According to the Agriculture and Forestry Ministry, a cash loss of $15,500, in the coming year, would be made by an average dairy farm.

The scene is quite contrary to the situation two years back, when an average farmer enjoyed a $263,000 surplus.

The loss can reach to $40,000; if no off-farm income is generated or new borrowing or extra funding is secured.

The ministry said in its report: "The ministry's average farm calculated on model farms in six regions from Northland to Southland finished the year on June 30 with a cash loss of $58,500, which without off-farm income and extra borrowing could have grown to $130,600."

The ministry feels that this year will be followed by last year's milksolids payout of $5.20 a kilogram to $4.55. It also holds the viewpoint that farmers will come down hard on working expenses, cutting them 11 per cent to $3.34 a kg. The hardest cut will be received by feed, fertilizers, repairs and maintenance.

The report continues that the season did not begin well and "farms in most areas went into the winter with less than desirable pasture covers and cow condition."

It adds, "While supplementary feed was readily available, the cash to buy it was not."

In spite of all this, farmers are budgeting for a 3 per cent increase in production. This might aid to offset the drop in payout; with the net cash income likely to be $714,900.