The Guaranteed Price Committee’s Figure; Minister’s Decision

Northern Advocate, 1 October 1938, Page 4

The Guaranteed Price Committee’s Figure; Minister’s Decision

QPEAKING AT STRATFORD TODAY, MR W. MARSHALL, ACTING CHAIRMAN OF THE N.Z. CO-OP. DAIRY COMPANY, IN ADDRESSING A MEETING OF FARMERS, GAVE A LENGTHY ADDRESS ON THE GUARANTEED PRICE. <

[ ,r/ J He dealt at length with the early meetings of the Guaranteed Prices Advisory Committee, its scope and its work.

“I should like to take this opportunity of saying that in my opinion, i the chairman and all the members of

229 farms wa? £6B per cow. The figure adopted by the 1 1938 committee j was £75 per cow., ! “Allowing interest at 4i per cent, and a production of 240 lbs of fat per cow, we obtained the figure of 3.375 d, per lb of butterfat,” said -Mr. Marshall, j “The £75 per cow capitalisation; 1 was accepted by the Minister, but by substituting 250 lbs for 240 lbs he reduced the amount to 3.24 d per lb.’' I On the question of production per j cow the figures submitted in various, statements ranged as follows: — New Zealand Year Book, 1938, from 19307 farms, 227 lbs; New Zealand Farmers’* Union, 227 lbs; New Zealand Co-op- Dairy Co., from 2487 farms, 238 lbs; Department of Agriculture, > from 229 farm?, 240 lbs; Southland farmers, from 15 farms, 235 lbs; New Zealand Dairy Board, Taranaki, .from 46 farms, 296 lbs; New Zealand Ddiry Board, Waikato, from 100 farms, 257 lbs; New Zealand Dairy Board, spread over Dominion, from 100 farms, 246 lbs; New Zealand Herd Testing

, the committtee carried out their work •with, a full sense of their responsi- ;- to the Dominion, the producers • and the Government, and the comunanimity reached is, I think, /evidence supporting tha~ opinion,” said Mr Marshall. : *The wording of the report was - carefully considered by the commit- ' tcfe and the quotation of some, porof it should help us to an underof the Work done and the : ■''■■reasons for decisions reached; dealing tfe generally with its finding the report

Unanimous Views. ■ -“'The committee submits a report Unanimous on all points. The evi- • defence, both general and statistical, | Iwas ..caretuliy and closely scrutinised

|>anci analysed; and the knowledge fepossdSsed by the members of the pJpommittee of the various phases of the pv dairying. industry in the different of the Dominion enabled apparBfefclled and the influence of local confjdiiions .to be .allowed for. The memlibers of the committee . realised the -“«desirafeility 'of deciding on standards efficiency and of costs measure* I iftent which, though probably not ap«;^Ucable! in detail to any particular farm, could nevertheless reasonably . /be applied as general standards to an, .efficiently managed farm in any part ' of the Dom inion. With regard to ''many matters of detail, evidence of facts was available, on .which a de■ori could be reached after eaph n of evidence had been given its per value. In respect of some other matters, however, insufficient * /factual data were available to enable . a, decision to be based upon’ them. " v These were largely, and of necessity, iafetters of opinion, and the members ’.of the cominiitee ffeely exchanged their views add the reasons for those views, and finally reached decisions they all could unreservedly acm '■ Judge’s Interpretation... ' r examination of the order of reference,’. in which' the learned Judge, . /\yho was chairman, gives a Comprehensive intrepretation of Sub-sec-I tion 4 .and 5 of Section 20 of the Primary Products Marketing Act, 1636; it l.i .is tbo long to permit of restatement iiS this 1 ai^icle;- blit thfi Conclusion which I reached was that when it

Association, factory returns • for alt New Zealand, 235 lbs. “It is difficult to see how on this evidence there is any justification for a higher standard than 240 lbs,” commented the speaker: After discussing the formula used by the Department of Agriculture in ascertaining the amount of butterfat that can be produced toy the various labour units, Mr. Marshall said the summarised figures submitted by the several witnesses who appeared before the committee, were:— Government Statistician, from survey of 19307 farms, 4540 lbs; New Zealand Farmers’ Union, 4540 lbs; New Zealand Dairy Board, 5135 lbs; New Zealand Co-op. Dairy Co. Ltd. returns from 2487 farms, 5135 lbs; Southland farmers, hypothetical calculation, 5250 :lbs; Department of Agriculture, from 229 pure cream farms, 6095 lbs. Careful Analysis. Mr Marshall said that careful analysis was necessary in deciding the value of these statements. He detailed the sorirces from which the various returns were obtained. It would be unreasonable to class an overwhelming proportion of those engaged in the industry as inefficient, and he asserted that the statement in the report to the effect that 5750 lbs. “is acceptable by all members of the present committee as being in conformity with the weight of evidence now available to it” was justified. "[ On this figure, taking a two-man farm as a basis and allowing £4/10/per week to the owner-farmer and £4 per week for the employees, the' labour reward became 9.22 d per lb, of butterfat. , - . ‘ ,

Rto the poiht of precise practical kttion, it was probably the most ilt enactment ever placed on the te ißooks of New Zealand. Is will be apparent if we continue points. (1) What constian efficient producer, working finder usual conditions and in normal ■ 'Circumstances. (2) What are usual [:•/conditions and normal circum--1 stances. (3) What is a reasonable > state of comfort for himself and his f family. fj > “Obviously there are no exact Pi'standards by which such matters can ;;be measured, they can only be de- / termined from an exhaustive investigation of conditions, circumstances [ and comparisons, and! when linked !/■ with the other considerations involved , inf the legislation, including all mati r -ters deemed to be relevant the difficulties become multiplied. “The functions of the committee were to investigate as fully as possible, /j arid in accordance with its Order of reference the several matters that it was required to consider, to determine reasonable standards of efficiency, I and to make recommendations based on. the results obtained from a consideration of all relevant data.” The Committee’s Objective r After reading a long extract from the committee’s report dealing with evidence, Mr. Marshall said that the /objective of the committee was to establish standards for the various |! phases of production of dairy produce, ■which,, it was hoped, would make possible a reasonable evaluation of the costs of production under whatever conditions existed from time to time. Production Formula I In considering the capitalisation p figure the committee had placed befjpre it a memorandum from the 'Valuation Department containing exfrom recent reports from disgiving valuations for the liilslr districts on a'per cow basis, iyf from £3O per cow in the BRecuanga county to £l2O per cow for Hnst . quality dairying land in the ■ts.uJiwat.u-Horowhenua district; to there must be added, HHHH stock and implements. decided on by the 1937 was £73 per cow. The figure, -.the New Zealand Dairy j 300 butter farms spread | New Zealand was £B3 per figure compiled by the New tjV'f Dairy Board from 100 Waiwas £62' per cow. The BHB9jKn>iled by the New Zealand from 46 Taranaki farms cow. The figure comZealand Co-opera-from 156 farms was lgure compiled by lira f . \gf'.cultU’ , o. from

This figure, however, the Government altered to 8.84 d, by increasing the production from 5750 to 6000 per unit of labour. Under heading ' “Standard Working Costs and Maintenance,” the figures submitted were:— Unanimously adopted by 1937 committee 5.07 Dairy Board on 100 Waikato farms y . 5.44 Dairy Board on 46 Taranaki farms 6.53 Dairy Board on 100 all-New Zealand farms 6.51 N.Z. Co-op. Dairy Co., Ltd., 156 all-N.Z. farms 6.51 Department of Agriculture, 229 farms 6.053 Committee’s Decision. The committee’s decision, as embodied in the report, was; — ■ “The committee devoted considerable time to the consideration of a standard measure of working and maintenance costs. Every item that could properly be regarded as coming within this category was separately discussed and was given its due weight. Certain items which bulk largely in the costs of particular classes of farms in certain districts are of less importance in the case of other farms in other districts, and accordingly an endeavour was made to construct a standard measure which, though not applicable in detail to any particular farm, would

in gross be of general application to all reasonably efficient farms. The

‘committee has decided that the standard amount per lb. of buttcrfat to be allowed for working and maintenance costs, including depreciation, is 5.695 d. An ascertained increase in costs since 1936-37, and the inclusion of new items, have brought ;the figure unanimously adopted by the former committee from 5.07 d to 5.695 d. The amount 'allowed for depreciation is .95d per lb. of butterfat. The committee is of the opinion that this is a reasonable amount to fix as a standard, and that the Allowance for depreciation should be regarded as a fixed allowance, especially when it is borne in mind that depreciation in respect of any farm is an item that does not vary in amount in exact ratio to increases and reductions in the volume of butterfat production on that farm. - ’ The figure decided on by the committee is .358 d per lb. less than the amount indicated by the Department of Agriculture. The Government reduced this allowance to 5.34 d, a reduction which bears no proportional re-

lationship to standards and amounts fixed by the committee, and it appears 1o indicate that it was the residue of the price it was decided to pay after the labour and interest amounts had been fixed by alteration of the standards. “In my opinion, having due regard to the evidence, there is less justification for this redu<Jtion than for either of the other two,” commented Mr Marshall. Pig Returns. The evidence submitted indicated that the return for pigs of 1.54 d per lb. cn butterfat production, as fixed by the 1937 committee, was correct; and it should be understood clearly that this is a gross figure.

j Interest on capital outlay is included j in the capitalisation item; depreciation 1 of piggeries and maintenance is allowed for in appropriate items, and pig | food is accounted for in working costs, j The labour of pig feeding and atten- ! tion to same was intended to be covered as being part of work to be done by each unit of labour producing 5750 lbs. j of fat. 1 Dairy Factory Costs . The evidence : submitted indicated that the 1937-38 allowance of 2.25 d per lb would cover the cost from farm gate to F. 0.8. of manufacturing butler, even allowing for .known increases also that the existing standard overrun of 21,75 should, remain unaltered. In the case of cheese, the 1937-38 allowance for 3.75 d per lb of butterfat is insufficient to meet the costs of the 1938-39 season, and ah increase to 3.50 d was made, and the differential increased so as to provide on a yield of 2.45 per lb of butterfat a return 2d above the estimated payout for butter with a standard overrun of 21.75. It is worthy of note, Mr. Marshall I said, that the gradings of cheese for the 1927-33 season show a reduction's , compared with the previous season of i 312 per cent., while those of butter '.show a/decrease of 7.59 per cent. This i reduction and further reduction being ’ experienced this year is a. matter for grave concern to the industry, and there is little doubt that difficulty

in obtaining suitable labour has been and still is a contributing factor, Mr Marshall said. The considered opinion of the committee, as stated iin the report, is “that labour is being attracted from dairy farms, and an adequate ■i supply of fresh labour to replace it is 1 not forthcoming.” He contended that the rate of £4, as recommended by the committee, was not a competitive rate

of pay or likely to prove attractive; Wages Not Attractive.

“The rate of £3 12/6 now agreed upon by the Minister of Labour will definitely be unattractive, arid in some cases a higher rate will have to be paid,” said ‘ Mr Marshall. “When this is compared with the wage of £4 8/4 and £4 10/ —wet or fine with a maximum of 40 hours work —which is now paid to registered unemployed working for local bodies, we are forced to realise the dependence of the industry on the labour of women and children, and are justified in anticipating that marginal lands must gradually turn from dairying with consequent further reduction 4n output.” Regarding the standard of living of the dairy farmer as compared wijh that of other sections of the community, the only evidence available was a statement of net income tendered by the Deputy Commissioner of Taxes,, compiled from employment tax returns where careful investigations had been carried out by inspectors, a summary of which is as follows:

1935, 500 farms with an average of 45.928 cows, £74.91 average net income; 1936, 500 farms with an average of 47.44 cows, £156.41 average net income; 1937, 500 farms with an average of 45.392 cows, £253.046 average net income.

An average per year of £154.788 works cut at about £3 per week. This net income included interest of the capital which the farmer himself had invested and unpaid family labour. Strong Case for Higher Price.

“It would, in my opinion, be correct to. say that from the evidence and data available, a strong case could be made out for a higher price than recommended and that the standards established represent the minimum that could be accepted. I wish, also to emphasise the fact that the increase of 1.23 d per lb on butter cannot possibly result in an increased payout of IJd per lb to producers because that is the maximum that a 21.75 overrun would give and against it there must be set increases in cost from farm gate to f.o.b. estimated to be .20d to .25d per lb,” said Mr Marshall. “It should also be remembered that all those producing below the standards

of efficiency decided on by the Government will receive a lower reward for themselves than £4 10/—and a roof over their heads.” Definite Statement Wanted, Mr Marshall concluded his address by drawing attention to the qualifications of the members of the committee, which he indicated were very high. “Mr Nash,” he said, “is reported as having said'at a meeting at Kimbolton that the committee’s recommendation was not given effect to ‘because it was wrong.’ That is a definite statement and one which I think the industry has a right to ask should be substantiated by authoritative facts and figures.”

Election Eggs, A touch of humour w'as given to the week-end shag drive in Hawke's Bay by the exhibition of a number of shags’ eggs in a shop window in Waipukurau bearing a card reading, “Election Eggs —Price According to Age.”