REPORTER: Dani Isdale
The day has barely begun but time is money, and in New Zealand, money is milk. It's 5am on a Saturday morning and the humble hand-milkers of the old days have been replaced by faster, more efficient machinery. Now it's all about volume - milking as many cows as many times a day as possible. These udders of white gold feed people all over the globe, particularly in China. And they help keep the entire New Zealand Kiwi economy afloat.
TREVOR HAMILTON, DAIRY FARMER: How's it going, alright.
Trevor Hamilton is a bit of a legend around here. He's a self-made milk mogul. He built a 140-million dollar dairy farm empire from the ground up.
TREVOR HAMILTON: I love what I do now. Yeah, business is the best game in town. You've just got to know how to play it. I love the thrill of the chase. Hi Andy, how is it going this morning?
This morning, talk in the shed revolves around the latest drop in the price of milk.
TREVOR HAMILTON: Last year was a record year, so that’s pretty good. This year it is about holding our bloody costs in every which way we can. I’m going to have a managers meeting.
Global dairy prices have dropped more than 40% since February. It's been a bumpy ride for farmers.
TREVOR HAMILTON: Cows like this were about $2,200 each.
REPORTER: $2,200 each?
TREVOR HAMILTON: Yes. With the milk price coming down, these cows will reduce in value, maybe down to $1,500 or something like that.
REPORTER: Wow.
TREVOR HAMILTON: Of course, the demand of the last two years has been insatiable out of China. But it looks like it's backing off at the moment as the Americans and the Europeans push production into China and a high milk price. That's going to put a lot of people under a lot of pressure on that basis if they haven't built a business that is sustainable around those levels.
The dairy cooperative that buys 90% of New Zealand's milk to process and sell to the rest of the world is Fonterra. It says next year it will be paying farmers less for their milk. Maury Leyland is Fonterra's Director of Strategy.
MAURY LEYLAND, FONTERRA: Cause there’s more markets are more interested in milk there is more trading dairy so therefore you see ripples across the markets with different political, economic climatic shocks either effecting supply or demand so we’ve seen an increase in volatility and we really expect that to be the norm going forward.
New Zealand does dominate the global dairy market. It produces 19 million tonnes of milk a year, and 95% of that is exported. Most of it goes to China. In 2008, the Kiwis signed a free trade agreement with the Chinese and around the same time, a deadly baby formula scandal in China destroyed its domestic market. So they turned to their Kiwi friends. And now, the world's superpower buys a whopping half of all its dairy products from NZ. To meet its long-term growth goals, Fonterra is looking further afield.
MAURY LEYLAND: China is not our only important market. Latin America, South-East Asia, Middle East, Africa, these are really all important markets to us and continue to be. Yes, it is a big China story, but it's not our only story.
For Alastair Neville, every cent and every drop counts.
ALASTAIR NEVILLE: I grew up on this dairy farm here and I basically just followed in my father's footsteps.
At 26, he's taken over his family farm and the heavy responsibility of keeping it profitable. Some days are easier than others.
ALASTAIR NEVILLE: It is scary but as I said, you've just got to keep positive and just keep pushing it, get those cows cranking and make up for any losses, really, and just budget carefully.
The mornings are early, the days long, and dirty. But he knew what he was getting into.
ALASTAIR NEVILLE: It's a good industry to make good money in. But at the same time, it's more than just a job. It's a passion and it's an interest. And most people farm because they love it. It's all about farming smarter and not harder.
And hoping his biggest customer stays hungry.
ALASTAIR NEVILLE: China is always going to need food. So, we're just sort of hope that we can keep feeding them.
Dave Baker doesn't depend on China. Most of his milk is sold to Japan and that's not the only thing that makes him different from most Kiwi dairy farmers.
DAVE BAKER: All thanks to the hard-working cows. The cows do all the work for me while I party on.
Dave offered me a lift through cow country. He drives fast and he works hard, running a high-density feed farm.
DAVE BAKER: Come on.
The property is worth $4.2 million. And he reckons it's the best dairy farming land in the country. The profits he's made in the dairy boom have bought him plenty of big boys' toys.
DAVE BAKER: The engine is worth about five grand. This is my leisure bus for when we're partying.
After all, what dairy farm is complete without a party bus? Dave told me that if the market for milk sours, he'll be fine. He inherited the farm, and the land is valuable. It's invaluable, according to environmental activist and economist Gareth Morgan.
GARETH MORGAN: When you do the surveys of what people value in the environment in New Zealand, fresh water is actually number 1 by a mile, far more than pest eradication, far more, actually, than climate change.
Kiwis are rightly proud of their 100% pure reputation. But Gareth fears the famous brand is now at risk because of the dairy farming boom.
GARETH MORGAN: Putting more and more cows per hectare, more and more fertiliser and there's your nitrogen problem. So we're bursting at the seams here in terms of capacity.
Because more farms mean more cows, more cows means more waste. That contains nitrogen and phosphorous. When they leach into rivers and lakes, water quality suffers. That's a worry for New Zealand's Parliamentary Commissioner for the Environment, who is already warning of increasedstressers to water quality. There’s talk of regularly sanctions if farmers don’t work harder to protect the environment.
REPORTER: Is it a question of the environment or the economy?
GARETH MORGAN: It's certainly being posted like that by a lot of people. If we continue our current dairy practice and if we don't adapt, it will be a bit environment versus economy, yes. The problem is so big, particularly with the leaching from the intensification, and so I think what's required is a change in farming methods to less intensive farming. And that's hard to do.
Unless you can afford more environmentally sound methods, which Trevor Hamilton can.
TREVOR HAMILTON: We've probably spent $250,000 in the last couple of years just in this couple of farms that are in the catchment in terms of lined effluent ponds, testing effluent, testing the depth of effluent.
While he may work on a farm, Trevor lives on a lake - a clean one. And proof, he says, farmers aren't all bad.
TREVOR HAMILTON: We tend to get the blame for a lot that I don't think these rightly sometimes justified.
REPORTER: Is it unusual for this lake to be so clean given that it's surrounded by so many dairy farms?
TREVOR HAMILTON: I think it is blows the theory completely that dairy farmers are the polluters.
He told me it's in his best interests to look after the environment, and his business. The future of his family depends on it.
TREVOR HAMILTON: You show me how it goes. How are you? Now, that's how you breed farmers.
Trevor has big plans for his kids and for his grandkids too.
TREVOR HAMILTON: Having a drink of milk, mate. It's got to be good for you! It's got to be good for you that milk!
Global demand will rise and fall, but Trevor's not going anywhere. He believes for the smart dairy farmer, the grass will always be greener in New Zealand.
TREVOR HAMILTON: For me, it's 140 million, 50 million dollar business today. I want to double it in the next five years and then probably double it again. It's been our rate of growth. So I want to continue with that so long as I'm capable. We're chasing a rainbow and the rainbow has no end.
Reporter/2nd Camera
DANI ISDALE
Producer/Camera
MEGGIE PALMER
Researcher
MELANIE MORRISON
Editor
NICK O’BRIEN
DAVID POTTS
Graphics
DAN HOLOHAN
Courtesy of Fonterra (milk plant production vision)