DAIRYING INDUSTRY

Nelson Evening Mail, Volume LXXI, 20 November 1937, Page 10

DAIRYING INDUSTRY

GUARANTEED PRICES FOR CURRENT SEASON FACTORS CONSIDER ED lFrom Our Own Parliamentary Reporter] WELLINGTON, 19th November. Factors taken into consideration by the Government in fixing the guaranteed prices for the current dairy season are recounted in the first annual report of the Primary Products Marketing Department, which was presented in the House of Representatives by the Minister of Finance Hon. W. Nash.

“The guaranteed price had to be such as would maintain obth the stability and efficiency of the dairy industry," states the report. "Both could he destroyed by a price that is either too high or too low. “Some 21,500 return forms were sent to farmers under the direction of the Government Statistician. Based on 19,307 full and complete returns sent in by farmers, the following information was derived: Variation in size of herds, average butterfat yield per cow and per acre, the dairy farm population, the incidence of employment on dairy farms under the headings of male and female family labour and hired labour and the distribution of male labour according to size of herd. This was the first comprehensive view ever obtained of the New Zealand dairy industry.

“A more detailed and intensive investigation was made of dairy farms by the Department of Agriculture from the point of view of cost of analysis. Of these 75 per cent, consisted of farms investigated by the depatment on behalf of the Dairy Industry Commission, 1934. The information supplemented and confirmed the broader survey of the Government Statistician. A detailed analysis was also made of dairy factory costs. PRODUCTION PER ACRE “A production per acre of from 100 lb to 1751 b of butterfat was regarded as the standard which could readily be realised by an efficient producer operating under usual conditions and in normal circumstances. On the basis of using adult male labour, 12,5001 b of butterfat was taken as the labour standard of efficiency for two units. Efficiency per cow was taken at 2581 b of butterfat and capitalisation, including unimproved value, improvements, stock and chattels at £73 a cow. The standard rate of interest applied to determine total interest charges was 4| percent. The standard allowance for working and maintenance costs was 5.07 per lb. butterfat.

“The standard for pig returns was 1.54 d per lb. butterfat, the report continues. This figure is probably below the average of efficient farmers, as the Dominion average was taken, including farms where no pigs are kept and farms supplying casein factories. “The allowance for factory costs and all other costs to f.o.b. ocean steamer was 2.25 d a lb butterfat for butter and 3.25 d a lb butterfat for cheese. In the overrun of 21.75 per cent, and the cheese yield of 2.45 c! a lb, there is a margin in favour of reasonably efficent factories working under average conditions. “The allowance on a two-unit farm for housing and other perquisites was 30s a week and labour reward for the farmer was fixed at £4 a week.

PRICES AND STABILITY “The history of the dairy industry shows clearly that high prices do not necessarily promote the stability of the industry because of the tendency to capitalise the benefits in inflated land and stock values. The guaranteed price should not be such as will induce persons to capitalise its benefits, especially as the trend of land and stock prices in 1936-37 was of a hardening nature. “The standards of efficiency are greatly crceded by the more efficient dairyfarmers of New Zealand and the allowances for working and maintainance costs are on such a scale that, if they are expended for the purposes specified, only an inefficient farmer or a farmt-- working under unusual conditions or in abnormal circumstances could fail to attain the average standards mentioned. Any excess of efficiepcy above these standards and any increase in pig returns represent an additional return to the farmer. It must also be remembered that an efficient farmer in usual circumstances and in normal conditions is fully protected from the vicissitudes of the external market. 1

ALLOWANCE FOR LABOUR “With the allowances for farm labour there is no justification for any unpaid or sweated labour to be utilised on any efficient dairy-farm in New Zealand, and, if there is any unpaid labour employed the farmer is increasing his own personal income. It should, of course, be stressed that there is nothing essentially reprehensible in the utilisation within reasonable limits of family labour. By the adoption of 62501 b of butterfat as the production of a full-time labour unit, a reasonable payment is provided for all labour units employed, whether male or female labour, members of the family or employees. The data collected shows that approximately only 20 per cent, of the labour employed in the industry is hired labour. “The new procedure has been organised for the purpose of inducing the average efficient farmer to work his holding and to pay him for his knowledge and experience and for time worked, while freeing him from the menace of price fluctuations.”

FINANCING PAY-OUTS The procedure adopted by the Primary Products Marketing Department in financing purchases of butter and cheese for export to the markets of the United Kingdom is outlined in the report. “Dairy factory companies,” states the report, “forward butter and cheese to the cool stores for export as in the past. The care of the produce in cool store is the responsibility of dairy companies, but supervision is exercised by the expert officers of the Primary Products Marketing Department and by the Government dairy produce graders

with a view to the preservation of the quality of the butter and cheese.”

Dairy factory companies may obtain advances from their bankers on produce in cool store awaiting shipment, at the bank’s best interest rates. The amounts advanced by the banks are as follows:

Creamery butter: Finest grade, £3 Os 6d a box; first grade, £2 19s 4d a box; second grade, £2 15s a box.

Cheese: North Island, finest grade, £4 19s 6d a crate; first grade, £4 17s a crate; second grade, £4 14s 6d a crate South Island, finest grade, £4 17s 6d a crate; first grade, £4 15s a crate; second grade, £4 12s 6d a crate . “Butter and cheese for export,” adds the report, “is allocated for shipment in accordance with the recommendations of the Dairy Sales Division in London, after consultation with the selling agents. The shipping programme is worked out by the department- and the Overseas Shipowners’ Allotment Committee, which meets regularly for the purpose of planning arrivals of butter and cheese at United Kingdom ports, in accordance with the agreed programme. Under the present system the department has been able to arrange a better programme of shipments to United Kingdom outports. “The financing of payments to dairy factory companies for butler and cheese is arranged through the Dairy Industry Account established at the Reserve Bank. The administrative, marketing, shipping, insurance, and other expenses of the department are paid from this account. The proceeds of sale of dairy produce are paid into the account, the final balance of which will show the surplus or deficit on the operations for the year. “The sale of butter and cheese in the United Kingdom is conducted by a group of 20 merchant firms appointed as agents for the department. These merchant firms sell on agency terms for a commission of 2 per cent., which includes the credit risk. The agents are firms which have been selling the produce for years und : the maikeling system in operation before the passing of the rimary Products Marketing Act. Provisional allocations of produce are made to the agents for a period of one year, and quantities are reviewed and varied according to the selling ability of the firms as indicated by price returns and marketing and distributive service rendered.”