DairyNZ has revised its breakeven milk price up to $5.40kg ms, due to the decrease in expected production for the season and a slight lift in farm working costs.
Milk production nationwide is already well below last year, after farmers culled cow numbers heavily earlier in the season due to a low milk price.
If dry summer conditions put pressure on pasture growth, then milk production would drop further, DairyNZ economist Matthew Newman said.
"Currently, I'd say we are tracking for a 6% drop in milk production this season but, if El Nino conditions affect us badly this summer, it could be 10% or more down in some regions.''
DairyNZ had received pasture growth data from the three strongest El Nino years (1972-73, 1982-83 and 1997-98) which this summer was predicted to mirror, and many farms could grow two to three tonnes less feed per hectare than normal, senior developer for productivity Kim Mashlan said.
ASB's latest Farmshed Economics report said dairy farmers would want to put 2015 "quickly behind them''.
Dairy prices ended the year where they started, low, but rural economist Nathan Penny remained optimistic dairy oversupply would correct and the price recovery would "stick'' over 2016.
Demand was likely to remain sluggish, at least early in the year.
The Chinese economy was transitioning to lower, albeit more sustainable, growth, and other dairy-importing economies were also feeling the pinch.
That soft demand would keep a lid on overall price rises.
ASB was sticking with its $4.60 and $6.50 milk price forecasts for 2015-16 and 2016-17 respectively.
