of milk but merely defines grades. So far, however, as it stimulates a public demand for these grades of milk, the costs of handling are bound to be greater than under present conditions. It has been represented to us that the Order will also tend to consolidate the position of the larger businesses and correspondingly to weaken that of the small retailers who have few, if any, facilities to enable them to comply with the regulations.

134. Witnesses from the Ministry of Health have informed us that it is not the custom of that Department to consider the likely effects on the costs of handling, and consequently on the selling price of milk, of the various orders and regulations which it issues pursuant to legislation, but seeing the known reaction of prices on the demand for milk and the importance of increasing the consumption of so essential a food, the position in this respect should, we think, be carefully investigated when legislation or consequential regulations are under consideration.

135. In this connection, and in view of the fact that milk in its various aspects is dealt with by more than one Government Department, and of the various and sometimes conflicting interests of the producer, the distributor and the consumer, we recommend that a standing Milk Advisory Committee should be appointed jointly by the Ministry of Health, the Ministry of Agriculture, the Scottish Board of Health, and the Board of Agriculture for Scotland, for the consideration of all matters affecting the industry. Such a Committee should consist of representatives of producers and distributors as well as of Government Departments and one of its duties should be to advise the Government in regard to administrative questions affecting the milk industry, such as orders and regulations prescribing the conditions of sale of milk and dairy produce generally.

XI. FUTURE AGREEMENTS AND PRICES.

136. We propose to conclude our review of the methods and costs of milk distribution, by considering the future position of the milk trade both as regards agreements and prices. We have already shown that neither the retailer nor the wholesaler has been able in the past few years to deal economically with the natural summer increase in the supply of liquid milk, which, for some months, far exceeds the demand, although the winter yield from approximately the same number of cows is normally no more than sufficient for winter needs. There are, in fact, two conditions which are more or less in opposition. In the national interest it is desirable that more milk should be consumed, but in order to secure additional supplies throughout the year the quantum of winter production must be increased. This entails a still further increase in summer supplies, hence, probably also in the summer surplus, the manufacture of which may, as a result, prove a source of greater loss.

137. In our opinion this loss can be largely diminished. The distributor who undertakes the task of equalisation, whether he is a wholesaler or a retailer, must necessarily be remunerated for his services, but there is no reason for assuming that the cost of equalisation need be more than a fraction of a penny per gallon, provided the distributors concerned make every effort to adjust accurately supply and demand and do not buy, at high prices, milk which they know in advance they cannot possibly sell as a liquid article. Such milk should be either manufactured on the farm or bought at a price equivalent to its potential value for manufacturing purposes. In this way, although a relatively higher price should be paid to the producer for milk for liquid consumption, surplus milk for manufacturing purposes will not be a charge upon the costs of distribution. As already stated, this is the underlying principle of the agreement reached last year between producers and distributors and it should considerably lessen the costs incurred by distributors in equalising supplies. We are of opinlon that this method should be adopted in all future contracts.

138. For this reason we consider that the charge for distribution in future is capable of marked reduction from the nominal sum of 1s. per gallon which is at present operative in London and other places, and where the nominal margin may be less, proportionate reductions should be made. We have already expressed our view that the wholesale portion. of the distributive margin is, in any event, unduly high in cases where it amounts to as much as 3d. and 4d. per gallon. We consider, therefore, that, so far as London is concerned and on the assumption that the residuary retail margin of 8d. is not capable of immediate reduction-though in Glasgow a margin of 5d. appears to suffice for that purpose-nothing less than a substantial reduction of the wholesale portion of the margin will meet the case in future having regard to the changed conditions.

139. In order to stimulate the consumption of liquid milk, the trade should consider the advisability of passing on this reduction to the consumer. It has been stated in evidence that small reductions in gallonage prices are impracticable owing to the limitations of our coinage system which preclude reductions in the price to the consumer by smaller amounts than one penny a quart, equivalent to 4d. a gallon. The logic of this argument is manifestly unsound, since a short extension of the lower prices obtaining in summer into the recognised winter months would enable adjustments even of fractions of a penny per gallon to be made in the average price ruling over the whole year. Thus, a continuance of the summer price of 6d. per quart throughout October, 1922, instead of the advance to 8d. which took place at the commencement of that month, would have meant an actual reduction of two thirds of a penny per gallon in the average price paid by the consumer during the whole of that year.

140. There are advantages in avoiding noticeable variations in the price of milk. Although a high winter price can be compensated for by proportionately lower prices in the summer and an average annual price obtained which is not unreasonable, we feel that it would be better to aim at a greater uniformity throughout the year. For example in 1922, the price in May, June and July was 5d. per quart, in August and September it rose to 6d. and then to 8d. per quart for the six winter months. This substantial increase must have tended to restrict consumption by making it more difficult for the poorer classes to purchase as much milk as they had been accustomed to buy in the summer, and, if circumstances are at all similar in September next, we should prefer to see the winter milk price raised to 7d. only even though the price in the following summer be reduced to only 6d. per quart.

141. On the question of the fixing of prices it has been suggested to us that a tribunal consisting of equal numbers of representatives of producers, distributors, and consumers, with a High Court Judge as president, should determine not only the price to be paid to the producer, but also the price to be charged to the consumer. We have carefully examined this proposal. The difficulty we see in the way of its adoption is largely geographical as the application of a flat rate throughout the country would clearly be impossible. Moreover, it would involve the re-establishment of the control of prices which appears to be both impracticable and undesirable in present circumstances. We are satisfied that the interests of the consumer will best be served by leaving the question of retail prices to the unrestricted play of supply and demand, and we are accordingly unable to support the suggestion referred to.

142. Finally, we have received abundant evidence that the consumer is influenced more by prices than by statements of dietetic values. Hence lower prices mean more milk consumed. The average consumption of milk by a large proportion of the infants and children in this country is authoritatively stated to be entirely inadequate to physiological needs. Taking the population as a whole, the per capita consumption of liquid milk is estimated to be less than half of that obtaining in other progressive countries such as the United States. We have been informed that a decrease in price of 1d. a quart results in an increase in consumption of as much as 15 to 20 per cent., and hence any such increased consumption compensates distributors by reducing the quantity of surplus milk to be manufactured at a loss. Any effective increase in consumption per head should also tend to cheapen the unit cost of delivery. Indeed, the position with regard to milk is paradoxical, in the sense that the consumer can best cheapen his milk by drinking more of it. Efforts are being made by organisations interested in the milk trade to increase the sale of liquid milk by means of advertisement, education education and propaganda generally. We

welcome this movement; its importance cannot be over-estimated, and we recommend that producers and distributors, with the co-operation of the Government Departments concerned, including the Board of Education, and also the local education and other authorities, should, on grounds of child welfare and public health, take every means of stimulating the consumption of fresh milk. Efforts should also, in our opinion, be made to encourage an increased consumption of home manufactured dairy products. This is one of the questions which should be kept constantly in view by the standing Advisory Committee of the Ministries of Health and Agriculture, the appointment of which we have recommended.

NOTE. The summarised conclusions of this part of the report will be found on page 84 et seq.

PART II.

MILK PRODUCTS.

PRELIMINARY OBSERVATIONS.

143. The manufacture of butter, cheese, cream and preserved milk forms part of the general milk problem in that in each case it represents a method for utilising and keeping, during more or less extended periods, milk that is not required for immediate consumption. It is upon the successful development of the processes involved in the manufacture of milk products that the possibility of a permanent increase in the dairying industry in this country depends. Each process, however, has its limitations which need to be recognised.

144. Normally, cheese making is carried on during the summer months from April to October. It thus forms a valuable outlet for the excess summer milk in those cases where producers contract to sell regular quantities throughout the year. For many years immediately preceding the War, the returns obtained from cheese-making were, in the average case, on a parity with those obtained by the sale of milk, but the effect of War conditions was to disturb the parity in favour of milk selling. The effect of that disturbance is still being felt, though there are signs that normal conditions are about to return. Cheese-making is generally more profitable than butter-making. For this reason, butter-making on any considerable scale tends to be confined to districts in which stock-raising is a speciality and where there is no convenient outlet for the sale of liquid milk. In such cases, butter-making is frequently undertaken all the year round with the addition of cheese-making in the

summer.

145. Condensed milk is made throughout the year; the large manufacturers usually enter into yearly contracts to take the whole output of the farmers with whom they deal, but regulate their manufacture proportionately to supplies in that they divert liquid milk to consuming centres in times of scarcity and, conversely, relieve the market of excessive supplies in the more prolific periods. The position is the same with dried milk or milk powder, except that the manufacture of this form of preserved milk is not yet extensively developed.

146. Cream is also separated all the year round, although its production and sale in large quantities are mainly confined to the summer months. Its production on farms is a specialised business, but the bulk of trade supplies are separated by creamery proprietors and milk distributors generally.

147. The manufacture of butter, cheese, cream and preserved milk is therefore an important aspect of the milk problem and one which we feel has not, in the past, received all the attention it deserves.