DAIRY PRICES

Waikato Times, Volume 122, Issue 20502, 19 May 1938, Page 11

DAIRY PRICES

QUESTION OF SURPLUS AODREBB BY \IR A. J. SINCLAIR THE COMPENSATED PROPOSAL Some of the factors influencing the dairy farmers’ attitude towards the guaranteed price and the compensated price schemes were dealt with by Mr A. J. Sinclair, secretary-manager of the Te Awamutu Co-operative Dairy Company, Ltd., in an address to a meeting of the New Zealand Society of Accountants at Auckland last evening. Mr Sinclair was a member of the Guaranteed Price Committee set tip by the Government last year. “The Primary Products Act of May, 1036, was an ambitious attempt to create a position of stability In an industry which had witnessed great vicissitudes over a period of ten years,” said Mr Sinclair- * The scheme was propounded at a time when farmers saw their butter selling on the London market as low as 65s per cwt. They were not clear about the details. They certainly never anticipated that It involved the compulsory purchase of their produce at a price fixed arbitrarily by the buyer, to whom they could talk effectively only once every few years, but It promised them relief from the vagaries of the overseas market, and they supported it solidly. The guaranteed price scheme has achieved its main objective, and the farmer s gross income is stabilised today. If he Increases his butterfat production by lOOOlbs., he knows to a penny the additional revenue he will receive. This is a great advance on anything the dairy farmer has hitherto experienced. However, the scheme is in very bad odour to-day in every dairying district in New Zealand. “The reason is not far to seek. Stability of income without stability of costs is embittering the dairy farmer. The guaranteed price scheme was designed to meet a special set of circumstances. Had those circumstances continued, and butter remained round about 70s to 80s on the London market, there would be little outory from the dairy farmers to-day. Certainly oosts would not have reached their present high level, because money , would not have been available for the " many projects which are now on foot or In train. Surpluses and Deficit# “To-day the dairy farmer sees his butter realising Is 3id per lb. f.o.b. Nsy Zealand—a price which would enable his factory to pay out Is 5d per lb. butterfat—and he knows that the bulk of his produce has still to be sold on what has always proved to be the more favourable half of the home market. He may deplore the prime oause of this higher level of prices—the huge expenditure on armaments In Great Britain—but he believes this state of affairs will be static for some time, and at the moment a scheme which Is returning him 3d per lbbutterfat less than he would receive on an open market possesses no attractions for him. The indication given this week by the Minister of Marketing that the surplus would probably be paid to him later le a wise and timely move. Had any attempt been made to withhold It from the dairy farmer, there is no doubt as to the oourse he would have adopted when the opportunity arrived in the near future. “In one way this is unfortunate, because it Jeopardlaes one of the fundamental objects of the guaranteed price scheme—namely, to achieve stability in the industry by accumulating surpluses in good years which will offset possible deficits in the future. Confronted by mounting costs, however, the dairy farmer cannot be convinced that it is good policy to withhold from him a penny or twopence per lb. butterfat this year for the purpose of paving it to tome other dairy farmer several years hence/’ Mr Sinclair said the main factor which had disillusioned the dairy farmer, and which caused the guaranteed price scheme to stand condemned in his eyes was its inability to give him a return which would enable him to pay hie workers a wage that would attract labour to the farm. Dairy farms were being steadily denuded of the best class of labour. “Many farmers are concerned at the loss now being sustained on the local market, where 20 per cent of their butter is aold, for this is something that is Irrecoverable,” Mr Sinclair contlnued. “Tariffs, higher wages and shorter working hours—these are costs which find their way directly or Indirectly to the primary producer, and all add to his burdens, but in exchange he is asked to supply the people of New Zealand with butter at a price substantially lower than could be obtained by its export. The farmer maintains that the basis of the local market price should'be the f.o.b. parity of the London market, and not an arbitrary price considerably lower. There la reason to believe, however, that he would not be so adamant on this point If overseas prices fell below the payment guaranteed by the Government. In such an event he is prepared to submit good reasons why the butter anJd in New Zealand should at no time fall below the guaranteed price level.” The Alternative Scheme Mr Sinclair added that dairy companies were also seriously perturbed at the moment by the heav y accumulation of produce in store awaiting shipment. **On the overseas marketing side, the policy and administration laid down before the guaranteed price came into operation have merely been extended, and in some directions made more efficient, and most dairy farmers agree that substantial progress has been made In this respect.” «**mmenting on the compensated price plan. Mr Sinclair said: “Of the two methods to close the gap—reduced •oats or higher prices—the supporters of the compensated price movement infinitely prefer the first, but they realise the difficulty of getting any reduction In costs to-day. and are therefore concentrating temporarily on what they term an expansion of the farmer s Income, because they dislike the term Inflation. They claim that they can prove their case to the hilt, and that the onus does not fall upon them to devise a method of compensating the farmer, but In response to pressure they have outlined tentatively methods by which the desired result could be achieved“lt appears to be an essential feature that the Reserve Bank should remain in the control of the State, and those who support the compensated «Hc.c and at the same time advocate

the restoration of the Reserve Bank to private ownership are apparently taking up a somewhat untenable position.”