More than one in 10 dairy farmers are under pressure from banks over their mortgages as dairy prices fall yet again.
Prices dropped this week for the fourth consecutive GlobalDairyTrade auction, although the 2.8% fall was less than expected.
Whole milk powder dropped 3.7%, now down 18% since the end of 2015, while casein recorded the largest fall, down 11.5%. Skim milk powder and butter prices fell 1.4% and 2.3% respectively.
A recent member poll from Federated Farmers showed 11.1% of dairy farmers were under pressure from banks, up from 6.6% in August and 7.6% in November.
That was a ‘‘worrying statistic'', Federated Farmers dairy chairman Andrew Hoggard said.
With prices not expected to recover until next year, the increased pressure from banks meant farmers needed to be even more proactive around budgeting and scenario planning, and make the most of the support available from DairyNZ, accountants and farm advisers, Mr Hoggard said.
He also called for action to be taken to address the global market conditions affecting New Zealand's dairy farmers.
Softer demand from China and displaced product from Russia were not helping but the real issue was increased production from Europe driven by the retention of subsidies.
They needed to keep moving forward to more market orientated structures, rather than moving backwards to more regulation.
‘‘The more farmers around the world live with the economic realities of the decisions they make, the more stable a market we will get for all farmers.''
That was something the New Zealand Government needed to take up through direct diplomatic channels and the World Trade Organisation.
If next season was going to be any different from this one, it would have to move quickly, he said.
Westpac senior economist Anne Boniface said it still looked like a ‘‘long tough road ahead'' for the dairy sector.
To date, impressive resilience had been displayed, with farmers trimming as much fat from their operations as possible.
Low international oil prices, falling interest rates and a benign inflation environment locally had also helped on the cost side of the ledger.
But such measures could only continue for so long.
‘‘If our forecasts are right, and many farmers are facing a third consecutive season where revenues are below costs, signs of stress in the sector are likely to increase. And the impact of this won't just be confined to the rural sector,'' she said.
ASB yesterday trimmed its 2015-16 milk price forecast by 20c to $3.90 and dropped its 2016-17 forecast to $6.
Rural economist Nathan Penny believed Fonterra was likely to open the 2016-17 season with a forecast in the low $5 range, and then lift it towards $6 over the season.
BNZ said it would not be too surprised to see Fonterra's milk price this season fall below $4. The co-operative's forecast is $4.15.
