THE DAIRYING INDUSTRY.

Waikato Times, Volume 110, Issue 18378, 11 July 1931, Page 3

THE DAIRYING INDUSTRY.

MR 1 GOODFELLOW’S REVIEW. CHAOTIC MARKETING CONDITIONS AMALGAMATED DAIRIES, LTD. TO CURTAIL ITS OPERATIONS.

Baltic Competitors.

Mr Goodfellow said that the first (object of his visit was to look into marketing conditions in the United Kingdom, and secondly to investigate the sources of supply from other countries with a view to determining the prospective competition of the ( future. After a brief spell in England he had therefore visited Denmark, Holland, Sweden, Finland, Esthonla, Latvia, Poland and Germany. In each country he had got into close touoh w'lth the leaders of the industry and of the export co-operative marketing associations. All of these countries marketed the bulk of their produce through export marketing associations In which as many as 500 co-operative dairy companies were combined in a group. In Denmark the most authoritative opinion was that the expansion for the future would be relatively slow. Their exports in 1930 amounted to 159,000 tons of butter compared with 91,000 tons in 1914. Of their produce 40 per bent, was handled by 11 co-opera-tive marketing associations, 20 per oent. by twenty-four private concerns and 40 per cent, went direct to co-operative societies, retail and wholesale and the multiple shops. Finland had a 'well organised Industry and a co-operative association, which marketed 90 per cent, of its dairy produce. Their expansion in Finland would not be rapid because of the low prices and the very low prices of ■Russian timber made it uneconomical to cut Finnish forests and bring in more dairying land. The same conditions applied to Esthonia and Latvia. Poland was showing considerable expansion In dairying and especially in pig products because grain-grow-ing was unprofitable and farmers were diverting to dairy farming. It was expected Polish production would expand 15 per cent, to 20 per cent, per year for a time, but the influence of that increase on the market would

Unsatisfactory Prices

be offset by the reduced export from Sweden and other factors. Russian .'a butter production he did not regard as a serious menace. While it was very difficult to procure reliable information about Russia the opinion he formed from full inquiries iin the Baltic and In London was that sound observers expected Russia to achieve a certain amount of success with her five year plan, in connection with wheat growing which could he done on a mass scale, timber-getting with slave labour, and coal and petrol which ajll lent themselves to organised mass production with unskilled labour. He did not anticipate any increase in dairying to the point of danger because there had to be a close Intimate contact (bdlwecn the farmer and the cow and that could only be given by personal Interest. The dairy industry did not lend itself to development under Soviet methods. His conclusion regarding Russia was that she would -probably evolve some form of socialism with payment for results and as that came in so the standard of living would rise. Russia had approximately 170,000,000 people and as their standard rose they would absorb the whole of Russia’s butter production which was, only from 25,000 to 30,000 tons. At present Russia exported practically the whole of her butter production, about half going to Britain, and the balance to Europe, and was paid cash. She purchased Dutch margarine on twelve months terms. Britain’s consumption of butter was 7,500 tons per week so that Russian imports were negligible, and well below pre-war shipments. Summing up the position about the Baltic States he considered that they were in reality not serious competitors 'to New Zealand. Their yiifflculties were largely climatic and involved heavy cost In winter feeding and shelter. New Zealand had an advantage in her climate which was shared by no other country in the world save Australia and which more than counterbalanced her distance from the market.

Cannot See Daylight.

The British Market,

A Last year, Britain was supplied with Amore ciieese than she could conveniently absorb. The mining districts were having a bad time and end not use as much cheese as they ordinarily did, more especially as competing food stuffs such as meat, eggs and bacon wero very low in price. He considered, therefore, It would be unwise for New Zealand to increase the quantity of cheese going on to that market until there was a marked improvement in British trade conditions. There was, however, practically no limit to the amount of butter the United Kingdom could take. This was very fortunate for New Zealand because we could in some measure recoup ourselves for low prices by expanding our industry. What increase of butter went on to the British market in Die nexL live or ten years would come mainly, lie believed, from Australia and Ne.w Zealand. Figures for 1929 showed that the average consumption per head in Britain was 15Alb of butler per annum and of margarine 1311 b. We ■could therefore keep on expanding our butter industry, provided we coud sell at prices which could compete with margarine. .Margarine was selling in the retail shops at (id, Bd, and lOd per lb, and he had seen host New Zealand butter retailing in the cheap shops at Is per 11), rhecso at 6d per 11). At that time even at Cut per lb, ciieese did not sell freely. The prices of margarine hail not dropped very much, largely because it was understood I that one of the big m.ugarine distributors had bought hc«i\ ih in whale oil and copra at prices which -were above to-day s level. 'iheio

A review of the dairy industry of the first importance was given ■by Mr Wm. Goodfellow in an address at Palmerston North to companies associated with Dairies, Limited. This review embodied experiences and' observations made in the course of a comprehensive visit to Australia, the United Kingdom, the Baltic States, the United States, and Canada, and covered marketing conditions and prospects of the future. The review was followed by Mr Goodfellow intimating that owing to the chaotic marketing conditions existent in the industry he could not see any prospect of Amalgamated Dairies, Ltd., in the present circumstances rendering a useful service to the industry. He therefore announced that the directors of Amalgamated Dairies, Ltd., had unanimously decided that they would suspend operations so far as outside companies were concerned. The strong recommendation was given by Mr Goodfellow that the only way the Industry could hope to effect much needed improvement in the marketing end of the business would be by the steady formation of groups on a territorial basis.

was therefore the possibility that lower prices might rule in that commodity, and react a little into the butter position. The next six months would probably be the worst period of the depression in the United Kingdom, but thereafter some slight improvement might be expected. *

Referring to prices in the past year, •Mr Goodfellow said that the market was in a very chaotic condition indeed. He had been over 22 years in the business, and at no period had he ever known the market in such a ■state. There was absolutely no coordination between the New Zealand agents—there was no working together, and the whole position was very unsatisfactory to the producers Re could not see any daylight at all through the situation in England, lie went there hoping to effeot some coordination, by getting some agents In Tooley Street to work together and reduce competition, and evolve some system that would at least enable the producers to get value for their goods, which they were frequently not getting to-day. This, however, could not be done as the business was

at present conducted. He discussed matters with some of the leaders amongst the agents, and they rightly claimed that the whole trouble was the present competitive system of selling, by which factories in New Zealand were concerned not with getting the full value for their goods, but merely with being able to pay out to their suppliers a price compared with their neighbours which would retain and attract suppliers. The agents in Tooley Street knew that they were Judged against the competitive returns given by another agent to a neighbouring factory, and therefore were naturally concerned only to compete on that basis, and not with getting the value of the goods. Those with whom he had discussed the position were very disgusted with the marketing of New Zealand dairy produce, and they reckoned that the present competitive system in New Zealand has cost the producer in the past season Id a lb on butter and id a lb on cheese, as those articles would have gone into consumption at those extra figure's. They estimated that probably £1,000,000 had been lost in this way on 'butter, and £500,000 on cheese, and another £500,000 through quality factors; making £2,000,000 in all.

41 1 cannot see any way of making any improvement,” said Mr Goodfellow. “Tooley Street depends upon making competitive returns to the co-operative factories for securing business, and so long as that is the basis they will lay themselves out to give those returns, regardless of values. No agent in 'London is concerned with getting value for the goods— they are interested only in comparative returns with some other agent. This is a very serious matter, because it means that there is no selling force acting on behalf of New Zealand that is interested in getting the market value. If anybody tries to raise the market to a fair price and get better returns, as Amalgamated Dairies did on several occasions, then immediately others undercut the price, say, 2s a cwt., knowing full well that the market is well supplied, and others will be forced to come down quickly to that figure. We did raise Hie price on several occasions, but were immediately undercut, and had to drop hack to a figure at which the produce was sold as fast as it came in." If Amalgamated Dairies had lo make competitive returns in New Zealand they could do so only by leading the market down and being the first to get out. This could easily be done, but only at the cost of returns to tlie producer in New Zealand. To get value for the goods and to make competitive returns also simply cannot lie done, it amounted to building up with one hand and tearing down with the other.

The whole situation was so disorganised that it did not matter what the price was, a certain section would undercut the market. Those doing Ibis were usually perfectly safe, under present conditions, because the market invariably came down, liecause of Hie plentiful supply. All agents simply attempted lo get out first. it became a regular ramn. This was a most disastrous way of handling business, and UUdC-il iUI&JH

lutely impossible to get any co-or-dination in Tooley Street. The London merchants had lost money, and had had a very difficult time during the past few years. The real cause of the trouble was in New Zealand. “A ” factory competed with “ 13 " factory in pay-out. Under those conditions, no improvement could be effected. They would have to eliminate that competition amongst themselves, as the producers in almost every other country in the world had done. In Australiar in Canada. in the 'Baltic, in Germany, in Denmark, the producers all had marketing associations' They did not have insane competition, but they cooperatively aimed at improving quality and marketing their goods in a sensible, orderly fashion. Personally, he could not see where anything could be done to improve the position unless they started at this end. Important Decision Reached.

As a result of this investigation, continued Mr Goodfellow, the Directors of Amalgamated Dairies Ltd., and the New Zealand Co-operative Dairy Co., Ltd., had come to the unanimous decision that it was utterly useless to carry on the present organisation. They were handling a lot of stuff—few firms wers handling more —and the business was paying its way, but they could not see that they would be serving any good purpose by continuing the present organisation. They had set out to do two things, first to establish an organisation to he of some service to the industry, and secondly, to put it on a commercial basis so that it would be self-sup-porting without cost to the producers. The business was paying its way all right, but it was not performing any good service to the Industry, and they were simply subjecting themselves to a lot of work to no purpose and possibly by intensifying the competition might be doing- more harm than good. The directors accordingly had decided to change the policy and not to enter into competition for outputs in future, but would aim to efficiently market the produce of the New Zealand Co-oper-ative Dairy Co., Ltd., and develop Empire Dairies. In reaching this decision, Mr Goodfellow said the directors desired io express their warmest appreciation to the many companies who had accorded them their support ’in their effort to do something worthwhile for the industry. For the future, the organisation would remain intact but would be suspended and if at any time groups were formed and desired advice or co-operation, Amalgamated Dairies would be quite prepared to help in any effort to Improve the marketing of New Zealand dairy produce overseas. Work of Empire Dairies.

One bright spot in the situation was the development of Empire Dairies. This was handling the produce of Canada, New Zealand, South Africa and Australia. They had four salesmen in Tooley Street, one in Manchester, one in Liverpool and a newly appointed outlet in Glasgow. Last year their turnover had amounted to £2,500,000 and in the past year would amount to £3,500,000 in spite of the lower prices. They had thought that they might have difficulty in securing contact with the wholesale houses. On the contrary they had found it quite easy to develop associations with wholesale houses who wished to get closer to the producer. These wholesale houses handled GO per cent of the distributive trade in Britain, 15 per cent, going to the co-operative societies and the remaining 25 per cent. to the multiple stores. Empire Dairies had found that there was a distinct demand now in the Midlands and Scotland for New Zealand butter, this being due partly to the disparity in price with the Danish article. Thanks to the publicity work of the Empire Marketing Board, and the Control Board, and also the developmental work of Empire Dairies, plus the excellent work of Sir James Parr, there was a very distinct opening in- the Midlands and in the northern area for New Zealand, butter, which would in future somewhat relieve the pressure on London.

Britain’s Prospects

In concluding, Mr Goodfellow said he had lost no opportunity of discussing Britain’s future trade prospects with prominent bankers, financiers, shipping and insurance men. In every Instance, save one, he had found the definite belief held that the traditional policy of free trade must be abandoned and a policy of modified protection brought in instead. It was recognised that this would only come about with a change of Government. It was possible that the present Government would run out its full term of nearly another two years, but in the interval every effort was being made to educate the workers throughout Britain as to the benefits of a policy of modified protection. An outstanding example was the motor industry which with only a little protection had become very prosperous while most of the other industries were languishing. Further the prices of British cars had come down, thus showing that mass production was essential. Far-sighted business men were quite optimistic as to the future. They recognised they could move only as fast as the mass of the people couuld follow and the people had to be prepared for the change. As soon as the Government was changed, Britain would Immediately scrap free trade and go in for modified protection, which would permit her to bargain with the Dominions and selected foreign countries for reciprocal trade. The United Kingdom was practically the only free market in the world and at present practically all the surplus goods of the world were being dumped on that market. Money was being paid out by Britain for those goods, while many of her own workers stood unemployed, in spite of all that, however, lie believed that Britain was In a better position relatively than any other country. She was prepared to buy goods and the future trade of the world would depend on the exchange of goods. The position of the United States was rather startling. She had accumulated a tremendous supply of gold and had surrounded herself with a high tariff fence. Her warehouses were full of goods and she had factories enough to supply the world, hut she could not operate those factories because the world could not buy her goods, except for gold, which-they had now pretty well exhausted. The only way America could now trade was either by lending gold and getting it back in payment for her goods, or by exchanging goods for goods which a|he would not do. But the countries that wanted to borrow were not good risks and the countries that were sound such as Britain, France and Italy did not want to borrow. Because of tin's position, America now had from 10,000,000 to 20,000,000 unemployed and she would find it extremely difficult to readjust her tariff wall because of coMilleting internal factors.

A Period of Adjustment. So far as New Zealand was concerned we had to recognise that our Dairy Produce prices were down permanently. At the moment producers’ 1 products were lower reluiively than manufactured goods, hut they would have to come down as well. The ( Carvl.lnji.ad. lu xiext column.)

commencement of a turn for the better would take place in the Old Country when free trade went and protection came in. It would probably taice two years to do that, and a further 2 to 3 years for Britain to get going properly under the new conditions. Til live years’ time lie was convinced the Old Country would be going ahead rapidly on the road to prosperity, and that prosperity would bo reflected in New Zealand. In the meantime this country had to cut Us expenses down right and left. The biggest problem was the reduction of the expenses of Government which were quite ridiculous compared with other countries. We had gone ahead too fast and were probably 10 years before our time in certain developmental work. It wis absolutely necessary to stop borrowing and to live within our means and cut down national expenses. That was a difficult job but someone had io do it before we could get back on the road to prosperity. The meeting, which was presided over by Mr Dynes Fulton, received Mr Goodfellow’s intimation as to the cessation of operations with sympathy and recognised that his action was dictated by a regard for the best interests of the industry. Messrs W. Grounds and .1. G. Brechin, directors of Amalgamated Dairies, both stressed the point that they hail no sense of defeat in The decision that had been come 10. Their regret was that the industry had not given the backing necessary to achieve success. A hearty vote of thanks was accorded Mr Goodfellow for liis address coupled with expressions of high regard from the. mover and seconder, Mr Hale (Hopclamjs) and,, MiyMu.gfig£id££.