PRIMARY PRODUCE MARKETS

Press, Volume XCVIII, Issue 29010, 26 September 1959, Page 8

PRIMARY PRODUCE MARKETS

Outlook For Farmers In South Island

At the end of a survey of market prospects for file main items of primary produce, Mr H. E. Garrett, senior lecturer in the farm management and rural valuation department at Canterbury Agricultural College, says that while there are some bright spots, the overall situation compares unfavourably with two years ago and at the same time the upward movement of farmers’ costs has continued with undoubted prospects of more rises as a result of the wage increase announced by the Court of Arbitration.

Mr Garrett says that a case in point of increased costs is the removal of the subsidy op lime transport or at least a great part of it. “There is a limit to increased output and the application 'of scientific techniques.” he says, “and at the present moment farmers are losing the battle to increased costs. This, together with the unusual run of bad weather—last season’s severe drought and the cold dry spring now being experienced—make the lot of the South Island farmer much less attractive than it was a few years ago. If this situation continues the only solution must be an alteration in the exchange rate with its consequent relative increase in the cost of living to all," Time For Review Referring to the general wage increase. Mr Garrett says that it prompts a careful look at the whole situation as it confronts the New Zealand farmer. ‘‘No doubt valid arguments can be produced to show that, owing to increases in the cost of living, a rise of more than the modest 15s 7d a week maximum awarded is in order. However this is not the point at issue. The real crux of the matter is whether the country as a whole is in a position to support it. For the farmer who sells the major part of his produce in overseas markets, which are quite unaware of any rise in the cost of living in New Zealand, the great need is for a ! general reduction in the cost of production to counter the level of overall realisations which still continue relatively low.

If we look at dairying for export from the farmer’s point of view, present realisations are still about 2s 8d per lb of butter-fat to farmers. In modern times we expect 3s, and although this is now being paid to cheese producers they form only some 15 per cent, of the total of 40,000 dairy farmers. The remainder are in receipt of pay-outs of about 2s Bd. Gain In Funds “Admittedly realisations for butter on the London market are now near 400 s per cwt and well above the level of 365 s required to clear the costs of a 3s per lb pay-out to farmers. Thus the Dairy Commission will accumu-

late appreciable funds this season. This is not as promising as it sounds as the season began with a deficit in the dairy pool fund. Should the 400-odd million pounds of butterfat for export, sold in various forms, realise an average of 3s 6d per lb. which would be regarded as highly successful, the fund might benefit by some £lom. This would not place it in credit by very much after meeting its liabilities. “While this situation could be regarded as satisfactory, we would imagine it would only allow a rise of 3s for farmer pay-out in the season starting next spring. This point of view is based on the great variabilities in the butter market over the last 18 months and the reasonable and prudent assumption that these variations will continue to occur. A rise of this order would mean an increase in income to farmers of some £Bm, spread over 40,000 farmers, which would equal £2OO a dairy farmer a year. “This is very satisfactory but several interesting, facts emerge from a study of the situation. These are: (a> It merely puts the . dairy pay-out back to what it was in 1957; (b) costs have risen meantime and will be increased by the wage increase; (c) by this distribution 34.000 North Island farmers will receive just under £7m and 6000 South Island farmers will receive just over £lm. Wool Situation “It looks as though production will be round 540 to 550 m lb of greasy wool in the present production season. Last year some 540 million lb realised about 36d per lb and £B2m. There has been a great deal of congratulatory comment on the rise in price of wool in recent months. It was most welcome but it was mediocre. The present outlook suggests an average realisation of probably 42d—a rise of some 6d per lb. equal to some £l3m to £l4m. or a total clip worth £9sm to £96m. No doubt this is a satisfactory rise, but it compares unfavourably with the £ll2m received for only 491 m lb in the 1956-57 season.

“The £l3m to £l4m additional wool cheque will go to about 26,000 farmers, about equally distributed between the islands, but owning rather more sheep in the North Island. With the strength of the market in the stronger

wools and the greater number of sheep in the North, receipts are likely to be a good £Bm more in the North Island and rather less than £6m more in the South Island.

Lamb Prospects “The lamb situation appears to be weak in the extreme. With a promised kill of some 17m, roughly equally distributed between north and south, realisations would appear to be certain to be on the basis of the floor price for the coming season. This is on a basis of 153 d for prime 29-361 b, a realisation of some 43s for the typical prime lamb produced in both islands. No doubt many lambs will just bring the £2 or even fail to do this in the new killing season unless the meat market undergoes a radical change, which can be regarded as a most remote possibility at present. These prices will amount to a drop from some 63s to 64s for lamb two years ago to 43s this year, a fall of about 20s per lamb in two years. While this has been countered to quite a large extent by increased output, this has not been done without increased costs to the farmer and the net situation for the fat lamb farmer is greatly inferior.

“Beef output remains on an even keel or promises to be slightly reduced, and prices, while remaining on a very satisfactory level, are somewhat below the peak of the last two years. There is no doubt that the good beef prices have contributed, in a major way, to the sustaining of incomes of sheepfarmers, particularly those on the rougher country. However, 90 per cent, of the beef cattle are in the North Island, and this valuable form of assistance to income has been of benefi.t in the main to the North Island farmer. Bright Spot “The bright spot for the South Island farmer is price for wheat. Realisations of two years ago were on the basis of 70.000 acres at 40 bushels at 11s 6d—some £l.6m. gross income to wheat farmers. The current season promises a sowing of about 200,000 acres, and if the weather conditions allow a 40-bushel harvest once again, this will realise at the 13s 6d price level £5.4m., the majority of which will come to the South Island.

“The outlook for both ryegrass and white clover is weak with little solid basis of trading in both commodities. Both of these seeds rely for satisfactory trading on a clearance of some 25 to 33 per cent, of production to overseas markets. This volume of overseas sales has not been realised in the last two years, and accordingly, in spite of unsuitable weather and poor harvests, prices have been barely satisfactory to growers. Although current feed and weather conditions suggest another light harvest, the general trading situation continues weak, due to the absence of any prospect of a satisfactory clearance of stocks to overseas buyers.”