Dairy Board says outlook is terrible

Press, 6 March 1984, Page 2

Dairy Board says outlook is terrible

PA Wellington The diary industry’s outlook for 1984-85 is “terrible,” the chairman of the Dairy Board, Mr J. T. Graham, told the New Zealand Co-operative Dairy Company ward conference in Hamilton yesterday.

He said that the board could not see how to avoid a deficit which in the absence of some national support would exhaust its savings at an inappropriate rate. “Yon will note that I said national support. I meant just that—not National Party support, not Government support but an understanding from the community that its most efficient and internationally competitive industry is under attack,” he said. Mr Graham said that New Zealand benefited from the dairying industry’s successes and New Zealand’s high living standard and consequent high internal costs were part of the result of the benefits. On the basis of a basic price of 340 c a kilogram for milkfat, the board’s deficit in its 1983-84 season would not be unendurable, he said. It was likely to be about $25 to $3O million, “although if we write all our stocks down to the figures we may see facing us in the coming season, it could be considerably more.”

Mr Graham said that total earnings for the 198485 trading year could be down as much as $2OO million from an estimated $1.4 billion in 1983-84 to about $1.2 billion in 1984-85. To survive, and to maintain a payout that would

sustain the industry with its efficiency unimpaired, it was vital that export earning capacity be expanded as prices recovered. The board was being forced to work under the shadow of heavy United States and European Economic Community surpluses. “Despite the backdrop of heavy surplus stocks in the United States and E.E.C. with co-operation, especially at trade policy level, it is still possible to contain the pressure from heavy stocks if it is firmly demonstrated to all concerned that this surplus problem will be resolved internally with a resort to export”

The threat to the international market from United States surpluses could ease by 1985. Half of the deficit was from local market sales of butter, where the board was caught by the price freeze, said Mr Graham.

He said that the board believed that dairy farmers would require a payout of up to 365 c a kilogram for milkfat this season to maintain total farm expenditure and leave a residual income of $21,000, about the same level as for 1982-83.

Meanwhile the board had, at the invitation of the Government, proposed an altered system of supplementary minimum payments whereby the dairy industry would meet the difference between a “correctly established” basic price and the market return or S.M.P. level from reserves. Changes in the system were needed, he said.