APPENDIX 3:
CHARACTERISTICS OF
THE NEW ZEALAND DAIRY INDUSTRY
In reviewing the development of the New Zealand dairy industry since 1892, the following features stand out:
- Continual political lobbying and involvement by central Government;
- Centralised and compulsory mechanisms to manage business risks (such as price fluctuations, price falls, costs of
remoteness, and overseas selling);
- Heavy focus on increasing production and farm efficiency;
- A guaranteed buyer for all the milk a farmer could produce (the rules of a dairy co-operative require it to buy all
production from its members);
- Technical excellence on-farm;
- A predominance of family farms, with relatively limited access to capital;
- Most farmers with “all their eggs in one basket’ (the dairy industry);
- A strong traditional cohesion built around “co-operative principles’;
- A traditional community of interest within the dairying district;
- A deep distrust of “outsiders’;
- A real fear of becoming “peasant farmers’ to predatory corporates;
- Very limited awareness by farmers of overseas buyers’ needs;
- Except for a brief period in the 1920s , exporting of dairy products from New Zealand has always been managed by the
Government or a producer board.
- Prices and costs for dairy farmers have always been “averaged’, “stabilised’ or “supported’ - by a producer board and
the Government. True signals from consumers have been “softened’ for farmers.
- Exports comprising mainly commodities and ingredients, which are relatively low value;
- High levels of trust by farmers in their producer board;
- Real control of the producer boards held by senior managers, not directors;
- Rigorous monitoring of the producer boards at a “political’ level, but much less so at a business level;
- Limited flows of meaningful information between the Dairy Board, the co-operatives and farmers ;
- Highly geared public relations machines which constantly reinforces old industry beliefs, particularly in relation to
the Dairy Board’s performance and its claimed market power overseas;
- Recurring political power struggles, particularly for directorships and senior management positions; and
- Over recent years, serious (often debilitating) power struggles between the co-operatives to gain dominance in the
industry, particularly over the Dairy Board.