Arable farmers are cutting back on wheat and barley for next season and planting more seed crops in response to falling grain prices.
Growers cut back on seed production last year in response to higher grain prices but increased wheat and barley production and record yields created high stock levels and reduced prices.
Federated Farmers grain and seed chair Ian Mackenzie says the one contract price offered for milling wheat so far has dropped from about $460 to $420 a tonne.
Feed grain contract prices have dropped from about $410 to $360 a tonne.
He says those falls are relatively modest, but growers are planting more seed crops after seeing more opportunities in that area.
"There was an opportunity there to get involved in multiplication of overseas varieties - rye grass in particular - and so the arable sector, being relatively flexible has jumped into that in a big way."
Mr Mackenzie says falling dairy prices have also created uncertainty for grain growers who are becoming increasingly dependent on supplying feed for cows.
The Situation and Outlook report from the Ministry for Primary Industries says increased wheat and barley production and record yields produced high stock levels and reduced prices.
It says high Australian grain stocks will add to the pressure on New Zealand prices and it predicts cereal volumes will be cut back to more normal levels next year.