Synlait Milk is the latest dairy company to drop its forecast milk price, shaving 80c off its previous figure.
The revision for the current season, from $5 to $4.20, was driven by the sustained low global commodity prices since September last year, and a view the recovery would be slower than anticipated, chairmanGraeme Milne said.
Last week, dairy giant Fonterra downgraded its forecast from $4.60 to $4.15, while fellow competitors Open Country Dairy and Westland Milk Products have also made cuts.
Synlait's previous forecast expected prices to "recover somewhat'' by this stage in the season, but that had not happened, Mr Milne said in a statement.
"Similar to this time last year, there is still a lot of uncertainty. While our business is focused on value-added products, global commodity pricing is the main driver behind the milk price that our suppliers receive,'' he said.
The Mid Canterbury-based processor would continue to monitor the situation and expected to revise the forecast again in May.
Managing director John Penno said there was "no doubt'' this year would be very tough for dairy farmers, with two straight years of unsustainably low milk prices.
Synlait was meeting suppliers in a few weeks to create a forum where their ideas and options on managing could be shared, Mr Penno said.
Global milk supply growth continued, despite soft prices.
The European Union output for November was reported to be up almost 5% from 2014 levels, with little sign of moderating soon, Prof William Bailey, from the department of agriculture at Western Illinois University, said.
As a consequence of the continued high level of production, product prices remained below levels seen the past three years.
Milk production in the United States was up slightly, Prof Bailey said, in the latest ASB Commodities Weekly.
Bankers spoken to by BusinessDesk said they were prepared to keep supporting the industry, with long-term prospects still looking good.
However, they and rural advisers said some of the most marginal farmers were having their debt capped with no further working capital supplied while others were being urged to sell.
One rural adviser working with loss-making farmers, who did not want to be named, said his clients were starting to have tough conversations with bankers that varied from "What's your exit plan?'' to "What's your action plan to reduce debt?''.
Dairy farm debt hit $37.8billion in June from $34.6billion the year before as farmers sought more working capital to cover their losses after last season's poor payout, and the Reserve Bank has estimated about 30% of that debt was concentrated among 10% of farms.
What's more, 11% of total dairy farm debt was held by farms with negative cash flow and loan-to-value ratios above 65%.
Rabobank, the third-largest dairy lender, said it would continue to support clients during the downturn.
General manager country banking Hayley Moynihan said she expected farm debt to peak in the 2016 calendar year because of the way milk payments were structured in the industry.
A small percentage of farmers would end up in forced sales and receiverships.
"Some borrowers, if they weren't in a robust position to start with, could end up in that position,'' she said.
While the low prices might be hitting dairy farmers hard in the pockets, the news was brighter for Fonterra Shareholder Fund unit-holders.
Forsyth Barr broker Suzanne Kinnaird said the expected cut in input costs should boost earnings in consumer and food-service markets that sourced milk from Fonterra's New Zealand holdings, and unit-holders were the biggest beneficiaries of that move, with higher earnings expected in the short term.
At a glance
• Synlait drops its forecast milk price to $4.20.
• Mid Canterbury company warns of tough year ahead for dairy farmers.
• Supplier meetings will be held in a few weeks.
• Bankers say they will continue to support the industry.
