THE DAIRY INDUSTRY.

Waikato Times, Volume 116, Issue 19451, 15 December 1934, Page 9

THE DAIRY INDUSTRY.

(To the Editor.) Sir, —I have to thank Mr J. 11. Furniss for the frank and courteous manner in which he has answered, the three questions I put to him relating to the proposals of the Auckland Farmers’ Union foe a guaranteed price, of Is per lb butter-fat by means of credits to be issued by the Reserve Bank. Mr Furniss has now made it clear that this proposal involves a loan -to the dairy industry, to be repaid if and 'when prices exceed Is per lb. Every one of my fellow-farmers with •whom I discussed’ this scheme was definitely of opinion that the proposed subsidy would be a non-repayable credit —in other words, that it would be a gift resembling the exchange premium; but now that they understand they would have to pay it back they think the proposal is no good at alii The Farmers’ Union knows only too well, however, that every credit created must he cancelled sooner or later; otherwise a state of chaos would result.

In elaborating - this scheme at Dargavillo Mr A. E. Robinson made it clear that it involved the abolition of the present exchange premium, which is worth 2d per lb butter-fat at present prices. As there is no indication of increased price levels in London, the proposal means that the Reserve Bank would lend the industry* approximately £7,000,000 per annum without interest. This scheme is fraught with so many dangers and difficulties that I do not believe dairy farmers would support it if they realised its implications. I should like permission to set out these very briefly—1. It is safe to assume that it will be a considerable time before dairy produce reaches a level on the London market which would return Is per lb butter-fat without the exchange premium, and it is therefore not unreasonable to estimate that the industry might have to face an accumulated debt of about £30,000,000 within the next few years. 2. The individual producers must be responsible for this debt in the Anal analysis, and I estimate at £2OO annually the share of a farmer milking 40 cows at present prices. I appreciate the fact that this debt would not be saddled on to his farm like a mortgage or bill of sale, but it would be none the less real if he wanted to sell his farm, because the incoming man must shoulder the liability. Mr Furniss considers that the new man would be prepared to buy in on the basis of the guaranteed price of Is per lb butter-fat; but no purchaser would lake such a risk, because it is obvious that if prices did not very materially improve the scheme would collapse, since no Reserve Bank and no Government could continue indefinitely lending £7,000.000 a year to the dairy industry. The day of reckoning would have to be faced, and .the Minister of Finance was quite correct when he said in the House .that such a proposal was very nice until the time came to “ante up” at such an enormous rate? to hold any position in any Government which attempted to enforce payment.

3. Ilow long could the Reserve Bank continue lending money of “creating credit” at such an enormous rate? At present, of course, it could not do so at all, because it is limited under its constitution to lending not more than one-hall' of its anticipated revenue. The Farmers' Union must realise that they would find it quite as difllcult and quite as prolonged a task to alter the Reserve Rank Act as they will to •secure the repeal of the recent Agricultural (Emergency Powers) Act. II could not be done under at least two years, and they are therefore not justified in submitting the proposal as one which would provide immediate financial relict to dairy farmers. Incidentally the proposal that the Reserve Bank should lend these huge sums without interest for our special benefit is not one that would commend itself to Ihc. many thousands of people who have invested their money in that, institution.

i. The "'Farmers’ Union proposal would .undoubtedly create a scare among the holders and investors in New Zealand currency Just as great proportionalcly as Unit which is occurring in Ilaly at present. As a supporter of Douglas Social Credit. Mr Kumiss may smile at my contention that this would cause a rush of capital

front New Zealand and create an inordinate demand for sterling, but this would follow as surely as night follows day. This in turn would force up the rate of exchange which the Farmers’ Union propose to abolish I In short, the scheme would cause internal inflation of the worst kind, because it would be for the benefit of only one see Lion of tit e community. It appears to he merely a special application to the dairy industry of Hio proposals advocated by Major Douglas, proposals which have been rejected in Great Britain by every section of the people, from Conservatives to Communists. If tbo Farmers’ Union arc surreptitiously advocating Douglas Social Credit us a remedy for the ills which afflict the dairy industry the position should be made clear. 5. Apart from Hie fact that Ibe abolition of the exchange premium would involve the Government in an immediate loss of £5.000,000 on the sterling funds taken over by the Reserve Bank this proposal would also definitely force other sections of the primary industries on to a noil-payable basis. In fairness, the Government would then he compelled to give a guaranteed price to those oilier primary producers, Ibis involving the crealing of more loans or credits by the Reserve Rank. This contingency will not arise, however, because I have visions of what would happen io Messrs Mcllsop, Robinson and uI her members j of the Auckland Farmers’ Union Ifj they went on loin- in the sheep fanning; districts of Hawke's Ray among mem- : hers of the Farmers' Union there and ; advocated the abolition of thr exchange : premium as part ef Iheir scheme lo [

assist the dairy farmer. Obviously avc should find ourselves seized by the throat by every other section of the primary producers, and the resultant strife would be so great that on these grounds alone I consider the proposal impossible. d. A guaranteed price of Is per lb butter-fat would result in an enormous increase in production, and a big percentage of this would be contributed by men who arc not bona lide dairy farmers at all. 1 have been studying carefully the Dairy Commission’s report for several weeks —a much better procedure than that of forming one’s opinion of the report by reading only die criticisms' levelled against it —and 1 was surprised lo note dial out of 72,000 persons enrolled as suppliers to dairy companies over 00,000 were milking herds which averaged only four cows. As a dairy farmer, I have no grievance against these people; 1 merely say they are not bona tide dairy farmers. They are mostly retired persons living in suburban areas—artisans, clerks, and other people who find two or three eows a v valuable help, lint if the subsidy proposed by die Farmers’ Ibiion were paid (ad per lb at present prices). I hose people would double in number in a very short lime. Every person who could buy or lease a few acres of ground and run a few emvs would do so. This would merely aggravate the difllriilly we are faring in Ureal drilaiii 10-day herausr of our rapidly increaslna production, and would mate die position of die bona lide dairy laritier worse than ever. 1 7. VI Invercargill this week the Prime .Minister referred to the influx

' to the dairy industry when the prices of wool and meat were low, and showed that this factor influenced the greatly increased production of dairy produce last season. I contend dial if w r e take away the benellt of die 24 per cpnt. exchange premium enjoyed by the wool and meat men and substitute a subsidy of 5d per lb ' butler-fat to the dairyman, great numbers of wool and meat men would switch over lo dairying at the earliest possible moment. The meat men are now operating under a quota, and there is nothing more certain than that die dairymen will he in exactly the same position so soon as die Ottawa Agreement expires next August. If we pay a subsidy of 5d per lb without Making steps to regulate production (ami such a course would be anathema lo die Farmers’ Union) what are we to do with the huge unsaleable surplus which would accumulate under the Farmers' Union proposal? Even if we decided to give the butter away it could not be absorbed on die local market, and dial, is worth over £2,000,000 a year lo us at the moment. Under die Farmers’ Union proposal we would assuredly liml that Hie lolal markel relurns for our pro- | duce would lie less on a but tor-fat | basis Ilian they are at die present j time. i | have lakdi up much valuable | space. Sic. lull after reading .Mr Fur- ! uiss’ explanation I am more convinced ! ip, hi i", hi* dial Ibc Dairy Commission was wise In avoid any inllalionary j scheme such as dial put forward by i 1111 > Viic lduiid Farmers' Union, and to concentrate un a plan Lo revalue dairy

farms on die basis of present-day prices as die best Solution of the dairv farmers’ problems.—l am, etc., E. H. WILSON. Thames, December id, 1034.