AGRICULTURAL LIME INDUSTRY (REPORT ON) BY AGRICULTURAL LIME INVESTIGATIONAL COMMITTEE.

Appendix to the Journals of the House of Representatives, 1940 Session I, H-29b

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1940. NEW ZEALAND.

AGRICULTURAL LIME INDUSTRY (REPORT ON) BY AGRICULTURAL LIME INVESTIGATIONAL COMMITTEE.

Laid on the Table, of the House, of Representatives by leave.

The Hon. the Minister oe Agriculture. The Agricultural Lime Investigational Committee lias pleasure in submitting herewith its report on the agricultural lime industry in accordance with your direction of 27th April, 1939.

CONTENTS.

1. Introduction — page Appointment of Committee and Order of Reference .. .. .. .. .. 2 2. Method of obtaining Evidence — Details of Committee's Investigations and Summary of Principal Representations made to Committee .. 2 3. Lime— Growth of Use of Agricultural Lime and the Purposes for which Lime is considered necessary .. 4 Potential Demand for Agricultural Lime .. .. .. • • • ■ • • • • • • 5 The Occurrence of Limestone Deposits in New Zealand, with Special Reference to Deposits which are worked commercially .. .. .. . • • • • ■ • • • • .. 5 4. Production of Agricultural Lime— Financial and Costing Data .. .. .. .. • • • • • • ■ ■ .. 6 Prices of Agricultural Lime .. .. .. .. • • ■ • • ■ • • .. 7 Peak Periods and Spread of Deliveries .. .. .. .. .. ■ • • • .. 8 Rents and Royalties .. .. .. • • • • • • • ■ • ■ • • .. 10 Commission .. .. .. .. • • • • • • • • • • • • ..10 Bags .. . • • • ■ • • • • • • • • • • • • • 10 5. Transport— Overlapping and Rail Transport generally .. .. .. .. • • • • ..11 Transport by Road .. .. .. • ■ • • • ■ ■ • • • • • .. 12 6. Standards and Control — Quality of Agricultural Lime .. .. .. .. •• •• •• •• ..13 The Organization of the Agricultural-lime Industry .. .. .. .. •. .. 14 7. Sundry— Mobile Plants —Community Plants .. .. .. .. • • • • • • " , t Company-promotion as relating to Lime-producing Companies .. .. .. • ■ .. 14 Research Work .. .. • ■ • • • • • ■ • ■ • • • ■ .. 16 8. Government Assistance — Schemes for Subsiding Alternative to the Free Railage Subsidy at present operating .. .. .. ifa 9. Recommendations .. .. • • • • • • • • • • • • • • '' J, 8 9a. Memorandum of Dissent .. .. • ■ • • • • ■ ■ • ■ • • " o? 9b. Acknowledgments .. .. .. •• •• •• •• •• •• ..21 10. Appendices— A. Lime Subsidy Schcmc .. .. . • • • • • • • ■ • • ■ -- B. Precis of Principal Clauses of Proposed Legislation .. .. .. . • ■ • • • 22 C. Graph illustrating Seasonal Demand for Agricultural Lime .. .. .. .. [Not printed.'] D. Graph illustrating Growth in Demand for Agricultural Lime .. .. .. .. [Not printed.] E. Graph illustrating Weighted Avorage of l'riccs of Agricultural Lime .. .. .. [Not printed. | P. Graph illustrating Range of Costs of Production in each Tonnage Grade .. .. .. [Not printed.] g'. Employment Data showing Number of Employees in the Industry, both Casual and Permanent, together with an Estimate of Salaries and Wages paid in each District .. .. .. 23 H. Data showing Storage Capacity, both Bulk and Bag, of the Works in each District .. .. 23 I ' Tabulated Summarized Statement of each Company's Costs detailed through the Various Stages of Production [^ 0< printed.} J. Tabulated Summarized Statement of each Company's Assets and Liabilities .. .. [Not printed.] K. Tabulated Statement showing, District by District— . . .. •. • • • • .. 24 (!) The total output of Agricultural Lime from District: (2) The Monthly Distribution of this Output: (3) Through what Agency the Output was Distributed : (4) The Method of Distribution —Road, Rail, or Boat : (5) The Estimated Maximum Output of the Works, with Existing Plant.

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1. INTRODUCTION. APPOINTMENT OF THE COMMITTEE AND ORDER OF REFERENCE. The production of primary produce in New Zealand is at all times important, and it is absolutely essential that the fullest possible use be made of our productive capacity. As one of the factors making for maximum production is lime, used either in the carbonate or burnt form, any scheme which will result in an increased usage is of national importance. The Committee is fully cognizant of this fact, and, in making its recommendations, envisages an expanding usage of this necessary soil amendment, having in mind the wider problems of national production. Prior to the appointment of this Committee an investigation into the agricultural lime industry was carried out by officers of the Departments of Agriculture and Industries and Commerce. This investigation brought to light certain uneconomic features of the industry which made it imperative that a detailed investigation should be undertaken without delay. The Agricultural Lime Investigational Committee was appointed on 27th April, 1939, and commenced deliberations immediately thereafter. The personnel was fully representative of all interested parties—the Government, the farming community, the employees, and the lime companies all being represented. The Committee was as follows :— Chairman : Mr. G. A. Holmes, Department of Agriculture, Wellington. Committee : Mr. N. E. Dalmer, Department of Industries and Commerce, Wellington. Mr.' J w'Milne 1 ! Auckland} re P resentin g the lime-manufacturing companies. Mr. W. Horrobin, Waikanae, representing the farming community. Mr. J. J. Scott, Wanganui, representing the employees. In view of certain facts which were made apparent by the preliminary departmental report, it was decided to make the scope of the Committee's investigation as wide as possible, and with this object in view the following order of reference was drawn up for the guidance of the Committee (1) To investigate the more efficient production of lime and the organization of the lime industry generally : (2) To recommend more efficient methods of distribution and marketing of lime : (3) To investigate and report on the most efficient and equitable manner in which Government assistance should be directed so that bona fide farmers may receive the maximum benefit therefrom, and to indicate the total estimated liability under any system alternative to that operating at present: (4) To investigate the price and quality of agricultural lime from different works. 2. METHOD OF OBTAINING EVIDENCE. DETAILS OF THE COMMITTEE'S INVESTIGATIONS AND SUMMARY OF PRINCIPAL REPRESENTATIONS MADE TO THE COMMITTEE. To enable the Committee to have as complete a picture as possible of the existing units in the industry, statistical and financial data was sought by means of a questionnaire. The response by the companies was excellent, and from the information supplied by eighty-three lime-manufacturers the following tabulated data was assembled for the confidential information of the Committee : — (a) Employment data showing number of employees in the industry, both casual and permanent, together with an estimate of salaries and wages paid (Appendix G —not, printed). (b) Data showing the storage capacity, both bulk and bag, of the works (Appendix H—not printed). (c) Tabulated summarized statement of each company's costs detailed through the various stages of production (Appendix I-—not printed,). (d,) Tabulated summarized statement of each company's assets and liabilities (Appendix J— not printed). (e) Tabulated statement showing district by district (Appendix K) — (i) The total output of agricultural lime from each works : (ii) The monthly distribution of this output: (iii) Through what agency the output was distributed : (iv) The method of distribution—road, rail, or boat: (v) The estimated maximum output of the works with existing plant. From the Railways Department, in order that the anomalies in the present free railage system could be closely examined, information was obtained, from which the following data has been assembled : — (a) Statement showing the amount of agricultural lime railed free of charge to each officered railway-station in New Zealand for the year ended 31st March, 1939. (b) Statement, showing the amount of agricultural lime railed free of charge from each works or group of works to the various officered railway-stations for the year ended 31st March, 1939,

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The Committee commenced a comprehensive tour of the Dominion on the 12th May, 1939, and, with two short breaks of ten days each, completed the tour on the 19th July, 1939. During this period evidence from interested parties was taken in twenty-five centres —fourteen in the South Island and eleven in the North. Representations were made by forty-two farmers' organizations, fifty-five lime companies, and forty-four sundry persons or organizations. In this period also the Committee visited sixty-one lime-works with the object of investigating at first hand various units of the industry and studying in detail the domestic difficulties of each. It is regretted that the Committee was unable to visit certain districts in the Dominion owing to pressure of time, but the difficulties of these districts have been taken into consideration. A summary of the principal representations made to the Committee in each district is appended : — Southland.—The use of lime is essential for the development of Southland. Zoning of free railage is considered to be neither practicable nor desirable. Lime companies do not favour giving a price concession in the slack months, but the farmers do favour such a scheme and also request the introduction of a scheme of subsidizing road-transport costs. All parties mentioned difficulties in periods of peak deliveries in obtaining both railway-trucks and tarpaulins. Otago.—Here again lime is one of the first essentials for successful farming, and a subsidy on the costs of road transport was sought. Farmers' representatives also requested consideration of a proposal that a certificate of analysis and degree of fineness of grinding should be supplied by the companies. North Otago. —The potential demand for lime here is great. Prices charged are, in one or two cases, stated to be too low on account of price-cutting ; the commission paid to agents was considered too high ; it was also suggested that the heavy traffic license fees should not be charged in respect of farmers' trucks. Canterbury. —Liming of the soil is of the utmost importance, and the potential demand is high. The companies expressed no great objection to a scheme of zoning, but the farmers do not wish to be debarred from obtaining lime from North Otago. Difficulties are experienced m periods of peak demand in obtaining railway-trucks, and an endeavour should be made to level off this peak. A subsidy on the cost of road transport is desired : A certificate should be given by each company as to the quality of its lime. Marlborough and Nelson. in these districts gives good results, but has been restricted because of its high cost. There is, however, a good potential demand if the form of subsidy given were not restricted to cost of transport by rail, as both districts are poorly served by that method of transport. It was suggested that the industry be licensed and standards fixed as to quality and fineness of grinding. West Coast. —Successful farming is almost impossible without liming. The companies complained of poor demand on account of the high transport costs, and a subsidy on these costs was sought. Suggestions were also advanced that the committee should consider schemes for financing farmers in connection with the purchase of lime. Wellington-Wairarapa.—There is a good potential demand for lime in these districts, but it is felt that consumption will not increase until a subsidy on road transport is instituted to alleviate the high cost of lime landed on the farm to the back-country farmer. It has been suggested that lime should be deleted from the Road Transport Schedule of Charges to allow the farmer to make his own arrangements with the carrier. A considerable amount of delay in deliveries is experienced in the peak period. Hawke's Bay - Poverty Bay - East Coast.—The potential demand for lime, especially in the Poverty Bay - East Coast areas, is good. These two areas are poorly served by rail and a subsidy on road transport is desired. It was suggested that lime companies should be required to supply a certificate of analysis, and also that the Department of Agriculture should supply data as to the lime deficiency of the soil in the various districts. Lime is considered beneficial to the health of stock. Some lime companies desire an expansion of the 100 miles free railage area. Bay of Plenty - Thames - Coromandel - Rotorua— An extension of the free railage subsidy over the 100 miles limit, together with a subsidy on road transport, is desired. Zoning is not favoured. The issue of a certificate of analysis by lime companies was desired in some quarters, whilst the Bay of Plenty district also favoured the establishment of distributing depots. There is a certain amount of delay in deliver)' in the autumn. A uckland - North Auckland. —There is a great potential demand for lime due to the high limedeficiency of the soils in certain areas. Zoning is not desired. To obviate the delays at present occurring in the peak period it has been recommended that a price-reduction in the slack season should be granted. The district, especially the far North, is not well served by rail, and it is desired that a subsidy be granted on road transport to assist back-country farmers. It is also considered that the collection of heavy traffic fees on farmers' trucks should be waived. Whikato - King-country. —Evidence was given to the effect that excellent results have been obtained from liming, also that there is a good potential demand for the product. The peak period is very pronounced in this area and causes delayed deliveries, congestion at the works, and a shortage of railway-trucks. It is considered that every possible effort should be made to spread this peak. Free railage zoning is not desired, but it is felt that a subsidy on road transport should be given in addition to the free railage subsidy at present operating. Farmers desire that lime companies issue a certificate of analysis ot their product.

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Taranaki-Wanganui.—The potential demand for lime is good, but the increased consumption will not eventuate until some relief by way of subsidy on road transport is given to backcountry farmers. A certificate of analysis by lime companies is desired. There is delay in the peak period, but it is felt that this could be overcome to a certain extent if a reduction in price were made in the off season to give some incentive to farmers to take delivery out of the autumn months. General. (1) Evidence was given by several persons proposing to start lime-crushing in the near future. (2) Details of lime deposits which could be opened up if considered desirable were also submitted. The Committee also called expert and technical evidence from the following persons and organization:— (1) The Cawthron Institute, Nelson : (2) The Crop Experimentalist, Department of Agriculture : (3) Canterbury Agricultural College : (4) The Inspector of Fertilizers, Department of Agriculture : (5) The Commissioner of Transport: (6) The New Zealand Road Transport Alliance : (7) New Zealand Railways Department: (8) The Soil Survey and Geological Survey Divisions of the Department of Scientific and Industrial Research : (9) The Animal Research Division, Department of Agriculture. 3. LIME. THE GROWTH OF THE USE OF AGRICULTURAL LIME AND THE PURPOSES FOR WHICH LIME IS CONSIDERED NECESSARY. The Dominion of New Zealand is a country endowed with a temperate climate, with ample rainfall in most districts, and with abundant sunshine ; but the soils, except for somewhat limited alluvial areas, are of comparatively low fertility, being markedly deficient both in lime and phosphate. Even on the most fertile soils constant cropping of arable land or removal of live-stock and live-stock products from pasture land tends to eliminate those elements in the soil which are necessary for the production of farm crops and first-grade pastures. Another factor which is of great importance in the higher rainfall districts is the tendency for calcium compounds to be leached out of the soil by water. In many districts in the earlier days of settlement the natural fertility of the soil was sufficiently high to enable successful cropping and pasture establishment, but on all except the first-class soils the deterioration of productive capacity was soon noticeable, and as the soil position became apparent so did the need for artificial fertilizers become evident. Towards the end of last century the position was realized by the Government, and it was decided to encourage the use of lime by assisting the farmer to obtain it at a reasonable price through the granting of a free railage concession up to 100 miles. In the first year of its inception, 1898, 12,450 tons of lime were railed under this subsidy scheme. Ten years later the tonnage had risen to over 16,000, not a remarkable increase. Ten years later, in 1918, 50,000 tons were railed, and from then onwards a steady increase was noticeable which brought the tonnage to 175,000 in 1933. It was then becoming increasingly apparent to the farmer that the use of lime was beneficial, and, in some cases, absolutely essential to successful farming. During the next five years the amount of lime railed increased by over 100 per cent., the tonnage hauled in 1938 being approximately 380,000. As can be seen, the growth in the use of lime has been phenomenal, but the peak has not yet been reached. There have been several factors operating to encourage a heavier use of lime. The Committee is of opinion that the efforts of officers of the Department of Agriculture in encouraging farmers to concentrate on improved pasture-management methods and the response of farmers in this direction have been the outstanding developments of the past twenty years. Parallel with this development there has been considerable improvement effected in the methods of application of lime, in particular by the use of the type of top-dresser which is attached to and driven by the motor-lorry. There has also been increasing efficiency at many of the lime-works, and this has been reflected in many oases in a reduction in the price of carbonate of lime, even though wage-rates and other costs have substantially increased during the past twenty-five years. The extension of experimental work carried out by the Fields Division has demonstrated the value of lime on many soil types which were formerly assumed not to be lime deficient. An illustration of this is to be found in the light gravelly soils of the Canterbury Plains. These soils, although usually referred to by the farmer as " light sweet soils," are now found to give a remarkable response to lime, particularly where there is sufficient pasture population of clovers. A development of great importance has been the increasing efforts to establish and maintain first-class pastures on second- and third-class soils by improvement of surface fertility. In the case of soils, such as gum-land clays and acid volcanic types, fairly heavy initial applications of lime are essentia] to successful grassing. In some districts increasing use of lime has been essential in order to cope with " club-root" disease of brassica crops. It is noteworthy, too, that in many districts where top-dressing has been carried out over a period of years with phosphatic fertilizers only there has apparently arisen a need for applications of lime also.

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Evidence brought before the Committee is to the effect that lime and yet more lime is urgently needed if production is to be maintained. At present probably the chief factor limiting the wider use of lime is the comparatively high cost of road transport, but it must also be remembered that many districts have been able, since the introduction of motor-lorry transport, to procure supplies of lime in quantities and at delivered costs which would be impossible by horse-drawn wagons. In this way many outlying districts, which were formerly able to produce only store stock, have been brought within the zone of intensive farming and now receive their lime and fertilizers by fast road transport and send away butterfat or fat stock by the same means. Lime is a cheap product at the works, and it is essential that transport costs be such that cartage to back-country districts is not out of all proportion with original cost if back-country usage is to be encouraged. Evidence before the Committee is to the effect that in some districts successful farming without lime is an impossibility. This, of course, is a generality and is not applicable to all or even the majority of districts. The benefits of lime to the soil have been emphasized by the late P. 6. Morgan in Bulletin No. 22 (Geological Survey) on " Limestone Resources of New Zealand," and by Bulletin No. 117 issued by the Canterbury Agricultural College, Lincoln, entitled " Liming the Land." The chief features adduced from these authorities would appear to be : — (a) Lime is indispensable as a component of the bodies of plants and animals : (b) A most important function of lime is to correct acidity of the soil: (c) Lime increases the efficiency of fertilizers by fixing the phosphate in citric-soluble form, and by promoting the break-down of organic matter: (d) The presence of lime in the soil is indispensable to clover-growth, while it also promotes nitrification : (e) Lime ameliorates the texture of soils, tending to make clay soils more friable and loose sandy soils more compact: (/) Lime liberates potash from various minerals, such as feldspar, and makes it available for the use of plants. POTENTIAL DEMAND FOR AGRICULTURAL LIME. Approximately 478,000 tons of lime are produced annually for agricultural purposes in the Dominion. Of this total, the South Island uses 289,000 tons and the North Island 189,000 tons. These figures seem large, but they do not by any means represent the optimum consumption of the country. The marked increase in the use of lime during the past decade is convincing evidence of that fact that as the farming community become more fully educated to the benefits of the use of lime, provided, of course, that financial conditions remain reasonably stable, the increase in consumption in the next twenty years should continue on nearly as steep a plane. It will be realized that the increased demand will vary considerably from district to district. In many districts extension of the use of lime has progressed in parallel fashion with the settlement of newly-broken-in country. It is difficult to forecast to what extent further developments are probable in this direction, but it is generally considered that under existing economic conditions the more urgent question is the holding from deterioration of country already settled, and, for this purpose, increasing use of lime is of major significance. THE OCCURRENCE OF LIMESTONE DEPOSITS IN NEW ZEALAND WITH SPECIAL REFERENCE TO DEPOSITS WHICH ARE WORKED COMMERCIALLY. Abundant deposits of limestone are available in the Dominion, but, unfortunately, these are not all strategically situated from the point of view of access and coverage. The Committee does not propose to go into a detailed description of each and every deposit, but will endeavour to show briefly how each district is served as regards availability of limestone and by existing works. North Island. In the extreme north comparatively low-grade rock and shell-lime is to be found in the Mongonui County. Deposits are at present being worked at Kaingaroa and Kaitaia. On the West Coast down to the Kaipara Harbour fair-grade deposits are available, and two are being exploited at Arapohue and Matakohe. Inland from this area a high-grade deposit is being worked at Waikiekie, while on the East Coast other high-grade deposits exist and are being exploited adjacent to Whangarei. The Rodney and Waitemata Counties are well served by rather low-grade soft stone deposits around Wellsford and Kaukapakapa where no fewer than six small units are operating. Another deposit is also being worked at Redvale. Several deposits are available in the Coromandel County, but access is a difficulty. The only deposit being utilized is situated at Mercury Bay. Shell deposits are available in the Thames County, and these are being worked by companies at Kopu and Miranda. No deposits of any commercial value have been located in the Bay of Plenty, Rotorua, or Taupo districts, the nearest available supplies being at Thames and Te Kuiti, necessitating long haulages. Ample deposits are available in the Raglan and Kawhia districts, but only two of these are being worked at present, one at Te Mata and the other at Karaniu. The Awakino and Waitomo Counties probably contain the greater proportion of the higher-grade stone available to the North Island. Large companies are working deposits at Hangatiki and Te Kuiti, while a smaller concern is operating at Piopio.

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Taranaki is unfortunately situated as regards lime deposits. A deposit was until recently worked at Toko near Stratford and this is the only known limestone in the district. The Wanganui area is served by a company operating 011 a shell-rock deposit at Waitotara. This company also serves the South Taranaki district. On the East Coast fair-grade deposits are available in the Waiapu County, and it is probable that a quarry will be opened shortly near Te Aroroa. Pair-quality stone is available in Poverty Bay, which district is served by a works operating near Patutahi. Hawke's Bay is well supplied with good-quality lime deposits, which are worked at Napier, Hastings, Waipawa, and Hatuma. The Manawatu and Rangitikei districts are served by a works operating on a deposit in the Manawatu Gorge. No deposits are available between the Gorge and Wellington on the West Coast. The Wairarapa area is well supplied with works at Pahiatua, Pongaroa, Mauriceville, and Gladstone. South Island. The Nelson Province is well supplied with deposits of almost pure limestone. These are being worked in the Collingwood and Takaka districts arid at Motueka, Kaka, and Brightwater. Very few deposits are available in the Murchison district, but the one concern operating there at present should suffice to supply this area. Marlborough's lime deposits are situated in the south-east corner of the province, a disadvantage when the question of haulage is considered. Two works are operating, these being situated at Ward and Wharanui. Deposits of good stone exist in the Kaikoura County, one unit at present operating in close proximity to Kaikoura Township. On the West Coast, deposits of good-quality stone are available, and some of these are being worked—• namely, Cape Foulwind, Ross, and Koiterangi. Extensive deposits are available in North Canterbury, works being in operation at Waiau, Cheviot, Waikari, Amberley, and Whiterock. In the back-country districts of the Canterbury Plains, limestone outcrops in a number of localities and is worked at Mount Somers by an established company and at least in one case by a mobile unit. South Canterbury has extensive deposits of limestone, quarries being worked at Kakahu, Cave, and Fairlie. North Otago is well served with deposits which are commercially worked adjacent to Oamaru and Dunback. South Otago is also in a good position as regards supplies, three works being in operation at Milburn. There are 110 deposits commercially exploited in Central Otago, so that supplies must be drawn froni Milburn or Dunback. All interesting deposit exists at the south end of Lake Hayes, consisting of a calcareous ooze or marl. This can easily be excavated by the use of a shovel. The southernmost part of the South Island is well served by three large works operating around Winton and two others situated at Balfour and Clifden. The deposits here are of good-quality stone and are practically inexhaustible. 4. PRODUCTION OF AGRICULTURAL LIME. FINANCIAL AND COSTING DATA. In the initial stages ol' its investigation the Committee forwarded a questionnaire and tabulated costing-sheet to eighty-three companies who are known to be producing agricultural lime. Thirtyeight of these are located in the South Island and forty-five in the North Island. Various tabulations have been assembled from the completed returns, amongst which are : — (a) Tabulated summarized statement of each company's assets and liabilities (Appendix J—■ not printed). (b) Tabulated statement of each company's costs detailed through the various stages of production (Appendix I—•not printed). The striking feature of these statements is the inconsistency of the figures from a comparative point of view. This fact renders it extremely difficult to make any general comparisons. Taking the tabulated statement of each company's assets and liabilities, points which obtrude are : — (1) Capitalization and fixed asset values bear no relation to output, giving the impression that a great number of companies are overcapitalized : (2) Amounts owing to creditors are in many cases considerable, and this adds to the impression gained in (I) above : (3) Sundry debtors bear a high relation to turnover, but it is understood that the amount lost by way of bad debts is remarkably small, 110 doubt due to the fact that the greater proportion of the companies' business is done through merchants, who provide the farmer with the necessary financial accommodation : (4) In several instances fictitious assets are out of all proportion to the value of the companies' undertaking as a whole. In some cases this is caused by a debit balance, representing accumulated losses in the Appropriation Account, but in others it is due to excessive flotation costs or what would appear to be excessive goodwill: (5) Several companies appear at present financially unstable. Information gleaned from the various companies' costs of production are interesting but inconsistent: — (1) Output has some bearing on costs of production—that is, generally speaking a company with a large output is producing more cheaply than a company with a small output (Appendix F —not printed). However, it is impossible to compare two companies' costs, even if they have equal output, without an intimate knowledge of each company's peculiar domestic difficulties. Some of these difficulties will be touched 011 in later paragraphs.

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(2) Taking the more efficient companies as examples, it is found that wages-costs are approximately between 50 per cent, and 60 per cent, of the companies' total production costs — a vital factor and one that has a considerable bearing on the cost of lime. (3) Rents and royalties vary from as low as Id. per ton to as high as 2s. 6d. per ton, 0.9 per cent, to 16.5 per cent, of production costs. (4) The variability of stripping-costs is one of the features which makes any generalization of costs impracticable. Before lime can be quarried it is necessary to clear away all overburden of earth, so that the quality of the product is of the highest possible standard, consistent, of course, with the analysis of the limestone in the quarry. On viewing the various quarries the Committee was impressed with the variation in the amount of stripping that has to be done. Certain quarries require to strip only about 6 in. of earth, while in others the depth of overburden may be up to 10 ft,, or, as in one or two cases, up to 50 ft. Stripping-costs are frequently heavy, but a great reduction in costs has been brought about by recourse in some cases to mechanization and in others to sluicing. The Committee is of opinion that such methods might be more widely adopted. (5) Like stripping-costs, quarry-costs also show a high degree of variability; This is usually due to the different physical characteristics of the limestone in the various quarries. Costs of labour, explosives, repairing tools, &c., all vary according to the; hardness of the stone and the tightness of the quarry-face. (6) In a few cases the mill is situated some distance away from the quarry, involving a further expenditure in carting the spawls to the mill for crushing and pulverizing. Here again is one of the features which makes generalization impracticable. (7) Mill-costs —that is, the cost of crushing, drying, and pulverizing the limestone—are reasonably consistent except for the fact that some works dry the stone and others do not. Fuel-costs vary in accordance with the proximity of the works to the source of fuel-supply. Repairs to machinery arc heavy, as is to be expected in an industry such as this : (8) Delivery costs—that is, the cost of bagging the lime and delivering to the railhead — again are variable. There is a certain amount of consistency in bagging-costs, but the costs of delivery to the railhead naturally vary according to the distance the works are located from the rail point of despatch. (9) Management and selling expenses on the whole are not excessive, the chief variation being in the rates of commission payable to merchants or agents, these varying from-Is. per ton to 2s. 6d. per ton, or 10 per cent, to 17J per cent, on selling-price. (10) Some companies show quite an appreciable gross profit on bags, amounting in certain instances to a sum equivalent to the company's annual net profit. (11) In an industry such as this depreciation of buildings, plant, and machinery is a heavy item. If a company wishes to state its financial position accurately in its annual statement of account then full depreciation should be provided. There is a tendency on the part of some companies, especially private ones, not to charge depreciation in the accounts, and this practice is not advisable. As plant and buildings have little break-up value it is essential that allowance be made in depreciation not only for wear-and-tear, but also for the lifetime of the deposit. Few companies would appear to be making provision for the wastage in assets occasioned by the operations of the company, and consequently the values of same appear to be overstated in certain balance-sheets. On summing up the data in short, it appears that, generally speaking, the average lime-producing company is eking out a precarious existence, operating on a very small margin of profit, which profit, factors outside its control, such as weather, breakdown in machinery, and even the smallest increase, in wages-costs, could quickly reduce to a loss. The Committee considers that any increase in the price of lime is undesirable in the interests of national production, and that any increases in the cost of production should be met, if at all possible, by the more efficient operation of plant, particularly by securing increased output and a better spread of deliveries. THE PRICES OF AGRICULTURAL LIME. Prices of carbonate of lime range throughout the Dominion from 9s. to 235. per ton, while those for burnt lime vary from 235. to 465. per ton, an extensive range and one that serves to show how diversified conditions are within the industry. Only thirteen companies out of eighty-three produce burnt lime, ten of these companies being in the South Island and three in the North. As companies burning lime do not always keep separate production costs for this product it is difficult to comment at all on this section of the industry. The amount of burnt lime consumed is very small by comparison with the total amount of lime used, being approximately 5 per cent, of the total. The weighted average price for carbonate of lime throughout the Dominion is 13s. 9d. per ton (Appendix E —not printed). Prices appear to be fairly consistent in districts, competition no doubt accounting for this. I t must be stressed that the prices quoted are net to consumers. As the major proportion of the output is sold through merchants, discounts ranging from Is. to 2s. 6d. per ton apply in most cases.

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In Southland and South Otago the price of carbonate of lime to consumers, ignoring charges for bags, is lis. and 12s. per ton. In North Otago, where a certain amount of price-cutting is evident, prices range from 10s. to 14s. 6d. per ton. The price rises as one works North, South Canterbury figures being 13s. to 16s. and North Canterbury from 15s. to 16s. per ton. In Marlborough the price is 17s. 6d. per ton, whilst in Nelson prices range from 20s. to 225. 6d. per ton. The West Coast is the only district which uses more burnt than carbonate of lime. Burnt lime here is the cheapest in New Zealand, due largely to the cheapness of fuel in the district. Carbonate prices range from 14s. to 18s. per ton. Reviewing the South Island prices briefly, the low price in Southland and South Otago is due to the following factors : — (а) The individual works have large outputs : (б) The peak period of demand is fairly well spread : (c) The works are run efficiently and economically. The 10s. price in North Otago is due to price-cutting, but occurs only in the case of two companies, both of which are primarily engaged in the production of other commodities. The 13s. to 16s. range in South Canterbury appears to be reasonable, as also are the North Canterbury prices. The largest of these works has an output equal to only approximately one-third of certain of the Southland companies. Marlborough is unfortunate in that the output of the two works situated in that district Is very small, consequently the price is relatively high at 17s. 6d. per ton. Nelson prices, with one exception, appear high, due to low outputs and the high cost of quarrying the exceptionally hard stone. The West Coast prices are more reasonable, but appear to be bordering on the cost of production. In the Wellington-Wairarapa-Manawatu districts prices range around 155., except for one small works which charges 9s. per ton. In Hawke's Bay the price is 16s. per ton, whilst in Poverty Bay the price is 19s. per ton. The shell-lime companies around Thames charge 21s. per ton, whilst in Auckland and North Auckland prices vary from 10s. to 235. per ton. Prices in the King-country range from 14s. to 15s. 6d., whilst in Taranaki the price is 18s. per ton. "As has been stressed elsewhere, North Island companies work at a disadvantage compared with the South Island due — (a) To the high peak in one month, March : (b) To the output of many of the companies being low. Prices ranging from 14s. to 16s. appear reasonable. The low prices—for example, 9s. in the Wairarapa and 10s. in North Auckland —cannot be taken as an indication that prices elsewhere should be lower, as these works, both small, have special circumstances not common to other companies. In Poverty Bay the high price is probably due to exceptionally low output. Both the shell-lime companies around Thames operate under disabilities not applicable to other companies. The variation of price in North Auckland is remarkable and some adjustment would appear necessary. The King-country companies enjoy the largest output in the North Island. The Taranaki company has particular domestic difficulties which are reflected in its charge of 18s. per ton. Speaking generally, prices vary in accordance with the domestic difficulties of various works. Increased output would help considerably in reducing overhead, but would only create further problems in most works if the peak period were not spread. The Committee considers that the cost of production of lime is based on and regulated by the existence of a peak period. If by some means the demand could be spread over a greater portion of the year, then costs would be released from their present uneconomic high level and prices thereby allowed to find a uniformly lower range. PEAK PERIODS AND SPREAD OF DELIVERIES. Representations made to the Committee by lime-producing companies throughout New Zealand showed that the irregular nature of the demand for lime was one of the chief difficulties ol the industry. Farmers, rightly or wrongly, order their lime only at certain periods of the year, these periods being governed by seasonal agricultural activities according to district and type of farming. As a result, a sharp peak in the demand for lime occurs in certain months (Appendix C—not printed). In the South Island arable districts the cultivation of a variety of crops helps to spread the peak period to a greater extent than in the North Island. In Southland the practice of top-dressing grassland in the autumn, of liming in winter or early spring, and of using lime when sowing down young grass, together with the use of lime for root and forage crops sown in early summer, all tend to spread the peak, enabling greater regularity of deliveries from lime-works. The off months are January, February, March, and, to a -less extent, July and August. In Canterbury the demand is not so well spread, the heaviest deliveries being called for over a period of about five months. In this district the off months are January, February, July, August, October, November, and December. In the North Island the position is totally different, most of the lime consumed being used for autumn top-dressing. In Wairarapa, Manawatu, Hawke's Bay, and Poverty Bay District the peak is distributed over three months—March, April, and May. In the Bay of Plenty, South Auckland, North Auckland, Waikato, and King-country the peak gradually confines itself to one monthMarch. In Taranaki the peak period is in May. Summarizing the position in both Islands, the peak in the South Island is in November, closely followed by October, September, May, and April. There is a drop in production in June, August, March, and December, and a further considerable drop to July, February, and January, in that order. The North Island is not so fortunate. There is an exceptional peak in March, with a 33J per cent, drop in production to May, April, and February, and a further sharp drop to June and January. July, August, September, October, November, and December are practically equal, 75 per cent, below the production figures for March. The difficulties ncidental to irregularity of demand can only be appreciated by a detailed study ol the effect which the peak period has on the industry from various angles:—

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(a) Effect on the Lime-producing Companies. (1) Companies' Operating-costs.—A company which is working steadily throughout the year can be organized, with careful attention to costing figures, to produce at the maximum efficiency of the plant with a minimum waste in expenditure. The peak periods in the lime industry render such organization practically impossible, especially in the North Island. For a few months of the year the plant is operated at full capacity, while for the remaining period it is practically idle. The exceptionally short-peak period in the North Island explains, to a certain extent, the disparity in production costs between the two Islands. (2) Labour. —The effect of having peak periods, with consequent slack periods, renders it impracticable for the lime companies to employ more than an absolute minimum of permanent hands. It is estimated that the industry employs 491 men permanently, though, no doubt, some of these are not employed in certain months of the year. The number of employees actually classed as casual is 466. The total amount paid out in wages for the past financial year was £166,899. Casual employment is partial unemployment, and if the peak period of production could be spread more evenly throughout the year greater permanency of employment would result therefrom. (3) Deliveries. —The rush of orders causes considerable congestion at the works, and it is often found that deliveries become delayed by several weeks, resulting in many orders being cancelled. (6) Effect on the Railways and Road Transport Companies. The peak in the lime traffic, unfortunately, coincides with the peak in the fertilizer traffic and with a general busy period in many districts, placing an undue burden on Railway rolling-stock and road transport companies, resulting in a shortage of trucks and lorries and consequent delay in deliveries. The evidence before the Committee on the question of the peak period agrees unanimously to the effect that:— (a) The peak period is at present one of the chief disabilities of the lime industry: (b) All possible methods designed to spread seasonal demand should be explored. The following methods are suggested as a means of overcoming the difficulty :— (a) Educational Propaganda to encourage the Farmer to take Delivery at Non-peak Periods. — In many districts evidence available from farmers was to the effect that lime may be applied to grassland with equally good results at almost any period of the year, and, apart from the period when the farmer is engaged in urgent seasonal work such as lambing or harvesting, it seems possible to encourage application of lime at other than the recognized liming-seasons, taking into account varying climatic conditions. Detailed evidence is lacking as to the necessity to apply lime at the same time as top dressing with superphosphate, and the Committee is of opinion that further research work is urgently necessary in regard to the best time of the year for application of lime to pasture lands, both alone and in conjunction with phosphatic fertilizers. (b) Storage Facilities :— (i) At the Works : Generally speaking, lime companies when undertaking building construction have not provided ample bulk storage facilities to enable lime to be produced in the off months and stored until the peak periods. The heavy cost of building bins was no doubt responsible to a great degree for this position. The total bulk storage capacity for both Islands is 24,642 tons, with further space for storage in bags 9,806 tons. Of the bulk storage 13,178 tons is in the South Island and 11,464 tons in the North Island. The companies in the latter Island have a greater amount of bagged storage space, 7,281 tons, as against 2,525 tons, but, as a genera] rule, storage in bags over any lengthy period is inadvisable. The chief inference to be drawn from these figures is that the total bulk storage space in the Dominion represents only about two weeks' supply in the peak period. If greater provision for bulk storage had been made, a considerable amount of the delay in deliveries, which now occurs, would be obviated. (ii) Storage elsewhere than at Lime-works : It has been suggested to the Committee that the construction of centrally situated storage depots, where companies could store lime in the off season for distribution in the peak season, would alleviate to a considerable extent the delays at present occurring. The Committee has given full consideration to this suggestion, but has formed the opinion that at only a few points would the construction of storage facilities be practicable. The capital cost of erection, which was found to amount to approximately £2 per ton of storage space, is the greatest factor to bear in mind. The Committee recommends, however, that where a company desires to erect storage bins at a suitable delivery-point any concession by way of subsidy existing for the time being should operate in respect of transport from the works to the bin. (c) Concession in Freight Charges in the Off Season.—The peak period affects the railways and transport companies by congestion of deliveries just as much as it affects the lime companies. It has been suggested that, if sufficient inducement were offering, the farmer would take delivery or part delivery in the off season, and the Committee feels that some action should be taken with a view to implementing this suggestion. (d) Concession by the Lime Companies in the Off (Season.—The same principle applies here as in (c) —namely, that the lime companies might offer a reduction in price in the off season in an endeavour to get the farmer to spread his deliveries.

2—H. 298.

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(e) Importance of Forward Boohing of Orders.—With a view to assisting the industry in regulating supplies the Committee feels that more attention should be paid by the farmer in placing his orders well in advance of delivery date. This would also be of assistance to the railways in providing trucks and so enable the farmer to receive more certain deliveries. RENTS AND ROYALTIES. In an industry such as the agricultural lime industry, where the product is low priced, the smallest of overhead charges has a pronounced bearing on the cost of the finished product. The initial cost of producing lime is in the payment of rents and royalties, and here, where some uniformity might have been expected, costing figures submitted by the various companies show that charges vary from Id. per ton to as high as 2s. 6d. per ton, or 0-9 per cent, to 16-5 per cent, of production costs. There also appears to be a variation throughout the Dominion in the charges made for lime taken from Crown leaseholds. Evidence submitted stresses the fact that in certain cases royalties paid are excessive and constitute a burden to lime companies, who are struggling to keep production costs within competitive limits. It is the considered opinion of the Committee that a royalty of 3d. per ton is an equitable charge to pay for the privilege of quarrying lime, provided a reasonable minimum annual payment is guaranteed. A somewhat higher figure may be justified where, as in certain shell-lime deposits, winning of the lime extends over a wide surface area or where access of trucks to the lime deposit causes considerable inconvenience to the owner of the land or in other special cases. In the case of many companies the amount of royalty paid is the subject of a contract between the company and the owner of the freehold. The Committee considers that legislative provision might be considered—• (a) For reduction of the rate of royalty in cases where it is deemed excessive ; and (ib) For the taking under the Public Works Act of land containing limestone deposits where such are required to be worked for the production of lime. COMMISSION. According to the figures supplied by the lime-producing companies, of the 473,077 tons of agricultural lime sold during the year a total of 336,288 tons, or approximately 71 per cent, was sold through the agency of merchants, stock and station agents, dairy companies, or similar organizations. Commission paid to these agents varies from Is. to 2s. 6d. per ton, the cost to the industry averaging commission at Is. 6d. per ton, possibly a low figure, being approximately £25,000, or nearly Is. Id. per ton on the total quantity of agricultural lime sold. The main functions of the agents cover : — (1) The granting of credit facilities where necessary : (2) Collecting orders and assembling same : (3) Despatching empty sacks : (4) Arranging deliveries as required. The agents do not handle the product, which is forwarded direct from the works to the farmer. The chief benefit accruing from this service both from the farmers' and the lime companies' points of view is the granting of credit facilities, and it is here that a wonderful service is rendered. The farmer obtains lime when required without the worry of finance, and the companies in turn benefit through a lessening of the possibility of bad debts. However, from the point of view of the cost of the product, a different angle is presented. Carbonate of lime, a product selling throughout the Dominion at prices ranging from 9s. to 235. per ton, has to bear commission varying from Is. to 2s. 6d. per ton. For the purpose of comparison, the position with regard to fertilizers, where conditions are somewhat similar, may be mentioned. Commission on superphosphate is approximately 6 per cent, of the value of the product, compared with percentages of from 10 per cent, to over \l\ per cent, on carbonate of lime. From this viewpoint the lime industry appears to be loaded with a percentage of commission higher than average. Evidence tendered varies considerably on this question. On the one hand it is the contention that commissions as a whole are too high, and on the other that the rates paid are commensurate with the value of the services rendered. There is no doubt as to the value of the services rendered, but it appears desirable, on summing up the position, for maximum rates of commission on agricultural lime in certain districts to be fixed at a lower figure. BAGS. Difficulties in regard to the supply of bags constitute one of the critical problems of the lime industry. With the exception of one or two of the North Auckland companies, who deliver a portion of their output of lime in bulk, every ton of lime has to be bagged before delivery. The general practice is for lime companies to purchase either new or second-hand bags and to charge these out to the customer at so much per ton, allowing a lesser amount as rebate when the bags are returned in good condition. Throughout the Dominion, the charges for bags vary considerably, while in several instances companies allow a full rebate and consequently bear the total cost of replacements themselves.

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Some farmers supply their own bags, usually second-hand fertilizer-bags, and by doing so obtain their lime at a considerably reduced price. This practice is to be commended if only from the point of view that if the farmer wishes to obtain lime at the cheapest possible price then he should do everything in his power to keep that cost down, and the using of his own bags is one instance where he can help himself to attain this result. Bags can usually be used three or four times, but often carelessness on the part of the purchaser cuts the life of the bag down by 50 per cent. Here again the purchaser can help himself, as the cost is ultimately borne by him in the price of the lime. The handling of bags at the works involves a considerable amount of labour in tallying, sorting, examining for tears, &c. If some cheap bag could be devised, cheap enough to be used once and discarded, then ultimately a great saving in cost would result to the industry and also to the farmer. The use of paper bags would ideally suit this purpose, but at present the cost is prohibitive. It is estimated that the lime industry would use about 6,000,000 bags per annum, and it is possible that with so much pulp timber becoming available in the Dominion within the next few years, an opportunity presents itself, if a cheap and serviceable bag could be produced, for local industry to cater for the bag trade of the lime industry. It must be stressed that for a low-value product such as lime the question of cost of bags is an important factor. Suggestions have been made to the Committee that some form of preservative treatment might be devised for jute bags to prolong their life. The Committee recommends that research work should be undertaken with this object in view. 5. TRANSPORT. OVERLAPPING AND RAIL TRANSPORT GENERALLY. The present form of assistance granted by the Government is by way of a concession in railage. Lime may be railed in minimum 6 ton lot's up to 100 miles free of charge to bona fide farmers, the cost of such railage being met by the Consolidated Fund —vote, " Agriculture." When the subsidy was first granted, in 1898, few works were operating and little lime was used; in fact, as recently as 1920 only approxinately 50,000 tons were used in the Dominion, of which 40,000 tons were consumed in Otago and Southland. In 1928 the figures had risen to 114,000 tons, but since then the growth has been phenomenal, last year approximately 380,000 tons being railed. In line with the growth in the use of lime the amount of the subsidy paid has increased from £31,000 in 1927-28 to approximately £120,000 in 1938-39, the latter figure working out at over 6s. per ton on the total quantity of lime railed. The establishment of numerous lime-works in situations adjacent to the rail has contributed to a great deal of overlapping in railage throughout the Dominion. This overlapping is caused by farmers purchasing lime from works a considerable distance away instead of from the nearest works. Some points which assist to create this uneconomic aspect of the subsidy are : — (a) Efficient salesmanship in the case of certain companies : (b) Varying prices for lime throughout the country : (c) Variation in the quality of the product: (d) The establishment of farmer-shareholder companies : (e) Inability of certain works to supply during peak periods. The chief point to be borne in mind in connection with overlapping is its uneconomic aspect, although it must be admitted that at times a certain amount of overlapping is unavoidable. From a survey of the railway figures it is estimated that overlapping is resulting in the Consolidated Fund having to find something in the vicinity of £20,000 more subsidy than would be necessary if farmers purchased from the nearest works. Overlapping also results in greater shortage of trucks in the peak period than would otherwise be the case. The longer haulage resulting, while satisfactory from the Railway revenue point of view, directly reflects on the farmer when the question of delay in delivery is considered. The only apparent method of remedying overlapping is by a system of zoning, limiting the farmer to buying from works within a certain prescribed area. This system, while it would accomplish the saving of uneconomic payment of subsidy, has many disadvantages, the chief of which are : —- («) It would be difficult to administer from the Railways point of view : (h) It would necessitate continual revision, if new works were allowed to commence operations, or if established works were unable to supply: (c) It would restrict the farmer to purchasing from a particular works even though the price or quality might, in his opinion, be unsatisfactory. This could possibly be overcome to a certain degree by making the zoning elastic or allowing the farmer to buy out of the zone provided he paid the extra railage, but any variation of this nature would again tend to make administration more difficult: {d) It would tend to restrict healthy competition among the lime-works, probably resulting in higher prices : (e) It would drastically change every company's clientele and would result in considerable confusion.

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The Committee consider that a system of enforced zoning would be too sudden and drastic in the light of present conditions. The alternative appears to be some system which would zone automatically and which would be arranged so that if overlapping still continued to a degree it would be paid for in a lesser proportion out of the Consolidated Fund than is the position to-day. Such a system would of necessity leave the farmer free to buy from any works provided he was prepared to pay the extra cost entailed. Full consideration of all schemes of subsidizing alternative to the present one will be dealt with in later chapters of the report. On the subject of railway transport, the efficient manner in which the Department has met all demands is generally acknowledged. The main difficulty met with is the shortage of rolling-stock in the peak periods. As has already been mentioned, this peak, unfortunately, coincides with the fertilizer peak, creating an exceptional demand over a limited period. There has been a fair amount, of delay in the past in fulfilling the demand for wagons. In the future the Department expects to be able to cope with the demand for wagons, except during exceptional peaks, and the heavy building programme in this year's estimates will help towards bringing about that desirable state of affairs. It may be mentioned here that a great deal of the delay could be obviated if consignees would unload trucks immediately on arrival. Certain factors, such as bad weather and availability of local carriers, often render it difficult for the farmer to comply with the railway regulations regarding the time limit for unloading. The Committee wish to impress upon farmers the necessity of assisting the Railways Department by prompt clearing of trucks after arrival. TRANSPORT BY ROAD. Although the farmer obtains a free railage concession up to 100 miles for orders of 6 tons of lime or more it must not be assumed that his cost of obtaining lime on the farm begins and ends with the f.o.r. price quoted by the lime companies. Very few farmers are situated adjacent to a railway station or siding, consequently an additional cost by way of road transport is involved. Road-transport rates, unfortunately, do not bear comparison with railage rates over similar distances, being in most instances from 200 per cent, to 400 per cent, greater. As an example, the railage rate for 15 miles is 3s. Id. per ton, while for a similar distance the charge by lorry is from lis. to 12s. per ton, an important factor when the cost of lime on the farm is being considered. To study the question from another point of view, the farmer 15 miles from the railhead pays in transport charges a rate approximately equal to the cost of the lime itself. The Committee's attention was frequently drawn to the necessity for increasing the use of lime in many outlying districts where it may be found that the high cost of transport normally makes its use uneconomic. In such districts deterioration of pastures and reversion to secondary growth is commonly seen, and as this country is typically a home of breeding-stock it is considered of greatnational importance, that such deterioration should be prevented. It is stated that the distance of the farm from the rail is, generally speaking, reflected in the price paid for the land. That statement cannot be refuted, but, looking at the position to-day from a national point of view, it has to be discounted to a certain extent. If primary production is to be increased or even maintained, the back-country areas must be kept in production, and one method of doing this is to provide lime and fertilizers at a lower delivered cost. The chief representation made to the Committee, and it was practically universal, was that some assistance should be given towards reducing the roa.d transport costs on lime. Suggestions having a bearing on this question were : —• (1) In addition to the Rail Subsidy, the Government should also grant a Subsidy on the Cost of Road Transport.—With regard to this request it appears only equitable that it should be granted; in fact, it appears to the Committee to be in the national interest that the Government should do so. The difficulty lies in formulating a scheme which could be readily and efficiently administered. This aspect, however, will be dealt with in later chapters of the report: (2) The Road Transport Schedule Rates on Lime should be reduced.—lt is problematical whether these rates could be reduced. Such action would create anomalies in that requests for reduction of schedules on other lines would automatically follow ; also, if the cartage rates on lime were uneconomic to the carrier, he might tend to avoid carrying lime, and. confusion and delay would result: (3) Lime should be deleted from the Road Transport Price Schedule to allow Cartage to be undertaken by Carriers under Arrangement with the Farmer. —The opinion was expressed that by obtaining competitive prices the farmer would get his lime carted at a lower figure than Schedule rates : (4) Heavy-traffic Fees on Farmers' Trucks should be waived or reduced.— The whole question of heavy-traffic fees on farmers' trucks is at present under consideration by a departmental Committee. While it may not come within the scope of the Committee's inquiry, perhaps it would not be out of place to sound a note of warning with regard to the use by farmers of their own trucks. Some farmers feel that by purchasing trucks they are keeping their cartage costs down to an absolute minimum in that the amount expended would more than favourably compare with the amount they would pay under Road Transport Schedule rates. In many cases the farmer in assessing his figures does not bring depreciation on the truck into account, and no comparison should be made without allowing for this important factor in costing. One aspect advanced by transport interests was that every mile the farmer covered in transporting goods in his own truck reduced the average mileage of the carriers.

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The official figures for the Dominion for the year 1937-38 showed that the average mileage travelled by each vehicle in the transport industry was 14,209. In order to achieve an economic spread of costs, this mileage should be increased to 20,000 per annum. On the other hand, farmers complained that in many instances they were compelled to purchase their own trucks because of the high rates charged by local carriers. No comment on transport by road would be complete without stating the position from the point of view of the operators. The cartage of lime is one of the most difficult jobs undertaken by carriers, due chiefly to the unwieldy method of bagging at present in practice. It is also stated that lime is seldom true to weight and is frequently 5 per cent, to 10 per cent, above the declared weight. As the cartage is based on this declared weight, the affect is that the transport industry is in some cases giving a substantial bonus on this class of work. The peak period affects the transport companies by creating seasonal conditions that do not make for an even spread of overhead. The result is that many lorries are out of commission for a considerable part of the year. If the period of maximum demand could be spread, then costs might reasonably be expected to be reduced. It is understood that cartage rates on lime have now been fixed for the greater part of New Zealand. The fixing of a standard rate for the whole of the Dominion, or in the event of that being impracticable, then the fixing of rates in all districts where agreements are not yet in operation, would appear desirable as a means of assisting in the administration of any scheme of road transport subsidy. 6. STANDARDS AND CONTROL. QUALITY OF AGRICULTURAL LIME. The quality of agricultural lime sold throughout the Dominion shows a considerable degree of variation. Selling-prices, however, do not vary according to quality, for in actual fact these two features are in no way related. The subject under discussion can be more easily clarified if viewed under four main headings : — (a) Chemical composition : (b) Hard and soft stone : (c) Moisture content: (d) Fineness of grinding. (a) Chemical Composition.— The carbonate content of agricultural lime varies to a considerable degree throughout the country, the variation being due to the dissimilar qualities of the quarried stone and to other factors such as the geological origin of the deposit. Analyses taken show that the percentage of calcium carbonate ranges from as low as 63 per cent, to as high as 98 per cent. This variation is accentuated by the fact that even at a single works the carbonate content of the finished product is rarely constant from day to day. This may be caused by a variation of the quality of the stone in different strata of the quarry or by the fact that stripping is not always efficiently controlled. In this connection it should be mentioned that variation in the quality of the product could to a certain extent be controlled by having the stone tested regularly and poor-quality stone discarded or avoided. The analysis of the lime is a vital factor as far as the farmer is concerned, as the balance of the product which does not consist of calcium carbonate is chiefly silica or other mineral of no known value as a soil-dressing. It has already been mentioned that the price of lime does not vary according to the carbonate content; in fact, it is found that the lower grades of lime are often sold at the higher prices. This is a point of contention among farmers, and even among the lime companies themselves. It has been suggested that prices should be controlled and fixed according to quality, the higher the carbonate content the higher the price. The Committee considers that such a system would prove impracticable in operation. For instance, in certain districts where high-grade lime is produced the price is low, and any effort to raise the price would meet with strenuous opposition from the farmers. Then again, in some districts only low-grade deposits occur. If the price were reduced, the effect would probably be that these companies would be forced out of production and farmers in these districts would have to go further afield for their lime, resulting either in more money having to be paid by way of subsidy or the farmer having to pay excessive railage. The present position is not satisfactory, as the farmer is not always aware of the quality of the product he is buying. It has been suggested that a certificate of analysis be supplied with each invoice so that the farmer may be fully aware of what he is buying. This should provide a sufficient safeguard to the buyer, and beyond this precaution it is doubtful if any further steps can be recommended. (b) Hard and Soft Stone. —One physical dissimilarity of limestone is the hardness or softness of the various stones. It is contended that a soft stone weathers quickly and is more easily available in the soil than a hard stone. For these reasons also it is contended that soft stone need not be ground as finely as hard stone. Unfortunately, at the moment experiments with soft and hard limestones are not sufficiently advanced to arrive at any satisfactory conclusions on the subject. It may be mentioned that a considerable number of the low-grade limestones are of the soft variety. (c) Moisture Content. —Since lime is purchased by weight it is essential that as much moisture as possible should be eliminated from the finished product before sale to the consumer. Again, if the lime is not dry it does not flow freely through the top-dresser, involving the farmer in unnecessary and costly delays. Water does not penetrate the harder stone to the extent that it does the softer stone, so that some companies are in the fortunate position of not having to dry the stone by mechanical means, and a saving in cost results.

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Unfortunately, all companies do not enjoy this advantage. Drying, a costly process, has to be undertaken, and this naturally results in an increased price to the farmer. Some companies whose product needs drying have not provided for this contingency when constructing their plant, with the result that in wet weather production has to cease and orders cannot be fulfilled. In the peak periods such a position is serious, and it is recommended that, despite the extra cost, provision should be made by those companies for drying-plant to be installed where necessary. (d) Fineness of Grinding.- There is a divergence of opinion as to the degree of fineness to which limestone should be ground. On the one hand it is contended that coarsely ground lime is easier to sow and does not leach to the same extent as a finely-ground product. On the other hand, it is stated that finely-ground lime is more quickly available in the soil. Unfortunately, again, experiments with finely and coarsely ground limestones are not sufficiently advanced to comment on these points, but it is agreed that a small percentage of coarsely-ground lime does make for easier running through the topdresser. There is no regular standard of grinding throughout the Dominion, the variation in many cases being considerable. It has been suggested that some standard of fineness of grinding sufficient to meet the average farmer's requirements should be enforced, and this request appears reasonable. It should be borne in mind, however, that to secure an extra degree of fineness, involves a considerable increase in production costs. General. To sum up the requests for adjustment or regulation under these headings, the Committee is of opinion : — (a) That any variation of price according to quality is not possible under present conditions : (b) That a certificate as to the carbonate content of the lime should be issued with each invoice : (c) That some reasonable standard of fineness of grinding should be insisted upon : (d) That moisture content should be controlled. THE ORGANIZATION OF THE AGRICULTURAL LIME INDUSTRY. The only regulations in any way affecting a measure of control over the industry are those operating in respect of the granting of the free railage subsidy. Before a company can be granted the privilege of railing lime free of charge to bona fide farmers it must obtain, through the Railways Department, the consent of the Department of Agriculture, which, before giving same, is to be satisfied that the establishment of the works is warranted, that the price charged is reasonable, and that the quality of the lime is satisfactory. Any increase in price thereafter is also subject to the approval of the Department of Agriculture. The regulations affect companies desiring the free railage privilege, so that no control whatever was placed on producers situated at a distance from rail. These regulations have not proved entirely effective in checking the establishment of superfluous units, especially where the Department was confronted with a fait accompli —that is, where a company had gone to considerable expense erecting works without first obtaining permission to be granted the concession. The upshot has been the springing-up of mushroom companies all over the country, even in districts where an efficient service was being rendered by existing works. This has resulted in uneconomic competition, price-cutting in the first instance, then, in certain districts, as finances were depleted, organized efforts to have the price of lime raised to the consumer. This would have resulted in many companies going into liquidation had it not been for the remarkable increase in demand. The position to-day is that there are in certain districts companies which may be superfluous to the industry and which, by gaining a measure of business, are preventing the industry generally from operating at capacity production. This position must be faced, and it is apparent that no new works should be allowed to commence operations without a full investigation into all the surrounding circumstances. There are several methods by which control can be effected : — (a) Departmental control such as is operating at present in connection with the free railage subsidy: (b) Licensing—either (a) under the Industrial Efficiency Act, or (b) under separate legislation covering lime-production. Under this system every company in the Dominion would be required to apply for a license to produce and sell agricultural lime. The issuing of the license would naturally be subject to compliance with certain conditions, of which the principal would be— (i) That the lime produced be of an approved standard of quality both in regard to analysis and fineness of grinding ; (ii) That the price to the consumer be reasonable ; (iii) That existing lime-producing companies be not prejudicially affected by the establishment of new units, always providing for fair competition. 7. SUNDRY. MOBILE PLANTS-COMMUNITY PLANTS. By reason of the present free railage subsidy on agricultural lime the tendency has been for lime companies to commence operations only on deposits situated within easy reach of the rail. As a consequence, back-country districts have suffered, either by having to pay heavy road transport costs on the lime or, because of the uneconomic cost, by doing without lime altogether.

14

H. —29b.

From the evidence gathered throughout the Dominion the Committee has been impressed with the necessity of assisting the back-country farmer, by providing for some subsidy on road transport costs of lime and, in some cases, by assistance to ware] s the establishment of new producing units located in isolated districts. The question of direct assistance will be dealt with elsewhere, but in the event of 110 direct assistance being forthcoming, the alternative of indirect assistance can be discussed. Ample evidence has been forthcoming that many back-country districts are badly in need of lime and that a considerable area of once fertile pasture is deteriorating into secondary growth. This position is unfortunate even if only considered from the angle that in a great number of these districts lime deposits are available but are not being utilized. Various suggestions have been advanced to make lime available from such deposits, and the methods can bo considered under the following headings : — (a) Use of Mobile Plants. —In certain districts a series of lime deposits may be available, situated at strategic points from the point of view of road haulage. It has been suggested that more than one deposit be opened up and that mobile lime-crushing plants be used, working each deposit until the nearby demand is satisfied and then moving on to cover a further section of the district. A drawback to thh scheme is that all sections of the district may want their respective quarries operated at the one time. On the question of organization alternative suggestions have been as follows: — (i) The Government should set up the plants and operate them to the best advantage : (ii) Local rating bodies should assume the responsibility. The problem of lime-supplies may be considered a national one, but it is also a local one, and in this instance local bodies could probably work such deposits to far greater advantage than any other organization. Most rating bodies have power under the Counties Act to produce and sell lime. Technical advice is available, and experienced men on the county stafE could be diverted to this work as required. (b) Use of Small Community Plants. —In certain districts at the present time groups of farmers have co-operated in the purchase of small lime-crushing plants and work these on a community basis. Where supplies of the finished product are not readily available owing to high transport costs this system has proved of considerable value to outlying districts. COMPANY PROMOTION AS RELATING TO LIME-PRODUCING COMPANIES. The Committee has given consideration to the important question of the flotation of new companies to operate lime-works. Of the eighty-three lime-works operating to-day, forty-three are public or private limitedliability companies. It will be seen that to date company-promotion has played a prominent part in the history of the utilization of limestone, and will presumably continue to play its part in the future. The Committee has received certain evidence of a rather disquieting nature regarding methods of promotion and share salesmanship. It is not proposed to discuss the pros and cons of these statements, but it is desired to sound a note of warning on the subject. Numerous companies have been promoted without full cognizance being taken of all surrounding factors relating to the industry. These comprise, among others : — (а) The accessibility and quality of the stone. Cases have been brought to the notice of the Committee where substantial expenditure has been incurred on buildings and plant without any systematic boring and testing of the limestone deposit: (б) The possibility of an economic output, taking into account especially the additional costs incurred by irregularity of demand : (c) Estimating the selling-price, having due regard to existing nearby competitors, in relation to the estimated costs of production : (d) Climatic conditions : (e) The possibility of erecting the works on the most economic basis, making use of all natural advantages and allowing for duplication of-plant and construction of drying and storing facilities : (/) The estimating with reasonable accuracy of the amount of capital required to enable the company to erect and operate the plant. It is evident that in the past companies have underestimated or miscalculated their requirements, and have involved themselves in difficulties both from a financial and a production point of view. It is the shareholder who suffers the consequences, and in most cases shareholders in the lime companies are farmers. While on the question of shares, a word of caution should be issued regarding extravagant statements made by share salesmen. While such statements are to be deprecated, it is the purchaser who is partly to blame through failure fully to investigate the statements before committing himself financially. As expert opinion is available, full use should be made of it wherever possible. In making these remarks the Committee is not addressing them to any specific company or companies or in the light of criticism. More so are the remarks to be taken as advice for future operations and for the future welfare of the industry.

15

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RESEARCH WORK. The Committee received a great deal of valuable information from officers of the Department of Agriculture, the Department of Scientific and Industrial Research, and from the Directors of Canterbury Agricultural College and Cawthron Institute, and wishes to place on record appreciation of the efforts being made to investigate some of the problems bearing on the value of agricultural lime to certain crops and to pastures. The Committee recommends that further research work be undertaken to elucidate many of the practical problems which confront farmers in deciding upon various questions concerning the use of lime. It is difficult to give detailed recommendations as to the scope which research work should cover, and it may be sufficient if an indication can be given of certain immediate problems of practical importance brought to the notice of the Committee. The Committee considers that work along the following lines should be undertaken at the earliest possible date : — (a) Research work bearing on the value of applications of lime to pasture as measured by weight increase of live-stock : (b) Investigations dealing with the relationship of the use of lime to the health of stock : (c) Further experimental work to enable accurate comparison between : —■ (i) Hard and soft limestones; (ii) Rock-lime and shell-lime ; (iii) Finely-ground lime and coarsely-ground lime ; (iv) Burnt lime and carbonate of lime : (d) Experimental work comparing the value of lime applied at different times of the year. (e) Fundamental research into the problems of phosphate fixation on particular soil types, covering the question also of the quantity of lime per acre which should be recommended on such soils and the best time of application. (/) Further investigation into the question of the use of lime in the control of weeds. 8. GOVERNMENT ASSISTANCE. SCHEMES FOR SUBSIDIZING ALTERNATIVE TO THE FREE RAILAGE SUBSIDY AT PRESENT OPERATING. The terms of the free railage subsidy have already been touched upon in several paragraphs of the report. Before discussing alternative schemes it may be as well to note representations made to the Committee that the present system does not appear to be equitable in that it benefits one section of the farming community only —namely, those to whom rail transport is available. In order to be as brief as possible and to avoid repeating what already appears in other paragraphs of the report the Committee considers that any system of subsidy to be recommended should be one which is equitable, giving assistance to all members of the farming community, but which would preserve the natural ratio of landed cost on the farm between those farmers farming high-priced, favourably-situated land and those farming low-priced and unfavourably-situated land. Several schemes have received the full consideration of the Committee, and these will be briefly reviewed hereunder: — (1) Present System of Free Railage Subsidy zoned, with the addition of a subsidy on transport charges other than rail. The drawbacks to zoning have already been amplified in discussing the question of overlapping of railage, and no further comment is necessary. However, even if zoning were practicable, it would still leave a scheme to be brought in to cover a subsidy on other transport charges. This would involve the administration of two separate aspects of the scheme which would prove extremely cumbersome. (2) A Scheme involving the Payment of a Flat Rate of Subsidy to the Producer. —Under this scheme a flat rate of, say, 6s. per ton would be paid to the lime companies, who would reduce their price to the consumer by a corresponding amount. The consumer would thereafter pay all transport charges whatsoever. The scheme has advantages in that —- (a) It would be simple to operate and administer : (b) The extent of payments under the scheme could be easily and reliably estimated : (c) By eliminating free railage it would eliminate the present overlapping of subsidized railage. Disadvantages would be — (a) It would be inequitable in that it would not proportionately relieve the farmer with the greater transport costs : (b) It would represent too revolutionary a change compared with existing conditions : (c) It would discourage the use of lime by farmers situated a long way from lime-works. (3) A Scheme for Centralized Marketing. —This scheme would involve the setting-up of one or more Central Marketing Organizations whose main functions would be — (a) To receive all orders for lime and to allot these to the nearest works able to supply in proportion approximately to their present outputs : (b) To distribute or control any subsidy payable by the Government.

16

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The advantages of such a system appear to be outweighed by the disadvantages, of which the following are noteworthy: — (a) The system would be difficult to control on account of the latge number of comparatively small operators : (b) It would involve extra cost by way of administration, could not cover local orders, and would create difficulties with regard to bags : (c) The system would control unnecessary overlapping in railage, but a separate scheme of subsidy would be necessary for road transport: (d) The farmer would have no right of selection and the existing relations between purchaser and supplier would be disrupted. (4 ) A Scheme of Subsidy based on allowing to the Farmer a Rebate of a Percentage of the Total Cost of the Lime landed on the Farm. —The scheme would follow much the same lines as the Land Fertility Scheme of Great Britain. The benefits of this system would be —■ (a) It would cover subsidies on transport both by rail and by road: (b) It would benefit the back-country farmer and stimulate the use of lime in such districts : (c) It would zone automatically by reason of the fact that as the farmer would be paying the greater proportion of his transport charges he would consider cost of transport before buying from any but the nearest works : (d) It is anticipated that the operation of automatic zoning would be somewhat gradual : (e) The system would operate in an equitable manner to the farmer, all of them participating, and it woidd preserve in all respects the ratio of landed cost on the farm which would exist if no subsidy were paid. The chief disadvantages are — (a) It would be somewhat difficult to administer, but the system itself would contain several automatic checks on the correctness of the claims to be made: (b) The farmer's choice would be restricted unless he were prepared to pay his percentage of the extra transport charges. In this respect it would be noted that even if overlapping were to continue to a degree the cost of unnecessary railage to the taxpayer would largely be eliminated : (c) The farmer or merchant would in the first place have to finance rail, freight, and cartage costs: (d) By reducing the effective margins between the low-cost and high-cost units it would proportionately decrease the existing incentive to produce at the most efficient level: (e) It would tend to create monopolies : (/) By reason of its zoning effect it would tend to increase the output of certain works and decrease the output of others, thus creating a measure of disruption : (g) It would be necessary to pay a different rate of subsidy on burnt lime compared to that paid on carbonate, and the position would be further complicated by the sale, as at present, in certain districts of mixtures of burnt and carbonate. (5) Freight Subsidy Scheme : A Scheme of Subsidy based on rebating to the Farmer a Proportionate Amount of his Transport Costs. —The scheme involves abolishing the present inequitable distribution of the 100 mile free railage subsidy and replacing it by a subsidy on all transport costs. To avoid raising the price of lime to the average farmer it would be necessary to pay a subsidy of 75 per cent of rail freights and of 60 per cent of road freights. The advantages of the scheme are —- (a) It introduces zoning which is not too drastic and will not cause too much disorganization in the industry, some units of which, although not geographically nearest the source of greatest demand, are on the best deposits. If after trial its zoning effect is found to be inadequate, the position can be easily reviewed: (b) In so far as it includes a subsidy on road transport, it recognizes the position of the farmer who depends on road transport and has not been catered for in the past except when he also used rail transport: (c) It helps to a very great extent the farmer who has so far not been able to use lime at all on account of the high cost of road transport: (d) It ensures the cheapest production and therefore selling-price through maintaining the maximum incentive to produce cheaply : (e) Administration does not present any very great difficulties : (/) Minimum finance to be found by the farmer or his merchant and minimum inconvenience to the farmer : (g) The tendency to create monopolies over wide areas would be very slight compared with any scheme of definite zoning : (h) It will have the effect of reducing to the minimum very short rail hauls which are at present uneconomic. Disadvantages are — (а) It is not equitable in that it does not make provision for extra assistance to the farmer compelled to purchase high-priced lime : (б) In so far as the rate of subsidy is high, if in the future it is necessary to economize on the lime subsidy the percentage of reduction to bring about any reasonable saving may appear harsh to certain sections of the farming community.

3—H. 29b.

17

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9. RECOMMENDATIONS. In dealing with the numerous aspects of the industry under the various subheadings set out in the body of the report the Committee has endeavoured to discuss as briefly as possible (a) The position of the industry and the farmer as it appears to-day : (b) The main suggestions for correcting existing anomalies or overcoming difficulties. At the same time advice has been offered on several points which cannot be dealt with in the recommendations. The Committee feels that it has covered a wide field in its investigations, and in doing so has given due consideration to all representations made by interested parties. Districts and works which were not visited and where representatives had not the opportunity of tendering evidence duly came into consideration before any final decision was made. The diversified conditions under which the industry labours rendered the task of the Committee, from the outset, a difficult one. If it had been possible to generalize to any degree, the Committee feels that some reorganization within the industry would have been possible and would have been reflected in better conditions both within and outside of the industry. Under the circumstances the Committee's hands have been somewhat tied. Despite these adverse factors, a series of important decisions have been formulated which will be fully detailed in the recommendations to the Minister set out hereunder. The Committee is of the opinion that if these recommendations arc adopted the changed conditions following their beitig brought into operation will be of the greatest benefit :■----- (a) To the Dominion from the point of view of both national production and prevention of deterioration of land : (b) To the farming community as a whole : (c) To the agricultural-lime-producing companies. Recommendations follow in detail: — (1) As to the most efficient and equitable manner in which Government assistance should be given to the production and consumption of agricultural lime. The Committee is of the opinion that the present system of subsidy by way of free railage on agricultural lime is inequitable in that it benefits only one section of the farming community, also that it is uneconomic in its present form in its encouragement of overlapping in railage. To correct the first anomaly the Committee considers that a subsidy should also be paid covering a proportion of the cost of transport other than by rail. After due consideration was given to all possible alternatives, the Committee is of the opinion that the most efficient and equitable manner in which Government assistance should be directed would be by the granting of a subsidy on transport costs only. The percentage of subsidy recommended by the Committee is 75 per cent, on rail transport and 60 per cent, on other methods of transport. It is estimated that the cost of the scheme to the Consolidated Fund will, in the first year, amount to £170,000 based on an output of 500,000 tons. This figure may be expected to increase in subsequent years due to the stimulating effect the subsidy is expected to have on the demand for agricultural lime. A tabulated statement is appended showing how the cost of agricultural lime landed at the farm gate under the suggested plan compares with the cost under the present system of free railage. A precis of the principal conditions of the suggested scheme is given in Appendix A. Examples or the Cost per Ton of Lime under the Nevy Scheme of Subsidy as compared with Present Costs. Take 14s. as the cost of lime per ton. Railage figures actual. Transport figures based on No. 4 Transport District Schedule rates.

(a) Where Rail Transport only is used.

(b) Where Road Transport only is used.

18

Miles. 10. 20. 30. 40. 50. 60. 80. 100. 120. s. d. s. d. s. d. s. d. a. d. s. d. s. d. s. d. s. d. Railage oosts .. .. 26 3 10 53 60 68 7 4 8 10 10 2118 Total coats .. .. 16 6 17 10 19 3 20 0 20 8 21 4 22 10 24 2 25 8 Cost under old schemo .. 14 0 14 0 14 0 14 0 14 0 14 0 14 0 14 0 17 10 Cost under now scheme .. 14 8 15 0 15 4 15 6 15 8 15 10 16 3 16 7 16 11

Miles. 5. 10. 15. 20. 25. 80. a. (I. s. d. s. d. s. d. s. d. a. d. Cartage oostg . i .. .. 5 0 8 4 12 0 15 0 17 6 20 0 Total costs .. .. 19 0 22 4 26 0 29 0 31 6 34 0 Cost under old scheme .. .. 19 0 22 4 26 0 29 0 31 6 34 0 Cost under new scheme .. .. 16 0 17 4 18 10 20 0 21 0 22 0

H.—29b,

(c) Where both Rail and Road Transport are used.

(2) As to prices of agricultural lime. The Committee recommends that the prices of agricultural lime be controlled and that this should be effected by the introduction of a system of registration of lime-producing companies subject to approval by the Minister of the analysis and fineness of grinding as mentioned in (6) hereunder ; and that registration should be refused to lime-producing companies failing to comply with the terms under which their registration had originally been approved. (3) As to rents and royalties on agricultural lime. The Committee recommends that legislative control be instituted to ensure that in the future rents and royalties paid for the right to quarry agricultural lime are regulated within reasonable limits. If possible, provision should be made for the revising of existing contracts in cases where the charge is deemed excessive. (4) As to commission rates on agricultural lime. The Committee recommends that the maximum rate of commission on the sale of agricultural lime be fixed at 10 per cent, of the selling-price excluding the cost of bags. (5) As to charges for bags. The Committee recommends that a standard charge per ton of lime for usage of bags be fixed throughout the Dominion, and also that efforts be made to explore the possibilities of a cheap paper bag being produced within the country. (6) As to standards. The Committee recommends that it should be a condition of its license that each company publish on each and every invoice issued a statement as to the official analysis showing carbonate content of the lime sold. Also that it be a further condition of the said license that a standard of fineness of grinding be required. (7) As to company promotion. The Committee recommends that no prospective lime-producing company be allowed to issue a prospectus without first obtaining a license. (8) As to spreading the peak period. The Committee recommends — (a) That propaganda work be undertaken by the Fields Division of the Department of Agriculture and branches of the New Zealand Farmers' Union in an endeavour to spread the peak period : (ib) That representations be made to the road transport operators to freight lime on a reduced schedule of charges in other than peak periods : (c) That, where practicable, lime companies provide storage both for spawls and the finished product to allow for production and storage in the off season and continuity of running : (d) That companies institute a price differential with a view to encouraging the use of lime during the " off " months of the year. In making these recommendations the Committee wishes to emphasize the fact that it is the considered opinion of all members that the peak period difficulty is the main disrupting factor in the agricultural lime industry to-day and that any spread of deliveries that can be effected will make for — (a) Greater stability; (b) Less congestion: (c) More permanent employment: (d) Reduced costs. In attaining the objects set out above the Committee earnestly appeals for the co-operation of the farming community. (9) As to mobile plants and community plants. The Committee recommends that, in back-country districts not well served by existing units, local bodies should co-operate with the farming community in an endeavour to establish lime-crushing plants. The use of farmers' community plants in certain districts is also deserving of encouragement. With regard to the initial cost of the plant, the

19

Road-miles. 5. 10. 16. 20. 25. 30. Railage. s d. s ci s d. s d. s. d. s. d. Cost under old scheme: 10 miles .. 19 0 22 4 26 0 29 0 31 6 34 0 Cost under new scheme: 10 miles .. .. 16 8 18 0 19 0 20 8 21 8 22 8 Cost under old scheme: 20 miles . . .. 19 0 22 4 26 0 29 0 31 6 34 0 Cost under new scheme: 20 miles .. 17 0 18 4 19 10 21 0 22 0 23 0 Cost under old scheme: 30 miles •. .. 19 0 22 4 26 0 29 0 31 6 34 0 Cost under new scheme: 30 miles . . .. 17 4 18 8 20 2 2J 4 22 4 23 4 Cost under old scheme: 40 miles . . .. 19 0 22 4 26 0 29 0 31 6 34 0 Cost under new scheme: 40 miles .. .. 17 6 18 10 20 4 21 6 22 6 23 6 Cost under old scheme: 50 miles .. .. 19 0 22 4 26 0 29 0 31 6 34 0 Cost under new scheme: 50 miles . • • • 17 8 19 0 20 6 21 8 22 8 23 8 Cost under old scheme: 60 miles . . -. 19 0 22 4 26 0 29 0 31 6 34 0 Cost under new scheme: 60 miles .. .. 17 10 19 2 20 8 21 10 22 10 23 10 Cost under old scheme: 80 miles .. .. 19 0 22 4 26 0 29 0 31 6 34 0 Cost under new scheme: 80 miles .. .. 18 3 19 7 21 1 22 3 23 3 24 3 Cost under old scheme: 100 miles . . . . 19 0 22 4 26 0 29 0 31 6 34 0 Cost under new scheme: 100 miles .. .. 18 7 19 11 21 5 22 7 23 7 24 7 Cost under old scheme: 120 miles .. .. 22 10 26 2 29 10 32 10 35 4 37 10 Cost under new scheme: 120 miles .. .. 18 11 20 3 21 9 22 11 23 11 24 11

H.—29b

Committee feels that the present time is not propitious for recommending Government assistance in this direction, but that provision should be made for assistance to be granted by way of a loan to be repaid by amortisation. (10) As to the opening-up of new quarries in certain approved cases. Except in certain districts which are at present poorly served, the Committee is of opinion that no new quarries should be opened up adjacent to or in districts easily served by existing units. Applications should be dealt with on their merits under any new regulations which come into force. (11) As to heavy license fees on farmers' trucks. A departmental Committee is at present inquiring into this position, and its report is expected at an early date. Subject to the note of warning sounded in its report, the Committee recommends that some measure of relief from heavy traffic license fees be considered to farmers using their own trucks. (12) As to Road Transport Schedule rates. The Committee has fully considered this subject and is convinced that any departure from a fixed schedule of charges would be a retrograde step, and recommends accordingly. (13) As to Legislative control. The Committee recommends that the industry should be controlled by legislation and that the Minister take appropriate steps to have this put into operation. The Committee further recommends that an Advisory Committee, consisting of one representative of the farming community, one representative of the lime-manufacturers, one representative of the employees, one officer of the Department of Agriculture, and one officer of the Department of Industries and Commerce, should be appointed to advise the Government in regard to necessary alterations which may present themselves from time to time in the operation of the transport subsidy recommended in (1) above, to exercise control over the prices of agricultural lime, and to deal with all matters in connection with the registration of lime-manufacturers and other matters pertaining to this industry. A precis of the principal clauses of proposed legislation is given in Appendix B. G. A. Holmes, Chairman. Jno. Barron. J. J. Scott. P. W. L. Milne* W. Horrobin. 9A. MEMORANDUM OF DISSENT. I agree with all the recommendations of the Committee as enumerated in its report with the exception of No. 1, being that relating to the most efficient and equitable manner in which Government assistance should be given to the production and consumption of agricultural lime. I have abstained from signing the report for the reason that the scheme recommended and providing for payment by way of subsidy on transport charges only is neither equitable nor will it overcome, in my opinion, those deficiencies in the existing system which are of chief moment to the Government. There can be no question but that the granting of 100 miles free railage forty-one years ago has had a very marked influence on the increased usage of lime for agricultural purposes. It must, however, be remembered that at the close of the nineteenth century there were neither the efficient road vehicles we now have, nor, in fact, the roads on which to use modern transport. With the ever widening of the area of land used for agricultural and pastoral purposes made possible by these modern means of transport any subsidy based purely on rail transport confers the major benefit on those in close proximity to rail. Thus the entire community, per medium of the Consolidated Fund, is asked to subsidize one section only of the farming community. During the last few years there has been a considerable increase in the number of lime-producing units, and this growth, dependent as it is on the free railage concession has led to what might almost be termed a chaotic state in the industry. Lack of adequate output per unit decreases efficiency, while distant farmer shareholders, good salesmanship, personal bias, and other factors have all tended to bring about a considerable amount of uneconomic haulage. This overlapping is a very serious and real problem, and, while a certain amount is unavoidable, due perhaps to the inability of the nearest works to supply at peak demand periods, much of it is preventable. From railway freight statistics, relating to the fiscal year 1938-39 I have worked out the overlap as 11,170,856 ton-miles. This figure takes account of " officered stations " only, but is, I think for all practical purposes, " near enough." If we take as an average freight charge nine-tenths of a penny per ton-mile which is the added rate per ton as between 60 miles and 70 miles we find that the additional cost to the State for this uneconomic haulage is £42,000. This is equivalent to 35 per cent, of tho total subsidy paid, which in the year under discussion was £120,000. Much of this excess freight charge cannot be avoided for reasons given above, but if we assess the unnecessary haulage at 50 per cent, of this figure we have £21,000, which represents wasteful expenditure. Another pertinent fact is the tying-up of railway-trucks, and here we find that this uneconomic haulage of upwards of 11,000,000 ton-miles is responsible for tying up 17,000 trucks for varying periods over the twelve months. That the Government recognizes that improvement might be effected'is indicated in the order of reference, which reads, inter alia: — " To recommend more efficient methods of distribution and marketing of lime. "To investigate and report on the most efficient and equitable manner in which Government assistance should be directed so that bona fide farmers may receive the maximum benefit therefrom."

* I agree that the recommendations of the Committee will introduce a degree of automatic zoning with a minimum interference with existing conditions. Should any reduction in the percentage of subsidy either on the rail or by road be considered, however, I would favour the adoption of a scheme of subsidy based on tho cost of lime landed at the farmer s gate as adopted by tho Land Fertility Schome now oporating in England. With reference to the proposed advisory oommittee, it would be preferable to limit the membership to, say, threo. If a larger council is appointed the manufacturing interests should be reasonably represented.—P. W. L. Milne.

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In ray opinion, the scheme put forward by the Committee does not provide the most suitable means of meeting the position. Any rate of subsidy based on transport costs only must be comparatively high to afford the farmer adequate assistance, and consequently the Committee has recommended 75 per cent, subsidy on rail transport and 60 per cent, subsidy on road haulage costs. A subsidy of 75 per cent, on rail transport will mean that the farmer pays only 25 per cent, of railhaulage costs, and this, in my opinion, will be insufficient inducement to purchase from the nearest works—rail transport is comparatively cheap. It should be noted that, in so far as overlapping is not overcome, the State bears 75 per cent, of the cost. The scheme does not provide for equitable treatment in that the farmer forced to purchase highpriced lime is placed in a relatively less advantageous position than those more favourably situated. It is desirable in making grants by way of subsidy to treat all sections in the same manner, and thus preserve an equitable distribution of the subsidy. This is not done by the existing system, nor will it be accomplished if a subsidy based on freight charges only is adopted. I feel that a subsidy based on the Land Fertility Scheme of Great Britain, which provides for a percentage rebate to the farmer on the cost of the lime delivered at the farm gate, would best meet the needs of New Zealand. The percentage rebate could be readily adjusted to meet changing conditions and would not favour any section of the farming community. Thus at the present juncture, when it is imperative that production should be increased to the utmost, a subsidy in the vicinity of 30 per cent, could be made applicable. If this were done practically no farmer would be asked to pay more for his lime than he is paying at present. The fact that he himself pays 70 per cent, of rail transport costs would ensure that the overlapping would be reduced to a minimum. Encouragement to use lime would be given to farmers some distance by road from rail or works. Assistance would be given to lime-manufacturing companies in that those best placed to meet the local demand would receive larger orders and should thus be enabled to produce more efficiently. Over a period it may be that certain minor units would be displaced. It has been argued that such a scheme would create monopolies, but I feel that this is an overstatement in that in such an essential industry as lime-production a greater measure of control should be exercised than is done at present. We would admittedly have a tendency towards monopoly, but it would be a controlled monopoly. Furthermore, the farmer would not be precluded from obtaining lime wherever he chose, provided he was willing to pay his share of the cost of transport. In the disadvantages set out under the Land Fertility Scheme in the report it is stated in (b) " that the farmer's choice would be restricted unless he were prepared to pay his percentage of the extra transport charges " and (/) " by reason of its zoning effect it would tend to increase the output of certain works and decrease the output of others." I cannot but feel that these are advantages in favour of an adaptation of the Land Fertility Scheme— in the first instance overlapping is reduced to a minimum, and in the second case the building-up of a greater output should ensure increased efficiency and a possible reduction in price. I estimate the cost to the State of such a scheme, based on 30 per cent, subsidy and a usage of 500,000 tons, at £175,000 to £200,000 in the first year. If this figure is considered to be too high, then some considerable saving could be effected if the subsidy were such that in no case did it reduce the farmers' total cost to a figure below the cost of lime ex works. Wellington, 25th October, 1939. N. E. Dalmer. 98. ACKNOWLEDGMENTS. In conclusion, the Committee would like to thank all those persons who tendered evidence on their own behalf or on behalf of various organizations for the helpful manner in which their representations and suggestions were made, and also for the free manner in which any further information required, confidential or otherwise, wa,s made available to the Committee. Thanks are also due to the lime-producing companies for the prompt and able maimer in which statistical and costing data were forthcoming. The able assistance extended by officers of the various branches of the Department of Agriculture in districts visited by the Committee was greatly appreciated. The Committee gratefully acknowledges and appreciates the manner in which expert and technical evidence was made available. Thanks are due to :■ — (1) The Cawthron Institute, Nelson : (2) The Canterbury Agricultural College : (3) The Crop Experimentalist, Department of Agriculture : (4) The Inspector of Fertilizers, Department of Agriculture : (5) The Director and other officers of the Fields Division, Department of Agriculture : (6) The Soil Survey and Geological Survey Divisions of the Department of Scientific and Industrial Research : (7) The New Zealand Railways Department: (8) The Commissioner of Transport: (9) The New Zealand Road Alliance : (10) The Lands and Survey Department: (11) The Animal Research Division, Department of Agriculture. This chapter would not be complete without some reference to the ground work done by Messrs. L. C. Scott, of the Department of Agriculture, and N. E. Dalmer, of the Department of Industries and Commerce, in their compilation of the preliminary report on the agricultural lime industry, upon which report this investigation was based. The report gave the Committee a clear background on which to commence operations. The Committee wishes to record its indebtedness to Mr. L. Vogtherr, Secretary, and to Mr. L. M. Wilson, Stenographer, for their valuable and painstaking work in attending to records and all secretarial work in connection with the Committee's investigation.

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H.—29b

APPENDICES.

APPENDIX A. —LIME SUBSIDY SCHEME. Briefly, the scheme would provide — (1) For payment of a subsidy to bona fide farmers on the cost of rail, road, and sea transport. (2) That, for the purposes of this scheme, charges for railway tarpaulins and demurrage shall be payable in full by the farmer as at present. (3) That where a farmer uses his own truck to cart lime the subsidy will be paid at rates based on the Road Transport Schedule rates for the district. (4) That the minimum quantity of lime on which subsidy will be paid is 6 tons. (5) That for the purposes of implementing this scheme, certain measures of control would be necessary, which will be dealt with under the precis of proposed Legislation (Appendix B).

APPENDIX B.—PRECIS OF PRINCIPAL CLAUSES OF PROPOSED LEGISLATION. Legislation would provide for— (1) The registration of all lime-producers. (2) The implementing of the scheme of subsidy involving— (а) Provision for the subsidy : (б) Provision for setting up Advisory Committee (which would meet at infrequent intervals) and would advise the Minister on matters of policy : (c) Provision for existing Government Department to administer the scheme : (id) Provision for the Minister to make regulations covering— (1) Administration ; (2) Method of payment of subsidy ; (3) Standards of quality ; (4) Control of prices, commission, and royalties ; (5) Fixing of subsidy rates where farmer uses his own transport; (6) Any other matters incidental to the successful carrying-out of the scheme. (3) Some form of control on company-promotion to ensure that no prospectus is issued before a license to operate is obtained. (4) Assistance by way of loans to purchase the necessary plant being made in necessitous cases to encourage the use of mobile or community plants. (5) Provision for statistical and costing returns to be made periodically by each company.

APPENDIX C.—GRAPH ILLUSTRATING THE SEASONAL DEMAND FOR AGRICULTURAL LIME. [Not printed.] APPENDIX D.—GRAPH ILLUSTRATING GROWTH IN DEMAND FOR AGRICULTURAL LIME. [Not printed. ] APPENDIX E.—GRAPH ILLUSTRATING WEIGHTED AVERAGE OF PRICES OF AGRICULTURAL LIME. [Not printed.'] APPENDIX F.—GRAPH ILLUSTRATING RANGE OF COSTS OF PRODUCTION IN EACH TONNAGE GRADE. [Not printed.']

22

H.—208,

APPENDIX G.—EMPLOYMENT DATA.

APPENDIX H.—STORAGE CAPACITY FOR FINISHED PRODUCT (TONS).

APPENDIX I.—TABULATED SUMMARIZED STATEMENT OF EACH COMPANY'S COSTS DETAILED THROUGH THE VARIOUS STAGES OF PRODUCTION. [Not printed.'] APPENDIX J. —TABULATED SUMMARIZED STATEMENT OF EACH COMPANY'S ASSETS AND LIABILITIES. [Not printed.]

23

Number of Employees. Wages and Number . Salaries paid, employed if District. including Maximum OutCasual. Permanent. Contractors. put attained. £ Southland . ■ • • 149 103 43,745 304 South Otago .. .. 41 62 17,467 111 North Otago .. .. .. 6 58 6,910 80 South Canterbury .. .. 28 27 10,673 85 North Canterbury .. .. .. 34 25 6,389 59 Marlborough .. .. ■ ■ 7 6 979 14 Nelson .. .. .. .. 14 17 3,466 38 West Coast .. .. .. •• 10 7 1,994 19 Wairarapa-Manawatu .. .. .. 4 25 6,339 29 Hawke's Bay - Poverty Bay - East Coast .. 32 35 8,484 64 Thames-Coromandel .. .. .. 15 22 10,096 34 North Auckland .. .. .. 43 19 9,297 64 Auckland .. .. .. .. 18 6 3,521 32 Waikato - King-country .. .. .. 37 63 25,617 110 Taranaki-Wanganui .. .. .. 28 16 11,922 50 South Island totals .. .. 289 305 91,623 710 North Island totals .. .. 177 186 75,276 383 Grand totals .. .. .. 466 491 166,899 1,093

At Works. Elsewhere. Total. District. Bulk. Bag. Bulk. Bag. Bulk Bag. Southland .. .. .. 9,000 .. 1,000 .. 10,000 South Otago .. .. .. 1,133 350 .. .. 1,133 350 North Otago .. .. .. 350 100 .. .. 350 100 South Canterbury .. .. 700 200 .. .. 700 200 North Canterbury .. .. 175 405 400 150 575 555 Marlborough .. .. .. • • 100 .. 50 i. 150 Nelson .. .. .. .. 20 860 .. 270 20 1,130 West Coast .. .. .. 400 40 .. .. 400 40 Wairarapa-Manawatu .. .. 2,090 10 .. 2,090 10 Hawke's Bay - Poverty Bay-East 1,125 1,575 .. .. 1,125 1,575 Coast Thames-Coromandel .. .. 300 1,400 .. 500 300 1,900 Taranaki-Wanganui .. .. 115 15 .. 115 15 North Auckland .. .. .. 2,595 815 .. 125 2,595 940 Auckland .. .. .. 14 1,766 .. 510 14 2,276 Waikato - King-country .. .. 5,225 415 n 150 5,225 565 South Island totals .. .. 11,778 2,055 1,400 470 13,178 2,525 North Island totals .. .. 11,464 5,996 .. 1,285 11,464 7,281 Grand totals 23,242 8,051 1,400 1,755 24,642 9,806

H.—29b,

Price 9d. ] By Authority : E. V. Paul, Government Printer, Wellington.— 1941.

% Approximate Cost of Paper.—Preparation, not given : printing (845 copies), £37 103.

APPENDIX K.—TONNAGE DISTRIBUTION.

24

i Total Output. | Monthly Distribution of Output. Output distributed to Method of Distribution. : - j . Estimated District. I i II I I ' i I I :Farmers I ' : MaxiImIm Carbonate J Burnt. Jan. j Feb. March. ; April. May. June. July. Aug. Sept. Oct. Nov. Dec. Merchants Buyers B,ai1 ' Road. Boat. ; 0ut P ,lt - i I I' I I ! I I ' | *«• '1 * i n i ~~i i i ! i i Southland .. .. 134,377 7,150 3,928 ! 4,843 9,189 14,759 15,323 11,007 5,605 8,736 15,705 19,856 22,057 10,519 35,621 104,454 ; 1,452 119,193 22,334 .. 222,000 South Otago .. 50,441 8,603 2,256 1,635 3,743 4,977 6,152 4,659 2,411 4,264 6,507 7,381 9,144 5,915 11,780 44,699 2,565 58,472 572 .. 115,000 North Otago . 20,699 1,648 724 615 1,770 2,510 2,558 2,683 1,045 2,869 2,454 1,974 2,114 1,031 4,376 16,589 1,382 21,625 722 .. 80,000 South Canterbury .. £0.554 1,100 1,416 1,277 3,382 2,923 3,619 3,806 2,501 2,945 3,858 2,202 2,015 1,710 9,328 22,262 64 27,902 3,752 .. 81,000 North Canterbury . 18,973 .. 521 900 2,116 2,398 2,775 2,264 1,121 1,775 1,932 1,386 1,004 781 11,738 6,125 j 1,110 13,950 5,023 .. 65,500 Marlborough .. 1,865 ! 32 110 368 156 107 153 165 291 239 143 83 18 1,194 651 20 1,738 127 .. 15,000 Nelson .. .. 5,292 i 275 164 283 538 312 481 481 676 888 556 464 437 287 4,769 793 5 2,037 3,530 .. 17,150 West Coast .. 1.562 1,833 111 265 381 155 240 267 342 430 483 270 214 237 2,712 232 451 1,885 1,510 .. 13,800 Wairarapa-Manawatu.. 19,894 ! .. 1,465 2,085 3,192 2,656 3,200 2,384 853 625 653 927 1,100 754 6,404 13,190 300 18,490 1,404 .. 91,000 Hawke's Bay-Poverty 1 19,763 ! 3,054 634 2,541 4,451 3,376 3,177 2,705 1,519 1,185 1,013 1,084 666 466 1,217 21,274 326 20,189 2,378 250 53,500 Bay - East Coast I ■ Thames-Coromandei .. 19,264 j .. 2,325 2,854 4,082 1,913 1,845 1,998 1,038 700 762 612 516 619 9,354 9,910 .. 17,006 2,218 ; 40 40,000 North Auckland .. 20,669 1 .. 1,982 3,461 4,617 2,728 2,228 754 419 523 617 748 1,113 1,479 2,710 17,959 .. 12,774 7,845 50 55,300 Auckland . .. 9,287 .. 989 1,502 2,205 1,038 705 574 170 249 530 352 412 561 5,242 3,892 153 4,075 5,212 .. 20,750 Taranaki-Wanganui . 21,141 .. 237 715 2,642 2,856 4,483 2,656 2,230 1,232 949 1,143 1,367 631 5,241 13,156 2,744 21,101 40 .. 56,000 Waikato-King-country 74,773 860 5,568 9,877 14,260 9,880 9,572 4,737 3,597 3,805 3,736 3,253 3,197 4,151 6,090 61,102 8,441 72,089 3,544 j .. 149,000 South Island totals .. 263,763 20,609 9,152 9,928 21,487 28,190 31,255 25,320 13,866 22,198 31,734 33,676 37,068 20,498 81,518 195,805 1 7,049 i246, 802 37,570 .. 609,450 ; i North Island totals .. 184,791 3,914 13,200 23,035 35,449 24,447 25,210 15,808 9,826 8,319 8,260 8,119 8,371 8,661 36,258 140,483 11,964 165,724 22,641 340 465,550 Grand totals .. 448,554 24,523 22,352 32,963 56,936 52,637 56,465 41,128 23,692 30,517 39,994 41,795 45,439 29,159 117,776 |336,288 19,013 412,526 60,211 340 1,075,000

H.—3o,

CONTENTS.

(1) DAIRY-PRODUCE EXPORT DIVISION. Accounts — page Annual: Export Division .. .. .. ~ .. .. .. .. 35 Completion of Operations, 1937-38 Season .. .. .. .. .. 3 Summary, 1936-37 and 1937-38 Seasons .. .. .. .. .. 6 Advertising and Publicity .. .. .. .. .. .. • • .. 27 Consumption of Butter in relation to Margarine .. .. .. .. .. 17 Exports of Butter and Cheese — To all Destinations .. .. .. .. .. .. .. .. 10 To the United Kingdom .. .. .. .. .. .. .. .. 22 Freight Rates .. .. .. .. .. .. .. .. .. 27 Gradings of Butter and Cheese .. .. .. .. .. .. .. 9, 11 Guaranteed Prices, 1936-37 to 1939-40 .. .. .. .. .. .. 7 Imports into the United Kingdom .. .. .. .. .. 17, 20, 23, 41 Inspection of Shipping .. .. .. .. .. .. .. .. 26 London Prices .. .. .. .. ~ .. .. .. 14, 18, 45 Manufacturing-costs .. .. .. .. .. .. .. .. .. 32 Marketing in the United Kingdom .. .. .. .. .. .. .. 11 Marine Insurance .. .. .. ~ .. .. .. .. .. 27 Milk-production in the United Kingdom .. .. .. .. .. .. 20 Payouts by Dairy Companies .. .. .. .. .. .. .. .. 31 Premiums for Quality .. .. .. .. .. .. .. • • 8 Processed Milk .. .. .. .. .. .. .. • • 21 Production and Consumption of Butter in the United Kingdom .. .. .. .. 17 Quantities of Butter and Cheese purchased .. .. .. .. .. 8 Relation between Manufacture of Butter and Cheese .. .. .. .. 10 Sales to Markets other than the United Kingdom .. .. .. .. .. 21 Shipping .. .. .. .. .. .. .. ■. • • .. 22 Sources of Supply .. .. .. .. •. . • • • • • .. 16 Visit of Director to the United Kingdom .. .. .. .. .. .. 11 World Trade in Butter and Cheese .. .. .. .. .. .. .. 44 (2) INTERNAL MARKETING DIVISION. Accounts, Annual .. .. .. .. .. • • • • • • .. 60 Auckland Branch .. .. .. .. .. .. • • ■ • .. 59 Barley .. .. .. .. . • • • • • • • • • .. 55 Bobby Calf Pool Operations • .. .. .. .. .. • • • • .. 56 Dairy-produce .. .. .. .. . . • • • • • • .. 49 Eggs and Egg-pulp .. .. .. • • • • • • • • • ■ • • 52 Fruit 57 Honey .. .. .. . • • • • • ■ • • • • • .. 51 Hops .. .. .. .. . ■ • • • • • • • • .. 56 Kauri-gum .. .. .. .. .. • • • • • • • ■ .. 57 Maize .. .. .. .. .. • • • • • • • ■ .. 55 Onions .. .. .. .. .. • • ■ • ■ • • • .. 56 Potatoes .. .. .. .. • ■ • • • • • • ■ • .. 53 Trading Branch, Thorndon . . .. .. .. .. • ■ • • .. 59

I—H. 30.