The 2025/26 season was another solid one for Waikato dairy farmers, with increased production, a sound milk price and stronger livestock values all contributing positively.
Our 2026 benchmarking pool covers 134 Waikato dairy businesses producing 21.9 million kgMS across more than 18,000 effective hectares, giving us a strong picture of what is happening across the region.
For Farm Owner/Operators, average production reached a six-year high of 1,219 kgMS per hectare and 440 kgMS per cow, up 8% and 7% respectively on last year. Stocking rates remained relatively consistent, suggesting farmers are continuing to get more production from the land and animals already in the system.
The average cash dairy payout for Owner/Operators was a very workable $9.57 kgMS, down from $10.25 kgMS last year.
Livestock values also strengthened considerably during the year, with higher sale prices flowing through to Herd Scheme values. Net Livestock Cash Income lifted by $0.28 kgMS, while the value of a Mixed Age dairy cow increased by $713 per head.
The Fonterra capital return also provided a one-off boost to cash available during the year, giving farmers additional capacity for tax, debt repayment and reinvestment.
The sting in the tail is rising costs
The trend we are watching closely is farm operating expenditure.
Farm operating costs for Owner/Operators increased from $5.45 kgMS to $5.99 kgMS, a 10% increase in one year. Animal health spend increased 20% per cow, feed increased 10% per kgMS and fertiliser expenditure increased 40% per hectare.
That matters because higher costs are absorbing more of each dollar earned. Gross Operating Income for Owner/Operators fell from $5.39 kgMS to $4.32 kgMS, a greater decline than the fall in milk price.
In absolute cash terms, the impact is even clearer. In 2025, Gross Operating Cash Income was $1.553m and, after operating expenses of $781k, $772k remained for non-operating expenditure. In 2026, Gross Operating Cash Income increased to $1.768m, but operating expenses rose to $1.027m, leaving $741k. So despite an additional $215k of cash income coming into the business, there was actually $31k less left after operating costs.
It is perhaps the clearest message from this year’s results: a good payout doesn’t automatically translate into a good margin. Over the past few seasons, farmers have generally been able to absorb rising expenditure through stronger dairy returns and increased production. The question looking ahead is how sustainable that will be if milk prices eased off while the higher cost base remains.
What about 50/50 sharemilkers?
It was also a good season for our 50/50 sharemilkers, although they were not immune from increasing costs.
Farm operating costs increased 15% to $3.42 kgMS, with a 10% increase in feed spend, a 15% increase in animal health costs and a 10% increase in herd improvement expenditure.
Livestock continued to be a positive story, with Livestock Cash Income increasing by 28%. This helped offset the lower average payout for the group, which was down $0.07 kgMS. Despite some pressure on margins, overall profitability remained among the stronger results in our six-year comparison.
Where the margin opportunity lies
Perhaps one of the more interesting takeaways from this year’s benchmarking came from looking more closely at the top 25% of profitable Owner/Operators.
The top performers generally had lower costs across a range of areas, particularly feed and labour, highlighting the value of continuing to fine-tune already well-run farming systems.
Average feed expenditure across all Owner/Operators was approximately $1.93 kgMS, compared with around $1.46 kgMS for the top quartile. Wages were approximately $0.84 kgMS across the benchmark group, compared with $0.70 kgMS for the top quartile.
With production already at strong levels, managing the cost base becomes increasingly important. This is not simply about just spending less, but looking across the farming system at where a combination of money, time and resources at hand are being used and the value they are delivering.
A good time to look ahead
2026 represented another good year for the dairy sector, with strong production and livestock returns supporting results. However, rising farm working expenses are steadily lifting the underlying cost base.
The challenge ahead will be maintaining the strong production farmers are achieving while continuing to keep a close eye on costs and overall farm profitability.
If you would like to see how your results compare with the CooperAitken 2026 Waikato Dairy Farming Benchmarking data, contact us about preparing an individual comparison report.
