In 1984 the newly elected Labour government began the deregulation of what had been a highly regulated economy.
Supplementary minimum prices were among the first things to go. Fertiliser and noxious weed control subsidies were also removed. Government departments that dealt with farmers were restructured, and farmers were now expected to pay for any advisory services they used.
Following the removal of subsidies, the 1985–86 returns for lambs, including wool and pelts, fell by about $12 a head – a decline of 50%. Between 1982 and 1988, the value of grazing farms fell by 32%. With falling land prices, some farmers lost all their equity and, unable to meet the rising interest rates, were forced to sell up.
Sheep numbers fell by over 43% from the heights of 1982, to around 40 million in 2002. By 1993 the effective rate of assistance to agriculture had fallen to 3% compared to 52%. The government viewed pastoral farming as an industry in decline.
However, farmers showed resilience. Sheep and beef farmers adapted to the deregulated market, and dairying has grown significantly.
Export earnings from meat increased from $2,228 million in 1985 to $4,111 million in 2003 – making up 14% of the country’s exports. Although cattle numbers have been in decline since peaking in 1975, beef producers have refined their breeding and finishing systems. In 2008 beef made up around 10% of New Zealand’s agricultural exports.
Wool struggled in competition with cotton and synthetic fabrics. Sheep numbers and wool prices declined, and export returns fell by 36% between 1985 and 2003.
In face of the downturn in sheep farming after 1984, farmers experimented with farming other animals to try and increase profitability.
Deer farming developed in the 1970s, using deer that had been captured from the wild. The numbers of farmed deer increased steadily from the early 1980s to the early 2000s. Venison is exported to Europe and North America, and deer velvet to Korea, Japan and China. However, prices for these products have been low in recent years and farmers have reduced deer numbers.
Some farmers have also experimented with farming goats for fibre and meat, alpacas and llamas for fibre, and ostriches for meat. Most of these enterprises are on a very small scale.
The 1980s wasn’t the first time farmers had tried diversification in New Zealand. Angora and cashmere goats were imported in the 1860s. By the mid-1870s they had yielded little economic benefit, and many had escaped and become a nuisance. Similarly, alpacas were imported in the 1860s, but were found to be more trouble than they were worth. John Matson imported ostriches from South Australia in the early 1880s and farmed them for their feathers, but by about 1908 the business folded.
Dairying was by far the most successful and profitable farming enterprise in New Zealand since the mid 1980s. Between 1985 and 2007 the number of dairy cows in milk rose from 2.2 million to 4 million. Dairy products made up about 20% of New Zealand’s total exports by value.
The range of products expanded from the traditional cheese and butter, and milk powder and casein became increasingly important.
Much of the increase in production took place in the South Island, where dairying replaced the old mixed-farming system of cropping and sheep fattening. The relatively low price of land and plentiful water for irrigation attracted dairy farmers from the established dairying regions of the North Island. However, the rapid expansion of dairying put pressure on groundwater reserves, with low-country streams drying up in summer. There was also concern about the downstream pollution from dairy farms and the effects of high fertiliser usage and run-off, none of which were experienced under the less intensive sheep-cropping system.