UPDATED 3.06pm: Another cut to the milk payout has led to fears farmers will soon go bankrupt.

Open Country Dairy, the second biggest milk processor after Fonterra, has sharply revised its forecast payout - down from $4.90 per kilo of milk solids, to $3.95.

Green Party co-leader James Shaw said it's a major worry.

"You can see a number of farmers starting to go bust over the course of the next sort of six to twelve months which would obviously be a tragedy for them and it puts the New Zealand economy at real risk."

Meanwhile, the Finance Minister has painted a grim picture of the dairy stockpile in China, saying there are warehouses all over the country with bigger stockpiles of milk powder than was previously thought.

Bill English has just returned from there and says our falling dairy prices were part of the perfect storm involving China, Russia and Europe.

Mr English said dairy prices will remain flat for some time yet.

"Everyone believes they're too low for the health of the dairy industry - whether it's here, in China or in Europe. It's going to takes some time for prices to pick up."

But Mr English is hopeful that rising Chinese wages will draw in more demand for other kiwi exports and tourism. 

"[There are] a large number of people whose incomes are going up and who are looking for high quality products ... that theme came through all the time, and we have products that meet that demand. The outlook's pretty good."

However Labour's Finance spokesman Grant Robertson claims the Government's known about the glut for a long time but it's done nothing to diversify the economy.

"This is not just about the farmers themselves who are doing it tough, it's about the regional towns and communities around those farmers who are now looking at billions of dollars gone from their economy."