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CANADA PACKERS LIMITED REPORT TO SHAREHOLDERS The elerenth fiscal year ol Canada I>acker» Ltuiited ended March 31st, 1>I8 I" olit af'er UepieclatioB. Houd luteiest, and lucoms Tin in Jl, 100.059. IS Equivalent, on 200,000 Shares, to $5.50 per SliarL-. Out of this aiun it has been decided to dislribute. duriiiK the ciincnt liscal year, as Uivldonds on the Comiuou Shares i GOO.000.00 That is i^OO i)or Share. The year began well. For the first 7 months.â€" April 1st, 19:!7, to Novem- ber Ist, 1937.â€" Profits exceeded tliose of the previous year by $100,000.90. Hut from November forward Prodis declined rapidly. This decline was brought about by the economic reces.sion which set in about mldsumnier VJil. In the Packing Industry the recession registered, not 60 much in reduced Volume, as in a drastic decline in prices of certain corauiodilies, chiefly liyProducts. The following table illustrates the extent of this decline as between Sep- temlier 1st, 19:!7 aiul March 1st, 1938: Price per lb. Sept. 1st, March lat, 1937 1938 Hides, I.iglit Cc)*s, Toronto 15V4o 8c C'air Skins, " 24Vi 14 Tallow, " 5V4 3T4 Lard, " Vi'A 11 V4 Vegetable Tats, " C.7 4.85 On these products alone, large quantities of which mu.st always be carried as a necessary part of oiK'rations, Canada Packers took an inventory Loss of more than one-half Million Dollars. Thin Loss was inescapable. When prices again advance a corresponding Inventory Profit will be made. The Plant extension programme, begun about 3 years ago, was completed In January, 1938. when operations commenced in the new Vancouver Plant. That prgmp^mugjii^ ji«4rtV(rd a total expenditure as follows: Trended March, 1936 $ 304,091.81 1936 1,067,030.72 193S 1,161,953.41 Total $2,533,075.94 From the time of its organization, in August, 1927, Canada Packers' main objective, â€" continued for 7 years, â€" had been to build up Working C'ai)ital. But it had alw.iys been recognized that the Company's operations must in time extfnd to Alberta and British CoUimbla. The decision so to extend was made In 1935. In addition, certain jobs of expansion and repair had to be under- taken at the older Plants. The buildings and equipment of the Company are now in excellent con- dition. The new Plants at Kdnionton and Vancouver are of the best type of Packing House construction, and are also amongst the linest examples of industrial architecture in Canada. The completion of the Plant extension programme lias involved a reduc- tion in Working Capital, as follows: Working Capi'il, as shewn in Balance Sheet March 25th. 1937 .... $0,842,769.72 Profit for the year $1,100,559.48 Ueprcciaiion .set up $836,759.55 Transfers from Depreciation Re- serves of amounts set up in re- spect of properties sold during the year 231,291.02 605,468.53 1.700,028.01 $8,548,797.73 Less Jnv(;stnients in Plants $1,393,214.43 Less Book Value of properties .sold during the year 231,291.02 $1,161,953.41 Dividends 600,000.00 Serial Bonds retired 750,000.00 Transfer lioni Current to non-Current As.sets .... 89,051.58 2,601,004.99 Workini; fupi^al. as shewn in Balance Sheet March 31st, 1938 $5,947,792,74 ll is hoped now to settle Jown to another period of rest, so far as Plant construction is concerned, and to start again building up Working Capital. Total Sals for the year were $34,145,890.57 Total Tonnage r. 836.420,547 lbs. The Net Profit, ( $1,100,559.48 ) is, therefore, equivalent to: â€" 1.3 percent of Sales, or to appro. -iaiately V«t per lb. of product sold. The following table sots up an analysis for 4 years, in percentages, shew- ing how the total sums received from Sales were apportioned as between cost of Live Slock. Kxpenaes, and Prodis: Year ended,â€" .March March March March Average 1935 1936 1937 1938 4 Years Cost of raw iiialeiials, principally Live Stock 78.37o 78.6% 78.97o 81.2% 79.2% Cost of materials and packages 3.3 3.1 3.2 2.7 3.1 Wages and Salaries, including Bonus 8.8 8.9 8.8 8.6 8.8 Kxpcnses 5.6 5.5 5.L 4.5 5.2 Interest on Ronds 2 .1 .:{ .2 .2 Taxes 7 .8 .8 .6 .7 Total Co. . of Product and Kxpense 96.9 97.0 97.1 97.8 97.2 Depreciation . i Fixed Assets 1.2 l.l 1.0 1.0 1.1 Prollt from operations 1.9 1.9 1.9 1.2 1.7 100. % 100. % 100. % 100. % 100. % Income from Inveslmenis .3 .1 .2 .1 .2 To'tI Profit, including Income from Investments 2.2% 2.0% 2.1% 1.3% 1.9% The Karmers of Canada, particularly Western Canada, of late have had a difllcull time. When the Saskatchewan Farmer, struggling to raise Hogs and Cattle lhrou„h continued years of drought, reads that a Packing Company has made a Net Profit of a Million Dollars, it is .snuill wonder if be contrasts the lot of the L; j Htock I'loducer willi lliat of llie pi-ocessor. What he may not realize is that Ihe .Million iJoll.ars (l(>rives from Sales of SO Millions.â€" pro- ce:iied in Planis which have cost approximately 20 Millions. In other words, that the su'n, though large, |s small In relalion lo Inveslmeiu and to Turnover. The essential facis are epitomized in the table of percentages above. Out of each dollar of Sales, the Packer paysâ€" To Ihe Farmer 79.2 cents To Kmployees To Siiiipliers of malerlals, and for sundry Kxpense, 8.8 " FInanio, and Taxes 9.2 " IIu llimselt retains for Depreciation and obsolescence.... 1.1 a 11(1 for Prollt '. 1.7 " If the Canadian price could be brought up to Ihe level of the Danish price, the Canadian Producer would receive for his Hogs an extra 15/20 million Dollars per year. To iiilerpret market opportunities such as this to the I'roducer, and to the (lovernnient. is one of the Packer's chief duties. For he is the only person In intluiato coi.lact with the Producer on the one hand and outlets for pro duct oil the other. 100. cents The Packer [lerlornis an essential .".erviee in mark(Mliig the Farniei-'s Live Flock. For cl.'arly the householder cannot buy live Cattle and live Hogs. The Packer buys liie live animals and converts them Into Meats.* His job is to producH Ihe most p.il.iiable Mciis pnssihli^ then lo olTer Iheni for sale In llio.^e markets of ihe world in which they will lirlng tlie hiKhest price. The I'acker constantly seeks new markets In his own Interest. For the pioneer In a market mak<'s an extra Pnilit. Hut he Is followed into that market by competing Packers. This c(Hnpellllon immediately brinws Ihe Packer's I'rotit back to the normal level (1 to 2 per cent). Thereafter Ihe cnllre henedl of the new market goes to Ihe Farmer. This is not just theory. A slriklng Illustration of It occurred In the advance of Hog prices when the HrltlRh market for Bacon wa.i opened n|i by the Ottawa Agieemenl. Within 12 months (March 1933 lo March 19311 Hog prices in Canada advanced from 3',i cents per lb. lo an average li'Vel of nion; than ...Sc per lb. The Packer was the inslronient through which this advance was realized, lit shared in the bonellt Ihidugh an extra I'lolil during the period of Ihe advance. This extra Profit was approximately one-half of one per cent of Sales. But the Farmer's adv.ince was fron\ a 3 cent level lo an 8 cent level, (nearly 200 per cent) and thi.s icmalned. These facts are worth recalling Inasmuch as they IlluHlrale clearly the fundamental relations between the Farmer and the Packer, These may be •ummarlzcd as follows; â€" When i)rlcea of Live Slock advance, the I'acker makes an extra Prollt. Conversely, when prices decline, the Packer's Prollt Is reduce'' Therefore, the Packer works constantly for higher Live Slock prices. But the acker, within his own province, can do little to advance prices. Advances come from two main sources: â€" (8) Improved markets: â€" exanipli>, the rapid advance In Hog prices which derived from the Ottawa Agreement. Improved maikets are brought about mainly li> fiovernment action, (b) Matter Llv« Stock: â€" example, Canadian Baron sells on Ihe British market at .S/- per c wt. leis than T>nnl»h Bacon, -because It Is not so Kool. From the point of view of the Producer, the year was profitable as to Hogs and disappointing as to Cattle. Month by month, average prices for Hogs were as follows: (Bacon Hogs, f.o.b. Ontario Country points) 1934 1935 1936 1937 1938 .lanuarv 7.36c 7.81c 8.10c 8.18c 8.21c February S.92 7.85 8.24 7.93 8.67 March 3.36 7.4:! 8.15 8.16 9.47 .\l)ril 7.47 7.9'.> 8.02 8.40 9.54 Alay '.. 7.80 8.64 7.81 8.50 9.80 (esiimated) June 8.47 9,17 8.52 8.90 July 8.54 8.90 8.71 9.89 August 7.87 9.16 8.89 10.27 September 7.74 8.63 8.13 10.17 October 7,25 8.19 7.6»! 8.37 November .' 7.14 7,21 7,24 7,85 December 7.37 7,65 7.86 7.97 A -orage for ;-ear 7.85c 8.21c 8.09c 8,70c 9,14e During part of the year the price of Grains was also high. To the Pro- ducer who had to buy his feed, the relation between Hog and Grain prices at times caused anxiety. However, most Farmers do not buy their feed. They grow it on their Farms. And the Farmer who gets normal crops of Wheat, Oats, and Barley, and converts those into Hogs on the basis of 9 cents per lb. gets a good return on his land. Since January 1933, when the Ottawa Agree- ment came into operation. Hog production has without question been the most profitable branch of Canadian Agrlciillure. As has always been the case In the past, that Farmer has done best who continued produce Hogs all the time. The unfortunate Farmer is he who, th'oe''h a ries of crop failures, ha.i been forced out of Hogs. And there are many such. The evidence of this lies in the Hog deliveries of the Prairie Provinces during recent months HOG GRADINGS Alberta Saskatchewan Manitoba Total â€" Prairie Provinces Percentage 19:i7 19.TS 1937 1938 1937 193S 1937 1938 Decrease January 777698 71.585 32.109 21.636 6:!,322 45,402 173^29 141,623 18.2% February .S5,i:;S 67,076 31,262 15,491 5:1,393 38.270 172,793 120,837 30.1% March 10.;. 704 82,817 35,046 15,945 56,711 39,629 198,461 138,391 30.3% April 9 1,352 60.903 30,341 14,635 43,412 26.042 168,105 101,640 39.5% May 84,891 58,526* 27,375 12,249* 39,658 24,957* 151,924 95;732* 37.0% June 94,297 33,600 45,783 173,080 July 56,645 23,798 36,840 117,283 August 49,939 18,552 21,712 90,203 September 35,145 16,995 27,153 79,293 October 46,977 24,450 38,489 109,916 November 91,915 39,972 62,519 194,406 December 90,991 29,455 50,940 171,386 TOTAL 914,692 343.907 345.955 79,956 539,932 174,300 1,800,579 598,223 *May estimated. For the 5 months January to May 1938, decrease of Hog marketings as compared to the previous year have been: Number of Percentage Hogs decrease Alberla 104,810 23.4% Saskatchewan 79,177 49.3 .Alunitoba 82,196 32.0 Total Prairies 266,189 30.8% This decrease is due entirely to crop failure. Many Farmers have no feed. Ann in many districl.s there has not been water for Live Stock. A.s this Report is written. Cash and October (Jriiins are quoted as follows: Fort William Equivalent at Farm Cash October Cash October per bu. 75c 35 57 per bu. $1.01 .33 'i •39 li per lb. l.OSc .98 .82 per bu. 59c 24>,i 43^2 per bu Wheat .?1.17 Oats 44 Barley 53 Baseil on October prices, the cost per lb. at the farm of a mixed ration â€" one-ihird each Wheat, Oats, Barley, would be The best available estimate is that in 'Canada, on average, it takes 5 lbs. of Grain to i)roduce 1 lb. of Hog. Accepting this as the basis, and estimating the cost of the Grain at Octobi'r prices, the cos! of producin.g Hogs farrowed October forward, would be: 5 X .S7o or 4.35c per lb. per lb. .98c .72 .90 ..87c The average selling price for Bacon Hogs, f.o.b. Prairie points throughouf l!):il was approximately 6.S5c per lb, •â-  1935 " " 7,2lc per lb. " 1930 â- ' " 7,09c per 11). " 1937 " " 7,70c per lb. " 1938 to date) " 8,14c per Ih, If a price obtains throughout 1939, equal even to the lowest of the abo years (1931), â€" there will be a Profit in producing Hogs as follows: â€" Selling price O.Sac per lb. Cost price 4.35c per lb. Profit 2.50c per lb. Per Hog (200 lbs.) $5.00 So favorrahle :i prospect Is bound to bring about a large increase In Hog production. If a good crop is harvested this year on the Prairies there will likely be Ihe greatest increase on record in Hog ln-i^Mlings. Fortunately, Caiiaila's Hacon Quota In Great Hiiiain is such that a Very large increase can still be absorbed. That Quota is 2.500,000 Hogs. During 1937 shipments totalled 1,600,490 Hogs For Ihe lir.t 5 months of 1938 (January to May) shipments have been 674,000 Hogs Shipments for the year 1938 will probably total 1.500.000 Hogs So that Increased shipments can still be made of one million Hogs. Given a lartti' cro;i It is quite |)i)sslble that in 1939.- or more likely in 1910, â€" Canada may lill her Quota. The calinlation above of pioduclion cost. Is made on a basis of..., 5:1 I.e. 5 lbs. of mixed Grain (Wheat, Oats. Hariey) lo 1 lb. of Pig. That Is Ihfl ratio gc>ner:illy accepted as represenling average Canadian experience. Hut In every Provintc of Canada there are hundreds of Farmers who are prcdncing Hoks on a basis of 3^:1 And in Denmark the average for the whole production is 3\:\ These are challenging llgures. Their signltiiance is that It average Cana- dian feeding elllciency were brought up lo the level of Danish etflclency, the cost of producing Hogs would be reduced one-(|uarter. hi 1937, when Grains were high. Canada produced approximately 7,000,000 Hogs, II is Impossible to state exactly Ihe average cost, per lb. at the Farm, of producing ihosi' llog.s. An approximation to this average cost per lb. at the l''arm may h" taken at 6Hc, (Most I'loducers would probably say It was substantially more.) At this b:isis a 200 lb. Hog would cost to produce $13.00 If we assume thai avi'rage feeding elllcleiicy was on a basis of 5:1, and If we further assume that It was possible throuKhoul Canada lo achieve a feeding efficiency ecjuivalenl to Denmark, I.e 3%:1, then II follows that a saving in the cost of production might have lieeo made of one-quarter, (of.. ..$13 00), I.e. .. On 7,0U0.0iHl Hogs, approximately On two occasions after achieving an Important position in Great Urilaln. Canaillnn Bacon has been pushed out of that market by the Danes. In a gen- eral wav 11 was reali/eil ibis happened because Danish Hacon was better than Canadian Hacon. Hut II Is only recently that Canadians have begun to realize fully that Ihe Danish advantage lay chiefly In their higher feeding efficiency. 'i'here ninsl. of course, be some explaiiallon for this very great difference In feeillng etficlency II lies partly In Ihe fad that Danish Pigs from birth get a balanced ration. This Is due chiefly to Ihe fact that almost every Farm In Denmark earries on Milk production as well ns Pig proiluction. .-Vnd through- out Ihe eiilire growth of Ihe Pigs, Milk Is iiulnded In Iheir ration. In ('aiiiida this is not possible, for many of Ihe Farms on which Pigs are produced have no Milk av:, liable for feeding. Moreover, on most of those Farms, ll Is not possible to go in loi Milk piodi cllon. Hut in recent years the knowledge has become ,,eneral lh;it allhough a Milk ingredient provides the best ration, still a balanced ration Is p 1 1. I le w Tioiit Milk. The elements contributed by Milk can be made up from ol'- 'r sources, Including Beef Scrap. Pish meal, etc. .$3.2,"> per Hog. $22,750,000. VOICE CANADA BTHE EMPIRE THE WORLD AT LARGE of the PRESS CANADA When the Howl Starb The howl of the timber wolf will be as nothing to the howl that will go up if they start pull- ing up railway tracks in Canada. â€" Kegina Leader-Post. Delicaie Problem The delicate problem, as no doubt Mr. Bennett knows, is to eliminate graft and corruption from politics without eliminating politics. â€" Toroflto Saturday Night. Adapted to the Times Collinpwood reports a hail storm with ice the size of golf balls smashinK down crops. The vernacular of the day is going modern, as years ago hail stones were always referred to as being as big as hen's eggs. â€" Petcrboro r^xaminer. The Prison Report Penologists may differ as to the recommendations, but the lay- man who believes that humane treatment of prisoners is, in the end, the wisest course, and is the only way that reform can be ac- complished â€" and this should be the main objective of all prison confinement â€" will indorse the re- port. â€" London Fret Pre.*;?. The EMPIRE Sunday Observance In the interests of all partiei it is greatly to be hoped that tha unofficial compromise that hai been generally reached between ancient laws and modern practiia will remain undisturbed. Pub!;o opinion today is on the whole in agreement with the principle en- unciated by John Stuart Mill near- ly a century ago that "the only ground on which restrictions on Sunday amu.sements can be de- fended must be that they are re- ligiously wrong; a motive of legis- lation which can never be too earnestly protested against." Tha banning of harmless ways of em- ploying Sunday leisure would drive many people, not into places of worship, but into far less in- nocuous methods of utilizing the day. Under modern conditions there must be a measure of tol- erance and give and take on both sides. Few in this country would like to see a Continental Sabbath involving merely another working day for a vast number of people whose vocation lies in serving others. But an attempt by legal enactment to restore the Sabbath of the Puritans would be equally unpopular. â€" Johannesburg Times. Gold hoarding is being reported in Relgium. The next gre.it advance in Pig husbandry in Canada will be the general use of a balanced ration. The facts involved are no longer a matter of speculation. For in almost every Pig producing area of Canada, individual Farmers have achieved a feeding efiicieHcy as high as 3ii>:l. â€" with and with- out skim Milk. When Canada has achieved a standard of quality and also a standard of feeding efficiency equal to that of Denmark, then it will not again be possible f .• Denmark to push Canada oft the British market. For, granted equal ([ualit: and equal feeding efficiency, Canada is endowed by nature to produce Bacon Hogs more cheaply than Denmark. And there seems at last a possibility of Canada achieving the dream of two generations, that of becom- ing the dominant shipper to the British market. But to achieve this objective there is still a long way to go. In Cattle the year has been disappointing. The season 1936/7 had been a very successful one. Feeders had made large Profits. As a result, in the Fall of 1937 much larger numbers of Cattle than usual were put on feed. Demand for the feeders was so active that prices were forced up 1 to 1V4 cents per lb. above those of the previous Fall. And by January, 1938, it was already evident more Cattle were on feed than were needed. In United States, which ordinarily takes Canada's surplus Cattle, con- ditiiuis were very similar. Prices there were 2»4 cent.s per lb. lower than in January, 1937. As a result the movement of Cattle from Canada to United Slates was much less than in the previous year. Shipments were as follows: 1937 11)38 January 22,0SO ^ 4.402 February l.'iOSO 3.0tO March 17.5.-,! 10.171 April ll.::05 4.271 May 14.ilii 3.372 (estimated) Total 82.0:12 25,322 Some relief came from Great Britain. There prices of fed Cattle were high. They were willing to take as many Canadian Cattle as could be trans- ported. Unfortunately, due to limited Ocean space, the number was not large. However, those shipped helped greatly to relieve the situation. Shipment! to Great Britain were as follows: 1937 1938 January â€" 1,440 February 35 3,114 March 211 4,046 April 474 2.469 May 373 3.186 (estimated) Total • 1.093 14,255 Hoth in I'nited States and Canada, Packers made strenuous efforts to r»- lieve the depr ssed Cattle situallon. In both countries 'Fat more Beet" caitt- paigns were launched, with the object of siimulating consumption. Attentloa was called to the tact that Beef was plentiful, of good quality, and reasonabl* in price. In I'nited States the campaign was organized on a broad scale. Packers. Cattle Producers, and the Government all participating, hi Canada plans were not made in time to permit this wider oiganization. but Individual Packers carried on active campaigns. In this movement It is perhaps fair to say that Canada Packers look the lead, ..\s the result of these campaigns. Beet consumption was substantially stimulated, and from April forward Cattle prices became firmer. Unfortun- ately feeders are still making Losses, but these are much less serious than those aiUicip;ited in January, The success of these campaigns sns.tests possibilities for stimulating Reef consumption which had noi previously been thought of In Canada. It will probably lead to a broad pl:iu of co-operallon between Producers, Packer*, auv. (iovernmenl. • As is always the case, the conditions which brought about a Loss 10 Cattle Producers, similarly brought about a Loss to tha Packer on his Heef. In the year 1936, 7. the year of advancing prices and large Profits to Producers, â€" Canada Packers made a Prollt on Beef of $279.000.l)« The year just closed. whUh was an unprofitable one to Pro- ducers, was likewise unprolitable to Packers. On Heef opera- tions during this year Canada Packers made a Loss of $202,000.00 On the other hanil. on Hogs, prices for which throeghout the year were high. Ihe Kesult was unusually good. Profit being $756,000.00 'I'he Directors a.sain wish to inform the Shareholders of the highly loyal and etllcient service rendered by the Company's Kmployees. In a food In- dustry iiuality of products is the fundamental condition of success. Kmployeea of all ranks have taken a zealous Interest in achieving perfection of product and of service, .\bsoluto perfection will, of course, never he realized, bttt the constant aim lo achieve it not only eonlrlbutes to the success of the busi- ness, but adds dignity and significance to the job of each man and woman. Wages at all Phinis are now on a higher level than at any previous time, not excepting the post war peak of 1921, For several years the Company has practised a Profit-sharing plan. From net earnings Is first deducted a sum equivalent to 6 per cent on the Share- holders' equity, Heyond that point. Profits are divided evenly as between Shareholders and Kmployees. The Employees' share Is distributed at the end of the year,- in the form of a Ilonus. 1 the last three years, the sums distributed to Bmptnvees as Bonus haT« been: â€" Year ended March. 1936 $113,000.00 '• " " 1937 5 1 1.000.00 •' " 1938 193,000.00 Each Kmployee of the Company shares in the Bonus. The distribution la' made by a Committee of the Senior Kxeculives. who do their best to allocate* 10 each Individual in accordance with his or her contribution to the businete. At the approaching .\nuial Meeting. Shareholders will be asked lo glT« approval to this distribution. .\ copy of ihls lleport will be forwarded, as usual, to each of the 5.0M Kmployees of the Company. J. S, McI.EAN. President. Toronto. Ittl. June, 1918, t \ tT '- *^A V f 4 * i i t