This study utilizes a production function based on costs of feed, health and reproduction, and other inputs to measure efficiency of milk solids production in New Zealand. A second function was also used to measure inefficiency and the sources of inefficiency. The results show that on average producers are reasonably “efficient” with a score of 84%, with reproduction and farming system being major influences on efficiency. Efficient producers have good control over all costs and a high percentage of cows calving early in the milking season. One component of a system that “inefficient” producers can examine is their reproduction program.