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Tke Dairy Industry Account shows the position of the Produce Purchase and Sale Accounts as follow: — £ s. d. £ s. d. Estimated deficit on creamery butter . . . . . . ■ ■ 561, 397 1 6 Estimated surplus on cheese .. .. •• •• 18,354 7 6 Less estimated deficit on whey butter .. .. .. 5,707 5 9 — 12,647 1 9 Estimated deficit Dairy Industry Account, 1936-37 season .. .. 548,749 19 9 The balance-sheet is drawn up in the usual form to show liabilities and assets as at 31st July, 1937. The Government desires to acknowledge the co-operation and assistance which have been received from organisations interested directly and indirectly in the marketing of the primary products of the Dominion. In particular, the Government has appreciated the co-operation of the farming industry and of the directors and officials of dairy companies. The Dairy Board, the National Dairy and South Island Dairy Conferences and the farmers' organizations have been at all times helpful in the expression of their views. Finance, shipping, and cool-store interests have also given a full measure of co-operation, both in New Zealand and in London. In the United Kingdom members of the provision trade and the appointed agents of the Department have given their support to the Dairy Sales Division, which has endeavoured to improve the marketing of New Zealand dairy-produce on non-speculative lines. Che success which has been achieved is due to a considerable extent to this helpful co-operation. The Government realizes that its policy for the betterment of conditions in primary production in the Dominion can only be implemented to the full with the co-operation and assistance of interested sections of the community. INTERNAL MARKETING DIVISION. The Internal Marketing Division of the Primary Products Marketing Department was established in February, 1937, when the Government acquired the business of Picot Bros., Ltd. The purchase was made on a valuation basis, and included the premises, plant, and stock-in-trade, whilst the services of the managing director were retained as Director of Internal Marketing. At that time, the company was the largest wholesale dealer in primary food products for the local market in the Dominion, and the Government on assuming control became possessed of an organization competent to carry out the handling and distribution of primary foodstuffs in the capital city and also in certain districts of the Wellington Province. At the time of the purchase, Picot Bros., Ltd., were operating two branches in Palmerston North and Hastings respectively. The latter has, however, since been disposed of to the co-operative dairy interests in Hawke's Bay, who were desirous of undertaking the marketing of their own produce in that area. The basis of this transaction was the same as that used in the purchase of Picot Bros., Ltd., referred to above, so that neither profit nor loss to the Government resulted. The new concern thus established under co-operative control became the sole distributor of butter in Hawke s Bay, and at the same time became an important factor in the distribution of other primary products within the district. Butter-marketing. As a means of stabilizing prices and regulating the marketing and distribution of butter within the Dominion, following upon the policy adopted by the Government in respect of butter intended for shipment overseas, the Butter (Wellington District) Marketing Regulations were brought into force on Ist May. Under those regulations the wholesale price of butter was fixed so that the returns to the dairy companies would be commensurate with the returns received for the butter and cheese purchased by the Government for export, after taking into consideration the disparity between the costs of packing and handling for export and those for the preparation of the product for the local market. A system of licensing wholesale distributors was also introduced, and the conditions under which they could trade in butter were clearly defined so that their margin of profit could be kept within reasonable limits and the interests of the dairy companies protected by the elimination of price-cutting and other undesirable practices. In addition, the dairy companies in the Wellington District were placed on a more satisfactory basis so far as the sale of their output for local consumption was concerned, and a number of anomalies that had hitherto existed between them, particularly in respect of their butterfat payments to the producers, were eliminated. The regulations have worked exceedingly smoothly and served admirably as groundwork for the inauguration of a similar plan on a national basis, which it is expected will be in operation towards the end of the year. Eggs and Egg-pulp. Since its inception the Internal Marketing Division has been actively engaged in assisting poultry-producers in the marketing of their produce, and has done a great deal of useful work in the handling and distribution of eggs and egg-pulp not only in Wellington, but also in other parts of the Dominion as well. During the flush period of production the Division relieved the markets in the various centres affected of their surplus supplies, and by co-ordinating the activities of the various distributors and egg-exporting committees was instrumental in stabilizing the markets concerned and ensuring to the producers more equitable returns. The Division has at the same time been investigating the possibility of improving the marketing of these products with a view to assisting the industry to develop the distribution of its produce throughout the Dominion on the most economical and efficient lines.

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