DAIRY PRODUCE

Evening Post, Volume CXXV, Issue 145, 22 June 1938, Page 12

DAIRY PRODUCE

ADDITIONAL PAY-OUT

APPROXIMATELY HALFPENNY PER LB

SURPLUS NOW ESTIMATED AT £113,217

(By Telegraph—"Post's" Special Reporter.)

NEW PLYMOUTH, This Day.

An additional payment approximating a halfpenny a lb on all dairy produce sold during the current season is to be made to dairy farmers, announced the Minister of Marketing (the Hon. W. Nash) when opening the National Dairy Conference this afternoon. After the adjustment of this pay-out, said the Minister, there would be an estimated surplus for the year of £113,217. Had no adjustment been made the estimated surplus would have been £1,014,686 on butter, less a shortage of £86,100 on cheese, leaving a net surplus of £928,566. The additional pay-out will absorb a sum of £815,349.

Mr. Nash also announced the constitution of the tribunal which the Government proposes to set up to determine the guaranteed price in the future.

GUARANTEED PRICE

MINISTER'S VIEW

ESSENTIAL TO PRIMARY

INDUSTRIES

At the outset the Minister outlined the history of the guaranteed price proposal, and said that his own opinion was that the adoption of the guaranteed price was essential to the future success of the primary industries. Its objective was to so stabilise the minimum income of the farmer that he could meet his working expenses and enjoy a standard of living related to the time, energy, skill, and experience used by him in producing the commodity necessary for the balanced progress of the Dominion. The stabilised income of the farmer, he pointed out, could only be achieved by like treatment to all other sections of the community who gave equal service to that rendered by the farmer.

"The procedure proposed for the distribution of the adjusted pay-out," said Mr. Nash, "will be to buy the butter and cheese shipped up to June 30 at the present price of 13id per lb for butter and 7.54 d per lb for cheese, and to then distribute to all suppliers a further pay-out for all butter made after July 31, 1937, and shipped prior to June 30, 1938, of a further .41d per lb, bringing the total price for the year up to 13.66 d per lb for butter. Shipments after June 30 will be paid for at this rate of 13.66 d per lb. For cheese, the pay-out up to June 30 will, as before mentioned, be 7.54 d, and will be a special payment for adjustment; .21d per lb for all cheese exported after July 31 of last year, and before June 30 of the present year. After June 30 of the present year covering the make up to July 31 all cheese will be purchased at 7.75 d (7jd) per lb. | "On the present evidence this should result in a pay-out for the year amounting to 14.38 d per lb for butterfat for butter and 16.38 d per lb butterfat for cheese. In all probability both these pay-outs will be exceeded on the average. . { • ! NOT ALL TO BE DISTRIBUTED. "It is not proposed to distribute all the money in the Dairy Industry Account, but to increase the price, the purpose being to give an opportunity for paying better wages and to make some compensation for any increase of farm costs. It may be that our estimates as far as realisation is concerned will not be correct, if so; the payout will still be made, and the realisation will be a debit in the Dairy Industry Account. If the realisation is greater there will still be a credit even of a small sum in the Dairy Industry Account.

"There is not the slightest sacrifice ,of the principle of the guaranteed price. We are paying out a little more this year than the sum originally fixed to meet the legitimate criticism with regard to the difficulty of obtaining farm labour at the price offering.

"We propose to increase the basic price of butter by .41d per lb, which will mean we will, pay 13.66 d per lb. We propose to increase the price of cheese from the present 7.54 d per lb to 7.75 d (7§d) per lb—an: additional .21d p"er lb. "These extra sums should for the average dairy factory result in an added pay-out of id per lb butterfat for both cheese and butter, so that the average pay-out should be for but;terfat for butter at least 14.38 d. It will probably be Is 2£d for butter and 16.38 d for cheese. # THE LOCAL MARKET.

"To meet the criticism that is sometimes made that the Government has

been selling on the local market at a price that benefits the consumer as against the producer, there is the fact that the estimated realisation over and above the export parity price for butter and cheese on the local market amounts to £100,000.

"The price of 118s, being the estimated realisation for the year, is for finest, but the sale of the lower grades will, it is anticipated, bring the average realisation down to 117s 6d. This figure in London, if converted with the saving on butter sold locally and the additional cost of local distribution in relation to the local price, shows a figure slightly in excess of 14Jd. This is the price at present charged by the Internal Marketing Department to the wholesalers to enable them to pay out to the dairy factory a sum equivalent to that which is realised if the produce is exported. "This pay-out is based on a careful study of costs and the sound position. Let us look at the procedure of estimating returns. A week ago 1 asked Mil G; Duncan (Director of Export Marketing) to give an estimate of the return for the year. He consulted with Mr. Davis, of the London sales division, and submitted a net all-round figure for the year of 117s 6d per cwt for butter and a possible surplus of £828,000. But prices tend to fluctuate as do critics and criticism. Last year I announced the price. The Auckland 'Herald' said that there would be a deficit of £2,000,000, and we were criticised for blindly jeopardising the credit of the country. A month ago someone said that there would be a surplus of £2,500,000. It is likely to be somewhere between £800,000 and £900,000, maybe less. Mr. Sinclair on May 18 said that f.o.b. prices were on parity at about Is 3Jd per lb or a pay-out of Is 5d per lb. This was based on 130s to 133s per cwt London, but a month has passed and the price is 119s to 120s. POOLING OF PROCEEDS. "I am taking it for granted—it is certainly in accord with the Government's wishes, and I feel it will" be in accord with yours—that the whole of the proceeds of the butterfat sales whether, in the form of butter or in the form of cheese will be pooled, and the premium provided for in connection with cheese of 2d per lb will be paid irrespective of realisation on the overseas market. The suppliers providing milk for butter and the dairy factories making the butter will realise that any break in the proportion of cheese and butter manufacture will inevitably tend to depreciate the price of the one or the other. It is the balance of production between the two, difficult as it may be to achieve, that makes it possible for the price of both to be maintained at reasonable levels.

Referring to butter, Mr. Nash said that the present position for this year's make was: Sales in United Kingdom, 93,140 tons; f.o.b. sales, 3693 tons; shipped not sold, 23,424 tons; estimated! balance, 20,743 tons; total, 141,000 tons; and cheese, sold to June 9, 48,381 tons; shipped to June 9, not sold, 16,318 tons; balance to July 31, 1938, estimated, 19,301 tons; total, 84,000 tons.

"Let us see the run of prices for this year," said Mr. Nash. "Starting on October 14 at 131s lid, it went to 151s 3d on November 4, but 880 tons only was sold at this price. The following week 734 tons were sold at 144 a Bd, but the price gradually declined to 106s 4d on January 27, when it prtarted on the upgrade again to reach a peak on May 19 of 131s 8d when the market commenced again to decline till the present 121s 6d on June 9. It is now 119s to 120s. The average for the year so far (June 9) equals 117s 4d, with sales of 93,140 tons. Cheese has ranged from 70s 4d to 64s 3d, and is now, June 9, at 69s Id with a tonnage of 48,381 at an average of 68s per cwt. BENEFITS TO INDUSTRY. "May I set out an example of the benefits that have accrued to the industry by the appreciation of prices overseas and by the orderly and regulated procedure in the Dominion and the regulated marketing in the United' Kingdom and other countries. Let me

give you an example of one farmer: I These details cover six years:— ' - Sales Net Year. Total Wages. Profit. 1933 .... £583 £98 £175 1934 .... £510 £95 £189 1935 .... £530 £84 £270 1936- .... £725 £84 £385 1937 .... £822 £116 £420 1938 .... £867 £120 £570 "The labour is hired labour and it is an unencumbered farm." PRICE TRIBUNAL. Mr. Nash said that the Government proposed to set up the tribunal asked for. It would consist of a Judge of the Supreme Court, a representative of the Government, and a representative of the dairy industry. The representative of the industry would be appointed by the Government on the nomination of the industry, but he would suggest a conference between the Dairy Board, the National Dairy Association, and the South Island Dairy Association to select the man. Any representative person nominated by this committee would be appointed. DEFICIT ON WORKING. "In the report of the Marketing Department presented to Parliament during last session I announced the estimated deficit on the year's working as £548,479 19s 9d," continued Mr. Nash. "This sum has now been reduced to £272,108 19s 3d. Owing to an advance in prices subsequent to July 31, 1937, the surplus realisation on creamery butter was £17,083 8s Bd. The surplus realisation of the cheese sold subsequent to July 31, 1937, was £108,015 4s 4d, making a total of £285,098 13s for both butter and cheese. This sum, deducted from the figure in the Marketing Department's report, gives a deficit of £263,651 6s 9d. This deficit is increased by the loss on sales of whey hutter, amounting to £248 17s 3d, premiums paid for staff annuities ,*£ 5380 3s 3d, and payments to manufacturers of special milk products £2828 12s. That malces a total of £8457 12s 6d. Adding these sums to £263,651 6s 9d gives a final deficit of £272,108 19s 3d.

"Quite a lot of statements have been made in regard to the sale of butter for consumption in the Dominion at a lower price than London parity. The evidence does not sustain this charge. Actually the realisation of sales of butter in the Dominion will as closely approximate overseas prices as it is possible to be worked out.

"As I mentioned previously, the estimated surplus in the local marketing account will be £100,000. This sum has been paid by the consumers of the Dominion and represents very closely the Jd a lb additional price to be paid for the current season's make of butter and cheese.

Following the procedure of last year to keep the Government's undertaking to provide a differentiation of 2d a lb' between butterfat for cheesemaking and butterfat for butter, arrangements will be made when the full figures are known from the factories of the Dominion' to provide, if necessary, a further sum, to enable this guarantee to be carried out. MARKETING SYSTEM. "The marketing system overseas is accepted by authorities as being the best procedure 'that has yet been inaugurated to eliminate wasteful and speculative competition and to ensure that the best possible price that can be obtained from the consumer is obtained. The advantages of the new marketing procedure are real. Every dairy factory manager who \ has had long experience knows the inevitable drive when prices are falling to get rid of all stocks on hand. This in the past has always brought about a catastrophic fall in prices. Today, the stampede, to sell, and that consequent catastrophic fall, are things of the past, I believe. PRINCIPLE NOT ABANDONED. "It has x been said that the guaran-teed-price principle has been abandoned," continued Mr. Nash. "It i 3 not true. The principle remains that the Dairy Industry Account stands on its own. The Government does not propose to touch the Account in any way. The adjustment of the price for the current season that I have announced this afternoon does not break the principle. It is an increase in the price to meet some of the added costs that are known, and to some extent to provide a sum to enable the farmer who does employ labour to pay a higher rate of wages than he has previously been able to offer.

"Some statements have been made regarding tariffs and the need for promoting secondary industries. This has been linked up with a suggestion that buyers of our primary produce in the United Kingdom might resent the establishment of secondary industries in the Dominion to the extent that they would refrain from purchasing our goods. One of the difficulties that the manufacturing industries have had to face is that there has been during the past year a greater influx of imported commodities.

"I have affirmed before, and I am affirming again here, that we must have a more balanced economy In New Zealand. The future of the Dominion depends not only on the development of primary industries, but also on the development of secondary industries, and as long- as we keep to the principle laid down and previously enunciated, of taking from the United Kingdom to the full goods equal in value to the goods which we sell to the United Kingdom after provision is made for interest and debt redemption, then there can be no complaint by either side. REALISATIONS THIS SEASON. "We are estimating that realisations

from the sale of butter overseas this season will amount to 117s 6d per cwt, and for cheese to 66s per cwt. The realisation of butter sales shows a surplus over the price originally fixed of £914,666. If to this is added the estimated surplus of sales in the Dominion of £100,000, we get a total surplus of £1,014,666. From this it is necessary to deduct the estimated deficit on cheese amounting to £86,100. This will leave a surplus of £928,566. The adjustment of. prices, as announced today, will absorb £815,349; therefore the surplus, if the estimate is proved to be correct, will be £113,217. The adjustment will be made on all butter and cheese exported, and on all butter and cheese sold on the local market.

. "Two contributing factors to the appreciation in prices overseas have been trade with Germany and the market in Canada. The total sales to Germany amount to 58,112 boxes, the price realised being £162,161. MARKETING PROCEDURE. "There has been much discussion regarding the savings in the new marketing procedure as compared with- the old," said Mr.. Nash. "An analysis shows that the actual saving on butter, details of which I will be presenting to Parliament in the Primary Products Marketing Report, amounts to 12.89 d per cwt, or a saving on export of 150,000 tons of £161,125. Correspondingly, the saving in cheese marketing costs represents 8.275 d per cwt which, on an 85,000-ton export trade, amounts to £58,614. The two sums together will represent a total saving to the industry of £219,739 a year on the export trade under the new marketing procedure as compared with the old.

"One of the strongest features of last year's criticism was the fact that we were—"Unfairly, I think—indicted by some of our enemies because we were paying less for produce than it was realising in London, but some critics, as soon as we decided to meet some of the legitimate criticism and to make a further payment to cover farmers' costs, immediately affirmed that the guaranteed price principle had been abandoned. You will agree that it is impossible to satisfy this type of critic.

"During last session an amendment was made to' the Primary Products Marketing Act to enable the- Government to overcome some of the procedure in connection with local marketing and retail trading. It was decided that it might be necessary in certain circumstances to alter the price. This, in the main, had no relation to the price to be paid to the dairy farmer, because there was a specific statement in the Act that' if a contract to. pay had been entered into, then the price could be increased but could not be reduced. There has been some discussion regarding this principle; ' It has been affirmed that. the Government could : under this section of the Act reduce the price to be paid to : the farmer,. and legal minds, some of them very, able, have affirmed that that is correct. But' let us examine this point- The whole principle centres on our obligation to pay. It is said that there is no obligation to pay by the Government until the commodity for export has been placed, on board ship. That may be correct, but it almost appears to me that at that point, If the obligation to pay has been created by an Order in Council fixing the prices for the whole season's manufacture, then the only way we could escape that obligation would be by not exporting butter and cheese. It may be that the legal fraternity is correct, but as I see it the price fixed by Order in Council must apply to all butter and cheese exported after July 31, 1937. It does not appear to me, therefore, that the price can be lowered to the producer during the season."