BUTTER-FAT ADVANCES

Stratford Evening Post, Volume I, Issue 84, 18 March 1931, Page 5

BUTTER-FAT ADVANCES

POLICY OF COMPANIES CONSERVATIVE BASIS URGED LATER "SURPLUSES POSSIBLE With an exchange premium of £S 10s per cent, on shipments of dairy produce from New Zealand, on a premium of £9 12s fid on cabled remittances from London, the present value of butter is approximately Is Oid a lb., f.0.b., the exchange being equivalent to 7-Bd. In these circumstances, the opinion has been expressed that dairy companies might, with safety, raise their monthly advances to a higher level than has obtained recently. Discussing ibe position, an expert connected with the financial side of the industry points out that, for some considerable time, dairy companies had not handled the exchange premium, the amount having been retained by London agents, pending a final adjustment on the accounts sales. Dairy companies had drawn from lid to Is Id on early shipments, which had realised only 104 s to 110 s a cwt. on the London market, and the agents had evidently considered it advisable to retain the exchange premium meantime. to avoid the possibility of reclamations on early shipments. Another factor, he said, which was hampering dairy company directors, was the accumulation of butter awaiting shipment. A considerable portion of January’s make, and the whole of February’s make, were still in storage and the difficulty of estimating the price which this butter would realise ultimately when it came into competition with the early make of the new season on the European market tended to make dairy company directors somewhat conservative. He also pointed out that, while the over-run in a butter factory could be depended upon in normal circumstances to pay all costs of manufacture to f.0.b., these charges were not fully covered by the over-run when butter realised under Is a lb. For that reason, he said, a dairy company which advanced its suppliers the rate per lb., it was drawing against shipments, and relied on the over-run to cover its costs to f.0.b.. was doing all that could be reasonably exnected.

As the London market appeared to have stabilised round about 120 s, he said dairy companies, in this event, would have substantial surpluses later, as thev had drawn only 9d against consignments of butter shipped during the flush of the season, the rate having been increased to lOd in January and to ltd for February. No matter how keenly dairymen might like to see a higher nay-out at the moment, he considered it would be injudicious to bring pressure to hear upon dairy companies to gamble on future realisations bv paving to suppliers a higher advance for butter-fat than the rate drawn against shipments of butter.

Asked to comment on a statement that the total pay-out for butter and cheese this season would be. in all probability, from Is 2d to Is 2d a lh., he said this forecast had no tangible evidence to support it, and dairy farmers would be well advised to base their calculations for the approaching winter on a total pay-out for the season of Is a lb. butter-fat. “A year ago,” he said, “the prospect of a shilling pay-out for the season would have appeared appalling to most dairy farmers, but I feel optimistic concerning the future when I hear general expressions of satisfaction in dairying districts because there is a. reasonable prospect of this sum being realised when the final adjustments are made.”