By 3 News online staff / RadioLIVE
There are calls for banks to ensure the wellbeing of dairy farmers during the current crisis.
Fonterra has slashed its payout to $3.85 per kilogram of milk solids after another drop in global prices.
Rabobank analyst Hayley Moynihan says it's important farmers manage to cope with the downturn.
"Banks take a very strong interest in the wellbeing of farmers, and they have an obligation to do so, and certainly a responsibility, because people can't run their businesses and therefore the wellbeing of farmers is paramount."
Ms Moynihan is expecting more mortgagee sales.
Meanwhile, BERL chief economist Ganesh Nana says though Fonterra is facing perhaps a couple of years of depressed milk solid prices, it's essential for the New Zealand economy the company figures out how to survive.
"It represents the New Zealand dairy industry and it's our export face to the world in terms of dairy and yes, it has to bounce back. It's how we put our products on the global market," Dr Nana said on the Paul Henry programme this morning.
"I think we've got to probably not overreact too much – yes, there's strong competition out there, but that's the world that we live in. Fonterra will bounce back, just like the dairy industry will continue to be a strong sector in the New Zealand economy."
The key will be developing long-term relationships with customers to ride out short-term fluctuations on the global market, says Dr Nana, and finding ways to add value to raw products such as milk and logs.
"Unfortunately we in New Zealand, and this is not casting criticism at any particular official, Government or industry, we do have a short-term focus, we do go for the short-term quick bucks, and when that short-term finishes we sort of are a little bit perplexed about why we are not positioned for the long haul."
New Zealand First leader Winston Peters has warned the falling dairy price could see New Zealand's economy enter a "full-blown cyclone". Dr Nana agrees the fallout is going to be "bad", but "the critical thing is we don't talk into ourselves into a downer".
"We're definitely heading for a slowdown in the economy, a slowdown in growth. Whether that turns negative or not, to be honest is purely academic."
Dairy NZ says at $3.85 per kilogram, the average farm will have an operating loss of about $270,000 this season.
3 News / RadioLIVE