COSTS PROBLEM

New Zealand Herald, Volume LXXVI, Issue 23489, 28 October 1939, Page 14

COSTS PROBLEM

BUTTER AND CHEESE VIEW OF DAIRY BOARD LOWER RETURN TO FARMER PRICE GUARANTEE OFFSET [by telegraph—OWN correspondent] WELLINGTON, Friday The question of the guaranteed price for butter and cheese is referred to in the annual report of the New Zealand Dairy Board. "The controversy which is at present taking place in connection with this problem makes it difficult to see it in clear perspective," says the report. "Let it be said frankly that the Government has sought to implement its promise recorded in tho Primary Products Marketing Act, 1936. (Among the considerations to be taken into account when the price was being fixed were the following:— "(a) The necessity in the public interest of maintaining the stability and efficiency of the dairy industry. (b) The general standard of living of persons engaged in the dairy industry in comparison with the general standard of living throughout New Zealand. (c) The prices to be such that any efficient producer engaged in the dairy industry under usual conditions and in normal circumstances should be assured of a sufficient net return from his business to enable him to maintain himself and his family in a reasonable state of comfort.

Net Return to Farmer "It is on the question of the net return to the farmer that differences of opinion are expressed. On the credit side of the guaranteed prices we have the fact that in the first year of its operation the producers were paid £272,812 in excess of the amount realised by the produce on the market. For the second year of operation the producers received approximately £555,000 less than the produce realised and while it is impossible yet to give the results of the guaranteed price for the 1938-39 season, it is estimated that the Government's loss on the deal may be nt least £2,000,000.

"If this estimate is anything like correct, it will mean that producers have received the sum of £1,717,482 over and above the actual market realisations. On the debit side are tho largely increased costs. It is claimed that these increases very greatlyexceed the amount which has been received in excess of market realisations. It is difficult to see how such a result can be avoided under the policy which has been adopted. To give effect to the ideals of the Government policy for guaranteed prices to dairy ' farmers means cutting adrift altogether from tho question of market realisations. Average of Market Price

"It is quite evident, however, that the Government is seeking to, as far as possible, guarantee a price that will average over the years approximately that realised on the market. With tho accumulative effect of higher wages, shorter hours and generally rising costs, it is, of course, abundantly evident that the net return to tho farmer on such a basis must bo less than the actual market return under previously existing conditions." The board admits that tho Government is alive to the danger of rising costs. In the negotiations which have been carried on regarding tho price for the 1939-40 season, the Minister of Marketing, tho Hon. W. Nash, expressed his concern in this connection, and wont to the length of seeking a standstill agreement not only on the guaranteed price itself, but on the question of wages. The board's report gives a full account of tho negotiations with the Government on the vexed question of the guaranteed prices being adjusted to meet the risen and rising costs of production, and the inability of the Government to the difficulties as presented by the representatives of the producers,

HERD REPLACEMENTS ALLOWANCE INSUFFICIENT PRICE INCREASE NEEDED Some reasons in support of an increase in tho guaranteed £rice for dairy produce, particularly the high annual cost of herd replacements, have been submitted to the Minister of Marketing, the Hon. W. Nash, by Mr, Thomas Miller, of Heme Bay, who sent the following telegrnm to the Ministor yesterday:— "Your valuable and informative radio talk on the buttor-fat price is appreciated. I am a strong supporter of the fixed prico, which I consider has been of immense value to farmers and eiti/.ons generally, but I respectfully submit that, in view of increased and increasing costs of essential farm requirements and higher wages for skilled farm workers, in equity and justice some increase in price should be made to cover the same.

"Might I further point out that in estimating cost of production, to my mind, sufficient allowance was not made for the heavy annual cost of herd replacements through deaths, disease and culling? It ip estimated that these costs are £500,000 annually to the farmers of tho Dominion.- This season these costs have risen by' 20 to 2o per cent, in order to keep up, and if possible increase, production. "On a farm in which I am interested wo have to replace 62 out of a total of 26M head, the cost of such replacement being more than our entire net profit for the season. 1 submit that this is a factor which should be seriously considered.

"Queensland is reported to-have obtained an increase for butter, now exported to Britain at 119s, to a fixed price of 1365. Our Now Zealand butter should fetch slightly better."