PRIMARY PRODUCTS MARKETING DEPARTMENT ANNUAL REPORT (SECOND) AND ACCOUNTS FOR THE YEAR ENDED 31st JULY, 1938.

Appendix to the Journals of the House of Representatives, 1939 Session I, H-30

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Frontispiece,']

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CONTENTS.

A. Accounts — page Annual: Dairy-produce Export Division .. .. .. 39, 42 Annual: Internal Marketing Division .. .. .. 62 Completion of Operations, 1936-37 Season .. .. .. 3 Dairy Companies .. .. .. .. .. .. .. 38 Advertising and Publicity .. .. .. .. .. .. 35 Arrivals at United Kingdom Ports .. .. .. .. 30, 32 B. Butter — Consumption .. .. .. .. .. .. .. 22 Imports .. .. .. .. .. .. .. 48, 49 Prices .. .. .. .. .. .. .. 18, 52 Purchases, Quality of .. .. .. .. .. ..11 C. Cheese — Consumption .. .. .. .. .. .. .. 24 Imports .. .. .. .. .. .. .. 48, 50 Manufacture in Relation to Butter .. .. .. .. 14 Prices .. .. .. .. .. .. .. 22, 54 Purchases, Quality of .. .. .. .. .. 12 Constitution of Department .. .. .. .. .. 3 Costs of — Dairy Companies .. .. .. .. .. .. 38 Farm Working and Maintenance .. .. .. .. 7 Cold Storage in United Kingdom .. .. .. .. 34 D. Dairy Industry in Great Britain .. .. .. .. .. 24 Dairy-produce, Purchase of, by Crown .. .. .. .. 6 E. Exports— From New Zealand Ports .. .. .. .. .. 14 To Out-ports, United Kingdom .. .. .. .. .. 29 F. Freight Rates .. .. .. .. .. .. .. 34 G. Gradings— 1935-36, 1936-37, and 1937-38 .. .. .. .. 13 Quality Percentages .. .. .. .. .. 11 Quantities graded .. .. .. .. .. 13 Guaranteed Prices, 1936-37, 1937-38, and 1938-39 .. .. 6, 10 Guaranteed Prices Committee, 1938-39 .. .. .. .. 6 I. Imports into United Kingdom— Butter .. .. .. .. .. .. .. 48, 49 Cheese .. .. .. .. .. .. .. 48, 50 Insurance Rates .. .. .. .. .. .. .. 34 Internal Marketing Division .. .. .. .. .. .. 56 L. London Dairy Show .. .. .. .. .. .. .. 37 M. Margarine and Butter Consumption .. .. .. .. .. 22 Market Conditions, 1937-38 .. .. .. .. .. 18, 22 Marketing— Cost of .. .. .. .. .. .. .. .. 26 In United Kingdom .. .. .. . . . . 15, 18 In Outside Markets .. .. .. .. .. .. 25

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CONTENTS —continued. PAGE P. Payouts by Dairy Companies .. .. .. .. 38 Prices— Guaranteed Purchase, 1936-37, 1937-38, and 1938-39 .. .. 10 Trend, 1937-38 .. .. .. .. l 5 Influences affecting Prices .. .. .. .. ~ 28 In London .. .. .. ~ 19 52 Paid and realized . . .. .. .. 4 39 Premiums for Quality .. .. .. ~ 10 11 Primary Products Marketing Amendment Act .. .. .. .. 3 Procedure of Payment, &c., in New Zealand .. .. .. .. 13 Q. Quality— Of Produce purchased .. . . .. .. .. 11 Premiums for .. .. .. .. . _ .10 R. Review of Operations, 1936-37 Season .. .. .. 3 S. Sales— To Ports outside United Kingdom. .. .. .. .. .. 25 In United Kingdom : Weekly Graph .. .. .. 16, 17 Shipments to — Out-ports, United Kingdom .. .. .. ~ .. 29 Outside Markets .. .. .. .. ~ 25 Shipping .. .. .. .. .. .. .. 28 Shipping Inspection .. .. ~ .. .. .. 34 Storage in United Kingdom .. . . . . .. ~ . . 34 Store Warrant Advances .. .. .. .. .. .13 Supplies of Butter and Cheese available in United Kingdom : Graph .. 21 W. World Trade in Butter and Cheese .. .. .. .. .. 51

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1939. NEW ZEALAND.

PRIMARY PRODUCTS MARKETING DEPARTMENT ANNUAL REPORT (SECOND) AND ACCOUNTS FOR THE YEAR ENDED 31st JULY, 1938.

Presented to both Houses of the General Assembly 'pursuant to the Provisions of the Primary Products Marketing Act, 1936.

I have the honour to submit the annual report and Statement of Accounts of the Primary Products Marketing Department for the year ended 31st July, 1938. CONSTITUTION OF DEPARTMENT. The Primary Products Marketing Amendment Act, 1937, provided that the Department should be divided into separate Divisions as follows :— (a) The Dairy-produce Export Division ; (b) The Internal Marketing Division ; and (c) Such other division or divisions (if any) as may be constituted. The Department at present consists of two divisions, the Dairy-produce Export Division and the Internal Marketing Division. The Dairy-produce Export Division exercises the functions of the Department relating to the acquisition and sale of dairy-produce exported or intended for export from New Zealand. The Internal Marketing Division exercises all the other functions of the Department, including the control and regulation of marketing within New Zealand of dairy and other products. The activities of the Internal Marketing Division are reviewed in a separate section of this report. REVIEW OF COMPLETED FINANCIAL OPERATIONS FOR 1936-37 SEASON. At the time of issue of the annual report for the year ended 31st July, 1937, the following quantities of dairy-produce were unsold, and were in consequence taken into the accounts at estimated sale values : — Creamery butter : 1,152,752 boxes. Estimated sale value, 115s. sd. per hundredweight sterling gross. Whey butter : 5,139 boxes. Estimated sale value, 107s. per hundredweight sterling gross. Cheese : 325,621 crates. Estimated sale value, 655. 7d. per hundredweight sterling gross. On the basis of these valuations for dairy-produce unsold, the deficit in the Dairy Industry Account for the 1936-37 season was estimated to be as follows :— £ s. d. £ 8. d. Estimated deficit on creamery butter .. .. .. .. 561,397 1 6 Estimated surplus on cheese .. .. .. 18,354 7 6 Less estimated deficit on whey butter .. .. 5,707 5 9 12,647 1 9 Estimated deficit, Dairy Industry Account, 1936-37 season .. .. 548,749 19 9 The actual realizations for dairy-produce unsold exceeded the estimates, the average sale prices being as follows : — Creamery butter : 120s. 4d. per hundredweight sterling gross. Whey butter : 108s. 2d. per hundredweight sterling gross. Cheese : 695. 2d. per hundredweight sterling gross.

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follows 6 — nal reS "' fc °* o P eratlolls for the 1936-37 season, expressed to the nearest pound, is as Deficit on creamery butter .. .. .. £ 384^313 Surplus on cheese .. .. .. 369 ' Less deficit on whey butter .. .. .. ' 5*956 120,413 „ , x . 263,900 Add premiums, staff annuities .. .. .. _ _ g 3gQ Add payments special milk products (Special Milk Products Regulations, 1937) 2,829 8,209 Deficit, 1936—37 season, at 21st June, 1938 (date of closing of accounts).. 279 10Q Add interest to 31st July, 1938 .. .. .. " Deficit, Dairy Industry Account, 1936-37 season, at 31st July, 1938 .. .. 272,482 Full details of the completed financial operations for the 1936-37 season are shown in the section of this report. In t ®.™ s °* undertaking given to the dairy industry, the deficit for the 1936-37 season is the responsibility of the Government. SUMMARY OF RESULTS OF PURCHASE AND SALE OF BUTTER AND CHEESE FOR 1936-37 SEASON. IQ qa T q\ C followin g tabulations show summarized details of the purchase and sale operations for the 1 Joo-37 season in respect of creamery butter, cheese, and whey butter :

Purchase and Sale of Creamery Butter, 1936-37 Season.

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(Quantity : 5,992,382 boxes. Weight: 149,799 tons 12 cwt. 3 qr. 21 lb.) Amount. Per Hundredweight. Per Pound. g Realization on sales, United Kingdom 15,274,488 104- 1-739 ' n.'isa (sterling gross) 00 Less trade discount* .. .. 127,122 0 10-401 0-093 r ir v tt ■ -> -[7-• 15,147,366 103 3-338 11-065 Less selling charges, United Kingdom— Port dues and consolidated rate 140,816 11-521 0-103 Storage, cartage and delivery, 32,712 2-677 0-024 averaging, and other charges Commission .. .. 305,871 25-026 0-223 - 1 479,399 3 3-224 0-350 Realization on sales, United Kingdom 14,667,967 100 0-114 (sterling net) Plus exchange on remittances to 3,520,327 24 0-029 9 W9 New Zealand Realization on sales, United Kingdom 18,188,294 124 0-l'43 7^987 (New Zealand currency) Less freight and insurance .. 1,103,114 7 6-255 0-806 Net realization on sales, United King- 17,085,180 116 5-888 io.iJT dom, f.o.b. New Zealand Plus realization on sales to destina- 359,509 114 8-567 19 oqi tions other than United Kingdom - _ Total net realization sales creamery 17,444,689 116 5-442 19-177 butter f.o.b. New Zealand Less administration, interest, ad- 126,202 0 10-110 h nan vertising, cost of remittances, 0 ' 090 and general expenses Fl^ al tt aet realization sales creamery 17,318,487 115 7.332 12-387 Purchase cost under 1936-37 guaran- 17,702,800 118 2-118 19-RR9 teed price , D season n ° reamery butter ' 1936-37 384,313 2 6-786 0-275 * Allowed in terms of rules of London Provision Exchange.

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Purchase and Sale of Cheese, 1936-37 Season.

Purchase and Sale of Whey Butter, 1936-37 Season.

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(Quantity : 1,213,914 crates. Sale Weight: 85,979 tons 6 cwt. 1 qr. 27 lb.) Amount. Per Hundredweight. Per Pound. d. s. d. d. d. Realization on sales, United Kingdom 5,551,701 64 7-918 6-928 (sterling gross) Less trade discount* .. .. 46,224 6-460 0-058 Less selling charges, United Kingdom— 5,505,4-77 64 1-458 6-870 Port dues and consolidated rate .. 71,516 9-995 0-089 Storage, cartage and delivery, ave- 15,288 2-137 0-019 raging, and other charges Commission .. .. .. 111,321 15-559 0-139 198,125 2 3-691 0-247 Realization on sales, United Kingdom 5,307,352 61 9-767 6-623 (sterling net) Plus exchange on remittances to New 1,273,763 ] 4 10- 024 I • 589 Zealand Realization on sales, United Kingdom 6,581,115 76 7-791 8-212 (New Zealand currency) Less freight and insurance .. 671,101 7 9-794 0-837 Net realization on sales, United Kingdom, 5,910,014 68 9-997 7-375 f.o.b. New Zealand Plus realization on sales to destina- 7,466 62 7-203 6-707 tions other than United Kingdom Total net realization sales cheese f.o.b. 5,917,480 68 9-893 7-374 New Zealand Less administration, interest, adver- 46,818 6-534 0-058 tising, cost of remittances, and general expenses Pinal net realization sales cheese .. 5,870,662 68 3-359 7-316 Purchase cost based on sale weights 5,744,293 66 9-722 7-158 under 1936-37 guaranteed price Surplus on cheese, 1936-37 season .. | 126,369 1 5-637 0-158 * Allowed in terms of rules of London Provision Exchange.

(Quantity : 57,422 boxes. Weight: 1,435 tons 7 cwt. 2 qr. 26 lb.) Amount. Per Hundredweight. Per Pound. £ £ d. s. d. d. d. Realization on sale, United Kingdom 134,691 93 10-032 10-054 (sterling gross) Less trade discount* .. 1,123 9-388 0-084 133,568 93 0-644 9-970 Less selling charges, United Kingdom— Port dues and consolidated rate .. 1,479 12-365 0-109 Storage, cartage and delivery, 91 0-761 0-008 averaging, and other charges Commission .. .. .. 2,694 22-522 0-201 4,264 2 11-648 0-318 Realization on sales, United Kingdom 129,304 90 0-996 9-652 (sterling net) Plus exchange on remittances to New 31,032 21 7 • 430 2 • SI fi Zealand 1__ Realization on sales, United Kingdom 160,336 111 8-426 11-968 (New Zealand currency) Less freight and insurance .. 10,749 7 5-862 0-802 Net realization on sales, United Kingdom, 149,587 104 2-564 11-lfifi f.o.b. New Zealand Less administration, interest, adver- 1,247 10-425 0-093 tising, cost of remittances, and — general expenses Final net realization sales whey butter 148,340 103 4-139 11-073 Purchase cost under 1936-37 guaranteed 154,296 107 5-932 11-517 price Deficit on whey butter, 1936-37 season ' 5,956 4 1-793 0-444 * Allowed in terms of rules of London Provision Exchange.

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Summary. £ £ Deficit on creamery butter .. .. .. .. 384,313 £ Surplus on cheese .. .. .. .. 126,369 Less deficit on whey butter .. .. 5,956 120,413 Deficit on 1936-37 season's produce .. .. .. .. 263,900 Other debits — Premiums, stall annuities .. .. .. 5,380 Payments special milk products .. .. .. 2,829 8,209 Deficit, Dairy Industry Account, 1936-37 season, at 21st June, 1938 .. £272,109 AVERAGE FINAL PAYMENTS FOR BUTTERFAT SUPPLIES FOR 1936-37 SEASON. The average final payments by dairy-factory companies to suppliers for butterfat for the 1936-37 season were — For butter-manufacture : 13-558 d. per pound butterfat. For cheese-manufacture : 15-176 d. per pound butterfat. INCREASE IN GUARANTEED PRICES FOR 1937-38 SEASON. The Primary Products Marketing Amendment Act, 1937, empowers the Government to make adjustments in the guaranteed prices announced at the beginning of any season, the intention being that, if circumstances warranted an increase in prices, the necessary statutory authority would be available. The Government realized that during the 1937-38 season dairy-farmers had experienced difficulty in obtaining farm labour at the wages they could afford to pay, and in order to meet this difficulty, and also to make some compensation for any increased farm costs, the Government considered that an additional payment to the dairy-farmers for their produce was justified. It was therefore decided that the guaranteed prices as fixed in August, 1937, should be increased by 0-41 d. per pound for butter and 0-21 d. per pound for cheese. These increases applied to all butter and cheese exported with the. concurrence of the Department after the 31st July, 1937, and which was manufactured from milk or cream delivered to a dairy factory on or after the Ist August, 1937, and before the Ist August, 1938. The further payments of 0-41 d. per pound on butter and 0-21 d. per pound on cheese applied also in respect of butter and cheese manufactured during the period mentioned and sold locally. The basic guaranteed prices for the 1937-38 season were thus increased by the Government as follows:— Creamery butter from 13-25 d. to 13-66 d. per pound. Cheese from 7-54 d. to 7-75 d. per pound. The resultant estimated average payments by dairy-factory companies to suppliers for butterfat (based on the standard conversion formulae adopted) showed corresponding increases as follows : —■ For butter-manufacture from 13-88 d. to 14-38 d. per pound of butterfat. For cheese-manufacture from 15-88 d. to 16-38 d. per pound of butterfat. The published accounts and statistical statements of dairy-factory companies show that the estimated average payments to suppliers of butterfat for the 1937-38 season are approximately as follows:— For butter-manufacture : 14-81 d. per pound of butterfat. For cheese-manufacture : 16-39 d. per pound of butterfat. It will be seen that the estimated average payments to suppliers as shown in the published accounts exceeds the estimates based on the standard conversion formulae. GUARANTEED PRICES, 1938-39 SEASON. During the 1937-38 season approaches were made to the Government by orgariizations representative of the dairy industry and farmers generally in regard to the method of price determination under the guaranteed-prices plan. In view of the apparent conflict of opinion among the different organizations, it is desirable to place on record the salient facts and an outline of the circumstances that led to the appointment by the Government of an Advisory Committee of seven members to investigate and report regarding the prices to be paid for the 1938-39 season. The Dominion Conference of the Farmers' Union in July, 1937, approved of the setting-up of a tribunal, presided over by a Supreme Court Judge, to fix the prices. The Dominion Dairy Conference, convened by the New Zealand Dairy Board, and held in February, 1938, approved of the setting-up of a tribunal to fix the prices, such tribunal to consist of equal numbers of assessors appointed by the Dairy Board and the Government, and presided over by a Supreme Court Judge.

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The National Dairy Conference, held in June, 1938, approved of the setting-up of an advisory body consisting of three members appointed by the dairy industry, three members appointed by the Government, and a Chairman to be appointed by the Government after consultation with the representatives of the dairy industry. The advisory body was to recommend to the Government the prices which it considered fair and reasonable. It is to be noted that the National Dairy Conference did not request the setting-up of a tribunal to fix the guaranteed prices, but a tribunal or advisory body to recommend the prices to be paid. Ihe Government had agreed to meet the wishes of the dairy industry expressed in earlier resolutions asking for a tribunal to fix the prices, but following the later representations the Government announced the appointment of an Advisory Committee of seven members to conduct inquiries and to make recommendations regarding the prices to be fixed for butter and cheese purchased by the Government for the 1938-39 season. Three of the members of the Committee were dairy-industry representatives, appointed by the Government on the nomination of a selection committee of the industry. Three members were appointed directly by the Government; and the Chairman was also so appointed, after consultation with representatives of the dairy industry. The order of reference for the Committee was contained in subsections (4) and (5) of section 20 of the Primary Products Marketing Act, 1936, which are as follows — (4) In fixing prices under this section in respect of dairy-produce exported after the thirtyfirst day of July, nineteen hundred and thirty-seven, regard shall be had to the prices fixed under this section in respect of dairy-produce exported before that date, and to the following additional considerations, namely:— (a) The necessity in the public interest of maintaining the stability and efficiency of the dairy industry : (b) The costs involved in the efficient, production of dairy-produce : (c) The general standard of living of persons engaged in the dairy industry in comparison with the general standard of living throughout New Zealand : (d) The estimated cost to the Department of marketing the dairy-produce concerned, and also the cost of the general administration of this Act: (e) Any other matters deemed to be relevant. (5) Due regard having been paid to the several matters mentioned in subsection four hereof, the prices fixed in respect of any dairy-produce exported after the thirty-first day of Julyj nineteen hundred and thirty-seven, shall be such that any efficient producer engaged in the dairy industry under usual conditions and in normal circumstances should be assured of a sufficient net return from his business to enable him to maintain himself and his family in a reasonable state of comfort. The Committee recommended that the prices of butter and cheese manufactured from cream and milk supplied to dairy factories between Ist August, 1938, and 31st July, 1939, and exported from New Zealand, should be as set out hereunder :—

Ihis recommendation of the Committee respecting prices was qualified by a statement in regard to certain factors which, in the judgment of the Committee, had to be taken into account by the Government in determining the prices to be paid. The statement referred to is as follows:— hi submitting its report, the Committee recognizes that its functions are purely investigational and advisory. It recognizes also that, owing to the impossibility of forecasting, even approximately, market realizations for a year ahead, it cannot make a definite finding regarding the possible financial implications involved in the payment of the prices it has recommended. The decision, as to both the prices to be paid" and the extent of the financial implications involved, is necessarily dependent on general considerations of Government policy regarding finance, and the Committee can therefore only submit its recommendations in accordance with its order of reference."

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Costs. 'Per Pound Butterfat. d. d. Working and maintenance costs (including depreciation) .. 5-695 Capital charges (interest) .. .. .. .. .. 3-375 Labour reward .. .. .. .. 9.220 18-290 Less pig returns .. .. .. .. ,. 1.540 Butterfat price for butter .. .. .. .. 16-750 Equivalent f.o.b. basic purchase price per pound of butter .. .. 15-605 Butterfat price for cheese .. .. .. .. .. 18.750 Equivalent f.o.b. basic purchase price per pound of cheese . . .. 8-775

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The report of the Committee was considered by the Government, and the following statement was subsequently made announcing tlie prices for butter and cheese for the 1938-39 season : — " In submitting its recommendations based on the evidence submitted to it, the Committee in its report stated that ' it cannot make a definite finding regarding the financial implications involved in the payment of the prices recommended. The decision as to both the prices to be paid and the financial implications involved is necessarily dependent on general considerations of Government policy regarding finance, and the Committee can therefore only submit its recommendations in accordance with its order of reference.' " With this qualification the Committee recommended that the basic purchase price of butter f.o.b. should be 15-605 d. per pound and the basic purchase price for cheese f.o.b. should be 8-775 d. per pound. " These prices would give a butterfat price for butter of 16-750 d. (16fd.) per pound and a butterfat price for cheese of 18-750 d. (18fd.) per pound. " These prices are built up on the following bases :— d. " Working and maintenance, including depreciation .. 5-695 " Capital charges: Interest .. .. .. .. 3-375 " Labour reward .. .. .. .. .. 9-220 18-290 " Less pig returns .. .. .. .. . ■ 1-540 16-750 " Add 2d. per pound butterfat price for cheese .. .. 18-750 " These butterfat prices or pay-outs would be realized by the Government purchasing the butter graded 93-93| points at 15-605 d. per pound and cheese graded 92-92| points at 8-775 d. per pound. The purchase at these prices, presuming that sales during the 1938-39 season realized the average of last season (118s. per hundredweight sterling for butter and 68s. 6d. per hundredweight sterling for cheese), would result in a deficit of £2,824,000. " The working and maintenance costs allowed by the Committee show an increase of 0-625 d. over last season's allowance ; capital charges, an increase of 0-315 d., based on a capitalization of £75 per cow instead of £73 per cow allowed for the previous season. " It was recommended that labour reward be increased by l-43d. over the sum allowed last season. " The figure for pig returns is the same as that allowed last season. These increases recommended by the Committee are as follows :— d. " Working and maintenance .. .. .. .. 0-625 " Capital charges (interest) .. .. .. .. 0-315 " Labour reward .. .. .. .. .. 1-430 2-370 " In the opinion of the Committee this price increase of 2-37 d. was justified on the evidence and returns of farm production and costs submitted to it. Their recommendation as to price was based on an average butterfat production per adult male unit of labour of 5,7501b. In arriving at this figure the Committee took as a standard 2401b. of butterfat per cow, and it related a fifty-cow farm to 2-087 adult male units of labour. " The Government's Standard.—The Government is of the opinion that a more correct standard of efficiency from the point of view of both farm and farmer would be represented by relating forty-eight cows producing 250 lb. of butterfat per cow to two adult male units of labour. This standard could be expressed alternatively as relating to fifty cows producing 240 lb. of butterfat per cow. Accepting this standard of efficiency, which the Government, after inquiry, considers is likely to be more nearly correct than that of the Committee, the production per adult male unit of labour is 6,000 lb. of butterfat. The Government having adopted this standard, the basic purchase price for butter becomes 14-89 d. per pound, representing a butterfat pay-out for butter of 15-88 d. per pound. This purchase price for butter represents an increase of l-23d. per butter on the price at which butter has been purchased for last season. " In terms of butterfat pay-out for butter, the price represents l-sd. per pound above the price for last season. " On the question of butterfat production per cow the evidence was apparently insufficient to enable the Committee to adopt a definite single figure as representing an efficiency standard, and a range of 220 lb. to 260 lb. was therefore accepted as a basis. The middle figure of this range was 240 lb., and it appears that the Committee worked on that figure. The actual

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figure was left undecided by the Committee, and after careful examination of the returns of efficient farmers and other information the Government feels justified in adopting the figure of 250 lb. of butterfat per cow, which is well within the range adopted by the Committee, in place of the figure of 240 lb. accepted by it. " The acceptance of this standard does not affect the recommendation of the Committee relative to labour reward. It still provides, in respect of a farm employing two adult workers, for £4 10s. per week, plus £1 10s. value of house, &c., for the working farmer, and for £4 per week for the adult male employee. " Comparative Living Standards.—After careful consideration of the report and other relative information, the Government is of opinion that in making their recommendation the Committee has not given full weight to the central feature of the order of reference which is set out in paragraph (c). This paragraph provides that regard shall be had to : — "'(c) The general standard of living of persons engaged in the dairy industry in comparison with the general standard of living throughout New Zealand.' " If this factor is not given its correct weight, a disparity will arise that it will not be possible to overcome. " In the opinion of the Government, evidence submitted to the Committee indicated that, were its recommendations given effect to in their entirety, such a disparity would inevitably follow. " There is the further factor stressed by the Committee of which the Government is bound to take cognizance—namely, the financial implications of the price determined upon. This is a matter which the Committee considered did not come within the scope of its order of reference, but which the Government, however, cannot ignore in considering the Committee's recommendation. " Heavy deficits, moreover, if repeated, must inevitably wreck the whole guaranteedprices procedure. This statement is supported by the Committee's report where on page 7 it says " ' A further relevant matter is the necessity of ensuring that prices shall not be fixed at such levels as will cause the breakdown of the system of guaranteed prices, which has been designed to stabilize the incomes of persons engaged in the dairying industry and to afford an insurance against the seasonal and inter-seasonal fluctuations of a world market. It will be impossible to ensure the continuance of a reasonable state of comfort if prices are fixed at levels so high as to render it impossible to avoid deficits in the Dairy Industry Account of such magnitude as necessarily to react to the detriment of the general standard of living of the community ; though it is accepted that the community as a whole will bear such deficits as it may be necessary to meet in order to maintain the persons referred to in subsection (5) in a reasonable state of comfort.' " The Government is satisfied that the working dairy-farmer does not wish to end the guaranteed-prices procedure. It recognizes, however, that he desires and is entitled to recover the increased costs that have been experienced, and a better labour reward, in accord with the general improvement in living standards. " Having regard to these considerations and to present price levels and living standards in New Zealand, the Government is of the opinion that the prices that should be paid this season to lift the farmers' standards in reasonable relationship with other standards are 14-89 d. per pound for butter and 8-42 d. per pound for cheese. " The Increased Pay-outs. —These prices will allow the average efficient dairy-factory company to pay to its suppliers 15-88 d. per pound for butterfat for butter and 17-88 d. per pound for butterfat for cheese. " The make-up of this price is as follows : — <1. "Working and maintenance costs .. .. .. 5-34 " Capital charges (interest) .. .. •• •• 3-24 "Labour reward .. .. .. .. 8-84 17-42 "Less return from pigs .. .. .. .. 1*54 15-88 On the estimate of a continuance of last year's realizations for butter and cheese, these prices will result in a deficit of £1,535,000. If from this sum is deducted the estimated surplus for last season of £600,000, to which I will refer later, the net deficiency at the end of the 1938-39 season will be approximately £935,000. " The Government, to provide a sure return to the dairy-farmer and to maintain the stability of the industry, is accepting the responsibility of paying these prices."

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The full range of f.o.b. purchase prices fixed for the 1936-37 season, the 1937-38 season, and the 1938-39 season is as follows :—

The conversion formulae used in the determination of the 1938-39 season prices shown above are— Butter. Cheese. Over-run .. .. 21-75 per cent. Yield .. .. 2-51 gross. Costs of manufacture and \ 2-25 d. per pound 2-45 net. delivery to f.o.b. . . J butterfat. Return from whey butter 0-75 d. per pound butterfat. Costs of manufacture and \3-sd. per pound delivery to f.o.b. f butterfat.

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'I 1 1936-37 Season.* 1937-38 Season.f „ Butter and Cheese manufactured Butter and Cheese exported after ,, Z. '• cason. Grade. on and after 1st August, 1936, 31st July, 1937, and which is Ku f tter a " d t Ch , eese f an^° fi ! and exported on or before manufactured on or before o 1 , 0 ? T i S in«5f? US 'i \ i° 31st July, 1937. 31st July, 1938. 31st ' ,u]y ' 19!i9 > and ex P orted - I Creamery Butter. Per Pound. Per Pound. Per Pound. Finest grade— d. d. d. 94 points and over .. 12-6875 13-785 15-015 93 to 93| points .. 12-5Q25J (basic price) 13 • 66$ (basic price) 14-89$ (basic price) | Equivalent to 106s. 6d. sterling J Equivalent to 115s. sterling J Equivalent to 124s. sterling per hundredweight on London per hundredweight on London per hundredweight on London market market market First grade — 92 to 92| points .. 12-5 13-5975 14-8275 90 to 91£ points .. 12-3125 j 13-41 14-64 Second grade .. 11-8125 j 12-91 14-14 Whey Butter. First grade .. ..I 11-5625 I 12-66 I 13-89 Second grade .. I 11-0625 I 12-16 I 13-39 Cheese. Finest grade— 94 points and over .. 7-21875 7-90625 8-57625 93 to 93J points .. 7-1875 7-875 8-545 First grade— 92 to 92| points .. 7-0625$ (basic price) 7-75J (basic price) 8-42J (basic price) { Equivalent to 63s. 3d. sterling J Equivalent to 68s. 8d. sterling J Equivalent to 73s. 6d. sterling per hundredweight on London per hundredweight on London per hundredweight on London market market market 91 to 91£ points .. 7-00 7-6875 8-3575 Second grade .. 6-8125 7-50 I 8-17 Premiums. Unsalted butter .. 2s. 4d. per hundredweight 3s. 4d. per hundredweight 3s. 8d. per hundredweight. Coloured cheese .. 6d. per crate 6d. per crate 6d. per crate. Deep-coloured cheese Is. 5d. per crate Is. 5d. per crate Is. 5d. per crate. Waxed cheese .. 4|d. per crate 4|d. per crate 4Jd. per crate. Deductions. Butter, per Cheese, per Butter, per Cheese, per Butter, per Cheese, per Box. Crate. Box. Crate. Box. Crate, d. d. d. d. d. d. Insurance to f.o.b. .. 0-68 1-07 0-69 1-085 0-565 0-935 Dairy Board levy .. 1-12 1-63 0-56 0-815 0-56 0-815 Average Payments by Dairy Companies for Butterfai Supplies. Pay-out, per Pound Butterfat. Pay-out, per Pound Butterfat. Pay-out, per Pound Butterfat.. d. d. d. For buttermaking .. 13-558 14-81 15-88 (est.). For cheesemaking (in- 15-176 16-39 17-88 (est.). eluding whey butter) * It was estimated that the purchase prices originally fixed for cheese for the 1936-37 season (basic price, 6-8125d. per pound) would enable efficient cheese-manufacturing companies to pay, on average, to their suppliers for butterfat l£d. per pound in excess of the corresponding average payment made by butter-manufaeturing companies. The differential of l£d. per pound butterfat was not realized, and the Government made a further payment to cheese-manufacturing companies of Jd. per pound of cheese. The purchase prices for cheese for the 1936-37 season shown above include this further payment. f The purchase prices originally fixed for butter and cheese for the 1937-38 season (butter-basie price, 13-25d. per pound; cheese basic price, 7-54d. per pound) were increased by 0-41d. per pound for butter and 0-21d. per pound for cheese. The purchase prices for butter and cheese for the 1937-38 season shown above include these price increases.

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REVIEW OF OPERATIONS FOR 1937-38 SEASON. This report marks the completion of the second year of the operations of the Department. It is pleasing to record that the success of the policy adopted in regard to the marketing of butter and cheese, which was clearly indicated in the first year after the inauguration of the new procedure, has been fully maintained. Merchant-agents, dairy-industry officials, and others qualified to judge are in general agreement as to the soundness of the single-unit system of marketing, with general sales instead of sales by individual dairy-factory companies, and with consignment selling in place of the mixed consignment and f.o.b. and c.i.f. selling, which was a disturbing feature in the marketing system of the past. The distribution of butter and cheese in the United Kingdom has been widened by means of a better direct shipment service to the main ports. The new marketing procedure has resulted in savings in costs of marketing amounting to approximately £200,000 per annum. The marketing operations for the 1937-38 season are fully reviewed under separate appropriate headings in this report. The payment of guaranteed prices for butter and cheese has given dairy-farmers stability and security by protecting them from the effects of fluctuations in market prices for dairy-produce. The fixed and uniform monthly rate of payment for butterfat that dairy-factory companies have been able to maintain enables dairy-farmers to budget with certainty for their farming and domestic expenditure. The guaranteed-price policy has worked smoothly, and the administrative procedure has been conducted without a hitch. PREMIUMS FOR QUALITY AND QUANTITIES OF BUTTER AND CHEESE PURCHASED AND PAID FOR AT DIFFERENTIAL PRICES. The basic guaranteed purchase prices for butter and cheese are subject to additions and deductions according to the quality of the dairy-produce as disclosed by the grading points awarded by the Government graders. The experience of the past two years justifies the continuance of the price differentials. They provide an incentive for maintenance and improvement of quality, which is appreciated by representatives of dairy-factory companies. The following comparative figures show the percentages of New Zealand butter and cheese of the various grades, and the quantities purchased and paid for at differential prices : —

Grading of Dairy-produce: Percentages of New Zealand Butter and Cheese of the Various Grades.

The quantities of butter and cheese purchased and paid for at the respective differential prices are shown in the following tabulations : —

Creamery Butter (in Tons): Quantities purchased and paid for at Differential Prices.

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Butter. Cheese. Finest. First. Second. Total. Finest. First. Second. Total. Per Cent. Per Cent. Per Cent. Per Cent. Per Cent. Per Cent Per Cent. Per Cent. 1934-35 .. .. 77-04 21-66 1-30 100-00 20-60 76-27 3-13 100-00 1935-36 .. .. 76-48 22-36 1-16 100-00 19-47 77-18 3-35 100-00 1936-37 .. .. 79-98 19-12 0-90 100-00 20-58 76-81 2-61 100-00 1937-38 .. .. 82-00 17-44 0-56 100-00 9-22 85-55 5-23 100-00

Finest Grade. First Grade. Grading Ports. Total. „„ . oTad^ 94 Points p*° 92 to 90 to 91J Wacte ' and over. (jJ Points. Points. Tons. Tons. Tons. Tons. Tons. Tons. Auckland .. .. .. 99,365 32,321 47,208 12,441 7,048 347 Bluff .. .. .. 317 1 75 52 163 26 Dunedin 197 18 84 47 35 13 Gisborne .. .. .. 2,227 1,257 796 146 28 Lyttelton 2,304 1,612 545 49 22 76 Napier .. 1,796 921 630 131 114 New Plymouth .. .. 11,143 5,201 4,385 1,054 500 3 Patea .. .. .. 1,552 92 625 507 323 5 Timaru .. .. .. 914 474 381 21 14 24 Wanganui .. .. .. 2,684 2,102 340 82 143 17 Wellington .. .. .. 15,056 11,612 2,206 869 363 6 Grand totals — 1937-38 .. 137,555 55,611 57,275 15,399 8,753 517 1936-37 .. 149,810 53,844 66,717 15,550 13,192 507 Percentage of qualities — 1937-38 .. .. 100 40-43 41-64 11-19 6-36 0-38 1936-37 .. .. 100 35-94 44-53 10-38 8-81 0-34

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Whey Butter (in Tons): Quantities purchased and paid for at Differential Prices.

Cheese (in Tons): Quantities purchased and paid for at Differential Prices.

It will be noted that in the case of creamery butter 41$ per cent, was paid for at the basic guaranteed price, and 40$ per cent, above and 18 per cent, below the basic guaranteed price. In to- 6 case of cheese, 64 per cent, was paid for at the basic guaranteed price, and 94 per cent, above and 26§ per cent, below the basic guaranteed price.

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Grading Ports. Total. First Grade. Second Grade. Tons. Tons. Tons. Auckland .. .. .. 563 421 142 Bluff 6 5 1 Lyttelton .. . . . . g g New Plymouth .. . . .. 367 349 18 Pat ea .. .. . . .. 630 625 5 Timaru.. .. .. .. 26 6 Wellington .. .. 197 187 10 Grand totals— 1937-38 .. .. 1,795 1,613 182 1936-37 .. .. .. l ; 446 1 j 249 197 Percentage of qualities— 1937-38 .. .. .. 100 89-86 10-14 1936-37 .. .. 100 86-38 13-62

Finest Grade. First Grade. Grading Ports. Total. ~ j - Second 94 Points 93 to 93J 9 ?, to , 91 to 91A Grade ' and over. Points. (Ba^e .)| P °^- . . • -p- Hf" . , , , TonB - T °na- Tons. Tons. Tons. Tons Auckland 15,752 71 611 7,778 4,148 3 144 9 > 844 12 996 5,052 3,530 254 Dunedm 1,717 32 343 1,086 216 40 Gisborne .. .. .. 94 .. i 40 46 ? Lyttelton 893 15 236 521 108 13 Napier .. .. .. 56 .. 25 21 7 3 New Plymouth .. .. 17,042 97 3,270 10,482 2,939 254 4atea 22 > 689 4 700 18,750 3,046 189 Timaru 719 11 212 476 16 4 Wanganui 2,232 11 46 1,474 656 45 Wellington .. .. 12,746 132 910 7,978 3,311 , 415 Grand totals — nnoI~1S " 83 > 784 385 7,350 53,658 18,023 4,368 1936-37 .. .. 86,708 2,079 15,768 48,045 18,561 2,255 Percentage of qualities— " •' 100 °' 46 8-77 64-05 2 1- 51 5-21 1936-37 .. .. 100 2-40 18-18 55-41 21-41 2-60 Percentage of™ Waxed cheese— 1937-38 .. .. 59-32 1936-37 .. .. 58-54 .. Coloured cheese— 1937-38 .. .. 33-44 1936-37 .. .. 32-69 .. .. " Cheese figures calculated at fourteen crates to a ton.

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PROCESSES IN PURCHASE OF BUTTER AND CHEESE AND SHIPMENT AND DELIVERY TO MARKETS IN THE UNITED KINGDOM. In last year's report an outline was given of the procedure adopted by the Department in regard to the purchase, shipment, and delivery of dairy-produce to the United Kingdom markets. It is considered worth while to repeat this information, which is as follows :— 1. Dairy-factory companies forward butter and cheese to the cool stores for export as in the past. The care of the produce in cool store is the responsibility of dairy companies, but supervision is exercised by the expert officers of this Department and by the Government Dairy-produce graders with a view to the preservation of the quality of butter and cheese. 2. All butter and cheese exported from New Zealand and purchased by the Department is protected by a comprehensive insurance contract, which covers the produce until thirty days after arrival in the United Kingdom. The contract also covers the cream and milk which is made into butter and cheese intended for export, and which is identifiable as such, from the time such cream and milk is received at the factory until the produce is placed f.o.b. ocean steamer. The Department pays the insurance underwriters' flat rates covering the complete risk, and charges to dairy-factory companies the portion of the premium which represents the risk up to f.o.b. ocean steamer. 3. Dairy-factory companies may obtain advances from their bankers on produce in cool store awaiting shipment at the banks' best interest-rates. The amounts advanced by the banks are as follows :— Per Box. Creamery butter— £ a. d. Finest grade .. .. .. .. .. ..370 First grade .. .. .. .. .. .. ..360 Second grade .. .. .. .. .. ..310 Cheese— North Island—• Finest grade .. .. .. .. .. .. 510 0 First grade .. .. .. .. .. ..576 Second grade .. .. .. .. .. ..546 South Island— Finest grade .. .. .. .. .. ..570 First grade .. .. .. .. .. ..546 Second grade .. .. .. .. .. ..516 4. Butter and cheese for export is allocated for shipment in accordance with the recommendations of the Dairy Sales Division in London, after consultation with the selling-agents. The shipping programme is worked out by the Department and the Overseas Shipowners' Allotment Committee, which meets regularly for the purpose of planning arrivals of butter and cheese at United Kingdom ports, in accordance with the agreed programme. Under 'the present system the Department has been able to arrange a better programme of shipments to United Kingdom outports. 5. Dairy-produce becomes the property of the Crown as soon as it is placed on board any ship for export, and payment in full to dairy-factory companies is made forthwith. Credit-notes are issued in favour of dairy companies for butter and cheese, and the amount due is remitted to the credit of the bank accounts of the individual companies, under a special arrangement entered into with the trading banks. 6. All butter and cheese for export to the United Kingdom is shipped to the Dairy Sales Division, for sale on consignment. Delivery orders are issued to merchant-agents, enabling them to obtain the quantities allocated to them for sale. 7. The financing of payments to dairy-factory companies for butter and cheese is arranged through the Dairy Industry Account established at the Reserve Bank of New Zealand. The administrative, marketing, shipping, insurance, and other expenses of the Department are paid from this account. The proceeds of sale of dairy-produce are paid into the account, the final balance of which will show the surplus or deficit on the operations for the year. 8. The sale of butter and cheese in the United Kingdom is conducted by a group of twenty merchant firms appointed as agents for the Department. These merchant firms sell on agency terms for a commission of 2 per cent., which includes the credit risk. The agents are firms which have been selling the produce for years under the marketing system in operation before the passing of the Primary Products Marketing Act. Provisional allocations of produce are made to the agents for a period of one year, and quantities are reviewed and varied according to the selling ability of the firms as indicated by price returns and marketing and distributive service rendered. QUANTITIES OF BUTTER AND CHEESE GRADED. The total gradings of butter and cheese for the twelve months ended 31st July, 1938, are shown below, also the comparative gradings for the 1936-37 and 1935-36 seasons:—

Butter gradings for the 1937 38 season show a decrease of 7*59 per cent, and cheese gradings a decrease of 3-12 per cent. Expressed in terms of butterfat, the total decrease in gradings is 6-656 per cent. b

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1937-38. 1936-37. 1935-36. Butter (in Tons). Salted .. .. .. 136,023 147,168 139,973 Unsalted .. .. .. 6,812 7,396 6,714 142,835 154,564 146,687 Cheese (in Tons). White 56,752 59,337 58,263 Coloured .. .. .. 28,718 28,885 27,292 85,470 88,222 _ === _ 85,555

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QUANTITIES OF BUTTER AND CHEESE EXPORTED. The quantities of butter and cheese exported from the various grading ports of the Dominion are shown in the following tabulation : —

Butter and Cheese Exports from 1st August, 1937, to 31st July, 1938.

THE RELATION BETWEEN BUTTER-MANUFACTURE AND CHEESE-MANUFACTURE AND DIFFERENTIAL PAYMENTS AND ALLOWANCES. In order to assist the maintenance of cheese-production, the guaranteed purchase prices for butter and cheese have been fixed to allow on the average a differential marginal payment in favour of butterfat supplied for cheesemaking. This differential margin is intended to compensate suppliers to cheese-factory companies for the comparatively lower returns from by-products and for the costs of delivery of milk. The differential margin of l|d. per pound butterfat which was originally fixed has been raised to 2d. per pound butterfat, and there is evidence to support the contention that these price margins have been effective in arresting the steady decline in cheese-production which has been in evidence during the past five years. In this regard the following figures of cheese and butter gradings are of interest:—

Cheese and Butter Gradings.

The foregoing figures show that in the two seasons immediately preceding the introduction of the guaranteed-price procedure the decreases in cheese-production were respectively 10-62 per cent, and 7-68 per cent. In the 1936-37 and the 1937-38 seasons the position is shown to be relatively more favourable. For the 1936-37 season the increase in cheese-production is 3-12 per cent., and for the 1937—38 season the decrease is 3-12 per cent. When it is considered that in respect of butter the decrease for the 1937—38 season is 7*59 per cent., it can fairly be claimed that the present price margin of 2d. per pound butterfat in favour of cheese has assisted to maintain cheese-production. On the general question of cheese-production, the position is that imports of cheese into the main importing countries have shown a steady decline since 1930, in which year the imports into the seventeen main importing countries (including United Kingdom, Germany, United States, Belgium, and France) were 321,650 tons. Each subsequent year showed a decline until in 1935 the quantity was 242,350 tons. In 1936 and 1937 the quantity showed a slight rise, the importations for 1937 being 264,250 tons. This trend is noted in the published statistics. The decline in importations of cheese is evidence either of a lessened consumer demand or of an increase in the production of cheese in the importing countries, necessitating lesser importations. Both factors must be taken into

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To Great Britain. To X)e^Unatton § . Total Exports. Percentage. Grading Ports. — Butter. Cheese. Butter. Cheese. Butter Cheese. Butter. Cheese. Butter. Cheese. Boxes. Crates. | Boxes. Crates. I Boxes. Crates. Boxes. Crates. Boxes .Crates Auckland .. 3,897,705 220,529)86,613 665 1112,268 904 4,096,586 222,092 72-25 18-71 Now Plymouth .. 449,560 228,564 .. .. .. .. 449,560 228,564 7-93 19-26 Patea •• •• 87,089 318,533 87,089 318,533 1-54 26-83 Wanganui .. 112,399 32,718 40 112,399 32,758 1-98 2-76 Wellington .. 606,884 186,292 5,600 .. 1,688 66 614,172 186,358 10-83 15-70 xsborne .. 90,881 1,314 90,881 1,314 1-60 0-11 Napier .. .. 67,912 681 67,912 681 1-20 0-06 North Island totals 5,312,430 998,631 92,213 665 113,956 1,010 5,518,599 990,306 97-33 83-43 Lyttelton .. 92,059 14,033 1 92,059 14,034 1-62 W8 Timaru .. .. 37,820 10,145 37,820 10,145 0-67 0-86 Dunedm.. .. 7,812 23,135 .. .. 90 16 7,902 23,151 0 14 1-95 Blufi •• •• 13,387 149,235 .. .. .. 91 13,387 149,326 0-24 12-58 South Island totals 151,078 196,548 .. .. 90 108 151,168 196,656 2-67 16-57 Dominion totals.. 5,463,508 1,185,179 92,213 065 114,046 1,118 5,669,767 1,186,962 100-00 100-00

Cheese. Butter. Tons Increase or Decrease on T Increase or Decrease on Previous Year. * Previous Year. Per Cent. Per Cent. 1934-35 . . .. .. 92,673 10*62 (decrease) 136,217 2*86 (decrease) 1935-36 .. .. .. 85,555 7*68 (decrease) 146,687 7*69 (increase) 1936-57 .. .. .. 88,222 3* 12 (increase) 154,564 5*37 (increase) 1937-38 .. .. .. 85,470 3-12 (decrease) 142,835 7 • 59 (decrease)

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account in considering the extent to which New Zealand should maintain or expand cheese-production. It is important to. note that, with the increasingly higher standard of living in the United Kingdom and in other countries, consumption of cheese has tended to fall, while consumption of butter has risen. The London Manager of the Department points out that the substantial drop in the production of cheese in the United Kingdom in 1937 from the level of previous years is the principal factor contributing to the comparatively satisfactory price level for New Zealand cheese which has ruled during the 1937-38 season. It is considered by no means improbable that this reduction or the greater part of it might be rapidly recovered, in which case returns from New Zealand cheese would be lower, unless a corresponding reduction takes place in supplies from New Zealand or Canada. There is the further consideration that Australian supplies of cheese have increased during the 1937-38 season, the export figures being : 1936-37 season, 6,271 tons , and 1937-38 season, 12,357 tons. It is to be noted that the reaction on effective consumer demand of available supplies applies also to butter, but butter-consumption responds more quickly and effectively to retail-price adjustment. Thus, an additional 5,000 tons of butter is unlikely to affect the season's a.verage price to any great extent, but the equivalent in cheese—say 10,000 tons— is likely to make a substantial difference to the price return for cheese, lor the reasons stated, the London Manager of the Department considers that about 90,000 tons export for the Dominion should be kept in mind, as the maximum. Recently representations were made to the Government that in the case of small cheese-factories there should be an increase in the existing calculated differential margin of 2d. per pound in favour of butterfat supplied for cheese-making, or, alternatively, that there should be higher costs allowances for those cheese-factories. It is considered that it would be impracticable to adopt standards varying with the outputs of factories. It is to be noted that it frequently happens that the higher costs of a small cheese-factory are balanced by a higher cheese yield. The Government recognizes that any differentiation made in favour of the smaller cheese-factories, whether in regard to the calculated marginal butterfat allowance or the factory costs, would lead logically to similar claims being made on behalf of the smaller butter-factories. In the final issue it is conceivable that claims for special consideration would be made for factories in every farming district. The foregoing comment applies particularly to cheese-manufacture in Southland, where manufacturing-costs, though higher than in other cheese districts, are offset by a higher cheese yield. The Government, in increasing the differential margin in favour of butterfat supplied for cheesemakmg to 2d. per pound, regarded approximately |d. of the increased differential margin as a temporary expedient until a solution of the yield problem is found. It is considered that a further increase, to offset a continued lowering of the cheese yield, is open to objection, and that the price fixed for cheese for the 1938-39 season should not be augmented on account of a cheese yield lower than the standard net yield of 2-45, even though, for that reason, cheese-factory companies on the average do not show the anticipated margin of 2d. per pound of butterfat. The whole question of the relation of the net return to suppliers of milk for cheese-manufacturing to the net return to suppliers of cream for butter-manufacturing involves a consideration of the nature of the milk-supply for cheesemaking, the yield of cheese per pound of butterfat, economic cheesemanufacturing conditions, the method of payment for milk for cheesemaking, and the net return to cheese-milk suppliers per cow and per acre. If the conditions in respect of cheese yield are such that a yield allowance of 2-51 gross or 245 net is insufficient to enable the 2d. per pound differential payment lor butterfat to be generally realized, then an investigation of the factors referred to must be made by the industry. MARKETING OF BUTTER AND CHEESE. The report of the Department for the 1936-37 season contained a review of the developments during recent years in the marketing of dairy-produce. An outline was given of the changes in methods of sale and marketing organization, and reference was made to the establishment of the New Zealand Dairy-produce Control Board. Reference was also made to the marketing control of the Board m 1926, to the abandonment of the venture after less than one year's trial, and. to the plans formulated by the Board in 1935 for a system of group marketing. The decision of the Government to purchase the total exportable output of butter and cheese from the Ist August, 1936, and to market dairy-produce through the Primary Products Marketing Department, transferred all responsibility for marketing from the industry to the Government. The development by the Department of a more regular and wider distribution of butter and cheese in the United Kingdom has been supported by an extended publicity and sales-promotion campaign which has resulted in the establishment of a considerable " all the year round " counter trade for New Zealand butter and cheese as such. This regular counter demand for " New Zealand " assists the maintenance of New Zealand prices when competition from cheaper butters is keen. Further evidence of the benefits of the present marketing policy is to be found in the steady narrowing of the price margin for Danish butter over New Zealand butter. Attention is directed to the table on page 19, which shows the margins to be : For the 1935-36 season, 20s. sd. per hundredweight; for the 1.936-37 season, 15s. 2d. per hundredweight; and for the 1937-38 season, lis. 7d. per hundredweight.

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MARKETING OF NEW ZEALAND BUTTER IN THE UNITED KINGDOM. Quantities (in Tons) sold Weekly, with average London Prices (per Hundredweight Sterling), 1st August, 1937, to 31st July, 1938.

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MARKETING OF NEW ZEALAND CHEESE IN THE UNITED KINGDOM. Quantities (in Tons) sold Weekly, with Average London Prices (per Hundredweight Sterling), 1st August, 1937, to 31st July 1938.

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MARKETING IN THE UNITED KINGDOM. The system of marketing in the United Kingdom outlined in the report of the Department for the 1936-37 season has been continued during the 1937-38 season. The number of selling-agents employed has been reduced to twenty, with whom the closest contact is maintained. While unnecessary competition to clear stocks has been eliminated, the regular requirements of wholesale and retail buyers are, and must always be, the first consideration. Save on a few occasions, when the arrival of incoming ships has been delayed, adequate supplies of New Zealand butter and cheese have been regularly available, meeting a steady demand, which has prevented undue accumulation of unsold stocks at any period during the year. The distribution of butter and cheese in the United Kingdom has been widened by means of direct shipments to the main United Kingdom ports. In particular, regular shipments have been commenced to Cardiff, Southampton, Hull, and Newcastle-on-Tyne. The steady growth of trade in those areas served by west coast and east coast ports in the United Kingdom is shown in the statistical data and the maps_ published in appropriate sections in this report. Over one-third of the Dominion's butter and cheese is now distributed from ports other than London. It will be noted that, with the exception of butter to Glasgow, the shipping programme for 1938-39 calls for still greater quantities lor west coast ports. The price level of New Zealand butter and cheese has improved substantially during the year in relation to the produce of competing countries, and disturbing fluctuations in price during short periods have been minimized. These trends are shown in the tables of prices published in this report. Attention has already been directed to the narrowing of the price margin for Danish butter over New Zealand butter, and a reference to the table on page 19 will also show, in respect of the 1937-38 season, the favourable average price compared with the price for Australian butter. INFLUENCES AFFECTING BUTTER-PRICES IN THE UNITED KINGDOM DURING THE 1937-38 SEASON. At the beginning of October, 1937, stocks in cold store, according to the Imperial Economic Committee s return, were over 10,000 tons less than in 1936, the total being the lowest for the eight years during which cold-store statistics have been published. Imports in September had been unexpectedly light some 11,000 tons less than in the previous September—and October and November imports were also well below those of the same months of 1936. This shortage of supplies resulted m a very sharp rise in the price of all butter in October, the range of prices being from 1275. to 151s. per hundredweight. The consequent high retail price (Is. 6d. per pound) severely checked consumption, which, up to that time, had been maintained at a satisfactorily high level. It is reliably estimated that weekly consumption fell by at least 1,000 tons per week during November. Stocks at the beginning of the January-March, 1938, quarter, though showing some recovery from the very low level reached m December, were still much less than normal, but arrivals from the latter part of December onwards, particularly of New Zealand and Australian butter, were well above consumption. In consequence, the price of New Zealand fell almost continuously from 151s. per hundredweight at the end of October, 1937, to 106s. per hundredweight at the end of January, 1938 the average retail price falling at the same time from Is. 6d. to Is. 2d. per pound. Consumption responded to some extent to the lower retail prices, but remained well below the level of the previous year. In early February, market sentiment became more favourable, due in a large measure to the substantial reduction in New Zealand gradings, the persistent reports of the widespread incidence of foot-and-mouth disease in France, Belgium, Holland, and Germany, and to the abnormally dry weather m Great Britain, Denmark, and certain areas of Northern Europe. Notwthstanding these factors, however, imports were maintained at a higher level than in 1937 but the possibility of short supplies during the summer period created a good " stocking up " movement' which enabled sellers to advance prices steadily during February-March. At the beginning of April, total stocks had increased to nearly 15,000 tons, only about 2,000 tons less than at the same date of 1937. The continued decline in New Zealand production, however, and abnormally dry weather in the European countries referred to above, brought about a further increase in demand with a rising price movement, culminating in mid-May, when New Zealand, Australian, and Danish butter reached 1335., 1315., and 1325. per hundredweight respectively. Retail prices for New Zealand advanced in sympathy from Is. 2d. to Is. 4d. per pound., checking the seasonal increase m consumption which invariably occurs in the summer months. In May the long spell of dry weather was broken by ample rains, and it became evident that .Northern Hemisphere production would be maintained at a high level during the season. Prices receded by from 10s. to 12s. per hundredweight for all descriptions during the second half of May, and remained till the end of the season at around 120s. to 1255. per hundredweight for New Zealand, with Danish at about the same price to 4s. premium until mid-August, when the seasonal decrease in Danish production brought about the usual sharp rise in the price of Danish. The season will close in September with total stocks from 12,000 tons to 14,000 tons higher than at the same date in 1937 ? and also in excess of that of the two previous years,

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Average Monthly Prices of Butter at London.

Average London Market-prices.

19

New Zealand. Australian. ,, . Finest Salted. Choicest Salted. -Danish. Month. 1935-36. 1936-37. 1937-38. 1935-36. 1936-37. 1937-38. 1935-36. 1936-37. 1937-38, Per Cwt. Per Cwt. Per Cwt. Per Cwt. Per Cwt. Per Cwt. Per Cwt. Per Cwt. Per Cwt. s - d - s. d. s. d. s. d. s. d. s. d. s. d. s. d. s. d. August .. 95 3 119 6 116 6 94 6 118 3 115 9 110 6 127 6 126 6 September .. Ill 0 107 9 117 6 110 6 107 6 117 3 .127 0 125 3 134 6 October 120 3 99 9 137 0 120 0 100 0 136 9 132 0 122 6 145 0 November .. 102 6 109 0 131 6 102 0 107 9 130 0 124 9 122 6 150 0 December .. 90 3 100 6 113 3 89 6 98 9 111 6 127 9 114 9 151 9 January .. 95 0 94 6 110 3 94 3 94 6 109 3 119 6 113 0 132 3 February .. 93 9 86 6 112 3 92 6 86 6 111 9 129 0 119 6 126 9 March . . 84 3 96 3 117 0 84 0 96 6 117 0 122 6 126 9 121 2 April .. 88 3 105 0 124 3 87 9 104 6 123 9 106 0 115 0 125 3 May .. .. 94 6 107 0 129 6 93 3 106 0 126 6 104 6 110 6 129 6 June.. 108 3 110 0 122 2 107 0 108 6 119 10 115 6 114 9 124 5 July .. .. 114 9 114 0 121 6 113 6 112 9 120 0 124 6 120 3 124 6 Average . . 99 10 104 2 121 1 99 1 103 5 119 11 120 3 119 4 132 8 1 (See also graphical tabulation of the weekly prices, which is published in this report.)

1935-36. 1936-37. 1937-38. Per Cwfc. Per Cwt. Per Owt. s. d. a. d. s. d. New Zealand .. .. .. 99 10 104 2 121 1 Australian .. .. .. 99 1 103 5 119 11 Danish .. .. .. 120 3 119 4 132 8 Premiums— Danish over New Zealand .. 20 5 15 2 11 7 New Zealand over Australian .. 0 9 0 9 1 2

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BUTTER PRICES. London Weekly Average Cabled Quotations (per Hundredweight Sterling), 1st August, 1937, to 31st July, 1938.

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Diagrams showing the Sources of Supply of Butter and Cheese available for Consumption in United Kingdom in 1937.

SUPPLIES OF BUTTER AVAILABLE IN THE UNITED KINGDOM IN 1937. The production of butter in the United Kingdom in 1937 has been estimated to be 43,000 tons, or 7,000 tons below 1936. Total imports of butter into the United Kingdom in 1937 were 3 per cent, less than the previous year's record figure and the smallest in any year since 1933. Imports of butter from Empire countries declined in 1937 by 4 per cent, compared with imports in 1936. Imports from Empire countries in 1937 amounted to 52 per cent, of the total imports, compared with 53 per cent, in 1936. New Zealand in 1937 supplied 31 per cent, of the total imports of butter into the United Kingdom, Denmark 24 per cent., and Australia 16 per cent. The table shown on page 22 gives United Kingdom estimated butter-production, net imports yearly from 1930 to 1937, and consumption of butter in relation to consumption of margarine. The graph shown on page 21 gives the source of supply of butter consumed in the United Kingdom. Imports from the Empire countries for the eight months ending August, 1938, the latest date for which figures are available, were just over 3,600 tons lower than in the previous year. A decrease of almost 9,000 tons in imports from New Zealand was offset by an increase of just about the same quantity from Australia, but adverse weather conditions reduced South African imports by 2,700 tons, and imports from Eire were lower by 750 tons. Foreign supplies, on the other hand, increased by nearly 10,000 tons, notwithstanding a complete absence of imports from Russia, from which source 10,500 tons were received in the same period of 1937. The following substantial increases were recorded : Denmark, 4,300 tons ; Sweden and Finland, 5,800 tons ; Latvia, Lithuania, and Estonia, 6,700 tons ; Poland, 5,800 tons. As imports into Germany in the same period increased by over 7,000 tons compared with 1937, it is clear that the higher price level of the last two seasons has substantially stimulated production in the European exporting countries, and that, notwithstanding dry weather in Denmark and Northern Europe in the early spring, climatic conditions, on the whole, have been quite favourable. For the first eight months of 1938, latest available figures indicate that the weekly consumption of butter has fallen by approximately 470 tons, compared with the first eight months of 1937, while the weekly consumption of margarine has increased by about the same amount. This may be attributed to the higher retail prices of butter, a declining tendency in purchasing power, and a very intensive national advertising and sales campaign by margarine-manufacturers.

21

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BUTTER CONSUMPTION IN RELATION TO MARGARINE CONSUMPTION. The following table shows the United Kingdom estimated butter-production and net imports yearly from 1930 to 1937. The table also shows the average weekly consumption of imported butter and the per capita consumption of all butters. The corresponding per capita figures in respect of margarine are also shown.

United Kingdom Annual Production and Consumption of Butter.

INFLUENCES AFFECTING CHEESE-PRICES IN THE 1937-38 SEASON. The balance of the 1936-37 season's output cleared well during October-November last at from 70s. to 745. per hundredweight. The new season's make arriving for the mid-winter trade, when cheeseconsumption is at its lowest, caused the usual price recession, which, however, was not so marked as in recent years. The lowest price of the season for New Zealand cheese was reached at the end of December, when the week's sales averaged 645. per hundredweight. A moderate recovery followed and prices remained steady during January and February at an average of 68s. per hundredweight' From March onwards a gradual upward movement carried prices to 735. per hundredweight at the end of August. At the beginning of the Canadian production season conditions in the dairying areas were reported to be very good, and United Kingdom buyers expected increased supplies from this source. Although milk-production in Canada has been considerably heavier than in recent years, the output of cheese has been substantially below that of 1937, but the quantity of butter, condensed milk, and milk-powder manufactured is well above last year. Gradings of cheese in Ontario and Quebec to the end of August are 18 per cent, (about 6,000 tons) below the same period in 1937. The following table of average monthly prices of cheese at London shows, in respect of New Zealand and Canadian cheese, the movement in price during the season just closed compared with the previous season.

Average Monthly Prices of Cheese at London.

22

Consumption. (Jan Y -Deo.). (estimated). Net Imports. Total, all Butter. Imported P er a P m ~ Butter. aU Butter " Tons. Tons. Tons. Tons. Lb. Lb 1930 ■■ ■■ 48,185 332,421 380,606* 6,435 18-7 11-8 1931 •• 48,185 385,451 428,236 7,335 20-9 10-3 1932 •• •• 48,185 402,946 446,131 7,650 21-7 9-2 1933 •• •• 48,185 437,300 491,655 8,475 23-5 8-4 1934 ■■ •• 48,185 480,180 528,365 9,170 25-2 7-9 1935 •• 47,500 474,060 526,390 9,225 25-2 8-4 1936 •• •• 52,850 484,031 525,089 9,030 25-0 8-6 1937 •• 45,000f 465,108 524,150 9,190 24-8 8-9 Source : Imperial Economic Committee. * Apparent total annual consumption. After 1930, changes in cold-storage stocks in the beginning and end of the year have been taken into account. Provisional.

New Zealand (Finest White). Canadian (Finest White).* Month. — 1935-36. 1936-37. 1937-38. 1935-36. 1936-37. 1937-38. Per Cwt. Per Cwt. Per Cwt. Per Cwt. Per Cwt. Per Cwt s - d - s- d. s- d. s. d. s. d. s. d. August .. .. .. 48 6 68 9 70 3 52 9 68 9 71 3 September .. .. 54 9 68 9 68 6 55 9 71 3 70 3 October .. .. .. 60 3 70 0 71 0 61 6 70 3 71 6 November .. .. 52 6 72 3 71 9 58 6 73 3 73 6 December .. .. 54 0 62 9 66 0 59 6 71 9 73 6 January .. .. .. 54 9 55 6 67 9 62 0 72 0 73 9 February .. .. 52 6 53 0 67 6 62 6 72 0 74 9 March .. .. .. 50 3 60 6 69 3 63 0 73 0 77 3 A pri J 53 6 68 3 69 6 62 0 75 6 78 0 May .. .. .. 57 0 72 6 70 0 63 6 78 3 78 3 June •• •• •• 59 9 74 3 68 9 67 6 80 0 80 0 Jul 7 61 6 73 0 69 0 64 3 76 0 80 0 Average, twelve months .. 54 11 66 8 69 1 61 8 73 6 75 2 (See also graphical tabulation of weekly prices, which is published in this report.) * Old.

23

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CHEESE PRICES. London Weekly Average Cabled Quotations (per Hundredweight Sterling), 1st August, 1937, to 31st July, 1938.

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SUPPLIES OF CHEESE AVAILABLE IN THE UNITED KINGDOM IN 1937. The production of cheese in the United Kingdom in 1937 has been estimated to be 38,000 tons, or 17,000 tons below 1936. Total imports of cheese into the United Kingdom in 1937 were 10 per cent.' greater than in 1936. Imports of cheese from Empire countries increased in 1937 by 8 per cent, compared with imports in 1936. Imports from Empire countries in 1937 amounted to approximately 90 per cent, of the total imports, compared with approximately the same percentage figure in 1936. New Zealand in 1937 supplied 59 per cent, of the total imports into the United Kingdom, Canada 25 per cent., and Australia 4 per cent. The following tabulation shows the total cheese available for consumption in the United Kingdom, the Home production and net imports, and the main sources of supply :—

Cheese available for Consumption in the United Kingdom.

In relative importance the main sources of supply are : —

The graph shown on page 21 gives the source of supply of cheese consumed in the United Kingdom. Cheese-production in the United Kingdom for the eight months January to August, 1938, estimated at approximately 33,000 tons, is higher by about 2,500 tons, or 6 per cent., than in the same period of 1937, while imports are practically the same in both periods. Decreased supplies from New Zealand of 2,600 tons and from Canada of 1,500 tons are offset by an increase of 3,900 tons from Australia. Shipments from the latter country, at 7,700 tons, are double those of the previous year. Supplies from other sources show little change. MILK-PRODUCTION IN THE UNITED KINGDOM. The total quantity of milk passing under the control of the Milk Marketing Boards in England and Wales and Scotland in 1936 and 1937 was :—•

Returns for the first eight months of 1938 indicate that the loss of output in 1937 will be more than recovered, total milk passing under the control of the Boards in that period being higher by 41,000,000 gallons than in the same months of the previous year. Milk consumed in liquid form increased by over 26,000,000 gallons, and that used in manufacture by nearly 15,000,000 gallons. Increases in the manufacture of condensed milk and milk-powder, which is about 30 per cent, and 60 per cent, respectively above the same period of last year, have absorbed the increase in the disposal of milk for manufacturing purposes.

24

1934. 193S. 1936. 1937. Tons. Tons. Tons. Tons. Home production .. .. 50,238 57,074 54,585 37,760 Net imports .. .. 147,917 134,274 132,600 145,800 198,155 191,348 187,185 183,560

1934. 1935. 1936. 1937. Per Cent. Per Cent. Per Cent. Per Cent. New Zealand .. .. .. 53 46 45 47 Home production .. 25 30 29 21 Canada .. .. 13 12 16 20

SnM in Use< * or ManuYear ' Liquid Form. fa ?? ure ' j5 cludin g Total. 1 JJ arm Cheese. Gallons. Gallons. Gallons. 1936 .. .. .. 749,000,000 410,000,000 1,159,000,000 1937 .. .. .. 791,000,000 335,000,000 1,126,000,000 Increase in 1937 .. 42,000,000 Decrease in 1937 .. .. 75,000,000 33,000,000

11.—30.

SALES OF BUTTER AND CHEESE TO MARKETS OTHER THAN UNITED KINGDOM. During the 1937-38 season the Department has endeavoured to increase sales of butter and cheese in markets other than the United Kingdom, and the requirements of firms regularly trading in those markets continue to be supplied. This trade, though relatively small, is very widely spread. Apart from circumstances relating to impositions on imports into certain countries, over which the Department has no control, the year has seen a general increase in the quantities shipped to destinations other than the United Kingdom. The sales tabulated hereunder have been made direct from New Zealand, but in addition almost the same quantities of New Zealand butter and cheese have been shipped from the United Kingdom to countries which cannot be conveniently or regularly supplied from New Zealand. The destinations of these shipments from the United Kingdom are the Channel Islands, Malta, Gibraltar, Egypt, Newfoundland, British West Indies, British Guiana, and South Africa. Sales from New Zealand have been as follows: —

4—H. 30,

25

Butter (Boxes). Cheese (Crates). 1937-38. 1936-37. 1937-38. 1936-37. Japan — Kobe .. .. .. 720 5,552 Osaka .. .. .. .. 40 Yokohama .. .. .. 2,110 720 — 7,702 Philippine Islands .. .. 4,920 2,200 Singapore .. .. .. 9,425 8,526 .. 27 French Cochin China .. 1,153 765 China— Hong Kong .. .. 7,385 3,900 106 40 Shanghai .. .. .. 6,571 8,530 244 270 Tientsin .. .. .. 133 200 14,089 12,630 350 310 East Indies— Batavia .. .. .. 31 Samarang .. .. .. 29 Surabaya .. .. . . 23 — 83 India — Bombay .. .. .. 2,069 1,785 Calcutta .. .. .. 3,873 2,888 1 Colombo .. .. .. 220 50 2 Karachi . . . . .. 160 Madras .. . . .. 1,392 1,399 .. 5 Bangoon .. .. .. 232 252 7,946 6,374 —3—5 Pacific and United States of A in prion Honolulu .. .. .. 17,247 26,200 Boston .. .. .... .. .. 11 Los Angeles .. .. 17 New York .. .. 3,600 2,850 San Francisco .. .. 1,666 1,038 .. 4 22,530 — 30,088 .. — 15 Canada — Halifax .. .. 31,000 Vancouver .. .. 23,350 426 400 1,215 Victoria .. .. .. 4,200 .. 165 58,550 426 ■ 565 1,215 Canal Zone — Balboa .. .. .. 9,540 26,129 100 Cristobal .. .. .. 18,050 12,525 .. 4 —— 27,590 38,654 — 100 — 4 British West Indies — Bahamas .. .. .. 1,205 655 Bermuda .. .. .. 625 300 30 Jamaica .. .. .. 14,580 17,013 178 • 81 16,410 17,968 208 — 81 Falkland Islands . . . . 91 163,507 125,333 1,226 1,657

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Japan. The war between Japan and China has led to a complete cessation of sales and shipments to Japan. Dutch East Indies. The trade in butter and cheese to these ports is still very small, but the Department is continuing its endeavours to assist exporters by quoting competitive prices and supplying attractive butter cartons printed with the New Zealand national brand. India. The sales of butter to India show a steady increase. Butter cartons are supplied in 1 lb. and £ lb. sizes. Honolulu. Sales to Honolulu during the past season show a decrease, owing to the fact that during the 1936-37 season sales were to a considerable extent influenced by the American shipping strike. The regular trade has been fully maintained. Panama. Sales to Panama Canal Zone show a decrease compared with the previous year, and it is likely that under existing conditions a further decrease will be shown next year. The United States Government, under a recently issued Agricultural Adjustment Administration Order, subsidize sales of American butter in the Panama Canal Zone, on a basis which makes New Zealand competition virtually impossible. This question has been made the subject of representations to the United States Government. Canada. Owing to a shortage of butter stocks in Canada, 58,550 boxes of New Zealand butter were shipped during the year to Vancouver and Halifax. This market is meantime no more than an occasional market. The position at present is that Canadian stocks are high and quantities of Canadian butter are being shipped to London. It is satisfactory to record that, following discussions between the Canadian and the New Zealand Governments, the Canadian Government have agreed to remove the exchange dumping duty from butter shipped from New Zealand, subject to possible limitation of shipments to reasonable proportions if they appear to threaten the interests of Canadian producers. Germany. As the result of a trade arrangement made by the Hon. Walter Nash, Minister of Marketing, 58,112 boxes of New Zealand butter were shipped to Germany. Of this quantity, 38,112 boxes were! shipped from London stocks. These shipments were made during December, 1937, and January and February, 1938. At this time supplies of butter arriving in London were heavy, and the shipments to Germany materially assisted the level of prices realized in the United Kingdom market, COMPARISON OF COSTS OF MARKETING BUTTER AND CHEESE UNDER THE OLD AND THE PRESENT MARKETING SYSTEMS. • i 11 l or<^®l " ascertain the extent of savings in costs under the new marketing procedure compared old > al \ analysis of marketing-costs was made, on the basis of the selling-values for the 1936-37 season of 104s. per hundredweight sterling for butter and 645. 7d. per hundredweight sterling °^® ese ' ,18 anal y gis showed an approximate annual saving in marketing-costs, on outputs of 150,000 tons butter and 85,000 tons cheese, of £219,739. The savings m marketing-costs based on the approximate selling-values for the 1937-38 season of 117s. 6d. per hundredweight sterling for butter and 68s. 6d. per hundredweight sterling for cheese mar , ketln g> 13 "084 d. per hundredweight, or a total saving on an export of 140,000 tons » S ; t °L ß^ Se marketing 7-92 d. per hundredweight, or a total saving on an export of 85,000 tons of £56,100. Thus on the export trade in butter and cheese, on the 1937-38 season's realizations and quantities, there is an approximate annual saving of £208,750.

26

H. -30.

The details of the comparisons of marketing-costs are as follows : —

Comparison of Costs of Marketing Butter.

27

Charges Items. Costs under Old System. Costs undei^Prcsent s. d. s. d. s. d. s. d. Sale value (per cwt. sterling) .. .. .. 117 6 117 6 Less — Port dues, &c. .. .. ..13 13 Commission .. .. .. .. 2 11-25* 2 4-2f Discount (2d. in the pound) .. .. 0 11-75 0 11-75 London interest (5s. per cent.) .. 0 3-52 Freight .. .. .. ..510-5 Insurance .. .. .. .. 0 3-156 11 7-176 4 6-95 105 10-824 112 11-05 Plus— Exchange 24 11-917 27 1-212 Less— 130 10-741 140 0-262 Freight J .. .. .. .. .. .. 7 3-468 InsuranceJ .. .. .. .. .. .. 0 3-719 7 7-187 132 5-075 Interest on overdraft and cost of remittances to .. .. .. 0 5 • 25 dairy companies Net return, New Zealand currency .. .. .. 130 10-741 131 11-825 130 10.741 Increase in net return, represented by savings .. .. 1 1-084 in marketing costs I — — Summary of Savings in Marketing Costs under the Present System. Per Cwt. I Gains— d. Commission .. .. .. .. 7-05 London interest .. .. .. 3-52 Exchange .. .. .. .. 7-764 18-334 Less interest on overdraft and cost of 5-25 remittances to dairy companies ■——— 13-084 * Commission, 2J per cent. t Commission, 2 per cent. J Rates in sterling, plus exchange on remittance, New Zealand to London.

H.—3o.

Comparison of Costs of Marketing Cheese.

SHIPPING. In last year's report mention was made of the policy of the Department for ensuring greater regularity in arrivals of consignments of butter and cheese in the United Kingdom. It was pointed out that freight contracts are only made possible by co-operation between the dairy and other exporting industries particularly the meat and fruit industries. Consideration has also to be given to the requirements of New Zealand importers, whose goods have to be discharged at ports of destination before the export loading itineraries can be finalized. It is pleasing to record that the shirking programme for the 1937-38 season which was designed to give monthly arrivals in the IMted Kingdom of quantities of butter and cheese to suit market requirements, has been carried out in a satisfactory manner. Ihe extent of the possible regulation of shipments is necessarily somewhat limited, because there are sixteen ports of loading in the Dominion for overseas vessels, five of these being roadstead ports, where the risk of delay is considerable. r>f ti° Uri fin r S °, n Vr V T eIS l° aded dair y-P roduoe the Dominion for the United Kingdom Of these, 60 discharged at London the remaining 51 discharging at one or more of the following ports • Cardiff, Avonmouth, Liverpool, Manchester, Glasgow, Southampton, Hull, and Newcastle-on Tyne Many of these latter vessels also discharged dairy-produce at London.

28

Charges Items. Costs under Old System Costs under Pr ®sent System. s * d. s. d. s. d. s. d. Sale value (per cwt. sterling) .. .. .. 68 6 68 6 Less— Port dues, &c. .. .. ..12 12 Commission .. .. .. .. 1 8-55* 1 4.5+ Discount (2d. in the pound) .. .. 0 6-85 0 6-85 London interest (5s. per cent.) .. .. 0 2-055 Freight .. .. .. .. 6 2-327 Insurance .. .. .. .. 0 1-834 9 11-616 3 1-35 58 6-384 65 4-65 Plus — Exchange 13 9-762 15 8-316 Le !f~ i+ 72 4-146 81 0-966 Freight J .. .. .. .. .. 7 7-74 Insurance J.. .. .. .. _ 02-16 7 9-90 Interest on overdraft and cost of remittances .. .. 3 to dairy companies Net return, New Zealand currency .. .. . . 72 4-146 73 0-066 72 4-146 Increase in net return, represented by savings .. 0 7- 920 in marketing costs ' Summary of Savings in Marketing Costs under the Present System. Per Cwt. Gains — d Commission .. .. .. .. 4.95 London interest .. . . .. 2 • 055 Exchange .. .. .. .. 4. 3^5 10-920 Less interest on overdraft and cost of re- 3-000 mittances to dairy companies _ _ 7-920 New V?e°aZd t n LoL P o". C6nt - f C ° mmiS8i ° n > 2 *> er t - sterling, plus exchange remittance,

H.—3o.

An advantageous feature of the season's operations has been the large increase in shipments to the ports of Cardiff, Hull, Newcastle-on-Tyne, and Southampton. The quantities shipped to these ports during the 1937-38 season, compared with the 1936-37 season, are as follows : —

Direct shipments to Avonmouth, Liverpool, Manchester, and Glasgow have also been well maintained, the comparative figures being :■ — Butter (Boxes). Cheese (Crates). L 937-38 .. .. 1,529,040 1937-38 .. .. ..319 720 1936-37 .. .. 1,513,640 1936-37 .. .. .. 292,250 Increase .. .. .. 15,400 Increase .. .. .. 27,470 In consequence of increased shipments to other United Kingdom ports, shipments to London show a corresponding decrease. The comparative figures are as follows: — Butter (Boxes). Cheese (Crates). 1937-38 .. .. .. 3,485,080 1937-38 .. .. 783 870 1936-37 .. .. .. 4,288,080 1936-37 .. .. .. 901|050 Decrease .. .. .. 803,000 Decrease .. .. .. 117,180 It is considered that increased shipments to United Kingdom ports other than London have improved the distribution of New Zealand dairy-produce, and that the decentralization during the past season has been an important factor in maintaining prices. The arrangements for allocation of vessels for shipment of dairy-produce have been satisfactorily carried out by the Overseas Shipowners' Allotment Committee. There is complete co-operation between the Committee and the Department in the settling of a shipping programme which will ensure the clearing of dairy-produce evenly at all ports according to grading date, and give regular arrivals in the United Kingdom in quantities to suit the market requirements. Seasonal conditions frequently upset the forward estimates of quantities of dairy-produce available for shipment, and thus necessitate variations in the shipping allotments. The Overseas Shipowners' Allotment Committee is always ready to meet, to the best of its ability, any such emergency, and the Department desires to record its appreciation of the full measure of co-operation given by the Committee. During the 1937-38 season there has been a further reduction in the average number of ports of loading for vessels sailing from the Dominion. The comparative figures are as follows

The average for last season is arrived at as follows : — 3 vessels loaded dairy-produce at 1 port only. 22 vessels loaded dairy-produce at 2 ports only. 38 vessels loaded dairy-produce at 3 ports only. 31 vessels loaded dairy-produce at 4 ports only. 15 vessels loaded dairy-produce at 5 ports only. 2 vessels loaded dairy-produce at 6 ports only. Total 111 vessels with 372 calls at ports for loading dairy-produce. The Department has had the co-operation of the dairy-factory companies and cool-store companies, particularly in regard to the despatch of increased quantities of butter and cheese to United Kingdom outports. Requests to dairy companies for the port-marking of produce for outports, and to coolstore companies for special storage facilities, have been willingly complied with. The Department wishes to thank the officials of dairy companies and cool-store companies for this valuable assistance.

29

Butter Shipments. Cheese Shipments. 1937-38. 1936-37. 1937-38. 1936-37. Boxes. Boxes. Crates. Crates. To Cardiff .. .. .. .. 83,360 8,600 18,260 2,114 To Hull .. .. .. .. 95,150 8,640 14,960 2,200 To Newcastle-on-Tyne .. .. .. 85,920 5,560 17,526 1,862 To Southampton .. .. .. 91,240 43,000 17,344 5,614 355,670 65,800 68,090 11,790 Increase .. .. .. .. 289,870 .. 56,300

Season. Vessels loaded. Average Ports per Vessel. 1934-35 .. .. .. Ill 4-00 1935-36 .. .. .. 104 3-98 1936-37 .. .. .. 108 3-67 1937-38 .. .. .. Ill 3-35

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BUTTER. Map Showing Annual Imports into United Kingdom Ports, 1st October, 1932, to 30th September, 1938.

Note. —Total from weekly Customs and Exeise returns. Customs returns of total arrivals at Manchester are not comparable with New Zealand figures from the London office of the Department.

30

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Arrivals of New Zealand Butter in United Kingdom Ports (in Tons).

31.

Port. 1932-33. 1933-34. j 1934-35. 1935-36. 1936-37. 1937-38. London— New Zealand .. .. 93,730 102,147 98,276 105,143 107,224 92,056 83,300 Other sources .. .. 136,030 158,323 159,884 149,157 135,266 Total .. .. 229,760 260,470 258,160 254,300 242,490 Southampton — New Zealand .. .. .. .. 394 815 1,083 2,503 2,400 Other sources .. .. 2,370 1,490 4,336 8,185 6,887 Total .. .. 2,370 1,490 4,730 9,000 7,970 Avonmouth— New Zealand .. .. 7,495 8,096 7,311 7,166 9,674 10,978 13,000 Other sources .. .. 245 814 589 554- 176 Total .. .. 7,740 8,910 7,900 7,720 9,850 Cardiff — New Zealand .. .. 218 413 787 555 217 1,823 4,300 Other sources .. .. 22 .. 293 325 25 Total .. .. 240 413 1,080 880 242 Liverpool— New Zealand .. .. 6,585 6,572 6,778 7,342 7,799 8,004 9,200 Other sources (Liverpool 7,662 8,702 14,664 14,604 10,876 and Manchester) Total .. .. 22,440 25,650 29,950 31,240 29,190 Manchester— New Zealand .. .. 8,193 10,376 8,508 9,294 10,515 9,983 11,500 Glasgow — New Zealand .. .. 6,524 8,380 6,793 8,081 8,984 8,045 7,500 Other sources .. .. 5,076 5,560 10,127 8,069 5,226 Total .. .. 11,600 13,940 16,920 16,150 14,210 Newcastle — New Zealand .. .. .. .. .. .. 37 2,066 2,600 Other sources .. .. 30,440 31,050 25,730 25,540 28,163 Total .. .. 30,440 31,050 25,730 25,540 28,200 HullNew Zealand .. .. .. 116 146 .. 75 2,314 2,200 Other sources .. .. 23,620 28,994 26,724 28,140 35,825 Total .. .. 23,620 29,110 26,870 28,140 35,900

H.—3o,

CHEESE. Map Showing Annual Imports into United Kingdom Ports, 1st November, 1932, to 31st October, 1938.

Note. —Totals from weekly Customs and Excise returns. New Zealand figures from Now Zealand Dairy Sale 3 Division converted from crates at fourteen crates to ton. Customs returns of total arrivals at Manchester are not comparable with New Zealand figures from London office of the Department.

32

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Arrivals of New Zealand Cheese in United Kingdom Ports (in Tons).

Note. —New Zealand figures calculated at fourteen crates to a ton. N.a. means not available. The 1937-38 figures in this table are estimated so far as October, 1938, is concerned ; slight amendments may be necessary later should any late October steamers be delayed and arrive in November at any port.

5—H. 30.

33

. _ „„ I Estimate, Programme, Port. 1932-33. 1933-34. 1934-35. 1935-36. | 1936-37. 1937 _ 38 . i9 38 -39. |__ L__ .. .. 80,564 79,982 69,333 66,407 65,504 57,296 52,500 Otter sources .. .. •• 24,043 28,192 21,493 34,346 Total .. .. n.a. 104,025 97,525 87,900 99,850 306 439 1,™ 1,600 Other sources .. .. 4-85 1,024 746 Total .. .. 820 180 650 1,330 1,185 A NewZ U etw .. .. 5,586 6,278 6,137 5,494 7,092 7,391 8,400 Otter sources .. .. 1,774 2,442 2,563 1,776 2,968 Total .. .. 7,360 8,720 8,700 7,270 10,060 Ca New"zealand .. .. 160 288 474 519 150 1,329 1,925 Other sources .. .. 1,260 752 1,076 871 1,300 Total .. .. 1,420 1,040 1,550 1,390 1,450 .. .. 4,531 5,057 4,315 3,555 4,210 5,534 6,300 Other sources (Liverpool 3,659 2,295 3,663 3,141 6,084 and Manchester) — Total .. .. 13,650 12,630 12,350 10,660 15,080 ]\I 3j H C ll 6 s t) f r~ ~ New Zealand .. .. 5,460 5,278 4,372 3,964 4,786 5,464 6,250 G NeTzTaland .. .. 5,209 5,150 4,167 3,776 4,341 4,897 6,000 Other sources .. .. 1,731 1,705 813 909 1,764 Total .. .. 6,940 6,855 4,980 4,685 6,105 Newcastle — , „„„ New Zealand .. .. •• •• •• ?° 1 » 193 ] > 315 Other sources .. .. 1,380 1,335 1,425 2,130 Total .. .. n.a. 1,380 1,335 1,425 2,220 H New Zealand .. .. .. 40 88 .. 109 1,136 810 Other sources .. .. •• 960 1,592 1,080 1,431 Total .. .. n.a. 1,000 1,680 1,080 1,540 I

H.—3o.

SUPERVISION AND INSPECTION OF SHIPPING, TRANSPORT, AND STORAGE OF DAIRY-PRODUCE. In the for the 1936-37 season an outline was given of the measures adopted by the Department s Inspectors to safeguard the quality of butter and cheese. The Department has three officers m New Zealand and one in London engaged on this work. These officers collaborate with officers of the Dairy Division of the Department of Agriculture in New Zealand and London in connection with the care of produce in cool stores. The officers of the Department exercise supervision and inspection of the methods of handling, transport, and storage of dairy-produce in transit from the dairy-factories and during loading into overseas vessels. There is thus complete supervision at all stages from factory in New Zealand to cool stores m the United Kingdom. During the 1937—38 season this work has been fully maintained. All overseas vessels' refrigerated spaces for carriage of dairy-produce have been inspected, and conditions of transport and handling at mam ports and outports have been reported on. Wnen necessary, the attention of the representatives of the shipping companies has been drawn to any unsatisfactory conditions found in ships' refrigerated spaces, and in all cases the requirements of the Department's Inspectors have been met. The system of supervision and inspection of shipping, transport, and storage of dairy-produce is a factor in the determination of the basis of the contract for insurance and of the insurance rates charged. The excellence of the results achieved is reflected in reduced insurance rates, and is further evidenced by the provision in the insurance contract that the system of supervision and inspection be continued. MARINE INSURANCE. All butter and cheese exported from New Zealand and purchased by the Department is protected >y a comprehensive insurance contract which covers the produce until thirty days after arrival in the United Kingdom. The contract also covers the cream and milk which is made into butter and cheese intended for export, and which is identifiable as such, from the time such cream and milk is received at the factory until the produce is placed f.o.b. ocean steamer. Until the cream and milk is manufactured into butter and cheese, the cover is against fire risk only. The Department pays the insurance underwriters flat rates covering the complete risk, and charges to dairy-factory companies the portion of the premium which represents the risk up to f.o.b. ocean steamer. Practically all the important insurance interests in the United Kingdom have a share in the contract, and British insurance companies as distinct from Lloyds take approximately two-thirds of the total risk and Lloyds underwriters one-third. The contract expired on 31st August, 1938, and was renewed for a further term of three years at reduced inclusive rates as follows :— Butter .. .. .. . _ .. 4s. 3d. per cent. Cheese .. .. .. .. .. .. 4s. 3d. per cent. These new rates show a decrease from, the previous rates of 13-7 per cent, in the case of butter and 22 per cent, in the case of cheese, and represent an annual saving in insurance premiums of £9,000. t is a condition of the contract that the Department will maintain its present system of supervision and inspection of storage and loading in New Zealand, transport to United Kingdom, and unloading into port stores. The portion of the premium which represents the risk up to f.o.b. ocean steamer, and which is charged to dairy factory companies, is as follows Butter .. .. .. ~ 0-565 d. per box. Cheese 0-935 d. per crate. COLD STORAGE IN THE UNITED KINGDOM. Arrangements and charges for cold storage and handling of New Zealand butter and cheese in the United Kingdom were set out in last year's report. Owing to an increase in port wages in the United Kingdom, the consolidated rates under the Department s contracts have been increased by 4£ per cent. This increase is smaller than the increase w nch applies in the case of other imported dairy-produce, by virtue of special terms in the contract governing alterations in United Kingdom award rates of wages. FREIGHT RATES. The freight contract for butter and cheese, meat, and fruit will expire on 31st August, 1939 The freight rates for butter and cheese areButter, 2s. ll|d. per box .. Cheese, <jad. per pound .. .. .. r ß oth rates in sterling.

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Advertizing and Display Material issued to the Grocery Trade.

Face pat/p. 35 1

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ADVERTISING, PUBLICITY, AND SALES PROMOTION. In last year's report an indication was given that the financial allocation for publicity, advertising, and sales promotion was to be increased to provide additional facilities for widening the distribution of New Zealand dairy-produce in the United Kingdom. The expenditure during the 1937-38 season amounts to £81,259. The aim of the Department is to keep the Dominion's dairy-produce to the forefront in the highly competitive United Kingdom market, to extend the demand for " New Zealand " butter and cheese as such, and to obtain the utmost value and results from the expenditure on advertising, publicity, and sales promotion. The following is a brief record of the methods of publicity adopted and the types of advertising used :—■ Personal Canvas of Retail and Wholesale Grocers. Additional appointments have been made of field representatives, whose duties include the making of regular personal contacts with the retail and wholesale grocers. This work is considered to be of the utmost importance from the point of view of service and advice to distributors and the establishment of good will with the wholesale and retail trade. In addition to their primary duty of pressing the claims of New Zealand dairy-produce, these representatives give advice on the subject of window displays, take all possible steps to see that New Zealand dairy-produce is clearly marked for sale under its own name, and investigate promptly any complaints occurring in their respective territories. By no other means could the necessary service and advice be given, for there is no satisfactory alternative method of maintaining friendly relationships and of providing practical selling support to distributors. The Department's representatives make daily reports 011 their work and on the results of the calls which have been made. Supervising officers maintain close contact with their field representatives, and also keep directly in touch with the larger wholesalers and with public organizations and civic authorities. Very satisfactory results have followed the extension of activity in the personal canvas of the retail and wholesale grocers, and in the near future it is expected that about three-quarters of the entire trade purchasing-power will be personally contacted at least once every three months. Retail-shop Demonstrations. The retail-shop demonstrations are conducted by lady demonstrators, with the co-operation of retailers who desire to establish a sale for New Zealand dairy-produce or to extend their existing sales. The procedure is to install in the retailer's shop one of the Department's power-driven machines, capable of moulding (not wrapping) either \ lb. or lb. of butter. These pats are wrapped by the demonstrator, who tactfully introduces the butter to customers present in the shop in the ordinary course of their purchasing. The necessary New Zealand butter for the purpose is supplied by the retailer, who retains the proceeds of the sales made by the Department's demonstrators. The show is invariably supported by an attractive window and counter display, distribution of leaflets and folders in which the claims of New Zealand dairy-produce are fully set out, and occasionally by the presentation of some inexpensive advertisement novelty to children accompanying their parents. Attractively carried out in every way, these demonstrations have a particularly strong appeal to shops where the weekly trade, or prospects of weekly trade, are substantial. The shows have great practical value, and arc unique in that they present a splendid opportunity of contact simultaneously with both sides of the grocer's counter, giving a first-hand idea of the reaction in that locality to sales advocacy and of the further steps which may be necessary to promote sales. Sales Scheme. A sales scheme, with cash prizes for sales results, has been introduced as a new feature. The plan as yet is little beyond its experimental stage, and has so far been put into operation by only five retail organizations possessing seventy-four, sixty-five, eight, eighty-one, and forty-two branches respectively. These, it may be remarked, are types of retail firms to which the scheme can bo most successfully applied. It depends for its success upon the spirit of friendly competition between branches of the firm operating the scheme as to which can produce definite evidence of the biggest percentage increase in sales of New Zealand butter or cheese upon their basic sales over a continuous period of one month. Cash prizes to winning branches are awarded in ratio to the total number of branches within the scheme. All the necessary display material with which to build up and maintain really attractive window and counter shows is supplied to all branches competing, renewals being available as required ; and from which point onwards it is for the staffs of the branches, and the salesmanship they can bring to bear, to secure for themselves a place amongst the awards. The prize list is arranged in such a way as to provide for the greatest possible number of entrants to receive some reward for their effort. At the end of the month a complete and detailed statement is prepared by the head office of the firm, setting out the actual quantities of New Zealand butter supplied to each shop, with the percentage increase stated against each. Upon this statement the prizes are awarded. Window-display Material. An increasing number of requests are being received from retail grocers for window and counter display material. The material is smartly designed and possesses a practical value apart from its decorative appeal. When a representative calls on a retailer he explains the type of material available, and advises upon its effective use to meet the requirements and circumstances of that particular grocer's business. In addition, grocers are invited through the trade-press advertisements to make

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application for window-display material, and periodically special folders are posted to grocers within a specified area in which the material is illustrated item by item, usually in original colours. A response post-card addressed to the London office is provided for use of grocers in indicating their requirements. The window and counter display material consists of such items as butter dummies, price tickets attractively made of an ivorine type of substance, and show-cards in colour of varying kinds. In addition, a range of special window-display material is provided consisting in the main of backgrounds of varying dimensions to suit selected spaces in the windows or interiors of grocers' shops. These backgrounds most frequently portray typical New Zealand pastoral scenes, but other subjects and modern treatments are also utilized. The requirements in this particular field of publicity are exacting, but the results are correspondingly good. Window-dressing Competitions. Since the inauguration of the sales scheme, window-dressing competitions have not been such a prominent feature of publicity work as was formerly the case. Nevertheless, some excellent shows were made by branches of firms which desired that competitions should be arranged. These competitions aroused a good deal of public interest in their respective localities. Editorial Publicity. This side of advertising and publicity lias been developed. A press campaign synchronized with general advertising was directed towards maintaining the consumption of New Zealand butter, particularly during the period of rising prices. News articles and letters to the press drew attention to the fact that New-Zealand-butter rices were returning to pre-war levels with the arrival of new season's supplies. This publicity was, it is considered, largely instrumental in recovering a substantial proportion of the consumption lost during the period of high retail prices. The editorial publicity was most valuable in explaining New Zealand's case in connection with tariff preferences for British manufacturers, and in particular the circumstances of the duties imposed on certain types of British footwear. Women's Associations, Welfare Societies, and Similar Organizations. Booklets and other printed material on the quality and utility of New Zealand butter and cheese are supplied for circulation through women's associations, welfare societies, and similar organizations. Literature concerning the New Zealand dairy industry, the methods of manufacture of butter and cheese, and their quality and food value is requested by and supplied to domestic-science teachers, lecturers in housecraft centres, schools, colleges, evening institutes, co-operative societies, and women's institutes and guilds. Special attention is devoted to meeting requests from these inquirers, and it is felt that the cultivation of friendly relationship with them is invaluable to the furtherance of good will towards New Zealand and an appreciation of the high nutritive values of the Dominion's products. Exhibitions. Displays of butter and cheese have been arranged at the following exhibitions : London Grocers, Bristol Grocers, Norwich Grocers, Swansea Grocers, News Chronicle Schools, Birmingham National Trades, Southampton Grocers, Daily Mail Ideal Home, Manchester Grocers. In addition, displays have taken place conjointly with the High Commissioner's Department at the following exhibitions : North London, Brighton Home Life, British Industries Fair, Glasgow Empire (in progress). Considerable attention is devoted to exhibitions arranged by grocers' associations. In this way the Department is able to demonstrate its desire to co-operate with the distributors of our produce. Display Shops. The Department has continued the practice of renting prominently situated retail premises for periods of about four to six weeks for the purpose of making displays and selling samples of butter and cheese. The displays are of the reciprocal-trade type. Local United Kingdom exporters who ship manufactured goods to New Zealand arc cncouraged to display a selection of their products in proximity to the display of butter and cheese, and the attention of visitors is drawn to the reciprocal-trade aspect, and to the tangible contribution that they can make to this inter-trade by buying New Zealand butter and cheese. The displays are usually opened with formality by the Lord Mayor of the city, in the presence of other prominent civic and commercial representatives. The High Commissioner for New Zealand is frequently present, also. Trade Advertising. A systematic approach to the wholesale and retail trade through the medium of the trade press is essential. It is continuous throughout the year and uses all the trade publications in this field, such as The Grocer, Grocers' Gazette, Grocers' Review, Grocery, Scottish Grocer, Scottish Trader, Fingerpost, The Co-operator, The Producer. In these papers a succession of topical advertisements is maintained, which almost without exception include a paragraph drawing attention to the window-display material available, and inviting inquiries for it. Through this channel alone a very large quantity of display matter is put into useful circulation, the inquiries being consistently maintained week by week, and coming from traders in all parts of the United Kingdom.

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Window Display during Liverpool Demonstration.

Face page 36 ]

11. 30.

Stall at Ideal Home Exhibition, Olympia, London.

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Butter-wrappers. A service has now been in operation for over two years whereby retail grocers who regularly stock New Zealand butter may, on application, purchase from this Department at cost price supplies of either 1 lb. or | lb. size New-Zealand-butter wrappers. They are supplied on the recommendation of our representatives, after having satisfied themselves that the wrappers will be used strictly in the manner intended. Advertising- in Newspapers and Women's Publications. For the first time in the relatively brief history of the advertising of New Zealand dairy-produce the Department has been in a position to engage in press advertising to consumers on a reasonably adequate scale. Advertisements of a size that could scarcely be overlooked by any reader have appeared at regular intervals in provincial newspapers, which have been specially selected for their coverage and influence throughout the area of their respective circulations. The daily circulation of the newspapers referred to is 5,500,000. Women's journals published monthly have again been used to press New Zealand's claim amongst the actual purchasers of butter. Great reliance is placed on the effectiveness of advertising in publications of this type. Fully 90 per cent, of their circulation is amongst actual buyers of butter for household purposes. The advertisements are mainly in colour and are of arresting design. The per-issue circulation of these journals is about 2,500,000. Special advertisements and press articles were issued in newspapers with a per-issue circulation of 18,500,000 at a period during last autumn when it was thought that rising prices might result in a fall in consumption. These advertisements drew special attention to the fact that arrivals of butter from New Zealand would correct the temporary shortage, and that the public need not fear having to pay inordinately high prices for butter. This special advertising and publicity did a great deal to restore equilibrium in the shortest space of time. Outdoor Publicity : London. It has always been considered sound practice to devote attention to outdoor advertising, particularly in London during the summer months. The period March-July, with longer days and generally better weather conditions, permits of outdoor publicity being carried through with the maximum effect and whilst the relative supply conditions as between Southern and Northern Hemispheres butters justify such a special campaign in London and the Home counties, some excellent " special" sites for large posters were secured in commanding positions in busy shopping centres. In addition, posters are displayed on delivery vans and on trolley-buses. Scottish Empire Exhibition, Glasgow. The primary function in so far as the exhibit of this Department at the Glasgow Exhibition was concerned was regarded as being the selling of the maximum number of samples of butter and cheese to visitors. Display counters were provided, and a butter-moulding machine was installed. The exhibit was so arranged that the demonstrators were able to meet the demand for samples simultaneously from three sides. The display featured pastures, soil fertility, and sunshine conditions as applying to the production of New Zealand butter and cheese. A waterfall (with actual water), model Jersey cows, trees, and paddocks contributed to make the display interesting and attractive. This exhibit was dismantled after a period, and a freshly constructed exhibit of changed design was substituted. Sales of samples of butter and cheese exceeded all expectations, and this feature alone justified the exhibit. Immediately prior to the opening of the exhibition the canvassing staff began a concerted approach to the retail trade, and was successful in enlisting the active co-operation of most of the bigger distributors in Glasgow and the surrounding district. CHEESE EXHIBITS AT LONDON DAIRY SHOW. It is pleasing to record that New Zealand dairy companies won all four prizes allotted at the London Dairy Show for cheddar cheese produced in the British Empire. There were thirty-eight entries in this class, nineteen from New Zealand, fourteen from Australia, three from South Africa, and two from Canada. The prizes were won as follows : — First: Pine Bush Co-operative Dairy Co., Ltd., Invercargill. Second : Otahuti Co-operative Dairy Co., Ltd., Invercargill. Third : Pahia Co-operative Dairy Co., Ltd., Pahia, Southland. Fourth : Mokotua Co-operative Dairy Co., Ltd., Invercargill. Very Highly Commended : Menzies Ferry Co-operative Dairy Co., Ltd., Edendale. Congratulations are extended to the directors and officials of the cheese-manufacturing companies named on their outstanding success in the cheddar-cheese section of the London Dairy Show. It is reported that the quality of the New Zealand cheese exhibited was up to the usual high standard of the entries. The cheese was subsequently sold to Messrs. Selfridges, London, for a special window display, complete with prize cards and trophies.

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PAYMENTS MADE BY DAIRY-FACTORY COMPANIES FOR BUTTERFAT-SUPPLIES. The following tabulation shows, in respect of the 1936-37 season, the final average butterfat-prices paid to suppliers of butter- and cheese-manufacturing companies, and in respect of the 1937-38 season the estimated average butterfat-prices. The dairy companies are grouped, for purposes of averaging, under the appropriate dairy-produce grading ports. In any comparison of butterfat payments to suppliers of companies, regard should be had to the location and special circumstances of individual companies, which will inevitably have a bearing on manufacturing and transport costs.

Payments by Dairy Companies for Butterfat-supplies.

COSTS IN MANUFACTURE AND DELIVERY OF BUTTER AND CHEESE TO FOB OVERSEAS STEAMERS. The standard form of published accounts provides for the grouping in the manufacturing and marketing accounts of dairy companies of the costs, under six headings, as follows : Cream Collection, Manufacturing Charges, Depreciation, Repairs and Maintenance, Charges Factory to f.0.b., Overhead Charges. The costs of all items grouped under the six headings mentioned are shown worked out on the basis of per pound of butterfat. In addition, the total cost to f.o.b. per pound of butterfat is recorded. Thus a reliable comparison of costs, item by item, is provided. This comparison is of great value to those interested in the work of dairy-factory companies and to the Government. The following tabulation shows the average costs of butter- and cheese-manufacturing companies for the 1937-38 season. The dairy companies are grouped, for purposes of averaging, under the appropriate dairy-produce grading ports. Comparative figures for the 1936-37 season are also shown in the tabulation : —

Season 1937—38: Costs in Manufacture and Delivery of Butter to f.o.b. Overseas Steamers.

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(In pence per pound of butterfat.) Season 1937-38 (estimated). Season 1936-37. Butter. Cheese. Butter. Cheese. Auckland .. .. .. .. 14-870 16-514 13-642 15-546 New Plymouth .. .. .. .. 14-776 16-449 13-615 15-139 Patea-Wanganui .. .. .. 14-588 16-602 13-453 15-203 Hawke's Bay-Gisborne .. .. .. 14-557 15-697 13-386 14-425 Wellington .. .. .. .. 14-935 16-151 13-610 14-923 Marlborough-Nelson-Westland .. .. 14-254 15-514 12-918 14-266 Canterbury .. .. .. .. 14-764 16-353 12-861 14-836 Otago .. .. .. .. 14-195 16-166 12-831 14-398 Southland .. .. .. .. 13-724 16-128 12-310 15-393 New Zealand average .. .. 14-812 16-389 j 13-558 15-176

(In pence per pound of butterfat.) ho . _o • S G Tl 4) _• C C • O CJO .. O -rt . d° 5 <« 14-1 It. 1 | £§ 8>-S "3 fj 8 '31 § fc» &S o W o §r> ft, -=<0 >sS H 8 I Jf C£ -5 °? °° | p{ P & . . Auckland .. .. .. .. 0-354 0-901 0-064 0-076 0-402 0-139 1-936 New Plymouth .. .. .. 0-274 1-129 0-097 0-078 0-286 0-155 2-OI9 Patea-Wanganui .. .. .. 0-440 1-148 0-149 0-071 0-322 0-242 2-372 Hawke's Bay-Gisborne .. .. 0-420 1-064 0-106 0-056 0-457 0-269 2-372 Wellington .. .. .. 0-377 0-964 0-073 0-070 0-334 0-165 1-983 Marlborough-Nelson-Westland .. .. 0-464 1-146 0-145 0-127 0-544 0-261 2-687 Canterbury .. .. .. .. 0-743 0-921 0-079 0-098 0-225 0-514 2-580 Otago .. .. .. .. 1-006 1-314 0-112 0-045 0-365 0-778 3-620 Southland .. .. .. .. 0-603 1-395 0-090 0-144 0-173 0-714 3 119 New Zealand average — 1937-38 season .. .. 0-381 0-953 0-075 0-076 0-384 0-178 2-047 1936-37 season .. .. 0-352 0-927 0-072 0-088 0-398 0-147 1-984

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Season 1937-38: Costs in Manufacture and Delivery of Cheese to f.o.b. Overseas Steamers.

ACCOUNTS. The method of presentation of the accounts which was adopted in the first annual report of the Department was found quite satisfactory, and has therefore been followed in this report. For convenience in publication of the accounts, shillings and pence are omitted. The accounts now submitted are in terms of New Zealand currency, and they show, first, the completed financial operations for the 1936-37 season, and, secondly, the operations of the Department in the purchase and sale of export dairy-produce for the 1937-38 season. The completed operations for the 1936-37 season are referred to on page 3 of this report. The relevant accounts show that in the case of creamery butter and cheese the actual realizations for produce which was unsold at balance date exceeded the estimates. In the case of whey butter the actual realizations were less than the estimates. The net result is that at the date of closing the accounts (21st June, 1938) the actual deficit for the 1936-37 season was £272,109. In the accounts published with last season's report the deficit for the 1936-37 season was estimated at £548,750. Interest at 1| per cent, is allowed on the deficit of £272,109 from 21st June, 1938, to 31st July, 1938, bringing the deficit for the 1936-37 season at 31st July, 1938, to £272,482. The accounts for the 1937-38 season cover all export butter and cheese which was manufactured from Ist August, 1937, to 31st July, 1938, the quantities being— Creamery butter .. .. .. .. .. 137,542 tons. Whey butter .. .. .. .. .. 1,796 tons. Cheese •• •• •• •• .. .. 83,078 tons. The approximate average f.o.b. purchase prices paid or payable for this produce in terms of the Primary Products Marketing Act are as follows :— Creamery butter .. .. .. .. 13-7122 d. per pound. Whey butter .. .. .. .. 12-608 d. per pound. Cheese .. .. .. .. 7-769 d. per pound. The approximate average f.o.b. realizations for produce (actual and estimated) as shown in the accounts are as follows :— Creamery butter .. .. .. , . 14-0576 d. per pound. Whey butter 13-2847 d. per pound. Cheese .. .. .. .. _ _ 7.8986 d. per pound. In the compilation of the accounts butter and cheese unsold at balance date were taken in at the following values :— Creamery butter (shipments partially sold) : 120s. per hundredweight sterling gross. Creamery butter (in store awaiting shipment) : 110s. per hundredweight sterling gross Whey butter (shipments partially sold) : 110s. 6d. per hundredweight sterling gross. Whey butter (in store awaiting shipment) : 100s. per hundredweight sterling gross. Cheese (shipments partially sold) : 70s. 3d. per hundredweight sterling gross. Cheese (in store awaiting shipment) : 70s, per hundredweight sterling gross,

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(In pence per pound of butterfat.) I Manu- Repairs Charges: „ , , m . i facturing Depreciation.! and Factory to overhead r ,^ otal Charges. Maintenance. f.o.b. Charges. Charges. | Auckland .. .. .. 2-087 0-157 0-213 0-683 0-188 3-328 New Plymouth .. .. 2-014 0-128 0-119 0-490 0-243 2-994 Patea-Wanganui .. .. 2-015 0-123 0-161 0-507 0-254 3-060 Hawke's Bay - Gisborne .. 2-178 0-195 0-147 0-772 0-376 3-668 Wellington .. .. 2-216 0-108 0-128 0-666 0-310 3-428 Marlborough-Nelson-Westland 2-489 0-289 0-118 0-858 0-502 4-256 Canterbury.. .. .. 2-373 0-212 0-187 0-636 0-691 4-099 Otago .. .. .. 2-668 0-209 0-207 0-678 0-499 4-259 Southland.. .. .. 2-597 0-163 0-215 0-638 0-442 4-055 New Zealand average— 1937-38 season .. 2-151 0-141 0-166 0-589 0-290 3-337 1936-37 season .. 2-056 0-134 0-146 0-577 0-226 3-139 I '

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The accounts submitted comprise :— (1) Separate Purchase and Sale or " Pool " Accounts for creamery butter, whey butter, and cheese. (2) Administration and General Expenses Account. (3) Dairy Industry Account. (4) Balance-sheet. The Purchase and Sale or " Pool " Accounts show the purchase value of the produce, and the sale value less selling-charges, freight, and insurance. To each Purchase and Sale Account is charged its proportion of the total administration and general expenses, amounting to £192,141. The Administration and General Expenses Account shows the itemized expenses and charges in the United Kingdom and in New Zealand. It should be noted that the itemized expenses for the 1937-38 season are not comparable with the corresponding items in the accounts for the 1936-37 season, because the Department was not fully organized and staffed at the beginning of that season. In the advertising, publicity, and sales-promotion section of this report reference is made to the increase in the financial allocation for these activities, the expenditure being £81,259, compared with £39,049 for the 1936-37 season. The Dairy Industry Account shows the position of the Produce Purchase and Sale Accounts as follows :— £ £ Estimated surplus on creamery butter .. .. .. .. 443,398 Estimated surplus on cheese .. .. .. .. 100,447 Plus estimated surplus on whey butter .. .. 11,340 111,787 Estimated surplus, Dairy Industry Account, 1937-38 season .. .. £555,185 The balance-sheet is drawn up in the usual form to show liabilities and assets as at 31st July, 1938. ACKNOWLEDGMENTS. The Government desires to acknowledge the co-operation and assistance which have been received from organizations interested directly and indirectly in the marketing of the primary products of the Dominion. In particular, the Government has appreciated the co-operation of the farming industry and of the directors and officials of dairy companies. The Dairy Board, the National Dairy and South Island Dairy Conferences, and the farmers' organizations have been helpful in the expression of their views. Finance, shipping, and cool-store interests have given a full measure of co-opcration, both in New Zealand and in London. In the United Kingdom members of the provision trade and the appointed agents of the Department have given their support to the Dairy Sales Division in the carrying-out of the new marketing policy. The marked success which has been achieved is due to a considerable extent to this helpful co-operation. In concluding this, the second report of the Dairy-produce Export Division, I desire again to express my personal appreciation, together with that of the Government, for the excellent work carried out by the Director, Mr. G. A. Duncan and his staff in New Zealand, and Mr. H. E. Davis, London Manager, Mr. J. W. Rodden, and their staff in London. They have extended the marketing procedure in such a way that, added to the initial work set out in the first report, it has gained the respect and admiration of all who have examined it. References in Australia, Canada, Denmark, and the United Kingdom have all recorded the fact that the single-unit marketing system exercised in co-operation with the distributing houses in London and other centres has given results beneficial to producer, distributor, and consumer. YwUl Minister of Marketing.

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DAIRY INDUSTRY ACCOUNT. Record of Weekly Balances, 1936-37 and 1937-38 Season.

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PRIMARY PRODUCTS MARKETING DEPARTMENT. DAIRY-PRODUCE EXPORT DIVISION. Final Statement op the Dairy-produce Purchase and Sale Accounts, 1936-37 Season. Creamery Butter. Dr. £ Or. £ Estimated deficit on 5,992,382 boxes shown in accounts Surplus on realization of produce unsold at 31st July, at 31st July, 1937 .. .. .. .. 561,397 1937 .. .. .. .. .. .. 177,083 Actual deficit on sale of 5,992,382 boxes .. .. 384,314 £561,397 £561,397 Whey Butter. Dr. £ Or. £ Estimated deficit on 57,422 boxes shown in accounts at Actual deficit on sale of 57,422 boxes .. .. 5,956 31st July, 1937 .. .. .. .. .. 5,707 Deficit on realization of produce unsold at 31st July, 1937 249 £5,956 £5,956 Cheese. Dr. £ Or. £ Actual surplus on sale of 1,213,914 crates .. .. 126,370 Estimated surplus on 1,213,914 crates shown in accounts at 31st July, 1937 .. .. .. .. 18,354 Surplus on realization of produce unsold at 31st July, 1937 .. .. .. .. .. .. 108,016 £126,370 £126,370 Dairy Industry Account (Income and Expenditure), 1936-37 Season. Dr. £ Cr. £ £ Deficit, Creamery Butter Account .. .. .. 384,314 Surplus, Cheese Account .. .. .. 126,370 Premiums staff annuities (section 15, Finance Act, 1937) 5,380 Less deficit, Whey Butter Account .. 5,956 Payments to manufacturers of special milk products (The Dairy Produce (Special Milk Products) Regula- Surplus, Cheese and Whey Butter Accounts .. .. 120,414 tion 1937) .. .. .. .. .. 2,829 Balance (deficit, 1936-37 season, as at 21st June, 1938) 272,109 £392,523 £392,523 £ Balance (deficit, 1936-37 season, as at 21st June, 1938) 272,109 Balance (actual deficit, 1936-37 season, as at 31st July, £ Interest on balance, 21st June to 31st July, 1938 .. 373 1938) .. .. .. .. .. .. 272,482 £272,482 £272,482 Reconciliation of Balance in Dairy Industry Account. £ £ £ Estimated deficit in published aocounts at 31st July, 1937 .. .. .. .. .. 548,750 Less— £ Surplus on realization creamery butter .. .. .. .. .. .. 177,083 Surplus on realization cheese .. .. . . . . .. .. .. 108,016 285,099 263,651 Plus — Deficit on realization whey butter .. . . .. .. .. .. .. 249 Premiums staff annuities .. .. .. .. .. .. .. ~ g 330 Payments to manufacturers of special milk products . . . . .. ~ .. 2,829 8,458 Deficit, Dairy Industry Account, as at 21st June, 1938 .. . . . . .. .. .. 272 109 Plus interest on deficit for period 21st June to 31st July, 1938 .. .. .. . . . . .. 373 Actual deficit, 1936-37 season's produce, as at 31st July, 1938 .. .. .. .. .. . . _ £272 482 Examined and found correct —J. H. Fowler, Controller and Auditor-General.

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PRIMARY PRODUCTS MARKETING DEPARTMENT—continued. DAIRY-PRODUCE EXPORT DlVlSlON—continued. CREAMERY BUTTER. Puechase and Sale Account, 1937-38 Season. Shipments for which Complete Sale Proceeds have been received at 31st July, 1938. Dr. £ Or. £ £ Purchase of 3,715,531 boxes .. .. .. 11,896,254 Sale of 3,715,531 boxes (less United Balance carried forward (surplus on 3,715,531 boxes) 338,461 Kingdom selling-charges, including landing-charges, agents' commission, discount, and storage) .. .. 12,907,905 Less — £ Freight .. .. 648,405 Insurance .. .. 24,785 673,190 12,234,715 £12,234,715 £12,234,715 Shipments for which only Partial Sale Proceeds have been received at 31st July, 1938. Dr. £ Gr. £ Purchase of 1,392,120 boxes .. .. .. 4,461,040 Balance brought forward (surplus on Balance carried forward (estimated surplus on 3,715,531 boxes) .. .. .. .. 338,461 5,107,651 boxes) .. .. .. .. 625,948 Sale of 790,595 boxes (less United Kingdom selling - charges, including landingcharges, agents' commission, discount, £ and storage) .. .. .. 2,875,915 Estimated sale value of 601,525 boxes in store, United Kingdom or afloat, at 31st July, 1938 (basis of valuation, 120s. per hundredweight sterling, less United Kingdom selling-charges) .. 2,136,897 Total boxes, 1,392,120 .. .. 5,012,812 Less — £ Freight .. .. ..253,932 Insurance .. .. 10,353 264,285 4,748,527 £5,086,988 £5,086,988 Stocks in Store in New Zealand awaiting Shipment at 31st July, 1938. Dr. £ Gr. £ Purchase value of 393,113 boxes .. .. .. 1,245,438 Balance brought forward (estimated surplus Balance carried forward (estimated surplus on 5,500,764 on 5,107,651 boxes) .. .. .. .. 625,948 boxes), (137,541 tons 16 cwt.) .. .. .. 588,062 Estimated sale value of 393,113 boxes (basis of valuation, 110s. per hundredweight sterling, less United Kingdom £ selling-charges) .. .. .. 1,280,807 Less— £ Freight .. .. .. 70,836 Insurance .. .. 2,419 73,255 1,207,552 Total boxes, 5,500,764 (137,541 tons 16 cwt.) £1,833,500 £1,833,500 £ £ Proportion of administration and general expenses .. 144,664 Balance brought forward .. .. 588,062 Balance to Dairy Industry Account (estimated surplus on sale of croamery butter) .. .. .. 443,398 £588,062 £588,062 (Note. —The bulk of the produce unsold at balance date has since been realized at prices in excess of the valuation figures.)

43

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PRIMARY PRODUCTS MARKETING DEPARTMENT— continued. DAIRY-PRODUCE EXPORT DlVlSlON—continued. CHEESE. Purchase and Sale Account, 1937-38 Season—continued. Shipments for which Complete Sale Proceeds have been received at 31st July, 1938. ' £ Or. £ £ Purchase of 576,820 crates 2,973,990 Sales of 576,820 crates (less United Kingdom Balance carried forward (surplus on 576,820 crates) .. 20,911 selling - charges, including landingcharges, agents' commission, trade discount, and storage) .. .. 3,316,650 Less— £ Freight .. .. .. 314,344 Insurance .. . . 7,405 321,749 > j; 2,994,901 L ' £2,994,901 Shipments for which only Partial Sale Proceeds have been received at 31st July, 1938. ■ £ I Cr. f £ Purchaso of 432,556 crates 2,207,891 Balance brought forward (surplus on Balance carried forward (estimated surplus on 576,820 crates .. .. 20 911 .1,009,376 crates) .. .. .. .. 97,631 Sale of 297,310 crates (less United Kingdom selling-charges, including landing-charges, agents' commission, trade discount, and storage) .. .. .. .. 1,717,959 Estimated sale value of 135,246 crates in store, United Kingdom or afloat, at 31st July, 1938 (basis of valuation, 70s. 3d. per hundredweight sterling, less United Kingdom selling-charges) 806,467 2,524,426 Total crates, 432,556. Less— £ Freight .. .. .. 234,253 Insurance .. .. 5,562 239,815 2,284,611 £2,305,522 £2,305,522 Stocks in Store in New Zealand awaiting Shipment at 31st July, 1938. ® r • £ Cr. £ ■ £ Purchase value of 166,804 crates .. .. ..842,268 Balance brought forward (estimated surplus Balance carried forward (estimated surplus on 1,176,180 on 1,009,376 crates) .. .. 97 6'-51 crates), (83,078 tons 3 cwt.) .. .. .. 146,091 Estimated sale value of 166,804 crates (basis of valuation, 70s. per hundredweight sterling, less United Kingdom selling-charges) .. 982,369 Total crates 1,176,180 (83,078 tons 3 cwt.) Less— £ Freight .. .. .. 89,421 Insurance .. .. .. 2,220 , . . . 91,641 _____ . 890,728 £988,359 £988,359 £ £ Proportion of administration and general expenses v. 45,644 Balance brought forward .. • ~••• 146 091 Balance to Dairy Industry Account (being estimated • '• surplus on sale of cheese).. .. .. .. 100,447 ' i"^ £146,091 £146,091 (Note.—Of. the produce unsold at balance date, .the. portion hajs since realized..prices. in. excess ,of .the valuation figures.)

44

H.—3o.

PRIMARY PRODUCTS MARKETING DEPARTMENT —continued. DAIRY-PRODUCE EXPORT DIVISION —continued. WHEY BUTTER. Purchase and Sale Account, 1937-38 Season—continued. Shipments for which Complete Sale Proceeds have been received at 31st July, 1938. Dr. £ Or. £ Purchase of 51,519 boxes .. .. .. .. 151,744 Sale of 51,519 boxes (less United Kingdom Balance carried forward (surplus on 51,519 boxes) .. 10,452 selling-charges, including landing-charges, agents' commission, trade discount, and storage) .. .. .. .. 171,902 Less — £ Freight .. .. .. 9,892 Insurance .. .. .. 314 9,706 162,196 £162,196 £162,196 Shipments for which only Partial Sale Proceeds have been received at 31st July, 1938. Dr. £ Or. £ Purchase of 19,470 boxes .. .. .. .. 57,115 Balance carried forward (surplus on 51,519 boxes) .. 10,452 Balance carried forward (estimated surplus on 70,989 Sale of 14,842 boxes (less United Kingdom sellingboxes) .. .. .. .. .. .. 13,295 charges, including landing-charges, agents' £ commission, trade discount, and storage) .. 48,528 Estimated sale value of 4,628 boxes in store, United Kingdom or afloat, at 31st July, 1938 (basis of valuation, 110s. 6d. per hundredweight sterling, less United Kingdom sellingcharges) .. .. .. .. 15,112 63,640 Total boxes, 19,470. Less— £ Freight .. .. .. 3,550 Insurance .. .. .. 132 3,682 — 59,958 £70,410 £70,410 Stocks in Store in New Zealand awaiting Shipment at 31st July, 1938. Dr. £ Gr. £ Purchase value of 840 boxes .. .. .. 2,438 Balance carried forward (estimated surplus on Balance carried forward (estimated surplus of 71,829 70,989 boxes) .. .. .. .. .. 13,295 boxes), (1,795 tons 12 cwt.) .. .. .. 13,173 Estimated sale value of 840 boxes (basis of valuation, 100s. per hundredweight sterling, less £ United Kingdom selling-charges) .. .. 2,474 Less— £ Freight .. .. .. 153 Insurance .. .. .. 5 158 2,316 —i Total boxes, 71,829 (1,795 tons 12 cwt.). £15,611 £15,611 £ £ Proportion of administration and general expenses .. 1,833 Balance brought forward .. .. .. .. 13,173 Balance to Dairy Industry Account (estimated surplus on sale of whey butter) .. .. .. ... 11,340 £13,173 -- . £13,173 (Note. —The bulk of the produce unsold at balance date has since been realized at: prices in excess of the valuation figures.)

45

H.—3o.

PRIMARY PRODUCTS MARKETING DEPARTMENT —continued. DAIRY-PRODUCE EXPORT DIVISION —continued. Administration and General Expenses Account, 1937-38 Season.

46

uStftoL New Zealand, j Total. Dr. £ £ £ Salaries .. .. .. .. .. .. .. .. 12,489 12,028 24,517 Or. £ £ Legal expenses .. .. .. .. .. .. .. 158 .. 158 Allocation of expenses to Produce Purchase and Sale Office rent, maintenance, cleaning, telephone, and sundry expenses .. 2,535 2,295 4,830 Accounts — Postage, cables, printing and stationery .. .. .. .. 1,433 1,567 3,000 Creamery butter .. .. .. .. .. 144,664 Travelling-expenses .. .. .. .. .. .. .. 486 177 663 Whey butter .. .. .. l'833 Subscriptions, donations, and entertainment .. .. .. .. 151 .. 151 Cheese .. .. .. 45 644 Shipping inspection .. .. .. .. .. .. .. 1,445 2,098 3,543 ' 192,141 Agency expenses, Lyttelton .. .. .. .. .. .. .. 225 225 Audit fees .. .. .. .. .. .. .. .. .. 1,033 1,033 Depreciation (office and departmental equipment) .. .. .. 262 267 529 18,959 19,690 38,649 Advertising in United Kingdom .. .. .. .. .. .. .. .. 81,259 Miscellaneous general expenses .. .. .. .. .. .. .. .. 582 £ Cost of remittances to dairy companies .. .. .. .. .. .. 12,733 Interest on overdraft at Reserve Bank ., .. .. .. .. 58,765 71,498 Subsidy, Public Service Superannuation Fund .. .. .. .. .. .. .. 153 £!92,141 £192,141

H.—3o.

PRIMARY PRODUCTS MARKETING DEPARTMENT—continued. DAIRY-PRODUCE EXPORT DlVlSlON—continued. Dairy Industry Account (Income and Expenditure), Period Ist August, 1937, to 31st July, 1938. Dr- £ Cr. £ £ Balance (estimated surplus, Dairy Industry Account, Estimated surplus, Creamery Butter Account .. .. 443,398 1937-38 season) .. .. .. .. 555,185 Estimated surplus, Cheese Account .. .. 100,447 Plus estimated surplus, Whey Butter Account 11,340 Estimated surplus, cheese and whey butter .. 111,787 £555,185 £555,185 Balance-sheet as at 31st July, 1938. Liabilities. Assets. £ £ £ £ Overdraft, Reserve Bank of New Zealand 3,637,525 Sundry debtors for produce and amounts Less balance at Bank of England and accrued due .. .. .. .. 642 868 Bank of New Zealand, London .. 11,186 Stocks— 3,626,339 Produce .. .. .. .. 5,224,126 Sundry creditors for accrued charges and Advertising-material and sundries .. 4,628 sundry credit balances .. .. .. 1,967,656 5,228,754 Dairy Industry Account (estimated surplus, Office and departmental equipment .. .. ' 5,'076 1937-38 season) .. .. .. .. 555,185 Dairy Industry Account (deficit, 1936-37 season) .. .. .. .. .. 272,482 £6,149,180 £6,149,180 (Note.—ln order that the accounts should cover all export butter and cheese manufactured up to and including 31st July, 1938, the quantities in store in New Zealand at that date are included. Ownership of this produce passes to the Crown, in terms of section 18 of the Primary Products Marketing Act, 1936, when it is placed on board ship for export from New Zealand.) G. A. Duncan, Director, Dairy-produce Export Division. I hereby certify that the Purchase and Sale Accounts, the Administration and General Expenses Account, and the Dairy Industry Account (Income and Expenditure), together with the Balance-sheet as at 31st July, 1938, have been duly examined and compared with the relative books and documents submitted for audit, and correctly state the position as disclosed thereby, subject to the departmental note enfaeed thereon. —J. H. Fowler, Controller and Auditor-General.

47

H.—3o.

Imports of Butter into United Kingdom.

Imports of Cheese into United Kingdom.

48

(From Dairy-produce Supplies, 1937.) Country whence consigned. 1918. 1931. 1932. 1933. 1984. I 1935. 193G. ] 1937 L ' ] _M_ Tone. Tons. Tons. Tons. Tons. Tons. Tons. Tons. New Zealand.. .. .. 12,600 96,300 106,950 125,600 133,850 131,900 139,600 147,548 Australia .. .. .. 29,700 77,900 89,750 84,600 105,200 105,650 84,700 74,597 Eire .. .. (a) 19,050 15,750 18,950 23,400 24,400 23,400 15,998 Canada .. .. .. 50 3,900 950 1,650 .. 3,150 2,000 1,593 Union of South Africa .. .. .. 2,000 1,850 1,250 1,050 4,100 3,750 3,456 South-west African Territory .. .. .. 1,100 300 150 1,650 1,900 1,252 Kenya .. .. .. (b) 300 350 250 400 650 1,050 984 Nigeria .. .. .. .. .. .. .. .. 150 300 Other Empire countries .. 50 50 100 100 150 100 150 100 Denmark .. .. .. 85,350 123,300 129,200 125,950 124,300 109,300 108,550 112,825 Netherlands .. .. .. 7,650 4,800 2,350 7,300 15,050 23,200 37,300 35,831 U.S.S.R. (Russia) .. .. 37,550 20,200 16,150 28,150 24,550 25,150 20,750 13,668 Lithuania .. .. (c) 2,000 3,400 5,200 7,050 9,050 10,550 10,227 Latvia .. .. .. (c) 1,950 5,600 7,300 7,800 9,650 9,800 10,844 Poland .. .. .. (A) 1,650 150 .. 2,500 4,950 9,450 5,270 Finland .. .. .. (c) 1.2,700 10,850 6,700 7,550 5,800 8,000 7,894 Sweden .. .. .. 16,600 10,600 8,800 11,350 15,100 9,200 7,450 10,225 Estonia .. .. .. (c) 6,250 4,150 4,200 6,150 5,950 5,800 7,994 Austria .. .. .. .. .. .. 400 1,250 950 1,800 1,298 Hungary .. .. .. .. .. .. 1,600 2,000 900 1,750 2,112 France .. .. .. 12,450 50 100 50 750 350 1,450 307 Belgium . . .. .. (e) .. 50 100 700 .. 800 37 Germany .. .. .. .. 400 200 200 200 .. .. 74 Norway .. .. .. 1,000 650 750 150 Argentina .. .. .. 3,650 18,700 19,550 10,100 5,550 3,450 7,150 6,483 Other foreign countries .. 300 250 ; 100 150 50 750 150 202 Totals, Empire countries .. 42,400 199,500 216,800 232,700 264,200 271,750 256,850 245,528 Totals, foreign countries .. 164,550 203,500 20.1,400 208,900 220,550 208,650 230,750 225,291 Totals, all countries , 206,950 403,000 418,200 441,600 484,750 480,400 487,600 470,819 (a) Not separately distinguished before April, 1923. (b) Included in " Other Empire countries." (e) Included in Russia. (d) Included in Russia, Germany, and Austria-Hungary. (e) Included in " Other foreign countries."

(From Dairy-produce Supplies, 1937.) Country whence consigned. 1913. 1931. 1932. 1933. 1934. 1935. 1936. I 1937 , I Tons. Tons. Tons. Tons. , Tons. Tons. Tons. Tons. New Zealand.. .. .. 27,350 86,650 92,450 102,950 104,600 88,150 84,050 86,539 Canada .. .. .. 64,700 ' 35,350 37,350 31,500 26,000 23,500 30,150 36,114 Australia .. .. .. 400 3,400 3,700 4,650 5,750 6,700 4,550 5,979 Union of South Africa and South- .. 750 850 650 150 1,100 600 751 west African Territory Eire . . .. (a) 100 100 50 250 450 850 828 Other Empire countries .. .. .. .. .. .. .. 50 41 Netherlands .. .. .. 14,600 8,400 8,500 6,100 6,400 9,950 9,100 10,866 Italy .. .. .. 5,100 6,600 5,300 4,500 4,700 4,000 700 3,084 Denmark .. .. .. (b) 250 300 300 300 500 1,450 1,014 France .. .. .. 750 600 450 350 350 400 1,150 508 Switzerland .. .. .. 600 1,600 700 700 700 750 850 870 Finland .. . . .. (b) 150 150 100 100 100 50 171 Norway .. .. .. (b) 50 100 50 100 50 50 52 Belgium .. .. .. 100 100 50 .50 .. 50 3 Germany .. .. .. (6) 50 50 United States of America .. 1,100 200 .. .. .. .. 50 Other foreign countries .. 150 50 100 50 50 50 100 25 Totals, Empire countries .. 92,450 126,250 134,450 139,800 136,750 119,900 120,250 130,252 Totals, foreign countries .. 22,400 18,050 15,700 12,200 12,700 15,800 13,550 16,593 Totals, all countries .. 114,850 144,300 150,150 152,000 149,450 135,700 133,800 146,845 to) Not separately distinguished before April, 1923. (6) Included in " Other foreign countries."

H.—3o

Imports of Butter into Ports in the United Kingdom, 1st July, 1937, to 29th June, 1938 (In tons.) Weekly Dairy Produce Notes, Imperial Economic Committee.

7—H. 30.

49

Country whence consigned. London. Bristol. Fishguard. Liverpool. Manchester. Glasgow. Leith. j Newcastle. Hull. Goole. Grimsby. Harwich. Other Ports. Total. 8 Eire .. .. .. .. .. 50 5,050 4,350 .. 3,450 .. .. .. .. .. .. 2,600 15,500 21,000 Australia .. .. .. 78,400 50 300 .. 2,050 400 1,000 .. 50 1,400 .. .. .. 150 83,800 71,150 New Zealand .. .. 97,700 2,100 10,350 .. 15,550 2,600 7,800 .. 1,650 1,350 .. .. .. 1,050 140,150 144,900 Canada .. .. .. 900 150 .. .. 300 150 .. .. 50 .. .. • • • • • • 1, 5o0 1,350 South-west African Territory .. .. 600 .. .. •• .. .. •• •• •• •• •• •• 600 1,650 South Africa .. .. .. 1,100 .. .. .. .. •• •• •• •• 1,100 3,650 Kenya .. .. .. 900 .. .. .. .. .. .. .. ■ • • • • ■ • • • • • • 900 900 Nigeria .. .. .. 50 .. .. . ■ • • • • • • • • • • • • • • • • • • • • 50 100 Other Empire countries .. .. .. .. .. • ■ • ■ ■ • • • • ■ ■ • •• • • ■ • ■ • • ■ 200 Russia .. .. .. 11,050 .. .. .. ■■ •• •• •- •• •• •• 11,050 20,750 Netherlands .. .. 15,250 .. .. .. 1,250 400 .. 7,700 1,850 3,850 1,450 .. 600 2,050 34,400 39,300 Denmark 200 .. .. .. .. .. 150 21,800 22,950 6,400 5,250 41,600 14,300 .. 112,650 113,750 Sweden .. . .. 1,650 .. .. .. .. .. 1,600 1,850 7,300 .. .. .. 350 12,750 8,700 Finland .. .. .. .. .. .. . ■ •• •• ■■ 8,850 .. .. .. .. 8,850 8,850 Estonia .. .. .. 3,750 .. .. .. -■ .. .. •• •• 4,950 .. .. .. .. 8,700 6,650 Latvia .. .. .. 8,300 .. .. .. .. .. .. 200 500 3,000 .. .. .. .. 12,000 10,400 Poland .. .. .. 9,100 .. .. .. .. .. .. .. .. 1,650 .. .. .. .. 10,750 6,850 Lithuania .. .. .. 7,850 .. .. .. -• •• -• •• •• 3,200 .. -. .. 50 11,100 10,000 Germany .. .. .. .. .. ■ ■ • • • • • • - • • • • • 50 .. .. .. .. 50 50 Austria .. .. . . 1,550 .. .. .. .. .. .. •. .. .. . • • • • • • ■ 1,550 1,800 Hungary .. .. .. 1,750 .. .. .. •• •• •• •• •• •• •• 1,750 1,600 Belgium .. .. .. 100 .. .. •. .. . • • • • • • • ■ • • • - ■ • • • • 100 600 France .. .. .. ■. 100 .. .. .. .. .. .. •. .. - ■ -• •■ ■• 100 1,200 Norway .. .. .. 500 .. .. .. .. . . •. .. • • . ■ ■ ■ • ■ • ■ ■ • 500 Czechoslovakia .. .. 600 .. .. .. . ■ .. • • • • • • . - ■ • • • • ■ • • 600 Argentina .. .. .. 2,350 950 .. .. .. .. . • • ■ .. .. • • - • • • • • 3,300 8,850 Other foreign countries .. .. .. .. •• •• •• •• •• •• •• •• •• 1,050 1,050 2,400 Totals .. .. 241,950 5,050 10,700 5,050 23,500 3,550 12,400 31,300 28,900 42,000 6,700 41,600 14,900 7,300 474,900 2ndJuly, 1936, to 30th June, 1937 247,700 9,100 9,000 6,200 28,900 3,250 15,400 31,100 28,850 34,800 9,400 41,650 13,700 7,600 .. 486,650

H.—3o.

Imports of Cheese into Ports in the United Kingdom, 1st July, 1937, to 29th June, 1938. (In tons.) Weekly Dairy Produce Notes, Imperial Economic Committee.

50

Country whence consigned. j London. Folkestone.] 8o^°P- 1 Bristol. | Cardiff. Liverpool. [Manchester. Glasgow, j Leith. | Newcastle. | Hull. Harwich. Other Ports. Total. "^^ re • • • • • • i 50 . f . 250 100 New Zealand .. .. 59,900 .. 1,050 TOO 9,450 '850 4,550 '850 '500 " 550 «, ?*n 7Q Australia " !! | .! ,. 5 ° 2 ' 95 ° 1,05 ° 3 '?oo 1,4 °° 1,500 1,10 ° 1,2 °° 600 " " 1,500 36 ' 100 27^350 South Africa .. .. ' 50 300 " " " 250 •* •• 9,050 5,550 Netherlands.. .. .. 5 800 ™ " * nn " " 1 „ •• •• •• •• 350 750 Italy .. .. .. 2! 200 "o0 " " " " 00 2,150 100 350 10,600 10,500 Switzerland .. .. '400 ° "m " '' A "" •• •• •• 850 200 3,300 2,250 Denmark .. .. 350 ' " "' " * • • • • 250 200 950 800 France .. .. " .. " " " 50 50 50 .. 500 .. 1,000 1,050 Finland .. .. .. 150 " " '' '' ' • • • • • • • 400 550 850 Norway .. .. .. 50 ° " " " " • • • • • • • • • • 150 150 Bulgaria .. .. .. 50 '' " " " " '' " • • • • • • • • 50 50 Other countries .. .. 50 '' " " " " „ • • • • • • • • 50 L! 11 11 H H H '• 50 • •• 850 950 2,750 TOtalS 99 - 5Q0 l 50 1,600 10,250 1,750 12,900 2,250 6,200 1,900 2,800 2,100 2,150 1,700 4,050 149,200 T~ 89 ' 700 ! 300 MW ~MBO] 1,350 10,450 1,600 5,450 1,800 1,900 ~

H.—3o.

THE WORLD TRADE IN BUTTER. Export of Butter from Principal Exporting Countries.

Imports of Butter into Principal Importing Countries.

THE WORLD TRADE IN CHEESE. Exports of Cheese from Principal Exporting Countries.

Imports of Cheese into Principal Importing Countries.

51

(In tons.) Countries, 1929. j 1930. 1931. 1932. 1933. 1934. 1935. 1936. j 1937. - | Denmark .. 156,526 166,321 168,942 155,306 148,334 147,460 136,116 143,896 150,550 Netherlands .. 46,574 41,247 32,438 20,056 27,925 36,304 46,047 59,235 58,750 Irish Free State .. 28,034 26,235 18,887 16,488 20,193 25,396 26,549 25,907 19,000 Sweden .. .. 24,536 26,253 19,217 13,333 16,857 22,836 19,939 18,806 23,150 Finland .. .. 16,344 16,842 17,128 14,295 11,697 10,923 10,081 13,766 13,700 Estonia .. .. 12,164* 13,844 .14,216 12,333 9,079 9,958 10,667 10,782 12,950 Latvia .. .. 14,596 18,139 18,443 18,304 15,399 15,453 16,550 17,017 18,900 Lithuania .. .. 4,020 7,241 8,567 9,770 9,429 9,518 11,962 14,398 14,800 Poland .. .. 14,843 11,926 12,263 1,208 1,583 4,367 5,595 10,735 8,000 France .. .. 7,466 5,404 4,931 3,536 3,049 3,258 5,181 5,660 2,950 Totals, Europe .. 325,103 333,452 315,032 264,629 263,545 285,473 288,687 320,202 322,750 U.S.S.R. .. .. 24,971 10,356 30,368 30,446 36,617 37,305 28,929 22,732 14,100 New Zealand .. 82,690 94,212 99,428 109,277 131,760 130,725 139,466 139,810 148,800 Australia .. .. 45,944 56,518 85,275 102,258 94,434 110,171 102,898 82,889 81,650 Argentina .. .. 16,762 22,838 22,842 24,963 13,688 8,191 6,753 10,107 8,650 Canada .. .. 625 527 4,768 1,565 7,981 191 3,436 2,290 1,829 Totals, overseas .. 146,021 174,095 212,313 238,063 241,863 249,278 252,553 235,096 240,929 Grand totals .. 496,095 517,903 557,713 533,138 542,025 572,056 570,169 578,030 577,779

(In tons.) Countries. 1928. | 1929. 1930. 1931. 1932. 1933. 1934. 1935. 1936. 1937. Great Britain and 297,423 313,727 332,531 385,429 402,947 437,300 479,808 474,060 484,030 465,100 Northern Ireland Germany .. .. 124,555 133,404 131,054 98,638 68,421 58,210 60,788 69,879 74,216 85,450 Belgium-Luxemburg .. 1,294 4,267 10,105 18,554 20,950 12,235 9,238 5,943 3,634 2,200 France .. .. 2,571 4,354 5,770 18,230 11,670 9,066 4,287 674 1,898 650 Switzerland.. .. 8,064 7,433 8,392 10,428 3,639 511 292 135 1,439 2,500 Canada .. .. 7,500 16,040 17,234 1,260 106 615 1,283 66 53 29 U.S.A. .. .. 1,545 642 601 462 194 247 561 10,123 4,407 4,950 Totals .. .. 442,952 479,867 505,687 533,001 507,927 518,184 556,257 560,880 569,677 560,879

(In tons.) Countries. 1929. 1930. | 1931. 1932. j 1933. 1934. 1935. 1936. 1937. Netherlands .. 94,302 92,294 85,025 75,921 62,903 60,220 60,088 55,942 65,850 Italy .. .. 32,054 36,150 39,708 29,700 23,562 24,680 17,805 19,096 24,000 Switzerland .. 31,127 29,528 24,244 19,509 20,244 17,475 17,968 18,186 17,200 France .. .. 18,129 17,375 15,308 13,042 11,176 11,595 10,994 10,422 11,000 Denmark .. .. 6,479 5,636 4,188 6,488 9,920 6,201 6,558 9,379 9,250 New Zealand .. 88,954 90,648 81,818 89,520 99,146 99,226 86,378 82,911 82,350 Canada .. .. 41,495 35,787 37,853 38,812 33,111 27,307 24,876 36,558 39,700 Australia .. .. 2,291 3,242 3,309 3,929 4,864 5,565 6,845 5,550 8,350 Totals .. .. 314,831 310,660 291,453 276,921 264,926 252,269 231,512 238,044 257,700

(In tons.) Countries. 1929. 1930. 1931. 1932. 1933. 1934. 1935. j 1936. 1937. Great Britain and 148,100 154,118 142,820 148,712 150,783 147,918 134,222 132,600 145,800 Northern Ireland Germany .. .. 65,432 61,366 53,752 48,522 40,591 33,254 27,527 27,458 36 300 Belgium .. .. 20,740 22,815 22,143 20,384 21,615 21,173 22,645 22,695 22'300 France .. .. 22,800 29,249 36,968 23,334 20,583 15,692 15,539 14,508 13 100 U.S.A. .. .. 34,096 30,496 27,674 24,830 21,606 21,220 21,846 26,718 27,100 Totals .. .. 291,168 298,044 283,357 265,782 255,178 239,257 221,779 223,979 244,600

H.—3o.

BUTTER. Weekly Medium Prices at the London Provision Exchange.

52

(Shillings per hundredweight.) 1935-36. 1939-37. 1937 _ 38 Date. J! 1 ll t 1 | I I | I ! Date gl I |l I | | § ill T> . | I 3 1 I 4 4 S •* t 4 « * I *! I '! j is i 1 1 1 *|l *1 j |-l I I i 1 1J I • * " I i I I I I s.F. s.F. s. TT.E. tr.s. s. U.S. SI" sr s titt tt q q s . iI)er " I ! „ -c „ I Siber- ** £■■ J « » - SS S 2 SJ 8 *•* SI S5 ■ » 125 s ™ Au g . ... 55 ffi * S s : S :? " 94 93 •• •' J® 8 87 89 84 87 14 .. 118 117 .. 109 127 I 111 110 105 | 110 I 13 .. i 115 114 ; I 124 110 112 ! 107 110 30 97 % 92 " 114 86 89 82 87 28 " 119 118 " !!n {9s lln 113 107 112 ' 20 '' 114 113 " " 126 108 U ° 106 108 .. y/ 9b \)Z .. 114 8b 89 82 87 28 .. 119 118 .. 110 128 110 : 112 107 112 j 27 .. | 116 116 .. .. 132 112 112 .. ill Se Pt- ® •• ™ .. | .. 119 94 93 86 96 Sept. 4 .. 114 114 .. 107 128 108 108 102 109 Sept 3 116 115 132 112 114 ill 20:: Hi no 107! :: III IS! 9® 94 Ts II:: IS io* :: m IS 104 9 8? SS i? JJ? Ill :: :: \f 5 ;» \\t 110 27 •• 115 114 111 •• 129 105 101 96 103 25.. 99 99 .. 91 120 97 96 80 94 ll V. m 119 !! [ ill m I20 " Oct. 4 .. 118 116 112 .. 129 105 106 99 109 Oct. 2 .. 103 104 .. 94 125 97 . 97 Oct 1 127 127 1SQ I9fi 19« 11.. 124 123 115 .. 132 111 113 109 119 9.. 101 101 .. 94 126 95 82 93 8 " I30 30 " " I39 129 28 " " i 8 •• 125 123 •• I 36 l 23 120 115 12° 16 .. 95 96 .. .. 121 90 .. 81 88 15 " 135 134 " S m " 1*9 Nov. 1:: lit 105 :: :: III III :: III II y. It 9 9 8 ;; 90 91 82 84 88 22 m ™ ■■ •• j 38 j 3 ;; •• NOT - J:: 125 IS 95 :: IS 122 IS S S Kov ' 122 122 » :: ig £ :: L 8 Z No " » ' ISilX -I "|if! S "°- 148 148 I:: 21 '2? :: g IS 102 2? >°° I?:: IS IS 121 :: IIS -g :: g 22 111 IS wi|s S « IS De0 - jo 8fi 89 94 197 1 qc ■■ 88 Dec ' 4 ' 1° 4 1° 2 98 97 ns 98 •• 94 Dec. 3 .. 114 111 .. 109 152 1 113 113 20 ■" 89 88 " m Isi Q* •' •' 87 ]l ■■ 104 101 98 95 117 98 95 10.. 110 108 .. 107 I 150 114 " " I?" 99 98 •• 9g J28 99 II" a! 22 " of !!n 96 " " 94 17 ..114 113 .. 109 155 116 114 .. !! '• 9b l^ 8 JJ 23 .. 94 93 .. 91 110 .. .. 91 91 24 .. 113 112 .. 109 155 116 115 111 Jan. 3.. 99 98 .. 96 128 99 Jan. 1.. 94 94 .. 90 109 93 96 .. 92 31 " 1U 109 " 207 , I 46 m n5 1° 9 •• 17 " 99 91 87 97 m " 89 " if " ll " 92 1X ° 97 " 93 96 Jan " 7 212 U0 1° 8 135 114 116 1 A " 99 .. 89 .. 15 .. 95 95 93 92 111 97 .. 93 94 14 112 111 119 llfi 2 f • 9 5 99 •• 9 f n5 96 • 87 ■ 22.. 93 93 90 90 113 96 .. 89 92 21 109 108 " 107 134 1U lie " " 31 94 93 • 96 11® 99 •• 89 29.. 89 88 86 89 119 97 .. It 28 !! W6 104; lo5 lit 110 ll4 1W Feb. 7 96 95 92 95 125 101 .. 92 .. Feb. 5.. 87 87 .. 87 122 99 . 86 88 Feb 4 109 108 ' 107 127 111 11-s If • 9 ® 9 5 •• 96 127 105 .. 94 .. 12.. 85 85 82 87 122 100 . 87 11 " 11 111 " m m m " " 21.. 92 92 90 96 128 107 .. 91 19 .. 83 83 81 .. 116 99 .. 84 18 " 112 112 " "III 4 nf " " 28.. 88 87 85 94 135 102 .. 86 .. 26.. 88 88 .. 85 117 98 .. .. 87 25 !! Ill 111 \ " " 25 6 " "

H.—3o.

53

Mar. 6 .. | 86 86 83 89 ' 129 95 .. 85 j .. Mar. 5 .. 89 j 90 87 87 121 99 .. .. i 89 Mar. 4 .. 116 i 115 ; .. .. 124 i 116 | 115 , 13 .. : 85 84 .86 121 89 .. 82 .. 12 .. 97 1 96 93 91 128 99 .. .. I 94 11 .. 118 | 118 | .. i .. 124 1 117 I 118 I .. 20 .. 80 80 77 83 121 85 .. 80 .. 19 .. 98 98 96 92 128 102 .. .. j .. 18 .. 119 119 .. .. 124 117 120 27 .. 83 83 79 82 115 83 .. 80 .. 26 .. 100 100 97 92 127 101 .. .... 25 . . 114 113 . . .. 118 110 April 3 .. 87 86 83 87 110 86 .. I 84 . . 1 April 2 .. : 99 99 .. 93 118 97 .. .. j .. April 1 .. { 115 115 .. .. 116 112 116 10 .. 88 88 .. ..108 87 .. 85 .. j 9 .. | 102 101 .. 92 114 97 .. .. j .. 8 .. 118 118 115 ..122 116 118 17 .. 86 86 83 ..102 85 .. 85 .. 16 .. j 106 105 102 .. 115 103 .. .. I .. 15 .. 122 122 .. .. 123 118 122 24 .. 88 87 84 ..103 86 .. 83 .. 23 .. 108 107 104 102 112 105 22 .. 125 125 .. .. 128 124 126 OQ IOC 197 TOO lOK 11 Q May 1 .. 87 87 84 .. 100 86 .. 83 .. April 30 .. 108 107 104 .. 115 107 j 8 .. 88 88 .. .. 100 85 86 82 87 May 7 .. ! 104 102 99 .. 109 99 105 .. 101 May 6 .. 128 127 .. .. 130 125 128 15 .. 94 93 .. .. 102 87 .. 83 90 14 .. I 107 106 103 I .. 108 102 105 .. .. 13 .. 133 131 127 .. 132 126 128 22 .. 97 96 .. ..108 91 .. 89 96 21 .. 108 107 .. .. 110 104 107 .. .. 20 .. 129 126 122 .. 130 123 126 122 29 .. 103 100 97 ..110 97 .. 93 99 28 .. 108 107 105 .. 114 105 27 . . 124 121 .. .. 126 117 June 5 .. 106 104 .. j .. 112 101 101 ; 97 .. June 4 .. 110 109 ; .. 104 114 106 June 3 .. 122 119 .. .. 123 114 116 12 .. Ill 110 .. 118 108 107 103 .. 11 .. 110 108 106 .. 114 106 108 .. .. 10 .. 120 117 .. .. 123 111 115 19 ... 107 I 106 104 .. 114 106 104 ! 99 .. 18 .. 110 109 107 j .. 115 107 108 106 .. 17 .. 119 117 .. .. 122 110 114 26 .. 105 j 104 102 .. 117 ! 101 95 j 99 .. j 25 .. j 109 107 .. .. 115 107 104 .. 24 .. 124 121 .. .. 125 114 117 July 3 .. ; 107 106 101 .. 117 j 99 99 93 .. July 2 .. j 109 106 .. j .. 115 106 .. 103 105 ! July 1 .. 123 121 .. .. 124 113 .. 113 10 .. | 113 112 103 124 106 108 99 107 9 .. ! 110 109 .. .. 115 106 .. ..105! 7 .. 121 119 .. .. 122 111 113 17 .. 116 115 .. 105 127 110 111 105 111 16 .. I 115 113 .. : .. 122 109 111 .. 108 14 .. 122 120 .. . . 123 111 115 24 .. 118 116 .. 107 127 110 112 107 111 i 23 .. 116 115 .. .. 124 112 113 < .. 112 j 21 .. 121 120 .. .. 125 113 115 31 .. 116 115 .. 106 125 108 110 105 j 110 30 .. 118 117 .. | .. 124 112 115 .. .. I 28 .. 121 120 .. .. 125 111 113 j i I J ! ! S.F. = Salted finest; S. = Salted ; U.F. = Unsalted finest; U.S. = Unsalted and Salted.

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CHEESE. Weekly Medium Prices at the London Provision Exchange.

54

(Shillings per hundredweight.) ~ „ 7 1987-38. 1935-36. 1936 " 37 ' »—• "— _** ■». o,— v, ~s-«-». «• «• »• t-H® »■ »*■ I «• "• I c -»- — i " j i i j i i . „„ RO RA \ RA. 72 58 Aug 6 .. 74 i 71 72t 80* 72f 80* j 87 73 Aug. 9 . . 48 47 64* 51f 62* 51f 60 36 Aug. 7 .. 63 62 64 6 g 7Q 6g ? ? 89 71 16 .. 48 47 64* 51f 63* 51f 60 37 14 .. 68 65 67 6g 20 67 65 6 9f 80* .... 89 70 23 .. 49 49 64* 52f 65* 52| 60 37 21 .. 70 67 69 .. 2 7 .. 68 68 69f 80* 70f .. 89 70 30 50 49 61* 53t 62* 53t 60 36 28.. 72 67 68 „ x , ,n an (SC. i 71 78 67 Sept. 3 .. 70 71 70f 80* 70f .. 89 Sept. 6 . . 51 51 53 52 63 39 Sept. 4 .. 70 67 69 10 .. 68 69 70f 80* 70f 80* 89 74 13 .. 54 54 54 54 63 42 11 .. 69 67 71 69 w 17 .. 67 68 70f 80* 70f 80* 91 20.. 55 55 55 56 63 43 18.. 67 66 70 07 68 Oct. 4 .. 59 59 59 60 65 47 Oct. 2 .. 70 67 69 69 82 64 Oct, 1 .. 70 69 70j 70J .. jjj .. IS:: .s S S SI S S A:: 3 S . . - « I:: 8 S 83 * :: 5 :: S I ™ 8 8 8 8:: 8 '« ™ «» » - » " ,2t - 98 75 n.T « 79 68 70 68 84 67 Nov. 5 .. 74 73 73 73 ! 93 78 Nov. 8 .. 50 50 57 57 68 .. Nov. 6 .. 72 68 70 68 8 12 .. 73 72 73 73 93 73 15 .. 51 51 58 60 75 48 13 .. 74 72 73 71 so 7Q ?3 g3 ?2 22;; 53 54 58 58 77 47 20 ;; 73 72 73 72 68 72 73 gg 73 Dec. 6.. 52 53 58 58 77 45 Dec. 4 .. 62 62 71 71 87 62 Dec. 3 ; ; 68 6/ 73 95 13.. 52 55 57 58 77 43 11.. 64 64 71 71 jW 1? 65 65 73 73 gg 20.; 55 59 59 60 77 60 ?) 71 87 59 24 .. 65 65 72 73 95 J»n. 3.. 58 62 60 63 75 47 Jan. 1 « 57 71 71 87 56 gc.30 64 65 72 73 97 .. 10 .. 56 60 60 62 75 49 8 .. 58 58 71 n » 6g g9 ?3 73 g7 17.. 54 57 60 62 75 50 15.. 56 56 69 71 86 2 1 .. 69 70 74 73 97 |}" g g S 62 ™ S I!'. 51 51 72 72 87 53 28.. 67 68 74 74 97 Feb. 7 .. 5, 58 » « » « » 5 .. 51 51 72 72 g, g » < ■■ g g « £ '» 14 .. 53 57 61 63 75 51 12 .. 53 52 71 n 18 .. 67 67 74 75 97 74 21.. 51 55 61 62 75 52 19.. 52 51 71 7 25 6? 67 75 , 75 97 74 28 .. 50 54 62 63 75 51 26 .. 54 54 Ha- k kfi kk 71 71 87 50 Mar. 4 .. I 68 j 68 75 /6 97 .. Mar. 6 .. 49 53 62 63 75 52 Mar. 5 -55 56 71 6Q g9 7g „ 07 13 •• 51 53 62 63 75 52 12 • • 59 59 71 u ?() 7Q g g s 8 ™ s 55:: 8 8 3 » » «« 26 ■■ « 8 «» 1 " " " ••

B—30:

W.F. = White finest; C.F. — Coloured finest.

55

April 3 .. 52 53 61 64 79 50 April 2 .. 66 66 74 74 89 .. April 1 .. 70 70 77 .77 101 10 .. 53 53 61 I 64 80 49 9 .. 66 66 74 74 92 .. 8 .. 70 70 77 77 103 17 .. 53 53 61 63 83 50 16 .. 69 69 75 75 92 .. 15 .. 70 70 77 77 103 24 .. 54 54 62 64 83 51 23 .. 69 69 75 75 92 .. 22 .. 70 71 77 77 103 May 1 .. 55 54 64 65 83 51 30 .. 70 70 77 77 92 .. 29 .. 68 69 77 77 103 May 8 .. 56 55 63 65 83 51 May 7 .. 70 70 77 77 92 .. May 6 .. 68 69 77 77 15 .. 58 55 63 65 .. 53 14 .. 72 72 77 77 .. .. 13 . . 70 70 77 78 .. 68 22 .. 58 55 65 65 .. 52 21 .. 73 73 77 77 .. .. 20 .. 71 71 77 78 .. 69 29 .. 58 56 64 I 65 .. 53 28 .. 74 74 78 77 .. .. 27 .. 70 70 78 78 .. 70 June 5 .. 59 58 65 65 .. 54 June 4 .. 74 74 79 79 .. .. June 3 ..70 70 79 79 .. 69 12 .. 61 61 66 66 .. 58 11 .. 74 74 79 79 98 .. 10 .. 69 69 79 79 .. 68 19 .. 60 60 66 66 .. 57 18 .. 74 74 79 79 .. .. 17 .. 67 67 79 79 .. 66 26 .. 58 58 67 65 .. 56 25 .. 74 73 79 79 .. 71 24 .. 69 69 79 79 .. 66 July 3 .. 58 58 68 j .. .. 56 July 2 .. 72 71 79 .. .. .. July 1 .. 68 68 79 79 .. 65 10 . . 60 60 63f 69* 63f 66* 55 9 .. 71 69 78 78 .. 70 7 . . 68 68 79 79 .. 65 17 .. 62 62 64f 69* 64t 70* .. 57 16 .. 72 70 .. .. .. 69 14 .. 70 70 79 79 85 66 24 . . 63 62 . . 72* 64f 70* .. 58 23 .. 74 72 73f 80* 72f 80* .. 73 21 .. 69 70 79 79 85 65 31 .. 62 61 64f 75* 64f .. 72 59 30 .. 75 72 74f 80* 73f 80* .. 73 28 .. 68 69 79 79 85 65 * Old season's. t New season's.

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INTERNAL MARKETING DIVISION: ANNUAL REPORT AND ACCOUNTS FOR THE FOURTEEN MONTHS ENDED 31st MARCH, 1938. The following report and statement of accounts cover the activities of the Internal Marketing Division of the Primary Products Marketing Department for the period of fourteen months ended 31st March, 1938. In view of the fact that the Division was established on the Ist February, 1937, no accounts were issued at the 31st March of that year, hence the full period of fourteen months is included in this statement. The Division has continued its activities during the past twelve months and has made considerable progress in stabilizing the markets in various primary products. The following is a summary of the work done : — Local Marketing of Butter. Methods have been instituted for stabilizing prices and regulating the marketing and distribution of butter within the Dominion. Using as a working basis the experience gained through the administration of the Butter (Wellington District) Marketing Regulations, which came into force on the Ist May, 1937, the Division inaugurated on the Ist November, 1937, the Butter Marketing Regulations 1937, with a complete New Zealand coverage. The scope of the regulations included fixing the local wholesale price in relation to the guaranteed price ruling from time to time and ensuring that returns to dairy companies for their local sales were, as nearly as possible, equal to the export parity after making allowances for such items as patting, transport, handling, &c. Export parity is determined under clause 32 of the Butter Marketing Regulations by adding to the guaranteed price obtaining at any time the extra costs involved in preparing butter for the local market and then deducting the amount of the savings effected through not placing the butter f.o.b. The resultant figure is then known as " export parity." Licensing of wholesale distributors, conditions of sale, and distributive margins have been determined. The wholesale butter-prices under the regulations were—■ Ist grade creamery pats . . . . . . 14|d. Second grade creamery pats .. .. .. 13|d. Whey pats .. .. .. .. .. 13|d. Bulk butter of the same grade and quality . . |d. per pound under the above prices. On the 12th December, 1937, the price of second grade was advanced by |d. per pound to 14Jd. The distributing-allowance to manufacturers and licensed distributors was fixed at |d. per pound. Whilst retail prices have not been fixed in any way, the Division has closely watched retail prices in order to keep them as far as practicable at reasonable economic values. The regulations have smoothed out many of the anomalies which have existed for years past in wholesale butter distribution. One or two of these might be mentioned :— Every wholesale purchaser is now enabled to buy on the same basis. This has prevented the drastic price-cutting, both by factories and retailers, which has occurred in the past. Another factor is that of the quality available to the New Zealand consumer. Previously it had been the practice of some manufacturers to export their higher grading and pack the lower grading butter for local consumption. A system of payment by grade under the regulations has now made it an advantage to pack a high-grade butter for New Zealand consumers, and in this connection the Division have received and appreciated the co-operation of the dairy industry. The effect of the regulations has been to eliminate a practice which in the past has been the cause of much unnecessary expenditure by the dairy industry. The local market has been divided into seven zones or areas within which, under normal conditions, the supply of butter manufactured is sufficient to meet the demand, and manufacturers in one marketing district are not permitted to forward their butter into another district without permission in terms of the regulations. Previously, the whole of New Zealand was an open market for every manufacturer, and much uneconomic transfer of butter took place, particularly from the northern portion of New Zealand to southern markets, for the purpose of capturing markets in other areas. Apart from the unnecessary haulage costs, this practice was the cause of market disorganization. The Division has, of course, made the necessary provision for supplying butter to areas which, in their period of low production, are unable to manufacture sufficient butter to meet their local demand. This has been done in the most economic manner possible, after an investigation into the relative costs of storage and transport. Another practice which affected the retailing of butter was the habit of dairy-factory suppliers purchasing quantities of butter at prices even lower than wholesale rates and supplying neighbours

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and friends at prices below that at which recognized retailers were enabled to purchase. This position has been rectified to the point where retailers only are enabled to purchase at wholesale rates, although suppliers to a dairy factory may purchase sufficient quantities for their own requirements at the fixed wholesale price. Similar practices existed in the cities, where groups of individuals purchased at wholesale rates and distributed amongst their own members, thus depriving genuine resellers of part of their livelihood. Another matter to which attention has been given is the question of butter brands. Butter for consumption in New Zealand has, in the past, been packed under hundreds of different brands, in many instances the same dairy factory packing its butter in ten, twenty, or even more different wrappers. At the present time only a manufacturer's or licensed distributor's registered brand may be used for any one quality of butter. Prior to control being exercised on the local market, any person could engage in butter distribution, and in many instances some of these by reason of their other or connections were not suitable to act as butter distributors. Apart from uneconomic overlapping, this system, because of the lack of satisfactory facilities, did not tend to provide the best service or quality to the consumer. The issue of licenses under the regulations is now subject to careful investigation as to the suitability of the applicant and into any possible financial or other interest which he may have in any concern manufacturing or selling butter ; this is to ensure that no group oi resellers shall have an advantage over any other group or individual. It is further incumbent upon a licensee to have available an efficient delivery service of which he must be the owner. He must be prepared to give regular and satisfactory delivery within the area defined by his license to all persons eligible to purchase butter at wholesale rates, and his premises must be suitable for the carrying-on of a butter-distributing business. The available statistics provided by the returns under the Butter Marketing Regulations have enabled the Division to meet the problem of winter supplies and storages, and the Dairy-produce Section has done much valuable work in arranging for suitable supplies of butter to areas of short supply and short production. Particular instances of assistance rendered in this manner are found in the South Island, especially Westland, Canterbury, Otago, and Southland, to which parts large quantities of butter have been forwarded through the Division to supply local demand where the winter so reduces production that factories are unable to meet even their local requirements. Supplies have been drawn from factories in those parts of the Dominion where the winter production is sufficient to meet the local demands and also provide a surplus. In Wellington and Auckland, butter-patting plants have been installed by the Division with the object of supplying city requirements daily with a fresh hygienically prepared supply of butter as well as giving those factories desirous of supplying the city markets the facilities for doing so. These plants will also be of great service to dairy factories whose make of butter at certain times of the year, particularly during the winter months, is so reduced as to make the operation of their own patting plants more or less uneconomic. Local Marketing op Cheese. New Zealand is well known for its comparatively heavy consumption of meat, and this no doubt has a considerable bearing on the small amount of cheese consumed. This could be increased with advantage, and the Division is accordingly working on a plan to this end. Eggs and Egg-pulp. For many years conditions under which eggs are marketed in New Zealand have required attention and the lack of some central body with sufficient authority to influence marketing has been felt by producers. The main problem with egg marketing is the " flush " period, approximately from September to January, during which time egg-production is at its highest. As a consequence, prices are at their lowest at this period, and the absence of any co-ordinating body allows unrestricted transfers of supplies to markets which are unable to absorb them at prices payable to the producer. Thus the advantage to the poultrv-keeper of the period of highest production has been largely nullified by the low prices received. A further factor is that of production by domestic flocks which, mainly due to unscientific rearing, come into production at this period, and thus accentuate the marketing difficulty. For these reasons the Division has rendered assistance to the poultry industry in the following manner Last season the Division supervised and handled the export of eggs from New Zealand by giving a guarantee of Is. Id. per dozen in grading-store for all eggs exported. This action was taken m order to ensure that a minimum selling-price could be assured to the producers so far as the local market was concerned, and, whilst a comparatively small quantity of eggs was actually exported, the effect upon the market as a result of such export immediately made itself apparent. The net result of the transactions show that sales realizations were short by £468 of the amount paid to suppliers.

B—H. 30.

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, y iew the fact, that quantities for the ensuing season will be greater even than last year, the Division will continue its activities in this direction. The Division's supervision of the marketing of egg-pulp is also one of the main factors affecting local prices. Care was taken to see that the demands for export and for egg-pulp did not conflict. Merchants were requested to refrain from fulfilling their requirements of winter pulp until after exporting had ceased, thus giving a continuity of market stabilization. From the consumers' viewpoint the manufacture of egg-pulp is important, on account of the fact that this pulp largely provides for the requirements of bakers and manufacturers during the winter period when prices of fresh eggs are hio'h. If manufacturers and bakers were in the open market for fresh eggs at this period, the result would be that prices would rise even higher. It might be mentioned at this point that the generally increased prosperity within New Zealand resulted in a far stronger demand for eggs during the period when prices normally begin to rise that is at the beginning of the winter months. Investigations are being continued with the object of improving the marketing-conditions. Honey. Under the Honey Export Control Act, 1924, the New Zealand Honey Control Board assumed the sole authority for exporting honey from New Zealand, but sales of honey within the Dominion have not been subject to any supervision. Beekeepers who depend wholly or partly on honey-production for their living are m a minority among the beekeepers of New Zealand, and marketing of these supplies has been made difficult by the large number of domestic beekeepers selling their surplus production at whatever prices they were offered. In addition to this, there has been no possibility of standardizing grading and quality, and this factor alone has had a very deleterious effect on local consumption. At least two attempts have been made by producers at co-operative marketing, but, due to the tacts mentioned above, they have not met with success nor received the full-co-operation of all producers At the last annual meeting of beekeepers in Timaru an overwhelming majority favoured Government assistance to the industry. . °7 mg to t he serious plight the beekeepers of the Dominion in 1937 because of the poor season m that year, the Government (which had granted assistance at that time) was approached with a view to improving the marketing of honey so as to avoid the alternating shortage and glut conditions which had operated in the past. After a thorough investigation of the circumstances, it was decided to establish a Honey Section of the Division, this being initiated by the purchase of the assets of New Zealand Honey Ltd. a producers company in Auckland. The Government was influenced in its decision to take 'the step ot reorganizing the marketing of honey because of the very abundant crop this year following the acute shortage of last year. 6 It early became apparent that if selling-conditions internally were not regulated in some way, the producer would be placed in the unhappy position of being forced by competition to accept absurdly low prices for his product, whereas in the previous season he had received very small returns as a result ot the paucity of the crop. Honey-production varies considerably from year to year, and a long-range policy of conserving stocks m a glut year for the inevitable shortage in years to follow is deserving of attention ; for that reason honey has been brought under the jurisdiction of the Division. The supervision exercised over honey has enabled the Division to offer to producers a pro rata advance of Ud. per pound according to grade this season for both export and local sales. " 5 ~ further Parent of fd. per pound has now been made, and at the conclusion of the financial year the Division confidently anticipates a further final payment to all producers supplying their honey to the Division Advances have been made immediately on receipt of honey, irrespective of whether the honey will eventually be exported or sold on the local market. The final returns from export sales will be pooled with the local market returns. With the modern equipment available at the Government blending depot in Auckland, all honey received is blended to fixed standards of quality, so that the consumer can be assured of receiving a standardized flavour and quality m all honey packed by the Division. Fruit. Local. Following a comprehensive survey of marketing conditions of the fruit industry in 1936 by the Frmt Marketing Committee, the necessity for introducing a number of reforms in the handling and distribution of fruit became apparent. With this object in view, the Division was entrusted w£h fiT.rr^dTS" 8 ' 00 "^ 0 ™ S " erally ™ lU » We »T work h„ already

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In addition, the Division has been of considerable service to various sections of growers in assisting them to market thr ; r crops. In this connection the Division has acted as mediator between growers and factories in arranging prices and supplies. The raspberry-growers in the Nelson Province and the stone-fruit growers of Otago have utilized the Division for the purpose of negotiating minimum prices with the factories for raspberries and stone-fruits. Similarly with hops, the Division has been instrumental in bringing to a successful conclusion negotiations between various sections of the growers, their agents, and the brewers of the Dominion which resulted in increased prices to growers. Considerable attention has also been paid to the possible development of fruit-juice manufacture in this country, with its attendant by-products. With the assistance of the Department of Scientific and Industrial Research the Division went very thoroughly into the manufacturing of unfermented apple-juice in the hope that an outlet might be found for lower-grade apples which at present have such a depressing effect on the apple-market in this country. The matter has now been referred to the Bureau of Industry, which is making further investigations into the subject. Arrangements were completed to ensure a guaranteed minimum price for all first-grade fruit marketed within the Dominion. The Division also assisted in the preparation of grading standards for apples and pears, and regulations have now been introduced by the Department of Agriculture covering this important phase of marketing. Regulations prescribing standards for fruit were brought down, with the main object of giving confidence to buyers who purchased fruit in the open auction. In the past fruit-prices have been seriously affected through the unwillingness of buyers to risk too high a price on an unknown quality, and every case of fruit now sold must conform to standards which are known to the buyer as well as to the packer. The advantage of this has already been apparent in improved marketing conditions. It is hoped that this system will be capable of extension so that the consumer will be able to purchase his requirements of fruit according to grade. Anticipating an abnormally large crop of fruit, the Division inaugurated a comprehensive advertising campaign in February of this year to assist in the disposal of the additional supplies of fruit coming forward. Where we have been able to trace direct results, the effect of this advertising, particularly the radio-advertising section of the campaign, has been most gratifying. In the case of Bon Chretien pears, the market responded remarkably. Not only was the effect apparent in values, but also bottles for preserving were in such demand that supplies were very soon exhausted, purely as a result of the stimulus given by the campaign. Sales of apples, too, although in very plentiful market supply, have responded promptly when any particular type has been advertised. The abundant crops have been difficult to handle and prices have been low, but the intensive advertising has had the effect of increasing market returns considerably in numerous instances. The success of the campaign is to a large extent due to the co-operation of the various sections of the trade ; and in this connection the Division wishes to place on record its appreciation of the assistance rendered to it by the various wholesale merchants and retail associations throughout the Dominion. Imported. The Division has devoted a great deal of time to improving the marketing procedure in connection with imported citrus fruits and bananas, and the distribution of these two important foodstuffs is now the responsibility of the Division. Because of Mediterranean fruit-fly an embargo was placed 011 Australian citrus fruits in 1932, and the only area of the Commonwealth supplying the Dominion's requirements from that time ixntil 1937 was South Australia. This arrangement existed until the Bth November, 1937, when the restrictions were removed on fruit grown in areas which could produce certificates as to their fruit being grown in districts free from Mediterranean fruit-fly. This action enabled merchants and importers to bring into New Zealand whatever quantities of oranges and mandarins they desired, provided the certificate of freedom from disease was produced in accordance with the Orchard and Garden Diseases Act, 1928. Under a Customs Proclamation dated 11th May, 1938, the Division became the sole importers of citrus fruits and bananas. The distribution of Cook Island oranges, which had previously been under the jurisdiction of the Cook Islands Department, was therefore transferred to the Division. From that date the Division became the sole importer of citrus fruits. For a number of years prior to that date this trade was more or less confined to a small number of importers who were operating under a system which was conducive to the establishment of monopolies and monopoly prices. The Government therefore felt that a major alteration in policy was necessary. This step has been amply justified by the results that have been achieved. During a period of five months and a half since the inception of the scheme the Division handled approximately sixty thousand bushel-and-a-half cases of citrus fruits more than was handled in a similar period in 1937. This means that the people of the Dominion have consumed nearly ten million oranges more this year than last year over the same period. This greatly increased quantity has been

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so distributed that the consumers as a whole have paid no more in total for the increased quantity. This has been brought about as a result of the reduction in the price paid by the consumer through economies effected in handling and distribution. So far as the country districts are concerned, they have never previously been so well served in regard either to quantities or prices. Previously fruit sent to such districts was heavily loaded with transport and other costs, but to-day the country distributor sells at port-of-entry prices, plus a charge for freight only. The scheme of controlled distribution for Samoan bananas through a New Zealand agent expired on the 31st March of this year, from which date the Division assumed the responsibility of marketing not only Samoan bananas, but also those from the Cook Islands, Fiji, Tonga, and Niue. With the inauguration of this scheme, arrangements for the purchase of bananas were made with the various island territories, and the whole method of handling fruit was reorganized simultaneously for the purpose of bringing about an improvement in the system of importation and distribution. * Definite improvements have been effected as a result of the arrangements made, which, in turn, have already led to a greater supply at more reasonable prices. The selling of the above imported fruits has been effected through a panel of distributors in all the main centres and subsidiary towns of the Dominion, and all recognized fruit auctioneers have been included in the panel. In this way the channels of distribution previously in existence have been utilized in such a manner that both country and urban consumers have been catered for on the most economic basis possible. Maize. As a result of representations made by maize-growers in the Poverty Bay and Bay of Plenty districts, the Division has interested itself in the marketing of maize. When the representations were made, the abundant supplies of imported maize on the market made conditions difficult for the disposal of the local crop, but with the aid of the Division a satisfactorj' arrangement was arrived at between grower and merchant 011 the basis of ss. 3d. per bushel f.o.b. Gisborne. The Government guaranteed to the growers to find a market for their maize in the event of the merchants being unwilling to operate. This arrangement gave the market the necessary confidence, and with the full co-operation of the merchants and growers sales commenced immediately. This scheme having proved so successful, growers again approached the Government for a continuance in the next season, and a similar arrangement was made on the basis of new season's values. The Division will also exercise control over the imports of maize in order to maintain this market confidence in the New Zealand crop. The immediate difficulty having been overcome, the Division is now considering the practicability of a scheme which would give growers the protection required from unrestricted importations and at the same time enable New Zealand consumers to purchase supplies at reasonable rates. Bobby Calves. A very important adjunct to dairy-farming is the rearing and sale of bobbv calves, and here, again, lack of system and haphazard methods of marketing have left the bobby-calf trade in a chaotic state. In some areas voluntary pools had been formed which were attended with some success, but mainly due to lack of authority these attempts at co-operative marketing were to a certain extent frustrated and undermined by competitive interests. Very much thought and investigation has been given to the method which could best be employed to assist the marketing of bobby calves, and conferences have taken place with the representative bodies concerned. A referendum of the whole dairy industry of New Zealand returned an inconclusive opinion as to the advisability of the procedure being handled by the New Zealand Dairy Board ; and, following further discussions and conferences, it was decided that in any area in New Zealand where a sufficient majority of farmers is desirous of marketing bobby calves through their own appointed committees protection will be given to the committee in that area against outside interference with their collecting and marketing arrangements. The majority required is one of 80 per cent., and satisfactory evidence of such majority and of the suitability of the committee appointed is required before the necessary protection can be given. Regulations to this effect have been brought down under the Primary Products Marketing Act, and Agriculture (Emergency Powers) Act. Assistance has been rendered by departmental officers in forming pools and defining areas, and already indications are that the protection afforded under these regulations is much appreciated by the producers of bobby calves. Under the regulations complete marketing and financial arrangements have been left in the hands of the pool committees, who act as agents for the producers in their areas, and no fixed method of disposal has been adopted. In some cases sales were made at the farm gate on a " per calf " basis some on live weight, and others direct to freezing-works. The Division is at present making a complete investigation into the operations of all pools formed under the regulations, and is considering the advisability of a standardized balance-sheet for pool operations, in a similar manner to that adopted by all dairy companies.

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Kauri-gum. Gum-diggers in the North Auckland district have been experiencing great difficulty ih selling their output of kauri-gum on account of the weakness of the overseas market, New Zealand merchants being naturally diffident about operating on account of the unsatisfactory conditions obtaining. A conference was therefore arranged between merchants, diggers, and the Division in Auckland, and as a result an agreement was reached as to the price at which merchants would purchase kauri-gum. The action of the merchants in this connection, was appreciated, and the confidence thus established brought about more stable conditions. At the same time an assurance was given by the Division that if merchants could not continue to purchase in view of the uncertain overseas position, then the Government itself would be prepared to handle kauri-gum on behalf of the diggers. Very little trouble has been experienced in finding suitable markets through the merchant houses, but where this difficulty has arisen the Division has made the necessary arrangements. Trading Branch, Thorndon Quay. Trading activities in primary produce carried on by the Trading Branch at Thorndon Quay in conjunction with a depot at Palmerston North have been successfully operated during the year in competition with other distributors of similar lines, and a satisfactory monthly trading surplus has been maintained. Sales turnover in all lines has been kept up, particularly with eggs, honey, cheese, and milk-powder. The continued confidence of egg-suppliers is evidenced by the increasing volume of consignments forwarded to the Branch for disposal, and egg sales have showed a corresponding increase which can be viewed with extreme satisfaction. From a point of view of market stabilization, the very fact of the large volume handled by the Branch has been a big factor in steadying the local egg-market from the result of daily price fluctuations, thus assisting the retailer to purchase at the most satisfactory times and at the same time ensure to the producer the full value of the seasonal market. In order that the Division might more effectively supervise butter distribution in Wellington City, the accounting for all butter delivered to distributors in the Wellington City area on behalf of factories was entrusted to the Branch from the Ist May, 1937. Early in 1938 the installation of modern butter-patting machines and air-conditioning plant enabled the retailer and the consumer to be assured of a continuous supply of fresh butter patted under the most hygienic conditions, as well as providing to the dairy factories supplying this market full continuity of supply during their period of short production, when their own make is insufficient to meet the local market they have established. This is necessitated by the fact that many of the dairy companies supplying the city markets in New Zealand find that during the middle-winter period, when their production is at its lowest, they are unable to provide sufficient butter to meet the demand for their brand. In the past this shortage has been made up by purchasing from various factories in their vicinity sufficient butter to meet their requirements. The Division is now enabled to procure butter of the best quality available at this time of the year in order to meet these market deficiencies. This is necessary to avoid the disorganization which would take place on the local market if consumers were unable to obtain best qualities of butter required for a few months in each year, and the method adopted is the one calculated to cause the least disturbance in the trade. Through its operations the Branch continues to render an efficient service to dairy factories, wholesale distributors, retailers, poultry-producers, and consumers. In concluding this, the first complete report of the Internal Marketing Division, I desire to express the thanks and appreciation of the Government and myself to the Director, Mr. F. Picot, and his officers, who have carried out a difficult work to the credit of themselves and the Government, and have brought benefits and advantages to consumers and producers that will be experienced for many years and will be the foundation for extensions when occasion demands, to the benefit of producers and consumers, through regulation that will eliminate many wasteful experiences of the past. Minister of Marketing.

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PRIMARY PRODUCTS MARKETING DEPARTMENT. INTERNAL MARKETING DIVISION. WELLINGTON TRADING BRANCH, THORNDON QUAY. Trading Account foe the Fourteen Months ended 31st March, 1938. Dr. £ Cr. £ Sundry trading charges, commissions, and trade discounts 1, 983 Gross profits and commissions on trading in bacon, butter, Gross profit to Profit and Loss Account .. .. 27,473 cheese, eggs and egg-pulp, honey, milk-powder, pork, &c. 29,456 £29,456 £29,456 Profit and Loss Account for the Fourteen Months ended 31st March, 1938. Dr. £ Cr. £ Salaries and wages .. .. .. .. .. 12,871 Gross profits from trading .. .. .. .. 27,473 Motor and travelling expenses .. .. .. 2,734 Rents received .. .. .. .. .. 231 Audit fees .. .. .. .. .. 220 Bad debts provisionally written off .. .. 23 Reserve for bad and doubtful debts .. .. .. 150 Depreciation .. .. .. .. .. 1,077 General expenses and repairs .. .. .. 363 Interest and exchange .. .. .. .. 1,189 Insurance .. .. .. .. .. 131 Lighting, heating, and power .. .. .. 265 Rates .. .. .. .. .. .. 146 Postages, telegrams, bureau fees .. .. .. 604 Printing and stationery .. .. .. .. 502 Subsidy to Public Servioe Superannuation Eund (including reserve for subsidy accrued) .. .. .. 158 Reserve against possible liability under Workers' Compensation Act .. .. .. .. .. 467 Net profit to combined account .. .. .. 6,804 £27,704 £27,704 Butter Equalization Account for the Fourteen Months ended 31st March 1938. Dr. £ Cr. £ £ Equalization charges payable to dairy factories (costs not Differentials paid, and payablo by dairy factories covered by butter differential) (section 12, Primary under Butter Marketing Regulations 1937, Products Marketing Amendment Act, 1937) — £ clause 31 .. .. .. .. 75,729 Freight and cartage .. .. . . 66 Less refund to Wellington dairy factories of Defrosting and unboxing .. .. .. 18 differential collected between 4th September, Patting and wrapping .. .. .. 80 1937, and 31st October, 1937 .. .. 4,758 Storage and freezing .. .. .. 201 70,971 Bulking and parchment .. .. .. 557 Sale of butter withdrawn from export at regulaSundry .. .. .. . . .. 2 tion price for local sale .. .. .. 485 924 Less purchases at f.o.b. guaranteed price .. 464 Services as under — 21 Grading fees .. .. .. .. 18 Stocks on hand export butter withdrawn to meet Servicing, accounting, &c. (Wellington Market- estimated winter requirements for local ing District) .. .. .. .. 1,582 market (at cost, plus storage accrued) — Patting, wrapping, storing (Auckland) .. 359 Auckland .. .. .. .. 7,009 1,959 Wellington .. .. .. .. 4,611 Preliminary and administrative expenses .. .. 5,500 ——— Equalizing payment to dairy factories of Jj|d. per pound 11,620 on all butter sold locally in the Wellington Marketing Less purchases at f.o.b. guaranteed price, District between Ist May, 1937, and 4th September, plus storage accrued .. .. .. 11,620 1937 (owing to rise in guaranteed price) .. .. 14,197 Balance (representing surplus to be carried to next year's accounts) .. .. .. .. .. 48,412 £70,992 £70,992 Egg Export Account for the Year ended 31st March, 1938. Dr. £ £ Cr. £ £ Purchases New Zealand eggs at Is. Id. per dozen— Proceeds sale eggs in London (exchange included) 5,122 Canterbury .. .. .. .. 1,975 Less— £ Dunedin .. .. .. .. .. 1,159 Allowances for damaged eggs, London 92 Auckland .. .. .. .. .. 638 Loss in repacking, London .. 5 3,772 Inspection fee, London .. .. 4 Charges to f.0.b., insurance, storing, packing, — 101 cartage, and handling— 5,021 Canterbury .. .. .. .. 427 Balance on consignments carried forward .. .. 468 Dunedin .. .. .. .. 316 Auckland .. .. .. .. .. 134 877 Sea freight, New Zealand to London .. .. .. 812 Marine insurance, New Zealand to London .. .. 27 Sundry charges (postage, &c., prior to f.0.b.) .. .. 1 £5,489 £5,489

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PRIMARY PRODUCTS MARKETING DEPARTMENT—continued. INTERNAL MARKETING DlVlSlON—continued. AUCKLAND BRANCH: HONEY SECTION. Local Pool Account foe Two Months ended 31st March, 1938. Dr. Cr. £ Stocks — £ £ Sales .. .. .. .. .. .. 2,181 Packed .. .. .. .. 1 ,454 Sundry credits— £ Bulk .. .. .. .. 1,134 Storage .. .. .. .. .. 7 2,588 Sale second-hand tins .. .. .. 13 Advances to producers .. .. .. .. 919 Stencils .. .. .. .. .. 1 Purchases— Packing-costs earned .. .. .. 10 Australian honey .. .. .. .... 63 Beeswax .. .. .. .. .. 2 New Zealand honey .. .. .. .. 56 Wire strapping .. .. .. .. 5 Proportional administration expenses ...... 33 — 38 Store expenses— £ Stocks on hand— Packing-material .. .. .. .. 346 Packed .. .. .. .. .. 2,027 Wages .. .. .. .. .. 115 Bulk .. .. .. .. ; 820 Proportional rent and rates .. .. .. 44 2,847 Electricity ........ 12 Wiring .. .. .. .. .. 3 520 General expenses— Stationery .. .. .. .. 4 Commissions .. .. .. .. 28 Discounts .. .. .. .. 32 Freight and cartage .. .. .. 71 General expenses, returns, repairs, packing charges .. .. .. .. 3 138 Balance carried forward (payable to producers when, stocks on hand finally cleared) .. .. .. .. 749 £5,066 £5,066 Export Pool for the Two Months ended 31st March, 1938. Dr. £ £ Cr. £ Advances to producers pro rata .. .. 6,386 Advances to producers and costs incurred on 4,186 cases Purchases .. .. .. .. .. 1,791 of honey for export (of which 699 cases were awaiting General expenses .. .. .. .. 253 shipment on 31st March, 1938 ) .. .. .. 8,727 Export levy .. .. .. .. 181 Wiring .. .. .. .. .. 5 .Freight .. .. .. .. .. 66 Wages .. .. .. .. .. 27 Storage .. .. .. .. .. 28 8,737 Less primage refund .. .. .. 10 £8,727 £8,727 INVESTIGATIONAL AND ADMINISTRATIVE BRANCH, HEAD OFFICE, WELLINGTON. Income and Expenditure Account for the Fourteen Months ended 31st March, 1938. Expenditure. £ Income. £ Salaries .. .. .. .. .. .. 5,188 Transfer from Butter Equalization Account for administraTraveiling expenses and allowances .. .. .. 1,354 tive and other services relative to the local marketing of Advertising .. .. .. .. .. 26 butter .. .. .. .. .. .. 5,500 Audit fees .. .. .. .. .. .. 50 Transfer to Combined Account representing expenses in General expenses .. .. .. .. . . 139 connection with investigational work concerning the Lighting and heating .. .. .. .. 23 marketing of New Zealand fruit, imported fruit, honey, Postages, telegrams, and bureau fees .. .. .. 339 kauri-gum, maize, and other services .. .. 2,211 Printing and stationery .. .. .. .. 147 Rent and rates .. .. .. .. .. 280 Depreciation .. .. .. .. .. 44 Interest .. .. .. .. .. .. 71 Reserve against liability for Public Service Superannuation Fund subsidy .. .. .. .. .. 50 £7,711 £7,711

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PRIMARY PRODUCTS MARKETING DEPARTMENT- —continued. INTERNAL MARKETING DlVlSlON—continued. INVESTIGATIONAL AND ADMINISTRATIVE BRANCH, HEAD OFFICE, WELLlNGTON—continued. Balance-sheet as at 31st March, 1938. Liabilities. Assets. £ Internal Marketing Account (Reserve Bank of New £ Cash on hand . . . . . , .. .. 109 Zealand) .. .. .. .. .. 56,231 Sundry debtors— £ Sundry creditors — £ Departmental .. .. .. .. 1,564 Departmental .. .. .. .. 150 General .. .. .. .. 91,278 General .. .. .. .. 80,167 80,317 92,842 Local Pool Account (Honey).. .. .. .. 749 Less reserve for bad debts .. . . 150 Butter Equalization Account .. .. .. 48,412 92,692 Fruit Advertising Suspense Account .. .. .. 3,777 Export Pool Account (Honey) .. .. .. 8,727 Reserve for liability under Workers' Compensation Act.. 467 Egg Export Account .. .. .. .. 468 Reserve against liability for subsidy to Publio Service Stocks on hand .. .. .. . . 37,599 Superannuation Fund .. .. .. .. 200 Motor-cars, trucks, &c. .. .. .. .. 1,800 Writings off Reserve .. .. .. .. 23 Plant and machinery .. .. .. .. 5,016 Combined Profit and Loss Account — £ Loose tools .. .. .. .. .. 31 Profit, Thorndon Trading Branch (Wellington) 6,804 Furniture and fittings .. .. .. .. 640 Add profit, Butter Patting Depot (Auckland) 131 Mechanical office appliances .. .. .. .. 993 Libraries .. .. .. .. .. .. 21 6,935 Buildings .. .. .. .. .. .. 15,623 Deduct Head Office (Wellington) administra- Land .. .. .. .. .. .. 12,000 tive and investigational expenses not Goodwill .. .. .. .. .. .. 19,000 allocated to trading accounts .. .. 2,211 Expenses paid in advance .. .. .. .. 158 4,724 Bad debts in Suspense .. .. .. .. 23 £194,900 £194,900 Thore is a further liability in the Butter Equalization Account to pay 0-41 d. per pound and 0-21 d. per pound on butter and cheese respectively manufactured from milk or cream received at the factory stage between Ist August, 1937, and 31st July, 1938, inclusive, and not exported. (The amount due at the date of the Balance-sheet is approximately £71,128, and has now been paid.) F. Picot, Director. P. F. Shirley, 8.C0m., Acting Accountant. I hereby certify that the Wellington Trading Branch Trading and Profit and Loss Accounts, the Butter Equalization Account, the Egg Export Account, the Honey Section Local and Export Pool Accounts, the Head Office Income and Expenditure Account, and the Balance-sheet as at 31st March, 1938, have been duly examined and compared with the relative books and documents submitted for audit, and correctly state the position as disclosed thereby, subject to the departmental notes enfaced thereon. —J. H. Fowler, Controller and Auditor-General.

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