‘Real Sense Of Injustice’ Over Wheat Price

Press, Volume CVIII, Issue 31596, 6 February 1968, Page 14

‘Real Sense Of Injustice’ Over Wheat Price

“New Zealand wheatgrowers have a very real sense of injustice over what we believe has been an untimely and precipitate decision by the Government to reduce the basic price for wheat by 10c a bushel, to withhold a further 10c a bushel to be used wholly or in part to cover anticipated costs of storage and marketing, and to reduce the premium paid on the high - quality baking wheat variety, Hilgendorf,” says a statement issued by Federated Farmers. “The maximum production of wheat in New Zealand, having regard to optimum land utilisation, comparable returns from other farm produce and the conservation of foreign exchange, was accepted by the Government as a policy objective in 1965 when it made its decisions on the recommendations of the 1962 Committee of Inquiry into the wheat, flour milling and bread baking industries. “We believe that the Government has taken advantage of the current economic situation, the depressed wool prices and the uncertain outlook for other farm products, to force down the price of wheat to growers. There is as yet no surplus of wheat, and indications at present in Canterbury would lead us to believe that this harvest will be well below previous estimates. Three Grounds

“Our case for asking the Government to review its decision is based on three main points:— “(1) Lowering the price will drastically Curtail the profitability of wheat production, which at present is depended on by many farmers to augment their reduced incomes from sheep fanning. Taking an average net return of 15 per cent on wheat, the announced price reduction

will halve this profit margin. But, in addition, th* increased costs brought about by devaluation for fuel, fertiliser, pest control chemicals, machinery and spare parts, will create a further burden on wheat production. “(2) The objective of selfsufficiency in wheat as a means of conserving foreign exchange has been urged oh the wheat growing industry by Government for a number of years. Agricultural advisory committees, acting on behalf of the Agricultural Production Council, have exhorted farmers to grow more wheat as a means of increasing their budgetary cash flows, Farmers responded in the belief that

Government would honour its undertaking to give three years notice of a . change in the price for wheat. Selfsufficiency has also inherent in its meaning the carry-over of a seasonal surplus to counteract fluctuations in yield caused by disease or climate. It is believed that to achieve self-sufficleney it will be necessary to carry forward in favourable years a surplus of about 1.5 m bushels. On the basis of published yields over the last eight years and an assumed

acreage of 300,000, selfsufficiency would have been achieved in only two out of the last eight years and the average, shortage in supply would have been 800,000 bushels a year. “(3) Farmers have been encouraged to invest heavily in plant and equipment for cultivation, harvesting and storage as wheat production has been expanded, and this capital expenditure must te amortised over a number of years. The drop in the price will bear heavily on those meeting interest charges and depreciation on recent major purchases of equipment. “Wheatgrowing Is an enterprise subject to consider* able risk, and retention of an adequate and reasonable margin of profit is essential to maintain a sound foundation of continuity in the industry Sueh stability was an agreed basic factor in ensuring selfsufficiency in the recommendations of the Committee of Inquiry. Hilgendorf Price ‘The reduction of the price for Hilgendorf by 15c a bushel also gives consider* able grounds for concern. This high-quality wheat IS used to improve the grade of the baking quality of other wheats, particularly in difficult years. It is essentia! that every incentive be given to increasing the production of this variety, which has inherent disadvantages to growers of lower yield on average than the more popular Aotea, and it is also a more difficult wheat to harvest satisfactorily.

‘The withholding of 10c a bushel to • meet storage and marketing charges before a surplus is proved is, to us, an unnecessary step at this stage. In no season would a surplus be proved before November—experience in Britain has demonstrated the great discrepancies of estimating accurately the quantity of wheat held in bulk form on farms in varying types of storage—and it would seem more equitable to determine at the onset of the following harvest when preliminary estimates would indicate whether the carry-over was likely to be absorbed for domestic consumption, what deduction should be made."