MARKETING DEPARTMENT. FOOD AND OTHER SUPPLIES TO THE UNITED KINGDOM DURING THE WAR. STATEMENT BY THE HON. WALTER NASH, MINISTER OF MARKETING.

Appendix to the Journals of the House of Representatives, 1940 Session I, H-30b

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1940. NEW ZEALAND.

MARKETING DEPARTMENT. FOOD AND OTHER SUPPLIES TO THE UNITED KINGDOM DURING THE WAR. STATEMENT BY THE HON. WALTER NASH, MINISTER OF MARKETING.

Presented to both Houses of the General Assembly by Leave.

Mr. Speaker,— I have the honour to present the following report covering the arrangements made to date by the New Zealand Government in regard to the sale and export to the United Kingdom of essential food and other supplies during the period of the war. The report covers the action taken prior to the war and the making of preliminary plans against the possibility of hostilities, the action taken immediately upon the outbreak of war when the New Zealand Government offered its full resources to the United Kingdom Government, and the negotiations in respect of specific agreements for sale of the various products with details of prices and quantities covered by the agreements. Important cablegrams exchanged during the negotiations are quoted, and in the report and in the schedules at the end of the report the full text of each agreement is given. The report relates to supply to the United Kingdom of the following products : Wool, meat, dairy-products, tallow, woolly sheep-skins, hides, fruit, eggs, and scheelite. V Minister of Marketing.

INTRODUCTION. THE COMPARISON BETWEEN 1914-18 AND 1939-40. In the war of 1914-18 bulk purchases by the United Kingdom Government, of New Zealand farming products had three main characteristics : — (1) Delay in their commencement: (2) Consequent rises in prices : (3) The complete scrapping on the termination of hostilities of the machinery set up, and consequent rapid deterioration of market prices. On this occasion, twenty-five years later, there was a sharp contrast in the methods adopted for the purchase and sale of New Zealand primary products. Both Governments were at the outset disposed towards prompt action and the elimination of the obvious disadvantages which had been created

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during the previous war period. The United Kingdom Government doubtless remembered the costliness of long delays, whilst the New Zealand Government had full appreciation of the limited value of high but uncertain war prices. In this connection it is interesting to note that during the 1914-18 period the Department of Imperial Government Supplies did not commence operations in New Zealand until the 3rd March, 1915, and, indeed, was not fully functioning until 1917. By way of contrast, on this occasion, hostilities commenced on the Ist September, 1939, and before the end of the year the Marketing Department was in full operation and equipped to institute whatever procedure was necessary for the sale of our primary products to the United Kingdom. Within the brief space of three months, therefore, all the necessary arrangements for internal organization had been made and, in the main, the negotiations with the United Kingdom Government had been completed. The preliminary action taken by both Governments was along the lines of avoiding, if possible, extreme price-rises, whilst at the same time ensuring that the United Kingdom Government secured all the produce it required on an equitable basis, and that the prices agreed upon should enable the farming community in New Zealand to meet all necessary costs of production. PRE-WAR ACTION IN THE UNITED KINGDOM. In the United Kingdom the Food (Defence Plans) Department, then a Department of the Board of Trade (but later on to become the Ministry of Food), was set up in 1936. In June of that year, Dominion Ministers then being present in London for the Imperial Conference, the opportunity was taken by the United Kingdom Government to make a first approach to the question of possible wartime purchases of supplies from New Zealand. It was indicated that, in the event of war, the United Kingdom Government might become the sole purchaser of imported foodstuffs, and in this connection meat and dairy-produce were specifically mentioned. At this time it was also indicated that fresh fruit would not be especially controlled, and would therefore have to take its chance in the ordinary way. Again, in August of 1938, at which time the crisis over Czechoslovakia was developing, the United Kingdom Government submitted through the New Zealand High Commissioner a more detailed memorandum outlining plans for food-control in the event of war—this envisaged the bulk purchase of meat and dairy-produce on long-term contracts. This memorandum also stated (with special reference to New Zealand) that " since the New Zealand Government now acts as the sole exporter of butter and cheese and the New Zealand Meat-producers Board regulates the shipment of meat, it would be a simple matter to inaugurate both contracts in the event of war. Again, as in the case of the preliminary discussions at the time of the Imperial Conference, questions of prices and quantities were left for detailed negotiation should hostilities actually commence. This August, 1938, memorandum, having been examined by the New Zealand Government, was accepted in principle by the Prime Minister on the 28th February, 1939, and the United Kingdom. Government was advised to this effect. In June, 1939, early after the arrival of the Minister of Finance in London and when the European situation was again deteriorating, discussions were resumed at the instance of the Food (Defence Plans) Department in the United Kingdom. On this occasion it was again reiterated that dairy-produce and meat must take priority in any direct purchase from New Zealand, whilst fresh fruit could be exported as long as shipping space was available. Tentative discussions were also held between Board of Trade officials and the Minister concerning the possible purchase of New Zealand's wool-clip, although this subject could only be broadly discussed as a possibility at that time. PRE-WAR ACTION IN NEW ZEALAND. Simultaneously with these various pre-war conferences which were taking place in London, general plans were under discussion in New Zealand for the purpose of ensuring the efficient and prompt export of the Dominion's exportable surplus of primary products to the United Kingdom in the event of war. These discussions were commenced as far back as 1937 within the general framework of the Organization for National Security, which had been set up by this time. It was agreed that the Marketing Department could well form the nucleus of whatever organization would be required in the event of an outbreak of war and the bulk purchase of primary products by the United Kingdom Government. The Dominion was therefore already well equipped to meet the emergency and to commence detailed negotiations immediately war did commence on 3rd September. COMMENCEMENT OF NEGOTIATIONS. Pre-war discussions between the United Kingdom and the New Zealand Governments by way of exchange of cables and by personal conferences in London between the Minister of Marketing and the Ministry of Food had already prepared the ground for such immediate action as would be necessary to take in regard to the acquisition of New Zealand products by the United Kingdom in the event of war being declared. After the outbreak of war the United Kingdom Government cabled through the New Zealand High Commissioner (on the sth September, 1939, in the case of meat, and on the 6th September in the case of dairy-produce) stating that they were prepared to buy Now Zealand's " entire exportable surplus for twelve months of frozen beef, mutton, lamb, and edible offals " and " export surplus, being shipments up to the 31st July, 1940," of butter and cheese. In reply the New Zealand Government cabled within twenty-four hours stating their willingness to consider an f.o.b. purchase of the total surplus of these products by the United Kingdom Government.

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On the 12th September the following cable was sent by the Governor-General of New Zealand to the Secretary of State for Dominion Affairs :— His Majesty's Government in New Zealand have prohibited all exports except by consent of Minister of Customs. It is proposed to first offer all surplus products to His Majesty's Government in the United Kingdom and to consider any representations from His Majesty's Government in the United Kingdom as to marketing of supplies not required by United Kingdom Separate cables are being exchanged relative to meat, meat by-products, wool, dairy-produce, and Phormium tenax fibre, and it is hoped to complete arrangements at an early date. Position with regard to essential imports is being investigated and advice will be furnished thereon as soOn as possible." This communication provided ample evidence of the Dominion's readiness to make available all such products as might be exclusively required by the United Kingdom Government throughout the period of hostilities. Again, on the 20th September, the following further cable was despatched to the United Kingdom Government setting out the basis which, in the opinion of the New Zealand Government, should be adopted in relation to all purchase agreements affecting our products From the Governor-General of New Zealand to the Secretary of State for Dominion Affairs. " 20th September, 1939. I roposed conditions in connection with United Kingdom/New Zealand trade during war. My Ministers advise that His Majesty s Government in New Zealand feel that general and uniform conditions should be laid down in regard to the acquisition by His Majesty's Government in the United Kingdom of New Zealand's surplus primary production, and appreciate the views of His Majesty's Government in the United Kingdom on the following points " 1. The method of payment should be on a f.o.b. basis or prior to f.o.b. after a stated period in store awaiting shipment. This is extremely important in New Zealand, since during the war period her overseas exchange other than sterling will be almost negligible. A hold up in shipping could easily mean financial dislocation. To provide for continuous payment of debt services and for imports, sterling and other overseas exchange funds are necessary in adequate amounts at regular intervals. " 2. In every case the entire export surplus will be offered to His Majesty's Government in the United Kingdom with excepted sales to regular customers other than the United Kingdom to which His Majesty's Government in the United Kingdom agree or to such other customers as they may suggest. "3. The New Zealand producer and the New Zealand Government do not wish to take any advantage because of the war conditions. It is assumed that His Majesty's Government in the United Kingdom will not as a matter of policy buy New Zealand products for resale to neutral countries which can conveniently purchase from New Zealand directly. "4. If His Majesty's Government in the United Kingdom privately resells any product purchased from His Majesty's Government in New Zealand, the profit made should be divided equally between the two Governments, distribution of profits to be at the end of each season, the United Kingdom to take the risk of any loss. His Majesty's Government in the United Kingdom to be responsible for freight and shipping and marine insurance. His Majesty's Government in New Zealand would appreciate the comment of the United Kingdom Government as to the time at which the property in the products purchased passes to it. 5. That the purchase arrangement should be for the period of the war and for at least a year after the war. 6. lhat after the cessation of hostilities a conference should decide what adjustments • are necessary to bring trade to a peace-time basis. "7. Prices to be fixed on a yearly basis, but adjustable within this period if the index of export prices in the United Kingdom rises by 10 per cent, or more. This is important to New Zealand, since this country will depend on sterling funds to purchase imports which possibly may rapidly increase in price. 8. New Zealand will have to purchase from other than sterling or sterling exchange countries essential goods not available from the United Kingdom, and probably costs of conversion sterling in foreign currency will be substantially higher than former rates. His Majesty's Government in New Zealand would appreciate the suggestions of His Majesty's Government in the United Kingdom with regard to making available foreign exchange for such purpose and the cost of such exchange. "9. In any discussions on yearly revisions of price any alteration in the costs of imported materials for manufacture in New Zealand should also be taken into account." This cable sets out clearly the views held by the New Zealand Government on main points of policy which were to form the basis of the negotiations. On the sth September a first meeting was called by the Ministry of Pood in London to commence official discussions regarding the terms of the purchase of New Zealand butter and cheese and meat. A meeting was called by the Ministry of Supply to discuss the purchase of the New Zealand wool-clip." At a later stage the detailed negotiations covering dairy-produce and meat came to be conducted

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separately, but the commencement was made on a common basis and the main points of procedure common to all four products can be briefly summarized as follows :— Period op Purchase. The cable of 20th September had, on this point, expressed the opinion that purchase arrangements should cover the whole period of the war and at least one year thereafter. This view was not accepted entirely by the United Kingdom Government, but it was generally assumed for the purpose of the negotiations that the arrangements should cover at least the period of the war, and it was further agreed that prices and other terms of purchase should be determined only for the ensuing season's exports (with the exception of wool, which did cover a period more in line with the views of the New Zealand Government and which made provision for an annual review of price). In the case of butter, cheese, meat, and other sundry products, the final terms of agreement covered, in the main, specific quantities produced in the current year. Price Basis. At the commencement of negotiations after the outbreak of war the New Zealand Government had suggested that the purchase of dairy-produce and meat should be on an f.o.b. basis with prices fixed for a period of one year, but adjustable within this period if the index of export prices in the United Kingdom rose by 10 per cent, or more. Although this view was noted by the United Kingdom Government, no specific agreement was secured on this point, but the following cable communications show the extent to which the United Kingdom Government was prepared to meet the New Zealand Government on the issue. Copy of telegram from the High Commissioner to the Prime Minister, dated 15th September, 1939 :— " Reference to your suggestion, dairy-produce also meat, that United Kingdom purchase be subject to revision if United Kingdom index of export prices increased by 10 per cent, or more and unfavourable response as mentioned our meat telegram to-day. Very tentatively and without prejudice it was mentioned as alternative approach that New Zealand might arrange to purchase certain commodities in United Kingdom at controlled prices, instancing iron and steel, fencing-wire, woollen and other textiles. No doubt possibilities would be limited, although interesting. Glad of your views." Copy of telegram from the Prime Minister, Wellington, to the High Commissioner, London, dated 2nd October, 1939 " Your cable 15th September. Our negotiations are based on equitable exchange, but it is strongly pointed out here that prices to be paid for essential imports from United Kingdom and other British Commonwealth and neutral countries constitute major factors in New Zealand costs. We would be in very disadvantageous position if we sold exports at agreed prices which we propose to do, and were then compelled to pay abnormally enhanced prices for all imports. " The difficulty would be partly overcome if we could be assured of supplies of essential commodities mentioned your telegram, and others also at agreed prices." In so far as detailed price discussions for the current season were concerned, the average of recent ruling prices was taken as the first basis of approach. For meat, the 1938 prices (which were slightly better than 1939 realizations) were suggested by the United Kingdom Government, and after acceptance by the New Zealand Government in principle, became the basis of subsequent discussions and final agreement. On the question of precise point of purchase, it was suggested by the Imperial Government, and accepted by the New Zealand Government, that puxchase in the main should be on f.o.b. terms. The prices at f.o.b. were arrived at by taking London prices and deducting the latest peace-time costs between f.o.b. New Zealand and delivery "ex store " London. In other words, the United Kingdom Government at once accepted responsibilities for war-time increases in costs of freight and landing charges. In respect of wool, the purchase was to be made at appraisal point, and this procedure was immediately agreed upon by both Governments. Exportable Surplus. This concept caused some difficulty at an early stage of the negotiations, and uncertainty as to its meaning continued for a considerable period of time to confuse the discussions and delay the ultimate settlement, although in a cablegram dated the sth September, 1939, the United Kingdom Government had expressed itself as prepared to purchase the entire exportable surplus of meat and dairy-produce, and this phrasing had seemed to indicate clearly that the " quantity available for export" was meant by the Imperial authorities. On 17th September, 1939, the United Kingdom Ministry of Supply inquired through the High Commissioner for the United Kingdom in New Zealand as to the meaning of the term " all surplus output," and asked if "surplus over and above domestic requirements" or alternatively "any surplus available after allowing for normal export trade to countries other than enemy countries '" was the New Zealand meaning of the term. In reply the New Zealand Prime Minister, in a letter dated 20th September, 1939, addressed to the High Commissioner for the United Kingdom in New Zealand, stated that the term " all surplus output " meant all our surplus production over and above New Zealand's domestic requirements.

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The letter further expressed the desire of New Zealand, consistent with maximum assistance to the United Kingdom, to maintain trade connections with other countries, and suggested that quantities necessary for this purpose should be agreed upon. Copy of telegram from the High Commissioner, London, to the Prime Minister, dated 2nd October, 1939 " Your telegram 2nd October. Reference to procedure in purchase of New Zealand products we will press further for acceptance of principle that United Kingdom take all exportable surplus in the sense you evidently intend —i.e., surplus available for export whether in fact shipped or not. Indications to date are unpromising (see my telegram of 20th September). What are your views on formula suggested therein ? " In these communications the main point of difference arose from the fact that the New Zealand Government obviously intended this phrase to mean " the quantity available for export," whilst the United Kingdom Government, on the other hand, adopted the definition " the quantity which, having regard to available ships, could in fact be exported." The stand taken by the United Kingdom Government as buyers was that they should not commit themselves to purchasing limitless quantities of perishable produce which might be stranded in the country of production. Whilst giving the assurance that every reasonable endeavour would be made to lift all produce available, the United Kingdom Government continued to adhere to their own conception of what " exportable surplus " was to mean in terms of the agreements which were entered into. The New Zealand Government as sellers, on the other hand, contended that the ships to carry the produce were entirely under the control of the United Kingdom Government, who was the purchaser. If their interpretation of this phrase was not agreed to, then it was clear that, in actual fact, not an ounce of produce would be sold if the definition by the United Kingdom Government was accepted in toto. The agreements would represent an " option to purchase." From the discussions of the foregoing viewpoint, a compromise emerged whereby the United Kingdom Government gave a firm undertaking to purchase defined quantities of meat, butter, and cheese, and that over and above these definite commitments they would, within the limits of their requirements and subject to shipping being available, use their best endeavours to lift any balances of quantities available for export. This compromise was made acceptable by the fact that the defined quantities covered approximately the estimated seasonal surpluses available for export. In regard to wool, it should be noted that the agreement reachcd covered the whole of the quantity available for export without any qualification whatsoever regarding shipment. Payment. After prolonged negotiations it was finally agreed that 90 per cent, of the sterling f.o.b. value should be paid in London on shipment in respect of dairy-produce and meat, whilst the balance of 10 per cent, would be payable within twenty-eight days of arrival or of due date of arrival in the case of the steamer being lost. This 90-per-cent. payment can be regarded as a reasonable compromise between the lower advances which were at times suggested by the United Kingdom Government and the 100-per-cent. payment which was pressed for by the New Zealand Government from the very commencement of the negotiations. In actual practice, it means that, subject to delay in respect of the 10-per-cent. payment on early shipments, approximately 100 per cent, of the value of later shipments is paid, being 90 per cent, on actual shipments and 10 per cent, balance on earlier shipments. The 10-per-cent. balance is also convenient to both Governments in so far as it enables any necessary adjustments to be made from time to time within this limit. The possibility of exports being abnormally delayed by lack of ships was kept well to the forefront by the New Zealand Government, who pressed on several occasions for a special payment basis to cover this eventuality. A difficulty which presented itself in this connection was the lack of knowledge of the extent to which delays in shipping might be likely, and although agreement in principle was finally secured, substantial details necessarily had to be left for final determination should delays actually occur. In the case of butter and cheese and meat, the agreements finally secured by the New Zealand Government committed the Ministry of Pood to pay on account 50 per cent, of the value of produce which has had to remain in cool store in New Zealand more than two months by reason of the Ministry's inability to adhere to its shipping programme. Storage. Concurrently with the discussions on the question of advance payments on account of delayed shipments, the question of payments by the United Kingdom Government towards additional storage costs was also fully represented by the New Zealand Government. Here again it was difficult to do more than secure an agreement in principle, because the problem had not at that time assumed any practical importance, nor could the necessary detail costs be assessed. It was finally agreed that the arrangements governing special payments for storage should be on the basis of actual experience in regard to shipments up to the 31st March, 1940. Fortunately, however, it was not necessary to raise the question during that month as shipments had proceeded smoothly and with a minimum of delay. This question, however, is now a necessary point of discussion with the United Kingdom Government. Other Outstanding Points. (1) Rise in prices of goods imported into New Zealand. (2) Delayed shipments.

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(.3) Period "to be covered by agreements. (4) Prices and profit. (5) Further supplies from New Zealand. These points, which had remained outstanding at the time of the visit of the Acting Prime Minister, Hon. Mr. I. Fraser, to Britain, formed the basis of the subsequent discussions with representatives of the United Kingdom Government, and the following extracts from the minutes of this meeting will be of particular interest:— Minutes of Meeting with Representatives of New Zealand Government to discuss Questions arising out of the Long-term Agreements for the Purchase of Foodstuffs. " Monday, 6th November, at 11.45 a.m. " Present. —Right Hon. W. S. Morrison, M.C., K.C., M.P. ; Mr. A. T. Lennox-Boyd M P • Lord Perry, K.B.E. ; Mr. C. N. Ryan, D.8.0., M.C. ; Miss Coates; Hon.' Peter Eraser, M.P.; W. J. Jordan, Esq. ; Mr. R. M. Campbell; Mr. C. A. Berendsen, C.M.G. " The New Zealand representatives were introduced by Mr. Jordan, who said that Mr. Fraser, Deputy Prime Minister, had a number of points he wished to raise. "1. Price of Goods imported into New Zealand.—.Mr. Fraser said that the first point he had to raise concerned the general economic position of New Zealand under war conditions. If prices in England were to rise considerably, the imports of United Kingdom goods into New Zealand would be bound to fall. He pointed out that if, despite considerable increases in prices in the United Kingdom, payments to New Zealand remained on the basis of the prices now included in the various agreements under negotiation, a position of considerable difficulty would arise and might seriously affect the financial and economic position of New Zealand. In this connection the New Zealand Government had suggested that the price of produce sold by New Zealand to the United Kingdom should be subject to review if the United Kingdom index of wholesale prices increased by 10 per cent, or more ; another suggestion was that the New Zealand Government should be given the benefit of any price-control fixed in regard to United Kingdom goods. He thought, therefore, the agreements now being negotiated with New Zealand should be dependent upon the maintenance of a price equilibrium based on existing price-levels. In the case of wool, for example, the agreement extended for the war perioci and for one year afterwards, and provision was included for a price review every vear in May. J J " 2. Delayed Shipments.—Mr. Fraser next raised the question of New Zealand's position in the event of delayed shipments. He quite realized that the responsibility for the provision of shipping must rest with Great Britain and that a difficult position might arise from time to time. Nevertheless it would be vefy serious for New Zealand if they had to be penalized owing to such delays, and the gravity of the position might be accentuated in view of the fact that suitable storage accommodation was limited. They had been trying to increase this accommodation just before the war. Mr. Morrison said that, although it was difficult to forecast the position with any certainty, he did not anticipate any serious delays in shipping. If any major diversion of shipping from New Zealand were to take place, he could only visualize it as part of a common Empire effort towards some particular war operation of the highest importance. Mr. Fraser said that New Zealand fully appreciated that these agreements were part of a general co-operative effort, but he urged that if, owing to unforeseen circumstances, it became impossible to implement the transaction either by reason of the lack of shipping or owing to a really substantial increase in the price of materials imported from the United Kingdom into New Zealand, then the terms of the agreement should be regarded as open for reconsideration. Mr. Morrison agreed that in such circumstances the arrangements would have to be regarded as open for discussion. " Conclusions 1 and 2. " It was agreed " (a) To take note of Mr. Fraser's representations regarding effect on the financial position of New Zealand of (i) a serious increase in the price of materials imported from the United Kingdom, and (ii) of any serious delay in shipping exports of foodstuffs from New Zealand. " (b) That, in the event of it becoming clearly impossible to implement the terms of the agreements covering the purchase of foodstuffs, the two Governments would be free to enter into discussions as to the steps to be taken. 3. Period to be covered by the Agreements.—Mr. Fraser referred to the question of the period to be covered by the agreements. In the case of wool the transaction was for the period of the war and for one year thereafter. His Government was most anxious to appty this arrangement to the foodstuff agreements. After the last war the cessation of Government purchases had had disastrous results for the producers. It might be impossible wholly to avoid this after the present war, but the task of attempting to circumscribe the collapse should occupy their early attention. Mr. Morrison replied that wool and foodstuffs were on a different footing in two respects. In the first place wool was much less perishable, and excess stocks could be stored

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and disposed of gradually. Again, the clips from the southern Dominions constituted a very large proportion of the world's supplies. Neither of these considerations applied to New Zealand foodstuffs. He hoped it would not be necessary to delay the agreements for a settlement of this question, which certainly needed investigation but was unlikely to be settled quickly. " Mr. Eraser agreed that such a condition need not go in the agreements. "Conclusion (3). " It was agreed " (a) That consideration should be given by the two Governments to the question of the period to be covered by the scheme for governmental sales and purchases. " (b) That the agreements now being negotiated need not be delayed for the inclusion of a decision on this subject. " 4. Prices and Profit. —Mr. Eraser referred to the question of the prices at which New Zealand foodstuffs might be sold and the question of profits derived therefrom. In the case of butter, for example, the New Zealand producer would know what was being paid for his butter and that it was being sold first hand at 1455. Personally he realized that many charges were involved between the buying and the selling-price, but the margin at present looked large, and he was most anxious to prevent any idea spreading in New Zealand that those engaged in marketing New Zealand butter were making unreasonable profits, or that a relatively low price for New Zealand butter was enabling the British Government to pay relatively high prices for Continental butters. " Mr. Morrison said that he could assure the Deputy Prime Minister that the Ministry were determined through their control to ensure that only fair margins of profit were made and that the New Zealand and other butters reached the consumer at the lowest possible price. As things stood at present it was probable that the Ministry's butter account was running at a loss and there was certainly no intention to operate it for a profit. So far as was possible, within the limits of wartime freights, insurance, and other costs, every effort would be made to preserve the ordinary differentials between New Zealand and other butters. If owing to circumstances it could be shown at the end of the war that substantial profits had been made out of New Zealand butter by the United Kingdom Government, consideration could, of course, be given to the question of their appropriate distribution. " Conclusion 4. " It was agreed, To take note of the statements by Mr. Eraser and the Minister of Eood as set out above. "5. Further Supplies from New Zealand. —Mr. Fraser said that New Zealand were anxious to help in every possible way, but they were without knowledge as to the direction in which they could usefully develop additional supplies. Were there any other commodities other than those already covered in which they could be of assistance ? He mentioned particularly the possibility of sending tinned vegetables. " Conclusion 5. " It was agreed, That the Minister of Food, after inquiring, should communicate with the High Commissioner for New Zealand regarding suggestions for additional foodstuffs from New Zealand for this country." SUMMARY OF NEGOTIATIONS WITH UNITED KINGDOM GOVERNMENT REGARDING FOOD AND OTHER SUPPLIES. Apart from the main negotiations covering wool, dairy-produce, and meat, the scope of discussion was from time to time extended to cover hides, pelts, tallow, canned meats, scheelite, apples, and woolly sheep-skins. A record of the discussions and final agreements secured in these instances is included in the detailed summary covering all negotiations which now follows: —• Wool. Summary of Negotiations for Purchase and Sale of New Zealand Wool-clip. 1939, 13th September— The United Kingdom Government Ministry of Supply communicated to the New Zealand Government (and to the Australian Government also in identical terms) the following memorandum of suggested wool-purchase terms : — (1) His Majesty's Government in the United Kingdom to purchase the whole of the New Zealand wool-clip. This might apply to the clips during the period of the war and the following clip. (2) The New Zealand Government to be the sole agent for the purchase of the clip. (3) Wool required for New Zealand local manufacture to be excluded from the purchase scheme. (4) Wool lying in New Zealand already bought on British or Allied account to go forward if for British or Allied destinations. (5) To the purchase-price agreed upon (delivered to warehouse at port of shipment) there should be added a charge not exceeding per pound to cover all expenses to on board ship.

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(6) Wool to bo paid for on appraisement and not on shipment. (7) Any profit realized to be shared as to 50 per cent, to His Majesty's Government in the United Kingdom, the balance to be distributed between Australia and New Zealand in agreed proportions. Distribution of profits (if any) to be made when the accounts for the final season are closed. Any loss to be borne by His Majesty's Government in the United Kingdom. (8) The price to be paid by His Majesty's Government in the United Kingdom to be the average price realized during the twelve months ending 30th June, 1939, in New Zealand. In New Zealand currency, paragraph (8) meant an average overall price to be disbursed by the New Zealand Government as they thought fit of 9-17 d. per pound. The 1938-39 season had returned prices that were uneconomically low and abnormally so when it was noted that the average returns in the immediately preceding seasons, 193(5-37 and 1937-38, were 15-71 d. and 10-OM. respectively. These figures are of interest because the three-year average was the basis on which purchase-prices were finally fixed. (The three-year average was 11-64 d. New Zealand currency.) The corresponding Australian figures for the three seasons were 16-48 d., 12-51 d., and 10-39 d. respectively —an average of 13-13 d. Australian currency. The sale price eventually agreed for New Zealand wool was 12-25 d. (New Zealand currency), showing an increase of 33-6 per cent, over the 1938-39 average and of 5-24 per cent, over the previous three years' average. The price agreed for Australian wool —13-4375 d.—represented increases of 29'33 per cent, and 2'34 per cent, over the previous year's and the preceding three years' averages respectively. Like increases on New Zealand wool would have given us an average price somewhat short of 12d. per pound, instead of 12'25d. as agreed. The difference in New Zealand's favour is accounted for by the consideration following : — The sharing of profits was agreed to be confined to those profits resulting from raw wool sold for use outside the United Kingdom —a modification from the first draft made at the instance of the United Kingdom Government, by whom it was explained that their policy would be to keep sales within the United Kingdom, whether for military or civil purposes, at a low price approximating cost. Also, instead of a common pool as suggested in point (7) of the first draft above, it was agreed there should be a sharing with New Zealand of profits on sales of New Zealand wool alone, and a corresponding arrangement with Australia. It should be noted that the needs of war create a particularly strong demand, in the United Kingdom and in France, for crossbred wools such as New Zealand produces. Hence relatively little of our clip is available for resale elsewhere, and possibly profits to be divided are restricted accordingly. The higher initial price for New Zealand wool is intended to compensate for that disadvantage. It would clearly have been inequitable if New Zealand had been at a disadvantage through supplying wool of exceptional wartime value ; and this was fairly recognized by the United Kingdom Government. The New Zealand Government pressed the view, relative to point (5) in the memorandum above quoted, that the purchase-price —12-25 d. New Zealand currency as an all-over average —should be net to the fanner for wool delivered at brokers' warehouse. This meant a departure from peace-time practice, under which certain charges incurred subsequent to that delivery-point are debited to the farmer. It was, however, in line with practice evolved during the war of 1914-18 and, more important, was explicitly defined by the New Zealand Government as the basis of price discussions. So defined, the charge to be added to the purchase-price covered : — (i) Brokers'charges .. .. .. .. .. .. 0-625 d. (ii) Appraisement costs .. .. .. .. .. .. 0-053 d. (iii) Transport, &c., from warehouse to ship .. .. .. 0-125 d. (iv) Overhead costs of Marketing Department .. .. .. 0-0625 d. (Figures in pence per pound, New Zealand currency.) The United Kingdom Government, having concurred with the New Zealand Government's views as above set out in the matter of extra charges, the next and final step was to combine in one inclusive sterling f.o.b. figure the purchase price and the extra charges. The combined figure was agreed at 10-55 d. per pound sterling f.o.b. For slipe wool 13-75 d. per pound sterling f.o.b. was agreed as the all-over average. In dealing with scoured wool, the New Zealand Government had due regard to the necessity for continuing to employ the labour normally engaged in the processes of scouring. At the same time they took account of the quantities and types of wool which the United Kingdom Government wished to have scoured in the Dominion. As to prices, the New Zealand suggestion was that payment be on a greasy basis plus costs of scouring and additional handling charges to be fixed by arrangement between the New Zealand Government and the New Zealand Woolscourers' Association, the rates to be approved by the United Kingdom Government. It was agreed (sth December, 1939) that 75,000 bales of greasy wool, of usual types and qualities be scoured in New Zealand, at a charge of l|d. per pound (New Zealand currency). The main provisions of the agreement finally concluded between the two Governments now read as follows : — " An Agreement made this day of , 1940, between His Majesty's Government in the United Kingdom represented herein by of the one part and His Majesty's Government in the Dominion of New Zealand represented herein by of the other part.

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" Whereas with a view to providing for the sale of wool produced in the Dominion of New Zealand and maintaining supplies of wool in the United Kingdom during the war in which His Majesty is now engaged His Majesty's Government in the United Kingdom and His Majesty's Government in the Dominion of New Zealand are satisfied that it is expedient that all stocks of wool now in the Dominion of New Zealand and all wool produced in the Dominion of New Zealand during the period more particularly hereinafter defined shall bo purchased by His Majesty's Government in the United Kingdom through His Majesty's Government in the Dominion of New Zealand upon the terms and subject to the conditions hereinafter contained: " Now therefore it is hereby agreed and declared by and between His Majesty's Government in the United Kingdom (hereinafter referred to as ' the United Kingdom Government') and His Majesty's Government in the Dominion of New Zealand (hereinafter referred to as ' the New Zealand Government') as follows : —• " 1. In this agreement — " The expression ' wool' means any merino or cross-bred greasy wool produced and clipped or removed from the skin in the Dominion of New Zealand and " The expression ' wool year' means a period of 12 consecutive months ending on the 30th day of June in any year. "2. (1) The New Zealand Government shall acquire and sell to the United Kingdom Government and the United Kingdom Government shall purchase from the New Zealand Government at the price and upon or subject to the other terms and the conditions hereinafter provided all stocks of wool situate on the 2nd day of September 1939 in the Dominion of New Zealand and all wool produced in the Dominion of New Zealand after that date but before the end of the specified wool year as hereinafter defined Except so much of those stocks and of the wool from time to time so produced as may in the opinion of the New Zealand Government be required from time to time for manufacture in the Dominion of New Zealand into materials or articles required for domestic use in or for export from the Dominion Provided that the quantity of wool reserved for manufacture for export in any year shall not exceed the average quantity so used in the past five years. " (2) For the purposes of this clause the expression 'the specified wool year ' means —• " If hostilities in the war in which His Majesty is now engaged shall be concluded on or before the 31st day of October in any calendar year, the wool year commencing in that year ; but "If such hostilities shall be concluded after the 31st day of October in any calendar year, the wool year commencing in the next calendar year. " 3. Any wool from time to time purchaseable by the United Kingdom Government under this Agreement shall be delivered by and at the expense of the New Zealand Government free on board ocean going vessel for shipment out of the Dominion and accordingly the New Zealand Government shall be responsible for making and procuring the efficient carrying out of all arrangements from time to time necessary for or in connection with— " (a) The collection and appraisement of the wool and its transport to the most convenient port for shipment to the United Kingdom or other country to which the United Kingdom Government may desire the wool to be shipped ; " (b) The warehousing of the wool at that port or elsewhere in the Dominion of New Zealand; " (c) The loading of the wool at that port on board ship for shipment to the United Kingdom or such other country as aforesaid ; " (d) The insurance of the wool against all risks from the time when the wool shall become the property of the United Kingdom Government up to the time it leaves the warehouse at port of shipment or store at port of shipment for shipment; and " (e) The sale on behalf of the United Kingdom Government at such price as may be determined by the United Kingdom Government and otherwise subject to the directions of the United Kingdom Government of any wool purchaseable as aforesaid which the United Kingdom Government may from time to time desire to sell direct from the Dominion of New Zealand for use outside the United Kingdom. " Provided that if any wool purchased under this Agreement shall in consequence of any unforeseen circumstances arising by reason of the war in which His Majesty is now engaged be kept in store in the Dominion of New Zealand for a period which the parties hereto shall consider so abnormal as to justify an adjustment the United Kingdom Government shall pay to the New Zealand Government in addition to the price of the wool such sum towards the expense incurred by the New Zealand Government in respect of the storage of the wool and its insurance against all risks after the expiration of that period as may be agreed between the parties thereto. " 4. Subject to clause 10 the price payable by the United Kingdom Government to the New Zealand Government for any wool purchased under this Agreement shall be calculated upon the appraised weight of the wool at the rate of— " (a) 13-75 d. (sterling) per pound in respect of slipe wool and " (b) 10-55 d. (sterling) per pound in respect of other wool.

2.— H. 30b.

9

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''5. As soon as any parcel or consignment of wool shall have been appraised the New Zealand Government shall notify the United Kingdom Government of the quantity of the wool as so appraised and the United Kingdom Government shall thereupon pay to the New Zealand Government the price payable therefor under this Agreement and thereupon the wool so appraised shall become the property of the United Kingdom Government. " 6. Notwithstanding anything herein contained the United Kingdom Government reserves the right to reconsider the place of appraisal of any slipe wool purchased under this Agreement and in the event of the exercise of such right such consequential amendments shall be made to this Agreement as may be agreed to between the parties hereto. "7. (1) A separate account shall be kept by the United Kingdom Government showing any profits earned or losses incurred upon all sales pursuant to this Agreement of wool not required for use in the United Kingdom (including any such wool which may be scoured or carbonised on behalf of the United Kingdom Government in the Commonwealth of New Zealand) and such profits or losses shall be ascertained upon such basis as may be agreed between the parties hereto. " (2) Before selling or agreeing to sell direct from the Dominion of New Zealand for use outside the United Kingdom any wool purchased under this Agreement the United Kingdom Government shall notify the New Zealand Government of the price at which such wool is intended so to be sold. (3) As soon as practicable after all wool purchased under this Agreement shall have been disposed of by the United Kingdom Government, one half of any balance standing to the credit of such account shall be paid by the United Kingdom to the New Zealand Government. 8. (1) rhe proceeds of sale of any wool sold by the New Zealand Government on behalf of the United Kingdom Government shall be dealt with by the New Zealand Government in accordance with directions from time to time given by the United Kingdom Government. (2) Subject as aforesaid any sum payable by either of the parties hereto to the other of them under this Agreement shall be paid in sterling to the account of the New Zealand Government or the United Kingdom Government (as the case may be) at the Bank of England in the City of London. 9. (1) The New Zealand Government shall from time to time furnish to the United Kingdom Government such statements and accounts as may from time to time be required by the United Kingdom Government for the purposes of this Agreement in relation to all sales and other dealings in wool purchaseable by the United Kingdom Government under this Agreement. ' (2) Any such statement or account shall if so required by the United Kingdom Government be examined and certified as correct by the Controller and Auditor-General of the New Zealand Government. 10. If either of the parties hereto shall in May in any year so require, the price payable for wool purchaseable under this Agreement during the next wool year shall be reconsidered and increased or reduced to such extent or in such manner as may be agreed between the parties hereto to be expedient by reason of any substantial alteration occurring after the date of this Agreement or the date when an adjustment shall last have been made under this clause (whichever may be the later) in economic or other conditions. 11. This Agreement shall be deemed to have come into force on the 2nd day of September 1939 and shall be construed and have effect accordingly and in particular any act done before the execution of this Agreement pursuant to the arrangements to which this Agreement gives effect shall be deemed to have been done under this Agreement; " In witness, &c." Discussions between New Zealand Government and Dominion Wool Interests. On the 14th September, 1939, a conference was called by the Government of representatives of all sections of the wool industry for the purpose of discussing fully all essential aspects which should be taken into consideration in negotiating the sale of New Zealand wool to the Imperial Government. Present on this occasion were — Hon. W. Nash, Minister of Marketing, in the Chair. Hon. W. Lee Martin, Minister of Agriculture. Mr. H. D. A eland, President of the Sheepowners' Federation. Mr. W. W. Mulholland, President, New Zealand Farmers' Union. Mr. T. A. Duncan, Chairman, New Zealand Meat-producers Board. Sir Alexander Roberts, President, Stock and Station Agents. Mr. A. E. Mabin, President of the Woolbrokers' Association. Mr. C. G. Prevost, New Zealand Woolbuyers' Association. Mr. D. Allen, Messrs. Wright, Stephenson, and Co., Ltd. Mr. J. G. Barclay, M.P. for Marsden. Mr. D. 0. Williams, Director, Bank of Now Zealand. Mr. 11. M. Christie, President of the Wool Council. Messrs. Smallwood (State Advances Corporation), Snell (Public Trust Office), and Fawcett (Department of Agriculture). At an early stage in this conference a sub-committee was set up for the purpose of investigating costs of production and of recommending to the Minister of Marketing a possible purchase-price which would cover these costs and maintain the woolgrowiug industry. The same day this committee recommended a minimum price of 12d. per pound New Zealand currency.

10

H.—3ob.

Subsequent to the preliminary negotiations the Minister of Marketing decided to set up a Wool Advisory Committee, who would be charged with the responsibility of supervising the purchase and sale operations, and of advising the Minister from time to time on all matters of importance. The personnel of this Committee is as follows : — Hubert Maxwell Christie, Esq.; Alfred Hyde Cockayne, Esq., 1.5.0., Chairman ; George Andrew Duncan, Esq. ; David Alexander Ewen, Esq. ; Sir Alexander Fowler Roberts, K.B.E. ; and Albert Smith, Esq. In respect of slipe wool, frequent conferences were held throughout the period of negotiation with the members of the special committee set up by the North Island and South Island Freezing Companies' Associations and meat operators, particularly with regard to the question of the purchase-price offered by the United Kingdom Government and as to whether appraisal should be carried out in New Zealand or in the United Kingdom. Agreements with Woolbrokers, Woolbuyers, and Woolsoourers. Woolbrokers. —Concurrently with the conduct of sale and purchase negotiations, the Ministers of Marketing and Agriculture conferred with the above associations for the purpose of defining the functions and remunerations to be received by members of each section in respect of the preparation of the New Zealand wool-clip for export, and of its appraisement. At the end of October, .1939, a formal agreement was concluded between the individual members of the New Zealand Woolbrokers' Association and the New Zealand Government (see Schedule No. 1 of the Appendix), the main provisions of which were — Members of the association to operate as Government woolbrokers for the duration of the purchase agreement and on the following main terms : — (1) The woolbroker to cover all wool for insurance risks after entry into store until such time as the wool becomes the property of the Crown. (2) The woolbroker to undertake storage and preparation of wool for appraisement and all other duties in this respect. (3) In consideration of these services rendered by the woolbroker the Minister of Marketing (acting on behalf of the New Zealand Government) to pay to each broker by way of remuneration a sum calculated at the rate of 10/16 d. for every pound weight of wool appraised in the store of that broker. Woolbuyers.—Similarly, after considerable negotiation with the executive committee of the New Zealand Woolbuyers' Association, an agreement was concluded between the association and the Government covering the services of members of the association for the appraisal of New Zealand greasy, slipe, and scoured wools. This agreement is printed in full as Schedule No. 2of the Appendix. The following are the main provisions : — (1) The New Zealand Woolbuyers' Association to provide offices and a sufficient staff to enable it to undertake the examination, classification, and appraisement of all wool purchased by the Crown and all clerical, accounting, and other work ordinarily incidental thereto. (2) The New Zealand Woolbuyers' Association to perform the agreed services to the satisfaction of the Government Departments concerned. (3) In consideration of the services rendered by the New Zealand Woolbuyers' Association, the Minister of Marketing (acting on behalf of the New Zealand Government) to pay to the association a sum calculated at the rate of (>os3d. for every pound weight of wool appraised. Provision is also made for an additional payment under certain conditions. Woolscourers. —A third agreement was entered into between the Government and members of the New Zealand Woolscourers' Association, covering the scouring of wools selected for that purpose, under contract, and on a basis identical with the offer made by the British Government —namely, a total of 75,000 greasy bales to be scoured for an inclusive charge of l|d. per pound. A copy of this agreement is included at the end of this report, forming Schedule No. 3 of the Appendix. Meat. Summary of Negotiations for Purchase and Sale of New Zealand Meal. On the sth September, 1939, advice was received from the High Commissioner in London that the United Kingdom Government were desirous of purchasing the entire exportable surplus of New Zealand frozen beef, mutton, lamb, pork, and edible offals on the following broad basis : — (a) Purchase-price to be an f.o.b. sterling payment in London, 50 per cent, on shipment and 50 per cent, on arrival. (b) No storage in New Zealand payable by the British Government, but in the event of any hardship due to shipping hold-ups the matter may be raised for discussion. (c) The United Kingdom Government were not prepared to cover insurance in store whilst awaiting shipment.

11

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(d) The suggested price basis was the I.M.T.A.* official average price, calendar year 1938, worked back to an f.o.b. basis. Any classes of meat not included in the I.M.T.A. calendar to be subject to special discussion. Identical terms were also cabled simultaneously to the Commonwealth Government of Australia. After careful examination of these proposals the New Zealand Government cabled on the 14th September the following counter-proposals : —• (a) Full payment desired at f.o.b. with an advance of 75 per cent, of the declared f.o.b. value against store warrants after two months in store. (b) Non-lia,bility of the United Kingdom Government agreed upon, but subject to New Zealand having the right of revision should any shipping hold-up occur. (c) The non-liability of the United Kingdom for insurance whilst in store was agreed. (d) The New Zealand Government were agreeable to accepting the 1938 I.M.T.A.* official average prices as a basis for negotiation, whilst at the same time reserving the right to make qualifications in cases where the I.M.T.A. classifications were disadvantageous to certain classes of the Dominion's meat products. Price negotiations therefore commenced on the basis of 1938 I.M.T.A. prices. The methods adopted by the British Government in converting I.M.T.A. prices (which were more or less on an ex-store London basis) to an f.o.b. New Zealand basis were as follows :— (1) Freight was taken at latest pre-war rates as determined by the contract with the shipping companies for the 1936-39 period. (2) Insurance was allowed for at 245. sd. cent., which covered ninety days in New Zealand, plus voyage, plus sixty days in the United Kingdom. (3) Provision was made for one month's port management rate in United Kingdom (at 355. per ton) and port rate at 2s. per ton. (4) Commission was allowed for at 2 per cent. After consultation with the Meat-producers Board, the Government decided to make a protest against the deduction of the full 2-per-cent. commission, maintaining that under pre-war conditions a very considerable proportion of New Zealand meat was not subject to commission charges as it was delivered directly ex-ship to wholesale and retail buyers and without the employment of an intermediary. The United Kingdom Ministry of Supply, however, contended that the deduction was a just one, and the Dominion eventually decided not to press the matter further as it would tend to delay price discussions unduly. Other important points which were the subject of negotiation with the United Kingdom Government were— (i) Accumulated Stocks in New Zealand.—On the outbreak of war the New Zealand Government represented to the United Kingdom Government that the carry over of mutton and lamb which resulted from the United Kingdom quota procedure for the previous year had resulted in abnormal supplies in freezing-works and cool stores in the Dominion, and a request was made for additional shipping tonnage to lift 800,000 freight carcasses, mostly mutton, which was then available for immediate shipment. The United Kingdom Government recognized that failure to clear, these accumulated stocks would interfere with the handling ol new season's killings and arranged an effective clearance of all accumulated stocks. (ii) Chiller-quality Beef. Since the despatch of beef in chilled form was to be suspended under war conditions, the New Zealand Government in their first observations (13th September) on the United Kingdom purchase proposals made the point that prices at frozen-beef levels would prejudice the return on cattle specially bred for the chilled trade. They asked that meat normally shipped as chilled be paid for at chilled rates, even though it were now sent frozen. The reasonableness of this contention was at once conceded by the United Kingdom Government, and the New Zealand request was agreed to on 15th September. (iii) Outside Markets.—ln agreeing that the Dominion's "exportable surplus" be sold to the United Kingdom Government, the New Zealand Government made an express reservation of the small quantity of: meat required to retain the Dominion's regular trade outside the United Kingdom. To this reservation the United Kingdom agreed (20th September, 1939). On 23rd September, 1939, the New Zealand Government inquired from the United Kingdom Government whether the shipment of 15,000 freight carcasses to New York would be permitted, or did the United Kingdom Government wish the supply to be conserved for themselves ? The reply was that the United Kingdom Government wished all meat to be conserved for shipment to the United Kingdom. (iv) Pigs.—The United Kingdom Government's first offer (sth September, 1939) for pork was restricted to carcasses of dressed weight 1201b. to 1801b., the reason being that all supplies were wanted for curing, not for sale as fresh pork. The New Zealand Government replied (13th September) that the major proportion of the Dominion's pig production is below 1201b. ; that acceptance of the United Kingdom's suggested minimum would occasion a major change in feeding-arrangements, and that a minimum weight of 101 lb. was requested to meet the New Zealand position. To this request the United Kingdom Government agreed. Later discussions led to agreement that porkers of weights 601b. to 100 lb. would also bo purchased by the United Kingdom Government, with the understanding that at least 75 per cent of the total weight should be in carcasses of 101 lb. to 180 lb.

* Imported Meat Trade Association of London, which published average weekly prices for imported meat.

12

H.—3ob.

Subsequently, in April of this year, in response to further representations by the New Zealand Government, the United Kingdom Government agreed to the entire removal of this restriction for the present season, stipulating only that the percentage of porkers to baconers is to be maintained on approximately the pre-war basis. (v) Survey of Meat. —In line with their general food-purchase procedure, the United Kingdom Government proposed that buyers' and sellers' surveyors in the United Kingdom should be called in for survey of meat " not up to standard." The New Zealand Government (13th November, 1939) suggested that, if a check on grading were desired, United Kingdom officers might be associated in New Zealand with the officers of the New Zealand Meat-producers Board responsible for supervising grading. The United Kingdom Government preferred to follow the recognized custom in terms of which buyers of meat, in conjunction with sellers, arrange for survey for quality, &c., on arrival of goods. At the same time, they expressed the opinion that, if the New Zealand standard of grading were maintained, claims should not arise (15th November, 1939). (vi) " Telescoping ' Mutton and Lamb.—This, as a space-saving measure, was suggested by the United Kingdom Government. The New Zealand Government (26th October) answered that they could comply, but that they would prefer not to telescope lamb. This being further considered, and weighing possible detriment to carcasses against shipping-space considerations, the United Kingdom Government said that they appreciated New Zealand's reluctance and under normal conditions would agree ; but in view of the shipping problem and the desire to lift all New Zealand supplies, their considered request was that all mutton and lamb be telescoped. The New Zealand freezing companies make a charge of T Ld. per pound to the New Zealand Government for dividing the carcass, and a charge of a like amount is'made by the New Zealand Government to the United Kingdom Government. Note.—Telescoping means severing the carcass crosswise at the pin-bone joint, and then packing the leg portion inside the trunk. This results in a considerable saving in storage and shipping space. Export Grading Standards. It was agreed that pre-war grading standards should continue, and the United Kingdom Government were informed that every effort would be made in New Zealand to ensure strict maintenance of existing grades. Quantity of Meat purchased. This question caused some difficulty during negotiations, for the reason that the United Kingdom Government were obviously desirous of entering into a definite commitment for a stated quantity of meat only, whilst the New Zealand Government naturally pressed for an agreement to purchase" the whole of the " exportable surplus " —a term which had already received detailed definition by the New Zealand Government. On 24th October, when the main price discussions had been completed, the Ministry of Supply indicated, that the agreement was to cover a total of 285,000 tons of meat from the 1939-40 production season, and inclusive also of any carry-over from the previous season. Upon receiving further details of the Dominion's anticipated export kill, this offer was increased to 300,000 tons, but, nevertheless, the Government continued to press for the deletion of any specific quantity. The United Kingdom Government, however, refused to make any commitment to take the exportable surplus, but did undertake to make every endeavour to provide shipping-space for additional quantities and to pay for such additional quantities shipped at the contract prices. Heads of Agreement. The following are the Heads of Agreement finally entered into for frozen meat and frozen offals. This illustrates the complexity of the negotiations regarding prices, as it will be seen that there are over eighty separate price items scheduled :— " Heads of Ag-beement for Pukchase of New Zealand Meat. "1. Quantity, Price, and Shipment. " {a) Commencing with shipments from Ist October, 1939, the Ministry of Food undertakes to buy and the Government of New Zealand undertakes to sell 300,000 tons of frozen meats from the production of the season ending 30th September, 1940, and from the carry-over from the previous season at the f.o.b. prices in sterling shown on the attached schedule. " (b) In addition, the Ministry, subject to freight being available, will use its best endeavours to ship additional quantities available for export within the limits of its requirements, such quantities to be paid for in accordance with the terms of this agreement. "(c) Subject to freight being available, shipments to be made as far as possible in equal monthly quantities. " (d) The Ministry to accept responsibility for the provision of ships for the ocean transport of the meat. " (e) Payment to be made in London as to 90 per cent, on shipment and 10 per cent. within twenty-eight days after arrival or, in case of steamer being lost, of estimated due date of arrival. " (/) In the event of delay in shipment owing to the inability of the Ministry to provide ocean-going ships, the Ministry undertakes to make payment on account in accordance with

13

IT. —30b.

arrangements to be agreed with the New Zealand Government in the light of actual experience up to the 31st January, 1940. " 2. Conditions of Purchase. " (a) The meat purchased to be of the usual description and grades as at present shipped from New Zealand. " (6) Buyers to have the right to survey meat upon arrival for quality and, if not up to the standard, an allowance to be agreed between buyers' and sellers' surveyors. In the event of disagreement an umpire to be appointed by agreement between the two parties whose decision shall be final. " (c) In the event of any claims for short weight arising, such claims to be based on the customary rules of the trade with 1 per cent, franchise. (d) Carcasses of mutton and lamb to be cut and telescoped as indicated by the Ministry, the Government of New Zealand to be compensated by a charge of T Vd. per pound over schedule prices on all carcasses so cut. "3. Storage. " {a) The New Zealand Government will be responsible for placing the meat on board steamers in good frozen condition for shipment as they become available. " (b) The Ministry undertakes, in the event of meat having to be kept in store in New Zealand for an unduly long period owing to the inability of the Ministry to provide oceangoing ships, to make payments towards the consequential additional costs of storage in accordance with arrangements to be agreed with the New Zealand Government in the light of actual experience up to the 3.lst January, 1940. " 4-. Bills of Lading. " Bills of lading will be prepared, the shipper being shown' as the New Zealand Government and the consignee as the Ministry of Pood. Bills to be handed to agents in the country of shipment to be nominated by the Ministry. Shipping specifications for meat to be forwarded with the bills of lading. "5. Loss prior to Ocean Shipment. " All meat shall in respect of fire and all other loss or damage be at the risk of sellers until it is placed f.o.b. ocean steamer, except that in cases where meat is forwarded from one ocean shipping port for shipment on board ocean steamer at another port on through bills of lading such meat shall be at the risk of the Ministry of Food from the point of departure from the initial port. " Ministry of Food, 6th December, 1939. "F. 0.8. Meat-prices, New Zealand (Sterling) : F. 0.8. Prices agreed with New Zealand in Respect of Meat Purchases. " Lambs — . , n , « n •— n Agreed Purchase Price. Prime Down Cross— Per Pound " 2's, 36 lb. and under .... gsj "B's, 37/42 lb " " 6^d " 4's, 43/50 lb. .. .. .. .. . . 6 j d ' " Tegs, 51 lb. and over . . . . . . , , s_6 d " Prime Canterbury— " 2's, 36 lb. and under .... 6 J d " B's, 37/42 lb. .. .. ' " " 63 d ' " 4's, 43/50 lb. .. .. .. . . . . ' 6d! " Tegs, 51 lb. and over . . . . . . . . gij " Prime Crossbred— " 2's, 36 lb. and under .. .. 6 3 d " B's, 37/42 lb. .. . . ' " eld ' " 4's, 43/50 lb. . . .. .. .. . i " s i d ; " Tegs, 51 lb. and over .. .. .. .. g| c ]^ " Second Quality— " 36 lb and under . . . . .. 57^ " Over 36 lb. .. .. ~ ~ " Prime Wethers and Maiden Ewes— " 48 lb and under .. . . .. , , 4-5-rl " 49/56 lb. .. .. ~ 07J " 57/64 lb A j " 65/72 lb oft ' " Over 72 lb 3d. ' " Second-quality Wethers — " 56 lb. and under .. .. .. 3ALd " Over 56 lb. .. .. .. .. ou " Ewes— " 64 lb. and under .. .. ~ _ o^d " Over 64 lb. .. .. .. .. 2|d

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Agreed Purchase Price. ~ ... , , Per Pound. Boneless ox beef . . , . . . . , g.sj " Boneless bull beef .. .. . . . . 3!^ " Boneless cow beef . . . . .. .. 31^ " Boneless veal . . . . . . . 3^ " Boneless bobby veal . . . . , . 41^ " Yeal (in quarters or sides) .. . . . . , . ~ 2M " Baconers and Porkers — " First quality 6d. \All weights Second quality sf d ./ (>()/] 80. ( Choppers .. . . . . . . . . .. . . 4d. " Singed carcasses : per pound additional. " 75 per cent, of total weights to be 101 /180 range. " Pork Cuts— " Headless sides . . . . . . 6- 6 -d " Headless sides, singed .. .. .. . . _ _ " Wiltshire sides .. .. .. ~ qb ( j " Wiltshire sides, singed .. .. .. .. .. .. 6-jfd " Flitches .. .. .. .. .. g<j " Flitches, singed .. . . . . ~ 6-jtd " Shoulders (square cut) . . . . 411,1 " Middles .. .. . . . ; ;; 7d. ' " Rib backs .. .. ~ ~ ~ 7^d " Boston butts .. . . . . . . , , 51^ " Legs (long cuts) . . .. .. .. .. " g| d ' " Beef— 8 " Ox and Heifer— " G.A.Q. — " Hinds ■ • • • ■ • • • .. .. 4fd. "Fores •• • • •• .. .. 2&d. " F.A.Q. all Weights— " Hinds .. . . q_7 al7 ...... o l6 a. * ores 2|d. Cow — " G.A.Q. all Weiglits— " Hinds .. .. .. 01.1 « -n, ' • • • 4 H ores .... 97H " Offals— fn " Beef— " Tongues .. .. .. .. .. .. 6M "Tails 4<l " Kidneys .. .. .. .. .. .. Bd. " Livers .. .. .. .. _ _ _ g,} " Sweetbreads . . .. .. , , . . 6d " Hearts .. .. .. .. oi j " Cheeks . . . . , , 21(1 " Skirts (thick) .. .. .. .. ~ _ _ 4!^ " Skirts (thin) .. .. . , ~ _ _ _ _ 2 3 d " Tripe (raw) .. .. .. .. , _ . . l 3 d Fillets : Price to be fixed on arrival after examination. " Veal— Tongues Ofd. Livers (in pails) . . . . . . _ . _ _ 9 ( j " Livers (in bags and boxes) .. .. .. ~ gl<j. " Sweetbreads . . . . . . ~ ~ gi^ "Kidneys .. .. .. .. giY " Hearts .. .. .. .. _ _ .. 3d ~ _ Hearts (bobby) .. .. .. ~ _ _ . . Is. 6d. per dozen. J jamb— " Livers (in pails) .. .. , . .. 7^ " Livers (in cases).. .. .. . . .. Q3 C [ "Sweetbreads .. .. .. .. .. 7M " Tongues .. . . . . . . . . s |^ ~ Hearts . . . . . . ~ . . Is. per dozen. " Mutton— F L _ ivers Hearts .. .. .. .. __ .. Is. 6d. per dozen. Kidneys .. .. .. ~ ~ .. Is. 4d. per dozen. , Kidneys (special) .. .. ~ ~ _ _ lg. Bd. per dozen. " Tongues .... Krl " Pork— " Livers .. .. .. . . , . .. _ _ 51^ " Kidneys . . . . . . . . . . 6d " Tongues .. .. .. .. .. .. sd! Hearts • • ■ • ■ • • • •. Is, 6d. per dozen,

15

FT.—3ob.

Canned Meat. The clearance of frozen meat from the Dominion, to date, has been so satisfactory that the disposal of supplies in canned form has so far proved less urgent than had been apprehended. Since the start of the war the New Zealand Government had been in continuous touch with the United Kingdom Government to ensure that the maximum of required canned-meat supplies, at appropriate prices, are drawn from New Zealand. All offers to purchase are submitted by the Ministry of Food to the New Zealand Government. Rabbit Meat. The United Kingdom Government's reply to the New Zealand Government's inquiry at the outbreak of war was that the Government did not propose to purchase this meat. Priority in shipping space was desired for meat and dairy-produce purchased by the United Kingdom Government. If, however, shipping space proved to be available, frozen rabbits could be shipped to the United Kingdom and marketed at controlled prices. In recent months it has been found possible to ship small quantities of frozen rabbits. Other Meat, By-products. The United Kingdom Government also confirmed that the purchase of bobby-calf skins was not contemplated, and that sausage casings, though required in the United Kingdom, would not be purchased by the Government, but. would probably be controlled in the United Kingdom under a price order. Calf-veils were not, till very recently, under consideration for purchase by the United Kingdom Government, but these are now the subject of discussion. Discussions with Meat Industry and Producers in New Zealand. Shortly after the outbreak of war (on the Bth September), the Acting Prime Minister and the Ministers of Marketing and Agriculture met the Chairman and members of the New Zealand Meatproducers Board in a preliminary conference, at which broad aspects of the possible purchase of the Dominion's export meat products by the United Kingdom were discussed. Two further conferences were held during September, and it was agreed that the Meat-producers Board would be consulted throughout the period of negotiation between the two Governments. On the 4th October the Minister of Marketing, after consultation with the Meat-producers Board, called a conference of representatives of all freezing-companies, meat-exporters, and bacon-curers, together with members of the Board and officers of the Departments of Agriculture and Marketing. At this meeting the following Executive Committee was elected to represent the meat trade at all further conferences between the industry and the Government: — Meat Board representatives : Messrs. T. A. Duncan, H. D. Acland, D. Allen. Freezing companies' representatives: Messrs. J. P. Mackay, A. Rowlands, W. 0. Campbell. Meat-exporters' representative : Mr. W. Richmond. Bacon-curers' representative : Mr. C. Hauseman. This Committee had frequent conferences with the Meat Board, and, in addition, the following persons were appointed as members of the Price Committee for the purpose of assisting the New Zealand Government throughout the detailed price negotiations with the United Kingdom Government: Messrs. T. A. Duncan, D. Allan, and li. E. Worsp (Meat Board) ; J. P. Mackay and A. Rowlands (freezing companies' association). The Government is indebted to this Committee for the valuable assistance rendered. After a series of conferences between the Ministers of Marketing and Agriculture, members of the Meat Board and the meat-trade representatives, the marketing procedure to be operative during the period of Government purchase was embodied in the following letter addressed to the Chairman of the Meat Board by the Hon. W. Nash on the 18th November, 1939 : — " Dear Me. Duncan, — I desire to confirm the discussions between us in regard to the procedure to be followed in connection with the purchase of meat for the United Kingdom Government. " The Government is prepared to accept the following recommendation which was placed before the Hon. the Minister of Agriculture and myself as being the unanimous decision of your Board in consultation with the freezing companies and meat-exporters — " ' The method of procedure should be that the Marketing Department pay the fixed f.o.b. prices for all classes of meat purchased by the United Kingdom Government to the freezing companies and operators; the price paid to the grower being left in the hands of the trade. The trade to provide the Department of Agriculture with returns showing the prices paid to farmers and what deductions have been made to cover the intervening charges from farm to f.0.b., together with any further information required in order to enable the Department to decide whether the prices being paid are fair and reasonable. " ' The open door to farmers to be maintained, subject probably to conditions which will be laid down by the Marketing Department involving the possible pooling of farmers' individual consignments.' " In accepting this method of procedure, the Government only does so provided the operations of the freezing companies both as regards freezing services and buying operations

16

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are subject to an audit either by the Auditor-General or by a private firm of auditors approved of by the Government and reporting to it. " I understood your Board approved of this procedure, and as the Government has treated your Board as its immediate negotiator in all matters connected with the United Kingdom Government purchase of frozen meat, I shall leave you to communicate the Government's decision to the meat-freezing companies. " It was understood between us at our discussions that the overhead expenses of the Marketing Department and the Department of Agriculture would require to be a first charge on the prices agreed on with the United Kingdom Government. " I would suggest that one deduction, be made by the Marketing Department to cover the above-mentioned overhead expenses, and also the estimated expenses of your Board. This latter sum, which I understand is estimated at £30,000 per annum, would be paid over to your Board by the Marketing Department. " A basis of deduction on a percentage rate has been prepared, the resultant net prices payable for the meat, on an f.o.b. basis in New Zealand currency, have been submitted to your officers for ultimate reference to your Board. " I trust that the arrangements agreed will work satisfactorily. " Yours sincerely, "W. Nash." Purchase-prices to be paid to Freezing Companies. In accordance with the procedure outlined in the foregoing letter, the f.o.b. prices payable in New Zealand currency as set out in the schedules attached to the Meat Marketing Order 1939, Amendment No. I, were arrived at by converting the sterling f.o.b. prices agreed with the United Kingdom Government at the current telegraphic transfer rate of £124 7s. 6d. and deducting therefrom | per cent, to cover :— (a) Marketing Department expenses. (b) Interest: The Marketing Department pays shippers 100 per cent, of the schedule price on shipment and recovers 90 per cent, on shipment and 10 per cent, within twenty-eight days after arrival in United Kingdom. The interest charge incurred is covered in the J per cent, deduction. (c) New Zealand Meat-producers Board expenses of £30,000 per annum. Prices paid to Farmers for Stock. In pursuance of the agreement with the Now Zealand Meat-producers Board, the Government has left it with the Board and with the Department of Agriculture to ensure that farmers receive for their stock the full equivalent of the f.o.b. prices paid to the meat exporters for frozen meat, wool, skins, hides, and other by-products, after all the charges, including freezing, &c., have been provided for. DAIRY-rBODUCE. Summary of Negotiations for Purchase and Sale of New Zealand Dairy-produce. General Basis of Discussions. —On the 6th September the United Kingdom Government gave their interpretation of the main features of the proposed agreement to cover the purchase of New Zealand's exportable surplus of dairy-produce. This was —• (a) Payment in sterling at f.o.b. in accordance with the quality indicated by New Zealand Government grading classifications : (b) All charges in connection with storage and insurance to f.o.b. to be the responsibility of the New Zealand Government, with provision for discussion in the event of hardship through hold-up of shipping : ( c) Maintenance of pre-war standards of wrapping and containers. The main counter proposals which were put forward by the New Zealand Government on the 10th September, were as follows : — (1) Agreement to sell total exportable surplus to the United Kingdom on an f.o.b. basis, apart from approximately 2,000 tons to be supplied to regular markets outside the United Kingdom : (2) An advance of 75 per cent, of the f.o.b. value to be given by the United Kingdom against store warrants one month after date of grading : (3) United Kingdom to be responsible for storage charges after produce had been an average of two months in store in New Zealand. Price Basis. In the first instauce the United Kingdom had suggested a possible price basis of the 1938 or 1939 average market realizations, but at a later stage put forward a tentative figure of 121s. butter and 70s. cheese per hundredweight sterling ex store London, to be converted back to the f.o.b. New Zealand equivalent. Now Zealand in reply stated that on the same basis the minimum prices acceptable to the Dominion were 1255. per hundredweight for butter and 745. per hundredweight for cheese.

3—II. 308.

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Finally, after considerable discussion, which continued until the middle of November, the following prices were agreed upon, with the necessary differentials for quality variations Butter : 112s. 6d. per hundredweight sterling f.o.b. for finest grade. After allowing for costs from the point of f.0.b., New Zealand, to landed into store, United Kingdom, at pre-war prices, the f.o.b. sterling price of 112s. 6d. is equivalent to 1235. 2d. per hundredweight sterling landed London. Cheese : 645. 3d. per hundredweight sterling f.o.b. This price calculated oil the same basis as for butter is equivalent to 735. lid. per hundredweight sterling landed at London. Outside Markets. Supplementing these price agreements, it need only be added that by a later exchange of cables the New Zealand Government affirmed, and the United Kingdom Government agreed, that, New Zealand was free to continue to supply her normal outlets other than to the United Kingdom. Quantity purchased. As in the case of the Meat Agreement, the New Zealand Government made every endeavour to secure adherence to the principle that the quantity to be purchased covered the " available exportable surplus." However, the United Kingdom Government were insistent on defining quantities, although an undertaking was given in the agreement that every endeavour would be made to provide shipping space and to pay for additional quantities, such quantities to be paid for at the contract prices. It should be noted that the final quantity agreed upon of 115,000 tons butter, and so stated in the contract, is that portion of the 1939-40 season's production shipped from Ist October, 1939. To this quantity must be added some 4,000 tons to 5,000 tons of the 1939-40 season's production which was shipped from New Zealand prior to Ist October, 1939, and which was taken over by the Ministry of Food and paid for on the basis of the contract prices. This total quantity of approximately 120,000 tons was a small increase over the 1938-39 season's shipments to the United Kingdom. The quantity of cheese to be purchased was 84,000 tons, which was an increase on the 1938-39 season's shipments to the United Kingdom. Later the Ministry of Food advised that if the quantity of cheese could be increased by 5,000 tons or more it would substantially help them. The agreements for butter and cheese purchase are as follows: — " Heads of Agreement foe Purchase of New Zealand Bittter. "1. Quantity, Price, and Shipments. " (a) Commencing with shipments from Ist October, 1939, the Ministry of Food undertakes to buy, and the Government of New Zealand undertakes to sell, 115,000 tons of butter from the production of the season ending 31st July, 1940, at f.o.b. sterling prices specified in paragraph 2 (a) below. " (6) In addition, the Ministry, subject to freight being available, will use its best endeavours to ship additional quantities available for export within the limits of its requirements, such quantities to be paid for in accordance with the terms of this agreement. " (c) Subject to freight being available, shipments to be made according to a monthly schedule to be determined by the Ministry based on the 1938-39 shipping programme. " (d) The Ministry accept responsibility for providing ships for the ocean transport of the butter. " (e) Payment to be made in London as to 90 per cent, on shipment and 10 per cent, within twenty-eight days after arrival or, in case of the steamer being lost, of estimated due date of arrival. " (/) In the event of delay in shipment owing to inability of the Ministry to provide ocean-going ships, the Ministry undertakes to make a payment on account amounting to 50 per cent, of the value of any butter which has had to remain in cold store for more than two months by reason of the inability of the Ministry to adhere to the shipping programme referred to in clause 1 (c) above. "2. Conditions of Purchase. " (a) Quality and Price :— " Creamery Finest Grade, 93 points and over, at 112s. fid. per hundredweight delivered f.o.b. ocean steamer. " Creamery, First Grade, 90 points to 92| points, at Is. 3d. per hundredweight less. " Creamery, Second Grade, ss. per hundredweight less. " Whey, First Grade, Bs. per hundredweight less. " Whey, Second Grade, 12s. per hundredweight less. " (b) Weights.—Each box of butter shall contain 56 lb. 2 oz. of butter. Loss of weight to be calculated on the average of graders check weights on each grade-note. Payment to be on the basis of 56 lb. per box, less any loss disclosed by grade-notes. All butter to be packed in new regulation export boxes made of thoroughly seasoned timber lined with genuine vegetable parchment, double thickness, or the material known as 1 parchfoil,' both of equal quality to that hitherto used and approved. " (c) Salting.—All butter to contain salt in accordance with New Zealand Government's regulations with a maximum of 2 per cent.

18

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" (d) Preservative. —Preservative will not be included unless specially ordered by the Ministry of Food. " (e) TJnsalted Butter. —If supplies of unsalted butter or lightly salted butter are required by the Ministry of Food special arrangements will be made regarding the price to be paid for such butter. " (/) All butter to be free from any adulteration whatever, and moisture content not to exceed 16 per cent. "3. Quality. " The grading certificates of the New Zealand Government will be accepted as evidence of quality and weight, it being understood that the pre-war standard of grading is maintained. The New Zealand Government undertake to maintain a suitable staff of qualified graders in New Zealand as well as appropriately qualified Inspectors in the United Kingdom to deal with any complaints as to quality after arrival. Claims on quality, if not capable of mutual adjustment, to be adjusted by an independent umpire to be selected by mutual agreement. " 4. Storage. " (a) The New Zealand Government will be responsible for storing butter in suitable stores at suitable temperature in New Zealand and will be responsible for placing butter on board steamers for shipment as they become available. " (b) The Ministry undertake that, in the event of butter having to be kept in store in New Zealand for an unduly long period owing to the inability of the Ministry to provide ocean-going ships, they will be prepared to make payments towards the consequential additional costs of storage in accordance with arrangements to be agreed with the New Zealand Government in the light of actual experience up to the end of January, 1940. " 5 Bills of Lading. " Bills of lading will be prepared, the shipper being shown as the New Zealand Government and the consignee as the New Zealand Government Dairy Sales Division. Grade-notes to be forwarded with the bills of lading. " 6. Loss prior to Ocean Shipment. " All butter shall in respect of fire and all other loss or damage be at the risk of sellers until it is placed f.o.b. ocean steamer, except that in cases where butter is forwarded from one ocean shipping port for shipment on board ocean steamer at another port on through bills of lading such butter shall be at the risk of the Ministry of Food from the point of departure from the initial port. " 7. Arrivals on or after Ist October not covered by Paragraph 1. " The Ministry agrees that arrivals of New Zealand butter in the United Kingdom on or after Ist October, 1939, shipped from New Zealand before that date will be paid for at a landed price equivalent to the f.o.b. prices in paragraph 2 (a) above. " (Signed) W. J. Jordan. " (Signed) W. S. Morrison. " Ministry of Food, 16th November, 1939." " Heads of Agreement for Purchase of New Zealand Cheese. " 1. Quantity, Price, and Shipments. " (a) Commencing with all arrivals after 20th November, 1939, the Ministry of Food undertakes to buy, and the Government of New Zealand undertakes to sell, 84,000 tons of cheese at f.o.b. sterling prices specified in paragraph 2 (a) below. " (b) In addition, the Ministry, subject to freight being available, will use its best endeavours to ship additional quantities available for export within the limits of its requirements, such quantities to be paid for in accordance with the terms of this agreement. " (c) Subject to freight being available, shipments to be made according to a monthly schedule to be determined by the Ministry based on the 1938-39 shipping programme. " (d) The Ministry accept responsibility for providing ships for the ocean transport of the cheese. " (e) Payments to be made in London as to 90 per cent, on shipment and 10 per cent, within twenty-eight days after arrival or, in case of the steamer being lost, of estimated due date of arrival. "(f) In the event of delay in shipment owing to inability of the Ministry to provide ocean-going ships, the Ministry undertakes to make a payment on account amounting to 50 per cent, of the value of any cheese which has had to remain in cold store for more than two months by reason of the inability of the Ministry to adhere to the shipping programme referred to in clause 1 (c) above.

19

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" 2. Conditions of Purchase. " (a) Quality and Price. Price delivered f.o.b. Steamer. " Finest and First Grade, 91 points and over 645. 3d. per hundredweight. '' Second Grade .. .. .. At 2s. per hundredweight less. " (b) All cheese to be white and unwaxed. " (c) Shrinkage.—Shrinkage at the rate of per cent, will be deducted from the checked packed weights of cheese. Should the actual shrinkages, as ascertained in London, in respect of the cheese from any particular dairy company prove to be consistently higher than 2£ per cent, the shrinkage deduction on subsequent shipments will be increased accordingly unless it is evident that such excess shrinkage arises from abnormal periods of storage. " (d) Loss of Weight. —To be calculated on the average of graders checked weights on each grade-note. "3. Quality. " The grading certificates of the New Zealand Government will be accepted as evidence of quality and weight, it being understood that the pre-war standard of grading is maintained. The New Zealand Government undertake to maintain a suitable staff of qualified graders in New Zealand as well as appropriately qualified Inspectors in the United Kingdom to deal with any complaints as to quality after arrival. Claims on quality, if not capable of mutual adjustment, to be decided by an independent umpire selected by mutual agreement. " 4. Storage. " (a) The New Zealand Government will be responsible for storing cheese in suitable stores at suitable temperature in New Zealand, and will be responsible for placing cheese on board steamers for shipment as they become available. " (b) The Ministry undertake that, in the event of cheese having to be kept in store in New Zealand for an unduly long period owing to the inability of the Ministry to provide oceangoing ships, they will be prepared to make payments towards the consequential additional costs of storage in accordance with arrangements to be agreed with the New Zealand Government in the light of actual experience up to the end of January, 1940. "5. Bills of Lading. " Bills of lading will be prepared, the shipper being shown as the New Zealand Government and the consignee as the New Zealand Government Dairy Sales Division. Grade-notes to be forwarded with the bills of lading. " 6. Loss prior to Ocean Shipment. " All cheese shall in respect of fire and all other loss or damage be at the risk of sellers until it is placed f.o.b. ocean steamer, except that in cases where cheese is forwarded from one ocean shipping port for shipment on board ocean steamer at another port on through bills of lading such cheese shall be at the risk of the Ministry of Food from the point of departure from the initial port. " (Signed) W. J. Jordan. " (Signed) W. S. Morrison. " Ministry of Food, 16th November, 1939." Discussions between the New Zealand Government and the Dairy Industry. Because of the existence of the guaranteed-price procedure, the discussions which took place between the representatives of the dairy industry and the New Zealand Government relative to the sale of the Dominion's exportable surplus of dairy-produce to the United Kingdom were on an entirely different basis to that of the other primary products. In the case of these other products, particularly wool and meat, the conclusion of a purchase and sale agreement between the two Governments involved a complete departure from pre-war procedure, necessitating frequent conferences between the Minister of Marketing and representative organizations of the various industries for the purpose of ensuring that the agreements concluded, and the marketing procedure evolved, should give full consideration to the interests of all sections. With dairy-produce, however, a sale and purchase agreement between the two Governments did not materially affect the domestic working of the industry, and, in fact, constituted not a departure from pre-war practice but rather a continuance. As early as Bth September the New Zealand Government had indicated to the New Zealand Dairy Board that, quite apart from any finalization of an agreement with the United Kingdom Government, the Government would continue to purchase the whole of the butter and cheese manufactured within the Dominion. During the month of September the Minister of Marketing held several conferences with representatives of the dairy industry, and particularly the New Zealand Dairy Board, but these discussions related more directly to the price to be paid by the New Zealand Government to the industry for the 1939-40 season, quite apart from any consideration of the prices which the Government might eventually receive from the United Kingdom Government when a purchase agreement had been concluded. On the sth October, 1939, the Minister of Marketing made a formal announcement to the effect that the Government would continue to purchase the total Dominion make of butter and cheese for the 1939-40 season on the same price basis as for the 1938-39 season, although it was not until 15th November, 1939, that a price agreement with the United Kingdom Government was finally

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secured. In order, however, that the dairy industry might be kept fully acquainted with the trend of negotiations between the two Governments, the Minister of Marketing 011 the 30th October, .1939, forwarded to the Chairman of the New Zealand Dairy Board a full summary of the progress of negotiations which had taken place up to that time. On the 17th November, when the final agreement between the two Governments had been completed, the Minister made a public broadcast announcement in which the farming community throughout the Dominion were given full details of the price basis and conditions of this agreement, and a summary also of the main trend of the negotiations. Finally, on the 29th November, the Minister addressed the Dominion Conference of the New Zealand Dairy Board, at which he again gave full details as to the price basis and conditions of the agreement, and of the steps taken by the New Zealand Government during negotiations to ensure that the vital interests of the dairy industry received full recognition. Eggs. Summary of Negotiations for Purchase and Sale of New Zealand Eggs. The United Kingdom Government on the 3rd October, 1939, offered to purchase any export surplus of New Zealand eggs for shipment to 31st December, 1939, at sterling f.o.b. prices equivalent to the following c.i.f. London prices, less last peace-time freight and insurance charges : — Weights (lb.). Prices per Great Hundred (120). 13| to under 15 .. .. .. .. .. 10 0 15 to under 17 .. .. .. .. .. .. 12 0 17 and over .. .. .. .. . . 12 3 The New Zealand Government replied that the supply position was such that there would be no surplus for export in 1939. Fruit. Summary of Negotiations for Purchase and Sale of New Zealand Fruit. At an early date inquiries were made of the United Kingdom Government as to whether they wished to purchase apples and pears. The reply was (cable dated 6th October, 1939) that they had no intention of doing so at that time, but they would endeavour to provide some shipping-space, if shipping developments rendered this possible at the time when fruit was available. The New Zealand Government decided that in view of the uncertain conditions it was necessary to assure the New Zealand fruitgrowers of some income for their produce, and accordingly agreed to pay a fixed price of approximately ss. per case at assembly point. At a later date in the season it was found possible to obtain shipping space for some 700,000 cases of apples for shipment to the United Kingdom, apart from smaller quantities shipped to Canada and Malaya. Tallow. Summary of Negotiations for Purchase and Sale of New Zealand Tallow. Negotiations for the purchase by the United Kingdom of tlie New Zealand exportable surplus of tallow officially commenced 011 30th September, 1939, when the New Zealand Government cabled to London seeking a clarification of policy in order to ascertain whether or not tallow was to be the subject of a purchase agreement in line with dairy-produce, meat, and wool. In reply, the United Kingdom Government stated that arrangements had already been made with private exporters from New New Zealand to cover urgent requirements, and that as soon as possible negotiations would be opened between the two Governments to finalize a purchase agreement. In the interim, therefore, the New Zealand Government permitted the export of tallow to the United Kingdom to continue, on the understanding that arrangements had already been made by the Ministry of Food whereby such tallow was first offered to the Ministry before being sold to private manufacturers in the United Kingdom. These arrangements, continued until 9th December, 1939, when advice was received that the United Kingdom Government desired to make all future purchases through the New Zealand Government, the suggested price basis to be cost and freight with payment of cash against documents, seventy days after the date of bill of lading. In reply to this suggestion, the New Zealand Government indicated their preference for an f.o.b. purchase basis, and in a later advice forwarded the Ministry of Food full details of the quantities and grades available, with the estimated sterling f.o.b. values in line with current parity prices. On the 16th January, 1940, a further advice was received from London expressing reluctance on the part of the Ministry of Food to enter into a long-term contract on the grounds that an f.o.b. purchase basis was unsatisfactory and that the prices already indicated by the Dominion on this basis were up to £2 in excess of current market values. By the end of January, negotiations had again progressed to the point where the United Kingdom made a definite offer to purchase the total exportable surplus of Now Zealand tallow 011 the original basis of cost plus freight. Under this arrangement the sellers were to be responsible for the cost of freight to the United Kingdom, but the buyers were in turn responsible for making all necessary freight space available. This offer was finally accepted by the New Zealand Government, who agreed to make the whole of New Zealand's exportable surplus available, but at the same time requested consideration for the right to continue direct shipment to India of special tallow in normal quantities. This concession was agreed to by the United Kingdom Government, with a fixation of a maximum quantity to be shipped to India of 4,000 tons.

21

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Price negotiations on a c. and f. basis then continued for some weeks, and on the 27th March, 1940, final agreement was reached covering all grades and a formal agreement concluded. This agreement is as follows : — " Heads of Agreement fob Purchase of Tallow. " I. The Ministry of Food undertake to buy and the New Zealand Government undertake to sell (subject to qualifications in two and five below) all surplus tallow available for export from New Zealand of present season (up to 30th September, .1940) at prices set out below " First beef .. .. .. .. .. .. .. 28 0 0 " First mutton .. . . . . . . .. 26 10 0 " Good bright prime mixed .. .. .. .. 23 15 0 " Good colour mixed .. .. .. .. ~ 23 10 0 " Fair to good colour mixed .. .. .. .. 23 0 0 " Fair colour mixed .. .. .. .. .. 22 0 0 " Good gut tallow .. .. .. .. ~ 21 0 0 " Medium gut tallow .. .. .. .. .. 20 0 0 " Low and no colour gut tallow .. .. .. .. 17 10 0 " Premier jus .. .. .. .. .. .. 28 0 0 " Stearine— " Superior .. .. .. .. .. .. 29 0 0 " Medium . . . . . . . . . . 27 10 0 Lard .. .. .. .. .. .. .. 42 0 0 " Pig fat steam-rendered inedible .. .. .. .. 35 0 0 " Hog Grease— " Under 1 per cent, free fatty acid . . . . .. 29 0 0 " 1 per cent, to 2 per cent, free fatty acid .. .. 28 0 0 " 2 per cent, to 3 per cent, free fatty acid .. .. 27 0 0 " 3 per cent, to 4 per cent, free fatty acid .. .. 26 0 0 " 4 per cent, to 5 per cent, free fatty acid .. .. 25 0 0 " 5 per cent, to 6 per cent, free fatty acid .. .. 24 0 0 " 6 per cent, to 7 per cent, free fatty acid .. .. 23 0 0 " 7 per cent, to 8 per cent, free fatty acid .. .. 22 0 0 " 8 per cent, to 9 per cent, free fatty acid .. .. 21 0 0 " 9 per cent, to 10 per cent, free fatty acid . . . . 20 0 0 "2. The New Zealand Government shall be entitled to export to India normal quantity of the quality sold previously to India, not exceeding 4,000 tons. "3. The New Zealand Government will arrange locally for shipment of tallow (advising the Ministry of Food each fortnight of the quantity and quality shipped), and the United Kingdom Government will give every assistance to facilitate provision of freight space. " 4. Payment will be made by the Ministry of Food, under the London Oil and Tallow Trades' Association Contract No. 14/1922, as amended and set out in clause 6 below. •All deliveries under this agreement are to be of established brands and standards of quality, and to be marked in accordance with past custom. "5. It is essential as a term of the contract that the Ministry of Food shall be under no liability in respect of storage charges in New Zealand and will only be responsible for payment in accordance with clause 4 for amount shipped, but if any of the available surplus of the present season remains unshipped after a reasonable period subsequent to 30th September, 1940, has expired the Ministry of Food will release any such balance to the New Zealand Government to enable them to dispose of it elsewhere. "6. Contract—- " (a) Cost, freight, paid to United Kingdom port. " (b) Weight.—To be taken at the shipping weights and tares, but any loss beyond 2 per cent, on the net weight to be made good by the sellers, such net weights being ascertained at a public dock or wharf in or at such other place as may be assented to by the sellers. " (c) Shipments.—Shipment by direct or indirect with and/or without transhipment, by steamer as available from New Zealand. The bill of lading to be the customary form in general use by steamers trading with Australasian ports. For the purposes of this contract the words ' steamer or steamers ' are intended to include any full-powered primarily engine-driven vessel. " W Payment— Payment by cash in London without rebate on arrival of vessel at port of discharge, or on reported loss of same, whichever happens first, against bill(s) of lading and/or delivery order (the latter to be countersigned by banker, shipbroker, captain, or mate, if so_ required). Should bill of lading not be supplied, buyers to be put in the same position as if they had been in possession of such documents, and in no case shall payment be made later than seventy (70) days from date of bill of lading.

22

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" (e) Quality.—As regards quality, this contract to be severable as to each package, and the buyer shall not be entitled to reject any part of a delivery which is in accordance with the contract. In the case of inferiority in quality or condition of part or the whole of any delivery, such part or the whole shall be taken by the buyer at an allowance, or rejected as may be decided by arbitration hereunder. This clause, however, in no way overrides the provision with regard to franchise or dirt and/or water, which must be read as referring to any delivery as a whole. Certificate of Origin : ' These goods are grown, produced, or manufactured in the British Empire and have been or will be shipped from a port in the British Empire, or in such manner as to be in the same position as if shipped from a port in the British Empire.' The seller shall furnish a certificate of origin in the form valid at time of shipment, otherwise he shall be responsible for any duty or extra duty incurred by buyers through non-production of such, certificates. " (/) Analysis. —Should any dispute arise as to the amount of dirt and/or water, the tallow is to be sampled by Messrs. A. Norman Tate and Co. at destination (or such other place as may be assented to by the sellers) and analysed by them, their decision to be final. Any excess of dirt and/or water over 1 per cent, to be allowed at invoice price. Cost of sampling analysis to be paid by the losers. " (g) Delivery.—Each delivery to stand as a separate contract. The name of the vessel and marks and full particulars to be declared to the buyers in writing with due despatch. Should the vessel arrive before receipt of appropriation and extra expenses be incurred, such expenses shall be paid by sellers. " (h) Arbitration.—Any dispute arising out of this contract regarding the quality or weights shall be settled by arbitration in London in accordance with the rules endorsed on this contract, such claim for arbitration to be made within forty-two (42) days of the discharge of the vessel at the port of destination, and to be passed on without delay. The arbitration to-be held within seventy (70) days of the discharge of vessel at the port of destination, unless buyers' and sellers' arbitrators or umpire agree to extend the time. Any other dispute arising out of this contract shall be settled by arbitration in London, as soon as it may arise in accordance with the rules endorsed on this contract. On the application of either party the award may be made a rule of the High Court of Justice or any division thereof. All claims to be made without undue delay." Discussions with Tallow Interests in New Zealand. On the 12th December, 1939, when the first indication was received from the United Kingdom that the purchase of New Zealand exportable surplus of tallow was contemplated, the Minister of Marketing called a conference of representatives of the New Zealand Meat Board, North and South Island Freezing Companies' Associations, Master and. Live-stock Butchers' Associations, and the New Zealand Soap Manufacturers' Association. At this meeting general aspects relating to the possible purchase agreement with the United Kingdom were discussed, and representatives present were invited to submit to the Minister any practical suggestions which would assist in devising the marketing machinery most suitable to meet the situation. Throughout the detailed price negotiations which subsequently followed, the Marketing Department was in frequent consultation with the executive members of the Freezing Companies' Associations and the Butchers' Associations, who together represented the main suppliers of tallow. Finally, when negotiations had been finalized with the United Kingdom Government, officers of the Marketing Department and Price Tribunal, together with members of the executive committees of the New Zealand Soap Manufacturers' Association, held a conference at which the local market procedure was determined and prices adjusted so as to bear a direct relation to the export-value equivalents. This enabled the local soap-manufacturers to continue to secure their supplies from all sources without a further delay, and, furthermore, established a definite basis on which soap-prices could be controlled in relation to their tallow content. The basis of purchase from the New Zealand manufacturers of tallow is full purchase price at f.o.b. The United Kingdom sterling c. and f. prices (less freight charge) were converted into New Zealand currency prices, off which was deducted 4s. 6d. per ton to cover both the Marketing Department's administration expenses and also an interest amount due to payment being made to New Zealand manufacturers some seventy days before payment was received from the United Kingdom Government.

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Woolly Sheep-skins. Summary of Negotiations for Purchase, and Sale of Woolly Sheep-skins, The New Zealand Government on the 20th October, 1939, sought information from the United Kingdom Government as to whether it was intended to purchase the exportable surplus of New Zealand woolly sheep-skins. On 18th December a reply was received to this inquiry, indicating a possible purchase agreement for the entire exportable surplus on the following broad basis (a) The Ministry of Supply to purchase normal exportable surplus of woolly sheep-skins. Export to any other country to be prohibited : (b) Marketing Department in New Zealand to appraise the skins on basis of value of wool content plus value of pelt, less pulling and fellmongering charges. Appraisement price of skins to be on basis packed ready for shipment, plus all f.o.b. charges : (c) Wool to be valued on slipe-wool schedules already agreed upon : (d) Pelts to be valued in accordance with schedule to be agreed upon : (e) Allowance for pulling and fellmongering costs in United Kingdom at 2|d. per pound, New Zealand currency, on raw weight of skin. Whilst completely agreeing with the proposal to sell the total exportable surplus to the United Kingdom, the New Zealand Government nevertheless sought the right to supply direct such lono--established markets as existed in Canada and the United States of America. On the 15th January, 1940, however, the United Kingdom Government gave a very clear indication that they desired the purchase agreement to cover the whole of the exportable surplus in order that wool-prices might be generally controlled. It was finally agreed, in respect of these outside markets, that as far as possible New Zealand would ship direct to Canada and the United States of America, but on the instructions and to the requirements of the British Government. Accordingly arrangements were made immediately for the New Zealand Sheep-skin Control (a marketing authority already set up) to export without delay all the available woolly sheep-skins to the United Kingdom, and to such other markets as determined by the instructions of the Wool Control, Bradford. The basis of purchase was to be on values appraised in accordance with the New Zealand slipewool type and price schedules, plus the value of the pelt which was to be determined on world parity values to be reviewed at quarterly intervals, less an allowance of 2fd. per pound for fellmongering. The prices to be paid by the United Kingdom Government are for skins graded and packed, and placed f.0.b., all charges up to that point to be the responsibility of the New Zealand Government. The initial pelt-prices offered by the United Kingdom proved to be too low in comparison with the equivalent return possible from skins sliped in New Zealand. It was therefore decided that the whole position should be placed before the United Kingdom Government, who in reply again stated clearly that they desired to secure New Zealand's total exportable surplus sheep-skins as such, and, in order that the existing price disparity might be corrected, they offered amended pelt-prices, which have since proved satisfactory. Discussions with Wooly Sheep-skin Interests. The discussions which took place between the New Zealand Government and the representatives of suppliers of woolly sheep-skins, have been fully covered in the report of the New Zealand Sheep-skin Control, which now follows :— " N.Z. Sheep-skin Control, " Dunedin, 20th May, 1940. " The Hon. the Minister of Marketing, " Parliament, Wellington. Dear Sir, — I beg to report to you on the operations of the Sheep-skin Control from its inception on the 18tli November, 1939, to 31st March, 1940, as follows :— " Reasons for the Control. " In November, when a meeting of interested parties was called to acquaint them of the Control, these were the reasons why it was considered necessary to bring it into being :— " (1) Buying of skins generally had ceased throughout the country early in September and accumulated stocks were worth more than Ist September prices, and the appreciation in value was not able to be fairly reflected back to the producers : " (2) The disparity in prices from the various markets made a pool of some sort necessary, as the only way to relate them back to a common buying price : " (3) Canada and the U.S.A. prices for woolly sheep-skins made it possible that it might be more profitable to sell them to those markets than to fellmonger them in New Zealand. Were this to be the case, freezing companies might be attracted to dry skins instead of sliping them in New Zealand and so create difficulties with regard to the supply of wool to the United Kingdom and in the determining of the true value of meat for the buying schedule : " (4) The disruption of labour in New Zealand if normal fellmongering were not carried out: " (5) To ensure that if the United Kingdom finally decided to buy woolly sheep-skins that an organization able to give urgent delivery would be operating with the greatest possible equity to growers and stockists.

24

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" Commencement and Authority. " The introduction of the Control was announced by you to a meeting representative of all interests held in Parliament Buildings on the 16th November, 1939. They were advised that on behalf of the Marketing Department I would undertake the control, purchase, and sale of the sheep-skins produced in New Zealand and such treatment and processing as might be considered necessary. " The necessary authority to conduct the control purchase and sale of sheep-skins was given to Mr. E. C. Burgess, Public Accountant, of Dunedin, by a delegation of powers held by the Minister of Marketing pursuant to the Marketing Act of 1936 and the Marketing Amendment Acts of 1937 and 1939. Additional powers were delegated by the Minister of Agriculture pursuant to the Primary Industries Emergency Regulations 1939. This delegation of powers was restricted to sheep-skins only, and the conditions were subject to amendent or cancellation at any time by the Minister of Marketing. " The conditions attaching to the Control were advised to be — " (1) The purchase and sale of skins would be carried out in such a manner as would ensure the maximum return to the producer, the prevention of the taking of excess profits by any person, and the use, as far as possible, of the normal channels of buying, selling, and processing : " (2) In the allocation of any work to fellmongers and other persons for the acquisition and processing of sheep-skins a regard would be had for the services normally provided by such persons before the introduction of the Control: " (3) The profits from the sale of the accumulated stocks at the time of the introduction of the Control would go to the War Expenses Account. " Cost of Running the Control. " As you advised me when you wrote confirming my appointment, these are the actual expenses, and are not calculated at so much per pound weight of skins handled. The expenses are subject to review from time to time. " Outline of Operations. " The skins are purchased at schedule prices by appraisement at duly fixed appraisement points. The schedule prices are fixed from time to time with your approval, and endeavour to relate the full selling-price, less the cost of running the Control, back to the producer. The producers of the skins are the butchers (including freezing companies for their skins from sheep and lambs they sell on the domestic market) and farmers. " The skins come to the appraisement points through the same channels as they came through prior to the Control. Country dealers are licensed to operate in their usual districts and buy from the producers and sell to the Control through the brokers. The broker dealers are the few concerns who previously bought from producers and marketed their purchases not through the brokers, but themselves direct to fellmongers or to export. The brokers are the stock and station agents who previously auctioned skins coming to their stores from clients for sale. The stores of the brokers and broker dealers are the appraisement points. " Grading and packing to f.o.b. of dried skins for export is done by contract with packing houses at fd. per pound. This rate is subject to review from time to time. " Skins are not sold by the Control to the fellmongers, the normal fellmongering is done on behalf of the Control at rates fixed after investigation. These rates are subject to review, and returns are required from the fellmongers continuously whereby a check is maintained on the resulting products. The sale of the resulting slipe wool is to the United Kingdom under the Wool Purchase Agreement, but the pickled-pelt market is still free, and the resulting pickled pelts arc sold through normal trading channels. " The United Kingdom has purchased the whole exportable surplus of dried skins, and the Bradford Wool Control gives advice of the United Kingdom and French requirements. Sales to Canada and the United States of America are made with the consent of Wool Control, Bradford, but any profits from such sales over and above the United Kingdom prices are shared equally between the two Governments in accordance with the general provision covering all wool sales outside the United Kingdom. " Except to a very limited extent at the commencement of the Control, it has not been found practicable to use either the New Zealand exporters or their overseas agents for Canadian and American sales, and apparently all French and United Kingdom deliveries are made direct by Wool Control, Bradford, without the use of agents. " United Kingdom Purchase. " The negotiations were conducted by cable, and as a result proved difficult and protracted. The first cable to the effect that skins were wanted was received early in December, and finality was reached only early in May of the following year. The quantity of skins to be purchased was defined as the normal exportable surplus after normal use in New Zealand. " Certain interests here suggested that this definition might be elastic and that, if fellmongering in New Zealand were to be more profitable than drying and exporting, such should be considered normal use here. Such a definition in such circumstances would considerably reduce the exportable surplus. In reply to a specific question by cable, the United

4—H. 308.

25

H.—3ob.

Kingdom advised that she definitely wanted skins, and, under your instructions of the 22nd April, the Control has continued to operate giving the terms ' normal use ' and ' normal exportable surplus ' their literal meanings. " The prices paid by the United Kingdom are according to the various grades of skins and are based on the value of the slipe wool yield at the prices set out in the schedule used by the wool appraisers, the value of the pickled pelt at world parity prices, less 2-Jd. New Zealand currency for fellmongering. " The pelt values are fixed for three-monthly periods in advance, which means the buying schedule may have to be altered each three months after the change in the prices of pickled pelts have been received. In my opinion the prices paid by the United Kingdom are full and fair, a premium being paid for abattoir types of skins over ordinary country types. " Prices being paid by the United Kingdom are not as good as could be obtained from fellmongering skins here in New Zealand green at freezing-works largely because the resultant pickled pelts from skins so fellmongered are worth at least 10s. a dozen more than the pickled pelts from dried skins. Because of this disparity, and in order to give fair competition between the butchers throughout the Dominion, all fellmongering of skins from sheep killed for domestic use is done on behalf of the Control. The proceeds go into the Control Pool, and all butchers are paid for their skins a.t Control schedule rates. " Deliveries. " I am pleased to be able to report that on the practical side the Control functioned smoothly and efficiently from the outset, and that deliveries to Canada and to the United Kingdom and France were made without any delay as and when boats were available. Fellmongers continued to operate normally, and tanners were given their normal requirements of pickled pelts at Ist September prices up to sth February, and thereafter at an increase of 25 per cent. "Accounts. (See Schedule 4in the Appendix.) " Statements enclosed are " A copy of the balance-sheet at 31st March., 1940 : " A copy of the Trading Statement for the period from 18th November to 31st March : " A copy of a statistical statement giving the quantities handled for the period and unit costs : " These are subject to audit by the Audit Department. " Comments. " The balance-sheet is simple and calls for little comment except for the item ' Balance Pool Account.' This is the ' loss 'on the purchase of skins from producers between 18th November and 31st March. It means on the surface that the buying schedule was slightly high. It is, however, largely covered by the surplus which will come from some 700 dumps sold to Canada and undelivered at 31st March. This surplus will come into the Control Pool, as the United Kingdom advised that this would be so for all surpluses from sales made prior to the completing of the United Kingdom sale. The buying schedule operating from the 18th November to 18th March accordingly turned out to be very accurate, and, in fact, has returned to the producers almost exactly the full proceeds from the sale of their skins less the Control costs. " I should explain that the schedule is worked out by accurate costings and is constantly checked by reference to stock records which give the continuous cost in each export grade of all purchases. " Deficiencies, as that shown in the balance-sheet, or surpluses in one period will be endeavoured to be adjusted in the next with the change of the buying schedule. Stocks in the balance-sheet are taken at actual values or in the case of pickled pelts, at conservative values. " The Trading Statement.—The figures give the results of the sales and purchases on account of the War Expenses Account —i.e., of the dealing with the accumulated stocks taken over on 18th November, the sales and purchases of the Pool operations from that date to 31st March, and the combined operations. " You will notice that numbers of skins are given only up to the total made available for sale. Beyond that point the number is lost with the change in the products brought about by fellmongering part of these. It is for this reason the subsidiary statistical statement is given. " The expenses are shown analysed under the usual headings, and have been divided between War Expenses Account and Pool Account on the basis of loose skins purchased. " Costs. " When the Control started I advised you that the expenses under all headings embracing buying, grading, packing to f.0.b., and control of fellmongeries would work out at approximately Id, per pound of dried skin weight made up of fd. grading and packing to f.o.b. and fd. overhead. " The figures from the statistical statement applied to the costs show that the costs are less per pound than anticipated.

26

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" Overhead Expenses (£5,126 ss. 9d). " These include preliminary travelling and telephone and toll costs not likely to recnr. The basis for measuring these costs per unit is loose skins purchased. These were — Skins. lb. " For export account of war expenses .. 291,005 2,183,619 ''For export account of Pool .. .. 403,163 2,511,764 694,168 4,695,383 " For fellmongering .. .. .. 312,552 2,114,101 1,006,720 6,809,484 " Fellmongering skin weights are not actual, but taken as averaging the same as the dried export skins. " Exporters' buying stopped largely on Ist September, but the fellmongers kept operating right up until when Control took over, and the skins they bought between Ist September and 18th November could rightly be taken as available for purchase additional to those given by the above figures. These Control purchases can accordingly be accepted on a most conservative basis, as the supply for seven months Ist September to 31st March. The overheads are for five months. The relative purchase figures for five months are : — Skins. lb. " For seven months .. .. .. 1,006,720 6,809,484- " For five months .. .. .. 719,085 4,863,915 " The average weight per skin is approximately that for a full twelve months' period. " Resulting unit overheads :— " l-7lld. per skin : " 0-253 d. per pound. " Packing costs for the first purchase were fd. per pound and f-d. per pound since. The additional allowed for the first purchase was to cover extra cost of handling and working to ensure the skins being ready for the boats. The normal costs per pound on the five months' figures are accordingly— d. "For grading and packing .. .. .. .. .. 0-625 " For overhead .. .. .. .. .. .. 0-253 0-878 "I am satisfied that this is less than any exporter was operating for at the outbreak of war. The benefit of course has gone to the producers, a fact I wish them to be fully aware of, as much unfair criticism has been levelled at the Control on the grounds, amongst others, of its excessive cost. These unit costs can be taken as an indication that the Control is being run on sound business lines. I anticipate that it will continue to operate at not more than the Id. as originally forecasted. " As a general principle the Control records endeavour to show clearly and simply that its buying is sound —i.e., that what it pays for it gets, that it accounts for all its purchases, that it gives the producers full value for their skins according to the sale price received, and that expenses are carefully watched and reasonable. The records are doing this, and, as advised at the meeting on 18th November, they are open at all- times to inspection by representatives of trade interests. Such inspection would be welcome. " General. " I wish to acknowledge the support and co-operation given the Control, with very few exceptions, by all members of the trade from producers to exporters. I have endeavoured to make it known that the Control in its purchase of skins by appraisement has regard for the quality of the pelts, the quality of the wool and the length of the wool, and that the Control wishes to make all reasonable efforts to see that appraisement is satisfactory to producers. To this end it welcomes genuine complaints and helpful criticism. " I also wish to acknowledge the services of the Control staff. They have worked loyally and unsparingly to make the job a success. The long hours which were necessary to ensure smooth running from the start were given unasked without thought of personal remuneration. " Yours faithfully, " N.Z. Sheep-skin Control : " R. C. Burgess, Controller. "

27

H. —30u.

Hides and Skins (including Pelts). Summary of Negotiations for Purchase and Sale of New Zealand Hides and Skins (including Pelts). The United Kingdom Government's first reply (6th October, 1939) to New Zealand's inquiry whether these, and other related products, would be purchased in bulk was that they would probably take the whole surplus beyond the supplies that regularly go to Canada ; in pelts the United Kingdom requirements were estimated to be substantially more than the ordinary consumption of about two million skins. jgt On 12th October the United Kingdom Ministry of Supply advised the New Zealand Government that they wished to arrange for the United Kingdom Leather Control Authority to submit an offer for New Zealand's exportable surplus of hides and calf-skins, exclusive of supplies required for Canada. In the first instance, as an interim arrangement, the offer was to cover shipments in the ensuing three or six months. On this basis the New Zealand Government was asked to estimate quantities. Prices were still to be agreed and also procedure, and, indeed, the whole basis of handling in the United Kingdom. In October an " Imported Hide Pool " was established by the United Kingdom Government, but correspondence created some doubt as to whether the Pool would proceed by bulk-purchase or would simply co-ordinate commercial transactions. Subsequently, on 10th November, the Ministry of Supply appeared to leave no doubt that the former procedure was still favoured. They advised that the " Imported Hide Pool," although [it operates commercially, was formed under the authority of the Leather Control and would work in close relation with this " Control." They added that " there is great anxiety here to buy New Zealand hides, and the Pool wishes to make an offer for the (New Zealand) surplus " ; and asked to know the quantities available " for the period of the first deal—e.g., three or six months." The necessary information was cabled on the 20th November, 1939, and read as follows :• — " Hides. Reference your cable 15th November (stop) Customary New Zealand export classifications and weight ranges are as follows :— "Freezer Standards Yearlings and Kips 8/16 lbs 17/30 lbs Ox 40/49 lbs, 50 lbs and up (stop) Cows & Bulls straight run of weights (stop) " Abattoir Standards are same as Freezer classifications with elimination of bulls (stop) " Country Standards Yearlings and kips 8/16 lbs 17/30 lbs in first, second and third grades (stop) Cow and bull all weights and same grades (stop) Ox 50 lbs up first second and third grades (stop) "Estimate this season's exportable surplus hides yearlings and kips at 530,000 comprising approximately— " 250,000 freezer standard cows " 120,000 freezer standard ox " 40,000 freezer standard bulls " 20,000 abattoir standard ox " 40,000 abattoir standard cows " 25,000 country standard cows all qualities " 35,000 yearlings all qualities and weights (stop) " Our normal exportation to Canada, United States and Australia over recent years vary from 50% to 60% of total exports balance to Europe and Japan (stop) " Stocks at present held small and mainly required for domestic consumption (stop) Production at this period of year normally small but anticipate will increase sufficiently from December onwards to provide surplus for export although main supplies will not be available until beef killing season during February to July (stop) Please ascertain requirements United Kingdom tanners for shipment January July indicating classifications required and sterling prices offered F. 0.8. New Zealand (stop) " In contrast with the foregoing—and in reference to this contrast, the fact that the United Kingdom wartime controls, on their vast and complete scale, were still in process of initiation should fairly be borne in mind—it transpired that neither the Ministry of Supply nor the Imported Hides Pool were in fact anxious to proceed to bulk-purchase arrangements. The Pool regretted (11th December, 1939) that they were not in a position at that time to contract forward for supplies. They preferred merely to act as intermediary between sellers and tanners ; and until the latter could be induced to reconsider concerted methods of purchase, they wished to receive offers of hides and skins, for which world prices would be payable. On the 18th January, 1940, the New Zealand Government, in view of the difficulties which had arisen regarding the internal marketing procedure for hides, made a further offer to secure a definite indication from the United Kingdom Government as to whether the Ministry of Supply contemplated entering into any further purchase agreement. However, advice was received which stated definitely that the United Kingdom Government still adhered to the view that the bulk purchase of New Zealand hides was not a practical issue. In view of this final advice, the New Zealand Government then proceeded to make all necessary arrangements for the supply of hides to local tanners at stabilized prices, and to enable the export of the balance to all regular overseas markets to continue. Discussions with Hides Industry. On the outbreak of war, the export of hides had not only been prohibited, but also the internal sale was restricted in accordance with the provisions of the Price Emergency Regulations, which prohibited such sales being made at prices in excess of those ruling as at the Ist September, 1939. This meant that local tanners could not secure their supply of hides for manufacture into leather on

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any other basis than the ruling Ist September prices, and in view of the tendency of export prices to rise holders of hides became very reluctant to make supplies available at the Ist September prices. In order to meet this position, the Minister of Marketing, on 3rd November, 1939, called a conference of representatives of the hides exporters' association, freezing and butchers associations, for the purpose of defining Ist September prices, and of inaugurating a temporary procedure which would enable local tanners here to continue to secure their requirements of hides until such time as the United Kingdom Government gave a definite indication of their intention to buy or not. Unfortunately, the ultimate intentions of the United Kingdom Government remained obscure until the middle of December, and by this time local tanners were again in difficulties owing to the unavailability of supplies at Ist September prices. The Government then determined that a permanent marketing procedure was essential, and investigations and consultations with the hides industry were commenced with a view to creating a permanent marketing procedure which would enable tanners on the one hand to secure their supplies on a stabilized basis, and on the other hand allow the remaining hides to be exported at world parity prices. With this end in view several meetings were held, but, unfortunately, no satisfactory procedure was forthcoming which met with the approval of all sections of the industry. On 4th February, 1940, the Government, realizing that the matter could be delayed no longer, announced its intentions of creating a " Hides Pool," whereby the Marketing Department would purchase all hides on the Ist September prices basis, plus 25 per cent., and supply local tanners with their requirements on this basis, whilst making the balance available for purchase by exporters. On 17th February, however, the president of the New Zealand Farmers' Union approached the Minister of Marketing in support of the introduction of an equalization scheme whereby a levy on exports would be utilized to adjust whatever price-variation existed between the local price to tanners and export parity values, thus enabling both markets to be supplied with an averaged net return to all producers. After examining this proposal and having by this time secured a final indication of non-purchase by the United Kingdom Government, the New Zealand Government agreed to put the equalization proposal into operation for the balance of the season. Accordingly, the Hides Marketing Regulations were issued on the 7th March, 1940, and a Hides Committee, consisting of the following members, set up to administer the scheme, and generally supervise both the local and export market prices : —• J. F. Carter, Esq., representing New Zealand Master Butchers' Association. T. A. Duncan, Esq., Chairman of New Zealand Meat-producers Board and member New Zealand Sheepowners' Federation. J. P. Mackay, Esq., Chairman of New Zealand Freezing Companies' Association. A. A. Moore, Esq., representing Live-Stock Butchers' Association. A. P. O'Shea, Esq. (Chairman), representing New Zealand Farmers' Union. G. P. Roberts, Esq., representing New Zealand Woolbrokers' Association. W. V. Watson, Esq., representing New Zealand Hide Exporters' Association. S. L. Wright, Esq., representing New Zealand Tanners' Association. A. H. Cockayne, Esq., Director-General of Agriculture. G. A. Duncan, Esq., Director, Export Division, Marketing Department. It is satisfactory to report that the Committee has functioned with every success. ScHEELITE. Summary of Negotiations for Purchase and Sale of Scheelite. On the 21st September, 1939, the New Zealand|Government informed the Imperial authorities that the export of scheelite had been prohibited until such time as the views of the United Kingdom Government had been made known. In addi+ion to this advice, full particulars were included as to current export quantities and values. It was not, however, until two months later (20th October) that the United Kingdom Government again formally advised that they would purchase the Dominion's total output of scheelite for the period of the war. The New Zealand Government immediately agreed to enter into a purchase agreement and suggested a price basis of 60s. f.o.b. sterling per unit, payable on shipment. The United Kingdom Government in reply counter-offered on a basis of 50s. f.o.b. sterling per unit, with 80 per cent, payment on shipment and the balance on arrival. Although the New Zealand Government continued to press for a minimum of 555. per unit, the United Kingdom Government finally indicated that any increase over 50s. would create difficulties with the Burmese producers. The United Kingdom Government did, however, agree to refund to New Zealand producers any premium over 50s. per unit basis, which could be procured from smelters for New Zealand ore. This proposal was finally accepted by the New Zealand Government on the 19th February, 1940, and the formal purchase agreement became operative as from that date. The agreement provides : — (1) Purchase of New Zealand total export of scheelite : (2) Period of purchase to be for period of war and for two months thereafter : (3) Purchase price to be at 50s. per unit of W.O. 3 : (4) Payment to be made as to 80 per cent, on shipment f.0.b., the balance after final assay in London : (5) Other conditions as per standard European selling conditions. The price to the New Zealand producers was fixed at 625. 2d., per unit New Zealand currency, this figure being arrived at by converting the United Kingdom Government's price into New Zealand currency, and allowing 2-| per cent, for the administrative expenses of the Marketing Department.

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RETURN OF QUANTITIES AND VALUES OF PRODUCE PURCHASED BY THE UNITED KINGDOM GOVERNMENT UP TO 31st MAY, 1940. Quantity. Value (N.Z. Currency). 1. Dairy-produce (a) Tons. £ Butter .. .. .. .. .. .. 96,853 13,510,311 Cheese .. .. .. 64,190 5,081,725 161,043 £18,592,036 2. Meat :— ' Tons. Lamb (6,555,650 carcasses) .. .. .. 98,797 Mutton (1,553,001 carcasses) .. .. .. 38,582 Beef and veal— Quarters (190,989 quarters) . . . . . . 13,785 Boneless (385,724 bags) .. .. .. 16,284 Pork .. .. .. .. .. .. 15,601 Sundries .. .. . . .. .. 6,338 189,387 £11,358,177 3. Wool — Bales. lb. £ Greasy and scoured .. .. 682,684 234,068,166 12,823,382 Slipe .. .. .. 97,723 33,898,177 2,415,466 780,407 267,966,343 £15,238,848 Tons. 4. Tallow .. .. .. .. 3,692 .. £105,169 Skins. lb. 5. Sheep-skins .. .. .. 570,674 3,433,428 £117,267 Tons. 6. Scheelite .. .. 33 .. £6,676(6) Grand total of sales .. 475,316 tons .. £45,418,173 (a) Includes 1939-40 season's produce requisitioned by United Kingdom Government before contract came into force. (b) Subject to adjustment on receipt of final analysis and account sales.

APPENDIX.

SCHEDULE No. 1. Agreement with Government Woolbrokers. Agreement made the nineteenth day of April, 1940, between His Majesty the King in respect of the Government of New Zealand of the one part and the several persons firms and companies whose names are set out in the Second Schedule hereto (hereinafter severally referred to as " Government Woolbrokers ") of the other part WITNESSETH as follows : — 1. The Minister of Agriculture shall act for and represent His Majesty the King in all matters arising out of and incidental to this agreement. 2. Each person firm or company party to this agreement shall be appointed a Government Woolbroker under the provisions of the Regulations. 3. This agreement shall apply to all wool held by a Government Woolbroker in his store at the date of this agreement and all wool delivered to him after that date in pursuance of the Regulations. 4. A Government Woolbroker shall after entry of the wool into the store of the Government Woolbroker and until the date when such wool becomes the property of the Crown in accordance with the Regulations, insure that wool, and keep it insured against loss by fire to the full insurable value thereof. Such insurance shall be the usual covers effected by members of the New Zealand Woolbrokers' Association with. Insurance Companies according to the existing course of business and the Government Woolbroker will, not later than the date of delivery of any wool into his store notify the owner of the extent and limitations of the insurance cover provided under this agreement and of the owner's right to obtain further cover at his own cost. 5. In respect of such wool the Government Woolbroker will undertake storage and preparation for appraisement and all other duties in respect thereof in accordance with the conditions set out in the First Schedule hereto and elsewhere in this agreement and in accordance with the Regulations. 6. (1) In consideration of the services to be rendered by Government Woolbrokers under this agreement the Minister will pay to each Government Woolbroker by way of remuneration a sum calculated at the rate of ten-sixteenths of a penny for every pound weight of wool appraised in the store of that Government Woolbroker and not rejected by the Government Appraiser in pursuance of the Regulations.

Insurance.

Preparation.

Brokers' remuneration,

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(2) Subject to the provisions of the next succeeding paragraph such remuneration shall be paid in respect of each appraisement of wool not later than noon on the fourteenth day after the date of appraisement. (3) If the Government Woolbroker fails to deliver promptly and in proper form all invoices, debit notes and other documents required under the provisions of this agreement and of the Regulations in respect of any wool payment of his remuneration in respect of that wool shall not become due until noon on the fourteenth day after delivery in proper form of such invoices debit notes and other documents. 7. In any case where an appeal is properly lodged against the value assigned to any wool on appraisement the Government Woolbroker shall at the time for re-appraisement submit the wool to the Controlling Appraiser or Deputy Controlling Appraiser and shall be entitled to charge against the owner of the wool a reasonable fee for his services not exceeding in any one case two shillings for each bale of wool so submitted for re-appraisement. 8. (1) The services to be rendered by Government Woolbrokers under this agreement shall include the provision of storage from the date of the delivery of any wool to his wool store under the Regulations until the expiry of the twenty-eighth day after the date of appraisement provided that in the case of wool allocated by a Government Appraiser for scouring Government Woolbrokers shall where necessary provide storage for a further period of twenty-eight days. (2) If the Government Woolbroker has within twenty-eight days after the date of appraisement given to person firm or company to whom any wool has been allocated for scouring (hereinafter referred to as the " woolscourer ") or if the Government Woolbroker is not aware of the woolscourer to whom that wool has been allocated, then to the Secretary of the New Zealand Woolscourers' Association addressed to his office in Christchurch, notice that the space occupied by that wool is or will be required for other purposes and that wool is not removed from the Government Woolbroker's store within twenty-eight days after the date of appraisal the Government Woolbroker will be entitled to recover from the woolscourer or from the Secretary of the New Zealand Woolscourers' Association as the case may be his reasonable costs of any restacking of that wool. (3) If wool other than wool allocated for scouring is required to be stored for any period in excess of the period described in the last preceding paragraph of this clause the Minister will pay to the Government Woolbroker in whose store the wool is so stored in addition to the remuneration provided for in clause 6 hereof storage in respect of such excess period at the rate of fourpence per bale for each week or part of a week falling between the 30th November in one year and the Ist March in the following year and at the rate of threepence per bale for each week or part of a week falling between 28th February and the Ist December in any year. (4) If wool allocated for scouring is required to be stored for any period in excess of the period described in paragraph (1) of this clause the Government Woolbroker will be entitled to recover in respect of such wool from the woolscourer or if he is not aware of the woolscourer to whom the wool has been allocated then from the Secretary of the New Zealand Woolscourers' Association, storage in respect of such excess period at the rate of fourpence per bale for each week or part of a week falling between the 30th November in one year and the Ist March in the following year and at the rate of threepence per bale for each week or part of a week falling between 28th February and the Ist December in any year. (5) If any wool is forwarded by a Government Woolbroker to a port store pursuant to directions given by or on behalf of the Minister the Government Woolbroker shall if any charges are made against him by the proprietor of that store pay the same at the usual rate. (6) The Minister shall refund to the Government Woolbroker any storage charges paid by him under the provisions of the last preceding clause. 9. In any case where wool has been diverted to a port other than that at which it would normally be shipped pursuant to directions given by or on behalf of the Minister and the Government Woolbroker shipping that wool has not a branch of his business or a representative at the port to which the wool has been so diverted the Minister will refund to the Government Woolbroker his reasonable additional port expenses at the final port of shipment incurred directly by reason of the diversion of that wool. 10. The Government Woolbroker except as herein expressly provided will at his own cost bear all costs charges and expenses involved in the storage handling and shipment of wool other than freight, marine insurance, stamp duty on bills of lading, wharfage and lighterage charges in respect of shipment and transhipment, railage charges from his wool store to the ship in any case where wool is shipped from Wanganui, Christchurch, Dunedin, Invercargill, Blenheim, Nelson, Gisborne, Tokomaru Bay and Napier and dumping and any other charges customarily borne by shipping companies. 11. If any valuers appraisers or other persons are employed by any Government Woolbroker in respect of any services to be rendered by him under this agreement or the Regulations the salaries allowances and other expenses of such valuers appraisers and other persons shall be paid by the Government Woolbroker and shall not be recoverable from the Minister or any other person. 12. In any case where wool is delivered out of the store of a Government Woolbroker for shipment pursuant to directions given by or on behalf of the Minister before such wool has become the property of the Crown in accordance with the Regulations the Minister will indemnify and save harmless that Government Woolbroker from all liability arising out of the loss of or damage to that wool by fire or marine risk occurring at any time after the delivery of that wool from the stores. 13. If the appointment of any Government Woolbroker is determined pursuant to the Regulations : he will, unless the Minister shall otherwise expressly direct, thereupon complete all services required ' to be rendered by him under this agreement in respect of any wool received by him at his store prior to such determination but he shall not accept delivery of any other wool under the provisions of the Regulations.

Payment thereof.

Delay in invoicing.

Appeals.

Free storage period.

Scouring wool storage.

Scoured wool storage.

Extra storage on wool.

Extra storage on scouring wool.

Port store storage.

Diversion to other ports.

Brokers to bear costs.

Exceptions.

Brokers' valuers.

Indemnity for wools delivered before prompt.

Determination of Broker's appointment.

31

H.—3ob.

Limit of Broker's charges against grower.

14. Except as herein or in the Regulations expressly permitted or as may be expressly authorised in writing by or on behalf of the Minister no Government Woolbroker shall demand or accept from the owner of any wool subject to this agreement or from any other person in respect of that wool any brokerage, commission, or other remuneration or reimbursement. 15. No delay or loss necessarily caused by strike, civil disorder or other unavoidable cause shall render the Government Woolbroker liable in damages or otherwise to the Minister for any default or damage arising therefrom. 16. Every Government Woolbroker will promptly comply with all proper requisitions of the Minister, the Director-General or any authorised officer of the Department of Agriculture and the Director or any authorised officer of the Marketing Department. 17. The Minister may at any time require any Government Woolbroker to perform services additional to those required of him under this agreement and in such case shall pay to the Government Woolbroker such additional remuneration as shall be agreed upon between the Minister and the New Zealand Woolbrokers' Association. 18. In all matters arising out of this agreement so far as this agreement and the Regulations permit the agreement now subsisting between the New Zealand Wool Buyers' Association and the New Zealand Woolbrokers' Association with respect to the conduct of wool sales commonly referred as to " the Regulations governing Wool Sales 1913 and amendments thereto " shall apply as though the Minister were a wool buyer for the purposes of that agreement. 19. If any disputes shall arise or agreement shall not be reached between any Government Woolbroker or the New Zealand Woolbrokers' Association and the Minister as to the scope of the services to be rendered by a Government Woolbroker, the remuneration payable in respect of any additional services required by the Minister under clause 17 hereof, the validity or propriety of any requisition of the Minister, the Director-General or other officer of the Agriculture Department or the Director or other officer of the Marketing Department or as to any other matter arising out of this agreement that dispute or the question on which the parties have failed to agree shall be determined by arbitration under the provisions of the Arbitration Act, 1908, and this agreement shall be deemed to be a submission for the purposes of that Act. 20. The term of this agreement shall be one year from the first day of October, 1939 and thereafter this agreement shall continue in force until the acquisition of the clip of wool coming to hand next after the termination of the present war with Germany unless either the Minister or the New Zealand Woolbrokers' Association on behalf of the persons firms and companies whose names are set out in the Second Schedule hereto terminates this agreement by the Minister giving to the said Association or the Association giving to the Minister six calendar months' notice of his or its intention to do so such notice expiring during the month of September in any year. 21. Any notice to be given discretion to be exercised or thing or matter to be done by the Minister under this agreement shall be sufficient if given exercised or done by the Minister or by the DirectorGeneral of Agriculture or by the Director of the Export Division of the Marketing Department or any other person authorized by the Minister generally or particularly in that behalf. 22. In this agreement — " Date of appraisement " means the day on which the appraisement of all wool stored in the wool stores of all Government Woolbrokers and entered for that appraisement is completed. " Minister " means the Minister of Agriculture. " Owner " means any person who has the right to sell any wool with or without the concurrence of any other person. " Regulations " means any regulations relating to the purchase of wool that may be made under the authority of the Emergency Regulations Act, 1939, and any Regulations made in amendment thereto or in substitution therefor. In witness whereof these presents have been executed by the Minister and the persons firms and companies whose names and execution by whom appear in the Second Schedule hereto. FIRST SCHEDULE. 1. For the purpose of these conditions it is hereby declared that as far as is practicable the usual channels of business heretofore existing between the owner of wool and the Government Woolbrokers will be observed. 2. The Government Woolbroker will receive the wool in his store and keep it properly stored until shipment. 3. The Government Woolbroker will weigh, stack, catalogue, group, open and display the wool for valuing. 4. The Government Woolbroker will cause the wool to be classified and valued for appraisement by the Government Appraiser. 5. The Government Woolbroker will resew, rebrand, outweigh and stack the wool and countermark the same in manner prescribed by clause 6 hereof or as otherwise directed. 6. All bales shall be countermarked on the clear end and if required also on the flat side in accordance with directions given by or with the approval of the Minister. All letters and figures appearing in the counter-mark shall be three inches in height and three-quarters of an inch in thickness of line and the counter-mark shall be enclosed with a plain margin three-quarters of an inch wide. Example — W. is the centre. W. N.Z. 1010 N.Z. 1010 is the type. Space is to be left for any other mark.

Strikes.

Compliance with instructions.

Additional services.

Buyers and Brokers Regulations.

Disputes.

Period of agreement.

Delegation of powers.

Interpretations.

Usual channels.

Duties of Brokers.

32

H —308.

7. The Government- Woolbroker will provide all necessary specifications, invoices, accounts and all other proper statements relative to the services to be rendered by him under this agreement and will supply as may be required information relating to the quantities and estimated values of wool in store and likely to arrive in store during each week, together with such further information as may be required by the Minister. 8. The Government Woolbroker will use such special forms for the purpose of supplying any information required by the Minister under these conditions as the Minister may deem desirable. 9. The Government Woolbroker will repack all bales and packages of wool delivered in store otherwise than in good condition for shipment and all bales or packages of mixed description requiring repacking and shall be at liberty to charge the owner a reasonable charge for the additional work involved in so repacking not exceeding the charge for that work customarily made by Woolbrokers immediately prior to the commencement of this agreement unless an increased charge has thereafter been approved by the Price Investigation Tribunal together with the cost of new packs (if any) in such repacking. 10. The Government Woolbroker will whenever necessary bin, reclass or interlot any wool received into his store and shall be entitled to charge against the owner the reasonable cost of such work not exceeding the charge of interlotting binning or reclassing customarily made by Woolbrokers immediately prior to the commencement of this agreement unless an increased charge has thereafter been approved by the Price Investigation Tribunal. ] 1. The Government Woolbroker will be responsible to see that all wool received in store bears the squatter's or country brand on one end and on flat side only of each bale, and that the letters and figures appearing in the brand are not less than three inches in height. In cases where the requirements of this clause have not been complied with by the owner the Government Woolbroker shall properly brand such wool and shall be at liberty to charge the owner a reasonable sum for the service so rendered. 12. The Government Woolbroker will at all reasonable times afford facilities to persons duly authorized for the purpose for the inspection of work performed by him for the Minister in accordance with the terms of this agreement and of these conditions. 13. Owners of wool may forward wool to their customary woolbroker as heretofore, and business up to the point of receipt into the woolbrokers' store will be carried out as heretofore. 14. The Government Woolbroker will, on receiving delivery into store, deal, with the wool as i heretofore and will stack, show, catalogue and otherwise prepare the wool for appraisement purposes 1 as provided in these conditions and in the manner provided in the " Regulations governing Wool Sales " dated January, 1913, as amended and at present in force, between the New Zealand Wool Buyers' Association and the New Zealand Woolbrokers' Association. Such rights and privileges as are conferred on wool buyers by the said Rules will, for the purposes of this agreement and these conditions, apply to the Minister. 15. Owners of wool will pay all charges on that wool up to and including delivery in the 1 Government Woolbrokers' store. 16. Catalogues showing all particulars required by the Minister will be prepared by the Government l Woolbroker on forms prescribed by the Minister for delivery to the controlling Appraiser and shall be so prepared that the Lot Numbers shall be continuous throughout each season commencing from Ist October at Lot 1 • No lot of wool shall be catalogued until in store. Dealer's wool shall in all cases be noted in the catalogue by the word " Dealer's " and a Government Appraiser shall have the right to reject any wool which, although not so marked, he has reason to believe is offered on behalf of a dealer until ownership is proved to his satisfaction. 17. Wool required for New Zealand woollen mills must be selected in such manner as the Minister shall direct and the selections made must be adhered to. If required to do so by the Minister the Government Woolbroker will invoice such wool to the purchasing mill direct at appraisement prices with the addition of such amount for appraisers' and brokers' and other charges as the Minister either generally or specifically in respect of each purchase may direct and will release the wool on payment of the whole or such part of the total purchase price as the Minister may direct. On completion of the purchase the Government Woolbroker shall remit to the Minister the whole or such portion of the purchase money as the Minister may direct. 18. The Government Woolbroker from whose catalogue wool is selected for Governments other 1 than the Government of the United Kingdom will promptly furnish to the Minister particulars of that wool and will brand the wool in accordance with directions given by or with the approval of the Minister. 19. On completion of appraisement, the Government Woolbroker will render to the Minister or to such other person as he may direct within five days after the date of appraisement Invoices and Weight notes, together with a summary of Invoices showing the due date of payment and a debit note for the remuneration of the Government Woolbroker in respect thereof. Such separate invoices shall be prepared in respect of wool included in each appraisement as may be required by or with the approval of the Minister. 20. A Reconciliation Statement shall accompany all invoices and weight notes submitted to the Minister or "to such other person as he may direct showing the following particulars : — > (a) The number of bales of wool for immediate shipment by each ship separately according to the relative invoices. (b) The number of bales of wool for deferred shipment according to the relative invoices. (c) The number of bales of each grade of scouring wool according to the relative invoices. (cL) The number of bales of wool selected for other Governments according to the relative invoices.

Invoices, &c.

Special Forms.

Repacking.

Binning and interlots.

.Farmers' brand.

Inspection.

Owners' duty.

Stacking and cataloguing.

Owners' charges.

Catalogue.

Dealer's wool.

Local mills.

Wool for Canada, France, U.S.A.

Invoices.

Reconciliation Statement.

5—H. 308.

33

H.—308.

™X . ! e) I 6 nu ™! )e y of , bales of wool supplied to local mills according to the relative invoices. J lie total number of bales shown in the Reconciliation Statement shall agree with the total number of bales shown m the Appraisement Statement. Invoices and weight notes shall be made on m-weights. Invoices must be numbered with the serial number of the appraisement in the order in which each valuation was made. Particular of lots under appeal and still undecided shall be cancelled in the Appraisement Statement and the lots shall be recatalogued as required bv this agreement. i / 21. Weight slips shall show the rate per bale at which the deduction for tare is computed. 22. When wool is delivered by a Government Woolbroker to a woolscourer for scouring the form used for obtaining the scourer's acknowledgment of receipt shall be forwarded so as to reach the scourer together with the wool to which it relates. Each consignment shall be marked with the scourer s mark or initials. 23. When bales are rebranded by a Government Woolbroker the counter-mark referred to in clause 6 of these conditions must not be placed on the end or side which bears the squatter's or country brand. 24. The dumping of wool shall be so carried out that the counter-mark shall be shown on each end ol the double dump. 25. The Government Woolbroker once each month will render accounts for storage to the appropriate office established by the New Zealand Wool Buyers' Association in accordance with the agreement made between that Association and the Minister.' Accounts in respect of wool stored in the South Island, shall be rendered to the office at Christchnrch and accounts in respect of wool stored in the North Island to the office in Wellington. Payment will be made by the Minister within fourteen days of the receipt of the accounts by the appropriate office. 26. The Government Woolbroker shall be at liberty to charge the owner of any wool a reasonable S ™ l , 5 services rendered by him in respect of any wool rejected and also in respect of any wool which for any other reason does not become the property of the Minister pursuant to the Purchase ot Wool Emergency Regulations 1939. Second Schedule. 1. Abraham and Williams, Limited 2. Alfred Buckland and Sons, Limited. 3. Buxtons Limited. 4. Canterbury Farmers' Co-operative Association, Limited. 5. W. E. Clouston and Company, Limited. 6. Common, Shelton, and Company, Limited. 7. Dalgety and Company, Limited. 8. Darling and McDowell, Limited. 9. de Pelichet, McLeod, and Company, Limited. 10. Farmers' Co-operative Auctioneering Company, Limited. 11. Farmers' Co-operative Organization Society of New Zealand, Limited. 12. Freeman R. Jackson and Company, Limited. 13. Gisborne Sheepfarmers' Frozen Meat and Mercantile Company, Limited. 14. Hawke's Bay Farmers' Co-operative Association, Limited. 15. Henderson and Company, Limited. 16. Johnston and Company, Limited. 17. Levin and Company, Limited. 18. H. Matson and Company, Limited. 19. J. R. Mills and Son, Limited. 20. Murray, Roberts, and Company, Limited. 21. National Mortgage and Agency Company of New Zealand, Limited. 22. Newton King, Limited. 23. New Zealand Co-operative Wool Marketing Association, Limited. 24. New Zealand Farmers' Co-operative Association of Canterbury, Limited. 25. New Zealand Farmers' Co-operative Distributing Company, Limited. 26. New Zealand Loan and Mercantile Agency Company, Limited. 27. North Auckland Farmers' Co-operative, Limited. 28. North Otago Farmers' Co-operative Association, Limited. 29. Otago Farmers' Co-operative Association, Limited. 30. Pyne, Gould, Guinness, Limited. 31. Donald Reid and Company, Limited. 32. G. H. Scales, Limited. 33. Southland Farmers' Co-operative Association, Limited. 34 . Stringer and Company, Limited. 35. Stronach Morris and Company, Limited. 36. Wairarapa Farmers' Co-operative Association, Limited. 37. J. G. Ward and Company, Limited. 38. J. E. Watson and Company, Limited. 39. Williams and Kettle, Limited. 40. Wright, Stephenson, and Company, Limited.

Tare.

Scouring.

Countermarks.

Dumping.

Storage accounts.

Extra services to owner.

34

H.—3ob.

SCHEDULE No. 2. Agreement with N.Z. Wool Buyers' Association. AGREEMENT made the twenty-third, day of November 1939 between His Majesty the King in respect of the Government of New Zealand of the one part and Herbert Hill, Erank Brear Clark, Albert Smith, Frederick Marshall, Alfred Vuna Moulton, Rawei Harold Hill, all of Christchurch, Woolbuyers, Charles George Prevost of Wellington, Woolbuyer, and Philip Theophilus Robinson of Dunedin, Woolbuyer, being the General Committee and members of the New Zealand Wool Buyers' Association and being authorized by the members of that Association to be the representatives of the members of the New Zealand Woo] Buyers' Association (the said Herbert Hill, Erank Brear Clark, Albert Smith, Frederick Marshall, Alfred Vuna Moulton, Rawei Harold Hill, Charles George Prevost, and Philip Theophilus Robinson hereinafter where the context so admits being referred to as " the Association ") of the other part Whereas the said Herbert Hill, Frank Brear Clark and Albert Smith have been appointed to hold office as the Executive Committee of the Association Now these presents witness as follows :— 1. The Executive Committee shall have full authority on behalf of the Association to receive and disburse all moneys payable to or by the Association under this agreement to exercise all powers conferred on the Association and undertake all duties imposed on the Association under this agreement and generally to act for and represent the Association in all matters arising out of and incidental to this agreement. 2. The Minister of Agriculture shall act for and represent His Majesty the King in all matters arising out of and incidental to this agreement. 3. The Association will undertake the examination classification and appraisement and where necessary the re-appraisement of all wool proposed to be purchased by the Crown under the provisions of the Purchase of Wool Emergency Regulations 1939 in accordance with the conditions set out in the First Schedule hereto and all clerical accounting and other work ordinarily incidental thereto. 4. The Association at its own cost will provide and maintain a sufficient staff of appraisers accountants clerks and other employees to enable it to perform its obligations under this agreement promptly and efficiently. 5. The Association will at its own cost establish equip staff and maintain for the purposes of this agreement offices at Christchurch and Wellington and may, if it considers it desirable to do so establish additional offices in any other part of New Zealand and shall pay all salaries, rents, travelling expenses and other expenses in respect thereof Provided that the Minister will supply to the Association free of charge all invoices and all special forms required by His Majesty's Government in the United Kingdom additional to the normal requirements of the wool trade and all bills of lading required by the Association for the purposes of this agreement. 6. (a) The examination classification and appraisement of wool by the Association will bo performed to the satisfaction of the Director-General of the Agriculture Department. (b) The clerical and shipping work of the Association under this agreement will be performed to the satisfaction of the Director of the Export Division of the Marketing Department. (c) The accounts of the Association in respect of this agreement shall be subject to internal or external audit by the Controller and Auditor-General's Department. (d) The Association will promptly comply with all proper requisitions of the Director-General of the Agriculture Department, the Director of the Export Division of the Marketing Department, and the Controller and Auditor-General under this agreement. 7. (1) The Minister, on behalf of His Majesty, will on the twentieth day of each month during the continuance of this agreement pay to the Association in consideration of the services to be rendered by it under this agreement a sum calculated at the rate of fifty-three one thousandths of a penny (-053 d.) for each pound by weight of wool appraised under this agreement during the preceding calendar month by the Association. (2) If the amount to be paid to the Association under the provisions of paragraph (1) of this clause during any annual period ending on the thirtieth day of September in any year during the continuance of this agreement is less than Seventy thousand pounds (£70,000) and the Controller and Auditor-General certifies to the Minister that the actual expenditure paid or incurred by the Association in respect of that period directly for or on account of services rendered by the Association under this agreement is greater than the sum so received the Minister will pay to the Association by way of additional remuneration for that period the amount by which such approved expenditure exceeds the amount so paid to the Association under paragraph (1) of this clause Provided that the amount to be so paid for additional remuneration shall not exceed Five thousand pounds (£5,000) And provided further that the total sum so paid for such period under the provisions of paragraphs (]) and (2) of this clause shall not exceed in the aggregate Seventy thousand pounds (£70,000). (3) In calculating the actual expenditure of the Association for the purposes of paragraph (2) of this clause no account shall be taken of any remuneration paid or to be paid to the Association for additional work under the provisions of clause 9 of this agreement. (4) Within ten days after the execution of this agreement in the case of the first year of the currency of this agreement and on or before the first day of October in each subsequent year during the continuance of this agreement the Minister, on behalf of His Majesty, shall pay to the Association the sum of Eight thousand pounds (£8,000) as an advance on account of remuneration payable to the Association under the provisions of this clause and such advance shall be repaid by the Association by four instalments of Two thousand pounds (£2,000) each on the first day of the months of January, February, March and April in each year.

35

H.—3ob.

8. In calculating the expenditure of the Association under clause 7 of this agreement, the salaries and allowances paid, to those appraisers and other employees whose salaries and allowances amount to Three hundred pounds (£300) or more per annum shall be in accordance with the scale set out in the Second Schedule hereto but the Association may re-arrange those salaries and allowances provided that the number of persons and the aggregate amount of salaries shown in the said Second Schedule is not altered. 9. The Minister may at any time require the Association to perform services additional to those required of it under this agreement and in such case shall pay to the Association such additional remuneration as shall be agreed upon between the Minister and the Association. 10. If any dispute shall arise between the Minister and the Association as to the scope of the services to be rendered, the remuneration payable to the Association in respect of additional services required by the Minister under clause 9 hereof, the propnjty or validity of any requisition of the Agriculture, Marketing or Audit Departments or as to any other matter arising out of this agreement the dispute shall be referred to the Wool Advisory Committee appointed under the provisions of the Purchase of Wool Regulations which shall endeavour to bring the parties to agreement. If such Committee is unable to bring the parties to agreement or if a Wool Advisory Committee has not been appointed under the said Regulations the dispute shall be determined by the Minister whose decision shall be final and binding on the Association. 11. The term of this agreement shall be not less than one year from the first day of October, 1939, and thereafter this agreement shall continue in force until the acquisition of the clip of wool coming to hand next after the termination of the present war with Germany unless either the Minister or the Association terminates this agreement by giving to the other party six calendar months' notice of his or its intention so to do such notice expiring during the month of September in any year. 12. Any notice to be given, discretion to be exercised or thing or matter to be done by the Minister under this agreement shall be sufficient if given exercised or done by the Minister or by the DirectorGeneral of Agriculture or by the Director of the Export Division of the Marketing Department or any other person authorized by the Minister generally or particularly in that behalf. 13. (1) Except as may be expressly authorized by the Purchase of Wool Emergency Regulations 1939 or in writing under the hand of the Minister no person employed by the Association for the purposes of this agreement shall directly or indirectly be a party to demanding or receiving from any owner or any purchaser of wool subject to this agreement any brokerage commission or other remuneration, reimbursement or payment of any kind. (2) The Association shall obtain from each of the persons so employed by it a declaration that he will observe the provisions of this clause. If any such person accepts brokerage commission or other remuneration reimbursement or payment in contravention of this clause the amount thereof shall be recoverable from the Association as a debt due to the Crown. FIRST SCHEDULE. 1. The appraisement of wool shall be carried out in accordance with the Purchase of Wool Regulations 1939 and any regulations passed in amendment thereto or in substitution therefor and in accordance with the scale of values from time to time determined by the Minister. 2. Subject to the provisions of the said Regulations and of this agreement the appraisement shall be in accordance with the standard practice of the New Zealand Wool Buyers' Association. 3. Appraisement of greasy wool shall be conducted at Auckland, Christchurch, Dunedin, Gisborne, Invercargill, Napier, Timaru, Wanganui and Wellington. Appraisement of slipe wool shall be conducted at every Freezing Works in New Zealand where slipe wool is ready for appraisement and appraisement of scoured wool shall be conducted at every Scouring Works where scoured wool is ready for appraisement. If appraisement is required at any other town, that requirement shall be regarded as involving additional work within "the provisions of clause 9 of the agreement. 4. The Association will appraise all greasy, slipe and scoured wool in English qualities and will describe all suitable wools in Continental types the appraisement in every case to be on the English basis and will allocate wool suitable for scouring. 5. The Association's appraisers shall draw proper samples of all wool appraised under this agreement in accordance with the requirements of the Government of the United Kingdom as communicated to the Association by the Marketing Department. 6. The cost of containers for samples and the cost of labour for packing and baling samples shall be paid by the Minister. 7. Wool shall be graded as follows : —■ AA Good colour, well grown, sound, well skirted, well classed, free from fault. A Good colour, well grown, sound skirted, may contain very slight fault, suitable spinner. BB Good colour, well grown, skirted, free or practically free of seed, may contain slight tender, B Good topmaking, fair to good colour, may contain odd cott, very slight seed, more or less skirty. C Topmaking fair colour, may contain few cotts, may be unskirted, bushstained and part seedy. D Ordinary topmaking, average colour, may be cotty or seedy, unskirted and bushstained. E Any wool inferior to the above mentioned grades. General: Hairy or badly bred wools must be thrown down in grade.

36

H.—3ob.

8. Where wool is required for the purposes of any Government or purchaser other than the Governments of New Zealand and the United Kingdom the Supervising Appraiser will be responsible for the selection of the wool required for those purposes and supply to the Director of the Export Division of the Marketing Department and to the broker in whose store the wool selected is stored particulars of the selection. Such selection shall not be regarded as involving additional work under the provisions of clause 9 of this agreement. 9. As soon as practicable after the completion of each appraisement the Association shall supply to the Director of the Export Division of the Marketing Department particulars of the quantity of wool included in that appraisement. 10. The Association on the completion of each appraisement will supply to the Director of the Export Division of the Marketing Department in triplicate full particulars of all wool included in that appraisement in accordance with the requirements of the Government of the United Kingdom as communicated by the Director of the Export Division of the Marketing Department to the Association and will also supply particulars of the values assigned to all such wool to the broker in whose store the wool is stored. 11. In any case where an appeal is lodged against the valuation of any wool the Association will make the necessary arrangements for the wool to be re-appraised in accordance with the provisions of the Purchase of Wool Emergency Regulations 1939 as expeditiously as possible. Such re-appraisal shall not be regarded as additional work under the provisions of clause 9 of this agreement. 12. When any wool has been re-appraised in consequence of an appeal being lodged in respect thereof the Association will on the completion of the re-appraisal supply to the Director of the Export Division of the Marketing Department and to the broker in whose store the wool is stored the particulars of that wool as required under the provisions of clause 10 of this Schedule in respect of an appraisement of wool. 13. In all matters relating to the appraisement of wool under this agreement the Association will make the necessary arrangements in consultation with the Government Woolbrokers appointed under the provisions of the Purchase of Wool Emergency Regulations and so far as the said Regulations and this agreement permit the agreement now subsisting between the New Zealand Wool Buyers' Association and the New Zealand Woolbrokers' Association with respect to the conduct of wool sales commonly referred to as " the Regulations governing Wool Sales 1913 and amendments thereto" shall apply to the appraisement of wool under this agreement. 14. The Association shall perform all clerical work associated with the appraisement of wool from the time of commencement of the appraisement up to the delivery of shipping documents to the Director of the Export Division of the Marketing Department and shall prepare and deliver all returns in respect of each appraisement in accordance with the requirements of the Government of the United Kingdom as communicated to the Association by the Director of the Export Division of the Marketing Department. 15. The books of the Association so far as they relate to the subject matter of this agreement shall be kept in accordance with normal practice in the wool trade and in a form acceptable to the Controller and Audit-General and the Association shall prepare and deliver all receipts invoices vouchers accounts and other records and documents that may reasonably be required by the Controller and Audit-General and the Director of the Export Division of the Marketing Department. SECOND SCHEDULE. The persons and salaries referred to in clause 8 of this agreement — 1 Chief Appraiser at £1,750 .. .. .. •• •• 1,750 3 Inspecting Appraisers at £1,500 .. .. .. .. ■ • 4,500 4 Head Appraisers at £1,350 .. .. .. .. 5, 400 8 Appraisers at £1,200 .. .. .. .. •• 9,600 10 Appraisers at £1,000 .. .. .. .. ..10,000 9 Appraisers at £850 .. .. .. .. • • 7,650 5 Appraisers at £750 .. .. .. .. •• 3,750 4 Appraisers at £550 . . .. . • . • • • 2, 200 2 Appraisers at £400 .. .. . . • ■ • • 800 4 Appraisers at £300 .. .. .. • • • • 1, 200 50 46,850 5 Clerical Staff at £650 .. .. .. .. .. 3,250 4 Clerical Staff at £500 . . .. 2,000 2 Clerical Staff at £450 .. 900 3 Clerical Staff at £400 .. .. .. .. .. l s 2oo 3 Clerical Staff at £350 .. .. .. .. .. 1,050 5 Clerical Staff at £325 .. .. .. .. .. 1,625 2 Clerical Staff at £300 .. .. . . • ■ 600 24 £10,625

37

H.—3ob.

In witness whereof these presents have been executed by the Minister and by the said Herbert Hill, Frank Break Clark, Albert Smith, Frederick Marshall, Alfred Yuna Moulton, Rawei Harold Hill, Charles George Prevost and Philip Theopiiilus Robinson the day and year first before written. Signed by William Lee Martin the Minister of") Agriculture for and on behalf of His { Majesty the King in respect of the Govern- \ ment of New Zealand in the presence of—J Signed by the said Herbert Hill in the presence \ of— / Signed by the said Frank Brear Clark in the\ presence of— j Signed by the said Albert Smith in the presence") of- / Signed by the said Frederick Marshall in the\ presence of— J Signed by the said Alfred Vuna Moulton in the\ presence of — J Signed by the said Rawei Harold Hill in th.e\ presence of — J Signed by the said Charles George Prevost in\ the presence of— f Signed by the said Philip Theophilus Robinson! in the presence of- — J

SCHEDULE No. 3. Agreement with N.Z. Woolscourers' Association. AGREEMENT made the 4th day of January 1940 between His Majesty the King in respect of the Government of New Zealand of the one part and Arthur Philip Alan Nicholls of Christclmrch, Company Director, William Tucker of Hastings, Woolscourer, George Thomson Matheson of Invercargill, Woolscourer, Sydney Smith of Feilding, Company Director, Arthur Irwin Logan of Auckland, Company Director, Thomas Joseph Bourke of Wellington,' Woolscourer, Aage Bernhard Christensen of Christchurch, Woolscourer, and Keppel Goodwyn Archer of Christchurch, Company Secretary, being the General Committee and Members of, the New Zealand Woolscourers Association and being authorised by the members of that Association to be the representatives of the members of that Association for the purposes of this agreement (the said Arthur Philip Alan Nicholls, William Tucker, George Thomson Matheson, Sydney Smith, Arthur Irwin Logan, Thomas Joseph Bourke, Aiige Bernhard Christensen and Keppel Goodwyn Archer hereinafter where the context so admits being referred to as " the Association ") of the other part And whereas the said Arthur Philip Alan Nicholls, William Tucker, George Thomson Matheson and Sydney Smith (hereinafter referred to as " the Trustees ") have been appointed by the Association as Trustees of the Association Now this agreement witnesseth that it has been agreed by and between His Majesty the King and the said

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Arthur Philip Alan Nicholls, William Tucker, George Thomson Matheson, Sydney Smith, Arthur Jrwin Logan, Thomas Joseph Bourke, Aiige Bernhard Christensen and Keppel Goodwyn Archer jointly and severally as follows:— 1. The Minister of Agriculture shall act for and represent His Majesty the King in all matters arising out of and incidental to this agreement. 2. The said General Committee of the Association shall have full authority on behalf of the Association to exercise all powers conferred on the Association and undertake all duties imposed on the Association under this agreement and generally to act for and represent the Association in all matters arising out of or incidental to this agreement, and the term " General Committee " shall be deemed to include any persons appointed by the Association in addition to or in substitution for the persons hereinbefore named as the General Committee. 3. The said Trustees of the Association shall have full authority on behalf of the Association to receive and disburse all moneys payable to or by the Association under this agreement, and the term " the Trustees " shall be deemed to include any persons appointed by the Association in addition to or in substitution for the persons hereinbefore named as the Trustees. 4. The Association will promptly and efficiently scour all greasy wool that is allocated by or on behalf of the Minister to the Association for scouring and perform all incidental services hereinafter specified or normally associated with scouring for the consideration and upon and subject to the terms stipulations and conditions hereinafter provided. 5. (1) The said General Committee will forthwith on the execution of this agreement in respect of the season ending on the thirtieth day of November, 1940, and on or before the first day of December in each year for each following season during the currency of this agreement allot to each Government Wool Scourer the total quantity of wool to be scoured by him during the ensuing season in such a manner that each Wool Scourer will obtain an equitable share of the total quantity of wool allocated to the Association having regard to the type, condition, and quality of the wool, the capacity of the respective woolscouring works and the efficient performance of the duties of the Association under this agreement. (2) The said General Committee shall also on each appraisement of wool by a Government Appraiser allot to each Government Wool Scourer the quantity of wool to be scoured by him from that appraisement, having regard to the quantity of wool from that appraisement allocated to the Association for scouring and to the total quantity allocated to each Government Wool Scourer during that season. (3) Every allotment of wool made under this clause will be subject to the approval of the Minister and in the event of a disagreement between the Minister and the Association in regard to any allotment the decision of the Minister will be final and binding on the Association and on every Government Wool Scourer. (4) Subject to the provisions of paragraph (3) of this clause and of paragraph (3) of the next succeeding clause every allotment of wool by the Association under the provisions of this clause shall be final and binding on every Government Wool Scourer. 6. (1) Except with the prior authority of the Minister in writing and subject to such conditions as he may require, the Association shall not and no Government Wool Scourer shall during the currency of this agreement scour or accept for scouring or have in its or his possession or custody for any purpose any wool other than wool allocated to it or alloted to him for scouring under the provisions of this agreement and except with the like authority the Association shall not allot to any Government Wool Scourer any wool for scouring under this agreement so long as he has in his possession or custody any greasy scouring or scoured wool other than wool required to be scourcd under the provisions of this agreement. (2) The Association will at the request of the Minister and may with the approval of the Minister undertake the scouring of any wool required by any person firm or company engaged in the business of manufacturing or any other business in New Zealand on such terms and conditions as may be agreed upon between the Association and that person firm or company, but neither His Majesty the King nor the Minister shall in any way be liable to pay any charges or expenses in respect of the scouring of such wool. (3) If the Association or any Government Wool Scourer shall undertake the scouring of any wool at the request of or with the approval of the Minister in accordance with the provisions of this clause the Association may with the approval of the Minister vary any allotment of wool made under the provisions of clause 5 of this agreement having regard to the additional quantity of wool required to be scoured. (4) If in any case the Minister authorises any Government Wool Scourer to scour or accept for scouring any wool other than wool allotted to him for scouring under the provisions of this agreement notice of such authority shall be given by the Minister to the Association. 7. Any person firm or company carrying on business as a bona fide wool scourer at the date of this agreement but who is not a member of the New Zealand Wool Scourers' Association shall if the Minister and the Association agree to accept that person firm or company be entitled to receive an allotment of wool for scouring under this agreement upon such person, firm, or company becoming a member of the Association.

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H —30b.

8. The Association will take delivery of all wool allocated to it under this agreement from the store of the Government Broker in whose store the wool is stored at the following places at which the appraisement of greasy wool is conducted, namely, at Auckland, Wellington, Wanganui, Napier, Gisborne, Tokomaru Bay, Oamaru, Nelson, Blenheim, Ohristchurch, Timaru Dunedin and Invercargill and shall at its own cost bear all transport costs and charges on such wool from that store to the scouring works at which the wool is to be scoured. 9. (1) The Association will take delivery of all wool allocated to it for scouring from the store of the Government Broker not later than the fifty-sixth day after the date of appraisement of that wool by a Government Appraiser. (2) If the Government Broker in whose store the wool is stored at the date of appraisement of that wool within twenty-eight days after the date of appraisement of that wool, gives to the Government Wool Scourer to whom that wool has been allotted by the Association or if the Government Broker is not aware of the Government Wool Scourer to whom that wool has been allotted then to the Secretary of the Association addressed to his office in Ohristchurch, notice that the space occupied by that wool is or will be required by the Government Broker for other purposes and that wool is not removed from his store within twenty-eight days after the date of appraisement, the Government Wool Scourer or the Association as the case may be shall pay all reasonable costs incurred by the Government Wool Broker in restacking that wool. (3) If the Association fails or neglects to take delivery of any wool allocated for scouring within fifty-six days after the date of appraisement the Association will pay to the Government Broker in whose store the wool is stored his charges for storage for any period in excess of fifty-six days after the date of appraisement at the rate of fourpence per bale for each week or part of a week falling between the thirtieth day of November in one year and the first day of March in the following year and at the rate of threepence per bale for each week or part of a week falling between the twenty-eighth day of February and the first day of December in any year. (4) The Government Wool Scourer shall not be liable to pay any Government Brokers delivery charge on any such wool. (5) " Date of Appraisement " for the purpose of this clause means the day on which the appraisement was completed of all the wool submitted for appraisement on the same occasion at all the wool stores in the same locality. 10. The Association will in accordance with the normal custom in the Wool Scouring trade recondition any wool pack which requires reconditioning as a container for any wool. 11. The Association will sort, scour, bale, mark and deliver all wool allocated to it under this agreement in accordance with particulars of types of scoured wool supplied to it from time to time by the Minister and in accordance with the requirements of the Minister. 12. (1) Forthwith on completion of the scouring of any wool by the Association the Association shall notify the Minister or the person appointed by the Minister in that behalf that such wool is available for inspection and examination. (2) If on such inspection and examination the Government Appraiser or other person appointed bv the Minister in that behalf is satisfied that such, wool has been sorted, scoured, baled and marked in accordance with the provisions of this agreement lie shall issue to the Association a certificate to that effect. 13. (1) Subject to the provisions of the next succeeding paragraph of this clause, the Association will at its own cost store all wool for the time being held by it under this agreement until the expiration of the twenty-eighth day after the date on which notice is given by the Association under the provisions of paragraph (1) of clause 12 hereof. (2) If on inspection and examination pursuant to clause 12 hereof the Government Appraiser or other person is not satisfied that such wool has been sorted, scoured, baled and marked or otherwise dealt with in accordance with the provisions of this agreement, the Association will at its own cost store such wool until the expiration of twenty-eight days after the date of issue of the certificate provided by clause 12 hereof. (3) If the Association is required to store such wool for any period in excess of the period described in paragraph (1) or paragraph (2) of this clause as the case may be, the Minister will pay to the Association storage in respect of such excess period at the rate of fourpence per bale for each week or part of a week falling between the thirtieth November in one year and the first March in the followingyear and at the rate of threepence per bale for each week or part of a week falling between the twenty-eighth day of February and the first day of December in any year. 14. (1) The Association will at its own cost deliver all wool scoured by it under this agreement to a port store at which ocean going steamers call in the normal course of their loading and will pay all transport costs and charges on. such wool up to and including the loading of that wool into the ship at the port of delivery. (2) In any case where such wool has been delivered to a port store in accordance with shipping instructions given to the Association by or on behalf of the Minister the Association shall not be liable to pay any storage charges that may be incurred on such wool pending shipment but in any other case the Association shall pay such charges for storage, for any period during which the Association is required to provide storage under the provisions of paragraph (1) or paragraph (2) of the last preceding clause hereof as the case may be.

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(3) The Association shall not be liable to pay any charges for transhipment of any wool delivered to a port store under the provisions of this agreement. 15. The Association will ensure that all wool of which it has taken delivery under this agreement shall be kept in safe custody in suitable premises from the time of so taking delivery until the Association delivers that wool to port store under the provisions of the last preceding clause of this agreement but the Association will not be required to insure that wool against loss or damage by fire, flood or other cause. 16. In consideration of the services to be rendered by the Association under this agreement and subject to the provisions of the next succeeding paragraph of this clause the Minister will pay to the Association by way of remuneration a sum calculated at the rate of one penny halfpenny (l-5d.) for each pound by weight of greasy wool allocated to the Association for scouring in respect of which a certificate has been duly issued under the provisions of clause 12 hereof. (2) Such remuneration shall be paid to the Trustees not later than noon on the seventh day after submission by the Association of its claim for payment supported by a certificate duly issued under the provisions of clause 12 hereof and all other documents that may be required by the Minister. (3) The receipt by the Trustees of any moneys paid to them in respect of any claim pursuant to this clause shall discharge the Minister from his liability in respect of that claim and the Association will indemnify and save harmless His Majesty the King from and against all claims, damages, costs, expenses, actions, and proceedings on the part of any Government Wool Scourer or any other person claiming directly or indirectly to be entitled to payment of any moneys paid to the Trustees in respect of that claim. 17. (1) The Association will keep all proper books and records relating to the subject matter of this agreement in accordance with the normal practice in the Wool Scouring trade and, if required to do so by the Minister, will submit Such books and records to audit by the Controller and AuditorGeneral and will supply weight notes, specifications, and all such other statements relative to the scouring of wool pursuant to this agreement to the Government Appraiser or other person authorised in that behalf by the Minister together with such further information as may be required by the Minister. (2) If any invoices other than those normally used in the Wool Scouring trade are required by the Minister to meet the requirements of His Majesty's Government in the United Kingdom the Minister will supply such printed invoice forms. 18. In the event of loss or damage by fire, flood or other cause occurring to any wool for the time being in the possession or custody of any Government Wool Scourer (excepting loss or damage due to the default or neglect of the Government Wool Scourer) the Minister will pay to the Association a proportion of the remuneration provided to be paid under the provisions of clause 15 hereof equal to the proportion which the costs incurred and services rendered in respect of that wool by the Association up to the date on which such loss or damage occurred bears to the total costs that would have been incurred and the services that would have been rendered if the Association had in respect of that wool carried out the whole of its undertakings under this .agreement. 19. No delay, loss or damage in respect of any wool for the time being in the possession or custody of the Association necessarily caused by strike, civil disorder, or other unavoidable cause shall render the Association liable in damages or otherwise to the Minister for any default or damage arising therefrom. 20. If any dispute shall arise between the Minister and the Association or any Government Wool Scourer as to the scope of the services to be rendered by the Association under this agreement or as to the validity or propriety of any requisition of the Minister or any person authorized by him in that behalf, that dispute or the question on which the parties have failed to agree shall be referred to the Wool Advisory Committee appointed under the provisions of the Purchase of Wool Emergency Regulations 1939, which shall endeavour to bring the parties to agreement. If such Committee is unable to bring the parties to agreement the dispute shall be determined by the Minister whose decision shall be final and binding on all parties. 21. Any notice to be given discretion to be exercised or thing or matter to be done by the Minister under this agreement shall be sufficient if given exercised or done by the Minister or by the DirectorGeneral of Agriculture' or by the Director of the Export Division of the Marketing Department or any other person authorized by the Minister generally or particularly in that behalf. 22. The term of this agreement shall be for the period ending on the thirtieth day of November, 1940, and thereafter this agreement shall continue in force until the acquisition of the clip of wool coming to hand next after the termination of the present war with Germany, unless either the Minister or the Association terminates this agreement by giving to the other party three calendar months notice of his or its intention so to do such notice expiring during the month of November in any year. 23. In this agreement — " Government Appraiser" means a person appointed as a Government Appraiser under the Regulations. " Government Broker" means a person appointed as a Government Broker under the the Regulations.

6—H. 30b.

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" Minister " means the Minister of Agriculture. " Regulation " means The Purchase of Wool Emergency Regulations 1939 and any Regulations made in amendment thereto or in substitution therefor. In witness whereof these presents have been executed the day and year first above written. Signed by the said William Lee Martin the\ Minister of Agriculture in the presence of—J Signed by the said Arthur Philip Alan\ Nicholls in the presence of— f Signed by the said William Tucker in the\ presence of — j Signed by the said George Thomson Matheson\ in the presence of— f Signed by the said Sydney Smith in the\ presence of— j Signed by the said Arthur Irwin Logan in the\ presence of— j Signed by the said Thomas Joseph Bourke in"! the presence of—• j Signed by the said Aage Bernhard Christensen\ in the presence of— f .Signed by the said Keppel Goodwyn Archer \ in the presence of— J

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SCHEDULE No. 4.—TRADING STATEMENT OF ACCOUNTS, NEW ZEALAND SHEEP-SKIN CONTROL. Trading Statement, New Zealand Sheep-skin Control, for the Period 18th November, 1939, to 31st March, 1940.

Apportionment of Expenses. Basis (value of loose skins purchased)— Per Cent. £ s. d. War expenses .. .. 35-29 77,852 7 I Pool expenses .. .. 64-71 142,756 0 0 100-00 £220,608 7 1 Expenses as under — £ s. d. -— Salary, Controller .. .. .. 210 0 0 £ s. d. Salaries, Deputy Controller and Appraisers 1,847 110 35-29 per cent, of £5,126 ss. 9d. .. 1,809 1 3 Salaries, Administration .. .. 1,157 4 1 64-71 per cent, of £5,126 ss. 9d. .. 3,317 4 6 Travelling-expenses .. .. .. 720 9 5 ~~ —— Postages and telegrams .. .. 108 3 5 Telephones and toll charges .. .. 342 1 11 Resulting Balances. Stationery .. . . .. .. 263 5 6 War Expenses Account £ s. d. £ s. d. General expenses .. .. .. 66 0 2 surplus .. 18,602 19 2 Rent .. .. .. .. 134 12 0 Less proportion Interest and exchange .. .. 277 7 5 expenses .. 1,809 1 3 Total overhead expenses .. .. 5,126 5 9 Net balance due Net surplus— £ s. d. to account .. £16,793 17 11 Or. 16,793 17 11 War expenses .. Gr. 16,793 17 11 - Pool .. ..Dr. 2,917 14 6 Pool — £ s. d. 13,876 3 5 Surplus .. .. 399 10 0 Less proportion Gross surplus from above .. .. £19,002 9 2 expenses .. 3,317 4 6 Debt balance, carried forward .. £2,917 14 6 Dr. 2,917 14 6 Net surplus .. .. .. £13,876 3 5 Dunedin, 20th May, 1940. R. C. Burgess, Controller.

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Total Operations. SgS 1S. ; Pool Operations. j N S^n e S r0f j Money. Money . £ s. d. £ s. d. £ s. d. Purchases all loose skins .. 1,006,720 220,608 7 1 291,005 77,852 7 1 715,715 142,756 0 0 Less stocks loose skins .. 105,704 16,614 0 0 .. .. 105,704 16,614 0 0 ■Costs loose skins for export and 901,016 203,994 7 1 291,005 77,852 7 1 610,011 126,142 0 0 fellmongering Add fellmongering charges .. .. 12,195 0 0 .. .. .. 12,198 0 0 Add grading and packing .. 12,859 5 10 .. 6,823 16 1 .. 6,035 9 9 charges Cost of fellmongers' stocks and 901,016 229,048 12 11 291,005 84,676 3 2 610,011 144,372 9 9 packed skins f.o.b. Packed skins ex exporters .. 294,485 ! 77,044 19 0 294,485 77,044 19 0 Cost packed skins and fell- 1,195,501 306,093 11 11 585,490 161,721 2 2 610,011 144,372 9 9 mongered products Less packed stock and fell- .. 50,880 2 7 .. .. .. 50,880 2 7 mongered stock F.o.b. cost of skins and fell- .. 255,213 9 4 585,490 161,721 2 2 .. 93,492 7 2 mongered products sold Gross surplus, carried down .. 19,002 9 2 .. 18,602 19 2 .. 399 10 0 Sales at f.o.b. value .. .. .. 274,215 18 6 585,490 180,324 1 4 .. 93,891 17 2

H.—308.

Trading Statement, New Zealand Sheep-skin Control, for the Period 18th November, 1939, to 31st March, 1940. Quantities.

Resulting Costs. Grading and packing to f.o.b.— War expenses purchase, 291,005 loose skins weighing 2,183,619 lb. Cost, £6,823 16s. Id., to put f.0.b., being 0-75 d. a pound. Pool purchases, 369,218 loose skins weighing 2,330,996 lb. Cost, £6,035 9s. 9d., to put f.0.b., being 0-625 d. a pound. These were the contract rates.

Unit Cost cot Ovekheads. Basis is loose skins purchased— Skins. lb. For War Expenses Account .. 291,005 2,183,619 For Pool .. .. .. 403,163 2,511,764 694,168 4,695,383 For fellmongering .. .. 312,552 2,114,101 Seven months' purchases .. 1,006,720 6,809,484 The weight of the fellmongered skins is estimated at the same average weight as the dry skins. Relative purchases, five months .. .. 719,085 skins. 4,863,9151b. Overheads, five months £5,126 ss. 9d. Resulting unit costs— Per skin .. .. .. .. 1-71 Id. Per pound .. .. .. .. 0-253 d.

By Authority: E. V. Paul, Government Printer, Wellington.—l94o.

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Total Operations. War Io ™e. P°«»Item. ~. 0f Weight. —l a >. weight. ~s. 0f Weight, Welght . lb. lb. lb. lb. Purchases, all loose skins .. 1,006,720 Less fellmongers' skins .. 312,552 Prime costs, dry skins .. 694,168 4,695,383 .. .. 291,005 2,183,619 403,163 2,511,704 Less stocks loose skins .. 33,945 180,768 .. .. .. .. 33,945 180,768 Costs, loose skins for export .. 660,223 4,514,615 .. .. 291,005 2,183,619 369,218 2,330,996 Add grading and packing charges Cost of packed skins f.o.b. .. 660,223 4,514,615 .. .. 291,005 2,183,619 369,218 2,330,996 Packed skins ex exporters .. 294,485 1,956,031 294,485 1,956,031 Cost, all packed skins f.o.b. .. 954,708 6,470,646 294,485 1,956,031 291,005 2,183,619 369,218 2,330,996 Less packed stock .. .. 146,647 707,404 .. .. .. .. 146,647 707,404 Sales .. .. .. 808,061 5,763,242 294,485 1,956,031 291,005 2,183,619 222,571 1,623,592