Guarantee for Dairy Board

Press, 7 February 1986, Page 3

Guarantee for Dairy Board

PA Wellington The Government is finalising new arrangements to give the Dairy Board a firm guarantee for loans to replenish its rainy-day reserves, says the Minister of Agriculture, Mr Moyle. The board and the Government were keen to conclude the arrangements soon, he said yesterday. The changes would take effect at the start of the new season on June 1.

In line with its tight monetary stance, the Government is moving producer boards’ price stabilisation accounts out of the Reserve Bank where they have incurred 1 per cent interest until recently. The boards use the accounts to even out prices paid to farmers during market fluctuations. The reforms mean the boards will have to borrow in the private sector if their reserves run out in a bad season. They have been concerned by the Government’s offer to be “a guarantor of last resort” only.

The Government decided in September to guarantee the billion-

dollar loan the Meat Board needed to pay farmers for their lambs but the agreement was subject to radical reforms in meat marketing. It lapsed on December 21 when meat companies regained control over sheepmeat exports. The Dairy Board, next in line, has been fighting hard for a guarantee giving it confidence, and has been spurred by the prospect of having to borrow money next season to bolster its reserves.

The stronger New Zealand dollar has eaten into the board’s reserve account so that it will probably be in the red at the end of the season.

Mr Moyle also indicated that the Government might allow the board to make substantial midseason adjustments to the price for farmers’ milk. “I think there will be some legislative changes required to enable more flexibility on payout to farmers," he said. Under the present rigid system, the board is unable to alter the price once the season has begun. Price changes between seasons also are restricted.