THE GUARANTEED PRICE

Hawke's Bay Herald-Tribune, Issue 148, 10 July 1937, Page 17

THE GUARANTEED PRICE

. vi mm m i( An Increase Warranted/? . State Investors

COSTS COMPENSATION

« in A price increase ' of 3.518d per 1b. butterfat js necossary to compensate the farmer for his' iuoreasod costs is tho decision that has been reacked by a special costing comniittee set up by tho New Zealand Co-operative Dairy Coinpany. The committee states that it has found that to give the producer the return he would have received had costs not risen after the. guaranteed price was fixed the payment for butterfat should now be: (1) The guaranteed price Jast season, plns 3.5188d per lb. butterfat, made up as follows; (a) 2.197d to 2.305d for increased wagea costs, (b) .4091 for increased maintenance costs, (e) .4628d for increased costs, from farm to f.o.b,, (d) .342d to cover present wage charges above the minimnm prescribed by the Agriculture "Workers Act, making a total mimmum increase of 3.41 08d. The committee considers that a further increase is necessavy if wages again increase. "In arriving at the foregoing minimum necessary increase we have carefally considered the meaning of Section 20 (4) of the Primary Prodncts Marketing Act. It defimtely states that the present guaranteed price must be considered," the committee states. "That is the view of the dairy industry — the Dairy Gonference in March, 1937, unahimously assented to the proposition that the present guaranteed priee would have been regarded as sufficient had there been no further increase dh production and manufacturing costs. "This contention is aleo borne out by Subsection (a) of Section 20 (4) of the Primary i/i'oducts IvlarKotiug Act, whieh refers to the neeessity in the public interest of .maintaining the stability and eificiency of the dairy industry. "The surest way to destroy -the stability of the industry is to pay a price that will not enabie the average producer to meet his production costs and live in "a reasonable state of comfort." If too high a standard of effi-cienc-y in production— otherwise a high production cost per unit of labour — is insisted on% then all produeers who do not obtain that standard will be penalised, Olimate and soil may provent theni ever attaining the standard." Standard of Production, "We have taken the standard production per unit of labour as 43471b. butterfat and per cow production as 2351b. butterfat. If a higher standard is insisted on approximately 85 per cent. of produeers will not receivc eufficient to meet their living expenses. "Let us assume that the average of the 550 farms surveyed for the Dairy Commission is taken as a standard. For these 550 farms the average production Fas: Per cow, 2541b. fat; per Unit of labour, 53801b.; per acre, 117.73 lb. Average cows per 100 aeres, 46.35. "The New Zealand average is: Per cow, 2351b.; per unit of labour, 43471b.; per acre, 851b. Average cowa per 100 acres, 24. "the Dairy Commission worked out tliee average cost per lb. butterfat on these 550 farms (which it states are 38 per cent. better than the New Zealand average). If its figures are taken the cost is— 3. Working costs 4.093d Plus 10 per cent. increase as found above . . ,4093d 2, Labour costs (corrected to the present average wage of ^2 17/10, and assuming a unit of pro duction of 53801b 6.75d " 3. Capital charges ...... 3.479d« 14.7313d

"The present production cost, based on an average production of 43471b. per unit, is — 1. Working costs 4.093d, plus 10 per cent 4.5023d 2. Labour at £2 17/10 per week 8.38d 3. Capital charges 3.479d 16.3613d "The difference is 2.37d, so that if 63S01b. is taken as the standard the average producer will receive 2.37d less than his cost of production. If 60001b. were taken as the standard he would receive 8.07d per pound less than the cost of production. If 5380 is taken as the unit, then as this is based on 2541b. per coav tho 56 per cent. of berds which produce less than 2501b. of fat (Dairy Commission, paragraph 19) t will receive less than production costs. Need of Definitlon. "Tho* committee may have difficulty in interpreting the last part of Section. 20, ' any efficient producer — under usual conditions and in normal circuinstances — should be assured of a sufficient net return from his business to enabie him to niaintain himself and his family in a reasonable state of eomfort. ' The terms 'efficient,' 'usual couditions, ' 'normal circumstanees,' 'reasonable state of comfort,' all need deflning. , " ' Usffal conditions and normal circumstanees' make the average producer 'any efficiout producer.' In the Mortgagoi'fl and LcsSeeS Rehabilitation Act tlie averago producer is de'Oined to be the 'efficient producer. ' "We strongly urge that the average producer must be taken as the fltan-

dard. This has been protuised in cotintless politieal sstatements. We have pointed out the obvious injustice of any other interpretation and its inevitable result on the stability of the induati y,"