While a recovery phase was imminent, the bank has pushed out the timeframe by at least three months.
The market correction was largely delayed by the removal of EU quotas, which had bolstered exportable supplies, Rabobank's director of dairy research New Zealand and Asia, Hayley Moynihan, said.
''We are currently operating in an environment where global milk production is rising faster than local demand growth, and there is simply too much milk in the market,'' Ms Moynihan said.
That had left exporters looking for additional offshore sales at a time when China and Russia had been largely absent.
While global milk production was set to increase, the rate of growth was expected to slow, particularly from New Zealand and the United States, while an improvement in demand should result in some rebalancing in the market by early next year.
The rate of initial price recovery would be dampened as the market worked through accumulated excess stocks and the stronger upward momentum in prices was unlikely to be seen until the second quarter of the year.
A wide range of farm-gate milk prices were being forecast for the 2015-16, ranging from $4.70 to $5.60 kg/ms, which was below full production costs for many farmers, but well above the price realised last season.
A return to more sustainable prices was unlikely to occur before the 2016-17 production season, she said.
Despite Fonterra's opening season forecast of $5.25, farmer cashflows still had further to fall, ASB rural economist Nathan Penny said.
Using Fonterra's milk price and dividend forecasts, ASB calculated that cashflow this season would fall by about $1.38 kg/ms (22%) to $4.77 from $6.15 last season.
Cashflow was likely to remain tight for another 12 months even if this season's milk price exceeded expectations. At the same time, falling interest rates would put some cash back in farmers' pockets, Mr Penny said.
Close to 600 dairy farmers were expected to attend the annual South Island Dairy Event (SIDE) at Lincoln University this week.
The present dairy downturn made it ''more important than ever'' for farmers to make the effort to attend, organising committee chairman Steve Booker said.
Farmers were not only made aware of the latest dairy information, but the event also provided the support that came from networking with fellow farmers all dealing with and facing similar issues, Mr Booker said.
