THE WEEK

Press, Volume XC, Issue 27470, 2 October 1954, Page 5

THE WEEK

FLOOR PRICE FOR MEAT The somewhat abrupt refusal of the Government to go on in the meantime with the floor price scheme for meat, financed from the Meat Account funds, will puzzle most producers. Though few details of the scheme have been made public, it is known that in essence it is simply a device to ease the impact of a sudden and continued fall in prices, and to use for this purpose the money standing to the credit of producers in the industry account, and not. public money. Farmers are particularly vulnerable to a sudden fall in prices. Their fixed commitments must be mainly undertaken for a long term ahead, usually for at least a full production season; and in face of the rapidly falling income, these relatively inflexible costs can have a devastating effect on farm finances. The farmer cannot suddenly shorten sail, because what he does now is only the foundation for production two, three, or more seasons ahead; and drastic reduction now will have its effects over several years. Similarly, it is not possible for a farmer, having reduced his undertaking, to restore it to full size overnight. The floor price scheme was designed to go some way toward meeting the gap between rigid costs and low prices until normal economic pressure at length adjusts costs downward.

No new principle is involved in using the meat industry account for some such purpose. The previous government decided to keep the fund intact to be used if necessary in this way, and Mr Holland has told the Meat Board that this is also the policy of his Government. What is new is that over many months officials of the Treasury, the Department of Agriculture, Federated Farmers, and the Meat Board, through its economic section, have worked out and agreed on the details of a scheme to be available in this first season of free meat marketing in case it should be needed. No details have been released, but it is known' that the bodies concerned have agreed on them. It is believed that the floor price decided on was a percentage of the moving average of bare meat prices over the last few seasons. The percentage could not be made particularly low. If it were,

say, 50 per cent, of the average over the last three years, it would be too low to stave off the effects it was meant to prevent. The level would need to be fixed with regard to the position of producers to store sheep, who are as vulnerable as meat producers to price declines. It is believed that these aspects have been worked out in detail and are thoroughly understood by the officials who have been conferring frequently for months, and that a scheme, complete in every respect, is ready to come into existence as soon as Government approval is secured.

The Government recognises the need for some floor price scheme, and the Treasury and the Department of Agriculture, the government departments most closely concerned, have agreed with the producers* organisations on details. The scheme involves spending no public money. It might retard to some degree a fall in domestic meat prices after a heavy decline in export prices, but, to offset that, the economy would benefit from the release of money now locked up in the producers’ funds. There seem to be no obvious political implications. Farmers will await with interest a statement of the Government’s reasons for delaying legislation they believe to be essential to secure the stability of an industry on which the whole economy of New Zealand largely rests.