Sour taste for family driven out of dairying

Allan Crafar and his family are selling up. Photo / Tracey Robinson

In rural Reporoa, a winding 45-minute drive up unsignposted roads from Rotorua, the Crafars gather for lunch in their single-storey farmhouse. The fare is simple, but ample: Pickled onions, bread and jam and, of course - given this is a family where dairy flows in the veins - unpasteurised milk fresh from the cow.

At the table sit family patriarch Allan, clad in shorts despite the winter chill, and his brother Frank, who's wearing dark glasses to cover a genetic defect that has left him 90 per cent blind. Allan's wife Beth has put the spread together, and her youngest daughter Lyn has just returned after spending the morning tending to calves.

Everyone is heavily into dairying to the exclusion of all else, says Allan. "We don't drink, we don't smoke, and we haven't had time to play sport. We gave that up when we become serious. It's not a hobby. It's our life and our religion and our work."

Then he cracks a smile: "I've ended up in the greatest job in New Zealand - I've 20,000 girlfriends, I get to play with tits all my life, and my wife doesn't get jealous."

Despite the estimated $35 million-worth in land titles shared between the people sitting around the table, this is a modest home. The sole luxury on display is a Sky television decoder, and even that was only bought recently.

Allan has a hacking cough. "The doctors says it's lung congestion brought on by stress - but I don't believe it," he says.

The Crafars, or rather their farming company CraFarms, principally run by Allan, Beth and Frank, have been at the forefront of the debate about "dirty dairying" - an unwarranted title, say the Crafars.

Green co-leader Russel Norman said last year in Parliament that the repeated prosecutions for effluent discharges by CraFarms had led to them becoming colloquially known as "CrapFarm". Last month CraFarms appeared before the courts a fourth time, and was convicted a fourth time.

But while the Crafars' brushes with environmental regulation are well-known, it is a deeper malaise that has led to the ruin of this proud farming family.

The recession, added to pressures to improve environmental practices, has left them with nothing but bad headlines to show after 40 years of cud, shit and tears.

The Crafars, after breakneck expansion in the 1990s funded by large-scale borrowing, are - until the hammer falls on forced sales in the very near future - the largest privately owned dairy farming outfit in the country.

Early last year the family should probably have featured on the National Business Review Rich List. Fonterra had just paid a record $7.90 per kilo of milk solids, far eclipsing the previous record of $5.33 set the previous year. With good times ahead - a payout of $7 plus was forecast for the next seven years - one source put the value of this modest, family-run, empire at $400m.

But last year, disaster hit - and not just in court. The Fonterra payout dropped two dollars, just like that.

"And, boy, it has a big effect on us. You work that out. The sensitivity in our job is massive," says Allan.

Fonterra's decline in payout, down to $4.55 this year and with more bad news to come, has slashed the value of CraFarms. They had expanded rapidly by using existing farms as leverage for financing. For a while the strategy paid off spectacularly.

"We had a double or quits idea, and we'd bloody near done it," says Allan.

Whereas once the Crafars were Rich Listers in waiting, the family business - 22 farms - is now being put up for sale.

"You'll get vultures around wanting to buy up one or two of the good ones," says Allan. But he's holding out for a bulk buyer, and is reportedly in talks with interested Chinese and Australian companies.

"Our thinking is: If you're going to go out, you've got to go out with a bang. It's a hell of a good opportunity for someone to buy in at the bottom of the market."

A good opportunity for a buyer probably does not equal any returns for the seller. After debts are repaid - Allan says the business has more than $200 million in debts to banks and finance companies - the Crafars don't expect to retire on the proceeds. "Zilch, zero at this stage," is what Frank says he expects the balance to be.

"Bugger all," says Beth - but she's got some sense of perspective: "We started with nothing, we've ended up with nothing."

ALLAN AND FRANK grew up in Wanganui, two of nine children. Crafar senior was a butcher with a few sheep and a solitary cow who often felt he'd picked the wrong profession, recalls Frank. "He'd say 'I missed my calling, I should have been a farmer'."

But life in the backblocks of Wanganui was far from easy, and the Crafars seemed blighted by bad luck.

The eldest son became apprentice to a sparky, but was electrocuted at the age of 16; the eldest daughter contracted fever and died before she reached age 5; the mother suffered a stroke and spent her last 20 years unable to speak before she died in the 1980s; and Crafar Sr died of a heart attack when Allan was only 11.

The youngest son, he was left to take up some of the slack around the house and found his own calling early: "I had to go and milk the bloody cow by hand," says Allan.

Frank, meanwhile, began doing the same thing on a larger scale. Despite suffering retinitis pigmentosa, a genetic disorder that steadily eroded his vision and prevented him from ever getting a driving licence, he left school at 14 and started sharemilking at 16.

At age 20, with the lament of his father ringing in his ears, Frank pitched in with his brother Neville for a property in the Manawatu.

Allan met Beth on a blind date and they married in 1973. Allan started working on Frank's farm in 1973, and the trio bought the property in Reporoa in 1981.

They made their first foray into expansion the following year when they sent the local electrician to bid on a neighbouring property. The Crafars feared their presence would spook the auction, but their proxy ended up paying well over valuation.

It was after the economy picked up in 1991, for the agriculture sector at least, that the Crafar empire started to take shape. By 1999 the trio had 6000 cattle on numerous farms under their control and were big players.

To put that in perspective, the average dairy herd size is 526 cows. Allan told the Taranaki Daily News at the time: "We're the Warehouse of dairying; there's a lot of fellows who are the corner shop."

Borrowing-financed expansion continued, and even accelerated. Today CraFarms owns 22 farms, 18 of them dairy, totalling more than 8000ha. Their herd totals 20,000 cows.

Why did they grow so big, so quickly?

Allan: "Why do people climb bloody mountains or run marathons? They say, because it's there. I don't know what it does for the country, climbing a mountain. At least we produce something."

Allan says he and his kin have an inherent need to prove themselves and keep busy. "We've got a rats-in-the-guts attitude. I suppose we're vertically challenged and we're going to prove that teacher wrong who thought we were wash-outs at school."

As the business grew, the Crafars kept doing business in the same manner as when they were small.

Allan says they've kept things simple and within the family. So simple, in fact, that they only recently purchased a computer and the company's business diary is a wall calendar: "I write things on the calendar, and at the end of the month I tear it off and that's it, it's gone."

This approach to business administration flummoxed MAF and police officers who searched the property last year in relation to a dirty dairying case. Allan says the police told him: "You can't run a business that big like that."

The police search is not the first the Crafars have endured. Relations with environmental authorities are so frosty that Allan refers to regional councils as "regional communists", and Frank likens them to the Red Army.

"Dirty dairying" was first raised in public by Forest and Bird's then chief executive Bryce Johnson in 2001, when his organisation launched a $1 million public campaign to push for clean waterways.

Johnson fingered dairy farmers as prime culprits. "Dairy farmers are making huge profits at the moment by freeloading on the environment - they are dripping with money," he told the New Zealand Herald at the time.

Shortly before lunch, Allan takes a phone call from a friend and exchanges unkind words about Johnson: "Everything he stands for pollutes waterways - the biggest contaminant of water worldwide is mallard ducks."

Nonetheless, the pollution from cows is not insubstantial. Each cow produces an amount of effluent equivalent to 14 people, meaning that CraFarms' herd, 20,000 strong, puts out as much dung and urine as the population of the Wellington region.

Rapid changes in the industry, particularly since 2003, have seen new compliance codes implemented that have caught many farmers - the Crafars included - on the hop.

They say best practice was initially to house effluent in ponds. Then the councils turned around and told them to spread it with sprinklers. "It's a nightmare."

The four prosecutions for effluent discharge stung CraFarms into action. New machinery was bought, one of Crafar's sons took the job of compliance officer to make sure each of the family farms was keeping up standards, and construction of an experimental 600-cow shed with a 5m-deep effluent pit at one end was begun on the Reporoa farm.

"We ordered enough materials to build 30 cow sheds when the payout was up," says Allan.

But the recession brought these improvements, and the business itself, to a crashing end.

The framing of the shed is finished, and the pit dug, but the structure stands half-finished.

More than a million dollars of steel beams sit idle, says Allan. "We can't finish paying for them, let alone build them."

THE CRAFAR family was held up in a gunpoint home invasion in 1998. They were tied up, and shots were fired inside the house. "They fired a bullet, missed my son by inches, and it went into the bathroom doorpost," Allan says.

Despite the obvious trauma of this event, Allan claims the past few years of battling environmental regulators has been even worse.

Fines have totalled only a few hundred thousand dollars, but the employment of Queen's Counsels has cost a lot more, says Allan. It's a part of dairying he hates, and a stress he's looking forward to doing without.

Stress, he says, is killing farmers.

In April, Allan was with a friend who took a call from a young farmer with two children concerned about his finances and some grass that was not growing.

"Two things had gone wrong. He thought he talked him out of it - but a quarter of an hour after he hung up that guy had shot himself.

"Shit, that shouldn't happen, but it does. There were seven in seven weeks that I knew round that time in the Waikato, Bay of Plenty Region. And it's happening all the time."

The only thing keeping the Crafars from a similar fate, says Allan, is the support of family - both practical and financial.

"We're just lucky," he says. "Because when one's down, the others can cover for them. Otherwise we'd have long since splattered our brains against the wall."

After CraFarms, what next for the family?

Allan jokes that he might go to Parliament, but doubts the Green Party would let him on their list.

Beth says they'll probably have to hunt for work. "We'll be going out looking for a job, starting again. We're not going to just lay down and die like Al jokes we might."