WHEAT AND FLOUR PLAN

Dominion, Volume 30, Issue 192, 11 May 1937, Page 13

WHEAT AND FLOUR PLAN

Reply to Milling Company Chairman CONDITIONS STABILISED Statements concerning the wheat and flour rationalisation scheme made by Mr. J. A. Peacock at the annual meeting of the Northern Roller Milling Company, Ltd., at Auckland, were replied to yesterday by the deputy-chair-man of the Wheat Committee, Mr. L. J. Schmitt. It was contended by Mr. Schmitt that the criticism was calculated to give a wrong impression of the rationalisation plan. “Our attention as the Wheat Committee lias been drawn to a report iu Hie daily papers of certain remarks made by Mn J. A. Peacock, in the course of his annual address to the shareholders of the Northern Roller Milling Company at Auckland,” said Mr. Schmitt. “These remarks are calculated to give such a wrong impression concerning many asiiects of the wheat and flour plan for the rationalisation of the milling industry, that they cannot be allowed to pass without comment. “Mr. Peacock describes as ‘disastrous’ the effects of what he calls '(Government interference’ in the milling industry, but he must bo well aware that disaster to many millers was narrowly averted only by the Government’s action in stepping iu to assist the industry, Continuous and wasteful price wars were ruining the milling and allied industries from a national viewpoint and the Government’s action stabilised trading conditions. Realisable Asset. “Mr. Peacock says that the Govern-, merit to-day owns slightly more than half the shareholders’ business, and from this be infers that the Government is knowingly pledged to confiscation. This inference is wrong as also is the fact stated, and moreover it must be pointed out. to him that as a result of the Government’s action the Northern Roller Milling Company has acquired a definite right to an output allocation of 27,541 tons of flour. Under the control scheme this tonnage, which is considerably greater than their actual sales of their own grist in 1934 and 1935 is assured to them, and Is now a realisable asset of great value. “It is very doubtful whether the amount of capital on which the company desires to pay dividends is not in excess of the amount of capital actually required for a mill producing the quantity that represented the output when the allocations were made under the control scheme. “Mr. Peacock states that prior to the inauguration of the rationalisation scheme, his company was handling about 34,000 tons of flour, but he knows quite well that about 6000 tons or more of this total were being manufactured by South Island mills. 'The Northern Roller Milling Company were warehousing this quantity of flour by agreement with the southern mills for the purpose of stabilising the market without disturbing the Auckland price, and to ensure to the southern mills some share of the Auckland market. For this service they were receiving a small commission from the southern mills. The allocation given to the company under the control scheme was based, as in the case of all other mills, on the actual quantity gristed and sold by it during the previous three years. Furthermore, as importations have been restricted under the scheme, it lias been necesssary to produce a larger quantity of flour in New Zealand. The Northern Roller Milling Company has received its share of this increased business, and incidentally a very much larger quantity than any other mill. Assured Market. “Under the scheme, an assured market for the whole output of the mill is guaranteed, and furthermore the credit risk on debtors’ accounts has been taken over by the Wheat Committee, so that the . company is assured of payment in full with no risk of bad debts. Its flour is not being placed in a common pool, but is still being sold under the company’s own brand. “Mr. Peacock stated that the directors of the company bad received reports to the effect that there was no other mill In New Zealand quite as efficient as that of the Northern Roller Milling Company, but the fact remains that bn the results of last manufacturing year, other New Zealand mills have been able to show better figures. Many New Zealand mills of average efficiency have been able to produce a ton of flour from a given number of bushels of wheat, and if the Northern Roller Milling Company had equalled that figure of average efficiency, they would have saved several thousand l>ounds. “The wheat and flour rationalisation scheme cannot, be held responsible for the scale of income tax paid by the company. 'This is a matter for another department, and is based on aggregate profits. “The Northern Roller Milling Company had as good opportunities as any other company to obtain its wheat requiremetits Mr. Peacock infers that flour produced by other mills was inferior. A very careful check has been kept on the quality of flour produced, and Mr. Peacock should be informed that many mills have produced better quality than the Northern Roller Company. Milling Efficiency. “Efficiency in milling is not only a matter of plant and machinery, but also of situation, and in this respect the Northern Roller Milling Company’s two mills may be badly located. “The price of flour in Auckland immediately before February 10, 1936, when the plan came into operation, was much higher- relatively than it was anywhere else in New Zealand, and because of that relatively higher price to the people of Auckland, was the company able to show a high profit, pay high dividends, as well as set aside substantial reserves, even though its position was not satisfactory for most economic working. "The cost of production of all units in the flour control scheme is based on a reasonably efficient mill, and on this basis the Northern Milling Company, if it is as efficient as is claimed by Mr. I’eacock, should really be working at an advantage over most other mills, and be in a position to pay a reasonable dividend to its shareholders.”