GRADUAL CLEARANCE OF STOCKS

Evening Post, Volume CXIII, Issue 62, 15 March 1927, Page 12

GRADUAL CLEARANCE OF STOCKS

In a statement covering the position and the decision of the board, Mr. W. Grounds, chairman of the board, says: The statistics and information available to the board show the market position statistically to l>s very much sounder than was the case at this time last year, there being, on official conservative figures, actually 6300 tons less butter in store in London than at this date last year, :.nd 1150 tons less Now Zealand butter. Statistically, therefore, the market should have been in a healthy condition permitting of ready sale, were it not for the attitude of a section of the trade.

"STAMPEDING THE PRODUCER." The actual position is by no means so bad as the view that has been presented to the public over the last ten days, and this contrast justifies the statement that the campaign that has been conducted—one might definitely say, "stage managed," in view of the harmonisation of time between statements here and in London—has had for its primary purpose the complete abandonment of the board's policy and the restoration of past conditions. To achieve this end by stampeding the producer and the public, it has been represented that the market position is phenomenally bad, because of (a) Excessive drops of price as made by the board; (b) Excessive accumulations of stocks because of the board's policy. Neither of' these statements can be justified on examination in relation to the performances of the past. The normal course of the market over the past six seasons has been for New Zealand produce to suffer a definite seasonal slump in the face of heavy arrivals. These slumps have inflicted tremendous loss upon the producer while not benefiting the consumer proportionately; and the primary purpose of the formation of the board has Tjeen to achieve orderly marketing, with its attendant benefits of more regular deliveries and more regular prices.

PREVIOUS MARKET RECORDS. In the propaganda of the present the performances of the past have been overlooked, but it is timely to remind producers of them. The most dramatic drops in the market prices of the past in comparison with that recently sustained, are as follow:— ' Scaaon 1921-22. 3rd December .... 202/----31 st December .'.. 130/A drop of .... iy. in 28 (!ilya Season 1922-23. 17th March 208/- ---■ 11th March 144/. A drop of .... G4/ . in 3g d(lJ . s _ Season 1923-24, 2nd February 210/----19 th .March 150/- ' A drop of .... co/- in 53 days. Season 1024-23. 21th December .. 202/----l'th January mi;/. A drop of .... .]u/_ In 0., dllJ , s Seanon 1925-20 21at August 17"/. Kith October „,... 131;/. A drop of .... ~30/- In 55 days. fsJTVi! 26'27-"10 PfaontCaao. lain t cbruarv 17 r/ 10th March .....'. 100/ I A drop of .... "T^L ln 20 days Those facts show that the drops of the past have far transco.-led the reauction made by tho board in following the market They also illustrate tho process, explained by the Imperial Economic Committee's report, of Mr buyers, holding off the market at time! of heavy arrivals to cause it to crash to a low level and then buy in heavy stocks for which they have financially prepared. Once such big buyers had lilled their temporary needs, tho market invariably rose rapidly to permit of. profits bomg taken. Tho result was that tho consuming public nevor received the full benefit of tho New Zealand producors' slump sacrifice. The board's policy has certainly achieved a more regular price level during tho nast four months. 1

STOCKS NOT UNDULY HEAVY. But it is alleged that this steadiness of pneo level has been secured at the expense of volumo of sales, and that unduly heavy stocks have accumulated in comparison with past years. This contention is disproved by official figures. The position in London on 12th March of this year with the same date last year is as f-Oows:

The figure of 19,200 tons for last year is derived from official reports of the Importers' Association, but it is fair to say that certain sections of the trade estimated stocks -at that time to be 29,000 tons. Those heavy stocks were carried forward successively owing to the holding policy of Now Zealand factories, independent of the board, until in August last the total f nnn nnq n Ua, ntjtieVVe'e as3essed at over 1,000,000 boxes (25,000 tons), and reliable importers stated that Britain could do without importing any more butter for six months. Normal supplies of butter have, however, been receded in the .past period; hence the partieu arly bad economic conditions winch have attended the inauguration of the board's policy. Britain's consumption of butter is estimated at 5500 tons weekly, so that the present stored stocks represent 2J weeks' consumption, which can be regarded as goo d from the producers' point of view The position in cheese stocks, which market operates differently from butter is practically comparable with that of last year. x MAEKETING POSITION. New Zealand, of course, is concerned in more than the immediate stock position in London, the marketing of the balance of the season's output now nass ing forward is the principal concern Analysis of our position on this fea' ture presents the initial difficulty that there are no past statistics of sales at this period available for comparison as this is the first year of the board's operations. 3?he following table, how-

After a two days' meeting the Dairy Producers' Export Control Board resolved to abolish price-fixing in view of the present difficulties of the London market. The. Board had before it conflicting advice from its London agency as to the effect of the trade boycott and the loss of goodwill. The price-fixing abolition resolution was carried by six votesto three. The Board further resolved unanimously that instructions should be given for a gradual clearance of stocks of butter and cheese. To prevent speculative absorption of the quantities in hand, supplies will be allotted to distributors weekly so as to clear accumulations of cheese by the end of May and of butter by the end of June.

Note.—Butter: Stocks in New Zealand, plus quantlt es afloat. In stock London, and sold, equal 44,402 tons, the difference being butter outside control. Control did not begin till Ist September, hence August shipments were outside control.

Cheese.—Stocks in New Zealand, plus quantities afloat, in stock London, and sold eaual controltOtlS> th° difference D«ine .cheese outside INFORMATION NOT WITHHELD. On the point of information and the 'demand" of certain sections of the Press for "statements," it may be said that the board, although recognising that the publication of its business statistics gave opponents very vital information, has consistently adopted ths practice of supplying to each of tho 57,000 suppliers of the. Dominion, through the columns of '' The N.Z. Dairy Produce-Exporter," its official organ, information as it affected them. This information has also been available to the daily press, and there is therefore no justification for the suggestion that the board has withheld information. The February issue of the "Exporter" contained a very complete summary of the position as at that date. KEEPING SUPPLIES MOVING. In relation to the sales position it is alleged that there is a trade boycott of New Zealand's produce by a section, of the distributive trade—obviously that section which has been accustomed in the past to speculate heavily at periods of low prices. Apart from that speculative element, it must be recognised that the inception of a stable price has made it unnecessary for traders to carry what they call protective stocks. For instance, cases are known where, although formerly 5000 to 6000 boxes were carried as normal reserves, now only 200 are held. This does not mean a reduced consumption in these cases, but merely that the trader is naturally allowing the board with its stabilised price policy to carry his supplies which aro available at any time. This factor over the whole of tho field would in itself tend to slow sales in the first instance, without reducing the ultimate volume of consumption. Beyond this factor, however, importers allege a trade boycott against the price policy as being directly responsible for the piling up of stocks. CAUSES OF ANTAGONISM. It never was the Intention of the board to permit the piling up of stocks. The London Agency has always had the power to adjust prices to keep stocks moving at sales point. A combined committee of three members of the trade and the agency has been responsible for varying the price as need arose, and if the trade now alleges that the price level has been beyond the sales point, they cannot avoid through their own nominees a definite degree of responsibility in connection therewith.

The board feels strongly that a boycott by any section of the trado is not justified, either on commercial or national grounds. There has been no desire to ponalise the consumer or the distributor, but only to work cooperatively with the distributor in improving the courso of marketing. The development of antagonism to the extont alleged has been due to three main causes: — (a) The divisions amongst producers themselves in New Zealand, and the consistent antipathetic propaganda indulged in here. (b) The proprietary and trade propaganda from those resentful of monetary loss. Some of this took forms gravely, and oven maliciously, misrepresenting the policy of tho board and imperilling national interests.' (c) Tho divided counsels of the London agency, and the dissension created by the Government reprcsentativo thereon, with his definito opposition to the instructions of the board to apply its policy. This was gravely accentuated at the time of the Prime Minister's visit to London in the encouragement given to the belief of the trade, that something would be done by the Government. The hope of influencing the Government definitely invited an intensification of trade opposition. "On that point I would remark, in passing," said Mr. Grounds, "that the fully story o'i the intrigue in London at the time of the Prime Minister's visit may yet have to be told. I will not touch' upon it in this statement."

LOSS OF GOODWILL. In considering the position at its two meetings, the board had before it the following memorandum from a meeting of 22 of the 29 agents who are handling tho allotments from tho board:— At meeting board's agents it was resolved urge board necessity immediate consideration present situation New Zealand butter, cheese, as otherwise they would be neglecting duty imposed on agents to advise their principals any circumstances having important bearing upon their mutual interest. Board commenced functioning more than five months ago. According information provided by board, 4th March, estimated total output New Zealand butter current season 65,000. Board sales to date, in- ' eluding sales to other countries than. Great Britain, about 13,763

tons. Estimated output New Zealand cheese, current season, 72,000 tons. Board sales to date about 12,500 tons. These figures show unavoidably, unless some means found increasing sales immediately, large ..surplus must inevitably be carried. Carrying over stocks long periods deprives Dominion advantage undoubtedly held when produce distributed consumers whilst in best condition. As result these conditions position for producer and has become unsatisfactory. Continuance will inevitably lead to acute financial embarrassment to producer. Present unsatisfactory sales position New Zealand butter, cheese due, our opinion, to large extent to loss goodwill of New Zealand produce among distributing trade shown by persistent determined efforts their part to boycott board's produce as far as possible. Principal reason for hostility and for present position as follow:— EFFECT OF FIXED PRICES. 1. Fixed price policy adopted by board.

2. Fixed prices nullify value experience and judgment of buyers and sellers, bringing about lack of flexibility in market, and lack of security buyers mind, consequent on artificial movement price as against market being governed by natural conditions. 3. Failure of board to carry out its declared policy to always maintain prices at economic sales levels. London agency have reversed this policy by maintaining prices at level which has not resulted in satisfactory clearance arrivals Under present system there is no effective arrangement in being for co-operation with trade to carry out policy of price-fixing always at sales level. It is our urgent recommendation, if whole industry is to avoid severe crisis, immediate steps should be taken to do away with fundamental causes which have brought about present position. Twenty-two allottees present at meeting. Messrs. A. J. Mills and Co., Ltd., and Messrs. Lovell and Christmas, Ltd., two of the largest allottees, both cabled entirely dissassociating themselves Ironi the foregoing message. These two firms together handle 28 per cent of the butter allotments and 23 per cent, of the cheese allotments. If the seven absent allottees included other large firms the weight of opinion £ produce held might be markedly different from the views. cabled. It may be explained that the position of the allottees varies greatly, some holding tlllarlZ 6d 'la c°mP"ed with the largest holding of well o-er 20 000 ton S but in meeting assembled the vote Stt'e'SfC 11"-*6"1 ™"*11'*

CONFLICTING LONDON VIEWS. The views of the London Agency were submitted as follow:— 7 W. A. lorns ana Paterson strongly advise immediate abandonment Y£x« XmgKJnt SU^est " board decide on this, board should give London Agency complete discretion to consult with trade and in co operation with agents decide best methods of introducing change. W C. Motion and Wright strong op! pose suggestion eliminate price-fix-Oog ns-lPai' tiCUlarl? pre3ent l£t£L Consider prove disastrous producers' niterests Present position due mainly large quantity carr i ed fo ' SSL 1-"*, Se. ason's free market. Statistical position more favourable than same period last year, and (& 6000 tOnS I6SS °f a" butt^ Cons der present position can be handled more effectively by continu »8 policy, although Listing procedure movement rendered difAs when Grounds was hore wp Lave large section trade, Including 99 per cent, of wholesalers, hostile to price fixatmn. Although many retailers made window ■ display s^-Bir-nungham area control has dopreciat- , od there considerably. The fact thir our produce is not selling with our competitors and incurring charges gives me great anxiety. ftuQy „*& ise the gravity of the position should tho boycott by trade continue until the Northern Hemisphere production comes on, and believe the best thine possible would be to eliminate pricf fixation. It will take some time to regain tho goodwill in many directions, as some traders have latelY made extreme efforts to push foreign produce and establish a new trading connection. I am pleased to assure the board we have done everything humanly possible by co-operation tf make a success of the board's policy. THE BOARD'S PROBLEM wa?L P orssTd to1 re°: nting the Wd

To accelerate the rate of sale sufficiently to clear the forthcoming ar3,T™*° f p 'oduce afl^t and to be shipped, and at the same time steadily absorb within a given period the stocks now held. It was recognised that cheese should bo cleared more rapidly than butter because New Zealand cheese interlocks with Canadian to tho extent of becoming a seasonal supply, whereas butter is m demand and available the year round. This problem was faced in two phases— (a) The rate of sale; and (b) The price necessary to induce sale. On the first point the board reached a unanimous decision. It was seen that * oo£l w the whole accumulated stock of 8850 tons and 13,000 tons of cheese upon tho market free of control at prices low enough to force sales would be playing into the hands of those speculative interests which have pursued the practice of heavy buying at low prices as an annual custom. Their capacity to absorb and hold the quantity is undoubted, as will be remembered by producers who recall 1921, when withm a few hours some 20,000 tons of de-controlled produce passed into privato hands before producers could clinch the arrangements made for themselves buying in that produce to avoid wrecking the new season's market. In this instance it is known that the stocks m second hands are particularly light, the object being to force defea"t of the producers' aims. GRADUAL CLEARANCE. A limitation upon the quantity to be sold weekly was recognised as imperative, and was provided for in the following mption, which was adontcd unanimously— r That the board agree to instruct the London agency that the following quantities of produce must bo sold per week: 90,000 boxes of butter, 45,000 crates of cheese, so as to secure a clearance of the accumulated stocks of butter and cheese by the end of May, so far as cheese is concerned, and by the end of June so far as butter is concerned these quantities to be allotted on a percentage basis for each allottee. ABOLISHING PRICE-FIXING. On the method of determining the price which would induce sales, there was a radical conflict of opinion. The motion adopted by the board on 27th October, and cabled to London for execution, was that the combined coni- { mittee of the agency, and the trade

should maintain an effective sales I price sufficient to clear stocks as they arr iy% T *uat cx Pectat«>n has not been realised, the explanation of the slow sales being either— ( a ) that the actual prices have been too high, in which case responsibility must be shared by £ a?V 10W making complaint; or (b) that the method of naming prices at all has been resented by some although approved by others. Mr. H. D. Forsyth moved in accordance with notice of motion—consideration of which was accepted with the unanimous consent of the board That all resolutions and restrictions dealing with the fixing of prices are hereby rescinded. It was contended on behalf of the motion that the removal of price restrictions would inspire competition amongst importers and make the agents responsible for returning the best prices possible for the amount of produce to bo sold weekly by them. Full consideration was given to the question and other aspects of the board's policy hinging upon the question. The motion was carried by 6 votes to 3, 'lie voting beingFor. Against. Winks Grounds Corrigan Thacker Forsyth Bryaut Timpany ■Keynolds Mr. Goodiellow, the only otier Now Zealand member outside ths Lhndcu Agency, ?of t ten days ago for the United States. The following cablegram, conveying the board's decision to London, "was approved:— Board meeting to-day decided to . instruct the London Agency, firstly, that to clear accumulations allottees must sell total of 90,000 boxes butter per week till end of June and 45,000 crates cheese per week until end of May. Sales of allottees to be on percentage basis compared with total each allottee has to sell. These quantities not to be exceeded. Secondly, to ensure these quantities being sold priie-flxing is eliminated and London Agency must co-operate with merchants in reducing stocks, and agency is to do its utmost to secure best possible returns for producers. Thirdly, Mr. J. B. Wright is temporarily appointed .to London .Agency from date of Messrs. Motion and lorns sailing from London. It was also resolved to procure from London a regular record of the sales effected by each allottee in proportion to the produce available to that allottee for sale, both- before and 'after the change of policy. The next meeting of the board was fixed for 30th March, in order that it may keep closely in touch with the position.

This Last Year. Year. N.Z. (controlled) .... B °Bso T™3" N.Z. (uncontrolled) .. 1,500 11500 Australia 1,600 3*Boo Argentine l jo oo 3,900 Totals ••••' 12,950 19,200

sver, sets out the position for this year. Butter. iuantity graded from Ist S" °DS' August, 1926, to 28th February 1927 2,013,000 50,325 iuantity shipped to 9th March, 1927 1,621,000 40,525 luantlty unshipped 392,000 9 800 iuantity unshipped If board not In existence . 212,000 5,300 iuantity afloat 383,000 9,025 Stocks iv London, inrinding Gallic, Port Melbourne, Rotorua, and Huntingdon 476,000 11,900 iuantity sold (Including America) 523,115 13,077

Quantity graded from Ist Aujlist, 192G, to. 2Sth February, 1927 ... Quantity shipped to 9th March, 1927 Quantity unshipped Quantity unshipped if , board not in existence . Quantity afloat Stocks in London, includ- . ing Gallic, Port Melbourne, Rotorua, and Huntingdon Juantity sold (Including America) Crates. 749,000 592,000 157,000 98,000 157.000 103,017 174.51G Tons. 53,501 42,20! 11,201 7,001 11,201 13,781 12.4 C: