Almost all New Zealand dairy produce is manufactured in factories owned cooperatively. The method of establishment and the running of cooperative dairy companies have changed very little in principle since the first cooperative dairy company was established in 1871 at Springfield on the Otago Peninsula. This company was modelled on similar enterprises in Scandinavia and Ireland.
Dairy factories need much money for equipment. In earlier years few dairy farmers had enough surplus cash for this purpose; hence shares have usually been able to be paid up over many years. The early cooperatives arose through buying out proprietary companies by mortgage, capital to be gradually paid off. Later, however, new cooperatives were formed and were capitalised by bank overdraft, guaranteed by the individual members of the cooperative, jointly and severally. The overdraft was also secured against the assets and uncalled capital. A supply agreement could also be adopted to ensure adequate and regular supplies of raw material, which would at the same time strengthen the security for loans. For example, when a new cheese factory is mooted, it is usual, before building the factory, to take a specific supply contract for five years. Sometimes year-to-year contracts are made.
It is desirable and usual for suppliers to hold share capital in proportion to the amount of produce supplied. Earlier, shares had to be held in proportion to cows milked. This, however, was unfair to the man with the low-producing herd, who had to take up a disproportionate share of capital; it was also unfair to the man with the high-producing herd, who did not receive his full interest payments. At present shares are allotted on the basis of butterfat supplied (all payments to suppliers are made on this basis). The precise relation varies among companies from one share to 50 lb of butterfat a year to one share for 300 lb of butterfat. One 1 share to 80 lb of butterfat is probably the most common. The directors usually have power to allot shares without reference to the shareholder. Shares are paid up either by a deduction of d. to d. per pound of butterfat supplied monthly or by a similar deduction annually from the deferred payment made after the product of the factory has been sold. Cooperative dairy companies are administered by a directorate elected by the shareholders. Large companies comprising many factories have ward systems of election so that the directorate can represent the whole area.
Dairy companies vary greatly in size. In 1959–60, of 92 dairy companies producing butter, 14 produced less than 249 tons, and one, over 10,000 tons. Most produced between 1,000 and 5,000 tons. Of 101 cheese companies, 18 produced under 149 tons, and three, over 5,000 tons. Nineteen factories produced under 1,000 tons. Most produced between 150 and 750 tons, for, as cheesemaking uses whole milk, it developed in smaller units, drawing supplies from limited areas to suit the once primitive transport facilities. In contrast, butter production use cream, only a tenth of the bulk of whole milk; this is more conveniently carted, so that a greater area can be served by one factory. Recently, smaller companies have tended to group themselves into larger units, with considerable economic advantage. The New Zealand Cooperative Dairy Co. illustrates successful amalgamation. The company was formed by the amalgamation in 1920 of three large dairying concerns in the Waikato, New Zealand's greatest dairying district. The company has since then gained enormously. It runs 39 factories, many of which can make milk powder and casein, as well as butter. In 1959–60 the company produced 75 679 tons of butter and 50,296 tons of milk powder (37 and 60 per cent respectively of New Zealand's total production), as well as much cheese and casein.
Whole milk, instead of cream alone, has recently been collected by tanker. This enables factories to make milk powder and casein, an important addition to export earnings.
Apart from its marketing activities, the New Zealand Dairy Production and Marketing Board has many important technical functions, the most important being its herd-improvement work. The Board employs about 12 consulting officers, who advise farmers on production. It carries out all testing of dairy cows and does much research into statistics which serve to guide farmers in the selection of suitable breeding stock, including a continuing survey of the production records of the progeny of selected bulls. The Board runs on a business basis the Artificial Breeding Service at Newtead, near Ruakura, a service taken over from the Department of Agriculture, which had set it up. The Board administers the Bobby Calf Marketing Regulations, which organise the sale of bobby calves through a pooling system, to ensure that farmers receive full returns for their calves.
In New Zealand pig meat is a by-product of the dairy industry, for almost all pigs are fattened mainly on skimmed milk. The New Zealand Pig Producers' Council, responsible for the development and welfare of the pig industry, works therefore under the New Zealand Dairy Production and Marketing Board Act. The Council also runs a National Pig Breeding Centre to improve the quality of breeding stock.
There are two dairy associations, the National Dairy Association and the South Island Dairy Association. These were developed to do work similar to that later done by the Dairy Board, with more attention to some of the industry's technical problems, especially manufacture, packaging, and transport, also the training of staff. The National Dairy Association did, however, interest itself generally in marketing and in specific matters, such as the arranging of freight contracts and the allocation of shipping space.
When, however, the Dairy Board was formed. the dairy associations became trading-type concerns specialising in the supply of machinery and other dairy-factory needs. They later became, as they are at present, limited liability companies with dairy companies the shareholders. They have undoubtedly saved the industry much money by buying supplies wholesale and, although they are not greatly in the public eye, they have an important place in the organisation of the dairy industry.
Research into dairy manufacturing is done by the Dairy Research Institute—a body controlled by a board with representatives from the industry, the Government, Massey College, and the Dairy Factory Managers' Association. The Institute studies problems of manufacture and packaging, the development of new products, and improvements of machinery and methods. The Institute is housed at Massey University of Manawatu.
J.V.W.