SELLING PRICE OF BUTTER

Taranaki Daily News, 22 December 1932, Page 16

SELLING PRICE OF BUTTER

SCHEME FOR STABILISATION CONTROL OVER LOCAL MARKETS. SUPPORT FOR MR. A. J. SINCLAIR. TARANAKI PRODUCERS’ MEETING. The scheme for the stabilisation of the price of butter sold in New Zealand received the unanimous support of 40 producers from various parts of Taranaki, when it was outlined at New Plymouth last night by Mr. A. J. Sinclair, secretary-manager of the Te Awamutu Dairy Company Ltd., at a meeting sponsored by the Federation of Taranaki Cooperative Dairy Companies. There were 11 factories represented and their total butter output amounted to 4936 tons last year. • T In the unavoidable absence of Mr. lu. J. Rundle (Bell Block, and the deputychairman of, the federation),. Mr. H. E. Blyde (Lepperton) presided. Factories represented were: Waitara-Taranaki, Maketawa, Midhirst, Rahotu, Stratford, Lepperton, Tarurutangi, Tikorangi, Bell Block and Mangorei. . In introducing the speaker the chairman said he appreciated Mr. Sinclair s action in visiting Taranaki to place his scheme before producers. Mr. Sinclair was welcomed with acclamation. The chairman then read a letter of apology for absence from Mr. J. Hine of the Dairy Produce Board. As mover of the supporting resolution to Mr. Sinclair’s plan at the board meeting Mr. Hine stated that he heartily supported the movement and considered that Mr. Sinclair deserved the thanks of the dairy industry for evolving a scheme which, if adopted, would lift the local butter trade from the deplorable condition at present existing and at the same time refrain from asking for financial assistance from the Government. SUPPORT FOR THE SCHEME. While his scheme had been under consideration only over the last few weeks, Mr. Sinclair said he had already received many resolutions of unanimous support from all parts of the. country. Dairy companies representing over 30,000 tons of butter output had supported the scheme and. the ManaWatu Federation of Dairy Factories, representing 30 dairy companies with a total output of 25,000 tons of butter, had also endorsed it The Dairy Produce Boat'd had also lent its support. The objectives of the scheme, said Mr. Sinclair, were to apply the principles of rationalisation to the local market so that by stabilising a unified system of marketing, unnecessary competition as well as price-cutting could be eliminated.

All attempts to evolve a voluntary scheme for the local butter market had failed and. the competition between cooperative and proprietary dairy companies had been exceeded only by the lack of co-operation among the cooperative companies themselves. Any scheme to place the local market , on. a sound basis had to be national in its scope. It had to give every facility to. dairy companies to supply the local market if they wished to do so, but it had to contain adequate powers to prevent dairy companies or their agents cutting prices or' granting rebates or commissions other than those provided in the scheme. The desirability of a voluntary scheme was admitted, continued Mr. Sinclair. However, the industry would waste its time in attempting to frame one, for the following reasons: —

(a) A voluntary scheme would require the binding consent of every buttermaking company, and of every cheese-, making company possessing a dual plant. The refusal of even one company to link up with the scheme would jeopardise its success.

(b) A voluntary agreement without a substantial penalty clause would • be useless, and it would be impossible to induce every buttermaking company to sign an agreement of that nature. (c) Past experience had shown that there was no possibility of co-operative and proprietary dairy companies combining voluntarily in the marketing of local butter. (d) It was the avowed policy of certain dairy companies to adjust the price of butter to storekeepers so that the local market would not become too remunerative in relation to export prices. CENTRAL CONTROL NEEDED. “The more closely this problem is examined, the more clearly it will be evident that there must be a central organisation to ensure unanimity in the procedure to be adopted by dairy companies selling butter on the local market,” said Mr. Sinclair. “Every dairy company should have’ the right to supply the local market, and should be assured of a fair return if it does so. It is not the object of the scheme to eliminate fair competition among dairy companies in catering for the local trade which must at all times be made sufficiently attractive; but the central organisation should possess the right to set out the terms and conditions to be observed by every dairy company or its distributing agents.” There .was no organisation in the industry more suitable for that purpose than the Dairy Produce Board, and it was undesirable to create a new organisation when a slight extension of the present powers of the board would enable it to undertake the work, he continued. The board could be given power to appoint, from among its members, a butter stabilisation committee, consisting of two members from the North and two from the South Island, and one Government representative. The work of the committee would not be onerous, as the scheme would function automatically. “It is suggested that the basis on which the stabilisation committee should work in determining the price to be charged by dairy companies should not be left to its uncontrolled discretion, but should be fixed by regulation,” continued Mr. Sinclair. “In a scheme of this nature the control of the local market would be so complete that the interests of the consumer should be safeguarded.” As a commencing basis of computation for the local market, the scheme suggested there was no more suitable starting-point than the f.o.b. parity of export bulk butter, and that fortnightly adjustments could therefore be made in the local market price in sympathy with the rise and fall of the London market. “Possibly the most important part .of the scheme is the second step, which proposes to add a premium of 2d per lb., to the f.o.b. parity of bulk butter, before the costs of patting and distribution are dealt with,” he said. “The scheme asks the New Zealand consumer to pay this additional price for the same reason that the Australian consumer has been paying it without demur for the past six years. Except for the lack of organisation in our industry, there is no reason why the consumer should expect to buy his butter fresh from the chum at the price which the producer realises for a frozen butter sold in Great Britain after three or four months’ storage. The producer is entitled to get at least Danish parity for butter sold on the local market, and so far I ’have not met a customer who

considers that this claim is unreasonable.” , „ . Official figures published by the Dairy Produce Board showed that the butter consumed in New Zealand for the 12 months ended July 31, 1932, to 23,000 tons. The premium of 2d per lb would amount to £429,000. In the scheme, that figure was set out at £400,000, in the belief that the slightly high price would not seriously curtail consumption so long as the retail price did not exceed, say,, Is 4d. The manner m which that fund would accrue to the industry, and be distributed to every butter-making company in New Zealand in proportion to its total output, was dealt with in the scheme. PROBLEM NOT WHOLLY SOLVED. “This additional revenue to the butter producer would not solve the whole of his problems, but it is an advantage to which the industry is legitimately entitled, and which it could easily secure without inflicting hardship on the consumer, provided a workable scheme can be evolved,” said Mr. Sinclair. On an export of 109,000 tons of butter, it would be equivalent to an increase of 4s per cwt.; and (based on an over-run of 20 per cent.) it would be equivalent to 0.4 d per lb butter-fat on the total butter production of New Zealand.” The scheme required no complicated machinery for its administration; it involved no Government subsidy; it inflicted no undue hardship on the consumer; it assured a fair return to every dairy company supplying the local market; it automatically eliminated secret commissions and rebates by dairy companies or their agents; and it would provide an additional revenue (in which’ every butter-making company will participate) of approximately £400,000 per annum, he continued. The scheme coul be made effective if it received the solid support of the industry, and the time was opportune to make a united effort to end the extremely unsatisfactory conditions under which butter was marketed in New Zealand. According to Mr. Sinclairs plan every dairy company supplying the local market had to be given a fair and reasonable allowance to cover patting and distributing charges from factory to storekeeper. That was suggested tentatively at IJd per lb. That charge would be permanent; it would be fixed by butter stabilisation committee, and would have to be observed by all dairy companies or their agents catering for the local trade. FIXING OF THE PRICE. With export bulk butter at lOd per lb. f.0.b., the wholesale price charged to storekeepers under the scheme would be Is 2d, less id discount for cash, made up as follows: F.o.b. parity, 10d; premium, 2d; allowance for patting ana distribution, 2d less Jd cash discount. | The storekeeper’s profit of, say, 2d, would | therefore make the retail price Is 4d,; with an f.o.b. parity at lOd. All dairy companies required a license to export butter. Under the scheme they would also require a license to supply the local market. A license would be granted to any dairy company or its accredited agent on application. The stabilisation committee would have power to suspend or cancel the license of any dairy company er its agent violating the terms and ditions relating to supply. There would be the right of appeal to the Minister of Agriculture. The scheme did not propose to exercise any supervision over retailers of butter. If a retailer wished to sell at cost, or at a small margin of profit, he would be allowed to do so, provided he was merely foregoing a portion of the legitimate profit he was entitled to make, and was not cutting the retail price because he was obtaining a secret commission or rebate from a dairy company or its ggeiyf, The premium of 2d per lb over ex-, port parity would be paid into a stabi-

lisation account (which would form part of the public account for the time being) on the fifteenth day of each month by all dairy companies on, all butter sold on the local market during the pre- . vious month. The auditor for each dairy company would be required to furnish a certificate annually showing the total quantity of butter placed on the local market. DISTRIBUTION OF FUND. The accumulated fund would be distributed at the end of the season to all butter-making companies in New Zealand in proportion to their total output for the year. It -was considered that a dairy company supplying the local market would be satisfied with the f.o.b. parity plus a fair and reasonable charge for patting and distribution. The premium of 2d would represent an advantage in which the whole industry would share because of the ability of any but-ter-making company to place a fresh article on the local market at short notice. That premium would represent approximately £3500 for each 1000 tons of butter made in New Zealand. Mr. Sinclair said it was an undoubted fact that many consumers in New Zealand expressed open regret that they should be able to buy butter at lOd a lb. With every fall in the local market price it was not unusual for dairy companies to receive complaints from storekeepers who said they did not want it and their customers did. not expect it. Mr. H. A. Foreman (Tikorangi) asked if whey butter would participate in the benefits of the scheme. It was explained that it was not proposed that either whey or farm butter should be included. They could be left to find their own level. To Mr. J. Brown, Mr. Sinclair said he not only wanted a resolution of support from the meeting of producers but also one from each butter factory. On the motion of the chairman, seconded by Mr. W. J. Wellington (Midhirst), it was then decided “That this meeting of representatives of Taranaki butter factories endorse the principles of the stabilisation of the butter trade in New Zealand as outlined by Mr. Sinclair, and urges the Government to bring in the necessary machinery for its operation without delay.” Mr. Sinclair was . accorded a hearty vote of ■ thanks, carried with’ acclamation.