MARKED FALLS IN LAMB PRICE THOUGHT LIKELY

Press, Volume XCIX, Issue 29240, 25 June 1960, Page 7

MARKED FALLS IN LAMB PRICE THOUGHT LIKELY

“If things are left to take their normal course,” Professor B. P. Philpott, professor of agricultural economics at Canterbury Agricultural College, predicts that a further marked decline in prices for New Zealand lamb in the United Kingdom seems probable in the future, bearing in mind the close relationship between lamb supplies and prices. Professor Philpott makes this prediction in a Canterbury Chamber of Commerce Agricultural bulletin in which he foresees a very considerable increase in the New Zealand lamb kill in the next three or four years. There is, he says, considerable evidence to show that year by year the proportion of lambs killed to lambs tailed fluctuates according to the ratio of lamb prices to wool prices. In years with low lambing prices and good wool prices there is a tendency, if seasonal conditions are favourable, for farmers to reduce the proportion of lambs killed to those tailed so that more are retained as hoggets thus tending to build up flocks in the year following. But Professor Philpott says that with lowered incomes earned by sheepfarmers a point must ultimately be reached where there are no longer financial resources available from incomes to reinvest in farm development expenditure, which is essential if sheep numbers ard to be continually increased. When this point was reached (and with the present reserve of carrying capacity it could conceivably be in three or four years’ time with about 55m sheep) then lamb killings would settle down at a steady rate—about 22m—and sheep numbers would become stationary. This increase in lamb killings could come much earlier than this if there was a marked decline in wool prices. Relationship Elsewhere in the bulletin Professor Philpott draws attention to the striking relationship of supply and price on the United Kingdom market and says that for every rise in supply of 1 per cent, there appears to follow a fall of 1.5 per cent, in price and vice versa for falls in supply. He said that a very significant implication of the relationship between supplies and prices was that not only did greater supplies lead to lower prices, but they were likely to lead to lower over-all total receipts because of the price falling proportionately more than the rise in volume.

To cope with, or if possible prevent, this decline in price must be the major aim of New Zealand’s agricultural production and marketing policy, says Professor Philpott, in view of the need for continued expansion of agricultural output at remunerative prices to maintain living standards with an increasing population. Professor Philpott said that three main avenues of policy could be suggested. Discussing the possibility of Increasing the demand for lamb by every possible method, he said if New Zealand wanted to sell to new markets she had to be prepared to engage in reciprocal trade by allowing freer entry for unports from these countries into New Zealand. The effect on prices of extra supplies of lamb and mutton sold in Britain was such that the extra volume marketed yielded little by way of extra export receipts. If these extra supplies were sold elsewhere, even at prices lower than those received in Britain, they would yield extra export income. Clearly, marketing in these terms of differential prices could only be performed by a co-ordinated marketing authority such as the proposed New Zealand Meat Export Development Company. Professor Philpott said that this was not to say that New Zealand should here and now embark on a policy of differential prices and centralised marketing. . . .

“But in our marketing policy we should at least be prepared to accept the view that, even if costs of transport and market development are such that some new markets return us net less per lb than in Britain we would still be better off. from the national point of view, than by continuing to sell the lambs in Britain.” Another School There was another school of thought that believed that extension into new markets was not so much a matter of prices as packing and presentation, and that the operation of individual exporters testing out and developing new markets with a variety of packs and choices of joints and cuts and some variety in presentation was likely to be more rewarding in the development of new markets. But some concern had to be felt as to whether ex-

porters would be willing to bear, or should be asked to bear, costs of development which must inevitably result in lower profits for them than if the meat was marketed in the United Kingdom. Of the possibility of security a reduction in supply in Britain from other sources, Professor Philpott said that this could only be achieved by a reduction in the level of British subsidies for lamb production. “These are, in any case, likely to be lowered with the fall in open market prices for lamb which have the effect of increasing the cost of the subsidies and it may be that we might have to put up with lowered prices for a year or two in the interests of forcing such a reaction. “But this, he said, should be backed up by “moral persuasion” through the appropriate diplomatic channels. On the question of shifting production away from lamb, Professor Philpott says that the difficulty with beef is that it is still not as profitable per acre to produce as fat lamb. Some sort of extra financial encouragement, such as subsidies, would be required to induce any large-scale shift towards beef, ’’’inally there was the possibility of switching the accent in sheep production from lamb to wool, which of all agricultural products seemed to be standing the test of time the best. No-one had so far worked out the economics of such a policy but it merited consideration for it might well be that the country was emerging from a period in which wool was a sideline to lamb production to a position where the sideline was fat lamb.