DAIRY PRODUCE.

Manawatu Standard, Volume LV, Issue 80, 2 March 1935, Page 5

DAIRY PRODUCE.

FORWARD BUSINESS LACKING. AA’ith the easing of the spot position, there has Been no forward inquiry' this week, report A. J. Mills and Coy., Ltd. Some offers have been put through to London at lOd a lb, f.0.b., for March shipment, but no business has eventuated. Market prices ruling at tho close of business on Thursday are as follow, last week’s prices being shown in parentheses:—Butter market is steady. New Zealand, finest, 80s, 81s (84.;, 83s); firsts, 795, 80s (83s, 82s;. Australian, choicest, 80s, 81s ( —, 84s); first grade, 795, 80s (83s, 82s). Danish, spot, 110 s (110 s); f.0.b., 90s (90;). Cheese market slow. New Zealand white, 4{x>, 47s (47s 6d, 48s); coloured, 465, 46s 6d (475, 47s fid). Canadian, white, 625, 64s (62s 6d, 645); coloured, 58s, 60s (58s, 60s). Mills and Coy. also report Ihat the receipts of dairy produce into grading store during tho week ended February 23 show a decrease of 23j per cent, in butter and a decrease of 20 per cent, in cheese compared with those for the corresponding week of last year, the figures being as follow: — 1934 1935 Dec. Butter .(boxes) ... 140,000 107,000 33,000 Cheese (crates) ... 37,500 29,700 1 7,800 Joseph Nathan and Coy., Ltd., have re- ] ceived from London the following cabled advice, elated February 28: —New Zealand butter: 8L per ewt. Quiet. New Zealand cheese: White, 46s to 46s 6d per cwt.; coloured, 455. Bettei demand. BUTTERFAT. COST OF PRODUCTION. A NATIONAL PROBLEM. Described as “a national crisis’’ the parlous condition of the dairy industry of New Zealand is directly • attributable to low prices. Markets for New Zealand produce overseas are beyond the Dominion Government's control. AA 7 ilh the object of enabling- the primary producer and especially the dairy farmer exporter to meet tho low price situation the Government has takon certain steps, the subject of considerable controversy. All this is admittedly trite, but the fact that so much of the Dominion’s prosperity depends upon tho price of butterfat is sometimes lost sight of in the dust' of debate. Given a London price for New Zealand butter of 100 s to 110 s per cwt the economic difficulties of the Dominion would, in large part, be removed, says an exchange. Tho "circvimstanccs of the Now Zealand dairy farmer, difficult as they are by reason of the low return for his produce, widely vary. AH are not in the same plight; all are not- mortgaged over head and cars. Mr E. J. Fawcett, farm economist of tho Department of Agriculture, has gone exhaustively into this important question of the costs of producing butterfat. In the Department’s Journal he discusses certain factors in those costs and suggests “some standards which may give farmers a reasonable basis of comparison with their own operations.” The discussion is based on 1933-34 season’s records of 550 dairy farms situated in tho North Island. The averages given for those 550 farms show that the herd performances and the number of cows milked per 100 acres are above Dominion averages for tho season, and tho consequent average production oi H'7.731b of butterfat per acre is comparable with the higher grade dairy farms of the Dominion. The production standard, Mr Fawcett holds, should not be less than 1201 b of butterfat per acre. To obtain this approximately forly-eiglit cows averaging 250ib of butterfot must be milked per 100 acres. It’ this production standard were attained tho Dominion’s 1933-34 season’s- output of 427,000,0001 b of butterfat would be produced by milking 1,700,000 cows on 3,5t0,000 acres instead of 1,816,000 cows on approximately 5,000,000 acres, as. was the case. WORKING EXPENSES.

Mr Fawcett shows that a reasonable production standard cannot-be maintained unless money is spent on the upkeep o: farms and herds and farm operators, oi owners are in receipt of at least a sustenance allowance for living purposes. lie asks, “What is a reasonable allowance to. working expenses and for the reward o: labour 1” and shows that district avoiages of main working- costs range from approximately £2 4s to £3 per cow and the average cost over the whole 550 farms in review was £2 12s per cow. '1 his include, costs of cultivation, fertilisers, casual labour, repairs to plant and machinery, power, materials and sundry items. Depreciation should be allowed for, and in the farms under discussion it amounted to 13s 6d per cow. Local rates varied from 3s 6d to 14s 6d per cow or an average over the whole group of 8s 9d per cow. Stock feed purchased averaged 5s 3d pci cow. AA 7 hen all costs under the heading “working expenses” are aggregated, it is found ttiat the average costs for the vari ous districts have a range of variation between districts of over £1 per cow, oi from £3 16s 3d to £4 19s bd, with an average over all of £4 6s 6d. On a pel pound of butterfat basis, tho variation ho tween district averages is from 3.6 to 4.7 d per pound, with an average overall of * 4.1 d. It can thercfon be accepted that on well-managed farm.producing- 1291 b of butterfat per acre the costs of production as 'enumerated unde: the foregoing- headings are at least 4d per lb of butterfat produced, stated M; Fawcett. In dealing with the coit cf la hour he remarks “it can be accepted the. under tho conditions prescribed in thi analysis a labour cost of 3id per lb. ol butter!at should provide an annual pay nient of £IOO per year per male unit oi labour, if the size cf tho farm and hero is such that labour can bo employed witi; a fair degree of efficiency. AVo therefore arrive at tho position whore wo can say that working expenses and labour absorb 7jd per pound of butterfat on wellmanaged farms producing 1201 bof bul- - per acre.” INTEREST ON CAPITAL. As to interest on capita! Mr Fawcett remarks: “There is no recent informatio; available to show tho actual interest bin den on dairy farms. It is known thai lull liabilities cannot bo met ui, a great percentage of cases. As to the 550 taim; dealt with, the Government valuations vary from £l6 to £36 per acre with an overall average of £26 12s per acre wh.lsi stock and plant vary between £6 12s am £9 per acre, giving a total capitalisation basis between. £22 and £44 per am or a general average of £34. Ibis amoum equals an annual charge of £1 14s per acre on a-5 per cent, interest basis, or 0.4 d pc', lb of butterfat if 1201 b of fat per acre is produced. This added to working expense and labour reward would bring the tota cost per lb of butterfat to 10.9(1. If per cent, of this assumed capitalisation is farmers’ equity then the cost would b. reduced to 10.22 dat 5 per cent. If tin interest were reduced 1 per cent, the co-u per lb of full capitalisation would bo 10.2 a or with 20 per cent.. equity, 9.66 d pe. lb. Tho group of farms taken for exam ination are above tho average for Nev. Zealand, which is probably about 901 b, m stead of 1201 b, of butterfat per acre “Small woll-developed farms have a • higl capital value and owing to the limitec gross income even at maximum, produo tion, there is little or no surplus for in terest, aftor working expenses are me) and tho owner and family extract a ban living. , , “The analysis proves that low per acn production is associated with high produc tion costs, and a low-intorost-paying cap acity .. . and demonstrates tlie neces sity of considering any farm propositio: individually when reviewing the ability o the farmer to meet his liabilities. “The costs covered under working ex penses cannot be disputed. If these an not maintained at -a reasonable level In: security represented in farms is undermined to the ultimate detriment of all con corned. It mav be possible for ’ dairyine: to "carry on with a lesser labour rotvarc than the amount used in this discussion.’ Mr Fawcett concludes, “If is possible end the position is so controlled that r lesser amount is a.lowed, the interest sur plus would be improved accordingly. Tlir only other factor concerned is gross income per lb of butterfat sold . . . Unlcs unforeseen circumstances arise there is m reason to be more optimistic than is denoted by the estimate of a final gross incomo of 9Ad per lb for. butterfat, which includes average returns for pigs.”