Agricultural review highlights assistance from supplements

Press, 12 March 1982, Page 17

Agricultural review highlights assistance from supplements

The terms of exchange for sheep and beef farms are estimated to improve by 3 per cent in 1981-82 compared with the previous year, according to a report by the Agricultural Review Committee to the Minister for Agriculture (Mr Maclntyre). The terms of exchange at the farm gate express the relationship between prices received for farm products and prices paid for farm inputs, and will only be maintained this year to the benefit of farmers by the operation of the Government supplementary minimum prices scheme. The committee estimates that receipts, including Government supplements and producer board minimum price supplements, will increase at a slightly faster, rate than prices paid for farm inputs. For sheep and beef farms the prices paid for goods and I services, or farm costs, are estimated to increase by 19' per cent in 1981-82 compared with a 23 per cent increase in the previous year. But this year's increase is still above' the consumer price increase and stems largely from continuing increases in the cost of buying and applying superphosphate. The total applied price of superphosphate during 198182 which includes the ex works price, $118.07, transport. $11.63, spreading. $22.13, price subsidy $l5,

transport subsidy, $7.50, and spreading subsidy, 88c is estimated to be $175.21 a tonne, assuming superphosphate travels an average distance of 108 kms.

The total applied price is the resource price from the national viewpoint, or what superphosphate costs the nation.

The applied price to the farmer during 1981-82 is estimated to be $151.83 a tonne, compared with $123.09 in 1980-81.

The terms of exchange for sheep and beef farms have been increased by 3 per cent for 1981-82 only because of

the Government's supplementary minimum prices scheme. Gross farm income for the average sheep and beef farm is forecast to reach $96,600, 18 per cent up on the previous year’s gross income of $Bl,BOO. “As a result the net farm income for 1981-82 is estimated to be $24,600 per farm (or $17,000 per farmer) 16 per cent above the previous year.” the committee’s report to the Minister says.

“Prices received for livestock and wool sales in the above estimate for farm income all reflect the Govern-

ment's S.M.P. scheme and in some instances producer board supplements also. “Compared with the previous year wool income per farm is up 26 per cent despite a reduction in wool production and 22 per cent of the increase is estimated to come from the S.M.P. scheme.

“The remaining 4 per cent increase reflects the ’average’ market improvement for 1981-82 compared with 1980-81 and includes support from the Wool Board’s grower funded minimum price support scheme,” said the committee.

The income for sheep and lamb sales is estimated to be up 13 per cent but only 2 per cent of the increase represents higher market returns, reflecting to some extent lower production levels of lamb and mutton. “Beef income is estimated to increase by 9 per cent. Income from beef at market prices for 1981-82 is estimated to have decreased by 6 per cent implying that total supplementary payments and producer funded supplements have been estimated to lift beef income by 15 per cent," said the report. Income from other sources

on sheep and beef farms, mainly from cropping, has been forecast to increase by 18 per cent, largely from the higher wheat price and increase in barley areas for this year. The report predicts that the total volume of farm inputs will remain at a similar level to the previous year, maintained by an increase in total farm expenditure of 19 per cent to an average of $72,000 per farm. The committee, consisting of representatives from the M.A.F.. Treasury, Federated Farmers, wool, dairy and meat boards, and Rural and Reserve Banks, has predicted a decline in the terms of exchange for dairy farms by 2 per cent. This is because prices received have not kept up with the rate of inflation in prices paid for dairy farm inputs.

Gross income per dairy farm will be up 19 per cent to $62,000, but continuing high inflation and outlay on maintenance and development will give a net income per farm increase of only 16 per cent to $16,900. The committee has commented on the current debate in New Zealand on the need for S.M.P.s. “There is no doubt that our pastoral industries hold an international comptetitive advantage,” it said in the summary of the report. “For this advantage to be eroded by internal inflationary forces could be damaging to farming and the New Zealand economy.

“For this reason the Government has provided additional support to the industry this season.

“While New Zealand's rate of cost increase remains out of line with our trading partners there will continue to be cost pressures on the industry.

“However the dangers of continuing the current systems of farm support should be widely recognised. “These problems include difficulties in foreign markets, in administration of the schemes and distortions

in the allocations of resources within the sector. “This leads the committee to conclude that to retain growth in agricultural exports the prime objective should be to reduce cost pressure in the industry. “This would involve bringing down the level of price inflation at least to that of our major trading partners and reducing the level of protection afforded to other sectors,” the committee said.

Total export receipts in 1981-82 are expected to reach $7320M, an increase of 18 per cent from the previous year. Agriculture will contribute $5.185M. also up 18 per cent, which is 71 per cent of the total overseas earnings. The average lamb price for export (carcase and pelt) will be around $20.50 at schedule, up 33 per cent on the previous year.

“Included in this increase are estimated Government supplementary payments of $1.25 per lamb. 8 per cent of the ‘33 per cent increase. “Wool and pelt payments compared with the previous year are estimated to increase by $l.lO and account for a further 7 per cent of the over-all increase in lamb returns at schedule, and the remaining 18 per cent is the actual increased market returns.

“The average 1981-82 per head mutton return is estimated at $10.70 on schedule, up 4 per cent on the previous year.

"Included in the above return is a Government supplementary payment estimated at $1.37 per head which is based on the difference between the Government’s minimum price for mutton and the Meat Board’s minimum price.” said the report. Manufacturing beef will receive a. supplement of about 20 per cent of schedule from the S.M.P. scheme and a contribution of 6 per cent from the Meat Board's meat income stabilisation account. Wool prices to growers will average 320 c a kilogram, which is the supplementary minimum price, and this is an increase of 29 per cent on the auction price of

the previous year. The S.M.P. will account for 22 per cent of the increase while the additional 7 per cent increase comes from higher market returns. The report said that the farm sector as a whole was reverting to a more modest rate of expansion following two seasons in which substantial growth was achieved. “Factors contributing to this slowdown in momentum are the impact of continuing high rates of inflation on farm incomes, drier weather in many parts of the country and a reduction in farm development partly as a result of the recognition by farmers of the need for consolidation following the rapid build-up in stock numbers of the previous years," said the report. Total livestock units at June 30, 1982 are forecast to be 109.4 M, 2.2 per cent up on the level of 107.1 M at June 30, 1981. Just how rapid the stock increase has been can be seen from the fact that in the three years 1979-80 to 1981-82 the total growth in livestock units will be 9.6 million, or over 10 per cent in three years. Among the other estimates of the report are: 0 Sheep numbers 73.4 M at June 30, 1982, up 3 per cent on 1981. 9 Beef cattle numbers 5.25 M at June 30. O Dairy cattle 3.05 M at June 30, up 1.5 per cent. • Meat production, domestic and export, for 1981-82, 1.2 M tonnes. 0 Wool production 370,000 tonnes, down 3 per cent. © Dairy production 283,000’ tonnes of butterfat. © Apple production up 2 per cent to 251,000 tonnes. © Kiwifruit production up 5 per cent to 29.500 tonnes.