Jim Johnstone, a partner with Balclutha accountancy firm Shand Thomson, said bank officers had told him they were still lending to farmers, but their criteria were tighter than it was two years ago which helped fuel a mass expansion of the dairy industry.
"If a proposal stacks up, they are in the market to lend, and that appears to be the case for all banks, but they are returning to normal lending criteria," he said.
As well as tightening conditions on which loans were made, financiers were requiring farmers to focus more on improving debt-equity ratios and strengthening cashflows and balance sheets, Mr Johnstone said.
This week, Fonterra announced it was forecasting an opening payout next season of $6.90 to $7.10 a kg of milk solids with the possibility the payout could go higher.
In the past, that would have provoked renewed interest in converting land to dairying, especially given continued frustration at low meat and wool prices.
Next season's opening price forecast was higher than the most recent forecast for this season of $6.10 a kg.
It is rumoured that about 30 South Island farms will convert to dairying for next season.
Environment Southland says 12 are in Southland.
This is well down on the 87 which converted in the province in 2008-09.
For a small number of heavily-indebted dairy farmers, Mr Johnstone said the higher payout would not protect them from wider financial problems.
He also warned against being overly confident at the sector's prospects, saying there was still plenty of market volatility.
"We have been there before, but I think people will be more cautious than they have been in the past."
While some farmers had strong businesses, Mr Johnstone said they were also more adverse to taking risks than previously and might think twice before buying a neighbouring property or farm to convert.
Also tempering expansion was the gap in the price vendors were asking for land and what buyers were prepared to pay, as evident by Real Estate Institute of New Zealand reports in recent weeks on the lack of farm sales.
PGG Wrightson Southland rural real estate manager Andrew Patterson said there continued to be a shortage of dairy farms on the market due in part to the expectation of a high payout.
Some vendors were also waiting to see what conditions were like in spring.
Southland land prices had stabilised in recent months at $30,000 to $40,000 a ha including Fonterra shares.
Sources say interest from potential Chinese purchasers of farms in Otago and Southland had waned in the past six weeks.
It was recently revealed that the company behind the bid to buy the Crafar family farms which are in receivership, has been looking to buy up to 100 southern farms and to also invest in a milk processing factory.
Hong Kong-listed Natural Dairy New Zealand, which owns 20% of UBNZ Assets Holdings, intends eventually buying outright UBNZ, which will own the farms.
But UBNZ was seeking Overseas Investment Office approval to buy the 16 Crafar farms, and sources say the company is focused on that rather than seeking other farms.
