The New Zealand Dairy Industry

Dairying is New Zealand's leading export industry and its largest pastoral farming sector. The industry has grown rapidly over the last 15 years and offers sound investment opportunities in the main dairying areas of New Zealand.

Dairying is not only the biggest exporter but also contributes significantly to the GDP of the country and is a large employer, with over 40,000 people employed directly in the industry.

It is a vertically integrated industry owned on a cooperative basis by approximately 14,000 dairy farmers. Almost all of the milk produced is for export, with only about 3% used in the local liquid milk market and around 95% of total production being processed for export.

Farmers own shares in and provide milk to cooperative dairy companies for processing and manufacture to a wide range of products. These companies have worldwide distribution and marketing networks for sale of the dairy products.

Fonterra Cooperative Group is the largest of the cooperatives and also New Zealand’s largest company. It was formed in 2001 by the merger of New Zealand Dairy Group and Kiwi Dairies Limited and the subsequent integration of The New Zealand Dairy Board, the longtime marketing organisation for the NZ dairy industry. This new organisation is supplied with approximately 95% of milk produced in New Zealand, manufactures products from the milk and markets them worldwide. There are two smaller cooperative companies, Westland Cooperative Dairy Co. Ltd. located on the West Coast of the South Island and Tatua Cooperative Dairy Co. Ltd. in the Central Waikato.

Dairy farming areas

The main dairying areas are in the northern part of the North Island. These include Northland, Auckland, Waikato, Bay of Plenty and Taranaki. Significant numbers of dairy farms are also found in the southern North Island areas of Manawatu, Hawke’s Bay and Wairarapa.

Substantial growth of the industry has occurred in the South Island in recent years, particularly in Canterbury, Otago and Southland. Substantial investment has occurred in these areas to create a large number of large-scale dairy farms. This expansion of the industry has occurred both through traditional family farm ownership and through investor groups coming together to purchase large areas of land, develop new dairy farms and employ staff to run the enterprises.

Even after the spectacular growth in the industry in the South Island approximately 70% of dairy cattle are still found in the North Island of New Zealand. Potential exists for much more growth in the industry to occur in the South Island in coming years. Irrigation is an essential component, particularly in Canterbury and Otago and access to adequate water resources is essential for successful developments.