Peter Bradstreet has cut costs. Photo / John Borren
Peter Bradstreet has cut costs. Photo / John Borren
Bay of Plenty dairy farmers stand to lose $467 million this season after Fonterra slashed its payout and local farmers say if there is another drought it could spark an animal welfare crisis.
Businesses and "hangers on" reliant on cash from the agriculture industry will also struggle and "should prepare for a tough couple of years," they warned.
Peter Bradstreet has cut costs. Photo / John Borren
Yesterday Fonterra reduced its Farmgate Milk Price forecast from $5.30 per kgMS to $4.70 kgMS for 2014/15 - 40 per cent less than the $8.40 record payout last year.
Papamoa dairy farmer Andrew McLeod said farmer support networks which relied on farmers for their income would suffer the most.
"People won't buy in those extra minerals, fertiliser or supplementary feed. We are only spending on absolute essentials."
If there was another drought there would be no money to buy in extra feed, which may put animals at risk, he said.
"That will be the hardest one, if you have a bit of surplus in the system then you can pull out some feed if you need it. But when the fat in the system disappears after a payout like this unfortunately it could be the animals that suffer ... that is the worse thing a farmer can go through."
Bill Webb has seen reduced orders.
Bradstreet Contractors owner Peter Bradstreet said the combination of the payout and the weather would be "devastating".
He had already cut costs and laid off staff as he expected the payout would drop.
"We've already cut back as much as we can but we didn't expect it to go that low," he said.
"It depends on the farmer, what he's going to do."
"If they are in trouble, we're in trouble and the guys below us are in trouble and the town's in trouble."
Bill Webb Feed Solutions owner Bill Webb said some of its customers had already reduced orders.
Tauranga Chamber of Commerce chief executive Dave Burnett said the ripple effect would be felt across other industries and in Tauranga.
"There will be a big impact and effectively farmers have already locked their wallets."
Federated Farmers Bay of Plenty provincial president Rick Powdrell said the weather was an issue.
Rainfall on his property at Te Puke was 400mm behind average for the year, he said.
Bay of Plenty Rural Support Trust chairman Derek Spratt said lower order sharemilkers would be affected the most and some final tax bills due in April were "quite horrendous in some cases".
Farmers needed to make sure they talked to their banker and accountant.
Te Puke dairy farmer John Scrimgeour said the majority of farmers had sufficient earnings to cover their farm working expenses but it left nothing for living, tax, interest payments, debt reduction or reinvestment.
Some sharemilkers may reduce the amount of staff they employ as its their biggest expense, he said.
DairyNZ's chief executive Tim Mackle said it would be encouraging farmers to focus on making cost-effective choices, rather than just straight cost-cutting.
