GUARANTEED PRICES FOR DAIRY FARMERS

Wanganui Chronicle, Volume 83, Issue 288, 6 December 1939, Page 8

GUARANTEED PRICES FOR DAIRY FARMERS

THE PROCEDURE DEFENDED STATEMENT BY THE MINISTER OF MARKETING “PRODUCERS ARE DOING WELL UNDER PRESENT SYSTEM”

(Special to 'Chronicle.") WELLINGTON, Dec. 5. Referring to the recent discussion on the guaranteed prices for 1938-39, the Minister of Marketing, the Hon. Walter Nash, stated to-day that it appeared that the representative* of the dairy industry 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 pcints in particular,” said Mr. Nash, “which require emphasis. The first is that no dairy farmer really wants to go back I to the mercies of the open maikot 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 first year the guaranteed price was assessed on an average of the previous 10 years' realisations. The ■ average prices paid for butterfat fci / the 10-year period prior to July 3i. ’ 1935, were: Butterfat for butter 12.73 d per lb. ■ Butterfat for cheese 13.81 d per lb. j “The guaranteed price for the first year, that is for the 1936-37 st/Jh.. was in advance of this figure, ma.ung j a payout for the 1936-3 1 season ui ■ approximately 13.6 pence per lb. for ( butter and 15.18 pence per lb. for cheese. The first point to make here is that the actual payouts were o\e: id on the average higher than the estimated guaranteed price. That J means that for the first year of th< ‘ guaranteed price the dairy farmers of | this country were actually getting I much more than had been calculated 1 on the average basis. “But let us compare the abov . figures with those for the two pre-j ceding years. Here they are: Payouts for Butter and Cheese j 1936-37, | under guaranteed 1934-33 1935-36 price. J Butter 9.5 12.125 13.558 Cheese 10.125 13.125 15.176 j “The guaranteed price for 1935-361 not only included payment for butter I and cheese carried over from the pre- j vious 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 J price, then, the dairy farmer not only | got more than he had received on the . average of 10 years but he also got i more than the two previous years and » more than was estimated as a fair ■ guaranteed price for that year. The j same can be said of subsequent years. I If we take the guaranteed price for 1 the second year, that is. 1937-38, and | for the third year, that is 1938-39, we I will find that again the average pay- j out from dairy factories was much ! higher than was estimated as the fair j guaranteed price. Here are the , figures: i Payouts in Pence Per Lb. of Butterfat. 1936Estimated. Actual, i Butter 13.04 13.558 Cheese 14.54 15.176 I 1937Estimated. Actual, j Butter 13.880 14.812 { Cheese 15.880 13.389 ■ 1938Estimated. Actual. Butter 15.880 16.199 ■ Cheese 17.88 18 06 J ; Mr. Nash quoted the exact figures | showing the excess of average payout < over the basic guaranteed price, in the ‘ ■ season 1936-37, he said, the excess ( payout was .518 d for butter, or 323,- I 904,0001b5. fat, making £699,093, and i on cheese .636 d or 80,172,000ib5. fat, I making £212,416, which made a total> excess payment over the guarantee; for the season of £911.549. He showed i that in the season 1937-38 the excels j payout for butter was .932 d and for I cheese .5090. making a total of i £1,336,153. In the 1938-39 season the excess estimated payout on butter was ! .319 d and .18d on cheese, making an I estimated excess payment over the I guarantee of £408,635. “What do these figures show? They i show that in 1937-38 suppliers of i butter factories received almost Id i more than was considered fair at the . beginning of the season, while sup-: pliers of cheese factories received id more. Last year, the guaranteed price | was substantially increased, so much I 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 I ; very difficult to find any basis what- » soever for an i r crease in the guaran-| teed price for this year which has i been fixed at the same level as lasi ! season. The make-up of the price L j as follows: d. Working and maintenance costs 5.34 I Capital charges (interest) 3.24 Labour reward 8.84 ■ 17.42 ! Less return from pigs 1-54 ; Estimated payout for butter 15.88 j

Let us look at another point — Factory costs. In the first, year of the guaranteed price the estimate of the Factory costs of producing butter and .•heese was of necessity not as accurate is it had been in the last year or two, k vhen much more material has been at fiand on which to base figures. The following table shows that with butter factories an allowance for factorycosts 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 Lhe guaranteed price. In the case of cheese, the first year showed some disparity against lhe 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, out the supplier to a butter factory has received more than what was assessed as a fair return. Here is lhe [able of costs: Costs in Pence Per Lb. of Butterfat. 1936-1937. Estimated. Actual. Butter 2.125 1.984 Cheese 2.75 3.139 1937-1938. Estimated. Actual. Butter 2.25 2.047 Cheese 3.25 3.337 1938-1939. Estimated. Actual. Butter 2.25 2.222 Cheese 3.50 3.592 “It was difficult to find out exactly what factory costs were in the years 1934-35 ano 193c-36, but they were estimated at 2d per lb. for butterfat for butter, and 2.7 5d per lb. for butterfat for cheese. Dairy Output • No a a few words as to output," Mr. Nash continued. "Output is a matter that varies very much with the seasons. It varies with costs ana 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 in regard to output has neen 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 lor this varying production has progressively increased; even for 1938-39, when production dropped over 10 per cent, owing to the bad season, tne return to the dairy industry as a whole dropped by about 2 per cent., 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 ate as follow: Total butterfat Total value (lbs.) all products 1933- 1 391.961.21'2 £1 f. 911.129 1934- 376.71 355 1935- ... 390.540.197 £23,364,594 1936- 4Ce.541.958 £26,858,643 1937- . . 383.037.469 £27,767,288 1938- 342.000.000 £27,250,000 t Estimated. “.Xs far 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 over the amount paid out to farmers, making a net payout to the farmer for the three seasons of £2.217.921 in excess of realisation bysale. The details are as follow: 1936- deficit £272,109 1937- surplus £576,724 1938- estimated deficit . £2,552,536 First Year’s Deficit Paid “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 beer, 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. Individual Fa. tory Payouts “Let me give you some examples of individual factory payouts above the estimated basic payout for last season. It will be recalled that for 1938-39 it was estimated that the payout for butter would be 15.88 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 d N.Z. Co-op. Dairy Co. . 16.253 Awahuri (Palmerston North) 16.761 Tai Tapu (Canterbury) 16.449 Te Awamutu 16.136 Levin 16.978 Kaitaia .. . 16.142 Cheese N.Z. Co-op. Dairy Co. 15.446 Tatua (Waikato) 18.110