UNIVERSITY OF CALIFORNIA COLLEGE OF AGRICULTURE AGRICULTURAL EXPERIMENT STATION BERKELEY, CALIFORNIA AN ECONOMIC SURVEY OF THE LOS ANGELES MILK MARKET LELAND SPENCER BULLETIN 513 MAY, 1931 CONTRIBUTION FROM THE GIANNINI FOUNDATION OF AGRICULTURAL ECONOMICS UNIVERSITY OF CALIFORNIA PRINTING OFFICE BERKELEY, CALIFORNIA CONTENTS PAGE Forword 3 Summary 4 Recommendations 7 Methods and scope of the study 9 Consumption of milk and cream : 10 Consumption per capita 10 Population trends 12 Sales promotion by distributors 14 Work of the California Dairy Council 15 Daily distribution of milk 16 Grades and sanitary control 16 Supply and utilization of milk 20 Number, location, and size of dairy herds 20 Production per dairy 23 Seasonal production 26 Possible changes in sources of Los Angeles milk supply 27 Standardizing 31 Monthly supply, sales, and surplus of milk 31 Utilization of surplus milk 34 Supply and utilization of cream 36 Sources of milk fat in ice cream 38 Supply and utilization of skim milk 40 Distribution 40 Number of distributors 40 Southern California Milk Dealer's Association 42 Comalac Service Company, Incorporated 43 Los Angeles Bottle Exchange 45 Containers for milk and cream 45 Sales outlets for milk and cream 46 Processing plants 48 Routes 49 Prices and margins 53 Retail and wholesale prices for pasteurized milk 53 Buying prices of bulk milk 56 Distributors' margins on pasteurized milk 64 Buying prices of raw milk ! 68 Prices of market cream 69 Transportation of milk and cream 73 Agencies engaged in hauling milk 73 Proposals for unified hauling service 75 Time of delivery 75 Ownership of cans 75 Transportation of cream 76 Dairymen's organizations 77 California Milk Producers' Association 77 Dairymen's Protective Association 84 California Dairymen's League 86 Functions of dairymen's organizations 86 Cooperative Dairy Products Association, Limited 87 Reasons for organizing 87 Plan of organization ■ 87 Operations 88 Costs of operation and assessments 91 Recommendations for handling surplus 95 Acknowledgments 97 Appendix of tables 98 AN ECONOMIC SURVEY OF THE LOS ANGELES MILK MARKET 1 LELAND SPENCERS FOREWORD This study was undertaken during" the summer of 1930 at the request of several organizations representing the dairy industry of California. A bulletin on Economic Aspects of the Dairy Industry 3 published by the California Agricultural Experiment Station in 1927 had attracted considerable attention and had suggested to some leaders of this industry the need for more specific studies in this field. In 1929 a committee was appointed by the State of California Milk Distributors' Association to consider the problem of surplus milk in general, and in December, 1929, a formal request was made to the California Agricultural Experiment Station to undertake a special study of this question. In February, 1930, similar requests were made by a general committee of producers and distributors, which was created to deal with certain problems in the Los Angeles area, by the Southern California Milk Dealers' Association and by the Butterfat Club of San Francisco. These requests were the result of unstable market conditions due to a large surplus of market milk in Los Angeles particularly. Through the courtesy of Cornell University, the services of the author were made available for this study, beginning September 1, 1930. Meanwhile, some preliminary work was done by Professors H. R. Tolley and E. C. Voorhies and Mr. M. H. Blank. The time which the author could devote to the work was limited to a period of five months. Consequently it was necessary to confine the survey to certain aspects of the situation that promised to yield the most useful information in the time available. Data on the costs of production and distribution of milk were not collected. 4 Particular attention was given to the surplus problem and to the relations between producers and distributors. 1 Paper No. 19, The Giannini Foundation of Agricultural Economics. 2 Professor of Marketing at Cornell University, Ithaca, New York. He was employed by the Giannini Foundation of Agricultural Economics from Septem- ber, 1930, to February, 1931, to conduct the research which forms the basis of this report. Throughout the survey the author was assisted by Martin H. Blank, to whom much credit is due for compiling and analyzing data. 3 Voorhies, Edwin C. Economic aspects of the dairy industry. California Agr. Exp. Sta. Bui. 437:1-192. 1927. * Data concerning production costs in Los Angeles County and other areas in 1922 are reported in: Adams, R. L. Cost of producing market milk and butterfat on 246 California dairies. California Agr. Exp. Sta. Bui. 372:1-164. 1923. University of California — Experiment Station SUMMARY Daily distribution of all grades of milk in Los Angeles County amounts to approximately 150,000 gallons daily. About 70 per cent of this is pasteurized milk. The consumption per capita is rather low, being just a little over half a pint a day. It is suggested that greater efforts be made in the direction of educating consumers as to the food value of fresh milk. The total demand for milk increases with the population. In the past, the population of this market has increased with remarkable rapidity. It seems unlikely that the growth will be so rapid during the next few years. A conservative policy would be to plan for an increase of not more than 5 per cent a year in the total consumption of milk. The sanitary requirements for market milk in the Los Angeles market are stricter than in most other places. The enforcement of these requirements is complicated by the existence of several inspec- tion agencies whose requirements and methods differ in greater or less degree. Much more effective enforcement of the sanitary regula- tions could be had by the cooperation of the several inspection agencies in a unified system. In the last few months of 1930 Los Angeles County drew its milk supply from about 1,400 dairies in six counties of southern California. The dairies under inspection in Los Angeles County included about 70 per cent of the cattle in all dairies approved for selling milk in this county. During the past six years milk production has increased faster than the demand for milk in this market. The production of a large group of dairies, on which records were available, increased 43 per cent from 1926 to 1930. The increased output per dairy was partly offset by a reduction in the number of dairies, but the net increase was such as to cause an unusually large surplus of milk during 1930. From March, 1927, to May, 1930, a period of 38 months, the number of cows in Los Angeles County dairies increased 49 per cent. The population of Los Angeles City increased only 21 per cent in the five years from January, 1925, to January, 1930. Meanwhile, an increasing quantity of milk has been brought to Los Angeles from Kern County in the San Joaquin Valley. On this account there has been much speculation as to whether competition Bul. 513] Economic Survey of the Los Angeles Milk Market 5 from outside sources would make the production of milk near to Los Angeles unprofitable. During* the past seven years, the base buying price of milk in Los Angeles has averaged 45 cents per pound of milk fat and above the local wholesale quotations for 92-score butter. Information gathered in connection with this study indicates that new supplies of market milk can be obtained from Kern County at a cost of approximately 46 cents over Los Angeles butter quotations. However, over a period of time the cost might be reduced to a mini- mum of 32 cents over butter quotations. It is probable that so long as the base buying price of market milk in Los Angeles is 40 cents or l< ss over wholesale butter quotations, there will be little inducement for anyone to attempt to develop a supply of milk in Kern County or any area outside the present milk shed. Since Los Angeles County dairymen have increased their production rapidly at prices about 45 cents above butter quotations, it seems probable that they can maintain their position in this market indefinitely in competition with the dairymen in other areas. The greatest danger to dairymen in the vicinity of Los Angeles lies in maintaining base prices that are high enough to encourage the producers in other areas to make the improve- ments and investments necessary to comply with the Los Angeles requirements for market milk. In December, 1930, 276 firms and individuals were distributing milk in Los Angeles County, according to the records of the Bureau of Dairy Control of the California State Department of Agriculture. Over 200 of these were distributors of grade-A raw milk exclusively. Forty-eight firms were distributing pasteurized milk. Data were obtained from 17 of these concerning their purchase and sales of milk and cream, and the utilization of surplus milk. These 17 firms sold over 80 per cent of the total quantity of pasteurized milk sold in the county. In August, 1929, their surplus was 18.5 per cent of total purchases; in August, 1930, 18.6 per cent. Beginning with January, 1930, part of the surplus milk was cared for by the Surplus Plant. In June, 1930, the receipts of milk, including that going to the Sur- plus Plant, indicated that 32 per cent of the total had to be used for products other than fluid milk. Apparently, the Los Angeles distributors prefer to buy about 20 per cent more milk than they sell as such. Part of the dealers' surplus was used for standardizing cream and for buttermilk, acidophilus, and ice cream, but about 70 per cent was separated for cream. All surplus milk at the Surplus Plant was separated for cream. Fat in milk that is separated for cream can command little more in price than milk fat 6 University of California — Experiment Station in cream shipped in from country plants, namely 25 cents or less over butter quotations, depending upon the quality. Under the conditions of milk production that prevail in the vicinity of Los Angeles, it is doubtful whether the local dairymen can afford to produce more milk than is required by the fluid milk trade, including a margin of 20 per cent or so over sales which must be considered as a 'necessary' surplus. During the past six years distributors' margins in Los Angeles have been somewhat larger than in San Francisco or Oakland. Prob- ably the costs of distribution are higher in Los Angeles because of the widespread residential section and the large number of distributors. Judging from the growth of small distributors and the extent of dis- counts in the wholesale trade, however, the distributors' margin has been too wide for the maintenance of stable conditions. Since the Cooperative Dairy Products Association was organized, early in 1930, buying prices of milk at Los Angeles have been estab- lished at meetings of the board of directors of this association. Pre- viously prices had been established by informal negotiations between representatives of the California Milk Producers' Association and the leading distributors. It is evident that the persons responsible for making prices have had very inadequate and inexact information concerning the conditions of supply and demand. Prices have been adjusted from time to time to meet temporary situations. What is needed is a price policy having as its main objective the adjustment of milk production as closely as possible to the market requirements. In order that this may be done successfully, it is necessary that some agency assume the responsibility of collecting and analyzing basic economic information concerning the supply and demand for milk in this market, and the relation of these factors to price. Since 1915 officers and directors of the California Milk Producers' Association have been the chief spokesmen of dairymen in the Los Angeles milk shed. The association has performed a number of useful services for the industry, including the stabilization of prices by con- trolling surplus milk. However, the effectiveness of the association has been limited by insufficient membership, by its failure to give sufficient emphasis to the collection and analysis of market informa- tion, to quality improvement, and to the education of members, and by the obstructive attitude of some of the leading distributors. Because many dairymen were dissatisfied with this association or its manage- ment, two other dairymen 's organization have been set up in the past three years. If the California Milk Producers' Association assumes Bul. 513] Economic Survey of the Los Angeles Milk Market 7 aggressiveness constructive leadership of the dairymen, it is probable that the other associations will become inactive. The Cooperative Dairy Products Association, Limited, formed to operate the Surplus Plant, represents a commendable effort on the part of producers and distributors to work together for the solution of some of their mutual problems. Although the membership is lim- ited to a few persons, it is understood that they act in behalf of the entire industry. The association has had a remarkable degree of coop- eration from both producers and distributors. During 1930 this asso- ciation concerned itself almost entirely with the operation of a plant to handle surplus milk. Except for this arrangement, a serious price war might have resulted from the abnormal surplus of milk that developed during the past year. As a long-time program, the operation of a plant especially to handle surplus milk in Los Angeles is likely to be too costly. If by the proper regulation of prices, the supply of milk is brought into close adjustment with demand, the small surplus over trade require- ments probably can be handled much more economically by contracting with one or more established creameries to take care of it. Although the actual handling of surplus milk may become a rela- tively unimportant matter, there are other functions which such a joint organization of producers and distributors might perform. The Board of Directors of the Cooperative Dairy Products Association may well continue as the price-making body if provision is made for the collection and analysis of facts concerning the supply and demand conditions which are essential to the intelligent adjustment of these prices. The association might also deal with such problems as the hauling of milk, sanitary requirements and inspection, dairy legisla- tion, and any other matters which are the mutual concern of producers and distributors. RECOMMENDATIONS 1. Some agency should assume the function of collecting and anal- yzing facts which are essential for the intelligent adjustment of buying prices and wholesale and retail prices of milk and cream. The Cooperative Dairy Products Association, being a joint organiza- tion of producers and distributors, appears to be the logical agency to undertake this responsibility. A capable person with economic training and a sympathetic understanding of the problems of both producers and distributors of milk should be employed to carry out this work. In order that the person who occupies this position may 8 University of California — Experiment Station have independence of action and close contact with research, educa- tional, and extension agencies, it is suggested that some public insti- tution be asked to cooperate in this project. 2. The buying price of milk should be regulated in such a way as to bring the supply into close adjustment with trade requirements for fluid milk, including a margin of 'necessary' surplus. Under the conditions of production in the vicinity of Los Angeles, these dairy- men probably cannot produce milk fat for cream so cheaply as it can be obtained from more distant sources. Basic surplus prices and similar devices should be considered only as temporary expedients, not as a permanent part of the price system. 3. If the supply of milk is adjusted closely to the trade require- ments as suggested, the relatively small volume of surplus milk can probably be handled more economically in established creameries than in a surplus plant, The Cooperative Dairy Products Association should then arrange with one or more creameries to handle surplus milk on contract, the price being varied according to the way the milk is used. 4. The Cooperative Dairy Products Association should be reorgan- ized with more adequate representation of the producers of bulk milk. Dairymen should be given full opportunity to nominate the producer representatives. A manager should be employed in whom all parties have sufficient confidence so that only general policies need be con- sidered at directors' meetings. The efficiency of management can be greatly increased thereby. The distributors should pay one-half the operating expenses of the association. 5. Wholesale and retail prices of milk and cream should be adjusted so as to bring the distributors' margins more nearly into line with the costs of distribution by the more efficient firms. In this way excessive competition can be avoided and the position of the established firms can be maintained with consequent saving in costs of distribution and the maintenance of high standards of quality and service. 6. The California Milk Producers' Association should take the leadership in raising the quality of milk produced in the Los Angeles area to a higher level. More effort should also be expended in dis- seminating information to members concerning the business of the association and concerning conditions which affect the welfare of the producers generally. The aim should be to develop a strong unified organization including a large percentage of all dairymen in this milk shed. The best interests of producers, distributors, and the public Bul. 513] Economic Survey of the Los Angeles Milk Market 9 would be served if the distributors recognized the California Milk Pro- ducers' Association as an exclusive agency to supply them with milk. The employment of a joint economic advisor, as suggested previously, should go far to remove causes of misunderstanding and antagonism between these two groups. 7. A unified system of milk inspection covering the entire metro- politan district of Los Angeles would make possible much more effective enforcement of the sanitary requirements with the same expenditure of funds. It is therefore suggested that further efforts be made by the industry to bring about the cooperation of the Bureau of Dairy Control of the State Department of Agriculture and the various health authorities in Los Angeles County in setting up a unified milk inspection service for this market. METHODS AND SCOPE OF THE STUDY The survey was limited to Los Angeles County and to the sources of the supply of milk and cream for this county, some of which are outside of the county. Personal interviews were held with officials of the leading firms engaged in the distribution of milk, the Southern California. Milk Dealers' Association, the milk producers' associations, the Cooperative Dairy Products Association (Surplus Plant) and the Los Angeles City and County Departments of Health. A thirteen-month record of the supply and utilization of milk and cream was compiled from office records kept by the leading milk dis- tributors, the Surplus Plant, and country plants shipping sweet cream to this market. Data were obtained from records of the State Bureau of Dairy Control relative to the total supply and sales of milk. Data to indicate the trend and variations in the production and sales of milk were compiled from records of the California Milk Producers' Association, the Southern California Milk Dealers' Association, and the Los Angeles County Farm Bureau Cow-Testing Association. Owing to the very rapid growth of population and the numerous consolidations that had recently taken place among the distributors in this market, it was difficult to obtain figures on the purchases and sales of milk that were comparable over a series of years. Very inadequate records of milk and cream supply and disposal were kept by some of the firms, and for this reason the statistical data in this report are less accurate and less complete than desired. 10 University of California — Experiment Station CONSUMPTION OF MILK AND CREAM CONSUMPTION PER CAPITA Few reliable data are available concerning' the per-capita con- sumption of milk and cream in Los Angeles or elsewhere. Since January, 1930, the Bureau of Dairy Control of the California State Department of Agriculture has made monthly estimates of the quan- tity of fresh milk distributed in each county. These data are based on monthly reports made by all distributors who operate pasteurizing plants and upon reports of daily sales made two or three times a year by all firms and individuals who distribute milk. These monthly reports of the State Bureau of Dairy Control prob- ably show with reasonable accuracy the total quantity of milk con- sumed by the people not living on farms where cows are kept. By deducting from the total population of the county the estimated number of persons supplied with milk on the farms that keep cows, one may compute the per-capita consumption of milk by the remain- ing population. The per-capita consumption of milk in several counties of California as computed by this method is given in table 1. TABLE 1 Per, Capita Consumption of Milk in Certain Counties of California Where the Population is Predominantly Urban, 1930 County Gallons of milk distributed daily Jan. to Sept. 1930 Total population 1930 Estimated population on farms reporting cows milked Estimated population served by all milk distributors Approximate consumption per capita daily pints ; 2 3 4 5 Los Angeles San Diego 145,484 13,473 7,471 9,665 33,603 43,888 2,208,492 209,659 144,379 141,999 474,883 634,394 10,792 6,576 19,836 7,096 6,060 2,197,700 203,083 124,543 134,903 468,823 634,394 53 .53 Fresno Sacramento. ... Alameda .43 .57 .57 56 Sources of data: Col. 1: Dr. M. E. McDonald, California State Dept. of Agr. Bur. of Dairy Control. Col. 2: California, Fifteenth Census of the United States: 1930. U. S. Dept. Commerce Bur. of Census. Population Bulletin, pp. 6-7. 1930. Col. 3 : Calculated from number of farms reporting cows milked (United States Census of Agriculture 1925: Part III. U. S. Dept. Commerce, Bur. of Census, pp. 486-491) by multiplying by four (average number persons per family in rural areas of California). Bul. 513] Economic Survey of the Los Angeles Milk Market 11 These figures indicate that the per-capita consumption of milk in Los Angeles and other metropolitan centers in California is rather low. A consumer survey in Philadelphia in 1929 showed the per- capita consumption of milk there to be 0.68 pint of milk a day. 5 During the first eight months of 1930 receipts of milk at the New York freight terminals were equivalent to 0.83 pint daily, for each person living in the metropolitan area. Since at least 90 per cent of the milk shipped to New York is consumed as fresh milk, the actual per-capita consumption was 0.75 pint a day or higher. Studies in Chicago and St. Louis in 1928 showed the per-capita consumption of fresh milk in those cities to be 0.80 and 0.67 pints a day respectively. 6 These figures on per-capita consumption are not entirely compar- able because of differences in the percentage of fat in the milk. In New York the average test of the milk as sold is approximately 3.6 per cent, the figures for Chicago and St. Louis are computed on the basis of a 3.5 per cent test, whereas the average test of milk dis- tributed in Los Angeles is about 3.85 per cent. Therefore about 7 to 10 per cent may be added to the per-capita consumption indicated for Los Angeles to place it on a milk-fat basis comparable to that of the other cities. Even with this adjustment, however, the consump- tion of milk in Los Angeles County remains rather low. Some of the influences that have the greatest effect on the per- capita consumption of milk are : Racial characteristics of the popu- lation, number of children, family incomes, climate, the quality and price of the milk, and education. The warm climate in Los Angeles is favorable for the generous use of milk. The quality from the standpoint of sanitation is high, and the price is as low as in many of the other large cities of the United States. Some characteristics of the population of Los Angeles and other cities are shown in table 2. On account of the rapid immigration into the Los Angeles area, the ratio of children to adults is lower than in most cities. This tends to reduce the per-capita consumption of milk. Los Angeles has more people of the Asiatic races than the eastern cities, and more negroes than San Francisco. These races are light users of fresh milk. How- ever, Los Angeles has a smaller percentage of foreign-born people than any of the other cities except St. Louis. In general, Americans s Lininger, F. F., and Hutzel Mctzger. Consumption of dairy products by 1,370 families in Philadelphia. Pennsylvania Agr. Exp. Sta. Bul. 245:8. 1930. 6 Brown, C. A. Costs and margins and other related factors in the distribu- tion of fluid milk in four Illinois market areas. Illinois Agr. Exp. Sta. Bul. 318:211. 1928. 12 University of California — Experiment Station TABLE 2 Characteristics of the Population of Los Angeles and Other Cities, 1920 Item Total population: 14 years or younger White* Negro Chinese, Japanese, etc Native Foreign born White population only* Of native parentage. ... Of foreign parentage Of mixed parentage Of foreign-born white. . Los per cent 20 94.8 2.7 2.5 78.8 21.2 53.8 15.9 9.8 20.5 San Francisco per cent 19 3 96.7 0.5 2.8 70.6 29.4 34.1 25.6 11.6 28.6 Chicago per cent 28 95.8 4.1 0.1 70.1 29.9 24.8 34.3 9.7 31.1 St. Louis per cent 23 5 90.9 9 1 86.6 13.4 51.2 22.5 11.7 14.7 Phila- delphia per cent 27.4 92.6 7.4 1 78.0 22.0 41 4 26.5 8.6 23.6 New York per cent 28.3 97.1 2.7 1 63.9 36.1 21.3 34 3 7.9 36.5 * Includes Mexican population. Source of data: U. S. Dept. Commerce, Bur. of Census, Fourteenth Census of the United States 1920, 2:47. 1922. use milk more freely than foreigners, so this is a favorable factor for milk consumption in Los Angeles. A considerable proportion of the foreign white population in Los Angeles is of Mexican origin. These people are said to use milk rather freely for their young children, but their total purchases are nmch restricted by the low income per family, particularly in times of business depression and unemployment. POPULATION TRENDS Since the per-capita consumption of milk remains comparatively stable from year to year, changes in population have a very impor- tant bearing on the total demand. Although adequate records are not available to show the changes in quantity of milk consumed in Los Angeles County over a period of years, it is certain that these changes have paralleled closely the changes in population, and undoubtedly wdll do so in the future. The growth of population in Los Angeles County and in the more important cities of the county since 1900 is shown in table 3. From 1900 to 1930 the population of the City of Los Angeles increased about twelve times and that of the county nearly thirteen times. Meanwhile a number of other important cities have developed within the county, so that the entire area is fast becoming one large metropolitan district. The estimated annual growth of population of the city of Los Angeles from 1920 to 1930 is given in table 4. Bul. 513] Economic Survey of the Los Angeles Milk Market 13 TABLE 3 Population op the County of Los Angeles and the Principal Cities in the County, 1900, 1910, 1920, 1930 Year Los Angeles Long Beach Pasadena Glendale Santa Monica Hunting- ton Park Los Angeles County 1900 102,479 319,198 576.673 1,238,048 2,252 17,809 55,593 142,032 9,117 30,291 45,354 76,086 3,057 7,847 15,252 37,146 170,298 1910 1920 1930 2,746 13,536 62,736 1,299 4,513 24,591 504,131 936,455 2,208,492 Source of data: U. S. Dept. Commerce, Bur. of Census, Fifteenth Census of the United States 1930, California, Population Bulletin, pp. 4-7. 1930. TABLE 4 Estimated Annual Growth of Population, City of Los Angeles Population January 1 of each year Increase during year Year Number Per cent 1920 576,673 660,795 738,115 804,216 846,046 1,018,239 1,061,118 1,084,553 1,158,306 1,212,962 1,238,048 84.122 77.320 66,101 41,830 172,193 42,879 23,435 73,753 54,656 25,086 14 6 1921 11 7 1922 9 1923 5.2 1924 20.4 1925 4.2 1926 2.2 1927 6.8 1928 4.7 1929 2.1 1930 1931 Sources of data: 1920 and 1930 U. S. Dept. Commerce, Bur. of Census, Fif- teenth Census of the United States 1930, California, pp. 4-7. Years 1921-1929 from Los Angeles Chamber of Commerce. As shown in table 4, the population of Los Angeles has grown less rapidly in the past few years. Commenting on this situation, the editor of a well-known economic service, says: " .... experience discloses that when cities reach the size of Los Angeles, the usual expectation is that they will experience a decreasing rate of growth in population." 7 It would seem unwise for distributors or producers to anticipate for the immediate future any more rapid rate of increase in population and milk consumption than has occurred during the past five years. 7Eberle Economics Service, Weekly Letter 7(25). June, 1930. 14 University op California — Experiment Station SALES PROMOTION BY DISTRIBUTORS While most of the advertising and sales-promotion work done by the distributors of milk in Los Angeles is of a competitive nature, it undoubtedly has some effect on the total consumption of milk. It brings frequently to the consumers' attention milk and its favorable characteristics, such as healthfulness and cleanliness. Customer circulars were the form of advertising most commonly used by the firms included in this study. These circulars are used primarily to bring to the milk customer's attention the various prod- ucts sold by the firm, in particular such products as cream, buttermilk, cottage cheese, ice cream, butter, and eggs. Printed circulars or booklets also are used by the salesmen in soliciting new business. Such circulars usually contain views and descriptions of the firm's plants, equipment, and dairy farms, intended to give the prospective customer a favorable impression of the firm's service, cleanliness in handling milk, and the like. Eight of the 18 largest firms reported some newspaper advertising. One of these advertised regularly in the rotogravure section of a Sunday newspaper. Two others reported regular daily newspaper advertising. Six of the 18 firms used bill boards, electric signs, or signs painted on the outer walls of stores to call attention to their dairy products. Four firms reported use of the radio for advertising, which varied in scope all the way from a brief mention of the firm and its products once a day or once a week, to a regular weekly musical program of one or two hours. Only 1 firm reported advertising in moving picture theaters, 1 used advertising cards in street cars, and 1 carried an advertisement in the telephone directory. Probably the names and brands of the various firms were called to the attention of the public more frequently by their trucks, wagons, and route salesmen than by any other means. In addition to the use of formal advertising, most firms were attempting to promote sales by offering prizes to the salesmen. Only 1 firm reported the use of special solicitors for retail trade, but it was a common practice to employ solicitors for the wholesale trade. Nearly all firms paid their salesmen partly or entirely on a commission basis. This probably is one of the most effective ways of increasing the sales of individual firms, although it does not have much effect on the total consumption of dairy products. Bul. 513] Economic Survey of the Los Angeles Milk Market 15 WORK OF THE CALIFORNIA DAIRY COUNCIL Whatever the cause, the rather low rate of milk consumption in Los Angeles is a challenge to the industry to increase its efforts along educational lines. The California Dairy Council and the public schools are the chief agencies engaged in work to promote greater use of fresh milk by the people of California. The California Dairy Council maintains an office in Los Angeles, with three employees who devote the major part of their time to educational work intended to increase the use of dairy products including fresh milk. This educa- tional work consists of radio talks, addresses to luncheon clubs, women's clubs and other groups, demonstration courses in health education which emphasize the position of milk and milk products in the diet, and the like. For about five years the Council provided the services of a woman for the purpose of extending milk service in the Los Angeles schools and bringing this matter to the attention of parent-teacher associations. Besides these personal services, the coun- cil provides for the use of school teachers, educational material featur- ing dairy products, makes exhibits at fairs and food shows, and loans motion picture reels. It is estimated that approximately 60 to 65 per cent of the Council's effort is applied to fresh milk and cream. The Council also cooperates with other agencies in promoting the general welfare and harmony of the industry. The Council is financed jointly by producers and dealers. Coop- erating dealers make a deduction of approximately %2 cent per pound of milk fat from amounts due dairymen for their product and match this with an equal contribution of their own. The annual expenditure TABLE 5 Approximate Quantities of Milk Distributed Daily in Los Angeles County, August, 1930 Grade Gallons Per cent of total Certified 3,500 3,000 40,000 107,000 2 3 Guaranteed 2 26.0 A pasteurized 69.7 Total 153,500 100 Sources of data: Compiled by author from report of Los Angeles County Farm Bureau Dairy Inspection Committee (mimeo- graphed); 1930; and California State Dept. of Agr., Bur. of Dairy Control, Monthly Market Milk Report (mimeo- graphed), Aug., 1930. 16 University of California — Experiment Station of the Dairy Council in the Los Angeles area is approximately $25,000. About $12,000 is used for salaries, office rent, and expenses, the remainder for literature, exhibits, and other methods of promoting a wider knowledge of the health and food values of dairy products. 8 DAILY DISTRIBUTION OF MILK The approximate daily distribution of each grade of milk in Los Angeles is given in table 5. About 70 per cent of the milk sold in Los Angeles County is pas- teurized. Most of the remainder is grade-A raw milk with smaller quantities of certified and guaranteed milk. GRADES AND SANITARY CONTROL A detailed discussion of sanitary control of the milk supply is outside the scope of this report. However, because sanitary control has an important bearing on the economics of milk production and distribution, a brief statement at least must be made regarding it. Under the Pure Milk Act of 1927 the State Department of Agri- culture is charged with complete responsibility for sanitary control of milk and cream throughout the state. This department is authorized to approve milk-inspection services maintained in conformity with its regulations and with the state law by counties or municipalities. Accordingly, state-approved milk-inspection services are maintained by the County of Los Angeles and by the following municipalities in that county: Los Angeles, Long Beach, Pasadena, South Pasadena, and Burbank. The county provides milk inspection service for all unincorporated places and also for 36 of the 45 municipalities in the county, for whom this work is done on contract. In accordance with the state law the following grades of milk are sold in Los Angeles County: certified, guaranteed, grade-A raw, and grade-A pasteurized. Grade-B pasteurized milk may be used only for manufacturing and may not be sold as market milk. For con- venience, a tabular statement is given, showing the chief requirements for each grade of milk (table 6). Under the State Pure Milk Law, the legal minimum for market milk is 3.3 per cent of milk fat, and 8.5 per cent of solids not fat. Standardization of milk by the addition of cream or skim milk is permitted and is commonly practiced in the Los Angeles market. s From letter of Mr. S. H. Greene, Secretary-Manager California Dairy Coun- cil, to the author. January 15, 1931. Bul. 513] Economic Survey of the Los Angeles Milk Market 17 The various measures of sanitary control place very definite and important limitations on the supply of milk for this market. Every dairy that supplies milk for any municipality or incorporated place in Los Angeles County must be inspected and licensed by one or more of the milk-inspection agencies. At any given time the available supply of market milk is limited to that produced by the approved dairies. The requirements as to cattle, buildings, equipment, methods, and bacterial count necessitate a larger investment and higher costs on the part of market milk dairymen than are involved in the produc- tion of milk for butter factories, cheese factories, and condenseries. On dairy farms that have been selling milk to manufacturing plants considerable time is required to bring conditions up to the standards required for market milk supply. Since added cost is involved in producing milk under inspection for city supply, heavy loss is incurred when a surplus of market milk has to be utilized for other purposes. Until December, 1930, no grade-A cream was sold as such in Los Angeles. However, an ordinance of the County of Los Angeles, effective January 1, 1931, prohibits the sale, except for manufacture, of cream which does not meet the grade-A requirements. The health department of the City of Los Angeles has issued an order requiring grade-A cream exclusively after January 1, 1932. The requirements for grade-A cream are the same as for grade-A milk except that the maximum bacteria count may be three times as great and that the milk to be separated for cream need not be cooled to the low tempera- tures required for market milk. As indicated in table 6 all cattle producing grade-A milk must be free from tuberculosis as shown by the tuberculin test. Since April 1, 1930, grade-B milk has been outlawed in both city and county except for manufacturing purposes. This involved the eradication of tuberculosis from all herds of cattle supplying milk for this mar- ket. Likewise, when the new requirements for cream are enforced, only those herds which are free from tuberculosis may supply cream for table use in the city or county. Temporarily, there is a scarcity of cream which meets these requirements. The sanitary regulations for milk and cream apply not only to the farms but also to the milk plants and the entire system of distribution. Here, also, the requirements as to buildings, equipment, and methods tend to increase the necessary investment and the cost of distribution. The quality-control work of the several public agencies is supple- mented to a considerable extent by the distributors and by the milk producers' associations. Several of the larger firms employ field men 18 University of California — Experiment Station 03 p .2 "3 03 Fh 8 Prdouced and handled according to the rules fo the Amer. Assoc, of Med. Milk Commissions and certified by milk commission of county medical society. Shall be bottled on the premises where produced; pouring lip of container must be completely protected. e p fr- ee -C c c -t J c PC "2 45 03 -a c >> 5t o « X! to S oj a * 03 - fe -o S 03 03 O m ->* O # o o CO 10 u 3 o 03 1 03 O (h 03 « "» ,2 -a « 03 _, 03 3 "7T " O "" 03 o | '■§ © | ~ Maximum bacteria per cubic centimeter before pasteurization § o © Maximum bacteria per cubic centimeter when delivered to consumer s o o o 8 § I O O © 10* o o o us a a^H 3 .a 3 .5t3 o> ■Sco 5! O o £ m o to ■8 en Q 03 S a o OS d a) Kh 03 a o oo "S 03 U Ph 03 a o 43 §>> *■« I g 2| o> oj 43 -<-• t-, 0) "-"■0 to O 03 O Physical examination once a month and tuberculin teat every 6 months 03 o o §1 Is 3 1 £ .2 n eo O Ph 0J CO > 2, .2 3 a B 8 j 13 n o o Ph 03 -2 a. a .2 3 n <3 1| 03 += 1 § Pw ga o a "8 a O 1 i c £ s 3 1 03 £ i 3 03 03 03 a 1 < T3 03 03 N t- — « o 03 -JS ^3 a Bul. 513] Economic Survey of the Los Angeles Milk Market 19 who visit the dairies regularly once a month or oftener to see that a satisfactory standard of cleanliness is maintained and to give advice on the feeding and management of the dairy herds. Special attention is given to the prevention of undesirable odors and flavors in the milk. In the case of most firms which do not employ a regular field man, the manager or other representative makes occasional visits to the farms, as is available to ascertain the cause of high bacteria counts or other defects in the quality of the milk from individual farms. Most of the larger firms, and a few of the smaller ones, make bacteria counts on each producers' milk once or twice a week. Sediment tests are used to some extent to determine the cleanliness of individual dairies. In general the quality-control work done by the distributors and the milk producers' associations is not intended to raise the quality of milk to a higher standard than that required by the public agencies of inspection, but rather to insure a more general observance of those requirements — in other words, to make the inspection more effective. In nearly all cases the milk is delivered at the milk plants twice a day, and nearly all of the dairies that supply market milk have mechanical cooling equipment. The sanitary requirements for milk are more strict than in most other cities, and the nearness of the supply area makes possible unusually prompt delivery of milk to the consumer. The existence of a State Pure Milk Law and the general super- vision over milk inspection that is exercised by the State Bureau of Dairy Control have resulted in comparative uniformity in the sani- tary requirements of the several milk inspection services in Los Angeles County. However, certain differences which exist in the specific regulations and in the instructions given to dairymen and creamerymen by representatives of the different agencies tend to cause confusion. Several of the larger firms distribute milk and cream in nearly all parts of the metropolitan area, Consequently, their plants, equip- ment, and product, and also the dairies supplying milk to them, are subject to inspection by several different agencies. It is undoubtedly true that the same expenditure devoted to a unified system of inspec- tion would provide much more effective enforcement of the regula- tions, or conversely, enforcement of the present effectiveness could be had for much less cost. 9 9 For a more detailed discussion of this question, see report of Dairy Inspec- tion Committee to Dairy Department, Los Angeles County Farm Bureau, dated May, 1930. 20 University of California — Experiment Station SUPPLY AND UTILIZATION OF MILK NUMBER, LOCATION, AND SIZE OF DAIRY HERDS The number of dairy herds in each county that are approved to supply each grade of milk to Los Angeles County and the number of cattle in these herds are shown in table 7. TABLE 7 Number, of Dairies and Number of Cattle in Dairies Supplying Milk to Los Angeles County, 1930 Certified Guaranteed A raw A pasteurized Total County Herds Cattle Herds Cattle Herds Cattle Herds Cattle Herds Cattle Los Angeles 4 3,500 .... 20 2,535 257 1 4 13,067 700 260 697 105 69 168 2 82 36,188 5,147 3,798 10,972 391 3,347 978 105 70 172 2 82 55,290 5,147 4,498 San Bernardino.. 11,232 391 3,347 Total 4 3,500 20 2,535 262 14,027 1,123 59,843 1,409 79,905 Source of data: Los Angeles County Health Department, Division of Dairy Products. From this table it is evident that a very large proportion of the milk supply for Los Angeles is produced within the county. Nearly the whole amount comes from a distance of 60 miles or less. In 1930 a few more than 1,400 dairies were approved by the Los Angeles County health authorities as sources of fresh milk. These dairies contained about 80,000 cattle, of which nearly all were dairy cows. Dairies listed as sources of bulk milk for pasteurizing contained about 60,000 head, or 75 per cent of the total. The dairies in Los Angeles County included nearly 70 per cent of the cattle in all approved dairies. The distribution of cows supplying milk to the Los Angeles market is shown graphically in figure 1. The most intensive producing area is in the vicinity of Downey, Norwalk, Artesia, and Hynes, directly southeast of the city. Other important producing centers are El Monte, Pomona, Chino, and Ontario to the east. Approved dairies with a few hundred cows are found at several points to the east and southeast, also to the northwest in the San Fernando Valley, and in the vicinity of Palmdale in the Antelope Valley. Centers of produc- Bul. 513] Economic Survey of the Los Angeles Milk Market 21 DAIRIES SUPPLYING MILK TO LOS ANGELES, 1930 Fig. 1.— In 1930 a few more than 1,400 dairies with about 80,000 head of cattle were approved as sources of market milk for the Los Angeles area. One dot represents 100 cows. Seventy per cent of the cattle on approved dairies were in Los Angeles County, with the most intensive producing region near the cities of Hynes, Artesia, Downey, and Norwalk, southeast of the City of Los Angeles, and around El Monte, Chino, Pomona, and Ontario to the east. Dairies including 3,347 cows in Kern County and 400 in Ventura County are not shown on this map. (Data from Los Angeles County Health Department, Division of Dairy Products.) TABLE 8 Frequency Distribution" of Dairies Approved as Sources of Market Milk for Los Angeles County, According to Number of Cows, 1930 County Number of cows per dairy Los Angeles San Ber- nardino Orange Riverside Kern Ventura Total* Number of dairies 10 or less 58 246 400 177 74 84 7 30 72 20 17 18 8 36 45 21 7 6 4 24 32 16 9 13 4 13 22 7 1 1 2 81 11 to 25 346 26 to 50 569 51 to 75 236 76 to 100 108 Over 100 124 Total 1,039 164 123 98 48 2 1,474 * The total number of herds is larger in table 8 than in table 7 because data was collected at an earlier date. Source of data: Compiled from records of Los Angeles County Health Department, Division of Dairy Products. 22 University of California — Experiment Station tion in Ventura and Kern counties are not shown in figure 1. Most of the approved dairies in the former are in the vicinity of Oxnard, in the latter near Bakersfield and Wasco. In table 8 the approved dairies are grouped according to number of cows in the herd. The largest number of dairies were in the group having from 26 to 50 cows per herd. The average number of cows in all herds was 56. Changes in the number of dairies and number of cows in herds of two or more cows in Los Angeles County are shown in table 9. Within a period of slightly more than three years the number of dairies decreased 15 per cent and the number of cows increased 49 per cent. Of the 1,226 dairies listed in 1927 only 316 remained under the same names in 1930. The rapid turnover of dairymen in this region is to a large extent the result of the small equity that most of TABLE 9 Number of Dairies and Number, of Cows in Dairies of Two or More Cows, Los Angeles County March, 1927, May, 1930 Increase or decrease, per cent Number of dairies 1,226 35,240 28.7 1,039 52,505 50.5 — 15.3 +49.0 +76.0 Sources of data: Compiled from records of Los Angeles County Health Department, Division of Dairy Products, and the Los Angeles County Livestock Inspector. TABLE 10 Number of Dairy Cattle Eecef/eb in" Los Angeles County Month 1925 1926 1927 1928 1929 1930 1931 January 760 901 1,451 1,365 935 884 813 664 1,225 983 889 1,368 992 925 1,153 1,360 1,360 1,348 1,427 1,726 1,981 2,301 2,629 1,299 1,231 1,593 1,629 1,163 1,334 1,855 2,210 1,985 2,356 1,317 950 1,103 859 1,376 1,759 1,281 1,276 1,245 2,241 2,307 3,172 2,700 1,881 1,765 1,610 444 731 3,660 4,080 2,420 1,694 2,876 2,653 2,161 1,733 1,745 1,060 1,226 2,311 2,700 2,845 1,676 956 1,296 2,434 1,963 2,089 1,923 1,487 1,272 1,728 July Total 12,228 18,501 18,726 21,862 25,807 22,479 1,019 1,542 1,561 1,822 2,151 1,873 Source of data; Dr. L. M. Hurt, Los Angeles County Livestock Inspector. Bul. 513] Economic Survey of the Los Angeles Milk Market 23 them have in the business. Most of the dairies are maintained on a few acres of land. In a majority of cases the property is rented and the cows are purchased on installment credits. The change in dairy- men during" the period mentioned may have been greater than usual because of the campaign for eradication of tuberculosis. The number of dairy cattle shipped into Los Angeles County each month since January, 1925, is given in table 10. Because of the large number of cattle removed from Los Angeles County herds during the campaign for the eradication of tuberculosis in 1928 and 1929, it is impossible to determine accurately the number of cattle required annually for normal maintainence of the herds. It is estimated, however, that about 35 per cent of the cows are replaced each year. PRODUCTION PER DAIRY Records were obtained from the California Milk Producers' Asso- ciation showing the number of dairies selling through the Association and the quantity of milk and milk fat delivered each month from 1925 to 1930 inclusive. From these figures was computed the average daily production of milk fat per dairy each month. There was considerable change in the number of dairies selling milk through the Association during this period and the changes in the average production of the group undoubtedly were affected by this fact. As a check on these changes in production, therefore, rec- ords were compiled for approximately 50 dairies that sold milk through the Association throughout the entire six-year period, 1925 to 1930, inclusive. The average daily production of milk fat by the 50 dairies and by the entire group of Association shippers in shown graphically in figure 2. 10 During this period there was a marked increase in the average production per dairy. Although the rate of production of the 50 dairies was considerably higher than that for the entire group, similar changes occurred in both cases. The 50 dairies apparently suffered more severely from the tuberculosis eradication campaign in 1929. In the first few months of 1925 the production per dairy was prob- ably lower than normal, since quarantines for foot-and-mouth disease in 1924 had prevented the normal movement of cows into the Los Angeles territory. In 1926 the daily average production of all asso- ciation dairies was 30.6 pounds of milk fat per dairy. In 1930 the average production was 43.7 pounds of milk fat per dairy, an increase of 43 per cent. 10 Detailed data are given in the Appendix, tables 52 and 53. 24 University of California — Experiment Station Dairying' of the type carried on in the Los Angeles territory lends itself to rather prompt changes in response to changes in the profit- ableness of milk production. Where all concentrate feeds and nearly all of the hay are purchased, where there is little pasture and most of the cows are shipped in rather than raised locally, adjustments can quickly be made as the margin between receipts for milk and expenses for feed widens or narrows. AVEKAGE DAILY POUNDS OF MILK FAT PEODUCED PER SHIPPER EACH MONTH, 1925-1930 - - - -~S~* - -._—/%./' / V--''- f — * — ; ^y^^2 - - - f - - ALL 50 SHIPPERS 5HIPPERS 1 1 1 1 1 1 1 1 1 1 1 1 1 ILJJ.U.U.1. .J..I.1 1.L1 1 1.1 1 1 1J_LLLLLLLLL I a. u « UJ U) < V \ \ 1 \ ■Ht ._ **m*\ 1 1 1 I I *_ ~%, % 25 — DAILY AVERAGE POUNDS OF MILK FAT PER DAIRY — POUNDS OF FEED ONE POUND OF MILK l_-i._J ..J._L_L_1_I — r — J — I — L_ to a & 60 Z 50 o 1 uj a. 3 8 S t I 8 g Fig. 3. — Previous to January, 1929, apparently little correlation existed between the purchasing power of milk fat in terms of dairy feed and the pro- duction of milk fat per dairy, according to records of dairies shipping to the account of the California Milk Producers Association. Since then there has been a relatively high degree of correlation, indicating the importance of the changes in the costs of dairy feeds as factors in price negotiations. (Data from Appendix, table 55.) The prices received by operators of dairies selling through the California Milk Producers' Association from 1925 to 1930 inclusive were such as to encourage them to increase to a marked extent the size of their herds and the production of milk. Since these dairymen were subject to a basic surplus plan of prices during a considerable part of the time, it is probable that they increased their production less than others who were not so restrained. 26 University op California — Experiment Station SEASONAL PRODUCTION Compared with that in most other regions, milk production in the vicinity of Los Angeles varies but little at different seasons of the year. Based on the year's average as 100, the index of daily produc- tion for all Association dairies was 102.4 in December, the high month, and 97.6 in September, the low month. The production of the SEASONAL VARIATION IN PRODUCTION OF MILK FAT PER DAIRY IN THE LOS ANGELES MILK SHED, 1925-1930, AND IN THE NEW YORK MILK SHED, 1925-1929 1 JO I 1 t 1 /-NEW YORK _ 120 V 1 I 1 t i 1 1 \ - 120 i I i I I 1 - 1 12 i i / / - 104 \ \ — '<& *^h i fAU pSHIF 3 PERS /•50 5HIPP ~- RS *& ** / "*>«i 5^: ■»«=» fjpr 100 / \ / 88 4 S -s f ' \ \ x *»* - \ \ 4 / 80 \ / - f O a. ^ Z3 Ul o < < 1 1 DC "^S 1 o ~i a> i 1 1 ': 2 1 =r-= i 2 ■■■■ ^ — t^: — *""■ ': 2 - ID 01 - — i i ; m i 2 -— ■ ^ • — :ra 2 i "-i n ^.j - \ 2 2 3 £ o a> ? . * 5c ,3 _J2 o oj 03 ; 9 >3 a> o O ° ^ '3 a> P n ci cj s «o o >>'5o . +-> cj j» a; o « £ ° £ "*" SCO 5 S ® sis "C ft ,4 "3 £ oo O) >. a> h J3 fn O ©"£ . « h^ »§: _£ oi -M -2 ft o ^r Bul. 513] Economic Survey of the Los Angeles Milk Market 55 make a smaller differential between quarts and pints. From February, 1925, to May, 1930, the ratio of retail prices was 9 to 15, and wholesale prices 8 to 13. In January, 1931, the ratio of retail prices of pints and quarts was 8 to 13, wholesale prices 6 to 10." From February, 1925, to February, 1930, bulk milk was quoted at $1.30 per 3-gallon can, or the equivalent of 10% cents a quart, while the wholesale price of milk in quart bottles was 13 cents, and the retail price 15 cents. 15 As previously indicated (page 47), bulk milk is sold chiefly to hotels and restaurants, where it is used for cooking. The quoted retail prices are observed generally by the trade, com- paratively little milk being sold at a discount. This is not true of the wholesale quotations. A considerable proportion of the wholesale milk, both bottled and bulk, is sold for less than the quoted prices. Wholesale customers who take a large volume of milk and cream most often receive a, discount or rebate. The reason for this is obvious. It costs less per unit to deliver a large order than a small one. This does not apply to groups of chain stores, restaurants, or confectioners, the individual units of which may not take any larger volume than independent stores or restaurants which receive no discount. However, there usually is less selling cost in dealing with chains, and the volume of buying controlled from one source makes such outlets appear attractive to the distributor. The number and extend of discounts to the wholesale trade varies with conditions. More and larger discounts are given when the distributors' spread is wide enough to leave a con- siderable margin over costs. Sometimes discounts and price-cutting result from the ability of one or more distributors to buy milk at a reduced price. In the autumn of 1930 discounts were more numerous and larger than usual, due in part to efforts of some distributors to maintain their sales volume against increased competition. Efforts have been made by the Los Angeles distributors to stabilize prices by eliminating discounts to the wholesale trade. This is impos- sible unless the quoted prices are reduced to the point where no profit is left for the distributor. Buyers that take a large volume of goods are such attractive customers that even if all established distributors agreed to eliminate discounts, others would come in to take advantage of the situation. The more practical method is to establish fixed differ- entials according to the quantity of goods purchased by the wholesale customers. Such a schedule of prices should be worked out by a committee of the distributors. * Prices of milk in pint bottles are given in Appendix, tables ;">9 and GO. s Prices of bulk milk are given in Appendix, table 61. 56 University of California — Experiment Station BUYING PRICES OF BULK MILK Price Changes since 1914. — Prices paid by Los Angeles distributors for bulk milk to be pasteurized, are shown graphically in figure 8. 1G BUYING PRICES OF MARKET MILK PER POUND OF MILK FAT IN LOS ANGELES, 1914-1930 J\- , /\ / 1 a/S N \ / w Ma/^\_j . l\ r~^J . ~W _ i t =^==J=r^^^==^^^^^ : \= — \-=\ Fig. 8. — From January, 1921, to December, 1930, there were fourteen increases and nineteen reductions, or a total of thirty-three changes, in the buying price of milk. The average time between price changes was about three and one-half months. The average amount of these price changes was 5.6 cents per pound of milk fat. (Data from Appendix, table 62.) From January, 1921, to December, 1930, the buying price of milk was changed thirty-three times. There were fourteen increases and nineteen reductions. The average time between price changes was about three and one-half months. The average amount of these price changes was 5.6 cents per pound of milk fat or about 0.5 cent a quart. The reduction of 30 cents per pound of milk fat in February, 1921, corresponded with the general decline in commodity prices which occurred beginning in the fall of 1920. The increase to $1.08 in July, 1924, was the result of foot-and-mouth disease eradication which cur- tailed the supply of market milk. From June, 1926, to April, 1930, prices were relatively stable. The decline that began in May, 1930, was due chiefly to the increased production previously mentioned, and to increased competition among distributors. In some sections of the market, unemployment caused a reduction in sales of cream and milk. Method of Establishing Prices. — Before January, 1930, buying prices were established by informal negotiations between the Califor- 16 Buying prices are given in the Appendix, table 62. Bul. 513 J Economic Survey of the Los Angeles Milk Market 57 nia Milk Producers' Association and the Leading distributors. Since January, 1980, price discussions have been held at meetings of the board of directors of the Cooperative Dairy Products Association (Surplus Plant). In general, reductions in prices are initiated by the distributors. Usually the first indication of declining prices is found in the whole- sale trade. Because of an increase in the volume of surplus milk or some other cause, discounts increase until the larger distributors decide that a reduction in the quoted wholesale prices is necessary to stabil- ize the market and protect their trade. Then a lower buying price is sought, to offset the reduced selling price. Sometimes small changes in the wholesale prices and in the buying prices are enough to stabilize the market. Sometimes the retail price must be reduced also, and since these changes are at least 1 cent a quart and involve a large pro- portion of the milk, a larger cut in the buying price is demanded. Increases in the buying price usually are the result of higher prices for dairy feeds. Such changes are usually initiated by the milk pro- ducers, although it is not to be assumed that the distributors generally favor low prices. A number of firms and individuals engaged in the distribution of milk in Los Angeles have large interests in dairy herds. For this reason they favor a high level of prices, provided a favorable margin is maintained between the buying price and selling prices. Relation of Milk Prices to Butter Prices. — One factor which has an important indirect influence on the buying price of milk is the price of butter. As explained elsewhere in this report, there is a very large production of milk within 200 miles of Los Angeles which is a poten- tial supply for this market and from which a large part of the cream supply already is drawn. The chief use of milk fat in this region is for making butter. Milk and cream are paid for at the country plants, and sweet cream is sold to Los Angeles buyers on the basis of the wholesale butter quotations. Some of the surplus milk produced locally is also used in making butter. The price paid for milk fat in market milk produced locally may of course be considerably higher than the wholesale butter quotations without attracting additional milk from the outside areas. The addi- tional cost of producing milk under city inspection must be consid- ered, and also the additional handling and transportation costs that would be involved in shipping milk from more distant points. Nearby production also has the advantage of easier and cheaper supervision, greater certainty of prompt delivery, and larger experience on the part of dairymen in meeting all requirements for market milk. 58 University of California — Experiment Station TABLE 30 Theoretical Prices of Market Milk Based on Los Angeles Butter Quotations Year and month Wholesale but- ter quotations previous month Market milk differential Base buying price of market milk Retail price 1926 Dec 1927 January February March April. May... June.. July. August September. October November December.. 1928 January February March April May... June.. July... August September October November. December 1929 January February... March April May... June . July.. August September. October November.. December. 1930 January February.. March April.. May. . June.. July.. August September.. October November... cents per lb. 45 8 48.7 48.3 48.4 45 9 43 3 42 42.0 42 .0 44.2 47 3 48.8 49 49.0 47.6 45.4 44 2 40 8 42.6 43 4 46 4 48.4 51.5 51 8 50 4 50 9 46.3 47.8 45.2 43 5 45.6 45.8 46.0 47.4 49.7 49.6 48.7 42.8 37.1 38.9 38 9 39.8 37 3 34.0 34.2 37.7 40 36.4 cents per lb. milk fat 45.0 45.0 45.0 45 35 35.0 35 35.0 40 40 40 40.0 45.0 45 45.0 45.0 35 35 35.0 35.0 40 40 40 40.0 45 45.0 45.0 45.0 35 35 35.0 35.0 40 40 40 40 45 45 45 45.0 35.0 35 35 35.0 40 .0 40 40 40 of cents per lb. of milk fat 90.8 93.7 93 3 93 4 80 9 78.3 77.0 77 82 84 2 87.3 cents per quart 95.4 95.9 91 3 92 8 Average of theoretical prices.. Average of actual prices 15 15 (14) 15 (14) 15 (14) 15 15 15 15 14 14 14 14 15 15 15 (16)* 15 (16)* (14)' (15) (15) (15) (13)' (15)' 15.1 14.9 * Figures in brackets indicate instances when the retail price for a given month would vary from the price for the first month of the four month period, based on the assumed relationship of buying prices to retail prices. Source of data: Adopted from a report prepared by Mr. K. L. Carver, Vice-President of Western Dairy Products Co., Inc. Bul. 513] Economic Survey of the Los Angeles Milk Market 59 It has been suggested by several prominent members of the indus- try that buying' prices for market milk should be based on the whole- sale butter quotations, using a fixed differential, as is done in the case of cream. A committee of producers and distributors was appointed to study this question but made no recommendations. One member of this committee outlined a plan in which the buying price of milk would be based upon butter quotations with a series of different nils varying from 35 cents to 45 cents according to the season (table 30). According to this plan, buying prices would be adjusted on the fifteenth of each month on the basis of butter quotations for the pre- ceding month. Retail prices would be adjusted three times a, year, on the basis of the buying price in effect at the beginning of each four- month period, as follows: Buying price cents per pound of fat 60 to 69 70 to 79 80 to 89 90 to 99 Retail price cents per quart 13 14 15 For the period December, 3 926, to November, 1930, inclusive, the average buying price as established by this method would have been 2.8 cents less per pound of fat than the actual buying price. The average of the theoretical retail prices is 0.2 less per quart than the average of the actual retail prices. If such a plan were to be used, two changes in detail should be considered, namely, that the monthly spread of market milk prices over butter quotations be fixed more nearly in accordance with past experience and that the retail price be adjusted only twice instead of three times a year. In table 31, column 3, are shown the average monthly differences between butter quotations and the actual base prices paid for market milk in Los Angeles for seven years. During this seven-year period the buying price of milk fat in market milk averaged 45 cents a pound higher than the wholesale price of butter. The spread varied from 40.1 cents in October to 50.1 cents in April. The monthly differences are changed considerably when the price of market milk for a given month is compared with the price of butter for the preceding month (table 31, column 4). In this tabulation, the 60 University op California — Experiment Station TABLE 31 Average Monthly Spread of Buying Price of Milk Over Wholesale Butter Quotations in Los Angeles, 1922-1929, Omitting 1924* Month Butter quotation Buying price of milk Spread of milk price over butter quotation of same month Spread of milk price over butter quota- tion of pre- ceding monthf January February March April May June July August September. October November. December. Average. cents per lb. 45.23 45.49 42 61 40.34 41 46 43 51 44.03 46.13 49.36 51.30 50 14 49.27 cents per lb. of milk fat 91.86 92.36 92 00 90.43 88.71 88 00 89 00 89.64 90 36 91.43 92.57 92.57 cents 46.63 46.87 49.39 50.09 47.26 44.49 44.97 43 51 41 00 40.13 42 43 43.30 45.74 90.74 45 01 cents 42 35 47.13 46 51 47.82 48.37 46.54 45.49 45.61 44 23 42.07 41 27 42 43 44.99 * 1924 omitted because of wide price fluctuations due to foot-and-mouth disease. t Average December butter quotation for 1921-1928 was 49.51. Source of data: Compiled from data furnished by Mr. W. H. Jackson, Golden State Milk Products Company, Ltd. greatest spread between butter prices and milk prices occurred during the spring and summer, the smallest spread during the fall and early winter. The monthly differences varied from 41.27 cents in November to 48.37 cents in May. If milk prices were adjusted on the fifteenth of the month, the monthly differentials over butter quotations should be midway between those indicated in columns 3 and 4 of table 31. It is apparent that the prices received by dairymen in the Los Angeles territory have been too high to maintain a stable rate of pro- duction. Therefore it is possible that an average differential of 40 cents over butter quotations would be sufficient to obtain an adequate supply of milk. However, the seasonal variations in the actual differ- entials during the seven-year period are quite unlike those proposed in the plan outlined in table 30, and it would seem unwise to deviate so widely from the price relations that have prevailed heretofore. It is doubtful whether it would be wise to adopt any formula whereby the price of milk would be varied automatically with changes in the price of butter. The conditions under which milk is produced in the Los Angeles area differ greatly from those which prevail in the areas of potential milk supply. In the Los Angeles area all the con- Bul. 513 ] Economic Survey of the Los Angeles Milk Market 61 centrales and nearly all the hay are purchased and there is very little pasture. In the areas of potential supply, pasture is used to a consid- erable extent, nearly all of the hay is grown on the farm, and concen- trates are used to a much smaller extent. Therefore changes in production costs in the one case do not necessarily parallel those in the other. The supply of butter is determined not only by conditions in California but by those which prevail in the great butter-producing areas of the central west, and to some extent by the conditions in Denmark, New Zealand, and Australia, Again, the supply of butter is affected by holdings in cold storage warehouses, whereas the supply of market milk is determined only by current production. Butter prices fluctuate from day to day, whereas it is not generally considered good business practice to change the selling price of milk oftener than twice a year. In figure 9 are shown changes in the monthly prices of butter and market milk at Los Angeles. In the past there has not been a close correlation between these prices. The demand for milk is much less flexible than the demand for butter. In times of depres- sion and unemployment, less reduction need be made in the price of fresh milk than in butter. In prosperous times the demand for butter tends to expand more than that for milk. BUYING PRICES OF MARKET MILK PER POUND OF MILK FAT AND WHOLESALE BUTTER QUOTATIONS AT LOS ANGELES, 1921-1930 -_ MILK PRICES 1, aK \_ i "\ r v\ V — \y\ \ \ r A K/\* i i A V \ \ \j V \r V\ 1 II 1 llll II 1 1 M.I 1 1 1 II 1 1 Fig. 9. — There has not been a close correlation between butter prices and the buying prices of market milk during the past ten years. The price of butter is determined by many factors which do not affect the price of market milk. Fluctuations in the price of butter have occurred much oftener and usually have been seasonal to a large extent. (Data from Appendix, tables 62 and 63.) 62 University of California — Experiment Station Need for Economic Information. — It would appear to be a more practicable plan to treat the butter market as one of the important considerations in price negotiations where all factors having an impor- tant bearing on the supply and demand situation are given attention. It is evident that the persons who have taken the responsibility for establishing prices for market milk in Los Angeles have had very inadequate information concerning the economic conditions which should be considered in establishing prices of market milk. Prices have been adjusted to meet temporary conditions, with insufficient consideration of such factors as trends of production and distributors ' sales; butter prices, feed prices, and cow prices; and costs of distribu- tion. What is needed is a more forward-looking program, whereby changes in supply and demand conditions that affect the price of milk may be recognized more promptly. Surpluses and shortages should be anticipated before they occur, and the necessary price adjustments made before conditions become serious. The more promptly the necessary adjustments are made the more stable prices will be and the less loss will be incurred by both producers and distributors over a period of time. Basic-Surplus Prices. — The buying prices shown in figure 8 are the so-called ' base ' prices. During parts of this period a basic-surplus scheme of prices was used, whereby each producer was assigned a maximum daily quantity of milk for which he should receive the base price. Any excess over this basic quantity was paid for at a lower TABLE 32 Data Concerning Basic-Surplus Prices in the Los Angeles Market Months in effect Months on which basic production was computed August and September, 1923 April, 1924* May, June, July, 1923 Highest monthly production, March, 1923-March, 1921, plus 10 per cent October, 1925, to January, 1926, inclusive April and May, 1926 November, 1926, to January, 1927, inclusive October, 1926, to September, 1927, inclusive October, 1926, to September, 1927, inclusive tFebruary to May, 1926, inclusive June, July, 1926 March to October, 1927, inclusive January to June, 1928, inclusive August, 1929 JJuly, August, September, 1930 February, March, April, 1930, less 10 per cent October, 1930— February, March, and April, or August, 1930 if production was greater that month less 10 per cent. * Never placed in effect, due to outbreak of foot-and-mouth disease. t Reduced prices on surplus milk were partly refunded later. X As used by Cooperative Dairy Products Association. Other records apply to California Milk Producers' Association. Source of data: California Milk Producers' Association. Bul. 513] Economic Survey of the Los Angeles Milk Market 63 price, usually at wholesale butter quotations. This plan of prices was instituted by the California Milk Producers' Association in 1923. Periods when this plan was in effect and the months on which basic production was calculated are given in table 32. Since the Surplus Plant has been in operation, the price for surplus has been the base buying price (see table 48) minus the deduction on surplus milk made for the support of the Surplus Plant (see table 49). Data are not available to show what proportion of the total milk production has been paid for at surplus prices. However, the extent t<« which some dairymen regulated their output during this period is shown in table 33. TABLE 33 Percentage of Total Milk Fat Produced by a Selected Group of 50 Dairies Which Was Paid for at Surplus Prices January February March April May June July August September. October November December 1926 1927 1928 1929 * * 4 6 * 3 4 * 4.8 * 3 5 6 7 4.9 * 3.3 7.1 4.1 * 3 1 6.7 3.3 * 2.6 7.8 2.1 * 3 5 6.6 * * * 4.7 * 1.6 * 5.4 * * * 1.5 * * * * * * i* * * 1930 8.7 7 3 9 1 7.4 10.2 * All milk paid for at base price. Source of data: 1^ Compiled from records of the California Milk Producers' Association. These are a select group of dairymen who undoubtedly regulated their production more carefully than the average. From July to December, 1930, surplus production by dairies supporting the Surplus Plant varied from 6 to 10.9 per cent of the total production (page 91). The basic-surplus plan of prices has given rise to what is known as 'shipping rights,' which are transferable and have commercial value. A dairyman who has established a basic quantity or shipping right, may transfer it when he sells all or a part of his herd. In general the shipping right is considered equal in value to 1.25 pounds of milk fat per cow per day. Shipping rights usually go with the cows. A cow sold with shipping right brings about $20 more than one of equal quality without a shipping right. Under the basic- surplus price plan that has been in effect since July, 1930, a new 64 University of California — Experiment Station producer without shipping rights receives the base price for two- thirds of his production, surplus price for one-third. Since July, 1930, the basic-surplus plan of prices has applied to all dairymen who cooperated with the Surplus Plant. Previous to the organization of the Surplus Plant this plan applied only to mem- bers of the California Milk Producers' Association and some inde- pendent producers delivering to creameries where this system was applied generally. Several creameries which did not cooperate in the basic-surplus price plan before the Surplus Plant was organized had contracts or agreements with their producers whereby the latter were to supply a given quantity of milk. Increased production was discouraged by paying a lower price for the additional quantity or by refusing to accept it. The object of a basic-surplus price plan is to penalize producers individually for changing their production from a given quantity designated as the base. In this way a condition of excessive produc- tion sometimes can be ameliorated without reducing the price to those who adjust their production as desired. It is an effective method of bringing about changes in seasonal production and is used for this purpose in Philadelphia, Pittsburg, Chicago, and other cities. In Los Angeles, however, the seasonal variation in milk supply is negligible. Where seasonal variation in supply is not an important factor, a basic-surplus price plan may be very effective as a temporary exped- ient, but the highly competitive conditions in dairying make it imprac- ticable to regulate production by this means over an extended period of time. The maintenance of basic prices at an artificially high level inevitably results in increased competition from independent local producers and those in the areas of potential market milk supply. If it is necessary to continue a basic-surplus plan of prices for longer than a few months at a time, under Los Angeles conditions, this is in itself evidence that the base price is too high. Basic-surplus prices in Los Angeles should be regarded as a temporary expedient and not as a permanent part of the price system. Another price arrangement which might be considered for this market is that of prices differentiated according to the use that is made of the milk. For example, milk used for table cream, ice cream, or butter, might be sold at lower prices than milk distributed as such. This would enable firms that are equipped to utilize surplus milk to dispose of it without loss. It would be more difficult to carry out a Bul. 513] Economic Survey of the Los Angeles Milk Market 65 plan of this sort in Los Angeles than in some other markets, because some of the plants where manufacturing operations are carried on also handle market milk and cream. However, if careful checks as to the actual use of the milk were provided for, such a plan could be made to function successfully in Los Angeles, and might be used as an alternative to the operation of a surplus plant. Surplus Control by Intelligent Price Adjustment. — Since costs of producing milk in the Los Angeles territory are relatively high, it is doubtful if dairymen there could produce milk at a profit if they were paid for it on the basis of its value for table cream, ice cream, or butter. Therefore the logical plan is to adjust the local production of milk so closely as possible to the requirements of the city for market milk and thereby eliminate most of the surplus. This can be done by adjusting the base buying price of milk so that dairymen cease to increase the size of their herds and for a time fail to replace some of the cows that are discarded. As a long-time program, careful atten- tion should be given to the trend of production per dairy and to changes in the total surplus of milk, so that price adjustments may be made from time to time as needed to maintain a stable situation in the market. DISTRIBUTORS' MARGINS ON PASTEURIZED MILK In table 34 are given the average yearly buying prices, retail prices, and distributors' margins on pasteurized milk distributed in quart bottles. In 1930, the distributors' margin averaged 7.23 cents a quart, or approximately one-half the retail price. In 1915 the margin was only 4.18 cents a quart, but this again was nearly equal to the buying price. During the years of rapidly rising prices, 1917-1920, the margin was relatively smaller. In tables 35, 36, and 37 are shown the distributors' margins on pasteurized milk retailed in quart bottles in Oakland, San Francisco, and New York City. During the past six years the distributors' margin in Los Angeles has been practically the same as in New York, and about 1 cent a quart higher than in Oakland or San Francisco. The New York margins are not quite comparable with the others, because New York dealers have carried less surplus milk at the full base prices. Distribution costs are probably higher in Los Angeles than in Oakland or San Francisco. The more widespread residential sections 66 University op California — Experiment Station- table 34 Buying Prices, Retail Prices, and Distributors ■' Margins on Quart Bottles of Pasteurized Milk Sold on Retail Routes in Los Angeles Average buying price per quart Average retail price per quart Distributor's margin Year Per quart Percentage of retail price 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 cents 4.40 4.69 6.04 8.38 8.89 10 54 8.39 7.88 8.39 8.58 7.64 7.98 7.71 7.38 7.67 7.27 cents 8.58 9 00 10.50 13.83 14 33 17 00 15.08 14.17 15.00 15.50 14.92 15.00 15.00 15.00 15.00 14.50 cents 4.18 4 31 4.46 5.45 5.44 6.46 6.69 6.28 6.62 6.92 7.28 7.02 7.29 7.63 7.33 7.23 per cent 48.7 47.9 42.5 39.4 38 38.0 44 3 44 3 44.1 44.6 48.8 46.8 48.6 509 48.8 49.9 Average 1925-30 7.61 14.90 7.30 49.0 Sources of data: Compiled from records furnished by Mr. Ross Weaver, Santa Rita Dairy Company, and the California Milk Producers' Association. TABLE 35 Buying Prices, Retail Prices, and Distributors' Margins on Quart Bottles of Pasteurized Milk Sold on Retail Routes in Oakland Average buying price per quart Average retail price per quart Distributor's margin Year Per quart Percentage of retail price 1925 cents 6.3 6.8 7 7.4 7.4 6.9 cents 12 12 13.1 14 14.0 13.3 cents 5.7 5.2 6.1 6.6 6.6 6.4 per cent 52.5 1926 56.7 1927... 53.4 1928 . 52.9 1929 .... 52.9 1930. ... 51.9 6.9 13.1 6.1 53 4 Source of data : Data furnished by Professor E. C. Voorhies, Giannini Foundation of Agr. Econ. University of California. Bul. 513 J Economic Survey op the Los Angeles Milk Market 67 TABLE 36 Buying Prices, Retail Prices, and Distributors' Margins on Quart Bottles of Pasteurized Milk Sold on Retail Routes in San Francisco Average buying price per quart Average retail price per quart Distributor's margin Year Per quart Percentage of retail price 1925 1926 cents 7 5 7.5 7 5 7.9 7.5 7.5 cents 14 14 14 14 14.0 14 cents 6 5 6 5 6 5 6 1 6 5 6.5 per cent 46 4 46 4 1927 46.4 1928 43 6 1929 46 4 1930 46 4 Average 7.6 14 6.4 45.9 Source of data: Data furnished by Professor E. C. Voorhies, Giannini Foundation of Agricultural Economics, Uuiversity of California. TABLE 37 Buying Prices, Retail Prices, and Distributors' Margins on Quart Bottles of Grade-B* Pasteurized Milk Sold on Retail Routes in New York City Average buying price per quart Average retail price per quart Distributor's margin Year Per quart Percentage of retail price 1922 1923 1924 cents 7.1 7.6 6.7 7.6 7.7 7.9 8 1 8 5 8 2 cents 14.6 14 9 14.0 14.8 15.0 15.4 15 7 16 15.9 cents 7.5 7.3 7 3 7.2 7.3 7.5 7.6 7.5 7.7 per cent 51.4 49 52 1 1925 48.6 1926 48 7 1927 1928 48.7 48 4 1929 1930 46.9 48 4 Average 1925-30 ... 8 15 5 7.5 48 3 * Grade B is the grade of milk predominently sold to the retail trade in New York City. Source of data: Compiled by author from records of New York City distributors. and the larger number of distributors tend to reduce the efficiency and increase the cost of distribution in Los Angeles. However, judg- ing from the growth of small distributors and the number and amounts of discounts being given to the wholesale trade, the spread between the buying price and selling price of milk has been too wide for the 68 University of California — Experiment Station maintenance of stable conditions in the trade. Considering the wel- fare of the established distributors over a period of time, it would seem advisable for them to accept a margin more nearly in accordance with the actual costs of distribution by the more efficient units. The situation in the distributing trade appears to be much the same as that in production. Prices supported artificially, out of line with costs of services efficiently performed, have invited competition which is rapidly endangering the position of the older established concerns. It should be understood that the distributors' margins shown in tables 34-37 are not realized on all the milk purchased. Some of the milk is sold wholesale at lower prices, some is sold in pint, %-quart, and %-pint bottles. A considerable percentage of the total supply is utilized as cream, buttermilk, ice cream, and in other ways, which yield a much lower return than retail sales. However, since quarts of pasteurized milk sold at retail constitute a large percentage of the total supply of market milk, changes in the margins thereon give a good indication of changes in the margin realized on the total supply. BUYING PKICES OF RAW MILK The certified, guaranteed, and grade-A raw grades of milk are bottled on the farm, and either distributed by the producer or sold to distributors. Several of the distributors produce raw milk on their own farms. Other distributors contract with one or more producers for a certain number of cases of raw bottled milk a day. However, the buyer often exercises the right to increase or decrease the quantity purchased. Buying prices and retail prices of the three grades of raw milk for January, 1931, are given in table 38. TABLE 38 Buying Prices and Retail Prices of Bottled Raw Milk at Los Angeles, January, 1931 Grade Size Buying price per bottle Retail price per bottle Certified quarts pints quarts pints quarts pints cents 21.0 12.6 12.0 7.3 8.3 5.3 cents 30 18 20 12 13 8 Source of data: Mr. H. A. Walsh, Secretary Southern California Milk Dealers' Association. Bul. 513] Economic Survey of the Los Angeles Milk Market 60 PRICES OF MARKET CREAM Retail and Wholesale Prices. — Retail and wholesale prices of Vj-pint bottles of coffee cream since 1921 are shown in figure 10. The percentage of milk fat in this cream varied from time to time within a range of 21 to 26.5 per cent. From July, 1923, to March, 1930, coffee cream was retailed at a constant price. The test varied from 24 per cent to 26.5 per cent. In April, 1930, four grades of cream were established. RETAIL AND WHOLESALE PRICES OF ONE-HALF PINT BOTTLES OF TABLE CREAM, 1921-1930 TIT hi L RETAIL PRICES s I I 1 I -WHOLESALE PRICES I Fig. 10. — Since January, 1921, the retail price of %-pint bottles of table cream has changed eight times, while the wholesale price has changed five times. These changes are not significant in themselves because the milk-fat content has also changed, often in accordance with the change in price. (Data from Appendix, tables 64 and 65.) The wholesale price on %-pints of cream generally has been 2 cents lower than the retail price. The percentage of fat has been approx- imately the same in wholesale cream as in that sold retail. In Decem- ber, 1930, the wholesale price of bulk cream was $1.60 a gallon or the equivalent of 10 cents a y 2 pint. 17 Prices of Cream Paid by Distributors. As previously indicated (page 35), about 70 per cent of the milk fat used as cream in the Los 17 Monthly retail and wholesale prices of cream are given in the Appendix, tables 64, 65, and 66. 70 University of California — Experiment Station Angeles territory is shipped in from outside production areas and about 90 per cent of this is handled by five dealers who in turn sell it to the distributors. Sweet cream is purchased by the distributors on the basis of Los Angeles wholesale butter quotations. The differential between cream prices and butter prices has varied from time to time, and there have also been differences in the price schedules of different firms. In April, 1924, one of the leading cream dealers established a series of prices to distributors which varied according to the price of butter (table 39). TABLE 39 Schedule of Sweet Cream: Prices Expressed as Differentials Over Whole- sale Butter Quotations; Effective April 30, 1924; as Reported by One Dealer Los Angeles butter quotation, Sweet cream price, amount per pound of milk fat over butter quotations cents per pound 24 per cent cream 40 per cent cream 21 to 25 cents 15.60 16.75 17.90 18.85 20 20 21.35 22.50 23.65 24.80 25.95 cents 13.10 26 to 30 14.25 31 to 35 15.40 36 to 40 16.55 41 to 45 17.70 46 to 50 18.85 51 tc 55 20 00 56 to 60 21.15 61 to 65 22.30 66 to 70 23.45 Source of data: Challenge Cream and Butter Association. This firm followed the sliding scale of cream prices until 1928, and used it again from March to December, 1930. During 1928 and 1929 a flat differential of 20 cents per pound of milk fat over butter quota- tions was used. In recent months this firm has varied the price accord- ing to the quantity taken by different distributors. Those who took 5 cans a, day or more paid the list price, those taking from 3 to 5 cans paid 2 cents more, and those taking less than 3 cans a day paid 4 cents more per pound of milk fat. Another leading cream dealer sold cream to distributors for many years at a flat differential of 20 cents over butter quotations. In the summer of 1930 this firm adopted the sliding scale (table 39) and made it applicable to those buyers taking 30 cans or more of cream per week. Other buyers paid a flat differential of 18 cents over butter quotations. Bul. 513] Economic Survey op the Los Angeles Milk Market 71 The above prices applied to the cream which came from sources approved by the Los Angeles City Health Department, and was there- fore available to be used for distribution to retail and wholesale trade in the city. Sweet cream from uninspected sources has been sold at lower prices, according to another sliding scale (table 40). TABLE 40 Schedule of Uninspected Sweet Cream Prices Expressed as Differentials Over Wholesale Butter Quotations Los Angeles wholesale butter quotations per pound Cream prices Amount per pound of milk fat over butter quotations cents cents 35 . 5 or less 12.00 35.6 to 45.5 13 00 45.6 to 50.5 14.25 50.6 to 55.5 15.50 Source of data: Golden State Milk Products Co., Ltd. Compared with the sliding scale of prices for inspected cream, during the last six months of 1930 the prices for uninspected cream were 2.25 cents to 3.4 cents lower per pound of milk fat. Uninspected cream has been available only for use in places outside the city of Los Angeles. The other municipalities have not exercised much control over their cream supply. The cream situation is greatly changed by the county ordinance that became effective January 1, 1931, whereby all cream for distribu- tion in the communities under Los Angeles County inspection must come from herds that are free from tuberculosis. Due to the shortage of cream available to meet the new requirements, and the high cost to dealers of obtaining sufficient quantity for the trade, the price to dis- tributors in Los Angeles has been fixed at 25 cents per pound of milk fat over butter quotations. These prices for cream include delivery to the buyer 's plant in Los Angeles. At the prices to distributors which prevailed in January, 1931, the cost of milk fat in a %-pint bottle of 21 per cent cream was 6 cents. The cost of milk fat in a %-pint bottle of 38 per cent cream was 11 cents. Relations between the yearly average prices of butter, cream, and milk are shown in table 41. The differential of milk prices over cream prices increased from 1 8.7 cents in 1928 to 30.4 cents in 1930. In view of the higher require- 72 University of California — Experiment Station TABLE 41 Belation of the Buying Prices for Market Milk and Cream to Wholesale Butter Quotations in Los Angeles, 1921-1930 Average of but- ter quotations per pound Per pound of milk fat Year Average buying price of milk Average buying price of cream in Los Angeles Amount cream price exceeded butter quotations Amount milk price exceeded cream price / 2 3 4 5 1921 cents 42 4 41.8 48.3 41.5 47 2 43.6 45.8 47 46.4 37 cents 97.5 91.7 97.5 99.7 88.8 92.8 89.7 85.7 89 85 4 cents 62.4 61.8 68.3 61.6 67.2 63 6 65.8 67.0 65.7 55 cents 20 20.0 20.0 200 20 200 20 20 19.3 18 cents 35.1 1922 29.9 S923 29.2 1924 38.1 1925 1926 1927 1928 1929 1930 21.6 29.2 23.9 18.7 23.3 30 4 Sources of data: Cols. 1 and 3: Mr. W. H. Jackson, Golden State Milk Products Company, Ltd. Col. 2: Mr. Ross Weaver, Santa Rita Dairy Co. ments recently established for cream it is probable that for some time at least the spread of cream prices over butter quotations will be greater and the differential between cream prices and milk prices will be less than in 1930. Before January, 1931, the buying price at most country cream plants for milk meeting' the Los Angeles requirements for grade-B cream was 10 cents per pound of milk fat over Los Angeles butter quotations plus cost of hauling to the plant. Some plants in Merced County were buying milk on the basis of San Francisco butter quota- tions, at a somewhat lower price, and two plants in other sections were paying somewhat more than the usual differential. In order to encourage the producers to meet the new requirements for cream, including the eradication of tuberculosis from their herds, proprietors of most of the country cream plants agreed on a buying price of 21 cents per pound of milk fat at the farm over butter quota- tions. Accordingly this schedule of prices was made effective at most of the plants in January, 1931, with variations of 1 or 2 cents in certain localities. The former schedule of prices for grade-B cream was maintained temporarily, but undoubtedly the price for such cream gradually will be reduced to the level of that for churning cream, namely a differential of 2 cents or less per pound of milk fat over butter quotations. Bul. 513] Economic Survey of the Los Angeles Milk Market 73 TRANSPORTATION OF MILK AND CREAM AGENCIES ENGAGED IN HAULING MILK In August, 1930, 15 per cent of the bulk milk received by 21 Los Angeles distributors was hauled by the producers, 29 per cent was hauled by the distributors, and 56 per cent was hauled by public truckmen (table 42). TABLE 42 Agencies Hauling Milk to Los Angeles Distributors, August, 1930 Hauling agency Number of dairies Cans of milk daily Per cent of total milk 62 206 512 1,773 3,367 6,580 15 1 28.7 56.2 Total 780 11,720 100 Source of data: Compiled from records of distributors. Hauling by Dairymen. — Most of the dairymen who haul their own milk live near the plant where their milk is sold, or in isolated sections where other hauling service is not available. Hauling by Distributors. — Nine of the 21 distributors included in this tabulation maintained their own trucks for picking up milk at the farms. Reasons given for this were : less loss of milk cans and covers, more prompt delivery of milk to the plant, closer contact with the dairymen, and the possibility of a profit on the hauling. It was claimed that public truckmen were careless with cans and covers, with the result that many were lost or mixed with those belonging to other distributors, and that since the distributors' trucks delivered milk only to one plant, considerable time was saved as compared with trucks that stop at several plants. It was claimed that public truckmen have been responsible for transfers of the pa'tronage of some producers from one distributor to another. By hauling their own milk, these distributors plan to keep in closer touch with their producers and thereby to exert more influence upon the producers against joining a cooperative association or transferring to other distributors. It is also thought that sanitary conditions at the dairies can be checked up on more frequently. 74 University of California — Experiment Station In general the distributors who did their own hauling charged approximately the same rates as the public truckmen, but in a few cases their rates were higher. Hauling by Public Truckmen. — The public truckmen mentioned in table 42 are licensed by the California State Railroad Commission, by which their rates and services are regulated. In 1930, 14 individuals and firms were listed by the Railroad Commission as licensed haulers TABLE 43 Rates Charged by Public Truckmen for Hauling Milk to Los Angeles, December, 1930 From Miles Rate per 10-gallon can Rosemond Lancaster Palmdale San Jacinto Arlington Riverside Chino 94 80 71.0 90 62.5 57 40 32 28 25 23 20 20 18 18 18 14 14 12 5 $0 65 .30 .30 .25 .25 .25 .17- 20* .17 Stanton Hansen Cypress Artesia Norwalk Hynes Bellflower Compton .15 .13 .11 .11 .11 .11 .11 .11 20 El Monte . . . .15-17* Lynwood 10 * The higher of these rates is the regular rate. A re- duction of 2 to 3 cents a can is granted to producers shipping 200 cans of milk a month or more. Source of data: Compiled from records of the California Railroad Commission. of milk in the Los Angeles district. These licensed haulers operated 79 trucks and 28 trailers. The firm hauling the largest quantity of milk operated 18 trucks and 11 trailers. The highest hauling charge reported was 65 cents a can (table 43). Hauling by California Milk Producers' Association, — In December, 1930, the California Milk Producers' Association let contracts for hauling the milk produced by its members in the Hynes-Clearwater district. Reasons given for this are a saving in hauling charges of 2 to 6 cents per can of milk, and the elimination of independent truck- men, who, it is claimed, had caused disloyalty on the part of some of Bul. 513] Economic Survey of the Los Angeles Milk Market 75 the members. During December, 1!W0, 3,225 cans of milk a day were hauled under contract for the association. Nearly all of this replaced hauling formerly done by public truckmen. Except in the case of members of the Milk Producers' Association, charges for hauling are deducted by the creamery each month from amounts due the dairymen for milk. The creamery then pays each hauler in one check. The California Milk Producers' Association makes deductions for the hauling of its members' milk and pays the haulers. PROPOSALS FOR UNIFIED HAULING SERVICE There has been some discussion of the possibility of unified hauling by the Cooperative Dairy Products Association, the Comalac Service Company, or some similar agency. One principle that should be recognized in considering any changes in methods of hauling is that the fewer hauling agencies there are, the lower the cost will be. Hauling by distributors tends to increase the cost. It has the further disadvantage that it tends to prevent the development of a strong milk producers' association. Hauling by the California Milk Producers' Association would be a satisfactory method if most of the dairymen were members, but under present conditions hauling by the Association tends to increase rather than to reduce the cost of hauling in general. If the Cooperative Dairy Products Association were reorganized with more effective producer representation and with a capable man- agement in which all parties had confidence, this organization might well assume the function of contracting for the hauling of the milk. By this means, it would be possible to realize the objective of low cost plus interested service. TIME OF DELIVERY Nearly all of the milk is delivered to the processing plants twice a day. From a few dairies in the Antelope Valley, and in Ventura County, and from some tributary to Long Beach, the milk is delivered only once a day. The time of delivery at different plants varied from 6 :00 to 9 :30 o'clock morning and evening. OWNERSHIP OF CANS With the exception of that brought in by tank truck from Kern County, all milk is delivered to the processing plants in 10-gallon cans. All cans except those furnished by the Cooperative Dairy Products Association for producers delivering milk to the Surplus Plant, are 76 University of California — Experiment Station owned by the distributors. Producers should own the cans needed to transport their milk to the processing plants. Failure to do so places them at a serious disadvantage in the event of any controversy with the distributors. The cans probably would receive better care if owned by the producers. The California Milk Producers ' Association, at least, should make arrangements to provide its members with cans. TRANSPORTATION OF CREAM Of the 18 country plants that supplied cream to Los Angeles during 1930, only 6 shipped by rail. In general railroad rates were slightly higher than truck rates for equivalent distances (table 44). Lower freight rates effective February 19, 1931, may make transpor- tation of quantity shipments by rail cheaper than by truck (see Appendix, table 67). In addition to the fact that their rates were lower, trucks had the further advantage that they picked up cream at the country plants (some of which had no railroad connections) and delivered it to buyers' plants at destination. Additional trucking expense was involved on cream shipped by rail. TABLE 44 Rates Charged for Transportation of Cream to Los Angeles, December, 1930* From Miles Transpor- tation agency Rate per Place County Highway Rail 10 gallon can Kern Kern Tulare 125 155 180 185 190 195 200 200 210 210 220 230 235 290 305 224 240 220 333 346 Truck Truck Rail Truck Truck Truck Truck Rail Truck Truck Truck Rail Truck Rail Rail $0 40 50 Tipton 45 Santa Maria 55 Tulare 50 55 Visalia Tulare 53 Tulare 94 40 60 ElCentro Imperial 75 Fresno 60 1 09 Los Banos 1 13 * New freight rates from all these points on milk and cream as published by the Southern Pacific Railway and effective Feb. 19, 1931, are given in the Appendix, table 67. Source of data: Compiled from records of plants shipping to Los Angeles. Bul. 513] Economic Survey of the Los Angeles Milk Market 77 DAIRYMEN'S ORGANIZATIONS CALIFORNIA MILK PRODUCERS' ASSOCIATION^ Organization and Management. — The California Milk Producers' Association was organized in 1915 because of dissatisfaction among the producers concerning the price received for milk. A number of worthy purposes, including the improvement of quality, the collection and dissemination of useful information concerning the industry, and promotion of efforts to increase the consumption of milk, are men- tioned in the articles of incorporation. However, the prime object in view at the time of organization was to obtain a higher price for milk by means of collective bargaining. The Association is organized under the Cooperative Corporation laws of California, Its policies are determined by a board of eleven directors. Eight of the directors are nominated by the members, from seven regional districts (one district nominating two). Three directors at large are nominated by these eight. These nominations are ratified at the annual meeting in January. The directors hold regular meetings once a month. The executive committee, consisting of the president and two directors, meets once a week. The president acts as general manager of the Association. Experience in Distribution. — From the beginning the Association was handicappel by the reluctance of some of the distributors to deal with it, as agent for its members' milk. Whenever there was a surplus of milk, independent producers were given the preference by the dealers and the Association had to dispose of large quantities of milk through other channels. For several years one large creamery that cooperated with the Association utilized the surplus milk of the Asso- ciation on contract. The loss on this milk was prorated to the pro- ducers in the form of deductions from the amounts due them for milk at established base prices. For example, if the Association disposed of 60,000 pounds of surplus milk fat at 60 cent a pound when the base buying price was 90 cents, there was a loss of $18,000. Assuming that the total quantity of milk fat delivered by the members was 600,000 pounds, the pro rata loss was 3 cents a pound. !8 Some additional facts concerning the California Milk Producers' Associa- tion are given in: Metzger, Hutzel, Cooperative marketing of fluid milk. U. S. Dept. Agr. Tech. Bul. 179:84-86. 1930. 78 University of California — Experiment Station It was because of the difficulties in disposing of its members' milk in a satisfactory way to the established firms that the Association undertook to establish its own distributing facilities in 1920. In that year one of the larger creameries with retail and wholesale distributing facilities was purchased. This business grew with the market and in 1928 another large retail business was purchased. In October, 1928, the Association, through subsidiary companies, was operating 345 retail and 27 wholesale routes. In May, 1929, the Association sold its entire distributing business with the exception of a branch in San Bernardino. Reasons given for this change of policy are that market conditions were unsettled by efforts of the Dairymen's Protective Association to establish a distributing business, the tendency towards consolidation of distribut- ing businesses, the necessity for raising a large amount of new capital to retire bonds against the Association's properties, and the difficulty of obtaining capable hired management, The retail branch of the business had been profitable, but these gains were offset by losses in the wholesale branch. Terms of the sale were such that the Associa- tion realized about $1,000,000 in excess of its investment in the busi- ness and was guaranteed a market for an equivalent volume of milk at prices no lower than those paid by the other large creameries in Los Angeles. The Association accepted preferred stock and debentures in part payment for the business sold. Membership. — Although the sale of the distributing business placed the Association in a strong financial position and provided a continuous market for a large quantity of fluid milk, its influence appears to have been weaker during the past two years. The sudden acquisition of the large surplus of cash and securities brought its own problems. Some of the members favored an immediate distribution of this surplus. The policy of the management, however, was to retain these funds in the treasury of the Association, and in the sum- mer of 1930 the board of directors definitely approved this plan. Meanwhile no new members were taken in and the membership declined from about 550 to a few more than 300. As soon as a final decision with respect to disposal of the surplus was reached steps were taken to increase the membership. At present, suits are pending against the Association to force a distribution of the surplus funds, but the by- laws appear to give the directors complete discretionary powers in such matters. The number of producers selling milk through the Association, and the quantity of milk delivered in September of each year since 1925 are given in table 45. Bul. 513] Economic Survey of the Los Angeles Milk Market 79 TABLE 45 Number op Producers and Quantity of Milk Sold by the California Milk Producers ' Association Year Number of producers delivering milk in September Total pounds of milk fat in milk sold each September Bulk milk Bottled milk Total 1925 571 524 551 535 357 325 482,250 474,428 554,905 599,680 405,474 425,232 482,250 1926 474,428 1927 1928 1929 1930 5,127 19,039 25,551 31,271 560,032 618,719 431,025 456,503 Source of data: California Milk Producers' Association. Since September, 1930, a considerable increase in membership has occurred. In December, 505 producers shipped milk for the account of this Association. Five of these are producers of raw bottled milk. In August, 1930, sales of milk by the association constituted approx- imately 35 per cent of the total supply of bulk milk for pasteurizing. In December the Association supplied about 50 per cent of the total. Milk was sold to 16 firms besides the Association's branch at San Bernardino and the Surplus Plant. By-laws of the Association require that members shall market all their milk or other dairy products through the facilities provided by the Association. Failure to do this subjects the member to the penalty of expulsion and sacrifice of his membership fee, also to liquidated damages amounting to 10 per cent of the value of products sold in violation of his agreement. Provision is made for the member to withdraw from the marketing agreement by giving notice in January of any year, withdrawal to become effective May 1. The Association never has enforced the marketing agreement, but it is stated that such action will be taken in the future. The membership fee is $5.00 a cow or a minimum of $50. The by-laws provide that the expenses of maintaining the Association may be charged against each member in proportion to the volume of busi- ness done for him. For several years past, 1 cent per pound of milk fat has been deducted to cover Association expenses. Producers of raw bottled milk are assessed according to the number of cows kept, $5.00 a month for 50 cows or less, $10 for 51 to 100 cows, $25 for more than 100 cows. During the time when the Association was building up a distributing business, additional deductions were made for a capital fund, but these amounts were repaid with a large bonus. 80 University of California — Experiment Station In recent years members of the Association generally have received less for milk than independent producers by the amount of the deduc- tion for Association expenses, namely 1 cent per pound of milk fat. At times, however, the differences in prices have been as much as 5 cents per pound of milk fat because of the loss on surplus milk. One of the large creameries cooperated with the Association by carrying a considerable surplus of milk and making the same assessments against its independent shippers as the Association made against its members, but this policy was not followed by other buyers. Services performed by the Association. — The principal object of the Association is to bargain collectively for the sale of milk. From the time of its organization until the Surplus Plant was organized, officers of the Association played an important part in establishing the base buying prices for milk. Although representatives of this Association sit on the board of directors of the Cooperative Dairy Products Association, which is now the price-making body, their influence appears to be much restrained. Unlike milk producers' organizations in some other markets, this Association has not taken the responsibility of collecting and analyzing basic economic information essential to judicial price* making. Lack of definite information which could be presented in a convincing way to other persons who share the function of making prices probably accounts for the limited influence which the Association seems to have at the present time. The Association has a very good system of accounting. These accounts could be used to a much greater extent as the basis of economic information concerning the rate of milk production, changes in dairy herds, and the like. The sales plan of the Association is to arrange with a creamery to take all the milk produced by certain dairies. This milk is delivered directly to the buyer's plant. As far as possible each buyer is per- mitted to select the producers he desires as patrons. Payment for the milk is made to the Association, which performs all the accounting connected with deductions for Association expenses, feed bills, and the like, and writes the checks to individual members Considerable saving is thus afforded the creameries with respect to accounting, writing of checks, and adjustments with the individual producers. In order to protect its members against possible loss due to the dishonesty or errors of the buyers, the Association maintains in each plant receiving Association milk a man to supervise the weighing of the milk and the taking of samples. This practice is annoying to some distributors but others state they are quite willing to have this Bul. 513] Economic Survey of the Los Angeles Milk Market 81 assistance and relief from responsibility. Unquestionably the pro- ducers are entitled to a greater measure of protection in this respect than can be conveniently afforded by law. While it is undoubtedly true that the integrity of many firms is not open to question, this cannot be said of all, and any plan of checking weights and tests must be applied uniformly. A possible modification of this requirement would be to permit the members delivering milk to any buyer to deter- mine by majority vote whether the supervision of testing- and weigh- ing is desired, and to assess the cost of this service chiefly or wholly against those who benefit thereby. The testing and weighing service is the most costly part of the Association 's activities. About thirty men are employed for this work. In plants that receive only a small quan- tity, the cost of supervised weighing and testing is rather high per pound of milk fat. As explained elsewhere (page 63), the Association took the leader- ship in efforts to control production by means of a basic-surplus plan of prices. These efforts are commendable, although as previously stated the stimulus to increase production by reason of high base prices was so great that the artificial restraint was ineffective. Edu- cational efforts might well be increased, with the purpose of forecast- ing for the producers what they may expect in the way of prices. In this way adjustments in production can be speeded up and producers saved from making unwise changes in their herds. This presupposes, of course, the development of trustworthy economic information as a basis for such forecasts and publicity. The Association has played an important part in stabilizing the market by taking care of surplus milk either in its own plants or by contract in private plants. Before the Surplus Plant was opened the Association also supplied distributors with accommodation milk in times of shortage. As previously explained (page 74), the Association recently let contracts for hauling the milk produced by its members in the region southeast of Los Angeles. A considerably lower rate was obtained on this hauling than would be possible by individual bargaining. This move to control the hauling of its members' milk tends to place the Association in a stronger position, since it increases the difficulty of buyers picking up milk from independent dairies. Until recently the Association did not give much attention to the improvement of the quality of milk produced by its members. More emphasis might well be placed on this phase of the Association's activities. In the long run the position of the Association would be 82 University of California — Experiment Station strengthened by taking the leadership in bringing the quality of milk to a higher standard. Soon after organization, the Association undertook the buying of hay and grain for its members. By 1920 the feed business had devel- oped to a point where it was considered advisable to set up a new cor- poration to handle it. The Association took common stock in this corporation in return for the investments which had been made out of association funds. Most of the officers and directors of the Dairymen's Feed and Supply Company hold similar offices in the California Milk Producers ' Association, and the same clerical staff attends to the work of both organizations. A separate accounting is made, however, and salaries are divided approximately in proportion to the time spent on the work. The Dairymen's Feed and Supply Company is a proprie- tary corporation. Most of the stock is owned by individuals. Divi- dends are paid at the rate of 8 per cent a year, and one stock divi- dend of 33 V3 per cent has been issued. In August, 1930, another affiliated organization, the Dairymen's Finance Company, was set up by the California Milk Producers' Asso- ciation. Directors of this company are identical with those of the Association. The function of this organization is to lend money to dairymen for the purchase of cattle. The Association provided $100,000 capital for the finance company. Cattle on which loans are made are appraised, ear-tagged, and carefully described. Chattel mortgages taken by the company are discounted at the Federal Inter- mediate Credit Bank. Loans made by this company are largely in replacement of those formerly made by proprietary finance com- panies at much higher rates. The preference given to members of the California Milk Pro- ducers' Association when loans are granted has aided materially in attracting new members to the Association. Because of its close con- tacts with the dairymen, and the fact that payments for the members' milk pass through its treasury, the Association seems to be in a very favorable position to handle the cattle loan business at a large saving to the producers. It is also in a position to regulate loans in accord- ance with the need for increased or decreased production, and thereby aid in stabilizing market conditions and prices. The Association cooperates with the California Dairy Council, con- tributing 1 cent per pound of milk fat in the milk delivered by mem- bers during one month of each year. Financial Condition. — The financial condition of the California Milk Producers' Association, as shown by its balance sheet of Decem- ber 31, 1930, is as follows : Bul. 513] Economic Survey of the Los Angeles Milk Market 83 Balance Sheet December 31, 1930 Current assets: Cash on hand in bank $ 19,200.02 Advance to members 15,593.56 Accounts receivable 1,568.15 Accrued assessments 6,000.00 Due from creameries 45,023.98 Notes receivable 88,882.37 Trade acceptances receivable 12,651.21 Chattel mortgages 42,998.91 Lease contracts — ice plants 20,009.59 Real estate mortgages 13,000.00 Accrued interest 9,492.17 Total current assets $ 274,479.96 Other notes and accounts: Notes receivable (membership) 8,386.73 Prudential Life Insurance Co 1,638.92 Total other notes and accounts 10,025.65 Stocks and bonds: Dairymen's Feed and Supply Co. (common stock).. 48,400.00 Western Dairies, 6^ per cent (preferred stock) 398,500.00 California Dairies, 6^ per cent (debentures) 10,000.00 California Cooperative Creamery Co., QV2 per cent (debentures) 23,405.00 B. P. O. Elks No. 99 (debentures) 2,800.00 Dairymen's Finance Co., Ltd. (common stock) 100,000.00 Los Angeles Chamber of Commerce (bond) 100.00 Total stocks and bonds 583,205.00 Fixed assets: San Bernardino Creamery Plant 285,316.26 Office building, Los Angeles 60,782.51 Office furniture and fixtures 4,362.29 Laboratory equipment 580.66 Total fixed assets 351,041.72 Total assets $1,218,752.33 LIABILITIES Notes payable (bank) $ 80,000.00 Total current liabilities $ 80,000.00 Members net worth: Membership 69,707.75 Reserves: Contingency reserve — net credit Balance 17,214.78 Undivided surplus 1,051,829.80 Total members net worth : $1,138,752.33 Total liabilities, membership, and surplus 1,218,752.33 84 University of California — Experiment Station DAIRYMEN'S PROTECTIVE ASSOCIATION Organization and Purposes. — The Dairymen's Protective Associa- tion was organized in July, 1928, as a nonstock association under the Cooperative Corporation laws of California. Most of the organizers and charter members were former members of the California Milk Producers' Association, who believed that the latter Association was not serving the dairymen satisfactorily. The original purpose of this Association was to bargain collectively for the sale of milk to the distributors. The intention was to sell to the distributors only what milk they required for their trade, and to operate a plant for disposal of surplus milk. It was believed that the distributors were taking too wide a margin on the milk and that they should pay a higher price. From the beginning the distributors considered the organizers and members of this association as a radical group and with the excep- tion of one firm refused to have any dealings with them. They not only refused to negotiate with the Association for the purchase of milk but also discontinued the purchase of milk from all producers known to be members of the Dairymen's Protective Association. Experience in Distribution. — Failing to sell its members' milk to the established distributors, the Association undertook to establish distributing facilities of its own. A processing plant was established and solicitors were employed to develop both wholesale and retail outlets for milk and cream, which were offered at reduced prices. Distribution was started December 28, 1928. By September, 1929, sales had increased to nearly 3,000 gallons daily, on 14 retail and 9 wholesale routes. Various difficulties were encountered in the operation of the Asso- ciation's distributing business. The rapid increase in business left the Association short of working capital. It is said that the hired management proved incapable, that accounting was very inadequate, and that some of the employees were dishonest. It is claimed that other distributors resorted to unethical and illegal practices to injure the Association. Although sales increased rapidly, collections fell behind. A huge surplus of milk had to be disposed of through out- lets yielding a low return. In May, 1929, officers of the Association opened negotiations with the Challenge Cream and Butter Association for lease or sale of the business. Challenge advanced a considerable amount of capital, and Bul. 513] Economic Survey of the Los Angeles Milk Market 85 on October 1, 1929, took over the business under lease, with option to purchase. This option was exercised in December 1930. Membership. — When the Association was first organized, over 500 dairymen are said to have signed membership cards. However, the majority of these never delivered milk to the Association. In August, 1929, there were 92 active members, in December, 1930, only 42. Although by-laws of the Association require that members market all milk, cream, or other dairy products through the Association, no attempt was made to enforce this requirement because at all times the active members supplied much more milk than was needed. The rapid decrease in membership was due to the low prices received for milk. Heavy deductions were necessary to provide working capital and to cover expenses. Because of the shortage of funds, payments for milk delivered in the latter half of July, and that delivered in August and December, 1928, were withheld. Recent Developments. — After all properties and business were sold to Challenge, there remained a debt of $112,000, part of which was owed producers for milk. This debt is being reduced by deductions on milk delivered by the remaining members each month. The Dairymen's Protective Association now is a member of the Challenge Cream and Butter Association. Challenge handles the milk on a cost basis with a small surcharge for administration. Although a large surplus of milk was handled, the prices paid by Challenge during 1930 were on a par with those received by dairymen cooperating with the Surplus Plant. All payments are made to the Dairymen's Protective Association, which makes deductions for cur- rent operating expenses and debt reduction. During the last four months of 1930, deductions were made at the rate of 2.5 cents per pound of milkfat. About 1.5 cents of this is required for operating expenses. The Association maintains an office in the milk plant and employs a field man. The Association's affairs are managed by a board of directors and executive committee of three members. 86 University of California — Experiment Station CALIFORNIA DAIRYMEN'S LEAGUE This is a membership association of dairymen organized April 30, 1929. Leaders in this association believed that the California Milk Producers' Association had grown too weak to provide adequate bar- gaining power for the dairymen. An outside organizer took the lead in soliciting memberships. The initiation or membership fee is 50 cents a cow. There are no other dues. It is said that about 660 dairymen signed membership cards. The League has never become active as a bargaining or sales agency. Late in 1930 an agreement was reached with the California Milk Producers' Association whereby the latter is designated as sales agent for members of the League. The membership of the League includes many dairymen who also are members of the California Milk Producers' Association or the Dairymen's Protective Association. FUNCTIONS OF DAIRYMEN'S ASSOCIATIONS Since 1915 officers and directors of the California Milk Producers' Association have been the chief spokesmen for the dairymen of the Los Angeles milk shed. The Association has been conservatively and effi- ciently managed and has done much to stabilize the industry. Because it has controlled an insufficient percentage of the milk and has had inadequate representation in the Cooperative Dairy Products Asso- ciation, and inadequate statistical and economic information concern- ing the production, consumption, and distribution of milk, the Associa- tion has not represented the producers as effectively as it should. More attention should be given to the compilation of economic information, to the improvement of quality, and to membership service with par- ticular emphasis on its educational aspects. If these steps were taken it is probable that the other dairymen's organizations would become inactive. Although some of the distributors have had very satisfactory deal- ings with the California Milk Producers' Association, others appear to be opposed to the development of an effective milk-producers' organization in this market. Lack of confidence between the dis- tributors and officers of the Milk Producers' Association is due in large part to unwarranted suspicions of each other's motives. A more cordial spirit of cooperation between these two groups would be highly beneficial to both of them and to the public. Such an objective could be realized more promptly if a person with economic training and a sympathetic understanding of the problem of both groups were available to supply information and to correct misunderstandings. Bul. 513] Economic Survey of the Los Angeles Milk Market 87 COOPERATIVE DAIRY PRODUCTS ASSOCIATION, LIMITED REASONS FOR ORGANIZING This organization was formed in January, 1930, for the purpose of operating a surplus milk plant. It is organized under the coopera- tive laws of California. Plans for establishing a surplus plant had been discussed at various times during the preceding two or three years. In April, 1928, a scheme for joint operation of a surplus plant.by dealers and producers was endorsed by the Comalac Service Company, an organization of distributors, and presented to directors of the California Milk Pro- ducers' Association for their consideration. No further action was taken, however, until an increasing quantity of surplus milk at the beginning of 1930 threatened to demoralize the market. At that time the base buying price of milk was 90 cents per pound of milk fat. On account of the large surplus of milk, however, some of the creameries made deductions to cover their loss on surplus, or accepted milk from some of the shippers only at reduced prices. Other creameries, particularly the smaller ones, were able to buy their entire supply at prices considerably below the established base price. Some plan was sought, therefore, which would remove the excess supply of milk from the market and make it possible to maintain prices. Accord- ingly new interest was aroused in the plan to establish a surplus plant. Detailed plans for an organization to operate the plant were prepared by Mr. W. H. Jackson, of the Santa Monica Dairy Company. PLAN OF ORGANIZATION For various reasons, and particularly in order to obtain as much freedom of action as possible under the antitrust laws, the cooperative form of organization was chosen. In order that producers and dealers might have equal voting power, it was arranged that the organization should have a limited membership. Originally it had twelve mem- bers, six producers and six distributors. The six distributors qualified for membership by reason of their interest in producing herds of cattle. Later a thirteenth member was elected. There are twelve directors. Although the membership is limited, it is generally under- stood that the Surplus Plant is to be operated for the benefit of the entire industry. Directors' meetings, which are held twice a month, are open to the public, and nonmembers are given an opportunity to speak. 88 University of California — Experiment Station Representatives of producers in the membership and on the board of directors of the Association were selected as the result of a mass meeting" of producers held in Los Angeles. Representatives of dis- tributors were selected from the few who were eligible by general consent of the distributors. There is no definite provision for electing new members but vacancies have been filled by the remaining members of the board of directors. Additional members could be admitted by majority vote of the board of directors. OPERATIONS The Surplus Plant was first established in connection with the plant of the California Milk Producers' Association in San Bernar- dino. Later it was located in Los Angeles. Any producer of milk is permitted to deliver his milk at the Surplus Plant on the same basis of prices as it would be received at any creamery cooperating with this Association. Any distributor having a larger supply of milk than desired may arrange for one or more of his producers to transfer their shipments to the Surplus Plant. Likewise any distributor who desires an addi- tional supply of milk may arrange for one or more producers to trans- fer their shipments from the Surplus Plant to his own. Also any distributor may purchase an additional supply of milk at the Surplus Plant, if any is available there. During each of the first seven months of 1930 more producers were transferred to the Surplus Plant than were transferred from the Surplus Plant to other creameries (table 46). TABLE 46 Transfers of Producers to and from the Surplus Plant, and Number Delivering Milk to the Surplus Plant, 1930 Number of producers trasnf erred Number of producers delivering milk to surplus plant Month From cream- eries to surplus plant From surplus plant to creameries CM. P. A. members Independent producers Total January No record No record 58 41 99 February 37 1 75 55 130 March 51 16 92 68 160 April 57 22 99 89 188 May 94 42 102 118 220 June 104 14 98 176 274 July 102 89 102 190 292 August 40 56 91 133 224 September 40 43 107 114 221 October 15 16 98 77 175 Novembei 39 29 138 49 187 December 24 14 173 69 242 Source of data: Compiled from records of the Surplus Plant. Bul. 513] Economic Survey of the Los Angeles Milk Market 89 The receipts of milk fat at the Surplus Plant during 1930 are shown in table 47. The quantity of milk handled by the Surplus Plant gradually increased to a daily average of 2,024 cans in July, then fell off until December, when it rose again to 2,061 cans a day. The proportion of the total supply at the Surplus Plant which was furnished by mem- bers of the California Milk Producers' Association increased from 37 TABLE 47 Quantity of Milk Fat in - Milk Receive© at the Surplus Plant, in Milk Sold, and Net Surplus, 1930; in Pounds of Milk Fat In milk received from Total In milk sold Month Net surplus C. M. P. A. Independent dairies dairies January 18,887 4,945 23,832 2,426 21,406 February 54,051 21,689 75,740 12,594 63,146 March 74,004 47,733 121,737 14,168 107,569 April 68,365 39,785 108,150 14,981 93,169 May 67,559 82,140 149,699 17,300 132,399 June 71,725 122,105 193,830 6,260 187,570 July 88,117 115,987 204,104 34,016 170,088 August 85,874 93,709 179,583 48,128 131,455 September 82,720 58,640 141,360 32,868 108,492 October 87,703 55,024 142,817 43,892 98,925 November 102,940 20,760 123,700 32,422 91,278 166,238 46,667 212,905 13,978 198,927 Total 968,273 709,184 1,677,457 273,033 1,404,424 Source of data: Compiled from records of the Surplus Plant. per cent in June to 78 per cent in December. This is in part a direct result of an increase in membership of the Association. In part it is due to the fact that several of the larger creameries preferred not to buy milk from the Association and therefore selected independent patrons of the Surplus Plant to replace those of their producers who were members of the California Milk Producers' Association. Since the full base price is realized for all milk sold by the Surplus Plant, this cannot logically be listed as surplus, even though some is used for manufacturing. Consequently the net surplus is the differ- ence between the amount of milk fat received and the amount sold in fresh milk. The net surplus was much greater in December than in any of the previous months, due to the increased supply and to smaller sales of milk to dealers, especially to those engaged in the manufacture of ice cream (table 47). Rules established by the directors provide that milk may be sold at the prevailing base price to cooperating distributors, that is dis- 90 University of California — Experiment Station tributors whose shippers support the Surplus Plant. Other buyers are required to pay 5 cents more per pound of milk fat. Milk not sold as market milk is separated. Sweet cream is sold only to certain firms that had an established trade in supplying cream to the distributors. In May, 1930, an agreement was reached whereby these cream dealers were to take the entire supply of cream available at the Surplus Plant at 6 cents per pound of milk fat over butter quotations. Only one of the firms took its entire allotment of cream throughout the year. Another buyer has taken a large quantity of cream at prices ranging from 6 cents over butter quotations at first to 12 cents in the last two months of 1930. The additional supply of cream has been sold for churning 1 or cheese making at 2 cents over butter quotations. The reason given for selling Surplus Plant cream to the cream dealers at approximately 12 cents under the established buying price of cream in Los Angeles is that these firms had to utilize in butter or condensed milk at their country plants an equivalent amount of milk fat, on which a considerable loss was sustained. Since the quantity of cream available at the Surplus Plant was subject to great variation, the cream dealers could not rely upon this as a permanent source of supply and consequently had to maintain a supply at their country plants by paying the usual premium of about 10 cents over butter quotations, whereas churning cream was worth from 8 to 10 cents less per pound of milk fat. As previously explained (page 37), a pool was organized in Jan- uary, 1931, to provide all distributors with grade- A cream for bot- tling. It was arranged that cream from the Surplus Plant be turned over to this pool at 13 cents per pound of milk fat over butter quota- tions, although no grade-A cream was available from country plants at less than 25 cents over butter quotations. Had any of the cream dealers controlled a similar supply of grade-A milk during this period of shortage it is very doubtful whether they would have sold it at so low a price. Had the milk producers controlled the Surplus Plant at this time it is quite probable that they could have sold their surplus cream at a price comparable with the cost of grade-A cream from country plants. The quality of the cream available at the Sur- plus Plant is superior to that obtained from country plants. Most of the skim milk at the Surplus Plant is dried by the roller process and sold through the usual channels, largely to feed mills. Some skim milk is sold to poultry fattening houses and other buyers at about 3 cents a gallon. Bul. 513] Economic Survey of the Los Angeles Milk Market 91 COSTS OF OPERATION AND ASSESSMENTS The monthly operating' expenses and amount per pound of milk fat assessed against producers to cover these expenses and losses at the Surplus Plant are given in tables 48 and 49. TABLE 48 Receipts for Milk Products Sold, Operating Expenses, and Net Return for Milk Delivered at Surplus Plant, 1930 Total amount Amount per pound of milk fat Month Gross receipts for milk products Operating expenses Net returns Gross receipts Operat- ing ex- penses Net returns Amt. net returns exceeded butter quotations Base buying price Jan. and Feb $ 63,774.80 81,021.80 81,108.02 86,715.70 81,767.78 107,960. 06 106,124.74 90,088.17 92,131.93 75,151.75 100,053.10 $ 5,061.13 8,040.83 5,021.36 8,421.41 19,849.73 17,103.48 17,883.27 11,500 79 15,035.85 10,986.50 13,071.86 $58,713.67 72,980.97 76,086.66 78,294.29 61,918.05 90,856.58 88,241.47 78,587.38 77,0G6.08 64,165.25 86,981.24 $0 640 .666 .750 .579 .422 .529 .591 .637 .645 .608 470 $0 o 051 066 046 056 102 084 100 081 105 089 nfii $0,589 .600 .704 .523 .320 .445 .491 .556 .540 .519 409 $0,203 .212 .306 .149 -.020 .104 .116 .156 .160 .164 077 10 90 90 90 88 86 July 80 80 80 80 80 80 Total $965,897.85 $131,976.21 $833,921.64 $0,576 $0 079 $0 497 $0. 127 $0 84 Source of data: Compiled from records of the Surplus Plant. TABLE 49 Milk Fat on Which Deductions Were Made for the Support of the Surplus Plant, 1930 Pound of milk fat Deduction per pound of milk fat Month Normal* Surplus* Total Normal Surplus Average January 1,267,130 1,145,214 1,246,753 1,191,369 1,257,464 1,260,675 1,321,296 1,205,678 1,074,331 1,113,460 1,205,354 1,335,589 $0 01 .01 .02 .02 .01 02 $0.31 .31 .28 .28 .30 55 $0 030 February .030 March .040 April .030 May .040 June .110 July 1,187,758 1,104,511 1,002,576 1,046,207 1,122,991 1,189,732 133,538 101,167 71,755 67,253 82,363 145,857 .045 August .034 .032 October .029 November .025 0056 * From January to June the basic-surplus plan was not used, milk fat was not divided into normal and surplus, and equal deductions made on all milk fat supporting the Surplus Plant. Source of data: Compiled from records of the Surplus Plant. 92 University of California — Experiment Station In December, 1930, the net return on milk received at the Surplus Plant after deducting the expenses of operation was 40.9 cents per pound of milk fat. This amount was 7.7 cents over wholesale butter quotations and 39.1 cents less than the base price for market milk (table 48). However, the difference between the base price and the net returns was assessed not only against those producers who hap- pened to deliver milk to the Surplus Plant but against all producers who were cooperating in the plan, representing approximately 90 per cent of the total quantity of market milk produced in this milk shed (table 49). Operating expenses in 1930, the first year of operation of the plant, included large initial payments for rental of equipment and organization expenses such as attorney fees. One marked advantage of joint operation of the Surplus Plant by a board of producers and distributors is that the distributors have given the plan a larger measure of moral support than might have been given otherwise. Without the cooperation of most of the dis- tributors it probably would have been impossible to obtain the consent of so large a proportion of the dairymen to submit to the deductions. Four firms that distribute 40,000 gallons or more of milk a month and a number of smaller firms have continued to operate independently of the Surplus Plant. Only a few of the producers delivering milk to these firms contribute to the financial support of the Surplus Plant. Firms that are cooperating with the Cooperative Dairy Products Association have discontinued buying milk from most of the producers who refused to submit to deductions for the Surplus Plant. Elsewhere (page 15) in this report it is shown that grade- A raw milk, and other grades of raw milk constitute a considerable percent- age of the total distribution. Up to this time none of the losses at the Surplus Plant have been assessed against milk that is bottled on the farms. One reason for this is that the amount of raw milk bottled is adjusted closely to the daily requirements of the trade. Most of the surplus over the amount required by the distributors is sold as bulk milk for pasteurizing. Because of the wide variations in the amount of bulk milk sold by these raw-milk dairies, the basic-surplus plan of prices was not applied to them. Instead the board of directors of the Surplus Plant established the principle that raw milk producers should pay a flat deduction of 1 cent per pound of milk fat in bulk milk sold. Under this arrangement the amount contributed to the Surplus Plant by raw milk dairies is very limited. Were it not for the fact that a majority of the directors of the Cooperative Dairy Products Association are producers of raw bottled milk, it is probable Bul. 513] Economic Survey of the Los Angeles Milk Market 93 that a larger assessment would be levied against the milk produced by such dairies. The list of contributions to the Surplus Plant by members of the board of directors indicates that the producers who are paying the bill are not adequately represented (table 50). TABLE 50 Deductions for Surplus Plant on Milk Produced by Members of the Board of Directors, November, 1930 Director Amount of number deduction Remarks 1* $13.50 2* 2 26 Raw milk producer 3* 12.14 4* Raw milk producer 5* 30 58 Raw milk producer 6* 52.84 Raw milk producer 7t 61.47 Raw milk producer 8t 88 00 9t 9.08 Raw milk producer iot Temporarily cut of production lit 595.46 12t 12.31 Raw milk producer * Representatives of producers. t Representatives of distributors. One of the above directors represents the California Milk Producers' Association, which paid the Surplus Plant $19,656.23 by deductions on its members' milk for November. Source of data: Compiled from records of Surplus Plant. The financial plan of the Association is such that it owns no assets. The reason for this arrangement is that the Surplus Plant is operated for the benefit of the industry by a limited membership and board of directors. The absence of any assets avoids the difficulty of issuing evidence of ownership to the producers generally, without giving them voting control of the Association. All property used in the business is leased. The plant is located in connection with an ice cream factory from which steam and refrigeration are purchased. The equipment used is either paid for on a lease plan or leased from the Comalac Service Company, a distributors' company which has purchased some items of equipment for the convenience of the Association. Itemized expenses incurred in the operation of the Surplus Plant are given in table 51. Considerable office expense is involved in computing the amount of deductions to be made from amounts due the producers for milk. The office of the Surplus Plant has assumed the responsibility for a large share of the extra accounting necessitated by the basic-surplus 94 University of California — Experiment Station plan of prices. A record is kept of the basic quantity to which each producer is entitled. At the end of each month a form is sent to each distributor on which the latter reports the total quantity of milk fat delivered by each producer. The Cooperative Dairy Products Asso- ciation then computes the quantity of basic and surplus milk and the amount that should be deducted on each. The distributor makes these TABLE 51 Itemized Expenses in" Operation" of the Surplus Plant Item Total amount January to December, 1930 December, inclusive $162,386.78 $1,342,578.98 202.93 3,425.35 135 00 1,164.82 25000 18006 1,162.45 400.00 3,400.00 8,816.83 57.04 742.39 53.98 1,458.92 9,01005 95.63 873.94 3,405.53 33,446.26 84.95 1,156.66 66.00 57.26 799.81 40 00 1,023.44 122.40 1,36065 83.22 682.02 91.00 532.38 103.50 4,051.36 3,629.46 18,00 5300 292.85 1,386.21 87.77 1,329.47 11,518.99 39.56 3,283.64 13,349.38 153.28 941.90 58.88 269.26 139.87 939.46 841.85 6.885.70 23.55 195.95 325.27 1,366.08 1,029.67 15,04034 481.65 2,83300 $175,458.64 $1,474,555.19 Total milk received at prevailing prices. Purchasing expense Traveling Powdered skim storage Depreciation Membership campaign expense Rent— 1739 Albion Street Transportation expense Insurance Manufacturing and processing materials expense. Manufacturing and processing supplies expense. Miscellaneous expense Wages and salaries Office supplies and expense Administrative expense Telephone Butterfat testing expense Bacteria testing expense Miscellaneous laboratory expense Postage Fees and dues Plant service expense Licenses and taxes Stationery and printing Bulletin expense Moving and installation expense Freight and express Steam expense Electric power Light and heat Water Refrigeration Laundry Repairs to machinery and equipment Rent on machinery and equipment Can expense Total expense Source of data: Compiled from records of the Surplus Plant. Bul. 513] Economic Survey of the Los Angeles Milk Market 95 deductions and pays the total amount thereof to the Association. This method applies only to the independent producers. The California Milk Producers Asosciation makes a complete accounting for its mem- bers and pays the total of their deductions to the Cooperative Dairy Products Association in one check. It is very fortunate that the Cooperative Dairy Products Associa- tion has had the services of a good accountant. Serious difficulties might easily have arisen had the importance of this phase of the operation not been recognized. As indicated elsewhere (page 57) in this report, the board of directors of the Cooperative Dairy Products Association has assumed the function of establishing base buying prices for milk. The advan- tage of this arrangement is that opportunity is given for full discus- sion not only by members of the board of directors but also by any other interested parties. The disadvantages are that this board has not been a truly representative body and that no provision has been made for assembling essential facts as to economic conditions, without which no group can hope to maintain a stable market situation. RECOMMENDATIONS FOR HANDLING SURPLUS Under the conditions that exist in the Los Angeles milk shed it is doubtful whether milk can be produced for a cost as low as the net price received for surplus milk. If not, it is an economic waste to produce more than is required for use as market milk, including a small surplus to allow for fluctuations in supply and sales. The industry should adopt a definite policy of so regulating prices that the supply will be kept in close adjustment as possible with the demand. The quantity of milk coming to the Surplus Plant should be reduced to a maximum of 1,000 10-gallon cans a day, and during most of the year the surplus should not exceed 500 cans daily. The probable volume that will be available for the Surplus Plant should be given careful consideration in formulating any policies, such as for con- struction of a new building. Possibly the most economical plan will be to contract with one or more of the large creameries for disposal of the surplus milk. On account of the variable volume of milk received and the relatively inefficient system of management, costs of operating the Surplus Plant are likely to be higher than the cost of correspond- ing operations in the ordinary milk plant. Probably 50 per cent or more of the monthly cost of the Surplus Plant is in addition to what the cost of handling the surplus milk in the various distributors ' plants 96 University of California — Experiment Station would be. Therefore it is essential that the Cooperative Dairy Prod- ucts Association exercise the greatest possible economy in its operations. Arrangements should be made for the election of directors that adequately represent the milk producers. Perhaps the simplest method is to provide that each dairymens' organization nominate one or more directors depending on its membership or relative importance as a selling agency. The Los Angeles County Farm Bureau might be asked to nominate one or more representatives of independent dairymen. The Association should arrange if posisble to employ a person trained in economics of the dairy industry, who might act as manager or executive secretary of the Association, outline policies for approval by the directors, and supply economic information essential for the establishment of equitable prices. Heretofore the milk producers have paid the entire loss on Sur- plus Plant operations. However, the distributors derive a consider- able advantage from the operation of this plant. They are enabled to carry a smaller surplus, are better able to maintain their selling prices, have a convenient source of accommodation milk to call upon when needed, and are also relieved of considerable expense for account- ing. It is suggested, therefore, that the distributors pay one-half the operating expenses of the Association, which amount at present to approximately $10,000 to $15,000 a month. It is also suggested that this contribution be approximately $5,000 per month be prorated among the cooperating distributors on the basis of their monthly pur- chases of milk fat. The cost to the distributors on this basis should not exceed V2 cen t P er pound of milk fat. Such a contribution by the distributors would go far to strengthen the confidence of milk pro- ducers in the Association. Bul. 513] Economic Survey of the Los Angeles Milk Market 97 ACKNOWLEDGMENTS Credit is due to Professor H. R. Tolley, Assistant Director of the Giannini Foundation for Agricultural Economics and to Professor E. C. Voorhies and Mr. G. E. Gordon for their helpful advice and constructive criticism in the conduct of this study and preparation of the manuscript. Special acknowledgment is due to Mr. H. A. Walsh, Secretary of the Southern California Milk Dealers' Association, for advice and assistance in obtaining" the desired information from members of the trade. Without the cooperation of the leading" milk distributors in Los Angeles, who made available for the purpose a vast amount of confidential information from their records, such a study would have been impossible. The following firms, associations, and departments contributed the essential data for this report : Adohr Creamery Company, Bothell's Inc., Bordens Farm Products Company of California, Brentwood Dairy Company, California State Department of Agriculture — Bureau of Dairy Control, California Dairy Council, California Dairymen's League, California Milk Pro- ducers' Association, Cameron Sanitary Dairy, Challenge Cream and Butter Association, Cloverdale Creamery Corporation, Colnbrook Creamery Corporation, Cooperative Dairy Products Association Limited, Crown City Dairy Company, Dairymen's Cooperative Cream- ery Association (Tulare), Danish Creamery Association (Fresno), Dairymen's Protective Association, Fosselman's Creamery Company, Golden State Milk Products Company Limited, Hansen Dairy Com- pany, Harbor Creameries Inc., Henry Creamery Corporation, Hill- crest Dairy Products Company, Kern County Creamery and Farms Company, Knudsen Creamery Company, Los Angeles Chamber of Commerce Research Department, Los Angeles City Department of Health, Los Angeles County Department of Health, Division of Dairy Products, Los Angeles County Livestock Department, Los Banos Dairymen's Association (Los Banos), Lucerne Cream and Butter Company, Mount View Dairy, Mountain View Dairies Inc., Model Farms Dairy, Our Own Dairies Inc., Peoples Milk Company, Santa Rita Dairy, Santa Monica Dairy Companj^, Southern California Milk Dealers' Association, Southwestern Dairy Company, Valley Dairy Company (El Monte), Wasco Creamery and Construction Company (Wasco), Western Dairy Products Inc., Whittier Sanitary Dairy Inc. 98 University of California — Experiment Station APPENDIX OF TABLES W 05 ft « M P El .9 S o|8 Jl' 1 ' 91 .0 100.0 112 123.8 123.9 143.0 03 (-. 09 a >> CD ft "03 M o (D a 3 o Ah h 0) > OO CO CO OS OS t~ t^ © i*< t^ 1^ CO CO CC CC CC CC ">*l d 29.5 33.2 36.3 40 9 41.5 43.7 o lO 'C O N Ol ■* a n m © os it* OO fli CO N 00 ^ N N CO M M * 28.0 30 4 34 1 37.1 37.6 45.5 09 3 3 o o io o as if CD O > 29.0 30.7 34.0 38.1 37.0 44.8 < OO i-l H 1*1 •«** t~- OO O i*i OO U5 CO IN CO CO CO CO * u 03 O! N •* CO ■* N N OS M N ■* CO « N CO CO M 11 26.5 29.8 33.6 37 2 37.6 42.3 Q 3 21 4 30 3 33 1 36 3 38.7 42 1 c3 «5 CO t-- OO OS O N N (N IN IN CO OS OS OS OS OS os 2 s •A § CM 2 Oi o rH O 05 i < o I? ft 9 © p tf ft * § o m a H HH 6 S M ^j s S & s <*J © Ph w n Eh < W J 3 & a •8 Ah - 5 44 p £ g 3 M 5 '3 £g o "^ &H ft a O w « 02 o 2 t-H CO "8 § H 1 r tf 1 5 s m « a 6 fe T3 P o ft fin a t* o J 3 03 A S3 T3 g o 1 . s a C U P4 rt ■«t< O O © -**! CO CC O t>- «3 CO t^ Oi O O — < O ^H >> 03 a> ft >s 1 (-1 09 ft 1 O 1 3 o 09 > <3 48.0 51.4 55 59.1 54.7 60 3 ci Q lO ■* N N !6 OO OS iC ^ CJ b- (N i(l lO ifl US o * o 48 54 4 55.7 59.8 56.5 62 o 47.6 52.2 55 59.1 54.8 61.6 ft 03 'Jl 47.8 50 3 54.4 58.2 53.6 61.9 bi 3 47.8 50 4 54.2 57.6 53 60.4 >-5 48.2 51 1 55.7 57.2 54.1 61 <0 a 3 •-s o 00 (N OO 00 i-l » OI * N ^ O ijl Kl lO lO >fj CS 03 O lO ■* OO M lO ffl OJ T|i 05 i*i 6 if 1)1 if) lO "O CO ft CO ■* N i* N N 00 O i*< O CO OO ^ io io e u; 14 oi 48.5 51.1 54.5 60.2 51.4 58 3 47.4 51.0 54.1 59 8 56.1 57.3 d t^ m o oj >o i»< ij< T-< •>* 1-- h- ob if if) If) lO U5 lO >< io e n co o o CO CO CO CO CO CC OS Od OS OS OS OS Bul. 513] Economic Survey of the Los Angeles Milk Market 99 TABLE 54 Average Retail Prices per Ton of Dairy Feed, 1927-1930 Month 1927 1928 1929 1930 January February March April May June July August September... October November... December Average. $26.31 24.21 27.57 26.55 25.86 25.96 25.47 24.91 25.37 28 58 28.60 28.81 26.53 $28.73 29.22 28.65 27.82 28.33 27.36 27.50 27.00 29.09 29.28 30.19 30.43 28.63 $31.23 31.70 36.53 33.70 37.74 28.85 28 36 28.54 30.99 3016 29.90 29.72 31.45 $29.86 30.01 25.86 25.04 23.39 23.87 21.62 22.43 21.91 21.96 19.74 19.92 23.80 Source of data: Monthly retail prices of alfalfa, barley, wheat, bran, copra (coconut oil meal), cottonseed meal, and beet pulp were furnished by the Dairymen's Feed and Supply Company, of Los Angeles. An average price for each month was computed using the following weights: alfalfa 78.5 ;copra 6.42 ; barley, 6.25 ; wheat bran 3.36; beet pulp 2.92; and cottonseed meal 2.55; It was assumed that 11,000 pounds of alfalfa and 3,000 pounds of concentrates are fed per cow annually. The weights of each of the concentrate feeds were based on actual .tonnage sales of these feeds by the Dairymen's Feed and Supply Company from July, 1929, to December, 1930, inclusive. 100 University of California — Experiment Station TABLE 55 Pounds of Dairy Feed Equivalent in Price to One Pound of Milk Fat Year and month Price per pound of Price per pound of milk fat Poundsoffeed per pound of milk fat 1927 January February March April May June July August September.. October November.. December... Average.. 1928 January February March April May June July August September. October November.. December... Average 1929 January February March April May June July August September. October November.. December... Average 1930 January February March April May June July August September.. October November... December... Average.. $00131 .0121 .0138 .0133 .0129 .0129 .0127 .0125 .0127 .0143 .0143 .0144 .0133 .0143 .0146 .0143 .0139 .0141 .0137 .0138 .0135 .0145 .0146 .0151 .0152 .0143 .0156 .0158 .0182 .0168 .0188 .0144 .0142 .0142 .0155 .0151 .0149 .0148 .0157 .0149 .0150 .0129 .0125 .0117 .0119 .0108 .0112 .0109 .0109 .0098 .0099 0.0119 $0.90 .90 .90 .90 .90 .90 .90 .90 85 85 85 85 85 85 85 85 85 .857 90 .80 .80 0.845 68.7 74.3 65.2 67.7 69.8 69.8 709 72.0 70.9 62.9 61 5 61.1 67.4 61.5 60.5 61.5 61.1 60.3 62.0 61.6 63.0 58.6 58.2 56.3 55.9 59.9 57.7 55.4 48.4 52.4 46.3 60.4 63.4 63.4 58.1 59.6 60.4 56 60 4 60 69.8 72.0 75.2 72.3 74.1 71.4 73.4 73.4 81.6 71.0 Sources of data: Compiled from records of California Milk Producers' Association and the Dairymen's Feed and Supply Company, Los Angeles. Bul. 513] Economic Survey of the Los Angeles Milk Market 101 TABLE 56 Indexes of Seasonal Variation in Daily Average Production of Milk Fat per Dairy (Daily average production for the period =100; corrected for trend) Month January February ... March April May June July August September October November.. December. California Milk Pro- ducers' Association All shippers 1925-1930 98.9 100.7 99 4 100 9 101 7 101.1 99.9 98.8 97.6 98.0 100.8 102.4 50 Regular shippers 1925-1930 100 5 100 .7 100 5 100 99.4 97 9 98.7 99.4 101.0 102.3 New York Milk Shed Receipts of milk fat per dairy at 250 country milk plants 1925-1929 90 3 94 100 2 111.0 123 4 133 5 108.6 92.1 89 8 88.3 81.7 87.1 Sources of data : Compiled from records of the California Milk Producers' Association and the records of New York distributors. TABLE 57 Retail Price of Quart Bottles of Milk in Los Angeles Year Jan. Feb. Mar. April May June July Aug. Sept. Oct. Nov. Dec. cents cents cents cents cents cents cents cents cents cents cents cents 1906 10 10 10 10 10 10 10 10 10 10 10 10 1907 10 10 10 10 10 10 10 10 10 10 10 10 1908 10 10 10 10 10 10 10 10 10 10 10 10 1909 9 9 9 9 9 9 9 9 9 9 9 9 1910 9 9 9 9 9 9 9 9 9 9 9 9 1911 9 9 9 9 9 9 9 9 9 9 9 10 1912 10 10 10 10 10 10 10 10 10 10 10 10 1913 10 10 10 10 10 10 10 10 10 10 10 10 1914 10 10 10 10 10 10 10 10 10 10 10 10 1915 10 10 10 8 8 8 8 8 8 8 8 9 1916 9 9 9 9 9 9 9 9 9 9 9 9 1917 9 9 9 9 10 10 11 11 12 12 12 14 1918 14 14 14 14 13 13 14 14 14 14 14 14 1919 14 14 14 14 14 14 14 14 14 14 16 16 1920 16 16 16 16 16 16 18 18 18 18 18 18 1921 18 16 16 16 16 15 14 14 14 14 14 14 1922 14 14 14 14 14 14 14 14 14 14 15 15 1923 15 15 15 15 15 15 15 15 15 15 15 15 1924 15 15 15 15 15 17 17 17 17 15 14 14 1925 14 15 15 15 15 15 15 15 15 15 15 15 1926 15 15 15 15 15 15 15 15 15 15 15 15 1927 15 15 15 15 15 15 15 15 15 15 15 15 1928 15 15 15 15 15 15 15 15 15 15 15 15 1929 15 15 15 15 15 15 15 15 15 15 15 15 1930 15 15 15 15 15 15 14 14 14 14 14 14 Source of data: Mr. Ross Weaver, Santa Rita Dairy Company. 102 University of California — Experiment Station TABLE 58 Wholesale Prices of Quart Bottles of Milk in - Los Angeles Year Jan. Feb. Mar. April May June July Aug. Sept. Oct. Nov. Dec. cents cents cents cents cents cents cents cents cents cents cents cents 1909 n n 7i ih lh 71 n n 7h 1910 n n n n n n n 7h 8 8 8 8 1911 8 8 8 8 8 8 8 8 8 8 8 8 1912 8 8 8 8 8 8 8 8 8 8 9 9 1913 9 9 8 8 8 8 8 9 9 9 9 9 1914 9 9 7 7 7 8 8 8 8 8 8 8 1915 8 7 7 7 7 7 7 7 7 7 7 8 1916 8 8 8 8 8 8 8 8 8 8 8 8 1917 8 8 8 8 9 9 10 10 11 11 11 13 1918 13 13 13 13 12 12 13 13 13 13 13 13 1919 13 13 13 13 13 13 13 13 13 13 15 15 1920 15 15 15 15 15 15 17 17 17 17 17 17 1S21 17 15 15 15 15 14 13 13 13 13 13 13 1922 13 13 13 13 13 13 13 13 13 13 14 14 1923 14 14 14 14 14 14 14 14 14 14 14 14 1924 14 14 14 14 14 15 15 15 15 14 13 13 1925 13 13 13 13 13 13 13 13 13 13 13 13 1926 13 13 13 13 13 13 13 13 13 13 13 13 1927 13 13 13 13 13 13 13 13 13 13 13 13 1928 13 13 13 13 13 13 13 13 13 13 13 13 1929 13 13 13 13 13 13 13 13 13 13 13 13 1930 13 13 13 12 12 12 11 11 11 11 11 11 TABLE 59 Retail Prices of Pint Bottles of Milk in Los Angeles Year Jan. Feb. Mar. April May June July Aug. Sept. Oct. Nov. Dec. cents cents cents cents cents cents cents cents cents cents cents cents 1906 5H 5A VA 5A 5A 5H hA. 5H 5A 5A 5A VA 1907 5A 5H 5M 5A 5A 5H 5A 5H 5A 5A 5A 5A 1908 5H VA 5H 5A 5A 5A 5A $A VA VA 5H 5A 1909 5 5 5 5 5 5 5 5 5 5 5 5 1910 5 5 5 5 5 5 5 5 5 5 5 5 1911 5 5 5 5 5 5 5 5 5 5 5 5A 1912 5M 5H 5H 5H 5H VA 5A 5H 5A 5H 5A 5A 1913 5H 5V 2 5H VA 5A 5A 5A 5A 5A 5A 5A 5A 1914 5H 5V 2 5A 5A 5A 5A 5A 5A 5A 5A 5A 5A 1915 5H VA 5A iA *A 4H 4H 4A 4A 4A 4A 5 1916 5 5 5 5 5 5 5 5 5 5 5 5 1917 5 5 5 5 5 5 5 5 7 7 7 8 1918 8 8 8 8 7 7 8 8 8 8 8 8 1919 8 8 8 8 8 8 8 8 8 8 9 9 1920 9 9 9 9 9 9 10 10 10 10 10 10 1921 10 9 9 9 9 9 8 8 8 8 8 8 1922 8 8 8 8 8 8 8 8 8 8 9 9 1923 9 9 9 9 9 9 9 9 9 9 9 9 1924 9 9 9 9 9 10 10 10 10 9 9 9 1925 9 9 9 9 9 9 9 9 9 9 9 9 1926 9 9 9 9 9 9 9 9 9 9 9 9 1927 9 9 9 9 9 9 9 9 9 9 9 9 1928 9 9 9 9 9 9 9 9 9 9 9 9 1929 9 9 9 9 9 9 9 9 9 9 9 9 1930 9 9 9 9 9 9 8 8 8 8 8 8 Source of data: Mr. Ross Weaver, Santa Rita Dairy Company. Bul. 513] Economic Survey of the Los Angeles Milk Market 103 TABLE 60 Wholesale Prices of Pint Bottles of Milk in Los Angeles Year Jan. Feb. Mar. April May June July Aug. Sept. Oct. Nov. Dec. cents cents cents cents cents cents cents cents cents cents cents cents 1909 9% w m w VA w 3H W 3% 1910 SH w 3M m w 3M 3% 3M 4 4 4 4 1911 4 4 4 4 4 4 4 4 4 4 4 4 1912 4 4 4 4 4 4 4 4 4 4 4H 4H 1913 4H 4H 4H 4H 4 4 4 4H 4H 4H 4H 4H 1914 4H 4H 3M 3!^ 3M 4 4 4 4 4 4 4 1915 4 3H 3M 3H 3H 3H 3H 3H 4 4 4 4 1916 4 4 4 4 4 4 4 4 4 4 4 4 1917 4 4 4 4 5 5 5H 5H 6 6 6 7 1918 7 7 7 7 6 7 7 7 7 7 7 7 1919 7 7 7 7 7 7 7 7 7 7 8 8 1920 8 8 8 8 8 8 9 9 9 9 9 9 1921 9 8 8 8 8 8 7 7 7 7 7 7 1922 7 7 7 7 7 7 7 7 7 7 8 8 1923 8 8 8 8 8 8 8 8 8 8 8 8 1924 8 8 8 8 8 9 9 9 9 m 7 7 1925 7 8 8 8 8 8 8 8 8 8 8 8 1928 8 8 8 8 8 8 8 8 8 8 8 8 1927 8 8 8 8 8 8 8 8 8 8 8 8 1928 8 8 8 8 8 8 8 8 8 8 8 8 1929 8 8 8 8 8 8 8 8 8 8 8 8 1930 8 8 8 1Yi 7V 2 1V2 6 6 6 6 6 6 Source of data: Mr. Ross Weaver, Santa Rita Dairy Company. TABLE 61 Wholesale Prices of 3-Gallon Cans of Milk in Los Angeles Jan. Feb. Mar. April May June July Aug. Sept. Oct. Nov. Dec. cents cents cents cents cents cents cents cents cents cents cents cents 1909 70 60 60 50 50 50 50 50 50 50 60 60 1910 60 60 60 60 60 60 60 60 60 75 75 75 1911 75 75 75 75 75 75 75 75 85 85 85 85 1912 85 85 85 75 75 75 75 80 80 80 90 90 1913 90 90 90 90 80 80 80 80 90 90 90 90 1914 90 90 90 70 70 70 80 80 80 80 80 85 1915 85 85 65 65 65 70 70 70 80 80 80 90 1916 90 90 75 75 75 85 85 85 85 85 85 90 1917 90 90 90 90 100 100 100 115 115 125 130 130 1918 140 140 140 140 130 130 140 140 140 140 140 150 1919 150 150 150 150 150 150 150 150 150 150 160 ieo 1920 160 160 160 160 HO 160 175 175 175 175 175 175 1921 175 160 160 160 160 160 150 150 150 150 150 150 1922 135 135 135 135 135 135 135 135 135 135 140 140 1923 140 140 140 140 140 140 140 140 140 140 140 140 1924 140 140 140 140 140 140 140 140 140 130 130 130 1925 130 130 130 130 130 130 130 130 130 130 130 130 1926 130 130 130 130 130 130 130 130 130 130 130 130 1927 130 130 130 130 130 130 130 130 130 130 130 130 1928 130 130 130 130 130 130 130 130 130 130 130 130 1929 130 130 130 130 130 130 130 130 130 130 130 130 1930 130 130 130 130 130 130 115 115 115 115 115 115 Source of data: Mr. Ross Weaver, Santa Rita Dairy Company. 104 University of California — Experiment Station TABLE 62 Buying Prices of Market Milk in Los Angeles per Pound of Milk Fat Year Jan/ Feb. Mar. April May June July Aug. Sept. Oct. Nov. Dec. cents cents cents cents cents cents cents cents cents cents cents cents 1914 57H 57H 57^ 57^ 1915 65 65 45 40 40 45 45 45 55 55 55 60 1916 60 60 45 45 45 52H 52H 52H 55 62H 62^ 62H 1917 62H 62 H 60 60 60 65 70 75 75 80 85 87^ 1918 100 100 95 95 80 85 100 100 100 100 107 107 1919 107 100 100 100 100 100 100 100 104 105 110 115 1920 115 115 115 115 115 115 130 130 130 130 130 130 1921 130 100 100 100 100 100 90 90 90 90 90 90 1922 90 90 90 90 90 90 90 90 90 90 100 100 1923 100 100 100 95 95 95 95 95 95 100 100 100 1924 100 100 105 95 95 100 108 104 105 105 90 90 1925 90 96 93 90 80 79 83 87M 87H 90 95 95 1926 95 95 95 95 94 90 90 90 95 95 90 90 1927 90 90 90 90 90 90 90 90 90 90 88 88 1928 88 88 88 85 85 85 85 85 85 85 85 85 1929 90 87M 88 88 87 87 90 90 90 90 90 90 1930 90 90 90 90 88 86 80 80 80 80 80 80 Sources of data: Years 1914-1928: Mr. Ross Weaver, Santa Rita Dairy Company. Years 1929-1930: California Milk Producers' Association. TABLE 63 Monthly Average Butter Quotations at Los Angeles in Cents per Pound Year Jan. Feb. Mar. April May Jupe July Aug. Sept. Oct. Nov. Dec. cents cents cents cents cents cents cents cents cents cents cents cents 1921 46.5 48.5 39.5 34 32.0 33.0 40 5 44 5 46.5 51.0 48.5 44.5 1922 36 43 5 33 31 34.5 40 41 41.5 48.0 53 48.0 52 1923 52 48 44 .5 43.5 45.5 47.0 43.5 48.0 51.5 52 52.0 52 1924 51.7 49.7 47 5 37.2 34 .7 38.5 39.0 40 39.7 39.7 38.7 42.2 1925 42 7 39.7 44.7 40 5 40 7 45.7 47.5 48.7 51.8 57.5 57.8 49 5 1926 43 5 45 5 40.7 39.7 39.5 41.0 42 44.0 46.0 47.6 46.0 48.7 1927 48.2 48 5 46.0 43 2 42.0 42.0 42 44.0 47.2 48.7 49.0 49.0 1928 47.7 45 5 44.2 41 42.5 43.2 46.2 48.4 51 5 51.7 50 2 51.0 1929 46.5 48 2 45.2 43.5 45.5 45.7 46.0 47.0 49.5 49.5 48 42.7 1930 36.9 39 38.8 39.8 37.4 34 34.1 37.5 40 38.0 35.5 33.2 Source of data: Mr. W. H. Jackson, Golden State Milk Products Company. Bul. 513] Economic Survey op the Los Angeles Milk Market 105 TABLE 64 Retail Prices of Coffee Cream in - 14 -Pint Bottles at Los Angeles* Year Jan. Feb. Mar. April May June July Aug. Sept. Oct. Nov. Dec. cents cents cents cents cents cents cents cents cents cents cents cents 1921 18 18 18 18 18 18 16 15 15 15 15 15 1922 15 15 15 15 15 15 15 15 15 15 16 16 1923 16 16 17 17 16 16 17 17 17 17 17 1924 17 17 17 17 17 17 17 17 17 17 17 1925 17 17 17 17 17 17 17 17 17 17 17 1926 17 17 17 17 17 17 17 17 17 17 17 1927 17 17 17 17 17 17 17 17 17 17 17 1928 17 17 17 17 17 17 17 17 17 17 17 1929 17 17 17 17 17 17 17 17 17 17 17 1930 17 17 17 15-20t 15-20 15-20 15-17 15-17 15-17 15-17 15-17 15-17 * The percentage of milk fat in the cream during this period varied from 21.0 to 26.5 per cent. f Beginning with April, 1930, two grades of coffee cream were sold. Source of data: Mr. W. H. Jackson, Golden State Milk Products Company, Ltd. TABLE 65 Wholesale Prices of Coffee Cream in %-Pint Bottles at Los Angeles* Year Jan. Feb. Mar. April May June July Aug. Sept. Oct. Nov. Dec. cents cents cents cents cents cents cents cents cents cents cents cents 1921 17 15 15 15 15 15 15-14 14 14 14 14 14 1922 14 14 14 14 14 14 14 14 14 14 15 15 1923 15 15 15 15 15 15 15 15 15 15 15 15 1924 15 15 16 16 15 15 15 15 15 15 15 15 1925 15 15 15 15 15 15 15 15 15 15 15 15 1926 15 15 15 15 15 15 15 15 15 15 15 15 1927 15 15 15 15 15 15 15 15 15 15 15 15 1928 15 15 15 15 15 15 15 15 15 15 15 15 1929 15 15 15 15 15 15 15 15 15 15 15 15 1930 13-15f 13-15 13-15 13-17 13-17 13-17 13-15 13-15 13-15 13-15 * The percentage of milk fat in cream during this period vaiied. t Beginning with January. 1930 two grades of coffee cream were sold. Source of data: Mr. W. H. Jackson, Golden State Milk Products Company, Ltd. 106 University of California — Experiment Station TABLE 66 Wholesale Prices of Bulk Coffee Cream in Los Angeles, Price per Gallon in 3 -Gallon Cans* Year Jan. Feb. Mar. April May June July Aug. Sept. Oct. Nov. Dec. cents cents cents cents cents cents cents cents cents cents cents cents 1921 $2 40 $2.25 $2 25 S2.25 $2.25 $2.25 $2.25 $2 00 $2.00 $2 00 $2.00 $2 00 1922 2.00 2 00 2.00 2 00 2 00 2 00 2 00 2 00 2.00 2.00 2 00 2 00 1923 2 00 2 00 2.00 2 00 2 00 2 00 2 00 2 00 2 00 2.00 2 00 2 00 1924 2 00 2 00 2 00 2 00 2.00 2 00 2 00 2.00 2 00 2 00 2 00 2 00 1925 1.60 00 1.60 1 60 1 60 1 no 60 1.60 1.60 1 60 1 60 1 60 1926 1.60 60 1.60 1 60 1 60 1 60 60 1.60 1 60 1 60 1.60 1 60 1927 1.80 80 1.80 1 80 1 80 1 80 80 1.80 1.80 1 80 1.80 1 80 1928 1.80 80 1.80 1 80 1.80 1 80 80 1.80 1 80 1 80 1.80 1 80 1929 1.80 80 1.80 1 80 1.80 1.80 80 1.80 1.80 1.80 1 80 1 80 1930 1.80 so 1.80 1 60 1.60 1.60 60 1.60 1.60 1 60 1 60 1 60 * The percentage of milk fat in cream varied during this period. Source of data: Mr. W. H. Jackson, Golden State Milk Products Company, Ltd. TABLE 67 Rail Transportation Rates on Milk and Cream from Country Points to Los Angeles From Dis- tance Rates per gallon on quantity shipments Rate per gal. from country plant to station Rate per gal. from station Miles 1,000 gal. 2,000 gal. 3,000 gal. 4,000 gal. to city plant Bakersfield Wasco (Famoeo) Tipton Tulaie 170.8 191 1 223 3 233.7 252.4 244.6 198.3 198.3 223 3 257.4 265.6 276.5 278.2 333.2 346.2 218.6 $003997745 .04472887 .05226560 .05467642 .05467642 .05725108 .04641410 .04641410 .05226560 .06024704 .06216634 .06471759 .06511549 .07798879 .08103157 0.05116552 $0.02665163 .02981924 .03484373 .03646655 .03646655 .03816738 .03094273 .03094273 .03484373 .04016470 .04144422 .04314506 .04341033 .05199253 .05402105 03411034 $0 02132096 .02385501 .02787454 .02917277 .02917277 .03053342 .02475379 .02475379 .02787454 .03213124 .03315485 .03451550 .03472771 .04159336 .04321615 0.02728784 $0 01827560 .02044770 .02389310 .02500590 .02500590 .02617220 .02121810 .02121810 .02389310 .02754180 .02841920 .02958550 .02976740 .03565240 .03704340 002339020 $0 0035 .0060 .0035 .0035 .0060 .0035 .0060 .0035 .0035 .0035 .0035 .0035 .0035 .0035 .0035 0.0035 $0 005 .005 .005 .005 Viaalia (Tulare) Goshen Santa Maiia (Guadalupe) Guadalupe Corcoran (Tipton) Hanford .005 .005 .005 .005 .005 .005 .005 Riverdale Fresno Merced .005 .005 .005 .005 El Centro 005 Source of data: Rail transportation rates are taken from Local Commodity Tariff No. 2 effective Feb. 19th, 1931. Southern Pacific Company. Rates per gallon from country plants to station and station to city plants are based on existing con- tracts for this type of work. At some stations the rate from country plant to station is higher because the product must be hauled some distan ce to the station. At present, milk produced at Visalia is trucked to Tulare to be shipped in the regular refrigerator car from there. The same applies from Santa Maria. While the milk produced at Corcoran is trucked to Tipton, the cost is low because a small additional sum is paid a regular laborer to handle the shipments. STATION PUBLICATIONS AVAILABLE FOR FREE DISTRIBUTION BULLETINS No. 253. 263. 277. 279. 283. 304. 310. 331. 335. 343. 344. 347. 348. 349. 357. 3G1. 362. 363. 364. 366. 369. 370. 371. 373. 374. 379. 388. 389. 390. 391. 392. 393. 394. 396. 404. 405. 406. 407. 408. 409. 410. 412. Irrigation and Soil Conditions in the Sierra Nevada Foothills, California. Size Grades for Ripe Olives. Sudan Grass. Irrigation of Rice in California. The Olive Insects of California. A Study of the Effects of Freezes on Citrus in California. Plum Pollination. Phylloxera-resistant Stocks. C'ocoanut Meal as a Feed for Dairy Cows and Other Livestock. Cheese Pests and Their Control. Cold Storage as an Aid to the Market- ing of Plums, a Progress Report. The Control of Red Spiders in Decid- uous Orchards. Pruning Young Olive Trees. A Study of Sidedraft and Tractor Hitches. A Self-Mixing Dusting Machine for Applying Dry Insecticides and Fun- gicides. Preliminary Yield Tables for Second- Growth Redwood. Dust and the Tractor Engine. The Pruning of Citrus Trees in Cali- fornia. Fungicidal Dusts for the Control of Bunt. Turkish Tobacco Culture, Curing, and Marketing. Bacterial Decomposition of Olives During Pickling. Comparison of Woods for Butter Boxes. Factors Influencing the Development of Internal Browning of the Yellow Newtown Apple. The Relative Cost of Yarding Small and Large Timber. Pear Pollination. A Survey of Orchard Practices in the Citrus Industry of Southern Cali- fornia. Walnut Culture in California. Pruning Bearing Deciduous Fruit Trees. The Principles and Practice of Sun- Drying Fruit. Berseem or Egyptian Clover. Harvesting and Packing Grapes in California. Machines for Coating Seed Wheat with Copper Carbonate Dust. Fruit Juice Concentrates. Crop Sequences at Davis. I. Cereal Hay Production in California. II. Feeding Trials with Cereal Hays. The Mat Bean, Phaseolus Aconitifolius. The Dehydration of Prunes. Citrus Culture in Central California. Stationary Spray Plants in California. Yield. Stand, and Volume Tables for White Fir in the California Pine Region. Alternaria Rot of Lemons. The Digestibility of Certain Fruit By- products as Determined for Rumi- nants. Part I. Dried Orange Pulp and Raisin Pulp. Factors Influencing the Quality of Fresh Asparagus After it is Harvested. A Study of the Relative Value of Cer- tain Root Crops and Salmon Oil as Sources of Vitamin A for Poultry. Planting and Thinning Distances for Deciduous Fruit Trees. No. 415. 416. 418. 419. 420. 421. 423. 425. 426. "427. 428. 431. 432. 433. 434. 435. 436. 438. 439. 440. 444. 445. 446. 447. 448. 449. 450. 451. 452. 454. 455. 456. 458. 459. 460. 462. 464. The Tractor on California Farms. Culture of the Oriental Persimmon in California. A Study of Various Rations for Fin- ishing Range Calves as Baby Beeves. Economic Aspects of the Cantaloupe Industry. Rice and Rice By-Products as Feeds for Fattening Swine. Beef Cattle Feeding Trials, 1921-24. Apricots (Series on California Crops and Prices). Apple Growing in California. Apple Pollination Studies in California. The Value of Orange Pulp for Milk Production. The Relation of Maturity of California Plums to Shipping and Dessert Quality. Raisin By-Products and Bean Screen- ings as Feeds for Fattening Lambs. Some Economic Problems Involved in the Pooling of Fruit. Power Requirements of Electrically .Driven Dairy Manufacturing Equip- ment. Investigations on the Use of Fruits in Ice Cream and Ices. The Problem of Securing Closer Rela- tionship between Agricultural Devel- opment and Irrigation Construction. I. The Kadota Fig. II. The Kadota Fig Products. Grafting: Affinities with Special Refer- ence to Plums. The Digestibility of Certain Fruit By- Products as Determined for Rumi- nants. Part II. Dried Pineapple Pulp, Dried Lemon Pulp, and Dried Olive Pulp. The Feeding Value of Raisins and Dairy By-Produces for Growing and Fattening Swine. Beans (Series on California Crops and Prices). Economic Aspects of the Apple In- dustry. The Asparagus Industry in California. A Method of Determining the Clean Weights of Individual Fleeces of Wool. Farmers' Purchase Agreement for Deep Well Pumps. Economic Aspects of the Watermelon Industry. Irrigation Investigations with Field Crops at Davis, and at Delhi, Cali- fornia, 1909-1925. Studies Preliminary to the Establish- ment of a Series of Fertilizer Trials in a Bearing Citrus Grove. Economic Aspects of the Pear Industry. Rice Experiments in Sacramento Val- ley, 1922-1927. Reclamation of the Fresno Type of Black-Alkali Soil. Yield, Stand and Volume Tables for Red Fir in California. Factors Influencing Percentage Calf Crop in Range Herds. Economic Aspects of the Fresh Plum Industry. Lemons (Series on California Crops and Prices). Prune Supply and Price Situation. Drainage in the Sacramento Valley Rice Fields. Curly Top Symptoms of the Sugar Beet. BULLETINS— (Continued) No. No. 466. The Continuous Can Washer for Dairy 484. Plants. 467. Oat Varieties in California. 485. 468. Sterilization of Dairy Utensils with 486. Humidified Hot Air. 469. The Solar Heater. 487. 470. Maturity Standards for Harvesting Bartlett Pears for Eastern Shipment. 488. 471. The Use of Sulfur Dioxide in Shipping Grapes. 489. 472. Adobe Construction. 473. Economic Aspects of the Sheep In- dustry. 474. Factors Affecting the Cost of Tractor 490. Logging in the California Pine Region. 491. 475. Walnut Supply and Price Situation. 477. Improved Methods of Harvesting Grain 492. Sorghum. 493. 478. Feeding and Management of Dairy 494. Calves in California. 495. 479. I. Irrigation Experiments with Peaches in California. II. Canning Quality 496. of Irrigated Peaches. 480. The Use, Value, and Cost of Credit in Agriculture. 497. 481. Utilization of Wild Oat Hay for Fat- tening Yearling Steers. 498. 482. Substitutes for Wooden Breakpins. 500. 483. Utilization of Surplus Prunes. The Effects of Desiccating Winds on Citrus Trees. Drying Cut Fruits. Pullorum Disease (Bacillary White Diarrhea of Chickens). Asparagus (Series on California Crops and Prices). Cherries (Series on California Crops and Prices). Irrigation Water Requirement Studies of Citrus and Avocado Trees in San Dieero County, California, 1926 and 1927. Olive Thinning and Other Means of Increasing Size of Olives. Yield, Stand, and Volume Tables for Douglas Fir in California. Berry Thinning of Grapes. Fruit Markets in Eastern As,ia. Infectious Bronchitis in Fowls. Milk Cooling on California Dairy Farms. Precooling of Fresh Fruits and Tem- peratures of Refrigerator Cars and Warehouse Rooms. A Study of the Shipment of Fresh Fruits and Vegetables to the Far East. Pickling Green Olives. Dehydration of Grapes. CIRCULARS No. 117. The Selection and Cost of a Small Pumping Plant. 127. House Fumigation. 178. The Packing of Apples in California. 203. Peat as a Manure Substitute. 212. Salvaging Rain-Damaged Prunes. 230. Testing Milk, Cream, and Skim Milk for Butterfat. 232. Harvesting and Handling California Cherries for Eastern Shipment. 239. Harvesting and Handling Apricots and Plums for Eastern Shipment. 240. Harvesting and Handling California Pears for Eastern Shipment. 241. Harvesting and Handling California Peaches for Eastern Shipment. 243. Marmalade Juice and Jelly Juice from Citrus Fruits. 244. Central Wire Bracing for Fruit Trees. 245. Vine Pruning Systems. 248. Some Common Errors in Vine Pruning and Their Remedies. 249. Replacing Missing Vines. 250. Measurement of Irrigation Water on the Farm. 253. Vineyard Plans. 255. Leguminous Plants as Organic Ferti- lizers in California Agriculture. 257. The Small-Seeded Horse Bean (Vicia faba var. minor). 258. Thinning Deciduous Fruits. 259. Pear By-Products. 261. Sewing Grain Sacks. 262. Cabbage Production in California. 263. Tomato Production in California. 265. Plant Disease and Pest Control. 266. Analyzing the Citrus Orchard by Means of Simple Tree Records. No. 269. 270. 273. 276. 278. 279. 282. 287. 288. 290. 294. 295. 296. 301. 302. 304. 307. 308. 310. 311. 312. 313. 316. 317. 318. 319. 320. An Orchard Brush Burner. A Farm Septic Tank. Saving the Gophered Citx*us Tree. Home Canning. Olive Pickling in Mediterranean Countries. The Preparation and Refining of Olive Oil in Southern Europe. Prevention of Insect Attack on Stored Grain. Potato Production in California. Phylloxera Resistant Vineyards. The Tangier Pea. Propagation of Deciduous Fruits. Growing Head Lettuce in California. Control of the California Ground Squirrel. Buckeye Poisoning of the Honey Bee. The Sugar Beet in California. Drainage on the Farm. American Foulbrood and Its Control. Cantaloupe Production in California. The Operation of the Bacteriological Laboratory for Dairy Plants. The Improvement of Quality in Figs. Principles Governing the Choice, Oper- ation, and Care of Small Irrigation Pumping Plants. Fruit Juices and Fruit Juice Beverages. Electrical Statistics for California Farms. Fertilizer Problems and Analysis of Soils in California. Termites and Termite Damage. Pasteurizing Milk for Calf Feeding. Preservation of Fruits and Vegetables by Freezing Storage. 16m-5,'31