Expectations of a second season of low dairy prices appear to have hit Southland particularly hard.
Regional economic confidence fell sharply in the June quarter, reaching its lowest level since March 2013, the latest Westpac McDermott Miller regional economic confidence survey has showed.
Southland's result was the weakest across all of the main regions and also the biggest deterioration over the past three months.
It was the region's lowest reading since December 1997.
About 11% of all dairy cows in New Zealand are located in Southland, dairy industry statistics for 2013-14 showed.
While the March quarter survey was characterised by relief, the dry summer had proven to be less damaging to the farming sector than initially feared.
That brief respite had now given way to the reality of a second season of low dairy prices, Westpac senior economist Michael Gordon said.
Fonterra dropped its farmgate milk price for last season to an eight-year low of $4.40 per kg of milk solids and its opening forecast of $5.25 per kg of milk solids for this season was also well below the average of recent years.
Economic confidence in Waikato, the nation's largest dairying region, had also fallen sharply in the past three months.
Meanwhile, Fonterra has set its June guaranteed milk price (GMP) at $5.25, the same as its opening milk price forecast.
Applications from suppliers to lock in a guaranteed price for a percentage of their milk for the new season saw a total of 45.2 million kg of milk solids offered by 443 farms, more than double the number that applied this time last year.
More farmers were seeing it as a financial risk management tool, Fonterra's group director co-operative affairs Miles Hurrell said.
They had the opportunity to apply for a GMP for a percentage of their estimated production at one or more of five prices at and below the opening forecast milk price.
The applications exceeded the 40 million kg of milk solids available and so they were accepted from the lowest price upwards with applications at $5.25 scaled back by 16.5%.
The second opportunity for farmers to lock in a GMP for the 2015-16 season will be in December.
