THE New Zealand Herald AND DAILY SOUTHERN CROSS WEDNESDAY, APRIL 29, 1936 GUARANTEED DAIRY PRICES

New Zealand Herald, Volume LXXIII, Issue 22405, 29 April 1936, Page 12

THE New Zealand Herald AND DAILY SOUTHERN CROSS WEDNESDAY, APRIL 29, 1936 GUARANTEED DAIRY PRICES

Kile the main parts of the machinery for operating the Government s plan to guarantee prices for dairy produce are provided for in the Primary Products Marketing Bill, the prices to be paid remain a secret. The bill does reveal, however, the basis on which export prices are to be calculated in the coming and future seasons. The difficult question of the local market is left undetermined, although the bill empowers the Government to purchase at fixed prices produce for domestic consumption or to control its sale and distribution, including the fixing of retail prices. Concerning produce for export, the fixed price does not apply until the* butter, cheese, pig or bobby calf meat is placed on shipboard, when it becomes the property of the Government at the price fixed. This is important because the late stage at which payment is to be made disposes of objections that a flat guaranteed price, say, for butter-fat would remove the economic motive to strive for quality and efficiency on the farm and in the factory. The Government is taking power to fix different prices according to the kind, grade and quality of produce and its task will be simplified by the existing grading system. Another good thing, it will shortly have a direct interest in grading standards and, by raising these and by differential payments, can exercise a powerful influence on quality. Purchase on shipboard will also preserve relative land and factory values derived, from geographical position.

In the coming production year, commencing on August 1, the prices to be paid will be fixed after taking into consideration the prices received in New Zealand during the past eight to ten years, including the current year. Apparently a straight-out average is not to be taken, but, if it were, the period is left indefinite. The average for ten years would give a considerably higher figure than that for eiight. It may be noted that such an average i' 3 purely arbitrary. It takes no account of what the consumer is prepared to pay, nor of present costs of production. Moreover there is no mention of making allowance in the price paid, as promised, for the extra labour costs farmers and factories will incur under the Government's new legislation. As the general basis has been determined, the Government could make an end of these uncertainties by announcing at once the prices guaranteed for next season. The excuse offered for withholding the figures until the end of July or beginning of August is that an earlier announcement would encourage speculation. But the reverse is the case. There can be no speculation on what is known—"you can't bet on a certainty." It is while the information is withheld that the speculator has his opportunity. As it is the farmer is almost as much in the dark as ever he was in respect to future prices. If this important factor were defined at once, he could plan ahead with more confidence. He would realise, of course, that prices are only one factor in his problem. Against that is the spectre of rising costs and it is the difference between costs and prices that gives his income. Moreover, the Government has not yet offered to plan the weather, to guarantee a good season or a bad.

In future production years, starting on August 1, 1937, most of these factors are to be allowed for, if it i's possible to work out prices on the basis laid down in the bill. The first additional consideration in reaching this basis, after allowing for the past average, is "the necessity in the public interest of maintaining the stability and efficiency of the dairy industry." The farmer will be puzzled to discover how this jargon of generalities can be reduced to pence per pound for butter-fat or pork. Next is to be considered "the costs involved in the efficient production of dairy produce." On this count, the farmer will want a definition of "costs" and "efficiency," and, even so, he knows that costs vary from district to district, and farm to farm, because of the infinite variety of land and methods of management. His general standard of living—another infinitely various factor—is also to be taken into account. On the debit side is the allowance to be made for administering the scheme. For a beginning there is to be a new Minister of the Crown, a new State department, a director and assistant-directors, with the attachment of 1 the Executive Commission of Agriculture and a reconstituted Dairy Board, and no doubt a whole army of Civil servants, statisticians, mathematicians, experts, inspectors and economists. The cost will be formidable and it is to come off the guarantaed price. And the latter, be it remembered, is to be fixed by reference to these various and complex considerations, which are practically indefinable. If the farmer is befogged, it is not surprising. Yet the 'scheme is bound to prove far more complicated in detailed practice than it appears in terms of the bill. Finally there is the question of finance. That is to be arranged by overdraft from the "Reserve Bank. The cost cannot be estimated in advance because it will depend on the relation between the prices guaranteed and those actually realised in export markets. The expectation of a heavy deficit is strong, however, since prices are likely to be fixed high rather than low. Later on that deficiency must be made good, if not by the farmer, then by the taxpayer.