PRIMARY PRODUCE

Kaikoura Star, Volume LXIV, Issue 65, 21 August 1944, Page 2

PRIMARY PRODUCE

EXPORT PRICES. 'STATEMENT BY HON. B. ROBERTS. The following statement regarding primary produce prices has been issued by the Hon. B. Roberts (Minister of Agriculture and Marketing):— For months past farmers in New Zealand have been distributed by comparisons between the prices paid for New Zealand export produce and prices paid for the produce of other countries. These comparisons purport to show that New Zealand farmers have somehow been penalised in the arrangements made for the sale of their produce. A clearer view of the actual position was taken by the President of the New Zealand Farmers’ Union (Mr W. W. Mulholland), in his presidential address to the Farmers’ Union on July 19. Mr Mulholland said that the resentment about the price situation had been 4 4 added to unnecessarily by published.' statements of comparisons which have not been altogether correct.” One source of error instanced by Mr Mulholland was the fact that obviously local market prices for beef in Aus tralia were being compared with New Zealand export prices, and, he added, 44 it would have been just as fair to have compared the local market prices here last spring, ranging up to 70/ per 1001 b as though they were the normal prices. ’ ’ These misleading price comparisons have been so widely publicised and so many false conclusiions have been drawn from them that I will deal with them in detail.

The most serious error of all these coiD|parisons is the fact that they make no allowance for difference between New Zealand farm costs and those of other countries. What matters most to the primary producer is not so much the price he receives for his produce as the margin between those prices and his costs. Here in New Zealand we have been more successful than most other countries in keeping down the level of farm costs.

In New Zealand of pounds have been provided to subsidise primary industries. These subsidies have obviated the need for higher prices by keeping farm costs low. With low costs and a reasonable margin between his costs and his prices the New Zealand farmer is better off than farmers in other countries who have high prices but little margin above their costs. Another source of error in the false price comparisons which have received so much publicity is, as Mr Mulholland pointed out, that export prices for New Zealand produce have been compared with donjestic prices of other countries. The comparisons have also ignored the fact that before the war there were always differences between prices paid for New Zealand produce and prices paid for produce of other countries. For example, Canadian cheese has always been at a premium over New Zealand cheese, just as New Zealand dairy produce has enjoyed a premiumover Australian produce. Nor has any account been taken of the fact that some of the countries for which prices are quoted normally export only insignificant quantities of the product under comparison. A particularly careless error, to say the least of it, is that which disregards the different stages of the marketing process at which the price is taken. In other words, the critics ignore the manner in which prices to the producer are compared with prices a long way down the scale from producer to consumer.

Another significant source of error is the fact that export prices paid under bulk purchase arrangement have been compared with payments under Mutual Aid Agreements. Let me refer particularly to this last point, not only bescause it is a source of misleading comparisons, but also because there is still a very widespread misunderstanding of the financial side of Mutual Aid. There are, I know, many complexities in the Mutual Aid system, but the essence of it can be stated fairly simply. Take the case of butter supplied by Canada to Britain under Mutual Aid. This butter is bought by the Canadian Government from Canadian factories at a price determined by production costs in Canada —which, incidentally, are much higher than production costs in New Zealand. This butter is sent to Britain and sold by the British Government to the trade at a price which bears no necessary relation to the prices received by the ‘Canadian farmer in a country where costs are high. The Canadian price is in effect a domestic price, paid by the Canadian Government. The prices are simply not comparable to New Zealand prices. Canadian cheese is not 44 501 d” to Britain; it is supplied under the Mutual Aid Agreement. The same applies to the transfer of all commodities under Mutual Aid. Britain does not 4 4 buy” meat from the United States she is supplied with meat by the United States Government which pays the United States meat producer a price which has no relation to the terms of trade. >

There are, no doubt, other errors in some of the price comparisons which have been published, as, for instance, in not allowing for exchange differences. But it will perhaps be more use-

ful if, instead of trying to enumerate all the sources of error, I deal in detail with some of the comparisons mpre commonly made, and show precisely where they go astray. BUTTER AND CHEESE. The only fair comparisons that can be made of export prices for butter and cheese are between New Zealand and Australia. Canada and the United States are normally importers of butter. There have been occasional shipments of but-

ter to Britain from Canada, as from Argentina, but these have been negligible in quantity and are not a factor in the world market or in world prices. Similarly, with regard to cheese. The United States and Argentina are not normally exporters to the United Kingdom. Canadian exports of cheese to Britain have, before the war, brought higher f.o.b prices than

either New Zealand or Australian cheese. This was because Canadian cheese had an established reputation on the English market long before New Zealand cheese was exported, and because Canadian cheese, normally a fully matured cheese, was sold in a higher-priced market than the relatively immature New Zealand cheese. But Canadia cheese is now exported to the United Kingdom under a Mutual Aid Agreement, which, as I have already explained, makes it impossible to conj,pare New Zealand f.o.b. prices with the payments received by Canadian farmers. Even Australian exports of cheese, though more comparable with those of New Zealand as to quality -aud price, are relatively small in quantity. However, let us compare the f.o.b. sale prices to the United Kingdom of Australian and New Zealand butter and cheese. Expressed in New Zealand currency, the price of Australian butter is 15.30 d per lb, while the price of New Zealand butter is 15.59 d per lb. Australian cheese is sold to Britain at 9.37 d per lb, New Zealand cheese at 9.72 d per lb. In both cases New Zealand is receiving a premjium over Australia in the export prices for these commodities; the difference is based on market premiums which existed before the outbreak of war. When returns to the farmer are considered, it is necessary to take account of the value of all Government subsidies to hold down farmers’ costs, either directly or indirectly. When there is added to the basic guaranteed price the various cost allowances which have been made since the outbreak of war, and the value of all the subsidies for the benefit of the dairy farmer, and this total is compared with correspond ing Australian figures, New Zealand no longer appears in an adverse light. Comparisons of prices for Australian and New Zealand dairy produce must also take into account the fact that Australian dairy companies obtain proceeds from the local market where wholesale prices are higher by 2d per lb than f.o.b. parity, and higher than local market prices in New Zealand.

BEEF. In the case of beef, the only countries for which export prices can be compared are New Zealand, Australia, and Argentina, and here, again, the comparisons can only be made on the basis of the full United Kingdom f.o.b. purchase price. In New Zealand this is made up as follows:—Priices paid to farmers at port works, 34/ per 100 lb; credited to Meat Pool Account and Meat Stabilisation Account, 5/10. United Kingdom f.o.b. price 39/10. The United Kingdom f.o.b. price for Australian beef is approximately thj same as this. The corresponding price for Argentine beef is 40/6 per 100 lb. This represents the normal pre-war premium which Argentine beef obtained on the United Kingdom market. It would have been just as fair, as Mr Mulholland rightly pointed out, to have compared the New Zealand local market price last spring, ranging up to 70/ per 100 lb with those quoted for Australian States —iviz., Queensland 40/10, Victoria 50/7, New South Wales 45/6.

PORKERS AND BACONERS. In the case of pork and bacon the compariisons that are commonly made are not valid. In the first place the United States prices commonly given are not borne out by the United States official publication 4 4 Crops and Markets,” but even then none of the United States prices quoted can be correctly compared with the United Kingdom purchase prices for New Zealand pork and bacon, because all North American deliveries of primary produce to the United Kingdom are made under Mutual Aid agreements, and so provide no f.o.b. prices to compare with ours. It follows that comparisons with quotations of Canadian prices for pork and bacon are equally invalid. Similarly, the prices commonly quoted for Australian do not have any relation to the United Kingdom purchase price since Australian pig meat is inquired for civilian and miliitary requirements and there is no question of the United Kingdom purchase price foi Australian pig meat. Let me ,in conclusion, go back to something I said earlier in this statement. What matters most to farmers is not the prices they are paid for their produce, but the margin between those prices and their costs. I know that during this war the farmers of New Zealand, have met heavy demands on their productive capacity in spite of many serious difficulties. I know that some of them feel that their monetary reward has not always been commensurate with the effort they have and that consequently the fictitiously high prices paid to farmers in other countries make them restive. But I would urge them to give full consideration to what I have just said, and not chase after the false prosperity of inflated prices wiith its inevitable accompaniment of inflated costs. Let the farmers of New Zealand look back at the history of their industry between the two wars, and ask themselves what they ever gained from boom conditions except a brief and hectic prosperity followed by a long struggle against adversity. This Government believes that in the long run the wise policy for the farming industry is to stabilise costs and prices at levels which will assure to the farmer a good living and which will enable the industry to hold its own in competition with the farming industries in other countries. __________