THE HEMP INDUSTRY.

Manawatu Herald, Volume XXX, Issue 416, 28 July 1908, Page 4

THE HEMP INDUSTRY.

The Question of Flax j Royalties. , 1 Fortunes made while Industry Languishes. (From the N.Z. Times). The hemp industry is threatened with a serious crisis, due to the probable state of the market mak- 1 ing it uu profitable for the miller to continue operations. It is well, therefore, to consider certain conditions at the flax end of the business which by raising the cost of reduction are stiflping a valuable industry. THE ROYALTY CURSE. While it is generally admitted that the arbitrary regulation of hours of labour by State enactment in an industry where the produce! is at the mercy of the weather is responsible in a large measure for the inability of millers to successfully meet the competition of rival fibres, there is little doubt that the royalties demanded in many cases are a loadstone around the neck of the millers concerned. In one case we know of the owners of flax land who are waxing fat at the expense of millers and the industry, in fact they are reaping profits which few industries in the world could successfully stagger under. The flax swamp in question, an area of between 3000 and 4000 acres in extent was purchased along with an agricultural estate at a cost in the region of ,£14,000 for the flax area, and today the royalties being paid on the natural flax crop amount to an equal sum, or the owners are receiving back every year in flax royalties the total amount of the purchase money, and this without the expenditure of any money for maintaining the drains or swamps in proper order. In addition to this enormous royalty income, the millers are providing another source ot income for the fortunate owners. Before a mill can start operations the owner has to pay the modest sum of ,£3OO as a fee for cutting rights, and this is bound around with remarkable provisions. Should the mill cease operations but for one day another ,£3OO may be demanded before cutting rights may be resumed. Again, if a man sells out bis mill his successor is called upon to pay another ,£3OO, and even if a man buys out a partner he is liable to the same little fee.’ The flax owners in question have received a sum of no less than ,£2OOO for cutting right fees from changes in the flax mills referred to during the last two years. THE COST OF PRODUCTION. The actual cost of producing fibre under the above conditions is on a plane which leaves no margin of profit to some and a|_loss to others at present market values. Taking the total area at 4000 acres the reiurn of ,£14,000 means that £2 103 P er acre was received and this without the expenditure of a copper, and if we take the fee for exchange of mills the acre return is brought up to This year, however, the average royalty is 13s 3d a ton of green leaf, which means, taking nine tons of leaf to the ton of fibre, a cost to the miller of the natural product of £6 15s 3d a ton of fibre. If we add the cost of milling—the bare expense of mill wages, fuel, freight to the shipping port, etc., ,£17 —the cost of the hemp reaches ,£23 17s 3d, or higher than the present market value of 1 ‘ Good Fair” hemp, and if we allow a proportion of the hemp milled to turn out ” Fair” (as it invariably does) the prcductiou of fibre under these heavy royalty charges is several pounds a ton above the market value. We do not wish to make any overdrawn estimate, and therefore we will go into further details. A certain amount of tow is obtained which will represent a return of something under ,£1 a ton, though the value of this by-pro-duct is quite lost in the lower return secured for any proportion of “Fair” hemp. But the position is at once seen to be impossible when it is remembered that in the cost of production mentioned above the miller does not receive a penny for his own managerial work, interest on capital invested (which includes heavy costs for tramways and a probable outlay of £2OO, for milling plant), depreciation, risk by flood and fire and other smallar incidentals. On the face of it flaxmilling under such conditions is impossible at present values and present royalties. If some re-arrangement of the latter —by mutual agreement or legislative enforcement—is not brought about, there is little hope of the industry being continued unless an improvement in values takes place, and this at present appears highly improbable. Commenting on the above the Times says : —Onr contributor to the “ On the Laud” page gives some interesting figures to show the manner in which the “ royalty curse” is operating to the detriment of the hemp industry. He points out that through this agency the cost of production is likely to stifle a valuable industry. The problem is hedged round with difficulties. It is the old question of “supply and demand” over again. When the arrangement which our contributor refers to was made, we were on the boom. The optimists were looking for flax, and certain shrewd speculators jumped in and secured options, which enabled them to levy a huge toll on the industry. If New Zealand had laws to prevent man from grabbing and holding laud foa speulative purposes, this sort of thing could not have happened. As it has no such law, we can only applaud the

speculators, and wish we had been in ' the deal ourselves. We are sorry for the throttled-industry ; for the millers who have gambled their all on a rising market; for the labourers who have been deprived of a lucrative avocation ; for the speculators who will, in the long run, be left with a lot of taxable flax swamps on their hands; for the merchants, engineers, etc., who have lost a valuable connection. They have all been outwitted and undersold by the shrewd Yankee who “ fixes ” the market in the same way that the speculators have “fixed” the royalty, only more so.