Mid Canterbury milk processor Synlait has issued a new-season starting forecast of $4.50 a kilogram of milk solids for its suppliers, but yesterday cut its current-season payout from $4.20 to $3.90.
Fonterra, Synlait and Westland Milk Products are now in unison with $3.90 apiece for this season's payout, but all are yet to make it final.
About 30% of the current $40billion of dairy debt is estimated to be held by 10% of dairy farmers.
Fonterra said recently it would be bringing forward some payments in the early new season to assist its suppliers, and Synlait followed suit yesterday, saying it would deliver its suppliers a higher than usual advance rate to help ease cash-flow problems.
In recent weeks, analysts have been predicting new-season starting prices of between $4.60 and as high as $6.
Synlait chairman Graeme Milne said yesterday its dairy farmers were facing the prospect of another tough season and the company had "prioritised a significantly higher advance rate'' for its milk suppliers.
"They'll start the season in a stronger cash-flow position than they were expecting ... Cash flow is really important at this time of year,'' he said in a statement yesterday.
Shares in Synlait, in which China's Bright Food has a 39% stake, were up slightly at $3.06, but were down 3.5% on a year ago.
Fonterra surprised the market late last month when it announced its new-season forecast of $4.25, which was well below expectations of $4.50-$4.80, leaving the majority of suppliers facing a third consecutive season of negative cash flows.
Fonterra is expected to update markets in July on its 2015-16 final payment, which sits at $3.90 at present, while Synlait will declare its final payout, along with any revision of its 2016-17 forecast milk price, in late-September.
In the face of stubbornly low global prices and a milk glut, Fonterra downgraded its forecast from $4.60 to $4.15 in mid-January. Synlait followed suit in early February, cutting its payout forecast from $5 to $4.20.
Westland Milk Products also has a current season forecast payout of $3.80-$3.90, and its new season predictions range from $4.55 to $4.95.
Mr Milne said low global commodity prices were continuing to drive low milk prices, and milk production in New Zealand had started to ease in response.
"Unfortunately, increasing milk production in Europe, soft demand from China and trade sanctions in place with Russia continue to be more important than reduced milk production in New Zealand, he said.
"We expect our milk suppliers will continue to reduce milk production next season. However, we've planned for this by increasing the number of farmer suppliers and are confident we have sufficient milk supply to keep meeting strong demand from our customers,'' Mr Milne said.
Synlait's chief executive John Penno said the company had also adjusted payments for the current season to give suppliers better cash flow through the winter.
To assist its milk suppliers, there would be premium payments, expected to be around $6million this season, for creating value on their farms through the Lead With Pride and our Special Milk programmes, Mr Penno said.
"We estimate these premiums will give our suppliers, on average, an additional 10c per kilogram of milk solids to our forecast milk price for 2015-16,'' he said.
Westland Milk Products chief executive Rod Quin told the Greymouth Star this week the reduced payout would cause farmers to review their budgets, and the board and management were "very conscious'' of the stress it would put on some suppliers.
"We'll be monitoring the situation and working closely with shareholders to help ensure they have the resources and tools to manage their way through this,'' Mr Quin said.
