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Dairying and dairy products

by  Hugh Stringleman and Frank Scrimgeour

Most pioneer families kept a few cows to supplement their limited diet with dairy products. Soon, cream was trundled in cans to factories by horse and cart to be processed for city folk. Better transport, refrigerated shipping, and mechanical milking saw the dairy industry expand into the export earner it is today.


Beginnings of New Zealand’s dairy industry

Since the early 1800s the dairy industry in New Zealand has gone from farmers keeping a few domestic cows on bush blocks to being a world leader.

First cows

The first dairy cows to arrive in New Zealand were Shorthorns, known at that time as Durhams. They were introduced in 1814 by missionary Samuel Marsden for mission stations in the Bay of Islands. The cows came from the New South Wales Crown herd, and were a gift from Governor Lachlan Macquarie. Shorthorns were useful draught animals, which gave good milk and provided excellent meat.

Early farms

Shorthorn herds were established by the early 1840s, and for a long time Shorthorns were New Zealand’s most popular cattle breed. Farmers mainly kept cows to provide milk, butter and other dairy products, and grazed them on pastures cut out of native bush. Initially, herds were small, but were larger near towns, where milk, butter and cheese could be sold.

Domestic milking and processing

All settlements had dairy cows, each family usually keeping one or two to provide its dairy needs. Women and children generally had the task of milking, which they did in a paddock. They restrained the animal with a leg rope or halter, and sat on a stool or upturned bucket. The milk was strained through fine mesh, then allowed to settle so the cream rose to the top. This was skimmed off with a ladle and made into butter in a small churn. Cheese was made by curdling whole milk with lactic acid or rennet from the lining of a calf’s stomach. Whey – the watery waste product – was usually fed to the pigs.

Better butter

Before refrigeration, butter sent from New Zealand to Britain or Australia invariably arrived in poor condition. However, butter sent to New Zealand from Ireland, and cheese from England, arrived in good condition, and was sold at a premium. Overseas butter was heavily salted, and was packed in salt, and was thought to be of the highest quality.

Dairy products

In the early days of New Zealand settlement, butter was the only dairy product with a marketable value – although it was often bartered rather than sold for cash. As late as the 1880s butter that was surplus to a family’s requirements was taken to the local store and swapped for food or farm tools. The storekeeper would then sell the butter for a profit.

Dairy products added protein and fat to the limited pioneer diet of bread, meat, some fish, and a few fruits and vegetables. Butter, cheese and yogurt stayed fresh and edible a lot longer than raw milk or cream.


Expansion of dairying

Before the advent of refrigeration, almost all of New Zealand’s dairy products were consumed locally, with only a small amount of butter and cheese exported to Australia. From the early 1880s refrigeration made it possible to export more dairy products.

First factories

The first dairy factories in New Zealand were opened in the mid-1880s, in Taranaki and Waikato, to process whole milk. Henry Reynolds developed the Anchor trademark, which later became known worldwide. Farmers took their milk to the local factory in metal cans on the back of horse-drawn carts. The factories became places for farmers to gather and chat.

However, many farmers were not convinced of the benefits of sending their milk to factories, although it was generally recognised that it was better for making cheese. In more isolated districts, milk was processed into butter on farms long after factories had been established elsewhere. This butter was often taken to small packing stations, where it was blended for local markets.

Cheese and butter factories

In the early 1880s the most successful factories made both butter and cheese, and could adapt to changing supply and demand. Twenty factories had been built by 1884. At first they used traditional farmhouse methods, and only slowly began to use larger, steam-driven equipment.

Early factories were mainly built through the efforts of individual and corporate entrepreneurs. They played an important role in the development of dairying and showed how useful technology could be to farmers.


Cooperatives and centralisation

The creamery system

In the late 19th century butter factories grew larger, but it was difficult for farmers to transport milk more than a few miles to be processed. As a solution, small skimming stations were built on the outskirts of factories’ regions, where farmers could bring their cans of milk each morning. The milk was weighed and then fed into separators to extract the cream. A share of the skim milk was returned to the farmer to feed his pigs and calves. Cream from a number of farms was then transported to the central dairy factory, usually by truck but sometimes by boat. This creamery system operated, with regional variations, from about 1880 to 1920.

Pasteurised and UHT

Pasteurised milk is heated, usually to 71.7°C, for 15 seconds to kill the bacteria that causes food-poisoning and makes the milk go off. Pasteurising makes milk safer to drink and longer-lasting. UHT is ultra heat-treated milk, sometimes called long-life milk. It has been heated to at least 135°C for at least one second to destroy all bacteria.

Transport

The transportation of milk to factories, and dairy products to markets, was critical to the industry’s rate of expansion. In Waikato and Northland, river boats and barges carried milk and cream to factories. Coastal ships took goods to markets around the country, or to Wellington for export.

Some shortcomings in transport slowed the dairy industry’s growth. Delays in the spread of refrigerated equipment meant that for a long time dairy products travelled as ordinary cargo, without refrigeration. Many dairy factories were not near ports, and so the industry awaited rail links, refrigerated wagons and storage to expand. The frozen-meat industry had similar needs, which accelerated the building of rail lines and the availability of refrigerated wagons. By 1892, 113 ventilated cool trucks were available for transporting dairy produce. In Canterbury and Otago, and in many places in the North Island, factories were built along the rail network.

Being cooperative

The idea of starting a dairy cooperative was first put forward on 22 August 1871, at Highcliff on the Otago Peninsula. John Mathieson called a meeting of eight settlers to discuss forming a cooperative company for the purpose of cheese making. Operations started a month later.

Cooperatives

The success of entrepreneurs encouraged the establishment of cooperatively owned factories. By 1890, of 150 factories nationwide, 40% were cooperatives – owned and directed by farmers – and by 1900 they outnumbered individually or corporately owned factories.

However, varied sources of supply meant that product quality varied enormously. In 1894 the government introduced the Dairy Industry Act, under which goods were graded for export and payment for milk was based on factory inspection.

Centralisation

The number of factories peaked at about 600 in 1920 – about 85% of which were cooperatives. From then on, more efficient transport and economies of scale in processing led to larger factories and the closure of smaller ones. Cooperatives merged until, in the late 2000s, three remained: Fonterra Co-operative Group, Westland Milk Products and Tatua Co-operative Dairy Company.


Separators and milking machines

The on-farm separator

The first cream separator was invented in 1877 by the Swedish engineer Gustaf de Laval. It enabled farmers to separate their own milk and sell the cream to dairy factories, rather than taking milk to a skimming station to be separated. The major advantage was that only about 10% of the volume of milk had to be transported to the factory.

However, the change from skimming stations to on-farm separation was slow. As road transport improved, cream could be collected more regularly, and more milk was separated on farms. By 1918, 24,700 farms (71%) supplied cream to dairy factories. In the 1930s and 1940s a cream truck called at each farm every one or two days to collect cream cans and return empty ones. Cream cans were a fixture until 1951, when factories once again required whole milk, and the first large tanker collections began.

Milk fat and protein

When farmers separated the milk and sent cream to the local dairy factory, they were paid for the fat content, as this was the main ingredient in butter. However, it was later realised that the skim milk they were feeding to their pigs was high in protein. Today, skim milk is processed into a range of products and is more valuable to the farmer than milk fat.

Milking by hand

Owning more than three or four cows turned farming families into full-time dairy workers. It was time-consuming to care for cows and calves, do the milking, separate out the cream and drive it to the factory. The laborious business of hand milking created the demand for mechanical help.

The first machines

The first milking machines were built in Europe in the 1890s, and a Scottish model was trialled in Māngere, South Auckland, in 1893. Vacuum and pulsation was applied through four teat cups (called a cluster) attached to the cow’s udder. The milk was collected in buckets and emptied into vats. Later, these systems were connected up by small engines and electricity to a central machine. Milk flowed along pipes to a vat that delivered milk to the cream separator. When whole milk began to be collected, the milk was cooled in a heat exchanger then poured into cooling vats.

Once initial problems cleaning these machines had been overcome, they proved much more efficient than hand milking. They kept the milk enclosed and safe from contamination. Mechanical milking was the main reason for the increase in cow numbers and herd sizes from the beginning of the 20th century.


Dairy sheds

Early dairy sheds had rough floors of earth or stone, often with poor drainage. They lacked a supply of fresh water and a means of heating water, so were difficult to clean. A need for improvement led to the passing of the Dairy Industry Act 1908. However, it was not until about 1920 that hygiene improved due to regular inspections by the Dairy Division of the Department of Agriculture and the building of better-designed walk-through bails and yards.

Walk-through bails

Cows were milked in stalls or bails, with rear chains to stop them backing out and leg ropes to prevent kicking. The walk-through design allowed cows to exit by going forwards, through a remotely operated back door. The concrete floors had channels to hold milk spills. Water was available for cleaning effluent and a wood-fired copper provided hot water.

Step-up platforms and pit parlours

Variations in shed design made milking easier. A raised cow platform called a step-up made the working height more comfortable for milkers. Handlers could move around the cow to apply the cups from behind rather than from the side, as before.

Pit parlours had trenches about 1 metre deep in the floor behind the cows. When milk-machine operators stood in them they were level with the udder. They would reach up for the clusters of mechanical teats that hung from central milk lines above their head. Cows filed onto a platform from one end and exited at the other.

Herringbone sheds

In the 1950s Waikato farmer and inventor Ron Sharp combined the pit parlour with angled cow positions after seeing angle-parked cars on Hamilton’s main street. He called it the herringbone system, because when viewed from above it resembled a fish skeleton. This design meant that more cows could be milked at once by fewer people, and the cows walk in and out of the parlour by themselves. Within a few years almost all new milking sheds were herringbone design, and in the 2000s the design was still popular in New Zealand and around the world.

Rotary platforms

Taranaki farmer Merv Hicks invented the rotary milking platform in the late 1960s. His turnstile design consists of a raised circular concrete or steel platform with 16 to 60 stalls. It rotates on wheels driven by electric motors. Cows walk on and are milked, during one rotation, by operators standing outside the circumference of the platform. Cows back themselves off once the cups are removed and make their way back to pasture.

On big rotary platforms, 800–1,000 cows can be milked in two or three hours by two people. Cows on the platform sometimes receive supplementary feed such as grain or palm kernel.

The modern milking process

In the 2000s cows are assembled in a holding yard, which usually has a backing gate to gently nudge them towards the milking area. The cows learn to position themselves for milking, and operators are free to wash teats, attach and remove the cups, and let the cows go afterwards. Milking parlours contain a machinery room with pumps and coolers, and a vat room where milk is stored before it is picked up by tanker and taken to the dairy factory. Yards also have bails where cows can be restrained for health procedures or artificial insemination.

In 2007 building and equipping a milking parlour in New Zealand cost from $500,000 to more than $1,500,000.

Robot milking

Automatic milking machines, which are run by a computer, are used on some farms in European, North American and Middle Eastern countries, where cows are confined and fed indoors. In 2007, Dexcel (now Dairy NZ) in Hamilton trialled the Greenfield project, where cows on pasture voluntarily walked to the milking shed once or twice in 24 hours and waited for their turn on the robot milker – all without human assistance.


Dairy cattle breeds

In 2007 New Zealand had more than 4.2 million dairy cows producing over 15 billion litres of milk.

The national dairy herd was made up of Holstein-Friesian (47%, although declining), Jersey (15%), Ayrshire (2%), and some minor breeds such as Guernsey, Brown Swiss and Meuse Rhine Issel.

English Shorthorns

Most dairy cows brought to New Zealand in the pioneering years were English Shorthorns, which were also beef-producing animals and could be used to haul carts and logs. But a number of other breeds took over in popularity and importance as the main milk producers, and there are now relatively few Shorthorns in New Zealand.

Holstein-Friesians

These black-and-white dairy cows have bloodlines from Friesland, a northern province of the Netherlands. Now known as the Holstein-Friesian, this breed is the most common milking cow in the world. It was first imported to the South Island by Canterbury farmer John Grigg in 1884, and to the North Island by Wairarapa farmers four years later. Larger numbers of Holstein-Friesians came in from the US in 1902–3. The breed association was formed in 1914.

Holstein-Friesians are large cows, and their milk has high concentrations of protein and lactose. In New Zealand, on a grass-only diet, they produce more than 4,000 litres of milk from when they calve in early spring to when they ‘dry off’ in autumn. In the US they can produce up to 10,000 litres in the same period when fed high-energy supplements.

The first Jersey cows

Jersey dairy cattle were first imported in 1862. During the expansion of the dairy industry from the 1880s, Jerseys were considered a good alternative to Holstein-Friesians because they gave more butterfat per litre of milk, and were smaller and easier to handle. They are slightly more efficient and profitable than Holstein-Friesians because more can be stocked per hectare of pasture. They were favoured in Taranaki, where farms were smaller. New Zealand has the world’s largest Jersey population – about 600,000.

Hybrid vigour

Hybrid vigour is the term given to the extra productivity or performance that occurs when two breeds are crossed, compared with the average of the two purebreeds.

Cross-bred cows

Many New Zealand dairy farmers want medium-sized, fertile, easy-calving cattle that will not suffer leg and foot problems when travelling from paddock to parlour. In the late 20th century Holstein-Friesians were bred with Jersey cows to produce a cow that has a dark-brown coat with white or black accents.

Hybrid vigour boosts its milk-solids production, conception and calving rates. In 2006 there were 1.2 million such cows (about 30% of the national dairy herd), and their numbers were increasing steadily.

Ayrshires

The red-and-white Ayrshire breed originated in Scotland and came to New Zealand in 1848 with the first settlers to Otago. The breed society was formed in 1909, and Ayrshires or their crosses now number about 100,000. The breed performs well under all-grass, medium-intensity farming, with reliable calving, a strong constitution, good foraging abilities, strong legs and a well-shaped udder.

Breed associations

Holstein-Friesian, Jersey, Ayrshire and English Shorthorn breeders have their pedigree and production records kept by breed associations. These promote genetic imports and exports, conferences and training for young cattle handlers. They also provide judges at agricultural and pastoral shows.


Breed improvement

Measuring milk fat

The introduction in the 1890s of the Babcock test for measuring the fat content of milk prevented unscrupulous farmers from watering down their milk to get paid for more volume. The test was applied to herds, so that cows producing the fattiest milk could be used in selective breeding. In 1896 a farming magazine was enthusiastic about the test:

It is most desirable that this fair, just and equitable system be adopted, as it puts a premium on good breeding, careful handling, good feeding and the delivery of the milk at the factory in good condition.

Testing showed that some cows gave four times more butterfat over a season than the poorest cows. Early tests showed the fat content of milk was 3–4%; in the 2000s it was 4.5%–5.1%. Agricultural and Pastoral associations quickly realised that production records were more important than a cow’s appearance or pedigree.

Testing times

Herd testers were often women. They travelled from one dairy farm to the next – in the early days by horse and trap, and later by van or small truck – to test milk samples. The tester usually arrived in time for the afternoon milking, stayed the night on the farm, and was up for the morning milking at 5.30–6.00 a.m. For the Babcock test, milk samples were collected from each cow at each milking.

Herd-testing scheme

Organised herd testing began at the Dalefield Dairy Company, Wairarapa, in 1909, and by 1922 the first cooperative herd-testing scheme was under way in Waikato. Four years later there were 30 such schemes in the country. Between 1922 and 1930, production per cow grew by 29% – from 175 pounds (79 kilograms) of milk fat per season to 225 pounds (102 kilograms). Herd-testing schemes were amalgamated into six associations, and test procedures were regulated by the government to ensure uniformity.

Modern testing

The herd-testing service reached a peak in the proportion of cows tested in 1996–97, when 2.5 million cows (90% of all cows) were tested. Ten years later, about 2.8 million (70%) were tested. The farmer-owned company Livestock Improvement Corporation and competing genetics company Ambreed provided testing services.

Milk analysis

Milk solids are calculated from the fat and protein content in milk. These are measured by the amount of infrared light that is absorbed when shone through a milk sample. Somatic cells (which indicate the presence of an infection) are also counted at this time to check if the milk has been contaminated.

Testers visit a farm an average of four times a year and sample milk from each cow in the herd. The samples are sent for laboratory analysis (a total of 10 million analyses are made per year) and the results sent back to farmers and breed societies. The average results per cow tested in the 2005/6 season were 3,951 litres of milk, 186 kilograms of milk fat (4.71% by weight) and 146 kilograms of milk protein (3.69% by weight), totalling 332 kilograms of milk solids (8.4% by weight) from 266 days of milking. Farmers are paid for total milk solids.

Artificial breeding

Keeping records of the production from offspring of a cow (progeny testing), and relating this to the bull parent (sire surveying), began in 1934, with the aim of breeding the best stock, and researching methods of artificial insemination. Herd testing showed which bulls sired the most productive daughters. Semen collected from a top bull could be used to fertilise many more cows than would be possible by natural insemination.

The first list of proven sires was published by the Dairy Board in 1941. In 1949 a commercial artificial insemination service began in Waikato and Taranaki – a world first. The 1950s brought improved techniques for freezing semen. It was stored at very low temperatures and then thawed for use, which meant semen from the best bulls could be used long after they were dead.

Sire proving

The Livestock Improvement Corporation (LIC) performs more than 3 million inseminations each year (about 80% of all dairy cows and heifers). Bulls and cows are ranked against the breeding worth index, which is an estimate of the animal’s genetic merit, and takes into account milk fat, protein and volume, and live weight, fertility and longevity. Since the 1950s the LIC sire-proving scheme has contributed more than $15 billion to the New Zealand economy by genetically improving the national herd.

Footnotes
  1. Quoted in Jack Hepburn, ed., New Zealand Farmer– a century in retrospect. Auckland: New Zealand Newspapers, 1982. › Back

On the farm

Dairy farms proliferated in the early 20th century as bush was cleared, land drained, and pasture improved with superphosphate fertiliser and faster-growing grasses and clovers. Although dairying required more labour and capital than sheep and beef farming, it provided regular income, and home-bred animals could be added to the herd to either replace culled animals or increase herd size. Farmers could start small and build their herd size comparatively quickly.

Dairying regions

Dairying was developed in regions where rainfall was reliable and winters were warmer, such as Northland, Waikato, Taranaki, Bay of Plenty, Manawatū, Nelson and the West Coast. Farms were small, usually near factories, and could graze two cows per hectare.

Ruminating

Cows, like other animals that eat pasture, have a four-chambered stomach called a rumen. Such animals are called ruminants. The rumen digests food with high cellulose content such as grass. The ingested pasture moves from chamber to chamber, progressively broken down by bacteria, fungi and protozoa, to a form that can be passed into the intestine.

Grass to milk conversion

Only 10% of the world’s dairy cows live solely on grazed pasture. This is an important advantage of the New Zealand dairy industry. New Zealand has a climate that, in most regions, grows grass year-round, and is mild enough that cows can be kept outside in all seasons. This means that the cost of feeding and caring for dairy cows is lower than anywhere else in the world. In most other countries cows live in stalls, and eat ‘cut and carry’ feed (pasture or grain harvested and taken indoors) and grain-based supplements.

The price of milk

It takes about 1 kilogram of dry pasture eaten by a cow to produce one kilogram (about a litre) of milk. Mature cows eat about 17 kilograms of dry pasture each day and drink up to 50 litres of water. Grazed pasture costs less than 5 cents per kilogram to produce. Including capital farm costs, the cost of producing one litre of milk is 10–12 cents. In 2007/8 New Zealand farmers were paid more than 90 cents per litre.

Grazing management

New Zealand farmers use fencing to ration pastures, making sure cows receive the required daily allowance but not too much. Fencing off areas minimises the amount of pasture that is trampled, fouled and wasted, especially in winter. In the 1930s Bill Gallagher in Hamilton invented low-voltage electric fencing, which is used to divide paddocks into strips that are grazed between milkings.

Farmers who know the total pasture area, the growth rate of grass and clover, and the numbers of cows and their requirements, can devise a grazing rotation over the farm to prevent a shortage of feed and maximise milk yield.

Any surplus grass in spring, which is when grass grows fastest, is made into silage in pits, stacks or bags, and stored to supplement winter feed.


Pattern of milk production

Seasonality

In spring, pastures grow most rapidly and cows produce the most milk. Cows are mated to produce their calves in mid- to late winter, so that they lactate during the peak season. On seasonal-supply farms, daily milk flows slowly diminish until cows ‘dry off’ in autumn, and they are not milked from May to July. During this time cows may be moved to another farm or feed pad, so pastures can recover or be renovated.

Total milk production from New Zealand’s 4 million cows builds in late spring to 80 million litres a day, and dairy companies must have enough transport and processing equipment to handle the peak in mid-November. Every day the perishable milk has to be converted into cool-stored products like powders and cheeses.

Calving

Pregnancy for a cow lasts 282 days (around 9.5 months), so she must be mated or artificially inseminated around early October if she is to calve in mid-July the following year.

Cows are generally left alone to calve, although occasionally a farmer has to assist. Calves are usually taken from their mother after they have taken the first high-colostrum milk. The calves are kept together in a warm, dry shed and fed milk from a tank with artificial teats. Gradually they are introduced to dry feed (cereal-based meal or pellets), and then to grass as their rumen develops.

Bull calves are slaughtered for veal or raised as beef cattle. Heifer calves are reared as dairy or beef herd replacements. Dairy heifers are mated at 15 months of age, to produce their first calf at the age of two. They will then stay in the milking herd for four to five years.

Once-a-day milking

Traditionally, milking was done twice daily, but a number of farmers now milk their cows only once a day. They report a slight reduction in milk production, but say that this is offset by lower labour and operational costs.


Dairying in the 2000s

Farm and herd size

In the early years of the 21st century dairying expanded onto irrigated farms on the Canterbury Plains and to Southland, where land prices were lower than in the traditional dairy regions of the North Island. By 2006 Waikato and Bay of Plenty had 32% of New Zealand’s dairy cows, Taranaki 12%, Northland 9%, and the South Island 28%.

Super milk

New Zealand scientists have bred a herd of cows that produce milk naturally low in saturated fats and high in omega-3 oils, which help to improve brain power. Butter made from the milk is spreadable when chilled, just like margarine.

From the 1970s many South Island farms were joined into bigger farms, which led to a reduction in the number of herds. By 2007, farms were twice as large as they were in the early 1990s, at an average of 118 hectares, with a stocking rate of 2.7 cows per hectare.

In 2007 New Zealand had 2 million cows in milk or in calf, with an average herd size of 322 cows. This was twice that of the average herd in the early 1990s and almost twice the number of cows milked in 1980.

Farm prices

The average price of a dairy farm in 2005/6 was $1.8 million, or $21,000 per hectare. The inflation-adjusted price of dairy farmland doubled between 1992 and 2006. Dairy farm values are often expressed as the price paid per kilogram of milk solids produced from that property in one year. The national average farm value in 2005/6 was equivalent to $32 per kilogram of milk solids, with some farms over $40 – around 10 times the annual milk price, which was $4–5 per kilogram of milk solids. By the 2007/8 season, the payment for milk solids had increased to around $7 per kilogram.

Sharemilking

With the average price of a farm at almost $2 million, plus the cost of cows and dairy-company shares, it is difficult for young people to acquire properties. However, many young New Zealanders have followed the sharemilking route into farm ownership. It begins with practical training as a farm worker, followed by responsibility as a herd manager, and then cow ownership and sharemilking. The farm owner, usually an older and experienced dairy industry operator, offers a contract of one to five years to a sharemilker who owns all or part of the herd, operates the farm, and shares the income. They have equal share of the revenue in the common ‘50% sharemilker agreement’.

Sharemilking allows someone with little money to invest in cows, accumulate expertise and finance, and eventually buy a farm. Some have gone on to buy sheep or beef farms.

New Zealand dairy farms usually have two full-time workers, mostly family members. Sometimes the sharemilker is a son or daughter of the owner, intent on increasing equity so they can pay out siblings and take over the family farm. More than 90% of all New Zealand dairy farms are owned by a family rather than a company or city-based investor. Sharemilkers operate 35% of all farms, allowing owners to step back from hard daily work and concentrate on farm maintenance or other interests.


Dairy exports

The dairy industry had export sales of more than $6.3 billion in 2007, making it New Zealand’s leading export earner.

New Zealand sells 95% of its dairy products abroad, which is a greater proportion than any other country. However, only 3–4% of the world’s dairy products come from New Zealand. Most other countries produce their dairy products largely for domestic consumers.

The manufacture of dairy products depends upon reliable supplies of high-quality milk. Since the 1980s milk production has grown in response to the relative profitability of dairy farming compared to other land uses in New Zealand.

Export markets

New Zealand dairy products are marketed around the world. Europe is the most important market for butter, the US for casein (a protein supplement), Japan for cheese, and Asia for whole milk and skim milk powder.

New Zealand’s dairy markets are sensitive to global production factors. In the late 20th and early 21st centuries subsidised production in Europe and North America led to the accumulation of significant global stocks of dairy products, which drove prices down, and the nature of marketing activity. However, between 2006 and 2008 these global stocks declined significantly and led to higher demand and product prices.

Early exports

Before the advent of refrigeration, which meant milk could be reliably shipped overseas in large quantities, the domestic market consumed the milk of only a few thousand cows. In 1880, exports of butter and cheese to Australia comprised 0.17% of New Zealand’s total exports.

In 1882 frozen butter was first experimentally shipped from New Zealand to London aboard the Dunedin, which was mainly carrying meat. The voyage took 98 days. Refrigeration plants gave a huge boost to the infant dairy industry, as well as to the meat industry, from the early 1880s.

Despite a period of agricultural recession, dairy exports increased to 7% of total exports by 1890. By 1920 this had risen to 22%, and in 1930 to 42%. Butter was crated in wooden boxes or barrels, kept at a temperature of 4°C, for shipping to Australia and Britain.

The UK market

The cooperative movement in the dairy industry fostered collective export marketing, and in 1914 the government agreed to sell all New Zealand exports to Britain for the war effort. The bulk-buying agreement ended in 1921. Companies competed on the UK market until 1928, when Amalgamated Dairies was formed in London by several New Zealand companies to market butter and cheese in the UK. This initiative was led by Sir William Goodfellow, who ran the Waikato-based New Zealand Co-op Dairy Company, a leader in grade standards, hygiene, farm construction and herd testing. In the Second World War, Britain again became the sole buyer of all dairy exports. This arrangement lasted until 1954.

And then there were…

In the 1920s and 1930s there were 240 cooperative dairy companies in New Zealand. Through amalgamations and takeovers, they declined in number to 230 in the 1940s, 220 in the 1950s, 100 in the 1960s, 90 by the 1970s, and 36 in 1983. In 2008 there were only three: Fonterra, Westland and Tatua.

New Zealand Dairy Board

The New Zealand Dairy Control Board was created in 1923 to oversee group marketing. It was disestablished in 1934 when the government assumed all responsibility for product marketing and introduced a guaranteed price scheme.

The New Zealand Dairy Board was established in 1961, and operated as sole export marketer for 40 years. More than 100 cooperative companies gained collaborative strength to compete in distant and difficult marketplaces.

Multinational marketing

The Dairy Board grew from a dispatcher of butter and cheese to the UK to a multinational dairy foods company. It operated through 80 overseas subsidiaries and joint ventures established in 30 countries, marketing products to more than 100 countries.

Investments in subsidiaries increased to around $1 billion in 2001. These included Dorman/Roth, the largest importer of European cheese into the US; Anchor Foods in UK; and subsidiaries in Latin America, South-East Asia and Japan. The Dairy Board used these subsidiaries to develop closer relationships with markets and customers.

Off-shore sourcing

Over time, more and more dairy products sold overseas by the New Zealand Dairy Board were actually made from milk produced outside of New Zealand. By 1988 such products made up nearly 20% of subsidiaries’ sales.

Branded goods

The Dairy Board recognised there was an advantage in processing their products into branded goods, which was perceived as more secure than selling commodities on the open market.

Deregulation

In 2001 the dairy industry was deregulated and legislation passed to liberalise exports, with the aim of making New Zealand more competitive on the world market. The New Zealand Dairy Board merged with the New Zealand Dairy Group and Kiwi Co-operative Dairies, previously the two largest in New Zealand, and formed Fonterra Co-operative Group.


Manufacturing and marketing in the 2000s

Fonterra Co-operative Group

The formation of Fonterra in 2001 was a significant step for New Zealand dairy manufacturing and marketing. It resulted in one major processing and marketing cooperative and provided the opportunity for other firms to enter the industry and develop and exploit market opportunities.

When formed in 2001, Fonterra was owned by 11,000 dairy farmers and supplied 95% of the country’s milk.

Fonterra Research Centre

The Fonterra Research Centre (FRC) in Palmerston North was formerly called the New Zealand Dairy Research Institute. FRC is a subsidiary of the Fonterra Co-operative Group and conducts research and development in dairy science and technology, with emphasis on dairy product development.

The volume and reliability of Fonterra’s milk supply, which comes from more than 12,000 dairy farmers, has made it one of the top 10 dairy companies in the world. It is the leading New Zealand exporter of dairy products and is responsible for a third of international dairy trade.

Fonterra’s global milk supply comes from farms in New Zealand, Australia, Chile and China, and it sells products to customers and consumers in 140 countries. It collects more than 13 billion litres of milk a year, and manufactures and markets over 1.8 million tonnes of product annually. It has around 20,000 staff in 40 countries, with over half of its staff working outside New Zealand.

As well as traditional dairy products, Fonterra exports milk powder, casein and speciality products, such as a range of dairy products to help maintain bone strength. Fonterra has a range of organic products on the market and aims to have 200 farmers producing organic milk by 2013.

Other manufacturers

Two dairy cooperatives that did not join Fonterra were Tatua Co-operative Dairy Company and Westland Milk Products. Tatua has since been at the forefront of the development of niche products. Westland has specialised in the production of milk powders, milk fats and milk protein products. Other manufacturers include Dairy Trust and Synlait.

Hundreds of specialist dairy product companies export their products, some of which are made from goats’ milk. Products from organic cows’ milk are sold on the domestic market.

Non-cooperative dairy manufacturers have become more significant in New Zealand. It was estimated that non-cooperatives would process 3% of New Zealand milk in 2008/9, and this share was expected to grow during the following decade.

The Dairy Companies Association

The principal manufacturers of dairy products in New Zealand are members of the Dairy Companies Association of New Zealand. In 2008 these were Fonterra Co-operative Group, Tatua Co-operative Dairy Company, Westland Milk Products, Fonterra Brands, Goodman Fielder and Open Country Cheese.

Branding

New Zealand dairy products are promoted around the world with distinctive brands such as Fernleaf, Anchor, Kapiti, Anlene, Anmum and Fresh ‘n Fruity. However, the vast majority of New Zealand dairy products are used as ingredients in consumer products sold under global brands.


Dairy products

New Zealand now produces more than 100 categories of dairy products. The basic materials for all of these is whole milk.

From bottles to branding

The domestic milk market in New Zealand was deregulated in the 1980s, and consumers went from buying milk in plain glass bottles to buying branded cartons and plastic bottles.

Milk can be processed and sold as whole milk or as whole milk powder. Alternatively, whole milk can be separated into cream and skim milk. Cream can be processed and sold as fresh cream, or made into butter. A by-product of this is buttermilk. Whole milk may also be used to make cheese, from which whey is the by-product.

Production processes aim to make food products longer-lasting. Dairy factories operate under strict hygiene requirements.

Products and value

Milk and cream (not concentrated)

Between 1988 and 2008 the volume of liquid whole milk increased at least fourfold to more than 40 million kilograms per year, with a value of more than $50 million. However, during this period average revenues decreased, fluctuating between $1.20 and $1.80 per kilogram.

Concentrated milk and cream

Concentrated milk (whole or skim milk dried to a powder) is the largest export product category. Skim milk can be processed and sold as milk protein concentrate, or as casein, a protein supplement. The volume of concentrated milk exported increased fourfold between 1988 and 2008 to approximately 1 billion kilograms, with a value of around $3 billion. Average values fluctuated between $2.80 and $4.80 per kilogram.

Butter

Butter has declined in relative importance, but in 2008 remained the third most important dairy export. The quantity of butter exported increased slightly between 1988 and 2008 to over 300 million kilograms, with a value of around $1 billion. Average revenues have been relatively flat, fluctuating between $2.50 and $3.60 per kilogram.

Buttermilk

Between 1998 and 2008 the volume of buttermilk exported doubled to more than 40 million kilograms, with a value of around $100 million. Values have been relatively flat, fluctuating between $2 and $4.50 per kilogram.

Whey

Whey can be processed and sold as whey powder, lactose, whey mineral concentrate or alcohol.

Whey product exports increased dramatically between 2004 and 2008, from less than 10 million kilograms to more than 80 million kilograms. Total revenues increased from less than $10 million to more than $400 million. The increase in price can be attributed to successful marketing of whey protein in Europe, North America and Japan by targeting niche sports beverage companies.

Curds and whey

‘Little Miss Muffet’ is a well-known nursery rhyme that first appeared in print in 1805. It is said to have been written by a famous entomologist, Dr Thomas Muffet, for his stepdaughters. The girl in the rhyme sits on a tuffet, eating curds and whey – an old name for cottage cheese. The curds are the lumpy parts and the whey is the milky part.

Cheese and curd

In 2008 cheese and curd was the second-most important export dairy product. The volume of cheese and curd exported nearly tripled between 1988 and 2008 to approximately 300 million kilograms, with a value of around $1 billion. Average values fluctuated between $3.50 and $5.00 per kilogram. In 2008 New Zealand was the fifth-largest cheese exporter in the world.


External links and sources

More suggestions and sources

More links and websites


How to cite this page: Hugh Stringleman and Frank Scrimgeour, 'Dairying and dairy products', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/en/dairying-and-dairy-products/print (accessed 25 August 2019)

Story by Hugh Stringleman and Frank Scrimgeour, published 24 Nov 2008