The Press WEDNESDAY, AUGUST 30, 1950. Dairy Contract Prices

Press, Volume LXXXVI, Issue 26204, 30 August 1950, Page 6

The Press WEDNESDAY, AUGUST 30, 1950. Dairy Contract Prices

It is very regrettable that the negotiations between the United Kingdom and New Zealand on the prices of the Dominion’s butter and cheese for the current season have broken down. It may be said at once that the rights in the matter are not all on one side, the wrongs on the other. Britain has one excellent reason—a reason to which New Zealand should respond, as it has in the past—for asking for special consideration from its suppliers of produce, especially Commonwealth suppliers. Britain’s economy is still under severe strain from the effects of the last war; it will be strained still further by the new rearmament programme. In comparison with Britain’s, New Zealand’s economy is buoyant and prosperous. Unfortunately, when faced by the request for higher prices for the new dairy season—a request legitimately framed within the provisions of the long-term contract—the British Ministry of Food chose to argue its strong case on grounds bound to arouse resentment rather than sympathetic understanding in the New Zealand dairy industry. It is wrong, almost to the degree, of impertinence, for the British Ministry of Food to use an entirely domestic New Zealand matter—the fact that the reserve in the dairy farmers’ stabilisation fund was increased last- year—to support a contention that prices given last year were too high. As the chairman of the New Zealand Dairy Products Marketing Commission (Mr Marshall) points out, the transfer of sums to reserve has been a matter of domestic policy facilitated by such things as subsidies on farmers’ costs and by price controls. New Zealand is legitimately entitled to include these real costs in a contract price in which prices are based on costs. It is entitled to dispose of its returns as it chooses. Prudent* allocation of a portion of returns to reserves is not proof of overpayment; it would be as logical to that a wage-earner had been paid too much in a year if he had put aside something in a savings bank or a savings loan. The British Ministry too lightly dismissed New Zealand’s very solid case for some approach to equality of treatment with other major suppliers. The disparity between Danish and New Zealand butter has been lowered from 86s 6d in 1948 to 19s per cwt.; but it is still above the 15s premium customary before the war. At 40s 4d the premium on Canadian cheese is far above the pre-war premium of 6s per cwt. Moreover, if the British Ministry wants to argue a case for giving high prices to European countries on economic-political grounds, it must surely concede that on these grounds Dominion countries are entitled to greater consideration. In brief, the British Ministry of Food cannot be congratulated on a case which does everything to cause the New Zealand dairy farmer to believe that his goodwill has been trespassed on too heavily, and to believe that with the return Of a buyer’s market for dairy produce New Zealand’s principal customer is showing less consideration than it received when the bargaining power was all on the other side.

The deadlock presumably means that the British offer to buy at last season’s prices will rule, possibly for the whole season. The dairy industry faces the alternatives of fitting costs to returns or of drawing on the reserve fund to make up the gap between returns and whatever the guaranteed price may prove to be. The first course will be difficult. Farm and factory costs are affected by higher wages and higher coal and transport costs consequent upon the lifting of subsidies. In effect this is a pertinent retort to the British Ministry’s disregard of the domestic policy of subsidising to keep costs down. The dairy industry has no great margin to meet extra costs. Last season payments to dairy companies were 12s per cwt for butter and 9s per cwt for cheese less than receipts from Britain. These sums will probably be absorbed, and the dairy industry may find itself in the position of being forced to draw on reserves at a time when good prices for produce are ruling in the world markets. Turning the industry back on its own resources to make ends meet, though distasteful medicine, will not be bad for its health. The industry may get some relief if it can find markets other than Britain for a bigger proportion of dairy products at prices nearer to world parity; but in the main the industry unquestionably must adjust itself to the British market. The mood of the controllers of this market under bulk purchase agreements has been shown. The warning to New Zealand to give closer attention to costs is too plain to ignore.