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War Economy

The Dairy Industry

The Dairy Industry

The stabilisation agreement with the Farmers' Federation was announced by the Minister of Marketing on 23 June 1943, in an address to the National Dairy Association's annual conference. He also informed the conference ‘that the Government was prepared to accept the general principle that costs in butter and cheese production, dairy farming, factory requisites and other agreed costs should, as far as practicable, at the beginning of next season, be taken back to the 1938/39 level.’ Because of administrative difficulties this proposal was not put into effect. Instead, dairy companies received equivalent compensation by way of increased cost allowances.

To siphon off price increases on sales of produce to the United Kingdom and the United States Joint Purchasing Board, a Dairy Industry Stabilisation Account was established within the framework of the Dairy Industry Account, which had been set up for guaranteed price purposes and was operated by the Marketing Department. To this account were to be debited any amounts paid as farm or factory cost allowances, or paid as subsidies in agreement with the industry. Sums accruing in the stabilisation account were, in due course, to be available for the benefit of the industry.

A Dairy Industry Costs Adjustment Committee, comprising industry and government representatives, met each year to determine what increases in factory and farm cost allowances should be made, these allowances being charged against the stabilisation account.

There was also a Joint Debits Committee of representatives of the Dairy and Meat Boards who met government representatives to determine which of the subsidies on fertiliser, on dairy requisites, on local market butter and so on could be met from the stabilisation accounts, and to allocate the subsidies in a fair proportion between dairy produce and meat.

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The result was to vary payments to dairy farmers, as follows:

Pence per lb. of Butterfat for Butter
Season Guaranteed Price as for 1941–42 Season1 War Cost Allowance2 Farm Cost Allowance Total Payable to Farmers
1942–43 15·88 0·61   16·490
1943–44 15·88 0·61 0·767 17·257
1944–45 15·88 0·61 2·887 19·377
1945–46 15·88 0·61 3·904 20·394

In 1945 the Government and the dairy industry agreed to submit to arbitration the question whether the industry stabilisation account should meet the subsidy on the difference between the guaranteed price and the wholesale price of butter sold on the New Zealand market, and whether it should meet also the subsidy on requisites used in the production of dairy produce for the local market. A Commission of Inquiry was established, comprising the Chief Justice and two other Judges of the Supreme Court. The majority report of the Commission held that these subsidies could be met from the account.3 The industry accepted this as far as past years were concerned, but intimated that it was not prepared to meet the subsidy for the season 1946–47 and after.4

The balance in the Dairy Industry Stabilisation Account rose to £1·1 million in July 1944, but reached £4·7 million in July 1945 and stood at the same figure in July 1946. It was to go much higher in the next two years.

1 This price had applied for four seasons, commencing in 1938–39.

2 Allowance to meet (mainly) increased labour costs as a result of general orders. Fixed by agreement between Government and Dairy Industry Council in May 1942.

3 The Commission reported in Parliamentary Paper H–30B, 1946.

4 The following statement appeared in the 1946 report of the New Zealand Dairy Board, p. 7: ‘On the 5th September the Prime Minister (Mr Fraser) intimated the decision of the Government that for the 1946–47 season payment would be made into the Dairy Industry Stabilisation Account from the Consolidated Fund of an amount equal to the dairy cost allowances and other subsidies debited to that account that are fairly apportionable to butter and cheese sold on the local market.’