H.—3o.

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

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

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

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

11

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

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