THE New Zealand Herald AND DAILY SOUTHERN CROSS MONDAY, JULY 17, 1939 THE DAIRY GUARANTEE

New Zealand Herald, Volume LXXVI, Issue 23400, 17 July 1939, Page 10

THE New Zealand Herald AND DAILY SOUTHERN CROSS MONDAY, JULY 17, 1939 THE DAIRY GUARANTEE

If the latest statements of the Prime Minister are*to be accepted at their face value, the guaranteed price scheme for dairy produce, after three full seasons in operation, is threatened with extinction. Until the application of exchange control and import restrictions, no single point of Government policy had encountered such active and persistent criticism. For that reason it might bo thought that, since Mr. Savage has suggested the willingness of the Government to bow to the inevitable, his numerous farmer critics should be overjoyed at the prospect of their imminent release from a system which they have vigorously contested. It would be pleasant if the issue were as simple as all that if a guaranteed price could be taken up and dropped at will without serious repercussions at either stage on the complex mechanism of an important industry. But the issue is not _ simple and both the Prime Minister and the dairy farmers must know that a "take it or leave it" attitude on the part of a Government which has assumed dictatorial powers over the industry is neither helpful nor practicable. The guaranteed price was probably accepted in principle by a large number of dairy farmers at the 1935 elections. It was when the Government set to work to give effect to its policy that doubts began to arise. Before long the farmers saw that a system which was supposed to insulate them from world market fluctuations was being manipulated to operate largely as a price stabilisation scheme. At the same time, the farmers saw that while the price was fixed from season to season costs were not, and it was this fact that lent , a keener edge to their criticism. Argument based on the relationship between costs and prices is not new, but that relationship has now reached a point where it must become a vital question in any discussions regarding a possible change of policy. Other matters, however, must * also receive con-

sideration. When the Government introduced its guaranteed price scheme under the Primary Products Marketing Act, it made important and far-reaching changes in the management of the Dominion's vast dairy export trade. In effect it took over all the marketing arrangements of the New Zealand Dairy Board and altered them to fit in with a State-controlled system of finance, shipment and sales. Dairy factories were required to forward their butter and cheese to cool stores for export as in the past. The care of the produce in cool store remains the responsibility of the companies, but 'supervision is carried out by departmental officers. The companies are entitled to obtain advances from their bankers at the bank's best interest rates on produce in cool store awaiting shipment. After

grading, butter and cheese are allocated for shipment in accordance with the recommendations of the Dairy Sales Division in London and, with a single authority in control, a shipping programme can be worked out to regulate the arrivals of produce in Great Britain. As soon as the-butter and cheese are placed on board ship for export, payment is made to the companies from the Dairy Industry Account at the Reserve Bank, Previously the companies had to await the final disposal of their produce on the British market and during all that time interest had to be paid on bank advances. The sale of butter and cheese in the United Kingdom has been handed over to a group of 20 merchant firms, appointed as agents for the Government and selling on a commission of 2 per cent, instead of the 2i per cent formerly charged. After three years, these changes in procedure have become an integral part of the conduct of the dairy industry. Various claims have been put forward regarding the authorship of the present London marketing plan, but, whoever was responsible, the scheme has worked well, tending to smooth out violent fluctuations in stocks and prices and also to eliminate much undesirable speculation. Whatever happens, most dairy farmers would insist on these arrangements being retained and in that regard no great difficulty should be experienced. The financing of payments within the Dominion, however, depends on access to cheap credit. The Government has been paying interest to the Reserve Bank at per cent on the balance in the Dairy Industry Account, representing advances to factories on produce still to be sold, whereas previously the dairy companies had to pay 4 or 5 per cent for financing their payouts. When changes of this nature have been made, it is useless dis- I cussing a reversion from the new system to the old without taking steps in advance to avoid dislocation of the industry while the change-over is being effected. On these grounds alone, the Prime Minister's statements, if they are not regarded as a piece of calculated political manoeuvring, must be accepted with marked reservations, more especially since he has sprung them on the dairy farmers right on the eve of a ' new producing season. Nor would it be honest for the Government suddenly to disclaim all responsibility in the matter of costs. It is all very well for the Prime Minister to say that farmers have the same right to ask for a higher price as trades unionists have to ask for higher wages. The trades unionist makes his request to the Arbitration Court, which is an independent tribunal; the farmer makes his I request to the Government, which, < as the purchaser of his produce at a \ fixed price, is virtually hiß employer. < In spite of all political arguments, ] the fact remains that the Govern- i ment has allowed the farmer to be , caught in the trap of mounting costß j and it is the Government's [responsibility, to effect his release.