PRICE OF BUTTER

Dominion, Volume 10, Issue 2900, 12 October 1916, Page 6

PRICE OF BUTTER

-♦ REPORT BY BOARD OF TRADE WHOLE QUESTION TRAVERSED LEVY ON ALL BUTTER FAT STATE'S POWER TO PROHIBIT EXPORT Tho following very exhaustivo report on the nrico of butter question by tho Board ot Trade is made available for publication.. It is understood that tho Government'-will probably adopt the proposals in the report:— "Since tho Board's appointment in March of this year, numerous complaints have been received that the consumor in New Zealand is paying an unreasonably high, price for butter. Tho Board, in consequence, has made extensive' inquiries into all phases of the butter question. ■ Evidence was taken from representative traders and producers in Wellington, Auckland, Thames, Christchurch, 'and Dunedin, and reports and statistics dealing with the world's markets, were considered. "During the winter months restrictions were placed by the Government on tho export of butter; but, in spite of these restrictions, the local wholesale price' moved in sympathy with the world' 6 markets, and the retail price went from Is. 6d. in March-to Is. 7d. in June, and Is. Bd. in August. Even this price did not bring the local wholesale price, during tire period covered by our investigations, •up to tho f.o.b. equivalent, as the retail price of bntter would have needed to be, by the end of September, Is. lOd. Since the beginning of the war, the factories supplying the local market-have done so at a "disadvantage a 6 compared with export of from Jd. to ljd. per lb., as the following tablo will show:—

Table Showing Margin In Favour of Butter for Export. i 23 M <B Ojjw £»■ go £.* So" |« 5« go .B|3 is- h- -s r s ' °ft «ft 3- H. sr '«• '' a Month, ' ° 191M5. per. lb. per. lb. per lb. per lb. d. d. d. d. ■ Sept. to Mar. ... 135 123 13J i 1915. April 15 Hi 151 tj May 17 161 m • IB June 17 161 17? 18 July ■ 18 17J 18J 1 August 17 161 . * - September 15 MJ 15} 11 "No exports. Note—Average disadvantage- on local mar. kefc for 12 months, as compared with net return from other markets—.B2d. per pound. Sertomber-Ha-rch;— Represents prices realised in British markets. April-July.—Represents prices realised on sales to Australia.. September.—Represents prices paid for shipments to London.15 .?«* §1 as™ gtt 3.3. •? **~ Sft "ft £ ?ft ?ft £ M Month. 4 S 1915-16 per. lb. per lb. per. lb. per lb. d. d. d. d. Sept. to' March 15a M} 15 5 April 16 151 15} . i Mot 6 16 151 - - May 31 17 ftl 16 - Juno 17 161 161 2-3 July 17 161 16g J August 1 to 9... 17 161 17 I Note.—Average disadvantage on local market for nearly 12 months, as compared with net return from other markets— .33d. per lb. Soptcmber-April— Represents prices realised in British markets. May-June;—lcopre-seiits prices realised on sales to Australia. July-August.—Represents prices paid for shipments to London. Still Higher Prices. By the- middle of August it had become apparent that, owing to tho world's supplies of butter and cheese being inadequate to meet the demand, further advances in price in the London market were inevitable. Up to June 30, 1916. there was a shortage of 41,939 tons (or 25 per cent.),' as compared with tho previous year, and a shortage of 71,439 tons (or 33.4 per cent), as compared with 1911, the year in which imports of butter into Great Britain Teached their maximum. Consequently this f season opened with. offers for New Zealand butter at prices that eclipsed nil previous. records. The Facts' of the Case. New Zealand's consumption of butter is approximately 10,000 tons; its production of buttor is approximately 30,000 tons; its exportable surplus is therefore 20,000 tons per aunuiu. Somo few factories produce exclusively for the local trade, most factories exclusively for the export trade, and a few do both local and export trade. All tho factories aro keen competitors for supplies of butter-fat, and it therefore follows that thoso factories which are unable to givo Tuling prices for butter-fat will be driven in time out of- business. If the price received by factories catering for tho local market is lower than the export value, theso factories are placed at a decided disadvantage in procuring supplies. Tho position is further' complicated by tho competition of cheese factories for butterfat, and as there is no restriction on tho export of cheese to British ports, and cheese is bringing record prices in London, the cheese factories aro able to offer exceptionally high prices for butter-fat. Request from Grocers. On August 11 a deputation of grocers waited upon tho board, and informed the' boanl that as an advance in the wholesale price was apparently about to take place, they could no longer distribute butter rotail for tho margin of 2d. between the wholesale and retail price. They stated that when the wholesale price was lOd. per pound the Tetail price was Is.—a difference of 20 per cent.; when the wholesale price was advanced to Is." Gd. the-retail price was Is. difference'of only 11 1-9 per cent. The average cost of running a retail grocery business now was 121 per cent on • the turnover, consequently they were handling butter at a loss. The position, they allced, was oven vrorso than these ngurcs show, as tho retail price of butter in some centres was subject to a discount of 2!, per cent., or ' u d. per pound on all monthly accounts. The grocers further pointed out that their loss would bo ' much greater if another advance was made in'the wholesale price and the retail price ■ was merely increased by the same amount. They asserted that, in justice to the trade, if a further wholesale advance took place a percentage advance would, therefore, have to be mado on the rotail price to cover working expenses and a reasonable profit. Thus, if the wholesale price were advanced from Is. Gd. to Is. 7d. the retail prico shonll, in fairness to them, bo advanced from Is. Bd. to Is. 10d. less; of course, the usual discount of 21 per cent, making tho net price Is. 9Jd. approximately. They agreed, however, to maintain tho present price, pending action by the Board. The Board, however, is not convinced on tho evidence at present submitted by (ho grocers that they are handling butter at an actual loss; but it is quite clear that they aro not now obtaining tho same rate of profit as in pre-war years. We are satisfied that the 2d. per pound has not been at any time an excessive charge for distribution. The following table shows the movement of retail prices. The local wholesale price is on an average 3d. less.

Monthly Retail Prices of Butter Sold in Wellington During the Following Periods. Monthly Retail Prices of J)uttcr Sold in Welinßton during, the folowiiiß periods: 1914. ' 1915. 1916 s. d. s. d. s. d. — .Tan. ... 1 4 Jan 1 5 Feb. ... 1 4 Fob. ... 1 5 - . M«r. ... 1 4 Mar. ... 1 6 — Apr 1 6 Apr 1 6 May ... 1 7 May ... 1 7 - .Tune... 1 7 June... 1 7 July ... 1 3 July... 1 9 July... 1 7 Aug. ... I'i Aug 1 7 Aus. - 1 8 Sopt. ... 1 3 Sep. ... 1 5 Sep. ... 1. 8 Oot 1 3 Oct. ... 1 5 Oct 1 8 Nov. ... 1 3 Nov. ... 1 5 - Dcj 1 3 Dec. ... 1 6 -

Local Supply Menaced. The local wholesalo distributors wcro subsequently summoned before the Board, and gave evidence upon oath. _ They stressed the fact that the factories at present catering for the local trade were receiving iess than the average export value. This was an impossible position, as they were una.blo to return to their suppliers tho same figure per pound for butter-fat as those factories which were exporting, or as cheese factories were paying, and in consequence their supply of butter-fat was endangered. A study of tho table given in paragraph 2 confirms this contention. They agreed, however, to make no advance until the Board had had time to' thoroughly investigate tho position. To illustrate what this means to a factory doing a local instead of an export trade, the Board was advised that the monetary disadvantage to a particular co-opera-tive factory was at the rate of .£3600 per year. The evidence adduced was sufficient to convince the Board that the present conditions could not continue, that the factories producing for the local trade were placed at an unfair disadvantage, and would be compelled in justice to themselves either— (1) To bring the local price on a parity with the f.o.h. price. (2) To enter the export trade—or (3) Go out of business, as their supplies would be diverted to the export factories and to the cheese factories. - An Unfair Disparity. On .August 22 the Board found that the f.o.b. offers for August and September were equivalent to Is. 5Jd. per pound, and that the September offers were Is. 6d., with a tendency to rise. The average cost of preparing the butter from bulk to pounds, including patting, wrappers, collection from railways, deliveries to grocers, booking, travellers' expenses and bad debts, was 3d. to Id. per pound. The local wholesale equivalent . for August was therefore Is. 6d. a pound, and for September Is. 63d. to Is. 7d. Allowing the grocer's present cost of distribution, tho September retail price to bo on a parity with the f.o.b. equivalent should have been Is. 9d. On the Board's return to AVcllington from tho south, further interviews took place with tho local'distributors and grocers, and, as airesult, a joint deputation of. representative producers, distributors and grocers waited- upon the Board, the president (the Hon. W. D. S. Mac Donald) in the chair. The Hon. Mr. Myers (Minister of Customs) was invited to attend, and was also present. The following questions were discussed:—

(a) R-emoval of tho restrictions on the exportation of butter. (b) Necessity of raising tho price' on the local market to bring it into a parity with the export value. (c). Necessity of increasing the margin between wholesale and retail •prices. Tho Two Alternatives. A.,'sub-committee was appointed representing all interests to discuss tho matter in detail with the members of tho Board. Tho appointed members have carefully considered the whole of tho facts submitted, and are of opinion— (a) That tho restrictions on cx- • port, whilst vexatious to trndors, have not kept tho price down in tho local market. (b) That tho disparity on October 1 between f.o.b. and local prices was from 1!d. to 2d. per pound. (c) That it is inequitable to expect factories supplying tho local market to bear tho whole of this difference, as it would represent a loss to those factories on the season's output equivalent to ,£186,000 on a disparity of 2d. per pound. (d) That unless Governmental action of some -sort is taken an increase in the New Zealand retail price to Is. lOd. or Is. lid. per pound ■is unavoidable. The position therefore appears to the Board to resolve itself into— (a) Allowing values to adjust (hemselves in (he ordinarv course or trade or, (b) Government action with a view to regulnting local prices. • *? •'£ <,es,rill)le ,0 "How valu.es to adjust themselves in tho ordinarv course of trado? As shown above, tfiis would mean that the retail price of butter would instantly rise to Is. lOd. or Is. lid. ,a position which the Board of Trado foels should be avoided if possible, in view of the fe.-.t that New Zealand produces butter greatly in excess of its requirements; that its (surplus of butter and cheese is exportable at tho present high prices only because- of the excedingly favourable conditions as to freight and space secured by the representations of the Government to the Imperial Board of Trade; and that the producers owe in return some consideration to the New Zealand consumer. It is fair to ask what the local price of butter and cheese would be without possibilities of shipments to London? Price'of Is. 7d. Recommended. The boardjias come to the conclusion that tho retail price of butter should not be allowed to rise indefinitely, and for tho fallowing reasons recommend that tho price should be in the vicinity of Is. 7d. throughout New Zealand:— (a) The Tetail selling price in October, 1914, was Is. '3d., in 1915 Is. sd. (Even these were high prices in comparison with previous summer prices.)

. _ (b) Tho increase of 2d. per pound in the retail price as compared with "■ October, 1915, is more than sufficient in the board's opinion to cover any extra cost of production that lias accrued since. (c) If Is. 7d. is exceeded, difficulties wil liu'ise in 'connection with the summer supply of milk for domestic use through New Zealand. Already • the price charged for milk is abnormally high for the flush of the season, and is creating a good deal of discontent. Economy due to high price in tho use of milk for human consumption is not desirable on the ground of public health. (d) The price in the Commonwealth of Australia is fixed at Is. Gd. retail. (c) If butter is Tetailcd at lfi. 7<l. the grocers will be satisfied with the present distributing charges. (f) Medical men have informed tho board that butter is an absolute necessity in the home, and. that many children are not receiving the quantities requisite for their proper physical development. Thinos to be Done. Assuming that the Government is propared to take action with a. view to regulating tho price on the local market, the appointed members of the board have considered. various possible courses now available, and after the elimination of impracticable schemes, recommend as follows:— Q\) The prohibition of export of butter and cheese except under license, on term and conditions submitted in a separate memorandum attached. to this report, (b) The fixation of a maximum "wholesale price from time to time at the factory for butter for local consumption. (c) Distributing charges not to exceed those rating in the trade as on tho Ist of August, 19H Should the scheme outlined in the report and the attached memorandum bo adopted by tho Government, tho board would further recommend the removal of all other restrictions on the export of butter. Tho scheme would be fruitless if mado to apply to hatter only, as the throat has been constantly used that manufacturers would manufacture choose in its place, and butter-fat would be diverted to cheeso factories. Wo append a schedule showing f.o.b. equivalent per pound >if prices realised for New Zealand butter in bulk in London. (Signed) W. G. MACDONALD, .1. It, HART, P. lIALLY. Members of the Board. ,T. W. COLLINS, Secretary.