Climate and Feeding Strategies: An Analysis of Productivity Growth in New Zealand Dairy

ABSTRACT Productivity growth is essential for securing the long‐term profitability and competitiveness of pasture‐based dairy systems, particularly amid volatile input and output prices and increasing environmental constraints. This paper measures productivity growth using a total factor productivity index (TFPI) tailored to the seasonal, pasture‐based nature of New Zealand dairy farming. We apply a proper‐index approach to enable meaningful comparisons across time and farms. The TFPI is decomposed into key components: technological progress, scale and input‐mix efficiency, technical efficiency, production environment and statistical noise. To account for climate‐related variability, we integrate pasture growth indices as proxies for pasture availability supporting milksolids (fat + protein) production. Between 2012/2013 and 2023/2024, productivity growth plateaued, with the TFPI declining by 1.33% (−0.09% per annum). While technological progress increased by 6.9%, this was offset by declines in scale‐and‐mix efficiency (−4.2%), technical efficiency (−0.63%) and production environment favourability (−1.68%). Moreover, technological progress has stagnated since 2015/2016, suggesting that recent innovations have not translated into measurable productivity gains. These findings underscore the need for a multifaceted response to reverse productivity decline and secure competitiveness: accelerating innovation, strengthening technology adoption and building environmental resilience.