Where is the $10 payout going

Rhys Wylie and Gareth Reed from our Agri team joined Fonterra and DairyNZ, presenting to dairy farmers and agri industry professionals on ‘The dairy sector outlook for 2025-26’. Rhys and Gareth shared insights into the key conversations farmers are having with ANZ bankers in both Canterbury and the Waikato – and how they’re planning to make the most of the anticipated $10 dairy payout.

There has been significant interest shown in the adoption of new technology on-farm. Farmers are known for their innovation and willingness to test new ideas in pursuit of greater efficiency. We’ve noticed a lot of interest in wearables, bolus technology, and even AI-powered cameras. This uptake is being driven by improvements in technology and greater awareness of the benefits beyond labour saving, such as heat detection and lameness monitoring. Additionally, there has been a lot of encouragement to lift farm efficiency, as well as lower-cost finance options emerging, making these technologies more attractive. 

In both Canterbury and the Waikato, we’ve observed that the market for first farm buyers is the strongest it’s been in some time, with many share milkers stepping up to purchase their first farms. This year saw some of the highest numbers of farm sales with a first farm buyer aspect, either as outright purchasers or as equity partners. According to Canterbury dairy market overview March 2025, 26 irrigated dairy farms have gone under contract this season, with 14 of those involving a first farm buyer in some way shape or form. This trend is supported by share and contract milkers who have banked some equity in recent years, enabling them to acquire land themselves or with support from a larger partner.

There is growing interest in solar installations, both on sheds and in field. The falling cost of panels has reduced the payback period to approximately 5.5 to 6 years in some cases (ANZ client proposals from solar companies to dairy clients). Additionally, there is a growing awareness of the vulnerability of the national grid and the likely long-term increase in power prices. We have a range of lending options— that can help you uplift your farming business and make the investment decision easier – talk to your Relationship Manager today. 

Dairy sheds are critical infrastructure on any farm. In Mid Canterbury, building consent data tells us that there were 140 dairy sheds built between 1993 and 2007. As these sheds approach their 30-year mark, it’s understandable that farmers are looking to reinvest into the profit centres of their operation. As a result, there is significant investment in platform rebuilds or outright shed replacements across Canterbury. This surge in demand may put pressure on the shed builders in the market, who are also responding to significant enquiries for potential dairy conversions again.

We've observed that the recent sales period has been one of the busiest in quite a while, with a higher number of dairy farmers looking to buy. There has been a lot more depth on the buy side, with several situations involving multiple bids. Interestingly, it is not necessarily the corporates or foreign buyers driving this trend, but well-established families looking to expand from one dairy farm to two or three. Often these are farmers from within the same region, having converted to dairy within the last 15 years. They’ve weathered tough times, paid down debt, lifted production, and are now in a strong position to grow again.

Many dairy farmers are choosing to invest profits outside of farming. In the Waikato, we’ve seen strong interest in beach houses, where farmers start thinking about where they want to settle after farming. In Mid Canterbury, the trend has been more towards investment in residential and commercial property, according to our frontline bankers. There has been renewed interest in these investments, particularly in Christchurch, as farmers look ahead to retirement or access to schooling for children.

The significant tax bills that dairy farmers will be paying in the 2025 calendar year was also highlighted. Any losses from the 2015/16 period have long since been used up, and the dairy industry is now contributing significantly to the nation's tax revenue.

The presentation also provided an in-depth analysis of rural and dairy debt based on data from the Reserve Bank of New Zealand (Banks: Assets – Loans by sector (S30)). Dairy debt is now at its lowest point since 2016, both in absolute terms and as a proportion of total rural debt. At the end of March 2025, dairy debt across all banks in New Zealand was $35.335 billion , down from a peak of $41.7 billion in July 2018. Dairy debt now contributes less than 58% of all rural debt, down from almost 70% in 2016.

Despite the reduction in debt, dairy production has remained stable. In 2016, New Zealand produced just under 1.9 billion kgMS. According to Dairy NZ’s New Zealand Dairy Statistics 2023-24, by the end of the 2024 season, production was slightly higher at around 1.92 billion. This means the average dairy farmer has reduced their debt per kgMS from around $22/kgMS in 2016 to around $18.40 in 2025.

The value of this debt reduction is significant, as it puts the sector on a much stronger footing for if and when there is a significantly softer payout. In the very short term, through to the end of the season, the repayment rate will slow as farmers conserve cash ahead of some large tax payments due. However, the heavy lifting and hard work have already been done to set them up for a resilient 2026.