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Full text of "The price of milk"

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^OO 1 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 r 1 

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 NATIONS 1 







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 COUNTRIES I 

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, 1909 1 

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, 1810-1918 1 

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 1918 1 
(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. 


Beef 2 (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 raised 3 (number) 


488,000* 


544,000 


567,000 


578,000 













Product. 


1918. 


1919. 


Per Cent 
Increase or 
Decrease, 
1919 over 
1909. 


Beef 3 (pounds) 


8,465,000 


7,500,000 


-7.84 


Pork 9 (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 


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: 
1,605,587,52s 1 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 


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 









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 PuT 1 

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 


^^^^^^f or/4L SOLIDS 


/A/ A//Z.A" IO 3 39B^-7S y SOO //////^ 






///////// A 










y/^y//M 4 , ',74& i odo,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/9VJ 


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 73 y OOOflOO 


//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, 

1917-1920 1 



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 




Ta 



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 




2iy 2 


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 


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 

BUTTER 1 AND CHEESE, 1913-1919 



1913 1914 1915 1916 1917 1S1O 1919 




BUTTER 
CHEESE 








L*. 






2 










/ 
/ 


1 

* 1 a 












/ 


i\ / 
\ / 












/ 
/ 


^ 

j j^ 










/ 

/ 


*\ / 
\ I 




4*' - 








/V A . /" 


2 




/ 






T N 


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 



P > O C O U U 

8 g S S . * fl S 


80 

70 

10 



] 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 s 1 



Product. 


1912 
(pounds). 


1914 

(pounds). 


1916 

(pounds). 


1917 
(pounds). 


Vegetable oils* 
Animal fats 5 


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 


Butter 2 (farm) 


1,660,000,000 


1,613,736,000 


879,610,000 


733,222,000 


Butter 2 (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 Butter 1 


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 cent 1 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, 1913-1919 2 

(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, 799 1 




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 


35.202.192 1 


12,180,445 


1912 


6,337,559 


46,542,007 


40.205.448 1 


20,642,738 


1913 


2,599,058 


49,387,944 


~ 46.788.886 1 


16,525,918 


1914 


2,427,577 


63,784,313 


-61.356.736 1 


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 committee 1 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 


July.. . 


84 8 


81 


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 the 1 , 
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) 








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 



$2.950 



$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 


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 


7 






3 




4 


Bedding 




3.2 


2.7 


2.7 


2.3 


0.8 


Hauling milk 








4.8 


6.9 


5 

















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 1850 1 



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 1850 1 



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 

\ 





\ 




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,- 

7 


V 












V 

\\ 
* 


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\ 




-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, PITTSBURGH 1 

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* 




'? 


?---"' 

''-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^ 




































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-y 


-^ 


s. 


^ 








****/ 










^ 


^ 


^ 


^^^ 


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ft 


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/ 




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>y 




> 


"X 

\ 






\ 


5 


/ ' ^ 






\ 


\ 
\ 
\ 


/. 


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^ 


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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 December 1 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 

L 168 



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 ered v or 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 



i 8 

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 



1 



II 



I: 



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 


$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 



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g Id A 

g s s 

S SS 



I OO C >. 

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' 2 S S 






i i s fe g 



IS oo cJ 00 S 



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000 







i <M CO 



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55 



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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. Woolman 1 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 A 1 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 Rogers 1 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 

Producers 9 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- 
tors 1 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 
California 5 
Indiana 9 
Nebraska 5 
Oklahoma 17 
Oregon 5 

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, rawless 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 Milk t 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 average 1 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 
investigator 1 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 
grant 1 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). 
2 47 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. Stoeser 1 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. 
Funk 1 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 Kennedy 1 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 Series 1 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 . 

In eggs at 35 cents a dozen 234 . 

In eggs at 55 cents a dozen 153 . 

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 storage 1 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 Committee 2 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 composition 1 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 fkim 


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. 

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 
. 3 per cent unavailable 

nutrients 

3 . 3 per cent protein 
. 3 per cent fat 
5 . 1 per cent carbohydrates 
. 5 per cent ash 



Whole Milk 
87 . per cent water 
. 5 per cent unavailable 

nutrients 

3 . 2 per cent protein 
3 . 8 per cent fat 
5 . per cent carbohydrates 
. 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 agent 2 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;^ch L J^ 
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, 
328 r 329. 

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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