Federated Farmers in South Canterbury says the region is experiencing its worst drought in ten years.
Its president, Ivon Hurst, said sheep farmers have been offloading lambs since December and the market is flooded.
But he said dairy farmers are more vulnerable because they do not have the same flexibility.
Drought conditions in mid-Canterbury, January 2015 Photo: Jeremy Talbot
Mr Hurst says the Opuha Dam, which supplies 170 properties, has just three weeks of water left, which means farmers will have to make decisions fast.
He said with no significant rain forecast for the region, there was no relief in sight.
A forecaster says some rain could be on its way in the coming week to provide relief to parched farmers in Otago and South Canterbury.
Farmers on the eastern side of the South Island have been experiencing a long spell of hot dry weather since a dry spring last year.
A National Institute of Water and Atmospheric research forecaster, Chris Brandolino, said rain was due in some areas.
He said in Southland, Otago, and South Canterbury there was likely to be meaningful falls which should give relief to farmers.
But the prospect of rain in central and northern areas of Canterbury was less likely, he said.
Meanwhile, the Department of Conservation said it has rescue plans in place for native fish species if the drought deepens in Otago.
Dunedin conservation services manager David Agnew said fish are dying but populations are not yet in crisis.
David Agnew said the Department of Conservation was working with Fish and Game, Ngai Tahu and the regional council to monitor fish stocks in the region's rivers.
He was confident there was still enough water and sufficient numbers of fish that when the rain returned and the rivers started running, populations would bounce back.