Stabilization of the Dairy Industry

Report Outline
Production and Prices of Dairy Products, 1924–34
Marketing of Milk: Profits of Distributors
Initial Attempts to Stabilize the Dairy Industry
New Price Policy and Failure of Production Control
Special Focus

Milk Production at the beginning of April, according to estimates of the United States Bureau of Agricultural Economics, was approximately 2 per cent less than at the same time a year ago. While production per cow was at the lowest point on record, the number of cows on farms was greater than ever before, having increased about 3 per cent over the high level of last year. The production rate will be higher during the coming months when dairy cattle are put out to pasture and feeding costs reduced. Retail prices for fresh milk in 51 cities surveyed by the United States Bureau of Labor Statistics averaged nearly 10 per cent higher at the end of March than a year ago. Considering the increased number of cows and the possibility that the price rise may restrict consumption, there is prospect of another milk surplus this summer such as that which disorganized the market for dairy products in the latter part of 1933.

The probability that milk supplies will outrun demand is enhanced by frustration of the efforts of the Agricultural Adjustment Administration to induce dairy fanners to accept a plan of production control similar to the plans of crop restriction applied to certain other agricultural commodities whose markets were burdened by depressing surpluses. The production control plan was put forward last month only after various other steps to improve the position of the dairy industry had proved inadequate. Milk producers, who had consistently shied away from suggestions that they cooperate to reduce output, again showed so little liking for this final remedy that the A.A.A. considered it useless to press the proposal at this time.

Fixing of both producers' and consumers' prices for fluid milk in local markets, through the medium of marketing agreements and licenses, was undertaken by the Agricultural Adjustment Administration last summer. The difficulty of enforcing resale prices caused a change of policy early this year. All the old agreements were cancelled, and the A.A.A. began the writing of new agreements applying only to farmers' prices. By that time, however, it was considered essential that such agreements be supported by basic adjustments of milk supplies. The marketing agreements and licenses were viewed as offering to producers supplying city markets assurance of obtaining their full economic advantage of location and quality production, while the production-control program was designed to aid in strengthening and maintaining all dairy prices. It now remains to be seen whether the milk licenses can be upheld without the prop of reduced production.