About a quarter of dairy farmers face some business risk this season at Fonterra's forecast $4.70 milk price, industry body DairyNZ has calculated.
While managing in a low payout year was nothing new for many farmers, it would be one of the lowest milk prices in the past six years, chief executive Tim Mackle said.
Farmers would have to apply more thinking and planning around cashflow and business management decisions, while agribusiness suppliers, including banks, would also be expected to ''share the load and pitch in'' to help them manage their way through it.
A good level of retrospective payments over the past winter, reflecting last season's record milk price, had been crucial in boosting the total milk income for most farmers for 2014-15.
The 2015-16 season was likely to be when things would ''crunch financially'' for many people, Dr Mackle said.
''We don't expect milk prices to recover in the first half of 2015. So the start of the season next year, in June, will be when things could get really tough for farmers and they'll need a robust plan that includes some practical and useful tactics up their sleeve to cope financially,'' he said.
When combined with Fonterra's previously announced estimated dividend range of 25c-35c per share, the latest revision amounted to a forecast cash payout of $4.95-$5.05 for the current season.
Fonterra chairman John Wilson said there was still considerable volatility in global dairy markets.
The global milk supply remained greater than demand, while falling oil prices, geopolitical uncertainty in Russia and Ukraine, and subdued demand from China were all contributing to ongoing volatility and weak demand.
Fonterra Shareholders Council chairman Ian Brown said farmers would be understanding of the co-operative's decision.
''Most farmers understand the reality of the situation is that this year will not be a great one in terms of milk price.
Farmers will be focused on getting through this year and ensuring they place their businesses in the best possible shape for next season,'' he said.
Rabobank Otago manager Brent Irving said the drop had not come as a surprise and dairy farmers and the industry had ''tightened their belts'' and been bracing themselves for a while.
The industry had been pro-active in preparing itself for a downturn and he did not expect there to be major issues.
''They've seen it coming and have put their cheque books away. Clearly, in every game, there is a percentage that find it quite difficult. They are going to have to work closely with banks and professionals to work through it,'' Mr Irving said.
The medium to long-term outlook for dairy was still very positive, he said.
ANZ rural economist Con Williams said there was no simple answer to at what milk price financial stress in the sector started to increase, given there was a wide range of businesses and leverage within the sector.
From a cashflow and financial stress point of view, the bigger risk was around the 2015-16 season outlook next May, with little in the way of deferred payments over July to October.
''The industry can manage one tough year but two years of a sub-break-even payout would become problematic and entail material economy-wide consequences,'' he said.
ANZ was forecasting a milk price of $6.50 for 2015-16 but there were clear down side risks to that, given the global backdrop for economic growth in key importing regions and, more generally, the commodities complex.
If there was not a recovery in international prices by next May, operating expenditure would need to be ''trimmed dramatically'' to avoid a blowout in debt. At the moment, it was more discretionary and capital expenditure that was ''on the chopping board'', he said.
ASB economists said there was a ''distinct possibility'' the dividend forecast would be raised, which would be a small offset to the milk price cut.
While ASB had shaved its 2015-16 season forecast by 50c, to $6, its long-run forecast remained unchanged at $7 and it reiterated that long-term prospects for dairy remained solid.
''We believe that the main culprit of the current dairy funk is largely a cyclical excess of milk. And once this excess clears, aided by demand returning to its long-term growth trend in emerging economies, the milk price is likely to return towards its long-run average.''
Labour's primary industries spokesman Damien O'Connor said the reduction in milk price would hit provincial towns and farm industries hard.
