STABILITY FOR BUTTER.

Otaki Mail, 29 August 1930, Page 4

STABILITY FOR BUTTER.

TASK OF MARKET ORGANISATION.

CAUSES OF LAST SEASON'S FLUCTUATIONS EXPLAINED. ADDRESSES BY MESSRS FULTON AND GOODFELLOW. An array of facts and figures suck as rarely come before the public on one occasion was presented on Thursday, when, in the Century Hall, Levin, addresses were delivered, at the invitation of the directors of the Levin Co-opera-tive Dairy Co., Ltd., by Mr Dynes Fulton, chairman of Amalgamated Dairies (N.Z.), and Mr W. Goodfellow, who is well-known as a pioneer in organising the marketing of New Zealand dairy produce in the Old Country. The price fluctuations of last season have given concern to farmers generally, and with a view of having the position elucidated, the local company arranged for a visit by Mr Goodfellow, whose lengthy and explicit review of the situation showed him to be on very familiar terms with the somewhat complex factors that decide the fate of the Dominion's dairy produce overseas. The meeting was a, large and atteni live one, composed of something like I a hundred of !the Levin /company's suppliers and several interested visitors. _ Mr S. A. Broadbelt, chairman [of directors, presided. The Chairman expressed his picas': ■ure at seeing so many suppliers present, and extended a welcome to the two gentlemen who had come to address them. A TIME OF CRISIS. Mr Fulton said that a stage had been reached when they had to think very seriously about . the forward position. The indications were that they were gping to be subjected to lower prices for some time to come. In view of the fact that dairy production was coming on very rapidly in New Zealand and increased competition had to be faced in all parts of .the world, they had to consider what was going to happen on I lie market, which had been pretty fully supplied in the lust twelve months. ' One of the greatest drawbacks which the producers had to face was the competition among themselves. lie was a farmer himself and could speak from practical, knowledge. Two factors which hud' to bo dealt with were the competition between dairy factories find the competition in marketing in the United Kingdom. What was to be done with the increased output? Barriers in the form of tariffs were put up everywhere outside Great Britain. While the producers were in competition with one another in endeavouring to find a market it was not possible for them, to decentralise as they should and spread -.their markets in the central and northern parts of England. To bring that about, a combination of the whole of the producers was required. The aim was to secure the highest, price possible for their produce. In discussing the position he would be speaking us chairman of Amalgamated, Dairies from its inception: The N.Z. Co-oper-ative Hairy Company was formed by the amalgamation of the largest dairy companies in operation in the Waikato district, and they had considered it was necessary for them to have some better method of marketing their produce, the result being that Mr Goodfellow, who had been general manager of the Waikato company, was sent to the Old Country to make investigations. Mr Goodfellow took an office in London, and he secured the services of Mr J. B. Wright, the present London manager for. Amalgamated Dairies. They established.', a marketing organisation in Britain, and the result of it was very marked even in the first twelve mouths. Those who were interested in this movement felt that a similar marketing organisation would be for the benefit of those who entered into it and for Now Zealand as a whole. It had been found that, although at maintimes,, of the year the price could be kept up, when the Hush months arrived there was too great, a quantity of produce to allow the companies' to hold the market. In bringing about the amalgamation, the promoters had in mind that it would lie the nucleus of a voluntary. system taking in all the dairy companies of Xew Zealand. They had felt that if they could,get a further quantity to back up the. 'market, it would be possible to obtain a better price for dairy produce for all concerned.. They had not been able to get that quantity up to the present time. Amalgamated Dairies had sacrificed a very great deal in the interests of the dairy industry in New Zealand. They had always rigidly stood behind the market when it was failing. They could easily have said that they would soil quickly and secure the high price, just as others had done during the past twelve months; but they had never attempted marketing on those lines. A broker could sell over the telephone and drop the market, but he was not th-3 iii.in who was going to get the lies; returns. If the speaker's company had 1 t;:ken up that "attitude, it could" have shown better returns than any other company in the Dominion, but this would have been at a great sacrifice to the New Zealand dairy producers as a, whole. The sacrifice had been made will: the object of having-this country's" producers working through the one channel for the purpose of marketing their dairy xn-oducts. New Zealand sent 25 per cent, of the total dairy produce that reached Great Britain. In the Hush mouths, the New Zealand and Australian produce, arriving simultaneously, constituted' over "'GO "per" cent. of the dairy produce on the Britis?i market at a time when it was necessary to obtain the highest price possible.

ADVANTAGES OF TION. An appeal was made by Mr'Tulton to cooperative dairy companies to join 'Amalgamated Dairies and obtain tome of the profits of marketing, in tiie way of rebates on commission. He stated that a charge of 2£ per cent, covered everything iu the Amaigamati t(1 marketing scheme, and two-thirds ot" I whatever-*"Syas 'saved on that amount ■was .'returned to the factories. The .scheme, if taken up'by the jiroducers and supported as it should be, would j lie tile means of placing the dairy farmer on a very muelt* higher level than at present. They had to look further - afield than they had done in the past. The forward position indicated lower prices, and they had to meet the drop 111 prices by increasing the.output per cow and per acre. Improvement in those respects was going on year by year. The next step was to find a mar-ki-'t for the increased .production. Within the next 50 years the dairy output from this eauntry would be doubled. Urklesrt■■. they: were prepared to give consideration toil scheme: that could work through one channel and meet the j competition .[of buying organisations ar j .Home, then; they would remain ■'in the position they had occupied for a numLor or years past. No country in the. world cordd produce dairy stuffs more cheaply than New Zealand, but no country had a more wretched system of marketing. '"''~" : .- ; '■' ' '' We are not here to beg your output f«jf the year," said Mr iSilton,' in Amalgamated "Dairies your ebnsideraJ!!>clieuu!; deserves, , : ,\vtt will all ■be iii- . . -.. ■ ;•'■ .■;■.. '■ . ■-:

a very much' better position to bear the burden of taxation that "the country is carrying at present." ' ■ ;■■, : THE TWO WORST, YBJKBS.

Mr Goodfellow stated that he had been associated with the co-operative movement for over 20 years. The years 1921-22 and 1929-30 were the two most difficult years ho had experienced in the marketing of New Zealand butter and cheese. In those two periods greater falls of prices had occurred than at any time during the history of the dairy industry. Last season the price went down from 180 s to 120 s. Those companies that had been fortunate enough to sell a considerable quantity f.o.b. had done exceedingly well and the buyers had done exceedingly badly, and a large number of Tooley Street houses made no profits last, year. The N.Z. Co-operative Dairy Company's f.o.b. sales for shipments other than to the United Kingdom returned a profit of £170,000 when compared with consignments, and the company paid its suppliers Is 4.3 d per lb. of butter-fat. The payment to sup pliers this year by the various cooperative companies would depend very largely on the volume of f.o.b. sales. The indications were that it was going to bo fairly difficult to make f.o.b. sales in future. During the last few years Tooley Street had lost very heavily on its forward purchases, and it was very unlikely in the circumstances that it would be prepared to take any further risks.

CAUSES OF FALL IN PRICES. The speaker went on to outline the three main reasons for the faling market. In the first place, during the past season they were due for a fall because of the general drop in the prices of all commodities. This was primarily due to the increasing value of gold. The second reason for the fall was the unrestricted competition in the selling. Thirdly, there was the handicap of combined buying. INFLUENCE OF GOLD SUPPLIES.

Dealing with the first point, Mr Goodfellow said that those who had followed the position over a long period would remember that for about 20 years before the War there was the Experience of rising prices. This was £due to the heavy production of gold. When the War came, the gold basis was removed and there was rapid in-.. flat ion. Since itho War there had been . falling prices, owing to deflation, due to the return to the gold standard and also to the fact that there was hardly enough gold available to finance the world's trade. What was worrying a good many people was the question of how much further prices would fall. The amount of gold held by the United States was .€800,000,000, or more than double the pre-war amount. France had also very substantially increased her holding of gold. The result of these factors was that all other countries had an insufficient supply of gild. COMPETITION IN SELLING. Coming to the question of the undue fall in prices through competition in selling, Mr Goodfellow said that 140 s instead of 120 s would have been the lowest figure reached by butter last year if the product had been marketed efficiently. The fall was due to the excessive competition among the sell-' ing agents. It could be traced to ths fact that the suppliers in New Zealand demanded that the returns should be reasonably competitive with the factories round about. Tooley Street was not worrying very much about getting the most out of the market, the agent's main object being to beat his rival and make competitive returns on a weak market. The agent who undercut and got out first made the best return, despite the fact that in doing so he invariably brought the market down. In reality he was placing a premium on inefficient marketing. The policy of Amalgamated Dairies was to get the most out of the market, and he could say definitely that the N.Z. Dairy Compa::; 's Anchor brand —constituting approximately one-third of the butter exported from the Dominion—sold at the highest price it was possible to get on the market at the time of safle. Of this article 1750 tons per annum, in lib and i lb. pats, were distributed and sold throughout Great Britain, mainly in London and the south of England. Had Amalgamated Dairies adopted the policy of under-cutting and getting out first, then, instead of the market taking.three weeks to fall from 150 s to 120 s, it would have come down in two or three days, and the return to the dairy far- ' mors of the Dominion would have been substantially reduced. When the price went down from 150 s to 120 s this year, Amalgamated Dairies resisted the fall, and their returns were not as good as those of some of their competitors; on the other hand, when the price went up from 120 s to 140 s, the organisation led the rise, and their returns were better than those of any other company in New Zealand.

MAGNITUDE OF COMBINED BUYING. In speaking of the third factor in price depression, that of combined buying, Mr Goodfellow stated that during the last two or three years a very big organisation lu-d come into operation. •This.was the Margarine Union, which had amalgamated with Lever Bros. The combine had a capital of from eighty to one hundred millions, and was reputed to have 5000 shops. Another large organisation was the Co-operative Wholesale Society, with about 100 millions of capital. This was probably the second largest buyer. Thirdly, there were the Federated Small Grocers. Keen selling competition existed as between the multiple shop group, headed by the Margarine Union and representing capital, and' the co-perative group, representing labour. A fight was going on between those two huge societies to get control of the distribution of the foodstuifs of the United Kingdom. Competing with these great forces were the small independent grocers, who had been having a bad time, and who were forming buying organisations ail over England. The effect of this struggle to get the trade was that the buying was keener than ever. If the Cooperative Wholesale Society -were to pay 2s per cwt. more than the Margarine Union, it would not be able to compete in sales with the other society; if was therefore necessary for it to buy on a bedrock basis. Four or five years ago there were a number of big independent groups operating on the London market, but they had amalgamated., and one man was buying' for them alt. These big buying organisations had any abount of capital and they never ran "out of stock; they aimed to buy at the bottom of the market, and the bulk of; their profits were made on their buying, not on their sell- j ing. Twenty to thirty per eeut. dividends per annual were paid by the multiple shops. Weekly meetings were held by their companies, to decide what they Were going to pay for the butter. It often happened that the Tooley Street agent cut his price, to sell a substantial quantity of produce to one, of these big buyers. The object of these buying combines was to continually work the market .down by;systepia tie ally reducing their buying limits. Concentrated baying became a serious nieuace to the dairy- factories of New Zealand'when'there was' too, eb-ordiiKi-J tiou on the part of the sellers. | COMPETITION NO LONGER GOOD J

;; . ' ' TOR TBADE. '. : ; " . --'A ehanging : condition in the metlipds of, tie world had to ha ''Seed, "ilr'Obooi'ei'few^'iJoloteil:'out. "It had been said : that : it' was owing "to" dairy control tlat the London buyers had formed thts-c group, organieajiojiej ■ __"„_

Mil toTig' TsoTdre f-TTaf ; T"ii«e : Germany" and: the United States "had similar big combines at work. The -old slogan that competition f was gpod for trade was out:of dato. It was now recognised that unrestricted competition meant ruination in trade. As examples, of the tendency of the "times the speaker mentioned combinations among petrol, fertiliser and insurance companies; there was. keen competition to give service, but no competition as to the price. If such were not the case, one seller would under-cut the other, with the result that no profit would be made.

TRADE IN BLENDED BUTTER. Minor troubles were also met with in the marketing of New Zealand dairy produce, the speaker added. One of these was the blending of butter. Eighty thousand tons of blended butter were turned out every year, and this business in the Old Country was becoming quite a menace to the New Zealand producers and to the Danes, who controlled the bulk of the table butter trade of the United Kingdom. Denmark had the premier position and New Zealand came a good second, although the amount of blended butter exceeded the total-importations of New Zealand butter into the United Kingdom. Blended butter manufactured in England was mostly of foreign origin and contained practically the total importations from Siberia, the Balkan States, and the Argentine, besides 40 per cent, of the butter imported from Australia and 5 per cent, of that from Now Zealand. It should be noted that the retail price of blended butter was at least 2d per lb. more than New Zealand butter, despite the fact that it was purchased on the open London market, wholesale in bulk, for Id or 2d less than the Dominion article. MARGARINE AS A RIVAL.

Margarine was another menace, said Mr Goodfellow. The Margarine trust had the biggest dairy produce business of England. It had recently taken over the huge estates of Lever Bros., in West Africa, from which it would draw supplies of raw materials at bedrock cost, for the manufacture of margarine. All these raw materials had fallen tremendously in price in the last six or eight months, so the Margarine trust was in a better position than ever to, meet the competition in butter. It was advertising margarine to-day as a national necessity. The Dairy Control Board was countering this by advertising New Zealand butter; 'but the N.Z. Co-operative Dairy Co. was doing more than any of the otheis to uphold, the interests of the Dominion, by sell-, ing butter in pats. In the past year 1750 tons were thus sold by it; and every time the public bought' this butter, it was a direct advertisement for New Zealand. The company had a packing factory in England; 'the buttev was shipped Home, and the staff there put out from 30 to 50 tons a week of pat butter, which was distributed mostly to London and the south of England. The Danes had also been concerned regarding the position, and they had decided that ...they would shortly run a campaign in the United Kingdom and put butter out in pats. It had cost the N.Z. Dairy Co. a good many, thousand pounds to build up the busi'iiess to its present turnover. Apart, from this j organisation ho did not think there was any dairy company in the Empire that was selling butter under its own registered brand in the United Kingdom. TERMS WITIT TOOLEY STREET. - ilr Goodfellow explained that the organisation called Amalgamated Dairies did not itself sell any produce. It' , followed the policy laid down in 1922. when he was sent to London and spent five months in Tooley Street investigating the methods of selling. He hail then found that each agent was telling consumers that his brand of butter was better than the others, though they all came from the same company in the Waikato. The speaker told the agents that the companies he represented wanted their co-ordination, and finally the agents agieed to sell all the butter under one brand. To-day New Zealand had practically one brand; "Fcrnlcaf" was the national brand. The agents also agreed to a request that they would confer with Mr Wright over the telephone continuously and accept i his decision in the'matter of price. It was also decided that there was not to lie any speculation in the butter as between the agents; every sale would be a bona fide sale to a distributor, and there was not to be any dealing among the agents themselves. At 5 p.m. every day the agents had to return a statement showing the sales for the day and the stocks on hand.. An arrangement was made for an auditor to check the deliveries, to see that there was no speculation. After the first month or two, the organisation had 100 per cent, co-operation from the agents. The company, was entitled to "this, because its accounts was by far the most valuable that they held, owing to the huge amount of "produce which they sold on the company's behalf. A similar policy was adopted byq the Control Board after investigation and had since been continued by Amalgamated Dairies. The method of supervision in London, therefore, had remained' unaltered since January, 1922. EXTENDING THE CO-OPERATIVE PRINCIPLE.

During the past year, the speaker added Amalgamated Dairies had had associated with it 4D co-opera-tive companies throughout New Zealand, and had handled approximately 35 per cent, of the batter and 12 J per cent, of the cheese exported from the Dominion. So far this season the organisation had held all previous years' busiues-s and in several cases had had a substantial increase, and several factories had agreed to consign through Amalgamated Dairies for the first time. Mr Goodfellow stated that he could safely say that the butter exported on behalf of associated companies during the coming year would show an increase of anything from .10 to 100 per cent, as compared with the previous season. This quantity, however, would be insufficient to enable the company to attain its objective—namely 50 to 00 per cent., which would be required if Amalgamated Dairies was to become a stabilising factor on the London market. AN EMPIRE ORGANISATION. Referring, to Empire Dairies, Mr Goodfellow said that this organisation was trying to do on an Empire scafe what Amalgamated Dairies were doing for New Zealand. The capital had been subscribed by Amalgamated Dairies' (N.Z.) and the Australian Producers' Co-operative W uolesalc Federation. Shares had been retained for Soutli Africa and Canada. The policy of Empire Dairies in London was. to: sell direct to the wholesale trade, and selling floors had been established in Tooley' Street 1 '{London) "and -Liverpool. A representative had l*en appointed is Manchester, and additional selling floors would, be: opened'at a 'later date in Glasgow. Bristol, Hull and other important centres, with the."object of. building up an outlet for Empire products throughout the United .Kingdom and •thereby reducing the periodical overstocking- of the' 'London market. ■ BRITAIN THE ONLY SUBSTANTIAL

MARKET. Iu "the' past Xew Z&alitistl had hal ] r.o difficulty in; disposiag of its "baiter, as the buyers were fusions-to secure supplies, but in the ..near '■ tnttae, ' the. J main difficulty would he io find saffliei- j t-nt buyers to eiear stocks. There wa3 J every, indication that iXev Zealand J Would contißW ; to'inciva.se production. J Indeed thin was essential ia order- >.i> ' aiaLfttaiu our rsi.'.wg «»cdard o£. :

living. 1 " Denmark and .Northern Euro- 1 pean countries would no doubt adopt a similar policy, and the dairy industry would have'to face a difficult position until some of our weaker competitors were forced out of the business. As an instance of the expansion of the dairy, industry in Denmark, .Mr Goodft-libw mentioned that whereas in 1913 that country expoited 90,000 tons of butter, last year its export totalled 159,000 tons—an (increase of ;. Vipjproxinrately 70,000 tons. The difficulty was that we had really only one market. Canada must be regarded mere or less as a temporary market. New Zealand sold last year to Canada 22,000 tons .og butter, and it was estimated that the requirements of that country this vear would bo 10,000 or 12,000 tons less. The East had hundreds of millions of people, but they did not eat bread and butter, but fish, fowl, vegetables and rice. The only butter eaters in the Orient were the European population, who were of comparatively small number. The only permanent market of any magnitude, therefore, was that of Great Britain, where the population was increasing -very slowly—much more slowly than the increase in production. The ultimate solution of our difficulties would probably be due to the action of Great Britain should it decide to tax foreign foods and raw materials. Such a policy would give the Dominions a preferential market and would greatly help to maintain the existing standard of living. It would also result in increased preference luring given by the Dominions to British goods. Mr Goodfellow stated that various parts of the Empire to-day purchased o/er one thousand million pounds' worth of foreign goods annually. If only 2ij per cent, of this huge quantity were diverted to the United Kingdom, the unemployment problem there would Tie solved. The promoters of Empire Dairies anticipated that Great Britain would abandon free trade in favour of limited protection, and the organisation was so designed as to foster Empire trade and to assist in the future development of the Empire as J 1 whole.

A number of the matters referred to by Mr Goodfellow were enlarged, upon in his replies to questions asked by members of the audience.

A hearty vote of thanks, on the motion of the Chairman, was passed by acclamation to Messrs Fulton and Goodfollow for their informative addresses. Mr I!. V. Brown moved a vote of thanks to the Levin Dairy Co. for having organised the meeting, and after this had been carried the proceedings terminated with a vote of thanks to the Chairman.