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Full text of "Problems arising from public regulation of milk prices with special reference to Pennsylvania [microform] : a thesis"

Author: Anderson, Ellen F. 

Title: Problems arising from public regulation of milk prices 

with special reference to Pennsylvania 

Place of Publication: 



Copyright Date: 1938 

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Water Damage 
, June 1993 



THE PENNSYLVAUIi STATE COLLEGE 
The Grfiduate School 
Department of Agricultiiral Economics 



PEDBLflvIS ARISING FFjDK PUBLIC REGULATION 
OF MILK PRICES- WITH SPECIAL P^F^KENCE TO 

PENNSYLVANIA 



A Thesis 



by 



ELLEH ^. ^iHPEP-SON 



Submitted in partial fulfillment 
for the degree of 



OF SCIENCE 



Jure 1938 



APPROVED 



BY 



^ 






^/ /?^F 



/(^'^y^ 




<^ 



Profesiior of Afff iculturtu. Economicc 



APPROVED 



■ II I Ml ■ S> I "* !<" ' " ,1 "~ — **^ 




Acting Head of Department 



ACKNOV^EDGMHITS 



The v/riter wishes to express her apx^reciation to those 
members of the Departraent of Agricultural Fcomomics, F. F. 
Lininger, W. V. Decnis and F. ?. Weaver, who have counseled and 
assisted her in the preparation of this thesis. The cooperation 
of Howard G. Fdsaman, Chairman of the Pennsylvania Milk Control 
Commission and many of the employees of the Commission is grate- 
fiaiy acknowledged, especially tiie time and assistance given by 
Miss Margaret Young and John Pfautz* 



194G44 



CONTENTS 

Page 

INTRODUCTION 1 

FEDERAL CONTROL • • . 2 

MILK CONTROL IN OTHER STATES ...•..•••• 9 

MILK CONTROL IN PENNSYI.VANIA • U 

The Legal Basis ♦••• 14- 

!• Operation of Milk Price Control 

Under the First Law •♦..•... 17 

2* Operation of Milk Price Control 

Under the Second Lav; • 23 

3* Operation of Milk Price Control 

Under the Present Lav/ ...•• • 30 

4.. The Court Decisions •••♦•••*•••«.•*.• 34- 

The Problems Arising from Milk Price Control 36 

1. The Development of the Order 37 

2* Area »«»•»•••«• ,•♦•••••♦••«•» 4-*- 

3. The Problem of Fixing Prices , • . . • • 52 

Milk Prices and Other Prices 57 

Differentials for Fluid Uses ,.•*.♦..*.. 62 

Prices and Interstate Movements 69 

4. Special Grades ••••••• •.#•• 76 

5. Production Control • 79 

6. The Costs Argument 84- 

SUfilMARY * ^ 

CONCLUSIONS 91 

APPENDIX 



Table 



1 - 



2 - 



4 - 



5 - 



7 
8 



9 - 



10 -- 



11 ^ 



12 - 



13 - 



TABLES 

Page 

Markets Arranged According to Milk 

Classifications, January 1, 1938 6 

Markets Operating Under the Three Types 

of Pools Authorized by Federal Orders, 

January 1, 1938 . • 8 

Length of Time Intervening Between Date of 

Hearing and Effective Date of Subsequent 

Order, for the First Eighteen Orders Issued 

by the Milk Control Commission A-O 

Dealers^ Buying Price for 3»5 Per Cent 
Grade «B" Milk f •o.b. in the Major Classi- 
fications at Three Markets Since the 
Inauguration of Milk Control 4-8 

Pittsburgh Class 1 Prices in Dollars Per 

Hundredweight 3.5 Per Cent Grade "B^^ Milk, 1928-1937 • • • . 59 

Differentials for Milk in Fluid Uses - Philadelphia • . • . 67 

Differentials for Milk in Fluid Uses - Pittsburgh 68 

A Comparison of the Volume of Surplus Milk 

in the Pittsburgh Market and the Differentials 

for Class 1 Milk Over Milk Used to Produce 

Creaia or Butter, 1934-1937 69 

Percentage of Receipts of Fluid Milk at 

Philadelphia Metropolitan Area, Originating 

in Pennsylvania, 1935-1937 72 

Percentage of Total Crea^n Receipts at Phila- 
delphia by State of Origin, 1933-1937 72 

Percentage of Total Cream Receipts at Phila- 
delphia from Pennsylvania Sources by Months, 
1933-1937 72 

Net Differences in Market Price of 1^0 Per Cent 
Cream at Philadelphia and the Price Paid Penn- 
sylvania Producers for Milk Used as Cream 
Compared with the Per Cent of Out-of-State 
Receipts, 1935 and 1936 75 

Percentage of Receipts of Milk and Cream at 

New York and Metropolitan Area Originating 

in Pennsylvania .•••••• • ••• 76 



Table 

L4 - Extent of Seasonal Variation of Milk 
Receipts from Producers in the Three 
Major Milk Sheds of Pennsylvania, 1930-1936 



Page 



81 



Appendix 

1 - Weighted Composite Index Numbers of 20 Farm 
Products in Pennsylvania, 1922-1937 ♦ . . • 



2 - Index Numbers of Prices of a 20 Per Cent 



Dairy Feed 



««»t>4>tJC«»*« 



• • • • • 



• • • 



ii 



3 - Index Numbers of Pennsylvania Prices of Milk 
Containing 4- Per Cent Butterfat ..•*.. 

4, - Pounds of Milk Required to Buy a Ton of 
20 Per Cent Dairy Feed . 



« « « • • 



iii 



»« *•••••• ••«••• 



IV 



FIOaHES 



Figure 

1 - Milk Marketing Agreements Under the Agricultural 

Adjustjnent Administration in Effect January 1, 1938 • • • • 

2 -' States Providing for Some Type of State Control 

of the Production and Distribution of Milk, 
January 1, 1933 • 



» • * 



» * • « » « 



• • • 



Page 



• • 



10 



3 - Location of Farms in Centre County From Which 
Milk Was Sold to Various Markets, 1931-1935 



• * « 



• • • • 



4.6 



4, - Dealers^ Spreads Betv/een the Buying Price of 
Class 1 and the Retail Price Per Quart of 
4 Per Cent Milk in Philadelphia, Pittsburgh and 
the State-wide Areas Since April 1934- 



«•«»«•• 



* « 



51 



5 - Dealers* Spreads Between the Buying Price of the 
Amount of Milk Needed for One-Half Pint of Light 
Cream and the Retail Price ?er Plalf Pint of Light 
Cream in Philadelphia, Pittsburgh and the State-wide 
Areas Since April 1934- 



• «•«»•••» 



• «««!« 



» « -» 



53 



6 - 



Index Numbers of the Price of Dairy Feed in 
Pennsylvania and the Price of Fluid Milk at 
Pitt?l>argh, 1923-1937 . . 



«> * ♦# ft «••■*•{•* I T e ♦» ♦ 



5B 



7 - 



a - 



9 - 



Pounds of Milk Required to Buy a Ton of Dairy Feed 
in Pennsylvania, 1922«1937* (Line graph shows 
yearly average. Vertical bars show range from the 
highest to the lov^est months of each year*) • * . . 

Index Numbers of the Price of 4- Per Cent Milk and 
the Composite Index of the Prices of 20 Farm 
Commodities in Pennsylvania, 1922-1937r •*•»#• 

Index Numbers of the Price of Milk in Pennsylvania 
and the United States Index of ViJhoIevSale Pr ices j, 
1922--1937 



• « • • 



<? « 



61 



63 



« • * 



• *«•#»«»••*••*«••«•*« 



64 



10 '- Tne Differentials Betweei) Class Prices and the 
Incroane in vSnrplus in the Pittsburgh Market, 
1934-1937 . ., . 



*» •*w«-r • 



«•«#>••• 



70 



11 - Percentage of Receipts of Cream at Philadelphia 
Originating in Pennsylvmiia, 1933-1937 • • • ♦ . 



■♦ • 



m fl! 



73 



Appendix 



Figure 

1 - Milk Marketing Areas Defined by the Pennsylvania 
Milk Control Board, April 2, 1934^ 



« « • • 



2 - Milk Marketing Areas Defined by the Pennsylvania 
Milk Control Board, June 1, 1934 • • 



3 



Milk Marketing Areas Defined by the Pennsylvania 
Milk Control Board, August 7^ 1934 



4. •- Milk Marketing Areas Defined by the Pennsylvania 
Milk Control Board, October 1, 1934 



«»«••« 



5 - Milk Marketing Areas Defined by the Pennsylvania 
Milk Control Board, Novernber 16, 1934 • 



« « « * « 



6 - Milk Marketing Areas Defined by the Pennsylvania 
Milk Control Board, January 16, 1936 



7 - Milk Iferketing Areas Defined by the Pemisylvania 
Milk Control Board, vTune 16, 1936 . 



# • ♦ ♦ « 



9 - Milk Marketing Arear Defined b^^^ the Pennsylvenia 
Milk Control Board, January 1, 193? •' • « . 



10 « Milk Pterketing Areas Defined by tlie Pennsylvania 
Milk Control Coinjniseion, June 2, 1937 • 



11 •- Milk Marketing Areas Defined by the Pennsylvania 
Milk Control Commission, July 1, 1937 »#♦••. 



Page 



• «•»«« 



vi 






• • 



• • • 



viii 



« « • 



ix 



♦ ••« «•«•••« 



<■ <1 • 'S C • 



xi 



8 - Milk Marketing Areas Defined by the Pennsylvania 

Milk Control Board, October 11, 1936 ••«•«..«««« xii 



««•**<*•# 



xiii 



«•««•«( «•« 



XXV 



EXPLANATION OF TERMS 



As the terms are used in this thesis they will have the 



follo^vlng meanings: 



Price control means any determination of price by other than 
free competitive forces. 

^ federal order is an order issued by the Secretary of Agri- 
culture reg^xlating the handling of milk in the current of interstate or 
foreign com^nerce* 

Classification of milk refers to the listing of milk on the 

■■—i ii—i^_ m '■ ^ u I ml If I --i - ■ - ■! II ir -I II -IT ■ !■ I Iff- — tti - - ^"^ 

basis of how it is used for the purpose of setting up a price schedule, 

8nrplus milk is that supply of milk which reaches the market 
over the amount required for fluid milk consumption. 

A market pool is a method for paying producers whereby they 
receive an average or blended price for all classes of milk sold on 
that market. 

Spread is the dealer's margin between the price he pays the 
farmer and the price he receives from the consumer for milk or cream. 

Under the base-sunJLag plan of payment for milk the producer 
receives a higher price for his base (or normal) production than for 

any amount in excess of the base. 

A store differential is the amount by which the store price 
is less than the price for v;agon~delivered milk. 

Sales quantity control refers to control of seasonal varia- 
tions in production* 

Standardizing^ refers to the dealers' practice of adding cream 
or skifmned milk to milk purclmsed from producers in order to offer 



bottles of uniform milk for sale. 



The principal grades of milk offered for sale for human 
consumption are "A" and "B"» "A" is produced according to more strict 
sanitary requirements and usually has a higher butterfat content than 






INTRODUCTION 



The crash in the niiid milk industry which occurred in 1933 
came at a time when government regulation was being proposed and 
adopted as a remedy for depression His* Codes and commissions had 
been established in other enterprises. It is not strange that polit- 
ical leaders promised the distressed dairy farmers some government aid 
in righting the industry* Dairy farmers were clamoring for help fully 
as loudly as other groups* It is not the purpose of this paper to 
suggest other possible steps which might liave been taken but rather to 
present an accurate account of facts relating to the government con- 
trol of milk prices* In the words of Howard G* Fdsaman, Chairman of 
the Pennsylvania Milk Control Commission, 

"It is perfectly clear and perceivable to one who realizes 
the very recent origin of milk control in this country just irtiy we 
are today confronted with so many perplexities and baffling problems-^ •" 

The early mistakes in price fixing can be attrituted to and excused in 

part on this theory that they were experimental* It is well, however, 

to record these errors as a warning and to note any successes which 

may form useful precedents* 



"Address before the National Association of Milk Control Boards, 
Portland, Oregon, 1937. 



FEDERAL CONTROL 



There was agitation for control of milk prices when the dairy- 
farmers were hit by the downward turn of the purchasing power of milk 
cows in the years 1915 to 1918^ • The New York farmers* milk strike in 
1916, the Boston upheaval and the two milk strikes in the Chicago area 
in 1917 ai'e evidence of the unsettled conditions* Editorial comment 
at that time suggested governmental control of milk prices* 

Price control on a national plan was authorized by the 
omnibus Act of May 12, 1933 which, among other things, established the 
Agricultural Adjustment Administration. Under the General Powers 
assigned to the Secretary of Agriculture was included the power "to 
enter into marketing agreements with processors, associations of pro- 
ducers and others engaged in the handling in the current of interstate 
or foreign commerce of any agricultural commodity or product thereof, 
after due notice and opportunity for hearing to interested parties". 

The legality of such marketing agreements was not impaired 
hy the Supreme Court when it declared in 1936 that the processing taxes 
were unconstitutional. 

Representatives from the unsettled Chicago market requested 
assistance under the act immediately upon its adoption. The early 
formulators of the A.A.A. dairy policies were Dr. Clyde L. King, on 
leave from the University of Pennsylvania, and a group of younger 
economists headed by Dr. Edwin A. Gaumnitz who had been an economist 
in the Bureau of Agricultural Economics. Dr. King had been active in 



^iniuger, F. F* Dairy Products Under the Agrioatural Adjustment 
Administration. The Brookings Institution. Page 3# 



bargaining efforts on the part of producers • cooperative organizations 

and dealer groups in several eastern and mid- west markets • 

The pix>blems which arose in the Chicago case covered the 

major issues for other areas* The principal features of the market 

agreements have been summarized by Dr* F, F. Lininger for The Brookings 

Institution^^ He lists: 

^Definition of terms and delineation of the milkshed and 
sales area# 

«Estahlishment of the interstate character of the market. 

Fairness of provisions as to prices to producers for Class I, 
Class II and Class III milk. The basis of purchase, the plan for 
equalizing payments between comparable producers, such as the pooling 
systems or other adjustment plans, and the plans for equalizing be- 
tween distributors and the so-called surplus, or excess of fluid milk 
receipts over fluid milk sales. 

"Production control provisions, if any. 

"Provisions for check-offs to the producers^ association, 
the dairy council (if any), the adjustment fund, or any other service 
charges. Definite limitations on these check-offs were considered 
desirable. 

"Provisions for handling non-members of the association, 
new producers in the market, or others. 

"Reasonableness of distributors margins and relationship 
between margins on various products or quantities. 

"Place of producer-distributor in the market. 

"Store prices: margins, relationship to wagon delivery 
prices and change from present status. 

"Reasonableness of prices to consumers of milk and cream of 
various percentages of butterfat; of raw pasteurized and special milk; 
of quarts, pints, and other units; of by-products such as buttermilk, 
skim milk, chocolate milk, and cottage cheese. 



ability. 



"Health and qualitj' standards. 

"Schedule of fair practices - reasonableness and enforce- 



^Lininger, F. F. Op. Cit. Page 33. 



"Organization or plan for carrying out the various provisions 
of the agreement, such as allotment of producer bases, handling of the 
adjustment fund, and equalizing distributer s • surplus burden. 

"Equitableness of representation on any committee, boai^s, or 
councils that were provided for in the agreement. 

"Probable relative and actual benefits from the agreement to 
producers and distributors, and probable burden and benefit, if any, 
to consumers. 

"Relationship of prices to producers and consumers to those 
prevailing in the base period (August 1909 - July 1914) $ with due con- 
sideration for changes in other prices and in production and distribu- 
tion. 

"Any other provisions in the agreement irtiich mi^t in any 
manner affect the market, or various agencies in the market, or the 
public in general." 

The Agricultural Adjustment Administration was hampered at 
first by the uncertainty concerning the constitutionality of the act 
but the point ifas cleared by the Nebbia case which tested the New York 
State law. An iinportant contribution at the outset and since its in- 
auguration has been the fund of information collected by the Dairy 
Section of the Agricultural Adjustment Administration for markets for 
which federal orders fixing milk prices have been written and for many 
other markets in vihich agreement has been reached without the order 



process 



There were on January 1, 1938, 23 federal orders effective in 



markets of the east and the west. A great majority of the orders were 
for markets in the Central Plateau area, figure 1. The exceptions were 
three Massachusetts cities, Denver, Colorado, and San Diego, California, 

The general procedure in the establishment of the orders has 
been similar. There is some indication of an attempt to make orders 
adapted to the particular needs of the market. For example, the clas- 
sification principle on which milk prices are based is universal but 



1. 

3. 

5* 
6* 

7. 
8. 

9- 

IC. 

11. 
12. 



Battle Creek 
Boston 
Denver 
Des Moines 
Dubuque 
Fall River 
Fort Wayne 
KalajT;ezoo 
Kansas City, 

Kansas 
Kansas City, 

Missouri 
La Porte 
Leavenworth 




]S 



Lincoln 

Louisville 

New Bedford 

Omaha 

Quad Cities 

St. Louis 

San Diego 

Sioux City 

Topeka 

Twin Cities 

Wichita 



«s 



FIGU hii 1 -. Milk Marketing Agreemcntw^: Under the Agricultural Adjustment Administration in Effect January 1, 1938. 



Vil 



definitions and number of classes vary. 

The most common classification was Class I, Class II and 
Class III although five areas have also a Class IV and four markets 
were set up with only two classes, table 1# 



Table 1 - Markets Arranged According to Milk Classifications, 

January 1, 1938 •* 



Classes 
I and II 

Boston 
Fall River 
New Bedford 
Twin Cities 



Classes 
I, II and III 



Battle Creek 

Des Moines 

Dubuque 

Kalamazoo 

Kansas City, Kansas 

Kansas City, Missouri 

Leavenworth 

Louisville 

Omaha, Council Bluffs 

St. Louis, Missouri 

Sioux City 

Topeka 

Wichita 

Laporte 



Classes 
I, II, III and IV 

Denver 
Fort Wayne 
Lincoln 
Quad Cities 
San Diego 



*Letter from Dr. Edwin F* Gaumnitz of October 12, 1937 and news re- 
leases of the Agricultural Adjustment Administration. 

In seven cities^ the Class I price was expressed in pounds 
of butterfat. Other Class I prices were given for hundredweight of 
milk testing 3.5, 3*7, 3*8 or 4.0 per cent butterfat. The surplus 
classes are all different. The majority are based on some percentage 
of the butter market. The Massachusetts Class II is based on the 
Boston cream price and the Louisville and Wichita prices are a fixed 
amount per hundredweight. 

The following description of classes was given by Dr. Gaumnitz 

^Denver, Leavenworth, Lincoln, San Diego, Sioux City, Topeka, Wichita. 



in a letter of October 12, 1937: 

"In the Battle Creek, Denver, Des Moines, Detroit, Dubuque, 
Kalamazoo, Kansas City, Lincoln, Louisville, Omaha, Quad Cities, Rich- 
mond, San Diego, Sioux City and Wichita markets Class I milk means all 
milk sold or distributed by distributors as whole milk for consianption 
or use in the Sales area^ In Fall River and New Bedford all milk sold 
or distributed as milk, chocolate milk or flavored milk drinks and 
milk which is not established as Class II shall be Class I milk. In 
Fort Wayne and Leavenworth Class I means all milk sold as milk and all 
milk used to produce cream for consumption as cream* In the St* I'ouis 
market Class I means all milk sold as milk, containing not less than 
one-half of one per cent butterfat* In the Topeka market Class I 
means all milk used as milk, flavored milk drinks, chocolate milk, 
creamed cottage cheese and creamed buttermilk, and all milk not speci- 
fically reported as Class II or Class III* In the Twin Cities area 
Class I means all milk purchased from producers except surplus milk. 

"In the Battle Creek, Denver, Des Moines, Detroit, Dubuque, 
Kalamazoo, Lincoln, Omaha, Quad Cities, Richmond, Topeka, San Diego 
and Sioux City markets Class II means all milk used to produce cream 
for consumption as cream. In the Fall River market milk specifically 
accounted for as being used other than milk, chocolate milk or flavored 
t yn'ik drinks or as actual plant shrinkage vdthin reasonable limits shall 
be Class II • In the Leavenworth market Class II means all milk used to 
produce flavored milk, creamed cottage cheese and creamed buttermilkj 
provided that the milk from r^hich only the skimmed milk is used in the 
production of the above products shall not be included in Class II 
milk. In the Kansas City, Louisville, and Wichita areas Class II means 
all milk used to pix>duce cream for consumption as cream, flavored milk, 
creamed cottage cheese and creamed buttermilkj provided that the milk 
from which only the skimmed milk is used shall not be included in Class 
II. In the New Bedford and St. Louis areas Class II means the milk iin 
excess of Class I. In the Fort Wayne area all milk sold as or for the 
manufacture of condensed milk, evaporated milk, powdered milk, cream 
for the manufacture of ice cream mix and cheese, except cottage cheese 
shall be Class II milk. In the Twin Cities area Class II is surplus 
milk. 

"In the Battle Creek, Denver, Des Moines, Detroit, Kalamazoo, 
Kansas City, Leavenworth, Lincoln, Louisville, Omaha, Richmond, Topeka, 
Sioux City and Wichita markets Class III means all milk purchased, sold, 
used, or distributed in excess of Class I and Class II milk. In the 
Quad Cities area Class III means all milk used to produce evaporated 
milk and for ice cream mix* In the San Diego area Class III means all 
milk used to produce ice cream and for ice cream mix, creamed butter- 
milk, creamed cottage cheese and flavored milk drinks; provided that 
the milk from which only the skimmed milk is used shall not be included 
in Class III. In the Fort Wayne area all milk specifically accounted 
for (a) as being sold, distributed or disposed of other than as Class I 
or Class II milk, and (b) as actual plant shrinkage not to exceed 3 per 
cent shall be Class III milk. In the Dubuque area Class III means all 
milk specifically accounted for (a) as sold, distributed, or disposed 



8 



of other than as milk or cream for consumption as cream, (b) as manu- 
facturing loss, and (c) as general plant shrinkage within reasonable 
limits • 

»«In the Quad Cities and San Diego markets Class IV means all 
milk in excess of Class I, Class II and Class III milk.^ 

The market type of pool, with or without base rating was most 
common, table 2# 

Table 2 - Markets Operating Under the Three Types of Pools Authorized 

by Federal Orders, January 1, 1938. 



Market pool 


Market pool 


Dealer pool 




base rating 




Boston 


Battle Creek 


Dubuque 


Des Moines 


Kalamazoo 


Laporte 


Denver 


Fall River 


St. Louis, Missouri 


Fort Wayne 


Kansas City, Kansas 




Lincoln 


Kansas City, Missouri 




San Diego 


Leavenworth 




Sioux City 


Louisville 




Topeka 


Hew Bedford 




Twin Cities 


Omaha, Council Bluffs 
Quad Cities 






Wichita 





The federal orders are intended to cover markets which cannot 
be regulated by one state. Federal orders appeared to be equally com- 
mon to areas within states where state control laws operated and where 
there was no state control. 



BULK CONTROL IN OTHER STATES 5 



New York led the way in establishing a governmental milk 
price control agency* Her law was effective one month before the 
authority for federal control was enacted* Eight other states passed 
laws setting up milk price control in 1933 • In 193A five more states 
passed control acts and seven followed in 1935* No states adopted con- 
trol measures in 1936# Georgia joined the control group in 1937. 

Ohio, Maryland and Washington are the only states to adopt 
control of milk prices and not to continue control to this date. The 
emergency act expired in Ohio July 1, 1935^ and although milk legisla- 
tion has been voted upon at every session of the legislature since 
then, no act has passed* The Maryland act was passed in 1935* Al- 
though no funds were appropriated for salaries or operating expenses, 
the commission operated for a short time before the act was declared 
unconstitutional. It was held tlmt the act was in restraint of trade 
since it set both the price that a milk processor shoixld pay for milk 
and also the price that he should receive for the sale of it. 

The 19 states operating under some type of state control of 
milk prices on January 1, 1938 are shown in figure 2. The New England 
and the Middle Atlantic groups were unanimous in the acceptance of con- 
trol. There are two chief reasons for this. In this northeast section 
of the United States the concentration of population accounts for a 
great demand for milk and milk products. Consumers suffer during milk 
strikes and political leaders emphasize this point in the description 



^The data on milk price control agencies in otlier states were obtained 
by mailed questionnaires sent to Economists of the Agricultural Ex- 
periment Stations in every state. 




nCUFE 



^ — 



states Providing for Soir.e Tj^^e of State Control of the Production and Distribution of Milk, 
January 1, 1938. 



H 
O 



n 



of a control platform. The producers of fluid milk (milk for sale in 
bottled form) outnumber the producers of milk for manufacturing in 
those areas adjoining a center of concentrated population. These fluid 
milk producers hope to maintain their advantage over producers of sur- 
plus milk. Government regulation is the method advocated^. 

This theory that control has been adopted and continues in 
areas of concentrated population appears to be nullified by the Chicago 
situation. The densely populated state of Illinois does not have state 
or federal regulation. On the other hand, Indiana and Wisconsin, defin- 
itely surplus areas, have enacted state laws. The explsjiation may lie 
in the fact that the Chicago market differs from the northeastern mar- 
kets in that it is very close to the important surplus areas. In a 
later discussion will be brought out the difficulty with which differ- 
ences between prices of Class 1 and surplus milk are maintedned in a 
section where there is normally a large surplus close to market. It 
is likely that thivS difficulty has made control of the Chicago market 
more of a problem. 

In 7 of the 19 states now under regulation, milk price con- 
trol was set up as an emergency measure with fixed expiration dates. In 
Massachusetts the law expires in 1938, in New Jersey, Alabama, Indiana, 
Florida and Wisconsin in 1939 and in Georgia in 1941* The others are 
permanently under control until such time as the legislatures declare 
the emergency at an end. The length of the emergency in Virginia may 
be determined either by the governor or by the legislature. 



^f government fixed prices do not maintain the status quo they are 
open to adverse court decisions based on the constitutional precept 
of confiscation of property. 



12 



The most common agent of administration was a coEimission or 
board* Two states exercised control through the State Departments of 
Agriculture and Markets; two called for producer distributor agreements 
sanctioned by the State Department of Agriculturej one had a Board of 
which trie commissioner of agriculture was ex officio chairman, and one 
placed control in tlie hands of an administrator. Control was admin- 
istered as follows: 

Milk Control Board: New Jersey, Rhode Island, Vermont, 
Pennsylvania, Virginia, Alabama, Indiana, Florida, New Hampshire, 
Massachusetts, Georgia, Maine, Oregon, Montana* 

State Department of Agriculture: Wisconsin, California, 

Producer Distributor agreement sanctioned by trie Department 
of Agriculture: Hew York, Utah, 

Administrator: Connecticut, 

The fixing of prices to producers is mentioned in all 19 
laws but consumer prices are not to be set under the New York law. 
Price fixing is mandatory in New Jersey, Vermont''^, Pennsylvania, 
Alabama^, California, Florida^, Utah^, Massachusetts^O, Maine^, and 



Oregon. 



State Control laws fall into two major groups which for lack 



of better names are called the Pennsylvania type and the New York 
type • This designation makes possible the classification of states 



Kl ■ r-^MMiafc 



^When public health is likely to be impaired, 

%n markets where the board has jurisdiction. 

9 As tlie emergency requires. 

^^Only fixing prices to producers, 

-^^-The grouping is according to the present New York law. The Penn- 
sylvania act was modeled after the original New York law. 



13 



according to the general pattern followed in effecting control. 

In Pennsylvania the control covers the whole state and the 
initiative lies with the commission, ^ile in New York control need not 
cover the entire area of the state and application for control must 
come from the industry^ An agreement acceptable to a fixed percentage 
of the producers and/or distributors in the market is enforced against 
the entire industry under the New York plan* 

According to this distinction the states may be grouped as: 
Pennsylvania type: Pennsylvania, New Jersey, Connecticut, 
Rhode Island, Vermont, Virginia, Florida, New Hampshire, Massachusetts, 
Montana » 



Hew York type: New York, California, Alabama, Utah, Georgia, 
Maine, Wisconsin. 

Indiana's law is characteristic of botla types. Producers' 
prices are set on the Board's initiative but resale price setting shall 
come only by petition from the industry* 



u 



MILK CONTROL IN PENNSYLVANIA 



The business of producing or of distributing milk in some 
parts of Pennsylvania was not a fair game for any man in 1933* The 
federal agencies under the authority of the Act of May 12 had tried to 
bring order to the Philadelphia market but their lack of success was 
widely recognized^ The dairy farmers were objecting to prices which 
netted them as low as 65 cents per hundred pounds for their milk. 



The Legal Basis 

The Republican administration in possession of the law making 
agency of the state at that time offered a plan for the control of 
prices through a state board* There was no opposition on the part of 
Democratic legislators and with the signature of Governor Gifford 
Pinchot the bill became a law on January 2, 193A* 

The Act created a Milk Control Board of ttiree members who 
exercised final price-fixing autiority* The law obligated the Board 
to set minimum prices to be paid the producer and minimum resale prices 
to be charged the consumer and empowered it to set maximum pii.ces» The 
privilege of fixing maximum limits has never been exercised. Section 
13D excepted milk used solely in manufacturing from mandatory minimum 
price fixing. The Act specifically outlawed rebate practices by which 

dealers avoid compliance with orders • 

The official prices were to be declared to the trade by 
orders of the Board. The Board was permitted at any time, to "alter, 
revise or amend" orders with respect to prices to be charged for milk. 
Such revision as well as the original order was to be preceded by a 
hearing at irtiich all interested parties might appear. 



15 



The control of the milk industry was to be insured by the re- 
quirement that milk dealers operate under license • In addition to the 
authority of revocation of license, the Board might force compliance 
with orders under threat of fine or imprisonment. License fees were 
graduated in proportion to volume of milk handled. License fees, to- 
gether with an appropriation by the legislature, provided the funds for 
the administration of milk price control. The appropriation from the 
General Fund for the aidministration of the act was $100,000 for the 
duration of the act. The act expired April 30, 1935* 

The act contained specific approval of conferences for the 
dissemination of information among dealers • and producers' organiza- 
tions. Inter-change of information mi^t be made between individuals 
or organizations or it mi^t be fostered by a common agent. 

The Democratic party, in control of the law-making processes 
in 1935, rode in on a platform including the approval of state con- 
trolled milk prices. When Act 37 expired April 30, 1935, the new Act 
number 43 was approved. 

The new Act repeated the purpose of the first law and also 

provided for 

^....♦.oxtending the provisions of the Act for a further 
period of time, prohibiting the sale of milk in certain cases; en- 
larging and modifying the definition of milk to include ice cream mix, 
powdered whole milk and powdered skimmed milk; changing, adding to, and 
increasing license fees and further prescribing the method of comput- 
ing such fees; requiring all licensees to file bonds or collateral 
without any exceptions; providing for a supersedeas in certain cases of 
appeal; conferring certain powers upon the Governor; conferring upon 
the board certain additional powers over cooperative agricultural asso- 
ciations or corporations, also over milk prices; and authority to es- 
tablish marketing area enforcement committees; providing new and chang- 
ing existing notices and penalties; and making an appropriationl^^w 



12 



Act Number 43 • Statement of purpose 



16 



It was made obligatory on the part of the Board to "file at 
its office, with each order issued, a statement in writing of the find- 
ings of fact in support of or the reasons for such order". This pro- 
vision was inserted to meet the criticism of the industry that orders 
did not reflect ttie facts presented in hearings. Act 4-3 limited the 
price-fixing authority of the Board by requiring the governor ^s signa- 
ture to all orders with price-fixing clauses. In Section 18, that part 
which deals with price setting, the phrase "with the approval of the 
governor" was inserted six times. In this manner Governor Earle 
carried out his promise to "personally" supervise the milk industiy of 
the state. The duration of the Act was set at two years and the ap- 
propriation from the General Fund for the period amounted to $225^000. 
License fees paid by dealers were also available. 

The major difference between Act 105, approved by Governor 
Earle April 28, 1937, under which the Milk Control Commission is now 
operating and the two former laws, is the pei^nanency of the later act. 
Act 105 makes no mention of an emergency period but recites those pre- 
mises on which tine first laws were enacted and declares that any 
lessening of the rigidity of the interpretation of the act would be 
detrimental* Under the new Act the Milk Control Board took on a new 
name. Milk Control Commission. The authority of the new body differs 
little from the old but its members are appointed for six-year terms, 
with a new appointee every two years. A schedule of license fees, 
bonding provisions and fines for non-compliance is a part of Act 105. 
The permanent act requires each milk sta.tion to exhibit a permit for 
weighing and measuring issued by the Commission. Milk dealers are not 
permitted to buy milk at any station not certified for weighing and 



17 



measuilng such milk» These pennits relate to suitable apparatus as 
well as to the requirement that weighing and testing be done by persons 
certified by the Commission. The Commission took over from the Board 
of Health the granting of certification to testers* The law states 
specifically that cooperative organizations may blend their prices to 
members providing bargains with dealers are made according to the price 
schedule set by the Milk Commission. The Act limits the amount which 
new cooperatives may deduct from returns to producers for expenses. 
The appropriation of $300,000 covering the period from June 1, 1937 
to May 3li 1939 supplements the receipts from license fees. Act 105 
was the child of Governor Earle's administration. It rival in the 
legislature was a regulatory measure not having as wide authority in 
fixing prices. The administration bill had the better chance to win 
even if contested but it was handled without much publicity and passed 
the House when its advocates outnumbered its enemies in attendance. 



1. Operation of Milk Price Control Under the First Law 
Governor Pinchot appointed the first Milk Control Board on 
January 24, 1934.* He chose as chairman Edward A. Stanford, superin- 
tendent of George D. Widener's Erdenheiin Farms since 1920. Mr. Stan- 
ford had been president and was at the time a director of the Pennsyl- 
vania Jersey Cattle Club. John C. Barney, president of the Erie Co- 
operative Producers Association at the time of his appointeient was 
named a member. The third member, Howard C. Reynolds, had experienced 
a colorful career. He was associated with the Allied Dairy Farmers 
Association and was the guiding star in a "rmapti organi2;ation which had 
broken away from tlie Holstein-Friesian Association^ 



18 



Dissatisfaction was evident on several sides ^en the an- 
nouncement of appointments was made* The attitude of the Holstein- 
Friesian Association is clearly brought forth in the following excerpt 
from an editorial, "Pennsylvania's Milk Muddle," which appeared in the 
February 10, 1934 issue of the Holstein-Friesian World. 

"Greatly disturbed are many Pennsylvania dairymen over the 
personnel of the Milk Control Board just appointed by Governor Pinchot 
under authority of the new law adopted by the state legislature* 
• ••••• ••••Governor Pinchot named two of the three members from the 

actual ranks of the Allied Dairy Farmers Association and a third from 
the western part of the state. Edward A* Stanford, chairman, is super- 
intendent of George D^ Widener's Erdenheim Farms, a Jersey breeding 
establishment* Mr^ Widener is iinderstood to have made a substantial 
cash advance to promote the organization of the Allied Dairy Farmers 
Association. The second member is none other than Howard C. (Doc.) 
Reynolds, of Harrisburg, whose very name is anathema to thousands of 
Pennsylvania Holstein breeders, and whose espousal of the Allied Dairy 
Farmers Association cause through his "organ" was rewarded with a 
directorship. The third member is John C. Barney, agricultural editor 
of the Erie Disi>atch Herald." 

It is possible that the personnel of the Board was more im- 
portant in shaping the first orders than was the testimony presented 

at the hearings. 

The first hearing under Act Jl was held at Erie, February 13, 
1934» Chairman Stanford in his opening statement spoke of the contro- 
versies at similar meetings in otlier states and emphasized the informa- 
tion-seeking phase of the hearing as most important. There were in- 
quiries concerning the costs of production and the attitude toward the 
base surplus plan. Some questions were designed to determine the 
number of farmers represented by tlie producers • cooperative speakers. 
Prices reported for 3.5 per cent milk ranged from 65 cents to |1.46^ 

During the progress of the hearings in the first quarter of 
193ii the testimony did not show marked opposition to the basic surplus 
plan except in the statements of representatives of the Allied Dairy 



19 



Fanners Association* The Inter-State Milk Producers Association and 
the Erie Cooperative Producers Association appeared to favor the con- 
trol of seasonal surplus by the establishment of bases* The orders 
proiaulgated by the Board as a result of these hearings set up different 
prices for milk used in various classes. The percentage which a pro- 
ducer might sell in the fluid class was limited by General Order No* 6, 
the first general order* 

At the Philadelphia hearing the battle for and against a base 
surplus arrangement was waged between the Inter-State and the Allied 
Dairy Farmers Association* Costs data presented at this hearing and at 
the Erie hearing were based on the figures of cow testing associations 
sponsored by The Pennsylvania State College* 

Hearings were also held in Pittsburgh and in Harrisburg be- 
fore the first general order was framed* That Order, No. 6, regulated 
all prices to be paid beginning April 2, 1934. Order No* 3 had pre- 
viously set prices for the Erie area. Three price schedules were set 
up by Order No. 6* These prices applied to tiie Philadelphia milk mar- 
keting area, the Western Pennsylvania milk marketing area, and the 
area not included in these two* The General Order defined four classes 



of milk J Class 1, tlrnt milk used in fluid form; Class 2, milk used as 
fluid cream, ice cream, homogenized mixtures, milk chocolate, candies, 
soups and other manufactured dairy products except those included in 
Classes 3 and /^; Class 3y pov/dered milkj Class A^ milk made into butter 
or American cheese* Maximum hauling charges were established. Grade 
"A" milk was defined and both producer and consumer prices set. Mini- 
mum prices to be charged by distributors for fluid milk, fluid cream 
and buttermilk were fixed* 



20 



A store differential of one cent was permitted in those 
nninicipali ties in ishicli during the month of February I934. there had 
been a store dif f erential ♦ 

The retail price schedules for cities on or near the border 
of the state were to conform with the prices in the adjoining state. 
Dealers in rural communities were allowed to sell milk at prices lower 
than those fixed by the Control Board after they had obtained permits 
from the Bo€ird. 

The order required that producers be paid at least monthly 
and not later than the fifteenth of the month following delivery of 
their milk* 

Milk dealers were instructed to keep records of milk bought 
and sold with butterfat tests, prices and classification in which milk 
was sold* A number of unfair trade practices were declared illegal. 

Tlie order set down rules for sales quantity control by desig- 
nating the period on which sale bases should be calculated and pro- 
mulgated rules for the establishment and transfer of bases. 

Amplification of the requirements for licenses and the 
definition of bonding collateral was the subject of Order 7. 

Tlie second all state general order was No. 3, dated May 24, 
193^9 and effective June 1, 1934. The boundaries of the Philadelphia 
milk marketing area were revised and a new schedule of milk classes was 
established. This time seven classes of milk were defined. Class 1 
still represented milk sold in fluid form. The Class 2 definition was 
broadened to include milk used for sweet cream butter as well as fluid 
sweet and fluid sour cream. A new class, 2A, was established for milk 
utilized in the manufacture of milk chocolate, candy and confection- 



21 



erles. Class 2B included all milk used in making ice cream, homogen- 
ized mixtures, soups, condensed or concentrated milk, powdered whole 
milk and soft cheeses^ Plant loss due to waste and spillage up to 
2 per cent could be classed as 2B. Milk used in the manufacture of 
farmers* pressed cheese or cream cheese was called 2C. Milk that went 
into butter, except sweet cream butter, was Class 3 and milk made into 
American cheese was 3A# The Class 1 price was a fixed amount deter- 
mined by the Board • One price was set for the Philadelphia area and 
another for the rest of the state* All other prices except 3A in each 
area were formula prices determined for the month on the basis of the 
price of 92 score New York butter. The 3A price was regulated by three 
principal cheese price quotations. The section applicable to Grade "A" 
contained stipulations as to bonuses to be paid for high butterfat per- 
centages and low bacteria count. The resale price schedule was similar 
to the previous order. It was provided that a 10 per cent discount 
might be allowed on relief sales. Under the tenns of payment. Order 8 
required that dealers' payments to producers should be accompanied by 
a complete statement "showing the producer's basic quantity, the total 
amount of milk received, the amount utilized in each class, the per- 
centage of butterfat, and the nature and amount of all deductions 
made". Order No. 3 repeated the specifications of No. 6 with respect 
to dealers* records, trade practices and sales quantity control. 

Order No. 13 effective July 18, 1934 differs conspicuously 
only in the omission of the paragraph entitled "Sales Quantity Con- 
trol." No essential difference was made in the classification or 
method of computation of prices for "B" milk. The producers' premiums 
for Grade "A" milk were linked to the spread between the retail prices 



22 



for "A" and ^B^. Order No^ 13 was official until August 16, 1935, when 
Order No* 3 was reinstated by Order No* 16 for all areas except Pitts- 
burgh. The first order bearing H. B. Steele's signature was Order No* 
16* Mr* Steele, secretary for the Pittsburgh cooperative, the Dairy- 
men's Cooperative Sales Association, had been appointed August 6, 1934. 
to fill a vacancy caused by the forced resignation of H. C. Reynolds on 
July 26, 193A. 

The seven classes designated in Order No* 17 were defined in 
substantially the same terms as in Orders 8 and 13* Producer price 
schedules were made up in three sets, one for the Philadelphia market- 
ing area, one for the Pittsburgh marketing area and another for the 
rest of the state* Consumer prices were fixed in four groups, Phila- 
delphia, Pittsburgh and Scran ton areas, and all other areas in the 
state* The section relating to sales quantity control appeared again 
in Order 17 but the method of calculating the base was newl3^ 



•Pennsylvania Milk Control Board General Order Number 17* 
Sec. 30* Sales Quantity Control for Philadelphia Marketing Area - 
Starting October 1, 1934-, the basic quantity of fluid milk for each 
producer shall be the higher quantity of: 

(a) His present 1934 basic quantity as determined by the previous 
orders of the Pennsylvania Milk Control Board; or 

(b) An amount equal to the average monthly quantity of fluid milk 
which was produced by his herd and sold in fluid form during 
the eight months from January 1 to August 31, 1934-* 

Should the present total basic quantities of all producers selling 
to any milk dealer be increased by this method, then the new basic 
quantity for each producer shall be reduced by the same percentage 
that the milk dealer *s total basic quantities have been increased by 
the above method, so tliat the total basic quantities of all pro- 
ducers selling to any milk dealer shall not be increased hereby* 

Sec. 31* Sales Quantity Control Anywhere in Pennsylvania Except 
Philadelphia Milk Marketing Area - The basic quantity of fluid milk 
for each producer selling anywhere in Pennsylvania except in the 
Philadelphia milk marketing area, shall be the higher quantity of: 
(a) The amount equal to the average monthly quantity of fluid milk 



23 



2. Operation of Milk Price Control Under the Second Law 

The Pinchot appointed members of the Board resigned in Janu- 
ary 1935 after the inauguration of George H» Earle as Governor of 
Pennsylvania* Official General Order No. 23 was signed by the Pinchot 
Board on January 15, 1935* Although the next effective order v/as dated 
January 6, 1936, an order was TTritten in September 1935 but it was re- 
called because of general dissatisfaction. During that period the act 
prolonging the emergency control uras passed. Governor Earle had ap- 
pointed Paul 0. Sunday of Cujnberland County, A. C, Marburger of Butler 
County, and Charles T. Carpenter of Chester County, all producers, to 
the Board on February 2, 1935. Mr. Carpenter resigned on April 30, 
the day Act 37 expired. Mr. Sunday's and Mr. Marburger* s terms also 
ended automatically on that day. These two, however, continued to 
discharge their duties until reappointed \mder the new la«, June 2As 
1935c Three days later tliey were discharged on complaint that they had 
accepted salaries for the period during which they v/ere not officially 
appointed. James S. Pates, the third to be appointed on June 24., was 
the only member on the Board until July 1 when Charles T. Carpenter 
and Howard C. Peynolds were reappointed. Mr. Pates was chosen to re- 
present the conmimer's interest. This shifting scene may explain why 



13 (Continued) 

which was produced by his herd and was sold in fluid form dur- 
ing the two calendar years previous to January 1, 1934» If > 
however, a producer can show that his established base was at 
least 20 per cent lower the second year of this period, then he 
may add one-half of this difference to a second base year for 
computing his basic quantity of milk to be governed by this 

Order; or 
(b) The 1934 established monthly basic as now on file with any 
distributor and/or cooperative dairy marketing organization 
operating in the Commonwealth of Pennsylvania. 



2K 



the year 1935 passed ivith little action on tlie part of the Board. 

An order was issued on August 2, 1935, with the stipulation 
that it become effective September 1. Before that time dealers had 
registered such opposition that the order was indefinitely postponed. 
Principal features of the order. No. 24^ in original form, were reduc- 
tions in receiving station and transportation charges, a flat price for 
Class 2 in place of the formula tied to New York butter, end a total 
disregard of any production control pleji. Three more milk marketing 
areas were established, thereby making a more detailed division of 
territorial economic interest • 

Upon the posting of the order, dealers immediately threat- 
ened pointed opposition vSuch as closing their receiving stations and 
hauling milk direct to market. Since no method of production control 
was permitted, they proposed to instruct producers to limit their 
supply offered or keep one day's milk home each week. The difficulty 
in keeping a fixed price for cream in line with the market price was 
recognized and tlie possible loss of the market to Pennsylvania sliippers 

was considered. 

The proposed method of ccilculating the Grade "A" price em- 
bodied material changes. The premium for "A" milk was set at a fixed 
amount for each one cent by which the "A« retail price exceeded the "B»' 
retail price. The bacteria bonus was removed and the butterfat differ- 
ential reduced from six to four cents for one-tenth per cent butterfat 

above 3*5 per cent* 

In the months following tlae recall of Order 2Mr hearings were 
held several days a week in an effort to remedy the faults and make the 
order acceptable to tlie industry* During this period a group of 



.. \. 



25 



dealers in the Pittsburgh district paid farmers a price lower than that 
set by the Control Board* The dealers justified their position by re- 
ferring to the tardy attention of the Board and for the same reason 
producers did not object strenuously* A revised order was sent out to 
interested persons on December 19 and at the same time notice was given 
that there would be a hearing to discuss the order on December 23 • The 
object was to permit recommendations before the effective date. There 
was plenty of opposition to the order as it was written, both from 
dealers and producers. Dealers were unanimous in their condemnation 
but the producers were divided. Those opposed contended that some fea- 
tures were ''economically impractical." 

The provisions around which contention centered were the 
classification of fluid cream with fluid milk into Class 1, a price for 
cream out of line i/ilth market prices, an increase in consumer cream 
prices, and a reduction of 10 cents per hundred in the price of direct 
shipped milk in the Philadelphia Area. 

Order No. 2U as amended became effective January 16, 1936. 
k few of the points of difference were ironed out before the order was 
finally raade effective. There were several classification changes, 
milk for ice cream was taken out of Class 2B and made Class 2, while 
fluid cream which had been in Class 2 was designated as Class lA. The 
classification names for milk used in butter and in American cheese 
were changed. Some persons felt that the schedule should have been 
limited to three or four classes. The reduction of the Philadelphia 
f.G.b. price and the increase in receiving station prices were strongly 
contested but they became part of the order. The disparity in the 
wholesale price between market cream and Pennsylvania cream purchased 



26 



from producers remained in the final fonn. There iras also an increase 
in resale prices of cream ♦ Retail prices of Grade "B" were divided on 
tlie basis of butterfat contentj milk over 4. per cent was to sell for 
12 cents per qiiart while that 1^ per cent or irnder was set at 11 cents* 
Order No. 24, divided the state into nine areas. 

The next change of order came in June of 1936. The general 
phases of Order 24 were not modified by Order No. 25. Area 8 was re- 
defined to include area 9 and there was a slight change in the defini- 
tion of the Southwestern marketing area. The order increased prices of 
milk to producers and in some instances to consumers. 

Two supplementary^ orders were written during this period. 
Order No. 26, effective April 23, 1936, was a definition of the types 
of bonds acceptable as surety in connection Y.ath applications for milk 
dealers^ licenses. The adjustment of bulk cream and ice cream mix 
prices semi-monthly was provided by Order 27. 

The terms of appointment of the Board members expired August 
6, 1936 and there was no Board until August 20 when Ctovemor Earle re- 
appointed Howard C. Reynolds. Howard G. Flsaman of Erie County was 
named chairman and John J. Snyder the third member. Mr. Fisaman had 
been director of the Pennsylvania Farm Show and Mr. Snyder was a 
producer-distributor and former sheriff of Nortiiampton County. Mr. 
Reynolds had been a member of the Board for a short time under the 
Pinchot regime. 

The new Board sent out notices of hearings to be held during 
August and September. They met at Harrisbin-g August 27j Philadelphia, 
August 31; Pittsburgh, September 3; Pottsville, September H; Easton, 
September 15j Scranton, September 16j Johnstown, September 18; Erie, 



27 



September 21 • 

In October 1936, the general prograan for milk price control 
in the entire state was set forth in two orders. No. 28 and No. 2^. 
Order No* 2B was applicable to all the areas except Pittsburgh. The 
provisions for the Pittsburgh area were included in a separate order. 



No. 29* 



The number of areas was increased again by Order 28 for the 



purpose of subdividing the existing areas. Both farmer and retail 
prices were increased. The Scran ton and Johnstown areas were put on a 
13 cents per quart market with a ^2.88 per hundredweight price to pro- 
ducers for 3*5 per cent Class 1 milk. The Philadelphia producers' 
Class 1 price was also $2.88 but the retail figure was only 12 cents. 
A 12 cent market prevailed in southwestern Pennsylvania, Schuylkill 
County, Erie and Harrisburg and tiie price to farmers was fixed at $2.75. 

The price in the state-wide area was advanced to 11 cents re- 
tail and $2.38 to farmers. These prices appeared to meet the demands 
of producers but there was some criticism that the increase was unjusti- 
fiably tardy. As far back as June 1936 the Inter-State Milk Producers 
Review had carried the headlines, •'Price Increase Is Over-Due — 
Inter-State Asks For Rise In Mid-Summer". 

In the Pittsburgh area the Dairymen's Cooperative Sales Asso- 
ciation acted to raise the price of milk in the area without waiting 
for the Control Board action. The Dairymen's Cooi>erative Sales Asso- 
ciation prices as adopted July 16, 1936 were not legalized by a Board 
order until October. The Pittsburgh group also took the cream situa- 
tion into its own hands. Out-of-state cream ims jeopardizing the 
market and the Association asked the Board for an adjustment of prices. 



28 



•*The conditions facing our cream outlets were laid before the 
chairman of the Milk Control Board and also before the entire Milk 
Board at a hearing in Pittsburgh two months ago* We were assured that 
a revised order would be issued on May 8. This order failed to materi- 
alize. In order to save the Association's market for bottling cream 
and ice cream, the directors called a conference with producers at 
Pittsburgh and placed before this group the situation in the market. An 
analysis of the market's requirements for ice cream supplies and for 
bottling cream revealed that the Association producers were getting 
only about one-half of this business. Western cream suppliers deliver- 
ed carloads of their product into our markets^." 

The f .c.b. prices fixed by Order 29 for the Pittsburgh area 
were a ratification of tiie prices prevailing in the market, those set 
by the Dairymen's Cooperative Sales Association on July 16. The Milk 
Board lowered the country receiving station differentials on Classes 1 
and lA. This meant a slight increase in the country station price. 

The retail price was set at 12 cents per quart for Grade "B" 
milk and a 1 cent per quart store differential was approved. 

In October 1936 the Dairymen's Cooperative Sales Association 
again took Uie initiative in fostering a price change, this time a rise, 
The Board took action in December. Order Ho. 33 was approved by Gover- 
nor Earle December 1^ to become effective on the 21st. The request was 
based on a brief setting forth the increase in feed prices due to short 
crops and the general improvement in business conditions. The Grade 
"B" Class 1 price was raised from $2.65 per hundredweight to f3*03f and 
the retail price was advanced to 13 cents per quart. It was argued 
that the elimination of the store differential made the higher price 
possible. The price for half pints of light cream was raised 1 cent on 
the basis that dealers had not been recompensed for the advance in 
Class 2 prices which took place on July 16. The classification of 



•^Dairymen's Price Reporter, May 1936. 



29 



bottled cream was reduced to two classes, '•li^t" and "whipping". It 
had formerly been listed as "light," "medixim," and "heavy". 

An order governing "A" milk was to have been effective on 
December 21 and a new order for Philadelphia, No* 32, was to have been 
in force January 1 but both orders were suspended before the effective 
dates and Order No. 28 remained the basis for payments* Much dissatis-^ 
faction was voiced concerning the state control of the Philadelphia 
market during the Fall of 1936* The United States Department of Agri~ 
culture made a study of the interstate problem but no further action 
was taken xrntil a federal hearing was called on March 17, 1938 • 

Orders No. 3U and No. 35 for the Johns town-Altoona and 
Schuylkill and Scranton areas became effective December 21, 1936. Both 
areas remained on a 13 cents per quart market and Grade "B" Class 1 
milk was to be paid for at the rate of $2.88 per hundredweight, 3.5 



per cent. 



Order No. 36 v/as isritten to meet tlie demands for new prices 



in the Southwestern milk marketing area, the Leliigji marketing ai*ea and 
the Harrisburg area. This order became effective Januarj^ 1^ 1937. A 
new order governing the production and marketing of Grade "A" milk was 
among those made effective December 21. The order was suspended for 
the Philadelphia area but remained in force throughout the rest of the 



state. 



A new order. No. 38, dated December 23, 1937 separated the 



Central milk marketing area, the Lancaster area and the York area from 
the state-wide area. That order never became effective. 

A new measure governing prices and quality premiums for Grade 
"A" milk became effective Februaiy 15. 



30 



Order No. 28 in the Philadelphia milk marketing area was 
superseded February 15, 1937 by Order No. ^0. No change was made in 
the f#c.b. Class 1 price but the new method of calculating the receiv- 
ing station charges made some changes in prices at receiving stations; 
some were increased and some decreased. The retail price remained 12 
cents per quart, but Grade "B« milk testing over k per cent butterfat 
was to be sold at 13 cents* With "A" milk, too, the grade was divided 
on butterfat content, and 1 cent more was charged for milk testing over 
4.»3 per cent* 

In the Pittsburgh area Order 33 was amended by No. ^2 on 
April 1, 1937* The amended sections reduced Class 2 and Class 3 prices 
and the minimum wholesale prices for fluid cream and ice cream sold in 
bulk* 



3. Operation of Milk Price Control Under the Present Law 
Tne terms of the Milk Board members terminated with the ex- 



piration of Act ^3, April 30, 1937. Governor Earle announced th 



e ao— 



pointments to tlie Milk Control Commission May 4., 1937. Howard G. Eisa- 
man and John J. Snyder were reappointed and Robert E. Pattison, Jr. of 
Chester County replaced Mr. Reynolds. Mr. Pattison^ s attitude was ex- 
pected to reflect the consumers* interest in the price-fixing macliinery. 

The effective orders written under Act i^J were continued 
until the new commission prepared a set of orders. Of the nine super- 
seding orders which became effective June 2, 1937, six were special 
orders applying to specific areas; the other three were general orders 
covering the whole state. The order governing prices and bacteria 
bonuses for Grade "A" milk, A-7, is an exact copy of the last order 



31 



which the prerious Board had phrased to govern ^A" milk. 

The general rules for the conduct of business in every area 
of the state were contained in one order, B-1. This order stipulated 
that all milk not accounted for in milk dealers* records should be pre- 
sumed to be Class 1 and producers should be paid at that rate* It pro- 
hibited transportation charges in excess of the rates set by tiie Public 
Utility Commission of Pennsylvania or the Interstate Commerce Com- 
mission or the actual cost paid by the dealer ♦ There appear vS to be no 
recognition of the difficulty involved in determining such actual cost* 
The minimuin charge which one dealer must collect vfhen selling bulk un- 
pasteurized milk to anotlier dealer \ms set at 16 cents per hundred 
pounds. Conditions were described whereby bulk sales of milk might be 
made in case of an emergency which might leave a dealer with a large 

volume of milk on his hands. 

By the same order dealers were required to accompany whole- 
sale sales vdth sales invoices. Section 6 prescribed the rate of pay- 
ment to be made for milk to be resold in other sta.tes. The paragraph 
is not enforceable. Butterfat content was made the basis on which the 
percentage of utilisation in each class should be calculated. Milk in 
inter^lealer sales is considered Class 1 unless its ultimate use in 
some other form cmi be proved. Wiien a dealer receives part of his milk 
from producers and part from other dealers the milk received from pro- 
ducers must be given precedence in the better priced classes. In like 
manner, milk purchased from producers in Pennsylvania must be given 
precedence over ?nilk received from producers outside the state. 

The order states the terms of dealer payments to farmers. 
Producers must be paid t^/dce monthly witli not more than 15 days ensuing 



32 



$ 

I 



m 



between the last day of delivery and the date of payment. Each dealer 
is instructed to make a complete account of all milk purchased and to 
render such a statement to all producers supplying riim. Records which 
dealers shall keep are listed and acts which constitute fair and unfair 
trade practices are defined, 

* 

The Commission set forth rules for the conduct of Milk Mar- 
keting Committees in this order* A Committee is a voluntary coopera- 
tive group which has united to present the farmers' case at hearings 
and t<3 assist in the enforcement of orders, 

A second general order, B-2, deals with thie subject of milk 
dealers* financial and statistical reports. The order contains re- 
quirements for annual and monthly reports to be submitted to the Com- 
mission* This section has been violated flagrantly. It has been im- 
possible to obtain complete or consecutive reports. 

The prices set under the Commission's first orders for speci- 
fic areas were all based on 4- per cent railk. Class 1 prices were 
changed in some secondary markets but for the most part they remained 
the same^ The formula for Class 2 milk was modified so that the price 
increases gradually after the price of 92 score New York butter passes 
33-.1/3 cents per pound. The Class 3 price in all areas was lowered 10 
cents per hundredweight, A new marketing area was established in 
Centre, Clearfield and Huntingdon Counties. 

The Commission called a hearing for June 16, 1937 at which 
the subject of discussion was limited to prices for classev*^ other than 
Class 1, The orders arising out of Uiis hearing advanced the price for 
Class 2 by 25 cents per hundred pounds. The order was nullified before 
it was to become effective. However, a subsequent order effective 



?>3 



July 16 raised the price 22 cents. These orders did not apply to the 
Pittsburgh market. 

During the last half of 1937 attention in the Philadelphia 
market was diverted from state control to federal control. Leaders of 
the Inter-^tate Milk Producers Cooperative turned to the possibility of 
a federal order under the Dairy Section of the Agricultural Adjustment 
Administration to solve the problem of the varying price schedules in 
the st8.tes adjacent to Philadelphia. 

During this period the Commission encountered difficulties in 
the Pittsburgh market. A hearing was called on August 17 at the re- 
quest of the dealers in that area. The distribut<-^rs claimed that their 
margin on fluid milk was too lov/, especially since their costs had been 
increased by a forced increase in milk men*s wages and social security 
taxes. An increased margin could have been obtained by an increase in 
the price to consumers or by a decrease in the price to producers. The 
producers objected strenuously to a loT^ering of their price and the 
dealers replied that they would be forced to purchase tank milk from 
other sources. The Commission took action in the form of an order 
effective October 1, 1937 which reduced the Class 1 price by 6 cents. 
This was not at all what the dealers demanded. The findings of fact 
issued with the order stated that the Commission's study of milk 
dealers' operations contradicted evidence presented at the Pittsburgh 
hearing. According to the Commission's study of 50 dealers in the 
Pittsburgh area engaged in fluid milk and milk manufacturing business 
in 1936, the average earnings on unadjusted investment were 6.9 per 
cent. The Commission attempted to discourage ttie purchase of tank milk 
by raising the price 21 cents per hundred pounds over that for direct 



3A 



deliveries from within the area* Dealers had found it more profitable 
to bay the actual supply needed in tanks from small producers' coopera- 
tives rather than to purchase it in small lots from farmers close at 



hand* 



The dealers were not satisfied with this order and 30 Pitts- 
bargii dealers appealed from tlie order to the Dauphin County court on 
October 20, 1937. The court granted the petition and issued a super- 
sedeas on November 26 retroactive to October 1, fixing the price at 
$2.92 per hundred pounds, 27 cents under the Commission order. 

On December 17, the Milk Control Commission opened a hearing 
in Pittsburgh and the hearing continued int3 the new year with recesses 
for the holidays* During this period dealers were for the most part 
pajdng at the §2.92 rate and making provision by bond to cover a re- 
versal of the decision* 



U* The Court Decisions 
The legal pattern of milk price control has been described 
bat that pattern has been snipped and patched by court caprice* The 
volumes of written words are but a small part of the law. Words may 
be interpreted by judges to mean tie direct antithesis of their ori- 
ginal thought* 

In the case of Rohrer^s Med-0-Farms Dairy versus the Milk 
Control Board the judgment of the lov/er court was that the Milk Control 
Act was constitutional. The decision was reversed in the Superior 
Court where the majority of the judges declared the law violated the 
^Dae Process" clause and the first section of the Bill of Rights of the 
State Constitution* In his dissenting opinion Judge Keller states: 



35 



''To say that the "Due Process" clause in our Bill of Rights, 
or the declaration that all men have certain inherent and indefeasible 
rights, among them those of acquiring, possessing and protecting 
property, prevents the state from dealing with a situation of this 
nature, with consequences so fraught with harm and danger to the 
general public, is carrying its meaning far beyond what anyone contem- 
plated when it was first promulgated, or even when last adopted as part 
of our present Constitution." 

The Supreme Court upheld the opinion of the minority of the 
Superior Court bench* The law was declared constitutional by the high- 
est test witiiin the state. The constitutionality of the law had al- 
ready been proved with respect to the Federal Constitution when a simi- 
lar act by New York State was upheld. 

In the case of the Milk Control Commission versus Eisenberg 

Farm Products, a Pennsylvania corporation, the practices which become 

a part of interstate commerce are defined: 

"Conclusions of Law" 

"1. All of the transactions of the defendant including the 
purchase of milk from the Pennsylvania farmer-producers, within the 
Commonwealth of Pennsylvania, constitute interstate commerce. 

"2. T>ie regulations sought to be imposed upon tie defendant 
by the plaintiff, including the taking out of a license as provided 
by the Act of April 26, 1937, posting a bond conditioned for the pay- 
ment of all amounts due to farmers under the Act and under orders of 
the Milk Control Commission, and to pay such milk prices to the far- 
mers as is required by the Commission would constitute a regulation of 
and a burden upon interstate commerce. 

"3» The defendant, is not subject to the jurisdiction or 

control of the Milk Control Commission of the Commonwealth of Penn- 
sylvania in the matters complained of by the plaintiff." 

This decision of the court of Common Pleas of Dauphin County 

handed down in 1936 may not fix the law for all time. Mr. Harry 

Polikoff, Deputy Attorney General, mentioned the probability of an 

appeal . 



The effectiveness of the act was severely hampered in 1937 



36 



by an adverse decision of the Daupliin County court* The court declared 
the price which a Commission order required dealers to pay farmers was 
"confiscatory" • The court set aside that price and determined one on 
its own judgment. At a later period the court changed its fixed price. 
These operations of the court appear to be an usurpation of authority 
assigned to the Milk Control Commission. 



The Problems Arising From Milk Price Control 
There are fundamental questions which may be asked concerning 
the advisability of adopting a measure of social control. However, 
v/hen a control program has been accepted and inaugurated there are 
still problems of method and purpose to be considered. 

Dr. Joseph S. Davis, Director of the Food Institute Research 
at Stanford University, has outlined the criteria on which the judgment 
of a control program may be based^5. He would ask first if the correct 
amiiysis had been made of the situation to be met, then whether the 
underlying assumptions of the policy were correct. In observing the 
program once it had been set up he would ask how far the intended re- 
sults had been achieved, whether tlie secondary results were welcome or 
tolerable, and whether tlie net resu lt was wortli the cost^^. 

The following pages which are devoted to specific problems 
of milk control have been developed with these appraisal criteria in 
mind. The mechanics of consti'ucting an order, the division of the 
state into areas, the study of prices fixed and the recognition of 



15 



Davis, Joseph S. Observations on Agricultural Policy. 
Farm Economics, November 193'7. Page 861. 



Journal of 



16 



Emphasis added by the author. 



37 



production control features by the Board will be examined* 



1* The Development of an Order 
The order has been designated as the legal organ which the 
Control Commission shall use to convey its commands to the milk In- 
dus try. The routine by wliich an order is conceived, written and made 
effective is a problem in itself. 

The law provides for hearings at which interested parties may 
present their cases. Such hearings must precede the formulation of an 
order. The Commission may act on its own initiative to start the mach- 
inery of a new order, or the hearing may be the outcome of a petition 
on the part of producers or distributors. The Commission is not re- 
quired to hold a hearing even though requested to do so by petition. 
The necessity for a hearing is judged by the Commission. 

Notices of hearings are released to the Associated Press and 
to International News Service. Interested persons are infonned direct- 
ly. The hearing is opened by a member of the Commission and all who 
wish to testify indicate their intention on fora cards. Hearings are 
open to anyone who cares to speak and tlie length of address is not 
limited, although ttie chairman may specify some particular questions 
for consideration arid restrict discussion to these questions only. All 
testimony is recorded by a stenographer employed by the Commission and 
is on file at the Harrisburg office. Witnesses must swear to testimony 
which is to become a part of the record. 

Relevant testimony and reasons for action must be prepared 
for a document called "Findings of Fact". "Findings of Fact" must be 
certified by each member of the Commission present at the hearing and 



38 



must be filed for public reference. If the hearing brings forth facts 
calling for action, an order is framed by the Commission members with 
the advice of their legal counsel. Orders must be posted six days be- 
fore the effective date and must be mailed to dealers three days in 
advance of the effective date. 

The smooth machinery of the law has slipped a cog now and 
then. Chairman Stanford emphasized the information-seeking phase of 
the hearing at the first meeting at Erie, February I3, 193J^, He cited 
cases of hearings by other agencies which had added pepper to the milk 
stew. This purpose was forgotten, it seems, at the first Philadelphia 
hearing when the principal item of business was hurling accusations of 
one sort or another. 

There is no arranganent for agreements between producers and 
distributors outside iiie hearings, but testimony presented at the 
Harrisburg hearing on February 18, I937 Indicated that some compromise 
had been attempted. Representatives of producers and dealers and the 
Board members appeared to favor these preliminary efforts^'^. 

The Commission interprets its responsibility for obtaining 
information as more than listening at hearings. According to Chairman 
Eisaman, the Board does not sit as a board of jurors restricted to the 



17 



MilK Control Board of the Commonwealth of Pennsylvania. Harrisburg 
hearing, February 18, I937. Mr. Stewart Senft, representing farmers 
of York County, reported that he had tried to get the dealers to 
confer and draw up a tentative order to be presented to the Board 
for approval. The dealers refused to cooperate. Mr. Snyder (of the 
Board) brought out the fact that the Board had had similar difficulty 
in requesting producer organizations to confer. Mr. James Sutcliffe, 
representing dealers, admitted that some request had been made for a 
conference but he said he did not consider tlie invitation official. 
Mr. Sutcliffe spoke in favor of such a conference. 



39 



immediate testimony in the formation of orders • For example, at the 
hearing prior to issuing Pittsbargh Order A«-13, the facts presented 
by dealers were not considered representative since the dealers' 
costs used represented two of the most inefficient dealers in the area. 
The Commission proceeded to check the facts through their own figures, 
and the order was based on the records the Commission obtained* 

Dealers at this Pittsburgh hearing asked for immediate action 
because they insisted they were losing money each day the order was de- 
layed. The Inter'-State Milk Producers Review carried several articles 
during the summer of 1936 in which the Board was criticized for delayed 
action. It has been possible to trace the lapse of time between hear- 
ings and the subsequent orders for each of the orders promulgated under 
the permanent act, table 3. 

If the purpose of the hearing is to obtain timely information 
for the determination of just prices, it is altogether possible that 
the means defeat the purpose. Timely information in March may indicate 
a movement of prices contrary to what is needed in June. The compara- 
tive celerity witti which orders have been issued since July suggests a 
recognition of the necessity for quicker action. The six day notice 
required before effectiveness is partly responsible for the delay. It 
is not probable that this period of notice could be decreased. 

Complete understanding of the local situation should not be 
saci-ificed for speed. A new order which does not help the situation is 
no improvement. The efficiency of the Commission could be materially 
increased by a reorganization of personnel. First, the functions car- 
ried out by the Commission members themselves should be limited to re- 
viewing and administering orders. The compilation of evidence and the 



^0 



Table 3 - Length of Time Intervening Between Date of Hearing and 

Effective Date of Subsequent Order, for the First Eighteen 
Orders Issued by the Milk Control Coniraission. 







Days elapsed 


Order number 


Effective date 


between hearing 






and effective date* 


A-1 


June 2, 1937 




90 


A-2 


June 2, 1937 




83 


A-3 


June 2, 1937 


^3 


- lOA 


k-A 


June 2, 1937 


96 


- 103 


k-5 


June 2, 1937 




97 


A-6 


June 2, 1937 


91 


- 103 


A-7 


June 2, 1937 


83 


- 104 


B-1 


June 2, 1937 


83 


- 104. 


B-2 


Jiine 2, 1937 


B3 


- 104 


A-8 


June 2, 1937 


96 


- 103 


A-9 


Never effective 




«» 


A-10 


July 16, 1937 




30 


A-n 


July 1, 1937 




15 


A-12 


July 1, 1937 




15 


A-13 


July 1, 1937 




15 


A-l<4 


July 1, 1937 




15 


A"15 


July 16, 1937 




30 


A-16 


July 16, 1937 




30 


A-17 


July 16, 1937 




30 


A-18 


October 1, 1937 




51 



*n 



yjhen more than one hearing Kas hel rl for an order the time elapsed is 
expressed by range • 



framing of orders should be handled by a corps of technical workers 
under the supervision of a milk marketing specialist. This specialist 
in milk marketing of course should be chosen on merit and his discharge 
for anything but incompetency forbidden. He would be resx>onsible for 
interpreting policies and for coordinating the many orders to fit the 
genercj policy. 

Another cl^^ange needed ic the definition and adherence to some 
generel policy. All through the development of the law In the form of 
orders there has been lacking a guiding sense of direction. New fea- 
tures have been added vathout consideration of tlie repercussions or the 



41 



long time effect. 

No great advances in efficiency and type of administration 
can be expected as long as tiie Comralssion is hampered hy the incompe- 
tency of employees who rei)resent political patronage. The accomplish- 
ments of the Commission to date in the fields of audits and litigation 
can be directly attributed to the superior personnel in these depart- 
ments* 

2« ^rea 

The 14,7,629 Pennsylvaiiia farms on \7hich cows were milked in 
1934 cannot be dealt vdth as a single class* There are fund^onental 
differences ?;hich divide the types of farms that make up the fifteen 
and a half million acres of farm land in Pennsylvania. Differences in 
topograxAy, soil, climate, location of markets and established market-^ 
ing routes form areas of vastJ.y varied production and marketing prob- 
lems. In determination of milk prices each area vdUi its ovm char- 
acteristics should be dealt vdth as a separate unit. 

Numerous tjnpes of farming are practiced in this state. The 
differences are a result of variations in topography, soil and growing 
season. "The elevation varies from nearly sea level in the southeast 
to peaks of over 3,000 feet in the south central part^^." The south- 
eastern level tract, the Allegheny plateau, the valley fanris of the 
central and northern sections and the nortimestern level areas cause 
basic differences in famdng r^ractices. 

The northwestern and the southeastern lovdands enjoy compara- 
tively long growing seasons. The climate is tempered in both cav^es by 



18 



Tlie Pennsylvania Agricultural Experiment SUition Bulletin No. 305, 
page 5. 



^ 



the proximity of large bodies of water. The plateau and mountain re- 
gions have shorter growing seasons. Rainfall and soil characteristics 
also vary throughout the state* In addition to these natural factors 
of difference the availability of market outlets is important in de- 
termining the type of farming. 

The state has been divided into 25 "type of farming" areas by 
Emil Rauchenstein and F. P. Weaver^9^ It would not be logical for a 
price control agency to group the Philadelphia Truck Crop area with the 
Allegheny Mountain Self-sufficing area. The Northeastern Dairy section 
has its oY/n problems; tlie Anthracite Coal area its unique features. 

The marketing routes in Pennsylvania lead to tliree primary 
centers of consumption, Philadelphia, Pittsburgh and New York, and to 
numerous secondary markets. The small markets are important. "Nearly 
60 per cent of the non-^farm population live in 102 incorporated places 
each having a population of 10,000 or more'^^." These three city mar- 
kets are supplied both hy direct shipped milk and by milk concentrated 
at receiving stations. The country plant areas supplying these cities 
overlap each other^. 

In addition to the fluid outlets there is a manufacturing 
outlet for Pennsylvania milk. Dealers who manufactured the greater 
part of the milk they purchased handled 19 per cent of all, milk bought 
by Pennsylvania dealers in April 1934.^^» 



19 



f-M > 



G 









The Pennsylvania Agricultural Experiment Station Bulletin No. 305. 

The Pennsylvania Agricultural Experiment Station Bulletin No. 327, 
page 6. 

Idem* Page 9» 
Idem. Page 12. 



43 



The cost of inspection of milk when producers are located far 
from the consuming center is a limiting factor in the determination of 
a milk shed* It is possible that the extra cost of inspection at a 
distance is more than offset by high land values and increasing labor 
costs near consuming centers ♦ 

The factors heretofore mentioned have been those which deter- 
mine whether a fanner can profitebly engage In milk production and what 
market he supplies • A control agency must also recognize underlying 
differences which make it necessarj^ for a dealer in one area to absorb 
more spread than in another. The purchasing power of the consumer is 
also an influential item. 

Dr* Leland Spencer has done the most comprehensive published 
work in costs of distribution^^. He found tliat dealers' operating 
costs expressed as a per cent of sales were lower in up-state New York 
cities than in the City of New York. The largest single item of ex- 
pense is that of delivering and selling. It is to that item then that 
most attention should be turned in an effort to increase efficiency. 
Physical barriers to delivery, the unionization of labor and the keen- 
ness of competition give rise to variations in selling and deliverv 



costs. 



For very definite reasons consumption per capita and total 



consumption wxy within the state. Milk consumption is closely related 
to income per family. Although the differences are not great v.lthin 
the higher income groups, there artt marked differences betY/een the per 
capita consumption of the poor income groups and that of the middle or 



-^Spencer, Leland. Cornell University. Report to the New York Stete 
Milk Control Board. March 24, 1934. 



Kh 



well-to-do groups. Nationality is another factor which affects milk 
consumption. The per capita consumption of milk by Jews in Philadelphia 
in 1929 was higher than that of native whites or of Italians and color- 
ed races* Both the Italians and colored races reported very little use 
of milk^^-. In determining a retail price these factors are important 
and the area liudts must be set with the description of the market in 
mind. In the Philadelphia metropolitan market the demand for Grade "A" 
milk is far greater than in any othier part of the state. 

Tlie Pennsylvenia Milk Control Board and the Milk Commission 
have recognized these difficulties and thie shifting of boundaries that 
were first set up shows that they have discovered faults in the loca-- 
tion of some of trie boundaries. The areas described by every order of 
the Board and of the Commission are shown on maps on pages v to xv of 
the Appendix. The areas were determined in accordance vdth testimony 

presented at hearings. 

The importance of considering a number of determinants in the 
definition of areas for fixing milk prices has been outlined in the 
preceding pages. But principles and theories are not the most practi- 
cal guides for setting up usable boundary areas. It appears necessary 
for the purpose of administration that the boundaries of political 
units be followed. The township unit, while not perfect, appears to be 
the only usable unit. The dissimilarities within one county will be 
described in the ensuing paragraphs. Centre County has been chosen to 
illustrate this point, partly because it supplies so many markets and 
partly because the data are readily available. 



Pennsylvania Agricultural Experiment Station Bulletin No. 245 • 



U5 






The eastern townships of Centre County belong in the Appala- 
chian Valley Dairy section • The v^estern and northern tomiships are a 
part of the Allegheny Mountain Part-time and Self-sufficing areas. The 
best interests of the farmers or of the consumers cannot be satisfied 
by grouping these townships into one administrative area. The dairy 
problem to the farmer who keeps a cow to fill the family milk bucket 
is far different from the problem wliich faces the farmer who depends 
upon his herd for a cash income. 

Figure 3 gives some indication of marketing eireas witliin the 
county. The producers are considered a fair sample for the purpose of 
showing usual movements of milk. The lack of date, for the western and 
northwestern tovmships is representative for the reason that the area 
is not favorable to daiiy farming. The lines connect producers* farms 
and the plants to v/hich milk was delivered. County and township bound- 
aries are shown for the purpose of illustrating how easy it is for milk 
routes to cross political barriers. Farmers in Ferguson Township sold 
to Supplee-Wills-- Jones at Huntingdon, to Sheffield Farms plant at 
Belief onte, to a Tyrone dealer, and to local dealers in State College. 
Producers selling over county boundaries linked Centre County with 
Clinton, Blair and Huntingdon Counties. 

In Centre County there is not ordy the problem of country 
plant and local retail milk producer" on adjoining farms but the country 
plant milk is routed to two primarj^ markets as well as to secondarj^ 
markets. The eastern half of the county is definitely a part of the 
New York shed, but in the southwestern townships the New York market 
competes with the Philadelphia and Altoona markets. For the purpose of 
justifying producer prices it seems necessary to make some division of 



• New York 

O Philadelphi 

A Tyrone or Altoona 

A Local Wholesale 

9 Local Retail 




Altoona ^^ 



Figure 3 - Location of Farms in Centre 

From 7/hich Milk Was Sold to 
Markets, 1931-1935 



County 
Various 



^"S, Huntingdon 



ON 



47 



the county into two areas, one affected by the New York market and the 
other influenced by the Philadelphia and Altoona buyers* The boundary 
appears to be the Tussey mountain ridge in Ferguson Township and the 
township boundarA'^ between Fatten and Benner, and Huston and Union Town- 



ships 



Centre County does not illustrate the problems of a metro- 



politan consxamers* market. The local markets are all under 5>OCX3 popu- 
lation and are served by producer-distriUitors or distrilnitors who pur- 
chase from less than a dozen producers ♦ However, the fact that the 
consumer is so close to the producer makes a problem of another type* 
Can there ever be satisfaction among fanners when one enjoys the pri- 
vilege of the local market while the other must accept manufacturing 
or country plant prices? This is perhaps the greatest point of con- 
tention in the confusion of price arguments* It Vv^ould seem that the 
perfect di 'vision of the sta.te into areas affected by similar economic 
interests is impossible* Township boundaries present a better working 
basis than the county* A detailed study of areas would be helpful to 
the Commission* 

In conclusion to these statements setting forth some differ- 
ences in area it seems fitting to describe the manner in which the 
Control Boards have interpreted these differences. They have set up 
price schedules for the various areas in the state. Tlie Philadelphia, 
Pittsburgh and State-wide areas ai'e compared in table l^. The price for 
fluid milk in the State-u^ide area is consistently lower than in either 
of the metropolit<'An areas. As between the two cities there seems to 
have been a reversal of opinion* Up to 1937 the price for fluid milk 
in Philadelphia was higher than the Pittsburgh price, but consistently 



TABLE ^ - Dealers* Buying Price for 3.5 Per Cent Grade ''B" Milk f.e.b. in the Major Classifications at Three 

Markets Since the Inaugurf^tion of Milk Control, (In Dollars ^oer Hundred Pounds)* 



-«-^«u~4t — mkJtma^t^^^l^mt^ '^^"%fciiWii.,^'^--^^^^3Wtfc<ir' % m m» 



Fluid Milk 



Fluid cream 



Butter 





Philadelphia 


Pittsburgh 


State- wide 


Philadelphia 


Pittsburgh 


State-Td.de 


Philadel] 


phla Pittsburgh 


State- wide 


193^ 




















April 


$2.60 


$2.] 5 


♦2.33 


$1.70 


$1.70 


ei.7C 


.99 


e .93 


$ .99 


May 


2.60 


2.3 5 


2.33 


1.7C 


1.70 


1.70 


1.G3 


.96 


1.03 


June 


2.60 


2.2A 


2.24 


i.a 


1.41 


I.a 


.«7 


.87 


.87 


July 


2.55 


2.2A 


2*4c-4 


1.39 


1.39 


1.39 


.86 


.86 


.86 


August 


2.55 


2.36 


2.24 


1.51 


1.6« 


1.51 


-o6 


.96 


.96 


September 


2.60 


2.4-8 


2.24 


1.35 


1.68 


1.35 


.90 


.95 


.90 


October 


2.60 


2.^8 


2.24 


1.14 


1.68 


1.39 


.94 


.94 


.94 


November 


2.^0 


2.^8 


2.24 


1.23 


1.78 


1.48 


1.03 


1.C3 


1.03 


Deccinber 


2.60 


■ 2.4.S 


2.24 


1.32 


1.85 


1.53 


1.08 


1.C8 


1.08 


1935 


- 


















Janucry 


2,^ 


2.48 


2.24 


1.50 


1.99 


1.65 


1.20 


1.20 


1.20 


February 


2.60 


2.48 


2.24 


1.57 


2.07 


1.72 


1.27 


1.27 


1.27 


March 


2.60 


2.43 


2«24. 


I.a 


1,88 


1.56 


1.11 


1.11 


1.11 


April 


2.60 


2.48 


2.24 


1.51 


2.00 


1.66 


1.21 


1.21 


1.21 


May 


2.60 


2.48 


2.24 


1.26 


1.70 


1.41 


.96 


.96 


.96 


June 


2.60 


2.48 


2.24 


1.15 


1.57 


1.30 


.85 


.25 


.85 


July 


2.60 


2.48 


2.24 


1.34 


1.55 


1.29 


.84 


.84 


.84 


August 


2.60 


2.48 


2.24 


1.17 


1.60 


1.32 


.87 


.87 


.87 


Septeaber 


2.60 


2.48 


2.24 


1.22 


1.65 


1.37 


.92 


.92 


.92 


October 


2.60 


2.48 


2.24 


1.28 


1.73 


1.43 


.98 


.98 


.98 


November 


2.60 


2.48 


2.24 


1.43 


l.oo 


1.58 


1.13 


1.13 


1.13 


December 


2.60 


2.43 


2.24 


1.49 


1,98 


1.64 


1.19 


1.19 


1.19 



4^- 

CO 



'^m^^^iSA 



TABLE ^ - (Continued) Dealers' Buying Price for 3.5 Per Cent Grade "B" Milk f.c.b. in the Major Classifications 

at Three Markets Since the Inauguration of Milk Control, (in Dollars per Hundred Pounds) 













Milk ^ped 


as 










Fluid milk 






Fluid cr aa 
La Pittsburgh State-^lde 




Butter 


• 


4 


Philadelphia Pittsburgh State-wide 


Philadelph: 


Philadelphia 


Pittsburgh 


State-ride 


1936 




















Jana:-iy 


^2,55 


♦2.^3 


#2.22 


$1.66 


^1.90 


$1.73 


$1.21 


$1.21 


$1.21 


February 


2.50 


2.38 


2.19 


1.80 


1.80 


1.80 


1.29 


1.29 


1.29 


March 


2.50 


2.28 


2.19 


1.20 


1.80 


1.80 


1.13 


1.13 


1.13 


April 


2.50 


2.28 


2.19 


1.80 


1.80 


1.80 ■ 


1.08 


1.08 


1.08 


May 


2.50 


2.38 


2.19 


1.80 


1.80 


1.80 


.96 


.96 


.96 


June 


2.50 


2.38 


2.19 


1.80 


1.80 


1.80 


l.OA 


l.CA 


1.04 


July 


2.50 


2.38 


2,19 


1.80 


1.80 


1.20 


1.17 


1.17 


1.17 


August 


2.50 


2.38 


2.19 


1.80 


1.80 


1.80 


i.ai 


1.2.; 


1.24 


September 


2.50 


2.38 


2.19 


1.80 


1.30 


1.80 


1.22 


1.22 


1.22 


October 


2.69 


O CO 


2.28 


1.76 


1.92 


1.76 


1.27 


1.26 


1.27 


November 


2.28 


2.65 


2.38 


1.76 


2.02 


1.76 


i.a 


1.41 


1.41 


December 


2.88 


2.25 


2.38 


1.79 


2.02 


1.79 


i.u 


1.40 


1.^4 


1937 




















January 


2.88 


3.05 


2.38 


1.79 


2.02 


1.79 


l.U 


1.40 


1.44- 


February 


2.88 


3.05 


2.38 


1.79 


2.02 


1.79 


i.-u 


1.40 


1.44 


March 


2.88 


3.05 


2.38 


1.25 


2.02 


1.85 


1.50 


1.45 


1.50 


April 


2.28 


3.05 


2.38 


1.73 


2,02 


1.73 


1.38 


1.35 


1.38 


May 


2.28 


3.05 


2.38 


1.71 


2.02 


1.71 


1.36 


1.23 


1.36 


June 


2.88 


3.05 


2.38 


UAA 


2.02 


l.iW 


1.14 


1.14 


1.14 


July 


2.28 


3.05 


2.38 


1.58 


2.02 


2,00 


1.17 


1.17 


1.17 


August 


2.88 


3.05 


2.38 


1.7-4 


2.02 


2.00 


1.21 


1.21 


1.21 


September 


2.88 


3.05 


2.38 


1.25 


2.02 


2.00 


1.30 


1.30 


1.30 


October 


2.28 


2.99 


2.38 


1.90 


2.02 


2.00 


1.3A 


1.34 


1.34 


November 


2.88 


2.99 


2.38 


2.00 


2.02 


2.00 


l.-i2 


1.42 


1.42 


December 


2.88 


2.99 


2.38 


2,QA 


2.02 


1.97 


1.A6 


1.46 


1.46 























50 



lit 



during 1937 the Pittsburgh price was the higher. In the period before 
milk control was adopted the retail price had been consistently higher 
in Pittsburgh than in Philadelphia. 

Prices to farmers for milk used as fluid cream have been 
lower in the Philadelphia market than in any of the others during the 
period of control* This is undoubtedly due to the great demand for 
cream in that city and to the fact that western shipments ai-e waybill ed 
to Philadelphia. It is Yery likely that the Pittsburgh market will re- 
ceive a greater proportion of cream shipments if the discrepancy in 
area prices is continued* 

The price paid to farmers for milk used in Initter was almost 
uniform for the entire state during this same period. The greatest 
spread betv,/een areas was four cents per 100 pounds. 

In a free market the spread between the dealer's buying and 
his selling price is determined by three principal factors, the bar- 
gaining power of the producer, the bargaining power of the consumer and 
the bargaining power of the distributer. The main force behind bar- 
gaining power is the condition of supply and demand. However, in an 
economy hampered in its free movement as the dair^/- industr^^ is in this 
state, unnatural bargaining power may give undue weight to other than 
economic forces. 

In most cases when the Class 1 price to farmers has been in- 
creased the retail price has also been raised, but there does not ap- 
pear to be an absolute relationship between the increavSe in price to 
the producer and the increase in price to the consumer, figure 4.. In 
the three areas, Philadelphia, Pittsburgh, and State-wide, the spread 
on Class 1 milk has not been lowered since October 193A* This is im- 



m 







52 



portant to note in considering claims of the political leaders that 
milk price control has continued to curb the profits of milk dealers. 
Careful attention should be given the use of the word "spread". By 
spread on fluid milk is meant the difference between tiie f .c.b. price 
paid fanners and the retail price of Grade "B" in quart bottles. The 
increased spread does not necessarily mean a liigher profit to distri- 
butors but the increasing breadth must be considered in its relation to 
production and consumption regardless of whether the spread is due to 
increased costs or to increased profits. 

The spread25 on fliiid cream was consistently less in Pitts- 
burgh than in other areas until recent!.y, figiu-e 5. The lower spread 
may be an adjustment to the higher price demanded by farmers in the 
Pittsburgh area and to the ability to handle the product at some 
profit. This might not be a net profit because costs could be made up 
on the fliiic. milk market v;here the spread was v/ider. 



3. The Problem of Fixing Prices 
The greatest problem of milk control arises from its price- 
fixing authority. lir. J. M. Tinley of the Giannini Foundation has 
pointed out the difficulties of price fixing and has expressed a very 
important conviction .« He writes: 

"The difficulties of administering price-fixing laws are 
great* In an economy characterized by continual expansion of price 
fixing into more and more fields of economic activity, however, such 
legislation for individual industries seems inevitable^^.ti 



^^Spread on fluid cream as used here means the difference between the 
f.c.b* price paid farmers for Class 2 and the retail price of 20 
per cent cream in half-pint bottles^ 

^^Tinley, J» M. Economic Considerations in Fixing Resale Prices of 
Milk. Giannini Foundation of Agricultural Economics. Mimeographed 
Report No. 57. Page 9- 



mmmmmmfmmmi^mm^fmmmmmmmKtKHKttflKKlt 



IPMPMiillWIIiM.'iijn ..«i . m 







54 



The following evaluation of price-fixing experiments and suggestions 
for futxire action will be founded on this vievvpoint of the inevit- 
ability of regulation. The citizens of Pennsylvania have elected to 
set up a permanent price-fixing agency in this state. Unless there is 



a 



radical change in thought, tiiere is little reason to look for a re- 



peal. 7^1 th this recognition of the permanency of some type of control, 
it becomes increasingly important to evolve some T/orkable standards for 
establishing prices. 

The fact that milk and milk products have different elasti- 
cities of demand should be recognized by any agency regulating prices. 
It is generally conceded that the demand for butter is elastic, the de- 
maxid for cream slightly less elastic and the demand for milk less elas- 
tic than the demand for either of the other two. However, to say that 
fluid milk consumption is less elastic in comparing it with other dairy 
products does not mean that it is inelastic. Reliable evidence con- 
cerning the effect of an increased price of bottled milk on the con- 
sumption is not available. It may be suggested by figures showing 
consumption of substitute products. The common substitute for fresh 
milk is, of course, canned evaporated or condensed milk. The sub- 
stitution is not entirely for fluid milk.. Canned milk may take the 
place of cream or it may represent additional consumption. For that 
reason the fluctuations in the consumption of canned milk do not serve 
as a reliable indication of the demand for fluid milk. 

Even though the degree of elasticity in the demand for fluid 
milk cannot be exactly determined it may be recognized, and a close 
check on the effects of price changes should be made by the Commission, 
Assuming that the consumption of milk is very inelastic, tliat the same 



55 



amount will be consumed at any price, it ?R3uld seem wise from tlie view- 
point of Pennsylvania dairymen to maintain the fluid milk price at a 
much higher price tlian that charged for milk used as fluid cream or for 
the manufacture of batter. It is possible that if the price were made 
too high, ou-t-of-state sources of fluid milk would supplant Pennsyl- 
vania milk. 

The more probable assumption is that the consumption of milk 
is elastic to a degree^ but that it is not as elastic as the demand for 
other dairy products. In that case an increase in the fluid milk price 
can increase returns to farmers only as long as the price increase is 
not great enough to drive any buyers off the market. If the consump- 
tion of fluid milk is decreased the proportion used in other classes 
will increase and the combined price to farmers will decrease. The 
price of milk used in cream and butter must be maintained at the econ- 
omic level reached by the xvorld supply and demand. 

It may be tliat a lower Class 1 price would enable Pennsyl- 
vania dairymen to sell more milk in this class and thereby receive a 
greater net return. The lower Class 1 price would be higher than the 
price for the alternative outlets in Class 2 or 3, Any agency fixing 
prices should recognize the effects of either of these policies both in 
relation to producers and to consumers. 

In the development of milk pricing policy tlie more elaborate 
price-fixing schedules have been constricted for areas adjoining con- 
sumption centers* The legal argument which forms the basis of orice 
fixing is the plea that a safe supply of bottled milk must be guaran- 
teed tue city populace. The period of control has coincided with that 
period of the cycle reprosenU^d by ample supplies, Tlie problem has 



56 



ma 



been one of preventing the abundant supplies from disrupting the market. 

Costs of inspection and transportation tend to keep milk from 
nufacturing areas oat of the fluid market. These costs, however, are 
gradually changing, and with shifting differentials between the markets 
for manufacturing and for fluid milk, the price becomes the balance 
which evens the flow into the different channels. /Ictuy-lly, the power 
of interests fighting to maintain a limited market has been a potent 
factor in the attempt to hold nearby prices at a premium. 

A price regulating body is confronted with the task of set- 
ting up not one price schedule but many. Both producer and consumer 
prices vary in different areas of the state, according to use, with 
variations in quality and batterfat content, and with varying costs of 
distribution. 

"Perliaps the most fundamental difficulty in pricing milk to 
distributors on a flat-price basis is found in the fact that distri- 
butors tend t v) vary widely as regards the proportion of milk sold in 
each use, coupled with the additional fact that, in a market suffi- 
ciently large, differences in transportation costs per unit of milk 
and tiie product equivalent of such unit of milk operate so that the 
market tends to be zoned and milk used for fluid milk must command a 
price sufficiently higher than tliat of the creajn equivalent jf a unit 
of milk tx) cover the higher cost of transporting milk in fluid form 
rather tlrian as cream or other product form^^.w 

Price differentials which reflect the variations necessary 
in a price schedule are second in importa.nce only to the problem of 



4- 



he general level. In the follo?/ing pages, some effects and com- 



parisons Ydll be presented to show how prices set by the Pennsylvania 
Milk Commission have been established and changed ^vith too little 
recognition of the economic facts involved. 



07 



•Qaumnitz, E. W. and Reed, 0. M, Some Problems Involved in Estab- 
lishing Milk Prices. Page 29. 



57 



MILK PRICES AND OTHER PRICES ~ It is not difficult to forget 
the general picture of a complex program when it becomes necessary to 
deal with a practical problem. The general picture is none the less 
important and oxxj decision of a pi^ctical nature is in no sense prac- 
tical if it is not formulated vilth the broad viewpoint in mind* 

One of the reasons for establishing a milk control agency 

was the desire to correct the disparity between the farm price of milk 

and other prices. This purpose is expressly stated in Acts 37 and 4.3* 

"VJhereas, the present acute economic emergency being in part 
the consequence of a severe and increasing disparity between the prices 
of milk and other commodities, which disparity has largely destroyed 
the purchasing power of milk producers for industrial products, has 
broken down the orderly production and marketing of milk, and has 
seriously impaired the agricultural assets supporting the credit struc- 
ture of the Commonv/ealth and its local governmental subdivisionj • . . . ." 

The achievement of this purpose is assumed in the present 
Act No. 105 and the intention to continue such purpose is embodied in 
the law. 

"f •».. .public control of the milk industry in recent years is 
stabilizing the conditions therein and a relaxation of control will 
cause a return to the unliealthiful, uneconomic, deceptive and destruc- 
tive practices of the past vdth respect to this paramount industry 
upon wliich the heal.th and welfare of tiie Commonwealth largely de- 
pends; ••..•" 

An examination of the movements in milk prices and other 
prices affecting the farmer does not show any lessening of this dis- 
parity. The prices paid farmers for Class 1 milk direct shipped to 
Pittsburgh are compared v/lth the index of Pennsylvania farm prices of 
feed in figure 6, table 5# The period from 1928 to March 1934 shows 
some lag in adjuL^tment of milk prices to the price of feed, but the lag 
is more marked during the period of control. There is a feeling that 
the control agency is producer minded and is anxious to raise the price 




3 , 



•- T ■ -I - 



I 

X 



-I — i. 



i-^r- 



1:1- til 



i-j'fX 4- 
► t-4 i 



-t-i- 



i 

i 



+— T 



i-i 



FIGUEE 6 - Index Numbers of the Price of Dairy ?eed in PenrisylVaras' arid the Price of Fluid Milk at 



^^ 



Pittsburgh. 392d-19; 



71 



f— r"'-l'-'M---i-'-'i 1---^ 



t 



4— H h 



r ' ' ' j' ' ' I ' I 



-1 



-tri 



i_Lj. 



I I I I I I ' I 



■rnt= 



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4T-rt:n 






-t-1-*- 



-U 



i 



— r 



t—r- 



»-i- 



-•4 



Xt 



4 



T-t-r 



I ii I >i 



■t 



i . 1 


4U.' 


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.-,-i-,-i 



trtTThTTTton: 

I 1 . _..-- ^14-4-;- 



a 



I ; M ! 



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S 



i-44- 



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TABLE 5 - Pittsburgh Class 1 Prices in Dollars Per Hundredweight 3-5 Per Cent Grade '^B" Milk, 1928-193?^ 





Januai'y 


FebFuarj' 


March 


April 


May 


June 


Jvily 


August 


September 


October 


November 


December 


1928 


3.90 


3.50 


3.50 


3.10 


3.10 


3.10 


3.10 


3^A5 


3.45 


3.?5 


3.85 


3.85 


1929 


3.S5 


3.85 


3.85 


3.A5 


3.^5 


3.>i5 


3.45 


3.45 


3.50 


3.50 


3.50 


3.45 


1930 


3.40 


3.00 


3.00 


3.00 


3.00 


3.00 


3.00 


3.20 


3.40 


3.40 


3.05 


3.05 


1931 


3.05 


2.65 


2.65 


2.68 


2,68 


2.68 


2,68 


2.68 


2.68 


2.25 


2.25 


1,70 


1932 


1.70 


1.70 


1.70 


1,70 


1.70 


1.70 


1.70 


1.70 


1.83 


1.95 


1.30 


1.70 


1933 


1.30 


1.30 


1.30 


1.55 


1.55 


1.55 


1.55 


1.90 


1.90 


1.90 


1.90 


1.90 


193a 


1.90 


1.90 


1.90 


2.15 


2.15 


2.24 


2.24 


2,36 


2.48 


2.48 


2,48 


2.48 


1935** 


2.43 


2.48 


2.48 


2.48 


2.48 


2.48 


2.48 


2.48 
2.30 


r?t48 

2.30 


^.48 
2.30 


2.4S 
2.30 


^.4S 

2.30 


1936** 


2,38 


2.36 


2,38 


2.38 


2.38 


2.38 


2.65 


2»3S 
2.65 


2,3? 
2.65 


2.65 


2.65 


2.85 


1937** 


3.05 


3.05 


3.05 


3.05 


3.05 


3.05 


3.05 


3.05 


3.05 


2,?9 

2.72 


2.99 
2.72 


2.99 
2,72 



-w-Prices reix^rted by the Dairymen's Cooperative Sales Association for the Direct Shipped area. 

^Hfvrnere two orices are indie- ted for one nontli the price obove the line is the price set by the Control Board 
and the price belov; the line is the actual raarket price reported by Dairymen *s Cooperative Sales Associci tion^ 






60 



to 



fanners at every opportunity. If that is the case, this disparity 
will prove even greater during a period of falling prices. In fact, 
such an event is portended in the reluctance to drop the price of milk 
during tiie recession which started in September 1937^ 

It is probable that the disparity of prices would have been 
less if the price of milk had not been controlled by a state agency. 
Tie liave proof that a local bargaining agency was able to interpret the 
correct movement several months before the state board took action. In 
August 1935 trie Pittsburgh market broke away from the legal price* The 
reduction was partly adjusted by the Control Board six months later* 
In JuH^y 1936 a price rise was Instigated by the market and tbj-ee months 
later the Control Board adopted t!:iat same price for the area. Unusual- 
ly lov/ feed costs and declining business activity in the Fall of 1937 
evidently were not adequately taken into account in the determination 
of a price to farmers. The dealers in the Pittsburglri market again 
broke away from the legal price. The court of Dauphin County upheld 
the dealers and declared that the price fixed by the Comrdssion was 
confiscatory. 

Tlie ratio of pounds of milk to pounds of daii^' feed is a com- 
mon method of associating these two factors. In figure 7 is shown the 
average pounds of milk requii*ed to buy a ton of dairy feed in Pennsyl- 
vania by years from 1922 through 1937. With the average is plotted the 
high and the low average months. The range in 1937 v;as greater than 
for any other year shown. This is further evidence that prices of milk 
and feed liave shov,ii little relation dux*ing the period of artificially 



set prices. 



How doGwS the price for milk received by farmers compare with 



«p 



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nCKJRi: 7 - Pounds of Milk Reqiiiix^d to Buy' a Ton' of Dairy Feed in Penn5yl%^nia, 1922-1937/ (line grajl; 

shows yearly average. Vertical bars show range from the highest to the lovif est months of 
each year.) 



I 



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62 



■'4 



prices received for all farm products? The indexes of these prices on 
a pre«v.^ar base are shown in figure 8» The relation is not noticeably 
greater after April 1934 than before that time* 

The average price paid Pennsylvania fanners for milk is com-- 
pared ydth the United States index of ?jholesale prices in figure 9* 
Here the milk price does appear to be held closer to the v/l^iolesale 
index tlian it was before control was instituted. The rise in milk 
prices compared vdth the wholesale index had begun before the function- 
ing of control of milk prices* It is possible that tlie advent of con- 
trol prevented the svdng from rising to former heights and widening the 
difference between the milk prices and other wholesale commodities* 

Now that the facts have been presented which tend to show 
that milk prices have not achieved a close relationship to other prices, 
we must examine the structure further* The study will be pursued with 
careful attention to the time and extent of price changes and the 
inter-relationships of the class price schedule. 

DirFERENTIALS FOR FLUID USES - Because of the alternative 
opportunity for sales the price of milk used in one dairy product can- 
not long be maintained at a level out of economic adjustment with 
prices of other dair;^ products. A normal adjustment will tenrj to es- 
tablish areas of production for fluid use and for manufacture* Several 
factors determine the limits of production zones. First of all^ cott- 
parative transportation costs set up differences in opportunity* 
Frei^t on fluid milk is higher than for a similar amount of butter- 
fat in cream or butter. The farmer is often limited to one sales out- 
let, but if free to choose he would maice his decision as to sales 
channel by comparing the farm price for milk wiili the price for cream 



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/93^ 



/^3G 






FIGURE 3 - Index Numbers of tiie Price of K Per Cent Milk and the Composite Index of the Prices of 20 Farm - i 1 1 rj j 
i Cominodities in Pennsylvania, 1922-1937. 



I ; ! i 
I I I I 



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/936 



FIGURE 9 - Index Nvimbers of the Price of Milk in Pennsylvania and the United States Index of Wholesale 

Prices, 1922-1937. ■ 



I 

i 



I 

1 



J_i. 



r-f-t ! 



Ij-Li 



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65 



and vdth the manufacturer's price • In so far as supplies of milk are 
similar and may be utilized in any class, the differences in prices 
f*c.b, will approximate the variations in costs of transportation. 

The differential for fluid milk is an absolute amount greater 
than the difference in freight cost* This amount represents the added 
incentive for producing quality milk. The rigid sanitary requirements 
enforced by the various Boards of Health involve an extra cost of pro« 
duction and delay the shift from cream to fluid milk production. The 
limit to availability of marketing outlets is also a deterrent to nor- 
mal adjustment. Such incongruities as tfie location of inspected manu- 
facturing plants in Montgomery and Bucks Counties appear irreconcilable 
Tdth any theory of zones based on transportation differentia] s 2^. For 
the most part, however, manufacturing plants in fluid areas can be ex- 
plained by their established producer clientele built up in a period 
v;hen manufacturing offered advanta.ges. 

The city manufacturiiig plant may have no regular group of 
producers bat may p:jirclm3e milk from other dealers and thus absorb 
their day to day surplus, or it may contract to receive milk from 
specified routes during the flush season. The recognition of compara- 
tive transportation costs within the milk shed as the most important 
factor is necessary to a workable schedule of regulated prices* 

It might appear at first thought that there should be a fixed 
differential by which Class 2 should exceed Class 3 and Class 1 exceed 
Class 2. ThesQ differentials YJould be computed on tlie basis of com- 
parative freight rates (with adjustments for tiie premium for sanitary 



28 



Tlie Pennsylvania Agricultural Experiment Station Bulletin No. 327, 
page 53. 



66 



production) • 

The differential shoald not be a constant but an adjustment 

ficTure and should be sensitive to changes in volume of production* 
Volume of production exerts a direct influence upon the differential 
for fluid ailk because any change in production within the fluid area 
necessit-^tes an expansion or a contraction of the zone which was estab^ 
lished by the former transportation differential. 

Mr. Gaumnitz has explained the adjustment^^^ 

"TJith a uniform increase in production in the butter-supply 
area and the fluid^milk area for a mcirket and with no change in these 
areas, the^ orice of fluid milk would fall more than the price of the 
milk equivalent of butter because of the differences in the elasticity 
of demand for trie two oroducts. The more inelastic the demand for milk 
is, in relation to the^ demand for butter, the greater the difference. 
The greater decline in fLuid-milk prices than in butter prices would 
tend to oroduce some shift in the fluid milk area to the area producing 
butter and some lessening of the former margin between the two. The 
absolute fall in the price of milk would be greater than tiiat of the 
milk equivalent of b.iUer. Territory may be shifted more easily from 
fluid mir^: to butter the smalJLer the absolute difference between them 
in the transportation costs per mile." 

The differentials for fluid uses are shovm in tables 6 and 7 
for the Philadelphia and the Pittsbargh markets. It can be readily 
seen that the Board has not provided for a constant relationship be- 
tween the classes. Some of the variatiDns may be attributed to marked 
changes in neUiods of c^acu].ating formula prices and some changes came 
about because the arbitrarily set prices were not quickly adjusted to 
the automatic changes in fomiula prices. T3:ie differential between 
Class 1 and Class 2 has at tines been higher, and at times has been 
lower than tlie differential between Classes 2 and 3* 

Tlrie differential between Class 1 milk and milk used as fluid 



2 



-^ Gaumnitz, E. W, and Reed, 0. M. 
lishinf{ Milk Prices. Page 72. 



Some Problems Involved in Estab- 



67 



TABLE 6 - Differentials for Uilk in Fluid Uses - Philadelphia 



Differentials in 


dollars per lOO 


pounds 3,5 per cent 


(irade "B" 


Year and month Milk 


over cream Milk 


over butter Cresin 


over butter 


1934 








April 


•90 


1.61 


•71 


May 


«90 


1^57 


• 67 


June 


1*19 


1^73 


• 54 


July 


1*16 


1.69 


• 54 


August 


1*05 


1.59 


• 55 


Septeciber 


1*25 


1^70 


•45 


October 


1*46 


1.66 


•21 


NoveKbor 


1*47 


1.57 


• 10 


December 


1*27 


1.52 


.25 


1935 


• • 


-■ - -^ , , 


* 


January 


•90 


1.40 


.50 


February 


•83 


1.33 


• 50 


March 


1.19 


1^49 


•30 


April 


1.09 


1.39 


• 30 


Mry 


1.34 


1.64 


•30 


June 


1.45 


1.75 


.30 


July 


1.46 


1.76 


•30 


Au^^ust ' *" 


1.43 


1^73 


.30 


September 


1.38 


1.68 


.30 


October 


1.32 


1.62 


.30 


Noveifiber 


1.17 


1.47 


.30 


Deceiuber 


1.11 


1.41 


• 30 


1936 








Jfluu ry 


.99 


1^44 


• 50 


Februp-TY 


.80 


1.21 


•41 


March 


.80 


1.37 


• 57 


April 


•80 


1.42 


.62 


May 


.80 


U54 


•74 


June 


•80 


1.46 


• 66 


July 


.80 


1,33 


• 53 


; August 


•80 


1^26 


•46 


September 


.80 


1.28 


•48 


October 


•98 


1.42 


•44 


November 


1^12 


1.47 


•35 


December 


1,09 


1^44 


•35 


1937 






- • 


Januitry 


1.09 


1^44 


.35 


February 


1.09 


1^44 


.35 


Marcii 


1.03 


1.38 


.35 


April 


1.15 


1.50 


.35 


May 


1.17 


1.52 


,35 


J una 


1.44 


1.74 


.30 


July 


1.30 


1.71 


•41 


August 


1.14 


1^67 


• 53 


September 


1.03 


1.58 


.55 


1 October 


.98 


1.54 


.56 


H November 


•88 


1^46 


.58 


m December 


.84 


1^42 


.58 



68 



TABLE 7 - Differentials for Milk in Fluid Uses - Pittsburgh 

Differentials in dollars par 100 pounds 3.5 per cent Graded 



Year and month Milk over cream Milk over butter Cream over butter 



1934 
April 
May 
June 
July 
lugust 
September 
October 
Noveiflbar 
December 

1935 
January 
February 
March 
April 
May 
June 
July 
August 
September 
October 
Koveuibcr 
December 
1936 
January 
February 
March 

April 
May 

June 

July 

August 

September 

October 

November 

December 
1937 

January 

February 

March 

April 

t'ay 

June 

July 

/iUgUSt 

SepteEber 
October 
November 
December 



.45 

.45 

.83 

•85 

•68 

•80 

•80 

•70 

• 63 

.49 
•41 
•60 
.48 
•78 
.91 
•93 
•88 
•83 
.75 

• 58 

• 50 

• 53 

• 58 
•58 

• 58 

• 58 

• 58 
.58 
.58 

• 58 
.61 

• 63 
•83 

1^03 

1^03 

1^03 

1^03 

1^03 

1^03 

1^03 

1^63 

1^03 

.97 

.97 

•97 



1^22 

1^87 

1.37 

1,38 

1^38 

1^53 

1^54 

1^45 

1^40 

1^?.8 

1^21 
1^37 
1^27 
1^52 
1^63 
1^64 
1.61 
1^56 
1^50 
1^35 
1^29 

1^22 

1^09 
1^25 
1^30 
1^42 
1^34 
1^21 
1.14 
1.16 
1.26 
1.24 
1.45 

1^65 

1^65 

1^60 

1.70 

1.82 

1.89 

1^88 

1^84 

1.75 

1.65 

1.57 

1.53 



.77 
.74 
• 54 
.&4 
•69 
.73 
.74 
.76 
.77 

.79 

.80 

.77 

.79 

.74 

.72 

.71 

.73 

.73 

.75 

.77 

.79 

.69 

.51 

.67 

.72 

.84 

.76 

.63 

.56 

.54 

.66 

.61 

.62 

.62 
.62 
.57 
.67 
.79 
.88 
.85 
.81 
.72 

• 68 
.60 

• 56 



SX! 



-SB 



69 



•»». 



cream and the differential betv/een Class 1 and milk used for making 
butter in the Pittsburgh area have been compared m,th the yearly sur- 
plus as reported by the Dairyraen^s Cooperative Sales Association v/hich 
represented 40 per cent of the milk in the Pittsburgh market in 193Af 
table S, figure 10 ♦ Surplus is used instead of total production be- 
cause the effect of its movement cannot be minimized by reference to 
changes in demand for fluid railk^ It vdll be seen that while surplus 
was Increasing the differentials betv/een classes increased. This move- 
ment is not consistent with economic reasoning and must be attributed 
to the monopoly of state controlled prices. 

Table 8 - A ComL>ari3on of the Volume of Surplus Milk in the Pittsbui^gh 

Market and the Differential v^ for Glass 1 Milk Over Milk Used 
to Produce Cream or Butter, 1934-1937 • 



Year 


Receipts above 


Differential- between 




Class 1 sales* 


Class 1 price and 
price for milk used 
as cream 




(thousand pounds) 


(dollars per 
huhdredweight) 


193ii 
1935 
1936 
1937 


112171 
l/,/,1?? 
U7923, 
159215 


•69 

.63 

.60 

1.02 



Differential between 
Class 1 price and 
price for milk used 
as butter 



(dollars per 
hundredweight) 

1.26 
1.73 



— I* ■ 



"^.lilk marketed by the Dairjnnen's Cooperative Sales Association. Dis- 
tribut<:)rs buying their milk supplies from this cooperative accounted 
for 62 per cent of the milk sold as fluid cream and 40 per cent of 
the milk manufactured in 1934 • Pennsylvania Agricultural Experiment 
Station Bulletin No. 327. 



PRICES mD INTEIiSTATE MOVS^IE^ITS « The Milk Control Commission 



was establisxhed to control the production and distribution of milk in 
Pennsylvania. The vjording of the act also extends the power to regu- 
late the processing and the rss^ile price of manufactured dairy products 
However, the Commission has foreseen the impossibility of regu].ating 







-4-^ 



en 
'Ch.oo sand 

no 



/^o 



-\ 



ISO 



A 



/Vo 



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IZO 



no 



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over dutter 




1-nM_ 



Flo, J MilH 
Oyer Ct^om 



/fjy 



ifss- 



/936 



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OiffrrenTuE/S 
dollar^ p^r- 



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-, — : i. . .. - i ■■ 



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.a— — : ;- 



— ■ — ^ — I — ^- 



FIGURE 10 - The Differentials Betvieen CI est. Prices and the Increase in Surplus in the 

Pittsburgh Market, 1934-1937. 



, : . I ■ : — n .[ „ — —L— I — i.^, .^-i - i I ■ { . <— i -^- . ... i— {-- 1 — '— •- . — I * ■ i — I — —f- 



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71 



commodities like butter. Butter could be controlled only to a limited 
defj^ee on a national scale. It is a commodity of world trade. Fluid 
milk and cream are not intei^ationally traded commodities but they are 
items of interstate commerce. Cream can be shipped greater distances 
tliaii milk because it has higher value per unit and is not so perishable 



a 



s fluid milk. 




The effect of trie law upon interstate shipments must be con- 
sidered from two angles, (l) Y.^at is the effect of regulation upon the 
volume of milk and cream purchased from other states, and (2) How has 
regulation affected sales from this state? 

The United States Departaent of Agriculture Bureau of Agri- 
cultar?il Economics collects data on receipts of commodities by state of 
origin* It appears from table 9 that the percentage of fluid milk fur- 
nished by Penns^rlvania farmers to the Philadelphia consumers has not 
changed markedly in the past tnree yearns . Some tendency toward a 
slightly higher proportion of Pennsylvania milk may be noted. 

The percentage of cream receipts at philadelpliia originating 
in Pennsylvania reached a low in 1935 and increased in the past two 
years, tables 10 and 11, figure 11. Receipts of cream from states ad- 
joining Pennsylvania also show an increase and receipts from western 
states have dropped off • It does not follow that milk price control 
has had anything to do with this trend toward narrowing the market. 
The reaJ. reason has been the more stringent sanitary rules enforced by 

the Boari of Health. 

The posoibility that prices of loarket cream in relation to 
the price paid Pennsylvania producers for milk used as cream may in- 
fluence receipts of cream from other states by causing dealers to buy 




72 



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1933 



If 3^ 



I93S 



/936 



/9J7 



t— rr 



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T~-r~-\": 



FIGURE 11 - Percentage of Receiptc of Cream at Pliiladelphia Originating in Pennsylvania, 1933-1937 



T^ 



^T^ 



i 



4-1 



' ^- 1 



I 1 M 



.<■ ■■■■■fa- 



1* It Mil 



l^^-Nf|M-l4fMHH4-l 






74 






the cheaper cream from the outside, has been examined, table 12» The 
movements do not follov/ a similar pattern and the logical conclusion is 
that the relationship, if it exists, is not one of prime importance. 
There has been a definite increase in sanitary restrictions on fluid 
cream offered for sale in Pennsylvania « This overshadows any influence 
which price relationships might exert in a less restricted market* 

The same restrictions which limit the volume of milk received 
at Pliiladelphia from other states appear t-o affect receipts at New York 
from Pennsylvania, table 13 . The proportion of receipts from Pennsyl- 
vania increased from 1933 to 1935 and tlien decreased until the 1937 
figure nearly equalled the 1933 percentage. The proportion of cream 
receipts from Pennsylvania at Nevi? York has decreased from 13 per cent 
to 9 per cent* 

No milk was shipped from Pennsylvania to Boston during this 
period and no cream was shipped in 1935, 1936 or 1937» Small amounts 
of Pennsylvania cream were sold at Boston in 1933 and 1934.* 

The trend appears to be for less milk and cream to pass over 
state boundaries. The explanation may lie in the sincere desire of 
each state to provide a sanitary supply of milk which has been in-- 
spected by its own Board of Health. Hov/evor, it is likely that the 
restrictions are used to protect local milk and cream from interstate 
competition. To the extent that restrictions are set u^) to regulate 
the interstate shipments for purely economic protection, they cannot 
be justified. The barriers decrease the productive capacity of all 
states. In so far as the barriers are for the purpose of insuring a 
safe supx^ly of milk they might be reduced by Interstate cooperation on 
the part of health departments. Recognition of inspection by another 



75 



/ 



TABLE 12 - Net Difforences in Market Price of 40 Per Cent CreaiD at 

Philadelphia (Pennsylvania Approved Quality) and the 
Price Paid Pennsylvania Producers for Milk Used as Cream, 
Compared with the Per Cent of Out-Of-State Receipts, 
1935 and 1936## 





Net difference 


Percentage of total 




(dollars per 


receipts from other 




40 quart can) 


states 


1935 






January 


.0576 


71 


February 


1«4464 


67 


March 


2.1376 


67 


April 


.8448 


77 


May 


1.8624 


75 


June 


3.0048 


77 


July 


.6720 


82 


August 


.1472 


82 


September 


1,0528 


68 


October 


.0848 


66 


November 


1.9904 


88 


December 


•4720 


79 


1936 






January 


1.4251 


78 


February 


1.5968 


79 


March 


1.5072 


78 


April 


1.4464 


70 


May 


2.6368 


60 


June 


2.8160 


59 


July 


.5760 


52 


August 


«2528 


51 


September 


.0544 


46 


October 


.4112 


55 


November 


.4928 


64 


December 


1.7888 


63 



7n 

'^Differences are calculated on mean average prices 



76 



Table 13 - 



Percentage of Receipts of Milk and Cream at New York and 
Metropolitan Area Originating in Pennsylvania* 



Percentage of receip ts from PennBylvania 

^— Pi— i^pw— I I ■!■ • ■ II m ill ■» » n i ■ ■ * " '■■ ""■ ' ' ' ' '" ' " I "" ' 

Milk Cream 



1933 
1934 

1935 
1936 
1937 



16 

17 

19 
18 

17 



13 
12 
11 
10 

9 



*i^ X —>- 



-^ ^t Mi* ■ ■■ ' 



state would remove the artificial barrier of inspection. 



4.* Special Grades 

Under tiie regalations, milk sold in fluid form for human con- 
sumption must be purchased from the producer as Class 1. It may be 
sold to the consumer under one of several names. Resale prices vary 
with quality, butterfat content and distinguishing characteristics of 
flavor and appearance. 

The first general order effective in April 1934 fixed a 

quality differential of 3 cents between Grade "A" milk and Grade "B" 

milk not exceeding 3.3 per cent butterfat. The price to farmers was 

the price of Grade ^B^ 3.7 per cent plus a differential of 6 cents for 

each one- tenth point of butterfat above 3*7 per cent butterfat content. 

Grade "A" milk was defined as: 

".•....milk which conforms in quality and is produced under 
the Rules and Regulations promulgated by the Department of Health of 
the Commonwealth of Pennsylv^inia in accordance with Section 4 of the 
Act 428, Approved May 2, 1929. 

"Grade '•A" milk shall contain not less than 4 per cent 
batterfat content as shown by the average monthly computed test. The 
bacteria count of all Grade "A" milk as delivered in the terminal mar- 
ket shall not exceed 200,000 bacteria per cubic centimeter^^.^ 

30^,lilk Control Board, Commonweal tli of Pennsylvdnia. Official General 
Order No. 6, Section 6. 



77 



,; 



Specific requirements concerning premiums allowed for low 
bacteria counts were a part of Order 8, effective June 1, 193^- A 
minimura of five bacteria counts per month were required of "A" milk 
producers • The order stated that Grade "A" milk that in quality falls 
below the bacteria bonus requirements, and for v/hich the producer is 
not paid a bacteria bonus, shall not be sold to consumers as Grade "A" 
milk* The definition of Glass 1 was extended by Order No. S to in- 
clude chocolate or flavored milk or cream buttermilk. The schedules 
of premiums for lov. bacteria counts were discontinued with tiie approval 
of Order 13, effective July 13, 1934, but were adopted again by the re- 
instatement of Order No. 8 in August. 

The requirements for Grade "A" and the schedule of bacteria 
bonuses established by Order No. 17 effective October 1, 1934 remained 
in force until Febraary 15, 1937, when a new schedule was set up by 
Order 39. That order differentiated between markets when it set up the 
butterfat differential to be paid producers. The markets where the 
spread was only two cents between "A" and "B" milk had a lo?fer butter- 
fat differential. In both Orders 17 and 39 the premiums and quality 
standards v;ere lower for Pittsbargh than for the Philadelphia area. 

There has been a gradual decrease in the differentials paid 
producers for special grades and an increase in the specifications for 
production. Tlie producers of Grade "A" milk have protested against the 

lower premrims. 

It is intaresting to note that skim milk is excluded from 

Class 1 by the order of October 1, 1934. Later developments caused a 

change of classification. Skim milk was relegated to Class 1 because 

some dealers used skim milk in standardizing the butterfat test of 



78 



their bottled milk, 

Homogeni7.ed milk was included in the definition of Class 1 
by the order effective January 15, 1936. In Orders 28 and 29 written 
in the Fall of 1936 the words "and milk drink" were added to the class. 
Milk drink would seem to include any beverage made with some proportion 
of fluid milk. 

Tne first set of orders written by the new Commission in 
June, 1937 specifically defines certified, inspected raw. Vitamin "D" 
and skim milk. Resale price schedules were set up for each type. 

The tendency has been to enlarge the definition of Class 1 
milk to include all milk purchased from producers whicli is sold to 
consumers in the semblance of bottled whole milk. The increasing 
divisions in the resale schedule are in part a recognition of varia- 
tions in quality but they are primarily a blow to individual dealer ad- 
vertising. In the case of homogenization, dealers who do not homogen- 
ize complain that this is a different type of milk and must be sold at 
a higher rate* The de^ilors who process their milk in this wajr argue 
that it does not change the quality of the milk^ that it is merely 
Seles t^ilk* 

Dealers may hesitate to advertise quality features of their 
products if they do not increase their sales by such methods. The com- 
plaint of one dealer against another dealer^s sales practices arises 
from the struggle for sales on the miirket. The curb on selling milk 
advertised for special features at the price of Grade "B" tends to 
lessen the possibility of improvement. 



79 



r'n 



$• Production Control 

There are cert^iin characteristics of the production and con- 
sumption of farm products to which may be attributed many of the com- 
plaintc^ of farmers. The farmer is unlike the button manufacturer who 
makes his buttons all year round and sells them the year round as well. 
He is unlike the hat maker v.ho can make his hats to fit the income of 
the buyer and v/ho can often induce the customer to buy a second hat 
when the farmer is unable to sell him another potato. 

The production of farm products is an extended process and 
demand anticipated at planting time may be far different when the crop 
is harvested. Crop yields are dependent on weather and the farmer may 
be disappointed by a small crop or by a crop so large that it sells at 
a loss. A large proportion of the expense of prodvicticr of livestock 
products is made up of fixed expenses, - the cov/, the barn^ the milk- 
ing equipment and the facilities for taking care of milk. It is not 
the cow«s nature nor the farmer ^s wish to turn off the milk flow when 
the price goes down. 

There Is a peak in production of milk in the spring months 
and a low point in the fall. Demand also tends to be higher in the 
late spring and summer months, but the demand peak comes later than 
the production peak and it does not rise so hi^i. This inability on 
the part of the farmer to adjust production to demand causes a surplus 
of milk over fluid requirements in some months. The surplus must be 
sold for manufactured uses and brings a lower price* The price for 
fluid milk has vcried little ^tiLth tlie seasons since tlie prices have 
been fixed on a clessification base. 

The dealer is interested In an adequate supj>ly to meet the 



80 



>; 



demand of his customers during the vdnte^r as well ac during the summer. 
The usual procedure is to contract to buy a producer's entire supply 
the year around. If the seasonal variation ii^ very great the price 
paid in the summer v/ill be considerably lovjer than the average price 
because of the greater proportion of the milk vjhich must be sold for 
manufticturing. 

There have been attempts to control this seasonal swing to 
some extent. One of the simplest plans offered is a flat price which 
would reflect the seasonal conditions of supply and demand. Tl-.e 
assumption is that farmers vdll plan production to get the greatest 
possible volume when prices are high. 

One plan that v.as successful in controlling seasonal varia- 
tion was the basic-surplus plan used for several years by the Inter- 
State Milk Producers Association in the Philadelphia milk shed. A base 
plan was inaugurated in 1923 in the Pittsl^urgh shed but the results 
were not so successful. The length of time it was in operation may 
have been too short to show marked results. No plan for payments on a 
base surplus arrejigement has been adopted by producers in the New York 
milk shed. 

The differences in seasonal variations is expressed by range 
for the three major sheds in table 1^;. Tlie data In this table were 
calculated by F. F. Llninger and C. W. Pierce for their study of the 
"Seasonal Changes in Market Milk Production in Pennsylvania^-^.*' 

Tlie lower range in seasonal variation in the Philadelphia 
milk shed during the period when the production plan was administered 



^-^Pennsylvania Agricultural Experiment Station Bulletin No. 3^B. 



ai 



Table 14. - Extent of Seasonal Variation of f^lk Receipts from Producers 

in the Three Major Milk Sheds of Pennsylvy.nia, 1930-1936* 





Phil 


Extent 


of seasonal 


varis" 


tion^ 

New York^HHf^ 




Year 


a del phi a** 
27 


Pittsburgh*** 




1930 


45 






55 




1931 




18 


31 






62 




1932 




18 


39 






66 




1933 




10 


51 






57 




193-4 




22 


U3 






61 




1935 




33 


62 






70 




1936 




33 


59 






60 





^Seasonal variation by monttis wa^s calculated on the basis of the 
variation of dail> receipts from the daily average for each year. 
Extent here is the difference betv.een the index of the month of 
greatest receipts and the index of the month of lowest receipts • 

"^^Based on purchases of three large distributors in Philadelphia, 

'^^'^^Based on pui*chases of distributors buying from Dairymen's Coopera- 
tive Sales Association* 

Based on production by members of Dairymen *s League delivering to 
League plants. 






•>o-: 



is fairly conclusive proof that the plan was effective. 

Seasonal production control has been one of the points of 
contention at hearings and among Board members. Some of the differ- 
encev^' arose from the producers^ attitude toward tlio plan of payment. 
The advantage tliat any system of bases offers tlie established pro- 
ducers is aly/ays greater than the advantage to new producers entering 
the market. For this reason the plan does not injoy univei-sal ap- 



proval. 



Proposals for the recognition of base-surplus pl^ns for 



payment to be adopted by the Milk Control Commission v>ere promoted by 
the Philadelphia producers^ group and by some ottiers in 1937. Tiie Com- 
mission members became interested and lielc a hearing for the purpose of 
discussing such plans. The industry and the Commission requested the 



82 



i 



etudy of seasonal variationB in the major milk sheds made by Mr. 
Lininger and Mr, Pierce. The principle of seasonal production control 
is rather generally accepted but the method for establishing bases is 
more difficiilt» No plan acceptable to a majority of both producers 
and dealers has been promoted* 

These efforts at control have all been directed toward the 
regulation of seai3onal surpluses. There is another production problem 
caused by cyclical surplus. The production of milk forms peaks and 
troughs every seven or eight years. These peaks and troughs are caused 
by farmers* reactions tonvard current prices and their inability to 
foretell futiire prices. VJhen the price of milk is high farmers save 
heifer calves and build up their herds so that they may get a greater 
supply of milk to sell. It talies some time for the heifers to reach 
milking age and meanvrhile other farmers have been raising heifers. The 
supply of milk is greatl.y increased and the price goes dovm. The pro- 
cess reverses* Farmers sell cull cattle and calves because they are 
not mailing profits. When the supply has been diminished the price goes 



up again 



Price has a marked effect upon farmers' decisions. This re- 



flection of price upon production may be felt in varjring degrees by 
producers for the fluid outlets and for the manufacturing use. This is 
caused by the relative reluctance v.ith which the fluid milk price is 
adjusted to the production. When the price of fluid milk goes up not 
only the producers of fluid milk are induced to expand production but 
producers who have been selling to manufacturing dealers now find it 
advantageous to sell fluid milk* 

Control in Pennsylvania has been exercised chiefly to main- 



83 






^ i 



I I 



tain the advantage of the producer of fluid milk. At least that seems 
to have been the aim* T^Tiether the prices of the Control Board have 
achieved that goal is a matter for questioning. It is possible that 
the Class 1 price may have been maintained at a level too far above 
the other classes. If the Class 1 price has been too high increased 
production on the part of producers who supply the fluid market vdll be 
noted. In so far as this increased supply can be sold as Class 1 milk 
these farmers have gained, but the consumption of milk would be affect- 
ed by the price and v/ould be likely to decrease. 

If a certain farmer sells 10,000 pounds of milk to a dealer 
who utilises 8,000 pounds as Class 1 and 2,000 pounds as surplus, and 
receives payment at the rate of $2.50 per hxindred for the Class 1 and 
$1.50 per hundred for the surplus, he v/ould be paid $230.00 or ^2.30 
per hundred pounds of milk. If the price of Class 1 milk is increased 
to $2^60 he and all other producers supplying the dealer will increase 
their production* When he gets his milk check he finds that he has 
been paid $208.00 for 8,000 pounds of Class 1 and ,^^^5.00 for the 3,000 
pounds of surplus. The total check is $253*00 but the per hundred 
price is still |;2.30. Whether or not the farmer has made a profit %111 
depend upon the kidded cost of the 1,000 pounds. It is possible that 
the rate of return to all Pennsylvania f^^rmers has been reduced by tliis 



policy of high Class 1 prices. 



84 



Bef ore price rise 

Farmer sells: 

8,000 pounds Class 1 

@ $2*50, $200*00 
2,000 pounds surplus 

@ 1*50, _JQXO 

$230.00 

f^230 7 10,000 - $2.30 
per hundred pounds 



After price rise 

Farmer sells: 

8,000 pounds Class 1 

•§ $2.60, $208.00 
3,000 pounds surplus 

® 1*50, ii5>0C 

$253*00 

$253 T 11,000 = $2.30 
per hundred pounds 



Since production is an effect as well as a cause of price, 
a price which may be out of normal adjustment to supply and demand 
exerts its influence on production and may exaggerate the maladjustment. 
If a price is set too high it encourages production and the added pro- 
duction cannot be sold at the higher price. If the price is too low 
the desired supplies vdll not be forthcoming and dealers vdll bid 
higher for milk. Any agency for the control of prices must take this 
pressure into account in setting prices. 

It was assumed that the farmer could sell the same volume of 
milk for fluid use at $2.60 per hundred pounds as he had sold at $2.50. 
It is more probable that the increased price would have resulted in a 
decreased volume of Class 1 sales. Then the farmer ^s price would be 
lower because he would not only be selling a lower proportion as fluid 
milk but he Y/ould be selling a smaller amount at the higher price. 



6# The Costs Argument 
In any approach to some public regulation of prices the cost 
argument has been a major issue in the determination of such prices. 
Cost of production has been adopted as the basis for fixing public 
utility rates. Cost of production is the chief item of testimony on 
the part of farmers, and cost of distribution is the main theme of 



85 



dealers • briefs. 

No one method of calculating costs has been adopted either 

for the cost of production or the cost of distribution. The cost 
figures vary of course, T\lth the different methods used. The wide 
range of testimony in regard to cost is probably responsible for the 
lack of regard given to it when orders have been written. It wo\ild 
appear from the volume of testimony showing costs that they form tlie 
basis of Control Comiaission prices. The Commission recognized the in-- 
adequacy of available costs figures in 193?. The auditors of the Com- 
mission made a study of Pittsburgh milk dealers' accounts. The Com- 
mission also encouraged the Department of Agricultural Economics of 
The Pennsylvania State College to malce a study of producers' costs. 
Cost figures are more difficult to obtain for the milk industry than 
for those industries v/hose units of production are larger. The range 
in costs is very great. 

The attitude toward costs miglit be exyjected to change with a 
new position in the dair^^ cycle. TlThen supplies are great a price based 
on cost of production would defer the normal adjust^nent to a lower 
level. On the otlier hand, when supplies are small the cost of pro- 
duction price may not be high enough to encourage the necessar^'^ ex- 
pansion of the production. The recognition of the proper use of cost 
figures in the determination of a price is just as essential as the 
necessity of having correct figures to analyze. 



¥ 



F 



86 



SUMMARY 



Government regulation of the fliiid milk industry was inaugu- 
rated by the New York state and by the federal laws passed in the first 
half of 1933* The administrators of these early acts were involved in 
many court cases testing the constitutionality of the laws* The 
federal government is permitted to regulate some markets under its 
power to regulate interstate commerce, and a state may devise laws to 
control markets entirely ?dthin its boundaries under the state's right 
to regulate internal affairs for the good of its citizens • Acts passed 
by the legislatures of Maryland and Washington were the only state laws 
declared unconstitutional* It is possible that if the method of con- 
trol had been modified these laws might have stood the court test* 

There v/ere 23 federal orders effective in markets of the east 
and of the west on January 1, 1938 « On that same date some type of 
state control of milk prices was operated in 19 of the states. There 
was a concentration of federal orders in areas of the Plateau States 
while the densely populated areas of the Mer.^ England and the Middle 
Atlantic States represented a section completely under sta^te regulation 
of milk prices* 

The original state laws were emergency measures. Lav;s passed 
in the last year show a tendency to replace emergency laws with legis- 
lation for permanent stste control of milk prices* 

The first Pennsylvania act setting up a Control Board for the 
administration of regulated milk prices was approved by Governor Gifford 
Pinchot January 2, 1934* Tlie Act created a Milk Control Board of tlu^ee 
members who exercised final price- fixing authority. Minimum price fix- 



87 



ing v/as mandate rj^ and maxiinum price fixing vms permissive. To insure 
compliance on the part of milk dealers they were required to operate 
under license. The administration of the act was financed by license 
fees and by an appropriation from the generrJL fund. 

The general provisions y/ere essentially the same in the 
second act passed at the expiration of the original law in 1935* In 
addition to the extension of previous pov^r^ers the Board was authorized 
to establish marketing area enforcement committees. The Board* s power 
was limited by the requirement that price-fixing orders bear tlie 
Governor's signature. This provision was the Governor's method of 
carrying out his campaign pledge to serve on the Milk Board. 

The present law. Act 105, differs from the two former lav/s 
in that it sets up a permanent agency for the control of milk prices. 
This agency is known as the Milk Control Commission and like the former 
Boards consists of three members. However, the Commission members are 
appointed not for an emergency but for successive six year terms. Act 
105 adds to ttie powers of the Milk Commission the responsibility of 
certifying stations for weighing and testing. 

Tlie first general order setting forth schedules of prices for 
the entire state became effective April 2, 1934- Prices to fanners 
were based on a schedule of four classes according to the final utili- 
zation of the milk. Resale prices to be charged for fluid milk, fluid 
cream and buttermilk were fixed. Grades ^A*^ and "B" were defined and 
price differentials were established. The order also established store 
differentials and maximum hauling ciiarges, defined fair trade practices 
and sales quantity control, and required that milk dealers keep records 



of accounts. 



88 



J" ■: 

In 



(' 



The definitions of classes of milk and the area limits were 
modified by succeeding orders* Sales quantity control was dropped and 
the attitude toward store differentials changed* These years of ex- 
perimentation vdth milk control in Pennsylvania have been marked by a 
trial and error philosophy - many trials and many errors. The chang- 
ing policies and the lack of an established policy may be attributed 
in part to the many changes in the personnel of the Board* This may 
also partly explain the complaints of producers and distributors that 
price changes have not been forthcoming as quickly as they were needed, 

A major duty of the Milk Control Commission has been to 
justify itself and its orders in the courts* The constitutionality of 
the state control of milk prices v/as established by the decision of 
the Pennsylvania Supreme Court in the Rohrer^s Med-^-Fr rras Daii-j- case* 
The legal counsel of the Commission has been busy testing the right to 
require dealers to be bonded, and recently the price-fixing authority 
has been questioned on the grounds that certain prices were confisca- 
tory* 

Problems of milk control arise from inherent difficulties of 
price fixing and also from the impedimenta of political caprice and 
patronage* Tlie length of time taken to develop an order reflects both 
of the latter obstacles. So-called arbitrary prices can be effective 
in a democracy only when the interested persons are in subvStantial 
agreement* It takes some time to reach this agreement, if in fact it 
can be reached at all, and meanwhile the old prices prevail* Once the 
facts were assembled by the Commission it required from 15 to IO4, days 
for the execution of an order* This tardiness can be blamed on the 
poorly equipped staff of a Commission weighed dovm by political ap- 



89 



poiritees v/ho are not familiar ^dth tlie problems involved. 

The price schedules are established on an area basis. Tliese 
areas are intended to define localities of similar economic structure 
Ydth reference to the production and consumption of milk. Boundaries 
for tiie most part follov^ county lines although in a fev/ Instances 
tovmshio boundaries have been used. Price differentials between areas 
have not remained constant. In some cases the differentials have been 
reversed and a city which formerly had a lo?/er price schedule than its 
neighbor now has a higher schedule. 

The fixing of milk prices by a governmental agency presumably 
has been placed on a permanent basis in Pennsylvania. There are two 
general policies from v/hlch a control agency may choose its plan of 
procedure. Either (l) the price for fluid milk may be maintained at 
an unnaturally high level and the amount which cannot be sold as fluid 
milk converted to other classes or (2) the price for Class 1 may be 
lower and a greater volume may be absorbed in this higher priced class 
with proportionally less in the surplus classes. The former policy has 
been adopted by the Pennsylvania Milk Control Commission. 

In spite of the expressed purpose of the act to correct the 
disparity in prices paid farmers for milk and prices of other com- 
modities, the evidence points toward slightly greater disparity since 
milk control Y,/as inaugurated. 

Prices for the different classes van^^ according to the use 
to which the milk is put. Milk in the fluid classes returns a higher 
price to farmers because the cost of transporting fluid milk is greater 
than the cost of vshipping manufactured dairy products. The difference 
in price is also due to the added cost of producing milk in more 



90 



sanitary surroundings* From a study of the differentials for fluid 
uses in Philadelphia and Pittstrurgh it appears that the differentials 
do not remain constant for either city over a period of tiiae nor Is 
there any semblance of constancy in the ratio by which the differ- 
entials in one o±tj exceed those in the other city* 

The volume of milk moving in interstate commerce has decreas- 
ed since the advent of milk price control by the government* It is 
likely that this decrease is due to the more stringent inspection re- 
quirements rather than to price differentials* 

The number of special grades under which milk is sold has 
been increasing since the first Control Board Order. Premiums paid 
producers have been decreasing and specifications for sanitary produe- 
tion have increased* 

The lJK.lk Control Commission has come to recognize the impor- 
tance of some plan for the control of sea^^onal production of milk, 
Hov/ever, they have as yet given no consideration to the more important 
problem of cyclical swings in the number of cows on farms. Tlie present 
price policies are being carried out with little or no regard for 
future supplies* 

Cost data are inadequate and eiflpliasis on costs at hearings 
appears to be out of proportion to its place in price fixing* Better 
cost figures and the correct analysis of them are needed. 



91 



CONCLUSIONS 



Milk Control experience in Pennsylvania has little to recom- 
mend it., Nevertheless, it is a part of the philosophy of the time and 
we must expect to live with it, at least until this philosophy of regu-» 
lation consunes itself. 

Immediate attention should be directed toward ref onus in the 
administration of controlled prices. The establishment of prices is 
not an appropriate field for busying politicians. The person in charge 
of policies should not be bound by vote strings* Although complete 
separation of the Commission from political movements is impossible, 
such a goal might be the aim in reform. 

The free play of price-making forces is not likely to return 
nor is it desirable in the case of milk prices. Ho^vever, the Indus tr^^ 
itself has exercised some control in the past and might be expected to 
do the same in the future if the price-fixing autiiority were returned 
to those most able to exercise it. A board with permission rather than 
with mandatory powers of price fixing would in any case seem a more 
gradual and evolutionary procedure than the abrupt revolutionary pro- 
gram of rigid price fixing. 

Milk Control was inaugurated ostensibly to improve the pro- 
ducer's economic position. It is argued by some that the real motives 
for farm legislation have been consumers* interests. Are consumers 
concerned with improving the farmers' position in order to secure an 
adequate supply of cheap food or are they more concerned with building 
up the farmers' purchasing power? As long as emphasis on the pro- 
ducer's purchasing power is foremost in the public mind the producer 



92 



may expect to get favorable decisions. When the consumers become con- 
scioiis of high costs of living their viewpoint inevitably clashes m,th 
the farmers* interests. In Pennsylvania consomers exert the more pov;er-- 
ful political pressure and the politically appointed Commission may be 
expected to reflect the attitude of the larger group of constituents* 



APPENDIX 



Table 1 - TIeighted Composite Index Numbers of 20 Farm Products in Pennsylvaxiia, 1922-1937* 

(1910-14=100) 



Year 


Jan. 


Feb. 


Mar. 


April 


May 


June 


July 


Aug. 


Sept. 


Oct. 


Nov. 


Dec. 


Year 

average 


1922 


U7 


151 


130 


130 


130 


120 


130 


127 


126 


134 


139 


149 


135 


1923 


146 


U2 


141 


142 


146 


150 


U9 


144 


157 


163 


159 


150 


149 


1924 


146 


U7 


140 


140 


137 


142 


141 


145 


143 


146 


146 


154 


144 


1925 


154 


153 


146 


149 


155 


159 


161 


161 


155 


165 


137 


173 


160 


1926 


173 


170 


163 


170 


159 


155 


156 


151 


158 


161 


177 


166 


164 


1927 


164 


15B 


153 


15s 


158 


157 


157 


152 


159 


169 


171 


162 


160 


1923 


164 


159 


156 


163 


165 


165 


166 


159 


157 


157 


155 


162 


161 


1929 


155 


157 


160 


162 


162 


167 


165 


162 


177 


192 


183 


168 


167 


1930 


163 


156 


147 


155 


14s 


140 


137 


135 


144 


153 


143 


130 


147 


1931 


125 


117 


117 


123 


114 


109 


108 


102 


102 


94 


96 


96 


103 


1932 


87 


82 


81 


84 


79 


73 


79 


78 


78 


78 


76 


76 


80 


1933 


73 


67 


66 


72 


78 


84 


94 


95 


102 


108 


104 


92 


86 


1934 


91 


96 


97 


98 


96 


92 


100 


104 


102 


101 


97 


100 


98 


1935 


101 


107 


103 


109 


114 


110 


103 


104 


102 


100 


108 


115 


107 


1936 


109 


113 


111 


lU 


113 


115 


120 


126 


127 


131 


129 


122 


119 


1937 


124 


124 


125 


129 


125 


123 


127 


12/, 


120 


112 


115 


lU 


122 



*Data for years before 1934 may be found on page 6 of Pennsylvania Agricultijral Experiment Station 
Bulletin No. 309. 



mmmmmmm^^ 



mmmm 



MMI 



Table 2 - Index Numbers of Prices of a 20 Per Cent Dairy Fee*^' 











(1910~U=100) 


















Year 


Jan. 


Feb. 


Mar. 


AprU 


May 


June 


Jxily 


Aug. 


Sept. 


Oct. 


Nov, 


Dec. 


Year 
average 


192S 


U9 


US 


162 


168 


17-4 


173 


171 


150 


138 


153 


153 


157 


158 


1929 


157 


158 


161 


151 


UO 


U2 


U9 


lU 


U6 


155 


153 


154 


151 


1930 


U9 


UO 


136 


Ul 


138 


135 


130 


132 


127 


127 


123 


124 


133 


1931 


119 


113 


lU 


114 


106 


101 


98 


84 


78 


80 


88 


85 


98 


1932 


79 


76 


78 


79 


73 


71 


70 


70 


68 


70 


68 


69 


72 


1933 


68 


66 


71 


75 


82 


% 


113 


101 


93 


93 


95 


94 


86 


193^ 


96 


98 


103 


101 


96 


IDA 


106 


112 


116 


124 


128 


132 


110 


1935 


136 


123 


123 


123 


121 


115 


110 


97 


92 


103 


99 


95 


112 


1936 


93 


94 


96 


96 


95 


97 


122 


128 


125 


130 


134 


134 


112 


1937 


l/,n 


135 


135 


U5 


Ul 


151 


130 


108 


100 


103 


99 


— 


— 



Data for years before 1934 may be found on page 18 of Pennsylvania Agricultujral Ex-oeriment Station 
Bulletin No. 309. 






r'o F^ ■ ^j I PST^ii S m S! ^^^ ^ ■^ 



■MMMHIHiail 



IMpii'il '-',.< "WIBWII" 



H ! |pil,|l ! ) l l l ll J U||| | W |l . i .tHJH I , l .|l 



Table 3 - Index Numbers of Penns/lvania Prices of Milk Containing L, Per Cent Biitterfat*. 

(I9i0-U=100) 



Year 



1922 
1923 
192^ 

1925 
1926 
1927 
1923 

1929 
1930 

1931 
1932 

1933 
1934 
1935 
1936 
1937 



Jan. Feb. Mar. April May June July Aug. Sept. Oct. Nov. Dec, 



U5 
173 
167 
16A 
167 

179 
132 

185 
164 
134 
99 
71 
106 

124 
124 
133 



UO 

170 
161 
167 
166 
181 
177 
185 
162 

134 

99 

73 

109 

126 

127 
135 



129 
163 

159 
169 
16$ 
132 
172 
139 
161 
131 
96 
71 
107 

124 

123 

133 



130 

165 
172 
166 
181 
170 
137 
165 
132 

95 
80 

115 
129 
127 
133 






13 

173 

U9 

171 

161 

133 
176 

185 
165 
130 

91 
88 

119 
122 
126 

133 



135 

176 

154 
172 

162 

132 

176 

185 

162 

123 

90 

99 
119 
117 
128 
130 



141 

181 

153 
171 
165 

179 
173 

183 
162 
132 

88 

103 
120 

116 

134 
139 



145 
173 

153 
169 
169 

175 
131 

181 

169 
130 

83 
108 
123 
119 
137 
141 



148 
130 

154 
166 

171 

179 
179 
182 

168 
122 
87 
109 
115 
112 

131 
141 



160 
179 
151 
164 
169 
130 
180 
133 
162 

113 
83 
106 
112 
113 
129 
138 



167 
170 

155 
164 
175 
179 
132 
176 
150 
109 
76 

105 
115 
120 
127 
139 



175 
167 
162 
163 
177 
180 
182 

169 
137 
97 
72 
102 
116 
119 
129 
127 



Year 
average 



146 

174 
157 
167 
163 
180 

179 
132 
161 

124 

33 

93 
115 
120 

129 
135 



Data for years before 1934 mfiy be found on page 50 of Pennsylvania Agricultural Exijeriment Station 
Bulletin No. 309. 






mmmmm 



mmmmm 



I ILDH IIIII I, ip i ll BliepWPW 



Table A - Pounds of Milk Required to Buy a Ton of 20 Per Cent Dairy Fee-d^. 



Year 


Jan. 


Feb. 


Mar. 


April 


May 


June 


July 


Aug. 


Sept, 


Oct. 


Nov. 


Dec. 


Year 

average 


1922 


1/JO 


1552 


1730 


1365 


1979 


1937 


1721 


1497 


1395 


1349 


1312 


1284 


1590 


1923 


1383 


U73 


1504 


U64 


1535 


1550 


1477 


U63 


1449 


1378 


1399 


1385 


1459 


1924 


l/t28 


U34 


15U 


1521 


1775 


1743 


1806 


1872 


1788 


1754 


1605 


1566 


1655 


1925 


1649 


1614 


1595 


1570 


1723 


1316 


1732 


1670 


1527 


1342 


1295 


1296 


1569 


1926 


1386 


1359 


1339 


U3A 


1564 


1549 


U54 


1380 


1279 


1186 


1133 


1125 


1349 


1927 


1170 


1235 


1243 


1300 


1U6 


1534 


1503 


1499 


1434 


1321 


1270 


1301 


1355 


1923 


1361 


H55 


I64O 


1306 


1959 


1954 


1828 


1602 


1436 


1422 


1329 


1363 


1596 


1929 


ia5 


1472 


1430 


U74 


1510 


1523 


1547 


1521 


1492 


1403 


1373 


U34 


1470 


1930 


1515 


U95 


U65 


1562 


1651 


I64I 


1524 


1509 


141 8 


1299 


1299 


1443 


U85 


1931 


U74 


U65 


1517 


1531 


1620 


1580 


1419 


1252 


1187 


1131 


1271 


1376 


1410 


1932 


134^ 


1322 


1399 


U97 


1604 


1583 


1519 


1533 


1451 


1389 


U37 


U93 


1464 


1933 


1598 


1535 


1731 


1705 


1S43 


1677 


2079 


1806 


1592 


1462 


i/./.n 


1465 


1665 


1934 


1503 


1554 


1657 


1597 


1599 


1734 


1689 


1747 


1872 


1303 


1716 


1829 


1692 


1935 


1332 


1750 


1719 


1663 


1954 


1957 


1789 


1649 


1524 


1515 


13U 


1322 


1666 


1936 


1307 


1265 


13a 


1333 


1478 


1497 


1717 


1797 


1777 


1684 


1680 


1713 


1553 


1937 


1829 


1730 


1752 


1994 


2097 


2299 


1771 


1/,,^ 


1315 


1247 


1130 







Data for years before 1934 may be found on page 21 of Pennsylvania Agricultural Experiinent Station 
Bulletin No. 309. 



■A 



wmmmmmm 



mmm 



mmmmmmmmmmimflllllt 



mmm 



«l»^»YXV40n» 




fi 3 10 II i-? 



■■B 59 yc- y a?*^ 33 M 3? 36 77 36 ^"^ 



3* -W) 



Philadelphia 



Ea Western 



Figure 1. Milk Marketing Areas Defined by the Pennsylvania Milk Control Board, April 2, 1934» 







;»' i,^5vT i'4- I 




?0 ?' ?2 ?•< 7 4. 2^^ 3^ .'■' JS Pv' 



N ! DJD^K// ^ 



r ?• 3 7'' ?3 3A 3? 36 37 M^W io 



Philadelphia 



Figure 2. 



Mil< Marketing Areas Defined by the Pennsylvania Milk Control Board, June 1,1934- 



ii 



»« •• N ■ - 1 . ■ N 




Philadelphia 



23 Pittw^burgh 



Figure 3* Milk Marketing Areas Defined by the Pennsylvania Milk Control Board, August 7, 1934 • 



ii 




mwp-iiii i i !i 



^■"s^fvttir"^ ^*,'*, 



Niiiiiijjiii-ijiumgpipp 



"-ift^" " . "^ 



»»NNrV\.V4N.» 







Philadelphia 



W Pittsburgh 



DDD Scranton 



Figure 4-. Milk Marketing Areas Defined by the Pennsylvania Milk Control Board, October 1, 1934.. 







Philadelphia 



BaPittsbiu-gh 



m Scran ton 



Figtire 5# Milk Marketing Areas Defined by the Pennsylvania Milk Control Board, November 16, 1934. • 



^ 




ni Scranton 
CS Lehigh 



CZlErie 

CD State-wide 



Philadelphia B Sou thwes tern 
E2 Pittsburgh fflS Schuylkill 

Figure 6. Milk Marketing Areas Defined by the Pennsylvania Milk Control Board, January 16, 1936, 



X 



f MK$yiv4«i'« 




Philadelphia 
^Pittsburgh 



Southwestern 
pffl Schuylkill 



PP Scran ton 
1^ Lehigh 



jTlErie 
-n State-wide 



Figure ?• Milk Marketing Areas Defined^ by the Pennsylvania Milk Control Board, June l6,.1936* 



/ 



r" 



r 






r«MN5VlViN'» 



_ ^.^ 7" ^ 1 




2 3 4 



,7''" 3 il 15 :? r^ >a 



Philadelphia 

Pittsburgh 

Southwestern 



I 



Schuylkill 



CEl Scran ton 
^ Lehigh 



EI Erie 
CZ] Harrisburg 



LiJ Johnstown 
I I State-wide 



Figure 8. Milk Marketing Areas Defined by the Pennsylvania Milk Control Board, October 11, 1936 






|CUNTO^J 




»»NNSVl-.AN'» 



j. ^ o^ 31- :Vfc '-^7 ryOe 3^" 




??* 33 VI 35 3« ?? 38 ^^^59 



X 



Philadelphia 
SS^ Pittsburgh 
Southwestern 



33 vSchuylkill 

OD^'^ranton 

^Lehigh 



EErie 

nS] Harrisburg 

JUj Johns to wn-Altoona 



(EH Central 
CD Lancaster 
CO York 
Cj State-wide 



Figure 9. Milk Marketing Areas Defined by the Pennsylvania Milk Control Board, January 1, 1937. 



^ 

»-*• 



P>*N5rw-N'» 




Philadelphia 
13 Pittsburgh 
Q Southwestern 



ffl Schuylkill 
ITT Scranton 
S3 Lehigh 



iZlErie 

I77T Harrisburg 

rm Johnstown-Altoona 



Ed Central 
I State-wide 



Figure 10. Milk Marketing Areas Defined by the Pennsylvania Milk Control Coamission, June 2, 1937. 



5 



t »'"IS»T.»- '^ ■« 




■s:- y 3?'*" ?3 ^A 35 3f '»•' ■ 3JLJ!:Ji-_±S-^ 



Philadelphia 
K5 Pittsbiirgh 
Southwestern 



CO Erie 

[m] Harrisburg 

rm Johns to wn-Mtoona 



[23 Central 
□ Stete-wide 



E Scmiylkill 
□Q Scranton 
C3 Lehigh 

Figure 11. Milk Marketing Areas Defined by the Pennsylvania Milk Control Commission, July 1, 1937 



^