For Garry Reymer, who farms near Cambridge, ongoing low dairy prices will mean more cost control, but he stops short of saying the situation is desperate.

"No, we are not desperate yet, but it is definitely serious," he says.

Reymer faces the prospect of a farmgate milk price substantially below the $5.40 average cost of production for a second season.

Last season, Fonterra's milk price came to $4.40 kg of milksolids, a far cry from the previous season's record price of $8.40 kg.


Reymer has already been cutting costs and can see more to come.

"There is very little discretionary spending."

Reymer's original herd has been cut from 300 to 260 and he expects more culling will be necessary, perhaps by as much as 20 per cent. The farm has cut right back on supplementary feed -- no grain and only a small amount of palm kernel.

Likewise, he will not be using off-farm winter grazing.

He says farmer cost-cutting is bound to have an impact on the support industries.

"Farming is not a switch-on, switch-off thing," he says.

"The commitments that you make can be 12 to 18 months in the making.

"The inquiries to the support industries have been trending off and it looks like they have been trading off what has been historically on their books," he says.

Despite the poor price outlook, Reymer said he was not despondent about the future.

"It does take a lot of the fun out of farming but you've really got to take a longer term focus," he says.

Jamie Gray