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Wheat, Flour and Bread Industries - Royal Commission - Fourth report


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1934-35-36.

THE PARLIAMENT OF THE OF AUSTRALIA.

ROYAL COMMISSION

ON THJl

WHEAT, FLOUR, AND BREAD INDUSTRIES.

FOURTH REPORT.

Presented by Command; m·dered to be printed, 1st Apri l, 1936.

[Co 8t of Paper.- P reparatiun, not given ; 80 5 co pi es ; a11proximate cost of print in g an d publi8hi ng, £1 02. ]

Printed and Published for the GoVERNMENT of t he CoM MONWEALTH of A u sTRALIA by L . F. JoHNSTON, Commonwealth Government Printer, Canberra.

No. 234.-F.765.-PRICE 6s.

COMMONWEALTH OF AUSTRALIA.

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

To Our Trusty and 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, 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 SAMUEL McMAHON WADHAM, M.A., Professor of Agriculture, University of Melbourne.

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 f-or 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, handling and marketing wheat, manufactm;ing flour and other commodities from, whe!!-t and 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 Counpil, and in pursuance of the Constitution of Our said, Commonwealth, 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, manufacturing flouz: and other commodities from wheat, and manufacturing, distributing and selling bread:

AND WE APPOINT YOU the said Sm HERBERT WILLIAM GEPP to be the Chairman of Our said Commission : AND WE DIRECT that, any one or each of you Our said Commissioners, 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 between all of you Our said

Commissioners, inquire into and take evidence upon any matter entrusted to you Our said Commiasioners 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; (b) 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 matters entrusted to you 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, Sir Isaac Alfred Isaacs, Knight Grand Cross of Our Most Distinguished Order of Saint Michael and Saint George, Governor-General and Commander-in-Chief in and over 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 Reign.

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

ISAAC A. ISAACS, Governor-Genera].

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

FLOUR MILLING INDEX.

PAa•.

SECTION I.-HISTORICAL INTRODUCTION . . 21

(a) The evolution of the processes of flour milling 21

(b) Economic factors in the development of the industry 22

(c) The early development of the industry in certain States of Australia. . 22

(d) The development in each State from 1913 to 1933-34 26

SECTION H.-THE PosiTION OF THE INDUSTRY IN 1932-33 37

(a) The location, size and operations of Australian Flour Mills in 1932-33 37

(b) The gross production of, and markets for, Australian flour, bran and pollard during recent years 42

(c) Economic factors influencing the policy of individual flour mills 49

SECTION III.-COSTS AND CAPITALIZATION OF '!'HE FLOUR MILLING INDUSTRY 55

(a) Procedure adopted in making the investigations . . 55

(b) Procedure adopted in analyzing the costs 57

(c) Milling, selling, delivery and administration costs 1932-33 59

(d) The cost of wheat to the" coated" milling businesses, and average receipts from offals during the year 1932-33 . . . . . . . . . . . . . . 67

(e) The capitalization of the flour milling industry 68

(/) Total costs (less the value of offals) allowing a return of 8 per cent. on proprietors, capital invested . . 75

SECTION IV.-THE P:IWFITS AND LOSSES OF THE INDUSTRY 81

(a) The average prices obtained for mill products-1932-33 81

(b) The profits and losses of the" costed "milling businesses in respect to milling operations in 1932-33 83

(c) A review of the trading results of flour milling businesses during the eleven years 1924 to 1934 86

SECTION V.-TRADE ORGANIZATIONS WITHIN THE FLOUR MILLING INDUSTRY 97

SECTION VI.-EcoNoMICS OF THE ExPORT TRADE AND THE PROBLEM oF CoNTROL 101

(a) Present methods of selling export flour . . 101

(b) The relation of the prices received for flour sold on the local and the export markets 102

(c) The problem of control 108

(d) The possible effects of rationalization of the industry 109

SECTION VII.-THE INDUSTRY AND THE LocAL MARKET 115

SECTION VIII.-OTHER FACTORS AFFECTING THE INDUSTRY 119

(a) Milling industry in relation to wheat purchases 119

(b) The effect of railway freights on the industry 119

(c) Standardization of the products of flour-milling 121

GENERAL CoNSIDERATIONS LEADING UP TO THE RECOMMENDATIONS 125

FINDINGS 129

RECOMMENDATIONS 133

APPENDIX A.--FLOUR MILLERS' STATISTICAL AND FINANCIAL RETURN 135

APPENDIX B.-FACTORS INFLUENCING THE QUANTITY OF WHEAT REQUIRED TO PRODUCE ONE TON OF FLOUR 138

APPENDIX C.-SoME NoTES oN THE PRACTICE oF" HEDGING" 139

ROYAL COMMISSION ON THE 'VHEAT, FLOUR, AND BREAD INDUSTRIES.

FOURTH REPORT.

To His Excellency, Brigadier-General the Right Honorable Lord Gowrie, V.C., G.C.M.G., C.B., D.S.O. ; Governor-General and Cornmander-in-Chief in and over the Commonwealth of Australia:

MA .Y IT PLEASE· YouR ExcELLENCY :

This Commission has already submitted Reports upon the economic position of the industries of growing, handling and marketing wheat and the manufacturing, distributing and selling of bread.

The Commission now has the honour to present to your Excellency this Fourth Report which deals with the economic position of the industries of manufacturing, distributing and selling of flour.

The Repo1t embraces the following n1atters, viz. :­ ( 1) Historical introduction. (2) The position of the Industry in 1932-1933. (3) Costs and Capitalization of the Flour Milling Industry.

(4) The Profits and Losses of the Industry. (5) Trade OrganizationS within the Flour Milling Industry.

(6) Economics of the Export Trade and the Problem of ControL (7) The Industry and the Local Market.

(8) Other Factors affecting the Industry.

'

THE FLOUR MILLING INDUSTRY.

SECTION I.-HISTORICAL INTRODUCTION.

(a) THE EvoLUTION OF THE PROCESSEs OF FLouR MILLING (b) EcoNOMIC FACTORS IN THE DEVELOPMENT OF THE INDUSTRY

(c) THE EARLY DEVELOPMENT OF THE INDUSTRY IN C ERTAIN STATES OF AUSTRALIA

(d) THE DEVELOPMENT IN EACH STATE FROM 1913 TO 1933-34

PAGK.

21 22 22 26

FIGURE

FEED INTAKE OF WHEAT FROM F RMERS

EXTRACTION OF STRAWS, STICKS. SAND, DUST & LOOSE SK INS.

REMOVAL OF ADHERING CLOSELY TO WHEAT.

APPLICATION OF MOISTURE & HEAT TO

OBTAIN SAME DEGREE OF MELLOWNESS FOR ALL VARIETIES OF WHEAT.

r-------------, I

- - - - - ---- I

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

PROCESSES OF

GE ERAL VE TILATIO OF

ALL MACHI ES & OMPLETE COLLECTIO • .1 F 0

() PRO p 'f

G WHE

FIGURE ll.

CLEAN WHEAT--+

SCIENTIFIC CUTTING & OPENING OF WHEAT BERRY IN GRADUAL STAGES.

l

l

I

LO R

GRADATION & COLLECTION OF SIMILAR SIZED PARTICLES FOR

PURIFICATION, ALSO EXTRACTION OF FLOUR

_ _..,FLOU R

EXTRACTIO N OF BR 1 & FLO R.

BR

PROCESSES OF FLOUR MANUFACTURE

PURIFICATION OF WHEAT PARTICLES TO REMOVE HUSKS & LIGHT FLOURY DUST. ALSO SEPARATION OF POLLARD.

13- 14

FIGURE III.

POLLARD

PROCESSES OF FLOUR MANUFACTURE

49i>

ACTUAL PRODUCTION OF FLOUR

DISINTEGRATION OF PURE FLOUR PARTICLES IN GRADUAL STAGES.

FLOUR

FINAL CLEANING & SIFTING TO PRODUCE A CLEAN BRIGHT & FINE WHITE FLOUR. ALSO TOTAL EJECTION OF POLLARD.

FLOUR

FLOUR

FLO UR

15-16

FIGURE IV.

--------------------,

COLLECTION OF ALL FLOURS

COLLECTION OF ALL BRAN

GENERAL VENTILATION OF" ALL MACHINES &

COMPLETE COLLECTION OF DUST FROM FLOUR PRODUCING PLANT

I

I

)

PACKING OF FLOUR IN BAGS

PACKING BRAN IN BAGS

COLLECTION OF ALL POLLARDS

PACKING OF POLLARD IN BAGS

PACKING OF FINAL PRODUCTS

17-18

>

j ..J UJ t ::J C) Li: J J t-.:

19-20

l

21

I.-HISTORICAL INTRODUCTION.

(a) THE EVOLUTION OF THE PROCESSES OF FLOUR MILLING.

l. The milling industry is one which bas seen many fundamental chanaes during the course of its evolution. Very primitive mills were equipped with laro·e , stones,

the moving surfaces of which grain was slowly ground. The lower stone was usually

artificmlly hollowed and the upper one shaped so as to fit into it. In the lower stone a bole or groove was made through or along which the powdered wheat could gradually pass. After grinding, the meal was sifted over a series of sieves made of bolting silk. Although this type of equipment seems primitive when compared with a modern mill, yet such plants achieved a considerable degree of efficiency and gave a fairly high extraction of flour.

2. During the last century more and more of the world's wheat supplies were being drawn from countries of drier climate. European millers found that this grain, being more brittle, required more grinding and the fine particles of pollard did not separate so completely from the flour. Hungarian millers, to whom the problem was especially important, adopted the device

of using fluted steel rollers in place of stones for grinding the grain. American millers rapidly adopted the new method, and to-day practically all flour mills are equipped with rollers rather than with stones. This change began during the 'seventies of last century. 3. Modern developments of mill machinery have chiefly taken the form of a subdivision

of the grinding process into a number of stages, at each of which the grain is ground a little fin er. Further, the development of elevators for moving the grain and flour about from one set of rollers to the next has simplified the process considerably. 4. Naturally, the most primitive mills were operated by hand, although animals were

occasionally used as a source of power: Later, natural agents such as water or wind were employed, but the relative unreliability of the latter and the infrequent occurrence of localities suitable for the exploitation of the former were disadvantageous. With the development of engineering practice other sources of power have been employed and modern mills use steam, producer

gas, crude oil andjor electricity. The greater reliability which is thus afforded more than compensates for the extra labour involved and the cost of fuel and machinery. 5. Other technical advances of considerable importance have been numerous. Among them are the following:-

(a) The installation-of machinery for removing all kinds of fore ign matter from the wheat and for actually cleaning the surface of the grain before it is ground. (b) The preparation of the grain for the milling process. In the early days millers knew that there was a definite relationship between the degree of dryness of

the grain and the effective operation of the milling process. Too low a water content meant that the grain would not mill properly, while too high a content resulted in the production of flour which was objectionable to the baker. Up-to-date installations are equipped with so-called " conditioning " plants, the object of which is to ensure that the wheat, before it passes between the rollers, shall have a definite water content. During this process, the wheat

is first moistened and then held in containers for some time during which the moisture spreads through the whole of the grain. If necessary, the moisture may be reduced at a in ;,

(c) All modern mills are eqUlpped w1th deviCes for mamtammg a dust-free atmosphere in order that the risk of explosion shall be minimized ; .

(d) the "germ" of the wheat grain is now removed from the grist . by one s.peClal treatment. This has meant that the flour can be stored w1tb less nsk of deterioration ; (e) Most mills are equipped with a bleaching in whi?h t.he flour is

with the gases which result from the

in this way the colour of many flours 1s defimtely Improved ; and . (j) In some modern plants, the very finely. ground flour, . which }1as the consiste?-cy of dust and which depresses the quality from the pomt of VIew of breadmaking, is removed by means of a special device. 6. Figures I. to VI. the flow sheet and design of a modern flour mill and give some idea of the number of operatiOns mvolved. .

22

(b) ECONOlVIIC FACTORS IN THE DEVELOPMENT OF THE FLOUR-MILLING INDUSTRY.

_ 7. In most countries the developments of the technical processes outlined in the preceding paragraphs gradually led to considerable changes in the prosperity of individual mills or groups of mills. When transport difficulties were considerable, the small mill using locally-grown wheat / and selling most of its products in its own district, was naturally the order of the day. As steam

engines became cheaper and better understood the old water and wind mills were in a less favorable position. Individual circumstances decided the fate of the individual ip.stallation. 8. While technological changes have disturbed the fortunes of particular mills, .changes in the sources of supply of the grain have been even more potent forces in this matter. The geographical regions from which the world draws rnuch of its wheat supply have changed materially

since 1870. The gradual development of the inland prairies in the United States of America and Canada moved the centre of the North American wheat industry westwards and northwards, and gradually less and less of the grain was grown near the Atlantic seaboard. The headquarters of the Arr1erican n1illing industry consequently moved westwards. Similarly in. Britain: the competition of the "Hungarian" roller mill flour in the 'seventies and 'eighties caused a severe crisis in the local milling trade and led to the gradual re-equipment of most mills. Further, the steady decrease in the proportion of home-grown wheat used in gristing and the higher quality of flour which could be made from many of the imported wheats gave those mills which were located at the ports an advantage over those which were established at inland centres.

9. The world war caused much disturbance in the flour-milling industry throughout the world. During the period of hostilities, and for a year or so afterwards, governments took over the problern of the control of national food supplies. Some sources of grain .and flour were cut off and othets were extended. In 1920, England and Wales had a mill capacity 25 per cent. in excess of their consumption. For son1e time, European countries were prepared to import flour, but, gradually, tariffs were reimposed and the importation of grain was given preference to that of flour. The United States and Canada have also been equipped with a mill capacity far in excess

of their local requirements. 10. This brief survey suggests that flour-milling has been affected by economic forces which have varied from time to time and have occasionally resulted in the cessation of milling in various areas. It also suggests that international competition is likely to be intense. The history of the Australian section of the industry requires more specific consideration in the light

of these general developments. ·

(c) THE EARLY DEVELOPMENT OF THE INDUSTRY IN CERTAIN STATES OF AUSTRALIA.

II. The Comn1ission considered it desirable to ascertain whether the flour-n1illing industry had followed the same line of evolution in Australia as in other parts of the world. In the main this was found to be the case in those States in which inquiry was made. 12. The Royal Australian Historical Society was kind enough to assist in the inquiry in New South Wales, and the Commission is indebted to the late Mr. WalterS. Campbell, one of the Fellows of the Society and a retired Director of Agriculture of the State, for a review of wheat­ growing and flour-milling during the first century of the State's history. From that review the following are extracts:-

In 1796 the quantity of wheat, public and private, was expected to amount to from 35,000 to 40,000 bushels, sufficient for twelve months' consumption. Generally speaking, quite small hand mills were used for grinding wheat, but it was soon found necessary to substitute something better and save a vast amount of labour. The erection of the first windmill in Australia was begun at Sydney in September, 1796. It was made strong and substantial with a stone tower " and which " wrote Governor Hunter " will last for 200 years; and we are preparing for another such at Parramatta. These two mills when furnished will occasion a considerable saving by issuing flour instead of grain." The mill at Sydney was completed in February, 1797, and was capable of grinding a bushel of wheat in ten minutes. This mill stood opposite the present Public Lib1:ary, where Governor Phillip's statue now stands."

In September, 1797, the Duke of Portland wrote to Governor Hunter," You will also receive under separate cover the plan of a corn mill with the books mentioned in the margin. The undermentioned persons who have lately been attending the construction of corn mills, go as settlers by this conveyance . . . . . ." 13. As is well known, the colony in its early years was at times confronted with a considerable shortage of grain owing to droughts, rust and other farming difficulties. Under these circumstances stored reserves of grain·or flour were important, but were considerable owing to the a:ttacks of grain weevil grain moth. Campbell, in his '.quotes Governor Darlina, who, In a report on the conditiOn of the colony In 1828, wrote . . . It IS now gernerally that with proper care in the drying and grinding of the wheat of the colony, and in the

packing and of the floll! produced, the keeping of the .latter. may be .for

a sufficient length of time and the wind, water, draught and steam mills WhiCh are fast Increasing

23-24

F/G. V//. LOCATION Or rLOUR M/LLS IN WCI ORLA 1/V /864. (FRO/\# DATA I

I

------'--{)- --------------- ··-(·-··· )

\ .

_: :M' • •

_ __.-- • • an e;a J:>e. t ta.

i

I ,----- ....

•

', .

': .Bendigo •

t • • ... -

: / • • • • Mansfie}..d,,

• .Al'ara.[t,/ • _ \ , '

,, . . ; •. • •. ---, l more 1 \, '\ _ _ ,' .. , ___ ... • •• j '-.. ,_ ____ . t ------. '· \

• ( • • • • •• : .Tt _ ____ ___ ...: ____

•flamil ton • \. N€

• •• Berv.fick

• '

• c .. .. \

•

•

25

in. number. may be expected shortly to provide efficacious 1neans of reducing the wheat to flour with sufficrent promptitude to prevent the heavy loss hitherto sustained by the attacks of in the former while kept for a length of tin1e in the ungTound state. Capacious store houses have also recently been erected by the most opulent millers and eorn dealers, and the success of this useful has capital to the business, which must t end ultimately to render the supply and prices of grain and flour rnore steady and equable . . . Three steam engines, two and at are employed in grinding and dressing grain, and another

IS In course of bmng erected 1n Sydney. Several additional windmills have also been recently erected, and both water and wind n1ills are being worked in various districts of the colony." . 14. "In November, 1840, Governor Gipps reported to the Hon1e Secretary , . . 'The quantity of wheat now stored in the underground granaries, or silos, which were constructed last year at Cockatoo Island, is 20,000 bushels, but additional silos are in progress'."

15. The gold discoveries caused a great drain on the farm labour of the colony and for some years the i1nportation of wheat increased. Occasionally flour was also brought in sometimes from the other colonies and sometimes from the Pacific coast of South America. 16. The development of railways which -was considerably accelerated after the 'seventjes br9ught with it the•possibility of the expansion of the wheat zone into the present wheat-growing areas. the course of this expansion small flour mills were erected in many districts. These

were marnly concerned with supplying the local countrysi de, but some of them sent their products to Sydney. 17. The quality of the wheat showed some variability. lVIr. Ca1npbell quotes the Report of the Intercolonial Exhibition in Sydney in 1870 as stating " The wheat most esteemed

is that from Adelaide. Nothing produced in this colony comes up to it in quality ; but there is a compensation in quantity inasmuch as the average yield is greater than in South Australia . . . Taking as a standard Adelaide wheat at five shillings a bushel, wheat grown in the best districts averaged about four pence a bushel below Adelaide wheat. Victoria is classed about equal in quality with the best of New South Wales wheat and Californian a shade below

it. Taking the same standard of value, Tasmanian wheat averages about four shillings and six pence and that from New Zealand, which, however, is very unequal in quality, ranges from four shillings to four shillings and three pence. All these relative values, however, fluctuate somewhat with the season, the quality of the grain produced in the different colonies varying according to

the rainfall which, in all of them, is exceedingly uncertain. The preferences here indicated are due to the experiences of the millers as to the strength of the flour produced from the different wheats . . . Flour of excellent quality is produced here in all the colonies, the principal millers having imported all the newest i1nprovements in grinding and dressing machinery.

In no part of the world is the loaf finer than in Australia." 18. The Commission was fortunate in obtaining the assistance of Mr. A. S. Kenyon, M.I.E.Aust., M.Aust.I.M.M., President of the Historical Society of Victoria, in making inquiries as to the past history of flour-milling in that State. The following account is entirely derived

from the notes which he very kindly prepared. 19. The position in regard to bread stuffs in the early or pastoral days of the colony can hardly be understood without reference to local customs. In the towns-Portland, Melbourne, Geelong and Port Albert-the numerous stores stocked flour but little grain. At times stocks

became low, but although prices rose there were no privations similar to those experienced in the early days of Sydney or van Diemen's Land. In the country all station hands and Governn1ent employees had weekly rations which included 10 lb. of flour. In remote parts the wool drays went once a year only to the port and brought back flour and other comn1odities. In these distant

localities wheat was sown and when reaped- -with a hook-and threshed- with a flail- the grain was ground in a hand steel 1nill. The result might better be terrned meal, than flour. This phase of the milling industry- if it can be so called-set in very early. For instance, Mungabareena, or Albury, settled in 1835, had a wheat crop in 1835-36.

20. The development of mills in the towns took place rapidly. In 1841 the first steam­ milling plant was erected in Melbourne at a P?int and Flinders-lane at

their western end. In the same year a second mill followed m Flmders-street. Shortly afterwards water mills were constructed at Dight's Falls, Yarra Bend, and on the Plenty River near Mill Park. 21. As the· countryside developed new mills were opened wherever wheat was grown. These mills gristed locally grown grain only, as transport was difficult and costly. N they were

most frequent in the :regions w:here there were most people and the was

most successful. As the grain was grown on small farms and was and

were high and five shillings per bushel was : ounted as wh1le. t en shillings was a faiT thing, the areas which for:n:- maJor part of the wlieat were not wheat

districts in those days. This stage 1n tne of .the. m1llmg Industry 1'3 Illustrat ed by the map in Figure VII., which shows the locatwn of gram mills In 1864 .

26

22. The next phase was consequent on the great increase in farming which followed the decline of profitable gold digging. With the pa ssing of the 1869 Land Act came the rush of workless diggers to the open Northern Plains, reaching its maximum force in 1873-74. The reaping machine. and its successor, the binder, made it easier to harvest areas with low yields, and although pnces were low the new farmers managed to establish themselves in the southern part of the present wheat belt of the State. New mills were erected at such centres as Horsham,

Stawell, St. Arnaud, &c. This new development was able to withstand the fall in the price of wheat, but in the older wheat district, wh ere rust had become a serious menace, the land found more profitable use in other directions. Con se quently many of the mills in these areas found their local supplies of grain curtailed and gradually closed down. To-day the only survivors are found in the larger cities and towns, although the presence of somewhat rulapidated three­ storey buildings at many places is a reminder of a phase of the milling industry which has long since passed.

23. M:eanwhile the increasing development of the railway system was steadily reducing the necessity for local milling. The wide year to year variations in yields of some districts occasionally made it difficult for local millers to obtain regular supplies of grain. Those near the city had the advantage of being astride the ma!n channel of wheat transportation, where they were therefore better able to select supplies from a wide range of districts could maintain both volume and quality of their product. The co11centration of flour milling in Melbourne was therefore gradually intensified.

24. In South Australia the early settlement had the advantage of being situated in fairly close proximity to a first -class wheat-growing district-the Adelaide Plains. In 1840 two mills were built in Adelaide to supply the local requirement of flour. A few years later the South Australian Company built and operated a mill on the banks of the river Torrens. With the gradual opening up of the State, wheat was grown at greater distances from the capital and in most cases mills ·were erected in the districts where the wheat was grown, until in 1870 there

were 81 mills operating, many of which were small and only supplied local requirements. 25. The success of the State in wheat-growing led to the early development of an export trade. New South Wales and Queensland were the chief customers and remained the largest individual buyers until as late as 1895. Markets outside Australia were also developed, particularly in the United Kingdom, Cape Colony, New Caledonia, Mauritius and Java.

(d) THE DEVELOPMENT IN EACH STATE FROl\1 1913 TO 1933-34. 26. The developments of the industry can be followed more easily during the period subsequent to the publication of combined statistics for the whole Commonwealth. Table I sets out the position with regard to the number of mills in each State since 1913. It shows that there has been a contraction in the number of milling establishments except in Western Australia. 'I'he data are, in some cases, for grain rather than purely flour mills, but the amount of grain milled, other than wheat, is relatively small.

27. The decline in the t ot al number of mills in most States did not necessarily mean a decline in the industry. The number of persons employed by it is shown in Table 2, and suggests that in fact an expansion was occurring. The figures show an increase of roughly 20 per cent. in New South Wales and Victoria, still larger increases in Queensland and Western Australia, a relatively stationary position in •rasmania, and a decline in South Australia. They cannot be taken as convincing proof of the progress of the industry because, on the one hand, there was a reduction in the daily hours of work, and on the other the milling machinery probably became more efficient and the size of the individual plants also increased.

28. An increase in the size of many mills is demonstrated by the facts shown in Table 3, where the flour mills of the Commonwealth are classified according to the number of hands they employ. The reduction in the number of mills in the employing less. than 20 hands is marked while the increase in the numbers of those employmg over 20 hands 1s equally apparent. The data are for the number of hands usually employed during the year, so that alteration in the number of shifts worked might cause complication in interpretation. For instance- a mill which had been in one class one year might naturally fall into another in the following year ; but the general trend and larger mills is . .

29. The Stat1stimans collect from each factory mformatwn concernmg the average horse­ power employed in the machinery during the _yea! . . This_ measure of power developed is further analysed according to the source from w:hwh It IS Table 4 presents the data dealing with these matters. It shows that durmg the _penod of the survey there has been a

fairly steady increase in the total power deyeloped . . It IS clear th_at the use of has decreased; that gas engines showed a considerable m?rease .m the middle of the and then a decline ; that oil engines have been used to an mcreasmg extent; and that electnc1ty has become the principal source of power during the last decade.

27

30. Unfortunately there is no record of the production capacity of the mills, and while "power used" is some indication of that capacity it is not perfect in this respect, because t he r:atio of power to out put has probably changed slowly as new machinery has been introduced, and there is no information as to the average periods in which the mill has been in operation.

31 . The amount of flour produced is another indication of the extent of the development which t he industry has reached at any time, but it again is not necessarily directly proportional to the potential capacity for production. Table 5 shows the flour production for the Commonwealth and each State from 1913 to 1933-34. These data show clearly the expansion which has taken place in all States except Tasmania.

32. The whole of the data which have been presented in Tables I to 5 indicate that, while during the last twenty years some small mills -have been closed, the general trend has been towards expansion, particularly in New South Wales, Victoria and Queensland. In this connexion it is of interest t o note that similar expansion took place in the flour-milling equipment in many other wheat-exporting countries in the period at the end of the war when European countries

were very short of foodstuffs.

TABLE 1.

SHOWING FOR EACH STATE THE NUMBER OF GRAIN-MILLING ESTABLISHMENTS IN OPERATION IN THE STATISTICAL YEARS 1913 TO 1933-34.

New South Victoria . Quecnsbnd. South I

\Vestern

Ta.amania. Commonwealth. - Wales . Australia. Au ::.tralia.

-----1913 .. . . 68 61 11 48 17 17 222 *1914 . . .. 63 57 11 46 17 14 208 *1915 . . . . 63 51 11 42 14 17 198 *1 91 6 .. . . 63 51 12 42 16 13 197 *1917 . . .. 62 54 12 44 15 14 20 1 *1918 . . .. 61 55 23 46 16 10 211 *1 918-1 9 . . .. 63 53 23 45 16 10 210 *1919- 20 . . .. 58 51 22 45 17 8 201 *1920-21 .. . . . 60 51 11 40 16 6 184 *1921-22 . . . . 62 45 11 39 17 9 183 *1922-23 . . .. 60 47 11 39 17 10 184 *1923-24 . . .. 60 47 12 37 18 8 182 *1924- 25 . . . . 58 46 12 36 18 11 181 *1 925- 26 . . .. 58 45 10 36 . 16 9 174 1926-27 . . . . 57 44 10 37 17 10 175 1927-28 .. . . 57 42 lO 36 19 10 174 1928-29 . . .. 56 41 9 36 17 10 169 1929-30 . . . . 53 38 9 34 19 9 162 1930-31 . . .. 52 35 9 32 19 8 155 1931- 32 . . .. 53 39 9 36 19 9 165 1932-33 . . .. 52 39 10 37 21 9 168 1933-34 .. . .. 53 ..39 10 36 22 10 170 • FOOTNO TE TO I . (a) Up to and includin,_.., the year 191 4, statistics of manufacturing in the variou s States were for each calen_ dar year. In 1915 the New South figures were for the financial y'ea.r ended 30th June, 1915, and the same flgures are shown for t his State m Commonv;ealth Year Books for both the years 1914 and liH5 ill all tables from which data have been extracted. , . . . . . . ' (b) In HHO, Victoria and South Australia feU into line with Ne w South funusbmg for th.e finan c•al yea; endtng on 30th J b t lt was found necessary in that year, to repea.t the fi gures for the year 191:J 1 11 the case of VlCton an and South Au strahan data, the New South Wales be in for the year ended 3bth June, 191 5, and those for the other three s.tates calendar year 19 l6. . . . . . ( ) l917 consequent on New South Waies, Victoria, and South Australia fu rmshmv retnrns for the financial year ended 30th June, the 1917 manufact unng ft ures these three States were for the year ended 30th June, 1917, while the ot her States' figu res we r e for t !1e P. nded 31st De 1cember, 1917. . . g (d) In 191s the same stat e of affairs } ""'rom 1918- 19 to 1Y22-23 the retu rns as. presented conslsted of Qucensl.\ud, " es t er n Austra.ha and Tasmama. to t h e 31st December, and New South Wales, VlCtorta a nd South Australia to the 30th SIX (e) in 1923-24, Ta::mania adopted year ended 30th Ju.ne, and fel11nto lme dunng 1924-2o . ·west ern Au stralia made the change over in 1925-26 but included particulars for the eighteen months ended 30th .Tnne, 1926 . 1:hese facts require consideration in connexion with the data of Tables 1 to 5. TABLE 2. SHOWING FOR EACH STATE THE NUMBER OF PERSONS EMPLOYED IN GRAIN MILLING ESTABLISHMENTS IN OPERATION IN THE STATISTICAL YEARS 1913 TO 1933- 34. I New South Queensland. South Wes t ern Tasmania. Commonwealth. - Wales. Vic toria. Australia. Au stralia. 1913 1,035 842 166 547 227 113 2,930 . . . . 519 230 114 2,833 *1914 901 887 182 . . .. 182 469 246 130 2,579 *1915 901 651 . . . . 212 469 287 124 2,769 *191 6 1,026 651 . . . . 239 325 127 3,252 *1917 1,097 897 567 .. .. 297 653 392 104 3,703 *1 918 .. .. 1,236 1,021 104 3,855 *1918-19 1,326 1,063 297 673 392 .. .. 407 98 3,733 *1919 20 1,129 1,064 330 705 . . . . . • See footnote r.o Table L

28

TABLE 2-

SHOWING FOR EACH STATE THE NUMBER OF PERSONS EMPLOYED IN GRAIN-MILLING ESTABLISHMENTS IN OPERATION I N THE STATISTIC AL YEARS 1913 TO 1933-34--continued.

*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 1933-34

-----

. .

. .

. .

..

..

..

..

. .

. .

..

. .

..

. .

. .

New South Wales.

.. 1,023

.. 1,204

. . 1,146

. . 1,211

. . 1,181

. . 1,210

. . 1,224

.. 1,116

.. 1,146

. . 1,043

.. 1,086

. . 1,182

.. 1,251

.. 1,259

Victoria . Queensland. South

Austra lia .

-- 947 259 581 997 288 549 1,089 273 598 1,114 288 584 1,064 311 519 1,039 340 539 1,094 274 537 971 286 513 985 303 488 898 274 428 888 294 388 957 387 443 1,049 358 404 1,018 331 412 0 Se e footnote to Table 1. TABLE 3. West ern

Tasmania. Commonwe al th. Australia .

418 112 3,340

322 122 3,482

386 134 3,626

395 105 3,697

453 116 3,644

449 107 3,684

426 115 3,670

438 119 3,443

355 107 3,384

350 104 3,097

386 106 3,148

385 104 3,458

389 104 3,555

409 99 3,528

SHOWING THE DISTRIBUTION OF THE FLOUR AND GRAIN MILLS* IN THE COMMONWEALTH ACCORDING TO THE NUMBER OF HANDS EMPLOYED IN EACH OF THE STATISTICAL YEARS 1913 TO 1933-34.

Yea.r. Under 4 hands. 4 hands. 5- 10 hands. 11-20 hands. 21-50 hands. 51-100 hands. 101 hands and Total Mills. upwards. -1913 .. 32 17 77 54 37 5 0 222

ti914 .. 26 15 76 55 30 5 1 208

t1915 . . 29 14 76 48 24 7 0 198

t1916 .. 27 13 71 51 27 8 0 197

t1917 .. 26 17 62 59 41 7 1 213

t1918 .. 27 12 52 58 52 9 1 2ll

ti918-19 .. 26 9 53 55 55 11 1 210

t1920-21 .. 11 16 51 53 42 9 2 184

t1921-22 .. 15 9 52 50 47 7 3 183

t1922-23 .. 14 9 52 47 50 9 3 184

t1923-24 .. 11 8 53 47 49 11 3 182

ti924-25 .. 15 7 51 45 48 13 2 181

ti925-26 .. 12 10 46 44 46 14 2 174

1926-27 .. 17 10 41 46 44 15 2 175

1927-28 .. 19 8 46 46 41 12 2 174

1928-29 .. 19 3 44 47 43 11 2 169

1929-30 .. 15 9 43 40 41 13 1 162

1930-31 .. 12 8 37 36 50 9 3 155

1931-32 .. 18 7 38 37

I

52 10 3 165

1932-33 .. 11 11 36 29 59 9 3 168

1933-34 .. 18 7 36 44 51 12 2 170

• See footnote to Table I. t The Produ-ction Bullet ins, fro m which the above are derived, showed flour mills from 1913 to 1929-30 and grain mills fr om 1930-31 to 1933-34.

TABLE 4.

SHOWING FOR THE COMMONWEALTH THE NUMBER OF GRAIN MILLS AND THE ACTUAL HORSE-POWER USED IN THE PRIME MOVERS ACCORDING TO ITS SOURCE IN EACH OF THE STATISTICAL YEARS 1913 TO 1933-34.

Actual H.P. of Engines used.

Ye!U'. Number of Total.

Mil ls .

St eam. Gas . Oil. Electricity. Wat er .

1913 . . .. 222 10,634 3,575 230 660

..}t

15,099

*1914 . . .. 208 10,789 3,791 46 652

*1915 . . .. 198 10,110 3,572 52 653 14,387

*1916 . . .. 197 10,107 3,741 83 962 14,893

*1917 . . .. 213 9,858 4,120 106 1,530 139 15,753

*1918 . . .. 211 9,864 4,474 102 1,707 122 16,269

*1918-19 . . .. 210 10,369 4,157 94 1,937 122 16,679

*1920-21 . . .. 184 10,230 4,805 171 3,454 70 18,730

• See footnote to Table I. t Water m ills not recorded in these years.

29 5

TABLE 4--continued.

SHOWING FOR THE COMMONWBALTH THE NUMBER OF GRAIN MILLS AND THE ACTUAL HoRSE-POWER USED IN THE PRIME MOVERS ACCORDING TO ITS SOURCE IN EACH OF THE STATISTICAL YEARS 1913 TO 1933-34-continued.

Actual H.P. of Engines used.

Year. Number of Total. Mills. Steam. Gas. Oil. Electricity. Water.

*1921-22 .. . . 183 9,974 4,386 145 4,552 13 19,070

*1922-23 .. . . 184 9,347 4,551 128 5,836 13 19,875

*1923-24 .. . . 182 8,584 4,229 235 6,953 7 20,008

*1924-25 .. . . 181 8,084 4,369 311 7,256 6 20,026

*1925-26 .. . . 174 6,870 4,990 1,064 7,605 4: 20,533

1926-27 .. . . 175 5,991 4,798 1,701 8,537 9 21,036

1927-28 .. . . 174 5,928 4,436 2,080 9,043 8 21,495

1928-29 .. . . 169 5,419 4,196 2,160 9,914 7 21,696

1929-30 .. . . 162 5,085 3,603 1,946 9,561 114 20,309

1930-31 .. . . 155 4,736 3,638 2,339 9,710 llO 20,533

1931-32 .. . . 165 4,589 3,-959 2,564 10,134 100 21,346

1932-33 .. . . 168 4,508 3,046 2,531 12,430 101 22,616

1933-34 .. . . 170 4,759 2,993 2,644 12,748 100 23,414

• See footnote to Table I.

TABLE 5.

SHOWING FOR EACH STATE AND THE COMMONWEALTH THE AMOUNT OF FLOUR (IN SHORT TONS) PRODUCED DURING EACH OF THE STATIS'TICAL YEARS 1913 TO 1933-34.

Year. New South Victoria. Queensland. South I

Western Tasmania. Commonwealth. Wales. Australia. Australia.

1913 .. . . 285,425 252,763 33,889 107,994 61,997 18,545 760,613

1914 ..

} 266,302 246,136 35,402 . 84,701 61,922 19,382 713,845

*1915 .. 266,302 134,401 39,734 49,404* 32,396 19,573 541,810

*1916 .. . . 254,393 134,401 42,559 49,404* 70,912 25,369 577,038

*1917 . . .. 331,233 263,095 46,244 105,925 102,300 21,178 869,975

*1918 . . .. 355,843 3ll,450 45,589* 135,882 119,876* 17,121* 985,761

*1918-19 . . .. 377,107 347,841 45,589* 138,734 119,876* 17,121* 1,046,268

*1919-20 . . .. 348,691 353,683 49,300 134,727 141,516 22,311 1,050,228

*1920-21 . . .. 244,818 260,032 54,383 98,557 120,125 23,596 801,511

*1921-22 .. . . 336,572 301,532 54,694 108,893 82,148 20,613 911,452

*1922-23 .. . . 354,704 352,002 51,476 109,761 94,316 23,220 985,479

*1923-24 . . .. 409,645 382,204 54,244 113,436 107,990 25,337 1,092,856

*1924-25 .. . . 395,409 359,597 52,592 ll7,042 122,192* 21,866 1,068,698

*1925-26 . . .. 434,407 336,704 61,587 138,127 190,369* 24,774 1,185,968

1926-27 .. . . 431,532 360,051 52,959 140,426 133,919 22,861 1,141,748

1927-28 . . .. 400,363 367,383 53,858 122,107 127,246 21,675 1,092,632

1928-29 .. . . 449,011 390,286 54,433 137,202 119,550 21,277 1,171,759

1929-30 .. . . 432,472 364,682 61,102 138,115 120,595 19,899 1,136,865

1930-31 .. . . 449,439 369,966 71,994 136,346 132,090 19,863 1,179,698

1931-32 . . .. 490,662 396,257 77,376 155,215 131,165 19,540 1,270,215

1932-33 . . .. 525,651 425,930 91,498 129,225 127,574 19,372 1,319,250

1933-34 . . .. 495,779 395,566 84,159 121,811 122,000 19,253 1,238,568

• See footnote to Table 1.

,

SECTION II.-THE POSITION OF THE INDUSTRY IN 1932-33.

(a) THE LOCATION, SIZE AND OPERATIONS OF AUSTRALIAN FLOUR MILLS IN 1932-33 37

(b) THE GROSS PRODUCTION OF, AND MARKETS FOR, AUSTRALIAN FLOUR, BRAN AND POLLARD DURING RECENT YEARS 42

(c) ECONOMIC FACTORS INFLUENCING THE POLICY OF INDIVIDUAL FLOUR MILLS 49

F.765.-2

I I

33- 34

QLD. FLOUR MILLSAsArao""h·.:T(./Nc 0- CAP.ACITY LESS TH-""N II SACKS PER HOUR e- CAPACITY BETWEEN I I AND 2S SACKS PERI-lOUR X- CAPAC// Y B£TW££N eo AND SO SACKS PER HOUR 0- CAPACITY 114'0R£ THAN SO S/"''CKS P£R .r-iOUR ®-NOT OP£RATING 0 0 ..

Fll3. VIII.

VICTORIA

FLOUR MILLS ..Ar /95.5

1

I

I

0- CAPACITY LESS THAN II SACKS PER HOUR

________ ..!-, e-cAPAC/TY BETWEEN II ,.qNO 25" SACKS PER /?OUR

l .... __ ... _j _________ _

l , A I • -----'--.. _:-- -------..._ I \ • • X( oeO ... 9o ', • 0 - _ _, ........... --- xe -• • ..- -. - - · r--, ---7 ,:, • ,, '•,,---,,,) c\ - , __ , ..... , __ , ---'-,_ _ __ ...,' '-,..... ( \ , __ ....1.... ' o, . - '-\............ ,....,.-- .... _) I \ -X-CAPACITY BETWeEN .i?5 A/VO 50 SACKS PER HOVR

0 -CAPACITY MOR£ THAN 50 SACKS PER HOVR

OPERATING

I ....---- )

I /

I I

I I

I I

) I

( .....

'- I

' \

)

I

FII3.1X.

a-l)-36

I \

: ', I "\ I \ ____ 5 ) I f./ I I I / 1_ 1 I I \ __ _) I ·----------' \ : ...J 0 : ___ ..J . -ooi !- __ --i I I o 8o 1 oo0 f 0 o 0 o 0 > 0 SOUTH AUBTRALIAC)d 0- CAPACITY LESS THAN II SACKS PER h'O(/R e- CAA'!CITY 8E'T'W££N II ANO £!D SACKS PER r/O&R X- CAPACITY 8E'T'VVEEN 26 AND 50 S.ACKS PER HO(/R 0- MORE" Th'.AN SO SACKS PER HO(/R e - NOT' OP£RATI/\/G FIG.X. ,I -"" ------0 I WESTERN AUSTRALIA FLOUR MILLS AS ,....qr BOrh . ..TU/\1£ / 533 0 - CAPACITY LESS Th'A N II SACKS PER I-lOUR • -CAPACITY BETVV££N /I AIVO E'S SACKS PER HOUR X - CAP,....qCITY 8£TVVEEN ,£!6 A IVD 50 SACKS PER 1-fO(/R 0 - CAPACI TY /WORE THAN 5V SACKS PER HOUR ®-NOT OPERATING FIG. XI.

37

11.--THE POSITION OF THE INDUSTRY IN 1932-1933.

(a) LOCATION, SIZE AND OPERATIONS OF AUSTRALIAN FLOUR MILLS IN 1932-1933.

33. Foregoing paragraphs have indicated the general expansion which has taken place in the industry during the last two decades . It is now necessary to examine the present position of the industry in greater detail from the point of view of its capacity-output and markets. The majority of the mills in Australia are affected by the same general conditions, although there · are certain interstate differences in some cases.

34. The location and approximate size of the mills in each state can be seen from figures VIII to XI. The concentration of groups of relatively large mills in the metropolitan areas and the distribution of the country mills in and adjacent to the wheat-growing districts is marked. 35. Table 6 shows the milling organizations and mills which were in operation in the various States during 1932-33-the year on which the detailed investigations were based.

TABLE 6.

LIST OF MILLS OWNED BY FLOUR MILLING COMPANIES, FIRMS AND PROPRIETORS IN AUSTRALIA, LOCATION OF MILLS AND SACK CAPACITIES-1933.

Metropolitan. Country.

Name of Milling Company, Firm or Proprietor.

Sack Capacity Sack Capacity. Location. (200 lb. F lour). Location. (200 lb. Flour).

NEw SouTH WALES.

Allsop's Silver Spray Flour Mills Ltd. Murrumburrah .. 15

Black, J., and Sons .. Molong 7

Boggabri Flour Mills Ltd. Boggabri 6i

Brunton and Co. Ltd. Granville 68 Gunnedah 14!

Burrows, J., Pty. Ltd. Albury 14

Conolly, Wm., Ltd. Goulburn 15

Corowa Milling Co. Ltd. Corowa 25

Corp, W. H., Ltd. Cowra .. 4

Crago, F., and Sons Ltd. Newtown 53 Bathurst 14

West W yalong 14

*Crago Bros. Ltd. Yass . . 5

Dalton Bros. Ltd. Orange 15

Darling, John, and Sons Rhodes 75

Davey, E ., and Sons .. Pyrmont 30

Dubbo Milling Co. Ltd. Dubbo 15

Fielder, Geo., and Co. Ltd. Tamworth 18i

Gillespie Bros. Ltd. Pyrmont 73

Gillespie and Co. Narromine 7

Great Western Milling Co. Ltd. Dulwich Hill 35 Mill thorpe 15

Canowindra 14

Grenfell 10

Hamilton Bros. Manildra 4!

Harris and Co. Forbes 12

Homebush Flour Mills Ltd. Home bush 20

Inverell Milling Co. Ltd. Inverell 12

Jackett Bros. Ltd. Strathfield 18

Keys and Co. Ltd. Narrabri 9

Loneragan, J. (Milling) Co. Ltd. Gulgong 11

McCorquodale Bros. Sydney 15

Parramatta 20

McGee and Co. Ltd . . . Parkes 10

Mcintyre, C. S., Ltd ... Hamilton 27

McLeod, A., and Sons Merry lands 8

McLeod, M., Ltd. Wellington 14

Gilgandra 7i

Mungo Scott Summer Hill 60

Murrumbidgee Milling Co. Ltd. Wagga 30

Namoi Milling Co. Ltd. Gunnedah 7!

*Northern Milling Co. Ltd. Thornleigh 5

Pardey and Co. Ltd. . . Temora 13

Pyke Bros . . . Coolam on 7

*Southern Cross Flour Mills Newtown 10

Stratton and Sons Ltd. Co otamundra 25

Sydney Milling Co. Glebe 13

Tee Bros. Canowindra 4

Tremain Bros. Ltd. . . Bathurst 10

Wellington Farmers' Flour Milling Co. Ltd. Wellington 10

38

TABLE 6-continued.

LisT OF MrLLS OWNED BY FLouR-MILLING CoMPANIES, FIRMS AND PRoPRIETORS IN AusTRALlA, LocATION MILLS AND SACK CAPACITIES, 1933--continued.

Name of Milling Company, Firm or Proprietor.

West Tamworth Milling Co. Ltd. White Rose Flour Mills Ltd. Wise Bros. Ltd.

Young Roller Flour Milling Co. Ltd.

Brunton, T., and Co. Pty. Ltd. Burnley Flour Mills Pty. Ltd. Butcher, A J. Darling, J., and Son .. Echuca Flour Mills Pty. Ltd. Firth and Grant Flour Mills Pty. Ltd. Garden City Milling Co. Ltd. Grant and Wilson Pty. Ltd. *Jackett, T. H., and Sons Kimpton, W. S., and Sons Malcolm, J., and Co. Pty. Ltd ... Maryborough Flour Mills Co. Pty. Ltd. Minifie, J., and Co. McLennan and Co. Pty. Ltd. Noske Bros. Pty. Ltd.

Reilly, Robt., and Co. . . . .

Schutt and Barrie Flour Mills Pty. Ltd ... Shepparton Milling Co. Pty. Ltd. *Silver Lake Flour Milling Co. Smith, W. and P. Stratton and Co. Pty. Ltd. Sunraysia Flour Mills Pty. Ltd. Thomas, W. C., and Sons Pty. Ltd.

Tomlins, Simmie and Co. Pty. Ltd. W angaratta Flour Milling Co. Pty. Ltd.

Water and Kerang United Roller Mills Ltd.

*Willis Bros. *Wimmera Flour Milling Co. Pty. Ltd.

Adelaide Milling Co. Ltd.

* Angaston Milling Co. Boer, A. E. Ltd. . .

Both, J. H. and Co. *Braund, E. J., and Sons Bridgewater Milling Co. Ltd. Century Flour Mills Ltd. Charlick, Wm., Ltd. (City Flour Mills) *Commercial Flour and Oatmeal Co. Ltd.

*Cummins Milling Co. Ltd *Futcher and Irvine . . Glatz, C. H., and Co ...

Hamley Flour Mills Ltd. Heidenreich, T. Jackett, Wm., and Son * Jackett, T. H., and Sons

Ka.punda Milling Co. *Kleinig Bros. Ltd. Laucke, F . ..

Laura Milling Co

Metropolitan.

I,ocation. Sack Capacity (200 lb. Flour).

NEw SouTH WALES-continued.

Ultimo

VICTORIA.

North Melbourne Burnley

Albion

Kensington

South Kensington

West Footscray

Abbotsford

Newport

Richmond

SouTH AusTUALIA.

Port Adelaide

I Hilton . .

Hilton

Port Adelaide

Port Adelaide

15

49 20

60

124

48

15

45

28

9

43

3

30

2

17

Location.

Tamworth

Narrandera Tocumwal Young

Rupanyup

Elmore

Echuca Geelong Ballarat Yarrawonga Swan Hill

St. Arnaud Mary borough

Mooroopna Nhill ..

Charlton Horsham Murray Bridge Tatura . .

Shepparton Sale Wangaratta

Mildura Rainbow Murtoa W arracknabeal Bendigo

Wangaratta Wahgunyah Bridgewater Kerang Kyneton Stawell

Moonta. Jamestown Angaston Eudunda Stockwell Caltowie Edith burg Bridgewater

Mount Gambier Naracoorte Cummins

Sedan Loxton

Country.

Hamley Bridge . . Salisbury

Morgan Kapunda Lyndoch Greenock Laura

Sack Capacity (200 lb. Flour).

9

20 15 20

14

6

18 6

10 9

7

12 12

15 19 27! 27!

28 4!

2t 8

9

6i l4

36 21 21 10

5

25 11 5

11

4

4

4

4

10 10 7!

6

3

3

2

7i

39 519

TABLE 6-rontinued.

LisT OF l\IILLS owNED BY FLOUR-MILLING CoMPANIES, FIRMS AND PRoPRIETORS IN AusTRALIA, LocATION oF MILLs· AND SACK CAPACITIES, 1933- continued. Countr y.

NamC of ],filling Company. Firm or PropriP.tor.

Lo t. n II Sack Capacity Locat 1 •011• Sack Capacit)'

---------------------------------l-------c_a_w_. ______ _ __________________ < _2_oo_I_ h._F_Io_ u_r>_·_

*Martin, A. S. *Pflaum, F., and Co. Ltd. Robins, J. H., and Co. *Schultz, F. *Stevens, G. H. (Alton Gristing Mills) Strathalbyn Milling Co. Thomas, W., and Co. Ltd. *Truslove and Addison Walker, B., and Sons

Boronia Flour Mills Ltd. *Bond, M. G., and Son Ltd. City Milling Co. Ltd ... *Ferguson, T. C. Great Southern Roller Flour Mills Ltd. Katanning Flour Mills Ltd. Merredin Flour Mills Ltd. Peerless Roller Flour Mills Ltd. *Quigley, C. G., and Son Thomas, W., and Co. (W.A.) Ltd.

Victoria District Flour Milling Co. Ltd.

Wagin Flour Milling Co. Ltd ... W.A. Flour Mills Ltd. *Western Star Milling Co. Ltd. York Flour Milling Co. Ltd.

Barnes and Co. Pty. Ltd. Brisbane Milling Co. (Pty.) Ltd. Dalby Milling Co. Ltd. Defiance Milling Co. Ltd. Dominion Milling Co. Ltd.

Gillespie Bros. (Q.) Pty. Ltd. . . Warwick Farmers Milling Co. Ltd.

Gibson's Ltd. Monds and Affleck Pty. Ltd. Ritchie, D., and Son .. "I

. .

SouTH AUSTRALIA-continued.

Mitcham 3

Allenby Gardens 2!

Adelaide 30

WESTERN AusTRALIA.

East Perth Leederville West Perth Mount Lawley North Fremantle

Guildford May lands Cottesloe

. West Perth Fremantle West Perth QUEENSLAND.

South Brisbane .. South Brisbane ..

Albion

TASMANIA.

Hobart

.. I ..

37t 6

22t

8

4

24

27 42

34

26!

Bird wood Marra bel Tanunda

Stratha.Ibyn

Orroroo Mannum

Narrogin Katanning Merredin

Northam Kellerberrin Gerald t on Dongara

Wagin

York

Warwick

Dalby ..

Toowoomba Toowoomba Roma Mary borough

Warwick

Launceston Launceston .. I . .

5

5

2!

4

5

6!

10 19 3

60 12! 9

7t

11

21

7

7

12 12 5

16.4

12

15 4

The books and accounts of the Compa.nies whose names a n asterisk is shown were not investigated by the Commission, for the reason that either their mills were very small, they were entirely local in their operations, or the accounts were not kept in sufficient detail to enable correct figures t o be obtained.

36. Table 7 summarizes the data and shows the distribution of the mills by States, and their capacities. TABLE 7. SHOWING THE DISTRIBUTION OF FLOUR MILLS IN AUSTRALIA IN 1932-33.

Metropolitan Mills. Co untry M1lls. ·

State. Capacity in sacks per· hour. Capacit)' in sacka per hour. Total Mills.

Less than 11. 11-25 . I 20-50. I More than 50. Less than 11. ll-25. 26-50. More than 50.

New South Wales .. 3 6 2 5 16 21 2 .. 55

Victoria . . . . 1 2 4 2 13 12 4* . . 38

South Australia . . 4 1 3 . . 26 . . . . . - 34

Western Australia .. 7 3 1 .. 4 4 . . l 20

Queensland . . . . . . 3 . . 3 4 . . .. 10

Tasmania . . . . . . 1 . . 1 1 . . .. 3

Totals . . .. 15 12 14 7 63 42 6 1 160

• Including one South Australian mill grouped for ftnan cud reasons w1th Victorian data.

40

37. The total figures here shown differ slightly from those of the Commonwealth Statistician given in Table 1, because in the latter certain small mills largely engaged in milling grains other than wheat were included in the figures relating to certain States.

38. Table 8 shows that the metropolitan mills, although less numerous are generally larger than the country mills. The total capacities of metropolitan and country groups are set out by States.

TABLE 8.

SHOWING CAP A CITIES ALL FLOUR MILLS EXPRESSED ·IN SACKS OF 200 LB. PER HOUR. I

Metropolitan . Country.

State.

Mills. Capacity. Mills. Capacity.

New South Wales .. . . 16 518 39 506

Victoria . . . . .. 9 398 29 400.5

South Australia .. . . 8 130.25 26

I

136.75

Western Australia . . .. 11 143.75 9 153

Queensland . . .. . . 3 103 7 71.4

Tasmania . . . . .. 1 26.25 2 19

Totals . ... 48 1,319.25 112 1,286. 65

39. Table 6 given in paragraph 35 indicates the mills which were not investigated by the Commission. Their operations were local in character and restricted in volume. The capacities of these mi1ls were only 2. 84 per cent. and 5. 81 per cent. of the total capacities in metropolitan and country groups respectively.

40. There were certain other mills the affairs of which, although examined, were not suitable for complete investigation (see paragraph 70). In the cases of 113 mills complete cost investigations were made. The output of these mills represented about 91 per cent. of the total flour production of the Commonwealth as recorded by the Statistician. Table 9 shows the data of production of these mills by States.

41. Table 10 shows the number of employees engaged in the 113 "costed" flour mills during the year 1932-33. The figures include all employees directly associated with the industry and shows some divergence from the Commonwealth Statistician's figures for grain mills given in Table 2. The Commission's data related to the financial year of each mill which does not

in every instance end on 30th June.

42. The extent to which the mills were in active operation during the period of investigation should indicate the relationship between their capacity to produce and the trade which they were able to develop. The total capacity of the Ill "costed" mills which were working during the year was 2,210-200-lb. sacks per hour.* If it be assumed that continuous operation for five and one-half days each week was attainable then the total potential output was 1,518,114 tons per annum. The actual output registered by · the mills concerned during the period was

1,198,840 tons, which represents 79 per cent. of the estimated capacity. ·

43. Table 11 shows on its left-hand side a detailed analysis of the capacities and hours worked by areas and by States. Flour millers were asked to give explanations for the idle time revealed by their records. These reasons have been grouped and are set out on the right-hand side of the table. Roughly, 2 per cent. of idle time was caused by breakdowns and 3 per cent. by holidays in the various mill groups ; the remainder was due to lack of trade. As the idle time percentages due to breakdowns and holidays were similar in all groups they can be applied in a consideration of the idle capacity of the industry as a whole. It is recognized that some time is · inevitably ]ost owing to accidents, breakdowns and renewals of plant and also that certain holidays are recognized as part of the national life. If a deduction of 5 per cent. is made from the unused capacity percentage the balance-i.e. 16 per cent.--is the measure of the extent to to which the capacity of the industry was in excess of available trade under the conditions which applied in 1932-33.

44. The country mills were less fortunate than the city mills in respect to the amount of time worked; also mil1s in South Australia and Western Australia were in general in a worse position than were those of the other States.

• Two "costed" mills in New South Wales which formed part of a Company's milling organization were closed during the period.

TABLE

11.

SHOWING FOR

THE INVESTIGATED

METROPOLITAN

AND

COUNTRY MILLS

IN

EACH STATE

DATA RELATING

TO

CAPACITY, PRODUCTION,

HOURS \VORKED

AND

REASONS FOR

IDLE TIME-1932-33.

0 ldl

e

time

by r easo n

of-

Tonnage

W o.

kl ng

hom•

I Ordinary hours work

ed

Capacity

of capacity o f Tonn age

o'f

possib l e

1932-33.

Mills Mills

work ing

fiou:r

Produ ction annun,lly

Breakdowns . Holidays . Lack o f Trade.

Sta te

.

(200

lb.

three s hifts, produced t o

Capae ity.

on basis

sacks

per

5t

days

1 932

-33.

of 5t

days

hour) .

ver we

ek. per week . Percenta g e of Percentage of Percent a

ge of

Per ce

nt age

of

Nu m ber . Nu mbe r. N u mber. Number.

I

Overtime worke d ln addition

to

ordinary hours.

I

po s sible possible possible pos s ible

working hours . working hours . working hours .

wo rk ing

hours.

\ ---

.

_

(Sac

ks .)

(Ton

s.)

( T ons.)

% %

% %

%

I (Hour

s .)

New

So uth

W ales-

M e tropol

ita n

..

. .

4 82

33 0 , 844 297, 1 78

90 75,504 6 9,

033

91

80 1

I

2,305

3

3 , 8 08

5 443

Co u

ntry

. .

. .

..

464 . 5

31 9 , 52 1 2 17,880

68

233 ,

3.76

153,971

6 6

5 ,4 06

2

7, 404 3 66,595

29

88 7

-

T o tal

. .

..

946 . 5 650,365 5 1 5

,0 58

I

79

3 08,880

223,00

4

7 2

6,207

2

9,709 3

7 0,403

23

1 ,330

Vi ct

o r ia

-

:M etrop

olitan

. . . .

39 8 273 ,184 245 ,027

90

61,776

52,565

85

1,3 8 0

2

2 ,013

3

6,333

10

515

C ountry

. .

.. . .

319 . 25 219

,1 33

170,860

78 137,28 0

100, 1 93

73 5 ,141 4 4,099 3 28,1

37

20

290

--

--

-

T o ta

l

. .

..

7 17 . 25 49 2 ,317

4:15,887

84

19 9 ,0

56

1 52

,7 58

77

6,521 3

6,ll2

3

34,470

17

805

Sou

t h

Aust

r a lia-

M etropol

itan

..

. .

73

50 ,107

41,381 83 13 ,72 8

11,097

81

28 3 2 456 3 1,892

14

..

Country

. . ..

. .

7 2 49,422 24,159 49 89,232

44,434

50

2,811 3

2 , 088

3

39,899

44

1,000

"

Total

..

..

14 5 99,529

65,540

66

102,960

55,53 1

54

3,094 3

2,544

2

41,791 41

1,000

·we

stern

Au st

ralia-

Met

r opolitan

. . ..

11 5.

5 79,278 56,621

71

34, 23 0

27,667

80

620

2

1,128 3

5,037

15

..

Co untr

y

. .

. .

..

145 . 5

99,870

61,764

62

54,912 37,691 68 1,109

2

1,982 4 14, 234

26

104

Total

..

..

261 179,1 48 118,3 85 66

89,142

65,358 73 1,729 2

3,ll0

4 19 ,271 21

104

Qu ee

nsl a

nd -

M

et ropolitan

..

. .

76 52 , 1 65 45 , 668 88 13,728 13,399 97

179

1 252

2

..

. .

102

Co untr

y

. .

..

..

64.4

44,590 38,302 86

41,184

32,946

79 672 2 1,404 3

6,620

16

458

Total

. . ..

140.4

96,755

83,970

87

54,912

46,345

84

851

I

1,656 3

6,620

12

560

Grand

Totals-:M e

tropolitan

..

..

1,144.5

78 5 ,578 685,875 87

I

198,966

173,761

87

3,263 2

6,154

3

17,070

8

1,060

Country

. . .. . .

1,065 . 65

732,536 512,965

70

555,984 369,235

66

15,139 3 16,977 3 155,485

28

2,739

2 ,2 10

.15

1,51 8,114

1,198,840

79

754,950

542,996 72

18 ,402

2 23,131

3

172,555

23

3,799

-

---

---

------

.......

42

TABLE

SHOWING TONNAGE AND PROPORTION OF PRODUCTS-FDOUR AND OFFALS-OBTAINED FROM WHEAT GRISTED BY 131 OF THE 158 MILLS OPERATING 1932-33.

State. Nu mber of Flour. Percentage Percentage. Percentage

Total tonnage

Mills. of total. Bran . of total. Pollard. of total. of products obtained.

- -

New South Wales

(Tons.) (Tons.) (Tons.)

.. .. 48 515,058 71 99,683 14 112,529 15 727,270

Victoria. .. .. . . 28 415,887 71 90,218 15 83,982 14 590,088

South Australia .. .. 16 65,540 71 15,456 17 11,567 12 92,563

Western Australia . . .. 13 118,385 71 30,839 18 18,766 11 167,990

Queensland . . .. 8 83,970 72 12,972 11 20,131 17 117,073

Total .. .. 113 1,198,840 71 249,168 15 246,975 14 1,694,984

Mills not coated, for which production particulars were obtained .. .. 18 84,936 71 18,106 15 17,352 14 120,394

Grand Total .. 131 1,283,776 71 267,274 15 264,327 14 1,815,378

TABLE 10.

SHOWING NUMBER OF EMPLOYEES ENGAGED IN THE 113 " COSTED " FLOUR MILLS, 1932- 33.

New South Wale8. Victoria. South Australia. Western Australia. Qu eensland.

Class of employee. ·Total.

Metro· Country. Metro- Country. M"etro· Country. Metro- Country. Metro- Country. poll tau. politan. politan. politan. politan.

Mill managers .. .. 17 40 10 19 2 11 5 8 2 7 121

Millers, millhands, mill- wrights, storemen, &c. .. 492 530 438 437 llO 80 143 172 125 147 2,674

Tra. vellers .. . . 39 23 23 16 1 .. 3 .. 5 2 112

Carters .. .. .. 12 13 39 7 .. 3 1 1 .. 6 82

Office clerks, &c. .. .. 87 82 64 37 21 13 21 23 18 20 386

Total .. .. 647 688 574 516 134 107 173 204 150

I

182 3,375

(b) THE GROSS PRODUCTION OF AND MARKETS FOR AUSTRALIAN FLOUR, BRAN AND POLLARD DURING RECENT YEARS.

45. Table 12 gives the data for the production of flour, bran and pollard in the Commonwealth during the past ten years, and shows the quantities exported and the ratio of export to total production expressed as percentages.

46. Table 13 shows the quantities of wheaten flour exported to various destinations during the years 1924-25 to 1933-34. The figures indicate that, although the trade has fluctuated from year to year, the general trend has been towards an increase, 1931-32 and 1932-33 being years of particularly heavy exports. Figure XII. sets out the data in diagrammatic form.

4 7. The features of certain markets of particular interest to Australia are briefly as follow:­ United Kingdom.-In this highly competitive rnarket Australian millers have to compete with British millers and with those of many other flour-producing countries. Although there have been some wide fluctuations the imports of Australian flour into the United Kingdom have increased considerably in recent years, particulaTly since the exchange rate between Australia and England has been in favour of Australian exports.

Egypt.-Egypt was the largest buyer of Australian flour for a number of years. Egypt commenced its import trade in flouT after the war and continued it untillatein 1929. The Egyptian Government then imposed heavy import duties on wheat and flour, apparently with the object of maintaining the price of local wheat and encouraging its production: This course was probably

brought about by the decline in cotton prices and the contraction in the export of that commodity. The present Egyptian tariff on imports of Australian flour is on a sliding scale, varying inversely with the London price; when that price is £10 per metric ton, the duty is roughly £6 lOs. per ton sterling ; when it is £5 per metric ton the.duty would be approximately £11 sterling. Naturally such a duty severely restricted imports. A revival in the cotton industry may lead to a re-opening of this market.

China.-The data in the tables include exports to northern China and Manchukuo. Originally the principal ports concerned were Tsingtao, Tientsin and Darien. The exports to northern China have been largely restricted as a result of the increase in 1933 of the duty on

43-4:4

riS . .>nl. COLU/'vfN DIAGRAM INDICATING IOTA L PRODUCTION AND EXPORT OF rLOUR FROM AUSTRALIA 19E4-5" TO 1933-34.

975.000

2.50.000

/25.000

0

41· 92 42·E'4 45'·E'g 9.9·7 48·// .40 ·.95 44·44 48·09 4787' 451' · 8

riG . .><'''· COLUMN DIAGRAM INDICATING TOTAL PRODUCTION AND E.XPORTS OF POLLARD AND SHARPS FROA4 /984-S TO 1933-4.

!tl

/25'.000

97· 5 .95·94 TRA.OE EXPOR'T'TRAO£ L..:_ 7__: · 7 :......:._ 7 ___1._:2' =---: · 7' :..___[__: 4 _· _ e _ e _l__ S_·_ o _ e ___ l _:_ · 7_ 8.:..__j_ 4 __ ·o _tS __ __ L_ 6 _· 9 _ 4 __ ...L- 5_·_7 _ 4 __J

\

45

flour imports from 13s. 9d. Australian currency to 42s. Australian currency per short ton plus 10 per cent. relief surtax. The new position introduced by the United States silver policy and the consequent adoption of a paper currency in China has introduced new factors which are difficult to assess at the present time. .l.VIanchukuo is a new market in which considerable progress has been made in recent years. The principal competitors are United States of America, Canada, Japan and Australia. The competitive ability of the North American flour-producing countries is influenced firstly, by the pressure to sell , secondly, by their currency relations, and thirdly,

by any artificial stimuli applied to their export trade by wa y of bonus or other form of subsidy. Japan is an importer of wheat and an exporter of flour , and is equipped with efficient flour mills favorably situated. The market is a price market and future prospects will depend on Australia's ability to quote for business at competitive prices. The possibilities of the expansion of local production of wheat in this country are obscure.

British Malaya.-Australia has a considerable trade in flour, the volume of which has been steady over a number of years. Netherlands East I ndies.-The market here is at present practically held by Australia. The fluctuations in the volume of trade have not been of any consequence for a number of years.

Hong Kong.-Hong Kong is the distributing centre for Southern China through Canton and French Indo-China. The falling-off in the trade in 1933-34 is probably due mainly to Chinese tariff changes. The future prospect of trade with the colony will depend largely on the market conditions of the mainland and on the competitive power of North American and Japanese exporters.

Ceylon.-The market here has been steady for a number of years, but a flour mill has recently been established and future trade may be influenced by its success or failure. Japan.-The flour trade with Japan is comparatively small and not likely to expand. The policy of the Japanese Government is one of self-sufficiency of supplies of rice and wheat. A five-year plan for wheat production has been in operation and the indications are that it has been

successful in building up local production to satisfy local requirements. Even in the case of a deficient harvest it is probable that wheat and not flour would be imported. The flour-milling industry in Japan has been developed along scientific and efficient lines. The wheat imported into Japan from the principal wheat-exporting countries, including Australia, is milled to some extent for the export flour trade. She is thus enabled to compete with other

nations so far as quality is concerned. l !er geographical situation gives her an advantage in the China market, but having to import wheat may tend to retard her force as a competitor in other markets unless she can continue to buy at a low price and other countries have surplus wheat to sell.

Union of South Africa.-The trade in flour is now negligible on account of the policy of self-sufficiency in wheat supply. .

New Zealand.-Here again the policy of self-suffiqiency is in operation so far as wheat is concerned. Other Countries.-The quantity of Australian flour sent to various other destinations has increased considerably during the last decade. These cou ntries aTe mostly Britjsh possessions in the Mediterranean and Pacific regions, the east co ast of Africa, Siam and Indo China. The individual importations are relatively small although an improving export trade is being done

with the Philippine Islands and Portuguese East Africa.

48. Table 14 shows the Australian exports of bran, pollard and sharps to various countries in the last t en statistical years. Figure XIII. set s out the data in diagrammatic form. The fluctuable nature of the exports offers a marked contrast to tha t of flour. This contrast may presumably be partly to the fact that, wh.ereas flour is a human food consumed in

relatively steady quantities, bran polla! d are foo ds used largely as supplementary foodstuffs in times of short supphes. Their consumptiOn must therefore be partly governed by seasonal demand which fluctuates according to climatic vagaries ; further, price is an important factor because numerous alternative animal foodst uffs are often available.

49. The exports of offals to individual fall into t wo which go

to a fairly steady regular market, e. g., ;New FIJI and Islands,

East Indies and those which are occasronal1n nat ure, e.g., Un1ted Kingdom and the Insh Free State. It be as'su1r1ed that the former group of countries .is frequently prepared to par a sufficiently high price to compe.te wit.h Austrahan purchasers, while. the la.tter large consurrung countries to which the Australian mrller sends those surplus supphes which he 1s unable to place on the local market; occasionally, however, .markets take large supplies when their prices rise owing to special circumstances (e .g., Bntarn rn 1934- 35). .

46

50. Table 14 which shows the fluctuations in the percentage of oifals exported from the Commonwealth indicates that the local market is usually able to absorb the production. The chief customers on the local market are the dairying and poultry industries. When the former is faced with a greater shortage of feed than usual the local demand for wheat offals naturally increases and the amount which has to be exported diminishes. When the opposite condition

occurs the millers sell offals at the best prices they can obtain overseas. 51. In a consideration of the possible future of the export trade in flour, t he absence of large exports in recent years to European countries other than Great Britain is specially noteworthy. The larger European countries are adequately supplied with flour mills, and

although in seasons of poor harvest they may be prepared t o import wheat as grain they are often not prepared to permit the importation of flour. 'rhey naturally wish to maintain their own mills in production both because it means less unemployment and because a steady supply of offals is useful for maintaining their intensively-fed live stock. During the war the general shortage of all foodstuffs was sufficiently marked to cause a temporary reversal of this policy.

Extra-European millers may have interpreted this change as a permanent trend in the world's cereal trade, but the history of the last few years has corrected that view. 52. In Britain importations are still permitted under a tariff and it has been stated that very ]arge amounts of French flour have entered the country in 1935. The reaction of the British millers was strong and at times vigorous protests were ma de . In addition the acreage under wheat in Britain has increased owing to· the price stabilization scheme ; consequently, the need for importations of flour will be somewhat diminished. This change will be particularly

detrimental to the flours and wheats of lower " strength " because these are from the quality standpoint more comparable with the home-grown product. 53. The North Pacific trade which has assumed such considerable significance in recent years is subject to certain considerations already mentioned.

54. Careful consideration suggests that in the absence of international hostilities on a iarge scale the Australian flour-milling industry is likely to have few opportunities for expansion In the next few years. It is to be anticipated that British possessions along the lines of shipping routes, together with the South Pacific Basin, the East Indies and parts of West Africa will remain the most favourable areas for the industry. The relative movements in the value of the currencies of Australia, Canada and the United States of America will be a factor of importance iiJ. the trade of the Pacific basin.

55 . The question of quality of the product is of importance, in view of the highly competitive nature of certain markets. The matter will be discussed further in a later section, but it is necessary at this stage to emphasize that flour is not used solely for making bread in all the countries to which our exports go.

56. The main conclusions of paragraphs 48 to 55 are that the Australian flour millers have been able to export about 45 per cent. of the flour they have produced during the last ten years and that in 1932-33 when there was an export above the average in quantity there was a net unused mill capacity of about 16 per cent. ·

57. The yearly relationship of exports of flour to total production in each State during the period 1924-25 to 1933-34 is shown in the diagram of Figure XIV.

TABLE 12.

SHOWING THE TOTAL PRODUCTION, THE QUANTITIES EXPORTED, AND THE RATIO OF EXPORT TO THE TOTAL PRODUCTION EXPRESSED IN PERCENTAGES OF FLOUR, BHAN AND POLLARD DURING THE STATISTICAL YEARS 1924-25 to 1933-34.

(Quantities in hundreds of short tons.)

- 1924-25. 1925-26. 1926-27. 1927- 28. 1928-29. 1929-30. 1930- 31. 1 1931-32. 1932-33. 1933-3,1

- --.- ------

Flour-Total production .. 10,687 ll,860 11,417 10,926 11 ,718 11,369 11,797 12,702 13,193 12, 386

Export . . . . 4,480 5,0!0 4,935 4,338 5,638 4, 657 5,242 6,109 6,315 5,425

Percentage of to

39.70 48 . 11 40.96 44.44 48.09 43 . 80 production .. .. 41.92 42 .24 43 . 23 47. 86

Bran and Pollard-Total Production-Bran . . . . 2, 359 2,573 2,344 2,305 2.441 2,295 2,580 2,81 4 2,839 2,819

Pollard .. .. 2,066 2,265 2,300 2, 183 2,343 2,354 2,415 2,655 2,709 2,544

Export bran and pollard 344 ll6 101 219 243 82 203 730 385 308

Percentage of export to

2.40 2.17 4.88 5 .08 l. 76 4.06 13.35 6.94 5. 74 total production .. 7.77 ·-

527 47-48

COLUMN D/_.,4,GRA/'v1 IND/CATIN6 TOTAL PRODUCTION AND EXPORTS OF FLOUR AUSTRAL/.,..q 1924-5" TO FROM ALL STATES OF

/933-4.

/00 . 000

TRAOC O

__ __ __ __ __

0

TRADC

__ __ __

_;....

I I I

/00· 00 99 ·96 .99·97 99 · 9.9

49 529

TABLE

SHOWING THE AUSTRALIAN EXPORTS OF FLOUR (WHEATEN) ·AND THEIR DESTINATIONS IN THE STATISTICAL YEARS 1924-25 TO 1933- 34.

-

-Ceylon . . ..

China . . .. . .

Egypt, including entre-pot trade .. . .

ong Kong .. ...

apan .. . . . .

alaya (British) ..

H J

M M N N p

auritius .. ..

etherlands East Indies . . ew Zealand ..

hilippine Islands ..

nion of South Africa ..

nited Kingdom . .

u

u

0 ther countries, including Pacific Islands ..

Totals .. ..

1924-25.

10,416 219

172,416 13,247 156 29,408

6,496 44,875 4, 258 10,016 25,475 103,817

27,248

448,047

(In tons of 2,000 lb .)

1925-26. 1926- 27. 1927-28. 1928- 29.

18,130 16,060 20,203 21 ,705

132 306 263 127

194,909 185,392 150,795 243,468 9,703 3,966 5,856 2,972

732 711 844 638

48,910 42,451 41,071 52,176

3,990 7,781 4,979 9,395

66,868 64,648 65,923 79,040

12,363 28,383 5,053 3,556

11,389 8,754 7,569 8,436

22.780 I 18,912 22,183 24,558

70,537 76,167 71,837 57,945

40,589 39,933 37,219 59,787

501,0321 493,464 433,795 563,803

TABLE 14.

1929- 30. 1930-31. 1931-32 . 193 2--33. 1933-34.

21,252 21,630 19,441 19,239 18,893

23 5 2,021 6, 85 9 160,062 79,261

125,963 145,694 106,526 28,589 27,766

2,933 5,947 53,557 50,874 27,663

780 744 1,650 3,801 5,716

51,160 41,841 43, 664 43,965 50,834

5,988 4,896 13,231 10,950 14,277

82,595 74,765 85,570 78,1 79 80,623

3,823 5,168 4,833 2,716 1,246

8,707 8,949 11 ,762 11,484 10,998

18,256 9, 051 1,230 228 436

85,364 134,547 191 ,963 121,995 136,677

58,677 68,990 70,572 99,377 88,102

465,733 524,243 610,858 631,459 542,492

SHOWING THE AUSTRALIAN EXPORTS OF BRAN, POLLARD AND SHARPS, AND THEIR DESTINATIONS IN THE STATIS'riCAL YEARS 1924-25 TO 1933-34. (In tons of 2,000 lb.)

- 1924-25. 1925- 26. 1926-2 7. 1927-28. 1928- 29. 1929- 30. 1930-31. 1931-32. 193 2- 33. 1933-34.

Belgium .. .. . . .. 112 . . . . . . 224 258 .. . .

Ceylon .. .. 105 76 48 92 133 79 126 185 2 71 358

F iji .. .. . . 3,495 4, 243 4,207 4,284 4,658 4,594 5,593 5,277 5,362 5,807

Germany .. .. 448 . . . . .. . . . . . . .. .. . .

India ·- .. .. 332 59 475 133 124 149 5 7ll 156 106

Irish Free State .. . . . . . . 622 .. .. . . 1,792 1,680 ..

Italy .. .. .. . . .. .. .. . . .. .. 112 196 ..

Malaya (British) .. 172 225 232 375 363 313 433 678 1,072 1,277

Malta . . .. . . .. . . .. . . . . .. 588 1,690 447 ..

Mauritius .. .. .. 55 145 488 1,346 56 280 930 1,043 650

Netherlands East Indies . . 192 95 136 136 106 108 1l 9 298 83 60

New Zealand .. .. 6,906 5,939 3,329 1, 633 3,103 2,210 5,406 5,521 4,474 4,741

Pacific Isla.nds-Other British .. 249 277 289 297 369 321 328 389 441 432

Foreign .. .. 114 139 114 171 212 208 257 221 240 209

Union of South Africa .. 84 . . . . . . .. . . .. . . .. ..

United Kingdom .. 21,937 504 967 13,668 13, 828 138 6,863 54,700 22,749 17,106

United States of America . . 382 . . .. .. . . . . .. . . 52 ..

Other Countries .. 18 5 40 48 49 59 103 281 220 87

Tota.ls .. .. 34,434 II,617 10,094 21 ,947 24, 291 8,235 20,325 73,043 38,486 30,833

I

(c) EC9NOMIC FACTORS INFLUENCING THE POLICY OF INDIVIDUAL FLOUR MILLS.

58. Preceding paragraphs have shown the importance of the flour-millin g industry in that it uses about 60,000,000 bushels of wheat annually, employs directly about 3,500 persons and exports nearly half the flour it produces, while about nine-tenths of its by-products are used by rural industries in Australia. The percentage of idle time has been shown to vary considerably

from State to State and district to district. While this variation may be partly caused by varying efficiency, it is in the main the result of the interplay of many economic factors in the minds of the individual millers. 59. Some consideration of these factors is essential before proceeding with the analysis

of the costs of milling, because without such consideration the reader of this report might be tempted to arrive at conclusions which are neither reasonable nor acc urat e. The Co mmission has, therefore, endeavoured to fa cilitate the study of the detail s of this report by stating below in simple form a number of most important problems which require continuous study by the

owner or manager of a flour mill. F ollowing this enumerated statement , brief comments are made upon a number of the problems. Unavoidably, these comments involve a certain amount of repetition of information given in various ot her sections of this repOTt but it is considered that the value at this point of a concise survey of the matters to which the leaders of the fl our-milling industry must give regular attention justifies such repetition as may occur.

50

60. A flour miller actively engaged in the conduct of a flour milling business buying wheat and selling flour and flour offals, knows frmn experience that the price and the quality of his raw material-wheat, vary continuaJly; that the quality of his principal product-flour, will vary according to the quality of the wheat which he grists ; further, that competition is becoming more and more keen, and that his principal cust 01n ers, whether bakers or biscuit manufacturers

or grocers, are beginnin g to demand higher quality and more regularity of quality in the flour. 61. There is a growing tendency for the people of Australia to want information regarding the profits and losses of flour milling industry which is closely associated on the one hand with the industry of wheat-growing (towards which t he nation has been forced to make considerable financial contributions) and, on the other hand, with the baking industry supplying the nation

with one of its staple foodstuffs concerning the price of which there is considerable agitation from time to time. · ·

62. A flour mill owner or executive has before him many questions of which the following are examples :-(i) Is his mill efficient as to site, transport facilities handling equipment and, generally, as to n1achinery ? If not, what would be the cost of bringing the

miJl up to date ? Vi hat would be the anticipated extra net return ? Is such Inodernization essential in order to maintain an effective trade in his products ? (ii) Should he remain or become (as t he case may be) a member of the State Flour lVIill Owners' Association ? (iii) vVhat is the present and proba ble future extent of his market for flour and

flour offals ? (iv) Should he run his mjll one, two or three shifts daily ? (v) Should he produce only fo r the local m.arket, or should he sell flour for shipment to oversea rnarkets also ? (vi) If he is in the export market for flour, should he establish representatives or

agencies overseas or sell his export flour only through Australian brokers or merchants or speculators ? (vii) What should be the principles of hiS policy guiding his purchases of wheat for gristing ? For instance, should he take whea-t- · on storage ; should he buy

large quantities at harvest time ; should be buy wheat only against firm orders or such as may be confidently anticipated ? (viii) Should he speculate in wheat apart from the wheat required for his gristing .

(ix) If speculating in wheat-as wheat-- at what prices should his gristing operations be charged for the wheat used by the mill from time to time, and at what time or times or over what periods ? (x) Should he make only one quality of fl our or several qualities including perhaps

a grocer's flour, a premium grade flour for the Australian market, and a f.a.q. grade for export ? (xi) And if so, should he buy large or small quantities of premium wheat at premium prices ? To what specifi cations should the premium gTade of flour conform ?

In other words, what percentage of premiu1n wheats should be used in the grist ? (xii) In the con1petition for business, would it pay him to use a larger percentage of premium wheats purchased at prices higher than those paid for f.a.q. wheats

in order to produce higher grade :flours, more attractive to the bakers ? (xiii) vVhat syst e1n should he use for the purchase of premium wheats, particularly with reference to t he methods whereby t he premium value of the special wheats can be safely det ermined ? (xiv) Should he plirchase or finance bakeries in order to obtain more trade in flour ?

(xv) To what extent should he go in allowing book debts to accumulate, particularly when a bread-price war is waging ? (xvi) To what extent, if any, should he supply flour to price-cutting bakers ? (xvii) To what extent should he make forward sales or contracts of sale for :flour

without receiving cash with the order or orders ? (xviii) To what extent should he take export orders at little or no profit or even at a loss-when necessary-in order to hold certain business connexions ? (xix) To what extent should he· keep his baker and other customers advised regarding

future movements in the prices of :flour in order thereby to improve the goodwill of his customers towards him? ·

(xx) To what extent should he endeavour to anticipate intelligently the movements of the market for jute and calico bags when purchasing his requirements of these packages ?

51

(xxi) To what extent, if any, should he compete in the business o£ selling flour to grocers and others in packages, smaller than the normal 150 lb. sacks, realizing that this business involves higher packing, selling, and delivery costs, whilst yielding somewhat higher returns (xxii) Should he own delivery vehicles, or should he contract for all or part of his

deliveries of flour and flour offals ? (xxiii) What policy regarding the provision of working capital should he adopt? To what extent should the working capital be provided by shareholders on the one hand or obtained from private lenders or financial institutions on the

other?

(xxiv) I£ not a men1ber of the Flour Mill Owners' Association, should he, for instance, observe the declared prices and schedule of rebates, or should he quote lower net prices and grant lower or no rebates, or should he consistently under-quote net "Association" prices, and obtain as an "independent "a larger amount of

trade?

(xxv) If he be a men1ber of the Mill Owners' Association, and working under a quota system regarding the local market for flour, would it pay hi1n to increase his local sales, if possible, and pay the penalty amount per ton of sales in excess of his allotted local quota 1 (xxvi) Would it pay him to install a somewhat expensive chemical laboratory in his

mill to supply him rapidly with information regarding the " quality " of the wheats offered to him for purchase and, if so, would it pay to extend the areas over which he purchased wheat in order to obtain wheats of the quality most economically suited to his mill and market requirements 1 (xxvii) Having in mind the growing importance of "flour" quality and the variability

of wheat from place to place and from year to year, to what extent should he go in providing separate silo or bag storages for wheats of different qualities and/or prices in order that his gristings may regularly yield flours of as high a quality as possible (xxviii) Having in mind the best interests of his industry and of the nation, should he

support the proposal for a variable excise on flour used within the

Commonwealth, or the proposals for a h01ne consumption price for wheat­ so long as either be necessary to assist the wheatgrowers 1 (xxix) To what extent should the flour millers of Australia either individually or · collectively contribute financially and otherwise towards scientific and economic .

research work directed to the improvement of the qualities of the wheat grown in Australia, of the knowledge of the methods of grinding and testing wheats and flouTs, and of the knowledge of the best baking practices applicable to to Australian flours ? 63. This list of factors conveys son1e idea of the n1atters to which an efficient and active­ minded flour miller must give attention. As some of the matters raised may be obscure to readers unacquainted with the industry, the following notes have been prepared in connexion with certain

of the points brought forward :-(Ref. Nos. ii, xxiv and xxv.)-In all the States of the Commonwealth, except Queensland and Tasmania, the majority of the flour millers are members of associations, which direct their energies towards the of prices, after the of.

industry. Some flour millers, who are by conv1ctwn or persuasion extremely IndiV1duahstiC, and others who prefer to fight for a comparatively large share of the n1ore profitable local market and again others who are unable to agree with vital points of policy as determined by any particular association, remain as "independents " and are to an extent free from the control of the

Association and from the payment of certain levies made on all members. Experience in some States has shown that some form of association is of considerable advantage in reducing the tendency, otherwise apparent, to unrestricted competition with increased costs and diminished profits or even increased losses.

(Ref. Nos. v and vi.)-Unless the miller can sell his' full economic production locally, only an economic study continuously applied can decide whether he should sell flour for shipment overseas. (Ref. No. vii.)-To a extent, the of. a flour business upon

ability and luck of ,th.e flour null owner or executive In the wheat reqUired for h1s mill-so long as there IS a for t he wheat. that he . .

(Ref. No. viii.)-Trading In wheat, as wheat, 1s not a of the of a flour n;ull

owner or executive and the profits and losses from these op erations have nothmg to do With the economics of the flour millin g industry . Table 17 paragraph 83 shows the extent to which millers dealt in wheat as wheat in 1932-33.

52

(Ref. No. ix.)-The economics of the flour milling industry qua flour milling industry with respect to any particular mill cannot be determined by the owner or executive unless the flour milling business is kept strictly apart from the business of buying and selling wheat. (Ref. Nos. xi and xii.)-lVIuch remains to be done in Australia in the determination of

" flour " qualities for baking and for other purposes The recommendations in the Fifth Report of this Commission emphasize the importance of individual and co-operative effort in this regard. (Ref. Nos. xiii and xxvi.)-The "flour" and other qualities of f.a.q. and premium wheats vary from place to place and from year to year to material extents, and much knowledge and experience is necessary if millers are to obtain the best results, when purchasing wheats they require for gristing.

(Ref. No. xvi.)-Flour millers, as well as bakers, must choose between more and more stabilization of their industries on the one hand and free-for-aU competition on the other. They must realize that increased stabilization inevitably means more national control, more publicity regarding profits and losses, more demand for efficiency and profits on a lower scale in return for more assurance of some profit.

(Ref. No. xvii.)-Making large sales of flour ahead, without assurance as to the costs of the wheat to be used, introduces a gambling element into a milling business. Hedging or covering against a rise in the price of wheat is one method sometimes adopted. (Ref. No. xviii.)-This question can only be answered from time to time by a continuous economic study of all factors involved, including the definite or probable prices of wheat to be used and the possible losses involved on the one hand balanced against the extra costs of production

when less flour is produced on the other. (Ref. No. xxiii.)-This question is dealt with further in a later section of the Report when considering the" notional "capitalization required for the starting and operating of a flour milling business.

(Ref. No. xxiv.)-An efficient" independent" who refuses to co-operate with the majority of the members of the trade has a freedom from levies that gives him a margin either for extra profit or for lower prices. (Ref. No. xxv.)-The answer to this question will depend upon the results of close economic studies from time to time, having under consideration all factors involved, including his costs of production and the relative prices in his State and overseas.

SECTION IlL--COSTS AND CAPITALIZATION OF THE FLOUR MILLING INDUSTRY.

(a) PROCEDURE ADOPTED IN MAKING THE INVESTIGATIONS 55

(b) P ROCEDURE ADOPTED I N ANALYZING THE COSTS 57

(c) MiLLING, SELLING, DELIVERY AND ADMINISTRATION COSTS 1932-33 59

(d.) THE COST OF WHEAT TO THE " COSTED" MILLING BUSINESSES, AND AVERAGE RECEIPTS FROM OFFALS DURING

THE YEAR 1932-33 . . 67

(e) THE CAPITALIZATION OF THE FLOUR MILLING INDUSTRY 68

(j) ToTAL COSTS (LESS THE VALUE OF OFFALS) ALLOWING A RETURN OF 8 PER CENT. ON PROPRIETORS CAPITAL INVESTED . • 75

•

I

\ I

I

55

AND CAPITALIZATION OF THE FLOUR MILLING INDUSTRY.

(a) PROCEDURE ADOPTED IN MAKING THE INVESTIGATION.

64. All flour milling companies, firms and flour mill proprietors throughout Australia were asked to supply to the Commission on a specially designed statistical and financial statement, Form "J,' full particulars of the milling operations at each mill worked during each of the financial years 1928, 1931, 1932 and 1933. A specimen of Form "J" with its explanatory notes is reproduced in Appendix A.

65. Form "J " was drawn up to enable the Commission to obtain in a concise manner all essential statistical information rel8.ting to the capacity of each mill, the hours worked, the staff employed, full particulars of wheat transactions, and, also, detailed financial information covering each of the four yea-rs above mentioned.

66. Statistics relating to the distribution and return of Forms " J " are shown in Table 15:-TABLE 15.

SHOWING THE NUMBER OF STATISTICAL AND FINANCIAL RETURNS (FORM "J ") RECEIVED FROM FLOUR MILLING COMPANIES, FIRMS AND P ROPRIETORS IN AUSTRALIA, 1932-33.

- New South Victoria.

I

South Western

I Qu eensland. Tasmania. Total \Vn.les.

-

Number of flour milling companies, firms, &c., to which Form" J" sent .. 46 28 30 15 7 3 129

Number of mills owned by above

companies, &c. . . . . .. 55 38 34 20 10 3 160

Number of Forms "J" received in respect of individual mills . . . . .. 49 28 31 20 7 3 138

Number of Forms "J" received in respect

.

of combined mills . . . . . . 2 3 1 .. 1 . . 7

Number of mills included in preceding item 6 10 3 .. 3 . . 22

Number of Forms " J " used for cost

purposes . . . . . . .. 44 22 13 13 6 . . 98

Number of mills represented by Forms "J" costed . . . . .. 48 29 15 13 8 . . 113

67. In addition to the submission of a completed Form "J ", the following statements and returns were sought :--(a) from Limite.d Liability Companies--(i) particulars of the share capital of the Company in 1924, with details of all

subsequent additions, reductions, and/ or reconstructions ; (ii) the amount to the credit of each Reserve Fund in 1924, with particulars of amounts since transferred to or withdrawn from each such fund; (iii) the amount of net profits earned, dividends paid and amounts transferred from

Profit and Loss Account to Reserve Fund in 1924, and in each subsequent year; (iv) a copy of the annual or half-yearly balance-sheet, trading and profit and loss account for each of the last ten ( 10) years ;

(v) copies of Income Tax Returns for the financial years 1928, 1931, 1932 and 1933. (b) from Firms, Partnerships, and Sole Proprietors :-(i) a statement showing the amount of capital originally brought into the business by each partner and particulars of any additional amounts brought in and/ or

capital withdrawn during the last ten years; (ii) three copies of annual or half-yearly balance-sheets, trading and profit and loss accounts for each of the last ten years ; (iii) a statement giving full particulars of advances, loans, overdrafts, mortgages, &c.,

including the names of the institutions, banks, firms or persons, to whom indebted for money borrowed and the rate of interest charged; (iv) copies of Income Tax Returns for the financial years 1928, 1931, 1932 and 1933. 68. Companies, firms or proprietors flour milling commenced

subsequent to 1924 were asked to furmsh statements covermg the years durmg which they had been trading. , 69. The methods adopted by milling companies with regard to the keeping of mill statistics and financial records vary considerably. Some companies group ail sales in one account without

any dissection between flour and offals. Others separate flour sales from other produce but make F.765.- 3

56

no dissection as between flour exported and that sold for local consumption. Certain companies group practically the whole of their milling transactions in one account calledMerchandiseAccount, the balance of _ :Vhich at any period represents the gross results of mill trading. l\1any companies do not keep rehable records of the amount of wheat actually gristed.

70. There are certain flour milling companies who do not confine their milling operations to the production of flour and who do not keep the records of their flour milling operations separate from those of their other transactions. In such cases, the Commission was unable to obtain a dissection of their fl our milling costs. In addition, there are a few small companies or firms whose records were found to-be so unreliable or incomplete as to leave the Commission no alternative

but to disregard their figures for costing purposes. · · 71. Table 16 shows the number of flour milling companies, firms and proprietors operating in the Commonwealth in 1933, the number of mills owned by them and tlre number of mills in respect of which costs were computed :-

TABLE 16.

--

Number of Number of mills Number of mills J capacity / Sack capacity Sack capacity

State. Companies owned by firm s, fonhioh w't' mdl< Column 3 I of mills of costed firms and &c ., in (2) . were compiled (200 lb. flour per costed 4 to total mills . P roprietors. · hour). (1) (2) (3) (4) (5) (6) (7) (Sacks.) (Sacks.) %

New South Wales .. . . 46 55 48 1,024 971.5 94.873

Victoria .. . . . . 28 37 28 770.5 689.25 89.455

South Australia . . .. 30 35 16 289 173 59.860

1N estern Australia . . .. 15 20 13 296.75 261 87.952

Queensland .. . . .. 7 10 8 174.4 140.4 80.504

Tasmania .. . . . . .3 3 . . 45.25 . . . .

----Totals .. . . 129 160 113 2,599. 90 2,235.15 85.971

NoTES.-(a) Owing to the mixed nature of the business of each of the Tasmanian companies and/or the absence of separate records in respect of their flour milling operations, flour costs could not be compiled in respect of the mills in that State. (b) ]'or costing purposes a mill at Murray Bridge, South Australia, has been included with the Victorian country mills.

72. The detailed trading, profit and loss accounts and balance-sheets were made available to the Commission on the understanding that the information contained therein was confidential and solely for the use o£ this Commission. The production of these particular documents was not insisted on where such documents contained information of any magnitude which concerned private and/ or business affairs not related to the flour milling operations of the companies, firms or proprietors concerned.

73. A thorough investigation of the books of account and other records of practically every flour milling business in Australia was made by qualified accountants whose services were made available to the Commission from Commonwealth Government Departments. Each statistical and financial return, Form "J," received was subjected to close examination and reconciled with the company's or firm's ledger accounts. In this way the Commission was able to obtain a complete an d accurate survey of costs and all data necessary for an economic survey of the industry.

74. The accountancy investigations involved a large amount of work owing to the complex nature of the task and the difficulties encountered in many instancesinobtainingthestatisticaland financial information dissected under the necessary sub-heads from the mills concerned. Only a few flour-milling businesses keep detailed costs, and in many instances the controlling ledger accounts are kept in an antiquated form.

75. The Commission was surprised at the lack of uniformity in accounting methods and the incomplete nature of records in such a well-established industry and one in which the process of manufacture and the principles controlling the disposal of the products do not vary to any appreciable extent. It can only be assumed that satisfactory trading results over a period of years have not necessitated in a number of cases the keeping of a . close and constant supervision over the costs.

76. In addition to the detailed information supplied to the Commission on Form "J " and in trading, profit and loss accounts and balance-sheets, a considerable amount of statistical and financial information was obtained by correspondence. One hund:z:ed and sixteen (116) flour mill proprietors or representatives gave evidence before the Commission in regard to the financial affairs and milling operations generally of their respective businesses.

57

(b) PROCEDURE ADOPTED IN ANALYSING THE COSTS. 77. For the purpose of ascertaining the costs of making and dealing with flour from the stage when the wheat is passed in to the mill for gristing until sales are effected and brought to account, the various items of expenditure were subdivided under the four main headings of Manufacturing, Selling, Delivery and Administration. The cost of the wheat itself was, in the first place, excluded from the computation.

78. The charges included under each sub-head were :---(a) Manufacturing: Mill wages; Endowment tax on mill wages;

Fuel, power and light ; Bags, twine and branding, special packing calicoes, &c. ; Improvers used; Workers' eompensation insurance ; Oils and sundry supplies; . Repairs, machinery and plant; Th'Iunicipal rates and land tax on mill site ;

Insurance (fire) on buildings; Maintenance rail siding; Depreciation mill plant. (b) Selling :

Travellers' salaries and expenses ; Commission ; Marine insurance; Cables; Bad debts; Ad vert ising ; Special allowances to customers ; Depreciation travellers' motor cars. (c) Delivery :

Freight and den1urrage (outwards); Cartage outwards; Storage; Overseas freight and shipping charges; . Depreciation-delivery vehicles. (d) Administration :

Directors' fees or owners' salaries ; Auditing and accountancy fees ; Office salaries and wages ; Office rent ;

Rates and taxes; Insurance-stock, &c. Office lighting, heating and cleaning; Printing, stationery, telegrams, telephone and stamps; Travelling expenses ; Discounts allowed customers ; Exchange and bank charges ; Association levies; Interest paid in excess of interest earned; Depreciation mill puildings, rail sidings, silos, 1notor vehicles, and office

furniture.

79. The methods followed and principles adoptedin dealing with the main items of cost are explained in the following notes ; (i) Mill Wages.-This includes the expenditure for all mill employees, including the manager, mill hands, millwrights, storemen and others engaged in the mill on the actual production of flour.

(ii) Bags, twine, special packing cal1:coes, &c .. -The actual expenditure on such items as mentioned, including bags used for flour sold for local consumption and special bags and calicoes required for 'flour exported, is included under this sub-head. The majority of millers were not able to discriminate between expenditure on bags used for export flour and those required for flour sold for home consumption.

(iii) Repairs and sundry supplies.-The amounts charged to this item represent ordinary repairs to mill plant, replacement of parts and expenditure incurred in keeping the mill plant in efficient working order.

58

(iv) Depreciation of mill plant and machinery.-The general practice in the industry is to maintain the mill plant and machinery at a high standard of efficiency. Repairs are effected regularly and parts replaced when necessary owing to wear and tear, obsolescence or for other reasons. Consequently, the Commission applied the following rates when computing the amount of depreciation to be allowed in respect of mill plant :-

Mills operated by purchased power­ Working l shift Working 2 shifts Vv or kin g 3 shifts Mills operated by owned power-

2! per cent. per annum ; 5 per cent. per annum ; 7! per cent. per annum.

Working I shift 5 per cent per av...num.

Vvorking 2 shifts 7! per cent. per annum ;

Working 3 shifts 10 per cent. per annum.

The reducing value basis of depreciation was adopted. These rates are in conformity with those allowed by the Income Tax Commissioners. (v) Marine Insurance.-This expenditure is incurred only in connexion with export flour and, as it was assumed that such flour was sold on an f.o.b. basis, this item was excluded from the computations of costs.

(vi) Bad debts have been treated as being apart from ordinary overhead expenditure and dealt with as part of selling cost. Only amounts written off in respect of ordinary trade debts were allowed as items of flo ur milling costs. (vii) Fteight and demutmge include the expenditure involved in the distribution of flour sold for home consumption and that incurred in delivering export flour to the f.o.b. position. Freight on wheat to the mill door has been excluded, such charges being treated as part of the cost of wheat.

(viii) Oveneas freight and shipping charges being expenditures subsequent to the arrival of the flour in the f.o.b. position have been excluded. (ix) Depreciation of vehicles has been allowed on motor and horse-drawn vehicles used in connexion with deliveries at the following rates :-

M otot lorries and trucks-20 per cent. per annum (calculated on the fixed instalment basis with a residual value of 10 per cent. of their original cost.) Horse-drawn vehicles-

lO per cent. per annum -(calculated on the reducing value basis with a residual value of not less than 10 per cent. of their original cost.) Depreciation was not allowed in respect of horses. All horse replacements were allowed as a charge against working expenses. ' _ _

(x) Directors' f ees or owners' salaries.__:___The amounts paid weretreated as administration expenses, except when the amounts were out of all proportion to the size of the business concerned. In such cases the charge was adjusted to what was considered to be fair and reasonable. (xi) Levies.-Le-v-i.es paid to Flour Mill Owners' Associations were allowed as expenses incurred in connexion with the running of the business. Comments on the principles of levies

will be made in later paragraphs. (xii) Interest on borrowed monetj.-Only the ::1.mount by which interest paid on borrowed money exceeded the interest earned from investments was allowed as an item of cost. Interest on capital has not been included.

(xiii) Depreciation on mill buildings, railway sidings, silos, &:c.-The rates of depreciation allowed in connexion with fixed assets, apart from mill plant and machinery are as follow :-Mill buildings, railway sidings and silos-1 per cent. per annum based on original cost. (The above rate is calculated on the fixed instalment basis.)

Furniture and office equipment-5 per cent. per annum on the reducing value basis with a. residual value of not less than 10 per cent. of the original cost. (xiv) Expenditure of a capital nature which has been charged to revenue was excluded when compiling the costs.

(xv) Similar procedure was followed in respect of any expenditure charged in the accounts which had not been incurred in connexion with flour milling. (xvi) Losses on wheat options were not allowed as working expenses. (xvii) Federal and State income taxes paid were also excluded.

(xviii) Certain flour milling companies deal in wheat in addition to their ordinary flour milling In some the wheat transactions are in the

financial books, m others no special records are kept of the wheat sectiOn of the busmess. In ascertaining the costs of production of those flour milling companies which deal in wheat as part of their ordinary business operations, but who do not keep separate accounts of each _department,

59

539

no attempt was made to segregate overhead costs properly chargeable against wheat from those applicable to flour milling. The average amount received per ton from the sale of offals was calculated in the case of each mill. 80. Flour costs were compil ed from the figures for the finan cial year 1932-1933 and were computed on the basis of per ton of flour produced. .

81. One of the many difficulties that had to be faced in connexion with the computation of flour milling costs wa s to separat e t he figures that relat ed solely to flo ur from t hose directly affecting other business activities chiefly the buying and selling of wheat. 82. In compiling the flour cost s, the Commission trea t ed the buying and selling of the whea t not required for milling as a separate business activity, and excluded such tranasctions from those relating to flour milling.

83. The extent to which the flour milling companies, whose costs were ascertained, sold wheat during the financial year 1932-33 is shown in Table 17. TABLE 17 .

29 flour milling businesses 1 per cent. or less of t he wheat they purchased ; sold as grairi 22 flour milling businesse

sold as grain 14 flour milling businesses More than 10 per cent . but not more t han 20 per cent . of the wheat t hey pu.rchasd : sold as grain 8 flour milling businesses More t ha n 20 per cent . but not more than 30 per cent. of the wheat they purchased ;

sold as grain 8 flour milling businesses More than 30 per cent . but not more than 40 per cent. of the wheat they pmchased ; sold as grain 3 flour milling businesses More than 4.0 per cent. of the wh eat they purchased.

sold as grain

(c) MILLING, SELLING, DELIVERY AND ADlVIINISTRATlON COSTS, 1932-,33.

84. A consideration of paragraphs 58 to 63 of this report will reveal the wide range of policies which ma y be adopted by any individual mill owner in Australia. 85. The res11lt of this range of policies adds greatly to t he co mplica tion of any att empt at ascertaining what js a reasonable cost of production because each divergent course of action has costs which are more or less appropriate t o itself and t hese are in t urn more or less offset by variations in the prices received. ·

86. The variation in location of the mills with reference to supplies of wheat and to the main markets to which the flour is sent is another complicating factor. 87. In setting out to investigate the cost s of millin g it was considered desirable to segregate the data from the various mill organizations into groups. In the first place, t he figures for the metropolitan businesses were separat ed from those in t he country. A further subdivision according to the period worked was desirable in order to in vestigat e t he extent t o which idle time affect ed the costs of production. Although mills endeavour to operat e on a one, t wo , or three-shift basis, in actual practice, a mill owner is oft en unable to put his particular policy into effect owing to lack of orders, or break-clowns or other exigencies . An analysis of the mills

according to the relation of hours worked during the year of investigation to the total working hours" possible" on a st-day week (on a percentage basis) gave t he result shown in Table 18. TABLE 18.

SHOWING DISTRIBUTION OF COSTED METROPOLITAN AND COUNTRY MILLING BUSINESSES ACC ORDING TO THE PERCENTAGE OF POSSIBLE HOURS WORKED.

Groups and percentage. Metropo li tan Mil ls. Country Mills .

Group 1-91- 100 per cent. 0 0 0 . 0 0 13 9

81-90 per cent. 0 . 0 0 0 . 6 16

Group II.-71-80 per cent. .. 0 0 0 0 5 9

per cent. 0 0 0 . 0 . 1 5

51-60 per cent. 0. 0. 0 0 1 8

Group III.-

8 41-50 per cent. 0 . 0 . 0 0 0 0

31-40 per cent . 0 0 0. 0 . 0 0 9

21-30 per cent . 0 . • 0 0 0 0 0 4

Totals 0 0 0 0 0 0 0 0 26 68

60

88. The table suggests that convenient subdivisions of the businesses on this basis would be arrived at if they were divided into three groups :-Group I.-Those which operated for 81 per cent. of the possible time or more. Group H.-Those which operated for not less tha:q 51 per cent. and not more than

80 per cent. of the possible time. Group IlL-Those which operated for not more than 50 per cent. of the possible time.

89. Very roughly, these correspond to " three-shift " mills ; " two-shift " and the less fortunate " three-shift " mills ; " one-shift " and the less fortunate "two-shift " mills. Table 19 gives certain information in regard to the activities of the mills within each of these groups :--TABLE 19.

SHOWING CERTAIN INFORMATION REGARDING THE MILLING BUSINESSES IN THE VARIOUS GROUPS SHOWN IN THE ARRAYS OF COSTS.

Particulars.

Total capacity of mills in group (200lb.) sacks per hour . . . . . . . .

umber of mills in group . . .. N A verage capacity per mill-(200 lb.) sacks per hour . . . . . . ..

A verage distance of the mills from capital city-miles . . . . . . ..

p ercentage of flour exported .. . .

Metropolitan. Country.

Group I. I Grou p II. Group I. Group II.

I

Group III.

827 211.5 414 338 .5 179 .75

20 7 28 23 21

41.35 30 . 21 14.78 14 .7 8.56

. . . . 146 .88 184.26 209 .8

51.16 53 . 21 45.33 41.42 30.84

90. As already stated, the costs in each group were segregated under four main divisions­ manufacturing, selling, delivery and administration. An examination of the data showed that there were certain items in which variations between individual businesses were particularly noticeable and further subdivisions were made accordingly. The final segregation was arranged in the following way :-

Manufacturing : Wages; Bags; Depreciation of mill plant and machinery ; Other manufacturing costs. . Selling:

Bad debts; Selling costs other than bad debts . Delivery : Administration :

Directors' fees, owners' and office salaries and wages including auditing and accountancy expenses. Levies; Interest on borrowed money ; Other administration expenditure.

91. The costs of the various organizations in each group have been arrayed (i.e., placed in order of ascending magnitude) in respect to each of these sub-heads. Therefore any individual case does not appear in the same position in each of the arrays. Some method of this kind was necessary in order to avoid the disclosure of the identity of individual costings as much of the information which has been afforded to the Commission wa s confidential in nature. Figures

XV., XVI. and XVII. show the result of this analysis. ·

92. The following comments will explain the variations in the costs disclosed:

MANUFACTURIN G CosTs .

Wages.-In general the costs per ton are lower in the city mills than in the country installations. This is mainly a reflection of the larger size of mo st of the metropolitan units which enables them to effect certain economies in respect to t he tons of flour produced per employee. To some extent the same reason explains why there are such wide differences within each group ; in addition mills a,re more effici ent than others in the way in which they use

61-62

OV

METRO. COUNTRY 6.ROUP. / . 6ROUP. I . G.ROUP . //. GROUP. Ill. esf

\1\/'ASES ecy<

IS/

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sf 111111111111 11 111111 111 1111111 11 1iil llllllillllll l .1111 11

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BA-ssrcrcj I S /-

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FIG. XV.

01...--'lG"R...--'lM SHOWING FOR THE GROUPS O r COSTED M ILLING

BUSINE SSE S THE /"'lRRAYS OF COSTS IN R ESPECT TO 0£L / V£ R Y/"JND THE CHIEF I TEMS Or SELLING

DELIVERY CDBTB METRC. COUNTRY G HUU/-'. / . G,ROUP./1. GRO UP ./. GROUP .//. GROUP. 11/. 9 0/

'Tl::lr-"AL eS /

COSTS eo/

/ S f '

' ' /Of 111111 11 , ill .II III , I

I

, i/\11 s j !

llil lllll l\ 1111 111 d l\1 11 II III II I II ' II III I 0

BELLING CDSTB

157-

"''"' 0 /Of 0£8/S

I I' I s-f 0 I Iii .d .1 111111 1 lid II dillll

/Of O THER

,I I S E LL/N& sf " COSTS IILIIIIIII IIIIIII\11111 I lllill lilll llll\11 111 111 11 11 11111 0 1111 1 11 11111 111 1 II III II FIG. XVI.

83-64

.5.!-?0V'\IrNG FVRTHE G,.t.:?OUPS OF COST£0 MILLING

8USIN£SS£S THF ,.....RRAYS OF COSTS IN RESPECT TO THE CHI£F ITEMS OF AOAI/N/STHAT/ON. N . B . MCD/.AN COSTS /IV EACH GROUP .ARE /NO/CATE"D 6Y TH/CKER L/IVE'.S.

METRO. CD·UNTRY GROUP. I. GROUP. I . GROUP. 1/. GROUP. ///. 7:;-cs ;of I I

ANO ,,[[ ll ,I ill QVOTA Sf AO.TVS'TMENT'S. II ill I L II llll illllllll .111 111 11111 11111 0 I I Ill' I( 15/ ANO /0 DIREr: TORS ill ,I rCES g. I 0 llillllllllilllllll II II III lllllllillltllllll lll lll l .tllllllUilllllllll lll .Jiiillll llll ll /0 sf 1 1JI 0 !I ill llill illll Ill 1/ 1111111 ,1111 11 Sf Ill II C'OST.S. illlilllillillllll II IIIIi 111111111111111111 1111 lill lll lli ll lllillll IIIIIIJJ!IIIIIJJIII 0 FIG. XVII. r/G. XV///. A. ShOWING THE eB/CIC. B:J.IQ. C12.B. WHEAT BY E-ACH COST ED MILLING BUS/NESS DURING /93e-3.s>

/VB. II#EOI .AN COSTS / IV E:'.ACh' GROUP __..,RE /NO/C.A7"£'0 B Y TH/CKCR L /NC.S

METRO. COUNTRY ft'AJ GROUP. I. GROURII G.ROUP. I . GROUP. II. GROUP. Ill. g 8 COST • ?' PCH sf COST' OF BuSHEL 4'7' l!i BUSHELS .AT " AT' .5 MILL DOOR M ILL 2/ 4 OOOR .!' ;f 2 / 0 0 . ....-IPPROX/M'.A'TeL Y 4'7' BuSHELS O F VVH£.AT .AR£ R£f¥UIRED TV PRODUCC ONE TON Or FLOUR ,-,._ XVIII. B . S/-10\.NII'vG' THE PRICE C:..OB.. Oe-F'ALS BY EACH COST ED jMILLING BUSINESS DURING 1.932-33. LV'1J 0 40f s I .Aio£R,....sE I PRICE I !!Of RECEI VED 4 I OF PER 9 I seo ecy. I LBS. TON I CV" 2 OF I ClrrALS ,, ;o/- OFFALS I I 0 I • AP.A'i'OX/,....,..ATCL Y eeo L BS. or O F"FAL S .........v?E .OOR / N G THE 1'\.o;"/LI... //VG OF ........ TOI'V or F LOUH

65

,

their labour force. Differences between the groups indicate the extent to which the percentage of time worked influences this item of cost; the relative inefficiencv of Group III. of co1u1trv mnls is striking. ol "

Bags.-'rhe wide variation in this item is due to two main causes :---(i) the variation in the proportions of wheat bought in bags and in bulk. For instance in most New South Wales districts where much of the wheat is handled in bulk the millers either buy bags for their flour or, in some cases; where they

are dealing with farmers growing high grade varieties, they provide the bags for the farmers as part of their contract. In other States and districts where much of the wheat is handled in bags the wheat bags are used for the flour. In each of the arrays the New South Wales mills are mostly on the right hand

side of the series. The bags each contain three bushels so that a bout sixteen will be necessary for the wheat required to produce a ton of flour ; if their cost is 7. 5d. per bag an extra outlay of lOs. per ton of flour vfill be required. On the other hand the miller buying bulk wheat obtains a full 60lb. of grain to each bushel whereas the miller buying bagged wheat has to accept 2.5lb. of

bag as gTain with each three bushels, or 40 lb. of bag in the wheat necessary to produce a ton of flour, which, when wheat costs 3s. 4d. per bushel, represents about 2s. 3d. During periods of active trading the prices of bagged and bulk wheat are determined by shippers' quotations which usually fa vour the bulked

grain because of lower ocean freight charges . From the standpoint of the local miller the bagged grain should be worth rather more than bulked especially as individual lots varying in quality can be more readily kept separate. (ii) The variation in the proportions of export flo ur, part or whole of which Inay be

packed in small bags (" calicoes ") according to the nature of the market. The extra cost of packing the whole output in caJicoes would be about 5s. per ton. The export trade is usually done on the basis of an extra charge for the " calicoes ". The differences between mills in this respect are therefore offset by higher receipts. Some of the supplies to the local are also packed in small bags, certain mills making a special feature of this trade ; such mills

will naturally show high costs for bags. Depreciation.-The divergences between mills in this respect are not of great significance in the cost of producing flour. The fact that the costs of mills in the country Group III. are on the average lower than in the other groups is due to the basis on which the allowance has been

made (see paragraph 79 (iv).) " Other manufacturing costs " call for no special comment except vvith reference to the wide divergences in the country Group III. section which contains such a large proportion of small plants.

DELIVERY CosTs.

The spread within the groups is wide for the following reasons:-(j) Some city mills have a large business with retailers involving heavy cartage charges. (ii) While some country mills do little more than supply customers within their own districts, others have a trade which extends over wide areas in their own State .

or into adjacent States ; Queensland mills figure prominently in the second category. In addition, many country mills are also engaged in the export trade and when placed at considerable distance from the seaboard they have to meet correspondingly high delivery costs in order to place their flour in

the f.o.b. position. The proportions of these three t ypes of trade vary greatly from mill to mill. As an offset to these variations the price which the country miller pays for his wheat is usually lower than that paid by the city miller but this reduction in cost has not been set off in the analysis at this stage.

SELLING CosTs.

Bad Debts are here shown as a cost. The sums set out represent the experiences of the individual mills, some of which have been particularly unfortunate. The data are also affected by the policy of management in this particular year in respect to writing off outstanding accounts as bad debts. The figures for Group III. country mills are in gen eral higher than for the other groups-a fact which may be explained by. the lower proportion of export trade (in

which bad debts seldom occur) earned on by these nnlls. " Other selling costs " are very low in the case of mills with well-established trade requiring little or no expenses for travellers or agents.

66

ADMINISTRATION CosTs.

Net levies and quota ad}ustments.-In several States, the flour-n1illers ' associations make levies on their members ; in addition, they allocate the local market among mills, chiefly on a capacity basis ; member mills, ·which exceed t heir quotaJs , pay a levy into a central fund while member mills which sell less than their quotas on the local market receive bonuses. In the analysis which is here presented the balance of payments to, or receipts from, the local association is set out on a per ton of output basis. Mills showing no costs in this respect are either situated in States in which there js no association, or they Inay not be members of an association, or their· · shares of local trade are in accord with t heir allocations. . It may be urged that these levy

contributions should not be included in a survey of costs. At this juncture this investigation is , bowever, concerned with the costs of milling as they are and not as they might be under an ideal sys,tem. Further, if attention is focussed on the :figures for medians, and not on averages within the groups the cost of levies will be found to be small.

Office S alaries and Directors' Fees.-The arrays here call for no special cominent except in the case of Group III. country mills where the relatively small proportion of time worked influences the costs in some cases. lnterest.-This refers only to interest payments in excess of interest received; it does not include any item for _ the remuneration of the capital of the mill itself. The amounts shown are therefore largely influenced by the general financial policy of the businesses ; the sums concerned are in most cases small. This item will not seriously affect the computations if medians are used instead of averages.

Other Adrninistrative costs -call for no special comment. 93. A general exainination of these dissected cost arrays shows how varied the charges are in respect to any individual item and how much they are ·influenced by varying policies of the millers and by such circumstances as location. Such an examination also indicates the difficulties in the way of arriving at a figure for the cost of milling a ton of flour unless the particular circumstances of the mill are stated. Table 20 sets out the medians for each main item of .

TABLE 20.

SHOWING MEDIANS OF THE COST ARRAYS OF THE GROUPS OF MILLING BUSINESSES IN RESPECT TO VARIOUS COMPONENT FACTORS OF MILLING, SELLING AND DISTRIBUTING A TON OF FLOUR (EXCLUDING COST OF WHEAT, RETURN ON CAPITAL AND PROCEEDS FROM THE SALE OF OFF ALS).

,

Area. Metropolitan. Country.

Groups. Group I. Group II. Grou p I. Group IL Group III.

Number of mills in group . . .. 19 7 25 22 21

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

Manufacturing-Wages . . . . .. . . 8 0 7 9 9 8 10 2 15 6

Bags, &c. . . . . . . . . 6 0 4 10 5 11 4 7 5 6

Depreciation . . . . . . .. 2 1 1 7 2 2 2 2 1 5

Other manufacturing expenses . . . . 5 3 5 0 5 3 6 1 9 3

Selling-Bad debts . . . . .. . . 0 5 0 8 0 7 0 10 1 0

Other selling costs .. . . . . 2 7 2 4 3 2 3 10 2 2

Delivery-Total costs .. . . . . . . 5 8 6 0 15 1 16 3 14 4

Administration-Levies, &c. . . . . . . . . 0 10 0 2 1 9 1 10 . .

Salaries, &c. . . . . . . . . 3 7 3 7 3 8 4 0 411

Interest 0 3 0 3 ·' 1 0 1 5 011 . . . . . . ..

Other administration costs . . .. 2 6 2 6 3 0 2 11 3 6

94. In the data for the metropolitan mills the largest difference between the medians of the two groups in respect to individual items is in the cost of bags and this is explained by the fact that Group I. includes most of the New South Wales metropolitan mills. 95. The agreement between the data for the country mills of Groups I. and II. is generally good. diver.gence the cdsts o.f these and of

the c.ity nulls 1s the higher dehvery charges which have 15een discussed already. In additwn, smaller differences occur under the followin g headings :-wages , "other selling cost s " , levies and " other administration costs" all of which are associat ed with the maintenance of a staff' for a relatively low output. This same t endency is even more evident among the country mjlls of Group III. It seems clear that these are largely able to continue in production by milling

67

for relatively short periods for a limited market which they do not attempt to expand by incurring heavy selling costs; their delivery charges are low because they are in many cases content with a local trade. Although in some cases efficient in their methods of production they are often only able to continue in operation by reason of special circumstances. They should not be taken into consideration when the cost of milling applicable to the main body of the industry is under discussion.

(d) THE COST OF WliEAT TO THE "COS TED" :MILLING BUSINESSES AND AVERAGE RECEIPTS F R OM OFFALS DURING THE YEAR 1932-33.

96. Other parts of this Report will deal with the question of the various policies which can be adopted by millers in respect of the purchase of wheat. The purpose of this sub-section is to review the actual prices paid by the " casted" milling organizations during the season of the investigation

97. The cost of the wheat has been taken at the mill door irrespective of whether it was bulked or bagged, and irrespective of whether the price of the wheat included a factor of cost due to its transportation to the city. The result·s of this inquiry are set out in the fonn of arrays in Figure XVIII "A".

98. The median costs of the groups are shown in Table 21 :­

TABLE 21.

Metropolitan Mills. Count ry Mills .

-

P er bushel. P er 47 bushels . Per bush el. Per 47 bushels.

8. d. £ 8. d. s. d. £ s. d.

Group I. . . . . .. 3 0.41 7 2 7 2 8.43 6 7 0

Group II. . . . . .. 2 11.79 7 0 2 2 8.22 6 6 2

Group III. . . . . . . . . .. 2 6.51

j

5 19 6

99. The factors which have caused the differences between one business and another in respect of the average cost of the wheat are as follow :-. (i) the mills are situated in different States and the prices at the seaboard are not the same in every State. Queensland in particular diverges widely from

the other States in this respect owing to its system of price-fixing and its lack of wheat for export which makes the · Brisbane price the equivalent of New , South Wales price plus freight ; (ii) some mills find it necessary to buy a larger or smaller proportion of premium

wheat at higher prices than are pa yable for f.a. q. grades ; (iii) the survey was made for the financial year 1932- 33 of each mill. Irrespective of other differences, the average costs of mills differ owing solely to the fact that they were not. all buying through the same calendar period. (iv) some mills were more fortunate in selecting the time at which they purchased

/ their wheat than were others ;

(v) the difference between costs of the wheat to the country mills and to the metropolitan mills is due to the fa ct that the former are able to buy their wheat at local prices which are roughly seaboard prices less freight from the local station to the ports; (vi) the mills in country group III. are, on the average, furthest from the seaboard

and therefore buy at prices which are lower than those in country groups I and II. ; also in some cases, these millers prefer to close the mill rather than operate on wheat which they regard as dear.

100. It has been necessary to make this survey of prices actually paid for wheat because it was desirable to build up a rational " notional " figure for cost of production of a t on of flo ur during the investigated but it will be clear that it is more to ref_er t o the cost of

flour with the wheat fa ctor Included at a stated fi gure and at the same t1me haVIng regard to the returns from the sale of offals. * • F OOTNOTE.- As a mat t er of i nt erest and in order to ascertain th e success of !? ill ers i n bu yi ng wheat pr_i.ce the co. }? f wheat bo ught by

three Sydney mills whose financial year all ended on a certai n date were compared \ IH h the a':'eragc_ of t he da1ly m1llers pn ces of wh eat lD ::, ydney fo r t he year concerned. The results were- Average Sydney prices, bulk 2s. ll}d., bagged 3.s. 0} i. ; the mil ls paid an ave rage of 3s. 0 · 34d ., 2s . 11 ·8d . and 2s. lld. per bushel.

68

101. The prices realized by the "costed" milling businesses for the o:ffals are set out diagramn1atically in the lower half of Figure XVIIIB. in which the average price actually received for 820 lb. of o:ffals during the year of investigation (1932-33) are shown. This weight has been selected because it is approximately the quantity of o:ffals produced during the milling of a ton of flour. -

102. The n1edians of weighted average prices received for offals are shown in Table 22 :­ TABLE 22.

Metropo litan Mills . Country Mills.

Per Ton of Off als. Per 820 lb. of Offals. Per Ton of Offals. Per 820 lb . of OffaJs·.

--- -£ s. d. I £ s. d. £ s. d. '£ s. d. Group I. . . . . . . 5 2 10 2 2 2 4 18 4 2 0 4 Group II. .. . . . . 5 5 10 j 2 3 5 4 18 7 2 0 5 Group III. .. . . . . . . . . 5 3 4 2 2 4 The prices for offals fluctuate considerably according to the balance of supply and demand ; as demand varies according to the general availability of animal foodstuffs, and this is largely a matter of the nature of the season, it follows that there may be considerable interstate differences in this respect. A survey of offal prices during the last ten years is given in paragraphs 222 to 225, and bears out this contention. The difference between prices obtained by the two groups of n1etropolitan miJls in the above Table is due to this feature as Group II. contains a hjgh proportion of Ir.J.lls fro1n one particular State where offal prices happened to be high during the period. Among the country groups the price obtained is usually lower if the mills are large and working two or three shifts. Mills working short time or intermittently (Group III.) may have a better chance of disposing of their by-products to advantage. (e) THE CAPITALIZATION OF THE FLOUR MILLING INDUSTRY. 103. Details respecting the ownership of the flour-milling businesses in Australia in 1934 are shown in Table 23. TABLE 23. SHOWING THE NUMBER OF COMPANIES, FIRMS, AND PROPRIETORS CONTROLLING THE FLOUR MILLING INDUSTRY IN THE COMMONWEALTH, 1934. I Particulars of ownership. Numher Proprietary Limited Totals. of Flour Partnerships. \filling Num ber Companleti . Companies . Sole State. Com- of mills Propri e- pani es, owned. tors. Number of F irms, Number of Number Number of P artners, &c . Number Number. of Share- Number . Share- Number. Share- Par t ners. holders. holders. holders, &c. -- - - · New South Wales .. 46 55 5 8 20 I 9 32 1,704 46 I, 738 Victoria .. . . . . 28 36 3 7 20 I7 247 I 48 28 318 Sout h Australia . . . . 31 36 5 10 31 . . .. 16 268 31 304 West ern Australia . . 15 20 2 .. .. . . io8· I3 I,I94 15 1,I96 Queensland . . . . 7 IO .. I IO 5 1 613 7 731 Tasmania . . . . 3 3 .. l 2 I I6 1 273 3 29I Totals . . . . 130 I 160 15 27 83 24 380 64 4,100 130 4,578 I 104. As explained in paragraphs 64 to 76 the Commission obtained a large amount of financial information from the flour-milling organizations. In dealing with thjs information the first step was to analyse the liabilities and assets in the following way-Liabilities- Assets-Paid-up capital Mill land buildings and plant Reserves Other fixed assets Undistrjbuted profits Stocks Loans by shareholders Sundry debtors Bank overdrafts Advances to farmers Sundry trade creditors Advances to bakers Sundry other creditors Other advances Cash and bank credits Fixed deposits Intangible assets Goodwill

69-70

/'1fP. XIX. ShOWING ARRAYS OF C'APr'r.AL/S'AT70N FOR 8/MILLS cv=- C/1P..-4CITY P£R SACK P£R I-1C>UR DURIIVG /932-3. N . S. NfE"DIAN COSTS 1/V EACH GROUP .ARE INDICATED BY THICKER L.INES

METRO. COUNTRY Lt;v G_ROUP. I. GR()(P./1. GROUP. I. GRr.X..P. I I. GROUP.///. 9000 8000 7000 6000 5DOO 4000 I I .f/000 I I I I I 1!000 I I Ill I I I !1 illlll 1000 I Ill I I I I II 111111111 0 I I I Jll7t;.XX. SH0\1\17NGF AHRAYS OFCOST£0 FLOUR MILLS IN RESPECT TO INTEREST COSTS PER TON OF FLOUR Bfo ON PROPRIETORS • DURING N .8. /vf£:0/AIV COSTS /IV EACH GROUP ARE IIVDI C.-"'lTED BY THIC"K£.R' LINES. METRO. COUNTRY §ROUP. /. GA=tX/P. I/. 6ROUP. I. GROUP. II. GROUP.///. ezf .eof 18/ /of -14/ /2} /Of 8/ I 6f I ! 4f il l I 1111111 I 2f I Jill II 1111111 I I 0 I N.B. Nf£DI.AN COSTS /IV EACH tSROUP ,..R£ INOIC'ATED BY TH/C'KER J:..//VES METRO. COUNTRY Zt.A) GROUP. I. GROUP.//. 6ROUP. I . GROUP.//. GROUP. II/. /I /0 9 8 ,... I 0 S' 4 3 2 I 0

71

105. As the items " Other advances", " Intangible assets" and " Goodwill " have no relation to the actual effective eapitalization of the industry they were excluded from further consideration, corresponding deductions being made from "Reserves" or " Other shareholders' or proprietors' funds". ·

106. Some milling companies follow the practice of including in their balance-sheets mi1l buildings and plant at cost, showing amounts provided to cover depreciation as depreciation reserve. In computing the capitalization, the Commission has deducted the amounts of depreciation reserves from the value of mill buildings and plant.

107. Table 24 shows the aggregate figures under each subhead for the 89 milling organizations (113 mills) which have been costed. The same table shows the total sack capacity of the mills and the average capital per unit sack capacity.

TABLE 24.

SHOWING AGGREQ-ATE DATA FOR "COSTED" MILLS (1932-33).

Liabilities. Assets.

£ £

Paid-up capital .. 4,430,039 Mill land buildings and plant

Reserves .. 544,848 Other :fixed mill assets ..

Undistributed profits .. 390, 635

Loans by shareholders . . 754,377 Total fixed assets

Stocks

Total shareholders' or pro- Trade debtors ..

prietors' funds .. 6,119,899 Advances to farmers . .

Bank overdrafts 934,201 Advances to bakers

Sundry trade creditors 615,675

Sundry other creditors .. 141,784 Total floating assets

1,691,660 Cash and bank credits Fixed deposits

Total liquid assets ..

Total liabilities .. £7,811,559 Total assets

Total " sack capacities" of mills concerned-2,180. 9. Average value of assets per sack capacity-£3,582.

£

. . 3,154, 380 54,158

1,592,292 . . 1,899,914 99,067 450,772

443,271 117,705

£

3,208,538

4,042,045

560,976

7,811,559

108. Figure XIX. shows in diagrammatic form the capitalization of individual nUlls worked out on a (200 lb.) sack capacity basis. The data have been set out in the same way as those showing the costs of milling, except that the number of cases shown is somewhat smaller. This difference is due to the fact that some milling organizations own more than one mill, and, although they keep separate records of the operations of each, yet in their balance sheets the :figures for

the whole enterprise are shown en bloc. In these cases it was possible to work out separate costs for each mill, but it was not practicable to apportion all the items in the balance sheets to the various mills. Where the different mills in an organization were in both metropolitan and country districts the business has been excluded from this survey. Where the mills were all

in the country and al1 in the same group they have been shown as a single enterprise. The number of such cases is small.

109. An examination of the arrays in Figure XIX. shows the wide variation in the capitalization of the mills which is the result of the adoption of different policies by the mill-owners in respect to capitalization. The array for Group III. .of the ?ountry mills is particularly interesting and reflects the fact that many of these are old Insta1lat1ons, and also that

mill is able to erect a cheaper type of storage plant than can the larger. The lower capitalizatiOn of the Group III. mills may to some extent explain why such mills are frequently prepared to work for a short time only.

110. The total ,capitalization (Table 25) of the whole Australian fl our-mill ing is a matter of some interest. The figures so far shown have referred. t o the organizatiOns controlling 113 mills in the year 1932- 33. for 1933-34 were also collect ed from every operating flour-mill in in to obtain m?st recent :figures. In one or t wo cases

where other forms of actiVIty were carried on apprmumatwns have been made· apart from these Table 25 is a statement of the position as disclosed by the books of the businesses concerned.

72

TABLE 25.

AGGREGATE CAPITALIZATION OF AUSTRALIAN FLOUR MILLiNG INDUSTRY, 1933-34. Liabilities.

P aid-up capital Reserves ..

Undistributed profits Loans by shareholders ..

£

. . 4,978,584 832,108 434,841 769,715

£

Total shareholders' or pro-priet ors' funds Bank overdrafts Sundry t rade creditors Sundry other creditors

Total liabilities

7,015,248

868,140 824,418 210,844

----1,903,402

8,918,650

Assets.

£

Mill land and plant .. 3,887,969

Other fixed assets 65,501

Total fixed assets Stocks .. 1,730,114

Trade debtors .. 1,645,623

Advances to farmers .. 290,940

Advances to bakers 673,413

Total floating assets Cash and bank credits 431,177

Fixed deposits 193,913

Total liquid ..

Total assets

Approximate total sack capacities of mills concerned-2,606 sacks per hour. Average value of assets per sack capacity-£3,422.

£

3,953,470

4,340,090

625,090

8,918,650

Ill. The difference between the totals here shown and those in paragraph 107 is relatively small, because the additional 47 mills represented in the former are for the most part small businesses and because alterations in their capitaljzation between 1932-33 and 1933-34 had been small except that there had been a considerable reduction in the item " Trade debtors".

112. The relatively large item "Loans by shareholders ., reflects the extent to which the industry of flour milling has remained a family enterprise in Australia. It also shows that the shareholders were sufficiently satisfied with the stability of the business and the rate of interest which it was earning. Had the shareholders not loaned this money the total of bank overdrafts would have been higher. · This method of financing rna. y have led to higher costs if the money lay idle for part of the year or if the sums so loaned received a higher rate of interest than the bank overdraft rate.

113. 'Fixed assets represent about 44 per .cent. of the total capital. The item "stocks" only includes wheat, bags, &c. , actually purchased or o:ffals, &c., not yet sold ; it includes advances on wheat held ''on storage" for farmers. The figures are those shown in the balance­ sheets and inust be regarded with caution ovring to the well known commercial ·_practice of assessing the value of stocks on a conservative basis.

. .

114. The jtem " Trade debtors " represents about 18 per cent. of the total capital and is composed of the unpaid accounts of those to whom flour 'and offals have been supplied. A distinction has been drawn between advances to bakers and their debts on current account, the former being either actual sums advanced to bakers to buy or carry on their businesses or, in certain cases outstanding book debts now treated by the miller· as advances.

115. The item "Advances to farmers" chiefly includes money lent to farmers to enable them to carry on their wheat-growing operations. It also contains any sums over-advanced to farmers in connexion with wheat held on storage during the calamitous season 1930-31 an

116. The Commission has taken the view that advances to bakers and farmers are correctlv included in the balance-sheets in view of the fact that the present organization of the milling business is such that many mills would be unable to maintain their businesses without adopting a policy of rendering such assistance to their suppliers and their customers. Interest received on such advances has beel,l set off against interest paid by the millers.

117. From the standpoint of the costs of milling a ton of flour it is necessary to consider the question of capitalization on an output" basis and then to determine a reasonable rate per cent. to be allowed on that figure. It is logical that the rate should be determined to some extent by the degree of risk present in the investment. While the industry has enjoyed a period of prosperity in recent years it must be that the extent to which that prosperity has been dependent on the export trade largely governs the extent to which its capital was invested at a risk. If 6 per cent. be taken as a reasonable rate to allow on the comparatively safe capitalization employed in the home trade and about 19 per cent. as a reasonable rate for the export trade,

then as the export trade represents 4 7 per cent. of the whole production, a general figure of 8 per cent. seems reasonable having regard to the fact that there. is about 16 per cent. of i9:le tiD?-e in the mills. · · ·

73

118. The net amount of shareholders' or proprietors' capital employed in each "costed" rni11ing business has accordingly been worked out on a per ton of production basis, and the return on this has been calculated at 8 p er cent. Figure XX. shows the result of this computation.

119. The arrays jllustrate the extent of variation in respect of this item. :Mills wjth exceptionally high interest costs per ton are chiefly those which are over-capitalized in res_pect to the amount of money invested, but the extrmne cases are explained by special circumstances which cannot be made public without a breach of confidence. Such exceptions do not interfere with the computatjon of a rational figure for capitalization of the industry if attention is concentrated on the mills in the median position . Those which show very low fi gures are in most cases those which have raised a large proportion of their capital in the form of loans from shareholders or bank overdrafts. These same mills showed relatively high fig ures in the interest section of the cost survey set out in Figure XVII. In some instances, the value of the mills has been written down in the proprietor's books to a figure which is considerably below their present day value.

· 120. The country figures are generally higher than those for metropolitan mills within the same group because, although they have less capital per unit of capacity invested in land yet, owing to their smaller size they have proportionately more locked up in buildings and machinery.*

121. The median figures for return on capital per ton of flour produced in 1932-33 when calculated on the basis already discussed are :-Metropolitan mills {Group I. 6s. Od. per ton · · , II. 5s. 9d. ,

Country mills

rGroup I. 7s. 1d. ,

.. , II. 7s. Od. ,

l , III. 9s. 4d. ,

TABLE 26.

10 sacks (200 lb.) 15 sacks (200 lb.) 20 sacks (200 lb.) 30 sacks (200 lb .) 60 sacks (200 lb.)

Size of Mill. = 1 t on per hour. = It t ons per h our. = 2 tons per hour. = 3 t ons per hour. = 6 tons per ho ur.

-----

£ £ £ £ £

Machines . . . . .. 8,024 11,494 15,072 19,775 37,700

Accessories and erection .. 5,440 9,700 13,337 17,275 35,500

Brick building .. . . 7,000 9,000 12,000 15,000 22,000

Silo . . . . .. 4,000 6,000 8,000 10,000 18,000

Motors . . . . .. 500 700 1,000 1,400 2,000

Total cost . . .. 24,964 36,894 49,409 63,450 115,200

-----Cost per sack . . .. 2,496 2,459 2,470 2,115 1,920 . . It will be noted that cost per unit of production falls markedly after twenty sacks per hour capacity is reached, eighteen of the 22 city mills here surveyed have a capacity of twenty sacks or over and only seven of the 59 country mills considered in the arrays are above that capacity. 122. The Commission has endeavoured to arrive at a notional figure for capitalizatjon based on the amount of capital required to purchase the necessary land and construct and equip and carry on a representative flour mill in a metropolitan district. In the light of the financial facilities by way of bank overdraft, private loans and trading credit which have been available to the industry it would appear that the capitalization requirements would be covered if the flour miller personally all the in the fix:d" plus half of the amount required for the "floating" assets of his null. The following IS an outhne of the procedure : (i) A mill with a capacity of ·twenty sacks per hour (i .e. 2 short tons) has been taken as a basjs, (ii) On a five- and one-half-day week basis working throughout the year on three shifts, this would mean an annual maximum capacity of 13,728 tons of fl our. A margin for holidays (other than week-ends), breakdowns, and idle would reduce this to about 12,000 tons. (iii) The capit alization , exclusive of items such as cost of land and rail way sidings, but inclusive of buildings, plant, silo capacity, &c., has been estimated by a competent authority at £2,470 per unit of sack ca pacity for a mill of this size. The maximum capital required for these items would therefore be £49,400. • An expert witness qualified to speak authoritatively on the matter, presented Table 26 showing costs of building and equipping mills of va.rious si zes.

..

74

(iv) As the large majority of mills operating in Australia to-day have been more or less written down in value for purposes of obsolescence, a 25 per cent. reduction is reasonable. This leaves a net capital for "buildings, plant, &c., of £37,050.

(v) Additional capital required for the land 4 acres in an industrial suburb adjacent to a capital city at £400 per acre) would be £1,600 ; the railway siding -vvould cost about £2,500 and incidental expenses might be expected to require £1,400.

(vi) The foregoing items would mean the investment of £42,550 in the fixed assets.

(vii) The working capital that should be provided in excess of this amount having regard to financial accommodation which might be raised on overdraft on daily balances by virtue of the fixed assets being free of liability requires some consideration. This capital is necessary to provide for purchasing wheat, milling jt, for holding stocks of flour and o:ffals until sold and for back debts. For convenience we might regard the flour and o:ffals as wheat for the time being and look at the matter on the basis of firstly holding wheat; and secondly, providing wages for milling. If we suppose that the former section is the equivalent of four months' supply of wheat to the mil1, and if we assun1e 47 bushels of wheat are required for a ton of flour, then the amount of wheat concerned is 188,000 bushels. Accepting the relatively high figure of 4s. per bushel as its value the total sum thus locked up is £37,600.

(viii) The capital absorbed in the -wages and other costs of manufacture on the flour and o:ffals held can be calculated on the basis of monthly accounts and a monthly production of 1,000 tons by taking the figure of £1 17s. as the cost of manufacturing, distributing and selling, in accordance with the Commissioner's finding. The amount of capital required to cover the expenditure in the unsold stocks would thus be £1,850.

(ix) The working capital required for the two foregoing items is therefore £39,450. Assumjng that 50 per cent. of this money can be obtained as required from a bank in the form of a daily overdraft the other half, namely, £19,725, would have to be supplied by the proprietor's capital.

(x) The foregoing calculations are detailed in the following table:-TABLE 27.

SHOWING THE , ESTIMATED CAPITALIZATION OF A FLOUR MILL OF TWENTY SACKS (TWO SHORT TONS) PER HOUR CAPACITY, WORKING ON A THREE SHIFT BASIS.

1. Fixed Assets.

(a) Buildings, plant, silo capacity, &c., at £2,470 per sack capacity Less 25 per cent. written off

(b) Land-4 acres at £400 per acre Railway siding Incidentals

2. Working Capital.

(a) Four months' wheat requirements . . . . . . . .

(b) Manufacturing, distributing and selling costs on 1,000 tons for one month at £1 17s. per ton of flour ..

Less 50 per cent. obtainable as bank overdraft

Total proprietor's capital

£

49,40Q 12,350

£

37,600

1,850

39,450 19,725

£

37,050 1,600 2,500 1,400

42,550

£

19,725

62,275

(xi) From these figures, it appears that the capital required. would be approximately £62 275 for a mill at an annual out turn of 12,000 tons of flour. This represents £5 per ton of produced, and return on capital invested at 8 per cent is 8s. per ton.

123 Tllis notional estimate of capitalization is similar to the actual median capitalization of the groups.

75

(j) TOTAL COSTS (LESS THE VALUE -OF OFFALS) ALLOWING A RETURN OF 8 PER CENT. ON PROPRIETOR'S CAPITAL INVESTED.

124. The average cost of a ton of flour produced during the year 1932-33 has been ascertained for each investigated mill by the following process :-(i) The costs of operation have been calculated in accordance with the procedure a-lready described in Sections III. (b) and (c).

(ii) The average cost of the wheat gristed into flour during the year has been ascertained by reference to Form "J," the figures of which were checked by an examination of the books of the business. The total cost of this wheat has been divided by the amount of flour produced therefrom.

(N.B.-The number of bushels of wheat required to produce a ton of flour is discussed in · Appendix B).

(iii) The actual receipts for the whole of the o:ffals sold by the mill during the year after deducting purchases from other mills; if any, have been divided by the number of tons 'of flour produced. There is some opening for error here as the end-of-the-year stocks . vary slightly from year to year. This error is not

greater than 2 per cent. of the total value of o:ffals because m]llers endeavour to avoid an accumulation of offal stocks. The receipts from offals per ton of flour produced have been deducted from the total obtained in (ii) above.

(iv) The return on the proprietor's capital invested in the business has been workeEl out on a basis of 8 per cent. as explained in Section III.( e). This figure has been added to the costs (less offals) mentioned in (iii) above.

125. The resu]ts of carrying out this process in the case of every investigated mill have been set out in Figure XXI. where the mills are shown by groups. The medians of these groups are set out in table 28.

Metropolitan Metropolitan Country Country

Country

.Area.

TABLE 28.

Group .

I.

II.

I.

II. III.

Median of total costs including 8 per cent return on capital.

£ 8. d.

7 6 7

7 0 9

7 8 0

7 13 0

7 15 1

Metropolitan, Group II., contains only seven mills which is an insufficient number for satisfactory comparisons. If the two Metropolitan groups are combined the median becomes £7 5s. lOd. per ton. As a check on this use of medians the weighted average cost was also obtained for each group.

126. The following Table 29 shows a comparison of the results:­

TABLE 29.

Metropolitan Country­ Group I.

Group II. Group III.

Mills. Median Method.

£ s. d.

7 5 10

7 8 0

7 13 0

7 15 1

WP ighted Av erage.

£ s. d.

7 7 6

7 6 7

7 12 5

7 19 7

A comparison between, the these two a satisfa ct ory agreemen t.

The average method gives a shghtly higher pnce for metropohtan nulls partly of the package trade conducted by some mills ; partly because certain null s with relatively high costs are brought in and partly ?e?ause In on e or cases o.f nuxed wheat flour

businesses the cost of wheat used for nnlhng was brought In by the nnllers at a figure which was, in the opinion of the Commission, high.

ifj'

127. The divergence between the results obtained by the two methods in the case of Country Group III., mills is not surprising in view of the variability in the circurnstances of these units.

128. The Commission again draws attention to the fact that these figures are only representative of an average milling business and that the costs of varjous milling enterprises wiH show considerable deviations in respect to certain items according to the policies adopted.

129. From the foregoing sections the approximate average price at which a city miller could have sold a ton of flour so as to cover all costs and, in addition, obtain a return of 8 per cent. on the capital as defined elsewhere was £7 6s. in the year 1932-33. Within this figure there are the factors for the wheat and the offals. The median wheat cost was 3s. 0.2d. per · bushel and the offals were sold at a median price of £5 3s. IOd. per ton. Every pe:qny rise or fall in the price of wheat represents 3s. lid. per ton in the cost of flour jf 4 7 bushels are required to make a ton of flour. Every alteration of £1 per ton in the value of offals represents 8s. 2d. per ton in the

cost of flour if 820 lbs. are produced with every ton of flour. From these data Table 30 has been constructed to show theoretical variations from the notional cost of flour to an average city mill in accordance with variations in prices of wheat or offals, always assuming that the mill produces a ton of flour and 820 lbs. of offals from 4 7 bushels of wheat, and that it runs for the same period of the year and has the same costs as it did in 1932-33 . . The wheat price is stated as at mill door.

TABLE 30.

SHOWING THE RELATIONSHIP BETWEEN FLOUR PRICES, POLLARD PRICES AND WHEAT PRICES IN AN AVERAGE CITY MILL . .

Average price of offals per ton. 2s . 6d. 3s. 3s . 6d . 4s. 4s. 6d. 5s.

£ s. d. £ s. d. £ s. d. £ s. d. £ s. d. £ s. d.

£4 . . . . .. . . 6 11 5 7 14 11 8 18 5 10 1 11 11 5 5 12 811

£4 lOs. . . . . . . . . 6 7 4 7 10 10 8 14 4 9 17 10 11 1 4 12 410

£5 . . . . .. . . 6 3 3 7 6 9 8 10 3 9 13 9 11 17 3 12 0 9

£5 lOs. . . . . . . . . 5 19 2 7 2 8 8 6 2 9 9 8 10 13 2 11 16 8

£6 . . .. . . . . 5 15 1 6 18 7 8 2 1 9 5 7 10 9 1 11 12 7

£6 lOs. . . . . . . . . 5 11 0 6 14 6 7 18 0 9 1 6 10 5 0 11 8 6

£7 . . . . . . .. 5 611 6 10 5 7 13 11 8 17 5 10 011 11 4 5

Example.-To obtain 8 per cent. on the proprietor's invested capital the miller must obtain an average price of £6 lis. 5d per ton of flour if the offals are being sold at £4 per ton and wheat cost 2s. 6d. per bushel at the mill door.

SECTION IV.-THE PROFITS AND LOSSES OF THE INDUSTRY.

(a) THE AVERAGE PRICES OBTAINED FOR MILL PRODUCTS-1932- 33

(b) THE PROFITS AND LOSSES OF THE " COSTED " MILLING BUSINESSES IN RESPECT OF MILLING OPERATIONS IN

PAGE. 81

1932-33 83

(c) A REVIEW OF THE TRADING RESULTS OF FLOUR MILLING BUSINESSES DURING THE ELEVEN YEARS 1924 TO 1934 86

.F.765.-4

F/G

.X:X/1.

S,.Lrt?WING

ARRAYS

OF

TH£

AVE8AGE

PHICES

087;11N£:D

PER

TONoeezOVHSOLDIN

/932-3

FOR

THE

GROUPS

Or

COST£0

MILLING

BUSINESSES.

lbAJ 1 0 9 8 '7' 6' 5 4 3 2 / 0

.(A 12 II /0

9 8 ,.. 5 s 4 3 2 / 0

ME

TAD.

GROUP.

I.

GROVP.

//.

COUNTRY

GROl.P.

I

.

GI'?OUP./1.

GROVP./17.

I

-

I I I I

N .

B.

A-f£

0 /A/V

//V

£...-"''CH

G;li'OUP

ARE

/NO/CAT£0

B Y

THICK£R

LINES

I

I

,./t!l.

COLUMN

SHOVV/NG

THE

0/SSECT£0

COSTS

INCV,&?RED

IN

THE

PRODUCTION

AND

SALE

or-ONE

TVN

OF

FLOVR

OVR/N6

/932-3.

(BASED

ON

-""4/V

.AVE.RA6E

Or

THE"

COSTS

Or

THE"

riVE

MEDIAN

1\#ETR'OPOL/TAN

M/LLS)

RETURN

.ATB%

ON

CAP/1/1LISATiON

S£LLIN5

- - - -

--7!

WHEAT

NET

COST

OFTI-IAT PART

OF

VVHEAT l/SE:OFOR FLOUR OF OFFALS

I

C)1 c -D

;

-8J

IV.-THE PROFITS AND LOSSES OF THE INDUSTRY.

(a) THE AVERAGE PRICES OBTAINED FOR MILL PRODUCTS IN 1932-33.

130. The actual price received by any mill for any one sale of flour or offals varied according to the market price at the time of sale and the extent to which concessions were given to the buyer. Further, the average price obtained by any one mill throughout the year was naturally influenced by the proportions of sales made at times when prices were particularly high or low. In general, there was a marked difference between the price obtained for flour sold for consumption within Australia and that for export. The rea sons for, and the policies

underlying such differences will be discussed later ; the average price received by the miller for the flour sold, whatever its destination, is dealt with in this section.

131. The total value of the flour sales made by each milling business during 1932- 33 has been divided by the quantity of flour sold. The results of this procedure have been set out in the arrays shown in Figure XXII. In these arrays the very high figures are for Queensland mills and were caused by the exceptional conditions prevailing in that State. On the other hand, the cases of particularly low average prices on the left-hand side of some of the arrays were the

results of certain mills in Western Australia, in which State particularly low prices were obtained for flour during the investigated period owing to a burst of unusually intense competition. Aparb from these extreme cases, the arrays present the type of variation which is to be expected on statistical grounds.

132. The comparison between the two groups of metropolitan mills shows that the Group II. mills in general obtained lovver average prices for their flour than those in Group I. This is in accord with the rather lower costs incurred by the former group, but again the small number of mills in that group prohibits a very satisfactory comparison.

133. The comparison between the three country groups shows that, while there is a similarity between the prices obtained by Groups I. and II., the mill s in Group III. obtained rather higher prices.

TABLE 31.

SHOWING THE MEDIAN WEIGHTED AVERAGE FLOUR PRICES RECEIVED BY METROPOLITAN AND COUNTRY MILLS, 1932-33.

Metropolitan Metropolitan Country Country

Country

• A.Iea. Group .

I.

II.

I.

II.

III.

Median weighted a ve rage flour prices-per ton.

£ s. d.

7 8 11

6 17 8

7 5 4

7 6 8

7 13 3

134. The range of prices obtained for offa ls in 1932-33 has been set out in paragTaph 102. These are to some extent influenced by the amount of offals produced in excess of the demand in the district or State in which the flour mill is operating. Such excess production is usually not large and is at times exported. Table 32 shows the t otal production and exports of offals from each State during the period 1924-25 t o 1933-34. The percentages exported from South Australia and Western Australia were at times higher than those for the other States. However,

during the year in which the operations of the mill s were " :· the prices obtained in vyestern Australia were generally above the of .those obta1_ ned m the other States, while the average prices obtained in South Australia were m accord With the genera l average.

-

1924--25

..

1925-26

..

1926

-2 7

..

1927-28

..

19 28-29

..

19 29-30

. .

1930-31

. .

I931-32

. .

1932-33

..

1933 - 3 4

..

Avera

ge for

10 years

. .

-----

TABLE

32.

SHOWING PERCENTAGE

OF

BRAN,

POLLARD

AND

SHARPS

EXPOHTED-ALL

STATES-TO

TOTAL PRODUCTION,

1924---25-1933-34.

New

South

Wales.

Victoria .

South

Australia .

Western

Au st

ralia. Queensland.

Tasmania.

Total

for Commonwealth.

Total

Per

Total

I

rl

Per

Total

Pf'r

T o t al

Export.

Per

Total

Per

Total

Per

Total

I

Fe<

Production.

Export.

c en

t .

Production.

Expo

·

c en t .

Pro

duction.

Export.

cent.

Production.

cent.

Production.

Export.

cent.

Production.

Export.

cent.

Production.

Export.

Tons.

Tons. Tons.

Tons. Tons.

Ton'S.

Tons.

Ton

s.

Tons.

Tons.

Tons

.

Tons. Tons.

Tons

.

167,762 20,231

12.06

1 50,993 7,477

4.95

47,37I

5,569

II.

76

5I,682

I37

0 .27

21,I86

974

4.60

7,269

44

0.61

446,2 63

34,432

7.72

178, 206 6,994 3 . 92 139,42 2 854

0.61

I

55,6I8

3,540

6 . 36

78,000

2 2 8

0.29

26,437

.. ..

I0, 9

06

. . .

.

488,

589

11,616

2.38

179,279 6,142

3.43

149,614 1, 9 19

1.28

57,116 1,72 9 3 . 03 52,162

304

0.58

21,146

I

. .

9,479

. .

..

468,796

10,095

2.15

167,94 5 5,835

3.47

15 3, 1 52

2,1781

1. 42 49,828 8,747

17.

55

50,400

5,189

10.30

21,512

. .

. .

9,651

. .

. .

452,488 21,949

4.85

18 5,993 9,695

5.21

160,978 6,49 2

4 . 03

56,650 7,773

13.72

47,6I8

330

0.69

22,520 I

..

9,403

..

. .

4 83,

I6 2 24,291

5.03

179,219 6,451

3.60

I49,538

728

0 . 49 56,375 723

1.2 8 49, 554 331 0 . 67

26,160

1

..

8,885

..

. .

469,731

8,234

I.

75

196,950 11,694

5.94

1 55 , 822 1,82 8

1.17

59,393 4,591

7.73

54,I38

2,208 4

.0 8 31,076 4

O.OI

8,819

..

. .

506,1 98

20,325

4.02

217,506 40,597

18.66

172,274 7,4 48 4 . 32 65,789* 14,116

21.46

56,573

I0,878

I9.23

32,251* 2

0.01

8,924

. .

. .

553,317 73,041

13.20

224,696

20,115

8.95

18I,380

5,961

3.29

54:,633*

4,947 9 . 05 54,962* 7,456 1 3

.57

36,051 * 4

0.01

7, 879*

. .

. . .

559,601 38,483

6.88

218,781 19,098

8.73

172,777 4,794 2

.77

52,789* 2,422

4.59

53,2 98 * 4,517 8

.47

35 ,0 96* 2

0.01

8,904*

.. ..

541,645

30,833

5.69

991

496,979127,330

191,634 14,685

7.66

158,59 5 3,968

2.50

55,556 5,416

9.75

54,839

3,1581

5.76

27,343

0.36

9.012

4

0.04

5.50

-

----------

•

Sharps

and

screenin g s

not

included (negligible quantities).

.

00 t>::)

83 t>·

(b) THE PROFITS AND LOSSES O:F THE (f COSTED" MILLING BUSINESSES IN

RESPECT O:F MILLING OPERATIONS IN 1932-33. 135. In Table 33 the medians of t otal net costs in each group are compared with the medians of prices obtained, and the corresponding differences shown:-TABLE 33.

Metropolitan Mills . Country Mills.

Rub-Head.

Groups I. and II. Group I. Group II. Group III.

£ s. d. £ s. d. £ s. d. £ s. d.

Median total costs per· ton .. . . 6 18 5 6 19 10 7 5 3 7 5 10

Median of average prices obtained for flour 7 511 7 5 4 7 6 8 7 '13 3

Difference per ton for return on capital . . .. . . 0 7 6 0 5 6 0 1 5 0 7 5

136. Although the comparison of n1edians does not allow of any accurate deduction as regards rate of profit, the figures suggest that this industry was in general on a profitable bas]s. 137. The Commission has analysed the costs of the five metropolitan 1nills whose total costs per ton approxi1nated most closely to the median cost of £6 ISs. 5d. These mills had an average tonnage of 18,337 tons during 1932-33 and the average costs incurred were as follow:-

Manufacturing Selling Delivery Administration

Wheat

Less Offals

Net Cost Return on capital at 8 per cent.

£ s. d. £ s. d.

1 4 I

3 7

5 6

8 1

7 0 3

9 1 6

2 3 5

6 18 1

6 10

7 4 11

138. The above average costs are presented in diagrammatic form in Figure XXIII. 139. The relative financial success of each business during 1932-33 has been ascertained in the following way-. The actual expenditure incurred by each 1nill solely in connexion with its milling

operations was taken. Depreciation was added at the rates adopted by the Commission. The value of offals sold was deducted from this figure and the net profit obtained. The net profits were then expressed as a percentage of the net amount of proprietors'

capital invested in the industry. 140. Table 34 sets out a classification of the mills according to the data prepared in this way:-T ABLE 34.

SHOWING THE DISTRIBUTION OF THE " COSTED " FLOUR MILLS ACCORDINQ- TO THE COMPUTED PERCENTAGE OF PROFIT OR LOS S E AR rTED SOLELY IN RESPECT OF FLOUR-MILLING OPERATIONS-1932-33. 1\fetropolitan. Country.

Percentage of profits or losses to capital.

Gro ups I. and II. Group I. Grou p II. Group III.

L osses-Over 6 per cent. . . . . . . . . . . . . 1 2

Between 6 per cent. and 4 . 01 per cent. . . 1 . . . . . .

Between 4 per cent. and 2. 01 per cent. . . 3 2 2 1

Between 2 per cent. and nil .. . . . . 1 2 . . 2

Profits-Between Nil and 2 per< cent. . . . . . . 1 1 2

Between 2.01 per cent. and 4 per cent. . . 2 1 1 1

Between 4. 01 per cent. and 6 per cent. . . 2 3 1 1

Between 6. 01 per cent. and 8 per cent. · .. 1 1 2 2

Between 8.01 per cent. and 10 per cent. . . 4 3 3 1

Between 10.01 per cent. and 12 per cent. . . 1 1 4 1

Between 12.01 per cent. and 15 per cent. . . 3 4 3 3

Between 15.01 per cent. and 20 per cent. . . 3 4 2 3

Over 20 per cent. . . . . . . . . 5 3 2 2

Total . . . . . . . . 26 25 22 I 21

84

141. Table 35 shows the distribution of the " costed" mills according to the computed profit or loss per ton of flour in 1932-33 solely in respect of flour-milling operations. TABLE 35 .

SHOWING THE PROFIT OR LOSS PER TON OF FLOUR PlWDUCED IN RESPECT 01!' EACH FLOUR­ MILLING BUSINESS WHOSE FIGURES HAVE BEEN INCLUDED IN COST ARRAYS-FINANCIAL YEAR 1932-1933.

New South Wales. Vi etoria. South Australia, Wes tern Au stralia and Queensland .

METROPOLITAN.

per ton. per ton. per ton.

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

1 made profit .. 1 10 1 made profit 2 6 1 made profit 5 5

1 made profit .. 4 7 1 made profit . . 7 1 1 made profit 8 3

1 made profit ' . 6 10 1 made profit . . 8 9 l made profit 8 5

1 made profit .. 7 5 l made profit .. 11 0 l made profit . . 11 7

1 made profit .. 9 1 l made profit .. 12 6 l made profit . . 15 6

1 made profit .. 10 1 1 made profit .. 15 0 1 made profit 23 4

1 made profit .. 16 10 1 made profit .. 15 1

1 made profit .. 24 6

! ·sustained loss. .. I 0 1 sustained loss . . 011 1 sustained loss 1 9

1 sustained loss 3 5 1 sustained loss .. 3 4

CouNTRY.

1 made profit 0 8 1 made profit .. 3 6 1 made profit 3 2

2 made profit . . 1 1 1 made profit .. 4 2 1 made profit 510

1 made profit . . 1 4 1 made profit .. 5 0 l made profit 6 10

1 made profit . . 4 1 1 made profit .. 5 4 1 made profit 611

1 made profit . . 4 10 1 made profit .. 710 1 made profit 8 4

1 made profit 5 4 1 made profit .. 8 8 1 made profit 9 0

1 made profit .. 5 10 1 made profit 11 8 1 made profit 9 6

1 made profit 6 7 1 made profit .. 14 10 1 made profit 9 7

1 made profit .. 6 9 1 made profit .. l7 7 1 made profit 11 1

1 made profit .. 8 1 1 made profit .. 18 7 1 made profit 12 2

1 made profit .. 9 9 1 made profit 19 5 1 made profit 12 4

1 made profit .. 10 6 1 made profit 13 10

1 made profit .. 11 7 1 made profit 16 0

1 made profit .. 11 10 1 made profit .. 18 4

1 made profit .. 13 5 1 made profit 18 10

1 made profit .. 14 0 1 inade profit 21 5

1 made profit .. 14 4 1 made profit 28 0

1 made profit .. 16 4 1 made profit 35 7

1 made profit 17 1

1 made profit .. 20 3

1 made profit .. 22 1

1 made profit .. 28 2

1 made profit .. 33 10

1 sustained loss 0 3 1 sustained loss 1 0 1 sustained loss 0 9

1 sustained loss . . 1 3 1 sustained loss 1 10 1 sustained lo ss 5 4

1 sustained loss .. 1 5 1 sustained loss 8 7

1 sustained loss .. 1 11 1 sustained loss .. 17 7

1 sustained loss .. 2 4

1 sustained loss . . 4 4

1 sustained loss .. 4 9

1 sustained loss .. 5 7

1 sustained loss .. 15 4

142 . The aggregate figures showing the average rate of profit (computed in the way described) earned by those mills whose figur es were used in the cost investigation are shown in Table 36. TABLE 36.

SHOWING THE AVERAGE MILL PROFIT (FROM FLOUR MILLING ONLY) PER TON OF FLOUR PRODUCED AND THE PER CENT AGE RETURN ON CAPITAL INVESTED ON THE BASIS ADOPTED BY THE COMMISSION, 1932- 33 .

Propriet ors' capital Net profit Area. Flour produced. invested In flou r· Profit per ton. Percentage on milling only. (flou r). capital . .

tons. £ £ s. d. %

Metropolitan . . .. 620,444 2, 788,587 313,420 10 1 11.239

Country . . .. . . 441,110 1,751 ,798 160,76 1 7 3 9. 177

-85 143. l!'rom the evidence before the Commission it would appear that the total profits of the industry are somewhat greater than are disclosed in the figures here submitted, for the following reason. Certain. important flour-milling concerns also deal largely in wheat. From the point of view of book-keeping it is permissible in such cases to charge the flour mills with the average cost of the wheat purchased, whether that wheat is used for flour-milling or sold as wheat. It is quite probable that in these cases the average cost of the wheat is higher than in the cases of flour-millers who are watching the wheat market carefully and purchasing wheat at the appropriate times for flour-milling only. 144. As 1d. per bushel difference in the price of wheat affects the profit or loss of flour by approximately 4s. per ton, it is clear that a difference of 1d. or 2d. per bushel in the price charged for the wheat used in the flour · mill affects the profit and loss account of the flour-miller considerably. 145. It would be impossible to do anything but generalize upon this position without a continual audit over a number of years; the evidence before the Commission supports the view that the profits of the flour-milling businesses would, in certain cases, have been greater in the absence of any dealings in wheat as wheat. 146 The financial returns from Australian businesses mainly concerned with flour-mil1ing are given in sub-section (c) of this section for a period of eleven years. No clifferentiation between profits from flour-milling and other operations was possible for all these years. However, for purposes of comparison with Table 34 the results given in sub-section (c) for the year 1932-33 are shown below. In this investigation the only adjustment made to the proprietors' figures has been the exclusion of depreciation reserve from the amount of capital on which a return is to be ca]culated. A close agreement between the results of this particular method of survey and those of the preceding method was unlikely for the following reasons : (i) Earnings from outside investments are here included. (ii) Earnings from other forms of trading activity are also included in the accounts of some of the businesses. (iii) The rates of depreciation are those used by the businesses and these are in some cases lower, in others higher, than those adopted by the Commission. 147. As some of the milling businesses control more than one mill the number of cases recorded is less than those used in the cost investigations. 148.-TABLE 37. SHOWING THE DISTRIBUTION OF THE MILLING BUSINESSES ACCORDING TO THE COMPUTED PERCENTAGE OF PROFIT OR !lOSS FROM ALL SOURCES AS REVEALED IN THE BOOKS OF THE PROPRIETORS EXCEPT THAT DEPRECIATION RESERVES HAVE NOT BEEN REGARDED AS CAPITAL-1932-33. Metropolitan. Country. Percentage of profits or losses to capital. Groups I. and II. Group I . Group II. Group III. L osses- Between 6 per cent. and 4.01 per cent. . . . . . . . . 1 Between 4 per cent. and 2. 01 per cent. . . . . . . . 1 2 Between 2 per cent. and Nil . . . . . . . . . . .. ro:fits- p Between Nil and 2 per cent. . . . . . . 5 4 1 Between 2.01 per cent. and 4 per cent. . . 3 1 . . 2 Between 4.01 per cent. and 6 per cent. . . 2 1 1 1 Between 6.01 per cent. and 8 per cent . . . 7 2 2 2 Between 8.01 per cent. and 10 per cent. . . 3 3 2 2 Between 10.01 per cent. and 12 per cent. .. 4 3 2 2 ., Between 12.01 per cent . and 15 per cent . . . 3 1 1 1 Between 15.01 per cent. and 20 per cent. . . 2 4 2 1 Over 20 per cent. . . . . . . 2 1 1 2 . . Totals . . . . . . .. 26 21 16 17 149. The figures for the metropo]itan and country mills when aggregated and examined on this basis appear in Table 38.

86

TABLE 38.

SHOWING THE AVERAGE MILL PROFIT (FROM ALL SOURCES) PER TON OF FLOUR PRODUCED AND THE PERCENTAGE RETURN ON PROPRIETORS' CAPITAL INVESTED (EXCLUDING DEPRECIATION RESERVE)-1932-33.

Total proprietors' Net profits earned Percentage OJt Area. Flour produced. capital (excluding from all sources. Profit per ton. capital. depreciation reserve).

Tons. £ . £ s. d. %

Metropolitan .. .. . . 705,332 3,397,579 306,259 8 9 9.01

Country . . .. . . 356,222 2,115,521 142,283 8 0 6.73

NoTE.-The differences between the figures relating to flour produced and proprietors' capital as shown 'in the above Table and those appearing in Table 36 are due to certain country branch businesses being included under. metropolitan in Table 38.

(c) A REVIEW OF THE TRADING RESULTS OF FLOUR MILLING BUSINESSES DURING THE ELEVEN YEARS 1924-1934.

150. As many Australian flour-milling enterprises have been -established for a long time the Commission decided to make a survey of their financial or failure in past years. Profit and loss accounts from 1924 onwards were obtained, where possible, from all milling businesses, and these have been surveyed. The difficulties in the way of making detailed use of the information were--

(i) It was not practicable to separate the results of flour-milling from those of wheat trading or from income arising from other sources of investment or trading. . (ii) The number of mills able to afford information in regard to the earlier years

was relatively small. ·

.(iii) There were changes both in the type of equipment and in the amount of capital · invested. (iv} It was impracticable to publish the results from individual milling __ businesses without disclosing information.

151. The data could only be used as a general indication as to whether flour-milling businesses had, as a whole, been profitable or otherwise.

152. The result of the inquiry is shown State by State in Figure XXIV., the construction of which is fully explained in the letterpress. A review of the data indicates that, in general, flour:-milling businesses have been carried on profitably except in certain seasons, notably 1930, when a rapid fall took place in the _ price of wheat. Exceptional periods have occurred from time to -time in -.various States: 1928 was relatively unsatisfactory in New South Wales: the period

1928 to 1932 was one of difficulty for a large proportion of millers in South Australia : in Western Australiaa high proportion of the mills have shown results which have been unsatisfactory in .1932 and 1934. These intra-State . anomalies in both South Australia and Western

Australia are largely bound up with the development of intense competition on the local market, and the fact that both these States are not in as good a position as Victoria and New · South Wales in respect to ·the export trade to the Pacific which has been particularly valuable in recent ·years. The improvement in South Australia fron1 193.2 onwards is doubtless due to the .formation

of a State Flour-millers' Association. This circumstance enabled the industry to establish a11 effective local price. !laving regard to the general information revealed in this survey, it appears that the year chosen by the Commission for its detailed analysis is ,reasonably representative of recent years in respect t'o profits earned by the flour-milling industry. . .

153. An examination of the records relating to the share holdings in the flour-milling companies shows that during the period of eleven years ended 1934there havenot been many changes in the capitalization of the older con1panies. ·. · · . .

·154. There have been instances of re--valuations of assets and/or · reco"nstructions of companies. Some · companies have reduced capital, have increased

their ca a of the latter represent Increases by the Issue of

155. As a result of the survey, capitalization during the period

under reviinv do not reveal abnormal distributions of profits or reserves by way of of bonus shares: · ' ·

87-88

COLUMN DIAGRAMS SHOWING FOR EACH YEAR FROM 1924 TO 1934 INCLUSIVE PROFITS OR LOSSES EXPERIENCED BY THOSE FLOUR MILLING BUSINESSES WHOSE ACCOUNTS WERE AVAILABLE.

N.B. The results of wheat trading and returns from outside investments are included in the data set out.

The data are set out by States. Each vertical column deals with a single year. The number of cases for which information was available was smaller in the earlier years. The column appropriate to each year is subdivided into · equal sections. Each section represents the results of one milling , business. The shading of each section indicates the amount of the profit- or loss thus :-

N.S.W.

VIC.

B.A.

W.A.

Full Black shading indicates a profit Cross Hatched , Close Diagonal , Wider

or loss of £1,000 or under. , between £I ,00 I and £5,000. £5,00 I and £I 0,000. £I 0,00 I and £20,000.

Clear Section indicates a profit or loss of £20,000 or over.

FIG.XXIV.

89

156. The following examples of capital alterations are mentioned :­ NEw SouTH Vv ALEs. Company "A" reduced its paid-up capital by £16,576 by writing down. Company " B " increased its capital by £10,000. Additional capital was obtained by

increasing the share capital, and the additional shares were fully paid up in cash. Company " C " reduced its paid-up capital by £15,210 by writing down Company " D " reduced its paid-up capital by £10,125 by writing down. Qompany " E

" reduced its paid-up capital by £21,839 by writing down. Company" F" reduced its paid-up capital by £21,000 by writing down. VICTORIA. . .

Company " A " increased its nominal capital by £20,000. -All , which have been issued since have been paid for in cash. the addition a I shares Company · " B

" increased its nominal capital · by £5,000. issued to date have been paid for in cash.

WEsTERN AusTRALIA.

The additional shares

Company "A "-the paid-up capital was increased by £1,000, all of which was paid for in cash. .

qompany "B "increased its paid-up capital by £2,000, all of which was paid for In : .cash.

Company "C" increased its nominal capital by £2,000, all of which was paid up In cash. Company " D " increased its capital by £29,500, all of which represents a distribution I_ of bonus shares.

QUEENSLAND,

Company " A " increased its paid-up capital by £4,045, all of which was obtained in : cash.

Company "B " increased its capital by £15,000, all of which represents an issue of · bonus shares.

157. 39 has been prepared for general information only. The Commission desires to that deductions other than those specified by the Commis_ sion should not be drawn from this for the following reasons :- _ (a) Table 39 covers all operations of businesses known as flour-milling businesses,

: · but included in at least 30 per cent. of the cases operations such as wheat · trading which are not directly associated with or necessary to the business of flour-milling. (b) The capitalizations given are taken direct from the bala:nce-sheets of the various

busjnesses, and include considerable sums of mon ey which are not now directly employed in the flour-milling operations. (c) Whilst, generally speaking, the capitalization representing shareholders' or proprietors' invested capital employed in the flour-milling business is not

excessive (with the exception of some of the Queensland mills, and a few special cases in other States) , the Commission has no comments to make in regard to the capitalization shown in Table 39 because it wa8 not necessary to examine these figures critically. (d) The---percentage of profits shown in Table 39 is probably lower than it would be

if a critical examination of t he capital had been made. The profits, and the percentage of profit on capital sho wn in Table 39 is the

aggregate result. Frmn the sum of all profits has been deducted the sum of all · losses; and, as some units in the industry in each State have made losses due to a variety of causes (and son1etimes these losses are considerable- often in operations outside of the fiour-1n illing industry), the net result do es not

represent the results obtained by the businesses which have been well conducted. 158. The interesting points which can be deduced from Table 39 are :-(a) The considerable increase in the capitalization since 1924. To a material extent the increase in this capital has come from the accumulation of undistributed

profits.

The poor results obtained in 1928, with the exception of Tasmania, where special

circumstances apply. (c) The effect of severe internal competition in South Australia from 1928 or 1929 to 1932. The poor results of 1928 may have been due t o other causes. (d) Generally, the poorer results in 1934 as co1npared with 1933. (e) The progressive decrease in profits in Victoria which was comparatively much

greater in that State than in New South Wales.

TABLE

39.

SHOWING

AGGREGATE NET

PROFITS OF

THE

"FLOUR

MILLING

BUSINESSES "

AFTER

DEDUCTING

THE

LOSSES OF CERTAIN BUSINESSES,

IN THE

DIFFERENT

.

STATES OF

THE

COMMONWEALTH, EXPRESSED

AS

A

PERCENTAGE OF PROPRIETORS' CAPITAL INVESTED

AS

SHOWN

BY

THE

BALANCE­

SHEETS

FOR

THE

YEARS

1924

TO

1934,

INCLUSIVE. \ (The profits

or

losses

from

wheat

trading

and

other

outside activities

are

included.)

I

State

.

Item.

1924.

1925.

1926.

1927.

1928.

1929.

1930.

1931.

1933.

1934

.

-

£

£

£

£ £ £ £ £ £ £

£

New

South

Wales

..

Capital

..

..

1,867,458 2,275,195 2,463,348

2,544,441

2,616,217 2,834,777 2,789,601 2,970,236 3,022,456 2,977,654 2,987,027

Profit

. .

..

155,170 175,359 239,480 250,886 89,995 162,732 80,322 247,674 225,034 241,660 163,736

Percentage

..

8.31

7.70

9.72

9.86

3.44

5.74

2.87

8.33

7.45

8.11

5.48

.

.

Victoria

. .

Capital

..

..

1,472,638 1,601,625

1,840,726

1,993,407 2,112,582 2,346,256 2,159,525 2,185,437 2,129,509 2,113,043 2,134,836

Profit

. .

..

238,420 255,804 253,287 263,901 137,162 230,942 39,773 186,948 132,707 179,409 138,942

Percentage

..

16.18

15.97

13.76

13.23

6.49

9.84

1.84

8.55

6.23

8.49

6.51

-

South

Australia

. .

Capital

..

385,961 440,262 476,589

491,808

498,466 529,105 544,189 549,975 543,770 492,174 473,078

Profit

or Loss

..

17,223 31,711 18,349 31,601 (L) 1,425 (L) 7,425 (L)

1,965 "

(L) 19,791 (L) 17,899 39,719 19,417

Percentage

..

4.46

7.20

3.85

6.42

(L)

.28

(L)

1.40

(L) .36 (L) 3.60 (L)

3.29

8.06

4.10

---

Western

Australia

..

Capital

..

..

246,222 251,512 284,816 29.3,582 594,839 617,361 608,258 639,147 626,890 652,171 658,353

Profit

or Loss

..

42,128 23,373 35,550 42,358 43,823 (L) 20,681 (L) 5,562 46,445 (L) 28,266 34,999 12,014

Percentage

..

17.11

9.29

12.48

14.42

7.36

(L)

3.35

(L)

.91

7.26

(L)

4.51

5.36

1.82

Queensland

. .

Capital

..

..

371,781 404,759 419,179 427,910 434,045 459,577 458,263 546,642 721,733 716,926 673,902

Profit

. .

..

18,615 36,554

34,730

25,963 24,768 39,382 25,114 65,988 . 65,534 54,772 32,907

Percentage

..

5

9.03

8.29

6.06

5.70

.

8.57

5.48

12.07

9.08

7.64

4.88 --

Tasmania

. .

Capital

..

..

76,246 76,329 78,577 79,438 78,517 75,185 78,192 203,328 211,921 214,325 216,580

Profit

. .

..

8,252

11,110 14,402 11,809 13,038

6,895 13,525 12,927 29,555 21,101

9,130

Percentage

..

10.82

14.55

18.33

14.86

. 16.61

9.17

17.29

6.36

13.94

9.85

4.22

co 0

.

TABLE

40.

SHOWING AVERAGE CAPITAL, COSTS,

PROFITS,

AND

RECEIPTS

FROM

FLOUR

SALES COMPUTED ON

A UNIT

BASIS

AND

ARRAYED

ACCORDING

TO

AND

COUNTRY

FIGURES

DISPLAYED

SEPARATELY-FINANCIAL

YEAR

1932-33.

'

Area

or

State

.

Sydney Melbourne Adelaide Perth Brisbane

(1) ....

M e tropolitan summary

New

South

Wales

..

Victoria

..

. .

South

Australia

..

Western Australia

..

Queensland

..

. .

Country

summary

..

Combined

Metropolitan

and

Country

summary

Proprietors' invested capital per

sack

capacity. (2) £ 2,481

2,221 2,066 1,845 4,048 2,421 2,4:4:1 1,4:48 1,685 2,179 4:,987 2,173 2,304

Average

actual

Flour

costs (per ton)

1932-33.

Average flour profits.

I

Operating

Cost of

Offal

Net

Costs.

Per

ton

of

Return

on

Costs.

Wheat.

I

Receipts.

production.

on Capital.

(3)

(4}

(5)

(6)

(7)

(8)

METROPOLITAN

MILLS.

£

s. d.

£

s. d.

£

s. d.

£

s. d.

£

s. d.

%

2 1

0

6 18 7 2

0 10

6 18 9

0

9 5

11.68

1

13 11

7 3 1 1

19 11

6

17

1

0

6

3

8.66

1

15

1 6 6 3 2 1 3 6

0

1

0

15 6

21.14

2 2 1 7 2 3 2

4

1 7

0

3

0 4 4

5.79

2

15

7 8 6

10

2

3

10

8 18 7

0

14

0

10.39

119

5 7 2

· 4: 1

2 1

0

7

0

9

0

8

4

10.27

- - -

----

-

COUNTRY

MILLS.

3 1

10

6

4

9 2 2

3 7

4 4 0

6 2

5.87

2 8

0

6

4:

6 2

0

3

6 12 3

0

9 1

16.54:

3 6 6

6 6 5

211

3

7 1 8

011

9

11.15

2 9 2 6

14

3 2 2 2

7

1 3

LO

0 4

L

.30

3

16

2 8 5 3 2

3

4

9 18 1 1

7 2

17.4:6

2

16 10

6

711

2 2 1 7 2 8

0

7

4

7.93

2 6 9 6

16

4

2 1

5 7 1 8

0

7

10

9.23

Average flour proftts assuming

Average price received for flour (per

ton).

local flour

had

been

sold 5s.

per

ton

less.

Local

and

ex- Local.

Export.

Per

ton

of

Return

on

port

combined. production. capital.

(9)

(10)

(11}

(12)

(13}

£

s. d.

I

£

8.

d.

£

8.

d.

£

s. d.

7 9 9 8 5

10

6

17

2

0

7

3

8.95

7 2 1 7 12 3 6 13 5

0

3 9

5.19

6

17

4

7 2

4

611

2

0

12 9

17.49

6 16 6 8 7 2 6

0

7

0

2 7

3.5

9 18 2 9 18 2

..

0

8

10

6.57

7 8

10

8 5 2 6 13 7

0

5

10

7.18

----

--

-----

---

---

7 9 5 8 2 9 6 8 7

0

3

0

2.82

7

4:

1 7 12

0

6 14 6

0

6 5 11.61

7

10

9 7

12

9 6 13 6

0

7 2

6.76

6

6

1

8

1

11

5 12 9

LO

1

8

L

1.63

11

2 6

11

2 6

..

1 1

10

14.04

711

6 8

4 10

6 6 9

0 4 4

4.73

7

8

7 8

4

7

611

1

0

5 3

6.09

----

- - -

--

- - -

NoTE.-The

total

amount of proprietors' capital invested in flour-milling as represented

by

the

figures shown

in

Column

2 of

the

above Table is £2,513,682

and

£2,026,703

for metropolitan

and

country businesses respectively.

O'"'e+-C)C) ct>

P""'o

o

(!>

(!>

\F.l

§

ct-

\/.l

c:+

t-1

2-.et>

.....

<

I

01

c:+

s OQ

P"'....::!

Ot

(t)

('t)

..--;J

00

:a

• p-'1-0

<

0"'

'"0 .....

(t)

('j

.....

t-1

.......

c:+

\/.l

00

(Jq

0

0

(t)

\/.l

_.....-ct-so

0

:a

c:+

1:::!!

......

P"'c:t-

U1

0

=:...·

Z.l-0

.2J

....

- .......

<

t-1

.

._,

:a g

g_

\/.l<"t>l-+>

......

0

•

p-'

.....

0

l::::h

0

00

o-''"0

p...

§

t-1

('t)

(t)

(t)

0

('j

•

&r":::;.·

.....

0

1-J

_.a>

ct- ct-

,_.""

__,et>Oa>O p..

I-+>

(j

t:jt=bOoa> e.s

s

.........

.....

1-0

0

d-" p

0

s

t-1

§

(Jq

<

c,...,

s

qaq

..

a>t:::l

I

s

p...

0

t:::l

.....

p..

::::::::_..

c.c vi() cto:..""

..........

92

160. Table 41 shows certain financial data relating to the costed mills whose figures were used for the compilation of Table 40, arranged in ascending order in respect of each item reviewed. It should be clearly understood that the figures on any horizontal line do not bear any relation whatever to any other figures on the same horizontal line :- . ·

TABLE 41.

SHOWING CERTAIN FINANCIAL DATA RELATING TO "COSTED " FLOUR MILLS RANGED IN ASCENDING ORDER IN RESPECT OF EACH ITEM REVIEWED. (N.B.-The figures for any individual mill occupy different horizontal positions in the various columns of the Table, and do not bear any relation whatever to any other figures on the horizontal line.)

(METROPOLITAN MILLS.)

Flour costs per ton- actual1932-33. Trading results-Flour only. Average price received for flour (per ton) .

Capital per

Opomtlng I

I

Lo cal and

capacity. Cost of Offal Net Cost . Profit Losses Proftt. Loss. Export Local. Export. Wheat. Receipta. per ton. per ton. Combined. I I

AREA-SYDNEY.

£ £ 8. d. £ 8. d. £ 8. d. £ 8. d. 8. d. 8. d. % % £ 8. d. £ 8. d. £ 8. d.

1,415 1 10 10 6 2 5 1 16 10 5 19 10 110 1 0 3.91 •2.23 6 1 7 7 9 0 6 5 3

1,643 1 14 3 6 15 8 1 18 6 6 15 11 4 7 3 5 5 4.19 6 18 8 7 9 5 6 11 7

1,815 I I6 10 6 15 9 1 19 5 6 16 8 6 10 6.48 7 0 2 7 19 8 611 9

I,938 l 18 4 7 3 4 2 I 2 6 18 0 7 5 8.65 7 6 1 7 I9 9 6 13 0

2,009 I IS 8 7 3 7 2 l 6 7 1 6 9 1 12.33 7 7 10 8 0 7 6 13 5

2,542 2 0 ll 7 3 11 2 2 2 7 3 2 10 l 13.84 7 811 8 1 0 6 15 0

2,890 2 2 2 7

4 4 2 3 0 7 6 IO 16 10 16.21 7 10 3 8 1 10 6 18 8

2,979 2 9 0 7 5 2 2 3 4 7 7 6 24 6 28.09 7 13 9 8 6 3 7 4 4

3,479 2 9 1 7 7 6 2 4 8 7 9 7 7 14 ll 9 0 7 7 7

2

4,049 2 15 4 7 10 8 2 6 6 7 11 8 7 19 6 9 ll 1 7 8 8

AREA-MELBOURNE.

692 1 9 0 6 14 4 1 16 7 6 2 6 2 6 0 11 3 .41 l. 36 6 17 0 7 5 2 6 1 8

1,282 1 12 3 6 15 4 1 16 10 6 10 11 7 1 8.4I 6 I7 8 7 8 0 6

4 0

I,500 I 13 2 6 I9 II I 19 1 6 II 8 8 9 9.50 6 19 9 7 9 7

6 10 8

I,504 I I4 0 7 0 8 1 19 7 6 13 11 II 0 10.06 6 19 11 7 I2 0

6 I5 7

2,272 1 I5 2 7 1 3 2 3 I 6 I5 0 I2 6 15.04 7 5 3 7 I2 5 6 15

8

2,276 I I7 3 7 1 4 2 4 6 6 18 0 I5 0 25.35 7 5 9 7 I8 ll

6 16 7

3,161 2 0 0 7 5 9 2 6 4 6 18 10 15 I 72.23 7 9 7 8

1 ll

5,148 2 2 7 7 8 2 2 6 IO 7 6 6 7 I2 0 8

2 3

AREA-ADELAIDE ; PERTH AND BRISBANE.

1,572 1 I5 1 6 6 3 1 15 2 6 0 I 5 5 1 9 5.78 2.01 ' 6 4 3 7

2 5 5 4 3

1,582 I 15 8 6 I4 7 2 1 3 6 9 8 8 3 3 4 8.23 3.55 6 9 10

7 8 0 5 9 10

1,598 2 3 2 7 0 7 2 1 5 6 16 7 8 5 I < .l:. 7

6 I7 4 7 I9 1 6 3 4

2,048 2 3 4 7 1 7 2 3 0 6 19 10 ll 7 15.33

6 I7 7 810 9 6 8 2

2,066 2 3 9 7 7 0 2 5 4 7 4 4 15 6 20.0I

6 I9 II 8 I2 2 611 2

2,449 2 4 ll 7 8 6 2 7 2 7 10 5 23 4 21.14 7IOII 9 0

0 6 17 3

2,932 2 14 8 8 4 8 2 7 7 8 I7 10

9 7 IO 9 7 10

4,952 2 16 2 8 10 5 2 lO 11 8 19 9

10 14 II 10 I4 ll

RANGE OF CAPITAL, COSTS, PROFITS AND RECEIPTS FROM FLOUR SALES 1932-33. CouNTRY MILLS. STATE-NEw Sou TH W Ar,Es .

£ £ B. d. £ 8 . £ 8. d. £ 8. d. 8. d.

8. d. %

0 1 £ 8. d. £ 8. d. £ 8 . d. / 0

560 2 0 0 5 5 2 1 13 8 6 3 2 0 8 0 3

. 57 .4 6 9 5 7 5 10 5 I4 5

838 2 3 3 5 9 8 1 15 ll 6 3 10 (2) 1 1 1 3

.70 l. 60 6 13 0 7 6 9 5 19 3

936 2 4 6 5 11 6 1 17 3 6 11 8 l 4

1 5 .73 2.23 6 18 4 7 7 7 5 I9 6

I,288 2 5 9 5II 9 I 17 9 6 12 10 4 1 I ll

l. 74 2.59 6 I8 8 7 8 1 6 2 6

1,469 211 6 5 13 8 I IS lO 6 13 1 4 10

2 4 2.02 2.67 7 0 5 7 10 11 6 2 10

I,688 2 I3 0 5 I6 5 1 19 1 6 I4 4 5 4 4

4 5 . 32 4.81 7 010 (2) 7 II 6 6 5 7

1,706 2 14 5 5 16 11 1 I9 5 6 16 I 5 10 4

9 5.55 8.26 7 2 0 7 I3 5 (2) 6 6 4

1,735 2 I5 9 5 I7 I 1 19 7 6 18 l 6 7

5 7 6.27 12. 53 7 2 6 7 14 7 6 6 10

1,793 2 17 5 5 17 3 1 19 8 6 18 7 6 9

I 5 4 7. 77 I4.48 7 3 6 7 I5 7 6 7 2

1,834 2 17 8 5 18 2 1 19 10 6 19 10 8 l

8 . 56 7 4 4 7 17 2 6 9 7

I,835 2 17 9 5 18 8 2 0 3 7 2 1 9 9

9.64 7 5 3 7 17 3 6 9 8

2,14·o 2 I9 4 5 19 10 2 0 6 7 2 7 10 6

9 . 84 7 6 3 7 17 7 6 9 10

2,180 3 0 6 0 6 2 l l 7 2 9 ll 7

10 7 6 9 7 19 1 6 10 0

2,203 3 0 4 6 1 1 2 I 5 7 3 8 ll 10

10.16 7 7 6 8 1 4 610 7

2,236 3 1 4 6 2 2 (2) 2 1 9 7 4 5 13 5

10.90 7 8 1 8 I 7 (2) 6 II 0

2,296 3 5 2 6 2 9 2 2 2 7 5 3 14 0

11 .22 7 10 ll 8 l lO 611 4

2,32I 3 6 1 6 3 6 2 2 5 7 6 0 14 4

11 . 23 {3) 7 II 6 8 2 10 6 11 8

2,358 3 2 ll 6 3 10 2 2 10 7 6 6 16 4

12 . 21 7 12 3 8 4 7 (2) 6 12 5

2,461 3 3 5 6 4 2 2 3 0 7 7 2 17 1

13.06 7 13 3 8 4 9 6 12 7

2,486 3 5 - 7 6 5 3 2 3 4 7 7 4 20 3

13.08 7 13 4 8 5 2 6 13 3

2,561 3 8 9 6 5 7 2 3 8 7 8 3 22 1

15 .21 7 I3 8 8 5 7 6 13 9

2,674 3 9 4 6 5 9 (2) 2 4 3 7 9 10 28 2

15 .4 7 15 1 8 5 9 7 2 4

2,700 3 ll 8 6 9 9 2 5 0 (2) 7 10 5 33 10

15 .61 7 16 4 8 6 1 7 4 5

2,848 3 II 10 6 II 5 2 5 2 7 10 10

27.8 7 19 1 8 7 3

2,908 3 12 1 6 ll 6 2 5 11 7 12 3

8 1 6 8 8 ll

3,096 3 I2 9 6 12 5 2 6 5 7 12 4

8 1 ll 8 15 8

3,288 3 14 0 6 12 6 2 8 6 7 13 9

8 2 10 8 17 2

3,338 3 I5 2 6 I3 5 2 IO 1 8 0 6

8 3 1 9 I 0

3,364 3 15 4 6 I3 ll 2 10 7 8 0 7

8 5 7 9 4 2

3,539 4 0 2 6 17 I 2 I2 0 8 3 8

8 10 8 9 5 9

3,920 4 0 8 6 17 3 2 12 4

8 . 8 7 8 14 6 9 I3 10

3,951 4 14 1 6 17 7 8 11 4

10 1 5

4,395 4 18 5 6 18 4

93

RANGE OF CAPITAL, COSTS, PROFITS AND RECEIPTS FROM FLOUR SALES 1932-33-continued. CouNTRY MILLs-continued.

Flour costs per ton-actuall932-33. Trading result s- Flour only. Average price recei ved for flour (per ton).

Capital per sack I

I

capacity. Operating Cost of Offal Profit Loss es Local and

Costs. Wheat. Receipts. Net Cost . per ton. per ton. Profit. Loss. Export Co mbined.

Local. Export.

----· I I STATE-VICTORIA. 655 1 13 2 5 19 8 1 11 4 6 4 7 3 6 1 0 3.29 1.18 6 16 11 7 7 2 5 19 1 696 1 16 0 6 0 1 1 15 9 6 6 4 4 2 1 10 9.45 2.17 6 17 10 7 7 4 5 19 11 807 1 18 9 6 2 10 1 16 7 6 8 3 5 0 10.08 6 18 9 7 7 5 6 0 9 949 2 0 7 6 4 3 1 17 0 6 9 5 5 4 13.13 7 0 0 7 8 5 6 3 0 1,078 2 1 8 6 5 4 1 19 7 6 9 9 7 10 13.92 7 1 7 7 9 4 6 3 2 1,199 2 411 6 6 7 1 19 9 6 13 6 8 8 14.13 7 5 4 7 11 5 6 4 8 1,366 2 811 6 9 4 2 0 7 6 15 9 11 8 15.85 7 6 8 7 11 7 6 8 10 . 1,398 2 9 6 6 9 7 2 2 5 6 17 11 14 10 16.83 7 7 4 7 13 5 611 7 1,419 211 8 6 14 4 2 5 1 7 2 4 17 7 17.79 7 8 1 7 14 3 6 13 8 2,344 2 14 5 6 15 5 2 6 1 7 7 9 18 7 26.40 7 8 5 7 15 5 7 0 5 3,244 3 1 8 6 18 7 2 7 3 7 8 10 19 5 33.95 7 8 7 7 16 7 7 0 9 4,562 3 4 3 6 18 9 2 8 8 7 13 0 7 15 0 7 J7 0 4,601 3 4: 7 7 17 10 2 8 10 7 16 4 7 15 5 8 5 8 STATE-SOUTH AUSTRALIA. 545 2 16 1 5 9 6' 2 4 7 6 4 7 9 0 0 9 4.93 .34 6 19 9 6 19 9 5 16 592 3 0 4 5 17 10 2 6 0 6 5 7 9 6 17 7 7.9 6.66 7 1 6 7 3 6 5 17 6 846 3 4 4 6 0 10 2 6 9 7 0 10 11 1 9.55 7 8 7 7 911 6 16 10 1,137 3 5 0 6 1 10 2 7 5 7 2 0 12 2 10.66 7 13 0 7 13 0 1,196 3 9 3 6 4 0 2 7 9 7 3 11 12 4 13.89 7 13 6 7 13 6 1,371 3 10 4 6 8 3 2 9 10 7 5 4 13 10 19.29 7 14 0 7 14 0 2,000 311 9 6 8 7 2 13 4 7 5 10 18 4 23 .27 7 16 5 7 16 5 2,176 3 12 5 6 910 2 13 8 7 6 2 18 10 38.14 7 17 10 7 17 10 2,850 3 13 7 6 10 11 2 14 3 7 10 4 21 5 39.26 7 18 9 7 18 9 3,006 3 19 1 6 16 10 2 19 10 7 10 11 8 1 2 8 1 5 3,203 3 19 8 7 3 10 3 10 3 8 411 8 1 5 8 8 10 STATE-WESTERN AUSTRALIA. 892 1 13 2 6 4 !I 1 5 7 6 6 7 3 2 5 4 3.29 3.33 5 14 6 7 I 3 5 0 5 1,180 2 5 5 6 5 2 1 4 611 3 5 10 8 7 4.33 6.92 5 15 2 7 16 8 5 8 6 1,312 2 9 3 6 7 2 1 8 6 12 9 6 10 6. 74 6 1 0 7 19 1 5 9 2 2,282 2 9 6 611 4 2 2 1 7 3 8 611 9.71 6 9 9 8 5 6 . 6 3 3 2,414 2 16 3 6 14 9 2 4 7 7 5 6 8 4 13.05 7 I 11 8 5 10 6 5 9 2,756 2 19 9 6 16 10 2 5 7 7 7 0 9 7 14.47 7 4 9 8 9 3 6 IO 5 3,208 3 0 10 6 19 5 2 9 6 7 14 10 7 5 ] 8 14 7 6 14 5 5,226 3 19 9 7 3 9 2 11 0 8 14 0 8 5 10 9 1 5 STATE-QUEENSLAND. 2,998 I 3 6 6!7 12 2! 1 19 911111 16 0 I 115.121 .. I 10 3 41 10 3 !j 4,038 3 17 4 8 10 9 2 5 9 13 8 28 0 16.96 .. 10 11 I 10 11 7,530 4 0 11 8 12 10 2 5 10 4 9 35 7 22.02 .. 12 1 12 l 161. The following are some of the factors that contribute to the wide variations in the costs shown in the preceding tables :-(a) Queensland has no export trade and flour-millers in that State pay a higher price .for wheat than do those in other States. (b) Western Australia is far removed from the eastern markets and consequently millers enjoy certain advantages as regards the local price for flour, owing to the absence of competition from millers in other States, but they receive a lower price for flour exported. _ (c) There are no large producing mills in South Australia outside the metropolitan area. (d) Practically no country mills in South Australia (of which there are too many operating) export. (e) In Victoria the country mills are not as far from the sea board as are those in New South vVales, consequently, export freight costs are lower and many New South Wales country mills situate far inland export more flour than some of the mills nearer the coast. Moreover, the application of the respective "milled in transit " railway freight rates is more favorable to Sydney than to Melbourne mills. (f) Some flour-milling businesses have long and well established export markets with little fear of competition and so obtain good prices-others are not so fortunate, conSequently they are into keen competition for overseas trade and · have to accept much lower pnces. (g) In New South Wales some country millers adopt the practice of supplying bags to wheat farmers and so increase the costs, as shown, although, generally speaking, the cost is recovered in the form of high class or premium wheat.

57:;

SECTION V.-TRADE ORGANIZATIONS WITHIN THE FLOUR MILLING INDUSTRY.

97

V.-TRADE WITHIN THE FLOUR-MILLING INDUSTRY. 162. In New South Wales, Victoria, South Australia, and Western Australia, the flour­ have from time to tiine formed trade a.ssocia. tions for the purpose of protecting and

fostenng. their industry. In South Australia, the association is a registered company with Articles of Assomation. In New South Wales, Victoria and Western Australia, the associations are not registered, but are held together by certain rulesandregulatjons to which members agree to-adhere. In Queensland there is no definite association but the millers confer from time to time on matters concerning the welfare of their industrv. The various associations are affiliated through a Federal Council. . · .;

163. The history of the associations has shown that; although they have usually obtained the support of a large majority of the millers they have managed to attain unanimity only in certain States and for relatively short periods. The associations have found it desirable to change their rules and regulations or even to reorganize their procedure from time to time. They are to be regarded, therefore, as the expression of a need for a stabilizing force within the industry rather than as all powerful controlling organizations.

164. One of the main activities of each association has been an endeavour to place the selling of flour on an organized basis and so prevent cut-throat competition on the local market. It has already been seen that the mill capacity for Australia is rather more than double that required by the local market, assuming a 5-!-day week on a three-shift basis. It follows that at times when it is difficult to make overseas sales there is a tendency to increase the attractiveness of the price of flour to prospective purchasers within Australia to ·a. point which gives little or no return on the capital invested in the mills. Under these conditions the association can perform an effective service to the industry by fixing a local price.

165. Each State association fixes wholesale prices, terms and rebates at which flour shall be sold within its State for Australian consumption from day to day. Members of the associations are theoretically bound to adhere to this price. The factors taken in-eo consideration in fixing the prices are, inter alia, the price of wheat, the price at which offals are being sold, the costs of production and the extent · of competition from non-associated 1nillers. The investigations

of the Commission have shown that, in actual practice, the price received for much of the flour sold to bakers is lower than the declared price after deducting such discounts as are allowed. Further, in most States, there are a few mills which are not adherent to the association and are, naturally, free to quote whatever price seems reasonable to them. Certain of these mills frequently

under-cut the association price. 166. In general, the association price is considerably higher than that which the millers obtain for flour sold for export. The difference between these prices is discussed in paragraphs 188 to 192.

167. A quota system, applicable to the local trade, has been adopted from time to time in most States. The details of the system vary according to circumstances and are not necessarily the same in any two States. Under such systems the miller is permitted to dispose of his whole output on the local market if he is able and wishes to do so, but if it be found that he

has exceeded his quota he pays a certain sum; if be falls short of his quota, he is entitled to compensation from the association's funds. 168. The amount of compensation paid to mills selling less than their quotas on the local • market is usually about 15s. to 20s. per ton '(short-sold" but the method of calculation varies in

different States. 169. If the association fixes the price of flour on the local market at too high a figure, it is natural that enterprising men with a knowledge of the milling trade will endeavour to construct small mills at low capital cost and with low overhead and fight their way into the local market by a process of under-cutting. Several mills have been started in certain States during recent

years through the operation of this set of circumstances. 170. Under certain circumstances, if the profit margin be relatively low, it would pay certain mills, which were adherents to an organization, to close their and draw the sums to which they are entitled in. view of the fact that they have not sold therr quota on the local market. This contingency is overcome in New South Wales by a rule which enables the association to call upon the miller to make available for export such quantity as is delivered locally

short of quota. In one or two cases, the position has been :ealized. and South

Australia certain mills which have been closed owrng to a bankruptcy are bmng credited With quota payments received through the operation of an of tbis These

were contributing towards the purchase these nnlls,. the bmng a lim1te.d

liability company, the shareholders whiCh. are nnllers o: therr In effect.' t?-is

means that the general public, by pay1ng a pnce for supplies of flour, the industry to avoid the results of over expansion and excess1ve UJ?-balanced com.petitwn, wbicb have been serious. On the other hand the fact that these two mills have remained closed has F.705.-6

98

certainly reduced costs of production in the other flour mills of the State, because they have worked for longer periods. Owing to a fresh advent of competition prices in South Australia were again more in line with those in Victoria and New South Wales in January, 1936. 171. The prices of bran and pollard in each State are determined either by the Millowners' Association or by the agency of a Millers' Produce Company. In some cases the Millers' Produce

Company purchases all bran and pollard produced and appoints each miller to act as a selling agent on its behalf for the sale of offals. In others the companies undertake the marketing of all surplus stocks of bran and pollard. 172. The nullowners' associations concern themselves with the welfare of the bakers,

who are the chief local customers of the millers. _ In some States they have from time to time provided funds to enable the master bakers' organizations to endeavour to maintain the price of bread and, generally, to restrain the activities of price-cutters in the bread trade. 173. The associations a_ lso act as disseminating centres for information in respect to flour-nulling problen1s and practices ; they endeavour to stimulate an interest in :research and they represent the industry in connexion with industrial proceedings.

SECTION VI.-ECONOMICS OF THE EXPORT TRADE AND THE PROBLEM OF CONTROL.

(a) PRESENT METHODS OF SELLING EXPORT FLOUR

(b) THE RELATION OF THE PRICES RECEIVED FOR FLOUR SOLD ON THE LOCAL AND THE EXPORT MARKETS

(c) THE PROBLEM OF CONTROL

(d) THE POSSIBLE EFFECTS OF RATIONALIZATION OF THE INDUSTRY

PAGE.

101 102 108 109

101

58_

VI.-ECONOMICS OF THE EXPORT TRADE AND THE PROBLEM OF CONTROL. (a) PRESENT .METHOpS OF SELLING EXPORT FLOUR.

174. survey of ind'ustry as a whole. has shown th: part which the export

trade plays m Its economic >;elfare.. An analysis of the destmatwns to which export flour has bee.n sent has .been recorded m Sectwn II. (b). The structure of the marketing system through whiCh that export flows is worthy of some consideration. 175. flour may be sold to o.verseas buyers .by the millers direct, or through agency houses whiCh work on a brokerage basiS, or to exportmg merchants who deal on their

own behalf. 176. The number of millers who have their own agents in overseas countries is somewhat small, because the establishment of such an agency would be relatively expensive unless the volume of the product handled through it was laFge. While some Australian millers have developed their special connexions in certain overseas markets and have been able to maintain those connexions in fa ce of severe competition on the part of both millers from other countries and Australian millers working through brokers or other channels, this is not the normal method of trade. Where such trade is carried on, the quality of the product and the good name of the

brands supplied are of considerable significance. In markets which are t echnically known as " pric.e " markets, :vhere quality is of less significance, it is usually difficult for millers to carry on this class of busmess. 177. Millers who carry on this kind of business are sometimes confronted w.ith the difficulty of obtaining shipping _space at short notice. Shipments of flour sufficient in size to warrant the chartering of a whole vessel are rare. Consequently, most of the business has to be done along the channels of trade followed by regular shipping services. Millers in South Australia, and to

a lesser extent in Western Australia, are at some disadvantage in this respect in that Adelaide -and Fremantle are not ports of call for such a large number of shipping services as are Melbourne and Sydney. At times, particularly during the main wool shipping season, the competition for parcels' freight is intense, and consequently the business is handicapped.

178. Sales through brokers account for a considerable proportion of the trade. The essential feature of this type of business is that the broking house has branches in a number of flour importing markets. These branches have an intimate knowledge of the trade passing through their particular market and have well-established connexions with man y buyers. They

are in more or less continuous communication with Australian branches and are able to act as negotiators for sales in a very effective manner. They do not buy flour on their own behalf so their only prospect of profit is in the commission which they charge. They are able to carry out the business more economically than could an individual miller with his own agency because they usually deal in a number of commodities and are able to spread their overhead costs over the whole volume of their trade.

179. The exporting merchants often act as brokers but they are sometimes more concerned with the profits which they hope to obtain from buying and selling the product themselves than they are with the acquisition of an income on a brokerage basis. Their business is therefore more speculative. They sometimes buy quantities of flour for which they have no immediate market

but which they expect to be able to sell prior to, or on, its arrival at the port to which they ship it. The amount of risk involved in transactions of this kind automatically demands that the profits on such transactions as are successful shall be considerable. 180. The activities of these entrepreneurs have been criticized in certain quarters. It has

been said that they have been responsible for the sale of consignments of Australian flour at prices which were considerably below those ruling at the time in the appropriate markets. There is little doubt that, from time to time, such circumstances do arise , but before this type of trading is condemned, the circumstances must be reviewed.

181. Periodically, the general export market for Australian flour becomes "dull" and sales are difficult. Most millers make a practice of milling ahead of actual orders t o some extent. If the market continues slack, stocks begin to accumulate and the individual miller is confronted with the alternatives of reducina the number of shifts worked, and thereby increasing costs per ton of production, or of getting

0

rid of some of his accumulated stock at a figure which may be

so low as barely to cover costs and to show no return on capital. Millers are occasionally caught badly in this way. This set of circumstances affords the speculative merchant an opportunity to acquire flour at low prices. . . .

182. At times when the price of wheat advances rapidly and the pn?e of flour on .the local market is adjusted accordingly, overseas buyers of flour are often hes1ta1_1t. The nnller caught with large stocks at such a period is naturally t empted to sell these at a .pnce much below the local price because in his eyes the flour has been produced from wheat wh1?h was bought at

a much lower figure than that on which the local price is based. An mstance occurred in December, 1935-January, 1936. In Melbourne the price of wheat was fairly stable at about

102

3s. S!d. per bushel for some time prior to 13th December, 1935. The most favorable price of flour was then £8 5s. per ton.* A rapid rise in wheat prices then took place and after some fluctuations relative stability was reached about an average price of 3s. 9fd. during the period 8th to 21st January, 1936, when the most -favorable flour price for local sales from £9 5s. to £9. During this period overseas buyers refused to follow the local price in their offers. On 23rd January an export parcel of flour was sold at £7 13s. per ton f.o.b. This showed a margin of £1 6s. 6d. between the most favorable local price and export price and an apparent margin of £1 19s. between local declared and export prices. From the standpoint of the miller, however, this flour had been produced from wheat brought when the price was 5d. per bushel lower than that on which the local prices were based and the true net margin was £1 6s. 6d. less 19s. 7d.

(47 bushels at 5d.) = 7s. 5d. per ton. ·

183. Whilst occasional parcels may be sold at prices below the immediate cost plus profit figure the speculator supplies a service in finding new markets and relieving the pressure of the surplus from the local position. Under any freely competitive system operating in a · market in which price is the dominant feature, it is inevitable that, from time to time, consignments will be disposed of at prices which would be ruinously low if they represented the average receipts £rom all sales.

184. The flour-millers' associations have recognized that from the standpoint of the industry overseas sales at low figures have a wide effect on the general price which millers are able to obtain in those markets. They have made at ]east one attempt to regulate the price of flour sold for export and have endeavoured to control sales incorporating the existing channels of marketing as their agents in an endeavour to eliminate the speculative element. Naturally, - this procedure was turned to advantage · by the non-associated millers, particularly by those who

had mills with large volumes of production. After a short time, the scheme broke down and the millers reverted to the system of independent selling as it was found impossible to obtain and retain the adherence of these important sections of the trade.

(b) THE RELATION OF THE PRICES RECEIVED FOR FLOUR SOLD ON THE LOCAL AND THE EXPORT MARKETS.

185. The difficulty which the industry in any State has in selling ]ts production is partly influenced by the state of the overseas markets and partly by the extent to which the In1lls in the State have mi1led flour in of the requirement of the local market. In States where the ratio of milling capacity to the local requirement of flour is higher, there will be a gTeater chance of consignments of export flour being sold at prices which are considerably lower than those ruling on the local market.

186. Table 42 shows the sack capacity per hour of an the mills in each State, the maximum production possible if an the mills worked a 5f-day week throughout the year, the local consumption of flour estimated by taking the population figure and multiplying ]t by the estimated peT capita consumption, and the potential surplus capacity in excess of the estimated local requirement. The data show that in this sense Western Australia and South Australia are " over-milled " to a somewhat greater extent than the other States.

TABLE 42.

Sack capacity Potential annual Estimated lo cal con· P otential surplus

Potential surplus

State. production (on 5l sumption (population x capacity as per ce ntage per hour. day week basis). 202 lb. per capita). capacity. of potential production ----

(200-lb. sacks.) Tons. Tons. Tons. %

New South Wales .. 1,024 702,873 261,790 441,083 62.8

Victoria .. . . . . 798 547,'747 183,162 364,585 66.6

South Australia . . .. 267 183,268 58,512 · 124,756 '68.0

Western Australia .. 296 203,174 44,083 159,091 78.4

Queensland . . .. 174 119,433 94,873 24,560 20.3

Tasmania . . . .

I

45 . 30,888 23,292 . 7,596 24.6

N.B.-It has been impracticable to allow for the extra quantities of fl our used in allied industries, e.g., biscuit­ making, in certain States.

• As elsewhere no ted numerous concessions ar e made by Victoria n millers t o r eg ular customers. The price of flour bought on th e most favorable termg (i. e., in la.rge quantities for c!l.Sh qO days by an appr ved bu 'er qualifying f r the fuU rebat e) is 6d. per to n Jess than t he offi cia l " declared " price .

103

.- 187. '!abies 43 and 44 set out the percentage of export sales to total production in each ma1n exporting State and the percentage of Australian exports of flour derived from each State. TABLE 43.

SHOWING PERCENTAGE OF FLOUR EXPORTED TO FLOUR PRODUCED IN CHIEF EXPORTING STATES 1930-34

Year. State. Flour produced. (Short tons).

Flour exported (Short tons). Percentage exported.

1929-30 New South Wales .. 432,472

o/o

. ... . . . . 131,025 30.3

Victoria .. .. . . 364,682 179,452 '49.2

South Australia .. . . 138,115 86,017 62.3

Vvestern Australia .. .. 120,595 69,049 57.3

1930-31 .. . . New South Wales . . 449,439 182,046 40.5

Victoria .. .. . . 369,966 190,269 51.5

South Australia .. .. 136,346 66,293 48.6

\\restern Australia .. 132,090 85,616 64.8

1931-32 .. . . New South '\Vales .. . . 490,662 210,702 43.0

Victoria .. .. . . 396,257 217-,872 54.9

South Australia .. . . 155,215 94,048 60.6

Western Australia .. 131,165 88,212 67.3

1932-33 .. . . New South Wales . . 525,651 237,743 45 :2

Victoria .. .. . . 425,930 241,612 56.7

South Australia . . .. 129,225 65,997 51.0

Western Australia .. 127,574 86,083 67.5

1933-34 .. . . New South Wales . . 495,779 208,361 42.0

Victoria .. . . . . 395,566 216,124 54.7

South Australia . . .. 121,811 53,489 43.9

Western Australia .. 122,000 64,513 52.9

TABLE 44.

SHO\VING THE CONTRIBUTION BY THE MILLING INDUSTRY OF EACH STATE TO THE TOTAL AUSTRALIAN FLOUR EXPORTS 1929-30-1934-35.

Date. Flour exported

I Western (Short tons). New South Wales. Victoria. South Australia. Austrl).lia. Queensland . Tasmania .

%) o/o % Ofo % o/o

1929-30 .. 465,733

I

28.2 38.5 18.5 14.8 . . . .

1930-31 .. 524,243 34.7 36.3 12.7 16.3 . . . .

1931-32 .. 610,858 34.5 35.6 15.4 14.5 . . ..

1932-33 .. 631,459

I

38.0 38.1 10.3 13.6 . . . .

1933-34 .. 542,492 38.2 39.9 9.9 11.9 . . . .

1934-35 .. 697,971 39.1 37.8 10.8 12.3 I . . . .

188. The Commission made a survey of the prices received -by millers for their flour in 1932-33, in order to ascertain the extent to which the average price received for the exported part of their production was lower than the average price received for that part which was sold on the local market.

189. As prices in the country vary to some extent from district to district the survey has been confined to metropolitan mills, but as these are responsible for the greater part of the export production, they may be regarded as reasonably representative. As it was clear that differences were to be expected between the average prices received both for locally-consumed flour and for the exported product in the various capital cities, the data were compiled by States.

190. The prices obtained by mills on the local market are jn certain cases influenced by the special nature of the local trade ; as the inclusion of data from these businesses would have unwarrantably enlarged the difference between local and export prices, they have been excluded. Apart from these special cases, Table 45 sets out the difference between the average local and

export prices for the mills which show the widest and narrowest margins in this respect. It also shows the difference between the weighted average prices fo;r local and export flour for all the normal mills in each metropolitan area. ·

TABLE 45 .

Difference bet ween" local " and" export " prices per t on in case of the mill with- Weighted average difference for all

Metropolitan Area. normal mills.

Largest difference. Smallest difference.

£ s. d. £ s. d. £ s. d.

Sydney . . . . . . .. 1 14 8 0 5 1 0 18 1

Melbourne . . .. . . 1 17 3 0 8 7 0 19 5

Adelaide . . . . .. . . 1 7 9 0 11 3 0 19 1

Perth .. . . . . . . 3 15 9 1 4 8 I 2 10 11 , . -- - NOTE.-See lat er for di(Ierences in costs of ma nufacturing and distributing flour so ld locally and for export .

104

191. The weighted average of the margins between the export price and the local price in the case of aJI metropolitan flour-milling businesses carrying on ordinary trade in Australia was , during the investigated period of 1932- 33, £I 4s. 8d. per ton. This statement is based on an output of 609,401 tons which is approximately 46 per cent. of the total Australian flour output.

192. The flour millers are well aware of this divergence between the prices for flour obtained for local consumption and for shipment overseas and the matter was referred to in evidence before the Commission on numerous occasions. It was represented that the actual costs of producing and disposin g of flour were considerably higher in the case of the local market than for the export trade. Actually, export trade is a wholesale business while much of the local trade approximates to retail sales. Unfortunately, few milling businesses keep their accounts in such a way as to enable a detailed analysis of the respective costs to be made. The

Commission has used such direct information as was available on this point and has also drawn on its detailed knowledge of the general costs of operating flour-milling businesses in coming to its conclusions on the matter. .

193. There are two divergent points of view on the subject. The first is based on the narrow view of costs of operations ; according to it the differences which are admissible between the cost of a ton of flour for local consumption and the cost of a ton for export are only those which are caused by differences in actual disbursements on account of packages, transport, selling, &c. The second point of view is based on the factual position of most international trade in the world to-day. This standpoint assumes that the local market price bears all costs of material, wages, &c., for its production and the major part of the overhead costs of all production because the mills or factories would be working short time and incurring the greater part of the overheads if the export were not available. The fust view might be t.ermed the "theoretical view of international trade", while the latter may be called the "realistic view of international trade." The Commission has endeavoured to estimate the costs from each

standpoint in turn. ·

194. Firstly, according to the theoretical view, the following notes afford the basis for an estimate of the reductions of cost :-(a) MANUFACTURING COSTS. When export is made in calicoes or other special packages, some extra cost is involved for either the containers themselves or extra labour or both. The amount of this varies according to the type of package specified. The following list sets out the additional cost involved in excess of that incurred when the flour is packed in once-used normal sacks. This information was afforded by a miller well acquainted with the trade :-

Per ton. s. d.

25-35-lb. calicoes 10 0

44-45-lb. calicoes 6 0

46-50-lb. calicoes 5 0

98-100-lb. calicoes 5 0

140-lb. calicoes · 5 0

98-100-lb. hessians 4 0

140- 150-lb. hessians 3 0

150-lb. jutes (new) 2 6

196-lb. jutes (new) 2 0

The percentage of these packages used in the various export markets varies considerably. The 49-lb. calico bag is the package which is most extensively used, but large quantities of flour are sent in 150-lb. JUte sacks. On the other hand, in the large exporting mills, export flour is frequently loaded direct into trucks for shipment without intermediate handling. This affords some sayings in wages.

Taking, as a basis, the proportion of the different packs used for export, the Commission has concluded that the average increase in cost in curred in packing export flour is a bout 3s. 9d. per ton. The occasional savings in handling for ex,port may be approximated at 6d. per t?n , leaving an average extra net cost of 3s. 3d. per ton aga mst the export flour as far as manufacturmg is concerned.

(b) SELLING CosTs.

(i) Travellers' salaries and expenses concern the local trade only. The costed metropolitan mills in 1932-33 spent £33,387 on this item in respect to the sale of 310,544 tons ?f flour. This represents an average of 2s. 2d. per ton. . .

(ii) Commission is normally paid to agents makmg. sales .. rr:he usual 1

per cent. but in certain cases sa les are effect ed on a net basis vVIthout commJssi.on . Comnusswn is also paid in respect ,of some local sales. It does not seem clear. that there 1s ?n the average any difference between the costs for the export and local markets m regard to this factor.

58"

105

(iii) Bad debts are rare on the export market. The average amount of bad debts in respect of local production in the costed metropolitan mills in 1932-33 was 2s. 2d. per ton. (iv) Advertising.-While some companies do a limited amount of advertising overseas the majority of charges under this head are in connexion with the local trade. The average_ cost was 5d. per ton.

(c) DELIVERY CosTs.

· (i) The cost of transporting the flour to the ship's side and putting it in the hold is in most cases considerably less than the cost of delivery t o local customers. The average figure for delivery costs over the whole output of metropolitan mills was 6s. 3d. per ton. The difference between the cost of delivery for lo cal consumption and for export varies considerably from mill to mill according to location in respect to wharfs, sidings, &c . If the. cost of delivery for export flour be taken at 3s. 6d. per ton then the average cost under this heading for local flour will be 9s. 6d . per ton if the percentage of export is 54 per cent. On this basis it appears that the flour sold for local delivery incurs extra costs of 6s. per ton.

(d) ADMINISTRATION CosTs.

In this group the only large item which can be directly charged against the flour for home consumption as opposed to the export is Association levies. Some part of these is chargeable against all production, being a necessary payment to endeavour to maintain order in and disseminate information through the industry. Another part is used in an endeavour to maintain the bread industry in a satisfactory st ate, while a third part is devoted t o making payments in

respect to quotas of flour. In some Stat es there is a levy for maintaining an organization to sell offals. Of these the first part is the only legitimate charge against the export The

total levy payments made by all metropolitan mills averaged Is. 9d. per ton of flour sold for local consumption while relative levy receipts averaged 2d. per ton. A reasonable approximation of levy cost would be 3-!d. over all production for general purposes and an extra shilling for the local trade, making a total cost of Is. 3-!d. on the local trade.

Extra office expenses in connexion with the local trade are caused by the extra postage and stationery required and the cost of keeping a large number of relatively small accounts as opposed to a smaller number of large accounts. These extra expenses may be approximated at Is. 6d. per ton. •

Certain millers adopt the practice of using a percentage of high grade premium wheats when gristing flour for the local market, while their export production is milled from f.a .q. grain. The extent of this practice is variable; in some States it is almost non-existent and in those where it occurs not more than I5 per cent. of premium wheat is used. Approximately one-third of the local flour is affected and the extra cost is 4d. to 6d. per bushel. Extra costs against the

local market on this score were about Is. per ton on the average. This item is increasing in importance; These various differences may be summarized as follow:-Extra cost per ton against .

-

- (a) Local sales. (b) Export sales.

£ s. d. £ s. d.

Manufacturing costs . . . . .. 0 3 3

Selling costs-

. 0 Travellers, &c. . . . . 2 2 . . Bad debts . . . . . . 0 2 2 .. Advertising . . . . 0 0 5 .. Delivery costs . . . . 0 6 0 .. Administration costs-Levies . . . . . . 0 1 0 .. Extra office charges . . . . 0 1 6 . . Other costs- Extra cost of wheat .. . . 0 1 0 . . 0 14 3 0 3 3 NoTE.- There is some extra charge m connex10n With local sales for mterest on overdue accounts as compared with cash usually for sales. An a:verage figure for this item is hard to assess and vanes greatly from busmess to busmess . In certam cases the advantage of having cash immediately instead of in creasing overdrafts is considerable. This might be taken possibly at 6d.

i06

195. This survey suggests that when producing for and selling on the local market the metropolitan millers . are faced with extra net costs of abolft lis. 6d. per ton. This figure is only approxi1nate and the data for each mill would be somewhat different from those of any other mill. No estimate has been made in the case of the country because the variations would be greater and no general figure could be reached.

196. In 1932-33 the average difference between the export price and the local market price was £1 4s. 8d. per ton apart from the specialty trade which has special costs. Of this difference about lis. 6d. per ton was definitely due to higher charges incurred in dealing with the local flour. The sales of all the metropolitan mills in the four exporting States were :-

Local 289,409 tons (46 per

Export . . 332,54 7 tons (54 per cent.)

621,956 tons -·--· "' Consequently, 54 per cent. of the trade bore charges which were lower than the average and 46 per cent. bore charges which were higher. The average cost in 1932-33 was found to be £6 18s. per ton for all metropolitan mills, which means that the. approximate true cost of flour sold for export and local sales was £6 12s. 8d. and £7 4s. 2d. per ton respectively. The actual average prices realjzed were £6 13s. lOd. and £7 19s. 3d. Consequently, while export flour was sold with a margin for profit of Is. 2d. per ton the local flour was sold at a profit of about 15s. ld. per ton. As the capitalization of these mills is such that I per cent. interest requires 9d. per ton margin the export business was earning about Il per cent. and the local production about. 20 per cent. on capital. 197. Turning to the second method of estimation referred to in paragraph 193, the figures take a .somewhat different form. 198. Several millers in their evidence adopted the attitude that the export trade caused a further reduction in cost because it enabled the mills to ·work for a greater number of hours than would have been possible had they only been concerned with supplying the local market. Some witnesses took the view that the third shift was run for the export market and that they were entitled to consider that all administration and office overheads were chargeable against flour milled for the local market and did not co,ncern the cost of producing for export. 199. It is common knowledge that in a great many, and probably in a majority of 1nanufacturing industries in most countries, the wholesale prices charge for products on the local market are higher than are those charged for export. The practice has grown up readily under the protective and cartel systems and the Commission understands it was even prevalent in Britain when the Free Trade policy was dominant. The practice is loosely designated as "dumping", but a precise definition of that term has yet to be made, especially in view of the difficulty of deciding on the allocation of overhead costs on the second and third shifts. 200. The details of the savings in cost on this basis are as follow:-Manufacturing.-In addition to the alterations in costs already referred to there are some extra savings on the third shift owing to the practjce of employing as few men as practicable at night, particularly among the higher grades of employees. Reductions may be estimated at-Wages and salaries of mill staff Depreciation of buildings and machinery 2s. od. per ton. Os. 6d. per ton. Selling and Delivery adjustments are the same as jn the fu·st c9mputation, viz. lOs. 8d. per ton. Administration charges are lower by Is : already discussed for levies, and further adjustments are necessary in respect of Directors' fees and salaries, auditing and accountancy fees, salaries and wages and travelling expenses of the managerial staff, rates and taxes, insurance, bank charges and depreciation of office equipment and mill buildings. The difference between costs of producing for local and export markets under these heads is estimated at about 5s. 6d. per ton.

587

- 107·

201. These differences are summarized as follow :-------Extra cost per ton against. -(a) Local sales. (b) Export sales.

s. d. d.

Manufacturing costs . . .. . . 9

Selling costs-Travellers, &c. . . . . 2 2 . .

Bad debts .. . . . . 2 2 . .

Advertising .. . . 0 5 . .

Delivery costs .. . . 6 0 . .

Administration costs-Levies .. . . . . 1 0 . .

Extra overhead charges .. 5 6 . .

Other costs-Extra cost of wheat . . .. 1 0 . .

18 3 9

On this basis the extra cost of producing flour for local consumption is 17s. 6d. per ton, to which might perhaps be added 6d. per ton for interest on overdue accounts on local sales as compared with cash for export sales, thus bringing the extra cost to 18s. 202. The average cost in 1932-33 was £6 18s. per ton for all metropolitan mills, which

means that the approximate true costs of flour sold for export and local consumption were £6 9s. 8d. and £7 7s. 8d. per to:p. respectively. The actual average prices realized were £6 13s. 10d. and £7 19s. 3d., consequently on this basis export flour was sold with a margin of profit of 4s. 2d. per ton while the local flour brought a return of 11s. 7d. per ton. These margins represent about

5! per cent. and 15 per cent. respectively. 203. It should be remembered that if this difference in prices were adjusted to the maximum extent then the consequent alteration in each price would be half the difference, i.e. about 4s. per ton.

204. These two different views of the facts of the relation between export and local prices have been drawn up so as to elucidate the position in an unbiased way. From the point of view of the general economic welfare of Australia there are certain ways in which the industry as at present constituted is of assistance.

(i) A certain amount of export flour goes to countries which have no flour-mills of their own and which would not import Australian wheat as wheat. Export to such countries has been of particular value during those years in which sales of wheat were difficult to effect. The total amount of wheat sold· in this way may be estimated at 12,227 ,000 bushels annually. Under the normal conditions of the world wheat market this factor would not be of material assistance to the wheat-grower, because if other countries supplied these markets there would be a better

demand for Australian wheat elsewhere. (ii) The · export side of the industry gives a certain amount of employn1ent within the country. The total direct employees number about 3,500 (without allowing for those indirectly concerned), and although the export trade has formed about 45 per cent. of the whole production

jn recent years, yet it is not to be assumed that more than 40 per cent. of these employees would lose their employment in the event of the total loss of the export market. This suggest s that the export trade directly employs at least 1,400 persons. (iii) The industry provides a source of supply of concentrated foods for such rural industries

as dairying and poultry-keeping. It is true that these industries do at present rely on the use of offals as one of the basic materials used in feeding their stock, also offals are usually sold at a somewhat lower price in Australia than they would be if imported. On the other hand it is probable that a greater use of foodstuffs alternative to. o:ffals would be beneficial t o stock-feeding

industries ; further, that the cultivation of such alternative foodstuffs would add a valuable diversification to the general agricultural system of the Commonwealth, the basis of which is at present too narrow. 205. Having regard to the above considerations, and, in view of tbe factu al conditjons

under which most international trade is now conduct ed, t he Commission has come t o t he conclusion that the second view-po1nt must be accepted, at least for t he present. This view is contingent the ?£ a. small.standing. committee whose business it be .regularly to

review the position of pnces 1n the rndustry In order that the home consumptiOn pn ce for flour is not maintained at a higher :figure than is necessary in the national interest .

- . ,108

(c) TI-IE PROBLEM· OF _CONTROL.

206. Under the present system by which flour is sold the nation has no control over the difference between prices received for the export flour and for that consumed locally. In the past the main check on any tendency to enlarge the difference between export and local prices has been t he inability of t he millers to obtain complete adherence to any scheme of fixation of local prices. This independence in the industry has been in evidence during a period when the overseas trade in flour was active and the amounts exported were larger than ever before. If the export market became more difficult unanimity might be achieved in respect of internal prices (probably after a period of intense unrestricted competition). Under such circumstances the difference between local and export prices might become wider than at present or in other words the Australian public might be subjected to an increase in the unofficial home consumption price of its flour in order to maintain the export sales. In such case the only check on this procedure

would be t hrough go vernment action or by the construction of new mills with the intention of exploiting the high local price and " cutting," on the local market. The construction of additional milling capacity at t he present time is undesirable in view of the prospective difficulties associated with the sale of an increased amount of Australian flour . .

207. While the Commission does not consider that a drastic amendment of the price system present in vogue is desirable, it is strongly in favour of the appointment of a permanent central

body well a cquainted with the methods of operation in the eeonomic position of the flour milling industry. This body might well take the form of a small standing committee as set out in Recommendation No. 3 (iii) of the supplement to the First Report of this Commission and constituted as follows: The Comptroller-General of Customs (Chairman), the Secretary of the

Commonwealth Treasury, the Secretary of the Department of Commerce and the Comr.aonwealth Statistician. This committee would have a small staff of skilled officials which would have a watching brief onthe course of prices of flour, wheat and o:ffals on both local and export markets and on the costs of operation of mills in Australia. For the purpose of its inquiries it should have power to de n1and t hat the accounts and records of all flour-milling enterprises should be kept in a prescribed manner and available for inspection by itself or its accredited officers.

208. The normal activity of such a body being merely to watch the course of costs and prices would not be intense in nature. The investigations of this Commission have revealed tl1e general relationship which exists or should exist between the prices of wheat, flour and offals; further, it has indicated reasonable figures for capitalization; if these data are

used as a starting point it should not be difficult for anybody charged with the duties of an observer to ascertain whether the-prices of Jocal and export flour are out of line with one another and with the prices of wheat and offals at any time. 209. Possibly a section of opinion in Australia will take the view that the inauguration of such a body charged with the duty of observing the profit margins in an industry which in the past has been highly individualistic in its operations is an unwarrantable extension of the powers of the State. Apart from the facts subn1itted in the previous sub-section with reference to the home consumption price for flour, such opinion does not appreciate the change in outlook which is continually taking place in British communities.

210. It has been truly said that we are not individualists of the pre-war era ; we are living mostly under conditions produced by the Great War. We are more collective in prjnciple than individualjstic. Wealth is more evenly distributed throughout the country than ever before, and is being directed to greater consideration of the masses and thejr requirements than to the individual client. ·

211. This Commission takes the view that a modern government, acting under modern conditions, is charged with the duty of watching the prices at which commodities necessary for the manufacture of an essential basic foodstuff are sold. · ·

212. With regard to the flour sold on the export market, it has already been stated that the mill-owners have endeavoured on at least one occasion to · stabilize the price, but that such endeavours have been fruitless. The very keen competition for business has resulted in a stimulation of the export trade; consequ,ently any control of the exporting side of the might lead to a diminution of exports rather than an expansion. On the other hand the advantages of control would be that it would prevent the occasional sale of shipmentsat" slaughter" prices and the consequent general debasement ?f t?e average price obtaine_d in certain. markets. In addition, it might lead to a better average pnce for the export flour Without affecting the volume

of sales. 213. The subject cannot be reviewed apart from the background of the conditions which influence international trade today. · A study of adjustments being made in recent years in various countries to meet the altered economic conditions which developed since 1918 leads the Commission to the conclusion that Australia has moved as rapidly_ in this as

109

tilany other countries previously regarded as conservative.. Australia, in spite of this conservative tendency, cannot expect to remain a law unto herself in these matters; she must conform to the general trend which is affecting the world at large. At the mo1nent the world situation as regards international trade is a coinplex of tendencies-on the one hand the tendency towards a realization that barriers to trade are not in the best interests of mankind as a whole, and that freer trade is in general beneficial ; on the other the tendency to restrict international trade to certain channels the banks of which are 'defined by specific agreements. If, as seems likely, the latter tendency prevails, then it will imperative for the Commonwealth to regularize its position in regard to its exports of flour. In such an event those millers who today adopt the individualistic standpoint and refuse to participate in joint action will have to modify their attitude and bow

before the strength of forces which are in fact beyond the control of the governn1ents or people or individual industries of Australia. ·

214. Control of the export side of the industry would be difficult to operate unless inter and intra State trade were also controlled at the same tin1e. The difficulties in the way of arriving at any scheme which would take cognizance of and make allowance for the widely divergent policies followed by various mills would be considerable; as such special policies are frequently the key to the successful operation of the mill owing to the special circumstances with which it is confronted. Further the milling industry in certain States might be prejudiced unduly

unless the scheme were drafted with great care. In the event of control becoming necessary it would be highly desirable for the scheme to be drawn up by the milling industry in conference with representatives of the appropriate government department rather than by the appropriate government department in conference with the milling industry.

, 215. It may seem . curious that the. Commission, while advocating a compulsory pool for wheat, does not compulsory selling organization for flour. The two industries are, however, entirely different in regard to the structure of their marketing organization. The wheat industry consists of a large number of small units of production which are not effectively organized. The flour-milling industry is controlled by a relatively small number of individuals

and they are, for the most part, well organized into groups which are sufficiently large to exereise a dominating infJ.uence on prices. Whereas no single grower of wheat is able to sell his production directly on the overseas market, a number of flour-millers are in t hat position and can thereby exercise a steadying influence on the market. The wheat-growers are not in a position to have accurate and intimate knowledge of the factors which are likely to govern the future wheat markets.

Flour-millers on the other hand have available to them information which can guide them to some extent with reference to supply and demand. It follows, t herefore, that whereas under the present systein of selling the wheat-growers collectively may be unable to judge what is or what is not a reasonable price for their wheat, having regard to the world's the flour-mjllers

are able to form a reasonable opinion on the matter and, further, can look after their own interests. 2l6. In general the Commission concludes that while there is no immediate need for a control of the industry such need may easily arise if the conditions of international trade continue to become more rigid owing to the further extension of Trade Treaties. In this event the industry should be called upon to work out a system of organizing the export of Australian flour. Failing

agreement within the industry it may be imperative for the Commonwealth Government to exercise its powers in this direction. Such a scheme would require regulation of t he internal market as well. In any case the need for observing continuously the relationship between prices of flour and wheat is so considerable that the Commonwealth should take immediate steps in

this direction.

(d) THE POSSIBLE EFFECTS OF RATIONALIZATION OF THE INDUSTRY.

217. The Commission has been particularly anxious to discover the extent to which the price of flour could be if the were zoning areas of

preventing wasteful competitiOn and clos:ng. or rne:ffiCient u:n:ts. In order to. at a conclusion on this matter the cost and capitahzatwn data for every mill have been scrutinized and considered, having regard to the special features developed by each business. 218. As regards the mills. the figure,s. indicate that as far as

is concerned there is little evidence of IneffiCient operauwn and only one or t wo Instances of over-capitalization. l{owe_ver, the larger mills are in the. better able produce at lower cost (and usually obtain higher returns) unl:ss they specialize rn some particular form of trade which involves extra expense. Some savings therefore be effe cted .by process of

aggregation, but the sum would not exceed a few shillings under a Far greater savings could, however, be effe?t.ed by a reductiOn In costs due to the of expenses which are inherent to the com:petitive system. The need for an elaborate ?rgan1zatwn for selling the products would largely disappear although there wouJd probably still be a need

110

for a small staff for investigating complaints. The only levies necessary would be for the maintenance of a central body dealing with trade information and research activity. Certain small reductions could be made in administration expenses of a general nature. Delivery costs would show a substantial reduction through the elimination of the practice of sending flour over wide areas which could be more effectively served by other mills or by co-operative organization of transport.

219. The country mills present a rather different picture. In many of these the installation is small and sometimes relatively inefficient and therefore somewhat extravagant in labour costs. Again the difficulties in obtaining markets are such that some of the mills only operate for one or two shifts which . results in increased costs per ton of output. Although most country mills secure a large proportion of the trade of their own district yet many of them sell their flour over a wider area and find it necessary to employ a staff for this purpose. Their continued is often largely dependent on obtaining a higher price for offals and in some cases for such portion

of their product as they are able to place in their own districts. It is difficult to avoid the conclusion that some of these plants are relatively uneconomic units and that a smaller number of mills strategically placed both in respect to supplies of grain and to the subdivision of the selling area would lead to a reduction in the price at which flour could be sold.

·220. Taking a very broad view of the position of the industry as a whole, it is clear that a scheme of rationalization could result in savings which would permit of the community being supplied with its flour at prices at least lOs. per ton lower than those which are charged at present­ quite apart :b:om any reduction which might be made in the present margins of profit being

obtained from flour sold within the Commonwealth. 221. The cost of the competitive system in the flour-milling industry to the public is therefore of the order of lOs. per ton. On the other hand it must be recognized that the system employs directly and indirectly a greater number of persons than would be necessary under a rationalized scheme and in general a fair standard of efficiency is ensured as regards service and quality, although as will be seen in a later section of this report, the industry has not been entirely beyond criticism in its attitude towards the quality of its products. Whether a rationalized industry would manage to maintain an equal standard in respect to service quality with that which has developed under the competitive system is a debatable matter which cannot be

pursued further in this report.

59!1

SECTION VII.-THE INDUSTRY AND THE LO CAL MARKE1' .

113-114

PRICES DF FLOUR BRAN AND POLLARD IB24TDIB34

I T 19.

/ 6

I S

14 1 9

12

14 15 IE II

/0

9

B 7

6

s

4

9

B

7

6

5"

4

'--"" r-' \.1

15'Z'4-

/

1 9ES"

ALL STATES. rLOVR PER Pr::U .. ;(..ARD PER TOIV VVHOLESALe BR_....IV PER TOIV VVHO,L.ESAL.£' 1980

19Z5 15'80

FID.XXV.

1991 198c

19.5'4

59

115 595

VII.-THE INDUSTRY AND THE LOCAL MARKET. 222. During the course of its investigations the Commission has endeavoruecl to ascertain the relationship between the price of vvheat and the prices of flour and offals on the local markets. As regards the past, Figure XXV. shows the relative variations between the prices of flour, bran and pollard during the years 1924 to 1934, both inclusive, in eac} State of the Commonwealth.

The graph has been drawn from statif'tics supplied by the Commonwealth Statistician, who furnished the monthly averages of the wholesale prices of flour, bran and pollard ruling in the capital cities of each State. The prices in Queensland and Tasma.nia for certain months were not available.

223. The data of Figure XXV. are to be regarded as indicative of general trends only, because considerable variations sometimes occur within a month, also because discounts and rebates are customary within the industry, and finally because bakers and other consumers of flour do not always pay official net prices.

224. Offal prices are largely influenced by the local supply and demand position, so that an exceptional shortage in one State, caused by a dearth of animal fodder, may cause a temporary rise in price which may not affect prices in other States. 225. The Commission has ob:::erved the price of wheat and the price of flour and offals in

each State over a period of several months, and has concluded that although the flour-millers' associations fix the declared price of flour to some extent in accord with the price of wheat and the returns from offals, yet adJustments are by no means automatic. At times there is an apparent tendency to maintain prices at a somewhat higher level despite a fall in the price of wheat, at other

times the price of flour is not Dclvanced immediately in response to a rise in the price of wheat, and, generally, the f...rst mentioned tende11cy is proba.bly more in evidence than the second, although the latter is by no means infrequent. Doubtless the extent to which millers have purchased stocks of grain at prices which are out of line with those of flour 1s an important factor.

226. Using the graphs as indicators of general trends only, it becomes clear that while there is a general similarity between the trends of prices in 811 States, there are considerable local divergences from these trends, particularly in Queensland and Western AustrB.lia. 227. These clivergerces have been caused by the -variations in the position of the industry

in each State from time to time. Consequently any attempt to understand the course of prices in any one State can only be successful if the actual position of the export market and the degree of unanimity prevailing among the millers in that State with reference to the local prices at that time are known. It becomes necessary, therefore, to review the economic position of the industry State by State.

228. In New South \Vales and Victoria the industry is in a better position to export flour to either the Pacific ports, European destinations or India, because parcel space is easier to obtain on the regular lines of ste'1mships which s:til from Sydney and Melbourne. New South Wales has an advantage jn that it can compete more effectively in certain sections of the Queensland

trade. In both States the controllers of a material proportion of the milling capacity are not adherent to the locf-ll association of flour mill-owners and consequently there is little opportunity for maintaining a local price very greatly in excess of the general export price level. 229. In South Australia· the total milling capacity has a rather higher ratio to the

requirements of the local market than in the two preceding States, consequently the pressure to export is greater. To some extent Adelaide is handicapped in competing with Pacific ports because of the lack of a direct regular line of steamers, and at times South Australian millers find difficulty in obtaining parcels space in the sh ips plying to Europe. On the other hand the price

of wheat in Adelaide is generally rather lower than in Melbourn e or in Sydney. In this State competition between millers was intense during the period 1929-1932 and profits were low as has been shown in Figure XXIV. The lack of an extensive dairying industry has to some extent reduced tbe demand for offals in this State, and has consequently necessitated a rather high

percentage of export of these commodities, sometimes at unprofitable prices. At times there has been a complete understanding between millers as regards the local price and the price bas been out of line with those of Melbourne and Sydney. A period of this type occurred in 1935, possibly because millers were endeaYouring to recoup themselves for losses in previous years of intense competition.

230. In Western Australia the milling capacity shows an even greater excess over that of the local consumptio:t;l The cost of transport .to State the States

makes it relatively easy for the pnce of flour to be out of hne With that whiCh obtams m South Australia, Victoria and New South Wales. Combinations of the millers, when effective, are therefore better able to maintain a lo cal price, and the course of the graphs shows that from time to time this has been done. The export trade, although assisted by a 5s. per ton "State" subsidy on freights to the East Indies, is confronted with considerable obstacles, particularly owing to the

F.765.-6

116

difficulty of obtaining shipping space on t he regular lines of steamers to the European ports. The Commission's investigations have shown t hat some millers attracted by t he prices obtained for local flour have built new mills, and in 1935 were competing with older mills adherent to the association. It is clear t hat periodically t he effort to maintain a satisfact ory local price to the millers has broken down. In addition prices obtained for export flo ur have at times been low. On the other hand the local market for o:ffals has usually remained good.

231. In Queensland t he position is complicat ed by the fa ct t hat t he State does not grow sufficient wheat for its own requirements, and consequently Queensland mills must in1port some wheat or alternatively flo ur must come in from smne other St at e. The location of t he mills with -reference to channels of communication and wheat supply is an important fact or. In addition,

the price of wheat on t he local market has been determined by a St at e \Vheat Board set up by the Government. This Board endeavours to n1aint ain lo cal prices for wheat at· as high a figure as possible in order t hat the growers may receive the benefit. In 1935 when the inclusion of wheat under the Sugar Acquisition Act was no longer practicable the Wheat Board was still able to obtain a somewhat higher price for its wheat t han was ruling in Sydney at the same time. The Warwick mills are open to serious competition from New South \Vales flour in the territory along the New South Wales-Queensland border. The Toowoomba and Dalby mills are in a good position to compete effectively for the t rade in their own localities and along the railway line westwards from T0owoomba, while the Brisbane 1nills are able t o compete effectively for the metropolitan trade and for that of some of t he inland districts ; t hey feel the competition of of flour from New South Wales in respect to areas supplied througli the ports on the north and central Queensland coast. Again the State Price Fixat ion Com missioner determines the maximum price of flo ur from time to time. All t hese circumstances contribute t o the creation of a considerable divergence from the general trend which is seen in New South VVales and Victoria. Investigations have shown that the industry is oveT- capit alized in Queenslan d but despite this fact it is earning handsome profits.

232. In Tasmania the position is son1ewhat complicated because t he milling enterprises are, to a considera ble extent, interested in lines of busin ess ot heT than flo ur-milling. Further, the wheat grown in Tasmania at the present time is not very suitable for the production of flour for bread-making, but is particularly valua ble for biscuit flour. Consequen tly the flour price on the local n1arket is largely based on t he cost of wheat at mainland port s, plus the cost of freight from those ports to Tasmania. It follo ws t hat a rather higher price is to be expect ed for flour than jn the adjacent States.

233. Having regard to all these divergent factors it is clear that under existing circun1stances it would be impracticable to lay down any one price at which flour could be produced and sold in all the capital cities of the Commonwealth . Any body charged with t he dut y of exercising surveillance over wheat and flo ur prices must of necessit y t ake in t o account the variations in the local circumstances. On the other hand the fact that t he milling industry in each State renders it possible for an local combination of milling interests to maintain from time to time higher prices than are justifiable. Tills in turn emphasizes the need fo r a continuous observation of the prices which are being charged, a lways assuming that the people and t he Government of the

State concerned consider t hat a restriction of prices and therefore of profits is a proper procedure for a Government. 234. The introduction of a stabilizin g force int o t he wheat and :Hour industries in the form of a variable excise_ on flo ur, or the alternative of a fixed price for wheat in the manufacture of flour for local consumption, wiJl cause con siderable modification of the possibilities of obt2ining margins of profit which exist under t he present syst em. The practical certainty that some action of this type wjll take place in the near future must not be overlooked. It wiJJ be particularly important that a body charged wjt h t he dut y of wat ching the course of prjces should be in existence at the time when t he milling industry is adjustwg itself to t he new conditions.

235. Any hard and fast formula specifying the average price at which flour could be sold locally is inapplicable, beca use the loca l price of fl our 1nust be allowed t o vary to a certain extent according to t he prices obtainable overseas for t he export fl our, jf the principle be accepted that the Australian nation desires the con tinuation of the export t ra de in flo ur to the maximum possible extent.

SECTION VIII.-OTHER FACTORS AFFECTING THE INDUSTRY.

(a) MILLING INDUSTRY IN RELATION TO WHEAT PURCHASES

(b) EFFECT OF RAILWAY FREIGHTS ON THE INDUSTRY

(c) STANDARDIZATION OF THE PRODUCTS OF FLOUR-MILLING

PAGE.

119 11 9

121

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•

119

VIII.-OTHER FACTORS AFFECTING THE INDUSTRY. (a) MILLING INDUSTRY IN RELATION TO "\VIIEAT PURCHASES. 236. In the section of this Report which deals with milling costs, reference has been made to an investigation of the actual prices which n1illers paid for wheat during the period of a year.

Some comments were also given as to t he reasons for the variations in the different average price paid by different millers for ·the wheat which they bought. Every miller must exercise considerable judgrr1ent in respect to the time and pTice at which he buys his supplies of grain, although there ::ne a few cases in which millers adopt t he practice of only buying wheat against firm orders for flour at agreed prices. In t hese particular cases, the miller is fortunate because,

if he knows the costs of his milling process and overheads, he is in a sound position to determine what price will leave him a margin of profit. 237. The great 1najority of millers are not in this position. In order to n1eet their overhead charges, they have to keep their mills running as far as possible throughout the working

year. If they are to do this, they r.aust periodically acquire grain in the expectation that they will be able to obtain orders for t he flour offals they have milled. This means that they are, in a sense, gambling on t he price of wheat re1na·ining either stationary or moving upwards after they have bought their stocks for they must expect t he price of flour to move in accordance with the price of wheat if the latter rises. This enforced speculc,tion with reference to the price

of wheat means that the miller n1ust either himself take the risk of the price changing or must endeavour to cover his operations in respect to the grain by deding on the futures market through the process known as making a " selling hedge ", which is discussed in Appendix C. 238. The position of the city miller is in some respects more advantageous than: that of

the country miller, because being athwart t he main channel of supply of the grain he is usually able to obtain it when he requires it. The country miller, located in a specific district, can only readily draw grain from his immediate neighbourhood, or from stations which are on the same line of railway. This disability is particularly felt in seasons when the crop is light or poor in

quality or towards the end of the year when local stocks c,re being cleared preparatory to a new season's harvest. 239. The country miller, and to some extent the metropolitan miller also, have in recent years been somewhat affected by the development of the system of accepting wheat on storage from farmers, which was discussed in paragraph 206 et seq., of the Commission's Second Report.

Under this system, the miller, in order to compete for supplies, is virtually forced to accept some grain during the period of Decen1ber to January without knowing the price which he is to pay for it. As the season goes on and his ·supplies of purchased grain are exhausted, he is often forced to mill grain of which he is not the legal owner. Although under the contract he is partially

protected because he can replace the actual grain by its equivalent, yet this protection refers to the grain and not to its price. He can to some extent, however, cover himself by making a "buying hedge" on the futures market. On the other hand there are times during the season at which he may be forced to purchase wheat which he does not require for his present purposes.

• 240. The Australian flour miller, particularly when operating in the metropolitan area, is in as favorable a position to deal in wheat as is any other wheat merchant. Table 17 shows the extent to whioh this trading is carried on by the " costed " milling businesses. The Commission, in paragraph 241 of its Second Report, has pointed out-that it is evident that the

business of buying and selling wheat is, or has been intrinsically profitable in the past when speculation has been avoided and when trading has been carried out efficiently. 241. The miller, in buying his wheat under the same conditions as the merchant, is naturally able to place himself in a favorable position in regard to export markets for flour

always provided that his purchases are made with the sa,me skill as those of a wheat merchant and that he does not have to buy much " premium " wheat in order to maintain the quality of his flour. His chief disability arises at those periods of low prices during which farmers refuse to sell and millers are forced to offer a premium above export parity price in order to

obtain supplies. 242. Under a pooling system in which the miller would be compelled to buy from the pool . it would be necessary to safeguard the interests of the flour-milling industry as far as this export trade is concerned. This difficulty is not insuperable and has been overcome in Western

Australia where many of the mills obtain a large proportion of their supplies under the terms of a contract the trustees of the West Australian Wheat Pool.

(b) THE EFFECT OF RAIL\VAY FREIGHTS ON THE INDUSTRY. 243. The Commission investigated the effects of rail freights on the development of the flour milling industry. There were many conflicting views amongst millers, particularly in New South Wales, regarding the effect on the industry of what is commonly known as the " through the mill"

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or" milled-in-transit" rate. Under this system a rebate is allowed on the freight charges on flour and other mill products consigned from mills which have used the railways in transporting the wheat. Such rebate is the difference between the sum of the freight on the wheat into the 1nill, and the freight on the flour consigned from the mill on the one hand, and the freight which would have been paid had the entire distance been travelled in one journey on the other, plus a break of

journey charge. The break of journey charge is made to recoup to some extent the railways for additional tenninal services and extra accountancy work involved. The Railway Departments in New South Wales, Victoria, South Australia and Queensland have a "through the mill" rate and although the principle is the same its is different in the various States. In all these ·States the freight rates on wheat and its mill products are the same.

244. The object of the " through. the mill " freight rebates was to encourage the milling of wheat in the country districts. 245. In New South Wales the rebate concessions on wheat and flour-mill products apply to rail-borne wheat "milled-in-transit" over all sections of the railway system.

246. In Victoria the " Inilling-in-transit " privileges apply to products consigned by country mills, but the break of journey charge varies according to destination of the products. Metropolitan mills are allowed these rebates only in respect of flour and o:ffals sent to Gippsland where only one small mill operates.

247. In South Australia the rebate is only allowed on flour and other mill products consigned from country mills. 248. In Queensland the conditions are complicated. There are different freights for wheat, for flour and offal" milled in transit'' and for flour and offals regarded as ordinary merchandise.

249. The effect of the rebate or" through the mill" freight conditions in New South Wales on flour and offals for (a) export, and (b) local distribution, is illustrated in the following examples* :-Rate per ton.

£ s. d.

(a) Wheat conveyed to a country mill-milled and forwarded for export:-Wheat-Finley to Cootamundra, distance 196 miles . . . . 0 15 2 Flour-Cootamund.ra to Darling Harbour, distance 268

miles 0 16 4

Sum of the two local rates 464 miles Through rate for total distance 464 miles Break of journey charge

Rebate

(b) Wheat conveyed to a Metropolitan mill- milled and forwarded by for distribution :-Wheat-Berrigan to Darling Harbour, distance 451 miles .. Flour-Darling Harbour to Dubbo, distance 288 n1iles

Sum of the two local rates 739 miles .. Through rate for total distance 739 miles Break of journey charge

Rebate

0 19 8

0 2 0

0 19 7

0 16 9

1 2 I

0 2 0

£ s. d.

1 II 6

1 1 8

0 9 .10

1 16 · 4

1 4 1

----0 12 3

250. Except for a difference in the local rates and break of journey charge, example (a) also illustrates the method of arriving at the rebate concession on flour and offals consigned from mills in both Victoria and South Australia. Similarly exan1ple (b) illustrates the method·

of computing the amount of rebate on flour and offals milled in l\felbourne mills for Gippsland stations. ·

251. The arrangement extends to flour· millers the full advantage of the "tapering" rate for the total rail mileage. The "tapering" rate is common to all railway systems and applies to most commodities conveyed by rail. Under a "tapering" scale the average mileage rate per ton decreases as the distance increases which gives an advantage to users over areas.

• These examples wer e drawn from evidence prese nted during a sitting of the Commission. It Is understood that certain subsi dized :. have since been made in these rates.

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252. The granting of rebates to New South Wales metropolitan millers on flour forwarded to country districts was the subject of some adverse criticism by a number of country witnesses, who claimed that it enabled t he city miller t o compet e with them for their own local trade and thereby defeated the intention for which the system was designed. Against this the country millers also gain an advantage because they can send their flour all over the State if they so desire. If the rebate were only allowed on mill product s moving towards the seaboard cross haulage via cross country lines past other flour-n1ills to destinations on the other main and branch lines would probably be discouraged. From the evidence of the Chief Traffic Manager of theN ew South Wales

Railways it appears that if a consignment of wheat were hauled to a city mill and its products were then carried by rail t o son1e country destination-traversing a total distance of 900 miles, then each ton would be carried over t he last 450 miles for 4s.-i.e. at a rate of approximately one-tenth of a penny per t on mile-a " very unprofitable o·peration."

· 253. During t he year ended lVIay 1934, the actual value of the rebate concessions to all participating flour-millers in New South Wales was :-£

Country millers 52,480

Newcastle millers 4,536

Metropolitan millers 31,604

, 254. The amount of rebates paid to millers in Victoria and South Australia during the year ended June 1935, was £34, 000 and £4,324 respectively. 255. In a further concession is granted in respect of flour consigned from country mills for export by means of a reduction of 15 per cent. from the already rebated rate for flour and offals. Similarly the State Treasury in South Australia has been paying 20 per cent. of the ordinary tariff rates on wheat, flour and other mill products consigned from the country to the

metropolitan area for local and export trade. 256. The " through the mill " system has not been adopted in Western Australia, but the freight rate on flour for local consumption is higher than that on flour produced for export. In addition to the reduction in the freight on export flour (I2i per cent. off ordinary rates) the

Railways Department, in order to assist in obtaining new business or recovering lost business, gives a further reduction of ls. per t on on consignments of 1,000 tons or over irrespective of the distance hauled. 257. In Tasmania t here are no freight concessions comparable with those granted in some of the mainland States. The Railways Department does not make any distinction between

export and local flo ur. Except that truck loads are carried at a cheaper freight rate than smaller quantities no rebates are allowed on flour consignments. 258. The Commission has, after careful examination of the rebate system, arrived at the conclusion that the policy of allowing rebates and granting other concessions has definitely encouraged country milling and although railway revenue may have suffered as a consequence the establishment and preservation of secondary industries in the country districts more than

compensates for the loss of revenue. It is of opinion that the rebate system operating in New South Wales is not fulfilling its original purpose, and its details should be reviewed in spite of absence of unanimity in t his regard amongst t he flour-millers.

(c) STANDARDIZATION OF THE PRODUCTS OF FLOUR-:MILLING.

259. Section VI. of the Second Report of t he Commission dealt with the baking quality problem in flours from Australian wheats. Appendix F. of the same Report gave a further reasoned discussion on the subject in the course of which it was pointed out that the soil in which the wheat was grown and t he climatic conditions under which it was harvested have an important

influence on the quality of t he raw material used by t he flour-miller. 260. In sub-section VIII. (c) of the Third Report of the Commission, the quality question was considered from t he stand-point of t he baker and it was made clear that, although millers endeavour to maintain a standard of quality in their flour, they are by no means invariably successful.

261. The miller is in a somewhat awkward predicament in this respect for he is seldom able to obtain unlimited supplies of high quality grain at prices which he can afford to pay, and further, in the southern section of t he Australian wheat belt at least , he can never be sure that the production of any one farm or any one district will be of t he same quality from year to year. It follows that considerable discretion is necessary in respect to purchases of at least a part of his

wheat r:equirements, particularly in seasons when weat her conditions during harvest have been patchy.

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262. At the present time millers are hampered by t he lack of any test of wheat quality which is completely satisfactory from their point of view. For t he purposes of illustration the following brief consideration of the various t ests which can be applied to wheat is set out :-(i) The weight of a bushel of grain.- In the old days when wheat was actually bought by the bushel measure this was of paramount importance because wheat of a greater number of pounds to the bushel would manifestly produce a ton of fl our from a smaller number of bushels. Nowadays when wheat is bought in units of 60 lb. (still called bushels) this particular point has naturally assumed a lesser significance. However, experience has shown that, other things being equal, wheats of a high bushel weight usually give a higher yield of flour to the t on of grain than wheats of a low bushel weight, and to t his extent they are particularly valuable to millers, although they are seldom prepared to pay more for wheat with higher bushel weight than the f.a.q. unless that when.t has other special qualities.

(ii) General inspecti,on of the sample.- Tl1is is of value for two reasons ; :firstly, it allows the miller to ascertain whether conditions of ripening and harvesting the grain were satisfactory. He is thus able to determine whethe r .t here is any danger from the sample in respect to mustiness or objectionable weeds or sprouted grain. Secondly, apart from the detection of these major defects, the millers often use inspection as a guide to inherent protein quality. In general, they prefer translucent, corny grains to those which are more opaque or are mottled. \.V'hilst it is true)hat opacity of the grain, being an indication of the conditions of ripening and being directly caused by the conditions of the actual cells of the endosperm at harvest, is some guide to quality, yet the test is a de ceptive one, as some wheat s containing gluten of reasonably high quality are sometimes more or less opaque in appearance. This t est has been discarded as relatively inefficient from the second point of view by mill ers in most countries, and the Commission is surprised at the extent to which some prominent Australian millers are apparently still relying upon it.

(iii) A chewing test in which the prospective buyer slowly chews a number of grains is sometimes adopted, and t here is little doubt t hat some men are able to form an idea of the quality of the gluten in the grains by the chamct er of the little ball of gluten which remains when the saliva has done its work. This, however, can be regarded as no more than a rough and ready field test.

(iv) Protein quantity as measured by chemical analysis is seldom employed by millers in Australia and as this test is by no means conclusive, it is perhaps as well. (v) ·wet and dry gluten tests are used by some millers and give a fair indication of protein quantity, but they are not acc11rat e regarding the quality of the prot ein. An examination of the elasticity of t he extracted gluten serves a useful purpose but affords little guide as to the length of time during which its quality would be retained in a dough .

(vi) The Pelschenke test has come into vogue in recent years, but many authoritative millers have informed the Commission that, in their experience, it is an unreliable indicator of the quality of the grain. .

(vii) From theoretical considerations the Tecently devised Brabender flour testing machines give promise of a new possibility in testing flour from the poipt of view of quality, but whether t hese machines will differentiate satisfactorily between the somewhat closely allied types of wheat from which the Australian miller has to make his selection is not yet proven.

263. Having regard to the lack of any single satisfactory test for wheat quality the best which any miller has been able to do in this respect when judging grain has been to apply as many of these tests as possible and nse his experience as a guide to the degree of reliance to be placed on the results of each.

264. While a considerable number of mills are equipped with chemical laboratories of a primitive type, the Commission has been surprised to find that there is a large number in which laboratory equipment of any kind is lacking, and the miller depends solely on his eye, coupled with his experience.

· 265. During the course of the milling operations the miller is able to do a great deal towards maintaining some degree of uniformity in the quality of his flour by blending the various consignments of grain which he has obtained from separate sources. He is also able to make minor adjustments in the milling process in order to remedy some of the grosser defects.

266. In this respect the Australian miller is in a totally different position from that of the miller in the United Kingdom as the latter can draw supplies of grain from a far wider range of sources . This is, presumably, t he main reason why the Australian flour-millers have in general concentrated on the production of a straight run of flour in which the whole of the extractable portion of the grain is used for t he one product·. The United Kingdom miller is in a much better position to produce a wide range of flours because he can purchase wheats of widely different qualities from different sources of supply. It would be practicable for the Australian industry to adjust its processes so that flours o£ somewhat different quality were produced from the same grain by tapping the flow of flour at various points in the milling process and diverting the portions

123 60

derived from various parts of the grain into separate channels. vYhiJe this would result in the production of a proportion of flour higher in qmdity than the average , t here would be a corresponding reduction in t he quality of the remainder. 267. As matters stand the millers' only method of maint aining a standard of quality is by purchasing proportions of wheat ''vhich are speeifi cally known to be inherently satisfactory as regards the qualit y of their gluten l:md ot her essential constituents such as maltose, and either mixing these in with t he grist or blending the fl ours derived from separate gristings. These practices, although by no metms general in Australia, are growing.

268. It has been represented to t he Commission t hat in certain overseas markets considerable damage has been done to the reputation of Australian flour by the shipment of quantities which were defi nitely sub-normal in quglity. In those market s where the brand of the individual miller is one of the chief recommendations to the purchaser t his is no t of great significance, but in other markets where price is the dominating influence the matter requires careful examination. This will become additiona1ly important if, as seems likely, alterations in t he exch .... nge position and in the supply of whec,t in Canada and t he United States of America re-establish fl our millers of t hose countries in a position to compete with Australian fl our millers in certain export markets.

269. Having regr.rd to t he difficulties of defining 2. satisfs,ctory test for flo ur quality the Commission considers t hat it would be useless t o recommend any enforcement of standards in respect to Australian flour at the present t ime except in rege,rd to. procedure in combating insect pests, which will be discussed later .

270. If in the future it be fo und t hat the flo ur testing machinery already mentioned is wholly sati sfactory, then it may in time becom e practicable t o grade flo ur and sell it according to definite specifications. In this event t he Australian industry would have everything to gain and nothing to lose by the adoption of a system of grading because the quality of its product, altl;wlJgh high in many respect s, is, in certain quarters, not highly regarded from the point of view of its gluten.

271. Offals are on an entirely different basis to flour in respect t o standardization . Many millers regard the offals as a by-product into which t hey put those portions of t he grain from which they cannot extract flour and into which they can divert most of the wheat screenings and other extraneous material which come to them with the wheat. Somet imes it pays to extract much more flour from t he grain than it do es at others. Sometimes there is a higher proportion of inferior matter to be disposed of t han is usual. In addition, t he wheat itself varies considerably in composition. As a result of these varying factors t he miller is very loth to agree to any scale of standards which will defin e t he composition of these products.

272. On the other hand the purchaser of o:ffe,ls buys them as concentrated foodstuffs required to raise the nutritive qualities of t he general fo od n1ixture which he is giving to bis stock. From his standpoint, therefore, it is important t hat he should know the approximate compositions of foodstuffs concerned.

273. In general, the use of supplementary foodstuffs for animal husbandry has not reached an advanced st age in Australia. There is a great deal of ev idence t hat many branches of animal husbandry could be rendered more effective if more foods of a concent:rated nt>,ture Were used. However, havincr regard t o t he distance of the markets to which t he product s of t he animal industries have to be sent and t he high transport costs, it is essential that such practices of better feeding should be conducted on a highly efficient basis. An efficient scheme for fe eding animals

can never be drawn up unless the approximate compositions of the foodst uffs used are known. Lack of standardization in mill o:ffals is therefore a definite obstacle t o pr ogress in animal husbandry. 274. The Commission was anxious to fo rm some opinion as to the variability in the composition of pollard and bran sold in Australia. Therefore fo ur samples of each of these commodities were obtained from a reliable source and submitted to the Com monwealth Analyst for his investigation. Table 46 shows t he percentages of the more significant fe eding elements

in the samples :-

T ABLE 46.

Pollar d (Dry basis). Bran (Dry basi>).

Feeding element-s. I

Sample 1. Sample 2. Sample 3. Snmple 4. Sample 1. Sample 2. I Sample 4.

P er cent . P er cent. Per rent. Per cent. Per cent. Per cent. P er cent. P er cent. Total protein . . .. 16. 9 18.03 ] 4. 27 18 .30 18 .69 18 .20 I 14.50 15.75

Digestible protein . . . . 6. 71 6. 83 6 .05 7.03 4.48 4.28 3 .78 3.88

Fats (total ether extract) .. 540 5 .49 4 .2 l 5.48 5.28 4.05 5.62 5.02

F ibre . . . . .. 10. 11 9.33 5. 67 5 .82 11. 60 11.30 10.60 15.43

Ash . . . . .. 3. 24 3.15 2 .18 3 .36 5.09 5. 94 4.95 5.57

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

Moisture . . . . .. 12. 0 11 .7 12.93 10.63 11. 98 12.45 13. 15 11.18

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275. The Commission recognizes that definite inferences cannot be drawn from the small number of analyses presented in the above table. However, the · figures disclosed show considerable variability, particularly in respect to t he fibre content of the pollard, while the variations in the digestible protein in both pollard and bran are considerable.

276. It has been represented that it would be unfair to t he milling industry to lay down specific standards of composition for offals and to enact that they rnust conform to this composition. On the other hand t he present position, according to which the purchasers of offals are not aware of the composition of the materials which they are buying, is equally unfair.

277. The i1nportance of the matter has been recognized and State Governments and other authorities have endeavotll'ed to fix physical and chemical standards for mill offals. In Victoria, Western Australia and Queensland the standard of bran and pollard is laid down by legislative enactment. In New South Wales and Sout h Australia the flour-millers' produce companies, which undertake the distribution of the offals, have defined and fixed a standard to which all bran and pollard made available to them must conform.

278. The v:arious standards include the following specification :-Bran. Pollard.

Ingredients.

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

Per cent. Per cent. Per cent. Per cent. Per cent. Per cent. Per cent. Per cent. Crude protein .. . . 14 14 . . . . 14 14

I

. . . .

Crude fat . . . . 2.5 2.5 . . .. 3 3 . . . .

Crude :fibre . . .. 10 10 9 . . 7 7 5 . .

Moisture . . . . . . . . . . 10.5 . . . . .. 10.5 . .

Foreign ingredients .. . . . . 1 1 . . . . 1 0.5

by weight

Ash . . .. . . . . . . 4 . . . . . . 2 . .

Whole and broken grains . . . . . . . . . . . . .. . . . .

Wheat by-product over a certain size . . . . . . . . . . .. . . . . . . 1

(South Australia-Percentages are not prescribed.)

279. The Commission understands that certain difficulties have arisen in .respect to the enforcement of the regulations and the matter is not as effectively controlled as the existence of the Acts and specifi cations might suggest.

280. The Commission is of opinion thap the matter should be put on a more satisfactory basis and that a compromise might well be effected by enacting that each consignment of offals so]d should be accompanied by a label or other document on which the minimum percentage of each class of foodstuff cont ained in the offal should be stated, whilst physical standards such as ·fineness should also be added.

281. The Commission has been informed that at times consignments of flour have left Australia in an unsatisfactory condition owing to infestation of flour moth and weevil. These pests are a continual source of trouble unless thorough fumigation is carried out periodically. Unfortunately some millers are less particular than others, and t he Commission has seen stores in some mills which were badly infested. The efficient millers are agreed that regulation is necessary in this matter in order that the export of infested flour may be prevented. The Commission therefore recommends that the Commonwealth Government should pass legislation to ensure the periodic fumigation of all flour mills selling flour for export and the inspection of such mills.

It should be practicable for the Commonwealth and State Governments to agree upon a scheme whereby qualified officers of State Departments could undertake the work.

.

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GENERAL CONSIDERATIONS LEADING UP TO THE RECOMMENDATIONS. 282. The growth of the Australian flour milling business has been comparatively rapid owing to a number of favorable conditions and to the attractive quality of the Australian product as a high-grade white flour.

283 ThJ comparatively small capital expenditure required to erect flour-mills, the steady and increasing demand in Australia for offals at prices which, whilst good, were still competitive with those of other animal concentrated foodstuffs , t he automatic availability of the wheat supplies and the good name of Australian fl our in many world markets, encouraged the steady expansion of the flour-milling industry, particularly during t he period 1913-1923. The demands during the war period, 1914-1918, and the post-war boon1 probably acted as an additional stimulus to this expansion. Later, in 1930, the maintenance by the United States and Canada of a currency condition approximating to gold parity whilst Australia had departed considerably from that parity, enabled the industry to supply a large demand from Japan and China just at the critical time when, owing to economic and other causes, the important Egyptian market was lost to the Australian indust.ry.

284. The financial results of the operations of the_ flour-milling concerns of Australia for eleven years were studied. It was found that the results of the year 1932-1933 were a fair representation of the conditions in the industry during the period 1931 to 1935 inclusive. It may be generally said that the industry as a whole enJoyed a long period of financial success,

except in South Australia and Western Australia, where this view must be somewhat modified. 285. However, a study of the profits of this industry in relation to the wheat industry on the one hand the bread and biscuit industry on the other, must be made by States rather than on a Commonwealth basis. Whilst the conditions applying to the industry in New South

Wales and Victoria are more similar, even as between these two States certain differences appear which affect the reliability of direct comparisons. Queensland and Tasmania are not actually exporters of wheat for flour, although Tasmania exports a certain an1ount of biscuit flour and imports both flour and wheat from the mainland. In Queensland the amount of wheat and flour imported depends upon the quantity of wheat produced in that State during each particular

year. In South Australia the conditions under which the industry operates are rather similar to those of Victoria and New South Wales, but the export facilities for flour are not as suitable as iJ?. those two States. Further, local conditions have at times caused internal competition which has had serious effects upon the stability and profits in the industry. In Western Australia the milling capacity in relation to local consumption of flour is large, the local demand for offals is relatively greater than in other States and the percentage-of flour exported is higher.

286. The greater proportion of the industry in Australia is controlled by family or partnership interests and, fortunately, these interests resisted the temptation to convert their businesses into public companies, during the period between 1914 and 1930, with an almost inevitable expansion of capital values. It should be remembered that, owing to this particular constitution, the number of shareholders concerned in this industry is ren1arkably small ;

consequently the net return per individual is, in many instances, high. Probably this has tended to create in the mind of the community an i1npression of the profitable nature of the flour­ milling industry which might not have been created if the industry had been conducted by public companies, particularly if such companies had been formed during an expansive period

and with a comparatively high capitalization. 287. Further, the increase in the size of individual enterprises has been financed to a considerable extent from undistributed profits. Individual shareholders have left much of the accrued profits in the business, so that borrowing from financial institutions has been, on the whole, remarkably small. An appreciation of this particular aspect of the industry is important both

as regards the past and as to the future if the present large and valuable export trade decreases. It may be reasonably assun1ed that if the industry has been able to increase its capacity to a considerable extent from past profits and thereby enjoyed the profitable results of past export trade, any re-adjustment on the capital side of the business that may become

necessary in the future must be taken care of by the industry and not at the expense of thf\ Australian community. ··

. 288. During recent years the industry has developed organizations resembling cartels. These organizations have aimed at the regulation of the local price and at the allocation of the local market amongst the various mills on a quota basis. They have in this way attempted to avoid severe price-cutting' on the local market and, in so doing, have t ended to keep in existence the less efficient mills. The spreads of costs and profits are shown clearly in Tables 40 and 41.

. 289. The Commission has given consideration to the question as to whether the price charged for flq,ur to the Australian consumers has been and is reasonable under the circumstances existing from time to· time.

126

290. A study of this Report will indicate clearly that no fair judgment on this matter can be made at any particular point of time but only with reference to a period of time, because of the many varying and sometimes compensating factors. 291. The best method of deciding this important question is, without doubt, to study the detailed figures given in Tables 40 and 41 in Section IV., sub-section (c) of this Report. For convenience, the four 1nost pertinent columns from Table 40 have been reprinted hereunder

(Table 47). Particular attention is drawn to t he last column which shows the percentages of profit which would have been made if the average local price of flour had been 5s. per ton lower . than it actually was. 292. Some care is necessary in drawing conclusions from these tables. For instance, the

percentage of the profit should be considered in conjunction with the proprietors' capital per sack capacity (shown in the first colun1n). This is particularly true in the case of the Queensland 1nills. 293. Reference to Section IV. sub-section (c), Table 40 of the Report will show that the

Queensland "invested " capitalization per sae.k capacity, generally speaking, is much higher than the Con1.mission's notional figure, which again, is slightly higher than the actual "invested " capitalization shown by the books of the flour-r.r1illing businesses in most of the States of the Commonwealth.

294. Reference to the last column of Table 47 below will show the extent to which prices of flour on the local market could have been lowered, if at all, with a reasonable return to the industry. 295. As 1nentioned elsewhere, consideration has to be given to the rather speculative nature of the export section of the trade. However, giving this all due consideration, no other conclusion can be arrived at than that the prices charged for flour in 1932-33 were, in a number of instances, somewhat higher and in others considerably higher than would have given a reasonable return. The view taken on this matter will naturally vary according to the pr:.rticular attitude of mind of the individual with reference to the extent to whieh national control should be exercised over trade and commerce.

TABLE 47.

Average flour profits. Average flour profits assuming local flour had

Proprietors' invested been sold 53. per ton less

Area or State. Capital per sack

capacity.

P" ton of Return on capital. Per ton of production. Return on capital.

(1) (2) (3) (4) (4) (6)

I

etropol£tan ills.

£ £ s. d. % £ s. d. %

Sydney .. 2,481 0 9 5 11 .68 0 7 3 8.95

Melbourne 2,221 0 6 3 8.66 0 3 9 5.19

Adelaide 2,066 0 15 6 21.14 0 12 9 17.49

P erth 1,845 0 4 4 5. 79 0 2 7 3.5

Brisbane 4,048 0 14 0 10.39 0 8 10 6.57

Metropolitan summary 2,421 0 8 4 10.27 0 5 10 7.18

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

Mills.

New South Wales .. 2,441

I

0 6 2 I 5.87

I

0 3 0

I

2.82

Victoria .. .. . . 1,448 0 9 1 16.54 0 6 5 11.61

South Australia .. . . 1,685 011 9 11.15 0 7 2 6.76

Western Australia .. 2,179 0 0 4* 0 .30* 0 1 8* 1.63*

Queensland .. . . 4,987 1 7 2 17.46 1 1 10 14.04

Country summary .. 2,173 0 7 4 7.93 0 4 4 4.73

Combined metropolitan and country summary 2,304 0 7 10 9.23 0 5 3 6.09

I

• Loss

296. The figures just discussed can be taken as applying generally during recent years.

297. Table 39 in Section IV. (c) gives the profit and loss position of the industry as a whole over the eleven yoars period ended 1934. Whilst this table includes profits and losses from all activities, including flour-milling, the comparison is interesting and instructive. It must be realized that during a considerable portion of this period of eleven years the wheat industry was

not being subsidized by the nation (through the price of bread and directly from Government

127

funds.) In view of the general attitude of commerce that as nnwh profit should be made while it is possible to do so since less profitable times may be approaching, no particular criticism can - be levied against the flour-milling industry as a whole. 298. However, in view of the changed circumstances, including the fact that the Australian

public is, in effect, making contributions towards the export trade in flour, it seems clear that the governments and the public should be kept regularly informed on the matter. 299. With regard to relative prices for wheat, flour and mill offals at present, the Commission is of opinion that no comments of value can be made because, as mentioned before, a fair judgment can be made only over a period. For instgnce, at the present time wheat is high in price con1pared with the priees during the last few years, and there has been a serious absence of overseas orders for flour during past few months and· there is a strong demand for offals.

300. The industry must have time to adjust its affairs to alterations of these kinds, and critical comments on present prices of flour would not be just or fair. 301. For information, the prices at recent date of wheat, flour and offals in each capital city of the mainland States are given hereunder (excluding the tax on flour of £2 12s. 6d. per ton).

The flour prices are the best official prices to after deducting rebates, including loyalty rebates.

Capital City. Wheat per bushel. Flour per ton. Bran per ton. Pollard per ton.

,

s. d. £ s. d. £ s. d. £ s. d.

Sydney .. . . . . 3 9! 917 6 5 10 0 5 15 0

Melbourne .. . . . . 3 8! 9 2 6 5 10 0 6 0 0

Adelaide .. . . . . 3 7! 9 8 9 5 7 6* 5 7 6*

Perth .. . . . . 3 9l 10 12 6 6 0 0* 6 0 0*

Brisbane .. . . . . 4 2 11 2 3 7 0 0 7 5 0

• Truck lots.

NoTE.-The wheat prices are those that. were paid for bagged wheat by millers in each particular capital city on the 31st January, 1936.

129

FINDINGS.

302. As a result of the Commissi?n's investigations its findings are as follow:-(!.) Flour-milling is an industry which has shown considerable improvement in its technique during the last half-century. (2.) In most countries changes in the method of transport, in the sources of power, and in the geographical location of sources of supply of the raw material have caused alterations in the orientation of the industry.

(3.) In Australia the industry has follow ed the smne line of evolution as in other parts of the world. Originally, mills were located in the capital cities ; later numerous small installations were erected in many wheat-growing districts; later still, as the wheat belt moved, mills sprang up in the new areas.

(4.) The general improvement in transportation and the growth of .city population has stimulated development of mills in tile capital cities, and these are usually in the best position to export. ( 5.) The general trend has been towards .fewer and larger mills and a replacement of steam power by electricity or oil engines.

(6.) There has been a steady increase in flour production during the last 30 years in all ·States except Tasmania. (7.) There are 48 metropolitan and 112 country mills, but the total capacity of city mills is slightly in excess of that of the country mills.

(8.) The Commission carried out a complete cost investigation of the operations of 113 mills for the year 1932-33. Their total output represented 91 per cent. of the total flour production. (9.) The actual output of the "costed" mills was 79 per cent. of their estimated capacity assuming that they could work for 5! days in each week. The 21 per cent. of idle time includes

5 per cent. which could be accounted for by break-downs and national holidays. On this basis the capacity of the industry was in excess of the available trade to the extent of 16 per cent. under the conditions which prevailed in 1932-33. (10.) In general South Australian and Western Australian mills showed a higher percentage of idle time than those in the other States. Country mills showed less satisfactory figures than metropolitan mills.

(11.) The flour-milling industry about 60,000,000 bushelsofwheatannually and directly employs about 3,500 persons. (.12.) Statistics show that the annual export of flour from Australia has averaged about 45 per cent. of the total production during the last ten years. In 1927-28 it was as low as 39.7 per cent. and in 1931-32 it reached 48.87 per cent.

(13.) Exports of mill offals have been relatively small during the last ten years. They were 1. 76 per cent. of the total production in 1929-30 and 13.35 per cent. in 1931-32. (14.) The chief markets for export flour have been:-(a) United Kingdom ; -

(b) the Asiatic countries ; (c) the East Indies and Pacific Islands and coastal ports of East and West Africa. (15.) Most European countries are already equipped with flour mills and no increase in flour exports to them can be expected under normal conditions.

(16.) The movement of the Australian exchange rate has been of great value to the industry in its export trade. The relative movements in the value of the currencies in Australia and competing countries would be a factor of importance in the flour trade of the Pacific basin. ( 17.) There is a wide range of policies which a flour-miller rna y adopt in planning the policy of his mill. Numerous economic and other factors influence his line of action. This range of possible policies causes considerable variation in costs and has made an · adequate

presentation of the facts of the industry a somewhat difficult matter. (18.) There is a wide variation between flour-milling businesses in respect of the manner in which they record the statistics of their mill operations and even in respect of their accountancy systems, some of the organizations being · surprisingly lax.

(19.) In making its analysis of costs the Commission excluded dealings in wheat not required for milling from the' costs and profits of the milling portion. The Commission found it desirable to analyse expenditure under four main headings, viz., Manufacturing, Selling, Delivery and Administration. A segregation of the mills was made into metropolitan and country groups and these were further subdivided according to the proportion of idle time which the milLs were

able to operate during the year 1932-33.

130

(20.) The wages costs per ton of flour produced are generally lower in city mills than in country mills. This is partly caused by the larger average size of the city installations and partly by the smaller percentage of idle time. (21.) The cost of bags per t on of flo ur varies according to the use of a greB,ter or smaller percentage of bulk wheat and also according to t he per.)entage of output packed in special containers such as calicoes.

(22.) Delivery costs vary considerably because some mills have a trade which contains a gTea.ter proportion of ret ail business . (23.) Country mills have higher delivery cost s than city mills, but this is largely set off by a lower price paid for wheat at the mill door.

(24.) The interest on borrowed money is generally small in amount. (25.) The Commission has .made arrays of the costs incurred by the mills in respect-to the main subdivisions of expenditure. In arriving at an "average " cost of flour per ton it has taken the average costs of the five mills in the central posit ion of each array.

(26 .) The capitalization o£ the milling businesses has been studied and has been found to show the result s of a wide variation in policy. (27.) The industry has, to a large extent, remained a family' enterprise in Australia, large public companies being rare.

(28 .) The total capitalization (including wm king capital) of the industry in 1933- 34 was roughly £9,000,000. (29.) Fixed assets repTesent about 44 per cent. of the total capital. (30.) The invested capital (p er ton of production basis) shows very wide variations. In general, there is little evidence of over-capitalization.

(31.) The Commission has estimated the warrantable capitalization on the basis of 75 per cent. of the cost of erecting a new mill plus 50 per cent. of the necessary working capital. On the basis of a 12,000-ton mill this estimate indicat es an invested capital requirement of approximately £5 per ton of flour produced per annum.

(32.) The Commission has taken 8 per cent. on t he proprietors' invested capital as a reasonable return, having regard to the speculative nature of the export part of the business. (33.) From the foregoing it appears that 8s. per ton of flour produced is a reasonable return on the capital required for a 12,000-ton mill.

(34.) A study of the figures obtained by t he Commission shows that a profit of 6s. per ton of flour produced and sold is sufficient to yield 8 per cent. upon the invested capital of the metropolitan mills whilst somewhat higher figures are required for country mills, particularly those that have a higher proportion of idle time.

(35.) The proprietors' "invested" capital as shown by their books agrees fairly well with the Commission's estimate o£ the warrantr..ble C:>upitalization. (36.) For each investigated mill an average cost of producing, selJing and delivering a ton of flour, less o:ffals, was ascertained, and an amount sufficient to give a return of 8 per cent. on the proprietor's capital was added. The mills in each group were arrayed and in the metropolitan area the middle fi gure of t he array was found to be £7 5s. 10d. per ton. The weighted average figure for all metropolitan mills was £7 7s. 6d. per ton.

(37.) Approximately every one penny alteration in the price of wheat represents 3s. lid. in the cost of a ton of flo ur , while every alteration of £1 per ton in the price.r eceived for offals represents 8s. 2d. per ton in the cost of flour. • (38.) The average price paid by individual millers for their wheat supplies during the

" casted " year 1932- 33 showed some variation, but among the metropolitan mills this was relatively .small (39.) The average prices obtained for products of the industry have been surveyed. In Queensland and ·western Australia som ewhat special circumstances prevailed during the year of the detailed investigation; apart from these the figures showed normal fluctuations.

(40.) The average net cost (apart from any return on capital) per ton of flour produced in the five mills in th e middle of the metropolitan array was £6 18s. 1d., and as the median of average prices obtained for flour was £7 5s. lid., this leaves a margin for profit and return on capital of 7s. 10d. per ton of output. ·

(41.) The computed profit of the " costed" mills during 1932- 33 was found to vary considerably. Of the 26 metropolitan mills 5 sustained losses and 21 made profits. Of these 21, five earned over 20 per cent. on the invested capital, while the maJority of mills earned over 8 per cent.

131

(42.) Among the country mills which worked for over 50 per cent. of the possible time, figures were very similar; among those on short time the profits were slightly less. (43.) The average mill profit during 1932-33 of all mills was 11 .239 per cent. on invested capital, whilst the. country mills earned 9.177 per cent.

(44.) The Commission considers that, while these figures are a satisfactory representation of the position, it is probable that certain milling businesses which deal in wheat made rather larger profits. (45.) A further investigation into the profit position in 1932-33 was made through the median of the balance sheets and profit and loss accounts of the businesses ; the results of this survey confirm the former inquiry.

(46.) A survey of profits of flour-milling businesses for the period 1924-1934 was made. This survey included profits or losses on subsidiary trading. It showed that 1932-33 was a reasonably representative year. ( 4 7.) The same survey showed that the industry had been generally profitable during this period except for the year 1928 in New South Wales and the period 1928-1932 in South

Australia, and the years 1929, 1930, 1932 and 1934 in Western Australia. (48.) An examination of records of share-holdings showed that during the eleven year period ended 1934, changes in capitalization of the older companies had been few and capital re-organization relatively infrequent.

(49.) Associations of flour mill owners exist in most States and are largely concerned with attempts to regulate the price of flour on the local market, (50.) From time to time the associations have endeavoured to adopt a quota system with reference to the amounts of flour sold by mills on the local market.

(51.) The flour-milling associations have financially assisted the baking industry ·in the respective States from time to time. (52.) In the past members of associations have not always strictly adhered to the schedule of prices laid down. ·

(53.) The exported flour is sold by millers direct or through brokers or through speculat:ors. , . (54.) The weighted average of the "crude" differe:qce between the export price and tbe local price received for flour in the case ofa.ll metropolitan flour-milling b usinesses carrying on ordinary trade in Australia was £1 4s. 8d. per ton during the investigated period of 1932-33.

(55.) The costs incurred in the production, sale and distribution of flour for local consumption are somewhat higher than those for export. The difference may be computed on two bases. (56.) The first basis takes into account direct expenditures only and spreads " overheads" over all the production. On this basis export flour costs about lls. 6d . per ton less t han the

flour consumed locally. Accepting t his approximation, t he margins of profit on the export and locally consumed flour were ls. 2d. and l5s. ld. per ton respectively in 1932-33. (57.) The second met ho d allows the local flour to bear most of the overhead in addition to the extra costs entailed in its production, sale and distribution. On this basis the extra cost of producing and dealing with flour for local consumption is about ISs. per ton. Thus the margins for profit on export and local flour were 4s . 2d. and lls. 7d . per ton respectively. Having regard

to the general conditions of international trade which prevail to-day, the Commission concludes that the second method of estimation is the one which should be adopted. {58.) The continuance of the export trade is of importance to the national life of the Commonwealth. If it be assumed that this higher price charged for flour on the local market is permissible then it is essential that a small standing committee should be set up to keep a

continual review of prices of flour in the States of the Commonwealth. (59.) At present the nation has no control over the difference between prices charged for export and local flour. {60.) The main check on this difference has been the inability of millers to obtain complete

adherence to any scheme of local price fixation. (61.) If the export market becomes more difficult and sales overseas become materially less, a complete unanimity between millers may be achieved in respect of internal prices, probably after a period of intense unrestricted com petition. This unanimity might lead to an undue

increase in the Australian price for flour. Among the possible correctives would be Government action {or the erection of independent mills. F.765.-"i

132

- {-62.) The fu11ther expansion of the milling capacity in the Commonwealth is economically undesirable at the present time. The Commission considers that nowadays G.overnments are charged with the duty of watching prices at which commodities necessary to the manufactuxe of an essential basic foodstuff are sold.

(63 .) With reference to the export market the tendency towards restriction of international trade may make it imperative for the Commonwealth to consider its position in regard to floux exports. (64.) In such case some control of the export industry would become essential, but it is highly desirable that the milling industry should if possible regularize its own position of its own accord. Any scheme for regulation of exports would also require regulation of the internal market. ·

(65.) If the industry were rationalized as regards areas of supply and on a basis of efficiency of production, it seems probable t hat t he community would obtain its supplies of flour at prices about lOs. per ton lmver than those charged at present apart from any reduction which might be made in the present margins of profit being obtained from flour sold within the Commonwealth.

(66. ) The cost of the competitive system in t he flour-milling industry is of the order of lOs. per tori. This extra expenditure c>mploys more people and whether a rationalized industry would manage to maintain efficiency, in respect of service and quality, is debatable. (67.) A careful survey of the trends in prices of flour and offals showed that, although the declared price of flou:r generally moves in sympathy with the price of wheat and the value of offals, yet the changes in flour prices are not automatic.

(68.) Past price trends show that from time to time the local price in some States has been out of line with t hat in other States. This is shown particularly in Queensland, while in Western Australia and South Australia the same tendency has occurred. (69. ) In the foux flour exporting States the main factor,s governing price vagaries are the condition of the export market and the degree of adherence by millers to t heir associations. In Queensland the position is complicated by the necessity of importing wheat or flour and by other· factors.

The different economic positions of the industry in the various States render it essential that surveys of prices of flour and offals should take into consideration the particular circumstances, existing in different regions or States. (70.) These and other considerations emphasize the need for a small standing committee with the duty of examining the local prices of flour and offalsin various parts of the Commonwealth, particularly at a time when millers are adjusting their position to the changed circumstances, which will be brought about by the introduCtion of a fluctuating excise on flour or a fixed price for wheat for home consumption.

{71.) The relative cost of the grain, being such an important factor in the cost of producing flour, to some extent governs the profit of each milling business. (72.) The Commission is advised that millers, when buying wheat, are able to protect­ themselves to a co,nsiderable extent against future alterations in price before the wheat is milled by covering on the "futures" market of the Liverpool Corn Exchange. This protection, while not absolute, is valuable. One of the difficulties is that the tenderable wheat at Liverpool may change from that of one country to that of another during one season.

(73.) This covering of business risks by legitimate use of the "futures" market is to be distinguishe d from gambling in whe at futures. (74.) The system of accepting wheat on storage has complicated the millers' position with reference to wh eat purchases. They are able to cover their risks in this direction to a limited extent by dealing on the "futures " market.

(75.) The "through-the -mill" or railway freight rates apply

differently in different States. The policy of allowing t hese rates or rebates has been beneficial to country millers, but the system as now operating in New South Wales is not fulfilling its original purpose, (76.) Millers attempt to maintain a standard of quality in their flour. They are handicapped in this respect by lack of any completely satisfactory t est for wheat or flour in respect of gluten quality.

(77.) At present it would be useless to recommend any enforcement of standards with respect to Australian flour. (78.) The offals sold on the Australian market vary considerably in composition at the present time.

(79.) Purchasers of offals are not aware of the composition of the materials which they are buying. . .

(80.) The Commission considers that each sale of o:ffals should be accompanied by a­ specification indicating the percentage of the more important food substances contained therein_

133

RECOMMENDATIONS ..

.. 303. The Commission recommends-(i) That the Commonwealth Government , after all necessary consultations with the State Governments, appoint a Standing Committee consisting of the Comptroller- General of Customs (chairman) ; Secretary of the Commonwealth Treasury; Secretary of the Department of Commerce the Commonwealth Statistician. (see paras. 207- 213.)

· (ii ) That the duties of this Comm ittee shall be to watch the course or costs and prices of flour and mill offals, and the relations which exist or sh ould exist between the prices of wheat, flour and offals, and to make reports to the Commonwealth an d State Govern ments frmn time to time .

(iii) That t he Committee co nfer fro m time to t ime with representatives of t he • ·industries of wheat-growing, flour-milling and bread-making with regard t o all pertinent matters so that its report.s to the Governments with regard t o fl our costs and prices shall be based upon the latest and best information obtainable. ·

(iv) That the Commonwealth Government prov ide the Committee wit h a small permanent staff to ·enabie the continuation of the work instituted by t his Commission in the study of the economic fa ctors affecting the flour-milling industry. .

(v) That the Commonwealth Government seek the co-operation of the State Governments with the obj ective of ensuring that all flour mill propriet ors shall keep their books of accounts in a standardized form and that these books of accounts shall be available, in confidence, for inspection by the Committee or its duly appointed representatives .

(vi) That the Commonwealth and State Governments adopt t he principle that the home consumption price for flo ur shall be considered in relation to the importance of maintaining and developing the trade in export (vii) That the industry take all possible steps to organize and develop a control of the export trade.

(viii) That, if the efforts of the industry in that direction fail, the Commonwealth and State Governments give serious and sympathetic consideration to legislative action in connexion with the institution of some form of control of the export trade in flour, provided that a majority of the industry makes the necessary representations to the governments concerned.

(ix) That the Commonwealth Government, after consultation with the State Governments concerned, arrange for a system of licensing of flour mills producing flour for export, and that no flour mil1 be so licensed unless it be effectively fumigated at regular and specified intervals a.gainsl; insect infestation.

(x) That the flour-milling industry give serious and active support in conjunction with the industries of wheat-growing and bread-making, to the inauguration of a programme of continuous research into the scientific, technical and economic problems of each of these industries (see recommendation in Fifth Report.)

(xi) That the funds for this programme of research be supplied fr om a levy made under the excise powers of the Commonwealth Government (see Fifth Report). (xii) That the Commonwealth Government submit to the Stat e Governments a recommendation that each consignm ent of o:ffals sold or offered fo r sale should be accompanied

by a label or other docum ent on which the minimum percent age of each nutritional constituent contained in the offal is clearly stated.

304. The Commission desires to express its thanks fo r the assistance rendered by experts associated with the flou r-mill ing industry and with tbe wheat trade. Amongst those to whom special thanks are due are :-· .. The Secretaries and senior offic ials of Commonwealth Government Departments.

The E'ecretaries, Directors, and senior officials of the Stat e Agricultural Departments. Mr. J. Gatehouse, President of the Federal Executive of Flour-mill Owners' Association. Mr. A. Sutherland, President, Flour-mill Owners' Association of New South Wales. Mr. A. L. J elfs, Secretary, Flour-mill Ow ners' Association of New South Wales.

Mr. F. A. Crago of Messrs. F. Crago & Sons Ltd., Flour-millers of Sydney . Mr. R. W. Gillespie, of Gillespie Bros., Flour-millers of Sydney. Col. L. A. Holborow, Manager , New South Wales Gra in Elevators. Mr. A. R. Brocklehurst , of Messrs. Henry Simons & Co., of Sydney. Mr. Harold Darling, of Messrs. J. Darling & Sons of Melbourne and Sydney. Mr. E. V. Nixon, of Messrs. Noske Bros. Ltd., Flour-millers, Melbourne. Mr. G. C. Downe, Secretary, Victorian Flour-mill Owners' Association.

Mr. H. Grose, President, Flour-mill Owners' Association of South Australia. Mr. W. A. Padbury, President, Flour-mill Owners' Association of Western Australia. Mr. H . C. H. Merry, Secretary, Flour-mill Owners' Association of Westem·Australia. Mr. T. Hatton, Messrs. Baker Perkins Pty. Ltd., Melbourne. Messrs. Mitchell Bellair & Lees, Wheat-brokers of Melbourne Mr. G. G. Nicholls, Wheat-broker of Sydney.

Also to all others who readily assisted the Commission with information and advice, sincere thanks and appreciation are tendered.

We have the honour to be, Sir, Your Excellency's Most Obedient Servants,

E. N. ROBINSON, Secretary. 18th February, 1936.

H. W. GEPP, Chairman.

T. S. CHEADLE J C. W. HARPER LCo · ·

E. P.M. SHEEDY r mmissioners. S.M. WAD HAM j

135

APPENDIX A.

CoNFIDENTIAL. F ORM J .

CoMMONWEALTH OF AusTRALIA.

Royal Commission on the Wheat , Flour, and Bread I ndustries, 1934.

FLOUR MILLERS' STATISTICAL AND FINANCIAL RETURN.

1. Name of Miller or Milling Company ......... ......................... ...... ......... ....... ...... .. .. .. ... ............ ... .. ..... .. .. .... ............. ........ ... ... .... .... .. .. ........ .

2. Location of Mill covered by this return ........... .. ...... ....... ..... .. ....... ...... ... ......... ...... ....... ........ ... .......... ..... ...... .............. ......... ... ... .. .... ....... ....... . .

(A separat e form t o be supplied for each Mill)

3. Capacity of Mill-expressed in sacks of 200 lb . of flour per hour

- 1928. 1931. 1932. 1933.

-

4. Mill Working-(a) N um ber of working hours Mill

operated-(i) on one ( 1) shift of hours

(ii) on t wo (2) shifts of hours (iii) on three (3 ) shifts of hours

Total hours (a ) .. ..

(b ) Number of working hours Mill did not operate owing to-: (i) breakdowns .. ..

(ii) holidays . . . .

(iii) lack of t rade .. . .

Total hours (b ) .. . .

Grand Total (a) and (b ) ..

1928. 1931. 1932. 1933.

No. Annual No. Annual No. Annual No. Annual Amount Paid . Amount Paid. Amount Paid . Amount Paid. - - - --- -----

5. Mill Staff-

£ £ £ £

(a) Manager .. .. .. --- - - --- (b) Millers, Mill h ands, Millwrights, Storemen, &c . .. . . --- - - - --- (c) Travellers .. .. .. --- .- - (d) Carters .. .. . . --- --- ----- (e) Office Clerks, &c. .. . . --TOTAL .. .. .. 1928. I

1931. 1932 . 1933.

6. W heat Purchases-Quantity of Wheat Purchases (Bu shels) I

£ £ £ £

Detailed Cost s of Wheat purchased .. I

Cost of Wheat (price paid, excluding commission) .. .. .. '

Agents' Commission paid .. ..

Rent of Railway Grain and Stacking Sites \Vheat Handling E xpenses , e.g., curtains, wire, extr a bags, freight an d handling charges on d unnage and r oofing

material, fuel and oil for elevators . . Depr eciation of Dunnage, roofi ng, material, wheat sheds, &c . ..

F reight Wheat St ati on t o Mill, includin g shunting t o Mill Siding .. ..

Losses of Wheat and «iamage in t ransit Stacking and Shifting expenses at Mi ll and from stack t o Mill . . ..

Insurances on W heat Stocks ..

Ot her E xpenses (jf any, give details separately ) . . .. ..

Total Cost of Wheat Purchased

F.765.-8

136

FLOUR MILLERS' STATISTICAL AND FINANCIAL RETVRN-wntinued.

MANUFACTURED STocK AccouNT.-FLOUR (INCLUDING MEAL AND SEMOLINA), BRAN, AND PoLLARD {INCLUDING SHARPS),

1928. 1931. 1932. 1933.

Tons. Value. Tons. Value. Tons. Value. Tons. Value.

£ £ £ £

7. To Opening Stock-Flour . . . . . . ..

Bran . . . . . . ..

Pollard .. . . .. .. --

To Stock Manufactured from Wheat Gristed-Flour . . . . .. ..

Bran .. . . . . ..

Pollard . . . . . . .. ------

N .B.-State Bushels of Wheat used to pro-duce one (1) Ton of Flour ( bushels.)

--------By Closing Stocks-Flour . . .. . . .. ----- Bran .. .. .. .. Pollard . . . . .. .. --- lBy Cost of Stock Sold- (transferred to Trading Ajc.) Flour .. . . . . .. Bran . . .. .. . . Pollard . . .. .. .. TRADING AND PROFIT AND L ·oss AccouNT. 1928. 1931. 1932. 1933. - -- - - £ £ £ £ 8. To Manufacturing Expenses- To Cost of Stock transferred from Manufac-tured Stock Account .. . . Mill Wages .. . . . . Endowment Tax on M.ill Wages .. Fuel, Power and Light . . .. Bags, Twine and Branding } .. Special Packing Calicos, &c. Improvers Used .. . . . . Workers' Compensation Insurance .. Oils and Sundry Supplies . . .. Repairs, Machinery and Plant .. Municipal Rates and Land Tax on Mill Site . . -. . . .. Insurance (Fire) on Buildings .. . . Maintenance Rail Siding . . . . Depreciation Mill Plant .. . . Other Manufacturing Costs-details-- To Selling Expenses- Travellers' Salaries and Expenses .. Commission . . . . . . Marine Insurance .. . . . . Cables .. . . . . . . Advertising .. . . . . Special Allowance to Customers .. To Delivery Expenses- Freight and Demurrage (Outwards) .. Cartages Outwards .. . . . . Storage .. . . . . . . Overseas Freight and Shipping Charges To Administration Expenses- Directors' Fees or Owners' Salaries .. --- Auditing and Accountancy Fees .. Office Salaries and Wages .. . . Office Rent .. . . . . Rates and Taxes .. . . . . Insurance-Stock, &c. . . . . Office Lighting, Heating and Cleaning .. Depreciation, Office Furniture .. Printing, Stationery I Telegrams, Telephones J .. . . Stamps .. . - Travelling Expenses .. . . Discounts allowed Customers . . . . Exchange and Bank Charges .. . . Bad Debts .. . . . . . . Other Trading Expenses .. . . Total Expenses .. . . To Net Profit .. . . . . . . £ -

137

FLOUR MILLERS' STATISTICAL AND FINANCIAL RETURN--continued.

1928. 1931. 1932. 1933 .

Tons. Value. Tons. Value. Tons. Value. Tons.

I

Value

By Sales (excluding Flour Tax)-

£ £ £ £

Flour-Within the State . . . ..

In Other States .. ..

Export .. .. ..

Total- Flour Sales .. ..

Bran-Within the State .. ..

In Other States .. .. --------::t-

Export .. .. ..

Total-Bran Sales .. ..

Pollard-Within the State .. ..

In Other States . . ..

Export .. . . ..

Total- Pollard Sales ..

Total Sales-All Products ..

---

Less purchases from other mills-Flour .. .. .. . . ..

Bran .. . . . . .. ..

Pollard .. .. .. . .. .. -------- Net Sales . . .. .

By Earnings from wheat gristed for customers . . By Other Earnings (detail)-

By Net Loss .. .. .. ..

£

1928. 1931. 1932. 1933

Bus. Value. Bus. Value. Bus. Value. Bus. Value.

9. Wheat Operations-

£ £ £ £

To Opening Stock Wheat .. ..

Wheat purchased at cost (as per Item 6) Wheat Gains (if any) .. ..

Surplus . . . . . . ..

TOTAL .. . . ..

By Wheat Gristed for Flour .. ..

Wheat sold .. .. ..

Waste or Loss at Mill .. ..

Closing Stock .. .. ..

Deficiency .. .. .. ..

TOTAL .. .. ..

DECLARATION.

I We hereby declare that the information contained in this return is true a.nd that the particulars supplied in relation to the financial affairs of the business are in agreement ·with the books of account and other records.

Date .................... ...... .......... ........ ... .. 1934.

Owner or Maooger.

Auditor( s) . ·

RoYAL CoMMISSioN oN THE WHEAT, FLoUR, AND BREAD INDUSTRIES, 1934.

EXPLANATORY NOTES FOR GUIDANCE OF FLOUR MILLERS IN PREPARING FORM J .

NOT E.-The fiooncial and statistical information is requit·ed in respect of your financial years 1928, 1931, 1932, and 1933. Item 2.-A separ'ate Form J is to be used in respect of each mill. Shillings and pence can be ignored. Item 4.-It is desired that under (a) the total number of hour actually worked each shift be shown, and under (b) the number of hours the mill did not work owing to lack of trade, public holidays, breakdowns, &c . The grand total of (a) and (b) should represent the number of working hours the mill could have operated during the year had there not been any stoppages.

Item 6.- The charges enumerated are those incurred up to t he time the wheat i ·at the mill ready fo r gristing. No manufacturing, selling, delivery, or administratiou expenses . hould be included .

·.

Item 9.-For the purpose of the information required under this item, wheat is to be included at cost, which should cover all those charges shown against Item 6. It should be noted that no expenses incurred in connexion with the gristing of wheat for flour are to be included under this item.

Item 7.-Manufactured Stock Account.----,-The amounts under this sub-head should be at wheat cost prices. If the actual quantities of bran and pollard obtained from the gristing are not known, and it is hund necessary to estimate the figures, the following uniform percentages should be adopted :-

Bran ..

Pollard ..

Per cent. 49 51

Item 8.-Trading and Profit and Loss Account.-The amount shown against the first item on the debit side " Cost of Stock Transferred from Manufa·,;tured Stock Account " should agree with the total of the item " Cost of Stock Sold " (]'lour, Bran, and P ollard) in the " Manufactured Stock Account."

It is desired that care be taken to show expenditure under the proper sub-heads, viz., Manufacturing, Selling, Delivery, or Administration. Any charges for which provision has not been made on Form J should be inserted under their appropriate sub-heads.

Upon completion, Form J and supporting statements should be forwarded to­

The Secretary, Royal Commission on Wheat, Flour, and Bread Industries, Commonwealth Bank Chambers, 367 Collins-street, Melbourne, C.l,

Victoria.

APPENDIX B.

FACTORS INFLUENCING THE QUANTITY OF WHEAT REQUIRED TO PRODUCE ONE TON OF FLOUR. There are various matters which affect the yield of flour obtained from the wheat gristed. These include :-(i) The efficiency of the mill plant.- In some modern mills employing special " breaks " it is possible to obtain a higher yield of flour than in older plants. The method of conditioning the wheat also influences t he yield as we ll as the quality of the flour. Consequently, in those mills where the wh eat is conditioned in a haphazard way a so mewhat larger quantity of wheat is required to produce one ton of flour.

(ii) Moisture content of the wheat .- The actual moisture content of t he wheat when received by the miller from the farmer or oth er seller is of significance because the lower the moisture content the larger the amount which can be added during t he " conditioning " stage of the milling process without detriment to the flour. The moisture percentage in the wheat varies both according t o the climatic condit ions under which the crop has been grown and to the st age of ripeness reached at harvest . In general, under t he climatic conditions which prevail during the early summer in the Australian wheat belt, t he moisture percentage in the grain is low. Provided bad weather does not occur during harvesting this percent age falls during ripening to about 9 per cent. when the wheat is "dead ripe." After the grain has been st ored, the process is reversed and the percentage rises to about 12 per cent. Consequently, wheat which is harvest ed early and sent st raight to the mill has a higher moisture content than that which is harvest ed a week or so lat er in t he dead ripe stage, whilst wh eat acquired from farmers or others later in the year will again contain more

moisture. (iii) The percentage of pinched grain, rubbish, &c.- This naturally affe cts the amount of flour whi ch can be produced. There has been a t endency for t his percentage t o rise during recent yea rs. The amount concerned varies according to the harvesting methods and the honesty of the farmer, but in general, it should not exceed 2 per cent. in the average seaso n. The presence of t his material lowers t he yield of fl our but does not necessarily represent a total loss t o the miller. The weed seeds and pinched grain which usually form the weightier part of the screenings are fair stock fo od and the material is treated in a " disintegrator "in the mill and then added to the pollard.

(iv) Expm·t flou r. - When packing for export mo re flour is required owing t o t he lighter bags used and the fact that in most cases an extra weight is shipped in order t o allow for damaged bags . It is understood that various methods are adopted by millers to increase the yield and reduce the costs when manufacturing export flour, but millers generally .are exceedingly reticent on these matters as each in turn thinks that his particular method belongs to him alone .

It is pointed out that the weight of products usually exceeds the weight of wheat gristed and millers generally st ate that this gain in weight should average between 1 per cent. and 2 per cent. E xperience has confirmed this stat ement. In computing the number of bushels used t o produce one t on of flou r many millers t ake the t ot al quantity of product s in lbs. and divide it by 60 and assume that the result is the bushels of wheat gristed. It will be seen tha t this method will give only t he number of bushels of conditioned wheat gristed. In the figures obtained during this inquiry the quantity of wheat in its natural condition has been t aken as a basis, and it will be appreciat ed that less · "uncondit ioned" wheat is required t o produce a ton of flour than when the wheat is" conditioned " . The Commission

has t aken t he wo rking figures from each mill and has ascertained the number of bushels of wheat required t o produce a ton of fl our in that mill under the conditions of operation which prevailed in 1932- 33. Table BI. shows the dist ributio n of t he mills in respect t o capacity and their classification according t o flour obtained. This t able shows that, although inefficient extraction is specially noticeable among t he smaller mills, high efficiency in this re spect is by no means invariable among the larger ones. An inspection of the data presented shows that the approximation of allowing 47 bushels of wheat to the ton of fl our is justified.

6 9

139

It is pertinent to add that, when the local market for offals is good and the flour market is slack and the price of wheat is low, a high extraction is not necessarily advantageous.

TABLE Bl.

SHOWING THE NUMBER OF BUSHE LS OF WHEAT REQUIRED TO PRODUCE A TON OF FLOUR IN THE INVESTIGATED MILLS BELONGING TO VARIOUS CAPACITY CLASSES IN 1932-33.

Metropolitan-Sack capacity per hour. Country- Sack capacit y per hour.

Bushels. Total.

Less than 11 . 11-25. 2!>--50 . 50 and over. Less than 11. 11-25. 26- 50. 50 and over.

-

43.5 to 44.49 .. .. . . .. .. 1 1 2 . . .. 4

44.5 to 45.49 .. . . .. 2 .. 3 .. 5 . . .. 10

45. 5 to 46.49 . . .. .. 2 4 .. 3 12 . . 3 24

46 .5 to 47.49 .. .. 1 1 3 2 4 8 2 . . 21

47.5 to 48.49 .. .. 1 3 1 1 7 3 .. . . 16

48 .5 to 49.49 .. .. . . .. .. .. 4 2 . . . . 6

49 .5 to 50.49 .. .. .. .. 1 .. 7 . . . . . . 8

50 .5 t o 51.49 .. .. .. .. . . .. 1 . . .. . . 1

51.5 to 52.49 .. .. .. .. .. .. 1 , . . . . . 1

52.5 to 53.49 .. .. .. .. .. . . 1 .. . . . . 1

53.5 to 54.49 .. .. .. .. .. .. .. . . .. . . . .

54 . 5 to 55.49 - .. .. .. .. .. .. .. . . . . . . ..

55.5 to 56.49 .. .. .. .. . . .. 1 . . . . .. 1

Number mills .. 2 8 9 7 30 32 2 3 93

APPENDIX C.

SOME NOTES ON THE PRACTICE OF " HEDGING." In connexion with the question of purchasing wheat, reference has been made to "buying " and "selling " hedges. It is unnecessary to give any detailed account of the futures market in wheat, but the following short explanatory notes will make the process intelligible :-

(a) " Futures " markets have been established in several grain-selling centres of the world. Australian mills wishing to cover their operations by dealing in the futures market naturally trade on the Live rpool futures market because it is the only wheat futures market in Britain and the English market virtually fixes the ·price of Australian wheat and the prices on that market are less subject to the complications of external interference than are those of the

Winnipeg and Chicago markets. (b) In a "futures" market, a trader buys or sells the right to take or deliver wheat at the price named . The wheat referred to may be of any type which is not inferior to the standard set up in this market for the particular transaction.

(c) The unit of trading on Liverpool is 8,000 bushels. (d) A miller wishing to safeguard himself against a fall in the price of wheat, the flour from which he has not yet sold, sells wheat" futures" on Liverpool. Then, if the price of wheat in Australia falls and the price of flour comes down, he can still meet the market, because he is now able to buy back his " futures " at a lower price, always assuming that the Liverpool price moves in accord with the Australian price.

(e) A Iniller wishing to cover himself against the risk of milling wheat which he has on storage but which he has not bought can make a buying "hedge " . This means that he buys " futures" on Liverpool and then, if the price in Australia moves upwards and a farmer decides to sell on that advance the Iniller can se ll his " futures ." on lliverpool and take the profit which he has made on the " futures " market as an offset against the loss which he has

made on the Australian market on the actual wheat. Again, this scheme will only operate if the Liverpool option price moves in accord with the price in Australia. {j) Theoretically, this method of covering would only involve the expenditure incurred in making the purchases in the ' futures " market. An expenditure of £10 6s. sterling covers t he buying and selling costs for a " futures " unit of 8,000 bushels and, owing to the difference in price, an 8,000-bushel cover in Liverpool would usually be

sufficient for a 10,000-bushel risk in Australia and would represent approximately 0. 30d . per bushel covered. (g) In practice, the matter is more complicated because under the conditions of " futures " trading, a buyer may tender any class of wheat not inferior to the minimum laid down for the market and, naturally, t he whea t whose price is taken to fix the "futures " price is that which is cheapest in the market. If, therefore, Argentine wheat is being freely offered on Liverpool whilst Australian sellers are not pressing, the price of Argentine wheat will deterlnine the

Liverpool "futures " price which may be out of adjustment with the price of wheat in Australia on a parity basis. To this extent, the " hedging" market offers an inco mplete cover to t he miller. This disability of the hedging system has been particularly marked during the period of low prices when Australian Inillers in order to obtain supplies of grain were frequently forced to offer margins of several pence per bushel over the world " parity " pri ce as then fixed by the price of Argentine wheat, which was the lowest priced " tenderable " wheat and which was bei ng "forced " on the Liverpool market.

(h) A common conception of a " futures " market is that it is an orga nization which enables people to gamble. While this is true to some extent, yet it has a legitimate function in co nnexi on with milling. As already noted, the Liverpool futures market is not entirely satisfactory from the Austmlian Inillers' standpoint. It has been suggested that the establishment of a "futures" market in Australia would be defini tely advantageous .

There is much to be said for this proposal always provided that any orga nization so set up was given a constitution which safeguarded it against the undue activities of speculators.

Printed a n d Publ ished for t he o f t he CoMMONWEALTH OF Aus TRALIA by

L . F. JOHNSTON, Comm onwe a lth Government P r in ter , Canberra.