HIGHER GUARANTEED PRICE

Press, Volume LXXIV, Issue 22435, 23 June 1938, Page 12

HIGHER GUARANTEED PRICE

Average Pay-out 14.38 d for Butter; 16.38 d for Cheese MR NASH EXPLAINS PROCEDURE Increased Rate Will Leave Surplus Of £113,217 in Dairy Account (PRESS ASSOCIATION TELEGRAM.) . .. NEW PLYMOUTH, June 22. The Governmeilt’s intention of increasing the basic price of butter by .41d per lb, which will mean a payment of 13.66 d per lb, was announced by the Minister for Marketing (the Hon. W. Nash) at the conference of the National Dairy Association. “We propose to increase the price of cheese from the present rate, 7.54 d per lb, to 7.75 d (75d) per lb, an additional .21d per lb,” the Minister said. “These extra sums should, for - the average dairy factory, result in added pay-out of id per lb of butter-fat' for both cheese.and butter, so.that the average payout should be, for butter-fat for, butter, at least 14.38 d. It will probably be Is 2sd for butter, and 16.38 d for cheese. “The procedure proposed for the distribution of the adjusted pay-out will be to buy butter and cheese shipped up to June 30 at the present price of 13£ d per lb for butter and 7.54 d per lb for cheese, and then to distribute to all suppliers a further pay-out, for all butter made after July 31, 1937, and shipped before June 30, 1938, of .41d per lb, bringing the total price for the year up to 13.66 d per lb for butter. Shipments after June 30 will be paid for at this rate of 13.66 d per lb.

"For cheese, the pay-out up to June 80 will, as before mentioned, be 7.54 d, and there will be a special payment for adjustment. of .21d per lb for all cheese exported after July 31 of last year, a'nd before June 30 of the present year. “After June 30 of the present year, covering the make up to July 31, all cheese will be purchased at 7.75 d (73d) per lb. On present evidence, this should result in a pay-out for the year amounting to 14.38 d per lb for butterfat for butter, and 16.38 d per lb for butter-fat for cheese. In all probability. both these pay-outs will be exceeded on the average. “It has been said that the guaranteed price principle has been abandoned,” said Mr Nash. “It is not true. The principle remains that the dairy industry account stands on its own. The Government does not propose to touch the account in any way. The adjustment of the price for the current season does not break the principle. It is an increase in the price to meet some of the added costs that are known, and to some extent to provide a sum to enable the farmer who does employ labour to pay a higher rate of wages than he has previously be n able to offer. Tariffs Discussed “Some statements have been made regarding tariffs, and the need for promoting secondary industries. This has been linked up with a suggestion that the buyers of our primary produce in the United Kingdom might o resent the establishment of secondary industries in the Dominion to the - xtent that they would refrain from purchasing our goods. One of the difficulties that manufacturing industries have had to face is that there has been, during the last year, a greater influx of imported commodities. I have affirmed before, and I am affirming that we must have a balanced economy in New Zealand. The future cl the Dominion depends not only on the development of primnry. indi. tries, but also cn the development of secondary industries, and as long as we keep to the principle laid down, and previously enunciated, of taking from the United Kingdom to the full goods equal in value to the goods which we sell to the United Kingdom, after provision is made for interest and debt redemption, then there can be no complaint by either side, but regarding tariffs in general, if the measure of prices to be paid to the dairy farmer is based on costs in New Zealand, then obviously tariffs are previously included in those costs, and provision is made to enable the dairy farmer to meet his costs.

mated surplus of sales in the Dominion of £IOO,OOO, we get a total surplus of £1,014,666. From this it is necessary to deduct, the estimated deficit on cheese amounting to £86,100. This will leave a surplus of £928,566. The adjustment of prices announced to-day will absorb £816,349. Therefore the surplus, if the estimate is proved to b.e correct, will be £113,217. The adjustment will be made on all butter and cheese exported, and on all butter and cheese sold on the local market. Effect of Trade Agreements “Two contributing factors to appreciation in prices overseas have been trade with Germany, and the market in Canada,” said Mr Nash. “Under the trade agreement with Germany it is provided that, if we purchase German goods to the value of £400,000, Germany is to spend 25 per cent, of that sum in purchasing butter from the Dominion. To the extent that our purchases exceed £400,000, 50 per cent, of that excess is to be spent in buying our butter by Germany. This agreement was supplemented by an undertaking that purchases by Germany would be made in December, January, and Ffebruary, being the months in which peak supplies would have a tendency to depress prices on the local market. I have had a letter from Mr Davis (the Government’s London representative) in which he states that the announcement that sales were to be made to Germany caused prices to lift by 4s per cwt. Total sales to Germany amount to 58.112 boxes, the price being £162,161. “There has been much discussion regarding the savings in the new marketing procedure, compared with the old," said Mr Nash. “An analysis shows that the actual saving on butter amounts to 12.89 d per cwt, or a saving on-an export of 150.000 tons of £161,125 Correspondingly, the saving in cheese marketing costs represents 7.275 d per cwt. which .on 85.000 tons export trade amounts to £58.614. The two sums together will represent a total saving to the industry of £219.739 a year on the export trade under the new marketing procedure as compared with the old Eliminating Speculation “The marketing system overseas is accepted by the authorities as the best procedure that has yet been inaugurated to eliminate wasteful and speculative competition, and to ensure that the best possible price that can be obtained from the consumer is obtained.” said Mr Nash. “The advantages of the new marketing procedure are real Every dairy factory which has had long experience knows the inevitable drive, when prices are falling, to get rid of all stocks on hand. This in the past has always brought about a catastrophic fall in prices. To-day the stampede to sell, and that consequent catastrophic fall, are things of the past. I believe if evidence were needed as to the effect of the procedure of abolishing speculation, it is contained in the report of a speech by the chairman of International Tea Stores, appearing in the ‘Financial News’ of March 3, 1937; ‘More relevant is the case of New Zealand butter. Formerly it was purchased in the Antipodes;, but since the Government’s marketing scheme came into operation, this is no longer possible. Speculative profits on New Zealand butter and cheese, therefore, have now been virtually eliminated. The tendency toward more and more gov ernmental and other forms of control of commodity marketing promises further to restrict the speculative field in future.’

“Accordingly, we are estimating that realisations from the sale of butter overseas this season will amount to 117 s per cwt, and for cheese to 66s per cwt” Mr Nash said. “The realisation of butter sales shows a surplus over the price originally fixed of '£914,668. If to this is added the esti-

“In the report of the Marketing Department presented to Parliament during last session- 1 announced ihe estimated deficit oft the year’s working as £548,749,” said Mr Nash. “This sum has now been reduced to- £272,108. Owing to an advance in prices subsequent to July. .31, 1937, the surplus realisation on creamery butter was .£177,083. The surplus realisation of cheese sold subsequent to July 31, 1937, was £108,015 a total of £285,098 for both butter and cheese. This sum. deducted from the figure., in. the Marketing- Department’s report, gives a deficit of £263,651. This deficit is increased by a loss on sales of whey butter, amounting to £248: premiums paid for staff annuities £5380; payments to the manufacturer of special milk products, £2828. That makes a total of £8457. Adding these sums to £263,651 gives a final deficit of £272,108. Stabilising the Industry “Time does not allow a complete analysis, of the procedure by which the Government tried to give stability to the dairy industry,” said Mr Nash, “but it has carried out its promise to give the guaranteed price at a level that enables a farmer working under average conditions to continue his farming operations and maintain his family and himself at a reasonable standard of comfort. It has provided, in the Primary Products Marketing Act, a formula for the guaranteed price, which, in my opinion, covers every possible hazard to be faced by the dairy farmer. It has' taken steps to clear up excess mortgages on dairy farms, and has taken a heavy load off many working occupiers of farms. It hhs brought about a procedure under which the dairy farmer can know what he can reasonably expect for his butter fat during the year, and can thus budget for farming expenses with certainty. “With some difficulty: but I contend, with some margin of success, the Government, through the Executive Commission of • Agriculture has brought about zoning arrangements which have resulted in the greatest advantages to the dairy industry. “One of the strongest features of last year’s criticism was the fact that we were, unfairly I think, indicted by some of our enemies because we were paying less for produce than it was realising in London,” - said Mr Nash. “But some critics, as soon as we decided to meet some of the legitimate criticism and to make further payment to cover farmers’ costs, immecli-

ately affirmed that the guaranteed price principle had been abandoned. You will agree that it is impossible to satisfy this type of critic. Amendment Explained “During the last session an amendment was made to the Primary Products Marketing Act to enable the Government to overcome some of the procedure in connexion with local marketing and retail trading. It was decided that it .might be necessary, in certain circumstances, to alter the price. This, in the main, had no relation to the price to be paid to the dairy farmer, because there was a specific statement in the act that if a contract to pay had been entered into, then the price could be increased but could not be reduced. There has been some discussion regarding this principle. It has been affirmed that the Government could, under this section of the act. reduce the price to be paid to the farmer, and legal minds, some of them very able, have affirmed that that is correct. The whole principle centres on our obligation to pay. It is said that there is no obligation to pay by the Government until the commodit” for export has been placed on board ship. That may be correct, but it almost appears that at that point, if an obligation to pay has been created by Order-in-Council fixing the prices for the whole season’s manufacture, then the only way we could escape that obligation would be by not exporting the butter and cheese. It may be that the legal fraternity is correct; but as I see it, the price fixed by Order-in-Council must apply to all butter and cheese exported after July 31, 1937. It does not appear, therefore, that the price can be lowered to the producer during the season.”