Testing dried milk for solubility for Mid-West Producers' Creameries, Inc., in its laboratory at South Bend, Ind.

As mentioned, the first dairy cooperatives in this country manufactured cheese. Small factories were set up by groups of neighboring farmers who found it convenient to haul their fresh milk to a common point. There the combined supply could be made into cheese more easily than on individual farms. Skilled artisans were needed to convert the milk into cheese. When a cheesemaker established a factory, it was usually operated as a private enterprise. But when a group of farmers provided the original capital and hired a cheesemaker, the undertaking normally became a cooperative.

These cooperatives used a pooling system to distribute the net proceeds from the sale of the cheese among those who provided the milk, according to the quantity of milk contributed by each. The cooperative form of business was well adapted to their needs but many cheese factories now are owned by cooperatives that do not meet modern standards. In some instances ownership has not been kept in the hands of patrons, and methods of operation are not in accord with accepted cooperative practice. Many such organizations have found it impossible to adjust to changing condi

tions, and as a result are not legally incorporated cooperative business institutions.

Milk must be delivered fresh to make good cheese. Consequently, in the horse-and-wagon days the area served by a cheese factory was small. Many little inexpensive factories sprang up at country crossroads. Since World War I a trend toward expansion and consolidation of cheese factories has resulted in fewer but larger ones. Yet the little crossroads factory still prevails. The typical cooperative cheese factory is small compared with other kinds of dairy cooperatives.

Most cooperative cheese factories, as is true of cooperative creameries, restrict their activities to processing. They perform only the initial step in marketing their products. Some have joined together in federations to carry out a number of marketing functions in moving the cheese from factory to

consumers.

Dried Milk. The cooperatives normally produce a large proportion of the Nation's total nonfat dry milk solids. In 1944, this percentage was 58 and it is believed to have been about the same in 1954. Wisconsin is the leading State in terms of cooperative production of this product.

Prior to World War II dried milk products accounted for only a small portion of the milk handled by dairy cooperatives. The war brought a tremendous demand for all milk solids. They were needed in a form which could be transported in minimum space and would retain flavor and nutritional qualities for months. The Federal Government financed construction of 16 dehydrating plants and installation of dehydrating equipment in nine other plants.

These plants were leased to cooperatives who paid rent and had options either to renew the lease at the end of every 5 years or to purchase the plant. In 1945 the plants produced over 100 million pounds of dried milk. Participation in the Federal program and cooperation among local associa

tions to supply central drying plants greatly increased the relative importance of cooperatives in production of dried milk. The cooperatives operating them have purchased most of these "lend-lease plants."

Since World War II, nonfat dry milk solids have had to seek new outlets. Like butter, cheese, and evaporated milk they are sold in consumer-size packages. A number of dairy cooperatives have contributed to this development by preparing compact, attractive packages of highquality products. As a result, the market for such products continues to expand.

Dried whole milk was another dairy product for which production rose sharply during war years. It has declined in relative importance since then, however. It is estimated that cooperatives manufactured about 50 percent of the total production in 1954. Many of these manufacturing cooperatives were in Wisconsin.

No data are available to indicate the cooperative proportions of total production of other dried milk products. Cooperatives, however, play a less important part in the manufacture of those products than in making nonfat dry milk solids.

Combinations of Products.-The number of large diversified or flexible dairy plants operated by farmer cooperatives is still increasing. The productive capacities of such plants can be shifted from one product or group of products to another single product or group within a relatively short time. These plants cannot be classified accurately on a product basis because of their potential in varied production capacity. In contrast, the specialized plants, such as the traditional crossroads cheese factory, readily fall into the product classification.

Relative merits of diversified and specialized plants of approximately equal size have not been fully determined. Perhaps each should be judged on an individual case basis. The price sensitiveness of the diversi

fied plant must in any event be weighed against the greater opportunities for operating economy in the specialized plant.

More complete utilization of all the milk solids, whether in a specialized or diversified plant, is a significant development. Such increased efficiency means greater returns to farmer-patrons from their cooperative plants.

In recent years many cooperatives operating diversified manufacturing plants have carried the development one step farther. They now have special departments to distribute fluid milk in bulk or in consumer containers.

Other Product s.-Cooperatives manufacture large quantities of dairy products other than those mentioned. in preceding paragraphs. Those quantities are relatively unimportant, however, as proportions of the total quantities produced in the Nation.

In 1946, 11 dairy cooperatives produced about 7 percent of the total United States production of evaporated milk (unsweetened, unskimmed case goods). During World War II, production by cooperatives increased greatly in response to Government

requirements for military personnel and for lend-lease. Before this war the large capital requirements for manufacture of evaporated milk, plus the difficulty in establishing satisfactory sales outlets, deterred cooperatives from manufacturing this product.

It is probable that cooperative production of evaporated milk in 1954 was a smaller proportion of the total than it was in 1946.

Cooperatives manufacture large quantities of ice cream and certain other dairy products, but most of the national total of each is produced by other concerns. In certain individual markets, though, cooperative products are of major importance. Merchandise Cooperatively. All cooperatives handling milk and its products, including the bargaining associations, perform some marketing function. Most of them, however, have no control over the physical forms or the distribution of their products after these leave the production plants. Fluid-milk distributing associations are a notable exception.

Relatively few cooperatives have been established for the specific purpose of selling to regular commercial outlets the finished dairy products produced by affiliated farmer coopera

Employees of Rochester (Minn.) Dairy Cooperative filling and closing 100-pound bags of nonfat dry milk solids.

tives. Such cooperatives are termed sales or merchandising federations. In 1954, 14 federations of this kind had a combined annual volume of business of about $400 million.

Merchandising dairy products is a highly technical business. More intense competition provided by stronger and larger organizations, widening markets, involved pricing techniques, Government regulations, and many other factors have contributed to its complexity. This calls for the assistance of specialists-lawyers, economists, market analysts, accountants, transportation experts, and others.

Potential markets for the products of each cooperative are becoming greater as facilities for transporting and storing products continue to improve in terms of speed, care, and refrigeration. Even rather small dairy cooperatives no longer operate in more or less isolated communities. Much of their production must be sold on regional or national markets.

These conditions have led to increasing emphasis on the services merchandising cooperatives offer to independent dairy manufacturing associations of all kinds and sizes.

Butter has always played the major role among the manufactured dairy products merchandised by cooperatives. Data have not been compiled to show the present combined volume of the federations handling that product, but a substantial proportion of the quantity produced by local cooperatives is merchandised by overhead organizations. The largest merchandising federation, one that at first specialized in handling butter but later diversified, had sales in 1953 of over $140 million.

The trend since 1920 has been toward fewer and larger butter handlers. The principal outlets before World War II were cooperative sales agencies; wholesale receivers on the central markets, mainly in New York and Chicago; and large direct distributors, such as food chains and the produce departments of meat packing plants.

These outlets represented two general sales classifications: (1) Sales in central markets and (2) sales at "country" concentration points. Use of the latter type of outlet represented a distinct shift in butter marketing methods. Cooperatives and private agencies have assembled, graded, analyzed, and packed butter at "country" plants to an increasing extent since 1940. Sales to wholesale receivers in central markets are still important, however, to local midwestern cooperative creameries.

Specialized cheese associations have organized federations to perform assembling, grading, warehousing, and distributing functions. In 1954 there were two specialized cheese marketing associations in Wisconsin. One of these was primarily concerned with assembling, however, and the actual distribution at wholesale levels was done by a federation originally organized to market butter.

Only about one-tenth of the Swisstype cheese and about one-twentieth of the American cheese produced in Wisconsin in 1945 were marketed cooperatively. A few very large organizations not under farmer control continued to handle most of the cheese of all types and varieties.

Several marketing federations distribute large quantities of dried milk and condensed milk products. Most of these federations began as butter marketing associations and subsequently diversified. At least two were organized for the specific purpose of handling dried milk.

The federations merchandising manufactured dairy products handle a variety of dairy and poultry products because diversification reduces the unit cost of each product handled. These federations have also assumed some processing functions because of the savings realized from performing these functions after quantities of the product have been assembled from local associations.

There is a distinct trend among many large dairy merchandising con

Two types of dairy cooperatives "straddle the line" between a specialized dairy marketing association and a specialized service association. These are the quality improvement cooperative and the artificial breeding cooperative for dairy cattle. The membership of two other types, the dairy herd improvement association and the specialized service association, consists of cooperating dairy farmers, also, but such cooperatives are of a purely service type. Both the dairy breeding and the herd improvement cooperatives are discussed elsewhere. (See page 192.) The quality improvement associa

tions formed by small marketing cooperatives make available to each marketing cooperative the benefits of a fieldman's services. Ordinarily, only a large marketing association can afford. to employ a fieldman. In March 1947, 17 quality associations served 17 counties in Wisconsin.

Over 60 specialized dairy service cooperatives were operating in Ohio in the late 1940's. They coordinated. local programs to improve both dairy cattle and farm management practices.

Have Specialized Nationals

Cooperating dairymen created two organizations to meet special needs at the national level.

Dairy Products Marketing Association (DPMA), Chicago, Ill., was composed of regional dairy cooperatives. Incorporated in May 1938, it was organized to engage in activities that would stabilize or otherwise improve prices for dairy products.

DPMA began purchasing butter in June 1938, in accordance with instructions from the Secretary of Agriculture. Such purchases were designed to keep market prices at or above a stabilization level that would insure a fair return to producers. DPMA made additional purchases of butter during some months of succeeding years before the beginning of World War II. It made purchases of nonfat dry milk solids in 1940 and 1941.

During World War II, DPMA acted

A

as agent for the U. S. Department of Agriculture in handling procurement programs primarily related to military and lend-lease needs.

In February 1947, the association again acted to support prices through purchases of nonfat dry milk solids on the open market.

After 1949, DPMA did not engage in Government procurement programs. It continued to act as a clearinghouse for information on the dairy industry until 1955.

National Milk Producers' Federation was organized and incorporated at Chicago, in December 1916. The word "Cooperative" was added to its name in 1923 but was later dropped. It was one of the first national organizations concerned with the welfare of cooperatives.

In 1955, the Federation had more than 100 member-associations. Included among them were local, regional, and federated cooperatives and bargaining, processing, and merchandising associations representing nearly 500,000 farm families.

This organization provides its membership with representation at the national level. It functions primarily as a contact agency with the legislative and administrative branches of the Federal Government and as an educational institution. It makes appraisals of legislation, market conditions, and economic and other factors affecting the organization and operation of dairy cooperatives.

HIGH point in cooperative marketing achievement was reached during the 1952-53 fiscal year through the united efforts of 134,000 fruit and vegetable growers. As small businessmen, these growers acting through their 776 farmer controlled associations compiled a most impressive record when they carried on a gross

business volume equal to 10 percent of that for all types of marketing cooperatives with but 3 percent of the membership.

Associations Grow

A measure of the relative importance of the volume of fruits and vegetables marketed cooperatively may be gained