A new report estimates that the sheep milking industry in Southland could be worth $124 million for the region by 2040.
That would be 1.5 percent of the region's GDP.
The Institute of Economic Research report, commissioned by the Southland Regional Development Strategy, says this target is achievable.
Project manager Sarah Brown said for the sector to reach its potential in Southland, farmers and processors needed to partner up to sell niche products in high value markets.
Ms Brown said she was cautiously optimistic about the report.
"It's a really good opportunity for Southland but there's a lot more work that needs to be done."
A key benefit to milking sheep is the lower environmental impact, particularly compared to milking cows.
"Research in other parts of the country has shown that it's potentially up to 50 percent better in terms of nitrate run off.
"One of the next steps is seeing how that looks in Southland conditions."
Currently the region has one sheep milking operation, Antara Ag Farms, which runs around 14,000 milking ewes across three properties.
Ms Brown said there was a long way to go to get other farmers into the sheep milking sector.
"We need technical expertise. We've been talking to MBIE [government] and scientists are coming down to Southland at the end of the month to have a look and start that conversation."
The government regional development work had given Southland initial funding, and the group was discussing future funding at the moment, she said.
Farmers in the region are on board.
"We're talking mainly to sheep farmers about that work. Southland sheep farmers for a huge number of years have had to be very broad in their thinking because sheep farming hasn't paid particularly well for a long period of time.
"They've seen how well Antara Ag has done with their sheep milking operation, so they're certainly keen to have that conversation."