Business closures could move people from rural communities, affecting schools, sports clubs and other organisations making small towns viable.
Mr Collins said the diversity which horticulture and beef farming brought to Northland agriculture was important with dairying returns down and further diversification should be encouraged.
The estimated national drop in dairy farmer income, based on the $1.40 reduction in the forecast milk price to $3.85kgMS is predicted to total $2.5 billion this season.
Multiplying the $1.40 drop against estimated regional production would trim Waikato dairy farmers' income by $692 million this season, with Bay of Plenty farmers down $177 million, Taranaki $259 million, Hawke's Bay $24 million, Manawatu $113 million, Wairarapa/Wellington $86 million, Tasman/Marlborough $50 million, Canterbury $494 million, Otago $134 million and Southland $313 million.
DairyNZ chief executive Tim Mackle said the drop meant a further reduction of $150,000 for the average dairy farm income this season.
"The harsh reality is that Fonterra farmers won't actually receive $4.25-$4.35 because of the way the payment system works. It's likely to be more like $3.65," he said.
"The effect on the level of payments over a season will keep farmers' cash income constrained for at least the next 18 months and it will take some farmers many years to recover from these low milk prices.
"At a national level, the $1.40 reduction means another $2.5 billion dropping out of local economies. This obviously impacts on farmers and their own already stretched business cash flows. It makes it even harder for them to manage their way through."
The milk price is now half what it was in 2013/14 and around nine out of 10 farmers are expected to need to take on extra debt to keep going through some major operating losses.
"For the average farmer, you are looking at covering a business loss of $260,000-$280,000 this season, but for many it will be a lot more than that," Mr Mackle said.
Many rural servicing businesses would also be affected.
"More than half a farmer's business income is spent on farm working expenses. Drops like this have a cascading effect through rural economies," Mr Mackle said.
The current milk price is the lowest since 2002 and, since then, farm costs have risen more than $1 per kilogram of milksolids and average debt levels have doubled.
"That's the double whammy farmers are facing," Mr Mackle said. "It is also why we have to help them as much as we can to reduce the costs associated with producing milk. Low interest rates are helping, but our analysis shows the average farmer now needs a milk price of $5.40 to break even."
Farmers knew they could not control the milk price, but they had some control over what it costs them to produce their milk.
"They'll focus on production at minimal cost," Mr Mackle said. "More than 600 farmers have taken up DairyNZ's offer of a one-on-one feed review visit so far."
DairyNZ held a meeting with Fonterra and Federated Farmers and the representatives of the major banks last week.
"We wanted to discuss what we could do at an industry level and we've agreed on a few initiatives," Mr Mackle said. "We're going to organise regular regional forums to ensure everyone is fully informed of what is happening, including the rollout of DairyNZ's Tactics campaign and the Federated Farmers-led initiative for sharemilkers.
"For sharemilkers, we want to ensure we have put enough support behind facilitating conversations with owners to re-negotiate sharemilking agreements."
The dairy industry has contributed $67 billion in export income since June 2010.
"We will bounce back but it may take some time, so other sectors will need to step up to help our economy and that will help us all get through this together," Mr Mackle said.
