Effectiveness of Price Control in the Dairy Industry

Abstract

IE price stabilization program has been reappraised in recent 1 months, with resulting modification of the hold-the-line policy. Considerable pressure has been exerted to relax or remove the food price-control programs. This discussion raises the question of how effective the control has been in keeping the cost of living down. Would food prices rise higher were it not for these controls? What would prices be without any controls? This article seeks to provide the answers to these questions as they apply to butter and other dairy products. The butter-or-guns days are over. There are too many guns and not enough butter. Despite an estimated all-time high record milk production, butter output in I946 is likely to be considerably smaller than normal. The returns to producers and manufacturers from butter fat in the form of fluid milk, cream, and ice cream have increased during the war period relatively more than the returns from butter-fat processes as butter. The relatively lower returns from butter are largely due to the price-control program, which rigidly fixed the price of butter early in the war. Secretary of Agriculture Clinton Anderson, speaking in Chicago on January 9, said that if the public wants butter it will have to pay more to get it. Department of Agriculture officials have suggested that the ceiling price of butter be raised six cents a pound as of the first of February, and another twelve cents a pound by the first of April. Price officials were reported to be opposed to the proposed increases. It was stated that OPA is vigorously opposed to any price, increase for butter.Y2 The issue in the controversy is clear. Shall butter price control be continued, and, if so, at what level, or shall it be discontinued? The decision will undoubtedly indicate the over-all policy which the Administration is likely to adopt with respect to foods now subject to price controls. It is an important decision and will bear close watching. Ignoring the political implications of the problem, which admittedly are far reaching, it seems that before a rational decision is made as to whether or not to continue the control of butter prices it is necessary to evaluate the effectiveness of the program heretofore. Has the control program been instrumental in keeping the cost of butter down? Would butter prices rise higher were it not for these controls? What would prices have been without controls? If price control has not been effective in the past, there is no reason to continue it; on the other hand, if the ceilings stabilized butter prices, it seems likely that their continuation during the period of reconversion would be desirable. In evaluating the effectiveness of the stabilization program some investigators have compared the trend of the prices during each year of World War II with the corresponding datum during World War I. Since there has been price control IThe author is in the service of the federal government in Washington. The article is a personal contribution and in no way reflects the views of the federal government. 2New York Times, January Io, 1946.