Over-production of milk in the U.S. will affect N.Z.

Press, 17 February 1983, Page 16

Over-production of milk in the U.S. will affect N.Z.

NZPA staff correspondent Washington

“Bessy isn’t going to the butcher,” says the “National Dairy News,” a weekly publication put out by United States dairy interests.

That, in a phrase, sums up the problem of continuing over-production of milk in the United States, a problem the Government is trying to overcome, but without success, and which threatens to trample New Zealand's dairy trade as pressure mounts in Congress for America’s dairy surpluses to be exported at whatever price they can fetch.

The Government has plans to deduct $1 per 1001 b of milk from April this year, a deduction that is going through some hiccoughs as farmers and dairy companies challenge its legality in courts, as a levy designed to reduce production and help

pay for storage and distribution of surpluses, but it seems that this is having little effect.

Dairy herd replacements remain high, and milk cow numbers are above those of a year ago.

On January 1, according to the “National Dairy News.” farmers had 41 replacements for every 100 cows in the milking herd.

“Odds are that each of those 41 replacements is capable of producing more milk than their predecessor,” the “Dairy News” says.

“But the word replacement is something of a misnomer. With cull cow prices more than $1 lower than they were a year ago, these so-called “replacements” are simply joining the ranks of the milking herd. Bessy isn’t going to the butcher — instead she is being joined by her daughter in the milking line. During 1982, the nation’s milking herd grew by 54,000 head.”

Milk prices are down, and will go lower if the $1 levy comes into effect, as it is expected to, but feed prices have fallen even more. This would leave the allimportant milk-feed ratio — the basic yardstick of profitability — at 1,59 in January this year as against 1.55 last January, according to the “Dairy News.” The newspaper says economists generally agree that a milk-feed ratio of 1.25 to 1.3 makes it profitable for farmers to produce milk The Government has now introduced a Payment In Kind (P.1.K.) programme for the nation’s grain farmers, who are also producing vast surpluses, but the “Dairy News” says this is likely to compound dairy farmers’ problems in the short term.

The P.I.K. programme gives farmers surplus grain from Government warehouses, free, in return for leaving their fields fal-

This is a device designed to reduce over-production as the United States exports its enormous grain surpluses to the Soviet Union (while telling its European allies they should punish the Soviet Union for its invasion of Afghanistan by withholding manufactured exports) and while the United States rails against subsidised agricultural production in Europe and at the same time sells cheap flour to Egypt, undercutting French farmers.

The initial effect of the P.I.K. programme will be to make more grain available, the “Dairy News” says, and this will obviously not lead to higher prices. Agricultural economists do say, however, that the programme will, in the long term, if it continues, reduce grain supplies, raise grain prices and thus reduce dairy production as farmers find it more profitable to cull older cows from their herds.