NZ is known for its dairy products, and is home to one of the biggest dairy companies in the world. In this Stuff special investigation, we examine how the price of milk is set and explore the industry behind our liquid asset.

It's a practice often questioned by non-farmers but separating newborn calves from their mothers is better for the animals, a dairying leader says.

Janet Schultz, Federated Farmers Taranaki dairy chairwoman, said although taking calves from their mothers might appear cruel, it was necessary for the health of the animals and the industry.

Schultz said cows experienced the same discomfort as human mothers when their milk came in and a calf couldn't drink enough to relieve the pain.

"You'd do anything to relieve that pressure but cows can't," she said.

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"Milking them takes that pain and pressure away."

While a cow could have 20 to 25 litres of milk in her udder, calves could only drink about five litres, Schultz said.

"At the end of the day, the cow is producing so much milk, if she's not taken away and milked she's at risk of getting mastitis."

A potentially fatal inflammatory reaction in the udder tissue, mastitis is the most common disease in New Zealand dairy cattle. It can cost the industry up to $280 million a year in treatment, loss of milk production, labour, discarded milk and culling.

Although usually caused by bacteria entering through the teat canal and infecting the udder, mastitis can also develop when the udder is not completely drained.

However, animal rights group Safe rejected animal welfare as a reason to separate cows and calves.

Head of campaigns Marianne Macdonald said the dairy industry was inherently cruel and had brought the problems associated with higher production on itself.

"Millions of cows are milked twice a day and plenty still get mastitis," she said.

"But by selectively breeding them to have unnaturally high production, the industry is adding to the problem."

Once removed from their mothers, calves are placed in a sheltered pen or shed with bedding – usually woodchip, sawdust or shavings – and fed regularly, beginning with colostrum.

"Most cows produce colostrum for the first four days or eight milkings after calving, although heifers [first-time calvers] can hold their milk for up to 10 days," Schultz said.

"Fonterra don't want colostrum but it's gold for calves, it gives them everything they need."

Because the placenta doesn't allow the transfer of antibodies, also known as immunoglobulins, from mother to foetus during pregnancy, calves are born with poorly developed immune systems.

Colostrum is rich with nutrients and the antibodies that provide the calf protection from diseases until its own immune system takes over.

GRANT MATTHEW/STUFF Most of the calves born on New Zealand farms are separated from their mothers soon after birth.

The 280 calves expected to be born on Schultz's farm this season would contribute to a national total of between 4.5 and 5 million this year.

Of that total, about 30 per cent would be raised as replacement dairy cattle and 30 per cent reared for beef. The remainder would be surplus or "bobby" calves.

From four days old, bobbies are transported and slaughtered for meat (veal) and other animal products, including rennet for dairy products, skins for leather, and blood for pharmaceuticals or for use in laboratories.

According to MPI statistics, more than 1.77 million calves were sent to the freezing works last year and another 34,510 were processed for pet food.

A total of 1100 bobby calves (0.06 per cent) died on the way to the works, down from 5390 (0.25 per cent) in 2016.

Following an outcry from animal rights activists and damaging film footage of calves being thrown into trucks in 2015, the Ministry for Primary Industries (MPI) tightened rules around the care and transport of bobbies.

Industry groups responded positively to the changes and that, coupled with an increase in monitoring and compliance action by MPI, had driven the drop in mortality, the ministry said.

The number of bobbies sent to the works also fell in 2017, which MPI attributed to a decrease in the size of the national dairy herd and fewer calves overall.

GRANT MATTHEW/STUFF Once removed from their mothers, calves are placed in a shed with fresh bedding and fed regularly.

Farmers were also looking at all possible ways to reduce the number of surplus cows born on their farms in the first place, Schultz said.

"Some are using sexed semen, others are rearing calves for beef," she said.

Though more expensive than normal artificial insemination, the guarantee of producing a female calf is touted as being as high as 90 per cent when using sexed semen.

However, many farmers would need to see the conception rate for animals inseminated with sexed semen improve before making the switch, Schultz said.

"On average the conception rate for standard insemination is 60 to 70 per cent but with sexed semen it's about 40 per cent at the moment," she said.

"So although there's a higher chance of a heifer [female] calf if insemination is successful, there's also a higher chance of no calf at all."

GRANT MATTHEW/STUFF The 280 calves expected to be born on Janet Schultz's farm this season will contribute to a national total of between 4.5 and 5 million.

If cows didn't get back in-calf they wouldn't lactate and that was what the industry relied on, she said.

"Production will slowly start going backwards if you just keep milking a cow. Again, it's like people – if you breastfeed a child until it's three, you won't be producing the same volume of milk."

Although most women didn't produce offspring every year, farming was a business and letting cows take a year or so off wasn't financially viable, Schultz said.

"There's not enough land to let them stay dry. They become a cost, using feed and manpower and not producing," she said.

Some "empties" – animals which didn't get in-calf – were kept.

"We keep some holdovers because of higher genetics and others because there are different reasons for being empty," Schultz said.

"The weather can impact in-calf rates or she might have had a hard calving last time and not be healed properly."

Macdonald said there was growing concern about animal welfare and the environmental issues linked to dairy farming, and consumers were beginning to weigh their options more seriously.

"I know there are also farmers who are also looking for ways to move away from farming animals and find other uses for their land," she said.

"There is so much evidence that we can get by without reliance on animal farming.

"The dairy industry won't come to an end overnight but people are increasingly making other choices."