DAIRY PRODUCE

Dominion, Volume 27, Issue 187, 7 May 1934, Page 6

DAIRY PRODUCE

Board’s New MarketingProposals EXPORT BY LICENSE Article in Agricultural Year Book Complete proposals finally adopted by the New Zealand Dairy Produce Board for the marketing of dairy produce are published in an article in 1 the 1934 Year Book of Agricultural Co-opera-tion which is issued annually by the Horace Plunkett, Foundation, London. The author of the article is the secretary of the Dairy Board, Mr. T. C. Brash. Copies of the Year Book reached tlie Dominion by last week's English mail. .' ■ “Co-operation, in the manufacture of the Dominion’s dairy produce,” writes Mr. Brash, “has advanced much more rapidly than co-operation in its marketing, even granted that there are certain features in the manufacture which are anything but idealistically co-operative—namely, the competition between co-operative dairy companies for supply from farmers. The cost of collection of eream is tremendously increased by reason of the fact that ereani-collecting lorries from several dairy companies are operating over the same territory. .. “Nevertheless, in the manufacture of the Dominion’s dairy produce, some 90 per cent, of the total is carried out by co-operative dairy companies controlled by the farmers who supply the raw material. In marketing, however, the spirit of co-operation has had but little part. Each dairy company, be it cooperative or proprietary, has been . a law unto itself, and for any individual dairy company, by reason of a lucky sale; to beat its neighbouring company in the payout for butterfat, is a matter for rejoicing. It would appear as if dairy-farmers were co-operators up to a given point, but beyond that were violently individualistic. Varied Experiences. “Many and varied have been the experiences of marketing of dairy produce in the fifty years since the inception of the industry. In the earlier years, when dairy companies were few in number, the produce was mainly sold to local merchants, frequently at a given price at the nearest railway station to the dairy factory. As the quantity grew, British merchants became interested, and sought to make direct contact with the directors of dairy companies. At the same time there was established compulsory grading by Government officials, and cool storage of butter and cheese at the grading stores at ports of shipment; f.o.b. sales are now made from this point. , ,“As the industry developed, two systems of marketing became firmly entrenched : one, the shipment to British merchants for sale on consignment, the dairy company being satisfied to secure the ruling market price when the produce arrived ’ oii the British market; the other, the system of .selling f.o.b. shipping ports to the highest, bidder. Sometimes the sales were foV one shipment only, or they may be for one or more month's make: 'orj -,' ; the whole season’s outputs have been sold in advance at the, beginning of the manufacturing season. The outstanding feature of these systems of marketing is, that every dairy company acts as a separate unit, and, whether intentionally or not, proceeds without any consideration as to how its action affects other dairy companies. Thus marketing has become intensely individualistic. Consignment Policy. “The proportion of the produce sold on an f.o.b. basis has been approximately 20 per cent, of the total exported each year, the balance being shipped on consignment,” continued Mr. Brash. “Those dairy companies which adopted the consignment policy did not consistently market through any particular merchant, but in the majority of cases changed their merchant frequently, and very often even small outputs were divided among several merchants. By reason of this, there has been fierce competition between merchants for the right of handling each dairy company’s output. This has resulted in an army of local agents, whose particular work is to make contact with the individual directors of dairy companies to secure their support to the firm which the agent represented. The,competition has been bitter, and the tactics used —well, to say the least of them—not of a very high standard.. “Dairy company directorates and British merchants have alike been dissatisfied, but up td the present it has been impossible to get anything like unanimous support for any co-operative marketing proposal. A number of 1 years ago there was formed the New Zealand Producers’ Co-operative Marketing Association, but through lack of support it has not been able to bring about any very great improvement. Then in 1926-27 the New Zealand Dairy Board took over the allocation of outputs to merchants and made such f.o.b. sales as were thought advisable on behalf of the Industry. The industry did not stand behind the proposal, and the Dairy Board, could not continue. Then there was formed the Amalgamated Dairies Limited to handle co-operatively the huge output of the New Zealand Dairy Company and such other outputs as could be persuaded to support the organisation. The policy of Amalgamated Dairies Limited has been modified so that it now handles practically only the output of the New Zealand Co-operative Dairy Company. Need of the Industry. “The great need of the dairy industry is for a Dominion viewpoint on the part of directors of co-operative dairy companies. Until there is recognition of the fact that no section of the industry suffers without directly or indirectly affecting the whole of it. any advance is very difficult. “The British dairy produce merchants who have been handling, the produce sent to London on consignment have again and again pointed out the growth of the practices among themselves which worked out to the detriment of producers, and- which, by reason of the system of marketing hi operation, they were helpless to prevent. When Mr. W. A. Ibrns, chairman of the New Zealand Dairy Produce Board, visited Great Britain during recent months, the Importers’ Association, after lengthy consideration, adopted unanimously certain proposals for the improvement of marketing New Zealand dairy produce. “These they submitted to Mr. lorns. asking that he place them before the board in New Zealand, with a view to their being put into -operation. The Dairy Board very carefully considered these proposals, and after making some amendments, submitted them to a conference of dairymen fully representative of the dairy industry of the Dominion. This conference strongly sup-

ported the proposals, and the board decided to put them into operation, although the date of their taking effect has not yet been fixed.” The proposals as finally adopted were stated by Mr. Brash to be as follow: — 1. Export of all butter and cheese from Zealand to be. under license granted by the New Zealand Dairy Produce Board, New Zealand, to importers approved by the board. The license shall provide that the licensee shall not buy on his own account New Zealand dairy produce either in New Zealand, afloat, or elsewhere. The board to provide machinery for sales or transfers from one importer to another when the board’s London manager is satisfied such importer is short of New Zealand produce, either for pat or general trade, and. other than such sales, it is a condition of the license that the holder undertakes to confine his activities in New Zealand dairy produce to first sales only. Dairy companies or proprietors to be free to make f.o.b. or c.i.f. sales on their own account, tl regulation to be established by the board to provide that no f.o.b. or c.i.f. sales shall be made below the London current price at the time the sale was made. • 2. Butter and cheese to be allotted by the New Zealand Dairy Board in co-operation with the factories. The board to have final decision in the allocation, but importers in the event of any change to have opportunity for discussing this matter with the board, before such allocation is completed. No canvassing to be allowed as from date agreed upon between the New Zealand board and the Importers’ Association. 3. Accounts to be subject to verification as and when required by the board’s accountant. If any importer desired inde]>endent verification, the board is willing to grant it, but it will be at the importer’s expense. 4. No licensed importer to sell New Zealand dairy produce “short.” 5. No sale of butter and cheese on consignment after date of bill of lading to be made'until official notification of ‘commencement of discharge. Sales Through Brokers. ’ ’ 6. In connection with sales through brokers, the buyer's name to be disclosed and goods to be Invoiced direct. A list of accredited brokers to be made by the Importers’ Association in epnjunction with the board. 7.. Where the general interests of the industry do not suffer by such action, the board undertakes to give all pos sible protection to existing, contracts between factory and agent. 8. Commission on landed sales to be not more than 24 per cent., and on c.i.f. and f.o.b. sales not more than 1 per cent. x, 9. Agents prepared to contribute to advertising scheme equitably to the amount spent by the board, not exceeding halfpenny per box of butter and one penny per crate of cheese. ■ 10. Any dispute between a licensed agent and/or broker and the board to be settled by arbitration under rifles to be formulated and agreed. 11. No averaging of returns shall be permitted under the license. 12. The board to be advised weekly of the stocks of consignment produce held in London. “It will be noted .that while every consideration wlll.:he given to the wishes of .the dairy companies, the final word as to .the merchant who shall handle consignment produce is in the*hands of the Dairy Board,” concluded Mr. Brash. “No' holder of a license to handle consignment produce shall speculate in dairy produce on his own , account. : The proposals provide that' all account sales will pass through the'hands of the board and an audit system can be adopted to check uu dates of sales, buyers’ names, etc. '■ ; “A far. as f.o.b. sales are concerned, dairy companies can continue to-rniilre' these direct, subject to certain resti'ic-, tiohs. These restrictions are being criticised by selling dairy companies, but It has been obvious for some time that restrictions in this connection were necessary in the interests of the whole industry. The Australian Dairy, Board has regulations' in force giving, them power to fix a minimum price for -f.o.b. sales and preventing the sale df-produce- before it is made.” At the conclusion of Mr. Brash’s article there .is a footnote by the editor of the Year Book reading as follows: “The Dairy Producers’ Free Marketing Association, a' body which claims to represent 126 companies, having an annual output of 44,000 tons of butter, is reported in London as opposing the board’s proposals in the cause of ‘absolute freedom to dispose of their produce'.” [“Year Book of Agricultural Co-opera-tion (11134),” by the Horace Plunkett Foundation. (London: P. S. King and Son. Ltd.).l