GUARANTEED PRICES

Te Awamutu Courier, Volume 53, Issue 3825, 23 October 1936, Page 6

GUARANTEED PRICES

SAVING TO DAIRY COMPANIES. GAIN OF £250,000. It is estimated that the savings in costs to dairy companies by way of interest, dairy levy and commission, through the operation of the Government’s guaranteed price plan, will amount to more than £250,000. This estimate is based on figures which have been supplied to Mr J. G. Barclay, Government member for Marsden, by the acting Director of Marketing, Mr G. A. Duncan. Dealing with the saving which the scheme has effected in interest charges, Mr Duncan pointed out that when butter and cheese were shipped from New Zealand for sale on consignment in the United Kingdom, the dairy companies, as owners of the produce, had to borrow from some source to the value of the produce, pending the receipt of the sale moneys from the buyer. Therefore the dairy companies were involved in an interest charge on the value of the produce for the period from the time of shipment until receipt of the sale proceeds. The companies met this interest charge either by paying interest on a bank overdraft, or through the medium of the interest factor in the exchange rate, or by both of these processes. The interest period involved was approximately seven weeks. But when butter and cheese were sold under f.o.b. terms, as in the present Government plan, the dairy companies, as owners of the produce, were paid the full sale on shipment, Mr Duncan added. Thus, apart from any consideration of the market return compared with the return under the Government purchase plan, a saving in interest or its equivalent represented in the exchange rate accrued to the dairy companies. In general terms it could be said that the saving in interest under the present plan, compared with the sale of the produce on a consignment basis, was approximately £121,000.

Under the guaranteed price plan, Mr Duncan also pointed out, the dairy board levy was reduced, and the saving to dairy companies on that item was estimated to be £41,000. The reduction of selling commission from 24 to 2 per cent represented approximately £90,000 sterling on the London selling value of buttei' and cheese, at approximately last season’s prices. This saving was a set off against the cost of the Marketing Department, and represented a definite benefit to the producers.

Commenting on the details supplied by Mr Duncan, Mr Barclay pointed out that the aggregate savings under the three headings covered would amount to £252,000.