MR. NASH'S REVIEW

New Zealand Herald, Volume LXXV, Issue 23145, 17 September 1938, Page 17

MR. NASH'S REVIEW

BASIS OF DECISION PRODUCTION AND COSTS DIFFERENCES OF OPINION GOVERNMENT AND EXPERTS [BY TELEGRAPH PKESS ASSOCIATION'] "WELLINGTON, Friday In presenting the report of the Guaranteed Price Advisory Committee, tho ' Minister of Marketing, the Hon. \Y. Nash, referred to the steps taken by his party to fulfil its election promise to the dairy industry, and the philosophy governing the determination of the price paid. The underlying principle was to pay all a dairy farmer's working expenses, including a minimum standard wage for his employees, and secure for him an income commensurate with the skill, energy and experience used by him. 'fn submitting its recommendation*, bused on the- evidence submitted to it." Mr. Nash said, "the committee in its report stated that it cannot make a definite finding regarding the financial implications involved in the payment of the prices recommended. The decision as to both the prices to be paid and the financial implications involved is necessarily dependent on general considerations of Government policy regarding finance, and the committee can therefore only submit its recommendations in accordance with its order of reference.' Committee's Price "With this qualification, the committee recommended that the basic purchase price of butter, f.0.b., should be 15.605 d per' lb., and the basic purchase price for cheese, f.0.b., 8.775(1 per lb. These prices would give a butter-fat price for butter of 16.750(1 per lb. and a butter-fat price for cheese of 18.750 d per lb. "These prices are built up on the following bases:—Working and maintenance, including depreciation, 5.695 d; capital charges, interest, 3.375(1; labour reward,, 9.220 d; equalling 18.290 d; less pig returns, 1.540 d, or 16.750 d; plus *2d per lb.;-butter-fat price for cheese, 18.750 d. "These butter-fat prices or pay-outs would be realised by the Government purchasing the butter graded 93-93 J points at 15.605 d per lb., and cheese graded 92-92.} points at 8.775 d per lb. The purchase at these prices, presuming that Sales during the 1938-39 season realised the average of last season, 118s per cwt. sterling for butter, and 68s 6d per cwt. sterling for cheese, would result in a deficit of £2,824,000.

Farm Costs Allowed "The working and maintenance costs allowed by the committee show an increase of ,625 d over last season's allowance, capital charges an increase of '•3 lsd, based on a capitalisation of £75 per cow, instead of £73 per cow allowed for the previous season, and labour reward has been increased by l..Kst)d over the sum allowed last season," continued the Minister, "From this increase, however, can bo deducted the additional payment of per lb. of butter-fat which increased the labour reward for last season to 7.79 d, so that, if tho additional payment for last season is added to the original labour reward, tho increase recommended would be 9.2? d, less 7.7'Jd, or 1.13 d per lb. of butter-fat. fhe figure for pigs returns is the same as that allowed last season. , 'lncreases recommended by the committee arc as follows: —Working and maintenance, ''.625(1; capital charges (interest), .315 d; labour reward, 1j430d, totalling 2.370 d. Jn the opinion "' the committee, this price increase of was justified on the evidence and returns of fa rm production and costs submitted to it. Its recommendation as .price was based on an average "Upter-fat production per adult male of labour of 57501b. In arriving a t this figure, the committee took as a standard 2101b. of butter-fat per cow, and it related a 50-cow farm to 2.087 ac, ult male units of labour. Attitude of Government

th + CJoviTiiiuoiit is of the opinion flat a more correct standard of nciency from the point of view of f t arni lUI| I fanner would be repre9Aniu b - v rc 'hitin{; 48 cows, producing n,i u butter-fat per cow, to two v, nifV J ( : ' .""its of labour," said Mr. In., , '""his .standard could bo exahcrnativclv as relating to 50 "S producing L'-lOib. of bntter-fnt per Aefoj>t iiiir this standard of ; n Cl ? nc . v ' which the Government, after n ;"! r . v » considers is likely to bo more 11, ' A' e°Vrc,n t'lian that of the commit- , ' the production' per adult male unit <'Ti .V s 6()n0l!j - of butter-fat. a- ' 6 yovernnient. having adopted | or s tandard, the basic purchase price butter. becomes approximately

14.89 d per lb., representing a butterfat pay-out for butter of 15.83 d per lb. lliis purchase price for butter represents an increase of 1.23 d per lb. on the price for last season. In terms of butter-fat pay-out for butter, the price represents 1.5 d per lb. above the price for last season. Basic Standard Adopted "On the question of butter-fat production per cow the evidence was apparently insufficient to enable the committee to adopt a definite single figure as representing an efficicncv standard, and a range of 220 to 2Uolb! was therefore accepted as a basis. The middle figure of this range was 2401b., and it appears that the committee worked on that figura. It is indeed well-known that there is a wide range of butterfat production per cow in the different dairying districts, and even from farm to farm in the same district. "Taking this and certain other factors which were left undecided by the committee into account, the Government feels justified in adopting the figure of 2501 b. of butter-fat per cow, which is well within the range adopted by the committee, in place of the arbitrary figure of 2401b. accepted by it. If consequential adjustments in the committee's other standards are made, the standards are then approximately in conformity with the price for butter now arrived at, and approximately the same reward is provided for management and labour as was recommended by the committee. Disparity Foreseen "The Government is of opinion that in making its recommendation, the committee has not given full weight to the central feature of the order of j reference, which is set out in para-! graph C," proceeded the Minister. ! "This paragraph provides that regard I shall be had to the general standard of living of persons engaged in the dairy industry in comparison with the general standard of living throughout New Zealand. If this factor is not given its correct weight, a disparity will ariso that it will not be possible to overcome. In the opiiiion of the Government, evidence submitted to the committee indicated that were its recommendations given effect to in their entirety such a disparity would inevitably follow. " There is the further factor stressed by the committee, of which the Government is bound to take cognisance, namely, the financial implications of the price determined. This is a matter which the committee considered did not come within the scope of its order of reference, but which the Government, however, cannot ignore in considering the committee's recommendation. Question of Deficits "Heavy deficits, moreover, if repeated, must inevitably wreck the whole guaranteed prices procedure," ilr. Nash added, lie said that this statement was supported by the committee's report, and the opinion of the committee in this regard was reinforced by Mr. R. H. MeKenscic, chairman of directors of the New Zealand Co-operative Dairy Company, Limited, when speaking at the annual meeting of the company in 1936. in saying that the surest way to end guaranteed prices would bo to fix the price at a figure which would result in a big deficit. 1 "The Government is satisfied that the working dairy farmer does not wish to end the guaranteed price procedure," the Minister said. "It recognises, however, that he desires and is entitled to a reasonable recompense for such increased costs as have been experienced, and a better labour reward. ' Having regard to these considerations, and to present price levels and living standard* in New Zealand, the Govern- 1 ment is of the opinion that the prices ; that should be paid this season to lift j the farmers' standards in reasonable relationship with other standards are 14.89 d per lb. for butter and 8.42 d per i lb. for cheese. j Result for Dairy Factories "These prices will allow the average efficient dairy factory company to pay to it's suppliers 15.88(1 per lb. for butter-fat for butter, and 17.88 d per lb. for butter-fat for cheese. The makeup of this price is as follows: —Workng and maintenance costs, 5.12 Id; \apital charges, interest. .'5.21 Id; abour reward. 8.7H2d; total, 17.-120(1, ess return from pigs, 1.51 d, equalling 5.88(1. "On the estimate of a continuance >f last year's realisations for butter ind cheese, these prices will result in i. deficit of £1.535.000. If from this tun is deducted the estimated surplus or last season of £OOO.OOO, the net. leficienev at the end of the 1 03H-3!) en.son will be approximately £935,000. j 'ho Government, to provide a sure re- 8 urn to the dairy farmer and to main- § ain the stability of the industry, is | ■ illing to take the responsibility of 1 laying these prices. 1 ''lt will interest dairy farmers to | now that the figures to hand show 1 hat the average pay-out last season I ->r butter-fat for butter amounted to I 4.83 d. which is 45d in excess of the asic return from the guaranteed price >r last season. If a like excess in pavut results for the present season, the vera go pav-out for butter-fat for but- j :>r should be 10.33 d per lb., or l.'d | er lb. better than last season. The g 'suit of the Government's decision will lean that the whole of the proceeds f last year's sales will in effect be aid to the dairy farmer, and unless rices rise the deficit in the account n- the 1938-39 season will be approxilatcly £935,000."