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REPORT I have the honour to submit the annual report and statement of accounts of the Marketing Department (Export Division) for the year ended 31st July, 1944. This report relates to the 1943-44 production season (the fifth year of war), and the transactions in respect of dairy-produce, meat, wool, tallow, woolly sheep-skins, hides, linen flax, and scheelite are reviewed under the appropriate headings. • CONTRACTS BETWEEN THE UNITED KINGDOM AND NEW ZEALAND GOVERNMENTS FOR THE FIFTH YEAR OF WAR, 1943 44 The contracts of purchase of wool and woolly sheep-skins by the United Kingdom Government run for the period of the war, and include the following season's wool-clip and production of woolly sheep-skins. Contract prices for wool continued at the 1942-4-3 rates. In the case of dairy-produce, increased prices for butter and cheese applied from Ist April, 1943, details of which are revealed in the dairy-produce section of this report. Meat-prices remained unchanged except for an increase in mutton-prices. Tallow-prices also remained unchanged. Details of contract terms and prices for all products handled by the Department are given in the appropriate sections of this report. LONG-TERM CONTRACTS BETWEEN THE UNITED KINGDOM AND NEW ZEALAND GOVERNMENTS FOR PURCHASE OF EXPORTABLE SURPLUSES OF BUTTER, CHEESE, AND MEAT FOR FOUR YEARS, 1944-48 The outstanding feature of the Department's activity during the year under review was the initiation by the United Kingdom Government of proposals for long-term contracts to ensure the largest possible supplies of dairy products and meat to Britain and to enable New Zealand primary producers to plan their farming operations in advance. These proposals envisaged the purchase of all supplies of dairy-products and meat which would be available for export from New Zealand up to the end of the 1947-48 production season. The first approach in regard to the proposals is contained in the following cablegrams conveying communications from the United Kingdom Minister of Food to the New Zealand Government through the New Zealand High Commissioner, London : — 7th January, 1944 (being text of letter dated 31st December, 1943, from the United Kingdom Minister of Food to the New Zealand High Commissioner, London) : — My Ministry has boon surveying the meat position with the object of ensuring that supplies may be availablo for a reasonable period ahead. lam told that the production of meat in Now Zealand has not as yet been increased to any great extent (although stops which have been taken may be expected soon to produce results) and that the most effective way to increase it may be to give producers the confidence that would result from a long term arrangement to purchase their exportable surplus. We are accordingly prepared to discuss the purchase of your exportable surplus meat until the end of 1947. If you will let me know that this procedure is acceptable to your Government I shall be glad to arrange for my officers to meet yours with the object of working out details of a mutually satisfactory arrangement. I hope your Government will agree to the course which I propose and that it will be possible to hold these discussions and to bring them to a speedy conclusion. 3rd March, 1944 : — As you know the world supply position for milk products is causing vis some anxiety and I believe your Government views with some concern the steady decline in exports from New Zealand to the United Kingdom and Allied nations. You may consider a long term contract tor a period similar to that suggested for meat about which I wrote you on 31st December last, may not only help to stem this decline but may well stimulate production to an extent that would enable exporting to be resumed on a scale more nearly approaching that of immediato pre-war years. We are therefore prepared to discuss with the representatives of your Government the purchase of your exportable surplus butter and cheese for period ending with your 1947-48 production season. If your Government would care to consider this proposal I shall bo glad to arrange for my officers to discuss with you the details of such an arrangement. The reply of the New Zealand Government to these proposals was to the effect that New Zealand was anxious to provide maximum supplies of meat and dairy products, and that discussions in regard to long-term contracts would be welcomed. The first conversations with the United Kingdom Minister of Food and the Chancellor of the Exchequer were conducted by the Hon. W. Nash, who represented to the United Kingdom authorities that when, at the commencement of the war, the original purchaseprices for New Zealand export products were fixed, we had emphasized that we did not wish to make any profit out of the war, but had merely asked that prices be reasonable in the existing situation. We did, however, make a reservation, the substance of which was repeated from time to timenamely, that returns to New Zealand should be adjusted if the index of export prices in the United Kingdom rose significantly. In particular Mr. Nash referred to the minutes of the meeting on 6th

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