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Wheat, Flour and Bread Industries - Royal Commission - Second Report


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1934-35.

THE PARLIAMENT OF TIIE OF AUSTRALIA.

ROYAL COMMISSION

ON THE

WHEAT, FLOUR AND BREAD INDUSTRIES.

!)I

SECOND REPORT.

Presented by Command; ordered to be printed, 13th M arch, 1935.

[Cott of PaPer :- Prep&ration, not given; 1015 copies ; approximat. oost of prln Ung and publi.ahiog. £3 36. )

Prin ted and P ublished f or the G o v EHNMENT of t he of AusTRALIA by

L . F . JoHN S T ON , Commonwealth Gov ernmment Printer, Canberra.

No. 83.-F.5964.-PRICE lls.

COMMONWEALTH OF AUSTRALIA.

GEORGE THE FIFTH, by the Grace of God of Great Britain, Ireland and the British Dominions beyond the Seas King, Defender of the Faith, Emperor of India.

To Our Trusty n.nd Well-beloved:

GREETING:

Sm HERBERT WILLIAM GEPP, Knight, Consultant on Development to the Commonwealth Government ; THOMAS STANLEY CHEADLE, Esquire, Pastoral Company Director;

CHARLES WALTER HARPER, Esquire, Company Director ;

EDWARD PATRICK MICHAEL SHEEDY, Esquire, Fellow of the Institute of Chartered Accountants (Australia), Fellow of the Society of Accountants and Auditors (England); and PROFESSOR SA:r.ruEL MAcMAHON WADHAM, M.A., Professor of Agriculture, University of :\felbourne.

WHEREAS by the Constitution of Our Commonwealth of Australia it is provided (inter alia) that the Parliament of Our said · Commonwealth may make laws for the peace, order and good government of Our said Commonwealth with respect to taxation: ..

AND WHEREAS by the Constitution of Our said Commonwealth the Parliament of Our said Commonwealth has exclusive power to make laws for the peace, order and good government of Our said Commonwealth with respect to bounties on the production or export of goods:

AND WHEREAS questions have arisen with 'respect to the payment of bounties for the assistance of wheat-growers and with respect to the effect of taxation under the laws of Our said Commonwealth upon the industries of growing, hahdling and marketing wheat, manufacturing flour and other commodities from wheat and manufacturing, distributing and selling bread:

NOW THEREFORE WE do by these Our Letters Patent, issued in Our name by Our Governor General in and over Our Commonwealth of Australia, acting with the advice of Our Federal Executive Couhcil, and iii pursuance of t he Constitution of Out said COthlnonwealth, the Royal Commissions Act 1902-1933, and all other powers him thereunto enabling, appoint you to be Commissioners to constitute a Commission to inquire into and report upon the economic position of the industries of growing, handling and marketing wheat, manufapturing flour and other coinniodities ftt>in wheat; artcl manufacturing, distributing and selling bread :

AND WE APPOr:NT YOU the flaid Sm HERBERT WtLLtiM GEPP to be the Chairman of Our said Commission :

AND WE DIRECT that, any one or each of you Our said Co:rnm.issioMrs, together with any other one of you Our said Commissioners-( a) may, if so directed in writing by the Chairman of Our said Commission after consultation bet ween all of you Our said Commissioners, inquire into and take evidence upon any matter entrusted to you Our said Commissioners by these

Our Letters Patent--(i) either as to the whole or any part of that matter; or (ii} in respect of any State or part of the Commonwealth, as specified in the said direction; (h) shall, for all purposes relating to the taking of evidence in pursuance of any such direction, constitute a quorum; and

that the Chairman of Our said Commission may, if and when he thinks proper, sit with and take part in the proceedings of any two of you Our said Commissioners when taking evidence in pursuance of any such direction ;

Provided that all of you Our said Commissioners shall report upon each matter entrusted to you by these Our Letters Patent ;

AND WE REQUIRE YOU with as little delay as possible to report to Our Governor-General in and over Our said Commonwealth the result of your inquiries into the matwrs entrusted to y ou by these Our Letters Patent :

IN TESTIMONY WHEREOF WE have caused these Our Letters to be made patent and the Seal of Our said Commonwealth to be thereunto affixed.

WITNESS Our Right Trusty and Well-beloved Counsellor, Sm IsAAC ALFRED IsAA('S, Knight Grand Cross of Our Most Distinguished Order of Saint Michael and Saint George, Governor-General and Commander-in- Chief in and orer Our Commonwealth of Australia, this Twenty-fifth day of January in the year of Our Lord One thousand nine hundred and thirty-four, and in the twenty-fourth year of Our R eign.

By His Excellency's Command, J. A. LYONS, Prime Minister.

ISAAC A. ISAACS, Governor-General.

Entered on record by me, in Register of Patente, No. 60, page 136, this twenty.fifth day of January, One thousand nine hundred and thirty-four. F. STRAHAN.

TABLE OF CONTENTS.

SECTION I.-THE WoRLD WHEAT PosiTION

SECTION . II.-COSTS OF PRODUCTION

SECTION Ill.-THE DEBT STRUCTURE OF THE INDUSTRY

SECTION TV.-DETAILED CoNSIDERATION OF CoMPONENT FACTORS IN CosTs

SECTION V.-MARKETING

SECTION Vl.-THE BAKING QUALITY PROBLEM IN FLOURS OF AUSTRALIAN WHEATS

SECTION VII.-ScrENTIFIC KNOWLEDGE AND EDUCATION IN RELATION TO THE vVHE.AT INDUSTRY

SECTION VIII.-FIN.ANCI.AL RECONSTRUCTION.

FINDINGS AND RECOMMENDATIONS

SuMMARY AND FINDINGs

INDEX

THE DETAILED TABLE OF CONTENTS WILL BE FOUND AT THE FRONT OF EACH SECTION.

PAGE.

7

43

99 119 159 185 195 205

247

249 259

ROYAL COMMISSION ON THE WHEAT, FLOUR AND BREAD INDUSTRIES.

SECOND REPORT.

To the Right Honorable SIR IsAAC ALFRED IsAAcs, a Member of His Ma}esty's Most Honorable Privy Council, Knight Grand Cross of the Most D1:stinguished Order of Saint Michael and Saint George, Governor-General and Commander-in-Chief in and over the Commonwealth of Australia.

MAY IT PLEASE YOUR EXCELLENCY :

This Commission submitted to you on 30th July, 1934, its First Report upon certain of the matters into which it was directed to inquire and report by Letters Patent under your hand dated 25th January, 1934.

. This Report did not purport to deal comprehensively with various important aspects of the economic position of the industries of growing, handling, and marketing of wheat, which had then not been fully investigated, but was, in effect, an interim report presented in view of the serious general situation disclosed and because of the necessity to suggest measures of assistance to the industry in respect of the 1934-1935 harvest. The Report dealt with the following matters :- -

History of the Australian Wheat Industry; Description of the Australian Wheat Belt ; Costs of Production of Wheat on the Farm; Debt Structure of the Wheat Industry;

Assistance rendered to the Industry; Brief Survey of Suggestions submitted in Evidence ; Methods of rendering assistance to the Industry; Findings and Recommendations.

Some of the recommendations contained in this Report were subject to review in the light of fuller information than was then available to the Commission in respect of the quantity of wheat likely to be produced from the 1934-35 harvest, and the prices likely to be realized.

In a Supplement to the First Report presented to Your Excellency on 27th November, 1934, the Commission then having more complete information, explicit recommendations were made as to the amount of financial assistance which should be provided by the Commonwealth Government for the industry in respect to the present harvest and in future years; and as to the means which should be employed to raise a certain proportion of the finance necessary in respect of the present wheat year, and of the whole of the financial assistance for future years .

.. The Commission now submits its Second Report, which will be its final report, on the

industries of growing, handling and marketing of wheat.

SECTION I.-THE WORLD WHEAT POSITION.

1. I NTRODUCTORY

2. THE HISTORICAL BACKGROUND

Tbe cris es of 1818-1837 The recovery of 1837-1874 .. The agricultural depression of 1875-1900 The period from 1914 t o the present time

3. SUMMARY OF THE PRESENT POSITION

4. ANALYSIS OF F uTURE PossiBILITIES (a) General considerations .. (b) Wheat policies of importing count ries (c) Wheat policies of exporting countries

(i) General features of expansion in production during the last half century (ii) The United States of America . . . . · . . . .

(iii) Russia ..

(iv) Canada (v) Argentina (d) Possibility of a restriction of ontput in exporting countries

5. THE DE STINATION OF AUSTRALIAN EXPORTS OF WHEAT AND FLOUR

6. BROAD LINES OF DESIRABLE PoLIOY FOR THE AusTRALIAN WHEAT INDUSTRY

APPENDIX A.-Examination of the prices of Australian Wheat from to 1932-3

APPENDIX B.-International Wheat Conferences

PAGE .

7

7

8

15 15 16

20

21

21 21 23 23 24 27 28 28 29

30

32

35

31

7

I. THE WORLD WHEAT POSITION.

I. INTRODUCTORY.

1. The Australian wheat problem is merely part of a great world problem which affects all kinds of agricultural production and has rapidly and radically changed the economic outlook for more than 70 per cent. of producers in the world. The central fact is the great fall in world prices for every kind of primary product. Since 1929, the index of gold prices for the commodities which Australia exports has fallen approximately 70 per cent., whilst the fall calculated in Australian currency is of the order of 50 per cent. (see Figure I.). For no single commodity affecting such a range of producers and consumers throughout the world has the collapse of prices been more complete than in the case of wheat.

2. It is impossible for an industry to experience such a reverse without undergoing severe strain, and the social system of primary producing countries cannot be expected to endure indefinitely the consequent economic distress. For agriculture in newly-settled areas where long-range planning and its inseparable risks on the part of governments and producers are essential, the impact of falling prices has been serious. The gap between costs of production and current prices of rural products is tbe measure of rural distress which has to be faced.

3. The progressive submergence of rural producers under accumulating debts, constitutes a political problem of the :first order in every wheat-exporting country. Particularly is this the case in those countries where wheat production for export plays a great part in the national economy, because many of the areas are not readily suitable for other forms of export production or for subsistence farming. Millions of acres of farm land, developed at great cost in money and effort, cannot be allowed to revert to wilderness without a close examination of alternative courses of action. Further, the livelihood of the great numbers of farmers cannot be allowed to disappear, nor can the shrinkage in purchasing power of primary producers in general be permitted indefinitely to impose unemployment upon large numbers of workers in other occupations. Consequently, constructive planning to save a grave situation has become

increasingly urgent in every country which relies on the export of primary commodities.

4:. Devices of many· kinds for alleviating the burden of depressed prices upon primary

producers, and plans for assisting them to work their way back to solvency, have been adopted in almost all countries. · Some of these schemes have been put into operation without adequate consideration of the facts of the local situation and regardless of their effects upon the international economy as a whole. Import quotas, restrictions of production, increased tariffs upon imports

of primary commodities, bounties and exchange control, have all been regarded at various times in various countries as expedients which might be employed to assist home producers. The total eflect of these expedients is to diminish world trade and to intensify the problems of such countries as Australia which depend mainly on external markets for many

of their primary products.

2. THE HISTORICAL BACKGROUND.

5. From the historical angle the present wheat crisis is no new phenomenon; similar economic disturbances have occurred in all ages. The chief causes of such troubles have been alternations in the balance of supply and demand through war or famine, the development of new countries, and changes in the value of money.

6. The experiences of British wheat-growing during the nineteenth century, are particularly instructive for several reasons. In the :first place the British wheat market has developed into being the largest wheat market in the world, and it is , therefore, in many ways the best indicator of world wheat conditio1;1s; consequently, a survey of its evolution and of the forces which have influenced it is, at the same time, a survey of main factors in the wheat world. Secondly, such a survey will also show several major crises in the wheat-growing industry and will indicate in a broad manner the way in which such crises developed, the results they produced in rural communities and the way in which they have passed away.

7. Figure II . . shows the average annual price of wheat in the United Kingdom from 1800 till 1932. On it are also shown some of the more important historical occurrences which had some bearing on wheat prices. A general "trend" line has been introduced into the graph in order to bring out the major changes in the price level as opposed to the relatively minor which occurred owing to relative shortase or abundance in the harvests in supplying

countnes.

8

8. The Crisis of 1813-1837.-The long period of hostilities in Europe at the of the nineteenth century and the monetary inflation which went with it raised wheat pnces ,, until they reached 15s. IOd. per bushel in 1812. A decline then began, the Waterloo of 1815 being too short to have much effect on the price. Despite the tariffs on importations the price fell rapidly and during the period 1817-1823 it averaged about 8s. 7d. per bushel. This fall in the prjce of grain produced a condition of strain in British agriculture which lasted for twenty years, during which major changes occurred in the econon1ic structure of the countryside.

9. The parallel between the present day crisis and that of 1813-1837 is so striking that the following extracts from Lord Ernie's English Farming Past and Present are worthy of close examination :-During the ten years ending in 1792, the average price of wheat had been 47s. per quarter* ; the natio?-al expenditure under twenty millions a year; the poor rate less than 1! millions; there was also no property tax. Durmg

the ten years ending in 1812, wheat averaged 88s. a quarter. While wheat had thus not quite doubled, wages had risen by two-thirds; the national expenditure had multiplied five-fold; tithes had increased by more than a fourth; a property tax had been imposed on owners and occupiers of land. The poor rate (had quadrupled ; the county rate had risen seven-fold.

The inflated prices of the war had conferred, from one point of view, a great advantage on the agriculture of the country. They brought under the plough districts which, but for their stimulus, might never have been brought into cultivation. . . . :Money made by farming had been eagerly re-invested in the improvement of the land. For the s2.me purpose banks had advanced money to occupiers on the security of crops and stock which every year seemed to rise in value. Farmers had been able to meet their engagements out of loans, and wait their own

time for realizing their produce. Better horses were kept, better cattle and sheep bred. Land was limed, marled, or manured. Wastes were brought under cultivation; large areas were cleared of stones in order to give an arable surface; heaths were cleared, bogs drained, buikEngs erected, roads constructed. .

Between 1813 the accession of Queen Victoria (1837} falls one of the blackest periods of English farming. Prosperity no longer stimulated progress. Except in a few districts, falling prices, dwindling rents, vanishing profits did not even rouse the energy of despair.

In the period 1814-16 the agricultural industry passed suddenly from prosperity to extreme depression. At first farmers met their engagements out of capital. vVhen that W8,s exhausted, their only resource was to sell their corn as soon as it was threshed, or their stock, for what it would fetch. The great quantity of grain thus thrown on the market in a limited time lowered prices for producers, and the subsequent advance, which benefited only the dealers, suggested to landlords that no reductions of rent were necessary. Farms were thrown up ; notices to quit poured in ; numbers of tenants absconded. Large tracts of land were untenanted and often uncultivated. In 1815

3,000 acres in a small district of Huntingdonshire were abandoned, the nineteen farms in the Isle of Ely were without tenants. Bankers pressed for their advances, landlords for their rents, tithe-owners for their tithes, tax-collectors for their taxes, tradesmen for their bills. Insolvencies, compositions, executions, seizures, arrests and imprisonments for debt multiplied. Farmhouses were full of sheriffs' officers. Many large farmers lost everything, and became applicants for pauper allowances.

Even as late as 1833, it was stated that, in spite of rent reductions, which in Sussex amounted to 53 per cent., there was scarcely a solvent tenant in the Wealds of Sussex and Kent, and that many farmers, having lost all they had, were working on the roads. Violent fluctuation's in prices continued to overthrow all calculations; the wheat area alternately expanded and contracted; the sliding scale of 1829, soon exploited for their own profit by foreign importers, only increased the speculative character of the agricultural industry. On heavy clays less capital and less labour were expended; wet seasons prevented farmers from getting on the land, and caused the discontinuance

of manure, excessive cropping, and the impoverishment, even the abandonment, of the heavier soils. To add to the difficulties of clay farmers, the rot of 1830-1, which is described as the most disastrous on record, swept away 2,000,000 sheep. Everywhere wages were lowered and men dismissed. Work became so scarce that, in spite of the fall of prices, starvation stared the agricultural labourer in the face. Distress bred discontent, and discontent disturbances, which were fostered by political agitation. While the Luddites broke up machinery, gangs of rural labourers destroyed -threshing machines, or avenged the fancied conspiracy of farmers by burning farm-houses, stacks, and ricks, or

wrecking the shops of butchers r.nd bakers.

To small freeholders, whether gentry, yeoman-farmers, or peasant proprietors, the Napoleonic war, with its crushing load of taxation and subsequent collapse of prices, had been fatal. The evidence before the Agricultural Committee of 1833 proves that some still held their own in every county. But it was in the first thirty of the nineteenth century that their numbers dwindled most rapidly. Some had consulted their pecuniary interests by selling their land at fancy prices, which they took into business. Others sold and embarked their capital as tenant-farmers in hiring larger aFeas of land, on which they could take fuller advantage of the price of corn. Those

who remained on their own estates were for the most part ruined. Many had raised· mortgages to buy more land, or to improve their properties, or to put their children out in the world. Prices fell; but the private debt, as well as public burdens, remained. The struggle was brief; farming deteriorated; buildings fell out of repair; creditors pressed; :finally the estate was sold. Even where land was free from charges, owners could not stand up against the burden of poor rates, which was most crushing to those who employed no labour but their own. "That respectable class of English yeomanry", writes Glover in 1817, "whose fathers from generation to generation have lived on the same spot and cultivated the same farms are now rapidly dwindling into poverty and decay, sinking themselves into the class of paupers." The purchasers were not men of their own class. After 1812 small capitalists no longer in_vested their savings in land. Their place as buyers was taken by large land-owners or successful traders. . . . Throughout the country, it is evident that most of the small land-owners, who, in addition to taxes and rates, had to pay annuities or interest on mortgages, were forced to sell their properties. Everywhere large estares were built up on the ruin of srnF.ll proprietors.

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During times of adversity it has always been the practice t o charge land-owners, farmers, and even labourers with extravagnnce, t o trace distress to their incret'"sed. luxury, to attribute their domestic difficulties to their less simple habits. . . . So in 1816 the wiseacres of the London clubs vehemently contended that farmers had only to return from claret to beer, and their wives from the piano to the hen-house, and agricult ural distress would

be at an end. It was reserved for an imaginative versifier in 1801 t o charge them with soaking five-pound notes instead of rusks in their port wine. Somewha,t similar in t one wa,s t he outcry against labourers. "We hear ", writes Borlase , the Cornish Boi:ltiquary, in 1771, "every day of murmurs of the common people; of want of employ; of short wages; of dear provisions . There may be some reason for this ; our taxes are heavy upon the necessaries of life ; but the chief reason is the extravagance of the vulgar in the of life." . . . " There is

scarce a family in the parish, I mean of common labourers, but have tea, once if not twice :1 day. . . . In short , all labourers live above t heir conditions."

The same explanations with regard t o all classes of agriculturists were repeated in 1837, and have been periodically offered ever since. The di2,gnosis of dise8,se would not be so popul:1,r if it were not easy an d t o some extent true. It is, t o say the least, inadequate. '\Vhen the standard of living rises for all classes, a,griculturists are not the only men who s_ pend money more lavishly than the prudence which criticiz es afier the event can justify . But the true explanation of the distress h-.y in the condjtions already described. The old instrument of farmin g had hiled ; the new had not been perfected. An agricultural revolution was in progress, which wa,s none the less complete in its operation because it was peaceful in its processes.

10. The Recovery of 1837-1874.-The same writer's comm.ents on the reorganization which was taking place during this crisis are also inforn1ative :-The distress of 1813-37 produced good results. So long as war prices prevailed, prosperous years ]Jad brougnt wealth to slovens, and sluggards had amassed riches in their sleep. The collapse of prosperity spurred the energies and enterprise of both landlords and t enants, who could only hold t heir own by ec onomizing the cost and increasing . the amount of product ion. Vlithin certain limits, low pric es and. keen compet ition compelled improvement.

The period from 1837 to 1874 formed an era of advancing prosperity and progress, of risin g rents and profits, of the rapid multiplication of fertilizing agencies, of an expandi. g area, of corn cultivation, of more numerous, better bred, better fed, better housed stock, of varied improvements in every kind of implement a.nd machinery, of growing expenditure on the making of the land by drainage, the construction of roads , the erect ion of farm buildings, and the division into fields of convenient size.

The new system worked well despite the repeal of the Corn Laws in 1846 under which Britain ceased, for the time being, to be a protective country so far as her agriculture was concerned.

11. About the middle of the century, most important changes were taking place in world supply and demand in wheat. On the one hand international trade in wheat was increasing, especially with North America and Russia; on the other, developn1ents of manufacturing industries in Britain and other European countries were also having their effect in stimulating

an increase of populations with a corresponding r ise in gross consumption. Wheat prices fluctuated largely in accordance with European harvests and with the extent to which international production and trade were interfered with by war. There was also some tendency to a slight inflation of the monetary systern.

12. The Agricultural Depression of 1875-1900.-After 1875, however, the steady fall which characterized the next 25 years began. After the American Civil and Franco-Prussian wars of the 1865-70 period the rapid developn1ent of railways in the United States of America opened large new wheat areas while some expansion of production also took place in Argentina

and Australia. As these regions slowly developed suitable wheat varieties, and methods of growing the crop which were in accordance with their particular soils and clin1ates they became more and more efficient producers and were better able to compete at lower price levels. In addition to the disturbance due to increased supply, the deflationary monetary trend of the period

also had its effects on the price level. Between 1865 and 1897, there was a steady appreciation in the value of gold ; and, consequently, while wheat prices fell, the price of farming equipinent fell also. This was of som.e assistance to all wheat producers, but particularly to those in countries whose land prices had not been high.

13. The crisis through which world wheat producers passed in the 'eighties and 'nineties has been fully analysed by workers at the Food Research Institute of Stanford University.* Their makes it apparent that durin g the 'seventies and 'eighties there had been a steady expansiOn In wheat acreage in non-European exporting countries-parti ularly the United States

of America. The slow fall in price which took place in European markets was largely offset by lowered. transp?rtation and handling costs and the general cheapening of commodities. The large dechne of 1891-95, thougb influenced by many factors was chiefly caused by the very large Umted States' crop of 1891, wbich was seriously under-estimated by all wheat authorities

• Decline and Recovery of Wheat Prices in tbe 'nineties, in" Whe11t Studies" of the Food Research Institute, Vol. X ., Nos. 8 and Q, June and July, 1984 .

A

• Jl

16

at that time. Following on this initial came three years in which world production

was above normal and in two of these seasons the European rye crop was also high ..

Year end " surplus " wheat stocks became higher in the years 1893 and 1895 than In any other pre-war year for which r ecords exist. For a tin1e speculators assisted in holding the price in the expectation that shortages would occur but by IVIarch, 1895, the British import price was 2s. ll !d. per bushel.

14. The situation was relieved by a progressive diminution in world stocks between 1895 and 1898. This was part ly due t o seasons which were unfavorable to the cult ivation of the crop and resulted both in a relative steadiness in acreage planted and also in a diminution in world yield per acre fron1 13.2 bushels in 1894 to 11.2 bushels in 1897. Other contributing causes were the use of large quantities of the grain for feed purposes and a tendency for p er capita consumption to increase in many countries.

During the period there was no serious restriction of European imports by the action of government s, although both F rance and Italy had duties equivalent to about Is. 8d. per bushel while in the case of Germany the tarif£ was about lid. Ther e was no other attempt at restrictive action in respect to the types of wheat n1illed or of flour used in those countries.

15. Australia was now a wheat exporting country except when her harvest was unduly affected by drought. In normal seasons the local prices were therefore largely influenced by world conditions. Figure III. shows the price of the grain in South Australia, which was the earliest State to have a regular export of wheat. When t his figure is co n1pared with the graph.

of British prices (Figure II. ) it is fairly clear that the general price trends have been parallel in the t wo markets, and t hat the Australian price has been on a parity with the British except in those seasons where there was little or no grain available for export. Further discussion of this matter is contained in Appendix "A".

16. The effect of the general decline in wheat prices between 1870 and 1900 was most marked in freetrade Britain. There the agricultural depression became most acute in the 'seventies, when several years of bad harvests followed one another and the local dearth was not compensat ed by any substantial rise in price. From that time until the end of the century British agriculture declined, land values fell n1arkedly, many sn1all farmers were ruined, land-owners reduced rents and often received no return for their capital investment. In general most of the European importing countries' marginal wheat lands went out of cultivation or where there was an expansion in general agriculture the wheat expansion was smaller than in the case of other crops and grass land. In Australia the wheat industry was being maintained and expanded largely by miners who, fin ding gold digging no longer profitable turned to agriculture for a meagre livelihood. It was also the period in which labour saving m_ achinery was developed, superphosphat es came into use, and better varieties were being bred.

17. In 1900 a new phase set in ; increased gold production, consequent upon the opening of the South African Rand, led to a general expansion of available credit throughout the world. General trade conditions -were satisfactory, populations were increasing. P er capita consumption was high and there was no serious accumulation of a world surplus of the grain. 1 The general of wheat prices began to r11ove upward despite a further increase in production in exporting

countries.

18. The P eriod fr orn 1914 to the present time.-During the .war, cessation of production in many European wheat areas and the losses of grain through' naval activity caused a scarcity of wheat, which was not wholly satisfied by a widespread increase in acreage in some exporting countries, notably the United States of America. This scarcity led t o a rise in prices, which was fur,ther accentuated by the considerable fin ancial inflation which took place.

19. The war period in Australia opened with a drought in 1914-15. This was followed by a great expansion in acreage in the following year, but after that, difficulties in obtaining labour, coupled with adverse seasons, led to a considerable decline in production. The prices realized by Australian growers in 1920 were high, but they did not reach the peaks obtained by farmers in North America. This was .largely due to the difficulties of obtaining shipping freight and to the exist ence of a selling agreement with Great Britain. In North America, however , a great wheat" bo01n" was caused by the high prices. The resumption of more norn1al conditions of supply and demand caused a great decline in world prices between 1920 and 1922. This decline caused a serious economic situation in those countries which had participated in the boom already referred to.

17

20. Table 1 shows the tTend in production during the period From its data

the effect of the extraordinary season 1927-28 on the world production beco1nes apparent. In that year the world wheat harvest was over 500,000,000 bushels in excess of the annual average production for the five-year period, 1923-27.

Year ·

Ending 31st July.

1909-13 1922 ..

1923 ..

1924 ..

1925 . .

1926 ..

1927 . .

1928 ..

1929 ..

1930 ..

1931 . .

1932 ..

1933 . .

1934 ..

TABLE 1.

WHEAT AL AREAS.

(Constructed from statistics compiled b y the Stanfo rd Food Research Institute.) (l\fillions of Bushels.) I

World Total Principal Principal

Excluding u.s.A. CaMda. .Argentina. Austr11lia. F our Main European E uropean

Russia. (a) (b) (c) (d) Exporters. Exporters. Importers . (a to d)

2,975 698 197 147 90.5

I

1,132 312 900

3,118 847 400 196 109 1,552 224 768

3,427 760 474 248 125 1,607 260 935

3,044 840 262 191 165 1,458 205 809

3,293 669 396 191 115 1,370 296 1,027

3,354 834 407 230 161 1,632 29 4 865

3,567 875 480 282 118 1,755 272 930

3,905 926 567 349 160 2,002 367 972

3,403 813 305 163 127 1,407 303 1,067

3,663 857 421

I 232 214

1,7 24 353 910

3,621 900 321 220 190 1,631 368 970

3,619 727 429 235 200 1,591 224 1,1 90

3,482 527 272 256 160 I 1,215 361

I

1,333

3,450( 1) 515

I

491 240 150

I

1,396 430 1,624

I - - · -- -

(1) Estimated.

Russia.

815 405 417 474

782 914 785 807 694 989

..

753 ..

1,100( 1)

Figure IV. indicates the way in which stocks rose during 1928-29, as a result of this bounteous season. The extent o:f the surplus which has been created was probably not imn1ediately realized. The season 1928-29 was a poor one in the exporting countries, and it was expected that the position would be relieved. The importing countries, however, had large harvest s and the

surplus remained at about the level it had reached in 1929. June, 1930, saw the prospect of a fairly large harvest in most exporting countries and Russia gave signs of becoming once more a large source of supply ; whilst harvests in European i1r1porting countries were fairly good. The net result of all these influences was a loss of confidence in the market and a rapid break in ·the

price during the latter half of 1930. 21. There is thus a strong assumption that the sudden collapse and the subsequent persistently low world price for wheat was directly due to the unrelieved pressure year after year of an enormous surplus which world markets failed to absorb. This situation was further aggravated by large crops in the season 1930-31, and 1931-32, while 1932-33 was remarkable for a very large crop in the importing countries.

Table 2 is a recent estimate of World Production, world requirements, export stocks and prices since 1927 made by the Institute of Agriculture, Rome. The graph of export stocks and prices shown earlier (Figure IV.) presents the changes in the world wheat situation sun1marized in the last two columns.

Season Ending Slst July.

1927 . . .. .

1928 . . ..

1929 .. . .

1930 .. . .

1931 . . . .

1932 .. . .

1933 . . ..

1934 (1) ..

TABLE 2.

WORLD PRODUCTION, SUPPLIES, STOCKS AND PRICE OF WHEAT. (In milllons of bushels.)

World Production (2). World's E xport able Supplietl.

;Exporting Countrietl.

2,397 2,534 2,836 2,230 2,653

2,543 2,352 2,055

I

Importing Of which

Countries. Total. U.S.S.R.

999 1,076 49

1,077 1,128 3

1,102 1,435 Nil

1,223 1,130 10

1,062 1,388 11 3 .

1,129 1,387 64

1,358 1,321 16

1,400 1,105 30

I

(1 ) Estimate. (2) Excluding U.S.S .R ., China, Persia, 'l'urkey, and Iraq. (B) Average, August, 1933 , to February, 1934 .

I

I

Exportable World Stocks at End R equirements. of Season.

827 249

809 319

92 3 512

628 502

824 564

799 588

629 692

525 580

Average Import Price (c.i.f.) British Ports (per cwt.)

8.

12.62 11.87 10.20 9.98

6.10 5.76

I 5.77 (3) 5. 38 I

18

22. The relative importance of various exporting countries as producers is a matter of considerable interest. Table 3, therefore, compares the average production for the periods 1923- 27, and 1928-34 fo r certain of the main producing areas both in terms of volume

and as percentages of the world total. TABL E 3.

VOLUME OF WHEAT PRODUCTION- -PRINCIPAL AREAS OF ORIGIN. {Millions of Bushels.)

World I FonrMalu I Principal Principal - Excluding U.S.A. Canada. Australia. European Russia. I Exporters. I .Argentine. E:uropcan Exporters. Importers. 1909-13 2,975 I 1,132 698 197 147 90.5 312 900 815

(5 years) 1923-27 3,247 1,524 790 388 211 135 256 880 599

(5 years)

I

1928-34 3,592 1,566 752 401 242 171 344 1,152 ..

(7 years) I I

THE ABOVE AS P ERCEJ\ TAGES OF WORLD TOTAL. % % % % % %

I % % 1909-1 3 100.0 38.0 23.4 6.3 4.9 3.0 10.5 30.0 27.0 (5 years) (base) 1923-27 109.0 47.0 24.0 12.0 7.0 4.0 8.0 27.0 18.0 (5 years) 19 28- 34 120.0 44. 0 21.0 11.0 7.0 5.0 9.0 32.0 .. (7 years) I It will be seen that, while the proportion for the United States has fallen, that of Canada has nearly doubled, while the figures for Australia and the Argentine have increased considerably. The proportion of the world total produced by European exporters has, however, fallen by nearly 2 per cent., but this has been more than compensated by an increase from European importers. An ·unsatisfactory feature of this comparison concerns the inability to relate Russian wheat production to the world tot al with any exactitude. Before the war, Russia had an average annual export of 160,000,000 bushels, but the end of the war saw a rearrangement of her boundaries, further, the social re-organizations which have since taken place have extended into the agriculture of the country; these are also referred to in a later paragraph. 23. A more important aspect of the long-term changes in world supply concerns the proportion which each of the main producers contributes to world trade. In this respect considerable alterations have taken place in recent years and the change in the case of Australia is particularly significant. As Table 4 shows, the Australian proportion of the volume of wheat and flour which entered world trade has fluctuated considerably from year to year. It was 7 per cent. in 1922- 23 ; it was over 25 per cent. in 1932-33; for the five-y ear period 1922-23 to 1926-27 it was 11.5 per cent. and for the pe:riod 1927-28 to 1932-33 it had risen to 15.8 per cent. These data are shown at the foot of the table. T ABLE 4. ORIGIN OF INTERNATIONAL SHIPMENTS OF WHEAT AND FLOUR. (Millions of Bushels-After Broomhnl!.) Year. TotaL North America. Argentine. Australia. .All Others. 1st August-31st July-1922-23 . . . . .. 676.4 455 .1 138.3 47.8 35.2 1923-24 . . . . .. 782.9 454.2 174.4 78.0 76.3 1924--25 . . . . . . 715.2 422.6 121.4 117.1 54.1 1925-26 . . .. . . 667.6 . 413.2 94.0 74.0 86.4 1926-27 . . . . .. 817.4 484.0 139.2 104.0 90.2 1927-28 .. . . . . 802 .8 489.6 177.6 74.4 61.2 1928-29 . . . . .. 927 .6 542.9 223 .7 ll2 .1 48.9 1929-30 .. . . . . 612.5 318.4 151.9 64.6 77 .6 1930- 31 . . .. . . 786 .7 354.3 123.2 154 .0 155 .2 1931 - 32 . . .. . . 769.6 331.2 138.4 153.2 146.8 1932- 33 . . .. . . I 615.0 289. 9 126.3 154.4 44.4 AVERAGE P RODUCTION. 1922- 23 to ] 926-27 .. . . 731.9 I . 445. 8 133 .5 84.2 68 .4 Per cent. of total .. . . 100.0 60 .9 18.2 11.5 9.3 1927-28 to 1932-33 .. . . 752.3 387.7 156. 8 118.8 89.0 - Per cent. of total .. . . I 100 .0 51.5 20 .9 15. 8 11.8

19

3

24. The serious position in which wheat-growers in all exporting countries were placed by the fall in price of wheat led to international conferences on the matter. These began in 1930.* As a result of these conferences a scheme designed ,to reduce the world surplus was agreed upon. Under it exporting countries were to restrict production and exports, and importing countries agTeed both to amend their policy so as to increase consumption, t o cease stimulation of home production, and also to lower their tariffs on wheat when once the world price had risen t o levels at which their own producers could for the most part cont inue in

production. The expectation ·was that the world surplus would in this way be reduced t o manageable dimensions by July, 1935.

25. Table 2 shows that the harvests of the exporting countries in t he crop years 1932-33 and,.}933-34 were smaller than in many preceding years. This decline in production resulted in a slight decrease in stocks (Table 2, col. 7) but the very large European harvest in 1933 and 1934 caused a considerable shrinkage in the demand for extra European wheat, and consequently,

there was no improvement in price.

26. The year 1934 opened with a market the selling side of which might almost be described as despondent. The opening price at .Australian ports for the recent harvest had been roughly 2s. 6d. per bushel which corresponded to less than 2s. per bushel at the t ail of the farmer's wagon at average sidings. By J anuary a further fall had occurred and some f.a .q. wheat changed

hands at ls. 7d. per bushel in the country. A considerable number of farmers had stored their wheat with merchants and millers and had received advances of up to ls. 6d. per bushel. These farmers realized that if they sold their wheat at that very low fig ure the.re was no further cash in it for themselves. In most cases they decided to take the risk and held on. The result was

that there was little pressure to sell Australian wheat overseas and the price remained steady whilst the Argentine grain was freely sold in London at prices about 6d. per bushel lower than Australian. The net result was that on 31st July, 1934, the stocks of wheat held in the Commonwealth were estimated at 67,000,000 bushels compared with a normal figure of 32 for that date.

27. The opinion of the wheat trade is that had sales of Australian wheat overseas been pushed during the first half of 1934 a marked fall in price must have occurred. In May t here seemed no prospect of selling the recently harvested Australian crop except at a very low figure, while there was every prospect of a very heavy carry-over of wheat in Australia at the end of

the year. The situation \vas saved temporarily by the reports which began t o arrive in June of weather unfavorable to crops in the wheat areas of the United Stat es of Am erica, parts of Canada and Europe. The anticipation that there would be both a considerable reduction in the world exportable surplus and an equally important increase in European demand was responsible for bringing about a rise in wheat price in July and August, which was almost as spectacular as was the fall in 1930-31. '

28. There is little doubt that part of this rise was due to the operation of speculators who had largely withdra-wn from the market during the preceding t hree years. Part of t he rise, however, was due to the expectation that the world's wheat stocks would reach manageable dimensions once IIfore, and that this would end the state of affairs which has depressed the world

wheat market for four years. During those years b uy ers, confident in theiT knowledge that abundant supplies were available and would have to come for warJ. in due course, and knowing that an international agreement between sellers was unlikely, wer-e always able to offer low prices to the sellers who were thus in a very "weak" position. Now, with less certainty of supply it became necessary t o accept the higher prices which sellers who were also conversant with the position were demanding.

29. 'rhe course of price during September and October was almost steadily downwards. This fall disproved the idea that the world wheat crisis was over and demonstrated the fact that the quoted statistical position of supplies is not a perfect indicator of the world wheat position. There are two reasons for this. In the first place the st atistical figures for wheat are not ent irely accurate. This fact has been comment ed on by many writers on the subject . Inaccuracy in

early estimates of crops is frequent ; but inaccuracies in estimates of the volume of wheat held in various storage p9sitions are equally important. There is, therefor e, some doubt as to the true position; particularly as later reports of the Emopean harvests have indicated larger crops than were expected earlier. The second reason for a failure to react t o the quoted statistical

position lies in the realization that under the system of government which at present prevails in many European importing countries, there is no certainty that a shortage of wheat would • Fttrt her detail• are given io A ppeod ix B.

20

necessarily lead to a corresponding in1portation of the grain; home grown alternative foo dst uffs would certainly be used first. This would not apply in Britain, the largest . wheat importer in the world, but this year she has the largest crop of wheat for some years and it is t o be expected that her importations will be reduced accordingly.

30. So far the figures of production and prices alone have been considered. Behind them is an increase in world wheat acreage which took place dtiring the period Table 5

gives the detail of this movmnent and shows that there was a fairly steady increase in world wheat acreage up to 1930 after which a decline set in. It also shows thatthe total acreage the crop in the four major exporting countries began to show signs of reduction in 1929. There was a ternporary reversal of the movement in 1930, which, incidentally, was the year of the " Grow tnore Wheat'' campaign in Australia. In 1932 Canada reached her maximun1 area under wheat. The effect of this reduction by the exporters was considerabl}r offset by the increase in acreage in the hnporting countries.

TABLE 5.

'WHEAT ACREAGE IN PRINCIPAL REGIONS AND (Millions of acres.) ...... .- . ' - ..

World I Total of U.S.A. Canada.

I

Argentina. Australia. I

Principal Principal U.S.S.R . North exchidirig C. :b. :E. & F. (2) (2) (2) (2) Elhropean Eu±opea. rt (5) AfriGa . Year. Russia. (2) I Exporters. Importers. (6) (1) I I (3) (4) A. B. c. D. E. F. G. H. I. J. I 81.1 I (78. 0) 1909-13 ;. 193.9 (47 .5) 9.95 I 16.05 7.60 17.28 47.01 6.01 i 1922 .. 216. -9 115.60 I 67.17 22 .42 I 16 .25 9. 76 16 .04 45.73 34.0 6.88 1923 216 .5 112 .. 24 I 63.62 21.89 17 .19 9.54 16.16 4o . 51 43.4 6,98 .. 1924 .. 215 .6 106.35 55.68 22.06 17.79 10.82 18.07 45 . 77 53 . 7 7.19 1925 . . 218.5 Ill. 58 61.40 20 . 79 19 .19 10 . 20 18 .54 47 .07 63.1 1.86 1926 .. 226.4 113.68 59.82 22 . 90 19 .27 11.69 18.73 47 . 48 73. 9 8 .14 1927 .. 232.4 120 . 99 65 .56 22.46 20 .69 12.28 18.87 48 .44 77 . 4 7. 15 1928 .. 240.5 132 .44: I 70.70 24.12 22.78 14.84 19.55 47,94 68.5 8.53 -. --- - ... 1929 . . 240 .9 I 125.16 I 65.43 25.26 19.49 14.98 18.34 47.45 73.5 8.54 1930 .. 246.0 129.60 I 65.26 24.90 21.28 18.16 20.00 48;72 83.8 8.91 1931 .. 238.0 121.45 63.35 26.20 17.30 14.60 21.05 49.54 92.1 8.10 1932 .. 243.6 124.89 62.34 27.18 19.79 15.58 19."31 51.00 88.7 8.25 1933 . . 234.1 106.7 47.5 26.00 I 19.7 14.5 18.9 57.3 .. 8.8 1922-26 .. 218.8 111.89 61.54 22. 01 I 17.94 10.40 I 17.51 46.51 53.6 7.41 1929- 32 .. 242 .1 125.28 I 64 . !1 25.89 I , 19.41 I 15.83 19.68 49 . 18 I 84.5 8.45 I I I I Explanatory Notes.-Source " Wheat Studies" published by the Foods Research Institute, Standford University, California, princip11Jly Vol. IX., No. 7 (April, 1933), entitled Wheat Crops, 1885-1932." . . . (1) Excluding U.S.S.R., Chlrla, a nd numerous insignificant ateas. Basis hiiifvested area where possible, important except ions being Canada and Australia. (2) Basis sown area, excepting U.S., whieh is sown area of winter wheat and harvested.area of spring wheat except 1931 and when area sown to spring wheat was officially estimated. (3) Bul garia, Hungary, Roumania and YugoslaVia harvested area. (4) France, Italy, Germany, British Isles, Belgium, Hblland, Switzerland, Denmark, Norway, Sweden, Austria, C3echoslovakia, Spain, Portugal, and Greece 1909-13 averages exclude Austria and Czechoslovakia. All data har vested areas. (5 ) 1909-13 average for Russian E mpire. 1922-29, presumably harvested areaa, data from "Wheat Studies," Vol. IX., No. 1; sown areas compiled from official Soviet publications. (6) French Morocco, Aigeria, and Tunis. r 3. SUMIV!ARY OF THE PRESEN'J:' POSITION. 31. Expert opinion is unanimous in accepting the accu1nulation of abnormal stocks of exportable grain, as the in1mediate cause of the depress_ ion of wheat prices, this accumulation being accentuated by the bounteous harvest of 1928. The fundmn ental for this state of affairs must, however, be sought in the lack of balance between the expansion of wheat acreage and the expansion of consumption of the grain. In time this increase of the potential wheat­producing area would have built up the surplus of its own unless the world's consumption* of wheat had kept pace with the increased production. It is illogical to expect the price of a c01n modity to rmnain at a reasonable level unless there is a balance between the expansion of its production and the increase in its consumption. The Commission feels that, while the quoted statistical position of world wheat price seems to warrant a moderate rise in price in t)le next few months, there is no ground for expecting a spectacular appreciation in price except owing to speculation. Even should this occur, a large crop in either exporting or importing countries in the next season (July-September, 1935) would almost certainly bring the price back to about a level of 2s. 4d. per bushel Australian ports. " The subject of world consumption is a complex one involving questions of rates of increase of populations, food habits of populations, changes of bread requirements in accordance wi th changes in the kind of wor k from manual to mechanical, and other matt ers. F urther, when the general depression set in the resultant unemployment undoubtedly decreased the consumptive capacity of the millions who were reduced to idleness.

21

4. ANALYSIS OF FUTURE POSSIBILITIES. (a) G ENERAL CoNSI DERATION S.

32. In the concluding sentence of its first Report the Con:unission emphasized " the fact that the increased prices of wheat now in evidence do not, as is sorriet irnes supposed, indicate that the difficulties of indust ry have been overcome." There is a definit e need for reconstruction of the indtistry as it now exists surrounded t he accumulat ed troubles of t he past fo ur years.

An examination of the possibilities which lie ahead is essential as a basis for whatever reconstruction is necessary. 33. The Commission is of opinion the past history of wheat prices if considered t;tnalytically is some guide t o what may be expected in t he future. Figure II. and the earlier

discussion on paragraphs 5-30 shows that wheat prices since 1800 have oscillated about a trend line, and that those oscillations were caused by the relation of supply and demand during the various seasons. The trend line has been influenced by t wo sets of factors. Firstly, there have been general changes in the value of money in relation to all co n1modities, which changes have the result of world monetary and the supply of gold. Secondly, there have

been violent changes owing to an over-developn1ent o£ wheat production in relation t o world demand (as in the crises of 1895 and of to-day), and an under-supply of wheat (as in the periods of the Napoleonic and Great Wars). It is t o be expected that, given reasonable freedom o£ trade in wheat in the future, the same forces will produce somewhat similar result s, as long as an exceptional surplus of wheat remains on t he world's wheat n1arkets, t he price will remain depressed.

If that surplus be reduced to reasonable proportions*, then the price level may be expected to react according to the way in which prospective s1,1pplies balance wit h current and prospective demands. If a reasonable balance be achieved then the position of the middle point about which the ·price will oscillate will depend on the prevailing monetary policy. At present American monetary policy is definitely inflationary, while t he current tendency in Europe is deflationary. If the forn1er succeeds in dow -:inating the latter, then the average level of wheat prices may be

expected to return to about the level of 1926; although as mentioned above there will be considerable fluctuations due to the supply and dmn and posit ion in individual years, and it is to be anticipated that all cost s (possibly excluding interest) will rise. 34. Assuming that t he world surplus is likely to contract t o reasonable proportions, and that world monetary policies become stabilized at their present position, then t he main factors

which will decide whether a reasonably stable wheat price will be achieved in the near future are:-(I) Wheat policies of the importing countries which will be discussed in t he next section (paragraphs 35-41 ).

(2) The extent of per- capita consu1nption. As alr·eady not ed, considerable have taken place in this matter during the depression. It seems unlikely that there will be any further extension of Une1nployn1ent or alt erations in breadstuffs so that any rapid change in t his factor should be in the direction

of an increase in consumption of bot h wheat and bread. Long-terrn trends due t o alterations in national habit s are bound t o occur but they will presumably be slow in operation. (3) Increase or decrease in consumption due t o growth or decline in popu)ations.

These are within the bounds of reasonable estimation especially at a time when national reorganization is taking place in so many countries. ( 4) Wheat policies in the major wheat-exporting countries, which will be discussed lat er (paragraphs. 42-49.)

(b) W HEAT PoLI CIE S OF IMPORTING CouNTRIEs. 35. Ever since the world war a growing change in the attitude of many countries towards international trade has been evident . r he economic crisis was not responsible for the birth of that change, it merely accelerated it. The final result has been the fixation of the principle of

protecting t he home producer of primary products as a cardinal point in the policy of many governments. Further, in s01ne countries, notably Italy and Germany, t he stimulation of agricultural industries has been regarded as an effective method of reducing t he pressure of unemployment; consequently, in such countries there has been an expansion of agricultural

production both by t}le extension of cultivation into regions which could not be cultivated economically under a less protective system, and also by developing more intensi e methods of production which would have been unsound without very considerable extraneous financial support .

• The phrase " reasonable proportions" here means a size such that the average requirements of impor ter:'! during any co ming year cannot be met except by the absor ption of a considera ble par t of the supplies which will be available from the exporting countries dw·ing that same year. Under such co nditions speculators are prepared to take a risk and t hus a fa ir degree of stability in the price level is ensured and buyers ha ve to ylan their buying programme ahead and are forced t o meet t he sellers on the more or less even terms whi ch characterize a fr ee market in a" healthy" condition .

22

36. Denmark-By the end of 1932-33 the position reached was that Denmark was the only importing country which persisted in a policy of free trade for her domestic wheat supplies, . and she only allowed importation subject to a permit. Britain had jmposed a tariff of 3d. per bushel on imports from countries outside the

Empire. She had also given a guaranteed subsidy for home gro·wn millable wheat up to 50.4 million bushels annually. This caused an increase of about 4:40,000 acres in the area under crop. Italy had a duty of 9s. 2!d. per bushel on Australian wheat. She also required that certain percentages of home gr own wheat should be used in milling. These percentages were raised to as high as 99 per cent. after 16th J uly, 1933.

France was maintaining maximum and duties. In September, 1932, she had decided that not more than 66 per cent. of the grain should be extracted for flour. She had also increased the percentage of domestic \Vheat in flour to 100 per cent. after lVIarch, 1933. In July, 1933, she had introduced a minimum wheat price to farmers for the ensuing year. The French t ariff on Australian wheat was 7s. ld. Australian per bushel.

Germany had instituted a standard quota of 97 per cent. of home grown wheat for milling. She had bought 11 ,000,000 bushels on the open market and had it stained and sold at a lo'rver price t o poultry-keepers; on the other hand, her bread-flour was being compulsorily adulterated with potato flour to the extent of 2! per cent. to v,rhich figure it had been reduced from 5 per cent. Her tariff on wheat had been raised to l3s. l fd. per bushel in Australian currency.

Belgium had a milling quota of 10 per cent. of home grown wheat and refused licences for the importation of soft wheats. Portugal admitted wheat only on go vernmental authorization and on payment of various duties.

Sweden continued the delegated monopoly over imports and maintained a fixed domestic price for home-grown wheat. Japan had set out on a programme of increasing wheat acreage. With the intention of becoming self-sufficient, she had a duty of ls. 8d. per bushel on Australian wheat.

China had imposed a duty on flour in 1933 and of 5ld. per bushel on Australian wheat in 1934. Egypt had increased her minimum duties on wheat and .flour. In 1934 the duty on wheat stood at approximately 6s. lOd . per bushel, Australian currency.

South Africa was maintaining a system of licensing imports under a tariff so as to support a constant intemal price. In 1934 such Austmlian exports as were made faced a duty of approximately 2s. per bushel, Australian cmrency. New Zealand had also adopted a policy of self-sufficiency in wheat production, and had set up a guaranteed price for the local consumption and a centralized selling ag ency fo r the whole, with a variable Customs duty on wheat.

37. The above list which is by no means complete, is sufficiently imposing to indicate the intensity of the " protective care " which many wheat-growing import L. ""lg countries are exercising over their local wheat industries. The effect of these duties is to maintain the local market for their own :farmers; and, inasmuch as high duties have virtually had the same effect a,s giving a guaranteed price for the whole of the home market, there has been the expansion

of acreage and production already noted. This has had the somewhat unexpected result of transfening certain countries, such as France and New Zealand, which were once importers, to the list of exporters in seasons such as 1933 in which their harvests were good. The important point is that until there is a reversal of these policies there will be no reason to expect that the countries concerned v'\7ill be importers, except when their local harvests fail.

38. One further consideration also demands attention. Many of the importing countries are keen exporters of manufactured commodities. In recent years some of them have shown marked tendencies to conclude special treaties \v.ith wheat exporting countries. The Ottawa Agreements are a case in point; still more striking are the FTench agreements with t he Danubian countries. The same principle has been carried further, in some cases by imposition of super tariffs of a retaliatory nat ure again st the products of cotmtries with whorn they have no reciprocity of trade. France has taken steps in this direction against the United States of America and Australia. Our exporters now have to face a 200 per cent. surcharge over and above the normal tariff on wheat shipped to France. On the other hand, France has reduced

the duties on wheat imported from her political allies, the Danubian countries. Italy has taken somewhat similar action in years when her home production was high. Among the wheat exporting co untries the Argentine has been successful in concluding trade agreements with wheat importing countries.

23 3

39. It might be thought that these policies would have resulted in a great increase in the price of bread in the countries concerned, but the main effect of the duties has been to prevent a fall in the price of breadstuffs rather than to cause a rise. A population is generally more irritated by rises in the price of necessities than by their failure to fall to levels which happen to be current

in other countries. This largely accounts for the general acquiescence to the tariff policies in these countries. If the world price of wheat were to rise markedly then the local price in any of these countries would also rise under cover of the tariff in any year when such country was not self-supporting in wheat. Under such circumstances the populace would begin to feel the

position acutely. This probably explains the consent of the importing countries to the Agreement of the London Conference in which they undertook to begin to reduce tariffs when the world price had risen above a level (s ee Appendix " B " ) of about 4s. ld. (sterling) per bushel.

40. These instances are indicative of a general trend towards the restriction of world trade into specified channels, the course of which is largely determined by specific international agreements based on national policies. If this trend continues then Australia may in the future find very much more difficulty in selling her wheat crop she has done in the past. Many witnesses before the Commission, both in the cities and in the country, have emphasized the need for a conciliatory trade policy on the part of the Commonwealth towards wheat importing countries. The Commission considers that such a policy should have sympathetic consideration.

41. There are several alternative possibilities. One is that international trade will once more become relatively free and that the trend towards national self-sufficiency in foodstuffs in Europe, rendered possible only by increasing restriction of importations, will be reversed. This sort of change is likely to be slow and there is little evidence of it at present although certain of these countries are finding their general economic position one of increasing difficulty. Another is that world wheat production will be overtaken by world wheat consumption to such an extent that importing countries will be for ced into a position of accepting wheat from any country which can supply it. This is unlikely unless a majority of the wheat areas of the world experience a series of disastrous crop years .

.

(c) WHEAT PoLICIES OF ExPORTING ColTh"TRIEs.

42. (i) General featu.res of expansion in production during the last half century.-A balanced wheat market in which the price level for the grain remains fairly steady over a period of years can only be expected if supply balances with demand during the period. There will always have to be stocks of the grain in sight but those stocks must not be inordinately large ..

Exceptionally good harvests will swell the stocks and exceptionally poor ones will diminish them. Demand also may change through alterations in the habits of numbers of wheat consumers. If on balance demand increases then either fresh sources of supply must be tapped or more intensive methods leading to increased yields per acre must be employed.

43. The relative parts which these t wo methods have played in meeting the increased world demand during the last half century is shown in the fo llowing figure which is taken from Wheat Stu.dies, Vol. IX.; No. 7. The full line indicat es the actual progress of world production apart from U.S.S.R., and certain other countries, the size of whose crops is not accurately lmown. The dotted line shows what production would have been if t he average yield per acre in each country had remained

the same as it was in 1885-188 9. The difference between the general trend of the full curve and the dotted curve is, therefore, a measure of the improvement in production due to scientific developments, to better cultivat ion and probably also the maturation of the soils of some of the new wheat areas. The broken line indicates what the yield would have been if the acreage had remained the same as in the period 1885-1889. The gap between the full line and the broken line indicates the approximat e ext ent t o which the opening of new wheat lands has been responsible for the increased supply.

It is apparent that an increased wOTld acreage under t he crop has been a more potent factor in the expansion of production t han has technical improvement, particul arly during the post war period. 44. If the increase in world demand fails to keep pace with t he increase in world supply,

and consequently a price fall t akes place, the best method of adjustment would be a cessation of further expansion of wheat area coupled with either the abandonment of production in areas which are less efficient or the partial support of such areas until demand catches up and relieves the pressure.

F.5964--2

24

The abandonment of production in the less efficient area is a very difficult policy both in countries whose overseas c;redit is largely dependent on exports of primary commodities, and in countries where unemployment; has become a serious social problem. Consequently, neither Oanada, Russia, Argentina, Australia, nor the -united States of America, is desirous of allowing wheat production to fall off. Further, the first four have considerable territories awaiting developn1ent and to them restriction is irksome in the extrmne. Consequently, in each country

effprts have been made to ;keep farmers in production. These efforts have sometimes been directed towards preventing dispossession, and so1netimes towards lowering the farmers' net costs of production. The forrner type of device remedies a social evil, but its ernployment does :t:tot necessarily affect production, because even if the farr 11er we:re dispossessed there is a strong

presumption that the land would still be used for growing wheat. The latter t ype, however, definitely. tends to maintain production at price levels which are, for the moment at least, uneconomic.

45. This does not necessarily imply that such action on the part of Governments is wrong. The function of government is, inter alia, to 1naintain order and justice and it is quite probable that these would not be maintained if such action were not taken. What is of irnportance, however, is the fact that such action if unduly pronounced may lead to undesirable results. The inefficient may be fostered where they should be allowed to cease operations. Districts which are reasonably well suited to other purposes are encouraged to continue growing wheat. The extent to which such assistance has been rendered in the past is a matter of fact and can be ascertained. The extent to which it will be forthcoming in the future is more problmnatical. The following paragraphs endeavour to survey the position in each of the major exporting countries.

46. (ii) The United States of America was usually the largest exporter of wheat in the two decades before the war, during which period she norr:'lally had from 45 to 50 n1illion acres under the crop. In 1915 her acreage rose to 60. 5 :rnillions and as the season was a good one 1,025. 8 million bushels were harvested. The high prices of the war years caused an increase in the area under wheat which reached 73.7 1nillion acres in 1919, although the yield did not again reach 1,000 m.illion bushels. Between 1920 and i 922 t he fall in prices caused a shrinkage in acreage and the abandonment of wheat-growing in some of the more marginal areas. During the decade 1922-32, however, the acreage has fluctuated between 52.4 and 62.7 millions. The demands of her increasing population have resulted in a reduction in the amount available for export.*

The United States Govern1nent has for many years adopted a progressive attitude towards all forms of rural development. Considerable surr1s have been expended on research, on rural education of a technical nature, and on adviso,ry work of all kinds. When the fall in wheat price OCCUlTed the government endeavoured to maintain the internal price by creating the Farm Relief Board, which was given the power to purchase large stocks of grain and hold them off the market. As is now well known this action, being isolated and unaccompanied by a general world-wide reduction in production, was unable to raise wheat prices, during the period 1929-33. However, it probably had an effect in accelerating the rise in the local price in 1934 as soon as the serious nature of the drought of the year was apparent.

The government adopted a scheme for subsidizing a reduction in the planted in 1933-4-5. The money necessary for this scheme was raised by a " processing " tax on wheat used for local human consum.ption. Further, the government, finding that tariffs and restrictions faced the export of wheat from the United States to most importing countries, arranged the sale of 50,000,000 bushels to China under a trade agreen1ent. This virtually amounted to a subsidy of about 23 cents per bushel on the sale.

For some years the system of rural credits in the United Stat es of America been very extensive. The 1nortgage position soon became difficult when prices fell. The goven11nent has assisted rural reconstruction, lending its financial support to several schemes which are outlined in Section VIII. of this report.

The section of the work of National Reorganization which- applies to agriculture is controlled by the Agricultural Adjust1nent Adrninistration. Its central problem is to raise the internal prices of agricultural products t o such a height as t o more than keep pace with the general rise in the prices of all comn1odities, including farmers' requisites. The general rise in prices being the objective of t he N.R .A., it has been realized that the reduction of that proportion of the farmers' costs which is due to interest is an essential feature in the reorganization, and, consequently, a scheme for arrangen1ent with creditors or an alternative to bankruptcy has been developed.

* Source " Wheat Studies, " Vol. IX., p. 26 5.

FIG. V

ANALYS\S OF WoRLD WHEAT ' PRODUCTION 1885- ,,31

(U.S.S.R. AND OTKER COUHTRIE$ EXCLUDED)

(Million bushcla)

(F,..om WHEAT STUDIES)

27

The present situation in America is too uncertain to serve as a forecast £or the future, but it seems unlikely that the policy of restricting the acreage under crop will be continued for long unless other exporting countries are prepared to adopt a similar policy. . One thing is certain ; during the depression many methods of reducing costs have been developed, particularly through

the aggregation of holdings and extensive mechanization in the J:VIiddle \Vest. If international trade in wheat reorganizes along unfettered lines, the United Stat es of An1erica may well be a rather more serious competitor on the world markets than she has been in recent years.- She has a large internal population a:q.d her home consumption can be used as a basis for the

stimulation of export if she chooses to extend that policv which she has already adopted to a lim.ited extent. · "

The words of one prominent authority are worthy of note : " An agreement must be reached unless the wheat-growing nations of the world wish t he United States of America to go into production on a big scale and battle for the world's markets."

47. (iii) Russia.-Before the European War Russia was the largest individual producer of wheat. Her annual export averaged about 160,000,000 bushels. Her production was partly in the hands of independent peasant farmers with very small farms, partly in large peasant farms, and partly derived from the estates of large landowners. The last section, although the smallest

in area, provided the largest proportion of the exports. The close of the war found the Soviet regin1e firmly installed, agriculture very largely disorganized, communications in disrepair and starvation frequent. As some of the best wheat lands were handed over to other States, in accordance with the Treaty of Versailles, comparisons between pre-war data and post-war data

are difficult.

The attitude of the Soviet organization towards agriculture has changed from time to time. In the early days large estates were subdivided among the peasants, but one of the main results of this change was a diminution in the supply of grain for the cities and the total cessation of exports. Later as the food problem was ac ute various steps were taken both wit h the intention

of obtaining control of agricultural production, and also with the ult in1ate objective of rapidly expanding it so as to provide goods which would be sold on the world m.arkets in the sa1ne way as Russian grain had been sold before the war.

The political and social difficulties which have been encountered in the progress of these development s need not be enu1nerated here; they were inevitable in view of the speed at which the developn1ents were intended to take place, and the poor level of education among the peasant population with which t he Government had to deal.

Briefly, the Soviet's plans for expanding rural production fell into two sections. In the first place, more efficient methods were to be installed in t he older agricultural areas. The "old peasant " systmns were to give way to modern farming methods, in the same way as they were replaced in England in the eighteenth century; the difference being that whereas it

occurred gradually in the course of a century in Britain it was expected to be achieved in a decade or less in Russia. In the second place new areas were t o be opened for grain production under the methods of mechanized agriculture. The obstacles here are threefold. Some of the best wheat land in Asiatic Russia can only be opened effectively when the t ransport system has been

considerably augmented; the nearer undeveloped wheat lands were largely situated in areas with variable and uncertain rainfall ; the 1nechanization of agriculture requires operators who are mechanically minded, otherwise it is expensive.

So far the result s of these plans though considerable have been less striking than their creators anticipated, but there is every reason to suppose that the final result will be a great expansion of agricultural production. When England changed from peasant farming to high-grade farming her yields increased by about 25 per cent. There is no reason why the Russian experience

on her old wheat areas should be different, provided that the individual operators can be induced to aim at efficiency. It is illogical to suppose that fertile soils of known suitability for wheat­ farrning will not yield good crops when they are developed properly. As regards new areas, the overland transport of their grain will be as long as that which confronts the Canadian farme;:,

but if the grain is the property of the State such transportation can be arranged.

The conclusion is that the next twenty years may be expected to show a marked increase in Russian production. Her soil and plant t echnologists are among the best in the world, and as her government learns by experience it will reap the reward of its efforts, particularly if the rising generation of rural workers is stimulated to develop an enthusiasm for the new regime.

However, the population is increasing rapidly and will prob ab ly absorb the greater part of this

2S

new production, but it is inevitable that there will be considerable surpluses available £or export especially in good seasons; the vagaries of the annual rainfall in some of the new districts will intensify the extent of the fluctuations in the amount available for export. As the ·u.S.S.R. has now re-entered the general councils of the world, there is no :eason supposing that she or will be t!eated on any basis different from that which

Is apphed to any other exporting country. Her system of governmental control of all her international trade will make her a potent factor in the world's wheat market. This does not mean that she will be any less desirous of selling her wheat at the highest available price, but . it does mean that any estimate of the future of the world's wheat supplies which fails to include

the expectation of increased supplies from the U.S.S.R. is likely to be misleading.

48. (iv) Canada.-The rise of Canada to the position of the foremost wheat exporter in the world has been one of the features of the present century. This development was due prirnarily to the breeding of special wheats requiring but a very short period for their growth and maturation. Armed with these wheats the Canadian wheat belt was pushed into higher latitudes where the frost free period was relatively short. Railway systems were constructed and land development proceeded apace. Between 1904 and 1914 wheat acreage increased fro1n 4.43 to 10.29 million acres; by 1924 it had exceeded 20,000,000 in several years and in 1932 it was 27.18 million acres.

Most of the wheat-producing districts are situated at long distances from the seaboard, so that transportation costs to the ocean are high. The rigorous nature of the winter makes animal husbandry somewhat difficult and one-crop farming is prevalent. This has rnade it very difficult for wheat-growers to turn their attention to other fonns of production and, consequently, a policy of restriction of acreage has proved difficult to put into effect.

Bulk handling has b.een the characteristic n1ethod of handling most of Canada's wheat for a good many years. The erection of a large number of silos has made it practicable for her · to store large surpluses of grain from one season to another. The pooling system of marketing has also been extensively developed. In 1928, when the country received an exceptionally large

harvest, both the pools and private dealers found it impossible to sell holdings; consequently, large stocks were accumulated. The pools had made advances against the crops and being unable to sell at the estimated figure the Provincial Governments supported them, presumably in order to a vert a financial disaster.

49. (v) In Argentina the wheat acreage first exceeded the 10,000,000 mark in 1903; in the two following decades it varied fron1 14,000,000 to 18,000,000, but a rapid expansion ensued and between 1925 and 1932 the area under the crop fluctuated between 17.3 and 22.8 n1illion acres. The total production varies very considerably; in 1928 it was 349,000,000 bushels, but in 1930 it was as low as 162}000,000.

The wheat-growing region is mostly within fairly easy reach of seaports. An excellent railway network has been built up, rnostly with the aid of British capital. Rail freights are on about the same scale as Australia, but the average distance over which the wheat is hauled is somewhat lower in the case of the Argentine.

The systmn of agriculture is a very varied one in son1e parts of the wheat belt. Other crops are produced on the grand scale-notably linseed and maize. In addition the cattle industry is well developed and to smne extent ·wheat is cultivated periodically as a phase in the establishment of grazing areas. A considerable part of the wheat acreage is run on either the rented or share: farming systems.

The govc;:rnment and other organizations have adopted a _progressive agricultural policy in recent years. The depression produced a serious state of affairs which the governn1ent endeavoured. to meet by the establishn1ent of a system of n1anipulation of the currency in conjunction with exchange control, part of any profits from these transactions being used to support primary industries in certain ways. Briefly, the foreign drafts received by exporters frmn the sale of exports are taken over at a fixed price and then the resulting a;rnount of overseas credit is allotted f...rstly, to the service of overseas national debt and the balance sold to tenderers

wishing to make paym.ents overseas. Any profit accruing from the transactions is used to support agricultural production. ·

In :November, 1933, the government fixed the price of wheat at ports at a :figure which is approximately equivalent to 2s. 7d. per bushel in Australian currency. They bought large quantities of the grain at this and sold it to exporters. Losses incurred in this transaction are made good from the exchange fund.

29

The government is extending the wheat silo system at ports and through the country. So far its policy has been to sell the wheat at whatever price it will bring and to avoid carrying surplus stocks forward into the following year. It has recently taken steps to control the varieties of wheat grown by farmers in such a way as to raise the general standard of Argentine

wheat from a milling point of view.

{d) THE PossiBILITY OF A RESTRICTION OF OuTPUT IN ExPORTING CouNTRIES.

50. Among the discussions of the International Wheat Advisory Committee the subject of restriction of output has occupied a prominent place. Consequently, it semn s desirable to consider some aspects of the general problen1 of reduction of production. The various kinds of restriction fall into three categories :

(a) There is first and foremost the contraction in yield due to bad weather conditions during the growth of the crop. Cognate with this is the restriction of planted acreage which frequently occurs in the winter wheat crops of the northern hemisphere when unfavorable weather conditions render sowing impossible. Either difficult conditions at harvest, or the

activity of locusts or of rusts, fron1 time to time cause an extensive limitation of the acreage actually harvested in ahnost every country. These natural restrictions inevitably occur periodically in every wheat-growing region. They are the main causes of fluctuation in wheat output of the world. ·

.. (b) The second group of restrictions is economic in character. Numbers of farmers find

that they are getting very poor returns for their work, and some of them either give up growing the crop altogether, or diminish their planted acreage. The chief force impeding restriction · of this type countries of commercialized agriculture is the pressure of debts combined with the hope that "this year the price must turn". Manifestly this form of restriction is very

much easier in districts where there are other possible lines of activity which are neither less profitable nor more arduous than wheat-growing. The wheat belts of various countries differ markedly in this respect. In Argentina and Australia there are considerable possibilities of transference to sheep or stock or other crops. In Canada, however, the winter climate is so

difficult over large parts of the wheat zone that alternative production is not easy.

Fundamentally this :transference of energy from wheat-growing to other forms of agricultural production solves no problem. It may give temporary ease to the wheat market, but its subsidiary effect is to put an extra strain on the markets for the other produce to which attention has been diverted. If these are other grains, then, inasmuch as there is a certain

amount of interchangeability between all grains for stock-feeding purposes, the extra supplies in the minor markets will have a secondary depressing effect on the wheat position and partly undo the good which might have been done in the first place. If the alternative production is one of animal husbandry, then the transference ultimately causes a depressing effect on the

particular market concerned, and unless this market is definitely more elastic than the wheat market little good may result. Further, the producers who transfer their efforts to the new forms of enterprise will probably be ready and waiting to return to wheat-growing as soon as there seems to be a reasonable probability of a rise in price.

There is one kind of economic restriction which is ultimately of benefit to all concerned. This happens in those instances where land is being overcropped and its fertility " mined ". There are a good many areas in Australia where land is being seeded to wheat too frequently, and as a result is losing "fertility" as years go by. On national grounds there is now no

justification for this type of practice. The reasons for its existence mainly lie in the relatively small size of some farms. On such holdings if the farmer rests the land for a sufficient period between crops to maintain the soil in a good condition then his acreage under crop is too small to occupy the attentions of his power and machinery unit. •

The chief form of transference which can take place in the Australian wheat belt lies in the direction of a further increase in the number of sheep. It is to be expected that this will cause some increase in the amount of wool and the number of fat sheep and lambs produced. As regards the former the pre-eminent position of Australia as a wool-producing country based

as it is on her climatic conditions, suggests that she should be able to hold the position, even if the sheep flocks were to increase to some slight extent owing to an alteration in the relative importance of sheep production and wheat production in the wheat belt. As regards the meat production side her only valuable market is that of Great Britain, and it is somewhat doubtful

whether this can be expanded profitably especially in view of the present agricultural policy of the British Government.

30

(c) The third type of possible restriction is by means of encouragement based on legislative action, which has been attempted to a considerable extent in the United States of America. Such schemes may be based on the control of the amount marketed from the individual farm or on the control of acreage put in under the crop. The primary difficulty in either case is that some fonn of compensation to the farmer is necessary, otherwise he cannot be expected to meet the obligations into which he entered in the expectation of unfettered production. If every farn1er in all the exporting countries agreed to plant 20 per cent. less acreage for one or possibly two seasons, and carried out that agreement, the resultant effect on the price of wheat would

probably be sufficient to cause a return to the price levels of 1928. It n1ust be admitted that so far international confidence and co-operation have not been sufficiently developed to give such a scheme a reasonable chance of success. Further, there is good reason to suppose that when once the period of such an agreement had expired, the position of oversupply would again be built up and would once more become don1inant a result of the next year of bumper crop.

It may be concluded that the only restriction which is likely to be effective in the long run is the natural one due to unprofitableness which will cause some of the poorer areas to be abandoned so far as wheat-growing is concerned.

51. Numerous witnesses have stressed the desirability of applying a compulsory restriction of acreage or marketed output by legislative action. It may be that the future of international trade may force upon governments the necessity of taking such steps. In that case it would i1nmediately become necessary for the State to compensate farmers for the inefficiency into which they were being forced either directly or through a guaranteed price for the product considerably higher than that which might have been expected without the application of restriction.

52. Several systems for such restriction have been suggested ; among them are-( 1) a ballot system under which the selected farmers in various acreage groups would cease wheat production altogether for the year of their election, being compensated for their abstention from the production of wheat ; (2) a systmn of production licences with or without pooled marketing under which

the production of every farm would be rationed. The allotted quota would be paid for at a relatively high price and any excess at a much lower one.

The Commission does not propose to discuss restriction proposals ·further at the present juncture. It considers that the reorganization of the Australian wheat industry must inevitably lead to a restriction in acreage along the natural lines referred to in paragraph 50 above.

5. THE DESTINATION OF AUSTRALIAN EXPORTS OF WHEAT AND FLOUR.

53. The present congested state of the world market for and flour renders an

examination of the destination of Australian exports of those commodities most desirable. There is a very real danger that it n1ay become increasingly difficult for the Commonwealth to maintain her grip on overseas markets for wheat or flour, or both. Figure VI. has been prepared in such a way as to show for each of the last eleven years the size of the Australian crop, the a1nount which was exported and the destinations to which it was shipped. Table 6 supplies the statistics on which this figure is based. In constructing the diagram, flour has been expressed in terms of wheat on the basis of 48 bushels to the "short" ton (2,000 lb.). The time basis

of each year is that of the statistical returns, viz.: 1st July to 30th June, so that for any one year the "export" is composed partly of late shipn1ents of the preceding harvest and partly of shipments from the crop harvested during the year in question. The difference between total crop and total export is the amount used for local consumption minus the carry-over at the beginninK plus the balance held at the end of the year.

54. The detailed consideration -of this figure throws into high relief the importance of Great Britain as the main consumer of Australian wheat. The actual amount shipped to the Mother Country has varied fron1 year to year and has usually shown an increase in years of high production. This was very marked in the years 1930-31 to 1933-34 when the Australian crop was at its highest level. The fact that the Australian pound has been at a considerable discbunt to sterling since 1930 has probably played a part in stimulating this export.

Egypt was a good market for Australian flour but has shown a decline in her importation since 1930-31, partly owing to the very good local crops of those years and partly owing to a high tariff,

31

The data on which Figure VI. is constructed, are shown in the following table :-TABLE 6.

SHOWING THE AUSTRALIAN E XPORTS OF WHEAT AND FLOUR AND THEIR DESTINATIONS IN THE YEARS 1923-24 TO 1933-34 (lsT JULY TO 30TH JUNE).

(In Thousands of Bushels.)

I

- 1923-24. 1924-25. 1925-26. 1926-27. 1927-28. 1928-29. 1929-30. 1930-31. 1931-32.11932-33. 1933-34.

Philippines-Wheat .. .. .. .. .. . . .. .. .. .. .. .. Flour .. .. 625 481 547 420 363 405 418 430 565 551 528 Ceylon-Wheat .. .. . . . . .. . . .. .. .. .. . . 6 Flour .. .. .. 487 500 870 771 970 1,042 1,020 1,038 933 923 907 Sweden- Wheat .. .. 1,304 1,041 129 168 1,010 856 .. .. 600 Flour .. .. .. .. . . .. .. . . .. .. .. .. . . . . . Hong Kong- .. Wheat .. .. . . .. .. .. .. .. .. .. .. .. 18 Flour .. 563 636 466 190 281 143 141 286 2,571 2,442 1,328 Malaya {British)- Wheat .. .. . . .. .. . . .. .. .. .. .. .. 40 Flour .. .. 1,617 1,412 2,348 2,038 1,971 2,504 2,456 2,008 2,096 2,110 2,440 Germany- Wheat .. .. Ill 3,062 941 2,133 2,357 1,002 .. 194 204 38 .. Flour .. .. . . . . .. .. . . .. .. . .• .. .. 4 Netherlands- Wheat .. .. 143 3,297 2,211 3,380 727 1,834 490 2,168 2,073 527 64 Flour .. . . .. .. . . .. .. . . .. . . .. 30 Netherlands East Indies- Wheat .. .. .. .. .. .. .. . . .. .. .. 7 Flour .. .. 2,365 2,154 3,210 3,103 Belgium- 3,164 3,794 3,965 3,589 4,107 3,753 3,870 Wheat .. .. 622 4,440 1,349 4,782 1,729 995 409 2,017 1,892 827 37 Flour .. .. .. .. .. . . .. .. .. . . .. .. 3 Union of South Africa- Wheat .. .. 3,722 3,675 3,117 2,005 6,941 4,143 1,540 956 462 20 39 Flour .. .. 1,809 1,223 1,093 908 France-- 1,065 1,179 876 434 59 11 21 Wheat .. .. 3,562 14,581 54 7,254 623 1,967 187 351 163 .. .. Flour .. .. . . .. .. . . . . .. . . .. . . .. .. Italy- Wheat .. .. 6,484 15,561 4,642 10,317 7,152 5,862 3,261 12,698 8,195 3,656 699 Flour .. .. .. .. . . . . .. .. . . .. . . .. .. · heat .. .. 1,340 1,888 668 4,625 3,827 4,943 1,178 3,143 1,640 1,019 204 Flour .. .. 8,781 8,276 9,356 8,899 7,238 11,686 6,046 6,993 5,113 1,372 1,333 Japan-Whea-t .. .. 13,068 7,019 10,862 4,299 3, 200 5,626 2,811 17,676 21,464 17,896 7,720 Flour- .. .. 741 7 35 34 41 31 37 36 79 182 274 India- Wheat .. .. .. 23 1,327 2,714 1,988 26,440 7,777 10,197 303 1,771 281 · Flour .. .. 6 . . 76 11 19 27 lO 6 6 16 21 China- Wheat .. .. 4,506 .. 986 . . .. 2,668 . . 24,400 30,991 33,740 1,476 Flour .. 61!) 10 6 15 13 6 11 97 329 7,683 3,805 United Kingdom- Wheat .. .. 23,017 39,357 22,320 26, 511 20,465 20,565 21,489 39,995 49,220 50,940 45,532 Flour .. 4,436 4,983 3,386 3,656 3,448 2,781 4,097 6,458 9,214 5,857 6,560 Other Countries- Wheat .. .. 2,031 9,594 5,621 5,738 3,023 4,995 1,248 5,438 10,194 9,122 5,477 Flour .. .. 2,488 1,824 2,627 3,641 2,249 3,465 3, 278 3,789 4,249 5,410 4,916 Total- 103,538 i Wheat .. .. 59,910 54,227 73,926 53,042 81,896 40,390 119,223 127,401 119,556 61,599 Flour .. .. 24,537 21,506 24,020 I 23,686 20, 822 27,063 22,355 25,164 29,321 30,310 26,040 Total Wheat and Flour 84,447 125,044 78,247 97,612 73,864 108,959 62,745 144,387 156,722 149,866 87,639 The amount taken by Italy has varied largely according to her own production. During recent years an intensification of farming has been taking place in Italy and a serious attempt at self-sufficiency in breadstuffs has been made. Japan has been a variable import er of wheat and has occasionally t aken large quantities of flour. She normally draws her supplies from Pacific sources and when the disparity between North A1n erica and Australian currencies arose in 1930 she was able to buy more cheaply from Australia than from Canada or the United States of America. Consequently, there was a marked expansion in her trade with the Commonwealth in these commodities. When the currency values in North America fell in 1933 this t endency was reversed. China is a very spasmodic market for both wheat and flour. Her purchases are largely dependent on the price at which these commodities are offering ; consequently, she was able to accept a very considerable volume when the price collapse occurred. 0£ this volu,me

32

Australia was able to obtain a large share owing to the currency position. In 1933-34 the United States .of America was able to regain her share by means of a trade agreement with a loan to China. France, The Union of South Africa, Germany and Sweden form a group of countries in which national policies of protecting and stimulating local wheat-growing industries have caused a marked diminution in their imports in recent years.

Belgium and the Netherlands are minor markets which have been variable in size. Ceylon, The Dutch East Indies, Malaya and the Philippines have been steady purchasers of Australian flour. ·

Hong Kong offers a market for flour which expanded markedly when the depreciation of the currency gave the Australian exporters an advantage over sellers from North America. India is largely self-supporting in wheat but in certain seasons she has been a good market for the grain.

The item other countries contains the export to a large number of destinations, chief among which are Mauritius, Portuguese East Africa, ;New Zealand, Spain, Norway, various islands in the Pacific, and the Pacific ports of the U.S.S.R.

55. The detailed examination of this list is not reassuring. It suggests that, apart from Britain, the destination of Australian wheat and flour during recent years has been-( a) the Northern Pacific, notably Japan and China, of which countries the latter is a most uncertain factor ;

(b) the Southern Pacific and Southern Asia, especially those ports which are on the normal sea routes of Australian trade ; ·

(c) Italy and Egypt.

During the period 1923-24 to 1926-27 France, Belgium, Germany, Netherlands and Sweden absorbed an average of 13.2 million bushels from Australia annually; during the period 1929-30 to 1932-33 that average had fallen to 2,500,000 and this was despite the fact that Australian wheat was being offered at a lower price than it ever had been offered before. A conciliatory policy in connexion with overseas trade will be an essential if Australian wheat and flour are to be sold.

6. BROAD Lit\TES OF DESIRABLE POLICY FOR THE AUSTRALIAN 'VHEAT INDUS'rRY. 56. The world wheat position makes it difficult for the Commission to take an optimistic view of the prospects of the industry during the next few years. The historical survey suggests that agricultural depressions normally extend over long periods, twenty years being by no means unusual. A rapid upward movement in the trend of average world price of wheat occurs only when there is a rapid and major decrease in world supply in relation to world demand, caused for instance by a great war. Even the year to year fluctuations in average price have been reduced in amplitude since the 'seventies when extra-European trade in became a normal feature of the world market. Figure II. is illustrative of this point and emphasizes the disparity between the relative stability between 1875 and 1914 and the wider fluctuations which occurred prior to the opening of wheat production on the grand scale in the newer countries. If this be a guide, then major fluctuations are unlikely in the future. Further, as extensive increases in the world acreage are unlikely at present prices, it is to be expected that the growth of populations will slowly create an increasing demand and that the world wheat price trend will move slowly upward from its present low level, individual years being somewhat above or somewhat below the mean position.

57. Human nature remains much the same in the present depression as it was between 1810 and 1835, and nationalistic tendencies are almost as strong now as they were then. There is no immediate expectation that importing countries will change their present attitude towards wheat, nor is there any expectation that the exporting countries will cease to assist their wheat-growers to the limit of ca_ pacity and, in certain cases, this may under certain circumstances mean a further stimulatiOn of exports.

The one respect in which the present .situation differs from preceding depressions is the fact that a wider interest is now taken in currency problems. Many countries have been prepared to attempt to the sit_uation by altering basis. of their currency. This has, undoubtedly, been of assistance to their farmers for the time bemg, but it will in the end be partly offset by an increase in some of the farmers' costs.

33

...... t:T' ;; c+

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o , .....- r.i -· ... i:; ~ t::" C

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- .... , . ,-(/. r. ,;.; .... ~. ,.. - pr: ,... .... ,_....., ..., ..... ('O ,!Jl c:, (b d-:T' :;) t:T' <'f cc '"1.;,r.> .... 8. ;:'.!... '"1 r., ::, '"I r.o r., ::, ----~ -·,...,i ... ~-.., "':) .....-j,,J Mo"-·,-:_ < "-<: ; :, (j ;::_ '~ ~ :::: C./"'! tc. fr.. r; .. ;..: ' ;:.: :::: ":. r-"""~,__,-..,1 r-+ ........ - :.c - . ~ ("f- """" ,..., (/) C J, (/) (1) ..... CL f:j M­r+ ro OA ------=-- - -- .,~ - -- ..... .. '·~ ,-------------~-~---

F1G. ·VI

DIAGRAM S HOWING FOR THE YEARS DESIGNATED:-I

2

Total production of Australian Wheai' Countries of destina-tion of such

and the quantit'j

exports.

expor{ed (wheat and flour)

1n3 _24 1n4_25 1')25 _ 2'; 1':lb-27 1,21-2& l'n8 _2~ "2, _lO i,30 _31 i,31 _ 32 "l2 -~ 1,3~_34

PH I LIP Pl N ES ........ .. ................ -··-·_ .. _ _ ___ .. a ............ _ ... ______ .. __ . .. _ ............... _ .. ___ . .. ____ ...... _ ..... ___ a __ .. ____________ .... __ a .. __ ·-·-----·-·- .... -• ..... _ __________ . ---•----...... _ .. ____ .. ___ ... I .. _ .... --.. ---------- -----•-----·--- ·---· ____ .. -----.. -•-------- _____ --·---·-·---·â€¢

CEYLON .... , ... _ .. ,,_ .. ··--··-- .. --. --- -···----··· -·-· .. ------------··-· -· ----------------·--·-···--·-------·· .. ··--·--··- ------• -------··---• -.. ----··-- ------· ··----------·--.... -·- ··-- --------·---·-··· .. · ······-·· ......... . -.... --• ----------------- ----------•

SWEDEN ... .. ...... --... -· . .... -•----- ----- .... ·-----• ------- ---·---- ----- -· -·-- -- ----· -·-----·-· -·- .. -·--·. -------• -- --------·---- ... .. ----- ---- ----- - -· . - -.. - -------- -------------· ---- -· ·-·- -- ----·-·

HoNG KoNG ... . --,-- .. ·.--- ----·---• ..... ______ .. ---------•--- --· ----··-·------•------ --·--- --· -- .--·â€¢---·------------··-·· ---------------------.. --------- .. --• --·---·-- --·----·· .. ---•- -- --------.. ------·----• ---------··--------•---------------- ·----------•

MALAYA (BR) ________ ____ .. ·----• ----------------- · -·------------- • ---------• ---------·---• --~ --- -----• --- ·---------· '.·--,---· ···· -·-----·-·-------- ----------• --- -- ------------·· ··-------------------------•

GERMAN y __ _ .. _ __ ---- --- .. _____ ---- -- ---· .• ·-· --- ·-- -· -.. ..... - --- .. --. --- --• .. -----------• -~ ---·-- ---- ---· ------·---•--- ----- -- -------------------- ------•-------- --------•--- --- -- ------ --. -·-- --·-------------------------- ----·

NETH ER LAN OS __ _ ____ _ __ ____ ... -----•·- ___ ______ __ _ II ___ ·-·------·--·-- -- ___ _ __ _II _ _____ ___ _._ ------ -----•-------- _ ____ _.. ____________ • __ _ ... __II .. ... ___ -- -. -· -.. -·· ----- -------------------- ---··

NETHERLANDS EAST INDIES __ •. _. _ ___ ___ ____ ll _ ________ ____ ll _ ____ _ ___ __ ll ____________ ll _ _______________ a __________ _ _____ a _______________ ll _______ __ __ __ )I _______ _ ________ ____ _ II

BELGIUM ... ...... __ .. _ __ __________ __ .,.--·--·---------- - --- - ------------• --- ------- ----·------•-- ---------- -• - ----·--- .-·---•----·- -- --- - ·- -· -·------- ·- ·· -· -·--------- -·-------• ----- ------- ----·

UNION OF SOUTH AFRICA•---------- -• ~ ----·----- -- ___ ____ _ __ II ____ ______ _ -- .. --~-- - • ------- - -- · --·-·-· •··---- • ---- --·- ·- ·-----· --· ------ --- ----------·-·-L------ -------------

FRANCE_ ------------····--··-----. ·----------------- ---

1

-------- -------- •--·--- ---------- ----------· .. --•---- ---- ·-- -------•-----·------- -----· .. ----------------•-- - ------------- ----•

"OTHER COUNTRIES·~--- ----·-·---------- -

------ ---•--- ----- -- -- ---------------------------

ITALY .. . -·--- --· ..... _ .. ____ __ __ __ ____ _

- -- ---- -----•- ---- --- . .. ---------------•-------------·

EGYPT. .... ------- ---------------- --

JAPAN. _ __ .. __________ _________ ... ____ __ _

[ ____________ • ______ -----------------·--· - --- -- -------• ---- --------

I ND I A __ -----·- -------~----·--·-- --- ----.. -.. ---•-.. ---------------------·-- --------· --------•----------------•---------------•---------

CH IN A ___ ______ , ..... ·-- ··-·---·-· .. ---·---· ·----------- -------- .&..--------- -----------•------•M·-------------- . ---------.. -----·------------------- -- ·------- ------•------- -------

UNITED KINGDOM ___ ____ _

TOTAL CROP FOR THE YEAR JULY to ~O·" JUNE

TOTAL EXPOR1S FOR ~IMILAR PERIOD IN BLAtK ~ ec Lttterpru~

---.-------· - _____________ _____ _ ____ _.

------------ ---------------~---•

[ __ __________________ . ____________ ____ ________ . _____ _____________ ...

---- --- --- -- --•

I

35

58. The Commission is forced to the view that, on the one hand, nationalism is too strong to permit European countries with high-production costs to alter their policy to one of accepting cheap wheat and, on the other hand, the present capacity for the production of wheat in ·exporting countries exceeds the probable demand to such an extent as to make it doubtful whether

any return to the price levels of 1926-28 will last for more than one or two seasons. Temporary improvements in price will be dependent on the prospects of poor harvests in large sections of the world's wheat areas. Permanent improvement, on the other hand, will be achieved only by concerted international action or by the growth of world population to a level which will

utilize the potential wheat acreage to the full, and in view of the present decline in birth rates, this latter circun1stance will be considerably delayed.

59. In its First Report the Commission recommended the adoption of the principle of a Home Consumption Price for Australian wheat used for human consumption in Australia. The Commission has taken a price of 3s. per bushel f.o.r. Australian ports (including the assistance from the Home Consumption Price) as the basis of its calculations of the present stability of

the wheat-growing industry. On this basis only about 40 per cent. of the Australian wheat-farmers can continue in production, unless substantial reductions can be made in interest charges or other items of the cost of production.

60. The Commission concludes, therefore, that the broad lines of future wheat policy for the Commonwealth should in addition contain the following items:-(a) Themaximum possible contribution by Australia to the solution of the problem of the revival of international trade especially the maintenance of active trade

relations with all countries which are prospective purchasers of wheat and flour. (b) A general review of all items in the cost of production including debts and interest, with a view to ascertaining the extent of relief which the industry may expect

fron1 such sources. (c) The adoption of agricultural reorganization in such districts or on such farms as cannot be utilized for the economic production of wheat at price levels which n1ay be expected in the next few years, after having regard to

reductions in costs which may be expected from (b). (d) A general regard to the agricultural practice in relation to the maintenance of soil fertility wheat areas so that a national heritage shall not be wasted. (e) The necessity of avoiding for the present an increase in the gross annual average

production in the Commonwealth and the desirability of conforming to such world-wide agreements as may be made in respect to this matter.

APPENDIX A.

AN EXAMINATION· OF THE PRICES OF AUSTRALIAN WHEAT FROM 1861 ONWARDS. AI. In the early years, before communications and transport were effectively organized, there were some differences in the prices of wheat at the various capital cities in Australia. Adelaide prices have been chosen for this study because that city was, as explained elsewhere, the centre of the largest wheat-exporting region near the coast. Figure 3 shows the average prices per bushel obtained for wheat at Adelaide during the period 1861-62 to 1932-33.

A2. An examination of the dotted line shows that there were .very considerable fluctuations from year to year. An examination of similar curves for other capital cities would show the same trends in price, although the prices in any one year might have a somewhat different relation to the Adelaide price than they would have in another. The reason for that was that the harvests of the individual States did not always fluctuate in the same way, so that there might

be a trade from Adelaide to Sydney or Melbourne in one year and a reverse movement in the following year if the South Australian crop was extremely low. In the former case Melbourne price would be Adelaide price plus freight and in the latter, Adelaide price minus freight. If the line is examined in relation to the general conditions of supply first in Australia and then in the world

at large the cause for each of its peaks becomes apparent. A3. The following table (Table 7) shows in its second column the total population of the Australian States for the mid point of each statistical year. The third column estimates the human consumption of wbeat in tbat year on the very safe that it averaged five bushels per per fourt h shows the amount of

grain which was required plant the acrea!Se of the follown;:g year, assunung t hat the rate was bushel per acre. This again is a fauly safe assumptwn, at all events 1r: the_ because the rate was, m th?se

days, higher than it is now, and because the crop was m distn cts wh1ch t o-da_ y requue a heavy sowmg per acre. The fifth column indicates the total wheat requuement of the populatiOn assummg t hat all the wheat was used as human food or for seeding purposes, and makes no allowance for wheat used for stock feed. The final column shows the Australian crop.

5

36

A4. A comparison of the last two columns shows that in certain seasons there was an actual shortage of the grain within Australia, while in certain other years t here was a condition which came sufficiently near t o shortage to create uncertainty in t he minds of dealers of grain. The years of shortage or fear of shortage were 1863- 64, 1864-65, 1867-68, 1885-86, 1888-89, 1895-96, 1896-97, 1902-03, 1914-15.

A5 . In 1876-77 the yield wr.s particularly poor in South Australia, although not quite so low in other States. The peaks in the line for the years 1881-82, 1890-91 and 1908-09 are readily explicable fr om the fact that there was in those years a definite rise in the price of wheat on the world's market overseas. The trough at 1893-94 corresponds with the general world depression of that year and a markedly low price on the world market. These correlations with world price can be checked by referen ce to Figure 2, which shows t he actual prices of wheat in Britain since 1800.

This study, therefore, show s that supply and demand on the local market are sufficient t o explain the major vagaries of the Australian wheat price from the general trend during the last 70 years.

TABLE 7.

SHOWING WHEAT PRODUCTION AND ESTIMATED WHEAT CONSUMPTION IN AUSTRALIA FROM 1860-61.

1860-61 1861-62 1862-63 1863-64

1864-65 1865-66 1866 67 1867-68 1868-69

1869-70 1870-71 1871-72 1872-73 1873-74

1874-75 1875-76 1876-77 1877-78 1878-79

1879-80 1880-81 1881-82 1882-83 1883-84

1884-85 1885-86 886-87 1 1

1

1

1

1

1

1

I

I

1

1

1

I

I

1

l

1

I

1

1

I

1

1

1

1

1

887-88 888-89 889-90 890-91

891-92 892-93 893-94 894-95

895-96 896-97 897-98 898-99 899-00 900- 01

901-02 902--03 903- 04 904-05

905--06 906--07 907-08 908--09 909-10

910-11 911-I2 912-13

. .

. .

. .

. .

. .

. .

. .

. .

. .

. .

. .

. .

. .

. .

. .

..

. '

. .

. .

. .

. .

. '

. .

. .

. .

. .

. .

. .

.. .

. .

. .

. .

..

. .

. .

. .

. .

. .

. .

. .

. .

. .

. .

. .

. .

. .

. .

. .

. .

. .

. .

. .

. .

Year.

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. ' . '

.. . '

. . . .

. . . .

. . ' .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

.. . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

Mlll!ons of Bushels.

Australlan Population. Estimated Actual

(Millions.) Human P.equirement

Total Australian

Consumption. for Seed.

Consumption. Crop.

.. 1.15 5.75 . 72 6.47 10.25

.. 1.17 5.85 .67 6 .52 10.24

. . 1.21 6.05 . 66 6. 71 9.15

. . 1.26 6.30 .70 7.00

8.10*

.. 1.33 6.65 .82 7.47 8.62*

.. 1.39 6.95 .94 7.89

9.65

.. 1.44 7.20 1.01 8 .21 15 . 38

.. 1.48 7.40 1.05 8.45

9.28*

.. 1.54 7 .70 1.10 8.80

12 .34

.. 1.59 7 .95 1.12 9.07 13.21

. . 1.65 8.25 1.28 9.53

12 .08

. . 1. 70 8.50 1.36 9.86

11 .92

.. 1. 74 8.70 1.39 10.09 18.55

. . 1. 79 8.95 1.42 10 .37

14.57

.. 1.85..:.J 9.25 1.42 10.67 18 .26

.. 1.90 L 9.50 1.69 11.19 18.71

.. 1.96 9.80 1.98 11.78

14.61

.. 2.03 10.15 2.31 12.46 19.69

.. 2.09 10.45 2.47 12.92 19 .99

.. 2.16 10.80 3.05 13 .85 28.73

.. 2.23 11.15 3.00 14.15 23 .36

.. 2 .31 11 .55 3. 04 14.59 21.44

.. 2.39 11. 95 3.31 15.26 21.49

.. 2.51 12.55 3.39 15 .94 35.71

.. 2.61 13.05 2 . 98 16.03 30.56

.. 2.69 13.45 3 .42 16 .87

17.98*

. . 2. 79 13.95 3.65 17.60

29.75

.. 2.88 14.40 3.20 17.60

38 .16

.. 2.98 14.90 3.53 18.43

17 .42**

.. 3 .06 15 .30 3. 23 18 .53

34 .04

.. 3.15 15 .75 3.33 19.08

27.12

.. 3.24 16.20 3.44 19.64 25.68

. . 3 .31 16.55 3. 92 20.47

32.76

.. 3.36 16. 80 3.70 20.50 37.14

. . 3.43 17 .15 3. 52 20 .67

27.86

. . 3.50 I7 . 50 4.28 21.78

18 . 27*

.. 3.55 17.75 4.36 22 . 11

20.88**

.. 3.62 18.IO 5.47 23.57

28.24

.. 3 . 66 i8.30 5.61 23.91

41.42

.. 3.72 18 . 60 5.67 24.27 39.98

.. 3 .77 18 .85 5. 12 23.97

48 .35

.. 3.82 19.10 5.16 24.26

38.56

.. 3.88 19 .40 5.57 24.97 12 .38*

.. 3.92 19 .60 6.27

25 .87 74.15

. ' 3.97 19.85

6.12 25.97 54.54:

.. 4 .03 20.15 5.98 26.13

68.52

5.38

.

.. 4 .09 20.45 25.83 66.42

.. 4.16 20.80 5.26 26.06 44.66

.. 4.23 21.15 6.59 27.74 62.59

.. 4.32 21 . 60 7.37 28.97

90.41

7.43

.. 4.43 22.15

29.58 95 . 11

.. 4.57 22.85 7.34 30.19

71 .64

4 .75 23 .75 9. 29 33 .04 91 .98 ..

1913-14 1914-15 1915-16 191 6-17

1917-18 1918-19 191 9-20 1920-21 1921-22 1922-23

1923-24 1924-25 1925- 26 1926-27 1927-28

1928-29 1929- 30 1930-31 1931-32

1932-33

37

TABLE 1.-oontinued.

SHOWING WHEAT PRODUCTION AND E sTIMATED WHEAT CoNSUMPTION IN AusTRALIA FROM 186()-61--continued.

Millions of Bushels.

Australian

' Year. Population. Estimated Estimated (Mlllions.) Hum an Requirement Totnl Consumption. for Seed. Consumption. .. . . . . . . 4.89 24 .45 9 . 65 34:.10

. . . . . . . . 4.97 24.85 12.48 37. 33

. . . . . . .. 4. 97 24 .85 11 .53 36.38

. . . . . . .. 4. 92 24 . 60 9.77 34.37

. . . . . . .. 4.98 24.90 7.99 32 .89

.. . . . . . . 5.08 25.40 6.42 31.82

. . . . .. . . 5 .30 26.50 9.07 35.57

. . . . .. . . 5.41 27.05 9.72 36.77

.. . . . . . . 5.51 27.55 9.76 37.31

. . . . . . . . 5.63 28.15 9 .54 37.69

. . . . . . . . 5.75 28.75 10.82 39. 57

. . .. . . . . 5.87 29. 35 10 . 20 39.55

. . . . . . . . 5.99 29.95 11 . 69 41.64

. . . . . . . . 6.11 30.55 12.28 42 .83

.. . . . . . . 6 .23 31.15 14 .84 45 .99

. . . . . . . . 6.34 31.70 14.98

I

46.68

. . . . . . . . 6 . 41 32 .05 18.16 50 .21

. . . . . . .. 6.48 32 .40 14.74 47 .14

. . . . .. .. 6 .53 32.65

I

15.76 48.41

. . . . . . . . 6.58 32 .90 14.99 . 47.89

APPENDIX B.

INTERNATIONAL WHEAT CONFERENCES.

IN 1930 AND 1931.

Actual AustraUan Crop.

103.34 24.89* 179.07 152.42 114.73

75.64 45.97 145.87 129.09 109.45 124.99 164.56 114.50 160.76

118.20 159.68 126.88 213.59 190.61

212.40

Bi. During the twa years 1930 and 1931 there were sixteen international conferences, primarily concerned with the world's wheat situation or having wh eat as one of t he principal subj ects of discussion. Certain of t he conferences concerned only the agrarian countries of Eastern and Central Europe, which had suffered severely fro m the depression of wheat prices during the preceding two years, and had continually been seekin g some means of alleviating their

position. Others, notably the conferences held at Rome; 26t h March to 2nd April, 1931, and at London 18th to 23rd May, 1931, covered a wider fie ld.

B2. The European agrarian States have repeatedly urged that the chief wheat-import ing countries should adopt a plan of preferences giving advantage t o t he fo rmer states. After a number of preliminary conferences this proposal was placed before t he Assembly of the League of Nat ions in September, 1930. I t was not unnaturally opposed by representatives of overseas wheat-exporting count ries. The idea continued to play an important part in subsequent discussions, no tably at Bucharest in Febrmuy, 1931, and at P aris in the same mon t h. At these conferences, however, proposals based on t he allocation of certain quotas in favour of the Em opean agrarian states gained support, and a

resolution in favour of such a procedure was adopted at the P aris Conference, held under the auspices of the League of Nations Commission of Inquiry fo r t he European Union.

B3. The conference held in Rome at t he invitation of t he International Institute of Agriculture repre8ented 48 wheat-importing and exporting countries, and was concerned with the wo rld wheat sit uation as a whol e. The main result t hB,t emerged from it was the passing of a resolution urging that a meeting of representatives of the prin cipal wheat-exporting states should be called to " formulate a plan on an international basis fo r the exportation of the 1931-32 crop." The conference fore shadowed in this resolution was heid in London in May, 1931, an d the principal question before it was t he possibility of organizing an international export quota plan amongst. the wheat -export irg countries of t he world. Alt hough a majority of t he delegates present supported t he plan, it was found impossible to reach un animity. The conference ultimately decided t o est ablish a committee for the purpose of submitting to the Governments of t he participating colmt ries a proposal for establishing a clearing house for information for t he use of wheat-exporting countries, and for explo ring avenues for t he greater utilization of wheat.

AuGUST, 1933.

B4. A number of discussions between wheat-exporting and importing. countries t ook place both before and during t he World Economic Conferen ce of 1933. These led up to t he I nternatiOn al Wheat Conference held in London in August of that year.

5

38

The conference concluded with a "Final Act" which is of sufficient importance to be quoted in extenso. It was as follows:- .

"The Governments of Germany, Austria, Belgium, Bulgaria, France, the United Kingdom of Great Britain and Northern I reland, Greece, Hungary, Irish Free State, Italy, Poland, Roumania, Spain, Sweden, Czechoslovakia, Switzerland, the Union of Socialist Soviet Republics, and Yugoslavia, having accepted the invitation extended to them by the Secretary-General of the Monetary and Economic Conference on behalf of the Governments of Argentina, Australia, Canada and the United States of America, to take part in a conference to consider the measures which might be taken in concert to adjust the supply of wheat to effective world demand and eliminate the abnormal surpluses which have bee:fi depressing the wheat market, and to bring about a rise and stabilization of prices at a level remunerative to the farmers and fair to the consumers of breadstuffs, have agreed as follows:-

Article 1.

The Governments of Argentina, Australia, Canada and the United States of America agree that the exports of wheat from their several countries during the crop year 1st August, 1933, t o 31st July, 1934, shall be adjusted, taking into consideration the exports of other countries, by the acceptance of export maxima on the assumption that world import demand for wheat will a.mount during this period to 560,000,000 bushels.

Article 2.

They further agree to limit their exports of wheat during the crop year 1st August, 1934, to 31st July, 1935, to maximum figures, 15 per cent. Jess in the case of each country than the average outturn on the average acreage sown during the period 1931-33 inclusive, after deducting normal domestic requirements. The difference between the effective world demand for wheat in the crop year 1934- 35 and the quantity of new wheat from the 1934 crop available for export will be shared between Canada and the United States of America as a supplementary export allocation with a view to the proportionate reduction of their respective carry-overs.

Article 3.

The Governments of Bulgaria, Hungary, R.oumania and Yugoslavia agree that their combined exports of wheat during the crop year 1st Augus , 1933, to 31st July, 1934, will not exceed 50,000,000 bushels. This undertaking is made on the understanding that the aggregate may be increased to a maximum of 54,000,000 bushels if the Danubian countries find that such a supplementary quota is required for the movement of the exportable surplus of the 1933 crop.

Article 4.

They further agree that their combined exports of wheat during the crop year 1934-35 will not exceed a total of 50,000,000 bushels, and recognize that the acceptance of this export allocation will not allow of any extension of the acreage sown to wheat.

Article 5.

The Government of the Union of Socialist Soviet Republics while unable to give any undertaking in regard to production of wheat, agree t o limit their exports for the crop year 1933-34 to a figure which will be arrived at upon the completion of negotiations with the Governments of the overseas wheat exporting countries. They also agree that the question of their export of wheat during the crop year of 1934-35 shall be the subject of further negotiations with the wheat exporting countries represented on the Advisory Committee. ·

Article 6.

The Governments of the wheat-importing countries in signing this instrument : (i) Agree henceforth not to encourage any extension of the area sown to wheat and not to take any governmental measures, the effect of which would be to increase the domestic production of wheat; (ii) Agree to adopt every possible measure to increase the consumption of wheat and are prepared to bring about the progressive removal of measures whjch tend to lower the quality of breadstuffs and thereby decrease the human consumption of wheat ;

(iii) Agree that a substantial improvement in the price of wheat should have as its consequence a lowering of customs tariffs, and are prep:ued t o begin such adjustment of customs tariffs when the international price of wheat reaches and maintains for a specified period an average price to be fixed. It is understood that the rate of duty necessary to assure remunerative prices may vary for different countries, but will not be sufficiently high to encourage their farmers to expand wheat acreage.

Appendix A. contains the agreed definitions relating to the technical points mentioned in· this paragraph: (iv) Agree that in order to restore more normal conditions in world trade in wheat the reduction of customs tariffs would have to be accompanied by modification of the general regime of quantitative restriction of wheat imports, and accept in principle the desirability of such a modification. The exporting countries for their part agree that it may not be possible to make substantial progress in these modifications in 1933-34, but the importing countries are prepared to make effective alterations in 1934-35 if world prices have taken a definitely upward t urn from the average price of the fir st six months of the calendar year 1933. The

obj ective of these relaxations of t he various forms of quantitative restrictions will be to restore a more normal balance between total consumption and import's, and thereby to increase the volume of international in wheat. It is understood that this undertaking is consistent with maintaining the home market for domestic wheat grown on an area no greater than at present. It is obvious that fluctuations in the quantity and

quality of the wheat harvest resulting from weather conditions may bring about wide variations in the ratio of imports to total consumption from season to season.

39

The obligations of the importing c.ountries under this Agreement are to be interpreted in the light of the following declaration :-It is recognized that measures affecting the area of wheat grown and the degree of protection adopted are primarily dependent upon domestic conditions within each country, and that any change in these measures must often

require the sanction of the legislature. The intention of this Agreement is nevertheless that the importing countries will not take advantage of a voluntary reduction of exports on the part of the exporting countries by developing their domestic policies in such a way as to frustrate the efforts which the exporting countries are making, in the common interest , to restore the price

of wheat to a remunerative level.

Article 7.

The countries participating in the Conference agree to set up a Wheat Advisory Committee to watch over the working and application of this Agreement. The functions, organization and financial basis of this Committee are set out in Appendix B. Done at London, the twenty-fifth day of August, one thousand nine hundred and thirty-three, in a single copy

which shall be deposit ed in the archives of the Secretariat of the League of Nations, and of which authenticated copies shall be delivered to all Members of the League of Nations and non-member States represented at the Conference of Wheat Exporting and Importing Countries. (Here follow the Signatures.)

Appendix A.

" 1. 'International price of wheat,' as mentioned in Article 6, Paragraph (iii), of the draft agreement, shall be understood to mean a duty-free gold price c.i.f. on a world market. This price shall be calculated according to t he method followed by the Food Research Instit ute of Stanford University, California (explained in Vol. 4, No.8, of Wheat Studies). It is the average price of all parcels of imported

wheat of all grades sold during each week in all the ports of Great Britain. 2. The Secretariat of the Wheat Advisory Committee set up by the Conference shall undertake the regular communication of indices of prices calculated as above t o all Government s adhering t o the Agreement. 3. The minimum average gold price calculat ed as indicated above t o be maintained for a period of sixteen weeks before it will be necessary for importing countries t o adjust their Tariffs shall be t welve gold fr ancs per quintal

(63. 02 gold cents per bushel). 4. The period referred to in Article 6, Paragraph (iii), of the Agreement, during which the average quotation for wheat is to be maintained before it will be necessary for importing countries to adjust t heir Tariffs shall be sixteen weeks.

5. Each country will decide upon its tariff adjustment in accordance with the principles enunciated in Article 6, Paragraph (iii), of the draft Agreement, and every considerable and lasting change in wheat prices shall be followed by an adjustment of Tariffs proportionate to such change." B5. In June, 1933, the four major export ing countries also into a supplementary a.greement of which the following were the salient features :-

It was estimated that world import demand would amount to 750,000,000 bushels. On the basis of this estimate, the following tentative quotas were allotted-

Argentina , .. Australia Canada United States of America

Bushels.

150,000,000 142,000,000 283,000,000 \plus a conditional 35,000,000 bushels each if demand proved to be 30,000,000 f sufficient. A formula for reducing these quotas pm m ta if demand should be less than 750,000,000 bushels was also included; consequently, when in August, 1933, it became clear t hat world demand actually would be in the neighbourhood of only 560,000,000 bushels, the quotas were reduced to-

Argentina Australia Canada United States of America

Bushels.

110,000,000 105,000,000 200,000,000 47,000,000

Under these altered circumstances , Argentina, wit h a very good harvest , and t o a lesser extent Australia, with an averaae one, were faced with t he question of the disposal of the wheat crop in excess of their quotas and normal domestic 0

requirements. They pointed out that , as Canada and the United Stat es of America had very large surplus st ocks and were asking the Southern H ernj sphere countries to reduce production t o make room for the liquidation of these, it was only reasonable that Canada and the United Stat es of America should permit all the new crop (1933-34) of Argentina and Australia to be moved int o consumption first.

After considering the above-ment ioned representations , Canada and United St ates of America agreed t hat Argentina and Australia should retain their 1933- 34 quotas, but that in 1933- 34 exports should be limited to 110,000,000 and 105,000,000 bushels respectively, the balance (40,000, 000 bushels in .. Argentina, and 37,000,000 bushels in Australia) being carried over to t he 1934--35 crop year.

B6. The 1934-35 quotas were agreed upon on the basis of an implied reduction of 15 per cent. of t he 1933-34 s,creage in exporting countries. They thus appeared as :-Argentina 108,000,000 bushels, plus an additional 40,000 ,000 bushels from the 1933-34 crop.

Australia 112,000,000 bushels, plus an additional 37,000,000 bushels from the 1933-34

Canada United States of America

crop. 268,000,000 bushels. 84,000,000 bUBhels.

... ,-

40

Argentina and Australia also definitely agreed not to accumula-te above normal stocks.

Table 8 shows the actual response t o this agreement as far as wheat exports and acreage were concerned.. TABLE 8.

SHOWING SOME DETAILS OF THE OPERATIONS OF THE WHEAT AGREEMENT DURING 1933-34.

ExPORTING CouNTRIES.

I

I Quota 193 3-34 I Articles in Exports I Amount by

Amount by

Agreement which exports which exports

Country. in which (l\1illions of 1933-34 exceeded were less Estimat ed inerease Ol' reduction in acreage.

undertakings bushels). (Millions of

I

quota than quota

are set out. bushels). (.Millions of (Millions of bushels). bushels).

Argentina I 1 and 2 110 (a) 144 34 A reduction of a-pproximately 5 per cent. .. I .. in relation to wheat agreement base period 1930-32 · Australia .. .. land 2 105 88 .. 17 A reduction of probably more than 15 per Canada 1 and 2 200 194.8 cent. in area sown for 1934-35 crop .. .. .. 5.2 A reduction of approximately lOl per cent. United States of Commitment under the agreement was America. . . 1 and 2 47 (a) 20 . . 27 interpreted to mean harvested area should not be above 49. 9 million acres. It is estimated harvested area will be about 7 million acres less than t hat limit Bulgaria .. .. 3 and 4 't 5 I .. } An increase of 3. 3 per cent. Hungary .. .. 3 and 4 t Global I 30 .. 13.8 A decrease of 8. 9 per cent. Roumania .. 3 and 4 quota 0.3 .. A decrease of 2. 9 per cent. Yugoslavia .. 3 and 4 50 0 . 9 .. A decre'1.se of 1 . 0 per cent . Soviet Union .. 5 44* 27 Others .. .. ... .. . . I I (a) Official figures not availaLle. • .An agreement was not finalized with the So'tiet Union in regard to its wheat quota for 1933-84. B7. By August, 1934, it had become clear that, not only was the initial estimate of world import demand of 750,000,000 bushels .too high, but the second estimate, viz . : 560,000,000 bushels, was also t oo optimistic. It was alleged that there had been a general lack of confidence in the observance of the quotas, particularly on t he part of the private grain trade. It was considered that both these factors had prevented the export quotas from having the undoubted strengthening effect on prices they would otherwise have had. It was estimated that at the beginning of August, 1934, "world" stocks of wheat amounted 1,140,000,000 bushels as compared with about 1,120,000,000 bushels in August, 1933, and the 1922-28 average of about 625,000,000 bushels. However, at that time the prospect of abnormally low yields in the United States of America, coupled with a reduced European crop indicated th2.t there would be a reduction in the world surplus. It was thought that, by 1st August, 1935, this reduction might bring the world surplus to as low a figure as 750,000,000 or 800,000,000 bushels-i.e., 125,000,000-175,000,000 bushels a,bove t he 1922-28 average. While t he operations of the agreement had not so far brought about any appreciable rise in wheat prices, it was considered that it had prevented these prices from dropping t o still lower levels, and furt her that it had introduced an element of stability into the market. Auous·r, 193L1. B8. After examining the results attained during t he first year of operation of the agreement, the \iVheat Advisory Committee befo re agreeing upon the reallocation of t he 1934-35 export quotas, submitted proposals to the Governments' signatory to the Agreement with a view t o rendering its working more flexible and t o ensure its full and effective maintenance. Experience had made it evident to the Commit tee t hat favorn,ble climatic conditions resulting in abnormally high yields may render it difficult for countries t o fulfil t heir undertakings regarding export quotas, and on the other hand export quotas may be based on too high an estimate of the world demand. The Committee suggest ed that, in order to provide for such eventu2Jities, provision should be made for the creation of quot a reserves t hrough the medium of which the allotted export quotas may be readjusted. These reserves , it is suggested, should be placed in the hands of the Vl heat Advisory Committee. They will be available throughout the crop year to meet the needs of countries which may be faced with an unexpectedly large wheat supply, or t o meet the situation which may be brought about by world demand failing to reach an expected level. B9. The world position, t oget her with suggestions involving, inter alia, the ext ension of t he wheat agreement from 31st J uly, 1935, to 31st July, 1937, and the re-allo cat io n of the 1934-35 crop-year export quotas were considered at a meeting of the Wheat Advisory Committee which was held at Budapest, commencing on 20th November, 1934. The importing countries expressed their desire to 'see the Wheat Agreement extended for a further period and stated t hat their respective Governments were prepared t o accept the proposed amendments. Difficulties arose in connexion with the four main exporting countries, particularly wit h reference to a request by t he Argentine Government for a revision of the basic acreages and basic quotas on which the allocation of export quotas was based. The meeting was adjourned without coming t o a final decision, on t he understanding that further consultat ions would take place as soon as the Argentine Governemt was in a position to define its attitude more fully. ·'

SECTION !I.-COSTS OF PRODUCTION.

1. GENERAL

2. DISTRIBUTION OF FARMERS ACCORDING TO COSTS

3. RELIABILITY OF THE SAMPLE . .

4. GEOGRAPHICAL DISTRIBUTION OF COSTS . .

5. ANALYSIS OF CoSTS OF PRODUCTION IN RESPECT TO­ (a) Yields per acre (b) Interest cost per bushel (c) Labour costs ..

(d) Value of side lines (e) Machinery Costs

6. SURVEY OF WIMMERA FARMERS BY THE "RANK, METHOD

7. GENERAL SuRVEY

C.-Further examination of the reliability of the sample

PAGE. 43

43

44

47

71 72 79 79 85

86

87

89

43

D.-COSTS OF PRODUCTION. 1. GENERAL.

61. In pages 21-26 of its First Report the Commission laid down the principles which it accepted in estimating the cost of producing wheat. It recognized that costs might be estimated on three distinct bases which were defined as follows:-" (i) the basis of Cost No. 1 is the actual cost of the operations on the far1n including

a sum for the farin er's own labour (discussed below), but excluding all interest charges. It t herefore indicates the average price which the farmer must obtain at the siding if he is to continue in production, assuming that he is free of all debt and has credit or cash to finance his year's operations; (ii) the basis of Cost No. 2 is Cost No. 1 plus such interest charges as the farmer has

to meet;

(iii) the basis of Cost No . 3 is Cost No . 1 plus an interest charge on the "notional" value of the land and equipment. Such notional value will have relation to the value of the land for wheat-growing or for alternative production, such as dairying or sheep-raising. It is noteworthy that Cost No. 3 will be higher than No. 2 where indebtedness is small and alternative production is easy,

while it will be lower where land has been b-ought at high values or where the farmer has been improvident or where the farm is still in the develop­ mental stage."

62. The Commission also outlined the n1ethods by which it had obtained inforrnation on costs of production. In all, 646 questionnaires " B" were returned. Of these, 122 were found either to be incomplete, or to deal with cases the successful detailed examination of which would have required closeT investigation than the Commission could achieve effectively, or to deal with farmers who were mainly concerned with other forms of production. The remaining 524

were distributed among the States as follows :-New South Wales 161

Victoria 143

South Australia . . 127

Western Australia 7 5

Queensland 18

524

63. In the fust place, the costs were worked out on a " sidings " basis. This method is unsatisfactory for comparative purposes because there are considerable differences between districts in respect to the cost of transportation to shipping ports and also because all parties interested in wheat-growing are accustomed to think in t ern1s of prices at ports.

The cost of handling at the siding plus transportation to the nearest shipping port was, therefore, ascertained and has been added to the No. l and 2 costs to bring them to an" f.o.r., port " basis. In all later pa-ragraphs these costs on the "f. o. r., port " basis will be referred to as 1*, 2*, costs. Where possible, the part of the cost due to the handling and freight charges has been indicated in the diagrams so that the cost on a "sidings" basis can be deduced readily. Further reference is made to No. 3 costs in later sections of the Report.

64. These inclusive costs are such as applied when the Commission collected its information during the first half of 1934. Alterations in various cost items will probably occur in the future as they have in the past. Therefore, the C01nmission has endeavoured, where possible, to indicate in the diagrams the result on the cost per bushel of increasing the farmer's out-goings by an extra £52 per annum.

2. DISTRIBUTION OF FARlVIERS ACCORDING TO COSTS.

65. Figure VII. shows in t he forn1 of a block diagram the distribution of the 524 farmers as regards No. l * ?ost s, and Figure VIII. illustrates the position as No. 2* costs. Each of the colu1nns 1s mad_ e up of s:mall squares, each square representing a farmer. The columns are built up on a price base line which is made discontinuous at the high cost end of the series in order to facilitate reproduction of the diagrarns. Underneath the base line is shown the

number- of fanners in each State producing at each price. The lowest line of figures shows the progressive total for the Commonwealth of the farmers examined who are able to produce at F5964.-3

5

44

that price or less. Thus, Figure VIII. showS' tha.t, of the 524 farmers in the Cornmonw:ealth whose returns have been analysed, 297 are produmng at 3s. Sd. per bushel (f.o.r. port basis) or less, assuming that they have to meet the ·same costs and interest charges as confronted them in June, 1934. Of the 524 farmers examined-

105 (i.e., 20 per cent.) are producing at a No. 2* cost of 2s. 9d. or less. 210 (i.e., 40 per cent.) are producing at a No. 2* cost of 3s. 3d. or less. 314 (i.e., 60 per cent.) are producing at a No. 2* cost of 3s. lOd. or less. 419 (i.e., 80 per cent) are producing at a No. 2* cost of 4s . Sd. or less. The " scatter " or distribution of the farmers along the base line is not uniform. but it . 0 . takes a form which is well recognized in statistical surveys. In mather.o.atical tenns it may

be described as a frequency curve showing skewing to the left. The inequality of t he distribution has been brought out by indicating the points on the base line which separate each successive fifth of the 524 farmers whose costs have been estimated. This has been done in the lowest line of figures-those for the Commonwealth-by enclosing in a square the position of the 105th, 210th, 314th and 419th farmer, i.e., each successive fifth.

66. The distribution of farmers according to cost is by no r11eans uniform in each of the States. The nature of this distribution is in the following tables :-

No. 1 * costs. Range of-

- -

- Lowest Second Middle Fourth Highest Total 20 per cent. 20 per cent. 20 per cent. 20 per cent. 20 per cent. Number.

s. d. s. d. s. d. s. d. s. d. s. d. s. d. s. d. 8. d. s. d.

Commonwealth .. 0 7 - 2 2 2 2 - 2 7 2 7 - 3 0 3 0 - 3 10 3 11 -15 5 524

New South Wales .. 0 10 - 2 1 2 2 - 2 7 2 7 - 3 1 3 1 - 3 10 3 11 -13 9 161

Victoria . . .. 0 9 - 2 0 2 1 - 2 7 2 7 - 3 0 3 1 - 4 1 4 1 -15 5 143

South Australia .. 0 7 - 2 2 2 3- 2 9 2 9- 3 2 3 2- 4 0 4 1 -10 7 127

Western Australia .. 1 7 - 2 3 2 3 - 2 5 2 5 - 2 10 2 10 - 3 5 3 5 - 4 10 . 75

Queensland . . .. 1 3 - 1 4 2 4 - 2 10 2 11 - 3 3 3 3 - 4 5 4 7 - 4 9 18

No. 2* costs. Range of--

Lowest Second Middle Fourth Highest Total - 20 per cent. 20 per cent. 20 per cent. 20 per cent. 20 per cent. Number.

s. d. 8. d. s. d. s. d. s. d. s. d. s. d. s. d. s. d. s. d.

Commonwealth .. 1 1 - 2 9 2 9 - 3 3 3 3- 3 10 3 10 - 4 8 4 8 --19 11 524

New South \Vales .. 1 4 - 2 8 2 9 - 3 3 3 3 - 3 9 3 10 - 4 7 4 7 -16 4 161

Victoria . . .. 1 1 - 2 9 2 9- 3 4 3 4- 4 0 4 1 - 5 5 5 5 -19 11 143

South Australia .. 1 1 - 2 9 2 9- 3 3 3 3 - 3 10 4 0- 4 8 4 9 -15 7 127

Western Australia .. 1 8- 2 9 2 9- 3 1 3 1 - 3 5 3 6- 4 3 4 3 - 6 10 75

Queensland . . .. 1 5 - 1 8 2 8- 3 0 3 1 - 3 9 4 4- 4 8 4 9 - 5 2 18

3. RELIABILITY OF THE SAMPLE.

67. The farmers whose returns were used as the basis of the present investigation ·form, roughly, one per cent: of. those wheat-growers of Col?monwealth whose . incOine is rnainly derived from of Before thmr returns as a basis for ascertaining

costs of productiOn, It was uo whether they were truly representative of

the industry as a whole. They might be a defective sample because of the method bv which they were selected, or because of their wheat acreage, or because of the yields which they obtain. As regards. method of selection, the to farn1ers suggested

by farmers' organizatiOns on the one hand, by .credit-affording Institutions, State Agricultural Departinents, State Banks t he on the other .. I.n each case the bodies

con?erned were to assist by b:In.ging to notice ?£ the Commission a !air. range of ca.ses typical of each distnct. The CommissiOn consiaers that, If there had been a bias In the selection of the individuals, this would have been revealed by an unequal distribution of the resultant costs when these were finally worked out. Accordingly, the Commission has taken all the results submitted for each in ea?h having costs of production

of each farmer, has determined. the n1Iddle (median) farmer In that d1stnct. Of the farmers approached t hrough sour?es other than farmers' organizations, the nun1bers on each side of the median have been ascertained. If the whole sample has been selected on a reasonable basis then the instances should be approximately evenly divided on either side of the median. '

Ull<)nwcalth · La i.-) or

ll t•J tlte rn

>1 n, Lut it

11 lt I l ,a\~

Ii 11Ltiti<>;t l l i 1 \ e

l i llC

JO.,th , t.

r

u I t

.>:.! I

l ii

1 L, 1:...

I I

,. '

FIG. VI I

BLOCK

FIG. V 111 BLOCK

45

DIAGRAM

DIAGRAM

------------~---------------------~~ ~ - -~ --

SHOWING N2 I* COSTS

REFERENCE .-

SHOWING COSTS

REFERENCE :-

OF 524

Qwiensland ... .. ........... ................... .. ....... .D

Western Australia ................. - ...... ..11

Soui'h Australia ......... ............ ·-·--··~

Vic-toria ............ -······················-········-······-··

New South Wales ..........................•

OF 524

Que.e.n5land._ ............ ........... .............. -... g

We.s-te.rn Aus-tra\ia .................. --... ..Jml

Sou-th Aus-tralia ...... -···· ···-·······.Ji

VI ctoria .............................. ............ _ ........ JI

Ne.w Sou-th Wale.a .... ................. -.•

WHEAT FARMERS

ISOLATED CASES Cos-ts e.xce.ed 6/-

WHEAT

H •I' :---1 I I ~--, u ~.!!J r---,

' I

[5 ' ' ~--~ ~

FARMERS

ISOLATED CASES Where. N2 2:fi Cos-ts exceed . 'o/6

r----------- A-----:.---------'\

111 ~;1 ~---:

: :

~1

.----,

~) ~·-·i : I:

~!~l

tJ : 1: ~---j ~(~J

fj!~ : : S.A. :iJ v,c r··: N.S.W. ~--·\ ~CWTH

47

The resuits are ets follow :-

--

(2) Number not

In (2) the number who were-

- (1) Total number submitted by . examined. farmers' Above median Below median organizations. cost. Median. cost . ... New South Wales-Riverina .. . . . . . . 49 32 18 . . 14

S.W. Slope . . .. . . . . 27 19 10 1 8

C.W. Plain .. . . . . . . 15 8 3 I 4

C.W. Slope .. . . . . . . 36 22 10 . . 12

N.W. Slope } 20 12 7 5 N.C. Plain . . . . . . . . Other Districts . . .. . . 14 12 6 . . 6

161 105 54 2 49

Victoria.-Wimmera. . . . . . . . . 47 17 9 . . 8

Mallee (i) . . .. . . 54 24 9 . . 15

Mallee (ii) .. . . . . . . 7 . . . . . . . .

Mallee (iii) .. . . . . . . 11 2 1 . . 1

County Moira .. . . .. . . 13 4 1 . . 3

Other Districts .. . . . . 11 7 4 . . 3 __/

14:3 54 24: .. 30

South Australia-Central and Lower North .. . . 42 30 16 . . 14

South Eastern . . .. . . 1 .. . . . . . .

Murray Mallee . . .. . . 27 13 5 . . 8

Upper North .. .. . . . . 15 5 3 1 1

Western . . . . .. . . 4:2 20 14 . . 6

- 127 68 38 1 29

Queensland . . .. . . . . 18 10 4 . . 6

Western Australia .. . . . . 75 10 5 . . 5

Grand Total . . .. . . 524 247 125 3 119

These tables show that 53 per cent. of the evidence as regards costs was derived from farmers who were selected by farmers' organizations. Of those farmers who were otherwise selected, approximately half were found to have costs above and below the median. This fact is a tribute to the genuine nature of the assistance given to the Commission in its endeavour to ascertain the true position of the industry.

The examination of the sample from the point of view of acreage under crop and yield per acre requires more lengthy exposition. This is given in Appe;ndix "C." It is sufficient here to state that, in general, there is every reason to feel confidence in the data which are used as the basis of the cost survey.

4. GEOGRAPHICAL DISTRIBUTION OF COSTS. 68. Costs of production vary widely from farm to farm in every wheat-growing district. Therefore, the use of averages has been avoided as far as possible and the survey has been n1ade on a basis of series of farmers. In each main wheat-growing State there are districts which differ more or less widely from each other in methods of production and in costs of production. As the Commission wished to utilize statistical information for the purpose of checking and reinforcing ,its investigations, the boundaries of the Statistical Divisions of each State, although not entirely satisfactory, were used as the boundaries of its wheat districts in most cases. In the major wheat-growing districts the number of farmers examined has been large enough t o give adequate data for a statistical survey, but in certain other districts the number has been insufficient to warrant the selection of a sample large enough for such a survey.

In connexion wit}l the broad survey of the costs a map has been prepared fo r each State showing the ·approximate location of the farmers whose operations have been investigated and also their costs of production on a No. 2* basis. In addition, column diagrams have been prepared for most districts in each State. In these latter each column represents one wheat­ grower. Each column has been divided into three portions; the bottom, hatched portion

48

represents the of transporting and handling the wheat to the appropriate port of shipment; the 1niddle, black section represents working costs on the fann and delivery to the siding ; and the upper, white portion represents the interest charges which the farrner had to rneet at June,, 1934. Above each colu1nn is an indication of the a1T10unt by which the cost of production .woula be increased by a further addition of £52 per annurn to the total costs of production.

Western Australia (See· First Report, pages 14-15).

69. In this State there are no large well-marked geographical subdivisions. Most of the wheat-growing belt is fairly recent in its development and the sizes of farms are nearly always suitable. There are instances of fanns still in comparatively early stages of development all along the Eastern fringe of the wheat belt. The Esperance region, which the Commission was unable to visit owing to lack of tirne, is not represented arnong the " B " questionnaires.

The rnap ]1igure IX. indicates that while there is a consideTable range of costs in each part of the belt there is a general tendency to higher costs on the eastern fringe. This tendency is partly due to sonwwhat higher rail freights, but to a far greater extent to the fact that the eastern fringe is the region of new developm.ent and also the zone of decreasing rainfall and rainfall reliability. In order to avoid complication, all costs in Western Australia have been worked out on a " bagged " wheat basis.

70. Figure X. shows in the form of a colurun diagra1n the distribution of the -western Australian cases examined by the Com.n1ission. The actual median No. 2* cost is at 3s. 3!d. per bushel. The nu1nber of cases examined is 75. These cases v;,rill be exarnined in detail in paragraphs 75-82, ai1ording an opportunity for con1parison with the chief districts of other States.

The recent development of rnuch of the \Vestern Australian wheat belt m.akes a segregation of the fanners, according to the length of time during which they have been operating then· present properties, interesting.

'J.lhe number who started their farms before 1915 Between 1915 and 1919 Between 1920 and 1924 Between 1925 and 1930

Of the 37 farmers whose costs per bushel were below the median 3s. 3!d.

21 2

7

7

37

Of the 37 farmers whose costs per bushel were above the median.

11 2

15 9

37

------------·---------"---------'---------·----'---------------

A greater tendency to success is indicated an1ong those farmers who have been longer in occupation and who developed their properties during tl.w periods of relatively high wheat prices. Those farrners who "started their farms" in rrwre :recent years did so by buying at higher land values or by developing properties in districts which were moTe rernote and n1ore risky.

71. Sottth Australia.---The examination of the "B " questionnaires has given 127 cases which can be regarded as satisfactory. The median No . 2* cost for the whole State is 3s. 6d. per bushel. The cases examined are distributed among the Statistical Divisions as follow :-Central Division . . 17

Lower North Division Upper _ North Division Western Division Murray Mallee Division South Eastern Division

The map (Figure XI.) shows their geographical position.

25 15 .42

27 I

The Central and Lower North Divisions have been represented separately in the diagram (Figure XII.), but they are in.many ways similar in costs. In subsequent studies they have been grouped together so as to Inake the statistical analysis rnore reliable. Together these two districts contain 42 cases, the 1nedian No . 2* cost of which is 3s. ld. per bushel. 'rheir further analysis follows in paragraphs 75-82. One significant feature of these two divisions is the relatively low freight and handling charges due to proximity to the seaboard.

t9

SOUTH

WESTERN

NORTHERN GOLDFIELDS

_. Q__ BENCU BBIN . -.-. _. • _.

WESTERN _. 41 •

EASTERN GOLDFIELDS

AUSTRALIA SHOWING

N22• COSTS IN THE CASES OF 15 WHEAT FARMERS (INCLUDING FREIGHT TO NEAREST PORT AND AGENT'S COMMISSION) REFERENCE:-Cost s pe.r Bushel sh own -t hus

Below 1/6 0

1/7 2/ - 0

2/ 1 2/6

2/7 3/- Q

3/1 3 / G

_.

3/7 4/ - 41

4/1 4/10

• 4 7 and • FIG. IX

't.-

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' 1/- ,--

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FIG. X

WESTERN AUSTRALIA COLUMN DIAGRAM SHOWING COSTS ON AN - F.0.R. PORT BASIS ( = N22* COSTS)

REFERENCE :-

FOR 75

Add i-tional cost fu r ther f 52 to

WHEAT FARMERS

per each

l

busheJ allowinq a . !

f armer ·------·-----··------ --·--------·----- EltlllllltlOIIOIIO\mnOmun\mmmt·------'

0

3

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~:{

1

erest __________________________________ _ _ ___________ _ _ ____________ ____ _________________ ___ ___ , ~ ::::~--~.:::

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--- -------- 5/-

Freight and handli ng charqe.s -to por-t ________________ W4 ZiiPdP)-------1

y

4fa --------·---- ------· --'.---- --- -----·---------·-·-----------------------------·---- ------------ ----------- -------- ------ --- ------------------- ------ --- -------- --- ------- ---- --~---- --- --- --- ·- c--· -------- --- ------"'--·------------- ------------- -------- -- --- ------ 4/6

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REFERENCE :- farm

farmers using Trac-tors fhroughou-t -the ~q,ar. .. ·--··· ···-·· ····· ··· ·· ··-···· ···· .T

farm

51

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WESTERN

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*

COSTS

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REFERENCE:

-

127

WHEAT

FARMERS

AND

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C os

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SOUTH DIAGRAM SHOWING COSTS

FOR 127

AUSTRALIA ON· AN

WHEAT

F.O.R. PORT FARMERS

BASIS (= N22* COSTS)

REFERENCE:-Addif i ona\ a further

cost £52 pe.r for

bushel all owinq f

e.ach f at"me.r ....................... 811RmmmmC 1BOIOO-······J

ln-te.re.5-t'. ........................................................ .................. .................. .................. ..----- -,

NQ. I Cos-ts ............................................................................................... .

!

·······1

?'nJ---.. ·-1 Freight and hand\inq h a.rge.s to port .............. .

{,

1/-

MURRAY MALLEE

UPPER NORTH -

WESTERN

---- --------------- --- -------- ---

----------------------------- ------- - -- --------- ---------- ----------------

................... .... .......... ···················································--·-······················- . ....................... -· ..................................... ·+ •,--, .. ---------------- ------------- -------------- --- ------------------- ·· ·· .. -- ---·

--------·------· ·----- - -- ----- -----····

· --· .. ···-·· -·CENTRAL··

~/-

,;

-Lo·WER NORTH - ··------· -··---· ·-· --·--·- -··---···-· ·········---- --·· ···- --- ··-·····----------····-----·---------------·------- ----- ------·-···--· ---- --------·-- ---------------

0 L....--,1~~1,Z,1111~~~~~~~ : 1: 2; 3J4: 5: G\ 1 l el, l1ol 11 :rzh3ll4li~\l, ll7! L •• • 1.---l..--1.--.l- - .1 •• .J • • • L •• .l •• .J • • .; • •• L •• .1 ••• t. __ 1 _ _ ..L •• L - .J

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............................... . ····-······· ······ .. ·······- --·------- ---·· ----- --------­ ··--------- ----------

-·-- ------- -----·--···· -········ -- --·····-·--· ·---- ··-- -··-··-····--······--····--·· ·------ --· ····· -----.···-- .

---•--•--·- ..... ·-·-· ---------·······- ·-- ········-·· ·····--······--·····-·· --······· ---~ ,rH"-,.H

_, ................. ..... ......................... ............ ,.,_ .......... ............. ..

SOUTH .. EASTERN i• r--••· ... --. ....... ... ----·----.. ··---··-·-·---·----·-t•···----·----··-·"··--····-- .... ..... .

I

1,;/-

12/-

11/-

1 oj-

o/'-

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57

. . Upper North cases only examined and too few for adequate

statistical mterpretatwn. I he median No. 2* cost Is 4s. 7d. The followmg table shows relevant figures:-South Australian Serial Numbers. No. 2* Cost Yield per Acre Interest Cost Value of Side Average Acreage Approximate Area per Bushel. (Bushels). per Bushel. Lines per Bushel. under Wheat. of Farm (Acrea.)

8. d. s. d. s. d.

71 . . . . .. 2 5 20 . . 0 Ot 620 1,275

72 . . . . .. 3 2l 20 0 10 0 11 311 825

73 .. .. . . 3 18 0 6 0 5 210 600

74: . . . . . . 3 6 14: 0 8 1 7 250 875

75 .. . . . . 4: 3 12 1 3 0 5 350 850

76 . . .. . . 4: 4! 10 1 0 0 3 450 1,315

77 .. . . .. 4 6! 15 011 0 3 235 525

78 . . . . .. 4 7 8 0 9 0 4 700 2,375

79 . . . . .. 4 71 14 1 5 0 4 900 2,000

80 . . .. . . 4 8! 9 011 0 4 200 575

81 . . . . .. 5 2! 6 1 6 011 550 2,250

82 . . .. . . 7 3! 4 1 11 3 6 300 1,425

83 . . .. . . 9 Ot 3 0 9 1 5 800 1,959

84 . . .. . . 9 9! 3.4 2 8 4: 6 400 4,200

85 .. . . . . 15 6! 1.5 411 0 ot 600 1,800

No. 85 stated that he had suffered from five consecutive years of drought during which he has had returns from neither stock nor crops. Several of the other cases are probably unreliable as regards the average yield shown. Meteorological evidence is to the effect that this division is one of the most uncertain in Australia as regards rainfall. Its wheat-growing history is a long one and suggests that in certain parts of the district the production of the crop is too speculative to be worthy of encouragement. Some of the farmers have areas which are

too small for the effective use of large size machinery.

Western Division.- -The 42 cases examined are analysed later. Costs vary considerably reflecting the diversity of conditions met with in this division with its wide geographical extent, its varying climatic and soil conditions. The fact that some of the farms are still in the developmental stage is responsible for some of the cases of high cost.

Murray Mall ee Division.-Twenty-seven cases were examined and the median was found to be 3s. S!d. per bushel. The data are analysed later, but in general it may be said that in this division also there are wide divergencies between various cases, for the same reasons as were stated for the Western Division.

The comparison with the returns of older sections of the Victorian Mallee (Mallee 1) which are analysed later is of interest and suggests that the main difference is one of interest charges.

A considerable amount of evidence was taken in the South-Eastern Division, but the majority of the farmers were more dependent on sheep than on wheat, and there is little difference between this division and adjacent western parts of the Wimmera of Victoria which is discussed later. ·

72. Victoria .-One hundred and forty-three cases were examined; they reveal a median No. 2* cost of 3s. S!d. per bushel. The data have been segregated into districts which are partly geographical and partly agricultural in charact er. The boundaries are indicat ed in the Map, Figure XIII., which also shows the limits of the Statistical Districts of the State.

The Wimmera District as used in this section is the statistical division of Wimmera with the exception of the north-east part of it which is "agriculturally" known as the Mallee fringe. This area has been transferred to Mallee l.

The Mallee has been subdivided into three sections as suggested by officers of the State Agricultural Department, and as described on page 17 of the First Report. The Commission bas satisfied itself that the broad divisions there laid down are satisfactory. The separation of County Moira from the rest of the northern and from the north-eastern Statistical Divisions has seemed desir.able.

The remainder of cases studied were few in number and have been gro uped in one section.

58

The cases analysed were distributed among the districts as follows:-Wimmera 47

Mallee 1 54

Mallee 2 7

Mallee 3 11

County Moira 13

Other Districts 11

143

Figure XIV. indicates the extent and range of No . 2* costs found in each division. It shows that the Wimmera and County Moira contain a higher proportion of cases of lower costs of production than the Mallee, and that there is a wide variation in costs in the Mallee areas.

column diagram for the Wimmera shows the "array" of the 47 fann ers

examined in respect of costs. The median cost is at 3s. 1 !d. Further analysis of these costs is set out in the " cornparative " tables found in paragraph 82 of this section of the Report.

Mallee I.-The district designated Mallee 1 is the older part of the Victorian Mallee settlement. It was mostly cleared and farmed before the end of the war. Fifty-four cases have been examined; these show a median cost of 4s. O£d. per bushel. The number is sufficiently large to warrant a stati':\tical analysis which is furnished in paragraphs 75 to 82.

Mallee 2.-The district Mallee 2 comprises the Northern Mallee vvith the exception of Mallee 3. Most of this district was settled immediately after the war. Its farms are now fully developed but over very considerable areas of the district the soils are variable and often of poor character for wheat-growing. The rainfall is low and variable. The farms are, in many cases, insufficient in area to employ a set of modern wheat -growing machinery to economic capacity. Seven cases have been examined. The number is insufficient to give a reliable

statistical survey, but the following facts are of int erest :-Victoria Serial No. 2• Cost per Yield per acre. Interes t Cost per Value of Sidelines Average Acreage Approximate Approximate Numbers. Bushel. Bushel. per Bushel. under Wheat . Area of Farm. Cultivable Area.

s. d. Bushels. s. d. s. d. Acres. Acres. Acres.

102 . . .. 5 2! 12 1 2 0 Of 200 1,350 500

103 . . .. 5 3 9 I 10 6 8 200 1,225 1,125

104 ... . . 6 5 4.6 2 2 1 7 300 700 650

105 . . .. 11 10 5 4 6 0 2 210 700 525

106 . . .. 13 11 3 3 0 0 4 400 1,925 1,700

107 . . .. 17 6 2! 5 3 .. 275 1,150 1,050

108 . . . . 19 11 2 4 6 .. 280 875 775

The seasons have not been markedly unfavorable during the last five years, so that the average yields obtained on all but the first two farms suggest either bad farming or poor soil as the cause of the failure. The solution of the problem of cases such as these is a matter for State rather than Commonwealth action.

Mallee 3 is a new area, only one of the eleven farms investigated having been developed prior to 1924. The capitalization has been tempered by nwderation and the soils are generally, though not invariably, satisfactory.

Victoria Serial No . 2• Cost per Yield per acre. Interest Cost per Value of Sidellnes Average Acreage Approximate Approximate Numbers. Bushel. Bushel. per Bushel. under Wheat. Area of F arm. Cultivable Area.

s. d. Bushels. s. d. s. d. Acres. Acres. Acres.

109 . . . . 2 9! 14 0 4 0 2 300 800 775

110 . . .. 3 9l 10 0 5 0 3 500 1,050 975

111 . . .. 4 2f 12 0 3 0 1 400 800 750

112 . . .. 4 2! 10 0 8 0 8 280 925 850

11 3 . . .. 4 2! ·10 0 2 0 6 360 750 700

114 . . .. 4 4i 12 0 10 1 1 225 775 450*

115 . . .. 5 4i 8! 0 11 0 6 260 775 400

116 . . .. 5 8! 7 1 2 0 2 250 775 525*

117 . . .. 5 11! 9 1 3 0 5 240 900 700*

118 .. . . 6 O! 8 1 1 0 7 250 900 550*

119 . . .. 7 2! 5 2 0 1 0 250 625 525

•These farmers are still clearing land.

Ul <.D

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COSTS

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143

WHEAT

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I

MALLEE

3

:

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(INCLUDING

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r - ,.--r - ,--T--r--,- - r-,--T-,--,--T--,. --r-,--,---r-, --y--,.- -,- - T-, - - 'T--r--r-,--,--,- -,--,.--.- -T-r -,-,-,--r-,- -r--,--T-,-- r-,- - r - ,

: I : 2 : ~f 4: i;:': 7: 8: ':10: 11 :11[0 :14l 15' llb: 17)1Sl 1'>!20l21 :22:23J24:2s:2,:v :2s:2,Jl0:3J :32:~i:34!35l3G:37laa:l,~0[41 :42:4i:,W45!.c.'-l47 :

FIG. XIV

COLUMN DIAGRAM

··-- ·········· ····· w1M.MERA

VICTORIA SHOWING COSTS ON AN f.0.R. PORT BASIS

FOR 143 WHEAT FARMERS

REFERENCE:-Additional a fur-the...-cosf

f !'12

per for bus'1el allowinq t

each fa. rmer ·-----·---··--- -·····--- 11w m1w owoomm f-···--.J

INn:e.\ r e.s-t_·----··---·-·-·-- ··--······-··-····-··-··-········ ·-·-····---··--····-···· -·-·---------------··-··------ --··-·---· -······-··,__-~ ::-_:]

CO S1'S.... ...... -------·-······----·-- -·--·····- ---·---·--·-·-··-·---·-··-·-····-·-···-····-· ··-· ··-· ··--·--·-·----· ;

I

Freiqh-t and handling charges i'o port···-·- --····--- ~ ------·j

MALLEE

77

0

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MALLEE 2 '20/-

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12/-

11/-

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MALLEE 3

COUNTY

-----· T ···-···-········--···· ----- -----·-- -----·-- --···MOIRA --·------ -- --------------- ·------·-· ···--·-- ------·-···- --------

···---'-··-- ············· . .

-f-· ... ·-----·····- ----- ·---·- ···- ··------· ····· ··--·-···-·-- ·-- ·-·-·

0

:B3:ll4{BS:13'/B7:llal13' IW0:14t/1-12i..tll ,. _ _ ._ _..__~-L- .J-- ..L. - ~ - ..l---'-- -L-.J

63

The extent to which costs can be reduced will depend very largely on t he yield obtained. This yield in its turn will be considerably influenced by the rotation used and the care and skill of the farmers. The longer the rotation the better the chance of success. It is worthy of note that not one of these farn1ers has a large enough area of croppable land for the full employment

of a large set of implements on a four-year rotation. Probably fertility will not be effectively maintained on this class of soil if it is cropped more frequently than one year in four. Further, the larger area should give a better chance of improving the returns from side lines.

County Moira is a section of the Northern Division in which irrigation has not yet been fully developed. The district is suitable for sheep raising and has a long wheat-growing history, in the course of which the average yield has im.proved fairly steadily. Thirteen cases have been examined in the country.

The range of No. 2* costs is from 2s. 6!-d. to 4s. 7d., whilst the n1edian is at 3s. 3d. per bushel, f.o .r. ports.

Victoria Serial No.2* Cost per Yield per acre. Interest Cost per Value of Sidelines Average Acreage I Approximate Approximate Numbers. Bushel. Bushel. per Bushel. under Wheat. Area of Farm. Cultivable Area. ,

s. d. Bushels. s. d. s. d. Acres. Acres. Acres.

120 . . .. 2 6! 21.4 0 9 1 2 I . 380 1,325 1,200

121 . . .. 2 7 15 1 1 2 3 300 1,300 1,170

122 . . .. 2 8 17 1 4 0 9 800 1,475 1,300

123 .. .. 2 10 30 0 . 9 0 1 400 1,100 1,000

124 . . .. 2 10 20 . . 0 2 400 1,000 800

125 . . .. 3 1 12 2 0 0 3 550 1,275 975

126 . . .. 3 3 20 1 5 0 10 400 1,375 1,300

127 . . .. 3 3! 24 0 6 0 4 150 375 300

128 . . .. 3 4 24 1 ,3 0 9 350 925 875

129 . . .. 3 4 17 .5 011 0 9 200 650 550

130 . ' .. 3 9 18 1 2 0 5 350 1,400 1,300

131 . . . . 3 10 15 1 7 1 8 300 1,050 750

132 . . .. 4 7 21 1 2 1 2 200 1,600 750

Other Districts- The regions already examined are responsible for t he production of over 80 per cent. of the wheat crop of Vict oria. The remainder is grown in scattered districts in various parts of the State ; some of these are eminently suitable as wheat areas but they are either limited in extent or in them wheat-growing is generally subordinate to other forms of agricultural

activity such as the production of oats, oaten hay, barley, dairy products, fat sheep, &c. Most of the farmers in these districts scarcely con1e under the description of wheat-farmers because their incmne is not mainly derived from growing wheat. The dissection of the affairs of such cases, so as to isolate the cost of producing wheat from other activities, is a matter of considerable

difficulty and the results must be treated with circun1spection.

The following table, showing some of the, data for the eleven cases, illustrates these

Victorian Serial No. 2• Cost per Yield per acre. Interest Cost per Value of Sidelines Average Acreage Approximate Numbers. Bushels. Bushel. per Bushel. under Wheat. .Area of Farm. Cultivable .Area.

8. d. Bushels. s. d. s. d. Acres. Acres. Acres.

133 . . .. 1 3! 20 . . 1 9 300 1,275 1,000

134 . . .. 1 6! 27 0 10 2 1 200 650 625

135 . . .. 2 3! 18 0 10 1 11 400 1,325 1,250

136 . . .. 2 6! 18 0 1 1 1 400 1,850 1,775

137 . . .. 2 9! 24 0 5 1 4 200 600 550

138 . . .. 2 9! 16! 0 2 2 4 250 900 800

139 . . .. 3 0 15 0 2 0 8 280 675 575

140 . . .. 3 ' 7};; 21 0 5 1 2 250 1,325 850

141 . . .. 4 Ol. 4 24 0 6 0 7 200 650 650

142 . . .. 4 3! 20 2 3 4; 5 100 700 450

143 . . . . 14 9 6 7 5 14 3 100 1,675 650

64

73. New South Wales.--The cases which were suitable for analysis were distributed among the Statistical Divisions as follows:--Riverina South-Western Slope

Central Plain Central .,.Western Slope North Western Slope "\. North-Western Plain f Other Districts

These costs are illustrated by Figures XV. and XVI.

49 27 15 36

20

14

161

In this State the charges for freight and handling of the wheat have been calculated according to the circumstances of the individual farmer.

Riverina.-The wheat farms of the Riverina are diverse in both rainfall and soil conditions. As a result the costs were found to vary considerably. The median case worked out at 3s. 7d. per bushel. Freight rates in this division show considerable variation because certain sections adjacent to the River lVIurray have the benefit of a rail haul of less than 200 n1iles to l\1elbourne, while most of the remainder· are confronted with a distance of over 300 rniles to Sydney, the difference being of the order of a penny per bushel.

The further analysis of the data is carried out in paragraphs 75-82.

The South Western Slope also contains a wide variety of wheat farmers. Twenty-seven cases were examined and the median was found to occur at 2s. II £d. This is lower than most other districts, probably owing to the fact that this Division has a srnaller proportion of its area in "new" districts with variable rainfall. A detailed analysis of the data will be found in paragraphs 75-82.

The Central Plain.-The data for the fifteen cases examined in detail are:-

Serial Number for No. 2• Cost per Average Yield Interest Cost per Sidelines per Average Acreage Approximate Approximate

New South Wales. Bushel. per acre. Bushel. Bushel. under Wheat.. Area of Farm. Cultivable Area.

I

8. d. Bushels. s. d. 8. d. Acres. Acres. Acres.

77 . . . . 2 10 15 0 4 .. 600 1,275 1,100

78 . . .. 2 10! 13 0 5 0 3 500 1,100 i 1,050

79 . . . . 2 11! 11.4 0 3 0 4- 450 1,000 800

80 . . .. 3 2 10.5 011 1 2 300 950 425

81 . . .. 3 3! 12 0 3 0 1 500 1,100 975

82 . . .. 3 5! 12 0 6 1 0 750 2,560 1,350

83 . . .. 3 5! 14 0 4 1 5 390 1,325 1,000

84: . . .. 3 5! 9 0 4 0 4 500 1,600 900

85 . . .. 3 8! 11 1 1 0 2 300 1,600 625

86 . . .. 4 0 8 0 3 0 8 600 1,525 1,200

87 . . .. 4 O! 9 0 5 0 1 500 800 700

88 . . .. 4 4 12 0 11 0 6 400 1,600 1,150

89 . . .. 4 10! 10 1 2 0 I 450 1,450 1,300

90 . . 6 O! 9 2 0 . . . 300 1,175 400 . . 91 . . . . 8 6i 4 2 4 1 I 400 1,800 600

----------

This Division contains some areas which are not yet fully developed and consequently some of the farms show higher costs than would be incurred were they n1ore n1atured. The variable ' nature of the rainfall makes the production of wheat at a low cost in1practicable even on the best farms. The land, although by no means uniform, is generally not unsuitable for wheat-growing.

SHOWING

N22* COSTS IN THE CASES or 18 WHEAT FARMERS (INCLUDING FREIGHT TO NEAREST PORT AND AGENTS COMMISSION)

•

QUEENSLAND :•ROMA

0Q oTOOWOOMBA

Q •

8

// I

/

/

/ c

I

--------------------------------------- NQ2* CosTs IN THE CAse:s OF 161 WHEAT FARMERS 1 ) (INCLUDING fREIGHT TO NEAREST PORT AND AGENT'S COMMISSION) ( I () / \. f • I f / NORTH \ • ,..-_/ _..-' / 1WESTERN\ r ( ____ _.... r/ PLAIN ("" } NORTHERN t.., ,./ I ( TABLELAND I ... , \ 0 ) ', \ .J I , '\ f ,,, ', \ /,.. ' ' N E W / \._$ CENTRAL \ /WESTERN 0Q \ ,' /" PLAIN ,a-- \ \ SLOPE / I • { QIJ) 0 I , ........ ...... \. I j ', \ Q \ /-) 1.. SOUTH WAL'ES / ... .... , __ , __ ij_ (_\.,--"' (WESTERN m• 1 - -I ) / / - \ / • /_,Q I

65

\ : •• ("fj--' I

I Q \ I

WESTERN _, IJ) Q• {

..,--JLAKE I. I CENTRAL \

.. PARKES TABLELAND'--- ...... ,

/ ., • )

/" • qJ.--'\ Q ---"' ( ' .... I I - .......... _ .... I ,-, '--- I. • • /.,... I • ', Q• • '\ f • ... _ 1 __ / e Q WESfERN \ / { \ ,...... • - ... SLOPE I I I \ ..... / RIVERINA \ /----' I f Q '- • Q I ... 1 • _., 1 I I ,.OENILIQUIN Q I / URANA Q+ ljeWAGGA I / -. IJ)\ l / • 0 IJ) ··HENTY I ,- / : • I I FIG. REFERENCE :- I ) I Costs per Bushel shown VICTORIA I' I / , , \ I I I I ' ) .......... ) 'I ........... Below ......... 1/G 1/7 2/1 2/7 J/1 3/7 4/1 4 7 2/-2/b 3j­J/b 4/-4/G and XV thus 0 0

r--T-,-- 1 - - r--,-- ,---,. -T--r--1-·, ·-,--y--,-- ,- -,-- , --T--y-- ,---,. .......... ,. ... r--,---,.--,----.---,.- -,. --r-·r--..---T--T ---r- T--T--T· -,-• ,-- .,-- .,- ·T· -,--..,.- -r--,

: I : 2: 3: 4: ~ : ~: 7: 8:, :10: ti :12: 13:14:15!J

v-E .•.• , ... ·.-· 11·.·.,,11·~;·~ ~··;~~;·····a 11·1")·a···,,··111n'1·1 · 1r1,1 ,1

NEW SOUTH WALES 11/-

16f-

14/-

iy-

10/-

~1-

s/-

1/-

s/-

sf-

0

COLUMN DIAGRAM SHOWING COSTS FOR 161 ON AN WHEAT

F.O.R. PORT FARMERS

SOUTH

·WESTERN SLOPE -

----------------- --------------- ------------··-·---------------------·- RIVERINA······ ·······-· ······-·······-· ·· ·· ..

-·----·---- ------------------·· ·--· ------ -- --- ----- ------·------ ------ ------- ------------------ ------ ----------- ----- ----------- -------------- -

------------- - --------- -------------·-- -- ------- ------- ---·-·--------------- -- ----- --------------- -- ------------------·-- ··------ --·---------------------- -- --1••-- ···--------- -------- ---. ----·-- ----------------·----··--- ---·--

·â€¢1•11-•~•1•·· ······-····· · ·-·-· ······· ······ ··--· ···· ········-···········-·-···· ·-······---,-

-

Ill

67

BASIS (- NQ 2* COSTS)

REFERENCE:-Additional a further

cos-t fr;2 per for

bushel allowing each farmer._ ......................... .

t __ __ ___ J

I nferes-t ........................ --···-----····-··-····--······- -·--·--······--····-·--·····-·-· ···-·-··---········..__....,__.. ·--·-··,

Ng I Cos-ts ....... .... ................. _ .... ...... --------·-···--···--·--····-···-·--···--··-- --···-··-··

Frei9ht and handlinq charges to porl'................ ---·-·"

CENTRAL WESTERN · SLOPE

t

NORTH

W' STERN SLOPE NORTH STERN PLAIN

--·---- -----------------------------------------·-------------- ------------------- -------- ------- ------

OTHER DISTRICTS

ji.cs;i., \r;o \1s1\1 )2\1~1 s~1 ssj1s~1';7:~r;,i 160\"'! .. _ _ j. __ J __ . L. _ _ .. __ ., ___ \. _ _ ...._ __ • __ J ___ .. _ _ , _ _ .,,_ __ , _ _ 4

11f

1 6/-

15/-

14/-

13/-

1 2/-

11/-

IO/-

a/-

5/-

69 . i'

Central Western Slope.-36 cases were examined· and the median was fou..11d to be at 3s. 8-!d. Figure XVI. indicates the position and shows that wheat-growing in this Division is rather more costly than in the Riverina and the south-western slopes.

l\r orth-western Slope and North-western Plain.-These districts are conveniently considered together. The data with respect to the t went y cases exa1nined are set out in the following table:-

I I

New South Wales No. 2* Cost Average Yi eld Interest Cost Side Lines Approximate Approximate Approximate Area under Serial No. per Bushel. per Acre. per Bushel. per Bushel. Wheat. Area of Farm. Cultivable Area.

s. d. Bushels . d. s. d. Acres. Acres. Acres.

.

128 . . .. 1 3£ 21 2 0 7 1,050 1,800 1,350

129 . . . . 1 9£ 19.5 .. 1 5 4:50 1,350 1,100

130 1 nt

. 20 1 0 7 600 1,275 1,000 . . .. 131 . . .. 2 3 17 1 0 5 560 975 675 132 . . .. 2 3£ 18 4 0 3 280 525 450 133 . . .. 2 6! 20 4 0 1 240 550 425 134: . . .. 2 6! 13 4 1 0 240 525 375 135 .-. . . 2 7! 26 6 0 6 340 650 450 136 . . . . 2 9! 18 4 0 2 475 725 650 137 . 3 O! 15 5 1 0 300 1,025 550 . . . . 138 . . .. 3 O! 19 2 011 300 850 650 139 . . .. 3 1! 21 5 0 Ot 650 900 675 140 . . .. 3 5£ 20 4 011 350 975 600 14:1 . . .. 3 9! 20 11 1 2 110 375 200 142 . . . . 3 11 15 4 .. 120 180 150 143 . . .. 4 4! 12 3 011 280 400 375 144 . . .. 4· 6t 18 5 0 1 I 200 3,000 300 145 . . .. 4 7 9 7 2 9 130 775 240 146 . . . . 4 8! 12 3 .. I 250 375 325 147 . . .. 5 1! 15 7 l 4 I 120 475 200 Othe·r Districts.-Fourteen cases derived frmn the Northern and Central Tablelands, and t he Western Divisions, were examined in detail. The following shows the results :-New South Wales No. 2• Cost Interest Cost Value of Side Average Approximate Approximate Yield per Acre. Lines per Acreage Serial No. per Bushel. per Bushel. Bushel. under Wheat. Area of Farm. Cultivable Area. ------8. d. Bushels. 8. d. 8. d. Acres Acres. Acres. 148 . . .. 1 7! 20 0 2 1 4 550 850 700 149 . . . . 1 7i 21 0 1 1 8 300 1,550 400 150 . . .. 2 2l 23 0 4 0 3 350 1,175 950 151 . . .. 2 8! 12 0 9 1 6 575 2, 325 1,600 152 . . .. 3 1! 20 1 1 0 7 300 700 550 153 . . .. 3 2£ 15 0 9 1 7 400 1,1 75 750 154 . . .. 3 6i 21 1 2 I 8 150 1,075 575 155 . . .. 3 6! 20 0 2 2 9 100 300 200 156 .. 4 I! 15 1 5 2 7 300 775 625 . . 157 . . .. 4 2 9 0 1 0 1 440 1,225 1,150 158 .. 5 7 12 1 11 , l 2 100 325 295 . . 159 .. 5 8i 18 1 6 0 5 100 425 250 . . 160 .. 7 8! 9 1 2 2 1 180 1,375 800 . . 161 .. 9 5! 6 1 0 1 8 200 625 425 . . No. 157 corresponds closely with adjacent districts in Victoria where costs are similar. Nos. 158 and 159 have t oo small an area for effective wheat-growing, while the yields obtained by Nos. 160 and 161 are too low to warrant their continuance in wheat production.

70

74.-Queensland.- Eighteen cases have been dealt with fully in the Commission's investigations. The costs have "been analysed and are shown in the following In each case the No.2* cost is worked out on the basjs of f.o.r. Roma-street, Brisbane, in order to preserve uniformity with the method adopted in the other States.

No . 2* Cost Yield per I nterest Cost Side Lines Average Approximate I Queensland Serial No. per Bushel. Acre. per Bushel. per Bushel. Acreage under Area of Farm. Culttvable Machinery Wheat. Area. Maintenance. - -s. d. Bushels. s. d. 8. d. Acres. Acres. Acres. d.

1 . . .. 1 4l 15 . . 3 1 300 1,050 500 4.6

2 . . . . 1 18 0 1 2 9 250 650 500 4.4

3 . . .. 1 7t 15 0 4 3 8 200 350 350 3.7

4 . . .. 2 7i 24 0 3 2 10 100 300 250 6.5

5 . . .. 2 8t 9 . . . . 1,850 1,850 1,850 2. 2

6 . . .. 211 22 0 1 0 6 200 400 375 5.3

7 . . .. 2 19 . . 1 3 175 425 275 6.3

8 . . . . 3 Ot 18 0 4 3 1 100 . 250 250 11.1

9 . . .. 3 3t 19.5 . . 1 5 125 250 225 9.5

10 . . .. 3 6l 12 0 7 3 5 300 600 400 6.5

11 . . . . 3 St 13 0 8 1 6 400 . 750 650 13.1

12 . . .. 4 3l 6 1 0 7 6 200 2,000 1,600 12.4

13 . . .. 4 4£ 20 . . 2 1 75 200 150 16 .8

14 . . . . 4 6 14 0 4 0 7 250 475 400 5.3

15 . . .. 4 7i 12 . . 211 125 700 200 9.3

16 . . .. 4 81 2 15 0 7 2 2 100 175 175 9.0

17 . . . . 4 llt 12 0 3 .. 250 450 300 7.3

18 . . . . 5 It 15 0 4 1 10 225 . 400 325 . 12.8

The high returns fron1 side lines which are characteristic of many of the farms are indicative of the mixed nature of the farming. F or this reason labour costs per bushel are not shown as the dissection of t ot al labour expenditure among the various activities of n1ixed farming is a more complicated task than t he Corrnnission could well undertake. The median cost is

3s. 5d. per bushel, which is readily comparable wit h similar costs of the average wheat-growing districts in the other States. The results of farmers whose interests are mainly devoted to wheat-growing are distributed on both sides of the median. The average yields per acre are high in conformity with the general average for Queensland, which is higher than those of the other States. It must be borne in mind, however, that in poor seasons areas which would otherwise have been stripped for grain are frequently used for stock food.

5. ANALYSIS OF COSTS OF PRODUCTION. 75. The survey set out in the preceding paragraphs of this section illustrates t he wide range of costs encountered in each region of_ the wheat belt. The Commission realizes that under such circumstances averages are apt to be misleading, and for that reason has endeavoured to use the middle case (median) as a basis in n1aking comparisons. Thus the median No. 2* cost per bushel for the States and fo r various districts are as follow :-

Western Australia. South Australia. Victoria. New South Wales. Queensland.

-

s. d. s. d. s. d. s. d. s. d.

Whole State 3 Whole State 3 6 Whole State 3 8l Whole State 3 6 Whole State 3 5

Central and Wimmer a . . 3 11* Riverina . . 3 7* 4 Lower Mallee J. . . 4 0£* South-

Nort h .. 3 1* M:allec II. Western

Murray and III ... 5 6! Slope . . 2 lli*

Mall ee .. 3 8l* County Moira 3 3 I Central-

Upper Nort h 4 7 Ot her Western

\ Vestern . . 3 lOl* Districts . . 2 9! Slope .. 3 81..* 4

Central-Western Plain .. 3 5!

North- West-ern Slope and North Western Plain .. 3 Oi

Other Districts 3 6!

71

The figure for Western Australia is s01newhat lo wer than tor the other States. This result may be partially explained by the absence of individual returns from t he Esperance districts where costs are high and where it is now recognized that wheat-growing is generally unprofitable.

76. In those districts where the number of cases examined is sufficiently large to warrant an attempt at statistical analysis of the principal factors governing costs, an asterisk has been inserted in the above table.

In a complicated business such as farming there is usually no single definite reason for high costs of production. The factors governing success or failure are too numerous and varied for any single one to be isolated as the prime cause. Among t he contributing causes to high costs are low yields, high land values, a lavish use of machinery, failure t o produce side lines intelligently, high labour cost, &c. Any broad survey of the industry in a region is ahn ost certain to contain instances of each of these causes. Any attempt to correlate success or failure with a single factor by mathematical n1ethods will be inconclusive. Broad tendencies are, however, revealed in the diagrams which follow. Each diagram deals with one of t he major fac t ors in costs of production. In t hese diagrams there are two coluinns for each district. These columns

are headed - and+ In the former are those fanners in t he district who have t ot al

No. 2* costs lower than the median ; in the latter are those with costs higher than the median. Each farmer is represented by a single dot which is placed on the horizontal lines referring to his particular cost of production. Thus a farn1er in the Western Division of South Australia growing wheat at No. 2* cost of 4s . per bushel (which is above the median for the district) will

appear in the sixth column of dots in each of ] igures XVII. to XXI. ; if his average yield per acre during the past five years has been 5 bushels he appears in the first horizontal row of dots in Figure XVII., and if his interest charges are 7id. per bushel he will be represented in the third horizontal group in Figure XVIII. ; and so on in the other tables. /

It is unfortunate that no effective method of subdivision of the Western Australian wheat belt into districts was available, and consequently the whole of the returns from that State are treated together.

77. Figure XVII. shows the analysis for yields per acre. In every region examined the . "scatter" of the farmers shows that those with sub-median costs, generally speaking, obtain somewhat higher yields than those with super-median costs.

If the columns for sub-median cost farmers in each d] strict are compared, the figure affords an opportunity of making a fairly effective comparison between the various. wheat-growing districts in respect to average yields. The Wimmera stands out as being the region of highest yields; the Central and Lower North districts- of South Australia follow, with the South

Western Slope and the Riverina of New South Wales and and Western Australia close behind them. The Western Division and the Murray Mallee of South Australia with Mallee I. of Victoria are prominent as districts of lower yielding capacity. In this connexion, however, it n1ust be remembered that several of the districts which had even worse figures for productivity have been excluded owing to the relatively small nurnber of cases examined. The Upper North of South Australia, Mallee II. and III. of Victoria would have been prominent in this respect.

The conclusion that individual farmers are to be held responsible for their relatively poor yields is not invariably justifiable for several reasons. In the first place soils vary fairly widely within the districts. There are numbers of farms in the Wimmera which are not sufficiently fertile to give an average yield of 27 bushels per acre no matter how well they are farmed. In the second place many farmers have an insufficient amount of power or machinery to enable

them to carry out the practices of cultivation at exactly the right time t o secure the best results, and the precise time at which an operation is done is often a matter of great significance in determining the ultimate yield obtained. It might be suggested that this is the farmer's own fault and that he should have obtained more power and machinery, but quite apart from the financial obstacles to such a procedure is the question of the size of the farm, which may not be

sufficient to warrant the extra outlay. . Again, on some farms where higher yields could be obtained only by many more workings of the land, the cost of such workings would more than outweigh the value of the extra grain harvested. When prices of the product are low the effect of the "Law of Diminishing Returns" is to decrease the value of every extra effort expended. Many farmers prefer to devote more of t heir available labour to side lines which may in the long run be more profitable. Thus, the facile conclusion that all would .be well if farmers farmed

more efficiently and obtained higher yields is not necessarily justifiable.

72

INTEREST CosTs PER BusHEL.

78. Figure XVIII. shows the analysis according to the interest costs per bushel with which the farmer was faced in the flTst half of 1934 when the Commission took its main evidence. As already noted this computation takes no account of the farmer's private capital which he may have invested in the farm or its equipment. In any district in which wheat-growing has been carried on for any considerable period of years, the farming populat ion is comprised of men who developed their farms from grazing land, and of others who inherited t heir land more or less free from debt, and of those who bought their farms from previous owners. Those who have of their own accord built up their farms sometimes did so many years ago; in which case they have had the benefit of years of high wheat prices in which they were able to pay off much or all of their capital indebtedness if they had a mind to do so. Other farmers started as late as 1927 and have never had good crops and good prices at the same time. Similarly among the farmers who inherited farms ; some have kept the original block intact; others seeing that modern machinery made it practicable for them to apply their effort to larger areas bought

extra blocks, others added to their acreage because they wished t o start their sons in farming. Of the farmers who bought properties outright some did so before the war, others were unfortunate enough to do so in the few years prior to the depression. These wide variations in the circumstances of individuals make an analysis of the reasons for varying interest costs a

matter for inquiry into each particular case. The variations are, however, a matter of signifi cant importance in a consideration of methods of ameliorating t he present condition of the industry.

The examination of the data requires some caution if certain fallacious are to be avoided. In the first place the data are worked out on a per-bushel basis so that a farmer who has bought land at a high price and is able to obtain high yields from it is not necessarily shown as incurring high costs per bushel. Again the whole of the interest cost is shown as being borne by the wheat production so that a farmer who derives 40 per cent. of his gross income from sheep and has diminished his gross production of wheat accordingly appears at a disadvantage in this diagram. When the price of wheat is high the true economic value of land estimated according to productive capacity rises faster in the case of land of high productivity

than in the case of relatively inferior land. Thus, a man on 15-bushelland may be just paying his way and meeting his interest charge of tid. per bushel, when wheat is at 3s. per bushel at local sidings, and at the smne time a man on 30-bushel land may be doing the same if his interest charge is ls. per bushel; but if the price of wheat were to rise to 4s. per bushel the 15-bushel man would earn 15s. per cropped acre for himself, but the man on the better land would earn double that amount and could in fac.t afford to pay much more for his land. As a result, land

values which now seem ridiculous when wheat is at present prices, were not necessarily uneconomic when wheat was at the price levels which obtained between 1920 ancl1928.

Another result of framing the table " -per bushel " and not " per acre " is to " weight " the appearance of the data against farmers who are not able to obtain good yields, and this is the reason for most of the cases where the per bushel cost is over 2s. per bushel.

A general inspection of the facts disclosed suggests that in Western Australia interest cost s are on the whole lower than in the other States. This is probably partly explained by the fact that the general wheat belt in this State was the last to be developed and that there was a fairly large tract of moderately good country available for settlers until recent years; so that men were able to take up new land for wheat-growing and competition did not drive land prices to the levels reached in the better parts of the other States. On the other hand these interest costs might have been lower still had there been a larger proportion of older established farms on which returns had been sunk to pay off borrowed capital.

Mallee I. and Wimmera show the highest t endency to high interest costs per bushel. This tendency may be partly explained in the case of the latt er by the general high yielding capacity which has already been noted as being charact eristic of the district. The reputation which this region achieved probably resulted in a tendency to over optimism in respect to land vaiues. In addition a considerable area of Mallee L suffered severely from particularly poor harvests in 1927- 28, 1928-29, 1929- 30 and 1930-31 , which not only depleted the cash resources

of farmers but forced many of them into borrowing for cropping purposes. The Central Western Slope of New South WaJes also shows a relatively high interest cost per bushel. The Western Division of South Australia shows up very well possibly because many of the settlers are well acquainted with the difficulties of the district and are umvilling by nature to enter into debts or are unable to obtain financial assistance.

FIG. XVII A SURVEY OF THE RELATION OF YIELD PER ACRE TO COST PER BUSHEL (For each of the. mon~ important wheat qrowit1q distraicts a

made be-tween the scatter of -those, faYmeYS whose costs are _Qf -the district)

W. A. S.A.

MEDIAN 3/3Ya

Central and L.N. Wes-tern Murra't Mallee. 31 .3/IOY2 3/81/2

- + - + - + - + NUM BER OF CASES 37 37 2\ 2\ 21 21 \3 \3 Number of farmers who obtained an average ~ie\d of:-Less -than G bushels per acre •••••• . .. ~ and less -than ~ per acr4Z •• •• • ....... •• • •••• ~ " 'I ti 12 II II •• ••••• ••• .. ., •••• • •• •••• 12 JI .. ,, J5 II II ••• •••••••••• • ••• ••••••• • •• • •• ••••••••• • 15 II II .. 18 II II •••••••••• •••••••• • • •••••• • ••• • ••• ••••• ••• \8 II II II 21 11 II •••••••••• •• ••••••• ••••• I • •• •• 21 II II ti 24 II II ••• • •••• • • 24 II II • 27 II II •• ••••• • 27 II II ,, .30 II II • • 30 bushels and OVOn

reseec-tivel~ in resP-ect -to '

below (-) and above (+)_-t'-"-h=e____;,m..;...;.e=-d;..;..;i-=a..;...;.n_c..;;;_o;a.....s;;;_ts-=-

VIC N. S.W.

Mal lee I Wimmera Rive.-.ina s. wi

1 slopes C. W. Slopes

4/0V4 J/f~ 3/7 2 l\?>/4 3/81/4

- + - + - -f - + - + 27 27 23 23 24 24 13 13 18 lS

• •• I •

••• • • •••

• ••••••• •• • •••• •• • •••••

••

• •••••• ••••••• •• •••• ••••• • • ••• •••••••

• •

••••••• ••••• •• ••••••• •••• • •••• • • • ••••• ••••• • ••••

• ••• ••••••• •••• •••••• • • •• ••• • • •••••• • •• •••••

• •

••• ••••• ••• •• •• ••

• ••• • ••• ••

•••• • •

••••••

FIG. XVIII A SURVEY OF THE RELATION OF INTEREST CHARGES AND PER BUSHEL ( foy each of -the more 1111podan-t whe.a-t qrowinq dis-tricts a comP-ar-ison 1n resP-ect to ln-te.res-t charges is here.

made between -the. scaf-ter of those farmer5 whose cos-ts at"'e resP-ectivel'j_.:;;.b...;;;;e..;..lo..:...;w;:..;.._.....:~ ..... --6,..)__:a=n....:.d~~a=b.....: o:.-v_e.----' ('-'-+.._)_ t_h_;; e. ;..._....:.m ~ e...;.. d.....: ia =t1 --'--- _c..:...;o:......:s c..... t..:c..s Qf the. d isfric{.)

W.A. S.A. VIC N.S.W.

MEDIAN 3/33/s

C~ntral and L.N We.s-te,rn Murra~ Malle.e. Mall

31\ 3/10 1/2 3/ 'h 4/03/4 3/J Y4 3/7 2/113/4 3/8Y4

- + - + - + - + - + - + - + - + - + NUMBER OF CASES 37 37 21 2\ 2\ 21 13 ,~ 27 27 23 2~ 24 24 13 \3 18 18

Number ot farmers whoStt inte..-es1' c arges represent.

under 3> per bush,\ ••••• •• ••••• •• ••••••• • •••••• • ••••••• • ••••• •• • ••• • •••••• ••

·8 and unde~ G, p(tr bushel •••••••••• ••••••• •• •• • •••••• ••• • ••• • •••••• •••••• • • •••• • •• • •• • •••• ••• • 'o) . .

'>

.. .. •••••••••• •• ••••• ••••••• ••• ••• • •••••• •• • • ••••• •• • ••• • • •••••• •••• • ••• • •••• • •••••• ...

• ••• •• •

.,,

~

H

v- .. .. ••• • ••••••••• ••• •• ••• • • • • •• •• • •• ••• • •••• • ••• ••• • ••• . ... • •••

v- .. 1/3 .. . . • • ••• • ••••••• ••• • ••• • • ••••• • • ••••• • ••• • •••••• • •• . .. ..

1/3 .. 1/G • • • •• • •• • •••• •••• • •••• ·'···

• •• .. .. ..

1/6 .. t/9 " .. • • •

•• •• ••• • . .. ..

I/CJ 2/-

.. . . • •• •••• • . .. ..

2/- ,. 2/fJ .. .. •• • • •••• • • ..

2/6 .. 3/- • • • • .. .. .

3/- and • • • t.o over -

- ----

FIG. XIX SURVEY OF THE RELATION OF

{For each oJ -the more important whea-t grow1ng districts a -the scat-te..-- of -tnostt farmers whose costs are r-es~ectivel'i

W.A. S.A.

LABOUR COSTS AND COSTS PER BUSHEL compat"'i son h1 re5pect -to labour costs is he..-e. made

------- below (-) anol above (+) -the. median of -the district)

VIC N. S .. W.

MEDIAN J/3'1& Central and L.N. Western Murri), Mallie. Mall

Number of f arme.Ys whose labour COS15 we.re. :- ,

under ,;," per bushel •• • • •• • ••

, unciftr- cf per bushel •••••••••• ••••••• •••• •• • •••••• ••••• •••• • • •••••• •• a II•• • •••••• ••• ..... band ...... , .... ••••• • •••

""

II

1/- II II ••••••••• ••••••••• ••••• •• • ••••• •••• • ••••••• •••• • ••••• •••••• ••• ••• . ...... •• •••••• . .. •• •• 1/- n 1/3 II

II ...... •••••••••• ••••• ••••••• ••• ••••• ••• •• ••••••• ••• •••• ••••• ••••••• • ••••••

I . ... ...

• II • •• •

1/3 1/6 II

II ••••••• ••• •••• • ••• ••••• • •••• •• • •• • •• •

. .. . . . . .. II .. .

1/G

,,, II II •• • •• • •• • ••• ••••• •• I • • • •••• II II ,,, 2/- u •• • • •• • • •• • ••• ••••• .. • • ••• II •• 2/- and • • • • • ••• • •• ••••••• • ••••• ••• • •• aver-

79 9

L ABOUR CosTs.

79. Figure XIX. shows the analysis according to labour costs per bushel. These have been worked out on the scale discussed in the First Report, pages 22-24, according to which the farmer is allowed £125 per annum for his own work in order to maintain himself and his dependants, and a minimum of 20s. per week plus keep for each adult male member of his family

working on the farm. Employees are entered at the figure they actually receive, plus an allowance for keep where it is provided.

Again it is necessary to emphasize that all the labour costs are here charged against wheat production so that a farmer wh o has developed his side lines to a considerable ext ent and uses extra labour for them shows to disadvantage in the comparison.

There are t wo other factors which tend to cause a wide variation in labour costs per bushel. The first point is the fact that many farmers' sons are unable to find employment outside their home farms at the present t ime and there is a natural tendency fo r t hem to stay on the property. In some cases they have replaced hired employees, but in others they have undoubtedly increased the amount of labour computed. The second point lies in the fact that farming is rather

more t han a business ; it is a way of life as well. Men who are becoming somewhat erJeebled through advancing years or ill-health still go on doing a certain amount of work on the farm. Such a state of affairs is inherent in farming in all countries of settled agriculture. It is of course not unknown in manufacturing business, but its results are less serious. If we take the case of a

farm on which an annual average crop of 8,000 bushels of wheat is being produced, then every extra man receiving £1 per week as wages and. l5s. for keep involves an extra expenditure of £91 per annum or 2s. 7d. per bushel.

Western Australia and the Wimmera show up to advantage in relatively low labour costs per bushel when a comparison is made of the various regions. In most of the districts of New South Wales speed at harvest is particularly important, and extra expenditure becomes an economic procedure. In some districts, such as the Western Division of South Australia, there

are farms which are still partly in the developmental stage, and where some small portion of the labour cost may be devoted to clearing work.

VALUE OF S IDE LINES.

80 . The side lines concerned are oats, barley, wheaten or oaten hay, wool, shorn and fat sheep, fat lambs, skins, horses, butter fat, cattle, eggs and poult ry, and, very occasionally, fruit. Farmers' returns of receipts from the smaller it ems were frequently vague, but the statements in respect to wool, fat lambs and sheep were usually clear enough to be treated with confidence.

Table 9 shows for the farmers whose results were examined in each State the number of live-stock kept. In order to ascertain the average number of anin-:als grazed in terms of a common unit, columns 3 a.nd 4 are added together and the result is multiplied by eight in order to turn them into " sheep grazing units ". The result is seen in column 5 . Column 6 gives the

number of " sheep grazing units" maintained, whilst column 7 gives the average amount of grazing obtained per farm, column 8 the total acreage of the farms, and column 9 the average grazing capacity per acre in sheep units when the farms are managed under present conditions.

TABLE 9.

NUlVIBER OF LIVE-STOCK KE PT.

(1) (2) (3) (4)

I (5) I (6) (7) (8) (9) Average

- Column (3)% Total number Number of Farmers Sheep Cows and Otl> er Column (4) of" oheep "sheep Total farm Sheep Units examined. kept. Heifers . Cattle. ex pressed as units" per acreage. per acre. sheep units. grazing units." farm. Western Australia . . 75 44 ,253 481 246 5,816 50,0C9 667 . 5 182 ,338 .274

South Australia .. 127 53,103 890 416 10,448 6::\,551 500.4 255,594 . 248

Victoria .. . . 1±3 60,260 978 620 12,784 73,041 510 .8 177,473 .411

New South .. 161 73,84.8 1,553 553 16,848 90,696 563.3 181 ,435 .499

Queensl?.nd .. 18 2,310 372 109 3,848 6,1 58 342 . 1 11,24() . 547

80

Table 10 deals with the returns obt ained by these farmers from the main categories of side lines. In these figures no account has b een taken of the value of produce consumed on the farm which t he Commission estimates to be of the order of £30-£50 per a:nnum. T ABL E 10.

I NCOME RECEIVED F ROM.

(1) (2) (3)

I

(4) (5) (6) (7) (8) (9)

Crops other t han Wheat Wool, Sheep and Fat Poultry and Dairying . and Agistment. I Lambs. Total Receipts. - Number of Farm era. Average Average Average Average £ per farm £ per farm £ per farm £ per farm (n earest£). (nearest £). (nearest £). (nearest£). -Western Australia 75 1,757 23 13,363 178 ' 2, 327 31 17,447 233 .. South Australia .. 127 6,132 48 1"7,735 140 7, 387 58 31,254 246 Victoria .. . . 143 4,610 32 27 ,096 189 4,880 34 36,586 256 New South Wales . . 161 3,173 20 24,316 151 4,986 31 32,475 202 Queensland . . 18 1,430 79 1,040 58 2,884 160 5, 354 297 --- -17,102 83,550 22,464 123,116 I I The receipts from sheep t otal £83,550, which were obtained fro m 233,774 sheep. The figures shown . include the returns from wool, less selli ng and t ransport costs and without deductions for labour or incidental expenses such as supplementary foods, woolpacks, licks, dips, &c. As regards sheep and lambs t he figures include net returns from sales of all classes of sheep less t he gross cost of purchases of all classes of sheep, including rams. They are, therefore, within Is. per head of the net returns from sheep (labour excluded) . This represents an average of about 7s . 2d. per sheep. If the value of the mutton consumed on the 524 farms was £10,480, then the average returns per sheep would become about 8s. This figure is an average for the five -year period of the returns and during most of t hat period the woo l industry has suffered from low prices, whilst the markets for fat lambs and store sheep have also been depressed. The figures for " crops other than wheat " and fo r poultry and dairying contain the statements of actual cash r eceived from t hese side lines without any deductions for labour or materials used. The Commission has expressed the view that " There is an overwhelming consensus of opinion against single-crop farming, owing to the fact that it causes slow but sure deterioration in many soils, and because it becomes economically unstable immediately the price of the particular crop falls" (First Report, page 23, paragraph 7) . Figure XX. shows the " scatter " of the farms according to the returns from side lines divided by the number of bushels of wheat produced. The figure thus obtained is really an indication of the extent t o which the individual operat or mixes his types of farming. There is an almost complete gradation from t he man who grows wheat only t hrough the wheat and sheep farmers and t he sheep-owners who grow som.e wheat t o the men who plant wheat as a side line crop, which is used sometimes as fodder and sometimes harvested for grain in particularly favorable seasons. The latter group is well represented among farmers in the Darling Downs and in upland districts of New South Wales and Victoria . . The last two groups have been largely excluded from the Commission's investigations in view of t he definition of a wheat-grower which has been adopted, but a few border-line cases appear. The first horizontal line of Figure XX. shows t hose farmers whose side lines return less than 3d. per bushel of wheat produced. The dist ricts in which these relatively low incomes from side lines are encountered are Western Australia, t he Western Division of Sout h Australia, the Riverina and t he Wimrnera. The farmers in t his category fa ll mainly into two groups. The first group comprises those whose farms are in the developmental stage and are not yet sufficiently equipped with water supplies and fencing to allow them to carry sheep ; the second contains those whose farms are too smail in area to make it practicable to carry many sheep. As an instance of t he latter group may be taken a man wit h 600 acres or less in the Western Riverina who can only expect good yields if fa llowing is practised, and whose machinery is capable of cropping 250 or 300 acres . Such a man would have t oo little spare ground to be able to carry more than a small floc k. The farmers with higher side line re'turns contain those who crop on a more lenient rotation, and also those who have areas of uncultivable land in t heir holdings. A detailed analysis of the cases is, therefore, scarcely warranted. Nor is it reasonable t o attempt to lay down any hard and fast line with reference t o what should be expected in this respect. Some

fl G. XX A SURVEY OF THE RELATION OF THE. RATIO FROM S\DE LINES TO WHEAT PRODUCED OF RECEIPTS BUSHEL TO COSTS PER

(For each of -th2 mor~ important whe.at gr'Owinq distrids a comparison in resp~ct -to receiP-ts from side. line.$ wheat P-roduction \s h(lrC"t mack IJetween the scatter of those farmers whoscr. costs are res~ec.tivel~ below (-) I median oi -the district.) when divid~d b~

and abov~ (-t) th~

l

"

W.A. S.A. VIC N .S. W.

MEDIAN 3/31/a

Central and LN We.stern Mun··a~ Ma\lee Mallee t Wimm

3/1 3/10''2 :,/ 'h. 4/Q?,/4 3/11/4 37 2 11 3/4 3/814

NUMBER CASES - + - -+ - + - + - + - + - + - + - + OF 37 37 21 21 21 21 13 13 27 27 2~ 23 24 24 13 13 18 18

Number of farm

under 3) per bushel •••••••••• ••••••••••• ••• ••••••• • •••• • •• • • •••• • ••••• ••• • •••• ••••••• • •• • • • ••• ••• 3' and under b, per bushel •••••••••• •••••• • •••• ••••• • ••••• ••••• • • • ••••• • •••••• • • ••• • •••• •••••• •• ••••••• • • . •• •

s., II II

'

II ll •••• • •••••• ••• • •• • •• •• • ••• • ••••• • ••• • •• ••••••• ••• • ••••• ••• •••• • ••

cf

r

1/- II ••••• •• ••• • •••• •••• • •••• • •• • •••••• ••• .. ... • ••• • •• •• •• • ••••

" II II •

1/- t/3 ll ••• ••••• •• •• • • ••• • •• • • • • ••• •• • • •• II II ll

1/3 J/6

• • ••• •• •• • • •• • • •• • •• • • •• II II .. " 1/G 1/,

• • •• • • • • • •• • • • • II II II u

"'

2/-loll . •• • • •• • • • • II i• II u

2/- 2/fo ,. • •• • • • • • • • II II \I

2/G • •

•••• • •• • • • •• • • and over

Q~·\ A SURVEY OF THE RELATlON OF CHARGES FOR DEPRECIATION AND REPA\RS TO MACHINERY AND COSTS PER BUSHEL ( for uch of -the. mor-~ important wheat growing disi'Yic-ts a comparison in r espeC't fo charges for · deP-reciaiion and reP-aiYs i'o

machiner~ is here made. between -the sca-tter 9f those farmers whose costs are res~ctivel~ below ~) and above (+} i'he media11 _of -th~ disfr-ic:t.)

W.A. S. A. VIC N .S.W.

M E DIAN

~Va

Central /tnd L.N Western Murra\ Mallee Mallee I Wimmet'"a Rive,-ina s.w.s,~es C.W. Slopes.

3 I · 3/IO'h l 8'h 4/0¥4 3/1 1/4 3. 7 2/11 ~ 3/8!/4

CASES - + - + - + - + - + - + - 24 - + - + NUMBER OF 37 37 21 21 21 21 13 13 27 27 23 23 24 13 13 18 18

Number of farmers whose machi11er~ cos-ts were :-unde.r 3> per bushel •••••••••• •••••• •• •• • • •• • • • •

3'and under A/ p~r bushel •••••••••• ••••• ••• •• • •• ••• • • •••••• • •• •••••• • •• •• • • • ••

4> .. •• 5' .. .. ••••••• •••••• •••• • •••• •••••• •••• ••• • ••••• ••••••• • •••• • •• • •• •• • •••••• ••• ••

5•

, .. •• • ••••• •••••• ••••• •••• • ••••• ••• •• • ••••••• •• •••• •• •••••• • •• ••• • •••• • • ••• •• .. •••• 6, 7' .. • •• ••••• •• • • ••• ••• ••• •••••• •• • ••• •• • ••• • • • ••••• II .. 7> .. " g> • .. •• ••••••• ••• •••• • •• • •••• •• • • ••• ••• • • • • • • •• g ,, .. • • •• • • ••• •• • • ••••• .. .. .. c,' 10' • •• • • • •• •••• • • •• • • • .. .. .. II 10' Ill •• •• ••• • • •• .. 11 .. N II, 1 /- •• •• •• • .. , . .. •• •• •• ••• • •• ••••• • ••••• • •• 1/- and over ({)

85

• ...& l')· J ! .

- At JL

ine?- s·urprisingly large numbers of sheep on their farms ; in so doing they incur a

serwus nsk of having to sell thein at extremely low prices in years when rain fails to come at the usual time. .

An examination of Figure XX. shows that there is no marked difference between the "sub-n1edian-cost" farmers and those with costs above the n1edian in point of side line income. In some districts such as the Riverina of New South Wales and the Central and Lower North of South Australia, there is a definite tendency for the farmers above the median to have a

smaller income from side lines, but it is necessary to remember that these are excellent districts 1I()EJ. the standpoint of keeping sheep and from that of growing wheat. The farmers with acreages can, therefore, vary the balance of their operations in one direction or in

the other. When wheat prices were high the wheat acreage increased considerably in these districts. Under existing circun1stances there is a t endency to keep more sheep and grow less wheat wherever possible.

MACHINERY CosTs PER BusHEL.

8L Australian methods of wheat production require the use of a fairly large amount of machinery. The Commission adopted a definite scale for depreciation of the Inachinery on each of the farms under investigation. 'That scale is set out in the First Report in which it was estimated that if the new cost of the machinery when landed at the local siding is taken, then

12! per cent. of that sum should be sufficient to cover the depreciation of the machinery and all repairs and all spare parts required for those repairs. This scale applies to all machinery for cultivation, harvesting and carting of the crop, but not to tractors, motor trucks or cars. Had tractors been included in this particular analysis horses would have had to be dealt with

as well, and the true cost of ';horse " labour is beyond the present inquiry. l\'lotor trucks have been excluded because, although they are valuable in many instances, they are not invariably essential, and as a general rule the saving which they n1ake is on account of human and" horse" labour, and these are not included in the under consideration.

Figure XXI. shows for each of the regions concerned the " sea tter " of the farmers with super-Inedian costs, and those with sub-median costs respectively. In every district the farmers with,. the lower costs in general show much better " machinery " .figures than those with the higher costs. This result may be partly explained by the fact that sorne men have certainly

been far more lavish in their purchases of machinery than others. However, the farmers with the lower costs have usually the heavier yields, and as the data are presented on a per bushel basis, this factor may obscure the result to a certain extent. The Commission believes that an examination on a per acre basis would not be more satisfactory, because during recent years

some farmers have been wisely curtailing their wheat acreages, although they are still in possession of machinery which would have been sufficient for larger areas of crop. For the Commonwealth as a whole half the farmers have a machinery cost of under 6d. per bushel. That figure also holds good for New South Wales and Victoria. In 'Vestern

Australia, however, the median cost is 5d., whilst fo r South Australia and Queensland it is 7d. The districts' yields are indicative of the reasons for this state of affairs ; thus in the Win1mera of Victoria which is characterized by high yields half the farmers are incurring n1achinery charges of 5d. per bushel, while in the dist rict of Mallee I. , a district with lower average yield, it rises to 7d. 'The New South Wales districts under review all show 50 per cent. of the farmers

working under 6d. per bushel. I n South Australia the bet ter districts of Central and Lower North work out at 6d. and the Western and Murray-Mallee regions both show 7d. per bushel as the n1edian figure. Frequently the Comn1ission has encountered t he opinion in the cities that farmers are unduly lavish in their purchases of machinery, and are prodigal in the way in which the machinery is allowed to ren1ain either in t he paddocks or unshelt ered in the yards. In some instances there is an amount of truth in both these assertions. However, those agencies responsible for the sale of machinery are fully alive t o the meaning of the term "sales pressure "

and have been accustomed to employ salesmen who were well versed in the art of selling buyers articles which they did not always really require. If the farmer has been prodigal in his purchases in most cases city influences have been partly responsible. hnprovmn ent in the housing of machinery is desirable in many fanns, particularly on those which are in the earlier st ages of development. l\1any farmers have learnt much about the care for machinery during the present depression. On the other hand the n1achinery

often seen lying in paddock corners frequent ly had no value w:hen abandoned, IS often worth the labour of cartinr- t o t he hmn estead. The tract or IS an outdoor machine and w1th the engine simply prot ected t he paddock may b e it s most appropriate resting place for a few days or even a week under some The that a m?re

careful use of machinery and more resistance to sales pressure Will result In some reductiOn of costs in many cases.

86

82 . In the preceding sections the Cornrnission has endeaJvoured to analyse the position of the 524 wheat-growers under exarnination and to illustrate t he complications which follow from an analysis in respect to any single factor in costs of production. Such cornplications are inevitable in any agricultural survey; they have been described in detail in the numerous treatises on the subject. The only way of avoiding them is by the mnployment of the methods

of deta.iled cost accountancy which would have necessitated a greater length of time and a rnuch larger staff than the Co1nn1ission had at its disposal. The met hod of setting out the data ernployed in the construction of Figures XVII. to XXI. shows clearly the general effec tiveness of the farmers in each region, but it does not indicat e how far any individual farmer is efficient _ as regards each of the factors into which.inquiry has been made.

This last inquiry is carried a stage further ·if for any region the farn1ers are arranged in an order of increasing costs in respect to each of the factors of analysis. This has been done for the V\Timn1era in Table 11, the first column of which gives the order of the 4 7 farmers in respect to No. 2* costs. Incidentally, this column also gives their Victorian serial numbers

(see Column Diagrarn Figure XIV.). 'Ihe second colurnn showR the rank of each fanner in respect to interest costs. The third colu1nn gives each producer 's position as regards No. 1 * costs. The fourth shows the individual's nun1erical rank in respect to decreasing incom_ e frorn side lines on a per bushel basis (i.e., in this column the farrner with t he greatest relative side line income has the figure I. against hirn) . In the fifth and sixth colun1ns analysis as regards labour and machinery costs has been reduced to a rank basis. The seventh colurnn gives the rank in order of decreasing yield per acre; the succeeding column gives an indication of relative size of the farr.o. in question and the final one shows the arrangement in ord01 )f number of acres under the crop.

Thus the farrner with the lowest No. 2* cost had as low an interest charge as anyone, but this was not the sole reason for his success for he was second on the list as regards actual working costs ; this was achieved by a high incorne from side lines with relatively efficient utilization of labour, as shown by low labour and 111achinery costs. This farmer was high in rank in respect of yield and had the benefit of a fairly large farm, but the proportion of land cropped to wheat each season was relatively low. The data suggest that oareful management and use of side lines are responsible for this success.

The second farn1er in the table had a fairly large interest charge t o meet (reference to :Figure XIV. shows that it was about 9d. per bushel) ; column 4 shows that his side lines were very productive and column 8 indicates that his farrn was relatively small in cultivable acreage, and that he cropped very leniently so t hat his labour costs were high; he was a long way down the list in' respect of yield per acre. The success of this farmer may almost certainly be attributed to the effective production of side lines.

The man who is tenth on the list in respect to No. 2* costs may be taken as an example of the opposite type. His interest charge is relatively low, he has very few side lines; his farm is of moderate size in respect to cultivable acreage, but the last colun1n shows that he crops a large area of it, while colun1ns 5 and 6 indicate an extreme efficiency as regards the utilization

of rnachinery and labour. EHicient rnanage1nent frorn the wheat-growing standpoint is t :he prime cause of this farmer's ability to land wheat in lVIelbourne at about 2s. 6d. per bushel (s ee No. 10 in Figure XIV.).

The twentieth farmer is another instance of a, rnan who has a large farm with very little income from side lines but low labour costs per bushel.

Farmer No. 38 is an interesting case of a n1an who has high interest costs (about ls. 6d. per bushel) but who is also fairly high in roperating _costs . This farm_ er .has a large cultivable area and grows a large acreage 01 wheat using labour and machinery very effiCiently ; and his side lines produce a moderate return. IIis failure to achieve a low cost of production is due to his low position in respect to yield per acre. This may be because the soil is inferior , or because he does not cultivate his lanc]_ sufficiently well or often. It is possible that low labour and machinery costs are his undoing, or that he should crop the land less frequently.

Reference to Figure XIV. shows that all fanners from No . 29 to 47 inclusive have No. 2* cost s of over 3s. 6d. per bushel. An examination of the third column shows that actual working costs apart from interest are high. Returns from side lines (column 4) vary widely on the whole. These fanners are the s1naller growers ( cohunns 8 and 9) although this is by no means always the case. They are relatively inefficient as regards labour and machinery costs, and in yield per acre they are usually It difficult to avoid t_ he conclusion. that. t hey .are

either fanning under a system whiCh IS not suited to the ty_pe of sOil, or are relatively IneffiCient in t heir This deduction is strengthe?-ed by the that. the boupdaries of the

Wimmera Distn ct as here used are chosen so as t o Include a relatively uniform regiOn.

87

Similar surveys in other districts would reveal a similar state of affairs, but in most regions wider ranges of conditions would lead to greater difficulties in making comparisons.

Table 11 showing the relative position of the 4 7 cases examined in the Wimmera when the .individuals are arranged according to rank in respect to various factors in production costs.

I I

I I

(1) (2 ) (3) (4) (5) (6) (7) (8) (9)

No . 2* Costs. Interest Cost, No. 1* Costs. Side Lines,

I

Labour Costs. Machine Costs, Yield, Cultivable Average Acreage

per bushel. per bushel. per bushel. per bushel. per acre. Acreage. under Wheat.

I

.

1 1 2 0 11 16 8 9 24 .. t.1

2 .. 19 3 1 37 16 26 29 37

3 .. 25 1 2 11 3 26 8 16

4 .. 6 6 12 11 3 4 10 16

5 .. 15 5 4 2 3 22 1 1

6 .. 1 21 I 31 33 16 14 17 9

7 . . 14 10 34 2 3 7 5 7

8 .. 15 6 16 11 32 1 27 30

9 .. 1 24 40 23 3 . 9 41 41

10 .. 8 16 35 1 1 18 17 9

11 .. 8 16 18 8 16 26 21 16

12 .. 5 22 45 11 16 4 40 40

13 .. 8 20 40 20 3 2 43 41

14 . . 33 4 21 8 3' 9 11 4

15 .. 7 24 18 23 32 31 15 23

16 .. 1 35 35 23 I 38 32 34 33

17 .. 15 16 8 39 I 32 11 28 39

18 .. 20 15 47 2 3 4 29 16

19 .. 35 6 15 11 3 11 2 2

20 .. 23 16 45 2 1 3 13 8

21 .. 35 6 10 20 3 14 29 9

22. .. 13 26 24 39 32 39 38 24

23 .. 8 30 31 30 16 19 36 33

24 .. 30 13 8 30 16 26 4 9

25 .. 30 13 6 23 16 22 22 16

26 .. 38 12 4 30 42 26 14 16

27 .. 41 10 12 23 16 19 29 24

28 .. 20 26 24 33 38 37 42 31

29 .. 25 26 24 11 38 22 24 33

30 .. 25 30 40 23 16 14 47 41

31 .. 33 22 35 11 32 13 6 3

32 .. 23 37 39 8 16 14 39 31

33 .. 25 36 40 2 3 19 43 41

34 .. 20 40 35 42 38 39 24 15

35 .. 15 41 21 45 42 35 26 24

36 .. 35 30 16 11 16 32 3 4

37 .. 38 30 24 23 3 35 34 16

38 .. 38 30 24 2 3 i 46 ·11 4

39 .. 29 38 10 20 16 32 43 46

40 .. 41 38 30 33 16 26 37 33

41 .. 8 44 24 44 16 22 20 37

42 .. 46 26 31 33 16 42 7 9

43 .. I 45 41 24 37 32 42 16 9

44 .. 30 46 6 47 46 42 43 46

45 . . 44: 45 21 43 45 47 23 24

46 . . 41 47 18 46 47 42 17 24

47 .. 4.7 43 12

I

4:1 43 39 33 41

. I AND GENERAL SURVEY.

83. The cost analysis data used by the Cornmission may be taken to be reasonably of the wheat.-growing of Australia. Any error

111 the drrectwn of decreaSing the estimated costs. The range of conaitwns of production In

the Cornrnonwealth is so wide that the concept of the " average" fanner is not a particularly useful one. If he were to exist, then his production costs on a No.2* basis would be approximately 3s. 6d. per up roughly as follows

1. Labour (own, family and hired) 2. Interest 3. Maintenance of machinery 4. Rates, taxes and insurance 1!'.5964.-4

s. d.

1 lt

0 8

0 5!

0 2

88

5. Rail freight and handling charges from siding to f.o.r. port position 6. Seed wheat 7. Cartage* (including cost of running truck and car where such

are kept and cartage of wheat to siding where this is done by contract) .. 8. Superphosphates 9. Cost of bags or silo charge 10. Cost of power* (horse expenses or tractor costs)

11. Maintenance of farm and buildings, and sundries including pickling :material, sheep dip, licks , wool packs, oil and grease (for agricultural machinery only)

Less returns from side lines

s. d.

0 6

0 1i

0 2!

0 2i

0 2i

0 2!

4 3

0 9

3 6

The extent to which reductions can be made in any or all of the above costs is discussed below and elsewhere. •

84. The largest single item is seen to be " labour " which has been considered in some detail both in the First Report and in paragraph 79 of the present section. From the survey the Commission considers that savings in labour might be made in individual cases either where farmers have areas which are too small to give effective employment or where too much family labour is at present used on the farm owing to lack of opportunity for outside employment.· Such cases are relatively few in number and no great saving can reasonably be expected in this direction. This item is one on which savings are being made during the depression; large numbers of farmers are unable to pay their families even the low rate of wages which has been used in these computations (normally £1 per week and keep for each adult male employed); many farmers are not in a position to take from their receipts the £125 in cash which the Commission considers is a minimum return to the farmer himself for his work and management of the farm. But it would be inconect to expect that the Australian wheat industry can continue for a long period under such conditions.

85. Items 2, 3, 4, 5, 8 and 9 form the subjects of further sections .of this Report in which the possibilities of reduction are discussed.

The components of Item 11 are individually relatively small, and their extent must inevitably rise and fall with the general price levels which obtain throughout the Commonwealth. Any considerable savings in connexion with them are unlikely.

Item 6 bears a relationship to the price of wheat. It is to be hoped that no reduction can be expected from it.

Items 7 and 10 require some explanation. A . superficial consideration of the matter might lead to the conclusion that there are many farmers who are able to cart their wheat and carry out all their cultivations without the use of tractors and without incurring any expenditure for buying horses and that, therefore, there are no grounds for the inclusion of these items. These operations of carting wheat, breeding and feeding ·horses are, however, part of the general operations of the farm, and consume considerable quantities of material and labour and occupy considerable areas of land. Those farmers who adopt these practices are forced to grow smaller acreages of crop and frequently can make less efficient use of their machinery. Their costs in respect to other items would be proportionately higher on a bushel basis. The actual figures here stated are an approximation derived from the two types of farming. On a "power"

farm where tractors only are used Item 10 ·will be higher than is shown while other items will be lower; on a "horse" farm Item 10 will be low (because no allocation has been made in this item for costs of cutting hay or for grazing) while other items will be rather higher than here shown.

• See diBcusslon in paragraph 25.

89

APPENDIX C.

CONSIDERATION OF (a) THE RELIABILITY OF THE " SAMPLE " OF WHEAT-GROWERS ON WHICH . THE COST OF PRODUCTION DETERMINATIONS ARE MADE, AND (b) THE NUMBER OF WHEAT­ GROWERS IN AUSTRALIA WHO ARE MAINLY DEPENDENT ON WHEAT PRODUCTION. Cl. In view of the magnitude of the wheat-growing industry in Australia the Commission decided that, in it s

cost of production inquiries, the investigation of the costs of more than a small proportion of the growers would be impracticable and also unnecessary provided that the cross section taken was sufficient ly representative. The number of satisfactory Questionaires B. examined represents about 1 per cent. of the wheat-growers as defined by the Commission. This sample is relatively small, but if its dist ribution is satisfactory geographically and fr om the standpoint of size of production and of yield per acre, it will give as effective a survey of the industry a.s if a " sample" ten times its size had been taken. This conclusion is statistically true.

Paragraph 67 of t his Report shows that the sources from which samples have been obtained have been divided between farmers' organizations, State Departments, private persons and credit-affording institutions, and that the distribution on a cost basis of farmers, whose nn.mes were suggested by the credit-affording institutions, has been roughly equal on each side of the median. By this test, the samples can be regarded as being representative.

In this Appendix the results of an inquiry as to whether or not the samples were truly representative of the industry in respect to acreage under wheat and the yields obtained are set out in detail. The only method available was the use of the official statistical returns of the various States. It is singularly unfortunate that in most of the the statistical departments are somewhat understaffed and ill-equipped with modern machinery; consequently, they were not in a position to provide all the data which were desirable without incurring considerable extra expense. ln New South Wales , the Bureau of Statistics and Economics was in a better position, and through the courtesy of Mr. T. Waites, the Government Statistician, t he Commission obtained a satisfactory set of data for that State. As the methods used by the Commission were the same in all States, it may be presumed that, if the results of a detailed survey in New South Wales were satisfactory, those for the other States would be similar in t heir reliability.

NEW SOUTH wALES.

C2. The New South Wales data being the most exhaustive may well be examined first. The detailed data for 1932-33 were compiled and presented in such a way as to make it possible for the Commission to exclude wheat­ growers with less than 100 acres under the crop and also those who, from the number of sheep kept, might be expected to derive a greater income from side lines than from wheat-growing. This correction of the number of wheat-growers is made in accordance with the definition laid down by t he Commission in its First Report (page 26 , paragraph 16) .

The following table for New South Wales shows the distribution of" wheat-growers" in the State in 1932-33, according to acreage under crop and the number examined in each class :-Size Classes. Number of Holdings.

I Number Examined.

100-199 acres . . .. 2,663 25

200-29 9 acres . . .. 3,270 32

300-399 acres . . .. 2,1 76 48

400--499 acres . . .. 1,329 24

500-599 acres . . .. 638 15

600 and over .. .. 926 17

Total .. .. 11 ,002 161

As regards area under wheat, this table shows that the sample examined by the Commission was dispersed through the range of wheat-growers in the State. The tendency has been for the sample to be drawn to a somewhat greater extent than is desirable from the larger holdings. It would have been rather more satisfactory if there had been a larger number in t he 100-199 and 200-299 acre classes, but in general, other evidence suggests that acreage under

crop is not of overriding importance in costs when once a minimum of about 200 acres is passed. The inclusion of rather too small a number of cases in the 100-199 class and too large numbers in the 500- 599 and 600 and over classes should tend towards presenting the costs of the industry in a more favorable lig ht than they actually are. In respect to yield per acre, the Commissio n's data must be examined more carefully, because a bias in the sample either towards low yields or high yields might have an appreciable effect on the deductions. Th e distribution of the sample in respect to yield is set out below, and in the third ?olumn is the distribution as it would have been if it had

been taken in exact proportwn to the number of holdings m t he vanous classes of y1eld for the year 1932-33.

NEW SOUTH WALES.

Yield Classes.

Number of Number Number propor-

Holdings. Examined. tiona! to holdings.

Under 3 bushels .. . . . . 234 .. 3

3 and under 6 bushels . . .. 483 6 7

6 and under 9 bushels . . .. 942 7 14

9 and under 12 bushels .. . . 1,404 25 21

12 and under 15 bushels

. 1,609 31 24: . . . . 15 and under 18 bushels .. . . 1,778 35 27 18 and under 21 bushels .. .. 1,685 39 24 21 and under 24 bushels . . .. 1,309 13 19 24 and under 27 bushels . . .. 837 4 12 27 bushels and over . . .. 721 1 10 Total . . . . .. 11 ,002 161 161

90

The distribution of the sample clearly bears a geneml resemblance t o that of all wh eat-growers in New Sout)1 Wales. The chief difference is that a greater proportion of the sample is taken from the middle yields, and a smaller ·j proportion from the two ends. As the deficiency of the sample is much the same at both ends, the sample could ·be used for many purposes with a high degree of accuracy. For other purposes, such as bushel costs per acre, a small error might be caused by the deficiencies of numbers in the low and high yields.

However, the sample is for the average yield over five years, and the figu res fo r total holdings are for a single year's yield. It is obvious that the average will be much less liable to extremes than the yield for a single year. Over 200 growers, as iu the table, might have yields under three bushels in any one year, but the number with an average , yield of under three bushels must be negligil>le. Therefore, we should expect that the numbers with low and with high yields would be considerably less in a five-year average computation than in one based on a single year. The di&tribution of t he sample differs from that for total wheat-growers precisely in the expected way if the sample is a fair representation of the average yields of all wheat-grov;-ers . The eflect of the diversity of the two sets of figures is to reduce, if not entirely to eliminate, the possible small error mentioned in the preceding paragraph.

I t is not possible to test the sample fo r the highest accuracy without complete information about average yields from all wheat-growers, but the comparison given a bove shows that the sample is sufficiently accurate for the purposes of this inquiry. There is a furt her difference between the sample and the distribut ion of all wh eat-growers for 1932-1933. The yield for that year was ubove the average, and we should expect relatively great er numbers in the higher yields and smaller numbers in the lower yields for the year 1932-33 than for the sample of averages. On examination, this expectat.ion will be found t o be realized, so in this respect also the sample is a fair one. 'I'he Commission has con sulted P rofessor L. F. Giblin, of the Ritchie Cha.ir of Economics in the Un iversity of :Melbourne, Oil the above matter. The preceding statement embodies his considered opinion on the matter.

The 161 farmers examined represented 1.46 per cent. of the whe&t acreage pla.nted by wheat-growers, using the word in the limited sense adopted by the Commission. The same farm ers represented 860,006 bushels of production, or 1. 4 7 per cent. of the production of the wheat-growers. Figures based on Sta.te-wide returns may be misleading. A further investigation of t hese matters on a district basis has, therefore, been c::;.rried out. The data for the chief wheat-growing districts of New South Wales are given in the following tables :-

Number of Number ol Numl!er of Number of

Area Cla•ses.

1-------------- -

Area Basis. I Yield Basis.

Yield Classes.

holdings. examined. holdings. examined.

I

wheat-gro·wers' cases I wh eat-growers' cases

--------------------------------l--------·1-------------------------

100 acres- 199 acres 200 acres- 299 acres 300 acres-399 acres 400 acres- < 199 acres 500 acres- 599 acres

600 acres and over

100 acres-199 acres 200 acres-299 acres 300 acres- 399 acres 400 acres-499 acres

500 acres-599 acres 600 acres and over

100 acres-199 acres 200 a.cres- 299 acres 300 acres-399 a.cres 400 a.cres- -±99 u.c res 500 acres- 599 acres 600 acres and over

Total

798 1,11 7 667 442

211 300

3,535

RIVERINA.

9 Under 3_ bushels 12 3 bushels and under 6 bushels

11 6 bushels and under 9 bushels

6 9 bushels and under 12 bushels 6 12 bushels and under 15 bushels 5 15 bushels and under 18 bushels 18 bush els and under 21 bushels

21 bushels and under 24 bushels 24 bushels and under 27 bushels 27 bushels and over

49

SouTH-WESTERN SLOPE.

639 '1 Under 3 bushelB

922 8 3 bushels and under 6 bushels

627 ] 0 6 bushels and under 9 bushels

369 4 9 bushels and under 12 bushels

182 12 bushels and uncler 15 bushels

224 1 J 5 bushels and under 18 bushels

18 bushels and under 21 bushels 21 bushels and under 24 bush els 24 bushels and under 27 bushels 27 bushels and over

2,963 27

CENTRAL P LAIN.

36

I

Under 3 bushel.a

90 3 bushels and under 6 bushels

150 4 6 bushels and under 9 bushels

14.0

I

4 9 bushels and under 12 bushels 67 4 12 bushels and under 15 bushels

134 'J 15 bush els and under 18 bushels

I

" 18 bushels and under 21 bushels 21 bushels and under 24 bushels 24 bushels and under 27 bushels 27 bushelB and over

617 15

65

119 190 346 452 602 642 531 309

279

3,535

25 6-i 177 322 382 492 518 435 304 244

2

5

7

9

10 10 5

1

49

1

2

1

8

11 2

2

2,963 27

28 49 93 134 110

92 49 34 15 13

617

1

I

7

5

1

15

91

DATA FOR THE CHIEF WHEAT-GROWING DISTRICTS OF NEw SouTH WALE s-continued.

Area Basis. Yield Basis.

Area ClMses. Yield Classes.

Number of Number of Number of Number of wheat-growers' cases ' wheat-growers' cases holdings. examined. hol ding-;. examined. CENTRAL-WESTERN SLOPE.

100 acres-199 acres 466 3 Under 3 bushels 31

200 acres- 299 acres 612 5 3 bushels and under 6 bushels 94 1

300 acres-399 acres 464- 15 6 bushels and under 9 bushels 210

4:00 acres-499 acres 24-1 6 9 bushels and under 12 bushels 286 6

500 acres-599 acres 115 2 12 bushels and under 15 bushels 355 11

600 acres and over 178 5 15 bushels and under 18 bushels 347 10

J 8 bushels and under 21 bushels 280 5

21 bushels and under 24 bushels 187 l

24- bushels and under 27 bushels 128 1

27 bushels and over 128 1

Total 2,076 36 2,076 36

NoRTH-WESTERN SLOPE AND NORTH WESTERN PLAIN.

100 acres-199 acres 0 0 0. 456 4- Under 3 bushels 0 0 0 0 66

I

0 0

200 acres-299 acres 0 0 0 0 385 6 3 bushels and under 6 bushels 136 0 0

300 acres-399 acres 0 0 0 0 185 4- 6 bushels and under 9 bushels 198 0 0

4:00 acres-4-99 acres .. 0 0 105 2 9 bushels and under 12 bushels 248 1

500 acres-599 acres 0 0 .. 48 1 12 bushels and under 15 bushels 225 3

600 acres and over 0 0 0 0 72 3 15 bushels and under 18 bushels 14-1 4-

18 bushels and under 21 bushels 113 9

21 bushels and under 24 bushels 66 2

24 bushels and under 27 bushels 33 1

27 bushels and over 0 0 0 0 25 0 0

1,251 20 1,251 20

A detailed examination of the tables shows that wh ereas in general there has been a satisfactory number of farmers investigated rather too many were derived from some of the less important wheat-growing districts such as the Central Plain and the North Western Slope and North Central Plain, and rather too few from the more important South Western Slope. However, the discrepancy is not serious. As regards " scatter" in the various size and yield

classes these sub-samples show the same general distribution as has been pointed out for the State as a whole ; the departures from the ideal distribution are somewhat greater in the individual districts, but this is to be expected on account of the smaller size of the sub-samples . The analysis of the "scatter" of its information on costs of production in New South Wales justifies the conclusion that the data are reliable and that any tendency is in the direction of giving a more favorable picture of the costs of production in the industry than the position warrants.

WESTERN AusTRALIA .

C3. The Statist's returns indicate that while there were 9,804 wheat-growers of all types in the State in 1932-33, 8,267 had 101 acres and over under the crop. The Commission was not a bl e t o obtain data which would permit of the segregation of those who derived a greater income from side lines than from wheat. However, the " corrected" figure for the State would probably not exceed 8,000. Th e Commission has examined 75 case. , which represents . 94-

per cent. of the total. As the detailed returns of the Statist do not permit of eff ective pruning, the detailed comparison of the sample is of necessity less satisfactory than in New South Wales. The following tables give the position as far as it can be explored.

Acreage BMis. Yield Basis.

-

Number ol Total Acreage

.A.ereage Classes (under Wheat) . wheat- Number Yield Classes. Acreage

represented

Examined. fn Examined growers. under W beat. Cases.

101-500 • 0 0 0 0 0 6,642 50 Under 3 bushels 0 0 .. 35,518 0 0

501-1,000 0 . 0 0 0 0 1,44-2 22 3 bushels and under 6 bushels 192,858 • 0

1,001 and over 0 0 0 0 183 3 6 bm!hels and under 9 bushels 602,797 600

9 bushels

and under 12n ushels 910,970 ° 2,846

12 bushels and under 792,052 10,890

15 bushels and under 21 bushels 725,196 24,405 21 bushels and under 27 bushels 119,479 2,550

27 bushels and over 0 0 0 0 10,4-82 0 0

The acreage under wheat of the cases examined represents 1 . 21 per cent. of the total acreage under wheat in the State ..

92

Again, the absence of cases from the two ends of the yield class distribution is noticeable and is explicable by the fact that the comparison is being attempted between five-year average yields and a statistician's single year returns. The data suggest that a rather larger sample than was desirable has been taken from growers who were producing the heavier yields. This probability is partly explained by the fact that the only figures available are not capable of correction, and because no detailed statements were investigated for the isolated Esperance region which is low in its yields.

In Western Australia the season 1932-33 was normal in respect to yield.

SouTH AusTRALIA.

04. The gross number of wheat-growers in 1932-33 was 14,248. The only correction which could be applied was the exclusion of those farmers reported in the Statistical Register as having less than 50 acres under the crop. This correction reduces the figure to 12,530, and the further reduction for growers with acreages between 50 and 99 under wheat, and for those whose income is mainly derived from sources other than wheat must remain a matter of conjecture. Probably the " pruned " figure would not exceed 10,870. The Commission has examined 127 cases, or 1. 01 per cent.

of the partially corrected total, and 1.17 per cent. of the estimated total.

The following table shows the percentage which t he cases examined by the Commission bear to the total wheat­ growers in each Division of the State, in respect to both total production and total acreage. The table applies to the two rmccessive crop years, 1931-32 and 1932-33.

Central Lower North Upper North South-Eastern . . Western Murray-Mallee ..

Central ..

Lower Central Upper North South-Eastern Western ..

Murray-Mallee

Total

SOUTH AUSTRALIA.

1931-32. 1932--38.

Production Production

Total Production. , as per Per cent. Total Production. as per Per cent.

Questionnaires. Questionnaires.

Bushels. 10,113,4:18 15,544,496 4,113,493

589,151 10,532,342 7,200,202

48,093,102

Bushels. 88,212 192,922 68,913

3,600 264,085 160,762

778,494

l-931-32,

- -. I .Acreage

Wheat .Acreage. 1 shown on

622,108 881,214 421,587 55,742 1,136,977

953,682

4,071,370

Questionnaire!!.

4,941 10,867 7,002 200 25,990 16,750

65,750

.87 1.24 1.67 . 61 2.50 2. 23

1, 61

Bushels. 8,550,536 13,656,908 4,413,748

619,727 8,039,427 7,149,268

Bushels. 88,212 192,922 68,913

3,600 264,085 160,762

778,494

- <

I 1932-aa.

I I Per cent. I Wheat Acreage. .79 1.23 1.66

.35 2.28 1. 75

1.61

622,701 894,498 409,821 53,721 1,155,191

930,850

4,066,782

Acreage shown on Questionnaires.

4,941 10,867 7,002 200 25,990 16,750

65,750

1.03 1.41 1.55 .58 3.28 2.24

1.83

I Per cent.

.79 1.21 1.70 .37 2.25 1. 79

1.61

The pubhshed data for acreage do not afford an opportunity for dissection in respect to the size of wheat farms but are more satisfactory with respect to yield. '

On a yield basis the analysis of the cases examined by the Commission shows the following result :-1931-32. 1932-33.

Yield Classes. Total Wheat Number Total Wheat Number

Farms. exalhined. Farms. examined.

Under 3 bushels .. . . . . . . . . 746 1 1,136 1

3 bushels and under 6 bushels . . . . . . 1,960 12 2,214 12

6 bushels and under 9 bushels . . .. . . 2,408 20 2,631 20

9 bushels and under 12 bushels . . . . . . 2,131 19 2,213 19

12 bushels and under 15 bushels .. . . . . 1,875 21 1,967 21

15 bushels anrl under 18 bushels . . .. . . 1,698 20 1,764 20

18 bushels and under 21 bushels . . .. . . 1,347 20 1,170 20

21 bushels and under 27 bushels . . . . . . 1,557 12 . 984 12

27 bushels and under 33 bushels . . . . . . 501 2 148 2

33 bushels and over .. . . . . . . . . 83 . . 21 . .

14,306 127 14,248 127

93

For the crop year 1931-32 the "scatter" is reasonably satisfactory, but in that year the yields obtained in this State were higher than the average. I n 1932-33 the average yield was lower, being about the same as for the preceding ten years. The distribution of the sample as regards 1932-33 suggestB a rather better impression of the position than is entirely justifiable. ·

The analyses by districts which are shown in the following t ables tend to confirm this opinion, but it must be that, had the corrected fi gures for " wheat -growers" (in the Commission's interpretation of the word)

been obtainable, the resultant examination would probably have been more satisfactory.

Yield Class€6.

Under 3 bushels 3 bushels and under 6 bushels 6 bushels and under 9 bushels 9 bushels and under 12 bushels 12 bushels and under 15 bushels 15 bushels and under 18 bushels 18 bushels and under 21 bushels

21 bushels and under 27 bushels 27 bushels and under 33 bushels 33 bushels and over ..

Under 3 bushels 3 bushels and under 6 bushels 6 bushels and under 9 bp_shels 9 bushels and under 12 bushels l2 bushels and under 15 bushels 15 bushels and under 18 bushels

18 bushels and under 21 bushels 21 bushels and tlnder 27 bushels 27 bushels and under 33 bushels S3 bushels a:p_d 9ver 'i I I

Under 3 bushels 3 bushels and under 6 bushels 6 bushels and under 9 bushels 9 bushels and under 12 bushels 12 bushels and under 15 bushels 15 bushels and under 18 bushels

18 bushels and under 21 bushels 21 bushels and under 27 bushels 27 bushels and under 33 bushels 33 bushels and over ..

Under 3 bushels 3 bushels and under 6 bushels 6 bushels and under 9 bushels 9 bushels and under 12 bushels 12 bushels and under 15 bushels 15 bushels and under 18 bushels 18 bushels and under 21 bushels 21 bushels and under 27 bushels 27 bushels and under 33 bushels 33 bushels and over ..

1931-32.

'

Total I Number

Wheat-growers. examined.

CENTRAL AND LOWER NORTH.

Farms. 132 . .

391 . .

674 . .

910 3

1,101 4

1,207 11

1,105 14

1,403 9

462 1

70 . .

7,455 42

Ul?PEE :NORTli

1

251 3

247 2 .. 219 2

179 3

151 1

78 3

73

I • 20

l' I I I ' 7

1,337 15

WESTERN. 160 ..

540 6

767 10

576 7

321 11

195 4

92 1

37 2

6 1

3 . .

2,697 42

MURRAY-MALLEE.

301 710 3

654 8

363 7

209 3

91 4

29 1

9 1

1

2,367 27

1932-33.

Total · 1 Number

Wheat-growers. examined.

Farms. 146 ..

490 ..

917 ..

1,1 65 3

1,408 4

1,388 11

963 14

808 9

120 1

16 ..

--

7,42l

118 1

208 3

234 2

211 2

183 a

165 1

120 3

103 9

' ' 1

1,352 lo

442 . .

796 6

826 10

402 7

142 11

50 4:

18 1

6 2

2 1

. . . .

I 2,684 42

386 668 3

589 8

357 7

167 3

102 4

30 1

21 1

1

1

2, 322 27

94

VICTORIA.

05. The relation between the cases examined and the wheat production of the chief wheat districts of the State is revealed in the following table which refers to the crop year 1932-33, in which year the State's yield per acre was 20 per cent. higher than the average for the preceding ten years.

Wheat-growers. Acreage under Wheat '000 acres. Production, 000 bushels.

-

I Examined. With over I Number Per cent. Tot.al. Examined. Per cent. Total. Per cent. 20 acres . ,d Examined. under Crop.! Examme . I I Wimmera-=-I Low an . . .. ·1,105 9 .81 230 3.4 1.46 4,052 78.4 1. 93

Borung .. . . 1,860 36 1.93 476 14.5 3.04 10,300 308.6

I

2.99

Kara Kara .. . . 732 6 .81 155 2.6 1. 69 2,824 52.4 1.85

Mallee-Millewa .. . . 672 11

I

1.63 188 3.3 1. 75 2,271 32.5 1.42

Weeah .. . . 693 8 1.15 207 2.9 1.42 1,940 36.7 1.89

Karkarooc .. . . 2,396 33 1.37 732 11.7 1.59 7,542 143.6 1. 90

Tatchera .. . . 1,366 15 1.09 I 420 5.5 1.31 5,474 80.5 1.47

Northern-

I Moira .. . . . . 1,747 14 .80 272 5.1 I 1.86 5,139 97.3 1.89 Other counties . . .. 2,658 8 .30 347 2.6 .75 5,506 44.5 .81 I I

The distribution is generally satisfactory in the Mallee and in C01mty Moira; there are rather too many instances from Borung. The deficiency in "other counties" of the Northern District would probably be less serious if the corrected figures were available, because wheat-growing is frequently a side line in these areas. The Commission was unable to obtain the detailed informat ion which would have enabled it to determine the number of wheat-growers in Victoria in 1932-33 growing wheat on more than twenty and less than 100 acres. The Government Statistician was able to supply this information in regard to the number of wheat-growers in Victoria in the season 1933-34. The particulars are set out hereunder :-

Number growing wheat on less than 20 acres Number growing wheat on 20 acres or more and less than 100 acres .. Number growing wheat on 100 acres and over

Number of Farmers.

3,166 3,587 10,732

17,485

Percentage.

18.1 20.5 61.4

100.0

Probably the percentage of the three sections of growers mentioned above would be the same for the 1932-33 season as for the 1933-34 season, and on this basis the number of farmers growing wheat on 100 acres and over would be 11,238. On the above partially corrected basis the sample (143) represents 1. 27 per cent. of the wheat-growers (11,238) in the State. This indicates that the number of samples examined for Victoria may be regarded as satisfactory.

The only available analysis of wheat-growers into productivity classes in Victoria was for the year 1930-31, which was the season of a "grow more wheat " campaign. As there was an increase in area under the crop of about 30 per cent. and many extra areas of diverse types were used_for wheat production, the use of these data for the present comparative purpose would be useless. r

C6. QUEENSLAND.

1932.

Total acreage under wheat Total acreage under wheat on Questionnaires B. Percentage Total production of wheat .. Total production of wheat shown on Questionnaires B.

Percentage

Number of farms on which wheat was harvested during 1932 Number of Questionnaires B. Percentage

250,049 acres 5,210 acres 2.08 per cent. 2,493,902 bushels

67,112 bushels 2. 69 per cent. 1,927 18

. 93 per cent.

The position in this State is somewhat different from that in the other States examined. Wheat is frequently grown as a side line to some other form of production, such as dairying. Under such circumstances wheat is not a major crop. The statistics available in regard to this State are unsatisfactory, but it is clear that they include a far greater proportion of farmers classified as wheat-growers, who, under the Commission's definition, would be excluded than do the figures of any other State concerned in this investigation.

Even though figures, corrected according to ihe Commission's definition, are not avajlable, the percentages set out above sh_ow that. a reasonably large sample of the wheat-growing industry in Queensland has been studied.

95

SUMMARY.

07. This detailed examination of the "scatter" of the data from which the costs of production :figures have been derived has led to t he conclusion that the "scatter" is generally satisfactory, in spite of the diffic ulties which have to be overcome in facing s) cost survey of this magnitude. Generally speaking, t he samples from the various States are well distributed and from a statistical point of view they are sufficiently representative of the wheat industry as a whole, to justify the Commission basing thereon findings and re commendations in regard to costs of production. Such divergences as are apparent tend to give a rather better impression of the whe2.t position than the facts warrant ; alternatively it may be stated tha.t the Commission is setting a slight ly higher standard of attainment for the wheat indust ry in the future than has heen achieved in the past. It

is Jar more satisfactory that the data should show a divergence in this direction than in the reverse.

(b) THE NuMBER OF " WHEAT-GROWERS" IN AusTRALIA.

CS. In its First Report the Commission explained that attention was being concentrated on those farmers who were dependent on wheat production as their chief source of a livelihood.. At that time, it was estimated that the number of such men would approximate to 60,000. Further examination of the matter bas revea.led the very large number of growers who pls,nt less than 100 roeres under the crop and who, in most. cases, cannot be considered to derive their livelihood mainly from wheat. I n certain States , notably New South "\Vales, the number of farmers who grow over 100 acres of wheat and who still obtain a greater income from other agricultural or pastoral sourees is also large. Share-farmers are a further problem ; there were 6,094 share-farmers in New South "\Vales in 1932-33. For the purposes of estimating costs the Commission has endeavoured to exclude the cases of fgrmers planting less than 100 acres to wheat and also those with a lar-ger income from sources other than wheat ; it bp.s also refrained from computing cost s in case of share-farmers. The way in which these corrections have been applied has been described for each State in t he preceding sections of the present Appendix C. The following table shows the .effect of t he " pruning " :-

Season 1932-33.

State.

Total Number of " Pruned " Total. Wheat Holdings . .

New South Wales . . . . ' . . . . . .. 17,892 11,002

Victoria . . . . ' . . . . . . . .. 18,303 11,238

South Australia . . . . . . . . .. . . 14,248 10,800

Western Australia . . . . . . '. .. . . 9,804 8,267

Queensland . . . . . . . . . . .. . . 1,927 500

Tptal . ' '. . . . . . ' .. .. 62,174 4:1,807

From this table, it is clear that the number of wheat farmers in Australia excluding the categories mentioned above falls between 40,000 and 45,000 and it is on these that the Commission's estimates are based. The amendment of the total is considerable, but it in no way affects the validity of the ec onomic surveys. The inclusion of the groups which have been excluded would have complicated an estimations very considerably. There is no reason to suppose that cost determinations based on "wheat-growers " who comply with the restricted definition

would not equally apply to efficiently conducted wheat-growing on larger holdings or to wheat-growing on small holdings provided that machinery were pr9perly cared for and labour were effectively used in other occupations when wheat was not demanding the whole attention of the farmer and his assistant s. As regards the share-farmers, some of whom ha ve small farms of their own, the same remarks appiy; although there may be eases of difficulty where a man cannot get a sufficient area "under shares" t o allow him to use his team and plant effectively. The individual circumstances of these men are so varied that no good purpose would be served in trying to investigate t heir position in great detail.

SECTION III.-THE DEBT STRUCTURE OF THE INDL[STRY.

PAOJ!I.

1, GENERAL CONSIDERAT;£0NS AND OF INVESTIGATION 99

2. EsriMATlON oF ToTAL DEBTS Of 99

3, BANK CREDITS OF WHEAT-G:j:l.OWERS 103

4:. FINANCIAL POSITION OF Wa:E.AT-GROWERS 104

5. P!tES]INT CAPITALIZATION OF TliE INDUSTRY 107

6. DISTRIBUTION OF THE DEBTS ACCORDING TO THE CLASSES OF CREDITORS 110

7, THE FINANCIAL MARGIN OF W:a:EAT FARMERS , . 110

APPENDIX D.-Statistical information regarding the questionnaires used in estimating the debt position 114

99

Ill. THE DEBT STRUCTURE OF THE INDUSTRY. l. GENERAL CONSIDERATIONS AND l\,fETHODS OF INVES TIGATION. 86. The investigations of the costs of production have suggested that apa.rt from labour, the 1nterest on borrowed capital is the largest single item in the costs of the average wheat-grower.

Inasmuch as the debts which this interest represents are an integral and not inconsiderable part of the general financial structure of the n'1tion as a whole, it is imperat ive that the -whole subject should be viewed from every angle. The Com1nission has, therefore, endeavoured to analyse the debt position of the industry in detail.

87. The Commission obtained much of its information on costs of production from the use of Questionnaire "B ", which was sent to individual farmers whose names were suggested by farmers' organizations, by financial institutions and by other authorities. This particular questionnaire, although primarily designed for acquiring information in respect to costs of production, also asked for a statement of the debts of the farmer ; but as a rather large proportion of the answers were received from 1nen who were i1nportant clients of financial institutions, it follows that among the returns there were ' probably rather too few who had

obtained the larger part of their iinancial assistance from other sources-notably private mortgagees. This does not invalidate the use of the answers to the questionnaire for the purpose of surveys of either costs or the total amount of debt, but it does render them some·what as a reliable indication of the particular sources from which financial assistance

has been obtained. Further steps were therefore taken. These are described in paragraph 89 below. 88. The Commission also sent out special questionnaires to, or obtained evidence fron1, appropriate government organizations, from financial institutions, and frmn all classes of

companies or private traders who might be expected to have any considerable amount of money in the hands of wheat-growers. In this way a figure for the gross debt of the industry was obt1.ined. This Investigation had proceeded sufficiently for the Connnission to be able to state in its First Report that the total wheat-growers' debts were not less than £140,000,000 in round figures.

89. The Comrnission was not wholly satisfied with the results of its investigations at that stage. There had been considerable difficulty in obtaining evidence as regards the liabilities to private mortgagees, to private persons for unsecured loans, and to storekeepers. Further, the returns from banks had revealed that a large number of farmers had credit balances and it became essential to ascertain whether this fact indicated that there were a great many

wheat-growers who were not financially encun1bered in any way. The Cmnmission therefore resolved to make a further and much wider survey with the intention of investigating the problem in greater detail. Additional questionnaires were therefore distributed to selected at random from lists of wheat-growers in the main wheat-growing areas of the mainland States. The replies to these have furnished the basis of estimation of the debts to certain classes of creditors which could not be obtained satisfactorily by more direct means. The returns from the creditors

have been used as the basis of estimation wherever possible. In approaching the creditors, the Commission asked them to include in their returns those farmers whose chief fanning operation is the growing of wheat. It is probable that a certain number of men who derive a large proportion of their income from stock, &c., have also been included. Appendix D. shows the numbers of the various types of questionnaires which have been sent out, the numbers returned and also the numbers which were rejected on account of the inadequacy of the information afforded. As regards the returns received from individual farmers, the same appendix also shows how these farmers were distributed between the States and the proportion they bear to all "wheat-growers" in each State both numerically and in terms of acreage under

crop.

2. ESTIMATION OF TOTAL DEBTS OF WHEAT-GROvVERS. 90. The Commission has considered it desirable to segregate the debts of thew heat-growers under 1nain headings according to the class of creditor. The following table gives the analysis of the total debt of £151,459,270 :-

Secured creditors- £ £

Government organizations (other than State banks) 30,008,000 State banks . . 20,363,751

Joint stock banks 33,148,624

Trustee, assurance and other finance companies 14,538,759 Stock and station agents 420,908

Private mortgagees 37,652,000

136,132,042

100

Unsecured andjor partly unsecured creditors­

Machinery firms and general merchants .. Wheat merchants Private loans Oil and fertilizer companies Storekeepers Miscellaneous

£

2,504,514 428,799 4,684,000 2,612,885 2,341,000 2, 756,030

£

15,327,228

151,459,270

91. The debts due to Government organizations in the preceding table cover a wide range. The actual items vary from State to State according to the systems by which advances have been made to farmers. The chief items in this total are-( a) Sums due by way of principal, and/or interest in respect of land purchase. It

proved impossible to segref!ate the sums representing instalments of purchase money which had not yet fallen due from those which had fallen due, either by way of principal or interest, and had not been paid. This, however, is a minor matter, as future instalments under a purchasing scheme are fundamentally of the same nature as a mortgage. (b) Advances for purposes of developing the farm or for carrying on farming

operations, e.g., for general improvements to the property, or sustenance, or such special items as machinery, fertilizers, fencing wire, vermin destruction, &c. (c) Amounts owing in respect of water rates or for the installation of water supply _

schemes.

(d) Unpaid Federal and State income and land t axes. (e) Unpaid district and shire rates, including the advances made to farmers through local councils in some States.

Items (d) and (e) have been partly. estimated from the answers to questionnaires by farmers ; the others have been obtained from the evidence or statements afforded by officers of the departments concerned.

Thtl magnitude of indebtedness of wheat-growers to the various States under all these headings is estimated as follows :- -

£

New South Wales 10,038,000

Victoria 7,884,000

South Australia 8, 762,000

Western Australia 3,277,000

Queensland 4 7, 000

30,008,000

· 92. The figure stated as debt due to State banks has been ascertained from statements submitted by the following institutions :-The Rural Bank of New South Wales. The State Savings Bank of Victoria.

The State Bank of South Australia. The State Savings Bank of South Australia (both General and Credit Foncier sections). The Agricultmal Bank of Western Australia. The Agricultural Bank of Queensland.

The Commission points out that the of these banks are by no means uniform in all cases. For instance, the Agricultural Bank of Western Australia provides assistance to farmers which in Victoria would be afforded by the Closer Settlement Commission. As a result there is a certain amount of lack of definition of the boundary dividing the sums included under the

headings Government Organizations and State Banks in the table.

101

93 . The item "Joint Stock Banks" contains the total of wheat farmers' indebtedness to all banks other than those operating under government auspices. This indebtedness may be a specific advance under a mortgage, or credit by way of an overdraft. In almost all cases the latter is secured by some form of lien. The Joint Stock Banks do not normally advance money for the development of new land ; their function in the credit structure of the industry is to assist farmers who have passed through the developmental stage, or farmers who are operating land in \Yell-developed districts. '.rhere is, however, no well defined boundary for separating the debts to the Joint Stock Banks from those to State Banks, as there are many wheat-growers who are customers of the Joint Stock Banks who are also indebted to State Banks. The details of indebtedness to Joint Stock Banks is set out in detail by States, in Table 12. The possession of a credit balance with a Joint Stock Bank is no indication of a freedom from debt. This matter is discussed further in paragraph 104.

TABLE 12.

SHOWING NUMBER OF WHEAT FARMERS WITH CREDIT AND DEBIT ACCOUNTS AT JOINT STOCK BANKS-1928 AND 1933, AND THE AMOUNTS AT CREDIT OR DEBIT OF SUCH ACCOUNTS .

State.

New South Wales Victoria ..

South Australia Western Australia .. Queensland ..

.L"""'---...:.-.. --.-. · - ---'-----

Total

New South Wales .. . .

Victoria . . . . ..

South Aust ralia .. . .

Western Australia . . ..

Queensland . . .. . .

Total . . ..

I

Number rarmera.

7,131 7,545 5,207 4,721

744

25,348

4,613 6,739 3,820 3,107

676

18,955

1928.

Amount.

£

1,943,581 1,556,115 573,021 661,354

125,228

4,859,299

6,867,812 6,218,536 3,498,496 5,591,461

509,325

22,685,630

Average per farmer.

Number farmers .

CREDIT BALANCES.

£ £

272 11 1 8,013

206 410 6,637

110 1 0 4,587

140 1 9 4,2 26

168 6 4 759

191 14 1 24,222

DEBIT BALANCES.

1,488 15 11 5,066

922 15 5 7,005

915 16 9 3,821

1,799 12 8 3,509

753 8 9 782

- -

1,196 16 3 20,183

1933.

Amount.

£

1,852,918 1,027 ,1 62 408,199 519,761

114,930

3,922,970

9,715,671 9,231 ,311 5,198,173 8,39 1,039

612 ,430

I

33,148,624

Average per farmer.

£

231 4:

154 15 9

3

88 19 10 122 19 10 151 8 6

161 19 2

1,917 16 4

1,317 16 4 1,360 8 5

2,391 5 9

783 3 2

1,642 8 2

94. Trustees, Assurance and other Finance Companies also have lent considerable sums on mortgage on wheat farms. The distribution of this sum by States is-£

2,990,384 7,790,887 2,282,654 1,304,838

New South Wales Victoria South Australia Western Australia

Queensland 169,996

14,538,759

The individual advances by these organizations are usually fairly large in amo1mt so that the actual number of holdings concerned in the above figures is rather less than might be anticipated. 95. Private Mortgagees.-As there is no ready means of obtaining information in any

other way, the figure shown for the total sum estimated as lent under private mortgages, £37,652,000, has been arrived at by from an analysis of the returns of 3,277 farmers. The difficulties in the way of arriving at the figure were and the Commission does not wish it to be inferred that the st atement here is as accurate as the data based on creditors' returns. However, the Commission considers t hat its method of estimation is reasonably reliable. In a number of cases, a cross-check was put on the statements made in the farmer's

questionnaire, and this showed that there were no grounds for doubting the general accuracy of the returns submitted.

102

The following table sets out the results of the computation of private mortgage debt :-

New South Wales Victoria South Australia Western Australia Queensland

Total es timated privat-e mortgage debt of " wheat-growers " in the State.

£

9,551,000 15)33,000 10,051,000 2,882,000

35,000

37,652,000

A portion of the private n1ortgage debt is internal to the industry. lVIany farmers have sold their farms in order to obtain larger ones in other districts, and in n1any instances part of such purchase money has taken the form of a mortgage on the old property. 96. The itmn standing as debts to i'Jtlachinery and General Merchants (see table in paragraph 90) is £2,504,514. The sale of n1achinery is on rather a different basis

to that of other farmers' requisites. It is usually sold either for cash or on " term_s " which provide for payn1ent over one, two or more years. If the instalments are not met, the machinery can in some cases be repossessed. Further, there are indications that many firms are making substantial provision for .bad debts. (See Section IV.). During the depression there has been a good deal of repossession of rnachinery from fanns. There has also been a considerable writing-off of farmers' indebtedness for machinery and for these reasons the figure is lower than rnight have been anticipated.

The average indebtedness for rnachinery is £59 ISs. ld. per "wheat farn1er ", which is less than 10 per cent. of the new value of the plant on an average farm. It n1ust be assumed that the greater part of the total debt is secured, although the Commission has no definite evidence on the point. ·

97. The debts to stock and station agents are mostly for sheep, cattle and occasionally working horses. The major part of this debt is secured by liens on the stock or wool clip. The figure £420,908, estin1ated as being the total of debt which falls into this category, is derived fron1 returns prepared by the principal firms concerned with this class of business as one of their rnain activities. The an1ount of n1oney represented by such loans varies very widely frmn season to season, and the figure must be regarded with son1e caution. Some considerable part of the total included under the term "1niscellaneous" would have con1e under this heading had detailed analysis of the 1niscellaneous item been practicable.

98. The £428,799 due to wheat merchants does not include the sums which have been advanced on the security of last year's crop. It is almost entirely due to a position which occurred in 1930-31, when the .farmers drew a fairly high initial advance against the previous harvest. The price fell disastrously and ultimately large quantities were sold at figures which were less than the initial advance. The farmers thus becmne the debtors to the m.erchants. Some of the 1noney has been repaid, large sums been writtep. off, but the total outstanding is

still large. The debt is, for the most part, unsecured. 99. rrhe total of private loans has been estirnated in the same way as that of private mortgages. The sum is surprisingly large and is to au extent composed of.sums advanced by relat ives.

The distribution by States was as follows :-New South Wales Victoria South Australia 'V estern Australia. Queensland ..

£ .

1,176,000 1,607,000 1,230,000 649,000

22,000

4,684,000

100. The amount owing to oil. a .. nd fertilizer companies is consider!=tble. Most of these organizations have done their best to assist the industry during the difficult period. 101. The total debt due to storekeepers has been difficult to estin1ate. The C01nmission has used the same basis of estimation as that employed in the case of private mortgages and private loans.

103

The following table shows a c.mnparison of the debts to storekeepers per farmer arrived at in two different ways. The first column shows the result obtained by averaging the debt per farmer from storekeepers' returns. The second column shows the result obtaL_'1ed by averaging the debt as entered on the farmers' returns :-

------------------------------------------------------------------------------

1

From Storekeepers' returns. Average debt per farmer.

From Fanriers' returns. Average debt per farmer.

------------------------------l------------1 ------------

New South Wales Victoria ..

South Australia \Vestern Australia

£ s. d.

125 11 0

54 8 2

47 8 7

40 0 0

£ s. d.

128 11 4

50 7 4

26 12 11 35 11 4

The agremnent between the figures is satisfactory, except in the case of South Australia, where the discrepancy may be explained by t he fact that the number of storekeepers' returns was relatively small, and that much of the store business is done by large organizations with head offices in Adelaide. These organizations were not able t o dissociate genera l store items from debts for such supplies as manure and machinery. Their returns are included under the

d. " . 11 " hea 1ng m1sce aneous . The total debts of "wheat-growers" to storekeepers is esti1nated as follows:­ £

New South Wales Victoria South Australia Western Australia

Queensland ..

1,264,000 481,000 274,000 269,000

53,000

2,341,000

Debts to storekeepers have, in general, di1ninished rather than increased during the last three years. This .decrease is ovving partly to the fact that farmers have been rationed severely and, in many cases, financed to a prescribed lirnit by supporting creditors, partly because certain payments are made in kind, partly because there has been an increase in the cash " mail order" business, and partly to a writing off of debts.

102. In Western Australia the average debt to "storekeepers" is relatively low. This is explicable by the fact that the wheat belt in this State is in a somewhat earlier stage of than is that of the Eastern States, and consequently, on the one hand the industry has had less time to accumulate capital fron1 profits and has been 1nore dependent on credit, and on the other has had less opportunity for borrowing, and neither storekeepers nor private individuals have able to afford the financial support which has been a feature in older-established wheat

areas. In South Australia, the figure is also low. It is probable that the long experience of this State in wheat-growing, and the reverses which have from tin1e to tirne been experienced, have generally engendered a spirit of financial cautiousness in the trading comn1unity which has been less in evidence in other States, Further, the relatively lo'v average yields which have been characteristic of sections of the wheat belt in this State never justified the advance of large sums of rnoney.

In New: South Wales the " storekeeper " figure is high. This is due to the fact that the wheat belt here has for the n10st part been developed in regions which had been successful wool and sheep raising districts for many years. During that period successful and well-established stores had been in existence in n1any of the older tovvns. These stores had accurnulated reserves

of capital which they were accustorned to use as credit in their business.

103. The total of ":Miscellaneous" debts includes those ite1ns which cannot be segregated under the appropriate sub-heads with any degree of certainty.

3. BANK CREDITS OF WHEAT-GROWERS. 104. As already stated, the returns fr01n the Joint Stock Banks indicated that a large number of wheat-farmers had credit balances. Table 12 summarizes the data supplied by the banks to the C01nmission,. It shows that the credit of the industry with the banks has diminished and the debts to the banks have increased n1arkedly during the last fi ve years. The average of credit balances has declined by about £30 per farmer and the average of indebtedness has. increased by about £450 per farmer during the period.

F.5964.-5

104

The answers to the questionnaires (B3) subsequently sent to farmers, showed that the bank credits of the 2,120 "wheat-growers" who afforded information were as follow:-929 (or 43. 8 per cent.) had no credit balance. 103 (or 4. 9 per cent.) had credit balances of under £I 0.

426 (or 20.1 per cent.) had credit balances of over £I 0 and under £50. 228 (or 10.8 per cent.) had credit balances of over £50 and under £100. 434 (or 20.4 per cent.) had credit balances of over £100.

An interesting confirmation of the reliability of the questionnaires is afforded by the fact that the banks' returns showed that 54. 5 per cent. of the farmers had credits whilst the questionnaires indicated that 56.2 per cent. were in that position.

This particular inquiry showed that, although there are some farmers who have no liabilities, and a few who have substantial sums on deposit account, yet in general, the possession of a credit balance with a bank by a "wheat-grower", is no indication of a general freedom from indebtedness. Broadly speaking, such credit balances are in the nature of small working accounts.

4. PRESENT FINANCIAL POSITION OF WHEAT-GROWERS.

105. In the Cost of Production ,Section of this Heport, the Commission examined in detail the reliability of its sample, which consists of 524 cases, and showed that its cross section of the wheat-growers was adequate for the purpose of making its estimates of costs.

Figure XXII. has been constructed to illustrate the position of each of these cases with reference to costs of production (including interest) and to the extent of their interest charges on a bushel basis. In this figure each farmer 'is represented by a dot; those who are on the left-hand side of the line AB (Group I.) were able to produce vvheat at a cost of 3s. per bushel f.o.r. ports or less in June, 1934. (This is equivalent to 3s. per bushel on the basis of reduced costs, which will be discussed later). These farmers are able to maintain themselves on the austere standard adopted by the Commission and to pay their vvay and meet their interest charges ; the adjustment of their interest-bearing debt is not a vital matter. Those who are below the diagonal line CD (Group III.) had costs of production which, apart from interest charges on debt, were in excess of 3s. 2id. per bushel f.o.r., ports basis. Most of these farmers cannot be made economic producers of wheat by any scheme of debt adjustment alone. Because with wheat at 3s. per bushel f.o.r. ports, they cannot meet working costs, let alone interest on any capital at all. Those who are in the middle position (Group II.) had costs of production

which (apart from interest) were less than 2fd. per bushel; an adjustment of their total interest payments would, therefore, enable them to continue in

Figure XXII. shows that-(i) Group I. contains 40 per cent. of the wheat farmers in this sample. The respective ability of each of these farmers to liquidate his past deb ts rriay be judged by his respective horizontal distance to the left of the ordinate A.B.

(ii) Group II. contui"ls 26 per cent. of the wheat-farmers in the sample. The extent of the reduction in interest charges which would be necessary to transform any particular case in this group into one of economic production under present conditions may be judged by the horizontal distance separating it from the AB. The rela.tive amount of interest charge which can be met may be judged by the horizontal dista.nce from the line CD .

(ii1) Group III. embraces 34 per cent. of the wheat farmers; in each case the costs of prodtiCtion without interest were in excess of 3s. 2id. per bushel, f.o.r. ports. Even if their debts were writt en off, they would still have to farm more effectively than they have been doing in the past if they were to become economic producers. The relative economic position of each of these cases may be inferred from its horizontal position with reference to the line CD.

In practice the boundaries of each group would be found to overlap to a certain extent. Thus, as regards Group I. , the figure shows interest-bearing debt only; consequently, a man on t.he right-hand margin of this group might need some debt adjustment in respect to

tiG.

XXll

SHOWING

THE

POSITION OF

524

INDIVIDUAL

FARMERS

WITH

NQ 2"'

COSTS

OF

PRODUCTION AND INTEREST CHARGES

PER REFERENCE

BUSHEL

TO

(CALCULATED

JUNr

1?.34)

2 / G

!

• I

I •A

.

'c

I

I

I I

.

.........

2/3

o:t c-'1 a" 2/­ c:.l t: :::1 I ........

1/6

..£

I

/.

1

I I

GROL

p

1 I

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107

non-interest bearing liabilities. Again , in Group III. men wit h low interest charges and costs only slightly in excess of 3s. 2id. and who have little debt would probably be willing to continue on their farms in the hope of an improvement in prices and costs, even although they could only do so by sacrificing part of their own income.

5. THE PRESENT CAPITALIZATION OF THE INDUSTRY. 106. An endeavour has been 1nade to assess the present financial position of the wheat industry of Australia as a whole on the basis of what its minimum earning capacity ):night be on the assu.mpt ion that the growing of wheat ceased and the whole of the wheat lands of Australia were converted to the production of sheep, wool and fat la1nbs. In this hypothetical statement no cognizance is taken of the possible effects of the increased produetion of sheep products.

The Commission realizes tihat such a picture of the industry 1nay lead to an utterly wrong conception unless certain fact s are emphasized. A study of the R.eport as a whole clearly that even under the present conditions of costs and prices, and after allowing for the incon1e from side lines, and without charging interest on 1noney invested by the farmers themselves, approximately 40 per cent. of the wheat holdings of Australia can still carry on

making some profit. The remainder of t he industry is involved in a continuous l oss of varying magnitude and in the cases included in Group III. as in F igure XXII. the losses are so great as to have a serious and important effect upon the results of the study of the industry as a whole.

Again, the Commission has been concerned as t o the justification for accepting a sheep basis for a valuation of the assets of the industry, but has been unable to find any other basis which would be applicable generally. In this connexion, and in further elaboration of t he point made just above, the holdings under Group I., F igure XXII., can doubtless, in many cases, make more profit even under present costs and prices by a so u>.1d rotational system of growing wheat than by r.aaking sheep and sheep products their main objective.

After careful consideration, the Commission has decided that a balance-sheet of the industry on the lines sub1nitted hereunder should be included in the Report in order to ernphasize the magnitude of the assets of the industry, and also to draw attention to the fact that when the inevitable elimination or re-adjust1nent of n:1any of the holdings under Group III., Figure

XXII., has taken place and the re-adjustments of the holdings under Group II. are effected, the wheat industry in Australia will be re-established on a sound basis. Therefore the Commission has endeavoured to analyse the total of all classes of '' wheat farn1ers' " debts, and to compare them with the assets of the fanns. The init ial step in the process was to ascertain the debts on a per-acre basis ; the results are expressed in Table 13, the data for which were

derived fron1 Questionnaires B , B2, and B3 (3 ,27 7 cases) .

TABLE 13.

AN ESTIMATION OF THE INDEBTEDNESS OF ON A

BASIS BY STATES.

Number of

I

Debt per

- farmers concerned Area cropped. Total debts. acre cropped. in estimate.

Acres. £ £

New South Wales . . . . . . 991 361,377 3,911,929 10 16 6

Victoria . . . . . . .. 725 226,313 3, 11 2, 149 13 15 0

Sout h Australia . . . . . . 1,026 388,351 2,714,843 6 19 10

\V estern Australia . . . . .. 494 215, 844 1,763,661 I 8 3 5

Queensland . . . . . . .. 41

I

10,595 42,15 1

I

4 0 2

I

3,277 1,202,480 ll,545,033 ..

I I

107. The average debt-per-cropped-acre is not a very satisfactory figure, because the ratio of cropped area to the t otal area of the farms varies widely. It may be l t o It, . l to 2 , 1 to 3, or even higher in districts where, for topographic or other reasons, there are considerable areas of grazing land enclosed within the boundaries of wheat farms. This land is frequently useful in the manaO'ement of the farm and enables the wheat-grower to carry sheep more effectively than he otherwise could, but generally, it is not as valuable as cultivable land.

A staternent of the average debts of wheat-growers in the arious States on a farm acreage basis is found in the following table in the compilation of which the same 3,277 cases have been used.

108

TABLE 14.

AN ESTIMATION OF THE INDEBTEDNESS O:F WHEAT-GROVvERS BY S'l,ATES ON THE BASIS THE AREA OF THE WHOLE FARM.

New South "\Vales Victoria South Australia Western Australia Queensland . .

. .

. .

. .

. .

. .

..

..

..

..

..

- Number of farmers concerned Area of farms. in the estimate. Acres. 991 1,151,644

725 754,343

1,026 1,550,750

494 1,024,925

41 28,462

3,277 4,510,124

I

I l'ota.l debt.

A vera.ge debt per acre.

£ £ s. d.

3,911,929 3 711

3,112,149 4 2 6

2,714,843 1 15 0

1,763,661 1 14 5

42,451 1 9 10

11,545,033 ..

108. The average figures for indebtedness on either basis takes no account of the differing degrees of productivity of the land in various States or districts. Nor do they indicate the extent to which smn e farmers are free of debt and others are over-capitalized. Therefore, Table 15 has been constructed to further the investigation of these points. It shows, for the 3,277 cases dealt witb, the incidence of the debts in each major wheat-growing district. The data in the table show that the 1nore satisfactory and well established districts have the higher indebtedness per acre in spite of the high yields and n1ore profitable returns fron1 these areas.

Thus, in the Riverina and the South Western-Slopes of New South vVales, in the \Vimmera and the Northern Districts of Victoria, and in the Central and Lower North of South Australia, the capitalization is relatively high. On the other hand, districts which are of lower average productivity or which are generally less satisfactory for wheat-growing, norr11ally have lower debts per acre, although some of the areas have nun1erous instances of high

capitalization.

TABLE 15.

SHOWING FOR EACH MAJOR WHEAT-GROWING DISTRICT THE EXTENT OF WHEAT-GROWERS' INDEBTEDNESS AND THE INCIDENCE OF THAT DEBT IN THE 3,277 CASES EXAMINED.

(ON A F AHM Ao.R EAGE B Asis}.

(1) (2) 1 (3) (4) (5) 1 (6) 1 (7) 1 (8) 1 (9) 1 (10) 1 (11) 1 (12) 1 (13) 1 (14) 1 (15)

Number _ _ Num_b_e r _ Further analysis of Columns 3 and :per farm acre.

of ! I I I I cases I With With

examin- Free of debts debts £1 and £1 / -/1 £2/--/1 £3/-/1 I £4/-/1 £5/-/1 £6/-/1 £7 1-/1 £8/-/1 £9/-/1

ed. debt. under over under. to £2. to £3. · t o £4. to £5. to £6. to £7 . to £8. to £9. to £10.

£100. £l(JO.

£10 and over.

--------1----------------------,-------- New South Wales­Riverina .. South Western Slope Central Plain .. Central Western Slope North-Western Siope North-Western Plain Other districts .. Whole State . . I

321 16 l 304 40 32 41 39 42 37 28 19 15 8

2121 n 9 192 21 26 26 20 2s 24 I4 11

1

I s 5

49 1 . . 48 3 8 17 7 7 4 I I . . . .

23s n 3 224 25 31 38 4o 3o 1s . 21 n 1 3 9

75 4 1 70 ll 11 Jl 11 10 I I 3 I 2 . .

36 l 1 34 lO 8 7 3 3 - l . . l ..

60 3 1 56 s 9 6 4 J o 1 5 I 3 a

--------- _____ , _ _____ --------------991 47 16 928 126 125 146 124 130 99 67 56 32 25

4

4-

4

14

Victoria­ Wimmera . . Mallee I. . .

Mallee II. Mallee III. Northern ..

Other Districts

. . 227 22 11 194 25 21 16 13 1 24 17 17 19 9 14 30

. . 283 12 7 264 32 28 53 35 I 3t1 29 19 14 ll 8 8

Whole State

South Australia-Central ..

Lower North Upper N or'th Vifestern . .

Murray Mallee South Eastern

. . 63 I 1 61 6 4 10 14 14 8 2 4 . . . . . .

. . 14 . . . . 14 1 2 6 4: 2 . . . . . . . . . . . .

. . 121 14 2 105 6 10 13 9 12 11 8 15 8 5 lO

. . 17 2 . . 15 l . . 2 2 3 1 4 . . . . . . 2

.. - 725 _ __ 5!_21 6531:=-71 - 65-----w·--7:;---:sg-66 28 27 50

204 284 98 220 209

11

34 47 22 31 27

r,

13 5

7

9

161 224 71 I82 173

11

44 32 24 120

62 3

25 26 ll

37 42 3

16 16 11 15 34

1

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17 1

21 30 7

7

12 1

1:3 30 4

I

12

8

17 2

2

8

18 4

6

11 I

2

2

I

4

5

------------------------------

7

21 2

Whole State . . 1,026 16 1 43 822 285 144 93 82 78 60 30 30 23 10 30

·western Australia­ Whole State

Queensland­ Whole State

-------------------------- - --494 21 8 465 123 138 104 70 17 14 4 3 --------------------------------------4I 8 32 7 11 lO 2 2 ------------------------------CoMMONWEALTH . • 3,277 288 89 2,900 612 483 452 355 316 240 151 141 83 62 94

109

109. The total debt figure appears large, but the industry has very definite assets which are substantial backing for a considerable proportion of the indebtedness. In endeavouring to arrive at the valuation of the assets, it is to be assumed that the industry is to be regarded as a going concern although in the event of a severe contraction of wheat-farming, assets such as machinery and horses would depreciate

Table 16 whi'ch follows , shows the nun1ber of various classes of stock carried on "wheat farms" (numbering 41,807) and also the valuation of that st.ock. The estimate has been based on 2,120 to questionnaire B3. A cross-check against the statistical data for sheep in New South Wales gave satisfactory results.

New .South Wales. I Victoria. South Australia. West Australia. Queensland . Total.

. (OOO's.) (£000's.) (OOO's .) (£000's.) (OOO's.) (£000's.) (OOO's.) (£OOO 's .) (OOO's.) (£000's.) (OOO's.) (£000'8.)

Sheep .. 4,250 2,656 2,037 1,273 I 2,549 1,593 2 ,519 1,574 55 35 11,410 7,131

Horses .. 139 2,224 121 1,936 136 2,176 80 1,280 3 48 479 7,664

Cows 38 190 48 240 53 265 21 105 9 45 . 169 845 . . Other cattle 73 219 62 186 39 117 27 81 3 9 204 612

. . 5,289 .. 3,635 . . 4,151 . . 3,04:0 . . 137 . . 16,252

The basis of the valuations has been as follows: Sheep have been valued at 12s. 6d. per head in view of the fact that they contain old and young wethers, and breeding ewes, many of which are not of very high quality. Horses have been valued at £16 per head; the totals include hacks which number about 10 per cent. The figure accepted may seem low,

but at the present time there are many horses which have been kept working longer than they normally would have been. Cows are included at £5 per head, as the average type of cow on wheat farms is not a high grade animal. " Other cattle " , which includes bullocks and yearlings, have been estimated at £3.

On this basis the total valuation of the stock on " wheat farms " is roughly £16,250,000.

110. The machinery on the farms may be averaged at £250 per farm in view of the fact that replacements have been reduced to a mini1num in recent years. On this basis the total value of the machinery on the 41,807 farms will be roughly £10,500,000.

111. The value of the land and improvements is difficult to estimate. Their value for the purposes of alternative production may be a guide. The total area of wheat farms is estimated at about 50,000,000 acres. These farms are well subdivided and as a rule well supplied with water, and equipped with buildings. In the majority of cases, they could be used for grazing purposes, provided that effective fodder plants were grown. Their present carrying capacity in terms of various classes of stock is shown in Table 16. If those figures are converted into

" sheep grazing units " by multiplying the horses, cows and cattle by eight, the figure of 18,226,000 is reached. It is a reasonable assumption that this capacity could be increased by one-half if attention was focussed on grazing instead of cropping. This would mean a carrying capacity of say 27,339,000 sheep units. The economic value of land to carry a sheep is dependent on the prices of sheep products, but as the grazing areas should continue to provide at least the present supplies of fat lambs, it would be somewhat higher than if it were available for the production of wool alone. £4 per sheep "area" is an average figure which may be accepted for the sake of argument. This gives a land value of £109,356,000.

112. Therefore, on a sheep-carrying basis, the total value of the assets in stock, machinery and land can be computed at about £136,000,000, as against total liabilities of about £151,000,000. It is to be noted that this estimation of liabilities does not take into account the large sums of private capital which have been invested by farm_ ers in their properties, and which are not shown as debts in the Commission's calculations. The estimation is a rough one and applies to the industry as a whole. The cost surveys show that in the better districts the extent to

which capital charges can be met, even at present high levels of indebtedness , is considerable; while in the less favor,able wheat districts the number of farmers who can pay no interest at all is relatively high. The real problem of the wheat industry as a whole is the amount of indebtedness which has been incurred in districts which are uneconomic wheat areas at present

price levels.

.110

6. DISTRIBUTION OF THE DEBTS ACCORDING ·TO THE CLASSES OF CREDITORS.

113. Figure XXIII. shows for each main wheat-grmving region the way in which the debts are distributed among t he various creditors. The fi gures have been expressed on a percentage basis and m u sG be · regarded as approxi1nations; in arriving at them the term "Financial Inst itutions " has been used to include joint st ock banks and trustee and assurance companies. " Crown Debts" includes debts t o St ate banks and all other public bodies except for rates and taxes, while t he "l\1iscellaneous " iten1 cornprises debts t o storekeepers, machinery and other merchants, stock bills of sale and rates and taxes.

The exan1ination of the figure shows that the percentage of debts due to the Crown is higher in the less reliable wheat-growing districts; Conversely, the advances by ·financial institutions are generally higher in better wheat areas or in districts in which there are good possibilities of alternative production, e.g., the ·wim.mera, the Riverina, the Central and Lower North District s of South Australia, and in Queensland. Unfortunately the data for Western Australia could not be segregated into separate districts so that deductions in regard to the various wheat-growing regions of t hat State could not be made.

The fi gure shows the position in percentages; consequently, a high percentage of indebtedness t o any special cla,ss of creditor is not necessarily an indicatio!l of an unsound position. It would be necessary t o use t he figure in conjunction with the cost studies before such a conclusion could be reached.

The case of t he three sub-sections of t he Victorian Mallee is of special interest. Their history has been outlined in t he First Report (page 17). The Comrnission has been able to analyse the data for t hese districts to a greater extent than is possible in any other State. The segregation of the relatively small and newer districts Mallee II. and Mallee III. from the older and 1nore reliable area tern1ed JYiallee I. is very disadvantageous to ·the two former districts. It is probable that a sin1ilar subdivision of n1arginal areas such as those occurring in certain regions in Western Australia, in parts of t he Western Division and l\1urray Mallee of South Australia, and of the Riverina and Central Plain in New South vVales, would have revealed a similar state of affairs had such a subdivision been practicable.

7. THE " FINANCIAL JYIARGIN "* OF WHEAT FARMERS,

114. In the preceding calculations no account has been taken of the sums which have been invested by individual farmers in their properties either in the form of cash or returns reinvested as improvements. Such sums do not lend themselves to computation, nor would any good purpose be served by considering the matter in detail. There is no actuarial difference between a man who has paid only £500 in cash for his property but who, by living penuriously and putting all his profits into the purchase of improvements during say 40 years, has built up the farm until it is as valuable as another farm for which a second man may have paid £10,000 in 1926. It is known that the actual total of money invested by farmers in their farms is large.

Whenever a farmer purchases a property he automatically enters upon a transaction which is speculative in character. I£ the average annual net returns from the type of farming carried on increase then the industry becomes prosperous, land values rise and capital appreciation occurs. If the reverse process occurs and the industry enters upon a period of depression, land values tend to fall and the farmer has to face capital loss if he finds it necessary to sell the property. Such changes in capital value are inevitable under any system of private occupation of land.

In ''normal" ti1nes when the price levels both of the materials which the fanner buys and of the commodities which he produces are relatively stable, the market value of agricultural properties usually stands at a somewhat higher :figure than will allow the purchaser to earn current rates of interset. This n1eans that there is a general tendency towards over-capitalization in land prices and the incoming farmer is only able to establish him.self if the price relationship

of his purchases and his produce moves in his favour or if he is able to work the farm more economically than his predecessor, or if he is prepared to take in lieu of interest on portion of his capital the inherent satisfaction in owning land which also provides him with a home. This state of affairs is not confined to Australia ; it applies to agricultural areas in most countries. The reasons for it are varied and need not be discussed here. The result is that the purchase of agricultural land is a speculation in which the farmer wagers his capital on the success of a venture the outcome of which is dependent upon his skill on the one hand and on movements

'" The term " margin " is here used to designate t he relat.iou between tot al lia bili ties and total assets.

COLUMN

DIAGRAM

DISTRIBUTION

FIG.

XXIII

SHOWING

FOR

THE

PRINCIPAL

.

WHEAT

OF

WHEAT

FARMERS'

DEBTS

AMONG

GROWING

DISTRICTS

THE

PERCENTAGE

VARIOUS

CLASSES

OF

CREDITORS

(APPROXIMATE

FIC.URE.5

ONLY)

SOUTH AUSTRALIA

NEW

SOUTH

WALES

WESTERN

AUSTRALIA

0 CENTRAL

&

UPPER

LOWER NORTHERN

NORTHERN

WESTERN

QUEENSLAND I 0

u

,--------,

MURRAY MAL

LEE

SOUTH

CENTRAL

CENTRAL

NORTH

WESTERN

OTHER

RIVERINA

WESTERN

SLOPE

PLAIN

WESTERN

SLDPE SLOPE&PLAIN

OISTRICT5

VICTORIA

REFERENCE :-

Miscellaneous

······-··--····

- ··-···-

--

-··-· - · · · - · ·

·-· ·

··

-· ··- ·

r:::::::=::::J

Private.

Loans

.......

. . .................

.....

.........

Private

Mortgages

.....

. ...

....

...

.........

. ocxx::&:RI

Crown

De.b-ts

......

. ....

. . ..

. . ...

....

. . ....

. .. ......

.. . .

..

rzzzzz.:A

Financial

Ins-titutions

__

______

·· -··------

- -

OTHER

WIMMERA

MALLEE

I

MALLEE

2

MALLEE

3

NORTHERN

QISTRICTS

N

113

of price levels over- which he has no control on the other. · In times of depression the farmer's speculation is and he a part or the :vhole whatever capital he has

in the enterpnse If for any reason he IS forced to terrrnnate his occupancy. In the event of his being able to carry on his farming operations his investment may again appreciate in accord with an alteration in the ratio of prices and a consequent improvement in the economic position of the farm.

The estimation of the "financial margin" -which individual wheat farmers have in their holdings at the present ti1ne could be worked out on a basis of the notional value of land . in each district, but such a 1nethod would have no sound foundation. The Commission has therefore adopted the econon1ic value of the farm judged from the point of view of its productive

capacity as the basis of esti1nating this margin in the farms. When doing so the Commission is aware that in the event of stability being arrived at in the wheat industry the market price of land would slowly rise above an economic price even if that stability were achieved at the present price level for wheat.

The amount of "financial margin" based upon the productive capacity of the farms must have regard to the price of the com1nodities produced. On this basis farmers who, having made such economies as are practicable, and are still unable to produce wheat at a price per bushel which is less than their total receipts per bushel, will have no "financial margin" in their holdings. The following table based on the detailed costs of 524 farmers sets out the percentage of wheat-growers who still retain a "financial margin" in their holdings assuming that costs of production remain as they are at present and that the assistance recommended by the Commission in the matter of a home consumption price is afforded, thereby yielding a total f.o.r. price of 3s. per bushel:-

New South Wales- Percent.

Riverina S.W. Slop_ e C.W .. Slope N.W. Slope and N.W. Plain

Other districts

Whole State

Victoria-.. ·wirnmera ].\1allee I. Mallee II. and III.

Other districts

Whole State

South Australia-Central and Lower North Murray Mallee Western

Other districts

Whole State

Western Australia­ Whole State

Queensland-Whole State

Commonwealth

34.7 55.5 30.6 60.0

31.0

39.7

53.2 24.1 5.5 54.2

36.3

59.5 37.0 28.5 18.7

48.0

44.4

40.1

This table m.ust be regarded as a rough approxin1ation, but it is useful an as indication of the measure of distress in the industry in each district at the present time. It shows that about 60 per cent. of the wheat farmers are unable to make ends meet on the basis which has been described.

114

APPENDIX D.

INFORMATION RELATIVE TO THE DISTRIBUTION AND RETURNS OF RELATING TO THE DEBT POSI'riON OF WHEAT-GROWERS AND TO THE RELIABILITY OF THE " SAMPLE " USED FOR DEBT ESTIMATIONS.

Dl. The found it necessary to use a variety of forms in making its inquiries into the debt position. The distribution of these questionnaires and the number of each which was returned to the Commission are matters of interest.

Form B. was used to obtain on the general system of farming as carried out by reliable farmers. It was a comprehensive document covering several pages and in it many questions were asked. Some of these had reference to indebtedness and rates of interest. The way in which this form was distributed and the localities from which replies were received have already been referred to in the section of this Report which deals with costs of production and in Appendix C.

Form B2. was of a simpler nature designed to elicit information on the debts of individual farmers. It was sent to wheat-growers in all the mainland States. The individuals to whom it was sent were selected at random from lists supplied from local sources.

Form B3. was designed for debt survey purposes but was rather more comprehensive than Form B2. It was sent to wheat-growers in the four main wheat-growing States. The individuals were selected at random from lists supplied from local and other sources.

Form D. was issued to Government and private trading banks throughout Australia, chiefly through the head office of each bank.

Form D2. was issued to merchants and general storekeepers in Queensland.

Form G. was issued to machinery, fertilizer, oil and other companies and merchants, trustee companies, assurance companies and other institut.ions, firms and traders in New South Wales, Victoria, South Australia and Western Australia.

Form H. was issued to country storekeepers in New South V¥ales, Victoria and South Australia.

In many cases reminders were sent out where replies had not been forthcoming. Doubtful points in returns were followed up by correspondence although in some cases the replies were so unsatisfactory as to render the answers valueless. In some 500 cases farmers explained that their particular circumstances were not typical for one reason or another; such explanatio;r.s were usually valid. Returns which have seemed to the Commission to be incomplete or unsatisfactory have not been used in the compilation of the data.

D2. The following table shows by States the numbers of each questionnaire which were issued, the number of returns which were received, and also the number of those fin allyaccepted as worthy of inclusion in the survey:--I

Number forms Number reminders Number of Number forms Number forma Questionnaire. State. issued. necessary. forms returned. discarded used. (unsatisfactory).

Form B . . .. New South ·wales .. 369

I r 207 46 161 (farmers) Victoria .. .. 315

r

None I

168 25 143

South Australia .. 240

sent 150 23 127

Western Australia .. 105

l 85 10 75

Queensland .. 60 j 36 18 18

1,089 .. 646 122 524

59.3%

.Form B2 . . .. New South .. 347 195 265 82 183

(farmers) Victoria .. .. 355 187 265 79 186

South Austr8Jia .. 274 169 218 47 171

Western Australia .. 141 .. 76 6 70

Queensland . . 60 .. 31 8 23

1,177 551 855 222 633

46.8% 72.6%

------

Form B3 .. . . New South Wales .. 2,511 1,532 1,024 377 647

(farmers) Victoria . . . . 1,058 640 526 130 396

South Australia. .. 2,417 1,773 1,030 302 728

'Vestern Australia 701 423 409 60 349

Queensland . . . . . . . . .. . .

6,687 4,368 2,989 869

65.3% 44.7%

115

Number forms Number reminders Number of Number forms Number forma Questionnaire. State. discarded issued. ·necessary. forms returned. (unsatisfactory). uaed.

Form D . . . . New South '\Vales . . 7 2 7 .. 7

(to Banks) Victoria . . . . 9 2 9 I .. 9

South Australia . . 7 2 7

l

. . 7

\Vestern Australia .. 5 3 I 5 . . 5

Queensland 3 2 I 3 I 3 . .

I

I

..

31 11 31 . . 31

35 .5% 100°/o

Form D2 . . . . Queensland . . 202 None sent 9 .. 9

(to Merchants and 4. 5°/o

Storekeepers)

Form G .. . . New South Wales .. 295 159 I 197 150 47

(to Merchants, Victoria .. . . 439 234 226 155 71

Trustee Companies, South Australia .. 90 60 77 30 47

&c.) Western Australia . . 24 .. 24 2 22

Queensland . . . . . . .. . . . .

848 453 524 337 187

53.4(% 61.8%

FormH .. . . New South Wales .. 349 235 202 - 81 121

(to Country store- Victoria .. . . 242 50 99 52 47

keepers) South Australia .. 111 97 49 22 27

Western Australia .. . . . . . . . . . . .

Queensland . . . . . . .. . . ..

-

702 382 350 155 195

54.4o/0 49.8%

D3. Form B3. had included in it a question which a.sked the farmers to compare their present indebtedness with their indebtedness in 1929, and to give their reasons for any change which they recorded.

The following table shows an analysis of the position as revealed by the answers received:-

- Number who have Number who have I Number who have

I

Number results not Total. progressed. remained stationary. fallen back. stated. Ofo % o/o % %

New South Wales .. 77 11.9 142 21.95 385 59.50 43 6.65 647 100

Victoria .. . . 32 8.09 87 21.97 255 64.39 22 5.55 396 100

South Australia .. 86 11.81 183 25.14 351 48.21 108 14.84 728 100

Western Australla .. 37 10.6 66 18.92 216 61.89 30 8.59 349 100

Total .. 232 10.94 478 22.55

I

1,207 56.93 203

I

9.58 2,120 100

Of the 1,207 farmers who have fallen back during the last five years, the reasons given are as follow :-

(1) (3) (4) (5) (6) (7) (8) (9)

Bad seaaons. Total.

Two or more Reasons

of reasons ty Column 2, 3,

Low prices . shown in I pr?per ' 4 plus No reason

Columns 2, &c ., reasons given.

-------- 11---------- o' __:=-_ -------

% % I o/c I % % I % %

New South Wales . . 5 1.3 .. .. 113 ,29.35 79 20.52 18 4.68 60 1 15 .58 llO 28.57 385

Victoria.. .. 5 1.96 2 .78 64 25.1 83 32.55 14 5.49 32 12.55 55 21.57 255

South Australia. . . 24 6.84 3 .85 86 24.5 67 19.1 9 2 .56 59 16.81 103 29.34 351

Poor ylelds .

WesternAustralia .. 2 ' .92 3 1.39 69 31.94 16 7.41 22 10.18 39 18.06 65 30.1 216

.. J36 2.98 8 .66 332 27.61245 20.30 ,63 5.22 190 15.74 333

% 100 100 100 100

100

116

2. THE DISTRIBUTION OF THE FORMS B3 AND THE RELIABILITY OF FORM B AS A "SAMPLE". D 4. The distribution of the Forms B3 among the various districts in the States has been examined by the method in Appendix C. This examination has shown that the distribution is generally satisfactory.

In estima.ting the t otal debts of wheat-growers, all satisfactory replies to Forms B, B2 and B3 have been used. In the followin g table t he relationship between t he forms used and the total "wheat-growers " in each Stat.e is shown:---- Total Forms B, B2 ant! Percentageo used. •' \Theat-growcrs. "• B3 used. --------------- -

New South Wales . . .. ll,002 991 9.00

Victori <:L .. . . . . 11,238 725 6.45

South Australia . . . . 10,800 1,026 9.5

Western Australia .. . . I 8,267 494 5 .97

Queensland .. . . 500 41 8.20

41,807 . ' ..

-

• For discussion of these totals see Appendix C.

The acreages under crop of the farmers whose Forms 13, B2 and B3 were used, and the percentage which that acrea.ge bears to the acreage under wheat cultivated by " wheat-growers" as defined by the Commission is as follows:-

New South Wales Victoria South Australia Western Australia

Queensland

Acreage under Crop.

Of all

•• ·wheat-growers."

3,584,050 2,981,000 3,894,980 3,31 2,500

125,000

Of all Forms B, B2, and B3.

361 ,377 226,313 388,351 215,844

10,595

Percentage.

10.08 7 .59 9.97 6.52 8.47

These figures show that t he percentages of acreage under crop are slightly higher than the percentages of number of wheat-growers, indicating that the "sample" of farmers used in these calculations is drawn from farmers wit.h a rather larger acreage under crop than is represented by t he State average. In computing total debts from average debts as calcul ated from the the p.ecessary adjustment has been made,

SECTION TV.-DETAILED CONSIDERATION OF COMPONENT FACTORS IN COST.

1. MACHINERY AND SPARE PARTS AS FACTORS JN , COSTS

2. TRACTORS AS A FACTOR IN CoSTS OF PRODUCTION

3. PETROLEUM PRODUCTS AS FACTORS IN COSTS

4. SUPERPHOSPHATE AS A FACTOR IN C'OSTS . .

5. BAGS AS A FACTOR IN CosT PRODUCTION

6. SuNDRY FARM SuPPLIES IN RELATION To CosTs oF PRODUCTION

7. RAILWAY FREIGHTS AS FACTORS IN COSTS

8. PORT CHARGES

9. RATES AND 4s n'r Oosrs

P aGE.

119

122

125

125

131

132

134

147

152

119

IV.-DETAD..ED CONSIDERATION OF COMPONENT FACTORS IN COST. I. MACHINERY AND SPARE PARTS AS FACTORS IN COSTS. 115. In paragraph 81 of this Report the Commission set. out the relation which the cost of an adequate provision for replacement of machinery other than tractors and for: spare parts for such machinery bears to the total costs of production. The data of that survey suggest

that the average "machinery cost" is between 5d. and 7d. per bushel. Figure XXI. suggests that there are few cases where such costs are over 10d. per bushel and it is probable that such cases are due to particularly low yields or uneconomic acreages under cultivation. The reduction in production costs which rnight be expected from the machinery section is therefore

somewhat limited. Such reductions n1ight ensue from either a more econ01nical use and selection of machinery by farmers, or a general reduction in cost of machinery and spare parts. 116. In the past some farmers have hought larger and more expensive machinery than they really require. This was largely brought about by a variety of causes. The period 1920-1931 was one of expansion during which many men increased the areas of their holdings and planted larger acreages. This tendency reached its clin1ax in the "grow n1ore wheat" year, 1930-31. These larger areas required larger machinery or more machinery, and plant was purchased accordingly. At the present time the t endency is for a contrac.tion of acreage and at the Inoment 1nany farmers have rather more n1achinery than they require. During the past decade in the less reliable districts, where crops are light and usually short in the straw, many farmers gave up the use of the strippers and winnowers which had been sufficient for preceding generations and took to stripper-harvesters or headers. These new machines are larger and more costly and have more moving parts subject to wear and consequently they are more expensive to keep in operation. On the other hand they are more efficient and work faster, so that the number of man-days required to harvest a given area is dirninished when they are used. It is, however, a question whether this is a justifiable saving in those districts in which favorable harvesting weather may be confidently expected for weeks on end. Son1e experienced farmers gave evidence to the Commission strongly in favour of the use of strippers and winnowers.

It is still rnore doubtful whether the saving in time is economic in regions where the land still contains stumps and roots which have devastating effects on the more con1plicated types of machine. 117. The Commission has received many representations on the subject of the high costs of machinery and spare parts. The farmers' representatives expressed the opinion that all machinery costs have advanced very considerably during the last two decades and that the prices are to-day unwarrantably high. They also stated that the cost of spare parts was in their opinion excessive. When pressed for definite evidence on the matter they were not able to afford convincing proofs of their statements. The production of actual list prices of n1achinery

at two different periods is not of great value because in ahnost all cases the types of the various machines have changed, the costs of manufacture and distribution of all articles have altered markedly during the last twenty years, and finally the value of money has also changed. Judging by the public evidence taken by the Tariff Board, its forthcoming Report on Agricultural lVlachinery will deal with the question of present costs and prices of machinery in considerable detail and the Con1n1ission has decided that a repetition of investigation is unnecessary.

The farmer's chief concern is that the price he receives for his product has fallen to a much greater extent than has the price he is called on to pay for the machinery which he uses in growing that product. The following tables taken fron1 the evidence given before the Cou1mission are of interest in this connexion :- -

vVEIGHTED AVERAGE PRICES PER BUSHEL OF AUSTRALIAN WHEAT F.O.R. PRINCIPAL AUSTRALIAN SHIPPING P OHTS.

1907-08 1908-09 1909-10 1910-11 1911-12

1912-13 1913-14 1914-15

1915-16< 1916-17 1917-18 1918-19 1919-20 1920-21

Year.

Pd" 1-----Ye _ar_. ----J ---Pr-ic_o. __

8 . d. 8. d.

4 1! 1921-22 5 5

4 4! 1922-23 5 2!

4 0 1923-24 4 9}

3 5! 1924-25 6 6

3 8! 1925-26 6 2f

3 7! 1926-27 5 3!

3 7! 1927-28 5 4! --

6 11 1928-29 4 9!

4 8! 19 29-30 4 3}

4 7 1930-31 2 4!

5 O! 1931-32 3 2

5 4! 1932-33 2 10!

8 8! 1933-34* 2 8-!

8 6!

' attmated.

Prices do not include bounties paid since 1931-32.

120

TABLE SHOWING VALUES OF ESSENTIAL FARM MACHINERY IN 1913, 1918, 1925, 1930, AND 1934.

4-Furrow Plough 15-Tine Cultivator 16-Hoe Drill . . .

.

6-Leaf H arrow and Bar Hay Trolley ..

Tip Dray 6-ft. Harvester 5-ft. Bag-lifter No. 4 Chaffcutter Binder

Oil Engine

Increase above 1913

11)13

£ s. d.

32 39 43 1

9

66

0

0

0

0

0

26 0

104 0

1 15

15 12 40 0

142 0

518 17

0

0

0

0

0

0

0

0

0

0

0

0

I liHS.

£ s. d.

52 0 0

66 5 0

54 10 0

12 5 0

90 0 0

29 10 0

130 0 0

2 7 6

21 6 6

57 10 0

192 0 0

I

I

707 14 0

I % 36.4 I

1925. 1030. 193,.

£ s. d. £ s. d. £ 8. d.

64 0 a 42 11 3 46 16 0

80 15 0 76 9 9 63 15 0

70 0 0 67 17 6 60 9 0

13 10 0 10 12 1 11 0 0

150 0 0 166 0 0 160 0 0

58 0 0 52 0 0 50 0 0

136 0 0 119 9 9 116 10 0

2 15 0 2 2 6 1 7 6

31 0 0 24 14 0 22 8 6

85 0 0 73 2 6 73 2 6

210 0 0 192 0 0 120 0 0

901 0 0 826 19 4 725 8 6

% % %

73.7

I

59.38 39 . 9

118. Tables showing the cost of machinery in 1920 and in 1933 have been presented to the Commission. ·They show that a very considerable reduction (about 32 per cent.) took place during that period. The Con11nission is mindful of the fact that the post war period was one of iniiation during which all costs, prices and were high, so that reductions were to be expected if the machinery industry is efficient in its operations.

119. The Commission recognizes the difficulty in n1aking adequate c01nparisons in respect to the cost of machinery in different countries. In general, it is satisfied that the prices of 1nost agricultural 1nachinery in Australia are about the same as the costs of approximately sirnilar machinery in North America when the latter costs have been loaded with freight, exchange cha1-ges and distribution costs. The Comrnission recognizes that this indicates that the Australian farmer is paying no rnore than he would have to pay if machinery were not made locally. It also knows that, in the absence of a local industry, combinations of overseas manufacturers might exploit the Australian users through non-competitive agreements. However, the

Commission considers that such c01nparisons are not the correct basis for a determination of what is a reasonable cost for fg,rming n1achinery. 120. In a sense, the agricultural machinery industry should occupy the same position in the agricultural structure as a public utility company does in the social life of the nation. The price of its products should not exceed basic costs (including normal additions for depreciation, bad debts, &c.) plus a reasonable profit on "the capital invested in the industry. This does not mean that it should be a nationalized industry, but rather that the industry should have the outlook of a public utility organization. The interests of the wheat-growing industry and of the manufacturers of agricultural i1nplements are, in reality, identical.

121. During the last three seasons, the people of Australia have been assisting the wheat-growers to continue their operations by giving bounties on production acreage. The Con1mission has recormnended a scheme for the conti:q ua tion of this assistance as long as lo w prices continue. This being an accepted principle the Commonwealth has a definite right to be sure that the farmers' costs are not being unduly enhanced by higher charges for machinery and spare parts than are justifiable.

122. The machinery industry has found it practicable to carry on its operations since 19 30 and to make decreases in its charges despite the fact t hat the value of the Australian pound has depreciated by 25 per cent. The Co1n1 ;nission considers that it is to ?e on having

been able to do this and suggests that 1t would be 1nost unfortunate If this state of affairs should be found to be impracticable in the future. Contributory causes have been the decline in the cost of raw materials and in wages but, on the other hand, there has been a considerable diminution in sales. The Commission is informed that the profits of manufacturers during the period have been small owing to a large decrease in turnover. It is reasonable to expect that the increase in sales, which would follow an improvement in the prosperity of fanners, would more

than offset any increased costs in the. n1anufacture of mnchinery, and that under such circumst8Jnces price reductions might ensue. 123. The rnachinery manufacturers have a very extensive system of agencies for selling their products. Such agencies are desirable because local stocks of spare parts must be kept readily available, if the farmer is to be able t o keep . his rnachinery in operation during the critical periods of fann work, especially harvesting. Apart from local agencies, many other devices common to selling organizations of all kinds are employed by most of the machinery

121

firms. This "sales· pressure" is doubtless as important in the agricultural implement business as in other forms of competitive enterprise, but its cost is considerable and, unfortunately, results in added charges to the farmer. The Comn1ission realizes that the wheat-growers seldom consider the cost of the services they usually obtain and often expect as a right. As long as this state of affairs prevails, there is little prospect of reduction in this element of the machinery

manufacturers' costs. In some other cou..ntries co-operative buying organizations have been able to effect marked reductions in the costs of distribution. In Australia, such organizations have been few and have met with ::;mall success. This may be partly due to the greater extent to which credit is expected in Australia, but it is also partly due to the individualistic outlook of the Australian wheat-grower who has cmne to expect services without appreciating that he h g,s

to pay for them. In view of the competition which exists in the 1nachinery business, no large manufacturer can afford to neglect his sales' orga::1ization and, until farmers have learnt the wisdom of collective buying, little improvmnent can be expected. _ 124. Many witnesses before the Com1nission stressed the high cost of spare parts. 'rhey were usually ready to admit that the quick service is expected and given rnust be smnewhat costly. The Coml'n jssion, however, finds it difficult to avoid the conclusion that some spare parts are sold at prices which must yield a high rate of profit, even when the cost of services rendered is taken into account. It seems probable that, in some cases where there 1nay be little profit on the initial sale of a machine, considerable profit is subsequently derived from the

sale of spare parts. Instances have been brought to the notice of the Commission in which certain parts manufactured locally in country districts have been made and sold at prices considerably below those charged by the gen_eral distributing firms, despite the fact that the local producer had to incur the expense of n1aking patterns for a relatively small output. No

evidence is available regarding the service value of the spare parts made locally. 125. The agricultural machinery industry has so far been unable to agree to the principle of standardization. The Com1nission recognizes that complete standardization in co1nplicated machinery is not possible, but it believes that much rnore might be done in the way of adopting standards for all the sin1pler parts of 1nachines and also in making n1achines in such a way that wearing parts can be used as long as possible. 'The Commission considers that, if the rnachinery

manufacturers are to have the shelter of the tariff, they in their turn should give every assistance to .the industry by adopting the policy of standardization whenever practicable. At the same time, standardization must not be allowed to prevent the application of new ideas. Wheat-growing is highly mechanized, and efficient 1nachinery is vital. At present, the only check on efficiency of 1nachinery is the opinion of the farmers and its effect on sales. A small

Commonwealth-wide organization under the direction of, and financed by, the wheat industry, with a few officers qualified both as regards engineering and, also, in respect to agricultural knowledge, would be in a position to improve matters considerably.. Such a body would be able to draw the attention of manufacturers to points where in1proven1ent could be n1ade and would

have power to report on cases where standardization was being deliberately avoided. At present, there is no organization within the wheat industry which is in a position to foster a critical exmnination of matters of this kind. The Cmnmission considers that such a state of affairs is extremely undesirable, and points out that an annual levy of 2s. 6d. per agriculturalist in Australia would provide at least £15,000 a year, which would be an1ple for the purpose.

126. The Commission is aware of the fact that pro\,ision against bad debts fonns a part of the selling price for machinery. A certain amount of repossession fro n1 abandoned and other farms has taken place during the depression ; in addition, the actual sums which have had to be written off by manufacturers have been considerable. Many fanrLers fail to realize that bad debts incurred by machinery firms inevitably either cause a rise, or delay a fall, in the prices

which they pay for their implements. 127. Much agricultural n1achinery is sold on the "terms" system under which one part of the purchase price is paid with the order, a second instalment becom es payable after the following harvest and, in some cases, a third part falls due at some later date-probably after a second harvest. The spread of the payments in this way is always accompanied by an increase in the total cost. Frequently, the increase represents more than 10 per cent. on the

outstanding ainounts although, naturally, it corresponds to a lower rate on the total cash cost of the machinery. In cases where the n1achinery instalments having fallen due cannot be n1et by the farmer, the machine is sornetirnes repossessed, and sometin1es becorr es the subject of further legal arrangements under which the t erm of the payment is extended, additional sums being

added to the instalrnents in view of the extension of the tern1 in favour of the purchaser. It has sometimes been 'alleged that farmers are exploited by firms working under this system ; it is apparent that, when the wheat industry is prosperous, the vendors make high rates of profit but, on the other hand, both costs of repossession and the difficulties in the way of reconditioning

122

and reselling are considerable. Consequently, substantial losses must occur· when a depression sets in. The Con1mission takes the view that this syste1n is part of the tirne-payment system which hfts, in recent years, becorne so widely developed in rnany directions. There is no evidence that the farmer is exploited to any greater extent than other citizens who wish to purchase 1nore than their means can afford. The only difference between the purchase of agricultural n1achinery under this method of finance and the acquisition of other articles under the same systern is that the possession of the new rnachinery is, in sorr1e cases, vital to the farmer's work. It is therefore desirable that the financing charges shall be as low as possible; . on the other hand, as long as there are defaulting farmers and depressions_ , the risks of the hire-purchase system in agricultural rnachinery must rernain somewhat high, and the interest rates 1nust correspond with that risk. The Commission makes no recornn1endation on the matter but suggests that if, and when, legislative action be taken with regard to time-purchase agreements, the special case of agricultural machinery should not be forgotten.

128. The Commission draws attention to the fact that, although the cost of machinery in Australia is now generally on a parity basis with overseas prices, this has duly been influenced by the depreciation of the Australian currency with reference to those of c01npeting countries. Prior to this fall in the currency level, the cost was ahnost certainly well above world parity. If it may be assun1ed that the excess cost was 25 per cent. the average wheat-farmer was, therefore, making a considerable contribution towards the establishn1ent of this secondray industry. The size of that contribution m.ay be estirnated as follows :--The average wheat-farmer employs machinery which costs about £800 vvhen new. The excess cost was therefore about £160 per farn1er before the depression. The depreciation and renewals at 12! per cent. represent £20 per annum extra cost. The interest at the then ·low rate of 6 per cent. represents about £10. This 1nakes a total of £30 per annum which, when spread over an average production of 4,000 bushels, is 1. 8 pence per bushel. It r.nay be urged that the wheat-growers were making profits at that tin1e and were able to bear those charges which enabled the machinery industry to beco1ne a valuable part of the economic life of the Con1rnonwealth. If that argu:ment is followed to its logical conclusion, it is not unreasonable to expect that the rnachinery manufacturers will make all possible contribution to the assistance of the wheat-growers 'tinder the present difficult conditions .

•

2. TRACTORS AS A FACTOR IN COSTS OF l)RODUCTION. 129. The economics of tractor farming open up an extremely wide and highly controversial subject. Evidence was given before the Comrnission on this question by many witnesses, by some fanners who had used tractors and had subsequently abandoned them, and by others who, through the years of depressed prices, still relied to a large extent on tractors as their main source of power on the farm. The conflict of opinion of these various witnesses was sharp and varied.

130. An examination of the 1eplies furnished by farmers to the questionnaires prepared by the Com1nission did not tend to elucidate the problem. These replies showed that the majority of farn1ers depend solely on horses as their ·main tractive unit for their agricultural operations, and that, of the remainder, the number that' com.bines horse and tractor power on the farn1, is rnuch greater than that which relies solely on the use of tractors. It will be seen from the column diagrams of each State showing the No. 2* costs, in Sectio:n II. dealing with the cost of production, that tractor farmers, on the average, do not produce wheat at a lower price than farmers who only use horses. Despite the rrwre or less inconclusive nature of the general evidence, however, it would appear that in certain circun1stances the ut]lization of the tractor has n1uch to commend it. For its successful operations a tractor m.ust be worked by a person who is interested in and

has an aptitude for rnachinery. Of alm.ost equal i1nportance is the type of tractor used. lmproven1ents tending to the greater efficiency and durability of these machines have been introduced within the last few years. 'VheTe both rnan and machine are efficient good results have been achieved whenever the area under cultivation is sufficiently large to warrant the capital outlay on a tractor. .

· 131. One of the advantages of the tractor, when used in cornbination with, or in addition to the horse team, is that it frequently enables a farn1er to cope with a rush of work which inevitably occurs on a farm from ti1ne to tim.e. The necessity of early ploughing in preparation of the fallow is only one of several instances that may be cited where adequate tractive power is of great importance, and where considerable value attaches to the tractor to supplement the work of horses. ·

132. Although the evidence indicated that, during the last four years, the number of tractors in regular use on wheat farms has been rnaterially reduced, this fact alone should not be regarded as proof that they should have no place in the economy of the farm. Probably many of them have become obsolescent, or have been repossessed by agents. On the other hand, it is quite probable that many farmers would have bought the most modern types but for their inability to finance such puTchases.

· 123

.A 3.

. Ul

133. A feature of tractor farming which deeply in1pressed the Commission was the progress being made towards the practical and successful use of producer gas as a fuel. Two or three stated in evidence that they had been able to reduce their fuel costs considerably, by

substituting gas generated fron1 charcoal or from wood or mallee roots in lieu of kerosene. The for the gas not expensive, afthough. it may perhaps still a_,s

being In the expenmental stage. In the cases mentwned, the owners were enthusiastic In therr support of and_ clain1ed that substantial reduction in. costs of cultivation

could be obtained by Its adoptwn. It was however, clear to the ComimSsion that the apparatus could only be effectively used by the men with a better knowledge of tractors than-is possessed by most farmers. Further, some alterations to the tractor itself are necessary if loss of efficiency is to , be, avoided. This matter is further discussed in Appendix E by lVIr. T. E. Moorhouse of the Department of the Interior, which appendix is attached to this section of this Report. • This me1norandun1 was prepared at the Commission's request.

134. Another developmeJ?.t which seen1s likely to n1ake a change in the tractor situation in the near future is the introduction of Diesel or semi-Diesel types ot tractors. Son1e ·witnesses before the Commission gave evidence of satisfactory results from this type of machine. Again success was achieved by men with marked mechanical ability.

135. As a general rule, the tractor finds its strongest support among those farmers who cultivate extensive areas. Farmers who sow only fron1 200 to 300 acres of crop each year generally find that one good horse team can satisfactorily accomplish the regular cultural progran1me for the year. When this area is greatly exceeded, it is frequently found that .a tractor is relied upon to undertake much of the additional work.

136. One special case where tractors are of considerable value is in those districts where summer rainfall causes a rapid growth of weeds during the rrwnths prior to seeding; if this growth is not effectively dealt with the ensuing crop invariably suffers. Tractors, by enabling the farrner to control the weeds over a large area in the course of a few days, solve a major problem in such districts.

137. Another type of instance where tractors become an essential feature of wheat-farming occurs in those dry areas, fortunately lirnited in extent, where water supplies are precarious and the difficulties of watering horses are considerable.

APPENDIX E.

PRODUCER-GAS FUEL FOR POWER FARMING.

By T. E. 1vloorhouse (D epartment of the Interior).

El. F.or many years attention has been given t o the possible use of producer-gas as a cheap fuel for use in internal combustion motors for mechanical transport, and fo r farm tractors. The fact that France was entirely dependent upon outside sources for her supply of petrol and fuel oil, caused the Government of that country to adopt energetic measures to encourage the development of local fuels t o replace imported liquid fuels in internal combustion motors.

Even before the war producer-gas equipments were in considerable use in France for mot or vehicles, but the war served to illustrate the importance of the transport fuel question and, at its conclusion, the matter was treated as one of national importance, and encouragement was given t o use of producer-gas 1y-(a) Subsidizing approved vehicles using producer-gas fuel ;

(b) Reducing taxation on producer-gas vehicles t o half that paid on petrol vehicles; (c) The organization of demonstration t ours of vehicles using nationally-p10duced fuels.

E2 .. Under these conditions the growth in France , and French Alrican Possessio ns, of the use of producer-gas driven motor vehicles and farm tractors was remarkable, and a number of effective designs of equipment passed from the experimental to the practical or production stage of development. In Great Britain, where the first producer-gas equipment was patented in 1819, considerable attention has been given to the production of producer-gas equipments suitable for motor vehicles and farm tractors. The same applies to Germany, Belgium, Austria, Italy and J apan ; but,.in none of these count ries has their use become popular, nor is it known that any governmental attempt has been made to encourage such development by subsidies or ot her means.

E3. Recognizing the vital need for chen.p transport fuels in Australia , the Commonwealth Development and Migration CommiRs ion, in 1927, arranged for the creation of a Committee on Mechanical Transport to invest igate this and other mechanical transport problems. A Producer-Gas Sub-Committee was established, which carried out tests with imported and locally manufactured producer-gas equipments attached t o motor ve:hicles and farm tractors.

These tests included a total of about 6, 000 miles operation of mot or vehicles. The Sub-Committee! as_ a result of that the fuel costs_ of a producer-gas

driven motor vehicle, m average operatwn, were approximately one-thud oi those of a petrol-dnven vehicle when the prices of charcoal and petrol were £3 per ton and l s. per gallon respectively. On long runs the saving effected was as high as 75 per cent: of the fueLcost of a petrol-dnven lorry.

F5964.-6

124

With respect to farm tractors the t otal fuel saving effected by the use of obtained !rom charcoal costing £3 per ton, was roughly about 65 per cent. of the cost of a kerosene-operated tractor, using kerosene costing Is. 2d. per guJlon. .

In the case of a farmer burning his own charcoal at a cost of, say 30s. per ton, the savings effected would, of -· course, be doubled.

E4. 'rl1e South AuRtralian Government set up a South Australian Committee on Producer-Gas as appiied to 1\iech n.nic,ol This Committee carried out t ests with different producer-gas equipment designed and manuLL cture d in South Australia. As a result of this action the use of prod uce:<-gas as a fuel fo r farm tractors made com;iderably quicker advance in that State than elsewhere in Australia.

In one case investigated by the South Aust ralian Committee it was found that t he farmer concerned expen ded a tot.al of from £500 to £600 in fu el and lubricat ing oil for three tractors. This outlay was reduced to about £200 by the adaptation of producer-gas plants to t he three tractors. Assuming that t he average expendit ure on charcoal per tractor amounted t o £60 per annum, it was estimated that about £50 of t his would represent labour.

The Committee pointed out that, therefore, in a district where wast e t imber was available, and where, say 131 farm tractors employed were converted to use producer-gas in place of imported pet rol or kerosene, an amount of approximately £6,500 could be expe nded annually fo r labour in the local production of fu el, instead of approximately £15,000 being sent out of t he district for liquid fu els. In addit ion t here would be a very appreciable saving in expenditure on lubricating oils.

E5. Mr. E. J. C. Rennie, M.E., Chairman of the Producer-Gas Sub-Committee, in a paper delivered before the Victorian Section of the Institution of Engineers, Au stralia, in April, 1930, supplied some interesting t echnical data upon the relative values of producer-gas and kerosene as fu els for farm tractors. He pointed out t hat a 30 h.p. kerosene tractor would deliver approximately 60 per cent. or 18 h.p. at t he drawbar. The same tractor equipped

with high compression cylinder heads, and converted to use producer-gas would have an output of about 23 h.p., of which about 11 h.p. will be absorbed in driving the tractor, leaving only 12 h.p., or 67 per cent. of the equivalent drawbar output on kerosene.

By increasing the speed of the engine, and by other devices, t his lo ss of power in t he use of producer-gas may be minimized ; but, it was the considered opinion o£ t he P roducer-Gas Sub-Committee, that the only effec tive method of using produ cer-gas as a fuel for farm tractors lay in having the whole unit specially designed for use with this class of fuel, and in particular the provision of an engi ne of sufficiently largo volumetric capacit y t o develop the required volume of power with this fuel. ....;

On the other hand. t ractors have been observed operating under producer-gas fu el and successfully hauling ploughs and other farm implements which, in the natural course of events, wo uld have been hauled by t he same tractor using petrol or kerosene fuels. This do es not indicate that t he power of t ho fuels is the sa me; it rather indicates t hat when operated on liquid fuels, full advantage was not being taken of the power available.

It is t herefore evident that the use of producer-gas fuel could be successfu lly adapted t o a considerable percentage of farm tractors without materially reducing the output of farm work performed by them under liquid fu els. That being the case it is hard, at first glance, to appreciate why &a lit t-le advantage has been t.aken of this locally procured ch eap fu el for power farming and motor vehicles . Producer-gas equipments suitable for attachment

to farm tractors have now been commercially produced in most of the mainland States ; but sales have been practically negligible compared with the number of farm tractors owned in Australia .

E6. Examination of the matter leads to the following conclusions :-(a) Before a proprietar)' make of producer-gas equipment can be placed upon the market , considerable expenditure in preliminary experimental work is required. Few engineering firms interested in this class of work could, in the recent period of depression, afford to incur this initial capital outby ; (b) Possibly those firms who have entered into the commercial production of t his equipment have, in most

cases, found difficulty in fin ancing t he sale of their equipment owing t o the adverse fin ancial position of a large proportion of tmctor owners ; (c) Equipment manufactured in Australia has in some cases been of excellent workmanship and material, but in other cases has been crude and rough though effective in operation. It ,is doubtful if any

Australian design has yet reached such a degree o£ perfe ction t hat it could be regarded as having reached t he stage of standard productio n. For t hat reason individual design s are subject t o frequen t 2J terat ion as improvements are effected. The sale price of Australian equipments bas , in most cases , been t oo high to have a general appeal to t ractor owners ; (d) The prcpar:Jion of clean suitable charcoal hn,s present ed a difficulty to many tractor owners, and no

simp k eff<'ct ive retort sui table for small charcoal production has yet been placed upon t he market a.t :tn 1d;t mctive pri ce. In the same way possible users of producer-gas attachments for motor

lorr ies nre deterred from purchasing these equipments owing to the uncertaint y of a regular :tnd convenient su pply of charcoal ; (e) Development in the of producer-gas equipments fo r either farm tractors or motor veh icles and t he prov ision of snitaLle cJ ,cap fu el fo r use in such equipmon ts are int erwoven-neither wi ll progress

wit hout the cst:J.Llishment of supply and demand for t.he other ; (j) 11 is qu w io t ;,Lie whether the design of t hese equipmcnts and their adaptation to farm tractorR, ope r,.t e

t hese equ ipntents has not passed the experimental stage, and t hat it is wiser to delay purchase pending proof of their success or failure ; (g) T bore are many influences tending t o retard the general-introduction of pro ducer-gas as a motor fu el. Oversea mnn uf

rnac bin<·s for the man ufacture of their standard tractors. They would not willing ly modify t heir design s and install new mach inery t o manufact ure a special t yp e of tract-or for only a small

125

percentage ot their output. Oil interests would, naturall)' , combat a movement tending to reduce consumption of liquid fuels. Tractor and motor vehicle owners are now in receipt of wonderful assist ance and service from t he oil companies, which service might be jeopardized, or even refused, if vehicles or tractors were converted to use producer-gas fuel ; (h) For these reo,son s the successful early introduction of producer-gas as a fuel for farm tractors and

motor vehicles, may only be privately achieved by a very v.ealthy company, capable of not only supplying large numbers of cheap equipments on easy financi::tl teJms, but which \\-ouid also be prepared to supply cheap carbonizing retorts, po5F.ibly arrange fu el sun lies, and also poss.bly attend t o the quest ion of lubrication of producer-gas equipped tractors and vehicles ; in other words

build up an Austmlian wide organizatio n to compete "ith liquid fuel organizations. The alternative to this, and possibly supplementary t o it , would be Government assistance in the fo rm of subsidies, remission of taxation and establis1ment of exrcrt offi cid bodies t o encourage and assist the development of producer-gas or any ot her cheap national fuel. (i ) In view of the fact that the subsidization of whea.t production when prices fall below a certain level

has already been undertaken, it might be considered expedient t o expend some of that subsidy in encouraging t he introduction of producer-gas fuel for .farm tractors, thus possibly reducing the necessity for as great a subsidy in subsequent years. Such a subsidy might take the form of-

(a) Contribution towards the purchase price of approved equipments, either paid to the manufacturer of the equipment, or in the form of assisted finance to the farmer; (b) Further technical invest igation to assist in the perfection of producer-gas equipment suitable for attachment to farm tractors ; (c) Publicity to encourage the use of producer-gas or any other cheap national fu el. Such

publicity could include exhibitions of the practical use of producer-gas tractors in various farm districts in each State.

3. PETROLEUM PRODUCTS AS FACTORS IN COSTS .

138. The relation of kerosene and lubricating oils to farm costs is a variable one. In the case of the power farmer using tractors it represents an item of considerable moment. In the case of the farmer who has no tractor or who, having one uses it in t he role of a stationary engine, the matter is of far less importance.

In the case of the tractor farmer, the cost of kerosene and lubricating oil naturally varies considerably according to the nature of the soil and the number of workings required for effective cultivation, and also according to the size of the implements and the efficiency of the tractor. Expressed in terms of cost per bushel, the costs probably average about 8d., but the variations

from such a figure Virill be wide. In the case of Heavy Oil machines they will be considerably lower and, where the farmer is able to obtain satisfactory ser vice from a producer-gas machine, they will be lower still. The cost of kerosene and oil on farms where the tractor occupies the role of a stationary usually does not exceed ld. per bushel.

A reduction in the prices of kerosene, fuel and lubricating oils would, therefor e, result in appreciable reduction in the costs of production in the case of the tractor farmers, of whom there are a considerable number. On the other hand, it would not make much difference to the average farmer who often has no tractor, or if he has one, uses it very little.

The Commonwealth Government has appointed a Royal Commission to investigate the costs of petroleum products in Australia. The Wheat Commission, in answer to a formal inquiry addressed to the Petrol Commission, has been advised that the costs of kerosene and other oils will be considered by that body. Consequently, it is not proposed to investigate t his particular point more fully in the course of the present inquiry.

4. SUPERPHOSPHATE AS A FACTOR IN COSTS .

139. I mportance to the Wheat-growing is essential to the

profitable production of wheat in Australia. Experiments and fi eld trials- abundantly confirmed by the experience of farmers-have demonstrated that , as a general rule, the .soils of the Australian wheat belt are seriously deficient in phosphates and that this deficiency can best be remedied by the application of superphosphate. The exceptions to th.is general condition are to be found in northern New South Wales and m Queensland. W1thout superphosphate, the wheat-growing lands in the larger portion of New South Wales and over the whole of Victoria,

South Australia and Western Australia would soon fa ll off in productivity and would revert, in some cases, to poor pasturage. The importance of cheap and adequate supplies of this fertilizer, therefore, needs no emphasis. 140. Owina primarily to the growth of the wheat industry, t he manuiacture of super ­

phosphate has gradually into a industry. of considera1le importance and la1:ge

factories have been established m all States with t he exc ept10n of Queensland. Concurrently w1th the increased demand, the Australian manufacturers enlarged the productive capacity of their

126

factories and for some years pas·t they have rnet all local requirements. At the present time the Australian farrr1er is obtaining his supplies at prices f.o.r. works which are generally lower per unit of phosphoric acid, than are those charged in other countries. In view of the fact that the Tariff Board made a detailed exa:mination of this industry· in 1929, and that, in 1932, it was again the subject of a special investigation by the Develop1n ent

Branch of the Prime Minister's Departn1ent, the Comn1ission did not directly concern itself with the economics of manufacture, but directed its attention to matters concerning transportation and distribution. 141. The Com1nission has investigated the amount which superphosphate represents in the cost of producing wheat. The analysis of 524 farmers' questionnaires revealed that there is considerable difference between States and districts in this respect. The following table shows costs of superphosphate per bushel of wheat produced. The district figures are calculated to the nearest farthing-

New South Wales. d. Victoria. d.

State 1.41 State 2 .08

Riverina 2.00 vVimmera 2.00

South-west Slope 2 .00 1\fallee 1 2.00

Central Plain 1. 75 Mallee II. 5.00

Central-western Slope .. 1.25 I\1allee III. 2.00

North-west Slope and Plain Nil. County Moira 2.00

Other Districts 0.75 North-west, Central and

vVestern 3.00

South Australia. Western Australia.

State 3.18 State 3 . 61

Central and Lower North 3.00 Upper North 3.00

Murray l\1allee 4.00 Cmnmonwealth.

Western 4.00 \V1wle 2.48

The greater deficiency of phosphate in the soils of vVestern Australia and South Australia necessitates somewhat greater applications of superphosphate in those States. Victoria and Southern New South Wales occupy an intermediate position, while in Central and Northern New South vVales the use of this manure is relatively infrequent. ·

The actual rate of application varies considerably from. dfstrict to district throughout Australia and departmental experiments have shown that the payable quantity may be as low as 30 lb. to the acre in some areas, whereas in others it approaches 2 cwt. 142. The Oom1nission is particularly concerned with the possibilities of a reduction in the cost. This may be considered under two headings; the cost of rail freight frOin the factories to the farmer's siding, and the actual cost of 1nanufacture.

143. As regards the rail freight, Figure XXIV. shows the railway freights which are charged on artificial manures in the various Stat es. The data have been drawn up so as to indicate the position in both 1911 and 1933, and show that there have been considerable changes during this tinw. \Vhereas the · basal charge for a short haulage has increased in ahnost every case, there have been alterations in respect to cases where the manure is carried for long distances.

In Western Australia the rate increases uniformly with the mileage ,an<;l is lower than in any other State. In New South Wales there is a tapering rate, but as n1ost of the wheat belt is more than 200 miles fron1 the factories it follows that transport charge is 1n ore than 8s. 8d. per ton. In Victoria the rate is also a tapering one, falling off rapidly for _distances over 300 miles.

In South Australia the 1nileage rate is higher than in any other State, but the distance of haul is relatively short except in the case of farmers in the lVIurray-1\!l allee. The net result for other wheat districts of South Australia, therefore, is that the average cost to the farmer of hauling superphosphate to the siding is no higher than in the other States.

The general question of railage freight as it affects wheat costs is discussed in another section of this Report. 144: The costs of superphosphate are cmnposed of the following itmns :-(i) The cost of the original phosphate rock which cornes almost entirely from the

Pacific Islands. ·

(ii) The cost of sulphur or s·ulphur-bearing ores or concentrates. (iii) The cost of jute sacks which are similar in all respects to the Australian wheat sacks. (iv) 'l'he manufacturing cost of sulphuric acid.

127

(v) The cost of grinding of phosphate rock and of the manufacture of the

superphosphate from the ground phosphate ro ck and the sulphuric acid. (vi) Interest, depreciation, and redemption items calculated upon the capital used in the business , eit her fi xed or op erating capital. (vii) Costs of selling and distribution.

The Commonwealth Goverment pays a bolmty on sulphur calculated fro n1 the sulphuric acid made from Australian sulphur-bearing materials. This bounty amounts to approximately £50,000 per annu1n .

The Commission is satisfied that manufacturers are obtaining their supplies of raw materials at or below world's parity prices. The overseas shipping freight s on the imported raw materials are low at the present tin1e, owing to shipping tonnage being in large over-supply. Therefore, there is little prospect of effecting any appreciable reduction in this respect.

145. Manufacturing costs have been brought down C"onsiderably during recent years, and investigations have not indicated serious inefficiency or unduly high profits. Probably son1e further reduction ' in selling prices 1n ight be expect ed through the wider spread of overhead charges of manufacturers if the consurnption of superphosphate in Australia were to increase

markedly. Apart from this eventuality, the cost of manufacturing do es not appear capable of further large reductions. Indeed, it appears that the primary and dominating· factor is the cost of raw materials used in the manufacture. 146. Considerable reductjons in selling prices f.o.r. works have occurred more or less steadily since 1928, the reductions being due to the general downward trend in the costs of raw materials

and manufacture, to decreased selling charges, and generally to the effect of increased competition. The table following gives the detailed information:-PRICES F.O.R. WORKS OF SUPERPHOSPHATE (TOTAL P 2 0 5 22 PER CENT.) IN THE VARIOUS STATES.

Terms. Cash.

£ s. d. £ s. d.

Victoria-. 1928-29 5 5 0 4 19 0

1929-30 4 15 0 4 10 0

1930-31 4 15 0 4 10 0

1931-32 4 15 0 410 0

1932-33 4 15 0 410 0

1933-34 4 7 6 4 2 6

1934-35 .. 3 15 0 310 0

Western Australia-1928-29 5 5 0 4 16 6

1929-30 4 18 6 410 0

1930-31 4 15 0 4 10 0

1931-32 4 15 0 4 10 0

1932-33 4 15 0 4 10 0

1933-34 4 10 0 4 5 0

1934-35 4 5 0 4 0 0

South Australia-1928-29 5 0 0 *

1929-30 4 15 0 ...

1930-31 4 15 0 4 10 0

1931-32 4 15 0 t

1932-33 4 15 0 t

1933-34 4 10 0 t

1934-35 .. 4 5 0 4 0 D

New South Wales-1928-29 ..

1929-30 5 2 6 4 17 6t

5 0 0 4 15 0§

1930-31 4 15 0 410 0

1931-32 4 15 0 410 0

1932-33 4 15 0 410 0

19 33- 34 4 15 0 4 10 0

1934-35 4 2 6 3 17 6

to t o

3 15 0 3 10 0

• Less 2t per cent. for cash in ao ·days. t Less 5 per cent. !or cash before despat ch Ordered through agents.

§ Ordered din ct through Company.

128

PRICES OF SUPERPHOSPHATE DELIVERED AT RAILWAY SIDINGS THROUGH TASMANIA.

List Price Delivered Equivalent ex Works. Cash Price Delivered. Equivalent ex Works. - Terms.

£ s. d. £ s. d. £ s. d. £ s. d.

Tasmania-1929 . . . . . . .. 5 15 0 5 2 0 5 10 0 4 17 0

1930 . . . . . . .. 5 10 0 4 17 0 5 5 0 4 12 0

193] . . . . . . .. 5 10 0 4 17 0 5 5 0 4 12 0

1932 . . . . . . .. 5 10 0 4 17 0 5 5 0 4 12 0

1933 (January) . . . . .. I

1933 (July) . . . . ..

j 5 7 6 4 12 6 5 2 6 4 9 6

1933 (August) . . .. . .

1933 (D ecember) . . .. . . 5 0 0 4: 7 0 4 15 0 4 2 0

1934 1935

. . . . . . .. 5 0 0 4 7 0 4 15 0 4 2 0

. . . . . . . . 4 17 6* .. 4 12 6 (Cash prior to

delivery)

• Rebate of 2s . 6d. per ton all owed by Government delivered by rail.

Notes-(1) For the present season 1934-35 prices have been on rather an uncertain basis, they having been altered twice in Victoria and New South Wales since the beginning of the season. In Sout h Australia no change of price has been

announced, but in n1any cases the selling price is materially below that of last year. (2) Vi/estern Australian prices are ordinarily some shillings per . ton in advance of those applying in the Eastern States, but this is compensated to a certain

extent at least by the fact that manufacture of superphosphate has been decentralized, primarily for the purpose of overcoming difficulties in regard to rail transport in the busy season, and also to reduce the cost of superphosphate on the farm. In addition, none of the works in Western Australia has the advantage of being situated close to deep water, the raw materials having to be railed to the works; whereas in the Eastern States nearly all the factories have the advantages of deep water frontages. (3) One Victorian Cmnpany is conducted on co-operative principles, rebates are paid

at the end of the year t o shareholders who therefore obtain their superphosphate at prices less than those quoted above. However, the rebate is partly offset by the fact t hat no int erest or direct dividend is paid to farmers holding the ordinary .participating shares in the enterprise.

147. Trading Methods.-In the past, a material proportion of the superphosphate was purchased by farmers on terms, but this position has changed in recent years owing to the credit difficulties occasioned by the low prices ruling for wheat. The conditions attaching to sales on terms vary considerably in detail as between different manufacturers, but the general practice has been to charge an extra 2s. 6d. to 5s. per ton on all sales effected on " terms." Some firms selling direct to the farmers or through agents have made an additional charge of only 2s. 6d. per ton for cash in 30 days, and 5s. per ton for payment after 30 days. Others have charged 5s. per ton when the order is not accompanied by cash. Similarly, t he method of distribution of their products varies as between the different manufacturers. The commissions paid t o agents and distributors vary according to States, condit ions, and the amount of risk t aken by the agent in regard to del credere. During the depression, the number of del credere agents has decreased, as many·of them were not sufficiently strong :financially to withstand the losses that inevitably

occurred.

148. Effects of th(!, Depression.-The depression has affected the manufacturers of superphosphate as well as the farmers. Employees engaged in fertilizer works have suffered unemploy1nent or restricted working hours. Some of the pennanent hands lost part tirne owing to rationing, whilst the reduced number of casual employees worked for a shorter period of the year than usual.

In 1928 and 1929, the percentage of payments by the farmers was particularly good 'and trading risks were srnall, but after 1930 of payment s began to increase greatly and bad debts were considerable. For a year or two the manufacturers endeavoured to ca1Ty the farmers but the burden grew too heavy and it became necessary to reduce the amolmt of credit given. The onus of providing finance then fell to a larger extent upon the State Governments through

_ th tari fi ~ · inatter

t andards lown for xtr mely t up and

·h supply

r u;p before

1 t c lta rges

w pr ent

1• '!>•.! f r a

it r Lt m

.\ I r llt .

---

f35

r,c.XXV '

perton .

2~1-

24/-

23/-

22/-

2v-20/-,,;-

DIAGRAMS SHOWING RAILWAY ( IN VARIOUS STATES FREIGHT I~ 11

RATES FOR AND -1~33) WHEAT

~----.---------:;,i2~-

/

REFERENCE :-

// 2,;-I I I // 1/ / I I I /;/ /// fl 'I fl ~uee~sla~iw.·· j· - ············· ···· ······--···-·· - ····--·--·-···-- •////

2 4,L

v:~o ri:u r:.=~~:f .~- i!~::;;;:::~:;,;~~~~-~-=-=-~~-~ l-------,/'----,1'-l/_/_/_/ ___ -,23/-Sourh Austr-a\ia .................... ~=~~;.;;;;;;;t~~~~=i~---- 1-----J,/,._/_/_/_,,i--------i

22 f

Wesfe.rn A~us_-t_r_a-.--li_a ___ . __ ··- - _- -·,--·--_---_- --_ ·---_---,--- --_ --- -_---_---_ -- --,-----_I~-~ _-'-' 3 = 3 ===~-t----;;''-/-t-./ __ ---t-____ 12 if /, I ,, I ..................... - ....

2of

,,1-

18/-

11/-

1s/-

15/-

14/-

13/-

12/-

11/-

1

V // I ,,--/ ./.-..... -·············· V ,, ./ . ..-·

l&f

11f

CJ/­

a/-1/­

G/-

5/-4/­

:/-2/-v-0

II

if

/!

/I/

/1 v· /

,· /

/

I / / I / / / ./ ...... /j, I // ·_:.·.~····························· v · .. / / I v<>/ -- /~ ( -- - ... ...... -- j!;:-··· -- / --; ,, ' ; ~(.· ; , Ii. / !l / / '/I/ / 'II ! , / II i/ I JI Ii , , I I ~ // I _ I :'.1 ·' ; "i ,; ~: i 50 100 ,~o 200 300

MILES

·' /

/

,,, ./

/

/

/

.... .. .. ... ... ....... ...... . ... .. ...... - - -- - . - -....... ..

..... -·······················

- -- --- - - -

The S011th Australian charges on wheat were reduced by 20% from 1/11/33 - a special contribution being granted by the Governmen t for this purpose. The actual

freight l'atee have remained unaltered.

400 !;00

Freigh-t Ra-te.s shown onl~ for dis-tanc~s

I _.,....- I//

I ... I V/

/i 1 /,/ .

I/,' //

I/.'/,/ / j'J /'

I !/ .

I : i 'f: I . /

k1 i /

/

,. I ; .

tj ;'

!i . ;

50 100 i,o

desi g nafed.

200 MILES

1{,/-

·~1-

14/-

13/

12/-

11/

· 10/-

,1-&/-7/-Gj-r;j-

4/-3/-2f

1/-

300 400 ,oo

131

their Land Settlement organizations and upon the secured creditors generally. Although trading risks were largely eliminated by th_ ese 1neans, the heavy reduction in the volume of output remained a factor operating against the an1ount of profit earned by manufacturers. 149. S01ne farmers' organizations have stressed the fact that where a group of farmers or a farmers' organization is prepared to buy in quantity, to arrange distribution and to . guarantee the collection of money payments, considerable reductions in the prices charged have been possible. lTnder such circumstances, the group or organization is doing the work of an agent, and earning or avoiding the agent's com1nission. It should be realized that the services of arrrunging distribution, taking the responsibilities for orders and guaranteeing the collection of cash payments are more valuable than is generally understood.

The idea that, because an individual or organization carries out agency work voluntarily and supplies del credere, ;'nanufaoturers can avoid agents' charges is by no ·:neans generally true.

5. BAGS AS A FACTOR IN COST OF PRODUCTION.

150. This problem is one which will bec01n e less acute if the present tendency to install bulk-handling systems develops further. There will, however, be a demand for a certain number of bags in all States because it is probable that many farmers will continue to use them as temporary containers for carrying wheat to the local silos. Further, in seasons when crops are heavy, any quantity of wheat in excess of the handling capacity of the bulk-handling system will be stored in bags.

· 151. During past years, there have been wide fluctuations in the cost .of bags to the farmer. These fluctuations have taken place not only from year to year but also within an individual season. Fron1 7s. to 13s. per dozep. represents the range of prices which have been encountered during recent years. To the purchaser such differences have been somewhat inexplicable and, consequently, very irritating. The reasons for their existence lie in the price of jute, in the nature of the trade and in the rapid changes which occur in the prospects of the individual wheat harvest.

152. The bags are made in India, Calcutta being the port of shipment for most of the supplies. There is no prospect of manufacturing the bags in Australia at prices competitive with the imported article. Supplies of bags have to be ordered several months before the Australian crop is harvested. Bags which are ordered or bought by the farn1er at that time are priced according to Calcutta parity. The farmer does not carry any large stock of bags, nor do the merchants wish to retain quantities of them from one season to another. The three-bushel grain sack is not normally used in quantity for any other purpose than storing grain, and any surplus on hand at the end of the harvest has to ren1ain until the next ; it is bulky to store, liable to damage and represents so much idle capital. The essence of successful trading, therefore, lies in estimating requirements effectively. ·

153. Wide fluctuations in the prospects of the season frequently take place after the period at which the bags are ordered. Sometimes the crop ,prospects improve as harvest approaches. In this case farmers increase their orders and the market is in a condition of short supply. In other years rust, exceptionally dry periods or, locally, hailstorms ruin the crop and, as a result, farmers cancel part of their orders and the supplying houses are left with stock on their hands.

154. A market which draws its supplies fro m far distant sources is bound to be a very fluctuable one when demand varies so considerably. It is clear that farmers fail to realize the extent to which their present methods of filling their bag requirements inevitably causes a considerable variation in the price of this eon1modity.

155. Considerable com petition exists between those who are handling the sale of bags as their chief business and other wholesale merchants who occasionally trade in them. There is evidence that at times very considerable losses have been incurred by firms who deal in this class of business; on the other hand, in years when crop estimat es are unreliable and the supply of cornsacks in Australia runs short, the price n1ay rise very high and, presumably, large profits are made on that portion of the bags which is bought by the farmers late in the season.

156. There was no available means by which the Comn1ission could explore the question satisfactorily. The bags are not made by those who sell them in Australia, and the Commission had neither the power nor the opportunity to m_ ake investigations in India. Superficial inquiries would have led to no good result because they would have been unable to bring to light the ramifications of the jute trade overseas where mill-owners, speculators and shippers all operate.

157. From time to time, complaints have been made by farmers as to the quality of the bags. Under the present met hod of settling disputes, the purchasing merchant is bound to return not less than four unopened bales to Calcutta for arbitration. This systen1 is not satisfactory and calls for consideration and amendment.

132

· 158. The Commission has been unable to discover any prospect of a reduction m the costs of landing wheat in the "f.o.r., Australian ports" position through a reduction in the cost of bags. . The bulk-handling system, if generally installed, will give the careful farmer a greater opportunity of avoiding the purchase of bags at high prices because he will be in a position to · mend damaged bags or use other transporting containers between the farm and t he silo, if he cares to do so. On the other hand, in a season when the bulk-handling system proves inadequate to lift the crop and bags have to be brought into use 1 the fluctuations in demand will be even greater than they have been in the past and, consequently, an accentuation of the price fluctuations of the past may well be expected. This state of affairs is likely to occm at intervals, particularly if the difficulty of selling the wheat makes it necessary to store a greater proportion of the crop at the sidings than has been the case in the past.

6. SUl\TDRY FARM SUPPLIES IN RELATION TO COSTS OF PRODUCTION.

159. In preceding sections, farm machinery, tractors, superphosphate, bags, and petrol and oil have been considered in relation to costs of production. In addition to these there are many other items in farmers' costs which are too small to warrant individual consideration, but which in the aggregate are of importance. These are inclu ded in the items "Sundries" in paragraph 83 which covers both sundry services which the fariner cannot carry out and also the provision of materials. Among the materials are those which are necessary for the upkeep of the farm such as fencing wire, netting, galvanized iron, paint, timber, cement, wind-mills and pumps, gates, &c. In addition there are minor expendable stores such a$ sheep dip, wheat pickling compounds, binder twine, sewing twine, nails, oils and grease, fuel for engines other than tractors and trucks. Among the services are postage, t elephone (where necessary),' blacksmith's charges, veterinary service, and the cost of such operations as the farmer cannot himself carry out with his labour for ce. No one' item represents as much as a penny per bushel in the eost of production but taken together they were fo und to be about 4!d. per bushel in the case of the "average" farmer.

160. With reference to materials for maintenance of improvements mentioned above, the Commission has learnt in evidence and also from its own observations that great economies have been made by farmers in curtailing this type of expenditure during the last few years. There is little doubt that while in some cases financial necessity may have exercised a salutary influence

in curbing extravagance on the part of farmers, yet at the moment many farms are not being maintained at an efficient level in respect to their improvements. A fence may be patched and made to last another couple of years or so whereas in better times it would have been renewed, but when patch joins to patch the time eventually comes when disaster is liable to take place, stock obtain access to growing crops or stray and inefficiency occurs. There is little doubt that in many districts the permanent improvements on farms are now depreciating fairly rapidly. Such a situation cannot last indefinitely. If the industry is to be maintained it must be maintained on a basis of reasonable efficiency. For this reason a sum for upkeep of permanent improvements has been included in every estimate of a farmer's costs. The Commission considers that sixpence per farm acre should be sufficient in most cases but having regard to the fact that the costs per acre t end to rise as the farm decreases in size a minimum of £20 has been allowed. In the case of the small , one-man farm, extra labour will have to be employed fo r some of the work and the sum mentioned co vers any expense on this score. In the average case sixpence per farm acre represents roughly 9d. to Is. 6d. per acre under crop so that the per bushel cost of this item will vary from . 3d. per bushel in fertile areas to 1 . 5d. per bushel or more where yields are low, averaging perhaps . 75d. per bushel.

161. The costs of minor expendable st ores mentioned in the first paragraph, vary fairly widely from farm to farm. Roughly about a penny per bushel is represented by oil and grease for all purposes and the kerosen e used in chaffcutting. Th is leaves about 2!d. per bushel for such sundries as the compounds used in preventing bunt, and dipping sheep, salt and other licks,

veterinary services and medicines for stock, binder twine, wool packs, chaff bags, bolts and nuts, minor tools and nails, and payments for postage, telephone, stationery, &c. 162. Farmers, when giving evidence before the Commission, frequently stressed the effe ct of the tariff in raising the costs of these sundry items. This matter is one which concerns the whole policy of Australian development during the past few decades. The genera.l result of the tariff has been to raise the price of the commodities to the farmer by a certain percentage which is difficult to estimate. The Informal Committee of Inquiry which went into the matter and reported in 1929 came to the conclusion that the general effect of the tariff as a whole was to raise costs by about 9 per cent. If this be accepted as correct then the tariff is responsible · for an increase in costs of about t d. per bushel in respect to all items which go to make up the list of " sundries."

133

Since the publication of the Report of the Informal Committee several changes have occurred in the tariff situation. Many duties were increased considerably wit h the onset of the depression. In addition, the departure of t he Australian pound from parity wit h sterling has had much the same protective effect as an increase in the t ariff. Inasmuch as the farmer receives the benefit of that currency change in an enhanced price of his products he must expect that there

will be either some increase in the costs of his requirements, or some delay in t he lowering of prices dming the general fall in world price levels. Since 193 2 there have been considerable reductions in the t ariff on many items which are used by t he farmer. The fo llowing t able is illustrative of this point. It may be expected t hat there will be some slight reduction in the costs of some of the farmers' supplies owing to these tariff amendments. The whole question is one of governmental f!,nd national policy in which t he Tariff Board is the statutory investigating body.

BRITISH PREFERENTIAL TARIFF.

Item.

136 (E) (2)- Fencing wi re 152 (c) (I)-Galvanized pipe fittings

302 (A)-Axe handles

182 Bolts, nuts, &c. 219 {D)- Shovels . . . .

219 (E)-Picks, matt ocks, hooks an d slashe rs 324 {c) {4)-LeatlJ er N .E.I. 229 (F) (3)-Linseed Oil 231 (G) (2)-White lead

231 (G) (I)-Paints and colours

269 (A)--Sheep, cat t le and horse washes, weed scrub and t ree killers N.E.I. ..

266 (c) -(1)-Cresyl ic Acid

281 (A) (4)-Arsenic Trioxide 269 (B)-Insect icides and Disinfectants . . 278 (c) (2)-Carhon Tetrachloride

Duties early in 1932.

52s. per ton l s. per lb.

35 per cent. ad val. 4s. 6d . per doz:. or

50 per cent . ad val. lls. per cwt . 35 per cent. ad val. 35 per cent. ad val.

25 ·per cent. ad val. 9d. per gallon 14s. per cwt. or 40 per cent. ad va.l.

8s. per cwt. or 35 per cent. :.:,d val.

25 per cent. ad val. ] s. per g11.llon or 25 per cent. ad val. 25 per cent. ad val. 20 per cent . ad val. 25 per cent. ad val.

Present Duties.

5 per cent . ad val.

3!d. per lb. 26! per cent . ad val 2s . 3d. per doz. 22! per cent. ad val.

3s. 6d. per cwt. 20 per cent. ad va.l. 25 per cent . ad val. 10 per cent. ad val.

6d. per grtll on 5s. per cwt. or 15 per cent. ad val. 5s. per cwt. or 20 per cent. ad val.

10 per cent. ad val. 8d. per gall on or 15 per cent . ad val. F ree 10 per cent. ad val.

Free

163. Apart from the question of costs per bushel of production there is a further point that the operation of the tariff has increased farm capitalization in the past owing to the fact that the materials necessary for equipping the farm cost more than they would have done under free-trade conditions. In connexion with the " sundries" item, this will have particul ar reference to the costs of fencing wire, both plain and barbed, rabbit and dognetting, and galvanized iron and wood used in the construction of buildings . These will represent a t otal capital outlay of about £500 on a normal wheat farm of 1,280 acres. There wo uld also be secondary increases due to higher rates for freight and labour.

164. In this connexion attention is drawn to the following extract from the First Report. of the Commission, page 34 :-" Having in view the necessities of the fa rmers, and recogni zing t.be desirabilit y of adding as little as possible t o t;he cost of Jiving in Australia, the Comm ission is that the wheat-farmers are entitled

t o share in the benefi t.s accorded to other industries by the protection policy of the nation."

165. It may be argued that the effect of these cost s, by making the production of wheat a little less profitable in the past had the eff ect of retarding a rise in land values , because t here has presumably been less 'incentive to farming as a live lihood. This argument may well be correct in the case of the older established districts, but it does not apply t o the marginal country where

the farmers were engaged in developing their holdings during the period of high prices, and where any capitalization is solely due to expenses wh ich have been actually incurred.

The importance of reducing costs of development in marginal areas is a serious matter not always recognized.

' 134

166. A further point which has been raised by certain farmers in connexion with the tariff has been that the locally made articles have sometimes been of inferior quality. This matter is of serious in1portance and is worthy of special attention. There is now a St andards Association in Australia and during the last few years standards have been laid down for ··

galvanized iron and various .classes of wire. The Commission considers t hat it is extremely important to recognize that whenever practicable, standards of quality should be set up and adhered to in the case of all industries which are protected by t he tariff and which supply requirements to farmers.

7. RAILWAY FREIGI-ITS AS FACTORS IN COSTS.

167. The Railway Departments in the wheat-growing St:1t es gave eviden,ce before the Commission. F armers and their organizations made frequent reference to freight charges as Important items in their costs. The Commission has also made inquiries into the present position of railway finances with a view to ascertaining whether it is reasonable to hope for a reduction in costs of railway transport.

168. Figure XXV. has been drawn up so as to show t he freight charges on wheat for specified mileages in the various States 111 both 1911 and 1933. The graphs indicate that wheat freights in 1933 were roughly one-third higher than in 1911. During the intervening period vanous changes had taken place both in respect to average rates and also in the way in which they taper as the mileage increases. The in:creases occurred, for the most part, between 1915 Bnd 1922 when the inflationary -tendencies of the war period were making their effects felt on wages and costs.

169. The following table shows the alterations which have been made in freight rates in the four principal wheat-growing States since 1914 :-ALTERATIONS TO RAILWAY FREIGHTS ON WHEAT.

New South Wales. Victoria. South Australia.

I Western Australia.

-

Increase. Decrease. Increase. Decrease. Increase. Decrease. Incr ease. Decrease.

Per cent. P er cent. Per cent. Per cent . Per cent. Ton.

1915 .. . . . . . . 5 . . . . -. . . . .

1916 . . .. 10 . . . . . . . . . . . . . .

1917 . . .. . . . . 10 . . . . . . . . . .

1918 . . .. 7i . . . ' 5 5 .. . . . .

1919 . . .. . . . . . . . . 10 . . 1s. * . .

1920 .. . . 10 . . . . . . . . . . . . . .

16f .. . . . . . . . . 1s.* . .

1921 . . .. . . . . 18 . . 16f . . . . . .

1922 . . . . § . . . . . . . . . . . . . .

1923 . . .. . . . . . . . . . . . . . . . .

1924: . . . . .. . . . . 10 . . . . . . . .

1925 .. . . . . . . . . . . . . . . . . . .

1926 .. . . 5 . . 5 . . . . . . . . . .

1927 .. . . . . . . . . . . 20 . . . . . .

1928 . . .. . . . . . . . . . . . . . . . .

1929 . . .. . . . . . . . . . . . . . . . .

1930 . . .. . . . . . . . . . . . . . . . .

1931 .. . . . . . . . . . . . . . . . . . .

1932 . . .. . . . . . . . . . . ti' . . . .

1933 . . .. . . t . . . . . . 20 . . . .

1934 . . .. . . . . . . . .

I

. . . .

I

. . . .

• On the 1932-33 tonnage and earnings, this increase of 2s. per ton represents an increase of about 18 per cent. t In 1932-33 the New Sout h Wales Government supplement ed t he Commonweat h Bounty by refunding the wheat-grower td per bushel (about 10 per cent.) of his rail freight paid on wheat . The rebate was not made through the Railways Department. •

t t From 1st November, 193 3 to 30th June, 1934. § Slight adjustment made in basis.

. to rharges deficits were responsible fo r many general

Increases wh1ch d1d not disturb t he relative positions of the various classes of goods whilst Arbitration Court Awards and alterations in the basic wage were quoted as reasons manv increases in freight rat es. "

137

Taking the 1915 rates as 100 in each State, the effect ot the reductions and increases was that at 30th June, 1934, the rates were:-New South Wales Victoria

South Australia Western Australia

159 122 129 118

In 1911 the freight rates on cornsacks were fairly uniform throughout the four principal wheat-growing States, but there were 1narked differences between freights charged in these States for agricultural machinery and fertilizers. Large increases were imposed on all three oj these commodities in all four States between 1911 and 1933. For instance, by 1933 the rates for 150 1niles had ·been increased over the 1911 rates by the follo wing percentages:-

! I

- I New Sout h Wales . Victoria.

I South Australia . Western Australia.

Per cent. Per cent. Per cent. Per cent.

Cornsacks . . . . . . . . .. 120 51 78 23

Agricultural Machinery . . .. . . 70 55 50 32

Fertilizers 71 * 53 63 . . . . . . . . ..

• A reduction of 5 per cent.

170. The average railway receipts per bushel (60 lb.) of wheat transported in 1932-33 were as follow:-

New South Wales Victoria South Australia .. Western Australia

The average hauls of wheat for the same year were-New South Wales Victoria South Australia .. Western Australia

d.

4.85 4.45 3.72 4.13

Miles.

282 187 81 151

The actual freight rates on wheat for these distances in +he various States were :-

New South Wales .. Victoria .. South Australia .. Western Australia

Per Bushel.

d.

5.40 4.29 4.21 4.10

171. The basis on which freights for any commodity are fixed by the railway authorities is governed by three factors--( a) the cost of handling the commodity; (b) the bulk-weight ratio of the commodity ;

(c) value of the con1modity and what it can afford to pay.

As regards the first and second factors, wheat lends itself to economic handling unless the seasonal circumstances make it imperative that the crop should be moved to the seaboard at a faster rate than would be desirable from the point of view of economic transportation. This state of affairs may be brought about by the danger of overloading a bulk-handling system, in the early part of a se'ason when the crop is heavy, or when there is heavy selling pressure for

other reasons, or when a mouse plague is feared in a district where bag handling occurs. In general, wheat is entitled to be considered favorably from the point of view of cost of handling.

138

As regards the third factor, an investigation into the returns per ton mile for 1932-33 from all goods traffic and a comparison of the freight rates on wheat with these figures resulted as follows :-All Goods and Live Stock Traffic. Freight on Wheat per ton mile.

Payable Rate per / Receipts per ton Percentage of ton mile (Estimated I Amount. Receipts shown in by Railways). mile. Column 2. (1) (2) (3) (4)

Pence. Pence. Pence. %

New South Wales 1. 75 1.25 .6 (a) 48

Victoria 1.49 (d) . 87 (b) 58

. 79 (c) 53

South Australia 2.2 1. 63 1. 71 (b) 105

1.4:2 (c) 87

Western Australia 1.49 1.01 68

(a) In 1932-33 only the New South Wales Government refunded the farm er per bushel freight. The refund was made from moneys obtained through the New South Wales Flour Sales Tax and was made direct to the farmer and not through the New South W ales Railways. {b) Includ es Government subsidy, Victoria 10 pe1· cent., South Australia 20 per cent. (c) Excludes Government subsidy.

(d) Excludes live-stock.

Allowing for subsidies, therefore, the wheat-grower is paying in all four States a freight which is in every case below, and in some cases about 50 per cent. below, the average charge for all goods traffic. In all four States, wheat, in conunon with most other primary produce, is carried at rates well below those imposed on corr1n1odjties which can afford to pay higher rates. Also, a nurnber of " unprofitable railway lines were built to develop and serve wheat-growing areas.

172. The Commission found it impracticable to determ_ ine the relative profitableness of wheat .traffic to the railways. Railway aecountants do not analyse the receipts and expenditure of the systems in this way. The South Australian railway representative stated-" There is no basis ever devised which permits of any apportionment in railway expenditure as between

freight and passengers which is of any value. It is impossible to make a.ny segregation a.s between freight service and passenger service. That was shown by one of the large American ra.ilway companies, the Santa Fe Company, which had a staff of about 50 men working for about two years, endeavouring to prepare a fo rmula for the purpose of going to the Interstate Commerce Commission to try to get an increase in freight rates on wheat. Notwithstanding that it probably cost the eompn.ny fifty thousand to sixty thousand dollars or more, they had to admit that it was, in the final analysis, anything but a success ; they had to admit that it was nothing but a series of arbitrary assumptions, apportionments and divisions, and the Court to which the Santa Fe Company appealed stated that it was not sufficiently accurate to enable the Court to make a decision."

In a n1emorandum dated 23rd February, 1934, the New South Wales Railways Authorities stated-" In regard to the question of cost of handling the wheat harvest and its relation t o wheat freights, I desire to say it is not possible to segregH.te the cost of handling any particular class of traffic on the railways

owing to the diversity of the business. As a matter of fact, it is not possible to separate actually the cost of the coaching from the goods business."

173. The wheat industry is of great importance to the railway systerns of Australia. Table 17 has been drawn up to demonstrate this point and shows that, in the year 1932-33, wheat t onnage representated 20.87 per cent. of the total tonnage carried on the railways in t he principal wheat-growing States, and that it was responsible for 18 .89 per cent. of t he total earninas fro1n freight and livestock. It must be pointed out that this particular season was one of heavy crop in New South Wales and South Australia, whilst the Victorian yield was rather above the average.

TABLE 17.

RAILWAYS IN THE FouR PRINCIPAL WHEAT-GROWING STATES-EARNINGS AND ToNNAGE, 1932-33.

(a) (b) (c) (d) (e) (f) (g) (h)

Earnings from Column (a) Column (a) Total tonnage Column {f)

State. Earnings from all goods and percent,age Earnings from percentage Tonnage of goods and percentage wheat. on all sources. on wheat. on live-stock. Column {b). Column (d). live-stock. Column (q). £ £ £ Tons. Tons .

New South Wales .. 1,327,889 8,169,056 16.25 15,405,320 8.62 1,777,492 11 ,147,866 15.9

Victoria . . .. . . 75 8, 150 4,773,699 15 . 87 9,446,121 8 .02 1,104,127 6,244,346 17 .68

South Australia .. .. 460,291 1,930,575 23.84 2,744, 741 16 . 77 801,84-9 2,401,070 33 .39

·western Australia .. 662,754 2,110,065 31.41 2,932,140 22.6 1,041,011 2,840,077 36 .65

3,209,084 16,983,395 18.89 30,528,322 10.51 4,724,479 22,633,359 20 . 87

139

In addition to earnings direct from wheat, revenue is obtained by the railways indirectly through wheat from the carriage of flour and from the transport of twine,

machinery and general stores to the wheat districts. In the three years 1931, 1932, 1933 the New South Wales railways, even with bulk handling in operation in rnany districts, carried an annual · average of 10,000 tons of cornsacks alone, the value of the freight being £25,000 per ann urn.

174. Although an estimate of the number of mnployees engaged in handling the wheat traffic is unobtainable, it is clear that, apart from the extra hands engaged at harvest ti1ne, wheat provides employn1ent for many railway men. During the 1932-33 harvest the New South vVales railways engaged 535 extra 1nen, averaging 64 days per n1an , at :=tn approxi1nate total cost of £22,450.

175. Table 18 shows the excess of receipt s or expenditure on the ra,ilways of the four main wheat-growing States for each year from. 1929-30 to 1932-33. It indicates that in no case has any one of these railway system.s been able to meet the whole of the interest charges on its capital. This has been true despite the very considerable reductions in rates of interest and in working costs which have occured during the period. (See Figures XXVI., XXVII., XXVIII.)

TABLE 18.

STATEMENT SHOWING THE ExcESS OF R .ECEIPTS (+) OR ExPENDITURE (-)IN THE RAILWAYS oF THE FouR MAIN

WHEAT-GROWING STATES DURING THE YEARS 1929-30 TO 1932- 33.

(lnclud·ing Government Grants for Non-paying Lines and for Reduction in Freight and Including Electric Tramways and Motor Road 8ervices under Control of Railways).

___ 1 _9 _2_ 9-_a_o. ___ \ 1930-31.

___ 19_3_1-_3_2. _ ___ 1 I

I Excluding II Including Excluding I Including Excluding Including

Excluding Including Interest and Interest and Interest and I Interest and Intere . stand Interest and Interest. Interest. Exchange. Exchange. J!;xchange . Exchange. Exchange. Exchange.

----- - ·---

£ ' £ I £ £ - I • £ -1 I

New . South

1

+3,664,269 -2,7o6,374 095 -4,421,620j+3,268,lo3 -4,o64,60o +4,184,036 -3,360,482

Wales I I I

I I I I I

In 1928- 29 and sub­ sequent years, New South Wales Govern­ ment paid railwavs £800,000 towards

Victoria ..

South Aus­ tralia.

Western Australia

. I · i

-970,351,+2,948,081

cost of non-paying developmental lines. This £800,000 is

included in Revenue receipts

+ 2,489,1201-1 '036,997 + 2,319,5421-1.4 78,5641 + 3,129,2921

. I I

- 300,4691 -1,796,228 152,933 -1,685,9201 + 612,33 7

1

-

1 I I I I

1+ 546.3081- 404.489

1

,+ 588,0741- 379,9921+

I I I l

I 1 I ----

i

799,!041-

1

I

I

910,6361+

I

190,0691+

i

I

-695,7961 Calculations include figures for electric tramways and road

I

motor services under / control of Victorian

I Railways 758,574, - 688,072 Interest includes about I

I I 000 per annum

1 to Sinking Fund

I

(National Debt)

820,552

1

!- 175,681

1

No exchange on

interest payments overseas is included

The Commission understands full .rnaintenance is charge.d against .working expenses, but that no figure is or has been shown 1n the accounts for redemption of capital.

176. vVhilst 2ll Australian State Railways have adopted a standardized costing system, there is a disparity between the n1ethods of accountancy adopted by the various States in connexion with their railway finances as shown in the States' Public Accounts. In South Australia, the railways bear of the \Vhich theT State 1nakes to the sinking

fund under the C01nmonwealtn Natwnal Debt blnkmg Fund Act. 1n other States, such charges are debited against Consolidated Revenue. Again , pension charges on behalf of ex-railway ernployecs are, in some States, paid from Consolidated Revenue and, in others, fr01n railway Every St ate has a considerlble develop1nent al n:ileage which -ioes not pay its way ;

part of _the losses on such is frmn State in S:tates. Under

these cucumstances, an effect1ve companson between tne costs of tne vanous railway systen1s

140

is impracticable. '.Vhe Commission considers that such a state of affairs is undesirable, and. that the uniform system of railway accountancy in regard to operating adopt ed in all States should be extended to make ultimate comparisons possible. .

177. The data presented in Table 18 indicate the large proportion of railway costs which is due to interest on capital. Figures XXVI., XXVII., and XXVIII. have been drawn up to show the relat ionship of earnings, working expenses, net earnings, and interest (including exchange) t o each other, and to invested capital for the railways of New South Wales, Victoria and South Australia during the period 1900-34. The outstanding features are the growth of the invested capital since 1910 and the decline in earnings since 1929 (1927 in South Australia owing to bad seasons). The relation between net earnings and interest charges gives the measure of railway deficits which have been somewhat enhanced by the development of alternative methods of transport.

As matters now stand the rail ways are to some extent over-capitalized an d as all their capita l has beert raised by loans guaranteed by Governments, deficits are inevitable tmless interest rates are drastically reduced or net earnings are increased or dead capital is written off. In this matter the Government of Victoria appointed a "Special Committee t o investigate and report on certain specific questions related to the capital indebtedness of the Victorian

Railways." lVIr. Edwin V. Nixon was the Chairman of that Committee.

Two of the questions to be answered were : " What amount, if any, should be transferred out of the Railways Capital Accou11t to make that amount represent only live and productive assets " and "Show a comparison between the capital sum upon which interest is charged against the railways to-day and a sum which would truly represent the reasonable

capitalization of the Department regarded as a going concern in normal modern circumstances.' '

The Committee, in arriving at the valuation, submitted that "the real t est as to what amount should be transferred is the ability of the system to meet interest charges. " . The rate of 4 per cent. was adopted as the basis to determine capitalization. The Committee fo und that £29,623,032 out of a total capital debt of £75, 498 ,032 (approximately 39 per cent.) should be transferred from Railway Capital Account to Consolidated Debt, to meet the position under normal working conditions. · Until this position is met in each State the powers of the railways to meet road transport by reduction of rates to competitive levels is seriously impaired. 178. Rai lway statistics in New South Wales show that there were surpluses in railway accounts in each of the nine years from 1905-1914. Those surpluses were all paid into Consolidated ·Revenue and not used to diminish the capitalization of the system. In 1911 , the rate for a 300-mile haulage of a bushel of wheat was 3. 3d. In 1934 the charge fo r the same haulage was 5 .4d. The price received by the farmer in 1911 was about 3s. 10d. per bushel f.o.r. ports. At the end of 1934 that price was about 2s. 8d. The main reasons for the increase in freight rates are to be fo und in higher interest rates, higher costs of materials and higher wage levels. These reasons are, doubtless, valid, but their ultimate effect on the general welfare of the agricultural community must be considerable. The initial producer, the farmer, is being placed in a disadvantageous position from which he can only be extricated by some form of assistance. Whether that assistance comes through t he extra deficiencies on the railways account, or by other methods, is not of great moment to the farmer. 179. The Commission was not in a position to make a complete investigation of railway expenditure. The facts as presented are that any reduction in wheat freights would lead to an increase in the railway deficits. In 1931-32 the deficits of State railways in the four main wheat-growing States absorbed a sum equal to about 88 per cent. of the income tax collected by State treasuries. Relief to the farmers by reductions in freight would be at the expense of the general body of taxpayers in the State concerned in a form probably not recognized. Direct assistance from other sources seems wiser. The Commission therefore finds that, while a reduction in rail freights on wheat, unless such reductions do not increase the railway deficits, would be a form of subsidizing the

-

F IGXXVI.

DIAGRAM SHOWING INVESTED CAPITAL , INTEREST AND NET EARNINGS FOR

145

140

130

127

';'3

7/)

" s:: 0 18 17

It

15

14

13

12

II

10

' 8 7

G

5

4

3

2

0

1'00

1+ 1

(YEARS I'JOO

1r1vesre d Capital sho wrt

0" t-e 0'-'Cf cf S( al€

' ' --------- : --+-·----- ...... __ .... ----">--

______ .....,.. .....

"10 "17

EARNINGS , NEW SOUTH - 1934)

1720

157

WORK INC. E. X PE NSES. WALES RAILWAYS

lnve.sted C..pital

DIAGRAM 5HOW/NG INTEREST AND 78

77

74

72

71

10

G8

"

105

63

62

101

100

?8

57

?5

!SI

FtGXXVII.

INVESTED CAPITAL, NET EARNINGS FOR (YEARS J'}OO

EARNINGS, VICTORIAN

I

I

I

I

I

I

I

WORKING RAILWAY5

I •

I

I

I

EXPENSES,

48

"'7

. 0:::0

""'

45

'14

43

42

41

'10

14

13

1'2

10

I

I

I

I

I

I I I I I I

I I

• ,------· - - - ... Ne-t Earnir19s

"" 01 02 Ol 04 07 08 ., 10 1'1 13 I< IS 14 17 II " lt 1771 "'J03/l23l.S4

1+3

DIAGRAM 5HOW\NG INTEREST AND

30

2"

28

2

FIG XXVIII

INVESTED CAPITAL, EARNINGS, WORKING [XPE NSE S, NET EARNINGS FOR SOUTH AUSTRALIAN RAILWAYS. (YEARS -

l!

4

I _.,,...---+--

' E

',.._ __ ..,.. __ 0 Workin9

' /

I ,. .... ------ .... ....... ---r--- ....

. > i ---: .. , __ .

0

"00 "05 1;10 " ,15 "20 1',.25

3

2

•

, --------- Ne-1" Earnrn9s

I 1-5

i47

industry out of general State revenue, it does not recommend such a method. In individual regions there may be instances of unduly high freight charges on wheat. Such cases are a State matter and are beyond the scope of the present inquiry.

8. PORT CHARGES.

. 180. The Ports of Australia were opened and developed by the State Governments long before the estabhshn1ent of the Commonwealth, and the control of such ports has remained with the States. Each State has its own policy of administration in respect to the seaports and harbour within its boundaries. All the States operate independently of each other and

altogether free of any ad1ninistrative control or influence of the C01nrnonwealth Government.

181. In the course of years there has grown up a number of State authorities and departments concerned in adn1inistering some phase or other of the various port activities and services. There are Harbour Boards for the main ports of each of the wheat-exporting States discharging certain port responsibilities and various other authorities administering other port functions in the san1e ports. The Harbours Board of South Australia controls all ports in South

Australia excepting Port Augusta, which is under the control of the Comn1onwealth.

Generally in other States the ports, other than the n1ain port, are controlled by a special Board or con1e under the control of s01ne State Government Department. Each of these authorities and departments makes levies o:r charges in connexion with the particular service or responsibility it discharges. In these circurnstances, with so many independent units of departmental administration, there has arisen an almost equally perplexing variation of port regulations, levies and charges, in some cases in which even the nomenclature for si1nilar charges differs. The variations in the physical condition of the ports, the capital expenditure involved, the improven1ents provided, the volume of traffic, the statutory obligations, and other naturally affect port charges.

A Commonwealth Transport Committee comprising experienced Commonwealth and State officers was appointed in 1929 to inquire into and advise the Government respecting the co-ordination of transport in Australia. The affairs and administrative methods of various shipping ports and harbours came under the consideration and review of this Committee. The

Report of this Committee (May, 1929), after stressing the many disparities of control, methods and charges of the ports of the several States, submitted the following among other recommendations :-PoRTS AND SHIPPING.

"(a) Finances of the n1ain ports should be separated from those of the State, but financial and developmental policy of the Port Authority should be subject to the control by State Governments. (b) Port charges at main ports should be adjusted so t hat revenues resulting are no

greater than required to meet working cost s, interest charges and approved reserves. (c) Financial assistance required by outports should be given directly fron1 State revenues and overseas and interstat e t rade at main port s should not be used

as a taxing n1edium to provide such funds."

These rec01nmendations of experts wh o carefully considered the policies operations and results of the various ports of the several States indicate that in the opinion of that Committee there is a definite need for a radical change in financial 1nethods.

183. The Commission has studied the extent to which Australian port charges aff ect the freight charges in respect to shipment of whe!l't overseas and, t he ba,si.s for t he clain1s submitted in evidence that port enarges were unduly burdensome to t he wheat 1ndustry. It was uraed that especially in those States where outwar d wharfage was levied on wheat and flo ur,

or 0 in some cases where no outward wharfage was levied, that other equally exacting charges existed and that generally the port charges were unduly high.

184. Nature of Port Charges. - The more direct port imposts levied on .wheat those styled outward wharfage, tonnage and port dues. The wheat fa rmer 1s. also 1nduectly affected by inward as apphed bags, sulphur, and other

imported fann supphes. Outward whartage rat es are lev1ed. 1n New South Wales aJnd South Australia only on wheat and flour and are payable by the sh1pper.

148

The Sydney Harbour Trust in July, 1933, reduced t he outward wharfage rate on wheat from 9d. to 7 !d. per long ton and on flour froro. 1 s. 6d. to 1 s. 2fd. per long ton, a reduction in both instanees of 20 per cent. Tho rate on wheat is a preferential one, specially fixed to assist the wheat export trade, and represent s about id. per bushel. This rate is baH the general

outward wharfage rate. rn - o . • h · ' · IT 1 £' - 1 · 1 , I'

1_ he oo ut Austrauan 12Jr oours ortrd 1evws an outwaru wnarrage rate at Port Adelaide

of ls. 3d. per long t on on wheat ; this equals about -fd. per bushel (hvice the Sydney rate). The rate on flour is l s . 3d. per short ton. At South Australian outports the outward wharfage rate on wheat is Is. per ton ; about id. per bushel. The South AustTalian Harbours Board claims that on analysis of last year's wharfage earnings it is irnpossible t o abandon the outward wharfage rate without making an unwarranted increase in the inward -vvharfage rates. The Harbour Board Conferences of Australia since 19 16 have contended that the payment for all services rmi.dered by a contribution fro1n every class of cargo, whether import, export, governn1ent or privately owned, is the only logical way to finance a port.

185. Tonnage rates are i1nposed at the capital city ports in all the States. These charges are paid by the owner of t he ship and consequently are included in the freight. The pre-war tonnage rate at Sydney, Nfelbourne and Adelaide was !d. per ton per day on the vessel's net register tonnage. The present tonnage rate is !d. per gross ton per day on the vessel's gross register tonnage. The change in the basis of applying the tonnage rate and the increase in the rate has in son1e cases more than doubled this levy on the ship-owner.

At Frmnantle the tonnage rate at l-24d. per ton per hour (i.e. ld. per day per ton) on the gross register tonnage plus 20 per cent. surtax is 60 per cent. higher than the rates of other ports.

As the tonnage rate is levied on a per day basis, it follows that loading facilities at a port which reduce the lo adi11g time of vessels also reduce the an1ount payable. The bulk handling and conveyor systmns for bag loading provide substantial savings in this .Another i1nportant consideration in regard to any system which expedites the loading of ships is the saving of overhead and running cost s to the ship-owner, which a quick despatch of a vessel from the port ensures. All savings of this kind should tend towards lower freight rates.

186. P ort dues are paid by the ship-owner. They include a variety of charges covering expenditure in connexion "\Yith harbour lights, maintenance of water channels and artificial aids to navigation and protection of shipping generally in the various ports of the Oomrnonwealth and are administered by State Departments.

187. Light dues of 9d. per net ton on vessels entering Australian ports arelevied by the Cornmonwealth. The resultant reve nue is applied towards the rnaintenance and adrninistration of t he coastal lights of the Oon1monwealth. After the payrnent of Oon1monwealth Light Dues at the first port of call vessels 1nay enter any other Australian ports within three months without further payment.

In 1915 the Connnonwealth Governrr1ent assun1ed control and 1naintenance of the coastal lighthouses and lights on the Australian coast. The States were then relieved of the expenditure entailed in n1aintenance and upkeep of these services. The capital debts involved were subsequently taken over by the Cornmonwealth Government.

The rnaintenance and adrninistration costs of these services, and the interest on the capital debts associated therewith, have not been co vered by the revenue arising from the above charges; consequently the Corn1n onwealth Govern1n ent has had to provide from other Oo1nn1onwealth sources, an average of fr01n £50,000 to £60,000 per annurn during the last seven years.

The Ilobart l.V1arine Board abolished its coastal light rate altogether as soon as the Comn1onwealth Governn1ent assu1r1ed the cost of light services . A reduction in the Light Rate was 1nade in Western Australia for t he san1e reason, but in all the other States the san1e charge has been 1n aintained as existed prior to the financial responsibility being assu1ned by the Commonwealth Governm_ent, it being contended that working costs in other directions have so increased as to make any reduction irnpossible.

188. Inward wharfage is charged ou irnports and is payable by the consignee. Agricultural machinery, cornsacks, phosphate rock, and sulphur are subject to inward wharfage charges at different rates. At Sydney the inward wharfage :rate on agricult ural implements and cornsacks is the general rate of 4s. per ton, and in the case of phosphate rock Is. 3d. per ton.

At Melbourne the inward wharfage rate on machinery and corn sacks is 5s. per ton- and on phosphate rock from overseas 2s. 6d. per ton.

149

. At Adelaide the general inward wharfage rate of 5s. is levied on agricultural machinery and cornsacks; on phosphate rock the rat e is 2s. per ton crude and 3s. crushed. At Fremantle the general inward wharfage rate of 5s. per ton is applied to agricultural implements and cornsacks. A special rate of 1s. 8d. per ton is levied on phosphatic rock and manures, which is one-third the general rate.

A special conveyor, involving a capital cost of £88,117 was built at Glebe Island by the Sydney Harbour Trust for the mechanical loading of bagged wheat. A loading charge of 6d. per ton (less than l d. per bushel) is made on all bagged wheat and on flour shipped direct from trucks or sheds. The conveyor reduces the time required for loading bagged wheat

to about half that occupied under the old methods, thus saving about half the tonnage rates on vessels. This charge, however, has not been sufficient to cover the operating and maintenance costs and no contribution has been made towards interest since its installation. 189. Taxation.-The owners of all oversea vessels are subject to Commonwealth and State Income Taxes on all freight earnings concerned with Australian ports. The Federal rate is

ls. in the £ on 5 per cent. of gross freight charged on a sterling basis. The rates of the States' taxes differ and are in general higher than the Federal rate. • Customs duty has also to be paid to the Comn1onwealth on imported ship stores consumed whilst the vessel is in Australian waters.

190. The pilotage charges are as follow:-Sydney.-The State Navigation Department collects the pilotage at the rate of 2!d. per ton on a vessel's net register tonnage-rnaxin1um £25 each way. Vessels arriving in ballast pay half rates, i.e., I!d. per ton net-maximum £25.

lJrlelbourne.-The Marine Board of Victoria collects pilotage at the rate of I!d. per ton net to 5,000 tons net, for every additional ton net. In the river the charge is !d. per ton up to 5,000 tons net, with ld. for every additional ton net. Adelaide.-In South Australia pilotage is collected by the South Australian Harbours Board. The charge for the first 100 tons gross register tonnage is £2 lOs. ; every additional gross ton 1!d.-maxin1um £12, plus 40 per cent. each way.

Frmnantle.-Fremanple Harbour Trust collects pilotage for the port of Fremantle, the rates being:-In-3d. per gross ton-maximum £21, plus 20 per cent. Out-not compulsory.

The harbour rate is £4 lOs., plus 20 per cent. each way.

PoRT FINANCES.

191. The Comrnission has obtained from the latest pubiished accounts of the main port authorities of the wheat-exporting St at es figures indicating the capital expenditure and debts of the port authorities together with the financial results of their operations as foll ow:-I Melbourne, P ort Adelaide and

-1 Sydney, 30t h June, 31st December, Outports, 30th l<' r eemant le, 30th 193 3. 1933. June, 1933. June, 1934 .

£ £ £ £

Capital Invested . . . . . . . . 12,531,075 8,881,890 8,018,191 2,740,646

Capital Debts Outstanding . . . . .. 11,596,315 4,471,111 7,764,785 2, 702,697

Financial Operations-

880,012 579, 583 564,4:40 385,239 Revenue (All Sources) . . .. . . Expenditure- •

Maint enance and Working Expenses .. . . 321 ,902 147,509 132,203 163,936

Depreciation Renewals and Insurance Reserves 1 .. 10,000 28 ,1 28 2,000

Interest . . . . . . . . . . 527,543 256,64:9 365,1 85 119,010

Sinking Fund . . . . .. . . 41, 658 45,89 3 26 ,514 10,581

Surplus . . . . . . . . . . .. 119,532 12,410 89 ,712

Deficiency . . . . . . . . ll,09 1 . . . . ..

I

In addition to the above figures relating to Capital Expendit ure considerable capital outlay was made by ,all the Stat e Governments to. the of the port aut horities .

However, the figures above disclose amount of Expenditure of each of the fo ur

principal concerned w1th wheat export and t he amount of t he

Capital Debt still renlallling unpaid at the date shown. F .5964.-7

150

Apart from the financial responsibilities the above comparative :figures display the earnings and expenses Involved and also illustrate the substantial interest and sinking fund requirements. The surplus or deficit in each State is also shown.

PE RCE NTAGE OF EXPENDITURE ITEMS TO THE GROSS RE VENUE.

- Sydney, 30th Melbourne, 31st Port Adelaide and I Frema.ntle, 30th June, 1933. December, 1933 . Outports. June, 1934.

Per cent. Per cent. Per cent. Per cent .

Maintenance, Working expenses and Depreciation 36.58 27.18 28.4 43.07

I nt erest . . . . . . . . . . 59.95 44.28 64 .7 30.89

Sinking Fund .. . . . . . . 4.73 7.92 4.7 2.75

Surplus .. . . . . . . . . . . 20.62 2.20 23.29

Deficiency .. . . . . . . . . .

I

1.26 . . . . . .

The percentages of expenditure to gross revenue show marked contrasts. The maintenance and working expenses of South Australia and 1\felbourne Boards com pare favorably with the percentages of other State Boards. All Boards show a surplus excepting which has almost as heavy a percentage due to interest as the South Australian Board. The percentage due to interest and sinking fund of both these Boards is about double that of Fremantle.

At Sydney.-Prior t o 1928, the revenue of the Harbour Trust was paid to State Consolidated Revenue. The amount so paid to Consolidated Revenue from 1901 , the year the Sydney Harbour Trust was const itut ed, to 30th June, 1928, was £15,164,627. The accumulated surpluses during the period t otalled £1,690,437. From 1st J uly, 1928, t his practice was discontinued and a Harbour Trust Fund was established at the Treasury to account separately for all monetary transact ions of the Trust. The Capital Debt at 30th June, 1928 , was fix ed at £11,204,370, but this has since been increased by loan moneys received from the Government for capital works.

The operations of the Trust during the years 1932 and 1933, showed losses and as a consequence a reserve account which was in credit to the extent of £3 6,070 on 30th J une, 1930, was converted into a Deficiency Account with a debit balance of £132,394 7s. lOd.

At' Melbourne.- The Act establishing the IVIelbourne Harbour Trust in 1876 imposed a statutory obligation that one-fifth of the gross annual revenue be paid to Consolidat ed Revenue, and this obligation has been duly observed ever since. For the purposes of con1parison this charge has been included in t he surplus of The amount was applied fir st in paynwnt of the statutory charge as to £1 11,089, and the balance £8,443 to the accumulat ed reserve of the Trust.

Over the ten years ended 30th December, 1933, the contribut ions 'to Consolidated Revenue and Surpluses after providing for Int erest and Sinking Fund amount to £1, 288,9 18.

South Australia.-The account s of the Board relate t o t he combined fi nancial transactions of all the South Aust ralian ports with the exception of Port Augusta. They do not disclose the results of the main port as distinct frmn those of the outports. South Australia ships wheat from many ports and t his procedure may add to t he costs where vessels cannot load t heir full complement without " topping up " elsewhere.

The accounts of t he South Australian Harbour Board for the t hree years ending 30th June, 1928, disclose substantial surpluses, which have been paid to the State Treasury. During the succeeding four years t he gross revenue declined so considerably as t o disclose deficiencies each year, which t urn were by t.he State. The the year ended 30th June, 1933,

is traceable to an Improvement In earnings and a reductwn In Interest .

The Profit and Loss Acc ount of the Board shows t he accumulated profits since it s inception at £303 ,489 16s. l d., which have passed into the State revenue in keeping with the established practice of that State.

At F1·enwntle.-The surplus arising from t he Fremantle Harbour Trust operations is paid into Consolidat ed Revenue. The surplus fo r each of the last three years wa s :-1931-32, £103,361 ; 19 32- 33 , £104,879 ; 193 3-34, £87,262 ; making an aggregate of £295,502.

i51

CoMPARATIVE GovERNMENT AND PoRT CHARGES.

192. vVith a view to assisting the Commission in arriving at some equitable basis of t he comparative charges i1nposed at the four major wheat exporting port s of Australia, the officer of the Melbourne Port Authority submitted in evidence a comparison of the charges in respect of a ship of 5,200 tons gToss register had it loaded with wheat at any one of the four major ports.

VESSEL-5,200 TONS GROSS, 3,220 TONS NET, LOA.DED 8,067 TONS OF V HEAT. TEN AND THREE QUARTER DAYS IN ALL P ORTS E XCEP TING SYD NEY WHERE FIVE DAYS IN PORT HAS BEEN ADOPTED.

Levied by Harbour Trust . ' Sydney . Melbourne. Ad ela ide. Fremantle.

£ s. d. £ s. d. £ s. d. £ s. d.

Tonnage rates . . . . . . . . 81 5 0 174 13 9 174 13 9 279 10 0

Special berth charges .. . . . . . . 26 17 6 . . . .

Wharfage rates .. . . . . . . 242 0 2 . . 537 16 0 . .

323 5 2 201 11 3 71 2 9 9 279 10 0

In addition to the above Port Authority charges, there are other port dues levied by vanous Government Authorities, namely:-Commonwealth Government Light Dues. New South Wales Navigation Department-For H arbour Lights.

Victoria-Ports and Harbour Department-Tonnage Duty. South Australian Harbour Board-Port Dues . . Western Australia-Harbours and Light Department-Tonnage Dues. In all ports-Pilotage Rates.

A summary of these additional charges in respect t o the same vessel loading wheat is as follows:-- Sydney. Melbourne. Adelaide. Fremantle.

£ s. d. £ s. d. £ s. d. £ s. d.

Port dues, &c. . . . . . . . . 53 13 4 26 16 8 (a) 120 15 0 21 13 4

Pilotage . . . . . . . . .. 33 10 10 40 5 0 (b) 33 12 0 36 0 0

Commonwealt h light dues (c) . . . . . . 120 15 0 120 15 0 120 15 0 120 15 0

207 19 2 187 16 8 27 5 2 0 178 8 4

(a) Arrived ln ballast. (b) Present rates. (c) Payable only ln one State. Vessel may enter any ot her port in Australia within three months of payment and be exempt fr om further payment.

total charges wbicll would have been levied against t he vessel and its cargo at the

various ports and the average charge per ton of cargo are as follows :-Average charge per ton of cargo.

£ s. d. s. d.

Sydney 547 13 6 l 3!

Ivlelbourne 389 7 11 l 0

Adelaide 987 11 9 2 5

Fremantle 457 18 4 1 2

In addition F ederal and State Income taxes are also payable by the ship-owner, and these are not provided for in t he above illustration. 193. In order to compare Aust ralian port charges with t hose levied by overseas wheat exporting information was obtained from respective offic ial sources as fo lJ ows :-

Canada-· Quebec Montreal Vancouver Argentina­

Buenos Aires Rosario South Africa- · Capetown

Durban

Australian Currency.

..

P er ton ot cargo.

s. d.

0 lli

1 1

0 6!

l 7

1 2

1 1

1 1

152

· The wave of depression has affected shipping possibly more than most industries, and it is obvious that the falling off in the income of the Australian poTts Authorities during depression years has exercised considerable pressure towards the reduced expenses under the head of maintenance and working expenses, which these accounts display. vVithout an exhaustive-· investigation it is impossible to say whether any further economies could be effected in these expenses, without impairing efficiency. The Comrr.ission specially urges, ho...vever, that in these

distressed years all classes of expenditure should be carefully curtailed to a minimum.

9. RATES AND TAXES AS FACTORS IN COSTS. 194. The question of relief from rates and taxes is one which was raised by many witnesses before the Con1mission. Each State has its own systmns, and the C01mnission has made a general review of the position as far as it affects the wheat industry.

As regards taxes, it was reasonable that the farming comrnunity during its period of prosperity should find its full share of contribution to the Government of the Commonwealth and the States by making general or special contributions in the forn1 of taxes. In this present time of its distress it bec01nes desirable that the burden on the agri9ultural industry should be lightened. Reductions of taxation have therefore been rnade during recent years and it is now a question of ascertaining whether any further assistance towards lowering of costs can be effected from this -source. On the other hand, rates other than water rates are a local1natter and n1ust

be regarded as a.n essential elmnent in the costs of production of each district. Econmnies cannot he effected beyond a certain limit which is set by the necessity of maintaining a reasonable standard of social services and an1enities in the neighbourhood.

195. Land Taxes on Wheat Farms.-The Commonwealth and all the States levy land taxes. Queensland, the last StaJte to impose the tax, n1ade its first collection in 1915-16. In the other States the irnpost is of long standing. In all cases, land tax is levied on the uni1nproved value of land. Under the Con1monwealth

and some of the State Acts no tax is chargeable unless the assessed uni1nproved value of all lands owned exceeds a certain amount. The following table shows the amount of such exmnptions. £

Com1nonwealth.- For resident taxpayers . . . . . . . . 5,000

New South Wales.-But the tax is only levied on unimproved value of land in . the Western Division of the State outside 1nunicipal areas . . . . 240

Victoria.- The exemption din1inishes at the rate of £1 for every £1 in excess of £250; so that the exemption disappears at £500 250

South Australia Nil

Western Australia.- Settlers are exmnpt for the first five years provided their holdings of conditional purchase land from the Crown do not exceed an area which is roughly that of a one-unit wheat farm. Queensland.-A maxin1um exemption . of £1,500 when that sun1 is the

unimproved value of the land. This exemption diminishes by £6 for every £5 of unimproved value in excess of £1,500, until a 1ninin1um figure of £300 is reached.

Rate of Tax.-The Commonwealth and the Queensland taxes are graduated, but a fiat rate is charged in New South Wales, Victoria, South · Australia and Western Australia. The rates for resident taxpayers range fron1 fd. in the £ to as high as 9d. in the £. The net result of these taxes is that few wheat-fanners are liable to the Federal Land Tax.

In New South Wales there is virtually no State taxation on wheat lands because these are almost entirely outside the limits of the Western Division, and in the other four States some revenue is derived from wheat-growers. 196. During the depression the Govern1nents concerned have recognized the necessity of adjusting this burden on rural industries. They have, therefore, made various amendments, which have been as follow :-

The Con1monwealth reduced the rate of land tax by 10 per cent. in 1927-28. It made a further reduction of 33! per cent. in 1932-33, and this reduction was increased to 50 per cent. in 1933-34. In Vjctoria an arnendment designed to give a relief fro1n tax where the incon1e has been reduced o-vvi111.z to the low prices of prin1ary products, was passed in the middle of 1934.

In South Australia rate of tax on properties valued at less than £5,000 unimproved value, was reduced fro1n 1d. to !d. in the £ in 1'932, it having been raised fron1 the latter figure to the fonner in the preceding year. In V\Testern Australia the tax been from improved

land used solely for agricultural, horticultural, pastoral or grazing purposes dunng the last three years. No change has been made in New South Wales or Queensland.

153

197. The Commission has endeavoured to ascertain the amount of land tax which wheat-farmers have been paying by using the information contained in 524 questionnaires B. A survey reve.als the following state of affairs :-LA11]) TAX.

- Total Land Taxes

I

Number of Average Tax per Average Tax per Paid (Federal and Bushel (five-year State). Forms B. Farm. Average 1929-1934).

£ £ s. d. d.

Western Australia .. . . . . . . 188 75 2 10 1 .07

South Australia 1,943 127 15

I

.. . . . . . . 6 0 .59

Victoria .. . . . . . . . . 2,023 141 14 7 0 .54

New South Wales .. . . . . . . Negligible . . . . . .

Queensland .. . . . . . . . . 97 18 5 7 9 .34

It is to be noted that the Commission's estimates of per-bushel costs are based on the 5-year average and will show a reduction when the amendments to the present rates of taxation ha.ve had full time to. operate: As regards the high rate of taxation on the heavily

priced lands of the 'Vnnmera 1s largely responsible for the high average tax per bushel.

'fhe 47 cases examined in the Wimmera are distributed as follow:-. 1 pence per bushel and less than .2 pence in 1 .2 , ,

" " " "

.3

"

, 2

.3

" " " " '' "

.4

" "

5

.4:

" " "

,

" "

.5

" "

5

.5

" "

,

"

,, , .6

" "

7

.6 ,

" "

,

" "

.7

" "

6

.7 , ,

" " ''

, .8

" "

4

.8 , ,

" " " "

.9

" "

4

.9 , ,

"

, ,,

"

1.0 " "

3

1.0

"

.,

" " " "

1.1 " "

5

1.1

"

,,

" " ''

, 1.2

"

, 2

1.2 ,

" " "

and over 3

47

It may be expected that the Victorian Amending Act will give some relief in cases where farmers are able to prove to the Commissioner of Taxation that their income has been unduly owing to the low price of primary products.

198. The Commission considers that there is every reason for sympathetic amendment of land taxation in the direction of a reduction of the burden of such taxation on the wheat industry whilst present conditions continue.

199. Income Tax.-Being only a taxation of profits, this does not fall on the majority of the wheat-growers during the period of depressed prices; having little or no profits, they are automatically exempt. Even in normal tin1es, a satisfactory arrangement for the taxation of farmers' incomes is a matter of difficulty. The wide fluctuation in profits from year to year,

which is an inherent feature of most types of farming in all countries, is particularly pronounced in Australia, where climatic vagaries play such an important part in the success or failure of the operations in an individual season. It follows that a principle of averaging profits over a period, or for making allowances for losses in preceding years, is necessary if hardship is to be avoided. The principle of averaging profits has been used in detennining the rate at which tax should be levied in son1e parts of Australia, while the principle of allowing losses to be carried forward and deducted from subsequent profits has also been applied.

As regards carrying forward of losses, the present provisions of the several State and Commonwealth Acts are, briefly, as follow :-deduction is allowed of a loss sustained by a taxpayer in carrying

business in any of the four years next preceding the year in which the income

was derived.

154

New South W ales.-A deduction is allowed of a business loss from the income of the two succeeding years.

Queensland.-A deduction is allowed only of a loss sustained by a taxpayer from agricultural, dairying or grazing pursuits out of the inc01ne of the five succeeding ,, years, but in the case of the grazier the allowance is limited to £1,000 of income.

South Australia.-The Act of this State was amended in November, 1933, to allow losses sustained by a taxpayer deriving income from agricultural or pastoral pursuits during the taxation year ended 30th June, I 932, to be carried forward as a deduction fro1n the incmne derived frorn the same pursuits during the taxation year ended 30th June, 1933. The section has been re-enacted to provide for the similar treatment of losses incurred in the next taxation year.

Western Australia.-An individual taxpayer is allowed to deduct a net trading, prospecting or business loss incurred during the two years preceding the year of incon1e and also net losses arising over a like period from a loss of stock-in-trade, crops and livestock due to droughts or other circumstances or conditions over which the taxpayer had no control or against which he was unable to protect or insure himself. This concession is not allowed to companies.

Victoria and Tasmania.-No deduction is allowed of losses incurred in any year preceding the year of income.

In regard to this matter, the recent Royal Com1nission on Taxation (1934) recommended­ (i) That the taxpayer be permitted to deduct from the inc01ne of any year a loss sustained by hin1 in any of the four years next preceding the year in which the income was derived ;

(ii) that a loss so allowed should be the excess of expenditure incurred in the production of assessable income over such income; (iii) that the deduction should be made in the first place fron1 the net exempt income derived by the taxpayer ; and (iv) that a similar concession be allowed by each State."

The rnethod of averaging income for the purpose of determining rate of tax payable was introducedin the commonwealth Act of 1921. It now applies to all taxpayers with the exception of companies.

Of the States, New South Wales is the only one which has adopted the principle of averaging income in determining the rate of the tax and, in that State, it is applied only to income derived from agricultural, dairying or pastoral pursuits.

The Royal Commission on Taxation recommended that the averaging of incomes for· the purpose of determining the rate of tax to be applied to the income of the year preceding the year of assessment should be retained in respect of primary producers who ordinarily carry on primary production as their sole or main business, and that the same basis of assessment be adopted by the States.

Both these matters are of considerable importance and the Commission urges that the States be recommended to adopt the findings of the Royal Commission on Taxation, as quoted above, as far as wheat-growers are concerned.

200. Rates.-The revenue of local governing bodies is derived mainly from rates levied on the value of land and of the improvements thereon. The method of valuation is not identical in the case of all councils. In some the assessment is based on unimproved values and in others on improved or annual rental values, periodic valuations being made of all rateable property. The purposes for which the rates are imposed include some or all of the following services :-

Roads and street improvements and maintenance, water supply, drainage, electricity, sanitary and garbage services, parks, fire-brigade and town improvements. .

Evidence submitted to the Commission showed that councils had taken steps to reduce valuations and afford relief to ratepayers.

155

following tabulation for each district, the. number of cases examined by the

Commission, t?e average rates (exclusive of water rates) whiCh have been levied on the farmers concerned dunng last five and their effect on the per bushel costs. It is to be expected that the actual pos1t1?n today will oe owing to economies which have already

been effected and ow1ng to the revaluations whiCh have been tak1ng place. RATES.

State or District. Number of Casea A vera,ge Rates Paid

Average Rates per

Examined. per Farm. Bushel (Five-year Average 1929-1983).

£ 8. d. Pence.

Western Australia . . . . .. . . . . 75 18 15 8 .523

South Australia-Central and Lower North . . .. . . . . 42 18 19 1 .679

South Eastern .. . . . . . . . . 1 12 0 0 .800

l\1urray-Mallee . . . . .. . . . . 27 10 8 2 .418

Upper North .. . . . . . . . . 15 9 17 4 .515

Western . . . . . . .. . . . . 42 10 0 5 .382

State . . . . . . . . . . . . 127 13 1 1 .511

Victoria-Wimmer a . . . . .. . . . . 47 35 9 4 .957

Mallee 1 . . . . . . .. . . . . 54 17 5 2 .785

Mallee 2 .. . . . . . . . . . . 7 6 2 10 1.128

Mallee 3 .. . . . . . . . . . . 11 7 5 5 .591

County Moira . . . . .. . . . . 13 32 10 9 l.lll

Other Districts . . .. . . . . . . 11 20 5 5 1.037

State . . . . . . .. . . . . 143 23 10 4 .910

New South Wales-Riverina . . . . . . .. . . . . 49 12 2 5 .616

South Western Slope . . .. . . . . 27 15 8 10 .665

Central Western Slope .. . . . . . . 36 11 18 4 .508

Central Plain . . . . .. . . . . 15 6 10 8 .313

North West Slope and North Western Plain . . .. 20 9 14 0 .339

Other Districts . . . . .. . . . . 14 13 11 5 .714

State . . . . . . .. . . . . 161 11 18 9 .536

Queensland . . . . . . .. . . . . 18 15 811 .994

The Commission has taken the official figures for valuations and rates in New South Wales for the years ending 31st December, 1927, 1928 and 1932. The data for the chief wheat-growing shires have been extracted. The result shows that the unimproved valuations have been amended and in the n1ajority of cases somewhat reduced; the general tendency has been for rates to fall by about 25 per cent.

201. Water Rates.-These are by no means general throughout the various States and only apply to certain districts where water supply systems have been installed. There are several of these in the Commonwealth; the largest is that of the Wimmera-Mallee Gravitation System in Victoria, which cornprises 6,155 miles of channels and serves an area of about 11 ,000 square

miles of country. Other schmnes have been installed in t he Lower North and Western districts of South Australia and in certain localities in Western Australia. The importance of these water supplies to the farmers is great for without them the important subsidiary industry of keeping sheep would be, in many cases, extremely risky. However, in certain districts the cost on a per bushel basis is high as the following tabulation shows:-

WATER RATES.

Number of Caa ee A ve:rnge Rate!il Paid Average Rates per

District. Examined. per Farm Examined. Bushel (Five-year .A. verage 1929-11133).

£ 8. d. Pence.

South Australia-Lower North . . . . . . . . .. 15 42 9 4 1.266

Western . . . . . . . . . . . . 25 27 19 2 1.030

Victoria-Wimmer a . . . . . . . . . . 4-7 27 5 6 .738

Mallee 1 . . . . . . . . . . .. 54 25 4 5 1.147

Mallee 2 . . . . . . . . . . ..

I

7 17 11 5 3 .227

Mallee 3 . . . . . . . . . . . . 11 28 18 2 2.350

County Moira .. . ' . . . . .. 13 14 7 8 .491 -

156

In Western Australia the incidence of these rates is localized on a certain number of farms in special geographic areas, so that figures averaged over the whole of the State would be misleading. Nineteen of the farmers wl:iose cases have been investigated were concerned with water rates. Their production as averaged over the last five years was 166,269 bushels, the total water rates paid amounted to £632 per annum, so that the scheme is costing . 912d. per bushel.

202. The majority of the water supply schemes are operated by the Governments and any reduction in the rate would lead to a further demand on the consolidated revenue of the States concerned, which would involve an additional tax on the community as a whole. However, the people of each State will have to realize that the provision of water supplies in the more difficult districts is part of the price which they must expect to pay if they wish these districts to be held as closely settled areas.

The capital cost of the schemes have been incurred and if service were no longer given interest charges would still have to be met. Thus in the case of the vVimmera-l\1allee system, in the year 1932-33 the capital cost was of the order of £3,000,000 and the annual interest charge £109,248, the latter item being over two-thirds of the total expenditure of £152,135. The loss on the year was £38,145.

203. The outstanding indebtedness of "wheat farmers" in respect t o taxes, rates and water rates is estimated by the Commission to be approximately as follows:-

State. Income and Land Local Rates. Water Rates. Taxes.

£ £ £

New South Wales . . . . . . . . . . 17,400 100,000 127,012

Victoria . . . . . . . . . . . . 38,200 226,400 3'03,741

South Australia . . . . .. . . . . 203,000

I

58,500 80,000

Western Australia . . . . .. . . . . 51,200 89,600 130,000

Queensland . . . . . . .. . . . . 2,400

I

1,000 . .

I

The data is partly from official sources and partly derived from answers to questionnaires.

204. General Conclusion.-Consideration suggests that the future costs per bushel due to rates and taxes will be slightly lower than those shown in the Commission's computations. The amount of such reduction is difficult to estim_ ate and will be by no m_ eans evenly spread over the whole of the farming community. In some cases the reduction will be of the order of ld. per bushel; in others quite negligible. The high water rates in some of the rnore difficult districts are a serious matter and will be an essentialJeature in the reconstruction of the general agriculture of the districts concerned.

As the full effect of interest reductions becomes operative, a further reduction in rates and taxes may be expected, except in cases where losses are being lliade under present conditions.

SECTION V.-MARKETING.

1. GENERAL DESCRIPTION OF SYSTEM

2. MARKETING COSTS

3. THE F.A.Q. SYSTEM OF SELLING WHEAT

4. ALTERATIONS IN THE EXCHANGE RATE AND THEIR EFFECTS UPON WHEAT PRICES

5. THE PooLING SYSTEM

6. CONTROLLED MARKETING­ (a) Arguments in favour (d) Disadvantages and dangers (c) Recommendations in relation to a scheme for controlled marketing

7. BULK HANDLING

PAGE. 159

162

168

170

170

171 176 178

179

159

V. MARKETING.

1. GENERAL DESCRIPTION OF PRESENT METHODS.

205. It is customary for the fanner to n1ove his wheat from the fi eld to the railway siding as part of his harvesting operations. Marketing commences at this point, for if he has not already chosen his method of disposal he must now do so. He may-( a) Sell his wheat at the day's price.

(b) Store it with a merchant or miller.

(c) Sell it through a pool.

Merchants and pools are represented by an agent who contracts to provide all services connected with the receival, storage and care of wheat at the siding. The principal, i.e., the merchant or pool, provides stacking sites and materials for stacking and protecting the wheat. The agent undertakes, for a commission of 1 td. per bushel ( 1 !d. in New South Wales) to supply

plant and labour and to do all work in con'nexion with receiving, weighing, stacking, protecting, loading and forwarding the wheat delivered to him on account of his principal. The agent also accepts responsibility for the quantity, quality and condition of the wheat delivered to him until its arrival at rail destination and undertakes to re-deliver as directed by the principal the full

number of bags and the full weight of wheat handled by him. He is responsible for any damage to wheat sustained by reason of neglect in the proper performance of his contract. He a·lso undertakes that when wheat stacks have been removed, he will clean .up the site.s, collect and stack timber, roofing iron and other material belonging to the principal and be responsible for its safe keeping.

206. Wheat on delivery to an agent acting for a merchant is wei ghed and sampled ; if sold, it is paid for at the day's price; if placed on storage a cart note is issued upon which is recorded the quantity of wheat delivered and any dockage which may have been made on account _ of inferior quality. Subsequently the cart not es are exchanged for a storage receipt for the

quantity of wheat represented by them. The farmer may secure from the firm with which he is storing an advance upon his st ored wheat, and there is evidence that this convenience is made use of ·by a large number of farmers.

207. Pooled wheat is acquired in the same way as wheat delivered to merchants, but the farmer receives a certificate for his total deliveries in place of the storage receipt issued by the merchant. The certificate entitles the farmer to an advance immediately upon delivery of his wheat, and to subsequent as they are declared.

208. The form of storage receipt in general use by the wheat merchants is not transferable without the consent of the firm. It sets out the conditions under which the wheat has been received, which in general provide-(i) that the wheat on delivery becomes the propert y of the merchant. The merchant

undertakes, at any time the farmer desires, to fix t he purchase price , which price shall be the current market price quot ed by the merchant. This option remains open to the farmer until 31st October in each year in New South Wales and Western ?"Australia ; 30th Novemb er in Victoria, and 31st December in South Australia. At any time"' .. after the expiry of the option

the merchant may fix the purchase price at his current n1arket price in respect of any of the wheat on which the purchase price then remains unfixed. (ii) that any advance made by the merchant on the stored wheat with interest thereon and any dockage made on wheat shall be deduct ed fro m the purchase price,

and should these amounts exceed the purchase price the farmer shall pay the difference. _ (iii) that the merchant will , upon request by the fanner, set t le for any wheat on the purchase price remains unfixed by delivering t o him an equal quantity

of f.a.q. wheat ; the farmer shall pay to the merchant before such delivery the amount of commission paid by the merchant to the siding agent for recejving, handling and t rucking, any and interest thereon (if and any dockages which have been raised against t he wheat , together VVlth

a charrre at the rate of ! d. per bushel per month or part of month from the 0 • date of the storage receipt. .

160

(iv) that should the amount advanced by the merchant to the farmer plus interest be at any time within 3d. per bushel of the merchant's current market price, the merchant may require the farmer to make a payment sufficient to bring the amount advanced plus interest down to 3d. per bushel below such Should the farmer neglect to make such payment within reasonable time the merchant n1ay fix the purchase price upon the wheat at the merchant's current market price at the time of fixing. Should the amount advanced with interest exceed the purchase price so fixed the farmer must pay the difference to the merchant.

In actual practice the merchant almost invariably becomes the purchaser of the wheat stored with him. .

209. Although the storage system provided by merchants and millers is generally used by farmers desiring to hold wheat for later sale, a consideraJble quantity is stored independently of wheat buyers. At some sidings, particularly those where sheds are individual farmers lease space and stoxe for themselves; at others agents not connected with wheat buying firms lease sites and undertake to receive wheat from farmers, stack, protect and truck it for an inclusive charge of about ld. per bag. In the aggregate the amount so stored is relatively small, but there are instances of the free agents having been well supported by farmers. Whilst some witnesses have informed the Commission that for wheat stored under these methods they have been able to secure a price above that offered at the time for wheat stored under the merchant storage system, the practice involves considerable danger of losses to growers and is not suitable for general application.

210. The greater part of the harvest passes directly into the hands of merchants, pools and millers. In some localities however, country traders eome into possession of a considerable quantity of wheat as part of their dealings with farmers; they have supplied goods on credit and accept sufficient wheat to liquidate the debt. Full market rates are paid and under the

circumstances the system must be looked upon more as a convenience associated with general trading activities than as a method of marketing. Such wheat usually finds its way into the ordinary export channels or is sold to m.ills.

211. The foregoing paragraphs have reference to wheat delivered in bags, the handling and storage of which are provided by the merchants and pools as part of the marketing service. At sidings equipped for bulk handling these services are part of the bulk system. The official in charge of the silo takes delivery from the farmer who is given a receipt showing the weight and quality of each load of wheat delivered. Later, on application by the farmer on a prescribed form and on surrender of the receipt, a Wheat Warrant is issued which entitles the holder to obtain delivery of wheat of the quantity and quality specified in the Warrant. The Wheat Warrant is transferable and sales are effected by the. holder endorsing and delivering the Warrant to the purchaser.

212. The "siding agent" for the wheat merchant receives for his much reduced services under the bulk handling system a buying commission of !d. per bushel.

213. At the end of the delivery season a considerable portion of the harvest has been sold or shipped for sale; of the remainder some is held by farmers in bulk silos or stored privately at sidings or on farms, and the balance is stored at mills, railway sidings and ports in the hands of n1illers, IIlerchants and pools, awaiting disposal. Farmers have handed over their wheat and hold bulk warrants, pool certificates and the storage receipts of merchants and millers.

214. Wheat in the pools is shipped and sold in accordance with the selling policy of the directors or trustees of the pool. The wheat in the hands of merchants and millers is bought in by them as and when fanners accept the prices offered fron1 day to day.

2l5. Purchases from farmers are made by the country agent as part of the general service undertaken by him under his agreement with the merchant. He is notified by his principal each morning of the day's buying price and at the close of business each day reports the total of his purchases. It is to be noted that under this system of buying the aggregate of the

purchases made by all of his agents on behalf of the merchant upon any day may either greatly exceed or fall far short of his immediate requirements.

161

216. An examination of the process by which wheat is bought, and sold makes it clear that the merchants do not make haphazard purchases of indefinite quantities of wheat in the hope that subsequently sell at a profit but that the price offered through

agents at Sidings. IS genera}ly a of the sales actually made, or In course of being made, overseas at the time. Merchants, In their evidence, have stated that they do not speculate­ they endeavour to conduct then· buying and selling operations concurrently in such a way that and are kept in a balanced positio_n. It is probable that this theoretical objective

Is never .reach.ed, and that merchant 1s to e:x:tent in an over-bought or

over-sold position; If the balances either way are small his profit Is slightly increased or reduced as the market goes for or against him; should they be considerable he is able to avoid speculative risks by operating on the future market or by arbitrage.

217. Figure XXIX. shows in graphic form the operations of one wheat trading firm for the first eight months of a wheat trading season, during which there were considerable difficulties in marketing. The upper pa.rt of the diagram (a) consists of a graph showing the quantities bought and sold on each partwular day. The lower part (b) shows the fum's daily real position in respect to trading. At the opening of the season the merchant had purchased

100,000 bushels before making any sales; during November the position fluctuated and at the end of the month he was "overbought". This state of affairs continued Inore or less acute for the next three months; by the end of February the position was balanced. From then until the middle of l\1:ay he made sales without having actually purchased the wheat from farmers.

He was probably forced to do this owing to his position with reference to ships which had been chartered in the expectation that farmers would sell. For a considerable part of this period he was oversold to the extent of about 250,000 bushels. If the price had moved downwards from December to February he would have made a loss on the balance of wheat overbought on the day; if it had gone up he would have made an enhanced profit. During the period March to mid May, the position would have been reversed. During much of this latter period every rise in price of a 1d. per bushel would have meant a loss of about £1,000 to hin1, unless he had covered his position by dealing in" futures" or by arbitrage. The important point to notice is that the firm was not in a position to avoid speculating on the price of wheat because it did know. how much the farmers were going to sell at any particular time. Covering by " futures "

1s expensive.

218. The difficulties in co-ordinating purchases, made in the 1nanner described, with sales of large quantities to overseas buyers are accentuated by transport difficulties due to the great distances separating Australia froffi: markets, and to the fact that cargo freight is seldom available in Australian waters and must usually be brought out .in ballast.

219. Sales to Europe are made on a c.i.f. basis; wheat, therefore, cannot be offered for • sale until shipping has been arranged for it. Shipment is made as full cargoes in tra1np steamers or as parcels in "berth" stean1ers. The proportion of each varies from year to year, but witnesses have estimated that on an average rnore than 80 per cent. of Australian wheat export

is shipped as full cargoes. Chartering is arranged through London brokers and parcels space through local shipping offices. Owing to their New South Wales and

Victoria are able to take more advantage of the parcel freight ofienng.

220. The merchant charters according to his estimate of m.arket requirements. He expects that in the time between the chartering and the despatch of each ship he will be able to buy and sell the wheat required for loading. The tim.e available depends upon the distance the ship was from loading port when chartered, but nonnally it is not less than two or three weeks. If

he has over-esti1nated the buying den1and, or if farmers are not selling as freely as anticipated, ships are loaded and despatched despite the fact that the cargo has not been sold that the price has not been agreed as between the farmer and the merchant. By thus carrying stocks afloat the period during which 1nerchant can sell the cargo and buy 1n from the

farmers is extended by about mght weeks. The storage system allows of thiS bmng done, but since the merchant must account to the farmer at the ruling price upon the date the farmer chooses to complete the sale the merchant must either make sales only as farmers sell to hi1n or sell when he is able and cover his excess sales by purchasing " futures " or by arbitrage. Arbitrage· in this case would be the purchase from. another merchant Australia or elsewhere,

of the quantity oversold ; this wheat would be disposed of as the shipped wheat was bought in from farmers. 221. Sales overseas are conducted through direct representatives of shippers or through brokers, are usually on a c.i.f. basis and are concluded munder the of contract specially

urovided for the Australian trade by the London Corn lrade AssociatiOn. Sales to Japanese J:

162

buyers are made through branch offices established within the Commonwealth by Japanese merchants; these sales are on a f.o.b. basis and the wheat is usually carried in ships owned or under the control of the buyers.

222. The wheat export trade is mainly in the hands of large :firms which specialize in wheat buying and srnaller :firms which conduct a wheat buying business as part of a general trading business with farn1ers ; the former operate in all of the exporting States. In Victoria, South Australia and Western Australia a considerable quantity of wheat is 1narketed through voluntary pools, in connexion with which efficient overseas servicing and marketing organizations have been established.

2. l\fARKETING COSTS.

223. In the following survey the costs of marketing wheat in bags and in bulk have been considered separately. The costs for bagged wheat hsJve been divided into-(1) Internal costs, which may be defined as t hose incurred from the receival of wheat at t he siding to .delivery into ship ; and

(2) External costs, which may be defined as those incurred from ship to delivery to overseas purchaser.

224. The average costs of the leading exporters from siding to ship in each State for the season 1932-33, and t he average railway freight per bushel paid by them are set out in detail in the following table :-TABLE 19.

Country Section.

Agent's Commission (see paragraph 1 of previous section) .. Rent of railway sites, dunnage, roofing mat erial, sacks and twine for rebagging, damage by mice, weevil and storm, insurance (fire and flood), &c. . . . . . .

Total

Seaboard Stacking Section- .

Weighing, storage, loading in and out of stack, plant, sacks 1 and t wine for rebagging, clerical work, office accommoda­ tion, &c. . . . . . . . . . .

Shipping Sectio n--Freight from P ort stack t o ship, weighing, unloading fr om trucks t o ship, sampling, tallying, Government Certificates, &c. . . . . . . . . . .

All ot her costs, including Administration . . . .

Wharfage.. . . . . . . . . . .

Total local charges (exclusive of rail freight) siding to shipboard . . . . . . . . . .

Average rail fr eight paid by merchants 1932-33 . .

New South Wales.

.250 .560 .191

3.102

5.650

I

Victoria.

Pence. 1.125

.147

1.272

.4:68

.296 .590 Nil

2.626

4.528

• Varymg rates m excess of this amount are paid at outports in South Australia.

South Australia.•

P ence. 1.125

.191

1.316

.874

.329 .590 .333

3.442

3.672

Western Australia.

Pence. 1.125

.193

1.318

.686

.354 .620 Nil

2.978

4.449

(:'ote.- Since season 1929-20 h as b een a in the commission paid to the country agent in

each of vhe States; t h1s rep·esents a savmg per bushel of .1 25d. m New South Wales, . 375d. in Victoria and So Lb Australia, and .1 25d. in Western Australia.) Uv

225. Several of the costs between and ship are not incurred in respect of all wheat handled. This applies to the seaboa:d stacking section and_ some of the items of the country section. The :figures used represent the total costs for t hese Items spread over the total bushels b.an dled by each ship per.

163

300,000.

250,000 . -· ·

200,000 .

150,000 ·--

100,000

50,000

i

bvshe1 s.

.....

::c c., ::, 0

al

a: uJ > 0

0

..J

0

(/)

0:: w > 0

l1 , : \

_,,.____....,.-0-..1..-'~t~ I I

~ I_ _ J_"' _ .1 __ ~- ---

D e. c cz. m be r . - - ->:-E-----

Figure XXIX. showing for one wheat trading firm­

(a) the amount of wheat bought and sold on each wheat trading day ;

(b) the daily extent to which this firm was " over-bou ght " or " over-sold" during the period.

REFERENCE:-bough-t shown -thus Whtia-t Whea-t sold s h ow11 -thus

DAYS

bushels. J,

_ -- --- --- - - -- - ----- ------ --- ------ ----- 200, 000

- ---- -- ---------- -- -------- --- -- -------- -- ---- ---- -- -- - - - --- ---- -- - - -- - - - - _ _ --- -- - ------- -- ----- ------ ________ _1 50,000

_ _ _____ J 00,000

__ ____ _ 50,000

50,000 --·- ____ -- ---- -- - - - - - - - -

100,000 ----- --- --- -- --- ----

150,00Q ______ ________ ____ - - -------- - - - - - - - - - - - - - - - - - - - 1 - - - -- - - - - -

200,000 -- ---- --- ------- - --------- ------- -- ---- - - - - - - - - - - - - - -

2~0.000 _ -- ------ _ -- ----- ----- ---- -- ----- -- - - - ----

185

226. There are certain minor variations in the net costs incurred between the "£.o.b. Australian port ", and the " c.i.f. overseas port " positions, but the following pro forma schedule which sets out the charges, allowances, rebates, &c., which are usually experienced will serve as a basis for consideration. The figures are based upon a cargo shipped from vVilliamstown and sold at 22s. sterling c.i.f., United Kingdom port, per quarter of 8 bushels and a freight rate of 23s. 9d. per ton.

Value at 22s. per quarter Less freight at 23s. 9d. per ton

Less London brokerage on sale at i per cent. on (1) , Superintendence · of outturn of

cargo at 6d. per ton ..

, Selling commission at 2d. per

quarter

, Buyer's rebate in respect of draft, 1 per cent. for 50 days

. Plus exchange at £125 per cent. on (8)

Less Marine Insurance

Plus Chartering commiSSion at 4! per cent. of freight, plus 25 per cent. exchange Plus Average despatch money

F.O.B. price per bushel Williamstown ..

d.

(1) (2)

(3)

(4) .165

(5) .161

(6) .250 (7) .035

(8) (9)

(10) (11)

(12)

(13) . 424 (14) .120

(15)

Per Bushel.

s. d.

2 9.000 (stg.) 7.538 "

2 1.462

"

"

"

"

.611 "

2 0.851

"

6.213

2 7.064 (Aust. curr.) .082

2 6.982

" "

.544

2 7.526

The London brokerage referred to in Item 4 is the recognized allowance made to the

buyer for all sales made on the Baltic Exchange.

The deduction of 6d. per ton for superintendence in Item 5 is the cost to the shipper for a cargo superintendent to watch the discharge of the cargo on his behalf. S01ne of the larger shippers employ a staff for the purpose, in which case there would be a reduction in the cost.

The rebate in Item 7 is an allowance to the buyer in respect of purchase moneys paid before the expiration of the full period of 63 days allowed for payment under the contract of sale; it represents interest on his payment for the average period of 50 days.

, Item 13 represents the net amount to the shipper of the 5 per cent. chartering commission allowed by the shipowner after payment to the chartering broker of per cent. As freight is payable in sterling the seller receives the benefit of exchange .

. De.spatch money (Item 14) is the bonus earned by shipper for loading and despatching the ship 1n less than the number of days allowed for loading under the charter party. If the time allowed is exceeded the shipper pays demurrage.

, 228. The value per bushel to the Victorian

farmer of the sale at 22s. sterling per quarter

would be 2s. 7. 526d., Australian currency (the Williamstown price as shown in paragraph 226), less the internal cost of 2. 626d. shown in paragraph 224, less railage from siding to port and less the merchant's profit.

166

229. Bulk handling systems are operating in New South Wales and Western Australia. " Internal" costs for bulk wheat in these States are set out in the following schedule :-

Handling ..

Buying Commission to local agent Merchant's office expenses (estimated) .. Wharfage ..

Toll Shipping costs ..

Allowance for shrinkage, l per cent. Special raiiway charge for bulk wheat . . Adjustments for raihmy trucks

New South Wales.

Per Bushel. 2. 500 .250 .250

. 191

3 . 191

Western .Autralia.

Per Bushel. 1.125 .375 .250

. 625 .254 .125 .241 .125

3.120

Storage in New South Wales is free until 31st July, after which the charge is id. per bushel per week. In Western Australia, the fixed storage charge after 30th J uly is td. per bushel per month, but the Company controlling bulk handling reserves the right to impose a special charge in any season for the purpose of hastening the clearing of the bins. This right was exercised in the 1933-34 <;eason and the charge of td. per bushel per month was made as from lst June.

(Note. - -In Western Australia the bulk handling system has been financed by the farmers' co-operative organizations, and ownership is to pass to the users when the capital cost has been refunded from the " toll" payments. Of the " toll " of . 625d. per bushel . 305d. is absorbed in interest and depreciation and the remaining . 320d. is available for the redemption of the debentures securing the debt. Special rail and shipping charges are due to there being no

"terminal " elevator and no railway trucks entirely suitable for the transport of grain in bulk.)

230. In Victoria, South Australia and Western Australia, a considerable quantity of wheat handled in bags is shipped in bulk. The bags are cut and emptied at the ship's hold. " Internal " costs for bagged wheat are increased by this operation, but the cost is more than compensated by the value of the empty bags retained by the shipper, and part of the saving in ocean freio-ht mentioned in paragraph 231.

0

231. The net " external" costs for wheat shipped in bulk are the same as for bagged wheat, with the exception that ocean freigLt is 2s . 6d. per ton less for " bulk " than for bagged wheat.

232 . The " internal " costs for bagged wheat vary slightly from season to season. The selling policy of farmers, the weather experienced while wheat is in course of being receiyed at sidings, stacked and protected, and the extent to whirh damage has been caused by the prevalence of mice or weevil, are all factors causing these variations.

2?3. At times" external'.' costs in to those shown in the. schedule paragraph 226 are mcurred; these may anse from such Items as demurrage on sh1ps, expenses m connexion with " futures " or " arbitrage " dealings or for overseas storage, which occasionally becomes necessary.

234. As a set-off against marketing costs, the merchant has the advantage of the quantity of wheat sold by him in exeess of the quantity purchased from farmers. This surplus is due to the " natural increase " in weight occasioned by the absorption of moisture by the wheat, subsequent to its delivery by the farmer. The net gain in weight varies from season to season and is influenced by the conditions at harvesting time and the extent to which there have been losses occasioned by weather and vermin. An indication of what might be expected in an average season is to be found in the information supplied by the Victorian and Western Australian pools; these show that the weighted average gain in weight for the five seasons ending 1932-33 in respect of the wheat handled by them was . 374 per cent. and . 496 per cent. respectively.

235. It has been suggested that the system by which wheat is docked for inferior quality, a charge is levied against the farmer which the merchant, in his turn, may not have to meet. This state of aff airs is unlikely for the reason that, owing to keen competition during the delivery period, there is a general inclination amongst receiving agents to be lenient in the matter of dockages. That the ruling scale of dockage is a reasonable one is borne out by the evidence

167

of the wheat pool of Western Australia which showed that, in the eight seasons ending 1932-33, the total dockages against farmers on 162,000,000 bushels of wheat amounted to £24,535 and the allowances awarded under arbitration to overseas purchasers against the pool for the period to £25,4.07 showing a balance in favour of the farmers of £872.

236. The system merchants carry on a combined business of handling,

warehousing and merchanting bagged wheat enables them within certain limits to adjust prices to the farmer so that they may recover net costs and secure a profit for their services.

From sworn information supplied in respect of wheat prices in one of the exporting States, which information may be considered as indicative, the Commission has been able to compare export parity Australian f.o.b. prices with prices offered by merchants to farmers for wheat in a similar position. These comparisons show that, during the early part of the season, ruling prices represent a very high percentage of the export parity price, but that later in the season the

percentage is considerably reduced ; thus, in the two selling seasons covered by the period from 1st January, 1933, to 3rd July, 1934, f.o.b. prices offered to farmers averaged 99 .44 percentage of export parity for the twelve weeks ending 21st March, 1933, and 99.70 per cent. for the same period ending 20th March, 1934, whereas prices offered on the same basis for the weeks ending s.th August, 1933, averaged 96.6 per cent. of overseas parity, and for the fifteen weeks ending 3rd July, 1934, 94. 95 per cent.

It is not suggested that this increase in the amount deducted is not warranted, but the reason for it is not apparent to farmers. '

It is probable that competition which is keenest during the delivery season is responsible for the relatively high prices offered in the early period. This competition is presumably stimulated by a desire to obtain a large quantity of wheat on storage. Storage costs and the greater difficulties experienced in co-ordinating, buying, selling and shipping, when dailv

purchases from farmers are becoming less, account for the increased margin between the expo;t parity and the Australian prices in the latter part of the year.

It has been shown in an earlier part of this section that, upon the introduction of bulk handling under which a. third and disinterest ed party becomes responsible for all of the services other than the actual marketing of the wheat, this cause of dissatisfaction amongst the farmers would be removed. The silo charge for storage, &c., is known and the farmer will be able to separate his storage and handling costs from those incurred in marketing.

237. The Commission was faced with a difficult. problem when deciding the extent to which it should undertake investigation into the financial results of the operations of wheat merchants. The number of firms dealing in wheat has diminished considerably since 1912, and the business is now divided between certain firms and voluntary pools of entirely Australian character and certain other firms whose operations are world-wide.

238. The investigations of the Commission show t hat the trading results of wheat merchants vary from year to year according to circumstances over which the merchants themselves have little or no control. A study of the sub-section of this Report dealing with marketing demonstrates the existence of certain risks in the buying and selling of large quantities of wheat and the necessity for special commercial skill of a high order.

239. It was obvious that any attempt to arrive at the profits and losses of wheat merchants would have involved _ the qommission in the expenditure o£ much time and money in investigating the results over a penod of years, because the figures of any one year would be entirely misleading. Also, from the evidence given by representatives of the international wheat merchants, it that their Australian firms are really branch offices and operate to a considerable extent on cabled instructions conveying price limits for purchasing wheat. Experience in other directions has proved the difficulty of obtaining the essential information regarding profits and losses of firms operating internationally.

240. Several interesting points emerge from the consideration of the business of buying and selling wheat. Special knowledge and skill, together with carefully selected overseas representatives are essential, but given these essentials, the capital required to operate even a large business is relatively small. The wheat purchased and placed on board ship for export

can be made to supply most of the finance by discounting against the shipping documents. F .5964.-8

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241. The information in the possession of the Comrnission, 1nost of which is confidential, leaves no doubt that, provided wheat 1n erchants are skilled in the business, have the necessary efficient connexions in Australia and overseas and resist any temptation to speculate in wheat and wheat futures, confining themselves strictly to the legitimate buying and selling of wheat, the business is intrinsically profitable and requires an astonishingly small amount of financial capital.

242. As in all businesses where the unit of trading is small, such as in bread and wheat, a small profit per unit in a business of a reasonable size yields in the aggregate a handson1e return, whilst a small loss per unit has the reverse result . I t is in such businesses that skill and knowledge have a preponderating influence in success or failure.

3. THE ]1.A.Q. s-YSTEI\1 SELLING WHEAT. . 24 3. Crops of wheat vary from season to season and from farm to farm in respect to the quality of the grain harvested. Originally all wheat was sold on a sample basis, the buyer inspecting the sample before making his offer to purchase. This rflet hod is still used t o a certain extent in Australia when millers are purchasing theiT supplies direct from farmers. A different m_ ethod is necessary where large quantities of the grain are to be sold, particularly when the sale is being effected in another country. These altered conditions den1and smne scheme whereby a standard

of quality is set up and shipn1ents of wheat can be sold with reference to that standard. The variations in quality which are discussed in this section are those due to the bushel weight of the grain, to t he presence of weeds, foreign grain, or rubbish in the sample, to pinching and bleaching of the grain, to the presence of smut or other objectionable taint. Variations in quality in respect to t he breadmaking properties of the flour derived from the grain are dealt with in Section VI. of this Report.

In the United States of America and Canada somewhat elaborate standards have been set up designating various grades within each type of wheat which is grown. In these countries the standards are the same fr01n year to year. Such a system takes no cognizance of the special features of the crop in any particular season so that the pr oportion of the crop which is classified in any particular grade rnay vary considerably from year to year.

In Australia, each main wheat-growing State has adopted what is known as the f.a.q. (fair average quality) basis for the sale of most of its wheat. Under this system a composite sample is 1nade up each year from the crop in each district and this is declared to be the f.a.q . for the State for that particular year. The declaration with an attendant sa1nple is sent to the Baltic Exchange in London and forn1s the basis of dealings in that season's wheat for that State. Farmers whose wheat is lower in quality that the f.a.q. standard are liable to a dockage .in the price they receive.

In the case of ship1nents to those countries (principally Japan) which do not purchase the grain under the terms of the " Baltic Contract " payment for each shipment is rnade on an f.o. b. basis upon 'presentation of docunwnts one of which is a certific-ate of quality from a Government Inspector. On this certificate is stated the quality of the wheat in the shiprnent and normally the f.a.q. sample is taken as the basis. In n1any cases special san1pling n1ethods are adopted by the Government Inspectors in order to ensure that the shipment is up to the standard.

244. The advantages of t he f.a.q. system are considerable-(i) It takes into account the fluctuations in the quality of the grain due to the vagaries of the season. The buyers of the wheat doubt less t ake equal cognizance of the quality from their point of view when rnaking their price,

so that if a season's crop is of a value higher or lower the normal from

the point of view of the buyer, a general appreciation or reduction jn the price is t o be expected. However, the farn1ers do not realize this point and the friction which occurs under a rigid grading systern in other countries and would occur under such a system in Australia, is avoided. (ii) The grading is rough and ready and can be applied by workers who need not be

highly skilled in the somewhat cmnplicated matter of classifying grain. Disputes ar e relatively rare and there is no need for an extensive centralized grading authority to. whon:1 sam.ples can be referred for arbitrmnent. Consequently t he system is cheap. (iii) The system is also si mple to operate in respect to the handling of the grain. There

is no need to segregate t he wheat at the receiving sidings into several distinct bins or stacks according to a range of standards. FOOTNOTE.-In this Sect io n of t he Report the term "grading " is used to signify the classification of wheats according to their grades . It has no reference to the mechanical process of cleaning wheat.

i69

245. The disadvantages of the f.a.q. system are, however, numerous_,_

(i) The crop from "early" districts in States may have been exported before the crop is ripe in "late" districts ; consequently, these early ship1nents have to be sold on a basis of what the f.a.q. for the season is likely to be. Overseas buyers are not then certain of the quality of the n1aterial which they are buying and may reduce their offers in view of this uncertainty. It is true that rebates may subsequently be claimed if the sample& taken from these early shipments

are later found to be lower in quality than the f.a.q. sample when it arrives,. but this does not necessarily avoid a reduction in the price which would have been offered if there had been certainty as t o the quality of the shipment. The Commission has no definite evidence on t his son1ewhat intangible point.

(ii) The f.a.q. sample, being selected so as to give a level of quality for marketing which the majority of farmers can attain, is not a very high one. Any farmer who is producing wheat superior in quality to t he f.a.q. obtains no benefit for his extra skill unless he is able to sell the wheat to a local miller at a premium.

Unfortunately, some farmers are purposely careless in the 1natter of adjusting their harvesting machinery so that a certain · amount of rubbish becomes included in their product. Whilst such men are perfectly within their rights in taking advantage of the system, they are in reality prej udicing the standard

and therefore the value of the wheat of the State.

(iii)

(iv)

The system gives no positive standard which has to be reached and there is a danger of the state of affairs outlined in the preceding paragraphs resulting in a slow but progressive deterioration of the general level' of wheat from Australian States. Under the present scheme of marketing there is intense competition at the sidings between agents of the various buying houses in their desire to obtain the wheat which is being delivered by the farmers, consequently there is a definite tendency to adopt a lenient attitude towards the grade of

wheat which is coming forward.

The system allows for a fluctuation of the average of quality according to the climatic vagaries of the season. If all districts suffered equally in this respect then the experiences of any individual district would average out over a period of years. This, however, does not happen in some parts of the wheat belt.

There are areas in which the gTain produced is said to be of exceptionally high bushels weight in most seasons. If such is the case, then farmers in these areas are at present precluded from obtaining an advantage to which they have a definite right . There are certain other districts in which quality is

frequently interfered with by bad harvesting conditions. Farmers in the latter areas obtain an advantage which they do not deserve.

(v) In States where there are several ports of shipment drawing their supplies from different regions of the State's wheat belt , shippers are confronted with serious difficulty in seasons when the wheat from one of these areas is definitely inferior in quality from that coming forward from the others.

(vi) It is commonly urged that the transportation of the rubbish in the wheat really represents an economic waste because freight and other charges are paid on it. This argument presupposes that the rubbish is wholly waste and not convertible into a saleable by-product. H owever, should such not be the case

it presumably has some value and it is conceivable that the overseas buyers of the wheat are not greatly preturbed by the percentage of rubbish contained in the wheat. It is improbable that the bulk of the grain could be raised to such a level of cleanliness that millers would be able to avoid putt ing it through

a cleaning process before starting milling operations.

246. The system is enshrined as part of the accepted method of trading in wheat with Great Britain and other countries who buy Australian wheat under the " Baltic Contract." Any change in the system slwuld be made only after consultation with the authorit ies representing the purchasing side of the trade, and those responsible for selling Australian wheat overseas.

The abrupt adoption , of a new system of grading and designating Australian wheat might be expected to cause some initial troubles in connexion with some of the export unt il such time as the new systems were installed: The det ails of the system of arbitration for t he settlement of disputes on the question of quality of shipment would require careful consideration.

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247. A· consideration of the advantages and disadvantages set out in the preceding paragraphs suggests that the f.a.q. system, though cheap and easy} is relatively inefficient and definitely unjust to districts and individual farmers who produce high grade wheat. As the maintenance of standards of quality is an inherent necessity for any industry this conclusion is of considerable importance.

248 . Although the departure from the f.a.q. system to some new rilethod of grading the wheats of the Australian States is desirable, it is a matter requiring very careful consideration. ·A rnore rigid system would be difficult to operate under the present methods of marketing. Careful investigation in buying countries, especially Great Britain, should be made prior to the

formulation ·of a new sche1ne. Such new scheme should take into consideration the cleanliness and quality of the grain and if desirable should be extended to cover action in connexion with the conclusions of Section VI. which deals with the question of quality from the point of view of the flour produced.

4. ALTERATIONS IN THE EXCfiANGE HATE AND THEIR EFFECTS UPON WHEAT PRICES. 249. The rate of exchange between Australia and London has an important bearing upon the price received by Australian wheat-growers in Australian currency for their wheat. The importance of this Inatter can be realized from the fact that, if Australian currency were on a parity with sterling to-day, the Australian farmer would be receiving in Australian currency

approximately one-fifth less per bushel for his wheat (in a particular instance 2s. 4d. instead of 2s. lld. per bushel). If a further increase in the rate of exchange were riow made, the higher local price would, judging by the results which followed the depreciation of the Australian pound in 1930-31, be in the :first instance offset only to a minor extent by an increase in the costs of production of wheat. It has been suggested to the Commission that even in the long run the increase in costs would probably not be greater than one-third of the increase in price. The

Commission desires to point out that insofar as an increase of the existing rate of exchange between Australia and London might yield a net advantage to the wheat-farmer and increase his net income, it would also enable him to meet 1nore of his debt obligations in those cases where he is heavily encumbered. To this extent such a change would be advantageous to the creditors

of the wheat industry and to the credit structure of the nation. In such circumstances there would be need for a smaller direct cash contribution from the nation for the assistance to the wheat-growers. Further, the total taxable income of the community in Australian currency might be increased.

The Commission can express no final or expert views upon the many aspects of this important and complex problem, but it may be that a contribution towards the financial readjustment of the wheat industry is possible if, under strict control, the rate of exchange were further increased.

The Commission is of opinion, that the question of the of exchange should be referred by the C01nmonwealth Government to the Con1monwealth Bank Board for serious consideration.

In this connexion, the Commission has endeavoured to provide in its scheme of financial readjustment the necessary elasticity whereby the debt adjustment Courts recomn1ended by this Commission may modify their decisions as and when a major change in the financial returns of the industry occurs.

It should be noted that for the reasons stated in sub-section 6 of this section, the provision of a controlled marketing scheme for wheat exported from Australia would appear to be necessary to ensure the full advantage of any increase in the rate of exchange.

5. THE POOLING SYSTEM.

250. Wheat pooling in Australia commenced with the war-time compulsory pools which handled the 1915-16 crop under Feder:;tl and State legislation.

251. When the compulsory system was discontinued, farmers' organizations in each of the four exporting States instituted voluntary pools. Those in Victoria, South Australia and Western Australia are still in active operation, though there has been some considerable reduction in the amount of support accorded to them in recent years.

171

252. Pooling is 'a "non-profit" form of co-operative commodity-marketing under which those participating hand over their product to an elected body for realization. In cases, pools enter into trading activities such as the ownership and operation of grain elevators, in which case capital is required, and they take the form of limited liability companies, but usually in Australia little capital is required and working expenses are provided each year from marketing loans which are available as soon as the grain is delivered. .

253 . The main principles of wheat pooling are that-(i) upon delivery the wheat of each participant loses its identity and becomes part of a common stock, the participant receiving a certificate which represents his share in the pool ; (ii) subject to any dockages made for inferior quality or condition, each bushel shares

equally with every other bushel in bearing the costs, and in sharing the net proceeds of sales.

254. The objectives of those who organized the wheat pools were to provide collective handling, storing and n1arketing organizations controlled by wheat-growers-(i) to spread sales evenly over the selling season and, more ·particularly, to reduce the quantity of wheat offered for sale during the delivery period ;

(ii) to raise moneys upon the collective security of the wheat to enable participants ·. to carry on pending the realization of the wheat;

(iii) to arrange selling agreements with local millers and to set up selling organizations overseas; (iv) to improve handling and storage facilities at sidings; and (v) to retain for distribution among participants the merchants' profit and such

savings as might be effected in handling and selling costs.

6. CONTROLLED MARKETING.

255. During the course of its investigations strong representations were submitted to the Commission hy farmers and commercial organizations both in support of and in opposition to the establishment of an Australian-wide Compulsory Pool. The Commission has considered the matter from the broadest possible viewpoint, and has come to a majority conclusion that there are definite advantages in favour of some such organization for marketing, but that the installation of such a system might be a definite source of danger to the industry and to the people of Australia if certain safeguards are not inserted in any scheme which might be devised.

A.-ARGUMENTs IN FAvouR oF EsTABLISHING A CENTRALIZED CoNTROL OVER THE MARKETING OF AusTRALIAN vVHEAT.

256. The Commission has grouped the advantages of a centralized control of marketing Australian wheat under the following sub-heads:-253. The inherent weaknesses of the present marketing system.-vVhile the competition between merchants and pools, which exists at the present time, has certainly led to a convenient and efficient service, yet the system itself is fundamentally unsatisfactory. The farmer is generally

unable to appreciate the cost of the several services in the present combined system of handling storage and marketing ; he also usually fails to realize the effect his marketing policy may have upon wheat values.

The farmer's sole consideration in deciding when he will sell his wheat is the price which is offered to him at the siding in Australian currency, so that if any change takes place, either in the cost of handling, or chartering, or in the exchange rate between the countries to which the wheat is being sold in Australia, the producers the1nselves may sell either too much or too

little wheat because they are thinking only in terms of Australian currency. A special instance of this occurred in the year 1930-31, when the. value of the Australian pound with reference to sterling moved rapidly during the marketing season. The result of this movement was that the merchants were able to offer a fairly steady price despite the widely advertised collapse in

world price. Consequently, large numbers of farmers, thinking they were getting a very good offer sold, wheat in such quantities that the inevitable result of a rapid and undue depression in the price offered by purchasers overseas occurred. This depressed the value of Australian wheat in relation to other wheat unduly on the world market. Figure XXX. illustrates this

point and shows that while the maximum f8Jl in Manitoba No . l was 4d. per bushel, that for the Western Australian and Argentinian during the period was 8d. The recovery which occurred

172

in the first part of February was less in the case of Western Australian than in the two t ypes. The following list of cables received during that period from London by an marketing organization suggests that, at t hat t ime, Australia was to some extent responsible for depressing the world wheat position as far as price was concerned:-

EXTRACTS OF CABLES RECE.IVED FROM 1 01\TD ON BY AN AUSTRAI.JIAN WHEAT EXPORTING FIRM. 2nd J anuary, 1931 3rd J anuary, 1931 5th J anua,ry, 1931 6th J anuary, 1931

7th January, 1931 ·

8th J anuary, 1931 9th January, 1931 lOth January, 1931 12th January, 1931

13th January, 1931

14t h January, 1931 15th January, 1931 16th Janmuy, 1931 17th January, 1931 19th January, 1931 20th J anuary, 1931 21st January, 1931 22nd January, 1931 23rd J anuary, 1931 24th January, 1931 26th January, 1931 27th January, 1931 28th January, 1931 29th January, 1931 29th January, 1931

30th January, 1931 31st January, 1931 2nd February, 1931 3rd February, 1931 4th February, 1931

There is a shade more inquiry demand chiefly fo r Australians. Market is quiet demand limited almost entirely to futures . Market steady demand chiefly for Aust ralians. Market quiet.

(Exchange increased fr om £108 lOs . to £115 per cent.) . .

Futures market is firm but Australians do not participate owing shippers annous. (Exchange increased from £115 to £11 5 2s . 6d. per cent.) . . .

Market open firm closed quiet in sympathy with pressure by Australian sb1ppers contmues. Ma rket is easy Australian offering freely at yesterday's prices. Market is dull. Pressure by Australian shippers continues. AustraJian pressure continues.

Australians depressed shippers offering freely appear anxious to effect sales. increased from £115 2s. 6d. to £118 per cent.)

. . Market opened steady closed easy. . Market is quiet no pressure from any quarter except Australian. Market is dull. (Exchange increased from £118 to £125 per cent.) Ma,rket easy. Market dull continues neglected. . . Australia pressing.

Market steady Australia offering

freely 22s. 3d. buyers hoping to get in cheaper.

Australians depressed offering freely 22s. soliciting bids 6d. less. Market unchanged. Ma rket steady. Market steady. Market easy sellers pressing Australian.

No change practically no business done. . . Exchange position encourages shippers anticipate without profit. (Exchange increased from £125 to £130 per cent.) Australians continue offering freely.

Nominally unchanged. Market dull fea,tureless. Market held in check by continuously Australian pressing. Australia pressing continues demand limited aJmost entirely t o Australians over

fifty thous[md tons Australians sold relatively cheap.

Had a qentralized marketing authority been in existence for Australian wheat at that time, it is probable that it would not have Jallen into this error.

It is arguable that in protecting the producers for a larger part of the exchange premium such an authority might have caused a reduction in the volume of exports, and in t his way added to the" carry-over" of the particular season in question. There is some t ruth in t his cont ention, but it is probable that a greater proportion of this wheat could have been sold to China and Japan, wh o were the princ1pal buyers, at a ·higher price t han was actually obtained.

258. Again in 1933-34 the farmer, as his own salesman, appears t o have adopted a policy which might have ended disastrously both for hi1nself and those financing him. In that year, under the International ' Vheat Agreement, an Australian export quota of 105,000,000 bushels was provided for, but owing to the refusal of farmers to accept ruling prices, only 87,500,000 bushels were actually exported during the period, and had it not been for the slight rise in world prices

occasioned by the drought in North America, the exports would have been even lower than the figures indicate. During t he season when Australian farmers were refusing to sell their wheat, Argentine wheat was virtually replacing Australian wheat for a large part of the quota \vhich had been allotted to the Commonwealth.

Later in the same season, when the price of wheat on the world markets a substantial rise , farm_ ers frequently fa iled to take advantage of that position, so t hat the carry-over of Australian wheat at the end of 1934 was larger than it need have been, and much of the excess has been sold during recent months at unnamed and presumably low prices in t he East. It is

of interest to note that the wheat pools disposed of the whole of their holdings during the recognized selling season and it may, t herefore, be presumed that a Wheat Board acting for the whole of the farmers would have been more prepared to accept ruling prices than the farmers have been as individuals.

fiG.XXX SHOWING COURSE OF PRICES OF WESTERN AUSTRALIAN, N 2 1 NORTHERN · MANITOBA AND ROSAFE' WHEATS DURING THE PERIOD 1/12/30 TO 27/4/31; ALSO THE BUYING PRICE OFFERED TO FARMERS IN WESTERN AUSTRALIA

17 3

3/5

3/4

3/2

I

-II

j{

AND THE MOVEMENTS OF AUSTRALIAN, ARGENTINIAN AND CANADIAN CURRENCIES DURING THAT PERIOD. .

1\ \

1 \

\

\

1\

1 \ 1 \ I

\ \ I \ \ \

\ \ \ \ 1 \ \ >-----

7 1 \ I 1 / \

\

I 1\ 17 \ >----- v

I

v

I

N9 1 Northern Manifo.,a C.l.F London . ·

I

/ Wesii ern Australian at London C.I.F. whe S-terl inq 1 /

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\ 1 \ I

2/8

1 \ 1 \ .. I \

\ I/

1 / Rosafe' C. I. F.

London

0:

0..

2/ 7

c:

2f

't;

2/

3 2/

.£'s R11stral 1M to £'• S1eri1Mq

/ I\ \ \v i/ \ 1 \ v \ I I 1\ \ \ v 1 / !\ \ / I

1\ I

1 \ /

v ,______.

VI

1 /

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1 / I v

/

wheat rn Australian Bu\j ing Price rmers F. 0. B. t"d lian Cu r renC':J to fa

8 15 22 2'} 5 12 I'J 2G 2 9 16 23 2 'J lb 23 30 G 13 20 27

DECEMBER

JANUARY FEBRUARY MARCH APRIL

___ _ R_o_l!. Clsl_s _______ _

Pesos

Dollars Parif':l for ea ch

175

259. The Neces sity of Cont1·ol in the Event of International Agreements with R eference to Selling.-l t appears probable at bne present t ime t hat the future of international trade in many commodities , one of which is wheat, may definitely lie in t he direction of the establishment of selling agreements -vvhich almost amount t o a system of barter. In such an event it will be difficult for Australia t o participate in any such agreement under the present system of wheat marketing. It is impossible to view the existence of such a state of affairs with any degree of satisfact ion, but at t he same time it is necessary t o realize that it may happen, whether the wheat -growers and people of Australia like it or not. Apart from the installation of a syst em

of international trade by barter, no form of international agreement , with reference t o quantities exported, can be implement ed under t he present system of control without leading t o much friction between merchants and the Government on the one hand and the farmers on the other.

If, fo r any reason, a large number of farmers find it necessary t o sell their wheat at any given t ime , the net result is that the merchants are forced into a position of being " weak " sellers on overseas markets, so that a serious decline in the price of AustraJiP .n wheat generally occurs. This frequently took place prior t o the advent of the pooling system, when fa rmers found finance difficult t o obtain ; and being obliged to meet the promissory notes on maehinery and

other materials which fe ll due in February, they were fo rced t o sell a large proport ion of ·their harvest duri ng that month. This heavy selling about that time of the year invariably resulted in a marked deeline in the price offered fo r Australian ' heat . It is not suggested that precisely simil ar circumstances are likely t o happen again in the immediate future , but it is a good illustration of the way in which undue pressure t o sell for any particular cause may lead to the

depression of a market price.

260. Savings which may be E xpected f rom Centralized Selling and MMketing.- Man y fa rmer witnesses urged that t he present system was extmvagant because of the large number of · competing agent s which are appointed at each siding, s,nd for ot heT reasons. While it seems certain that these farmers were unduly optimistic as to the amount of saving which could be effected by the employment of a single handling and ac quiring body, yet it is ·reasonable to suppose that some saving would certainly result from the installation of such a system if it were efficiently conducted. While it is not suggested t hat, under existing circumst ances, the

commission paid to agents is excessive, it must be pointed out t hat, under a centralized scheme of control, each individual agent would be handling a larger volume of the crop ; his overhead expenses per bushel would consequently be lo-vver , with the result that some reduction in the rate of commission paid per bushel should be possible. It is noticed that expedition in t he handling

of wheat upon delivery at the sidings is an essent ial fea ture of any ha.ndling scheme if friction is t o be avoided. Consequently, it is quite incorrect t o n.ssume that the manual labour could be materially curtailed at this point.

With regard to the overhead expenses of the present system, it is probable that greater economies could be efieeted. At the present time, it is usual for every agent at a siding to be in d aily telegraphic communication with his principals during the rush period of delivery; in most States there are five or head offices to be maintained and, in addition, each has it s

inspectors visiting country sidings and ports ; each organization is also in communication with it s agencies in countries where the wheat is to be sold. It is clear that a considerable reduction could easily be effected in t he costs which are at present incurred in these directions. On a basis, these economies might not be large, but they art obviously attainable.

Chartering ships is again another item of expenditure in which savings might be effect ed through the centralized authority being able to obtain concessions as a result of being in a position t o give firm contracts fo r shipping over a considerable period. H owever, freight rat es on wheat are so low at the present time that it seems unlikely that any substantial reductions on present rates could be expected but in the event of a considerable rise in freight rates on overseas shipping this point might assume a greater significance .

In addition the net profits made by the wheat merchant s would be saved.

Apart from all these specific considerations, there is the general question that a central organization shoul d be able to avoid all t hose risks wh ich merchants are at present forced to ac cept in of their being in a position in which they are unable completely t o co-ordinate their buyin g and selling policies.

261. Home Consumption Price f or Wheat Consumed as Human Fo od in A ustralia.-Many farmer wit nesses urge d the Comm ission to t ake the view that their industry had a definite right to a home consumption price fo r t hat part of the product wh ich was consumed within Australia. I n its First R eport the Commission discussed the matter and came to t he conclusion that as long

176

as the policy was applied to other rural industries, and as long as prices were at t heir present low level there was much to be said in favour o£ this principle· of a home consumption price, and the Comrnission recornmended accordingly. In the supplement to the First Report the Commission recomn1ended a scheme for in1plen1enting_ that decision. It appears that there is a grave political difi1culty in the way ef obtaining the hmne consumption price through the

mediu1n of a flour excise or a flour tax. In the event of such difficulties proving insurmountable, a centralized marketing organization would provide an alternative n1eans by which the recommendations of the Cornrnission could be implemented. The Cornmission has already expressed the opinion that it is undesirable to place any further burden upon industries which are using wheat in Australia for purposes other than human consun1ption, for instance the poultry-raising industry. It is also of the opinion that any levy which is made upon the people of the Com1nonwealth by a Wheat Marketing Board should be lirDited to periods during which the wheat industry is in a difficult position owing to the low prices received for its product. Consequently, there are certain dangers which are inherent in the raising of the price for wheat consumed locally by hun1an beings unless safeguards are inserted in any sehenw. The nature of these safeguards is discussed in a later section, which deals with the dangers of a centralized n1arketing authority.

262. Jl!laintenance of the Standard of Australian Wheat.-The question of the quality of Australian wheat as sold on the market has already been discussed. In the section dealing with that subjeet it has been pointed out that t here is serious danger of a slow deterioration of the average quality of the Australian product unless steps are taken to stop such retrogression. Under the present systen1 of rnarketing, where there is keen competition by the agents of the merchants for obtaining the farmers' wheat at the local siding when it corr1es from the harvest, there is a natural inclination on the part of those accepting the wheat not to submit it to dockages. The natural result of the cumulative effect of this state of affairs at a large number of sidings is a tendency for the average level of the sample received to be of lower quality or to contain 1nore rubbish than should be the case. There is also a tendency to ensure that t he nature of the sample from which the f.a.q. is determined shall be such that the majority of t he shipments will be able to attain the standard without much diffieulty . It follows that, under the present' system of competitive buying at the sidings, it will be a practical i1n possibility to advance and possib ly even to maintain the standard of quality of the wheat which is being marketed. A centralized handling and selling organization would be able to deal with this m.atter very effectively and would' be in a position to make suitable rewards to such farmers as were producing grades and types of wheats which were above the average.

263. Greater Efficiency of Railway Transport-Under a system of centralized control, working harmoniously with the Railway Departn1ents in the n1atter of arranging collection of wheat for loading ships at ports, certain savings can be effected in railway operations.

264. A centralized organization would afford an opportunity for the wheat-farmers to formulate a common policy on matters concerning their industry. At present there is no such eonnnon meeting ground, for, with all due deference to existing fanners' organizations, there is today no widespread unanimity among them. Many serious problems confront wheat-growers in connexion 'vi.th their cultural operations, their machinery, and the quality of their product. These are approached by State Departments or other organizaitons to the best of their ability, but necessary investigations are frequently delayed or carried out on too small a scale through lack of staff and lack of funds. A centralized body would be in a position to expedite such work and see that it was effectively carried out.

B.-DISADVANTAGES AND DANGERS OF A CENTRALIZED CONTROL OVER THE MARKETING OF AUSTRALIAN WHEAT.

265. These have been grouped under the following sub-heads :-266. Safeguards are essential to regulate selling prices in local markets.-There would be a definite danger that a centralized selling organization might endeavour to raise the price payable to fanners for their wheat by charging the millers on t he one hand,

and other grain consumers such as poultry keepers on the other, too high a figure for their requirements in respect to grain under the control of the pool or Board. The Commission takes the view that it is essential that, if any centraliz ed selling organization for wheat be instituted, safeguards should be inserted in the controlling legislation in order to prevent th01n from unduly raising the price of wheat used for flour , or other purposes in the loeal markets. A system whereby the excess over world parity price charged for wheat used locally dim.inishes as the world price of wheat rises, should be used for this purpose.

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267. Dangers of Autocratic or lnqficient Management.-The Commission is well aware of the fact that many organizations which are wholly controlled by farmers are frequently unsatisfactory. It is essential that the wheat consumers and the general public should be represented upon any body which is in any way concerned with the regulation of the local price

of a commodity which is S

268. The Differences between the Products of Different States.-The assun1ption that the average wheat produced in the various States is the same in value is by no means correct; in respect to the average level of quality produced in any given season there are, frequently, wide differences between the crops of the various States. This is partly owing to clirnatic differences which may have injuriously affected the harvesting operations in some districts, or it may be due to the fact that better quality wheats are n1ore easily grown in some places than in others. For exam.ple, in some seasons it is found that buyers exhibit a very definite preference for wheat frmn a particular State and that they are prepared to pay a higher price for such wheat than is

paid for that which is . grown in the other States. Further, t here is a certain amount of geographical advantage in respect to the freight rates are paid in connexion with chartering ships. Western Australia has a definite advantage in t his respect in connexion with boats \Vhich are chartered for European ports; this is usually 2s. 6d. per ton (!d. per bushel) . On the other hand, the eastern States are in a rather better position to obtain a somewhat higher price per bushel for at least a part of the wheat which is used for local milling. Any scheme of centralized selling which did not recognize these advantages would be doing an injustice to certain sections

of the Australian wheat belt.

269. The Destruction of Existing Organizations.-It is clear that, should a central organization be established for acquiring and selling the Australian wheat crop, it must be recognized that all existing organizations which have been built up by private or co- operatives -vvould naturally lapse. This does not necessarily mean that the whole of their staffs would be thrown out of employment, because obviously any centralized authority would require a considerable number of skilled directors and assistants and the present organizations would be the most desirable field for recruitment of the personnel. If, at some later date it was found that the scheme was not working satisfactorily and it was desired to return to the pre-existing method o:f organization, the re-creation of the separate handling and selling

organizations would be a matter of some considerable difficulty.

270. Possible Progressive Opposition by the Farmers to a Central Marketing Attthority.­ It must be recognized that, under the present system, there are every year a considerable number of farmers who consider that they have a definite grie·vance against the organization to which they have handed their wheat for sale. The reasons for this .dissatisfaction are numerous; they are frequently connected with dockages, which the farmers sometimes consider

unjust, or with delays which are always irritating at a time of high pressure such as the harvest. At the present time, the farmers have an opportunity of transferring their patronage to another organization and, consequently, they are able to rest ore their state of mental satisfaction until the next time some similar instance occurs. Compulsion would remove this safety valve. A

centralized organization might become the cockshy for all disgruntled producers. It is inevitable that there will always be a certain number of complaints every year in connexion with the handling of wheat, and it is quite conceivable that, after some years of operation, a central marketing authority might find that it was confronted with very serious opposition

which might easily result in political agitation culminating in the disruption of the system.

271. Non-exporting States.-Queensland and Tasmania grow relatively srnall quantities of wheat, and usually do not enter the export market. These States would require speciaJ consideration in view of the fact that there is no justification for farmers in such States receiv-ing the home consumpti'on price for the whole of their product. In fact, there would be a defmite

danger if they were allowed to do so because they would find wheat-growing highly profitable and, consequently, would increase their area under crop, and such a procedure would possibly be a further expansion of uneconomic farming.

C.--REcoMMENDATioNs IN RELATION To A ScHEME FOR CoNTROLLED MARKETING OF -WHEAT.

272. The Commission has considered the advantages and disadvantages of controlled marketing, and has come to t he majority conclusion that the advantages outweigh the objections. It does not propose to recom.Inend any hard and fast scheme for the creation of the necessary marketing authority because t he co-operation and assent of the States will be necessary before a workable plan can be constructed and because an interstate conference of interested should be called to assist in working out the details.

273. The Commission by majority recommends-(!) that steps be taken by the Commonwealth and/ or State Governments to ascertain whether a Commonwealth wheat marketing scheme is desired by the wheat-growers. If a poll of wheat-farmers be taken for this purpose, the

Commission suggests that voting be according to the following scale :-Each wheat-farmer, not being a minor, shall have one vote for each aggregate £20 of " bushel " and " acreage " bounty paid to him in respect of the 1934

season; but no wheat-farmer shall have more than ten votes in all. (2) that if three or more of the wheat exporting States agree, the further necessary steps be taken by the Commonwealth and State Governments. (3) that the following principles be adopted for inclusion in the scheme :-

(a) that a Commonwealth Wheat Marketing Board and State Wheat lVIarketing Boards be constituted ; (b) that the Commonwealth Board deal with all wheat sold on export markets and from within one State to within another State and

with all matters concerning the industry as a whole ; (c) that if it be found that the principle of a home consumption price for Hour or wheat can be best applied through a levy on wheat used for local human consumption, the Boards be granted limited powers in

this connexion ; that such powers be limited in such a manner as to keep the price of wheat in Australia fixed as long as that price is higher than the Australian export parity price for wheat.

. Note.-This limitation might be ensured by-(i) a variable customs duty graduated inversely to world parity prices for wheat or (ii) a fixed internal price for all wheat bought by millers in

Australia, the necessary drawback being allowed in-respect of flour exported; that any such fixation of price have regard to special circumstances which may apply to wheat of any particular State, and to premiums

above the recognized price for wheat of special quality which millers may wish to pay. ·

(d) that all moneys received from wheat sold under the home consumption price scheme be paid to the Commonwealth Board. (e) that moneys raised by the application of the home consumption price be distributed by the Commonwealth Board on a per bushel basis

on all wheat produced and delivered for sale within the States which have adopted the scheme, the whole o£ these States to be regarded . as one nnit for this purpose. (j) that the Commonwealth l\1arketing Boa:rd consist of-

(i) One director nominated by the Board of each State which comes under the scheme ; (ii) An equal number of directors nominated by the Commonwealth Government ; the Chairman being appointed by the Governor-General in Council from among the members nominated by the Commonwealth

Government; (g) that the managem·ent be in the hands of three full-time Managing Directors nominated from the members of the Board on account of their special business knowledge and experience of the wheat

trade; such appointments being subject to the approval of the Governor-General in Council;

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(h) that a definite part of the operations of t he Commonwealth Board be the maintenance of a publicity departn1ent with the functions of keeping Australian wheat farmers in touch with the activit ies of the Commonwealth and Boards and advising t he Boards of

all n1atters concerning world wheat markets and carrying out investigations on all matters of importance to the wheat industry of Australia; (i) t hat each State Wheat Board be responsible for t h e handling of all the

wheat produced for sale in that State and carry out the proper instructions of the Commonwealth Board; (j) that each State Board consist of-

(i) Three direct ors elected by t he wheat fanners by districts, one director for each district; (ii) Two directors nominated by the State Government ; and that the manager have special business knowledge and experience in the wheat trade and be appointed by the Board, but subject to the appr-oval of the Governor in CounciL (k) that the accounts of each Board in respect of th e \vheat of each State

be kept separately in order that the moneys received for the wheat produced in each State shall, subject t o (e), be paid t o the wheat farr.ners in that State. (l) that subject t o necessary adn1inistrative and operating expenses of the

Boards, advances against and later payments for t he wheat delivered by wheat fanners be made by the State Boards under arrangement with t he Commonwealth Board; (m) t hat no person be allowed t o export wheat from the Commonwealth

or transfer wheat from one State to another except under licence and that no person be allowed to sell wheat within a Stat e except under licence.

7. BULK_ HANDLING.

274. The installation of bulk handling systems for wheat has been a matter of much public in Australia during recent years. Many public bodies and private individuals have

Inqurred Into the matter and have presented reports and statements thereon in the various States. The Commission considers that it is unnecessary to do more than draw attention to the salient features of the system and its advantages and disadvantages.

275. The original system under which all Australian wheat was handled was based on the· use of the bag. The bag is really a cheap form of container and has such dimensions as render it fairly easily handled. The bulk handling system takes advantage of the fluid nature of wheat grains when present in mass. Owing to that nature they can be made to flow down an incline

or travel on a conveyor belt, or can be handled by means of cup elevators, or by suct ion.

276. As far as costs are concerned the difference between the two systems lies in the cost of the containing bag plus the cost of handling it on the one hand, as opposed to the int erest and depreciation charges on the bulk silos and their equipment, and the cost of handling wheat under this system on the other. The higher the price of bags the more attractive does bulk handling tend to become.

277 .. The satisfactory operation of a system of bulk handling depends on the existence of bulk handling facilities at the ports of destination to which the wheat is ultimately consigned, and also on satisfactory freight rates in the ships which carry it. During recent years freight rates on bulk wheat have, on the whole, tended to become lower than freight rates on bagged

wheat, largely f

278. There are certain aspects in which a bulle handling system has definite advantages over a bag system:-(i) When 'once wheat is stored in a bulk silo it can be cleared more quickly if the export position or any emergency so requires . At sidings the rate at which

the railways can move their wheat trains away is usually the limiting factor, but at the ports more t ime is r equired to stow bags in a ship's hold than is necessary to load a correspondinO' quantity of wheat in bulk.

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(ii) In certain districts of the Australian wheat belt plagues of mice appear from time to time ; these can be dealt with far more effectively when the wheat is in bulk than when it is in bags. (iii) When wheat is stored for any length of ti1ne weevils almost invariably make

their appearance and frequently cause considerable damage. The extent of such da1nage is reduced by taking precautions on the ground on which the wheat stacks are placed, but if wheat is kept for a considerable pyriod of time weevils are ahnost certain to appear. The control of weevil in bulk silos is usually more easily effected than it is in the case of wheat in bags. (iv) Wheat in bulk can be readily inspected . and graded if it becomes necessary to

do so. When once wheat is bagged any cleaning is a matter of considerable difficulty and exp.ense. ·

(v) If bad weather occurs during the time when wheat is being received at the station considerable da1nage may be done to partly built stacks of bags, but when once wheat has been put in a bulk system it is im111ediately covered and safe from further depreciation in this respect. (vi) If the silos are properly located and construct"ed, the wheat in them is safe from

any danger of flooding, or from the weather. If suitable precautions are taken, the fire risk also should be diminished.

279. The basic idea under which most bulk handling silo systems have been constructed in the past, is that there will be a certain arnount of flow of wheat through the system during the harvest season. According to thatplan it is unnecessary.,. therefore to construct silos of sufficient storage cgpacity to store the whole of the crop as it is anticipated that ships will convey part of the wheat away frorn the ter1ninal silos at the port before the whole of the harvest has been collected and delivered at the railway sidings. Under the existing conditions of the world wheat market, it is by no rrteans easy to sell wheat in large quantities without seriously depressing the price. Consequently, the rate of the flow of wheat through the bulk handling systems during harvest in the last two seasons has been much slower than was originally expected. ·This has rneant that there has been a congestion in the silo system, and that a good many farmers have been unab le to fi.nd acceptance for the whole of their wheat at the silos; such wheat has, therefore, had to be bagged. It is necessary to point out that the modification of a silo system of bulk handling into one ·of wheat storage in silos alters the econon1ic outlook of the system considerably. One of the chief items of cost in running a bulk handling system is the interest

on the capital invested in the silos. If it is expected that the system will handle twice as n1uch wheat as is represented by the total capacity of the silo, and in the end it only handles say 20 per -cent. more wheat than the totaJ silo capacity, it follows that there is an increase in the overhead costs per bushel handled in the ratio of 5 to 3. Consequently, a system which would be economic

when the first state of affairs prevailed would probably p1:ove quite uneconomic under the second.

During the past crop season, 1933-34, there was more congestion in the flow of wheat from the sidings to the ports in Australia than in any previous year since the war. If this state of affairs continues it seerns likely that the Australian wheat-farmer will find himself placed between the ravages of the weevil on the one hand, and expensive storage charges iri bulk handling systems on the other. ·

280. Several different systems of storage bins have been designed from tin1e to time. It does not necessarily follow that one particular type is the only type which js applicable in Australia. Conditions vary widely fr01n district to district, and it is quite likely that a system which works well in one district will be more expensive than is desirable or necessary in another.

Up to the present tin1e two systems have been developed in Australia foHowing quite different lines. The first is that which was established in New South Wales after the war. It is based upon the use of large and somewhat expensive concrete silos in the country, and a si1nilar terminal elevat or with 6,750,000 bushels capacity at Sydney. For some years after its installation it was not used to capacity by fanners, but since the depression it has coma into favour as it has

afforded an opportunity for the farmers to avoid the expense of buying bags. Many wheat-growers informed the Comm.ission that they were now staunch adherents to the bulk handling system. although they admitted that they had experienced a certain amount of sidings

when the wheat was being received. · , ..

In Western Australia an entirely different systmn has been put into operation by private enterprise. After experiment it was found that a light form of silo could be constructed from heavy timber and corrugated iron. The cheapness of this construction has lead to the anticination that it will be practicable to reduce materially the costs of handling wheat by the bulk

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using this system. The system has not yet been long enough in operation for it to be certai!l that this hope is well founded, but published results so far obtained semn tO suggest that such 1s the case. Unfortunately, there is at present no tenninal storage at the ports in West ern Australia so that the decreased costs, which n1ay be expected t o ensue from a complete bulk handling systmn,

cannot yet be achieved. There is a great deal t o be said for the installation of a relatively cheap system at those country sidings where the variability of crop received from year t o year is very n1arked. In Western Australia, in addition to the inst allation of the bulk silos at sidings in 1933-34, a further experin1ent was tried in which wheat was stored for a period of several months

just after harvest in open "bulkheads" without cover. The absence of sparrows made this a feasible proposition, and the fact that heavy rain is rare in most of t he Western Australian wheat belt during the three months following harvest, is also a m.atter of considerable in1port ance. I-Iowever, heavy rain fell during the first week in 1934, and certain members of the Con1mission inspected several of these bulkheads on which roughly an inch of rain had fallen ; the actual damage to the wheat was much less than might have been anticipated ; it seemed probable that roughly I per cent. r:night have suffered sorne darnage. The subject of the bulk handling system in Western Australia is one which has aroused rnuch controversy and the "'\Vestern Australian Governn1ent has announced its intention of appointing a Royal Con1mission

to inquire into the matter. Under these circumstances it seems unnecessary for this Commission to express further views upon the subject.

281. In Victoria bulk handling has formed the subject of numerous inquiries, and during 1934 the State Parliament passed Act authorizing t he construction of a bulk handling syst en.1 at a large number of Victorian sidings.

282. In South Australia a Committee of Parliament recommended the inst allation of a bulk handling system, but no legislation has a,s yet been passed.

283. The savings which may be expected from the adoption of hulk handling for the wheat crop of Australia will vary considerably according to a variety of fact ors. In the first place the price of bags is an important matter; on the other hand, if expensive silo systen1s are erected by States and are unab]e to pay t he interest on their capital they becorne a t ax upon the general revenue of the State concerned. Alternatively they n1ay be regarded as one of the methods by which t he genera] comn1unit y helps the wheat-farmer to face his difficulties during the tim.e of depression. Unfort unat ely, the adoption of bulk handling involves considerable reduction in employment previously engaged in handling wheat. If it becomes necessary for Australian wheat to remain stored within t he boundaries of the Commonwealth for a much longer period than has been cust 01rmry in the past, then bulk handling will ahnost certainly become an essentiaL

There is little doubt that, provided t he capital cost can be kept down, this will aff ord definite assistance to the farn1ers . If that be accept ed as an axiom, t hen the development of bulk handling projects is a definite method by which an economy may be efleet ed as a result of capital expendit ure .

284_. No bulk handling systern will ever be successful unless it has the support and patronage of t he whole of the fa rmers and .is called upon to Landle quantities of grain which are comparable with those for which its silos were designed.

285. The effectiveness of t he silo system is also dependent upon the close co-operation of t he railway authorities. In New South vVales t he railways carry bulk wheat at the same freight rate as bagged wheat . In VVestern Australia the railway authorities make an extra charge for handling bulk wheat in order t o cover the value of trucks, which, having been adapted for the

transportation of bulk wheat, can no longer, in their opinion, be used fo r other purposes.

286. The Commission has not t hought it necessary to analyse in detail the costs of handling wheat by the bulk met hod as opposed to the bag. To some extent t his is a matter fo r t he State authorities. Similarly t he adoption of bulk handling as a scheme of transportation in any Stp,te must remain a matter for the Parliament and people of that State. The Commission is of the

opinion that some saving can be effect ed by t he adoption of bulk handling as opposed t o bag handling, but t he amount of that saving will depend entirely on the efficiency of the system which is adopted, on t he ext ent of t he capital cost which is incurre d, and on the extent to which the farmers use the system.

SECTION VL-THE BAKING " QUALITY " PROBLEM IN FLOURS OF AUSTRALIAN WHEATS.

1. THE BAKING "QuALITY" PROBLEM IN FLOURS oF AusTRALIAN ·WHEATS ..

2. APPENDIX F.-THE MILLING AND BAKING QuALITIEs oF AusTRALIAN WHEATS

P.A.oE .

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188 "

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VI. THE BAKING " QUALITY " PROBLEM IN FLOURS OF AUSTRALIAN WHEATS. 287. The problem of baking quality in the flours of various wheats has exercised the minds of millers for 1nany years and during the last three decades it has also attracted the attention of scientific workers in many parts of the world. The problem is a complex one and its analysis into its component sections has proved difficult. In Australia, the chemists of the various

State Departments of Agriculture have devoted considerable attention to it in respect to Australian wheats. Their results have, in many cases, been published in their annual reports or in other publications of the State Agricultural Departments.

288. The Cmnmission has been assisted in its inquiries into the matter by lVIr. W. R. Jewell, M.Sc., F.I.C., Agricultural Research Chemist of the Victorian AgTicultural Department, who has prepared a summary of the scientific position on the matter which is presented in full in Appendix F. The summary states clearly the factors which go to make up " quality " and

discusses the extent to which each is present or absent in Australian wheats. Finally, suggestions are made regarding a policy which should be reasonably attainable if pursued with vigour. Science Bulletin No. 44 of the New South ·wales Department of Agriculture also gives a review of the problem.from several separate points of view.

289. The problem may be view:ed from three distinct aspects, namely­ (1) the point of view of the overseas purchaser of the grain; (2) the stand-point of the local miller who is concerned with the production of flour for local consumption or for export overseas ; (3) the position of the farmer in his struggle with economic conditions.

The most appropriate course of action may not be the same from the three

points of view.

290. The relative importance of the two classes of purchaser of Australian wheat is of significance. According to official figures, the average annual export of wheat from the Commonwealth during the period 1927-28-1933-34 was 86,000,000 bushels, whilst about 57,000,000 bushels were used for flour production for the home or export markets. In view of the construction of flour mills in EasterP, ports, it is not to be expected that the exports of

Australian flour will increase very rapidly in the near future, so that the production of wheat for export as such is of rather more significance to the farmer than the production for the local mills.

291: From the of wheat export, there is to be a change in

the " quahty " of Austrahan wheat unless such a change 1s hkely to result 1n an Increase in the price received, or in the quantity sold. The Commission was confronted with the necessity of ascertaining whether the Australian wheat would be likely to command a higher price on the overseas market if its " strength " were

greater from the point of view of bread production.

292. In recent years considerable attention has been devoted in England to the production of wheats which will produce flours with greater "strength" in their gluten and which will also give the fanner yields as high as those obtained from the "weaker" varieties. The Commission was aware that considerable success had been achieved in this respect by the production of

"Yeoman", "Yeornan II." and other varieties. That the success was real and not a scientific myth may be gauged from the following quotation from a publication of .the National Joint Industrial Coup.cil for the Flour lViilling Industry (United Kingdom). Yeoman II. varies in strength according to the district but always it is far stronger than a sample of, say,

Squa.rehead's Master grown at the same place. Such a result represents, of course, a great step fo rward, and a large amount of both Yeoman and Yeoman II. are now grown in t his country. For breadmaking purposes the wheat deserves a better price than ordinary English varieties and probably some country millers are prepared to pay a premium for good parcels of Yeoman.

The Commission got into touch with informed opinion in England and desire to call attention to the following extracts from a reply which was received :-The percentage of' strong wheat grown in England is not likely to increase in the visible future. Bitter experience has proved to us that it is yield per acre which pays, not qua.lity. . . . . . . Alter fourteen yea.rs'

work, a new wheat substantially in advance of " Yeoman " fo r quality has been produced. . . . . . . On t e market it would not be ;worth a a, quar,ter. worth a a quarter

more than " s. Master (a soft g whea ) for 1,ts qua.hty. The reason for this is partly

that the demand for b1scl.llt wheat helps to keep up the pn e of Squa.rehea s Master and other soft wheats of similar quality, but t his is not t he main reason. F.5964.-9

i86

There is plenty of high-quality wheat available in the world, and I cannot believe that to bring over :from Australia high-quality wheat to take the place of what comes over now would be of any advantage to Australian growers. The tendency in modern baking practice in England is undoubtedly such as to make use of more weak wheat and less hard wheat, e.g., by means of improvers, &c.

Really high-quality wheats from Australia of the level of Comeback or Pusa 4, which are grown on a small scale, would undoubtedly sell quite satisfactorily here. They would, however, have to be sent over in considerable bulk, and also kept quite apart from ordinary Australian. They would, further, have to submit to the prejudice against white wheats, for many buyers in England still believe that no white wheat can be strong. (The new strong wheat of which I have already spoken is white, and one miller wasted half an hour of my time in impressing upon me its probable merits for making biscuits; this was entirely because it was a white wheat.)

It may be taken for granted, I think, that, if the proportion of strong wheat in the world goes up substantially the price of strong in relation to weak will come down. Colour is in much the same situation as quality. If Australia were to send over new varieties of wheat lacking the colour of the present ones, the fact would probably be seized on as an exeuse fo r diminishing price. On the other hand, colour has lost a good deal of its old importance because so much can be done by bleaching.

The attitude of the millers can be summed up in a paragraph fr om Sir Albert Humphries' paper which he read at the Regina Grain Conference last year:-" The upshot is that the miller having appraised or assessed each wheat as to points on which arithmetical calculations can be made, will use as much of the cheaper wheat and as little of the dearer wheat as he cr.n do, consistent with the regular maintenance, year in, year out, of the good characteristics for which his flou r is known and bought by his customers, and the proportions he uses of various types will vary if only season by season, for there are seasonal variations in nearly all varieties."

In Canada, high quality and high yield seem to be together, i.e., the higher yielding wheats for Canada happen to be high quality ones. If this were so in Australia, it might be worth while to embark upon a quality-breeding programme. But your experience for quite different reasons·-be the same as ours, namely, quality and y1eld go t ogether only up to a certam hm1ted extent.

Our lesson has been, and I believe yours or anyone else's probably would be, t.hat yield must be put first. ·with a common product like wheat, so long as you can attain a quality wh ich is saleable, yield and points of convenience, i.e., non-lodging, &c., are likely to override all considerations of quality.

293. This opinion of an authority well versed with the difficulty of overcoming the conservatism of the British millers and the obstacles which the peculiar featUI'es of that market present to any changes in the natUI'e of supplies, is of considerable importance. This same opinion. is reinforced by exp.erience .a result ?f .certain experimental shipments of Australian wheat. Spemal consignments of mdividual vanet1es have been made from Western Australia to London for the pmpose of ascertaining whether a whole shipment of a variety known to be of high baking strength in one case, and of low baking strength in another would bring prices which were respectively higher or lower than that current for the f.a.q. grade. In neither

case was the expectation of a differential price fulfilled. These r-esults seem to indicate that at present the London market is indifferent to any. qualities. in wheat other than

those represented by the normal f.a.q. sample. Th1s conclusiOn IS remforced by the following statement which is to be found in the Bulletin of the National Joint Industrial Council for the Flour Milling Industry (of Great Britain) to which reference has already been made. " The figures" (of British importations from various countries) "prove what is well known to millers: that the main governing factor in the choice of wheat is price. If the price is right, then there is a predisposition in the British milling industry for Canadian wheat."

On the other hand it is stated that there are limits to the proportion of Australian wheat which the English miller finds he can use in compounding his flour. If this be so a moderate improvement in quality of the Australian product would probably enable him to increase that percentage if he chose to do so. This would only occur if the Australian price was lower than that of other countries, but any market is better than no market at all. This is all subject to

the fact that steady advances are being made in the study and utilization of "improvers" which are gradually lessening the importance of wheat quality.

294. As regards markets other than Britain, it may be assumed that there is no outstanding difference between Britain and other European countries. In the East where Australian wheat comes into competition with the Pacific Coast wheats of North America, many of which are similar to Australian in character, the competition in respect of quality might be expected to be more intell:se. However, a large proporti?n of the flour in those countries is used f?r other purposes than making bread and t here Is no evidence that any factors other than pnce and millable extraction are of significance.

295. From the point of view of. the Australian miller, who is making flour for the local market or for export, the question is somewhat different. There is considerable evidence that some of the varieties which have been produced in recent years have been definitely deficient in strenath-Science Bulletin No . 44 of New South Wales Department of Agriculture, December,

I933, 0 gives a survey-although their yielding capacity has been higher than that 0f many of their

187

predecessors. There is also evidence that strong wheats of lower yielding capacity have been bred from time to time but have not retained popularity among the farmers. Until wheats which combine high-yielding capacity and high strength have been bred for Australian conditions, the supply of strong wheat can be increased only by a guarant ee that a higher price for quality will recompense the farmer for his diminished yield.

296. At present the farmer who sells his wheat under the f.a.q. system, which takes no cognizance of strength, has nothing whatever to gain from growing a strong wheat unless its yield is higher than that of the soft varieties and, in most districts and with most strong varieties, such is not the case. As long as the export market takes the bulk of t he wheat and is not prepared to pay more for strong varieties than fo r weak, there is litt le to be said for making any change, unless a

new system of grading be adopted. It is unreasonable to penalize farmers in competitions for growing soft wheat s and it is at present equally unwise to advise t hem t o grow hard wheats unless they will yield as well as t he softer varieties. 297. There is , however, every reason why plant breeders should make every endeavour to produce new varieties which have the quality of strength in addit ion to the ot her favorable attributes charact eristic of Australian varieties.

298. Australian millers are at t imes prepared to pay a premium for varieties which are specially valuable for their milling quality. This premium is advantageous to farmers who are able to obtain this bonus for quality only when the premium is sufficient to more than balance the lower yield per acre.

299. I t has been urged that a definite grading system, which would take into account varietal strength in addition t o the other characters which fo rm part of the f.a .q. syst em, would be advantageous. Such a system would require close consideration by experts who are acquainted with the peculiar features both of varieties and districts.

300. If such a system were in vogue and were responsible for stimulating the production of strong wheats to an extent that t heir supply exceeded the demand of the local Australian market, the price of such grade s would tend to fall. to their export value. As already noted, their export value is likely to remain the same as for f.a. q. types of lower strength while the immediate result

of a system of grading fo r strength in addition to other characters, might well be a price difference in favour of the stronger varieties, its ultimate effect might be that there would be but a very slight difference in price bet ween the grades; in fact the present premiums obtained by some farmers might be lost.

If we assume tha.t Australian millers found it desirable to use 25 per cent. of strong wheat in their blend, then 14,000,000 bushels would satisfy their annual requirements and a greater production of strong wheat than this would t end to eliminate t he price diffe rence in favour of strength. The prob1em is likely to be one of locality, for some years at least, because the production of varieties is easier in some districts than others. These dist ricts

would over-supply the m11ls in some centres and States while their surplus would be needed in

I other part s of the Commonwealth. Unfortunat ely, the cost of moving thJse special wheats tJ these more distant points woul d absorb a large part, if no·t the whole, of t :1e extra value which they possess. However, it might be necessary to maintain t he extra value to the fa rmer so that Australian bread be improved m quality- unless additions of " improvers " can give the required improvement. 30 l. There is only one way in which the fa rmer can be assured of receiving a definite benefit for growing better quality wheat and that is by the adoption of a policy of centralized selling in addition to the adoption of a system of grading which win include quality amongst other fact ors for assessing value. 302. At present, Queensland is the only Stat e in which grading according to quality is generally carried out. So fa r, the experience of grading in t hat State has been by no means entirely happy and many farmers are dissatisfied with it. This serves as a wq,rnina that a complex scheme of grading is not to be lightly entered upon. The task of defi.nincr a ;yst em is beyond the range of the Commission, but there is little doubt that it could be achieve d by the technical experts of the State Agricultural Departments in conference with representat ives of milling interests. It must be observed that the adoption of any such system would necessarily demand the select ion and appointment of a staff of graders who are more skilled than most of those entrusted with grading wheat at the present time, and the co-operation and advice of expert s in t he value of flour s for bread-making. In each State one o more bodies of appeal t o whom disputed gradings could be referred would also be necessary. These organizations would involve some additional cost t o the farmer, which will diminish the benefits he might expect t o receive under the system. The simplicity of the f.a.q. system cannot be jettisoned without further expense to some one and, in the end, extra costs fall o the producer.

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APPENDIX F.

THE MILLING AND BAKING QUALITIES OF' AUSTRALIAN WHEATS.

By W. R. Jewell, M.Sc., P.I.O. , Agricultural Research Chemist.

INTRODUCTION.

Fl. The question of quality in wheat has engaged the attention of cereal chemists and wheat breeders for many years and the enormous amount of literature on the subject published in the last decade is evidence of increasing interest in the problem. Much of this work has been directed towards determining methods for evaluating quaJity and investigating t he chemical and physical characteristics which actually determine . quality in wheat and flour. The correlation of quality with such characteristics is not yet established, partly because in wheat one is dealing with a highly complex biological substance and partly because of a certain amount of confusion as to what was being defined and evaluated. It is therefore necessary in the first instance to establish a definition of quality in wheat and flou r which will represent modern accepted thought on the matter. Any such definition will depend on whether it is considered from the point of view of the producer, the miller or the baker, and quality of wh-eat is an expression which conveys entirely different ideas to the minds of these three groups of people.

F2. rro the Australian farmer or producer, l'. high quality whMt is simply one which, through heredita l characteristics and disease resistance, returns hi gh yields per acre, preferably of sound plump grain of high bushel weight. He is, of course, cognisant of the importance. of protein in wheat but, under existing conditions, the question of yield is practically his sole consideration.

F3. To the miller, quality wheat, in addition to being piump and of high bushel weight, should be reasonably free from fo reign material, practically free from broken grain, possess easy m.iHiiJg characteristics and yield flour of good colour. In fact, his chief desire is a wheat which will yield a high percentage of fl our, if possible of good baking quality. High bushel weight is desirable as bushel weight is correlated with flo ur yielding capacity. Foreign material is objectionable in that it does not produce flo ur, must be removed prior t o milling and may poasibly leave & taint. Damaged wheat of any kind adversely affects the milling procese ; it is either lost durin g cleaning or mills

difierently from the bulk of the sample. The miller naturally desires a wheat which will yield a very white flour in accordance with public demand, but in this respect no difficulty is experienced in view of the pronounced degree of whiteness of Australian flour and of the 2Jmost unive:raal practice of bleaching to enhance that whiteness. He is naturally interested in the quality of the flour he produces, at least to the extent of its moisture, ash and gluten eon tents.

F4. The baker, in turn, views quality from an entirely different angle. His chief concern is to ebtain a uniform flour which will pl'oduce the largest number of satisfactory loaves"per sack of flour with the minimum of trouble, the number of loaves per sack being dependent largely on the water absorption of the flour. He aims at loaves which are of good shape, large volume, satisfactory crumb structure and good colour of crust. For his purpose flour should have a reasonable fermentat ion tolerance, i.e., should give a dough capable of withstanding neglect or punishment during fermentation and proof. He also desires to receive a flour of standardized or uniform quality so that changes in baking procedure may not be necessary with different consignments of flour. The demand for flour of high baking quality has become much more pronounced of late years in Australia as well as in other parts of the world , largely due to changes in the bakehouse, particularly in t he increasing use of mechanical devices. On the other hand some modern developments, e.g., shorter working hours and the use of " panned " bread, have somewhat lessened the demand overseas for very strong wheats.

F5. It will be apparent that, in its broadest sense, a wheat to be of high quality must satisfy a host of diverse requirements. In the present instance, as in all modern cereal investigations, the accepted definition of quality is narrowed down t o that concerned with baking. The farmer's point of view need not be considered as every effort has been made to supply him with ever higher yielding varieties. Except for the presence of foreign seeds and broken grain, Australian wheats can be considered quite satisfactory from a milling point of view. They are easy t o mill and produce a high yield of flour of particularly good colour. In these respects they compare more than favorably wit h wheats from any other part of t he world. We therefore have to consider a concise definition of quality of flour in respect to its baking properties. In this connexion it should be noted that " quality " and " strength " , two terms frequently used, are synonymous.

DEFINITION OF QUALITY.

F6. Many definitions of quality have been advanced in the past but the most widely, and now practically universally, aec.epted is one similar to t he following, viz. :-" Quality of flour is its ability to produce large well-piled loaves." As water absorption a.nd fermentation tolerance are intimately connected with one or other of the fa ctors that go t o produce a loaf of good text.ure,. it be seen this definition the of the baker more

fully than might, at :first .glance, Imagmed. or strength of IS 1ts ab1 hty to proauce a strong flour.

The strength particular va.ne.ty of Is the general average quahty of flour from that variety compared with other vanetws grown under sumlar condit10ns. When flour is made into a dough with water and yeast and allowed t o ferment or prove, carbon dioxide is generated and the dough swells, the proteins (gluten) for ming a network enclosing the gas thus produced. It will be apparent, therefore, t hat the production of large loaves o-f good texture will depend on two factors-

(1) The ability of the flour to produce an adequate supply of gas during fermentation, and (2) The ability of the gluten t o retain the gas so evolved. Gas production is closely related to the diastatic power of the flour which, broadly speaking, is a measure of the ability of the flour t o provide sugar as yeast foo d. It is generally determined as the amount of maltose produced

by the action of diastase on the starch in a definite time and under definite fermentation conditions. The power of gas retentio n is dependent almost solely on the quantity a,nd quality of the gluten present. It will be obvious that both quantity and quality are of importance, a deficiency in quantity being t o a certain extent counterbalanced by superlative quality and vice versa.

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MEmone or M:rusuniNo QuALn'Y.

F7. It was not until it was ·realized t hat strengt h was dependent on two such widely difierent factors that the difficulty-if not fut ility-of attempting to correlate strengt h with one particular characterist ic was apparent, and the standard baking test still remains the only reasonably sa.t isfactory method of measuring quality as a whole. Single tests for measuring some of the individual factors involved in quality have been elaborated and now form useful. tools in the hands of cereal chemist and wheat-breeder.

For inst ance, the quantity of protein, diast atic capB.cit y, reaction value and buffering can all be accurately determined, and various devices aimed at measuring protein qualit y have been advanced, of which the Pelshenke or wheat-meal fermentat ion time t est is one of the most r ecent and promising. While it is not necessary to detail these tests here, fuller mention should be made of t he last-named in view of certain remarks to be made later. Briefly, in t his test a dough ball is made of ground wholemeal and yeast, and the ball placed in water under definite conditions o{ temperature, &c. The dough ball expands and eventually disrupts, the time from immersion to t he first disruption of t he ball being measured. The bett er t he quality and quantity of t he gluten, the longer the time figure. This test has come int o great prominence in the la,st year or two, and although it measures something not determined by previous met hods, it nevertheless suffers from the limitations inherent in all individual t ests. These tests assess some of the separate factors which make up t he sum total of quality and are of definite assistance to the

wheat breeder in t he early stages of breeding befo re sufficient sample is available for milling and baking, but the baking test is the only satisfactory single t est of quaJity. This t est is usually conducted under standard conditions in which the flour is t he only variable and the dough is allowed t o ferment t o t he point at which the loaf of greatest possible size is produced. I n view of the fact t hat baking procedure is not st andardized throughout t he t rade and that, as a result, a given flour might be condemned by

one baker and passed by another, the standard baking test has

shortcomings which are well' recognized and have been freely discussed in t he lit erature.

Loaf volume does, however, give a measure of strength of individual flours, and, when combined with further baking tests in which yeast food or gluten improver is added or fermentation time altered, does indicate in what respect a particular flour may be lacking in qualit y. It seems certain that such baking tests, allied to determinations of individual factors1 can give a definite relative measure of quality and, in disclosing specific weakness, indicate in

what way it may be improved.

When used to measure the quality of a variety of wheat, ba.king tests are actually relative in that, because of environmental influences, the qualit y of a variety should be measured in relation to a, st a.ndard variety grown in the same season and under the same soil and climatic conditions.

Texture, crust colour, &c., are also important baking fact ors which are sometimes given arbitrary numerical values and included in a t otal baking " score " . This does not appear to be a sound procedure, as fundamentally it is not possible to add together cubic centimetres, colour, texture and crust, and two loaves may have the same " score " whereas one might be useless commercially because of its absurdly small volume.

FACTORS AFFECTING QuALITY.

F8. We have seen that gluten quantity and quality, d.iast at ic capacity, &c., all have a bearing on wheat quality and differences in these individual fact ors- and hence in quality itself-may be varietal or environmental. All varieties seem to be modified in the same general way by climate t hough t he degree of modification is determined by variety. H ence, those varieties which are superior in st rength in one locality or season are likely to be the stronger

under other conditions, although wit h a probable difference in degree. Owing to t he variat ion within a variety due to environmental factors, principally locality and season, the quality of any particular variety cannot be established from a single test from one localit y unless, as previously mentioned, it is considered in relation to a standard variety grown under the same conditions. ·

The quantity of protein is partly dependent on variety but is considerably influenced by soil and climatio conditions. Gluten quality, on the other hand, is considered to be more largely, if not entirely, an inherent characteristic, not markedly affected by environment.

Diastatic capacity is probably largely influenced by seasonal conditions. The drier the period during maturing the lower the diastatic activity. A moister period, resulting in slight germination, results in high d:iastatic power, as diastase is produced when i:Jle embryo starts to germinate.

The general effects of environment, apart from effects on diastatic capacity, may be stated thus--(a} Cool weather with sufficient and well distributed rainfall during the period from head formation to maturity retards ripening and affords conditions favorable to starch production and to low protein, thus producing weak wheats. (b) Hot dry summ.ers hasten maturit y and tend t o produce smaller kernels of higher protein and quality.

(c) Quality is affected by soil fert ility and by the amount and availabilit y of moisture. Abundance or lack of plant foo ds affects the composit ion of wheat and in t his respect nitrogen has probably the most effect. An abundant supply of available nitrogen unt il the grain matures tends to high-protein grain and, to some extent, counteracts climat ic conditions tending in the reverse djrection. Hence the higher content of soil nitrates t he better the baking quality.

It will be seen, therefore, that quality in wheat depends on variety and on environment during the growing season, especially during later stages of growth. Under given conditions, varietal influ ences will always be apparent but environment may alter the character of a given variety.

'PosiTION oF AusTRALIAN WHEATS IN REGARD TO QuALITY. F9. Much has been written of lat&-and more to t he quality of AustraJian wheats, and while it must be admit t ed t hat t here is room for some improvement in t his r espect, it must also be granted that Australian wheats are defi nit ely not as poor as has been maintained in some quarters. The average lo af of bread in Australia

is quite a respectable art icle and does no t call fo rth much complaint from the consumer. K ent Jones, the English cereal chemist, admits that Australian wheat and flour were never as weak as some people t hink and that the latter

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produces satisfactory bread, although he considers it could be better. Wheats from various parts of Australia, together wit h samples from all other wheat-producing countries were examined in-the laboratory of the United States Department of Agriculture and found to compare very favorably with wheats of a similar class from all other countries.

The quality of Austral ian wheats has, however, been criticized both overseas and locally. Kent Jones states that " they cannot be classed as of the strength which English millers re quire in t he blend. They mill well and give a good length of excellent-coloured flour not lacking fl avour. Where a long length of patent flo ur is required they are particularly useful but t he miller is often prevented from using as much as he would like owing to its obvious defects--lack of ge r.eral strength and low sugar content."

Local millers, who produce a straight -run flou r, have criticized the quality of the wbeat and have alleged that there has been a general and progressive decline in this respect. The ever increasing demand for higher-and-higher­ yielding varieties has probably been met at the expense of quality and, in fact, an official pronouncement was recently made to the effect t hat in South Australia the f.a. q. standard was tending lower and lower.

FlO. When Australian wheats are assessed in terms of t he individual factors affecting quality, the following generalizations bold:-Protein .-It is generally accepted by overseas authorities that a minimum of 10. 5 per cent. protein in flour (11 .5 to 12 per cent. in wheat) is necessary for optimum bread quality. Except fo r a few varieties not widely grown,

Australian wheats rarely approach t his minimum, and f.a.q. wheat, in general, is usually below this minimum in protein. Protein Quality.-When the P elshenke t est is taken / as & measure of protein quality, Australian wheats are relatively wee,k in this respect. Pelshenke himself gives the following figures as typical of some samples of world wheats:-

Northern Spring Manitoba Hard Winter Russian ..

Barusso ..

Australian Hungaria,n

160-280 minutes 80-240 minutes 25-110 minutes 2(}- 60 minutes

25- 50 minutes 25- 35 minutes 20- 40 minutes

While local t ests have shown few individual varieties to have Pelshenke t imes of from 100 to 21')0 minutes, the commoner varieties have much lower figures and the f.a.q. samples are usually under 30 minutes_

Diastatic Activity.-It is generaily considered that a diastatic capacity of from 1. 5 to 2. 5 (per cent. maltose after sts,ndard test ) is necessary to ensure adequate gassing power and crust colour, and that a figure of less than 1. 0 is definitely too low for this purpose. There is some evidence to suggest that the higher. figure should be set as the minimum when considering Australian flours, which, in some seasons at least, are low in maltose and samples are frequently fo und with a diastatic value of less than l_ 0.

Baking Test.-It has already been pointed out that flour from Australian wheats does not produce a really poor loaf, but loaf volume is considerably smaller than that of flours from wheats of certain other countries. H ere again, local investigations have shown that the more popular and more widely grown wh eats are the worst offenders in this respect.

PAsT AcTION To IMPROVE QuALITY.

Fll. Until the past two or three years it is apparent that very little attention has been paid to the question of improving quality. Farrer in New South Wales was certainly interested in this aspect of wh eat breeding and he produced a number of varieties (e.g. , Bobs, Comeback, Hard Federation, Florence) that were of decidedly higher quality than the leading commercial varieties t hen grown, but., as they were inferior in yield, they were not extensively adopted. P ye, t oo, in Victoria, was also interested in breeding relatively strong wheats and he produced such

varieties as Minister, Baldmin and Minfior, which suffered from a similar disadvantage as regards yield. The difficulty of combining high yield with strength has constantly been a bar to improvement in quality, particularly as there has been no incentive t o grow wheats better than f. a.q. It is only natural that breeders in t he past have concentrated almost solely on improving yield and disease resistance.

It is of interest at this stage t o review existing varieties of wheat 11.nd to classify them on a quality basis. The follo wing classification, based on views expressed by State Departments of Agriculture, cannot be considered as final nor to include every variety, but it does give a general idea of the relative quality of most of the wheats grown in Australia:-

Strong.-Cedar, Comeback, Pusa 4, Duchess, Goolma., Jonathan, Dindiloa_

Medium Strong.-Baldmin, Bobs, Bordan, Bruce, Bunyip, Cadia, Canimbla., Dundee, Flora, Ford, F lorence, Gloss, Gluford, Gresley , Gular, Hope, Minfior, Minfios , Minister, Riverina, Rymer, Union, Hard F ederation, S. H _J., Wardfir_

Weak.-Apollo, Aussie, Bald E arly, Baringa., Baroot a Wonder, Begum, Bena, BencubLin, Bobin, Bogan, Bredbo, Burrill , Cn,liph, Canberra, Clarendon, Cleveland, Currawa, Dun , Darts Imperial, Dawn, Duri, Exquisite, Federation , Firbank, Free Gallipoli, Geeralying, Ghurka, Gluclub, Gluyas, Gresley, Gullen, JofJ.re , Major, Marshall's No. 3, Nabawa, Nizam, Penny, Queen Fan , Ranee, Sepoy, Sirdar, Sultan, Sword, Turvey, Warden, Wandilla, Wannon, Waratab, Yandilla King, Yanward, Yetna.

And of t his last class there is sufficient evidence to suggest that the following are t he weakest and might be, classed as "very weak" :-Apollo, Baroota Wonder, Duri, Exquisite, Free Gallipoli, Gl uclub, Penny, Re,jah, Sultan, W aratah, Yandilla King.

It is significant that the wheats most widely grown in each State (e.g. , Waratah, Nabawa, Free Gallipoli -and Gluclub) fall into the " very weak " , or at best into the "weak", class.

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PossiBLE MEANS oF IMPROVING Qu.un'Y.

Fl2. It has already been pointed out that quality is partially dependent on environment, and it is therefore desirable to consider the limitations in Australia imposed by climatic conditions before proceeding to discuss possible methods of quality improvement. W enholz discusses climatic influe nces in Australia and states that over the greater part of the wheat belt, climatic conditions during the maturing period of wheat should be capable of producing grain of fairly high protein content. In South Australia, Victoria and the southern parts of New South Wales, the more

prolonged ripening period gives a greater tendency t o the production o£ soft wheat t han in other parts of the wheat belt, but grain of moderately good protein content should be possible. In Western Australia and t he south-west and central portions of New South Wales, the conditions are more favorable for the production of high quality grain. As far as climatic conditions are concerned, the highest protein grain should come from the north-west of New South

Wales and from Queensland (although there is some evidence to suggest t hat the Victorian Mallee is also favorably situated in this respect).

Fl3. Wenholz also points out the influence of Australian climate during the early stages of growth. Australian wheats, although practically all sown in the autumn, are not of the "winter habit" of growth as understood in America and Europe, but are "spring" wheats. In Australia, wheat makes continuous growth during the winter, but in the southern part of the continent the" soil is cold and wet during this period and nitrogen intake during its early growth is thus low and mullt react against the production of really high protein grain. These conditions do not hold to the same extent in the north-west of New South Wales nor in Queensland.

Fl4. It will be seen therefo re that, with the exception of a few districts, climatic condit ions militate against the production of very high protein wheat.

Fl5. As environmental factors are, generally speaking, beyond control it will be apparent that any attempt to improve quality rests with wheat breeders and Agricultural Departments, apart from any incentive that can be given to producers to grow existing strong, but relatively low-yielding, varieties.

Fl6. As regards the latter possibility, the incentive in the local market must come from millers prepared to pay a premium (commensurate with lowered yields) for such wheats, the flour from which would be blended with lower strength flour in the mill or sold separately at a higher price for blending in the bakehouse. On the English market it seems definite that really strong Australian wheat, with its present desirable characteristics, should command a premium over every other wheat if sold separately. Although is understood that an experimental shipment of such wheat from Western Australia failed to obtain any improvement in price over ordinary consigm;nents, this is not necessarily an accurate indication of what might be expected if regular shipments of such grain, appropriately

advertised, were assured to English buyers. It is obvious, however, that there will be no incentive to produce such wh eat for overseas' markets unless the existing f.a.q. system of marketing be altered or modified. It is unnecessary here to discuss the pros and cons of this system, as the general question of marketing is outside the terms of reference of this Report, but it might be mentioned in passing that the f. a.q. system, besides retarding the development of strong wheats, segregation separate sale of very ":heats biscuit fiour. It would appear,

therefore, m smtable d1stncts, the production of really strong vanettes 1s feasible, but only under the marketing conditions indicated.

Fl7. As regards the product ion of Australian wheats in general, it would be undesirable, even if possible, to attempt to convert them in toto to the very strong type, but from what has been said earlier it will be apparent t hat some all-round improvement in quality is desirable. This does not mean a radical alteration in the type grown, but that the wheat-breeding programme throughout the Commonwealth should be designed to produce wheats somewhat

better in quality than the present more popular varieties, with little if any reduction in yielding capacity.

Fl8. Take for instance, protein. Although this is not the only factor, a good percentage of protein still remains a first essential to . good quality, and ability withstand mechanical doug? The general average protein content of Austrahan wheat could well be raised to 111 to 12 per cent. w1th deCided advant ages to the local and overseas trade. I n a similar way, if gluten qu ality (as measured by the Pclshenke value) ofthe f. a. q. samples, instead

of being at the low figure of fro m 20 to 30 minutes, were raised to about 50 to 60 minutes, a marked improvement in quality would result.

Fl9. It. is suggested that wheat of this type should be aimed at by breeders even, if necessary, at a slight sacrifice in yield, and that such an obj ective is not unattainable economically. It would be necessary for t he varioUB Agricultural Departments to adopt a policy of not issuing or sponsoring new variet ies, irrespective of yield and other characteristics, unless they showed some improvement in quality, however small, over the present popll la.r varieties.

This would ensure a gradual but certain trend in the right direction.

F20. At the same time, it is felt that millers could take a more act ive part in improving the quality of local flour . The characteristics of a new season's wheat can be determined at an early date and its faults-whether in gluten quantity or quality or in diastatic capacity-can be demonstrated. With this knowledge as a basis it should not be impossible in most cases for the miller to incorporate in the flour the improver or yeast food necessary markedly to increase t.b e quality. Such additions are frequently, if not universally, made by the baker, but they could be more

scientifically and economically added in the mill , although such action would require slight amendment of existing pure foods regulations. In this way would be possible fo; the miller the b::>ker something approaching what he requires-a better and a more umform fiour. Such actwn by the IIll.ller 1s part1eularly necessary when the fault lies in diastatic power. This fact or is largely governed by seasonal influences and is outside the control of the

breeder. It is so easily rectified by the addition of a small percentage of sprout€d grain to the blend, or wheat malt to the flou r, that standardization in this respect is simple.. Action along these lines woul d be of particular benefit to locally-consumed flour but would also result m a more umform flour for export purposes to such countries as did not legislate against additions to flour. Standardization and improvement in flour are highly desirable in connexion with Eastern trade, the volume of which at present is due, not to t he superiority of Australian flour , but iolely to the question of price.

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F21. Summarized, it would appear that some improvement in the quality of Australian wheat and flour is desirable both for local consumption and overseas markets and that such improvement can be effected, without loss of existing desirable characteristics, along the following lines :-(1) It is not possible nor desirable to attempt to change the character of Australian wheats as a whole

to the really strong class, nor can very strong characteristics be obtained without considerable reduction in yield. (2) A breeding programme, aimed at raising the general average of Australian wheat to a protein content of 11! to 12 per cent. and a, Pelshenke figure of 50 t o 60 minutes, should be generally adopted,

possibly exempting certain areas which might best be reserved fo r the production of very soft wheats for biscuit flour. The various districts in each State should be accurately classified according to the quality of wheat potentially producible in those districts .. (3) This would involve the adoption, by the var·ious Agricultural Departments, of a policy of not

promulgating any new variety, irrespective of yield, which does not sh ow an improvement in quality on t he existing most popular varieties in any district, except in such districts as might be reserved for wheats for biscuit flour. (4) Really strong varieties nJready well known can be grown in certain districts provided a premium is

paid to compensate for reduced yield. This should be possible lo cally but is not possible with export wheat unless the f.a.q. system be changed, when such wheats, sold septrately, should command a remunerative price. (5) Immediate action should be feasible by millers to improve and to standardize the quality of flour both

for local baking requirements and for export by-(a) the encouragement, by means of a premium, of very strong wheats for blending; (b) a study of t.he seasonal and district characteristics of the wheat harvest and, where possible, remedying defects by mill additions; and (c) a study of the particular type of flour desired by each oversea's market. (6) Very weak varieties and wheat from districts which environmentally produce very weak wheats could

well be marketed and milled separately, and the :flour reserved for the biscuit trade and for export for that purpose. This also is dependent on the alteration of the f.a.q. system.

AcKNOWLEDGMENTS.

F22. General acknowledgment is made of information obtained from some of the literature cited in the attached bibliography, and particular acknowledgment is made of helpful suggestions and criticisms given by Mr. J. Brake of the Victorian Department of Agriculture and by Messrs. Wenholz and Griffiths of the New South "Wales Department.

Callaghan

Coleman, et alia

Cutler and W orzella

Griffiths Guthrie

Hickinbotha.m

Kent-Jones

Pelshenke

Richardson, et alia

Sewell and Swanson

Sherwood and Bailey Stockham

W enholz, et alia

SEIJECTED BIBLIOGRAPHY. Baking Quality of Australian Wheats. I. Development Aspect. South Aust. J. of Ag. 15th May, 1934, 1242. Milling and Baking Qualities of World's Wheats. U.S. Dept. of Ag. Tech. Bull. 197,

1930. The Wheatmeal Fermentation Time Test of "Quality" in Wheat as adapted for small plant breeding samples. Cereal Chemistry, 10, 1933, 250. The Wholemeal Fermentation Time Test. N.S.W. D. of Ag. Misc. Pub. 2947, 1934. Wheat Improvement in Australia. N.S.W. D .. of Ag. Sc. Bull. No. 11, 1914. W. J. Farrer and the Results of his Work. N.S.W. D. of Ag. Sc. BulL 22, 1922. Baking Quality of Australian Wheats. 2, The Question of Quality and the Pelshenke

Test. South Aus. J". of Ag., 15th June, 1934, 1447. Australian and Manitoba Wheats. Aust. Baker and Milling J., 13th March, 1932, 92. Australian ¥1heat. Milling, 2nd April, 1932, 376. Short Method for the Determination of Gluten Quality of Wheat. Cereal Chemistry,

10, 1933, 90. Milling and Baking Qualities of VictoriRn Wheats. Vic. D. of Ag. J., 1913, 1914, 1916. Tillage in Relation to Milling and Baking Qualities of Wheat. Kansas Ag. Expt.

Stn., Tee. Bull. 19, 1926. Diastatic Activity in Wheat Flour. Cereal Chemistry, 9, 1926, 165. Some Factors relating to the Quality of Wheat and Strength of FloUl'. N. Dakota Expt. Stn. Bull. 139, 1920. Quality of Australian Wheat and Its Improvement. N.S.W. D. of Ag. Sc. Bull. 44,

1933. .

When Flour is Poor in Gassing Power. Au.st. Baker and Milling Journal, 30th June, 1933. South Australia's Declining Wheat Quality. South Australia's Declining Wheat Quality, 31st May, 1933.

Standardization of Gassing Power. Standardization of Gassing Power, 30th November, 1932.

SECTION VII.-SCIENTIFIC KNOWLEDGE AND EDUCATION IN RELATION TO THE WHEAT INDUSTRY.

1. DEBT TO SCIENCE IN THE pAST

2. PRESENT PROVISION FOR RESEARCH AND ADVISORY VVORK

3. THE NEED FOR A MORE RAPID APPLICATION OF KNOWLEDGE

4. EXAMPLES OF THE NECESSITY FOR INCREASED SCIENTIFIC WORK

A. Soil Studies (a) Maintenance of Fertility .. (b) The problem of fallowing .. (c) Special Areas of low fertility : salinity

(d) The immediate need

B. "Quality" Problem in Flours 0. General Experimentation {a) Mixed Farming Rotations .. (b) The \Veed Problem

5. EXTENSION WORK FOLLOWING ON RECONSTRUCTION

6. THE NEED FOR MoRE PRECISE STATISTICAL INFORMATION

7. CLIMATOLOGICAL STUDIES

8. TECHNICAL KNOWLEDGE IN CoMMONWEALTH GovERNMENT DEPARTMENTS

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VII. SCIENTIFIC KNOWLEDGE AND EDUCATION IN RELArnON TO THE WHEAT INDUSTRY. . (1) DEBT TO SCIENCE IN THE PAST.

303. The Commission is greatly i1n pressed by the historical fact that the growth of the wheat industry of Australia was made possible only by advances in scientific knowledge and invention. The invention of appropriate machinery for dealing with stumpy land, for harvesting cheaply in areas of low yield, and for the eflective cultivat ion of wide areas with large implements gave

the industry a chance of rapid development in new districts. The belated application of the discovery of superphosphate was a factor of vital import ance. The genius of Farrer and subsequent plant breeders in producing new races specially suitable for various districts can scarcely be over-emphasized.

The Commission is also impressed by the fact that the history of wheat-growing in all English-speaking countries shows that every crisis has caused profound changes in the general, system of agriculture. Rural revival in England between 1835 and 1860 was based on the development of new methods, new machinery, and the use of fertilizers. The reconstruction after the collapse in the 'nineties was largely assisted by the application of new knowledge both

in America and in England. It is reasonable to suppose that the methods of wheat-growing of the future will differ considerably from those of the past. Every effort should be made to obtain new knowledge and disseminate it among the Australian wheat-growers.

(2) PRESENT PROVISION FOR RESEARCH AND ADVISORY WORK. 304. Each State has an agricultural department with research and advisory functions. The personnel is efficient and hard working but deficient in numbers. District officers, where they exist, are almost invariably confronted with insuperable .t asks owing to the very wide areas of

their districts. Improvement in production costs through more skilful management can be obtained over wide areas only by personal contact on the farm between the farmer and the adviser. A centralized system of agricultural assistance to farmers, conducting most of its work by means of correspondence and occasional instructional tours has a definite value but that value diminishes as the intensification of husbandry progresses.

The Commission realizes that an educational service is not likely to be effective unless men of the correct type with sound fundamental training are employed. It is useless to install a system which is expected to raise the level of farming along scientific lines unless those who are operating such a system have a clear grasp of the ultimate principles on which such an adva,nce

must rest; further, they must also possess the type of personality which engenders confidence in the minds of the farmers. Failure in these respect in the past has meant that the adoption of essential technical improvements has often been seriously delayed. The use of superphosphate did not begin to spread in Australia until about 50 years after its manufacture was first begun

overseas and even after its value had been demonstrated in Australia, its progress was slow, and years elapsed before its application became general.

(3) THE NEED FOR MORE RAPID PRACTICAL APPLICATION OF KNOWLEDGE. 305. It is true that educational services to farmers have been intensified greatly in the past 30 years but during the last decade the advance in scientific knowledge in respect to agriculture has been very rapid, and there is some danger that overworked department s may at times be slow to take advantage of new. researches, particularly those carried out in other countries. Frequently, such discoveries require much patient and thoughtful investigation before the precise method by

which they can be applied under Australian conditions is determined. The Commission is of opinion that a group of research officers together with an effective extension service should be regarded as an integral and vital part of the agriculture of every Stat e. Such an extension service would be the nervous system of the body of the wheat industry ; it would reveal the points

of weakness and danger and acting through the main brain centre at the standing Committee on agriculture would lead to the development of well-organized research on whatever problems require scientific investigation of a more fundamental nature. At present every State has some organization of this kind; some are better equipped than others ; but the senior executive

officers agree that improvements could be made if more financial support were available.

(4) EXAMPLES OF NECESSITY FOR INCREASED SCIENTIF IC WORK. 306. During the course of its investigations the Commission has obt ained widespread and conVInmng evidence of the need for more intensive research into the problems of the wheat industry.

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The lack of accurate information regarding the relative importance of the various factors which govern the growth of the wheat plant in Australia is somewhat surprising. Fear of drought occupies such an overwhelming place in the minds of many farmers that other causes of low yields are often overlooked. Drought is a most important factor in many districts but it is by no means the only cause o£ low yields and in some districts it is frequently of small

importance.

Certain outstanding matters will now be discussed, these being grouped together according to their natures.

(A) SoiL STuDIEs.

307. (a) Maintenance of Fertility.-The fundamental idea underlying the whole of advanced agriculture in European countries is the maintenance of the fertility of the soil. · In Britian, for instance, it has been recognized for a century that if productivity is to be maintained the ..soil rnust be regarded as a storehouse of plant food, and neither unduly depleted of those mineral

elements which are necessary for growth nor treated in such a way as to alter its physical nature to the detriment of ensuing crops. Rotations are arranged with this end in view, and a condition is fre quently inserted in leases requiring that the farming practices of the tenant shall conforn1 with accepted principles in this respect.

Such a system has so far had very little place in Australian agriculture. The first reason for this fact doubtless is that in the early days the land was in many cases new and had inherent stores of fertility. Another reason is that in some districts the soils are extremely fertile in nature and will stand frequent cropping with nothing but cereals for many years without showing

signs of serious deterioration in respect to texture, or of depletion as regards plant foods , although in most the shortage of phosphates in the soil makes itself apparent at a fairly early stage.

However, there is increasing evidence in widely scattered areas that a slow change is taking place in the texture of some of the soils and that this change is causing increased difficulties in cropping. The only effective method of avoiding this state of affairs is by adopting a different or a more lengthy rotation thus giving the soil time in which to recover from cultivation and build up its condition, probably chiefly through an increase in the humus content. The scientific explanation of the process is not known with certainty. The problem is important because the inherent fertility of the soil of a district should be a lasting asset. It would be a dis aster if bad farming were allowed to damage or destroy in a few years a possession which should be a national heritage for future generations.

308. (b) The Problem of Fallowing,__,.The desirability of having a certain knowledge of fundamental facts is well illustrated by the history of the practice of fallowing. This old-time. custom was found to have an application in Australia because crops grown after fallow were often · found to give higher yields than crops grown on stubble in many districts. In n1ost districts with an annual average rainfall of less than 20 inches, the major portion of which fa.lls in the winter, fallowing is a desirable practice, although it entails extra working of the land and larger areas than would be required under a stubble cropping systern. Until recently the main reason for fallowing was usually assumed to be the conservation of moisture, although the control

of weeds was regarded as a subsidiary advantage. Recent careful scientific work in various places has suggested that water conservation will not adequately explain the benefits of fallowing. As long as the earlier reason was thought to be correct, there was no object in trying to avoid the fallow because lack of water was considered to be the main factor limiting plant

growth. Now that the reasons for the success of crops on fallowed land are less certain, a complete investigation of the forces governing the growth of the wheat plant in all areas is essential. In certain districts the main chemical result of the fallow is to allow the formation and accumulation of nitrogenous compDunds in the soil. If weeds are well controlled, a dressing of nitrogenous fertilizer can replace the fallow on part of the cropping area. In other districts with reasonably good rainfaU a crop of peas or other legumes can replace the fallowing.

In drier districts with sandy soils fallowing frequently results in the development of sand drift which has bBcome a menacing problem in certain localities. This form of erosion has been investigR-ted extensively and calls for no further comment by the Commission. It is conceivable that considerab le improvement in the agricultural prospects of all the drier regions might ensue from a detailed investigation of the factors limiting p1ant growth, although it is necessary to

emphasize that their low and variable rainfall is probably the limiting economic factor, and will probably prevent them from ever becoming very highly productive regions with an intensive ' agricultural system.

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309. (c) Special Areas of Low Fertility-Salinity.-In certain parts o± the Australian wheat belt areas of soil of specially low fertility occur. These areas are often intermingled with better land well suited to wheat farming. The best example is the " sand plain " of Western Australia, of which there are said to be 20,000,000 acres. These poor areas frequently have to be enclosed within the boundaries of farms and their clearing then becomes almost essential in order to control vermin.

Work in Western Australia has shown that the fertility of " sand plain " can son1etimes. be built up by a systern of judicious r husbandry based on the use of superphosphate and leguminous plants. In this way, areas of such soil can be made useful adjuncts to the adjacent "first class" wheat lands. A technique for the employn1ent of such areas requires investigation.

The problem is essentially one of soil fertility, and Australia ·must realize that a progressive policy of experimentation co1nbined with intensive soil investigation is overdue.

Salinity of the soil has been found to be a definite bar t o economic wheat production in certain districts of Western Australia. Possibly similar conditions obtain in some localities in the drier parts of the wheat belt (e.g. , parts of the Mallee ) in other States. In .Western Australia the problem has been investigated with son1e degree of intensity by the Agricultural Departntent. The Comrnission understands that it is now a recognized departmental policy

to avoid all settlement for wheat-growing purposes on land which shows signs of salinity. Had the Government not been in a position to obtain qualified t echnical opinion on this point, a few years ago, a very large loan expenditure would have been incurred fo r land settlement in districts which are now known to be unsuitable. This narrow escape from a social and financial

catastrophe is an instance of the value of efficient technical staffs.

310. (d) The Immediate Need.-In the past, little attention has been given to soil research in Australia. There have been local investigations on a small scale in most States, but it was not until the Soils Division of the Commonwealth Council for Scientific and Industrial Research was founded in 1927 that any comprehensive plan of campaign was adopted. The personnel

of that Division is, however, small in numbers and their attention has perforce been directed in the main to special regions with out standing problems and especially to districts such as irrigation areas where production is intensive and much capital is at stake. A large increase in the activities of this Division which works in intimate association with State Departments of Agriculture, is highly desirable, and indeed, essential.

\Vork of a fundament al nature on the more difficult soils of the wheat belt and the relationship between soil nutrients and the growth of t he wheat crop will be amply repaid. \Vhether the States or t he Con1n1onwealth undertake this work, is a matter of minor importance provided that efficient workers are employed, that a unifocm basis of work is adopted and that the results are made generally available. Neither t he plan of the work nor the knowledge gained

as a result of its operation need have any immediate practical appJication, the important point being that the officials ad vising the wheat-growers sh ould know with certainty the important factors governing the growth of t he wheat plant and their relative importance.

B.-THE "QUALITY" PROBLEM IN F LOURS. 311. A detailed consideration of the " quality " problem in flou rs of Australian wheat is put forward in Section VI. of this Report where it is stated that the question of wheat strength is one which should be studied by plant breeders in every State. Several States have already carried out much valuable work on the matter. A joint conference of officers of each Agricultural

Department, including chemists in charge of cereal investigations and plant breeders, should be arranged by the new Council of Agriculture through its Standing Committee and a frank discussion of the present position, and the methods adopted in the past and the results so far achieved, should take place. The pooling of .knowledge and t he construction of a future programn1e of work would be beneficial. Useful definite information as to the relationship of

Australian soil and climatic types to wheat strength would be obtained, and plant-breeding problems could be allotted to various stations and workers.

C.-GENERAL EXPERIMENTATION.

312. The Commission has been impressed by the amount of fie ld work being carried out by various Agricultural Departments in connexion with crop rotati ns, rates of ·sowing, diseases and plant breeding. The staffs available for t his work are frequently small, while the areas concerned are large. Possibly in some cases too much is being in view of the number of staff

available. Quantitative results which are unreliable in their figures may be worse than no results at all because they may be misleading. During recent years many special studies of experimental method have been made and it is now practicable to design the lay out of

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198

experimental plots in such a way as to ensure that the results, if properly treated on a stat istical basis, are defi nite and conclusive . Experiments which are not laid out in such a manner are dangerous if their results are subsequently used as a basis for quantitative deductions. Every reser.rch organization entering on quantitative field experimentation should have an office r wh o is sufficiently trained in the statistical method as far as it affects agricultural work to be able to de cide on the validity of the results obtained. Quantitative results derived from experin:).ents which are not conducted on such principles should not be published.

313. (a) J}!ixed F ctrming Rotations.---The history of ·bhe development of agricultural practices in Australia. is short. In the early days repeated cropping was frequently pract ised. This gave way in many districts to the rotation of wheat and fallow. In recent years\ rith the of the fat lamb industry there has been a tendency to tum to a wheat-oats-fa llow senes of cropping, or to wheat followed by one or more years under grazing. This is a characteristic procedure of some farmers in regions where the soils will not g.cow wheat well under the wheat­ fallow system. In regions of low summer rainfall the " grazing" will be the weeds which are

natural . to the countryside ; where there is summer rainfall lucerne is planted in some cases.

The advantages of the tra.nsfer from wholly wheat farming to a system under which the farmer obtains his returns from the production of several commodities considerable. In t he case of wheat-growing combined with grazing, not only is there a better chance that part of the production will be sold on r. good or at least " fair " market, but the land is rested during t he grazing period. Further, as the cost of running the sheep is considerably less than that of cropping, the annual financial out lay is diminished. There is at the present t ime a definite tendency for this type of husbandry to increase. The chief obstacles aTe two in number. Many farmers have areas which are too small to allow them to make a living in this way. Other farmers

are impelled to crop more than they otherwi "e would in the hope that the wheat market will improve and they will be able to meet their interest charger", such charges being based on a capitalization incurred on t he assumption that a wheat-fallow system would be profitable.

The adoption of a broader basis of diversification is essential in many wheat areas. A more mixed type of husbandTy requires more knowledge on the part of the farmers and such knowledge is not always present; consequently the St ates should ensure that· a sufficient staff of competent adviseTs in live-stock matters is available for assistance to the farmers. There are many ways in which the wool clips coming from many wheat farms can be improved. F urther, t his greater dependence on animal husbandry will involve certain new developments in ronnexion with feeding . At the present time the sheep on many wheat farms lead a very haphazard existence. In bad seasons they are often sold at a loss, in others they become relatively

unproductive through malnutrition. All losses cannot be avoided, but small reser ves of concentrates, if fe d at the right time, would effect very considerable savings and would t end t o even out the fluctuations in the supplies of live-st ock coming on t o the market and at the same time avoid faults in the wool. "True" droughts are rare in wheat districts; partial droughts are frequent in some of them, but investigations_ would minimize the effect of the latter. The Commission suggest s that more attention should be paid to the development of subsidiary crops for providing reserves.

314. (b ) 1,he Weeds P1·oblem.- Certain weeds which are remarkably well adapted for growth under the conditions of the Australian wheat belt are spreading rapidly . The Hoary Cress or White Weed (Lepidium dmba) has taken a firm hold in parts of the vVimmera and Riverina. Of even greater significance is the spread of the Skeleton Weed (Chondrilla juncea) in the Riverina and the South-Westem Slope of New South Wales. So far no cheap effective method of controlling these weeds has been discovered and it seems probable that the chief hope of holding

them in check will be through widening the. rotations which are practised. These are two outstanding examples of the weed problem; m.any other species could have been mentioned as being of importance in various districts.

5. E XTENSION WORK FOLLOWING ON RECONSTRUCTION.

315. The Commission has based its recommendations on a price of 3s. Australian currency per f. o. r. ports bourit __ '· It recognizes that at t hat fig ure some farmers

t o despite all t hat can reasonably be done in the way of

ass1stmg t he 1 _ ndustry by reducmg mt erest charges and other costs. In the main wheat -growing States a considerable number of growers have already left the land and others are nreparing to do so .. If the of the_ future pri r2 proves to be too high then ... the number

who w1ll cease production will be further mcreased. The transference will be slow and many 'I

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farmers will be loath to give up an enterprise which has been their life as well as their livelihood for some years. The natural sequence of events will be for some to leave and for others on adjacent blocks to take over the holdings, thus acquiring an area which will allow them to become small sheep farmers growing small areas of wheat. ·

When once the reconstruction of farm areas has been accomplished, there will be no necessity for a continuance of financial assistance from Governments. The farmers should be self-supporting. This lJ1ay entail a period of subsistence farming, under which system each farm will have to be self-sufficing in most requirements. The Commission is of opinion that while there

are a number of farmers who would be better off if they left their farms, there are many others who would prefer remaining as subsistence farmers to leaving the land and their "independence ." These men are the salt of the rural population in every countryside and in all countries. Every assistance in the form of guidance should be afforded to them in the way of impro ving their home conditions. It cannot be too strongly affirmed that in many instances the success of a farm is just as dependent on the farmer's wife as on the e:!forts of the farmer himself. This will involve more attention on the part of States to Home Extension Services. New South Wales and Victoria have made a beginning in this direction and in all St ates some voluntary institutions, such as the Country Womens' Associations, are also at work. The Commission drew attent,ion

to this matter in its First Report, and desires to emphasize its opinion that there is here a large field of useful social work which ought to be strongly supported by every State Government.

6. THE NEED FOR MORE PRECISE STATISTICAL I NFORMATION. 316. The Commission has received much assistance from the Statistical Bureaux of both the Commonwealth and the States, but feels bound to draw attention t o the fact that t he State Departments other than that of New South \Vales were unable to afford information wh ich

would have rendered the Commission's investigat ions more satisfact ory. In some cases the basal data were available but the personnel t o ext ract and compile them was not available. In other cases the facts had not been collected. The reason for this state of aff airs is that governments were said to be unable to staff and finance t heir statistical departments in an

adequate manner. Thus in Victoria, where wheat-growing is an integral part of the economic life of the Stat e, the estimate prior to harvest of the acreage under t he crop is by no means sat isfa ctory. Further, since the depression of the 'nineties no Statistical Register has been published.

This laek of precise information may have been a matter of small importance in days of laissez Jaire production and trading, but uncle; modern conditions, in which international agreements are playing an important part, the collection and publication of reliable data fo rm the necessary ground work on which all organization must depend. Countries which do not

ensure that such data are collected and made available in respect of their territories are not fulfilling their obligations to their people or to the world as a wh ole .

7. CLIMATOLOGICAL STUDIES.

317. The Commission has been furnished with considerable evidence fr om the Commonwealth Weather Bureau. The difficult nature of the climate in large sections of t he agricul tural areas of Australia renders an intensive study of the weather most desirable. Much has been done , but there is ample room for further research work .

The Commission has encountered instances of local vagaries m the rainfall which require specific investigation. These instances mostly t ake t he form of enclaves of territory, with lower precipitation than the surrounding country. In a low rainfa ll region, where one extra inch during the growing period may mean all the difference between si.x and ten bushels t o the acre, the importance of accurate knowledge is great. A careful detailed survey of such instances and

of the causative fa ctors would be valuable. A great deal of investigation of the broad features of Austmlian rainfall has been made. More work is needed to elucidate the causes o£ t he minor vagaries. There is no reason to suppose that a consideration of the phenomena on a physical basis by qualified investigators would reveal

any inexplicable features. ·

Another matter which has received some attent ion is the long range trend in rainfall. The graph Figure XXXI. shows the annual rainfalls for Quorn and Hawker, South Australia, during the last 53 years. Several general trends are apparent; in the first place there was a definite downward trend during the 'ninet ies, and a rising one bet\veen 1900 and 1920, fo llowed by a relatively steep dedine during the following decade . The matter is being studied, but work

on such lines should be _pushed forward more rapidly than is at present the case. Again it is a question of the availability of personnel.

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Past experience justifies a progressive policy in the matter of detailed climatological research. The variability of the district rainfall was one of the reasons for the rejection of the settlement scheme in the Nowinji area of the Northern Mallee, in Victoria. Had this scheme been continued several rnillion pounds of capital would have been spent which would later have been regarded as wasted.

8. TECHNICAL KNOWLEDGE IN COMMONWEALTH GOVERNM:ENT DEPARTMENTS. 318. At the outset, the Commission was faced with the fact that the Commonwealth had no available staff capable of making an economic survey of farming operations. The warp and woof of the agricultural fabric of Australia are by no means as simple as is generally imagined. A study of the economics of agricultural production requires specially trained individuals. The

Commission is appreciative of the excellent assistance it has had from its staff and of the self-denying way in which they individually have worked ; but it feels bound to point out that the conduct of an agricultural survey was an entirely new experience for them. The Commission, therefore, suggests that the Commonwealth should take steps to ensure that it has available a nucleus of men trained in Economics, having detailed knowledge of agricultural organization and practice. Investigations such as ·the present one would then be practicable without great delay, and in many cases would be unnecessary as the information would be available. Future

conditions will require a supply of accurate information rapidly.

The recognition of the need for such a staff, and for rural economic surveys generally, is not new. In 1927 Professor A. J. Perkins, Director of Agriculture in South Australia, drew attention to the position in an address which was published as Bulletin No. 212 of the Department of Agriculture of South Australia. Little or nothing was done in the matter and the Commission recommends that the Commonwealth Government should request the Council of Agriculture to consider what steps can best be taken to further Agricultural Economic research in Australia.

The recommendations in this Section of the Report are numerous and varied, all demanding small increases in staffs and consequent expenditure. The Governments of the Commonwealth and the States can contribute towards the maintenance of good conditions in the industry by providing assistance through research and technical education and instruction. The small annual sums spent in this way will be amply repaid through a diminution of uneconomic farming and an improved morale among wheat-growers. Australia must recognize that the days of extensive happy-go-lucky development of wheat-growing are over. Modern conditions demand that every possible line of improvement in production must be exploited to the full.

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SECTION VIII . .;_FINANCIAL RECONSTRUCTION.

PAGE.

1. ScHEMES ADOPTED IN OTHER CouNTRIES 205

2. ScHEMES SuBMITTED To THE CoMMISSION 230

3. CoNSIDERATION oF SALIENT FEATUREs oF f?cHEMES SuBMITTED TO THE COMMISSION 232

4. GENERAL CONSIDERATIONS LEADING TO THE SCHEME OF DEBT RECONSTRUCTION RECOMMENDED BY THE COMMISSION 233

5. THE ScHEME RECOMMENDED BY THE CoMMISSION 238

6. FINANCE REQUIRED TO IMPLEMENT THE COMMISSION'S RECOMMENDATIONS 245

F.5964.-10

205 -

2

VIII. FINANCIAL RECONSTRUCTION.

I.-SCHEMES ADOPTED IN OTliER COUNTRIES TO ASSIST FARlVIERS DURING THE AGRICULTURAL DEPRESSION. 319. The situation of the wheat-growing industry in Australia, due to the collapse of prices, is not readily distinguishable from that which arose in other exporting countries, such as the Argentine, the United States of Arnerica, Canada, and the exporting countries of Europe. In all of these countries and in Australia it became imperative to resort to action by Governments to preserve the industry. The Commission has studied the schemes adopted in other countries and has considered them fully in arriving at its own conclusions. The measures adopted in the Argentine, the United States of America, Canada, and in certain of the European countries are surveyed broadly hereunder, as a preface to the recommendations submitted hereinafter by the Comn1ission. The information available to t he Comn1issiori in regard to the European countries is neither as complete nor as authoritative as the Comn1ission would have desired.

THE ARGENTINE.

320. The position of the wheat-grower of the Argentine, serious though it undoubtedly became, did not reach as critical a stage as that of the farmer in the United States, Canada or Australia, or in certain European countries which produce and export wheat. One fundamental difference between the industry as conducted in the Argentine and in Australia is that the greater proportion of the wheat-growers of the former country either rent their farms or are share-farmers, while the greater proportion in the Commonwealth are either the registered owners of their farms or are in course of acquiring ownership. In the case of the tenant or share-farmer, re-adjustments are more readily possible than in the cases of farmers with fixed debts upon their holdings secured by mortgage or other form of security.

321. The Commission is advised by the Consul-General for the Argentine in Australia, Seiior H. Bidone, that substantial re-adjustments of were effected following upon the collapse of prices, and that re-adjustments of fixed debts in a nun1ber of cases where the beneficial ownership was in the farmer were made voluntarily as the result of a campaign to this end by the Federal Agricultural Administration. But these re-adjustments, substantial as the Commission is advised they were, were not sufficient to bridge the gap between t he costs incurred in producing wheat and the money returns from its sale, and other steps were resorted to.

322. In order to raise the price to the farmer for his produet, the Government created in November, 1933, a control of foreign exchange which functions similarly to the British exchange equalization account and used a part of the profits for the payment of a minimum wheat price of $5.75 per 100 kilos which was higher than world parity ( $5. 30). .

323. It also effected a devaluation of the peso to the extent of 20 per cent. as a means of lightening the burden upon the primary producer. 324. Both of these steps were assisted by the bounteous crops and good quality wheat which have been produced in the Argentine during the period of depressed world prices.

325 : Credit facilities for long terms (33 years) were also provided by the National Mortgage Bank, an official institution. 326. Further, the Government undertook to purchase and market wheat and has now set up, by law, an authority for this purpose.

327. The fact that the farmer has in a large proportion of cases received substantial reductions in his rental charges, t hat he has the benefit of a stabilized price, that a devaluation of the currency has assisted him in respect of his indebtedness, and that he has a ready purchaser in the Government for all the wheat which the wheat-grower produces and delivers for sale, has assisted in the re-adjustment of the industry in the Argentine to the changed world conditions.

328. The Government has also inst ituted a schen1e for improving the quality of the crop by imposing classifications and limitations on the types of wheat which will be accepted in future seasons. THE UNITED STATES OF Al-wERICA.

329. In a report of the 25th August, 1934, of the Executive Secretary of the Executive Council to the President, the situation which existed h"1. the United States is briefly described as follows:- '

By Spring, 1933, when the usual sources of farm credit were making few or no loans, farmers were unable to obtain funds for re-financing maturing debts and mortgages, and were losing their farms and homes. Even the Federal Land Banks were making few new loans because economic conditions prevented the ale of their bonds at reasonable rates of interest to obtain money for lending, and because their lo ans which were limited t o 50 per cent.

of the value of the land and 20 per cent. of the value of the buildings, would not permit the re-financing of the debts for farmers who had the most urgent need of re-financing. Surplus s of agricultural commodi ies were among the principal price depressing influences.

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330. The relief of agricultural distress is stated by the Executive Secretary to have been along two major lines ; firstly, through increasing the purchasing power of the farmers ; and secondly, through providing a cornplete and co-ordinated agricultural credit system. The measures adopted under the first of these heads were directed to the adjustment of production to the effective demand for the commodity by voluntary adjustment programmes or marketing agreements ; and under the second head, by making available farm mortgage credit, production credit, and loans to co-operative associations.

331. These measures were not, however, sufficient to meet all cases and legislation was enacted for facilitating the adjustment of debts to the ability of the farmers to pay.

332. It will be convenient to deal separately with these three subjects.

333. Increasing Farmer's Purchasing Power.-In order to assist the farmer to increase his purchasing power, measures were adopted-(a) to control production in such a way as to enable the farmer to balance his farm production with the effective den1arid for his product;

(b) to provide for marketing agreements and licences designed to stabilize market conditions, and to require distributors and processors to pay fair prices for farm products ; (c) to arrange for and impose codes of fair competition formulated under the National

Industry Recovery Act with a view to the elimination of unfair and wasteful practices among manufacturers and distributors, thus enabling higher prices to be paid to farmers for their products; and (d) to remove from the ordinary trade channels burdensome and price-depressing

surpluses.

334. The Agricultural Adjustment Administration.-An agricultural adjustment administration wa·s created to carry out the policy expressed in the Agricultural Adjustment Act of promoting national econon1ic recovery by restoring, as rapidly as was feasible, the purchasing power of American farmers to the level which it occupied in the five years preceding the world war, during which period there existed an equitable balance between the prices of

things farmers sold, and the prices of things farmers bought.

335. This Administration evolved a "wheat adjustment plan'', for implementing which a very complete organization was created. The plan aimed at a voluntary and not a compulsory control of production. A processing tax levied on wheat used for domestic food consumption­ wheat processed for use by the producers and for charitable purposes being exempt-provided funds for the co1npensation of farmers who agreed to reduce their acreage sown to wheat.

336. Any wheat-grower wishing to participate in the wheat adjustment plan entered into a contract with the Secretary for Agriculture in which his "allotment" of production was specified. The allotment was based on the average production of the farm during a stipulated period, and represented the proportion of the production of the farr.a which it was assumed would be used for home consuro.ption for human food. This latter proportion was computed by applying

to the farm production the ratio which that part of the total production of the United States used for hon1e consu1nption for human food bore to the total production of the United States over a period of years. The adn1inistration agreed to pay the farmer an adjustlnent payment on each bushel of " allot1nent " :irrespective of whether the crop fell short of or exceeded the allotment.

In return the farmer agreed to restrict his acreage by a percentage to be declared by the Administration, but not exceeding 20 per cent. Although a contracting farm_ er was required to restrict his acreage, he was not prevented from exceeding his " allotment." He was free to market the whole of his crop as and where he pleased. The contract for acreage reduction was binding on the land for the period expressed therein and passed with.the land if it were transferred.

The "contracted aJcreage," which term means the land taken out of production, could be used for such purposes as summer fallowing, the planting of crops for improving the soil or preventing erosion, or the growing of food for consumption on the farm.

337. The operation of the Agricultural Adjustment Act, insofar as the control of production is concerned, has been very lightly sketched above. A full and valuable discussion of the subject is to be found in a publication by The Brookings Institution, "'\Vashington D.C., entitled Wheat Under the Agricultural AdJustment Act, by Sherman Johnson. .

338. In addition to the measures taken for the control of production, and as a further means of increasing the purchasing power of farmers, the Secretary of Agriculture entered into a marketing agreement for the removal, by export, of some of the surplus wheat. The difference between the domestic price paid for the wheat by the control authority and the price received

in foreign markets was made up out of a special reserve fund pro'vided from the wheat processing tax. Under the agreement wheat and flour were sold in considerable quantities in the Orient. A loan was granted by the Reconstruction Finance Corporation with the proceeds of which the Government of China was enabled to purchase considerable quantities ·of wheat and from

the United States. 339. In pursuance of a policy of relief of the unemployed and of drought-stricken farmers, wheat was also purchased in the open market. Part of the wheat purchased was converted into flour for human consumption and part transferred to drought-striken areas for use as food for live-stock.

340. The codes of fair competition already referred to, which were imposed under the ttgricultural adjustment administration on dealers, handlers and processors of wheat, had the same general purpose as other codes formulated under the National Industrial Recovery Act, namely: the promotion of an internal control of the trade or industry concerned, the fixation of wages, hours, and labour conditions, and the establishment of rules of fair practice to govern competition between employers in the trade or industry. The ultimate objective was to enable traders to pay higher prices to the farmers for their products. The trade practices of the grain exchanges were also subjected to limitation and regulation.

341. The Executive Secretary of the Executive Council reporting to the President on the 25th August, 1934, stated that, as the result of the measures taken by t he agricultural adjustment administration, the farm price of wheat had advanced from 39 per cent. of the 1910-1914 prices in March, 1933, to 111 per cent. in August, 1934. Including benefit payments, the prices of wheat to domestic consumers in August, 1934, were 14 per cent. above pre-war parity prices. A considerable part of this increase reflected short crops due to drought, and, therefore, the high prices did not mean a fully corresponding increase in farm income. Taking into account the higher prices and the smaller sales of farm products, farm income for the calendar year 1934

appeared likely to exceed that for 1933 by about 19 per cent. While this represented a further substantial step towards farm recovery, it still left farm income far below the levels of 1923-1929. vVhen the adjustment programme was initiated in 1933, a surplus had piled up in an unsaleable quantity. · By the programme and the unpredecented drought, supplies had been reduced to nearly normal proportions. Wheat stocks in the United States of nearly 400,000,000 bushels in

1932 were in August, 1934, approximately 290,000,000 bushels, and it was estimated that by next summer these stocks would probably be 125,000,000 to 140,000,000 bushels, or nearly down to normal. •

342. A comment from the report of the Executive Secretary whieh is inserted in order to illustrate a point of dissimilarity between the industry in the United States and in Australia is that " about half of the total farm income is determined primarily by the level of domestic purchasing power". The proportion of farm income of a wheat-grower in Australia determined

by the level of domestic purchasing power is comparatively small. · 343. The Farm · Credit Administration.-The second means of dealing with the situation which had developed, was, as has been stated earlier, the provision of further credit facilities. The farm credit administration was created to provide long term, short term, and intermediate

credits. This administration is a co-ordinated authority which has taken over functions previously performed by a number of separate instrumentalities. 344. Dealing with the co-ordination of credit control, the Executive Secretary in the report already referred to stated:-

Before May, 1933, the twelve Federal Land Banks and the Joint-Stock Land Banks were making long-term :first-mortgage loans to farmers ; and the twelve Federal Intermediate Credit Banks that re-discount short-term agricultural and live-stock paper and make direct loans to Co-operative Marketing and Purchasing Associations were under the general supervision of the Federal Farm Board, a division of the Treasury Department. The Emergency

Seed, F eed , and F ertilizer Loans were made by the Department of Agriculture, and Regional Agricultural Credit Corporations were set up under the Reconstruction Finance Corporation. By an Executive Order in May, 1933, the control of Federal Farm Credit Organizations was co-ordinated and centralized, and by t he Farm Credit Act additional necessary credit facilities were provided.

The Farm Credit Administration has had two very important functions during the 14 months since its organizat ion. It has saved many farmers fro m for eclosures and put them in a position to work out their financial difficulties by re-financing their existing debts with the proceeds of farm-mortgag e loans; and it has established a permanent production system for making short-term credit available to farmers.

345. It will help 'to an appreciation of t he methods followed if a brief description is given of the subsidiary authorities within the Farm Credit Administration and their respective functions. The Administration is headed by a Governor, two Deputy Governors, and four Commissioners, viz., the Land Bank Commissioner, the Intermediate Credit Commissioner, the

Production Credit Commissioner, and the Co-operative Bank Commissioner.

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The Land Bank Commissioner is responsible for the supervision of Federal Land Banks, Joint-Stock Land Banks and National Farm Loan Associations; for the liquidation of Joint-Stock Land Banks in receivership ; and for the administration of funds made available to him for the purpose of loans to fanners. The Intermediate Credit Commissioner is responsible for the supervision and regulation of twelve Federal Intermediate Credit Banks. The Production Credit Commissioner is responsible for t he supervision of twelve Production Credit Corporations, and the Production Credit Associations provided for under the Farm Credit Act of 1933. /

The Co-operative Bank Commissioner is in charge of the Central Bank for co-operatives, and is responsible for the supervision of twelve Regional Banks for Co-operatives.

The United States is divided into twelve Federal Land Bank Districts. In each district there is a Federal Land Bank, a Federal Intermediate Credit Bank, a Production Credit Corporation, and a Bank for Co-operatives. All have the same directors, who form a co-ordinating body known as the " Council of the Farm Credit Administration" for the district.

346. The Federal Fann Mortgage C(}rporcxtion.-This corporation was established by an a.ct of Congress approved on 31st January, 1934, to aid in financing the lending operations of the Federal Land Banks and t he Land Bank Commissioner, particularly the farm debt refinancing programme begun in the spring of 1933. To carry out its purposes, the corporation is authorized to issue and have outstanding at any one time, a total of not more than $2,000,000,000 of bonds. The corporation is 1nanaged by a board of directors consisting of the Governor of the Farm Credit Administration, who is chairman of the bo3Jrd, the Secretary of the Treasury or a Treasury officer

designated by him, and the Land Bank Cmnmissioner.

347. The Corporation is capitalized at $200,000,000. Its resources also include consolidated bonds of the Federal Land Banks taken in exchange for the Corporation's bonqs, and the farm mortgages accepted by the Land Bank Commissioner. All assets of the Corporation are available for the payment of the bonds. The Corporation's bonds are guaranteed fully and unconditionally, as to principal and interest, by the Government of the United States. They are marketable in the same manner as United States Government bonds; they are lawful security for fifteen-day borrowings by member banks of the Federal Reserve system; and they are lawful investments (and may be accepted as security) for all fiduciary, trust and public funds of which the deposit or investment is under the authority or control of the Government. It is intended that the bonds will carry interest rates comparable to those on long-term United States

Government bonds. The first issue dated 15th March, 1934, bears interest at. 3-l per cent. per annum payable sen1i-annually. Bonds of the first issue 1nature in 30 years and are callable upon notice ten years after the date of issue. 'rhe bonds, together with the income therefrom, are exempt from all Federal, State,. municipal and local taxation, except surtaxes, estate, inheritance and gift taxes.

348. Formerly, farm mortgage loans of the Federal Land Banks and the Land Bank Commissioner were made in cash, but · the disbursement of loan proceeds in cash has been discontinued for the present and all such loans are now being n1ade in Federal Farm Mortgage Corporation's bonds, except that cash is provided for making payments of less than $100 and for small amounts to meet special requirements such as for the payment of taxes, insurance premiums on the properties, and fees due to local National, Farm Loan Associations and to the Federal Land Bank.

349. Federal Land Bank Loans.-A Federal Land Bank loan is a long-term loan made by 'a Federal Land Bank to an individual who gives as security a first-mortgage upon the farm, and who agrees to repay in annual or semi-annual instalments. Loans are made in bonds of the Federal Farm Mortgage Corporation, but small cash disbursements are made to meet the special 1 requirements already mentioned, for which bonds would not be convenient. The borrower 1nay offer these bonds to his creditors or may sell them.

350. Loans may be made to any person who is engaged or is shortly to become engaged in farn1ing operations, or to any person, the principal part of whose income is derived from farming operations. The land offered as security, or an undivided interest therein, must be owned by the borrower, and must be a farming unit of sufficient aggregate size to produce an income adequate to maintain the .and his. family, pay and meet the interest and

amortization payments on hiS loan. Corporations are not ehg1ble for loans.

351. Farmers may borrow-( a) to provide for the purchase of land for agricultural uses ; (b) to provide for the purchase of equipment, fertilizer, and live-stock necessary for the proper and reasonable operation of the mortgaged farm;

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(c) to provide buildings, and for the improvement of the farm land; · (d) to liquidate indebtedness incurred for agricultural purposes by the owner of the mortgaged land, or incurred prior to lst January, 1933; . (e) to provide the owner of the mortgaged land with funds for general agricultural

uses.

352. No loan may exceed 50 per cent. of the appraised normal value of the land mortgaged and 20 per cent. of the appraised value of the permanent insured improvements thereon. 353. Loans are 1nade through and with the endorsement of National Farm Loan Associations, which are corporations chartered under the Federal Farm Land Act, and operating under the supervision and regulation of the Farm Credit Administration. Membership of the Association is restricted to borrowers from the Federal Land Bank. The farmer-borrower who

obtains a_ loan from a Federal Land Bank through a National Farm Loan Association, is required to purchase stock in the Association to the amount of 5 per cent. of his loan, and the amount necessary to pay for such stock may be included in the amount of the loan obtained from the Federal Land Bank. The National Farm Loan Association endorses and becomes

liable for the loan made to each of its members. In order to protect the Association against loss under its endorsement, the stock subscribed for by each member is pledged with the Association as collateral security. The Association, in turn, subscribes for an equal amount of stock in the Federal Land Bank which stock is held by the bank as collateral security . . When

a borrower pays his loan in full, the bank retires the stock which -was subscribed for by the Association. The borrower's stock in the Association is retired, and he receives payment therefor if the Association has the m·oney with which to make payment to him and can meet all its ·obligations. Only in localities where there are no associations will the Federal -Land Bank make direct loans to farmers. In such a case the borrower subscribes to the stock of the bank to the extent of 5 per cent. of his loan, and is required to pay one-:half of 1 per cent. higher rate

of interest on his loan. When such loan is paid, the stock is cancelled at par, or, if it has at its estimated value as approved by the Land Bank Commissioner, and the

proceeds thereof are paid to the Provision is made whereby, in the event of a Farm Loan Association being constituted in an area in which direct loans have been made, the borrower's bank stock may be for association stock, and his rate of interest reduced to the rate prescribed for loans made through National Farm Loan Associations.

354. Loans are now ·being made at the uniform rate of 5 per cent. per annum. However, on loans made through National Farm Loan Associations during the two years ending 12th May, 1935, 4! per cent. per annum will be charged for all interest falling due prior to lith July, 1938. 355. On all such loans outstanding on 12th May, 1933, or made before 12th May, 1935, no payment jn respect of principal payable after lith July, 1933, will be required prior to lith July, 1938, if the borrower is not in default with respect to any other or covenant of his· mortgage.

356. The normal value of the property for loan purposes is determined by a Land Bank appraiser, who, for the purposes of his appraisement, is required to consider the credit standing of the borrower, his equity in the farm, his ability as a farmer, his net financial worth, his moral character, and.any other circumstances. · 357. Loans are repayable over long periods ranging from 20 to 30 odd years, the repayments

being sufficient to retire the loan at the end of the period agreed upon. 358. Reasonable fees for the appraisal, determination of title, and recording, as well as the expenses of the Association, but not more than I per cent. of the amount of the loan applied for, are _payable by the borrower.

359. Land Bank Commissioner's Loans.-T:Q.e Land Bank Commissioner is empowered to make loans -for the purpose of refinancing and reducing farmers' debts and the Commission uses the services of the Federal Land Banks in the making of these loans. Congress made a-vailable $200,000,000 to be loaned by the Commissioner, but he has now been authorized to use up to

$600,000,000 in bonds of the Federal Farm Mortgage Corporation. Loans are now made in these bonds except for such small cash disbursements as the payment of fees, taxes, insurance, &c. 360. A farmer may obtain a Commissioner's loan in addition to a Federal Land Bank loan

if he is eligible and, has the necessary security. The farmer, to be eligible, must be engaged in farming operations either personally or through an agent or tenant, or the principal part of his income must be derived from farming operations. "Farmer" includes a personal representative of a deceased farmer. Corporations are not eligible for loans by the Land Bank Commissioner.

An individual cannot obtain a Commissioner's loan in order to buy a farm except in the case where he is effecting a re-purchase Df a farm lost through foreclosure, _

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361. There are Important differences between the security and other requirements for a Commissioner's loan and a Land Bank loan. A. Land Bank loan can be made only on the security of a :first mortgage. The Commissioner's loan may be made .on the security of either a :first or second mortgage, and the security may be supplemented in appropriate cjrcu1nstances by a mortgage on farm chattels such as live·stock: equipment, and crops. No .speciallimitation as to

size or type of farm has been set, each application being considered on its merits. The past and prospective earning power of the property is taken into consideration, and this, with other income which the borrower may have, must indicate that in normal times he would be able to meet all annual expenditures, including payments on prior mortgages, insurance, taxes, &c.

362. Commissioner's loans tnay be used for the following purposes only:­ (a) To any indebtedness, secured or unsecured; (b) To provide working capital ; (c) To enable a farn1er to redeem and/or re-purchase farm property owned by him

prior to foreclosure.

363. The Commissioner's loan to any one farmer is not to exceed $7,500 and the amount of the loan plus all prior debts secured by the farm property is not to exceed 75 per cent. of the appraised value of the property. A farmer whose debts are greater than 75 per cent. of the appraised value of his property cannot secure a loan unless he persuades his creditors to agree to scale down their claims against him so that any claims that remain when added to the Commissioner's loan ordinarily may not exceed three-fourths of the value of the property real and personal.

364. The basis upon which a farm is appraised for the purposes of a Commissioner's loan is its normal value using the average prices of farm ,commodities for the :five-year period prior to the world war as a principal factor, and allowing for changes in the relative economic position of some commodities. 9ther things considered by the appraiser· are the crops the farm is capable of producing and the average yields and prices over a series of years. Among otherj things consideration must also be given to the number of acres of good crop land, the number in pasture, and the number in orchard, timber or waste ; the character and condition of the soil, rainfall, drainage, &c., susceptibility to erosion, the carrying capacity of the pasture land, and the prevalence of insect pests and plant diseases: He also ascertains operating costs as closely as possible, the amount of taxes assessed against the security, the accessibility to markets, transportation facilities, and the availability and cost of hired labour.

The rate of interest on a Commissioner's loan is 5 per cent. per annum. 365. In cases hi which loans are to be secured by second mortgages upon farm real estate, the borrower must obtain the agreement of the first mortgagee to the following conditions:-. (I) that during a period of. three years he will not ·proceed against the mortgagor

and/or the mortgaged property on default ·in the· payment of principal unless in the meantime the Commissioner consents in writing to such proceeding ; and (2) that he will notify the Commissioner in writing office in the district in which

the security is at least 30 days in advance of the institution of any

proceeding against the mortgagor and/or the mortgaged property. 366. Repayment of the loan is to be made annually or semi-annually, but during the first . three years the borrower may not be required to make payment on the principal of the loan if he is not in default with respect of any other provision of his mortgage. At the expiration of this three-year period amortization payments on the principal, equal in amount, must be made with each interest payment in order to extinguish the debt within the agreed period. ·

367. Loans secured wholly by first or second mortgage on real property made for the purpose of reducing and re-financing an existing mortgage must be repaid within an agreed period of not more than 40 years. Loans for all other purposes must be wholly repaid within an agreed period not to exceed thirteen years from the time the loan is made.

368. Reasonable fees not exceeding the actual cost of appraisal, determination of title and recording, are chargeable against the borrower. .

369. Federal Intermediate Cr,edit Bank Loans.-Twelve Federal Inter1pediate Credit Banks, under the supervision- and regulation of the Intermediate Credit Corp_missioner provide agricultural credit for purposes that are" intermediate" between the maturities usually available through short-term commercial bank loans and those of long-term farm mortgage loans.

370. Federal Intermediate Credit Banks lend only to or discount for credit institutions or associations, such as State and National Banks, Savings Banks, private or co-operative Agricultural Credit Corporations, Live-Stock Loan C01npanies, Production. Credit Associations and Co-operative Marketing and Purchasing Associations.

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371. The paid-in capital of each bank is $5,000,000 or a total of $60,000,000 for the twelve banks, all of which capital was furnished by the United States Treasury. The institutions which borrow from these banks do not buy the stock of the banks. They usually pledge with the banks s01ne of the investm.ents which they have made with their capital fvnds or, in the cases of Co-operative Marketing or Purchasing Associations, either their shipping docun1ents or warehouse receipts. This system increases the capacity of these organizations to do business with the banks. -

372. The money which the banks lend to borrowing associations is derived n1ainly fron1 sales to the investing public of short-term debentures. 373. Loans and discounts granted to associations are intended to provide additional funds to lend to farmers. The proceeds of the loan rnust be used for agriculturai purposes or for the raising, breeding, fattening or marketing of live-stock.

374. Federal Intermediate Credit Banks do not lend on farm mortgages . . Farm n1ortgages loans are made. by the Federal Land Banks. 375. Federal Intermediate Credit Banks do not lend directly to individuals. A producer seeking a loan n1ust apply to a Production Credit Association or other credit institution having the privilege of borrowing from, or re-discounting with, the Intern1ediate Credit Bank of his

district. · ·

376. Most notes accepted by the banks for discount, or as collateral for loans, mature in from six months to one year. Notes with a maxirnum maturity in excess of three years cannot be accepted for discount by Intermediate Credit Bank. The n1aturities of the notes accepted for discount vary, but experience indicates that notes should be payable when the 1naker expects to market his crop or live-stock.

377. Production Credit Corporations and Production Credit Associations.-A permanent production credit system for agriculture, co-operative in forrn, that eventually may be owned, controlled and operated by farn1ers has been organized in the twelve Federal Land Bank districts.

378. Production Credit Corporations have been organized by the Governor of the Farm Credit Administration in each city in which there is located a Federal Land Bank, and the Directors of that Bank are ex officio Directors of the Production Credit Corporation. 379. The capital stock of each Production Credit Corporation is of such amount as the

Governor determines is required for the purpose of meeting the· credit needs of the district, and such amount may be increased or decreased from time to ti1ne by t he Governor in accordance with such credit needs. The initial capital stoc1r of each Corporation must be $7,500,000 which is required to be subscribed for by the Governor and held by hi1n on behalf of the lTnited States. Payments by way of subscriptiOns to stocli by the Governor <::tre subject to call in wbole or in part by the Board of Directors of the CorporatiOn, w1th the approval of the Governor. The Governor ma.Kes such payments out of a rev olviPg fuPd exceeding $120,000,000 whi<'h has been created.

380. vVith the consent of the Corporation, ten or more farmers may organize a body known as a Production Credit Association, the functions of which are described hereinafter. Efforts are 111ade to have a larger number of farmers org8·nize, so that the entire territory and the various lines of agricultural and live-stock production to be financed through the Association will be represented.

381. The initial paid-in capital of the Production Credit Association is provided by the Production Credit Corporation located in the district. The Corporation subscribes to class A stock (see paragraph 387 et seq.) in the Association in such amounts as are necessary to maintain the amount of class A stock held by it and other holders of class A stock equal, as nearly as may be, to 20 per cent. of the volume of loans made or to be made by the Association; but at no time shall the amount of class A stock outstanding be less than $5,000 except with the consent

of the Association. 382. Nevertheless, the Governor may permit a Corporation to maintain the class A holdings of the Corporation and other investors at such amount in excess of 20 per cent. of the loans as may be necessary; and a Corporation rnay require an Association to retire and cancel

stock held by the Corporation in the Association if the Asso c.iation has resources available therefor. 383. Subject to such conditions and restrictions as the Governor may prescribe, a Production Credit Corporation n1ay subscribe and pay for stock in Production Credit Associations other than those organized in the manner herein described, if such Associat ions are controlled by Co-operative Associations as defined in paragraph 408 hereafter. The amount of stock which the Corporation may so subscribe for must not exceed 75 per cent. of the total paid-in capital of such Association.

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384. Excess earnings, if any, above the amount necessary to pay operaJting expenses and restore losses and impairment of capital of t he Corporation are to be devoted to the creation and n1aintenance of a surplus equal to at least 25 per cent. of the paid-in capital of the Corporation. The surplus is to be invested as the Governor may prescribe in direct obligations of the United States or in class A stock in Production Credit Associations or both.

385. The amount of excess earnings not required for the surplus must be paid into the revolving fund. Stock held by the Governor in the Corporation is retired upon such payn1ent in an amount equal to the an1ount of such pay1nent.

386. The fa rn1ers who unite to fonn a Production Credit Association are required to sign articles of association which specify in general terms the objects of the Association and the powers to be exercised by it. A copy of the articles must be :filed in the office of the Production Credit Corporation of the district. Upon the approval of the Governor of the Articles, the Association becomes a body corporate; but for good cause shown, the Governor mBJY refuse .to approve the Articles. The Governor has power to provide for the organization, managerDent, and conduct of the business of the Association; and such power extends to prescribing the amount of stock of the Association, fixing the 1nethod of election and 8Jppoint111ent of and the amount and payment of the compensation of directors, officers and employees, :fi..xing the maximum. arnount of individual loans, prescribing the conditions under \Vhich the stock mBJY be Tetired and providing for the consolidation of two or more Associations. The Governor n1ay, at any time, direct such changes in the charter of an Association as he :finds necessary. By-laws may be adopted by the directors of an Association but they shall not be valid unless approved by the Governor. ·

387. The stock of Production Credit Associations is divided into shares of $5 each, and there are two classes-(i) Class A stock which is held by the Production Credit Corporation and which may be purchased and held by investors; and

(ii) Class B stock which may be purchased only by farmer-borrowers and persons eligible to become borrowers.

Class B stock only is entitled to voting rights, but no holder can have more than one vote. No class B stock or any interest therein can be transferred except to another farmer-borrower or person eligible to become a borrower and then only with the approval of the directors of the Association. Each holder of class B stock, within two years after he has ceased to be a borrower, is required to exchange such stock at. the fair book value (not exceeding par) for class A stock. ·

388. All stock participates in dividend distribution without preference, but the directors may apply any dividends payable to a holder of class B . stock to any indebtedness to the Association of such holder. 389. Class A stock is preferred as to assets of the Association upon liquidation. During such time as a Production Credit Corporation is the holder of any stock in an Association, the appointment or election of directors, the secretary-treasurer and the loan committee of an Association is subject to the approval of the president of the Corporation ; and during such time any such director, secretary-treasurer, or other officer, may, at an:y time, be removed by the

president of the Corporation.

390. At the end of each :fiscal year, a Production Credit Association is required to apply its earnings in excess of operating expenses as follows:-(i) to making up any losses in excess of its reserve for bad and doubtful debts; (ii) to the restoration of the amount of the impairment, if any, of capital ;

(iii) to the creation and n1aintenance of a reserve account for bad and doubtful debts, the _amount of which account is prescribed by the Production Credit Corporation ; (iv) to the creation and maintenance of a guarantee fund equal to at least 25 per

cent. of the paid-in capital of the Association; (v) with the approval of the Corporation, to the pay1nent of dividends not exceeding 7 per cent. per annum.

Sums in the guarantee fund are to be invested subject to such regulations as the Corporation may prescribe.

391. A Production Credit Association is required under such regulations as may be prescribed by the Production Credit Corporation with the approval of the Governor, to invest its funds and make loans to farmers for general agricultural purposes such as the growing and

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. tp'>,.

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harvesting of crops, the breeding, raiSing and fattening of live-stock, and the production of poultry and live-stock products. The guarantee fund cannot be used for loans to farmers. The term ·" farmer " includes an individual, partnership or corporation engaged in the business of farming or of breeding, raising or fattening live-stock. To be an eligible applicant, an

individual must devote certain tin1e and energy to the active management of the farming of live-stock operations. The enterprise n1ust be conducted so that he reaps the benefits of the operation if it is successful, and suffers the loss if it is a failure. He need not be principally engaged in farming nor reside on the place where the operations are carried on. Where a , landlord is entitled only to a fixed return without regard to the success or failure of the farming

operations, or where he does not rightfully exercise substantial direction and control in the management of such operations, the tenant, not the landlord, is considered the "farmer." The eligibility of a partnership is governed by the same principles as those governing the eligibility of individuals. ·

392. Loans to farmers are n1ade on such terms and conditions, at sueh rates of interest, and with such security as may be preseribed by the Corporation. No loan can be made fo r less than $50, nor can any one borrower be indebted to the Association at any one time in an amount in excess of 20 per cent. of the capital and guarantee fund of the Association, or, if the loan is secured by collateral approved by the Corporation, in an amount in excess of 50 per cent. of the

capital and guarantee fund ; but loans may be made to any borrower in an amount in excess of 50 per cent. of the capital and guarantee fund if the loan is approved by the Production Credit Commission of the Farm Credit Administration. 393. Loans are 1nade by endorsing farmers' notes and discounting them with the Federal Intermediate Credit Bank in the district. Generally speaking, the primary security must be a first mortgage lien on personal property, such as live-stock, implmnents and crops. Real estate

liens are acceptable only as secondary security.

394. The majority of loans are made for periods not exceeding twelve months. They are intended to be of a self-liquidating character maturing at the anticipated time for n1arketing the crops or live-stock through the sale of which the loan is expected to be repaid. 395. The rate of interest charged on loans to farmers varies from time to tirne as the Federal Intermediate Credit Banks change their discount rates. Associations may charge interest

on their loans at a rate not n10re than 3 per cent. per annum above the discount rate of .the Bank at the time the loan is made. This spread of 3 per eent. per annum goes to the Association to cover expenses and provide reserves for possible losses. On lst May, 1934, the discount rate of the Federal Intermediate Credit Banks in continental United States was 2i per cent., so that on that date, the maximum rate charged on farmers' loans was 5f per cent. per annum.

39fl. Borrowers are required to pay an inspection fee and any other direct expenses incurred in closing the loan; but no charges are made by any officer of the Association for assisting the farmer in preparing applications, notes, mortgages, &c., unless such assistance requires the employment of any person not regularly employed by the Association. The minimum inspection fee is $2, but this is subject to review and change by the Production Credit Corporation. Any inspection fee in excess of $2 must not exceed an amount equal to l per cent. of the loan on the

annual basis. "

397. In applying for a loan a farmer is required to submit a financial statement and a definite plan for repayment. In addition he must state how the loan will be used. 398. Borrowers are required to own, at the time the loan is made, Class B stock in an amount equal in fair book value (not to exceed par) to $5 per $100 or fraction thereof of t he

amount of the loan. Such stock is not cancelled or retired upon payment of the loan but may be transferred or exchanged as explained in paragraph 387. ' .

399. Production Credit Associations are authorized to borrow from and re-discount paper with the Federal Intermediate Credit Banks ; and except with the approval of the Governor, an Association has no power to borrow from or re-discount paper with any other bank or agency. 400. An Association's capital is not intended to be used for loans to farmers, but invested in approved bonds to be deposited with the Federal Intermediate Credit Bank as additional

security for borrowers' notes which the association discounts with the ba:nk. 401. An association can discount acceptance notes up to approximately five times its unimpaired capital and guarantee fund. ·

402. Seed Loans and Crop Production Loans.-By Act of Congress approved on 23rd February, 1934, the sum of $40,000,000 authorized to be appropriated for the purpose of making emergency crop loans during the year!_ l934 and the Production Credit Commissioner was given the responsibility of supervising this fund.

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403. Emergency crop loans can be made from the $40,000,000 appropriation only to those applicants who did not have security acceptable to any other lending agencies. Farmers who have such acceptable security · are eligible for loans from the production credit associations hereinbefore referred to.

404. Co-operative Associations.-The provision of credit for co-operative associations was originally provided for under the Agricultural l\f.arketing Act of 15th June, 1929. Act has been amended by the Far1n Credit Act of 16th June, 1933, and its administration has been . transferred by Executive Order to the Governor of the Farm Credit 4..dministration.

405. In the Agricultural Marketing Act, it is declared to be the policy of Congress to prom.ote the effective m.erchandizing of agricultural com1nodities in interstate and foreign commerce, so that the industry of agriculture will be placed on a basis of economic equality with other industries, and to that end, t o protect, control and stabilize the currents of interstate and foreign

commerce in the marketing of agricultural commodities and their food products-(i) by minimizing speculation; (ii) by preventing inefficient and wasteful methods of distribution; (iii) by encouraging the organization of producers into effective associations or

corporations under their own control for greater unity of effort in marketing, ·by promoting the establishment and financing of a farm marketing system

of producer-owned and producer-controlled co-operative associations and other agencies ; and (iv) by aiding in preventing and controlling surpluses in any agricultural commodity, through orderly production and distribution, so as to maintain advantageous

markets and prevent such surpluses from causing undue and excessive

fluctuations or depressions in prices for the commodity.

406. The administration is authorized and directed-( a) to promote education in the principles and practices of co-operative marketing; (b) to encourage the organization, improvement in methods and development of effective co-operative assocjations; and

(c) to keep advised from any available sources and make reports as to crop prices, experiences, prospects, supply and demand at home and abroad.

407. A revolving fund of $500,000,000 was authorized to be appropriated. Originally loans could be made out of the revolving fund direct to co-operative associations, but since the amendment to the Agricultural lVIarketing Act effected by the Farm Credit Act, loans have been and will be made through the Central and Regional Banks for Co-operatives hereinafter referred to. revolving fund has since been placed in liquidation.

408. A co-operative. association is defined to mean any association in which farmers act together in collectively processing, preparing for market, handling, and/or marketing the farn1 products of persons · so engaged, and also means any association in which farmers act together in collectively purchasing, testing, grading, and/ or processing their farm supplies ; provided,

however, that sp.ch associations are operated for the mutual benefit of the m,.mnbers thereof and conform to one or both of the follqwing requirements :-(i) that no member of the association is allowed more than one vote because of the amount of stock or membership capital he may own therein ; and

(ii) that the association does not pay dividends on stock or membership capital in excess of 8 per cent. per annum. and in any case to the following :-(iii) that the Association shall not deal in the products of or supplies for non-members

to an amount greater in value than such as are handled by it for members.

409. Banks for Oo-operatives.-A Central Bank for .ft:ssociations located in Washington, D.C ., and twelve Regional Banks for Co-operatives--one in each Federal Bank city-have been organized and chartered by the Governor of the Farm Credit Administration under the Farm Credit Act 1933.

410. The initial capital stock of the Central Bank, amounting to $50,000,000, was subscribed and paid for by the Governor of the Farm Credit Administration on behalf of the United States. The an1ount of t he ca pital stock may be changed by the Governor as required to meet the credit needs of eligible borrowers.

411. The capital stock of each Regional Bank is such as the Governor determines is needed to meet the credit needs of borrowers in the district eligible to borrow under the Act.

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412. A Co-operative Association 1nay obtain· a loan £rom a Bank for Co-operatives and from a Federal Intermediate Credit Bank. .

413. The Central Bank for Co-operatives makes loans to associations serving more than one Federal Land Bank district, or seeking credit in excess of $300,000. The Regional Banks make loans to Co-operative Associations serving not n1 ore than one Federal Land Bank dist-rict and seeking credit not exceeding $300,000. With the approval of the Co-operative Bank

Comn1issioner, the Regional Banks may make loans to eligi ble associations serving not more , than one Federal Land Bank district and seeking credit of not more than $500;000. . 414. Banks for Co-operatives 1nake t hree kinds of loans to Co-operative Associations, viz., operating capital loans, effective 1nerchandizing loans, and physical fa cility loans, the latter

beil_lg for the or acquisition by purchase or lease (or for refinancing the cost of such

construction or acquisition) of physical 1narketing fa cilities for preparing, handling, storing, processing, or merchandizing agricultural commodities or their food products. A physical facility loan may not be made to purchasing associations.

· 415. The duration of a loan depends u pon the circumstances of each case. As a general rule, physical facility loans are repayable within a period of from five to ten years ande:ffective merchandizing loans or operating loans are repayable within a period of one year, 'or at the end of the marketing season.

416. The present rate of interest on physical facility loans is 4! per cent. per annum and on other loans 4 per cent. per annum. rates are £xed fr01n tilne to ti1ne in accordance with the statute but must not be less than 3 per cent. nor more tha,n 6 per cent. per annum.

417. The Banks for Co-operatives do not make loans to Co-operative Associations to enable then to make advances to 1nembers at t he time of delivery of agricultural commodities. Such loans are made by the· Federal Intermediate Credit Banks on the security of liens on the commodities.

418. Borrowing Co-operative Associations part icipate in the ownership and control of the Banks for Co-operatives so t hat they 1n ay help in det ermining t he lending policy. vVhen a loan is granted by a Bank, the borrowing Association is required by law to purchase one share of stock at a par value not exceeding $100 for each $2, 000 or fraction thereof of the amount

of the loan. When the loan is repaid, the stock held by the Associat ion is retired and cancelled, and the Bank pays the Association for such stock at its fair book value not exceeding the purchase price.

419. If the borrowing Association, has not sufficient funds with which to subscribe and pay for stocK in the Bank for Co-operatives, the stock subscription may be included in the amount of the loan. ·

420. Federal Credit Unions.-The Farn1 Credit Administration supervised the establishment of the Federal Credit Union system authorized by Public Act No. 467 approved 26th June, 1934.

421. Federal Credit Unions, which are co-operative thrift and lending organizations, are chartered by the Governor of the Farm Credit Administration under whose supervision they operate. 422. Membership in Federal Credit Unions is limited to groups having comn1on bonds of occupation or association, or living within well-defined cornr:r1unit ies. A mmnber of a Federal Credit Union must purchase one or more $5 shares of capital stock of the organization. Loans may be made to me1nb ers only, for provident or product ive purposes. The Government does

not subscribe to the capital of Credit Unions nor does it provide any of their loanable funds, which comes from the members' purchases of capit al stock and from such borrowings as are pern1itted by the law. ·

423. The following account of the operations of the F arm Credit Administration (paragraph 424) is given in the report of the E xecut ive Secretary of the Executive Council to the President dated 25th August, 1934.

424. The Farm Credit Administration r eported that it had loaned a total of $1,626,466,000 to farmers and farmers' organizations during the fourteen months ended 31st July , 1934. Of this, approximately $1,067,023,000 was farm-mortgage credit, $456 ,63 7,000 was production credit, $101,281,000 was loans to co-operative associations, and $1,5 23,000 was loans by the Land

Bank Commissioner to Joint Stock Land Banks. F or the period l st J une, 1933, t o 31st July , 1934, the Federal Land ·Banks and the Land Bank Commissioner closed 420, 821 loans, totalling $1,067,072,000. '

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Including loans made prior to the creation of the Farm Credit Administration, the Federal Land Banks and the Land Bank Commissioner hold more than one-fourth of the total farm debt in the United States as compared with 12.1 per cent. held by Federal Land Banks on 1st January, 1930. On 31st July, 1934, the Federal Land Banks and the Land Bank Commissioner 'held a total of 808,005 loans, an1ounting to $2,120,325,000. In con1parison on 31st May, 1933,

the two agencies held a total of 399,333 loans, totalling $1,102,930,000. Of the $1,067,072"000 loaned by the Federal Land Banks and the Land Bank Commissioner from 1st June, 1933, to 31st July, 1934, 68 .9 per cent. was used to re-finance n1ortgage indebtedness, 17.5 per cent. to -repay short-term indebtedness, and 2. 8 per cent. to pay taxes. Thus, 89.2 per cent. of the total

proceeds of the loans has been used to pay existing indebtedness. The loans for re-financing indebtedness had made it possible for farmers to obtain reductions in their indebtedness. Of these borrowers, 213,957 effected scale-downs amounting to $52,789,000, or 26.2 per cent. of their indebtedness. The farmers obtaining Land Bank and Commissioner's loans also had effected savings in interest charges through refinancing their debts. On interest-bearing debts refinanced by loans made during the period the saving in interest amounted to $15,719,000 or

23.7 per cent. of the interest charges previously paid on that debt.

The En1ergency Farm Iv.Iortgage Act provided for subscriptions by the Secretary of the Treasury to the paid-in surplus of Federal Land Banks to permit the banks to make extension and deferments of matured instalrnents and other items to worthy borrowers whose failure to pay resulted from. agricultural conditions rather than any fault of their own. At 31st July, 1934,

$42,712,000 of extended items in connexion with 116,111 loans were in force.

During the period from their dates of organization to 31st July, 1934; the Production Credit Associations had received 209,054 applications for $136,161,000. During the same period the Federal Intermediate Credit Banks approved for discount 101,039 applications for $60,445,000 and advanced $47,871,000 in eonnexion with 95,213 of the loans.

All loans to and discounts for financing institutions, by the Federal Intermediate Credit Banks, amounted to $402,541,000 for the fourteen months. The volume of Federal Intermediate Credit Bank loans and discounts outstanding had increased since 1st June, 1933, by $113,201,000 due to the discounting of paper for the Production Credit Corporations and the Regional Agricultural Credit Corporations. ·

The Emergency Crop Loan offices received 429,634 crop-loan applications, totalling $36,188,000, from 21st March to 3rd August, 1934. During that period $30,749,000 had been disbursed. These offi ces also were handling the Feed and Seed loans to farmers in drought areas fro1n the appropriation approved 16th , June, 1934. At 4th August, $3,605,000 of these loans had been n1ade.

For the purpose of providing credit for Co-operative Associations, during the period of organization up to 31st July, 1934, the Banks for Co-operatives, including the Central Bank, disbursed $5 0,433,000. These banks are able to satisfy the needs of Farmers' Co-operatives for credit in all cases where the granting of credit can be justified. On lst June, 1933, the loans outstanding to Co-operatives from the fund totalled $180,405,000, as compared with $55,436,000 on 31st July, 1934.

During the period lst June, 1933, to 31st July, 1934, loans amounting to $11,456,000 were made from the funds, and at the latter date $6,222,000 of commitments were outstanding. During that period the Federal Intermediate Credit Banks loaned $39,391,000 to Farmers' Co-operatives. At 31st July, 1934, $10,105,000 of loans to Co--operatives were outstanding.

The Land Bank Com1nissioner was authorized to make loans to Joint-Stock Land Banks to assist them in the orderly liquidation of their loans. During the fourteen-month period $1,523,000 of these loans were made.

425. Agricultural Compositions and E xtensions.---:-The steps hereinbefore described were apparently considered insufficient to bring the financial affairs of farmers to a position from which progress towards recovery was possible, and, as part of the re-adjustment plan, it became necessary to facilitate a re-adjustment of the financial relationships between debtor farmers and

their creditors.

426. Under the provisions of the bankruptcy law of the United States, a farmer, although he might voluntarily elect to obtain the benefits of bankruptcy, was protected against the sequestration of his estate on the petition of his creditors.

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427. 1n 1933, in view of the situation then existing, special provision was made in an of the bankruptcy law for agTicultural compositions and extensions. Its effect may

best be gathered from the following pro-visions, which were inserted vide Supplement VII. to the Code of the Laws of the United States of America, 1933, page 139 :-203. Agricultttral Compositions and Extensions.-(a) Court s of bankruptcy are authorized, upon petition of at least fifteen farmers within any county who certify that they intend to file petitions under this section, to appoint

for such county one or more referees · to be known as conciliation eommissioners, or t o designate for service in sueh county a eonciliation commissioner previously appointed for an adjacent county. In case more than one conciliation commissioner is appointed for a countyj each commissioner shall act separately and shall have such territorial jurisdiction within the county as the court shall specify. A conciliation commissioner shall have a term of office of

one year and may be removed by the court if his services are no longer needed or for other cause. No individual shall be eligible for appointment as conciliation commissioner unless he is eligible for appointment as a -referee and in addition is a resident of the county, familiar with agricultural conditions therein and not engaged in the farm-mortgage business, the business of financing farmers or transactions in agricultural commodities, or the business of marketing

or dealing in agricultural commodities , or of furnishing agricultural supplies. In each judicial district the court may, if it finds it necessary or desirable, appoint a suitable person as a supervising conciliation commissioner. The supervising conciliati9n commissioner shall have such supervisory functions under this section as the court may by order specify.

(b) Upon filing of any petition by a farmer under this section there shall be paid a fee of $10 to be transmitted to the Clerk of the Court and covered into the Treasury. The conciliation commissioner shall receive as compensation for his services, including all expenses, a fee of $10 for each case docketed and submitted to him, to be paid out of the Treasury. A supervising conciliation commissioner shall receive, as compensation for his services, a per diem allowance to be fixed by the court, in an amount not in excess of $5 per day, together with subsistence and travel expenses in accordance with the law applicable to officers of the Department of Justice. Such compensation and shall be paid out of the Treasury. If the creditors at any time desire supervision over the farming operations

of a farmer, the cost of such supervision shall be borne by such creditors or by the farmer, as may be agreed upon by them, but in no instance shall the farmer be required to pay more than one-half of the cost of such supervision. Nothing contained in this section shall prevent a conciliation commissioner who supervises such farming operations from receiving such compensation therefor as may be so agreed upon. No fees, costs, or other charges shall be charged or taxed to any farmer or his creditors by any conciliation commissioner or with respect to any pr'?ceeding under this section, except as hereinbefore in this section provided. The conciliation commissioner may accept and avail himself of office space, equipment, and assistance furnished him by other Federal officials, or by any State, county, or other public official. The Supreme Court is authorized to make such general orders as it may find necessary

properly to govern the administration of the office of conciliation commissioner and proceedings under this section; but any district court of the United States may, for good cause shown and in the interests of justice, permit any such general order to be waived. (c) At any time within five years after 3rd March, 19 33, a petition may be filed by any farmer, stating that

the farmer is insolvent or unable to meet his debts as they mature, and that it is desirable to effect a composition or an extension of time to pay his debts. The petition or answer of the farmer shall be accompanied by his schedules. The petition and answer shall be filed with the court, but shall, on request of the farmer or creditor, be received by the conciliation commissioner for the county in which -the farmer resides and promptly transmitted by him to the clerk of the court for filing. If any such petition is filed, an order of adjudication shall not be entered except as provided hereinafter in this section.

(d) After the filing of such position or answer by the farmer, the farmer shall, within such time and in such form as the rules provide, file an inventory of his estate. (e) The conciliation commissioner shall promptly call the first meeting of creditors, stating in the notice that the farmer proposes to offer terms of composition or extension, and enclosing with the notice a summary of the

inventory, a brief statement of the farmer's indebtedness as shown by the schedules , and a list of the ncvmes and addresses of the secured creditors and unsecured creditors, with t he amounts owing to each as shown by the schedules. At the first meeting .of the creditors the farmer may be examined and t he creditors may appoint a committee to submit to the conciliation commissioner a supplementary inventory of the farmer's estate. The conciliation commissioner shall, after hearing the parties in interest, fix a reasonable time within which application for confirmation shall be made and may later extend such time for cause shown. After the fili ng of the pet it ion and prior to the confirmation or other disposition of the composition or extension proposal by the court, the court shall exercise such control ove! the property of t he farmer as the court deems in t he best interests of the farmer and his creditors.

(j) There shall be prepared by, or under the supervision of, the conciliation commissioner, a final inventory of the farmer's estate, and in tbe preparation of sucb inventory the commissioner shall give due consideration to the inventory filed by the farmer and to any supplementary inventory filed by a committee of the creditors. (g) An application for the confirmation of a composition or extension proposal may be filed in the court of bankruptcy after but not before (1) it has been accepted in writing by a majority in number of all creditors whose claims have been allowed, including secured creditors whose claims are affect ed, which number shall a majority in amount of such claims, and (2) the money or security necessary to pay all debts which have priority unless waived, and in case of a composition, the consideration to be paid by the farmer t o his creditors has been deposited in such place as shall be designated by and subj ect t o the order of the court.

(h) A date and place, with reference to the convenience of the partie. in interest, sh3,ll be fixed for a hearing upon each application for the confirmation of the composition or extension proposal and upon such objections as may be made to its confirmation. (i) The court shall con firm the proposal if satisfied that (1) it includes an equitable and feasible method of liquidation for secured creditors and of financial rehabilitation for the farmer ; (2) it is for the best interests of all

creditors ; and (3) the offer and its acceptance are in go od faith, and have not been made or procured except as herein provided, or by any means, promises , or acts herein fo rbidden. In a plications for ext ru;ions the court shall require proof from each creditor filing a claim that such claim is free fr om u ury as defined by the laws of the place where the debt is contracted.

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(j) The terms of a composition or extension proposal may extend the· time of payment of either secured or · • unsecured debts, or both, and may provide for priority of payments to be made during the period of extension as between secured and unsecured creditors. It may also include specific undertakings by the farmer during the period of the extension, including provisions fo r payments on account, and provide for supervisory or other control

by the conciliation commissioner over the farmer's affairs during such period, and for the termination of such period of supervision or control under conditions specified : Provided, that the provisions of this section shall not affect the allowances and exemptions to debtors as are provided for bankrupts under title 11, chapter 3, section 24, of the United States Code, and such allowances and exemptions shall be set aside for the use of the debtor in the manner provided for bankrupts.

(k) Upon its confirmation a composition or extension proposal shall be binding upon the farmer and his secured and unsecured creditors affected'thereby: Provided, 'that such composition or extension shall not reduce the amount of nor impair the lien of any secured creditor, but shall affect only the time and method of its liquidation. (l) Upon the confirmation of a composition the consideration shall be distributed under the supervision of the conciliation commissioner as the court shall direct, and the case dismissed : Provided, that the debts having priority

of payment under title 11, chapter 7, section 104, of the United States Code, for bankrupt estates, shall have priority of payment in the same order as set forth in said section 104 under the provisions of this section in any distribution, assignment, composition or settlement herein provided for. Upon the confirmation of an extension proposal the court may dismiss the proceeding or retain jurisdiction of the farmer and his property during the period of the extension in order to protect and preserve the estate and enforce through the conciliation commissioner the terms of the extension proposal. The court may, after hearing and for good cause shown, at any time during the period covered by an extension proposal that has been confirmed by the court, set the same aside, reinstate the case, and modify the terms of the extension proposal.

(m) 'I'he judge may, upon the application of any party in interest, filed at any time within six months after the composition or extension proposal has been confirmed, set the same aside and reinstate the case, if it shall be made to appear upon a trial that fraud was practised in the procuring of such composition or extension, and that knowledge thereof has come to the petitioners since the confirmation thereof.

(n) The filing of a petition pleading for relief under this section shall subject the farmer and his property, wherever located, to the exclusive jurisdiction of the court. In proceedings under this section, except as otherwise provided herein, the jurisdiction and powers of the court , the title, powers, and duties of its officers, the duties of the farmer, and the rights and liabilities of creditors, and of all persons with respect to the property of the farmer and

the jurisdiction of the appellate co urts, shall be the same as if a voluntary petition for adjudication had been filed and a dec ree of adjudication had been entered the day when the farmer's petition or answer was filed. (o) Except upon petition made to and granted by the judge after hearing and report by the conciliation commissioner, the following proceedings shall not be instituted, or if instituted at any time prior to the filing of a petition under this section, shall not be in any court or otherwise, against the farmer or his property, at any time after the filing of the petition under this section, and prior to the confirmation or other disposition of the composition or extension proposal by the court :-

(1) Proceedings for any demand, debt, or account, including any money demand ; (2) Proceedings for fo reclosure of a mortgage on land, or for cancellation, rescission, or specific performance of an agreement for sale of land or for recovery of possession , of land ; (3) Proceedings to acquire title to land by virtue of any t ax sale;

(4) Proceedings by way of execution, attachment, or garnishment; (5) Proceedings to sell land under or in -satisfaction of any judgment or mechanic's lien; and (6) Seizure, distress, sale or other pmceedings under an execution or under any lease, lien, chattel mortgage, conditional ssJe agreement, crop payment agreement, or mortga.ge. (p) The prohibitions of subdivision (o) shall not apply to proceedings for the collection of taxes, or interest or penalties with respect thereto, nor to proceedings affecting solely property other than that used in farming operations or comprising the home or household effects of the farmer or his family.

(q) A conciliation commissioner shall upon request assist .any farmer in preparing and filing a petition under this section and in all matters subsequent thereto arising under this section and farmers shall not be required to be represented by an attorney in any proceedings under this section. (r) For the purpose of this section and section 202, the " f armer " means any individual who is personally bona fide engaged primarily in farming operations or the principal part of whose income is derived from farming operations ; and includes the personal representative of a deceased farmer; and a farmer shall be deemed a resident of any country in which such farming operations occur.

204. Extensions Extended to Persons Secondarily Liable for Debt; Evidence of Confirmation of Extension.­ Extensions made pursuant to the foregoing provisions of this chapter shall extend the obligation of any person who is secondarily liable to any person for the prompt payment _ of such debt or debts, or any part thereof, and a copy of the order confirming such extension, certified as required by the provisions of law with reference to judgments and proceedings in of the Un_ited Stat es of shall be evidence that such extension has been

confirmed in any smt or proceedmg brought agamst such person so hable . .

428. On 28th June, 1934, approval was given to an Act which was passed by the Congress to further amend the Bankruptcy Act. This Act was not an Administration measure. It is commonly known as the Frazier Lemke Farm Bankruptcy Act. The Act adds a new sub-section (s) to follow sub-section (r) of paragraph already quoted.

(s) reads as follows:-

(s) Any farmer failing to obtain the acceptance of a majority in number and amount of aYl creditors whose claims are affe cted by a composition or extension proposal, or if he fee ls aggrieved by the composit ion or extension, may amend his petition or answer aBking to be adjudged a bankrupt. Such farmer may, at the time of the first hearing, petition the court that all of his property, whether pledged, encumbered, or unencumbered, by liens or

Ql9

otherwise, be appraised, and that his exemptions as prescribed by the State law, subject to any liens thereon, be Bet aside and that he be allowed to retain possession of any part or parcel or all of the remainder of his property and pay for same under the terms and conditions set forth in this sub-section (s).

(1) Upon such a request being made in the petition or answe r, at the time of the first hearing, appraisers shall be designated and appointed. Such appraisers shall appraise all the property of the debtor at its then fair and reasonable value, not necessarily the market value at the time of such appraisal. The appraisals shall be made in all other respects, with right of objections, exceptions, and appeal, in accordance with this Act: Provided, that in case of real estate either party may file objections, exceptions and appeals within one year from date of order approving the appraisal.

(2) After the value of the debtor's property shall have been fixed by the appraisal as herein provided, the referee shall issue an order setting aside to such debtor his exemptions as prescribed by the State law, subject to any existing mortgages or liens upon any such exemptions to an amount equal to the value, as fixed by the appraisal, of the value of such exempt property as is covered by an mortgage or lien, and shall further order that the possession, under the control of the court, of any part or parcel or all of the .remainder of the debtor's property, shall remain in the debtor subject t o a general lien, as security for the payment of the value thereof to the trustee of the creditors,

if a trustee is appointed, such a lien to be subject to and inferior to all prior liens, pledges, or encumbrances. Such prior liens, pledges or encumbrances shall remain in full force and effect, and the property covered by such prior liens, pledges, or encumbrances shall be subject to the payment of the claims of the . secured creditors holding such prior liens, pledges, or encumbrances up to the actual value of such property as fixed by the appraiFal provided for herein. All liens herein on livestock shall cover all increase, and all liens on real property shall cover all rental received or crops grown thereon by the debtor, as security for the payment of any sum that may be due or past due under the terms and provisions of the next paragraph, until the full value of any such particular property has been paid.

{3) Upon request of the debtor, and with the consent of the lien holder or lien holders, the trustee, after the order is made setting aside t o the debtor his exemptions shall agree to sell to the debtor any part, parcel or all of the remainder of the bankrupt estate at the appraised value upon the following terms and conditions, and upon such conditions as in the judgment of the trustee shr.ll be fair and equitable:-

(a) Payment of 1 per centum interest upon the price within one year from the date of said agreement. (b) P ayment of 2! per centum of the appraised price within two years from the date of said (c) Payment of an additional 21 per centum of the appraised price within three years from the date of said agreement.

(d) Payment of an additional 5 per centum of the appraised price within four years from the date of said agreement. (e) Payment of ail additional 5 per centum of the appraised price within five from the dateof said agreement. (f) Payment of the remaining unpaid balance of the appraised price within six years from the date of said

agreement.

Interest shall be paid on the appraised price and unpaid balances of the appn•ised price yearly as it accruec; at the rate of 1 per centum per annum and all taxes shall be paid by the debtor. The proceeds of such payments on the appraised price and interest shall be paid to the lien holders as their interests may appear, and to the trustee of the unsecured creditors, as their interests may appear, if a trustee is appointed.

(4) An agreement having been reached as provided in sub-section (3), the debtor may consume or dispose of any part or parcel or all of said property whether covered by the general lien to the trustee, if a trustee is appointed, or subject to pledges or prior liens, or encumbrances held by secured creditors, provided he pays the appraised value of such part or parcel or all, a,s the case may be, to the secured creditors, as their interests may appear, and the trustee of the unsecured creditors, as his interests may appear, if a trustee is appointed, or he may put up a bond approved by the referee in bankruptcy that he will make payments, as provided for herein, of any property so consumed or disposed of.

(5) In case the debtor fails to make any payments, as herein provided, to any or all of the secured creditors or to the trustee of the unsecured creditors, then such secured creditors or the trust ee may proceed to enforce their pledge, lien, or encumbrances in accordance with law. It shall be the duty of the secured creditors and of the trustee of the unsecured creditors to discharge all liens of record in accordance with law, whenever the debtor has paid the appraised value of any part, parcel, or all of his property as herein provided.

(6) Having complied with the provisions of sub-section (3), the debtor may apply for his discharge as provided in this Act. (7) If any secured creditor of the debtor, affected thereby, shall file writt en objections to the manner of payments and distribution of debtor's propert y as herein provided for, then the court, after having set aside the

debtor's exemptions as prescribed by the St ate law, sh all stay all proc eedings for a period of five years, during which five years the debtor shall retain possession of all or any part of his property, under the control of the

court, provided he pays a rea.sonablc rental annually for t hat part of the property of which he retains possession ; the first payment of such rental to be made within six mont hs of the date of t he order staying proceedings, such rental t o be distrib uted amo ng the secured E md unsecured creditors, as their interests may appear, under the provisio ns of t his Act. At the end of five years, or prior t hereto, the debt or may pay into court the

appraised price of the property of which he r et ains possession ; Provided, that upon request of any lien holder on real estate the court shall cause a reappraisal of such real est ate and the debt or m2.y t hen pay the reappraised price, if acceptable to the lien holder, into t he court, otherwise the original appraisal price shall be paid into court, and thereupon the court shall, by an order, t urn over full possession and itle of said propert y t o t he debtor and he may apply fo r his discharge as provided for by t his Act; Provided, however, that the provisio ns of t his Act shall apply

only to debts existing at the t ime t his Act becomes effective.

If the debtor fails to comply with the provisions of t his sub-section the court may order the trustee to sell the property as provided in this Act. F.5964.-ll

CANADA.

429. The measures adopted by the Dominion Government to meet somewhat the same situation as has been reached in Australia were directed, firstly, to the extension of credit facilities, and secondly, to the facilitation of a readjustment of the relationships between debtor­ farmers and their creditors.

430. For these purposes were enacted the Canadian Farm Loan Act Amendment A:et 1934 to amend the Canadian Farm Loan Act 1927, and also The Fanners' Creditors Arrangement Act 1934. 431. The Canadian Farm Loan Act 1927, as amended by The Ce,nadian Farm Loan Act Amendment Act 1934.-The Act of 1927 provides for the constitution of the Canadian Farm Loan Board which consists of the Minister for Finance (Chairman), and three other n1embers appointed by the Governor, one of whom is the chief executive officer and is designated the "Canadian Farm Loan Commissioner ". ,

432. The Government of Canada is authorized to subscribe to the initial capital of the Board to an· amount not t o exceed $5,000,000, payable as requested by the Board. Such. subscription is to be free of interest for three years and thereafter to bear interest at 5 per cent per annum. Repayment of these subscriptions is made from time to time out of earnings, but the amounts so repaid shall not exceed the amount in the Reserve Fund which the Board is

required to establish. 433. In addition to the initial capital the Board is required to issue capital stock in shares of $1 each, non-transferable except at the option of the Board, to be subscribed for as follows :-(i) by the Government of Canada, as required by the Board to the extent of 5 per cent.

of the total amount of principal outstanding on loans ; (ii) By each Province, as required by the Board to t he extent of 5 per cent. of the total amount of principal outstanding on loans in the province ; (iii) By each borrower at the time a loan is made by payment for stock t o the extent

of 5 per cent. of the loan made to him. 434. The is required t o carry annually to a reserve fund 25 per cent. of its net

earnings until the fund equals 25 per cent. of the paid capital stock, and thereafter at least 10 per cent. of the earnings is to be carried to reserve each year. 435. Annual dividends may be declared by the Board but shall not exceed 5 per cent.· until the reserve fund shall have reached 25 per cent. of the capital stock, but provision is also made for the payment of additional dividends to borrowers in the event that the net earnings are greater than are necessary to satisfy the above requirements.

436. Dividends on stock held by. a borrower remain in the possession of the Board and accumulate at 5 per cent. per annum compounded annually until such time as the borrower's stock, t ogether with the accumulation of d.ividends, is sufficient to pay all indebtedness under the loan, when it will be credited to the borrower as a final payment and the borrower shall then cease to be a stockholder.

437. If the borrower defaults under the conditions of the loan and the title to the property is transferred to the Board or the property is sold but does not realize sufficient to repay the loan, the stock held by the borrower shall be cancelled and the amount paid thereon shall be forfeited to the Board.

438. The Board is authorized to issue and sell "Canadian Farm Loan Bonds", buy the same on its own account and retire the same at or before maturity. Outstanding bonds shall not exceed twenty times the amount of paid-up capital stock subscribed for by borrowers, and the rate of interest shall be such as will make the market value at the date of issue approximately par. The bonds shall be for such periods not exceeding 35 years and in such denominations as the Board thinks fit. Each bond shall be signed by the Commissioner and the Secretary or

Treasurer of the Board and it shall have printed thereon a certificate by the Commissioner that it is issued under the authorityof the Act and that, at the time of issue, the Board holds first mortgages on farm lands at least equal to the total amount of bonds issued under the Act. 439. The Minister fo r Finance is authorized to purchase bonds which will be repurchased by the Board at the price therefor when. for that purpose become available through the public sale of bonds; provided that the Minister shall not hold more than worth of bonds at any one time. According to the debate on the 1934 Bill, the Minister has subscribed for $10,000,000 of Farm Loan Bonds and none has been offered to the public. The 1934 Act amends the 1927 Act by increasing the amount of $15,000,000 t o $40,000,000 and by providing that the Governor in Council may authorize the guarantee of the principal and intreest of Farm Loan Bonds t o the amount of $30,000,000 . Notwithstanding anything contained in any other Acts, Insurance Companies, Loan Companies, and Trust Companies are authorized to purchase Farm Loan Bonds.

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440. Loans will not be made in any Province until the Province has, by legislat ion, authorized, prescribed or provided- · (a) The subscription by the Province to the capital stock of the Board; (b) The establishment of a Provisional Board of four members to act as agents of the

Board, three of whom shall be nominated by the Government of the Province and one by the borrowers in the Province. All four shall be appoint ed by the Board; (c) Subject to approval by t he Board, whether loans shall be made directly to farmers

through local Co-operative Societies or Colonization Societies or by a combinat ion of bot h methods: (d) The Treasurer of the Province t he Chief Executive Officer of the Provincial Board to act on the Advisory Council referred to later ; (e) That F arm Loan Bonds shall be authorized investments for trust funds within

the Province ; (j) That in the case of an adverse report on the operations of a Provincial Board by the auditors of the Board, or if a Provincial Board should refuse to enfqrce the regulations and directions of the Board, the Board may, after conferring with

t he Provincial Board, relieve such Provincial Board of its duties, and carry on the business of such P rovincial Board until a new Provincial Board, satisfactory to t he Board, has appointed.

441. An Advisory Council t o the Board consisting of the Treasurer of each Province and the Chief Executive Officer of each Provincial Board shall 1neet at least once a year, on the .call of the Minist er, t o discuss the general policy of the Board and the credit requirements of farmers.

442. If any Province passes legislation which, in t he opinion of the Board, is prejudicial to the security of existing or future loans, the Board may cease t o make loans· in that Province.

443. The cost of administration of Provincial Boards shall be borne by the Board which shall fix the salaries to be paid to all offi cers and employees of a Provincial Board.

444. The operations of the Board shall be conducted in such manner as to give, as far as practicable, to the shareholders in each Province t he full benefit of the operations in such Province.

445. Except as may be otherwise decided by the Governor in Council, all actions and decisions of the Board shall be deemed withi:q. its powers and shall be conclusive against all interested parties.

446. The Board may, subject t o t he approval of the Governor in Council , make regulations for the conduct of t he business of t he Board.

44 7. An audit of the books of t he Board and of each Provincial Board shall be made by a firm of chartered account ants appointed by t he Governor in Council and a copy of the report of the said accountants on the annual st at ement of the Board shall be laid befo re Parliament by t he Minister.

448. Loans under the A ct.- The 1927 Act provides t hat-(a) Loans shall be made only on the security of first on farm lands up t o

50 per cent. of the Board's appraised value of such land and 20 per cent. of t he permanent insured improven1ents ; provided that no person shall have more than $10,000 by way of loan at any one t i1ne. The 1934 Act provides for t he substitution of the amount of $7 ,500 fo r t he a1nount of $10,000.

An explana.tory not t o Section 9 of t he Bill for the 1934 Act point s out that in practice 50 per cent. of t he value of the land, plus 20 per cent . of the value of t he improvements, equals a maximum of between 40 per cent. and 50 per cent . of the value of t he farm.

(b) Proceeds of t he loan must be used for the following purposes only :­ ( i) to purchase fa rm land ; (ii) t o purchase fertilizer , seed, livestock, tools, machinery , implements and equipment necessary to the proper operat ion of t he farm ; (iii) t o erect farm buildings , or to clear, drain, fence , or make any other

' permanent improvement t ending t o increase the p o uct ive value of t he land; (iv) to discharge liabilities already accum lated; (v) any purpose which in t he op· ion f the Board may be reasonably

considered as improving t he v lue of the l nd for agricultural purposes .

(c) Loans shall be made only to farmers actually engaged in or shortly to become engaged in the cultivation of the farm mortgaged, and whose experience, ability and character are such as to warrant the belief that the farm to be mortgaged will be successfully cultivated; provided that no loan shall be made on the security of unimproved land except for the purpose of n1aking iinprovements on the same. (d) The appraised value shall be based upon the value of the land for agricultural

purposes, and, as far as practicable, on the productive value as shown by experience, and no other basis of valuation will be considered. (e) Interest shall be such a rate in excess of the rate yielded at the time of issue of the last series of the Farm Loan Bonds as shall be sufficient to provide for the

expenses of operation and for reserves for losses, or, if no bonds have been issued, such a rate as, in the opinion of the Board, will be yielded by the bonds when issued, increased by expenses and reserves as aforesaid. [From a perusal of the debate on the 1934 Bill in Hansard of the 18th June, 1934, it appears that the Board adds It per cent. for expenses and reserves.] (j) Every loan shall be repayable in equal annual or semi-annual instalments of

principal and interest at the option of the borrower ; and the amount of such · instalment shall be a fixed percentage of the amount of the loan, such

percentage to be at the rate of interest rnentioned in the 1nortgage, increased by either 1 per cent. or 2 per cent. of the amount of the loan as the borrower may elect. (g) The borrower shall pay rates, taxes, insurance and other charges and shall pay

8 per cent. per annum simple interest on defaulted payments. (h) The borrower may, on any instalment payment date, repay the whole or any part of the loan without notice or bonus. The 1934 Act permits the Board to make regulations to reasonable conditions or restrictions on the right

to pay off.

( i) If a borrower expends any part of the loan for any purpose other than that approved by the Board, the loan shall, at the option of the Board, become forthwith payable in full. (j) It shall be a term of every mortgage that if the mortgaged land is sold, the loan

shall, at the option of the Board, immediately become due and payable.

449. The 1934 Act makes provision for advances on second mortgage and for loans to mortgagees. . The Board may, in any case when it lends on first mortgage, make a further loan for a period of not more than six years on the security of a second mortgage on the farm lands and of a charge on live-stock and other personal property.

450. The aggregation of loans made to any borrower under the 1927 Act and the 1934 Act shall not exceed two-thirds of the appraised value of the land and buildings and shall not exceed at any one time $7,500. 451. The amottnt advanced under the 1934 Act shall not exceed one-half the amount advanced on the security of the first mortgage.

452. Loans made under the 1934 Act shall be used for the following and no other purposes:-(a) to enable the debtor to pay existing liabilities; (b) to purchase live-stock, tools, machinery, implements and equipment necessary

for the proper operations of the farm; (c) to erect farm buildings or to clear, drain, fence or make any other perrnanent improvement tending to increase the productive value of the land; (d) for such other purposes relating to the development and operation of the farm

as the Board approves. 453. Interest on loans made under the 1934 Act shall not exceed the current rate charged for first mortgage loans by more than. 1 per cent. per annum. 454. The Board may lend money to a mortgagee on the security of an assignment of a fust mortgage of farm lands in a case where a proposal for a composition extension or scheme of arrangement under the Creditors Arrangement Act has been approved, to the intent that such loan shall be disbursed to the farmer for such purposes in connexion with the proper

operation of the farm covered by the mortgage in such instalments as may be agreed to by the

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Board. No such loan shall be for an amount exceeding one-quarter of the principal amount owing under the mortgage assigned as security. Each loan shall bear inter.est at the rate charged to farmer borrowers by the Board and shall be for a period of one year, but may be extended for a further period of one year. The mortgagee is required to agree that he will loan the money

to his mortgagor at a rate not in excess of the rate reserved in the mortgage assigned as security and in any case, not more than 1 per cent. in excess of the rate charged the mortgagee by the Board. 455. The provisions of the 1927 Act with regard to the issue of capital stock shall not apply to loans to mortgagees.

456. The Governor-in-Council may make advances to the Board out of unappropriated moneys in the Consolidated Revenue Fund for the purposes of loans to mortgagees and the Board shall for such purposes be the agent of the Crown. 457. The Board is required to keep separate accounts in respect of loans made under the 1934 Act and if such accounts show losses the amount of such losses shall be advanced out of unappropriated 1noneys in the Consolidated Revenue Fund and repayment of the moneys so advanced shall be a first charge upon future profits.

458. If, as a result of any proceedings to realize upon any security, the title to the property is transferred to the Board, or if an amount insufficient to discharge the debt is realized, the stock in the Board subscribed by the Dominion Government and the Government of the Prov4nce in respect of the loan shall be cancelled and the amount paid thereon shall be transferred to reserve.

459. The Farmers' Creditors Arrangement Act 1934 . .;_The bankruptcy law of the Dominion contained no provision for the sequestration of a farmers' estate upon the petition of his creditors, although the farmer might voluntarily assign his estate and seek relief under the Act. The Farmers' Creditors Arrangement Act was enacted to provide a simple and inexpensive machinery and procedure whereby a farmer, who is unable to meet his liabilities as they become due, may make a proposal to his creditors for a composition, extension of time or scheme of

arrangement. The recitals in the preamble to the Act read as follow:-Whereas, in view of the depressed state of Agriculture the present indebtedness of many farmers is beyond their capacity to pay; and whereas it is essential in the interest of the Dominion to retain the farmers on the land as efficient producers and for that purpose it is necessary to provide means whereby compromises or rearra.ngements may

be effected of debts of farmers who are unable to pay. . . ."

460. The procedure to be followed by a farmer seeking relief is simple. The Governor in Council will appoint in the judicial centre of every farming community an Official Receiver. To this officer the farmer may go. The Official Receiver will assist him in preparing his statement of affairs and in making a proposal to his creditors. This proposal and a statement

of his affairs will go to each creditor with notice of date and place of meeting. At this meeting the farmer's affairs and the proposal will be discussed. 461. The proposal of the farmer. may provide for a compromise or an extension of time or a scheme of arrangement in relation to a debt owed to a secured creditor, or in relation to a

debt owed to a person who has acquired movable or immovable property subject to a right of redemption, but in that event the concurrence of the secured creditor or such person, shall be required. 462. If at a meeting of the creditors a majority of all the creditors and holding three­

quarters in amount of all the debts, approve, the proposal is deemed to be duly accepted and is then submitted for approval to the Court prescribed by and given jurisdiction under the Act. The Court is required to refuse approval if it is of the opinion that the terms of the proposal are not reasonable or are not calculated to benefit the general body of creditors, or if the debtor has committed a bankruptcy offence. If a secured creditor concurs in the proposal, he is required

to value his security and is not permitted to obtain payment of any amount iri excess of such valuation. 463. If the proposal made by the farmer is not approved by the creditors, the Official Receiver is required to bring that fact to the notice of a Board of Review consisting of a Chief

Commissioner, who shall be a Judge of the Superior or Appeal Court of the Province in which the farmer resides, and two other Commissioners, one appointed as a representative of creditors and the other of debtors. There shall be at least one Board of Review in each Province, and, on application by a debtor or a creditor the Board of Review is required to endeavour to formulate

an acceptable proposal, but it may decline to formulate a in any case in which it considers it cannot do so in fairness to the debtor or the creditors. Any proposal formulated by the Board shall be based upon the l?resent and prospective capability of the debtor perform his obligations and upon the productive value of the farm. The Board may hear eVIdence to

aid it in coming to a conclusion.

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464. If the Board formulates a proposal it shall be placed before the creditors and. the debtor, and, if shall be confirmed by the Court. I f it is not approved by the creditors or the debtors, the Board may nevertheless confirm it, either as formulated or as amended. Whenever a proposal has been approved or confirmed, the Court r11ay order the farmer to execute any mort gage, conveyance or instrument necessary to give effect to the proposal, and failure to carry out any of the terms of the proposal is deemed to be an act of bankrupt cy, and the farmer may, on the petition of a creditor, be adjudged bankrupt unless the Court is satisfied that such failure is due to causes beyond the control of the farn1er.

465. The administrative expenses are to be paid by the Governn1ent, and special machinery apart from the bankruptcy administration is to be set up for the purpose of adrninistering the Act. The Act also makes provision against publication of inforn1ation in regard to applications. 466. Apart from the n1easures described above, other steps have also been taken to assist wheat-growers. The Don1inion Government of Canada has maintained for a considerable period a policy of operating on the Viinnipeg Exchange, through Th'Ir. J. I. :McFarland, the General Manager of the Selling Agency for the Canadian Wheat Pool. His operations have been directed towards the maintenance of stability of prices. The following statement which appeared in the Australian press of 17th January, 1935, is indicative of his operations.

Mont real, 15th January.

" We are not interested in July futlues, " Mr. John I. McFarland, general manager of the Central Selling Agency of the Canadian ·wheat Pool, stated in commenting on the slump in prices on the Winnipeg grain exchange. "All our interest in the May price is pegged at 80 cents, and it will stay there. Our purchases are for May delivery. We are going to take delivery then.

He was referring to the wheat purchases in his operations carried on with the guarantee to the banks by the Dominion.

467. The guarantee of the Dominion Government is given to the Canadian banks for all necessary credit. The nature of the operations of this scheme may be judged by the following extract from a published statement by Mr. McFarland in October last: If the futures marketing system is tbe best system which can be devised to finance and distribute the crop, then there is a moral responsibility on the Governments of this country to take such steps as will protect the operation of this system in some measure at least against unwarranted operation by large speculators.

It is impossible to compute the price benefit received by the people of this Dominion during the past four years, as a result of the support of the price structure under the guarantee, by the Bennett Government. Unprejudiced observers of world markets conditions, of productive figures , and of enormously reduced constructive speculative factors, have estimated such benefits at upwards of 200 millions of dollars. It is now quite evident that without Government support in these years, the futures system would have failed in its essential function.

NEW ZEALAND.

468. In 1931, the Parliament of New Zealand found it necessary to pass the Mortgagors Relief Act , the n1ain object of which was to grant relief to mort gagors by giving power to the Courts to postpone proceedings 'vhieh would dispossess them of their properties. Later in 1931, legislat ion was passed giving the Courts power to order postponement of the dates of repayment of principal, reduction of interest rates and the remission of arrears of interest on farm mortgages in cases where the Court s considered such a course necessary.

469 . In 1932, the Act was extended from farmer mortgagors to cover all mortgagors. The existing Act is the Mortgago1·s and Tenants Rel?:ej Act 1933, and it enables a n1ortgagor or tenant, who is in difficulties attributable to the prevailing economic conditions, to apply to the Court for relief. The Court directs an Adjustment Commission for the district to investigate the financial position of the applicant and, if t he applicant is found to be not hopelessly insolvent,

an order for relief will be made. Such order may involve a reduction in the rate of interest, a postpone1nent of interest or a remission of arrears of interest. There is no provision for any compulsory writing down or adjustment of the original capital debt, but if, as a result of the investigation of the Comm ission, t he parties agree to enter ·into voluntary arrangements for the modification of t heir respective right s and ob ligations, the Commission reports the fact to the Court wi t h a st at ement of the nat ure of the proposed arrangement. Thereupon the Court may, if it thinks fit, allow effect to be given to the t erms of the arrangement by the execution o£ all necessary instruments, or may dismiss the application for relief or adjourn it.

470. In addit iCUl to the abovementioned powers conferred upon the Commission as a means of assisting the Court in respect of applications for relief, applications may also be made by a mortgagor or mortgagee, ·or by a lessor or lessee, direct t o the Commission. Thereupon, the Commission may endeavour to promot e a voluntary modification by the parties to any mortgage or lease of t heir respective rights or obligations, and for that purpose the Commission shall have and may exercise the san1e powers of investigation as those with which it is clothed for the purpose of assisting the Court.

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471. Each Adjustment Commission consists of three persons, appointed by the Governor-General, who office during pleasure. before this

are not open to the pubhc, nor are theu representatiOns In such matters or therr find1ngs or recommendations made public in any newspaper. \

472. This Act was enacted for a period expiring on the 31st December, 1935, and express provisions were inserted to avoid any attempt by a mortgagor or a lessee to contract himself out of the application of the provisions of the Act. 473. The above legislation has been of assistance to certain primary producers, but has not been entirely effective to meet the situation created by the fall in the overseas prices of primary products. A crisis having arisen in the dairy industry, the Dominion Government appointed a Royal Commission consisting of The Honorable Francis Vernon Frazer, Judge of the Arbitration Cou).'t, George Andrew Duncan, Company Secretary, John Gilkison, Cmnpany Director, William Augustus Iorns, Farmer, and David Owen Williams, Lecturer in Economics, Iv.Iassey Agricultural

College, to investigate that industry. The recommendations of this Royal Commission deal with a situation very similar to that which exists in the wheat industry in Australia. 4 7 4. The n1ethods of inquiry adopted by the New Zealand Commission were similar to those adopted by this Commission, evidence being obtained orally and in ·wTiting from a large number of witnesses, and a survey of farmers' financial outgoings and r'eturns being made of a cross-section of producers. - ·

475. The general condition found to exist in the dairy industry in New Zealand is similar ·to that found to exist in the wheat industry in Australia. The collapse of prices made it impossible for large numbers of farmers to meet their obligations . ., In the absence of a complete census of the debt position -of farmers, the New Zealand Commission found it impossible to

analyse as fully as it desired, the repercussions of· low prices upon the security of mortgagees and lending institutions, or to estimate the extent to which farmers are unable to meet other obligations than those under first mortgages and in respect of rent. On the evidence of representatives of Public D·epartments, and finance, farming and other witnesses, and fron1 a survey of 550 farms, which, on the average, are above the general standard of dairy farms i11 New Zealand, the Royal Commission on the Dairy Industry concludes that at least 50 per cent. of the dairy farmers of the Dominion are, in varying degree, unable at the present time to meet their financial comm.itments. -

476. The debt position of the wheat industry in Australia and the .dairy industry in New Zealand being similar, the views expressed and the recommendations subn1itted by the New Zealand Commission in relation to the debt position of farmers are valuable and, for this reason, are included in this report. ,

4 77. The New Zealand Commission considers·--· (a) that, if farmers are enabled to re-finance on more favorable terms an4 at lower rates of interest, a large number of those now in difficulties will be re-established on a more secure basis;

(b) that further statutory reductions of interest are inadvisable and that statutory reductions of principal are improper; (c) that general financial relief by way of subsidy, whether as a gift, as a loan, or in the form of a guaranteed price is objectionable and undesirable ; (d) that the most suitable form of mortgage finance for farmers is long-term

amortizable mortgage credit bearing variable rates of interest in conformity with current rates earned by investment capital. 4 78. The New Zealand Commission recommended the establishment of a Rural Mortgage Corporation with the following powers:-

(i) to establish a system of long-term mortgage credit for farmers approved by the Corporation ; (ii) to issue bonds in exchange for existing mortgages and to sell bonds in order to obtain money for new mortgages, such bonds to be perpetual but redeemable

by purchase by the Corporation ; (iii) to decide, on triennial adjustment dates, the rate of interest payable on bonds­ the rate to be so fixed that the bonds will command par value on that date; (iv) to decide, on triennial adjustment dates, the rate of interest payable on

mortgages-the rate to be higher than that payable on bonds by a margin sufficient to create a reserve fund and to provide for the cost of administration; (v) to prescribe from time to time, such annual amortization rates as it may deem desirable; (vi) to accept repayment on any interest date, without notice, of sums of £25, or

multiples thereof on account of principal ; and (vii) to purchase its own bonds with repayment moneys and reserves.

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479. It was recommended by the New Zealand Commission also, that mortgagors and mortgagees should be required to apply to take advantage of the facilities of the Corporation within a prescribed tirne, and that mortgagors who did not so apply should lose the protection of the Mortgagors and Tenants Relief Act. Provision is included in the scheme of operation of the Corporation for the appraisement of the securities offered and their classification into either (A) security suitable for accommodation, or (B) security unsuitable for accommodation.

In the former classification are included-(!.) properties where a valuation discloses that the full amount of existing mortgages may safely be taken over by the Corporation at t he prescribed rate of interest; (II.) properties where a only of existing mortgages can safely be taken over by

the Corporation as above, but where the residue of the applicant's liabilities, whether secured by mortgage or not, appears to be capable of liquidation within a re-asonable tirne. In such a case, the _portion of t he mortgage debt or debts that cannot safely be taken over in exchange for bonds will be placed by the Corporation in a suspense account, provided the mortgagor or mortgagees concerned consent to the basis of settlement that the Corporation is prepared to adopt. Where consent is withheld, the report of a District Cmnmission setting out the proposed basis of settlement will be subrnitted to the Court, which will take into consideration all the relevant circumstances and have . regard to the public interest and the interests of t he mortgagor and mortgagees respectively; and if the Court considers it equitable so to do and is satisfied that there is a likelihood of the portion of the mortgage debt or debts so placed in a suspense account being liquidated within a reasonable time, it will make an order approving the basis of settlement. The applicant will then be budgeted in much the same manner as under the present systen1 of

budgeting adopted by the Adjustment Commissions, in order to liquidate (a) the portion of the mortgage debt or debts placed in a suspense acc ount and (b) his other liabilities. The applicant's other liabilities are an important consideration, for it is futile to readjust his mortgage position if his other liabilities are unmanageable and likely to lead to bankruptcy; (III.) properties as in (II.) above, but where a compromise with mortgagees and/or

creditors other than mortgagees is necessary to reduce the residue of the applicant's liabilities to a 'manageable amount.

480. Dealing with the method of financial adjustment, the New Zealand Commission considers that-The amount of bonds in exchange for which the Corporation may take over existing mortgages shall not exceed 80 per cent. of the total valuation of land and improvements. In the case of new mortgages the amount to be lent shall not exceed 70 per cent. of such valuation. These percenta,ges are maxima, and it is not suggested that the Corporation should finance up t o the maximum limit in all cases. It is thought, however, that a somewhat narrower margin than has in the past been deemed necessary can be safely accepted when valuations are based on a low level of produce prices.

Mortgages t aken over in respect of securities classed (A I.) will be on an amortized basis, but the mortgagor will not be under budgetary control.

Mortgages taken over in respect of securities classed (A II.) and (A III.) will be on a fiat basis, but the mortgagor will be under budgetary control. The surplus proceeds over budgetary requirements (which term includes provision for liquidation of debts other than mortgage debts) will be distributed equitably according to priority among the mortgagees whose balances are held in the suspense account, and may be used to pay interest at a rate not higher than that payable to the Corporation and/or capital in respect of such balances. If and when all such debts are liquidated, the mortgagor will be released from budgetary control, and his mortgage liability t o the Corporation will be readjusted on an amortizable basis.

Mortgagors whose securities are classified in Class (B) will, as from a date to be fixed, be removed from the protection of the Mortgagors and Tenants Relief Act. The District Commission should, however, in each such case make any recommendations the mort g.agor and the that it considers advisable, but thereafter the process of adjustment would be outSlde the provmce of the Comm1sswn.

Except for the protection given in the case of mortgages taken over under t he scheme outlined above, the Mortgagors and Tenants Relief Act will cease, as .from a date to be fixed, to apply to rural mortga,ges.

The New Zealand Commission also expressed this view in regard to the revaluation of securities, viz. :-The Corpo.ration .may from t ime to time revalue any security under its control, and if its productive capacity (on a volume basis) has mcreased, may take over the balance held m the suspense account or part thereof and issue bonds accordingly to the person or persons entitled thereto.

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481. Recommendations of a general nature were also made as follow:-

" ' (

(1) Government Finance.-It is anticipated that the initial expenses in connexion with administration will be impossible of recovery for some years, and it is therefore necessary that t he · Government t ake up bonds, as required by the Corporation, up to £100,000. 'l1hese bonds should be free of interest for three years, and thereafter bear interest at current rates payable from the general revenue of t he Corporation. (2) Government Guarantee.-In order to secure the lowest possible rates of interest,

and to make the Corporation's bonds attractive to investors and suitable securities for the investment of trust funds, the Government should guarantee the payn1ent of interest thereon, and declare the bonds to be trustee securities. (3) ... lJ!ortgages due on Transf er.-The term of every existing taken over by

t he Corporation and the term of every new n1ortgage accepted by the Corporation should expire, and the principal moneys secured t hereby should become due and payable on the t ransfer of the property encumbered, unless the Corporation approves of t he transferee and consents to t he transfer. This condition would not apply in the case of a devise of land under a will or of

a transmission to the executors or ad1ninistrators of a deceased mortgagor.

rehe New Zealand Commission makes t his further observation-It is not our desire to hamper the private lender, but to encourage him by freeing him from, .o.e restrictions that are now imposed on him. He will, in many cases, especia.lly when he is perfectly satisfied as to the soundness of the security and the .:fficiency a.nd reliability of the borrower, prefer to secure a somewhat higher rate of interest

than he would derive from mortgage bonds and carry what he will regard as a negligible risk; and he will, of course, have the short-term mortgage field fully open to him.

EuROPEAN ExPORTING CouNTRIES.

482. The European countries which may be considered as exporters of wheat under normal circurnstances are Russia, Roumania, Hungary, Jugo-Slavia, Bulgaria and Poland. Russia does not subscribe to the tenets of the capitalistic system, and all wheat trade is in the hands of the Government. Russia may, therefore, be dismissed frorn consideration for the purposes of this section of the report.

483. The other countries mentioned have a different rural organization from that which is characteristic of Australia. The holdings are mostly small, and many are farmed under peasant systems. Rates of interest have often been high, and the financial system is not directly comparable with the Australian financial system.

484. The measures adopted for the amelioration of the financial position of farmers in any country, in order to be thoroughly understood, n1ust be considered in relation to the agricultural system practised in that country. Having in view the wide difference between the systems of agriculture practised, the laws in relations to the alienation of land, and the methods of finance applied in the European countries and in Australia, the Commission considers that it would

not have been justified in making extensive and laborious inquiries into the measures of reconstruction adopted( in:{the European exporting countries.

485. Such information as has been obtained, however, is set down hereunder. The Commission is well aware that the stater11ents are lacking in local distinctive background, and are probably by no means complete.

RouMANIA.

486. The first law to grant relief to agriculturists was passed on the 16th April, 1932. Under this law, farmers owning not more than 10 hectares were required to pay only 50 per cent. of debts within 30 years, together with interest at 4 per cent. per annum, the period of 30 years being compulsory for creditors, but debtors had the option of paying before the termination of that period if they so desired.

487. Farmers owning more than 10 hectares could settle their debts in one of the following ways:-(a) payment in full within two and a half years with reduction (on a prescribed scale) of interest due for the last six years ;

(b) payment of 60 per ceht. in full settlement without the consent of the creditor being necessary ; (c) payment in full without any reduction in interest at t he discount rate of the National Bank.

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488. The reason for this differential treatment seems to be disclosed in the Department of Overseas Trade Heport for Roumania for 1932, Appendix IV. p. 68, in which it is shown that out of 3,863,083 farmers owning 10 hectares or less 2,474,78 1 were indebted in the sum of 37,000 million lei, and that of farmers owning over 10 hectares only 16,839 were indebted in the sum of 15,000 million lei.

489. The opposition to the Act was s·o great t hat the Government was obliged to set up a commission to review it: As no funds were lo cally available efforts were made to procure a foreign loan, but they were unsuccessful. The Government then tried to meet opposition by undertaking to compensate losses due to debt conversion; but this was of no avail and the Government was defeated.

490. The new Government brought in a Bill on the 15th September, 1932, and it was duly passed into law. Among other things, it provided for a suspension of the previous law for eighteen months and also for the · suspension of foreclosure proceedings ; but on constitutional grounds it was set aside by the Supreme Court in November 1932.

491. The Prime Minister declared t hat t he Court's decision did not affect the principles of the Act , and he announced that he would introduce a new Bill whereby all foreclosures in respect of urban as well as agricultural debts would be postponed for eighteen months. 492. The Prime Minister was forced to resign early in 1933, and another member of the same party became Prime Minister and secured the enactment of a third measure in April 1933.

493 . The policy in pursuance of which the Act was framed was enunciated by the Prime Minister as follows:....;_ ·

(a) a firm break with the past ; (b) restriction of burdens which had become intolerable ; ( c stimulation of production without prejudice to the validity of future claims ; (d ) credit institutions to bear losses incurred, the Government guaranteeing only

National Bank losses ; (e) graduated remissions ·to three classes-­ (i) owning 10 hectares or less, (ii) owning 10 to 50 hectares,

(iii) owning over 50 hectares. 494. The Act is called the Agricultural and Urban Debt Settlement Act. It fixed definite dates of payments and gave creditors certain powers to enforce such payments. The Act does not apply to debts owing to t he State, to commercial and industrial debts, or to debts owing to companies and persons of foreign nationality. Credit institutions and banks are specially protected under the Act.

HUNGARY.

495. In 1932-1933, the Government the execution of auctions of agricultural estates which were deeply in debt and compulsorily reduced the rates of interest chargeable, both upon long term and short term mortgages. A moratorium for two years was declared (subject to the farmer making certain stipulated payrnents), for application only to cases where the farmer was involved in debt beyond a prescribed multiple of

his net income, provided such debt had been

incurred prior to a fixed dat e. In such cases t he farmer could apply to have his property declared a "protected property", and thereupon received the of a reduced interest rate. The an1ount of interest payable was also det erminable according to the extent of the debt burden in relation to the farmer's income. The prot ect ed properties were pla,ced under supervision, and no new mortgages could be charged on such properties.

496. F urther relief was also made available to small farmers who were deeply in debt. The Governn1ent undertook to assume , subject to prescribed conditions, responsibility for part of t he bank charges upon such debts out of a Capital-Repayment Fund to be established by the Treasury . The debt to the Government thus creat ed bears interest at 2t per cent. per annum, and is amortizable over 20 years beginning with the fiscal year 1935-1936.

497. If the owners of protect ed properties paid their taxes for 1933 in full they were permitted to pay their tax arrears in ten yearly instaln1ents without interest.

BuLGARIA.

498 . A law of t he 2nd January, 19 34, dealing with the debts owed by agricultural proprietors, shopkeepers or artisans, provided for a reduction of interest and a moratorium of interest payments for two years, an extension of time for payment of the whole debt and for the taking over of certain debts by a new public institution.

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PoLAND.

499. It is understood that the agricultural policy recently laid down by the Economic Committee of the Polish Council of Minist ers provides for the conversion of short-term credits into long-term credits carrying a lower rat e of int erest t han has hitherto been charged. A certain measure of Government assistance is provide d for. Creditors, will, at t heir option , have the

opportunity of converting t heir securit ies into long-term agricult ural mortgage loans or of having a certain proportion of their loans immediately repaid, the Government providing the land-owner with assistance for this purpose.

500. The wheat-grower is also assisted by a subsidy on the wheat exported. It has been reported that this subsidy will be continued, fo r the present, and that the subsidy on oats will be raised to t he same level, but that such subsidies will shortly be reduced. In t heir place a greater measure of support will be given to farmers who engage in the production of grain-consuming

live-stock, especially pigs and poultry.

501. The extent to which t his change of policy will be carried out is said t o be dependant to a considerable degree on t he result of the Anglo-Polish commercial negotiations, and on the share of the United Kingdom 1n arket which P oland can secure for her products.

SUMMARY OF SCHEMES ADOPTED I N OTHER COUNTRIES.

502. The means which have been applied or recommended for the assist ance of farmers in the countries referred to in this section may be summarized as follows :-(1} The provision of long-term amortizable mortgage loans at low rates of int erest, for the purchase of land, equipment, buildings, &c. , and to enable farmers to

re-finance on more favorable terms, and to repurchase properties lost through foreclosure (Argentina, Canada, United States of America, Poland and recommended in New Zealand. In United St ates of America loans are made in bonds ; in Canada loans are made in cash and in New Zealand it is recommended that the loans be made in cash.) (2) The encouragement of the formation of co-operative lending, buying and marketing ,

associations of farmers and the provision of finance and discount facilities to enable the associations to operate (United States of America). (3) The provision by the Government of emergency crop loans to farmers who have insufficient security to enable them to borrow otherwise. (United States of

America).

(4) The encouragement and facilitation of compositions and schemes o£ arrangement between farmers and their .creditors. (Canada, United States of America, Argentina, Poland, and recommended in New Zealand.) (5) The provision of machinery whereby a tribunal may impose a composition or

scheme of arrangement in cases where the parties cannot agree and when the debtor is not too deeply involved. (Canada.) (6) The enactment of legislation enabling a farmer who cannot agree with his creditors on a composition or scheme of arrangement to remain in possession of his

property and pay for it at an appraised value over a period of years at a low rate of interest. (United States of America.) (7) Acreage reduction accompanied by compensation, the money being raised by a tax on flour. (United States of America.) (8) Payment of bounties. (Poland and Argentina.) (9} Marketing Agreements. (United States of America.) (10) General reduction of interest rates by action of the Government. (Hungary,

Czechoslovakia, Bulgaria.) (11) Moratorium legislation. (Hungary, Czechoslovakia, Bulgaria and New Zealand.) (12) Purchase and disposal of wheat-the purchase being effected at a fixed price. (Argentina.)

(13) Maintenance of prices by the Government operating on the wheat market. (Canada.) (14) The position of primary producers in the various exporting countries has been improved by variations in the exchange rat es ; and individual primary .

producers have obtained some measure of relief from t heir debts by reason of de-valuation of the currency in countries where devaluation has occurred.

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2. SCHEMES SUBl\1ITTED TO THE COMMISSION FOR DEALING WITH THE DEBT POSITION IN AUSTRALIA.

503. Much of the evidence subn1itted to the Commission was directed to establishing the need for some measure of relief to the wheat-grower from the debts which have accumulated and are still accurnulating by reason of t he low prices of wheat and which are beyond his ability to pay in full.

504. vVitnesses examined before t he Commission made various recommendations in relation to t he debt problem. The principal proposals were that legislation should be enacted to-(i) effect arbitrarily a Teduction of all debts owed by wheat-growers ;

(ii) provide for t he suspension of part of t he secured and unsecured debts for a term of years, free of interest during the period of suspension ; (iii) effect a reduct ion in t he rates of interest chargeable upon moneys advanced upon rural land and upon rrwneys owed for farm plant, machinery, &c. (iv) provide for t he refinancing of farmers' debts by utilizing the credit of the

Commonwealt h and t he States. (v) guarantee t he payn1ent of premiums on assurance policies on the lines of farmers, or, in certain cases, nominees, to the amounts of the farmers' debts, in order to admit, at the option of the creditor-

(a) of t he liquidation of the debt upon the basis of the surrender value at t he time of liquidation; (b) of the payment of the full amount of the debt with bonuses added upon t he maturity of the policy; (c) of the pay1nent of the full amount of the debt, with bonuses added

upon the death of the farmer or nominee, if death occurs before the expiration of the period of the assurance. (vi) facilitate compositions between the debtor and his creditors, and, in appropriate cases, bankruptcy.

505. The witnesses, and t hey were many, who advocated the reduction by legislation of all debts, or at least the suspension of paym.ent of part of t he debts and also interest upon such suspended debts, cont ended that t he only means of infusing hope in the minds of the overburdened wheat-growers is either t o relieve thmn co1n pletely of smn e part of their debts, which some witnesses advocated, or alternatively, t o suspend for a term of years the payment of a portion of t heir obligat ions, such portion t o be det ermined by an authority in the light of the circumstances.

506. The proposal to utilize t he credit of the Commonwealth and the States to enable the refinancing of the fanners' debts to be acc01nplished was elaborated in detail.

507. Short-term fin ance, it was contended, is no longer suitable to the needs of the farmer, and long-term loans at low rates of interest are necessary to the re-establishment of the industry. With a view to providing long-term fi nance at low interest rates, the Commission was asked t o recommend that a Financing Authority-either existing or to be created-should be mnpowered to issue Government guaranteed rural bonds, redeemable over a long term, the lands upon which the bonds are secured to be free of land tax, and the interest upon the bonds to be free of income t ax. These rural bonds should, it was suggested, be issued to mortgagees (other than the Crown) who desire to negotiate their securities, not necessarily to the full amount of the debt secured, but to such amount as is determined to be the present value of the security. It was claimed for the scheme that no new money need be raised by public loan or otherwise ; that the issue of the bonds would be controlled, and that the appraised value of the land would det ermine t he value of the bonds to be issued and charged upon it. It was urged, ever, t hat reasonable working capital to enable the farmer to carry on should be provided. In the absence of some such scheme, it was contended that wheat-growers, by reason of the disappearance

or serious impairment of t heir equity of redemption, have no opportunity of financing the discharge of t heir existing liabilities with a view to obtaining the benefit of reduced interest rates. 508. It was proposed that debts, other than secured debts, be funded, and that payment

of such portion as was not within t he im111ediate capacity of the farmer to pay be suspended for a period of years- a non-interest bearing bond (such bond being merely an acknowledgment of the debt, and to be redeemable at some future date) to be issued to the creditor in respect of his suspended debt. It was contemplated as part of the scheme, that voluntary compositions as between debtors and creditors would be effected with the assistance of a tribunal created for the purpose.

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509. A somewhat similar proposal was submitted by another . witness who suggested the ereation of an Agricultural Mortgage Bank with a paid-up· capital of, say, £1,000,000 supplied by the Commonwealth Government. Under its charter the Mortgage Bank would be enabled to raise funds by the sale of long-term mortgage bonds at low rates of interest. The payment of interest on the bonds and their ultimate redemption would be guaranteed by the Commonwealth and State Governments. The funds of the Mortgage Bank would be loaned to farmers on long terms of, say, 25, 35 or 45 years at rates of interest considerably less than the average rate which farmers have been required to pay. The gradual redemption of the principal would be provided · for by the inclusion of one-half of 1 per cent. per annum in the rate charged to the borrower.

510. Farmers with existing mortgages would be eligible to apply to have their liabilities taken over by the Mortgage Bank, provided there was the necessary margin of security in the holding, and a national appeal would be made to mortgagees to accept the bonds of the lVlortgage Bank in lieu of cash for the discharge of their securities.

511. The purpose of the Agricultural Mortgage Bank would be to take over, co-ordinate, and c9ntrol the secured liabilities of farmers. Its policy would be directed and controlled by a Supreme Board and its operations in each State by a State Board free of political control or influence.

512. The witness claimed the following advantages for such an Agricultural Mortgage Bank scheme :

(i) The Bank's bonds would be marketable and acceptable as gilt edge security, and would rank as high as other Government bonds. (ii) The Bank could borrow at the lowest rates obtainable by any Government, since in addition to the guarantee of the Commonwealth and State ·Governments

the land would provide security for its loans. (iii) Private Banks, Savings Banks, State Banks, Insurance Companies and. other lenders would have an outlet for their funds by investing them in the Mortgage Bank's bonds instead of using such funds for making loans to farmers. (iv) Administrative and overhead costs would be reduced to a minimum by the

co-ordination of all lending, valuing and administrative operations under a single control. (v) A uniform system and level of valuation would be established which would assist in the rehabilitation of the wheat industry. (vi) A special reserve fund would be built up out of profits from which any shortage

of interest on bonds would be paid to bondholders, should some mortgagors be unable to meet their commitments through drought or other cause.

513. It was suggested that the Agricultural I\1ortgage Bank is a necessity not only because it would appreciably lower the interest rates for farmers, but also because it would convert perhaps £100,000,000 of unmarketable mortgage loans at comparatively high rates of interest to marketable mortgage bonds at a low interest rate; and the voluntary conversion of the unregulated and

unmarketable mortgage loans to marketable mortgage bonds would be equivalent to the release of so much additional credit.

514. The same witness urged that any scheme fo r' the rehabilitation of the wheat industry must also provide for the adjustment of debts to the farmer's capacity to pay. Such adjustment, settlement, or writing down of debts, however, . must, he argued, be on a voluntary basis, and State Governments, as the largest credit ors, should give a generous lead by writing down or writ ing

off relief advances, arrears of rent, rates, taxes, &c. H e asked the Commission to recommend that the Commonwealth Government bear one-half of the losses of State Governments as a result of such writing down.

515. Another view put before the Commission was that a special and more rapid bankruptcy pro?edure be provided. for by in order t? free wheat-grower

of debt obligatwns whiCh are hiS capacity t o pay. The witness that. the

facilitation of bankruptcy, both as to time and expense, would have the effect of Inducing creditors to come to arrangements with their debtors, and would enab le farmers to be restored t o their farms upon a financial basis which offered them some prosp ect s of success. . .

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3. CONSIDERATION OF THE. SALIENT FEATURES OF SCIIEMES FOR DEALING WITH THE DEBT POSITION.

516. The Commission has considered various proposals for dealing with the debt structure of the industry and the steps taken to deal with the same problem in other countries. No scheme fo r dealing with the unfortunate state of affairs which has arisen can be expected to be entirely satisfactory; the task of the Commission has therefor resolved itself into an attempt to decide which type of rmnedy is least objectionable to the three parties concerned-the debtor, the creditor and the nation.

For this purpose the difficulties in applying the main principles involved in the schemes already submitted are set out hereunder.

517. A reduction in the interest rate forms the main part of proposal (iii) and is carried further in proposal (ii) in paragraph 504 above. While such a reduction of interest rates to a figure below that normally charged on n1oney lent for a similar risk would have the advantage that it did not entail a reduction in the capital sum due to t he creditor, yet it does involve the reduct ion of a creditor's rights under the original conditions of the loan. Money is a commodity, interest is the charge for the use of that commodity, and rates of interest in general follow the Law of Supply and Dernand. Consequently, an int erference with t he ruling rate of interest is a definite disturbance of the free operation of the financial system and is likely to have numerous indirect after-effects in the operations of financial institutions, and such private individuals as are dependent for tbeir livelihood on money which has been lent. If a compulsory reduction in interest rates were found to be necessary it would be highly desirable that such interference should be as small as possible ; further, as t he rate of interest on loans increases with the degree of risk, it fo llows that advances on sec ond or later 1nortgages and similar securities, where the n1ortgagee expected a higher rate of interest in of some increased risk, should be more extensively affected than prior charges which were usually receiving a lower rate. Cheap money would to some extent assist the rec overy of the wheat industry, but it alone would be unable to maintain the whole of that section of the wheat-growers which, in the opinion of the Commission, should be maintained in the industry. In individual cases a reduction in the interest rate would be of material assistance in enabling the farmer to recover his financial standing.

518. The compulsory of the debts forms the subject of proposal (i) of the list

in paragraph 504 above. Such a reduction would be a quick and simple 1nethod of dealing with the position, but its repercussions on the general credit structure of the country would be considerable and in individual cases much hardship might result from its general application. A further point of mom.ent is that a readjustment at the present time, when values of the com1nodities produced on the farm are at a· low level, would be unjust to the credit ors in the event of a general appreciation in values. In this connexion it is to be reme1nbered that t he value of c01nmodities is influenced by the currency policy of the country and the relationship of the Australian pound to the monetary units of other countries. That relationship may alter during the next few years. Apart from these broad considerations, any generally applied rule in reduction of indebtedness would be inequitable in its operation, since it would be unduly advantageous to a considerable number of farmers whose circumstances do not require that their debts should be permanently reduced, while, on the other hand, a formula of reduction which would meet the needs of some farmers would fail to adjust satisfactorily the financial

position of others.

519. The provision of long-term and intermediate credit organizations forms the basis of proposal (iv) in paragraph 504. Such. organizations would enable farn1ers to earry on their operations and also to refinance their indebtedness on a more favoTab1e basis. Schemes of this type would either require an initial writing down of indebtedness according to an assessment of the individual case or they would involve the absorption of a bulk of debt which is at present

largely unproductive . In the fonner case such schemes are open to the objections mentioned in paragraph 518 above, and in the latter they would be in a financially unstable condition unless the price levels of agricultural products improved very considerably.

It is probable that any such schemes would either· have to be operated by the Government or if operated by a private corporation would require the guarantee of the Government. At p resent numerous State organizations for financing rural credits are in existence and the policy of adding to their number is of doubtful value. However, if it be ultin1ately fo und to be necessary

t o extend and co-ordinate t he present facilities for long- term credit in Australia (and such a course may ultimately be desirable) many aspects of such a proposal will need very careful consideration by experts. In any case it is essential that the policy and manage1nent of any

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such institution should ... be free from political interference. It is noted that an investigation of the monetary and credit systems in Australia has been foreshadowed . . Such investigation should naturally indude an inquiry into the provision of intermediate and long-term credit fo r priiYuny industries. The Commission suggests that this p2-.rticular subject should be specifically included

in the terms of reference of any such inquiry as may be instituted.

520. The Scheme Based on Life Assurance.-After investigation of a comprehensive scheme of life assurance covering farmers' debts, and involving a Government guarantee in respect of premiun1s, the Commission finds itself unable to recommend its adopt ion.

521. The facilitation of compositions, and, in appropriate cases , bankruptcy, which forms the substance of proposal (vi) in paragraph 504 would not involve any radical departure from the provisions of the existing law apart from the moratorium Acts.

It is generally recognized that bankruptcy may be desirable in t hose cases where the farmer is in such a hopeless position that he can neither meet interest charges nor pay his way wit h the prices of agricultural cmnmodities at present levels ; much can be done in t he way of ren1oving the stigma which is at present attached to bankruptcy and such course is both desirable and

just, in view of the catastrophic nature of the collapse which has affect ed the wheat industry.

The widespread application of bankruptcy proceedings would, be most

detrimental to all parties. It would probably result in a further general fall in the value of farn1 properties and possibly might cause the collapse of the social structure of the count ry-side ·in some areas. It would also place a very severe strain on the credit structure of t he communit y as a whole, for it must be recognized that a large portion of the so- called "secured" debt would

be found to have little or no value in the event of a more extensive recourse t o bankruptcy proceedings, which is at present being averted by the morat orium legislation.

522. The suspension of part of the secured and unsecured debt f or a period of years forms the main part of proposal (ii) in paragraph 504 . Its intention is to rest rain those creditors who might wish to enforce their legal claims to the fu ll during the period in which t he farmer is financially defenceless. It necessarily involves interference with t he rights of creditors in the

same way as these are being interfered wit h by t he 1noratorium at the pr esent t in1e. To t his extent such suspension might be said to be unfair t o t he creditor side of t he industry, but it must be remembered that it would fo r t he time being what ever chance many of the credit ors may have of obtaining any satisfaction in respect to the moneys t hey have loaned or the goods they have provided.

4. GENERAL CONSIDERATIONS LEADING TO TI-IE SCI-IE:l\1E OF DEBT RECONSTRUCTION R E COMl\1ENDED BY THE COlVIlVIISSION .

523. The continuation in Australia of t he industry of wheat-growing combine d with such diversification of production as circumstances direct is axiomatic ; t he only problems in t his regard are the determination of t he extent of t he indust ry and of the diversification.

The development of t he soundest and most practical scheme of fi nancial reconstruction must take cognizance of all factors affec ting t he t echnical efficiency of farm production, the costs on the farm and during transport, t he cost and efficiency of storage and handling, t he economic efficiency of t he marketing system, and the quality and selling points of t he wheat

and other products of the farm. The results of t he det ailed study of t hese items are given in other sections of this Report, and reference should be made t o t hem whilst t he adjustment of the debt struct ure of the industry is being considered in relation to the abilit y to pay interest on capitalization and to make provision for . depreciat ion and/ or redemption.

524. Some Factors of b nportance.- In considering t he principles and details of any pract ical scheme of financial readjustn1ent to be recmnmended for application to the wheat industry, the Commission has found it necessary t o t ake into account many important facts which have been ascertained and developed during t he course of t he economic survey of the industry which

it has made. Proposals made in evidence, in correspondence, or in conference, and schemes adopted or projected in other wheat-growing countries .have been stud1ed carefully in t he light of conditions in Amongst many important fa ct s, some of which are peculiar t o t he wheat industry, are-

(i) the paucity of effective organizat ion within t he industry and t he difficu lt y of achieving such organization because of t he wide geographical distribution of the individual units of t he industry , and the int ense individualism of many wheat-growers ;

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(ii) the intricate nature of t he technical and financial relations existing between the Governments and the wheat-farmers, of which some are recognized and acknowledged, some are recognizable with cornparative ease, and some become recognizable only during an intensive ec onomic survey. Railwa,y freights and railway deficits, port and harbour dues, Government land settlernent and rural -vvater supply schemes, the financial position of shires and other local authorities, t he costs and activities of Agricultural and Lands Departments; the Tariff, t he Government bounty on, and railway concessions on fertilizers and the bounty on sulphur, are amongst the items where intimate contact exists between t he Governments and the industry, directly or indirectly; ·

· (iii) the effect which the interest rate has upon the overhead costs of many of the undertakings mentioned in the preceding sub-section; the considerable effect which any reduction of t hat rate will have upon farmers' production costs. (iv) the relation of t he value of Australian currency to that of other countries w.hich

to a certain extent governs the price in Australian currency obtained by farmers for t heir wheat; which matter the Commission considers should be referred by the Commonwealth Government to the Board of t he Commonwealth Bank; (v) t he great increase in t he capitalizat ion of the industry during the last twenty

years due partly to t he inflation in land values, encouraged by the high prices of wheat from 1914 to 1930 and partly to the Governmental aid in the development of new a,reas;

(vi) t he sudden collapse of prices in 1930-31 with little recovery since t hat date and the great uncertaint y of t he future; (vii) the. steadiness and patience shown by all sections of the industry, including the creditors and debtors, under the strain of serious financial conditions within

large sections of the industry, which conditions have intensified progressively since 1930-31. (viii) the contributions during the past four years of £12,428,223 by the Commonwealth Government and of further large sums by State Governments in the form of

advances-all for t he relief of t he industry; (ix) the position of St ate Governments as principal creditors mainly in the areas of light rainfall and, variable soil conditions; (x) t he undesirability from the viewpoint of the Com1nonwealth Governn1ent, the

community and the wheat-growers, of the indefinite continuance of a practice of making annual grant s, -the det ails of which are determined after somewhat hurried parliamentary discussion towards t he end of each year; (xi) the accumulating evidence that the indefinit e continuance of the general

application of moratoriurn legislation is unwise, tending as it does to inefficiency and undesirable technical and business practices ; (xii) the wide variations between the financial circumstances of farmers.

PRELIMINARY CoNSIDERATIONS CoNCERNING FARM DEBT ADJUSTMENT.

525. Overshadowing all other factors which influence the economic strength of the industry stands the debt structure, the readjustment of which is unavoidable. 526. The Commission has been forced to the realization that under present_conditions of costs and prices, a large number of wheat-farmers are becoming more and more involved financially, and more and more desperate as t o the future, and that the minimum necessity is such action by the industry and by the Nation as will provide efficient farmers with a reasonable security of tenure within the industry which gives t hem work in which they are skilled.

527. There are always two parties to a debt-the creditor and the debtor. In many cases under normal circu1nstances, if sufficient t in1e is allowed, the steady pressure of economic and financial facts, generally accepted, brings about an adjustment between t he two parties without Governn1ental interference. And in cases where conditions become impossible, compositions or assignments, or bankruptcy proceedings provide the necessary readjustments when special leo-islation does not exist. However, t he exceptional circumstances of the past few years have pr

0 evented the ordinary application of pre-depression methods. Moratorium legislation and strong local pressure have stemmed the of up the.

problems t o an extent so dangerous and menamng as to necessitate national mterventwn.

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528. In considering the terms of such intervention, it must be remembered that circumstances alter quickly and that the interests of creditors in the future must be considered just as much as the interests of the debtors in the immediate present.

529. The farmers' debts are the assets of other sections of the community, and the number of creditors runs into many thousands and includes shareholders and depositors in banks, shareholders and policy holders in Assurance Companies, beneficiaries under trust deeds and estates, employers and employees in manufacturing and mercantile firms, and a large number of private individuals, including retired farmers who depend in whole or in part upon returns from money owed by farmers under various forms of security.

530. In evolving a scheme of financial reconstruction, the Commission has been guided by a determination to do its best to protect the present and future interests of the nation having due regard for the interests of all sections of the wheat industry.

531. TheNecessityfortheReview of Each Individual Case.-The stability of the debt structure depends upon and is related to the costs of production, and the prices of wheat and other saleable commodities produced by the wheat-farmer. Therefore, bases of costs and prices have had to be determined by the Commission for the purpose of developing a practical scheme of financial readjustment. The thoroughly authenticated information submitted by the Commission in its First Report, dated 30th July, 1934, and amplified in the Supplement dated 27th November, 1934,

and in this Report, shows the infinite variety of circumst ances of individual units within the wheat-growing industry. These variations make any common rule inapplicable, and emphasize the necessity for the review of the case of each farmer separat ely if injustice to creditor or debtor is to be avoided.

532. Appreciating the cost and complexity of a scheme of individual review the Commission has made a study of the possibilities in other directions, but has come to the conclusion that any scheme designed rather for simplicity and rapidity than in the expectation of permanently satisfactory results cannot be recommended. In this connexion, nothing will be gained by the

nation, ancl. probably much will be lost, if there is not recognition of the fact that the adopted scheme of rehabilitation for the wheat-growing industry may have to be applied to other primary industries and possibly to other industries and other individuals in distress, when such distress is due to the .same fimdamental causes. •

533. Whilst the determination of bases of costs and prices has been essential, the possibilities of future variations in the many factors concerned requires that any satisfactory scheme shall have considerable elasticity in fairness to all parties concerned.

534. General Principles of the Scheme Recommended by the Commission.-The results and conclusions from the Commission's study of various alternatives applicable to financial readjustment are given in the preceding sub-section of this Report. The Commission considered the whole range of possibilities from the facilitation and cheapening of compositions or of various forms of bankruptcy proceedings to the provision by Governments of money and credit through grants or national loans. ·

535. Finally, the Commission was forced to the following general conclusions:-(i) That by one means or another contributions must be made by the Nation to assist in raising the value received by the farmers for the wheat produced, such contribution being graduated according to the necessit ies of the situation. To this end the Commission made recommendations for direct Commonwealth assistance on a basis of production in its First

Report and the Supplement thereto.

(ii) That the provision by Governments of indefinite amounts of money and credit for the assistance of industry for the maintenance of internal values not supported by the present and anticipated returns from the industry would have serious effects on credit, confidence and employment within the community.

(iii) That no justification exists at present fo r Governmental action which would terminate permanently the ordinary relations between creditors and debtors. Too little is known of the future and too much , danger attaches to any such proposal.

(iv) That the adoption of a general policy of encouragement of bankruptcy proceedings is unsound and unwise.

(v) That the rate of interest charged on t he wheat-farmer's debts is an important item in his total costs, but that any possible downward adjustment of interest rates chargeable to the industry could not, of itself, provide the necessary solution of the problem. F.5964.-12

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(vi) That, in order to maintain in regular production such efficient wheat-farmers as are in financial distress, contributions will be required, for the time being at least, from Governments !! representing the Nation, and from all sections of -the industry; including the creditors and the

' farmers themselves. These contributions should be for a period of years during which

reconstruction will take place and some degree of stabilization related to a new price level may reasonably be expected.

(vii) That, during this period of reconstruction, the following principles, detaiJs of which are given in the full scheme recommended by the Commission, sha.ll apply:-(a) That the Commonwealth Government, with the full co-operation of the State Governments, shall provide the machinery mentioned below, whereby

voluntary schemes of arrangement or compositions between creditors and debtor farmers are encouraged and facilitated; . (b) that, failing voluntary agreement, the debtor or any creditor shall have the right to apply to a specially . constituted Authority for the examination of the

circumstances o£ the individual case ; (c) that is essential that this Authority shall be free from all external influences and, consequently, that it shall take the form of a Court presided over by a Judge, assisted by well qualified advisers, who shall decide whether the farmer

should be assisted under the Act. (d) in cases where the Court decides that there is no reasonable prospect of the farmer being able to produce wheat at a net cost (after allowing for production of side-lines but not allowing for interest) lower than a reasonably anticipated

price for wheat, or if it finds that the farmer is unsatisfactory for other reasons, the protection of special legislation shall be withdrawn. (e) that all wheat farmers who have a justifiable hope of recovery, and who need assistance; should be assured of the necessary national support, subject to

the efficient conduct of their business. (f) that the farmer's ability to pay interest on his debts shall be assessed on a basis of prices for products and that this basis of prices shall be such as not to encourage any unjustifiedincrease in production. (g) that the assessment shall provide in " working costs " for inter alia a reasonable

m.inimum maintenance both for the fanner and his family and for the farm and its necessary appurtenances, so that the efficiency of the asset shall be maintained. In this connexion the problem of the provision of n10ney for rnaintenance and replacement of necessary farm machinery assumes considerable importance. The Commission has found that the neglect of, or failure to recognize the necessity for a regular provision of money for this purpose has led to the over-estimation of the profit on fanning operations in a number of instances. Much far1n machinery is at the present time seriously worn and comparativelyinefficient, necessitating replacement by new or secondhand · machines. In such cases the Court shall have the power of obtaining for the farmers loans o£ the money.

(h) that all debts upon which interest can be paid on the basis of the assessment shall remain "liquid", and that all other debts which cannot be paid or upon which interest cannot be paid shall be "frozen ", and upon the "frozen" portion of the debts no interest shall be payable or accrue. (i) that the debts shall retain their cust01nary order of priority. (j) that in the event of an increase in incorne through higher prices of products and/or

increased efficiency o£ production the surplus which occurs shall be used in the first place to provide a reserve for working expenses in the following year, and any furthet surplus shall be divided between the £armer and the creditor owning the '' frozen" debts. The rate of such distribution shall be 25 per cent. to the farmer and 7 5 per cent. to the said creditors. (k) that the Courts adn1inistering the scheme shall have discretion in respect to the

for which the protectio_n sha_ll apply in each particular up to a

lim1t of seven years, unless this penod be extended later by Parliament. (l) that at the end of the determined period the case of each farmer concerned 'shall be reviewed. All debt's of the farmer which are then adjudged to have no value shall be cancelled, the value of the estate to the creditors being determined

on the basis of the net earning capacity of the property. (m) that in order to establish and rnaintain uniformity as regards policy in the administration of the legislation the Commonwealth shall, if practicable, arrange, at the initiation of the work and from time to time, such conferences

of t.hose responsible for its operation as seem desirable ..

23'1

536. At first glance a period of seven years of suspension may seem too long; but the following considerations render a· relatively lengthy period desirable. The uncertainty of the future level of wheat prices makes any hasty readjustln ent by compulsion unfair to the creditors; and any such readjustment would not be welcomed by many farmers, who desire to meet all their legal obligations if they possi bly can. Further, the longer the period the less import ant will be the effect of seasonal fluc tuations in productivity. Lastly, a considerable period of time will be required to permit the credit structure of the country t o adjust itself to any reduction of assets which in the end may prove to be unavoidable.

537. In drawing up this scheme t he Commission has endeavoured to submit a plan which should ensure the continuation in production of efficient wheat-farmers on suitable farms as a portion of the economic life of the Nation. At the same time t he schen1e is designed to protect as far as is possible the int erests of the credit ors inasmuch as suitable farnwrs wh o have hope for the future are the essential assets to the creditors of the wheat-growing industry. It is necessary to emphasize t hat unless this condition is fu lfilled the creditors' present assets will in many cases

become of less and less value. The Commission is convinced that unless t he debts of wheat -fann ers can be shown to have a productive value after a period of practically twelve years frorn t he commencement of the depression in 1930, it will he useless to n1aintain ths existence on paper of such debts with t he corresponding detrirnental efiec t upon the rnent al condition of the wheat-farmers concerned. The mini1num of justice t hat can be done to an efficient fa rmer who has carried out his work t horoughly and loyally and has n1aintained t he asset in t he farm over

a period of years in return for a home and fo r maint enance, is to leave t he farm wit h him subject to the payment of such int erest-on capital as is fairly assessed under t he conditions of stability then predicated. If the creditor expects more t han t he assessed capital value of the property, then he is assuming t he re-existence of a condition of affairs which led to t he present deplorable

difficulties.

538. The scheme of financial readjustment submitted by t he Commission cannot be operated successfully without considerable and continuous contributions from t he J ust as the £12,000,000 granted to t he wheat industry in t he form of bounties by t he Commonwealt h during the past four years, has materially helped t he creditor as well as t he debtor within t he industry,

so t he fut ure contn bu.tions t o the price of wheat recommended by t he Comrnission and t he costs of administrat ion and supervision of t he schen1e of readjustment will in a measure be t he assistance of the community to both t he farrners and the creditors. In addit ion, a large percentage . of t he moneys required as for working capital by t he farmers who will be helped under t he scherne must be prov1ded by the Governments.

• 539 . The position of some \\-heat-fanners, particularly t hose holding small area.s or situated in unreliable district s, is beyond hope. rihe Commission has given anxious t hought t o t he wisest and best steps which should be taken by t he Governments. Regretf -lly , but unanimously, t he Commission has come to the conclusion that in the interests of the Nat ion, of t hese farmers themselves, and of t lre more economically sound sections of the wheat industry, the t ime has

come when reconstruction should begin. The readjustJnent of areas, t he replacmnent of inefficient farmers and the gradual reorganization of farm production in t his section of the industry should be To t his end., .t he :withdrawal of

of special moratonum 1eg1slatwn IS essent1al and pr ov1s1on IS made accordingly m the recommendat ions submit t ed.

540. The scheme of financial readjust ment is based upon ant icipated Commonwealth The 9 om!-D-ission was, forced .to t his after having. investigated the

of legisl.atwn ,by t he w1th such c: ommo:awealt h as ?e necessary

because 1t was advised t hat the readJustment of debt s accordance wtth the abtltty of debtors to pa.y is, properly speaking, under t he Constitution a matter for Commonwealth legislation. Furthermore, uniformity of act ion in this matter most desirable. T.he Commission suggests t hat the Commonwealt h should take steps t o obtain the full co-operatwn of t he States with a

view to utilizing State administ rative machinery and personnel as far as practicable; and thus avoid overlapping wherever possible.

541. In formulating scheme Commission not into account any proposal

by the t o assist m the reco_nstructlon of the y the provision of

funds for hqu1datmg by of the debt 1s not represente by

product ive assets under the cond1t10ns whiCh obtam present nne. Any scheme intended to effect such a readjustment ould require an orga .zat1on the s me type as t hat wh ich has been suggested by the Commission, because t he bas1s of adJustment is still t he assessment of the individual case.

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542. Evidence has shown that while in some cases farmers' debts have been reduced by arrangement between the debtor and creditors, in other cases creditors have merely written down the indebtedness of farmers in their books; in this latter case the debtor is not relieved of his liability and any scheme for the allocation of Government funds for accelerating compositions would lead to the revival of such debts. · In the event of such a revival, the Commission's estimate of the total debt of the wheat industry would be found be an under-sta ternent.

5. SCHEME RECOMMENDED BY THE COMlVIISSION FOR THE :FINANCIAL HECONSTRUCTION OF THE WHEAT IND-USTRY. 543. That legislation be enacted by the Commonwealth Parliament to provide-(a) for the effecting by agreement of compositions, schemes of arrangement or

extensions of time in respect of farmers' debts and obligations; (b) for the formulation and enforcement in appropriate cases of schemes of readjustment of farmers' debts and obligations in accordance with their ability to pay; and for such purposes-

( c) for the creation of Debt Adjustment Courts ; (d) for the creation of such Commonwealth administrative organization as may be necessary to promote uniform administration throughout the Commonwealth; and (e) for the appointment of District Debt Adjustment Officers and such other officers

as may be required for effective administration. 544. That each Debt Adjustment Court shall consist of a single judge. In order to assist the judge in arriving at his determinations, two consultants shall be appointed who shall sit and confer with him. One of such consultants shall be chosen because . of his practical knowledge of farmers' affairs and the other because of his practical knowledge of affairs.

545. A uniform procedure for all Debt Adjustment Courts shall be prescribed by the legislation referred to above or by regulations made thereunder. 546. The District Debt Adjustment Officers shall be officers of the Court, and they and such other officers as may be necessary shall, unless the work can be done by State officers under an arrangement pursuant to Section 78 of the Qommonwealth Public Service Act 1922, be appointed by the Governor-General.

•

547. A farmer who is unable to meet his liabilities as they fall due may make a proposal for a composition, scheme of arrangement or extension of time and may lodge such proposal with the District Debt Adjustment Officer. Any creditor of a farmer may lodge with the District Debt Adjustment Officer an application that the farmer be required to make a proposal for a composition, scheme of arrangement or extension of time; and on the receipt of such an application the District Debt Adjust1nent Officer shall require the farmer to make and lodge such a proposal within a prescribed period.

548. On the lodging with the District Debt Adjustment Officer of a proposal, no creditor whether secured or unsecured, shall have any remedy against the property or person of the farmer, or shall commence or continue any proceedings under the Com1nonwealth Bankruptcy Act, or any action, execution or other proceedings for the recovery of a debt provable in bankruptcy, or the realization of any security, except by leave of the Court or of the Court of Bankruptcy and on such terms as the Court may impose; provided, however, that the stay of proceedings herein provided shall not be effective for more than sixty days from the date of the filing of the proposal with the District Debt Adjustment Officer, unless the Court extends the time for the purpose of any proceedings in connexion with the proposal. The stay of proceedings herein provided for shall be applicable only to the first proposal lodged by a farmer and a stay of proceedings shall not operate in respect of any other proposal subsequently lodged by him.

549. A proposal under this Part .may provide for a composition or a scheme of arrangement or an extension of time, in relation to a debt owing to a secured creditor, but in that event the concurrence of the secured creditor shall be required. In the event of a proposal concurred in by a secured creditor not being accepted by the creditors pursuant to the provisions of paragraph 559, or not being approved by the Court, the concurrence of the secured creditor shall be without prejudice to his rights in respect of any subsequent proposal in relation to the farmer's affairs whether under this Part or Part 2 hereof.

550. The District Debt Adjustment Officer shall assist a farmer who desires or is required to make and lodge a proposal under this part- .

(a) to prepare-(i) a full stat1nent of his assets and liabilities and a complete schedule of his creditors and debtors in a form to be prescribed ; (ii) a full statement of his farm operations over the past five (5) years in the

prescribed form (Schedule B.) ; (iii) an estimate of the net productive capacity of the farm upon the following bases of prices:-(a) Wheat-3s. per bushel free on rails at shipping ports, inclusive

of any Commonwealth assistance. ·

Wool-6d. per pound in farmers' lots free on rails at shipping ports. Fat lambs-lOs. per head at sidings. Other farm products-Current prices.

. Provided that if in respect of any particular district the Court is satisfied that the prices set forth above for wool or fat lambs are excessive or inadequate the Court may in respect of that district fix higher or lower prices than those

so set forth above. (b) working expenses as set out in Schedule A; and (b) to formulate a proposal based thereon to his credit?rs.

551. As soon as practicable after the proposal has been lodged, the District Debt Adjustment Officer shall post a copy of the proposal to each creditor and require each creditor to submit a proof of debt. He shall also advertise as prescribed for proofs of debt. A proof of debt shall be in a prescribed form and shall be verified by affidavit and shall state (inter alia) whether the creditor is or is not a secured creditor. ·

552. Whenever a proposal relates to the rights of a secured creditor, and is concurred in by him, such creditor shall be entitled to prove only for the difference between the amount of money to which he would be entitled under his security and the amount of money to which he will be entitled under the proposal.

553. The District Debt Adjustment Officer shall endeavour to obtain the consent of the creditors to the proposal and for that purpose he may communicate in writing with the creditors individually, or he may, at his discretion, instead of or in addition to such communication call a meeting of creditors.

554. If the District Debt Adjustment Officer decides to call a meeting he shall do so by notice in a prescribed form delivered or posted to the farmer and to each creditor of whom he has know ledge. ,

555. The shall be held at a time and place to be determined by the District Debt Adjustment Officer, having regard to the interestsf o£ all parties.

556. A District Debt Adjustment Officer shall be the Chairman and shall have the control of the meeting and its business. He may adjourn the meeting from time to time.

557. Any creditor whose proof of debt has been admitted by the District Debt Adjll.stment Officer may vote personally or by proxy.

558. The proposal may be amended by the meeting at the discretion of the Chairman, but any such proposal as amended shall be subject to t he consent of the farmer and shall not affect, except by consent, the rights of secured creditors.

559. Subject to the provisions of paragraph 558 hereof, a proposal shall be deemed to be duly accepted by the creditors, if, at thE' meeting convened to consider such proposal or at any adjournment of such meeting, a majority of all the credit ors and holding three-fourths in amount of all proved debts present in person or by proxy at such meeting and voting on the

proposal resolve to accept it either as made or as amended.

560. If a proposal is accepted by the creditors, the Distnct Debt Adjustment Officer shall submit the proposal for the consideration and approval of the Court.

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561. The Court shell refuse to approve the proposal if it is oft he opinion that the terms of the proposal are not reasonable, or are not calculated to benefit t he general body of creditors or to ensure the retention of the farmer on his farm ; and t he Court may refuse to approve the proposal if t he farmer has been guilty of an act or omission which would be an offence under Section 210 of the Con1n1.onwealth Bankruptcy Act . In any other case t he Court may either

approve or refuse to approve the proposal.

562. Whenever a proposal has been approved by the Court, the Court may order the farmer to execute any mortgage or other instrument necessary to give effect t o the proposal.

563. A proposal n1ay provide for the of the farmer for the creditors by some

person approved by t he creditors. The supervisor shall report and account from t in1e to tin1e as may be required by t he District Debt Adjustment Officer . The cost of such supervision may be dealt with by t he proposal but the Court shall, at any ti1ne, have power to revise or amend any proposal in t his rna tter.

564.-(l.) Where a proposal has been approved by the Court and default has been made thereunder by the farmer, no action to enforce the composition, scheme of arrangement or extension of time will lie, but the remedy of any persoh interested shall be by application to t he Court.

(2 .) The provisions of 8Jny composition, scheme of arrangement or extension of t ime may be enforced by the Court on application by any person interested and any disobedience of an order of the Court n1.ade on the application shall be deemed contempt of Court.

565. If-(a) default is made by the farmer in carrying out the t erms of any cmnposition, scheme of arrangement or extension of time, and the Court is satisfied that such default is not due to causes beyond the control of t he farmer; or (b) it appears to the Court on satisfactory evidence that the com.position, scheme of

arrangement or extension of time cannot, in consequence of legal difficulties or for any sufficient cause, proceed without injustice or undue delay to the creditors or to the farm.er or that the approval of the Court was obtained by fraud, the Court, if it thinks fit rnay, of its own motion or upon the application of any person concerned, annul the eomposition, schen1e of arrangement or extension of ti1ne, but without prejudice to the v11lidity of any sale, disposition or pay1nent duly made or thing duly done under or in pursuance of the composition, scheme of arrangen1ent or extension of time.

566. I f--

(a) a after being required t o submit a proposal pursuant to the provisions of paragraph 54 7, fails to do so within the prescribed time ; or (b) a composition, schen1e of arrangernent or extension of time is annulled under the provisions of paragraph 565, and the Court in making the order of annul­

ment· does not otherwise order :

then, notwithstanding the provisions of any State law, any creditor may sue for the recovery of any debt, obtain judgment thereon and levy execution for the enforcement of the judgment, and may exercise his rights in respect of any security for any debt.

567. No action taken by a fanner to ob-tain the consent of his creditors t o a proposal shall be deemed to be an act of bankruptcy under the Comn1onwealth Bankruptcy Act and amendments thereof. PART !I.-ADJUSTMENTS IN DEFAULT OF AGREEMENT.

568. In any case where a farmer has made a proposal under Part I. , but such proposal has not been approved by t he creditors, any creditor or the farn1er may lodge a written request with the District Debt Adjustment Officer t hat t he Court shall endeavour to formulate fo r submission to the credit ors and the fanner an acceptable scheme of readjustn1ent of the farmer's debts and obligations in accordance with his ability to pay.

569. The District Debt Officer shall, upon receipt of such written request,

prepare a report which shall, as fully as possible, deal with the following matters :-(a) the proceedings in relation to the farmer's proposal ; (b) the productive capacity of t he farmer's land; (c) t he farn1er's costs of production; (d ) t he nature and value of the farmer's assets ;

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(e) the farmer's liabilities; (j) the manner in which the farmer has managed his farm and affairs generally; and (g) any other matters which he considers relevant, and shall transmit to the Court-

(i) the written request of the creditor or farmer; .

(ii) the farmer's proposal and all statements furnished in connexion with such proposal ; and (iii) the report referred to above.

570. The Court may decline to formulate a scheme in any case in which it cqnsiders that it would be unfair or unjust to the farmer or the creditors to do so, and thereupon, notwithstanding the provisions of any State law any creditor may sue for any debt and may obtain judgment thereon and may levy execution in enforcement of such judgment and may exercise his rights in respect of any security for any debt.

571. Subject to the provisions of paragr'1ph 570, the Court shall endeavour to formulate a schen1e acceptable to the creditors and the farmer based upon the matters referred to in paragraphs 569 and 574, and may hear evidence and shall consider representations on the part of those interested.

572. A scheme formulated by the Court shall not, except by consent of the creditor concerned, provide for the reduction of the amount of any secured or unsecured debt or any part thereof before the expiration of a period of seven (7) years from the date of confirmation of the proposal; but it may, with or without such consent, provide for one or more of the following matters:-

(a) for the postponement of the payment-of the whole or any portion of any secured or unsecured debt for a period not exceeding seven (7) years; (b) for the reduction of the rate of interest payable in future on any secured or unsecured debt to a rate not exceeding 1 per centum per annun1 below the

rate current for bank overdraft mortgages or to 4 per centum per annum whichever is the lower; (c) that any secured or unsecured debt or any part thereof shall be interest-free for any period not exceeding seven (7) years; ..

(d) that, for such period as the Court n1ay detern1ine but in no case exceeding seven · (7) years the affairs of the farmer shall be supervised by a trustee or Committee of Management or by an authority constituted or officer appointed under any Commonwealth or State Act appointed by the Court : Provided that in

making any appointment the Court shall consider any nomination in this by creditors.

573. The Court may attach to any scheme such other conditions not inconsistent with the provisions of paragraph 572 _as the Court thinks fit.

574.-(1) In considering the merits of each case and in formulating a scheme, the Court shall have regard to :-(a) the interests of all parties concerned ; (b) the economic conditions of the industry;

(c) the productive capacity of the farmer's land; (d) the costs of production ; (e) the nature and value of the farmer's assets; (f) the manner in which the farmer has managed his farm and affairs generally; (g) a reasonable living standard for the farmer; .

(h) any remissions, adjustn1ents or concessions in relation to debts which have already been made voluntarily by a creditor ; and (i) any other circumstances which the Court thinks relevant.

(2) The Court shall also consider and, if necessary, amend the information and accounts supplied under the provisions of paragraph 569.

575. When a scheme has been formulated, it shall be placed before the creditors and the farmer; and if approved, shall be confirmed by the Court. If it is not approved by the creditors and the farmer, the Court may nevertheless confirm it either as formulated or as amended by the Court.

576. The Court may in its discretion at any time during the currency of any confirmed scheme, and either upon the application of any person concerned or of its own motion, amend or supplement the terms of such scheme.

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577. The Commonwealth shall provide funds wherefrom may .be advanced frorri time to time, as reco1nmended by the Court-(a) the working expenses of any confirmed scheme, or any part thereof; (b) any loans for development pursuant to the provisions of paragraph 587;

(c) any loans for the purchase of plant and machinery (including tractors) pursuant to the provisions of paragraph 588.

578. The income arising each year from ·the operations of a farmer working under a confirmed scheme together with any amounts in the reserve fund referred to in (d) hereunder shall be applied in the following order :- -

(a) payment of working expenses as set out in Schedule A; _ (b) repayment of any money advanced purs11ant to the provisions of paragraph 577 (a) together with any interest thereon; (c) payment of interest payable under the scheme; (d) payment into a reserve fund of an amount equal to the estimated working

expenses (as set out in Schedule A) of the following year ; (e) the farmer for his own use of 25 per cent. of any balance then

remaining ;

(j) the division of the remaining 75 per cent. pro rata in reduction of postponed debts. Provided, however, that ·any moneys derived from live stock shall be applied first in payment of any amounts which the farmer has agreed, with the consent of the trustee, to pay out of such moneys to the mortgagee holding security over such stock.

579. From moneys in the account referred to in item 7 of the Working Expenses as set out in Schedule A, there shall be paid, in respect of such plant and machinery (including tractors) as is found by the Court to be necessary for the efficient operation of the farm, such instalments as the Court may order-

(a) for the purpose of extinguishing debts owed by the farmer to any owner under hire purchase agreement or to any vendor or mortgagee of such plant and machinery (including tractors) in respect t o the hire or purchase thereof; (b) for the purpose of extinguishing such part as the Court may determine of a debt

incurred by the farmer for purposes other than the purchase of such plant and machinery (including tractors) and secured thereon.

580. If the Court is satisfied that a farn1er has worked satisfactorily under a scheme, the Court shall, at the expiration of seven (7) years from the date upon which it confirmed the scheme- ·

(a) estimate the then value qf the farmer's assets according to their productive capacity ; and (b) release the farmer from such portion of the debts then owing by him as is not represented by the value of his assets so ascertained:

provided, however, that the Court may take such action prior to the expiration of seven (7) years, if it is satisfied that the economic position of the industry in which the farmer is engaged has reachedl a condition of stability such as to warrant a permanent review of his debts and obligations.

581. Any amount in the reserve fund pursuant to the proyjsions of paragraph 578 at the time action is taken_ by the Court pursuant to the provisions of paragraph 580, shall be transferred to the farmer for the purposes of meeting working expenses, but shall be an asset within the meaning of the provisions of paragraph 580 (a) for the purpose o£ fixing the portion of the farmer's debts to be released pursuant to the provisions of paragraph 580 (b).

582. Upon any order for release being made under the provisions of paragraph 580 the following ·conditions shall apply :- ·

(a) debts secured on any asset at the time of making such order shall be charged thereon according to their priorities to the extent of the value of such asset,

any secured debt or portion thereof not then covered by such value shall

be deemed to be an unsecured debt; (b) the Court may, in cases where it thinks fit to do so, order the farmer to execute and the secured creditor to accept a mortgage in a form approved by the Court of the asset charged under sub-clause (a) hereof to secure repayment of the

debt remaining charged thereon. Such mortgage shall be for a term not exceeding three (3) years and shall provide for payment of interest yearly at the rate of interest current at the date of the mortgage; ·

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(c) if the farmer shall neglect to sign the mortgage within the prescribed time, then the Court may annul the order made under the provisions of paragraph 580 . . (d) if the secured creditor shall neglect to accept the mortgage in a form approved by the Court he shall nevertheless be debarred for the term of the mortgage

ordered by .the Court from exercising any of his rights in respect of his debt; (e) unsecured debts shall be discharged to the extent that they are not covered by the value of the unencumbered assets ; and the claims of individual unsecured creditors shall abate pro rata; (j) notwithstanding any State law to the contrary, a creditor, whose claim in respect

of any unsecured debt has been fixed under sub-clause (e) shall not except by leave of the Court, commence or continue any action or other proceeding for the recovery of his claim or levy any execution for the enforcement of any judgment during the term of any mortgage ordered by the Court under sub­ clause (b) hereof unless any mortgagee under any such mortgage has duly exercised any of his rights under the mortgage; and any action or proceeding taken or continued or execution levied contrary to this sub-clause shall be

void and of no effect.

583. So far as reasonably practicable the trustee or other authority controlling the farmer's operations under any confirmed scheme shall, when obtaining necessary supplies, give preference to the existing trade creditors of the farmer.

584. If-(a) default is made by the farmer in carrying out the terms of any scheme confirmed by the Court and the Court is satisfied that such default is not due to causes beyond the control of the farmer, or

(b) it appears to the Court on satisfactory evidence that a scheme confirmed by the Court cannot, in consequence of legal difficulties or for any sufficient cause, proceed without injustice or undue delay to the creditors or to the farmer or that the confirmation of the Court was obtained by fraud,

the Court, if it thinks fit, may of its own motion or upon the application of any person concerned, annul the sc4eme, but without prejudice to the validity of any sale, disposition or payment duly made or thing duly done 1mder or in pursuance oi such scheme.

585. If' a scheme is annulled under the provisions of paragraph 584, then unless the Court otherwise orders, any creditor may, notwithstanding the provisions of any State law, sue for the recovery of any debt, j.udgment. thereon and levy exe.cution for the enforcement of the judgment, and may exerCise his rights In respect of any security for any debt.

586: No action taken by a farmer under this Part shall be deemed to be an act of bankruptcy the Commonwealth Bankruptcy Act andi amendments thereof. ·

587. Upon the application of any farmer whose affairs are being considered by the Court pursuant to a request under the provisions of paragraph 568, or who is working under a scheme confirmed hereunder, if the Court is satisfied-(i) that the farmer's land is not fully developed or is not being utilized in the most

profitable forms of production ; and (ii) that he is in all other respects an efficient farmer, (iii) that a loan for the further development of the farmer's land or to enable the farmer to utilize his land in more :profitable forms of production is reasonably

calculated to improve the economics of his production, and (iv) that the application is recommended by the Department o£ Agriculture of the State in which the land is situated, and (v) that the secured creditors of the farmer consent to the action proposed, the Court may recommend that a loan be granted from funds provided. for that purpose pursuant to the provisions of paragraph 577 by the Commonwealth and, subJect to the grantin.a of the loan, may extend the term of the scheme for any period not exceeding five ( 5) years.

0

Such loan shall constitute a charge upon the said land and shall take priority to any other debts secured or charged thereon.

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PART III.

588. If the Court is satisfiecl-(i) that a fanner's plant and machinery (including tractors) is seriously worn a.nd ineffic ient, and (ii) t hat replacements are essential, and (iii) t hat t he moneys in the account referred to in item 7 of "Working Expenses, " as

set out in Schedule A are defic ient for the purpose of enabling such replacements t o be effected, and •

(iv) t hat the farn1er is unable to make good such deficiency either from his own funds or from moneys borrowed from his creditors or otherwise and is thereby unable to. effect such replacements,

the Court may recomrnend t hat a loan be granted from funds provided for that purpose pursuant to the provisions of paragraph 577 by the Commonwealth.

Such loan shall const itute a charge upon and be repayable by annual payments from the account referred t o in Item 7 of" vVorking Expenses" as set out in Schedule A .

589. The provisions of the legislation recornmended shall not apply to any debt, secured or unsecured, contracted after the dat e of this report; but shall apply to any debt contracted before t hat date for which a secuJ'ity is renewed after that date or given after that date for a debt cont racted before t hat date.

590. All applications t o t he Court hereunder shall be heard and determined in Chambers.

591. The Court shall not order costs to be paid by any party to proceedings hereunder, unless t he Court thinks t hat any application has been made without reasonable grounds therefor . or t hat any party, by his conduct in any proceedings, has put any other party to unnecessary expense.

592. There shall be no appeal from any approval, confirmation or other order of the Court except on a question of law.

593. In computing the time within according to law, any creditor 1nust commence proceedings or take any st ep in proceedings, no account shall be taken of the period during which such creditor's rights hC\!ve been post poned under any proposal or scheme approved or confirmed by the Court.

594. No trustee shall be chargeable with breach of trust by rea.son of his consent to or failure to object t o BJny proposal approved or scheme confirmed or any order made under the provisions hereof. SCHEDULE A.

" Working expenses " shall be deemed to exclude interest but to include the following items:--(1) R easonable maintenance for the farn1er and his family including clothing and other personal essentials and rnedical and dental expenses.

(2) Wages for hired labour, including adult children of the farmer, properly employed in t he production of farm income. .

(3) Reasonable wages of other children of the farrDer properly employed in the production of farm income. ( 4) Reasonable expenditure properly incurred in cleaning wheat, in cartage and in chaffcu tting.

NoTE.-This itmn should be incurred only in cases where circun1stances are such that these operations cannot be performed by the farmer with the plant and labour at his disposal. (5) Expenditure necessary for the purchase of all commodities required for the

purpose of operating the farm. NoTE.-In this item should be included the cost of petrol, kerosene and oil for use in a tractor if it is established that the use of such tractor is justified by considerations of econon1y and efficiency. (6) An amount for maintaining permanent improven1ents on the land utilized for

farming or grazing, but not to exceed in any one year £20 or a sum computed at the rate of 6d. per acre of the land so utilized whichever is the greater. NoTE.-The amount provided for herein shall be placed in a special account by the t rustee and shall be expended only as circumstances demand. Any balance remaining in the account at the end of each year shall be carried forward in such account.

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(7) (a) An amount for maintaining and replacing necessary plant and rnachinery (other than tractors) computed at the rate of 12! per cent. of the new cash value delivered at local siding of such plant and machinery (other than tractors) ; but if, in any particular case, it is established that such an1ount is insufficient by reason of the replacer11ent of necessary plant and n1achinery

(other than tractors) involving unusually large annual payments, the rate may be increased to such percentage and during such period as is deemed necessary. (b) The cost of maintaining and replacing tractors in cases where it is established

that the use of tractors is justified by considerations of econmny and efficiency computed at the followin g percentages of the new cash value delivered at local siding of such tractors, na1nely :- ·

(i) 20 per cent., when the tractor is used in lieu of a horse team as a major power unit; (ii) 10 per cent., when the tractor is used as an accessory power unit; (iii) 5 per cent., when the tractor is used as a stationary engine only.

NoTE.-The amounts provided for in Items (7) (a) and (7) (b) shall be placed in a special account by the trustee and shall be expended as circumstances demand. Any balance re1naining in the account at the end of each year shall be carried forward in such account. (8) Reasonable service fees for mares and/ or necessary replacements to the team. (9) Rates and taxes on the property. (10) Insurance against fire, hail and the like risks and workers' compensation. {11) Sundry essential expenses not otherwise specifie d not exceeding £20 in any one

year.

{12) Estimated essential expenses for truck or car.

ScHEDULE B.

Schedule B, which is a cmnprehensive docun1ent, is in course of preparation by the Commission, and will be banded to the Secretary of the Prin'.ce Minister's Department in due course.

6. ],!NANCE REQUIRED TO IMPLEMENT THE COMMISSION'S RECOlVIlVIENDATIONS. 595. The Commission has made an approximate estimate of the order of 1nagnitude of the financial contributions which its recommendations entail-

(i) The adoption of the principle of the Home Consumption Price would mean a direct contribution from the people of Australia which will vary according to the price of wheat: thus if the "f.o.r. port'' wheat price were 2s. 6d. per bushel, the sum raised by a flour excise of £5 2s. per ton will be about £3,250,000 ;

if the price rose to 3s. at ports this will be reduced to about £2 ,500,000 ; while at 3s. 6d. it will become about £1,750,000. If the principle be applied through a direct home consumption price for wheat the result will be approximately the same. (ii) The cost of adr.ninistering the scheme of reconstruction recon1mended in connexion

with the debts of the industry will probably average £300 ,000 per annum ; during the first two years this may be exceeded owing to the fact that the number of applicants may be large and it will be desirable to minimize delay. (iii) The "revolving" fund available t o finance the operations of farmers who cannot

obtain financial assistance from other quarters might require as n1uch ctS £3,000,000, but this will be a safe loan in view of the fact that only those farmers who are in a reasonably sound position would be assisted and interest will be a first charge. It is, therefore, probab le that n1ortgagees or traders will be prepared to undertake the major portion of all advances required under this heading. (iv) 1:1he sum for t ernporary assistance to enable farmers to recondition their machinery

mp,y require £1,200,000, but again mortgagees and traders will probably be prepared to undertake most of this advance, which will be a high grade security. (v) The sum for the equipment of wheat farms which are economic but which are not yet fully developed is very difficult to estimate, but it may be taken as

not exceeding £1 ,000, 000. The int erest on such advances will be a firs t charge on income and assets.

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596. The Comrnission has been unable to attempt an estimate of how much would be required to assist compositions by the provision of a Government contribution.

The following list summarizes these items:-(i) Contribution through home consumption price-up to £3,500,000 annually. (ii) Administration (charged to revenue), say £350,000 annually. (iii) " Revolving'' fund on loan-£3,000,000 or less. (iv) Temporary machinery loan-£1,200,000 or less.

(v) Long dated loans for permanent irnprovements, say £1,000,000.

Given proper Administration, Items (iii) (iv) and (v) will have the approximate status of first mortgage securities.

-I

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FINDINGS AND RECOMMENDATIONS. 597. In its First Report, which was dated 30th July, 1934, the Commission emphasized the serious financial position of the industry of growing wheat. It stated that wheat-growing had been unprofitable for most farmers at the prices which had ruled since 1930 and that Government assistance had been insufficient to remedy this position; that the earnings from individual effort in the industry had been out of conformity with those of other industries; that many wheat· farmers had little or no margin of assets over liabilities and were unable to meet their payments; that this situation was producing serious financial difficulty for those who trade with the industry; that the areas of light rainfall and variable soil for the development of which Governments have

been responsible were in a specially serious plight; that plant and machinery was falling into disrepair and reserves of fodder were low; that wheat-farmers were becoming discouraged and that the fear of dispossession was becoming a potent force. _ The Commission also found that the Australian consumers had been receiving their wheat

at a price approximately ls. per bushel lower than the import parity price and that, although the industry had received some cornpensations, it had definitely suffered in this regard. The importance of the industry as a source of employment and in connexion with railway tonnage and the activities of Australian ports was emphasized. It was also pointed out that numerous towns and townships are dependent, to a larger or smaller degree, on the industry, and that the wheat industry contributes a substantial proportion of Australian credits overseas.

The Commission therefore, recommended that the principle of a home consumption price for such part of the product as is consu1ned '' ithin the Common·wealth should be applied to the wheat industry ; that in order to n1aintain the industry for the being, the Commonwealth Governm.ent should provide financial assistant for wheat-growers who had sown wheat for grain

during 1934: that such assistance for one year should be provided partly from Cmnmonwealth moneys and partly from the adoption of t he principle of a home consumption price through an excise on flour at a rate varying in accordance with the :fluctuations of v.-heat prices; and that such excise sbould have due regar ·, to its effect on the price of bread and be rendered effective

by suitable amendments of customs duties on wheat and :flour. Finally, the Con1monwealth Government was recommended to urge upon the Governments of the States the necessity of taking steps effectively to protect against dispossession who were worthy of such protection.

598. In the Supplement to its First Report dated the 27th November, 1934, the Com.n1ission made recommendations with reference to the manner of distribution of the moneys which were to be made available by the Commonwealth Government for the assistance of the wheat industry in respect o£ the 1934-35 crop.

Further in order to put the assistance necessary for the industry L.1 the future on a stable basis the Commission recommend that the income from the excise duty on flour should accumulate annually as fr·om the lst July, 1935.

However, in view of the uncertainty as to the ultimate effect upon national economy as a whole, of increases in costs due to the application of the principle of the home consumption price, the Commission re?ommended that the Commmn,·ealth appoint ::"n

expert committee to consider and report as to whether the pohcy of mamta1nmg a home pnce in excess of \\'orld parity is the best means of rendering financial assistance to the primary industries.

In its First Report, the Comrnission stated that it would at a later date present the results of a. complete economic survey of the industry. This survey has been rnade and its results, together with further recommendations, are submitted in this Second Report which is divided into eight sections.

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SUMMARY AND FINDINGS.

599. Section I. deals with the world wheat position, a survey of which was essential inasmuch as it will control the future world price level of wheat. The findings of this section are-600. The Australian wheat problem is merely part of a great world problem which affects all kinds of agricultural production, and has radically changed the economic outlook for more than 70 per cent. of producers in the world.

601. For no single commodity affecting such · a range of producers and consumers throughout tp.e world has the collapse of prices been more complete than in the case of wheat.

602. The gap between costs of production and current prices of rural products is the measure of rural distress which has to be faced.

603. Constructive planning to save a grave situation has become increasingly urgent in country which relies on the export of primary commodities.

604. Devices for alleviating the burden of depressed prices upon primary producers have been adopted in almost all countries.

605. The total effect of these expedients is to diminish world trade. and to intensify the problem of such countries as Australia, which depend mainly on external markets for many of their primary products.

606. From the historical angle the present wheat crisis is no new phenomenon ; similar economic disturbances have occurred in all ages. .

607. The disturbances in international supply caused by the world war, the large expansion in wheat acreage in "new" countries and the subsequent return of European countries, particularly Russia, to normal production were the bases of the present crisis in wheat.

608. Expert opinion is u:q.animous in accepting the accumulation of abnormal stocks of exportable grain as the immediate cause of the depression of wheat prices, this accumulation being accentuated by the bounteous harvest of 1928.

609. The principle of protecting the home producer of pri1nary products has been adopted as a cardinal point in the policy of many Governments.

610. Consequently, in such countries there has been an expansion of agricultural production both by the extension of cultivation into regions which could not be cultivated under a less protective system and also by developing more intensive methods of production which would have been unsound without very considerable extraneous support.

611. UntiL there is a reversal of these policies, there will be no reason to expect that the countries concerned will be importers, except when their local harvests fa il.

612. Other policies have hastened a general trend towards the restriction of world trade into specified channels, the course of which is largely determined by specific international agreements. ,

613. The possibilities of restricting output in exporting countries include those due t o bad seasons, those due to economic conditions and those due to legislation.

614. There is a definite need for reconstruction of the Australian industry as it now exists, surrounded with the accumulated troubles of the last four years.

615. The reorganization of the Australian wheat industry must lead to a natural restriction in acreage by the abandonment of wheat-growing. in unsuitable areas.

616. A survey of the destinations of Australian exports of wheat and flour during t he past eleven years is not reassuring as regards the possibility for the expansion of this trade in the future. 617. The broad lines of the future wheat policy for the Commonwealth should embrace

the following :-(a) the maximum possible contribution by Australia to the solution of the problem . of 'the revival of international trade especially the maintenance of act ive trade relations with all countries which are prospective purchasers of wheat

and flour .

• (b) A general review of all ite1ns in the cost of product ion including debts and interest, with a iew to ascertaining the extent of relief hich the industry may expect from such sources.

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(c) The adoption of agricultural reorganization in such districts or on such farms as cannot be utilized for the economic production of wheat at price levels which rnay be expected in the next few years, after having regard to reductions in costs which rna y be expected from (b). (d) A general regard to agricultural practice in relation to the maintenance of soil

fertility in wheat areas so that a national heritage shall not be wasted; , (e) the necessity of avoiding for the present an increase in gross annual

average production in the Commonwealth and the desirability of conforming to such world-v, ide agTeements as may be made in respect to this matter. 618. The study of the results of the International Wheat Conferences from 1930 to the end of 1934 (Appendix B) indicate the grave difficulties associated with the complete fulfiln1ent of all the objectives.

619. Section II. contains the economic survey of the farming operations of 524 vYheat-farmers in the various Sta·tes. ·

620. The Commission has attempted to ascertain whether these farmers ·were a representative sample of the industry, and has concluded that such is the case (Appendix C).

621. Broadly speaking, ·the survey shows that about half the wheat-growers of the Commonwealth were producing the g;rain at a cost of 3s. 6d. per bushel on an f.o.r. ports including interest, in June, 1934. Very considerable variations have been found to occur between district and district, and between individuals within the district in respect to costs of production.

622. The successful farmers are those who have occupied their farms for long periods and developed them during periods of relatively high prices. 623. Farmers who started in more recent years either bought land at high prices or developed properties in districts more remote or more risky.

624. Fanns are in many cases insufficient in area t a employ a set of modern wheat­ growing machinery to economic capacity. 625. The factors governing success or fa ilure are too numerous and varied for any single , one to be isolated as the prime cause.

626 . The conclusion that individual farmers are to be held responsible for their relatively poor yields is not invariably justifiable, for several reasons. 627. The wide variations in the circumstances of individuals make an analysis of the reasons for varying interest costs a matter inquiry into each particular case.

628. Interest and other unavoidable charges, overhead expenses, and the chief costs of farm operations are relatively irreducible irrespective of the yield obtained ; consequently, yield is a factor of overriding i1nportance in costs on a per bushel basis. 629. There are two factors which cause a wide variation in labour costs per bushel, viz.:­

(a) farmers' sons are unable to find employment outside their own home farms ; (b) farming is rather more than a business; it is a way of life.

630. It is unreasonable to attempt to lay down any hard and fast line as to what should be expected fr01n sidelines.

631. Under existing circumstances there is a tendency to keep more sheep and grow less wheat.

632. Australian methods of wheat production require the use of a fairly large amount of machinery.

633. City influence has been partly responsible for the lavish purchase by farmers of machinery. 634. Some farmers are fanning under a system which is not suited to the type of soil, or are inefficient in their operations.

635. For the purposes of its investigations the Commission defined a "wheat-grower" as a man who annually plants more than 100 acres unCler -wheat and who obtains the major part of his livelihood from growing this crop. 636. There are between 60,000 and 70,000 growers of wheat in Australia of whom between 40,000 and 45,000 come within this definition. The costs of production in the case of •the others should be approximately the same as those of the main group as defined (Appendix C) .

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637. Section Ill. contains a survey of the industry in relation to its indebtedness.

638. Apart from labour, the interest on borrowed capital is the largest single item in the costs of the average wheat-grower.

639. It is estimated that the total debt of the wheat-growers of AustJalia amounts to about £151,000,000. ·

640: Of this sum approximately £37,000,000 is due to private mortgagees, about £33,000,000 to Joint Stock Banks, roughly £30,000,000 to Government organizations (other than State Banks), about £20,000,000 to State Banks, and £14,000,000 to Trustee, Assurance and other finance companies.

641. The sum due to unsecured or partly unsecured creditors is in round figures £15,000,000. This figure does not include considerable sums which have been written off in the books of creditors.

642. Although there are some farmers who have no liabilities, and a few who have substantial sums on deposit account, yet in general, the possession of a credit balance with a bank is no indication of a general freedom f:t;om indebtedness.

643. On a hypothetical sheep-carrying basis the total value of the assets in stock, machinery and land can be computed tentatively at about £136,000,000, under existing conditions.

644. The estimation of liabilities does not take into account the large sums of private capital which have been invested by farmers in their properties and which are not shown as debts in the Commission's calculations.

645. The Commission has divided the wheat-growers into three groups as follows :­

Group I.-Those who can pay their working expenses and meet their present interest charges when wheat is at 3s. per bushel f.o.r. ports (including Commonwealth assistance). Group 2.-Those who can pay their working expenses and meet some of their interest

charges.

Group 3.--=Those who are unable to produce wheat at 3s. per bushel f.o.r. ports, even if they were free from all interest.

646. The Cornmission emphasizes that this subdivision is a very approximate one but, using it as a basis, it finds that Group l contains 40 per cent. of the growers; Group 2, 26 per cent., and Group 3, 34 per cent.

647. The distribution of the debts according to farm acreage and according to various classes of creditors shows interesting differences in various districts and den1onstrates that the major problem of the wheat industry as a whole is the amount of indebtedness in districts which are uneconomic at the present price level.

648. Section IV. contains a detailed consideration of some of the more important component factors in costs.

. 649. At the present time some farmers have rather more machinery than they actually requue.

650. It is questionable whether the saving in time which may be effected by using costly modern machinery in place of strippers and winnowers is justifiable in districts in which favorable harvesting weather may be expected for weeks on end.

651. The farmer's chief concern is that the price he receives for ills product has fallen to a much greater extent than the price he is called upon to pay for the ma.chinery he uses in growing that product. .

652. In general the Australian farmer is to-day paying no more for his machinery than he would have to pay if machinery were not made locally and were imported duty free. The fall in the value of the Australian pound has been a contributing factor.

653. The Co!-fimission suggests that, as the agricultural machinery industry is now firmly established in Australia, and is an essential part of that section of the national life which is with rural production, its outlook should be that of a public utility.

654. The interests of the wheat-growing industry and of the manufacturers of agricultural implements are in the final issue, identical. F.5964.-13

L .

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655. During the depression there have been some reductions in the prices of agricultural machines in Australia; further reductions may be reasonably expected as a result of an improvement in the prosperity of farming industries. 656. The cost of services given free by manufacturers to farmers is considerable, and until farmers have ceased to expect these services and have learnt the wisdom of collective buying, little improvement can be expected.

657. Some spare parts are sold at prices which must yield a high rate of profit even when the cost of services rendered is taken into account. 658. Machinery manufacturers should assist the industry by adopting a policy of standardization of parts wherever practicable, but the principle must not be carried far enough to inhibit the application of improved ideas.

659. The comparat ive value of machinery, the cost of spares and other such matters should have the attention of a small technical organization financed and directed by the industry itself. Two shillings and six pence per annum per farmer would supply the necessary funds. 660. The main deciding factor as to whether a tractor should be used or not is the mechanical ability of the farmer, but there are certain special circumstances under which tractor farming has a decided advantage.

661. The possibility of lowering tractor costs by the introduction of new types of tractor is important. Appendix E, which has been drawn up for the Commission by Mr. T. E. Moorhouse, of the Department of the Interior, deals with producer-gas fuel for power farming. 662. During the last few years, great economies have been effected by farmers in their expenditure on permanent improvements and, at the moment, many farms are not being maintained at an efficient level in respect to their improvements.

663 . Tariff amendments effected since 1932 will effect slight reductions in the costs of some of the farmers' sundry supplies. 664. The operation of t he tariff in the past has increased t he capital outlay on a normal wheat farm of 1,280 acres by about £500.

665. The importance of reducing costs of development in marginal areas is a serious matter not always recognized. 666. The principle of standardization should be adopted wherever practicable in the cases of all industries which are protected by the tariff and which supply requirements to farmers.

667. The importance of superphosphate is stressed. The efficiency of that industry has been considered and the recent fall in has been pointed out.

668. The Commission has been unable to discover any prospect of a reduction in the cost of co:r:nsacks.

669. The lack of redemption funds for railway capital in the past is one of the main causes of the railway deficits of the present.

670. Allowing for Government subsidies, the wheat-grower is paying in the four main wheat-growing States,_ a freight which is in every case below and, in some cases, 50 per cent. below, the average charge for all goods traffic. 671. It was found impracticable to determine the relative profitableness of wheat traffic to the railways, as the receipts and expenditure statmnents of the railways cannot be analysed in this way.

672. The wheat industry of Australia is of great importance to the railway systems of Australia.

673. Railway freight s have been examined and the Con1rnission has come to the conclusion that relief t o the fa rmers by reductions in freight would, under present conditions of interest and costs, be at the expense of the general body of taxpayers. Direct assistance to farmers from other sources seem s wiser because it is rec ognizable as such.

674. The nature and amount of the various charges, taxes and dues levie d on vessels ' conveying wheat overseas from the main wheat shipping centres varies fron1 port to port. 675. On a typical wheat cargo ship the average cost per ton of cargo for all port and harbour dues and charges is as follows :-At Sydney, ls. 3£d. ; at :Melbourne, ls. ; at Adelaide, 2s. 5d. ;

at Fremantle, ls. 2d.

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676. 'l'hese figures may be compared with ls. 7d. at Buenos Aires and ls. ld. at Montreal.

677. The average cost of district or shire rates to the farmer varies from 0. 3d. to l.ld. per bushel. The cost of other rates and taxes have been investigated.

678. Section V. deals with the subject of marketing wheat. It discloses the following findings:

679. As a set-off against marketing costs, shippers have the advantage of a "natural increase " in weight of wheat due to absorption of moisture . The average gain from t his source is about 0. 4 per cent.

680. The ruling scale of dockages is reasonable.

681. Under the present system, there is a wider spread between the export parity price and the price offered to farmers during the winter than occurs during the period in which wheat is being delivered to the sidings. ;rhe facts <1nd reasons are discussed.

682. Special knowledge and skill are essential in wheat trading 'but a very small amount of money capital is required, t he wheat purchased and shipped being made to sunply most of the finance by against the shipping documents. 1.

683. The f.a.q. system of selling wheat, although cheap and simple, is relatively inefficient, and definitely unjust to districts and individual farmers who produce high grade wheat.

684. It seems likely that there is, and will be, some difficulty in maintaining the standards of Australian wheat unless a new system is introduced. However, a change should only be 1nade after consultation with authorities representing t he purchasing side of t he trade and those responsible for selling Australian wheat overseas.

685. It is probable that an increase in the exchange rate would assist t he farmer and thereby enable him to pay more of his debts.

686. A controlled marketing schen1e would appear to be necessary to ensure the full henefits from any increase in the rate of exchange.

687. Under the present system of marketing, farmers are prone to rush supplies on t he market when prices are high and thus depress prices, and, when prices are low, t hey tend to withhold supplies and there is a risk of a large carry-over.

688. The present system would not be adequate to control exports if Int ernational Agreements required that exports be limited.

689. A marketing control organization would provide an alternative method for enabling the Commission's recomn1endation for a home consurnption price t o be imple1n ented.

690. Safeguards would be required to control any tendency by a central marketing a.utbority to raise the local prices unduly.

691. Farmer controlled organizations are frequently unsatisfactory.

692. There are wide differences in qualities of wheat produced in different States. Western Australia has an advantage of about 2s. 6d. per ton in connexion with ocean freights.

693. Eastern States obtain higher prices than \Vestern Australia for wheat which is used for local milling.

694. The majority of the Commission has come to the. conclusion that the advant ages of a centralized control over the marketing of Australian wheat would outweigh the disadvantages.

695. The bulk handling system can deal with mice plagues and weevil more effectively than the bag system. 696. The adoption of bulk handling systems is a matter for individual States.

697. Section VI. and Appendix F deal with the" Quality" problem in the flour obtained from Australian wheats. 698. From the standpoint of wheat export there is nothing t o be gained from a change in the " quality "of Australian wheat unless a change is likely to in an increase in the price

received, or in the quantity sold. 699. Pending the breeding of wheats combining high yielding capacity and high strength, the supply of for. home consumption can be only ?Y a guarantee

that a higher pnce for quality w1ll recompense the farmer for his diillllllShed peld.

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700. Section VII. surveys the position in Australia as regards scientific knowledge, extension and educational services. It finds that-There is an urgent need for . more technical the wheat . industry in

connexion with a number of problems, and also for extension services in connexion with farming and the home-life of the farn1er. There is a considerable lack of precise statistical information in connexion with the wheat industry in States other than New South Wales. This is of importance

in view of the fact that the collection and publication of reliable data must form the ground work on which international agreements with respect to wheat are based. Further climatological research is necessary. There is a serious shortage in the Commonwealth of a specially trained staff

available for the conduct of economic investigation into agricultural problems.

701. Section VIII. deals with agricultural reconstruction.

In it various schemes which have been adopted in other wheat-growing countries of the world are analysed.

Such schemes involve one or more of the following :­ (i) a reduction of interest rates ; (ii) a compulsory reduction of debts ; (iii) the provision of long-term and intermediat e credit organizations; (iv) the facilitation of compositions and, in appropriate cases, bankruptcy ;

(v) the suspension of part of the secured and unsecured debts for a period of years.

The findings in relation t o various schemes of debt reconstruction are embodied in sub-section 4, which is entitled " General Considerations leading to the Scheme of Debt Reconstruction recommended by the Commission," to which reference should be made.

The Commission's scheme is then stated in full.

An estimate has been rnade of the finance required to implement the recommendations.

RECOMMENDATIONS .

702. The Commission recommends:-(i) That assistance be afforded.by the Commonwealth to the wheat industry through the application of a home consumption price for flour by an excise duty on flour used within the Commonwealth as reco1nmended in the First Report

dated 30th July, 1934, and in the Supplmnent to the First Report, dated 27th November, 1934. (ii) That, if for any reason, it be found impossible or undesirable to apply the principle of a horne consumption price through an excise duty on flour, it be

applied in some other manner, as for instance, through the agency of the compulsory marketing scheme, as set out in Recommendation (iii) below, or by such other means as may be considered desirable and appropriate. (iii) That, in any case, a compulsory rnarketing scheme for Australian wheat be

adopted, provided that the n1ajority of the wheat farmers of each of three wheat exporting States express their approval of such a scheme, and that the principles upon which the compulsory marketing scheme is based shall be those recommended in paragraph 273 of sub-section 6 of Section V. of this

Heport. (Mr. Cheadle dissents.) (iv) That action be t aken by the Commonwealth to facilitate adjustment of debts within the wheat industry in accordance with the scheme submitted by the Commission in sub-sections 4 and 5 of Section VIII. of this Report.

(v) That the desirability of increasing the rate of exchange between Australia and London be referred by the Commonwealth Government for the consideration of the Commonwealth Bank Board in view 'of all of the facts relating to the wheat industry as detailed in this Report. (See sub-section 4 of section 5.) (vi) That favorable consideration be given to the suggestions contained in conclusion (i)

of the Report by Mr. T. E. Moorhouse on "Producer-Gas Fuel for Power Farming " in Appendix E of this Report.

255

(vii) That in the event of legislative action being taken with reference to time purchase agreements the special case of agricultural machinery be borne in mind. (viii) That a small Commonwealth-wide organization be set up for the purpose of investigating matters concerning the machinery used by the wheat-growing

industry, and that this organization be under the direction of and financed by the industry, through the medium of the Wheat Marketing Board-the sum so raised not to exceed one-fiftieth of a penny per bushel. (ix) That wherever practicable standards of quality be set up and adhered to in the

case of all industries which are protected by the tariff and which supply the requirements of farmers. (x) That the States be urged to adopt the findings of the Royal Commission on Taxation (1934) in regard to averaging incomes for the purpose of determining

the rate of income tax and in regard to the deduction of losses from subsequent profits. (xi) That agricultural machinery manufacturers in Australia be urged to adopt the principle of standardization wherever practicable, having due regard to the

necessity for the application of improved ideas. (xii) That the f.a.q. system be the subject of a careful investigation in buying countries, especially Great Britain, and that any new scheme adopted in place of f.a.q. system take into consideration the cleanliness and quality of the

grain.

(xiii) That the plant breeders in Australia n1ake every endeavour to produce new varieties of wheat which have the quality of "strength " in addition to the other favorable attributes characteristic of Australian varieties. · (:xiv) That the milling industry be urged to offer a stimulus to the cultivation of " high

strength" wheats in Australia by offering a guaranteed premium for ·such wheats and that the details of such guarantee should be developed in consultation with the experts of the State Agricultural Departments. (xv) That a systematic study of the seasonal and district characteristics of each wheat

harvest be instituted and where possible defects be remedied by mill additions. (xvi) That the Comn1onwealth Department of Commerce, in conjunction with representatives of the wheat-growing industry and of the mjlling industry institute a systematic study of the particular type of flour desired by each

overseas market.

(xvii) That the States .be urged to increase the extension services of their Agricultural Departments in the various wheat-growing districts and also their research staffs available for investigating specific problems connected with the wheat industry. (xviii) That the States be urged to conduct a campaign against over-cropping in districts

where such practices lead to deleterious results in the depletion of fertility and/ or the uncontrolled growth of weeds. (.xix) That facilities be afforded for an increase in the personnel and activities of the Soils Division of the Commonwealth Council for Scientific and Industrial Research

and the appropriate sections of the Agricultural Departments of the States. (xx) That the publication of quantitative results of agricultural experiments which are not conducted on sound statistical lines be discouraged by the authorities concerned. (xxi) That the Commonwealth and State authorities concerned gjve every possible

attention to the study of n1ethods for the prevention of the further spread of Hoary Cress, Skeleton Weed .and other noxious weeds. (xxii) That the States be urged to give more attention to Home Extension Services in co-operation with voluntary institutions such as the Country Womens'

Associations.

(x.xiii) That the States be :urged to increase the pers?nnel and of their. Statistical Departments, Inasmuch as the collectiOn and publication of reliable data form the neceSBary ground work for all organization and are becoming increasingly important in oonnexion with international agreements. (x.x:iv) That the research work of the Con1monwealth Meteorological Bureau be extended

with particular reference to climatological facture such as the relation of evaporation m effective rainfall.

256

(xxv) That the Commonwealth take steps to ensure the availability of a staff in close touch with the economics of rural production of Australia in order to-( i) keep information such as has been ascertained and developed in this Report up-to-date,

(ii) reduce the time and expense of conducting any future special investigations, and -

(iii) have availaole for such investigations, a specially trained. staff.

703. The Com1nission expresses its grateful appreciation of the assistance rendered it by the Con1monwealth and State Public Services, and by various semi-public and private institutions. At all times requests for information were willingly met.

Particular thanks and appreciation are extended to Mr. J. S. Duncan, Commonwealth Public Service Inspector fo r New South Wales and a Barrister-at-Law, who assisted the Con1mission in the preparation, collation and presentation of evidence.

The Commission also places on record its acknowledgment of the excellent work and cheerful co-operation rendered by the staff. The st aff consisted of-Mr. E. N. Robinson, Secretary. Mr. C. J. Campbell, Assistant Secretary.

Mr. J. l\L Mills, Commonwealth Crown Solicitor's Office, who has assisted Mr. Duncan. Mr. R. Henniker, Chief Accountant. Mr. G. \V. Burns I

.

Mr . J. J. McK.enna Jlnvestiaating Officers. Mr . I-I. Howqua o

Mr. L. 0. Bro·:vn Mr. W. G. Love, Draughtsman. with Clerical and Typing Assistants.

704. Mr . Cheadle's agreement with this report is subject to his dissent from the recommendation for the establishment of a controlled system of marketing Australian wheat. Mr. Cheadle's reasons for his dissent are appended.

We have the honour to be,

Sir,

Your Excellency's Obedient Servants,

E. N. ROBINSON, Secretary. 2nd February, 1935.

HERBERT GEPP, Chairman. T. S. CHEADLE I C. W. HARPER ' . .

E. P. M. SHEEDY rComm1sswners. S. M. WAD HAM j

REASONS FOR DISSENT.

705. After careful consideration of the evidence that has been placed before this Commission I see no reason to support the recommendation of the establishment of a controlled system of marketing Australian wheat. An analysis of the scheme shows it to be exactly the same as a Compulsory Pool.

706. I wish to place on record my dissociation from the views of the other members of the Commission on this point.

707. The present marketing methods, namely, the purchasing of the wheat crop by merchants on the one hand, and the operations of the voluntary pools on the other, provide the farmer with ample opp ortunity of checking one method as against the other .

•

257

708. A study of the results of previous Compulsory Pools in my opnnon proves that neither the farmer nor the consumer benefits in the long run. During the past

four years of depression and low prices, Australia has had good crops, yet there has been practically no carry-over from year to year with the exception of the last harvest. These particular years have been extremely difficult from a marketing point of view, yet the crops have been marketed under unprecedented conditions and with success. This speaks volumes for the efficient organization and methods employed by those engaged both in the internal and export trade. No organization with compulsory control as its main feature can work as efficiently or with the same degree of flexibility and

judgment as organizations having freedom of action as the basic feature of their

existence. The establishment of a compulsory pool would eliminate the present marketing system, thus removing all the stimulus to efficient and economical ruarketiug which at present is provided by competition, giving as it does the power to both the farmer and the public to compare the results demonstrated by the different organizations.

709. I therefore register my dissent from that portion of the report having reference to Controlled Marketing.

T. S. CHEADLE •

•

t .

259

INDEX TO THE SECOND REPORT.

A.

Adjustments by agreement- Between credit ors and debtors Adjustments in default of agreement­ Creditors and debtors Advisory work-Present provision for .. Agricult'ural Adjustment Act-U.S.A.

scheme Agricultural departments-General ex - · perimentation ..

Agricultural depression-Australian prices and conditions

1931-1934 Devices for alleviation of Extent of present . .

Factors of st abilisation Immediate cause of present crisis Previous crises Probable future trend

1813-1837 Recovery of 1837 to 1874 1857-1900 Recovery after 1900

1914 to present day

Appendix A.-Prices of Australian wheat from 1861 onwards . . . .

Appendix B.-International Whea t Con­ ferences, 1930 and 1931 Appendix C.- ,

(a ) Reliability of " sample" of wheat­ growers on which co sts ar e

made, and

(b ) number of wheat-growers Appendix D.-Information relative to distribution and return of question­ nair es relating to debt position of

farmers Appendix E.-Producer-gas fuel for power farming Appendix F.-The milling and baking

qualities of Australian wheats . .

Argentina-Present position of the in­ dustry Argentina-Scheme of rehabilitation Assurance companies-Wheat farmers'

indebtedness to. ( See Debt .Structure.)

B.

Bagged wheat-Handling of by mer-chants Bags-Cost per bushel Baking qualities of Australian wheat Baltic contract-Basis of wheat dealings Bankruptcy and compositions-Commis-

sion's comments Bankruptcy proceedings-Encouragement unsound Bank credits-Of wheat-growers Banks-Wheat farmers indebtedness t o.

(See Debt Struct ure.) Belgium-Exports to, of wheat and flour Wheat policy Bounties on wheat, payment of­

See Argentina. See Poland_ Britain-Wheat policy Bulgaria-Rural rehabilitation

Bulk handling of wheat

Bulk handling­ New South Walee South .Australia Viotoria Western .Australia Buying and sellin·g o-f wheat on each

trading day

Para.

547

568 304

334

312

21 4

1

34 31 5

32 8

10 12 17 19

49

320

236 83

Appendix F . 246

521

535 (iv) 104

54 36

36 495 211 213 229 236 274

280 282 281 280

an

Page_

238

240 195

206

Hl7

17 7

7

21 20 7

21 8

16 15 16 16

35

37

188

28 205

167 87 188 169

233

236 103

31 22

22 228 160 160 166 167 179

180 181 181 180

un

:1

c.

Cabl es- Extracts from, between London and wheat exporting fi r m ..

Ca nada-F .a.q. system of selling wheat F a r mer s' Cr editor s Arrangement Act Farm Loan Act Amendment Act Loans u nder Farm Loan Act Schemes of rehabilitation Present position of t he industry Capit alization of the industry-Present­

day estimate Cartage of wheat-Costs per bushel Centralized selling and marketing of wh eat Centr al and Lower North ( S.A.) -Pro­

duction costs Central market ing aut hority-Possible opposit ion t o by wheat farmers Central Plain (N.S.W.)-

Cost s of production P roduction costs Central Western Slope (N.S.W. )-Costs of production Ceylon-Exports to, of wheat and flour Char tering of wheat ships China-

Exports t o, of wheat and flour Wheat policy Climatologi cal studies Collapse of prices (see a lso Agricultural

De pression ) Compositions with cr editors-See­ Argent ina

Canada N ew Zealand Poland U.S.A. Composit ion s and bankruptcy- Commis­

sion's co mme nt s Co mpulsory reduction of farmers' debts­ Commission's co mments Control of selling of wheat Controlled marketing of wheat­

Advantages of Dis advant ages and d angers of Reasons for Mr. Cheadle's dissent Recommendations in relation to a.

scheme for Co- operative marketing associations. (See (U.S.A.)

Para_ P age.

257 171

243 168

459 223

431 220

448 221

429 220

48 28

106-107

83 87

260 175

67 44

270 177

73 64

67 44

67 and 73 64

Table 6 31

220,260, 268 161

Table 6 31

36 22

317 199

524 {vi) 234

521

528 259

255 265 705

272

233

235 175

171 176 256

178

Costs of marketing wheat . . Table 19, 223 162

Costs of product ion. (See production of wheat, co st s of. ) Credit ors and debtors-Adjustments by agreement

Adjustment in d efault of agreement Ag reem ent of compositions _ . Compulso ry r eadjustment of Continuance of ordinary relations

bet ween Extensions of time Relation bet ween . _ Schemes of arrangement Vo luntary schemes of composition Cr editor s-

Secured-Wheat farmers indebtedness to_ ( See Debt Structure.) Unsecured-Wheat farmers indebted­ ness to. ( Eee Debt Stru cture.) Cr isis. (S ee Agricultural depression.)

547 568 543 (ll) 543 (b)

238 240 238 238

535 (iii) 235

543 (a) 238

537 237

543 (a) 238

535 (viia) 236

.C urrency- Value of 524 ( iv) 234

Curren cy problems-Movements in .Aua -tra.lian , .Argentinian and Canadian for period 1st Deoemb:el', Hl20, to 27th April, HHH Fi((Ure XXX. 173

D.

Debt adjustments courts-Creation of . . Debtors and creditors. (See creditors and debtors. ) Debt structure of the industry­

As surance companies-Amounts owing to ..

Considerations and methods of in­ vestigation Cred!tors- Sccured, amount owing t o Creditors-Unsecured, amounts owing

to

Distribution of according to class of creditors . . . .

Estimation of on per acre cropped

basis . . . . . .

Estimation of (by Stales ) on the

basis of the area of the whole farm Extent of in 3,2"!7 cases examined- On farm acreage basis . . . .

Debt Structure .of the Industry­ Fertilizer Companies, amounts owino- to Financial margin of the industry o Government organizations, amounts

owing to . . . . . .

Government organizations in each State · Joint stock banks, amounts owing to Land-Value of held by wheat farmers Livestock carried by wheat farmers-

numbers and values . . . .

private, amounts owing under

Machmery merchants, amounts owing to . . . . . .

Machinery, value of held by wheat

farmers . . . .

Miscellaneous, amounts owing : : private, amounts owing to

011 compames, amounts owing to .. Other financial institutions, amounts owing to . . . . . .

St ate Banks, amounts owing to . .

Stock and station agents, amounts owing to . . . . . .

Storekee pers, amounts owing to Total debts of wheat-growers-esti- mation . . . . . .

Tr ustee companies, amounts owing to vVheat merchants, amounts owing to .. Denmark-Wheat policy Depression- (See Agricultural Depres­

sion) District debt adjustment officers Dissent from recommendation re con ­ trolled marketing Dockage-Inferior quality of wheat

E.

Egypt-to . .

Exports to, of wheat and flour Wheat policy . . . .

Emergency Crop Loans- (See U.S.A.) Estimation of wheat-farmers' indebted· ness. (See Debt Structure). Exchange rates-alterations in their

effects upon wheat prices ..

Experimental Shipments-Australian wheat . .

Experimentation- General Export trade in wheat Exports of Wheat- Australian prices ..

Beginning of Australian trade Destination of Australian International shipments wheat and flour

260

INDEX-continued. Para. l'nge.

543 (c)

90

86 90

90

Fig. XXIII.

Table 13

Table

108

90 114

90 91 93 111

109 99

96

110 103 95 100

90 92

97 101

90 94 98 36

543

705 235

14

Figure VI. Table 6 36

249

293 312 222

Figure 15 53

Table 4

238

99

99 99

99

111

107

103

lOB

99 IIO

99 100 101 109

109 102

102

109 103 101 102

99 100

102 102

99 101 102 22

238

256 166

33 31 22

110

186 197 162

n

l(l

:m

18

Fertility-Special areas of low Maintenance of . . . .

Fertilizer companies-wheat-farmers' in· debtedness to. ( See Debt Structure). l<'igure I .-Australian export prices . . F1gure H .- Annual price of wheat in

United K ingdom since 1800 . . . .

Figure IlL-Adelaide wheat prices 1861 -62 to 1933-34 . . . . . .

Figure I V. - Wheat stocks and prices

1927-1934 Figure V.-Analysis of world wheat

production 1885-1931 Figure VI.-Production of Australian wheat and flour 1923-24 to 1933-34 and countries exported to . . . .

Figure VII.- Diagram of No. 1 * costs of 524 farmers . . . . . .

F igure VIII.-Diagram of No. 2 * costs of 524 farmers . . . . . .

Figure IX.-Distribution of W.A.

farmers whose No. 2* costs were

examined . . . . . . . .

Figure X.-No. 2* costa of W.A. farmers _plus an additional £52 per farmer .. F1gure XI.-Distribution of S.A. farmers whose No. 2* costs were examined .. Figure XII.-No. 2* costs, plus additional

£52 per farmer, S.A. . . . .

Figure XIII.-No. 2* costs of production Victoria . . . . . . :.

Figure XIV.-No. 2* costs of production plus additional £52 per farmer, Vic toria . . . . . . . .

Figure XV.-No. 2* costs of production, New South Wales . . . . . .

Figure XVI.-No. 2* costs of production plus an additional £52 per farmer,

South Wales . . . . . .

F igure XVII.-Survey of relation of yield per acre to cost per bushel . . . .

Figure XVIII.-Survey of relation of interest charges and costs per bushel W.A., S.A., Vic., and N.S.W. . .

Figure XIX.-Survey of relation of

labo ur costs and costs per bushel Figure XX.-Survey of relation of ratio of receipts from side lines to wheat

. produced, to costs per bushel . .

F1gure XXI.-Survey of reia"tion of charges for depreciation and repairs to . machinery and costs per bushel Figure XXII.-Costs of production re

present financial position of wheat· growers . . . .

Figure XXIII.-Distri'bution of debts amongst various classes of creditors . . Figure XXIV.-Showing railway freight rates for artificial manures (in various

States 1911 and 1933) . . . .

Fi1,1m:e XXV.-Diagrams showing railway !reight rates for wheat (in various

States 19ll and 1933) Figure XXVI.-Diagram showing in· vested c.apital, earnings, working ex­ penses, mterest and net earnings for

New South Wales railways (years

1900-1934) ..

Figure showing in­

vested c;ap1tal, earmngs , working ex­ penses, mtl'rest, and net earnings for _Yictorian railways_ (years 1900-1934) ..

Quotas of exporting countries Restriction of Appe ndix B. 37

Figure XXVIII.-Diagram showing in­ capital, working expenses,

mterest and net earnin!Zs for South Australian railways 1900 to

1934) . . . .

F.

F .A.Q. system-Grading advantages F.A.Q. system of selling wheat Fallowing-The problem of .. Farm credit administration-U.S.A.

scheme F armers' debts- (See indebtedness) . F arming mixed-Rotations .. supplies-

Cost of Tariff considerations Fede ral F arm Mortgage Corporation-U.S.A. scheme . .

50

299 243 308

338

159 162

346

29

187 108 196

20()

198

.132 132

20S

Figure XXIX.-Buying and selling of wheat . . . . . . . .

Figure XXX.-Course of W.A. , Manitoba. and Rosafe wheat prices 1.12.30 to 27.4.31 , and price offered to W.A.

farmers an d the movements of Aus­ tralian, Argentinian and Canadian . currencies during that pe riod ..

F1 gure XXXI.-Annual rainfall Quorn S.A.. annual rainfall Hawker, S.A .. .' Fina ncial assistance for the industry­ ( See scheme for reconstruction of) .. Financial 1n stitutions-wheat farmers'

. (See Debt Structure)

Fmnnc11ll margm of the industry

543

114

Para.

309 307

20

19i 190

9

11

18

9

25

33

45

45

49

61

53

55

59

61

65

67

13

75

77

81

83

105

lll

129

13ll

141

143

146

Hl3

201

298

110

Financial position of wheat-growers .. Financial reconstruction of the industry­ Adjustment by agreement . . Adjustments in default of agreement

Finance required to implement the Commission's r ecommendations Loans for various purposes .. Scheme recommended by Commission Summary of Commission's scheme Findings and recommendations­

Commission's first report Supplement to first report . . Findings and recommendations of the Commission ]!,lour-

Baking qualities examined . . Production and country exported to France-Duties on wheat

Exports to, of wheat and flour Wheat policy . . . .

Freight rates on wheat­ New South Wales railways Victoria railways Sout h Austr alia railways West Australia railwaya Freights-Artificial manure Fuel-Tractors Future of Industry

Proposals for Australia

Germany-Duties on wheat . .

G.

Exports to, of wheat and flour Wheat Policy Government assistance­ Basis of limitation . .

For efficient farmers Further contributions necessary On basis of production Government or ganis ations-Wheat farm­ er's indebtedness to. (See Debt Struc· ture.) Grading system-Queensland . .

H.

Handling charges-Costs per bushel Hawker (S.A.)-Annual rainfall Home consumption price-Terms of Home consumption price for wheat Home extension services . .

Hong Kong-Exports to, of wheat and flour , ,

Horses-Costs per bushel . ,

rehabilitation

I.

Income tax-Incidence of, to wheat-farm· , ers ..

Increase in weight of wheat , .

Indebtedness of farmers­ Recommendations made to Commission Salient features of schemes submitted to Commission

(See also Debt structure) Interest rates R eview of individual cases .. Writing down of farmers' debts India-Exports to, of wheat and flour Inefficient farmers. (See readjustment of

areas ) Interest co sts per bushel­ New South Wales Sout h Australia

Victoria W est ern Australia Inter es t rate-Effect on overhead costs

R educt ion of-See Bulgaria See Czechoslovakia See Hungary International Wheat Conference­

P arties to

Proposals submitted International Wheat Agreement Italy-Duties on wheat

Exports to, of wheat and flour Wheat policy

261

INDEX-«mtinved. Para. Page.

Figure XXII. 105

547 238

568 240

595 245

588 244

543 238

535 (vii) 236

597 247

598 247

599 249

287 185

53 30

14 Hl

Table 6 31

36 22

Table 19 162

Table 19 162

Table 19 162

Table 19 162

Figure XXIV 129 133 123

56 32

60 35

14 16

Table 6 31

36 22

535 (ii) 235

535 (vi) 236

538 237

535 ( i) 235

302 187

83 87

Figure XXXI 201 595 (i) 245

261, 273 175

315 198

Table 6 31

83 87

495 228

199 153

234 166

503 230

516 232

535 (v) 235

531 235

542 238

T able 6 31

78 72

78 72

78 72

78 72

524 (iii) 234

Appendix B. 37

Appendix B. 37

258 172

14 16

Ta.bl e 6 31

36 22

1.

Japan-Ex ports to, of wheat and flour W heat policy Joint Stock Banks-Wheat farmers'

indebtedness to. (See Debt Str ucture.)

L.

Labour costs per bushel Land-Value of, held by wheat-farmers. (See debt structure.) Legislation for purposes of r econstruction Life assuran ce to meet indebtedness­

Comm ission's comments L ive stock-Values and number held by wheat-farmers. ( See Debt Str ucture.) Loans, private-Wheat-farmers' indebted­

ness t o. (See debt structm'e. ) Long-t er m and intermediate credit or· ganisation-Commission's comments

M.

Machinery co sts per bushel Machinery costs per bushel-Comparison between districts . .

Ma chinery-Comparison of costs in' different coun-t ries Farm values of Purchase of Sta ndardization of

" Sales pressure " Value of, held by wheat-farmers. (See Debt Structure) Values of, in !913, 1918, 1930 and 1934 Machinery merchants-Wheat-farmers'

indebtedness to. (See Debt Structure) Machinery (other than tractors) -Cost of Maintenance allowance for farmers­

Living a nd other costs Ma intenance and sundry expenses-Costs per bushel Ma intenance of standard of Australian

wheat Malaya (British)-Exports to, of wheat and flour ..

Mallee I. (Victoria)-Definition of and co st s of production Production costs per bushel Mallee II. (Victoria )-

Definition of and costs of production Production costs per bushel Mallee III. (Victoria)-Definition of and costs of production

Production costs per bushel Manure, artificial-Railway freight rates (various States, 1911 and 1933). Marketing agreement-U.S.A. scheme .. Marketing of

Advantage of the f.a.q. system Baltic contract, basis of wheat dealings Bulk ha ndling costs-N.S.W. and W.A. Bulk handling of wheat

Buying and selling of wheat on each wheat trading date ·

Central marketing authority-Possible opposition by wheat-farmers Centralized selling and marketing , proba bl e savings .. Controlled marketing, advantages of . . Co nt r olled mar keting, di sadvan tages of

Controlled mar keting-Mr. Cheadle's dissent . .

Cost s of

Description of present methods Difference between products of dif· fer en t Stat es Disadvantages of f. a.q. system of sell­

ing wheat Exc hange rates, alter a t ions in and

t hei r effec t s u pon wheat prices Existing or ganizations, destruction of Export parity Expor t tra de F.a .q. system of selling wheat I nefficient ma nagement , dangera of

Maintenance of standard of Austr alian wheat Ov erseas sales of whea t Pooli n g system

Pam.

Ta.ble !i 31

3ll 22

79 79

540 237

520 233

519 232

81 85

81 85

128 122

117 119

127 121

125 121

81 85

117 llll

115 119

535 (vii) (g) 236

83 87

262 176

Table 6 31

72 57

67 47

72 57

67 47

72 57

67 47

Figure XXIV. 129 338 206

244 168

243 168

229 166

274 179

Figure XXIX. 163

270 177

260 17fi

255 171

265 176

705 256

223 162

205 159

268 177

245 169

249 170

269 177

236 167

222 162

243 168

267 177

262 176

221 161

250 170

}

Marketing of wheat-cont·inued. Railway transport-Greater efficiency of Re commendations in relation to a.

scheme for controlled marketing of wheat Shipping expenses-New South Wales, 1932-33

South Australia, 1932-33 Victoria, 1932-33 Western A ustra!ia, 1932-33 Skill and knowledge necessary Standard of Australian wheat Merchants, ge neral-Wheat-farmers' in -

debtedness to. {See Debt Str.l!Q__ture.) Mi sceilaneous- Wheat-farmers' indebted­ ness to. {S ee Debt Struc ture ) Mi xed farming--notation Moira {V ictoria)-

Costs of production Production costs per bushel Moratorium legislation-See-

Bulgar ia Czechoslovakia Hungary New Zealand Mortgage loans-

See­ Argentina Canada New Zealand

Poland U.S.A.

Mortgagees, private-Wheat-farmers' in­ debtedness to. (See Debt Structure.) Murray Mallee (S.A.)-Production costs per bushel

N.

Netherlands-Exports to, of wheat and flour Netherlands (East Indies)-Exports to, of wheat and flour

New South Wales-Production cost s per bushel Production cos ts per bushel New South Wales railways. (See Rail­

ways.) New Zealand-Mortgagors and Tenants' Relief Act . . Recommendations of Royal Commis·

sion

Royal Commission on Da iry Industry Rural Mortgage Co rporation Hural rehabilitation Wheat policy North Centra l Plain (New South

Wales )-Production costs per bushel North Western Slope (New South

Wales)-Production costs per bushel North Western Slope and North Western Plain (New South Wales) -Produc­ tion costs per bushel

0.

Oil companies-Wheat-farmers' indeb ted­ ness to. (See Debt Struct ure) Other financi al institutions-Wheat­ farmers' indebtedness to. (See Debt

Str ucture.) Organization of wheat industry- Action necessary

P.

Petrol Commission-Investigations by Petroleum products-Cost of Phillipines-Exports to, of wheat and fl our P oland-Rural rehabilita tion . . Policies of wheat importing countries Policies of various co untries-Effect of,

on world trade P olicies of various exporting countries Pooling-The system of Population-Australian, from 1860 to

19 33 Port ch arges-Comparison Australian ports and over- seas wheat exporting countries

Cos t of Customs duty H ow administered

Para.

263

272

Table 19 Table 19 Table 19 Table 19

240 262

313

72 67

67

Table 6

Table 6

67 73

469

477 473 478 468

36

73

73

73

524 (1)

138 138

Table 6 499 35

37 42 250

Table 7

193 180 189 180

262

lNDEX--

176

178

77 77 77 77 167 17 5

19 S

ll7 47

47

33

33

47 57

224

225 ' 225

225 224 22

64

64

64

233

125 125

31 229 21

22 23 170

35

151 147 149 147 -

Port charges-continue&. Inward wharfage Light dues Nature of Pilotage P ort dues . .

Taxation-Overseas vessels Tonnage rates Port finances Port fina nces-Comparison at four major

ports P ortuga l-Wheat policy P rices of wheat. (See Wheat.) Producer gas-See Appendix E . ..:..

Australian investigations Australian sub-committee establiahed Fuel for power farming Influences retarding use of Manufacture of equipment Sub si dization of industry . .

Use in other countries Production of wheat--Acreage, principal regions and coun­ tries

Analysis of world wheat position

1885 -1931 Analysis of cost of Bases of estimation of costs Con trol of in United States of America Costs of-

Analysis of various factors Bags, in relation to Income tax, in relation to Machinery, in relation to . _ Petroleum products, in relation to Port charges, in relation to Railway freights, in relation to Rates, in r elation to Rates and taxes, in relation to Sundry farm supplies, in relation to Superphosphate; in relation to Superphosphate itemized, in relation

to

Tariff considerations in relation to Tractors, in relat ion to Water rates, in relation to Distribution of farmers according to cost Economics, possible Factors in world expansion Interest charges in r elation to cost of Labour costs in relation to cost of Principal areas of origin ..

Questionnaires, distribution of Questionnaires, t o ascertain cost of Reliability of costs investigation States-

New South Wales Queensland South Australia .. Victoria Western Australia Statistical divisions­

Central Plain (N.S.W.) Central Wes tern Slope (N.S.W.) North Central Plain (N.S.W.) North-West Slope (N.S.W.) Other districts (N.S.W. ) . . Riverina (N.S.W.)

Sout h-Wes tern Slope (N.S.W.) County Moira (Victoria) Mallee I. (Victoria) Mallee II. (Victoria) Mallee III. (Victoria) Wimmera (Victoria) Central and Lower North ( S.A.)

Murray Mallee ( S.A. ) South-Eastern (S.A.) Upper North (S.A. ) Western ( S.A.) ..

Summary of costs of Variation in costs of World fi.gures 1922-,1934 World, supplies, stocks and prices

Q.

Qualit y of Australian wh eat-Baking "quality" problem in flours of Australian wheats Baking test Definition of Diastatic activity

Para.

188 187 184 190 186 1.89 185 191

191 36

E3 E3 E6 E6 (g) E6 E6 (i)

E1

Table 5

Figure V. 75 61 336

82 150 199 115 138 180 167 200

194 159 139

144 162 129 201

611 84 43 78 79

Table 3 62 62 67

66 66 66 66 66

67 61 67 67 67 67 67 67 67 67 67 67 67 67 67 61 67 83 68

Table I Table 2

287

F. 10 F. 10 F. 10

Pace.

148 148 147 149

148 149 148 149

149 22

123 123 123 124 124 124 125 123

20

25 70 43 206

86 131 153 119

125 147 134 154 152 132 125

126 132 122 155

43 88 23 72 79

18 43 43 44

44 44 44 44 44

47 47 47 47 47 47 47 47 47 47 47

47 47 47 47 47 47 87 47 17 21

185 190 100 lllO

-Quality of Australian wheat-continued. Factors aifecting . . . . . .

High quality wheats Maintenance of Methods of measuring Past action to improve Position in regard to Possible means of improving Protein Strong varieties of wheat Weak varieties of wheat Queensland-

Costs of production Grading system in force Railway fr eight rates fo r artifici al

manures Railway freight rates for wheat 1911 and 1933 Questionnaires- ·

Number of farmers examined, N.S.W. Number of farmers, examined, Queens­ land Number of far mers examined, S.A . .. Number of farmers examined, Vic·

toria Number of farmers examined, W.A ... Representative far mers selected Types issued ..

Analysis of details of forms issued

and received Analysis of details of indebtedness Quorn ( S.A.) - Annual rainfall Quotas. (See exports. )

Railway-Accountancy methods Capital indebtedness

R.

Earnings and tonnage, 1932-33 Earnings, New South Wales .. Earnings, South Australia . . Earnings, Victoria . . . .

Excess of receipts or expenditure dur· ing years 1929-30 to 193 2-33 Freights-Alterations on wheat since 1914 ..

Basis in which fixed Comparison of rate on aU goods

traffic and wheat Cost of Costs per bushel ..

Rate of artificial manures (in vari· ous States, 1911 and 1933) Rates on wheat in 1932·33 Rates on wheat (in various States,

1911 and 1933) H aulage--Average in 1932-33 Importance of wheat industry to Interest , includi ng exchange-

New So uth Wales So clth Australia Victoria Invested capital­

New South W ales South Australia Victoria Net earnings-

New South Wa les South Australia Victor ia Receipts-Per bushel transported in

1932-33 Transport-Greater efficiency of Vlorking expenses-New South Wales

South Australia Victoria Rainfall-Annual­ Hawker, S.A.

Quorn, S.A. Rates­ Cost of Indebtedness of wheat farmers Rates and taxes-Cost of Rates of exchange--Effects on wheat

prices Rates, taxes, and insurance--Costs per bushel Readjustment of wheatgrowing areae

263

I ND:&x.--contmued. PnrA. Page.

F. 8 18iJ

292 185

262 176

F. 11 190

F. 11 190

F. 9 189

F. 12 191

F . 10 190

F . 11 190

F. 11 190

74 79

302 187

Fig. XXIV. 129

F ig. X XV. 135

c. 2 89

c. 6 94

c. 4 92

c. li 94

c. 3 91

c. 1 811

Appendix D. 114

D. 2 114

D. 3 11 5

Fig. XXXI. 201

176 139

177 140

Table 17 138

Fig. XXVI 141

Fig. XXVIII. 145 Fig. XXVII. 143

Table 18 139

169 134

171 137

171 13 7

167 13 4

83 87

Fig. XXV. 135

170 137

Fig. XXV. 135

170 137

173 138

Fig. XXVI. 141

Fig. XXVIII. l4'i

F ix. XXVII. 143

Fig. XXVI. 141

Fig. XXVIII. 145 Fig. XXVII. 143

Fig. XXVI. 141

Fig. XXVIII. 145 F ig. XXVII. 143

170 137

263 176

Fig. XXVI . 141

Fig. XXVIII. 145 Fig. XXVI. 141

Fig. XXXI. 201

Fig. XXXI. 201

200 154

203 15()

194 152

24 9 170

63 43

539 237

Recommendations of the Commission­ Assistance to wheat industry through the applicat ion of home consumption price for flo ur

Compulsory marketing scheme Facilitation of adjustment of debts within the wheat industry Desirability of increasing the rate of

exchange between Australia and London Favorable consideration of sugges­ t ions in report of Mr. T. E. Moor·

house on "P roducer Gas Fuel for

Power Farming" Time purchase agreements of agricul· tural machinery . . Establishment of a small Common·

wealth-wide organisation to inveati· gate matters concerning machinery used by the wheat-growing industry Standard of quality of requirements of

farmers A