The Press THURSDAY, SEPTEMBER 9, 1971. A cautious confidence in dairying

Press, Volume CXI, Issue 32707, 9 September 1971, Page 12

The Press THURSDAY, SEPTEMBER 9, 1971. A cautious confidence in dairying

The confidence of the general manager of the New Zealand Dairy Board (Mr S. T. Murphy) in the prospects of the dairy industry is. apparent from his speech this week to the Society of Dairy Science and Technology, gutter is now fetching £4BO a ton on the United Kingdom market compared with £315 a ton 12 months ago: Mr Murphy apparently felt it necessary to defend the board’s selling policy: “ If we do not “ ask for the price we can get we only pass the profit “to the resellers ”. If anyone had suggested 12 months ago that Mr Murphy would be defending a decision to ask £4BO a ton for butter most experts including, perhaps, Mr Murphy would have dismissed the suggestion as wildly optimistic. Nor is there any reason to expect a reduction in this price over the next 15 months. Because of the reduction in dairy herds in Europe, Mr Murphy said, “ any significant recovery of the low European “ butter stocks is hardly possible this year or next ”. If the present prices of butter and cheese were maintained until the end of the season next May, the board would show a surplus of more than $5O million in its trading account. That would enable the board to pay off its $2O million debt to the Reserve Bank and the dairy companies to distribute handsome end-of-season bonuses. But the buoyancy of world markets this year has a more enduring significance. If the present price for butter holds until the end of next year New Zealand will have averaged £390 over the four years ending 1972. Under the terms of the agreement reached between Britain and the European Economic Community at Luxemburg this year, £390 would then become the minimum price for New Zealand butter in the United Kingdom until 1978. If any dairy farmers then complain that £390 is far short of the £4BO received in 1971 and 1972 they will need to be reminded that it is also far ahead of the £3OO they had to accept from 1966 to 1970. Even so, the Dairy Products Prices Authority will have a difficult decision to make next year: should it recommend producers be paid in 1972-73 on the basis of the 1971-72 realisations or on the 1972-73 expectations?

Much will depend on the outlook at that time for other dairy products. At present the outlook is hopeful: Mr Murphy said that world demand for cheese, wholemilk powder, infant milk foods, and condensed and evaporated milk was steadily increasing. But if a surplus of milk were again produced in Europe, would the E.E.C. again dump supplies in other markets, reducing the prices for New Zealand produce? Although he does not say so explicitly, Mr Murphy appears to expect a shortage rather than a surplus: and the board is evidently confident that the E.E.C. will honour its commitment not to “frustrate New Zealand’s efforts to diversify “ its trade ” which the board interprets as an assurance not to dump in other markets.

Encouraging as all this is for the dairy industry, it should not be allowed to obscure the difficulties yet to be overcome. Many of the cheese factories in Taranaki are overdue for replacement; should the new factories be designed to produce cheddar, or some other type? Or should they be replaced by wholemilk powder factories, or dual-purpose factories? If wrong decisions are made today on false or inadequate market information, millions of dollars might be wasted. Australian dairy products to be shut out of the United Kingdom market after next year will presumably be dumped in other markets in competition with New Zealand produce. Protection of less efficient producers notably in Japan and the United States continues to exclude dairy products from potentially lucrative markets. Such problems as these must still be solved if the prosperity of the New Zealand dairy industry is to be assured beyond 1972. A wary confidence is certainly not misplaced: complacency might be disastrous.