DAIRYING POSITION.

Taranaki Daily News, 25 January 1922, Page 5

DAIRYING POSITION.

ADVICES FROM LONDON. CAUTION URGED IN BUTTER-FAT ADVANCES. Palmerston North, Jan. 20. Naturally, the question which is at the present time agitating the minds of the dairy farmer generally is the advance being paid out for butter-fat by the factory with which he deals. At the present time the factories are in a rather awkward position, as in most cases the majority of shareholders are suppliers, and they naturally endeavor to get as much as they can in advance on their produce, with the result that some of the concerns are sometimes tempted to go beyond what is a safe margin. The position was discussed with the secretary of one af the leading local factories, who furnished a good deal of useful information as to the cost of handling our butter and cheese from the time it is put f.o.b. until it reaches the hands of the London salesman. This should be of considerable interest to producers, and would assist them in arriving at a fairly accurate estimate of the prices which are likely to rule for butter-fat.

He had extracts from advices received by the National Dairy Association from their London representative, advising that the outstanding feature in the London market was the high prices of Danish butter. Indications were that it was in somewhat short supply, and it had always to be remembered that ni Denmark the producers were more, united with icgard to markets and prices than in any other country in the world. The latest cablegram to hand stated that special lots of New Zealand butter bad realised up to 1355. Interesting information had Been supplied to local factories by the secretary of the association regarding the cost of selling butter and cheese from f.o.b. ocean steamer. These were calculated on gutter at 130 s, nnd cheese at 86s (which is 2s below the actual price ruling to-day). The difficult problem was the cost of manufacture. In this connection it had to be borne in mind that each dairy company would require to work out its own costs, as conditions varied so greatly. On statistics the butter position appeared stranger than cheese, that was to say, comparing 19)3 with 1921. The importations of cheese showed an increase, whereas butter showed a decrease. It was, of course, as well to remember that in addition to the importations during the 1921 period there were large stocks of Imperial Government butter. However, with the menace of Imperial stocks removed, at least to some extent, it was problematical as to whether it was advisable for factories with dual pithits to immediately rush into the manufacture of cheese.

Calculating butter at 130 s per cwt., the cost per cwt. from f.o.b. ocean steamer was as follows: —Freight, 10 per cent.; insurance, 1.1 per cent.; landing charges in London, 1 per cent.; commission, 3.3 per cent.; cash discount, 2d in the £l, LI per cent.; total, 16.5 per cent, per cwt. Allowing for the cost of manufacture, 2|d per lb, and an overrun of 20 per cent., the price of butter-fat to the suppliers would be Is per lb. Calculating cheese at 86s pw cwt., the costs would be: Freight, 12.2 per cent.; insurance, 9 per cent.; landing charges in London, 1.3 per cent.; commission, 2.3 per cent.; cash discount, 2d in the £l, 9 per cent.; shrinkage, 2.3 per cent.; total, 19.9 per cent, per cwt. Allowing for cost of manufacture at 4d per lb of butter-fat, and an average yield of 2.61 b of cheese to a pound of butter-fat, the price to sujipliers would be Is 2%d per lb of butter-fat.

In this connection it was interesting to note that* the last sales of New Zealand cheese were in the neighborhood of 84s per cwt., which was equivalent to the price to suppliers of about Is 2’/od per lb of butter-fat. It would not be safe for factories to pay out to the’utmost limit, otherwise, on a falling market, there would be a considerable deficiency at the end of the season. It was hard to get suppliers, who were in urgent need of every penny they could lay their hands on, to realise the necessity of allowing a sufficient margin of safety. Last year, for instance, the season opened up very well, cheese bringing as much as 17Os per cwt. On the strength of the market some companies paid out as much as 2s per lb on butterfat, whereas, before the season ended, cheese was down to 96s per cwt., which, taking into consideration the much higher selling costs then prevailing, equalled a price of about only Is per lb for butter-fat. The point was obvious. The cheese which was being sold now at 84s per cwt. in London was from butter-fat which was supplied in October, when the prices advanced to suppliers was'ls, in the case of his factory, The cheese manufacturing season opened in August, on account of which month his factory had paid out as much as Is 4>d oer lb on butter-fat. Fortunately,

the month s oiffnut was small, and rei ising the for preserving a cient margin ol safety, the Septemb advance was cut down to Is. He emphasised the point that facto ies, in paying out calculated the pri by lumping the whole of the seaaoi shipments, and thus striking ag av< age price, and if this was^done— in t lignt of the remarkable fiuctuationa 1 the market—suppliers might be plat in the invidious position of having make refunds on their advances. T first shipment of that factory’s for the present season realised HCs 1 cwt. in the London market; the aeca 90s, and the thifu 84a*