Might the bungy cord the co-operative is counting on be longer than it thinks it is?
Market economists are revising down their payout forecasts for the current season to levels below $5 and are increasingly dubious of a rebound to something north of $6 in 2015-16.
"We can't stress enough how important prospects for the 2015-16 year dairy payout are going to be," says ANZ chief economist Cameron Bagrie. "One year of negative cashflow is challenging, but manageable. Two years is problematic."
Westpac economist Anne Boniface says, "Our core view remains that dairy prices will benefit from an improvement in Chinese demand early next year and that eventually lower prices will send a strong signal to producers around the globe to cut back production. However, for this season at least, this improvement is now likely to be later and weaker than we had previously pencilled in."
The current season's weak prices follow a bumper year, of course. Many dairy farmers will have taken the opportunity to strengthen their balance sheets and undertake lumpy capital expenditure.
Agricultural sector debt rose 3 per cent in the year to August, down from 4 per cent the year before and 4.3 per cent the year before that, and anecdotally, farmers' bank deposits have risen sharply.
But such buffers only go so far. When the farmers stop taking their chequebooks to town the whole economy feels it, the country towns first, then Auckland after a lag.
"The pure income loss to the economy is $5 billion plus and rising," Bagrie says. "In terms of economic impact we are talking about 1.5 to 2 per cent of GDP." Gulp.
But it needs to be put in context.
There is a risk that this sort of view is now taking hold: dairy prices are falling like a stone, dragging the New Zealand dollar down with them; that will push up inflation; the Reserve Bank will respond by raising interest rates and I need that like a fish needs an umbrella.
That line of reasoning breaks down at several points.
The New Zealand economy is not just one big dairy farm.
The dairy sector is important - arguably too important - but it is worth noting that, dairy notwithstanding, ANZ's commodity price index went up last month in New Zealand-dollar terms. Not down but up, buoyed by higher beef prices and a lower kiwi dollar.
And the economy needs a lower dollar. It is badly out of kilter.
The decent growth recorded in the year ended June was entirely driven by domestic demand, which grew 5.2 per cent; net exports were negative and dragged gross domestic product growth (on the expenditure measure) down to 3.3 per cent.
How inflationary a lower exchange rate is depends on why it falls. To the extent that it reflects events elsewhere in the world - more cheerful economic news out of the United States, for example - then all else being equal, it will tend to push domestic prices up.
But if it has fallen because of a body blow to national income, that is a disinflationary influence.
Reserve Bank researchers have looked at the "pass-through" from exchange rate falls to domestic prices over the past 25 years, distinguishing between those driven by falls in world prices for New Zealand's export commodities and those caused by other factors. The net impact of a fall in export commodity prices has been to lower New Zealand consumer prices, they found, even though the exchange rate has tended to fall when export commodity prices fall, as lower incomes reduce spending power in the economy.
It is never wise to be dogmatic about why the exchange rate has moved, given that it is the net effect of a whole lot of trades by a large number of people for all sorts of reasons.
The most recent descent of the kiwi dollar from the vertiginous heights it reached a few months ago has been larger against the US dollar than on a trade-weighted basis, suggesting that some of it at least has been more about the market's brightening view of the US economy, rather than a darkening view of ours.
And market economists have pointed out that big multi-year declines in the rate since it floated - of the kind Governor Graeme Wheeler pointedly reminded the markets of in his most recent jawboning of the currency - have been associated with recessions.
Nevertheless there is a pretty close historical association between the exchange rate and the terms of trade. In August the real effective exchange rate was 17 per cent above its average level in 2010, while the terms of trade were 16 per cent higher.
Wheeler confirmed a month ago that the Reserve Bank is on hold while it undertakes a period of monitoring and assessment of the effects of the 100 basis points of interest rate increases it has delivered, and of export price falls.
Its September forecasts included a 14 per cent decline in export prices, in world price terms, between the March 2014 and March 2015 quarters, to levels still high by historical standards, followed by a gradual recovery.
That is clearly too optimistic. According to ANZ's commodity price index, world prices for our export commodities last month were already 13 per cent off their March quarter peak.
All else being equal - and it never is - that suggests a longer period of respite before interest rates rise again.
