FINAL PAYMENTS

Waikato Times, Volume 121, Issue 20254, 24 July 1937, Page 6

FINAL PAYMENTS

The dairy companies are announcing their final payments for the current season, and the fact that the aggregates are above the prices announced by Mr Nash in the Budget may puzzle some people. The guaranteed prices were f.o.b. and it was calculated by the experts who worked out the average prices over the eight-ten year period, that they would return the producers, according to the Minister, something over Is Id per lb. for butterfat, and Is 2£d to the cheese factory supplier. There are many factors to be considered even in connection with the pay-outs. They constitute the gross income of the producer and so are not an altogether satisfactory basis for comparisons. It is the net income that counts. Mr Nash confidently expected that thpse returns would be assured the producer without any material increase in costs, and it has been admitted that had that expectation been fulfilled the position of the industry would have been very satisfactory. The difficulties have been caused by the unexpected increase in costs of production, so much so that the Minister of Agriculture has stated that the authorities will give their attention to the task of making some reductions. The items Mr Lee Martin mentioned as likely to be dealt with did not impress the President of the Farmers’ Union for he said that they showed “a lack of appreciation of the structure of .farming costs,” but the duty of the Government to take action is clear. There may be, as some experts have stated, a psychological benefit to be derived from handling larger sums of money, but, whatever that may be, the hard fact is that the margin on which the producer, or anyone else, must live, is that between income and the expenditure incurred in earning it. When that is borne in mind it will be seen that the aggregate payments for the season, and any margin by which they may exceed the official estimates, are only of importance in relation to the costs incurred in producing the income. That margin is the thing that must be measured by the tape Mr Nash mentioned. He may be able to show that the larger payments have helped to bridge the gap between returns and costs —the data not yet being available—but that would not be sufficient. The economic stability of the industry depends upon the two things being brought into proper relation. The guaranteed prices for the first year admittedly had no definite relation to costs. They were simply an average, over a period of years, of the returns to the producer. But the prices for subsequent years are to be determined after the costs and other factors have all been carefully calculated, and that is why the announcement for the coming season is of such importance. Doubtless an effort will be made to use the payments for the 1930-37 season as evidence of the fulfilment of Government promises, but the producers at least will remember that the prices were fixed in the belief that costs would move very little. Instead they have moved upward rapidly, leading to a strong demand for a measure of compensation. They know that it is the net income that matters. If the upward trend of costs is sharper than that of returns then the results can never be satisfactory. It is the margin—the net income—alone that can ensure the standards promised in the Marketing Act.