HIGHER COSTS

Wairarapa Times-Age, 16 October 1941, Page 5

HIGHER COSTS

IN THE DAIRY INDUSTRY PAYMENTS TO COMPANIES & SUPPLIERS. STATEMENT BY MINISTER. (By Telegraph—Press Association.) WELLINGTON, This Day. Arrangements which have' been macle to recompense the dairy industry for the additional costs incurred in the change over from butter to cheese production were announced last evening by the Minister of Marketing, Mr Barclay.

These are based on the recommendations of a special committee representative of the industry and the Government. Assistance toward meeting these extra costs is being given by the United Kingdom Government by means of an increase in the purchase price of cheese for the present season of 5s 9d sterling per cwt. (approximately 7s in New Zealand currency). From the proceeds of this increase there has been established a special account. PROPOSALS ADOPTED. The Minister, who is chairman of the committee, said that because overseas shipping was not normal, and because of the necessity for conserving cool store space by close packing, the present guaranteed price procedure of payment on shipment could not be continued with equity to the industry. It was therefore necessary to determine a procedure for payment for butter and cheese. The committee recommended, and the Government had accepted, the following basis of payment: The Marketing Department will pay dairy companies for butter and cheese, at an average of two months after grading. Dairy companies will bear two months' interest and storage costs, but these costs incurred beyond two months will be a charge to the special account. The Marketing Department, in consultation with the Dairy Board is now determining the method by which such payments will be made.

“The second recommendation of the committee concerns the incurring of additional capital costs by suppliers who, on or after June 1 of this year, have changed over from butter to cheese production,” said Mr Barclay, “The committee was of the opinion that the basis adopted last year, namely, an immediate payment to each supplier concerned of up to £2O in lieu or loss by redundancy of milking-shed equipment, should remain, but as most items of milking-shed equipment, and particularly milk cans, had risen in price, the amount of the payment this season should be increased to a limit of £27 10s to cover the extra cost of these items, which would in fact have no more residual value than the same items purchased last year at a lower cost. This recommendation of the committee has been accepted by the Government.

CARTAGE CHARGES. “The third recommendation of the committee related to the additional costs incurred by a producer who is involved in twice-daily delivery of milk to the dairy factory. The Government accepted the committee’s recommendation that, where a producer is himself delivering to the factory twice daily, he shall be paid an amount of Id a lb. butterfat in respect of milk so delivered.

“In the case of suppliers who have changed over to cheese manufacture since June, 1940, and who are using a cartage service, cartage costs in excess of jd per lb. butterfat are to be shared 25 per cent by the supplier and 75 per cent as a charge against the special account in respect of a total cartage rate not in excess of l-i per lb. butterfat. “It was further recommended and agreed to by the Government that, in any case where a supplier, whether changed-over from butter to cheese manufacture or not, delivers milk twice daily to a collection point for collection by a carrier, a payment of id a lb. butterfat will be made to such supplier by way of compensation for additional costs incurred and extra work involved.

The committee, added Mr Barclay, also gave consideration to the possibility of special cases of hardship which might arise, and which would not be covered by the various payments he had already outlined. To meet cases where a supplier considered that he was suffering real financial hardship through change-over to cheese for the war emergency period, he should have the right of appeal to the Minister, who should have the right to make an appropriate monetary grant. Referring to dairy factory capital costs due to the change-over, the Minister said' it was recommended by the committee, and accepted by the Government, that the general basis operative last year should continue, subject only to minor adjustments such as the reduction of depreciation of extra plant from 10 per cent to 71 per cent. MANUFACTURING COSTS. The final item of cost affecting the dairy industry was the question of both butter and cheese factories incurring additional manufacturing costs directly as a result of the change-over. The Government had already provided a formula by which compensation will be payable to such factories where a rise in costs could be directly attributable to the change-over, but it was limited on the basis that no compensation would be paid to any factory whose costs remained below the guaranteed price standards of 2.25 d for but-' ter factories and 3.5 d for cheese factories. The committee recommended that in respect of the 1941-42 season, provision should be made for cases of butter companies excluded under the present formula.

Accordingly, where such a butter company had lost supply through the change-over to cheese, it would be compensated for such loss on the basis of Id a lb. butterfat on the quantity of butterfat produced and delivered to a cheese factory during the current season by the suppliers transferred, it being understood that this was subject to the principle that no company should make a profit out of the change-over. In cases where it was considered that the payment of ,’d would place the butter company in an advantageous position, the amount may be reduced or withheld entirely, the decision in all cases to rest with the Minister on the’ recommendation of the Executive Commission of Agriculture. On the other hand, where an advantage accrued to the cheese company through the change-over—that is,

by a reduction in manufacturing costs due to increased turnover —it should be required td pay into the special account the amount of the financial advantage so obtained, this amount again to be determined by the Minister on the recommendation of the Executive Commission of Agriculture. GOVERNMENT OUTLAY. Costs incurred by the Government which were a charge on the special account were also examined by the committee, and the recommendation was made that at present the following costs should be a charge against the account:—(l) Loss on account of the purchase of whey butter; (2) cost of stabilisation ( of the cost of cheese crates; (3) costs of storage, interest and insurance on butter and cheese remaining in store in New Zealand; (4) provision of emergency houses for cheese factory employees and for emergency cool stores; (5) cost of subsidy on bobby calves.