Later in the segment he described Mackay's top as "gay" in an exchange about golf.
"You're munted mate. You're never going to make it. You've got that gay red top on."
The comments have been ridiculed on Twitter, with comedian Guy Williams saying "John Key is quickly becoming to New Zealand what Borat was to Kazakhstan."
Other Twitter users said the use of "gay" as an insult made Mr Key appear homophobic.
Today Mr Key said he used the term "gay" to mean "weird".
He said he picked up the term from his children and had no intention of seeming homophobic.
Asked at his post-Cabinet press conference whether he was homophobic, Mr Key said: "No, I'm voting for gay marriage, I'm hardly homophobic - I led the charge on it."
Mr Key agreed it was an unfortunate use of words but said: "a hell of a lot of people would use it and the common use of it is in the Oxford dictionary".
"Young people use it all the time, I don't think too many people would be offended by it. If someone is I apologise for it," he said.
Also during the Farming Show interview, Mr Key also took a swipe at hip hop group Home Brew for criticising him during their acceptance speech for best urban/hip hop album at the New Zealand Music Awards last week.
"These people are idiots. They turned up on the red carpet with a goat that then managed to relieve itself or whatever on the red carpet. What idiots," he said.
Mr Key courted controversy over reports he branded David Beckham "thick as batshit" while speaking to a group of students at Dunedin's St Hilda's Collegiate.
He has refused to confirm or deny insulting the football superstar.
However, British media have picked up the story.
Beckham's London-based media guru Simon Oliveira - who also oversees global campaigns for tennis ace Andy Murray and Formula One star Lewis Hamilton - was not impressed.
"It is not worthy of comment."
