RISE OF ABOUT ID FORECAST

Southland Times, Issue 23287, 25 August 1937, Page 4

RISE OF ABOUT ID FORECAST

The New Guaranteed Prices RESULT OF TRADING LAST SEASON EXPECTED DEFICIENCY OF £400,000 (Special to The Times) WELLINGTON, August 24. From information available in Wellington it is possible to forecast that the new guaranteed price for butter shortly to be announced by the Minister of (the Hon. Walter Nash) is likely to be a fraction over 1/11 a lb. This represents an increase of about Id a lb on the basic price for finest grade last year, that price having been 12 9-16 d a lb. However, if the Government 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 be set at 1/2 per lb.

An interim report of the committee, released three months ago, recommended that the price for cheese should be fixed at a level that would enable cheese-manufacturing companies showing a yield not markedly below the standard to make a butterfat return to suppliers of not less than 2d a lb over the butterfat return made by a buttermanufacturing company of comparable efficiency. The committee takes the view that factory costs have increased by about |d a 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 today 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 86/- 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. MARKETING TECHNIQUE Against the loss of £400,000 it is claimed that improved marketing technique has saved the dairy industry from £250,000 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 that would result if the price was set at such a figure as to stimulate production to levels 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 7555 tons and cheese by 1241 tons. The butter increase represented a gain of about 5 per cent, on the 1935-36 figures. There is reason to believe that this year the committee has _ repeated that warning and has used this as a further argument for a moderate guaranteed price. —