ON PROBATION

Bay of Plenty Times, Volume LXV, Issue 12296, 9 April 1937, Page 3

ON PROBATION

GUARANTEED PRICES ATTITUDE OF FARMERS ADDRESS BY MIL SINCLAIR “Eight months ago the dairy industry entered a new phase; the dairy farmer found that many of his deep-ly-rooted ideas were jettisoned and replaced by a plan of marketing which proposed to bring stability to the industry by paying a price for his produce which was only indirectly related to the price realised on the overseas markets,” said Mr A. J. Sinclair, secretary-manager of the Te Awamutu Co-operative Dairy Company. in a luncheon address to the Auckland Credumen's Club this week. . “The dairy farmer was in a mood to welcome a proposal of this kind. Six years m succession he had struggled against falling prices by the only two methods known to him —increased production and decreased costs. The manner in which the farmer increased production during the period of low prices is a tribute to the efficiency of the industry.

"In 192 S the butter exported from New Zealand amounted to 73,3 9 7 tons, for which the industry received £ 11,315,756, f.o.b. New Zealand equivalent to Is 4ld per lb. butter. In 193 4 the exports of butter had increased to 141,29 4 tons, for which the industry received only £ 11,830,070, although this included an increase in the exchange premium, which had been raised in the interim from 10 per cent, to 231 -per cent. This price was equivalent to approximately 9d per lb. In the short space of six years the dairy farmers met a decrease of §4 per cent, in prices by an increase of 9 2 per cent, in production, and it is doubtful if any major industry in any country can show similar results.” The farmers’ efforts to reduce costs involved great sacrifice, but were not spectacular, said Mr Sinclair. Pie had reduced labour, in some ways causing the present shortage. The slight reduction in interest rates gave h.m little relief, and in 1934 iwuiy dairy farmers were insolvent. At this stage the guaranteed price scheme was placed before primary producers. Wisely, it was restricted to the dairying industry. It was rejected at a conference iu Palmerston North as uneconomic, but the individual farmer expressed his confidence in it when voting, the general impression being that it would return something iu the nature of Is 3d per lb. The announcement that the guaranteed price for the first season would be 12 9-16 d per lb., f.0.b., created general disappointment.

“Although the scheme' has been operating months, it has had two beneficial results,’’ continued Mr Sinclair. “It has undoubtedly brought to the industry a state of stability previously unknown. In the past it was not unusual for a dairy farmer to find his monthly income curtailed 20 to 30 per cent, in the space of a tew months. This season he has appreciated the advantages of a uniform monthly advance payment of Is. a lb butterfat, with the prospect of a satisfactory ‘bonus’ at the end of the season, because of the certainty with which he can now budget for his requirements. The scheme is also proving a distinct advantage to the small farmer who employs no hired labour.

“On the other hand there is a steadily increasing protest from farmers milking herds of 40 cows upwards, because increased costs are cancelling the benefits of the guaranteed price,” said the speaker. “Farm labour is the principal item of increased cost. Under all headings it will be found that the guaranteed price has increased the farmer’s returns hy approximately Id per 11). butterfat, whereas his costs have increased by at least IJd per lb., and are still going up. These factors had been recognised hy the Government, and a committee was now engaged investigating the increase in costs so that this might be taken into account in determining the price to be paid by the Government next year, Mr Sinclair said. It would he some time, before the committee could reach finality, but private investigations showed that if the farmer was to he adequately compensated for his increased costs, the guaranteed price for butter next season should be approximately Is 2d per lb. f.0.b., making possible a butterfat payout of Is 3d. Mr Sinclair gave a' comprehensive outline of the difficulties of the Government in financing a scheme of this magnitude. The proponents of the scheme were hopeful that the surpluses in subsequent years would cancel the deficits, but unfortunately the better conditions in industry in Great Britain were having no appreciable effect on the price level of Dominion butter.

“The industry as a whole, however, has accepted the guaranteed price scheme, and is making the best of it,” concluded the speaker. “Even those who consider it is fundamentally unsound concede that the Government is making a genuine attempt to place dairying in a position of stability, and they insist that the scheme be given a fair trial. From the farmer’s point of view, the scheme is on pro cation for this year, and its success will largely depend upon the decision of the Government in fixing the price for next year. If the farmer’s increased costs are adequately for all will be well. He gives little thought to the magnitude and the financial implications of the scheme. He contends that if “we are going upward, and the sky is the limit,” he should be an essential part of the social sky-rocket because past experience has shown him that, when the stick comes down the primary producer is invariably at the end which hits the ground first. “It will be idle to deny, however, that some of the leaders of the industry view the future with considerable misgiving, knowing that the creation of large deficits in the Dairy Industry Reserve Account cannot continue' indefinitely.”