The gloomy commodity picture will weigh on New Zealand's economy and farmers are likely to revise their farm budgets downwards, Federated Farmers national president Bruce Wills says.
Given pastoral agriculture spent about $13 billion on goods and services each year, that had implications for both the provincial and national economy, he said.
Mr Wills, who spent more than 20 years in the banking industry, was getting about $40 less for a heavy prime lamb compared with last year.
He expected his Hawkes Bay farm income would be down 20%, and he "shuddered to think" what would have happened if there had not been a wet summer.
The priority for farmers would be productive investment and tackling debt to take advantage of stable interest rates. It was expected farmers would recast their budgets to an "extremely conservative basis".
The export climate still had Europe "in a bad way", the United States remained bad, though slightly less of late, but demand from key Asian economies, including China, had weakened. Australia was not much rosier, he said.
The New Zealand dollar was not doing exporters any favour and Mr Wills was at a loss to explain why it had not fallen.
"Whatever the cause, we're hurting and that will be expressed by farmers' keeping a close lid on what they spend."
Councils must keep rate and fee increases in check and that applied equally to the Government's spending plans before this month's Budget, he said.
Prof William Bailey, chairman of the department of agriculture at Western Illinois University, said the excellent supply situation globally was helping to push dairy prices down.
Production in Oceania continued to be strong. Australian production, for the first nine months of the year, was 4% higher than for the corresponding period last year.
European production was reported to be off to an excellent start and US production continued to be strong, he said in the latest ASB commodities weekly.
While the results of Fonterra's latest GlobalDairyTrade auction showed mostly lower prices, some might look at slight increases in cheddar and lactose prices and see some positive news, Prof Bailey said.
