THE DAIRY PRODUCE TRADE

Taranaki Daily News, 19 November 1926, Page 5

THE DAIRY PRODUCE TRADE

REVIEW OF THE PAST SEASON THE HOLDING AND PRICE FIXING POLICY DOMINION’S ‘VERY DANGEROUS EXPERIMENT’ Messrs. W. Weddel and Co.’s review of the imported dairy produce trade for tile year ended June 30, 1926, will be read in this Dominion with more than usual interest, as it, not onlj r gives a retrospect of conditions obtaining throughout the year but makes reference to the departure of New Zealand in its efforts to control the sale of its produce on the Home market.

The review states: The past year in the dairy produce trade was probably not more eventful than some of its predecessors, but many happenings, by their unfamiiiarity, seemed to produce results out of proportion to their importance. As an example, the case of the strike of British seamen in overseas ports, which lasted from the beginning of August until the middle of October, may be cited. For the first few weeks of the strike stocks 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 as the weeks passed without any settlement being arrived at, the market became excited and butter prices soared. That the level to which prices were forced was unwarranted is proved by the collapse which followed when the strike suddenly ended, and it became known that there would be no shortage of butter. AU trading suddenly came to a standstill, aud 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 away, and prices have to be reduced much too drastically in order to bring back the consumptive demand to its former volume. The growing practice 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 has not eventuated this year. . At the end of June, 1026, 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. ; But apart from the fact that little financial advantage is likely to be derived from 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 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 add a warning that preparation must be made to meet the cutting of prices that will come from increased competition by the adoption of more efficient and cheaper methods of production, mainly by increase of output without any great increase in cost. So far as cheese is concerned, although the average selling values over the year were higher than for - some years past, it has been a very disappointing season to the many operators who early in the New Zealand season covered their requirements ahead at prices which could not be realised after the goods had been landed. It is estimated that nearly 30,000 tons, or 45 per cent, of-the season's make of cheese in New Zealand, was sold forward at prices which averaged the equivalent of 100 s c.i.f., whereas the market value of the goods after arrival, except in tl.e first few weeks, was well under 100 s c.i.f. SUPPLIES. As a result of reductions in the Australian and New Zealand outputs, the total importations of butter into the United Kingdom last year failed to reach the “record” total established in 192125. The supplies of Danish and Argentine butter were slightly heavier, as also were the shipments from most of the smaller foreign sources of supply, so that the proportion of foreign butter imported, amounting to 61 per cent., showed an increase over the preceding year. It was perhaps too much to expect the Dominions to maintain the heavy volume of supplies shipped in 1924-25, when Australia exported the unusually large total of 56,193 tons; but it is to be hoped that the set-back received last year may be only temporary. Imports of cheese during the period established a further high “record” in volume, a reduction in the supply of New Zealand cheese having been more than counter-balanced by an increase in Canadian. The proportion of cheese imported into this country from British possessions was 87.4 per cent, of the total. PRICES. The butter market of this country has a long way to go before anything ap-

[ proaching stability is reached. There are few commodities which exhibit so much I violent fluctuation. It is interesting to note that the contours of the diagram for the past year are strikingly similar to those shown for the year 1924-25. In aach year prices started at a moderate level, rose until the middle of October and then dropped rapidly until the end of the year, when there was a partial recovery, followed by a period of moderate fluctuation during the spring months. The average prices of the various descriptions of butter for the past year were mostly lower than in 192425, but are still 60 per cent, above the pre-war level. The movements of cheese prices are even more difficult to account for than those of butter, probably due to the fact that the Home make of cheese is a much more important factor in the situation than the Home make of butter. The market quotations for New Zealand and Canadian cheese during the period under review followed more or less closely the movements and fluctuations in the butter market, but to a much more modified extent. Prices rose during the early autumn months of last year in sympathy with the rapid upward movement of butter prices, and tended downwards during the remainder of the period. 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. CONTROL. 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 tendeiicy 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-opera-tive 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 out-strip the teacher. 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 from each other according to local conditions, but the object aimed at is more or less the same, viz., to do everything possible to produce an article of uniformly excellent quality. In New Zealand, however, a majority of the producers have decided that their control of the business shall be extended to include the sale of the product on this market through the usual agents. Commencing on September 1, 1926, this experiment in collective marketing will be watched with interest by everyone connected with the trade. BUTTER. The total quantity of butter imported into the United Kingdom during the twelve months ended June 30, 1926, amounted to 256,961 tons, as compared with 277,898 tons in 1924-25, a decrease of 20,937 tons, or 7.5 per cent. These figures are arrived at after deducting the quantities imported from the Irish Free State, amounting to 21,431 tons, as compared with 21,219 tons in the preceding year. Of the total imports of butter, 99,884 tons, or 38.9 per cent., were received from British sources, and 157,077 tons, or 61.1 per cent., from foreign sources. In the preceding year the proportions were 47 per cent, and 53 per cent., respectively. The total quantity received from British Dominions last rear fell short of the 1924-25 total of 130,478 tons by 30,594 tons, or 23.4 per cent. Imports of Canadian butter were heavier by 1193 tons, or 17.4 per cent., but from Australia and New Zealand decreases of 15,739 tons (28 per cent.) and 16,041 tons (24 per cent.) respectively, have to be recorded. South Africa again sent an insignificant quantity. As regards the foreign total, this was the heaviest on record, exceeding the quantity received in 1924-25 by 9663 tons, or 6.5 per cent. Practically all the individual sources of supply augmented their outputs, the most notable being increases of 4526 tons from Denmark, 2230 tons from Argentina, and 3409 tons from Sweden. French and Dutch butter also enjoyed a partial recovery from the reduced quantities shipped in the preceding year. From Russia, however, there was a rather surprising decrease of 4335 tons, or 23.4 per cent. Under the heading of “Other Countries” the total was 5752 tons, as compared with 4970 tons in the preceding year. Re-exports of butter during the 12 months amounted to 10,764 tons, as com pared with 18,550 tons in 1924-25. BUTTER MARKET MOVEMENTS. At the beginning of July, 1925, the butter market was experiencing a slight reaction from the quick rise of 20s per cwt. which had taken place in the previous month, brought about by a falling off in Home supplies owing to droughty conditions in the late spring and early summer. Danish butter opened at 200 s

and dropped to 192 s in the following week, chiefly as a result of some restriction in the German demand. New Zealand and. Australian quotations, however, shed only 2s per cwt., despite unusually heavy June arrivals. At this point the. Danish quotation was only 4s higher than that for New Zealand butter, and the comparative cheapness of the former iio doubt had a stimulating effect upon trade, as a considerable increase in the demand took place and prices of all descriptions again moved upwards. After the end of July, although the consumptive demand continued quite satisfactory, quotations for most descriptions became steadier for a few weeks, but Danish prices, under the influence of German buying, continued their upward course until 214 s was reached in the middle of August, this level showing a margin of 16s per cwt. over New Zealand prices. Early in September, as the seamen’s strike seemed to show no signs of coming to an end, many of the larger buyers, becoming apprehensive about their future supplies, came into the market and bought heavily, with the result that prices of most descriptions of butter again began to rise, slowly ut first, but more rapidly later on. As the strike had brought about a complete stoppage of all shipments of butter from Australia and New Zealand, an acute shortage of butter on this market seemed inevitable, and the whole trade became panicky. Between the end of August and the middle of October New Zealand butter advanced from 198 s to 234 s per cwt.; Australian rose to 2225; and Argentine to 2045. In the last fortnight of this boom, while New Zealand prices were rising from 220 s to 2345, very little legitimate trading was done, most of the purchases having been made on behalf of speculators. Without doubt, if the strike had continued for another month, prices would probably have continued to rise further, but in the second week in October a cable was received on this side from New Zealand stating that the Ruahine had sailed carrying 130,009 boxes of butter. This information, together with the discovery that stocks in store here had not been by any means depleted; that most of the larger buyers were fully stocked up for some tim*. ahead, many of them with very dea butter; and that the increase in retail prices during the rise had curtailed the consumption of butter, was sufficient to put a complete stop to all buying of butter on this market for about a fortnight, during which time prices of New Zealand butter dropped from 234 s to 2165. In the meantime the strike had been settled and steamers were leaving New Zealand and Australia carrying full cargoes. Many operators who had gambled on the strike were left with huge stocks of butter on their hands, and their endeavours to get out of their commitments became almost frantic in the face of the stolid indifference of most of the buyers. With one or two checks, the downward course of prices continued with increasing momentum until at Christmas New Zealand butter was selling at 166 s per cwt., Australian at 158 s, Argentine at 148 s, and Danish at 1745. From the middle of November onwards, after the first shipments of the new season's Australian and New Zealand butter had arrived, the quotations shown in the accompanying diagram represent fresh landed goods only, the prices obtainable for the old season’s stored stocks being sometimes as much as 10s under these figures. Just after Christmas, when a further reduction in the retail price of butter had taken place, aud an increase in the consumptive demand was anticipated, a number of large buyers considered the time opportune to replenish their stocks, which had been running low. This immediately put the market up 4s to 8s per cwt., and after a few days of hesitation buying became more general, and the prices made a further advance. January arrivals of butter were the heaviest on record for any one mouth, and it is not surprising that in February prices generally took a downward turn. Danish butter, however, experienced a very strong demand from Germany, which placed quotations for this description on a much higher plane throughout February and March, the margin between the Danish and New Zealand at this period averaging 20s per cwt., but throughout April, with rapidly increasing Continental production, Danish prices rapidly declined, until at the end of May and throughout June, the quotations for Danish, New Zealand and Australian were within a shilling or two of each other. The month of June witnessed a sharp spurt of 6s to 8s per cwt., partly speculative in character, but in face of heavy Continental and Irish supplies, the demand quickly subsided, and prices fell away again, closing at 174 s for Danish and New Zealand, and 172 s for Australian, with best Argentine at 160 s and Russian up to 160 s per cwt. CHEESE. The total importation of’ Cheddar cheese into the United Kingdom from all sources during 1925-26 amounted to 151,520 tons, as compared with 149,362 tons in the preceding year, an increase of 2158 tons, or 1.4 per cent. The quantity received from British sources was 131,691 tons, or 86.9 per cent, of the whole, against 88 per cent, in 1924-25. From New Zealand, for the third year in succession, there was a drop in arrivals, the decrease last year amounting to 4078 tons, or 5.7 per cent. Australia also sent a smaller quantity of cheese, but from Canada the shipments, amounting to 61,863 tons, were 5258 tons, or 9.3 per cent., heavier than in the preceding year, and also heavier than in any previous year since 1918. Amongst the various foreign totals, the most important change is an increase of 2057. tons, or 33 per .cent., from Holland. The total foreign supply, however, was greater than it lias been since 1918. Re-exports of imported cheese for the twelve months amounted to 1969 tons, as compared with 7165 tons in 1924CHEESE MARKET MOVEMENTS. The year opened with prices at the comparatively high level of 108 s per cwt. for New Zealand, and 105 s for Canadian; but, apart from the sharp rise in September-October, the general tendency throughout was downward, the final quotations at the end of June being practically the lowest of the year. After a short spurt in the middle of July, due to some increase in the demand, as a result of warm weather, a very quiet period set in, lasting for about six or seven weeks, during which time trade was slow and dragging, and prices sagged a little. Then followed a rise of 12s per cwt., for which there appeal's to have been little justification, except that butter prices were moving in a like manner. Certainly the shipping strike could have had no effect upon cheese supplies, as there was nothing to come forward from New Zealand. and Canadian boats were not affeclw’ Had there'been no strike, cheese

prices might have advanced a shilling or two during September or October, as a result of the disappearance of New Zealand supplies and the improving condition of the Canadian arrivals, but there was no time when supplies of cheese were not adequate for the very moderate demand.

From the high water mark of 120 s per cwt., reached in the second week of October, prices of Canadian cheese fell away gradually throughout November and December, until at the end of the year the opening level of 108 s was reached. During this period New Zealand cheese was practically off the Market altogether until the new season’s shipments began to arrive in the middle of December. Prices for these opened at 106 s, but as the demand was very unsatisfactory and supplies were heavy quotations had to be lowered in order to effect sales. By the end of the year 98s was being accepted for best New Zealand cheese; but at this level the demand improved, and buying became more general, with the result that prices recovered to 106 s in the first three weeks of January. Thereafter, with exceptionally heavy supplies of New Zealand cheese arriving and with a rather poor demand, prices gradually fell away throughout February, March, and April. Towards the end of April the retail price of cheese was reduced to Is per lb., and the increased consumptive demand at this level steadied the price of New Zealand cheese at about 93s during May, and, after a temporary rise in the beginning of June to 965, the year closed with New Zealand selling at 93s on a dull market.

Prices of the more mature and less plentiful Canadian variety remained remarkably steady between 108 s and 112 s from January 1 until the end of May, when the new season’s shipments began to arrive, the quotations for which opened at 90s per ewt. During the strike period in May, the price of cheese was stabilised along with that of butter at the level ruling before the strike started, viz., New Zealand 93s and Canadian 108 s per cwt. The quantity of cheese available in store during the strike was very small, and soon became exhausted, with the result that as soon as the maximum price order was released higher prices were obtainable for the goods available, but this proved to be only a temporary movement, as the supplies delivered ex the ships were soon sufficient to fill all requirements. AUSTRALIA. Although not so productive as its predecessor, the past season in Australia, with a total shipment of 40,454 tons of butter, was well up to the average for the Commonwealth. In the preceding year the total quantity of Australian butter imported was 56,193 tons, the decrease last year amounting to 15,739 tons, or 28 per cent. The arrivals of Australian cheese, amounting to 2875 tons, showed a shrinkage of 1533 tons

from the total of 4108 tons in 192125. In addition to the shipments made to the United Kingdom, about 5600 tons of butter and over 200 tons of cheese were exported from Australia to other destinations, including Canada, Egypt, South Africa and the Continent of Europe. Droughty conditions were experienced in Queensland and New South Wales in the early part of the season, and in Victoria and Tasmania later on. At times the weather remained dry for a sufficiently long period to create a certain amount of apprehension regarding the future, but a favourable autumn improved matters considerably, and producers faced the winter with every confidence of ample supplies for home consumption. The Australian Dairy Produce Control Board continued to suj>ervLse the general conduct of the export trade; but, apart from holding up to 25 per cent, of the butter submitted for export to the United Kingdom during the flush period, wisely refrained from interfering with the natural flow of trade. A London agency of the board was instituted during the period under review for the purpose of acting in an advisory capacity to the trade at this end. Determined efforts are being made to increase the quantity and improve the quality of the butter produced in Australia. To this end a body called tho Australian Dairy Council, composed of representatives of all States of the Commonwealth, meet regularly and

make recommendations to the variouf State Governments. (To be Continued.)