PELIC1
MILK
••:.;;y:;.;"
THE PRICE OF MILK
THE
PRICE OF MILK
By
CLYDE L. KING, Ph.D.
WHARTON SCHOOL OF COMMERCE AND FINANCE
UNIVERSITY OF PENNSYLVANIA
Formerly
CHAIRMAN, GOVERNORS' TRI-STATE MILK COMMISSION
(Pennsylvania, Maryland and Delaware)
FEDERAL MILK COMMISSIONER FOR THE EASTERN STATES
MILK PRICE ARBITRATOR FOR THE STATE OF PENNSYLVANIA
WITH
MAPS, CHARTS AND DIAGRAMS
PHILADELPHIA
THE JOHN C. WINSTON COMPANY
PUBLISHERS
Copyright, 1920, by
THE JOHN C. WINSTON COMPANY
All Rights Reserved
BOP
THE JOHN C. WINSTON COMPANY
PHILADELPHIA. PA., V. 8. A .
FRANK P. WILLITS
W. S. WISE
A. W. PLACE
Milk Producers
THIS BOOK
is
DEDICATED TO
HENRY WOOLMAN
E. M. BAILEY
JOHN LEFEBRE
Milk Dealers
HERBERT HOOVER
HOWARD HEINZ
JAY COOKE
Public Officials
427477
CONTENTS
PART I
THE PRICE OF MILK TO THE PRODUCER
CHAPTER PAGE
I. THE PUBLIC INTEREST IN THE PRICE OF
MILK 15
II. THE FORCES THAT Fix THE PRICE OF
MILK 35
III. MANUFACTURED MILK PRODUCTS IN
THEIR RELATION TO PRICE 51
IV. THE PRICE INTERDEPENDENCE OF
LOCAL, PRIMARY AND INTERNATIONAL
MARKETS 85
V. THE COST OF PRODUCTION 104
VI. SHOULD DAIRYMEN ORGANIZE FOR COL-
LECTIVE BARGAINING? 130
VII. POLICIES OF DAIRYMEN'S ORGANIZATIONS
IN THEIR RELATION TO PRICE 142
PART II
THE COST OF DISTRIBUTING MILK
VIII. THE COST OF MILK DISTRIBUTION .... 175
IX. SANITARY REQUIREMENTS IN THEIR RE-
LATION TO PRICE 193
7
CONTENTS
CHAPTER PAGE
APPENDIX: LEGAL STANDARDS FOR DAIRY
PRODUCTS 223
GEORGE B. TAYLOR AND HARRY N. THOMAS,
MARKET MILK SPECIALISTS, UNITED STATES
DEPARTMENT OF AGRICULTURE.
X. How SHALL MILK BE DISTRIBUTED? . . 237
XL CAN MILK DISTRIBUTION COSTS BE
LOWERED? 251
XII. THE PUBLIC INTEREST IN MILK DISTRI-
BUTION. 274
PART III
FAIR PRICE POLICIES
XIII. THE FOOD VALUE OF WHOLESOME MILK 293
XIV. COOPERATION AND PRICE 313
XV. FAIR PRICE POLICIES. . . 324
MAPS AND CHARTS
PAGE
I. PER CAPITA CONSUMPTION OF MEAT IN DIFFERENT
COUNTRIES 23
II. RECEIPTS FROM SALES OF DAIRY PRODUCTS, 1909... 26
III. MILK Cows IN THE UNITED STATES PER 1,000 POPU-
LATION, 1840-1918 27
IV. THE RELATIVE INCREASE IN WHOLESALE PRICES FOR
MILK, BUTTER, AND MILK Cows, AND FOR CORN,
COTTONSEED MEAL, HAY, AND LABOR IN THE
UNITED STATES, 1910-1920 32
V. USES TO WHICH THE TOTAL MILK PRODUCED IN THE
UNITED STATES is PUT 38
VI. PROPORTION OF TOTAL MILK SOLIDS PRODUCED IN
THE UNITED STATES IN 1917 GOING INTO THE
DIFFERENT MILK PRODUCTS 39
VII. THE PRICE OF BUTTER AND OLEOMARGARIN PER
POUND, 1913-1920, AND THE PRODUCTION OF OLEO-
MARGARIN IN MILLIONS OF POUNDS, 1917-1920. . . 47
VIII. THE RECEIVING STATION SUPPLY AND THE CON-
SUMER'S DEMAND FOR WHOLE MILK FOR ONE
MILK DISTRIBUTOR, 1915-1917 54
IX. AVERAGE MONTHLY WHOLESALE PRICES OF BUTTER
AND CHEESE, 1913-1919 70
X. COLD STORAGE HOLDINGS OF CREAMERY BUTTER BY
MONTHS FOR STATED PERIODS 72
XI. THE RELATION OF PRICES TO PRODUCTION, EXPORTS
AND STORAGE STOCKS OF BUTTER, OF CHEESE AND
OF CONDENSED MILK AND EVAPORATED MILK .... 79
THE PRE-WAR DISTRIBUTION OF MILK Cows IN FIVE
EUROPEAN COUNTRIES Facing 86
9
MAPS AND CHARTS
PAGE
XII. BALANCE OF TRADE IN DAIRY PRODUCTS, UNITED
STATES, 1913-1919 90
DISTRIBUTION OF DAIRY Cows IN THE UNITED STATES,
1919 Facing 94
XIII. FARM AND FACTORY BUTTER PRODUCTION IN THE
UNITED STATES SINCE 1850 132
XIV. FARM AND FACTORY CHEESE PRODUCTION IN THE
UNITED STATES SINCE 1850 133
XV. THE AVERAGE MONTHLY VARIATION IN THE AVERAGE
ANNUAL PRICE RECEIVED BY MILK PRODUCERS IN
THE NEW YORK, PHILADELPHIA, PITTSBURGH, AND
CHICAGO MILK MARKET DISTRICTS FOR THE TEN-
YEAR PERIOD ENDING IN 1916 152
XVI. THE PRICE RECEIVED BY MILK PRODUCERS AT
COUNTRY RECEIVING STATIONS DURING 1918 IN
THE NEW YORK, PHILADELPHIA, PITTSBURGH, AND
CHICAGO PRIMARY MARKET DISTRICTS 154
XVII. PRICE PAID FOR MILK AT COUNTRY RECEIVING
STATIONS IN THE NEW YORK, PHILADELPHIA, PITTS-
BURGH, AND CHICAGO PRIMARY MARKET DISTRICTS,
JANUARY 1, 1919, TO JUNE, 1920 156
XVIII. THE RELATIVE INCREASE IN THE PRICE OF ALL COM-
MODITIES IN THE UNITED STATES AND THE INCREASE
IN THE PRICE OF MILK TO PRODUCERS AND TO
CONSUMERS AND THE SPREAD TO DEALERS IN THE
PITTSBURGH DISTRICT, JANUARY, 1913, TO JUNE,
1920; JULY, 1913, TO JUNE, 1914 = 100 254
XIX. DECLINING UNIT COSTS WITH INCREASING VOLUME
IN THE RECEIVING STATIONS OF A LARGE MILK
COMPANY.. 268
10
ACKNOWLEDGMENTS
This book is the outgrowth of the studies inci-
dent to the author's duties as chairman of the
Governors' Tri-State Milk Commission (Pennsyl-
vania, Maryland and Delaware), as Federal Milk
Commissioner for the Eastern States in the Food
Administration and as price mediator in monthly
milk price conferences, particularly in the Phila-
delphia, Pittsburgh and Baltimore Districts. In
these conferences the interests of those who sell and
those who buy and those who consume milk have
found expression in price. Prices therein agreed to
have had far-reaching consequences to the welfare of
many thousands of producers and several million con-
sumers and to the business security of many milk
distributors and manufacturers. Errors in price
judgment quickly revealed themselves and returned
to plague their authors at the next conference.
It is difficult to choose the names that should have
special mention because of aid given the author in
the preparation of the manuscript. Among these
are Frank P. Willits, Robert Balderston, H. D. Alle-
bach, Fredrick Shangle, A.W. Place, W.S. Wise, T. S.
Brenneman, D. G. Harry, and I. W. Heaps, milk pro-
ducers; E. M. Bailey, Henry Woolman, Harry Scott,
Thomas Harbison, Henry Dolfinger, C. R. Lind-
back, Asa B. Gardiner, C. R. Bowman, J. D.
Stark, Irvin D. Baxter, milk dealers; Mrs. Nevada
D. Hitchcock, Mrs. H. C. Boden, Mrs. Joseph
11
ACKNOWLEDGMENTS
Heckman and Mrs. W. R. C. Wood, milk consumers;
and among representatives of the public have been
Herbert Hoover, Howard Heinz and Jay Cooke,
Food Administrators; Fred Rasmussen, now Secre-
tary of Agriculture, and Hon. Frank B. McClain,
now Director of the Department of Public Welfare,
in the State of Pennsylvania.
Acknowledgment is due to the members of the
Governor's Tri-State Milk Commission, particularly
to C. Henderson Supplee and Clarence Sears Kates.
The author is but one of many who are indebted to
the shrewd business ability and fair judgments of
M. T. Phillips, of the Guernsey Breeders' Association.
To W. L. McGee, an accountant of ability, expert in
milk matters, the author is indebted for assistance
that is as sound in judgment as it is mathematically
accurate.
Mr. Robert W. Balderston and Mr. Henry Wool-
man were asked to read the proof. Dr. H. W.
Dodds, now Secretary of the National Municipal
League, and Miss Viva Boothe helped in the prepa-
ration of the manuscript.
The price of no other commodity represents so
much for good or ill to public and individual welfare
as does the price for milk. The author sends this
book out with the hope that it may here and there
be helpful in a modest way to mutual understanding
and cooperative effort in keeping wholesome all the
factors that make for a fair milk price.
12
PART I
The Price of Milk to the Producer
CHAPTER I
The Public Interest in the Price of Milk
Milk is the essential element in the diet of civ-
ilized peoples.
It is estimated that during the year 1917 the
American people drank SGjSOOjOOO^OO1 pounds,
or 18,250,000 tons, or 2,000,000 carloads of whole
milk. This was 43.1 per cent of the 84,611,350,000
pounds produced in the United States in that year.
In round numbers the forty-five millions of our
people who dwell in cities drank approximately
31,500,000 pounds daily, in comparison with 45,-
000,000 pounds consumed each day by the thirty
million persons who live on farms having dairy
cows and 25,000,000 pounds consumed by the
twenty-five millions who live in small towns or on
farms without dairy cows. This is an average daily
consumption of two-thirds of a pint by persons who
dwell in cities. The average consumption of those
who live on farms having dairy cattle is one and
one-half pints per day, and of those who live in
small towns or on farms without dairy cows one
pint per day.
Vast as this consumption is, it is not as large in
many families as dietitians say it should be for whole-
some nutrition. To give to all the one pint per day,
*This is the estimate given by the United States Department of Agriculture
in Circular No. 85, issued January 31, 1918, p. 15.
15
THE PRICE OF MILK
which Professor H. C. Sherman has said is the
minimum necessary to maintain health, the resi-
dents of our cities would have to consume one-
third more milk than they do now. Expansion far
beyond this would be necessary to meet the standard
of a quart a day which Professor Sherman says is
a good rule to remember. Professor Graham Lusk
writes: "No family of five should buy meat until
they have bought at least three quarts of milk."
If such are to become our consumption standards,
our production will have to be greatly increased.
Professor E. V. McCollum, the outstanding
nutrition expert of the day, says as to the need for
our increased use of milk as a food r1
There is no substitute for milk, and its use should
be distinctly increased instead of diminished, re-
gardless of cost. Every possible means should be
employed to reduce the cost of distribution. The
necessity for the liberal use of milk and its products
both in the diets of children and adults should be
emphasized in order to stem the ebbing tide of its
production. It has been pointed out that the
value of milk as a food cannot be estimated on the
basis of its contents of protein and energy. Even
when measured by this standard it compares most
favorably with other foods, but it has a value as a
protective food in improving the quality of the
diet, which can be estimated only in terms of
health and efficiency.
An examination of any large groups of people
in the cities, will show that where there is a high
mortality from tuberculosis, milk is not being
1 McCollum, "The Newer Knowledge of Nutrition". MaoMillan, 1919, pp.
152 and 153.
16
PUBLIC INTEREST IN THE PRICE OF MILK
used to any great extent, and in any large group
where milk purchases are large this disease is not
a menace. It is well known that in institutions
where tuberculosis is sucessfully treated milk forms
the principal article of the diet of the inmates.
This has resulted from clinical experience. There
is no other effective treatment for this disease
than that of providing fresh air, insisting upon rest
and heightening the body's powers of resistance
through the liberal use of milk for the correction
of faults the diet will inevitably have when it con-
sists too largely of seed products, tubers, roots and
meats. The importance of diets of this character
in the etiology of tuberculosis, has not hitherto
been appreciated. In the light of facts presented
in the previous chapters of this book, there can be
no reasonable doubt that the importance of poor
hygienic conditions and of poor ventilation have
been greatly over-estimated, and that of poor diet
not at all adequately appreciated as factors in
promoting the spread of this disease. Milk is
just as necessary in the diet of the adult as in that
of the growing child. Any diet which will not
support normal development in the young will
not support optimum well-being in the adult.
Milk is our greatest protective food, and its use
must be increased. The price must be allowed to
go up as long as the cost of production makes it
necessary, and up so far as is essential to make
milk production a profitable business. Unless this
is done, the effects will soon become apparent in a
lowering of our standards of health and efficiency.
There is a substantial reason for this large con-
sumption of milk as well as for the insistence of
nutrition experts that it should be further increased.
2 17
THE PRICE OF MILK
Such national food habits do not grow up without
a cause.
The reason for the consumption and for these
recommendations to increase consumption can be
stated in a sentence : Milk is one of the cheapest and
is the most wholesome of foods because it is both a
" protective " food and a food easily assimilable for
use by bone and muscle. Dietitians chorus the call
to use more milk because it contains certain elements
that are essential to sound nutrition and to the
preservation of vitality and health, in addition to
its value as sources of protein and energy. In
Chapter XIII essential facts as to the elements that
make milk the outstanding protective food will be
further discussed.
But the large consumption of milk in the United
States preceded the definite discoveries of these
protective food elements. In part this consumption
can be attributed to an instinctive knowledge that
milk-fed humans fare better than those not milk
fed. Many a farmer had noted the difference be-
tween the calves or the pigs that did and those that
did not get milk in their diet. And mothers knew
from folk lore and from their own observations that
milk was the best food for growing children.
All consumers have had before them daily proof
from the market that milk was one of the cheapest
of animal foods. That knowledge was not expressed
as exactly as it can be now; but it was known, and
is now known and roughly measured by the house-
wife who chooses what she buys or decides what
18
PUBLIC INTEREST IN THE PRICE OF MILK
food she sells. The farm wife has not known pre-
cisely that one quart of milk is equal to 4.3 eggs as
a source of protein and to 8.5 eggs or a pound of lean
meat as a source of energy, as scientists have found
that it is; but she has long preferred milk as a food
for her children, and has sold the eggs. The city
housewife has not known the precise fact that milk
at 16 cents a quart is as cheap a source of proteins
as sirloin steak would be at 35.4 cents a pound, or as
eggs would be at 45 cents a dozen. And she has
likewise been scientifically ignorant of the extent to
which milk is valuable because of its mineral con-
tent. Although she has, therefore, been unwilling
to buy as much milk as the facts would warrant,
nevertheless the total consumption of city dwellers
shows that the city housewife has to an extent
selected the better and cheaper food. Comparative
food values have not been the sole guide with either
the country or the city housewife. Ease of marketing
eggs as compared with milk has helped the country
wife make her decision, while the fact that her
family prefers to chew solid food, regardless of its
actual protein or energy content, has helped to deter
the city housewife from buying solely on an exact
food-worth basis.
From the viewpoint of natural welfare it is of
serious importance that our city earners buy foods
which will yield them their full money's worth. The
days of national isolation were numbered with the
incoming of rapid steam transportation, and they
passed when the cable and the wireless made it
19
THE PRICE OF MILK
possible for nations to compete in prices for the out-
put of their factories as well as for the products of
the farms, the seas and the mines. Our high stand-
ards of living can be kept up without fear of ruinous
competition in international trade only if we choose
for our diet those foods that give the best nutrition
for the least price. Among such foods dairy products
easily take first place. The dairy cow is an econ-
omical producer of animal food. For turning inedible
into edible human foods the dairy cow acknowledges
the farm pig as her only near competitor, and in the
long run she leisurely leads the pig. In a short race
the pig beats the cow only because of the longer
period necessary for the cow to mature.
The amount of edible solids produced for each 100
pounds of digestible organic matter consumed by
different farm animals is as follows:1
Animal.
Edible Solids
Produced
(pounds).
Animal.
Edible Solids
Produced
(pounds).
Cow (milk)
18.0
Poultry (eggs)
5.1
Pig (dressed)
15 6
Poultry (dressed)
4.2
Cow (cheese)
9 4
Lamb (dressed)
3 2
Calf (dressed)
8 1
Steer (dressed)
2.8
Cow (butter)
5 4
Sheep (dressed) .
2.6
Herein lies the reason why Mr. Hoover emphasized
hog production during the war period. The pro-
duction of hogs can expand quickly to meet war
needs without as serious consequences in the sudden
contraction that may follow. Had the war been
i Compiled from tables of United States Department of Labor.
20
PUBLIC INTEREST IN THE PRICE OF MILK
prolonged, however, the policy of stimulating hog
production at the expense of dairy foods would have
been dangerous in the extreme. It is stated that at
the beginning of the war Germany adopted the rule
to conserve cereals for human consumption by killing
off all cows over two years old that could not be
sustained on foods and roughage unfit for human
beings. Milk production soon fell off. Conse-
quently the children soon ceased to get those ele-
ments, found so plentifully in milk, which are
essential to sound nutrition. England, on the other
hand, kept the largest number of cows possible and
bought milk freely from the United States.
The World War has no doubt changed permanently
to a degree the national and racial habits as to
sources of foods. The extent of the change we
cannot measure until normal conditions have been
restored for a number of years. However, we have
at hand a table showing certain national and racial
habits for the period just previous to the war. As a
general rule it may be said that foods from vegetable
sources are cheaper than foods from animal sources,
because of the lossof edible solids in the production of
animal foods from organic matter, as given in the table
on page 22. It is vital to our national well-being
that our earners buy their food from sources as cheap
as is consistent with contentment and wholesome
food value. Yet a comparison with other nations for
this pre-war period shows that we were getting a
larger share of our food from the more expensive
animal food sources. As a people we were, and no
21
THE PRICE OF MILK
doubt still are, next to England, and excepting the
new grazing countries mentioned on page 23, the
heaviest consumers of animal products in the world.
The table comparing the food sources per capita
of various competing nations follows;
THE FOOD SOURCES OP THE NATIONS1
Protein
Protein
Fat
Fat
Total
from
from
Total
from
from
Country.
Protein
(grams).
Animal
Sources
Plant
Sources
Fat
(grams).
Animal
Sources
Plant
Sources
Carbo-
hydrates.
Calories.
(grams).
(grams).
(grams).
(grams).
United States..
100
60
40
80
76
i
410
2,950
England
106
62
44
72
62
10
440
2,900
Germany
87
32
55
61
56
5
385
2,700
France
95
38
57
44
30
14
420
2,780
Austria
82
34
48
27
22
5
400
2,500
Russia
85
22
63
26
16
10
450
2,425
Italy
86
24
62
52
12
40
430
2,600
Japan
70
11
59
14
3
11
490
2,360
The chart opposite indicates the per capita con-
sumption of meat for each of the leading countries
in stated pre-war periods. Outside of two new
grazing countries, Australia and New Zealand (with
which we do not compete in manufacturing), our per
capita consumption of meats is far in excess of any
country with which we will compete in matters per-
taining to wages and living standards.
Studies of family budgets indicate that of the
total expenditure for food of a working man's family
consisting of man and wife and three children, ten
i The figures used in this table are Ballod's figures for 1910-1914. They appear
in Smaller's Jahrbuch, 1915. The data for Japan have been weighted to corre-
spond to racial differences in stature and weight.
22
PUBLIC INTEREST IN THE PRICE OF MILK
per cent goes for milk as compared with forty per
cent for meats. It has been estimated by dietitians
that such families would be better off financially and
physically if twenty-five per cent of the expenditure
for food went for milk.
CHART No. 1. — PER CAPITA CONSUMPTION OP MEAT IN
DIFFERENT COUNTRIESI
My argument is not that we should become vege-
tarians. My argument is that we should and must
turn to these animal products which are the cheapest
to produce and the most economical to the con-
sumer. These are primarily dairy products. With
the passing of cheap grazing lands we cannot produce
1 From " The Meat Situation in the United States", by G. K. Holmes, United
States Department of Agriculture, Report No. 109.
23
THE PRICE OF MILK
meat animals as cheaply as we once did, nor as
cheaply as can other countries in temperate climates
where such lands are not yet exhausted. Clearly,
from the standpoint of maximum utilization of our
natural resources as well as from considerations of
individual and family economy, the relative propor-
tion of dairy products to other animal products used
should be increased.
Had the milk produced in the United States in the
year ending June 30, 1917, been utilized to the fullest
extent it would have supplied one-fourth of the food
needed by all of the people in our country.1 This
fact indicates the real interest of the people of this
country in our dairy herds as a source of foods.
National welfare also demands attention to dairy
herds because of their importance, not only as a
source of food but as a source of wealth. The farm
value of the 23,747,000 dairy cows estimated to be
in the United States on January 1, 1919, was $1,835,-
770,000 (at $78.20 per head as estimated by the
Department of Agriculture). Prices for dairy cows
were inflated during this period, but not to the
degree characteristic of most commodities. The
normal value under any circumstances can be re-
garded as well over a billion dollars. The number
of dairy cows in the United States from 1867 to 1919,
their value per head and their total farm value was
as follows:2
1 This is the estimate given by the United States Department of Agriculture
in Circular No. 85, issued January 31, 1918.
* See Year Book, 1918, United States Department of Agriculture.
24
PUBLIC INTEREST IN THE PRICE OF MILK
NUMBER AND VALUE OF DAIRY Cows, U. S., 1867-1920.
Year.
Number.
Price per Head,
January 1.
Farm Value,
January 1.
Ig(j7
8349000
$28 74
$239,947 000
1870
10,096,000
32.70
330,175,000
1875
10,907 000
25.74
280,701,000
1880
12,027,000
23.27
279,899,000
1885
13,905,000
29.70
412,903,000
1890
15,953,000
22.14
353,152,000
1895
16,505,000
21.97
362,602,000
1900
16,292,000
31.60
514,812,000
1905
17,572,000
27.44
482,272,000
1910
20,625,432
35 29
727 802 000
1911
20,823 000
39 97
832 209 000
1912
20,699 000
39 39
815414000
1913
20,497,000
45.02
922,783,000
1914
20,737,000
53 94
1 118487000
1915 ,
21,262,000
55.33
1,176,338 000
1916 .
22,108 000
53 92
1 191 955 000
1917
22,894,000
59.63
1,365,251,000
1918
23 310 000
70 54
1 644 231 000
1919
23,747,000
78.20
1,835,770 000
1920
23,747,000
85.13
2,021,681,000
The distribution by states of the receipts from the
sales of dairy products is given on the map repro-
duced on page 26.
Dairying, moreover, has certain economic advan-
tages in addition to the monetary values of the
annual output of the herds. The flow of milk from
the herds can be so managed as to bring to the
farmer a steady cash income throughout the year.
The labor of the entire family can be utilized through-
out the year to an extent impossible with seasonal
farm products. The fertility of the soil can be kept
at a level consistent with net returns from the crops.
Roughage which human beings cannot eat and for
which the farmer would find but a poor cash market
25
THE PRICE OF MILK
can be conserved and marketed effectively through
the dairy herd.
II. RECEIPTS FROM SALES OF DAIRY PRODUCTS, 19091
From the point of view alike of city earner and
country worker, in the interests of the national well-
being and of the civilization that can spring only
from the well nourished, young or old, dairy products
are vital.
Shall we consume, each of us, a sufficient amount
of milk to create and preserve vigor and vitality?
The price of milk must be such as to make this
1 From Geography of World's Agriculture, United States Department of Agriculture,
1917, p. 120: "The receipts from sale of dairy products afford a measure of the rela-
tive importance of dairying as an industry in different sections of the United States.
New York leads all the States in the amount of receipts, totaling over $75,000,000
in 1909, and probably two to three times that amount today. Wisconsin ranks
second, with Pennsylvania third, while Illinois, Iowa, Ohio and Minnesota were
practically equal in amount of sales of dairy products in 1909, each receiving
about $25,000,000. The total receipts in the United States amounted to nearly
$500,000,000 in 1909 and are undoubtedly well over a billion dollars today. The
dots were distributed by counties, but the boundary lines of the counties are not
•hown on the map."
26
PUBLIC INTEREST IN THE PRICE OF MILK
possible. Are we to produce a supply of milk pro-
portionate to our national resources and sufficient
for our national needs? The price to the farmer
must be such as to entice him to produce milk in
preference to the other alternatives before him,
whether on the farm or in the city.
Price is the medium through which we make our
national judgments which will or will not maintain
and develop our all important dairy industries,
which will or will not keep us virile as citizens. Is
our production keeping up with our needs? Has
the price been such, not only to encourage con-
sumption, but to increase production as well?
300
£50
2OO
/SO
/OO
SO
O
/aao
CHART No. III. — MILK Cows IN THE UNITED STATES PER
1000 POPULATION, 1810-19181
The table given on page 25 indicates that the
actual number of dairy cows in the United States
has been increasing. The chart above indicates
that, since 1890, the increase in the number of dairy
cows in this country has not been in proportion to
iFrom Circular No. 85, United States Department of Agriculture, issued,
January 31, 1918.
27
THE PRICE OF MILK
the increase in population. This chart, however,
may be deceiving as to the future to a very slight
extent because the output of milk per cow is increas-
ing through selection in certain sections of the
country where dairying is a profession. Hence the
total amount of milk produced is not decreasing in
exact proportion to the relative decrease in the
number of dairy cows. A comparison of total out-
put with the total number of milk cows does not
indicate, however, that wise selection has as yet
been adopted in all sections of the country. More-
over, the question as to the output per cow is not
solely one of quantity but of quality when the
amount and value of feeds is considered.
The number of milk cows on the farms in the
United States as of January 1st was 14.8 per cent
greater in 1920 than it was for the annual average
of the five-year period from 1910 to 1914, in com-
parison with an increase in the same year of 17 per
cent in the number of other cattle, 17.8 per cent in
swine, 3.3 per cent in horses, 14.9 per cent in mules,
and a decrease of 6.3 per cent in the number of sheep.
Dairy herds increased but one one-hundredth of one
per cent in 1920 over 1919. The numbers of each
are given in the table on the next page. 1
The estimated production of milk in the United
States increased about 1.7 per cent from 1917 to
1918, as compared with an average annual increase
in population from 1900 to 1910 of 2.1 per cent.
The estimated production for 1919 increased but
1 The Report to the President by the Secretary of Agriculture, 1918, p. 8.
28
PUBLIC INTEREST IN THE PRICE OF MILK
0.007 per cent over 1918. Many now believe (Sep-
tember, 1920) that the production for 1920 will be
below what it was in 1919. In other words, the
price which the farmer receives for milk is' not
encouraging him to enlarge his output in proportion
to the increase in population.
NUMBER OF LIVE STOCK ON FARMS, 1870 TO 19181
(Figures are in round thousands, i. e., 000 omitted)
Kind.
1920.
1919.
1918.
1917.
1916.
1915.
1914.
21,109
21,482
21,563
21,210
21,159
21,195
20962
Mules
4,995
4,954
4,824
4,723
4,593
4,479
4,449
Milch cows
23,747
23,475
23,284
22,894
22 108
21262
20737
Other cattle
44,485
45,085
43,546
41,689
39,812
37,067
35855
Sheep
48,615
48,866
48,900
47,616
48,625
49,956
49,719
Swine
72,909
74,584
71,374
67,503
67,766
64,618
58933
Kind.
Annual
Average,
1910 to
1914.
1910.
1900.
1890.
1880.
1870.
Horses
20430
19833
18267
14969
10357
7 145
Mules . .
4,346
4,209
3,264
2,295
1,812
1,125
Milch cows
20,676
20,625
17,135
16,511
12,443
8,935
Other cattle
38000
41 178
50083
33,734
22488
13566
Sheep
51,929
52,447
61,503
35,935
35,192
28,477
Swine
61865
58 185
62868
57409
47681
25134
The Federal Department of Agriculture estimates
the production of meat and milk since 1909
follows:
as
i The figures for 1914-1918 are taken as of January 1st. Figures for 1870-1900
are taken as of June 1st. Figures for 1910 as of April 1st.
29
THE PRICE OF MILK
ESTIMATED PRODUCTION OF MEAT, MILK AND WOOL*
(Figures are in round thousands, i. e., 000 omitted)
Product.
1909.
1914.
1916.
1917.
Beef2 (pounds) .......... . .
8,138,000
6,078,908
6,670,938
7,384 007
Pork* (pounds)
8,199,000
8,768,532
10,587,765
8,450,148
Mutton and goat (pounds)
615,000
739,401
633,969
491,205
Total (pounds)
16,952,000
15 586 841
17 892 672
16 325,360
Milk' (gallons)
7,466 408
7 507 000
8 003 000
8 288,000
Wool including pulled wool (pounds)
289,420
290,192
288,490
281,892
Eggs produced' (dozens)
1,591,000*
1,774 000
1,848,000
1,884,000
Poultry raised3 (number)
488,000*
544,000
567,000
578,000
Product.
1918.
1919.
Per Cent
Increase or
Decrease,
1919 over
1909.
Beef3 (pounds)
8,465,000
7,500,000
-7.84«
Pork9 (pounds) ...
11,248,000
12,868,000
56.94
Mutton and goat (pounds) . . .
537,000
637,000
3.57
Total (pounds)
20,250,000
21,005,000
23.90
Milk» (gallons)
8,438,000
8,495,000
13.7
Wool including pulled wool (pounds)
298,870
308,459
6.57
Eggs produced^ (dozens)
1,921,000
1,957,000
23.00
Poultry raised** (number)
589,000
600,000
22.95
tSee Year Book, 1918, United States Department of Agriculture.
• Estimated for 1914-1917 by the Bureau of Animal Industry. Figures for meat
production for 1918 are tentative estimates based upon 1917 production and a
comparison of slaughter under Federal inspection for nine months of 1918 with the
corresponding nine months in 1917.
• Office of the Secretary, Circular No. 125.
•Annual averages for 1910-1914: Eggs, 1,695,000,000 dozen; poultry, 552,-
000,000.
• Decrease from 1909 to 1918
30
PUBLIC INTEREST IN THE PRICE OF MILK
A significant factor in the present and future
situation as to milk production has been the increase
in the number of calves slaughtered. The number
slaughtered in the United States under Federal in-
spection and the estimated number slaughtered
otherwise (including farm) together with the percent-
age of the total that was Federal inspected follows:
CALVES SLAUGHTERED IN THE UNITED STATES, 1914-1919
1914.
1915.
1916.
1917.
1918.
1919.
Federal inspection
Other
1,696,962
2,964,400
1,818,702
2,820,800
2,367,303
3,406,600
3,142,721
3,888,000
3,456,393
4,310,800
3,969,019
5,072,000
Total
4,661,400
4,639,500
5,773,900
7,030,700
7,767,200
9,041,000
Per cent Federal inspec-
tion
36 4
39 2
41 0
44 7
44.5
43 9
The chart on the next page reflects clearly the
unstable competition in recent years between the
prices for feeds and labor going into milk and the
prices for milk and its products and for milk cows.
Corn, hay and cottonseed meal are chosen as
typical feeds reflecting market opportunities. Other
cereals hover around the price of corn; and cotton-
seed meal is typical of prices on protein feeds.
Throughout the war period corn increased most
rapidly in price of any of these products. Cotton-
seed meal for two years lagged slightly in price as
compared with corn and milk, but in the latter part
of 1919 exceeded the relative increase in price for
both corn and milk and continued to rise while the
31
CHART No. IV. — THE RELATIVE INCREASE IN WHOLESALE PRICES
FOR MILK, BUTTER, AND MILK Cows AND TOR CORN, COTTONSEED
MEAL, HAY, AND LABOR IN THE UNITED STATES, 1910-1920
(The Average for 1910 to 1914 inclusive is taken as 100)1
•COTTON-SEEDMEAL
-- MILK COWS
BUTTER
CORN
MILK
HAY
FARM LABOR
1 The wholesale prices are from Monthly Crop Reporter: wages from Bureau
of Labor Statistics. The prices and wages are given on page 33.
32
PUBLIC INTEREST IN THE PRICE OF MILK
prices on both the others fell. The fall in the price
of milk was greater than that for corn and these were
the only two of these products showing a declining
price in 1919. Butter in relative increases lagged
behind cottonseed meal, corn and milk, reaching a
common point with milk in the latter part of 1920.
For labor the average paid for farm labor for the
United States by the month without board is taken,
the average being available only up to January 1,
1919. This wage is not typical for dairy districts
near munition and manufacturing centers. The rela-
tive increase in the price for dairy cows was not as
rapid as for the other products, with the single ex-
ception of hay. It is with these relative price fluc-
tuations in mind that milk producers have made the
choices reflected in the diminishing per capita pro-
duction of milk noted above. The price of milk
has not increased as rapidly as have feed prices.
Year.
Milk
(quart),
Jan. 1.
Butter
(pound),
Jan. 1.
Milk Cows
(head),
Jan. 15.
Cottonseed
Meal
Jan. 15.
Hay
(ton),
Jan. 1.
Corn
(bushel),
Jan. 15.
Farm Labor
without
Board by
the Month.
Average for
the U. S.
1010
$0 0412
$0 287
$41 18
$32 33
$11 37
$0 6320
§97 en
1911
.0391
278
44 70
31 83
12 24
482
OQ 77
1912
.0425
.281
42 89
30 42
14 85
622
29 53
1913
1914
.0375
0400
.284
292
49.51
57 99
39.97
32 49
11.86
11 29
.489
696
30.31
on OQ
1915
0413
287
58 47
29 53
12 42
662
QA IS
1916
0413
283
57 79
37 03
10 94
flOl
qo OQ
1917
.0513
340
63 92
42 95
10 86
900
4fl 41
1918
0808
431
78 54
55 93
18 09
1 348
47 fl.7
1919
.0913
549
86 10
62 81
19 92
1 447
eft on
1920
0853
613
94 42
79 39
20 55
1 404
33
THE PRICE OF MILK
In view of all the facts it is clear that the price of
milk is vital to the dairymen, to the consumer and
to the welfare of the nation. The consumer wants
to know what economic forces are determining the
price the farmer receives. The consumer is deeply
concerned as to the elements in the cost of distribu-
tion and as to whether the most economical methods
of distributing milk consistent with proper sanitary
precautions are being used. The farmer wants to
know why he gets the price he does and why dis-
tribution costs are what they are. And all who are
considerate of our national well-being and the future
of the best in civilization must become concerned as
to whether the price the dairyman receives is suffi-
cient to maintain a standard of living among country
workers consistent with approved standards of
human well-being.
It is to get at these larger aspects of one of our
greatest — if not our greatest national problem —
that this book is written.
CHAPTER II
The Forces that Fix the Price of Milk
Often during the author's public activities relating
to the price of milk, consumers and milk buyers have
expressed grave fears lest the forces that determined
the price for milk paid to the farmer were unduly
influenced by some association or "union" of milk
producers. Likewise, on numerous occasions, milk
producers have shown concern lest the price they
received for milk was unduly low because of the
strategic or " monopolistic " buying power of the
manufacturer or the milk distributor, or because of
the "prejudice" of the consumer. It is pertinent,
therefore, to inquire just what the factors and forces
are that in the long run determine milk prices.
To be sure, these forces vary as between sections
and as between seasons. Moreover, first one factor
then another is the real determinant. Yet the
forces which fix the price of milk to the producer can
be ascertained, and at any one time or place the
relative importance of each can be estimated with
considerable accuracy. These forces are:
1. The competition between whole milk and other
human foods at given prices;
2. Racial, national and local food habits with
especial regard for what the consumers believe to be
the food value of whole milk as compared with other
available foods at the season's prices;
35
THE PRICE OF MILK
3. The value of milk for manufactured products
such as butter, cheese, casein, condensed milk, ice
cream, and milk powders;
4. The competition of butter fats with fats from
other animal and vegetable sources;
5. The value of milk as a food for other farm
animals;
6. The cost of producing milk;
7. The cost of producing milk as compared with
the cost of producing other products of the farm,
and compared with the cost of securing foods from
the forest, the air or the sea with the resultant
relative scarcity or abundance of these alternative
foods;
8. The competition between different regions and
different countries with varying adaptability to milk
production;
9. The cost and method of distributing whole milk
and milk products;
10. Transportation charges and facilities (local,
national and international) ;
11. The buying power of milk distributors and
manufacturers;
12. The selling powers of milk producers.
These various forces are usually lumped together as
the "law of supply and demand/'
Certain of these forces are subject to more or less
control by consumers, others by dairymen, some by
distributors and manufacturers, a few by city, state
and national law makers, some by the productive
power and policies of other countries; but not one is
36
FORCES THAT FIX THE PRICE OF MILK
solely and absolutely under the control of any one
of the parties interested. To be sure, consumers will
decide what they will eat and farmers what they
will produce. But the choices of consumers and
producers, if rationally made, are each a resultant
of those larger forces. The consumer will not refuse
to eat dairy products if milk and its by-products can
be secured at reasonable prices as compared with
other foods of similar food value; nor will the farmer
refuse to produce if the net returns from milk are
equal to or greater than the net returns from the
other alternatives before him.
The Dairy Division of the National Department
of Agriculture has made the following estimates as
to the uses to which the milk produced in the United
States in 1917 was put:1
USES TO WHICH MILK WAS PUT IN 1917 (CALCULATIONS BASED
ON ESTIMATES)2
Item.
Pounds of Milk.
Per Cent.
Produce of 22,768,000 cows at 3716 pounds per annum
Disposition of Milk Product:
1,605,587,52s1 pounds of butter (at 21 pounds milk)
420,000,000 pounds of cheese (at 10 pounds milk)
84,611,350,000
33,717,338,000
4 200 000 000
39.9
5 0
1, 353,605,000! pounds of condensed milk (at 2M pounds milk)
210,000,000 gallons of ice cream (weighing 6 pounds to the
gallon, 10 per cent fat)
100,000,000 persons, 45 per cent at 0.7 pound a day (cities);
farms with dairy cows SO per cent, 1£ pounds a day; other
farms and email towns, 25 per cent, 1 pound a day, approxi-
mately
3,384,012,000
3,150,000,000
36 500 000 000
4.0
3.7
43 1
17,500,000 calves, whole milk requirement (estimated)
3,660,000,000
4.3
Total
84,611,350000
100 0
1 United States Department of Agriculture Circular No. 85.
2 Corrected estimates compiled by Bureau of Markets, March, 1919.
37
THE PRICE OF MILK
These figures were put in chart form as follows:
»'XX>'
/*?<>
'////,
CHART No. V. — USES TO WHICH THE TOTAL MILK PRODUCED
IN THE UNITED STATES Is PuT1
Inasmuch as it is from the milk solids that the
by-products are made, we can best picture the food
uses of milk from the following chart showing the
total amount of milk solids produced in 1917 and
the proportion that went into the different products.
1 Figure 9, Circular 85, p. 14. The side chart shows the estimated proportion
of the milk used to make butter going into buttermilk and skim milk.
38
FORCES THAT FIX THE PRICE OF MILK
CHART No. VI.1 — PROPORTION OP TOTAL MILK SOLIDS PRODUCED
IN THE UNITED STATES IN 1917 GOING INTO THE
DIFFERENT MILK PRODUCTS
BILL/ON POUNDS
0/234S67Q9/0///2
^^^^^^for/4L SOLIDS
/A/ A//Z.A" IO339B^-7SySOO //////^
///////// A
y/^y//M4, '•,74&iodo,ooo IN MILK CONSUL
'ED
\ \
2729776,000 IN
JAVA
' MILK
> i ' 1
y/yffi, /,386,<534,000 IN
BUTTER
771 r I
1
FOR CALVES
73 1 ' 1^
1
^ 403,000,000
//V /C£: C/9£VJ
M
% 1 1
1
^ 389,960,300
4 i i
IN BUTTER Mi
1 1
LK
^ 316,875,000
IN CONDENSED MIL
K
\ 1 1
1
| Z73,OOOpOO
IN CHEESE
£ \ \
1
x] 2 73yOOOflOO
//V WHEY
A 1 |
1
From this chart it is clear that the use of whole
milk (43.1 per cent of the total) is the leading
factor in determining the price received by the
farmer. Hence, the actual or supposed competition
of whole milk with other foods is vital to the pro-
ducer as well as to the consumer. The consumer's
choice, however, is directly influenced by the other
alternatives in foods at prices offered.
From the standpoint of national welfare, either
sufficient milk must be consumed to provide those
protective elements in milk that are essential to
1 ibid., p. 16.
39
THE PRICE OF MILK
sound nutrition, or these protective elements, dis-
cussed more fully in the later chapter on the "Food
Value of Milk", must be secured in sufficient quan-
tities from other sources. These protective elements
are found most surely and most cheaply in milk.
For two reasons Americans generally have not
used as much whole milk as price facts warrant,
even after these facts are known. One reason is
that, though we all think of milk as a food for chil-
dren, many regard it only as a beverage for grown-
ups— a pleasant addition to the meal. We have
not yet come to think of milk as a large ingredient
of a satisfactory meal.
The second reason is that humans prefer foods
they can chew to foods they can drink; they ask for
something to eat, not for food containing nourish-
ment. This instinct is deep seated. It should be
met not by dispensing with milk but by using milk
and milk solids plentifully in solid foods in addition
to the use of milk as a beverage. In view of these
facts, any campaign for an increase in the con-
sumption of milk should stress its value in solid
foods, as did the circulars issued early in the spring
of 1918 by the Food Administration of Pennsyl-
vania. Some of the recipes given in one of these
circulars appear in the footnote.1
* TOMATO SOUP
6 cupfuls milk ^ teaspoonf til soda
6 tablespoonfuls corn flour 3 teaspoonfuls salt
3 cupfuls canned tomatoes % teaspoonf ul pepper
Heat five cups of milk. Mix the corn flour and seasoning with one cup of cold
milk ; add to the hot milk and cook over hot water. Cook and strain the tomatoes,
add soda and mix with the sauce just before serving.
40
FORCES THAT FIX THE PRICE OF MILK
Differences in national and racial food habits dis-
close possibilities for special education. As a rule,
negroes do not consume milk in the quantities
Anglo-Saxon peoples do. Professor McCollum has
accounted by this fact for the high rate of tuber-
culosis among the colored people in certain crowded
sections of our cities. In tropical regions milk is
SCALLOPED VEGETABLE OB FISH
2 tablespoonfuls corn flour 4 cupfuls cooked vegetable or fish
1 tea spoonful salt 1% cupfuls seasoned crumbs
pepper 2 cupfuls milk
Make a sauce of the first four ingredients; pour over the vegetable or fish in a
baking dish; cover with the crumbs, and brown in the oven.
CREAMED CODFISH
4 cupfuls milk 1 cupful shredded codfish
4 tablespoonfuls corn flour chopped parsley
pepper
Heat the milk over hot water, and thicken with corn flour mixed in a little of
the milk. Add the codfish and parsley, and serve.
FRIZZLED BEEF
Yz pound chipped beef 3 tablespoonfuls corn flour
2 tablespoonfuls fat 3 cupfuls milk
Melt the fat in a hot frying pan, add meat, and stir until it browns and curls.
Pour the milk into the pan and stir in the flour, which has been moistened with a
little of the cold milk. Cook until smooth and creamy.
MILK OR CREAM TOAST
Pour hot, salted milk over slices of toast; or, make a sauce as for scalloped
vegetable, and pour this over the toast. Grated cheese may be added to the
sauce, if desired.
COTTAGE CHEESE
Pour boiling water into thick, sour milk, stirring all the time until the whey
begins to separate from the curd. Pour into a thin muslin bag (a small salt bag
will do) and hang up to drain. When whey has all drained out, rub it smooth
with a spoon; add salt and pepper, moistened with milk or cream.
BAKED RICE PUDDING
3 tablespoonfuls rice H cupful sugar or corn syrup
1 quart milk y± cupful raisins
Place all in a baking dish and cook in a slow oven, stirring occasionally, until of
a creamy consistency. Serve hot or cold. This may be cooked in a double boiler
by using one-half cupful of rice.
41
THE PRICE OF MILK
generally little used, though new methods of preser-
vation may now increase its use in these climates.
The consumption of dairy products by individuals of
any race or section will vary with the season. Larger
quantities of milk are used in the summer and less
in late autumn and more as the days begin to
lengthen, reaching greatest consumption about
Easter and declining slightly thereafter until the
return of warm weather.
Consumption, moreover, is affected by suggestion.
In one city of Pennsylvania an "Eat More Milk"
campaign, carried on in newspapers alone, increased
the total consumption of milk in that city ten per
JUNKET
1 quart milk 1 rennet tablet
honey or corn syrup to sweeten and flavor
Heat the milk until lukewarm, add the honey or syrup. Dissolve the tablet
in a tablespoonful of cold water, stir this into the warm milk and pour into cups.
Set in a warm place until it becomes firm; chill and serve. Vary the flavor by
using caramel, cocoa, chocolate, vanilla or nutmeg. When frozen like ice cream
it is delicious.
CORN-STARCH PUDDING
1 quart milk 6 tablespoonfuls corn-starch
4 tablespoonfuls sugar 4 tablespoonfuls cocoa
a few grains of salt
Heat three cupfuls of the milk. Mix sugar, corn-starch and cocoa with the
remainder of the milk. Pour this into the hot milk, and cook over hot water
for thirty minutes. Add salt and pour into a mold. When cold, serve with cream
or top milk.
Buy at least a pint a day (or every member of the family. No other foods can
take its place for invalids and children. Save on fat, wheat, sugar, meat— but
NOT ON MILK!
Use all of the milk — waste no part of it. Use skimmed milk for cooking. Serve
the top milk with breakfast foods and puddings. Use sour milk in making muffins,
griddle cakes or cottage cheese. Save the whey for bread making.
One pint milk yields 14 grams protein and 314 calories.
One pint skimmed milk yields 15 grams protein and 166 calories.
One pint buttermilk yields 13 grams protein and 165 calories.
One pint whey yields 4 grams protein and 125 calories.
One pound cottage cheese yields 94 grams protein and 510 calories.
42
FORCES THAT FIX THE PRICE OF MILK
cent in two weeks. By a concert of many methods
the per capita consumption of milk in Philadelphia
in the early spring of 1918, when milk was 13 cents
a quart, was brought up to where it had been when '
milk was 8 cents a quart.
The consumption of milk in a family depends upon
whether wages are rising or falling as well as upon
the trend in the price of milk. Miss Ethel Rupert,
for the Society for Organizing Charities in Philadel-
phia, took responsibility for a report to the author
as to whether the poor people in the city of Phila-
delphia were decreasing milk consumption because
milk had increased in price. Her study was made
in April and May of 1918. Data was secured from
a total of 1130 working men's families in the city of
Philadelphia. Comparison in wages and milk con-
sumption were made with a similar period in 1917.
During this year milk had advanced from 12 to 13
cents per quart. The results were as follows:
RELATION OP MILK CONSUMED TO WAGES, IN WAGE EARNERS'
FAMILIES IN PHILADELPHIA
114
128
234
654
Unknown
Decreased
Stationary
Increased
15.02
19.00
22.31
21.45
19.00
15.86
6.43
6.46
2.5
2.3
2.6
2.6
43"
34
65
201
51
31
44
70
194
46
45
82
228
THE PRICE OF MILK
This was a year in which wages generally were
increasing. When wages advanced there was a
slight tendency to increase the use of milk; and a
slight tendency to decrease the use of milk when
wages did not keep pace with living costs. When
wages remained stationary milk consumption re-
mained stationary. The significant point, however,
is the number that made no change, whether wages
increased or decreased. Milk is a family necessity.
The consumption of milk is also directly influenced
by the prices of substitute foods on the market. In
Philadelphia the consumption of whole milk was
kept constant despite a fifty per cent increase in
price. But a fifty per cent increase in the price of
butter brought a substantial decline in consumption.
In other words, there were no foods then competing
successfully with whole milk at the price level of
thirteen cents, while with the same proportional in-
crease in the price of butter, other fats came promptly
into competition with butter.
The belief of the people as to what is a fair price
for milk is a big factor in deciding the quantities in
which they will buy it. The author has seen the
leaders of a farmers' organization kill the consumers'
confidence in the relative food value of milk at
existing prices by advertisements containing in-
accurate statements as to the "huge profits" being
exacted by milk dealers. The purpose in this was
to create prejudice against the milk dealers. In
doing so, the fanners were quite indifferent to the
fact that they were also prejudicing the consumer
44
FORCES THAT FIX THE PRICE OF MILK
against the very commodity they wanted to sell.
On the other hand, more than once milk distributors
have sought to turn public feeling against the pro-
ducers with the result of arousing the distrust of the
consumer in the fair price of the product they were
distributing. Moreover, certain consumers have
talked of boycotting milk when it was the best food
purchase possible at the time. All these psycholog-
ical influences are factors in price, quite aside from
the actual facts as to the relative food value of milk.
Of the total amount of milk produced in this
country, about 39.9 per cent goes into butter and
into the by-products of skimmed milk, 5 per cent
into cheese, 3.7 per cent into ice cream and 4 per
cent into condensed milk — a total of 52.7 per cent.
Since over half the total goes into these manufactured
products, the demand for milk for these purposes is
an important influence in fixing the price.
Manufactured milk products exert a big influence
on the price of milk because in this form the milk
solids can be stored from seasons of plenty until
seasons of scarcity and transported from regions and
countries of plenty to regions and countries of scar-
city. These influences are so significant that
Chapter III is devoted to them. Later pages also
discuss the extent of independence and interdepend-
ence between local, primary, national and inter-
national markets (Chapter IV). Suffice it to say
here that on the whole the movement of milk and
milk products is so free that no local farmers' organi-
zation can, during the season of greatest production,
45
THE PRICE OF MILK
command a price for whole milk for city use above the
general market value of milk for manufactured
products; nor can local milk dealers and manufac-
turers long keep a price to local farmers below the
demand of the wider market. The comparatively
free interplay of forces as outlined more fully in the
two succeeding chapters go far toward assuring a
fair market price to dairymen and to milk buyers.
While all foods are competing through price for
selection by the consumer, the competition between
batter fats and fats from other animal and vegetable
sources is the keenest of food wars.
The following chart depicts the struggle between
butter and but one competitor, viz., oleomargarin,
produced from both animal and vegetable oils.
While oleomargarin has escaped the seasonal price
fluctuations of butter, its price curve has in general
moved with that of butter. The production of oleo-
margarin, however, is seen to respond quickly to
the fluctuations in the price of butter, indicating
that as the price of butter rises consumption is
transferred to oleomargarin. It is obvious that the
possibility of substitution which exists here tends to
equalize the prices of both products.
Fats we must have, but their sources are many.
The influence of the price of butter over the price
of milk is the one doubtful element of the future.
The danger is that this influence will keep the price
to the farmer too low to encourage production rather
than that it will keep the price of whole milk too
high for the city earner.
46
FORCES THAT FIX THE PRICE OF MILK
CHART No. VII. — THE PRICE OP BUTTER AND OLEOMARGARIN
PER POUND, 1913-1920, AND THE PRODUCTION OP
OLEOMARGARIN IN MILLIONS OP POUNDS,
1917-19201
13 1914
[ s 3 i Y r
19 i 5 1916
4-4-4-4
nn
BUTTER
OLEOMARGARIN
PRICE
-OLEOMARGARIN
PRODUCTION
£A_
V
V
V
When the price of milk gets too low for profitable
sale as whole milk or milk products, the dairyman
has the alternative of feeding his milk to young
animals. Of the present production 4.3 per cent is
used for this purpose. The protective elements in
milk which make it the food par excellence for human
beings, make it also the food par excellence for grow-
ing animals. Moreover, the chemical food content
itself is worth considerable for this purpose. While
this alternative will act as a governor when surplus
1 The price for butter is the average for the months for creamery extra Chicago
and for oleomargarine is for standard uncolored at Chicago. From Bureau of
Labor Statistics.
47
THE PRICE OF MILK
quantities are small, it cannot be an influential price
factor for all milk.
Unless milk producers can get net returns from
milk equal to the returns from other farm products
or from efforts in other industries, milk will not be
produced. To the extent that dairymen at any
given time choose other alternatives with larger net
returns, the production of milk will be decreased.
In proportion in which milk offers larger net returns
than in the long run can be secured from efforts in
other fields, milk production will be increased. These
cost factors determine the relative scarcity and
abundance of foods. They are, therefore, the prima-
ry factors in determining price, and hence a separate
chapter (V) is devoted to the cost of producing milk.
But some sections and some countries are better
fitted for milk production than others. The rivalry
in prices between various sections and countries is
so important that the major portion of the two
following chapters is devoted to it. A given dairy-
man may not be compensated for all his expenses of
production if milk can be produced on other farms or
in other sections at less cost. There is as much
competition between areas and countries as between
foods; and the price influence of areas peculiarly
adapted to milk production is ever present.
But to the cost of production must be added, for
that milk consumed as whole milk, the costs of
transportation and distribution. These costs plus
expenses of production are the important, though
not the only forces that determine what the con-
48
FORCES THAT FIX THE PRICE OF MILK
sumer pays for whole milk. Distribution and trans-
portation costs and facilities also influence directly
the price which the producer receives. If these
costs are excessive the consumer chooses something
else to eat as far as possible — and that "possible" is
often sufficient to cause producer's prices to tumble.
In this sense the price the producer receives is the
price the consumer pays, less the amounts taken out
for transportation and distribution. To all these
costs, including the costs incident to keeping milk
wholesome, the chapters in Part II are devoted.
But after all these price determining forces are
weighed there still remains the buying and selling
powers, the comparative bargaining powers, of those
who buy and those who sell milk. The general
forces do not automatically fix a price undisturbed
by efforts of buyers and sellers to swing the price to
their advantage. The price for any day or month
is a man-made guess as to where the fundamental
price-fixing forces will allow the price to rest. If the
distributors and manufacturers have developed a
well organized purchasing power and the sellers of
milk little or no organized selling power, the price
for milk is below what it would be if the producers
have a well organized selling power and the buyers
have a poor purchasing power. In both cases the
price is different from what it would be if the buying
and selling powers were equal, as they must be to
arrive at a fair price. These bargaining forces are
discussed further in Chapters VI and VII.
Such, in the main, are the influences that deter-
4 49
THE PRICE OF MILK
mine the price of whole milk and of manufactured
dairy products. They are not simple, but they are
all important. For in their free and proper expres-
sion lies the well-being of all our people, both those
who produce in the country and those who consume
in the city.
80
CHAPTER III
Manufactured Milk Products in Their Relation to Price
The amount of butter produced in this country
increased from 1,491,871,673 pounds in 1899 to
1,619,415,263 pounds in 1909 and fell to 1,605,587,525
pounds in 1917. This was an increase of about 8 per
cent in production from 1899 to 1917. The estimated
production for 1919 was 1,549,000,000 pounds, a
decrease over 1917. The cheese produced increased
from 298,344,654 pounds in 1899 to 320,532,181
pounds in 1909 and to 420,000,000 pounds (esti-
mated) in 1917, an increase of 40 per cent in the
same period. The estimated production for 1919
(378,000,000 pounds) was below that of 1917. The
production of condensed milk in the United States
increased from 186,921,787 pounds in 1899 to 494,-
796,544 and 1,353,605,000 pounds in 1909 and 1917
respectively, an increase of 64 per cent in these
dozen and a half years. The production for 1919
(estimated at 1,815,502,790 pounds) was substan-
tially above that of 1917. The figures for 1899 and
1909 are from census reports, while those for 1917
and 1919 are the estimates of the United States
Department of Agriculture. The value of all these
products increased from $136,365,983 in 1897 to
$307,255,277 in 1899, to $498,567,866 in 1909 and
to $863,000,000 in 1917. Over one-half (52 per cent)
of the milk produced in the United States goes into
51
THE PRICE OF MILK
manufactured milk products, including ice cream.
This fact and the relative amounts and values pro-
duced as given above will indicate at once the
important bearing that the prices for the various
manufactured products have on whole milk.
THE PRODUCTS MANUFACTURED FROM MILK IN THE UNITED STATES
AND THE TOTAL QUANTITIES OF EACH FOR 1918 AND 1919
Products.
Creamery butter
Whey butter (made from whey)
American cheese (whole milk)
American cheese (part skim)
American cheese (full skim)
Swiss cheese (includes block)
Brick and Munster cheese ,
Limburger cheese
Cottage, pot, and bakers' cheese
Cream and Neufchatel cheese
All Italian varieties of cheese
All other varieties of cheeae
Dried casein (buttermilk product)
Sweetened condensed skimmed milk (case goods)
Sweetened condensed unskimmed milk (case goods)
Sweetened condensed skimmed milk (bulk goods)
Sweetened condensed unskimmed milk (bulk goods)
Unsweetened evaporated skimmed milk (case goods)
Unsweetened evaporated unskimmed milk (case goods)
Unsweetened evaporated skimmed milk (bulk goods)
Unsweetened evaporated unskimmed milk (bulk goods)
Evaporated part or full skimmed milk modified with foreign fat
(case goods)
Evaporated part or full skimmed milk modified with foreign fat
(bulk goods)
Sterilized milk (canned same as condensed)
Condensed and evaporated buttermilk
Dried or powdered buttermilk
Powdered whole milk
Powdered skimmed milk
Powdered cream
Malted milk
Milk sugar (crude)
Ice cream of all kinds (gallons)
1918
(pounds).
793,275,309
5,510,213
247,276,503
9,102,159
6,610,993
18,586,505
43,332,215
8,808,140
27,802,037
5,774,630
2,042,234
11,088,236
97,196
8,653,067
411,224,893
46,303,494
40,871,997
12,049,163
016,437,919
56,781,752
183,611,949
41,033,855
7,591,182
6,257,710
6,534,023
4,341,157
4,164,334
25,432,007
654,360
15,654,243
2,749,928
122,900,106
1919
(pounds).
851,269,140
5,597,308
281,836,015
6,189,192
6,985,356
20,387,306
37,521,004
7,625:541
29,785,329
5,500,639
3,987,361
9,661,497
722,151
7,231,630
568,250,861
61,791,696
36,910,038
3,626,172
1,159,217,649
65,442,286
74,985,073
62,262,225
2,748,120
4,414,818
22,535,580
5,278,827
8,660,785
33,076,131
592,070
17,495,887
6,221,342
127,840,204
52
MANUFACTURED MILK PRODUCTS
The preceding table gives the products manufac-
tured from milk in the United States in 1918 and
1919, with the quantities of each.
Milk is worth more for consumption as whole
milk than it is in any manufactured form. In
order to meet fluctuations in demand the whole milk
distributor must have a supply equal to his maximum
demand on any day or in any season. This means
he will usually have a larger or smaller amount of
what he calls surplus milk. As the value of the
milk for whole milk consumption is usually above
its value when made into manufactured products,
the dealer may have to take a loss on the surplus so
manufactured. Moreover, some whole milk dealers
do not have the facilities for the efficient manufacture
of milk products.
This surplus problem of the whole milk dealer is
shown by the chart on page 54 giving separately
the supply received through the regular receiving
stations of this dealer and the demand from his con-
sumers for milk (the whole milk sold) for each of
the months for the years 1915, 1916 and 1917,
respectively.
It will be noticed that in 1915 the period of greatest
supply came in the first week of June, with a slight
increase in the first week in August and a marked
decline in the last week of September. The mini-
mum production was received in the first week in
December. In the year 1916 the time of high
supply comes about June 10th, with a slight increase
about the middle of August, and the period of lowest
53
THE PRICE OF MILK
§ I
£
"i i
T±a
N
s
u
54
MANUFACTURED MILK PRODUCTS
supply is reached in the middle of October, with the
second minimum of production in the middle of
November, after which time the production gradually
increases. For the year 1917 the maximum produc-
tion is reached the last week in June, with an increase
in supply the last week in August and the minimum
supply about the middle of December. Maximum
consumption came in the middle of August.
It is to be noted that during a considerable portion
of each year this dealer had to buy a varying amount
of milk from other sources than his own receiving
station supply. This means that he bought milk
from outlying creameries in the months when he was
short, rather than have the annual expense of main-
taining his own stations. Had he a supply of his
own sufficient for his trade the year round, his
surplus would have been all the greater. It is often
a close question as to whether it pays a milk dealer
to get a supply sufficient for all the year. If he
does he has the costs and risks of surplus. If he
does not he must pay a premium to some concern
for milk when he is short. In the last year or two
some have made up this shortage with remade milk.
(See Chapter VII.)
Most important of all it is to be noted that neither
supply nor demand could be effectively prophesied
in their relation to each other. Thus in 1915 in the
last week in September when there is an increase in
the use of milk, probably because of hot weather,
there is at the same time a rapid fall in the amount
of milk produced. The same thing is to be noted
55
THE PRICE OF MILK
for the first week in May of the same year. In the
autumn months, when the consumption remains
fairly constant, production decreases very rapidly.
The effect of a hot and cool week following each
other closely is shown in the month of August, 1916.
During the middle of that month there is a marked
increase in comsumption of whole milk, with a
marked decrease in production because of hot
weather, followed by a decrease in consumption and
an increase in production because of cool weather.
Again in the middle of October, 1916, there is an
increase in consumption for the very week that
brought the minimum decrease in production. The
actual supply and demand were seldom if ever at
equilibrium.
Taking the average receipts for October, Novem-
ber and December, 1919, as a base, seven distributing
and manufacturing companies in the Philadelphia
district had a surplus in pounds for the first six
months of 1920 as follows:
January.
February.
March.
April.
May.
June.
3,631,261
4,285,799
6,346,028
6,712,848
12,631,506
15,035,500
The amount of this surplus to be manufactured
will vary in the same city as between dealers, and
indeed for the same dealer in different years. Here
is one company which received 1,600,000 quarts in
the December of 1919 as compared with 3,100,000
quarts in the previous June, while another dealer in
56
MANUFACTURED MILK PRODUCTS
the same city with about the same receipts for
December had purchased but 250,000 quarts more
in June than he received in December. Another
dealer will be using but one-third of his total pur-
chases in June in his whole milk trade and yet use
all his supply for the whole milk trade in December.
To secure a supply adequate for whole milk sales
the dealer must (1) have the facilities for manufac-
turing the surplus or (2) take the losses on wasting
the surplus, or, (3) maintaining a supply fairly con-
stant with sales, pay a premium for milk in time of
scarcity. All methods are used, but dealers are as
a rule equipping themselves to care efficiently for all
the milk coming to their platforms, at least from
their regular patrons. By surplus milk is meant the
excess of milk coming to the plants of whole milk
dealers at certain seasons of the year above the nor-
mal sales of whole milk. This surplus is really in-
surance for an adequate supply of whole milk to
meet varying trade demands and losses in transit or
losses due to sour milk.
The exact time of the occurrence of the milk surplus
of course varies from state to state, as well as within
narrower boundaries, but in general it comes in April,
May and June, with a decrease below the average ,
in certain other months, particularly in October,
November and December.
If the farmer, gives the dealer during three months
of the year say one-fifth more milk than the dis-
tributor may be able to sell through his whole milk
trade, the dealer must possess some other means of
57
THE PRICE OF MILK
getting rid of this extra milk at the usual market
price, or he must pay a smaller amount to the pro-
ducer. Similarly, if the producer has a contract
with the distributor to furnish him with a certain
amount of milk per day, and has, therefore, at times
a surplus on hand which he is unable to get rid of
except through extraordinary channels at very low
rates, it necessarily follows that he must get more
for the milk he sells.
In general there are two ways in which the milk
surplus may be utilized: It may be converted into
such form as will allow it to be stored for at least
several months; or there may be created some new
demand for milk at the particular season at which
the surplus comes. If the first means be selected,
it is usually converted into butter, cheese or con-
densed milk. Cream may be taken from the milk
and stored for as long as six months, without any
substantial change in the bacterial count.
It is commercially impossible to create a demand
for milk that will automatically take care of the
surplus from week to week. For instance, the peak
in ice cream demand will not come before July 4th,
by which time production is declining.
In the past the price of butter was based on the
cost of turning milk into butter on the farm or in
small cross-road creameries. When this was the
case no special manufacturing facilities were needed
by a whole milk dealer to compete in price with those
butter manufacturers who had efficient equipment.
Of recent years, however, the large factory has been
58
MANUFACTURED MILK PRODUCTS
gaining over domestic manufacture or small cream-
eries because of savings in the manufacture of
skimmed milk and lower unit costs due to larger
quantities handled. Many milk dealers are, there-
fore, now equipped to condense their surplus skim
milk or convert it into skim milk powder. Those
who are not thus equipped are losing out in the
economical handling of milk. Other dealers have
added an ice cream business to their whole milk
business in addition to putting their own butter and
cheese out for sale on their retail milk wagons.
More and more, therefore, the surplus is being cared
for by milk dealers economically and without waste,
though large quantities of skim milk are still turned
into the creek or the sewer by those not equipped to
save it. It is to the interest of all that the milk of
the country flow into those plants equipped to save
and utilize economically all the milk solids. Those
dealers make most money who can immediately take
advantage of the best the market offers in price,
whether that be for whole milk, for condensed milk,
for cheese, for skim milk powders or for casein.
However the dealer's surplus may be handled (and
surplus he must have), there must be a direct relation
between the price the dealer can afford to pay for
whole milk as based on the price paid by the con-
sumer and the price he can receive for the product
or products into which he manufactures his surplus.
Indeed, the relation between the price which the
dealer receives for his surplus in the form of manu-
factured products and the price he can pay for whole
59
THE PRICE OF MILK
milk for distribution to consumers is so close that it
may be possible to use the former in computing the
latter.
A plan for using the price of butter and cheese, the
leading products manufactured from milk, as a basis
for determining the price of whole milk has recently
(1919) been tried out in the New York district.
Table A gives the value of whole milk at the different
price levels of butter and cheese.
The price of whole milk thus found is readjusted
by adding the sums indicated in Table B for nine
months, while for the three months of maximum
production 15 cents a cwt. is deducted. This table
also gives the price for whole milk as based on the
actual market values of butter and cheese that pre-
vailed by months for the year 1918 and for the first
two months of 1919.
The committee reporting this plan thus explained
its application:
We wish to call your particular attention to the
fact that this plan does not mean that producers
would sell their milk at its value in butter and
cheese. Not only have we provided a very liberal
allowance for skim milk and whey, but in addition
we have allowed the New York market price for
high grade goods without any deduction for manu-
facture, packing, freight and commission. If
milk were manufactured into butter or cheese
these costs would necessarily have to be deducted
from the New York market prices, and in figuring
the value of this allowance to the producer, we have
used the very conservative figures of 3 cents per
60
MANUFACTURED MILK PRODUCTS
TABLE A. — VALUE OF WHOLE MILK BASED ON THE MARKET
VALUES OP BUTTER AND CHEESE
Butter
Yield, 4
Per Cent
Milk,
Allowing
16
Per Cent
Over-run
Butter,
Cents
per
Pound
Fresh.
Extras
92
Score.
Value.
Value,
Skim
Milk
per
cwt. of
Whole
Milk.
Total
Value,
Butter
and
Skim
Milk.
Cheese
Yield,
4
Per Cent
Milk
(pounds)
Cheese,
Cents,
per
Pound.
Fresh,
Average
Run.
Value.
Value,
Whey
per
cwt. of
Whole
Milk.
Total
Value,
Cheese
and
Whey.
(pounds)
4.64
71
$3.29
$1.12
$4.41
10.60
37
$-3.92
$0.25
$4.17
70
3.25
1.10
4.35
1
36H
3.87
.25
4.12
,«*
69
3.20
1.08
4.28
36
3.82
.25
4.07
68
3.16
1.06
4.22
35^
3.76
.24
4.00
67
3.11
1.04
4.15
35
3.71
.24
3.95
66
3.06
1.02
4.08
34K
3.66
.24
3.90
65
3.02
1.00
4.02
34
3.61
.23
3.84
64
2.97
.98
3.95
33^
3.55
.23
3.78
63
2.92
.96
3.88
33
3.50
.23
3.73
62
2.88
.94
3.82
32H
3.45
.22
3.67
61
2.83
.92
3.75
32
3.40
.22
3.62
60
2.78
.90
3.68
31J*
3.34
.22
3.56
59
2.73
.88
3.61
31
3.29
.21
3.50
58
2.69
.86
3.55
30^
3.24
.21
3.45
57
2.64
.84
3.48
30
3.18
.21
3.39
56
2.60
.82
3.42
29H
3.12
.20
3.32
55
2.55
.80
3.35
29
3.07
.20
3.27
54
2.51
.78
3.29
28^
3.02
.20
3.22
1
53
2.46
.76
3.22
28
2.96
.19
3.15
52
2.42
.74
3.15
27^
2.91
.19
3.10
4
51
2.37
.72
3.09
27
2.86
.19
3.05
1
50
2.32
.70
3.02
26H
2.81
.18
2.99
'
49
2.27
.68
2.95
26
2.75
.18
2.93
1
48
2.23
.66
2.89
25H
2.70
.18
2.88
1
47
2.18
.64
2.82
25
2.65
.17
2.82
1
46
2.13
.62
2.75
24H
2.60
.17
2.77
1
45
2.09
.60
2.69
24
2.54
.17
2.71
44
2.04
.58
,2.62
23H
2.49
.16
2.65
'
43
2.00
.56
2.56
23
2.44
.16
2.60
1
42
1.95
.54
2.49
22^
2.39
.16
2.55
1
41
1.90
.52
2.42
22
2.33
.15
2.48
1
40
.86
.50
2.36
2iy2
2.28
.15
2.43
'
39
.81
.48
2.29
21
2.23
.15
2.38
1
38
.76
.46
2.22
20^
2.17
.14
2.31
'
37
.72
.44
2.16
20
2.12
.14
2.26
1
36
.67
.42
2.09
19^
2.07
.14
2.11
35
.62
.40
2.02
19
2.01
.13
2.14
1
34
.57
.38
.95
W/2
.96
.13
2.09
1
33
.53
.36
.89
18
.91
.13
.98
32
.48
.34
.82
17H
.86
.12
.92
1
31
.44
.32
.76
17
.80
.12
.87
'
30
.39
.30
.69
16H
.75
.12
.81
1
29
.34
.28
.62
16
.70
.11
.81
28
.30
.26
.56
15^
.64
.11
.75
11
27
.25
24
1 49
15
59
.11
.70
"
26
1.20
.22
1.42
14J^
1.54
.10
1.64
25
1.16
.20
1.36
14
1.48
.10
1.58
61
THE PRICE OF MILK
TABLE B. — NEW YOBK PLAN FOR BUYING WHOLE MILK BASED
ON THE MARKET VALUES OF BUTTER AND CHEESE
New York Market
4 Per Cent
Average,
Prices,
Whole Milk,
4 Per Cent
Cents per Pound.
Value in
Whole Milk
Adjustment
for
Net
Price
Date.
eluding Aver-
Conditions
4
Cheese,
age Costs of
Peculiar to
Per Cent
Butter,
Fresh
Manufacture,
New York
Whole
Fresh
Extras.
Average
Run.
Butter.
Cheese.
etc., of 34
Cents per
Territory.
Milk.
100 Pounds.
1918.
January
52.2
23.3
13.17
$2.63
$2.90i
+$0.16
$3.06i
February
51.1
23.3
3.09
2.63
2.86i
+ .16
3.02i
March
44.5
23.4
2.66
2.64
2.65i
+ .16
2.81i
April
43.3
22.2
2.58
2.50
2.54
- .15
2.39
May..
45.3
22.3
2.71
2.52
2.62
— .15
2.47
June
43.9
23.2
2.61
2.62
2.62
- .15
2.47
July
44.8
24.5
2.68
2.77
2.72
+ .16
2.88
August
46.0
25.7
2.75
2.90
2.83
+ -36
3.19
September
55.9
27.8
3.41
3.14
3.27
+ .36
3.63
October
58.7
32.2
3.59
3.63
3.61
+ .16
3.77
November
63.2
32.7
3.90
3.69
3.79
•f .16
3.95
December
68.6
36.0
4.26
4.07
4.16
+ .16
4.32
1919.
January
61.8
35.5
3.80
4.00
3.90
+ .16
4.06
February
51.8
30.0
3.14
3.39
3.27
+ .16
3.43
pound for butter and 2f cents per pound for
cheese, though we are advised the actual costs of
manufacture and marketing are greater. Further,
we have valued the skim milk and whey in 100
pounds of whole milk at the prices heretofore paid
for 100 pounds of such by-products when butter
1 In any comparison of values for the first three months of 1918 it must necessarily
be borne in mind that due to the placing of embargoes on ocean traffic by the
Government on account of having to use all available vessel space for troops, muni-
tions, equipment, etc., supplies of butter and cheese, as well as other food products,
intended for shipment to Europe, were unable to be moved, and due to over-
stocked markets values were demoralized. This created an abnormal situation,
a repetition of which is most unlikely.
62
MANUFACTURED MILK PRODUCTS
and cheese sold at the figures shown in Table A,
notwithstanding not more than 85 pounds of skim
milk or 90 pounds of whey can be secured from 100
pounds of whole milk. We figure that all these
allowances are equivalent to approximately 34
cents per 100 pounds of milk.
This plan recognizes the expense of producing
milk in this territory by the addition of certain
arbitraries; and likewise offsets the tendency to-
ward an increased summer production by deduc-
tions in the three months April, May and June.
The deductions so made taken into consideration
in establishing the arbitraries added to subsequent
months. (See Table B.)
The method of arriving at a price would be as
follows:
The market values of butter and cheese would
be ascertained from the "Producers' Price Cur-
rent/' an official report of transactions in butter,
cheese and other commodities sold in New York
markets, issued daily.
Take for illustration the month of December,
1918. Table B shows that the average price of 92
score butter for that month was 68.6 and cheese
36 cents per pound. The return of 4.64 pounds
of butter at 68.6 cents per pound would be $3.18
(actually $3.18304), and Table A shows that the
skim milk with butter at 68.6 cents per pound would
have a value of $1.072, making the total value of
100 pounds of 4 per cent milk on a butter basis of
$4.255. At 36 cents per pound Table A indicates
that 10.6 pounds of cheese would have a value of
$3.82, and on this basis whey is valued at 25
cents, making a total value for cheese and whey of
$4.07, or an average value on a butter and cheese
basis of $4.16. To this would be added 16 cents
63
THE PRICE OF MILK
as a further premium for meeting the costs of
production and conditions peculiar to milk pro-
duced in this territory, making a total price, under
this plan, for 100 pounds of 4 per cent milk in the
month of December, 1918, of $4.32.
Similarly, taking the month of June, 1918, as
the price of butter was 43.9 cents and the price of
cheese 23.2 cents, by figuring in just the same way
as above, the value of 100 pounds of 4 per cent
milk on a butter basis would be $2.61 and on a
cheese basis $2.62, and the average of these would
be $2.62. June being one of the three flush months
in which there would be a deduction of 15 cents,
price for 100 pounds of 4 per cent milk would be
$2.47.
The basic price to be considered is milk testing
3.6 per cent butter fat. To ascertain such basic
figure the price for 4 per cent milk as determined in
accordance with plan is to be divided by 4 and
multiplied by 3.6. The price of milk for tests
other than 3.6 per cent to be arrived at by adding
or deducting 4 cents per 100 Ibs. for each one-
tenth of one per cent of fat above or below 3.6 per
cent as the case may be. Such basic price to be
paid in the 200-210 mile freight zone, subject to
the freight differentials above or below such basic
zone, but with no deductions for freight zones above
400 miles.
As finally agreed upon, the price of whole milk for
any month under the plan was based upon the
average price of butter and cheese for the current
month ending on the twentieth day. Thus the
price for whole milk to be paid in May was based on
the price of butter and cheese for the month ending
64
MANUFACTURED MILK PRODUCTS
on April 20th, and for October on the butter and
cheese price for the month ending on September 20th.
One disadvantage of this plan lies in the fact that
in the spring and summer months when the prices of
butter and cheese are falling, the price for whole
milk for the subsequent month may be above the
price prevailing by that time for those commodities,
and, conversely, in the autumn the prices thus estab-
lished will tend to be below the prices of butter and
cheese. In other words, under this plan the past is
determining the price paid for milk while the prices
presently received for milk products — as for any
other commodity — is influenced also by the prospects
for the future. Moreover, the price to an extent
must always be above the actual market price during
the months of maximum production and below the
market price in the months of minimum production,
depending upon the degree of fluctuation in butter
and cheese prices. Moreover, the plan gives no
basis for including the value of milk for whole milk
consumption other than the stated differentials.
The plan is artificial. The differential to be added
and subtracted as given in Table B is for the purpose
of correcting this artificiality. But that this dif-
ferential always fairly represents both prevailing
producing and market facts no one would contend.
Prices are determined by the present supplies and
estimates of future demand and production. In the
world of prices the past is a good guide, but it is
not and cannot be the sole determinant in fixing
prices.
5 65
THE PRICE OF MILK
This plan after trial for one year was abandoned.
The chart on page 156 gives the results in price to
producers as compared with three other primary
markets for the months it was tried.
The surplus price plans now in use in the Phila-
delphia and Baltimore markets are discussed in
Chapter VII.
The manufactured products are the forms in which
whole milk is economically stored during flush seasons
against seasons of scarcity. The development of
cold storage facilities and of more efficient methods
for changing whole milk into forms that will keep,
stabilizes the prices of dairy products to the con-
sumer and provides the summer producer a larger
and better market. Butter and cheese have usually
been made in localities where transportation to
market has been poor, and hence where milk would
spoil if it were shipped for use in its fresh state.
This is as true of the old household industry that
turned out butter and cheese, as of the newer factory
industry that has sprung up in the last half century.
Also, countries with a surplus of milk for the needs
of their population have, with the right kind of
farmers' associations and marketing organization,
turned to the export of butter and cheese. Holland
and Denmark are striking examples of such countries.
It is through the manufactured products, too, that
milk solids produced in one country or one section
of a large country are made available to other
countries and to all sections of the same country.
During the war years the demand of other countries
66
MANUFACTURED MILK PRODUCTS
for our dairy products opened a market never before
in the reach of our dairymen, on a profitable basis,
with its inevitable result upon prices for dairy
products not only in this country but in all countries.
The quantities and values of our exports and im-
ports and the output in this country are summarized
in the succeeding chapter, where the interrelation of
international, national and local demand and supply
and their effect on the price of dairy products is
discussed.
A comparatively new method of changing the form
of milk so that it will not spoil, is to make it into
condensed or evaporated milk or milk powders.
Condensed milk, it is true, has been found to have a
limited market. A large portion of the population
does not find in it an entirely adequate substitute
for fresh milk. But notwithstanding these limita-
tions, there is a large and permanent market for the
product. Not only is the domestic market avail-
able, but there is also an expanding market in tropical
or frigid countries and in countries not adapted to
milk production.
The following table shows the relative amounts
of each of the different grades of condensed and
evaporated milk produced in the United States in
1916, 1917, 1918, and 1919. We are saving more of
our skimmed milk. The percentage of increase in
the use of imported animal and vegetable oils is
suggestive of the increase in substitutes for butter
with a relative decline in the production of butter,
as discussed on page 74.
67
THE PRICE OF MILK
PRODUCTION OP CONDENSED AND EVAPORATED MILK IN THE
UNITED STATES PROM WHOLE MILK, 1916-1919
(Figures are in round thousands of Ibs., i. e., 000 omitted)
Condensed Milk.
Evaporated Milk.
Total
Per Cent
Year
Condensed
over
Case.
Bulk.
Total.
Case.
Bulk.
Total.
and
Evaporated.
Previous
Years.
1916....
267,307
20,767
288,073
524,273
106,939
631,212
919,285
1917....
280,958
34,658
315,616
741,559
186,609
928,168
1,243,784
35
1918....
411,225
40,872
452,097
916,438
183,612
1,100,050
1,552,147
25
1919....
573,044
38,394
611,437
1,194,496
77,514
1,272,010
1,883,447
21
FROM SKIM MILK
1916. . . .
9,757
32,993
42,749
3,526
26,704
30,329
73,079
1917....
7,832
41,235
49,067
8,586
32,348
40,935
90,002
23
1918....
8,653
46,303
54,957
12,049
56,782
68,831
123,787
38
1919. . . .
7,468
65,377
72,845
3,626
71,039
74,665
147,510
19
FROM PART OR FULL SKIMMED MILK MODIFIED WITH FOREIGN FAT
Year.
Case
(pounds).
Bulk
(pounds).
Total
(pounds).
Increase over
Previous Years
(per cent).
1916
12000
14 134 712
14 146 712
1917
18,504
17,487 064
17,505 568
24
1918
41 033 855
7 591 182
48 625 037
178
1919
62,262,221
2,748,120
65,010,341
34
Continued on next page.
Chart No. IX on page 70 gives the monthly
variations in the wholesale price of extra creamery
butter and whole milk cheese from 1913 to 1919
inclusive. The prices taken are the average for the
month. It will be noted: (1) Monthly and seasonal
price fluctuations for cheese are not as great as for
68
MANUFACTURED MILK PRODUCTS
TOTAL PRODUCTION OF CONDENSED AND EVAPORATED MILK (cont'd)
(Figures are in round thousands of Ibs., i. e., 000 omitted.)
Increase
Relative
Increase
Relative
Percent-
Year.
From Whole
and Skim Milk
(pounds).
over
Previous
Years
(per
Increase
over
1916
(per
Including
Foreign Fat
(pounds).
over
Previous
Years
(per
Increase
over
1916
(per
age of
Foreign
Fat of
Total
Produc-
cent).
cent).
cent).
cent).
tion.
1916
992,364,000
100
1,006,510,712
100
0 014
1917
1,333,786,000
34
134
1,351,291,568
34
134
0.012
1918
1,675,934,999
25
168
1,724,559,037
27
170
0.028
1919
2,030,957,000
21
204
2,095,967,341
21
208
0.031
butter. (2) High and low price months vary from
year to year and are not always the same months
for both butter and cheese. (3) The price for one
product affects in general but not proportionally nor
immediately the price of the other. While the
average between the lowest price at which butter
and cheese went into storage and the highest price
at which they came out was 14.3 and 6.2 cents per
pound respectively for this seven-year period, the
monthly variations in these differentials (and hence
in profits and risks) were marked. (4) The margins
were larger after we entered the war than in the
pre-war period. Thus the margin for butter in 1918
was three times what it was in 1919.
These facts are brought out in the table on page 71
showing the lowest and highest average monthly
prices for each of these years for butter and cheese,
69
THE PRICE OF MILK
and the margin between the highest and the lowest
prices on these products for each year.
CHART No. IX. — AVERAGE MONTHLY WHOLESALE PRICES OP
BUTTER1 AND CHEESE, 1913-1919
1913 1914 1915 1916 1917 1S1O 1919
BUTTER
CHEESE
L*.
2
/
/
1
* 1 a
/
i\ /
\ /
/
/
^
j j^
/
/
*\ /
\ I
4*' -
/VA. /"
2
/
TN
f V
c
' \ /
\ /
1
i r
A
> r
/
v^s* 3M
» g*
\ r
v
V
/v .
, /
Jto
^
/^N/V
^\x
"\ ^
— y ^
^ /
52
V^
\S-s^—
\r
f . 1913 Idl4- 1913 1916 1917 191« 1919 "
The placing of butter in cold storage begins in the
United States about April 1st in ordinary years and
extends through August into September. The stor-
age of butter preserves its quality as well as stabilizes
price. Statistics of the cold-storage holdings of
butter in 1914 indicate that approximately 18 per
cent of the butter placed in cold storage is received
» The quotations taken are the average wholesale prices for extra-creamery
butter at Chicago and whole milk cheese at New York City. The quotations on
cheese were taken for New York because not available for 1913 on Chicago
market.
70
MANUFACTURED MILK PRODUCTS
MONTHS OP HIGH AND Low PRICES ON BUTTER AND CHEESE,
AND MARGINS, 1913-1919
BUTTER
Year.
Lowest Price.
Highest Price.
Margin per
Pound.
Month.
Price per
Pound.
Month.
Price per
Pound.
1913
July
April
August
July
July
April
June
$0.262
.245
.243
.275
.375
.400
.515
December
January
December
November
December
December
December
$0.346
.385
.333
.388
.475
.673
.718
$0.084
.140
.090
.113
.100
.273
.203
1914
1915
1916
1917
1918
1919
CHEESE
1913
July
139
January
173
034
1914
April
138
March
171
033
1915
August
132
December
164
032
1916
June
150
233
noo
1917
January
220
March
261
041
1918
May
223
December
863
140
1919
February
295
February
368
073
into storage in May, 33 per cent in June, 23 per
cent in July and 7 per cent in August. During these
four months 81 per cent of the butter stored is
delivered into storage. In 1917, 78 per cent of the
total butter in storage went in during the months of
June and July. Deliveries out of storage were more
gradual, approximately 11 per cent being removed
in August, 8 per cent in September, 9 per cent in
October, 12 per cent in November, 15 per cent in
December, 11 per cent in January, 9 per cent in
71
CHART No. X.1 — COLD STORAGE HOLDINGS OF CREAMERY
BUTTER BY MONTHS FOR STATED PERIODS
Base — 100 — Holdings on September 1st)
» s 5 £ s
100 a 4 I I S
^ ^r ^1 M H r^ ^
100
90
80
70
60
50
40
30
20
10
0
P > O C «O U U
8 g S S . * fl S
80
70
10
0
] I
D Ten- year average of
Associated Warehouses
1 i
| Season 1.916-1917
/ J
•Season 1917 -19lS
; /
/ /
1 ( ''*
/ ' i
\ \ r
V
jLil ^
i Chart from p. 9, Bulletin No. 776, United States Department of Agriculture,
March, 1919.
72
MANUFACTURED MILK PRODUCTS
February, 11 per cent in March and 5 per cent in
April. The deliveries out of storage during each of
eight months (September to April, inclusive) exceed
the receipts into storage, therefore the period of
storage for separate lots is variable. The average
length of storage is approximately 6.2 months.
The chart on the opposite page pictures the sea-
sonal variation in the flow of creamery butter into
and out of cold storage for (1) the ten-year average
(1907-1916 inclusive) of associated warehouses and
for the seasons of (2) 1916-1917 and (3) of 1917-
1918.
The differences in price for butter and cheese
between summer and winter reflects to a large
extent the difference between the price to the farmer
for whole milk in summer and in winter. In other
words, so far as butter influences the prices received
for whole milk in winter, it tends to keep that price
down to a point representing the cost of storing
butter for six months plus the added difference
people will pay to get fresh butter instead of cold
storage butter. The price for fresh butter usually
runs about ten cents per pound above the price for
cold storage butter.
To store butter many cold storage companies
charged before the war 12^ cents per cwt. per month
for less than carload lots, 10 cents per cwt. per
month for carload lots, and 25 cents per cwt. per
month for small lots stored for thirty days or less.
The customary rate with small storages was one-
fourth of a cent per pound per month. The approx-
73
THE PRICE OF MILK
imate costs for interest storage and insurance for
holding butter in cold storage for six months were
estimated at pre-war prices as:
Interest on 100 pounds butter at 28 cents for six months
at 6 per cent $0.84
Storage on 100 pounds butter at 10 cents per cwt. per month
for six months 60
Insurance at rate of 42 cents per $100 for six months 1175
Cost per 100 pounds for six months $1 . 5576
Cost per 100 pounds for one month 2596
These costs can readily be re-figured on present
day prices.
It was estimated in October of 1918 that the
people of the United States were consuming monthly
60,000,000 pounds of creamery butter, 20,000,000
pounds of margarin, 1,500,000 pounds of process
butter, and 500,000 pounds of whey butter, a total
of 82,000,000 pounds. It was estimated that
these 82,000,000 pounds of butter and butter
substitutes were consumed by 35,000,000 people, the
remainder of the population either using farm-made
butter or being too young to consume butter. This
is a consumption of 2\ pounds per month per person,
or A of an ounce per meal. About one-fourth of
this consumption consists of substitutes for butter.
These substitutes at that time were priced 34 to 35
cents per pound as compared with 54 to 53 cents
per pound for storage butter and 70 cents for fresh
butter.
In 1912 butter constituted 40 per cent of the total
fat production in the United States, but in 1917 it
74
MANUFACTURED MILK PRODUCTS
was only 27 per cent of the total. In 1912, vegetable
oils formed but 35 per cent of the fat produced and
animal fats other than butter 25 per cent; by 1917
the fats produced from these sources had increased
to 42 per cent and 31 per cent respectively.
TOTAL PRODUCTION OF FATS AND OILS IN THE UNITED STATE s1
Product.
1912
(pounds).
1914
(pounds).
1916
(pounds).
1917
(pounds).
Vegetable oils*
Animal fats5
1,966,613,000
1,351,867,000
2,338,185,000
1,596,157,000
2,236,507,000
1,898,774,000
2,159,335,000
1,636,451,000
Total
3,318,480,000
3,934,342,000
4,135,281,000
3,795,786,000
Butter2 (farm)
1,660,000,000
1,613,736,000
879,610,000
733,222,000
Butter2 (factory)
581,000,0003
652,382,000
609,398,000
636,278,000
Total
2,241,000,000
2,266,118,000
1,489,008,000
1,369,500,000
Grand total
5,559,480,000
6,200,460,000
5,624,289,000
5,165,286,000
And this increase in the use of substitutes for
butter has been accompanied by a decrease in the
per capita production of butter and cheese.
* The figures given in this table were compiled by the Fats and Oils Division of
the United States Food Administration from a careful survey made during 1917
and 1918. P. 3, Bulletin No. 769, United States Department of Agriculture,
February, 1919.
'These figures represent the average butter fat content of butter, or 83 per
cent of the total butter produced.
1 Estimated.
* Vegetable oils include castor, cocoanut, coquita, corn, cottonseed, grapeseed,
linseed, mustard seed, olive, palm kernel, peanut, rapseed, sesame, shea nut,
soy bean, sunflower seed, all other vegetable oils.
8 Animal fats include, bone grease, cod and cod liver oil, garbage grease, herring
oil, lard, menhaden oil, miscellaneous oils, neat's foot oil, neutral lard, oleo stock,
packers' and Tenderers' greases, sperm oil, tallow, whale oil, wool grease and
recovered grease, all other fish oils.
75
THE PRICE OF MILK
PER CAPITA PRODUCTION OF BUTTER AND CHEESE, 1870-1919
Production
Per Capita
Production
Per Capita
Year.
Population.
of Butter1
Production
of Cheese
Production
(pounds).
(pounds).
(pounds).
(pounds).
1870 . . .
28,558,371
514,092,683
13 3
162,927,382
4.2
1880
50,155,783
806,672,071
16.1
243,157,850
4.8
1890
62,947,714
1,205,446,606
19.1
256,749,383
4.1
1900
75,994,575
1,491,752,602
19.6
298,344,639
3.9
1910
91,972,266
1,619,415,263
17.6
320,532,181
3.5
1919
106,352,191
1,549,000,000
14.5
378,000,000
2.4
The table on the next page gives the average annual
wholesale prices of the vegetable and animal fats
competing with butter from 1913 to 1918, with the
percentage of increase in the wholesale price of each
for 1918 over 1913. Butter increased 59 per cent
as compared with 175 per cent in cottonseed oil,
196 per cent in corn oil and 157 per cent in lard.
Butter increased the least of any except cocoanut oil.
The great bulk of cottonseed, corn and peanut oils
are used for food. Cottonseed oil is used especially
for lard substitutes and for oleomargarin. One-
half of the available supply of cocoanut and soya
bean oils are used in making soap.2
Producers of the different animal and vegetable
fats have been competing in price for markets.
Butter, as a consequence, did not increase in price
as rapidly as [did its substitutes. On page 92 it is
pointed out that the imports for the substitutes for
» From Statistical Abstract for year preceding decennial year.
2 It is interesting to note here in passing that the average annual wholesale
price of Ivory Soap increased 218 per cent from 1913 to 1918 and the size of the
bar decreased from time to time in the bargain. The price per box was $3.11
in 1913 as compared with $9.91 in 1918.
76
MANUFACTURED MILK PRODUCTS
butter increased from about 1,000,000 pounds in
1913 to 4,000,000 pounds in 1919, and on page 68
that the percentage of condensed or evaporated skim
milk modified with foreign fat increased from 1.4
per cent of the total evaporated and condensed milk
produced in this country in 1916 to 3.1 per cent in
1919.
THE AVERAGE ANNUAL WHOLESALE PRICES BY YEARS OF
VEGETABLE AND ANIMAL FATS COMPETING WITH
BUTTER, AND THE PERCENTAGE OF
INCREASE IN EACH FOR 1918
OVER 1913
Butter
Cotton-
seed
Cocoa-
nut
Lard
Substi-
Corn
Cream-
Oleomar-
Soya
Bean
Tallow,
Year.
Oil,
per
Pound.
Oil,
per
Pound.
tutes,
per
Pound.
Oil,
per
Barrel.
ery
Extra,
per
Pound.
garine
per
Pound.
Oil,
per
Pound.
per
Pound.
1913
$0.0725
$0.1199
$0.0876
$0.0607
$0.3104
$0.1775
$0.0612
$0.0634
1914.
0663
1220
0828
0617
2873
1758
0630
0635
1915
.0681
.1231
.0821
.0630
2836
.1733
0625
.0633
1916
.1064
.1513
.1275
.0960
.3254
.1917
.0891
.0927
1917
.1535
.1706
.1779
.1452
.4111
.2700
.1421
.1486
1918
.1992
.1810
.2257
.1803
.4946
.3100
.1828
.1713
Per Cent
Increase,
1918 over 1913.
175
50
157
196
59
74
198
170
The production of oleomargarin in the United
States increased 72 per cent from 1918 to 1919.
)uring this year our production of butter increased
3ut 4 per cent. The production of oleomargarin
luring these two years was from the following
3urces:
77
THE PRICE OF MILK
PRODUCTION OF OLEOMAKQARIN (POUNDS)
1918.
1919.
Oleomargarin (uncolored), animal and vegetable oil
255,196,592
214,759,689
Oleomargarin (uncolored), exclusively vegetable oil
88 861 472
132 906 154
Oleomargarin (uncolored), exclusively animal oil
3 306 671
3 391 206
Oleomargarin (colored), animal and vegetable oil .
7 056 442
9 302 681
Oleomargarin (colored), exclusively vegetable oil
Oleomargarin (colored) exclusively animal oil
112,494
1 002 864
9,792,694
1 165 362
Total
215 536,535
371 317,786
Chart No. XI shows by months the relationship
between the amount of butter, of cheese and of
condensed and evaporated milk produced in this
country, the quantities of butter and cheese in stor-
age, the stock of condensed and evaporated milk on
hand, the quantities of each of these three products
exported, the average price received for all grades
of butter and of cheese exported, the wholesale price
of extra creamery butter, of American cheese and
(per case, 16-oz. cans) of condensed milk, all at New
York City. The domestic retail price for butter and
cheese is taken for New York City. Production,
stocks on hand and in storage, and quantities ex-
ported ought to be the chief factors in measuring
the effect of domestic and foreign supply and demand
upon prices.
A few of the points to be gleaned from the chart
are: 1. Exports are relatively not a large proportion
of the total production of butter and cheese, but are
of condensed and evaporated milk. 2. The seasonal
fluctuations in the wholesale prices for these three
78
CHART No. XL— THE RELATION OP PRICES TO PRODUCTION,
EXPORTS AND STORAGE STOCKS OP BUTTER, OF CHEESE
AND OP CONDENSED MILK AND EVAPORATED MILK
(Prices are in Cents per Pound. Quantities are in Millions of
Pounds. (For sources see page 84.)
1SZO_
•PRODUCTION
STORAGE
EXPORTS
-EXPORT PRICE
•RETAIL PRICE -^-WHOLESALE PRICE
£
MILK
p;
V
A
/\
N/
I BIO
1919
1920
79
THE PRICE OF MILK
products for this period were most marked for butter,
less for condensed milk and but little for cheese.
3. Seasonal production, however, varied most for
cheese, less for butter and least for condensed milk,
and neither high nor low production were in the
same months. The lowest production of cheese was
8,500,000 pounds in February of 1918; the highest
production, 47,000,000 pounds in June of 1919.
Butter production was lowest (42,300,000 pounds)
in February of 1918 and highest (119,300,000 pounds)
in June of the next year. The low production month
(102,000,000 pounds) for condensed and evaporated
milk was November of 1918, the high month (221,-
000,000 pounds) in the following May. 4. The whole-
sale price for these three products were lowest and
highest in the following months: Butter, April, 1918
(4.15),and December, 1919 (7.35) ; cheese, April, 1918
(2.25), and January, 1919 (3.68); condensed and
evaporated milk, June (4.50) and December (6.87)
of 1918. 5. The high and low months for storage
stocks were: Butter, May, 1918 (9,500,000 pounds),
and September, 1919 (131,000,000 pounds); cheese,
June, 1918 (22,000,000 pounds), and October, 1919
(81,000,000 pounds); condensed and evaporated
milk (stocks on hand), March, 1918 (105,000,000
pounds), and January, 1918 (515,000,000 pounds).
6. The quantities exported reached their lowest and
highest in August, 1918 (337,000 pounds), and April,
1919 (8,400,000 pounds), for butter; in October,
1918 (549,000 pounds), and in May, 1918 (13,000,000
pounds), for cheese; and in February (29,000,000
80
MANUFACTURED MILK PRODUCTS
pounds) and June, 1919 (114,000,000 pounds), for
condensed milk. 7. Storage stocks increased as
prices went down. 8. The retail price of butter and
cheese responded promptly in this period to rises
and declines in wholesale prices.
An example of the effect of changes in demand is
shown in the trend of prices following January of
1918. In that month stocks of condensed and
evaporated milks reached the unprecedented total
of 515,000,000 pounds. In the early days of 1918
the success of German submarines and the adoption
of the military program that won the war made it
impossible to get the cargo space to export either
the quantities of case goods needed or available.
Consequently stocks were higher in July of 1918
than in July of 1917 and prices of milk to the farmer
in this country had to be reduced. Beginning with
July of 1918, however, case goods, as did butter and
cheese, moved more rapidly and prices to the farmer
rose again, only to fall after the beginning of 1919,
because the civil marketing channels of Europe had
not as yet begun to absorb our dairy products in
proportion to the demand that had been made by
the military authorities.
Shortly after the armistice came closer buying by
consumers because of the outlook for unemploy-
ment. Butter exports did not move as rapidly as
in preceding months. The price to the farmers had
gone up in the autumn of 1918 to unprecedented
heights. People would not consume butter in usual
quantities at the prevailing prices and the consump-
e 81
THE PRICE OF MILK
tion of butter substitutes went up because cheaper.
The result was that in the early months of 1919 the
retail price of butter dropped ahead of the wholesale
price and as much fresh butter was going into cold
storage as was being taken out. The outlook did
not promise any change and hence butter prices
first and then prices for milk to the farmer went down
in the early months of 1919, though feed and labor
costs were higher than ever before.
The effect of dried milk powders uponthemaximum
price to dairymen selling on the whole milk market
is discussed in the succeeding chapter. It remains
here to point out the relation between the use of ice
cream and the price of whole milk to the dairyman.
There was a time when the making of ice cream
was almost exclusively a household industry. But
the growing popularity of this food has tended to
concentrate its manufacture in large plants on a
commercial basis. This has standardized its com-
position and rendered its quality uniform, which in
turn has increased the appetite for it. Because of
the chemistry of ice cream manufacture, large scale
production has developed economies which have kept
prices down and made the product available to all.
Many a fortune has been made through the inte-
gration of small milk manufacturing industries; and
a wider market has been opened to the producer, a
market that in price possibilities ranks second only
to that of milk for whole milk consumption. We
manufactured 122,900,106 gallons of ice cream in
this country in 1918 and 127,840,204 gallons in 1919.
82
MANUFACTURED MILK PRODUCTS
But it is not profitable commercially to manufac-
ture ice cream entirely out of whole milk and cream.
To the butter fat solids in cream, the milk solids not
fat are added from condensed skim milk or from
milk powders. Inasmuch as cream can be kept in
cold storage for at least six months without a ma-
terial increase in the bacteria count (if sweetened as
required for ice cream it can be kept much longer),
and since milk solids in manufactured form can be
kept indefinitely, the making of ice cream in the
average dairy section becomes a question of the most
economical use of storage products with regard to
the whole milk supply of the moment. It does not
pay to use fresh milk and cream at prices much above
the price of the storage products. Moreover, ice
cream itself can be stored for a week or two, though
it deteriorates in quality. Ice cream may be made
in New York City from condensed skim milk from
Seattle, cream from Wisconsin, salt from Kansas
and ice from Maine. It is in no sense now necessarily
a local product. The output of the best dairy
regions the world over determine the price of its
constituent milk elements.
Ice cream is not alone a sufficient outlet for the
surplus of the whole milk dealer. The maximum
of milk production comes in June, the maximum of
ice cream production in July or August. Indeed, if
August be dry and hot and the flies bad, milk pro-
duction may go down as rapidly as ice cream con-
sumption goes up. One or more of the other methods
of manufacturing milk products must be used to
83
THE PRICE OF MILK
consume economically the milk received by a dis-
tributor in excess of his needs for the whole milk
trade.
In 1918 a new machine was successfully put on
the market in considerable quantities by means of
which the " cream" for ice cream could be made by
homogenizing sweet butter and skim milk powders
in proper proportions with water. By this process
the mixture was emulsified and the ingredients
thoroughly blended into a product of the much
desired "velvety" consistency. The result is that
the small ice cream parlor can now keep the ingredi-
ents for ice cream on its shelves and use just the
portion needed, thus giving the small manufacturer
an opportunity in competition with the large and,
by increasing the use of manufactured milk products,
decrease the necessary seasonal dependence upon
whole milk and cream. This process, however, has
not proved sufficiently economical and practical to
affect the tendency toward large scale manufacture
of ice cream.
The making of whole milk from sweet butter and
skimmed milk powders is discussed in Chapter VII.
In these and other ways will one use of whole milk
affect the price of another use of whole milk. The
price forces at work are each mobile and powerful,
yet responsive one to the other.
The production statistics and storage stocks for Chart No. XI are compiled
from the monthly production reports of the United States Bureau of Markets,
the exports and export prices from the Monthly Summary of Foreign Commerce
of the United States, and the wholesale and retail prices from the Bureau of Labor
Statistics.
84
CHAPTER IV
The Price Interdependence of Local Primary
and International Markets
The competition between dairying areas in dif-
ferent countries has been named as one of the factors
strongly influencing the price of milk.
The mapand chart facing on page 86 depict the total
number of milk cows, the number per square mile,
and the number per 1000 population, preceding the
war, in the United Kingdom, Sweden, Austria-Hun-
gary, France and the German Empire.
The distribution of milk cows in Canada, the
total number, and the number per 1000 population
for the provinces notable for the production of dairy
products is given in the map on page 86.
Facing page 94 is a map showing the distribution
of dairy cows in the United States, together with a
chart showing the relative number of animals, the
percentage of all farms reporting milk cows and the
value per animal in dollars for the ten leading dairy
states and for the United States as a whole, for
the year 1910.
The world's greatest dairying areas are (1) the
region along the northwest coast of Europe where
climatic conditions favor rich pastures, (2) northern
Italy, (3) in the United States the so-called Elgin
district in northern Illinois and the adjoining counties
of southern Wisconsin, with a scarcely less important
85
THE PRICE OF MILK
PRICE INTERDEPENDENCE OF MARKETS
center in central New York and northwestern Ver-
mont, and (4) the St. Lawrence lowlands and the
peninsula of Ontario in Canada. The intensive
dairy districts in northern Italy and along the
northern coast of France, the Netherlands and Den-
mark have from two to three times as many cows
per square mile as the densest dairy regions in the
United States.
Why these dairy regions are where they are is a
fact pertinent to price. It is because of low produc-
tion costs in the first place and because of nearness
to markets in the second. There are of course
other reasons such as reputation for a special dairy
product. Denmark's reputation for butter causes
most of her milk supply to go into butter, " while the
Netherlands with somewhat better climatic con-
ditions and transportation facilities converts a con-
siderable portion of her milk supply into cheese, for
which a reputation has been established/' say the
authors of the Geography of the World's Agriculture.
But in general the dairy industry of northern Europe
flourishes because of favorable conditions of grass
production and proximity to large markets. Pasture
and dairying are even more closely connected in
Europe than in the United States. In Germany,
butter is produced in the northern lowlands and
cheese in the rough southern hill sections, especially
in Bavaria. In Great Britain about 70 per cent of
the milk produced is consumed as whole milk, and
in Germany about 43 per cent1 as compared with
1 Geography of the World's Agricultuie, U. S. Dept. of Agri., 1917, p. 119.
87
THE PRICE OF MILK
43.1 per cent in the United States and 27 per cent
in Canada, on pre-war standards. The dairy indus-
try in the Mediterranean countries is relatively un-
important. In Greece there are "not more than
4000 cows, mainly near Athens/' The irrigated hay
regions of the Italian Alps and the Po Valley are
important dairy regions.
The sections of large milk production in the
United States, noted above, are in areas where the
cool summer climate favors the production of dairy
products of high qualities, and where the best use
of corn is for silage. The climatic conditions and
rainfall make good pasture and hay, the most
profitable market for which is in dairy products.
Another milk area lies in the cool clay soils of north-
ern Ohio, from which comes the largest share of the
milk for the Pittsburgh and Cleveland markets. The
butter producing area in northwestern Vermont lies
in land adapted to spring and summer butter pro-
duction rather than to any other use.
These areas, peculiarly fitted for dairy farming, are
competing for the world's best markets in storage
dairy products.
During the war period the scarcity of dairy feeds,
especially the concentrates, caused a decline in the
herds of the European countries. The number of
dairy cows in Great Britain decreased by 1.7 per cent
from 1914 to June 30, 1918, the number on the latter
date being 4,548,000. The number of dairy cows
in France decreased from 7,794,270 on December 31,
1914, to 6,238,690 on June 30, 1917, a decrease of
88
PRICE INTERDEPENDENCE OF MARKETS
around 20 per cent. The dairy herds in Italy de-
creased during the war about 14 per cent. The
facts as to enemy countries are not now available.
But we do know that the, supply of whole milk for
Berlin was 220,000 liters in June of 1919, as compared
with 400,000 liters in July, 1917. Germany now
has but four-fifths of the milk cows she had before
the war. Because the dairy cows not killed were
poorly fed, the total output of the dairy herds in
these warring countries decreased more rapidly than
the numbers. Moreover, it may take considerable
time, at good feeding, to get these herds back to
normal. Until they are back to normal, the United
States can expect to supply Europe with decreasing
amounts of dairy products. To the extent, how-
ever, that European herds in the future may rely
on feeds imported from the United States, it would be
cheaper to transport dairy products to Europe than
it would be to transport feeds. Wages of laborers
and standards of living on American and European
farms will determine whether our nation is to be the
greatest dairy area of the world.
These conditions in Europe gave to our producers
during the war period a large and expanding market
for our dairy products.
We exported over nine times as much butter and
cheese in 1919 as in 1913 and about forty-five times
as much condensed milk. From 1908 to 1919 we
exported more butter than we imported, save for
1914. In 1880 the United States was the greatest
cheese-exporting country in the world. In 1918
89
THE PRICE OF MILK
five countries each exceeded the United States in
cheese exports. Just before the war we were con-
suming all the cheese we produced and importing
one-tenth of the exports from all countries.1
The net balance of trade in dairy products (1913-
1919) has been well presented by the Dairy Division
of the United States Department of Agriculture in
Chart No. XII. In this chart the differences between
exports and imports has been expressed in terms of
whole milk for butter, cheese and condensed milk,
assuming 21, 10 and 2^ pounds of whole milk,
respectively, to one pound of butter, cheese and
condensed milk. The term "condensed milk" in-
cludes evaporated and skim condensed milk. The
year 1913 was normal for pre-war times. Our pro-
duction was low in 1914.
CHART No. XII. — BALANCE OF TRADE IN DAIRY PRODUCTS,
UNITED STATES, 1913-19192
(In Terms of Whole Milk)
^ee "Trend of the Cheese Industry", United States Department of Agricul-
ture, Circular No. 71, November, 1919.
• Year ending June 30th.
90
PRICE INTERDEPENDENCE OF MARKETS
EXPORTS, IMPORTS AND BALANCE OP TRADE IN POUNDS IN
BUTTER AND CHEESE AND EXPORTS OP CONDENSED
MILK, 1908-1919
BUTTER.
Year.
Exports.
Imports.
Balance of Trade
1908
6,463,061
780,608
5,682,453
1909
5,981,265
646,320
5,334,945
1910
3,140,545
1,360,245
1,780,300
1911
4,877,797
1,007,826
3,869,971
1912
6,092,235
1,025,668
5,066,567
1913
3,585,600
1,162,253
2,423,347
1914
3,693,597
7,842,022
-4,148,425'
1915
9,850,704
3,828,227
6,022,477
1915
13,487,481
712,998
12,774,483
1917
26,835,092
523,573
26,311,519
1918
17,735,966
1,805,925
15,930,041
1919
33,739,960
4,131,469
29,608,491
Year.
-
CHEESE.
CONDENSED
MlLK.2
Exports.
Imports.
Balance of Trade.
Exports.
1908
8,439,031
32,530,830
-24,091, 7991
1909
6,822,842
35,548,143
— 28,725,301*
1910
2,846,709
40,817,524
-37,970,815*
13,311,318
1911
10,366,605
45,568,797
— 35.202.1921
12,180,445
1912
6,337,559
46,542,007
— 40.205.4481
20,642,738
1913
2,599,058
49,387,944
~ 46.788.8861
16,525,918
1914
2,427,577
63,784,313
-61.356.7361
16,209,082
1915 . .
55,362,917
50,138,520
5,224,397
37,235,627
1916
1917
44,394,301
66,050,013
30,087,999
14,481,514
14,306,302
51,568,499
159,577,620
259,141,231
1918
44,303,076
9,839,305
34,463,771
528,759,232
1919
18,794,853
2,442,306
16,352,547
728,740,509
* Imports exceeded exports.
* Includes evaporated and condensed skim milk. In 1919 there were imported
20,183,723 pounds of condensed milk. In 1918, 2,591,553 gallons of fresh milk
were imported.
91
THE PRICE OF MILK
These large exports are compared with production
and storage stocks in their relation to price in the
chart on page 79. Their effect was in large part
offset by the increase in the production of substi-
tutes for butter as shown on page 78. Not only
did domestic production of butter substitutes in-
crease as the price of dairy products advanced, but
imports of those substitutes also increased in 1919
over any previous year since 1908 except the year
1914.
IMPORTS OP SUBSTITUTES FOR BUTTER AND CHEESE, 1908-1919
For Year Ending June 30th.
Substitutes for
Butter
(pounds).
Substitutes for
Cheese
(pounds).
1908
780 608
32,530 830
1909
646 320
35 548 143
1910
1,360 245
40 817,524
1911
1,007,826
45,568,797
1912
1,025,668
46,542,007
1913
1 162 253
49 387 944
1914 . ...
7,842,022
63,784,313
1915
3,828 227
50,138 520
1916
712,998
30,087,999
1917
523,573
14,481,514
1918
1 805 925
9 839 305
1919 ....
4,131,469
2 442,306
By saving milk otherwise wasted on the farm or
in the plant, by conserving and by increasing pro-
duction, we changed from an importing to an export-
ing country.
Our dairymen can keep these foreign markets only
if the wages paid to industrial populations in other
countries will allow the wage earners of those coun-
92
PRICE INTERDEPENDENCE OF MARKETS
tries to buy our dairy products at prices satisfactory
to the living standard of producers in our dairy
regions. Since the freight on dairy products is less
than on feeds, those who have an abundance of
feeds close at hand ought to compete certainly with
dairy regions which must import feeds, provided,
however, that milk can be produced as economically
in the favorable areas in this country as in areas
specially adapted to dairying in other countries.
Under modern transportation facilities nearness of
market is not so vital in international price com-
petition as climatic and soil conditions on the one
hand, and land values, due to other alternatives, and
to agricultural wages and living standards, on the
other hand. An international movement to raise
the living standards of farmers in those milk pro-
ducing regions where living standards are lowest
concerns the welfare of milk producers everywhere.
Otherwise, milk producers in countries of high living
standards will find themselves under the increasing
necessity of competing with low standard labor as
the rivalry for world markets intensifies.
An examination of the map facing page 93 showing
the distribution of dairy cattle in the United States
and of the map on page 26 showing the receipts
from the sale of dairy products will reveal that there
are in this country about nine important primary
milk markets: Chicago, New York, Boston, Phila-
delphia, Pittsburgh (including Cleveland), Seattle,
San Francisco, Detroit, and Louisville, Ky. There
are no exact boundaries between these markets, but
93
THE PRICE OF MILK
each is sufficiently distinct to have its own climatic,
soil and marketing conditions and producing habits.
The rather uniform distribution of cows in other
parts of the United States indicates that they are
kept primarily to supply domestic and local needs.
In these nine primary market regions milk is pro-
duced far beyond domestic and local needs.
Outside the seasons of surplus production, the
price to the producer for the milk sold for whole
milk purposes in each of these primary markets will
vary more or less from the price in other primary
markets. To a certain extent the seasonal fluctu-
ation in price will also vary from year to year in any
one of these markets. For instance, the spring
starts earlier and the frosts somewhat later in the
Philadelphia district than in the New York district.
The clay soil of northern Ohio is preeminently suited
to dairying, while other farm products compete with
dairying in the blue grass region surrounding Louis-
ville. The long rainy season of the Seattle region
with grass practically the year round is quite in
contrast to the butter producing hill regions of Ver-
mont with its long winters. The Elgin dairy region
is close to the large corn and wheat market in
Chicago, while the dairy region in New York State
is far from a surplus corn and wheat area. As
between each of these primary market areas there
must be a variation in price that will reflect dif-
ferentials in producing and seasonal conditions, and
transportation costs.
Inasmuch as all these leading production areas
94
PRICE INTERDEPENDENCE OF MARKETS
have at hand a considerable industrial population,
the price for milk for whole milk consumption will
also vary in the different seasons, depending upon
many factors peculiar to each market. One factor
is the price that has to be paid to attract milk from
butter and other milk factories into the whole milk
market. How much this price must be above the
butter or cheese market depends upon the rapidity of
growth of city populations as compared with the
increase or decrease in the local output of milk.
For there is a limit to the distance whole milk can
regularly be transported to market, although this
distance has been rapidly increasing with better
refrigeration and transportation facilities. Then
again, the weather in one area will be more or less
conducive to milk production than in another area.
Or in the same market, one winter may be forbidding,
another winter inviting to milk production; one
summer too dry for pasture, another too wet for
corn.
Therefore the price for whole milk within each of
these larger primary markets, during the months
when most of the milk produced must go into whole
milk consumption, must and will vary from market
to market. National price uniformity during these
months is, therefore, not to be expected, nor desired,
and if attempted must fail. It is only when the
price in one market is so low or so high as compared
with the near-by primary markets as to tempt milk
distributors to put in permanent investments in
receiving stations in these other markets or to plan
95
THE PRICE OF MILK
to buy permanently from those other markets, that
the price in one primary market begins to affect the
price in near-by primary markets.
In seasons when the supply of milk in the primary
markets does not exceed the demand for whole
milk consumption, the supply devoted to the manu-
facture of milk products will flow into whole milk
markets, if the price offered is enough above the
prevailing value of milk for manufacturing purposes
to warrant the operators in closing their manufactur-
ing plants temporarily. A premium sufficient for
this purpose is often paid in whole milk markets.
To this extent the value of milk for manufacturing
purposes sets the lower limit to the price of milk for
direct consumption in any whole milk market.
But in the months of greatest production, the
price over a season will tend to be practically uniform
in all the primary markets of any country. The
variations in price between primary market areas
will be due either to differences in transportation
costs, to the bargaining power of dealers or buyers,
or to temporary producing or climatic conditions as
indicated above. Seasonal and annual variations
prove to be small, and about equal to freight on
feeds or dairy products, however great the monthly
variations.
The following table gives the average annual price
for extra creamery butter and for whole milk cheese
in Chicago and New York City for seven years, and
the difference between the price in the two markets.
This differential is not the same for succeeding years.
96
PRICE INTERDEPENDENCE OF MARKETS
The differential for butter averages 1.5 cents per
pound for the seven years, and 0.9 cent per pound on
cheese, or around 15 cents per cwt. on whole milk.
The differential for butter was twice in 1918
what it was in 1917, yet less for cheese. The dif-
ferential for Chicago is greater over San Francisco
than here shown for New York over Chicago.
Philadelphia prices range slightly above those in
New York.
AVERAGE ANNUAL WHOLESALE PRICE OP BUTTER AND CHEESE,
NEW YORK AND CHICAGO, AND EXCESS OP NEW YORK
PRICE OVER CHICAGO PRICE, 1913-1919
BUTTER
1913.
1914.
1915.
1916.
1917.
1018.
1919.
New York
$0.323
$0.299
$0.2988
$0.3409
$0 4341
$0 512
$0 6010
Chicago
.310
.2873
.2836
.3254
.421
.4885
5851
Difference .
.013
.0117
.0152
0155
013
0235
0159
CHEESE
New York
154
1518
1509
1805
2390
2666
3155
Chicago
.142
.1438
.1423
.1744
.2265
2637
3019
Difference
012
0080
0086
0061
0125
0029
0136
For the thirty months from January, 1918, to
June, 1920, the price to the producers in the New
York territory averaged 33 cents per hundred pounds
above the price received by producers in Chicago
territory. These may not be typical months. Thus
the New York price was below the price in Chicago
for August, September, October, and November,
7 97
THE PRICE OF MILK
1919, because of the formula is use in New York
territory in that year as described on page 60.
There is no constant ratio as between any of the
months for any season, however.
This point is enforced by an examination of the
location of cheese and butter factories in the United
States. Practically all the cheese factories in the
United States "are located where the average grow-
ing season is less than 155 days, except along the
immediate shores of the Great Lakes and the Pacific
coast, where, although the growing season is longer,
the temperature is cool/' Cheese factories are
located where the weather is cool enough to keep a
uniform high grade of milk and where land values
are low, pastures plentiful and the costs of summer
production low. Nine-tenths of all the creameries
are east of the Missouri and north of the Ohio river,1
one-half in Wisconsin, one-fourth in New York State.
The creameries are chiefly in Wisconsin, Minnesota,
Iowa, Michigan, New Hampshire, Vermont, New
York, and Pennsylvania.
The price for cheese and butter, as of other
storage products, is fixed by national and inter-
national forces. Butter and cheese are both made in
or near to the very regions supplying the larger
industrial centers with whole milk. Only to a
limited extent can the consumers of whole milk
underwrite the losses of milk distributors in manu-
facturing their surplus milk into storage products.
As soon as this difference becomes large, price factors
» See maps on pages 118 and 119 of "Geography of World's Agriculture", op. cit.
98
PRICE INTERDEPENDENCE OF MARKETS
force the price for whole milk downward to approach,
if not to equal, the price for manufactured milk.
But in the months of maximum production the price
in any one of the primary districts must be about
the same as in other primary districts, for price
factors now determining the value of milk are the
prices received or anticipated for butter, cheese,
condensed and powdered milk. (See chart on page
79.)
A new factor that will stabilize the price of milk
between the seasons of scarcity and the seasons of
plenty is the growing use of dried milk.
The use of milk powders will have a stabilizing
influence on the whole-milk market far beyond the
expectations of most producers. Skim milk powder
with sweet butter and water run through an emul-
sifying machine makes a reconstituted milk that,
according to the best advice of specialists, may be
as wholesome as natural milk. If made with filtered
water, this remade milk cannot be surely told from
natural milk. It may not taste as good as natural
milk, but it is a fair substitute. The author finds
considerable quantities of it used in towns large and
small though not advertised or sold as such. When
sold as fresh milk it is usually mixed with whole
milk.
The economic significance of this remade milk has
not been fully appreciated. Its wide use will mean
that condensed skim milk from the Seattle region
can be mixed with butter from Wisconsin and filtered
water from the Hudson and sold in New York City
99
THE PRICE OF MILK
as "Remade Milk." Whole milk powder can be
used likewise. During the war the demand for milk
powders by the American Red Cross and allied
organizations has been so heavy that their use for
domestic purposes has not been as large as would
have been possible otherwise. We can expect a
considerable use of these dried milks in the years to
come.
There are three varieties of dried milk powders:
Full cream, half cream and skim. The conclusion
reached by British health authorities, after consider-
ing a wide use of milk powders for infants when
breast feeding was impossible was that dried milk
probably was no better than and perhaps slightly
inferior to fresh cow's milk. Scurvy and rickets are
rare in infants fed on this preparation, although the
occasional use of fruit juice is desirable. In at least
seventy-six districts in the United Kingdom milk
powder was being used in maternity and child wel-
fare stations. The growth curves of children fed
exclusively upon dried milk from birth closely re-
semble the average growth curve of breast-fed
children, although at somewhat lower levels by rea-
son of the more delicate condition of these children.
The health authorities in Great Britain have reached
the conclusion "that cow's milk, during the process
of desiccation, loses none of the characters which are
necessary for the support of normal growth in in-
fants/' The wholesomeness of dried milk as com-
pared with fresh milk is discussed in the chapter on
the Food Value of Milk.
100
PRICE INTERDEPENDENCE . OF MARKETS
The use of powdered milk will be a governor that
may prevent abnormally high prices in the scarce
months to farmers in whole milk regions, but it gives
to farmers in other territories where milk may be
cheaper, or to summer producers, a relatively wider
market for their milk. The first effect of an extended
use of dried milk may, therefore, be disadvantageous
to the winter milk producers in or near large cities.
This competition has its limits, however, depending
upon the price of milk in the summer and the price
of fresh butter. Moreover, there is no comparison
between the taste of this remade milk and the taste
of good natural milk, and the better tasting natural
milk will have the wider sale under fair chances.
Skim milk powders keep indefinitely while whole
milk and cream powders as yet do not. In 1917,
22,624,357 pounds of powdered skim milk were pro-
duced in the United States as compared with 25,-
432,007 in 1918. In 1918 we produced in this
country 4,164,334 pounds of powdered whole milk,
as compared with 3,138,809 in 1917.
While the processes for making condensed milk
and milk powders both date in origin from the years
just preceding the Civil War, the manufacture of
dried milk has expanded notably in the last decade.
Powdered skim milk is used by bakers for breads,
biscuits, cakes, and custard in preference to whole
skim milk or condensed milk because it is easier to
handle and to mix. For the higher grades of cakes
and biscuits whole milk powders are used. The
ice cream manufacturer uses skim milk powder for
101
THE PRICE OF MILK
giving ''body" and smoothness to his product, and
cream powders for richness. The confectioner uses
whole milk and cream powders for his caramels,
milk chocolates, and fudges. Milk and cream dis-
tributors use it both for making and standardizing
their products.1
The price factors at work in any one of these
primary markets will keep the price practically uni-
form for the same grade of milk as between all the
local markets within this primary market.
In the first place, there are towns and cities of no
inconsiderable size and number within each of these
primary markets. An increase or decrease of as
much as one-half cent a quart is sufficient to draw
milk into one town or city out of an area that has
been furnishing another town or city. If the local
supply of whole milk is short, dealers buy ice cream
or cream or whole milk itself from other places, or
they may make whole milk or cream from dried
milk powders. If any variation in supply or price in
» The following definitions and standards for powdered milks have been recently
adopted by the joint Committee on Definitions and Standards of the American
Association of Dairy, Food and Drug Officials, and the Association of Official
Agricultural Chemists:
''Dried milk is the product resulting from the removal of water from milk, and
contains, all tolerances being allowed for, not less than twenty-six (26) per cent
of milk fat, and not more than five (5) per cent of moisture.
"Dried skim-milk is the product resulting from the removal of water from skim
milk and contains, all tolerances being allowed for, not more than five (5) per cent
of moisture.
"Malted milk is the product made by combining whole-milk with the liquid
separated from a mash of ground barley, malt, and wheat flour, with or without
the addition of sodium chloride, sodium bicarbonate, and potassium bicarbonate
in such a manner as to secure the full enzymic action of the malt extract and by
removing water. The resulting product contains not less than seven and one-half
(7.50) per cent of butter fat and not more than three and one-half (3.5) per cent
of moisture."
102
PRICE INTERDEPENDENCE OF MARKETS
any local market seems to be permanent, investments
in country receiving stations are made in another
producing district offering cheaper prices. Within
any primary market district, therefore, milk prices
must tend to be uniform as between localities. The
value to farmers and to dealers and manufacturers
of price uniformity throughout any primary district
is further discussed in Chapter VII.
In conclusion. The price of milk in local towns
and cities must keep fairly equal throughout a pri-
mary market area. Prices for milk as between pri-
mary market areas will vary sufficiently in the season
of scarce production to meet prevailing producing
conditions. The variation has its limits due to the
price of cold storage products. Variations in price
in the season of maximum production as between
primary markets for a number of years about equals
transportation costs and rates on feeds or dairy
products or both, though the price by months will
vary with local conditions. In turn the prices in
the primary market areas of any one country must
keep in tune with national and world prices on stor-
age dairy products.
The world market ever hovers over the price pre-
vailing in the national, the primary and the local
market. Milk and its products are stable in price
because the storage products are mobile in transport.
103
CHAPTER V
The Cost of Production
Among all the forces which jointly determine the
price that farmers must and will get for their milk,
the cost of production is of first importance. Second
in power only is the demand of the consumer de-
pendent upon whether or not she believes the milk
(or its products) is worth the price asked. One may
convince a Fiji Islander that it costs fifty dollars to
make a dress suit. But that fact alone will not
convince the aforesaid Islander that the dress suit
is worth fifty dollars to him. If he does not buy,
dress suits are not made. So the consumer will not
purchase milk unless she believes it is a good buy
in comparison with what she thinks is the value of
the alternatives. Nor will the farmer produce milk
if, in the long run, he can get better living standards
by engaging in other alternatives on the farm or in
work other than farming.
As to these elementary facts there will be no dis-
agreement. The problem beset with difficulties and
differences in opinion and judgment is as to just
what is the cost of producing milk at any given time.
First is the question whether the joint costs of
farm operations as a whole shall be the cost unit or
whether the cost unit shall be the cost of producing
each article on the farm. As a matter of fact, both
costs must be found before there is a final judgment
104
i
THE COST OF PRODUCTION
as to either. Each is relatively useless without the
other.
Two methods have been used to find out what is
the cost of producing milk. One is the "field," the
other the "formula" method.
The Field Method
The "field" method is to ascertain the cost of
producing milk from actual cost records kept by
farmers on their own farms or by agricultural experi-
ment stations. A considerable number of such
investigations have been made in all parts of the
country. As chairman of the Tri-State Milk Com-
mission appointed by the Governors of Pennsyl-
vania, Maryland and Delaware, the author was
given the responsibility for conducting such an in-
vestigation in the states named. Thousands of
letters were sent out in an attempt to find all the
cost records available in the district. Many others
have used the same method.
This method has many merits. In the first place,
the farmers' own records constitute the testimony.
This has the advantage of personal direct contact
with the cost data of those who will be directly
affected by the results. It has the merit also of
limiting evidence to concrete facts and conditions.
It throws out the biased opinion testimony that has
been used in some quarters under the formula
method. The consumer as well as the farmer has
confidence in the method because it is personal and
factual.
105
THE PRICE OF MILK
The difficulties with this method are not, as has
been so frequently stated, that dairymen do not
keep records sufficiently accurate and detailed. In
these days of cow testing associations and county
farm agents the percentage of farmers who are keep-
ing accurate cost records on dairy farms is relatively
as large as is the percentage of factory owners or of
small merchants who keep cost records for their
respective businesses. The number of such records
on dairy farms is now sufficient to justify conclusions.
The difficulty with the method is to select from
the records filed those that are typical of the dairy-
ing conditions in the district. If a dairy is kept on
land of high value for suburban dwellings the
amounts charged to rent or to return on land owned
should be stated separately so that that portion of
land values due to holding it for speculative real
estate purposes will be reflected in its own account
and not in the dairy account. Fancy stock farms
run as hobbies by city gentlemen must show by the
records the costs due to high tastes and rustic
pleasure, and the losses due to poor judgment as
well as the bona fide costs of the dairy. Again, milk
costs on a farm not suitable for dairying may have
little value as guidance to milk costs in districts
adapted to dairying. The records themselves must
be examined in all cases for assurance of accuracy.
The cost records used as the basis for judgment
must be typical costs from typical dairies in the
typical dairy district in the region, if the purpose is
to find out the cost of producing milk for a city in
106
THE COST OF PRODUCTION
the dairy districts supplying the city, as distinct
from the cost of producing milk on a given farm for
the guidance of the owner or operator of the farm.
In the Cleveland district the average number of
cows on the dairy farm is about eight. The size is
kept down to the number that will consume all the
roughage grown on the farm. In other districts,
such as Baltimore and "Washington, D. C., the
herds are larger. Again the length of the pasturing
season and the value of the pasture will vary from
section to section. The value of land per acre will
reflect the most profitable uses to which the farms
in a given neighborhood are or can be put. These
uses may not include dairying. In public testimony
particularly one may hear most from those hurt
worst. And these may be affected by factors other
than dairy costs under good practice in a region
suitable to dairying. Moreover, the findings as to
production costs by this method are accurate only
so long as feed and labor costs do not change
materially.
It is only when applied with such facts as these
in mind that the "field" method is accurate. But
applied with such facts in mind the method gains the
confidence of farmers and consumers; it gets at the
real facts; it discovers not only the many economic
factors at work in a given territory to increase or
decrease dairying herds, but it also compares the
profitableness of dairying with other uses of the farm.
To be worth while, the reports used for such purposes
should be of continuous and permanent record.
107
THE PRICE OF MILK
The Formula Method
The formula method is the outgrowth of the facts
ascertained in these "laboratory" investigations.
The dairy cow is to a considerable extent a standard-
ized factory. She is not exactly standardized or
breeders' and cow testing associations would have
little need for existence. But to the extent that the
dairy cow is a standard factory, one can estimate
the costs of her factory product (milk) by multiply-
ing the units of raw materials (feed) and labor em-
ployed in producing that product by the prevailing
price of the raw materials and the prevailing wages
for labor. The great value of the method lies in
the fact that it can be used in periods of rapidly
changing feed prices and labor wages.
The splendid field work of such dairy experts as
Professor Fred Rasmussen of Pennsylvania State
College had to precede the working out of the formula
method. Then came the work of Professor Larson
on "Milk Production Cost Accounts."1 Other
professors in agricultural colleges undertook to find
out the constant units to which the prices for these
units prevailing at a given time could be applied to
ascertain the cost of producing milk under any given
schedule of feed costs and wages. Among such men
should be mentioned Professor F. A. Pearson of the
University of Illinois, Professor Anderson of Michi-
gan Agricultural College, Professor H. C. Taylor of
Wisconsin and Professor G. F. Warren of Cornell.
i Larson, C. W.f "Principles and Methods of Milk Production Costs and Ac-
counts," New York, Columbia University Press, 1010.
108
THE COST OF PRODUCTION
Just about the time certain of these experts were
maturing their studies a committee1 was appointed,
of which the author was elected chairman, to report
to Mr. Herbert C. Hoover as Federal Food Admin-
istrator on "The Production, Distribution and Food
Value of Milk/' Professors Pearson and Warren
were on this committee. To them as a sub-com-
mittee was assigned the task of reporting to the
whole committee on production costs. Material
long in being collected by these two professors and
costs records secured by correspondence from many
other sources were used in making their report.
From the records of many thousands of cows, they
selected records for 976 cows on 490 farms producing
milk for city markets in six northern states. The
states were: Minnesota, Michigan, Massachusetts,
Connecticut, New York and New Jersey. On the
average 49.3 per cent of the milk of these herds was
produced in the six months beginning in October.
From their examination of these costs and quantity
records, the sub-committee found that in these herds
the average quantities of feed and labor used to
produce 100 pounds of milk were:
2.88 hours of labor.
33.5 pounds of grain (concentrates).
45.3 pounds of hay.
11.5 pounds of other dry forage.
93.2 pounds of silage.
9.4 pounds of other succulent feed.
1 The members of this committee were: Clyde L. King, Chairman; Mrs. A. W.
Smith, F. A. Pearson, J. W. Sullivan, Gifford Pinchot, G. F. Warren.
109
THE PRICE OF MILK
The committee report from this point based upon
the reports of this sub-committee follows:
The above items made 80.8 per cent of the total
yearly average net cost of milk after the value of
the calf and manure and miscellaneous returns
were deducted from the cost. The amount of
feed consumed is much more than the average in
winter and less in summer. Approximate average
yearly costs of production with given prices of feed
and labor can be estimated for the above averages.
But the costs in summer are much below the aver-
age, and in winter are more than the average.
Some estimate of prices to be expected can be
made by comparing past prices for different
months. The comparative prices paid to pro-
ducers for milk in different months when the
average for the year is 100 per cent have been as
follows:
PERCENTAGE OP YEARLY AVERAGE PRICES PAID TO FARMERS
FOR MILK FOR TEN. YEARS ENDING OCTOBER 1, 1916.
NEW YORK AND CHICAGO.
Chicago
New York
Chicago
New York
Month.
Milk
"26-cent zone"
Month.
Milk
"26-cent zone"
News.
Milk Reporter.
News.
Milk Reporter.
January
117.2
119 0
July.. .
84 8
81 0
February
112.6
114.7
August
95.4
90.8
March
104.6
106.1
September
98.0
96.9
April
95.4
93.9
October
107.2
110.4
May
79.4
79.1
November . .
115.8
119.0
June
71 5
70 6
December .
118 5
120.2
An approximate estimate of prices that might
be expected can be made by using the quantities
of feed and labor required and the past yearly
distribution of price as shown in the above
110
THE COST OF PRODUCTION
table. For instance, if labor is 25 cents an hour,
grain $55 a ton, hay $15, other dry forage $7,
silage and other succulent feeds $6, the average
yearly net cost of 100 pounds of 3.7 milk for herds
as good as those reported would be $2.88. If the
average price were $2.88, and if the prices in dif-
ferent months followed the average course, the
New York November price to the farmer might
beexpected to be approximately $3.43 (7.37 cents a
quart), and the June price $2.03 (4.36 cents a
quart).
If labor is 20 cents, grain $45, hay $10, other
dry forage $5, silage and other succulent feeds $4,
the average yearly cost would be $2.22. If the
average price were $2.22 and if the prices in dif-
ferent months followed the usual course, a Novem-
ber price of approximately $2.64 might be expected,
and a June price of $1.57.
If labor is worth 30 cents, grain $65 a ton, hay
$20, other dry forage $10, silage and other succulent
feed $8, the yearly average cost would be $3.56.
If the average price were $3.56, and if the distribu-
tion by months followed the average course, a
November price of approximately $4.24 (9.12
cents a quart) and a June price of $2.51 (5.4 cents
a quart) might be expected.
On the basis given above the farmer would re-
ceive more than the assumed wage in summer and
less in winter because the difference in cost between
summer and winter, if wages are uniform, is more
than the difference in price.
With the publication of these results the formula
method was used more or less by each of the various
Milk Commissions appointed by the Food Admin-
istration in the different primary markets of the
ill
THE PRICE OF MILK
country. It was used notably by the Chicago Milk
Commissions. In the summer and autumn of 1918
Judge W. E. Lamb, representing the United States
Food Administration, and the farmers and dis-
tributors in the Chicago market used the formula
method to arrive at a price to producers. The
formula thus used in the Chicago district was known
as the Modified Pearson Formulabecause of Professor
Pearson's pioneer work in developing the formula,
and his rational and fair application of it, and because
of his modification of his formula obtained from
actual feed records to one easier of practical use in
price fixing.
Professor Pearson's researches had led him to
believe that in the Chicago district 44 pounds of
grain, 118 pounds of silage, 50 pounds of hay, 39
pounds of dry forage and 2.42 hours of labor pro-
duced 100 pounds of average milk. After a thorough
investigation he found that the following "modified"
formula would yield substantially similar results and
give a definite market basis for feed prices: 20
pounds of home grown grains based on the value of
corn, 24 pounds of manufactured feeds, 110 pounds
of hay and 3 hours of labor.
The following memorandum, adopted on July 1,
1918, under the mediation of Judge W. E. Lamb
for the United States Food Administration, will
indicate the methods agreed on by these parties for
determining price units and for making monthly
distribution of the average yearly price thus arrived
at:
112
THE COST OF PRODUCTION
The price to be paid by purchasers of milk to the
producers in the so-called Chicago district for the
month of July is $2.30 per 100 pounds for 3.5 per
cent milk; four cents to be added for butter fat,
for each point above that amount and same
amount to be deducted for each point below 3.5
per cent. The retail price for delivered bottled
milk in Chicago for the month of July, 1918, is
to remain at 12 cents per quart.
The prices for milk to be paid to the producers
in the Chicago district for the months of August,
September, October, November and December,
1918, are to be determined in the following manner:
On or about the 15th day of the month preceding
each of the above named months the represen-
tatives of producers, distributors, ice cream manu-
facturers and condensers of milk in the Chicago
district are to meet the representative of the
Food Administration and in arriving at the prices
to be paid producers for milk for the month under
consideration, the following feed and labor formula,
to- wit:
20 pounds of home grown grains,
24 pounds of manufactured feeds,
110 pounds of hay,
3 hours of labor,
shall be taken as correctly representing the average
amount of feed and labor required to produce 100
pounds of milk in said district during said period,
the same being the feed and labor formula deter-
mined by the Chicago Milk Commission.
The values of the respective amounts of grain,
feeds, hay and labor aforesaid in any given month
are to be arrived at as follows:
First. — The value of the 20 pounds of grain and
the 110 pounds of hay determined by using the
s 113
THE PRICE OF MILK
farm values of corn and hay in the states of
Illinois and Wisconsin reported by the Agricul-
tural Department on the first day of the preceding
month, the figures usually being available by the
tenth of the month.
Second. — The value of 24 pounds of feed to be
determined as follows:
The per ton values of the following feeds, f.o.b.
Milwaukee or Chicago, are to be taken from the
daily Feed Report published at Milwaukee, to wit:
Ajax, Unicorn and Arcady mixed feeds; all
kinds and grades of molasses feeds; cottonseed
meal; oil cake meal; gluten feeds; hominy feeds;
brewers' grains; bran, middlings and Schumacher
feeds. The f.o.b. per ton prices as quoted in said
daily paper to be added together and the average
per ton found. To that average price per ton
shall be added the average freight rate applying
from Milwaukee or Chicago to points within the
Chicago district, which is today approximately
7J cents per 100 pounds. In addition, there shall
be added to the average per ton price so reached
the profit per ton allowed by the Food Adminis-
tration to the retail dealer in such feeds, and then
there shall be added the further sum of $1.50 per
ton as the cost of hauling the same from the feed
dealer's place of business to the farm of the con-
sumer.
Third. — The value of three hours of labor to be
determined by the average going prices for farm
labor paid within the Chicago district.
When the values of the various items have been
determined as aforesaid and added together the
percentage table set forth below and known as
the Pearson Percentage Scale shall then be used
to finally determine the price for milk for the
month under consideration, to wit:
114
THE COST OF PRODUCTION
Per Cent. Per Cent.
January 117 July 85
February 112 August 95
March 105 September 100
April 95 October 107
May 80 November 115
June 70 December 119
This table is based upon the average monthly
prices paid for milk for a ten-year period from
which Professor Pearson found that taking the
month of September as representing the average
monthly price of 100 per cent, the price paid in
January was 117 per cent of the average; Feb-
ruary, 112 per cent; March, 105 per cent; April,
95 per cent; May, 80 per cent; June, 70 per cent;
July, 85 per cent; August, 95 per cent; October,
107 per cent; November, 115 per cent; and
December, 119 per cent of the average monthly
price, and it being believed that these percentages
fairly reflect the same relative differences in cost
of production either above or below the average,
the percentage of the values of the various items
in the feed and labor formula as aforesaid shall be
taken as represented by the percentage figure
opposite such month under consideration; that
is to say when the values of the various items of
feeds, hay and labor have been determined, as
hereinbefore provided, for the month of August
and the sums thereof added together, 95 per cent
of such sum shall constitute the price for the
month of August and the percentage applicable to
each subsequent month applied in a like manner
to the values of the items in the feed and labor
formula determined in the same way for such sub-
sequent month.
If increases result in the prices to be paid for
fluid milk under the foregoing plan in such an
115
THE PRICE OF MILK
amount that the distributors of fluid milk in
Chicago cannot afford to deliver the same at 12
cents per quart, such increase in the retail price
shall be permitted as will enable the distributors
to overcome such increases in price and cost.
The Food Administration will procure each
month as soon as they may be available the farm
values of corn and hay in the States of Illinois and
Wisconsin reported by the Agricultural Depart-
ment as of the first of each month and communicate
such figures to the representatives of the parties
in interest. The wholesale prices of feed are to
be taken from the Daily Feed Report and averaged
for the month preceding the month in which the
conference is held.
The foregoing correctly sets forth the under-
standing of the representatives of the parties in
conference with the undersigned on the 28th and
29th days of June, 1918, at the office of the
Food Administration, Conway Building, Chicago,
Illinois.
Dated, July 1, 1918.
The application of this formula is illustrated from
the following excerpts from the memorandum issued
by the same group and signed by Judge Lamb for
determining the price for August, 1918:
It was agreed at the conferences on June 28th
and 29th that the farm values of corn and hay
should be those reported on the first day of the1,
month preceding the month in which the price of
milk was under consideration. The Agricultural
Department reports the farm value of corn and
hay in Illinois and Wisconsin as of July 1, 1918, as
follows:
116
THE COST OF PRODUCTION
Corn: Illinois $1 .32 per bushel
Wisconsin 1.53 " "
or an average of $1 . 43 " "
Hay: Illinois $15 . 80 per ton
Wisconsin. . . 15.90 " "
or an average of $15.85 " "
The prices of feeds in the district were deter-
mined as follows:
The average monthly prices for June of the
following feeds, f.o.b. Milwaukee:
Ajax, Unicorn, R.K.D. mixed feeds; Sucrene
and International Milling Company's molasses
feed; cotton seed meal; oil cake meal; gluten
feeds; hominy feeds; brewer's grains; bran;
middlings and Schumacher feeds. As the prices
of corn and hay reported by the Agricultural De-
partment as of July 1st represented the average
farm prices of hay and corn for the previous
month the prices of the foregoing feeds were taken
for the same period and the average of all was
found to be $47.24 per ton, to which was added
the average freight rate of 7 J cents per 100 pounds
or $1.50 per ton; $2.00 per ton, the profit allowed
by the Food Administration to the retail dealer
of feeds handling the same in ton lots or less and
$1.50 per ton haulage charge from the feed dealer's
place of business to the farm of the consumer,
which made the average price of all classes of
feeds for the period mentioned $52.24.
The average price of farm labor in the district
after careful investigation was found to be 30
cents per hour.
The average price of corn at $1.43 per bushel
for the period mentioned equals $2.55 per 100
pounds, or 2.55 cents per pound. The average
117
THE PRICE OF MILK
price of feeds of $52.24 per ton equals $2.612 per
100 pounds, or 2.6 cents per pound.
The average price of hay of $15.85 per ton equals
7.9 mills per pound.
Using these factors, we find 20 pounds of com
is of the value of 51 cents; 24 pounds of feed is
of the value of 62 cents; 110 pounds of hay is of
the value of 87 cents; 3 hours of labor at 30 cents
per hour, 90 cents, making a total of $2.90.
After determining the prices of the items as
aforesaid to determine the final price that shall
be paid for the milk it was also agreed that
Professor Pearson's percentage table should be
used. That table treats September as the 100 per
cent month, or the average of the twelve in the
matter of price. April, May, June, July and
August are below the average; October, November,
December, January, February and March are
above the average. It was determined that the
price for August should be 95 per cent of the
average based on the foregoing formula; 95 per
cent of $2.90 equals $2.75, or the price per 100
pounds that the producers are to receive for the
month of August. This is for 3J per cent milk,
with a differential of 4 cents for each one-tenth of
1 per cent of butter fat above, or a reduction in
the same amount for each one-tenth of 1 per cent
of butter fat below 3| per cent.
If the feed and labor formula adopted is correct
and it was the one the Chicago Milk Commission
determined to be correct, after careful deliberation
and consideration, there can be no question as to
the correctness of the price of milk for August
determined in the manner indicated. When it
is taken into account that the number of pounds
of milk produced by the average cow per year is
about 5000 pounds, it means a daily average of
118
THE COST OF PRODUCTION
about 13J pounds. This would require something
over seven days to produce 100 pounds. It is
believed that the amounts of feeds stated are not
more than necessary to produce 100 pounds of
milk on the average.
For six months the Chicago group used the Modi-
fied Pearson Formula with evident satisfaction to
all, as all parties joined in an effort to get reasonable
results with rational methods. It was abandoned,
however, immediately upon the withdrawal of the
Food Administration, and methods were adopted
that secured a lower price level (see page 125).
With this success in mind, Judge Lamb in the
early autumn of 1918 suggested that the purchasers
of milk and the organization of dairymen in the
New York district likewise agree on a method and a
formula, and price units.
The formula to which the New York buyers and
sellers turned attention was the Warren formula,
based on the testimony of Professor Warren to the
effect that, to produce milk of the average butter fat
(3.8 per cent) in the New York district, the following
feed and labor units were required:
Grain 33 . 79 pounds
Hay 43.3
Other dry forage 10.8
Ensilage 92.2 "
Other succulent food 8.3 "
Human labor 3 . 02 hours
When proper current prices were applied to these
items, the result according to Professor Warren, was
79.9 per cent of the cost of producing 100 pounds of
119
THE PRICE OF MILK
3.8 per cent milk, the remaining 20.3 per cent to
represent all overhead expenses such as (1) interest
on that portion of equipment devoted to the dairy,
(2) the full depreciation on cows so that herds would
be fully maintained, (3) bull expense, and (4) all
minor items such as fly killer, etc. The 100 per
cent price for producing 100 pounds on the average
yearly cost was to be distributed by months as
follows:
Per Cent. Per Cent.
January 119 July 81 .0
February 114.7 August 90.8
March 106. 1 September 96.9
April 93.9 October 110.4
May 79. 1 November 119.0
June 70.6 December 120.2
This method was abandoned after a short trial,
upon the withdrawal of the Food Administration,
and prices since have not been equal to those brought
about by the formula.
To get results with the formula method the sources
for price units must be agreed on and methods must
be such as to lead to accuracy, and rational results.
For instance, in the Chicago district farmers and
distributors each conducted their own survey as to
what were the actual going wages on the dairy
farms, each with the desire to obtain only the actual
facts. The results as found by the dealers and
farmers respectively were not over one cent an hour
apart and the figure first agreed on (30 cents an hour)
was a fraction of a cent above the average hourly
wage found by the producers.
120
THE COST OF PRODUCTION
Many difficulties have arisen in applying the for-
mula method when one party to collective bargaining
wanted results all in its own favor and was ready to
use inaccurate methods to get them.
The following table from Hoard's "Dairyman"
of November, 1918, summarizes the various formulas
and their results in price.
COMPARISON OF SEVERAL SURVEYS SHOWING THE ITEMS ENTERING
INTO THE COST OP PRODUCING 100 POUNDS OF MlLK
Factors in Formula.
Pearson.
Modified
Pearson.
Warren.
Hoover.
Indiana.
Michigan.
Grain (pounds)
44 00
44 00
33 80
33 50
28 9
23 50
Hay (pounds)
50 00
110 00
43.30
45.30
38.1
34.90
Silage (pounds)
118 00
100 50
102 60
104 8
110 40
Roughage (pounds)
39 00
10 80
11.50
9 9
15 20
Labor (hours)
2. $2
3.00
3.02
2.88
2.4
2.11
Corrective factor (per cent) —
0
0
25
23.7
45.8
COST OF PRODUCING 100 POUNDS OF MILK ACCORDING TO CERTAIN
FIXED PRICES AS APPLIED TO DIFFERENT FORMULAE
(Feed and Labor Costs those of Autumn of 1918)
Factors in Formula.
Pearson
Modified
Pearson.
Warren.
Hoover.
Indiana.
Michigan.
Grain
$1 10
$1.100
$0 845
$0 838
$0.723
$0.588
Hay
.500
1.100
.433
.453
.381
.349
Silage
564
301
.308
.314
.331
.078
.023
.023
.020
.031
Labor
.605
.750
.755
.720
.600
.623
Total feed and labor
Correction
$2.847
0
$2.950
0
$2.357
589
$2.342
555
$2.038
?
$1.822
.834
Total cost
$2.847
$2.950
$2.946
$2.887
?
$2.656
121
THE PRICE OF MILK
The "Hoover" report is the committee report
described above. The " Michigan " report refers to
the formula by Professor Anderson. The " corrective
factor" has been noted above in discussing the War-
ren formula as the amount allowed for overhead
expenses.
The following table compares the results of cer-
tain special studies made as to the proportion in
the cost and returns of milk due to such items as
feed, labor, taxes, equipment, bedding, etc. These
studies were all made before the war:
PERCENTAGE COST OP FACTORS IN PRODUCTION OP MILK
Massa-
chusetts.
Con-
necticut.
New
Jersey.
New
Hamp-
shire.
Larson,
Columbia
University.
Delaware
County,
New York.
Feed
54.3
57.6
63.3
49.4
52.7
67.8
Labor
21 5
21 8
22.4
21.8
18.9
18 6
Taxes, cattle
10.1
11.3
7.8
9.0
6.5
2.0
Miscellaneous . ...
5 5
1.3
3.0
4.5
0 9
Buildings
4.6
2.5
2.6
6.1
5.7
4.4
Keep of bull .
2.4
1 9
1.0
2.5
2.5
Equipment
0 7
0 3
0 4
Bedding
3.2
2.7
2.7
2.3
0.8
Hauling milk
4.8
6.9
5 0
PERCENTAGE RETURN OF FACTORS IN PRODUCTION
Massa-
chusetts.
Con-
necticut.
New
Jersey.
New
Hamp-
shire.
Larson,
Columbia
University.
Delaware
County,
New York
Manure
9 2
6 5
10 4
10 1
13.2
7 6
Calf
1.2
3 2
3 1
2.0
1.9
2.7
Balance for milk
89 6
90 3
86 5
87 9
84.9
89.8
122
THE COST OF PRODUCTION
The formula method, when fairly used, is a valu-
able guide to production costs. It does not give
"the cost of production" within any exact sense of
those words. The per cent of error in the assumption
that the cow is a standard factory is one that few
would attempt to state numerically. The costs for
the same cow in a hard winter like 1917-18 are
larger than in a mild winter like 1918-19. More-
over, the percentages assumed for the monthly dis-
tribution were based on the average of market prices
for ten years and are not based on any monthly
variation in production costs. For instance, are
March costs actually 14 per cent lower than No-
vember costs? Milk is produced more freely in
March than in November, and the prices of dairy
products in storage break because the season of
plentiful supply is at hand. How much of this
average ten year variation was due to this market
fact of greater supply and how much to the cost
fact that the cows naturally produce more with less
attention in March than in November? In both
the Chicago and New York markets during the ten
years when the market averages were taken, more
and more milk had to be taken for whole milk con-
sumption in the autumn months because of growing
city populations. Was this fact properly reflected
in the price paid for milk? Is this proportional
increase in the need for milk for city comsumption
the same now as in those ten years? Again, just
what is the value of a day's work on a farm in winter
as compared with a day's work at seeding or harvest
123
THE PRICE OF MILK
time? Assume that the price of milk is based on the
average going wage actually being paid. Is there
any seasoned old farmer who will not, in his own
mind, make his own estimate on these matters and
plan his farm output accordingly? Is the labor of
women and children during seasons when it has no
market value to be figured in at an assumed market
value? Will the attempt so to do " raise the standard
of living on the farm" or will it merely shift the milk
industry from one section to another? Or, after a
period of reflection, will each farmer make up his
own mind about these things and pay little heed to
"costs" proved by "theoretical" formulas? The
higher the price of milk the higher the price for
feeds, and the higher the price for feeds, the higher
the price for milk. Price fixing is not so simple as
the formula method implies.
Professor Pearson submits the table on the next
page comparing the price actually paid in the Chicago
market from August, 1918, to June, 1920, inclusive,
with the price called for by his formula. For the first
six months of this period the formula was used for
price determination. Thereafter it was not used.
The following facts are gleaned from this table:
(1) During the seventeen months following the
abandonment of the formula method the price
actually paid was below that called for by the formula
for twelve months and above the formula price for
five months. These five months were: June,
August and September, 1919, and June, 1920.
(2) The average price paid for these seventeen
124
THE COST OF PRODUCTION
months was $3.14 as compared with $3.33 called for
by the formula, or roughly one-half a cent per quart.
(3) For the months of August, September and
October, 1919, the market price averaged 7 cents
per hundred weight above the formula price.
(4) The formula price called for an increase of
about 10 per cent in the average price for November,
December and January over the average price for
THE PRICE ACTUALLY PAID PER HUNDRED POUNDS FOR MILK
AND THE FORMULA PRICE FOR MILK, CHICAGO DISTRICT,
AUGUST, 1918, TO JUNE, 1920
Date.
Formula
Price.
Milk
Price.
Date.
Formula
Price.
Milk
Price.
1018:
August
$2.75
$2.75
1919:
July
$2.94
$3.00
September
2 92
2 92
August
3 23
3 52
October
3.15
3.15
September . .
3.46
3 55
November
3.65
3.65
October
3.82
3.63
December
3.77
3 77
November
3 85
3 60
December
3.88
3.65
1919:
January
3 76
3 76
1920:
January
3 88
3 60
February
3.70
3 50
February
3 81
3 35
March
3.40
3.00
March
3.70
2.90
April . . .
3 99
2 80
April
3 40
2 75
May
2.57
2.50
May
2.92
2.70
June
2 35
2 50
June
2 66
2 75
the preceding three months; the market price (1919)
was but If per cent greater.
(5) For the first six months of 1920 the price paid
averaged $3.01 as compared with $3.40 called for by
the formula.
125
THE PRICE OF MILK*
(6) The price paid for the last six months of 1919
was $3.50 as compared with $3.53 called for by the
formula.
(7) During the last six months of 1919 and the
first six months of 1920 the price paid was above that
called for by the formula in July, August and Sep-
tember, 1919, and in June, 1920. But for this year
as a whole the price paid was $3.38 as compared with
$3.33 called for by the formula, practically the same,
as higher prices were paid in four months of higher
production.
The formula does not reflect the market possi-
bilities. The sales price of competitive commodities
and their costs seldom run hand in hand. And one
cannot be used as a measure of the other. But the
Pearson formula does reflect in general what produc-
tion costs are. But the percentage distribution of
the cost cannot be the same as that over any past
period.
To the extent that the market outlets and the
producing conditions and habits of any given region
remain fairly constant can the formula method have
any value as a guide to price. The price to the
farmer year in and year out will approach the formula
prices to the extent that it reflects truly both costs
and marketing conditions. Only in so far as an
historical, average, monthly distribution of prices
happens to run parallel with the current cost and
marketing factors can a formula based on the past
be accurate at the present.
We need continuous reports as to the costs and
126
THE COST OF PRODUCTION
net returns of dairies in the same neighborhood; as
to the costs and net returns of each farm product;
as to costs and net returns of the farm as a whole;
as to the relation between the net returns of different
products to which the resources of the farm can be
turned; and also the facts as to the changes in farm
output going on in any one region and the reasons
therefor. This side of the science of farming has
been neglected. When we have all such facts we
will probably explain the sound sense that has caused
dairy farmers to increase milk production as they
have for certain periods at prices below the "costs"
proved by a formula.
Notable work has been done quietly in building
up efficiency in dairy costs by J. M. McKee, County
Agent of Washington County, Pa. By keeping
accurate data on such items as output per cow,
quality and quantity of feed consumed per cow, and
the hours of labor expended on the different dairy
operations, such as milking, feeding, cleaning stables
and hauling milk, he has been able to compare the
cost items in each dairy with the average cost items
in all the dairies. For instance, as to hours of labor
including the hauling of milk, McKee has found a
variation of from 159 to 231 per cow, with an average
of 223. He finds a variation of from 2.1 to 6.3 pounds
of milk produced from one pound of feed, the average
being 3.13 pounds of milk to 1 pound of feed. Out
of 23 herds, 16 showed a profit and 7 a loss. The
profit per cow varied from $95.00 profit to $27.65
loss. Mr. McKee has also done well one other
127
THE PRICE OF MILK
thing: he has computed feed and overhead costs
and then given to each of the farmers what his labor
is netting him per hour on the basis of assumed over-
heads, and he assumes a given hourly wage and
reports the net return on the investment at that
wage. Mr.McKee writes the author:
The dairymen are showing an increased interest
in cost of production records and what the price
they receive will pay them in wages per year, but
to secure this information it is necessary to make
a study of the entire dairy business and in so doing
we find many places to increase the efficiency of
production of the plant so that in many cases they
can get an increased wage per hour through
cheaper production,
Cost of Production
The cost of producing milk is not easily ascer-
tained. But that is no reason why it is not im-
portant. For as are the alternatives to the farmer
so will his choices be. Every time a fanner plans
his crops he makes those choices.
It is not to be presumed that because the costs of
the different products of the farm are inter-related
and their allocation difficult that the dairyman will
go on producing milk without adequate compen-
sation. The mere fact that he is growing other
products every year gives him choices as to what pro-
duct is most profitable for him.
The consumer must realize that standards of living
must rise in the country in proportion to the standard
in the cities. Costs of producing milk like the costs
128
THE COST OF PRODUCTION
of producing steel, will rise as living standards rise.
Farmers will not continue to work the members of
their families when city earners need not do so. We
cannot continue to add to the values, profits and
wages in manufacturing industries and not bring up
living standards in the country to meet those in the
city.
The whole problem of milk costs is involved with
industrial stability and social well being not only in
the city but also in the country — and in the city and
in the country of all nations.
129
CHAPTER VI
Should Dairymen Organize for Collective Bargaining?
There has been in recent years a revolution in the
method of receiving, manufacturing, storing and dis-
tributing milk and milk products.
The time was when the manufacture of butter was
solely a household industry. The first creamery
built in the United States dates back only to 1856.
Soon after the Civil War period small cross-roads
creameries began to increase in number throughout
the country. Well does the author remember the
glowing promises made in the early " nineties " by
those organizing local cooperative creamery com-
panies. Those cooperative plants were usually
built to serve the dairymen of the immediate vicinity
only.
About 1890 the centrifugal separator was placed
on the market and Professor Babcock gave to the
industry in the Babcock tester a quick and reliable
method of ascertaining the percentage of butter fat
in milk. Shortly after this, cold storage on a large
scale was perfected. Following the development of
cold storage plants on a large scale came the large
butter centralizers such as the Beatrice Creamery
Company, the Blue Valley Creamery Company, the
Fairmount Creamery Company and the Hanford
Produce Company, the largest of which makes from
15,000,000 to 20,000,000 pounds annually, in many
130
SHOULD DAIRYMEN ORGANIZE
plants widely separated. These large plants grad-
ually added facilities for manufacturing the by-
products of skim milk.
Fast on the heels of these large butter concerns
came the large condenseries, likewise under the con-
trol of central companies. Such are the Borden,
Mohawk, Helvetia, Carnation, and Nestles' Con-
densed Milk Companies.
The home churn and the cross-roads creamery
could no longer effectively compete with the buying,
manufacturing, storing and selling facilities of these
large concerns. What was a household industry had
become a big manufacturing industry. Charts Nos.
XIII and XIV on pages 132 and 133 indicate graphi-
cally the expansion of the butter and cheese factory
industry at the expense of the household butter and
cheese industry.
In 1909, 1,619,415,263 pounds of butter was made
in the United States, or an increase over 1899 of
8.6 per cent. Of this amount 994,639,619 pounds
was made on the farm and 624,764,653 pounds in the
creamery. This was in ten years a decrease of 7.2
per cent in home-made butter and an increase of
48.7 per cent in factory butter.
The time was, and not so very long ago, when
milk was distributed to the consumer in the city
from house to house by the dairymen who produced
it in the country. The only facilities for caring for
it in the country were the side-hill spring house or
the cellar. Today in most cities of any size there
are but a few large milk distributors. These dis-
131
THE PRICE OF MILK
CHART No. XIII. — FARM AND FACTORY BUTTER PRODUCTION
IN THE UNITED STATES SINCE 18501
J000
/8&O /99O I90O /9/O /920
/CO
» From Circular No. 70, United States Department /of Agriculture, by John R.
Mohler.
132
SHOULD DAIRYMEN ORGANIZE
CHART No.XIV. — FARM AND FACTORY CHEESE PRODUCTION IN
THE UNITED STATES SINCE 18501
ieso /G6Q '97Q /eeo '890 /QOO ./9/o
tributors own receiving stations in the country to
which the milk is brought direct from the farm and
there properly cooled and cared for in quantities
sufficient to make the cooling and handling cost per
quart very small. Moreover, the large distributors
soon added facilities for economically manufacturing,
1 From Circular No. 71, United States Department of Agriculture, by John R.
Mohler.
133
THE PRICE OF MILK
storing and selling the milk products made from the
surplus milk for which no market could be found in
the wholesale or retail milk trade. The receiving
stations reach out great distances from the cities
served by the distributors. Until recent years the
manufacturing of condensed milk and evaporated
milk was open to practically all comers with but
little investment. Now, with the market more or
less monopolized by widely advertised brands, pushed
by high grade sales-agents, the condenseries have
been consolidated until not over a half dozen firms
control the major output of the condenseries of both
Europe and the United States. While of the total
milk produced in this country the portion going into
condenseries (2.9 per cent) is small, the strategic
location of these plants and their importance in
handling surplus milk in those weeks of the autumn
and spring when condensed milk offers a better
market for milk products than do butter or cheese,
gives to the few large condensing companies with
receiving stations scattered in every large dairy dis-
trict a position of f orcefulness in price determination
throughout most of the year.
With the development of these large industrial
units came heavy investments both in the city and
in the country that had to be protected. These
investments were made in order to handle milk and
its products most economically. One source of
economy was the choice of favorable locations for
receiving plants in order that they might be supplied
with the volume of milk necessary to low cost per
134
SHOULD DAIRYMEN ORGANIZE
unit handled. Thus, it has come about gradually
that in any one dairying community there is now
usually but one readily accessible receiving station
at which the producer can, within a reasonable haul,
find a sale for his milk.
These investments made possible the proper care
and handling of milk, and provided the most econom-
ical method of manufacturing, storing and selling it.
Hence through them came to the farmer and to the
consumer the possibilities of a more favorable price
through lower costs of receiving, manufacturing,
distributing and selling milk and its products.
But this change had left only one good near-by
market open to the farmer. When the producer
saw that the result of this revolution in dairying,
just described, was that his only market for selling
his milk to good advantage was the local receiving
station of a large milk factory or milk distributor,
he began to grow restless concerning the power of
these buyers to dictate the price he must accept for
his milk. Thanks to American traditions, the pro-
ducers began to question the fairness of the price
they received even though that price was more than
they could get, or could have gotten, or had ever
received, in any other way. There was a more or
less actual monopoly to which the producer must sell
his milk. The producer therefore joined with other
producers to protect his price, hence the "Dairy-
men's Organization" now present in every primary
milk market in the United States.
In the face of such conditions it is obviously to the
135
THE PRICE OF MILK
best interests of all that there should be such farmers'
organizations. The purchasing power confronting
the producer, if not organized, was thoroughly cen-
tralized, because purchasers were few in any district.
In many instances, if not in most instances, the
price proffered the farmer in the years preceding
these organizations was without doubt not a fair
price.
Even if the price proffered by these milk buyers be
the fairest of prices, it is still to the interests of the
buyers themselves that milk producers should be
thoroughly organized. For through collective bar-
gaining the producers feel that they are a party to
the price and hence suspicion and gossip — the twin
slayers of business security — cease to be. The best
price interpreter to all farmers is the farmer who
has had a "say" in determining the price to be paid
for milk by local buyers.
A dairymen's organization manned by fair-minded
farmers is an asset to the large buyer under present-
day conditions. In any case, so long as American
blood stays American, in the face of practically a
buying monopoly, such organizations are going to be.
What are the Functions of Dairymen's Organizations?
The first function of dairymen's organizations, of
course, is to bargain as to price. Often it has been
said that "the law of supply and demand must fix
the price." But when the only buyer in a district
offers a price to one producer here and another
producer there, and only the buyer sees all the
136
SHOULD DAIRYMEN ORGANIZE
individuals and the individuals never see each other,
is the law of supply and demand fixing the price or
is the will of the buyer fixing the price? Before the
law of supply and demand can be operative, the
buyer and seller must each have alternatives and
equal bargaining power. Under the conditions indi-
cated above this is possible only when all the sellers
sell as one man to the one buyer. The law of supply
and demand pre-supposes competition among buyers
as well as among sellers if a fair price is to be reached.
But, as has been shown, the milk buyer now usually
possesses a monopoly power which must be matched
by the organized selling power of the producers.
Otherwise, neither the consumer, the producer nor
the dealer can know that the price is fair.
But there are numerous duties of dairymen's
organizations, other than bargaining as to price.
One is to get and maintain shipping facilities that
many can secure which one cannot; another is to
look after milk tests; another is to find and keep
open the necessary markets. Much good is being
done by such organizations, through cooperation with
those who buy, to expand the market for milk by
advertising and by creating and keeping good will.
Then, too, net profits will increase by lowering pro-
duction costs as well as by increasing selling prices.
In feed and labor matters much can be and is being
done by central organizations of dairymen. Fur-
thermore, new markets must be found to meet new
conditions.
All these and other functions are best rendered by
137
THE PRICE OF MILK
the farmers themselves to the farmers themselves
through their own representatives. Thus and thus
only are the producers' interests fully protected.
Should these Organizations be Exempt from the Anti-
Trust Statutes?
The purpose of the anti-trust statutes is to assure
a fair price to the consumer and producer and
dealer by keeping open the avenues of trade. The
spirit of our institutions favors competition.
The essence of competition is the free bargain
between a willing seller and a willing buyer. The
seller is not a "willing" seller in any economic sense
of the word unless his power to sell is equal to the
power of the buyer to buy. This is possible as to
milk under present milk-market conditions, only
when the producers are organized. The same eco-
nomic forces that our law-makers and courts recog-
nized in collective bargaining for laborers argue for
legalized collective bargaining for dairymen.
Moreover, the investment now necessary for milk
distribution in a city of any size can be protected
only if the owner thereof knows what his competitor
is paying for milk. Otherwise price competition in
the city is at the expense of the farmer and hence at
the risk of a proper supply of milk for the consumer.
The same forces that made it advisable that all
railway rates be made public now make it advisable
that the price paid for milk be made public.
But may the dairymen not abuse their freedom
from prosecution for conspiracy to restrain trade?
138
SHOULD DAIRYMEN ORGANIZE
They may. The author has known of a few instances
where the privilege of immunity from prosecution
under the anti-trust statutes of a given state has
been abused by the officers of a dairy organization.
But when organized 100 per cent the power of the
farmer is not greater than is the power of those to
whom he sells before he organizes. We may by law
enforcement prevent many farmers from cooperating
to get a fair price. We cannot by any device known
to law successfully prevent the few buyers in any
one milk market from coming to a common under-
standing as to the price they will pay for milk,
especially when the buyers are few and large invest-
ments are at stake. Shall we prohibit the farmers
from combining to protect their interests when we
cannot prevent the milk buyers from combining?
It is not advisable that either should be prevented.
It is to the public interest that milk production
should have the protection that can come only
through equality of bargaining power. Moreover,
it is to the public interest that the centralized power
of the milk distributor be checked and balanced by
an organization of equal power among producers.
The abuses that may arise from collective bargaining
may be checked in many ways. These abuses are
neither so numerous nor so destructive as those that
arise when dairymen are not organized, and the
latter abuses cannot be checked by any means.
But, if collective bargaining is allowed, may we
not have a great " producer-distributor " trust that
would set its own prices without consideration of
139
THE PRICE OF MILK
the interests of the consumer? Those who read the
preceding chapters will learn of many forces other
than bargaining power that really determine the price
of milk. To be effective a " producer-distributor "
combination would have to include not only a con-
trolling number of all producers and all distributors,
but of all manufacturers of milk products and of the
producers and sellers of alternative foods to the
extent that the price for such foods affect the price
for milk. When such a combination shows promise,
the proper agencies, mainly national and inter-
national, will soon be created to meet it. In such a
combination the organized dairvmen would be
playing only a very small part.
Collective bargaining of any kind should be in the
open and all agreements kept on record. Some of
the essentials to this in milk prices are discussed in
the chapter on " Cooperation and Price/' The
whole tendency of the times is to get fair prices
through administrative supervision of price matters
and not through the old, inept, ineffective judicial
processes lamely attempting to prevent restraint of
trade. The consumer's long time interests can be
protected in ways other and more effectively (as
shown in Chapter XII) than by preventing coop-
erative organizations among farmers through anti-
trust statutes.
The truth is that exemption of such organizations
from those statutes allows fair bargaining; the want
of exemption compels unfair bargaining. For where
there is no exemption the milk buyer either fixes his
140
SHOULD DAIRYMEN ORGANIZE
own price or he meets with the farmers to agree on
prices only so long as it is to his own interests so
to do. For, when it is not to the interests of the
buyer so to do, the buyer pictures to the producer
the penalties of the conspiracy statutes and names
his own prices.
Under such conditions the American public will
conclude to exempt bargaining associations of dairy-
men from anti-trust statutes.
141
CHAPTER VII
Policies of Dairymen's Organizations in Their Relation
to Price
Certain questions as to the methods and policies
of these organizations have such a direct bearing on
price both to the farmer and to the consumer that
it is well now to consider them. These questions
are:
1. Around what market (local, primary, national
or international) should these societies be organized?
2. Is the strike the method to be used to secure
fair prices?
3. Can the interests of consumers be protected as
well as the interests of producers and dealers?
4. Does the formula afford a practical method of
price fixing?
5. Should such organizations own and operate
their own receiving, distributing and manufacturing
facilities?
1. Around What Market Should These Societies Be
Organized?
The Chapter on "The Interdependence of Local,
Primary, National and International Markets " de-
picts the degree of dependence and independence
between each of these markets. As there pointed
out, the primary market is the one that is most
nearly independent of the other. Within a given
142
POLICIES OF DAIRYMEN'S ORGANIZATIONS
primary market the competitive forces are such as
to tend to make unity of price essential. As between
primary markets there are seasonal and marketing
conditions that necessitate price differences. The
national and international markets blend into one
during the season of plentiful production, because
the sales value of manufactured products is to a large
degree international.
These being the facts as to price forces in each of
these classes of markets, it is clear that the type of
organization that will best meet conditions is one
independent dairymen's organization in each of the
primary markets, these to be federated into a
national (and in time international) organization
that will meet the national and international issues
on their merits.
The author has seen many instances when local
organizations within a primary market have sought
to maintain a price for whole milk for one town or
city above the price prevailing in the primary
market. The successes of those organizations have
been transient. The very existence of such dairy
organizations has depended upon the overshadowing
protection of the larger organization in the primary
market. Often such local associations have been
harmful to the interests of even their own members.
The unit is too small to be effective. One sound
principle, alike of price or rate regulation as well as
of collective bargaining, is that the regulating or
bargaining power should be coextensive with the
industrial organization to be regulated or bargained
143
THE PRICE OF MILK
with. Thus state regulation of transcontinental
carriers or city regulation of state-wide street rail-
way systems inevitably prove to be impotent, or,
if not impotent, unfair.
The "milk-sheds" separating the primary milk
markets are known to the trade and can be easily
observed. Often where the territories are not de-
fined by transportation barriers there are customary
divisions of territory among the milk purchasers,
which afford a basis for a division of territory among
dairymen's organizations. The primary market
offers the only logical basis for separate dairy organi-
zations.
It has been urged that these associations should
unite into one national organization whose repre-
sentatives would meet the representatives of milk
purchasers monthly at some central place, such as
Chicago, and then arrive at a base price for the
United States as a whole, with customary or agreed
differentials between the primary markets. The
author has never believed that this plan was for the
best interest of all parties for many reasons. Those
who sell and those who buy, whether dealers or
consumers, want to know that their "own people"
are influential in price matters. Even if the price
to the farmer were higher through a national price-
fixing conference, there will be better satisfaction
in the long run if these matters are determined at
"home" by "home folks." The trade customs
making a primary market for milk determine a
primary market for other products and hence the
144
POLICIES OF DAIRYMEN'S ORGANIZATIONS
people in these markets are ''home folks " in a mar-
keting sense. Accordingly the meeting held in these
markets are sufficiently near "home" to satisfy all
parties and allay suspicion as to unfair price methods
or conclusions. Neither the farmers, the dealers,
nor the consumers in Louisville, Kentucky, want
their prices determined for them (however wisely or
justly it may be done) in Cleveland. Nor will the
citizens of New York want their prices arranged in
Boston or Chicago. Moreover, those familiar with
the forces in a primary market should bargain in that
market. No "foreign" price will ever satisfy those
who buy and sell on a primary market.
Differing climatic conditions and variation in pro-
ducing or marketing output will necessitate a con-
stant change in any system of price differentials
between the primary markets.
"But," it is urged, "the butter, condensing and
other milk manufacturers who have factories or re-
ceiving stations in the different primary markets
play one low market against another to keep all
markets down and hence the dairymen's organization
in any one primary market is helpless to defend itself
without help from similar organizations in other
markets." In this argument there is much that is
sound. A manufacturer with a receiving station in
the Chicago district will not want to pay a higher
price there than he pays at his receiving stations in
the Los Angeles, Seattle, Pittsburgh or Boston dis-
tricts, and he will make this clear enough by many
means to the farmers in the Chicago district. It is
10 145
THE PRICE OF MILK
to meet such conditions that a federation of dairy-
men's organizations is needed. In addition to
organizations performing the many functions essen-
tial to each primary market, a central clearing house
is needed to meet the joint needs of two or more
primary markets. In the surplus production months
this central organization might well assume advisory
price functions, for in those months the price factors
are largely national or international. In other words,
the organization of dairymen's unions should be
mobile enough to meet the needs of local, primary,
national and international markets. A federation of
the associations in the primary markets offers a type
of organization adaptable to all these purposes. It
is no accident that this is just the type that is now
in operation,
2. Is the Strike the Method To Be Used to Secure Fair
Prices?
Many questions of sales policies have been the
center of public interest throughout the few years
that dairymen have been organized. Dairymen or-
ganized to right wrongs. Often the "fire-eater"
among the dairymen of a given district was chosen
to represent that district. Force was the chief idea
expressed and strikes were the first means used. So
it was with labor organizations. The new labor union
wants first of all to show its strength. The leaders
of some dairymen's unions believe that strikes bring
new members.
Contrasted with this view is the other policy, in
146
POLICIES OF DAIRYMEN'S ORGANIZATIONS
the application of which the Philadelphia and Pitts-
burgh dairy groups are examples, namely, never to
talk strike but secure results in other ways. Neither
the milk producers nor the milk dealers have ever
said they would never refuse to buy nor to sell but
these ideas are never voiced in any of their price
conferences. The idea of violence or of threat has
been wholly absent in both these buying and selling
groups. On the contrary each side assumes (and
now believes) that the other wants a fair business
settlement. The result : fair settlements are secured,
not without much discussion, and sometimes only
after much feeling is aroused, but for three years at
least every price agreement has been unanimous and
both sides have been convinced that the price was
fair. The conclusion reached, both sides then co-
operate to expand the market and to improve pro-
ducing, buying and selling conditions.
Centuries of accumulated experience have taught
all these in power in government or industry that the
use of strikes or lockouts is an evidence only of the
want of a higher ability on the part of those who use
them. It may not be wise under some circumstances
to advertise that these methods will never be used,
but it is recognized that their use even if "necessary "
is usually evidence of weakness and want of ability
on the part of those who use them. The best labor
leaders have for years stopped using violence and
are finding more successful methods. For in any
collective bargaining among equals, a point is reached
sooner or later where the power is first with one
147
THE PRICE OF MILK
group, then with the other. If one group abuses
power when it has it, the other group will be inclined
to do the same when in turn power comes to it.
Therefore, when bargaining relations are to be per-
manent, as astute labor and industrial leaders recog-
nize, force is never idly threatened and its use is
accepted by the leaders themselves as evidence of
poor leadership. Neither group will conclude never
to strike nor to lockout, but they will conclude that
these means prove destructive more often than they
prove beneficial.
The need is to attain real equality in bargaining
power. Power to bargain implies the power to
refuse to buy or to sell. There can be no quibbling
about this. The only question, therefore, is not
whether dairymen shall never refuse to sell nor deal-
ers refuse to buy but whether other methods will
be exhausted before such refusal is made. Dairy-
men have been told so often what price they "can
take or leave" that their first impulse is to do the
same when power is in their hands.
In the chapter on "Cooperation and Price" a
method of price agreement is described in which
the power to refuse to buy or to sell including the
power to name a price without a conference which
the other must take or leave, gives way as a
policy to mutual cooperation and understanding.
3. Can the Interests of Consumers Be Protected as Well
as the Interests of Producers and Dealers?
Can farmers and milk dealers adopt price policies
148
POLICIES OF DAIRYMEN'S ORGANIZATIONS
that will protect the consumers' interests as well as
their own? The consumers' interests require a price
that will maintain production and provide the costs
and profits essential to the economical distribution
of milk with adequate sanitary protection for the
milk from the farm to the pantry. Because of the
character of milk as a protective food, the consumer
is also interested in a price as stable as producing
conditions will warrant. In summer time the leafy
vegetables may offer an adequate alternative to the
protective food elements found most cheaply and
surely in milk. But in the autumn and winter those
leafy foods are high in price as well as scarce. Hence
chief reliance in these months must be placed upon
milk. From the point of view of social welfare,
therefore, the price of milk in winter should not vary
more from the summer price than is necessary to
stimulate autumn production. Moreover, the resent-
ment that a high seasonal price fluctuation brings to
the consumer leads to cutting down the consumption
of milk in winter. This does not mean exactly the
same price to farmer or to consumer throughout the
year, but it does mean that there are clearly defined
points beyond which the price of milk to the con-
sumer should not fluctuate as between winter and
summer.
Thus, during the war period, consumption was not
diminished by an increase of two cents per quart in
the price of milk when the Food Administration said
that that increase was fair, whether the increase was
from twelve to fourteen cents or from thirteen to
149
THE PRICE OF MILK
fifteen cents. Indeed, wth the support of the Food
Administration in many places, consumption was
not reduced at all when such price increases were
made. But a price increase in any one autumn or
winter of as much as four cents per quart over the
low price during the previous summer, however, has
invariably met with distinct opposition and marked
decrease in consumption. The only exceptions to
this rule were the few months in the autumn of 1918
when the influenza epidemic was on — an exception
that tends to prove the rule.
A stabilized price is essential to good loads on
retail milk wagons and maintenance of equipment at
full capacity, and these are the primary factors,
both in keeping down costs to consumers, as will be
shown later, and in assuring adequate annual profits
to milk dealers.
Good health requires habitual use of milk and a
habit of using milk keeps down the cost of handling
milk per unit, thus stimulating consumption and
increasing the farmer's market. A fairly uniform
price is conducive to the habit of using milk.
This stabilizing of price to the consumer cannot
be done without the cooperation of the selling organi-
zation among farmers. A short-sighted policy may
lead farmers' organizations to whang prices as high
as possible in the few months that milk is short, quite
forgetting that when this is done it is but human and
necessary for those who buy their milk to whang the
prices as low as possible in the months when milk
is plentiful. Quite forgetting, too, what is to their
150
POLICIES OF DAIRYMEN'S ORGANIZATIONS
interest, that when milk consumption goes down
because of extreme fluctuations in price, the number
of months in which the farmers can control the
whole milk market is to that extent lessened.
Cooperation here between buyers and sellers will
benefit both.
A monthly price distribution that stabilizes
prices to the consumer is to the advantage of the
producer who sells market milk. The new com-
mercial possibilities in reconstituted milk will help
stabilize the price. The use of powdered milk was
in the author's opinion much lower the autumn of
1918 than it would have been had the government
not taken practically all the supply for military
purposes. Even as it was there was a large use of
it. In its use lies the check to a monthly distribution
in the future price to farmers that upsets consumption
by necessitating abnormal seasonal increases in price.
Price stabilization to the consumer also means
that the milk dealer in the summer time must have
a spread wide enough to create reserves against the
lean months of the autumn. This again necessitates
close cooperation among dealers as well as between
farmers and dealers, and between consumers and
dealers. To this end, too, daylight delivery which
satisfies laborers is a contributing factor.
Stabilization does not mean that, on a year round
basis, the farmers with whole milk markets will get
less for their milk; it means they will get more, for
there is more milk produced in the spring and sum-
mer than in the autumn and winter months.
151
THE PRICE OF MILK
The chart below shows the monthly distribution
by per cents of the annual price that has actually
prevailed for the periods noted in the New York,
Philadelphia, Pittsburgh, and Chicago markets.
JAN ree tw APR MAY JUNE JULY AU& stPT CCT MOV DI
t
120
110"
100
90
80
TO
*x,.
\
x\.
&
1^'
*
100
90
do
TO
\
^S
\\
\
N
k\ \
, >x
//
If
*'j
12.
y
H
\
£
\
/i f
,„-»
7
V
V
\\
*
\
^/
\
-fHILADELPHIA.
----NEW YORK
— PITX5DURG
CHICAGO
\
//
1
CHART No. XV. — THE AVERAGE MONTHLY VARIATION IN THE
AVERAGE ANNUAL PRICE RECEIVED BY MILK PRODUCERS
IN THE NEW YORK, PHILADELPHIA, PITTSBURGH1
AND CHICAGO MILK MARKET DISTRICTS FOR
THE TEN- YEAR PERIOD ENDING IN 1916
An examination of this chart will show that the
milk producers in the Philadelphia district through
this ten-year period received a slightly lower price
than producers in the other leading milk markets for
January and December and a higher price in May,
* For nine years ending January 1, 1919.
152
POLICIES OF DAIRYMEN'S ORGANIZATIONS
June and July. Inasmuch as much more milk is
produced in the latter group of months than in the
former group of months, the net annual money
return to dairymen in the Philadelphia district has
been as high as the net returns to dairymen in the
other districts.
This market custom the producers in the Phila-
delphia district have kept during and since the war
period. This constitutes their contribution to a
favorable retail milk price situation in the Philadel-
phia district. Without this cooperation from the
producers, Philadelphia consumers would have had
to pay higher prices than they did pay in the fall and
winter months and hope for lower prices in summer
months. Under this latter plan the average paid by
consumers for the year would have been higher even
if the farmers' net returns had been the same, because
of the upset business conditions for the city milk
distributor. To accept this policy required faith by
producers that public officials, milk consumers and
milk buyers would not rush out to lower the price
to the producer when they would have the power to
do so in the season of greatest production to a point
below that warranted by a fair consideration of
sacrifices already made by the producer to stabilize
prices to consumers. In other words, the producers
had to refrain from "getting all they could get"
when milk was scarce in return for assistance to
maintain a fair average price through the rest of the
year, especially during the months of greatest pro-
duction.
153
THE PRICE OF MILK
How this plan worked out in practice is shown in
the chart below comparing the prices received by
the milk producers at the country receiving station
during the calendar year 1918 in the New York,
Philadelphia, Pittsburgh, Cleveland and Chicago
districts.
500
400
300
200
1QQ
JAN fTB MAR APR MAY JUNE JULY AU& SCfT OCT NOV DEC
500
400
S
~rr.t.
v
S
'-- — '-r
/
<'''?
fr
***** — '
•^-
^
^
.•^T^V
^ s
7-4*
•0
'?
?£---"'
''-PHILADELPHIA
NEW YORK
•— PITXSBURG
CHICAGO
— CLEVELAtfB
200
100
^.^
,s
CHART No. XVI. — THE PRICE RECEIVED BY MILK PRODUCERS
AT COUNTRY RECEIVING STATIONS DURING 1918 IN THE
NEW YORK, PHILADELPHIA, PITTSBURGH, AND
CHICAGO PRIMARY MARKET DISTRICTS
As pictured by this chart, the annual price re-
ceived by the farmers in the Philadelphia district in
1918 averaged as high as that received by producers
in any primary milk market. Giving consideration
154
POLICIES OF DAIRYMEN'S ORGANIZATIONS
to the higher price received by Philadelphia farmers
during the seasons of greatest production, the milk
producers in this district during 1918 received for
the year as a whole the highest net money return
received by producers in any primary market.
The risk taken by Philadelphia producers in thus
helping to stabilize the price to the consumer is
shown in the chart on page 156 comparing the prices
received by Philadelphia producers from January 1,
1919, to June, 1920, with the price received in that
year by New York, Pittsburgh, and Chicago pro-
ducers.
An examination of this chart will show that for
most of the year the monthly prices to producers in
the Philadelphia district averaged well in 1919 with
the monthly prices in other primary markets. In
December, however, Philadelphia producers were
receiving one cent per quart less than producers in
the New York, Pittsburgh and Baltimore districts.
The same inequity continued in January of 1920.
In other words, the price to consumers in Philadel-
phia would have been one cent a quart higher than
it was had those producing milk in that territory
received as high a price as milk producers in other
territories were receiving for those months.
Plans were made early in 1920 for maintaining the
price paid to farmers in the Philadelphia district
through which the price to the Philadelphia producers
by June 1, 1920, averaged as high as that received
by producers elsewhere on an annual basis. The
price of milk to the consumer did not rise over 14
155
THE PRICE OF MILK
cents per quart in Philadelphia as compared with a
rise to 18 cents per quart in New York City.
\919 1420
AM r«» HAft APfl MAT JUNt JUIY AUO JIPT OCT M> t)CC JAN. TC& MAft APR H*/ ju«^
w\
\
i^v
\
',.
-y
-^
s.
^
****/
^
^
^
^•^^
/'
•ft
C^~-
^
/
*~"^
>y
>
"X
\
\
5
/ ' ^
\
\
\
\
/.
/
^
-^
£-
PI
'
T
flLADELPHIA
MEW YORK
'ITTSBURG
CHICAGO
CHART No. XVII. — PRICE PAID FOR MILK AT COUNTRY RECEIVING
STATIONS IN THE NEW YORK, PHILADELPHIA, PITTSBURGH,
AND CHICAGO PRIMARY MARKET DISTRICTS,
JANUARY 1, 1919, TO JUNE, 1920
The price to the producer has been fairly stabilized
in the Philadelphia and Pittsburgh markets. The
price to the consumer has also been fairly stabilized.
The result is a market wholesome for producers,
satisfactory to dealers and a price fair to consumers.
One valid objection to price stabilization to pro-
ducers is that the price to winter producers may
not be sufficiently above the price to summer pro-
ducers to encourage production in the seasons of
156
POLICIES OF DAIRYMEN'S ORGANIZATIONS
greatest cost. To overcome this objection milk
sellers and buyers in the Baltimore district worked
out a plan for paying winter producers a higher
price throughout all the season of plentiful produc-
tion so that on the basis of the total annual income
winter production would be maintained if not in-
creased. Beginning in January of 1920, a similar
plan was adopted in the Philadelphia district.
Under the Philadelphia arrangement the average
monthly production of each producer for the months
of October, November and December is taken as his
"basic" production. For this amount of milk for
each month thereafter the producer receives a
"basic" price. He also receives the base price on
10 per cent above this average monthly production
during May, June and July, and for 5 per cent above
his basic output in August. Quantities of milk
produced above these amounts receive a "surplus"
price which is below the basic price. This surplus
price is based on the daily average price of New
York 92 score solid pack butter for the month pre-
ceding, plus 20 per cent. In this last named respect
the Philadelphia plan differs materially from the
Baltimore plan. In the Baltimore district the sur-
plus price is determined by negotiations from month
to month in which all factors figure, including the
price of butter. In both plans new shippers come
in during any month other than October, November
or December1 on the basis of 50 per cent surplus and
50 per cent basic.
1 And September in the Baltimore District.
157
THE PRICE OF MILK
To illustrate, farmer "A" produced 2100, 2000
and 1900 pounds of milk in October, November and
December respectively. His basic production is
2000 pounds for these three months. In May he
produced 2500 pounds. He receives the basic price
for 2200 pounds and the surplus price for 300 pounds.
If butter of the quality stated above averages 60
cents a pound in May he is paid for these 300 pounds
at 120 per cent of 60 cents, or 72 cents per pound of
his butter fat, or $2.88 per hundred weight for 4 per
cent milk at the receiving station door. The 20
per cent is allowed for overrun and the value of
skim milk. The basic price has to be related to the
value of milk both for whole milk consumption and
manufacturing. The average of both must allow
the average manufacturer to make a fair profit,
otherwise he would be driven out of the territory.
The plan for this reason is not adaptable to primarily
manufacturing markets.
The basic price in the Philadelphia territory was
$3.61 from January 1 to June 1, 1920; the surplus
price was $3.12, $3.18, $3.19, $3.43, $3.00 and $2.76
for January, February, March, April, May and June
respectively, an average of $3.11. With a surplus
of one-third, the producer actually received for this
period an average of $3.46. The winter producer
receives a higher average price, however, than does
the producer in seasons of lower cost. The price to
the consumer is stabilized with resultant advantages
of a wider market to producers, a stable trade
situation for distributors, a satisfactory price to
158
POLICIES OF DAIRYMEN'S ORGANIZATIONS
consumers and a fair price to manufacturers. The
longer experience of the Baltimore market and this
season's experience in the Philadelphia market bear
testimony to good results from this plan. Other
organizations, such as the New England Milk Pro-
ducers' Association, have adopted or are considering
similar plans. The objections to the plan lie with
the manufacturers. To meet these objections equi-
table considerations must be used.
It should not be inferred that the author recom-
mends the Philadelphia plan for all districts or
under all conditions. The Pittrburgh Plan is to
negotiate each month's price, in conference, for all
the milk as discussed in Chapter XIV. An exam-
ination of the three preceding charts will show that
the price to producers in the Pittsburgh district has
reflected normal market conditions and a whole-
some variation between summer and winter costs.
Pittsburgh is primarily a manufacturing district.
Price stabilization to the consumer in the Pitts-
burgh district has been accomplished through a wider
spread to the dealer in spring and summer than in
the autumn and winter months, and through a
variation of from one to two cents per quart
between the price to the consumer in summer and
in winter.
4. Does the Formula Afford a Practical Method of
Price Fixing?
While the formula as described in Chapter V is
valuable when used with other facts in gauging pro-
159
THE PRICE OF MILK
duction costs, the use of a formula for actual price
fixing without any consideration of other factors in
milk prices is so silly that, if it were set to music,
it would make good comic opera. Every business on
any annual basis must pay its costs plus a profit.
But what business man would succeed who at-
tempted to distribute the prices at which he sold
his goods exactly by per cents by months on the
basis of what he had actually received on a ten-year
previous average?
The advantages and limitations of the formula
method for fixing prices are illustrated in the use of
the Hoover hog price formula during the war period.
In November of 1917, with the avowed purpose of
stimulating production, assurance was given hog
producers that, so far as the Food Administration
could effect foreign buying of pork products, the
Food Administration would endeavor to maintain a
price per pound for hogs in the ratio to the price of
corn of 13 to 1. This price stimulated hog produc-
tion during the two years following. But peace
negotiations and the approach of the armistice
alarmed holders of corn, particularly because of
statements receiving wide circulation at the time as
to large accumulations of low-priced corn in Argen-
tine and South Africa to be made available to the
world's markets at once with shipping released. The
result was a break in the price of corn of from 30 to
40 cents per bushel. This break (when incorporated
in an average of the corn prices for the previous five
months settled upon as a basis for calculating the
160
POLICIES OF DAIRYMEN'S ORGANIZATIONS
price of hogs on the 13 to 1 ratio), indicated a fall
in the price of hogs even though the price of corn
should later rally. The rails were soon congested
with hogs half fat and hogs not fit for market. The
market in hogs taken alone did not justify such a
break in hog prices. But with one of many price
factors alone (corn price) determining hog prices
and the market itself omitted, producers were justi-
fied in sacrificing their stock. A conference was held
in Washington with the live stock committee and
the formula abandoned as a sole factor in prices.
It is noteworthy in this connection that the formula
method for price determination in milk was aban-
doned just as soon as the Food Administration was
dissolved.
Something similar to this formula method in other
industries is the sliding scale plan for regulating
profits and prices in certain quasi-public utilities
where there is a complete monopoly. Thus the Con-
solidated Gas Company of Boston was to have a
profit of 7 per cent on an agreed valuation so long
as gas sold at 90 cents per 1000 cubic feet to the
consumer, but 8 per cent when gas sold at 85 cents
and 9 per cent when gas sold at 80 cents per 1000
cubic feet.1 Stockholders immediately interpreted
this contract to mean that they were entitled to 9
per cent. The consumer received gas, therefore, at
80 cents. So far all were happy. The sequel is
found in a report of the Public Service Commission
of Massachusetts after the plan had been in oper-
> See King, Clyde L. "Regulation of Municipal Utilities." D. Appleton Co.
11 161
THE PRICE OF MILK
ation a number of years. The managers of the
plant could not maintain the plant in good condition,
pay 9 per cent dividends and still sell gas at but 85
cents. They therefore robbed the plant. The
public was finally presented with a plant worn out
and obsolete, with the time-old query: "What are
you going to do about it?" The plan failed because
there was no such constant ratio as the formula
necessarily assumed between operating costs and the
price of the product.
A similar fallacy lies in the plan to create a separate
wage board to state what shall be a fair wage to rail-
way employees, leaving to another commission the
power to state what is a fair rate. On the surface
this seems fair. Are we to deny a fair wage to the
employee or a fair rate to the companies? But if
the sum of the two gives a rate more than the traffic
will bear, what then? Continue to subsidize the
two groups from taxation?
During the Food Administration a proposal, hap-
pily defeated, was persistently pushed whereby one
department was to decide what was a fair price to
milk producers, another the fair spread for milk
distributors, the total to be the price to the con-
sumer. "Are you to deny," it was argued, "cost
plus a fair profit to producers or to dealers?" Cer-
tainly not. But what if the price to the consumer
thus arrived at was more than both producers and
distributors knew to be wise in order to keep their
market wholesome? And what if consumers do not
take all the milk offered at this "just" price? Are
162
POLICIES OF DAIRYMEN'S ORGANIZATIONS
we to make up the deficits from taxation, thus doing
away with all incentive to economies, to plant im-
provement, to elimination of useless costs?
Prices are not a simple case of mathematics.
Such are the limitations of the use of the formula
method. Its advantages lie in its simplicity of
application when the facts are agreed upon and in
the foundation facts which, thanks to long years of
patient research, the formula reflects concerning the
amounts of feeds and of labor necessary to produce
100 pounds of milk in the cow factory. As a guide
it is useful, and great credit is due to Professor Pear-
son and others who have made it practical.
By whatever method the cost of producing milk
is reckoned, that cost alone is not the sole factor in
determining the price at which it can be sold /or
any given month. If a farmer does get all his costs
and a profit will he produce milk if he can produce
some other commodity at a larger profit or secure a
higher and better living standard in other work?
Will one region stop producing milk because the
living standards possible thereby are not as high as
in other farming regions, though milk production
offers the best returns of any product to the farmers
in the first region?
Milk production costs and net returns are most
valuable when they can be compared with the costs
and net returns of other alternatives on the farm,
and when they are compared with the net profits of
the farm taken as a whole and with living standards
possible to earners in other industries. Under cer-
163
THE PRICE OF MILK
tain conditions it will pay better to plow clover under
as a fertilizer than to make clover hay and feed live
stock. Assuming that from both uses the farmer
gets his costs and a profit, which he will follow if
the one offers larger net returns than the other in
the long run? With the same field crops the farmer
has the choice of milk, beef and pork production.
Assuming for each he can get back all his costs,
which will he choose?
Here is a farmer in a good grain producing region.
May he decide to keep a dairy herd sufficient to
consume all his roughage and retain the fertilizer
for his farm even though the daily net return derived
from his work in the autumn and winter months
may not be as large as the return from his labor at
the seed time and harvest of his grains?
Will a farmer expect the same money wage for
himself during the autumn and winter months that
he will expect from his seasonal crops? The farmer
living near a city will want a standard of wages and
of hours for himself and his family comparable to
those in the city. Does this standard reach back
into the real dairy districts? Just how much is the
time of the farmer worth during the six months that
he is not planting or harvesting? What is the labor
of his family worth at harvest times? At other
times?
The principles concerned are similar (and no more
difficult of application) than they are in determining
the price for gas or electric current at "peak" de-
mand. The price for "off-peak" demand is lower
164
POLICIES OF DAIRYMEN'S ORGANIZATIONS
but yet this " off-peak " must bear a proper share of
all the overheads and all direct labor costs. What
this "proper" share is must depend upon whether
the major portion of the business is in short hour
residence lighting or in full day manufacturing.
Likewise milk production, on a farm where the dairy
is not the sole source of income, must bear its proper
share of overheads and all the direct labor costs.
Dairying, when economically and wisely prac-
ticed, is intermixed with the system of cropping
adapted to the neighborhood. In view of the most
economical distribution of labor and the need for a
cash income monthly, and in view of a hundred other
factors that commingle to make farming the most
exacting of sciences, the price for one product may be
below cost and another above it, yet a combination
of the two may still net the highest return. When
the prices for a period are such as to discourage
dairying for a period and the farmers turn to some-
thing else, more than cost plus profit will be needed
to reestablish dairying in that district. It takes
decades to train a whole community in the fine art
of producing milk.
5. Should Dairy Organizations Own and Operate Their
Own Receiving, Distributing and Manu-
facturing Facilities?
As to the questive of cooperation ownership, dairy
organizations have had but little experience directly
pertinent to the matter and of sufficient duration to
be a real test.
165
THE PRICE OF MILK
The best example of favorable results of cooper-
ative ownership by dairymen of milk manufacturing
and distributing facilities is the recent experience of
the Associated Dairymen of California formed in
1917 from a federated association of eight units, or
local associations. Several local units have since
been added, and others are in process of formation.
The central organization studies marketing in a
broad way to help the local cooperative factories
find the best outlet for their milk products. The
milk factories themselves are operated by the local
associations, although the central body is active in
developing modern and uniform methods in all
plants. By this means all factories are assisted in
turning out a standard product, sale of which will be
pushed by a wide campaign of advertising. To
meet capital expenditures, dairymen members are
assessed in proportion to the size of their herds, but
operating expenses are paid out of receipts from the
sale of the product.
The arguments for the cooperative ownership by
dairymen of milk manufacturing and distributing
facilities run as follows:
In the regions supplying whole milk markets, the
surplus must be manufactured into milk products,
the price for which is determined by a supply and
demand over which the local farmers have no con-
trol. Inasmuch as the whole milk market offers the
best price market, these surplus products must be
either manufactured by the milk dealer at a loss to
be underwritten by the consumer of whole milk as
166
POLICIES OF DAIRYMEN'S ORGANIZATIONS
insurance for an adequate seasonal supply, or the (
price must come down to the level where milk can
be profitably manufactured. The whole milk
dealers, it is argued, use a small surplus to beat down
the price on all the milk supply. This means an
unfair price to the producers. Therefore, the pro-
ducers, to get that price to which the price paid by
the consumer fairly entitles them, and to get a price
needed to compensate for the higher autumn and
winter costs of producing milk for a year round
market, must own the facilities for manufacturing
their own summer surplus. Otherwise the "surplus"
is forever fixing the price.
The argument for cooperative ownership and
operation of milk manufacturing plants by the pro-
ducers in districts primarily manufacturing, and for
owning and operating the distributing systems in
such districts, is chiefly to get all the market offers
or can be made to offer from both the manufactured
milk product and from the consumers of whole milk.
Fundamental to belief in cooperative ownership is
the recognition of the fact that the price to the
farmer is what is left after the middleman's costs
and profits have been taken from the consumer's
price. The purpose of such ownership is to secure
as large a share of those profits as possible for the
producer.
All will sympathize with this point of view. The
real question is whether a cooperative sales organi-
zation, or a cooperative oivning and operating organi-
zation, or a combination of the two, will best secure
167
THE PRICE OF MILK
these results. There are conditions under which
such cooperative ownership and management will
no doubt bring better net returns to milk producers
than they are now securing. But under ordinary
conditions the author concludes that best results
will be secured through the cooperative sales organi-
zations. The following facts and reasons compel one
to such a conclusion:
In the first place investments are now in existence
for the purpose of receiving and handling milk.
These properties will either have to be duplicated or
purchased. The wastes of duplication are apparent
as shown by the history of not only gas, electric,
street railway and other public utilities but by many
private industries as well. To be run economically
each milk plant must have that volume of milk
essential to economical operation. Duplication pre-
vents this and thus adds to the very cost of handling
which the producer desires to lower by ownership.
If the properties are purchased, the poorly located
plants will be on sale first at reasonable prices. If
the poorly located plants are purchased, the pro-
ducers are at once put at a disadvantage just because
of their poor location. If the best located plants
are purchased, the voluntary sale price (condem-
nation proceedings cannot be used) will include the
earning power of this plant in relation to other
plants which may or may not be desirable. For the
farmers of any district or of any nation to put in-
vestments into such plants larger than are necessary
in other districts or in other nations is to place such
L168
POLICIES OF DAIRYMEN'S ORGANIZATIONS
farmers at a distinct handicap in selling their pro-
ducts at a price that will maintain their investments.
To ruin existing investments by establishing com-
petitive plants in order to purchase them at a more
reasonable price or in order to force a manufacturer
to "come to terms/' is to launch on a policy that,
bPprtufcltflcBy, will have doubtful issue. Moreover,
to be effective, cooperative investments of this kind
must be sufficient to sell all the milk off eredvor manu-
facture it into that product which will bring the most
favorable price. To do this is not as simple as it
sounds. It seems easy to say to the milk purchaser:
"Take what you want for sale to whole milk con-
sumers at the price we set and we will handle all you
do not want in our own plant or plants at our own
cost and risks. " But really to handle supplies ad-
vantageously is not easy. Is the plant to be main-
tained as a permanent plant or as an "emergency
plant " solely? Is it to keep its own force all the
time? Suppose the price should be high enough to
stimulate greater production, is the dealer or the
farmer to handle this excess supply? Will the
whole milk dealer go beyond the district to get the
milk he needs in the scarce season, thus avoiding the
expense of surplus in the surplus season, placing
that expense on the farmers? To be effective will
the producers not have to own the plant equipment
sufficient to care for all the milk of any primary
market? Then what will be the relation of the price
in this primary market to prices in other primary or
national or international markets?
169
THE PRICE OF MILK
The large condensing and butter interests today
have receiving stations and manufacturing facilities
in many primary markets. It is easy for these
large concerns to keep the price to producers high
enough in a local territory competing with a cooper-
ative plant to ruin the cooperative investment. The
large concern can make up any such local deficit by
lower prices elsewhere. This producers cannot and
will not do.
Nor is this all. Milk is most economically handled
by that company equipped to turn to any product
that at the time offers the best market. Creameries
and milk distributing plants or ice cream plants are
not most economically operated as independent
units. The skim milk of the creamery can either be
fed to hogs or made into casein or into various
varieties of cheese; or it can be made into milk
powders to store for making ice cream or whole milk
later. With the sale of bottled milk retail can go
the sale of butter, cheese, eggs, ice cream, and of
sweet or sour cream. It takes a highly specialized
milk marketing organization to get the best prices
for all the milk products. The cooperative organi-
zation must compete with such organizations. This
means highly specialized full time managers. To be
sure farmers may employ these. The point is that
the cooperative manufacturing plants must have
output enough to make such employment econom-
A principle of law stipulates that he who buys on
commission should not retail. The purpose of the
170 •
POLICIES OF DAIRYMEN'S ORGANIZATIONS
law is to keep single the interests of the agent.
If the agent is also a retailer he is no longer interested
in gaining the highest price possible for those for
whom he acts. In the same sense the selling agent
of milk should remain solely a selling agent. When
he also becomes a manufacturer his purposes are no
longer single. He must make money on his manu-
factured products. This means a price to the
producer low enough to allow him a profit on his
manufactured products. If the agent is not as
economical a manufacturer or as good a sales agent
as professional manufacturers are, the members of
the cooperative producers' organization must take
the consequence either in lower prices for milk or in
the risk to their investments. In the history that
has led to the bankruptcy of many a cooperative
concern lies eloquent testimony to this fact.
If it be well for producers to own and operate their
own plants by all means such organization should be
separate from cooperative selling organizations.
In the mind of the author the interests of all will
best be served by a cooperative selling organization
that sets out to use every avenue available in its
district to sell the milk through the best existing
avenues. A good marketing channel today or this
season may not be the best the next day or the next
season. For the present at least, full and complete
utilization of the investments in existence offers a
safe and permanent policy for organized dairymen.
Exceptions to this rule will be made, of course,
where a fair bargain can not be made. The facts
171
THE PRICE OF MILK
as to the costs of manufacturing and distributing
milk are now available and hence the fairness of
the bargain as to prices on milk can be measured.
If the producers can not get a fair bargain then
they must own and operate their own manufactur-
ing and distributing plants, as a last means of self-
preservation,
Collective bargaining, as to milk prices, has come
to stay. The policies adopted can be such that
collective bargaining will protect at once the long
time interests of efficient producers and distributors
and likewise protect the best interests of consumers.
172
PART II
The Cost of Distributing Milk
CHAPTER VIII
The Cost of Milk Distribution
To understand the relative cost factors in milk
distribution one must first review the steps in the
process of getting milk from the dairy to the con-
sumer.
Milk must be cooled on the farm. This cost the
farmer usually stands, though sometimes a premium
is paid by the milk dealer for milk properly cooled.
Usually at whole milk receiving stations the milk is
rejected if it is sour because it is not properly cooled,
and in this way the farmer pays the cost of neglect
for properly cooling his milk.
Transportation costs from the farm to the railway
or receiving stations are commonly paid by the
farmer. Sometimes, however, the dealer hauls the
milk and deducts from the price to the dairymen this
cost of hauling the milk. Because of the economies
in hauling in larger quantities, the net L hauling costs
to the farmer when the milk buyer hauls the milk
and deducts the jcost therefor is logger-, than it would
be if the farmer hauled his milk himself . Were this
not the case the dairymen would continue to haul
individually. To get the savings in larger loads
many dairymen cooperate to hire their milk hauled
or take turns in hauling it.
The hauling cost varies with the distance, quantity
and character of the roads. For a twenty-mile haul
175
THE PRICE OF MILK
a charge of from ten to fifty cents per hundred weight
can be regarded as typical. The cans for this haul
are usually owned by the farmers, though occasionally
furnished by the dealer, in which case some allow-
ance for this expense is deducted from the price to
the farmer.
In general the costs borne immediately by the
milk distributor begin at the country receiving
station. Here the milk must be measured or weighed,
tested for fat content, if bought on that basis, cooled
and loaded into freight cars for shipment to the city.
The country milk station, in addition to being a
center for receiving, cooling, canning and shipping
milk, may also have the equipment necessary for
one or more of the following services: separating
cream, manufacturing butter, cheese, condensed
milk, casein, milk sugar or milk powder. Occasion-
ally these stations are equipped to pasteurize and
bottle milk.
Then follows the freight or express charge to the
city. The freight cars must be iced in many months
of the year, a charge either borne directly by the
milk company or included in the freight rates
whether the rates be by the car load or for less than
the car load.
Upon arrival at the city freight station, the cans
must be unloaded into trucks or wagons and hauled
to the bottling and pasteurizing plant. In rare
instances the pasteurizing and bottling is done at
the country plant. The larger city dealers now fre-
quently maintain facilities at one or more of their
176
THE COST OF MILK DISTRIBUTION
country plants for manufacturing their surplus milk,
though most dealers still provide such facilities at
their city plants.
When the milk reaches the city plant it is unloaded
upon a platform where it is weighed and tested,
certainly for sourness, and increasingly for butter
fat, if this test was not made at the country receiving
station. Selected milks are set aside for their
special uses. The milk is then clarified, pasteurized,
chilled and bottled. Thereupon the bottled milk
goes into a cold storage room until loaded on the
retail or wholesale wagon for delivery. Laboratories,
used for preparing certain modified milks, are an
additional expense. Then there is the loss in broken
bottles, the shrinkage in handling, the loss in sour
milk returned, bad debts and the donations regarded
as necessary to good will.
That portion of the price to the consumer that
goes to the distributor for costs and profits is called
the "spread." This word, however, is not always
used to include the same costs. Sometimes it in-
cludes the costs from the time the milk is delivered
to the receiving station until it reaches the consumer^
The table on pages 178 and 179 gives for the New
York City district for pasteurized milk by months for
the year 1918 : (a) the price to the producer 150 miles
out (the point agreed on during that year, beyond
which freight would be deducted and within which
freight would be added) for milk testing three per
cent butter fat, the basis to which the differential of
40 cents per 100 pounds is added to the producers'
12 177 y
THE PRICE OF MILK
I
3s
s
•-3
i
g
I
i8
C5
_!_
J
i
8
4
i
ii
8
178
THE COST OF MILK DISTRIBUTION
5 1 •
i
s
s
t>> t^
• COW
' *O • CO Ui I
i o • esl co i
llliiii
l
S 8
s
b&:
ill.
: a
iiilll
i
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II
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179
THE PRICE OF MILK
price for butter fat; (6) the price the producer
received on the basis of the actual butter fat content
from month to month; (c) the price to the consumer
for Grade "B" milk pasteurized, bottled and deliv-
ered to the door; (d) the spread to the dealer from
the receiving station located just 150 miles out
(the spread would be larger by the freight if beyond
150 miles and lower if within 150 miles) on the basis
of (1) 3 per cent milk and (2) on the basis of butter
fat actually paid for. The spread on the basis of the
actual butter fat of the average of all milk is given
also (e) for Grade "A" milk. Grade "A" is but a
small percentage of all the milk delivered as the
most of the milk sold in New York City is Grade
"B." The price at which Grade "B" milk is sold
loose to the stores, (/) and the price per quart, (jr)
at which this milk is sold dipped to the consumer by
the stores is included as is (h) the price delivered
to hotels and restaurants in can lots.
From 1901 to 1915 inclusive, the price of milk to
the consumer in Philadelphia was 8 cents per quart.
The following table shows for this period the pro-
portion of this 8 cents that went to the dairyman
and to the distributor. The price to the farmer is
the price f. o. b. Philadelphia. The spread to the
dealer in this instance is, therefore, for the costs and
profits from the time the milk was delivered to the
city until it was delivered to the consumer. Trans-
portation, cooling and hauling costs should be de-
ducted from the price given for the farmer in order
to get the net price on the farm.
180
THE COST OF MILK DISTRIBUTION
During this period milk was not bought by test.
PROPORTION OP CONSUMER'S PRICE OP EIGHT CENTS PER QUART
THAT WENT TO THE FARMER AND TO THE DISTRIBUTOR
FROM 1901 TO 1915 INCLUSIVE, PHILADELPHIA
Yearly Average.
1901.
1902.
1903.
1904.
1905.
1906.
1907.
1908.
Price to farmer, f . o. b. Philadel-
phia
$0 035
$0 04
$0 04
$0 039
$0.038
$0 0408
$0 043
$0 038
Spread to distributor
.045
.04
.04
.041
.042
.0392
.037
.042
Yearly Average.
1909.
1910.
1911.
1912.
1913.
1914.
1915.
Price to farmer, f. o. b. Phila-
delphia
$0 04
$0.041
$0 0408
$0 0417
$0 0404
$0 0425
$0 0425
Spread to distributor
04
.039
.0392
.0383
.0396
0375
0375
The average spread to the milk dealer for these
fifteen years was about four cents per quart. The
spread was slightly more than this, as early in this
period the producer was paid by dry measure and
not by wet measure. During the year 1918 the
spread was about 4f cents per quart, on the basis of
the price to the farmer f. o. b. Philadelphia, for 4 per
cent milk. During the early months of 1919 the
spread to the Philadelphia dealer, on the same basis,
was 4| cents per quart, an increase of one-half cent
per quart, or 12| per cent over the pre-war period.
This was on the basis of 4 per cent milk. The actual
average butter fat of the milk received varied with
the season from about 3.6 per cent to 3.8 per cent.
During 1918 and 1919 the differential paid for butter
fat in this district was 40 cents per 100 pounds.
181
THE PRICE OF MILK
Hence the actual spread was more nearly 4£ cents
and 4| cents per quart, respectively, for the two
periods given. This was an increase over the pre-
war period of about 25 per cent. The significance
of this relatively slight increase in the distributor's
spread as compared with over a 100 per cent increase
in price to the farmer, and as compared with the
increase on other commodities during the war period
is discussed in the following chapter.
Dr. Charles E. North has prepared the following
tables comparing the increases by items in the
costs of handling and distributing milk in New York
City, and the increase in the spread to the distributor
in that city for 1915 and 1918 respectively:
COST OF MILK HANDLING AND DISTRIBUTION, NEW YORK CITY
Item.
1915.
1918.
Per Cent
Increase.
Freight
Handling
$0.0093
0120
$0.0120
0260
29
118*
Distribution
0238
0404
70
Administration . .
0032
0040
25
Total per quart
$0.0483
$0.0824
PRICE PER QUART OF MILK, NEW YORK MARKET
Date.
Paid
Producer.1
Charged
Consumer.
Spread to
Dealer.
1915.
$03 66
$09 0
$05 34
1916
3 98
9 33
5 25
1917...
5.82
11 96
6.14
1918
7.13
14.50
7.28
1 This is for the 150 mile zone.
182
THE COST OF MILK DISTRIBUTION
This is an increase in the New York City district
in spread to the dealer, from 1915 to 1918, of 36.3
per cent.
The table on page 184 gives an analysis for the
periods, companies and districts named, of the cost
reports made to the committee appointed to report
to Food Administrator Hoover on the Production,
Distribution and Food Value of Milk.1 These re-
ports were made by the dealers themselves, and the
reports were audited by the accounting firm of
Haskins and Sells, under the supervision of the
author as chairman of the committee. The "fac-
tory" expense in this table is the average of the
costs of handling, pasteurizing, bottling and cooling
milk for the "whole milk" trade. "Selling" expense
is the expense incident to selling all the milk pur-
chased, whether as manufactured products or as
whole milk. The "spread" in this table, therefore,
differs in the items included from the "spread" for
a strictly whole milk dealer. Special attention is
called to the proportion manufactured in each of the
districts in the table. Thus the "spread" in the
Pittsburgh district (D) is primarily for manufactur-
ing rather than for retail distribution.
Care must be used in comparing the dealers'
spread in one city with the spread to dealers in an-
other. Many a comparison is made that is not
accurate. In the first place, care is needed to make
certain that the spread given for each city includes
the same cost factors. Very often an invidious
1 For the names of those on this committee see footnote p. 109.
183
THE PRICE OF MILK
OQ
s
«g Id A
g s s
S SS
I OO C« »>.
! S M- *?
' 2 S S
i i s fe g
IS oo cJ 00 S
S
000
§ §
i <M CO
^ S
55 ™
8
S3
o ia ;
£oi
184
THE COST OF MILK DISTRIBUTION
185
THE PRICE OF MILK
comparison has been made between the spread of
the dealers in Philadelphia and in New York City
by comparing (a) the difference between the price
paid to the farmer 150 miles out, for 3 per cent milk,
and the price paid to the consumer in New York
City with (6) the price to the farmer f . o. b. Philadel-
phia for 4 per cent milk with the price to the con-
sumer in Philadelphia. The first " spread " includes,
the second excludes, (1) the differences in price to
the farmer, due to the agreed difference in the price
of butter fat of 40 cents per hundred weight (nearly
one cent per quart), (2) the freight on milk for 150
miles, and (3) the country receiving station costs.
It is obvious that the only fair comparison is between
the prices to farmers for milk of the same grade of
butter fat at the same point, whether that point be
the receiving station or the city platform, and the
price to consumers for the same grade of pasteurized
bottled milk delivered. When this is done the
larger spread of from one to two cents per quart in
New York City can be accounted for in most part
by differences between distributing conditions such
as the following: (1) In New York City about 35
per cent of the milk sold to dealers is delivered in
bottles, retail to the consumer; in Philadelphia over
90 per cent of the milk is on the retail wagon. (2) In
New York City, business rents may be higher than
in Philadelphia. (3) Distributing conditions vary
between the two cities in such matters as adminis-
tration costs, sales methods, in capitalization, and
particularly in the load on the retail wagon and in
186
THE COST OF MILK DISTRIBUTION
the length of haul The skyscraper apartment house
is a factor in New York City, while in Philadelphia
it is not.
Similar differences exist as between other cities.
Thus Pittsburgh is hilly, while Cleveland is level.
The sanitary standard of the health department in
Washington, D. C., requires heavier costs to the
farmer and to the milk dealer than in other cities.
Comparisons between the price to the consumer in
Baltimore with the consumers' price in Philadelphia
have failed to mention that for the same month
Baltimore milk was averaging 4.2 per cent butter
fat as compared with 3,8 per cent in Philadelphia.
With butter at 70 cents per pound, this difference
would make a cost difference of one-half cent per
quart. Then again, Philadelphia dealers at that
time were buying largely by weight, and Baltimore
dealers largely by measure, which gave to the Phila-
delphia dealer an advantage of about one-fourth of a
cent per quart. Labor and wage standards also differ
in different cities. Most important, however, are the
quantities on and the length of haul for retail wagons
and the proportion of the milk that goes out on retail
wagons as compared with the portion that goes
through the grocery store as dipped or bottled milk.
The relative amount of surplus milk is also an impor-
tant factor in comparing costs in different cities or as
between dealers in the same city. The author has
found, also, a considerable difference in efficiency as
between milk firms in different cities, in such matters
as return of bottles, care of bottles in plant, manage-
187
THE PRICE OF MILK
ment in loading and unloading wagons, competency
of superintendents and of retail salesmen, difference
in methods of collecting bills and substantial differ-
ences in the concept of what constitutes a fair
profit per quart. Philadelphia and Milwaukee are
among the cities particularly fortunate in the high
standard of competency of their leading milk dis-
tributors.
From what has been pointed out thus far, it is clear
that there is no one cost of distribution. Costs vary
materially, not only between cities, but as between
dealers on the opposite side of the same street. It
must suffice, therefore, to include here three specific
examples of cost items for selected 'dealers in three
different cities, all for the periods stated.
The following are cost items for a company in a
large city in the Mississippi Valley. The cost items
are for the month of January, 1918. This company
handled in that month 840,000 quarts of milk, of
which 742,400 quarts were sold as whole milk and
the balance manufactured.
General operating expenses: Cost
Supervision, receiving, weighing, can washing, per ^uart-
pasteurizing, etc SO. 001483
Power and refrigeration and maintenance 004323
Bottle washing, bottling and capping 001127
Bottles and caps 001118
Total general operating expense .008051
Delivery expenses:
Drivers and stablemen 015035
Stable expenses and supplies 007290
Total delivery expenses .022325
188
THE COST OF MILK DISTRIBUTION
Selling, administration and general expenses: per Quart.
Salaries of officers and clerks $0.003533
Insurance, taxes and interest 001491
Stationery, printing, office supplies and expenses .001349
Advertising 001500
Depreciation on buildings and equipment 001255
Sales allowances. . ..... . 002076
Total selling, administration and general expense. .011204
Total $0.041580
The revenue and the items in the costs of deliver-
ing milk to consumers by retail milk wagons were
found to be as follows for the calendar year 1917
for a large company in the East Central part of the
United States. Manufacturing costs, wholesale
delivery costs and the costs of the ice cream depart-
ment are all taken out of all these illustrations.
About 9,000,000 quarts of milk were retailed by this
company during the period:
Cost per
Distribution costs: Quart Bottle.
Receiving station expense $0.0057095
Freight 0041411
Loss in pasteurization 0011812
Pasteurizing 0050377
Bottling, washing and platform 0091408
Delivery 0220158
Collecting 0040432
General office 0043803
Publicity and sales 0012970
Auditing 0006179
Purchasing 0001152
Treasury 0000840
Administration 0022196
Expense of selling stock 0010652
Total cost of distributing quart bottle $0.0610485
189
THE PRICE OF MILK
Depreciation was charged in the above to operat-
ing costs as follows:
Per Cent
per Annum
Buildings, country 10
Buildings, city (brick) 3
Buildings, city (frame) 5
Equipment, country , 10
Equipment, city 20
Wagons 10
Automobiles 20
Horses — value written off at death or at sale.
Harness 10
Office equipment 5
Cases 24
The next is selected because it gives the propor-
tional part going to wages for a large eastern milk
company of high grade efficiency for the first six
months of 1919:
Cost
Country expense: per Quart.
Wages $0.0016
Other expense .0027
Total country expense $0.0043
Freight $0.0061
Milk cost, f.o.b. city .0844
City plant expense:
Wages $0.0063
Other expense 0068
Delivery expense:
Wages 0118
Other expense r 0062
Administrative expense:
Wages 0019
Other expense 0031
Total cost, country and city $0.0361
190
THE COST OF MILK DISTRIBUTION
To segregate out the costs of distributing milk
from the costs of manufacturing milk products or of
making and handling ice cream or of other businesses
conducted by the same company requires answer to
many questions similar to those that have for the
while vexed rate-making tribunals. Thus electric
companies for a while contended that their plants
existed to serve residence and street lighting only;
all other services were by-products that need carry
only their direct operating costs but none of the
overheads. This made the rates for residence and
street lighting relatively much higher than rates to
manufacturing companies. Similarly some milk
dealers have contended that their whole business
plant exists to serve the retail consumer and that
bulk milk sold to hospitals and restaurants, or used
for ice cream or butter or condensed milk or cheese,
should bear none of the overheads but only their
direct labor costs. The rule public service com-
missions soon enforced universally with electric or
with other utility companies must be the rule with
milk companies: each distinct class of commodities
or services must carry their fair share of both over-
heads and operating costs. Whether allocation in
the milk business is to be by values or by quantities
or otherwise is a matter for judgment in a given
case. But the general rule is clear — and very im-
portant to the consumer.
Similarly there are other questions as to valuations,
apportionments of expenses to products and serv-
ices, administrative salaries, good will, competency
191
THE PRICE OF MILK
of management, etc., that are as pertinent and im-
portant in ascertaining a fair cost of distributing
milk as in ascertaining a fair rate. Both require
expert knowledge and equitable considerations.
The cost of distribution is as important to the
farmer as to the consumer. The price to the con-
sumer is the price to the farmer plus the cost of
distribution; the price to the farmer is the price
the consumer pays less the cost of distribution.
The cost of distribution is therefore of public con-
cern. Particularly so from the point of view dis-
cussed in Chapter XI: can these costs be lowered in
fairness to the dealer as well as to the producer
and the consumer?
192
CHAPTER IX
Sanitary Requirements in Their Relation to Price
Milk is the nation's food — or its poison. To make
certain that milk is not a carrier of disease and to
prevent its adulteration many statutory require-
ments have been adopted. Moreover, milk is an
exceedingly perishable product. It spoils readily if
not handled in a clean and sanitary manner and if
it is not maintained at proper temperatures. To keep
a fresh quality many public regulations are enforced.
Attempts to prevent adulteration of milk are
very old. Mr. Henry N. Woolman1 has pointed out
that—
In France as early as 1396 an ordinance of the
Provost of Paris dated November 25th of that
year forbade the coloring of butter with " saucy
flowers/' other flowers, herbs and drugs. Old
butter, likewise, was not to be mixed with new,
but the sale was to be separate under penalty of
confiscation and fine.
In 1412 the ancient laws of the merchant
butter sellers and fruiterers of Paris confirmed
the above provisions as to butter, and further
forbade the sale of butter in the same shop in which
fish were sold. There was a further provision
that no butter should be sold by spicers, chandlers,
apothecaries or other persons carrying on aij
"offensive" trade.
* In an address before the Eighth Annual Convention of the International
Milk Dealers' Association.
is 193
THE PRICE OF MILK
The oldest method of adulterating milk is the
addition of water. If the water used is the carrier
of any water-borne disease, such as typhoid or
dysentery, such adulteration becomes inimical to
health. If the water used is not the carriers of
disease, such adulteration lowers the food value of
the milk and sells water to the consumer at milk
prices. For detecting such adulteration the "cream
line" and the "appearance of the milk" used by the
housewife are both deceptive tests. But by the
specific gravity and other tests the addition of water
to milk can be detected. Adulteration by adding
skim milk or by subtracting the cream is more diffi-
cult to detect, as the ratio of fat solids in milk to solids
not fat is not constant. The laws of the majority of
the states, as does the pure food law of the United
States, provide that no cream shall be removed from
milk that is sold as whole milk. In addition the
laws often provide minimum standards for the butter
fat in milk.
These legal standards as to the minimum of butter
fat permissible in milk sold as whole milk and not as
skim milk are of little if any value. Some cows
produce milk with a low butter fat content, often as
low as 2.8 or 2.9 per cent. An examination of the
tables on pages 223 to 234 will show that the legal
standard set for the minimum of butter fat is 3 per
cent in thirteen statutes and 3.25 per cent in twenty-
four statutes out of the 43 national and territorial
statutes with requirements on this point in June,
1919. Now, if the cow produces less than this
194
I
SANITARY REQUIREMENTS
standard the law provides either that the milk can-
not be sold at all or that it can be sold only upon
proof that it was the milk that did naturally flow
from a given cow or herd. If the statute attempts
the former, an injustice will be done those producers
whose herds produce a milk of lower butter fat con-
tent than the statute permits to be sold. If the
latter alternative is adopted, the law is of no avail,
as it practically cannot be enforced. In either case
the milk distributor can safely distribute milk that
contains the minimum fat content provided by the
statute. Hence the milk delivered to the consumer
is often below the standard of the milk actually
being given by the herds of the community as a
whole.
Shall Standardization be Permitted?
Inasmuch as the milk of different herds varies in
butter fat content, any milk dealer can set to one
side the milk from the herds yielding the highest
percentage of butter fat. The cream from these
herds can be sold in preference to the cream of the
lower producing herds. All milk dealers in practice
thus "select" the cans of milk to be used for sale
as whole milk or for other purposes. No public
police surveillance of any kind can be of sufficient
detail to prevent this. Moreover, no chemist can
prove that skim milk has been put into whole milk,
if the skim milk be added in reasonable quantities.
And this for the reason that there is no constant
ratio between solids not fat and fat solids not only
195
THE PRICE OF MILK
as between cows in the same herd but as to the milk
of the same cow on successive days. Therefore
nothing can prevent the " standardization " of milk
by some milk dealers through " selection " or other-
wise.
By "standardization" is meant the lowering or
raising of the butter fat content of the milk by sub-
tracting or adding cream, or lowering the butter fat
content and increasing the percentage of solids not
fat by adding skim milk. Many a milk dealer who
buys no cream still has plenty of cream to sell. That
milk dealer, however, whose business would be hurt
by publicity of such facts, cannot afford to take some
cream from the milk he sells as whole milk. This
will usually include any dealer with a considerable
number of patrons who read the newspapers. The
result is that the irresponsible dealer will " stand-
ardize" his milk while the responsible dealer will not
take the risk.
The situation in the City of Baltimore at the time
these lines are being written illustrates at once the
problems at issue and their solution. The larger
dealers of Baltimore are now buying milk on the
basis of butter fat content. The farmers who sell
and the dealers who buy on this basis have agreed
to accept the tests of a certain laboratory as to what
is the butter fat content of the milk of each herd.
Thus the facts as to exactly what percentage of
butter fat these milk dealers buy are open to all.
It is easy to ascertain the butter fat content of the
milk on the street. With such facts available the
196
SANITARY REQUIREMENTS
responsible dealer does not standardize. But the
dealer whom publicity will not hurt in comparison
with the profits obtained thereby is standardizing
illicitly. At least one quart out of five now sold in
Baltimore is thus standardized by reducing the
butter fat content. The responsible milk dealer is
subjected to an unfair competition from this trade.
The health department does not, and cannot if it
would, prevent this illicit tampering with milk content.
But under the existing milk ordinance in Baltimore
the health department can state the conditions
under which milk must be standardized if standard-
ized at all. It can require, for instance, that all
milk that has been standardized shall be marked
"standard" milk, and that all milk so marked shall
contain not less than 3.6 per cent or any other
required percentage of butter fat. The milk on the
streets of Baltimore for the responsible dealers now
averages 4.2 per cent of butter fat. The resulting
saving, if the butter fat required were 3.6 per cent,
would reduce the price of whole milk, at the prevail-
ing prices of butter, one-half cent a quart to the
consumer — a saving that may be worth more to the
consumer than the butter fat in the milk. Indeed,
many a baby's milk is "modified" under a physi-
cian's orders so as to reduce the butter fat content
of cow's milk down to the butter fat content in
mother's milk. By permitting standardization, the
plane of competition would be raised as between
dealers and the consumer would get more cheaply
just the food content of the milk really needed.
197
THE PRICE OF MILK
The Commission on Milk Standards, appointed
by the New York Milk Committee, in its report for
1917,1 recommends that sellers of milk be permitted
to sell milk as whole milk if it be unadulterated,
provided it contains the minimum of butter fat and
solids not fat required by law, or sell milk under a
guaranteed statement of composition — that is stand-
ardized. If the dealer elects the latter the com-
mission recommends: (1) that the dealer be
required to state conspicuously on all containers the
percentage of fat content to which the milk is
standardized; (2) that this milk must contain a
minimum of 8.5 per cent in solids not fat; (3) that
the sale of milk on this guaranty system should be
by special permission obtained from some proper
local authority.
The author agrees with these recommendations
except in one particular — as a matter of practical
application he believes the public authority should
permit standardization only to a given percentage
of butter fat, preferably about 3.6 per cent, with a
minimum requirement of 8.5 per cent in solids not
fat and allow but this one grade of standardized
milk to be sold. This will put public inspection and
competition as to price by dealers both on a practical
basis.
Uniformity in milk from day to day is essential to
both the consumer and the milk distributor. The
milk from one producer averages 4.5 per cent, an-
other 4 per cent, another 3 per cent. Shall the milk
» Safe Milk Supplement No. 31. Public Health Reports, May 25, 1917, p. 7.
198
SANITARY REQUIREMENTS
of these several producers be bottled just as it
chances to come along? If so, from the same dealer
a given consumer will receive different grades of
milk on different days. This is not in the interest of
health nor of sales. The average dealer therefore
runs the milk as it comes from different producers
into large vats so as to get uniformity as between
customers. Again, the process of bottling, unless
watched, will cause a difference of as much as one-
half of one per cent in the fat content of bottled
milk.
In other words, the facts in the industry now
require that we pass from the negative laws that
vainly attempt to prevent the sale of milk below a
stated minimum to laws requiring the dealer to sell
milk of not less than a stated percentage of butter
fat, adding cream if necessary to bring all the milk
sold up to this point. The objection to this is that
this may require 'Hampering " with milk. But inas-
much as milk is tampered with anyway, this objec-
tion largely falls to the ground.
Adulteration
One form of adulteration which food laws aim to
prevent is the use of coloring agents to give milk the
appearance of richness and to avoid detection when
the milk has been skimmed or watered. For this
purpose caramel, annatto and certain dyes are used,
"none of which are particularly injurious in average
amounts/'1 Chalk is probably never used for this
1 Ibid., p. 7.
199
THE PRICE OF MILK
purpose, contrary to the common supposition, as it
is so easily detected. Such fraud must have penalties
prescribed by statute.
Formalin, borax, boric acid, and other antiseptics
or germicides are used occasionally as milk preser-
vatives instead of the true milk preservatives:
proper cooling, cleanliness and proper and adequate
distributing facilities. The dealer with a large
trade will not dare to use these methods of preser-
vatives or of adulteration because publicity of such
methods would ruin his business. But, as in all
food businesses, there are the few that use them.
It is to prevent injury to health from the use of
these preservatives that pure food and milk laws
contain provisions providing penalties for their use.
Sanitary Standards
To prevent the spread of milk-borne diseases
sanitary standards are required that are peculiar to
milk. Milk is itself an ideal medium for the growth
of bacteria. To this ideal medium, through careless-
ness in handling, may be added bacteria-carrying
media, such as manure, hair, dust, flies and foreign
material from human sources. It is not sufficient
that this dirt be removed by a clarifier. The clarifier
does remove visible dust and certain inflammatory
products, including many harmful germs. But it
does not remove all the disease producjng-germs.
Some kinds of bacteria in milk, such as the lactic
acid bacilli, are harmless or even beneficial, while
some are exceedingly dangerous.
200
SANITARY REQUIREMENTS
Among the diseases that may be conveyed through
milk are tuberculosis, typhoid fever, septic sore
throat, diphtheria, diarrhea, enteritis and the foot
and mouth disease. The last named is not serious
to the health of man, but it is to live stock.
"It is not unusual to find that as high as 10 per
cent of market milk in some cities contains live
tubercle bacilli.1 Probably half of the cases of so-
called surgical tuberculosis affecting children are
due" to bovine bacilli. . . . "and some authorities
estimate that at least 10 per cent of all tuberculous
children owe their infection to this form of germ/'
In butter, cheese, cream and other dairy products
these bacilli will exist for several months.
Milk is contaminated with typhoid germs through
direct contact with some person who has the disease.
The carrier of scarlet fever has never been isolated,
but it is believed that the carrier of this disease gets
into milk by careless coughing or sneezing by the
milker and possibly from inflamed udders. Milk is
a vehicle, though rarely, for diphtheria through
direct contact with those who, though apparently
healthy, have the disease. The foot and mouth
disease is conveyed through milk or any of its pro-
ducts. Filth as well as bacteria in milk may cause
diarrhea and enteritis. Similar symptoms may come
from the abnormal conditions of cows. The carriers
of septic sore throat get into milk both from the
inflamed udders of diseased cows and from the
throats of those who have the disease.
i Ibid., p. 15.
201
THE PRICE OF MILK
The means by which each of these diseases is
carried is given because it is the way these diseases
are spread that must determine the method to be
used in preventing their spread through milk.
One method for preventing the spread of milk-
borne diseases is inspection on the dairy farm; the
other is pasteurization and inspection of the milk as
delivered.
The present relative status of these two methods
is shown by the following report of the Committee
on the Control of Dairy Products of the Food and
Drug Section of the American Public Health Asso-
ciation presented at the Chicago meeting in Decem-
ber, 1919:
Your Committee on Control of Dairy Products
has deemed it wise to begin its survey of its field
with the problems of milk control.
In this field it is confronted with the fact that
there are two dissimilar theories of milk control.
One, the older theory, maintains that the control
should center around an inspection of milk as it
is delivered to the consumer. This theory was
dominant until about the beginning of the present
century.
About 1900 the second theory became prominent.
According to this theory milk could be best con-
trolled by a supervision of the details surrounding
its production, transportation and delivery. This
theory soon became immensely popular, and its
period of popularity was coincident with the
great interest in dairy score cards.
During the past five years there has been a
distinct and increasingly rapid swing of public
202
SANITARY REQUIREMENTS
interest back to the first theory — namely, that
control can be best based upon an examination of
the milk.
This latter change has been so rapid and so
recent that it finds your committee somewhat
divided between the two conflicting theories and
even more divided as to the best manner of
procedure in conducting a control of milk under
the theory of inspection of the milk itself.
The committee has tentatively considered bas-
ing the control of milk upon the conception that
the qualities to be desired in milk may be included
under (1) food value, (2) healthfulness, (3) cleanli-
ness, and (4) keeping quality.
While in the main favorably disposed toward
the general plan as outlined above, it feels that
sufficient exact information is not yet at hand to
settle some of the differences of opinion which at
present exist among its members, and it accord-
ingly presents this as a report of progress.
(Signed) H. A. HARDING,
R. S. BREED,
H. W. REDFIELD.
Inspection of dairies is not a sure prevention.
The tests, even for bovine tuberculosis, do not give
100 per cent guarantee that the cow tested surely
does or does not have that disease. Neither does
pasteurization for that matter, if improperly done,
offer absolute protection. But pasteurization does
offer a higher guarantee than does dairy inspection.
Milk is pasteurized by heating it to a temperature
of 140° to 155° F., which is a temperature sufficient
to kill the disease-bearing germs. The Commission
203
THE PRICE OF MILK
on Milk Standards in the report referred to above
recommends:
That the pasteurization of milk should be
between the limits of 140° F. and 155° F. At
140° F. the minimum exposure should be 20 min-
utes. For every degree above 140° F. the time
may be reduced by one minute. In no case should
the exposure be for less than five minutes.
In order to allow a margin of safety under com-
mercial conditions, the commission recommends that
the minimum temperature during the period of
holding should be made 145° F., and the holding
time 30 minutes.
The commission thinks that pasteurization is
necessary for all milk, excepting Grade A1 raw milk.
The majority of the commissioners voted in favor of
the pasteurization of all milk, including Grade A
raw, but since the action was not unanimous the
commission recommended that the pasteurization of
Grade A raw milk be optional. By the " flash "
method the milk is heated to a temperature of from
160° to 165° F. in from 30 to 60 seconds, and then
cooled immediately.
Many objections have been urged to pasteurization.
One is that it gives to milk a " cooked " taste. But
pasteurization does not give this taste unless the
milk is brought to a temperature of 155° F. or above,
and this is not necessary. Another is that the use
of pasteurized milk may cause scurvy.
1 For definition see footnote p. 222.
204
SANITARY REQUIREMENTS
Professor McCollum's conclusions as to boiled
milk and as to pasteurization are:1
Boiled milk has been extensively fed to infants
in various parts of the world and in the experience
of some observers does not induce scurvy. The
experience of Hess further supports the view that
boiled milk is less liable to induce scurvy than is
milk which has been pasteurized at 165° F. or at
a higher temperature. Milk which has been
pasteurized at 165° F. is more liable to induce
scurvy than either boiled milk or milk which has
been pasteurized at lower temperatures, as 140°
to 145° F. for thirty minutes. The most satis-
factory explanation for these results seems to be
found in the bacteriological condition of the milks
treated in the various ways described. Heating
milk at 165° F. kills nearly all the lactic acid
forming bacteria which normally cause the souring
of milk. Heating for thirty minutes at 140° to
145° F. leaves some organisms capable of develop-
ment, and milk so pasteurized will sour. In the
absence of the acid formers there develop during
the interval between heating and consumption
the spore-forming organisms which are not killed
by pasteurization. These will, in time, cause the
putrefactive decomposition of the milk. Any heat
treatment which kills all the acid formers leaves
the milk in a suitable condition for the develop-
ment of the pernicious forms, and old milk so
treated may be a menace to the health of infants
and unfit for consumption by adults. Boiling tends
to destroy all the organisms in milk and will do so
if sufficiently prolonged. Such milk may be more
suitable for food than that which has been so
1 E. V. McCollum, "The Newer Knowledge of Nutrition," 1919, p. 101.
205
THE PRICE OF MILK
treated as to prevent souring and yet be in a
condition to permit the growth of putrefactive
forms of bacteria. These results strongly support
the view that there is a bacteriological factor
involved in the causation of scurvy, and emphasizes
the importance of securing clean milk, and of
having it so handled as to insure its delivery in a
good bacteriological condition. Milk should not
be kept in the home without efficient refrigeration,
and should be consumed before it becomes stale.
Pasteurization seems, in itself, to have little
influence in lowering the food value of milk. The
staleness is the great element of danger. Pasteur-
ization is desirable as a safeguard against such
diseases as typhoid fever, tuberculosis, scarlet
fever and such organisms as cause epidemics of
sore throat. It does not render milk permanently
harmless. . . . Stale milk is dangerous, especially
for use in infant feeding. In other words, the
danger of pasteurization is more that people will
keep the milk too long and use it because it does
not "sour", inasmuch as the germs causing acidity
were killed in pasteurization.
Says the Commission on Milk Standards in its
report in 1917:
Scurvy and pasteurization. — The commission has
assumed that the low temperature of 145° F. for
30 minutes as recommended by this commission
for pasteurization destroys none of the food con-
stituents of milk. Inquiry conducted by the New
York City Department of Health into the records
of the infant-milk depots, where sometimes over
25,000 infants are fed daily on pasteurized milk,
appears to bear out this assumption. In view of the
fact, however, that recent hospital experimental
200
SANITARY REQUIREMENTS
studies suggest that an exclusive diet of pasteurized
milk may give rise to a subacute scurvy or similar
nutritional disease in infants, which was entirely
prevented, and even cured, by the feeding of
orange juice, or other antiscorbutic food, the com-
mission recommends that orange juice be added to
the diet of infants that are fed on pasteurized milk.
The commission wishes also to reaffirm its advo-
cacy of the adoption of pasteurization by munici-
palities as a public-health measure,
Pasteurization is necessary to insure the protection
of the consumers of butter from typhoid and tuber-
culosis. Mohler, Washburn and Rogers1 state:
"The work recorded in our investigations, as well as
that by contemporaneous writers, proves that con-
stant storage in icy temperature does not destroy
the virulence of butter which contains dangerous
tubercle bacilli/'
If milk is pasteurized at a heat above 150° F., about
10 per cent less cream will rise to the surface than
will rise in raw milk or in perfectly pasteurized milk.
The higher "cream line" on milk thus improperly
pasteurized has led some to believe that pasteurized
milk has less cream than raw milk. This, of course,
is not the case, as the heat essential to pasteurization
in no way destroys fat.
Pasteurization of milk brought home from city
plants is also necessary for the farmer. Even the
skim milk from the common supply tank of the
1 Mohler, John R., Washburn, Henry J., and Roger, Lore A., "The Viability
of Tubercle Bacillie in Butter," United States Department of Agriculture B. A. I.,
Annual Report, 1909, pp. 179-191.
207
THE PRICE OF MILK
butter factory taken home for feeding to animals on
the farm should be pasteurized so as to make certain
that it is not a carrier of tuberculosis or the foot and
mouth disease.
Opposition to pasteurization is often based on the
theory that the cost of pasteurizing equipment is
such as to drive out the small dealer and favor the
large dealer and thus make for a monoply of milk
distribution within the city. For reasons pointed
out elsewhere there is a tendency for concentration
of milk routes because of the economies in the larger
retail loads. Other things being equal, the larger the
volume of milk handled in the plant or on the retail
wagon the lower the cost per quart in handling it.
This is as true of pasteurization as of every other
step in receiving, transporting and distributing milk.
In other words, there are economies in handling
larger quantities of milk. To this rule pasteurization
is no exception. Just because the tendency for
business men to get the savings in costs due to
handling larger quantities of milk and the public
tendency to make pasteurization compulsory de-
veloped at about the same time, it has been easy
to conclude that the tendency toward larger milk
bflsinesses was due solely to the requirement for
pasteurization. Such is not the case.
What compulsory pasteurization does of ten do is to
prevent the nearby farmer from delivering his own
raw milk direct to the consumer. In small towns
in dairy regions this trade may be a significant price
regulator. In towns or cities of any size, however,
208
SANITARY REQUIREMENTS
this type of trade is not a determining price factor.
In any case the fewer the distributors the more cer-
tain the proper inspection of the quality of the milk
they deliver, and the fewer the distributors the lower
their unit costs and hence less competition from
outlying farmers.
There are two reasons for pasteurization. One is
to protect the health of those who consume it. Is
this protection worth the cost? The other is the
commercial advantage of handling milk from more
distant sources. Is this commercial advantage
worth the cost? This commercial advantage may
be in the interests of the small dealer as well as the
large, depending upon the source of the supply and
the facilities for transportation of each. It is just
as possible for the large dealer to have most of the
nearby dairies with direct transportation facilities
as for the small dealer to have them. With pasteur-
ization the available market for the purchase of milk
is widened.
What does it cost to pasteurize milk? Mr. John
T. Bowen,1 technologist for the Dairy Division of
the United States Department of Agriculture, in
1917, made tests of the cost of pasteurizing the daily
supply of milk in five city plants. He assumed a
depreciation, including repairs, of 25 per cent on the
pasteurizing equipment, such as pasteurizers, vats
and coolers, that had to be daily taken apart and
cleaned; and 10 per cent for depreciation and repairs
1 "The Cost of Pasteurizing Milk and Cream." Bulletin No. 85, United States
Department of Agriculture.
u 209
THE PRICE OF MILK
on other machinery such as engines, boilers and
shafting. The cost assumed for coal was $4 per ton.
Interest on investment was estimated at 6 per cent
per annum. The hourly wage for labor is not
stated. The number of pounds pasteurized at each
of the five plants, the number of hours taken for
pasteurizing this amount, and the cost per gallon
was:
Plant Number.
1
2
3
4
5
Time ol operation (hours) . . ....
4.366
40,577
$0.00229
3.216
20,236
$0.00262
2.0
7,628
$0.00436
4.0
29,799
$0.00251
3.6
22,055
$0.00387
Number of pounds of milk pasteurized
Cost of pasteurizing, per gallon
The average cost for the five plants was .00313
cent per gallon, or .00078 cent per quart. The three
companies whose costs were below this average
(.001229, .00262 and .00251 cent respectively) were
those that pasteurized the larger quantities. Yet the
cost to company "3" was but a small fraction of a
mill per gallon above that of company "5" which
pasteurized three times the quantity of company " 3. "
The same author found the cost of pasteurizing
cream to be .00634 cent per gallon, or .0756 cent per
100 pounds. This would amount to about two-
tenths of one cent for each pound of fat, calculating
35 pounds of milk fat in 100 pounds of cream.
Other things being equal, the larger volume the
lower the cost per unit in pasteurizing milk as in
other costs of receiving, handling and distributing
210
SANITARY REQUIREMENTS
milk. But the differences in the cost of pasteurizing
alone is not sufficient of itself to cause concentration.
Were pasteurization not required to protect the
public health, many firms would still pasteurize for
commercial reasons. In the same sense hygienic and
sanitary conditions in the dairy pay the farmer in
the longer lives of the herds and in the larger volume
of milk that will be produced with the same feed
from cows kept under hygienic conditions. A small-
mouth milk can is as advisable for milk for the pigs
as for city consumers.
There are other costs also that are really incident
to proper sanitary requirements. Among these are
refrigeration, bottling, and bottle and can washing.
Yet these costs, too, are incident to the necessity of
"package" delivery. A neat, clean, sterile container
is as advisable commercially for milk as for the
articles delivered from the city store. The washing
and sterilizing of milk cans has a commercial value
as well as a value in protecting health.
The up-to-date milk plant will, as a sanitary pre-
caution, have all the air thoroughly washed that
comes into the rooms where milk is handled, in
order to keep out the street dust. This, too, is an
expense, as is the assurance of absolute purity of
the supply of the water that comes in contact with
milk containers.
While these services to protect milk cost money,
yet the costs of meeting proper sanitary require-
ments by the milk dealer and the milk producer are
not prohibitive and do not add unduly to the cost of
211
THE PRICE OF MILK
milk. In some places a premium is paid for milk
produced under hygienic conditions. Thus one
dealer in Washington, D. C., pays a premium of one
cent a gallon for tuberculin tested milk and a premium
of one-half cent, one cent and one and one-half cents
per gallon for milk produced under conditions where
the barn score is 75 to 80, 80 to 85, and 85 or more,
respectively. This brings a better tasting product
and a product easier to handle commercially. In
other places the premium for milk produced with
good barn scores amounts to about ten cents per
hundred pounds, or less than three mills per quart.
The total cost for all purposes for protecting herds
and live stock, for hygienic conditions on the farm,
for refrigeration in transit, for pasteurization and for
refrigeration in delivery total around one cent per
quart, a portion of which is for business advantage
and a portion incident to the proper protection of
the public health.
Shall Licenses be Required from Milk Producers?
The objection to reliance solely upon inspection of
dairy herds and barns to protect the wholesomeness
of milk is that few cities have the inspectors neces-
sary, and those that have an adequate number of
inspectors, do not have inspectors with the proper
qualifications, too often because the salary paid is
too low to attract the technical talent necessary.
But quite outside of this there are so many ways of
circumventing inspection that the method is unre-
liable at its best and adds heavily to the cost of the
212
SANITARY REQUIREMENTS
consumer. Washington, D. C., offers an illustration
of this. It was the duty of the author during the
early winter of 1918 to advise the Food Adminis-
trator of the District of Columbia on matters per-
taining to milk prices in the District. The author
found in his investigations that the standards set
for the District requiring inspection and permits for
all dairies sending milk into the District did add to
the cost of the milk to the consumer in ways addi-
tional to the cost of the service. For instance, the
best dealers paid a premium to farmers who had
satisfactory barn scores. This cost money, both to
administer and in the production of the milk. Other
dealers did not go to these costs — but they kept the
same price to the consumer as those that did. In a
statement appearing in the newspapers of the Dis-
trict on March 31, 1919, Health Officer Fowler, said:
The health department is in full sympathy with
the licensed fanner who has to compete with his
unlicensed neighbor and is doing all it can to
protect them, but feels that its position in this
matter should be clearly understood by all con-
cerned.
It is admitted that milk from unlicensed farms
has been and is still being brought into the District
of Columbia, but it is not being brought into the
District with the permission of the District
authorities. ; The health department has resorted
to every means at its command to prevent this
unlawful practice and has consistently brought
proceedings against all dealers who have been
detected in engaging in such practice.
It is much regretted, however, that the depart-
213
THE PRICE OF MILK
ment has met with little success in getting these
cases before the court for final disposition. As an
evidence of the activities of the department in the
enforcement of the milk law, forty-five cases,
involving twelve separate dairymen in this city,
most of them being large distributors, are now
awaiting trial before the court. On or about Jan-
uary 30th a local dealer was tried before a jury in
police court for bringing milk from an unlicensed
farm into the District of Columbia, and was
adjudged guilty. His attorney, however, by
resorting to certain legal procedures, has thus far
been able to prevent the imposition of the deserved
penalty.
The statement that "dealers who procure their
milk supply from properly licensed farms are
penalized, since other dealers who compete with
them are permitted to bring milk into Washington
from uninspected sources" is equally a misstate-
ment of facts. Among the forty-five cases now
awaiting action by the court, some of the largest
dealers in Washington are involved. These
dealers not only obtained milk from licensed farms,
but have also obtained it from unlicensed farms as
well, mixing the products of the two farms at
their respective dairies in this city. The one
thousand gallons of unlicensed milk which has
been referred to in the public press recently was
brought into Washington by a dealer who obtains
his supply from both licensed and unlicensed
sources.
The licensed dairy farmer or producer is also
not entirely blameless in the matter of milk from
unlicensed farms being brought into the District
of Columbia, as the health department is in pos-
session of information tending to show that some
214
SANITARY REQUIREMENTS
producers operating under a license issued by the
health department allow their unlicensed neighbors
to use their cans (the licensed shipper's) and to
ship the unlicensed product as a part of the milk
supply from the licensed farm.
The requirement of a license from producers as a
prerequisite to selling milk in some instances may be
and has been used to limit supply for the purpose of
securing more or less of a monoply price. The
following is taken from a Washington, D. C., paper
the day after the statement by Dr. Fowler appeared
as quoted above.
(2) MILK DEALERS ARE PROSECUTED
Producers9 Association Plan for Enforcement of
Law Brings Results
Prosecutions were initiated yesterday by the
District health department against two prominent
milk dealers on charges of having violated the law
forbidding the bringing into the District of milk
from unlicensed dairies. The evidence was col-
lected and the warrants made out and signed
within the single day, which is said to be record
time.
Three prosecutions have been instituted since
Saturday. This action follows a resolution passed
last week by the executive committee of the Vir-
ginia and Maryland Milk Producers' Association,
appealing to the District authorities to enforce the
law, as it caused them heavy losses to be obliged
to compete with unlicensed producers.
Professor H. A. Harding of the University of
Illinois, chairman of the Committee of the American
215
THE PRICE OF MILK
Public Health Association, quoted above, sums up
the present tendency as to the best methods of sani-
tary control of milk as follows:
"It is apparent to any one familiar with the
milk business that the conditions surrounding the
production of milk may change twice a day, and
those surrounding its transportation and distribu-
tion at least once a day. Under the most generous
appropriations available to any of the larger cities
it has not been possible to inspect the conditions
surrounding production more than once in three
months and more frequently this inspection has
not averaged more than once a year. Under such
circumstances any genuine application of the
theory of official supervision of the details of pro-
duction is manifestly impossible.
Sanitarians as a class are not more deficient in
common sense than other people and they gradually
became conscious of the situation. New York
City, which was early the leader in farm inspection,
was one of the first to frankly abandon it, at least
so far as it applied to ordinary market milk. In
discussing the matter with the Health Commissioner
of one of our next largest municipalities, he said
frankly that he considered farm inspection as
camouflage. The chief dairy inspector from one
of the states where the state dairy inspection is at
its highest efficiency, said recently that, while
he formerly considered them as very important,
it had been a long time since he had paid much
attention to dairy farm score cards.
Much similar evidence might be presented to
show that the theory of official supervision of the
details of the milk business has had its day, and
now the tide is setting strongly toward the theory
216
SANITARY REQUIREMENTS
that official control of milk supplies should rest
upon an examination of the milk as it is delivered
to the consumer as far as it is possible to adequately
protect the consumer by such an examination. It
seems an easy and safe prediction that during the
next ten years the controversies in milk control
will range around the question as to what are the
examinations which will best accomplish this object.
At the same time the milk dealers should appreci-
ate that as the health officials relax their efforts to
directly stimulate the producer, the responsibility
for so doing will fall entirely upon the distributors.
This is a responsibility which they must accept
and should discharge creditably,
Wholesomeness of milk is even more important
than its food value. The word wholesome means
not merely pure milk, but milk that invites drinking
because it tastes so good. The first prerequisite to
wholesome milk is that it be promptly cooled. This
prompt cooling widens the farmer's market by mak-
ing the milk taste better and lowers costs by reducing
waste. The prompt cooling and proper handling of
milk on the farm makes money for all farmers and
saves money and ill health to all consumers.
The less milk is handled by human beings and the
more it is handled by machines that can be sterilized,
the fewer the possibilities of contamination, the
fewer the centers of contagion, the purer the milk
supply. Hence milk should go direct from fanner to
consumer through sterilized equipment, free from the
touch of human hands and from the dust of the
cities; for the city dust of today is made up of the
217
THE PRICE OF MILK
spittings of yesterday. To put this point another
way, milk should be taken through receiving stations
subject to inspection, transported under refrigerated
conditions, and delivered (refrigerated, pasteurized,
bottled) to the consumer's doorstep; never out of
controlled conditions and not subject to work done
by hand. Happily, this policy means not only pure
milk and wholesome milk, but milk at a lower cost
per unit, for reasons pointed out elsewhere.
Inspection of dairy herds and barns helps the
farmer protect his own herds and his own family
and improves the quality of the product he has to
sell. By improving quality he expands his market.
But inspection of dairies can never be so complete
as really to safeguard the supply of milk.
The qualities of milk needed when delivered to
the consumer are: food value, healthfulness, cleanli-
ness, keeping quality. The first is assured by the
test of fat content and of milk solids other than fat;
the second by prompt cooling on the farm, and by
pasteurization; the third by sediment tests; the
last by prompt cooling with proper refrigeration
from the farm to the consumer.
The question is not as to whether pasteurization
can dispense with hygienic conditions surrounding
the production, transportation and distribution of
milk, but whether sediment, acid, bacterial and simi-
lar tests of milk as delivered, just because they can be
used effectively, get a more wholesome milk than
does inspection on the farm just because dairy
inspection cannot be done effectively.
218
SANITARY REQUIREMENTS
The best public policy is to use each of these
methods for the ends which each is peculiarly
adopted to achieve. Daily tests of milk as delivered
to the consumer will point to the places in plants
or in dairies or in transit where the milk may be
contaminated or improperly kept. Inspection of
plants and of dairies can then be made to find and
check the causes for unwholesome milk. The
dairy inspector can help the dairyman in a business
way by assisting him to improve the hygienic
conditions surrounding his herds and the sanitary
conditions under which his milk is cooled, kept and
delivered. The inspector can help the dealer in
his plant. In these ways inspection costs can be
kept as low as consistent with a pure milk supply
without undue interference with the price for milk.
Under this plan a license is not required from the
producer before he is allowed to sell milk. But the
producer or distributor that knowingly violates
health standards is denied a market.
To prevent duplication the city and state inspectors
must cooperate. When several cities get their milk
supply from the same territory it is better for the
inspectors to be under state employ in order to get
uniformity and to avoid duplication.
Standards for Milk Inspectors
A survey made before the war by Dr. Ernest
Kelly of the United States Department of Agricul-
ture as to the salaries paid to inspectors in 31 of our
states and 102 of our cities showed that the highest
219
THE PRICE OF MILK
salary paid for milk inspectors was $1800 by the
states and $2100 by the cities, the lowest salary
being $1000 and $720 by states and cities respec-
tively. The average salaries for these inspectors
was $1352.16 for the states and $1208 for the cities.
But half of these employees were under civil service.
Both the tenure of office and the general lack of
prescribed qualifications indicated that those who
did milk inspecting were, as a rule, not expert.
As a result of this survey "The Committee on
Methods of Appointment of Dairy and Milk Inspec-
tors and their Compensation " reported to the
International Association of Dairy and Milk Inspec-
tors1 the following recommendations:
1. Cities and States should strive to employ
only men who can devote their entire time to dairy
and milk inspection.
2. No dairy or milk inspectors should be em-
ployed who derive any private income from the
persons with whom they deal in their inspection
work.
3. Salaries should be paid to dairy and milk
inspectors commensurate with the training and
experience necessary for properly performing the
work.
4. Dairy and milk inspectors should be protected
by civil service laws against removal except for
cause.
5. Civil service requirements should recognize
the fact that special education and training are
not only desirable, but necessary in a candidate for
appointment.
» At the Fifth Annual Convention held in Springfield, Maw.
220
SANITARY REQUIREMENTS
6. Dairy and milk inspectors should be agricul-
tural college graduates or should have at least
attended such an institution, or institutions of
similar rank, long enough to have acquired a
working knowledge of dairy sanitation, bacteriology
and chemistry.
7. It is very desirable that inspectors should have
had practical experience in at least one branch of
the dairy business, so that they are familiar with
trade practices and the problems with which they
will be constantly confronted.
If it costs money — as it does — to make and keep
milk a wholesome food, the obvious plan is not to
prevent wholesome milk because of the costs but to
adopt those public policies that will lower not only
these costs but all costs of distribution, and to
make certain that those who need milk get it through
the proper channels. The Food Administration of
Pennsylvania, during the war period, appointed a
committee of one representative from each of the
charitable organizations in the city to make certain,
both that there was not useless duplication in giving
milk by charity organizations to those who needed
it, but could not pay for it, in whole or in part; and
to see that all got milk who needed it. No one,
rich or poor, can afford to buy unwholesome milk,
no matter how cheap it is.
Milk not up to the proper sanitary standards
should be so classified under public regulations and
sold only for the limited purposes for which it is
properly useful. Under present conditions at least
two grades of milk should be provided for in our
221
THE PRICE OF MILK
cities: a grade of raw milk and a grade of pasteurized
milk. In addition a grade of "standardized" milk
may be permitted as discussed above.1
i The Commission on Milk Standards takes the following position as to grades
of milk:
GRADES OF MILK
The commission believes that nil milk should be classified by dividing it into
three grades, which shall be designated by the letter of the alphabet. It is the
sense of the commission that the essential part is the lettering, and that all other
words on the label are explanatory. In addition to the letters of the alphabet
used on caps or labels, the use of other terms may be permitted so long as such
terms are not the cause of deception. Caps and labels shall state whether milk
is raw or pasteurized. The letter designating the grade to which the milk belongs
shall be conspiciously displayed on the caps of "bottles or the labels of cans.
The requirements for the three grades shall be as follows:
Grade A
Raw Milk. — Milk of this class shall come from cows free from disease, as deter-
mined by tuberculin tests and physical examinations by a qualified veterinarian,
and shall be produced and handled by employees free from disease as determined
by medical inspection of a qualified physician, under sanitary conditions, such
that the bacterial count shall not exceed 10,000 per cubic centimeter at the time
of delivery to the consumer. It is recommended that dairies from which this
supply is obtained shall score at least 80 on the United States Bureau of Animal
Industry score card.
Pasteurized Milk. — Milk of this class shall come from cows free from disease as
determined by physical examinations by a qualified veterinarian, and shall be
produced and handled under sanitary conditions, such that the bacterial count
at no time exceeds 200,000 per cubic centimeter. All milk of this class shall be
pasteurized under official supervision, and the bacterial count shall not exceed
10,000 per cubic centimeter at the time of delivery to the consumer. It is recom-
mended that dairies from which this supply is obtained shall score at least 65 on
the United States Bureau of Animal Industry score card.
Grade B
Milk of this class shall coine from cows free from disease, as determined by
physical examinations, of which one each year shall be by a qualified veterinarian,
and shall be produced and handled under sanitary conditions, such that the
bacterial count at no time exceeds 1,000,000 per cubic centimeter. All milk of
this class shall be pasteurized under official supervision, and the bacterial count
shall not exceed 50,000 per cubic centimeter when delivered to the consumer.
It is recommended that dairies producing grade B milk should be scored, and
that the health departments or the controlling departments, whatever they may
be, strive to bring these scores up as rapidly as possible.
Grade C
Milk of this class shall come from cows free from disease, as determined by
physical examinations, and shall include all milk that is produced under conditions
such that the bacterial count is in excess of 1 ,000,000 per cubic centimeter.
222
APPENDIX TO CHAPTER IX
Legal Standards for Dairy Products
(Reprinted from a Report to the Secretary of Agriculture.)
By GEOEGE B. TAYLOR and HARRY N. THOMAS,
Market Milk Specialists, United States Department of Agriculture.
Summary: A majority of the States report standards for milk of
3.25 per cent milk fat and 8.5 per cent solids not fat. The standards
for total solids vary between 11.5 and 12 per cent. Ten States have
bacterial standards for milk. Skim milk has a generally recognized
standard for total solids of 9.25 per cent, while 18 per cent butter
fat in cream is almost universal, although one State reports a 15 per
cent standard and another a 22 per cent standard. Two States report
standards for light and heavy cream.
A majority of the States report an 82.5 per cent milk fat standard
for butter. A peculiar situation exists in that where this standard
is made directly by legislative action it is almost always 80 per cent.
On the other hand, where authority to make standards is delegated to
food control officials, the standard for butter fat is almost invariably
82.5 per cent.
For condensed milk and cheese the United States Department of
Agriculture standards are generally accepted.
California, Indiana, Nebraska, Oklahoma and Oregon report
State compulsory pasteurization laws for market milk. California,
Nebraska and Oregon exempt milk from herds free from tuberculosis.
Indiana, Oklahoma and Tennessee require all products entering
into the manufacture of ice cream to be pasteurized. Oklahoma
requires "all milk bought to be resold" to be pasteurized. Minne-
sota, Colorado, Iowa, Maryland, Michigan and Pennsylvania require
skim milk from creameries to be pasteurized.
All milk of this class shall be pasteurized, or heated to a higher temperature,
and shall contain less than 50,000 bacteria per cubic centimeter when delivered to
the consumer.
Whenever any large city 01 community finds it necessary, on account of the
length of haul or other peculiar conditions, to allow the sale of grade C milk, its
sale shall be surrounded by safeguards such as to insure the restriction of its use
to cooking and manufacturing purposes.
223
THE PRICE OF MILK
Thirty-eight cities report compulsory pasteurization of market
milk in the absence of State laws on this subject.
Twenty-one States and Territories report that standards for dairy
products are obtained by direct act of legislature; departments in
twelve States have used authority granted by their legislatures,
and have made all dairy standards; in fifteen States standards are
made, both by act of legislatures and food control or other depart-
ments under legislative authority. Four States or Territories report
that they have no legal standards for milk and milk products.
Pasteurization of market milk is compulsory in the following
cities and states:
Cities
Altoona, Pennsylvania.
Ann Arbor, Michigan.
Anniston, Alabama.
Atlanta, Georgia — for Grade B milk.
Baltimore, Maryland — except selected raw milk.
Birmingham, Alabama — except Grade A raw.
Buffalo, New York.
Charleston, South Carolina.
Chicago, Illinois.
Cleveland, Ohio.
Cumberland, Maryland — unless cows are free from tuberculosis.
Dayton, Ohio.
Detroit, Michigan — except certified and Grade A.
East Orange, New Jersey.
Elyria, Ohio.
Evanston, Illinois.
Findlay, Ohio.
Grand Rapids, Michigan — except certified, and dairies with tuber-
culosis— free herds and scoring not less than 75.
Hamilton, Ohio.
Jersey City, New Jersey.
Lansing, Michigan — unless cows are free from tuberculosis.
Minneapolis, Minnesota.
Newark, New Jersey — except Grade A and certified.
New York, New York — except Grade A raw.
Newport, Rhode Island — except certified milk.
Norwood, Ohio.
224
SANITARY REQUIREMENTS
Oklahoma City, Oklahoma — for dairies scoring less than 70.
Philadelphia, Pennsylvania.
Richmond, Virginia.
Rochester, Minnesota — unless cows are free from tuberculosis.
Rock Island, Illinois.
Saint Louis, Missouri — except special grade of milk.
Sandusky, Ohio.
Seattle, Washington — unless cows are free from tuberculosis.
Spartanburg, South Carolina.
Tacoma, Washington — unless cows are free from tuberculosis.
West Orange, New Jersey — except certified milk.
Wheeling, West Virginia.
States
California5
Indiana9
Nebraska5
Oklahoma17
Oregon5
Minnesota requires skim milk from creameries to be pasteurized
at 180° F.
Tennessee requires pasteurization of milk products used in the
manufacture of ice cream.
Pasteurization Temperatures
Arizona 145° F. for 30 minutes.
California 140° to 145° F. for 25 minutes.
Delaware 145° F. for 30 minutes.
Indiana 145° F. for 30 minutes or 160° F. for 30 seconds.
Massachusetts 140° to 145° F. for 30 minutes.
Nevada 140° F. for 25 minutes or 170° F., flash method.
New York 142° to 145° F. for 30 minutes.
Oklahoma 145° F. for 25 minutes or 150° F. for 20 minutes
or 170° F., flash method.
Oregon 140° F. for 30 minutes.
Tennessee 145° F. for 30 minutes or 165° for 30 seconds.
Vermont 145° F. for 30 minutes.
Washington 140° F. for 25 minutes.
Wyoming 145° F. for 30 minutes or 165° F. for 30 seconds.
These standards were established in the manner indicated under
the heading ''Standards Established by" in the tables.
15 225
THE PRICE OF MILK
STANDARDS
(Numbers in parentheses refer to Notes.)
Milk.
Skim
Milk.
Cream.
States.
Per
Cent
Per
Cent
Solids
Per
Cent
Per
Cent
Per
Cent
Standards Established by
Total
Solids.
not
Fat.
Fat.
Total
Solids.
Fat.
Alabama
No State standards.
Alaska. .
No Territorial standards.
Arizona
8.5
3.25
9.25
18
Act of legislature.
Arkansas
No State standards.
California
11.5
8.5
3
8.8
18
Act of legislature.
Colorado
3
Act of legislature.
Connecticut . . .
11.75
8.5
3.25
Act of legislature.
Delaware
8.5
3.25
18
State Board of Health under legislative
authority.
Dist. Columbia.
12.5
9
3.5
9.3
20
Act of Congress.
Florida (3)....
Legislature provides for adoption of
Federal standards.
Georgia
11.75
8.5
3.25
9.25
18
State Veterinarian under legislative
authority.
Hawaii
11.5
8.5
3
18
Act of legislature and Food Department
under legislative authority.
Idaho
11.2
8
3.2
9.3
18
Act of legislature and by Public Welfare
Department under legislative author-
ity.
Illinois
8.5
3
9.25
18
Act of legislature and Food Standard
Commission under legislative author-
ity.
Indiana
8.5
3.25
9.25
18
Act of legislature and State Board of
Health under legislative authority.
Iowa
11.5
3
16
By act of legislature and Dairy and Food
Commission under legislative author-
ity.
Kansas
8.5
3.25
9.25
18
State Board of Health under legislative
authority.
Kentucky
12
8.5
3.25
(3)
18
State Board of Health under legislative
authority.
Louisiana
12
8.5
3.5
8
18
Act of legislature and State Board of
Health under legislative authority.
Maine
11.75
8.5
3.25
18
Act of legislature
226
SANITARY REQUIREMENTS
STANDARDS — Continued
(Numbers in parentheses refer to Notes.)
Milk.
Skim
Milk.
Cream.
States.
Per
Per
Cent
Per
Per
Per
Standards Established by
Cent
Total
Solids
Cent
Total
Cent
Solids.
not
Fat.
Fat.
Solids.
Fat.
Maryland . ...
8.5
3.25
9.25
18
Legislative act provides for adoption of
standards and definitions under United
States Food and Drugs Act.
Massachusetts .
12
3.35
9.3
15
Act of legislature and State Board of
Health under legislative authority.
Michigan
11.5
8.5
3
18
Act of legislature.
Minnesota
13
3.25
20
Act of legislature and State Dairy and
Food Commission under legislative
authority.
Mississippi....
(3)
(3)
(3)
(3)
18
Law provides for adoption of Federal
standards. •'-•»
Missouri
12
8.75
3.25
9.25
18
Act of legislature.
Montana
11.75
8.5
3.25
Act of legislature and regulations of
Dairy Commissioner under legisla-
tive authority.
Nebraska
3
9.25
18
Act of legislature and Food, Drug, Dairy
and Oil Commission under legislative
authority.
Nevada
(3)
(3)
(3)
(3)
22
Legislative act provides for Federal
standards.
New Hampshire
11.85
(12)
3.35
8.50
18
Act of legislature and State Board of
Health under legislative authority.
New Jersey
11.5
8.5
3
16
Act of legislature and Food Department
under legislative authority.
New Mexico. . .
No State standards.
New York
11.5
3
18
Act of legislature and Public Health
Council under legislative authority.
North Carolina
11.75
8.5
3.25
9.25
18
State Agriculture Department under
legislative authority.
North Dakota .
(15)
18
Food Department under legislative
authority.
Ohio
12
9
3
Act of legislature.
Oklahoma
12
8.5
3.5
18
State Board of Agriculture under leg-
islative authority.
227
THE PRICE OF MILK
STANDARDS — Continued
(Numbers in parentheses refer to Notes.)
Milk.
Skim
Milk.
Cream.
States.
Per
Per
Cent
Per
Per
Per
Standards Established by
Cent
Total
Solids
Cent
Cent
Total
Cent
Solids.
not
Fat.
Fat.
Solids.
Fat.
Oregon
11.7
8.5
3.2
18
Act of legislature.
Pennsylvania. .
12
(18)
3.25
18
Act of legislature.
Philippine Isl . .
11.75
8.5
3.25
(3)
18
By Health Department under legislative
authority.
Porto Rico
(3)
(3)
(3)
(3)
(3)
United States Food and Drugs Act and
Board of Health under legislative
authority.
Rhode Island..
12
2.5
18,40
Food and Dairy Departments under leg-
islative authority.
South Carolina .
11.5
8.25
3.25
Act of legislature.
South Dakota . .
11:75
8.5
3.25
9.25
18
Act of legislature.
Tennessee
8.5
3.25
Act of legislature.
Texas (3) . .
Food and Drug Department under leg-
islative authority.
[18]
Utah
12
8.8
3.2
9
M
Act of legislature.
W
Vermont
11.75
8.5
3.25
9.25
18
Act of legislature and State Board of
Health under legislative authority.
Virginia
11.75
8.5
3.25
18
Food Department under legislative
authority.
Washington...
8.5
3.25
8.8
18
Act of legislature
West Virginia..
12
3
16
Public Health Council under legislative
authority.
Wisconsin
8.5
3
9
18
Act of legislature.
Wyoming
8.5
3.25
9.25
18
Dairy, Food and Oil Department under
legislative authority.
Note: The standards in the above table and in the table follow-
ing were obtained through questionnaires and personal letters sent
out by the Dairy Division of the U. S. Department of Agriculture
from April to July, 1919.
228
SANITARY REQUIREMENTS
STANDARDS
(Numbers in parentheses refer to Notes.)
States.
Butter.
Condensed Milk.
Ice Cream.
Per Cent Fat.
Cheese.
Per Cent Fat-
Sweetened.
Unsweetened.
Per
Cent
Fat.
Per
Cent
Mois-
ture.
Per
Cent
Fat.
Per
Cent
Total
Milk
Solids.
Per
Cent
Fat.
Per
Cent
Total
Solids.
Plain.
Fruit
or
Nut.
Whole
Milk.
Skim
Milk.
Alabama
Alaska
8
8
10
6
50
50
50
(4)
(6)
Arizona
80
16
7.7
28
(3)
28
7.7
(3)
7.7
28
(3)
24
10
10
10
8
Arkansas
California
Colorado
80
80
16
(3)
7.7
Connecticut
Dist. of Columbia
Florida (3)
Georgia
83
82 5
12
(3)
34.3
25.5
25.5
(3)
25.5
(3)
25.5
25.5
(3)
(3)
33.3
25.5
28
8(8)
14
14
8
8
12
14
14
10
14
•{
7
10
12
12.5
8
10
14
(3)
14
8
12
12
8
8
10
12
12
8
12
J<10)
7
8
12
10
8
9
12
(3)
14
50
(3)
50
50
50
(3)
50
(3)
50
(3)
30
50
50
50
(3)
(3)
(3)
(3)
(3)
(3)
•
25
(3)
Hawaii
Idaho
Illinois
(3)
82.5
82.5
(3)
7.7
8.
(3)
(3)
8
(3)
8
8
(3)
(3)
8
8
8
(3)
28
28
(3)
(3)
28
(3)
28
28
(3)
(3)
28
28
28
(3)
7.8
7.8
7.8
(3)
7.8
(3)
7.8
7.8
(3)
(3)
7.8
7.8
8
Indiana ....
82.5
(3)
80
(3)
82.5
82.5
(3)
80
82.5
82.5
82.5
16
16
16
16
16
16
16
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts. . .
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
80
82 5
16
(3)
(3)
(3)
(3)
(3)
(3)
(3)
(3)
New Hampshire . .
New Jersey
Under 30;
229
THE PRICE OF MILK
STANDARDS — Continued
(Numbers in parentheses refer to Notes.)
Condensed Milk.
Ice Cream.
Cheese.
Butter.
Sweetened.
Unsweetened.
Per Cent Fat.
Per Cent Fat.
States.
Per
Cent
Fat.
Per
Cent
Mois-
ture.
Per
Cent
Fat.
Per
Cent
Total
Milk
Per
Cent
Fat.
Per
Cent
Total
Solids.
Plain.
Fruit
or
Nut.
Whole
Milk.
Skim
Milk.
Solids.
New Mexico
New York
g
28
7.8
25.5
|
13
North Carolina...
82.5
16
8
28
10
8
50
18
North Dakota....
15
(3)
(3)
(3)
(3)
10
10
(3)
(3)
Ohio
/
25% of
\
3o(
under
Oklahoma
82.5
16
*
T.S.
'
10
8
*
20
Oregon
80
16
7.8
25.5
8
6
50
Pennsylvania. . . .
32
(19)
Philippine Islands
82.5
8
28
7.8
25.5
14
12
50
(3)
Porto Rico
(3)
(3)
(3)
(3)
(3)
(3)
(3)
(3)
(3)
(3)
Rhode Island .
84
16
,n\
(3)
(3)
(3)
South Carolina...
8
South Dakota....
80
7.6
28
7.6
28
14
12
50
Tennessee
8
8
Texas (3)
Utah
80
16
7.8
7.8
25.5
14
12
(3)
(3)
Vermont
82.5
(3)
(3)
(3)
(3)
14
12
(3)
(3)
Virginia. .
(3)
16
/q\
(3)
(3)
(3)
8
8
50
Washington
80
7.8
25.5
7.8
25.5
8
8
50
(20)
West Virginia....
8
8
Wisconsin
82.5
8
28
8
28
14
12
50
Wyoming
82.5
16
7.8
34.3
7.8
25.5
14
12
50
Bacteria Standards
The only States that have adopted bacteria standards are tha
following:
California. — In milk, as Note (1); cream, as Note (2).
Delaware.— In milk, 100,000 per c.c.; cream, as Note (7).
Georgia.— In milk, 500,000 per c.c.
230
SANITARY REQUIREMENTS
Hawaii.— In milk, 1,000,000 per c.c.
Idaho.— In milk, 500,000 per c.c.; cream, 500,000 per c.c.
New Hampshire. — In milk, 500,000 per c.c.
New York. — In milk and cream, as Note (13).
Oklahoma. — In milk, as Note (16).
Porto Rico.— In milk, 100,000 per c.c.
Vermont.— In milk, 200,000 per c.c.
Washington.— In milk, 400,000 per c.c.
NOTES
(1) Grade A, raw—less than 100,000 bacteria per c.c.
Grade A, pasteurized— less than 200,000 bacteria per c.c. before pasteurization; less than
15,000 after pasteurization.
Grade B— less than 1,000,000 bacteria per c.c. before pasteurization; less than 50,000
after pasteurization.
(2) Not more than two times the bacteria in the corresponding grade of milk.
(3) United States Department of Agriculture Standards.
(4) Half skim, 25 per cent fat.
(5) Unless milk is from herds free from tuberculosis as evidenced by the tuberculin tests.
(6) Less than 50 per cent of total solids.
(7) Haw cream— less than 500,000 bacteria c.c. Pasteurized cream— less than 250,000
bacteria per c.c.
(8) Bacteria standard for ice cream is 500,000 per c.c.
(9) Compulsory pasteurization of milk products entering into the manufacture of ice cream.
(10 Fruit ice cream, 4 per cent fat; nut ice cream, 6 per cent fat.
(11) Skim milk from creameries required to be pasteurized to 180° F.
(12) "By terms of law enacted in 1917, provision is made for the sale of milk, provided that
such be 'pure natural milk' and that 'every can, bottle, or other container in which such
milk is shipped, sold or delivered, at wholesale or retail, is plainly labeled so as to show
its guaranteed composition.' "
(13) Grade A, raw:
Milk— not more than 60,000 bacteria per c.c.
Cream— not more than 300,000 bacteria per c.c.
Grade A, pasteurized: (Milk or cream before pasteurization, not more than 200,000
bacteria per c.c.)
Milk— not more than 30,000 bacteria per c.c.
Cream— not more than 150,000 bacteria per c.c.
Grade B, raw:
Milk— not more than 200,000 bacteria per c.c.
Cream — not more than 750,000 bacteria per c.c.
Grade B, pasteurized: (Milk or cream before pasteurization, not more than 1,500,000
bacteria per c.c.)
Milk— not more than 100,000 bacteria per c.c.
Cream— not more than 500,000 bacteria per c.c.
(14) Cheese made from skimmed or partially skimmed milk must be branded with the words,
"Skimmilk Cheese"; if it contains 13 per cent milk fat or over, it may be branded,
"Medium Skimmilk Cheese", or if it contains 18 per cent of milk fat or over, it may be
branded "Special Skimmilk Cheese."
231
THE PRICE OF MILK
(15) Normal milk with no fat or solids removed and no adulteration.
(16) "Bottled raw milk must not contain more than 100,000 bacteria from May 1 until October
1. All pasteurized bottled milk more than 50,000 in the same period of time. . . . '
(17) "All milk and cream used in manufacture of creamery butter and ice cream for commercial
purposes, and all milk bought to be resold, must be pasteurized. ..."
(18) "If a person accused of violating section one of this act shall furnish satisfactory affidavit
that nothing has been added to or taken from the milk in question, which is otherwise
pure and wholesome, and is not below three (3) per centum of butter fat ... no
prosecution shall be instituted against said person."
(19) Cheese— Full cream, not less than 32 per cent butter fat.
Three-fourths cream not less than 24 per cent butter fat.
One-half cream not less than 16 per cent butter fat.
One-fourth cream not less than 8 per cent butter fat.
Skimmed— less than 8 per cent butter fat.
(20) Cheese— Half skim not less than 25 per cent butter fat.
Quarter skim not less than 12 per cent butter fat.
U. S. DEPARTMENT OF AGRICULTURAL STANDARDS
Milk and Its Products
1. Milk is the whole, fresh, clean, lacteal secretion obtained by
the complete milking of one or more healthy cows, properly fed
and kept, excluding that obtained within fifteen days before and
five days after calving, or such longer period as may be necessary
to render the milk practically colostrum-free.
2. Blended Milk is milk modified in its composition so as to have
a definite and stated percentage of one or more of its constituents.
3. Pasteurized Milk is milk that has been subjected to a tempera-
ture not lower than 145 degrees Fahrenheit for not less than thirty
minutes. Unless it is bottled hot, it is promptly cooled to 50
degrees Fahrenheit or lower.
4. Sterilized Milk is milk that has been heated at the temperature
of boiling water or higher for a length of time sufficient to kill all
organisms present.
5. Homogenized Milk is milk that has been mechanically treated
in such a manner as to alter its physical properties with particular
reference to the condition and appearance of the fat globules.
6. Skimmed Milk is milk from which substantially all of the
milk fat has been removed.
7. Buttermilk is the product that remains when fat is removed
from milk or cream, sweet or sour, in the process of churning.
It contains not less than eight and five-tenths (8.5) per cent of
milk solids not fat.
8. Goat's Milk, Ewe's Milkt et cetera, are the fresh, clean, lacteal
232
SANITARY REQUIREMENTS
secretions, free from colostrum, obtained by the complete milking
of healthy animals other than cows, properly fed and kept, and
conform in name to the species of animal from which they are
obtained.
9. Condensed Milk, Evaporated Milk, Concentrated Milk, is the
product resulting from the evaporation of a considerable portion
of the water from the whole, fresh, clean, lacteal secretion obtained
by the complete milking of one or more healthy cows, properly
fed and kept, excluding that obtained within fifteen days before
and ten days after calving, and contains, all tolerances being allowed
for, not less than twenty-five and five-tenths (25.5) per cent of
total solids, and not less than seven and eight-tenths (7.8) per cent
of milk fat.
10. Sweetened Condensed Milk, Sweetened Evaporated Milk,
Sweetened Concentrated Milk, is the product resulting from the
evaporation of a considerable portion of the water from the whole,
fresh, clean, lacteal secretion obtained by the complete milking of
one or more healthy cows, properly fed and kept, excluding that
obtained within fifteen days before and ten days after calving, to
which sugar (sucrose) has been added. It contains, all tolerances
being allowed for, not less than twenty-eight (28) per cent of total
milk solids, and not less than eight (8) per cent of milk fat.
11. Condensed Skimmed Milk, Evaporated Skimmed Milk, Con-
centrated Skimmed Milk, is the product resulting from the evapora-
tion of a considerable portion of the water from skimmed milk,
and contains, all tolerances being allowed for, not less than twenty
(20) per cent of milk solids.
12. Sweetened Condensed Skimmed Milk, Sweetened Evaporated
Skimmed Milk, Sweetened Concentrated Skimmed Milk, is the pro-
duct resulting from the evaporation of a considerable portion of
the water from skimmed milk to which sugar (sucrose) has been
added. It contains, all tolerances being allowed for, not less than
twenty-eight (28) per cent of milk solids.
13. Dried Milk is the product resulting from the removal of
water from milk, and contains, all tolerances being allowed for,
not less than twenty-six (26) per cent of milk fat, and not more
than five (5) per cent of moisture.
14. Dried Skimmed Milk is the product resulting from the removal
of water from skimmed milk, and contains, all tolerances being
allowed for, not more than five (5) per cent of moisture.
233
THE PRICE OF MILK
15. Malted Milk is the product made by combining whole milk
with the liquid separated from a mash of ground barley malt and
wheat flour, with or without the addition of sodium chlorid, sodium
bicarbonate, and potassium bicarbonate, in such a manner as to
secure the full enzymic action of the malt extract and by removing
water. The resulting product contains not less than seven and
one-half (7.5) per cent of butter fat, and not more than three and
one-half (3,5) per cent of moisture,
234
CHAPTER X
How Shall Milk be Distributed
City consumers as a rule now get their daily supply
of milk either by going to the retail store for it or
by daily delivery to the door by the retail milk
wagon. Through either of these channels the milk
may be delivered, dipped, into containers brought
by the consumer, or may be delivered in bottles
filled at the milk plant. The retail wagon may be
driven by the milk producer himself or it may be
one of many belonging to a city distributor.
The retail store, whether it be a grocery or drug
store or a branch store owned by the milk company,
may carry milk chiefly as an accommodation to its
patrons or it may act as the chief, if not the only,
source for the family milk supply. Which of these
services should the retail store furnish?
For the extra supply of milk needed by the house-
wife the retail stores furnish an essential service.
The housewife may need an extra bottle for a dessert
planned after the milkman has passed for the day.
Or the iceman has forgotten to leave ice, and the
milk is sour. For such occasions it is well to have a
store within walking distance at which this unusual
need may be met. If the retail stores furnish only
the occasional need, their prices can be above those
of the retail milk wagons and no adverse social
consequences result therefrom.
235
THE PRICE OF MILK
Should the retail store be the main source of
supply for the family, leaving the retail wagon to
furnish only those homes desiring to pay for delivery
direct to the door? In other words, which is to
have first place as a retail agency, the store or the
milk wagon? The answer to this question requires
answer to three questions:
(1) Which of these two agencies is the cheaper in
cost to the consumer?
(2) What has been the experience with ' 'cash and
carry" plans?
(3) Should milk be sold dipped or bottled?
The margin taken by the average grocery store
for carrying bottled milk ranges from one to two
cents per quart; about one-half taking a margin
of two cents or above, and one-half a margin of from
one to two cents. The margin taken by the store
for selling dipped milk ranges from one-half to one
cent per quart.
Professor H. E. Erdman, of Ohio State University,
who has studied the costs in handling bottled milk
in stores, found that the cost of ice per bottle for
the summer months ranged from 0.087 to 0.417 of a
cent with a weighted average of a quarter of a cent
(0.221) per bottle. To this ice cost must be added
labor costs, risks and overhead. Retail storekeepers
in New York City told representatives of the Food
Administration that their "costs" averaged about
three-quarters of a cent per quart for dipped milk,
exclusive of sours and other risks.
236
HOW SHALL MILK BE DISTRIBUTED
The amount of losses from sour milk and "returns"
vary with trade practices. If the milk dealer takes
this risk the cost is transferred to his books. But
the cost is ever present and material. So it is with
bottles. "Cost" to the groceryman mounts if the
dealer holds him responsible for bottles. Moreover,
the demand varies from day to day and hence the
store is confronted with losses from milk not sold,
or the entire trade is not supplied. The milk dealer
can afford proper facilities for taking care of milk
not sold.
Milk in the small store cannot be inspected either
for watering or as to sanitary conditions as effectively
as can milk of the professional milk distributor.
The latter has a larger trade and much more to lose
from adverse publicity than has the former. Rarely,
City Health Departments have wanted to keep the
stores because they pay license fees to the Health
Department.
The quantities handled by stores reflect the trade
policy as to price. In Philadelphia only the excep-
tional retailer handles as much as 20 quart bottles
and 20 pint bottles daily, and 3500 stores retail milk.
Milk from the store in Philadelphia retails usually
at a margin of two cents above the price for milk
delivered from the retail wagon. In Columbus,
Ohio, with one-tenth the population of Philadelphia,
over 800 stores retail milk. These stores handled
in 1918 on the average1 22.5 quart bottles and 26
pint bottles daily as against an average of less than
1 From Professor Erdman.
237
THE PRICE OF MILK
ten quarts and as many pints in the retail store in
Philadelphia. In Columbus the price for milk at
the store was the same as from the retail milk wagon.
"Costs" on units as small as milk bottles and in
quantities so limited as just given are illusive at the
best. The acid test is: what will retail stores handle
milk for? Grocers inevitably refuse to handle
bottled milk at a margin less than one cent per
bottle and many abandon the service at a margin
under two cents. Most grocers prefer not to handle
milk at all unless it is advisable to do so because
others do. Grocers in New York City have handled
dipped milk at a margin of one-half a cent per quart
for a few months, but desire, and frequently get,
a margin of at least one cent with an average around
three-fourths of a cent per quart.
Can, and does, the retail wagon perform these
same services at a lower margin? The answer is
definite. The saving in delivery of milk in quantities
desired by grocery stores does not amount to as
much as one-half a cent per quart. The author is
aware of cost records showing that special wholesale
route automobiles, delivering in large quantities
only to stores in a congested retail district, perform
their services at an apparent saving of one cent per
quart over the cost of house-to-house delivery on the
retail wagon. But this does not represent the cost
of delivering milk wholesale to all retail stores—
those in the suburbs as well as those in congested
centers. When these costs are taken into considera-
tion the average saving of delivery in quantities
238
HOW SHALL MILK BE DISTRIBUTED
to retail stores does not amount to one-half cent
per quart on all the deliveries as compared with the
cost of delivering to the consumer.
Grocerymen prefer not to handle milk, if at all,
at less than one cent per quart; milk dealers with
cost records would prefer not to sell to grocery
stores at so little discount as one-half cent per quart
from their house-to-house price. The retail wagon
performs the same service at less cost than can the
retail store. And this regardless of the fact that
the consumer herself does the delivery work for the
retail store.
One of the reasons for this lies in the loss in bottles.
At the present price for bottles, the bottle cost on
store trade alone averages over one-fourth of a cent
per trip, twenty trips for a five-cent bottle. It is
not difficult to get consumers in the habit of setting
bottles out regularly at the back door for the regular
morning delivery. But the milk industry, thus far,
certainly has not learned the art of getting cus-
tomers to return bottles to the retail store. The
higher rate of loss on bottles alone in grocery store
trade more than eats up any economy in delivering
limited quantities to one grocery store as compared
with house-to-house del^gp^^^The same territory
is traversed anyway, and a milk route horse is soon
taught to do much of the delivery work. ^^
To promote social and individual well-being there
must be regularity in milk consumption. But
people will not go to the stores regularly for their
milk. The maid is out or the children are late for
239
THE PRICE OF MILK
school, or the mother has company, or nothing else
is needed from the store. Retail delivery to the
door not only keeps the milk on the retail wagon
that would otherwise go through the store but it
increases milk consumption because of regularity
in consumption, thus adding to the retail load,
shortening the haul and lowering unit delivery costs.
In November of 1917, H. P. Hood & Sons of
Boston, in consultation with the Local Food Admin-
istrator, opened .a number of special "cash and
carry" stores throughout Boston, to the end that
those consumers who wanted to carry their milk
could benefit from any savings therefrom. This
plan was tried for a period of about six weeks. Milk
before this experiment was selling from the retail
wagon at 14 cents per quart. Soon the stores were
selling the milk at cost, as a "leader", at 11 cents
per quart. The retail wagons largely lost their
trade. There was no evidence of increased consump-
tion because of the lower price.
Assistant Attorney General Seagrave of Massa-
chusetts thus summarized the results of the experi-
ment:
I have been requested to communicate my
views to you relative to the effect of the so-called
"cash and carry" system as applied to the milk
business in Boston, which has recently been given
a test for some six weeks.
Certain milk depots were opened where milk
was sold under the ticket system of ten quarts
for a dollar, or 11 cents cash. The system was
instituted by one of the large dealers with the
240
HOW SHALL MILK BE DISTRIBUTED
approval of the Food Administrator. The im-
mediate result was the fixing of similar rates in
every milk depot and store in Greater Boston.
At first the sales were reasonably large, but in a
few days the novelty wore off and sales commenced
to drop. In the meantime, nearly every milk
route was disorganized, at a great loss to the
dealers, all of whom lost money, and some of the
smaller dealers were practically forced out of busi-
ness or else so badly involved that such will be the
ultimate result. In my opinion the introduction
of this system was a great mistake and has de-
moralized conditions in the milk business ever
since. As another result of the ruinous com-
petition, the price to the farmers was dropped
one-half cent a quart. It is my opinion that
there is no real economy in selling -milk in this
manner. Even if every consumer carried his own
supply from the stores, the additional clerks, the
keeping of all stores open on Sundays, the cost of
refrigeration and icing in summer, and other in-
cidental expenses would bring the cost up as high
as that of the delivery system, even though nothing
were allowed for the trouble and inconvenience
which the system must bring about. In order to
attract the trade the price must be abnormally
low.
The result of the experiment here has been, in
my opinion, disastrous.
During the war period the author sent a special
investigator1 to cities where the Food Administrator
was trying out "cash and carry " plans of any kind
for milk, with instructions to ascertain: (1) Whether
these plans brought milk to the consumer at a lower
i Mr. K. E. Carlson.
16 241
THE PRICE OF MILK
price; (2) whether the consumer went regularly for
the milk; (3) whether per capita milk consumption
was higher or lower under such plans; (4) whether
workers in charitable organizations and others con-
cerned in keeping milk to the consumer at as low a
price as possible favored such "cash and carry "
plans; and (5) what the attitude of health depart-
ments was as to dipped milk if the "cash and
carry " plans included dipped milk. Among the
cities visited to secure this information were Boston
and Springfield, Massachusetts; Pittsburgh, Phila-
delphia and Wilkes-Barre, Pennsylvania, and New
York City. As a rule the following conclusions were
reached on each of the above points respectively:
(1) These plans tended to increase the cost to all
consumers by decreasing the load on the retail
wagons, though the price paid by those who carried
their milk was about one cent per quart lower than
that for milk delivered to the door; (2) consumers
did not go regularly for their milk and as a rule
returned to the retail wagon for their regular daily
supply as soon as the novelty of the "cash and
carry " plan had worn off; (3) the per capita con-
sumption of milk in families using the "cash and
carry " plan was lower than in the same families
when milk was delivered regularly to their doors;
(4) the most of the workers interviewed in charitable
organizations were not impressed with "cash and
carry" plans, since those most in need of a regular
supply of wholesome milk in good condition-
mothers and the sick — so often could not avail
242
HOW SHALL MILK BE DISTRIBUTED
themselves of this source; and (5) with but one
exception the health officials interviewed opposed
dipped milk on sanitary grounds.
Not so many years ago most milk was delivered
as dipped milk, whether from the retail wagon or
from the grocery store. Today New York City is
the only city in the United States of any size in
which public policies favor the sale of dipped milk
from retail stores. In the other cities either public
policies as to sanitation or the preference of the
consumers for the bottled milk delivered at the
door in a refrigerated condition, or both, have dis-
couraged the distribution of milk from the retail
store in containers brought by the consumer, and
have encouraged milk distribution in bottles by
retail wagons direct to the consumer. For these
reasons the sale of dipped milk from the retail
wagon has practically ceased to exist.
The advantages urged for the policy of selling
dipped milk at the grocery store are:
(1) The cost of the bottle is eliminated.
(2) The cost of wholesale delivery by the milk
dealer in cans, in the quantities taken by the grocery
stores, is lower than is the cost of distributing quart
and pint bottles to the consumer by retail milk
wagons.
(3) Because of these lower costs this method
offers the cheapest method of milk distribution.
The disadvantages of dipped milk are:
(1) The inspection force adequate to assure the
sanitary handling of bulk milk by the grocery store
243 '
THE PRICE OF MILK
would have to be so large as to underwrite through
taxation much of the economies possible through
elimination of the bottles.
(2) The milk is carried home in containers
improperly sterilized, exposed to the dust of the
street and the home. As the city dust of today is
made of the spittings of yesterday this can scarcely
be regarded as adequate protection from dust-borne
diseases.
(3) The consumption of milk is not as large per
capita because irregular for reasons stated above.
To take forty-five quarts (three stores at fifteen
quarts each) off the retail wagon is to cut the profit
on the retail trade. To put part of the milk through
grocery stores and part through the retail wagon
is a costly duplication for which the consumer pays.
But even assuming that stores can be inspected
often enough to assure sanitary conditions, there is
still the objection of cost. There are no adequate
records as to just how much of the milk consumed
in New York City is sold as dipped milk. But we
do know that about 65 per cent of all the milk dis-
tributed in New York City is sold as bulk milk in
cans, a considerable portion of which is retailed as
dipped milk by stores. But 35 per cent of all the
milk consumed in New York City is delivered in
bottles. Distributing costs from the retail wagon
in New York City reflect the higher cost due to
duplication of service.
The retail wagons in New York City average
about 250 quarts per wagon as compared with 400
244
HOW SHALL MILK BE DISTRIBUTED
or more in Philadelphia and 450 in Pittsburgh.
In Philadelphia, where 90 per cent of the milk is on
the retail wagon, the milk dealer delivers milk
bottled and cooled to the consumer at about the
same spread that the consumer in New York City
pays for dipped milk at the store. If New York
dealers had 90 per cent of the milk sold to consumers
on the retail wagon their costs per bottle delivered
would be materially less than it is and all consumers
could get their milk delivered at a lower price than
it now costs them.
The Mayor's Committee in New York City,
which reported in the Autumn of 1917, stated that
if the load on the retail wagon in New York City
averaged 428 quarts (about the present average in
Philadelphia) the bottled milk then being sold in
New York City (estimated at 704,318 quarts)
could all be delivered on "2243 retail wagons
instead of the 4978 actually in use at the present
time. This would mean only 45.3 per cent of the
present number, or a saving of 54.7 per cent of the
total/' But a driver could not handle 428 quarts
on the average unless he had a relatively short haul.
With a larger portion of the milk bottled, more
could go on the retail wagon and the haul could be
shorter. Hence, the cost of distribution of bottled
milk per quart could be lowered.
A quart milk bottle now costs a little over five
cents. It should make at least thirty trips in the
wagon trade. This is a cost for the container of
about one-sixth of a cent per quart per trip. Is it
245
THE PRICE OF MILK
worth this to the consumer to have the milk delivered
daily and regularly at the door in good condition?
In addition to the cost of the bottle is the fraction
of a cent due to cleansing and sterilizing milk bottles,
putting stoppers into them and for refrigeration on
the retail wagon. Is this cost worth daily delivery
to the door? These same costs accrue to the con-
sumer through the retail stores. Since the grocer's
costs and profits are more than the savings to the
milk dealer in quantity deliveries, sales of bottled
milk through the grocery stores are more costly to
consumers than sales through the retail wagon.
The author was called into a Pennsylvania city
to advise as to the price of milk. The dealers were
insisting that the price to the consumer would have
to go to fifteen cents per quart for the following
month, with the price paid to the farmers remaining
the same. The reasons given by the dealers were
that their bottle, plant, wagon, feed and labor costs
were going up and that they had to have another
cent per quart from the consumer to meet these
Arising costs.
Milk was then retailing to the consumer at 14
cents per quart, bottled and pasteurized. Of the
bottled milk sold in the city, 60 per cent went to
the grocery stores at 12 cents per quart. This milk
the grocery stores sold to the consumer at 14 cents
per quart. From the retail wagons 40 per cent of
the city's consumption was delivered to the door
at 14 cents per quart. But one milk dealer in the
city had cost records. From these records and from
246
HOW SHALL MILK BE DISTRIBUTED
cost records of dealers in other cities the author
proved to the milk dealers that they were actually
losing more money on the 60 per cent of the milk
delivered to grocery stores at 12 cents per quart,
in view of the price to the farmer, than they were
making on the 40 per cent of the milk they sold to
consumers from retail wagons at 14 cents per quart.
He therefore suggested that, instead of raising the
price to the grocery store to 13 cents and to the
consumer, by grocery store and retail wagon, to 15
cents, they lower the price to the consumer to 13 cents
for milk delivered from the retail wagon and charge
the grocery stores the same as they charged the
consumer. The grocery store would then retail
milk as an accommodation at 15 cents per quart,
but the greater percentage of consumers would buy
their milk delivered at their door at 13 cents per
quart.
This policy was adopted. The results were: (1)
consumers got their milk at one cent per quart
lower than they did when more than half of the
milk was distributed through the grocery store and
less than half through the retail wagon; (2) the
retail wagons were soon carrying 85 per cent of the
bottled milk in the city at lower costs per quart
because of larger loads and shorter hauls; (3) the
milk dealers made a reasonable profit with milk
at 13 cents to both consumers and grocery stores,
when they were losing money at 14 cents to consumers
and 12 cents to grocery stores. Similar results have
been secured in other cities under similar conditions.
247
THE PRICE OF MILK
Milk is most economically distributed through one
channel and that channel is the retail wagon.
Proposals as to methods of milk distribution that
will revolutionize existing methods must be passed
in review only. One is to have a "nickel-in-the-slot
machine" in each apartment house or drug store
for self service. Because of refrigeration and other
difficulties this method has, to date at least, been
found impractical. Another proposal is to deliver
milk in paper containers sterilized and sealed at the
plant, to be opened by the consumer as used. Thus
far the cost of this has been prohibitive. Then
there is the delightfully sophomoric plan that the
public schools be made the center for milk distribu-
tion, whether by the school teachers (since they
have so little to do now) or by society ladies (who
of course have nothing else to do) or by paid officials,
doth not appear. A proposal that would change
the whole industry (and it is not without merit,
even though impractical under present standards
and costs) is to have the water extracted from the
milk in the country and sell to consumers milk
remade in the city by homogenizing skim milk
solids, sweet butter and water. This remade milk
is discussed elsewhere. All of these plans must
await far-reaching changes if they are ever to be
both commercially successful and acceptable to the
public. And none of them can change the essential
question discussed in this chapter.
The argument in favor of retail store distribution
as a policy is that certain consumers cannot afford
248
HOW SHALL MILK BE DISTRIBUTED
refrigerators and therefore must use (and pay for)
the refrigerator in the grocery or drug store. The
answer to this argument is that for most of the year,
in most of the United States, milk can be kept from
the morning delivery until supper without ice.
In the warm months milk can be kept certainly for
two meals without ice. That means that the
consumer without a refrigerator must go to the
grocery store for the milk necessary for children,
for one meal for the hot season only. Under these
conditions it is cheaper even for the consumer to
have the milk delivered at the door regularly and
use the grocery store for the special days and for
special needs. The percentage of consumers with-
out refrigerators varies as between sections of the
city and as between races. But the proportion of
households with refrigerators is rapidly increasing.
Moreover, a canvass of wage-earning sections, from
which one would expect demands for a lower price
of milk at the grocery store because of a lack of
refrigerators in the homes, revealed that most
wage-earners have refrigerators and want their
milk delivered regularly at the door. For the mother
in such homes has plenty to do without being her
own delivery boy.
The best policy for milk distribution is to have
the milk delivered, bottled and refrigerated, at the
consumer's door. This means that the price to the
grocery or drug store should be the same as to the
consumer from the retail wagon, the grocer and the
druggist retailing milk as an accommodation at one
249
THE PRICE OF MILK
or two cents per quart above the price the consumer
pays for milk delivered at the door, because,
(1) The larger the retail load and the shorter the
haul, the lower the cost of delivery per quart from
the retail wagon.
(2) By concentrating the handling and distribut-
ing of milk with those especially equipped to handle
it the costs per quart can be lowered and the whole-
someness of the milk more certainly guaranteed.
(3) The cost saved by delivery in quantities to
the grocery store is not as large as the grocer's cost
of keeping and selling milk. In addition to this
there is a larger loss of bottles from the store trade.
Retail delivery to the consumer is therefore the
more economical method of the two.
(4) Milk is a perishable commodity and should
be maintained and delivered under wholesome
refrigerated conditions.
(5) Dipped milk is more exposed to contamination
than bottled milk and the savings are small as
compared with the better quality and service from
the retail wagon.
(6) Milk cows and hungry children alike recognize
no holidays and no Sundays; stores do. The advan-
tage of the store as a neighborhood refrigerator
has also its limitation: it cannot always be open.
The best and cheapest channel for milk distribu-
tion is the retail milk wagon, leaving to the retail
store such sales as may prove worth while as an
accommodation.
250
CHAPTER XI
Can Milk Distribution Costs Be Lowered
It is pointed out on page 182 that the portion of
the consumers' price taken for a few months after
the armistice by the milk dealers in Philadelphia for
their costs and profits was around 25 per cent more
than the portion needed for these purposes, on the
average, for the fifteen years preceding the war. It
is there pointed out also that the portion of the cost
to the consumer, taken by the milk dealers serving
the consumers of New York City for costs and
profits increased 36.3 per cent from 1915 to 1918.
In Philadelphia, before the war, when milk was
selling at eight cents per quart, about four cents of
the annual average price per quart went to the pro-
ducer, f. o. b. Philadelphia, and four cents to the
distributor. This was the situation in 1914. By
1919 the farmer was receiving nine cents per quart,
f. o. b. city, and the distributor five cents per quart
for his services. The price to the producer, that is,
had increased 125 per cent while the share taken by
the distributor had increased 25 per cent. In other
words, out of a six cent increase in the price of milk
to the consumer in Philadelphia during the war
period, five cents went to the farmer and one cent to
the milk distributor.
Throughout the war period and since Philadelphia
consumers have purchased milk at from one to two
251
THE PRICE OF MILK
cents per quart below the price prevailing in any
other eastern city and at a price as low as in any
city in the United States, including those in the corn
and wheat belt where the price to the milk producer
has been below that in the Philadelphia territory.
This low price to consumers was not at the expense
of milk producers. For the producers of milk in
this territory received during this period as high a
net annual price as did the milk producers in any
primary market in the country. To account for
ANNUAL SPBEAD TO MILK DISTRIBUTOR IN CLEVELAND, 1914-1919
1914.
1915.
1916.
1917.
1918.
1919.
Price per quart paid
producer, f. o. b.
receiving station, 3.5
per cent milk
$0.030813
$0.030369
$0.034354
$0.049237
$0.066583
$0.0676
Price received from
consumer on quarts.
.08
.08
.0825
.1083
.13»
.14666
Spread retained by dis-
tributor from coun-
try to consumer
.049187
.049631
.048146
.059063
.0634167*
.07906
Price per quart paid
to producer, f. o. b.
Cleveland
.0381
.0380
.04166
.0573
.0775
....t
Spread retained by dis-
tributor from f. o. b.
city to consumer. . .
.0419
.0420
.04084
.0510
.0525
....f
the favorable retail price in Philadelphia one must
turn to the efficiency in plant and delivery of the
Philadelphia milk dealers.
The Table above gives the margin or spread for
expenses and profits in Cleveland, Ohio, for the years
* These figures include only the first three months of 1918.
f Not available for 1919.
252
CAN MILK COSTS BE LOWERED
1914 to 1919, inclusive, when measured (1) by the
difference between the net price paid to producer! .o.b.
country receiving station and the price paid by con-
sumer, and (2) by the difference between the price
paid the producer f . o. b. Cleveland and the price
paid by consumer.
The average spread in 1918 showed an increase
over that for 1914 of about 30 and 40 per cent
respectively from the country receiving station and
from f. o. b. city to consumer. The increase in
spread for 1919 from country to consumer was 56
per cent over that of 1914.
The portion taken per quart in the city of Co-
lumbus for distribution from f . o. b. city to consumer
increased 60 per cent from 1914 to 1919.
AVERAGE ANNUAL SPREAD TO MILK DISTRIBUTOR IN THE
CITY OF COLUMBUS, OHIO, 1914-1919
1914.
1915.
1916.
1917.
1918.
1919.
Price per cwt. to producers for 4 per
cent milk, f . o. b. Columbus
$1.88
$1.82
$1.90
$2.52
$3.42
$3.81
Price received from consumer
on quarts
.08
.08
.08
.0883
.13
.1425
Spread retained by distributors on
quarts retailed
.0325
.0375
.0375
.04
.0458
.0523
The chart on the next page compares (1) the
relative increase in the prices for all commodities in
the United States with (2) the increase in price to
the producer, (3) the increase in the spread to the
milk distributor, and (4) the increase in price to the
253
I li>13' I 1914 I 1915 i 1916 [1917 | 1916 | 1819 I 1!>20
iilsiiis i* H sii si H i * s* n m ; j u »
M I j S I I j 5 I t 4 * I M S
^TO PRODUCER
--•• CONSUMER
— » SPREAD
—ALL COMMODITIES
I 1913 1191411913 .1 1916 I 1917 I 1910 I 191P I 192O I
CHART No. XVIII. — THE RELATIVE INCREASE IN THE PRICE OF
ALL COMMODITIES IN THE UNITED STATES AND THE INCREASE IN THE
PRICE OF MILK TO PRODUCERS AND TO CONSUMERS AND THE SPREAD
TO DEALERS IN THE PITTSBURGH DISTRICT, JANUARY, 1913, TO
JUNE, 1920. JULY, 1913, TO JUNE, 1914 = 100.
254
CAN MILK COSTS BE LOWERED
consumer from 1913 to June, 1920, inclusive, in the
Pittsburgh district.
From July, 1913, to June, 1914, the price of milk
to the consumer in Pittsburgh averaged 9f cents per
quart. Of this amount 4f cents went for distributing
costs from f. o. b. city to consumer, and 5| cents
went to the farmer and for freight and country receiv-
ing station charges. In 1919 the consumer paid
an average of 14.7 cents per quart. Of this amount
5.97 cents per quart went for distributing costs and
8.73 cents per quart to the cost of milk in the country
and the cost of country receiving stations and for
freight. The distributing costs within the city
during this period increased, that is, about 25 per
cent, as compared with an increase of 47| per cent
in the total for milk, freight and receiving station
charges. From July, 1913, to June, 1914, the pro-
ducer at the country receiving station received a
monthly average of $1.49 per hundred weight for his
milk. During the calendar year 1919 the producer
received an average of $3.26 per hundred weight,
an increase of 119 per cent, as compared with an
increase of 114 per cent in the general price level.
During this period the price to the consumer per
quart increased 50 per cent as compared with 114
per cent for all other commodities. It is thus seen
that the favorable price to milk consumers in Pitts-
burgh has come through lower relative charges by
distributors both in the country and in the city.
In authorized statements shoe manufacturers have
held that their costs, including materials, went up
255
THE PRICE OF MILK
from $3.35 in 1914 to $10.04 in 1919. Had the milk
dealers in Pittsburgh increased the charge for their
services in this same proportion, milk would have
sold at 24 cents per quart when it was selling at 16
cents, keeping the same price to the producer. Had
the price to the milk producer and distributor both
gone up in the same ratio as shoes the price of milk
would have been 28 cents per quart. Had the price
of milk to the consumer increased in the ratio of
clothing prices from 1913 to 1919 the price would
have been 34 cents per quart instead of 16 cents.
Now wage costs to these milk dealers increased as
rapidly as did wages in other businesses. The cost
of glass bottles, milk machinery and other materials
went up to these milk dealers in the same proportion
that materials advanced in other businesses. The
prices on the 1437 commodities represented in the
"all commodity " curve in the chart above increased
114 per cent from 1914 to 1919. Yet the spread
taken by the dealers for costs and profits has
advanced in many cities, if not in most large Ameri-
can cities, from but 25 to 60 per cent; and more are
nearer the former figure than the latter.
y is this possible? Only because of the savings
due to the tendency to do away with duplication in
retail milk deliveries, and because of the economies
that have come to the dealer through larger quantities
of milk handled at the country receiving station, at
the city plant and on the delivery wagons. So far as
low unit costs are concerned, the ideal is one milk
wagon on each street, carrying the advisable grades
256
CAN MILK COSTS BE LOWERED
of both raw and pasteurized milk, handled through
plants of sufficient size, in relation to the city, to give
minimum unit costs in cooling, pasteurizing, bottling
and refrigerating. This ideal has led many a public
milk commission to recommend zoning of retail milk
wagons under public supervision.
What are the economies in large scale handling of
milk and in doing away with duplication of service
on the streets?
The cost per quart for pasteurizing milk, including
the investment for plant and operating costs,
decreases with increase in the size of the plant and
in the amount of milk handled; there is also a
decrease per unit in the cost of bottling milk, includ-
ing a lower price for caps bought in larger quantities,
and in the process of bottling itself; there are
economies in route service certainly up to the point
where the route is as heavy as one vehicle can serve
in a reasonable drive; there are economies in motor
truck distribution from the freight stations to the
plant; in the return of milk cans from the plant to
the station; and in large scale buying and sterilizing
of milk bottles. The cost of handling milk at the
receiving stations decreases per quart with the quan-
tity of business. Large scale distribution by a single
company would eliminate duplicate competitive
advertising. Laboratory work can be carried on
more effectively and at less relative cost per unit
without useless duplication. There are also savings
in overhead charges, because there are in most cities
already at least twice the investment in plants and
17 257
THE PRICE OF MILK
wagons necessary to handle well all the milk delivered
in the city.
>XMr. John R. Williams, in 1911, made a study of
/ the money cost of the duplication in milk distribution
in the City of Rochester, N. Y.1
In one section of the city he found that the 27 dis-
tributors therein traveled more than 20 miles to
furnish 273 homes, whereas one dealer could render
the same service by traveling not more than 2.6
miles. He secured data from 173 milk distributors,
practically all of the milk distributors in the city.
The equipment and man power used under the then
existing system of milk distribution were compared
with the equipment and man power essential under
a system of non-duplication as follows:
Under Present System
356 men, and in many cases their
families.
380 horses.
305 wagons.
2509 plus miles travel.
$76,600 invested in milk-room
equipment.
$108,000 invested in horses and
wagons.
$2000 present daily cost of dis-
tribution.
$720,000 yearly cost of distribu-
tion,
Under Model System
90 men. 1
50 horses.
25 horse-drawn trucks.
300 miles travel.
$75,000 equipment for sanitary
plant.
$30,750 equipment of horses
and trucks.
$600 estimated daily cost of dis-
tribution.
$220,000 estimated yearly cost
of distribution,
» Printed in the Transactions of the Fifteenth International Congress on
Hygiene and Demography held at Washington, D. C., September 23-28, 1912.
258
CAN MILK COSTS BE LOWERED
Dr. William's conclusions were:
In the foregoing estimates, liberal provision is
made for amortization, interest and superintend-
ence. Mention is not made of all the wastes that
could be obviated under efficient management,
and it is believed that conclusions here presented
represent most conservative judgment. There is
little question that if the milk supply of Rochester
were to be distributed by one agency, properly
organized and equipped, a saving to consumers of
at least $500,000 yearly could be effected,
The Milk Committee appointed by the Food
Controller for Canada to investigate milk supplies
for urban municipalities concluded that unnecessary
duplication in milk distribution resulted in excess
costs over a single zone delivery system of one-
fourth of a cent per quart in plant costs, three-fourths
of a cent per quart in delivery costs, and one-
fourth of a cent per quart on bottle losses. This
means that the savings in a single delivery system
would total one and a quarter cents per quart.
The Dominion Department of Agriculture esti-
mates that the per capita daily consumption of milk
to be one-half pint per day. The saving of one cent
per quart on milk distribution in Canadian cities
would amount to $1,500,000 annually. On the com-
mittee responsible for this estimate was John Bing-
ham, the leading milk distributor of Ottawa, Canada,
and widely known as an efficient business man.
The author, with the cooperation of one of the
vigorous and effective county Food Administrators
259
THE PRICE OF MILK
of Pennsylvania, tried out the economies in zoning
one of the smaller cities of Pennsylvania. With the
routes zoned so that there was but one retail milk
wagon on each street in the city, the dealers made
more money on a spread of four cents per quart than
they had made previously on a spread of five cents.
This saved the consumer one cent per quart.
In some cities the direct savings by zoning milk
routes would not amount to as much as one cent per
quart at first, but in any city savings would amount
to at least one-half a cent per quart. The amount
of the savings would depend upon such factors as:
the extent of duplication in plant equipment and on
the street; the load on the retail wagons; the char-
acter of the city's streets; the density of the residence
districts; the topography of the city; the managerial
ability employed.
Many of the economies in zoning of milk routes to
prevent duplication will appear after, the zoning has
been accomplished. For instance, the loss on bottles
due to carelessness of consumers can be prevented.
The gratuities now given to keep a competitor out of
a given apartment house or residence section will be
avoided. Capital will be attracted at lower interest
levels, because undue risks will be done away with.
The Mayor's Milk Committee of the City of New
York, reported (1917) that the number of retail and
wholesale wagons used to handle the milk supply of
New York City was:
Bottled milk supply 704,318 quarts
Milk in cans 896,405 quarts
260
CAN MILK COSTS BE LOWERED
Retail wagons 4,978
Wholesale wagons 1,522
Average load of retail wagons 142 quarts
Average load of wholesale wagons 14 . 7 cans
As to the economies incident to the elimination of
competition and the substitution of single-service
delivery, this committee quotes with approval the
following conclusions of the Wicks Committee
appointed by the Governor of the State of New York:
This business (milk) is conducted on an ex-
tremely competitive basis; ... a large part of the
cost arises from the bitter competition existing in
the distribution of the product. ... An army of
solicitors and sales agents are maintained. . . .
Great and expensive organizations are maintained.
. . . Overhead charges attributable to this work
amount to an alarming sum. ... It is customary
to refer to the fact that four or six or ten milk
wagons and milk drivers visit the same block, . . .
but this ignores the really greater expense of the
silent army of retainers. . . . Not only do we
find in single blocks these wagons and horses, but
on the same block six solicitors, six route superin-
tendents, six staffs of clerks and bookkeepers. . . .
The distribution of milk is a public service, which,
to be put upon an economic basis, requires public
regulation to the end that all unnecessary services
even of a competitive kind may be eliminated,
Distribution of Milk Should be a Regulated
Public Service
It is safe to assert that the consumer in the City
of New York pays several millions of dollars an-
nually for the privilege of having all the numerous
261
THE PRICE OF MILK
purveyors of this necessity of life engage in at-
tempts to serve him. . . .
It certainly seems as if the dairymen of this
State, and the distributors with their invested
capital, and the consumer, should cooperate to
the end that these unnecessary competitive
wastes be eliminated. . . .
The investigations of the committee lead to the
conclusion that under the present competitive sys-
tem it takes almost as many men to bring the
dairymen's milk to the consumer as there are
dairymen engaged in the production of milk with
all their employees. This is the result of the
purely competitive basis upon which the business
is handled. Three or four milk stations are being
maintained with a separate force of employees to
collect and receive the dairymen's milk at many
points where one well-equipped station with a
competent force could do all the collecting at one-
fifth the present expenses. This unnecessary
duplication of service follows with all its attendant
overhead and capital investment from the country
milk station until the bottle of milk is finally de-
posited at the consumer's door. A large part of
this, in the judgment of this committee, could
and should be eliminated. . . . The only solution
possible is to limit and leave only those in the
field which the service actually requires. This is
just as obvious in the case of milk as it is in gas
or any other daily necessity supplied in small
quantity to the consumer.
A milk dealer in a large eastern city handled, in
1917, 1,458,320 pounds of milk in the month of
lowest production and 2,605,931 pounds in the
month of highest production, with 27 employees for
262
CAN MILK COSTS BE LOWERED
the month of lowest production and 28 employees for
the months of highest production. In other words,
nearly twice as many pounds of milk were handled
at maximum production with the addition of but one
employee. The next year, with the same number of
employees, a minimum of 1,747,939 pounds were
handled during the month of lowest production and
2,823,219 pounds during the month of highest pro-
duction. That is, with the same number of em-
ployees, a much larger amount of milk was handled in
1918 than in 1917, and hence the cost of handling
per quart was lower.
From the cost records of a large milk dealer in the
Mississippi Valley, the author secured the following
facts as indicative of the lower costs per quart when
volume increased. For the six months ending Feb-
ruary 28, 1918, the sales in dollars amounted to
$642,662.08. Of this amount $480,214.50, or 74
per cent, was paid for the milk f . o. b. city. The sell-
ing, delivery, general and administrative expenses in
the city totaled $153,151.14, or 24 per cent of sales.
For the six months ending August 31, 1918, the
sales totaled $776,040.99, an increase of 21 per
cent. The cost to distribute this milk within the
city (selling, delivery, general and administrative
expenses) was $173,689.87, or 22 per cent of the
total received for sales. That is, the cost of dis-
tribution increased but 12 per cent to care for an
increase of 21 per cent in sales. And the costs of
labor and materials were higher in the latter six
month period than in the former!
263
THE PRICE OF MILK
Into a certain city in the East the author was
called by a local food administrator because the large
milk dealers of the city were demanding a substan-
tial increase in spread to offset what they claimed
was a "40 per cent increase in cost because materials
had gone up 50 per cent and labor 30 per cent/' An
examination showed these percentages as to materials
and labor to be substantially correct. But it was
also found that the larger retail loads and better
utilization of plant equipment due to a war popula-
tion and to a decrease in the number of milk dealers
in the city, had more than offset the increases in
material and labor costs so that, on the same spread,
the milk dealers were making a higher profit than
in the year preceding, despite the fact that "materials
had gone up 50 per cent and labor 30 per cent."
It must be remembered that, as the load "on the
retail wagons goes up, and the number of milk drivers
goes down in proportion to the amount handled, the
number of clerical assistants needed may have to go
up because the clerks have not increased relatively
their output. For instance, one milk dealer in
November, 1917, handled an average of 265 quarts on
93 retail routes, or 24,645 quarts daily, with 60
employees in the plant, with 15 clerks in the office
and with 15 foremen for the 93 milk drivers. This
dealer later increased the quarts on the retail wagon
and decreased the number of drivers. By July of
1918 he was delivering 347 quarts on the average
from 89 routes, or 30,883 quarts daily, with 70
employees in the plant, 14 foremen, and with 16
264
CAN MILK COSTS BE LOWERED
clerks in the office. There were economies in plant
and retail equipment. An increase of 20 per cent in
volume was handled by an increase of 16 per cent in
plant employees and 7 per cent in the number of
clerks and a decrease of one foreman and four milk
drivers.
Mr. Asa B. Gardiner, a milk distributor of Balti-
more, Md., writes the author that a cost survey in
November of 1919 of typical plants in four cities
brought out this striking comparison on the basis of
the quartage on the retail wagons:
City.
Average Number
of Quarts on
Retail Wagons.
City Distribution
Costs per Quart
(cents).
Ottawa, Can,
550
3H
Philadelphia Pa .
410
4&i
Baltimore, Md
335
%
New York City
240
7%
"Obviously," concludes Mr. Gardiner, "the quart-
age on retail wagons is not the only factor causing
this price variation, but it is a substantial factor."
The two principal reasons causing the low retail
loads in New York City (dipped milk at the stores
and limitations in load by drivers) are discussed in
Chapter X.
Mr. Gardiner continues:
Route salesmen, will, when properly encouraged,
taught and trained to effective salesmanship,
average willingly this high quartage. The labor
unions in New York City restrict and limit the
265
THE PRICE OF MILK
sales per route and in other ways prevent their
own members and the community from enjoying
the results of higher route quartage.
The increased ratio of earning per quart or
gallon of milk is the factor sought. Increasing
volume of business by adding retail wagons with-
out increasing quartage on present retail wagons
offers no immediate benefit, the reason being that
it requires a certain number of quart sales to pay
its operating expenses. All additional quarts sold
can be considered net profit, less salesmen's com-
missions and a slight allowance for use of bottles,
caps, steam, etc.
To illustrate:
Average quarts per route 400
Sales to pay operating costs 320
Sales to pay profits 80
Again:
Dairy A 25 routes average 300 quarts
Grows by increased quartage to 350 quarts
If in each instance 320 quart sales were needed
to meet expenses then at 330 quarts, only 10 quart
sales realized a very small profit per wagon, which
profit was, however, tripled when 350 quart sales
were reached.
Dairy B with 25 routes averaging 330 quarts
increases 500 quarts by putting on two route
wagons with 250 quarts per day each. This re-
duced the route average to 324 quarts, so that
only 4 quarts show for profit and there has been
made a capital investment of the value of the
two horses, harness and wagons. This dairy is
not now as well off as before.
Any thinking man will realize that no routes
should be added until the dead line of costs of
266
CAN MILK COSTS BE LOWERED
quarts per route was first ascertained and then
new routes started only when they promised soon
to pass this dead line of costs.
Milk drivers profit in wages by increasing their
retail loads when paid in whole or in part on a com-
mission basis. This wage basis milk dealers are now
using as a rule. Assuming that the total weekly
sales on four retail milk routes are $300, $350, $400
and $450 respectively, we could get the following
combinations for determining the weekly wage to
drivers:
Weekly rate to Drivers when Net Sales on
Wage Basis.
Retail Wagons are
$300.00
$350.00
$400.00
$450.00
Commission only at 11 per cent
$33.00
$38.50
$44.00
$49.50
$15.00 weekly, plus 7 per cent on sales ....
36.00
39.50
43.00
46.50
$15.00 weekly, plus 6 per cent on sales
33.00
36.00
39.00
42.00
$20.00 weekly, plus 5 per cent on sales
35.00
37.50
40.00
42.50
$25.00 weekly, plus 4 per cent on sales —
37.00
39.00
41.00
43.00
Which of these wage plans a driver would prefer
will depend on the load on his wagon and the average
time required to retail that load. There is greatest
motive to work when the wage is based on com-
mission only, but the driver working on this basis
may not, if handling packages selling at different
prices, push the lower priced products in a way
satisfactory to consumers or to the company. For
instance, if whole milk is retailing at 14 cents per
quart and skim milk at 8 cents, the driver working
solely on a straight commission may soon get "out"
267
THE PRICE OF MILK
of skimmed milk. If all packages sold at the same
price a uniform commission would get uniform
results. Where the wage is partly a fixed sum and
partly a commission the proprietor can maintain
route and sales policies that he cannot maintain
when the wage is on a straight commission. Differ-
ent policies will suit different sections and different
dealers. These alternative wage schedules are cited
here as methods of measuring pay by effort and
ability, such as can be applied in other wage costs.
VOLUME IN 'THOUSAND
CHART No. XIX. — DECLINING UNIT COSTS WITH INCREASING
VOLUME IN THE RECEIVING STATIONS OP A LARGE
MILK COMPANY
The chart above depicts the decrease in the unit
costs of handling milk in the country receiving sta-
tions of one company. The unit costs and the vol-
268
CAN MILK COSTS BE LOWERED
ume are for the month of August, 1919. Minimum
unit costs are not approached until the volume
reaches about 250,000 quarts. Other factors affect
costs as well as volume. Those stations above the
dotted curve have other costs such as those inherent
in poor management that offset in part the economies
in volume. The general tendency, however, is pro-
nounced; the larger the volume the lower the unit cost.
The same results are revealed in the following
table giving the ratio of unit costs and volumes in
the country receiving stations of a Philadelphia milk
dealer. The average volume and the average unit
costs in all stations are taken as equal to 100.
DECLINING UNIT COSTS WITH INCREASING VOLUME IN TWENTY-
ONE RECEIVING STATIONS IN THE PHILADELPHIA DISTRICT
Station Number.
1
2
3
4
5
6
7
8
9
10
11
Relative amount of milk handled ....
33
41
43
44
45
45
48
55
57
64
64
Relative cost per Quart
178
137
140
89
80
122
102
116
79
76
100
Station Number.
12
13
14
15
16
17
18
19
20
21
Relative amount of milk handled
Relative cost per quart
66
100
68
74
69
64
77
88
81
80
110
66
126
68
185
67
244
98
472
73
The cost of handling milk in the receiving station
with 472 per cent of the amount handled as an
average in each of the receiving stations was but
269
THE PRICE OF MILK
73 per cent of the average unit cost in all stations,
whereas the unit cost in the station handling but
33 per cent of the average quantity handled by these
stations was 178 per cent of the average unit costs
in all stations. Here and there are stations whose
unit costs are not absolutely in line with this rule,
but an examination of the cost records revealed
other cost factors at such stations to be abnormally
large.
The rule is clear and important: Volume pays in
the country as well as in the city.
Here is a company handling milk at its country
receiving stations in May (1919), when volume is
largest, at $0.037 per quart as against $0.0045 per
quart in September, when the volume is not so large.
For the same months the costs of two other com-
panies are $0.0033 and $0.0049 per quart in May as
compared with $0.0043 and $0.0061 respectively in
September. The plant with the larger volume has
substantiaLeconomies over the small volume plant.
The variations found in unit costs between differ-
ent dealers for the same item reflects the possible
savings in sound management. One dealer bottles
and caps 45,000 quarts of milk per day with a direct
labor cost of $0.0005 cents per quart, using 6 em-
ployees for 56| man-hours, a remarkably low cost.
Another dealer for the same period for exactly the
same service has a direct labor cost for 9000 quarts
per day of $0.0009, using 6 employees for 24 man-
hours. This same service for the same period cost a
third dealer handling 65,000 quarts per day $0.0012
270
CAN MILK COSTS BE LOWERED
cents per quart, requiring 20.3 employees for 192
man-hours.
The very nature of the product handled suggests
the need for exceptional abilities to get lowest pos-
sible operating costs. As between plants there are
substantial cost differences in such items as the
amount of milk spilled in handling; left when
emptying can because the can is not held upright
long enough; leakage in bottling or in pasteurizing;
breakage of bottles in plant; leaks in the coal bill
because the heat is not utilized most efficiently;
leaks in the stable because the horses are not fed a
balanced ration; lost time because platforms are not
placed well and the retail wagon not just suited to
the needs; losses in poor collections; inadequate
schooling of the route salesman (to the consumer
only a milk wagon driver) ; inefficient labor because
proper motives are not kept foremost. The milk
industry is far more complicated than the average
manufacturing establishment. The skilled manager
finds ample outlet for his every ability. The in-
dustry just now is run in the main by the most
efficient of those who started with one or two milk
routes of their own. These men have done well.
Every year has seen new economies. The progress
made in the milk industry in the past decade reads
like a fairy tale. But there is plenty left for the
skilled professional manager to accomplish.
Nor are all the savings in the plant. Good mer-
chandising counts for much. The art of the advertis-
ing that pays dividends in the milk business is of
271
THE PRICE OF MILK
recent growth. Cordial relations with customers
pays in the milk business as in few businesses. In
the matter of returning milk bottles alone, good will
spells company success. With milk bottles at five
cents a piece, there is a snug little profit in just
getting consumers in the frame of mind to set out
the milk bottles every night. To get thirty trips
out of a milk bottle, as can be done when the con-
sumer habitually sets out the bottles, is a profit of
one-fifth of a cent per bottle over an average of but
twenty trips per bottle, the most that can be
secured when the housewife is careless about the
bottles.
The loss on milk bottles is one point on which the
milk dealer is most often publicly criticized. Con-
sumers cite instances of scores of bottles in their
cellars! Or in dump heaps! Or at building opera-
tions! There is often a gleeful assumption that the
dealer gloats over throwing nickles away in the form
of milk bottles. Cannot something be done about it?
Consumers can in numerous ways be taught the
monetary value of the milk bottle. Drivers can be
paid in proportion to bottles returned. Experience
shows, however, that a commission to the driver
for return of bottles too large or a standard for
returns too strict merely encourages theft. A charge
can be made for bottles — if consumers and grocers
would only pay for the charge. But neither likes
the idea, and the milk dealer soon learns to believe
that he alone of all the dealers is keeping the agree-
ment to charge for bottles.
272
CAN MILK COSTS BE LOWERED
Commercially, the successful way to get bottles
back is (1) to build up the housewifely habit of
setting the milk bottle out every night; (2) by proper
compensation to the driver for collecting his bottles;
and (3) an efficient bottle exchange for sorting out
mixed lots of bottles. The Baltimore Bottle
Exchange handled 1,073,253 bottles in 1916 at a
cost of $0.009877 per bottle. Of this number,
486,000 came from dumps and 588,000 from other
dairies. (4) Public health authorities can help by
requiring the same name in the bottle as on the cap —
thus doing away with the motive for dealers to steal
each others bottles. This regulation saved 6000
bottles per week to the bottle buying dairies in one
city alone. (5) Magistrates can help by inflicting
real penalties on dealers using the bottles and the
bottle cases of other dealers. Low fines encourage
thefts. (6) Legislators can help by making it an
unfair trade practice for one dealer to use the trade-
marked bottles of another, and by authorizing the
proper authorities to revoke the license of any dealer
engaging in such unfair trade practices. (7) The
junk dealer should be prohibited from dealing in
milk bottles. His trade is too largely with thieves.
Milk distribution costs can be and have been
lowered relatively for two main reasons: (1) The
business is peculiarly one in which careful manage-
ment pays; (2) the business is one of decreasing costs:
added units of capital and labor bring more than .
proportional increases in returns.
Unit costs decrease as volume increases.
is 273
CHAPTER XII
Public Interest in Milk Distribution
Since milk contains certain elements essential to
sound nutrition, not found as cheaply nor as surely
in other foods, there is a public interest in milk
distribution certainly as great as that in the water
supply and exceeding the public interest in gas and
electric companies.
Water is a necessity for the preservation of life;
milk is necessary for growth in the young and for
that sound nutrition prerequisite to a happy and
fruitful life. Water may carry disease; so may
milk. The cost of the daily supply of water deter-
mines sanitary and health standards in the home;
the cost of the daily supply of milk determines the
physical vigor of childhood, and hence the mental
vigor of middle life and the contentment of old age.
Gas and electric prices form a small part of the
annual outlay of the average family as compared
with the outlay for milk. While gas and electricity
are aids to public welfare and add to home conveni-
ences, yet neither is essential to a normal physical
life as is milk. The discoveries of Dr. McCollum
and his contemporaries that milk contains nutrient
elements essential to health quite apart from its
high food value, lends to those who handle and sell
milk a place of vital importance as servants to the
physical well-being of their customers and to the
274
PUBLIC INTEREST IN MILK DISTRIBUTION
civic efficiency of their communities. Through
these discoveries every milk distributor becomes
in fact an all-important public official.
From times immemorial governments have recog-
nized that certain businesses were so essential to
public welfare as to warrant a community regulation
not customary nor, in these later days of constitu-
tional law, permissible as to private businesses. In
feudal days the baker, the smith, the miller had to
serve all who came (if they could offer the hire)
without discrimination, with adequate service, and
with just and reasonable rates. As commerce
developed the common carriers were held by the
courts to be public callings and to have the same
common law duties. We have from century to
century changed the lists of businesses that were
quasi-public, but the distinctions we have alwa^a
kept.
At law the quasi-public businesses must serve all
who come, without discrimination, with adequate
service and at reasonable rates. These are common
law obligations and may be enforced in the courts in
absence of statutory regulation. And government
may for such quasi-public businesses — and does—
by statute (or more recently through public service
commissions) prescribe reasonable rates, define what
constitutes discrimination, set standards for service,
and lays down the conditions under which service
may be refused. Milk distribution has, up to the
present time, been regarded as a private and not as
a quasi-public business.
275
THE PRICE OF MILK
All business, both public and private, is subject to
the state's general police power. The state is,
however, limited in its regulation of private business
under the police power by specifying what it may
not do. In its regulation of quasi-public business
it can go farther and provide a fair standard of
service, state the conditions under which service
may be refused, prevent discrimination in service
or in rates, and fix reasonable charges.
May milk distribution in the future be regarded
as a quasi-public business? Is the public interest
in the product and in the cost of the service such as
to put milk in fact among the quasi-public busi-
nesses? Is it to the interest of consumers, milk
dealers and farmers that this be done?
What is a private business for one generation has
been declared to be a quasi-public business for the
next. And businesses once quasi-public (such as
the miller, the smith and the baker) are now held
to be private. Our legislatures may not compel
private businesses to serve all who come without
discrimination, nor with adequate service, nor can
they fix the reasonable price at which private business
may sell. But some state legislature passes a law
regulating a given business in one or more of these
particulars — a business theretofore held to be pri-
vate— and the courts must determine whether such
business has already in fact become quasi-public.
If it has, such legislation is valid; if it has not, such
legislation is invalid. By what tests does the court
give answer to this question?
276
PUBLIC INTEREST IN MILK DISTRIBUTION
The first test is as to whether the commodity or
service offered is in fact a natural monopoly.1 On
the feudal estate, the miller, the baker and the
smith had to serve all who came, for there was no
one else to serve them. Pack trains had to carry
the goods offered at the customary rate in early
England, because the average merchant could not
afford a pack train of sufficient size to be a protec-
tion against the robbers that frequented the high-
ways. The ferry had to accept all four of the
obligations named above as peculiar to quasi-public
businesses at common law, because the sites for
ferries were limited by natural barriers and favored
by access to highways. Warehouses were proclaimed
to be quasi-public, because situated at the very
entrance to the gates of commerce. Municipal
utilities are quasi-public, because a very limited
number of competing companies can find room on the
strategic streets and highways. Water and irriga-
tion companies are quasi-public, because of the
natural monopoly of sources of water supply.
A monopoly or a combination to restrain trade
through controlling supply and demand in com-
modities or services where there is no natural
monopoly does not alone make a business quasi-
public; such a monopoly is subject to the penalties
prescribed at common and statutory law for restraint
of trade.
There is no natural monopoly as to the supply of
milk. But good sites for milk plants are as limited
i Y. B. 39 Hen. VI, 18, pi. 24; Y. B. 10 Hen. VII, 8, pi. 14.
THE PRICE OF MILK
as are good sites for warehouses. The milk dis-
tributing plant must have not only access to the
carriers as must warehouses, but milk is perishable
and there must be such a location of the plant as to
assure wholesome water supply and access to the
streets for the retail milk wagons. Therefore, on
this test alone milk distribution may be held to be
in fact quasi-public. The foregoing pages have
shown the economies due to concentration of busi-
ness. To be sure, mere size of business or proportion
of business done by one company are not in them-
selves final tests as to whether a business is either
quasi-public or in restraint of trade. But any
business subject to the law of increasing returns,
as is the milk business (see Chapter XI), is poten-
tially a monopoly and it is only a question of time
until it becomes a monopoly in fact.
The next theory applied by the courts in deciding
whether a calling is quasi-public is based on legal
privilege. Where a business was created by royal
grant1 or depended upon the exercise of the right of
eminent domain there was an obligation to the public
and the business was subject to regulation.2 Milk
distribution has not required the exercise of any
exclusive governmental right or privilege, such as
the power of eminent domain, and under this theory
it cannot be regulated. When milk distribution is
declared to be in fact quasi-public, the power of
eminent domain would then flow to the business.
i 12 East. 527
• 23 Wall. 108; 160 Fred. 856 (1908).
278
PUBLIC INTEREST IN MILK DISTRIBUTION
But natural monopolies and special privileges are
not the only tests applied by the courts in deter-
mining whether a business is sufficiently freighted
with the public interest to be classified as quasi-
public. The courts extended the theory of natural
and legal monopolies by strained analogies until the
decision in the case of Munn v. Illinois (94 U. S.
113, 1876). An Illinois statute was sustained fixing
the rate of storage of grain in grain elevators. The
court followed the principle laid down by Lord Hale
"that when private property is affected with a
public interest it ceases to be juris privati (private
right) only/' One underlying principle for uphold-
ing the fixing of these rates as legal was the virtual
monopoly held by the grain elevators from their
geographical location. But the court did not rely
upon this test. It based its decision entirely upon
the existing need in the public interest for such
regulation.1
The control exercised by common law and statute
over quasi-public business does not, therefore,
necessarily depend upon the presence of a natural,
legal or virtual monopoly or geographical location.2
The courts further extended the tests in Brass v.
Stoeser (153 U. S. 391). A North Dakota statute
made all buildings, elevators and warehouses, wher-
ever located, used for handling grain for profit, public
warehouses, and fixed the rates for storage. The
court held the statute constitutional. In this case
i This rule was followed in People v. Budd, 117 N. Y. 1 (1889).
247 Kans. 1; 41 Fla. 363.
279
THE PRICE OF MILK
there was no virtual monopoly arising from geo-
graphical site, yet the regulation was held to be
valid. The principle was that certain business is
so related to the public interest that it becomes
subject to regulation. The decision was based
entirely upon the public interest in the business.
Indeed, the supreme court itself in the later decision,
The German Alliance Insurance Co. v. Kansas (233,
U. S. 398), in discussing Brass v. Stoeser, said:
A law of the State of North Dakota was sus-
tained which made all buildings, elevators and
warehouses used for the handling of grain for a
profit public warehouses, and fixed a storage rate.
The case is important. It extended the principle
of the other two cases and denuded it of the limit-
ing element which was supposed to beset it — that
to justify regulation of a business the business
must have a monopolistic character. That dis-
tinction was pressed and answered,
Is not the cost of milk distribution equally of
public interest? Centralized bottling and pasteur-
izing plants and lower costs through the elimination
of duplication in service are tending, by economic
forces, to put but few competing retail wagons on a
given street. The service of these wagons and the
prices charged are of as much concern to the con-
sumer of milk as are the rates charged for warehouse
\^^ capacity to the wheat growers.
In Brass v. Stoeser1 the court stated that the public
interest in the business makes it subject to regula-
i Op. cit.
280
PUBLIC INTEREST IN MILK DISTRIBUTION
tion. This principle has been further developed by
applying it to the insurance case just discussed.1
A Kansas statute providing for the regulation of
fire insurance rates was upheld as constitutional.
The Supreme Court said that such regulation was
not a violation of the right of contract guaranteed
by the Fourteenth Amendment and did not take
property without due process of law. It held that
the business of insurance was so affected with a
public interest as to justify legislative regulation
of its rates. ^,
Are the rates charged by milk distributors of
any less importance than the rates charged by fire
insurance companies? The milk distributor is no
more readily accessible than the fire insurance
company, and milk is as essential to the protection
of the health as fire insurance is to the protection
of property. The court further held in this case
that a public interest can exist in a business distinct
from a public use of property.
There is another similarity in principle between
the price for milk by the large milk distributor and
the rates for fire insurance. Said the court:
The price of insurance is not fixed over the
counters of the companies by what Adam Smith
calls the higgling of the market, but formed in the
councils of the underwriters, promulgated in
schedules of practically controlling constancy which
the applicant for insurance is powerless to oppose
and which, therefore, has led to the assertion that
1 German Alliance Insurance Co. v. Kansas, 233 U. S. 409.
281
THE PRICE OF MILK
the business of insurance is of monopolistic
character, and that "it is illusory to speak of a
liberty of contract." It is in the alternative pre-
sented of accepting the rates of the companies or
refraining from insurance, business necessity impel-
ling if not compelling it, that we may discover the
inducement of the Kansas statute, and the problem
presented is whether the legislature could regard
it of as much moment to the public that they who
seek insurance should no more be constrained by
arbitrary terms than they who seek transportation
by railroads, steam or street, or by coaches whose
itinerary may be only a few city blocks, or who
seek the use of grain elevators, or be secured in a
night's accomodation at a wayside inn, or in the
weight of a five-cent loaf of bread. We do not
say this to belittle such rights or to exaggerate the
effect of insurance, but to exhibit the principle
which exists in all and brings all under the same
governmental power.
Business necessity likewise requires identical prices
to consumers for similar standards of milk. A
profit of one-half a cent per quart is good profit for
a company handling a large volume of milk. But
from a business point of view it is difficult and
costly to collect a half cent even from credit cus-
tomers. The milk is left at the door step before
the customer is up in the morning. The "higgling"
of the market is necessarily absent. The customer
must rely on the desire of some one competitor to
get the trade by cutting prices. This practice
results in all cutting to the same level or in the one
company driving others out of business. The
282
PUBLIC INTEREST IN MILK DISTRIBUTION
consumer must accept the price as given by the
companies or go without milk. And it is not in
the interest of the public welfare that this be done
without a review in public tribunals as to the fair-
ness of this price.
The courts have answered the querulous objection
to these principles to the effect that all business
will be regulated if there is any extension of businesses
that are quasi-public. These principles are not
general and loose, allowing any business to be
brought under them. In the dissenting opinion in
the German Alliance Insurance Case, Justice Lamar
gives the following list of quasi-public occupations:
Canals, waterways and booms; bridges and
ferries; wharves, docks, elevators and stockyards;
telegraph, telephone, electric, gas and oil lines;
turnpikes, railroads, and the various forms of com-
mon carriers, including express and cabs. To this
should be added the case of the innkeeper (as to
which no American case has been found where the
constitutional question as to the rights to fix his
rates has been considered), the confessedly close
case of the irrigation ditches for distributing water
(189 U. S. 439), and the toll mill acts,
To this list the court in this case added insurance
companies.
An examination of these occupations will indicate
that fundamentally the tests are:
The service or commodity is (1) essential to equal
access by the public, such as water companies, cabs,
inns, transmission of intelligence, insurance, turn-
pikes; or (2) essential to equal access by private
283
THE PRICE OF MILK
businesses in order to keep competition on a practi-
cal basis, such as canals, waterways, railways,
warehouses, stockyards and irrigation ditches.
These tests the Supreme Court stated as follows
in the German Alliance Insurance Case:
We have shown that the business of insurance
has very definite characteristics with a reach of
influence and consequence beyond and different
from that of the ordinary business of the com-
mercial world to pursue which a greater liberty
may be asserted. The transactions of the latter
are independent and individual, terminating in
their effect with the instances. The contracts of
insurance may be said to be interdependent. They
cannot be regarded singly or isolatedly, and the
effect of their relation is to create* a fund of assur-
ance and credit, the companies becoming the
depositories of the money of the insured, possessing
great power thereby and charged with great
responsibility. How necessary their solvency is,
is manifest. On the other hand to the insured
insurance is an asset, a basis of credit. It is
practically a necessity to business activity and
enterprise. It is, therefore, essentially different
from ordinary commercial transactions, and, as we
have seen, according to the sense of the world from
the earliest times — certainly the sense of the
modern world — is of the greatest public concern.
It is, therefore, within the principle we have an-
nounced.
The common law obligations that attach to every
quasi-public business is not only that their charges
shall be reasonable, but that they shall serve all
who come without discrimination and with adequate
284
PUBLIC INTEREST IN MILK DISTRIBUTION
service. When it is essential to the public welfare
that a given service or commodity be thus of equal
access to all, the courts declare it to be in fact quasi-
public and when the court finds a business to be in
fact quasi-public all these duties and obligations
attach thereto immediately. It is essential under
present-day conditions, for reasons stated in Chapter
VI, that milk producers around a given receiving
station should all have equal access to that station;
and it is essential that consumers should have
protection both as to service and as to prices.
The principles themselves also do away with the
objection that government cannot wisely fix or
control prices. This government can and does do
when there is a virtual monopoly in buying, trans-
porting or selling. And such now exists in fact
with milk distributing companies; certainly with
those in large cities.
If there be doubt as to whether milk distribution
is now in fact a quasi-public business there can be
no controversy as to what follows such character
if it be established.
If milk distribution should be declared a quasi-
public business the following are among the elements
in a program for public regulation that could be
adopted by any state:
1. A state milk commission could be created to
regulate individuals and companies engaged in milk
distribution to the end that they should serve all
who came for reasonable rates, with adequate service
and without discrimination.
285
THE PRICE OF MILK
2. A consolidation of milk distributing routes and
plants could be authorized in order to lower costs,
and hence prices to consumers for the same price
to the producer.
3. A certificate of public convenience and neces-
sity could be required for any individual or company
to enter into the milk distributing business or
extend routes beyond the territorial limits occupied
on the date the law takes effect in order to protect
investments subject to regulation of prices.
4. Grades of milk could be established and enforced
for the protection of health and for the assurance
of a fair price.
5. Standards of service in the delivery of milk
could be enforced to prevent discrimination.
6. Uniform accounting systems could be installed
and periodic reports required in order that fair
charges for milk distribution could be assured.
7. The commission could be given power to
subpoena books, records and witnesses, to examine
which it should have the funds necessary for the
employment of competent assistance.
8. Milk distributors could be required to take
out licenses and the commission empowered to
revoke licenses for due cause after due notice and
public hearing.
9. Unfair trade practice such as doing business
with the milk cans belonging to farmers or the cans
or bottles of other dealers could be prevented.
The advantages to the consumer of such a program
would be: unnecessary duplication of investment
286
PUBLIC INTEREST IN MILK DISTRIBUTION
and of service would be eliminated and milk dis-
tribution costs could be lowered accordingly; all
the economies listed in the preceding chapter result-
ing from zoning milk routes would be available to
lower distributing costs; the wholesomeness of the
milk supply could be more surely guarded at mini-
mum costs; fair standards of service and proper
grades of raw and pasteurized milk could be assured.
The advantages to the milk distributor would be:
investments would be protected in fact and in law;
a fair return on the fair value of the property would
be assured. Whether the "fair value " and the
"rate of return" allowed by the commission would
be as large as the capitalization and return thereon
possible without regulation is a question in the minds
of many milk dealers. But certainly the tests
applied as to what constitute fair values and a fair
return are such as are fair to a conservative judiciary,
and in the long run must be comparable to results
under real competition; for capital must not only
be kept in the business but attracted to it. And if
there is no real competition it is high time regulation
be provided in the public interest.
To the producer the advantages would be: (1)
Access through public officials to all the facts as to
receiving station and distributing costs of the milk
distributor to whom his milk is sold in order to
assure a fair judgment as to what costs should be
deducted from the consumer's price for these serv-
ices. The price to the farmer is the price to the
consumer less these costs and hence the farmers'
287
THE PRICE OF MILK
market is widened as the costs between him and the
consumer are lowered. (2) The increase in the
consumption of whole milk, due to the satisfaction
that tends to follow public assurance that a price
is fair, will tend to react favorably on the price of
milk going into manufactured products. (3) These
results will be secured in large part if only there be
assurance that these costs are fair even though they
are not lowered. For public confidence is an asset
of first importance to every business that needs a
widening market.
By no test can milk production be legally regarded
as quasi-public business and hence prices to pro-
ducers can not constitutionally be " fixed " by statute
nor by commission. Provision can be made for the
arbitration of such prices. The only compulsion,
however, can be publicity. The providing of such
machinery has created public confidence and thus
bettered and extended the market for both dealer
and farmer while assuring a fair price to the con-
sumer. Where collective bargaining is in force such
arbitration machinery is advisable.
Certainly the law and the facts warrant this
conclusion: There will be in time a sustained demand
for public regulation of the charges and services of
milk distributing companies that will find fruition in
law unless milk distributes place and keep their
businesses on a high ethical plane, with a high regard
for the public interest in fair charges for their services.
In more than one state such laws have already been
submitted to the legislators. If milk dealers will
288
PUBLIC INTEREST IN MILK DISTRIBUTION
keep their relations to the public on a high ethical
plane, refrain from taking all the traffic will bear
just because they may be in a position to get it,
prefer conservative annual profits and returns to
exorbitant profits and over-capitalizations, the day
of regulation of milk distribution in the public
interest may never come. But if this business
becomes one in which professional promoters exploit
consumers for personal profits and greed is unre-
strained public regulation is both inevitable and
advisable. The author should say that he finds a
high regard for the public interest to be innate in
the rank and file of milk distributors. This attitude
of fairness to the public is native just because the
demand for milk is so sensitive to the attitude of
mind of the consumer. Good will is the best asset of
the milk distributor.
There are certain policies which milk distributors
can adopt voluntarily that will go far toward
securing to all parties at interest some of the advan-
ages flowing from that concentration of business
essential to minimum costs, with a fair regard to
the public interest. These are:
1. To so locate and maintain receiving stations
as to get and keep a quantity of milk sufficient to
assure minimum costs. Unnecessary duplication of
investment is as inadvisable in the country as in the
city. The volume will also depend upon the roads
and hauling distance of producers.
2. To raise the standard of competition on the
street by agreeing as to a minimum amount of milk
w 289
THE PRICE OF MILK
to be carried on any retail wagon and as an average
on all retail wagons. This will put competition on a
paying basis, give to all a share in the economies of
larger loads and shorter hauls, and hence lower the
cost of distribution.
3. By cooperation and consolidation to scrap
receiving stations with capacity too low or with
equipment too antiquated for economical operation,
and to get the volume in well-located modern plants
sufficient to assure minimum costs with fair con-
sideration of the convenience of producers.
4. To do away through bottle exchanges with
many unfair trade practices such as doing business
with the cans, bottles, cases or other property of
farmers or dealers. Such cooperation must be
aided by proper ordinances or statutes affixing
penalties for the larceny of such properties.
5. To keep the retail wagon the main agency for
distributing milk.
6. To maintain faithfully high sanitary standards.
7. To keep the business on a sound investment
basis, shorn of speculation.
8. To accept the principle of conservative, because
assured, profits.
Under competition the savings on such policies
will in part at least be shared with the producer or
consumer or both.
The public is interested and will ever vigorously
interest itself in the policies of milk distributors and
in the costs of milk distribution.
290
PART III
Fair Price Policies
CHAPTER XIII
The Food Value of Wholesome Milk
Not so many years ago the relative values of foods
were determined so far as they were determined
scientifically by chemical analysis. Protein, energy
value and digestability were assumed to be the sole
tests of the value of a food. As fats, mineral salts,
proteins and carbohydrates were the essential con-
stituents of the normal diet, the nutrition expert
rested his investigations with an analysis of the
relative proportion and character of these elements
in the respective foods.
The facts thus discovered were and are of ines-
timable value. But it remained for a new school of
research students, of which" Professor E. V.McCollum
of Johns Hopkins may be called the dean, to find
out, through experimental methods that there are
certain other elements essential to sound nutrition,
not found in all foods, but found only in milk and
leafy vegetables, but most surely and abundantly in
milk.
Just what these substances are is not known.
Funk1 suggested that they be called vitamines. But
inasmuch as in organic chemistry the words ending
in "amine" apply only to subjects containing nitro-
gen, this word is not applicable to the substances in
question. It is certain that at least the substance
i Funk, C. J., State Med., 1912, xx, 341.
293
THE PRICE OF MILK
found in butter does not contain nitrogen. Messrs.
McCollum and Kennedy1 have proposed that these
elements be referred to as "Fat-soluble A" and
"Water-soluble B."
Fat-soluble A prevents the development of a
pathological condition of the eyes. Water-soluble
B prevents the development of beri-beri, a fatal
form of paralysis prevalent among rice-eating peoples.
Moreover, Professor McCollum points out that
"what we designate by each of these terms is in
reality but a single physiologically indispensable
substance, and not a group of substances/'2
It is not possible to secure appreciable growth in
young animals fed exclusively as the sole source of
nutriment upon seed products, such as wheat, corn,
rice, rolled oats, rye, barley, kaffir corn, millet seed,
flax seed, pea and both the navy and soy bean.3 A
cow, for instance, will not thrive on corn alone, but
it will thrive, give an abundance of milk and pro-
duce vigorous offspring, on a food mixture consisting
of all the parts of the corn plant, including the leaf
and the straw as well as the seed. It has not been
possible to prepare a ration that will induce good
nutrition in animals solely from wheat products.
The potato is to be classed with the seeds in its
dietary properties, especially when pared in the
i Jour. Biol. Chem., 1916, XXIV, 431.
« McCollum, E. V., "The Newer Knowledge of Nutrition" MacMillan, 1919, p.
32. This is by all odds the best book on the subject. This book and " The
American Home Diet" by E. V. McCollum and Nina Simmonds, 1920, should be
in every public library.
• Ibid., p. 38.
294
FOOD VALUE OF WHOLESOME MILK
ordinary way. In the cellular layer just underneath
the thin paper-like skin of the potato is relatively
more of the fat-soluble A. The roots which we use
as foods contain this substance but not in the
degree which milk does. The dietary properties of
meats are comparable with the seed foods rather than
with the leafy foods. . . . With the exception of
milk, the foods of animal origin do not supplement
completely the dietary deficiencies of the seeds and
their products.1
Says Professor McCollum:1
(1) Seed mixtures, no matter how complex or
from what seeds they are derived will never induce
optimum nutrition.
Seeds with tubers, or seeds with tubers, roots
and meat (muscle), will in all cases fail to even
approximate the optimum in the nutrition of an
animal during growth.
(2) The only successful combinations of natural
foods or milled products for the nutrition of an
animal are:
(a) Combinations of seeds, or other milled
products, tubers and roots, either singly or col-
lectively taken with sufficient amounts of the
leaves of plants.
(6) Combinations of the food stuffs enumer-
ated under (a) taken along with a sufficient
amount of milk to make good their deficiencies.
Milk and the leaves of plants are to be regarded
as protective foods and should never be omitted
from the diet. Milk is a better protective food
i Ibid., p. 81.
295
THE PRICE OF MILK
than are the leaves when used in appropriate
amounts.
Again he says:
It is unwise to approach very closely the physi-
ological minimum with respect to any dietary
factor. Liberal consumption of all of the essential
constituents of a normal diet, prompt digestion
and absorption and prompt evacuation of the un-
digested residue from the intestine before extensive
absorption of products of bacterial decomposition
of proteins can take place, are the optimum con-
ditions for the maintenance of vigor and the
characteristics of youth. Such a dietary regime
can be attained only by supplementing the seed
products, tubers, roots and meat, which must
constitute the bulk of the diet of man, with the
protective foods — milk and the leafy vegetables.1
The Professor's conclusions as to the value of milk
as a protective food compared with the leafy
vegetables are:
Milk is, however, without doubt, our most im-
portant foodstuff. This is true, because the
composition of milk is such that when used in
combination with other foodstuffs of either animal
or vegetable origin, it corrects their dietary de-
ficiencies. Combinations of equal weights of milk
and one of the cereal grains give excellent results in
the nutrition of animals during growth, and grain
mixtures supplemented with milk support well in
adult life the function of reproduction and rearing
of young. This is because of the excellent quality
of its proteins, the peculiar composition of its
1 Ibid., p. 148.
296
FOOD VALUE OF WHOLESOME MILK
inorganic content and the remarkable content of
the dietary essential, fat-soluble A, in the fats of
milk. Milk, like nearly all of the other natural
foods, contains a great abundance of the second
dietary essential of unknown chemical nature,
water-soluble B.
The conclusions from the above are that milk is
so constituted as to be priceless as a supplementary
food to make good the deficiencies of the tubers,
seeds, and muscle meats. The only other foods
which can more or less take its place are eggs, the
leaves of plants and the .glandular organs, such as
liver. In price these special nutrient elements are
found most cheaply and most abundantly in milk.
Yet milk also compares well with other foods in price
for its protein and energy content. By these tests,
milk, while not the cheapest, is one of the cheapest
and is the most needed of all foods.
Dr. Dorothy R. Mendenhall, in a bulletin in the
Care of Children Series1 issued by the United States
Department of Labor, declares milk to be the indis-
pensable food. She says:
Milk is often stated to be a perfect food. By
this we mean that it contains all the essential ele-!
ments for normal human growth and development.
The adequacy of a food or diet depends briefly
on its containing:
1. Enough of the right sort of material to build
up and repair the living tissues of the body. These
body-building substances in the food are called
proteins, and are found especially in milk, meat,
1 No. 4. United States Department of Labor, 1918.
297
THE PRICE OF MILK
fish, eggs, and in certain vegetables, especially
beans and peas.
2. Enough substances to furnish the required
energy of the body. Fats, starches and sugars are
the chief energy foods, and are transformed in the
body into energy for work and into body heat.
3. A variety of mineral substances, which are
needed in the growth and functioning of the parts
of the body, such as the skeleton, the brain, the
blood, etc.
4. An adequate amount of certain substances
whose nature is not yet fully known but whose
presence in the diet has been demonstrated to
affect body growth in animals or man. These
substances, known as vitamines, growth deter-
minants, or the unknown dietary factors, are
therefore essential elements in our food.
5. No substance poisonous to the average in-
dividual nor one which will not allow of normal
digestive processes.
In addition, to be properly digested and of the
utmost nutritive value, articles of diet must also
be of pleasing taste, palatable and preferably of a
consistency and appearance similar to the foods
in customary use by the race.
Clean milk fulfils all of these requirements for
an adequate food better than any other single
foodstuff.
Milk is, then, in a sense, a complete food; if
used as the sole food it will sustain life and allow
growth. It is used as an exclusive diet for young
children, but after infancy supplementary foods
need to be included in the diet for the best develop-
ment. For one reason, milk — which, in respect to
all its ingredients, ranks among the most digestible
of animal foods — is so completely digested that
298
FOOD VALUE OF WHOLESOME MILK
there is practically no waste. Though this com-
plete digestibility renders milk one of the most
efficient foodstuffs, a certain amount of non-
digestible material in the food — so-called roughage
— is necessary to regulate the discharges from the
digestive tract. For this reason, and for several
others, a mixed diet after the first year of life is
better than an exclusive milk diet.
Unfortunately cows' milk is low in iron content,
even as compared with human milk, and this
important mineral must be supplied in other foods.
The prolonged exclusive use of milk after early
infancy tends to produce an anemia from lack of
iron in the blood. Iron can best be introduced
into the diet through the early use of fruit, vege-
tables, and whole cereals.
The abundance, character and digestibility of
its proteins and its large mineral content make
milk, as we have shown, a most desirable food;
but, after all, the most valuable properties of milk
lie in its containing an abundance of the unknown
dietary factors — the vitamines which control
growth and health. One such substance is found
chiefly in milk fat and the organic fat of certain
other animals, but is not present in vegetable oils
or in pork fat. Eggs and green vegetables, such as
spinach and chard, do contain appreciable amounts
of this vitamine, but milk is our chief source. The
cream of a quart of milk contains as much of this
vital substance as is found in all the skim milk
left after the cream is removed. A second recog-
nized vitamine is present in all foods consumed in
their natural state and in sufficient abundance to
maintain health. In the manufacturing of purified
foodstuffs, such as the polishing of rice or in the
milling of flour, this substance may be lost, and a
299
THE PRICE OF MILK
diet made up entirely of denatured foods may cause
disease or even death, due to a deficiency in this
essential substance.
A food like milk which, given in moderate
amounts, combines enough of both of these vita-
mines to allow of normal growth and development,
has a value in the human dietary greater than that
of any other single food.
It is true that appetite in many cases has to be
considered, and an exclusive diet of any single
food substance becomes distasteful to the large
majority of us and tends to lower digestive pro-
cesses and to cause impaired nutrition. However,
this does not mean that the child should be allowed
to refuse milk as a substantial part of his daily
diet, if the diet includes, as it should, several
other forms of food. All normal children are
better for at least 1J pints of milk a day.
The average chemical composition of milk is:
Per cent.
Water 87. 1
Total solids 12.9
Fat 3.9
Casein 2.5
Albumin 7
Sugar 5.1
Ash 7
The variation in chemical content is given in the
footnote.1
1 From a chemical standpoint milk is a very complex substance. The component
parts may, however, be classified into a few well-marked groups as follows: (1)
Water, (2) fat, (3) nitrogenous constituents, (4) sugar, and (5) ash. The com-,
ponents other than water are collectively known as total solids or milk solids and
the solids other than fat as solids not fat. Milk serum, or more properly milk
plasma is the term used to denote the milk minus the fat; hence the terms serum
solids and plasma solids are synonymous with solids not fat.
Water: The water in milk varies from 82 to 90 per cent. The usual variation in
mixed-herd milk is much less and is probably covered by 84 to 88 per cent.
300
FOOD VALUE OF WHOLESOME MILK
Numerous have been the nutrition experts that
have made special researches as to the food value of
milk when compared with other foods. All of these
are in substantial agreement. The author chooses
the tables that follow made by Dr. Flora Rose
because they are so clear cut and concise in state-
ment.1 The prices used are pre-war prices. But
these can readily be translated into the prices of the
day.
Fat: The fat in milk — milk fat or butter fat — is not in solution but exists as an
emulsion of microscopic globules so small that a single drop of average milk
contains more than one hundred millions of them. These globules, even in milk
from one cow, are not all of the same size. Some may be two or three times the
size of others, the average size depending upon several factors, the principal one
of which is the breed of the animal. Chemically the fat is not a single compound
but a mixture of several compounds known as glycerids. Some of the glycerids
are common to all fats, while others are peculiar to butter. This fact is made
use of in detecting oleomargarin.
Cow's milk usually contains from 3 to 6 per cent of fat, depending very largely
upon the breed of the animal.
Nitrogenous constituents: These are principally casein and albumin, the traces
of less important nitrogenous compounds. The coagulum, or curd, produced
when rennet, dilute acids, or certain other chemicals are added to milk is chiefly
casein. Albumin is the flaky precipitate produced by heating whey or skimmed
milk from which the casein has been removed. The constitution and behavior
of it closely resembles white of egg. Casein is not really in solution in the milk,
but exists in an extremely fine colloidal condition in combination with some of
the ash constituents. With an appropriate filter of clay it is possible to separate
it from the water. Albumin is in true solution in the water of the milk. Fre-
quently, but improperly, the term casein is applied to all the nitrogenous con-
stituents in milk. Sometimes the term total proteins is used in referring to the
nitrogenous constituents taken as a whole. The amount of casein in average cow's
milk varies from 2 to 4 per cent and the albumin from 0.5 to 0.8 per cent.
Sugar: Milk sugar, or lactose, belongs to a group known as carbohydrates and
is a white substance less sweet in taste than cane sugar. Milk sugar is broken
up into lactic acid by the action of bacteria, this bringing about the souring of
milk. Milk sugar is in solution in the water of milk and is present to the extent
of from 3.5 to 6 per cent.
Ash: The ash, or the mineral part of milk exists to the amount of about 0.75
per cent and consists largely of the chlorids and phosphates of sodium, potassium,
magnesium, and calcium.
* Cornell Reading Course, III. January, 1917.
301
THE PRICE OF MILK
Ten cents will buy the following amounts of energy
in a few typical foods:
Calories.
In milk at 10 cents a quart 672 . 5
In milk at 8 cents a quart 840 . 1
In round steak at 26 cents a pound 271 . 0
In eggs at 35 cents a dozen 234 . 0
In eggs at 55 cents a dozen 153 . 0
In bread at 6 cents a loaf 1,713 . 5
In oatmeal at 5 cents a pound 3,601 . 5
In cornmeal at 4 cents a pound 4,037.0
While milk is not at the head of this list, it stands
well as compared with meat and eggs. The milk
fat and milk sugar in addition to being sources of
energy, perform certain other functions as well. In
the milk fat is the fat-soluble A, the essential food
protective element discussed above. The sugar in
milk is not the cane or beet sugar of commerce,
but lactose, a sugar peculiar to animals. Milk
sugar is but faintly sweet. It is an essential to
growth — while the sugar that pleases the "sweet
tooth" is not. Milk sugar is believed to be im-
portant in holding in check putrefactive changes
in the contents of the large intestine and thus per-
forming the beneficial effects supposed to come
from buttermilk and other sour milks.1
In protein ten cents will buy:
Grams of
Protein.
In milk at 8 cents a quart 40.00
In milk at 10 cents a quart 32 . 00
In cheese at 25 cents a pound 52 . 26
i Cf. Rettger, L. F., Jour. Exper. Med., 21; 4; 365-388, 1915.
302
FOOD VALUE OF WHOLESOME MILK
Grams of
Protein.
In round steak at 26 cents a pound 37. 14
In eggs at 35 cents a dozen - 20. 60
In eggs at 55 cents a dozen 13 . 85
In dried lima beans at 10 cents a pound 82. 10
In white bread at 6 cents a loaf 61 . 50
In cornmeal at 4 cents a pound 104 . 30
In oatmeal at 5 cents a pound 151 .30
In discussing the protein in milk Miss Rose says:
These figures without adequate explanation
indicate that milk is not a very cheap source of
protein. This criticism of the cost of protein in
milk would be convincing if it were not for certain
facts recently made clear about protein. Protein
is a name given to a group of substances differing
rather widely in their value to the body. Two
foods may contain the same amount of protein; but
an ounce of the protein from the first food may be
much more valuable in building and repairing tis-
sue than an ounce of the protein from the second
food.
Exact data making it possible to say that this or
that protein is twice or three times as valuable as
another protein are scarce, but some comparative
figures on the value of various proteins in animal
feeding are available, which will illustrate the
point sufficiently well to clear up the record of
milk as a cheap source of protein. McCollum
(1916) gives the following table to show what
percentage of various proteins eaten by pigs is
used for building tissue:
Percentage.
Oil meal proteins 16-17
Wheat proteins 20
Corn proteins 24
Oat proteins 25
303
THE PRICE OF MILK
Percentage.
Wheat germ proteins 40
Casein of milk 45
Skim milk proteins 63
Hart and Humphrey (1915), as a result of experi-
ments to determine what foods are best for the
growing animal and for milk production, state
that milk proteins have an efficiency for milk
production and tissue restoration of 60 per cent as
compared with an efficiency of 40 per cent for corn
proteins and 36 per cent for wheat proteins.
Milk of all the common foods is the richest in
available lime. Ten cents will buy the following
amounts of lime in common foods.
Grams of
Lime.
In milk at 8 cents a quart 2.045
In milk at 10 cents a quart 1 . 636
In milk at 15 cents a quart 1 . 090
In milk at 20 cents a quart 810
In cheese at 25 cents a pound 1 . 990
In eggs at 35 cents a dozen 149
In eggs at 55 cents a dozen 096
In round steak at 26 cents a pound 019
In dried lima beams at 10 cents a pound 450
In white bread at 6 cents a loaf 198
In whole wheat bread at 12 cents a loaf 226
In cornmeal at 4 cents a pound 170
In oatmeal at 5 cents a pound 1 . 179
Milk is also rich in phosphorus as well as in lime
and is a cheap source for this valuable food element.
While low in iron content, the amount of lime
increases the ability of the body to use iron. These
minerals are essential food products.
304
FOOD VALUE OF WHOLESOME MILK
Milk is a complete food containing all the elements
necessary to nutrition and growth.
Butter, because it contains the fat-soluble A, has
a food value not found in important quantities in
oleomargarin or other substitutes for butter. In
the margarin that contains no milk fat or beef fat,
both the fat-soluble A and the water-soluble B are
wanting. In the beef margarins that contain some
beef fat, the fat-soluble A is present, but not so
plentifully as in butter fat. Butter is not the only
source of the fat-soluble A, but it is an important
source. Says Professor McCollum on this point:
If the diet contains a liberal amount of milk,
eggs, glandular organs or the leaves of plants, it
will, if otherwise satisfactorily constituted, prevent
the onset of the eye disease. The seeds and seed
products, such as wheat flour (bolted), degermi-
nated cornmeal, polished rice, starch, the sugars,
syrups, tubers, roots, such as the radish, beet,
carrot, turnip, etc., and also the muscle tissue of
animals, such as ham, steak, chops, etc., do not
contain enough of the fat-soluble A to be classed
as important sources of this dietary essential.
The tubers and roots appear to be somewhat
richer in it than are the seeds. In the form in
which they are ordinarily eaten as mashed or
baked potato, baked sweet potato, fresh or creamed
radish, cooked carrots, beets or creamed turnips,
the water content of the dish as served is so high
that the amount of solids eaten is not a very high
percentage of the total food supply, and the
protective action is correspondingly limited. In
Op. cit., p. 89.
20 305
THE PRICE OF MILK
America, however, potatoes are seldom eaten with-
out the addition of butter. The vegetable fats
and oils, such as olive, cottonseed oil, peanut and
cocoanut oils, although good energy yielding foods,
do not furnish this dietary essential. The body
fats of animals such as lard, beef fat, etc., are not
important sources of the fat-soluble A.
This growth-producing fat-soluble A does not de-
teriorate when the butter is held in storage1 nor
when it is heated with live steam for two and one-
half hours,2 which is higher temperature and more
prolonged period of heating than the milk fat is
subjected to during the process of manufacture
into butter.3
Milk, therefore, compares well with other foods in
its chemical food value content, but it must be
repeated that the chemical test is not the sole test
as to the nutrient properties of foods. To quote
once more from the authority in these matters,
Professor McCollum:
It is fallacious reasoning to attempt to compare
the money value of certain foods with certain
others. We may safely compare the cost of the
cereal grains or the legumes with each other, or with
the tubers such as the potato or the sweet potato
or with the root foods. It is not possible to com-
pare the cost of any of these with milk or the
leafy vegetables, such as cabbage, cauliflower,
Swiss chard, collards, Brussel sprouts, onions,
i Osborne, T. B.t and Meldel, L.B., " The Stability of the Growth-Promoting
Substance in Butter Fat," The Jour. Chem., Vol. 24, No. 1, p. 38, 1915.
8 Osborne, T. B., and Meldel, L. B., " Further Observations of the Influence of
Natural Fats upon Growth," The Jour. Biol. Chem., Vol. 20, pp. 37 and 384, 1915.
» Guthrie, "The Book of Butter," p. 17.
306
FOOD VALUE OF WHOLESOME MILK
lettuce, celery tops, spinach, turnip tops and other
leaves employed as greens. Milk and the leafy
vegetables are to be regarded as protective foods.
In some degree eggs are to be considered in the
same class. Milk and the leafy vegetables should
be taken in liberal amounts. The leaves should
not be regarded as foods of low value because
their content of protein, fat and carbohydrate is
low and the content of water high. When com-
pared on the basis of chemical composition they
appear inferior to seeds, but they have a peculiar
value in their high content of fat-soluble A and
of mineral elements, which makes them stand in
a class by themselves among the vegetable food-
stuffs.1
In the report to Food Administrator Hoover the
Milk Committee2 summed up the actual food value
of milk in feeding the family as follows:
1. Milk is the ideal food for infants.
2. Milk is the best single kind of food for the
proper development of growing children.
3. Milk is necessary in any family dietary
that is based on the welfare of adults.
4. Milk has these values to the health and
development of the family because it meets the
nutritive needs of the human body.
For a given amount of money, milk will furnish
a higher percentage of available building materials
1 Op. cit., p. 141, 142. "No thorough studies of the dietary property of fruits,"
says Professor McCollum, "have yet been made, but from their known chemical
composition and biological functions as storage organs, their proper place in the
diet can be predicted. They are good sources of mineral salts and of energy-
yielding food, the sugars. They are highly palatable and exert a favorable in-
fluence on the excretory processes of the kidneys and the intestine. Their liberal
use in the diet should be encouraged "
8 For names of this committee see page 109.
307
THE PRICE OF MILK
than almost any other food. Milk is one of the
most important sources of the factors in foods that
are essential to growth, health and body regulatory
functions.
That pasteurization does not destroy the food
value of milk has been shown in Chapter IX.
The best present-day knowledge as to the food
value of milk powders and of condensed milk as
compared with fresh whole milk was expressed in the
following resolution adopted at the annual meet-
ing of the National Commission on Milk Standards
in Chicago on December 8, 1918:
The use of powdered whole milk, skim milk
powder, condensed or evaporated whole milk or
skim milk, butter fat or other fats and water and
of machines for combining, mixing or emulsifying
these materials for the production of manufactured
milk or cream was considered by a special com-
mittee including some of the food chemists of the
commission. Their special report on these sub-
jects was adopted by the commission and was as
follows:
1. Since the application of the term "synthetic"
to mixtures such as those under consideration is
not entirely consistent with the accepted scientific
use of the term and is likely to cause confusion,
we recommend that the use of the term "syn-
thetic" be discouraged and that the commission
recommend the terms "recombined milk," "re-
constituted milk," on the labels of products made
entirely from milk constituents, and "artificial
milk" or "milk substitute" on the labels of
products in which any other fat is substituted in
whole or in part for milk fat.
308
FOOD VALUE OF WHOLESOME MILK
2. The committee moves the adoption of the
following resolution:
"WHEREAS, Recent investigations in the
science of nutrition have fully demonstrated
the unique value of milk as a food and the inti-
mate relation between adequate milk con-
sumption and the support of normal growth or
maintenance of health and vigor; be it
"Resolved, That the commission urge upon all
concerned with the production and distribution
of milk, whether as producers, dealers or public
health and food control officials, the great im-
portance of bringing into human consumption
the largest possible proportion of all wholesome
milk products, and to this end recommends that
the sale of such products as recombined milk
should not be hampered by any restrictions be-
yond those absolutely necessary for the pre-
vention of fraud and the protection of health/'
3. In the case of recombined milk made ex-
clusively from cream or butter and milk or skim
milk, fresh, condensed or dried, the materials
having always been maintained in sound condition
and not subjected to unnecessary heating, the
interests of the consumer in our opinion demand
nothing further than that the product as delivered
to the purchaser shall meet all the requirements as
to cleanliness, bacterial count and chemical com-
position of fresh milk of the same grade or class
and shall be labeled in a manner that will correctly
indicate its true character.
All grades of milk up to 18 per cent cream are
now successfully dried. The composition1 of several
of these dried products follows:
1 Stocking, Wm. A., "Manual of Milk Products," 1917, MacMillan Company.
309
THE PRICE OF MILK
Butter Fat
Casein
Albumin
Milk Sugar
Ash
Moisture
(per cent).
(per cent).
(per cent).
(per cent).
(per cent).
(per cent).
Skim milk
1.35
29.79
7.91
49.94
8.21
2.40
Half f»kim
14.20
25.56
6.70
44 41
7 01
2 12
15 per cent cream
65.15
10.60
2.82
17.86
2.91
0.66
18 per cent cream
70.47
9.08
2.42
15.01
2.46
0.56
Buttermilk also can be powdered. Professor
Stocking gives the composition of dried buttermilk
as follows:
Per cent.
Butter fat 8.0
Protein 34.0
Milk sugar 40. 0
Lactic acid 6.0
Moisture 9.5
Ash.. 2.5
100.0
These powdered or dried milk products will keep
many months with no increase in the bacterial count.
There are available annually in this country about
15,000,000 pounds of skim milk. Too much of this
has gone to waste. This waste can be prevented by
drying or condensing skim milk and by using it in
the home in a liquid state or as cheese. The com-
parative value of skim milk and whole milk are:
Skim Milk
90 . 5 per cent water
0 . 3 per cent unavailable
nutrients
3 . 3 per cent protein
0 . 3 per cent fat
5 . 1 per cent carbohydrates
0 . 5 per cent ash
Whole Milk
87 . 0 per cent water
0 . 5 per cent unavailable
nutrients
3 . 2 per cent protein
3 . 8 per cent fat
5 . 0 per cent carbohydrates
0 . 5 per cent ash
310
FOOD VALUE OF WHOLESOME MILK
One pint of skim milk furnishes 170 calories; one
pint of whole milk furnishes 310 calories.
Skim milk is essentially liquid lean meat. Five
pints of separator skim milk contains chemically the
same food value as one pound of meat. Roughly
speaking, meat and cottage cheese are of equal food
value, pound for pound. On the average, 15 pounds
of cottage cheese, can be made from 100 pounds of
skim milk. Cottage cheese is composed of about
72 per cent water, 20 per cent protein, 1 per cent fat,
4.3 per cent carbohydrates and 1.8 per cent ash.
The food value of milk is thus summarized by Dr.
McCollum :
It is a fact too well known to need comment, that milk
is a complete food for a young, growing animal and
that for a certain period after birth, a period which varies
with the species, no other food can take its place without
disaster. It is not so well known that milk is a food
of exceptional value for the adult, although a few medical
men have fully appreciated this fact. Dr. Wier Mitchell
many years ago had remarkable success in the treatment
of patients suffering from neurasthenia, by keeping them
in bed confined to a diet which was principally milk.
It is of unusual interest to note that Harvey, the discoverer
of the circulation of the blood, in reporting on his autopsy
of Thomas Parr, who is stated to have lived to the age
of 153 years, says that his diet until just before his death
when he was invited to the court of King Charles in
1635 consisted of subrancid cheese, and milk in every
form, coarse bread and small drink, generally sour
whey. . . . Milk is therefore so constituted as to make
an ideal food for supplementing the ordinary vegetable
foods which should form a considerable part of our diet.
311
THE PRICE OF MILK
It corrects the deficiencies of these in a remarkable way.
In order to obtain best results, however, it is best to use
with the ordinary vegetable foods, but a small amount
of meat, a quart of milk a day for each member of the
family, and as much of one or another of the green leafy
vegetables as the appetite will permits
1 McCollum, E. V. and Simmons, Nina. " The American Home Diet," Fred-
erick C. Mathews Co., 1920, p. 69.
312
CHAPTER XIV
Cooperation and Price
One of the theories of our industrial life has been
that competition assured a fair price to producer
and to consumer. According to this theory price
was the result of forces beyond control and hence
the wisest policy was to let those forces alone and
accept as the gift of the gods whatever price they
brought. To this "law of supply and demand " we
were to abdicate the throne of reason and social
control. In this view, price was to be accepted
without protest as cows in pasture take the rain:
content with the downpours that fatten and, shiver-
ing, submit in silence to the long cold drizzles that kill.
But price is not necessarily the result of iron laws
that bind the hands of endeavor and stifle the voice
of social need. Prices are man-made. They may
have in them the sentiment of good will, the desire
to do well, the sense of obligations to others, the
ethical and living standards of those who buy and
sell. Being man-made, prices are subject to human
control and are in large part what we desire them
to be, if we have but the vision, the skill, the per-
sistency of endeavor and the good will that brings
the cooperation essential to sound price adjustments.
A few crowded years ago, because of rising feed
and labor costs, farmers had to get a higher price
313
THE PRICE OF MILK
for their milk to get back costs of production. One
way to secure an advance in price is to let milk get
so scarce that the short supply will force up the
price, leaving each farmer to sell at what he can get
and to stop production when he must. This method
is effective. Effective because it bankrupts some
dairymen who hope too long; effective because it
slaughters cows, leaves dairy barns to rot, and
destroys the fertility of the fields; effective because
it disgusts whole districts with dairy production,
and turns their energies to other products of the
farm; effective because it costs so heavily to the
next generation of children whose milk must be
higher priced in order to entice back the confidence
of dairy districts, reclaim the farms, rebuild the
barns, grow cows from calves and replace bank-
ruptcy with prosperity. Such is the law of supply
and demand when unguided by the torch of vision
in the hand of cooperative helpfulness.
There is another method for raising up the price
of milk to the point where production will be main-
tained or increased to meet growing needs. This
method starts with a meeting of milk producers
who see the need for a higher price. Their decision
is not to kill their herds, but to get others to believe
in their needs and, believing, help. The first step
is to get a thorough organization among milk pro-
ducers so that they may bargain as one man with
the one milk dealer to whom they sell. This one
dealer sees the need for getting others to join with
him. Perchance, being human, his first effort is
314
COOPERATION AND PRICE
to get others to join with him to prevent the pay-
ment of a higher price, or at least to make certain
that others pay as high a price as he does. The
cooperation of other dealers to this end means only
that the milk producers in their districts must also
organize to assure equality of bargaining power.
Dealers organized and producers organized agree
on prices that affect the consumer. Consumers
complain much, suffer long and patiently, then a
few consumers get together to "see what can be
done about it." At first, being human also, they
decide to boycott milk and bring the " producer-
distributor milk trust " to terms. In this they are
aided by reporters who write stories that say what
consumers want to hear. Some city attorney with
the political itch puts the farmers who are trying
to preserve their properties in jail for conspiracy to
restrain trade.
But in time wiser counsels prevail. Organized
consumers, organized dealers and organized farmers
get together. Each group states their needs and
all learn that by cooperation each group can get
justice in price. The demand for milk is widened
because consumers learn the true food value of the
milk they buy. The representatives of consumers
find that the price they thought was too much was
still less than the milk is actually worth in money.
They plead, however, that milk is a necessity for all
children and the price should therefore be based,
not on all that the traffic will bear, but on a program
of efficient production on the farm, with the least
315
THE PRICE OF MILK
possible costs in distribution. The farmers reply
that their interest is in the annual net return, and
that they are ready to accept somewhat lower
prices in the autumn if the organized consumers
will cooperate to increase consumption in the spring
months when production costs are as high as in the
autumn but when milk production is higher only
because cows are fresh. Consumers point out that
drivers of retail wagons are careless in collecting
bottles and that there are too many retail wagons
on each street. The dealers reply that they can
lower the costs of distributing if consumers will take
pains to put their bottles out each morning, report
the names of drivers who are careless in collecting
bottles, and see to it that bottles are not used for
preserves or carelessly broken in the home. The
dealers also indicate their willingness to reduce the
number of wagons on each street by agreeing to a
minimum load on each wagon and a minimum
average load for all wagons. Costs are lowered in
the country by the cooperation of organized farmers
and organized dealers to prevent unnecessary dupli-
cation in country receiving stations; and the cooper-
ation of transportation companies is assured to get
proper and adequate facilities for shipping milk to
the city. With these assurances the farmers'
organization urge their members to cool their milk
properly because so to do widens their market
through a more wholesome product and gives to
the organized consumers a product they can push
more vigorously.
316
COOPERATION AND PRICE
In planning their spring campaign for increased
milk consumption the organized consumers elicit
the cooperation of teachers in the schools in teach-
ing the food value of milk and in distributing
leaflets giving recipes for the use of milk. The
officials of charity organizations agree to bring these
recipes and the facts as to the food value of milk
to the attention of those whom they visit. Knowing
the facts and the needs, the physicians also agree to
help in this campaign. The bulletins published by
various governmental agencies are ransacked for
information to be used. For it avails nothing that
the scientists know the facts about the food value
of milk unless the mother in every home knows
and acts on these facts. Moving pictures are
enlisted, posters in the street cars and on the retail
wagons tell the value of milk as compared in prices
with other foods. Health officials join lustily in the
movement, knowing its value to public health and
welfare.
As the season of maximum production approaches,
it may be found that the prices for butter, cheese
and condensed milk are too low to safeguard pro-
duction. The cooperation of the federal authorities
is sought to relieve or encourage the export situa-
tion. To obtain and maintain a good export trade
standards are necessary and the aid of the national
bureau of markets with the cooperation of state
market bureaus is enlisted to assure standards in
production, manufacture, package, storage and trans-
portation that will give us an entrance into inter-
317
THE PRICE OF MILK
national markets. Prices to farmers soon reflect
this new confidence in future prices for milk products.
And what are the achievements of these coopera-
tive methods? Through stabilized prices the net
return to the producer for the year is such as to
keep the output of milk up to the larger amount
needed; the price to the consumer of whole milk is
stabilized on a year round basis so that the price
for milk in the autumn months when it is most
needed by consumers because of the scarcity of
green vegetables will not be unreasonably above the
price in the summer when such vegetables are
plentiful; to this same end it is agreed that the
spread to the milk dealer from f. o. b. city to the
consumer shall be wider in the spring and summer
in order that it may be smaller in the autumn months
and thus further aid to stabilize the price to con-
sumers; the price to the consumer reflects the
savings in economical milk distribution in that
avoidable duplication of investments and of wagons
on the street is done away with; the investments of
milk dealers are safeguarded so that the return need
not include an added risk due to discontent as to
milk prices in the country or in the city. All parties
are financially better off. And that because they
understand each other. And all have learned that
the law of supply and demand can be brought to
reflect social needs and fair prices.
But this is all a dream you say? Quite to the
contrary these are the methods that have been used
and the results that have been secured in Philadel-
318
COOPERATION AND PRICE
phia, Pittsburgh, Baltimore, Detroit and other cities
in the United States.
And all this without the use of power? Not at
all. All of this just because of the effective mobil-
ization of power. Producers, organized, can effec-
tively refuse to sell. Consumers, organized, can
effectively refuse to buy. Dealers, organized, can
effectively refuse to buy and to sell. Neither,
unorganized, can do this. Nor can either group
get its best results until both the other groups are
thoroughly organized. Useless one without the
other. For one, alone, can be unfair; and unfair
prices in time bring their own penalties.
The night of the day of individual effort unaided
by cooperation is over. The dawn of the new day
of enlightened cooperation is at hand; a cooperation
that is enlightened because it is powerful enough to
get a full hearing and a full hearing begets justice.
But does this not mean economic strife? Progress
comes through the struggle of equals. It is bush-
whacking, not fair price bargaining, for organized
dealers to say to individual farmers what price they
are to get for milk, or for organized farmers to name
a price to individual dealers or for organized farmers
and organized dealers to set prices to be paid by
individual consumers. Price conferences should
include all three elements through representatives
with a power sufficiently organized to get fair
treatment.
The agents of government when thus supported
can be effective whether as mediators or in aiding
319
THE PRICE OF MILK
marketing or in the protection of health and public
welfare. Government officials need not then assume
burdens they cannot carry. Only organized pro-
ducers and organized consumers are effective with
any governmental organization under the large
industrial units of the day. In cooperation is power.
Our forefathers put this another way: "In union
there is strength/' Through cooperation with
power, prices can be made just and kept so.
The elements in cooperation of the kind charac-
terized above have been exemplified for a consider-
able period in Philadelphia, Pittsburgh and Balti-
more. The results have been: a price to producers
equal to and at times above that in other primary
districts; a lower relative cost of distribution; a
price to consumers below that prevailing in nearby
cities where farmers have received a lower price;
a wholesome stabilized market for both producers
and dealers.1 The plans differ slightly in each of
these cities, though their essentials are the same.
It will suffice for the plans in all three cities to give
here the important elements in the Pittsburgh Plan.
The Pittsburgh Plan
When the Food Administration was demobilized
and its arbitral work came to an end the representa-
tives of the two farmers' organizations centering in
Philadelphia and in Pittsburgh joined with repre-
sentative consumers and milk dealers in asking the
1 See especially chart on page 156.
320
C06PERATION ANb PRICE
Governor of Pennsylvania to appoint a milk price
arbitrator to arbitrate price differences between pro-
ducers, dealers and consumers. The organized
farmers did not believe that their power to strike
should be uncontrolled nor did the dealers believe
that their power to refuse to buy should be exercised
save in the long-time public interest; and both felt
that the public should be party to prices so pertinent
to human welfare as are milk prices. This principle
is the fundamental one in the Pittsburgh Plan as it
is in Philadelphia and Baltimore.
This arbitrator meets with the monthly price
conference presided over by the county agent.1 In
attendance also are about a half dozen women
representing the Congress of Women's Clubs of
Western Pennsylvania, the Catholic Women's League,
the Housekeepers' League, the Public Health Nursing
Association, the Consumers' League, and the Milk
and Ice Fund. These conferences are open to the
public. The reporters for the newspapers are in-
vited and attend. An accountant named by the
arbitrator goes over the books of the milk dealers
and presents his findings to the arbitrator. These
findings for the market as a whole are given in
general to the conference. The arbitrator never
gives out facts as to any one milk distributor.
Reports are at hand from a county agent2 who has
continuous information as to production costs in the
district. The dealers and producers give their facts
1 Mr. N. S. Grubbs of Allegheny County, Pa.
8 Mr. J. M. McKee of Washington County, Pa.
21 321
THE PRICE OF MILK
as to costs and market conditions and present their
price arguments in open meeting. Conference com-
mittees may be appointed. The representatives of
the public aid in any and all ways pertinent to the
welfare of producers, distributors or consumers.
Prices thus agreed on are respected by all the pur-
chasers in the district. The State Agricultural
College, the Pittsburgh Chamber of Commerce both
have joined in this cooperative effort.
Representatives of producers, and the public
dealers have been and are willing to hear "the other
side." All parties have accepted heartily the prin-
ciple of arbitration and have recognized in spirit
and in letter the interest which each of the other
groups has in the price for milk.
The spirit of the Pittsburgh plan was expressed by
the following resolutions adopted by the congress
of Women's Clubs of Western Pennsylvania on
November 29, 1919:
Whereas, The farmers producing milk for the
Pittsburgh district have in their price conferences
considered the interests of the consumer; and
Whereas, The milk dealers in Pittsburgh are
taking substantial losses during the month of
December in order that the price to the consumer
may not be advanced over the November prices;
and
Whereas, The producers and milk dealers in-
clude a committee of consumers in their price
conferences and accept the principle of arbitration
as to prices to be paid by producers and consumers;
therefore, be it
322
COOPERATION AND PRICE
Resolved, That we, the Congress of Women's
Clubs for Western Pennsylvania, endorse the
principles and methods used in these milk
price conferences and recommend to all business
and to all laborers the advisability of accepting
similar principles at this time and including the
interest of consumers in setting prices and fixing
wages.
This is not an arbitral court. The arbitrator has
only publicity powers. The plan simply represents
the elements essential to fair prices in the milk
industry under twentieth century conditions. It
is the new way of giving achievement opportunities
to that race-old economic principle: "The Lord
helps them that help themselves. " The heart of the
plan is collective bargaining in the public presence
in the best interests of all, with no one party at
interest an autocratic power. It is a way truly
American. It gets results.
323
CHAPTER XV
Fair Price Policies
Policies adopted by the public as well as policies
adopted by milk producers, manufacturers and dis-
tributors will largely determine the fairness of the
price of milk both to producers and to consumers.
Let us therefore restate in conclusion those policies
reflected through these pages that, adopted, will
tend most surely to protect the long term interests
of all.
Those policies only will persist that are based on
the facts of the industry. Of these facts the follow-
ing are of outstanding importance in shaping policies:
(1) Whole milk is a perishable article, for which a
market must be found every day whether it be manu-
factured into products, the price for which is deter-
mined by national and international forces, or
whether it be sold as whole milk.
(2) The wholesomeness of milk is paramount to
its food value.
(3) Other factors being equal, the unit cost of
distributing milk decreases as volume increases.
(4) Milk contains certain properties essential to
sound nutrition.
These are not new facts, but they are the out-
standing facts around which policies that stay must
be built.
Whole milk is perishable. Just because whole
324
FAIR PRICE POLICIES
milk is a perishable product the price of milk to the
farmer and to the consumer must be determined by
market conditions; that is, by the quantity pro-
ducers are making and consumers are eating. When
prices of whole milk are materially above the price
of manufactured milk products, any increase in
normal production unaccompanied by a similar
increase in consumption, soon means heavy financial
losses to the dealer.
With uniform employment at rising wages, a much
larger quantity of milk can be sold at higher prices
than under conditions of unemployment. Weather
conditions peculiar to a primary market will materi-
ally affect either the production or consumption of
milk; usually decreasing the one while increasing
the other, seldom decreasing or increasing both in
the same ratio.
Within any given primary market region the price
on whole milk must be uniform in order to keep the
flow of milk into usual marketing channels. But
as between the larger primary raw milk markets
there must be monthly variations in price to meet
changing local producing and consuming needs.
Just as certainly as the conditions of production
and consumption in each primary market largely
determine the price of whole milk when that price
is materially beyond the value of manufactured milk
products, so the value of these manufactured prod-
ucts must largely determine the price of whole milk
when substantially more milk is being produced than
is being consumed. In both periods, of course,
325
THE PRICE OF MILK
there must be a price to the farmer that will give
him his production costs as judged by his alterna-
tives; and over a period of years, the production
costs and consumption figures must be the same;
but it is the way of all markets that these two forces
for any one day or for any one month or for any one
year are seldom identical.
The first plank in fair price policies is that the
price of milk to the producer is determined by
market conditions. And this for the very simple
reason that the alternatives lie with the farmer on
the one hand and with the consumer on the other.
The farmer can produce, the consumer can eat, more
or less of other things. And this "more-or-less"
factor it is that in the final analysis determines the
price of milk.
The question with the farmer is not only what
he is making on milk but whether he can make more
or less on milk than on other things; the question
with the consumer is whether she desires to choose
more or less milk at prevailing prices as compared
with other foods.
We ma;^chLJ^
worth
are noThi the toothless age
more powerful than preachments and demand some-
thing todiew. A long line of chewing ancestors
sets the upward limit to the amount of fluid milk
adults will consume, even though it is the one per-
fect food. And the wise old farmers that make the
choice as to whether they will or will not produce
326
FAIR PRICE POLICIES
milk cogitate on many things not included in price
formulas.
The law of supply and demand is not a juggernaut
car before which all must cast themselves. Both
production and consumption are the results of a
complexity of forces, all of which are subject to
social control within limits by proper means. We
can, by cooperative action, adopt constructive poli-
cies that will protect the interests of both producers
and consumers of milk. Communities, local or
national, can have ideals and carry them out just
as do individuals.
That governmental agencies can ever "fix" the
price to be paid producers for milk is one of the
ideas that ought to be interned for all time to come.
Governmental agencies can really "fix" prices only
where production and consumption are both known
and subject to complete control. This happens only
when, as in war time, government becomes the chief
purchaser, or when there is a monopoly of purchas-
ing or of production, or, as with electric, water, or
street railway companies, of distribution. The
spread that is required for distributing milk, public
agencies may determine; that is, where the dis-
tributing agencies are few or can all be put under
the same control, just as gas and electric and other
public utilities have.
But price fixing can never be effective as to the
price the farmer must take for his milk. For over
the farmer's choice no one can have control. Even
as to the distributor's spread governmental powers
327
THE PRICE OF MILK
have their distinct limits in that the alternatives as
to where and how men use their capital and their
abilities rest with the individuals. In this field,
therefore, governmental price fixing to be perma-
nent or economical must be such as to entice capital
and adequately reward individual merit.
As to milk prices to the farmers, all parties at
interest can help to assure a price that will maintain
a production adequate to consumption needs.
Many methods can be used to broaden the market
for milk so as to maintain a price that stimulates
production. To this end
(1) Policies that favor the development of an
export trade in dairy products should be adopted
and maintained. This emphasizes good grades and
proper packing
(2) The facts as to the food value of milk as com-
pared with other foods should be disseminated by
teachers, by consumers' clubs, by physicians and by
public officials.
(3) Conditions under which milk is produced,
shipped or distributed we should continue to improve,
in order that the quality of milk delivered to the
consumer may be such as to keep milk both a tasty
and wholesome food.
(4) The nutrient element in butter, not found as
a rule in substitutes for butter, should be made
known to each household in all countries.
(5) Milk producers should organize to protect
their price and further economies in production and
transportation. To this end collective bargaining
328
FAIR PRICE POLICIES
by milk producers should not be prohibited by anti-
trust statutes. This done the principle of arbitra-
tion must be recognized.
(6) Prices to consumers can be stabilized by
cooperation between producers and distributors to
the end that the habit of milk consumption may
grow to the betterment of the health of the consumer,
the market for the producer and the business of the
milk dealer. Price stabilization, however, does not
mean price uniformity the year round to either pro-
ducer or consumer.
Other factors being equal, the cost of distributing
milk per quart decreases as volume increases. Vol-
ume, to be sure, is not the sole determining factor in
distributing costs. Many concerns of small volume
will have lower costs than concerns with larger
volume. But, assuming equal competency in man-
agement, equal ability in getting efficient work from
laborers, and assuming that equipment and buildings
are used to capacity, the larger the volume of milk
going through the plant and the larger the volume of
milk on the retail wagon, the lower the cost per quart.
To increase the spread is to increase the number
of channels through which milk is profitably distrib-
uted; and it is only by decreasing those channels
that investments can be assured of protection, and
total net profits increased.
It is sound policy, therefore, to encourage volume
in plant and on retail wagons. This volume can be
encouraged and maintained by the following prin-
ciples:
329
THE PRICE OF MILK
(1) The retail wagon alone is the economical
method of distributing milk.
(2) Cash and carry plans must be eliminated.
(3) Grocery stores should carry milk as an accom-
modation and prices should reflect this.
(4) Unnecessary duplication of investment both
in city and in country is not to the interest of
farmers, consumers, milk dealers, or health author-
ities.
(5) The ideal is one retail milk wagon only on
each street.
(6) This retail wagon should deliver milk in
sealed containers, kept from the first under con-
trolled and refrigerated conditions.
One plan often advocated as a proper solution for
the milk problem misses all the essential points, and
that is the plan of having a public pasteurizing plant,
under the theory that any small dealer can get his
milk pasteurized at the same cost as the large dealer,
and thus assure low prices through competition.
Is each dealer to have his own bottles under this
plan? If so, is the dealer with the smaller number
of bottles to pay more per unit than the dealer with
a larger number of bottles? The cost will be more.
Is bottling to be done separately in many places
where there can be no adequate inspection? Is there
to be a higher price to the consumer for those
dealers who have to make the longer hauls? Is
there any assurance under this plan that many
competitors will either protect the purity of the milk
or the price?
330
FAIR PRICE POLICIES
The new scientific fact that there are elements in
milk absolutely essential to sound nutrition, quite
'apart from its chemical f o(xT~value, makeslnilk^dis-
tribution a public service, and of every milk dis-
tributor a public servant. This fact, together with
the other human elements in milk distribution,
emphasizes another plank in sound public policies:
the salient facts as to milk distribution should be
available to all; facts as to health, facts as to
investments, facts as to production and distribution
costs. Herein lies protection to investments, free-
dom from criticism of the uninformed, a stable
market, a satisfied clientele.
Just how this should and will be done will vary
from section to section. It augurs well for the future
that milk dealers themselves have been the first to
desire just such publicity. The promoter is an
unwelcome visitor to the average milk dealer, for
the milk dealer, as no one else, knows that there is
something peculiarly repugnant to the public mind
in having "water" in the stock of milk companies.
Therefore, the milk dealer has everything to gain
and nothing to lose by factual publicity.
Milk distribution is essentially a quasi-public
business. The law and the facts indicate that it
will be made so unless milk distributors keep their
business on a high plane of price justice.
American consumers are fair and cordially lend
their good will where facts show their treatment to
be fair. The dealer under full publicity can expect
that the public will be fair with him.
331
THE PRICE OF MILK
The wholesomeness of milk is paramount to its
food value. The wholesomeness of the milk supply
is best assured through bacterial, sediment and
butter fat tests of the product as delivered, rather
than through reliance primarily on inspection of
dairy herds and barns. This places a larger responsi-
bility on the milk dealer. A sufficient number of
inspectors should be provided to aid farmers and
dealers in producing milk that is wholesome and in
keeping it so.
Milk varies in value as much as does wheat or
corn or apples or other commodities for which grades
have been established by law. The value of milk
is dependent upon butter fat content and on purity.
It should be bought and sold, therefore, on a butter
fat basis. The grading of the milk purchased from
the producer is done when it is bought on a butter
fat basis. Grades of milk, including a grade of
standardized milk, should be legally established for
sale to the consumer.
'In short, those policies are sound that assure a
fair bargain as to price; secure a milk produced and
distributed under guidance of inspectors to insure
its purity; cooled promptly on the farm to insure
wholesomeness; handled through machinery that
can be sterilized that the milk may not be contam-
inated; distributed with the least possible duplica-
tion of labor and investment, with a volume in
receiving station, in plant and on the retail wagon
requisite for minimum costs; all with full publicity
of cost and profit facts.
332
INDEX
Acid test, 218.
Advertising, 189, 257.
American Public Health Association, 202, 216.
Anderson, Professor, 108.
Animal fats. See Substitutes for butter.
Anti-trust statutes, 138-141.
Arbitration of milk prices, 320-323, 329.
Australia, 22.
Austria-Hungary, 85.
Bacteria standards, 218, 230-234.
Balance of trade, 91. See Exports and imports.
Baltimore, 66, 107, 157, 159, 185, 187, 196, 265,
320.
Berlin, 89.
Bingham, John, 259.
Blended milk, United States standard for, 232.
Boston, 93, 185, 240, 242.
Bottle Exchange, Baltimore, 273.
Bottles:! capping, 188; exchanges, 290; loss,
188, 239; washing, 188, 189, 211.
Bottling, 188, 189, 199, 211, 271.
Bowen, John T., 209.
Breed, R. S.t 203.
Butter, 33, 36, 38, 39, 45, 47, 51, 60, 68-72, 89,
90, 91; adulteration, 193-194; companies,
130; food value of, 305; manufacture of,
130; prices, 70, 71, 76, 77, 79-81, 82, 96-98;
production of, 51, 52, 74-76; standards for,
223-234; substitutes for, 47, 74-82, 92,
305; value of, 61. (For legal standards for
butter see Legal Standards for Dairy Prod-
ucts.)
Butter fat, 158.
Buttermilk, 38, 39, 51; powdered, 310;
United States standard for, 232.
California, 166, 223.
Calves, 37, 38, 39; increase in, 31; slaughtered
in United States 1914-1919, 31.
Can washing, 188.
Canada, 85, 87, 88; Milk Committee, 259;
milk cows in, 86.
Casein, 36, 59.
Cash and carry plans, 236-244, 330.
Charitable organizations, 221, 242.
Cheese, 36, 37, 38, 39, 45, 51, 52, 59, 60, 76, 89,
90, 91; cottage, 311; factories, 98; prices
of, 68-72, 76, 79, 96-98; production, 51,
74-76; substitutes for, 92; value of, 61.
(For legal standards for cheese see Legal
Standards for Dairy Products.)
Chicago, 93, 94, 96, 97, 112, 113, 119, 120,
123, 125, 152, 154, 155, 156, 185.
Chicago Milk Commission, 118.
Civil service, 220.
Cleveland, 88, 93, 107, 187; price to pro-
ducer, 252; spread to distributor, 252.
333
Cold storage, 66, 70-74; plants, 130; prices,
78-80, 103.
Colorado, 223.
COLLECTIVE BARGAINING, SHOULD DAIRYMEN
ORGANIZE FOR? 130-141.
Collective bargaining, 49, 130-141, 313-323,
328r329.
Coloring agents, 199.
Columbus, 237, 238; spread to milk dis-
tributor, 253; price to producer, 253.
Commission on Milk Standards, 198, 204, 206,
222.
Competition, 35, 137, 138; butter, 46; inter-
national, 48, 66.
Concentrated milk, 232, 233.
Condensed milk, 36, 37, 39, 40, 51, 52, 59, 67,
69, 77, 81, 89, 90, 91, 134, 233; companies,
131; powders, 101; production of, 51;
retail price of, 79. (For legal standards for
condensed milk see Standards for Dairy
Products.)
Condenseries, 134.
Consumers and milk prices, 313-323.
Consumers' interests, protection of, 148-159,
324-333, 274-290.
Consumption: per capita of butter, 74; per
capita of meat, 23; milk, 15, 23.
COOPERATION AND PRICE, 313-323.
Cooperation and price, 148.
Cooperative sales organizations, 165-172.
Corn, 31, 33.
Corn oil, 76.
Cost, volumeand, 208, 210, 211, 251-273, 282,
290, 329.
Cost of producing milk, 36, 48, 104-129.
Cost unit, farm, 104.
Cottonseed oil, 76.
Cows, depreciation, 120.
Cream, 58, 83.
Cream powders, 101.
Creameries, 58, 98.
Cottonseed meal, 31, 33.
Connecticut, 109.
Dairy areas: United States, 88, 89; world's
greatest, 85.
Dairy cattle in United States, 93; see map
facing 94.
Dairy costs, efficiency in, 127.
Dairy cows, distribution of, in United States,
85; value, 24.
Dairy Division of the United States Depart-
ment of Agriculture, 37, 90, 209.
Dairy farms: licenses, 202-204, 212-222;
wages on, 120, 124.
Dairy organizations, 165-172.
DAIRY PRODUCTS, LEGAL STANDARDS FOR,
223-234.
INDEX
Dairy products: economical, 23; exports of,
89, 93; storage of, 123; receipts from, 25;
value of, 51.
Dairy regions, location of, 85-88.
Dairy strikes, H^HS.
Dairymen's organizations, functions of, 136;
local 143.
Daylight delivery, 151.
Delivery expense, 188, 189. See Distribution.
Denmark, 87.
Depreciation, 120, 189, 190.
Detroit, 93.
Dipped milk, 236-250.
Diseases, milk-borne, 194, 200-212.
DISTRIBUTED, How SHALL MILK BE? 235-250.
DISTRIBUTION, CAN MILK COSTS, BE LOW-
ERED? 251-273.
DISTRIBUTION, THE COST OF MILK, 175-192.
DISTRIBUTION, THE PUBLIC INTEREST IN, 274-
290.
Distribution: costs of. 16, 244, 251-273, 329-
331; dairy cows in United States, 85;
economies in volume of milk, 208; public
regulation of, 274-290.
Distributor, 198.
Dried milk, 233, 309.
Dried cream, 309.
Educational campaigns, 40-42, 328-329.
Efficiency in dairy costs, 127.
England, 21.
Erdman, H. E.. 236.
Evaporated milk, 52, 67, 69, 77, 81, 134, 232;
sweetened, 233.
Expenditure f9r milk and meat, 22.
Exports of dairy products, 67, 78, 81, 89-91,
93.
Europe, 85; milk cows in, map facing 86-
Ewe's milk, United States standard, 232.
Factors in production, 122. See Formula.
Factory butter, United States, 132. See
Butter.
Family budgets, 22.
Farmers, prices to, 110. See Producers.
Farms: inspection of, 200 ff.; labor on, 33;
live stock on, 29; wages, 117.
Fats, production, 75. See Butter.
Feed consumed per cow, 127. See Formula.
Field method, 10^107.
Food Administration: milk commissions, 111;
Pennsylvania, 40, 213, 221; 260; United
States, 162.
Food habits, racial, 35, 41.
Food Law, United States Pure, 194. See
Legal standards.
Food sources, 22.
FOOD VALUE OP WHOLESOME MILK, THE,
293-312.
Food values, comparative, 19.
Food value of milk, relative, 44.
Formula method, the, 108-129, 159-165. See
Cost of production.
France, 85, 87, 88.
Freight, 189.
Functions of dairymen's organizations, 136.
Gardiner, Asa B., 265.
Germany, 21, 85, 87.
Goat's milk, United States standard, 232.
Good-will, 289.
Grades of milk, 221-222.
Great Britain, 87, 88. See United Kingdom.
Greece, 88.
Grocery stores as milk depots, 235-250, 330.
Harding, H. A., 203, 215.
Haskins and Sells, 183.
Hauling: city, 176; cost of, 175.
Hay, 31, 33. See Formula.
Homogenized milk, United States standard,
232. See Remade milk.
Hoover, Herbert, 20, 109, 121, 160, 183, 307.
Hog price formula, Hoover, 160.
Ice cream, 36, 37, 38, 39, 45, 58, 59, 82, 189;
storage products in, 83-85; 101-102. (For
legal standards for ice cream see Legal
Standards for Dairy Products.)
Illinois, 26, 85, 185.
Imports, 67, 76, 91, 92.
Indiana, 121, 185, 223.
Inspectors: qualifications of, 212; salaries
paid to, 219.
International Association of Dairy and Milk
Inspectors, 220.
International trade, 20. See Balance of trade,
Exports, Imports.
Investments: protection to, 331; unnecessary
duplication of, 289, 330.
Iowa, 26, 223.
Italy, 85, 87, 88, 89.
Kelly, Ernest, 219.
Labor, hours of, 127.
Lamb, Judge W. E., 112, 116.
Law of supply and demand, 36, 327. See
Supply.
Live stock, number on farms, 29.
Malted milk, 52, 234.
Management in milk plants, 181-188.
Manufactured milk products, price of, 45, 325.
Market for milk, the, 328. See Law of supply
and demand; Competition.
Market price, 65.
MARKETS, THE PRICE INTERDEPENDENCE or
LOCAL, PRIMARY AND INTERNATIONAL, 85-
103.
Maryland, 223.
Massachusetts, 109.
McCollum, Professor, E. V., 16, 41, 274, 293,
294, 295, 303, 305, 306, 307, 311.
McKee, J. M., 127.
Meat, per capita consumption of, 23; produc-
tion of, 30.
Mendenhall, Dorothy R., 297.
Michigan, 109, 121, 223.
MILK, THE FOOD VALUE or WHOLESOME,
293-312.
334
INDEX
Milk: as an animal food, 47; bottled, 205;
cheap as a food, 18; chemical composition
of, 300; consumption of, 37, 38, 39, 44, 53,
54, 65; cooling of, 175; estimated produc-
tion of, 30; grades, 332; protective food
value, 17, 18, 149, 274-290, 293-312, 331;
qualities needed in, 218; regularity in con-
sumption, 239-242; relative price of, 18,
302; remade, 55 (see Remade milk); stand-
ardization of, 195, 232; surplus and price,
53-60; uses, 37. (For legal standards for
milk see Legal Standards for Dairy Products.)
Milk-borne diseases, 200-212.
Milk bottles, loss on, 272-273 see Bottles.
Milk Commission, 255-288.
Milk Commission: Chicago, 118; New York
Federal, 178.
Milk Commissions, Food Administration, 111.
Milk Committee, New York, 198.
Milk consumption, standard for, 15, 16, 312.
Milk cows: Canada, 86; Europe, map facing
86; number of, 28; United States, 27.
Milk distribution as a quasi-public business,
274-290, 332.
Milk distribution costs, 251-273.
Milk distributors, buying power of, 36. See
Distributor.
Milk drivers' wages, 267.
Milk inspectors, standards for, 219. See
Inspectors.
Milk manufacturers, buying power of, 36.
Milk plants, wages in, 90.
Milk powders, 36, 82, 99, 100, 101, 253. See
Dried milk; Remade milk.
Milk producers, price received by, 152-159,
252-256.
Milk solids, 39.
Milk sugar, 52, 302, 310.
Milwaukee, 185.
Minnesota, 26, 109, 223.
Monopoly, 135. See Quasi-public.
National Commission on Milk Standards, 308.
National price fixing, 144.
Nebraska, 223.
Netherlands, 87. '
New England, 185; Milk Producers' Associa-
tion, 159.
New Jersey, 109.
New York City, 26, 60, 78, 87, 94, 96, 97, 109,
119, 123, 152, 154, 155, 156, 177-180, 182,
185, 216, 236, 238, 242, 243, 244, 245, 251,
260, 265; spread of distributor, 179. See
Distributor; Spread.
New York Federal Milk Commission, 178.
New York Milk Committee, 198.
New Zealand, 22.
North, Charles E., 182.
Ohio, 26, 88, 94, 185, 237.
Oil, production, 75. See Butter substitutes.
Oklahoma, 223.
Oleomargarin, 46, 76, 305; price of, 47; pro-
duction of, 47, 75-79. See Butter sub-
stitutes.
Oregon, 223.
ORGANIZATIONS, POLICIES OF DAIRYMEN'S, IN
THEIR RELATION TO PRICE, 142-172.
Ottawa, Canada, 265.
Pasteurization, 189, 202, 202-219; cost of,
208, 209; states and cities requiring, 223-
234; United States standards, 232.
Pasteurization plant, public, 330.
Peanut oil, 76. See Butter substitutes.
Pearson, F. A., 108, 112, 121, 124.
Pennsylvania, 26, 260.
Philadelphia, 56, 66, 93, 94, 97, 152, 153, 15i
155, 156, 157, 158, 180, 185, 237, 242, 245,
251, 265, 320; consumption of milk in, 44;
distribution costs in, 184-188; retail prices
in, 252; spread in, 181, 182; wages, 43.
Pittsburgh, 88, 93, 152, 154, 155, 156, 159,
185, 242, 320; distribution costs in, 253-257;
price conferences in, 320; producers' price,
254.
Platform expense, 189.
POLICIES OP DAIRYMEN'S ORGANIZATIONS IN
THEIR RELATION TO PRICE, 142-172.
Powdered cream, 52.
Powdered milk, 52, 151. See Dried milk;
Remade milk.
Powdered skim milk, 52.
Power, 188. See Spread.
PRICE, COOPERATION AND, 313, 323.
PRICE, MANUFACTURED MILK PRODUCTS IN
THEIR RELATION TO, 51-84.
PRICE OF MILK, THE FORCES THAT Fix THE,
35-50. See Producers.
PRICE OF MILK, THE PUBLIC INTEREST IN THE,
15-34.
PRICE POLICIES, FAIR, 324-333.
PRICE, POLICIES OF DAIRYMEN'S ORGANIZA-
TIONS IN THEIR RELATION TO, 142-172.
PRICE, SANITARY REQUIREMENTS IN THEIR
RELATION TO, 193-222.
Price conferences, 319.
Price fixing: formula method, 159-165; see
Formula; national, 144.
Prices: consumers', 313-323; living standards
and, 93; market, 65, 94; pasteurization and,
208-210; producers', 110, 152-154, 252, 253;
relation of. to storage stocks, 79; relative
256-258; stabilization of, 149, 329; surplus
plans, 157; volume and, 257.
Primary market, 94, 111, 325.
Producer: advantage to, of public regulation
of milk distribution, 287-288; prices, 110,
152-154, 252, 253.
PRODUCTION, THE COST OF, 104-129.
Production: butter, 51, 76; cheese, 51, 76;
cpndensed milk, 51; meat, 30; milk, 30;
oils, 75; wool, 30.
PRODUCTION, DISTRIBUTION AND FOOD VALUE
OP MILK, 183.
Proteins, 19. See Food value of milk.
PUBLIC INTEREST, THE, IN MILK DISTRIBU-
TION, 274-290.
PUBLIC INTEREST, THE, IN THE PRICE OF
MILK, 15-34.
Public regulation, demand for, 274-290.
335
INDEX
Qualifications, inspectors', 212.
Qualities needed in milk, 218.
Quasi-public, milk distribution as, 274-290.
Rasmussen, Professor Fred, 108.
Receipts from dairy products, 26.
Receiving stations, 53, 54, 134, 135, 175, 218;
declining unit costs with increasing volume
in, 268-270; costs, 184, 187, 190. See
Distribution.
Recipes for use of milk, 40-42.
Recombined milk, 308. See Remade milk.
Reconstituted milk, 308. See Remade milk.
Redfield, H. W., 203.
Refrigeration, 188.
Remade milk, 55, 99, 151, 248, 308. See
Dried milk; Powdered milk.
Retail milk store, 235-250.
Retail wagon, 230-250. See Distribution.
Rochester, N. Y., 258.
Rose, Dr. Flora, 301, 303.
Rupert, Ethel, 43.
Salaries paid to inspectors, 219.
Sales of dairy products, 26.
San Francisco, 93, 97.
Sanitarians, 216.
SANITARY REQUIREMENTS IN THEIR RELATION
TO PRICE, 193-222.
Sanitary requirements, cost of, 211-212.
Scurvy, 206.
Seattle, 93, 94.
Sediment tests, 218.
Selling expense, 189. See Distribution.
Shipping facilities, 137.
Skim milk, 38, 39, 45, 52, 59, 60, 62, 84, 158,
194, 310; powders, 101; see Remade milk;
standard, 232. (For legal standards for
ekim milk see Legal Standards for Dairy
Products.)
Soil fertility, 25.
Spread: defined, 177; to New York distribu-
tor, 179; to Cleveland distributor, 252; to
Columbus distributor, 253; to Philadelphia
distributor, 181, 182, 184-188. See Dis-
tribution.
Springfield, Mass., 242.
Standardization of milk, 195-199.
STANDARDS, LEGAL, FOR DAIRY PRODUCTS,
223-234.
Standards: bacteria, 230-234; Commission
on Milk, 198; for dairy products, legal,
223-234. See Sanitary.
Standards of living, 93.
Sterilized milk, United States standard, 232.
Storage products, 70-75, 78-80, 123; in ice
i-' cream, 83-85. See Cold storage.
Strike, dairy, 146-148.
Supply and demand, law of, 30, 136, 313-323.
See Law.
Surplus, 53, 56.
Surplus milk, 166, 187; price plans, 66, 157.
Sweden, 85.
Taylor, Professor, H. C., 108.
Tests: acid, 218; fat, 176; sediment, 218.
Transportation: charges, 37; costs, 176;
facilities, 36.
Unfair trade practices, 273.
United Kingdom, 85. See Great Britain.
United States: calves slaughtered in, 1914-
1919, 31; dairy areas, 88, 89; dairy cattle
in 93 (see map facing p. 94); Department of
Agriculture, 26, 29, 37, 90, 209, 218, 223;
distribution of dairy cows in, 85; factory
butter in, 132; Food Administration, 162;
milk cows in, 27; production of milk, 28;
pure food law, 194.
Value, dairy cows, 24.
Vegetable oils, 75. See Butter substitutes.
Vermont, 87, 88, 94.
Vitamines, 293-312.
Volume and cost, 208, 210-211, 251-273, 282,
290, 329.
Wages: dairy, 120, 124; milk plant, 190;
Philadelphia, 43.
Wage earner, standards, 20.
Warren, G. F., 108, 119, 121.
Washington, D. C., 107, 185, 187, 212, 213-
215.
Whey, 39, 52, 60, 62, 63.
Wilkes-Barre, 242.
Williams, John R., 258.
Wisconsin, 26, 85.
Women's Clubs of Western Pennsylvania, 322.
Wool, estimated production of, 30.
Woolman, Henry N., 193.
Zone delivery system, 257-262. See Quasi-
public.
336
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