Town Milk Producers Hit Heavily

Press, Volume CVIII, Issue 31784, 14 September 1968, Page 9

Town Milk Producers Hit Heavily

Town milk producers are taking a big drop in their returns and apparently have little scope to increase output or diversify to soften the blow.

In the 1967-68 town milk season, which ended in August, for finest grade milk the average return dropped by 5.6 per cent on the previous season from 27.58 c per gallon to 26.038 c.

To take the average producer of Canterbury Dairy Farmers, Ltd, one of the supply companies servicing Christchurch, with a daily quota of 120 gallons, this represented a decline in gross income of $770. Now for the current 1968-69 season the advance price has been dropped to 21.694 c from 24.04 c last season, a further downward trend of 9.76 per cent, and one which will lower the income of the average Canterbury Dairy Farmers supplier by about a further SI2OO. But this is not the whole story of woe. Last season the end-of-season payment, which is related to the pay-out to cheese producers, was 1.998 c per gallon. No-one, of course, can hazard a guess at this stage as to what the pay-out will be at the end of the present season, but the outlook at this time is not at all optimistic.

When he announced the new advance town milk price at the recent conference of the New Zealand Town Milk Producers’ Federation, the Under-secretary for Agriculture (Mr D. J. Carter) said it was almost certain that the end-of-season pay-out on cheese would be lower this season, so the writing is on the wall for the town milk producers, too.

The end of season pay-out to cheese producers is re-

lated to realisations for milk powder and casein and at the moment the picture here is not too bright and the thinking seems to be that the final payment on town milk could drop to about half of what it was last season.

There is, of course, a possibility that a reduction of subsidy payments on skim milk powder in the European Economic Community could have a beneficial effect on the market for New Zealand powder and there could conceivably be some recovery in this product, but if the final pay-out on town milk fell by Ic, then there would be a further drop in the average producers’ gross income of about SSOO, bringing his over-all decline in income for the two seasons to something like $2470. Depending on the relative cost structure of a farm, the effect of the drop will be even more impressive on the producers’ net incomes. It is suggested that the drop between this season and last could reduce net incomes on average by about 33 1/3 per cent and in some cases by up to 50 per cent The only mitigating factor, if one can call it that, is that producers will pay less tax.

If there is no final pay-out this season the price will be the lowest since 1951-52 and it will have to be greater than 0.806 c per gallon to better the 1958-59 pnce.

What can the producer do to ease this burden? It seems that unlike many other fanners his opportunities are rather severely limited.

There is no possibility of his obtaining the full town milk price for extra production as quotas have been pegged now for a year and are likely to remain so for another two years. It will be the 1970-71 season before further increases in quotas can be visualised. The basic reason for this is the end of milk-in-schools. The current economic climate may also accentuate this position in that projected increases in sales may not be realised. Certainly a farmer could increase his production of surplus milk for which he is paid a lower price, but to do this and still maintain his quota he may have to buy in extra feed, which may not be economical, and by reducing savings of hay he may unwittingly jeopardise his allimportant quota, which he has guaranteed to supply on every day of the year and failure to do so results in a reduction in the quota.

Production of dairy beef and also cropping could likewise endanger the maintenance of the quota.

It is certain that some producers will be hard hit and in particular the younger men who have set up recently with considerable establishment costs and high liabilities. The trend in the industry has been for the number of producers to decline, indicating the smaller men have been progressively going out. As farmers struggle to make the best of the position it is certain that repairs and maintenance expenditure will be curtailed and there may be a decline in use of fertiliser and concentrates. There are bound to be repercussions for those servicing the industry. Town milk producers in the Christchurch area are naturally concerned at the trend of events and there has seldom been an issue that has aroused so much feeling. The Town Milk Producers’ Federation has asked the Government for a review of the price. This is particularly based on the extra costs that the industry faces in its allyear round production role. These have lately been increased by devaluation and now the new general wage order. Under the present

price fixing mechanism there has been no change in the cost calculations since about 1957-58 and steps have already been taken in the industry to have a new cost survey made. The last was made in 1964.

It has been widely held among farmers—outside the town milk industry—that town milk producers have economically been a favoured class of farmers, but those closely concerned with the industry feel that this has been largely an illusion and something that has been grossly exaggerated, although perhaps induced by the fact 'that with the producer having certain production obligations, it has not been an industry that one could readily walk into and this has tended to breed the belief that it must be “a good thing.” It Is said that butterfat producers coming Into the industry have seldom found the town milk industry as rosy as they imagined as they looked in from the outside. Against this background of sharply falling returns of their shareholders, the two Christchurch supply companies, Canterbury Dairy Farmers and Metropolitan Milk (Christchurch), Ltd, have been engaged in considerable capital development programmes. With producer capital and borrowed money which they are committed to service, Canterbury Dairy Farmers is building a new s2m milk treatment station in Blenheim Road in pursuance of a promise given when it bought the shares of the Christchurch City Council in the Christchurch Milk Company. Metropolitan, using producer funds, has bought its factory in Russley Road and will soon open a new bottling hall there. In both cases the companies are seeking to keep faith with the public in providing a quality product under the best conditions. The interest of local producers in ridding their herds of disease should by now be well-known, and practical efforts to improve the solids-not-fat content of winter milk are unhappily not likely to be helped by the drastic fall in income.