Federated Farmers says Westland Milk Products' decision to cut its 2014/15 milk price payout will cause "serious belt tightening" on the South Island's West Coast.
Westland, New Zealand's second biggest dairy co-operative after Fonterra, said it would cut its payout by 60c a kilogram of milksolids to a range of $5.40 to $5.80 a kg, before retentions, in the coming season.
The revision comes after Fonterra on Wednesday affirmed its latest milk price forecast of $6/kg and a payout, including dividends, of $6.20 to $6.25.
"Given Fonterra's hold on its benchmark payout forecast, this isn't exactly the best news to go into spring with," said Renee Rooney, Federated Farmers' West Coast dairy chairwoman.
"The fact the world produced seven billion litres of milk for export in the first half of 2014 isn't a secret and hasn't happened overnight, so this further revision is disappointing," she said in a statement.
"It is going to mean some serious belt-tightening on the West Coast."
Federated Farmers' Andrew Hoggard this week said farmers should budget in the mid-five dollar payout range.
Westland chief executive Rod Quin said the revised payout prediction was in response to market conditions.
The payout cut was driven by falls in prices across the globe and the continued high value of the New Zealand dollar, he said.
While last week's GlobalDairyTrade auction saw an overall price drop of just 0.6 per cent, Quin noted that the skim milk powder price - which represents a substantial proportion of Westland's production - fell by 12 per cent.