EXPORT MARKETING

Otago Daily Times, Issue 23203, 29 May 1937, Page 9

EXPORT MARKETING

EFFECT ON DAIRY PRODUCE GENERAL APPROVAL EXPRESSED JUDGMENT RESERVED ON GUARANTEED PRICE General approval of the operation of the Export Marketing Act in its relation to dairy produce is expressed in the annual report of the South Island Dairy Association, which will be presented to the annual meeting of that body in Dunedin on June 10. The system is described as a great improvement on the haphazard methods of the past. On the subject of guaranteed prices the report reserves its judgment on the ground that it is too early yet to determine whether its effect on the dairy industry has been beneficial or otherwise.

The report states: So far as the actual marketing of the produce is concerned, we are of opinion that the system which is now followed is a decided improvement on past methods. It is practically the same system as was recommended by the Dairy Board and endorsed by the industry at the Dominion Conference held in Wellington in September, 1935. We believe that the new method has the full approval and support of the distributing agents in Britain and the trade generally, and that it would be a big mistake to revert back to the haphazard methods that were formerly practised. Some months ago a statement appeared in the press suggesting that the decline which had then taken place in the market price,for New Zealand butter was almost entirely due to the method of marketing our produce, and that, if traders had been permitted,to speculate in our butter, the disparity between the prices for Danish and New Zealand butter would be much less than it happened to be at that time; The statement is reported to have appeared in a letter received by a New Zealand firm (eliminated from the dairy produce export business as a result of the marketing scheme) from an importing firm in the United Kingdom (not an agent of the Marketing Department). The facts of the matter are that there always has been that disparity at certain periods of the year; it has nothing whatever to do with the marketing system, but. is a natural occurrence brought about by the inexorable law of supply and demand. At the end of January, when the statement was made, it was midwinter in Denmark and the supply of Danish butter on the London market- was small, whereas New Zealand .was in abundant supply. \ To-day's quotations are: Danish, 108 s per cwt; New Zealand, 109 s. People who speculate in our produce af e no good to the industry, arid we can get along very well without them.

Under the present marketing system provision is made to regulate the supply to the market throughout the year, and this is carried out so far as is possible by holding the produce in store in New Zealand land arranging shipments to suit the market demand. There is a limit,. however, to the storage accommodation at • our shipping ports, and it sometimes happens that our produce, arrives in the United Kingdom in larger quantities than the market can satisfactorily absorb. If it could be arranged to spread production over the whole year instead of a portion of the year only, as at present, we believe that the fluctuations which now occur in the market would be greatly reduced, and the industry much benefited thereby. This is an aspect which we think should receive earnest consideration. GUARANTEED PRICES

With regard to the guaranteed price policy, we think it is too early yet to express any definite opinion as to whether, from the point of view of the industry's welfare, it has proved on the whole to be beneficial or otherwise. The scheme has been in operation for 10 months only, and that, we consider, is much too short a period for anyone to say whether the plan has been a success or a failure. In February last there appeared in the press throughout New Zealand an article which indicated that a considerable loss was likely to accrue to the national exchequer from the payment of a guaranteed price to the dairy farmers for this season. The statement was based on the average prices realised on the London market for New Zealand butter and cheese for the months September to January inclusive, plus the first week in February. The guaranteed price scheme applies to butter and cheese manufactured after July 31 last, and when the article appeared in February, only about one-third of the year's exports had reached the market. The market prices for both butter and cheese have advanced considerably since February, and it is quite possible that when the total exports for the 12 months have been sold there may be a surplus instead of a loss. There should certainly be a substantial surplus on the cheese account. The guaranteed prices are equivalent to London prices of 106 s per cwt for butter, and 61s for cheese, and present quotations are 109 s and 73s respectively. It will probably be October before the year's total production is cleared, and judging by the experience of past years, the markets should continue to advance until then. If the indications were that the Government was likely to incur a heavy loss, dairy farmers would no doubt be satisfied that the guaranteed price policy was an excellent one. The position being as we have indicated, however, it is possible that they may come to the conclusion it is of no advantage to them, especially in view of the heavy increase in costs they have to meet as the result of other Government legislation It would be a mistake we think for the industry to condemn the plan before it has been properly tried out, and our advice to you is to suspend judgment for at least another year. At the same time, we would suggest to the Government that when determining the prices to be paid for the coming year, liberal allowance should be made for increased costs, and also for a substantial rise in the market value of the produce which we feel confident will eventuate The cheese factory companies have some reason to be dissatisfied with the price received this year. The price was based on the higher market value of cheese as compared with butter over a period of years, plus the difference in production cost, and allowed for a differentia] of Ud per lb butter-fat in favour of cheese. We expressed the opinion last year that a premium of Ud was not sufficient, and this has been amply borne out during the present season. The market prices realised

show that on a butter-fat basis the difference in value is considerably more than ljd. Besides, > the cost of labour has risen to a much greater degree in the cheese factories. We are strongly of the opinion now that to do justice to the cheese factory suppliers the differential should be not less than 3d. There are better prospects for cheese on the British market, and it is in the interests of the industry that cheese production should be encouraged. The production of butter in New Zealand has increased tremendously in recent years, and that is one of the main reasons why its value has depreciated as compared with cheese, the production of which has practically remained stationary. In that connection we think the Executive Commission should take action to put a stop to butter factory companies collecting cream in districts far removed from their factories and where there are cheese factories operating. One particular district we have in mind is Banks Peninsula, where, as the result of the operations of Christchurch butter companies, one cheese factory has been compelled to close down/ and others probably will have to do like*: wise. The cost of collecting cream from these isolated farms and trans-, porting it all the way to Christchurch cannot possibly be economiC6MPENSATING PRICE Several remits on this subject have been received from members for consideration at the annual meeting. The movement, which has been advocated extensively throughout the Dominion during the past year, has as its object the securing of a price to the farmer which .will—(1) Enable him to pay competitive rates of wages. (2) Allow him reasonable interest on the capital invested in his farm and stock. (3) . Enable him to meet the increased and increasing costs imposed by legislation, including tariffs. (4) Allow' him a remuneration commensurate with the services he renders to the community, and with that obtained by other sections of the community rendering equal service.

The farmers of this country suffer a severe handicap through having to accept world parity for their products, and purchase their requirements in the high New Zealand market. It has been estimated that on present values it would require about £25,000,000 annually to equalise the position, and we must confess we are at a loss as to how the balance is to be brought about. That may be made clear to us by the discussion which will no doubt take place on the subject at the annual meeting. LOCAL MARKETING

Early in April, regulations were gazetted in connection with the marketing of butter on the local market. The scheme will be tried out in the Wellington district, comprising Wellington, Manawatu, Taranaki and Hawke's Bay, and, if successful, will no doubt be extended to other parts of the Dominion. The scheme will be under the control of Mr F. R. Picot, of Wellington, who was appointed Director of Internal Marketing by the Government some months ago. Only butter that has been manufactured in the.territory covered by the scheme can be sold in that area, and factories within the area will not be allowed to dispose of butter for sale on the local market outside the district.

All butter shall be graded and wholesale prices are to be fixed for the various grades Distributors are required to be licensed, and they will receive an allowance of id per lb for their services. The wholesale price will be based on the Government's guaranteed price for ex-

port, and factories will make no profit out of their local sales other than a small margin which may remain to them over and above the allowance they will receive to cover the cost of patting. The, Marketing Department may at any time call upon the factories to supply butter for the local market. It is not proposed in the meantime to fix retail prices, and whether that will

be done in the future will depend on the actfons of the retailers themselves. , . We are glad that a start has been made to rationalise the local butter market which has been in a more or less chaotic state for a long time. In some districts of the North Island the conditions'. have been particularly bad. The scheme appears to us to be sound, and should prove

of advantage to the industry, to the distributors, and to the consumers. It will eliminate price-cutting, by the factories, and speculation by the trade, and will ensure, a stable and reasonable price to.the consumer■