WORLD DAIRY OUTPUT

New Zealand Herald, Volume LXIX, Issue 21349, 25 November 1932, Page 15

WORLD DAIRY OUTPUT

INCREASE IN SUPPLIES

EFFECT ON PRICE STANDARD

PROBABLE REDUCTION

Prospective increases in the world output of dairy produce, especially of hutter, and their probable effect, on the trend of prices, are reviewed by Mr. F. B. Stephens, of the department of economics, Auckland University College, in a paper read before the economics section at the recent congress of the Australian and New Zealand Association for the Advancement of Science. The paper, which is entitled "Some Problems of Dairy Marketing," is printed in the latest number of the Economic Record (Melbourne). Mr. Stephens remarks that criticism may be levelled at continued concentration on the English market, but the latter forms by far the largest market for the world's surplus dairy produce in normal times and to-day, owing to restriction of imports into Germany, it is practically the sole important market. Hence it is maintained that conditions in the United Kingdom are the vital considerations when discussing the futift-e of the world's dairy products

European Production The first fact of importance is the tremendous increase in the butter marketed and consumed in the United Kingdom. The fall in price after 1925 stimulated consumption, until in 1931 it had risen from to 21jlb. per head There has been concurrent with this a decrease in margarine consumption, suggesting that the increase in butter consumption is largely a price factor. Consequently, it seems reasonable to assume that, failing a very substantial rise in the general price level, the present quantities can be consumed only at prices ranging from 95s to 110s per cwt. Recent reports of the Empire Marketing Board indicate considerable development in practically all the countries exporting dairy produce. European countries cannot compete with the new world in arable farming and therefore are taking advantage of the fact that they can effectively compete in dairy production, particularly of butter.

Further, there is a greater time-lag in a change from dairying to arable farming than vice versa. This is largely due to the fact that dairying involves much more fixed capital, not only on the farm, but also in the manufacturing plants necessary to process the raw material. Northern European Output

Change from dairying to arable farming requires a much more prolonged and more decided movement of prices in favour of the latter than a movement in the opposite direction. Hence the conclusion is that in the immediate future —and such a period would embrace the next decade at least—definitely increased production of butter can be expected in the northern European countries. This is more likely in view of the fact that recent developments in the technique of grassland farming and of fertilising have resulted in the postponement of the point of diminishing returns to investment of capital in dairying. Mr. Stephens goes on to survey the recent and prospective development of dairying in A ustralia, Canada, the Argentine* South Africa, Rhodesia and Kenya. He remarks that on recent figures Australian butter will probably become a very serious competitor on the English market. There is every indication that with a return to normal conditions, New Zealand's output of butter will increase enormously in a few years' time. "Consumptive Satiety"

" It can be seen that the potential supplies of butter in the very near future are very much greater than at present, and even assuming a rise in the general price-level, it seems improbable that butter prices will rise comparably with general prices. Limiting factors to this conclusion are, of course, either increased consumption of butter in Great Britain and (or) further markets for butter. As to the former, authoritative opinion behoves that at prices ranging between 95s and 110s, which are believed to be the lowest at which dairying can be carried on at the general level of prices in most countries, the point of consumptive satiety has been reached.

"Summing up the above arguments, it is very likely that the quantities of butter on the English market will very materially increase within the next few years. This increased import can be consumed only at a very substantial reduction in price. Such a reduction in price will cause considerable hardship on account of the very large amounts of capital invested in the dairy industry and the consequent reduced capacity of farmers to change to more remunerative branches of farming."