The decline in milk prices has made its presence felt in Landcorp's operating earnings forecast for the 2014/15 June year.
The state-owned farm owner, which is also the country's biggest corporate farmer, said it now expects a profit of between $1 million and $6 million, down from its previous forecast of $8m to $12m.
"This reflects the recent downward revision in Fonterra's forecast milk payment to $5.30 per kg of milk solids (from $6.00) and the potential for further softening in milk payouts," Landcorp said in a statement.
Landcorp said its forecast assumed there would be be no adverse weather conditions, a deterioration in the currency market, or in market prices.
"The fall in milk prices illustrates the extent to which New Zealand agriculture is vulnerable to the vagaries of the global market," chief financial officer Steven McJorrow said.