DRIED MILK.

Pukekohe & Waiuku Times, Volume 7, Issue 399, 9 August 1918, Page 1

DRIED MILK.

MR. PACEY'S VIEWS

FACTORY OFFERED FOR TEST

A meeting of the Producers' Committee of the Morrinsville District* was held on Monday last at Morrinsville. % members of the Committee bcinc present. The meeting was for the pur£use, of discussing the question of esiblishiflg a dried milk faetorv at Morrinsville. Mr. W. McLachla'n (chairman of the Committee) presided, and the N.Z. Dairy Association were represented by Messrs. H. E. Pacev (managing director), W. E. Clark, C. J. Parlane. and F. C. Daniell.

Sympathy Appreciated. On rising to address the meeting. Mr. Pacey referred to the messa.ee of sympathy which was addressed to him from the Morrinsville suppliers some weeks ago. It arrived, he said, at a trale when he was feeling somewhat "blue," and their consideration was veTy much appreciated. Ho was much better as the result of his visit to Queensland. For a few months, however, he would have to po a little slower than formerly, but at the end of that time he expected to be better than he had been for some time.

Fulfilling a Promise. He last met them in the autumn of 1917. Shortly before that arrangements had been completed for the amalgamation of the N.Z. Dairy Association with the Matangi Cheese Company, Ltd., with a view to the erection of an up-to-date " Glaxo " factory at Matangi. A meeting at Te Awamutu had been held shortly before, at which a promise was given to erect a "Glaxo" factory in that district, and they would remember that be bad indicated Morrinsville as a suitable centre for the next installation, and he had promised tiiat the claims of the Morrinsviile district should be considered in respect of the Association's fourth " Glaxo" factory. He was there that day in pursuance of that promise, and because the question of dried milk had recently engaged their serious attention, although they had Keen srood enough to delay actios until his return. The Matangi factory would be completed in the course of a few Weeks, And thev expected to start at Te Awamutu shortly thereafter. He could not say exactiy when a start could he made at Morrinsville, but. if they so desired, the Association would be willinc to commence as soon as possible under the " Glaxo " scheme as previously explained, or, if preferred, the Association would start a dried skim milk factory under a separate sehetne without either the advantages or disadvantages of any prior contract. Tactics Deprecated.

Before referring in detail to either scheme. Mr. Pacey desired to deprecate the attempt which had recently been made to complicate the issue by stirring up racial animosities. The anti-Jew cry might or might not he popular, but it was certainly unjust to use it. and especially in an attempt to injure a sister co-operative institution. It was not true that the Association had sold its birthright to the Jews or anvone else.

Payments for "Glaxo." The Association had made an important step forward when it entered upon the manufacture of " Glaxo." and sixteen months ago, when the announcement was made of the 2s minimum payment for " Glaxo " supply, the information was sent per wire right through New Zealand and Australia. the proposition being considered a particularly good one. There was no reason that day to regret the arrangement. The Association's contract with Messrs. Nathan assured certain minimum payments for a term of years but did not fix a maximum. For instance. the 2s minimum advance, which had yet to be augmented by a further substantial payment, was a recognition that values had advanced, and notwithstanding the minimum fixed in the contract the increased price was announced over sixteen months since. There was not any doubt but that further increases would l>e similarly responded to if the market justified it. Mr. Pacey continued: "The Association occupies a stromr position under the contracts with Messrs. Nathan. These contracts ensure co-operative control. The factories and equipment are owned by the Association; they have been paid for with the Association's money, an.l it is the Association's money which pays for the hotter fat supply, and for wages, fuel, and other expenses incidental to the running of the factory. The Association is responsible for the control of the factory. The co-operative ideal is further secured by the appointment of a committee of local shareholder-Mip-pliers. which committee has jurisdiction in connection with the oversight of testing and other local matter?, especially those which concern the sunpliers. He regretted that recent misstatements had made it necessary for him in reiterate these well known fact-. They could rest assured thai the interests of co-operation had been ear-t'iillv safeguarded, and the contained effort to discredit the Association's enterprise herein was especially to l»- deprecated." As a further indication of the spirit which was animatinir the rival movement, he would add that notwithstanding tin fact that a co-operative factory is iu ex-istem-e at Matamata. it had been -tated that the first of the rival faelores would be started in that district. This, surely, is a struma' conception of what co-operation means. To >ay that the rival factory was bein-.' started to rave tie- interests of suppliers to the Kuli.-coie-nt cheese factory ai Matamata is only to emphasise the mistake of havina started a competitive interest in a co-o|«rative district.

The Association's Offer. Those interests which wen now imminent in urjfanisimr the new nn<v<inent were orijfinallv in criticising dried milk on the itohikl.that it excluded the raisin--' of calve-' and pip*, and it' allowed to eontinnwould stultify the ddiryint' iiidu-try They would reim-mber foolish talk on the subject of apiiroaehin ■.' the Government to restrict dried milk r.fi«-rnti«.ii.-Messrs. Nathan had also reported thai one of the interests had approach. I them with a view to th erection of a "Glaxo" faotnrv in their di-triet. while he (Mr. I'acey) fould testify fo navin? received a i<'!""-* f " " ,;,,t ;; "Glaxo" fact-.ry in that company - district. He c-unerntnlnt-l 'ho?* concerned in the new movement on having at last recognised the possibilities of''dried milk manufacture, and assured them of his co-operation in developing the new business. The Dairy Association suppliers would profit mon

than would the suppliers of any other company by any advantages which would accrue from the manufacture of dried milk, and as a means of forthwith demonstrating Mr. Goodfellow's indications of from 3s fid to 4s per lb, he had made a proposition in a letter which lie had addressed to Mr. Goodfellow on tiie Ist August, and which read as follows: " Since my return from Australia I have reviewed the discussfon which lias taken place re dried milk and your indication that from 3s 6d to 4s per lb fat could he realised from the joint manufacture of butter and dried skim milk. This is an attractive proposition the demonstration of which would be a source of gratification and advantage to the producers connected with all co-operative Dairy Companies, including our own, " The indication was, T believe, first given by you about the beginning of June. Their does not appear to be any immediate prospect of a factory being started. Thus most of the coming season promises to be lost, as at best many months would be occupied in the erection and equipment of such factory. To lose the coming season would be regrettable, as it offers better prospects than those seasons which follow after.

"With a view to aiding the early demonstration of your indications, my hoard has directed me to offer you the use <»f one of .nr milk powder factories for the comii".' season, commencing, say, on the Ist September, provided you will give suitable guarantees of payment for the supply which is associated with sii'li factory at the rate of 3s Gd per lb butter fat. such payment to'be made monthly in respect of all butter fat which is supplied up to the capacity of the factory. " Our milk powder factories are new and in every sense up-to-date, and are equipped with sufficient appliances for the purpose in view, i.e., the separation of milk and the manufacture of dried skim milk. Your comment on the results attained for the past season indicates that vou recognise that fact.

" For the use of such a factory we should only ask you to pay to us such amounts as would ordinarily accrue if the factories belonged to you, i.e., usual interest, depreciation, insurance, rates, etc. Wages, fuel and other expenses would, of course, be a charge acrainst the working account. To facilitate matters we would hand over nt ordinary rates present stoeks of fuel, etc.

"At present, a committee of share-holder-suppliers has jurisdiction in matters of local interest and the oversight of testing. We should desire that suoh co-operative control would he maintained.

" Subject to the foregoing and to the safeguarding of our asset, we would give you the unrestricted use of the factory so that the best results might be attained by you.

"This is a bona fide proposition made in the interests of the industry, and will, I trust, be acceptable to yon. "An early reply is necessary, ns the new season is at hand. I shall be clad if you will let me have your decision by Thursday. Bth inst." Mr. Pacey went on to say that lie now awaited Mr. Goodfellow's reply to the proposition. Last season most of the milk powder made by the Association had been acquired by the Imperial Government. This arrangement had the advantage of improving the opportunity of shipment, but it meant a sacrifice' in respect of price. If. however, Mr. Good fellow had confidence that he could sell his skim milk powder at the price indicated by him and that he could secure shipment for the croods. he could easily pay 3s fid per lb butter fat. If he had not that confidence he was not justified in the statements which he had made. Shipping Prospects. He (the speaker) was apprehensive on account of both shipping and markets, while the difficulty in securing early deliverv of plant would be great. The shipping outlook to-day was more serious than ever before. The Dominion had in value almost twelve months' accumulation of produce awaiting shipment, including over eiOO.OOO worth of "Glaxo." Large quantities of milk powder also awaited shipment in the Argentine. The biggest price offered in Australia for dried skim milk powder last season was £llO per ton f.0.1.. London, but the order could not be accepted owing to failure to get shipping. On the morning he left Sydney he had a discussion with a manufacturing firm re price of a butter milk-drying plant which he was assured had produced a powder which had realised £*o per ton in London after the war had been going some time. Latterly, however, shipping could not be secured, so the dried but-ter-milk was being converted into pig food. Thus shipping was of surpassing importance. The number of ships in the New Zealand trade had been reduced by nearly 2d per cent, through losses, while many other ships had I n diverted to other uses and would not 1m- available tor New Zealand trade until the transportation of allied troops, munitions, etc., eased off. Months, i!' not years, must elapse before (he accumulation was cleared, and iu the interval there was poor prospect

o| shippiii'j for '.roods which had not been acquired l.y tie- Imperial Government.

Imperial Control. In the interval marketing prospects for -kim milk powder would prohably he subject to considerable chance, especially as control hy the Imperial Government was imminent. Mr. Ellison. London repiesentative of the Nati ,nal Dairy Association, had cabled that " lili.e- would lik'elv he control].,!." M,.., sr s. Weddoll and Co.. of London, reported a few days since that the I'nited Kiiijdoiu market was nomi-

nal and that thev anticipated that hnv.l •' would in fui uie require to fie-

, me an import li< eii*.' from the Home (loverniie-nt h.-fme inipi.it into the f0i1.,1 Kio.-d- in Would he pelhlitted, '.'.lie li poinl. ,| to prices. Slock-, ofc . 1.. in : '-.,ii| lolli-d. Simihii advice waul 11l I.V \f • I -. AlldleW ('lelllelltand S.iii- and Me, i- Lo\e|| and f'hii.-tiiiHS. Ltd hoth of London. Two \. w /.eahuid Mini til- of th- Clown had al-'. made -lal-m-nt- v liieh aplie; I |o -i\.< luithci coiiliimnliou Th- Mini.i, , h.i \-.|-ieiiltinv it! ■ Hon. W. I» S \la.li. nald). -p. akin il T iihape. l'.'iv'" a Hole o| v.amii'U' a'.-iin- I fin ha- inv ol imni'-n-e i \'p. I'tiii inn ■■ 0,-; ihi- pi' -.-nt piice ~| ilii' i| mill: 1 he Hon T) X. fluthrie said- " [I i- a very delirtfihle i|U'--tioii whether, pidgin 1 fiom the pi. sent position, the dried milk industry would i-ali-- auyfhiii'j like the pi.-,nt results later on." Tlhh control of prices of dried milk Ly th- Imperial Governiiienl won] I ap-

pear to be imminent, and control always meant lower prices. To show to what extent control was sometimes exercised, Mr. Pacey instanced butter, which on a free market and assured shipment would return to producers 4s per lb. instead of Is 7d per lb more or less. Tiie Hon. Mr. Guthrie had indicated that recent high prices were due to the action of a certain section of the community in the United States of America. There was a free market there, but the Director of Dairy Division, Washington, advised by cable on the 25th .T.une, 1918. that importation of milk powder was prohibited. Thus the U.S.A. did not offer a way out. Mr. Pacey said he had copies of the balance sheets for five years of an Australian dried skim milk company. Its profits during the war period had not been large, while during pre-war conditions its profits were almost nil. The payments for butter fat had been lower in Australia than in New Zealand. He thought the imminent prospects for whole milk powder were better than for skim milk powder.

Fluctuation of Prices,

Mr. Goodfellow had based his ox-pr-i tation of 3s 6d to 4s per lb upon a filing value of skim milk of £l6O per roii skim milk powder. Ho (Mr. I'acey) believed such a price since the war had occasionally been realised, but trices had usually been lower and had fluctuated much according to the extent of the scarcity of raw liquid milk. The imminence of Government control introduced a new hazard during the war period, the influence of which could not be estimated. The pre-war value of skim milk powder ranged from £l6 to £4O per ton. the latter figure seldom being reached. The market for skim milk powder had always been a comparatively limited one, much more precarious than that for whole milk powder. The post-war market could not be forecasted with certainty. An opinion on that point, however, had been expressed by Mr. J. A. Ruddiek, one of the world's bestinformed men on dairying matters, who was formerly Dairy Commissioner in New Zealand, and now occupied a high position under the Canadian Government. Ho said: "The Canadian Army is using a considerable quantity if skim milk powder in the camps, and I believe jt is {riving very good satisfaction, and I am inclined to think that skim milk powder will replace condensed milk to some extent in the near future. Tt seems to me quite possible that the market may be overdone after the war, as the increase in the production of both condensed milk and milk powder has been very large durincr the past four years. During normal conditions Holland and other near Continental countries have a distinct advantage over New Zealand in the skim milk powder, owing to lower delivery ohanres, which is important when dealing with low-priced articles. Holland could make business pay at a price which would lie useless to New Zealand."

There would also be undoubted difficulty in securing the necessary plant, and the cost would lie very high. The Association, however, were in touch with sources of supply and mediums of delivery, and could meet such difficulties as "well as anyone. These, however, were not negligible considerations.

Association Ready to Act. Having regard to the forecroing, Mr. Pacey said he did not feel justified in encouraging the belief that 3s fid per lh butter fat was a reasonable regular expectation, even for a few years. If. however, conditions were such that other companies could give a return of 3s fid. he had not any doubt but that the Association under similar conditions could return 3s 7d per lb. Its payments had averaged better for butter' than those of its neighbours, and there was not any doubt but that history would repeat itself on the new comparison. Having regard to the whole position, including markets, shipping, finance, and plant, and including the advice given by responsible Cabinet Ministers and by Sir James Wilson to "go slow." he did not at present feel at liberty to make a recommendation to proceed. _ If, however, the producers at Morrinsville were enterprisinu: and desired it. the Association would erect a skim milk factory at Morrinsville as soon as machinery, plant, etc., could be secured. A site had already been secured adjacent to the railway station. The cost of the scheme was estimated at about £30,000. The actual expenditure would need to lie covered by a joint arid several bond signed by the prospective suppliers, who would each guarantee supply for a term of, say, five years, and apply for shares on the basis of one £2 10s share for each 1001b butter fat supplied. The suppliers would receive all that was realised from the sale of the product, less usual depreciation and expenses, alfo less 3d per lb butter fat until the c/m of the scheme was covered. They would recognise that a dried skim milk scheme could not encroach upon the other reserves of the Association, and that payment on results and bearing their own liability were fair provisions. He desired to avoid misunderstanding which frequently arose. and to that end he drew attention to the fact that a joint and several bond meant that each person who signed it became responsible for all or any part of the amount, and that the Bank could, if trouble came, call upon each or any s tff them to pay up the full amount? It was not a nominal responsilrtlity. as some seemed to suppose. "He did not mention the matter to frighten them, but to make clear exactlv what was meant. He also drew attention tn the fact that all the other dried skim milk schemes which had been projected stipulated for a joint and several bond, and a deduction of fid per lb on account of capitalisation. The scheme just outlined, however, only required a deduction of 3d, thus giving it a distinct advantage over the other schemes. That did not apply to the Associate, "Glaxo" scheme, which prouded for id per Hi deduction only while the joint and several bond was enlirelv omitted, lie would be glad lo discuss either or l.oth the Association's schemes witli them. Risk of Over Production.

Mi Pac.y said he also desired to wain them ftL'ainst a supposition which seemed to prevail in sonic quarI, i . that the Waikato pould look for an era dm ill" which ris fid per lh wi.nl 1 he payable for hotter fat while th- te-t of the world would continue ~ii the Is 0,1 to 2-> standard. That manifestly would he impossible, and nlieady dozens of meetings had been held nil over the Dominion to consider the erection of skim milk powder factories. The Association had received

innumerable enquiries on the subject, some from as far as Australia. If all those factories were erected it would be quite safe to predict that the market would be over-stocked to such an extent -that probably pre-war prices would not be maintained. An investigation of the position and prospects was being made by the Government and by representatives of the whole Dominion's dairy industry. He approved of such investigation being made, so that all concerned might be guided to right conclusions. In conclusion, Mr. Pacey referred to the recent developments and further prospects of casein—the Association's manufacture of which would be lanre during the coming season. Reference was also made to the manufacture of sugar of milk. In regard to the proposal to amalgamate the dairy companies* in the South Auckland districts, Mr. Pacey expressed reeret that the meeting held last week had rejected the proposal. Another meetin?, however, was to be Weld to consider the question as affecting certain of the companies, and he hoped a favourable decision would lie reached. He trusted that the producers' interests would be behind any amalgamation movement.

Mr. W. E. Clark expressed the satisfaction of the Matangi suppliers with the "Glaxo" scheme under which they are working, and the suggestion was made that if all milk products were acquired by the Government, a payment should be made on a parity basis.

Many questions were asked and answered, and Mr. Pacey promised to submit his proposition in writing for the further consideration of the committee.

A vote of thanks was accorded the chairman and Mr. Pacey, and the proceedings concluded.