H.—29a

Vendor Margins Examination has been made of the cost of treatment and distribution in all four centres. The Commission regards it as important that fair and adequate margins should be allowed to the various interests, but that control of the trade should be so organized as to prevent the pursuance of a profit motive without adequate consideration of matters of public health. The margins set must be such as to encourage the utmost efficiency compatible with service, and at the same time must not be set at such a level as to penalize the efficiency of existing institutions. There must, furthermore, be an assurance of stability within the treating and vending interests so as to encourage efficient existing institutions to provide further modern equipment and plant. The Commission finds that margins to the vendors of bottled pasteurized milk are not unduly high, but that the consumer price fixed by the cost of producing, treating, and distributing bottled pasteurized milk has been adopted (except in Auckland, where the Metropolitan Milk Council has fixed the respective margins) by the vendors of other classes of milk—viz., raw loose milk. The Commission is of opinion that in order to avoid undesirable competition based on inferior-quality milk all milk should be the same price to the consumer, but it is unable to approve the appropriation of what may be described as " unearned " margins by vendors who have not incurred the cost of pasteurizing or bottling the milk. Goodwill values have increased to a very high figure —viz., £10 to £12 per gallon—and with the introduction of zoning are likely to increase further. Where all competition has been eliminated it is difficult to see why the goodwill value should, in its inflated state, be allowed to accrue to the vendor, and in all areas except Auckland the profit margin on the distribution of raw unbottled milk is out of all proportion to the services rendered. The Commission has indicated the general costs of distribution for private vendors and for companies and the steps to be taken to reduce the cost of distribution to a minimum by the introduction of appropriate measures of economy. Under existing circumstances of zoning, and particularly if the recommendations of the Commission are given effect, action must be taken to regulate the margin allowed to the vendor of raw unbottled milk so that altogether disproportionate profits according to the services rendered are not made. The Commission has recommended the distribution of all retail milk in sealed containers, and if unearned margins of the type described by the Commission are withheld from the vendor it is possible that pressure of economic circumstances alone will gradually bring about the achievement of the Commission's recommendation in this respect. Reference to the appropriate table in the Appendix will indicate the large number of vendors who are distributing less than an economic amount of milk—viz., 60 gallons. If all unearned margins are retained from the vendor, then consideration will have to be given in each area to the consolidation of small rounds, if and when such are available for sale or transfer. It is not in the interests of effective control over milk quality nor economy of distribution to have a large number of small vendors, and these should be consolidated into larger units as early as possible. Consumer Prices On the question of consumer prices the Commission has endeavoured as far as possible to maintain the present standard of prices, but this can only be achieved to the extent that economies are introduced into the supply, collection, treatment, and distribution of the milk. Whilst the public should be protected against unduly high prices, it should at the same time be prepared to pay a fair price according to the standard of the commodity being delivered. The Commission recommends that steps be taken to increase the consumption of milk, and that educational propaganda work be undertaken to improve the use and treatment of milk in the home. Now that zoning has been introduced and the consumer no longer has an unrestricted choice of the milk roundsmen from whom he or she may purchase milk, it is essential that steps be taken to ensure that all milk is of a uniform high-quality standard. There would be no justification whatever for the Commission recommending (as it does) the continuance of zoning and its consequent limitation of choice if the milk being delivered by the various roundsmen shows marked variations in quality. Supply Under this heading the Commission deals with the general problems of what constitutes a proper standard for the supply of liquid milk and also the quantity of such supply. The reasons are outlined for the establishment of " accredited " standards for all city-milk-supply herds and the necessity for adequate national consideration of the problem of eliminating T.B. from dairy herds. There has been no proper comprehensive planning in any area to provide a supply in anticipation of the demand for liquid milk in the next period of low production—that is, the ensuing winter period. This, in the opinion of the Commission, is due to the control by vendor interests of the organization o( supply. The vending interests are not prepared to accept responsibility for contracting for the full anticipated demand, with the result that in at least three of the metropolitan areas and to a limited extent the fourth there has at some time or other during the past five years been serious shortages of milk. Consequently, the Commission recommends that the Dairy Farmers' Co-operative Milk Supply Association ascertain from all vending interests their anticipated demand for the following winter. The Supply Association should then organize its membership to meet that demand so as to have at all times a supply available exceeding the estimated demand by at least 10 per cent. In order that the cost of surplus milk shall not be an undue burden on the producers, the Commission recommends that the proper authority be given to the Supply Association to control the sale of all milk intended for use in milk products. With a proper utilization of liquid milk from licensed herds for the provision of sweet cream it is probable that the greater part of the surplus can be disposed of without serious loss to the producers, but to the extent that the producers, in their efforts to provide a 10-per-cent. winter surplus, fail to secure an adequate return for that surplus, then to that extent will the average price to the producer fall below 13d. The Commission is particularly concerned that no loss should be suffered by producers due to providing surplus milk in the winter, and recommends the Central Authority to take appropriate action in that respect. The Dairy Farmers' Co-operative Milk Supply Association must of necessity establish a balancingstation in order to organize the daily supply of milk to the city and to dispose of surplus milk in the most economic manner. The Commission discusses proposals with regard to balancing-stations along these lines.

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