Fonterra's forecast payout to farmers is likely to drop further and may go below $5 when the dairy co-op revises it next month, rural economist Con Williams says.
That followed a drop of 3.1 percent in the dairy co-operative's price index, in the latest auction, overnight.
The key price for Fonterra, whole milk powder, dropped by $US122 to $US2,400.
Fonterra said the price of whole milk powder needed to rise to about $3,500 by March, next year, if it was to maintain its forecast payout to farmers, of $5.30, per kilo of milk solids.
ANZ agri-economist Con Williams said the forecast payout may go below $5 when it was revised.
"Powders were generally very weak, back five to six percent overnight. Basically that's 80 to 85 percent of the basket that makes up the farm-gate milk price for dairy farmers," he said.
"All those expectations of a lower farm-gate price, from the likes of Fonterra, is probably going to be confirmed over the next couple of weeks."
ASB Bank was also forecasting the payout would drop to $4.70.
