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11. The Table may be read in conjunction with Table II., with certain limitations as regards bread, bacon, butter and cheese, the retail prices of which do not necessarily relate to home produce. It must also be remembered that the Ministry of Labour figures are based on average prices ruling in July, 1914, whereas those compiled by the Ministry of Agriculture show increases as compared with prices in the corresponding month of the years 1911-1913. This is an important difference, as some of these products are subject to seasonal variations which are reflected in the figures of the Ministry of Labour but are neutralised in those of the Ministry of Agriculture. Moreover, during the first seven months of 1914, bread, flour, potatoes and dairy produce were slightly cheaper to the consumer, and meat and bacon dearer, than they had been during the years 1911-1913, and this fact must be taken into account in any comparison between wholesale and retail prices of individual commodities.

II. THE SPREAD BETWEEN PRODUCERS' AND

CONSUMERS' PRICES.

12. We have described in some detail the recent movements of agricultural prices because they reflect the serious position of agriculturists generally, and particularly of the arable farmer. Similarly, we have set out the comparable statistics relating to retail food prices because they serve to re-create the atmosphere at the time of our appointment, and to explain why agriculturists resent a state of affairs which leaves food producers inadequately remunerated while the agencies standing between them and the consumer remain apparently undisturbed in the enjoyment of their reward. A marked difference between the position of primary producers and that of distributors is a common feature of every industrial depression in this and other countries, but it is doubtful whether it has ever been so much in evidence as during the past two years.

13. We were asked by our terms of reference to consider whether the spread between producers' and consumers' prices could be diminished. With that end in view we have exhaustively examined the methods of marketing and distribution as they are, and we have set out, in most cases for the first time, the various costs and charges both of material and of services, and in many cases also of manipulative and manufacturing processes, which together make up the price which the consumer pays. The question remitted to us is one of vital moment both to the producer and to the consumer. Apart from the special circumstances arising out of the economic conditions created by the war, a stage of national development has been reached of such complexity and interdependence that the fundamental problem of the cheap and efficient distribution of foodstuffs is one of the most pressing and important with which modern society is faced. It is already engaging world-wide attention and interest.

Enquiries similar to our own have been completed, or are still in progress, in a number of countries, among which may be mentioned the United States, Norway, Sweden, New South Wales and South Africa.

14. Prior to our appointment, particularly in the years 1920 and 1921, many of the distributive trades were making large profits and making them easily. During the war, and for some little time after its conclusion, consumers were more concerned with the supply of food than with its cost. With the increase in food supplies and the removal of Control, a reaction ensued against the enforced food economy of the war period. This reaction was at first accompanied by a brisk labour market; salaries and wages being high, household expenditure remained a minor consideration, and distributors seized the opportunity to make large profits. In the year 1922 the distributive margins began slowly but surely to contract. Competition, which had been largely stifled by the operations of Control, began to revive, and although we have noted the tendency of mutual understandings to continue and to retard the normal initiative of the private trader, there is. reason to anticipate, in the natural evolution of events, a full restoration of competition.

15. Our investigations have led us to the conclusion that the spread between producers' and consumers' prices is unjustifiably wide. Taken as a whole, distributive costs are a far heavier burden than society will permanently consent to bear. Certain intermediaries between the farm and the home are, of course, indispensable for the great bulk of produce grown in these islands. Whatever system of collection, treatment, and distribution of the products of British farms may be evolved in future, it appears that the services now rendered by different types of intermediaries are typical of those which will always be required. Moreover, the consumers' demand for foodstuffs which have been prepared ready for immediate use involves increased ancillary services of treatment and manufacture. But economics can be made, and processes of collection and distribution can be shortened. In certain cases, for instance, it should be possible to concentrate in the hands of one intermediary the successive functions now performed by several. Again the balancing of supply and demand, although an essential service performed mainly by wholesalers, has, on the whole, developed in a somewhat haphazard manner. With better organisation the regulation of supplies could, to a greater extent, be performed near to the place of production, with a consequent saving in handling and transport.

16. In our interim reports we have instanced unjustifiable distributive charges, and we have recorded our view that individual traders and groups of traders are, in some cases, still making higher profits than are warranted by the services they perform. These profits should be reduced. The view that

middlemen as a class are rapacious, and that existing systems of marketing and of distribution are chaotic, is perhaps natural on the part of those who have not made a comprehensive survey of the costly and complicated processes of collection and distribution of agricultural produce. While we cannot subscribe to this view, we have no doubt that if the present system were carefully examined by those who are primarily interested in it, whether as producers or as distributors, modifications could be introduced which would render it more efficient and less costly. In some trades there are now too many profit-making agencies engaged in the process of distribution. Public interest demands a far more determined effort on the part of all concerned to bring about reform and to increase the efficiency of the marketing and distributive machinery as a whole.

III. THE PRODUCER AND HIS MARKET.

(A) THE DEVELOPMENT OF A MARKETING SENSE.

17. Following the natural sequence of events, it will be convenient to consider first the marketing process and to recall the insistence with which we have urged that greater attention should be given by producers to the conditions governing the marketing, transport and sale of their produce. A knowledge of these must represent an immense asset, yet it is abundantly clear from our evidence that most farmers and fruit and vegetable growers have little knowledge of the working of the distributive system. Farmers, for the most part, are men in a small way of business, and even when farming on a somewhat large scale the produce which they have individually to offer at any one time is an insignificant contribution to the total supply. Sales of such products as grain and live-stock are intermittent and not of daily, or even weekly occurrence, so that the marketing side of their business, though of primary importance, takes a second place as compared with the more immediate problems of farm management. Even if farmers had the time to spare, it is doubtful whether many have the capital and facilities necessary for the fuller development of the marketing side of their enterprise. Their choice of markets for much of their produce is restricted to those within a convenient distance of their farms; and custom or financial convenience has generally led them to deal only with particular firms. Hence the methods of marketing many kinds of farm produce have shown little or no change over a long period of years. On the other hand, considerable changes have occurred in the methods of distribution. Whilst every branch of industry and commerce has been organising on a wholesale scale, the British producer has, in the main, been content to pursue the methods which prevailed before this country became the principal market for the agricultural produce of the world.

18. In the new circumstances of world competition a knowledge of the marketing and distributive processes is essential to the producer. Only when thus informed can he adapt his methods of production, the goods he produces, and the preparation of these goods for market, to the needs of the buying public. This, together with a capacity to compare values and judge prices, is the marketing sense. It is possessed by the more progressive agriculturists, but if the British producer is to occupy his proper place in the home market it must be cultivated more generally.

19. Representative organisations of producers should also make it their business to study closely the systems of marketing and distribution in order that they may by organisation and by collective bargaining, on either a local or a national basis, secure for their constituents the most favourable terms in competition with well-organised supplies from other parts of the world. The periodical negotiations which have been conducted recently by the National Farmers' Union, representing milkproducers generally, with the representatives of the milk distributive trade, is an instance of collective action in the sphere of marketing and distribution which, in our view, circumstances clearly damand.

(B) STANDARDISATION OF PRODUCE.

20. Overseas interests have secured a large and increasing part of the trade in all the large urban markets by the efficiency with which they have standardised their products and organised methods of sale. In this matter, the large commercial and shipping interests have taken a leading part. The Governments. of the exporting countries have also, in many cases, lent their assistance, and brought pressure to bear upon their nationals to market their produce properly standardised as regards quality, packing, and, for certain kinds of commodities, as regards packages also. Their aim has been to build up a reputation which will at all times ensure a ready sale and facilitate the permanent establishment of market relationships.

21. Standardisation is a first principle of modern commerce. It enables goods to be bought and sold on the faith of their description; it renders valid a comparison of prices between. lot and lot, and between market and market; it is the essential foundation of advertisement. The producer whose goods are properly graded according to recognised standards is in a position not only to strike a satisfactory bargain with the distributor, but also to market his produce under his own brand or trademark. On the other hand, produce that is of varying quality induces an element of doubt in the mind of the buyer, who protects himself against loss by offering a lower price. These are, no doubt, truisms, but they merit the earnest consideration of the home producer. His proximity to his markets does not relieve

him of the necessity of adopting progressive marketing methods. The increasing penetration of attractive, high-class and wellgraded produce from abroad into the very heart of the countryside points to the standardisation of produce as the one essential preliminary to successful competitive trading under modern conditions. The British producer must break the inertia of custom; standardisation, with organisation, is the direction in which he must set his future course.

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22. In developing standardisation the producer should be able to count on the co-operation of intermediary organisations. As an illustration, we may take the British bacon industry. It can only hope to replace by home produce the bacon now imported from overseas (to the value of £35,000,000 in 1922) if a new relationship of co-ordination is established between pig farmers and bacon curers. The best English bacon is unrivalled, but the bulk of home produce is variable in quality and competes at a disadvantage with the uniform high quality Danish side. Grocers foster the Danish trade because they know that Danish bacon varies little in quality and gives satisfaction to their customers and themselves. The aim must be to raise home produce to a similar standard of uniform excellence. Nothing will do this more effectively than combined action by the curers to discriminate between pigs of different quality, instead of giving a fixed rate for pigs of suitable weight regardless of quality. In Denmark experience has proved the wisdom of grading carcases of suitable weight into (1) lean, (2) medium fat, (3) fat, and paying the farmer on a quality basis. The objection that a farmer would not appreciate why a bonus should be paid to his neighbour and not to himself could be overcome by the presence of a farmers' representative at the bacon factory to check the price calculations in the same way that the growers' representative acts at a sugar beet factory. This would give farmers confidence in the justice of the price they received.

23. Here, in our opinion, is an instance in which standardisation is immediately feasible. By co-operative action it should be possible to establish a "hall-mark" for British bacon which reaches a standard of excellence comparable to the Danish. In Denmark, Government Inspectors are on duty at bacon factories, and they give the brand permitting export. The British home trade might adopt similar measures, and thus ensure to the British producer the first place in his own home market from which he should never have been displaced.

IV. FOOD DISTRIBUTORS: THEIR RESPONSIBILITIES AND PRIVILEGES.

24. Apart from the instances which we have cited in our various interim reports of charges which should be capable of immediate reduction, distributors as a whole must be prepared not only to modify their margins in future as the cost of materials,

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