Abstract

The dairy industry is a major contributor to both the New Zealand economy as a whole and to the Waikato regional economy in particular. The industry is experiencing a period of considerable change with increase in dairy conversion, increased intensification, and increasing use of nitrogen fertilizers, each of which has an associated environmental cost. In this paper, the productivity performance of the mature dairy industry in the Waikato region is investigated using panel data at the sub-regional level from 1994 to 2007. In general we show that, under a range of specifications, productivity growth independent of increasing land use and herd numbers has been significantly below the four percent industry target. This suggests that, if the four percent goal were to be met in the absence of substantial technological progress, further increases in fertilizer use, land use, and/or farming intensity would be required.

Key words: Productivity, dairy industry, Waikato, New Zealand.