MILLIONS LOST.

Star (Christchurch), Volume LXVI, Issue 20204, 15 January 1934, Page 9

MILLIONS LOST.

Price-raising Plan in America. BUTTER AT SEVEXPEN'CE. CHICAGO, December 30. The net result of a large-scale-attempt to force up the price of butter in the United States by artificial means has been a drop in price to about 7sd a lb, the lowest price for 35 years. Chicago traders assert that the Federal Government has finally withdrawn from its latest attempt to stabilise the commodity market, which included the pegging of butter prices. Losses of millions of dollars in the dairy industrv have resulted. In the last two -weeks the price of butter has dropped to 151 cents (about 7id) a lb, the lowest figure for 35 years. For this debacle the traders blame the organised dairy “ lobbies ” in Washington, which caused the Government to repeat the price-pegging which demoralised the wheat and cotton markets in 1929 and 1930 under the old farm board. Early in September this year the farmers, encouraged by rosy promises of high butter prices from the Government, obtained from 22 to 25 cents (lid to Is Old) a lb for their butterfat. This week they are getting only from 8 to 10 cents (4d to sd) in Nebraska, lowa Kansas and other heavy producing areas. Buyers have lost from five to seven million dollars on the Chicago market alone bv being obliged to sell at 15 cents butter they bought earlier .for from IS to 2 o cents and placed in storage while the Government dangled an artificial price before the industry in Aew i ork, Chicago and on the Pacific Coast. State Buys. As a result of insistent demands by leading dairy organisations in Washington, the Agricultural Adjustment Administration (the “A.A.A.’’) created in September, the Dairy Marketing Corporation. Funds were supplied by the Government to buy 75 million lb of butter on the open market. This butter was to.be repurchased as needed, by the Federal Surplus Rehef Corporation to feed the needy tamihes of the nation durinjr winter and any lossefc incurred would be made up from a fund to be raised by impos- ? Processing tax on butterfat by the A.A.A. early next vear Before this A.A.A. had made half a mill.on dollars available to several cooperatives. They entered the open markets, boosting butter prices in October from 20 to 23 cents for extra quality, and 21 cents for standard grade butter. By November I the Federally financed Dairy Marketing Corporation took up a pegging programme and the farmers of the nation began milk, ing every available cow. The cheese and evaporated milk factories, finding here an assured price i , l e ' r own commodity markets glutted, closed down, and milk was separated and churned at a rapidly mounting rate. v y

At the same time, by boosting retail eSh a pnces in the cit T markets, the A.A.A. caused a curtailment of milk consumption, and the milk companies began churning the over-produc-tion into butter.

According to those in charge of the Government operations, it had been in. tended quietly to purchase two or three million pounds of butter monthly, but the industry through both the manufacturem of butter and the lobbyists V g ij farme L S . urged the Government to hold up the price, and buying became heavier in November in nearly every butter market of the nation Average purchases leaped to a million lb a day.

„ v sf COrds ? f the Chicago mercantile exchange show what resulted. Five times as much butter was offered as could be bought. Even Government bu\ mg could not stand the pressure and on November 13 came <the first break, from 23 cents. By November the price had broken again. The December 4 exchange quotations record the first signs that the artificial market was not to be maintained indefinitely. A break of 1 cent alb occurred, followed by others in rapid succession. The market was upset, and futures prices fell below cash prices.

By December 14 the Government was buying at 16 cents, a break in both New York and Chicago of 3 cents a lb overnight.