Part Four: Big Business
A British tax on imported Canadian beef and bacon is a distinct future possibility
G. R. STEVENS
BACON, beef and milk are big business in England. They are railways in the Argentine, loans to New Zealand, steel quotas in Denmark. They are also high politics, because the Dominions, confronted with a diminishing English market, are endeavoring to attach the foreigners’ share. They are national responsibilities, since fractional rises in their prices cost the British consumer millions. They are storm centres for Major Walter Elliot in his task of reawakening the English countryside. It does not matter greatly what happens to his schemes for potatoes, for wheat or barley, for sugar beets or for hops. But for bacon, beef and milk he must stand or fall.
A penny extra on each pound of bacon and beef, a penny more on each gallon of milk, represents $150,000,000 each year to the British consumer. This modest advance, which has already occurred in the case of bacon and milk, adds an additional five per cent to the national food bill. With minor crops, it might be sufficient to raise prices at public expense; the outlay would be lost in the vast Imperial Budget. But in the case of bacon, beef and milk, the quantities are too great, and Major Elliot must return something to the taxpayer in the form of greater production and more money spent in England. Otherwise his plans constitute gigantic subsidies to overseas suppliers.
Every morning the rasher or the gammon smokes on a million British breakfast tables. It requires 500,000 tons of bacon each year to keep the larder stocked. In the past Denmark has supplied about 350,000 tons, and the British bacon curers another 80,000 tons. The Danes have been studying British tastes since 1864, and they know to a millimetre the fat, the lean, and the streaky that is required. Canada is the only Dominion which offers much in bacon, and there has been a good deal of hit-and-miss about Canadian production in the past.
Canadian Pigs in Clover
SINCE 1926, Great Britain has been the only open market for all the exportable hams and bacons of the world. Every surplus has been shipped there; much more has been entered than could be eaten. Instead of 500,000 tons, 650,000 tons of bacon reached the British market each year. Prices broke under the glut, and in 1931 bacon was selling for half its price of four years before. Danish bacon which cost seventy-five shillings per hundredweight to grow was offered in London for sixty-three shillings; Polish and Russian bacons could be obtained at even lower prices. The home product was completely out of it, and British pig farmers faced ruin.
The first necessity was to relieve the glut. In 1930, the Danes began to slaughter their breeding sows in order to restrict production, and they welcomed a voluntary arrangement which withdrew 100,000 tons of surplus supplies from the market. Then two Marketing Boards were established, one representing the British pig farmers and the other the bacon curers. The pig farmers contracted to breed and to supply a steady stream of pigs throughout the year, instead of too many in the spring and autumn months and too few at other times. The bacon curers in return guaranteed a
scale of prices for British pigs which gave the farmers a chance to make money. These prices were set on a rather complicated formula which took into consideration both the costs of feeding stuffs and the market prices of bacon. This formula was designed to assure the pig farmers, the bacon curers and the consumers a fair deal when price fluctuations ensued.
The scheme saved not only the British but the Danish bacon industry from bankruptcy. The British housewife now pays twopence per pound more for bacon, or about $45,000,000 each year for all the breakfast tables of Great Britain. But the British pig industry has been saved, and is getting on its feet. British bacon production has increased by forty-three per cent in three years, and the Marketing Boards have budgeted for another thirty per cent increase by 1937. The feedstuff and agricultural equipment industries have profited greatly, and the Danes, who are now making money, are buying British goods in increasing quantities.
Yet the true pigs in clover are the Canadian pigs. Under the terms of the Ottawa Agreement, quantitative restrictions cannot be applied to Canada until 1937. Canadian shipments of bacon have jumped from 2,000 tons in 1930 to 50,000 tons in 1934, and Canadian bacon receives the stabilized price of around ninety shillings per hundredweight. The Canadians will be well advised to make hay while the sun shines, for they are incidental benificiaries, and Major Elliot promises to give them his attention when he is free to act.
Canada Must Fight Restrictions
TO REORGANIZE and remodel an industry with an annual turnover of $225,000,000 is no small undertaking, and there have been a number of unforeseen developments. First, and most important, is the steadily diminishing premium which home-grown bacon enjoys over Danish supplies. The new production is below the quality of the luxury bacons of the past, and British housewives do not favor lower grade domestic bacons. At present Danish bacon is definitely preferred to the home-grown product, and there is a certain amount of grousing because there is so much British bacon and so little Danish bacon available. There is also some resentment because the Danes and the Canadians are doing so well under Major Elliot’s scheme. Instead of losing twelve shillings on every hundredweight, the Danes now make about fifteen shillings and the Canadians about eight shillings out of the British consumer. Whereas the British bacon producers, on whose behalf control has been instituted, do little better than break even.
This restlessness on the part of both producers and consumers in England will result in the imposition of a tariff upon Dominion and foreign bacons in the near future. The British farmer will probably succeed in having such duties returned to him as a subsidy, so that he will benefit doubly. If he can hold the price of the home-grown product at the present level until his qualities improve and his bacons become more popular, his fight will have been won. The grading regulations, therefore, are being tightened radically—this year, for instance, a C. back and an A. belly no longer
receive a B. but a C. grading. By nursing the situation cannily, Walter Elliot hopes to navigate the strait passage between consumer and producer revolt.
The extent to which the British pig population can be increased is a matter of deep concern to both Danes and Canadians, and also New Zealanders, who have a fair trade in pork. None of Major Elliot’s experts will risk a guess, and their private opinions range from the entire requirements of Great Britain—a fourfold increase—to a figure little greater than the present production.
Nor do the British farmers themselves agree. A hearty old lad with a face like a carved chestnut, and bowed and gaitered legs, straight out of Dickens, who took ale with me in a Wiltshire pub, was frankly incredulous.
“Dang me, them ’uns cain’t farrow sows, sir,” he said. “Why, regular look of ’urn makes old sow sick.” Then he became technical. He was referring to the new farmers, the semi-suburban chaps who have put in styes as a sideshow to their milk. They have yet to learn the twist and the touch of the pig business. On the other hand, many experienced farmers, under the stimulus of assured prices, are installing swine plant and breeding stock which is comparable with that found in Denmark or America. Such developments as all-season outdoor folding of herds and rapid rotation of pasturage, have overcome traditional difficulties in British pig culture, and practical farmers have discovered that they can double the number of swine on existing acreage without risk either to the herds or to the pasture. It therefore seems possible that within ten years the pig population of England will have doubled, and bacon imports will have been cut to not more than 250,000 tons per annum. This would mean a reduction in the overseas bill for bacon of $120,000,000 each year, a saving which would justify the increased cost to the consumer.
If the Canadians are wise, they will muster forces for the battle against quantitative restrictions at once, before British bacons make further progress. The British pig farmers are seeking a duty of a penny a pound on foreign bacons, with some measure of preference for the Dominions. At present prices such duties would not be a serious handicap to importation, so that some scheme of quantitative limitation will probably accompany the duty. The British pig will have his place kept for him; the others must bargain for what remains.
Tax on Beef Imports Likely
WHAT HAS been done for bacon—quantitative regulation of imports with reorganization of home supply— has been planned for other meats. But two circumstances have held the programme in abeyance. Frozen mutton, which is imported, does not compete directly with fresh mutton, which is home-grown. The recent difficulties with the Irish Free State gave the British sheep farmer the home market to himself at a time when Englishmen—for some reason which no one has fathomed—suddenly bçgan to eat more mutton and less beef. As a result, mutton prices have been satisfactory, and no official stimulus has been required. It is doubtful whether the higher prices will increase the sheep population of Great Britain to any marked extent.
Many experts consider the risks of disease too great for intensive folding. As Dr. Innes, one of the research workers at Cambridge, put it to me: “The stomach of a sheep is a walking museum of parasites. In a hundred years we may know how to control them. At present they have us whacked.”
This is perhaps an extreme view, as at Rothamstead Institute I saw experimental plots which now support eight sheep, as against four before pasturage and rotation had been adjusted. But even here the research officers made it clear that the risk of disease had appreciably increased.
Beef is in a very different position. It is the blackest spot on the countryside. A fall in beef consumption coincided with a rise in milk prices, and thousands of farmers went in for dairy herds. During the same period better methods of cooling were developed, and chilled beef made advances at the expense of fresh killed meat. Then milk fell in price, and in disgust farmers began to slaughter dairy cattle, bringing down the quality of home-grown beef. The London Times was filled with letters about it, and all of a sudden no one wanted the roast beef of old England at any price. This sequence of events brought British beef farmers to the verge of ruin.
Major Elliot wished to limit overseas shipments of beef, and to levy a tax on all imports, such tax being earmarked as a subsidy for British cattle growers. But no limitation can be placed on Dominion shipments during the lifetime of the Ottawa Agreements, and to knock out Argentine simply meant setting up Australia and New Zealand in the beef business. Moreover, Argentine, scenting the danger, rushed through a trade agreement with Great Britain which permits her to ship ninety per cent of the quantities supplied in 1931-32. This agreement terminates in 1936, and unless greatly modified, will not be renewed. It pays to treat creditors civilly, and of late years the Argentine has not behaved very well in connection with the heavy British investments in her properties. It is time, says the City of London, that the Argentines were taught a lesson. The British farmers, therefore, have found an unexpected ally in the money power of the City.
Major Elliot never hesitates to extemporize. Faced with his stymies, he instituted a direct subsidy of five shillings per hundredweight on all home-grown first-quality beef. This temporary expedient was designed to save the British industry from collapse. From September of last year until March of this year, the original stated period of the subsidy, about $13,000,000 was paid out on fat cattle at the rate of about $12 per head. Last July a supplementary estimate continued the subsidy until September, 1936, when the Argentine Trade Agreement expires, at a cost of $21,665,000. Thus the beef farmer is drawing on the taxpayer to the extent of about $17,000,000 annually to keep his industry alive, and he is growing no more cattle than before, nor making any additional contribution to the commerce of England. This subsidy, therefore, is vulnerable, and Major Elliot undoubtedly yeams for the hour when, as announced in the House of Commons in July, he will be free to replace the present bounty with a tax on all imported beef.
Throughout May and June a mighty battle raged in the
purlieus of Whitehall. The Dominions’ Prime Ministers, with one exception, came to the King’s Jubilee with modest retinues. They walked up the necessary carpets, ate the unavoidable dinners, and went home to nurse their digestions and their constituents. But Prime Minister Lyons of Australia arrived with a small army of experts, and while the cheers still rang in the streets, his men came to grips with Major Elliot’s men.
The Australians were out to beat the pistol in the matter of the quantitative regulation of beef imports. Under the usual system of chilling, forty days from abattoir to consumer represents the prime lifetime of a carcase. This period nicely covers disposal from the River Plate, but is too brief for shipments from the Antipodes. But at the Low Temperature Research Station at Cambridge University it was discovered that an atmosphere fortified by a small dilution of carbon dioxide would preserve chilled meat indefinitely. This discovery offered Queensland and New Zealand a vast new industry—if the English market could be kept open. Should Argentine—which now supplies 400,000 tons of chilled beef to England each year—be placed upon a quota, and the Dominions permitted free entry, a vast tonnage would be diverted from the River Plate to the southern Dominions.
The Australians suffer from no false modesty in negotiating with the Mother Country. They are at home, and know it. Week after week they stuck to their guns, bargained, argued, cajoled. But they had dealings a short time ago with a Scotsman named Douglas Jardine, and now they met his brother in Walter Elliot. The atmosphere grew sulphurous. Nightly in the clubs the Australian experts said contemptuously, “As usual, we are fighting the battle and taking the knock for the whole Empire.” The agreement reached in July represented at least a tactical victory for them; and, as they do not mind suggesting, they deserve well of the other Dominions.
In so far as the Canadians are concerned, they have properly blotted their copybook over beef. No one in England cares whether another Canadian steer ever comes down the gangway. The Canadians have earned the reputation of chucking away the British market as dollars beckon elsewhere.
“Never saw such an off-again on-again lot as the Canadians,” a large importer said to me. “They spend years in nursing this market and in growling about our regulations, and when there is a penny or two more in it for them across the United States line, we can go to the devil. They have never learned that their friends to the South only buy from them when it suits them, whereas we are always in the market. Moreover, their railways are bankrupt and the Canadian taxpayer must find the running costs. ^ Yet they prefer to ship cattle to Minneapolis, on which their railways earn five shillings, instead of to the Atlantic seaboard, at forty shillings per head.”
The British take a rather dark view of Canada at present. They perhaps overemphasize the importance of the political monkeyshines and financial sorceries of an election year. Yet undoubtedly a growing number of Englishmen consider Canada as an American satrapy, or as they put it bluntly, “a back door for the Yankee.” They see disaster within the
next five years for the United States, where Mr. Roosevelt, in the brilliant phrase of a British diplomat, is credited with having created a “nation of competitive mendicants.” Canada, in British eyes, is going the right way about it to share that disaster.
The Milk Storm
1\ST and greatest of all Major Elliot’s problems is milk, * with its fats, butter and cheese. Where national planning is concerned, milk is no benign fluid, but the very waters of contention. Fifteen hundred million gallons of milk is drunk in England each year. This is all homegrown, and a relatively expensive food; the farmers obtain about thirty-two cents per gallon. But twice as much milk— over three billion gallons—-go into butter and cheese. This is not British milk; only one quarter of the cheese and one tenth of the butter is of domestic origin. The remainder comes from overseas countries where milk is very cheap. As a consequence. British butter-and cheese-makers can only pay a very low sum for their manufacturing milk—about eight cents per gallon. A fortunate English farmer, therefore, with a bv-the-bottle outlet, can sell his milk for four times the price of his neighbor who must supply the processors.
As a result, all English milk flooded into the fresh trade, and British butter and cheese factories were forced to close for lack of supplies. Moreover, the manufacturing milk threatened to spoil the prices of the bottle trade.
It is impossible to limit importations of butter and cheese during the lifetime of the Ottawa Agreements, so the bold step has been taken of pooling all milk prices, and of subsidizing factory milk at the expense of the household milk. An equalization fund has been established into which the milk-by-the-bottle farmers pay a stated amountten cents (fivepence) per gallon in many areas at present in order to help the dairyman whose only outlet is the butter and cheese factories. This subsidy raises the return on manufacturing milk to a living level. To energize the scheme, the Government made an initial contribution; thereafter the fund is supposed to be self-supporting. This contribution, together with a dollar for dollar allowance for milk advertising and a substantial grant toward the improvement of dairy herds, represents a taxpayer’s bounty of nearly $5,000,000 each year to the British milk industry.
This particular scheme, which is frankly syndicalistic in conception, is the most interesting of Major Elliot’s experiments and the most nearly fatal to him. It is indeed a strange offspring for a Conservative Minister to sire, and the brickbats have flown thick and fast. The political keyhole listeners declare that it has ruined Walter Elliot’s career. Some of his Cabinet colleagues are very critical ; because of the tempest which he has raised, they wish him to lighten the ship and to walk ashore. It is a daring thing to require any man to subsidize his competitor to the extent of thirty per cent of his income, and nowhere, except in Great Britain, would such a scheme work. Yet the alternative was chaos, and Major Elliot has not flinched before the storm nor minced his words. Speaking to a farming audience at the end of June, he said:
“You can, if you wish, sweep away the Milk Marketing Board. But you cannot sweep away the quarter million dairy cows which have come into existence since 1931. They will walk down Whitehall if necessary, lowing and groaning, to ask you what you are going to do about them.”
The Milk Marketing Board has taken a very significant step in buying up dairy factories which had closed under overseas pressure. These purchases mean that the British Government is in the butter and cheese business. As soon as the overseas trade agreements expire, the British dairy farmers will be given the same protection that other agricultural industries enjoy. A butter and cheese scheme has already been bruited, based on stabilized and guaranteed prices for a limited production. Such action offers the only permanent solu-^ tion to the dilemma of milk.
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From the permanent subsidy on sugar beets to the temporary payments on beef; from the tax on Hour for the sale of wheat to the remission of excise to aid barley; from the quantitative regulation of bacon to the market rigging of potatoes; from the private contract of hops to the pooling of milk prices, the British Government has moved always with one set purpose in mind—to leave the farmer to his own resources, but to assure him. if he farms efficiently, a decent
living. This simple idea dominates a great enterprise. The political risk of taxing ten for one is enormous; the expense is great, the difficulties innumerable. It is a venture which only leadership can decide.
In a snug canteen on the roof of a great newspaper on Fleet Street, a veteran correspondent said: “Lloyd George couldn’t do it; Winston couldn’t do it; Elliot may.”
At a farmers’ luncheon in Somerset my neighbor declared: “We cannot afford to
think of Walter Elliot as Prime Minister. He has a bigger task where he is.”
Major Elliot himself denies that there is an Elliot Plan; but for the next ten years at least the English harvest will be Elliot’s harvest.
This is the fourth of a series by Mr. Stevens. The fifth will appear in an early issue.