FARMERS’ UNION AND DAIRYING

Waikato Times, Volume 116, Issue 19461, 28 December 1934, Page 7

FARMERS’ UNION AND DAIRYING

(To the Editor.) Sir, —Mr Wilson, in his oriticism of the Farmers’ Union proposals for the relief of dairy farmers, has omitted to deal with them in their entirety, an omission which I trust he will repair should he pursue this matter further. On one point we entirely concur with the Report of the Dairy Commission—that it is vitally necessary for immediate relief to be given to the dairy farmers. Unfortunately not only is no provision for such relief contained in the report, but the provision, if carried out, will add further to the burdens which the industry is reeling under. In our recommendations we stated that the price .guarantee of Is per lb was ito be given to tide the industry over until a reduction in costs on the lines indicated enabled us to bring our receipts into alignment with out expenditure. It is curious that Mr Wilson has ignored this qualification in his reply. A reduction in costs is equivalent to a proportionate increase in price in its reaction upon tlic solvency of the producer, with the added advantage where the producer is an exporter—that it brings : the product within reach of a greater number of consumers.

Derating and reduction in tariffs would, I consider, reduoe costs, directly and indirectly, equivalent to probably 3d per lb butterfat, according to the tariff reduction effected and the incidence of roadlng rates to the individual ratepayer. Please note that we are not advocating these reforms merely from an economic standpoint. WeTegard the rating system as demonstrably iniquitous and the “user pays" basis as the only just one. The tariff issue Is a moral one as well as an.eoonomlo one. Tariffs create privileged economic classes and trades, reacting against the unprotected sections of the community in increased living and production costs, which, If uncompensated by relatively equal benefits, must inevitably result in impoverishment.

The financial cost factor—mortgage liabilities, etc., which obscured all others in the Dairy Commission’s report—must be met in one of two ways—stabilisation of our returns in New Zealand money on a level wilii our financial liabilities, or a reduction of such liabilities Lo a level with our monetary returns. Which course should be pursued in the national interest? A reduction in the incidence of the financial burden is perfectly feasible without any injustice to mortgagors, a reduction which, in conjunction with other cost reductions, would render the is butterfat unnecessary. Such being the case, the duration of such price guarantee would rest with the Government. If it were decided to reduce costs as indicated, such decision could be given effect to within twelve mouths bv any Government with the necessary courage and sincerity. Mr Wilson’s criticism centres entirely upon the price guarantee alternative, ignoring the fact that it is advanced as a temporary alternative only. It would rest with the Government how long it operated. Let us, however, examine (lie criticisms raised. “(!' It would cost £7,000,000 Per annum and would result In piling up a huge mountain of debt which would terrify all purchasers of land; (2) it would eventually break down under ils own dead weight of unro F ileemable debt; (3) it would scare investors and capita! would leave the country; (i) it would force up (lie rate of exchange; (5) ii would involve the Government in an immediate loss of £5,000,000 owing to the abolition of I lie exchange premium; (0) it would stimulate production or hutlerlat excessively by attracting sheepfarmers, etc., lo dairying, as well as encouraging men with a lew acres near town to increase their herds by leasing more land; (7) it would antagonise nun-dairy farmers by depriving them

f n ,.|.. nrcsent exchange premium of of theii incse u bc done, SPSS’S jFB&SSS demand price guarantees Dealing with these vitlC(l I and 8; The Reserve Dank P> .{•>.',,000,000 to redeem the sboitterm Treasury bills issued bj the vornment to finance lhe The the surplus sterling exchange. 1 i, an k lias no reserve or assets otiu-i han the £500,000 subscribed by i s shareholders. £24.000,000 represents sufficient to provide finance tor tb eo and a half years’ price guarantee on Mr Wilson's estimate at Is pu lb. As the scheme is alternative to cost] reduction it would only continue it deemed preferable in the national interest to cost reduction. As the debt would be non-intei-est-bearing and only redeemable it or when, and in proportion to, the in-crease-in price received in excess of. Is per lb, il would be a conditional liability mid would conslilute no burden | either in ils incidence or discharge, j Should the price level never exceed Is, . Costs never be reduced, lhe debt ! would eventually be cancelled, and as ; il was costless in creation (as was Hie, recent creation of Hie £2 i .000,000. | ils cancellation would entail no sacri- , lice to anyone. i ;t. ||s objectionable feature from lhe i investor's point of view would be lhe : reduction in inlerest rales which would result from an increase in eeedil . issue: and since lhe surplus over . ina ini enaiice and living expenses: would be absorbed by debt redenip- 1

’ tion, and interest rates are higher now , than in England, such a panic is too | remote a contingency to consider. • 4 and 5 need no answer; they cancel each other. G. Any increase in production due lo such leasing of already highly productive land near town would be Infinitesimal. Sheepmen, would only turn lo dairying as a last resort, owing to the unsuitability of sheep country generally for dairying. Further, as lhe guaranteed price would only suffice Lo meet costs of production and living expenses, dairying on sheep country would be uneconomic unless wool prices collapsed. No. 7 is answered by No. 4. fi. If costs were reduced as suggested all would benefit proportionately. If for policy or other reasons the Go- ! vernirient declined lo adopt this course, then tlie onus must rest upon it lo carry out the alternative, and apply it lo all sections of exporters needing assistance. Wheat farmers are now being assisted; secondary industries, also, by lariffs, which in effect eonstii tide a price guarantee. I I aln afraid 1 am encroaching 100 I much upon your space and must curI tail my remarks. Let me say Hint a | pegged exchange is merely a clumsy 1 and ineffective attempt lo guaranlec prices. Such would be unnecessary j wilii a guaranteed price: exchange I lluclunlioiis could he mrl by an ex- ! change equalisation fund or dealt with las in Egypt, where col I on exporl ; prices have horn stabilised for many years, lo lhe great hone fit of lhe mi I ion. as well as lhe rollon growers. [ I have only advocaled remedies | w il b in I lie s| ri 1 c I tiro of llic prrsenl j money njsleui. I‘ricu fixation is

already in operation in this country, and in others, as well as in Egypt, and ■ the Reserve Rank has already created credits l’or other purposes without cost to itself except that of bookkeeping, and without disturbance to our economic structure. We did not deal with the fixation of prices in other branches of farming, as we were dealing with the Dairy Commission Report. This aspect would be met automatically by cost reduction, or alternatively as proposed. This deals with any material 1 criticism advanced. My belief in Douglas Social Credit is not (lie point j at issue, nor are the tenets of that movement. 1 cannot deal with Mr McMillan’s letter now; I would suggest to him, however, tiiat it does not advance any cause by indulging in cheap sneers such as “Douglas Credit drivel,” etc. 1 would like him, however, to be good enough to explain how lie proposes to relieve farmers of their present crushing liabilities, or, alternatively, enable them to meet such commitments. To acquire the land for the State: "l presume this is a prerequisite lo renting such land and disposing of the rentals?” Dues he propose lo borrow llic money necessary for the purchase of the land, etc., or to issue the money as State-created credits? —I am, etc., .1. 11. I'Tin.MSS. Ruawafo, December 25, 193 5.