63. Practically all existing co-operative societies comply with the fundamental and mainly statutory requirements to which we have referred, but there is considerable divergence of practice as regards the extent to which societies are supported by their members, and the extent to which the facilities and advantages, apart from the division of profits, which societies are in a position to offer, are shared by non-members who may find it convenient to transact casual business through them.

64. While experience both at home and abroad appears to indicate that producers' organisations derive added stability and security as a direct result of their incorporation upon the principles we have already described, we do not wish to suggest that no other form of association can be successful, or unduly to discourage those who may be inclined to combine for their common advantage either in a statutory company or under a private agreement devised for the purpose of trading. Combination and organisation are the essentials; the manner of their achievement is a secondary consideration.

65. The fundamental principle of agricultural co-operation as it exists in Denmark to-day is not so much the mutual division of profits, as the combination and organisation of a group of producers for the collective handling of their produce and its sale as a unit. Co-operation on these lines existed in its earliest and simplest form where a number of milk producers combined to erect a dairy to which they could send their milk and, by employing a skilled dairyman and improved apparatus, place butter of uniform quality on the market in sufficient quantities. to command better prices than would be possible by individual manufacture and consignment. In such a case, the obligation of members to support their society is obvious. In later developments, such as co-operative bacon factories, in which direct competition with private undertakings is inevitable, the members' general relationship to their society has been firmly established on a contractual basis running over a period of years, thus ensuring for societies a regular minimum supply of raw material to enable them to meet their standing overhead charges on a satisfactory economic basis. Further, by agreeing to accept from their society such returns as it is able to secure-paid partly by way of an advance and partly by way of bonus-the farmers safeguard their society against loss, while experience shows that, on the average, they obtain in this way a better return than they would otherwise receive from the private trader.

66. In our interim reports we have set out the various causes of failure in this country, such as the tendency of farmers to underrate the importance of first-class management and to pay managerial salaries inadequate to command the knowledge, judgment and technical skill which is necessary for the proper conduct of the societies' business. We have also emphasised the importance to the various societies engaged in any one class

of business, such as dairying or egg-collecting, of federating in order to avoid overlapping in the market and in order to coordinate and consolidate their position as sellers generally. It is unnecessary to discuss these questions further; they are now well-known and understood.

(C) FUTURE POLICY.

67. In considering the question of future policy, the disinclination of the English farmer wholly to identify himself with his society is a factor which must be faced. At the same time, we do not regard it as practicable to lay down a hard-andfast rule in this matter. Other things being equal, a co-operative society operating on the lines of a private concern has the same chance of success as a limited liability company-no more and no less. Other things, however, are not always equal, and although it has not hitherto been found possible to persuade farmers in England to adopt the principle of employing their societies solely as agents and of supporting them in all contingencies, in the opinion of those best qualified to judge co-operation on these lines is the only system that can be confidently recommended. After careful consideration, therefore, we confirm the views, set out in our interim reports, regarding the type of co-operation most likely to achieve success in the case of societies promoted for the sale or manufacture of dairy produce, for the curing and sale of bacon, for the slaughter of livestock and for other similar purposes. In addition to the limitation of the rate of interest on shares and the division of profits among members in proportion to the business they transact, there should be an arrangement whereby the member undertakes to supply the whole or some definite proportion of produce to the society. The question whether a society should at once pay the full market price for the produce received, or whether it should make only such advance, approximating to current prices, as it feels it can safely pay, supplemented, at a later date, by a bonus based on actual proceeds, is a matter for the discretion of the society concerned, depending as it must on the amount of working capital at the society's disposal.

68. Not only the precise form of co-operative organisation, but also the business activities to be engaged in, should be carefully considered before any new society is set up. The whole ground should be thoroughly prospected in each case. There must be a definite objective, whether it be the creation of outlets and the development of markets, the elimination of intermediaries, the grading, sorting, cleaning and standardisation of produce, bulk transportation or any other service. If it is the intention to control the marketing of produce until it reaches the consumer, or, at any rate, the retail distributor, the farmer should disabuse his mind of the fallacy that the margins of the distributors displaced represent so much additional profit for him.

They are mostly made up of essential service and labour charges and it is only a relatively small proportion which is available for appropriation, even assuming that the society is able to perform the distributive services more efficiently than the middleman whom it supersedes. Co-operation is unlikely, therefore, to secure to the producer any really important part of the existing distributive margin. In most cases, it is only the wholesaler's services and so the wholesaler's profits that can readily be taken over. The greater part of the necessary distributive margin will always lie with the retailer. We are not convinced from our evidence that the retailer's domain is one that producers can expect to invade with any substantial measure of success in average circumstances.

69. Nevertheless, at the farmer's end of the distributive chain, including the distributive processes nearest to the farm, cooperation should be generally worth while. Indeed, it is in the direction of bringing production into relation with the requirements of the markets and of standardising and improving the marketability of farm products that co-operation can perform beyond dispute an undoubted and invaluable economic service. The operations of well-managed and successful co-operative societies should provide an important reform of the marketing process, namely, the intelligent control by producers of the supplies they market; not arbitrary control for speculative purposes, but control based on and justified by the conditions of supply and demand in order to diminish the serious and disturbing fluctuations in wholesale prices of which the ultimate disadvantage is borne by both producer and consumer.

70. Our view with regard to the future development of agricultural co-operation in this country is, therefore, that the more ambitious schemes of co-operative marketing and distributing produce by farmers direct to consumers, though admirable in their conception and intent, are fraught with considerable. risk and should be very cautiously applied, though we do not overlook the fact that a few societies have successfully organised retail businesses. In the present stage of development, however, it is better to wait and to aim at co-ordinating the activities of societies with the existing distributive machinery, concentrating rather on a country-wide organisation of production, on the co-operative standardisation of supplies and on a general straightening out and systematising of the primary or wholesale marketing processes on up-to-date and co-operative lines. This, of itself, should ensure improved returns for producers, while consumers should benefit by the more economical distribution of supplies which will result from the reduction in the risks and responsibilities of distributors generally. The establishment of trading relations between the industrial cooperative movement and producers' co-operative organisations is a development that should also be continuously explored.

71. These are considerations of national importance. Though they hold out a measure of hope for both producer and consumer, their importance can be over-rated. From the producer's standpoint co-operation is emphatically not a panacea for all the woes and ills that beset agriculture to-day. It may provide necessary aid, but it cannot of itself avail to make agriculture flourish. From the standpoint of the consumer, co-operation among farmers should lead to improved and more economical distribution as we have shown, but it obviously cannot, in normal circumstances, substantially reduce the cost of living. Nevertheless, apart from these considerations, its constructive possibilities, its educative value and its social advantages generally are so considerable as to make the question of its wider adoption deserving of most careful and sympathetic consideration by producers throughout the country.

72. Finally, we are of the opinion that the question of what Government action, financial or otherwise, shall be taken to foster agricultural co-operation in England and Wales and in Scotland, is one that is best left to the respective Departments of Agriculture.

(D) CREDIT.

73. In our interim reports, we have recommended that the State should assist co-operative societies, or organisations under the control of producers, by providing advances towards capital expenditure. Private traders contend that this will act unfairly by giving an advantage to societies with which they are in competition. This could only generally be the case, however, if the capital were lent by the Government at more favourable rates than the private traders can borrow from the Joint Stock Banks. Parliament by the Trade Facilities Act has accepted the principle that in certain circumstances, the public interest is served by offering facilities additional to those ordinarily obtainable from the banks, and in our view the development of the marketing and treatment of farm produce comes into this category.

74. As regards undertakings organised on a strictly co-operative basis for the sale, preparation or manufacture of farm products, we recommend the following general principles on which advances should be made :

(1) Loans should be made available only for organisations of producers.

(2) The organisations concerned should be registered under the Industrial or Provident Societies Act, or, if constituted in any other way, should be subject to approved rules as regards the limitation of dividends on shares and the division of surplus profits among the producers in proportion to the produce supplied to the Society or sold through its agency.

(3) Loans under this scheme should only be for capital expenditure on buildings, land, plant or equipment, and should not in general exceed two-thirds of such capital expenditure, to be secured by a first mortgage on the assets of the society.

(4) Loans should not be granted except where sufficient capital is raised in cash by private subscription or by shares held by members to provide ample working capital for the undertaking and to create a basis for the additional credit required.

(5) The simplest possible machinery should be devised consistent with the necessity for safeguarding the public purse.

75. We see no reason why similar facilities should not be made available for undertakings under the control of producers organised on a corporate rather than a strictly co-operative basis, but close investigation would be necessary in each individual case in order to determine whether and to what extent advances could safely be made.

76. We suggest that the Minister of Agriculture should consider the advisability of appointing a small Standing Advisory Committee to consider the merits of such applications for advances as may be submitted by co-operative societies and farmers' companies, and to make recommendations accordingly. In order to command general confidence the committee should be so constituted as to include in its membership those possessing not only an extensive knowledge of agricultural conditions, but also some experience in finance and commerce.

IX. THE COLLECTION AND PUBLICATION OF PRICE STATISTICS.

(A) THE BROADCASTING OF MARKET INTELLIGENCE.

77. We have little to add to the general views expressed in our interim reports with regard to the wholesale stage of the distributive system and the services performed by the various groups of traders and specialist buyers and sellers concerned. We desire, however, to refer to the fact that, particularly as regards fruit and vegetables, livestock and meat, the available physical supply is rarely so distributed as to equalise demand in the various markets throughout the country. A remedy may be found in the better dissemination of market intelligence. The prices collected and published in daily papers and in farm and trade journals as well as in official publications may, when published, be only 24 hours old, or they may be all the way from one day to ten days old, according to the journal concerned. Accurate