Because of the drought, Landcorp has had to advise the new Chinese owner of the former Crafar farms that its investment will be making a loss this year.
Landcorp is managing the 16 farms in the central North Island and Manawatu for Shanghai Pengxin, which took ownership from the receivers late last year.
Chief executive Chris Kelly said the drought has had significant affect on revenue. Extra capital expenditure by Shanghai Pengxin has also been required.
Under the partnership agreement with Shanghai Pengxin, Landcorp owns the livestock on the farms.
Mr Kelly said it has spent more than $21 million buying 16,000 cows from the receivers.
It will install its own staff and share-milk the farms from the beginning of the new dairy season in June.