New Zealand's Dairy Industry in 2023

New Zealand continues to be a pivotal player in the global dairy sector, supported by robust infrastructure and extensive operations. The nation manages a dairy herd of approximately 5.1 million cattle, resulting in an annual production of 21.4 billion liters of milk. Its advanced processing facilities can handle up to 20 billion liters per year.

Dairy Production and Export

New Zealand is projected to produce 375,000 tons of cheese by 2024 and currently generates 1.5 million tons each of milk powder and whey annually. The country contributes 35% to global milk powder exports, totaling 4.6 million metric tons. In 2023, dairy exports were valued at approximately NZ$18.2 billion, with 95% of products exported primarily to Asian and Middle Eastern markets. Exports to the United States face a 10% tariff.

Key Enterprises and Market Dynamics

The industry is dominated by companies like Fonterra, Synlait Milk, Westland Milk Products, Yili, Bright Dairy, and Pure Nutrition, which have seen significant investments. Notably, Westland Milk Products acquired a 60% stake in Pure Nutrition for NZ$31.1 million, and Fonterra invested NZ$150 million in a new UHT cream plant.

Economic Impact and Farmgate Prices

Dairy contributes significantly to New Zealand's economy, with current season milk prices expected to add about NZ$15 billion. The Farmgate Milk Price remains stable at NZ$10.00 per kgMS. In Taranaki, dairy exports have surpassed oil and gas revenues, supporting the third-highest GDP per capita in the country.

Challenges and Opportunities

The industry faces challenges such as inflation-driven cost increases, a downturn in the butter business, and potential labor shortages due to visa expirations. To address environmental concerns, the government is investing over NZ$400 million in methane mitigation, aiming for 11 commercially available options by 2030.

Environmental and Technological Innovations

New Zealand is addressing environmental concerns like nitrate and E. coli contamination, emphasizing food safety and plant protein production. The country aims to double its dairy export value by 2034, focusing on diversification and sustainability. Nestlé is financing the first commercially viable Net Zero dairy farm in New Zealand to target significant emissions reductions.

Labor and Employment

The dairy industry accounts for over 7% of New Zealand’s GDP, employing around 41,000 people. Due to labor shortages, the sector relies heavily on international workers. Fonterra, a cooperative owned by approximately 10,500 farmers, manages nearly a third of global dairy trade.

Strategic Developments and Investments

Fonterra plans to invest up to NZ$1 billion to enhance efficiency, including a NZ$75 million expansion in butter production. New Zealand is also negotiating a free trade agreement with India to improve dairy market access and facilitate skilled professional movement.

Animal Wellbeing and Sustainability

The industry emphasizes animal wellbeing, utilizing wearable technology to enhance cow metrics. The Competitive Farm Systems - Frontier Farms project supports this focus. Research at DairyNZ’s Scott Farm in Hamilton investigates a 24-month calving interval’s effects on labor peaks and profitability.

Waiū Dairy and Māori-owned Dairy Processors

Waiū Dairy faces financial difficulties amidst broader challenges for independent Māori-owned processors competing against larger corporations. The industry addresses climate change-induced heat stress on cows, a significant risk to production and welfare.

Fonterra's Environmental and Production Efforts

Fonterra's Eltham site in Taranaki is undergoing upgrades to expand cheese production capacity for international demand. As New Zealand's largest greenhouse gas emitter, Fonterra’s emission reduction initiatives are critical.

Legislative Changes

The government has repealed the longstanding Resource Management Act (RMA), introducing three new legislative measures to streamline environmental regulations and boost sector efficiency: the Natural and Built Environment Act (NBA), the Spatial Planning Act (SPA), and the Climate Change Adaptation Act (CCAA).

Technological Advancements

Radix Nutrition has launched an AI-driven platform, transforming product formulation and enabling upgraded products such as freeze-dried breakfast cereals, protein powders, and smoothies.

Future Outlook

New Zealand's food and fibre exports are projected to reach a record $62 billion in 2026, with dairy contributing a 1% increase. The dairy sector remains a pivotal part of the nation’s economy. Despite the threat of precision-fermented milk, Fonterra focuses on ingredient market segments, enhancing organic milk production in the South Island. New Zealand-based dairy cooperative LIC reports an increase in revenue attributed to demand for dairy genetics. The global dairy market crisis has affected key production regions including New Zealand. Synlait's experience underscores the difficult environment facing dairy producers in New Zealand and beyond. Fonterra has shifted its focus to high-value dairy protein and ingredients following its $4.2 billion sale of Mainland. The company aims to enhance efficiency and maintain stable milk prices. In Australia and New Zealand alone, 2,500 employees will transition to the Mainland Group. Fonterra will maintain a limited presence in Australia, retaining access to a small number of customers.

The a2 Milk Company, headquartered in New Zealand, is expanding its product offerings in the Chinese nutrition market, moving from infant formula to paediatric wellness products.

Modified: 2026/02/28