DAIRY PRODUCE

Manawatu Standard, Volume LVI, Issue 200, 14 July 1936, Page 5

DAIRY PRODUCE

PRICE MARGINS FIXED. TO ENCOURAGE QUALITY. Per Press Association. WELLINGTON, July 13. An announcement was made to-day by Mr G. A. Duncan, acting-Director of Marketing, regarding the price margins fixed by the Government in respect of the different grades of butter and cheese purchased by them lor export under the guaranteed prices plan. “The Government,” said Mr Dun- ' can, “are desirous of maintaining and improving the quality of New Zealand butter and cheese, and they have decided by means of a system of differential price margins based on quality to encourage the production of the best types of both commodities. At the present time creamery butter is classed for export under three grades: Finest, first and second. Whey butter is classed under two grades: First and second. Cheese is classed under three grades: Finest, first and second. “When butter and cheese are marketed in England the prices realised vary according to the grades assigned. Price variations occur also within the respective grades. The range of points for the three grades of creamery butter is: Finest, 93 and over; first, 90 to 921 ; second, 80 to 89-J. The range for whey butter is: First, 88 and over; second, 80 to 87$. The range for cliee.se is: Finest, 93 and over; first, 91 to 92$ ; second, 80 to 90$. it was realised that if under the guaranteed prices plan differential payments for quality were based simply on grades dairy factory companies would have no incentive to strive to secure higher pointings within the respective grades. In some cases there would be a tendency to save costs by making less frequent collections oi cream and by less efficient methods of manufacture with a resultant falling oil ill the quality of the product. “Under the existing marketing system the margins received for quality provide some incentive, though these margins are by no means constant. The Government by fixing constant margins aim at providing a more distinct and tangible incentive to quality production. At the same time it is obvious that the margins must bear a reasonably close relation to the expected market realisations. It was recognised that the industry was divided in opinion regarding the basis on which differential price margins should be fixed. One section adopted the view that no distinction iu price should be made between the different qualities in the same grade. Another section held that the price differentials should be made on half points throughout the grades and that the differential margins should bo well marked with the sole object of encouraging quality and without regard to market realisations. CLOSE EXAMINATION.

“The Executive Commission of Agriculture had a series of discussions with the officers of the Dairy Division of tlfe Department of Agriculture and the Department of Scientific and Industrial Research and members of the Dairy Board. Tile matter of grades and margins was carefully considered from all angles and a recommendation was made to the Minister of Marketing (Hon, W. Nash) that the grades should remain as at present, but that in addition to the fixation of price margins ior the different grades differential prices should be fixed for higher and lower scoring cheese and creamery butter in the finest and first grades. These grades represent by far the greater part of our output, the volume of second grade being practically negligible.

“There is a range of six halfpoints for first grade creamery butter and of lour lialf-points for first grade cheese, while for both creamery butter and cheese the range in the finest grade is from 93 points upwards. Though it was agreed that it would he inadvisable to alter the present number of grades it was considered that the range of half points was sufficiently wide to justify the provision of two prices for each of the finest and first grades.”

The price margins recommended to the Minister, and approved by him, said Mr Duncan, wore as follows: i CREAMERY BUTTER. Finest Grade — 94 upward plus Is 2d per cwt 93 to 93i basic guaranteed price First grade .92 to 921, minus 7d per cwt .90- to 914 ........... minus 2s 4d per cwt Second grade minus 7s per cwt M'HEY BUTTER. First. Grade — minus 9s 4d per cwt Second grade minus 14s per cwt CFIEESE. Finest Grade — 94 upward plus Is si<l per cwt - £2 to 935. plus Is 2d per cwt Fii-t Grade — 92 to 92j basic price guaranteed £1 to 91i minus 7d per cwt Second grade minus 2s 4d per cwt “The margins decided upon a.re thought to he sufficient to provide the necessary stimulus to quality production, hut at the same time regard has been had to the necessity of maintaining due relation to market realisations on dairy produce sold on consignment and to the grade differential prices recognised in the past in f.o.b. a.nd c.i.f. sale contracts. GRADING UNCHANGED.

“It should he made clear,” concluded Mr Duncan, “that what lias been decided upon does not alter the present grading system in any way. The number of grades, allocation of points to grades, and methods and standards of grading will remain the same. Butter boxes and cheese crates will be marked with the same grade marks as at present and no added marks will he affixed to indicate anything in the nature of subdivision of grades. These facts are stressed in order to remove the impression that the grading system is to he altered in some way. All that has been done is to recognise that under tlio present marketing system the market realisations show that price variations exist within the grades and that under a system of guaranteed prices provision must he made for similar price variations in order to maintain and stimulate production of butter and cheese of highest possible quality.”

Asked if lie could indicate the guaranteed prices for butter and cheese for the ensuing season, Mr Duncan saifl the Minister would make an announcement in due course. M’hat’ he had stated related only to margins above and below the guaranteed prices. He could, however, say that in the case of both cheese and creamery butter the range of grading points in respect of which the basic guaranteed price would be paid included a considerably larger percentage of our exports tliau other similar range.