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labour, transport, and other incidental items falls, but, in the meantime, to make a concerted and conscious effort through their various organisations, most of which either actually came into existence or were immeasurably strengthened as a result of war conditions, to increase the effectiveness of their trades and to work steadily forward in the direction of devising less expensive methods and of adapting their trading policies to the fundamental requirements of economical distribution. It is in their own interests to do so. At present most of these organisations appear to exist mainly for the purpose of trade defence, and their activities are largely protective and propagandist in character. Few have any marked constructive tendencies; fewer still have learned to abandon a purely sectional for a wide and progressive national outlook.

25. Yet there is little doubt that these organisations can exert a powerful influence for good, and this the public has a right to expect, and assuredly will expect, as a quid pro quo for the relatively protected and privileged position which distributors as a class enjoy in the business community. The distributive trades pass on their costs to the consumer. By adjusting prices as may be necessary to cover increases in cost, overhead and other charges, they remain tolerably secure in the permanent enjoyment of their profit margins. They incur no productive or manufacturing risks. Bad seasons do not wholly efface the fruits of their labour and enterprise. They handle all that the consumer requires, and whether the food they sell is produced in this country, or imported from other lands, is not unnaturally a matter of less concern to them than the maintenance of the total volume of their trade.

26. Primary producers, on the other hand, whose produce is sold in the wholesale markets in competition with supplies from abroad, are restricted in their returns by the price realised for the imported article. For them there is no sliding scale of costs and prices. The prices they receive are largely fixed by forces outside their individual or even collective control, and if costs of production or of marketing are high, their net returns are by so much the less. By the nature of their calling, they cannot readily adjust themselves to the shocks of shifting price-levels. Nor, as in the case of the railway companies, do they enjoy a virtual monopoly of an essential service.

27. One natural result of this condition of affairs is that the profits earned by agricultural producers have been seriously curtailed by the price changes of the last two years. Indeed, in many cases farmers of normal efficiency and with full knowledge and experience of their calling, have not only failed to make profits, but have suffered serious losses. As a consequence the wages paid to agricultural labourers are on the average considerably lower than is justified by the cost of living. On the other hand, the profits of distributors of farm produce, and the wages of workers

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engaged in the transport and distributive trades, have been well maintained, and are on the whole higher than in pre-war days even if the increase in the cost of living is allowed for. many cases both the net profits and the cash wages in distributive trades show an increase of 100 per cent., or even more, above the pre-war level, while the cost of living has now fallen to a point only about 70 per cent. above that of July, 1914. Those engaged in the distributive trades who have been able since the year 1920 to maintain their incomes, whether in the form of commission, profits, or wages, have enjoyed the full benefit of the decrease in the cost of living. Agriculturists, on the other hand, whether employers or employed, or working on their own account, have had to bear almost all of the burden resulting from the fall in wholesale prices of foodstuffs. Their cash incomes during the last two years have been such that, even when the decrease in the cost of living is taken into account, their real incomes have been reduced to a low level, and are much lower than those formerly enjoyed. Indeed, not only have many farmers experienced heavy losses and agricultural workers suffered severe reductions in wages, but many workers also have lost employment as a result of price changes which have scarcely affected the financial position of those interested in the profits of the distributive trades and which have to some extent been beneficial to those who earn wages in these trades. Supplies of nearly every type of farm product have been ample, if not heavy, and practically every trader has been able to obtain the full share of goods necessary to meet the demands of his customers. The limit to their trade has been set rather by the requirements and purchasing power of consumers than by the supply of goods. In some spheres, the importation of goods, which has been detrimental to the interest of the producer, has given the traders a wider sphere of purchase and of operations, and has also given them a lever with which to depress the farmers' primary markets.

28. Altogether, the position of the traders in agricultural produce during a period of acute depression in the producing industry has been an enviable one. It is true that in some cases they have had to reduce their margins to what they assert to be unremunerative dimensions, but this has been limited to certain sections of trade only, and mainly to the potato section of the trade in fruit and vegetables. It is also true that some traders have suffered temporary losses on the realisation of stocks held during times of quick changes in prices. But on the whole there is everywhere ample evidence that the margins of gross profit obtained by manufacturers and traders, whether on the wholesale or retail scale, have been sufficient to enable them to provide their workers with wages at least on a parity with, and in most cases superior to, those enjoyed before the war, and have retained sufficient net profit to enable them to improve their financial position. Moreover, while the amount of goods

to be handled has been equal to and in some cases in excess of requirements, the workers in the distributive trades have not suffered from unemployment as have many of their fellows engaged in production. Indeed it is possible that there might have been more employment, for both producers and distributors, more trade in and use of the goods available for consumption, if traders had reduced their margins of gross and net profit. While the purchasing power of a large proportion of the population was being reduced both by reductions in cash wages and by unemployment, it was clearly desirable that traders in foodstuffs should reduce their margins of gross profit to the lowest possible dimensions in order that the maximum amount of goods could be passed from the producer to the consumer.

29. It is by no means certain that traders have served their more permanent interests by maintaining gross profits of the dimensions which have been common during the last two years. The various agencies engaged in the handling and transport of produce from the farm to the home have been able to pass on their labour and other costs to the consumer and in the absence of effective public opinion, through lack of accurate information, they have had no special incentive to effect reductions, and no very special pressure has been put upon them to do so. Consequently, by maintaining comparatively high prices, they have to some extent limited the quantity of goods which the consumers could obtain with their purchasing power, and hence the quantity which the producers could sell, and which they could continue producing. This cannot be regarded as a service to the nation as a whole, and it has been a very definite disservice to the agricultural industry. Doubtless there would have been considerable odium attached to the reduction of wages in the distributive trades, but had this been accompanied by an effective reduction in gross and net profits, it might have been effected without ultimate disadvantage to the real interest of the trades and to the definite and immediate advantage of producers and consumers. There is no reason why producers of goods should bear the whole of the burden of a depression in prices or why consumers should not be able to enjoy the full advantage of reductions in wholesale prices and assist the producers by a greater and quicker consumption of goods, so that industrial and commercial equilibrium may be more quickly established. On every ground it is better that a readjustment should be made by the trade itself rather than by legislative compulsion, with all its deterrent effects upon initiative and development.

V. THE TRANSPORTATION FACTOR.

(A) RAIL.

30. The general impression we have received from our evidence is that the railway companies should now pursue a far more progressive and adaptable attitude towards agriculture. They

are themselves realising the benefits of more efficient organisation by combination, as also are agriculturists, and they can now, if they will, get into much more intimate and effective touch with the special needs of agriculture. It is no exaggeration to say that the financial prosperity of all primary producers depends on the cheap and efficient transport of their produce to consuming centres. An increase in freight-rates is, in effect, equivalent to an increase in the distance between producers and their market, with the result that producers on the "margin of cultivation can no longer sell in that market at a profit. We have shown, for example, how in the year 1922 many growers were deprived of the customary outlets for their produce by the relatively high railway rates on certain varieties of fruit and vegetables which, owing to various causes, including foreign competition, failed to realise satisfactory wholesale prices.

31. Railway rates at present stand at a level of approximately 50 per cent. above those of 1914. It is true that where such increase is in keeping with the general rise in the price level of any particular commodity its influence is neutralised. It is true also that the share of the consumer's price attributable to transportation costs, though variable, is small, particularly as regards milk and milk-products, livestock, meat and bread. Nevertheless, the cost of transport may bear a high proportion to the price which the producer receives and particularly to his gross profit. Indeed, from the farmer's angle, the whole question focusses on the fact that railway rates are a direct or indirect charge against the gross price which he realises for his produce, and to that extent reduce his profit. In many cases, the gross prices received show only slight increases as compared with those obtaining before the war. For example, the average price of the 1922 wheat crop was only 30 per cent. above the price ruling in 1914, whereas during the principal eight months of the cereal year 1922-23, railway rates stood at a level of 75 per cent. and are stil! 50 per cent. above those of 1914, thus bearing a substantially higher ratio to the farmer's gross price than in pre-war days. As regards potatoes, the position was even worse. During the greater part of the period when the 1922 crop was marketed railway rates were 75 per cent. in excess of the pre-war rates, while the prices of potatoes in the wholesale markets were on the average below their pre-war level.

32. Prima facie it would appear desirable that reductions in transport rates should be made in respect of such agricultural commodities as are faced with low wholesale prices, but we observe that in practice the policy of the railway companies tends towards the treatment of agricultural produce as a whole and the application of adjustments uniformly over the whole range of commodities concerned. This does not appear to us to be sound. Under the Railway Acts, the value of the commodity carried is one of the factors to be taken into consideration in

fixing rates and there appears to be an urgent need for a revision of the rates applicable to certain classes of produce, the prices of which are low, in order that the charges may form at any rate, no heavier a proportionate charge than those obtaining in pre-war circumstances.

33. There are many signs of the new spirit of progress in which railway managers are setting themselves to meet the industrial needs of this country, and we are satisfied that equal benefit would result from its extension to agriculture.

34. Finally, we desire to urge upon producers generally the importance of making up full truck-loads of produce whenever possible, if necessary combining with neighbouring producers for the purpose, in order to take full advantage of the reduced rates applicable to bulk consignments, an advantage which, in the nature of things, is almost invariably enjoyed by imported supplies.

(B) ROAD.

35. Our evidence leads us to attach the greatest importance to the new progressive policy of road development and improvement. It should tend materially to cheapen and quicken the transport of farm produce to consumer or market. Already the use of the motor lorry has facilitated the speedy collection of milk by creameries over a wide area; in some parts of the country livestock are now regularly conveyed direct to market in specially equipped motor vehicles where formerly they were consigned by rail or driven in on foot-a longer and more tedious operation in either event; most farmers' co-operative organisations use motor lorries for the combined purposes of transporting inbound farm products and outbound supplies. The effect of this traffic must be to extend the producers' markets as regards both radius and number while, at the same time, reducing the amount of local freight conveyed short distances by rail, which must necessarily be expensive in that it entails a certain amount of road haulage at the terminals, with consequent re-handling.

36. Where older methods are still employed the primary haulage of produce from farm to railway station or market would seem to be a relatively costly stage in the marketing process. Producers may by combination and organisation secure economies at least as great as those attainable in any other stage of marketing. In these days of extensive road improvement larger loads and greater speed should effect substantial savings.

37. As the new system of highways develops the proportion of commercial traffic passing over them increases enormously and the wear and tear for which the farmer is alone responsible becomes normally inconsiderable. Equity demands that the burden of construction and maintenance should be distributed as far as possible in proportion to use, and in view of the new and increasing charges on the taxpayer, both imperial and local, we

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