N.Z. BUTTER-MARKETING POLICY DEFENDED

Hawke's Bay Herald-Tribune, Issue 34, 24 February 1937, Page 10

N.Z. BUTTER-MARKETING POLICY DEFENDED

Minister Replies REASON FOR DROP Speculative F.O B. Saies Not Desirable HEAVY STOCKS PRESENT l WELLINGTON, Last Night. The Acting-Minister of Marketing i(Hon. W. Lee Martin) in a atatement jiesued to-day, gives an assurance that Ithe recent price ' variation for butter ;and cheeSe on the London market is not |in any way due to the Government's imarketing policy ahd the system of iguhranteed pricesj that the relations I'between the Primary Products Market(ing Department and its selling agents iare entirely harxnonioup and satisfacjtoary; and that the fullest co-operation Ua the sale of dairy produce exists bejtween the London officers of the departnneht and individual selling agents. "It is the experience of the past Ithat when butter and cheese prices fall suddenly, there are critics interestedi and disinterested in the sale of dairy produce who are ready to ascriibe the lower prices to the operations of the imarketing system and to affirm that if la different marketing polioy had been ;adopted, "prices would have remained at jhigher levels," said Mr. Martin. \" These critics often conveniently overllook the market trend in previous years J land the factors in supply and demand I [which are known to be a major factor Jinfluence in price variations. the ipoints of criticism as I have noted jthem, are as follow:-- j } " (a) That the Government marketing policy is responsible for the loss of price pref cjrence for our butter over Australian and certain foreign butters. "(b) .That the price margin of Danish over New Zealand has widened. "(c) That the goodwill of the trade has been lcst or impaired and that our butter is being neglected by buyers and partieuiarly speculator^ who have turned their attention to other butters. "During recent years," added the Minister, "the general quality of Anstralian butter has improved and only a •small average price margin in favour of New Zealand has been ehown. The f act that during a particular week the price of Australian has equalled the price of New Zealand, proves nofching because over the last f ew years the price of Australian has been at times above the price o£ New Zealand. The average premium for New Zealand butter Aor Australian for the past four years has been: 1933, le 3d per cwt.; J934, 2s 9d; 1935, Is 6d; 1936, lOd. "i?rom the time of the inauguration of the Government marketing policy on> August 1 last nntil the present date, j the average preminm for New Zealand over Australian has been 8d per cwt. wifh Australian in relatively 'short supply. Thus there is no evidence whatsoever to support the suggestion that New Zealand has lost any price margin over Australian as a result of the present marketing policy. "The premium per cwt. for New Zealand butxr over Siberian butter during the past three years has been;

"No Siberian butter was imported into the United Kingdom during January and February in 1935 or 1936 and 'the small quantity now available is attractive to blenders because of the lqwer moisture content. The quality oi Siberian butter has improved substanti;ally. "The London manager of the departIment reports that the present marketing system has .had no influenpe whatjever ou the trade and price of foreign butter aud that there has been nb change iu the method of handling foreign butter. "A price premium is paid for Danish butter because of its particular flavour and texture and because it is freshly made (not frozen and Stored as in the !case of New Zeanan. ,. The Danes jbuilt up a good market in the North of lEngland for their; butter by providing 'weekly supplies of uniform high quality. New Zealand, by improvement in qual ity and in regularity of supplies, has been steadily overcoming the advantages of proximity to the market enjoyed by the Danes and outlets have been Ifound for increasing quantities of New I Zealand butter year by year. .= "A comparison of the Danish butter j I premium oyer New Zealand butter is as| follows: —

"Oompared with Dutch butter and Baltic States butter, New Zealand this year shows more favourable prices than during the previous two years and the comparison of Danish butter margins which has been quoted entirely disproves any, suggestion that the present market policy has led to a widening of the Danish price margin over New Zealand 's goodwill. New Policy Approveft. "Advice receiver from London since' \he Government marketing plan was inaugurated, show that there is close co-operation between the merchants who acfc as selling agents for the Government and the London staffi of the Marketing Department. It -is known that almost all'leading firms welcomed

the change'5 policy Because it gave them a continuity of supply and enabled them to develop the selling ofj New Zealand butter aud eheese with! more confidence than could possibly bei ithe case under the system of the past,, jin the working of which merchants sud-j denly found their expected supplies! .curtailed. Possibly some firms are critical because of their inability to purichase butter and cheese on f.o.b. terms and to speculate iu the sale of our produce. The attitude of the Government !on the question of f.o.b. saies and speejulation is that, having appointed selling agents for our produce on terms which are cousistent with efficient service, secure to them regular supplies for sale on oousignment. The Government is entitled as a condition of the agency, to require that those appointed agents do not themselves speculate in the produce they sell. Leading agents have agreed that this requirement of the Government is reasonable. Advices from London show that there is much closer collaboration between the agents and the London officers of the department than has been the case in the , past. The Two Systems. "In reply to erit'-s who represent that the Government has been unwise ! to eliminate outright selling on f.o.b. | terms, of our produce, 1 cau say that1 when reporting to the New Zealand! Dairy Board after nine years' experience in London as manager for the board, Mr. H. E. Davis said the two. systems of consignment and f.o.b. saies] are difficult to reconcile even under pre-| sent conditions. Those agents handling. consignments only complain that butter sold on f.o.b. terms is frequently resoldl on arrival in competition with consign-i ment goods. These resales of f.o.b. purchases influence lower prices for butter sold on consignment. While. this view may be debatable, it is evident thatj any contemplated system of adjustiUgi : offorings of produce to the capacity ofj ' the market to absorb them, would be seriously disturbed by the presence on the market of substantial quantities of • produce, the oWnership of which has passed to other hands. Thus the opmion expressed by Mr. Davis, which is supported by many authorities, is that the policy of combining f.o.b. and consignment selling is inconsistent. "It cau fairly be said that the iuterests of the speculative f.o.b. buyer are uot the interests of the producers or the Government as seller. Obviously the f.o.b. buyer expects to beat the market. "Eurthermore, there must be general agreement that f.o.b. selling which leads to storing of produce, is a dis- , ruptive factor iu any policy which aims • at providing regular deliveries of butte.r aud cheese in a fresh condition. f'The present marketing policy is , different from the policy of the previous .year only in regard to the elimination of f.o.b. saies and a more strict superivision of "spot" buying by agents. "Suggestions have been made thav, f.o.b. buyers, being unable to purchasej Ifrom New Zealand, have turned their i [attention to Australian butter. This' j suggestion is disproved by' the fact' [that c.i.f. business in Australian butter j j is about in a line with recent years and' represents probably less than 15 perj jcent. of the Australian shipments to; ! date. j "It has been suggested that the pre-' jsent market price. of 85s per cwt. for; jNew Zealand butter is dUe wholly or in! 'j^art to the present marketing policy. "The advices receiyed by the Marketing Department show that the market is dominated by uiiusually heavy stocks in store compared with the stocks last year. The uuexpectedly heavy imports of uorthern hemisphere butters during December and January prevented any decrease in the accnmulated stocks. "Actually imports from northernj hemisphere countries and from the Argentine were 5700 tons above last year: ]for the five weeks ending Jdnuary 20, •the principal increases being from Russia 1700 tons, Netherlands 1300 tons, Denmark 1100 tons, Baltic States, 800 tons, Argentine 600 tons, Einland 300 tons, Sweden 200 tons. Small decreases have been registered from Poland and two or three of the more unimportant suppliers. While this Oon'tlnental type of butter is available, the-. inereased demand Which we look for im the Midlands and North, for New Zealand and Australian butter at this time of the year, is retarded and it is perhaps surprising that the wholesale and, retail trader has been wiliing to buy soi much New Zealand and Australian re-] cently to hold in store. "The drop in price applies to all butters and it is expected that the lowering of the retail price of but- - ter in London from ls to lld per lb. will stimulate consumption and result in a better market position. "The following comparison showsi that similar market price movementsj were experienced last year; —

"During the third weetf of Marc'h, 1936, the price fell to 80s per cwt. Tho retail price was then reduced from ls to lld per lb. and a bet'ter market followed. Thus the experience of the market this year is very much iu line with the experience last year with the difference that the drop in price due to heavy arrivals has come a few weeks earlier this year. It should be remembered that during the 1934-35 season, the wholesale price of butter fell to 65s per cwt. "I cau express the aim of the Government in regard to marketing of dairy produce in these words," said Mr. Martin, "that a. system of shipment and marketing of our dairy produce iphould be developed which will ensure

regular arrivals of butter aqd eheese Of uniformly high quality in frefeh condition, delivered at main distritmting ports in the United Kingdom in quantities to meet market .requiremfents, and the sale of this produce on a consignment basis through accredited agqncies with distributive outlets, at a minimum cost to the consumer. The .Government marketing plan inaugurated on August 1 last has already improved conditions towards this end. I can assure tha dairy farmers and public generally that they need have no uneasiness ' in regard to the present system of marketing in . UftitCd Kingdom,"

1934-35 1935-36 1936-37 October . . .. 44s 12s 23s November .... 46s 22s 14s December .... 52s 35s 14s January .. .. 36s 25s 18s February .... 28s 36s 36s Averages (per cwt.) . » 41s 26s 21s

1935-36 1936-37 Ootober 119/6 99/2 November .. .. 102/- 108/6 ' December .. .. .. 89/6 100/5 January 92/- 9£/5 February 93/- 87/2