INCREASED PRODUCTION AND LOWER PRICES

Stratford Evening Post, Volume II, Issue 220, 13 April 1933, Page 2

INCREASED PRODUCTION AND LOWER PRICES

Prospective increases in the world output of dairy produce, especially of butter, and their probable effect on the trend of prices, are reviewed by Mr. F. B. Stephens, of the Depart--incut of Economics, Auckland University College, in a paper read before the economics section at ’he recent congress of the Australian an.l New Zealand Association for the Advancement of Science. Mr. Stephens remarks that criticism may be levelled at continued concentration on. the English market, but: the latter forms by far the largest market for the world’s surplus dairy produce in normal times and to-day, owing to restriction of imports into Germany, it is practically the sole important market. Hence it is maintain ed that conditions in the United Kingdom are the vital considerations when discussing the future of the world’s dairy products. European Production

The first fact of importance is the tremendous increase in the butter marketed and consumed in the United Kingdom. The fall in price after 1925 stimulated consumption, until in 1931 it had risen from 152-lb to 2111 b per head. There has been concurrent whli this a decrease in margarine consumption, suggesting that the increase m butter consumption is largely a price factor.

Consequently, it seems reasonable to assume that, failing a very substantial rise in the general price level, the present quantities can he consumed only at low prices. Recent reports of the Empire Marketing Board indicate considerable development in practically all the countries exporting dairy produce. European countries cannot compete with the new world in arable farming and therefore are taking advantage of the fact that they can effectively compete in dairy production, particularly; of butter.

Further, there is a greater time-lag in a change from dairying to arable farming than vice-versa. This is largc_ ly due to the fact, that dairying involves much more fixed capital, not only on the farm, but also in the manufacturing plants necessary to process the raw material. Northern European Output Change from dairying to arable farming requires a much more prolonged and more decided movement of prices in favour of the latter than a movement in the opposite direction. Hence the conclusion is that in the immediate future —and such a period would embrace the next decade at least —definitely increased production of butter can bo expected in the northern European countries. This is more likely in view of the fact that recent developments in the technique of grassland farming and of fertilising have resulted in the postponement of the point of diminishing returns to investment of capital in dairying.

Mr. Stephens goes on to survey the recent and prospective development of dairying in Australia, Canada, the Argentine, South Africa. Rhodesia and Kenya. He remarks that on recent figures Australian butter will probably become a very serious competitor on the English market. There is every indication that with a return to normal conditions New Zealand’s output of butter will increase enormously in a few years’ time. “Consumptive Satiety” “It can be seen that the potential supplies of butter in the very near futifre arc Very much greater than at present, and even assuming a rise in the general price-level, it seems improbable that butter prices will rise comparably with• general prices. Limiting factors to this conclusion are, of course, cither increased consumption of butter in Great Britain and/or further markets for butter. As to the former, authoritative opinion believes that at prices ranging between 95s and 110 s, which are believed to be the lowest at which dairying can be carried on at the general level prices in most countries the point of consumptive satiety has been reached. “Su’mming up the above arguments, it is very likely that the quantities of butter on the English market will very materially increase within the next few years. This increased import can he consumed only at a very substantial reduction in price. Such a reduction in price will cause considerable hardship on account of the very large amounts of capital invested in the dairy industry and the consequent redu’cod capacity of farmers to change to more remunerative branches of farming.”