FARM COSTS.

Waikato Times, Volume 121, Issue 20247, 16 July 1937, Page 9

FARM COSTS.

UNION’S ANALYSIS HIGHER PAY-OUT NEEDED. OVER 3d PER LB. BUTTERFAT. WAGES INCREASE, 2.335 d. (Special to Times.) WELLINGTON, Friday. The findings concerning Increases in dairy farm costs from Ootober 1, 1938, to June 1, 1937, of the special committee appointed for the purpose by the New Zealand Farmers’ Union are announced to-day. The committee has come to the conclusion that the increase per lb. butterfat necessary to place the farmer In the same relative position at present as he was In the 1935-36 season is 3.386 d. As costs are rising rapidly It would be necessary to Increase that amount. Further, the committee finds that the Increase In labour costs due to legislation Is 1.856 d per lb. butterfat, plus the extra cost of a man’s keep. The total wage Increase Is 2.335 d. We would point out that dairy production during the 1936-37 season on a per acre and per farm basis has been higher on account of favourable seasonal conditions, and consequently Income has been above normal, states the committee’s report.

The 1936-37 season income has been swelled by the fact that the 1935-36 factory bonus was paid during the season and at the same time, a higher advance proportionate to the expected Anal return for the 1936-37 season was also paid, so that more than the actual income for the 193637 season Is shown in the cash receipts. In our experience, returns of Income and expenditure of individual farmers are not very reliable guides to the cost of production because of the variation in individual interpretation of various items, and particularly variations shown from year to year in actual costs such as the maintenance of a farm, herd, and plant, as quite heavy costs may be inourred in these items in one season and none, or comparatively light costs, in another.

We also find that only a part of the present Increase In costs Is accounted for, as many Increases In prices are taking place and they are continuing to rise, 'and these increases have not been anything like fully reflected in the year’s cost as they have only acted throughout the latter part of the season. Consequently, it is necessary to calculate costs on the basis of present prices with a due allowance for Increases that are now Imminent.

In many 'cases we find that farmers’ statements omit important items of costs which do not involve actual cash transactions. Depreciation Is often not charged, or only incompletely. Interest on the farmers’ own investment is frequently not included as a cost. No provision is made in most cases for a reserve to meet the decreased income in seasons of low production. No provision is made for Increased expenditure made necessary by the operation of dairy and other regulations which may be considerable. Danger of Averages. We would point out the danger of depending on average costs and returns to determine the price for butterfat as the price that is fixed will also fix the margin where production becomes unprofitable, and if the average is taken to fix this price then those farmers with costs above the average will be forced out of production or have their standard of living reduced below the general standard of living throughout New Zealand which the Act requires to be afforded to dairyfarmers. This would particularly affect the smaller farmers as is clearly shown in the Dairy Industry Commission Report (page 64, paragraph 144) where, with herds of 31 cows and under it is shown that the cost of producing butterfat, apart from capital costs, was 9.763 d per lb., while with herds of 100 cows and over the cost of similarly producing a lb. of butterfat was 6.279 d per lb. The same report (paragraph 135) Shows that with what is classed as “ efficient ” management, the cost of production may vary from 4.89 d to 10.22 d per lb. The average is 7.555 d hut it is evident that if the price were fixed on this basis all farms with over 7.555 d per lb. costs would produce at a loss and eventually be forced out of production. Farm Labour Costs. The report, referring to wages increase, states that it is drawn upon the assumption that only minimum rates are paid. In view of Hie difficulty of obtaining dairyfarm labour at present the average wage now paid is generally above the minimum. it is difficult lo obtain information with regard to concrete cases conlicieniiy large number of i rn*rn 1 illusion to lie i 111111 ,xi "i ;| l.- i'v'iracy. 'ho "‘ ‘I II"' inches I •' 1 ii I"' '■""||Hl|"|| till III,; basis of' tin* l ,n *"* s ogreeil "ii .liii-hiK I Ik, •J;ui‘> laiin labour discussions viz !« I' 1 "' rair amount of bn V"K>.i"i lioii for Olio adult labour mm (permanent employee.) is about 6000 lbs. of but tor fat. and ■ lv The average rate of wanes for ran ” •" i- surli a hand as could bo expected to produce (juoo Ills, of fill was Used by (lie Vrrieiiltural Workers' Art at Vi 2s fid, au increase | or I 7s fid per week. There was also per week hall' 11 1 o' hoard alto wince) lor I tie lim ■ which the worker had on holiday. In the calculation following for a fortnight has been taken although a month's holiday is provided for by the Act. Assuming the workers under 21 to be paid in proportion to their capability for the production of butterfat, the average increase per lb. or butter fat ju labour costs due lo legislation is I.S.VhI plus (be extra cost of the man’s keep. The increase in the charges of houses in \Yellington during

the last year have ranged from 5s to 10s per week. We can claim, therefore, that a conservative estimate of this Increase is 5s per week. To take a conservative view although a month’s holiday is provided and although an Increase of 8s 9d was taken above only for a fortnight in this case we base the Increase on 48 weeks of the year only. The totq,l wage increase Is 2.335 d. Main Items Analysed. It Is difficult to obtain figures whioh are truly representative, but the Dairy Commission went exhaustively Into this matter and accepting the figures on page 193 of their Report as a base we submit the following computation. It must be pointed out that we have taken the North Island average costs and consequently the Increases are probably more than those slated. It will be noted that for cultivation no increase has been stated as it is difficult to know just what was included In this figure. In the South Island for which no figures are shown In the Dairy Report, this Is a considerable item In dairyfarm costs. The cost of replacing horses, for Instance, has Increased very considerably. No Increase has been claimed for noxious weeds or rabbits, and an increase of only 20 per cent has been claimed for sundry items. Sundry items will Include cartage inwards, which has Increased by 50 per cent In many cases. A conservative view has been taken and 20 per cent only added. The procedure which has been followed has been to take the North Island costs of the Dairy Commission’s Report and add to those the percentage of increase which we have been able to ascertain (from comparisons of price lists and our personal knowledge) has taken place In the last year.

The farm In r.o.b. increase baseti on llgures supplied by dairy companies understand l„ be .ad. ‘ This would mabe the increase per lb. bultorl'at necessary | 0 Mm farmer in ||,e f; relative pusilion al Ibc present ns be \\as ill Ilm season llli):, :{ 1 I'd- lb. till 11 er la I. As. bow-' els are rapidly rising, il would appear that il would be necessary p, incrAf-a- this amount.

Increase per cent Cost since Increase per lb. 193 5- per lb. butter- 1936 butteritem fat. season. rat. Cultivation ... .171 — — Seeds 175 20 p.C. .0350 •Fertilisers .. .909 Fencing- 188 20 p.c. .0376 Water repairs . .068 20 p.c. .0136 Noxious weeds . .020 — Rabbits 003 Casual labour . .070 33 1 -3 p.c. .0233 Cow covers .. .045 15 p.c. .0067 Veterinary ... .072 — Shoeing- 035 12* p.c. .0043 implement repairs .107 20 p.c. .0214 Milking- plant repairs 125 20 p.c. .0260 Power 408 to p.c. .0370 Milking plant materials .. .077 10 p.c. .0077 Main works costs 2.473 .21 1 6 •Increases basic slag, blood and bone, and lime. Super sltght decrease, t Petrol 1-11 til. Cost Increase per Increase per lb. cent since per lb. butter 1935-1936 butter ttem Tat season. Tat. Forward: .2116 Depreciation p.c. Implements .258 20 .0516 buildings .140 33 1 -3 .0466 Milking plant . .24! 20 .0482 Total depreciation .630 .1464 .1464 Sundry Items .296 20 .0592 Ratos 4 19 20 .0838 I and tax . .020 Overhead .. .735 .1430 .1 430 Total expenses . 3.S17 Poultry ,0, ' a 20 .0 4 92 .0492 1.0 93 .5502 per "lb .... .... butterrat n^iJii,uUi's“ >C| i," <%)- 2 ' 333