By Richard Le Heron
In an extract from the new book “The New Biological Economy: How New Zealanders are Creating Value from the Land,” Richard Le Heron brings into question the future of dairying in New Zealand.
Dairying is, alongside tourism, New Zealand’s largest export earner. Taken together they account for about half of the country’s external trade by value. In recent years, both seem to have crossed a threshold in visibility, range of impacts and, increasingly, public legitimacy. Changes in the landscape are there for all to see. New dairy factories are linked by a seemingly continuous flow of double-articulated dairy tankers to huge production units fed by giant irrigators. Most of these dairy farms are suppliers to Fonterra, a cooperative which from the moment of its creation in 2001 became New Zealand’s largest company. It was intended at the time that Fonterra would have the scale and scope to deliver that most elusive of national goals in this critical primary industry: ‘added value’. But has this in fact been delivered?
A recent review in the Irish Times has provided a reality check, with a comparison of dairy development in Ireland and New Zealand under sharply contrasting regulatory regimes.1 In 1984, when the European Economic Community introduced milk quotas, the two countries had roughly the same number of dairy cows (four million) and produced comparable volumes of milk. Since then, Ireland’s milk output has increased to about 5.5 billion litres while New Zealand’s has soared to 20 billion. Irish dairying has a debt to- equity ratio of around 5 per cent, whereas in New Zealand it sits near 40 per cent. The Times contended that expansion and intensification over the past decade has ironically not returned any real value to New Zealand farmers, although export earnings to the nation amounted to roughly $90 billion over the decade. It quoted the Irish Minister of Agriculture as saying he would do everything to ensure Ireland did not go down the same route as New Zealand. So what has happened in the New Zealand industry, and why has a volume mentality continued to hold sway? Why is it that environmental costs have mounted beyond publicly acceptable limits, ironically threatening the national brand image that is so much a part of the growth of the other big earner, tourism?
The world dairy stage
This chapter explores those questions. In doing so, it seeks to provide fresh ways of approaching the perennial question of why New Zealand’s largest commodity business has not moved as rapidly up the value chain as business commentary frequently urges. In order to understand national dairy dilemmas today, it is necessary to recognise the international and historic context that frames these. The industry has been fundamentally transformed since the 1990s as part of the globalisation of dairying, which has truly been played out on the world stage. This is an inevitable consequence of New Zealand dairying from its inception having been overwhelmingly export-oriented. For much of its life, it has sold most of its production offshore, going right back to the late nineteenth century, when the Anchor brand first came to prominence as a means of positioning New Zealand butter in the British market. What happens offshore has always shaped the dairy industry onshore.
New Zealand’s dairy dilemmas today are therefore closely connected to ongoing changes in world dairying. Developments in New Zealand’s dairying, driven by regulatory and market reforms in the twenty-first century, have collided with the emerging global dairy and wider food system. The extent of structural change in world dairying could not have been easily foreseen. Dairy’s starting point in the last quarter of the twentieth century was a world map based on dairying in national economies, supplying fresh milk and producing traditional products like butter and cheese for domestic sale, with periodic surpluses sold internationally. New Zealand had a unique place on this map, supplying butter and cheese, mainly to the United Kingdom market through preferential trade arrangements.
National dairy companies then outgrew their home territories to become globalising entities. Dairy as a food category emerged with an expanding field of specialty dairy consumer products, melded into a supermarket revolution that began first in the United Kingdom, much of western Europe and North America. Global dairy supply chains associated with dairy companies arose to support new consumer-centred and supermarket-centred market relations. In this context, Fonterra became one of the world’s foremost ingredients suppliers to big food manufacturers. The supply chains formed the organisational glue, serving supermarkets, food manufacturers and multilocational dairy companies in developed and now developing countries. According to the Boston Consulting Group, dairy sales worldwide amount to $500 billion annually. They represent not only the biggest revenue-generating category in the food and beverage sector but also the fastest-growing, although profits growth of dairy companies was only half that of food and beverage companies overall. This state of global dairy affairs suggests that New Zealand dairying’s world view, which could be described as ‘produce first (but efficiently) and worry about consumption relations later’, is something of a misfit. The evolution and consolidation of the top ten dairy companies from the late 2000s through to 2016 makes for a revealing story. The rankings are fairly stable, Fonterra being no exception. The companies are a mix of farmer cooperatives and corporates. Both the corporates and the cooperatives have contributed to the rise of interlinking global dairy supply chains and have played their part in defining dairy as a food category. The 2016 descriptions of their core business values show differing views of what they wish to prioritise to make their dairy futures. The cooperatives (excepting Fonterra, which talks about value-adding products) are conventional in their commercial emphasis and vision. The corporates, in contrast, are diversified in their vision and operating focus. All companies have developed sophisticated strategies to enliven the dairy category, partly geared to new markets like China, but also dedicated to revitalising their traditional markets at home.
The defining features of the industry have been collaboratively orchestrated through the Global Dairy Platform, where Fonterra has been a conspicuous leader through provision of key staff. Begun in 2006 and based in Chicago, this platform made one of its first tasks the retelling of dairying’s story in the face of dietary, environmental and animal-welfare challenges. The excitement of this pioneering effort was most apparent first-hand during a visit to the platform in 2010. At that time, staff were saying that full-fat dairy foods are beneficial to health, a deliberate pitch to counter the view then prevailing among regulators and health professionals that dairying was linked to heart disease. Along with other lobby groups such as the European Milk Forum, they convinced governments that the fact dairy products contained saturated fats should not be a reason to set limits on the consumption of milk and milk products. More recently the Global Dairy Platform has been working with Google to build a dialogue with groups supporting similar interests to that of dairying to increase trust in dairy’s relevance story. That story is increasingly about dairying being a bigger part of the social fabric than many people realise: the livelihoods of about one billion people depend on dairying throughout the supply chain, and dairying meets the nutritional needs of six billion. Told like this, dairy is ‘an essential actor going forward’.
Although dairying is a globalising food category, the dairy companies are still in catch-up mode in terms of the geography of their operations. Six of the top ten global dairy corporates are headquartered in Europe, the largest of which is Swiss-based Nestlé. Fonterra is the only southern hemisphere company in the top ten, but it is also the only company that has direct operations in all the major dairy regions of the world. The multilayered and long-standing relationship between Fonterra and Nestlé is an example. Fonterra is Nestlé’s main supplier and Nestlé is Fonterra’s biggest customer. Nestlé, when rationalising its business in South America in 2009, sold its fifteen dairy-processing facilities there to Fonterra. This geography means that actors in different dairy regions now have an interest in constructing their own pictures of what is happening and the ability to do something about it. Fonterra is continually in the gaze of other dairy corporates, but it has its own special advantage: an on-the ground purview of the whole world of dairying, which has aided negotiation of border relations in markets.
Fonterra was formed in 2001 as a cooperative monopoly controlling 98 per cent of New Zealand’s milk supply, with the passage of the Dairy Industry Restructuring Act, after the government granted an exemption from the mergers and acquisitions provisions of the Commerce Act 1986. The aim was to ensure New Zealand dairying, with Fonterra as its vehicle, would be able to remain a strong international competitor on the changing world dairy stage. The merging companies were the Waikato-based New Zealand Dairy Cooperative Group and the Taranaki-based Kiwi Cooperative Dairies, along with the overarching coordinating entity, the New Zealand Dairy Board. The two cooperatives had different visions of where to take dairying. The Dairy Cooperative Group had a strong commodity ethos; Kiwi was said to be entrepreneurial. The Dairy Board brought expertise in marketing and logistics, having long been the industry’s marketing arm. The Dairy Industry Restructuring Act was a regulatory device, like legislation that had set up dairy governance in the past. A special focus of the Act was to prevent anticompetitive behaviour on the part of Fonterra. The assumption was that the commodity production arm of dairying would be under cooperative control in the new structure, while high-value production would be the responsibility of a corporate division. The regulatory provisions would somehow offer beneficial outcomes for economy, environment and society – just how being left tellingly unsaid. Commentators remain divided about how successful the cooperative merger has been for different dairy interests. On the commodity front, the launch in 2008 of the Global Dairy Trade auction created a market mechanism to more adequately price milk powder internationally. This took out of the hands of politicians and bureaucrats much of the pricing of international trading of milk powder. What is clear is that the various initiatives such as the push to add value and to promote environmental sustainability, which are distinguishing features among most of the other top ten corporates have only slowly gathered momentum in New Zealand.
It may seem as if Fonterra, and its predecessor the New Zealand Dairy Board, accepted by default the role of supplying the world’s food manufacturers with ingredients as the card they had been dealt, but this misses three key points. First, ingredients production enables economies of scale tied to processing efficiencies and economies of scope from refined technical versatility, all available in New Zealand’s dairy-processing plants. It could be argued that New Zealand dairying made its own niche by rapidly installing new-generation milk powder plants as early as the late 1960s. A unique market niche secure, it was then able to deliver both export earnings and earnings to its farmer shareholders from an expanding worldwide ingredients sector. Second, when Fonterra was created, part of its mandate was to ‘grow’ added value production, but for this it was ill prepared and, due to its cooperative legacy, it lacked a capital structure to move rapidly in new directions. Nonetheless, it has persisted, attaining substantial brand-focused leverage in recent years. Third, could the longer-term implications of sticking with ingredients have been foreseen, especially the cumulative effects of growing many more dairy herds in New Zealand? This is doubtful. Fonterra did, however, have an overriding concern. This was whether enough milk could be reliably produced in New Zealand to sustain processing efficiency gains or whether serious effort should be put into finding offshore sources of ingredients and milk supply.
The contemporary dairy scene
Low commodity prices and price variability have dominated New Zealand dairying’s existence. How much, or little, food manufacturers are prepared to pay for ingredients has placed constant pressures on dairy farming and dairy processing. Farmers and dairy companies past and present have reacted by seeking cost relief in bigger, reorganised and regrouped operations, leading to whole-system adjustments from a series of incremental changes. The economic viability of farm units to support the farming household has held a special place in energising farm business strategy in rural New Zealand. As the land area for dairying became restricted, due to competition on the margins from sheep/beef and forestry in the 1970s and 1980s, and as existing farms started reaching their production limits, farm sales gave fresh opportunity as a mechanism to increase farm size and farm potential. The motivation for sales has typically been capital gains, particularly for retirement (taking advantage of tax provisions), improving income (from capitalisation) and helping to settle other family members in farming (a major concern for family farmers).
By the 1990s there was a scarcity of dairy land for enlargement in the established dairying areas: Waikato, Taranaki and Manawatū in the North Island and Southland in the South Island. Some North Island dairy farmers sold up and moved to the South Island, where land prices were lower; others went to Australia, mainly Tasmania and Victoria, and beyond, to places like Chile, Uruguay, the Midwest of the United States and even Russia. Family farm enlargement receded in importance as a dynamic with the larger land requirement of new corporate entrants to dairying. As land conversion gained momentum in New Zealand, this social mechanism, activated by individual investment decisions, had two effects: it encouraged recapitalisation into bigger operations and reopened other parts of the South Island as potentially suitable for dairy expansion. This occurred in a context where there are no legal restrictions on land aggregation.
Steady consolidation and concentration also occurred within dairy processing, but in a relatively controlled manner, prompted first by rationalisations to secure suppliers, and then in later years driven by the power politics of dairy companies wishing to obtain a seat on the New Zealand Dairy Board. By the late 1960s dairy factory amalgamations were frequent, resulting in a reconfiguration of isolated factories into processing complexes. These were better able to meet Dairy Board manufacturing requests, and adopted new-generation equipment, such as cheese and butter mechanisation and giant spray dryers for production of casein and milk powder. The catchment or ‘milk shed’ of each complex widened. For example, raw milk was tankered and trained interregionally, from Manawatū and Tararua to Whareroa, near Hāwera. Company mergers between 1995 and 2000 saw the number of independent sites reduced from fifteen to seven.
Dairying has always had inbuilt financial paradoxes. Dairy farmers have been able to borrow readily from the banking system to step up production and productivity. Debt loading has been accepted as a principal driver of dairy farming system performance. In contrast, the situation for Fonterra as a dairy processor has been different. A cornerstone of the Dairy Industry Restructuring Act was Fonterra’s obligation to process all milk presented to it. This was accompanied by another obligation, to set an annual payment to farmers for milk that reflected the global price adjusted for cost deductions. The initial capital structure was made up of redeemable shares held by the cooperative’s farmer-shareholders. A drought in 2007–8 saw distressed dairy farmers draw down heavily at the time. A Trading Among Farmers scheme was put in place in 2012 to allow dairy farmers orderly access to their capital, and to remove the risk of a lot of them suddenly wishing to redeem their shares.
Fonterra, despite hopes on formation in 2001, has been unable to fully support its value-adding initiatives. Its ambitions to alter its legislated capital structure to adequately price its assets and price and support new initiatives have been met by much farmer-shareholder resistance. Dairy farmers have been reluctant to see a diminution in their shareholdings. As a result, in 2017 Fonterra retains its farmer-only cooperative structure with the average New Zealand dairy farmer having about $900,000 invested in the company. To widen the capital structure, a Fonterra Shareholders’ Fund has been created to attract outside investors who are not allowed to hold shares in Fonterra. These issues have had two diverging effects: ease of commodity expansion and simultaneous obstruction of value-adding plans. Farmer debt has risen steadily as dairying is seen to be an attractive investment with regularity of cash flow and likely capital gain. While the Reserve Bank Governor listed global finance, Auckland’s overheated housing market and dairying debt as his three major concerns of 2017, the banking system has been publicly supportive of dairying expansion and its cyclical and seasonal vagaries. When dairy farmers are segmented by their levels of indebtedness, using a coarse classification of new entrant farmers (10 per cent), high-debt corporate farmers (10 per cent) and family farmers (80 per cent), the high-debt corporate farmers were carrying more than a third of the industry’s $41 billion debt in 2016, while the numerically largest segment, the family farmers, accounted for a total debt similar to the corporate group. New-entrant farmers consisted of sharemilkers and farmers in business partnerships. These levels of indebtedness reflect not only land purchase costs, but also the investment required for intensification of land use.
The means of raising dairy farm productivity were greatly enhanced by the widespread availability of urea with the commissioning of the ammonia-urea plant at Kapuni, in Taranaki, in 1982. By the mid-1990s, it is clear that urea use was regarded as essential to managing pasture growth, grass nutrition and the ability of the land to carry more cows. This fractured the existing symbiotic pasture system on dairy land. For over fifty years pasture system productivity relied on perennial ryegrass and white clover, stimulated by lime that neutralised the soil and enhanced nitrogen-producing clover, with superphosphate to aid ryegrass productivity. Ryegrass requires moist, fertile conditions and is able to withstand treading and hard grazing, but performs poorly during dry, hot conditions. Demand for irrigation water was a by-product of the new pasture system. Between 1994 and 2002 dairy cows per hectare rose by 19 per cent, milk solids per hectare by over 34 per cent, and urea fertiliser use per hectare grew more than 162 per cent (although from a low base). At the same time, extended pasture growth over a longer growing season enabled more cows to be carried for longer.
The extension of dairying
For most of the twentieth century dairying was mainly confined to those areas in which it began in the late nineteenth century, after the bush was cleared from forest lands confiscated from Māori, namely in the Waikato and Taranaki, or acquired very cheaply, such as in the Manawatū and Southland. Since the 1990s, this heartland status has been usurped by the addition to dairying of extensive lands in other areas of New Zealand. The new geographic spread is central to twenty-first century tensions over the national income from dairying versus the environmental costs borne by the nation. The early signs of land use switching in the mid-1990s occurred when intensive sheep and beef operations opted into dairying. Then, upon its establishment, Fonterra was required to ‘welcome’ new milk suppliers. This cooperative production mandate was enshrined in its statutory obligations in the Dairy Industry Restructuring Act. Today the size of dairying operations from land converted in the last thirty years far exceeds holdings in the traditional dairy areas.
As the stream of land conversions gained momentum, new patterns became increasingly noticeable. In the established dairy areas, less profitable sheep and beef operations led the changeovers, although forestry conversions in the Volcanic Plateau of the North Island were on a larger scale. In the South Island the areal encroachment of dairying first took in mixed cropping operations and dry-stock farms in Canterbury and north Otago. Latterly significant areas of land usually rated as unsuitable for farming and intrinsically attractive as amenity landscape have been converted, including parts of the Maniototo and Mackenzie basins. It was not until the Parliamentary Commissioner for the Environment released figures in 2015 that the high level of conversions over the period from 2008 to 2012 came into public view. Cumulatively, in that short five-year period, some 157,000 hectares of land throughout New Zealand was switched to dairying. This clearly demarcates dairying’s new geography. Irrigation was an inseparable part of the conversion formula.
The combining of fertilisers to trigger pasture growth, water to ensure seasonal availability and to counter drought effects and irrigation installations and district irrigation schemes dedicated to farming20 has led to profound transformations in the landscape and look of dairying. If previously small herds of cows defined the dairy landscape, nowadays it is pivot irrigators that distinguish contemporary dairying in much of the South Island. According to the industry advocacy and information organisation, DairyNZ, the South Island contains 80 per cent of the national total of land irrigated for production. In Canterbury alone, the irrigated area amounts to 500,000 hectares, with half being watered by pivot, lateral-move and solid-set irrigation installations. Large irrigation schemes are presently paused because of legal challenges in the Mackenzie Country and the Ruataniwha catchment in Hawke’s Bay. Dramatic changes in herd statistics reflect this new geography. Two decades ago the North Island had 3,453,611 cows, the South Island 862,798.21 Now the North Island has 74 per cent of New Zealand’s dairy herds, 60 per cent of its dairy cows (2,985,992 in number) and produces 58 per cent of New Zealand’s milk solids. The South Island, with 26 per cent of herds, has 40 per cent of all cows (2,011,819) and produces 42 per cent of milk solids.
For a long time, it was almost a truism that New Zealand dairy cows were pasture-fed all year round. In reality, in winter especially, they consumed hay, silage and crops such as chou moellier or alfalfa grown in rotation on the farm. The maxim has now begun to dissolve as on-farm nutrient sources are supplemented by off-farm inputs, with interregional flows of these being a noticeable feature. Pumpkins from Hawke’s Bay and kiwifruit from the Bay of Plenty find their way as feed to Waikato dairy farms. Shipments of hay up and down the country are legion. But the development that has most enabled the management of drought and advanced production options has been the trade in palm kernel meal. Imports began in 2003, and levels started to rise rapidly from 2007, reaching 2,400,000 tonnes in 2014. This accounts for a sizeable portion of available palm kernel meal in the principal source countries of Indonesia and Malaysia. Following international pressure, including demonstrations at the World Dairy Federation International Dairy Summit in Auckland in 2010, Fonterra eventually began publicly urging farmers to avoid this form of supplementary feed.
Doubting dairying
The twenty-first century has seen New Zealand dairying under an intense spotlight. It has cast a twin beam: a series of alternative visions of the practices of dairy farming, and growing scientific documentation from many quarters of environmental costs. While dairying has been extending into new areas, and dairy farms were intensifying production, alternatives to the model of volume-production dairying have attempted to make inroads into the farming and processing mindset that had for decades dominated dairying. These reconceptions centre on three lines of doing dairying differently and, moreover, have been industry-led in the broadest sense. First, evidence has mounted that value-adding strategies might best be led by smaller dairy processors. The gradual erosion of Fonterra’s start-up position in 2001 as processor of 98 per cent of milk produced in New Zealand, down to 84 per cent by 2017, has been due to a small group of independent dairy processors. By market sales of product, these are Open Country Dairy, operating at various sites (6 per cent), Westland Cooperative of Hokitika (3 per cent), Synlait Milk of mid-Canterbury (3 per cent), Oceania of south Canterbury, Miraka of Mokai and Tatua of Morrinsville (1 per cent each). TDB Advisory of Wellington (a financial and economic consultancy operating in Australia and New Zealand) has undertaken some comparative analysis that throws quite new light on the value-adding goal. Using Tatua as the benchmark (chosen because of its high level of returns to shareholders and specialty ingredients mix), TDB looks at the level of investment that the smaller company is making to generate its sales. Rescaling the Tatua figures for Fonterra, they have calculated that Fonterra would need an extra $7 billion in fixed assets to match Tatua’s performance. This equates to an investment of $675,000 for each Fonterra farmer-shareholder. With no guarantee of success in generating sufficient returns, this would be a big ask. Second, taking an historical perspective turns up a lengthy presence of organic and other alternative dairying practices in New Zealand, joined since the early 2000s by a more radical farming approach known as biological farming or biological agriculture (whose abbreviation BA leads to the run-on term ‘BAdairying’). These farming philosophies reject the standard model of lacing the soil with fertiliser and pesticides. The organic movement is committed as its point of difference to eliminating chemical additives, while biological farming focuses on soil biota productivity as the foundation upon which plant nutrients and animal productivity and health depend. Organic farming, informed by experiences in the United Kingdom and United States, gained popularity in the 1990s and 2000s. Fonterra supported the broad initiative in the 2000s by paying a premium for organic milk and marketing organic cheese in the United States in the 2000s, until it unexpectedly cut its organic milk collection in 2011. Unlike organic dairying, biological agriculture dairying has obtained no premium from Fonterra, and has failed to overcome the critical supply-volume hurdle. However, biological farmers have shown that reduced stocking rates, with better-fed cows that live longer, get in calf earlier, suffer less disease and require less by way of inputs, can be as profitable as the conventional model.
Third, a similarly radical departure from established dairying practice would be a change in the nation’s dairy herd from cows with A1 to those with A2 markers. Keith Woodford, rural commentator and honorary Professor of Agri-Food Systems at Lincoln University, who helped alert the New Zealand and Australian farming scene to the potentialities of A2 milk, was a pioneer advocate for it. A2 milk is that which is free of the protein A1 beta-casein. The reasoning for a herd shift, and the creation of a new platform of competitive advantage, is that A1 beta-casein is implicated in numerous health issues, including Type 1 diabetes, heart disease and autism. When A2 Corp (now known as The a2 Milk Company) launched milk sales in Auckland and Christchurch in 2003, outside Fonterra’s structure, its success as a supplier of fresh milk and as an increasingly prominent producer of A2 infant formula for the Chinese market could not have been foreseen. What for so long stopped these ideas for alternative dairy practices from flourishing in their own right and from making much impact on mainstream dairying practices? Given the dominance of conventional dairying approaches, industry insiders and associates are able to control to a large degree the storylines that justify why dairying exists the way it does. This might be described as the effects of dominance power. The key dynamics have built upon each other, in terms of expansionary influences, intensification and the ability of farmers to borrow to sustain these practices. These features were greatly exacerbated when Fonterra was formed. The grip that export returns from the dairy economy have had on industry, government and the popular imagination is also undeniable.It illustrates that the way that dairying is done is a product of human inputs in farm systems. The cow is an innocent party in a human-centred pre- occupation with cow productivity, without much attention being given to the externalities that different forms of dairy production create. Juxtaposing economy and environment in this way is intended to guide thinking about the environmental complexities and complications that result from what happens on the farm. But some balance must be brought to any study of economy–environment relations. Taking a measured perspective that considers how different interests (the industry, environmental NGOs like Fish & Game, Forest & Bird, the Environmental Defence Society and Greenpeace, and different government units) have behaved over time, it becomes apparent that pressures from dominant narratives have made it very hard for dairy actors to break away from business-as-usual positions.
Dissatisfaction over progress on dealing with dairy effluent reaches back to the 1990s. A conspicuous attempt at self-regulation by farmers was the formulation by the industry-wide Dairying and the Environment Committee of environmental and animal welfare guidelines in 2001. These were distributed to all dairy farmers. They were followed by the publication of an industry-standard environmental system called Market Focused. This light form of governance centred on remediation (i.e., seeking to fix what was broken) and mitigation (i.e., to change behaviours) and assumed farmers would respond positively to information they could trust. But when in 2001 Fish & Game launched its Dirty Dairying campaign, drawing on a report commissioned from the National Institute of Water and Atmospheric Research, it captured the attention of the nation. The report’s claim that dairying was responsible for much eutrophication of lakes, and loss of water quality in New Zealand’s rivers, was an outright rejection of the dairying community’s premise that only a few farmers were not taking pollution seriously. Its most enduring influence has been to spread widely awareness of the nature and extent of farm-level effects of dairying practices by naming to the world at large the inexorable paths of pollutants to lakes, rivers and the sea. A broader-spectrum approach towards informing farmers crystallised in 2003 when the Dairy Clean Streams Accord was signed. This was a product of behind-the-scenes negotiations between a range of government and industry representatives. The parties to the accord were Fonterra, the Ministry for the Environment, the Ministry of Agriculture and Forestry and the regional councils. The Clean Streams Accord relied on farm-level actions (for example, fencing off streams and riparian planting), left responsibility for monitoring and reporting to Fonterra and was voluntary. Significantly, the environmental NGOs that had been most responsible for gearing up the debate, namely Fish & Game and Forest & Bird, were left out. This omission caused much friction. It was a further play of the view that assumed ideal governance was a settlement between the parties of growth and the institutions mediating growth. Independent thought had no place at the table. Although the later iteration of the accord formulated in 2013 was built on a three-tier structure of Accountable Partners, Supporting Partners and Friends of the Accord, the NGOs were still outside the governance tent. This was the background to the article in the Irish Times that opened this chapter, highlighting issues to be avoided at all costs in Irish dairy expansion.
The Parliamentary Commissioner for the Environment provided some interpretation of the early governance efforts in his 2004 Growing for Good report. Under the banner of a Redesign Spectrum, three themes were identified. The first comprised the farm level, where the concern was with remedy and mitigation. This typically supports the farm system, is single-issue-focused and relies on end-of-pipe technologies (e.g., nitrogen inhibitors). This approach may alleviate the undesirable impacts of farming practices, but usually leaves out the underlying factors that drive farmers’ behaviour or that enable them to adopt the practices in the first place. The second theme was farm-system redesign, concentrating primarily on adapting farming systems, a key example being the introduction of nutrient budgets. The use of more and more externally sourced inputs, while the health of the environment continues to decline, chimes with the evidence on the key role of feed outlined earlier. The third, and the most overarching and challenging, theme is system-wide redesign, which depends on new visions of organising land use and land-user relations. Such a shift of vision requires the individual farm or processor to be set in the wider context so that the implications and ramifications of particular actions can be discerned. At the time, this was one of the ‘knowledge gaps’ that Growing for Good identified. The ambitious Land and Water Forum, embarked upon in 2009, brought together a wider range of stakeholders than had come together before. This forum consisted of industry groups, electricity generators, environmental and recreational NGOs, iwi, scientists, central and local government officials, and other organisations with a stake in freshwater and land management, assembled as a collective governance body. Self-mandated, it sought to develop a common direction for freshwater management in New Zealand, and provide advice to government at a time when land use was intensifying at a rate beyond that of most OECD countries. The Land and Water Forum effectively spearheaded collective thought on water management and took cognisance of governmental initiatives to put in place regime-setting policy and standards. The forum’s achievements were referred to by its chair as approaching a new reconciliation on managing freshwater. Consensus collapsed, however, when first Fish & Game and then Forest & Bird departed.
The primary issue was concern that government had commandeered a collaborative approach to governance (which members had collectively endorsed) by splitting governance from collaboration, leaving a shell of the latter and keeping the former for itself.
More recently emphasis has moved away from technical questions and narrow solutions to frequently redefining the dairy problem to include ‘too many herds’; as a choice between ‘economy and environment’; as being ‘harmful to human health’, with a common claim to the effect that ‘our rivers need a moratorium on new dairy farms’. The authors of a recent paper – subtitled ‘Milking Our Environment for All Its Worth’ – argue that the export earnings of dairying are cancelled out by the cost of its own environmental externalities. In 2017, DairyNZ took Greenpeace to the Advertising Standards Authority, for running a series of TV advertisements on dirty dairying. The authority’s complaints board said the statements made by Greenpeace ‘would not come as a surprise to most New Zealanders’. They continued: ‘We would encourage DairyNZ to concentrate its resources into addressing the very real problems of river degradation, rather than trying to pretend the problem doesn’t exist.’ Responding to a joint Ministry for the Environment and Statistics New Zealand report on environmental impacts in 2017, the then Minister for Primary Industries, probably unwittingly, gave a contemporary spin to an old hope. ‘There’s no way that we can double the number of cows in New Zealand. One big opportunity the dairy industry does have is about increasing the value, not the volume.’
Different dairy futures?
This chapter has sought to create an interpretive framework that enables habits in thinking and action and tendencies leading from these to be seen more clearly. Some strong messages have emerged. There are dynamics inherent in dairying that have to be recognised. Individual dairy investors are making social decisions each time they decide on something relating to their dairy land or dairy operation. Every decision in the dairy scene therefore counts, and must be counted, and there is a responsibility to all others, no matter where they are, for what occurs off the farm as the result of these decisions. The dairy economy is not something that simply happens. Wider society participates in it in certain ways, increasingly with discomfort and concern about lack of thoughtful or truthful representation of what it is doing, or should or should not be doing. In this context, decision-making and choices as crucial individual and social acts have been trivialised. Instead, it is time to start to frame up some ethical coordinates for individual decision-making and some holistic moral understandings of the short- and long-range implications and ramifications of summed individual decisions.
If the current scene is a reliable indicator, ongoing debate about future land use and land occupancy will have its share of advocates seeking to perpetuate the status quo. As in all debates, purported facts will be marshalled with both self-interested and hand-on-heart motives. How are different positions to be reconciled? The latest commentaries stress that there are no realistic land use alternatives to dairying, as it is the best option in many areas,41 and that the value-adding path using existing knowledge and infrastructure will be ‘difficult’. The focus has to be on the type of growth rather than limits to growth. It is an urgent priority that such conversations are conducted honestly, informed not by selective evidence but by all competing knowledge, and do not back away from rekindling collective knowledge about the localised and distant, and the legacy, short-run and long-term cumulative effects of individual actions. There is an urgent necessity to tackle openly the complex matter of making visible the twinning of individual and social outcomes associated with different land uses.
Increasingly it seems unlikely that existing ideas will be able to resolve the problems created by current practices. This view is undoubtedly amplified in the context of relations of dominance power in dairy. Three system-wide choices have been touched on: smaller dairy processors moving into valueadding niches, organic and biological farming, and changing the cow mix of the national herd. These mostly have not been taken seriously by mainstream dairy interests. A fourth option has surfaced in 2017. This is open-stall barns, which are quietly gathering momentum. Open stalls mean cows are free to range in and out of doors according to weather conditions. The barns enable much closer control of effluent and nutrition management of animals. The idea of barns is hardly new in many other countries, but its novelty and potential in New Zealand is that it rebuts the assumption that cows here must be pasture-fed. Ironically, these developments foreshadow further increases in farm capitalisation, but then that has long been the nature of dairying’s history and geography in New Zealand.
Conclusion
Contemporary New Zealand dairying has become highly contested. Contrasting representations and evaluations abound over the impacts and limits of what otherwise seems dairying’s endless economic expansion and remaking of the landscape. These real-time contests over ‘truth claims’ indicate growing social concern and the stamp of social ownership regarding how the country’s natural resources used by dairying should be managed, presently and into the future. This chapter has sought to explain the inherent dynamics of the dairy economy as well as the burgeoning field of scientific and social knowledge about the environmental impacts of dairying. It has argued that the concept of dominance power which characterises New Zealand’s volume-based dairy model should be taken seriously and vigorously challenged.
Dominance power derives from those governing mentalities or approval systems characterised by perceptions, attitudes and expectations that rationalise an exploitative approach to territory, settlement, economy and ecology. Alternatives exist but are unsupported by the infrastructure of science and industry. Their merits and demerits in the present context of dairying as it is known and practised deserve to be investigated through experimentation and other evaluative frameworks. Understanding how the features of dairying’s specific economic-environmental relations have been locked in is an important basis for reigniting future-oriented collective conversations and commitments at large, over dairying’s many economic and environmental dilemmas. Ironically, as the chapter has shown, some parties in the dairy industry are attempting to do the fundamentals of dairying differently. These and other initiatives must be seen and heard when rethinking the nature of growth involving dairying.
Extract from Pawson, Eric, The New Biological Economy: How New Zealanders are Creating Value from the Land, 2018, Auckland University Press, Auckland.
Richard Le Heron is a Professor in the Environment at the University of Auckland. He is an expert in environmental management.
Link to book: click here.
Photo Credit: Sam Smith
Disclaimer: The ideas expressed in this article reflect the author’s views and not necessarily the views of The Big Q.
You might also like:
Q+A: What are the politics of food insecurity?
What are the solutions to food insecurity? 🔊
