DAIRY PRICES

Gisborne Herald, Volume LXVI, Issue 19987, 12 July 1939, Page 7

DAIRY PRICES

NEW SEASON’S PROSPECTS

CONCERN OF FARMERS WILL DEFICIT COUNT? FIXING OF GUARANTEE (Special to the Herald.) WELLINGTON, this day. Will the past season’s deficit be taken into account when the Government fixes the guaranteed dairy price lor the coming season? Fear that this might be so was expressed by Mr. W. W. Mulholland, in his presidential address at the opening of the annual conference ot the New Zealand Farmers’ Union Today.

“In my two previous presidential addresses,’’ Mr. Mulholland .-aid, I examined the guaranteed price as it appeared to be at the moment, and on each occasion I found if something different. It seems to be chame-lion-like in that it changes its colour, and one might say its shape in consonance _ with surrounding circumstances.

“However, it seems now t'o be assuming its adult, and, may be, its final form, and is seen to be shorn of most of its other attributes, and has become nothing more nor less than a State marketing scheme. The pretence that it would pay the fanner a price that would be related to hi 3 costs has been largely dropped, though it does crop up now and again. Basis of Cost

“The Minister of Marketing put the matter very clearly in a pamphlet called, ‘Guaranteed Prices, A Successful Reality,’ which he issued last October. After quoting the formula in section 20 of the Primary Products Marketing Act which everyone believed to lay down that the price was to be determined on the basis of the cost of production,” he said:— “It will be seen that this formula requires the guaranteed price to cover the complete range of far m and factory costs, including interest on capital and wage costs, to ensure a standard of living for tne dan>farmer commensurate with the standard of living of the rest of the community who render equal service, and to maintain the stability and efficiency of the dairvfarmer Ah other relevant factors, including finance and the effects of deficits on the standard of living of the resc ol the community, had to be considered. Every factor was included.' "That wqs a very astute way of saying without arousing the suspicions of the dairyfarmer that finance and deficits in the dairy industry marketing account had to be taken into consideration in fixing the price. “It is obvious that if the deficit in the dairy account is a factor included in the formula of section 20, it immediately becomes the overriding one—over-riaing all other considerations—tn e only effect of the other conditions being to limit the movement of tne price upwards, but not downwards. Tiie price, therefore, must be fixed on the market value. Market Prospects “Mr. Nash, speaks of this position as though it were the deliberately planned' and intended policy, yet at no time during the passage of the measure in- the House, or prioi to that, did any member o_£ the Labour Party give any indication, that this was the case, and certainly no one outside of the Government believed that this was what was intended. “The Minister has made it abundantly clear that the price must be based- on market prospects, not only ■n this pamphlet, but also in the statement in which he announced the guaranteed price for 1938-39. “Explaining that he Grad reduced the price which the 1938-39 Advisory Committee had recommended, he said: —‘There is a further factor stressed by the committee of which the Government is bound to take cognisance, namely, the financial implications of the price determined upon. This is a matter which the committee considered did not come within the scope of its order of reference. hut which the Government, however, cannot ignore in considering the committee’s recommendation. I Heavy deficits, moreover, if repeated, must .inevitably wreck the whole guaranteed price procedure.’ Meeting All Costs

“I agree with the Minister that it is impossible to carry on a guaranteed price scheme that will result in repeated heavy deficits in the dairy account. Bu.t I would remind him, that notwithstanding what it may be possible to read into the formula of the Primary Products Marketing Act, he did premise to pay the farmer a price that would meet all his costs. “The large deficit which seems probable in the account this season, even under the price that has been paid, inadequate though it was to meet the farmers’ costs, is a matter of concern. With the overdraft piling up in what cannot be regarded as other than a good price season, whai is going to happen should there be a heavy fall in the overseas price, making the price available to tht dalryfarmer very much lower, if in addition, he has the debit in the dairy account hung round his neck? “An attempt to sustain a policy ol piling costs on costs by an unbalanced dairy industry account would be a deadly danger to the industry. Consequently, the question of what'the Government is going to cm about the deficit is one of great moment. Raising of Wages “As’ a, matter of financial policy the Minister was right in refusing to pay a price which he knew would result in a very large deficit, but on the other hand the Government must face the position that the raising of farmers' prices by Government action was the foundation of its policy of raising wages and other costs, and the foundation ha/ving failed it isi essential that the Government should immediately review the whole structure.”

Mr. Mulholland reviewed the Minister’s proposal last year that the past season’s price should be accepted also for the coming season, but he said he was unable to agree with that for there was mo assurance that wages costs would not be increased; the Minister had only said 'he would appeal to the unions.