A ONE-SIDED BARGAIN

Evening Post, Volume CXXIII, Issue 135, 9 June 1937, Page 10

A ONE-SIDED BARGAIN

■ The complexity of the issues raised by the guaranteed price policy is illustrated by recent references to the effect uponthe price of farm and industry costs. The president of the National Dairy Association (Mr. Morton), referring to the question of costs in his annual report, stated that the allowance made by the Government for any anticipated increase in production costs represented approximately .3d per 1b of butterfat and would barely cover increases in the factory, without taking into account the much heavier increases that had taken place on the farm. "There is every justification," Mr. Morton said, "for the strong demand that the Government should now take this factor into consideration, and make a retrospective payment to compensate for the heavy increase in farming costs." As compared with the statement that .3d per lb would barely cover increased factory costs, the returns of the Hikurangi Cooperative Dairy Company, published last night, show an increase in total charges, including repairs and depreciation, at the farm gate from 1.841 dto 1.908 d per lb of butterfat, equal to .067 d. This may be exceptional, but it reveals a difference between estimate and actual cost which needs explaining. It does not, of course, cover farm costs; but those are likely to show even greater variations.

The point to note is that a demand is being made, not only for a higher price for the coming season, but for a retrospective payment for the present season. Can a marketing and guaranteed price plan possibly be operated on such lines? We do not see how it can be. Either the producers are entitled to the full product of their industry and must accept the marketing and cost risks themselves, or the community "which is asked to take the risks and pay the 'price has the right to control both production and marketing and retain any profits that may be made. The community does not want this responsibility and less still does it want a one-sided bargain under which it will accept all the risks without the right of control or the prospect of recompense. Yet that is just what the community is in danger of having forced upon it. When the Marketing Bill was before Parliament we pointed out the vagueness of the price-calculation formula and how it might lead to inflation of dairying land values (through a high guaranteed price) and then to a demand for a still higher price based upon the inflated value of the land. Now, it seems that the farmers wish the formula to work both backwards and forwards, to.give them a better price next season and then compensation for last season's costs. If this is to be done whose costs are to be taken—the estimate .of .3d for the.factory or the actual .067 d? And \vhat of cost reductions? At one time we were told that interest was the greatest single item in primary production costs. Will allowance be made, then, for the cash value of relief given under the rehabilitation legislation?