It said due to “extreme weather” during the summer dairy farmers were facing unprecedented costs and other global issues were affecting supply chains.
Funds will be used as an “interim measure” to manage the rising cost of feed importation.
The Minister for Economic Development, Tourism, Sport and Culture said financial intervention was needed.
Deputy Kirsten Morel said: “We know that farmers have been under significant pressure over recent months with significant increases in the costs of fuel and feed and drought conditions over the summer months.
Funding will come from underspends in the Department for the Economy’s existing budget, the government said.
“It is an important interim measure while we work to secure more long-term security for our rural economy,” Mr Morel said.
