HOME BUTTER AND CHEESE MARKETS.

Hawera & Normanby Star, Volume XVIII, Issue XVIII, 5 September 1912, Page 3

HOME BUTTER AND CHEESE MARKETS.

ADVANCE WITHOUT RECOURSE

Mr J. R. Scott, secretary of the South Island Dairy Association, has ■ received a letter under date July 19 from one of the largest English buyers of New Zealand dairy produce, and who is not an agent of the association ,to whom he sent a letter written by Mr Turner, of Wellington, and published by us some weeks ago. Besides criticising the statements of Mr Turner, of. Wellington, the writer of the letter gives some information of general interest to dairymen in New Zealand. The letter reads: —

"In re Mr Turner's effusion, ,which as you say is characteristic: Had we time we could show that this also contains serious, if not calculated, inaccuracies. In re the 'magnates' bearing the market by losing 4s per cwt. on _ the cheese they have bought: The unlikelihood of this looks very plausible, but when we remember that the magnates who bought cheese paid 6id to 6£d f.0.b., it is obvious that there is no question of loss on their sales,, even at the reduced price. What they are doing is to sell with a small profit, or even without a profit, a limited quantity. Some of these large speculators have been selling freely, directly or through firms who do not bear their name but who are under their control, large parcels of cheese at prices below present rates. We ourselves have bought cheese at various prices, from 61s clown to 595, c.i.f. In re make July shipment for guaranteed best descriptions of Canadian Western cheese: We could have turned these cheese over on the market at any time at a profit, as they were sold below current market prices.- If this is not bearing the market we don't know what is, and many thousands of Canadian cheese have been sold forward at corresponding prices, whilst market price on this side was several shillings higher. "Mr Turner also says, 'Canadian prices are not controlled by the English market price any more than the local market here is ruled by the English market price.' This * statement is altogether incorrect. The sole factor which determines the price of Canadian cheese at the different country markets is the price which Brit-, ish buyers will pay in competition with each other. The prices of these buyers are strictly determined by their instructions from Home, and these again are determined by market prices and conditions. So that Mr Turner's statement is so far incorrect. It often happens that the price which buyers are willing to pay is either higher or lower than the current price at Home but nevertheless the Home prices and especially the Home conditions, do as a matter, of fact determine the prices in Canadian, because the United Kingdom is the principal—if not the sole—outlet for Canadian cheese.

"The information we have given you is as far as we know correct. We are only concerned to place before you the facts. You can draw your own'conclusions from them.

_ ''As regards the course of the market ii" all cheese had been consigned, we have no hesitation in saying that if all th^ cheese had been consigned instead of being sold, English prices would not have ruled so high. We have always contended that the safest position for the maintenance of prices for New Zealand produce is that oU per cent, should be sold on contract. Then a strong interest for the support of the market is assured, whereas if the whole of the produce is consigned there exists no such influence for the support of the n.arket. We think you will agree with this.

"Mr Turner speaks of the system of guarantee without recourse as'likely to become universal, and says 'it ought to do so if the different firms will continue to olfer such good terms. The system of guarantee Avithout "recourse was introduced in the infancy of the New Zealand produce business to serve as a basis on which milk supplies could be paid for. This system exists nowhere else. The reason for it in New Zealand has long since passed away, because the markets for New Zealand produce are now established and certain, and directors can easily ascertain Avhat U a safe basis of price to pay for milk supplies Avithout having to" obtain a guarantee.

''Of itself, without some soecial reason for its existence, the system is bad, and contrary to the principles of trade, being an entirely one-sided contract. At: first the advance was on a low basis, an; 1 consequently the importer was safe in making a moderate advance, but in recent years the advance has come within a farthing, or even an eighth, of purchase price, and for that reason is often more attractive to sellers than an out-and-out purchase at a fraction more. In a word, it appeals to their gambling instincts. They have the chance of making a substantial profit, whilst their chance of loss is a small one. But for the importers it is taking a risk for which there is no adequate remuneration, and he has only to continue to do this year by year to fall in badly in the end. unless he safeguards himself by turning over the goods immediately they are bought, and so protecting himself against loss, but, in that case, what of the large pro/it to the factory? In a word, the system cannot be defended, and you in the south do well to set your faces against it.

_'_'C%eese Market.—We think there will not be much change from present c.i.f. values, say. 61s 6d to 63s 6d, accoiding to class and color of cheese. Late Julys and Augusts may even be rather cheaper; Septembers, again, will probably firm up a little. Spot values of Canadian cheese during the summer will probably be 65s to 68s, and if your n ; ake is to be 5000 or 6000 tons more than last year, it seems likely that your prices of last \ear will be repeated and possibly even a. little exceeded.

"Price;.! of butter are likely to remain firm, and, indeed, we should not be surprised to see them dearer. 'Anyhow, New Zealand butter is going to fetch big prices next year. We should be quite willing to pay Is a ib now f.0.b., and could sell a quantity on the basis of that price, but. probably a higher price than that will be paid. 'We ought to say that Fiad weather conditions in Canada been better than they have recently been, the price of cheese would have declined several shillings. It hns been n weather market this year."

Note.—Canadian July make is selling now at 655, 60s, and them weather conditions have not by any means im-proved.—Otao-o Daily Times, August 26: