WHEAT PROBLEM

Hokitika Guardian, 30 July 1926, Page 4

WHEAT PROBLEM

EFFECT OF PROTECTION. WELLINGTON, July 28. Tho history of the various efforts to secure an adequate supply of wheat for New Zealand is detailed by tlic industries and Commerce Department in its annual report. Since the Government’s decision was made to let the market take its own course behind the protection of the tariff there has been as in 1925, says the head of the Department, a conflict of opinion as to the true value of the wheat which growers have available. Millers have offered for the several varieties 0s Bd, Gs 10d and 7s f.o.b. sacks extra. Growers consider that these prices arc at least -Id below failmarket value, and in many instances ltavo refused to sell below a basis of 7s per bushel for Tuscan wheat. Allegedly under the necessity of continuing operations some millers ore reported to have paid growers’ prices,, while other mills are said to he prepared to close down if supplies cannot be bought on tho basis of Gs 8d for Tuscan. During the discussion on the matter a considerable amount of attention has been paid to the general tariff on the question of protecting the wheat growing und flour milling industries and a considerable misunderstanding of the facts has been evident. The effects of tho duties and the relationship between wheat growing and milling industries are not fully appreciated. In the first place it may he pointed out that the two industries are in Now Zealand interdependent, wheat as such having only a limited use in the Dominion, and the milling industry, on the other hand being dependent (without appreciable tariff protection) on ail adequate supply of locally produced grain. It follows that tile duties on flour and wheat must be so designed as to (a) provide adequate inducement for "■heat production, and (li) protect the milling industry from excessive competition from overseas. Inasmuch ns New Zealand millers are tho main buyers of local wheat, the duty on flour, and consequently the price which mills can pay growers and yet maintain their competition with imported flour, is of vital importance to growers. A duty -on wheat would, therefore, without an adequate duty on flour, be of little benefit to growers and would merely tend to increase tho price to he paid for wheat used as such, e.g., fowl wheat. On the other hand, a duty on flour without an appropriate duty on wheat would tend to result in the importation of wheat for gristing locally, and consequently would .depress local wheat prices to duty free import parity. HOAV PROTECTION IS REDUCED. The report adds that the question is, therefore, one of correct adjustment of duties for the purpose of achieving the dual objective. The difficulty of tho matter is, however, greatly increased by the fact that a tariff reasonably

applicable to the South Island does not meet, the position in the North Island, where a different level of prices must normally prevail, where virtually no wheat is produced and where the local milling capacity is not equal to the demand. Southern wheat and flour are normally transported to the North Island sfnd the value f.o.b. southern ports is, therefore, normally ruled by the value in competition with imported supplies brought directly into North Island ports. This latter fact tends to reduce the real value of the tariff protection given to wheat-growing by an amount equal to the cost -of convey-1 aneo from south to north. In a year when New Zealand • wheatproduction is less than the national needs either wheat or its products must bo brought in. It will probably be agreed that it is preferable that wheat should he imported, and that it should he ground locally. There is, | however, the objection'that- so far as I a largo portion of the. North Island desiand is concerned there is no milling capacity available to do this gristing without incurring costs of transportation from the South Island. These Slid many other matters give rise to considerable difficulty in laying down a. policy satisfactory in all its aspects. At the present time, however, there is reason for believing that the duty on wheat, while mathematically equivalent to the duty on Hour, is in actual effect too high in relation to the existing duty on flour. In other words, the import parity, duty paid, of wheat as such is higher than the duty paid import, cost of a similar quantity of wheat in the form of flour. For this reason it may he said that the flour-

milling industry has no tariff protec-

| tion, and is, in fact, placed by the 1 tariff under a handicap which it can | overcome only so long as local wheat * can bo secured at a price based upon flour import parity, which will allow local mills to compete with imports. The position is obscured from time to time by special ciieumstances arising from such factors as the admission of fowl -wheat duty free or the urgent need of mills to secure supplies even at non-payable prices.