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/ . f â- Â« „ S.I. :!:« CANADA PACKERS LIMITED REPORT TO SHAREHOLDERS The twentieth fiical year of Canada Packtn Limited doted March 27th, 1947. llie following are the key figures, setting forth volume and profit, with the romparative figures of the previous year: â€" Year Ending March 1947 Sales $204,068,650 Tonnage 1.373,000,000 lbs. Profit after all charges except Income and E.P. Tax _ 13,758,852 Income and E.P. Tax 1,699',208 Year Ending March 1946 ♦208,997,520 1,526,000,000 lbs. $4,620,712 2,803,931 Net Profit $2,059,644 Note: 1. Tonnage, â€" weight of product sold, â€" wa« down $1,816,781 107o 2.4% 2. Dollar Sales were down only _ _ ( reflecting an advance in average price of products sold of approxi- mately 8%.) 3. While Profit before Federal Tax was down approximately $860,000; nevertheless,â€" because of the reduction in Income and E.P. rates (applied to the lower Gross Profit) â€" Net Profit was up approxi- mately „ $200,000 The following is a comparison of the main items of the Profit and Loss Statement with the corresponding fiRurcs of the previous three years. For clarity in comparing years, each item is also expressed as a percentage of dollar sales. Out of each Sales Dollar there was paid: â€" 1944 1945 1946 1947 For Raw Materials For Wages plus Salanrs For Seivices (General Expense) „ For Materials and Packages For Taxes (Municipal, Provincial, Federal) For Wartime Inventory Reserve s.. For Depreciation on Fixed Assets Remainder, â€" Profit from Operations . Income from Investments, etc Total Net Profit for the year, on each dollar of Sales „. 83.60c 82.35c 81.33c 80:21c 6.77 7.35 8.06 9.10 3.46 3.83 4.13 4.25 3.08 9.32 3.76 4.06 1.59 1.70 1.48 .24 .25 â€" .45 .41 .40 99.19c .81 .01 .82c 99.21c .79 .01 .80c 99.16c .84 .03 .87c .98 .43 99.03c .97 .04 1.01c The products handled by the Company fall into four groups,â€" viz: â€" Live Stock Products, comprising all products derived from live aninr>als: â€" Meats, â€" Beef, Veal, Poxk products. Lamb and Mutton; By-products, â€" Hides, Skins, Tallow, Bones, Tankage, etc. Tonnage of this group 460,000,000 lbs. Other Farm Products, comprising, â€" Butter, Eggs, Cheese, Poultry, Frosted Foods, Fruit, Vegetables, etc. Tonnage 207,000,000 lbs. Non-Farm Products, comprising, â€" Edible Oils, Shortening, Soap, Fish, Fertilizers, Stock. Foods, etc. Tonnage 576,000,000 lbs. 'Manufacturing, comprising, â€" Canned Meats (sold chiefly to UNRRA) and Canned Fruits and Vegetables. Tonnage 130,000,000 lbs. 1,373,000,000 lbs. The outstanding feature of the year's result was the extremely small profit derived Iroin the fiist two groups, â€" viz. Live Stock Products, and Other Farm Products. Total weight of products in these groups was 667,000,000 lbs. Net profit for the two groups was ei{uivalent to otlierwise $233,592.00 SJ/ac per 100 lbs. ]/30c per lb. I'lofit as percentage of Sales 1/6 of 1% On the other two groups, totalling 706,000,000 lbs., net profit was $1,752,673.00 «t|uivalent to _ 24.8c per 100 lbs. otherwise !4c per lb. Profit as percentage of Sales 2.6% The very low profit on Live Stock and Other Farm Products was due to conditions arising out of war controls. On all these products, especially meats and poultry, supply was much below demand^ and prices paid by black market operators were, for lemj,' periods, above the equivalent of the established ceiling prices. During those periods, processors who respected the ceilings were forced either to buy the live stock at prices involving loss, or to withdraw from operations. For the regular firms in the Packing Industry to cease purchasing live stock was, of cour."(e, impossible. Therefore, the losses had to be taken. In this situation, the record of the Packing Industry as a whole was a highly creditable one. With only rare exceptions, inspected packers, large and small, scrupulously adhered to the regulations and did everything in their power to assist Uie officials of the Wartime Prices and Trade Board. On their part the directing officers of the Board made a strenuous and continuous effort to enforce ceilings. But the task was a difficult one. The difficulty was that of securing evidence. Only two persons, the seller and the buyer, knew the facts of illicit transactions. As both these persons were ex- posinp themselves to heavy penalties, they were most undependable witnesses. The record of the illicit transactions, in the accounts of seller and buyer, furnished no evidrnce. Goods were invoiced at ceiling prices. Payments In excess of ceiling wrre- in currency, and were made 'under the counter'. la the main, violations were confined to processors on the fringe of the Industry. These persons found themselves in a position to greatly increase their volume, at margins of profit much higher than normal. The fact that they were spread throughout the cities, towns and villages of all Canada made the task of catching up with them a very difficult one. In relation to offences, there were extremely few convictions. One result of black market operations was that pYoducers received a higher price for their live stock than the equivalent of the ceiling. It is only just to point out that this involved no breach of the regulations, cither technical or moral, on their part. Their animals were sent to market as usual, and were sold on the market, openly, to the highest bidder. No other system was possible. The Wartime Prices and Trade Board wisely refrained from imposing ceilings on live stock. This was tried in United States and proved completely unworkable. In view of the extremely poor results on live stock and other farm products, it was fortunate that volume in the other two groups was high, and profits normal (one-quarter cent per lb.). In the fourth group the chief product was one developed in the Laboratories of Canada Packers, viz. Canned Blood Sausage. All this product was sold to UNRRA. As suggested by the name, the product contains a substantial per- centage of cooked blood (from inspected animals). This gives it a high protein content. Other ingredients add important calcium and carbohydrate values. Be- cause of its high nutritional value, convenient form, and comparatively low cost. Canned Blood Sausage was a. very useful food for UNRR.A distribution. Once this product had been accepted by UNRRA, the Canadian Meat Board directed that the formula should be passed on to all Canadian plants equipped to produce it. Shipments of Blood Sausage formed a very important part of Canada's total sales to UNRRA. During 1946 total shipments from Canada were 63,000,000 cans. While this quantity was small in relation to UNRRA's over-all relief shipments, nevertheless it is gratifying that a product developed entirely in a Canadian laboratory should have played even as substantial a part in the relief programme of 1946. With the winding up of UNRRA, orders for Canned Blood Sausage have ceased. It was essentially an emergency food. Notwithstanding its high nutritional value, and low price, its colour subtracts from its appeal to the civilian consumer. The experience of this year proves again the wisdom of the Company's policy of diversification. In 1927 when Canada Packers was formed, live stock plus other farm products comprised 79% of the Company's total volume. In the year under review, the corresponding percentage was 49%. More than half the volume and 85% of the profit were contributed by groups three and four. It will be recalled that following World War I, deflation of food prices set in during July, 1920, â€" approximately eighteen months after Armistice Day. That deflation was brought about by the fact that, by July, 1920, food supplies had begun to catch up with effective demand. Following World War II, it was expected that the greater destruction of property and the greater displacement of population, in Europe, might result in a more prolonged period of dislocation. However, it seemed likely that the restoration of normal food conditions might follow the same general pattern as in 1919-20; â€" i.e. a period of advancing prices, to be followed at some time either by a slide or a collapse. (It is important to remember that the world's food supply is produced from year to year. If one year's crop is inadequate, hunger [perhaps starvation] may be the result. However, a bountiful world crop in the following vear can at once restore normal conditions. The hunger of the previous year docs not carry over.) World War II ended with V-J Day, August 15th, 1945. That is a full two years ago. But, as yet, world food supplies have not caught up with demand. Prices of most staple foods are not only above those of V-J Day, but actually, in the case cf many essential foods, are ttll at an all-time high. I'he following table gives a comparison of prices (in Canada) of animal products and cereals from 1939 to 1947. â- * CANADIAN FARM PRICES, 1939â€"1947 Good Steers, live, Toronto Hogs, B-1 dressed, Toronto Lambs, live, Toronto Chickens, Milk Fed A, Toronto Eggs, 'A' Large, Toronto Creamery Butter, Toronto Cheese, f.o.b. Factory, Ontario Under war cjinditions, steps had to be taken to ensure an even distribution of the jhrailable food. The necessary war effort could not otherwise have been sustained. TItc Wartime Prices and Trade Board was set up for this purpose. It was directed M the top by a group of men of the highest ability and character. The job they 4id was one of the most essential of Canada's total war effort. On the whole il was highly successful. But its enforcement of ceilings In respect of food left â- ach to be desired. The following notes are set down In the hope they may prove useful in the field •f animal products, if the necessity to establish controls should again arise:â€" 1. When food it scarce and purchasing power high, enforcement of ceilings is a most difficult task. The public may unreservedly endorte the principle of price control, but public opinion, of itself, cannot be counted upon to check illicit operations. 2. Only by an alert and firm Enforcement Branch, can controls be made efferfve. The post of Chief Enforcement Officer calls for a man with the highest qualifications of ability, courage and cool judgment. 9. In respect of meals, illicit transactions begin at the itage where the meats pats from the processor to the retailer. But the retailer Is clearly an unwilling participant. He does not wish to pay more than the ceiling price, and with intelligent leadership could be secured ai an ally of the Enforcement Branch. 4. Enforcement Is bound to fail unlets penalties are levere enough to deter offcndcn. (A fine of a few hundred dollars it no deterrent to a violator who is making illicit profits of thousands.) 9. Cancellation of licence li the ultimate and the only effective deterrent. This it a drastic penalty which should be Impoied only in caie of flagrant and repcatec* violatloni, involving the head or principal officers of the firm. Only a few cancellations would be neceitary. Wheat, No. 1, Nor., Ft. Wm Oats, No. 2 C.W., Ft. Wm Barley, No. 1 Feed, Ft. Wm Corn, Ontario Yellow, Toronto Average March 1939 Average y March 1941 Average i March 1943 Average March 1945 Average July 1947 6.78 12.25 9.10 8.62 11.33 11.14 11.77 17.16) 32)* 15.91 11.54 17.80) 1.62)« 14.92 14.47 22.01) .97)* 17.21 24/, 21'/, 21^4 28/, 20/, 35 32/, 33/, 35 8/,)* 35 35 35) 8/,)« 39 39^4 50/, 11 14/,) 1 )• '7% 20) 3)* 25/4) 3 )* 59/,t 76/4 97/8 1.25t 1.55t 28/, 35/4 51 51/,) 10)1 65 35/, 50>/4 61^ 64^4) 22/,)§ 1.27 93 65 86^ 1.17 J.27 It it possible to forecast the course of live stock prices in Canada for the yr^iri inimeoiately ahead ? No attempt at a compichensive answer to this question will be made. But all the following factors have a bearing. Prices cannot continue to advance indefinitely. At some point they must level off, and at a later date a aubstantial decline teems inevitable. However, the immediate trend in Canada seems upward rather than down- ward. This is certainly the case in respect of Hogs. An advance of 2c per lb. in the price. of Wiltshire bides has been announced for September 1st. The present Bacon contract with England would seem to ensure the maintenance of the September 1st level until the expiry date of the contract,â€" viz. December, 1948. As to Cattle, the fact that Steers in United States are selling at twice the Canadian price would indicate that the immediate price trend might also be upward. It must be remembered, however, that the great Beef exporting areas of the world are South America and Australasia. In both these areas. Cattle prices arc much lower even than the present Canadian level. When transportation facilities arc restored, prices of Beef on the open world markets may soon be brought to a level based upon costs in the exporting countries. In the present period of acute shortage and record prices, it seems difficult to recall that the ten-year period immediately before the war was one of burden- some surpluses and ruinous prices. The war crisis brought about a clearer realization of the fact that a nation's chief asset is the physical health of its citizens. An understanding of problems of nutrition has been advanced as in no previous period. Each nation will make the better feeding of its people a main objective. Except for widespread economic breakdown, the world demand for food wiil be higher than in the pre-war period. Whatever happens, it is unlikely that the ruinous food prices of the 1930s will ever recur. Nevertheless, a time will undoubtedly come wh^ food-surplus countries will have to 'compete for the available world markets. When that time comes, each food-exporting country will be forced to offer its surplus in the form of those products which it can produce most efficiently. In the case of Canada, â€" one of the chief food-surplus countries, â€" two products stand out. These are the two food products which, above all others, Canada can produce in competition with the world. They are Wheat and Bacor.. There seems little danger of Canada reducing her Wheat production. But the record of the last two years is proof that a serious dangfer docs exist in the case of Hogs. Between 1944 and 1946, inspected Hog killings were cut in half. Only by in- creasing and maintaining Hog production can Canada make her Agriculture safe. The main objective of Canadian agricultural policy should be immediately to build up her Hog population. For her Wiltshire Bacon there is an immediate, and continuing market,â€" namely Great Britain. And Great Britain needs Canada's Bacon more urgently than ever before. Ontario and .Mbcrta are the two chief Hog-producing Provinces. In both these Provinces the Departments of Agriculture have recently launched active cam- paigns to stimulate Hog production. The Ontario Hog Producers' Association and the Alberta Livestock Co-operative Limited have joined actively in these campaigns. It is to be hoped other Provinces will take similar measures, especially Saskatchewan, Manitoba and Quebec. It is felt that this year a more extended reference than usual should be made to Labour relations. The Directors recognize, without reserve, that the first claim on the earnings of the Compapy should be that of Employees, â€" the men and women of all ranks whose working lives are spent in the Company's service. Plant Employees are represented by their Union, â€" the United Packinghouse Workers of America. With the Union, except at times when negotiations arc under way, relations have been cordial and co-operative. This is mentioned be- cause widely published threats to strike, each time an agreement is being negotiated, may have given Shareholders, â€" and the public generally, â€" a wrong impression. During the war period advances have been frequent and substantial. Following i.-. a summary of the advances: â€" During 1941, 1942 and 1943, Cost of Men Living Bonuses reached a total for men of $4.60 per week, and for women 18.4% of their wages. In 1944 these were converted to permanent hourly increases of ._. ^\'ie: per hour. In addition to this the following successive general increases were negotiated : â€" In the agreement of 1943 5 c p?r lir. In the agreement of 1945 â€" 6.8%, equivalent to 5 c per hr. In the agreement of 1946 5 c per hr. Women "c per hr. 5 c per hr. 3/aC per hf. 10 c per hr. Total rate increases from 1939 to 1946 .. 29/aC per hr. 25 /iC per hr. In addition, there have been many upgradings and individual increases. These with the above general increases have resulted in raising average rates pcf hour as follows: â€" Men Women 50.8c 88.1c August, 1939, average rate per hour .. March, 1947, average rate per hour . Increase 37.3c Percentage increase ....% 73.4% 32.8c 63.5c ' • Subsidies, Federal plus Provincial, t Official Wheat Board price, March 1939. 80c. t Wheat Board to make participation payment in 19i0. § Equalization payments. It will be seen that each price in July, 1947 is at the high point of the eight- year period. But all these prices would be higher still except for the operation of controls. The chief control exists in the fact that (by mutual governmental agreement) Canadian foods arc not permitted to move to the United States. In that country, prices for the tame productt throughout the tame period are thown In the following table. UNITED STATES FARM PRICES, 1939â€"1947 (Chicago Market) Steers, 1200/1500 lbs. , Hogt, li^ht (live) Lambi, hVe Chickens, Spring Eggs, Standards _ Butter, 90 score Cheese, twins Wheat Oats _ Barley Corn Average Average March Average Average Average March March March July 1939 1941 1943 1945 1947 11.50 11.30 15.95 16.25 30.68 7.70 7.80 15.60 14.75 26.00 9.25 10.90 16.30 16.40 24.46 22/. 22/, 28 29 31 1654 17^4 38 34/4 43/8 23^4 30H 47M 41/, 6554 11^ if^? 23/4 23/, 33 /s ZS^ 91H 1.49 1.76H 2.36 ^^'^ 39/, 64^4 82/4 1.01% 47 57 92 1.24y4 1.75 51/4 69/. 1.02 1.20/, 2.19M. * Although the totA* proceised In Uitf departnitnt ar* farm Droducts,â€" meats, vegr tables, fruits, ncvcrtheleti the optratlon it OM which Ooei not form a necessary, or ruttor.iary, part of packlnghauie opcratloflf. Th« Dlant required for the processing Is ipprlallzed and cxpf nilve. It ii for thCM reasoni that tbete operations are segregated .a( â- M«niifnrturlnf . The startling fact regarding the two preceding tables is that United States and Canada arc two of the chief food-surplus countries of the world. That pricei in these two 'surplus' countries should have remained at these record levels it due to three main factort: â€" 1. The pull on North America tupplies due to the acute shortage of food in Europe. (This ihortage it aggravated by the fact that political dis- harmonies prevent certain natural movements of food; â€" e.g., grain from Eastern to Western Germany.) 2. The fact that in United States and Canada, purchasing power, -and consequently domestic demand for foods, â€" is at an all-time high. 9. The further fact that, in the face of this record demand (export plus domestic), production of live stock in United States and Canada teems definitely headed downward. Inspected slaughterings of C^ntlle and Hogs for the last three years have been as follows; â€" 30.7c 93.6% The averaftc advance in hourly rates throughout all Canada, for the same period, as published by the Dominion Department of Labour, has been The increase in hourlyNrates does not, of course, represent a cor- responding advance in 'real' income, â€" that is, in income meas- ured by purchasing power. Subtractions must be made for increase in the cost of living, also for Income Tax; â€" the latter offset to some extent by Family Allowance payments. It is prob- able, too, that the actual increase in the cost of living is some- what greater than that reflected in the official table of the Dominion Bureau of Statistics, â€" viz However, when all allowances have been made, the increase in real income of Plant Employees, as corrtparcd to 1939, is certainly not less than And this in spite of a substantial reduction in number of hours worked (1939, â€" average weekly hours 46!4; 1946, â€" average weekly hours 42'/,). If hours worked had been the same, increase in real income would have been at least 51.6%* 34.8% t 15%. 22%. Over and above these rate increases, important supplementary pri\ilcj;c3 have been granted. These include: "" after 1 year â€" 1 week. Improved vacation schedule; â€" now after 5 years â€" 2 weeks, after 20 years â€" 3 weeks. Rest periods with pay â€" 10 minutes, morning and afternoon. Night work premium â€" 5c per hour over corresponding day rates. Guaranteed minimum of 37/, hours work per week â€" or pay in lieu of work. Pay for eight public holida>'S. These suppplenientary privileges represent an annual cost to the Conip.iny of approximately $850,000, equivalent to 7.4c per hour United States C.\NAD \ Cattle Hog.« 69,016,982 40,959,800 44,393,920 Cattle 1,3^4,104 1,820,127 1,666,310 Hogs 1944 1945 1946 13,960,337 14,538,405 11,413,925 r7i,ii.-Mi .â- ..i>b:i,727 4,2'J3,511 Following the practice of previous years, an important share of the profits was distributed to Employees in the form of Bonus. The sum distributed at the year-end was $1,250,000. (Bonus distributed in March, 1939, wasâ€" $216,000.) The practice of profit sharing has been in operation for thirteen fisr.nl years. Within that period, total profit-sharing payments have been $8,910,000. Total Dividends to Shareholders within the s::me rrricd have been . $9,550,000. Total Sales for the same period bavi lirrn $1,716,000,000. J. S. McLE.\X, President. Toronto, Kw^mX 29th, !0'17. •Preliminary figure for Ortobrr, 1946, reported in Departuu nt of L;\bour News Release No. 3,000 ot June 19th, 1947. tDominion Bureau ol Sl.iiistirs Cost of Living Index for July 1st. 1947, basis August, 1939 e<|,iH< ITO. Extra ccii'.cr. of Ihis ri po: : are amihihle anU so long as they last, will be mailed to uni/one requesting them. Address to Canada Packers Limited, Toronto 9. 4 \ < < « i.