DAIRY INDUSTRY

Nelson Evening Mail, Volume LXX, 31 March 1936, Page 9

DAIRY INDUSTRY

TO FINANCE GUARANTEED PRICES NO EARLY REDUCTION IN RATE OF EXCHANGE STATEMENT BY THE PRIME MINISTER GOVERNMENT NOT OUT TO MAKE PROFIT (United Press Association) WELLINGTON, This Day. No reduction in the exchange rate is contemplated in the Immediate fn= ture, according l to a statement made last evening by the Prime Minister, Hon. M. J. Savage. In discussing Ifie exchange problem as a whole, Mr Savage gave several important details regarding the scheme ol guaranteed prices, notably the in= tention of the Government to pro= vide finance through a special Dairy ludustry Account. “The question of exchange is one of the most difficult things the Gov= ernment has to face,” said Mr Sav= age. “It is so easy to raise the rate of exchange and so perplexing to know how and when to cut it down.”

The Prime Minister adhered to his statements made immediately after the election that it, was the Government s intention to lower the exchange rate as soon as possible, hut said it was realised that reductions might be dangerous if they were not made at the most suitable moment. A number of factors bad to he taken into consideration. For insfance, a large amount of forward buying was carried out. in wool and butter, and it had to be recognised that a sudden and arbitrary reduction in the exchange rate overnight might cut the ground from under the feet of buyers and leave them in the mud. Similarly, the effect on importers had to he considered.

MANY DIFFICULTIES TO P»E OVERCOME “From the beginning,” Mr Savage continued, “our policy has been to substitute guaranteed prices for the high exchange in such a fashion that neither the farmer nor anybody else will lose anything by the change. That is still cur poliev, but we realise that many difficulties have to be overcome before it can he put fully into effect.” The point was raised that it might not be possible to reduce the exchange rate until the guaranteed prices system was extended to all agricultural and farming industries. “I would not say that,” said the Prime Minister; hut he agreed there was a very great deal in that suggestion. At present it was intended to provide the machinery o! guaranteed prices only for the dairy industry. Wool growers and meat producers were not so much in need of assistance, hut although the prices foi meat and wool were reasonably good to-day. there was no telling what they were likely to be in a month’s time. The Prime Minister made it clear that under the Guaranteed Prices Bill, which is to he introduced in the House of Representatives this session, the dairy-farmer would not receive the benefit of the exchange He would receive something more. Payment would he made in New Zealand currency by the Government, which would take over the produce, and the payment would represent a substantial increase over what the daiw-farmer was getting now. in spite of the exchange premium on the London market rates. SPECIAL ACCOUNT Mr Savage said one of the principal features of the Bill would be the settin" np of a special Dairy Industry Account to finance the guaranteed price scheme. He agreed to the following hypothetical case as illustrative of its working: A farmer at present receives 84s a cwt sterling for his butter, which represents approximately 105 sin New Zealand curency. Under the guaranteed price he might receive, for the purpose of argument, 112 s in New Zealand currency, which meant that the Government would have to make up ii deficit of 7s. However, if the price of butter advanced, say, to 120 s on the London market, the return in New Zealand would be approximately 150 s. and the gain could be used in extinguishing any earlier liabilities under the scheme and. perhaps, in giving some increased benefits The Prime Minister stated that the figures quoted were used purely lor the purposes of argument, and no significance could he attached to them. NOT OUT TO MAKE PROFIT “I want to make it perfectly clear that tho Government is not entering into the dairy export trade for the sake o profit,” Mr Savage continued. It boils down to this —if prices are obtained which are higher than the guaranteed ■price in New Zealand "money. the balance will he paid into the Dairy Industry Account and used solely for the benefit of the dairy-farmers who, m the first place, will he responsible for the production. In no circumstances wil. the account be dissipated for any other * The Prime Minister also pointed out that forward buying at the guaranteed price on behalf of the Government would not be over a long period. Hie Government would have to he prepared for sudden fluctuations m the mßrk fJ even during next season and would have to be ready at any tune to make adjustments. Neither the farmers nor anyone else could he embarrassed to one set price for all time. Mr Savage was asked whethei the Government had considered fixing the guaranteed price on the basis o fan f.o.b. rate per cwt., instead of on a flat rate of so much per lb. butterfat. It was pointed out that. the former rate might prove more equitable m view o' the varying distance of dairy farms from port™ of export, The Prune Minister said there might he something in the suggestion, hut there would he ample Unm for that and other points to be Steel. The Bill tal -fill I" >» «»- ally considered between the Go'""; mnet and the Dairy Beard and tno Dairy Conference, These meetings would probably he held within the next week or so.