Dairy farmers yesterday received the bad news they had been expecting when Fonterra announced a revised payout price of $4.70 per kilogram of milksolids, slashing 60c per kg/ms off the previous forecast.
A glimmer of hope comes from expectations of a higher dividend to help boost returns, but any higher dividend will not replace the substantial drop in income dairy farmers face in the current season.
There was no change to the dividend range, as it was not part of the reviews. All up, a 100% share-backed farmer is forecast to receive $4.95 to $5.05 per kg/ms.
The forecast still requires an assumption of an improvement in international prices in 2015; risks remain.
Fonterra may be able to lift its dividend payout because its input price, the milk payout, is lower.
The dividend was 10c per share in the last season, 32c in 2013 and 2012, and 30c in 2011. However, it is not a simple equation.
With so much debate in the public arena on falling demand and the falling price of whole milk powder on global auction platforms, farmers should have been prepared for the news.
Debt levels among some participants in the dairy industry will be high but, hopefully, early conversations with bankers will smooth the passage of a cyclical low price environment until fortunes improve, possibly as soon as 2015-16.
Much has been made of the cut in farmer incomes, particularly those in the dairy sector.
It appears, incorrectly, many people believe dairy farmers somehow deserve lower income because of alleged pollution of waterways - or because they are farmers.
Some critics are also suggesting farmers should have fewer cows, providing less pollution, without thinking through the immediate consequences.
Lower cow numbers - without a susbsequent lift in productivity per cow - will hurt the wider economy.
And dairy plays an enormous part in the fortunes of this nation.
The falling payout price will knock about 2.7% off New Zealand's economic growth.
One question which needs to be considered is at what price for milk does financial stress in the sector start to increase?
There is no simple answer.
There is a wide range of businesses and leverage within the sector.
From a cash flow and financial stress point of view, the bigger risk lies around the 2015-16 season.
The industry can manage one tough year, but two years of a sub-breakeven payout would become problematic and entail material economy-wide consequences.
The fortunes of the meat and wool industries of the agricultural sector have improved, dampening the hurt which will be caused by falling dairy incomes.
But make no mistake, rural jobs - and jobs associated with rural spending - will be at risk as farmers adjust to their own personal circumstances.
Some rural servicing industries may also be in danger.
Although most rural industries are cyclical - as shown by the downturn in log prices last year - there is much to consider.
Spending in urban areas will fall, meaning people selling tractors, heavy machinery, cars and utes, will sell less.
A year of lower sales may stretch to more as farmers need to rebuild balance sheets.
New Zealand's economy is not yet diverse enough to shrug off the latest downturn in prices and payouts without thought.
Economists are forecasting a payout price of $6.20 per kg/ms in 2016, but these are early days and nothing can be taken as read at this juncture.
Fonterra is facing inventory build-up and analysts are still trying to figure out the impact of higher inventories on the co-operative.
Fonterra is also tightening its own belt, undertaking a targeted programme to generate more cash.
Top executives are expected to produce plans to cut costs before the end of the year, looking at what needs to be spent to meet short-term goals and what expenditure can be deferred without affecting the growth strategy.
For the past few years, the term white gold has been used to describe the positive effect Fonterra's payout has had on the economy. How quickly fortunes can change.
