Farm Industry Reserves
Farm Industry Reserves
At the end of the war, there was some £5 million in the Dairy Industry Stabilisation Account, and over £9 million in the Meat Industry Reserve Account. No such account existed for wool. By 1956 the sum in the Dairy Industry Stabilisation Account had increased to over £27 million and the sum in the Meat Industry Reserve Account to nearly £41 million. There now existed also a Wool Commission Account with a balance of £29 million, which page 561 had been built up largely from profits from the sales of the accumulated surplus of wool at the end of the war.1 All these funds were held for the benefit of the industries concerned.2
The meat and wool reserves were now being used to maintain minimum prices which were fixed at the beginning of each season. If meat export prices fell lower, deficiency payments were made to producers. If wool prices at auction fell below the fixed minimum prices, the Wool Commission would buy in at these prices. In 1963 the meat reserves stood at £44 million, and the wool reserves at £35 million. Dairy reserve funds, on the other hand, had disappeared, and the account was £4 million in deficit.3
The rapid exhaustion of the dairy funds started in the 1956–57 season, when nearly half the surplus which had accumulated over thirteen seasons was paid out. The following season the other half was used up, and the account ran into deficit. Low prices in these two seasons were a major cause of the run down, but another important cause was the failure of those who fixed payout rates to realise that the high butter prices in 1953, 1954 and 1955 might be temporary, and should therefore be used to build up the funds, as a protection against later price falls.
The relative growths of the three funds is influenced by the fact that dairy produce prices have not risen so much as have prices of meat and wool since the war; but the administration of the Dairy Produce Account has not been particularly farsighted in the past decade.
Though none of the funds, as at present administered, is ideal as an economic stabiliser, the depletion of the dairy funds leaves this industry in particular, as well as the economy as a whole, much too vulnerable to overseas price fluctuations.4
1 It had been agreed that the profit or loss arising from the transactions of the Joint Organisation in the wool of any Dominion would be shared equally between the United Kingdom and the Government of that Dominion. The New Zealand share went to the Wool Commission Account, for the benefit of the industry in New Zealand.
Farmers, workers and others, who acquiesced in the restraint of their wartime incomes by the economic stabilisation scheme, all had the benefit of roughly matching restraints which the scheme put on the prices of their personal expenditures. Those who incurred business costs also received the benefit of stabilisation restraints on these costs. Farmers were unusual in having industry stabilisation funds against which the expenses of stabilising their business costs could be charged. However, whereas workers and others emerged from the war with only their personal savings to show for their wartime restraints, farmers had also, available for their joint benefit, the industry reserves. The equity of these end results needs more examination than the author has so far been able to give it.
3 There is expected to be a small credit balance at the end of the 1963–64 season.
4 It would be in the long-run interests of the farmers themselves, as well as of the economy as a whole, to have more rigid rules for the administration of all these funds, e.g., rules which would make it very difficult for those for the time being in control to avoid adding substantially to the funds in good seasons. This is discussed more fully in the author's 1959 paper, Income Distribution in a Trading Nation. (Cyclostyled: copies with the Department of Statistics.)