FUTURE OF CO OPERATION.

Otago Witness, Issue 3829, 2 August 1927, Page 13

FUTURE OF CO OPERATION.

MARKETS AND METHODS. ADDRESS BY MR W. J. POLSON. At the annual Conference of the New Zealand Farmers’ Union, which was opened in \A ellington yesterday morning, the President (Mr W. J. Polson) dealt exhaustitely with the subject of markets and marketing methods. Price-fixing was condemned severely and the speaker expressed the emphatic opinion that the chief factor in future successful marketing of the Dominion s produce would be pooling. “At a time when economists are preaching lower values and when the primary production of New Zealand is more or less at a standstill,” said Mr Polson, “it is wise to take stock of the position and study the future. I wish to strike a note ot optimism.

I | .1 ho recent set-back to co-operative marj keting in connection with our dairy produce | together with the reduced prices obtainable generally for most of our produels, have created some anxiety. Personally. £ think there should be no such feeling. The present depression, although severe, is undoubtedly temporary. All the evidence points to an increased future demand for the products of the soil, and the trend °. f modern economic evolution is so decidedly towards the association of inthviduals into groups for the merchandising of all products, whether primary or secondary, that organised marketing is inevitable, however noisy the opposition to it. “There is little reason to doubt that the problem of the future will be not how to fund markets, but how to stimulate production sufficiently to satisfy those markets. Allied to this will bo the problem of how best to meet business organisation by business organisation, by the application of orderly methods to farm marketing in order that, the benefits of increased demand may not be lost through tho handicaps associated with dumping and haphazard individual control. INCREASING POPULATIONS, It is long ago since Malthus demonstrated the tendency of populations to increase in geometric ratio while tho food supply of the world tends to be augmented only in mathematical ratio. The limit of growth of population is always contingent upon tho food supply, and as tho vacant spaces of the world—Canada, South and North America, and Australia—have filled ”P. population has advanced also, until >- day it stands at the colossal figure estimated by Professor M. E. East, of Harvard University, and Mr G. H. Knibbs, the Commonwealth Statistician, of 1,750,000.000 of souls. If this rate of progression during tho past three centuries is increased until the year 2000, the population of the world will be _ 3,000,000.000 people. “Despite the decimating diseases of the Middle Ages in Europe and Asia and the scourge of the World War with its enormous roll of 12,000,000 dead, the increase has gone steadily on. Nothing, not even tho great influenza epidemic with its estimated 20,000,000 death roll, has changed the rate of increase. Dr East gives the world’s annual increase as from 14,000,000 to 16,000,000, and the office of the United Stales census returns puts the estimate as high as 25,000,000 per annum. In other words, lhe hordes which inhabit tho earth are adding nearly 20 New Zealands to the world’s population every year. “The plain fact is: If these figures are correct, and they are borne out by the statistical researches of the eminent Australian statistician, Mr G. 11. Knibbs, they mean—on the assumption that it takes two acres to support a man —that every year the tillers of the soil must prepare, plant, cultivate, harvest, and market the produce of nearly 40 million acres more than they did the year before. According to Mr Knibbs the current rate of growth doubles lhe population every 60 years. It is quite evident that Dr East’s conclusions cannot be reconciled with Dr Fench’s. It is a remarkable instance of doctors differing But whatever the rate of increase in world populations, it must mean the stimulation of primary production. That is our immediate problem. We need not pursue these staggering calculations far into the future. The problem of growth will be the concern of the future generations. It is sufficient for us to know that the market for the produce of the soil is beyond question steadily increasing and that there can be no shadow of doubt about the great future of our industry.

“My own belief is that pressure of population and the need for cheaper food must in the near future break down the economic barriers of some, of our greater neighbours and destroy arbitrary fiscal cordons which can provide no permanent national bulwark against competition. ORGANISATION ESSENTIAL.

“But however wide the marketing possibilities of the future, the speaker continued, ‘no adequate advantage can be taken of it without organisation. Sound organisation has been responsible for the success of producers’ marketing efforts all over the world. The outstanding success of the Danes, who turned a poor country into a rich one, is due to nothing else. America’s- efforts in this direction have already achieved the most striking results, particularly in connection with her less perishable products, although her perishable products have benefited largely also. “Co-operative marketing had its humble origin in Switzerland as long ago as the Middle Ages Swiss dairy farmers learned that the labour of cheese-making was greatly _ reduced by forming groups and delegating each member in rotation to manufacture the cheese for all. Then the groups discovered that the trader would pay a slightly higher price for larger quantities of uniform quality cheese than they would for individual lotsi Each member in turn acted as group salesman, and finally the custom grew to delegate tho selling to the ablest among them. “So the idea spread until the Rochdale weavers pioneered the next stage nnd cooperative purchasing was begun. Perhaps

it is to the North American Continent, Canada, the United States, and latterly, to a very limited extent. Mexico, that" one must turn to observe the development of co-operative marketing along modern lines It has since spread to Cuba in connection with sugar, to Brazil through the organisation of the coffee growers, to the Malay Archipelago through the intervention o"f Government into the control with the growers of rubber, and to New Zealand, where the dairy farmers’ first real attempt at co-operative marketing has been partially defeated by a misunderstanding on the part of both the representatives of the dairymen themselves and the merchants with whom thy sought business relations, due to some misconception of the true principles of cooperative . control—a misunderstanding which it is still not too late to clear away, and which, while disconcerting to both buyer and seller, may ultmately prove a blessing in disguise. FIRST STEPS. “The first ciear-cut recognition of the principle was in 1912,” said Mr Polson "when the raisin growers of the San Joaquin Valley made the formation of the Californian Associated Rasin Company contingent upon the affiliation of 60 per cent, of all growers of that group. The sensational success of the Raisin Association led to a general recognition of the principle in the United States until to-day each commodity is controlled by its own group or groups. But the Californian Co-operators had many bitter experiences. They learned, as did the Danes, that co-operative associations must be based on long-term contracts with producers that only the ablest types of business men must be employed to manage their associations, and that their products must be graded and standardised and the returns pooled, if orderly marketing was to be sueoesfufly achieved and the goal reached

for which they had been blindly striving for generations NO PRICE DICTATION. “All these organisations eschew price dictation. Price fixing is a matter of definition after all. It is evident that the Danes control their product to almost as complete an extent as the New Zealand Dairy Control Board set about atlt is suggested that because the Californian Fruitgrowers’ Exchange does not fix prices on the products of its members it is opposed to farmers fixing the prices at which they will sell their prockuts. The Farm Bureau. Federation explains what actually happens. The dried fruit associations determine a scale of prices each year at which they will dispose of their products, which is precisely the Danish plan; the citrous fruitgrowers follow another course, and reach about the same point in efficient merchandising. They distribute the harvesting as uniformly over the season as is possible, and send the crop to the various markets in as nearly as possible the exact proportion to the demand for them. The pric. for oranges and lemons is determined by the amount available at a given time at the point of consumption, and “Y su Pply at the point of production. Ihis is a system of intelligent merchandising which is as effective as price fixing without being as controversial. ‘Cooperative marketing,’ says the Farm Bureau, ‘ attempts to keep the demand satisfied but not over-supplied.’ ‘lt is impossible to avoid a conflict between co-operative and speculative interests. Nor, as the Farm Bureau points out, can there be any compromise between them. They are wholly unlike in their fundamentals, although each serve the public in its own way.

“Consequently many opponents of price fixing confuse the methods of co-operation with arbitrary price fixing—a practice which is entirely indefensible. But cooperative price regulation is an important incident in merchandising, although it is a means to an end, rather than the end itsuelf. ARBITRARY CONTROL. “The control of rubber and coffee is in quite a different category to the co-opera-tive control of farm produce. Great Britain owns the great bulk of the vor Id's rubber crop, and the drastic clauses of the Stevenson Restriction Act are therefore possible. On the other hand, although Jsraz.il ships 80 «er cent, of the world's coffee from 6ne State (Sao Paolo), her monopolistic valorisation Act has not stood up to the test in spite of the monopoly. InvestigatioiC have revealed that notwithstanding the segregation of crops and the curtailment of exports, the dislocation of prices has created senstational runaway market conditions. “It would appear that control with arbitrary price fixing is impossible without a monopoly of the product. One of the outstanding instances of control with price fixation and restriction of output was attempted in 1925 by Cuba, a country which produces over 5,C90,C00 tons of sugar. Powers were invested in the President, per mitting him to restrict output by 10 per cent, and to fix a price. But Cuba, like New Zealand, has no monopoly of her principle product. The immediate effect of a 10 per cent, reduction in the output of sugar was to create an impetus in the production of beet sugar in Europe, and showed indications ot bringing new sugar on the market from other countries. It is extremely doubtful if the experiment which was devised for a two years’ trial •will be made permanent. The inexorable law of supply and demand such schemes futile. This was the conclusion of Presiednt Coolidge which led him to veto the famous M'Nary-llaugcn Bill, the most colossal price fixing measure the world has ever seen. POOLING THE KEY. “The New Zealand system of control is not singular in conferring legislative power on control boards to Bind minorities, but it possesses advantages over other mandatory systems inasmuch as it does not allow any interference with production and leaves it to the producers themselves to decide what measure of control, if any, thev shall-em-ploy.

“It seems to me that ]>ooling is the key to the successful merchandising of our products. It. is impossible to contemplate organised selling without pooling. Pooling gives the most important measure of control and enables regulation of the rate of movement to market and the distribution of the product as to locality and demand. To abandon pooling is to show want of study of economics and to throw away the whole position. It is to I>ctray the producers an<l deni n deadly blow at co operation.

“Co-operative methods of control aboard and New Zealand's system are in many respects similar and aim at the same result.

The main differences in New Zealand are: (1) In the application of compulsion to minorities, and (2) the method (now abandoned) of fixing prices. The Danes adopt a different system because they have found compulsion unnecessary, the manifest advantages of pooling being obvious to a largo enough proportion of them to make it servo their needs. The Copenhagen Committee certainly fixes prices, but they are minimum prices much below the actual selling values of the product and are in no way intended to hold up the market. As I explained in my address last year, it has always been a sore point with the Danish factories that the Copenhagen Committee’s price is too low, but tl*e over-price is re-

ceived in the bonus, and when the bonus is large in any year the following year’s price is generally raised a little. “In spite of the recent setback of control, I am convinced that it will ultimately achieve all that was expected of it, without price dictation, and that the producers of this Dominion will some day realise its value.

“Ono thing appears certain,” said Mr Polson, in conclusion, “that control along such lines as we have adopted is essential to the industry and that the future of the primary producer, whether he is a grower of butter-fat or wool, need cause no uneasiness. The markets which already exist arc likely to continually increase; the organisation to capture them depends upon himself. He may rest assured that his competitors are developing such an organisation and that they will not lost heart at the first fusiladc of the enemy.”