Puget
Sound

Milk Marketing Agreement and Order Programs as of January 1, 1955

55

Geography of Market Milk Prices Regulation by State Agencies, April 1954

Classification of states in most cases based on authority provided in the laws; authority not exercised to same degree in all states

Source:

Authority to fix minimum prices at producer level

Authority to fix minimum prices at producer and resale levels

Authority to fix minimum and maximum prices at producer and resale levels

From "A Report on Economic Considerations of the Market Milk Situation in Ohio," by C. W. Pierce and
W. T. Butz.

Another barrier if you want to consider it that, is the whole question of meeting the inspection that is required for that particular market. In many cases they are fairly high. And then also you have the very real problem of finding somebody that wants your milk. But as far as the Federal order is concerned, any plant or producer that wants to come in as a permanent part of the market to stay in throughout the year, can come in without the so-called penalty of compensatory payments.

Mr. LAIRD. It would not bar anyone under the 1954 orders that we have?

Mr. HOOD. They can come in as I say, if they meet the sanitary requirements.

Mr. LAIRD. Could not that go back to the local municipality or

the State?

Mr. HOOD. Yes, it does. After all, this is probably a little different than we are discussing today. It is specifically on Federal orders. Unquestionably if you are going to go to a certain market you have those sanitary requirements to meet. This means that you must have inspection.

Maybe it can be arranged on a basis of reciprocity or if it is large enough, why these inspectors may be able to come to your area to make the inspection but unquestionably you have to meet the sanitary requirements.

Mr. LAIRD. Do you know of any product that is regulated as much as milk, fluid milk?

Mr. HOOD. Frankly, I do not. I do not know of any product that is quite as perishable or quite as tied up with the whole question of health contamination and the other side of the need for it in the diet. Mr. LAIRD. Do you think that it is overregulated?

Mr. HOOD. I think in a good many cases I could say I think I would find agreement among most of the people in the milk business. Mr. ABERNETHY. Thank you very much. We appreciate your statement. We will hear now from Mr. John Baker.

STATEMENT OF JOHN A. BAKER, ASSISTANT TO THE PRESIDENT FOR LEGISLATIVE SERVICE NATIONAL FARMERS UNION

Mr. BAKER. Mr. Chairman and members of the committee, for the record, I am John A. Baker, assistant to the president for legislative service, National Farmers Union.

We commend your committee for initiating these hearings and for your plan to make a detailed study of fundamentals instead of a superficial survey of surface semantics.

We appear today in the spirit of Chairman Abernethy's statement opening this hearing. Figuratively he asked all participants in these first phases of your hearings to check their political and organizational guns at the door on the way in. And to confine our statements to matters of noncontroversial facts and reason. We are here today to give you a brief progress report on our dairy-research project. which is still under way.

The board of directors of National Farmers Union, composed of all the State presidents, authorized the initiation of a comprehensive scientific study of the economic problems of milk and their solutions. We went into this study realizing that it was a long-term venture.

Our purpose was not to make a dramatic splash of sensational charges against the economic institutions that generations of dairy farmers and their leaders in cooperation of public-spirited people have hammered out on the anvil of experience, negotiation, and the democratic spirit of conciliation and compromise. Nor do we believe that the economic problems of milk can be solved through reliance upon the theories and methods of classical economics and superficial statistics. The problems of the dairy industry are problems of human institutions and involve the consideration of possible improvements in those institutions that have been built up over time as people sought to meet their needs and attain their aspirations through laws, organization, custom, and cooperation. To move toward an understanding of possible improvements requires a great deal more than the accumulation of statistics and the application to them of the theoretical ideas used by emerging industrialists in their fight against the restrictions of mercantilism nearly 200 years ago.

Our study is still in progress. Thus far we have completed no more than the exploratory phases required to set up the outlines of the study proper. We do not have this morning a neat set of tables or a neat list of conclusions to give you. Rather we shall outline for you some of the human and institutional factors that we are convinced must be given full consideration in such a study and to share with you tentative conclusions that we have derived from our study up to date.

First, milk is unquestionably in politics and has been for over 100 years. Moreover, this has by and large generated good results, rather than bad, for the general public as well as for milk-producing family farmers. This is not surprising because in a democracy, politics includes everyone and deals with every facet of life. If the milk problems of the past had not been solved by political processes, consumers would not have the bountiful supply of sanitary milk at relatively reasonable retail prices they now enjoy. To know this one need only to compare the milk situation in western democracies such as the United States, Canada, Scandinavia, Switzerland with the dairy situation in countries run by dictatorial or imperial principles over the past 100 years. Or closer to home most of us can remember the time of milk strikes when many dairy producers, handlers, and distributors traveled armed through the streets of Chicago in bulletproof cars.

Second, we are convinced that the current problems of milk must be solved politically, that is to say legislatively. The iconoclasts and radicals who propose sensational propositions of returning to a free market in milk are almost surely wrong. Looked at from the consumer end, milk and its products are in the nature of a public utility. Milk and its distribution in sanitary condition, is that important to the general public. Therefore, we cannot view with alarm nor point an accusing finger at consumers and their representatives in city and State government who, in the absence of Federal inspection and standards, have acted to protect their ability to insure a continuous supply of sanitary high quality milk, cream and products at reasonable prices. We feel that the general public has been correct in insisting that milk production and distribution not be left entirely to the free market. From the strictly consumer standpoint there are three factors here: obtaining disease-free milk and products, assuming continuous ample supply and maintaining reasonable retail prices.

Third, our exploratory studies lead us to the tentative conclusion that local and State control over sanitation and disease prevention related to milk and its products may be out-dated. Moreover, we have seen no conclusive evidence that the health of the American people would be endangered by the substitution of Federal milkpurity standards and inspection for existing varying local and State regulations. However, we do not want precipitious action to be taken that might endanger the Nation's health; we hope that your committee will obtain the expert testimony of recognized scientific authorities on this subject so the Nation can learn the factual situation in this regard. We, also, have been advised that adoption of Federal sanitary regulations would require adoption of a constitutional amendment rather than a regular law.

Fourth, dairy farmers, like farmers generally, as owners and managers of small competitive free private enterprises in a large industry where, by its nature, the processing and distribution of milk and its products is characterized by a small number of firms, both in local situations and nationally. This structure of the industry would in an otherwise unregulated free market provide the basis for a degree of monopsonistic control by handlers as sellers and of monopsonistic control as buyers through the medium of administered prices. This in turn means that dairy farmers, as sellers, in a market of monopsonistic buyers find themselves at a distinct bargaining disadvantage. To overcome this bargaining disadvantage, milk farmers have used their State and Federal Governments to acquire what Professor Galbraith of Harvard University has called countervailing bargaining power. These have taken the form of the economic aspects of city sanitary regulations, of State price regulatory laws and the Federal milk marketing orders and dairy price support programs.

Fifth, our exploratory study indicates that most, if not all, of the economic, or price and supply affecting aspects of city milk sanitary regulations were adopted prior to and in the absence of State and Federal programs designed to even-up the bargaining power of milk producers. And, further, that these have been continued over recent years primarily because of milk producers' uncertainty and fears that the Federal programs may not be permanent or fully protective.

Sixth, our exploratory study, also, indicates that the same observation is probably true with respect to State milk price and supply regulations.

Seventh, we have seen no conclusive evidence that indicates that all dairy farmers generally have benefited from State and local economic milk regulations. Many milk producers have benefited but many have not. The point here is that such local and State programs help some but not all dairy farmers. Tentatively, we can say that the local and State regulations appear to have resulted in somewhat restricted supplies of fluid milk to consumers at somewhat higher than necessary retail prices. How much of this is due to the effects of local and State government regulation and how much to the monopolistic character of the milk-handling industry in local areas, we have not yet been able to determine. We, also, have seen some evidence that indicates that these local and State regulations result in raising barriers against farmers who wish to become producers for the fluid market. They may, thus, have contributed to some extent to lower incomes of milk producers who have not been able to "invade" the fluid market.