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Introducing British farmers and investors to New Zealand farms and farming

Historical background to New Zealand rural settlement

In the year 1840 at Waitangi in the Bay of Islands, a treaty was signed between Maori chiefs and representatives of the British Government. While important aspects and interpretations of the Treaty, as well as subsequent adherence to its principals by colonial officials of the day and successive New Zealand governments is subject to debate and controversy to the present day, the treaty was a hugely significant landmark event in New Zealand history, marking the real beginning of British colonial settlement and development. Whatever the Maori signatories to the document may have believed, from the European perspective the treaty of Waitangi was widely accepted as establishing British authority in New Zealand together with legal rights for British settlers and from that time New Zealand became a destination for migrating British farmers and settlers. Although over the years other minor European ethnic groups also migrated to New Zealand, it was the descendents of British settlers who went on to form the main population basis of the New Zealand farming industry.

Early New Zealand farm settlement schemes, promises and disappointments

For many settlers, migration from Victorian Britain to New Zealand was a consequence of the acute urban overcrowding and deteriorating social and living conditions which followed the agricultural and industrial revolutions within Great Britain. Within Britain notable politicians, radical activists, writers and commentators of the day advocated their own contrasting solutions and reforms to the social and industrial problems of the era, ranging from legislation to create improved social and working conditions, through to violent class revolution. Edward Gibbon Wakefield (1797 – 1862), promoted colonial migration as the answer. Wakefield’s colonial model advocated the creation of colonial settlements which were to be based on transplanting cross section of existing British working, trades and land owning classes from overcrowded England to a new, utopian life in New Zealand. Here, in settlements organised by the New Zealand Company, settlers were to enjoy a greatly improved life amidst an abundance of fertile soils for cultivation in a pleasant and favourable climate. Cheap land on the other hand was not part of the plan. On the contrary, Wakefield advocated that settlers pay high land prices in the new colony, in part to fund ongoing colonial development, but also to discourage emigrant labourers, tradesmen and artisans elevating themselves from their allotted station in the colony. In a publication promoting settlement in New Zealand the Secretary to the New Zealand Company described the colony as “two – thirds cultivatable, blessed with particularly rich forest soils, having few earthquakes, and enjoying one of the most equitable climates on earth” (Ward 1840). The reality was somewhat different. On arriving in New Zealand early British settlers faced survival in a physically challenging environment with mountainous, rugged, densely forest clad hills and coastal plains often dissected by large, braided, flood prone rivers. The development and evolution of rural New Zealand to the countryside we now recognise involved generations of struggle, hardship, perseverance and dedicated physical work. For a variety of reasons the New Zealand Company achieved only limited successes, but their story is taught to every New Zealand school child as the starting point of organised European settlement in New Zealand.

Other prominent early colonialists, notably Sir George Edward Grey (twice British Governor of New Zealand and following his entry into local politics in 1877; New Zealand Premier), advocated the sale of cheap land obtained from Maori land purchases (and in some cases Maori land confiscations) to encourage expanded immigration and farm settlement. Inevitably perhaps given their contrasting views, Wakefield and Grey were to become intractable political enemies.

Not surprisingly the colonial settlement model advocated by Wakefield and the New Zealand Company did not survive their early settlements. Rather, the modern New Zealand rural economy that evolved has its foundation in the policies and reforms affecting farmland ownership and distribution legislated in the late 19th to early 20th century. Early land settlement schemes for migrating British settlers to New Zealand were idealistic in intention, but very limited in scope. They were commonly abused through absentee and “dummy” ownership and created few realistic opportunities for farm settlement relative to increasing numbers of newly arriving migrants. Once in New Zealand the availability and the cost of land and land development made farm ownership unattainable to the majority of early migrants. On the other hand, by mid to late 19th century, substantial tracts of New Zealand pastoral farmland were tied up by a relatively few wealthy land owners in the form of very large sheep stations, in real effect replicating the traditional farm land owning class of the “home country”. It has been estimated that by 1890 through lack of opportunity, British and other new settlers were leaving New Zealand at the rate of 1000 each month for a better future elsewhere.

Progression in New Zealand to an agricultural export economy.

Following early gold rushes New Zealand had little obvious recourse to exploit other than the land and forests and so inevitably, farming and timber became the first significant New Zealand industries. The immense stands of native timber, in retrospect squandered as much as exploited, were New Zealand’s largest industry for much of the second half of the 19th century. Virgin forests were exploited both for export as well as to supply an inevitable building boom within the rapidly expanding colony. At the same time, while early English and Scottish settlers found New Zealand countryside a challenging environment, once broken in the land and temperate climate proved an ideal environment for the traditional British sheep and cattle breeds and farming practices with which they were familiar. From livestock imports and their natural increase stock numbers inevitably increased to the stage where limited local markets for fresh sheep meat and beef became a very real restriction on the New Zealand farming industry.

This situation changed forever in 1882. History was created both for the farming industry and New Zealand economy when the sailing ship Dunedin departed New Zealand’s South Island port of Oamaru for Great Britain, carrying what transpired to be the first successful export of frozen sheep meat and butter. New Zealand mutton and lamb was very well received on the Smithfield market, substantial profits were made by all involved and the direction of New Zealand as an export oriented farming nation firmly cemented. To this day New Zealand farmers continue to export and compete on British and European markets with agricultural commodities broadly similar to those produced by their British farmer counterparts. Over succeeding generations however, significant differences between the British and New Zealand farming industries and their respective economic environments have evolved.

Early Foundations in New Zealand for a modern, agriculture based economy

The legacy of Sir John (Jock) McKenzie

In Scotland an early migration catalyst was the massed clearances and evictions of tenant farmers from the Scottish Highlands by lairds and chieftains who preferred the economic benefits of sheep on their land to the traditional highland occupants; their own kinsfolk. A Scottish migrant to New Zealand; Jock McKenzie (Sir John McKenzie KCMG 1838 – 1901) the son of a poor Ross-Shire tenant farmer, witnessed first hand the Ross-Shire highland clearances and was forever deeply influenced by the experience. In future years this was to have significant consequences for New Zealand. Like many others he migrated to New Zealand searching for a better future however once in New Zealand, motivated by obvious anomalies and abuses of land distribution and tenure, he entered local and ultimately national politics to champion these issues. By the late 19th century McKenzie had progressed to become New Zealand Minister for Lands in which position he continued through successive governments. Jock McKenzie was responsible more than any other of his time, or time since, for determining the ultimate settlement pattern of New Zealand farm lands and as a direct result, the present day social and economic basis of rural New Zealand. His life work which was devoted to his principal “lands for the people” is perhaps best summed up in the closing couplets of a poem he quoted before the crucial division on the Lands for Settlement Bill 1894:

“Yet millions of hands want acres,
And millions of acres want hands.”

His legacy went far beyond equitable farmland distribution and includes creation of the Agriculture Ministry (as it is now known) to encourage scientific agricultural methods, agricultural education and of particular importance at the time, creation of schemes which made loan finance a realistic and affordable option, enabling farmers and settlers purchase and development of agricultural land in New Zealand. It is to him, more than any other individual that in 21st century New Zealand British migrants continue to find a wide range of farming opportunities in a diverse and thriving rural economy. More particularly, an economy based on the enterprise of individual farmers and economically viable and sustainable farming units, rather than a countryside of great land owners and small holder farmers. (Source: Bernard John Foster, M.A., Research Officer, Department of Internal Affairs, Wellington.)

The New Zealand formula: climate, geography, and economic environment

In the 20th century British and New Zealand farmers compete by selling similar agricultural primary products within the European market place. British farmers dependant on financial subsidies often have difficulty understanding why their New Zealand counterparts are able to transport their lamb, beef and dairy products more than 19,000 kilometres, but sell at competitive prices, successfully competing with British farm produce. Answers can be found in a number of fundamental differences between British and New Zealand farming systems, differences driven primarily by a combination of geographic, political and economic factors. New Zealand farming systems reflect production efficiencies made possible in the first instance by the relatively favourable temperate climate and geography common to much of the country. A further significant factor is the average size and scale of operation evident on most New Zealand farms compared to their average British counterpart. Never-the-less, recent history clearly demonstrates that these factors did not on their own result in current levels of efficiency through the New Zealand farming industry. The current economic model formula was not complete until the 1980′s deregulation of the New Zealand economy and the farming industry in particular.

An understanding of the competitive edge demonstrated by New Zealand farmers starts with a basic premise; that current levels of efficiency and productivity demonstrated by the New Zealand agriculture and horticulture industries are a direct impact of the deregulation of economy implemented in 1984. For the New Zealand farming sector deregulation meant withdrawal all existing farm subsidies and support schemes such as concessionary loans, compensation for production costs, and financial support for exports. Free market policies were highly controversial at the time, just as discussions concerning farm subsidies are in Britain and Europe at this time. There is no question that deregulation resulted in short term hardship, not only to New Zealand farmers, but also to other sectors of the economy long cushioned by a highly regulated internal economy and the comforts of tariff protection. Never-the-less, it has been estimated that only about 1% of pastoral farmers (the major beneficiaries of farm subsidies) were forced to leave the land. In most cases these were farmers with large, unsustainable borrowings. For the remaining New Zealand farmers, economic survival and ultimately, ability to achieve satisfactory levels of farm profitability, has been achieved through substantial, and widespread increases in farm efficiency and productivity. Of equal importance, removal of subsidies has encouraged significant levels of farm diversification to better reflect market requirements rather than as in the past; farming to low value, subsidy supported commodities.

Statistics indicate that while sheep numbers declined 35% through the period 1989-90 to 2004-05 – from 69 million to 39 million, actual lamb production increased 15%, up from 364,000 tonnes in 1989/90 to 427,000 tonnes in 2004/05. Over this period a large dairy beef industry has developed together with a major expansion of the New Zealand deer farming industry. It is estimated that while land used in New Zealand for livestock and arable farming declined from 14 million hectares in 1983-84 to 12 million hectares in 2002-03 (a period in which considerable areas were planted to forestry), overall productivity on the remaining land has increased 85% over the same period.

New Zealand farm productivity

Within any farming district of New Zealand, an analysis of the size of an average pastoral farm together with the livestock numbers they carry and their productivity, will demonstrate significant advantages compared to the published livestock statistics of average British sheep and beef farms. Of equal importance in calculating relative farm profitability is a comparison of the labour and management input into British and New Zealand farms, relative to the livestock they carry. Current literature suggests that in many areas of Great Britain a stocking rate of 1000 breeding ewes for each labour unit; shepherd or owner is considered normal. The same ratio might not have been considered unusual in New Zealand in the 1950′s or early 1960′s, however few aspects of the New Zealand pastoral industry have changed more radically. On an average New Zealand pastoral farm one skilled shepherd, or more commonly; one New Zealand farm owner, would normally be considered capable of managing 5000 to 6000 su. (Within New Zealand su is a common farmer’s measure of farm livestock which are calculated in stock units or su. One breeding ewe equates to 1 su. One breeding cow is the equivalent of 6 su, etc. As a basis of fair comparison, a farms su capacity is normally quoted as at mid winter). One individual managing a mixed sheep and cattle hill country farm carrying up to 10,000 su with assistance for seasonal work (e.g., annual shearing muster or lambing), is not considered unusual.

High ratios of livestock to management have not been achieved at the expense of livestock welfare; far from it. Over the past 30 years New Zealand farmers have invested in substantially improved genetic characteristics in their breeding flocks and herds. On many properties substantial advances have been achieved changing from traditional Romney sheep to new and improved breeds such as Perindale and Coopworth, which amongst other desirable characteristics have an inherited ability to deliver their lambs without assistance or intensive shepherding. More commonly however and especially in the New Zealand North Island, farmers have made considerable advances through the substantially improved Romney genetics now freely available.

With the exception of the South Island high country and foot hills where the hardy Merino or Merino crossbred are the dominant sheep breed, the duel purpose (meat and wool) Romney remains the most popular sheep breed in New Zealand. Until relatively recent times hill country farmers relied on intensive low country Romney studs for the supply of flock rams. These stud farms almost inevitably sold flock rams bred from stud rams selected in large part on the aesthetic characteristics required to compete and win trophies in livestock shows, rather than qualities more useful to a hill country farmer. Factors now appreciated as critically affected by genetics, such as fertility, weight gain and of major importance; the ability of a ewe to deliver a lamb without intervention (in part related to pelvis width), were compromised in the search for what stud breeders referred to “conformation”, in their quest for show trophies and ribbons. In the 21st century progressive New Zealand farmers purchase rams and bulls from hill country stud farms which select livestock progeny based on production recording schemes. Stud stock is reared on terrain similar to the farms for which the progeny are intended. Growth rates, fertility levels and other desirable characteristics are recorded and used as the basis for selection, rather than potential for show ring cups and ribbons.

New Zealand farm dogs, bikes and horses

In the early 1970′s some commentators were suggesting that in adopting modern farming methods, future generations of New Zealand farmers would inevitably abandon both the stock horse and sheep dog. In 2008 the farm stock horse which up to the 1960′s almost without exception had been an essential every day part of the operation of New Zealand hill country farms, has very largely been replaced by Japanese ATV’s or quad motor bikes. Conversely, good, well trained sheep dogs far from becoming obsolete, have had a significant role in achieving increased stock to management ratios and are more valuable than ever, a fact reflected by high sale prices achieved for well trained dogs. Nevertheless, once familiar with the larger scale of operation, a capable, traditional British sheep farmer would probably find little difficulty adapting to life on a traditional New Zealand sheep farm or station. Neither would his “strong eye” Collie sheep dogs, although on a larger New Zealand property a British farmer would probably add New Zealand Huntaway breed type dogs to his team. The New Zealand Huntaway is bred and trained to muster flocks from and over substantial distances using “noise” (barking) to good effect.

New Zealand and British farming systems: The climatic factor

The effect of climate on pasture growth patterns in the New Zealand livestock farming industry has a major part in explaining productivity and efficiencies relative to British and European systems. New Zealand has a broadly similar temperate, maritime driven climate to that of the British Isles, with the same range of seasons and a broadly similar rainfall range. Differences as they affect farming practices in each country lie in the relative extremes and length of seasons in each country, but most importantly; the winters. In New Zealand the climate has a dominant westerly pattern. While being the closest country to the Antarctic Continent – from which direction farmers expect cold southerly winter and spring storms, the main weather pattern originates from the moderately warm Central Pacific Ocean. Similarly, the British climate is also maritime based, but with a south-westerly pattern originating from the colder South Atlantic. British climate is also influenced by the nearby European continent. Colder, longer, winters result and critically for farmers, a significantly shorter pasture growing season resulting in the expensive necessity of housing cattle through winter in intensive feedlots. Sheep, especially in upland and moor-land environments, are commonly dependant on purchased or farm produced feed supplements.

Within New Zealand there is a broad climatic range between the sub tropical north of the North Island where grass growth may only slow in winter, through to the substantially colder south of the South Island where grass grows only between spring and autumn. Consequently there are marked differences between and to some extent within different New Zealand farming Districts in respect to pasture growth patterns. The need for farmers to provide supplementary hay, silage or winter forage crops is determined both by local microclimatic as well as individual farm stocking levels. Nevertheless, all classes of livestock in all Districts not only exist, but in winter under good management have potential to thrive and develop without housing or artificial shelter, a major point of difference many visiting British and European farmers find difficult to comprehend.

Financial and personal considerations for British investors in New Zealand farms

A common factor New Zealand farmers share with their British counterparts and farmer’s world wide, is the reality that financial returns are affected by many factors outside of any farmer’s control. Potential farm investors from outside of the farming industry – and as such unfamiliar with the vagrancies of farming as a livelihood, are commonly deterred by relatively low financial returns often demonstrated by New Zealand farms compared to sound commercial property investment or even a secure bank term deposit. In assessing a farm investment, of primary importance is the reality – well understood by generations of New Zealand farmers; that for reasons outside the control of any farmer, farm profitability is inevitably cyclical in nature and financial hardship is occasionally part of that cycle.

Ongoing causes of periodical low or negative farm profitability are low export commodity prices, the effect on farm gate prices of the free floating and frequently over valued New Zealand dollar and from time to time the effects of natural disaster such as drought. To illustrate; pastoral farmers experienced extremely difficult conditions for an extended period between 1983 through to about 1998 with low commodity prices, further aggravated on New Zealand’s east coast (Hawke’s Bay and Wairarapa) by two extended periods of severe drought. Conversely, from 1998 increased levels of farm productivity coincided with significant increases in commodity prices and a favourable New Zealand dollar exchange rate (trading as low as 39 cents to the US dollar in 2002). This combination triggered an extended period of prosperity in the farming sector lasting to about 2005. From around this time however, high internal interest rates relative to other countries resulted in New Zealand becoming a favoured destination for overseas bond investors and currency speculators. As a consequence the NZ dollar rose rapidly in value, peaking at 81 cents to the US dollar in 2007, substantially lowering farm gate lamb, wool and beef prices. Lamb prices to farmers fell to levels little or no more than the cost of production in most areas. Prospects for the 2008 -2008 season (and hopefully beyond) look very much better. Decreased world lamb production coupled with increased demand in Europe look set to combine with decreased New Zealand production (strongly linked to the increasing trend for dairy conversion of sheep farms in the more fertile higher rainfall or irrigated areas) and a weakening New Zealand dollar to result in much better farm gate prices. The prospects for wool look significantly brighter following amongst other things, New Zealand becoming the first nation to sign a free trade agreement with China. New Zealand’s naturally reared, disease free beef continues to attract more markets and better prices.

The large majority of New Zealand farms are family units which very often pass from generation to generation. New Zealand farmers have learnt to be resilient in character, accepting good times with lean. For most New Zealand farmers the incentive to remain on the land includes, but goes well beyond the need for a commercially viable return on capital. Lifestyle and work satisfaction factors while difficult to define, especially by a pragmatic New Zealand farmer, are nearly always of importance. The “lifestyle” factor has a major bearing on the sustainability of farm and farmland prices and overall stability within the New Zealand farming industry.

New Zealand farmers: Sustainable agricultural exporters to Britain and the world

A common motivating factor equally as important as short term profitability to many modern British migrant farmers considering the viability of New Zealand as a destination, are prospects of investment and a life within a genuinely sustainable industry, compared to European counterparts. The long term sustainability of British and European agricultural commodity production systems which remain dependant to any significant degree on financial subsidies and inefficient, air polluting energy sources, is more doubtful.

The international debate on global warming, its causes and remedies, is only about one decade old but now gaining the momentum it deserves. Not before time, as long term implications of unchecked global warming have extraordinary implications for all nations, as was suggested in a widely circulated report by British government chief economist Sir Nicholas Sterne, who concluded that a failure to act now on climate change and cut green house emissions would result in global economic and environmental catastrophe. The British Government, influenced perhaps as much by political factors as much as real science, have considered a range of “green taxes” including a proposal for a global warming “food miles” tax on food and produce which has travelled thousands of kilometres across the world. Inevitably perhaps, European competitors of New Zealand primary export produce have been quick to exploit the food miles argument as a tool or leaver for further protection against New Zealand primary produce imports. In a cynical attempt to exploit “green” sentiment and gain commercial mileage, to promote its own Country Life brand butter British dairy group Dairy Crest UK commissioned advertisements showing Anchor butter traveling 11,000 miles on a rusty old ship from New Zealand.

Fortunately for New Zealand farmers the nonsense typified by the Dairy Crest UK advertisement is not necessarily typical of sentiment in the United Kingdom. British Trade Minister Ian McCartney commented “It would be better for Britain to receive more goods from countries like New Zealand”. Global warming and the “food miles debate” in particular has triggered scientific studies of primary food production, distribution and their associated carbon emissions between New Zealand farmer and European consumer. A 2006 Lincoln University study demonstrated that “food miles” have considerably less affect on global carbon emissions than do the actual farming systems within which they are produced. Much more relevant to the carbon emissions debate was shown to be the overall “carbon foot print” created by a combination of the effects of production together with delivery to retail point by any one food commodity.

The Lincoln University study demonstrated New Zealand primary produce; milk solids, lamb, apples and onions (as examples) to be twice as efficient measured in energy input and carbon dioxide emissions as their European competitors. New Zealand lamb was demonstrated to be four times more efficient. In 2007 a further study compared the carbon emissions of the New Zealand dairy industry with that of the United Kingdom and found United Kingdom farms to produce 35% more emissions per kilogram of milk fats than New Zealand dairy farms. Of equal significance is the fact that produce shipment by sea, even over long distances between New Zealand and Britain or Europe, is relatively efficient measured in carbon emissions compared to long haul road produce transport within Europe and the United Kingdom.

The sad truth is of course, that if the “food miles” theory were to be successfully promoted ahead of genuine science, the real looser would be the environment. Using “food miles” as an argument to protect (for example) the European dairy industry is as logical as an argument would be to protect local pineapple and banana production in heated tunnel houses supplied by inefficient European coal fired power stations. Without reasonable doubt global warming is a problem that will only ever be resolved through global solutions and international cooperation. A rational, sustainable approach to the problem would include encouragement for international carbon efficient food producers and transport systems in preference to quotas and tariff barriers to protect inefficient production systems and purely national interests.

Potential for Joint New Zealand and British farmer produce marketing

In the long term it could be logically argued that real long term interests of British and New Zealand farmers would be better served through cooperation in areas of common interest than through trade barriers and tariffs. The obvious interest common to both is that the British and European market for quality beef and lamb be further developed and grown, and that farmers receive their fair share of retail prices. Sadly, at present there is little effective marketing cooperation even within these nations, let alone between them. New Zealand farmers are adversely affected by an inefficient, competitive export system dominated by two major farmer cooperatives. British farmers have a very fragmented marketing system dominated by five major retail supermarket chains. A joint New Zealand and British farmer trade organization combining marketing expertise and funding to promote quality beef and lamb consumption within Britain and Europe might well have exciting prospects (if it were not to become bogged down and suffocated with the bureaucracy that often afflicts trade boards and organizations). New Zealand farmers do not begrudge British farmers a deserved price premium for high quality fresh regional produce at a price premium over New Zealand imported frozen or chilled product. Prime Scottish Aberdeen Angus beef and Welsh Salt Marsh or Carmarthenshire lamb (for example) is certain to achieve the highest prices for British farmers when overall British consumer demand for quality beef and lamb is at its highest. What is most needed in the interest of both parties is intelligent joint promotion aimed at increasing consumer demand in a market with excellent potential for both.

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