A state of drought has been declared in the Waikato.



The Minister for Primary Industries Nathan Guy said a medium-scale drought had officially been declared for Waikato, Bay of Plenty, South Auckland and Hawkes Bay.



It has been more than a month since the Waikato recorded any beneficial rainfall, according to the MetService.



The declaration means that extra Government funding will be available to Rural Support Trusts.



Rural assistance payments will also be available from Work and Income through the Ministry of Social Development.



These are equivalent to the unemployment benefit and are available to rural people in extreme hardship, the minister said.



The official declaration of drought in the region offers a psychological prop rather than practical support for the average dairy farmer, says Federated Farmers Waikato president James Houghton.



"It gives farmers recognition of what they are dealing with, (Financial) assistance is not the main thrust. It provides resources to those who are really desperate...but it is not really designed for the average farmer."



The overnight surge in world dairy prices on Fonterra's Global Dairy Trade auction was little comfort, Houghton said.



Most of this season's production was already sold.



While economists are picking the 10.4 per cent hike in average world dairy prices overnight will lift this season's payout forecast, many contract milkers such as sharemilkers had already been forced to dry off and would have no income for the next two months until the new season gets under way, Houghton said.



Waikato dairy farmers had already lost $1.20-1.30/kg milksolids in payout this season to drought, he said.



Fonterra disappointed many in the sector last month by holding its milk payout forecast for the season at $5.50/kg, despite a string of small increases on recent GDT auctions.



Houghton said the overnight GDT result, which economists predict will continue as Oceania milk supply shrinks and demand for protein endures, would be more useful to next season's payout prospects. The new season starts officially on June 1, though new milk does not really start flowing until August.



Houghton also noted that in the devastating 2008 Waikato drought, many other dairying regions were not also affected, as is the case this year with most of the North Island dry.



"It just means less options for farmers."