HOME BUTTER MARKET

Wanganui Chronicle, Volume 71, Issue 260, 2 November 1928, Page 3

HOME BUTTER MARKET

INFLUENCE OF LARGE BUYERS I REVIEW BY MB GOODFELLOW. I With the changed conditions in tho London butter market and the marked I concentration of buying power into a small number of powerful groups, tho New Zealand Co-operative Dairy Company feels that the position is rapidly approaching a crisis and that an alteration or modification of the company’s policy may become necessary. ‘ The present position, as stated by Air W. Goodfellow, managing director, is that while an attempt has been made to strengthen the company on the London market, not sufficient produce has yet been made available to resist the efforts of the larger Home ouyers to force down New Zealand butter prices. Tho company may, therefore have to follow the market .down more quickly, as it is felt that the majority of the dairy farmers prefer the competitive price, regardless of the ultimate result.

In a statement Air Goodfellow said that a few years ago there were many buyers operating, including a host of small grocers, who owing to lack of capital found it necessary to buy their butter requirements from week to week.

Concentration of Buyers. This has now all been changed, and it was found that tho buying was now concentrated in the hands of three classes of buyers; the multiple shop companies, which had recently further consolidated; the Co-operative Wholesale Society, which controlled a large number of shops all over the United Kingdom and was organised for the express purpose of buying cheap fooc for the British worker; and the federated small grocers who had been forced to form buying association! owing to the competition of the Co-op-erative Wholesale Society and the multiple shops. It was found, therefore, that there were now on one hand three powerful groups of traders organised for the express purpose of eliminating competition in the buying of foodstuffs, and, on tho other hand, we had some hundreds of New Zealand dairy factories selling through 27 London agents, only seven or eight of which have a well-organised distributive system. Again, some factories consign, while others sell f.0.b., and thereby provide the big buyers with a protective stock, which enables them to keep off tho market, and break down the price received for consignments. Effect of Change of Policy. “This chaotic marketing of New Zealand produce has been more or less successful in the past because approximately one-third of the butter was firmly held and efficiently marketed by our organisation. We actively resisted any attempt on the part of the buyers to reduce prices unduly. If the New Zealand Co-operative Dairy Company is forced owing to the insistent demand for the highest prices to change its policy, and refrain from supporting the market, as it has done in the past—in short, if we are compelled to follow the get out first’ methods of our competitors, then unquestionably the result will enable our company to make competitive payments for butterfat, but at a tremendous cost to the industry.

“Take last season as an example. The market was a falling one for the new season’s butter until about the third week in January. During the whole of the period from October to January, inclusive, we resisted tho fall which would otherwise have been much more rapid. By this means, we got the most possible out of the produce, and incidentally enabled many of our competitors to under-cut tho market and get out, and by doing so to make a better return than we ourselves obtained for several of the early season’s shipments. As a matter of fact we made the market for all the New Zealand factories, but had we followed the policy of our opponents, and dropped our price quickly when a fall was imminent, our returns would have been relatively better than those of our competitors, but tho price received by all the factories would have been very considerably less.

The First Consideration. “To illustrate our point further, I may say that at a meeting recently held at Palmerston North, a director of a small co-operative company stated that he would rather accept Id a lb. butter-fat less for the output of his factory, provided ho could pay id for butter-fat better than competing factories. For his company self-preserva-tion was, after all, a vital necessity, and tho first consideration. For that reason, and that reason only, it may be necessary in the near futuo for your directors to reverse the company’s marketing policy. This question of effiiciently marketing the dairy produce of our company, and that of the Dominion—because the two are dependent one upon the other —is a matter which receives far too little thought. “The outlook for the butter producers for the immediate future is fairly satisfactory, but, if a weak market develops, when tho heavy shipments arrive, how is the inevitable fall to be resisted if tho New Zealand Dairy Company is required to make, competitive payments? Australian butter usually sells at about Id a lb. less than New Zealand on the London market. Perhaps it is not known to most of our people that the best Australian butter is almost equal in quality to New Zealand finest. The difference in price, therefore, is largely due to the ineflieient marketing of the Australian butter, and the position in the Argentine and Siberia is much the same.”