New Zealand's agriculture sector will be hit hard by the financial crisis while farms with existing debts may be forced to shut down, according to a ministerial briefing paper.
The paper from the Ministry of Agriculture and Forestry highlights falling dairy prices as consumers turn to cheaper products.
The agricultural sector could find it difficult to refinance debts due to increasing debts and falling commodity prices, which could lead to businesses shutting down or getting acquired.
The paper said demand for agricultural products will fall from oil producing countries and emerging Asian economies, where 40 percent of New Zealand's dairy exports go.
However, the paper said beef demand is expected to remain strong as consumers switch to cheaper ground beef.
The paper warns that farmers have taken on more debt over recent years and are vulnerable to rising financial costs and declining commodity prices on the world market.
"Therefore any recession is of concern. It is likely there will be fluctuations in income levels and less ability for farming businesses to obtain and service debt financing," the paper said.
The new Agriculture Minister, David Carter, said the government can do nothing to increase overseas demand of New Zealand products, but they could continue to fight for free trade opportunities.
Carter said they are working on a stimulatory package to the whole economy, including a tax cut package.