SHRINKAGE DEDUCTION

Te Awamutu Courier, Volume 53, Issue 3801, 28 August 1936, Page 7

SHRINKAGE DEDUCTION

PRICES OF WAXED AND UNWAXED CHEESE. DEPARTMENT’S REPLY TO CRITICISM. A reply to Taranaki criticism of the shrinkage deduction of 24 per cent on both waxed and unwaxed cheese was made on Wednesday by the Acting Director of Marketing, Mr G. A. Duncan. “The Taranaki criticism seems to arise from a misunderstanding ot the position,” said Mr Duncan. “The intention of the Government under the guaranteed price plan was to secure to dairy farmers a pay out based on the average of the past eight to ten years.

“When Cabinet decided what the pay out for butter fat in milk supplied for cheese making should be, it became necessary to convert this payout figure into a f.o.b. purchase price tor cheese. Directors and officials of dairy companies know that one factor in this conversion formula is the yield of cheese per pound of butter fat, and they know also that in determining the yield, allowance is made for the cheese shrinkage. Thus, a 21 per cent shrinkage results in a lower net yield than is the case if a 1 per cent, or 11 per cent shrinkage is allowed. Consequently, to secure a given pay-out per pound of butter fat the f.o.b. purchase price of cheese will be higher when a cheese shrinkage of 21 per cent is allowed than will be the case when the shrinkage allowance is 11 per cent. “I think that the foregoing explanation, and an assurance that the pay out conversion formula included a 21 ner cent shrinkage allowance, should convince the Taranaki cheese producers that they suffer no injustice through the deduction of a uniform shrinkage on all cheese. “If a 11 per cent shrinkage allowance on waxed cheese had been taken the basic purchase price of the cheese would have been lower than 6 13-16 d per pound, but the resulting pay out to dairy farmers would have been unaltered.

“It is not desired that all the cheese exported should be waxed, so the position is considered to be fairly met when the Marketing Department defrays the cost of waxing by an allowance of 44d per crate. This allowance was fixed after consultation with the secretaries ot.several large cheese manufacturing companies, and it adequately covers the cost of waxing for the season just closed.”