THE DAIRY INDUSTRY.

Otago Witness, Issue 4039, 11 August 1931, Page 17

THE DAIRY INDUSTRY.

AN UNFORTUNATE STORY. ° PRODUCERS MISLED. The New Zealand Exporter claims that dairy farmers will, as a result of the favourable exchange reaction, receive a large bonus. The Exporter says: ‘’Contrary to the expectations of all excepting those ‘ in the know.' the month of August will prove one of particular affluence to the dairy farmers of New Zealand. It is the practice of dairy companies to pay what is generally termed a ‘ bonus’ to their suppliers during this month. 'The name is really a misnomer, in that the ’bonus’ is really a deferred payment due to their farmer suppliers for produce of the previous season supplied and sold. In the season just ended advances have been most conservative. In addition, the exchange has reacted strongly in favour of the New Zealand farmer, since his produce has been sold for English money and paid for in New Zealand currency. This exchange provides a totally unexpected 12s a cwt for produce already sold. Authoritative figures have been secured which disclose the ameunt of the bonus to be declared in August at £2.000.000 for butter suppliers and £500.000 for cheese suppliers. This amount will be paid over in cash to dairy farmers, and will be additional or supplementary to- the usual monthly advance for supply sent to the factory in the ordinary way. Coupled together, the amount of money which will be paid out to farmers in August will amount to the enormous figure of £3,250,000.” STATEMENT QUESTIONED IN DUNEDIN. WRONG IMPRESSION CONVEYED. Inquiries made in Dunedin show that the report is unfounded as far as Otago is concerned. A daily factory manager when approached regarding the report commented that the statement was misleading, not only to clients of his company, but to the general public. “ The benefits of exchange that have operated have been received and distributed during the season,” he added. “ The only benefit from exchange that has yet to accrue will be the small amounts of surpluses that have still to come from London on butter and cheese sent Home on consignment.” The manager of a co-operative concern in Dunedin said: “The statement, which appeared in the New Zealand Exporter, seems to me to be quite inaccurate. It is said that a sum of two millions is due to suppliers of butter factories and half a million to the suppliers of cheese

factories fo r exchange. On the, figures of the season this cannot possibly be so, according to the quantities of butter and cheese shipped from New Zealand. In regard to butter, the dairy produce monthly statement shows that 87,544 tons were exported for the 11 months ended June 30 last, and allowing 7500 tons for July the total would be about 95,000 tons for the year. A high average price for the butter on the London market would be £l2O per ton, or a total of £11.400,000. The quantity of cheese exported for the 11 months was 82,630 tons, and allowing 90,000 tons for the full 12 months the total, value, at £6O per ton, wotlld be £5,400.000. The rate of exchange nas varied during the season from 21 per cent, to a maximum of 81 per cent., which has been operative since January 28 last. Up to that date half of the produce would have been shipped at the lower rate of ex change, and taking the quantities and values as stated above the rate of exchange over the whole season would require to have been about 15 per cent, in order to produce two millions and a-had sterling for our people. As a matter or fact, the exchange question has all been taken into consideration when making up our monthly advance payments to suppliers, so that instead of receiving it now in the shape of a bonus this month thej have actually had it spread over the 12 months. This applies to both butter and cheese. A plain statement of the position may be a disappointment to dairy pro ducers. after what they have been led to expect, but the facts are as set out. I am satisfied that in the North Island it is the same —factories have a similar system, and payments have probably been made to them on the same basis as in the South Island. Mr W. G. Wight, secretary of the South Island'Dairy Association of New Zealand, made this statement: —The re-

port to the effect that there is at present available for distribution to dairy factory suppliers a considerable sum of money accrued as the result of the favourable exchange on London during the past 12 months is most misleading and likely to convey a wrong impression to people who are not conversant with the actual ' position. The exchange premium on exports of dairy produce is payable to the factory companies only when the, produce is shipped on consignment. When the produce is sold f.o.b. New Zealand ports the buyer collects the exchange. The value of the exchange is, of course, taken into account by factory directorates when considering f.o.b. offers which may be made to them. In the case of consigned produce the exchange is credited to the factory company on each individual shipment. Some agents credit the factory ■with the exchange on the advance made when the produce is shipped at this end. whereas other agents withhold payment until the produce is sold in England, when the surplus proceeds, plus the exchange premium, are remitted by cable to the credit of the factory’s account. The latter method is more advantageous to the factory for the reason that the present rate of exchange New ZealandLondon on demand is 81 per cent., whereas the rate for cabled ‘remittances LondonNew Zealand is 10 per cent. Speaking for the South Island the factory companies generally, when deciding on the monthly pay-out to be made to suppliers, have taken into consideration the proceeds from exchange credited to, them throughout the past season, and in no case that I am aware of has a company intentionally withheld from distribution the amount derived from this source in order that it may be added to the surplus which is usually distributed as a bonus payment at the end of the season. It may be that one or more of the large companies in the north adopted the method suggested, but in that case their average monthly pay-out would necessarily be less than in the case of the others. The present exchange position is undoubtedly of considerable help to primary producers under existing circumstances, but it should not be overlooked slump in the value

of our primary products has been the principal factor in bringing that position about.

MR BRASH EXPLAINS.

Mr T. C. Brash, secretary of the Dairy Produce Board, who was in Dunedin last week, says that he deeply regrets having to refer to the statement made by the New Zealand Exporter relative to the amount to be paid out to dairy farmers during August. The Exporter is the official organ of the Dairy Board, but Mr Brash says the board is not responsible for the statement indicating that £3,250,000 would be paid to dairy producers in August. The statement has made the position of secretaries and directors of many dairy companies very difficult, as they are being inundated with inquiries as to when this amount will be paid out. The sum mentioned represents on the basis of last year's gradings a payment of over 2d per lb butter-fat to all suppliers of both butter and cheese factories. It is quite certain that the bonus or surplus payment will not reach anything like this amount. As a matter of fact, from the balance sheets of dairy companies which have already been issued, it is doubtful if the average payment can reach Id per pound—less than half the amount mentioned by the New Zealand Exporter. Further, the reference to an unexpected payment for exchange equalling 12s per cwt is entirely misleading. The advance made by merchants when dairy produce is shipped was made on the basis of the market price, with due allowance for exchange-—that is to say, the suppliers secured the advantage of exchange at time of shipment, and this was reflected in the monthly payment to suppliers, not in the bonus or surplus payment. The value of exchange on export dairy produce, allowing for an advance having been made on shipment of 10d per lb on butter and 5d per lb on cheese, is approximately 9s 6d per cwt on butter and slightly under 5s per cwt on cheese when the market price is 115 s per cwt for butter and 60s per cwt for cheese.