THE NEW POLICY

New Zealand Herald, Volume LXXIII, Issue 22489, 5 August 1936, Page 14

THE NEW POLICY

PAYMENT PROCEDURE MARGINS FOR GRADES RETURNS TO SUPPLIERS MINISTER'S EXPLANATION [BV TELEGRAPH —SPECIAL REPORTER] WELLINGTON, Tuesday In making the guaranteed price announcement the Minister, Mr. Nash, saicl:—"All butter and cheese made after August 1 of the present year becomes the property of the Government when placed 011 board the overseas steamer for export. At that point the dairy factory will be paid in full a guaranteed price for the dairy produce by means of a cheque drawn on the Dairy Industry Account at the Reserve Bank —the Government Bank. "The basic f.o.b. guaranteed prices for the current season —that is, for butter and cheese made between July 31, 1936, and August 1, 1937 —have been fixed as follows: — Finest grade creamery butter scoring 93 or 93 J points, 117s 3d per cwt., or 12 9-16 d per lb. First grade whey butter scoring 88 points and over, 107s lid per cwt., or 11 9-16 d per lb. First grade cheese scoring 92 or 92J points, 63s 7d per cwt., or 6 13-16 d per lb. "These prices will remain constant throughout the season arid the differential price margins previously announced ■will apply in respect of produce to which higher or lower grading points* ' are allotted. Varying Yield From Price "It is known that there is a wide variation in the costs of butter and cheese-making at the various dairy factories throughout the Dominion, so that a fixed f.o.b. purchase price for all butter and cheese will yield a varying butter-fat price to suppliers, as the pay-out is dependent on manufacturing results and factory costs, which in turn are dependent on the circumstances, location, standard of proficiency, nature and quality of raw material and extent of output of individual factories. "The guaranteed price will bo paid in full as soon as the produce is delivered to the overseas steamer. If the proceeds of the sale of this produce do not cover the guaranteed prieo paid out, then the deficit is not the responsibility of the dairy farmer, but of the Government. If, on the other hand, tho proceeds of sale in the first year aro greater than tho amount guaranteed, this surplus will bo used for the benefit of tho dairy farmer and tho industry after consultation with its representatives. "Tho intention of the Government in regard to guaranteed prices to dairy farmers was expressed by tho I'riino Minister in his statement that 'guaranteed prices should commence at an average of, say, the last eight or ten years' prices.' Promises Recalled "In reply to a question put to me when I attended tho National Dairy Association conference at Hastings in June last. I said that 'the price was positively fixed on tho butter-fat basis ox eight to ten years, and tho most generous interpretation of that promise.' Prices have been fixed in fulfilment of those promises to ensure that dairy farmers supplying factories working under average factory conditions will receive the average butter-fat return of the past eight to ten years. In addition, an allowance has been made for increased costs in tho industry. Tho basic f.o.b. purchase prices of cheeso and whey butter have been fixed to yield, under average factory conditions, a margin of lid per lb. of buter-fat processed into butter. * Basis of Determination

"In ascertaining tho average prices the most complete statistical information from the industry and Government departments was macfo available to the Dairy Advisory Committee. For future years the cost of production, tho standard of living of the farmer as compared with other sections of the community, and the stability of the industry will bo taken into account in fixing tho guaranteed price. The actual wording of tho Act determining the procedure is as follows: — " 'ln fixing prices under this section, in respect of dairy produce exported after July 31, 1937, regard shall be had to the prices fixed under this section in respect of dairy produce exported before that date, and to tho following additional considerations, namely: (a) The necessity in the public interest of maintaining the stability and efficiency of the dairy industry; (b) the costs involved in the efficient production of dairy produce; (c) the general standard of living of persons engaged in the dairy industry in comparison with the general standard of living throughout New Zealand, (d) The estimated cost to tho department of marketing the dairy produce concerned, and also the cost of the general administration of this Act. (e) Any other matters deemed to be tolerant. •"'(•5) Duo regard having been paid to the several matters mentioned in sub-

section 4 hereof, the prices fixed in respect of any dairy produce exported after July 31, 1937, shall be such that any "efficient producer engaged in the dairy industry under usual conditions and in normal circumstances should bo assured of a sufficient net return from his business to enable him to maintain himself and his family in a reasonable state of comfort." '

"For the purpose of giving effect to these principles the Government has asked Messrs. J. Dunlop, representative of the southern ward of the New Zealand Dairy Board; W. E. Hale, representative of the New Zealand Co-opera-tive Dairy Company, Limited, on the New Zealand Dairy Board; A. Morton, president of the National Dairy Association; N. H. Moss, barrister and solicitor, Stratford; B. Roberts, M.P., director of Parkvale Co-operative Dairy Company, Limited; A. J. Sinclair, sec-retary-manager of the Te Awamutu Cooperative Dairy Company, Limited; and 1). O. Williams, economist, Masscy Agricultural College, Palmerston North, to confer with the Executive Commission of Agriculture and report to the Minister of Marketing as to the price to be paid next year. "The relation of farming costs to guaranteed prices is largely affected by interest and other land costs and 1 propose later to set out the policy of the Government for adjusting the mortgage liabilities of the farmer to the guaranteed price. Marketing of Produce

"The Government's Marketing Department will market the dairy produce to the best advantage, and the proceeds will be paid into the dairy industry account at the Reserve Bank. In j-ome years there may be a deficit in the accQunt after the year's operations; in other years there may be a surplus to be offset against any deficit. "New Zealand dairy produce is mainly sold through importing houses in Tooley Street, London, most of which have regular connections with the distributors of butter to the British consumer, and the Government has made arrangements to continue .to use the efficient genuine distributor and to pay him an adequate commission for the service he performs. Reciprocal Trade "The more general question arises, however, of trade between the United Kingdom and New Zealand. New Zealand fully appreciates the right of and the necessity for Great Britain to safeguard the interests of her own producers and to increase her output of farm produce. We, too, are faced with the same necessity, and farming plays a large part in New Zealand's economy. We fully recognise also the economic grounds and the reasons of national security in time of war which British policy must take into account. But such a policy vitally affects the whole fabric upon which our trade with Britain is based and upon which our economy operates. Natural advantages make for an efficient and economic agricultural industry. On the other hand, we could produce motor-cars and other steel goods, but at a very much greater cost than Britain. "If, however, our efficient agricultural industry is deprived of an overseas market anci we cannot purchase overseas, the efficient British manufacturing industry loses its market, and trade between the two countries suffers. On the other hand, the more we can sell abroad at an economic price tho more we can buy. "Our elforts will, therefore, bo directed to making reciprocal trade agreements. New Zealand will have available the proceeds of the salo of a substantial volume of exports. These proceeds will be used in the first place to meet our debt commitments, and secondly for imports. There is no doubt that the trado between tho United Kingdom and New Zealand could be materially expanded; and it will be our aim, not merely to stabilise the existing trading relations, hut to expand them. This procedure will be mutually beneficial Heciprocal trade agreements with the United Kingdom and other countries do not conflict with tho natural development of the Dominion and tho right of our youth to creative work. "This development and right renders it imperative that wo should extend our manufacturing and other industries. The Government realises the difficulties of the task in establishing new industries, but sees no other immediate way of extending tho production of commodities that could improve our living standards. Readjustment of Mortgages "Tho procedure for the rehabilitation of tho farmer by removing the burden of over-mortgaged land has been drafted and will be introduced shortly after the debate on this Statement. Its main provisions will conserve to tho mortgagee tho values which are now sustained by his security, while allowing the working farmer to devote his time to production freed from tho menace of possible foreclosure or eviction, "Competent farmers will in future be assured of a reasonable income for the work they do on their farms and, so far as tho dairy industry is concerned, tho guaranteed prico is inextricably linked up with tho adjustment of the dairy farmer's debts. The mortgage legislation will provide that his liabilities will be adjusted so that he may receive a decent standard of living for himself and his wife and family. With stability of farm income will como an assessment of charges against that income, and the mortgage legislation will ensure to every reasonably efficient farmer that the charges will he so adjusted ji§ to give sufficient return to maintain tho standard of living referred to. A procedure has also been worked out for tho adjustment of urban mortgages."