From the beginning of European settlement, dairying was an important source of income for many small farmers. Butter and cheese were tradeable commodities and had been exported to the Australian colonies.
The first large-scale dairy expansion took place in the South Island on the New Zealand and Australian Land Company’s Edendale estate, in Southland. The estate was unprofitable as a sheep run, so the company’s New Zealand superintendent, Thomas Brydone, suggested it be turned over to dairying. William Davidson, the general manager, supported Brydone and was instrumental in the planning and construction of New Zealand’s first dairy factory at Edendale, built in 1881.
Dairying expands slowly
Refrigeration opened up an export market for dairy producers but, unlike sheep farmers, they were slow to take advantage of those opportunities. One explanation for the different responses was that the sheep industry was dominated by ‘big men’ who had financial clout. Wealthy landowners such as John Grigg, John Tinline and Matthew Holmes, could afford the investment and risk of experimenting in the early shipments of frozen meat; whereas dairying, especially in the bush districts of the North Island, was dominated by family farmers with few cows and very little capital.
A new direction
Refrigeration opened up a huge market for dairy products, and subsequently butter, cheese and other milk products have become New Zealand’s most valuable exports.
Refrigeration also changed landholding patterns. While the great pastoral era was dominated by people with capital who owned or leased large tracts of country, refrigeration made smaller-scale farming of dairy and meat products viable.
Dairying in Taranaki
Despite the earlier start of commercial dairying in the South Island, the real expansion of the industry took place on the better soils and wetter country of Taranaki, Manawatū and Waikato.
Early commercial dairying techniques were developed in Taranaki in the 1880s and 1890s. Taranaki was isolated from any major centre of population, so the many small-scale dairy farmers needed to export their produce to make money.
Chew Chong, an entrepreneur, organised butter production from the region. He established a dairy factory in Eltham and a network of creameries throughout the district. Farmers took whole milk to the creamery, where it was separated into cream and skim milk. The cream was sent to the butter factory and the farmer took the skim milk home for pig feed.
Dairy cooperatives were a way for small farmers to pool their capital to develop dairy processing factories. New Zealand’s earliest dairy cooperative was formed in 1871 by farmers on the Otago Peninsula, to manufacture cheese. The first cooperative in Taranaki was the Moa plant, which opened in 1885.
The movement soon spread – by 1890 there were around 150 butter and cheese factories in the country, and about 40% were farmer-owned cooperatives. Dairy products began making up an increasing proportion of New Zealand’s export income.
The first dairy cooperative was formed in 1871. By 1900 there were 152 cooperatively owned factories compared with 111 privately owned companies. In 1930 there were over 400 cooperatives, but amalgamations and take-overs reduced the number to 168 by the early 1960s. Following further mergers, since 2001 there have been only three dairy companies operating in the country: the giant Fonterra Co-operative Group, Westland Milk Products and the Tatua Co-operative Dairy Company.
Transportation difficulties limited dairying to areas near dairy factories or creameries. Because Taranaki was relatively closely settled, it gained an early lead in dairying.
After about 1910, the spread of hand-operated Alfa-Laval centrifugal separators allowed whole milk to be separated on the farm, meaning only the cream needed to be transported to the factory. As cream made up only about 10% of whole milk, there were significant transport cost savings. When factories began to organise the collection of cream from farm gates, the distance from the factory was no longer a problem for farmers.
Expansion of North Island farming
Refrigerated exports made North Island small farming viable, and so encouraged the movement of population from the South Island to the north. By opening up North Island bush country, people were able to set up farms with less capital than was needed in the south. The expanding dairy industry was particularly attractive, as it offered a regular payout for milk; whereas an annual wool cheque and a few payments for selling stock tested tight budgets for sheep farmers with limited capital.
Work in farm servicing and manufacturing industries also attracted people north. In 1886, 56% of New Zealand’s population lived in the South Island; by 1906 the proportion had declined to 46%, and 10 years later it was down to 40%.