DANGEROUS EXPERIMENT

New Zealand Times, Volume LIII, Issue 12607, 18 November 1926, Page 11

DANGEROUS EXPERIMENT

• ■■■■ ■»— “IN MASS SPECULATION” LONDON VIEW OF PRICE FIXAUON “ATTEMPTING TO SQUEEZE CONSUMER* In unmistakcn terms, the annual report of W. Weddel and Co.. Ltd., of 'Vest Smithfield, London, deals with the action of the Dairy Control Board in attempting to fix prices of butter on the British market. 'lt says: “For tho first few weeks of the strike the stooks of butter on hand were so heavy that no appreciable effect was produced upon" the market here by the hold-up of steamers on the other side; but fls Vie Weeks passed without any settlement being arrived at, the market beeame - excited and butter prices soared. That the level to which prices wero forced was unwarranted is proved by the collapse which followed when the strike suddenly ended, and it beeame known that there would be no shortage of butter. All trading suddenly came to a standstill, and prices fell to a point which more than discounted the effect of the heavy arrivals of accumulated supplies in January. One very bad result arising from these sudden booms which occur periodically in the butter market, is the fact that as soon as the retail price of butter increases beyond a certain point the public begins to economise, the demand falls atvay, and Brices have to be' reduced much too vasticallv in order to bring back the •onsumntive demand to its former volume. “The growing prnctico amongst New Zealand butter factories of placing limits upon their produce after arrival in this country, was much more extensively followed during the season just ended; but. so far. the success attending this policy on previous occasions baa not eventuated this year. At the

end of June, 1926, the quantity of New Zealand butter in cold store in the United Kingdom held up Under limit very largely exceeded the stocks in any previous year, As a considerable portion of these stocks had at that date been in cold store for several months, during which time the market prices had shown no improvement, it is evident that unless a very considerable appreciation in prices takes place during the autumn months heavy losses will be suffered by those factories who have speculated in this way. AROUSED ADVERSE CRITICISM “But apart from the fact that little financial advantage is likely to be derived ftam this policy, the restraint on the free marketing of supplies aroused a certain amount of adverse criticism and diverted regular buyers to other sources of supply. Control which ensures uniform standard of quality is welcomed by the trade, but holding up supplies in the United Kingdom for reserved prices is aptly described in the fourth report of the Imperial Economic Committee as ‘a very dangerous experiment in mass speculation.' We venture to say that it is not in the interests of the New Zealand producers that there should be room for anyone to say that by holding up supplies they are attempting 1 to squeeze the British consumer. The same report points out that within the . next few years competition in the United Kingdom market will become more severe, and that foreign countries ' are making considerable efforts to recover and improve upon the relative positions which they held before the War. The committee adds a warning 1 that preparation must be made to meet { the cutting of price* that will ocrao from increased competition bv the ' adoption of more efficient and cheaper ' methods of production, mainly by Inj crease of output without any great in- ' crease in cost. “So far as cheese is concerned, although the average selling values o\er ' the year were higher than for some ; years past, it has been a very disappointing season to the many operators who oarly in tho New Zealand season covered their requirements ilioail at prices which could not be realised after i the goods bud been landed. It *s t.sli- ' mated that nearly 30,000 tons, or 15

,per cent., of the season’s make of ' cheese in New Zealntld, was sold. for- i Ward at prices which averaged the I equivalent of 100 s c.i.f., whereas the I market value of the goods after arrl- < val, except in the first few weeks, was < well under 1008 o.i.f. 1 1 OTHER SUPPLIES “As a result of reductions in the Australian and New Zealand outputs, tho total importations of butter into the United Kingdom last year failed | to reach the ‘record* total established I in 1924-’25. The supplies of Danish i and Argentine butter were slightly ; heavier, as also Were the shipments I from most of the smaller foreign i sources of supply, so that the propor- ] tion of foreign butter imported, < amounting to 61 per cent. - , showed an : increase over the preceding year. It i was, perhaps, too much to expect the i Dominions to maintain the heavy vol- ' ume of supplies shipped in 1924-’25, I when Australia exported the unusually < largo total of 66,193 tons; but it is to ] be hoped that the set-back received 1 last year may be only temporary. Im- < ports of cheese during the period, estab- ] lished a further high ‘record’ in Vol- i ume, a reduction in the supply of New Zealand cheese having been more tliati t counterbalanced by an increase in Canadian. The proportion of cheese imported into this country from Bri- i tish possessions Wfts 87.4 per cent, of ] the total. “The butter market of this country has a long way to go before anything ■ approaching stability ig reached. There are few commodities which exhibit so i much violent fluctuation. Prices ; started at a moderate level, rose until ■ the middle of October, and then dropped rapidly until the end of the 1 year, when there was a partial recov- 1 ery, followed hy a period of moderate fluctuation during the spring months. The average prices were mostly lower than in 1924-’26, but 60 per cent, above the pre-war level. “The movements of cheese prices i are even more difficult to account for than tlioso of butter, probably due to i the fact that tho Home make of cheese i is a much more important factor in the ; situation than tho Home make of hut- • ter. The market quotations for NeW Zealand and Canadian cheese during 1 tho period under review followed morC

or less closely the movements and fluctuations In the butter market, but to a much more modified extent. At no time was there any shortage of cheese supplies available, and it Was only because of the firmness with which stocks were held that lower market prices were not recorded. WILL BE WATCHED WITH INTEREST “Having regard to . the unusual prosperity which the dairy produce trade in exporting countries has enjoyed during the past ten years, it is not surprising to an onlooker to observe the Strong tendency that has manifested itself in Practically every country of production towards the, establishment of official control over the production and grading of butter and cheese. The movement began In the first place many years ago in Denmark, when the Various co-operative societies joined forces and organised a system of inspection, under Government auspices, of all butter intended for export to this country. No doubt the. success of the Danish methods has inspired producers in other parts of the world to emulate their methods, but in certain cases the pupil is seeking to outstrip the tettcher. In Ireland, Canada, Australia, and the Argentine Republic this movement towards stricter official control over production and grading has made considerable progress Within the past year or two. The lines upon Which the various countries are working differ ffotn each other according to local conditions; but tho object aimed at is Wore or less the same, namely, to do everything possible to produce an article of uniformly excellent quality. In New Zealand, however, a majority of the producers have decided that theis control of the business shall be extended to include the Bale of the product on this market through the usual agents. From September let, 1926. this experiment in collective marketing will be watched with interest bv everyone connected with the trade.”