Japan's loss could be Fonterra's gain: as Japanese farmers abandon the industry in droves, Fonterra's branch there is filling the gap.
It's a success story that suggests their new business strategy of ditching consumer brands like Anchor and Mainland, to concentrate on selling dairy ingredients, could be a winner.
Japan is New Zealand's 4th-largest trading partner, and Fonterra is exporting about 130,000 tonnes of dairy product there every year. Demand is remaining steady, despite a declining and rapidly aging population.
That's partly because the number of Japanese dairy farms supplying the market is plummeting - from over 400,000 in the 1960s, to just 12,600 today. The average age of Japan's farmers is 65 and the sector is struggling to attract more people as farmers grapple with skyrocketing production costs driven by the Ukraine-Russia conflict, such as grain prices.
"It's difficult and hard, it's not easy to get profit for them right now", Japan farming consultant Kenji Takada told Newshub.
Fourth-generation Hokkaido farmer Baba Satoshi said there's a lack of interest from younger generations.
"There are no young people starting farming right now and feed prices are quite high right now. It's a difficult situation for the farmer," he said.
But Fonterra's head of sales for Japan, Kenichi Hada, said the country's dairy decline has a silver lining for New Zealand.
"We want the Japanese government to increase the total amount of imports going forward, in light of the decreasing milk production in Japan," he said.
Fonterra's main exports to Japan are cheese and butter, but also whey powder for protein products. The business there is seeing steady demand, and is an example of their new strategic direction focusing on selling dairy ingredients.
Hada said the diet of Japanese people has changed over the years to include more dairy.
"Yeah definitely, so Western types of food are being well consumed," he said.
However, the number of Japan's own farmers feeding that market is expected to keep falling as production costs keep climbing.
"The feed price, the fertiliser price, fuel price right now. So we have to find out some kind of solution in future," said Takada.
One solution is to get the cows outdoors and living off grass in winter rather than expensive grain. In 2014 the NZ dairy industry started teaching Japanese farmers about pasture-based systems, to improve animal welfare and reduce the costs of importing stock feed.
Satoshi has embraced the change to a pasture-based system.
"I love to walk with the cows back to the cow shed," he said.
It's hoped that by adopting Kiwi farming techniques, more Japanese farmers will be enticed back to this way of life in the future.
Alexa Cook's trip to Japan to cover this story was funded by the Asia New Zealand Foundation.
