Suppliers to Murray Goulburn in New South Wales are shocked with their opening price of 46.7 cents per litre and say it is under the cost of production.

Dairy farmers have been busy crunching the numbers to find out what that means for their business, and their future.

Wingham dairy farmer Robert Walsh said it was a 6 cents per litre drop for his farm.

"I was expecting a drop but not significant [one] like that; I was anticipating three, maybe four cents at the very most and that would be extreme," he said.

"You're going to have to tighten your belt, cut your costs, but that has a negative effect too.

"Once you start cutting your costs, you cut your production so you can't go out and spend on fertiliser like you used to be able to.

"So, by the end of the 12 months, you'll have less production so that'll be less income.

"The next 12 months, or the near future after that, is not looking very good at all."

The price could be lower for those farmers who do not reach 3.9 per cent butterfat and 3.2 per cent protein.

Farmers' Group president Graham Forbes does not expect north coast NSW farmers will see price cuts. ( Jeremy Story Carter )

'Horrendous for industry' if domestic milk market collapses

President of Dairy Connect Farmers' Group, Graham Forbes, said the Murray Goulburn's price was well under the cost of production.

"Most farmers would be needing a price well up into the 50 cents a litre [mark] to maintain the high feed costs and year round supply," he said.

He said the real concern was what impact the milk price would have on the total domestic market.

"Unfortunately, there will be milk around at a lower price and there will be pressure on the domestic market," he said.

"But I think it's important that if we see that domestic market collapse as well, it will be horrendous for the whole industry."

Mr Forbes said farmers further north in NSW should not expect to see any price cuts.

"From Comboyne south there's a major issue but further north there's a deficiency of milk," he said.

"Sales are up in Queensland and so there's real demand for milk into Queensland so there's no reason that market should see any erosion in price."

He feels confident that the processor he supplies milk to, the Norco dairy co-operative, will not announce cuts to its milk price tomorrow.

"They have very little exposure on the world market," he said.

"Two per cent of their product is exported and most of their contracts are domestic contracts that shouldn't be affected in any way, so it would be very disappointing if they dropped their price."

Liquid milk market not exempt from global downturn

Murray Goulburn supplier Sharon Parish from Bodalla was hoping the long-term contract with Coles would shield them from the global downturn.

The drop came as a shock to her and would mean a 12 per cent drop in her dairy's income.

"With our Coles contract, we were always led to believe — and that was in a release from Coles when it was first done — it wouldn't be affected by the world milk market," Ms Parish said.

"But certainly, that has proved not to be the case for us to get such a significant drop.

"We're going to have to sit down and have a long hard look at our budgets and make some hard decisions [and] decide whether we want to keep doing that.

"That's a $117,000 income drop and things are tough.

"We've just been through our second flood for the year and we had to dump milk at both floods, so our costs are up."