BUTTER-FAT ADVANCES.

Timaru Herald, Volume CXXXIV, Issue 18831, 20 March 1931, Page 9

BUTTER-FAT ADVANCES.

CONSERVATIVE BASIS URGED. With an exchange premium of £8 10/per cent, on shipments of dairy produce from New Zealand, and a premium of £9/12/6 on cabled remittances from London, the present value of butter is approximately l/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 was obtained recently. Discussing the position, an Auckland expert connected with the financial side of the industry pointed 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 account sales. Dairy companies had drawn from lid’ to 1/1 on early shipments, which had realised only 104/- to 110/- 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 Feb' ruary’s make, were still in storage in Auckland, 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 1/- 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 expected. As the London market appeared to have stabilised round about 120/-, he said dairy companies, in this event, would have substantial surpluses later, as they had drawn only 9d against consignments of butter shipped during the flush of the season that rate having been increased to lOd in January and to lid for February. No matter how keenly dairymen might like to see a higher payout at the moment, he considered it would be injudicious to bring pressure to bear upon dairy companies to gamble on future realisations by paying to suppliers a higher advance for butter-fat than the rate drawn against shipments of butter.

Asked to comment on a statement from Taranaki that the total payout for butter and cheese this season would be, in all probability, from 1/2 to 1/3 a lb., 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 payout for the season of 1/- a lb butter-fat. "A year ago,” he said, “the prospect of a shilling payout 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.”