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A Better Dairy Deal - Characteristics Of Industry

APPENDIX 3:

CHARACTERISTICS OF

THE NEW ZEALAND DAIRY INDUSTRY

In reviewing the development of the New Zealand dairy industry since 1892, the following features stand out:

- Continual political lobbying and involvement by central Government;

- Centralised and compulsory mechanisms to manage business risks (such as price fluctuations, price falls, costs of remoteness, and overseas selling);

- Heavy focus on increasing production and farm efficiency;

- A guaranteed buyer for all the milk a farmer could produce (the rules of a dairy co-operative require it to buy all production from its members);

- Technical excellence on-farm;

- A predominance of family farms, with relatively limited access to capital;

- Most farmers with “all their eggs in one basket’ (the dairy industry);

- A strong traditional cohesion built around “co-operative principles’;

- A traditional community of interest within the dairying district;

- A deep distrust of “outsiders’;

- A real fear of becoming “peasant farmers’ to predatory corporates;

- Very limited awareness by farmers of overseas buyers’ needs;

- Except for a brief period in the 1920s , exporting of dairy products from New Zealand has always been managed by the Government or a producer board.

- Prices and costs for dairy farmers have always been “averaged’, “stabilised’ or “supported’ - by a producer board and the Government. True signals from consumers have been “softened’ for farmers.

- Exports comprising mainly commodities and ingredients, which are relatively low value;

- High levels of trust by farmers in their producer board;

- Real control of the producer boards held by senior managers, not directors;

- Rigorous monitoring of the producer boards at a “political’ level, but much less so at a business level;

- Limited flows of meaningful information between the Dairy Board, the co-operatives and farmers ;

- Highly geared public relations machines which constantly reinforces old industry beliefs, particularly in relation to the Dairy Board’s performance and its claimed market power overseas;

- Recurring political power struggles, particularly for directorships and senior management positions; and

- Over recent years, serious (often debilitating) power struggles between the co-operatives to gain dominance in the industry, particularly over the Dairy Board.


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