Editorial: White gold

Those with knowledge of the history of New Zealand's dairy industry will regard the present high returns with caution.

In its more than 100 years of existence, dairying's booms and busts have been spectacular – delivering periods of both poverty and wealth to its farmers and the nation.

But that caution should not dissuade us from celebrating a fine achievement: the dairy industry, through hard work and smart organisation, has become New Zealand's economic backbone.

Fonterra's record income, profit and returns to farmers, announced last week, represent an historic moment in the nation's history. For the first time we see a farming organisation able to extract efficient production from the land, tailor its product to suit world demand, be something of a price setter rather than a price taker, return maximum profit to its suppliers, and maintain that performance in good years and bad. Fonterra bestrides its sphere like no other New Zealand organisation.

The complaint from dairy farmers that city dwellers do not appreciate the success is partly justified. Exports such as wine and technology make a much smaller contribution to the nation's budget but are glamorous in a way that dairying is not, and so they feature on the glossy pages and are discussed at dinner parties. Profile, though, does not much count when the power-brokers make room at the top table. Dairying has a permanent seat there.

That was demonstrated during the nine years of Helen Clark as prime minister, when Fonterra was finding its legs and farmers were converting to cows in unprecedented numbers. The problems that caused – ecological degradation and the hogging of water, for instance – were virtually overlooked by a Government ill-disposed to do so. The profits from dairying were too important to threaten and they over-rode environmental concerns.

Those days have changed, not because of more environmental sensitivity in Wellington but because of the public's pressure. New Zealanders saw their streams dirtied, their landscape denuded and water rights sequestered, and they did not like what they saw. The resulting protest against dairying was unprecedented in a nation that had previously given its farmers a soft ride.

The concern has not disappeared but it has perhaps moderated. It still taints dairy's sweet taste of success – and has been worsened by the high price of milk in the supermarket. Lowering those would lessen many Kiwis' Fonterra phobia.

In Canterbury, across-the-counter prices are not the main concern. Dairying's practices have been the big worry. The focus has turned to earthquake reconstruction but dairy farming is bound to come back into the picture, such is the importance attached by many citizens to abundant pure water and sustainable farming. A different scene will then emerge.

Fonterra has become more insistent about cleaning up dairying's practices, with things like the clean streams accord beginning to show significant results. Significantly, Environment Canterbury has banned cattle and pigs from waterways. Also, the rush to dairy conversion may be slowing because of high prices for meat and prospective higher interest rates.

Perhaps most significantly, it is likely the commissioners at Environment Canterbury will crown their administration with an effective water-harvesting policy. That is the way to ease the bitter divisions in the community over water extraction, in that the construction of storage dams will allow sufficient river flows for recreation while giving farmers assured access to water.

Water harvesting by way of dam construction will be controversial but is justified in the name of necessary compromise. Minimising the construction and paying rigorous attention to conservation means that both sides of the dispute get something out of the development. Not to compromise means an undesirable widening of the urban-rural divide and – more important – the hobbling of a main source of New Zealand's prosperity.

Some reduction of those returns is already showing as the international economy braces for a Greek default. Our big dairy sales in economically stable China will minimise the economic consequences of a Euro crisis, but we are once again reminded of the need to ensure dairying has the best chance of weathering storms by maximising its sustainable production of milk.

The Press