Right Hon. J. L. ILSLEY (Minister of Finance):
Mr. Speaker, I think it desirable to make a statement to the house in regard to the supply and price of farm implements. Throughout the war years, and continuing through to the present, the question of ensuring an adequate, supply of farm implements is one which has consistently been given special attention by the government. Towards the end of 1941 when the needs of war caused acute shortages of steel and component parts, hon. members will recall that a rigid control and allocation of all forms of steel and components was found necessary and a far-reaching priority system was set up. When doing so, however, particular attention was given to the needs for farm implements and they were placed in the very special position of receiving a priority as high as essential war production in regard to production programmes agreed upon from time to time. A special international committee was formed cpmprising representatives from the United States, United Kingdom and Canada to screen the requirements of the allied nations for farm machinery and equipment so as to determine minimum essential needs in relation to agreed food programmes. This committee worked out the allocation of available materials for each country aqd maintained a fair balance in its distribution. When this had been accomplished it became the responsibility of each country to determine what machines and equipment were produced to meet essential needs.
Through these special measures hon. members will be interested to know that despite the most urgent pressures for direct war equipment the government was successful in providing for Canada a steady flow of farm implements throughout the course of the war.
Notwithstanding this fact, however, it is true that a greatly expanded agricultural production, obtained despite a serious decline in farm labour, has meant that the demand for machinery and equipment continues far in excess of available supply. A significant barometer of the demand in this field has been the fact that in farm auction sales, prices bid for used machinery and equipment have been often far in excess of maximum ceiling prices on new equipment.
[The Governor General.]
Immediately following the cessation of hostilities the question of diverting all possible industrial production facilities towards meeting the demand for farm machinery and equipment was taken energetically in hand. The urgent need for food is so apparent that I need not emphasize it. Suffice it to say that it is the obvious duty of all producing countries to increase agricultural production to a maximum and all practical steps toward this end must be taken.
In studying the measures necessary to secure a maximum production of farm machinery and equipment the wartime prices and trade board, to whose administrative jurisdiction this question is entrusted, has reached the conclusion that some recognition of the uncontrollable war-time increases in the cost of materials, labour and general overhead is simply inevitable if vitally needed machineiy and implements are to be secured. This decision was reached after a careful study of cost information submitted by the farm implement industry. Accordingly, on Saturday, April 13, the board announced that maximum retail price ceilings for Canadian-made farm machinery and parts will be increased by twelve and a half per cent. Naturally, this step was taken with considerable reluctance. However, faced with the plain fact that increased costs of materials and component parts produced in Canada, or imported for assembly here, together with increased labour and other overhead costs, could not be absorbed at present price levels, it was obvious that a maximum production of farm machinery and equipment could not take place unless some relief was afforded. I/should add that the analysis of costs conducted by the prices board indicated that a price increase of upwards of 30 per cent above 1941 levels would have been required to regain 1941 profit percentage margins for the farm implement industry. Consequently, the price advance of only 12i per cent means, admittedly, a serious profit squeeze upon the industry, but in this transition period the government believes the prices board approach in the case of farm implements to be fully justified in view of the imperative need for holding down to a minimum, cost adjustments in the important basic industry of agriculture.
With one minor exception of a 5 per cent increase to adjust an anomalous situation on a small volume of implements (principally imported items) at the commencement of the price ceiling in the fall of 1941, prices have been held at or below the ceiling prices of the basic period in 1941. This rather remarkable record was made possible partly by
reason of large war contracts which expanded the volume of the industry and partly by insisting that increasing costs be absorbed by the industry instead of being passed on to the farmer consumer. Now that war production has swung over to normal supplies, however, the cost increases, as I have already stated, can no longer be absorbed and a reasonable price adjustment had to be worked out. In their submissions the companies disclosed increased costs since the basic period of 1941 averaging, roughly, materials and components 20 per cent, labour 28-J per cent, and general overhead 23 per cent. Unit costs in the coming year will run higher than this for some time due to premiums on castings, increases on imported components and higher than normal overheads which bring the over-all cost increase close to 30 per cent. In fixing the increase in the ceiling price at not more than 12i per cent the board has in mind that only through volume production can the Canadian farm implement industry survive, under the present level of costs and selling prices so that the price increase now authorized means that the companies must do their utmost to achieve a maximum volume of production. That I should add is exactly what is needed to meet the chronic shortages of farm implements which exist to-day. It will be of interest to recall also that on July 1, 1944, the exchange tax and all customs duties were removed from imported farm implements so that farmers are now assured that the Canadian price level must be fully competitive with other markets. I am further informed that retail farm implement prices in the North American continent are at least 25 per cent lower than in any other market in the world to-day.
To sum up, I wish to say that with the price adjustment now authorized and with the steps taken to give priority assistance in the securing of raw materials, such as steel, castings and component parts, I believe that the serious shortage in farm implements will begin to be remedied this year. I must warn, however, that with the best will in the world all shortages cannot be overcome immediately and that factors beyond our control, such as, for example, the recent strike in the steel industry in the United States, and the present coal strike, can seriously upset all forecasts or plans. It follows that strong inflationary influences are present in this field, both here and in the United States where about 50 per cent of our supplies of farm machinery and implements are obtained. For example, the United States farm implement industry during the months of January and February, 1946, showed a production decrease of, roughly,
20 per cent over the same months of 1945, or figured in dollars a total of some $110,000,000. Because of the dependence of the Canadian farm implement industry upon the United States for certain essential components, such a sharp decrease there inevitably affects production here.
The squeezed down price increase which has been allowed in the Canadian field of manufacture will, with the cooperation of the farm implement industry, ensure a maximum production in our own field of manufacture to the full extent that materials and labour are available, but there remains a very definite hazard that more serious price advances in import prices, over which we, of course, have no control, may yet be witnessed. *
Subtopic: PRICES AND SUPPLY-MOTION FOB ADJOURNMENT UNDER STANDING ORDER 31