ONCE DANGEROUS BUT NOW DESPERATE

Manawatu Times, Volume XLIX, Issue 3492, 30 October 1926, Page 3

ONCE DANGEROUS BUT NOW DESPERATE

Dominion Freezing Industry MERGER ONLY EFFECTIVE REMEDY THE POSITION REVIEWED. "... .And I have now to tell you that the position which three years ago was dangerous, has since become desperate,’’ said Mr. J. G. Cobbe (chairman of Directors of the Feilding Freezing Works) in dealing with the freezing industry of the Dominion and urging the need for an amalgamation of the Farmers' Freezing Works. Mr. Cobbc’s remarks which are of the utmost importance to the producers of New Zealand, are published in full herewith: “I intend, with your indulgence,” said Mr. Cobbe, ‘‘to refer to the proposed merger of the freezing works of the Dominion. I wish to do so for two reasons: the first being that the subject is of vital interest to you as shareholders, and is also of great importance to all stock owners. The second reason is that misleading statements have been made and wrong impressions created regarding the proposed merger. Before dealing with the proposal itself, it may be well to state briefly why it hag been formulated. To put the matter into a sentence the object is;—

To prevent the meat freezing industry from passing out Of the farmers’ hands and under the control of wealthy Trusts, xvho would manipulate the business entirely for their own profit, and to the detriment of the producers. “I have, on previous occasions, pointed out to you tho dangerous position into which the meat freezing industry, of the Dominion was drifting, and I have now to toll you that the position which three years ago was dangerous, has since become desperate. I shall repeat for your information part of a recent statement on this subject made by Mr. J. S. Jesscp, vice-chairman of the Meat Producers’ Board. I may remind you that Mr. Jcssep is one of tho large Hawke’s Bay shccpowners: he has had many years' connection with the meat freezing industry, and has a greater practical knowledge of that industry than any other member of the Board. In a special article published in various papers Mr. ~lessen says, inter alia. ‘The position of the frozen meat industry demands tho serious attention of the country. In Now Zealand we have the pronounced drift of freezing works gradually passing into a few hands .... A few large meat exporters a.re gaining control. In many cases they demand and receive from freezing works rebates on killing charges which make any pretence of earning interest on a much reduced capital utterly impossible. Unless the industry is stabilised it is incvita.blc that the control of all freezing works in New Zealand, and, through the works, the meat trade will entirely pass into the hands of a few meat exporting firms/ Prompt Action Necessary. “Those arc the words of a man who is in a position to know, and does know, what he is talking about. 1 need hardly remind you of what has happened during the past year in the case of certain old-cstablisljed companies: and I have no hesitation in saying (hat unless prompt action on well-considered, sound business lines bo taken, the Farmers’ Freezing Companies will go under, and tho

frozen meat trade of the Dominion will bo in the hands of less than half a dozen big concerns. This means that the enormous sums of money provided by the farmers for freezing works will be lost; that tho object they had in view when they subscribed 1 that money will be defeated, and they will actually be in a worse position than they were before any of the farmers' works were built. They will have to soli their stock at the prices fixed by tho Trust; and in other countries it has been proved that those prices are brought down to the lowest limit that offers any inducement to tho farmer to continue breeding fat slock. The Writing On The Wall. "There seems little doubt that those big concerns already believe that they have the game in their own hands. Listen to what a Christchurch commercial paper says in the course of a long article: ‘These innocent producers cannot see, or they fail to realise, that tho industry has developed along new lines, and has undergone very radical changes sinec the war. Those changes call for the extinction of tho small inefficient farmers’ freezing companies. Largo scale operations alone will enable any profit to be made, and it is not of the slightest use endeavouring to prevent the industry developing along naturp.l lines. The farmer-owned freezing works are doomed. They are now tho misfits of | the Industry trying to operate on borrowed capital entirely. They cannot compete against the large exporters, and that will bo emphasised during the coming season, which promises to be much more difficult than any previous season.’ Combines To Skim Cream. “That extract,” continued Mi. Cobbe, “seems to mo to show the cloven hoof pretty plainly, and is a direct invitation to you farmers to at onco throw up the sponge, and allow big city combines to skim tho cream while you provide the cows and do the milking. Tho directors of the various farmers’ freezing companies are fully acquainted with the position, they know that tho intention Is to squeeze them out, and concentrate the industry in a few big works situated dose to the cities, and owned by tho Trusts. Representatives of the farmers' companies have carefully considered the whole matter, they havo looked at tho various aspects of the business, considered its present position and its future prospects, and can see no effective remedy except by moans of an amalgamation, tho ultimate object of which is the control of the whole of our freezing industry by tho stockowners of the Dominion, thereby securing to the farmers tho full value of the fat stock they produce. The fact is the farmer must control the freezing industry or bo himself controlled by those who make profit out of the stock he grows. Tho proposed merger would bo on the lines adopted by banking, shipping, railway, manufacturing and other concerns in Great Britain, on tho Continent, and in the United States, where combinations of concerns in particular lines of business havo been most successful. To put the whole matter into a nutshell —it is simply a proposal to apply modem business methods to a key industry that is at present being conducted in a wasteful, unprofitable, and unbusinesslike manner. I do not intend to weary you by giving you all tho minor details of the proposed merger, and will therefore confine myself to tho more important proposals, and, where it seems necessary, explain them. The Proposals. “The first is—“To acquire on behalf of the stock-owners of the Dominion all existing freezing works. To arrange for the payment of the shareholders at present owning those works by means of debentures supported by power to levy on the meat exported. [As this proposal may he misrepresented or misunderstood, I shall deal fully with it at a later stage.] “To prevent the acquisition or control of the industry by local or foreign vested interests. [Tin's provision is of the greatest importance; if the imeat industry drifts into the hands of big monied concerns, whether local or foreign, it will he a bad lookout for the farmers.] “To obtain competition for the Jive stock and resulting products by exporters and foreign importers. Merger And Competition. "As this particular aspect of the matter has been tho subject of public statements to the effect that a complete merger would remove competition and affect prices, thus penalising the farmer, I think it as well that I should deal with it at this stage; but before doing so T should like to say that persons making assertions of (.his sort should at least attempt to prove what they assort. 1 thought everybody having any knowledge of the meat export business knew that (he Knglish market must have our mutton and lamb. No other frozen iamb going into the Home market is equal (o ours. The very latest report of the .Meat, Producers' Board says—-‘Now Zealand produces tho finest, qualities of lamb and undoubtedly satisfies all tho ro qiiirernentfi of the British market from this standpoint.' An earlier report issued by the same Board says—‘New Zealand mutton and lamb holds an unique position in tho world's meat markets, a position which has not been challenged by any other country.’ The position at Homo is as follows; The public want our meat and must have it, and the big meat oxj porting firms xvho havo built up their

trade largely upon the excellence of our mutton and lamb are not tho sort of people who arc likely to hand over to new competing firms tho particular branch of their trade upon which their reputation for quality is founded. If our mutton and lamb wore of third-class quality, there might bo some ground for supposing that exporters might withdraw from the New Zealand trade. But as our meat is the best of its kind going into the English market, it is surely absurd to suggest that exporters are going to sever their connection with tho Dominion. Such a suggestion is anything but complimentary to the business acumen of some of tho smartest men in London, I am of course aware of the fact that when the Argentine Government, in order to protect the farmers, introduced a measure fixing minimum prices for meat, ihc American Trust and the Union Cold Storage Co threatened that unless the Bill was withdrawn they would cease buying, and as they practically control tho meat trade of the Argentine, tho farmers would be ruined. So tar as the British company is concerned (hey could have easily withdrawn temporarily, as they could obtain their beef from Queensland, where they have big works, .and there are plenty of excellent cattle. The Boycott Bogey. "But the position in Now Zealand is entirely different; the importer who wants first-class mutton or lamb must come to us. At all events a threat that might be effective in a LatinAmerican country would have a boomerang effect if used in New Zealand. If such tactics wore adopted here, the stockowners would immediately force the Meat Producers’ Board to institute selling and cold storage arrangements. Any man dangling the boycott bogey before tho

eyes of the farmers of tho Dominion, apparently forgets that ho is talking to British people who have not yet learned how to tamely submit to any Trust. But there is one argument which should dispose of the whole matter; it is this, tho amalgamation of. the various works would bring about such a saving in working expenses that exporters would ultimately have their stock treated at oven lower rates than those ruling to- day. Other Merger Objects. "Other objects of the merger arc: "To have absolute security of tenure throughout the Dominion in regard to the sale, ownership, provision, and conduct of the works provided for the various operations connected with tho receiving, killing, preparation, and storage of stock for export and the by-products therefrom. "To refrain front entering into the business of the purchase of stock, meat, wool, pelts, and other produce, except in connection with the meat preserving departments and boiling down departments. “To so conduct the operations of the works that all clients who have stock or produce for export, including exporters, representatives of English or foreign importers, or any other person desirous of using tho facilities of works, shall obtain a reasonable share of tho capacity of the works in operation. (All such persons being placed on an equal footing with regard to the rates ruling at any particular works, and, as far as possible with regard to the facilities of the works. I "To have power to act as agents for owners of meat or produce in the handling and disposal of their consignments if required. Valuation Of Works. "The valuation of the works proposed to In- acquired under the merger is a matter of great interest and importance, and has already, as one might expert, been the subject of gross misrepresentation. It is sufficient at this stage to refer to a statement made at the annual meeting of the New Zealand Shcopowners’ Federation, held in August. Tho chairman of that meeting, in referring to, the proposed merger, said: .‘lf carried out, as suggested, tho cost, at the original cost of tho various

freezing concerns, would bo a huge amount, and would ultimately fall on the producers." It would be difficult to make a more misleading statement or one further removed from the actual facts. It has never been suggested by any responsible person, connected with the merger proposals, that works should he taken over at their original cost. It is no doubt intended to take over all existing 1 messing works, but no sane body of men would dream of giving anything approaching the original cost for works built where they cannot be profitably conducted, or where they are in bad condition. As a matter of fact, it the merger eventuates, quite a number of works will be closed, and it would be -asburd to suggest that works, the situation and condition of which do not warrant their continuance in active operation, would be valued at their original cost. An important undertaking of this kind, to bo successful, must be carried out upon strictly business principles. A thorough competent valuation commission, composed of men of the highest qualifications, would bo appointed; they would have the assistance of freezing works architects and refrigerating engineers. "A suggested system of valuation has already been worked out by men acquainted with the freezing industry. Such matters as the average output of works (spread over severad years), distance from other works, amount of stock in the district, probability of profitable working, and various other matters would have to be considered when valuing. Provision would bo made t'o ensure fair treatment to all persons and works concerned. Financial Proposals.. "Finance, of course, plays an important. part in a proposal of this nature, ft is proposed that I lit. present owners of the various works DC given 6 per cent, debentures for the amount of the valuation of their plant and works. It is estimated by practical men of long experience in file meat freezing industry, that by doing only actual freezing business on account of owners and exporters, and by rigidly abstaining from all speculative business, by closing unnecessary works, by much larger operations in the remaining works, and by bringing into operation a number of economies and improvements, to some of which 1 shall refer later, it will be possible to easily provide the debenture interest,’also one and a-half per cent, as a sinking fund for their redemption, besides building up a reserve or further reducing the freezing charges. I have already referred to the security to be given to the holders of the. debentures that would 1)0 issued in payment for (he different works. To anybody conversant with the moat freezing business it is obvious that, the fact that the amalgamated works would have a monopoly of the business would bo ample security for all debenture holders. Put notwithstanding that fact, no onterp rise, no matter howgood its prospects may be, has a right to expect, the public to take its unsecured debentures. Levy On Fxportcd Moat. "It. is therefore intended." continued Mr. Cobbe, “to ask for the power to make a small levy on the meat exported by way of security. This would bo similar to th“ security which a County Council or a City Council gives w’hon raising a loan for some, self-supporting enterprise: the. loan is secured by striking a rate which is no',-or collected. The constitution of a Central Board of Control and a number of what may be called machinery clauses, are matters into which it does not seem necessary to enter at this stage. But T particularly want to impress upon your minds this fact.—(hat this it not a wiki-oat. ill-digested, or hastily-con-ceived scheme. It is o, carefully thought-out. honest attempt to save the moat freezing industry, and place it upon a firm foundation, under the control of and for the benefit of the stockowners of the Dominion, Benefits Of Merger. "X may briefly refer to a few of the economies and improvements

which would result from an amalgamation of tho freezing interests: (1) There would be a big saving in overhead expenses .owing to the groat increase in the number of stock killed at operating works (2) Uniformity of control, grading, and freezing charges. (3) Saving in railage on live stock: which would be killed at nearest operating works, thereby avoiding the big losses in the weight o' lambs when railed long distances. (4) Saving in tho collective buying of the enormous quantity ol plant and materials required it: the industry. (5) Owing to the largely-increased numbers of stock treated at the I operating works, there would J probably bo increased profits from by-products, which could be more profitably handled upon a big scale. “There are many other directions i in which savings can be made, but ! f need not weary you by enumerating f them all. The management of an : enormous undertaking, such as I have ' outlined, would demand executive j ability of a very high order. But the great success that lias attended the , mergers of banking, shipping, in ami- j factoring, and other industries in 1 Great Britain and elsewhere, proves | that such management can be ob- i tairied. - And X think we may rest ' assured that if a meat freezing nior- i gcr takes place here, the matter of j management is so vitally important | and tho financial interests involved > are so great, that nothing but purely business considerations will bo allowed to influence tho promoters of the merger when making appointments. Tho Opposition "As one might expect, the merger is being strongly opposed not only by I those who object to the farmer con- ■ trolling his own business, but also by many well-meaning people, wh:, either don’t understand the position, or are frightened at the magnitude of tho undertaking. Consequently attempts arc now being made to sidetrack the amalgamation, by making plausible suggestions for relieving the industry. We hear—‘oh. yes, the amalgamation is the right thing, but let it bo a local amalgamation', lot three, or four companies in one part of the Dominion link up, and the same take place in other parts.’ It is really surprising that anyone having the least idea of business, or the slightest knowledge of the meal trade, should advocate such a thing. What advantage would be gained by the amalgamation of three or four weak companies ? How would the concern be financed ? Or what protection would it have from Trust competition ? I personally have not. up to tho present, heard a single argument, that will hold water, in favour of local amalgamation. Too Precarious For Experiments.

“The fact is, gentlemen, tho industry is too important, and its position is too precarious for any lime to be wasted in experiments, which every man actively engaged in the Industry knows are foredoomed to failure. Summed up the whole position is—that unless a full merger takes place tho fanners of the Dominion will never be absolutely safe. They run the risk of losing control of their own stock; they are likely to lose the enormous sums of money they have put into freezing works; and in spite of the great climatic and other natural advantages they enjoy, they arc likely to receive that return for their labour to which they arc justly entitled. On tho other hand a complete well-organised, and well-managed merger will secure to the farmer a fair return for his enterprise, capital and labour. It will save him a considerable share of the money he has invested in freezing works, and above all else it will make him independent of the Trusts and Combines that. have, overturned the law of supply and demand. and have crushed out effective competition wherever they have been allowed free scope. Conclusion.

“I would not have dwelt at such length upon this subject had I not felt its great importance, and had I not. been afraid that farmers ns a whole, do not fully realise the danger which threatens one of the greatest of our primary industries, ana the pressing necessity ot tailing prompt measures for its protection. If the owners of stock do not back up the directors of the various farmers’ freezing companies in their efforts to save the industry, it looks as it the stock business will, in a. few years, be in a similar position to that prevailing in the United States and South America.” (Applause).