Dairy farmers must not be spooked by the sharp and sudden fall in projected milk price, Federated Farmers' Rangitikei/Manawatu dairy president James Stewart says.
From a high last season of $8.40 per kilo of milksolids, Fonterra has dropped the predicted price this season to, first, $7 and now, $6 a kilo. Milk payments lag behind production, and the low prices will kick in from July to October next year.
They will hurt farmers who spend a lot on supplementary feed and fertiliser and have high debt - and some dairy farmers do carry a lot of debt, Mr Stewart saying half of dairy debt was with just 10 per cent of farmers.
The price drop will be of less concern for those with low debt and low-cost grass-feed systems.
"I don't think there's going to be many in trouble, but I think there will be a few farmers that will struggle to make a profit this year, and maybe a few will make losses," Mr Stewart said.
Dairy farmers should be used to volatility - two years ago the milksolid price was $5.80 a kilo - but volatility was annoying, because it made them constantly adjust their budgets.
The price drop came on top of a good season and would only be a problem if low prices continued, Mr Stewart said.
Rising interest rates could also make things worse for those with big debts.
"Seventy per cent of rural debt is on floating interest rates, so every move is a big cost for farmers."
Mr Stewart is picking there won't be too much more interest rate movement this year, because of the low milk price.
The fundamentals still looked quite good for dairy, he added.
Two things that could change that were the removal of quotas in Europe and increased production in the United States.
Farmers worried by the payout situation should talk to their banks, he said. They could also adjust budgets to reduce costs, but not at the price of production.
"You still have to make as much milk as you can."
The easiest way to cut costs would be to delay development.
Mr Stewart has just bought more land and is wondering whether to build a new effluent pond and dairy shed - he thinks he will go ahead.
"Farmers have got to look long term and have confidence."