The New Zealand dairy sector is navigating a more demanding economic environment as the 2026/27 season gets under way. Fonterra has revised its Farmgate Milk Price forecast down to $9.25 per kilogram of milk solids (kgMS), from the opening forecast of $9.75/kgMS announced in May. The revision reflects an 11 percent fall in Global Dairy Trade reference prices since that opening announcement, alongside stronger-than-expected milk supply from key exporting regions including the United States and Germany. While the revised forecast remains well above long-term historical averages, the direction of travel is clear: margins are tightening, and farmers need to look carefully at every part of their operation to protect profitability.
At the same time, DairyNZ has outlined six priorities for the sector in the lead-up to the 2026 General Election, with resource management, freshwater quality, and low-emissions technology featuring prominently. The organisation has called on political parties to back practical, evidence-based policy settings that give farmers the confidence to invest. These twin pressures, economic and environmental, are converging in a way that makes on-farm efficiency more important than ever. One area that deserves closer attention is the management of waste milk, a stream that most farms generate every season but few have the tools to fully recover.
What is the true scale of on-farm milk loss in New Zealand?
A peer-reviewed study published in 2026 by researchers at the University of Otago, drawing on case studies with New Zealand dairy farmers and a dairy processor, found that the average annual milk loss on farm was 1.8 percent of total annual milk yield. The majority of this loss was repurposed as animal feed, but a significant portion was simply discarded. When extrapolated across New Zealand's national milk production of approximately 21 billion litres per year, a 1.8 percent loss equates to the annual production of around 350,000 cows. That is not a rounding error. It represents a substantial volume of nutrient-rich liquid that is either discharged to effluent systems or fed to calves in ways that carry their own risks.
The primary drivers of this loss are well understood. Milk from cows undergoing antibiotic treatment for conditions such as mastitis must be withheld from the human food supply chain for a specified period under New Zealand's veterinary medicines regulations. Colostrum surplus from freshly calved cows is another significant contributor. Neither stream can be sold to the processor, and both require active management on the farm. When a farm's breakeven milk price is sitting at around $8.79/kgMS for the 2026/27 season, as DairyNZ forecasts, every litre that does not enter the value chain represents a real cost that compounds across the season.
Why does waste milk disposal carry environmental and biosecurity risks?
The environmental consequences of waste milk disposal are more significant than they might initially appear. Milk is a highly nutrient-dense liquid, and its discharge into effluent ponds places a heavy biological oxygen demand on treatment infrastructure. When systems are overloaded, the risk of nutrient leaching into groundwater increases, directly conflicting with the freshwater management priorities that DairyNZ and the Ministry for the Environment have identified as critical for the sector's social licence to operate.
The biosecurity dimension is equally serious. Feeding waste milk containing antibiotic residues to calves has been associated with the shedding of antibiotic-resistant bacteria in calf faeces, contributing to the broader challenge of antimicrobial resistance in agricultural environments. This is not a theoretical concern. International research has documented the pathway from antibiotic-containing waste milk to resistant bacterial populations in farm soils and waterways. For New Zealand, which markets its dairy products on the basis of clean, sustainable production, this is a reputational risk as well as a regulatory one.
The University of Otago research found that farmers and processors were very limited in their recycling and disposal destination options for waste milk. This exposed them to serious reputational and biosecurity risks. The researchers concluded that farmers and processors require support to diversify end-of-pipe recycling options and ultimately improve the sustainability of dairy supply chains.
How can on-farm technology turn waste milk into a recoverable resource?
The most effective response to the waste milk challenge is to shift the paradigm entirely. Rather than treating discard milk as a liability to be managed, the goal should be to convert it into a stable, usable product at the point of generation. Technologies that process eligible non-saleable milk on-farm into a stable animal feed-grade powder offer a compelling pathway. A dry, shelf-stable product eliminates the immediate environmental discharge risk, removes the biosecurity concerns associated with feeding raw waste milk to calves, and creates a nutritional input that can be stored and used as a calf milk replacer or livestock supplement throughout the season.
The economics of this approach become more attractive as farmgate milk prices soften. When the margin between revenue and breakeven narrows, the ability to recover value from a stream that would otherwise be a cost becomes a meaningful contribution to farm profitability. It also reduces the volume of liquid requiring effluent treatment, lowering the operational load on farm infrastructure and reducing compliance risk under New Zealand's freshwater regulations.
The AXIS system is being developed by DairyTech Solutions to address exactly this need, providing farmers with a practical, on-farm pathway to convert eligible waste milk into animal feed-grade powder and recover value from a stream that currently represents both a cost and an environmental risk.
What are the strategic implications for NZ dairy farmers in 2026/27?
Fonterra's revised milk price forecast is a timely reminder that the sector cannot rely on high payouts to absorb inefficiency. The BDO New Zealand dairy outlook for 2026/27 notes that farm working expenses are forecast to rise to $6.19/kgMS, and that the average breakeven milk price is expected to increase to $8.79/kgMS. With a midpoint forecast of $9.25/kgMS, the buffer is narrowing. In that context, the case for addressing avoidable losses, including waste milk, becomes straightforward.
DairyNZ's election priorities reinforce the direction. The organisation is calling for policy settings that support investment in low-emissions technology, resource management, and science and innovation. On-farm waste milk recovery sits squarely within this framework. It reduces environmental discharge, recovers value from an existing waste stream, and supports the sector's broader sustainability narrative without requiring farmers to sacrifice productive capacity.
The strongest farms entering the 2026/27 season will be those that have used the recent period of strong returns to strengthen their balance sheets and invest strategically. For many, that means looking beyond the obvious cost lines and identifying where value is currently being left on the farm. Waste milk is one of those places. With the right technology and the right regulatory framework, it does not have to stay that way.