West Coast dairy farmers have been warned to prepare for some serious belt-tightening.
The warning comes from Federated Farmers West Coast dairy chairperson Renee Rooney, after the region's dairy co-operative, Westland Milk Products, cut its forecast milk payout from $6.40 per kilo of milk solids to a range of $5.40-80 per kilo.
The company said it was due to a big drop in international dairy prices, especially for skim milk powder, which makes up a significant proportion of its production.
Mrs Rooney said the 60 cent reduction was a "hell of a drop" in less than a month and farmers needed to redo their budgets and cashflows.
Federated Farmers national dairy farmers chair Andrew Hoggard thought Fonterra suppliers should be budgeting for a similar payout, even though Fonterra is holding its forecast at $6 in the meantime.
"All the experts you hear talk are pointing towards mid-$5," he said.
"Fonterra seems a little more upbeat than them, but the risk remains that we could still end up in the mid-$5. So I guess the advice for farmers is, we've still got to play it tight for the rest of the season."