THE GUARANTEED PRICE

Te Awamutu Courier, Volume 59, Issue 4220, 6 December 1939, Page 7

THE GUARANTEED PRICE

“HAS BROUGHT STABILITY.” MARKETING MINISTER’S REVIEW. Referring to the recent discussion on the guaranteed price for 1938-39, - the Minister of Marketing, the Hon. Walter Nash, stated to-day that it appeared that the representatives of the dairy industrj’ had not taken into account all the details which are relevant to the guaranteed price prior - . to and since its inception. There are one or two points in particular, said Mr Nash, which require emphasis. The first is that no dairy farmer ■ really wants to go back to the mercies of the open market over which he has no control. There is no argument about the principle of guaranteed or stabilised prices. This has not been made clear in recent discussions, but a stable price in itself is a factor of some value and the working dairy farmer is very well aware of this. It will be remembered that for, the Href ;year the guaranteed .price was assessed on an average of the previous ten years’ realisations. The average prices paid for butterfat for the ten-year period prior to the 31st July, 1935, were:— Butterfat for butter, 12.73 d per lb. Butterfat for cheese, 13.81 d per lb.

The guaranteed price for the first year, that is for the 1936-37 season, was in advance of this figure, making a payout for the 1936-37 season of approximately 13.6 d per lb for butter and 15.18 d per lb for cheese. The first point to make here is that the actual payouts were over ?.d on the average higher than the estimated guaranteed price. That means that for the first year of the guaranteed price the dairy farmers of this country were actually getting much more than had been calculated on an average basis. But let us compare the above figures with those for the two preceding years. Here they are:— Payouts for butter 1934-35, 9.5 d; 1935-36, 12.125 d; 1936-37 (under guaranteed price), 13.558 d.

Payouts for cheese 1934-35, 10.125 d; 1935-36, 13.125 d; 1936-37 (under guaranteed price), 15.176 d. The guaranteed price for 1935-36 not only included payment for butter and cheese carried over from the previous season when there was not guaranteed price and farmers would otherwise have had to take market returns, but it also included an additional amount of Id per lb paid to cheese factories in order to make their payout lid higher than that for butter factories as had been promised earlier.

Under the first year’s guaranteed price, then, the dairy farmer not only got more than he had received on the average of 10 years but he also got more than the two previous years and more than was estimated as a fair guaranteed price for that year. The same can be said of subsequent years. If we take the guaranteed price for the second year, that is, 1937-38, and for the third year, that is 1938-39, we will find that again the average payout from dairy factories was much higher than was estimated as the fair guaranteed price. Here are the figures:— - ■ ■■ Payouts in pence per lb of butterfat: 1936-37, butter, estimated, 13.04; actual, 13.558. Cheese: Estimated, 14.54; actual, 15.176. 1937- Butter, estimated, 13.880; actual, 14.812. Cheese: Estimated, 15.880; actual, 16.389. 1938- Butter, estimated, 15.880; actual, 16.199. Cheese: Estimated, 17.88; actual, 18.060. INFORMATIVE FIGURES. The exact figure showing the excess of average payout over the basic guaranteed price are as follows: 1936- Season: Excess payout (butter) .518 d (cheese) .636 d pounds of butterfat (butter) 323,904,000, (cheese) 80,172,000; amount (butter) £699,093, (cheese) £212,456; excess payment over guarantee, £911,549. 1937- Season: Excess payout (butter) .932 d (cheese) ,509 d pounds of butterfat (butter) 301,130,000 (cheese) 78,632,000; amount (butter) £1,169,388, (cheese) £166,765; excess payment over guarantee, £1,336,163. 1938- Season: Excess payout (butter .319 d (estimated), (cheese) .18d (estimated); pounds of butterfat (butter) 265,019,495, (cheese) 75,173,372; amount (butter) £352,255. (cheese) £56,380; excess payment over guarantee, £408,635. What do these figures show? They show that in 1937-38 ’ suppliers of butter factories received almost Id more than was considered fair at the beginning of the season, while suppliers of cheese factories received id more. Last year, the guaranteed price was substantially increased, so much so that the estimated payout was 2d higher than the estimated price for the previous year. But these estimates were exceeded, for in the case of both the suppliers of butter factories and suppliers of cheese factories the actual payout was much higher than the Government estimated as being a fair figure. That being the case, it is very difficult to find any basis whatsoever for an increase in the guaranteed price for this year which has been fixed at the same level as last season. ... .

The makeup of the price is as follows:

Working and maintenance costs, 5.34 d; capital charges (interest), 3.24 d; labour reward, 8.84 d; (17.42 d less return from pigs, 1.54 d; estimated payout for butter, 15.88 d. Let us look at another point—factory costs. In the first year of the guaranteed price the estimate of thefactory costs of producing butter and cheese was of necessity not as accurate as it has been in the last year or two, when much more material has been at hand on which to base figures. . The following table shows that with butter factories an allowance for factory costs has been made in the guaranteed price, but actually the ‘ manufacturing cost in each of the last three years was lower than the figure allowed in the guaranteed price. In the case of cheese, the first year showed some disparity against the cheese factory, which was, however, made up in subsequent years’ guaranteed price so that the cheese supplier has received his fair return based on factory costs, but the supplier to a butter factory has received more

than what was assessed as a fair return. Here is the table of costs (costs in pence per lb of butterfat): —• 1936- (Butter) estimated 2.25, actual 1.984, (cheese) estimated 2.75, actual 3.139. 1937- (Butter) estimated 2.25, actual 2.047, (cheese) estimated 3.25, actual 3.337. 1938- (Butter) estimated 2.25, actual 2.222, (cheese) estimated 3.50, actual 3.592. It was difficult to find out exactly what factory eosts were in the years 1934-35 and 1935-36, but there were estimated at 2d per lb for butterfat for butter and 2.75 d per lb for butterfat for cheese. THE OUTPUT VARIES. Now a few words as to output;. Output is a matter that varies very much with the seasons. It varies witlji costs and it is affected to some extent by income which a farmer feels he needs. The biggest main operating factor in the last year or two ip regard to output has been the climatic factor, but in addition to. this there has been the question of disease. Notwithstanding variations in the output of butterfat due to the various factors, the amount received by the dairy industry for this varying production has progressively increased; even for 1938-39 when production dropped over 10%, owing to the bad season, the return to the dairy industry as a whole dropped by about 2%, and it is possible that this climatic factor is responsible for some of the assertions that farming income is not what it was. The figures for output and total payments of dairy products since 1931 are as follows: . :

1933-34: Total butterfat, 391,961,2021b5; total value all products, £17,911,129.

As as as the dairy industry account itself is concerned, it is well-known that the payments out to dairy factories have exceeded materially the market realisations over the period since the inception of the guaranteed price. During the three complete years the guaranteed price system has been in operation, the excess paid out by the Marketing Department to the farmer over the amount realised in London in two of these years is approximately £2,824,645; and for the year 1937-38 the realisation was £576,724 oyer the amount paid out to farmers, making a net payout to the farmer for the three seasons of £2,247,921 in excess of realisation by sale. The tietails are as follows: ' 1936-37: Deficit £272,109. 1937-38: Surplus £576,724. 1938-39: Estimated deficit £2,552,536. As the Government had promised that any deficit for the first year of the guaranteed price would be the responsibility of the Government, the first year’s deficit of £272,109 has been paid out of the Consolidated Fund, leaving a net deficit in the guaranteed price account of an estimated figure of £1,975,812. Had the Government not been marketing the dairy produce for New Zealand, market realisations would have been less. In addition to this, costs in New Zealand would have been higher, for the Government has saved commission charges, saved on Dairy Board Levy, saved on interest. Over three export, seasons the total savings to the industry is worked out at over £650,000, quite apart from the higher market realisations that have come about through a better marketing procedure. FACTORY PAY-OUTS. Let me give you some examples of individual factory payouts above the estimated; basic payout for last season. It will be recalled that for 193839 it was- estimated that the payout for butter would be 15.8.8 d and the payout for cheese, 17.88 d. The average was much higher than this. Here are some cases of total payments to suppliers:— Butter: N.Z. Co-op. Dairy Co., 16.253 d; Tai Tapu (Canterbury), 16.449 d; Te Awamutu, 16.136; Awahuri (Palmerston North), 16.761; Kaitaia, 16.142; Levin, 16.978 d.

Cheese: N.Z. Co-op Dairy Co., 18.446 d; Tatua (Waikato), 18.110 d; Kaupokonui, 18.024 d; Island (Southland), 18.33 d; Dalefleld (Wairarapa), 19.46 d; Normanby (Taranaki), 18.37 d; Awarua (Southland), 19.134 d. Is it not clear that the dairy industry is receiving much more than the basic guaranteed price which has come in for so much discussion ? As to costs which may increase to a major degree, I have already suggested that in regard to fertiliser the Government will see to it that there is no material increase in the price. The dairy industry has suggested that it would be better to incorporate in the guaranteed price any increase in the price of fertiliser. I have suggested that it would be better to pay a subsidy.’ Clearly, a subsidy is preferable. For a subsidy pays out what is necessary to see that the price of fertilisen bought is kept stable to the farmer, whereas it if were incorporated in the guaranteed price it would mean that some farmers received much more than they would

have expended on fertiliser while others 'received much less.

MUST MAINTAIN PRODUCTION. Farms vary within the districts themselves, they vary from district to district, some farms need more fertiliser than others, some farms need different types of fertiliser from others. This, surely, is elementary in any consideration of farm problems. That being the case, how can the dairy industry justify a request for inclusion in the guaranteed price of any increase in the cost of fertiliser, if the Government itself is willing to meet the amount of the increase? It it not much more rational and much more in the national interest and more just in the individual interest to see that for every ton of fertiliser used, no increased price is passed on to the dairy farmer? There are no grounds for including in the guaranteed price any increase which may occur in the price of fertiliser, if a subsidy can be made available. Furthermore, we have undertaken to assist Great Britain in her war effort by maintaining production, and extending it. In doing this, fertiliser is an important factor and by con centrating any additional expenditure which may be necessary on the provision of fertiliser we are directly assisting New Zealand in her production programme and the United Kingdom in the prosecution of the war.

From the tables in this statement it will be seen that the dairy farmer on the average (some more some less) received the following payouts for butterfat:—

If the output is compared with the total payout the figures show that compared with 1934-35 output last year (largely due to climatic conditions and facial eczema) declined by less than 10% but the payout increased by over £9,000,000, or 50% Even compared with the record production year of 1936-37, the total payments to dairy farmers were higher last year by £382,000 despite a production decrease of 16%. Production was well down but the total payment to the farmer was increased. WE ARE AT WAR.

The dairy farmer, with other citizens, is rendering good service to the nation and to the Commonwealth; he is worthy of reasonable pay for his work; and the Government will do everything possible to see that he receives it.

All the evidence that I have received from various sources in New Zealand is to the effect that dairy farmers on the whole are doing well and with few exceptions are quite satisfied with the guaranteed price. However, if the industry has some evidence relating to dairy farmers’ balance sheets which they would like to submit to the Government, 1 am sure that the Government would be very willing indeed to examine individual farmers' returns.

We are at war. Every dairy farmer in the Dominion is anxious to do his share of the work necessary to help in the conflict. Whilst the conflict lasts, and after, the Government will do ail that it can to ensure that the dairy farmer with other sections of the community receives a fair share of the wealth of the Dominion in some relation to his work and service.

The Government believes the guarteed price procedure has brought more benefits to the working farmer than any policy that has been introduced into the dairy industry foi many years.

It has brought stability. It has brought consistency, certainty with regard to market price, and relief from worry to a greater degree than ever before. The Government desires to continue the guaranteed price, and believes that the majority of working farmers also desire it continued, and that the statements in the press do not represent the working farmers’ views.

1934-35: 376,710,3551bs; £18,172,547. 1935-36: 390,540,1971bs; £23,364,594. 1936-37: 406,841,9581bs; £26,868,643. 1937-38: 383,037,4691bs; £27,767,288. 1938-39 (estimated): 342,000,0001bs; £27,250,000.

1934-5: Butter, 9.500d; cheese, 10,125d. 1935-6: 13.125d. Butter, 12.125d; cheese, 1936-7: 15.176d. Butter, 13.558d; cheese, 1937-8: 16.389d. . Butter, 14.812d; cheese, 1938-9: 18.060d. Butter, 16.199d; cheese,