The Government has been urged to fast-track rural infrastructure projects to help dairying regions get through the downturn in dairy prices.
Fonterra yesterday announced a forecast farmgate milk price of $3.85 for the 2015-16 season, with forecast earnings per share range of 40c-50c per share.
Federated Farmers dairy chairman Andrew Hoggard identified irrigation projects, rural roads and broadband rollout as ''obvious examples''.
Small-scale rural service industries, such as engineering or contracting, in some instances might be hit harder than the dairy farmers they traditionally relied on for work.
''When dairy prices go back up, as invariably they will, then the dairy supply and service industries need to be ready and skilled to get back on to the farms to make up for lost time.
''Or, at least, people will have had other employment in the district and haven't permanently left for somewhere else,'' Mr Hoggard said.
Fonterra chairman John Wilson said the reduction from $5.25 to $3.85 was due to the continued, significant imbalance in the global dairy market between weak demand and surplus supply.
While the co-operative was confident prices would recover over the course of the season, it would be a ''tough'' season for farmers, he said.
''We know the global dairy market will improve. The hard thing to call at the moment is exactly when and how quickly,'' Mr Wilson said.
To help farmers deal with the challenging conditions, all Fonterra share-backed farmers had an opportunity to apply for Fonterra co-operative support, amounting to an additional 50c per shared-up kilogram of milk solids for production for the season.
That payment, interest-free for two years, would be paid back when the farmgate milk price or advance rate went above $6.
Chief executive Theo Spierings said the co-operative had reviewed its capital expenditure for the next two years and was now targeting a spend of $500million to $600million less for the 2016 financial year, compared with 2015.
While farmers were expecting a drop in the milk price, it did not make the announcement any easier to bear, Fonterra Shareholders Council chairman Duncan Coull said.
Most farmers were facing a payout lower than their cost of production, some for the second year in a row.
Farmers were under ''immense pressure'' and the next 12 months would be extremely tough, Mr Coull said.
DairyNZ chief executive Tim Mackle said the effect on the level of payments over a season would keep farmers' cash income constrained for at least the next 18 months and it would take some farmers many years to recover from the low prices.
The milk price was now half what it was in 2013-14 and DairyNZ calculated about nine out of 10 farmers would 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.''
Many other rural servicing businesses would be affected, too.
More than half a farmer's business income was spent on farm working expenses and such drops had a ''cascading effect'' through rural economies.
It was the lowest milk price since 2002 and, since then, farm costs had risen more than $1 per kg of milk solids and average debt levels had doubled, so that was the ''double whammy'' farmers were facing, Dr Mackle said.
A North Otago sharemilker spoken to estimated they had taken an $88,200 hit with the announcement.
While there was financial support for shareholders, it was ''tough luck if you are a sharemilker'', she said.
At a glance
• Farmgate forecast cut to $3.85 kg/ms from $5.20 kg/ms
• More than $3 billion will be lost to Fonterra suppliers
• An interest-free loan will be available to help farmers through the tough times
• Production likely to fall 2% through lower stock and lower use of supplements
