Impact of Marketing Agreements and Orders on the Marketing of Milk

Abstract

UBLIC control of the pricing of market milk was undertaken primarily for the purpose of raising the incomes of producers to a more satisfactory level. At the time these controls were instituted milk prices and the prices of farm products generally were so low that farmers were hard pressed, and were demanding insistently that effective steps be taken to remedy the situation. In addition to the primary objective of promptly increasing the financial returns to milk producers, a continuing purpose of public control has been to maintain a stable price structure and to prevent unwarranted reductions in the prices paid producers as result of price wars among distributors, or other causes. Closely related to this function of stabilizing producer milk prices is that of providing for an equitable sharing of returns from fluid sales and surplus disposal in the various markets, and of eliminating unfair advantages in the purchase of milk that were enjoyed by certain handlers. Before public control was undertaken, some dealers in practically every market bought milk independently rather than through the leading producers' organization. By limiting their purchases to little more than the quantities sold for fluid use, and paying flat prices that were about the same or only slightly higher than the blended or pool prices paid by the cooperative or by the large dealers, these independent buyers obtained milk for fluid sales at a net cost considerably less than the announced Class I prices. Under federal and state milk marketing orders such disparities in costs and returns are eliminated by extending the classified price plan throughout the market, and by requiring all handlers to pay the full Class I price for milk used for fluid sales. It is obvious that some gain in returns to producers results by making the classified price plan effective throughout the market and enforcing a minimum price for each class of milk. Further increases in producers' returns were sought by the milk control authorities through fixing prices for fluid milk at higher levels than could be