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Farming in the economy

by  Robert Peden

New Zealand’s economy has long depended on grass – or rather, on the livestock that eat grass. Meat, wool and dairy products have brought in the vast majority of the country’s export earnings – but horticulture and viticulture are growing in importance.

Early farming and the great pastoral era

New Zealand’s economic backbone

New Zealand’s agricultural production since the beginning of European settlement has been different from that of most other developed countries because:

  • agricultural production was aimed at an export market
  • agricultural products have always been New Zealand’s main source of income, apart from a period in the 1860s when gold was the leading earner
  • since the 1850s, agricultural production in New Zealand has been dependent on pasture rather than crops.

New Zealand’s economic backbone has long been products grown on the country’s pastures, in particular wool, meat and dairy products. Even in 2000, after nearly 20 years of agricultural diversification, less than 0.5 million hectares were in horticultural production, compared with over 15.5 million hectares of pasture.

The beginnings of agriculture

Before organised European settlement of New Zealand began in 1840, venture capitalists were involved in sealing, whaling, timber extraction and flax processing. In the South Island, shore whalers spread their investments and began agricultural and pastoral enterprises on land leased or bought from Māori.

From whaler to farmer

Johnny Jones owned a string of whaling stations along the Southland and Otago coasts in the late 1830s. In 1837 he bought a whaling station at the mouth of the Waikouaiti River, and over the next two years purchased the surrounding land from Ngāi Tahu leader Tūhawaiki. By 1848 Jones’s Matanaka property had 800 acres (324 hectares) of cultivated land, 2,000 ewes and 200 cows.

In parts of the North Island, Māori learned European farming techniques at mission stations. Māori also adopted European crops, and in the 1850s and early 1860s they exported grain and potatoes to the Australian colonies, where food prices surged during the gold rushes.

Early European settlements struggled at first, as Māori owned the best land and many of the original sites selected had poor soil fertility. Auckland relied on produce grown by Māori to survive. Settlers in New Plymouth, Whanganui, Wellington and Nelson also had difficulty establishing themselves. The latter settlements were founded on Edward Gibbon Wakefield’s theories of colonisation, which envisioned that these isolated agrarian communities could survive and even prosper, despite having no access to a major market for their crops.

The first ploughman

The Reverend John Gare Butler was the first person to use a plough in New Zealand. He had arrived in 1819 as a missionary for the Church Missionary Society, and established a mission at Kerikeri. On 3 May 1820 he recorded that ‘the agricultural plough was for the first time put into the land of New Zealand at Kideekidee, and I felt much pleasure in holding it after a team of six bullocks brought down by the Dromedary. I trust that this day will be remembered with gratitude, and its anniversary kept by ages yet unborn. Each heart rejoiced in this auspicious day, and said, “May God speed the plough”.’ 1

Pastoralism in the South Island

From the mid-1840s the expansion of sheep farming changed the economic base of New Zealand. The open country of the South Island was ideally suited to running fine-woolled sheep. By the time the first Canterbury Association settlers arrived, in December 1850, the industry was well established in the Nelson–Marlborough region. By 1865 it took in all the suitable country east of the Southern Alps.

Wool was an ideal commodity for a frontier society far from the main centres of the northern hemisphere. It could easily be stored and shipped, and there was a strong demand for it in the expanding textile industries of Britain, Europe and North America. In 1856 wool grown on the South Island grasslands became the country’s most valuable export.

Stagnation in the North Island

The economy of the South Island boomed in the 1860s and 1870s with the income from wool and the gold rush in Otago and Westland. During the same period, the expansion of farming in the west and north of the North Island was hampered because much of the land remained in Māori ownership, and turning the heavy bush country into farmland was expensive and time consuming.

Crop farming rather than pastoral production was the focus for many of these settlements. This was because fine-woolled sheep, which were so profitable in the South Island, did not thrive in the wetter climate of the North Island. Only small areas could be cleared for ploughing at any one time, as the trees had to be felled and burned, and the unburned logs and stumps removed. Consequently, the North Island had only 24% of the country’s sheep in 1861. That dropped to 20% in 1871; although by 1881 its share had increased to 32%.

Hawke’s Bay and Wairarapa

The development of Hawke’s Bay and Wairarapa was more like that of the eastern districts of the South Island, with which they shared the dry climate and open vegetation that suited sheep farming. Extensive pastoralism began in the Wairarapa in 1843 and had spread north to Hawke’s Bay by 1850.

The Crown purchased land in both of these regions relatively early in the settlement phase. The first Wairarapa purchase was in 1853, and 2 million acres (809,371 hectares) of Hawke’s Bay (two-thirds of its total land area) were bought between 1851 and 1864. By 1882 Hawke’s Bay had 2 million sheep and Wairarapa 750,000, compared with 3.5 million in Canterbury and the same number in Otago and Southland.

  1. Quoted in A. H. McLintock, ed, An encyclopaedia of New Zealand. Wellington: Government Printer, 1966, Back

Responding to the marketplace, 1870s

Worsted processing

Prices for fine Merino wool fell through the 1870s and until the turn of the 20th century. This was in part due to new wool processing technology overseas. The new worsted process made a flatter, smoother and stronger woollen cloth. However, the machinery of the time could only handle longer and stronger wool than that grown by Merinos.

Breeding the Corriedale

In the 19th century authorities on sheep claimed it was impossible to establish a new breed of sheep by cross-breeding. Many experts thought that it was impossible to breed for both wool and meat together, and that you could only achieve one at the expense of the other. However, in breeding the Corriedale, local sheep breeders like James Little proved them wrong.

Sheep breeders in the South Island responded by crossing British long-woolled breeds with Merino ewes to produce the Corriedale. There was a shift away from the Merino on all but the hardest hill country of the South Island.


By the early 1870s South Island grasslands were stocked to full capacity. The only commercial outlet for surplus sheep was to boil them down into tallow. Some breeders found Merino sheep unprofitable for this and turned to cross-breeding to develop bigger sheep that would bring greater profits.

Tallow products

Tallow is animal fat, which, in a pure state, is white, odourless and tasteless. Before the mid-20th century it was widely used for making soap and candles. It was also used as a lubricant before petroleum oil became readily available.

The wheat bonanza

A trial shipment of wheat and flour from South Canterbury to Britain in 1867 proved that there was a market for the produce. The boom really began when the railway was extended through Canterbury to link with the port of Lyttelton, overcoming the logistical problems of transporting large quantities of grain. In the early years of the 1880s grain grown on the newly ploughed grasslands of the South Island produced over 20% of the country’s export income.

Regrassing tussocklands

The wheat bonanza caused a major transformation of the plains and downlands of Canterbury, Otago and Southland. These native tussocklands had reached their productive limit by the early 1870s, and they were sown with introduced grasses and legumes, usually ryegrass, cocksfoot, timothy, and red and white clover.

The usual rotation was to plough the native tussock and sow turnips, which would be eaten by sheep. The land was then sown in successive crops of wheat (oats were more successful in the colder parts of Otago and Southland) until the yields declined, due to decreased soil fertility. Turnips were planted again as a restorative crop before the land was sown in pasture. This rotation was the basis of the mixed-farming system of sheep production and cropping that persisted into the 1980s in parts of the South Island.

Refrigeration and sheep farming

Refrigerated meat shipments

The success of the first shipment of refrigerated meat from Port Chalmers to London in the Dunedin, in 1882, is seen as a watershed in New Zealand’s economic development. Although it was not until the mid-1890s that the country began to experience any real economic benefit from the frozen meat trade, farmers and the government could see its potential from the outset.

Railways and farming

The wheat bonanza of the late 1880s and the rapid growth of the frozen meat trade were only made possible by the expansion of the railways. The first public railway line in New Zealand was opened in Christchurch in 1863. From 1867 the Lyttelton rail tunnel linked the port and Christchurch. By 1879 there were 1282.5 kilometres of line in the South Island, including a main trunk line from Lyttelton to Bluff. The first export cargo of frozen meat in 1882 came from sheep slaughtered near Ōamaru and sent by rail to Port Chalmers.

Many commentators have suggested that refrigeration revolutionised farming in New Zealand. In fact, experiments in cross-breeding and sowing introduced grasses were well advanced in the South Island before 1882. Indeed, these developments enabled farmers, particularly those in Canterbury, to take advantage of the opportunity that refrigerated shipping provided.

Canterbury lamb

Canterbury dominated the frozen meat trade until the First World War. In 1900, 50% of frozen sheep carcasses exported were shipped from Canterbury. By that time, lamb was increasingly important in the frozen meat trade. Over 83% of lamb was shipped from the South Island, again mostly from Canterbury. In 1895 it was noted in newspapers that ‘Canterbury’ had become the standard term for the best class of meat exported from New Zealand, regardless of its actual place of origin.

Rapid expansion of freezing works

The country’s first freezing company was the New Zealand Refrigerating Company, established in Otago in 1881. The next two, both established in 1882, were the Canterbury Frozen Meat Company and the Gear Meat Company in Petone. By the mid-1890s there were 21 freezing works throughout the country, with 12 in the North Island and nine in the south.

The quantity of frozen lamb exported from New Zealand trebled in the first decade of the 20th century, and by 1910 lamb accounted for 65% of all sheep carcasses shipped. In 1908 New Zealand exported around 30% of the lambs born in any one season, making it unique among the world’s meat-producing countries. This was because in the early years of the frozen meat trade farmers exported so many sheep they had to turn to shipping lambs, as that was all the stock they had available. Farmers then began selecting sheep for early maturity and improved the quality of the feed, so that lambs could be ready for slaughter before they were seven months old.

North Island bush country

Initially, the South Island profited from the introduction of refrigeration because the basic system of breeding and fattening suitable sheep breeds was already in place. In the North Island, the new trade helped to reshape agricultural production – dairying became the predominant industry on the better lowlands, while sheep and beef farming expanded into the hill country, as new settlers battled to turn bush into farms.

Transforming the bush

Between 1892 and 1900, the Liberal government acquired 3.15 million acres (1.3 million hectares) of Māori land, which it made available to Pākehā settlers. This began a massive transformation of North Island hill country from bush to pasture, which continued into the 1920s. Settlers pushed into more remote and steeper hills, which were marginal for farming.

Settlers felled and burned the bush, and sowed grass seed on the ashes. Initially, results were spectacular, as pasture grew lush on the fertile soils.

Cattle played a vital role in the hill country, controlling rank pasture and preventing bush regrowth. Lincoln sheep were initially popular but were eventually replaced by Romney sheep, which were more active in the hills and produced better wool. On flat country, Lincolns were replaced by dairy cattle.

During this pioneering phase, mutton and wool were the main sources of income for sheep farmers. In 1910 the South Island produced 68% of the exported frozen lamb, whereas the North Island produced 66% of the frozen mutton. North Island farmers kept sheep for longer before slaughter than their South Island counterparts, as the sheep didn’t fatten as quickly on the lower-quality hill pastures.

Refrigeration and the growth of the dairy industry

Pioneering dairying

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

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.

Cooperative movement

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.

Milk separation

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%.

The closing of the farming frontier, 1900s to 1920

South Island farming

South Island hill and high country farmers ran Merino, halfbred and Corriedale sheep for wool, and sold surplus animals to farmers on better land, who fattened them for export.

On the plains and downlands, farmers grew a rotation of cereals and other crops, and fattened stock for export. Wheat remained the most important cereal crop, but by 1915 it was all used locally and New Zealand began importing it. Oats were the next most important cereal crop. They were grown to feed stock, horses in particular.

North Island farming

In the North Island, most attempts to turn bush into pasture had been completed by 1920.

Dairying was well established on the warmer, wetter and easier country. Co-operatively owned milk factories collected cream from farms to turn into butter or cheese.

In the hill country, Romney had become the main sheep breed, but cattle were needed to help control weeds and rank pasture. Wool was the main source of income for hill farmers, but fattening sheep and cattle for the export market was vital to their profitability.

State involvement in farming

From the beginning of settlement, provincial governments played an active role in the development of farming; particularly in controlling animal diseases, weeds and pests. After the abolition of provincial government in 1876, central government took over this role.

The state became increasingly involved after the establishment of the Department of Agriculture in 1892. It ensured the quality of export products, administered the control of weeds and pests, and conducted research on state-owned research farms.

By 1920 the country’s pastures produced 91% of New Zealand’s total exports by value.

Environmental damage

New Zealand had made tremendous progress in developing its grasslands. However, by the 1920s declining productivity and depleted soil fertility was becoming obvious in some regions.

As early as the 1880s, writers in the farming press were alarmed about the declining fertility of the lighter lands on the Canterbury Plains. The decline in productivity of the rabbit-ravaged, semi-arid high country of the South Island from the 1890s led to a Parliamentary commission of enquiry in 1920.

In the North Island, it was soon apparent that pasture production declined within a few years of clearing the bush. Soil loss, caused by erosion, in the steeper hill country was also becoming obvious.

Farm leaders, commentators and politicians looked to science to provide the solution to these and other emerging problems. At this time most people saw the problems in terms of lost production, rather than conserving natural resources for their own sake. Critics of land management practices, like ecologist Leonard Cockayne, wanted to use science to improve farming methods, rather than take land out of production for environmental reasons.

In the following decades the divide between proponents of production and conservation became increasingly wide.

Times of change, 1920 to 1950

Farm exports

Farming was hampered by economic depression in the 1920s and 1930s, and labour shortages in the 1940s caused by the Second World War.

Between 1930 and 1950, the growth in sheep numbers slowed, and wool production and prices swung dramatically.

Dairying, however, continued to develop. The number of dairy cows more than doubled between 1920 and 1950. Dairy farmers used increasing quantities of superphosphate fertiliser to boost pasture production, and shifted from using fodder crops to feeding stock solely on pasture. Exports of butter and cheese increased from 75,491 metric tonnes in 1920, to 233,619 tonnes in 1950, and their value increased by over 450%.

Meat, wool and dairy products consistently earned over 90% of New Zealand’s export income. By 1950 New Zealanders enjoyed a high standard of living and, based on the average income per head of population, New Zealand ranked in the top five countries in the world.


During this period there were many technological advances that benefited farmers. For example, improved roading reduced the isolation of many rural communities and made the transportation faster and cheaper. The introduction of electric power to rural areas benefited farms, and tractors and new machinery made many jobs less labour intensive.

Science and agriculture

In 1926 the government established the Department of Scientific and Industrial Research (DSIR), which began with a strong focus on improving production in agriculture.

The Plant Research Station was set up in 1928, partly under the umbrella of the DSIR. That same year, Bruce Levy began a trial to identify superior strains of ryegrass and white clover for New Zealand conditions, and breed improved varieties. He became the leading advocate for increasing grassland production by sowing the best grass and clover species, liberally using superphosphate, and increasing stocking rates.

Grass grub

The native grass grub (Costelytra zealandica) is a serious pest in New Zealand. It is found throughout the country and causes millions of dollars of damage to pasture. In its larval stage, which lasts from early summer until the following spring, it feeds on the roots of white clover and ryegrass, the country’s two most important pasture plants.

Improving pastures was one way of increasing production; others were livestock improvement and better grazing management. In the 1930s, at Massey College, Geoffrey Peren and Francis Dry began work on improving the performance of Romney sheep in North Island hill country through breeding. This work led to the Perendale and Drysdale breeds.

In 1943 C. P. McMeekan was appointed superintendent of the Ruakura Animal Research Station near Hamilton, where he led a team of scientists working on animal nutrition, genetics, artificial insemination and improving the milking process. This research had almost immediate benefits for dairy farmers.

A major breakthrough was the discovery in the 1930s that bush sickness, which afflicted livestock in the central plateau, could be cured by applying cobalt to the soil. Other discoveries of trace element deficiencies in the 1960s, especially those related to selenium, molybdenum and sulfur, led to improved animal health and productivity in the South Island.

Erosion problems

Concern had been growing over the environmental consequences of pastoral farming and land development in North Island hill country and South Island high country. Awareness increased in the 1920s and 1930s, as soil erosion became more obvious.

In 1925 the government appointed a committee to examine the deteriorating Crown lands west of Lake Taupō. In the late 1930s scientists from the DSIR mapped the badly eroded areas of the North Island, and concluded that some of the most affected country needed to be taken out of production. Serious flooding in Hawke’s Bay in 1938 made the wider public more aware of the problem.

Lance McCaskill, from Lincoln College, and Kenneth Cumberland, from Canterbury University, lobbied for a soil conservation agency to protect soils from erosion. In 1941 the government responded by establishing the Soil Conservation and Rivers Control Council. Between 1943 and 1948 catchment boards were established throughout the country to manage river control and soil conservation at a local level.

Nevertheless, production declined in both the North Island hill country and South Island high country. In dry areas rabbits numbers exploded in the mid- to late 1940s. Wool prices were low and farmers lacked capital to invest in improvements.

The golden years, 1950s to 1980s

In the years after the Second World War, prices for farm products rose, and there was increasing technological innovation and scientific agricultural research. The 1950s and 1960s were a buoyant time for farmers, as they developed their land, increased stock numbers, improved livestock productivity and enjoyed new prosperity.

Aerial topdressing

Spreading superphosphate fertiliser, pasture seed and poisoned bait from aircraft was a significant technological breakthrough in pastoral farming. Aerial topdressing enabled farmers in hill country to get fertiliser and seed onto places where the natural fertility had declined and pasture was reverting to weeds and scrub.

Experiments in aerial topdressing took place in 1948 and commercial operation began in 1949. By the mid-1950s, 400,000 tonnes of fertiliser was spread annually by air, and by 1982 this had increased to over 1 million tonnes.

Aerial drops of poisoned bait were crucial in controlling rabbit numbers. By the mid-1950s there was a spectacular increase in production in areas that had previously been overrun by the pest.

Rising prices

As overseas economies grew after the Second World War, markets opened up for New Zealand’s agricultural products. Rising prices and better returns gave farmers capital to invest in fertiliser, seed and new machinery. Farmers re-cleared thousands of acres of land that had reverted to scrub and weeds, such as gorse, and converted it back to pasture.

Between 1950 and 1960 sheep numbers rose by 40%, the value of wool exports increased by 37%, and frozen meat by 183%. Dairy cow numbers remained static, but rising overseas prices meant that export returns for dairy products increased by 55%. In 1955, 95.6% of New Zealand’s income came from products grown on its pastures.

Factory farming

By the early 1950s, the Department of Agriculture and the Grasslands Division of the DSIR had adopted Bruce Levy’s ideas of grassland farming on a grand scale. They bred new grass and legume species, experimented with intensive grazing (running more stock per hectare), and took their message directly to farmers through field days and farm consultants. By the 1970s about 50% of New Zealand’s land area had been converted to grassland.

Livestock improvement

Traditionally, sheep and cattle were bred according to an idealised breed type. When geneticists began measuring the heritability of factors such as wool weights in sheep, weight gain in beef cattle and milk production in dairy cattle, they were able to give farmers clear guidelines on how to improve the productivity of their stock.

New breeds of sheep, such as the Perendale, Drysdale and Coopworth, were developed for particular environments. Cattle breeds from Europe were imported to improve the traditional Angus and Hereford beef breeds.

In the dairy industry in the early 1950s, there was a shift away from collecting only cream from farms to collecting whole milk. This encouraged farmers to change from Jersey cows, which had been favoured because their milk had a high fat content, to Friesian cows, which produce more milk.

Arable crops

Cereal cropping remained an important feature of farm production, particularly in Canterbury, but very little was exported. Wheat remained the most important crop, but the amount grown fluctuated from season to season, depending on prices.

The area sown in oats declined as horses were replaced by machinery. In 1950 nearly 52,000 hectares were sown, but this had dropped to 18,600 by 1980.

Barley became an increasingly popular crop, and some malting barley was exported, depending on supply and demand in the international market.

Although most cereal crops were grown for local consumption, some were exported. Peas, and grass and clover seed, had been grown for export in the 19th century, and this continued throughout the 20th century.

In the 1950s vegetables began to be grown for processing. In 1950 exports of canned and frozen vegetables earned the country about $876,000. By 1980 this had increased to over $6 million.

Crises and subsidies

New Zealand’s dependence on wool, meat, butter and cheese was a potential economic weakness. In 1960 wool earned one-third of the country’s export income. In 1966/67 wool prices fell sharply – by 40% – and, although they later recovered, it was the start of a gradual decline that continued into the 21st century.

In 1973 the first international oil shock increased fuel costs, which affected transportation and production costs. Also in 1973, Britain entered the European Economic Community and, although New Zealand had negotiated secure access to the British market for their cheese and butter, earlier trade agreements covering other New Zealand products became void.

The government’s solution to rising costs and falling prices was to produce more. In 1977 it introduced the Livestock Incentive Scheme to encourage farmers to keep more stock. The following year it introduced a raft of subsidies and production incentives, including Land Development Encouragement Loans, which provided farmers with low-interest loans to develop unproductive, and often marginal, land. In some parts of the North Island, land that had reverted to scrub was cleared for the fourth time since it had originally been cleared 100 years earlier.

In the South Island, thousands of hectares of high country were oversown with pasture seed for the first time in their history. Subsidies were introduced for superphosphate and lime – superphosphate use peaked at 3.4 million tonnes in 1982. The supplementary minimum prices scheme guaranteed farmers price stability for pastoral products, despite their declining value overseas.

Stock numbers increased, with sheep numbers peaking at over 70 million in 1982. Between 1975 and 1985, wool exports increased by 45% and meat exports by 24%.

A sunset industry? 1984 to the present


In 1984 the newly elected Labour government began the deregulation of what had been a highly regulated economy.

Supplementary minimum prices were among the first things to go. Fertiliser and noxious weed control subsidies were also removed. Government departments that dealt with farmers were restructured, and farmers were now expected to pay for any advisory services they used.

Following the removal of subsidies, the 1985–86 returns for lambs, including wool and pelts, fell by about $12 a head – a decline of 50%. Between 1982 and 1988, the value of grazing farms fell by 32%. With falling land prices, some farmers lost all their equity and, unable to meet the rising interest rates, were forced to sell up.

Sheep numbers fell by over 43% from the heights of 1982, to around 40 million in 2002. By 1993 the effective rate of assistance to agriculture had fallen to 3% compared to 52%. The government viewed pastoral farming as an industry in decline.

Farmers respond

However, farmers showed resilience. Sheep and beef farmers adapted to the deregulated market, and dairying has grown significantly.

Export earnings from meat increased from $2,228 million in 1985 to $4,111 million in 2003 – making up 14% of the country’s exports. Although cattle numbers have been in decline since peaking in 1975, beef producers have refined their breeding and finishing systems. In 2008 beef made up around 10% of New Zealand’s agricultural exports.

Wool struggled in competition with cotton and synthetic fabrics. Sheep numbers and wool prices declined, and export returns fell by 36% between 1985 and 2003.


In face of the downturn in sheep farming after 1984, farmers experimented with farming other animals to try and increase profitability.

Deer farming developed in the 1970s, using deer that had been captured from the wild. The numbers of farmed deer increased steadily from the early 1980s to the early 2000s. Venison is exported to Europe and North America, and deer velvet to Korea, Japan and China. However, prices for these products have been low in recent years and farmers have reduced deer numbers.

Some farmers have also experimented with farming goats for fibre and meat, alpacas and llamas for fibre, and ostriches for meat. Most of these enterprises are on a very small scale.

Exotic animals

The 1980s wasn’t the first time farmers had tried diversification in New Zealand. Angora and cashmere goats were imported in the 1860s. By the mid-1870s they had yielded little economic benefit, and many had escaped and become a nuisance. Similarly, alpacas were imported in the 1860s, but were found to be more trouble than they were worth. John Matson imported ostriches from South Australia in the early 1880s and farmed them for their feathers, but by about 1908 the business folded.


Dairying was by far the most successful and profitable farming enterprise in New Zealand since the mid 1980s. Between 1985 and 2007 the number of dairy cows in milk rose from 2.2 million to 4 million. Dairy products made up about 20% of New Zealand’s total exports by value.

The range of products expanded from the traditional cheese and butter, and milk powder and casein became increasingly important.

Much of the increase in production took place in the South Island, where dairying replaced the old mixed-farming system of cropping and sheep fattening. The relatively low price of land and plentiful water for irrigation attracted dairy farmers from the established dairying regions of the North Island. However, the rapid expansion of dairying put pressure on groundwater reserves, with low-country streams drying up in summer. There was also concern about the downstream pollution from dairy farms and the effects of high fertiliser usage and run-off, none of which were experienced under the less intensive sheep-cropping system.

Horticulture and viticulture


Although pastoral products remained the core of New Zealand’s export trade, there was considerable growth in horticulture since the 1980s.

Apples were exported from the middle of the 20th century, and they continued to be an important crop. In 1980 New Zealand exported $35.75 million worth of apples; by 1995 this had increased to $800 million.

The growth of the kiwifruit industry was even more spectacular. Exports started in 1953, but the industry expansion really began in the 1970s. In 1980 kiwifruit exports were valued at $34.5 million; 10 years later they were $540 million. By 2007 they had increased to $756.8 million, and both production and prices were forecast to keep rising.


There have been vineyards in New Zealand since early in the 19th century, but they were on a very small scale. In 1920 there were about 102 hectares planted in wine grapes. By 1960 this had increased to only 350 hectares, half of which were in the Auckland region. The vast majority – 87% – went into making fortified wines.

Wine production slowly increased, and by 1970 nearly 1,500 hectares were planted in wine grapes. Most was in Auckland, Hawke’s Bay and Gisborne, with only 2.8 hectares in the South Island.

In 1990 wine exports earned $18.4 million, with Gisborne, Hawke’s Bay and Marlborough being the main wine-producing areas. During the 1990s Marlborough became easily the largest wine-producing region in New Zealand. The industry also developed in other areas, including Central Otago, Waipara, Martinborough and Waiheke Island.

By 2000, there was 10,000 hectares planted in wine grapes. Earnings increased to $168.6 million, with the export of nearly 20 million litres of wine. In 2007 this had grown to 72 million litres, which earned nearly $662.4 million. Production was expected to rise by 66% between 2008 and 2011.

Hononga, rauemi nō waho

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How to cite this page: Robert Peden, 'Farming in the economy', Te Ara - the Encyclopedia of New Zealand, (accessed 16 June 2024)

He kōrero nā Robert Peden, i tāngia i te 24 o Noema 2008