• TABLE OF CONTENTS
HIDE
 Copyright
 Title Page
 Acknowledgement
 Table of Contents
 List of Tables
 Introduction
 Quantities of potentially competitive...
 Major regulations applicable to...
 Prices of potentially competitive...
 Implications for the Florida dairy...
 Recent developments and prospects...
 Summary
 Bibliography
 Appendix






Group Title: Mimeo report - Department Agricultural Economics - EC 66-5
Title: Supplies of fluid milk for Florida
CITATION PAGE IMAGE ZOOMABLE PAGE TEXT
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00071968/00001
 Material Information
Title: Supplies of fluid milk for Florida competitive potential of alternative sources
Series Title: Mimeo report Agricultural economics
Physical Description: 60 p. : ; .. cm.
Language: English
Creator: Weisenborn, D.E
Smith, B.J
MacPherson, W.W
Publisher: s.n.
Place of Publication: Gainesville
Publication Date: 1965
 Subjects
Genre: non-fiction   ( marcgt )
 Notes
Statement of Responsibility: by D.E. Weisenborn, B.J. Smith and W.W. McPherson.
Funding: Agricultural economics mimeo report ;
 Record Information
Bibliographic ID: UF00071968
Volume ID: VID00001
Source Institution: Marston Science Library, George A. Smathers Libraries, University of Florida
Holding Location: Florida Agricultural Experiment Station, Florida Cooperative Extension Service, Florida Department of Agriculture and Consumer Services, and the Engineering and Industrial Experiment Station; Institute for Food and Agricultural Services (IFAS), University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: oclc - 67709405
clc - 000458677

Table of Contents
    Copyright
        Copyright
    Title Page
        Page i1
        Page i2
    Acknowledgement
        Page ii
    Table of Contents
        Page iii
        Page iv
    List of Tables
        Page v
        Page vi
    Introduction
        Page 1
        General
            Page 1
        Principles of location and comparative advantage
            Page 2
        Principles of location and comparative advantage
            Page 2
            Page 3
            Page 4
        The problem and its origin
            Page 5
        Objectives
            Page 6
        Scope and method of study
            Page 6
            Page 7
            Page 8
            Page 9
    Quantities of potentially competitive milk supplies
        Page 10
        Federal order markets
            Page 11
            Page 12
            Page 13
        State regulated markets
            Page 11
        Unregulated state markets
            Page 14
            Page 15
        Summary of potential supplies
            Page 16
    Major regulations applicable to the movement of milk into Florida
        Page 17
        Pricing and classification regulations
            Page 17
            Regulations affecting movement of milk from federal orders
                Page 18
                To the southeastern Florida federal order
                    Page 18
                To the areas of Florida outside the southeastern Florida federal order
                    Page 19
            Regulations affecting movement of milk from state markets operating under state milk control laws
                Page 19
                To the southeastern Florida federal order
                    Page 19
                To the areas of Florida outside the southeasternFlorida federal order
                    Page 20
            Regulations affecting movement of milk from state areas not under state control
                Page 21
                To the southeastern Florida federal order
                    Page 21
                To the areas of Florida outside the southeastern Florida federal order
                    Page 21
        Health and sanitation regulations
            Page 22
        Transportation regulations
            Page 22
        Summary of regulations
            Page 23
            Page 24
    Prices of potentially competitive milk supplies in Florida markets
        Page 25
        Page 26
        Prices of milk at points of origin
            Page 25
            Supplies from federal order areas
                Page 25
            Supplies from states regulated by state milk control laws
                Page 25
            Supplies from unregulated state areas
                Page 27
        Transfer costs
            Page 28
        Computed prices at destination compared with actual destination prices
            Page 29
            Page 30
            Page 31
            Page 32
        Price premiums resulting from preferences for local markets
            Page 33
            Page 34
            Page 35
    Implications for the Florida dairy industry
        Page 36
        Effects on processors and consumers
            Page 36
        Effects on Florida producers
            Page 36
            Page 37
            Page 38
            Page 39
            Page 40
            Page 41
    Recent developments and prospects for the future
        Page 42
        Page 43
        Page 44
        Page 45
    Summary
        Page 46
        Page 47
        Page 48
        Page 49
    Bibliography
        Page 50
        Page 51
        Page 52
        Page 53
    Appendix
        Page 54
        Page 54a
        Page 55
        Page 56
        Page 57
        Page 58
        Page 59
        Page 60
Full Text





HISTORIC NOTE


The publications in this collection do
not reflect current scientific knowledge
or recommendations. These texts
represent the historic publishing
record of the Institute for Food and
Agricultural Sciences and should be
used only to trace the historic work of
the Institute and its staff. Current IFAS
research may be found on the
Electronic Data Information Source
(EDIS)

site maintained by the Florida
Cooperative Extension Service.






Copyright 2005, Board of Trustees, University
of Florida








AGRICULTURAL ECONOMICS MIMEO REPORT EC 66-5
DECEMBER 1965

















titg
















SUPPLIES OF FLUID MILK FOR FLORIDA

Competitive Potential of Alternative Sources

David E. Weisenborn
Blair J. Smith
W. W. McPherson

Department of Agricultural Economics
Florida Agricultural Experiment Stations
University of Florida
Gainesville, Florida






















































Requests for additional copies of this report should be forwarded to:

The Department of Agricultural Economics
Unit B, McCarty Hall
University of Florida
Gainesville, Florida


SUGGESTED CITATION
David E. Weisenborn, Blair J. Smith and W. W. McPherson
SUPPLIES OF FLUID MILK FOR FLORIDA
Competitive Potential of Alternative Sources
Agricultural Economics Mimeo Report EC 66-5, December, 1965
Florida Agricultural Experiment Stations, University of Florida
Gainesville, Florida









ACKNOWLEDGEMENTS


An expression of gratitude is extended the agricultural economists
specializing in dairy marketing at the state universities in each state
of the study area who provided information for this report. Much of
the data they supplied were not available in published reports, and had
to be compiled following the receipt of our request for them. Without
their cooperation, this study might have failed in the early stages of
its development. Personnel of the Florida Milk Commission were especially
helpful in supplying price data and summaries of regulatory provisions
applicable to Florida. Many other persons and agencies contributed to
this study and deserve recognition,but are truly too numerous to list
individually.

Special recognition must be given Dr. R. E. L. Greene and
Dr. Ralph Eastwood, however, for their valuable suggestions throughout
the project and for their final review of the manuscript. An expression
of appreciation is due Mrs. Betty Jo Cook and Mrs. Sharon Lewis for their
capable assistance in carrying out many of the computations necessary to
this study, and in typing the several preliminary as well as the final
drafts of this report.









TABLE OF CONTENTS

Page

ACKNOWLEDGEMENTS ii

TABLE OF CONTENTS iii

LIST OF TABLES V

I. INTRODUCTION 1

General 1

Principles of Location and Comparative Advantage 2

Related Studies 2

The Problem and Its Origin 5

Objectives 6

Scope and Method of Study 6


II. QUANTITIES OF POTENTIALLY COMPETITIVE MILK SUPPLIES 10

Federal Order Markets 11

State Regulated Markets 11

Unregulated State Markets 14

Summary of Potential Supplies 16


III. MAJOR REGULATIONS APPLICABLE TO THE MOVEMENT OF MILK INTO
FLORIDA 17

Pricing and Classification Regulations 17

Regulations Affecting Movement of Milk from Federal
Orders 18
To the Southeastern Florida Federal Order 18
To the Areas of Florida Outside the Southeastern
Florida Federal Order 19

Regulations Affecting Movement of Milk from State Mar-
kets Operating Under State Milk Control Laws 19
To the Southeastern Florida Federal Order 19
To the Areas of Florida Outside the Southeastern
Florida Federal Order 20

iii









Regulations Affecting Movement of Milk from State
Areas Not Under State Control 21
To the Southeastern Florida Federal Order 21
To the Areas of Florida Outside the Southeastern
Florida Federal Order 21



Health and Sanitation Regulations 22

Transportation Regulations 22

Summary of Regulations 23

IV. PRICES OF POTENTIALLY COMPETITIVE MILK SUPPLIES IN FLORIDA
MARKETS 25

Prices of Milk at Points of Origin 25

Supplies from Federal Order Areas 25
Supplies from States Regulated by State Milk Control
Laws 25
Supplies from Unregulated State Areas 27

Transfer Costs 28

Computed Prices at Destination Compared with Actual Desti-
nation Prices 29

Price Premiums Resulting from Preferences for Local
Markets 33


V. IMPLICATIONS FOR THE FLORIDA DAIRY INDUSTRY 36

Effects on Processors and Consumers 36

Effects on Florida Producers 36


VI. RECENT DEVELOPMENTS AND PROSPECTS FOR THE FUTURE 42

VII. SUMMARY 46

BIBLIOGRAPHY 50

APPENDIX 54








LIST OF TABLES

Table Page

1. Milk Marketed by Producers, United States, 1950-1963 8

2. Seasonal Distribution of Estimated Annual Total Surpluses
or Deficits for Selected Federal Order Markets and Areas,
1961-63 Average 12

3. Seasonal Distribution of Estimated Annual Total Surpluses
or Deficits for Seven of the Ten States Operating Under
State Milk Control Laws, 1961-63 Average 13

4. Seasonal Distribution of Estimated Annual Total Surpluses
or Deficits for the States Not Operating Under State Milk
Control Laws, for which Sufficient Data Were Available,
1961-63 Average 15

5. Annual and Seasonal Class I Prices per Hundredweight in
Major Surplus Federal Order Areas, 3.5 Percent Butterfat,
1961-63 Average 26

6. Annual and Seasonal Designated Prices Per Hundredweight of
Surplus Milk Available for Out-Shipment for Fluid Use in the
Six Surplus States Operating under State Milk Control Laws,
3.5 Percent Butterfat, 1961-63 Average 27

7. Annual and Seasonal Manufacturing Prices per Hundredweight,
5 Surplus Unregulated States, 3.5 Percent Butterfat, 1961-
63 Average 28

8. Shortest Highway Distances from Selected Surplus States and
Federal Orders to Six Florida Destinations and Computed
Total Costs of Transferring a Hundredweight of Milk for Each
Set of Markets. 30

9. Annual and Seasonal Prices in Dollars per Hundredweight, for
Class I Milk with 3.5 Percent Butterfat, by Marketing Areas
in Florida, 1961-63 Average 31

10. Average Annual Differences Between Actual Florida Prices and
Computed Costs of Alternative Milk Supplies at Six Florida
Locations, in Dollars per Hundredweight for 3.5 Percent
Milk Based on 1961-63 Data 32

11. Surplus Quantities and Price Differences of Grade A Milk
for Selected Surplus Federal Order Markets which were Poten-
tial Lower Cost Sources of Milk for Florida Markets, 1961-
63 Annual Averages 34









12. Estimates of Income and Income Changes for the Average
Dairy Farm in the Five Florida Non-Federal Order Marketing
Areas Under Certain Assumptions with Respect to Price
Alignment 37

13. Total Milk Marketed and Per Capita and Total Domestic
Civilian Disappearance of Fluid Milk and Cream, United
States, 1950-1964 44



APPENDIX TABLES

1. Seasonal Distribution of Estimated Annual Total Surpluses
or Deficits for the 53 Federal Orders in the Study Area,
1961-63 Averages 54

2. Annual and Seasonal Class I Prices per Hundredweight for
the 53 Federal Orders in the Study Area, 3.5 Percent
Butterfat, 1961-63 56

3. Shortest Highway Distances Between the Federal Order Markets
not Included in Text Table 8 and Six Florida Destinations,
with Computed Total Costs of Transferring a Hundredweight of
Milk over each Distance 58

4. Average Annual Differences Between Actual Florida Prices
and Computed Costs of Alternative Milk Supplies at Six Florida
Locations for the Federal Order Markets not Listed in Text
Table 10, in Dollars per Hundredweight of 3.5 Percent Milk
Based on 1961-63 Data 60







SUPPLIES OF FLUID 1ILK FOR FLORIDA
Competitive Potential of Alternative Sources

by

David E. Weisenborn, Blair J. Smith and W. W. McPherson*


I. INTRODUCTION


General


In the early days of the commercial dairy industry, the geographic
areas of assembly for milk were relatively small and well-defined. They
tended to be concentrated around the local centers of population, and
market prices and other terms of trade were determined by forces largely
independent of conditions in other, even nearby, markets. As developments
in transportation permitted the movement of milk for given distances in
shorter times, and as the shelf-life of milk was extended through improved
methods of handling--particularly in the area of refrigeration--increases
in distances between places of production and points of consumption became
possible. Advantages accruing to producers because of proximity to markets
thus diminished, and the location of production began to shift to those
areas which had the greater competitive advantages on the production side
of the industry.

Public legislation for the regulation of the marketing of milk was
enacted, for the most part, in the decade of the thirties. This period
of time ante-dated the advent of many of the developments in transportation
and handling which have shifted the determinants of the location of pro-
duction from the marketing to the production side. Thus, milk at that time
tended to be priced more on the basis of local supply and demand factors
than on considerations related to the national milk market. Many of the
state regulations included features which had the effect, whether it was
their intended purpose or not, of reserving in-state markets for in-state
producers. These features were strengthened through legislative amendments
to the basic legislation, through changes in interpretation or shifts in
relative emphasis of the several features of the acts, or through stricter
enforcement of the rules of the governing bodies, to provide additional
protection of the markets for locally-produced supplies as the threat of
in-shipments from out-of-state mounted due to the shifts in market advant-
ages. But at the same time, and with increasing rapidity in more recent
years, a number of the agencies which establish administered prices have
recognized that prices in other markets should be a factor in their own
price setting decisions.





*Graduate Research Assistant, Assistant Agricultural Economist, and
Graduate Research Professor, respectively, Department of Agricultural
Economics, University of Florida.







SUPPLIES OF FLUID 1ILK FOR FLORIDA
Competitive Potential of Alternative Sources

by

David E. Weisenborn, Blair J. Smith and W. W. McPherson*


I. INTRODUCTION


General


In the early days of the commercial dairy industry, the geographic
areas of assembly for milk were relatively small and well-defined. They
tended to be concentrated around the local centers of population, and
market prices and other terms of trade were determined by forces largely
independent of conditions in other, even nearby, markets. As developments
in transportation permitted the movement of milk for given distances in
shorter times, and as the shelf-life of milk was extended through improved
methods of handling--particularly in the area of refrigeration--increases
in distances between places of production and points of consumption became
possible. Advantages accruing to producers because of proximity to markets
thus diminished, and the location of production began to shift to those
areas which had the greater competitive advantages on the production side
of the industry.

Public legislation for the regulation of the marketing of milk was
enacted, for the most part, in the decade of the thirties. This period
of time ante-dated the advent of many of the developments in transportation
and handling which have shifted the determinants of the location of pro-
duction from the marketing to the production side. Thus, milk at that time
tended to be priced more on the basis of local supply and demand factors
than on considerations related to the national milk market. Many of the
state regulations included features which had the effect, whether it was
their intended purpose or not, of reserving in-state markets for in-state
producers. These features were strengthened through legislative amendments
to the basic legislation, through changes in interpretation or shifts in
relative emphasis of the several features of the acts, or through stricter
enforcement of the rules of the governing bodies, to provide additional
protection of the markets for locally-produced supplies as the threat of
in-shipments from out-of-state mounted due to the shifts in market advant-
ages. But at the same time, and with increasing rapidity in more recent
years, a number of the agencies which establish administered prices have
recognized that prices in other markets should be a factor in their own
price setting decisions.





*Graduate Research Assistant, Assistant Agricultural Economist, and
Graduate Research Professor, respectively, Department of Agricultural
Economics, University of Florida.









Principles of Location and Comparative Advantage


The economic theory of location states that when producers supply
the markets which return them the largest net price for their product, and
buyers purchase that same product from the lowest-cost source, that the
differences in prices between markets will be just equal to the costs of
transfer between those markets under conditions of free and perfect com-
petition. The presence of local, state, and federal regulations, collective
action on the part of producer and processor groups, lack of knowledge,
and other factors make the milk market something less than free and perfect.
Consequently, price differences among markets are not just equal to costs
of transfer. However, it has been impossible to totally repeal the strong
economic law of comparative advantage for any extended period of time. This
is the law which in its simplest form says that a product will be produced
at the place in which the greatest relative economic advantage for its pro-
duction exists. Thus Florida produces oranges and Maine does not. The
natural advantages in this case are on the side of Florida. Her costs of
production are much lower than those of Maine and hence she has a compara-
tive advantage over Maine (and most other states as well) in the production
of oranges. Apparent costs of producing milk are lower in Wisconsin than
in Florida. Thus Wisconsin appears to have a comparative advantage over
Florida in the production of milk. But to the costs of producing oranges,
or milk, must be added the costs of transfer from, in the first case,
Florida to Maine, and, in the second case, Wisconsin to Florida. If, in
the example of milk, the sum of production and transfer costs of Wisconsin
milk in Florida is greater than the cost of production in Florida, the milk
will be produced in Florida, other things being equal. If the sum is less,
milk will move from Wisconsin into Florida provided, again, other things
are equal.

We have already noted, however, that other things are not necessarily
equal. If they were, differences in prices for milk of equal quality would
be just equivalent to the costs of transfer between markets, and the geo-
graphical milk price surface would be smooth over the United States.
Several studies in the relatively recent past have considered the matter of
the general geographic alignment of milk prices. Brief mention of a few of
these is made below.


Related Studies


Studies of the geographic structure of milk prices by the U. S.
Department of Agriculture generally show that the average increase in milk
prices, as movements away from an assumed basing point in Wisconsin take
place, are diminishing over time (4), (15), (17), and (29).I. They also
show that substantial individual market price deviations, both above and


- Numbers shown in parentheses this way refer to the publications with corre-
sponding numbers listed in the Bibliography to this report.









Principles of Location and Comparative Advantage


The economic theory of location states that when producers supply
the markets which return them the largest net price for their product, and
buyers purchase that same product from the lowest-cost source, that the
differences in prices between markets will be just equal to the costs of
transfer between those markets under conditions of free and perfect com-
petition. The presence of local, state, and federal regulations, collective
action on the part of producer and processor groups, lack of knowledge,
and other factors make the milk market something less than free and perfect.
Consequently, price differences among markets are not just equal to costs
of transfer. However, it has been impossible to totally repeal the strong
economic law of comparative advantage for any extended period of time. This
is the law which in its simplest form says that a product will be produced
at the place in which the greatest relative economic advantage for its pro-
duction exists. Thus Florida produces oranges and Maine does not. The
natural advantages in this case are on the side of Florida. Her costs of
production are much lower than those of Maine and hence she has a compara-
tive advantage over Maine (and most other states as well) in the production
of oranges. Apparent costs of producing milk are lower in Wisconsin than
in Florida. Thus Wisconsin appears to have a comparative advantage over
Florida in the production of milk. But to the costs of producing oranges,
or milk, must be added the costs of transfer from, in the first case,
Florida to Maine, and, in the second case, Wisconsin to Florida. If, in
the example of milk, the sum of production and transfer costs of Wisconsin
milk in Florida is greater than the cost of production in Florida, the milk
will be produced in Florida, other things being equal. If the sum is less,
milk will move from Wisconsin into Florida provided, again, other things
are equal.

We have already noted, however, that other things are not necessarily
equal. If they were, differences in prices for milk of equal quality would
be just equivalent to the costs of transfer between markets, and the geo-
graphical milk price surface would be smooth over the United States.
Several studies in the relatively recent past have considered the matter of
the general geographic alignment of milk prices. Brief mention of a few of
these is made below.


Related Studies


Studies of the geographic structure of milk prices by the U. S.
Department of Agriculture generally show that the average increase in milk
prices, as movements away from an assumed basing point in Wisconsin take
place, are diminishing over time (4), (15), (17), and (29).I. They also
show that substantial individual market price deviations, both above and


- Numbers shown in parentheses this way refer to the publications with corre-
sponding numbers listed in the Bibliography to this report.







-3-


below the calculated prices, do exist. That is, the price surface is uneven.
But again, the average value of these deviations is diminishing over time.
The most recent of the USDA reports show Class I prices paid in Jacksonville
to be 76, 56, 50, and 09 cents above the calculated Wisconsin plus costs of
transfer prices for the years 1953-54, 1957-58, 1960-61, and 1964-65, respec-
tively. The prices paid in Miami were 02, 46, 55, and 38 cents below the
calculated prices for the same years. The average deviations in prices for
all the 28 selected markets east of the Rocky Mountains were 40, 40, 35,
and 26 cents in the same four time periods. Deviations of prices in the
federal order markets included in the same 28 markets selected for compari-
son were 19,22, 22, and 15 cents, respectively, and in the included state
markets the deviations were 63, 65, 64, and 64 cents. Thus price deviations
in state markets remain generally unchanged, but in relation to all market
prices, which show diminishing price deviations, the differences have in-
creased. It may be noted that Jacksonville prices in 1964-65 have moved
very close to the Wisconsin plus costs of transfer level as calculated in
the reports.

The USDA price alignment studies use a single geographic location
as the basing point in the development of their price-distance coefficients.
Though Eau Claire, Wisconsin, may be the geographic center of the major
milk supply area in the United States, there are other areas of surplus
supplies which have prices even lower than those at Eau Claire after
adjustments for costs of transfer are made. Therefore Wisconsin milk
may not, currently at least, be the least-cost alternative source for milk
for Florida markets. The reports by the USDA do not consider production-
consumption balances, nor make any attempt to compare costs of production
in the markets studied. Their analyses are based solely on prices received,
though in a long-run sense prices tend to be equal to costs under conditions
of free competition.

In another study of intermarket milk price relationships, Babb examined
the relationships between milk prices in as many as 103 milk markets east
of the Rocky Mountains (1). His work was very similar to the studies by
USDA with regard to both basic procedure and findings. It is somewhat more
detailed, however, and Babb does considerably more analysis of his data in
an attempt to explain the observed differences in prices among markets. He
reported 1960 Class I prices in Southeast Florida 31 cents above the poten-
tial competitive price, and prices in Jacksonville $1.08 above the potential
competitive price. These differences are higher than those found in the
price alignment studies by the USDA in 1960-61. They are higher largely
because Babb used a calculated price based on the Eau Claire price plus
estimated costs of transfer, instead of a simple price-distance coefficient
which only reflects the price that would exist in markets if the price sur-
face were uniform and computed on the basis of prices actually received.
This implies that average increases in price as the market is further and
further removed from Wisconsin are higher than they would be if the only
things separating prices among markets were the actual costs of transfer.
This in turn implies either that there are cost elements in the movement of
milk not properly accounted for, or that there are imperfections, perhaps
in the form of barriers to the free flow of milk, in the national milk
market.









Freeman and Babb, working with all the federal order markets in
the United States at the time of their study (1961), used a transportation
model to simultaneously determine least-cost sources of milk supplies for
all such markets (9). Their analysis provided a more complete picture of
existing and potential milk flows and prices as quantities of milk, in
addition to prices of milk, were taken into account. Since their attention
was limited to federal order markets, the only market in Florida, and the
Southeast, for which data were reported was the federal order in the Miami
area. Based on the assumptions of their study, about three-fourths of the
milk for fluid use needed in the Miami area would be obtained at least-
cost from producers in the area. The other one-fourth would come out of
the Knoxville, Chattanooga, and Louisville Orders at an advantage over local
prices of about 34 cents. It must be emphasized, however, that those data
are applicable only within the context of a national milk market wherein
all federal order markets are also being supplied at least-cost, and non-
federal order milk is omitted from both the production and the consumption
sides of the market. It should also be noted that the assumed transporta-
tion charge of 15 cents per hundredweight per 100 miles is at the lower
limit of observed rates, and that no charge for handling was made. Thus
both the quantity of milk which might be expected to flow into Southeast
Florida and the price advantage it would carry, are probably overstated.
Freeman and Babb also showed, using the same assumptions, that there was
a total of 22 federal order markets that could ship milk into the Miami
area at a price advantage. Knoxville had the largest computed advantage,
48 cents. Though one may legitimately question the level of transfer
costs used by the authors, the general intermarket relationships they
found within the federal order market system are valid. Their analysis of
these relationships and their implications for the milk industry are parti-
cularly valuable.

One other recent study merits specific mention (5). This one was
by Carley of the Southern Regional Dairy Marketing Research Committee,
and centered its attention on the six Southeastern states of Florida,
Alabama, Georgia, South Carolina, North Carolina, and Tennessee. The
section of principal interest to this study is the one dealing with
price alignment in the 28 markets delineated in the six states and 73
federal order markets in other states east of the Rockies. A price-
distance coefficient was found for the 91 combined markets, and deviations
between market prices as computed from the regression and prices actually
existing in the market were shown for the months of April and October,
1959. Actual Florida prices exceeded the computed prices by 58, 48, 18
and 17 cents in the Pensacola, Jacksonville, Orlando, and Tampa markets,
respectively. The actual price in the Miami market was 34 cents below
the computed price.

The general conclusion one must draw from the price alignment
studies cited is that Florida prices, with the notable exception of
Miami, were somewhat higher than those which might obtain under conditions
of equilibrium over the long run under free competition. It can also be
inferred, from the publications directly discussed and from the findings
of a number of other studies listed in the Bibliography of this report,
that both the deviations of actual prices from a uniform price surface









and the difference in the slope of that price surface and the costs of
transfer are diminishing. Continually mounting forces for change in the
form of economic pressure on the system resulting from the change in the
handling and transporting techniques referred to earlier, and the inter-
mittent, though relentless attack and destruction by the courts of arti-
ficial barriers to the flow of milk across state lines set the stage for
the problem of this study.


The Problem and Its Origin


The general nature of the economic forces which have brought in-
creasing pressures to bear on the barriers to inter-state milk flows have
already been mentioned. The distortions which such barriers create in the
geographic alignment of prices are well documented. Though adjustments
in pricing and movement regulations have been made voluntarily by some
regulatory agencies, the real impetus for these changes has come from
a string of decisions by the U. S. Supreme Court dealing with the matter
of milk in interstate commerce.

Three of the most significant of these decisions are the Baldwin v.
Selig, the Lehigh Valley Co-op v. United States, and the Polar Ice Cream
and Creamery Company v. Andrews, et.al. The most noteworthy relevant
feature of the Court's findings in the Baldwin case was that New York
could not outlaw Vermont milk purchased at below New York prices as it
would constitute an impermissible burden upon interstate commerce. The
Supreme Court, in the Lehigh case, found the compensatory payments pro-
visions in federal milk marketing orders invalid as they, too, had the
effect of restricting commerce between the several states. Again, in the
Polar case it was the decision of the Court that those orders of the
Florida Milk Commission which down-allocated milk from out of state, giving
Florida producers first claim to milk sales in the higher-priced categories,
were in restraint of interstate commerce. In none of these decisions, nor
in a number of closely related cases, were arguments based on the necessity
of such restraints for purposes of health or sanitation found to be
convincing by the court.

The net, over-all effect of these decisions is to free the flow of
milk across state lines, thus increasingly subjecting local supplies to
competition from other areas, and paving the way for the evolution of a
fluid milk market more truly national in character. Because the language
of the decision of the court in the Polar case was specific to certain
regulations of the Florida Milk Commission, its impact was expected to be
felt in Florida markets most immediately. Whereas the philosophy of pric-
ing milk on the basis of cost of production had prevailed in Commission
markets, and prices so derived made to stick because of control of out-of-
state imports, it is no longer possible to ignore the competitive position
of Florida dairymen vis a vis dairymen in other states. This is particularly
true with respect to price, and especially in the short run. It is true
with regard to costs of production in the long run as well, as the "main
chance" for any business firm in a competitive economy is its ability to
produce efficiently.







This study was initiated to quantify and appraise the competitive
position of Florida milk supplies, relative to potential supplies from
other sources, in Florida milk markets. It draws heavily from an unpub-
lished Master of Science thesis by D. E. Weisenborn in the Department of
Agricultural Economics, University of Florida (39). Emphasis is on price
competition, though a brief look at cost competition is taken. The Polar
decision, price changes by the Florida Milk Commission, and the belief that
a more definitive study of price relationships would be valuable to the
industry in a time of stress and adjustment, prompted the undertaking of
this study at this time.


Objectives


Specific objectives of this study were: (1) to determine locations,
quantities, prices, and transfer costs of potentially competitive fluid
milk supplies for Florida; (2) to discover, discuss, and appraise the
effects of institutional arrangements influencing the movement of milk
into Florida, and (3) to outline the probable economic effects of the
Polar decision on the Florida milk industry.


Scope and Method of Study


"In view of its apparent costs of production, the Florida dairy
industry is not soon likely to deliberately produce milk for the manu-
facturing market. (38'). Thus attention in this study was limited to the
potentially competitive sources of milk for the fluid milk markets of
Florida.

On the basis of the literature reviewed preparatory to the develop-
ment of this study, it was initially decided to limit the geographic reach
of the potential supply area to be considered to the United States east
of the Rocky Mountains. On the basis of data obtained by mail questionnaire
from most of the states initially considered, the Great Plains tier of
states running from Texas through North Dakota and the six New England
States were dropped from further consideration. The basis for eliminating
those states was that their surpluses, if any, were generally so small,
and the distances so great from Florida, that they really could not be
expected to be an important competitive force in Florida's markets.

The potential alternative milkshed for Florida was then considered
to be limited to the 24 states shown in Figure 1. Four of these states
operated wholly and solely under their respective state milk control laws.
Six of them had one or more federal order markets wholly or partly within
the confines of their state boundaries in addition to operational state
milk control laws. The remaining 14 states had no state milk control law,
but all were wholly or partly regulated by one or more federal orders. A
total of 53 federal orders over the entire 24 state area were included in
the study.







This study was initiated to quantify and appraise the competitive
position of Florida milk supplies, relative to potential supplies from
other sources, in Florida milk markets. It draws heavily from an unpub-
lished Master of Science thesis by D. E. Weisenborn in the Department of
Agricultural Economics, University of Florida (39). Emphasis is on price
competition, though a brief look at cost competition is taken. The Polar
decision, price changes by the Florida Milk Commission, and the belief that
a more definitive study of price relationships would be valuable to the
industry in a time of stress and adjustment, prompted the undertaking of
this study at this time.


Objectives


Specific objectives of this study were: (1) to determine locations,
quantities, prices, and transfer costs of potentially competitive fluid
milk supplies for Florida; (2) to discover, discuss, and appraise the
effects of institutional arrangements influencing the movement of milk
into Florida, and (3) to outline the probable economic effects of the
Polar decision on the Florida milk industry.


Scope and Method of Study


"In view of its apparent costs of production, the Florida dairy
industry is not soon likely to deliberately produce milk for the manu-
facturing market. (38'). Thus attention in this study was limited to the
potentially competitive sources of milk for the fluid milk markets of
Florida.

On the basis of the literature reviewed preparatory to the develop-
ment of this study, it was initially decided to limit the geographic reach
of the potential supply area to be considered to the United States east
of the Rocky Mountains. On the basis of data obtained by mail questionnaire
from most of the states initially considered, the Great Plains tier of
states running from Texas through North Dakota and the six New England
States were dropped from further consideration. The basis for eliminating
those states was that their surpluses, if any, were generally so small,
and the distances so great from Florida, that they really could not be
expected to be an important competitive force in Florida's markets.

The potential alternative milkshed for Florida was then considered
to be limited to the 24 states shown in Figure 1. Four of these states
operated wholly and solely under their respective state milk control laws.
Six of them had one or more federal order markets wholly or partly within
the confines of their state boundaries in addition to operational state
milk control laws. The remaining 14 states had no state milk control law,
but all were wholly or partly regulated by one or more federal orders. A
total of 53 federal orders over the entire 24 state area were included in
the study.








IS
STUDY AREA


I
K





States with Milk Control Laws

Figure l.--The Study Area and Federal Order Milk Markets

Source: Adapted from Federal Milk Order Market Statistics, Milk Marketing Orders Division, A. M. S.,
U. S. D. A., Washington, D. C., 1964 Annual Summary.









The base time period used throughout this study was the three year
period 1961-1963. Total milk marketing were relatively stable throughout
that period following a substantial increase in 1961 (see Table 1). Total
milk consumption has also remained fairly constant in recent years. Since
primary emphasis in this investigation is on short-run changes and adjust-
ments, the use of the most recent readily available data should provide the
more logical base for predicting milk quantities in the near future.

Data obtained from each state by mail questionnaire included esti-
mates of total quantities of milk marketed, proportions of Grade A to
Grade B marketed, Class I and Grade A blend prices received, and a brief
resume of the regulations, particularly with regard to price, that governed
the handling and movement of milk among markets within their purview. These
data were heavily supplemented by information from a number of statistical
publications of the U. S. Department of Agriculture.

The 24 state area was divided into three kinds of markets on the
basis of applicable regulations. Each federal order was considered a
separate market. The portions of each state not under federal order were
classified on the basis of whether or not they operated under a state
milk control law. The ten that did so were referred to as state regulated
markets. The remaining 14 were referred to as unregulated states.

Surplus or deficit quantities of milk were ascertained for each mar-
ket in each of the three market categories. These findings are presented
in Section II. Applicable rules and regulations governing the flow of

Table l.--Milk Marketed by Producers, United States, 1950-1963.



Year Milk Marketed Year Milk Marketed

Billion Pounds Billion Pounds
1950 98.3 1957 112.2

1951 96.7 1958 112.1

1952 97.7 1959 112.0

1953 104.1 1960 113.8

1954 106.8 1961 117.0

1955 108.3 1962 118.3

1956 111.2 1963 118.0


Source: (32)








-9-

milk from each of the three types of markets to the Southeastern Florida
Federal Order area and to Florida areas outside Southeastern Florida are
presented in Section III. Surplus milk prices and transfer costs were
estimated in order to compute destination prices in Florida. These data
are shown in Section IV. Implications of the findings with respect to
the dairy industry in Florida appear in Chapter V. A discussion of deve-
lopments since the 1961-63 base period and a brief look at prospects for
the future of the Florida dairy industry are presented in Section VI.
Section VII is a general summary of the findings of the study.








II. QUANTITIES OF POTENTIALLY COMPETITIVE MILK SUPPLIES


Differences between receipts of Grade A milk and quantities of milk
consumed in Class I uses were the designated surpluses or deficits for
each of the 53 federal order markets, the ten state regulated markets, and
the 14 unregulated state markets delineated in the study. 9/ All milk
reported received in federal order markets is of Grade A quality and hence
eligible for fluid use. Grade A Grade B breakdown of milk receipts in
other markets were obtained from the respondents to the mail questionnaire
sent to each state, or estimated algebraically from other milk price and
quantity data which are regularly reported (22). The term 'milk" in this
report, unless otherwise noted, will refer exclusively to milk of Grade A
quality (that is, milk eligible for fluid use).

Before proceeding with the presentation of the surplus-deficit statis-
tics a note on the matter of plant reserves is in order. To Class I sales
must be added some allowance for shrinkage and day to day, week to week,
month to month, or season to season fluctuations in both sales and receipts
of fluid milk. There is a strong tendency in the dairy industry to avoid
any inability to supply milk to a buyer, no matter how unexpected or
sporadic his demands may be. Thus most plants will tend to error on the
side of supplies in excess of actual needs by inclination. Due to the
realities of fluctuating consumption by their more permanent trade, they
become obligated in varying degree, to receive excess milk in the long
seasons in order to ensure milk in the short seasons.

The excesses in reserves that come about as the result of seasonal
patterns of production (which presumably can be altered only within narrow
limits without considerable cost) would be available for shipment to other
markets. Many markets find themselves with excess reserves at the same
time, however, and would not seek additional supplies. The seasonal patterns
of production and consumption between Florida and the major surplus areas
are roughly three months out of phase with each other in terms of the months
in which the greatest and least spreads between levels of production and
consumption occur. Therefore, 10 percent for total operating reserves
seems adequate when the matter of supplying the somewhat unique markets of
Florida is under consideration.

Surpluses and deficits on a seasonal basis were computed by subtracting
the 1961-1963 monthly average of Class I sales from the 1961-1963 monthly
average of total fluid milk receipts for each market, and then combining
monthly differences on a seasonal basis. The winter season includes January
through March; Spring, April through June; Summer, July through September;
and Autumn, October through December. Annual surpluses and deficits for
1961-1963 were similarly computed, but annual rather than monthly data
were used.



2/
Detail as to the data and procedures used in these surplus-deficit
computations can be found in Weisenborn (39).






-11-


Federal Order Markets


Each of 12 federal orders had estimated annual surpluses of more than
150 million pounds (Table 2). The New York-New Jersey and Chicago Orders
had surpluses of 5,227 million pounds and 3,228 million pounds, respectively.
Florida's total fluid consumption annually amounts to less than 1,500
million pounds (38). These data show that the quantities of milk which
are in surplus are well in excess of total consumption in Florida. Memphis
was the only federal order studied that had a deficit, although several
markets had only small surpluses. The net surplus for all federal order
areas amounted to 13.7 billion pounds.

As expected, the surpluses fluctuated substantially from season to
season. Spring had the greatest quantity of surplus milk in the total for
all markets as well as in the majority of the individual markets. Surplus
supplies were lowest in Autumn since this is normally the season of low
receipts and high Class I sales. A number of the federal orders have
fairly constant surpluses in each season while others show large fluctuations.


There exists in the Class I sales figures of most federal orders some
milk which is sold outside the market area. These sales occur both in
bulk and in packaged form. The sales in packaged form can be regarded
as sales to regular outlets. This same assumption is not so easily applied
to the bulk sales outside the area, however, as it is clearly possible
that they could be directed to Florida. In fact, it may be that some of
these sales are made to Florida distributors even now. For purposes of
this study, however, these bulk sales are left in the Class I sales
figure, although this probably somewhat understates the supplies of milk
potentially available for shipment to Florida from federal orders.


State Regulated Markets


Ten of the states included in the study have areas under the juris-
diction of a state milk control agency. For each of these states, the
total milk marketed by producers was divided into Grade A and non-Grade A
quantities in the manner noted above. The amount of milk marketed in each
state to federal order handlers was subtracted from the computed total
Grade A supplies, and the resulting milk quantities were those that were
marketed to state controlled handlers, unregulated handlers, or out-of-
state handlers (excluding out-of-state federal orders). In every case for
which data were available, the amount shipped to out-of-state handlers was
extremely low. The unregulated quantities in all cases except New York
were so small that it would not have been meaningful to analyze them
separately in these 10 states. As a result, the milk sold to out-of-state
handlers, as well as that sold to unregulated handlers within the state,
is included with the total for Grade A milk marketed by state milk control
agencies.

After estimating total quantities of Grade A milk marketed under







-12-


Table 2.--Seasonal Distribution of Estimated Annual Total Surpluses or
Deficits for Selected Federal Order Markets and Areas, 1961-63
Average. a/


Federal Total Surplus or Deficit by Season
Order Areas Surplusb/ Winter Spring Summer Autumn

(Million Pounds)
MIDDLE ATLANTIC GROUP: 5,608 1,405 1,912 1,168 1,123
New York-New Jersey 5,227 1,305 1,770 1,090 1,062
Delaware Valley h/ 381 100 142 78 61

SOUTH ATLANTIC GROUP: 482 99 158 135 91
Upper Chesapeake Bay 159 34 46 47 33
Washington, D. C. 271 59 86 76 50

E. N. CENTRAL-E. GROUP: 2,264 506 709 540 508
Southern Michigan 1,192 258 334 296 304
Northeastern Ohio 569 136 189 133 110
Cincinnati 177 34 62 50 31

E. N. CENTRAL-W. GROUP: 3,998 1,010 1,226 883 928
Chicago 3,228 840 941 660 787
Lsville, Lxgton, Evns. 170 36 63 45 27
Indianapolis 160 30 60 44 27

W. N. CENTRAL-N. GROUP: 647 165 234 136 111
Minneapolis-St. Paul 344 92 120 70 64

W. N. CENTRAL-S. GROUP: 425 75 165 109 75
St. Louis 163 27 70 48 18

E. SOUTH CENTRAL GROUP: 183 26 75 58 24

WEST CENTRAL-N. GROUP: 1 (1) 1 2 (1)

W. S. CENTRAL-S. GROUP: 132 25 38 38 31

NET TOTALS 13,739 3,310 4,518 3,020 2,891

- Data for all 53 federal order markets appear in Appendix Table 1. Dis-
crepancies in this table may exist as the result of arithmetical rounding.
Numbers in parentheses denote deficits.
/1962-63 data only.
Source: Appendix Table 1.







-13-


state control, it was necessary to determine the quantities consumed with-
in each state in order to compute state surpluses and deficits. The
surplus or deficit in each state was calculated by the following steps:
(1) the average total population of each state for 1961-1963 was estimated;
(2) the population of all federal order areas within each state was obtained
(27); (3) the population in federal order areas was subtracted from the total
state population in each state; (4) the resulting figure for non-federal
order area population was multiplied by the state per capital consumption of
fluid milk to give total state consumption excluding that in federal order
areas, accounted for elsewhere; (5) total state consumption excluding
federal order consumption was then subtracted from the total Grade A milk
under state control, as estimated above, to give the surplus or deficit
figures. Three states--Georgia, North Carolina, and New York--have consid-
erable surpluses (Table 3). Only Virginia shows a deficit. Data for three
of the states were not available.

Table 3.--Seasonal Distribution of Estimated Annual Total Surpluses or
Deficits for the States Operating under State Milk Control Laws,
for Which Sufficient Data Were Available, 1961-63 Average.a/


Total
Available Seasons
State Surplus Winter Spring Summer Autumn

(million pounds)
Alabama 55 (2) 36 27 (6)

Georgia 145 30 52 47 16

New Jersey 99 25 28 24 22

New York 716 183 248 145 140

North Carolina 246 47 77 73 49

South Carolina 45 12 16 11 6

Virginia (76) (37) (4) 0 (35)

Net Totals 1,230 258 453 327 192


/-Discrepancies in this Table may
rounding. Numbers in parentheses


exist as the result
denote deficits.


of arithmetical


Source: Data from the study questionnaire sent to each state and (30).

It was mentioned earlier that federal order Class I sales figures
generally include some milk which is sold out-of-area in package form.
The people that are using this out-of-area package milk are not included
in the federal order population. They are included as consumers in the






-11-


Federal Order Markets


Each of 12 federal orders had estimated annual surpluses of more than
150 million pounds (Table 2). The New York-New Jersey and Chicago Orders
had surpluses of 5,227 million pounds and 3,228 million pounds, respectively.
Florida's total fluid consumption annually amounts to less than 1,500
million pounds (38). These data show that the quantities of milk which
are in surplus are well in excess of total consumption in Florida. Memphis
was the only federal order studied that had a deficit, although several
markets had only small surpluses. The net surplus for all federal order
areas amounted to 13.7 billion pounds.

As expected, the surpluses fluctuated substantially from season to
season. Spring had the greatest quantity of surplus milk in the total for
all markets as well as in the majority of the individual markets. Surplus
supplies were lowest in Autumn since this is normally the season of low
receipts and high Class I sales. A number of the federal orders have
fairly constant surpluses in each season while others show large fluctuations.


There exists in the Class I sales figures of most federal orders some
milk which is sold outside the market area. These sales occur both in
bulk and in packaged form. The sales in packaged form can be regarded
as sales to regular outlets. This same assumption is not so easily applied
to the bulk sales outside the area, however, as it is clearly possible
that they could be directed to Florida. In fact, it may be that some of
these sales are made to Florida distributors even now. For purposes of
this study, however, these bulk sales are left in the Class I sales
figure, although this probably somewhat understates the supplies of milk
potentially available for shipment to Florida from federal orders.


State Regulated Markets


Ten of the states included in the study have areas under the juris-
diction of a state milk control agency. For each of these states, the
total milk marketed by producers was divided into Grade A and non-Grade A
quantities in the manner noted above. The amount of milk marketed in each
state to federal order handlers was subtracted from the computed total
Grade A supplies, and the resulting milk quantities were those that were
marketed to state controlled handlers, unregulated handlers, or out-of-
state handlers (excluding out-of-state federal orders). In every case for
which data were available, the amount shipped to out-of-state handlers was
extremely low. The unregulated quantities in all cases except New York
were so small that it would not have been meaningful to analyze them
separately in these 10 states. As a result, the milk sold to out-of-state
handlers, as well as that sold to unregulated handlers within the state,
is included with the total for Grade A milk marketed by state milk control
agencies.

After estimating total quantities of Grade A milk marketed under








-14-


total state fluid milk consumption figures. The result is a slight
overstatement of total state fluid consumption and an understatement
of the surplus. This overestimate was partly offset by the fact that
some small amounts of milk shipped to out-of-state handlers were in-
cluded in the reported total Grade A milk marketed under state control
laws.

The seasonal distribution of surpluses and deficits in each of the
seven states under state regulation for which data were available was
calculated. Since the non-federal order milk marketed in each of these
states was not reported monthly, an index of monthly production was deve-
loped from monthly production for each state as a whole. This index was
then.applied to provide the monthly estimates that were combined to esti-
mate seasonal totals.

Monthly fluid milk consumption figures for the United States as a
whole were used to compute monthly percentage distributions which were
then applied to non-federal order fluid milk consumption in each state
(30). The monthly consumption figures for each state were then subtracted
from the estimates of monthly non-federal order Grade A milk marketed. The
monthly results were combined seasonally to give the seasonal surplus or
deficit (Table 3). As was the case with federal order areas, the largest
surplus season for each state was the spring, and the lowest, with the
exception of North Carolina, the autumn.


Unregulated State Markets


Fourteen of the 24 states included in the study had no state milk
control law, and were unregulated except for areas which were under fed-
eral order, if any. The procedure used to calculate surpluses or deficits
in these markets was as follows: (1) the total milk marketed in each
state was divided into Grade A and non-Grade A components; (2) the amount
of milk marketed by producers to federal orders in each state was sub-
tracted from the total Grade A quantity leaving milk marketed to unregu-
lated handlers in each state or to out-of-state handlers (excluding out-
of-state federal order handlers). In each case, the amount of milk mar-
keted to out-of-state handlers was extremely low or data on it were not
available; therefore, the out-of-state marketing were considered the
same as unregulated milk; (3) the non-federal order population was found
by the procedure explained in the preceding section; (4) the non-federal
order population was multiplied by per capital consumption of fluid milk
in each state to give total consumption of fluid milk; and (5) the total
fluid consumption was subtracted from the total Grade A milk marketed
to unregulated handlers to give the surplus or deficit figures.

Again the problem of federal order out-of-area package sales must
be recognized. Double-counting of these sales results in a slight over-
statement of total state fluid consumption in the unregulated states, and
an understatement of the surplus. This overlap is, as before, partially
compensated for by the fact that out-of-state marketing were included in






-15-


total Grade A milk marketed to unregulated handlers.

Data were either not available or were incomplete for three of the
states. Five states had substantial surpluses (Table 4). Wisconsin and
Michigan had surpluses of 802 million and 463 million pounds, respectively.
Several states showed substantial deficits. Most noticeable was Ohio
with a deficit of 634 million pounds. This deficit may be partially
explained by the fact that Ohio has numerous federal orders, and the sum
of their out-of-area package milk sales was probably rather large. The
people who consume this out-of-area milk are included in the estimates
of consumption of unregulated milk, but if an estimate of the people con-
suming out-of-area milk were available, Ohio's computed deficit probably
would be much smaller. The surplus in federal orders in Ohio exceeded the
deficit in unregulated Ohio areas. This relationship was also true in
Illinois. These unregulated states with deficits are quite important as
each one is a potential competitor with Florida for the surpluses which
exist in other state or federal order areas. Because of the shorter
distances involved, they are in a more favorable geographical position
to bargain for the surplus supplies than is Florida.

Table 4.--Seasonal Distribution of Estimated Annual Total Surpluses or
Deficits for the States not Operating Under State Milk Control
Laws, for Which Sufficient Data Were Available, 1961-63 Average.a-

Total
Available Season
State Surplus Winter Spring Summer Autumn
(Million pounds)

Arkansas (31) (13) (1) (3) (14)

Illinois (210) (55) (33) (49) (73)

Indiana 102 20 34 29 19

Kentucky (140) (39) (29) (30) (42)

Maryland (17) (6) (2) (4) (5)

Michigan 463 107 131 116 109

Minnesota 207 90 109 5 3

Ohio (634) (160) (146) (155) (173)

Tennessee (113) (35) (22) (19) (37)

West Virginia 140 30 41 39 30

Wisconsin 802 202 243 181 176
Net Totals 569 141 325 110 (2)


a!
- Discrepancies in the table may exist
Numbers in parentheses denote deficits.


as the result of arithmetical rounding.


Source: Data from the study questionnaire sent to each state and (30).








-16-


The procedure used to find the seasonal surplus or deficit for each
state was identical to that used for states under the regulation of state
milk control laws. Here again the largest surplus was in the Spring and the
lowest in Autumn.


Summary of Potential Supplies


Major potentially competitive sources of milk among federal order mar-
kets, with respect to quantities in surplus, were found to exist in the
Middle Atlantic and the West North Central Regions of the United States.
The New York-New Jersey Order, with an estimated surplus of over five
billion pounds, and the Chicago Order with an estimated surplus of over
three billion pounds, were the orders of greatest surpluses in the two
regions. Of the states operating under state milk control laws, New York
and North Carolina had surpluses of 716 and 246 million pounds, respectively.
Wisconsin and Michigan, among the 14 states not regulated under a state
agency had respective surpluses of 802 and 463 million pounds.

The sum of all surpluses in all markets was 16.8 billion pounds.
The sum of deficits in all markets was 1.2 billion pounds. Florida's
annual consumption of fluid milk is about 1.5 billion pounds. The esti-
mated net surplus of 15.6 billion pounds is clearly adequate to Florida's
needs in terms of quantities.

Applicable regulations pertaining to the possible movement of this
milk into Florida are examined in the next Section. Then the most critical
aspect of these potential supplies, their expected delivered prices in the
several Florida markets, are developed in Section IV.








III. MAJOR REGULATIONS APPLICABLE TO THE MOVEMENT OF MILK INTO FLORIDA


Regulations affecting the movement of any product in interstate
commerce are many and varied. When the product is milk--a perishable
food capable of transmitting disease--the regulations are truly manifold.
In addition to regulations enacted to protect the health and welfare of the
general consuming public, are those designed to protect the economic
well-being of certain members of the dairy industry, usually producers,
so that milk in "adequate supply" will be available to the public at all
times.

Concern over the economic well-being of dairymen became formally
manifest in the 1930's with the enactment of both state and federal legis-
lation to set minimum prices paid by handlers for milk. Prices at the
farm were on the shortest end of the disastrous price deflation with respect
to what the farmer sold, while the prices he paid for inputs were consider-
ably more sticky and remained proportionately higher.

It is not intended to enter a discussion of the philosophy or need
for public regulation of the milk industry, nor whether the intended and
actual impact of such regulations coincide. Regulations may be assigned
to one of three principal categories. These are: (1) those pertaining to
the pricing and classification of milk by the several state and federal
milk marketing orders included in the study area; (2) sanitation and
quality standards administered at the local, state, and federal levels of
government, and (3) those which pertain to the physical movement, or trans-
portation of milk within and among the several states. Only very brief
treatments of the two latter categories are presented in this report.
Several good studies which deal with those matters are published elsewhere,
and will be referred to when appropriate.


Pricing and Classification Regulations


Regulations affecting the movement of milk into Florida which fall
into this general category are examined in each of the following three
sub-categories:

(1) movement from federal order areas
(2) movement from state areas under state control or assumed to be
under state control
(3) movement from state areas not under state control or assumed not
to be under state control.

Florida in all cases is sub-divided into two types of markets with
respect to the receipt of milk from out-of-state: the Southeastern Florida
Federal Order market, and those not under federal regulation, as the Florida
Milk Commission no longer has the power to formally limit milk in-shipments
either as to quantity or price in any area of Florida. Thus the only appli-
cable regulations regarding the movement of milk into the non-federal order
areas of Florida other than those having to do with sanitation or trans-








III. MAJOR REGULATIONS APPLICABLE TO THE MOVEMENT OF MILK INTO FLORIDA


Regulations affecting the movement of any product in interstate
commerce are many and varied. When the product is milk--a perishable
food capable of transmitting disease--the regulations are truly manifold.
In addition to regulations enacted to protect the health and welfare of the
general consuming public, are those designed to protect the economic
well-being of certain members of the dairy industry, usually producers,
so that milk in "adequate supply" will be available to the public at all
times.

Concern over the economic well-being of dairymen became formally
manifest in the 1930's with the enactment of both state and federal legis-
lation to set minimum prices paid by handlers for milk. Prices at the
farm were on the shortest end of the disastrous price deflation with respect
to what the farmer sold, while the prices he paid for inputs were consider-
ably more sticky and remained proportionately higher.

It is not intended to enter a discussion of the philosophy or need
for public regulation of the milk industry, nor whether the intended and
actual impact of such regulations coincide. Regulations may be assigned
to one of three principal categories. These are: (1) those pertaining to
the pricing and classification of milk by the several state and federal
milk marketing orders included in the study area; (2) sanitation and
quality standards administered at the local, state, and federal levels of
government, and (3) those which pertain to the physical movement, or trans-
portation of milk within and among the several states. Only very brief
treatments of the two latter categories are presented in this report.
Several good studies which deal with those matters are published elsewhere,
and will be referred to when appropriate.


Pricing and Classification Regulations


Regulations affecting the movement of milk into Florida which fall
into this general category are examined in each of the following three
sub-categories:

(1) movement from federal order areas
(2) movement from state areas under state control or assumed to be
under state control
(3) movement from state areas not under state control or assumed not
to be under state control.

Florida in all cases is sub-divided into two types of markets with
respect to the receipt of milk from out-of-state: the Southeastern Florida
Federal Order market, and those not under federal regulation, as the Florida
Milk Commission no longer has the power to formally limit milk in-shipments
either as to quantity or price in any area of Florida. Thus the only appli-
cable regulations regarding the movement of milk into the non-federal order
areas of Florida other than those having to do with sanitation or trans-







-18-


portation, are those which are imposed on the shipping handler at point
of origin.


Regulations Affecting Movement of Milk from Federal Orders
3/
To the Southeastern Florida Federal Order 3

The rules of particular interest here are those that apply to the
transfer of milk from any other federal order to the Southeastern Florida
Federal Order. An example can perhaps best illustrate the procedure
required in making such transfers. Assume that a handler in the South-
eastern Florida Federal Order decided to purchase milk from a handler in
another federal order. The procedure would be as follows:

(1) The utilization of Classes II and III would be determined
in the receiving handler's own plant, and for the South-
eastern Federal Order market as a whole. Assume, again for
illustration, that these utilizations were 8 and 10 percent,
respectively. The larger figure (10 percent in this case)
must then serve as the basis for succeeding computations.
(2) If, continuing the example, the receiving handler was nego-
tiating the purchase of 100,000 pounds of milk, 10 percent
(10,000 pounds) would be allocated to Classes II and III,
beginning with Class III, to the extent of the receiving
handler's own plant utilization. The remaining 90,000 pounds
(and any of the 10,000 pounds which exceeded the receiving
handler's Class II and III utilization, if any), would be
allocated to Class I.
(3) The Market Administrator of the Southeastern Florida Federal
Order would notify the Administrator of the order in which
the shipping handler was located as to the allocation of the
milk in the receiving handler's plant. The Administrator
in the shipping order would bill the shipping handler for
the milk which is transferred based on the utilization
reported at destination and the Class prices applicable
in the Federal Order market of origin. The shipping handler
would then in turn collect from the receiving handler the
amount billed him by the Administrator of the shipping order
market, plus whatever service charges and transportation
costs are relevant.

At first glance, this pricing and allocation procedure would not
appear to be too restrictive to the flow of milk between federal order
areas. Under competitive conditions, prices in the Southeastern Florida
Order should be nearly equal to prices in the other order areas plus trans-
fer costs. To the extent they are not, however, the following considerations
apply. If prices plus transfer costs in the other order area exceed prices
in the Southeastern Florida Order area, the receiving handler would not be


3/
3From information supplied by the Milk Market Administrator, Federal
Order 13, Fort Lauderdale, Florida.







-18-


portation, are those which are imposed on the shipping handler at point
of origin.


Regulations Affecting Movement of Milk from Federal Orders
3/
To the Southeastern Florida Federal Order 3

The rules of particular interest here are those that apply to the
transfer of milk from any other federal order to the Southeastern Florida
Federal Order. An example can perhaps best illustrate the procedure
required in making such transfers. Assume that a handler in the South-
eastern Florida Federal Order decided to purchase milk from a handler in
another federal order. The procedure would be as follows:

(1) The utilization of Classes II and III would be determined
in the receiving handler's own plant, and for the South-
eastern Federal Order market as a whole. Assume, again for
illustration, that these utilizations were 8 and 10 percent,
respectively. The larger figure (10 percent in this case)
must then serve as the basis for succeeding computations.
(2) If, continuing the example, the receiving handler was nego-
tiating the purchase of 100,000 pounds of milk, 10 percent
(10,000 pounds) would be allocated to Classes II and III,
beginning with Class III, to the extent of the receiving
handler's own plant utilization. The remaining 90,000 pounds
(and any of the 10,000 pounds which exceeded the receiving
handler's Class II and III utilization, if any), would be
allocated to Class I.
(3) The Market Administrator of the Southeastern Florida Federal
Order would notify the Administrator of the order in which
the shipping handler was located as to the allocation of the
milk in the receiving handler's plant. The Administrator
in the shipping order would bill the shipping handler for
the milk which is transferred based on the utilization
reported at destination and the Class prices applicable
in the Federal Order market of origin. The shipping handler
would then in turn collect from the receiving handler the
amount billed him by the Administrator of the shipping order
market, plus whatever service charges and transportation
costs are relevant.

At first glance, this pricing and allocation procedure would not
appear to be too restrictive to the flow of milk between federal order
areas. Under competitive conditions, prices in the Southeastern Florida
Order should be nearly equal to prices in the other order areas plus trans-
fer costs. To the extent they are not, however, the following considerations
apply. If prices plus transfer costs in the other order area exceed prices
in the Southeastern Florida Order area, the receiving handler would not be


3/
3From information supplied by the Milk Market Administrator, Federal
Order 13, Fort Lauderdale, Florida.







-19-


likely to buy the milk, other things being equal. However, if prices plus
transfer costs from the other order area are less than prices in the
Southeastern Florida Order area, the receiving handler would be expected
to try to buy more milk from the out-of-state sources. The part of this
rule that may be restrictive to the free flow of milk between areas is that
which requires the receiving handler to pay for the milk from the other
order on the basis of utilization. If this were not the case, it is
possible that large quantities of milk would move from surplus orders at
Class II or perhaps even Class III prices, and replace Class I sales
allocated to local producers.

To the Areas of Florida Outside the Southeastern Florida Federal Order

Transfers of milk from handlers operating under a federal order to
handlers regulated by state milk control laws, and/or unregulated handlers
also must be carried out under several specific rules. Most federal orders
have what may be termed Class I mileage limits. This is simply a regulation
which states that milk sold by an order handler to a non-order handler
located more than a specified number of miles from the order is automatically
classified and priced out as Class I. For the orders included in this
study which had mileage limits, the limits ranged from 65 to 350 miles.
With the exception of a few plants in the Pensacola and Tallahassee areas,
these mileage limits would force Florida's non-federal order handlers to
pay Class I prices for federal order milk shipped into the state.

For those orders with no mileage limit, and for those Florida plants
that do come within the mileage limit of some order or orders, the rule is
different. The general requirement in this case is that if a receiving
handler claims another class use (other than Class I), and his own plant
utilization in that class is equal to the amount being transferred, then
he pays that class price. If the quantity transferred exceeds his own
plant utilization in that class, the excess is considered Class I. If
the receiving handler claims no class use, he pays the Class I price at
the source. Some orders using this general rule have mileage limits which
state that milk moved more than a given number of miles must move as
Class I unless other use can be verified by auditing the unregulated receiver.

In summary, it has been possible to state applicable rules only
in general terms. Though each order may have its own variations, the rules
do tend to require that milk for fluid use in the non-federal order areas
of Florida, which originates in federal orders outside Florida, be priced
at the Class I rate at the source.

Regulations Affecting Movement of Milk from State
Markets Operating Under State Milk Control Laws

To the Southeastern Florida Federal Order /

The regulations of the Southeastern Florida Federal Order make no
distinction between milk regulated under a state milk control law and milk
which is unregulated as to state or federal controls. Thus all milk from
non-federal order markets is subject to the same requirements for entry
into the Southeastern Florida Federal Order. These requirements are:







-19-


likely to buy the milk, other things being equal. However, if prices plus
transfer costs from the other order area are less than prices in the
Southeastern Florida Order area, the receiving handler would be expected
to try to buy more milk from the out-of-state sources. The part of this
rule that may be restrictive to the free flow of milk between areas is that
which requires the receiving handler to pay for the milk from the other
order on the basis of utilization. If this were not the case, it is
possible that large quantities of milk would move from surplus orders at
Class II or perhaps even Class III prices, and replace Class I sales
allocated to local producers.

To the Areas of Florida Outside the Southeastern Florida Federal Order

Transfers of milk from handlers operating under a federal order to
handlers regulated by state milk control laws, and/or unregulated handlers
also must be carried out under several specific rules. Most federal orders
have what may be termed Class I mileage limits. This is simply a regulation
which states that milk sold by an order handler to a non-order handler
located more than a specified number of miles from the order is automatically
classified and priced out as Class I. For the orders included in this
study which had mileage limits, the limits ranged from 65 to 350 miles.
With the exception of a few plants in the Pensacola and Tallahassee areas,
these mileage limits would force Florida's non-federal order handlers to
pay Class I prices for federal order milk shipped into the state.

For those orders with no mileage limit, and for those Florida plants
that do come within the mileage limit of some order or orders, the rule is
different. The general requirement in this case is that if a receiving
handler claims another class use (other than Class I), and his own plant
utilization in that class is equal to the amount being transferred, then
he pays that class price. If the quantity transferred exceeds his own
plant utilization in that class, the excess is considered Class I. If
the receiving handler claims no class use, he pays the Class I price at
the source. Some orders using this general rule have mileage limits which
state that milk moved more than a given number of miles must move as
Class I unless other use can be verified by auditing the unregulated receiver.

In summary, it has been possible to state applicable rules only
in general terms. Though each order may have its own variations, the rules
do tend to require that milk for fluid use in the non-federal order areas
of Florida, which originates in federal orders outside Florida, be priced
at the Class I rate at the source.

Regulations Affecting Movement of Milk from State
Markets Operating Under State Milk Control Laws

To the Southeastern Florida Federal Order /

The regulations of the Southeastern Florida Federal Order make no
distinction between milk regulated under a state milk control law and milk
which is unregulated as to state or federal controls. Thus all milk from
non-federal order markets is subject to the same requirements for entry
into the Southeastern Florida Federal Order. These requirements are:







-19-


likely to buy the milk, other things being equal. However, if prices plus
transfer costs from the other order area are less than prices in the
Southeastern Florida Order area, the receiving handler would be expected
to try to buy more milk from the out-of-state sources. The part of this
rule that may be restrictive to the free flow of milk between areas is that
which requires the receiving handler to pay for the milk from the other
order on the basis of utilization. If this were not the case, it is
possible that large quantities of milk would move from surplus orders at
Class II or perhaps even Class III prices, and replace Class I sales
allocated to local producers.

To the Areas of Florida Outside the Southeastern Florida Federal Order

Transfers of milk from handlers operating under a federal order to
handlers regulated by state milk control laws, and/or unregulated handlers
also must be carried out under several specific rules. Most federal orders
have what may be termed Class I mileage limits. This is simply a regulation
which states that milk sold by an order handler to a non-order handler
located more than a specified number of miles from the order is automatically
classified and priced out as Class I. For the orders included in this
study which had mileage limits, the limits ranged from 65 to 350 miles.
With the exception of a few plants in the Pensacola and Tallahassee areas,
these mileage limits would force Florida's non-federal order handlers to
pay Class I prices for federal order milk shipped into the state.

For those orders with no mileage limit, and for those Florida plants
that do come within the mileage limit of some order or orders, the rule is
different. The general requirement in this case is that if a receiving
handler claims another class use (other than Class I), and his own plant
utilization in that class is equal to the amount being transferred, then
he pays that class price. If the quantity transferred exceeds his own
plant utilization in that class, the excess is considered Class I. If
the receiving handler claims no class use, he pays the Class I price at
the source. Some orders using this general rule have mileage limits which
state that milk moved more than a given number of miles must move as
Class I unless other use can be verified by auditing the unregulated receiver.

In summary, it has been possible to state applicable rules only
in general terms. Though each order may have its own variations, the rules
do tend to require that milk for fluid use in the non-federal order areas
of Florida, which originates in federal orders outside Florida, be priced
at the Class I rate at the source.

Regulations Affecting Movement of Milk from State
Markets Operating Under State Milk Control Laws

To the Southeastern Florida Federal Order /

The regulations of the Southeastern Florida Federal Order make no
distinction between milk regulated under a state milk control law and milk
which is unregulated as to state or federal controls. Thus all milk from
non-federal order markets is subject to the same requirements for entry
into the Southeastern Florida Federal Order. These requirements are:






-20-


(1) The utilization in the receiving handler's plant is determined.
The receiving handler is permitted to bring any amount of unregulated milk
into his plant, but two possible situations are defined:
(a) If his total receipts of milk (regulated and unregulated)
are equal to or less than 125% of his utilization in Class I, the unregu-
lated milk is assigned plant utilization. Thus it is allocated to the
several Classes of milk in the Southeastern Florida Federal Order in the
same percentages that milk received from regular producers is allocated.
(b) If his total receipts of milk (regulated and unregulated)
exceed 125% of his utilization in Class I, the excess of unregulated milk
over the 125% of Class I sales is allocated first to Class III, then to
Class II, to the extent of his utilization in those classes. The balance
of his receipts, (that is, the remaining 125%) would then be assigned
plant utilization as prescribed in situation (a), above.

(2) The receiving handler would be required to make a payment
into the Southeastern Florida Federal Order equalization fund an amount
equal to the Order Class I price adjusted for location, less the order
blend price adjusted for location, on all the unregulated milk which had
been properly allocated to Class I. He would also be responsible, of course,
for paying the shipping handler whatever price they agreed upon and bear
the costs of transporting the milk to his plant in Florida.

An example to illustrate the actual procedure used in the second
step above might be helpful. Assume that a Southeastern Florida Federal
Order handler purchases 100,000 pounds of milk from a Georgia handler located
600 miles away. The per hundredweight location adjustment used in the order
is $0.13 for locations in the distance interval 60 to 70 miles, and $0.15
for each 10 miles in excess of 70 miles. Assume a Class I price of $7.00
and a blend price of $6.50 in the Florida order. The Class I price adjusted
for location would then be $7.00 minus $0.13 for the first 70 miles, and
$.015 times 53 (600 miles less 70 miles, divided by 10) for the next 530
miles. This would be $7.00 minus $.925 or $6.075. Similarly the blend
price would be $6.50 less $.925 or $5.575 per hundredweight. Thus the
Southeastern Florida Federal Order handler would pay $.50 into the equali-
zation fund on each hundredweight of unregulated milk he had properly
allocated to Class I use.

To the Areas of Florida Outside the Southeastern Florida Federal Order

Shipments to Florida areas other than the Southeastern Florida
Order from states operating under state milk control laws are governed by
the particular state in which the shipment arises. A description of the
rules and regulations that govern out-of-state milk shipments for each
state operating under a state milk control law for which data were avail-
able follows: -/
(1) Georgia: The Georgia law states that milk sold to handlers
who are not regulated by the Georgia Milk Commission must
be priced at $4.80 per hundredweight or higher. This means
that a Florida handler buying Georgia milk would have to pay
at least $4.80 plus transfer cost for milk intended for fluid
use.


From information supplied by the milk control agency in each state.
From information supplied by the milk control agency in each state.








-21-


(2) New Jersey,: The Office of Milk Industry, which is the govern-:
ing body for New Jersey, has no control over prices on out-of-
state sales. The price at source would be established by agree-
ment between the buyer and seller.
(3) Virginia: Virginia exercises no price control over milk sold
out-of-state.
(4) North Carolina: The North Carolina Milk Commission specifies
that milk shipped to other states for fluid use must be priced
out at the North Carolina Class I price less allowable handling
and transportation costs.
(5) South Carolina: If a South Carolina distributor has a surplus
above Class I use, the South.Carolina regulation specifies that
this surplus may be shipped at the surplus or manufacturing
price. If the distributor has no surplus the milk is priced
out at the Class I price.
(6) Alabama: The Alabama law states that the Alabama producer must
receive 90 percent or more of the transfer price for milk
shipped out-of-state for fluid use, and the producer can never
receive less than the surplus price. This means that the
minimum price at source for a Florida handler buying Alabama
milk would be the Alabama surplus price plus 10 percent of that
price.
(7) New York: Milk under the New York law shipped out-of-state
for fluid use is likely to be priced at the New York Class I
price. This is not, however, a tight legal requirement, and
it is possible that a lower price could be negotiated.

It can be seen that these laws vary quite a bit from state to state.
Some states are fairly specific as to applicable rules for out-movement,
while others exercise little control over out-of-state shipments.

Regulations Affecting Movement of Milk from State Areas
not Under State Control

To the Southeastern Florida Federal Order

As mentioned earlier, shipments of milk into the Southeastern
Florida Federal Order are all treated in the same manner if they do not
arise in another federal order. As a result, the regulations governing
shipments of milk from unregulated areas to the Southeastern Florida Fed-
eral Order would be identical to those for states operating under state
milk control laws discussed above, and the same procedures would apply.

To the Areas of Florida Outside the Southeastern Florida Federal Order

Shipments into Florida areas other than the Southeastern Florida
Order from state areas not under state control are not regulated as to price
or quantity. The milk changes hands at the price agreed upon by the buying
and selling handlers. Other terms of trade are also by mutual consent.








-21-


(2) New Jersey,: The Office of Milk Industry, which is the govern-:
ing body for New Jersey, has no control over prices on out-of-
state sales. The price at source would be established by agree-
ment between the buyer and seller.
(3) Virginia: Virginia exercises no price control over milk sold
out-of-state.
(4) North Carolina: The North Carolina Milk Commission specifies
that milk shipped to other states for fluid use must be priced
out at the North Carolina Class I price less allowable handling
and transportation costs.
(5) South Carolina: If a South Carolina distributor has a surplus
above Class I use, the South.Carolina regulation specifies that
this surplus may be shipped at the surplus or manufacturing
price. If the distributor has no surplus the milk is priced
out at the Class I price.
(6) Alabama: The Alabama law states that the Alabama producer must
receive 90 percent or more of the transfer price for milk
shipped out-of-state for fluid use, and the producer can never
receive less than the surplus price. This means that the
minimum price at source for a Florida handler buying Alabama
milk would be the Alabama surplus price plus 10 percent of that
price.
(7) New York: Milk under the New York law shipped out-of-state
for fluid use is likely to be priced at the New York Class I
price. This is not, however, a tight legal requirement, and
it is possible that a lower price could be negotiated.

It can be seen that these laws vary quite a bit from state to state.
Some states are fairly specific as to applicable rules for out-movement,
while others exercise little control over out-of-state shipments.

Regulations Affecting Movement of Milk from State Areas
not Under State Control

To the Southeastern Florida Federal Order

As mentioned earlier, shipments of milk into the Southeastern
Florida Federal Order are all treated in the same manner if they do not
arise in another federal order. As a result, the regulations governing
shipments of milk from unregulated areas to the Southeastern Florida Fed-
eral Order would be identical to those for states operating under state
milk control laws discussed above, and the same procedures would apply.

To the Areas of Florida Outside the Southeastern Florida Federal Order

Shipments into Florida areas other than the Southeastern Florida
Order from state areas not under state control are not regulated as to price
or quantity. The milk changes hands at the price agreed upon by the buying
and selling handlers. Other terms of trade are also by mutual consent.








-21-


(2) New Jersey,: The Office of Milk Industry, which is the govern-:
ing body for New Jersey, has no control over prices on out-of-
state sales. The price at source would be established by agree-
ment between the buyer and seller.
(3) Virginia: Virginia exercises no price control over milk sold
out-of-state.
(4) North Carolina: The North Carolina Milk Commission specifies
that milk shipped to other states for fluid use must be priced
out at the North Carolina Class I price less allowable handling
and transportation costs.
(5) South Carolina: If a South Carolina distributor has a surplus
above Class I use, the South.Carolina regulation specifies that
this surplus may be shipped at the surplus or manufacturing
price. If the distributor has no surplus the milk is priced
out at the Class I price.
(6) Alabama: The Alabama law states that the Alabama producer must
receive 90 percent or more of the transfer price for milk
shipped out-of-state for fluid use, and the producer can never
receive less than the surplus price. This means that the
minimum price at source for a Florida handler buying Alabama
milk would be the Alabama surplus price plus 10 percent of that
price.
(7) New York: Milk under the New York law shipped out-of-state
for fluid use is likely to be priced at the New York Class I
price. This is not, however, a tight legal requirement, and
it is possible that a lower price could be negotiated.

It can be seen that these laws vary quite a bit from state to state.
Some states are fairly specific as to applicable rules for out-movement,
while others exercise little control over out-of-state shipments.

Regulations Affecting Movement of Milk from State Areas
not Under State Control

To the Southeastern Florida Federal Order

As mentioned earlier, shipments of milk into the Southeastern
Florida Federal Order are all treated in the same manner if they do not
arise in another federal order. As a result, the regulations governing
shipments of milk from unregulated areas to the Southeastern Florida Fed-
eral Order would be identical to those for states operating under state
milk control laws discussed above, and the same procedures would apply.

To the Areas of Florida Outside the Southeastern Florida Federal Order

Shipments into Florida areas other than the Southeastern Florida
Order from state areas not under state control are not regulated as to price
or quantity. The milk changes hands at the price agreed upon by the buying
and selling handlers. Other terms of trade are also by mutual consent.








-22-


Health and Sanitation Regulations

Milk sold in Florida markets must meet certain minimum standards
as to quality and composition. These standards are the sum of federal,
state, and local laws and ordinances which are addressed to the matter of
commerce in foods and drugs generally, and in some cases milk particularly.
Food and drug laws are avowed to exist to prevent adulteration and mis-
representation. The necessity of such regulations, and others in the
area of public health and sanitation, may be bona-fide, necessary, and in
the public interest. They were enacted and remain in force largely for
the protection of the consumer, and were never explicitly intended to
restrict the geographic movement of milk.

Uniform standards as to composition and inspection procedures will
tend to facilitate the flow of milk in interstate commerce as buyers
can contract to buy with increased confidence and convenience. They will
tend to restrict the movement of milk to the extent such standards are
not uniform or not uniformly applied and enforced. If an overly strict
interpretation is given the laws, they may then also act as economic
barriers, and the opposite of their purported purpose will result.

Health and sanitation regulations may be used to limit milk in-
shipments in a number of ways. Two of the more likely ones are:
(1) Inability, reluctance, or refusal to inspect production and
processing facilities outside the marketing area of interest.
(2) Stricter enforcement of local market standards for out-of-area
suppliers than for in-area suppliers.

A 1955 report, sub-titled A Study of the Impact of Sanitary Require-
ments, Federal Orders, State Milk Control Laws, and Truck Laws on Price,
Supply, and Consumption of Milk by the U. S. Department of Agriculture,
is a valuable source of information on the topic of this section (29).
A more recent study dealing with similar topics, but limiting attention
to the South. and concerned more with description than analysis of effects,
is also particularly pertinent and to be highly recommended for further
reference (19).


Transportation Regulations


Milk is one of the most expensive agricultural commodities to
transport as it is highly perishable, easily contaminated, and its value
in relation to its weight is low. Milk requires expensive and specialized
equipment which can move it quickly and surely to its destination. It
now moves almost exclusively by truck. Thus differences among states in
the size and weight limits and applicable truck license fees and taxes are
potential impediments to the interstate movement of milk.

The general findings and conclusions of the study by Parry, et.al. (19)








-22-


Health and Sanitation Regulations

Milk sold in Florida markets must meet certain minimum standards
as to quality and composition. These standards are the sum of federal,
state, and local laws and ordinances which are addressed to the matter of
commerce in foods and drugs generally, and in some cases milk particularly.
Food and drug laws are avowed to exist to prevent adulteration and mis-
representation. The necessity of such regulations, and others in the
area of public health and sanitation, may be bona-fide, necessary, and in
the public interest. They were enacted and remain in force largely for
the protection of the consumer, and were never explicitly intended to
restrict the geographic movement of milk.

Uniform standards as to composition and inspection procedures will
tend to facilitate the flow of milk in interstate commerce as buyers
can contract to buy with increased confidence and convenience. They will
tend to restrict the movement of milk to the extent such standards are
not uniform or not uniformly applied and enforced. If an overly strict
interpretation is given the laws, they may then also act as economic
barriers, and the opposite of their purported purpose will result.

Health and sanitation regulations may be used to limit milk in-
shipments in a number of ways. Two of the more likely ones are:
(1) Inability, reluctance, or refusal to inspect production and
processing facilities outside the marketing area of interest.
(2) Stricter enforcement of local market standards for out-of-area
suppliers than for in-area suppliers.

A 1955 report, sub-titled A Study of the Impact of Sanitary Require-
ments, Federal Orders, State Milk Control Laws, and Truck Laws on Price,
Supply, and Consumption of Milk by the U. S. Department of Agriculture,
is a valuable source of information on the topic of this section (29).
A more recent study dealing with similar topics, but limiting attention
to the South. and concerned more with description than analysis of effects,
is also particularly pertinent and to be highly recommended for further
reference (19).


Transportation Regulations


Milk is one of the most expensive agricultural commodities to
transport as it is highly perishable, easily contaminated, and its value
in relation to its weight is low. Milk requires expensive and specialized
equipment which can move it quickly and surely to its destination. It
now moves almost exclusively by truck. Thus differences among states in
the size and weight limits and applicable truck license fees and taxes are
potential impediments to the interstate movement of milk.

The general findings and conclusions of the study by Parry, et.al. (19)







-23-


were that truck size limits were not a problem to milk transporters within
the South, and that except for the five-axle equipment limit in Georgia
that weight restrictions were not an important barrier to milk movement
either. They noted that reciprocity agreements with respect to licensing
of trucks were in effect in all the states of the South, and that no
Southern state levied ton-mile taxes. All states do require, however, that
out-of-state truckers pay state fuel tax on all fuel used within their state.

Current regulations applicable to the movement of milk in the non-
South states of this study region were not immediately available. Some
data for 1954 were published in the USDA report referred to above (29).
It is significant to note that at that time Kentucky, one state that
cannot conveniently be by-passed on runs from the major surplus areas of the
Midwest and Lake States to Florida, had one of the lowest truck weight
limits in Eastern United States. A bottleneck of that sort is particularly
critical with respect to the movement of milk as reduced loads in a milk
tanker invite churning, and the alternative is either to by-pass the bottle-
neck or have on hand a variety of tanker sizes.

Either of these latter choices increases the over-all cost of
transporting milk. Lack of uniformities in other areas of regulation
where the more restrictive limits are set at levels which force truckers
to deviate from preferred routes, or others where other factors impede the
movement of milk, have the ultimate effect of increasing milk prices at
the receiving station.


Summary of Regulations


Regulations pertaining to the possible movement of milk into Florida
were examined in three major categories. Primary attention was given to
those which fell into the first category, those pertaining to the pricing
and classification of milk by the several state and federal milk marketing
orders included in the study area. It was generally found that regulations
regarding shipments out of, into, or between federal order markets were
clearly stated and most specific. Shipments out of markets under state
control varied considerably as to pricing and classification requirements
and lacked uniformity as well as clarity. Markets unregulated by a state
or federal milk marketing agency of course did not exercise control over
either price or classification of milk moving across their boundaries.
The purpose of listing applicable price and classification regulations
was to provide a basis for establishing point of origin milk prices to
be used in the next section.

Regulations as to health, sanitation, and transportation were
reviewed very briefly. The over-all effects of such regulations are
to free as well as impede the interstate movement of milk. A quanti-
fication of these effects is very difficult to come by. Reference to
two very good reports which include discussions of these regulations
was made. The influence that such regulations have on milk prices is







-24-

assumed to be neutral, outside the scope of this study, or reflected in
the transportation and handling charges used to determine costs of trans-
fer in the next section. Price premiums resulting from preferences for
local supplies and outlets would also reflect the effects of certain
provisions of the various regulations.









IV. PRICES OF POTENTIALLY COMPETITIVE MILK SUPPLIES IN FLORIDA MARKETS


The material in this section is divided into three main parts:
(1) prices of surplus milk at selected points of origin, (2) costs of
transfer to Florida markets, and (3) a comparison of computed prices
F.O.B. Florida markets with prices actually paid in those markets.


Prices of Milk at Points of Origin


On the basis of prices that prevailed during recent years, and
the regulations governing milk movement out of each of the markets, prices
were computed for all of the 53 federal order areas, each state operating
under a state milk control law that had surplus supplies, and each surplus
unregulated state.

Supplies from Federal Order Areas

Concern in this study has been limited to alternative sources of
milk for Florida's fresh fluid market. Federal order regulations generally
require that milk which originates with a regulated handler destined for
Class I utilization in another market be charged out at the Class I
order price. For the most part it matters not what type of market, with
regard to regulation, the milk enters. The use of Class I prices at point
of origin are thus appropriate for all Florida markets when the milk orig-
inates in any federal order area.

Class I prices based on 1961-63 average for the major surplus
federal orders are presented in Table 5. Both seasonal and annual prices
are given. These prices are used in the subsequent costing of federal
order milk to distributors for Class I use in the several Florida markets.

Supplies from States Regulated by State Milk Control Laws

The prices at source in markets regulated by state milk control
laws depend upon the particular law or regulation in effect in each state.
The basic applicable regulations were presented in Section III. The
actual procedures used to calculate the price at the points of origin in
each of the surplus states operating under a state milk control law in
this study were as follows:
(1) Alabama: The price at source is the manufacturing price plus
10 percent. This is the minimum price that must be paid
by any out-of-state handler for supplies obtained in Alabama
and, in general, a higher price probably would prevail.
(2) Georgia: The minimum price at the source for milk intended for
fluid use at destination is $4.80. Here again higher prices
are likely to exist.
(3) New Jersey: There is no regulation governing price to out-of-
state handlers; thus the manufacturing price would be the








-26-


Table 5.--Annual and Seasonal Class I Prices in Dollars per Hundredweight
in Major Surplus Federal Order Areas, 3.5 Percent Butterfat,
1961-63 Average.a/



Seasonal
Federal Order Annual Winter Spring Summer Autumn

MIDDLE ATLANTIC:
New York-New Jersey 5.28 5.41 4.75 5.26 5.69
Delaware Valley 1/ 5.41 5.44 5.04 5.33 5.84

SOUTH ATLANTIC:
Upper Chesapeake Bay 5.32 5.31 5.01 5.44 5.52
Washington, D. C. 5.32 5.31 5.01 5.44 5.52

E. N. CENTRAL-E. GROUP:
Southern Michigan 4.14 4.18 3.89 4.16 4.33
Northeastern Ohio 4.55 4.77 4.23 4.50 4.70
Cincinnati 4.78 4.87 4.72 4.75 4.79

E. N. CENTRAL-W. GROUP:
Chicago 3.82 3.85 3.59 3.88 3.97
Lsville-Lxgton-Evnsville 4.51 4.58 4.46 4.46 4.52
Indianapolis b/ 4.40 4.49 4.37 4.34 4.39

W. N. CENTRAL-N. GROUP:
Minneapolis-St. Paul 3.91 3.90 3.82 3.99 3.91

W. N. CENTRAL-S. GROUP:
St. Louis 4.34 4.37 4.10 4.39 4.51

-/Prices for all 53 federal order areas appear in Appendix Table II.
- Based on 1962-63 data only.

Source: Appendix Table II.


minimum price at the source.
(4) New York: Milk shipped from New York to other states for fluid
use is likely to be priced out at the New York Class I price,
although this is not required. For purposes of this study, the
New York Class I prices are assumed to be the relevant price at
point of origin.
(5) North Carolina: The price at source in North Carolina is their
Class I price less allowable transportation and handling charges.
This makes the destination price in Florida equal to the North
Carolina Class I price, with the actual source price dependent









IV. PRICES OF POTENTIALLY COMPETITIVE MILK SUPPLIES IN FLORIDA MARKETS


The material in this section is divided into three main parts:
(1) prices of surplus milk at selected points of origin, (2) costs of
transfer to Florida markets, and (3) a comparison of computed prices
F.O.B. Florida markets with prices actually paid in those markets.


Prices of Milk at Points of Origin


On the basis of prices that prevailed during recent years, and
the regulations governing milk movement out of each of the markets, prices
were computed for all of the 53 federal order areas, each state operating
under a state milk control law that had surplus supplies, and each surplus
unregulated state.

Supplies from Federal Order Areas

Concern in this study has been limited to alternative sources of
milk for Florida's fresh fluid market. Federal order regulations generally
require that milk which originates with a regulated handler destined for
Class I utilization in another market be charged out at the Class I
order price. For the most part it matters not what type of market, with
regard to regulation, the milk enters. The use of Class I prices at point
of origin are thus appropriate for all Florida markets when the milk orig-
inates in any federal order area.

Class I prices based on 1961-63 average for the major surplus
federal orders are presented in Table 5. Both seasonal and annual prices
are given. These prices are used in the subsequent costing of federal
order milk to distributors for Class I use in the several Florida markets.

Supplies from States Regulated by State Milk Control Laws

The prices at source in markets regulated by state milk control
laws depend upon the particular law or regulation in effect in each state.
The basic applicable regulations were presented in Section III. The
actual procedures used to calculate the price at the points of origin in
each of the surplus states operating under a state milk control law in
this study were as follows:
(1) Alabama: The price at source is the manufacturing price plus
10 percent. This is the minimum price that must be paid
by any out-of-state handler for supplies obtained in Alabama
and, in general, a higher price probably would prevail.
(2) Georgia: The minimum price at the source for milk intended for
fluid use at destination is $4.80. Here again higher prices
are likely to exist.
(3) New Jersey: There is no regulation governing price to out-of-
state handlers; thus the manufacturing price would be the









IV. PRICES OF POTENTIALLY COMPETITIVE MILK SUPPLIES IN FLORIDA MARKETS


The material in this section is divided into three main parts:
(1) prices of surplus milk at selected points of origin, (2) costs of
transfer to Florida markets, and (3) a comparison of computed prices
F.O.B. Florida markets with prices actually paid in those markets.


Prices of Milk at Points of Origin


On the basis of prices that prevailed during recent years, and
the regulations governing milk movement out of each of the markets, prices
were computed for all of the 53 federal order areas, each state operating
under a state milk control law that had surplus supplies, and each surplus
unregulated state.

Supplies from Federal Order Areas

Concern in this study has been limited to alternative sources of
milk for Florida's fresh fluid market. Federal order regulations generally
require that milk which originates with a regulated handler destined for
Class I utilization in another market be charged out at the Class I
order price. For the most part it matters not what type of market, with
regard to regulation, the milk enters. The use of Class I prices at point
of origin are thus appropriate for all Florida markets when the milk orig-
inates in any federal order area.

Class I prices based on 1961-63 average for the major surplus
federal orders are presented in Table 5. Both seasonal and annual prices
are given. These prices are used in the subsequent costing of federal
order milk to distributors for Class I use in the several Florida markets.

Supplies from States Regulated by State Milk Control Laws

The prices at source in markets regulated by state milk control
laws depend upon the particular law or regulation in effect in each state.
The basic applicable regulations were presented in Section III. The
actual procedures used to calculate the price at the points of origin in
each of the surplus states operating under a state milk control law in
this study were as follows:
(1) Alabama: The price at source is the manufacturing price plus
10 percent. This is the minimum price that must be paid
by any out-of-state handler for supplies obtained in Alabama
and, in general, a higher price probably would prevail.
(2) Georgia: The minimum price at the source for milk intended for
fluid use at destination is $4.80. Here again higher prices
are likely to exist.
(3) New Jersey: There is no regulation governing price to out-of-
state handlers; thus the manufacturing price would be the









IV. PRICES OF POTENTIALLY COMPETITIVE MILK SUPPLIES IN FLORIDA MARKETS


The material in this section is divided into three main parts:
(1) prices of surplus milk at selected points of origin, (2) costs of
transfer to Florida markets, and (3) a comparison of computed prices
F.O.B. Florida markets with prices actually paid in those markets.


Prices of Milk at Points of Origin


On the basis of prices that prevailed during recent years, and
the regulations governing milk movement out of each of the markets, prices
were computed for all of the 53 federal order areas, each state operating
under a state milk control law that had surplus supplies, and each surplus
unregulated state.

Supplies from Federal Order Areas

Concern in this study has been limited to alternative sources of
milk for Florida's fresh fluid market. Federal order regulations generally
require that milk which originates with a regulated handler destined for
Class I utilization in another market be charged out at the Class I
order price. For the most part it matters not what type of market, with
regard to regulation, the milk enters. The use of Class I prices at point
of origin are thus appropriate for all Florida markets when the milk orig-
inates in any federal order area.

Class I prices based on 1961-63 average for the major surplus
federal orders are presented in Table 5. Both seasonal and annual prices
are given. These prices are used in the subsequent costing of federal
order milk to distributors for Class I use in the several Florida markets.

Supplies from States Regulated by State Milk Control Laws

The prices at source in markets regulated by state milk control
laws depend upon the particular law or regulation in effect in each state.
The basic applicable regulations were presented in Section III. The
actual procedures used to calculate the price at the points of origin in
each of the surplus states operating under a state milk control law in
this study were as follows:
(1) Alabama: The price at source is the manufacturing price plus
10 percent. This is the minimum price that must be paid
by any out-of-state handler for supplies obtained in Alabama
and, in general, a higher price probably would prevail.
(2) Georgia: The minimum price at the source for milk intended for
fluid use at destination is $4.80. Here again higher prices
are likely to exist.
(3) New Jersey: There is no regulation governing price to out-of-
state handlers; thus the manufacturing price would be the







-27-


on distances between the markets involved. For this reason, no
price at the source for North Carolina milk is shown in this
section. North Carolina Class I prices are used as destination
prices in a later part of this section.
(6) South Carolina: In South Carolina, the price at source depends
upon the shipping handler's surplus position. If he has a
surplus above Class I use, then this surplus can be priced out
at the manufacturing price. If he does not have a surplus above
Class I use, an out-shipment must be priced at Class I rates.
In this study the manufacturing price is considered to be the
minimum price at the source.

The prices at the source in these six surplus states are shown
in Table 6 on annual and on seasonal bases. Manufacturing prices for
New Jersey and South Carolina were not available.


Table 6.--Annual and Seasonal Designated Prices in Dollars per Hundredweight
of Surplus Milk, Six Surplus States Operating Under State Milk
Control Laws, 3.5 Percent Butterfat, 1961-63 Average.

Seasonal

State Annual Winter Spring Summer Autumn

Alabama a/ 3.27 3.38 3.19 3.21 3.33

Georgia 4.80 4.80 4.80 4.80 4.80

New Jersey n.aJ- n.a. n.a. n.a. n.a.

New York 6.00 6.00 6.00 6.00 6.00

North Carolina / ... ... ...* .

South Carolina n.a. n.a. n.a. n.a. n.a.
~a~f -
~ Based on 1961-62 data only.
b/
n.a. denotes not available or not reported.
c/
The North Carolina price at source is the Class I price in North Carolina
less allowable handling and transportation cost. See text above.

Source: Computed from data given in (35) and the study questionnaire
sent to each state.

Supplies from Unregulated State Areas

Unregulated milk may move into any Florida market. The price at the
source is set by agreement between the buying and selling handlers. If the
buying handler is in the Southeastern Florida Federal Order area, however,







-28-


the order specifications regarding obligations to the pool must be met.

In no case is the price at source expected to be below the market
price for milk for manufacturing uses, as that market is presumably always
open to the unregulated handler. In practice, a shipping handler would
probably require a premium to change markets since he would not gain from
sales at a price identical to the one he was already receiving. In view
of these circumstances, the manufacturing milk prices of Table 7 should
be regarded as absolute minima. Milk shipped to Florida for fluid uses
is almost certain to be priced above those shown.

Table 7.--Annual and Seasonal Manufacturing Prices in Dollars per Hundred-
weight, Five Surplus Unregulated States, 3.5 Percent Butterfat,
1961-63 Average.


Seasonal
State Annual Winter Spring Summer Autumn

Indiana a/ 3.01 3.12 2.94 2.97 3.09

Michigan 3.03 3.10 3.00 3.01 3.04

Minnesota /3.15 3.32 3.06 3.07 3.10

West Virginia n.a. c/ n.a. n.a. n.a. n.a.

Wisconsin 3.17 3.22 3.11 3.14 3.23

a!
SBased on 1962-63 data only.
b/
b/Based on 1962 data only.
c/
n.a. denotes not available.
Source: Computed from data given in (35) and the study questionnaire
sent to each state.


Transfer Costs


Butz found that the average cost of transporting milk by truck was
16 cents per hundredweight per hundred miles (3). He pointed out that
costs varied as a result of differences in tanker size, backhaul opportunity,
rejection at destination, and length of run. The figure of 16 cents is based
on one-way distances that ranged from 355 to 1,444 miles. West and Brandow
used 16 cents per hundredweight per hundred miles in their study of equi-
librium prices among the major dairy regions of the United States (40).
Quotations from two large interstate shippers of milk substantiate that
rate. On the strength of these data, a transportation cost of 16 cents
per hundredweight per hundred miles is used in this study.








-29-


Handling charges may be divided into two parts: those at the point
of origin and those at the point of destination. Charges made for handling
at:points of origin pay for such items as cooling, weighing, testing, and
loading. Charges at points of destination are mainly for unloading. West
and Brandow (40) showed average charges of 15 cents per hundredweight at
the point of origin and five cents per hundredweight at point of destination.
They emphasized that there was a high degree of variability in these charges
and recognized substantial differences in estimates by other researchers.
Their work appears to have been carefully carried out and confidence in
their findings seems warranted. Therefore, the handling charges as estimated
by West and Brandow are used in this study in the calculation of transfer
costs from points of origin outside Florida to points of destination inside
Florida.

Transfer costs were computed from each federal order area, each sur-
plus state operating under a state milk control law, and each surplus unregu-
lated state, to each of six cities in Florida--Pensacola, Tallahassee, Jack-
sonville, Orlando, Tampa, and Miami. These particular cities were chosen
because they represent the major city in each of Florida's six recognized
marketing areas. The following procedure was used to calculate these trans-
fer costs per hundredweight of milk: (1) the shortest highway mileage
from the geographic center of each surplus market area to each of the six
destinations was found; (2) each mileage figure was then multiplied by
16 cents and the resulting figure divided by 100 to give the transportation
cost per hundredweight of milk for that distance; (3) a handling charge of
20 cents per hundredweight was added to the transportation cost for each
combination of markets to give the total cost of transferring milk from
each market outside Florida to each market inside Florida.

Estimates of mileages and transfer costs from each of the surplus
states and from the major surplus federal order areas to the principal
markets in Florida are given in Table 8. In Appendix Table III are found
distance and transfer cost information for the federal orders not listed in
Table 8.


Computed Prices at Destination Compared with

Actual Destination Prices


The prices of potentially competitive milk supplies were computed
by adding the calculated transfer cost to the price at the source.
The prices that actually prevailed in each of the six Florida areas
(Table 9) were then compared with these computed prices. In each case
the comparison is made only on the basis of annual average prices, and
the differences between the computed and actual Florida prices are pre-
sented in Table 10. Comparisons on a seasonal basis can be made for any
area, however, by adding the appropriate transfer cost, found in Table 8,
to the appropriate source prices in Tables 5, 6, or 7 for any season of
interest.




Table 8.--Shortest Highway Distances between Selected Surplus States and Federal Orders and Six Florida Desti-
nations, with Computed Total Costs of Transferring a Hundredweight of Milk over each Distance.


Pensacola
Point of Origin Dist. Cost


Tallahassee
Dist. Cost


Jacksonville


Orlando


Miami


Dist. Cost Dist. Cost Dist. Cost Dist. Cost


Federal Order /
New York-New Jersey
Delaware Valley
Upper Chesapeake Bay
Washington, D. C.
Southern Michigan
Northeastern Ohio
Cincinnati
Chicago
Lsville-Lxgton-Evns.
Indianapolis
Minneapolis-St. Paul
St. Louis

State Regulated
Alabama
Georgia
New Jersey
New York
North Carolina
South Carolina


Unregulated
Indiana
South Michigan
North Michigan
Minnesota
Wisconsin
West Virginia


aDistance in miles taken from (24).


'The sum of transportation costs at 16 cents per hundredweight per 100 miles and
per hundredweight.
c/Data for federal orders not listed here appear in Appendix Table III.


handling costs at 20 cents


1313
1100
964
964
971
946
732
910
624
738
1238
689


215
324
1131
1278
720
513


738
1042
1291
1364
1142
807


2.30
1.96
1.74
1.74
1.75
1.71
1.37
1.66
1.20
1.38
2.18
1.30


.54
.72
2.01
2.24
1.35
1,02


1.38
1.87
2.27
2.38
2.03
1.49


1168
948
812
812
983
925
713
941
646
760
1324
775


251
184
979
1144
559
352


760
1049
1325
1450
1210
714


2.07
1.72
1.50
1.50
1.77
1.68
1.34
1.71
1.23
1.42
2.32
1.44


.60
.49
1.77
2.03
1.09
.76


1.42
1.88
2.32
2.52
2.14
1.34


1110
890
754
754
1093
919
775
1006
708
822
1405
872


387
231
921
1098
492
297


822
1078
1391
1531
1276
685


1.98
1.62
1.41
1.41
1.86
1.67
1.44
1.81
1.33
1.52
2.45
1.60


.82
.57
1.67
1.96
.99
.68


1.52
1.92
2.43
2.65
2.24
l.130


1252
1032
896
896
1181
1061
917
1148
850
964
1547
1014


496
373
1063
1240
634
439


964
1220
1533
1673
1418
827


2.23
1.85
1.63
1.63
2.09
1.90
1.67
2.04
1.56
1.74
2.68
1.82


.99
.80
1.90
2.18
1.21
.90


1.74
2.15
2.65
2.88
2.47
1.52


1298
1078
942
942
1198
1097
928
1159
861
975
1549
1016


493
386
1109
1279
680
478


975
1256
1544
1675
1429
866


2.28
1.92
1.71
1.71
2.12
1.96
1.68
2.05
1.58
1.76
2.68
1.83


.99
.82
1.97
2.25
1.29
.96


1.76
2.21
2.67
2.88
2.49
1.59


1461
1241
1105
1105
1390
1270
1126
1357
1059
1173
1756
1223


721
582
1272
1449
843
648


1173
1429
1742
1882
1627
1036


2.54
2.19
1.97
1.97
2.42
2.23
2.00
2.37
1.89
2.08
3.01
2.16


1.35
1.13
2.24
2.52
1.55
1.24


2.08
2.49
2.99
3.21
2.80
1.86


_I___ _~1~1 ~_


__~C_ __~I ~1~1


_ I _______







-31-


Table 9.--Annual and Seasonal Prices in Dollars per Hundredweight, for
Class I Milk with 3.5 percent Butterfat, by Marketing Areas in
Florida, 1961-63 Average.


Seasonal

Area Annual Winter Spring Summer Autumn

Pensacola a/ 6.56 6.56 6.60 6.60 6.52

Tallahassee b/ 6.58 6.60 6.60 6.60 6.52

N. E. (Jacksonville) 6.71 6.71 6.71 6.71 6.71

Central (Orlando) 6.71 6.71 6.71 6.71 6.71

Tampa Bay (Tampa) 6.71 6.71 6.71 6.71 6.71

S. E. Fla. Fed.
Order (Miami) 6.38 6.27 6.35 6.47 6.44

a/Averages for Pensacola are from Feb. 12, 1962 through Dec. 31, 1963.

b/Averages for Tallahassee are from Dec. 6, 1961 through Dec. 31, 1963.
Source: Florida Milk Commission, Tallahassee, Florida.

For the 1961-63 period, Miami prices were below the computed
destination prices for milk from the major surplus federal order areas
with the exception of Chicago. The spread in differences between Miami
and the other areas of Florida is due to lower Class I prices in the Miami
order and to the greater distance that the Miami market is from all po-
tential sources of supply. Costs of milk from the New York-New Jersey,
Delaware Valley, Upper Chesapeake Bay, and Washington, D. C., orders
exceeded prices in all Florida markets, while the estimated costs of milk
from all other orders were below prices in all Florida markets other
than Miami. Chicago, with its tremendous surplus, is the market wherein
the largest positive price difference is found.

Among the surplus regulated and unregulated states, New York is
the only state that shows a computed price above actual prices in any
Florida market. The indicated price differences otherwise are quite
large, but it should be remembered that the computed prices for all
these states tend to be bare minimums due to the nature of the data
available and the basis on which the calculations were made. It seems
certain that actual prices at source would be somewhat higher than the
manufacturing prices which had to be used in all states except North
Carolina. It is most difficult, therefore, to be very definitive as to
the competitive position that milk from these states might hold in
Florida markets.







-32-


Table 10.--Average Annual Differences Between Actual Florida Prices and
Computed Costs of Alternative Milk Supplies at Six Florida
Locations, in Dollars per Hundredweight for 3.5 Percent Milk
Based on 1961-63 Data a/


Pensa- Talla- Jackson-
Markets cola hassee ville Orlando Tampa Miami


Federal Order b/
New York-New Jersey -1.02 .77 .55 .- .77 .85 -1.44
Delaware Valley .81 .55 .32 .55 -..62 -1.22
Upper Chesapeake Bay .50 .24 .02 .24 .32 .91
Washington, D. C. .50 .24 .02 .24 .32 .91
Southern Michigan .67 .67 .71 .48 .45 .18
Northeastern Ohio .30 .35 .49 .26 .20 .40
Cincinnati .41 .46 .49 .26 .25 .40
Chicago 1.08 1.05 1.08 .85 .84 .19
Lsville-Lxgton-Evns. .85 .84 .87 .64 .62 .02
Indianapolis .78 .76 .79 .57 .55 .10
Minneapolis-St. Paul .47 .35 .35 .12 .12 .54
St. Louis .92 .80 .77 .55 .54 .12

State Regulated
Alabama 2.75 2.71 2.62 2.45 2.45 1.76
Georgia 1.04 1.29 1.34 1.11 1.09 .45
New York -1.68 -1.47 -1.25 -1,47 -1.54 -2.14
North Carolina .25 .27 .40 .40 .40 .07

Unregulated
Indiana 2.17 2.15 2.18 1.96 1.94 2.18
Southern Michigan 1.66 1.67 1.76 1.53 1.47 .86
Northern Michigan 1.26 1.23 1.25 1.03 1.01 .36
Minnesota 1.03 .91 .91 .68 .68 .02
Wisconsin 1.36 1.27 1.30 1.07 1.05 .41


a/
The differences shown


are the amounts by which


the Florida prices exceed


the computed prices. A minus (-) sign before an entry indicates that
actual Florida price was below the computed price by the amount shown.
SPrice differences for the Federal Orders not listed here appear in
Appendix Table IV.


the


Source: Tables 5 through 9.






-33-


Quantities of milk in surplus in all the selected major surplus
federal order markets which had computed prices for milk delivered in
Florida below actual prices in some or all Florida markets are listed
in Table 11. Opposite each surplus figure are the price differences in
each of the six Florida markets. Data for the Nashville, Knoxville, and
Chattanooga Orders have been appended to the table. Though they are not
major surplus markets as defined in this report, they are the only other
federal markets studied which had computed prices ten cents or more below
actual Miami prices, and they have been sources of supply for certain
Florida markets in the past. These data are brought together in this
way for the convenience of the reader. Based on the data and assumptions
of this study there was a good deal of surplus Grade A milk outside the
borders of Florida potentially available at prices considerably below
those existing in most Florida markets in 1961-63. The quantity-weighted
average price difference of the surplus milk in the major surplus federal
orders in each of the six Florida markets is a good indication of the
general extent to which Florida prices were aligned with those markets
in 1961-63. It must be emphasized, however, that a good deal of milk is
available from individual federal orders at prices even below the
weighted average surplus prices, as we have already seen. These indivi-
dual order prices are not overlooked by Florida handlers seeking the
least-cost source of milk for Florida markets. Nor are Florida markets
overlooked by handlers in the lower-priced federal order markets in their
search for better prices or additional outlets for their milk.


Price Premiums Resulting from Preferences for Local Markets

If the Florida price for milk exceeded the price from another
area plus transfer cost, Florida handlers would be expected to buy milk
from the other area, all other things being equal. When given a choice
between Florida milk and outside milk of the same price and quality,
however, a Florida handler is likely to prefer milk from Florida pro-
ducers. In fact, it is probable that it would be profitable for the
Florida handler to buy Florida milk at a premium over milk from more
distant sources. The handler is likely to have more certainty that
his supply would be available as moving milk from other areas involves
more risks of spoilage and time delay. There is also the matter of
proximity in settling contract disputes or other difficulties. Risks
of these kinds can be reduced by using local supplies. An additional
consideration is the sales promotional potential of local supplies.
Many handlers stress this fact in their advertising in an attempt to
create a differentiated product and an increase in demand. The value
of this type of promotion is not well established, but many handlers
might be reluctant to give it up.

The matter of local preferences will also enter into the decisions
of the shipping handler. A seller, when offered equal prices by local
and distant buyers, would be indifferent with respect to buyer if all
other things were equal. Again, however, the seller is likely to be
in a position to deal more effectively with problems when they are kept
.t the local level in comparison with similar problems involving more








-34-


Table ll.--Surplus Quantities and Price Differences of Grade A Milk for
Selected Surplus Federal Order Markets Which Were Potential
Lower Cost Sources of Milk for Florida Markets, 1961-63
Annual Averages.

Price Differences a/
Federal Surplus Pensa- Talla- Jackson- Tam-
Order Quantity cola hassee ville Orlando pa Miami

(mil. Ibs.)
Maior Surplus: (m. lbs.)
Southern Michigan 1,192 .67 .67 .71 .48 .45 -.18
Northeastern Ohio 569 .30 .35 .49 .26 .20 -.40
Cincinnati 177 .41 .46 .49 .26 .25 -.40
Chicago 3,228 1.08 1.05 1.08 .85 .84 .19
Lsvil-Lxgt-Evnsvil. 170 .85 .84 .87 .64 .62 -.02
Indianapolis 160 .78 .76 .79 .57 .55 -.10
Minneapolis-St. Paul 344 .47 .35 .35 .12 .12 -.54
St. Louis 163 .77 .80 .92 .55 .54 -.12
Total or Average b/ 6,003 .85 .83 .87 .64 .62 -.02

Other Surplus /
Nashville 50 1.10 1.07 1.08 .85 .85 ..19
Knoxville 28 1.03 1.12 1.16 .93 .91 .27
Chattanooga 31 1.00 1.06 1.09 .86 .84 .20

Total or Average b/ 109 1.05 1.08 1.10 .87 .86 .21


a/Amount by which the


Florida price exceeded the computed


price differences indicate that Florida prices were below


price. Negative
computed prices.


b/Total surplus and the average price differences weighted by quantities
in surplus.
-/See text for reasons for including data for these orders.

Source: Text Tables 2 and 10, and Appendix Tables I and IV.

distant buyers. It is likely, therefore, that a seller would also seek
some premium above local prices before he would sell his milk to a more
distant buyer.

Quantification of the price premiums handlers might ordinarily
be willing to pay for the advantages of trading in local markets would
be most difficult. No attempt to do this was carried out in this study.
A general knowledge of the industry and gleanings from conversations
with industry people would seem to indicate that the total of these
premiums might well fall within the range of ten to thirty cents per
hundredweight.

Whatever local preference premium figure represents the truth of
the matter, it should be subtracted from the computed price differences






--435-

shown in text Tables 10 and 11 and Appendix Table IV to adjust those
price differences to take account of the value of doing business locally.
Arbitrarily choosing the mid-point of the range (20 cents) reduces the
effective price advantage of Chicago milk to 88, 85, 88, 65, and 64
cents in the Pensacola, Tallahassee, Jacksonville, Orlando, and Tampa
markets, respectively. The Miami price would have been one cent below
the delivered price of Chicago milk.








V. IMPLICATIONS FOR THE FLORIDA DAIRY INDUSTRY


It is a matter of public record that the Florida Milk Commission
can no longer enforce its rules which once reserved Florida'a Class I
markets for Florida produced milk. The results of this study inescapably
lead to the conclusion that milk prices in Florida in the past were gen-
erally higher than the prices at which milk could have been obtained
from a number of markets outside the state if there had been no restrictive
barriers. If the economic forces unfettered by the Polar decision have
their sway, the net ultimate effect seems clear. Downward adjustments
of prices paid by Florida handlers will take place.


Effects on Processors and Consumers


Florida processors, or producer cooperatives under full-supply
contracts with processors, make the decision as to where milk will be
purchased to supply Florida markets. Florida handlers would expect to
experience greater risks when obtaining milk from distant as opposed
to local markets, and would be willing to pay some premium for local
supplies, as already noted. If Florida producer prices exceeded out-
of-state prices by much more than the premium that may be paid for local
preferences for very long, handlers would begin to bring the lower-
priced milk into the State. Then, if processing and distribution mar-
gins were maintained at former levels, retail prices would fall.
Distributors would gain through the somewhat greater sales volumes ex-
pected as the result of the lower prices. If retail prices were held
steady, however, margins would increase and profits to processors
would rise. To the extent there is effective competition among pro-
cessors, these margins would be expected to eventually fall as the
processors began bidding for additional markets by reducing retail
prices.

The ultimate beneficiary of most developments which knock down
barriers to free trade is the consumer. If the market is competitive,
the benefits of the Polar decision will accrue to consumers in the form
of reduced prices, or a reduced rate of increase in prices of milk at
the retail level.


Effects on Florida Producers


If competitive milk supplies are brought into Florida in sub-
stantially increased quantities, some of Florida's producers are
likely to be left without an outlet for their milk at present prices.
With the loss of their regular markets, they would be forced to pro-
cess and distribute the milk themselves or depart the industry. If
they did attempt to market their own milk, either individually or
through cooperative action, the competition of the lower priced sur-
plus milk available from alternative markets would still face them.








V. IMPLICATIONS FOR THE FLORIDA DAIRY INDUSTRY


It is a matter of public record that the Florida Milk Commission
can no longer enforce its rules which once reserved Florida'a Class I
markets for Florida produced milk. The results of this study inescapably
lead to the conclusion that milk prices in Florida in the past were gen-
erally higher than the prices at which milk could have been obtained
from a number of markets outside the state if there had been no restrictive
barriers. If the economic forces unfettered by the Polar decision have
their sway, the net ultimate effect seems clear. Downward adjustments
of prices paid by Florida handlers will take place.


Effects on Processors and Consumers


Florida processors, or producer cooperatives under full-supply
contracts with processors, make the decision as to where milk will be
purchased to supply Florida markets. Florida handlers would expect to
experience greater risks when obtaining milk from distant as opposed
to local markets, and would be willing to pay some premium for local
supplies, as already noted. If Florida producer prices exceeded out-
of-state prices by much more than the premium that may be paid for local
preferences for very long, handlers would begin to bring the lower-
priced milk into the State. Then, if processing and distribution mar-
gins were maintained at former levels, retail prices would fall.
Distributors would gain through the somewhat greater sales volumes ex-
pected as the result of the lower prices. If retail prices were held
steady, however, margins would increase and profits to processors
would rise. To the extent there is effective competition among pro-
cessors, these margins would be expected to eventually fall as the
processors began bidding for additional markets by reducing retail
prices.

The ultimate beneficiary of most developments which knock down
barriers to free trade is the consumer. If the market is competitive,
the benefits of the Polar decision will accrue to consumers in the form
of reduced prices, or a reduced rate of increase in prices of milk at
the retail level.


Effects on Florida Producers


If competitive milk supplies are brought into Florida in sub-
stantially increased quantities, some of Florida's producers are
likely to be left without an outlet for their milk at present prices.
With the loss of their regular markets, they would be forced to pro-
cess and distribute the milk themselves or depart the industry. If
they did attempt to market their own milk, either individually or
through cooperative action, the competition of the lower priced sur-
plus milk available from alternative markets would still face them.








V. IMPLICATIONS FOR THE FLORIDA DAIRY INDUSTRY


It is a matter of public record that the Florida Milk Commission
can no longer enforce its rules which once reserved Florida'a Class I
markets for Florida produced milk. The results of this study inescapably
lead to the conclusion that milk prices in Florida in the past were gen-
erally higher than the prices at which milk could have been obtained
from a number of markets outside the state if there had been no restrictive
barriers. If the economic forces unfettered by the Polar decision have
their sway, the net ultimate effect seems clear. Downward adjustments
of prices paid by Florida handlers will take place.


Effects on Processors and Consumers


Florida processors, or producer cooperatives under full-supply
contracts with processors, make the decision as to where milk will be
purchased to supply Florida markets. Florida handlers would expect to
experience greater risks when obtaining milk from distant as opposed
to local markets, and would be willing to pay some premium for local
supplies, as already noted. If Florida producer prices exceeded out-
of-state prices by much more than the premium that may be paid for local
preferences for very long, handlers would begin to bring the lower-
priced milk into the State. Then, if processing and distribution mar-
gins were maintained at former levels, retail prices would fall.
Distributors would gain through the somewhat greater sales volumes ex-
pected as the result of the lower prices. If retail prices were held
steady, however, margins would increase and profits to processors
would rise. To the extent there is effective competition among pro-
cessors, these margins would be expected to eventually fall as the
processors began bidding for additional markets by reducing retail
prices.

The ultimate beneficiary of most developments which knock down
barriers to free trade is the consumer. If the market is competitive,
the benefits of the Polar decision will accrue to consumers in the form
of reduced prices, or a reduced rate of increase in prices of milk at
the retail level.


Effects on Florida Producers


If competitive milk supplies are brought into Florida in sub-
stantially increased quantities, some of Florida's producers are
likely to be left without an outlet for their milk at present prices.
With the loss of their regular markets, they would be forced to pro-
cess and distribute the milk themselves or depart the industry. If
they did attempt to market their own milk, either individually or
through cooperative action, the competition of the lower priced sur-
plus milk available from alternative markets would still face them.







-37-


A most plausible conclusion which might therefore be drawn is that Florida
producers will experience lower milk prices as the effects of the Polar
decision have time to be felt.

To provide an idea of the magnitude of the income adjustments that
Florida dairymen may experience in response to a re-alignment of prices,
Table 12 was developed. Returns to family labor and capital invested
in the dairy, after all other costs are met, are perhaps the most
appropriate measure of the expected effect of competitive milk prices
on Florida dairy farm incomes. Returns measured in this way show, as
can be inferred from their designation, what the dairy farm returned
to the dairyman for his and his family's labor and to the capital in-
vested in the farm business. Capital as used here is the sum of the
value of all the land, buildings, machinery, equipment, livestock, and
other inventory employed in the farm business without regard to owner-
ship or indebtedness. To figure what the farm family earned above the
amount needed to just maintain their equity in the farm business, data
on indebtedness and changes in land values also need to be considered.

Items one, two, and three of Table 12 were taken from the most
recent production cost study available in each of the five areas. The
Pensacola and Tallahassee studies were conducted in 1962, the Jacksonville
and Orlando studies in 1958, and the Tampa study in 1959. The returns
shown in these studies are the product of both the costs incurred and
the price received in the particular year in which each study was made.
They are, therefore, most valid for those years, Since the dates of the
cost studies and the base time period (1961-1963) used in this study
did not coincide, certain adjustments and assumptions had to be made
before estimates of income and income changes between markets could be
developed and meaningfully compared.

The first of the assumptions was that milk would be priced out of
the major surplus federal order markets at the order Class I price,
regardless of its utilization in the non-federal order markets of
Florida. This is in accordance with the regulations already presented
in Section II. It was further assumed that milk shipped into Florida
would at best receive market utilization. That is, it would compete
against the blend price in the receiving market as the Florida handler
could already obtain Florida milk to supply his market at the Florida
blend price. It seemed unreasonable to assume that milk brought in
from the other areas would be given preferential treatment over Florida
produced milk just because the basis for its price was the Class I level
at source. The relevant consideration is the price itself, not its
derivation. Thus for purposes of the analysis of this section, it is
assumed that Florida blend prices compete with the costs of alternative
supplies in the major surplus federal order areas--that they happen to
be set on the basis of Class I prices in the originating market is only
incidental. The prices of line six, Table 12, are quantity-weighted aver-
age prices of milk in the major surplus federal order areas listed in
Table 11. Though these are designated "competitive", their characteri-
zation as such is valid only within the definitions and the rather
narrow limits of this analysis. Other prices would be designated
"competitive" under other definitions and assumption. They are felt to







Table 12.--Estimates of Incoma and Income Changes for the Average Dairy Farm in the Five Florida Non-Fed-
eral Order Marketing Areas Under Certain Assumptions with Respect to Price Alignment. V/


Unit of


Marketing Area


e Pensa- Talla- Jackson- Orlando Tampa
Measure ola hassee ville
cola hassee ville


Item

1. Milk sold per farm b/

2. Returns to family labor and investment -/
directlyy from the cost studies)

3. Blend price received in the respective
year of each cost study b/

4. Blend price received in 1962-63 c/

5. Returns to family labor and investment
using 1962-63 blend prices d/

6. Competitive prices 1961-63 e/

7. Difference of 1962-63 blend and 1961-63
competitive prices 9/

8. Change in returns if competitive prices
prevailed &/

9. Returns to family labor and investment
under competitive prices h

10. Percentage change in returns


cwt


4,154 5,143 15,545 10,764 12,427


dollars 5,138 5,939 15,163 11,601 10,919


dol/cwt

dol/cwt


5.66

5.87


dollars 5,945 7,794 17,463 11,701 10,344


dol/cwt


dol/cwt


dollars


5.72


-.15


-567


428 -4,601 -4,182 -3,563


dollars 5,369 8,222 12,862 7,519 6,781


percent


5 -26


(Footnotes to this table appear on the next page.)


5.28

5.67


6.00

6.16


6.49

6.50


6.46

6.41


5.76


.09


5.84


-.32


6.08


-.42


6.10


-.31








-39-.


Table 12.--Continued.

a/
See text for assumptions chosen and the rationale used for their selection,
All prices and quantities used have been corrected to a 3.5% butterfat
basis.
b/
Taken from (12), (13), (14), (20), and (21).
c/
Taken from the annual reports of the Florida Milk Commission for these
years. Data for 1961 were incomplete and so were not included in the
computations.
d/
Returns to family labor and investment if cost in 1962-63 had remained
the same as they were in the year that each particular cost study was
made.
e/
The quantity-weighted average price of milk in the major surplus fed-
eral order markets of Table 11 plus costs of transfer to the respective
Florida markets.
f/
Major surplus federal order competitive prices minus Florida 1962-63
average blend prices.

Found by multiplying the difference in price per hundredweight of the
1962-63 blend prices and the 61-63 competitive prices by the number of
hundredweights of milk sold per farm.
h/
Returns under 1962-63 blend prices plus or minus the change in returns
under competitive prices.







-40-


be reasonable insofar as movements from federal order areas into the
state-controlled or unregulated markets of Florida are concerned. They
are not quite appropriate with regard to the movement of milk between
federal order markets, as milk may be priced out of such markets in
accordance with its utilization in the receiving market. The price at
source may therefore be a blend price, and would be lower than the Class I
price. Thus it could arrive in the Miami Federal Order area at a price
lower than it could in other Florida markets, differences in costs of
transfer aside. No attempt to estimate the possible effects of the
movement of milk outside federal order markets into the non-federal
order markets of Florida is made. There certainly exists the possibility
of obtaining milk from these markets at lower cost as the manufacturing
price sets the lower limit in a number of instances. The effective or
applicable price could not generally be quantified, however, and our
attention, for purposes of this analysis of income effects, centers on
the major surplus federal order markets.

Blend prices received by Florida dairymen were computed for
1962-1963 so that they could be more directly compared with observed
differences in Class I prices in the 1961-63 period. Data for 1961
were incomplete and so were not included in these computations. Returns
to family labor and investment using the 1962-63 blend prices and the
costs of production in the year of each individual cost study were
computed. These are item five of Table 12. The validity of these
returns rests on the validity of using the same costs found to exist
in the year of each cost study for the 1961-63 costs. The assumption
is, of course, that costs were the same at both times in each of the
markets. Though prices of some inputs have increased in recent years,
technological efficiency has also increased. What the net effect of
these off-setting tendencies has been is not certain, but some evidence
that gains in efficiency might be outstripping increases in input
prices in Florida is at hand.

Item nine of Table 12 is of principal interest in this analysis.
The figures there were developed in the same manner as were those of
item five. They show what the returns to the family labor and invest-
ment in the average dairy farm in the five Florida areas would have been
if (1) the costs of 1962, 1962, 1958, 1958, and 1959 were relevant in
the Pensacola, Tallahassee, Jacksonville, Orlando, and Tampa areas,
respectively, in 1961-1963; and (2) if the prices received by Florida
producers were equal to the prices assumed to be competitive (item six
of Table 12) in 1961-1963. The rest of Table 12 is self-explanatory,
but it is certainly interesting to note that returns would have
actually increased in the Tallahassee area under the prices that were
assumed to be competitive, and that the Pensacola area showed the smallest
percentage decrease in returns.

5/
Data from 27 farms which participated in a farm business analysis pro-
gram conducted by the Florida Agricultural Extension Service under the
direction of Mr. Clifford Alston, showed that while prices received for
milk declined 28 cents over the period 1960-1964, costs of producing nilk
declined by 47 cents. Returns to the farm operators for their labor and
management t per farm increased from $6,252 in 1960 to $11,955 in 1964.








-41-


A brief evaluation of the foregoing analysis is in order. With
respect first to the cost of production studies, they were representative
of the areas in which they were conducted and can be considered to be
quite precise in their measurement of the costs and returns they report.
Their most notable shortcoming is that no allowance for appreciation
in land values is made. Farm land values over the state as a whole have
increased by an annual average of about 11 percent since 1958 (33). This
approximately offsets the traditional five to six percent charge for
capital investment assumed in many cost studies as land comprises roughly
50 percent of total investment on Florida dairy farms. The returns to
family labor and investment shown in Table 12 might then be considered
to be returns to family labor only, as the costs of capital are offset
by the increases in land values. Just as land appreciation is not income
until the land is sold and hence not available for family living, neither
is interest on owned capital a cash expense and hence it is available
for family living. From the point of view of cash for family living,
principal and interest payments on indebtedness and cash capital out-
lays must be deducted from family returns, and reserves for depreciation
and cash received from sales of capital items must be added. Another
weakness of the cost studies is that they are based on a single years
experience and the particular year used may not be typical of other
recent years.

The use of quantity-weighted costs of milk in the major surplus
federal order markets may be questioned as to its appropriateness. Some
of the rationale for using those costs has already been presented. Of
course one can assume any price he likes and, working with the data of
Table 12, develop other estimates of returns and changes in returns.
The prices chosen were simply felt to be a reasonable compromise between
maximum and minimum possible costs of milk available for shipment into
Florida. The type of regulation which might exist in both the shipping
and receiving markets will greatly influence the actual final price at
which milk will move in interstate commerce.

It is difficult to guess with confidence what costs of production
would have been at the time of the several cost studies if prices received
had been substantially different from what they were. There should be
little doubt, however, that there is a positive relationship between
costs and prices over time. That is, high prices engender high costs,
and vice versa, to some degree. The magnitude of the relationship
has not been the subject of intensive study, and remains unresolved
in this report.

By the way of a very brief summary of this section, it seems appro-
priate to say that out-of-state competition would cause Florida producer
prices to fall below the 1961-63 levels as a consequence of the Polar
decision. Incomes will also fall to the extent that offsetting cost
reductions cannot be effected. The look at the returns to family labor
and investment which remained after an adjustment was made to a set
of assumed competitive prices leaves a good deal of cause for optimism.
This is especially true when the increase in dairy farm land values is
also taken into account.









VI. RECENT DEVELOPMENTS AND PROSPECTS FOR THE FUTURE


The U. S. Supreme Court decision in the Polar case was handed
down early in January of 1964 and remanded to the U. S. District Court
in Tallahassee for interpretation and implementation at that time. The
Florida Milk Commission, in an apparent attempt to adjust to the anti-
cipated impact of the decision, reduced Class I milk prices in the
Jacksonville, Orlando, and Tampa markets by 46 cents per hundred pounds
on March 5, 1964. Then on June 1, 1964, they restored 14 cents of the
price cut in those markets. At the same time, prices to Tallahassee
producers were reduced by 20 cents.

The U. S. District Court in Tallahassee promulgated its findings
early in July of 1964. It is felt by some that they went beyond the
intent of the U. S. Supreme Court when they also declared the "just
cause" provision of the Florida Milk Law to be invalid. This is the
provision which required Florida handlers to prove, before the Florida
Milk Commission, just cause for the termination of dealings with any
base-holding Florida producer supplying milk to his plant. On September
1, 1964, the Florida Milk Commission reduced Class I prices to $6.02
in all Commission markets except Pensacola. There it was set at $5.90.
These prices represented a net decrease in Class I prices of 69 cents
in the peninsular markets and 56 cents in the Tallahassee market from
the 1961-63 averages. The decrease in the Pensacola market was 66 cents,
net, at that time. It was finally reduced to $5.67 on January 1, 1965
for a total net reduction of 89 cents per hundredweight.

The price changes of September 1, 1964 were made with the idea
in mind, perhaps, that this would remove most of the economic incentive
for the arbitrary termination of producers. And it generally did, as
Table 11 showed that the average differences in Class I prices between
Florida markets and the major surplus federal orders were of about the
same magnitude as the net price reductions ordered by the Commission,

In spite of the actions taken by the Florida Milk Commission, or
perhaps because of them, all areas with the exception of Tallahassee
have now withdrawn from the jurisdiction of the Commission. Tampa
area producers voted the Commission out effective December 10, 1964,
and Jacksonville, Pensacola, and Orlando producers on June 5, 7, and
22, 1965, respectively. Only the Tallahassee area now (November 30, 1965)
remains under Commission regulation.

Contracts to supply milk to many of the processors in the areas
formerly under the regulation of the Commission have been established
through cooperative producer action. These contracts have injected a
good deal of stability into what might have become extremely chaotic
markets where the Milk Commission had been voted out.

Producers supplying the Tampa market voted, on November 4, 1965,
to install a federal order. The Class I price set in the order is the
Minnesota-Wisconsin manufacturing milk price (called the basic price)







-43-


plus three dollars for 3.5% milk. The average level of the basic price
over the period 1961-63 was $3.16. The Tampa price, had it been under
the federal order at that time, would have been $6.16. The 1961-63
"competitive" price for Tampa (Table 12) was $6.10. Thus the Tampa
price would have been just six cents above the price assumed to be com-
petitive in 1961-63 for purposes of estimating income changes in the
previous Section of this report.

The producers supplying the Jacksonville and Orlando markets jointly
petitioned the Milk Market Orders Division of the U. S. Department of
Agriculture for a hearing on their proposal for a federal order to include
both areas. The petition was filed on October 22, 1965, and the hearing
has been scheduled to commerce in Jacksonville on January 17, 1966.

Tallahassee remains under the jurisdiction of the Florida Milk
Commission and Pensacola remains without public price regulation. What
might ultimately take place in these two area is conjecture, though the
possibilities of Tallahassee joining the Jacksonville-Orlando order (if
it becomes operational) or combining with Pensacola in a single order are
not unthinkable. It does seem unlikely, though, that an order would
be established in the Pensacola market unless the Mobile, Alabama area
were also included.

The very great quantities of Grade A milk currently in surplus in
a number of markets throughout the United States really makes redundant
the question of whether the Florida markets of the future could be sup-
plied by milk from outside the state. Table 13 shows that since 1950
the surplus of milk marketed over total fluid consumption has increased
in every year except two. There is little reason to believe there will
be any significant change in these trends for some time.

The great reservoir of manufacturing milk is rapidly being con-
verted into milk of Grade A quality. The rate of conversion could be
increased significantly if changes in demand for fluid milk were to
call it forth. It is likely that even now a good deal of milk reported
to be of manufacturing grade already qualifies as milk of Grade A
quality. It has not been designated as such simply because it lacks a
market.

Surplus quantities and prices of milk in the major euxylus federal
order markets generally increased in 1964 over the 1961-63 average levels.
It has already been shown that quantities of fluid milk in surplus will
be adequate to supply Florida's markets for a long time to come. Conse-
quently we may center our attention on the matter of recent price changes,

For purposes of illustration, the effect of price changes in the
major surplus federal order markets on the costs of .hat mi.k, were it
to be delivered to Tampa, are computed. The weighted aver-ge price of
milk from those orders delivered in Tampa, based on 1961-63 averages,
was $6.10, The weighted average price of milk from those same orders,
based on 1964 prices, was $6.13. This is an increase of three cents.
It was shown above that under the new Tampa Federal Order Class I milk








-44-


Table 13.--Total Milk Marketed and Per Capita and Total Domestic
Civilian Disappearance of Fluid Milk and Cream, United
States, 1950-1964.


Year


Fluid Per Capita Total Milk
Consumption Marketed

Pounds

349 98.3

352 96.7

352 97.7

347 104.1

348 106.8

348 108.3

348 111.2

343 112.2

335 112.1

328 112.0

322 113.8

310 117.0

308 118.3

307 118.0

305 120.1


a/
- Preliminary.
Source: (31) and (32)


1950

1951

1952

1953

1954

1955

1956

1957

1958

1959

1960

1961

1962

1963

1964 a/


Domestic Civilian Surplus of
Disappearance of Milk Marketed
Fluid Milk and Cream Over Disappear.

Billion Pounds

52.4 45.9

53.2 43.5

54.0 43.7

54.2 49.9

55.3 51.5

56.5 51.8

57.6 53.6

57.7 54.5

57.5 54.6

57.2 54.8

57.3 56.5

56.2 60.8

56.6 61.7

57.4 60.6

57.8 62.3








-45-


in the market would have been $6.16 in 1961-63. The price would still
have been $6.16 in 1964 as the basic price in 1964 was $3.16, the same
as the 1961-63 average. Thus the Tampa Federal Order price would have
been just three cents above the "competitive" price in 1964. Prices in
Tampa from the Nashville, Knoxville, and Chattanooga Orders averaged
24 cents lower in 1961-63 than prices in Tampa from the major surplus
federal orders. They increased by an average of 17 cents in 1964, while
a three cent increase took place in the major surplus federal orders.
Thus in 1964 the difference between the two groups of orders diminished
to ten cents.

Minnesota-Wisconsin manufacturing prices have averaged $3.23 for
the first nine months of 1965. On this basis, the Class I price in Tampa
would have been $6.23, an increase of seven cents over the $6.16 which
would have been paid Tampa producers in 1961-63 and 1964 had the federal
order been in effect at that time.

A figure of 16 cents per hundredweight per one hundred miles was
used for computing the costs of transporting milk by truck. It should
be noted, in closing this Section, that milk transportation costs are
trending downward. In fact, costs of 15, and in some cases even 14 cents,
are now being discussed. The effect of lower transportation costs, of
course, is the possibility of obtaining milk from out-of-state sources
at even greater price advantages than those shown in this report.










VII. SUMMARY


On January 6, 1964 the Supreme Court of the United States, in what
has become known as the Polar case, declared that certain provisions of
Chapter 501 of the Florida Statutes imposed an undue burden on inter-
state commerce. Chapter 501 is the state law which established the Flori-
da Milk Commission, and prescribes its authority and responsibility with
respect to the control of the Florida dairy industry. As a result of
the Court's decision, the Florida dairy industry was faced with the possi-
bility of increased competition from milk from areas outsidei-the state,
as the commission was enjoined from requiring any Florida distributor to
favor Florida produced milk over out-of-state milk as to quantity pur-
chased, price, or usage.

This study was initiated to quantify and appraise the competitive
position of Florida milk supplies, relative to potential supplies from
other sources, in Florida markets. Emphasis is on price competition,
though a brief look is taken at cost competition. The Polar decision,
price changes by the Florida Milk Commission, and the belief that a more
definitive study of price relationships would be valuable to the industry
in a time of stress and adjustment, prompted the undertaking of this
research at this time.

The specific objectives of this study were:

(1) To determine the locations, quantities, prices, and
transfer costs of potentially competitive fluid milk
supplies for Florida markets.

(2) To discover, discuss, and appraise the effects of
institutional arrangements influencing the movement
of milk into Florida.

(3) To outline the probable economic effects of the Polar
decision on the Florida milk industry.

Concern was limited to the fresh fluid milk markets of Florida
and the alternative sources of milk for those markets. The area east
of the Great Plains tier of states, but excluding New England, was
considered to be the potential milkshed for Florida, This 24 state
area was divided into three kinds of markets on the basis of applicable
regulations. Each federal order, of which there were 53, was treated as
a separate market. The portions of each state not under federal order
were classified on the basis of whether or not they operated under a
state milk control law. There were ten states with state regulated
and 14 with unregulated markets.

The base time period used throughout the study was the three year
period 1961 through 1963, though some of the more recent developments
are given attention in Section VI of the report. Data used in this
study were taken from a questionnaire sent to the Departments of Agri-
cultural Economics at the Land-Grant University in each state and to







-47-


the state Milk Control Agency where one was in operation, and from a wide
variety of statistical publications of the U. S. Department of Agriculture.

Differences between receipts of Grade A milk and quantities of milk
consumed in Class I uses plus ten percent operating reserves were the
designated surpluses or deficits in the 77 markets of the three kinds
in the study area. Each of 12 federal orders had estimated annual sur-
pluses of more than 150 million pounds. The New York-New Jersey and
Chicago Orders had surpluses of 5,227 and 3,228 million pounds, respect-
ively. Only the Memphis Federal Order showed a deficit. The net surplus
for all 53 federal orders was 13.7 billion pounds. Of the states operating
under state milk control laws, New York and North Carolina had surpluses
of 716 and 246 million pounds, respectively. Wisconsin and Michigan, of
the unregulated states, had respective surpluses of 802 and 463 million
pounds. The net surplus in all 77 markets of the 24 state study area
was 15.6 billion pounds.

Florida's annual consumption of fluid milk is about 1.5 billion
pounds. This is just one-tenth of the total net surpluses found in the
study area. It seems unlikely, therefore, that even if all of Florida's
needs were to be supplied from out-of-state, that there would be any
appreciable effect on prices in the major surplus areas.

Regulations pertaining to the possible movement of milk into
Florida were examined in three principal categories. These were:
(1) those pertaining to the pricing and classification of milk by the
several state and federal milk marketing orders included in the study
area; (2) sanitation and quality standards administered at the local,
state, and federal levels of government, and (3) those which pertain
to the physical movement, or transportation of milk within and among
the several states. Only very brief treatments of the latter two cate-
gories were presented in the report.

The purpose of listing the applicable price and classification
regulations was to provide a basis for establishing point of origin
prices in the 77 market areas. Costs of transferring milk from each
potential source to each of six Florida destinations were developed.
These were added to the source prices to yield estimates of the total
delivered costs of out-of-state milk in Florida markets. Transfer
costs were computed at 16 cents per hundredweight per 100 miles for
transportation charges and 20 cents per hundredweight for handling.
Class I prices were used as source prices in all the federal order
markets. Source prices in the state regulated markets varied according
to their respective regulations. Manufacturing prices were used as
minimum source prices in the unregulated states and in regulated states
which did not specify minimum prices for milk out-shipments, as there
was no other basis for establishing prices at any other level. The
reader is cautioned that these latter prices were minima, and it is
virtually certain that somewhat higher prices would in fact exist or
be required at source before milk would leave those markets for ship-
ment to Florida. It is largely for this reason that the analysis of
the competitive position of Florida markets with respect to milk prices







-48-


is centered on the comparison with federal order prices.

Of the twelve major surplus federal order markets (those with sur-
pluses of 150 million pounds or more), four had computed prices above
actual prices in all six of Florida's markets. These werevthe_.New.Mokk-
New Jersey, Delaware Valley, Upper Chesapeake Bay, and Washington, D. C.
Orders. The other eight had positive price advantages in all of Florida's
markets with the exception of Miami, where only the Chicago Order had
computed prices lower than actual prices. Chicago was in all cases
the lowest cost source of milk for all six of Florida's markets insofar
as major surplus federal orders were concerned. Nashville, Knoxville,
and Chattanooga, with surpluses of 50, 28, and 31 million pounds, respect-
ively, had computed prices of milk delivered in Florida about equal to,
and in most instances lower than, the Chicago delivered prices. The
quantity-weighted average prices of surplus milk from the eight major sur-
plus federal order markets which had positive price advantages in some
or all of the six Florida markets were 85, 83, 87, 64, and 62 cents
below actual prices in the Pensacola, Tallahassee, Jacksonville, Orlando,
and Tampa markets, respectively. They were two cents above the actual
price in the Miami market. There was a total surplus of just over six
billion pounds in the eight orders.

Price premiums resulting from-preferences for local markets would
diminish the differences between costs of milk obtained from out-of-state
and local prices by whatever dollar value would properly represent such
premiums. A range of 10 to 30 cents was suggested on the basis of a
general knowledge of the industry and from conversations with industry
people. The arbitrary selection of the mid-point of the range, 20
cents, would have reduced the effective price advantage of Chicago
milk to 88,.85, 88, 65, and 64 cents, respectively, in the Pensacola,
Tallahassee, Jacksonville, Orlando, and Tampa markets. The Miami
price would have come out one cent below the Chicago price.

It seemed certain, based on the analysis of the 1961-63 data,
that prices paid by Florida handlers would fall as the result of the
Polar decision. The effect on Florida processors and consumers would
depend on what happened to processing margins. If they remained the
same, consumer prices would fall and processors would gain from the
additional sales expected as the result of lower prices. If the
decrease in cost of raw product was not passed on to the consumer,
processing margins would increase to the sole benefit of the processor.
Competition among processors would be expected to drive margins down-
ward, however, and some benefit from the Polar decision would ultimately
accrue to the consumer in the form of lower retail milk prices.

Estimates of the effect of lower prices to Florida producers were
carried out by comparing returns to family labor and investment on the
average dairy farm in five of the six Florida markets under prices which
actually existed in 1961-63 and under prices which would have been con-
sidered to be "competitive" at that time. This comparison showed that
returns would have fallen by 10, 26, 36, and 34 percent, respectively,
in the Pensacola, Jacksonville, Orlando, and Tampa markets. Returns







-49-


would have increased by five percent in the Tallahassee Area. Cost
data were not available for the Miami Area. Since the returns remaining
after the adjustment was made ranged from $5,369 in the Pensacola area
to $12,862 in the Jacksonville Area, it was felt there was considerable
cause for optimism as to the prospects for the continuation of milk
production in Florida.

Since the Supreme Court decision of January, 1964, there have
been several very significant changes in the Florida dairy industry.
The Florida Milk Commission made the first of several changes in pro-
ducer prices in Commission markets on March 5, 1964. By January 1,
1965, the Commission had established Class I prices 69 cents below the
1961-63 averages in the three peninsular markets of Jacksonville,
Orlando, and Tampa. Class I prices were likewise down 56 cents in the
Tallahassee and 99 cents in the Pensacola markets. These price changes
were likely made in an attempt to reduce or remove the economic incentive
for bringing milk in from out-of-state. In spite of these efforts, or
perhaps because of them, all areas under the jurisdiction of the Florida
Milk Commission in 1961-63, with the exception of Tallahassee, have now
withdrawn from Commission regulation.

Tampa Area producers voted in a Federal Marketing Order on Novem-
ber 4, 1965. The Class I price set in that order would have been $6.16
for 3.5% milk in the 1961-63 time period. This was six cents above the
$6.10 price assumed to be competitive in the 1961-63 producer income
comparisons of Section VI. In the first nine months of 1965, the basic
formula price in Tampa would have been $3.23. This would have yielded
a Class I price in Tampa of $6.23, 13 cents above the 1961-63 "competitive"
price.

Producers supplying the Jacksonville and Orlando markets jointly
petitioned for a hearing on their proposal for a federal order to in-
clude both areas. This petition was filed on October 22, 1965, and
the hearing has been scheduled for January, 1966.

Quantities and prices of surplus milk in the major surplus fed-
eral order markets have generally increased in 1964 in relation to the
1961-63 average levels. The increases in quantities are inconsequential
as Florida markets could have been more than adequately supplied by the
surpluses which already existed in the base time period. The average
price increase was three cents, and for purposes of illustration
the effect it would have had on the competitive relationships between
the proposed Tampa Federal Order price and the costs of supplies from
other sources was pointed out, as already noted, in Section VI.

It may be noted, in conclusion, that since the Polar decision,
prices paid to producers in the major Florida markets have moved well
into alignment with alternative sources of milk from out-of-state
federal order markets.






-50-


BIBLIOGRAPHY


1. Babb, E. M., Intermarket Milk Price Relationships. Lafayette, Indiana:
Purdue University Agricultural Experiment Station, Bulletin
No. 760, January 1963.

2. Bartlett, Roland W., Is State Control of Consumer Milk Prices in the
Public Interest? Urbana, Illinois: University of Illinois
Agricultural Experiment Station, Bulletin No. 705, January
1965.

3. Butz, William T., Long Distance Shipment of Market Milk. Washington,
D. C.: U. S. Department of Agriculture, Economic Research
Service, Marketing Economics Division, Marketing Research
Report No. 648, March 1964.

4. Butz, William T., Geographic Structure of Milk Prices, 1960-61.
Washington, D. C.: U. S. Department of Agriculture, Economic
Research Service, Marketing Economics Division, Economic
Research Service Report No. 71, August 1962.

5. Carley, D. H., Optimum Assembly of Milk Supplies in the Southeast.
Southern Cooperative Series, Bulletin No. 92, March 1964.

6. Carley, D. H. and Purcell, J. C., Patterns of Fluid Milk Distribution
in the Southeast, 1959 and Projected 1975. Southern Coopera-
tive Series, Bulletin No. 105, June 1965.

7. Dubov, Irving and Downen, M. Lloyd, "The Role of Market Structures
and Other Institutional Arrangements of the Midwest-Eastern
Seaboard Conflict of Interest in the Production and Distri-
buition of Milk". Journal of Farm Economics, Vol. XLII,
December 1960.

8. Foelsch, Gertrude G. and Cook, H. L., An Analysis of Federal Court
Decisions Relating to the Marketing of Fluid Milk, Madison,
Wisconsin: University of Wisconsin, Wisconsin Agricultural
Experiment Station and United States Department of Agriculture,
Research Bulletin No. 200, January 1957.

9. Freeman, R. E. and Babb, E. M., Marketing Area and Related Issues in
Federal Milk Orders. Lafayette, Indiana: Purdue University
Agricultural Experiment Station, Bulletin No. 782, June 1964.

10. French, Charles E. and Kehrberg, Earl W., "The Comparative Advantage
Aspects of the Midwest-Eastern Seaboard Conflict of Interest
in the Production and Distribution of Milk." Journal of
Farm Economics, Vol. XLII, December 1960







-51-


11. Greene, R. E. L. and Warburton, H. W., An Economic Evaluation of Fluid
Milk Supply, Movement and Utilization in Florida. Gainesvillc,
Florida: University of Florida Agricultural Experiment
Station, Department of Agricultural Economics, Agricultural
Economics Mimeograph Report 63-1, September 1962.

12. Greene, R. E. L., et.al., Summary of Costs and Returns for Wholesale
Dairy Farms, Central Florida, 1958. Gainesville, Florida:
University of Florida Agricultural Experiment Station, Depart-
ment of Agricultural Economics Mimeograph Series 60-2,
October 1959.

13. Greene, R. E. L., et.al., Summary of Costs and Returns for Wholesale
Dairy Farms, Northeast Florida, 1958. Gainesville, Florida:
University of Florida Agricultural Experiment Station, Depart-
ment of Agricultural Economics Mimeograph Series 60-5,
October 1959.

14. Greene, R. E. L., et.al., Summary of Costs and Returns for Wholesale
Dairy Farms, Tampa Bay Milk Marketing Area, 1959. Gainesville,
Florida: University of Florida Agricultural Experiment
Station, Department of Agricultural Economics Mimeograph
Series 61-5, November 1960.

15. Herrmann, L. F. and Smith H. V., Geographic Structure of Milk Prices,
1957-58. Washington, D. C.: U. S. Department of Agriculture,
Agriculturel Marketing Service, Research Report No. 328,
July 1959.

16. Jeffrey, Arthur D., The Production-Consumption Balance of Milk in
the Northeast Region. Ithaca, New York: Cornell Univer-
sity Agricultural Experiment Station, New York State College
of Agriculture, A Unit of the State University of New York,
Northeast Regional Publication No. 29, A. E. 1055, June 1957.

17. Lasley, Floyd A., Geographic Structure of Milk Prices 1964-65.
Washington, D. C.: U. S. Department of Agriculture, Econo-
mic Research Service, Marketing Economics Division. Econo-
mic Research Service Report No. 258. September 1965.

18. Nourse, Edwin G., Report to the Secretary of Agriculture by the Fed-
eral Milk Order Study Committee. Produced through the facili-
ties of the U. S. Department of Agriculture. Washington,
D. C., December 1962.

19. Parry, S. P., et.al., Institutional Arrangements Influencing the
Movement of Milk in the South. Southern Cooperative Series,
Bulletin No. 104, April 1965.








-52-


20. Smith, Blair J., A Summary of 1962 Costs and Returns and an Economic
Description of Wholesale Dairy Farms in the Pensacola,
Florida Milk Marketing Area. Gainesville, Florida: Univer-
sity of Florida Agricultural Experiment Station, Department
of Agricultural Economics Mimeograph Series EC 65-1,
July 1964.

21. Smith, Blair J., A Summary of 1962 Costs and Returns and an Economic
Description of Wholesale Dairy Farms in the Tallahassee,
Florida Milk Marketing Area. Gainesville, Florida: Univer-
sity of Florida Agricultural Experiment Station, Department
of Agricultural Economics Mimeograph Series EC 65-2, Septem-
ber 1964.

22. Smith, Blair J., "An Algebraic Procedure for Separating Total Reported
State Milk Supplies into Grade A and Non-Grade A Components",
Journal of Farm Economics, Vol. 47 (2), May 1965, pp. 284-6.

23. Snodgrass, Milton M. and French, Charles E., Linear Programming
Approach to Interregional Competition in Dairying. Lafayette,
Indiana: Purdue University Agricultural Experiment Station,
Bulletin No. S. B. 637, May 1958.

24. Standard Highway Mileage Guide. Chicago, New York, Washington, D. C.,
San Francisco: Rand McNally and Company, 1961.

25. State of Florida Milk Commission, The. Reprint of Chapter 501 of
the Florida Statutes, 1961. Rules and Regulations 1962.

26. Supreme Court of the United States, Polar Ice Cream and Creamery Com-
pany, Appellant, vs. Charles 0. Andrews, Jr., Etc., et.al.,
Appellees. 375 U. S. 361, 84 Supreme Court 378, 1964.

27. U. S. Department of Agriculture, Agricultural Marketing Service,
Milk Marketing Orders Division. Federal Milk Order Market
Statistics. Washington, D. C., Annual Summaries for 1962,
1963, and 1964.

28. U. S. Department of Agriculture, Agricultural Marketing Service. The
Federal Milk Marketing Order Program. Washington, D. C.,
Marketing Bulletin 27, July 1963.

29. U. S. Department of Agriculture, Agricultural Marketing Service.
Regulations Affecting the Movement and Merchandising of
Milk. Washington, D. C., Marketing Research Report No. 98,
June 1955.

30. U. S. Department of Agriculture, Economic Research Service. Dairy
Situation. Washington, D. C., DS-300, April 1964.









-53-


31. U. S. Department of Agriculture, Economic Research Service. Dairy
Situation. Washington, D. C., DS-306, July 1965.

32. U. S. Department of Agriculture, Economic Research Service. Dairy
Statistics Through 1960. Washington, D. C., Statistical
Bulletin No. 303 and Supplements for 1961-1964.

33. U. S. Department of Agriculture, Economic Research Service, Farm
Real Estate Market Developments. October, 1964.

34. U. S. Department of Agriculture, Economic Research Service. Govern-
ment's Role in Pricing Fluid Milk in the United States.
Washington, D. C., ERS-63, September 1963.

35. U. S. Department of Agriculture, Statistical Reporting Service, Crop
Reporting Board. Agricultural Prices. Washington, D. C.,
September 15, 1962, September 15, 1963, and September 15, 1964.

36. U. S. Department of Agriculture, Statistical Reporting Service,
Crop Reporting Board. Milk Production, Distribution,and
Income, Washington, D. C., 1962-63 and 1963-64.

37. United States District Court for the Northern District of Florida.
Polar Ice Cream and Creamery Company, Appellant, vs. Charles
0. Andrews, Jr., etc., et.al., Appellees. Filed June 11, 1964.

38. University of Florida, The DARE Report. Institute of Food and
Agricultural Sciences, Gainesville, Florida. Published 1964.

39. Weisenborn, David E., Economic Analysis of Competitive Sources of
Milk Supply to Florida. Master's Thesis, Department of
Agricultural Economics, University of Florida, April 1965.

40. West, D. A. and Brandow, G. E., Equilibrium Prices, Production, and
Shipments of Milk in the Dairy Regions of the U. S., Univer-
sity Park, Pennsylvania: The Pennsylvania State University
Agricultural Experiment Station, Department of Agricultural
Economics and Rural Sociology. A. E. and R. S. No. 49,
November 1964.

41. Ziegler, Harmon, The Florida Milk Commission Changes Minimum Prices.
Published for the ICP by University of Alabama Press,
Tuscaloosa, Alabama. ICP Case Series No. 77, 1963.






































APPENDIX







-54-


Appendix Table l.--Seasonal Distribution of Estimated Annual Total Sur-
pluses or Deficits for the 53 Federal'Orders in the
Study Area, 1961-63 Averages.a/

Federal Total
Order Surplus or Surplus or Deficit by Season
Area Deficit Winter Spring Summer Autumn
(million pounds)
MIDDLE ATLANTIC:
New York-New Jersey 5,226.8 1,304.6 1,769.6 1,090.5 1,062.1
Delaware Valley b/ 381.4 100,3 142.0 78.0 61.1
Total 5,608.2 1,404.9 1,911.6 1,168.5 1,123.2

SOUTH ATLANTIC:
Upper Chesapeake Bay 158.8 33.5 45.5 46.9 32.9
Washington, D. C. 271.2 59.4 85.9 75.8 50.2
Wheeling 21.5 4.2 8.9 3.0 5.4
Clarksburg 4.9 c/ 2.2 1.6 1.0
Tri-State 16.5 1.6 9.2 4.9 .8
Appalachian 9.5 .1 6.0 2.4 1.0
Total 482.4 98.8 157.7 134.6 91.3

E. N. CENTRAL-E. GROUP:
Upstate Michigan 19.6 4.9 7.2 3.1 4.4
Muskegon 31.4 7.0 9.1 6.1 9.2
Southern Michigan 1,192.4 258.3 334.0 296.4 303.7
Toledo 50.2 14.0 20.1 7.7 8.4
Northeastern Ohio 568.8 136.4 189.3 133.1 110.0
North Central Ohio 37.3 9.1 13.1 8.0 7.1
Columbus 62.6 13.6 25.2 12.4 11.4
Dayton-Springfield 90.4 20.9 31.4 19.3 18.8
Cincinnati 177.1 33.6 62.3 50.2 31.0
Youngstown-Warren 33.7 7.7 17.6 4.0 4.4
Total 2,263.5 505.5 709.3 540.3 508.4

E. N. CENTRAL-W. GROUP:
Michigan Upper Peninsula 24.5 5.3 11.1 4.8 3.3
Northeastern Wisconsin 142.0 37.0 44.5 23.0 37.4
Milwaukee 78.4 20.9 27.9 13.2 16.4
Rock River Valley 12.8 2.4 6.7 2.0 1.7
Chicago 3,228.3 839.9 941.0 660.4 787.0
So. Bend-LaPorte-Elkhart 39.4 10.1 13.0 8.0 8.3
Fort Wayne 35.3 7.7 13.3 7.5 6.9
Lsville-Lxgton-Evnsville 169.9 35.5 62.8 44.9 26.7
Indianapolis b/ 159.9 29.6 59.8 43.8 26.6
Suburban St. Louis 59.6 10.7 27.4 16.3 5.3
Madison d/ 47.6 11.4 18.1 9.2 8.8
Total 3,997.7 1,010.5 1,225.6 833.1 928.4

W. N. CENTRAL-N. GROUP:
Duluth-Superior 64.5 17.2 24.1 10.5 12.7
Minneapolis-St. Paul 344.4 91.5 119.8 69.6 63.5






-55-


Appendix Table I.--Continued.


Federal Total
Order Surplus or Surplus or Deficit by Season
Area Deficit Winter Spring.' Summer Autumn
(million pounds)
N. Central Iowa 22.2 6.8 10.3 3.9 1.1
Cedar Rapids-Iowa City 71.8 17.1 25.4 18.4 10.9
Quad Cities-Dubuque 70.2 16.9 26.9 16.3 10.1
Des Moines 57.7 11.7 21.7 14.0 10.3
Sioux City 16.1 4.1 6.0 3.7 2.3
Total 646.9 165.3 234.2 136.4 110.9

W. N. CENTRAL-S. GROUP:
St. Joseph b/ 12.0 .2 5.8 3.9 2.1
St. Louis 162.9 27.3 69.5 47.7 18.4
Ozarks 64.1 8.8 28.7 16.9 9.8
Kansas City 143.8 30.3 46.9 29.9 36.6
Neosho Valley 41.8 8.5 14.3 10.7 8.3
Total 424.6 75.1 165.2 109.1 75.2

E. SOUTH CENTRAL GROUP:
Paducah .8 (1.1) 2.3 .9 (1.3)
Nashville 50.3 6.7 20.9 15.8 6.9
Memphis (1.2) (2.3) 1.5 2.2 (2.6)
Knoxville 27.9 5.1 11.1 7.6 4.1
Chattanooga 31.0 6.2 11.0 8.1 5.6
Mississippi Delta 15.4 2.4 6.9 4.9 1.2
Central Mississippi 45.5 7.2 16.5 14.2 7.5
Mississippi Gulf Coast 13.4 1.4 4.5 4.7 2.8
Total 182.9 25.6 74.7 58.4 24.2

WEST CENTRAL-N. GROUP:
Central Arkansas .2 (.7) 1.1 1.0 (1.2)
Fort Smith .7 (.2) .4 .6 (.2)
Total .9 (.9) 1.5 1.6 (1.4)

W.S. CENTRAL-S. GROUP:
Northern Louisiana 14.0 1.6 5.4 4.1 2.9
New Orleans 117.7 23.1 32.5 34.0 28.1
Total 131.7 24.7 37.9 38.1 31.0
Total All Markets 13,739.0 3,309.5 4,517.7 3,020.1 2,891.2
a/Discrepancies in this Table may exist as the result of arithmetical
rounding. Numbers in parentheses denote deficits.
/1962-63 data only.
c/
L Less than one hundred thousand pounds.
d/1963 data only.

Source: (27) and (39).






-56-


Appendix Table II.--Annual and Seasonal Class I Prices per Hundredweight
for the 53 Federal Orders in the Study Area, 3.5
Percent Butterfat, 1961-63 Average.


Federal Order Annual Winter Spring Summer Autumn

(Dollars)
MIDDLE ATLANTIC:
New York-New Jersey 5.28 5.41 4.75 5.26 5.69
Delaware Valley a/ 5.41 5.44 5.04 5.33 5.84

SOUTH ATLANTIC:
Upper Chesapeake Bay 5.32 5.31 5.01 5.44 5.52
Washington, D. C. 5.32 5.31 5.01 5.44 5.52
Wheeling 4.76 5.01 4.42 4.72 4.89
Clarksburg 5.08 5.34 4.77 5.01 5.18
Tri-State 4.81 4.81 4.31 4.90 5.22
Appalachian 5.10 5.21 4.82 5.09 5.28

E. N. CENTRAL-E. GROUP:
Upstate Michigan 4.44 4.40 4.15 4.56 4.60
Muskegon 4.40 4.37 4.15 4.51 4.55
Southern Michigan 4.14 4.18 3.89 4.16 4.33
Toledo 4.44 4.46 4.29 4.52 4.50
Northeastern Ohio 4.55 4.77 4.23 4.50 4.70
North Central Ohio 4.24 4.46 3.92 4.20 4.39
Columbus 4.37 4.43 4.19 4.42 4.46
Dayton-Springfield 4.51 4.56 4.45 4.51 4.52
Cincinnati 4.78 4.87 4.72 4.75 4.79
Youngstown-Warren 4.61 4.82 4.29 4.56 4.77

E. N. CENTRAL-W. GROUP:
Michigan Upper Peninsula 4.21 4.24 3.99 4.28 4.30
Northeastern Wisconsin 3.79 3.83 3.58 3.85 3.89
Milwaukee 3.78 3.79 3.56 3.85 3.90
Rock River Valley 3.84 3.87 3.61 3.90 3.99
Chicago 3.82 3.85 3.59 3.88 3.97
So. Bend-LaPorte-Elkhart 4.21 4.19 4.00 4.28 4.37
Fort Wayne 4.32 4.32 4.31 4.30 4.34
Lsville-Lxgton-Evnsville 4.51 4.58 4.46 4.46 4.52
Indianapolis?/ 4.40 4.49 4.37 4.34 4.39
Suburban St. Louis 4.24 4.27 4.00 4.29 4.41
Madison b/ 3.75 3.68 3.52 3.86 3.92

W. N. CENTRAL-N. GROUP:
Duluth-Superior 4.04 3.98 3.88 4.24 4.08
Minneapolis-St. Paul 3.91 3.90 3.82 3.99 3.91
N. Central Iowa 3.97 4.00 3.74 4.01 4.12
Cedar Rapids-Iowa City 3.98 4.00 3.74 4.03 4.12









-57-


Appendix Table II.--Continued.


Federal Order Annual Winter Spring Summer Autumn

(Dollars)
Quad Cities-Dubuque 4.02 4.05 3.79 4.08 4.17
Des Moines 4.41 4.44 4.25 4.44 4.50
Sioux City 4.57 4.65 4.54 4.52 4.57

W. N. CENTRAL-S. GROUP:
St. Joseph a/ 4.31 4.46 4.09 4.26 4.41
St. Louis 4.34 4.37 4.10 4.39 4.51
Ozarks 4.09 4.10 3.90 4.11 4.24
Kansas City 4.41 4.62 4.18 4.34 4.47
Neosho Valley 4.46 4.68 4.10 4.45 4.58

E. SOUTH CENTRAL:
Paducah 4.45 4.63 4.03 4.49 4.65
Nashville 4.52 4.54 4.36 4.54 4.63
Knoxville 4.54 4.65 4.56 4.40 4.56
Chattanooga 4.73 4.82 4.75 4.67 4.67
Mississippi Delta 5.18 5.28 5.16 5.12 5.16
Central Mississippi 5.34 5.44 5.33 5.28 5.32
Mississippi Gulf Coast 5.44 5.54 5.43 5.38 5.42

WEST CENTRAL-N. GROUP:
Central Arkansas 4.98 5.06 4.93 4.92 5.02
Fort Smith 4.93 5.15 4.59 4.96 5.03

W. S. CENTRAL-S6 GROUP:
Northern Louisiana 5.46 5.55 5.42 5.38 5.44
New Orleans 5.55 5.60 5.42 5.64 5.56

a/962-63 data only.
/ data only.
1963 data only.


Source: (27) and (39).






Appendix Table III.--Shortest Highway Distances between the Federal Order Markets not Included in Text
Table 8 and Six Florida Destinations, with Computed Total Costs of Transferring
a Hundredweight of Milk over each Distance.

Pensacola Tallahassee Jacksonville Orlando Tampa Miami
Federal Order
Dist./Costb/ Dist, Cost Dist. Cost Dist. Cost Dist. Cost Dist. Cost

Wheeling 938 1,70 878 1.60 849 1.56 991 1.79 1030 1.85 1200 2.12
Clarksburg 916 1.67 816 1.51 774 1.44 916 1.67 955 1.73 1125 2.00
Tri-State 765 1.42 714 1.34 705 1.33 847 1.56 883 1.61 1056 1.89
Appalachian 674 1.28 581 1.13 552 1.08 694 1.31 733 1.37 903 1.64
Upstate Michigan 1115 1.98 1137 2.02 1199 2.12 1341 2.35 1352 2.36 1550 2.68
Muskegon 1000 1,80 1022 1.84 1084 1.93 1226 2.16 1237 2.18 1435 2.50
Toledo 932 1.69 913 1.66 939 1.70 1081 1.93 1117 1.99 1290 2.26
North Central Ohio 885 1.62 866 1.59 896 1463 1038 1.86 1074 1.92 1247 2.20
Columbus 827 1,52 806 1.49 807 1.49 949 1.72 985 1.78 1158 2.05
Dayton-Springfield 785 1.46 766 1.43 828 1.52 970 1.75 981 1.77 1179 2.09
Youngstown-Warren 992 1.79 961 1.74 918 1.67 1060 1.90 1099 1,96 1269 2.23
Michigan Upper Penin, 1291 2.27 1325 2.32 1391 2.43 1533 2.65 1544 2.67 1742 2.99
Northeastern Wisconsin 1142 2.03 1210 2.14 1276 2.24 1418 2.47 1429 2.49 1627 2.80
Milwaukee 995 1.79 1029 1.85 1095 1.95 1237 2.18 1248 2.20 1446 2.51
Rock River Valley 936 1.70 1004 1.81 1080 1.93 1222 2.16 1224 2.16 1431 2.49
S. Bend-LaPorte-Elk. 875 1.60 897 1.64 959 1.73 1101 1.96 1112 1.98 1310 2.30
Fort Wayne 840 1.54 862 1.58 924 1.68 1066 1.91 1077 1.92 1275 2.24
Suburban St. Louis 689 1.30 775 1.44 872 1.60 1014 1.82 1016 1.83 1223 2.16
Madison 1001 1.80 1060 1.91 1145 2.03 1287 2.26 1289 2.26 1496 2.59
Duluth-Superior 1340 2.34 1410 2.46 1486 2.58 1628 2.80 1630 2.81 1837 3.14
N. Central Iowa 1108 1.97 1194 2,11 1295 2.27 1435 2.50 1436 2.50 1646 2.83
Cedar Rapids-Iowa City 927 1.76 1063 1.90 1154 2.05 1296 2.27 1298 2.28 1505 2.61
Quad Cities-Dubuque 977 1.76 1063 1.90 1144 2.03 1286 2.26 1286 2.26 1495 2.59
Des Moines 1021 1.83 1107 1.97 1208 2.13 1348 2.36 1349 2.36 1559 2.69
Sioux City 1177 2.08 1295 2.27 1396 2.43 1536 2.66 1537 2.66 1747 3.00
St. Joseph 929 1.69 1047 1.88 1173 2.08 1296 2.27 1289 2.26 1521 2.63
Ozarks 702 1.32 820 1.51 956 1.73 1069 1.91 1062 1.90 1294 2.27






Appendix Table III,--Continued


Federal Order


Pensacola Tallahassee Jacksonville Orlando Tampa Miami
Dist.~/Cost Dist. Cost Dist. Cost Dist. Cost Dist. Cost Dist. Cost


Kansas City 878 1.60
Neosho Valley 762 1.42
Paducah 543 1.07
Nashville 463 .94
Knoxville 492 .99
Chattanooga 391 .83
Mississippi Delta 290 .66
Central Mississippi 242 .59
Mississippi Gulf Coast 107 .37
Central Arkansas 496 .99
Fort Smith 652 1.24
Northern Louisiana 462 .94
New Orleans 205 .53


996 1.79 1123 2.00 1245 2.19
889 1.62 1025 1.84 1138 2.02
622 1.19 715 1.34 857 1.57
494 .99 570 1.11 712 1.34
451 .92 505 1.01 647 1.24
370 .79 432 .89 574 1.12
445 .91 522 1.04 694 1.31
430 .89 589 1.14 679 1.29
303 .68 546 1.07 552 1.08
670 1.27 812 1.50 919 1,67
823 1.52 959 1.73 1072 1,92
650 1.24 809 1.49 899 1.64
401 .84 570 1.11 650 1.24


1238 2.18 1470 2.55
1131 2.01 1363 2.38
859 1.57 1066 1.91
714 1,34 921 1.67
661 1.26 856 1.57
585 1.14 783 1.45
687 1,30 919 1.67
672 1,28 904 1.65
545 1.07 777 1.44
912 1.66 1144 2.03
1055 1.90 1297 2.28
892 1.63 1124 2.00
643 1.23 875 1.60


a/
Distance in miles taken from (24),
b/
The sum of transportation costs at 16 cents per hundredweight per 100 miles and handling costs
of 20 cents per hundredweight,


Source: (39).


_ ___


__ __ __ ___




-60-


Appendix Table IV.--Average Annual Differences Between Actual Florida
Prices and Computed Costs of Alternative Milk Supplies
at Six Florida Locations for the Federal Order Markets
not Listed in Text Table 10, in Dollars per Hundred-
weight of 3.5 Percent Milk Based on 1961-63 Data.2/

Pensa- Talla- Jackson-
Federal Order cola hassee ville Orlando Tampa Miami

Wheeling .10 .22 .39 .16 .10 -..50
Clarksburg .17 .01 .19 .04 .10 .70
Tri-State .33 .43 .57 .34 .29 .32
Appalachian .18 .35 .53 .30 .24 .36
Upstate Michigan .14 .12 .15 .08 .09 .74
Muskegon .36 .34 .38 .15 .13 .52
Toledo .43 .48 .57 .34 .28 .32
North Central Ohio .70 .75 .84 .61 .55 .06
Columbus .67 .72 .85 .62 .56 .04
Dayton-Springfield .59 .64 .68 .45 .43 .22
Youngstown-Warren .16 .23 .43 .20 .14 .46
Michigan Upper Peninsula .08 .05 .07 .15 .17 .82
Northeastern Wisconsin .74 .65 .68 .45 .43 .21
Milwaukee .99 .95 .98 .75 .73 .09
Rock River Valley 1.02 .93 .94 .71 .71 .05
So. Bend-LaPorte-Elkhart .75 .73 .77 .54 .52 .13
Fort Wayne .70 .68 .71 .48 .47 .18
Suburban St. Louis 1.02 .90 .87 .65 .64 .02
Madison 1.01 .92 .93 .70 .70 .04
Duluth-Superior .18 .08 .09 .13 .14 .80
N. Central Iowa .62 .50 .47 .24 .24 .42
Cedar Rapids-Iowa City .82 .70 .68 .46 .45 .21
Quad Cities-Dubuque .78 .66 .66 .43 .43 .23
Des Moines .32 .20 .17 .06 .06 .72
Sioux City .09 .26 .29 .52 .52 -1.19
St. Joseph .56 .39 .32 .13 .14 .56
Ozarks 1.15 .98 .89 .71 .72 .02
Kansas City .55 .38 .30 .11 .12 .58
Neosho Valley .68 .50 .41 .23 .24 .46
Paducah 1.04 .94 .92 .69 .69 .02
Nashville 1.10 1.07 1.08 .85 .85 .19
Knoxville 1.03 1.12 1.16 .93 .91 .27
Chattanooga 1.00 1.06 1.09 .86 .84 .20
Mississippi Delta .72 .49 .49 .22 .23 .47
Central Mississippi .63 .35 .23 .08 .09 .61
Mississippi Gulf Coast .75 .46 .20 .19 .20 .50
Central Arkansas .59 .33 .23 .06 .12 .63
Fort Smith .39 .13 .05 .14 .12 .83
Northern Louisiana .16 .12 .24 .39 .38 -1.08
New Orleans .48 .19 .05 .08 .07 .77
a/
The differences shown are the amounts by which the Florida prices exceed
the computed prices. A minus (-) sign before an entry indicates that the
actual Florida price was below the computed price by the amount shown,
Source: (39).
5JS :';c 12/1/65 -- Ag. Exp; Sta. 750




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