GUARANTEED PRICE.

Pahiatua Herald, Volume XLIV, Issue 13639, 25 August 1937, Page 5

GUARANTEED PRICE.

Id. INCREASE FORECAST. DANGERS OF OVER-PRODUC-TION. Electric Telegraph.—Press Association WELLINGTON, August 24. , From information available ’ ere it is possible to forecast that the newguaranteed price for butter shortly to be announced by the Minister of Finance (Hon. Walter Nash) is likely to be a fraction over Is ljd a lb. 'this represents an increase of about Id per lb on the basic price for finest grade last year, that price having been 12 9-16 d per lb. However, if the Govern 11 ?nt acts upon a section of the report of the Guaranteed Price Committee dealing with the delayed effect of price rises and their effect on production, the guaranteed price may he set at Is 2d per lb. In the case of cheese, an interim report of the committee, released three months ago, recommended 'hat the price of cheese should be fixed at a. level which would enable cheesemanufacturing companies showing a yield not markedly below the standard to make a hutter-lat return to suppliers of not less than 2d per lb over the butter-fat return made by a butter-manufacturing company of comparable efficiency. The committee takes the standpoint that factoi'y costs have increased by about Jd per lb and that other production costs are not likely to be less than an equivalent: sum. The increase in the guaranteed price of cheese will also be about Id, it is- reported. The loss on the first season’s trading under the guaranteed price scheme is stated to be £400,000, of which practically all was on butter, cheese just about paying its way. This fact has had its influence on the recommendations for next season, but to-day it is felt that London values are much sounder than they were at the time when the price was first fixed. This, and the belief that prices are not likely to go- anywhere near the low figure of 86s which butter touched last February, has led to some conflict of views on the committee. However, it is pointed out that the best way to end the guaranteed price scheme is to set the price at too high a level and for that reason moderate views prevailed.

Against the loss of £400,000 it is claimed that improved marketing technique lias saved the dairy industry from £2-50,000 to £300.000. One significant side of the report is not likely to be published. It concerns the effect of the guaranteed price on the- total production. In its first report the Guaranteed Price Committee warned the Government against the danger which w-ould result if the price were set at such a figure as to stimulate production to which would create problems of disposing of an over-supply of butter and cheese. In the past season of operation of the guaranteed price there was a general increase in shipments to all British ports, butter shipments being higher by 75-55 tons and cheese by 1241 tons. The butter increase represented a gain of about 5 per cent, ou the 103-5-36 figures. There is reason to believe that this year the committee has repeated that warning and has used this as a lurther argument for a moderate guaranteed price.