Milk or grass?

A recent article in the NZ Listener about Fonterra, the giant dairy cooperative, had a bearing on how New Zealand positions itself in the world, what sort of country New Zealand perceives itself to be, and some general challenging ideas about business and business practice. You can hardly open a newspaper or listen to the daily news broadcasts without coming across tales of woe about the catastrophic collapse of dairy prices and its impact on farmers and the country's economy.  Briefly, as I understand it, the article maintains that the New Zealand dairy industry is in its current precarious position because it failed to understand the business it was in. It thought that it was in the business of selling milk, milk powder and milk products, but in fact, originally it was in the business of selling grass converted to milk by cows that grazed in open paddocks. New Zealand was one of the world's most efficient dairy producer, simply because the grass grew, it needed little additional investment to turn cows into efficient milk producers. This was very profitable. Then the industry got greedy, stocked more cows than the land could carry, had to buy additional feed, and lots of additional fertilizers. The profit margin, the return on capital plummeted. In hindsight one may ask how seasoned, experienced farmers and business leaders could make such elementary mistakes. But while the going was good it was very good, milk prices were at record levels, the assumption was the more the better, and no one except a few pessimists imagined that the good times would not last for ever. With all the talk of knowledge economy, rock star economy, the dire strait of the dairy industry brought home the fact that despite all the changes in the last fifty years, New Zealand's is still essentially a colonial economy greatly dependent on the exploitation of its natural resources, in this instant, its benign climate. Intensive dairy farming ruined New Zealand's rivers, waterways, with nitrate leaching into the soil and ultimately into the ground water due to excessive farming practices. There is a lot to be said for lack of natural resources. Israel lacks these, so Israeli society was forced to exploit the ultimate resource, human inventiveness. New Zealand could learn a lot from that.