Growth in a world of limits
Looking forward with DairyNZ chief executive Campbell Parker.
Inside Dairy
2 min read
The next chapter for dairy will be built on responsible growth and resilient, low-impact systems.
New Zealand’s dairy sector cannot grow in the way it has in the past. So what is the plan to increase the value of exports while improving dairy’s environmental footprint?
Following several decades of growth, pasture and milksolids productivity in the dairy sector have plateaued in the last decade.
The big question facing our dairy sector is how farmers can contribute to the government’s plan of doubling the value of primary sector exports in the next decade, while also improving sector sustainability.
According to some forecasts, the global dairy sector will need to produce almost 70% more to meet demand by 2050. As the leading producer of sustainable dairy products, New Zealand has a big part to play in meeting this increased demand.
But that growth will be judged against a set of expectations that previous generations never had to face.
The past few decades have seen NZ’s dairy sector develop in three phases.
The 1990s saw the rapid expansion of dairy’s footprint, as sheep and beef land, and some forestry, were converted to dairy, especially in Waikato, Central Plateau, and lower North Island. It was a time of affordable land, affable bankers and increasing irrigation and supplementary feeding.
The turn of the century saw that intensification continued with greater inputs, nitrification inhibitors and early nutrient management practices. But that intensification was met with regulation in the form of changes to resource management rules and counter initiatives such as the Clean Streams Accord.
The early 2000’s saw the South Island increase its dairy platform as other regions levelled off. Labour shortages, the commodity crash of 2015, and a banking sector less willing to lend led to a stabilisation of the national herd.
At the same time, public concern over dairy’s environmental footprint intensified, leading to nutrient management rules, new banking restrictions, and the Sustainable Dairying: Water Accord, marking the transition towards regulated environmental management and the end of unrestrained growth.
The New Zealand economy relies heavily on dairy, with the sector contributing significantly to exports, employment and regional development.
In the year ending June 2025, NZ dairy exports generated approximately $27 billion, accounting for one in every four export dollars earned by New Zealand. Dairy farming and processing contribute around $20 billion a year to GDP, representing 3-4% of total GDP, and the sector employs over 55,000 people, including 40,000 on farms and 15,000 in processing.
But the sector has reached a productivity and environmental plateau. The national dairy herd peaked in 2015 and has declined by about 12% since then, while total effective hectares peaked in 2017 and have gradually reduced.
Total milksolids processed have remained relatively stable, and the average herd size has settled, since 2022, around a midpoint of 445 cows.
The opportunity lies in a responsible growth strategy, with sustainability at its core.
Although milksolids per cow have increased to an average of 400kg – 6kg above the five-year average – pasture productivity has stagnated since the early 2000s.
Gains in production per hectare are increasingly reliant on higher inputs, such as nitrogen fertiliser, irrigation and supplements, rather than improved on-farm efficiency or land expansion.
But environmental constraints, and a sector increasingly focused on sustainability gains to meet market demand, mean any future growth will need to follow a different model.
Freshwater regulations and nutrient caps will restrict the ability to convert or intensify.
Global markets are increasingly demanding that dairy producers show improvements in sustainability, animal welfare and emissions.
So what does the future hold for NZ’s dairy industry?
The opportunity lies in a responsible growth strategy, with sustainability at its core.
Previous generations have set us up to deliver milksolids growth and a reduced environmental footprint. By using the tools and technology now available, encouraging their uptake and understanding of emerging technology, the dairy sector can identify the regions or catchments where growth can occur to support sector profitability and resilience.
But, crucially, that growth will be predicated on next-gen farm systems that value a low footprint as much as high productivity.
Dairy’s social licence is conditional, and upholding that contract with people here at home, and the millions we produce food for globally, is vital.
The scene is set for dairy’s next chapter.
Pasture growth and milksolids production have levelled off in recent years, prompting fresh thinking about future farm systems.
This article was originally published in Inside Dairy February-April 2026.
