Surplus Exports Problem

Manawatu Times, Volume 66, Issue 84, 8 April 1941, Page 8

Surplus Exports Problem

• Address to Chamber of Commerce

HOW TO FINANCE Delivered before the Palmerston North Chamber of Commerce at its monthly meeting held last evening was a comprehensive statement by Mr. Herbert A. Seifert upon the surplus exports problem. It was contended that current Ministerial statemeuts upon the regulations governing admittance of stock to freezing works were concerned solely with implementing the Government's promise to producers to purchase all this season’s produce. These left untouched the grave problem of surplus exports for a full two seasons yet to come. Emphasis was placed upon that period, it beiug declared that little if any casement in the shipping position could be hoped for at an earlier date. Figures were quoted in support of the contention that a crisis as great as that of the 1951 depression was to be faced, unless steps were taken to stabilise our national income. At the samo time warning of inflatiou probability was given unless great care was employed in working out a financial policy to safeguard against such an undesirable outcome. The nature of the shipping problem was so described. Dependence on Britain. Our exports to Britain, stated Mr. Seifert, were valued at £63,425,000, and amounted to 88 per cent, of the total. Included therein was all that we shipped in refrigerated cargoes. The total balance of our exports —those not to Britain—amounted to but £8,778,000, this including both foreign and inter-Empire trade. Destinations of this group of exports were: United States of America and Pacific Islands, £3,000.000; Canada, £1,750,000; British Asia (80 per cent, to India), £950,000; foreign Asia, £10,000; Africa, £60,000; Australia, £2,200,000; and to Europe (mostly to France), £718,000. The complete loss of trade to Europe must be considered a set-off against hope for gains to be made elsewhere. There has been considerable expression of hope that greatly-expanded exports might be sent to our customers other than Britain during the shipping crisis. Unfortunately, however, the grim fact must be faced that the prospects for this are not hopeful. For one thing, the shipping shortage is world-wide, and secondly our problem concerns chiefly refrigerated tonnage, which is in specially short supply. Then again, even were our exports to North America doubled the gain they would be but small compared with the loss faced on our trade with Britain. As to exports to Australia, one cannot be hopeful of any great expansion in their figure. “Safe Exports.’’ Fortunately the Dominion is assured of a considerable export income under the heading of what may bo termed “Safe Exports.” A first group of these is gold and silver, £2,000,000; exports, not to Britain, £9,000,000; wool, £15,000,000; giving a secure total of £26,000,000. The figures for exports to places by Southland farmers as most unsatisfactory,” said Mr. Alex Derbie, general manager of the Southland Frozen Meat Company, in commenting today on the announcement by the Minister of Marketing that wethers and ewes up to 521b*. in weight might be killed at South Island freezing works. He said that at the weights stipulated not more than about 10 per cent, of the ewes offering could be killed aud the task of drafting lightweight sheep would be practically impossible. “The position in Southland of the weights of ewes is well known to the authorities because when I was in Wellington last week 1 made a point of making available the average weights of sheep killed,” Mr. Derbie said. “At one of the company’s works the ewes killed so far this season averaged 601bs. and at other works the average was 58.91 bs. The weights would tend to increase as the season progressed because of the satisfactory feed position. The arrangements announced by the Minister are quite inadequate to meet the position in Southland.”

other than Britain is the 1940 figure. This may probably be increased by £2,000,000 or £3,000,000. Wool payment is safeguarded under the “commandeer” terms. The wool total figure, however, for 1940, is here reduced by £2,000,000 ou the estimate that such a. value of wool goes under the group of exports termed “not to Britain.” The second group of what may be termed “Safe Exports” comprises the following: Cheese, £9,876,000; casein, £58,000; dried and preserved milks, £120,000; gelatine and honey, £42,000; peas, £109,000; seeds, £185,000; potted and tinned meats, £420,000; meat extract, £27,000; giving a total for this second group of £11,137,000. The “second group” figures are as for 1940, with but three exceptions; the cheese figure is increased by 20 per cent, on the estimate that production will be expanded by so much; peas and seeds are each reduced by 50 per cent, from the 1940 figure on the allowance that a proportion of these go elsewhere than to Britain and also that the shipping shortage may effect such commodities. The total of the above groups of secure exports is £37,137,000. This covers some 53 per cent, of the absolute record export income received during 1940. “Reasonably Possible” Exports. In addition to the above there is a further income which may be reasonably expected, though this is dependent on the refrigerated shipping position, but so far as we know at present it appears that we may reasonably count upon getting away 150,000 tons of meat and, by selecting the most valuable classes, this should return £10,000,000. One may assume also on the possibility of shipping one-quarter of our 1940 butter tonnage, Le., 33,000 tons, and this would then return £4,560,000. The total of these two figures is £14,560,000. If this be added to the “safe exports” total there is a grand total of £51,697,000. That is the export income we may presume upon for 1941 and also, one feels, for 1942. Should that figure bo realised then our export income will "be short by only £20,560,000 of the record 1940 income. The Gap to Bridge. The loss of £20,560,000 worth of exports arises almost wholly from inability to ship, in refrigerated space, just two products —butter and moats. Tho meats held up are worth £9,677,000, presuming production as for 1940. The butter held back would be worth £6,912,000. This butter figure is estimated somewhat optimistically, in that it presumes the doubling of the chees output (over 1940 shipments), which would reduce the butter tonnage by 47,000 tons, and there is also presumed an increased local consumption of 3000 tons. Together these would reduce the butter supply by 50,000 tons from 133,000 to 53,300. Then were onequarter of our 1940 tonnage shipped, shipped, 33,000 tons, there would have to be held in store here 50,000, worth the £6,912,000 shown above. The balance of lost exports, about £4,000,000, would be mainly of meat byproducts, such as hides, skins, pelts and tallow—such as were not shipped to foreign or Empire countries. Fortunately all these are storable goods. * To ensure the estimated export income for 1941 and 1942 we would require 371,000 tons of refrigerated shipping space (cheese 183,000 tons, butter 33 000 tons, meats 150,000 tons). This compares with 1940’s 581,000 tons, and shows a reduction of 210,000 tons, or 36 rer cent. When the matter is so viewed one is impelled to feel that in present circumstances it will be a very large order for Britain to provide us with even that reduced tonnage. Would it not be wise to estimate that no butter will be shipped, if cheese be expanded as estimated upon? In that event, we must count on a further loss of £4,560,000 and that added 33,000 tons of butter must be stored each year. Financial Problem. If it be decided to insulate the New Zealand economy, both farming and general, then huge financial problems must be faced. It would seem that the State must be prepared to pay out, say, £10,000,000 on meat, the great proportion of which must be destroyed (if not the lot), and that a return of no more than £2,000,000 can be allowed from it. Over two years there would be an outright loss on this of £16,000,000. As concerns butter, the situation is much more pleasant, for we have here a worth-while and storable asset. On the assumption that no butter be shipped for a full two years, then £23,000,000 must be in current advances against that stored asset. A loss, however, must be met on this, on account of storage costs, largely involved in the erection of new stores, and this wo estimate at 20 per cent., equalling £4,600,000. So, viewing the situation and planning the liabilities for a two-year term, and we believe it utterly foolish to expect to be “out of the woods” in a less time, the following financial provision must bo made:—• £. Meat surplus 20,000,000 Butter surplus 23,000,000 Butter storage costs .. .. 4,600,000 Sundry exports 8,000,000 Total £55,600,000 To be written o£E £20,600,000 Held as tangible asset .. .. £35,000,000 Jlegarding the meat surplus, caution advises against allowing for increased home consumption because so many men are soldiering abroad and their numbers will progressively increase over the two years. The tangible assets stated at £35,000,000 include the butter, some £4,000,000 salvaged from the boiling down of meats, and also the sundry exports that will have been stored, amounting to £8,000,000. War Expenses Account. It is held to be reasonable that the £20,600,000 shown as having to be writ-ten-off over the coming two years (£10,300,000 annually) should be charged to the War Expenses Account. As the whole £55,600,000 would be paid out—without a normal inflow of goods to be purchased—a risk of inflation is. present. This is in proportion