FLOURMILLERS’ EASE

Southland Times, Issue 19389, 1 November 1924, Page 6

FLOURMILLERS’ EASE

RESTRAINT OF TRADE ALLEGED

FURTHER EVIDENCE CABLED

EFFECT OF GOVERNMENT CONTROL EXPLAINED.

FOURTH DAY OF HEARING. SOME INTERESTING TESTIMONY ALLEGED DIFFICULTY OF OBTAINING FLOUR. (Our Special Reporter). DUNEDIN, October 31. The hearing for the fourth day of the case of the Crown v. Distributors, Ltd., and certain nour-milling companies was continued before His Honour, Mr Justice Sim, in the Supreme Court to-day. INTERVIEW WITH DIRECTOR. Frederick Tanner, a baker, with 15 years’ experience, stated that when Distributors, Ltd., was formed he had a contract for taking Ireland's (Oamaru) flour. It was a written contract. Witness said that after Distributors, Ltd., had stopped his contract, the price of Ireland’s flour went up 10/per ton. Witness detailed an occasion on which he was left with Hudson’s flour in the bakehouse, and this was not very good. He could not make a satisfactory’ loaf with it. He rang the manager of Distributors, Ltd., giving an order for ten tons of Stevens’ flour. He asked for one or two tons immediately to njix with Hudson’s flour. Mr Nancarrow said that Stevens’ mill was oversold, and that he could not give witness the flour. Witness complained to the secretary of the Master Bakers’ Association and in consequence he got two tons of Stevens’ flour. Two days later, Mr Hudson, a local director of Distributors, Ltd., asked witness aver the telephone to call on him. Mr Hudson outlined the system under which the mill’s quota was fixed, and he said that Stevens’ mill was 100 tons oversold. Mr Hudson said to witness: “Don’t think you are going to run us, or get the flour you want. If we have to be beaten by the bakers, we will fight, and if we are going to be beaten, we would rather form on the same system as the breweries are run.” Mr Hudson further said that he was determined that witness would get only his fair share of the quota. Before the advent of Distributors, Ltd., he had had no trouble in getting flour. There was a difference in the price of bread sold by the various bakers in Dunedin, and he had never known a time when prices were uniform. To Mr Myers: He did not like Distributors, Ltd. One of the reasons was that he had to pay 10/- a ton more for Oamaru flour. Mr Callan said that the Board of Trade officiaUy said that the gazetted price of flour at that time was £lB. In further reply to Mr Myers, witness said he got the flour at £l6 under a contract. There was a discount of 5 per cent. EVIDENCE OF BAKERS’ SECRETARY. Francis Joseph Campbell, with nearly 14 years’ experience as a master in the trade, and secretary of the Bakers’ Association, said that the only official of the Association who took any part in the formation of Distributors, Ltd., was the President at the time, Mr H. H. S. White. His experience was that there was great dissatisfaction with the way the operations of Distributors, Ltd., affected the trade. The two main causes of complaint were the difficulty of getting the brands desired and the poor quality of the flour supplied. Such a state of things applied within witness’s experience previously, only when there was a Flourmillers’ Association—somewhere about 1904 and 1909. It was important that a baker should get the brand he wanted, because a baker became familiar with a brand and could work to its satisfaction. One of the characteristics of flour was regularity of quality, and the output from a firstclass mill was of regular quality. The probabilities were that if flour dropped 20/- a ton, bread would drop a half-penny a lb. loaf. The statement in a letter from Distributors, Ltd., that the bakers would be supplied if they placed their orders on or before the first of the month covered a plan that was workable if Distributors, Ltd., carried it out, but they sheltered themselves behind the phrase: “If the flour is available.” In July, 1923, witness met Messrs Hudson and Lough, the two Dunedin directors of Distributors, Ltd., and asked them why they did not treat the bakers more decently. He made reference to the flour being sent out hot off the roUers—a remark that Mr Lough said was a lot of piffle. Witness also spoke of a promise made by Mr McDonald on April 25, 1923, that they would get flour if they ordered on or\before the first of the month. Mr Lough replied that that was not promised, but that the flour would be supplied only if it was available. There was, said witness, no such qualifying clause.

Mr Skerrett: You were the means of communication between the master bakers and Distributors. Ltd. in Dunedin, and to some extent you' adopted a somewhat dictatorial attitude towards the Distributors?—lt may be so.

You adopted the attitude that Distributors Ltd. did not know how to run their business; —I did not. Mr Skerrett read an extract from a letter to the General Manager of Distributors, Ltd. from witness, in which there was a suggestion that “common business methods should be introduced.”

Asked if he had replied to a letter from Distributors, Ltd.’s general manager giving a possible explanation of a temporary shortage of wheat in the Dunedin mills, witness .said that he could not remember the whole To Mr Solomon: He understood that if all the bakers wanted the same brand of flour, Distributors, Ltd. could not supply it. His Honor: If the quota were exceeded; that, of course, is the point of the objection.

Witness: There was no question of quota. We are assured by Mr McDonald that if our orders v( ere in by the first of the month we would get whatever flour we wanted. His Honor: The position was that if there was a desire to exceed the quota the flour could not be available. The question is, was it in the public interest that a miller should be required to take flour he did not want? That is the whole point of attack. Mr Solomon: Quite so, your Honor. His Honor: WeU this witness cannot help you on that point. Mr Callan (to witness) : You haw just heard a speech by Mr Solomon about the quota. Was anything of the kind said to the meeting of bakers by Mr McDonald? —No. GOVERNMENT OFFICIAL’S EVIDENCE.

George William Clinkard. advisory officer in the Department of Industries and Commerce said he had held the position since 1920. He was a qualified accountant holding the degree of Master of Accountancy in the University of New Zealand. In a position in the Census Office, and in his present position, he had been conversant with the economic conditions of the Dominion. Most of the work of the Government wheat control was done in WeUington. From approximately the date of its formation he had been conversant with the work of Distributors, Ltd., and he knew mills which were concerned in the agreement with Distributors, Ltd., and the mills outside the agreement. Witness enumerated these mills—three in Auckland and four others in various parts of the South Island. The annual output of the three Auckland mills was 35,860 tons. Witness further stated that three psr cent of the, wheat of the Dominion was grown in the North Island and

97 per cent in the South Island. He was conversant with the methods of wheat control by the Department, and described the conditions which led the Government to exercise such control. Mr W. G. McDonald . was the first wheat controller. He was then Chairman of the Board of'Trade, Mr J. W. Collins being Secretary. Witness stated that in 1918 flour was fixed by Gazette at £l5 10/- per ton f.0.b., Lyttelton, Timaru and Oamaru on a sack basis of 200-lb. per sack. During 1918 to 1921 there were importations of wheat into the Dominion. The Government was practically the only importer, a few permits being issued to merchants to bring in fowl wheat. GOVERNMENT SUBSIDY ON WHEAT. Witness said the embargo on importation was still in force and in 1919 the Government paid a subsidy to millers to keep down the price of flour. An increased subsidy was paid in 1920 and in 1921 a guarantee was given for the wheat to be harvested in 1922. The crop produced in 1922 was 10,500,000 bushls, which was a good deal greater than for a great many previous years. Approximately 6,500,000 bushels was the Dominion’s requirement in 1922 and in 1922 the Government decided to relinquish control. The reasons were that there was a large quantity of wheat in the country, the war was over, and there was likely to be plenty of wheat in the following year. Witness said that the original embargo *on wheat had not been removed but the Government had announced that it would be removed at the end of February, 1925. In connection with the embargo on wheat, the Government was interested to the extent of ensuring a reasonable supply of wheat, and at the same time a reasonable price for bread. He could conceive no other concern on the part of the Government, other than the welfare of all the secondary industries. The harvest in 1923 was 8,395,000 bushels. He could not supply any evidence as to the amount of good milling wheat contained in that year’s return, but the proportion of seconds was approximately 5 per cent. So far as he was aware, there was sufficient milling wheat for the country’s requirements. DUTY ON WHEAT. The duty on wheat, said witness, was 1/3 per bushel, including primage, and the duty was fixed by the tariff adopted in 1921. That tariff raised the duty to 1/6 per cental which was still in force. The present duty was £2 10/- per ton. plus primage duty of 2/-. Under normal conditions it was possible to import flour into New Zealand when the crop in New Zealand was short of requirements, and the price would be fixed by the cost of landing supplies without the tariff. The price in New Zealand w’ould tend to be equivalent to the cost of importation. In 1922 there was no immediate danger to the wheat trade in New Zealand and he could think of no danger that was likely to threaten, neither could he speak of any conditions of danger to the bread trade. In his opinion the effect of free trade amongst millers would not be disastrous. There would be merely a readjustment of prices. To his knowledge free competition had occurred in the flourmilling trade during the period of Government control. There had been competition right through the period of Government control, in particular, in regard to the price in 1922. There had been competition in the bread trade prior to Distributors, Ltd., taking control, and it still existed in regard to price and quality, especially in Dunedin. In other centres full maximum price allowed by the Department was charged. There was at present a considerable amount of combination amongst the bread manufacturers. He was familiar with the conditions of Distributors,, Ltd., control. In 1922 there was no indication of such an organisation being able to control wheat in New Zealand, and it would be impossible for them to do so without the Government embargo because the price of wheat in that event would be controlled by world prices. The Board of Trade issued a report on August 1, 1922. It contained the announcement that the further fixing of prices was unnecessary, and these could in future be left to the normal course of events. On October 25, 1922, a further decision was made to the effect that the embargo would be continued, but not for any definitely stated period.

CONFERENCE WITH THE MILLERS. On March, 23, 1923, Mr Collins of his department, witness and Mr Smyth, met a body of millers at the office of Distributors Ltd., in Christchurch. Mr Rennie, the Chairman, made a statement ta the effect that they, the Department’s officers, were nbt meeting Distributors Ltd., but a body of flourmillers. Before that meeting officers of the Department had an agreement submitted to them which had been made between the flourmillers and the wheat growers. He understood from information received that some millers had not signed the agreement. At the meeting the officers of the Department had a discussion with the flourmillers with regard to the prices they proposed to charge for flour, bran and pollard. The discussion was occupied in considering what the prices of flour would be from wheat bought in accordance with the agreement. They were informed by the millers that the prices of flour could not be reduced because if they forced a reduction it would be impossible to arrange a new agreement. The Departmental officers told the meeting that they could not take the responsibility of confirming those prices, but would refer than to the Minister of Agriculture. The matter had been referred to the Minister of Agriculture who decided to continue the embargo. When the agreement was entered into there was nothing to prevent the Government’ from continuing its control. The Board was formed in consequence of the agreement, but it did not possess any legal status. A similar agreement was entered into for 1924 and he was again present. In connection with that agreement there was a dispute between the parties and the millers waited upon them in connection with the price. The growers were given one penny advance and the Government continued the embargo. The payment of so much per ton to the mills closed down would lead to increased prices for flour, and could, not otherwise be carried out. Prior to Distributors Ltd., commencing the Oamaru and Dunedin mills had been competing for business, and this resulted in reductions of prices. The price of smalls had been raised beyond what his investigations had led him to conclude was a fair representation of the extra cost of packing since August 1, 1924. That increase , had not been put into effect by the free mills outside Distributors Ltd.

To Mr Myers: It was part of his work to undertake accounting investigations. He and the millers were not in agreement with regard to the costs of production, the millers claiming an increase over his figures. Witness added that the object of Government control by embargo was to make the Dominion as self-contained as possible in the matter of food production. He could not say that the growers were taking the stand in 1922 that unlees the price was increased they would refuse to grow wheat. He did not know that farmers who were demanding a higher price for wheat from the Minister of Agriculture were referred to Distributors, Ltd. when complaints about Distributors, Ltd. were made to the Min-, ister. His reply would be made after reference to witness’s Department. He was

aware of the operations of Distributors, Ltd., and also he was aware that particulars of the organisation were sent to the Department. His reply to Mr Atmore by the Minister of Customs ni the House of Representatives in July, 1923, in regard to complaints of the operations of Distributors, Ltd. would have been prepared by his Department. POLLARD AND BRAN.

Witness would not say the prices of bran and pollard in Australia were higher than here. In New Zealand the grower had under conditions of control known the minimum price he would be paid, and the dairy people would also be aware what prices they would be charged for bran and pollard. He knew that the millers had made contracts with farmers at 4/6 per bushel in 1922. He did not think that this low price would have affected the area sown in the succeeding year. Even when prices had been fixed, the output had been only 4,000,000 bushels in 1923, but he would not like to say what this reduction indicated. Assuming that the prices’ of wheat in New Zealand had been fixed, as they were, and there was no embargo, he would say that the New Zealand farmer would not have grown wheat. He could not say if the area sown in 1923 was affected by the floods, though 4,000,000 bushels was a small return for the area sown. A certain amount actually in stack had, however, been affected by the floods. He could give no indication of the amount, t The wheat agreement between millers and the growers and the Government retaining the embargo was renewed in 1923, with an adjustment of prices for bran and pollard. The growers received one penny per bushel extra. A Dunedin firm could not get more than the f.o.b. price of flour shipped from Dunedin. The hearing was adjourned till next day.