Fonterra has reduced its forecast farmgate milk price by 60 cents.

The price has dropped from $5.30 per kilogram of milk solids.

The new forecast price is $4.70 per kilogram.

Fonterra chairman John Wilson says farmers were expecting the reduction.

But he says it will still put pressure on farming budgets.

The price drop is a result of the volatility in global dairy markets.

Milk supply is currently greater than demand, which is forcing prices to drop worldwide.