Talk Money: March 9, 2016

Tony Field (Paul Henry)
Tony Field (Paul Henry)

Fonterra's decision to cut its forecast farmgate milk price by another 25 cents will be felt in every town and city in New Zealand.

The decision to cut the price to $3.90 per kilogram of milk solids will wipe $400 million from dairy farmers' collective incomes.

It is well below Dairy New Zealand's estimated break-even price of $5.25 for the average dairy farmer.

Dairy debt totals almost $38 billion and one in 10 farmers have told Federated Farmers they are "under pressure" from their bankers.

Fonterra has already cut around 800 jobs and has extended its payment period for many of its suppliers.

They'll now have to wait for 61 days after the end of the month in which they had sent invoices to be paid.

That puts them under pressure when they try to pay their bills.

The cut to the milk price has raised the chances of a rate cut tomorrow by the Reserve Bank.

Although most economists still think the RBNZ will keep the OCR at 2.5 percent, opting instead to signal that it is prepared to cut rates towards the middle of the year.