• TABLE OF CONTENTS
HIDE
 Title Page
 Acknowledgement
 Table of Contents
 List of Tables
 List of Illustrations
 Introduction
 The milk industry in Central and...
 Price structure prevailing in Central...
 Theoretical models of competit...
 Nature and extent of competition...
 Nature and extent of competition...
 Methods of stimulating competition...
 Summary and conclusions
 Appendixes
 Bibliography
 Biographical sketch














Group Title: appraisal of and recommendations for increasing the degree of competition in Florida's dairy industry /
Title: An appraisal of and recommendations for increasing the degree of competition in Florida's dairy industry /
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Permanent Link: http://ufdc.ufl.edu/UF00091629/00001
 Material Information
Title: An appraisal of and recommendations for increasing the degree of competition in Florida's dairy industry /
Physical Description: xv, 298 leaves : ; 28 cm.
Language: English
Creator: Brown, Ernest Evan, 1926-
Publication Date: 1956
Copyright Date: 1956
 Subjects
Subject: Dairying -- Florida   ( lcsh )
Dairy Science thesis Ph. D
Dissertations, Academic -- Dairy Science -- UF
Genre: bibliography   ( marcgt )
non-fiction   ( marcgt )
 Notes
Thesis: Thesis (Ph. D.)--University of Florida, 1956.
Bibliography: Includes bibliographical references (leaves 293-297).
Additional Physical Form: Also available on World Wide Web
General Note: Typescript.
General Note: Vita.
Statement of Responsibility: by Ernest Evan Brown.
 Record Information
Bibliographic ID: UF00091629
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: alephbibnum - 000419582
oclc - 36467339
notis - ACG7307

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Table of Contents
    Title Page
        Page i
        Page i-a
    Acknowledgement
        Page ii
    Table of Contents
        Page iii
        Page iv
        Page v
        Page vi
        Page vii
        Page viii
        Page ix
    List of Tables
        Page x
        Page xi
        Page xii
        Page xiii
    List of Illustrations
        Page xiv
        Page xv
    Introduction
        Page 1
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
    The milk industry in Central and South Florida
        Page 13
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
        Page 20
        Page 21
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        Page 23
        Page 24
        Page 25
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        Page 57
        Page 58
        Page 59
        Page 60
        Page 61
        Page 62
        Page 63
        Page 64
    Price structure prevailing in Central and South Florida
        Page 65
        Page 66
        Page 67
        Page 68
        Page 69
        Page 70
        Page 71
        Page 72
        Page 73
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        Page 84
        Page 85
        Page 86
        Page 87
        Page 88
        Page 89
        Page 90
    Theoretical models of competition
        Page 91
        Page 92
        Page 93
        Page 94
        Page 95
        Page 96
    Nature and extent of competition in the nation's regulated markets for milk
        Page 97
        Page 98
        Page 99
        Page 100
        Page 101
        Page 102
        Page 103
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        Page 120
        Page 121
        Page 122
        Page 123
        Page 124
        Page 125
        Page 126
        Page 127
    Nature and extent of competition in Central and South Florida
        Page 128
        Page 129
        Page 130
        Page 131
        Page 132
        Page 133
        Page 134
        Page 135
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        Page 200
        Page 201
        Page 202
        Page 203
        Page 204
        Page 205
    Methods of stimulating competition in Florida markets
        Page 206
        Page 207
        Page 208
        Page 209
        Page 210
        Page 211
        Page 212
        Page 213
        Page 214
        Page 215
        Page 216
        Page 217
        Page 218
    Summary and conclusions
        Page 219
        Page 220
        Page 221
        Page 222
        Page 223
        Page 224
    Appendixes
        Page 225
        Page 226
        Page 227
        Page 228
        Page 229
        Page 230
        Page 231
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        Page 286
        Page 287
        Page 288
        Page 289
        Page 290
        Page 291
        Page 292
    Bibliography
        Page 293
        Page 294
        Page 295
        Page 296
        Page 297
    Biographical sketch
        Page 298
        Page 299
        Page 300
Full Text











An Appraisal of and Recommendations

for Increasing the Degree

of Competition in Florida's Dairy Industry









By
ERNEST EVAN BROWN


A DISSERTATION PRESENTED TO THE GRADUATE COUNCIL OF
THE UNIVERSITY OF FLORIDA
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
DEGREE OF DOCTOR OF PHILOSOPHY










UNIVERSITY OF FLORIDA
June, 1956




ae '. 344-



AGRI-
CULTURAL
LIBRARY



































UNIVERSITY OF FLORIDA

3 1262 08552 3693















ACKNOWLEDGMENTS


The writer is indebted to a number of people for

valuable assistance and encouragement in the making of this

study. He regrets that the limitations of available space

do not permit him to mention them all by name. Special

thanks are due to Professor W. K. McPherson, for his friendly

and personal council; to Dr. H. G. Hamilton, for his advice

and suggestions; to L. K. Nicholas, Administrator of the

Florida Milk Commission for encouragement of this study; to

Miss Jeanne Lovett for her patience and diligence in typing

of drafts and re-drafts; to the members of the writer's

Supervisory Committee for constructive criticism; and to

fellow graduate students and colleagues. Mention must also

be made in all fairness of those milk producers and dealers

in Florida without whose assistance this study would not

have been possible.

Last, but not least, the writer wishes to thank his

wife, Arlene, for forebearing physical comforts, acquisition

of household goods, and for aid and encouragement given

with a cheerful and happy countenance.




ii
38 7g













TABLE OF CONTENTS


Page
ACKNOWLEDGMENTS . . . . . . .. . ii

LIST OF TABLES . . . . . . . . x

LIST OF ILLUSTRATIONS . . . . . . xiv

I. INTRODUCTION . . . . . . .. 1

Background 1
Purpose and Scope 3
Methodology 4

Review of Literature 4
Data Available 5
Selection of Area 6
Description of the Sample 7
Types of Data Obtained 11
Method of Analysis 11

II. THE MILK INDUSTRY IN CENTRAL AND SOUTH
FLORIDA . . . . . . . . 13

Unique Characteristics of Florida's Milk
Industry 13

Growth and Importance of Dairying in
Florida and Other States 13
Location of Production and Consump-
tion Areas 16
Form in Which Milk is Sold at the
Farm 19
Use That Dealers Make of Whole Milk 19
Prices of Whole and Fluid Milk 22

Characteristics of Commercial Dairies 23

Types of Dairies 23
Organization of Commercial Dairies 23
Characteristics of Selected Produc-
tion Factors 25

Land Ownership 25
Land Use Pattern 26


iii









Page


Degree of Diversification 26
Acreage Utilized 28
Pasture 30
Feed Crops 32
Differences in Land Use of
Wholesale Milk Producers
and Producer-Distributors 34

Number of Dairy Animals 34

Differences in Size of Oper-
ations of Wholesale Milk
Producers and Producer-
Distributors 35

Specialized Services Used 35

Commercial Hauling 35
Dairy Herd Improvement Asso-
ciation Services 36
Artificial Insemination 39

Characteristics of Milk Dealers 41

Types and Sizes of Distribution
Operations 41
Location of Milk Dealers 42

Methods of Pricing Milk in Central and
South Florida 43

Methods of Pricing Milk in Adminis-
tered Areas 43

Objectives and Policies 43
Techniques Used 46

Market Areas 46
Milk Classification 50
Butterfat Differentials 51
Pricing Techniques 51

Producer Level 51
Consumer Level 52
Results of Pricing
Techniques Used 52

Adjusting Supply to Demand 53









Page


Short-Run Adjustments 53
Long-Run Adjustments 54

Compliance With Regulations 57

Producer Class I, II, and
III Prices 57
Butterfat Differentials 58

Characteristics of Dis-
tributors Not Paying
Established Butterfat
Differentials 60
Characteristics of Producer-
Distributors Not Paying
Established Butterfat
Differentials 61

Consumer Class I Prices 62

Retail Prices 62
Wholesale Prices 62

Methods of Pricing Milk in Non-
Administered Areas 63

Milk Classification 63
Adjusting Supply to Demand 64
Quality or Butterfat Differentials 64
-Price Policies 64

III. PRICE STRUCTURE PREVAILING IN CENTRAL AND
SOUTH FLORIDA . . . . . 65

Consumer Prices 65

Geographic Price Structure 65
Fluctuations of Consumer Milk Prices 65

Producer Prices 66

Geographic Class I Price Structure 66
Fluctuations of Producer Class I
Prices 69
Class II and III Milk 71

Blend Prices 71










Page


Differences Between Prices Paid to
Producers Selling to the Same
Outlet 71
Differences Between Producers Selling
to Different Dealers in the Same
Market 76
Differences Between Producers Selling
to Dealers Located in Different
Markets 80

Market Problems Identified by the Industry 82

Wholesale Producers 82
Producer-Distributors 8
Distributors 8

Industry Suggestions for Improving the
Market for Milk 85

Wholesale Producers 85
Producer-Distributors 88
Distributors 89

IV. THEORETICAL MODELS OF COMPETITION . . . 91

Pure Competition 92
Imperfect Competition 93

V. NATURE AND EXTENT OF COMPETITION IN THE NATION'S
REGULATED MARKETS FOR MILK . . . . 97

The Pricing Problem 97
Development of Governmental Pricing
Agencies 100
Requisites of Pure Competition 102

Homogeneity of Product 102
Market Knowledge 103
Interference With Supply and Demand 104

Seasonal Class Prices 106
Base-Surplus, Base-Quota, or
Basd-Rating Plans 108
Fall Premium Plan 110
Retail and Wholesale Prices of
Milk 112

Factors Considered 112
Factors Necessary 113
Store Differentials 113


_~ C~F~ ~ ~









Page


Independence of Buyers and Sellers 121
Number of Buyers and Sellers 121

VI. NATURE AND EXTENT OF COMPETITION IN CENTRAL
AND SOUTH FLORIDA . . . . . 128

The Pricing Problem 128
Development of the Florida Milk Commission 128
Requisites of Pure Competition 129

Homogeneity of Product 129
Market Knowledge 133

Statistical and Information
Services 134

Report Forms 136
Accounting Practices 138

Producer Knowledge 140

Terms of Sale 140
Average Market Blend Prices 142
Average Individual-Handler
Blend Prices 143
Class Price Determination 146
Termination Notice 150

Dealer Knowledge 152

Interference With Supply and Demand 155

Short-Run and Long-Run Adjust-
ments 155
Local Options Versus Area of
State Options 159
Economic Areas 161
Retail and Wholesale Prices of
Milk 179

Independence of Buyers and Sellers 181

Restriction on Entry 181
Effect of Credit Terms on Mobility
of Producers 188
Bonding 191

Number of Buyers and Sellers 192

Summary of Competition in the Regulated
Areas of Central and South Florida 203


vii









Page


VII. METHODS OF STIMULATING COMPETITION IN FLORIDA
MARKETS . . . . .. . . . 206

Homogeneity of Product 206

Check Testing of Milk Weights and
Butterfat Contents 207
Butterfat Differential Payments 207

Market Knowledge 208
Interference With Supply and Demand
Adjustments 211

Adjusting Supply and Demand 211
Local Optione Versus Area or State
Options 212
Economic Areas 213
Retail and Wholesale Prices 215

Independence of Buyers and Sellers 217

Bonding 217
Credit 217

Number of Buyers and Sellers 217

VIII. SUMMARY AND CONCLUSIONS . . . . . 219

APPENDIXES . . . . . . ... . 225

A. Schedules Used 226

B. Information Indicating the Need for Improving
the Pricing Mechanisms for Milk in Florida 248

Milk Dealers 248

Reconstituting and Reconstructing Milk 248
Restricting Supply 249
Miscellaneous 250

Wholesale Milk Producers 250

Juggling of Bases by Milk Dealers and
Producers 251
Use of Bases and Agreements to
Restrict Production 252
Need for a Bonding Law 255
Pricing Inequalities and Trade
Practices 255


viii









Page
Miscellaneous 258

Other Sources 258

Wholesale Discounts 258
Butterfat Tests 259
Producer Payments 259
Reconstituted Milk 260

C. Practice and Theory of Market Exclusion Within
the United States 262

Geographical Barriers 262
Base-Surplus Seasonal Incentive Plans 265

Alternatives to Use of Base-Surplus 273

D. Effects of a Theoretical Market-Wide Pool Upon
Producers in the Miami Market 277

E. Inter-Dealer Bulk Sales and Prices 289

BIBLIOGRAPHY . . . . . . . . . . 293













LIST OF TABLES


Table Page
1. Milk Production Per Capita by States, 1952 16
2. Gallons of Milk Sold by Producers and Popula-
tion in Florida and Six Selected Counties 18

3. Percentage of Milk Sold or Utilized for Prep-
aration of Dairy Products Sold from Farms in
the United States and Florida, 1940-1951 * 21

4, Organization of Commercial Dairies in Central
and South Florida, 1953 . . . 24

5. Land Tenure Arrangements of 131 Commercial
Dairies in Central and South Florida by Type
of Organization, 1952 . . . . 25

6. Rental Arrangements of 17 Commercial Dairy
Farmers Who Rented All of Their Land, Central
and South Florida, 1953 . . . . 27

7. Farm Enterprises Other Than Dairy of 17 Whole-
sale Milk Producers, Central and South
Florida, 1952 . . . . . . . 28
8. Variability in Acreage Used for Dairying by
Size Groups, 117 Wholesale Milk Producers
and 14 Producer-Distributors in Central and
South Florida, 1952 . ....... 29

9. Land Utilization of 117 Wholesale Milk Pro-
ducers in Central and South Florida, 1952 31
10. Land Utilization of 14 Producer-Distributors
in Central and South Florida, 1952 . 32

11. Feed Crops Grown, Other Than Pasture, By 117
Wholesale Milk Producers and 14 Producer-
Distributors in Central and South Florida,
1952 . . . . . . . . . 33
12. Methods of Hauling Used by 117 Wholesale Milk
Producers in Central and South Florida, 1952 36











13. Comparison of Operator and Farm Characteris-
tics of Eight D.H.I.A. Members in Central
and South Florida With 109 Wholesale Milk
Producers Who Were Non-D.H.I.A. Members,
1953 . . . . . . . . . 37
14. Organization of Dairy Farm Ownershik and tJse
Made of Artificial Insemination on 117
Wholesale Milk Producing Farms in Central
and South Florida, 1953 . . . 40

15. Size of Distributors and Producer-
Distributors in Central and South Florida
as Measured by Fluid Milk Sales, 1952 42

16. Marketing Problems of 56 Wholesale Milk Pro-
ducers in Central and South Florida, 1952 83

17. Marketing Problems of Seven Producer-
Distributors in Central and South Florida,
1953 . 6. .0 . . . . . . 85
18. Marketing Problems of Eight Milk Distributors
in Central and South Florida, 1953 . 86
19. Suggestions for Improving Dairy Marketing
Made by 71 Wholesale Milk Producers in
Central and South Florida, 1953 . . 87

20. Marketing Suggestions by Five Producer-.
Distributors in Central and South Florida,
1953 . . . . . . 89
21. Suggestions by Five Milk Distributors in
Central and South Florida for Improving
the Marketing Situation, 1953 . . 90
22. The Nine Market Situations Possible, Accord-
ing to the Number Each of Buyers and
Sellers Assuming Absence of'Sellers' or
Buyers' Preferences . . . . . 95

23. Net Differences Between Home Delivered and
Lowest Reported Store Prices for 80 Markets
by Specific Groups, June 1954 .'. .'. 115

a. State Controlled Markets 115
b. Markets Under State and Federal
Regulation; Resale Prices Not
Established 118


Table


Page











24. Relationship Between Size of Milk Dealers
and Payment for -ilk on a Butterfat
Differential Basis, Central and South
Florida, 1952 . . . . ..... 131

25. Oral or Written Terms of Sale Between 117
Wholesale Milk Producers in Central and
South Florida and Their Milk Outlets, 1952 141

26. How 113 Wholesale Milk Producers in Milk
Administered Areas Believe Class Prices
Are Established, Central and South Florida,
1953 . . . . . . . . 1. . 47
27. Knowledge of 113 Wholesale Milk Producers as
to Prevailing Milk Prices, Central and
South Florida, 1953 .... . . 149
28. Length of Termination Notice Producers Felt
They Should Give Their Milk Dealers,
Central and South-Florida, 1953- . 151

29. Length of Termination Notice Which Producers
Felt Distributors Were Required to Give.
Them, Central and South Florida, 1953 . 152

30. Extent of Market Knowledge Twenty-Seven Milk
Dealers in Central and South Florida
Assumed Their Producers Knew, 1952 . . 153

31. Distribution of Dealers Who Did or Did Not
Take on New Producers Who Applied to Them
During 1952 for a Marketing Outlet and
Reasons Why Some Dealers Did Not Take On
These Applicants, Central and South
Florida . . . . . . . 183

32. Replies by 117 Wholesale Milk Producers in
Central and South Florida During 1953 to
Question, "Could You Have Sold Your Milk
to Anyone Else When You Started Shipping
to Your Present Outlet?" . . . . 185

33. Reasons Why 117 Florida Producers Decided
to Sell Milk to Their Present Outlet, 1953 186

34. Credit Relationships Between 117 Wholesale
Milk Producers and Their Milk Dealers in
Central and South Florida, 1953 . . 189


xii


Table


Page











35. Original Purpose of Distributors Extending
Credit to Wholesale Milk Producers in
Central and South Florida, 1953 . . 189

36. Reasons Why 117 Wholesale Milk Producers in
Central and South Florida Do Not or Cannot
Sell Milk in Adjacent Milk Marketing Areas,
1953 . . . . . . . . . 193
37. Number of Dealers and Producers in Each of
the Eleven Regulated Areas in Central and
South Florida, 1952 * . 195

38* Terms of Written Contracts Between 10 Whole-
sale Milk Producers and Their Dealers in
Central and South Florida, 1953 . . 200

39. Variations in Duration of 10 Contracts
Between Producers and Dealers, 1952 . 200

40. Methods Used by Eleven Milk Dealers Using a
Base-Surplus Plan in Central and South
Florida in Determining the Proportions of
Class I, II, and III to be Paid Producers
Who Might be Taken On as Producers After
the Base Period is Over, 1952 . . . 203

41, Index of Average Daily Fluid Milk Sales Using
a January-February Base in the Miami Market,
Compared to Other Markets in the United
States . . . . . . . . 281

42. Comparison of Blend Milk Prices Paid to Pro-
ducers for 4.0 Per Cent Butterfat Milk
Under the Individual-Handler Pools Using
a January-February Base, Compared to Prices
That Would Have Been Paid Under a Market-
Wide Pool Using a January-February Base,
Dade-Broward-Monroe Milk Marketing Area,
Florida, 1952 . . . . . . 284

43, Differences Between Prices of Class III (40
Per Cent Cream) Established by the Florida
Milk Commission in the Miami Area and the
Market Prices of Class III Bought by Milk
Dealers from Cream Jobbers in the Miami
and Tampa-St. Petersburg Areas, 1952 . 292


xiii


Table


Page













LIST OF ILLUSTRATIONS


Figure Page
1. Location and Number of Wholesale Milk
Producers, by Counties, Central and
South Florida, 1952 . . . . 8

2. Location and Number of Distributors and
Producer-Distributors by Counties in
Central and South Florida, 1952 . . 9

3. Average Number of Milk Cows on Farms by
Years in the United States and Selected
States, 1940-51 ... . . . . 14

4. Price of Milk Sold to Plants and Dealers at
Wholesale in the United States and
Selected States, 1940-51 . . . . 17

5. Location of the Larger Cities in Central
and South Florida, 1952 . . . 20

6. Retail Prices Per Quart of Milk in Selected
Cities of the United States, 1950-52 . 67

7. Retail Prices per Quart of Milk in Tampa and
Miami, Florida and in the Federal Order
Markets of Chicago and New York City,
1950-52 . .. . . 68
8. Producer Prices per Hundredweight of Milk in
the State Regulated Markets of Tampa,
Miami, Pittsburgh, Atlanta and Los Angeles,
1950-52 . . . . . . . . 70

9. Producer Prices per Hundredweight of Milk in
Tampa and Miami, Florida and the Federal
Order Markets of Chicago and New York City,
1950-52 . . . . . . . . 72

10. Comparison of Seasonal Production Patterns
of Two Producers in the Miami Area With
Class I Milk Sales of Dealers, Using a
January-February Base, Florida, 1952 . 78


xiv












11.


12.


13.


14;



15.



16,


17.


Page


162


164


Areas Operating Under Regulation of the
Florida Milk Commission, Central and
South Florida, January 1, 1953 .

Sales Area of Three Tampa Milk Dealers,
Florida, 1953 . * * a . *

Milk Supply Area of Three Tampa Milk
Dealers, Florida, 1953 . . . . .

Delivered Retail Price per Quart of Milk
in the Tampa, Pinellas, Polk and Lakeland,
Plant City and Manatee-Sarasota Milk
Marketing Areas, Florida, 1933-52 .

Producer Price Per Gallon of Milk in the
Tampa, Polk and Lakeland, Pinellas,
Plant City and Manatee-Sarasota Milk
Marketing Areas, Florida, 1933-52 .

Sales of Three Orlando Milk Dealers,
Florida, 1953 . . . . . .

Retail Prices per Quart of Milk in the
Orange-Seminole and Brevard Milk Market-
ing Areas, Florida, 1933-52 . . .


Producer Prices per Gallon of Milk in the
Orange-Seminole and Brevard Milk Market-
ing Areas, Florida, 1933-52 . . . 172

Sales Area of Five Miami and Three West
Palm Beach Milk Dealers, Florida, 1953 174

Milk Supply Area of Five Miami and Three
West Palm Beach Milk Dealers, Florida,
1953 . . . . . . 175
Retail Prices per Quart of Milk in the
Martin-Palm Beach-Hendry and the Dade-
Broward-Monroe Milk Marketing Areas,
Florida, 1933-52 . . . 176

Producer Prices per Gallon of Milk in the
Martin-Palm Beach-Hendry and the Dade-
Broward-Monroe Milk Marketing Areas,
Florida, 1933-52 . . . . ... 177

Probable Economic Milk Marketing Areas in
Central and South Florida, 1953 . . 178


Figure


167



168


169


171


18.


19.

20.


21.



22.



23.

















I. INTRODUCTION


BACKGROUND

In Florida the dairy industry has some distinguish-

ing characteristics. Dairy farms are large--both in terms

of size of herds and the number of acres of land owned and

operated. The number of farmers selling whole milk has been

decreasing while increasing elsewhere. Whole milk prices

are among the highest in the United States. While Florida

dairy farms are large and milk production has been increas-

ing at a rapid rate, per capital production of whole milk is

extremely low.

During the depression years of the nineteen thirties,

business practices employed by dealers created chaotic con-

ditions in many of the nation's markets for whole and fluid

milk. In 26 states, including Florida, State Milk Commis-

sions or Boards were created for the purpose of regulating

and stabilizing the prices of milk at levels that would be

fair to producers, dealers and consumers. By 1937, the

practice of administering milk prices was accepted, but it

was quite obvious that a better method of determining milk

prices was needed in many markets. During that year the

1











United States Congress authorized the Secretary of Agricul-

ture to issue Federal Market Orders designed to facilitate

the pricing of milk in markets of an interstate nature.

Since World War II, the public has become more and

more dissatisfied with administered milk-pricing and espe-

cially with administered pricing by state agencies. As a

result of this dissatisfaction, the number of state Bommis-

sions or boards has decreased from 26 to 17. On the other

hand, Federal Market Orders are now being used in more than

50 areas. These Federal Market Orders regulate the price

of whole milk at the producer level, whereas state milk-

pricing agencies frequently regulate the price of milk at

both producer and consumer levels.

Nearly every successive legislature, in the states

having milk commissions or boards, has found it necessary

to take a definite position on milk-pricing policy. Much

of the public opinion supporting changes in milk-pricing

policy is based on the hypothesis that administering milk

prices restricts competition and that restrictions to com-

petition raise the price of milk. On the other hand, the

original purpose of administering milk prices was to main-

tain and stimulate competition by establishing fair and rea-

sonable milk prices.

To a considerable extent, this apparent paradox can

be traced to a lack of understanding of the conditions that












facilitate competition, and of knowledge as to the extent

to which competitive conditions prevail in milk markets.

PURPOSE AND SCOPE

Since the capitalistic system is based on "competi-

tion" between producers of goods and services, and the citi-

zens of this country endorse the free enterprise system, it

is evident that the American people believe that some form

of "competition" is desirable. For this reason, the Florida

dairy industry has been studied from the viewpoint of its

competitive nature. Underlying the study are two basic

assumptions: (1) competition is desirable and necessary for

continuance of our free enterprise system and (2) the kind

of competition that is most desirable in the dairy industry

may be different from the kind of competition that is desir-

able in other industries.

The objectives of the study are threefold. The first

objective is to determine the kind and extent of competition

which exists in Florida's dairy industry. The second objec-

tive is to evaluate the kind of competition that prevails in

terms of its effect upon the production and utilization of

milk. The third objective is to suggest several courses of

action that might stimulate competition in the industry.

Section I includes background, purpose and scope,

and methodology used in the study. Section II describes the











unique characteristics of Florida's dairy industry, charae-

teristies of commercial producers and milk dealers, and

methods used in pricing milk in central and south Florida.

In Section III, the prevailing price structure in Florida

and blend prices received by producers in 1952 are examined.

In addition, the marketing problems of milk producers and

dealers and their suggestions for solving them are discussed.

The theoretical requisites of a competitive, economic envi-

ronment are outlined in Section IV.

Section V deals with the nature and extent of com-

petition in the nation's regulated markets, and comparisons

are made to the theoretical model of competition presented

in Section IV. In the Section that follows the type of com-

petition that prevails in the milk markets of central and

south Florida is evaluated. The competition that prevails

in Florida is then compared with competition that prevails

in markets in other states. Section VII outlines several

methods of stimulating competition in the milk markets of

central and south Florida. Finally, the Summary and Conclu-

sions are presented in Section VIII.


METHODOLOGY

REVIEW OF LITERATURE.--There is an abundance of literature

on the eeonomic characteristics of various aspects of the

dairy industry in many parts of the country. Numerous








5

studies have been published on the various phases of the

dairy industry in such leading milk producing states as

Wisconsin, Minnesota, New York, amd Pennsylvania. Likewise,

detailed and exhaustive economic analyses have been made of

the industry in such major milksheds as New York, Philadel-

phia, and Chicago.

In contrast to the abundance of information avail-

able on the industry in other states and major milksheds,

the economic literature on Florida's dairy industry is very

meager. Only one study1 of the structure of the industry

in Florida has been published. This study, together with

three production studies,2 constitutes all of the economic

literature currently available on the Florida dairy industry.

DATA AVAILABLE.--Secondary data were available from three

sources. These included United States Census reports, the

Florida State Department of Agriculture, and the Florida Milk

Commission. Data obtained from these sources were used dur-

ing the initial planning and carrying out of this study.

1W. K. McPherson and R. F. Luckey, Jr., Some Trends
and Characteristics of the Dairy Industry in Florida, Florida
Agricultural Experiment Station Bulletin 309, March, 1954.
2A. H. Spurlock, D. L. Brooke, and R. E. L. Greene,
Cost of Producing Milk in Selected Areas of Florida, Florida
Agr. Exp. Sta., Ag. Ec. Series No. 51-4, January, 1951;
E. D. Smith, N. K. Roberts, and W. G. O'Regan, Milk Produc-
tion Cost Trends in the Florida Peninsula, Fla. Agr. Exp.
Sta., Agr. Ec. Series No. 55-9, May, 1955; Bruce McKinley,
An Economic Study of 249 Dairy Farms in Florida, Florida
Agricultural Exp. Sta. Bulletin 246, May, 1932.








6
United States Census reports were used to determine

population figures by county areas in Florida and the volumes

of milk sold off farms in the individual counties. Lists of

wholesale milk producers and dealers were obtained from the

Florida State Department of Agriculture. These lists gave

the names of all producers and dealers in the individual

counties of the state. The Florida Milk Coimission provided

information relative to the general size and location ef pro-

ducers and milk dealers. The Commission was also able in

most cases to designate the producers who sold to each milk

dealer.

SELECTION OF AREA.--The data assembled from the above men-

tioned sources were then used to identify an area having the-

following characteristics: (1) this area included a large

percentage of the state's population and milk production,

(2) markets in this area were closer together spatially than

similar markets in north and northwest Florida and the degrees

of competition for milk should be greater than in north-or

west Florida, (3) dairy farms varied greatly in size and it

was felt that this variation might be due to market imper-

fections or to other causes, and (4) the number of milk dealers

in the area was considered sufficient for some degree of com-

petition for milk.supplies.

The area thus identified will be called central and

south Florida. It consists of 26 counties, all of which are








7

located south of the northern limits of Pasco, Polk, Orange,

Seminole, and Brevard Counties.

DESCRIPTION OF THE SAMPLE.--As of March 12, 1952, there were

429 licensed dairies in the 26 counties in central and south

Florida covered by this study (Figure 1). Three hundred and

eighty-six of these dairies, or nearly 90 per cent, were

located in the 15 counties where the Florida Milk Commission

established producer Class I prices and consumer retail

prices. Only 43 dairies, or less than 10 per cent, were

located in 11 counties where producer and consumer prices

were not established by a public agency. One hundred and ten

milk dealers were also located in the 26 counties comprising

the area of this study (Figure 2). Ninety-four, or about

87 per cent, of these dealers were located in the 15 counties

where the Milk Control Commission regulated producer Class I

prices and consumer retail prices. Only 14 dealers, or about

13 per cent, were located in the 11 counties where producer

and consumer prices were not determined by a public agency.

A judgment sample was used in order to obtain the

desired 25 per cent sample of milk dealers and producers and

at the same time: (1) to include all those producers located

in one area who sold their milk to dealers in another area,

(2) to include as many producers as possible who had been in

business two years or less, and (3) to include dealers and

producers of representative sizes in the sample.












FIGURE 1 LOCATION AND NUMBER OF WHOLESALE MILK
PRODUCERS, BY COUNTIES, CENTRAL AND
SOUTH FLORIDA, 1952


Ea Regulated areas
E1 Non-regulated areas








* Source--Revised Liet of Florida
Dairymen, John M. Scott, Chief
Dairy Supervisor, Florida State
Department of Agriculture, March
12, 1952.













FIGURE 2 LOCATION AND LUMBER. Q .DISTRIBUTORS AND PRODUCER-
DISTRIBUTORS BY COUNTIES IN CE'iTRAL AND
SOUTH FLORIDA,. 1952.


fRegulated area

E]Non-regulated area


* Source-John M. Scott, Chief Dairy Supervisor,.
Revised List of Kilk Pasteurizing Plants,
Florida Department of Agriculture,.April 8, 1952.


------------------- --,I--~- --,








10
This judgment sample was made by choosing at random

from each separate administered price and non-price admin-

istered area one large milk dealer, one average-sized dealer,

and one small dealer. In areas where this could not be done,

due to the limited number of dealers, some deviation from
this sampling plan was necessary. Efforts were made, however,

to secure dealers in the sample who varied greatly in size

of operations. Twenty-seven of the 110 milk dealers in the

area of study were chosen (24.5 per cent sample).

The producers who sold milk to each of these 27
dealers were then arrayed by volume of off-farm sales during

1951. Efforts were made to secure in the sample at least one

large, one medium, and one small producer selling to each of

the selected milk dealers. Nearly every producer located in

one area and selling to one of the selected 27 milk dealers

located in another area and producers who had been in business

two years and less who sold to one of the 27 milk dealers were

included in the sample. The 117 wholesale producers3 included

in the sample represented 27.3 per cent of the wholesale pro-

ducers in the area of study.

After drawing the sample, schedules were prepared.
These schedules were pre-tested by interviewing both.producers

and dealers not in the area of the study. Schedules were then


3The sample selected originally included 119 wholesale
milk producers but two producers refused to be interviewed.








11

revised slightly and interviews were started among the 117

wholesale producers and 27 milk dealers in the sample.4

All information was placed on these prepared schedules dur-

ing personal interviews with owners and/or managers of dairy

farms and milk distribution plants. These interviews were

conducted during the late spring-and early summer of 1953.

TYPES OF DATA OBTAINED.--Information obtaLned from producers

included: (1) general information from producers such as

tenure, education, size of operations, etc., which might
affect the individual's marketing situation, (2) size of

dealer operations as compared to producer's operations which

might allow some producers to gain bargaining advantages at

certain outlets, (3) contractual arrangements of sales be-

tween producers and dealers, (4) availability of marketing

outlets, (5) type of milk transportation used and its cost,

and (6) information which might indicate the degree of com-

petition for milk.

Information obtained from milk dealers was of a sim-

ilar nature to that obtained from producer's. Most of this

information was used as a cross check on the accuracy of pro-

ducer statements.

METHOD OF ANALYSIS.--A theoretical model of pure competition


4Schedules used are found in Appendix A.
A model of pure competition is used instead of per-
fect competition since time must elapse between the achieving









12
was first established. Data obtained from the 117 inter-

views with wholesale producers, 14 producer-distributors,

and 13 distributors were then analyzed in light of this

model. The methods that were used in 1952 and the results

of these methods in relation to this theoretical model were

compared. Comparisons between the present extent of compe-

tition in Florida and other areas of the United States were

also made. As a result of the above comparisons, suggestions

were made in regard to methods of stimulating competition in

Florida markets.


of knowledge on the part of buyers and sellers and the efforts
of buyers and sellers in using market knowledge. The model
of perfect competition does not recognize this time lapse.
















II. THE MILK INDUSTRY IN CENTRAL AND SOUTH FLORIDA

UNIQUE CHARACTERISTICS OF FLORIDA'S MILK INDUSTRY6
GROWTH AND IMPORTANCE OF DAIRYING IN FLORIDA AND OTHER

STATES.--From 1940 to 1950, the number of farms in Florida
reporting the sale of whole milk declined from 1,891 to

1,695 farms, a decrease of 10.4 per cent. Only about

3 per cent of Florida farmers reported sales of whole milk
in 1950. During the same period, the number of farms
reporting the sale of whole milk in the United States in-

creased from 953,898 to 1,097,150, an increase of 15.0

per cent. About 20.4 per cent of the farmers in the United
States reported sales of whole milk in 1950.

In 1951, Florida farmers were milking 137,000 cows--
an increase of 35.6 per cent over the number of cows milked

in 1940 (Figure 3). This increase in the number of cows

milked, coupled with the fact that the number of farms pro-
ducing milk has decreased, indicates that the average size
of dairies has increased since 1940.*


6Much of this material was abstracted from Some
Trends and Characteristics of the Dairy Industry innF-rida,
W. K. McPherson and R. F. Luckey, Jr., Florida Agricultural
Experiment Station Bulletin 539, March, 1954, PP. 6, 7.'

13




















FIGURE 3 AVERAGE INU.BER OF MILK COWS ON FARIS
23BY YEARS IN THE UNITED STATES AND
SELECTED STATES,. 1940-51*


2 0,000



10,000
8,000
6,000

4,000



2,000



1,000
800
600


400



200


UNITED STATES











----------------------------
WISCONSIN

--------------------------------
NEW YORK

- --
CALIFORNIA


...... **....*..
GEORGIA



.F--- LORIDA


1940 41 42 43 44 45 46 47 48 49 50 51
YEARS
*Source--United States Department of Agriculture,
Bureau of Agricultural Economics, Far=. r.oduction.
Di oasitldn, and Income From Milk, Washin-tor.,,
D. C., 1940-51.








15
While Florida farmers were increasing the number of
cows milked, Georgia, California, New York, and Wisconsin

farmers held Vheir number of milk cows about the same. In

the United States the number of milk cows on farms actually

decreased.

Florida farmers produced only 0.50 per cent of all
the milk produced in the nation during 1952, whereas 1.84
per cent of the total population of the nation lived within

the state. Milk production per capital in Florida was lower

than in any of the other states, except Massachusetts and

Rhode Island (Table 1).

Milk production per cow reached a high of 4,400
pounds in 1950 and 1951, but was still approximately 800
pounds less than the national average. To a considerable

extent, the relatively low production of milk per cow in

Florida is due to (1) a tendency of producers to use the
breeds of cows that produce milk with a high butterfat con-

tent, (2) quality of the cows, and (3) insufficient amounts

of good pastures and roughage.

Cash receipts from marketing of all milk and cream
in Florida (at the farm) increased from $10,632,000 in 1940

to $38,466,000 in 1951,7 or 262 per cent. About 30 per cent


7United States Department of Agriculture, Bureau of
Agricultural Economics, Washington, D. C., Farm Production,
Disposition and Income From Milk, 1940-49 and 1950-,1 .
April, 1952*










of this increase in income was due to increased production
and 70 per cent to the increase in price (Figure 4).

TABLE 1
MILK PRODUCTION PER CAPITAL BY STATES, 1952a

State Pounds State Pounds

Wisconsin 4,340 Mississippi 639
Vermont 4,116 Colorado 604
North Dakota 2,872 New York 590
Minnesota 2,678 Delaware 586
Iowa 2,146 Illinois 549
South Dakota 1,953 Virginia 543
Idaho 1,893 Pennsylvania 538
Nebraska 1,534 California 530
Kansas 1,174 Maryland 518
Missouri 985 Nevada 489
Utah 913 Georgia 428
Indiana 879 West Virginia 404
Montana 846 North Carolina 386
Michigan 812 Texas 386
Kentucky 798 Alabama 335
Oklahoma 772 Connecticut 331
Oregon 749 Arizona 322
Wyoming 721 New Mexico 290
Tennessee 710 Louisiana 273
Maine 697 South Carolina 270
Washington 679 New Jersey 222
Ohio 654 Florida 196
Arkansas 648 Rhode Island 165
New Hampshire 641 Massachusetts 163

aUnited States Department of Agriculture, Bureau
of Agricultural Economics, Farm Production, Disposition
and Income from Milk, 1951-1952, Washington, April, 1953.

LOCATION OF PRODUCTION AND CONSUMPTION AREAS.--Distributors
in the larger milksheds, such as New York and Chicago, pur-
chase milk from producers located as far as 200 or 300 miles














FIGURE 4 PRICE OF MILK SOLD TO PLANTS AND DEALERS AT
WHOLESALE IN THE UNITED STATES AND SELECTED
;-STATES,, 1940-51.*


I-
cr



UJ
0
z


cr 4


n-
Ur
-J
-J
o
03


0o f'--" I I I I I I I i
1940 41 42 43 44 45 46 47 48 49 50 51
YEARS
*Source--United States Department of Agriculture, Bureau
of Agricultural Economics,. Farm Production, Disposition,
and Income from Milk, Washington, D. C., 1940-51.










from the market. In these cases, either farmers located
near the market find it is moro profitable to produce other
commodities, or the cost of production at the more distant

points is low enough to offset transportation costs and
provides an incentive for dairymen to maintain and, in some

instances, increase production.

In still other milksheds, dairies are located very
close to the consuming area. This is particularly true in

Florida, where 66 per cent of the whole milk sold by dairy-
men in the state was produced in six counties in which 51
per cent of the population lives (Table 2).

TABLE 2
GALLONS OF MILK SOLD BY PRODUCERS AND POPULATION IN
FLORIDA AND SIX SELECTED COUNTIES

Gallons of Milk Sold
County by Producers Population

1949 1950
Broward 9,165,777 83,933
Dade 8,539,132 495,084
Duval 6,330,246 304,029
Hillsborough 5,728,802 249,894
Pinellas 3,201,282 159,249
Orange 3,149,042 114,950
Six-county total 36,114,281 1,407,139

State total 54,448,108 2,771,305
Six-county total as
percentage of
state total 66 51








19

A further illustration of the nearness of production

to consumption areas is shown by comparing Figure 5 showing

the location of the larger cities in central and south Florida,

and Figure 1 showing the number of producers per county.

FORM IN WHICH MILK IS SOLD AT THE FARM.--Essentially all of

the milk sold by Florida dairymen leaves the farm as whole

or fluid milk. No cream is sold to dealers, less than 0.7

per cent of the milk sold is in the form of farm-churned

butter, and the volume of cream sold by farmers at retail is

low.

Florida dairymen sell a smaller proportion of all

milk to dealers than other farmers throughout the nation

(Table 3). This means that Florida dairymen distribute a

larger proportion of their milk at retail than dairymen in

the country as a whole. Consequently, the number of producer-

distributors in Florida is relatively high. Here it is sig-

nificant to note that the proportion of the total amount of

milk sold by farmers at retail is declining, in both Florida

and the nation as a whole.

USE THAT DEALERS MAKE OF WHOLE MILK.--The proportion of whole

milk sold from farms that reaches consumers as fluid milk is

much larger in Florida than in t'he nation. For example, in

the Dade-Broward-Monroe milkshed in 1951, approximately 86

per cent of all milk sold from farms was distributed as fluid

milk and 12 per cent for use in the manufacture of ice cream













FIGURE 5 LOCATION OF THE LARGER CITIES IN
CENTRAL AND SOUTH FLORIDA,. 1952


I. BRADENTON
2. CLEARWATER
3. CORAL GABLES
4. FORTLAUDERDALE
5. FORT MYERS
6. FORT PIERCE
7. HIALEAH
8. HOLLYWOOD
9. KEY WEST
10. LAKELAND
I I LAKEWORTH
12: MIAMI
13. MIAMI BEACH
14. NORTH MIAMI
15. ST. PETERSBURG
16. SARASOTA
17. TAMPA
18. WEST PALM BEACH
19. ORLANDO






TABLE 3


PERCENTAGE OF MILK SOLD OR UTILIZED FOR PREPARATION OF DAIRY PRODUCTS SOLD FROM
FARMS IN THE UNITED STATES AND FLORIDA, 1940-1951a

For Deliveries to Plants
For Parm-Churned For Retail Sales and Dealers
Year Butter Sold of Milk and Cream
(Per Cent of Total) by Farmers As Cream As Milk
(Per Cent of Total) (Per Cent of Total)

U.S. Fla. U.S. Fla. U.S. Fla. U.S. Fla.
1940 1.6 2.7 7.0 28.8 37.6 2.3 53.8 66.2
1941 1.4 2.4 6.4 26.5 36.4 2.1 55.8 69.0
1942 1.3 1.6 6.0 25.7 32.0 1.9 60.7 70.8
1943 1.1 1-4 6.0 23.1 31.0 1.2 61.9 74.3
1944 1.1 1.4 5.9 22.0 27.0 .5 66.0 76.1
1945 1.1 1.3 5.6 20.5 24.0 .3 69.3 77.9
1946 1.1 1.5 5.5 20.3 21.9 .3 71.5 77.9
1947 1.0 1.4 5.0 19.0 21.5 ... 72.5 79.6
1948 .9 1.1 4.9 17.9 20.9 ... 73.3 81.0
1949 .8 1.0 4.3 15.7 20.3 .. 74.6 83.3
1950 .7 1.0 4.0 14.7 20.4 .. 74.9 84.3
1951 .7 .7 3.9 14.4 19.3 .. 76.1 84.9

aCalculated from data presented in Farm Production, Disposition, and
Income from Milk, 1940-49: Revised Estimates, USDA, BAE, April, 1952; and Ibid.
1950-51, April, 1952.









22

and milk drinks.8 This, and quantitative estimates on the

use of milk in other sheds suggest that at least 80 per cent

of all milk produced in Florida is sold by distributors as

fluid milk. In contrast, only 48.5 per cent of all milk

produced on farms in the nation was consumed as fluid milk

and cream in 1950. Since the latter figure includes cream

and fluid milk consumed on farms, it is reasonable to assume

that less than 45 per cent of all milk sold from farms is

sold to non-farm consumers as fluid milk.9

PRICES OF WHOLE AND FLUID MILK.--Prices of whole milk10 for

fluid Class I purposes in Florida are among the highest in

the nation and have been for many years. In addition, a

higher proportion of the whole milk sold off farms is used

as Class I than in almost any other market. This results

in even larger differences in producer blend prices than is

evident from the fluid milk prices.


8Data supplied by- DadeCounty Health Bureau, Miami,
Florida.

9United States Department of Agriculture, Bureau of
Agricultural Economics, Dairy Situation, February, 1951,
p. 12. ....

1TFor example, in April, 1953, only two markets in
the United States had a higher price for 4.0 per cent butter-
fat content milk than either Jacksonville or Miami, Florida..
Over 80 markets had lower prices. United States Department
of Agriculture, Bureau of Agricultural Economics,
Washington, D. C., Fluid Milk and Cream Report, April 16,
1953, pp. 2-5.










Consumer prices for milk both delivered to homes

and purchased from stores, are also higher in Florida than

in almost any other market in the United States.11

CHARACTERISTICS OF COMMERCIAL DAIRIES

TYPES OF DAIRIES.--The 131 commercial dairies included in

this study were divided into two types on the basis of the

kind of business in which they engaged. One type was com-

posed of 117 wholesale milk producers while the other type

was composed of 14 producer-distributors.12 Wholesale

dairiesl3 specialized in the production of whole milk aid

sold their product to milk dealers for processing and dis-

tribution. Producer-distributors operated two enterprises

simultaneously, that is, they produced whole milk and then

processed and distributed it.

ORGANIZATION OF COMMERCIAL DAIRIES.--Commercial dairies were

operated by three general types of business organization:

individual proprietorships, partnerships, and corporations.


11Ibid., pp. 2-5.
12There is no widely accepted definition of a
producer-distributor. Some research personnel consider an
operator to be a producer-distributor only if he produces
all the milk he retails, while others define him as one who
produces 50 or 75 per cent of the milk he processes and
distributes. Producer-distributor as used in this study
denotes an operator who produces any part of the milk he
processes and distributes.

13Wholesale dairies and wholesale milk producers
are used as synonymous terms in this manuscript.








24

Nearly three-fourths of all commercial dairies studied were

operated by individual proprietors (Table 4). About one-

sixth were operated under partnership arrangements, and less

than one-tenth were operated as corporations.

TABLE 4
ORGANIZATION OF COMMERCIAL DAIRIES IN CENTRAL AND
SOUTH FLORIDA, 1953

Type of Producer All
Business Wholesale Distributor Commercial
Organization Dairies Dairies Dairies
(Per (Per (Per
(No.) Cent) (No.) Cent) (No.) Cent)

Individual pro-
prietorship 89 76.1 8 57.1 97 74.0

Partnership 20 17,1 2 14.3 22 16.8
Corporation 8 6.8 4 28.6 12 9.2

T+t:q 117 100.0 14 100.0 131 100.0


Only 6.8 per cent of the wholesale dairies were

operated by corporations, while 28.6 per cent of the producer-

distributor dairies used this form of business organization.

As in other industries, the corporate form of business organ-

ization not only facilitates the acquisition of capital and

the distribution of risk, but also extends the life of the

firm. This may be an effective form or organization for

producer-distributor dairies that employ large amounts of

capital and/or operate several enterprises.










CHARACTERISTICS OF SELECTED PRODUCTION FACTORS

LAND OWNERSHIP.--Over three-fifths of the 131 commercial

dairies were operating only land owned by the firm

(Table 5). More than one-fourth of the farms utilized both

owned and rented land, while only about one-tenth of the

farms were operated entirely on rented land. Producer-

distributors did not use rented land to the extent that

wholesale producers did. None of the producer-distributors

were operating on rented land exclusively, whereas 14.5 per

cent of the wholesale producers utilized rented land exclu-

sively for their dairy enterprises.


TABLE 5
LAND TENURE ARRANGEMENTS OF 131 COMMERCIAL DAIRIES
IN CENTRAL AND SOUTH FLORIDA BY TYPE OF
ORGANIZATION, 1952

Producer- All
Type of Land Wholesale Distributor Commercial
Tenure Dairies Dairies Dairies
(Per (Per (Per
(No.) Cent) (No.) Cent) (No.) Cent)
Complete
ownership 69 59.0 11 78.6 80 61.1

Both owned and
rented land 31 26.5 3 21.4 34 25.9

Land entirely
rented 17 14.5 .. .... 17 13.0

Totals and
averages 117 100.0 14 100.0 131 100.0









26

Only three of the 117 wholesale dairies rented any

land out to other people. This acreage was quite small but

the use that was being made of the land is typical of the

way in which a substantial amount of Florida land has been

improved.14 The native or raw land was being cleared of

trees, brush, and palmettos and planted to watermelons and

gladioli. After one to three years it will be seeded with

improved pasture grasses and used for the dairy herd. None

of the producer-distributors rented any land to others.

Eleven of the 17 wholesale dairies that rented all

of the land used for producing milk were operating under

conventional rental arrangements for the use of land and

buildings. Five of these producers rented or leased land,

barns and livestock (Table 6). This system is quite similar

to share cropping arrangements found in other segments of

the agriculture industry. One dairyman rented only the

land he used and owned the barn he had built on the land,

and his cows.

LAND USE PATTERN

Degree of Diversification.--As a rule the 117 whole-

sale milk-producing dairy farms included in this study were

highly specialized, one product (milk) producing units.


14Less than one-half acre per farm based on all 117
wholesale dairies.
15Rent paid monthly.











TABLE 6

'RENTAL ARRANGEMENTS OF 17 COMMERCIAL DAIRY FARMERS WHO
RENTED ALL OF THEIR LAND, CENTRAL AND
SOUTH FLORIDA, 1953


Type of Firm
Type of Rental
Single
Proprietor- Partner-
ship ship Corporation

(Number) (Number) (Number)

Rented land only 1 .

Rented land and
barns 8 2 1

Rented land, barns,
livestock 4 1

Totals 13 3 1


Only 16 producers received any non-dairy farm income during

1952. These 16 farmers averaged only 17.4 per cent of their

farm income from sources other than producing milk and only

two of them received more than 25 per cent of their farm

income from these sources. One other farmer had a combina-

tion enterprise of beef and dairy during 1952, but had re-

ceived no income from his newly established beef herd. The

only farm enterprise combinations found were: (1) dairy

and citrus on four farms, (2) dairy and beef on eleven

farms, and (3) dairy, citrus, and beef on two farms

(Table 7).











TABLE 7

FARM ENTERPRISES OTHER THAN DAIRY OF 17 WHOLESALE MILK
PRODUCERS, CENTRAL AND SOUTH FLORIDA, 1952

Type of Non-Dairy Number of Average Acres
Farm Enterprise Producers Utilized

Citrus 4 12.8

Beef 11 350.1

Citrus and Beef 2

(a) Citrus 8.0

(b) Beef 17.0



The 14 producer-distributor dairies studied were

producing and selling whole milk. Only two of these 14

firms received any non-dairy farm income during 1952. One

of these dairies received 40 per cent of its farm income

from ,a beef herd which utilized 600 acres, or 50 per cent
of its land during 1952. The second dairy received 10 per

cent of its fard inebme from 10 acres of citrus during 1952.

Acreage Utilized.--The average wholesale dairy in

the group studied consisted of 232 acres owned by the firm

and 76 acres of rented land, or a total of 308 acres. A

great deal of variation was found in acreage operated. The

range in acres was from four to over 1,000 acres. While

the average was 308 acres per. farm, the most typical size

of dairy was between 50 and 99 aeres (Table 8).' This










difference was due largely to the number of large farms of

over 500 acres.


TABLE 8

VARIABILITY IN ACREAGE USED FOR DAIRYING BY SIZE GROUPS,
117 WHOLESALE MILK PRODUCERS AND 14 PRODUCER-
DISTRIBUTORS IN CENTRAL AND SOUTH
FLORIDA, 1952


Number of Farms
Size of Farms
(Acres) Wholesale
Milk Producer-
Producer Distributor


Less than 50

50 .99

100 149

150 199

200 249

250 299

300 349

350 399

400 449

450 499

500 549

550 599

600 and over


..


S.


* ..


117 1i


- --- --


Total









30
The average produeer-distributor dairy farm was com-

posed of 728 acres owned and 32 acres rented, or a total of

760 acres. Although there was not as much variability in
size of dairy operations as among wholesale milk producers,

there was still considerable variation. The smallest

producer-distributor operation was 131 acres while the largest

was over 2,000 aeres.

Pasture.--The land area, utilized by the 117 wholesale

milk producers, was devoted mainly to the production of for-

age to be utilized in milk production. Only 11 per cent of

the land area was used for non-dairy enterprises, such as

beef and citrus production, during 1952. Eighty-three per

cent of the land was devoted to the dairy enterprises, while

six per cent was waste and/or unused land (Table 9).

Of the land used for the dairy enterprises on these

117 wholesale dairies, 47.7 per cent was in improved pastures,
supplemental pastures and feed crops. Only very limited

amounts of this acreage was in supplemental pasture or were

used for raising feed crops for the dairy enterprise. Seven-

teen producers had 100 per cent unimproved pastures, 23 had

100 per cent improved pastures, and 77 had both unimproved

and improved pastures.

Of the land used by producer-distributors in their

milk production enterprises, 27.3 per cent was unimproved

pasture, while 72.7 per cent was in improved pasture and feed










crops. None of the 14 producer-distributors grew any

supplemental pastures and only two producer-distributors

devoted any land area to growing feed crops (Table 10).


TABLE 9
LAND UTILIZATION OF 117 WHOLESALE MILK PRODUCERS
AND SOUTH FLORIDA, 1952


IN CENTRAL


Per Cent Per Cent
Types of Land Use of of
Sub-total Total
Land Used in Dairy Enterprise

Unimproved Pasture* $2.3

Improved Pastureb 45.8

Supplemental PastureC .7

Feed Cropsd 1.2 83.0

Land Used in Non-Dairy Enterprises

Beef 98.3

Citrus 1.7 11.0

Waste and/or Unused Land 6.0

Total 100.0


4Native grasses, woods, palmettos.
bCleared of brush.and woods, fertilized and planted
to pasture grasses.

CRye, oats, millet for winter graze.
dHay, silage, corn for green feed.











TABLE 10

LAND UTILIZATION OF 14 PRODUCER-DISTRIBUTORS IN
SOUTH FLORIDA, 1952


CENTRAL AND


Per Cent Per Cent
Types of Land Use of of
Sub-total Total

Land Used in Dairy Enterprise

Unimproved Pasturea 27.3

Improved Pastureb 71.1

Supplemental Pasture .*..

Feed Cropse 1.6 75.2

Land Used in Non-Dairy Enterprises

Beef 99.1

Citrus .9 10.0

Waste and/or Unused Land 14.8

Total 100.0

aNative grasses, woods, palmettos.
bCleared of woods and brush, fertilized and planted
to pasture grasses.

cHay and grass silage.

Feed Crops.--Only eight of the 117 wholesale milk

producers and two producer-distributors raised any feed for

dairy animals in addition to pasture during 1952 (Table 11).

On these 10 farms, total farm production of the various











feed crops grown was estimated to be:

1600 tons of hay

1000 tons of grass silage

70 tons of green fodder

1000 tons of green chopped feed


TABLE 11

FEED CROPS GROWN, OTHER THAN PASTURE, BY 117 WHOLESALE MILK
PRODUCERS AND 14 PRODUCER-DISTRIBUTORS IN
CENTRAL AND SOUTH FLORIDA, 1952

Feed Crops Number of Producers

None (pasture only) 121

Hay 6

Hay and Grass Ensilage 1

Ensilage 1

Corn 1

Green Chopped Grasses
for Barn Feeding 1

Total 131



Based upon the amount of feed grown in other states

for the dairy enterprise, the amount of feed grown in

Florida was extremely low. No grain was grown at all, while

production of hay, silage, and other roughage totaled only

slightly more than one-tenth ton per milk cow.16

16W. L. Barr, Organizing Dairy Farms for Efficient


~ _~ ~_









34
Differences in Land Use of Wholesale Milk Producers
and Producer-Distributors.--There was little difference

between producer-distributors and wholesale milk producers

in the proportion of land used for supplementary pasture,

or for raising feed crops (Tables 9 and 10). There was,

however, a great deal of difference in the proportion of

improved pastures raised. Only about 46 per cent of the
land devoted to dairying by wholesale producers was in im-

proved pastures, while over 71 per cent of the land area of

producer-distributor farms was used for that purpose*

NUMBER OF DAIRY ANIMALS.--The number of milk cows on the

117 wholesale milk dairies studied varied from 6 to 850 and
averaged 154 cows* The number of herd replacements being

raised per wholesale milk dairy varied from none to over

300 animals and averaged 41 animals. Of all herd replace-
ments 54 per cent were one year of age or older.
The number of milk cows on the 14 producer-distributor

farms varied from 54 to over 800 animals and averaged 390.

The number of herd replacements being raised varied from 10
to 800 animals and averaged 159 animals. Of these 55 per

cent were one year of age or older, while 45 per cent were

less than one year of age.

Production, The Pennsylvania State University Bulletin 478,
April, 1946, p. 26. According to a study made during 1941-42
in Pennsylvania over 35 per cent of the dairy farmers in-
volved raised 75 per cent or more of their grain, 2.0 tons of
silage, .8 ton of other roughage and 1.9 tons of hay per milk
cow.








35
Differences in Size of Operations of Wholesale Milk

Producers and Producer-Distributors.--The average producer-

distributor farm was 147 per cent larger than the average

wholesale milk producer farm, as measured by acreage. The

average number of milk animals on producer-distributor farms

was 150 per cent greater than on the average wholesale milk

producer farm. The number of herd replacements being raised

on producer-distributor farms averaged 39 per 100 milk cows.

This was nearly 50 per cent higher than the ratio of 27 re-

placements per 100 milk cows being raised on wholesale milk

producers' farms.

SPECIALIZED SERVICES USED

Commercial Hauling,--Of the 117 wholesale milk pro-

ducers interviewed, 82 hauled their own milk to processing

plants (or dealers).17 Sixteen producers used hauling facili-

ties furnished by their dealers, thirteen producers paid

their neighbors to haul the milk, five producers hired their

own commercial haulers, and one producer had an arrangement

with a milk-producing neighbor to alternate the hauling

chore (Table 12).

None of the milk produced by producer-distributor

dairies studied was sold to other milk dealers. Seven of

these dairies operated bottling plants on the dairy farms,


17
Five of these 82 producers sold to and hauled
their milk to more than one dealer outlet.












TABLE 12

METHODS OF HAULING USED BY 117 WHOLESALE MILK PRODUCERS IN
CENTRAL AND SOUTH FLORIDA, 1952

SNumber of Per Cent
Type of Hauler Producers of Producers

Self hauled 82 70.1

Dealer hauler 16 13.7

Neighbor hauled 13 11.1

Commercial hauler 5 4.3

Combination hauling
(Alternating hauling) 1 .8

Total 117 100.0


thus minimizing the cost of transporting milk to processing

plnt-s. The remaining seven hauled their own milk from

their dairy farms to their bottling plants. The average

distance of these hauls was 12.5 miles'. With but two ex-

ceptions, these seven producer-distributors were the

largest of the 14 producer-distributors with an average of

166 cows per farmn Producer-distributors having one loca-

tion for production of milk and a different location for

processing of milk averaged over 600 milk cows per farm.

Dairy Herd Improvement Association Services.--Only
eight of the 117 wholesale milk producers were members of

"Dairy Herd Improvement Associations" while none of the










14 producer-distributors were members.18 The eight D.H.I.A.

members averaged 3.6 years younger than the 109 non-D.H.I.A.

members. In addition, the eight D.H.I.A. members had an

average of 1.6 years more schooling than non-D.H.I.A. mem-

bers (Table 13).

TABLE 13

COMPARISON OF OPERATOR AND FARM CHARACTERISTICS OF EIGHT
D.H.I.A. MEMBERS IN CENTRAL AND SOUTH FLORIDA
WITH 109 WHOLESALE MILK PRODUCERS WHO
WERE NON-D.H.I.A. MEMBERS, 1953

Eight D.H.I.A. 109 Non-D.H.I.A.
Characteristics Members Members
(Average) (Average)

Owner's age 43-0 46.6a

Years of schooling 10.9 9.3a

Acres used for dairying 203.0 260.0

Per cent of land in
improved pasture 51.7 47.6

Number of cows 70.0 160.0

Number of heifers 42.0 41.0

Cow-heifer ratio .60 .26

Pasture per cow (acres) 2.9 1.6

Per cent using artificial
insemination 75.0 18.0

Includes only 75 single proprietorships.

18C. W. Reaves, "Dairy Herd Improvement Association
Report," May 11, 1954 mimeographedd), Florida Agricultural
Extension Service, Gainesville, Florida. According to











The D.H.I.A. members had smaller farms than non-

members, as measured by acres of land used forx the dairy

enterprise and by total number of milk cows per farm. The

land used for dairying by D.H.I.A. members consisted, how-

ever, of 51.7 per cent improved pasture as compared to only

47.6 per cent for non-members. In addition, D.H.I.A. mem-
bers had 2.9 acres of pasture per milk cow as compared to

1.6 acres of pasture for non-members.

The number of heifers found on D.H.I.A. members'

farms per 100 milk cows was 60 as compared to 26 for non-

members, a difference of over 130 per cent. Three-fourths

of the D.H.I.A. members used artificial insemination on all

or part of their herds, as compared to less than one-fifth

of non-members.

Evidently D.H.I.A. Members, while having fewer acres

per farm and smaller dairy herds 'than non-D.H.I.A. members,

were producing more of their herds' feed needs through

greater reliance on not only improved pasture but on un-

improved pasture. D.H.I.A. members were also raising more

of their herd replacements than non-members, and in an effort


this information, about 4.3 per cent of Florida's dairy cows
were under D.H.I.A. supervision during the second quarter of
1952. Only 8 or 6.8 per cent of the 117 dairymen in this
study were members of D.H.I.A.; these 8 producers owned 3.1
per cent of the milk cows owned'by the 117 dairymen. Accord-
ing to the 32nd Biennal Report of the Department of Agricul-
ture, State of Florida, there were 172,000 dairy cows in
Florida as of June 30, 1952. During the secondn quarter of
1952 there were 7,369 cows under D.H.I.A. supervision.











to improve their herds' productive capacities, were more

interested in artificial insemination than were non-members.

Artificial Insemination.--Twenty-eight producers of

the 117 producers interviewed used artificial insemination

for all or part of their herds. Twenty-three of these 28

producers used artificial insemination exclusively. Five

used artificial insemination only on part of their herds.

Producers using artificial insemination exclusively averaged

116 cows per farm. These herds were smaller than herds

where artificial insemination was not used; there the aver-

age herd size was 154 cows. The five producers using arti-

ficial insemination on part of their herds averaged 260 cows

per farm.

No relationship was found between producers' use of

artificial insemination and the number of replacements

raised. The 23 dairies using artificial insemination exclu-

sively had a heifer-cow ratio of .38 compared to an average

of .26 for all 117 producers. The five producers who used

artificial insemination on part of their herds had a heifer-

cow ratio of .43. This suggests that since a greater propor-

tion of the smaller dairymen used artificial insemination

than did larger dairymen and dairies owned by individual pro-

prietors were smaller than those owned under partnership and

corporation arrangements, the use of artificial insemination

was also found to be related to type of ownership (Table 14).









TABLE 14


ORGANIZATION OF DAIRY FARM OWNERSHIP AND USE MADE OF ARTIFICIAL INSEMINATION ON
117 WHOLESALE MILK PRODUCING FARMS IN CENTRAL AND SOUTH FLORIDA, 1953

Type Artificial Insemination Used On
Own hi 100 Per Cent Part of None of
ers of Herd Herd Herd Total

(Per (Per (Per
(No.) Cent) (No.) Cent) (No.) Cent) (No.)
Individual
proprietor 20 22.5 3 3.4 66 74.1 89
Partnership 2 10.0 1 5.0 17 85.0 20
Corporation 1 12.5 1 12.5 6 75.0 8

Totals and
Averages 23 19.6 5 4-3 89 76.1 117










CHARACTERISTICS OF MILK DEALERS

TYPES AND SIZES OF DISTRIBUTION OPERATIONS.--Of the 27 milk

dealers interviewed, 13 were distributors and 14 were

producer-distributors.19 The average volume of fluid milk

sold by the 13 distributors during 1952 was 865,462 gallons.

The range in sales volume was from 85,000 to more than

2,000,000 gallons of fluid milk sales. The average volume

of fluid milk sold by the 14 producer-distributors20 was

537,000 gallons during 1952. The range in sales volume was

from 43,200 to nearly 1,800,000 gallons of fluid milk

(Table 15). None of these producer-distributors produced

enough milk on their own dairy farms to satisfy completely

their Class I fluid milk distribution needs. Individually,

these 14 producer-distributors produced from 10 to 80 per

cent of their Class I distribution needs.

The 13 distributors, all organized as corporations,

had been distributing milk from their present locations for

periods of 2 to 31 years. The average distributor had been


19The term "milk dealer" indicates both distributor
and producer-distributor. The term "distributor" denotes
that the firm is engaged only in processing and distribu-
tion of fluid milk and other dairy products. The term
"producer-distributor" denotes a firm, that in addition to
processing fluid milk and other dairy products, produces
part of its own milk requirements for distribution.
20
2Two of these producer-distributors were located
in non-Class I or retail price control areas. These two
producer-distributors averaged only 149,500 gallons of
fluid milk sales during 1952. The other 12 producer-
distributors averaged 601,000 gallons of Class I sales.


~








42
retailing milk for 15.5 years. The 14 producer-distributors
--8 operating under single owners, 2 under-partnership ar-

rangements and 4 as corporations--had been in the distribu-
tion business from 5 to 30 years. The average producer-

distributor had been retailing milk for 21.6 years


TABLE 15

SIZE OF DISTRIBUTORS AND PRODUCER-DISTRIBUTORS IN CENTRAL
AND SOUTH FLORIDA AS MEASURED BY FLUID MILK SALES, 1952

Gallons Sold Number of Number of
(000) Distributors Producer-Distributors

Less than 250 3 4

250 499 2 4

500 999 2 4

1,000 1,499 4 1
1,500 and over 2 1


LOCATION OF MILK DEALERS.--Twenty-three of the 27 milk

dealers were located in one of the centers of population in

central and south Florida. 'These 23 milk dealers were loca-

ted in the Miami Standard Metropolitan Area, the Orlando

Standard Metropolitan Area and the Tampa-St. Petersburg
Standard Metropolitan Area, as well as in the cities of West

Palm Beach, Lakeland, Sarasota, and Ft. Myers.21 The other


21Criteria used for Standard Metropolitan Areas,
cities and towns are those given in the 1950 United States
Census of Population, United States Department of Commerce,








43

four milk dealers were located in cities of less than 5,000

population in Brevard, Hardee, and Highlands counties

(Figures 3 and 5). Since milk production in Florida is, in

general, concentrated around the larger cities, these 27

dealers were also located close to milk supplies as well as

to consumption areas.

METHODS OF PRICING MILK IN CENTRAL

AND SOUTH FLORIDA

There were two methods used in arriving at consumer

and retail prices in central and south Florida. The first

method was by administered prices or prices established by

the Florida Milk Commission. This method of pricing was

used in 15 of the 26 central and south Florida counties.

The second method was non-administered pricing. This method

was used in 11 of the 26 central and south Florida counties.

METHODS OF PRICING MILK IN ADMINISTERED AREAS.--In 1933 the

Florida legislature established the Florida Milk Commission.

The Commission was directed to carry out the objectives and

policies which the legislature deemed necessary to correct

conditions in the Florida dairy industry.

OBJECTIVES AND POLICIES.--The objectives of milk pricing in

Florida by administrative action have been confused with

policies. According to state law, the policy of administered


Bureau of the Census, Florida, P-B 10, pp. IV to XVI.










pricing is


. to protect the public health, safety, and wel-
fare. It is declared that the production and dis-
tribution of milk, cream and other milk products in
the State of Florida is an industry upon which, to
a large degree, the prosperity and health of the
people of the State of Florida depend, and that the
present economic emergency is, in part, a result of
the disparity between the prices of milk, cream and
milk products, and other commodities, which dispar-
ity had diminished the power of milk producers to
purchase industrial products, and has broken down
the orderly production and marketing of milk, cream
and other milk products, and has seriously impaired
the agricultural assets supporting the credit struc-
ture of the State of Florida and political subdivi-
sions thereof; that unhealthful, unfair, unjust,
destructive, demoralizing and uneconomie trade prac-
tices have grown up and have been carried on in the
production, sale and distribution of milk, cream
and milk products in this state which impair the
dairy industry in this state and imperil the eon-
stant supply of pure and wholesome milk to the in-
habitants thereof, and constitute a menace to the
health and welfare of the inhabitants of this
state . ..

The law further states that,

In order to correct abuses arising from the
destructive and unfair manipulation of prices, which
are found to spring from a selfish disregard of the
public interest in the manner of carrying on the
dairy industry, which is an organized industry, it
is found necessary to resort to the legislative
remedy of regulating prices to save both producers
and consumers from such manipulation of prices in
the industry; because such practices amount to evils
which menace the health, safety and welfare of the
people at large, this chapter is passed. 3

In simpler language, the objectives of administered

pricing in Florida are: (1) to increase incomes of dairymen,

(2) to promote orderly production and marketing of milk,


22Florida Statutes (1953), c. 01. 23bid.








45

cream and other milk products, and (3) to remove unhealth-

ful, unfair, unjust, destructive, demoralizing and uneco-

nomic trade practices that are a menace to the welfare of

the people in the state.

The policies under which the Florida Milk Commis-

sion must work to obtain these objectives are termed "powers

of Milk Commission" in the statutes. These policies direct

the Commission24 to establish minimum prices that must be

paid to the producer by milk dealers for milk and minimum

prices to purchasers of home delivered milk, as well as

minimum prices that wholesale outlets must pay for milk.

The Commission also has the power to establish maximum pro-

ducer, retail, consumer, and wholesale milk prices. These

minimum and maximum prices are to be based on the different

classes or grades of milk.

It is the expressed policy of the Florida Milk

Statutes that the Commission shall supervise and regulate

the entire milk industry of the State of Florida, including

the production, transportation, manufacture, storage, dis-

tribution, delivery, and sale of milk, cream, and milk prod-

ucts. This expressed policy has been limited, however, by

a provision that such supervision and regulation shall be

done only at the request of producers. Only after being


240n October 1, 1955, the Milk Commission discon-
tinued minimum pricing for a period of one year.










invited to supervise and regulate a marketing area upon

petition of a group of representative producers, can the

Commission, after due consideration, establish administered

prices. This has been interpreted to mean upon the peti-

tion of a majority of whole milk producers, producing at

least 51iper cent of the milk distributed in the market.

Hence, the program of the Commission has been dependent

upon producer acceptance of administered prices.

TECHNIQUES USED.--Some of the techniques used by the Florida

Milk Commission as aids to regulation are: (1) delineation

of market areas, (2) milk classification, (3) butterfat.dif-

ferentials, (4) prices, and (5) other devices for adjusting

supply and demand.

Market Areas.--The Commission has the power to
"reasonably classify and establish definite market areas,

and provide different rules, regulations and charges there-

for ,25

While charged with the objective of promoting or-
derly production and marketing of milk, cream and other

milk problems and with the policy of supervising and regu-

lating the milk industry in Florida, the Florida Milk Com-
mission has apparently been hampered by a conflicting policy.

The Commission is restricted from reasonably classifying

and establishing economic marketing areas by a provision

25Florida Statutes (1953), c. 501.04 (9).








47

stating "that the Commission shall not supervise or regulate

any natural marketing area except upon petition of a group

of representative producers who petition the Commission to

invoke the provisions of this chapter as herein provided."26

The Commission is further limited in establishing or main-

taining natural economic milk-marketing areas by another

provision stating, "the Commission shall withdraw the exer-

cise of its powers from any market established under the

provisions of this chapter upon written application by a

majority in number of the producers and producer-distributors;

providing, however, that such producers and producer-

distributors shall produce not less than fifty-one percent

of the volume of milk distributed in said market."27

The Commission does not have the specific power to

establish economic marketing areas. As a result, the regu-

lated areas, as presently defined, are small areas which

bear little or no relation to milk supply and demand areas.

In most areas of Florida, wholesale milk producers are or-

ganized by counties. Hence, petitions by groups of repre-

sentative producers in natural marketing areas have generally

been on a county basis. This has resulted in the grouping

of most marketing areas initially as single county milk-

marketing areas. As producers in other counties adjacent

to a county under milk control regulations desire to have

26Ibid. 27Ibid., c. 501.20.








48

regulation extended to them, they have sometimes asked that

they be joined in a common marketing area with the adjacent

county already regulated. This has resulted in marketing

areas containing more than one county. When the producers

in the petitioning area did not want to be made a part of

another milk-marketing area, the Commission has had to is-

sue orders establishing them as a separate area or leave

them as a non-regulated area. This has not resulted in com-

plete integration of producers into areas from which the

major markets draw their milk supplies nor has it resulted

in establishing marketing areas on the basis of competitive

distribution areas.

Even after establishment of two or more separate

adjacent county marketing areas, the Commission has been in

a poor position to require consolidation of areas. The pro-

ducers, if they opposed such consolidation, could withdraw

completely from milk control regulation at the request of a

majority of the wholesale milk producers producing more than

51 per cent of the milk in the area. This undoubtedly has

led to the maintenance of separate small marketing areas

which should actually be part of larger established market-

ing areas. The Commission, on October 6, 1950, for example,

tried to consolidate three small marketing areas28 in central


8Information obtained from "Official Orders of the
Florida Milk Commission"and conversation with members of the
Commission.








49

Florida, but was unable to do so because of producer opposi-

tion. On September 1, 1948, after 15 years of regulation,

at the request of producers, the Lakeland area was split off

from the rest of Polk County. During April, 1949, the area

within 10 miles of Lakeland was classified as a separate

milk-marketing area. In 1941 after 8 years of regulation,

one county milk marketing area withdrew from Commission

regulation. During 1950 this county was reinstated as a

separate marketing area.29 This high degree of fragmenta-

tion has resulted from policies stated in the legislation

regulating the Commission.

As of January 1, 1953, 15 of the 26 counties in cen-

tral and south Florida were operating under the Commission's

regulations. These 15 price-administered counties were

divided into 11 different milk-marketing areas. Two counties,

Hillsborough and Polk, had four separate marketing areas,

that is, Tampa, Plant City, Lakeland, and Polk County Mar-

keting Areas. Seven areas included only one county each.

Five marketing areas included two counties each. Three

marketing areas were composed of three counties each.

Between January 1, 1953, and June 1, 1954, the Com-

mission issued orders consolidating the Highlands County

Marketing Area (five wholesale milk producers and two


29Information obtained from "Official Orders of the
Florida Milk Commission."








50
producer-distributors in 1952) with the Hardee County Milk

Marketing Area (five wholesale milk producers and two

producer-distributors in 1952). Osceola County was added

to the Orange-Seminole Counties Milk Marketing Area. The

Brevard County Milk Marketing Area was included as part of

the Volusia-Flagler Counties Milk Marketing Area. Other

areas in central and south Florida have remained unchanged.

Milk Classifications.--The Commission is empowered

not only to establish minimum prices to producers, and mini-

mum and maximum prices of milk and other fluid dairy prod-

ucts to consumers, but "may fix by official order the prices

to be paid by milk dealers to producers and others for milk
.30
and its various grades and uses, as well as fixing prices

applicable to various grades of milk sold by milk dealers to

consumers, if the majority of the producers producing fifty-

one per cent or more of the milk in a certain area have re-

quested regulation by the Commission. The Commission has,

in some areas, separated whole milk into three classes..

These classes have been commonly denoted as Class ,31


3Florida Statutes (1953), c. 501.13 (4).
31
31All fluid milk processed and sold includes Grade A
raw or pasteurized, homogenized, with or without vitamins
added, chocolate milk, certified milk and premium milk.










Class II,32 and Class III.3 Class I milk is the highest

price classification used for producer payment. Class II

milk is the second highest price classification. Class III

is the lowest price classification used in pricing producer

milk. Similar classifications are used in other markets in

the United States.

Butterfat Differentials.--In all regulated milk

markets in the United States, whole milk with varying butter-

fat content has been priced accordingly. Milk of high

butter-fat content has been recognized as having more eco-

nomic value than milk of low butterfat content. The Com-

mission has realized this economic difference in whole milk

and has provided an established butterfat differential.

Pricing Techniques

Producer Level.--The Commission under its powers

has established varying prices in the different milk market-

ing areas to be paid producers by milk dealers for all

Class I milk. During the first few years of administering

prices, the Commission often established minimum Class II

32
2Class II milk is defined by Commission orders as
milk from which cream is separated and the cream and milk
(skimmed) utilized for the manufacture of such by-products
as buttermilk, skim, chocolate drink, ice cream mix, etc.

33Class III milk is milk from which the cream is
separated and utilized while the skim milk is dumped or
given to the producer. Official Order No. 20-Q, the Florida
Milk Commission, October 14, 1953.








52
and III prices to be paid producers. During 1952, Class II

and III prices were established by administered pricing only

in the Dade-Broward-IHonroe (Miami) Milk Marketing Area. In

the other 10 regulated marketing areas of central and south

Florida, producer Class II and III prices were not estab-

lished by the CommissLon.

Consumer Level.--The Commission has established min-

imum wholesale and retail prices to be paid by consumers in

all of its regulated areas, but it has never made use of its

power to also establish maximum retail and wholesale prices.

Prices paid by wholesale accounts were two cents less per

quart of milk than the home delivered price, The store re-

sale price is, however, the same as the home delivered.price.

Minimum retail and wholesale prices are established for such

products as: raw and chocolate milk, buttermilk, Grade A

pasteurized, Certified and Premium milk and Homogenized milk

with or without Vitamin D. Skim milk and fluid cream prieos

are also established by the Commission in each of the regu-

lated areas.

Results of Pricing Techniques Used.--As a result of

establishing only Class I producer milk prices in nearly all

of the regulated areas of central and south Florida, and

only fluid milk and cream at consumer levels, blend milk

prices to producers are not regulated and neither are market-

ing margins.











In only the one marketing area of Dade-Broward-

Monroe are producer blend prices effectively regulated.

The Class II and III prices paid producers in the areas

where these prices are not regulated by the Commission have

at times been only one-half or less of the regulated class

price where Class II and III prices were regulated.

Dealer marketing margins on fluid milk and cream

have never been regulated in any area except the Dade-

Broward-Monroe Area. Since only milk to be used as fluid

(Class I) has been regulated in these other areas and milk

to be used as fluid cream has been unregulated, dealer

marketing margins have been unregulated.

Adjusting Supply to Demand.--In any one price-

administered milk marketing area of the United States there

are two periods toward which programs for adjusting supply

to demand are aimed. The first period is usually consid-

ered a short run period wherein an attempt is made to adjust

supply to demand over a one-year period or on a seasonal

basis. The second period is for a longer run period of time

than one year.

Short-Run Adjustments.--The Florida Milk Commission,

prior to 1954, left the problem of adjusting supply to demand

in the short run largely to the producers and milk dealers.

In only one or two areas in central and south Florida had

the Commission established a method adjustment by use of a










base-quota or base-surplus plan.34 In the other areas of

central and south Florida where prices were established by

administrative action, use of a base-quota or base-surplus

plan was not a part of the Commission's regulation. The

common practice in these areas, however, was for milk deal-

ers to use a form of the base-quota or base-surplus plan

with their producers. During 1954 the Commission made the

use of a base-surplus plan mandatory in each price regulated

area in central and south Florida.

Long-Run Adjustments--The Florida Milk Commission

has relied on public hearings in adjusting supply to demand

over the long run period. Adjusting prices of the various

class uses established by the Commission has been the sole

means of making this adjustment. These public hearings have

generally, if not always, been held at the request of inter-

ested producers. At these hearings, producers, dealers and

consumers are invited to testify. Producer cost of


34Base-surplus or base-quota plans very considerably.
In general, producers selling milk to a dealer under a base
plan are assigned a daily or monthly volume base in accord-
ance with the relationship between their total shipments
during a designated base period and the dealers' Class I
sales during the period. The base period used is generally
the time of lowest production in relation to fluid milk
sales. These bases are then used during the remainder of
the year to determine the Class I utilization of the pro-
ducer's milk. For example, in Florida a producer may supply
5 per cent of all the milk received by a dealer during the
base period (January-February in some markets),. Throughout
the rest of the year the producer may be paid 5 per cent of
the dealer's fluid milk sales during each pay period Milk
production higher than the base is considered surplus."











production records, usually based on the previous year's

operations, are generally presented at such public hearings.

These records are witnessed by a notary public and sworn to

be correct by the presenting producers appearing before the

Commissi on. Only those producers who care to do so present

such testimony at these public hearings.

The law specifically states that,

. the Commission shall take into consideration
all conditions affecting the milk industry includ-
ing the amount necessary to yield a reasonable return
to the producer and to the milk dealer. In determin-
ing what is a reasonable return to the producer, the
Commission shall take into consideration the neces-
sary Cost incurred in that particular locality in
maintaining dairy animals in a healthy condition,
paying wages and supplying working conditions to em-
ployees sufficient for their subsistence at levels
generally obtaining and for the safeguarding of
their health in defraying the ordinary fixed charges
and operating expense incidental to the ownership,
control and management of a herd of average numeri-
cal size, including a reasonable amount representing
annual rent of land equipment necessarily utilized
therein and in addition to afford such producers a
reasonable return in excess of their cost of produc-
tion. In determining the reasonable return to the
milk dealer, the Commission shall take into consid-
eration reasonable average operating expense in
processing, storage, transportation and delivery
charges and all necessary reasonable expenses con-
nected therewith.35

Based upon testimony of producers, the Commission

established the various producer Class I prices in the in-

dividual marketing areas. Class 1 prices are always estab-

lished in every area. At the producer level a uniform


c. 501.


3Florida Dairy Statutes (as amended, 1953),


5~








56

butterfat differential has been established by the Commis-

sion in the regulated areas of central and south Florida.

This differential amounts to 5.8 cents per hundredweight for

each one-tenth of one per cent variation from the established

class prices which are based on 4.0 per cent butterfat con-

tent milk.

Class II producer prices as of January 1, 1953, were

established by the Commission in only one of the eleven ad-

ministered milk marketing areas in central and south Florida.

Class II prices in this marketing area (Dade-Broward-Monroe)

were established through use of a formula which was based on

the competitive price of butter in Chicago on the butter

market, plus an allowance for the overrun in making butter,

plus an allowance for transportation charges from Chicago to

Florida, plus the price of the solids-not-fat of 4.0 per cent

butterfat milk, plus transportation charges, times a yield

factor for determining the amount of solid-not-fat on a dry

basis which can be made from a hundredweight of 4.0 per cent

butterfat milk, plus a butterfat differential of 5.8 cents

per hundredweight.

Producer Class III prices as of January 1, 1953,

were established in only the Dade-Breward-Monroe Milk Market-

ing Area. Class III prices were established by use of the

formula given above without any allowance for the non-fat

solids.








57

Minimum retail and wholesale prices for dealers are

also established at public hearings. Only rarely do dealers

present testimony based on statistical data or cost accounts

to show what marketing spread is needed to allow them a

reasonable profit. Testimony usually given consists of gen-

eralized statements under oath that the marketing spreads

elsewhere are larger, or that labor costs, package container

costs or equipment costs have changed.36

The Commission after due consideration to determine

the marketing spread needed, establishes the retail and

wholesale prices of dealer sales. It has been the custom

in the past to price wholesale fluid milk sales at two cents

per quart less than retail sales. The store handling margin

is generally two cents per quart. Milk delivered to homes

and milk bought from stores by consumers thus have identical

prices.

COMPLIANCE WITH REGULATIONS

Producer Class I, II, and III Prices.--The Commis-

sion's established Class Prices to be paid producers were

followed without exception by the 27 milk dealers included

in the study.37 In several instances, more than the minimum

prices was paid producers for Class I.

36
3This was true at two hearings the author attended.
Data furnished by other people indicated that this was true
at other hearings also.
37No data was found to the contrary.








58
Butterfat Differentials.--Butterfat differentials

of one-tenth cent per one-tenth per cent of butterfat per

gallon or 5.8 cents per hundredweight of milk per each one-

tenth per cent butterfat above or below a 4.0 per cent con-

tent level are established and are mandatory in each of the

11 milk marketing areas of central and south Florida. Lit-

tle attention has been paid to this provision by milk deal-

ers. Of the 112 wholesale milk producers38 located in ad-

ministered areas, 40 producers (35.7 per cent) were not

being paid for their milk on the basis of butterfat content.

These 40 producers were located in 9 of the 11 marketing

areas. In some instances, these producers received 100 per

cent Class I prices for their milk in lieu of butterfat pay-

ments; in other instances the established butterfat differ-

ential was subtracted for milk of less than 4.0 per cent

butterfat, but was not added when the milk was above 4.0

per cent. In many eases, these producers were paid one or

two cents per gallon more than the established Class I 4.0

per cent butterfat content price,3 while in numerous other

38Four other producers interviewed were located in
non-administered areas; none of these four were paid on the
basis of butterfat content. One other producer interviewed
in an administered area sold all his milk retail to custo-
mers coming to his farm.

39One dealer, who paid one cent a gallon above the
established class price in lieu of paying a butterfat dif-
ferential, reported that in the near future he would be
forced to pay on the basis of butterfat content because the









59

cases, no provision was made in lieu of payment on the basis

of butterfat content. In one rather unique case, a producer

did not receive any butterfat differential because of "free"

transportation of his milk from the farm to the dealer's

plant. This producer, in the event that his butterfat con-

tent dropped below 4.0 per cent, had an agreement to pay

transportation charges.

It is probable that dealers purchasing milk from

producers on any basis other than butterfat content would not

be doing so if it were not more profitable.40 These wide

variations and deviations, in paying for milk of less than

or more than 4.0 per cent butterfat content, would appear to

make adequate supervision of the industry much harder than

if these deviations did not exist. Hence the effectiveness

of the Commission in fulfilling its objectives has been de-

creased.

Of the 27 milk dealers interviewed, only 14 paid for

milk on the basis of butterfat differentials. Eleven of the

dealers who did not pay butterfat differentials were located

in milk control areas where butterfat differentials were pro-

vided and were mandatory of payment. These 11 dealers sold


butterfat content of his producers' milk had dropped over a
period of years, to the point where instead of making money
by not paying for butterfat, he was losing money on each gal-
lon purchased.
40One dealer indicated that the reason he was not
paying for butterfat content was because it was more profit-
able to buy milk on a flat price basis.








60
approximately 23 per cent of the total fluid milk sold by

the 25 dealers interviewed who were located in milk control

areas during 1952.

Characteristics of Distributors Not Paying Estab-

lished Butterfat Differentials .--Only nine of the 13 milk

distributors interviewed paid for milk on the basis of

butterfat content. The four distributors who did not pay

for milk on the basis of butterfat content were located in

four of the established marketing areas. In each of these

four areas butterfat differentials were regulated by the

Commiss on. These four distributors not complying with

pricing regulations were characterized by three factors:

1. Three of the four distributors were among the
smallest five distributors interviewed. Only
one of the four was among the largest five dis-
tributors in sales volume during 1952. These
four distributors, while representing 31 per
cent of the 13 distributors interviewed, han-
dled only 17.4 per cent of total fluid milk c
sales during 1952.

2. The four distributors who did net pay butter-
fat differentials paid for milk from producers
on the basis of 100 per cent Class I prices.
Two of these four distributors worked closely
with their producers in an effort to equate the
volume of whole milk produced with the sales
volume of fluid milk sold. As a result of this
collaboration, the distributors were able to
sell all of the whole milk they received as
fluid milk and hence pay the producers Class I
prices for their entire output.

The othor two distributors did not work
closely with their producers to achieve a
close relationship between production and sales,
and at times refused to take all of their











producers' milk production at any price. In
other words, they did not buy the milk if they
could not use it in the production of fluid
milk.

3. Two of these four distributors did not use any
base-quotas with their producers. All other
distributors used some variation of the base-
quota plan.

Characteristics of Producer-Distributors Not Paying

Established Butterfat Differentials.--Nine of the 14 producer-

distributors interviewed said they did not pay for milk on

the basis of butterfat content. Seven of the nine that did

not pay for milk on this basis were located in marketing

areas in which the use of butterfat differentials were man-

datory; two were located in uncontrolled market areas.

These seven producer-distributors not complying with the

Commission regulations were characterized by three factors:

1. The seven producer-distributors who did not pur-
chase milk from producers on a butterfat basis
were relatively small; their sales of fluid milk
averaged only one-third of the sales of the other
five producer-distributors during 1952.

2. Four of the seven producer-distributors who did
not pay butterfat differentials paid 100 per
cent Class I prices to their producers during
1952. Only one producer-distributor of the five
who paid butterfat differentials purchased pro-
ducer milk on the basis of 100 per cent Class I.

3. Five of the seven producer-distributors who did
not pay butterfat differentials used some varia-
tion of the base-quota plan during 1952. Of the
five producer-distributors who paid butterfat
differentials, only one used the base-quota plan
during 1952.


__ ~_







62

The two producer-distributors in non-control areas

were characterized by having relatively small Class I sales

volumes during 1952, paying for producer milk on the basis

of 100 per cent Class I use, payment on a flat price per

gallon basis without regard to butterfat content, and non-

use of any base-quota plan during 1952.

Consumer Class I Prices

Retail Prices.--None of the 27 milk dealers inter-
viewed gave any indication that the Commission's consumer

retail prices were not followed.

Wholesale Prices.--The Commission establishes whole-

sale prices for milk sold by dealers to stores, restaurants,

hotels and other larger accounts. Information obtained from

the 27 milk dealers indicated that discounting practices on

wholesale accounts wore rampsnt.

Ten dealers out of 15 who answered the question

"What are your marketing problems?" listed discount practices

as a major problem. These 10 milk dealers were located in 5

of the 11 separately administered milk marketing areas of

central and south Florida. Discounts ranged from 2 and 3 per

cent in some areas to over 15 per cent in at least one area.


41These discounting practices enable the'wholesale
accounts to have a wider spread on their sales, since little
or none of these discounts are passed on to the final con-
simer in the form of lower prices.









63

Further evidence of wholesale discounting was found

in the Miami market. Reliable sources reported that dealers

had been meeting once weekly, in the same building where the

Commission office is located, in a futile attempt to control

discounting practices.42 At last reports, these meetings

had not resulted in eliminating illegal discount practices.

METHODS OF PRICING MILK IN NON-ADMINISTERED AREAS.--Of the

26 central and south Florida counties included in this study,

11 counties were not subject to the Commission's price regu-

lations during 1953. Because of the nearness of these areas

to administered areas, there appeared to be some influence

upon prices found in the non-administered areas. In effect,

producers in unregulated areas could, by suggesting to their

dealers that they were interested in having administered

pricing, achieve prices which were closely related to admin-

istered prices in nearby regulated markets.

MILK CLASSIFICATION.--Milk classification in these non-

administered areas might well be said to be non-existent.

Milk was regarded as milk and not thought of as Class I, II,

III or any other type of classification. Milk was bought by

milk dealers at a flat price per gallon and sold to consumers

as fluid milk at a price the dealer or dealers felt was nec-

essary to maintain operations. In most cases milk produced


4An invitation to attend one of these meetings was
declined by the writer.









64
in excess of the dealers' Class I needs was rejected by the

milk dealer.

ADJUSTING SUPPLY TO DEMAND--In the non-administered areas

of central and south Florida, there were no organized methods

used in adjusting production to consumption. Dealers worked

closely with their producers in order to give them some idea

of when consumption of fluid milk was highest and lowest.

Producers attempted to adjust their breeding programs so

that production closely followed consumption. In some cases,

dealers refused to take all the milk produced by each of

their producers during several months of each year at

Class I prices. The surplus milk above Class I.needs was

turned back to the producers to dispose of as they saw fit.

QUALITY OR BUTTERFAT DIFFERENTIALS.--In non-administered

pricing areas, butterfat differentials were neither estab-

lished nor paid. By common agreement between the dealers

and their producers, the butterfat content of wholesale milk

was to be 4.0 per cent or greater.

PRICE POLICIES.--Prices to producers were based on a flat

price per gallon. These prices appeared to follow the estab-

lished Class I price for 4.0 per cent butterfat content whole

milk in nearby administered pricing areas. Both retail and

wholesale prices of Class I milk in non-administered areas

also appeared to follow the established retail and wholesale

prices in nearby price administered areas.

















III. PRICE STRUCTURE PREVAILING IN

CENTRAL AND SOUTH FLORIDA


CONSUMER PRICES

GEOGRAPHIC PRICE STRUCTURE.--As of January 1, 1953, the milk

prices per quart for milk delivered to homes, or for milk

purchased from stores, varied from 24 to 26 cents in central

and south Florida. Consumer prices were highest in the

Dade-Broward-Monroe (Miami) Area and lowest in the Manatee-

Sarasota Area.

FLUCTUATIONS OF CONSUMER MILK PRICES.--Consumer milk prices

in central and south Florida have been relatively inflexible.

During the three years of 1950, 1951, and 1952, no price

changes were made by the Commission in four of the eleven

marketing areas. These four areas were Highlands, Polk,

Lakeland, and Brevard. Only one consumer price change was

made in the Tampa, Manatee-Sarasota, Plant City, aid Pinellas

Areas. Only two changes were made in the Orange-Seminole,

Martin-Palm Beach-Hendry, and Dade-Broward-Monroe Areas.

Consumer price fluctuations in the two large markets

of Tampa and Miami can be considered as fairly representative

of price changes made in the central and south Florida areas.

65









The Tan pa marketing area experienced one price change up-
ward during October, 1950, and no changes in 1951 and 1952.

The Miami (Dade-Broward-Monroe) Area experienced one price
change downward in June, 1950, and one price change upward
in September, 1951. No changes were made during 1952
(Figure 6).
During the same three-year period1 markets operat-

ing under administered pricing in other states with Milk
Commissions experienced considerably more flexibility in
consumer prices. For example, Pittsburgh had five adjust-
ments upward and two downward, Atlanta had three adjust-

ments upward and one downward, and Los Angeles had five
adjustments upward and one downward (Figure 6). Adminis-
tered prices at the consumer levels in the Tampa and Miami

markets appear to be even more inflexible when compared
with prices in Federal Order Markets where consumer prices
are not determined by regulation. Chicago experienced 20
adjustments, 13 upward and 7 downward; Boston had 16 adjust-

ments, 9 upward and 7 downward, while New York City had 23
adjustments, 11 upward and 12 downward (Figure 7).4

PRODUCER PRICES

GEOGRAPHIC CLASS I PRICE STRUCTURE.--As of January 1, 1953,

producer Class I prices varied from a low of 51 cents per

43United States Department of Agriculture, Bureau of
Agricultural Economics, Washington, D. C., Fluid Milk and
Cream Report, 1950-1952.















FIGURE 6 RETAIL PRICES PER .0ART. OF I'ILK IN SILECIED
CITIES OF THE UNITED STATES, 1950-52

Price per quart.
(cents)


_Miami


Tomp -
Tompo---'
- - - -


0
0
0


o -Alanta
0
0


0 000 0


27



26



25



24



23



22 -


0000 0
0 0
0
o
0
0
S* 0 0 0 0 0 0 0

"O
*
*
X X X X X

*


XXXX

x
X
X
X
XXX
XX X


0**OO *


** *0


:1


*
XX
*X



x
x
X
XX XXXXXXXXXX
X
X


x
XXXXXXXX
X
x


X
- Los Angeles
x
x


16

I 1 I I I I I I I 1 I It I

0M MJS N.J MM JSN J M J SN
1950 1951 1952
(Months and Years)
*Source--United States Department-:of Agriculture,,
Bureau. of Agricultural Economics, Fluid Milk
and Cream Reports,, Washington,.D. C. and Official
Orders of the Florida Milk Commission,, 1950-52.


o Pittsburgh --
o0


20-



19


nb_











FIGURE 7 RETAIL PRICES PER QUART. OF E:ILK IN TANiTA
AND -.IA I, FLORIDA* AND IN THE FEDERAL
ORDER MARKETS** OF CHICAGO AND NEW YORK
CITY,, 1950-52.


Price per. quart,
(Cents)


27 I


Miami

~ i


17Tompo
- - --- ooooo o o
000 0 0 0
000 0 0 *
0000 00000*
0 00 0
0 0 0
0 0*0000 0
0 0
000 ***
0 0*
o
~o *- Chicago


O
O
- ***00
S* 00
**** o






0
O


0@0 000
o
- o.: .= New York City
00
0
00


o
0 0
0 0
0o
0 0
0 0
0*** 0


00* 00 *0
0* *----
0 0
o a o
0oo* * o
0 0 *0 0
0 * 0
0000 0* 00
0 0
0 000
0 0
0 0
0000
0 0
0 00 0


1950 1951 1952
(Months and Years)
*Source--Official Order. of the Florida .Milk
Commission,.1950-52.
**Source--United States Department: of Agriculture,.
Bureau of Agricultural. Economics,, Fluid Miilk
and Cream Reports,. Washington,, D. C., 1950-52.


0000

B--


26



25



24



23



22



21



20



19



18



17



16:.









69
gallon of 4.0 per cent butterfat content milk, to a high of

61 cents per gallon in the administered areas of central

and south Florida.

The lowest producer price of 51 cents per gallon was

found in Highlands, while the highest price of 61 cents was

found in the Lakeland, Polk, and Dade-Broward-Monroe Areas.

The Orange-Seminole Area had a price of 57 cents per gallon.

A 60-cent price was found in the Martin-Palm Beach-Hendry

Area. All others had a price of 59 cents per gallon.

FLUCTUATIONS OF PRODUCER CLASS I PRICES.--The producer

Class I prices in central and south Florida have been very

inflexible. During the three years 1950, 1951 and 1952, no

changes were made by the Commission in Class I producer

prices in the Highlands, Polk, Plant City, and Manatee-

Sarasota Areas. During the same period, milk prices were

changed only once in the Lakeland, Pinellas, Tampa, and

Brevard Areas, and twice in Orange-Seminole, Dade-Broward-

Monroe, and Martin-Palm Beach-Hendry.

In other state price-regulated markets in the United

States, producer prices have been much more flexible. Pitts-

burgh Area prices changed seven times, five upward and two

downward. Atlanta prices changed eight times, five upward

and three downward. In Los Angeles there have been five

changes, four upward and one downward (Figure 8).










70


FIGURE 8 PRODUCER PRICES PER HUNDREDWEIGHT OF IILK
IN THE STATE REGULATED 1.ARKETS OF TAVPA,
Price per YMIAI,. PITTSBURGH, ATLANTA AND LOS ANGELES,
Cwt. 1950-52.
(do.)
7.00


I -Tompa



6.50 -Mimi0

00000000 00000000 0
0 0
0 0 o0 0
00000000 00

A llonto ** *
6.00 :
x

0 0 xxxxxxxxxxxx
o o XoXXXXXXRXXX
S0 0 X
o oX
o o a X
0 0X
5.50 0 .
0 0 0 0 X
*** o o X
ooo o-oo XXXX X X

Pittsburgh --- x
x



X
5.00 x





x -Los Angeles
S******
4.50 x
x
xxxxxxxxxxxxxx




4.00

JM MJ S NJ M M J S N J K M J S N
1950 1951 1952
(Months and ears)
*Source--United States Department of Agriculture, Bureau
of Agricultural Economics, Fluid Milk and Cream Reports,
Washington, D. C., and Official Orders of the Florida
Milk Commission, 1950-52.










In comparison with producer prices under Federal

Market Orders, producer prices have been even more inflex-

ible. The Class I producer prices in Chicago were adjusted

25 times, 11 upward and 14 downward. In Boston there were
23 adjustments, 13 upward and 10 downward. In New York City

there were 33 adjustments, 15 upward and 18 downward

(Figure 9).

CLASS II AND III MILK.--The Commission regulated Class II

and III milk prices in only the one area of Dade-Broward-

Monroe (Miami). In the other 10 Class I price-regulated

areas, non-administered pricing is relied upon to determine

non-Class I prices. Since the Class II and III prices in

Miami are tied to Chicago butter prices,44 these Class prices

change monthly. In the markets where Class II and III prices

are not established by the Commission, the unregulated prices

tend to be considerably less than the regulated prices in the

Miami Area.


BLEND PRICES
DIFFERENCES BETWEEN PRICES PAID TO PRODUCERS SELLING TO THE

SAME OUTLET.--In central and south Florida, although the

Class I price is established by the Commission in the various


"Chicago butter prices are generally used by all
State and federal pricing agencies since Chicago is the
nation's main commodity market for butter. National prices
vary from Chicago prices generally by transportation costs
only.















FIGURE

Price
Cwt.
(do.)
7.00







6. ,0
















4-














5 .00


9

pe


r


PRODUCER PRICES PER HUNDRE.DfEI3HT. OF MILK
IN TAIVA AND MIAI,. FLORIDA AND THE FEDERAL
ORDER iARKEITS OF CHICAGO AND NEW YORK CITY,
1950-52.*


I
I /Tompa O
I,


Miomi


New York City
_ /


0 0000 ia
00 000 0000 XXX
0 00 0 x x x
o oXoooo o XX XX
0 Ooo X
o X o X xxx oo
o ooo X a a*


X 0 Xo 0
xx x Boston xxo "
0 ;xx 00..
XX o x

- X o X e
-X X 0
x e x
XX* X X
*,
0 00


0
0. 0 ..
0 0

: GO ..%

* ... .. -*
* ** *


*0*
**00

0 00 0

0 0
S ** 0
0*
0*
00* 0


0

Chic


* *
0 *
a 0



ago


SM M J S N J XM J S N J MM JS 1
1950 1951 1952
(Months and Years)
*Source--United States Department of Agriculture,.
Bureau of. Agricultural Economics,, Fluid Milk and
Cream Reports,.Washington,. D. C.,, and Official
Orders of the Florida Milk Commission,. 1950-52.


*1 .,%- .


L I I I I I I


= =


S i I


I









73

markets, no provision has been made in regard to equaliza-

tion of the proportions of each producer's milk to be used

in the various classes.45 The one exception was the Dade-

Broward-Monroe (Miami) Area where the Commission has estab-

lished base-quota periods and made the use of base-quotas

mandatory. Establishment of individual bases must be re-

lated to each producer's sales to his dealer during the base

period in this area.

As a result of the lack of specific Commission pro-

visions in regard to equalization of the proportions of each

producer's milk to be used in the various classes, many, if

not most of the producers in established price areas in cen-

tral and south Florida, are not a part of any pooling device.

In effect, many producers are not even selling milk by the

simplest and most widely used milk pool known, that is,

individual-handler pool. Producers selling to the same out-

let do not receive uniform average blend prices for their

milk. Each producer's blend price is a result of the pro-

ducer's bargaining power with his milk outlet. Deviations

from individual-handler pools were shown by data obtained

from dealers and producers. The following deviations have


45During 1954 base-quota periods were established in
all central and south Florida marketing areas. The base-
quotas based on the established period may have eliminated
producer blend price differences when producers sell to the
same outlet, except for differences due to the use of the
base-quotas,










been given as examples:

Dealer A

Producer 1 Gave a base arbitrarily and received
/ 100 per cent Class I prices during
1952.


// Producer


2 Received 100 per cent Class I prices
during 1952. Producer leased barn and
land from dealer.


Prod cer 3 Received 100 per cent Class I pri
during 1952. Producer owsd; dea
i money for a production lean.

Other Producers Received varying amounts of
i: Class II during 1952.


Dealer 'B

Producer 1 -


/oducer 2
i i
SProducer 2 -


Producer 3 -


Received 100 per cent Class I prices
during 1952 as per written contract.
Other producers did not have written
contracts.

Dealer has not allowed this producer
to change base-quota in five years
although other producers reset base
figures yearly.

Base-quota raised 50 per cent after
producer told dealer that making barn
improvements would be impossible un-
less a greater proportion of milk
brought Class I prices


Dealer C


Producer 1 -


Received 97 per cent Class I prices
during 1952 as per written contract.
Other producers did not have a written
contract.


Other Producers Received large proportions of
Class II prices and producers had not
been able to change base-quotas in
several years.


ices
ler











Dealer D

Producer 1 Received 100 per cent Class I prices
during 1952 after complaining to
dealer D about the amount of milk paid
at Class II prices during 1951.

Producer 2 Dealer D promised to pay for a larger
proportion of milk at the Class I
price after producer threatened to
sell to another dealer.

Producers 3, 4, and 5 These producers received
large amounts of Class II during 1952.

Dealer E

Producer 1 Received 100 per cent Class I during
1952, although no base-quota had been
assigned.

Other Producers Varying proportions of their milk
were bought as Class II, in accordance
with base-quotas.

Producer discrimination in buying policies of dealers

can make a great deal of difference in prices received by

producers selling to the same dealer.46 Using a theoretical

model, an illustration of this will be helpful in emphasizing

these differences.

Assuming that there are two producers of equal size

insofar as herds and farm facilities are concerned, and that

the production per cow is equal, with identical butterfat

tests and identical seasonality of production, the dealer

pricing policies can greatly affect returns to producers.

If both producers sell 200,000 gallons of milk to their dealer


46See Appendix B.







76

during a single year, and one received 100 per cent Class I

(61 cents), while the other received enough non-Class I to

free his yearly average blend price down to 54 cents perr

gallon, there would be a difference of seven cents per gal-

ion. Based on 200,000 galleoa this pries difference amounts

to $14,000 annually. This different e *ald net exist except
under conditions of producer discrimination which results in
immobility of producers.
DIFFERENCES BETWEEN PRODUCERS SELLING TO DIFFERENT DEALERS

IN THE SAME MARKET*--Wide differences exist in annual blend

prices received by producers selling in the same market.

These prices differ because of differences in (1) contractual
arrangements with dealers, (2) seasonal production patterns
of producers, (3) Class I sales patterns of the various

dealers, and (4) butterfat content of the milk. Illustra-

tions of differences in average annual prices paid to pro-
ducers due to these four factors are presented below.

Differences in average producer blend prices due

only to contractual arrangements was 2.75 cents per gallon
of whole milk for two producers selling to the same dealer

in a central Florida area. One producer received 100 per

cent Class I prices for his milk while another producer re-
eelved only 85.7 per cent Class I during the last four months

of 1952. Using a hypothetical volume of 5,00 gallons











monthly this difference would amount to $137.50 monthly,

or $1,650 yearly.
Differences in producer prices due to different

seasonal production patterns by dairy farmers in relation

to Class I milk sales by dealers is shown by the following

example: Two producers (producer A and producer B) in

the Miami market varied 42.5 per cent and 33.0 per cent

respectively from Class I fluid milk sales in the markets

(differences between high and low production figures,

Figure 10). Assuming that both producers had received

100 per cent Class I prices during the base-setting months

of January and February and during the months when their

production fell below their allotted bases during the

fall, one producer received some Class II payment from

March through August and one from March through September.

Because of the better adjustment of producer B to Class I

sales he would have received an average annual blend

price of 59.73 cents per gallon in 1952 while Producer A

would have received 54.87 cents per gallon. This dif-

ference was 4.86 cents per gallon.47 The total annual

return to producer A was $69,963.20 for 127,500 gallons of

47Assuming the Class I price of 61.0 cents per gal-
lon and the average Class II price of 47.8 cents per gallon
during 1952 as established by the Florida Milk Commission
for 4.0 per cent butterfat content milk was paid producers.














FI-jURiE 10, V0KPARISON OF SEAbON'LAL PfZ3DUCTION PATTERNS
,OF WO PWiODUCELS IN THE MIjiuiI AREA WITH
CLASS I j.ILK SALES OF iDEALER3, USING A
JANUARY-FzB&RUAiz! BASE, FLORIDA, 1952.


Percent


O l 1 I I t
Jan. Feb. Mar. Apr. May June July
Months


Aug. Sept. Oct. Nov. Dec.










milk and $70,305.60 for 117,700 gallons of milk for pro-

ducer B.

An example of differences in producer prices due to

Class I milk sales patterns of various dealers is shown in

the following hypothetical example. Several assumptions

need to be made:

1. The Class I price in the market is 61 cents per
gallon.

2. Each producer sells to his dealer 5,000 gallons
of 4.0 per cent butterfat content whole milk
each month.

3. Dealer A buying from producer A can use all of
the milk purchased from producer A as fluid
Class I milk for six months and 90 per cent as
Class I for the remaining six months.

4. Dealer B buying from producer B can utilize all
his purchases as Class I milk for six months
but only 80 per cent as Class I for the remain-
ing six months.

5. A Class I price of 61 cents per gallon and a
Class II price of 47.8 cents per gallon.

6. All milk not utilized as Class I was purchased
at Class II prices.

Using these assumptions producer A selling to dealer

A would have received an annual blend price of 60.34 cents

per gallon while producer B selling to dealer B would have

received 59.68 cents per gallon. This difference due solely

to Class I milk sales patterns of the dealers would be .66

cents per gallon. The yearly difference would be $396.

Differences in returns to producers due to butterfat

variation are readily apparent. For example, if two producers








840
sell 60,000 gallons of 5.0 per cent butterfat content milk

yearly to their dealers and one producer receives the estab-

lished Class I price and butterfat differential, while the

other producer received only the 4.0 per cent butterfat

Class I price, the difference is five cents per gallon48

The annual difference would be $3,000.

DIFFERENCES BETWEEN PRODUCERS SELLING TO DEALERS LOCATED IN

DIFFERENT MARKETS.--There have been wide differences in an-

nual blend prices received by the producers located in the

various regulated markets of central and south Florida.

These differences in annual blend prices have been generally

conditioned by one or more of six factors:

1. Differences in established Class I prices in the
regulated areas. For example, in the past, dif-
ferences in Class I prices to producers in dif-
ferent marketing areas have accounted for large
differences in prices paid to producers located
and selling milk in different marketing areas.
They may be justified to the extent that such
prices accurately reflect different competitive
costs of production. However, in many central
Florida marketing areas, first one, then another
of the areas has had the lowest or highest pro-
ducer Class I prices. No one area has consist-
ently been high or low in price. The very incon-
sistency of these producer Class I prices'points
out the extreme difficulty the Commisd on has in
pricing Class I milk from cost of production re-
ports submitted by producers at price hearings.
If these cost of production figures are inade-
quate, should they be used as the main criteria
in establishing producer prices?


48Assuming the Class I price of 61.0 cents per gal-
lon and the average Class II price of 47.8 cents per gallon
during 1952 as established by the Florida Milk Commission
for 4.0 per cent butterfat content milk was paid producers.










2. Differences in non-Class I prices paid to pro-
ducers in the 10 regulated areas where non-Class I
prices are not fixed by the Commission. Very
real differences were found in the prices paid
for non-Class I milk in the various areas. With
competition for hon-Class I milk these price dif-
ferences would be slight or non-existent.

3. Differences in the utilization patterns of deal-
ers in the various markets. The ability of some
producers to bargain with their dealer in regard
to the utilization to be made of their milk,
while other producers are part of an individual-
handler pool, aggravates market price differences.

4. Use or non-use of individual-handler pools by
dealers. In some markets individual-handler
pools were used by all or nearly all dealers. In
other markets some dealers had producers who
were not part of their individual-handler pool.
In effect, the exclusion of some producers from
the pool nullified the purposes and objectives
of the pool. The producers excluded from the
pool received discriminatory treatment and evi-
dently received unjust proportions of either
Class I prices or non-Class I prices. These
deviations caused considerable variations in
average prices paid to producers located in
various markets.

5. Compliance with the Florida Milk Commissionis
established butterfat differentials. In some
markets payments based on butterfat content of
milk were largely ignored. This caused wide
differences in producer prices. For example,
if two producers were selling 4.6 per cent
butterfat content milk, the producer being paid
on the basis of butterfat might receive the
Class I price of 60 cents per gallon plus three
cents for butterfat. The second producer would
receive only 60 cents per gallon.

6. Adjustment of supply to fluid milk demands.
Variations caused by these adjustments are
generally due to the responses of individual
producers. Some dealers gave their producers
little guidance in meeting expected seasonal
Class I needs.










MARKET PROBLEMS IDENTIFIED BY THE INDUSTRY

WHOLESALE PRODUCERS.--Evidence that considerable variations

in producer prices prevailed in central and south Florida

was shown by replies of 56 wholesale milk producers to the

question, "What are your marketing problems?"

Nineteen of $6 producers said that payment based on

utilization made of their milk was their major market prob-

lem while 18 of 56 producers said that payment based upon

correct butterfat content was their major problem (Table 16).

If these producers were right in suggesting that they were

not being paid for correct butterfat contents and/or utili-

zation of their milk, it must necessarily follow that pro-

ducer prices differed considerably without logical reasons

and competition was hindered or restricted seriously.

Eight of the 56 wholesale milk producers said they

were too small to bargain effectively with their milk deal-

ers. This marketing problem suggests the possibility of

highly imperfect market conditions, with resulting price

variations between producers based entirely on bargaining

power.

Eight more producers said they had little security

in the market place, due to lack of effective competition

of milk dealers for whole milk produced by dairy farmers.

If competition is lacking, the opportunity for discrimina-

tion between producers is present because producers have










TABLE 16

MARKETING PROBLEMS OF 56 WHOLESALE MILK PRODUCERS IN CENTRAL
AND SOUTH FLORIDA, 1952

No. of
Item Specified Marketing Problems Replies

1. Producer is not paid for correct utilization
made of his milk 19
2. Producer is not paid for correct butterfat
content 18
3. Producers are too small to bargain effec- a
tively with milk dealers 8
4. Producers have little security in the market
place because of lack of effective competi-
tion and alternative outlets 8
5. Distributors are slow in paying or owe pro-
ducer money for past deliveries 6
6. Unfavorable publicity when price is changed 6
7. Producer receives too much surpluab 6
8. Hauling time is excessive due to poor unload-
ing facilities at plant 5
9. Milk Control Commission needs changed or is
too lax 5
10. Too much milk coming in from out-of-state 3
11. Distributor pays too low a price for surplus 2
12. Wholesale price war in this area 2
13. Area is a closed market; producers' relatives
can't start dairying 1
14. Class I price is too low 1
15. Butterfat differential is too low 1
16. Miscellaneous" 2

Total Marketing Problems 91e

aIncludes 2 producers in non-price administered areas.
bSeveral producers thought that their dealers were
unwilling to sell whole milk to other dealers because of the
possibility of the competing distributors being able to ex-
pand sales,
COne producer said he was forced to rebate 2 a gal.
to his milk dealer in order to help finance the wholesale
price war.
dOne producer said his milk dealer paid him Class II
for plant loss and route spoilage; one producer said that










little opportunity to shift their sales outlets from one

dealer to another.

Six producers said their dealer owed them money

and/pr was slow in paying. Several of these producers were

owed thousands of dollars by their dealers. In some cases,

producer payments were as much as a year in arrears.

At least 64 of the 91 marketing problems given by 56

producers dealt with marketing conditions (Table 16, items 1,

2, 3, 4, 5, 12, 13, and 16), These problems showed clearly
the prevailing competitive conditions which were to be found

in the industry.

PRODUCER-DISTRIBUTORS.--Five producer-distributors said their

major market problem was the wholesale price war49 carried on

in their area (Table 17). These five producer-distributors

were located in three different control areas. One producer-

distributor said his major marketing problem was securing

payment for the correct butterfat content of his bulk sales

to other dealers.

bases were established in secret and this resulted in uneven
distribution of surplus.
eNinety-one marketing problems suggested by 56 whole-
sale milk producers.

49Discounting on wholesale sales to large accounts by
milk dealers in violation of prices fixed by the Florida Milk
Commission.




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