Last week Fonterra Co-operative Group revised its forecast Farmgate Milk Price for the 2023/24 season, setting the new price range at $6.25 to $7.25 per kgMS with a midpoint of $7.00 per kg MS.
That is down a full dollar from its previous midpoint of $8.00 per kgMS and ACT Agriculture Spokesperson Mark Cameron told REX host Dominic George the change has caused a lot of worry for farmers across the country.
"A revised dollar down is a big deal and on-farm costs have gone up so it's a combination of those two stories," he said.
"Farmers are going to see the squeeze and I'm certainly hearing it in the field."
Although it can vary slightly, the break-even mark for the average dairy farmer today sits around $8.00, which would see a large portion of those working in the industry operating at very slim profit margins and potentially even at a net loss.
With expenses also increasing, Cameron expressed serious concern about this revised dollar downturn.
"Operation costs have gone up disproportionately for many in that 15-18% bracket some more some less depending on who you ask.
"Break-even might be kind language for some, some people might actually find themselves in the deficit."
He told George that due to the rise in expenses, farmers have less money to reinvest in their own businesses, which is resulting in less capital in the output from the sector as a whole.
"We've heard figures of somewhere between $4.5 and $5 billion less in money circulating in the economy. That's massive.
"I've heard figures between 65% and 80% of farmers will actually see their fiscal margins so slight they don't render a profit."
There is speculation about the current export market in China and its impact on the economic downturn in New Zealand's dairy industry in particular. A recent decrease in demand saw an 8% decrease in whole milk powder (WHP) to NZ$4683/t, its lowest since July 2020.
Cameron said while the situation is complex, there is a conversation to be had about diversifying into more international exporting markets alongside China.
"The Central African Plateau, parts of Asia excluding China are going to be the areas we concentrate more of our trade into in the next 20-30 years.
"Now that doesn't exclude China it just means we've got to add countries like India, which have been notoriously difficult to negotiate with, as part of our trade future."
Listen to the full chat between ACT MP & Spokesperson Mark Cameron and Dominic George above.