EXPORT VALUES

Nelson Evening Mail, Volume 79, 15 August 1944, Page 5

EXPORT VALUES

MARGIN BETWEEN COSTS AND ; PRICES STATEMENT BY MINISTER Wellington, This Day. "What matters most to the primary producer is not so much the price no ( receives for his produce as the margin | between Chose prices and his costs, sa.c. j the Minister of Agriculture and Mar- j keting, the Hon. B. Roberts, in a state- j ment on primary produce export price?, i The Minister added that in New Zea- j land they had been more successful ] than most other countries in keeping j down the level of farm costs. j "For some months past farmers > n ( New Zealand have been disturbed by i comparisons between the prices paid j for New Zealand export produce amt j prices paid for the produce of other countries,” said the Minister. "These . comparisons purport to show that New Zealand farmers have somehow been penalised in the arrangements made for the sale of their produce. A clearer view of the actual position was take**, by the president of the New Zealand Farmers’ Union. Mr W. M. Mulholland. in his presidential address to the Far- j mers’ Union, on July 19 Mr Mulholland said that the resentment about the price situation had been added to unnecessarily by published statements of comparisons which have not been altogether correct. One source of error instanced by Mr Mulholland was the fact that obviously local market prices for beef in Australia were being compared with New Zealand export prices, and. he added, it would have been just as fair to have compared the local market prices here last spring, ranging up to 70s per 1001 bas though they were the normal prices. “These misleading price comparisons have been so widely publicised and so many false conclusions have been I drawn from them that I will deal with j them in detail. The most serious error I of all these comparisons is the fact that they make no allowance for differences between New Zealand farm costs and those of other countries. In New Zealand millions of pound* have been provided to subsidise primary industries. These subsidies have obviated the need for higher prices by keeping farm costs low. With low costs and a reasonable margin between his costs and his prices the New Zealand farmer is belter off than farmers in other countries who have high prices but little margin above their costs. DIFFERENCE IN PRICES “Another source of error in the false price comparisons wlv.ch have received so much publicity is, as Mr Mulhdlland pointed out, that export pricer for New Zealand produce have been compared with domestic prices of other countries. The comparisons have also ignored the fact that before the war there were always differences between prices paid for New Zealand produce and prices , paid for produce of other countries. For example, Canadian cheese has always : been at a premium over New Zealand [ cheese, just as New Zealand dairy produce has enjoyed a premium over Aus- ; tralian produce. Nor has any account ’ * been taken of the fact that some of th° countiies for which prices are quoted ’ normally export only insignificant quan- ; tities of the product under comparison, t a particularly careless error, to say the least of it, is that which disregards the ; different stages of the marketing pro- : cess at which the price is taken. In ; other words, the critics ignore the mani ner in which prices to toe producer are . compared with prices a long way down I the scale from producer to consumer. 1 “Another significant source of error » is the fr»?t that export prices paid under ’ bulk purchase arrangement have been ! compared with payments under mutudl aid agreements. Let me refer particularly to this last point, not only because , it is a source of misleading compari- - sons, but also because there is still a [ very widespread misunderstanding of [ the financial side of mutual aid. There i are, I know, many complexities in the ; mutual aid system, but the essence of it can be stated fairly simply. Take the case of butter supplied by Canada to Britain under mulual aid. This butter is bought by fhe Canadian Government from Canadian factories at a price determined by production costs in Cana* da—which incidentally are much higher than production costs in New Zealand. This butter is sent to Britain and sold by the British Government to the trade at a price which bears no necessary relation to the prices received by the Canadian farmer in a country where costs are high. CANADIAN PRICE "'The Canadian price is in effect a domestic price, paid by the Canadian Government. The prices are simply not comparable to New Zealand prices. Canadian cheese is not sold to Britain, it is supplied under the mutual aid agreement. The same applies to the transfer of all commodities under mutual aid.

“There are. no other errors in some of the price comparisons .which have been published, as. for instance. in not allowing for exchange differences. But •it will perhaps be more useful if. instead of trying to enumerate all the sources of error, I deal in detail with some of the comparisons more commonly made. and show precisely where they go astray. “The only fair comparisons that can be made of export prices for butter and cheese are between New Zealand and Australia. Expressed in New Zealand currency, the price of Australian butter is 15.30 d per lb. while the price of New Zealand butter is 15.59 d per lb. Aus Jralian cheese is sold to Britain at 9.37 d per lb. New Zealand cheese at 9.72-4 per lb. In both cases New Zealand is receiving a premium over Australia in the export prices for these commodities: the difference is based on market premiums which existed before the outbreak of war.

"When returns to the farmer are considered. it is necessary to take account of the value of all Government subsidies to hold down farmers’ costs, either directly or indirectly. When there is added to the basic guaranteed price the various cost allowances which have been made since the outbreak of war, and the value of all the subsidies for the benefit of the dairy farmer, and this total is compared with corresponding Australian figures. New Zealand no longer appears in an adverse light. Comparisons of prices for Australian and N.Z. dairy produce must also take into account tbe fact that Australian dairy companies obtain pro cceds from the local market where wholesale prices are higher by 2d per lb than f.o.b. parity, and higher than local market prices in New Zealand. VALUES FOR BEEF "In the case of beef, the only countries for which export prices can be compared are New Zealand. Australia and Argentina, and here again the comparisons can only be made on the basis of the full United Kingdom f.o.b. purchase price.' In New Zealand this is made up as follows:—Prices paid to farmers at port works, 34s per 1001 b: credited to meat pool account and meat ! stabilisation account, 5s 10d; U.K. f.o.b. j price. 39s lOd. “The United Kingdom f.o.b. price for j Australian beef is approximately tha j same as this. The corresponding price for Argentine beef is 40s 6cl per 1001 b. This represents the normal pre-war ' premium which Argentine beef ob- J tained on the United Kingdom marke!. It would have been just as fair, as Mr

• Mulholland rightly pointed out, to • have compared the New Zealand local ‘ market price last spring, 70s • per 1001 b with those quoted for 1 Australian States, namely. Queensland 40s lOd, Victoria 50s 7d, N.S.W. 45s 6d. “In the case of pork and bacon the 1 comparisons that are commonly made are not valid. In the first place, the United States prices commonly given are not borne out by the United Stales official publication. ‘Crops and Markets,’ but even then none of the United States prices quoted can be correctly compared with the United Kingdom purchase price for New Zealand pork and bacon because all North American deliveries of primary produce to the United Kingdom are made under mutual aid agreements, and so provide no f.o.b. prices to compare with ours. It follows that comparisons with quotations of Canadian prices for pork aiW bacon are equally invalid. AUSTRALIAN PIG MEAT "Similarly, the prices commonly requoted for Australia do not have any relation to the United Kingdom purchase price since Australian pig meat is required for civilian and military requirements and there is no question of the United Kingdom purchase price for Australian pig meat. "What matters most to farmers is not the prices they arc paid for their produce. but the margin between those prices and their costs. I know that during this war the farmers of New Zealand have met heavy demands on their productive capacity in spite of many serious difficulties. I know that some of them feel that their monetary reward has not always been commensurate with the effort they have made, and that consequently the fictitiously high prices paid to farmers in other countries make them restive. But I would urge them to give full consideration to what I have just said, and not chase after the false prosperity of inflated prices with its inevitable accompaniment of inflated costs. Let the farmers of New Zealand look back at the history of their industry between the two wars, and themselves w hat they ever gained from i boojn conditions except a brief and her • j t;c prosperity followed by a long struggle against adversity. This Government j believes that in the long run the wise j policy for the farming industry is to stabilise costs and prices at levels which will assure to the farmer a good | living and which will enable the in(dustry to hold its own in competition with the farming industries in other countries."