The Press SATURDAY, FEBRUARY 12, 1966. The U.K. Butter Market

Press, Volume CV, Issue 30983, 12 February 1966, Page 14

The Press SATURDAY, FEBRUARY 12, 1966. The U.K. Butter Market

The New Zealand Dairy Production and Marketing Board has been losing £23 a ton on every ton of butter sold on the English market since January 11 this year, and in the previous six months it had been losing £l3 a ton. Unless prices recover before the end of the season in May, the board is likely to show a loss on butter of some £3l million this season. In these circumstances there can be no possibility of an end-of-season pay-out, such as was made last year. As the deputy chairman of the board (Mr F. L. Onion) told a Hamilton meeting last week, the fact that there would be no end-of-season payment had nothing to do with the current negotiations in London. But the state of the United Kingdom butter market, which is directly responsible for the losses this season on New Zealand butter exports, is very relevant to the negotiations. Higher production in Europe last summer caused a big increase in butter stocks before Christmas, and prices fell as traders tried to quit their stocks. Consumption of butter has risen, but not enough to clear stocks which, by the end of March, are expected to be 30,000 tons above their normal level.

The London negotiations are to determine the import quotas for the year beginning on April 1. New Zealand, with a 37 per cent share of all United Kingdom butter imports, would be well suited by an over-all level of imports no bigger than last year’s. Australia was struggling last year to fill its quota (15 per cent of total imports), and is probably more concerned to get a good return on a small tonnage than an increased quota. Denmark (23 per cent) is the only exporter other than New Zealand which relies to any extent on its sales of butter to the United Kingdom for export income: but as New Zealand butter is the “ price leader ” in Britain, the Danes are likely to be less concerned than the New Zealanders with the effect on prices of an increase in their quota. Other European suppliers, notably France and Ireland, have been embarrassed by surpluses of butter and would gladly accept increased quotas next year. The recent decline in retail prices of butter has pleased British housewives and is consistent with the Labour Government’s policy on prices and incomes. Moreover, low butter prices strengthen the Government’s hand in opposing British farmers’ demands for higher guarantees for farm products. But probably the major factor in the United Kingdom Government’s attitude towards butter quotas this year is the likelihood of major changes in Britain’s trade relationships in the near future. New Zealand’s trade agreements with Britain will expire in 1967; and it becomes increasingly apparent that Britain is still a candidate for membership of the European Economic Community. If part of the price for admission to the “ Brussels Club ” is the ending of New Zealand’s privileged position on the British market, the sooner Britain can reduce its commitments to New Zealand the better, from Britain’s point of view.

These considerations suggest that it is in Britain’s interest to increase the import quotas this year. A further year of unprofitable trading on the British market might lessen New Zealand’s demands for a renewal of the right of unrestricted access to the British market and reduce New Zealand resistance to quotas and tariffs dictated from Brussels. This is a gloomy prospect: and any New Zealand dairy farmer who expects an early return to profitable trading on the United Kingdom market is likely to be disappointed.