WELLINGTON, June 17 (Reuters) - Fonterra Co-operative Group ,...

WELLINGTON, June 17 (Reuters) - Fonterra Co-operative Group , the world's top dairy exporter, said on Friday that New Zealand's dairy production is set to fall by 3 percent in the season that started June 1.

In its global dairy update for June, Fonterra said the country's milk production is continuing to decline as farmers respond to low prices.

Until recently, dairy was the backbone of New Zealand's economy, representing around 25 percent of exports. But prices have tumbled by more than half since early 2014, hurt by China's economic slowdown and global oversupply.

In the season that ended May 31 milk production fell 3 percent on the previous 2014-15 season.

"Lower milk collections were largely a result of the low milk price environment, with farmers reducing stocking rates and supplementary feeding to reduce costs," Fonterra said.

Weak dairy prices have put significant pressure on New Zealand farmers. More than 85 percent of dairy farmers are estimated to be running at a loss.