WHEAT PURCHASE BOARD

Timaru Herald, Volume CXXXVII, Issue 19626, 21 October 1933, Page 6

WHEAT PURCHASE BOARD

YEAR’S OPERATIONS j OUTLAY OF £1,400,000 The following statement on its operations has been forwarded to Members of Parliament and Chambers of Commerce by the Wheat Purchase Board:— Towards the end of last year it was apparent that unless something un- : forseen happened there would be an exceptionally large crop of wheat to be harvested in 1933. This was due i not to any markedly increased area 1 sown, but more particularly to excepi tionallv favourable climatic conditions, i New Zealand being faced with a surj plus and the price of wheat in the world's markets being at ruinously low prices serious consideration had to be given by those concerned as to the best method of dealing with the situation.

The Wheat Marketing Agency Co., Ltd., was in operation in 1932 for the purpose of handling that year’s crop. This concern was composed of farmers and flour-millers and by a voluntary agreement the price of wheat was fixed within the limits allowed under the Sliding Scale of Duties. The operations of this Company were successful and the object aimed at, namely that all growers should receive a reasonable price for wheat, was achieved. The circumstances existing at the end of 1932, however, were such that voluntary agreements within the industry itself could not cope with the difficulties arising from the very large harvest then in prospect fear 1933. The position was represented to the Government and the Board of Trade (Wheat) Regulations 1933, were issued early in January to establish the Wheat Purchase Board. The Wheat Purchase Board was established under the Regulations as the controlling authority and the Board consists of four wheatgrowers and four flourmillers appointed by the Minister of Industries and Commerce on the recommendation of the Wheat Marketing Agency Co., Ltd. The Chairman is a Government nominee appointed by the Minister. On its appointment in January the Board immediately set to work to deal with the problems involved. Briefly the objects to be achieved were:— (a) Securing to growers a reasonable price for wheat within the limits allowed under the Sliding Scale of Duties. (b) Orderly marketing to provide that all growers had the same benefits and bore tire same burdens. (c) To provide for export or storage of surplus, and (d) To see that each grower got the same initial payment, and in the end to see that each grower received the same total price for his milling wheat having regard to the variety and time of sale. Buying and Selling. The Board was to be the sole buyer of F.A.Q. wheat from farmers and to be the sole seller of F.A.Q. wheat to millers. The Board was to buy all F.A.Q. wheat from growers and the surplus over and above millers’ requirements was to be exported overseas or stored locally for carry over to 1934 season when the season might not perhaps be so favourable. To be in a position to carry out this work one of the main problems to be solved, was that of finance. The Board had no funds of any sort and whatever money was required to purchase and deal with the surplus had to be found within the industry. Careful estimates were made as to the probable yield per acre and the total amount of money required. On the basis arrived at it was calculated that the price to be paid out to growers should be 1/31 per bushel less than that charged to millers for their requirements, and that this difference would constitute the fund to enable the Board to purchase and deal with all the surplus wheat. Practically all wheat grown in New Zealand is available for sale immediately after harvest and in fact the grower for the most part is compelled for financial reasons to dispose of his crop immediately. For this reason it was imperative that millers should be induced to buy the bulk of their wheat requirements for the year during the first few months. By increments in the price each month till September it was hoped that any farmers who could hold their wheat till the later months would do so and that millers would purchase as much as possible early to avoid the increments, By these means it was hoped that the finances would not be strained to breaking point at the peak period. It was realised that while this method in itself could only at best ease the financial strain slightly, something of a far more definite nature was necessary in order to avoid the scheme collapsing financially in the middle of the season. The millers' representatives had all along made it perfectly clear that the great bulk of the millers, including all the large milling concerns, were readv and willing to carry out what was required of them by making the necessary financial arrangements with their bankers. Before this could be done, however, it was realised that there could be no unlimited release of wheat within the Dominion. Millers could not be expected to purchase supplies for many months ahead at a price considerably above world parity if danger existed of a break in the Internal price level of either wheat or flour. Restrictions on sales to all mills were consequently involved in any scheme which called for forward buying by the milling industry. Allocation to Mills. It was decided to sell the total quantity of wheat required during the •year for the Dominion's flour requirements and to allocate wheat to each mill in accordance with its usual requirements. All mills that were in existence last year were allocated supplies amounting to the same quantity as purchased by them last year. That still left four new mills to be dealt with. The Board allocated to these mills a quantity based on an average of the capacity of some forty odd estnb- ; lished mills. There was a clause in j the regulations which provided that in j the event of any mill being dissatisfied I with its quota an appeal could be made , to the Minister for his decision. The ( four mills referred to took advantage j of this clause and appealed. The j Minister, however, was not called ui>on i to make a decision because at a con- j ference called by the Minister in Wellington in May last an agreement w come to between the Board and the four mills. The agreement was set j down in writing at this meeting and j signed by Messrs. H. Worrall and R. : H. Webb on behalf of the four mills and Messrs. H. F. Nicoll and R. J. | Lyon on behalf of the Board. The i Board mentions this specific matter j because recently there has been some attempt to repudiate the definite agree- | ment come to. At the conference Mr j Worrall, although he had repeatedly ' held himself out as secretary and | representative of what he called the 1 "Associated Free Mills" which included I

I The Simplex Milling Co.. Ltd., and ; The Star Milling Co., Ltd.. Dunedin. I said that he was not sure that he had I the authority to bind those two mills, j However, he decided to sign the agree- ! ment and stated that if the mills were i not satisfied with his efforts on their behalf he would have nothing further | to do with them and they could fight i their own battles in future. The actual agreement is available and is clear and definite. The Board has met with some criticism regarding its policy of allocating wheat to mills, but is unanimously of opinion that no form of control can be operated successfully without restricting purchases by mills. Price fixation by itself is insufficient : as buyers are unable to arrange the finance unless mills are allocated wheat not exceeding in the total the quantity necessary to supply the full year's Dominion's flour requirements. It will be remembered that when the Government Wheat Control was operating in 1918-1922 the same restriction of purchases of wheat by millers was found necessary, and although new regulations were gazetted in each of the years referred to no suggestion was ever raised that this basic principle was in any way unfair or should be altered. Policy of Control. By adopting the policy of controlling the wheat for local requirements the result has been even more successful than the Board anticipated. Millers supported the Board and by the end of May five and a half million bushels of wheat had been bought out of a total of six to six and a quarter million bushels required for the full twelve months which will end on 28th February, 1934. Notwithstanding this early buying of such a large quantity the Board had many anxious moments in April and May as to whether the scheme was financially sound, but as time passed, and by judicious arrangements regarding export, the funds at the Board s disposal met all demands. From the outset the Board's desire was to cause the least possible disturbance in the trade and with this end in view the buying and selling has been conducted by broker merchants so that a farmer has dealt with his wheat in the way he has always done. He sold his wheat through his merchant and received payment from the merchant. All undergrade wheat became free and was sold in the ordinary course of commerce at prices well below anything ruling for many years past. It was necessary of course to provide against under-grade wheat being used for milling purposes. It might be asked now, what has the Board done in the course of its short existence? The Board has purchased from growers nearly eight million bushels of f.a.q. wheat at a cost of approximately £1,400.000 and has disposed of six million bushels to millers and one million bushels for export. Arrangements have been made for the storage of a further million bushels which is at present the property of the Board and is being held for a carry over to next year, or part of it may be exported if weather conditions for the new crop appear favourable later on. Due to the fact of the scheme being in operation, all growers could and did sell their wheat whenever they desired during the year. This clearly would have been an impossibility in the absence of regulations governing the handling of the crop. Reduction of Costa A most substantial reduction in the cost of storage, receiving and delivering charges has been brought about by tlie Board's efforts, and in most eases these reductions have been made to the Board only and not to other persons or firms. A rate of fire insurance on wheat In store has been secured which is lower than has ever been charged in New Zealand before. With regard to export business, sales have been made at prices ranging from 2/7 f.o.b. to 3/SJ. All sales were made on a f.o.b. basis and the Board's responsibility ceased when the goods were shipped, and full payment received at time of shipment. Buyers have expressed entire satisfaction with the deliveries made and no hitch of any sort has occurred in any of the overseas transactions. Representatives of two of the largest wheat dealing firms in the world came over to New Zealand to supervise the shipments of the purchases they had made and expressed satisfaction at the way the business was being handled. As all export sales were made on a f.o.b. basis the Board was not concerned with the destination of the wheat.

It is a matter of more than passing interest to note that the constitution of the Wheat Purchase Board is unique in this respect, that it is an actual working example of what is known as "planned control." Throughout the world to-day this method of organisation of an industry is being discussed and advocated by leading practical business men and economists. The form of control is within the industry itself with Government sanction and legal standing A book recently published by a foremost authority in England, Sir Arthur Salter, and entitled "The Framework of an Ordered Society," describes the organisation of industries by planned control. In New Zealand we have in the Wheat Purchase Board Just such an organisation as described and which it is believed will form the basis of control of most Industries in future.