State-owned Landcorp said it had scaled back its plans to turn former forestry land into 39 dairy farms near Wairakei, in the central North Island, saving $25 million to $35 million.

Landcorp said it would "significantly reduce" dairy's footprint from the original plans and instead include alternative uses for the 14,500 hectares of former forestry land it leases from Wairakei Pastoral.

The land-use changes reduce the risk of phosphate and sediment loss and bacterial contamination and should result in a significant drop in the levels of nitrogen leachate, Landcorp said. It is also expected to improve the profitability of Landcorp's development, located 15 kilometres from Taupo.

"Landcorp's strategy is to connect the food we produce on our farms with high value consumers around the world under our new Pāmu brand," Landcorp chief executive Steve Carden said in a statement.


"To do that, we need to exceed their expectations about how that food is produced, whether it is the standard of care for the animals, the people who work on the farm, or the environmental impact of producing that food," he said.

Landcorp's new direction would include a focus on developing new products such as sheep milk, which would require new farm systems. "We would like the Wairakei Estate to become the centre of such innovation as Landcorp looks to expand in these new areas," Carden said.

Wairakei Estate currently comprises 13 dairy farms with 17,000 cows over 6,400 hectares. The new land-use model will see the eventual number of dairy farms and cows on the Wairakei Estate significantly reduced from the 39 originally planned when the estate is fully developed.

The amount of capital invested in the project is expected to be about $25m-35m lower than originally planned, with improved returns across the development.

Landcorp's dairy support operations such as rearing young stock and winter grazing will be self-sufficient and be run largely within the confines of the estate rather than at other farms.

"We're acutely aware that we do not want to create any legacy issues for sensitive water catchments in the communities we operate in, anywhere around the country," Carden said.

"The expectations that consumers and the public in general have about how their food is produced is changing quickly, so we need to continually rethink our farming practices to keep up with them," he said.

"In arriving at this decision, Landcorp consulted with a wide range of dairy and agri-business experts along with our own Environmental Reference Group (ERG), a select group of external environmental experts that Landcorp consults on its farming activities," Carden said.

Landcorp is one of New Zealand's largest farming organisations, with 140 properties. The company's 's Pāmu brand means "to farm" and reflects the provenance and quality of Landcorp's products.