NZ Keeps Milk Costs Lowest Among Major Exporters

A new Rabobank report shows NZ dairy production costs lead the way among major dairy exporting countries.

New Zealand is leading the way, closely followed by Australia, as the lowest cost producer, having increased its cost advantage to USc5/litre in 2024 (up from USc2/litre in 2023), according to Rabobank’s new report, The Cost of Milk: dissecting milk production costs.

The five-year average total cost of production stands at US 0.37c/litre for both New Zealand and Australia, compared to around US0.48c/litre for other regions.

The Oceania region’s strong reliance on pasture-grassing, supplemented with homegrown feed stuffs or locally produced feeds, broadly supports its low cost of production position.

However, the downside of a stronger USD for non-US production regions is the impact on cost pressure for imported inputs like fertilisers and fuel, which average around 15% of New Zealand farm working expenses in the past five years.

China remains the highest cost milk producer, though it has become more cost-competitive in the past three years. Feed costs make up over 60% of China’s total production costs relying heavily on imported feed.

The report examined production costs across eight major exporting regions – Argentina, Australia, China, Ireland, New Zealand, the Netherlands, California, and the upper Midwest of the US. The average total cost for milk production across these regions increased by around US6c/litre from 2019 to 2024.

According to report author Emma Higgins, “Continued cost structure management relative to milk output will be needed to maintain dairy farmers' economic resilience in a potentially turbulent business operating environment — something Kiwi dairy farmers have demonstrated in previous commodity price down cycles.”