RATIONALISING AN INDUSTRY

Press, Volume LXXI, Issue 21631, 15 November 1935, Page 21

RATIONALISING AN INDUSTRY

* WORK OF EXECUTIVE COMMISSION AMALGAMATION OF DAIRY FACTORIES EXPLANATION BY MR DAVID JONES The steps that are being taken by the Executive Commission of Agriculture in its most pressing task of rationalising the dairy industry of the Dominion were outlined last evening to a conference of delegates from agricultural and pastoral associations in the central district of the Royal Agricultural Society of New Zealand, by Mr David Jones, a member of the commission. The reduction of manufacturing costs by the amalgamation of factories and the elimination of uneconomic units of production is one of the aims of the commission in this work, said Mr Jones, and he quoted numerous examples to show that good progress had been made. He declared that u consolidation of interests was necessary in Canterbury, and to this end conferences and discussions were sti.ll being held. Mr Jones said that the commission had been criticised chiefly on the grounds of the wide powers with which it was invested. He assured his hearers, however, that the commission recognised the responsibility that must go with such powers and the necessity of thorough investigation before any action was taken. The commission had the task of co-ordinating the activities of all the existing boards, and many other tasks such as the disposal of surplus production and the finding of new markets. Co-operation Wanted "The Dominion has prided itself on the completeness of the great cooperative dairy industry, but the investigations so far clearly demonstrate that the industry is rapidly drifting away from co-operative principles and that firm and definite steps must be taken if we desire to reinstate the industry on a really co-operative basis. The term 'co-operative' is not merely something to put as a heading to the letters of the company or in the articles of association; it must signify a truly co-operative company in a cooperative industry. Such companies must not, as has frequently been the case, develop competition and waste, lor they are a danger to the whole co-operative system. "The commission has carried out investigations in several districts, discussing with groups of factories the necessity of amalgamation in some cases, and purchasing outright in other cases, thus reducing manufacturing costs and getting down to a more rational system of cream collection instead of the wasteful, costly one," said Mr Jones. "The various boards enter into cne contract with the shipping companies for the carriage of produce by sea. This has brought order out of chaos and resulted in big reductions in freight and better handling of the product; we want somewhat the same order and economy on land. Transport Costs "The Transport Board carried out very careful investigations into costs in two districts, Taranaki and Waikato, and showed the great loss to the dairy farmers through overlapping. The cost of cream collection in the Dominion is more than £500,000 per annum, besides the unnecessary damage to the roads. The unnecessary cost, directly and indirectly, comes out of the pockets of the farmers, and in many instances lowers the quality of the product, although quality is a vital factor. Considerable progress has already been made." Mr Jones said one of the chief difficulties was to overcome the strong disinclination to close down local factories in districts where it was clearly evident that small units could not compete with factories taking advan- % tage of large-scale output, modern and economical equipment, and fast and efficient transport. "The commission is of opinion that a butter factory should have an output of 1000 tons and upwards to be economic," Mr Jones said. "The first consideration of the commission is the quality of the product, and it appears as if, in addition to what £ is done by agreement and amalgamation, some general regulations will be necessary to prohibit the carrying of cream unnecessarily long distances and making it compulsory lor the cream to be graded at the factory only." Some Achievements The six co-operative butter companies in the area south of Waverley and north of Palmerston North and extending eastward beyond Taihape agreed after several conferences with the commission and representatives of the Dairy Board to buy out the two proprietary companies at Wanganui and allocate the purchase money to be paid between the companies in proportion to the additional cream they obtained, and signed agreements had been entered inti between the companies to adhere to fixed boundaries in the future. In some cases groups of suppliers had been exchanged, and in one instance an exchange of two groups between two companies effected an estimated saving of £BOO per annum in transport alone. "The result altogether is entirely satisfactory and the companies are to be congratulated upon the public spirit displayed," said Mr Jones. "The small cheese factories in this and many other districts create a real problem. Butter relatively has beaten cheese prices over the last five years, J and with the attractive prices received; for pork and baconer pigs and fat lambs in mixed farming areas, the drift has been away from cheese, and the small factory cannot afford to lose supplies. The commission will not say to a farmer, 'You must supply milk and not cream,' and the drift to home separation and cream has left a number of small cheese factories stranded. "Our advice in many cases has been a recommendation to close up and sell their cream supply to a butter factory, while they have a goodwill to sell. We have established that a butter factory can afford to pay, and is now prepared to pay a fair price for an increased supply Cobtained by taking over a group of suppliers) of a factory's cream: that reduces their own manufacturing and collection costs. The commission's opinion is that if cheese improves in price, the larger cheese factories in purely dairying districts can adjust the balance of production between cheese and butter." Canterbury's Position Mr Jones also dealt with a wide economic survey carried out in the Manawatu at the request of 31 factories, amalgamations effected in Nelson, and others in course of negotiation in N>»wn and Blenheim. "The Canterbury position is very difficult; conferences have been held and discussions are continuing," he said. "There are 11 butter factories manufacturing about 4700 tons of butter. A consolidation of interests is necessary, and has been recommended by the commission. A statement was

made that six cream lorries run over the same ground in part of North Canterbury. Canterbury suffers through too many factories. If there were no butter factories and we set out to plan an ideal system in Canterbury we would say that the cream should run as nearly as possible towards the grading ports. One factory at Timaru, one at Ashburton, and one at Christchurch would be sufficient, and the savings would soon pay for a reconstruction. The importance of savings is better understood when we realise that a saving of one farthing per lb in the butter manufactured in the Dominion amounts to £375,000. Costly Rebuilding "We find that dairy factories' finance in some cases is in a difficult position; costly rebuilding has taken place when a careful survey would have proved the wisdom of joining up with neighbouring companies. The commission has now enacted that when a factory is to be totally or substantially rebuilt its license to manufacture must come up for review. The economic necessity for the continuation of a dairy factory, the prospect of its carrying on successfully, the possible effect of needless competition and its effect on the quality of the product, have to be taken into consideration in arriving at a decision whether the license will be renewed or refused. This is a very important safeguard for the future of the industry. The commission has been in consultation with the Dairy Board regarding export and local marketing of dairy produce. "The regulations and authority to act in order that such schemes may be made operative will be given under our act by the commission and we have the responsibility of agreeing to such decisions. My experience abroad satisfied me that our old system, or rather, lack of system, seriously prejudiced the market for New Zealand dairy product-, and the opinion of the commission is that the proposed group marketing of dairy produce with proper safeguards, is an important forward step. The Continental countries exporting butter to Britain exercise a very definite control over their produce, and we have been behind in our methods. Another aspect of this question is that a conference is being held in London before the beginning of next export year to decide the butter import policy of Great Britain and the Dominions. If is essential that the Dominion should be ready to meet any eventuality. Butter for the local markef 'z also to come within the scope of the board's operations and many objectionable practices will be eliminated. Subsidy on Building: "The commission approached the Unemployment Board and it agreed to subsidise the alterations or rebuilding of dairy factories, cowsheds, concreting, the purchase of dairy machinery (if of New Zealand manufacture) for the farm or factory in the interests of employment and improving the quality of the product. This concession has been widely availed of, and the arrangements also made by the commission with the Government for money at low rates of interest for this work has been of material assistance and will be reflected in the resultant improvement in the quality of our dairy produce." In moving a vote of thanks, Mr L R. C. Macfarlane, the chairman, said it was apparent that the commission was working on very sound lines indeed. "The Government is to be congratulated on appointing the commission and the commission ondbe way it ih synchronising the work of the boards and assisting in the rationalisation of the country's primary industries," he said.