Anyone thinking new Fonterra chairman John Monaghan has been given a hospital pass should save their sympathy and instead worry about what's going on at New Zealand's biggest company.

That's been the no-nonsense feedback - from the dairy company's farmer-owners, business leaders, primary industry specialists and former directors - after an 11th-hour decision by Fonterra directors that they couldn't afford to deliver the milk price or dividend forecast for the 2017-18 year - the dairy season just ended.

The Fonterra board's announcement yesterday followed the first board meeting chaired by new chairman Monaghan, who took over last month from John Wilson, who retired for health reasons.

The announcement that to protect its balance sheet Fonterra would have to shave 5c/kg milksolids off its $6.75/kg forecast milk payment to farmers, and that the full-year dividend would be the 10c already paid in April, was by all accounts an anti-climax compared with the potential horrors conjured up by the trading halt on Fonterra shares.

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The milk price cut is not too devastating, given that the value of annual milk production is about $12.5 billion. For the average dairy farmer there will be $20,000 less in the bank than had been relied on, said agriculture consultant Will Wilson.

But coming as it did at the last minute, the reaction was swift and harsh.

Business leaders warned Fonterra that getting the milk price signal wrong rattled the economy.

"That milk price is a very important price signal for the New Zealand economy. It drives behaviour. If you get that wrong you scare the entire economy," said one, who declined to be named.

The conclusion in the dairy industry was that Fonterra had over-promised and under-delivered. "It's just a continuation of the mess they've got us into," said a major industry participant who declined to be named.

Most disappointing for former Fonterra director Leonie Guiney was that "the governance would wait to be forced there".

"It was made clear by farmers at the half-year results that they questioned how an interim 10c dividend could be paid when [Fonterra] had made a loss," said the Southland dairy farmer and shareholder, who has taken a defamation case against the Fonterra board.

Former Fonterra deputy chairman Greg Gent said the announcement would be "a bitter pill to swallow but it's the right thing to do, rather than the expedient thing to do."

Fonterra's back-pedalling on the milk price has put the spotlight again on two issues - how it is allowed to set the country's milk price and how it has become a hybrid company with two lots of shareholders to please: its co-operative farmer-owners and non-farmer listed unit holders.

The price Fonterra sets each season becomes the price guideline for the dairy industry because of Fonterra's continuing dominance of the raw milk market.

Fonterra says the price it pays for milk is a reflection of world prices.

Fresh debate was triggered yesterday about the regulatory wisdom of allowing Fonterra to set the milk price. Market watchers told the Herald they were hopeful, but not confident, that the current Government review of legislation governing the dairy industry and Fonterra would grapple with the issue.

Agriculture Minister Damien O'Connor, who called for the review, did not respond to a Herald request to discuss the way milk prices are set.

For new chairman Monaghan, there was no sympathy.

Fonterra Shareholders' Council chairman Duncan Coull, who represents the interests of farmer-owners, was unusually publicly grumpy about Fonterra's decision.

He said the board's move was an "absolute disappointment" and the "situation is unacceptable".

"I totally accept it is the right thing to do from a governance perspective but the reason for having to do that is totally unacceptable. The milk price is sacrosanct to farmers."

Asked if Monaghan had been handed a hospital pass, Coull disagreed, saying the board worked "as a collective."

Former directors told the Herald Monaghan had been a senior, long-serving director before becoming chairman. "He's been there and part of what has taken us to this point. His accountability is high. He knew what he was getting into," said one.

Attention now turns to whether Fonterra's $7/kg forecast for the new season can be trusted. ASB Bank expects Fonterra to lower it closer to $6.50 later this month.

Coull said yesterday's developments had no bearing on the forecast.

"Will the board need to do this again? I hope not. This year we had two big hits with the Danone [court damages payment] and Beingmate impairment. "

Former director Gent said, "It's very hard to forecast this far out and have it accurate. Farmers have just got be conservative and believe the money when it's in their account."