DAIRY PRODUCE TRADE.

New Zealand Herald, Volume LXVIII, Issue 20922, 11 July 1931, Page 13

DAIRY PRODUCE TRADE.

MR. GOODFELLOW'S REVIEW J LONDON MARKET CONDITIONS. RUSSIA NOT SERIOUS MENACE. AMALGAMATED DAIRIES' FUTURE.

An important review of the dairy industry was given by Mr. W. Goodfellow, in the course of an address at Palmerston North to companies associated with Amalgamated Dairies, Limited. The review embodied experiences met and observations made in the course of a comprehensive visit to Australia, the United Kingdom, the Baltic States, the United States and Canada, covered marketing conditions and prospects of the future. Mr. Goodfellow said that owing to the chaotic marketing conditions in the industry he could not see any prospect of Amalgamated Dairies, in the present circumstances, rendering a useful service to the industry. He therefore announced that the directors of Amalgamated Dairies had unanimously decided that they would suspend operations so far as outside companies were concerned. The strong recommendation was given by Mr. Goodfellow that the only way the industry could hope to effect much-needed improvement in the marketing end of the business would be by the steady formation of groups on a territorial basis. Baltic Competitors. Mr. Goodfellow said the first object of his visit was to look into marketing conditions in the United Kingdom, and, secondly, to investigate the sources of supply from other countries, with a view to determining**the prospective competition of the future. After a brief period in England he had visited Denmark, Holland, Sweden, Finland, Estonia, Latvia, Poland and Germany. In eacfi country he had got into close touch with the leaders of the industry and of the export co-operative marketing associations.

All these countries marketed the bulk of their produce through export marketing associations, in which as many as 500 co-operative dairy companies were combined in a group. In Denmark the most authoritative opinion was that the expansion in the future would be relatively slow. Their exports in 1930 amounted to, 159,000 tons of butter, compared with 91,000 tons in 1914. Of their produce 40 per cent:, was handled by 11 co-operative marketing associations, 20 per cent. -Jjy 24 private concerns and 40 percent. went direct to co-operative societies, retail and wholesale, and the multiple shops. No Serious Menace. Finland had a well-organised industry and a co-operative association, [which, marketed 90. per cent, of its dairy produce. Expansion in Finland would hot be rapid, .because of the low prices, while the very low prices of Russian timber made it uneconomical to cut Finnish forests and bring in more dairying land. The same conditions applied to Estonia and Latvia. Poland was showing considerable expansion in dairying and especially in pig products, because graingrowing was unprofitable and farmers were turning to dairy farming. It was expected Polish production would expand 15 per cent, to 20 per cent, a year for' a time, but the influence of that increase on the market would be offset by the reduced export from Sweden and other factors.

Mr. Goodfellow did not regard Russian butter production as a serious menace. While it was very difficult to procure reliable information about Russia, the opinion he formed from full inquiries in the Baltic and in London was that sound observers expected Russia to achieve a certain amount of success with her fiveyear plan, in connection with wheat growing, which could be done on a mass scale, timber-getting with slave labour, and coal and petrol, which all lent themselves to organised mass, production with unskilled labour. He did not" anticipate any increase in dairying to the point of danger, because there had to be a close intimate contact between the farmer and the cow, and that could only be given by personal interest. The dairy industry did not lend itself to development under Soviet methods. The Future of Russia.

Mr. Goodfellow's .conclusion regarding Russia was that she would probably evolve some form of socialism with payment for results, and as that came in, so the standard of living would rise. Russia had approximately 170,000,000 people and as their standard rose they would absorb the whole of Russia's butter production, which was only from 25,000 to 50,000 tons. At present Russia exported practically the whole of her butter production, about half going to Britain and the balance to Europe, and was paid cash. She purchased Dutch margarine on 12 months terms. Britain's consumption of butter was 7500 tons a week, so that Russian imports were negligible and well below pre-war shipments. Summing up the position regarding the Baltic States, he considered they were in reality not serious competitors' to New Zealand. Their, difficulties were largely climatic and involved heavy cost in winter feeding and shelter. New Zealand had an advantage in her climate, which was shared by no other country in the world save Australia, and which more than counter-balanced her distance from the market.

The British Market. Last year Britain was supplied with more cheese than she could conveniently absorb. The mining districts were having a bad time and did not use as much cheese as they ordinarily did, more especially as competing foodstuffs such as meat, eggs and bacon were very low in price. He considered, therefore, that it would be unwise for New Zealand to increase the quantity of cheese going on to that market until there was a marked improvement in British trade conditions. There was, however, practically no limit to the amount of butter the United Kingdom could take. This w r as very fortunate for New Zealand, because we could in some measure recoup ourselves for low prices by expanding our industry. What increase of butter went on to the British market in the next five or ten years would come mainly, he believed, from Australia and New Zealand. Figures for 1929 showed that the average consumption per head in Britain was 15£lb. of butter a year, and of margarine 13ilb. We could, therefore, keep on expanding our butter industry, provided we could sell at prices which could compete with margarine. The Margarine Factor. Margarine was selling in the retail shops at 6d, 8d and lOd per lb., and he had seen best New Zealand butter retailing in the cheap shops at Is per lb. and cheese at 6d per lb. At that time even at 6d per lb. cheese did *not sell freely. The prices of margarine had not dropped very much, largely because it was understood that, one of the-big margarine distributors had bought heavily in whale oil and copra at prices which were above to-day's level. There was, therefore, the possibility that lower prices might rule in that commodity and react a little into the butter position. The.next six months would probably be the Worst period of the depression in the United Kingdom, but thereafter some slight improvement might be'expected. • Referring to prices in the past year, Mr. Goodfellow said the market was in a very chaotic condition indeed. He had been over 22 years in the business, and at no period had he ever known the market in such a .state. There jvas absolutely no co-ordination between the New Zealand agents—there was • no ' working together, and the whole position was very unsatisfactory, tg- tha . prpdacera*

He could not see any daylight througK the situation in England. ( Hc went there hoping to effect some co-ordination, , by. getting some agents in Tooley Street to work together and reduce competition and evolve, some system that would afc least enable the producers to get Value for their goods, which they were fre* quently not getting to-day. This, howi ever, could not be done as the business was at present conducted. He discussed matters with some of the leaders among the agents, and they rightly claimed that the whole trouble was the present com* petitive system of selling, by which fac-< torics in New Zealand were concerned, not with getting the full value for their goods, but merely with being able to pay out to their suppliers a price compared with their neighbours which would retain and attract suppliers.

The agents in Tooley Street, knew thafc tlioy were judged against- the competitive returns given by another agent to a neighbouring 1 factory and, therefore, werß naturally concerned only to compete on that basis, and not with getting the value of the goods. Those with whom he had discussed the position were very disgusted with the marketing of New Zealand dairy produce and they considered that the present competitive system in New Zealand had cost the producer in the past season Id a lb. on butter and |d a lb.on cheese, as those articles would have gone into consumption at those extra figures. They estimated that probably, £1.000,000 had been lost in this way on butter and £500,000 on cheese, and an-: other £500,000 on cheese through quality factors, making £2,000.G00 in all. Effects of Competition.

"I cannot see any way of making any improvement," said Mr. Goodfellow* "Tooley Street depends upon making com* petitivjs returns to the co-operative fac* tories for securing business, and so long as that is the basis they will lay them* selves out to give those returns, regards less of value. No agent in London is con-, cerned with getting value for the goods—» they arc interested only in comparative leturns with some other agent. This is d very serious matter, because it means that there is no selling i force acting on behalf of New Zealand that is interested in get* ting the market value.

"If anybody tries to raise the markeS to a fair price and get better returns, aa Amalgamated Dairies did on several ocx casions, then immediately others undercut the price, say, two shillings cwt., know-* ing full well that the market is well 6up« plied and others will be forced to com® down quickly to that figure. We did raise the price on several occasions, but were immediately undercut and had to> drop back to a figure at which the pro* duce was sold as fast as it came in."

If„ Amalgamated Dairies had to mak® competitive returns in New Zealand they, could do so only by leading the market down and being the first to get out. This could easily be done, but only at the cos& of returns to the producer in New Zealand.' To get value for the goods and to make competitive returns also could not be done. It amounted to.< building up with one hand and tearing down with the ether. " Trouble in New Zealand."

The whole situation was so disorganised that whatever the price was a certain section would undercut the market. Those; doing this were usually perfectly.safe,under present conditions, because the market invariably came down, because of the pleptiful supply. All agents simply, attempted to get out first. It became a regular ramp. This was a most disastrous way of handling business and madfl it absolutely impossible to get any co« ordination in Tooley Street. "The. London merchants had lost money and had bad a, very difficult time during the past few. years.

The real cause of the trouble was in New Zealand. "A" factory competed., with "B" factory in 'pay-out. Under those conditions, no improvement could be effected. They would have to- eliminate r that competition among themselves, as the producers in almost every other coun« try in the world had done; "in Australia, Canada, the Baltic, Germany, and Denmark the producers all had marketing associations. They did not' have insane competition, but they co-operatively aimed at improving quality and marketing their goods in a sensible orderly fashion. Personally, he could not see where anything, could be done to improve the position unless they started at this end. Important Decision Reached.

As a result of this investigation, continued Mr. Goodfellow, the directors of AmaJgamated Dairies,"Limited. and ih« New Zealand Co-operative Dairy Com* pany, .Limited, ha.d come to. the unani* mous decision that it was utterly useless to carry on the present organisation. They were handling a lot of produce—few firms were handling more—and the business was paying its way, but they could not. sea that they would be serving any gooqt purpose by continuing the present organisation. They had set out to do two things, first, to establish an organisation to be of some service to the industry, and, secondly, to put it on a commercial basis so that it would be self-supporting with* out cost to the producers. The business was paying its way all right, but it was not performing any good service to the industry, and they were simply * subjecting themselves to a lot of work to no purpose, and possibly by intensifying the competition might be doing more harm than good. The directors accordingly had decided to change the policy, and not to enter into competition for puts in future, but would aim to efficiently! market the produce of the New Zealand. Co-operative Dairy Company, and develop Empire Dairies. In reaching this decision, Mr. Goodfellow said the directors desired to express their warmest appreciation to the manft i liompanies who had accorded them their! support in their effort to do something worth while for the industry; For the future the organisation would remain in-f tact, but would be suspended, and if af£ any time groups were formed and desired advice or co-operation, Amalgamated Dairies would be quite prepared to help in any effort to improve the marketing of New Zealand dairy produce overseas.

Work of Empire Dairies. One bright spot in the situation was the development of Empire Dairies. Thi£ was handling the produce, in Canada', New; Zealand, South Africa and Australia. They; had four salesmen in Tooley Street, on® in Manchester, one in Liverpool and $ newly-appointed outlet in Glasgow. In 1929-50 their turnover had amounted to £2,500.000, and in the past year would amount to £3,500,000 in spite of the lowei; prices* ' ' They had thought they might have difficulty in securing contact with wholesale houses. On the contrary, they had found it quite easy to develop associations with wholesale houses who wished to get closer to the producer. These wholesale house# handled 60 per cent, of the distributive trade in Britain. 15 per ceut. going to the co-operative societies, and the remaining 25 per cent to the multiple stores. Em-» pile Dairies had found that there was at distinct demand now in the Midlands and Scotland for New Zealand butter, this being due partly to the disparity in plica with the Danish article. Thanks to ihe> publicity work of the Empire Marketing Board and of the Control Board, and also the developmental work of Empire Dairies, plus the excellent work of Sir James Parr, there was a very distinct opening in the Midlands and in the northern area for. New Zealand butter, which would future somewhat relieve the pressure ooi London. The meeting received Mr._ Goodfellow's intimation as to the cessation of opera? tions with sympathy and recognised thai, his action was dictated by a for the best interests of the industry. Direo. tors of Amalgamated Dairies stressed point that they Had no sense of defeat ia the decision that had been come to; their regret was that the industry had ,_noi given the backing necessary to achieve success. A hearty vote of thanks was accorded Mr. Goodfellow for his addresfc