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§ I. Co-operation for production and sale.

Butter and cheese factories.—The growth of the frozen meat business was accompanied by an equally rapid expansion in the dairy industry, an expansion that led to greatly increased prosperity throughout the dominion generally, and especially amongst the small farmers. It is only about 33 years since co-operative dairies under the factory system were started in New Zealand. But the dairy companies were more successful than the meat companies in preventing capitalists from getting a controlling interest and in securing to the settlers a full return for their produce.

At that time the outlook for the small farmers was very disheartening. The output exceeded the local demand. The nearest outside market, Australia, was 1200 miles away. The main market in England was 16,000 miles distant. Stock was selling at ruinous prices, and butter at 3d to 4d per lb. So the dairymen, like the pastoralists, were compelled to cooperate to improve the quality of their produce and to reduce the cost of manufacture; and after the introduction of refrigeration in 1882 they began to combine in order to secure the most skilful managers and the very best and most up-to-date machinery and plant. The establishment of butter factories brought a market to the farmers who, for want of roads, could not get bulky produce to the market.

The first butter factories in New Zealand were established by private enterprise, but some of the early shipments were exported in tins, which led to financial failure and heavy loss. Few had faith in the possibilities of the industry. It was asserted that New Zealand butter could never command good prices in Great Britain on account of the distance and the time occupied in transit. But when the contents of two boxes, carried in the freezing chamber of a passenger steamer, were landed in England as perfect as when first made, the question of transit was settled; the industry began to expand and in a few years many of the proprietary companies were taken over by the farmers.

In 1882, the government offered a bonus of £500 to the first factory that turned out fifty tons of cheese. The following figures show the great expansion of the business since that date. The total value of the butter and cheese exported from New Zealand from 1872 to 1881 (both inclusive) was only £122,157.

During the year that ended 31 March 1915, 417,138 cwt. of butter valued at £2.305,246, and 793,777 cwt. of cheese valued at £2,389,123 were shipped from the dominion besides what was consumed locally. There are now 492 butter and cheese factories at work. These turned out last season 11,425 tons of butter and 59,699 tons of cheese. Of these factories not less than 357 are owned by the suppliers, and the number worked on co-operative lines is steadily increasing. Of late years the failure of a co-operative factory has been practically unknown. Most of them divide the profits amongst the suppliers who are also responsible if any losses are page 11 made. The amount paid for the milk from month to month is somewhat below its true value, but (after paying a small interest on capital) the surplus is divided amongst the suppliers at the end of the season. The government secured experienced men to advise the settlers how to start the factories; and where there are a sufficient number of settlers in the district, who own a sufficient number of cows and are willing to take shares in the concern, success is assured. A government officer usually attends a meeting of the settlers for the purpose of explaining how the business may be organized, and how the members of the company (by guaranteeing an overdraft at the bank) can raise the capital required to erect the building and instal the necessary plant. He also furnishes them with a plan of the building and particulars of the best machinery, and assists them to select the most suitable site.

Directors of the company are usually selected from amongst the most progressive men in the district, and they employ a secretary to attend to the books and a manager to manufacture the butter and cheese.

The government also appointed a number of dairy instructors who, by visiting the factories and farms, by practical demonstrations, and by expert advice have done much to extend co-operative dairies, and to improve the quality and unformity of the butter and cheese, the means of transit, and the disposal and distribution in the English markets.

Legislation was passed regulating the manufacture, grading and branding of the butter and cheese, and the purity of the milk.

The system of free grading initiated by the department not only improved the quality but also facilitated the sale, as the government graders' certificates are accepted in the London markets, and the contracts usually contain the stipulation that the produce shall receive a certain number of points or be first grade. If there is any serious defect the factory is advised, so that it may be rectified at once. This system has proved so effective that last year, of 836,324 boxes of butter and 543,605 crates of cheese that were examined, more than 96 per cent. were placed in the first grade.

In some districts the principle of co-operation has extended to the establishment of refrigerating works by the dairy companies, each dairy company taking up so many shares in the venture. In this way the cost of freezing butter and of storing and chilling cheese has been reduced to a minimum.

A further instance of united action on the part of dairy farmers is afforded by the Egmont Box-making Company at Eltham. The member-ship in this concern (which operates a saw-mill and tramway lines, and owns large tracts of timber country), is confined to the dairy companies, who are supplied with all butter boxes and cheese crates required for their produce at a more reasonable price than would otherwise be the case. About 130 timber workers are employed and something like 2,000,000 feet of timber are felled and then milled and converted into butter boxes and cheese crates each year. The board of management is selected by the dairy companies interested in the concern.

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The government has also fostered the formation of co-operative herd testing associations. This was commenced in New Zealand on the co-operative principle in 1909, by one association that tested 815 cows. In the following year three additional associations were started. Two years later the number of herd testing societies had risen to twenty, and they dealt with about 25,000 cows.

In 1913 the number of cows tested increased to 30,000. Besides these semi-official associations many of the dairy companies are making herd testing a branch of the ordinary factory work, so that all their suppliers may benefit by the weeding out of unprofitable cows from their herds.

The Department of Agriculture also co-operated with the farmers' held book societies, to start a register of merit containing the names and pedigrees of the best pure bred dairy cows. Records of the quantity of milk and the percentages of butter fat are kept by the owner, and checked by departmental officers who also take samples and determine the quantity of butter fat. These records are finally compiled by the department, the cows giving up to a certain quantity are granted a certificate by the government, and the results are published in the respective herd books. Photographs and particulars of exceptionally good cows, holding the record for the highest yield, are published periodically in the Journal of Agriculture, and distributed widely throughout the dominion to stimulate others to improve their herds. The Holstein, Ayrshire and Jersey breeders have taken this up heartily, and the aim of the government—to increase the supply of bulls bred from dams with a high milk record—is gradually being accomplished.

As a typical example of the rise and progress of a fanners' company, and the manner in which the farmers' produce has been enhanced in price by co-operative production, we might instance the New. Zealand Dairy Association, the largest in the dominion. The headquarters of this company are in the Auckland district. It was started in 1883 as a private company, to buy farmers' dairy produce. Butter at that time often sold for less than 4d per lb. but owing to its variable quality, even with such low prices the company was not very successful at first.

In 1887 it erected a factory at Pukekohe : the price for milk was then only 2½d per gallon, but it was found difficult to obtain a satisfactory price for butter. In 1895 the association took over the business of another pioneer of the industry, Mr. Reynolds. At that time the association was paying the farmers about yd. per pound for butter fat. A few years later the business was purchased by the suppliers, and formed into a co-operative company.

The quantity of butter made that year (1901) was 2,409.573 lbs. and the annual turnover of the company was £105,107. Last year this company manufactured 10,737,775 lbs. of butter, and 65 tons of casein, and the turnover was £651,920. Practically all the shares (with the exception of a few belonging to the employees) are held by the suppliers, who number about 2500; no supplier is compelled to take shares but the annual bonus is divided amongst the shareholders only. The company has now eight but- page 13 ter and cheese factories, about 80 skimming stations, and a casein factory. It owns property valued at over £100,000. The price paid last year for butter fat to shareholder suppliers at the larger creameries (including a dividend of 6 per cent on the paid up capital), was about fourteen pence per lb. or about double that paid in 1895; the suppliers to the smaller creameries receiving a trifle less, according to their quantity bonus. It is stated that there are only two dairy association of this kind in the world, that have a larger output, viz. the Beatrice Company at Lincoln (Nebraska, U. S. A.) and the Byron Bay Company in New South Wales. This company has for some years regularly tested the cows of its suppliers. In 1913 it tested about 3,800 cows. The average return per cow was 208.85 lbs. of butter fat. In the following year the average yield per cow was 283.6 lbs., an increase of 74.75 lbs. The best herd tested averaged 384.34 lbs. per cow and the worst herd 207.34 lbs. for the ten months. The worst cow tested that year gave a ten months' yield of 109.10 lbs; while the best, cow yielded 502.54 lbs. or a monetary return of more than £20 over that of the poorest one.

The company also purchased for its suppliers last year £19,800 worth of dairy requisites, such as milk cans, separators and cement, molasses, manures, and veterinary drugs. These are sold to the farmers at slightly over cost price thus saving the producers a considerable sum during the year.

This company also (like others) assists its suppliers by advancing money to buy cows and milking plant, and manures to improve their farms, a portion of the monthly cheque for their milk being held back to repay the debt. This enables small landowners to tide over bad harvests and times of financial strain, and so to start farming without much capital.

Home separation.—When dairy factories were first started the farmers generally carted all their milk directly to the skimming stations, which separated the cream, sent it on to the central factories, and returned the skimmed milk to the settlers to feed their pigs and calves. There has, however, recently been a decided movement in the direction of home separation in some districts. At first there was considerable opposition to home separation as it was feared that it would reduce the quality of the butter. But in districts with bad roads and scattered farms, the system gradually spread, as settlers with small herds could sell their cream on the farms, although they could not send it long distances to the factory; so that with the increased supply and the more economical method of collecting, the cost of manufacture was very materially reduced, while the settler retained his own pure sweet skimmilk to feed his calves and pigs, thus diminishing any risk of spreading disease amongst his stock. There was some trouble about the quality of the skimmed milk at first, but instructors were appointed to visit the milking sheds in order to point out the best methods of cooling and handling it and to remedy defects when an inferior article was being produced.

Finally over 30 factories in the north of Auckland province agreed to grade all the cream, and pay the suppliers on a purity basis. This page 14 greatly raised the standard of the butter especially when the cream was delivered daily. In the Auckland province alone 5000 tons of butter were produced by this method last year, though butter made at factories from fresh milk still scores somewhat higher than that made from home separated cream. The dairy commissioner, Mr. D. Cuddie, is recommending companies handling this cream to insist upon a daily delivery, wherever practicable.

By-products, Casern, Sugar of Milk &c.—With the great expansion of business every effort was made by the dairy companies to utilise the by-products to the best possible advantage. Many of the larger cheese factories are now making " whey butter " and the experiment has proved so profitable that other companies are installing the necessary machinery to do so next season.

A company, formed at Edendale, has put in a plant to manufacture sugar-of-milk. In some districts large quantities of dried milk are made. In 1912 the Department of Agriculture sent an officer (Mr. Pederson) to Europe to secure all the information available with regard to the manufacture oft casein, and two years later the department reported that 22 factories were engaged in the preparation of caseincurd, and that 5,960 cwt. valued at £2,400 had been exported in the previous season, which enabled the companies to pay an additional 1¼ d Per lb. for the butter fat. Two central dairy stations were erected, one at Frankton, capable of dealing with 1000 tons annually. But owing to the war affecting the markets and to the high price of cheese the quantity shipped in the following season was only 87 tons.

The following table shows the number of proprietary and co-operative factories at work in New Zealand each year from 1906 to 1915, their respective outputs of cream, and the percentage of the latter which was of proprietary make.

Year	Butter					Cheese
No. of Prop.	Output Tons	No. of Co-op.	Output Tons	Per	cent. Prop. make	No. of Prop.	Output Tons	No. of Co-op.	Output Tons	Per cent. Prop. make
1906	103	9,061	108	13,436	40	22	657	60	6,911	8.6
1907	93	7,861	119	15,933	33	40	1,229	69	8,975	12
1908	67	5,588	114	15,361	26	51	3,178	88	12,326	20
1909	68	5,499	116	14,954	26	51	2,170	90	15,702	12
1910	71	4,999	118	19,954	20	66	3,315	113	21,032	13
1911	57	5,585	120	20,891	21	74	3,028	144	20,787	12
1912	53	5,443	119	20,810	20	65	3,061	159	23,372	11
1913	46	4,413	128	24,020	15	89	5,313	162	28,992	15
I9I4	46	5,910	135	25,477	18	87	5,576	206	32,310	14
I9I5	47	5,507	120	25,138	17	93	5,918	237	34.56l

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National Dairy Association of New Zealand.—Besides what has been done in the ways mentioned by individual companies to help their suppliers, they have gone a step further, and united to form a National Dairy Association.

This association organizes conferences to discuss matters affecting the producers' business. It imports factory supplies and other requisites required by the industry. It deals with all matters connected with the shipment of butter and cheese to England and Canada, reports on outside markets, secures specially low freights under lengthy contracts, arranges bills of lading, and generally supervises the export business in the interests of the members.

The National Dairy Association has been working on these lines for about 21 years, and it now has affiliated to itself 138 co-operative, and 33 proprietary associations, besides a number of exporting companies.