THE DAIRY INDUSTRY

Evening Post, Volume CXVI, Issue 106, 1 November 1933, Page 16

THE DAIRY INDUSTRY

(Continued from Page 15.) population of dairy cows In New Zealand in 1932 was 1,702,070. Thus it will bo seen that the dairy cow population of England and Wales alone is nearly twice that of New Zealand. Theso figures clearly demonstrate tho importance of dairying to Britain, and the increases which have taken place in recent years play an important part in the discussion on the restriction of produce into Britain. Apropos of that, it is of importance to note the change in population of Britain. In 1922 the j estimated population of Britain, excluding the Irish Free State, was 44,305,000, and in-1932 it was estimated to be 46,340,000. It is immediately apparent, therefore, that the dairy cow population has been increased at a greater rate than the human population. Dairying in Britain differs markedly from dairying in New Zealand in respect of the utilisation of dairy products. The bulk of the production of dairy herds in Tritain is used for milk for human consumption in the liquid state. It was estimated in 1930-31 that 66.4 per cent, of the milk produced on British farms was used in tho liquid state for consumption. Of the remainder it was estimated that 14.8 per cent, was converted into butter, 9.6 per cent, into cheese, 3.2 per cent, was sold as cream, 1.7 per cent, was converted into condensed milk, 8 per cent, into milk powder, 2 per cent, was converted into other milk products, and 3 per cent, was wasted. MARKET MILK TRADE. The market milk., trade is of such a nature that the milk sold to the consumer must be fresh and delivered to him within about one day of production. Consequently the British farmer is not subject to any competition in respect of his trade in market milking. The British farmer, then, can more easily control the price of his market milk than he can control the price of other forms of dairy produce, since tho latter are exported into Britain in enormous volumes by various exporting countries. Market milk, therefore, commands a higher price than milk converted into produce, and, it is the object of every dairy farmer in Britain to sell as much milk in the liquid state as possible. • With regard to produce manufactured by the British farmer, the practisei3 are again different from those obtaining in New Zealand, because the bulk of the produce is manufactured on the farm. Thus, of 14.8 per cent, of milk converted into butter it is estimated that 13 per cent, is made on farms, and of the 9.6 per cent, converted into cheese it is estimated that 5.4 per cent, is made on farms. Theso figures take into account all milk produced on farms, and also the produce consumed on farms. The position is amended when only the milk and produce which find their way to the market are considered. Tf farm production is disregarded, the milk sold off farms in England and Wales in the year 1930-31 was estimated to be as follows: —Liquid milk, 949,000,000 gallons; butter, 140,000,000 gallons; cheese, 60,000,000 gallons; and cream, 16,500,000 gallons. Of tho 1)49,000,000 gallons sold as liquid milk off farms, a certain amount would have been converted into produce, but no official estimate is available of that amount. These figures illustrate how important is the production of market milk to the British farmer, and that tho production of butter and cheese is not nearly so important to him as it is to tho New Zealand farmer. Nevertheless, the volume of milk converted into butter and cheese has a considerable effect on the price paid for market milk. , TRADE CHANGES. The milk trade in Britain has undergone considerable changes since the beginning of the present century. At one time the ■ milk consumed in the cities was produced cither within the city or within the immediate environment of it. It was sold in many cases by the producers, and in other cases by small retail shops. The keeping of cows within the cities was a costly business, because the ; animals had to be kept indoors the whole year round for the lack of available pasture, and under such conditions that the keepers had to observe very strict regulations in regard to the hygienic state of their properties. Under these,, conditions the cost of milk production was high. With improvements in the methods of the production of milk, and improvements in transport, there was a gradual move towards dispensing with keeping cows in the cities. This change from town to country production first of all had the effect of establishing two types of man in the' dairy trade, namely, producer as distinct from distributor. At this stage of development the venders principally operated on a, comparatively small scale, and had arrangements made with farmers who delivered to them milk subject 'to contracts respecting uniformity and supply throughout the year, and with respect to times of delivery. As in other classes of town businesses, the small retailer was gradually displaced by the large retailers, and this movement was hastened by (1) the advantages of processing milk, and (2) by the demand for pasteurised milk;i because experience showed that as the milk was drawn from the country and delivered in the cities there was considerable loss due to premature souring, especially in the summer months. It had also been shown that pasteurisation was a decided advantage in keeping down the spread of disease, particularly tuberculosis. There entered into the market milk trade between 1900 and the beginning of the war a certain number of large businesses who specialised in purchasing milk from farriers, pasteurising and cooling the milk, and then either distributed the milk direct to the consumers or sold it to the retailers. These men were of two classes: wholesale milk venders and wholesale retailers. Coincident with this movement, there sprang up the further practise of bottling milk, and the hygienic advantages of this appealed so much to the public and to the distributors that the movement rapidly spread. The bottling of milk is a process which can bo most economically carried out on a large scale. This movement then had the effect of accelerating the change from the small retail business to the largo milk trading and distributing business. Thus, it will be seen that prior to the outbreak of war there was in the milk business a considerable number of city retailers, and a 1 smaller number of city wholesalers, and a still smaller ' number of wholesale .retailers. The first-named sold the milk as delivered by tho farmer; the second pasteurised the milk and sold it in bulk to the retailers; the third treated the milk completely and prepared it,ready for sale. In all cases the farmers made contracts with the venders, and little difficulty was experienced by the farmers in arranging for reasonable prices. It was customary for a flat rate to be paid for the winter months, and a lower rate to bo paid during the summer months. Tho difference in price was due to the fact that in the winter months a considerable amount of feeding stuffs had to be used, and the cost of production was greater than in the summer months when the tiows depended mainly on pasture. PRICE DISPARITY. At this time there was not a wide difference in price between that received by the farmers for milk for liquid consumption and that used for the manufacture of cheese. Thus farmers whose properties were located at a considerable distance from the

market did not bother about the production of milk for sale in the cities. They satisfied themselves with the manufacture of butter and cheese, and they limited their manufacture to the period from the early spring till late autumn when the cows could rely mainly on pasture and home-grown foods. Thus, although they received a lower price per gallon for tho milk manufactured into butter and cheese than they would have received for milk for human consumption, their cost of production was less by reason of their not having to produce winter milk, and their net return compared favourably with that obtained by the producer of milk for city consumption. It may be noted, in passing, that at I this time cheese production was mainly carried out in the south-west and northwest counties of England, and in the south-west counties of Scotland. The pre-eminent cheese-making counties in Britain at this time were Somerset, Cheshire, Stafford, Derby, and Lancashire; and in Scotland, Wigtownshire, Dumfriesshire, and Ayrshire. Butter making differed from cheese making (and still does) in the respect that those farmers who made butter derived considerable revenue also from the rearing of stock. The skimmed milk and butter milk were fed to calves, and the calves were later sold either, to dairying areas or fattening areas. Consequently, the farmer who made butter procured his revenue from two sources in contradistinction to the cheesemaking farmer and milk-producing farmer who derived his revenue mainly from one source only. That was the position immediately before the war. A certain number of farmers within reasonable distance of cities made a practice of making cheese in the summer months and of filing their winter milk to city venders. This appealed to both parties, because the farmers on'the one hand were not required to maintain any definite volume of milk during the winter, and therefore did not need to undertake a substantial responsibility in that direction. On the other hand, the city distributors often experienced difficulty in getting sufficient volume of milk in the winter and were only too glad to avail themselves of a supply from the farmers. GUARANTEES. During the war the cost of milk rose to high Jevels^onsequent upon the high cost of labour, high costs of imported foodstuffs, and the general rise in pricelevels. Milk prices rose accordingly, and after a certain time milk prices were guaranteed. Consequent on difficulties in distribution and difficulties in obtaining supplies, the movement started before the war of small businesses being replaced by large businesses was accelerated, and at the end of the war the position in large cities was that there were operating in the milk trade a number of big milk concerns who were supplied by farmers on a contract basis. Because of trading difficulties, the city milk venders (more especially the big companies) had entered into trading understandings during the latter stages of the war, so immediately after the-war the milk venders had a loose type of collective milk-selling organisation. On the other hand, the farmers had no corresponding organisation. This state of affairs led to difficulties at a later date. First of all, in tho years immediately following the war when the price of feeding stuffs was very high and the prices of labour and other farm requisites were high, farmers producing city milk kept their winter production down to a. minimum, and there tended to be a shortage of winter milk. To overcome that difficulty .venders of city milk offered high prices during winter months, and the milk producers immediately responded to this, encouragement, with the consequence that the supply of winter milk actually exceeded the demand. The city"" distributors then broke their, price, and an attempt was made by 'the farmers to" \prevent this, there being evolved a scheme by which the British National' Farmers' Union entered into negotiations with the city distributors to agree to prices for a year in advance. In framing tho agreement, both the farmers' union nnd the city distributors recognised that the crux of the trouble lay in the supply to the market of surplus milk. The farmers, on the one hand, attempted to frame an agreement which would ensure to the producers of milk a price in keeping with the cost of production for a level supply throughout the year; the distributors, on the other hand, sought a scheme that would ensure the disposal of any surplus milk at a price in keeping with its market value. Thus, the arrangement arrived at was that farmers should receive a definite price for a given volume of milk, and tha*; whenever the volume exceeded the amount stated, in the contract they would, receive for that surplus milk only its manufacturing value. The city distributors \ protected themselves against under-supply by a penalty of so much per gallon for any amount below the guaranteed quantity. COMPUTING METHODS. In arriving at what should be a reasonable supply there were selected the months of November, December, January, and February. It was assumed that the amount supplied by a farmer during those four months should be the standard quantity which he would be expected to supply throughout the year. For this amount he was to be paid a guaranteed price. ,He was allowed to increase his supply by 10 per cent, during April, May, June, July, August, and September, and during October and March he was allowed to supply the same amounts as for the standard period. When the supply exceeded these stated amounts, the price he was to receive for his milk was to be its manufacturing value, and that manufacturing value was estimated by taking the average price of Canadian and New Zealand cheese, deducting 2d a pound for manufacturing, and stating that one. pound of cheese was the equivalent of one gallon of milk. The arrangement worked in the following manner: —If the guaranteed price of milk was Is a gallon during the summer months, and the average price of Canadian and New Zealand cheese was lOd a pound, the farmer received for his milk Is a gallon for 110 per cent, of the volume of milk he supplied during the period November to February, and for the amount surplus to that, he received lOd, minus 2d—Bd a gallon. This scheme was first brought into operation in the year 1922-23, and was carried on with minor fluctuations tj.ll the year 1928-29. There were minor variations with respect to the standard period of supply and the excess quantity paid for at standard rates. In the year 1929-30 the scheme was modified "to the extent of allowing the farmer to declare a quantity of milk and to be paid according to the extent of variation which he guaranteed from the declared quantity. Price was paid according to 10, 20, or 50 per cent, variation, and in this year the principle of relating the value of surplus milk to the price of cheeso was abandoned. This principle did not prove satisfactory to the distributor.!, because they had agreed to pay 2d a gallon less than the standard rate for all surpluses in excess of the guaranteed quantity, and it so happened that the surpluses exceeded anticipations of the city buyers. In 1931-32 the application of the principle of assigning to surplus milk its manufacturing value was restored, and a modification in tho original agreement was made whereby farmers could elect to supply either a definito or an unlimited quantity of milk to their city venders, subject to a difference in price according to the extent of seasonal variation in, quantity. In the years 1931 and 1932 the price paid for winter milk was so unattractive to producers that there was a

shortage, and the milk distributors agreed to a revision of the price, by which it was raised considerably. In 1932 considerable difficulty was experienced in negotiating a price for the following year because of certain demands made by city distributors, and also because of the fall in price which imported cheese was experiencing. The part of the agreement relating to the price of surplus milk was modified, placing it upon a lower limit of 5d a gallon. In other words, 5d a gallon was the lowest price that could bo paid for surplus milk. Tho price agreement was purely a voluntary movement by the Tanners' Union representing the farmers, and various bodies representing tho distributors. . There was no obligation on the part of fanners to sell at these prices, nor was there any obligation on the part of buyers to buy at those prices. The agreements were simply a. lead to farmers arid distributors, and tho agreements were in the main honoured. A certain section stood aloof from the agreements, and difficulty was created. Prominent among those who stood aloof were farmers and manufacturers of products in country districts. Theso men had, up to the beginning of the war and in the early war years, been specially interested in the manufacture of cheese, and to a lesser extent of butter. As manufacturers of factory cheese their produce sold at a price much like that of the lower grades of imported cheese because the average quality of factory cheese in Britain is low. Farmers, on the other hand, could obtain for cheese made on farms a distinct premium in price to that paid for imported cheese, yet because of labour difficulties, and others, they preferred to enter into the market milk trade if at all possible for them to do so. EFFECT OF TRANSPORT.' Prior to the war, distance from the mitrn.it. accompaui".! by lack of adequate transport and good roads pro ventcn these people- from entering the market, but subsequent to the war (notably in the last few years) improved transport and roads, and improvements in the method of treating milk have made it> possible for outlying districts to send their milk to the large consuming centres after the milk was cooled, the carriage being done in large glass-lined tanks. Improved express train services, which cater for milk carriage, have also played thenpart, and the consequence of these developments has been to place the same facilities at the disposal of the farmer a long distance from the market as wese previously held by those who were in* the immediate vicinity of the market. These people sought to sell their milk to the cities rather than to convert it into produce, and were agreeable to take a lower price than the contract entered into between the farmers' union and tho milk distributors. Two Government investigations were carried out in regard to the position. A commission was set up by the Minister of Agriculture in 1932, and its recommendations were given effect to by the establishment of a milk producers' board, and the vesting of, the control of the milk supply in the board. It was realised that the industry, was in a chaotic, state because-of the , disparity in the price of Jiquid milk and produce, and it was recognised that the crux of the problem was the surplus milk. THE NEW SCHEME. 'Under the new scheme England and Wales are divided into eleven districts, arid there has been set up a central producers' board representative of all the districts. The scheme provides that every man who keeps four or more cows must be a registered producer, and no registered producer is allowed to enter into an arrangement with a vender of milk if the agreement does not fit in with . the general arrangements made by tho central producers' board. The only men not required vto register aro those who do not sell liquid milk — farmers who manufacture all their milk into butter and cheese, and those who produce a very high quality milk, known as certified milk. The. latter form only a very small percentage of the total. The board fixes the price at which milk is to be sold by the farmers to distributors, and the price varies with regions. The city distributor pays the prico for all the milk delivered to him, and all the surplus milk is to be manufactured into prpduce. Arrangements are to be made by the board for the manufacture of the produce. Each registered producer has to pay certain levies to the board —levies for general administration and for the payment^ of a premium to tho producer of very high quality milk. Legally, every farmer sells his milk to the board, and the board sells it to the vender. The whole of the milk returns are pooled, and no matter whether tho milk is used for manufacturing purposes' or for direct consumption, all producers receive the same price. Slight modifications are made, however, to recoup producers for winter milk production. Those who supply a level throughout the whole year will receive a higher price than those who supply a small quantity in winter and a large quantity in summer. ,If venders purchase low-priced milk outside their own region, they are compelled to pay the same price as they would pay in their home region. Tho scheme is not an optional one, and it applies to all producers of market milk. It possesses this advantage, that whereas under the old scheme all milk in excess of certain' quantities was assumed to be surplus milk (but there was no guarantee that it was surplus milk), under the new scheme all surplus milk will really be surplus milk and will be converted into dairy produce. The net return from tho dairy produce will go to the farmer. Under the old scheme the producer of city milk was only interested in the price of cheese in so far as it' would affect his small surplus, and if he avoided surplus milk cheese price would not affect him at all; under the new scheme every producer of milk is interested in the manufacturing value of milk because he has to share in the general pool. It is apparent that the lesser is the volume of surplus milk the higher will be the price the farmer will receive from the milk, or alternatively, the higher the price that can be obtained for manufactured produce tho higher will be the pool price for the milk.' The change in the method of marketing should tend to stimulate still further tho production of milk. EFFECT OF IMPORTS. The prime movers in the scheme view with alarm tho present large amount of imported produce. It is feared that the scheme will entice a number of people who now manufacture cheese and butter on farms to seek an outlet for their produce in the market milk trade. The consequence is that there should tend to be a reduction in the volume of farm cheese and farm butter, and an increase in the factory production of produce, unless the price of farm produce can be sustained at a high level. From tho point of view of increasing imports affecting price, tho political weight of opinion amongst farmers in Britain will be towards curtailment of imports, and at the present time attention is mainly directed to cheese because of tho present facilities on farms in Britain for the conversion of milk into cheese. Consequently, the present agitation has been towards the restriction of cheese, but it has to bo remembered that cheese is only one dairy product and it is possible to convert milk into any type of dairy product. It is evident that tho British farmer's problems would largely bo solved if he could increase the consumption of _milk, which at the present time is notoriously low. It varies from 15i to 18 gallons per head of population per annum, and compares very unfavourably with the

consumption of 50 gallons in the U.S.A., and consumption in excess of that figure iii certain other European countries. It is asserted that Britain's low consumption is due to the fact that Britain is not a milk drinking country, and this claim is to Some extent supported by the fact that milk consumption has not been materially increased by active propaganda during the last ten years. But the fact remains that the British, milk supply has been 'badly disorganised. It has not had the wholehearted support of the medical people, but if the recommendations of th«* Milk Commission are given effect to regarding the purity and quality of the supply along witb recommendations regarding increasing its use, it is probable that milk consumption <-ovild be materially increased. It not be too much to say that by th««. measures the present volume of surplus milk and even the present milk made into butter and cheese could be used for human consumption. FOREIGN IMPORTS. At the present time there are .imported into Britain enormous quantities of condensed and dried milk which is mainly supplied by foreign countries; moreover, the quantity imported into Britain has been materially increased during recent years. This class of milk must enter into direct competition with milk produced by British fanners, because it is a product easily substituted for liquid milk. It is a lower-priced product and appeals to consumers desirous of economising in milk either for consumption or in its use for manufacturing purposes, such as the making of bread. According to agreements entered into with foreign countries the amount of these products imported into Britain is to be reduced by 20 per cent., but the opinion is hold that there is no reason why the reduction-should not be very much greater; further, there is no reason why under the ,new reorganised milk scheme the milk producers of Britain should not convert their surplus milk into these products. THE HOME-MADE ARTICLE. It is assorted that the restriction on the impdrt of butter and cheese would raise the price level of the home article, but the fact remains that home farm cheese always demands a distinct premium. During the years in which the | export of New Zealand cheese has been increasing, the price of farm cheese in Britain has been maintained, showing that the New Zealand cheese price has not materially affected the Home cheese price. Certainly, during the - last six months Horn a prices of Cheshire cheese in particular have fallen, but. this is due not to the fall in price of New Zealand cheese, but to an increase in,production of cheese in Cheshire. . Consequetly, the control of cheese price in Britain depends mainly upon Britain's own production. If imports of cheese into Britain from New Zealand and Canada are restricted, and simultaneously milk production increases in Britain, it seems doubtful if the British farmer will secure an advantage through his own production reducing the price. His solution apparently lies more in the way of'increasing milk consumption.^-If restrictions are to be employed, there is no' guarantee that there will be a rise in price. If there should be a rise in price there will tend to be a reduction in consumption, and what is more important, there will tend to be objection. by the British consuming public which, desires a continuous supply of a good quality article at a low price. Furthermore, no effort has been made on a.large scale to increase the consumption of dairy produce in Britain. Before quotas are considered it seems reasonable that an effort should be made in this direction in line with that made in other countries, notably in America. The marketing of butter and cheese^ is not systematised,in Britain; there is no grading system, there are no definite standards, and it is reasonable to suggest that before Britain asks New Zealand to restrict her output she should attempt the systcmatising of the marketing of her products. She would, then be able to ensure that there was a problem. ' ' . It cann.ot be overlooked, also, that any restriction on the output of dairy produco must relate to all forms of dairy produce, and of necessity, account must be taken of the extent to which countries are dependent upon dairy production.- ■ In 1932 New Zealand derived 30 per cent, of^ her revenue from'the export of butter, and 14 per cent., of her revenue from the export of cheese; in all,-44 per cent. The Netherlands, on the other hand, with an export of cheese much the same as New Zealand's, derived only 4 per cent, of her revenue from this source, and Denmark, with an export of butter greater than New Zealand's, derived 30 per cent, from the sale of butter. It is plain that a restriction on New Zealand would be of much greater consequence than a restriction on other countries.