8.—6.

(5) The financial burden of acquiring and holding these reserve stocks, together with contingent charges in relation to storage, insurance, quality deterioration, &c., to be shared equally between the two Governments. The conclusion of the foregoing agreement provides a definite basis on which the future financial obligations of our export trade with the United Kingdom will be determined. Secondly, it creates a broad framework within which our future primary production must be organized and directed. Under these arrangements the financial results of the coming season will obviously be governed to a large extent by the quantity of goods that can be shipped. It is likely that millions of pounds will be tied up in stocks held in store and on these there will be a charge for storage and other services, together with the possibility of loss arising out of the ultimate disposal of the produce. The estimated cost of purchasing whey butter amounts to £450,000 with, at present, no major outlet in sight. Notwithstanding all these liabilities, actual and contingent, the Government have already announced that they are prepared to purchase all butter and cheese available for export at the same guaranteed prices as for the season just closed. Although the dairy industry may be involved in some minor losses arising out of all these difficulties, the decision of the Government will protect them against the major risks and give farmers financial security to carry on their operations with confidence. The proposals for the sheep industry provide that wool will continue to be purchased on behalf of the United Kingdom Government, and no great difficulties are anticipated in dealing with this product. In connection with the allied product of meat, however, we have already had to take special measures to increase storage and to extend the canning-plants to cope with the quantity of meat that cannot be shipped in frozen form. It is recognized, however, that it would be inequitable and contrary to the best interest of the industry and the Dominion to allow losses to remain where they fall according to present war necessities. For the sake of economic stability now, and to preserve intact our productive resources for the future, it is necessary to consider wool and meat together, and work out a scheme under which the State will accept the financial responsibility for the normal exportable surplus as determined in the light of the new agreement with the United Kingdom Government. The schedule of meat prices is at present under consideration and will be discussed with representatives of the industry. Broadly, it can be said that the arrangements made will give the industry a measure of financial security that will enable it to carry on successfully. Apart from the large liabilities and the risks being taken by the State to protect the pastoral industries from the major economic shocks arising from the war, these industries are receiving considerable assistance in keeping their production-costs down. There is provision 011 this year's estimates for subsidies and other payments amounting in the aggregate to approximately £1,400,000, the chief items of which are as follows : — £ Fertilizer subsidy .. .. .. .. 751,000 Railage rebate (lime and fertilizer) .. .. 377,500 Railage rebate on farm produce . . .. .. 65,000 Noxious-weeds destruction .. .. .. 55,000 Compensation for condemned stock .. .. 39,000 Grant: New Zealand School of Agriculture .. 33,000 Rabbit-destruction . . . . .. .. 32,500 Subsidies on account of herd-testing . . . . 15,000 Subsidy on account of manufacture of butter-boxes.. 10,000 Miscellaneous .. .. .. .. . . 20,000 £1,398,000 It is anticipated that no shipping will be available this year for the export of fruit, which in the past has been worth from £500,000 to £750,000 per annum. The fruitgrowers, however, are protected by the arrangements made for the State to purchase the whole of the apple and pear crop for the season. Successful endeavours are being made to absorb the surplus by increased consumption within the Dominion.

Sheep industry*

Subsidies to pastoral industries.

Fruit.

3