SURVEY OF RURAL PROBLEMS

Otago Daily Times, Issue 23858, 12 July 1939, Page 8

SURVEY OF RURAL PROBLEMS

COSTS FACTOR ANALYSIS BY PRESIDENT PLIGHT OF INDUSTRY REMEDIAL MEASURES FREE EXCHANGE PROPOSAL (Special to Daily Times) WELLINGTON, July 11. “It seems that the continuation of exchange control, with its resultant depreciation of the internal purchasing power of our currency, added to the enormous Government expenditure is going to crush the farmer out of existence in the near future,” declared the Dominion president (Mr W. W. Mulholland) after reviewing the economic position of the farming industry in his address to the annual conference of the New Zealand Farmers’ Union today.

“With prices not unreasonably low, is there anything wrong with the farmer? ” Mr Mulholland earlier asked. "There are two facts that suggest there is some need to look closer into the situation. Farmers are being put off their farms in considerable numbers, while many others are obliged to make arrangements with their creditors.

Increase In Costs “Gn the basis of figures published in the Reserve Bank Summary of Statistics for. May, I. have calculated that in April, 1939, the farmer would receive £5 15a 9d for the same quantity of export commodities which he received £5 for in 1934, but he would now have to pay £6 Os 4d for the retail goods that he bought for £5 in 1934. For wholesale commodities worth £5 in 1934. he would have to pay £5 16s 4d in April of this year, so that to-day, on these figures, his costs are in a somewhat more unsatisfactory relation to his prices than they were in 1934, but on a higher price level, and it. was in 1934 that the Dairy Commission reports! that in its opinion more than 50 per cent, of the dairy farmers could not meet their financial' commitments if called upon to do. so.’ 1 '

“But:this is not; the whole story. Export prices are f.o.b. ocean steamer prices, not the prices the farmer receives, and since 1931 there has been a considerable addition to the costs from farm gate to' f.o.b., which are deducted from the f.o.b. price before the farmer is paid. - According to the 1939 Year Book, and allowing for keep, he is now nominally paying 75 per cent, higher wage rates than in 1934, blit we know that often he is paying more than that.

“Then there is Government expenditure. Apparently the Government spent about £57,000,000 last year,, and is going to spend more this year. Local authorities’ expenditure, according to the 1939 Year Book, was £20,222,715 for 1936-37, and it would be more last year. This makes a total general and local government expenditure of more than £75,000,000, allowing for amounts which are duplicated appearing in both local and general Government expenditure. Our production last year would be worth, perhaps £.140,000,000. , Worse Than in 1934 “ What a staggering burden' of cost this £75,000,000 is on our £140,000,000 production—more than 10s in each £! Even if the farmer carried only his proportion it would be a serious handicap, but the tendency is for far more than that to percolate through to the export industries.

“If the policy ot exchange control continues with its tendency to work against the exporter it must make the farmer’s position still worse On the basis of the figures contained in the May number of the Reserve Bank Statistical Summary, imported goods which would have cost £5 in 1934 could be bought for £5 5s 7d in April of this year, but locally-produced goods which cost £5 at the earlier date would cost £6 5s 6d in April, 1939. so that by increasing the amount of his supplies which he must draw from local production, exchange control will increase the export producers’ cost of production very materially “ Let us examine the assertion of how we could do without the exporter, and maintain our standard of living. A table in the statistical .summary of the Reserve' Bank- shows-that out of total imports for 1838 amounting to £55.422,000 only £19,691,000 were for finished consumers goe'io if include the whole of the £5.527,000 under unclassified as being finished consumers goods, which they were nqt. The remaining £35,731,000. come under the headings:—Producers’ materials, fuels, lubricants, producers’ equipment, and transport equipment, that is to say. for the production of local goods and services. As imports must be reduced by the Government in 1939 to not more than £35,000.000, possibly to £30.000,000, manufacturers will have difficulty in obtaining materials and equipment to maintain last year’s production even if no finished consumers goods were imported at all. Therefore any fall in farmers’ production for export must materially reduce the amount of goods and services that local manufacturers. etc., can supply.

“ Pure Stupidity ”

“It Is pure stupidity to suggest that the country can maintain its high standard of living independent of tne complete maintenance of its export trade. The primary production on which this depends can only be maintained by adjusting internal costs to a satisfactory relationship with export prices. ■ i “It is still the soundest method to bring this satisfactory relationship about by reducing costs, but if the people will not agree to that, then the next best thing to do is to allow the exchange to go free when the rate would adjust itself automatically to its true value, thus equalising the value of our currency internally and externally. If the Government is not prepared to do this, then certainly the exchange should be adjusted from time to time to as nearly as possible the real value of our currency, but whatever is done must be accompanied by that amount outstanding, otherwise the inevitable end will be that our currency will entirely lose its Value, and the whole country will be involved in disaster.”

VESTED INTERESTS

CREATED BY EXCHANGE CONTROL TENDENCY OF POLICY EXPORT PRODUCERS PENALISED (.Special to Daily Times) WELLINGTON, July 11. “Already there are vested interests in New Zealand which have been created by exchange control, and which show signs of resisting its abolition to the utmost,” stated the Dominion president (Mr W. W. Mulholland) in his address to the Farmers’ Union Conference to-day. “ These interests,” he said, “are being assured by Government spokesmen that they will be secure. I think that I should state plainly that vested interests, inimical to the country’s welfare that may grow up under shelter of the present emergency will not be regarded as sacred. “ The effect of maintaining an overvalued artificial exchange value for our New Zealand -pound overseas has been that the exporters have, in* fact, been forced to subsidise the import of goods. The fixed exchange was. of course, an important factor in this result. Had the exchange been free to reflect the altered value of our inter nal currency, the situation would not have assumed the serious proportions which it now has. Fundamentally i 1 was the unbalanced implementing of the economic policy of the Government which had failed to raise prices when it raised costs, as its 1935 policy iequired if to do, that was the real cause of the position. The Government decided to meet the difficulty by instituting exchange control. This was in the nature of treating a symptom in place of the disease, and the inevilaolo result must be to cause other symptoms to become more pronounced. One of these symptoms which particularly affects the farmers is the increase i.i costs of producing commodities for export. The tendency of exchange control in all countries where it has been adopted has been to penalise the oro ducers for export. “Although exchange control has only been in operation a little over six months, we have had a second tightening up of the import restrictions We have the complete control of the marketing of certain goods given to a Government department: we have had a regulation making it compulsory for traders to regiment their prices ana only alter them with the consent of the Government: and we have had a price tribunal established with inquisitorial powers: and with it all our exchange position has gone from bad to worse, so that to-day there is not enough left to pay our immediate commitments. , _ “ It is worthy of note that the Government control of the Reserve Bank has resulted in the freezing of the small amount of sterling exchange which that institution holds. Its reserves are so near the statutory limit that it cannot reduce its sterling holdings by a penny for any purpose, so that it has lost all possibility of exercising any control, and the position has been brought about in which the actually controllers of what may be imported into New Zealand are. at the moment the banks and not the Government, for they alone can find sterling exchange.”

RURAL WORKERS •‘POLITICAL” ORGANISATION MOVEMENT FOR COMPULSORY UNIONISM UNDESIRABLE POSITION (Special to Daily Times) WELLINGTON, July 11. “The frequency of Ministerial attacks on the union and union officers during recent months is a matter of interest," stated the Dominion president (Mr W. W. Mulholland) i - his address to the Farmers’ Union conference today. “It is regrettable that the Government’s reply to our criticism of such of their actions as we as an organisation, do not agree with, should so frequently be in the nature of attacks on our organisation and officers rather than dealing with the matter of our criticism showing where it was in error, if that were possible. It seems to justify me in claiming that the statements which we have issued officially from time to time, and those which our Dominion officers have made have been unanswerable.

“A particular line of attack which seems to be common amongst Ministers is to call our criticism ‘ political. One presumes that they mean that it is of a party political nature. It is no reply to our criticism of certain actions merely to dub us politicians. As the Prime Minister himself happens to be a politician, 1 doubt whether we should even regard the term as offensive. “It is certainly a new point of view to have the word ‘ political ’ used as synonymous with one of the seven deadly sins. Strangely enough there is nothing sinful in some other unions being political, for we find the New Zealand Workers’ Union not only indulging in blatant party politics, bui setting out compulsorily to convert a large number of those who apparently, at the moment, do not support their political point of view.

“A Very Thin Line ”

“It is obvious that the desire of the Workers’ Union is not so much to obtain better conditions for the workers as to ensure jhat they shall vote in the way it directs. II is certain that if the union obtains the legislation for which it asks, its first demand will be for compulsory unionism. With the I.C and A. Act as it stands to-day the court will have no option but to grant it . There seems to be a very thin line indeed dividing compulsory membership of a political party from the political methods of the Totalitarian Slates. Certainly it is entirely at variance with the British idea of individual freedom. ‘ln view of the claim of the New Zealand Workers’ Union that the Government has already committed itself to bring farmers under an Arbitration Court award I should say i, word or two about compulsory unionism in the farming industry In the farming in Castries there is no clear line of demarcation between employers and employees over a great oart of the in duslry. .such as exists in most industries It is usual for farmers to assist each other at various times. It is also usual for many farmers to work fpr wages for their neighbours al special seasons of the year or even at any time during the year when extra help may be required. These arrangements are mutually advantageous and usually very flexible, the re munerntion being money return of an equivalent assistance or some accom mndation In regard to stock implements. or a hundred and one other wavs which could be held to be payment establishing the relationship of employer and employee. Compulsory unionism would therefore, mean that a very large number of farmers and all farmers’ sons assisting their parents would be compelled to be members of the New Zealand Workers’ UHlon

Friction and Irritation

•• One might ask is the precedent ot compelling owner-drivers of motor lorries contracting for the Public .Works Department to join the New Zealand Workers’ Union to be followed and will farmers milking their own

MEAT QUOTA

RESTRICTIONS REVIEWED PROBLEM OF EWE MUTTON WORK OF COMMODITY COUNCILS (Special to Daily Times) WELLINGTON, July 11. Various aspects of the quantitative restriction of meat exports were discussed to-day by Mr W. W Mulholland in his presidentital address to the New Zealand Farmers' Union He emphasised the problem of disposing of the accumulated stocks of ewe mutton and in this connection suggested that the imposition of a small levy on ether classes of meat might be necessary. He also expressed the view that much was to be hoped from the Commodity Councils as proposed by the recent Empire Producers’ Conference in Sydney. “The imposition by the British Government last January of more severe restrictions on the quantity of mutton and lamb which we were allowed to send into Britain was rather a rude shock to farmers,” Mr Mulholland said, ” although it was not unexpected by those who were in close contact with events. The imposition of quantitative restrictions is not a new developranet. All our meat exports have been subject to a quota since the Ottawa Conference, but until the present the quantity allowed has been sufficiently large to enable us to export with very slight inconvenience the whole of our production.

Ewe Mutton Accumulates

“At the time the restrictions were announced,” the speaker said. “ it was expected that there would be little more than sufficient meat available to fill the quota this year, but as the season progressed the killings continued to be much heavier than had been anticipated earlier in the season. and the Meat Board was compelled to take action to prevent the whole of the available supplies being shipped. It decided wisely. I think, that the restriction should be placed on the least valuable class of meat and a very considerable quantity of our ewe mutton will have to remain m store in New Zealand at least until the end of this year. The fear that something of this kind would hapmm. undoubtedly had a depressing effect on prices for fat ewes from January onwards. accentuating the effect of values of ewe mutton on Smithfield market although I know that in some circles this is denied. , “If it had been known In January or February that we had 1,000,000 fai ewes that we could not export, the price for the whole of our fat ewes, if not for the whole of our fat sheep, would have been their value for boiling down—practically nothing. It cannot be gainsaid that if next year we have a normal production, and the quota remains at the present quantity there will be considerably more mutton than there will be a market for. Facing Serious Situation “As the value of the surplus of the ewe mutton will be very low —perhaps nothing—the price of all fat ewes will be based on that low figure,” Mr Mulholland said. “The price of breeding ewes tends to move in sympathy with the price of fat ewes, and as the receipts from the sale of their cost, ewes are an important item in the income of farmers on store sheep country.-fail-ure to deal correctly with the situation threatens a major crisis for the industry. I am aware that the Meat Board is taking active steps to meet the situation. but I know that there is strong opposition to the use of the only effective means which can deal with it. The only effective means that has been discovered for preventing a surplus from depressing the market is for some controlling authority to take complete control of the surplus and not allpw it to come upon the market at all.

“ R may be necessary to impose a small levy upon all other classes of mutton and lamb, so as to enable the whole of the ewe mutton to be usker at a normal price. As these other classes of meat would benefit by obtaining an unrestricted market, it would be entirely fair that they should make a small contribution to prevent the burden falling arbitrarily and unfairly on the ewe mutton. A rough calculation suggests that id per lb might be sufficient, and if that is so the net result of the quotas if they remain as at present may well be advantageous to New Zealand sheep farmers because, while we are restricted 3 per cent., foreign suppliers are restricted 10 per cent., and if there is anv virtue in restriction of supplies at all. thev should increase the price which we obtain for our exportable mutton and lamb by more than id per lb. It is urgently necessary at once to take the initial steps to devise a scheme and obtain sufficient powers to met whatever situation may arise. Commodity Councils “ I am confident that the Meat Board will not let the producers down in this matter,” Mr Mulholland said. “ in spite of very strong influences that are being brought to bear to dissuade it from taking effective action. The imposition of these restrictions has made the producers very much more interested in the Empire Producers’ Conference at Sydney last year, and especially in the proposal to establish Empire commodity councils. It was reported. I hope incorrectly, that a member of the Meat Board recently warned a large meeting of farmers not on any account to have anything to do with commodity councils. If he did so. he could not have known what commodity councils are. or he could not have known what the Meat Board was doing, because the Meat Board is, at the present moment, a party to a commodity council covering almost the whole of the commodities subject to their, control, -That commodity council was hot set up by our Meat Board and the other Dominion and United Kingdom producers’ organisations, but by the action of the United Kingdom Government, and in consequence it has all the disadvatanges which critics have claimed for commodity councils but few of the advantages. “ The commodity councils as proposed by the Empire Producers’ Conference offer us a great opportunity for expanding our markets in Britain To understand this, it is necessary to have some knowledge of the position in regard to nutrition and food supplies at Home, problems which these councils can attack from within. There are complications in the situation, but, nevertheless. 1 am of opinion lhai concerted action on the part of the meat producers of the Empire including the British producer can increase the available market for meat very considerably The reason why some hostility has been shown in New Zealand by some producers is that they have been verv grossly misinformed as to ■wha f the uomraoditv councils were and what thev could do. and frequently this information has come from those who have been strongly opposed to producer control either because they have wished to continue to enjoy the handsome profits which they are able to make out of the present position or because they are committed to Government control

cows and supplying the produce to the Primary Products Marketing Department also be required to join the New Zealand Workers’ Union? Then there is the question of flexibility When a iob on the farm has to be done, it has to be done then and there. The far mer is usually working himself ana has no time to be running all over the country to find out whether union men are available. It would undoubtedly lead to a great deal of friction and a great deal of irritation without giving any useful service in return.”

GUARANTEED PRICE OFFER FOR NEXT SEASON STABILISATION OF WAGES APPARENT FAILURE OF ATTEMPT (Special to Daily Times) WELLINGTON, July 11. "The guaranteed price system has become nothing more nor less than a State marketing scheme. The pretence that it would pay the farmer a price that would be related to his costs has been largely dropped, though it does crop up now and again.” stated the Dominion president (Mr W W Mulholland) in his address to the Farmers’ Union Conference to-day. “ I agree with the Minister of Mar kcting (Mr Nash) " he added “ that it is impossible to carry on a guaranteed price scheme that will result in repeated heavy deficits in the dairy account. But I would remind him that, notwithstanding what it may be possible to read into the formula of the Primary Products Marketing Act. he did promise to pay the farmei a orice that would meet all his costs The large deficit which seems probable in the account this season, even under the orice that has been paid, inadecuate though it was to meet the farmers’ costs, is a matter of concern. With the overdraft piling up in what cannot be regarded as other than a good-price season, what is going to happen should there be a heavy fall in the overseas price, making the orice available to the dairy farmer very much lower if. in addition, he has the debit in the dairy account hung round his neck? An attempt to sustain a policy of oiling costs on costs by an unbalanced dairy industry account would be a deadly danger to the industry. Consequently, the question of what the Government is going to do about the deficit is one of great moment. Wages and Other Costs "As a matter of financial policy the Minister was right in refusing to pay a price which he knew would result in a very large deficit but. on the other hand, the Government must face the position that the raising of farmers’ orices by Government action was the foundation of its policy of raising wages and other costs, and the foundation having failed it is essential that the Government should immediately review the whole structure.

“The offer in regard to the 1939-40 season made to the dairy industry by Mr Nash was that the dairy industry should accept the price paid in 1938-39 for 1939-40, and if they would do so he undertook that he would endeavour to get the trades unions to accept a stand-still agreement in regard to wages. It will be seen that in this offer there was nothing definite except the acceptance by the industry of the 1938-39 price for next year Ido not mean by that to convey that there was any reason to doubt Mr Nash’s sincerity. He was absolutely sincere and was genuinely desirous of putting a stop to the continually ascending spiral of costs and prices. But he very evidently had no power to do more than make an appeal to the unions “ I found myself strongly sympathetic towards an attempt to stabilise costs, and was prepared to recommend the industry to make some sacrifice to bring it about, but a close examination showed that the offer as it stood contained no promise of stability: it was never more than a hope, which recent events, particularly the number of strikes that have taken place in the last three months against recent awards of the Arbitration Court, show to have been ill-founded. Unfair Treatment " But supposing the offer could have been translated into act, it was treating the farming community in a decidedly unfair manner in that the farmer was asked to stabilise his 1939-40 prices at considerably below his 1938 costs as ascertained by the Government’s 1938-39 Advisory Committee, while wages were to be stabilised at the present level of costs, thus putting the farmer at a considerable disadvantage. The attempt at the stabilisation of wage rates, however, seems to have failed and the unions are out to demand their full pound of flesh, apparently not realising that a considerable slice of it must be cut from them, and it is difficult at the moment to see how stability is to be maintained. “Mr Nash deserves credit for his courage in facing the Federation of Labour Conference and urging that the unions should not ask for any increases on wages for at least a year Eventually, and perhans soon, the Government will have to screw its courage up to the point of a much more positive action than this, and, when it does so, it can be assured of the solid support of the farming community.”

ROYAL COMMISSION SHEEP FARMING INDUSTRY NEED FOR INVESTIGATION (Special to Daily Times) WELLINGTON, July 11. The appointment of a Royal Commission to investigate the problems of the sheep farming industry was commended by the Dominion president (Mr Mulholland) in addressing the Farmers’ Union Conference to-day. “ I heartily congratulate the Government on setting up a Royal Commission,” he said. “There has been a suggestion in some quarters that we already know all that a commission can tell us. I disagree. In New Zealand the sheep farmer has to take the outside running. Naturally, the more productive lands are used for the more intensive types of farming and the sheep farmer has to find his place between the lower margins of these more intensive types of farming and the outer edge of farmable lands. Consequently. he has many pressing problems apart from the all-important one of the relation between costs and prices. If the commission does its work as well as I have every reason to expect, its report will present us with Information of the very greatest value on many important phases.”

STATEMENTS OVER THE AIR

FARMERS’ UNION PRESIDENT PERTURBED (Special to Daily Times) WELLINGTON July 11. “The philosophy is being encouraged that we can make in Now Zealand all the things that we need to maintain our standard of living and that it is not necessary to worry about our export trade.” said Mr Muiholland in his address to the Farmers' Union Conference to-day. “ Suggestions of this nature are being put over the air very frequently from various wireless stations under Government control in a manner calculated to belittle the farmer and boost the manufacturer But the farmers are not al lowed to reply “If these attacks are going to be continued it will bp necessary for the farmers to find a means of reply through wireless station l : which are not in the control of the Government ”