Support crucial for diary farmers

Dairy farmers will be demoralised with the latest Fonterra payout reduction, Rural Support Trust secretary for Northland Julie Jonker says.

Dairy farmers working in prolonged tough conditions may find their situation is untenable says a Rural Support Trust liaison.

Yesterday, Fonterra cut its forecast farmgate milk price to $3.90 per kg of milksolids from $4.15 per kg - well short of the estimated break-even point for farmers of $5.25 per kg.

Rural Support Trust secretary for Northland Julie Jonker said the trust has been preparing for a difficult year.

"This announcement makes us more aware that we need to be very, very active at this stage," she said.

"There won't be any dairy farmers making money this year and they probably didn't last year."

Jonker said dairy farmers had been working for nothing for a prolonged period of time.

"Dairy farmers are really having their income cut drastically... you can cope with a year or even two, but this is getting beyond that period.

"Those that were only barely financially viable will find that their situation is untenable."

Sharemilkers and a lot of young people were leaving the industry, Jonker said, as the income dries up.

"The farmers are struggling, but the lower order sharemilkers don't have any assets to back up at the bank and say can you keep me going for another year."

The Rural Support Trust helps farmers access help from banks and Work and Income, as well as counselling.

"I don't think people realise just how hard these guys work... it must be pretty demoralising knowing that while you're working really hard you're not actually getting reimbursed for it," Jonker said.

"This is not just a job this is a whole lifestyle, most of them have grown up on farms that's what they know, that's what they've lived, it's their whole essence.

"Farmers are really proud, sometimes they get upset when they see keep seeing doom and gloom in the papers, but the fact is it is really hard and we do appreciate that."

Federated Farmers spokesman Andrew Hoggard told Newstalk ZB this would have a huge impact on farmers already struggling.

"Little bit surprised that it has dropped by 25 cents, I thought maybe 10 or 15 but it just goes to show how tough the world situation is at the moment."

Finance Minister Bill English said he expected farm prices to drop after Fonterra's announcement yesterday of a cut in its farmgate milk price forecast for 2015/6 but said he was confident the industry and the banks would "find their way through" the dairy downturn.

"They are going to see the land values drop - I think that is pretty much certain," he said in an interview with RNZ. "But I think that between the industry and the banks they will be able to find their way through it," he said.

Fonterra is expected to make an announcement on possible farmer support measures, when it releases its first half result on March 23. The co-op has said it intends to have its gearing ratio reduced to 40 to 45 per cent by the end of this year.

Farmer support could take the form of another "soft" loan scheme similar to the one offered last year, when the forecast went as low as $3.85, or paying out a greater proportion of the company's dividend.