3D LB. INCREASE

Poverty Bay Herald, Volume LXIV, Issue 19378, 16 July 1937, Page 9

3D LB. INCREASE

DAIRY FARM COSTS RESULT OP LEGISLATION FARMERS' UNION ESTIMATE SPECIAL REPORT ISSUED (Special to the Herald.) WELLINGTON, this day. The increase in dairy farm costs as a result of recent legislation is estimated by a special committee of the Farmers' Union as nearly 3d per lb. butterfat. A report issued by the committee gives the figure as 2.885 d per lb. butterfat. Wages costs increases are shown as 2.335 d and farm costs at .55d. The period under review was October 1 to June 1. "This," the report states, "would make the increase per ib. butterfat necessary to place the farmer in the same relative position at the present time as he was in season 1935-3 G, 3.385 d per lb. butterfat. As, however, costs are rapidly rising, it would appear that it would be necessary to increase- this amount." , "We would, point out," the report states,., "that dairy production during the 1936-37 season on a per acre and per farm basis has been higher on account of favourable seasonal conditions, and consequently income has been above normal. "The 1936-37 season income has been swelled by the fact that the 1935-36 factory bonus was paid during the season and at the same time a higher advance proportionate to the expected final return for the 1936-37 season was also paid, so that more than the actual income for the 1936-37 season is shown in the cash receipts.

Unreliable Guides J "In our experience, returns of in- ' come and expenditure of individual 1 farmers are not very reliable guides to the cost of production because of r the variation in individual interpretation of various items, and particu- , larly variations shown from year to . year in actual costs such as the main- . tenance of a farm, herd and plant, as , heavy costs may be incurred in these i items in one season and none, or comparatively ]ight costs, in another. "We also find'that onljj, a part of present increase in costs is accounted for, as many increases in prices are taking place, and they are continuing to rise, and these increases have not been anything like fully reflected in the year's cost as they have only acted throughout the latter part of the season. Consequently, it is necessary to calculate costs on the basis of present prices, with a due allowance for increases that are now imminent. "In many cases we find that farmers' statements omit important items of costs which do not involve actual cash transactions. Depreciation is often not charged, or only in-

completely. Interest on the farmers' own investment is frequently not included as a cost. No provision is made in most cases for a reserve to meet the decreased income in seasons of low production. No provision is made for increased expenditure made necessary by the operation of dairy and other regulations which may be considerable. Danger of Averages "We would point out the danger of depending on average costs and returns to determine the price for butterfats, as the price that is fixed will also fix the margin where production becomes unprofitable, and if the average is taken to fix this price then those farmers with costs abovp the average will be forced out of production or have their standard of living reduced below the general standard of living throughout New Zealand which the Act requires to be afforded to dairyfarmers. "This would particularly affect the smaller farmers, as is clearly shown in the Dairy Industry Commission's report, page 64, paragraph 144, where, with herds of 31 cows and under it is shown that the cost of producing butterfat, apart from capital costs, was 9.763 d per lb., while with herds of 100 cows and over the cost of similarly producing a lb. of butterfat was 6.279 d per lb. "The same report, paragraph 135, shows that with what is classed as 'efficient' management, the cost of production may vary from 4.89 d. to 10.22 d per lb. The average is 7.555 d., but it is evident that if the price were fixl on this basis all farms with over 7.555 d. per lb. costs would produce at a loss and eventually be forced out of production," Wages increase Reviewed Reviewing wages increase, the report makes the following, note:— "This is drawn up on the assumption that only minimum rates are paid. In view of the difficulty of obtaining dairy-farm labour at present the average wage now paid is generally above the minimum." "It is difficult," the report continues, "to obtain information with re- j gard to concrete cases concerning wage increases over a sufficiently large number of instances to enable a general conclusion to be drawn with approximate accuracy. It is submitted, however, that the increases over last year can be computed on the basis of the following points agreed on during the dairy farm labour discussions, viz.— "(a) The fair amount of butterfat production for one adult labour unit (permanent employee), is 60001 b. of butterfat, and—"(b) The average rate of wages for an adult dairy farm worker prior to the agreement was agreed to be 25s per week and found. "The average wage for an adult farm worker, such a hand as could be expected to produce 60001 b. of fat, was

aßEßßggßggggßg* .." T "': fixed by the Agricultural Workers' Act at £2 2s Od, an increase of 17s Gd per week. There was also granted a further payment of 8s 9d per week (half the board allowance), for the time which the worker had on holiday. In the calculation following a conservative allowance for board for a fortnight has been taken, although a month's holiday is provided for by the Act. Formula Explained ! "Assuming the workers under 21 to be paid in proportion to their capability for the production of butterfat, the average increase per lb. of butterfat will be the aggregate increase in payments divided by 6000—(17s (id X 52) -f- (8s 9d X 2) divided by 6000, equals £45 10s -f 17s Gd, equals £46 7s (id. divided by GOOO, equals 1.855 d. "It is submitted, therefore, that the increase in labour costs due to legislation is 1.855 d. plus the extra cost of the man's keep. "The increase in the charges of boarding houses in Wellington during the last year have ranged from 5s to 10s per week. We can claim, there- ' fore, that a conservative estimate of this increase is 5s per week. To take a conservative view, although a month's holiday is provided and although an increase of 8s 9d was taken above only for a fortnight in this case, we base the increase on 48 weeks of the year only. The increased cost per lb. butterfat due to increased keep is, therefore, 60 X 48 divided by GOOO, equals .48. The total wage increase is .48d. -I 1.855 d., equalling 2.335 d. Basis of Farm Costs "On farm costs it is difficult to obtain figures which are truly representative, but the Dairy Commission went exhaustively into this matter and. accepting the figures on page 193 of their report as a base, we submit the following computation. "It must be pointed out that we have taken the North Island average costs, and consequently the increases are probably more than those stated. It will be noted that for cultivation no increase has been stated as it is difficult to know just what was in- , eluded in this figure. In the South Island, for which no figures are shown in the dairy report, this is a considerable item in dairy farm costs. The cost of replacing horses, for instance, has increased very considerably. "No increase has been claimed for noxious weeds or rabbits, and an increase of only 20 per cent has been claimed for sundry items. Sundry items will include cartage inwards which has increased by 50 per cent in many cases. A conservative view has been taken, and 20 per cent only added. "The procedure which has been followed has been to take the North Island costs of the Daily Commission's report, and add to those the percentage of increase which we have been able to ascertain—from comparisons of price lists and our personal I knowledge—has taken place in the j last year. This would appear to be a j practical method of comparison, but j as prices had risen from 1934 to j October, 1936, the calculation must be j conservative. j

Total all costs .. 4.093 - -5502 ♦lncreases in basic slag and lime, with a slight increase for super. "The farm to f.o.b. increase based on figures supplied by dairy companies we understand to be .5d." Use of Standard Unit The Dominion president of the union, Mr. W. W. Mulholland, explained that the use of a standard of GOOOIb. of butterfat, a unit of labour was taken merely because it was the standard of efficiency postulated by the Government representatives in the discussion with the committee of the Farmers' Union on dairy farm wages, and having been postulated by the Government it was accepted by the union merely for the purpose of a standard for calculation. "I would like to state emphatically, he added, "that the Farmers' Union, by its use of this figure, in no way put it forward as the union's considered opinion of the standard of efficiency of the labour unit in the dairy industry. The union has at no time sufficiently investigated this question to have been able to express a definite opinion, and it was used merely because of the reason stated."

0_. g p, « i _ ■£ 1- ~ J t — 5 |~£ "■ i~. z* ■? H -' ~ H 5'/ ii >1 Main working costsd. l ;'o d. Cultivation .. ' • ■ .171 ' — Seeds .175 20 .0350 Fertilisers .909* —• — Fencing .188 20 .0370 Water repairs .008 20 .0130 Noxious weeds .020 — — Rabbits .003 —■ — Casual labour.. .070 33 .0233 Cow covers .. .045 15 .0007 Veterinary .072 — — Shoeing .035 12 J .0043 Implement repairs .. .107 20 .0214 Milking plant repairs .125 20 .0250 Power (Petrol) .408 9 .0370 Milk, plant materials .077 10 .0077 Total main works costs 2.473 — .2110 Depreciation — Implements .258 20 .0516 Farm 'buildings .140 33 .0400 Milking plant .241 20 .0482 Total depreciation .. C39 .1404 Overhead expensesSundry items .296 20 .0592 Rates .419 20 .0838 Land tax .020 - Total overhead .735 — .1430 Total working exs.. . 3.847 — — Stock & poultry feed .240 20 .0492 — "