DairyNZ says New Zealand milk production is expected to fall by 2 or 3 per cent this season as farmers focus on improving the efficiency of their farming systems.
Analysis undertaken by DairyNZ's economics group shows farmers reduced cow numbers through culling earlier than usual in the last season.
"This looks likely to continue this season in response to low milk prices," said DairyNZ senior economist Matthew Newman.
"Fewer cows along with less supplement use will inevitably mean less milk is produced and processed, so we're at this point in the season forecasting a drop of about 2 to 3 per cent."
High production in New Zealand and other dairy-producing countries has created a supply/demand imbalance, which has severely depressed prices.