DAIRY PRODUCTION

New Zealand Herald, Volume LXX, Issue 21578, 24 August 1933, Page 12

DAIRY PRODUCTION

NEW ZEALAND COMPANY; GREAT INCREASE IN OUTPUT . NEW RECORD ESTABLISHED SOUND FINANCIAL POSITION (Extended RepoTt By Arrangement) The annual meeting of the New Zealand Co-operative Dairy Company, Limited, was held at Hamilton yesterday. Mr. Dynes Fulton, chairman of directors, presided over a large attendance of Suppliers. ■ In moving the adoption of the re|xn - t and balance-sheet, Mr. Fulton said:— 'The season just ended has been the most difficult one in tho country's history, and not for 25 years have we seen prices recede to such a low level as during the past 12 months. In my report to shareholders 12 months ago I stated -that it was impossible to forecast tho future, as world conditions were po unsettled that it was obvious some drastic change would havo to tako place before we could get back to normal. We find that Ave are in much the same position to-day—indeed, at . tho moment, it is still impossible to indicate what the future holds for us. "In August of last year prices then ruling were from 108s to ,112s per cwt., • and it was tho opinion of many that wo h&d reached the lowest point, that conditions would materially improve and that we could look forward to a general improvement. One Compensating Factor "Wo were encouraged in this opinion by tho decisions reached at the Imperial Conference held at Ottawa. The final decision arrived at indicated that the duty of 15s per cwt. on foreign butter and 15 per cent on foreign cheese would materially improve our position, but our hopes in. this respect were shattered owing to the tariffs imposed by European countries being such as to prohibit'the importation of all dairy produce into those countries. Consequently, the usual quantities that under former conditions would have found consumption in the countries referred to were dumped in Great Britain, thereby creating greater competition on that market. "That, together with the phenomenal increase in production from New Zealand and Australia, was responsible for building up huge stocks of butter on the British market and consequently low prices were obtained; but it was never anticipated, at the commencement of the season, that prices would be as low as 60s for butter and 38s for cheese, "The only compensation to the producer during the past season was the excellent climatic conditions, which enabled him to increase his output, and whilo the prices for the whole year were' considerably lower than for the 1931-32"season, it is a fact that in many districts the .farmers' returns for the year ended May, 1933, excedcd those for the previous year. Company's Marketing Policy "On a falling market such as wo have experienced for the past two or three years, f.o.b. prices have given better returns than the open consignment policy and a few of the factories that w?re successful in making good f.o.b. sales show a slightly better return than a consigning company, although their gain has in most cases been made at the expense of the whole industry. Howovcr, the quantities purchased f.o.b. and c.i.f. during the past season were small in comparison with previous years, indicating that the importers of Great Britain were also uncertain as to the future and were not ' prepared to tako raanj' risks. Your company pursued its usual policy of consigning the whole of the exportable outi put, and at this point I wish to emphasise that the returns to our producers must- be regarded as definite proof of the wisdom of that policy. " In reviewing the capital position of our company, we find that a further £34,697 14s Id has been added to tho paid-up capital, which now stands at £1,239,450 4s lOd, and exceeds the capital cost (book v&lue) by £242,692. When you take into consideration that the cash resumption of shares for the season ended May 31, .1933, was £13,276 13s 4d, exclusive of conversions of butter and cheese shares amounting to £6733 9s lid, which have been nsed for the transfer of shares from various departments, making a total of £20,010 3s 3d, it will be seen that the financial position «f the company is exceedingly strong.

Expansion of Business "The New Zealand Co-operative Dairy Company still continues to expand, and the magnitude of the business, to-day is such that it requires very close attention by your directors, genera! manager, executive officers and staff, and the success of this great enterprise can be attributed to a great extent to the sound policy that was adopted, in its infancy, of giving the shareholders the fullest information at all times in all matters connected with the business. "It is interesting to note that tho number of supplies has increased" from 8240. last season to 9542 at present, ■which indicates tho rapid growth of your company." Continuing, Mr. Fulton said that i climatic conditions had been very favourable during the last year, and the season was the best oil record from a production point of view. Dairy herds wore coming into profit this season in first-class condition, and the winter had been a splendid one, leaving the land in excellent order for supplementary corps. Mr Fnlton said he was of tho opinion that the new season would bo equally as good as the last ono for production. Fertiliser prices had been stabilised at the same price of £4. Suppliers had been assisted in their purchases by the company by receiving extended credits. Substantial benefits had been derived from the operations of the Agricultural Lime Company. The liberal use of lime Was most beneficial to tho health of cattle. It was gratifying to note that notwithstanding adverse circumstances, no less, than 27,804 tons of superphosphate were purchased through tho Dairy Company. Suppliers were urged to place their orders through the company in increasing amounts. Finance For Farmers

Referring to herd-testing, Mr. Fulton said there were now 77 groups in the New Zealand Co-operative HerdTesting Association's territory, and the number of cows tested had increased by 8716 during the last season. Charges had been kept as low as possible, and had Jbeen assisted by a Government subsidy of £6OOO. Valuable service had been rendered dairy farmers by the Dairy Finance Company. Demands for financial assistance had been enormous, but al! reasonable requests had been met. The bad debts were comparatively small, although the advances had increased from £25,000 in 1925-20 to £65,000 last season. The total for eight years was £572,000. The amount repaid was £5157,000, leaving £53,000 outstanding. No fewer than 2G25 suppliers had been assisted, and 225 new accounts were opened last season. The average advance had been £220. Great consideration had been shown the/farmers by the Rural Intermediate "Credits Board. ,It had been most •anxious to assist in the way of reducing the basis pf repayments. Very vaiu- . • «bTe service had been rendered by Ik. [few lIQ^.

the board, and its system was the best financial scheme Mr. Fulton said he knew of. The company had guaranteed advances made by the board for amounts totalling £255,976. The Dairy Finance Company had paid the New Zealand Co-operative Dairy Company 6 per cout on all its paid-up capital and £3OO had been added to the reserve of £2500. The company's suppliers had benefited by the increased rate of exchange by £217,240, said Mr. Fulton, who added that he hoped the Government would drastically reduce tariffs on all good imported from Great Britain which could not be successfully manufactured in New Zealand.

Outlook lor Future Referring to future prospects, Mr. Fulton said at the moment it was impossible to forecast with any degree of accuracy what the position was going to be for the coming season. While the general position at present had unproved, and tho indications were more hopeful, nevertheless there was nothing to indicate that the incoming year would show substantially better returns than tho past season, and it was necessary for our producers to conserve their resources as far as possible. A great improvement; could be brought about if the producers right throughout New Zealand would stand solidly behind the Dairy Produce Board in its effort to improve marketing conditions, and not bo misled by reports that might appear opposing any scheme which might bo established for a general arid permanent improvement. Tho methods of marketing New Zealand produce could not be worse than they were at present, and the success or otherwise of any attempt to improve those methods rested almost entirely in tho hands of tho producers. Concluding, Mr. Fulton paid .a tribute to the loyalty, industry and efficiency of the staff. Offset to Lower Prices "An excellent season for production, coupled with a large increase in tho number of suppliers to the company and the efforts made by producers generally to increase their output of but-ter-fat in order to offset the lower prices, has resulted in another record being established in the matter of production, the output of all commodities having now reached the very large total of 56,426 tons," said Mr. C. J. Parlane, the general manager. The increase at the various factories varied according to circumstances and conditions, the greatest increase for butter factories being 45.8 per cent at Ngongotaha, Mount Eden being in second position with an increase of 34.7 per rent. The greatest increase in cheese factories was at Kiwitahi, with 88.4 per cent over tho previous season, and East - Tamaki second with an increase of 33.8 per cent. Mr. Parlane said the company had, as usual, shipped on open consignment the whole of the produce sent to the United Kingdom, and when this fact was taken ..into account tho payments made by the company for butter-fat for both butter and cheese supply, on a comparative basis, must be regarded as very satisfactory indeed. Payments to Suppliers

Including the cost of cartage and railage, the payment for finest quality butter-fat delivered direct to factories was 9.7490 d per lb., and for finest quality butter-fat delivered per medium of the company's cartage services, 9.6347 d per lb., while the payment to cheese suppliers ranged from 11.617 d to 10.649 d per lb., the average over the company's 18 cheese factories being 11.0943 d per lb. The bonus payment to bo made to butter suppliers at the end of this month averaged 1.0699 d per lb., or a total of £319 ; 673 10s, and this, plus the bonus to be paid to cheese suppliers, totalled £381,101 15s 2d. r lhe cheese suppliers had already been advised at their respective annual meetings of the bonus payments that would Ixs made to their individual groups. "It is pleasing to report," continued Mr. Parlane, "that the quality of our butter has been well maintained throughout the season, while the quality of our cheese has shown a marked improvement although it has to be admitted that there is still room for improvement in the quality of both products; however, notwithstanding this, reports from London have been satisfactory." Improvement in Cheese Referring to butter, Mr. Parlane said that during the year experiments had been carried out with a new type of churn, which the patentees were endeavouring to perfect, and which would enable cream to be churned and the butter worked under vacuum. If this could be achieved he thought it would be a decided advantage. In reference to. cheese, Mr. Parlane said that their London office had commented specially on the improvement in the quality of Anchor cheese during last season, which would no doubt be very pleasing information to cheese suppliers, and he said that every effort would be made during this coming season to still further improve the quality of this product. Arrangements had now been finalised whereby the Dairy Divifsion would assume control of the company's Rukuhia factory during this current season for the purpose of endeavouring to overcome defects, in cheese. The interests of the Rukuhia suppliers would be in every way safeguarded to ensure that they would not bo put to any loss on account of this experiment being carried out at their factory. New Dairy Regulations

"Tho gazetting of the new dairy regulations making milk grading compulsory throughout New Zealand, with differential payments according to grade, is," said Mr. Parlane, "a step in tho right direction, and, I am sure, will give general satisfaction to tho industry. The method provided in the regulations for determining the various qualities of milk has been the subject of much discussion, opinions differing as to whether the microscopic count should not have been accepted instead of the curd test, pins either the methylene blue or microscopic count as provided in the regulations. However, after giving the matter full consideration, it has been decided by our company to support the regulations as gazetted." The speaker commented on a number of the regulations. Mr. Parlane said there was still a verv strong desire in the industry for the introduction of tho block system of dairy farm instruction, but notwithstanding the repeated requests that had been made to th«* Government to introduce this system, it had not yet seen fit to do so. Tn his opinion, it was absolutely essential in tho interests of the quality of -dairy produce that dairy farm instruction should be mado universal throughout the Dominion. Box Supply Questions

Owing to the depletion of the white pine forests on account of the enormous quantity of timber now being used each year in the manufacture of butter boxes and cheese crates, the time had arrived when it was necessary for tho industry to give consideration to providing a substitute, continued tho genera] manager. TTis company for some time had been carrying out experiments in exporting butter to the United Kingdom in various classes of containers, and as they had now proved that a lihre board container with wooden cleats affixed to the ends gave satisfactory results, it was now airanging to include a few hundred of these packed with butter in the shipments- mado to the United Kingdom during tho current season.

The fibre board used in the manufacture of this box was purchased in England, and in consequence was in line with the company's policy to buy British goods at every opportunity, while the box was made up at the company's box factory at Frankton. The company was approaching the Depart-' nient of Agriculture for permission to export butter in these containers.

As a result of the change in policy made at tho commencement of last season in connection with the operation of the company's box factory,< a substantial reduction in the prices of butter boxes, cheese crates and milk powder cases had been effected.

Reduction in Costs "During tho season, 100!) tons of condensed milk were manufactured, and I am very pleased to say that, generally speaking, the quality turned out has proved'satisfactory to tho trade,' said Mr. Parlanc. "Unfortunately, however, competition that we havo had to meet from European countries 'particularly has resulted in the selling price being reduced to a point whore it has been impossible for ns to show anv profit. In order to reduce the cost of manufacture of this commodity to the lowest possible point, tho directors have decided to purchase a can-makirig plant, which will be installed at the condensery during this current season. "Fully realising the difficult times that otir suppliers are experiencing, he continued, "the executive officers and staff of the company have used their utmost endeavours to reduce costs in every direction, as is evidenced by the fact that the cost of manufacture and placing our butter f.o.b. has been reduced to the extreme y low figure of £9 16s per ton, or l.Ood per lb. butter, while tho average cost of tho manufacture and placing f.o.b. for our cheese factories is £lO 3s Id per ton. "In order that our suppliers may appreciate tho efforts that tho company has made to reduce costs in e\ery direction, I may say that, taking tho cost per ton f.o.b. of our various products from 1927-28 season, in comparison with the season just closed, the annual saving on a tonnage basis amounts'to £292,688 13s sd. 1 venture to sav that if all costs that the producer" has .to meet had been reduced in tho same proportion, our suppliers would to-day, even at present prices, be in a much better position than they now find themselves" < Features of Balance-sheet

Although tho amount paid per pound butter-fat during the last year was less than it was for the 1931-3- season, tho turnover of the company for the season ended May 31, 1933, amounted to £5,179,033, an increase ot compared with the previous year, said Mr. C. J. Parlano, in analysing tho balance-sheet. ' _ Tho paid-up capital of tho company had increased bv £34,697, and was now £1,239,450. Reserves „ amounted to £6(3,205, a decrease of £291. There was £6306 in the insurance reserve. Mr. Parlane said the .amount due to suppliers for butter-fat supplied in May was £53,214, as against £77,091 last year. Over, one million pounds more butter-fat was supplied this year. Owing to tho smaller quantity of fertiliser purchased, the suppliers' contra accounts stood at £16,419 less than it del last year. Assets of Company

Sundry creditors' accounts totalled £170,283, an increase of £60,181. Tho principal items were:' £47,944, forjjoods supplied but not yet paid for; £52,921 was due on orders on suppliers' cheques, and £36,794 was due to agents on current consignment accounts. There was little change in tho sundry depositors' account, which totalled £63,891. Tho ordinary accounts at the banks represented £311,343, as against £408,787. Referring to the assets of tho company, Mr. Parlane said property and plant were valued at £1,025,433. The sum of £51,251 had been allowed for depreciation, and additions to the value of £25,013 had been made during the year. The milk powder preliminary expenses. account had been decreased by £5893, and was now only £7625. Shares in the Glen Afton Collieries w<;re valued at £95,050, representing £99,995 paidup capital, less depreciation, £4938.

In the sundry debtors' account £267,620 was represented, including realisations, estimated realisations, and sundry accounts owing to the company.Loans to suppliers and sundry advances amounted to £65,756, a decrease of £4050 compared with last year. Investments were valued at £145,769, an increase of £4098. Stocks of produce were valued at £579,573, as agaitist £565,118 last year, stores at £86,441 (£105,735), and trading stocks at £1459 (£1975). The Butter Department

Dealing with the butter department, Mr. Parlano said stocks on hand at the beginning of last year were valued at £406,074. Purchases of milk and cream, whey cream, manufacturing requisites and packages totalled £2,572,936, as against £2,710,613. The decrease was due to the lower advance prices, although the qauntity of butterfat received was- 10,554,9381b. greater. The average advance price for superfine butter-fat was 8.2308 d, as against 10.2339(1 last year.

Wages and factory expenses cost £99,753, a decrease of £16,602, or 18s 9d per ton. There was an increase in the freight and cartage costs of £7279, due to the greater output, the total cost being £61,984. Freezing, grading and shipping charges cost £62,708, an increase of £6544, duo to the greater output. Office and general administration expenses accounted for £26,195, a decrease of £3499,. or 4s 5d a ton. The company had paid £10,048 on the dairy board levy, the increase of £1530 being due to the increased output. The balance to the bonus account for the year was £319,673, as against £303,255 3s lid, an increase of £16,418 6s Id.

Sales and Stocks Owing to lower range of prices, sales of butter had realised £3,196,382, a decrease of £131,587. The amount included tho exchange premium. Stock's of butter represented £471,107, as against £406,074 last year. Coming to the cheese department, Mr. Parlano said tho profit and loss accounts had been analysed in detail at the meetings of the individual groups. The payments had ranged from 10.649 d to 11.6173 d per lb butter-fat, an averago over all of 11 0943 d. Last year the average was 12.3305 d. Mr. Parlane gave details regarding operations of the casein department. Referring to milk-powder, he said tho accounts had been thoroughly analysed at the respective group meetings. He also dealt with operations of the trading department and the box factory. The output of the box factory totalled 1,701,991 containers of* all typos, as against 1,687,548 last year. The timber used was 8,307,477 superficial feet. In the. tin factory, 86,908 containers had been made, as against 117,518 in 1931-

End of Excellent Meeting There had been a steady decrease in the number of cows tested by the company owing to the growth of group herd-testing. The number tested was 6613, the charge being Is 6d a cow.

The chairman answered numerous questions, and the icport and balance-, sheet were adopted unanimously. , Two nominations were received for the position of auditors, Messrs. Hut-, chison, Klifl'e and Cameron. Auckland, and Messrs Reynolds and Allen, Hamilton. On the show of hands, Messrs. Reynolds and Allen received 50 votes, as against 41.-When a ballot was taken, Messrs. Hutchison, Eliffe and Cameron; were declared re-elected by 113,674 votes to 21,580. Hem its recommending currency reform, derating of rural lands, a>nd the reduction of tariffs on goods of British manufacture were adopted. . ' An excellent meeting closed with; votes of thanks to Mr. J. B. Wright, Mr. W. Goodfellow, the staff, and tho chairman.

At the conclusion of the meeting, Mr. Fulton was ro-elected chairman of directors and Mr. R. H. McKenzie deputychairman. , *•