Hi? n^i
- /
University of California
College of Agriculture
Agricultural Experiment Station
Berkeley, California
PROPOSALS FOR REORGANIZATION OF
BODEGA CObPERATIVE CREAiVuSRY INCORPORATED
AND
POINT REYES DAIRYI'.^iEN • S ASSOCIATION
by
J. M. Tinley and K. D. Naden
March, 1946
Contribution from the
Giannini Foundation of Agricultural Economics
Mimeographed Report No. 86
UNIVERSITY OF CALIFORNBA
LIBRARY
COLLECE Of AGRICULTURE
DAVIS
I
i
PROPOSALS FOR REORGANIZATION OF
BODEGA COOPERATIVE CREAlilERY INCORPORATED AND POINT REYES DAIRYI>'IEN ' S ASSOCIATION
J. M. Tinley and K. D« Naden
Reason and Purpose of Study. — Toward the end of 1945, the Challenge Cream
and Butter Association of Los Angeles and the Berkeley Bank for Cooperatives re-
quested the Giannini Foundation of Agricultural Economics, College of Agriculture,
University of California, to undertake an analysis of the economic conditions under
which the Bodega Cooperative Creamery Incorporated and the Point Reyes Dairymen's
Association were operating, with a view to recommending possible plans for reorgan-
ization.
More than two decades ago these two associations were organized to manu-
facture cooperatively butter and other dairy products. The two plants are situ-
ated roughly fifty and thirty miles northeast of San Francisco. Since 1938, a
large number of members of both associations have equipped themselves to ship
market milk and market cream to the Alameda-Contra Costa market. This transition
from the manufacturing of milk products to the shipping of market milk and market
cream was accelerated during the war years — so much so, that considerably less
than half the volume of milkfat received by the associations in 1945 was used for
manufacturing purposes. Moreover, an important volume of the manufacturing milk
of both associations has been sold in unprocessed form to creameries in the East
Bay cities and elsewhere. The volume of butter and dairy by-products handled has
declined to such an extent that operating costs per unit have risen appreciably.
As a result, the two associations have been unable to pay to members re-
turns comparable with those made to patrons by other creamery operators in the
same territory. Moreover, considerable dissatisfaction has arisen among members
who ship market milk, because they have been required to contribute toward the
losses incurred in handling manufacturing milk.
The purpose of this study, therefore, was to ascertain:
1. To what extent the conditions under which these two associations were
originally organized have changed.
2. Whether these changes in the economic environment and market outlets
aro likely to continue for any length of time.
3. How these changes have, and are likely to affect the operations of the
tivo associations.
4. In the light of the information, to recommend one or more plans for
the reorganization of the two associations.
Source of Data. --The information upon which this study is based v;as ob-
tained from: (1) publications of the United States Department of Agriculture;
l/ Associate Professor of Agricultural Economics, Agricultural Economist in
the Experiment Station, and Agricultural Economist on the Giannini Foundation.
2/ Research Assistant on the Giannini Foundation.
2.
(2) annual dairy statistics reports of the California Department of Agriculture j
(3) the records of the Bodega Cooperative Creamery Incorporated and the Point
Reyes Dairymen's Association; and (4) intervievj-s with members of the two associa-
tions, officials of the Challenge Cream and Butter Association, operators of
other dairy processing plants in Marin and Sonoma counties, and with several
persons familiar with the dairy industry in Central California.
Trends in the California Dairy Industry (1924-1945)
Trend in Popula tion and Buying Power .— The bulk of dairy products produced
in California has, and is bein;^ consumed in the state. The trend of population
and of buying povrer in California is thus of considerable importance in influenc-
ing tno manner in v^hich milkfat and solids-not-fat are utilized.
Between 1924 and 1945 the population of California (excluding members of
the armed forces) was just about doubled -- from 4,415,000 in 1924 to 8,823,000
in 1945 (table 1). This increase for California yras far greater than that for
the i;Testern States and for the United States as a v/hole, for v;hich the increases
vifcre 60.4 per cent and 23.5 per cent respectively.
Data indicating the trend of buying power in California are not available
for the whole of the period 1924 to 1929. Data on income received by persons in
California and in the United States, hov/ever, are available from 1929 on. These
data, v/hich reflect both increase in populs^tion and higher incomes per capita,
indicate that the monetary value of incoriies of people in California was just about
the same in 1939 as in 1929, but that income increased nearly one and a half times
betvreen 1939 and 1944 (table 2). Total income in California increased at a much
more rapid rate than did total income in the United States. Fioreovar, income per
capita in California has consistently exceeded that of the United States.
These facts are important because experience and inves titration have shovm
that consumption of dairy products per capita, and especially of the higher-
priced commoditif-s , such as market milk, market cream, and ico cream, tends to
rise with increases in family income. |
Trend in Number of Dairy Cov/s . — The number of dairy cov/s in California
increased from btj9,000 in i9'<i4 to 775,000 in 1944, an increase of roughly 36 per
cent (table 3). The rate of increase was somev/hat greater than for the Western
States and the United States, in which the increases v/ore 25.6 per cent and 21.3
per cent, respectively. |
The rate of increase in numbers of dairy cows in California was not as rapid
as that for population. As a result, the mmbor of dairy cov^s per hundred of
population declined stuadily, from 12.9 in 1924 to only 8.9 in 1944. In the United
States, the number of dairy cows per hundred of population in 1944 was practically
the same as in 1924, namely 18.8; in the Western States, the number had declined
from 18.4 per hundred of population to 14.4. It is significant that the number
of dairy cows per hundred of population in California has been consistently below
that of the United States and the Western States. The disparity has become
greater sincu 1924. ^
Tr^.nd in Output of Milkfat.— Production of milkfat in California increased
from 127 million pounds in 1924 to 208 million in 1944 — an increase of roughly
64 per cent (table 4). As the number of cows in the state has increased only 36
per cent, it is apparent that a material increase in output of milk per cow has
occurred since 1924.
3.
ThBL 1
Population of th3 Unitize' Stc^tes, Western States,
^i-nd California
Population
Per cent change, 1924
=100
Year
(thousands) 1
V^estern
California j
California
ot at s s
States
1
States
1924
X X w , C\J C
10 ,217
4,415
XUw .VJ
100 ,0
1925
T 1 ,1 PA7
X-l 4 y oO /
10.509
4,634
XUX tf^
X V . ?
105 .0
1926
1 1 A ^ '^P
xXO f ooc.
10 , 801
4, 854
1 np Q
1 0"^ 7
109 .9
1927
1 1 R 1 Q 7
ail.093
5,073
1 n 1 zi
X •
X\JO .D
11 ^•9
1928
HQ C « P
11 , 385
5,293
XUO , r
111
XXX .'i
1 IQ 9
1929
XcXj DXD
11 677
5,513
1 n7
XU 1 • o
11"
1 ? 4 - Q
X -t 9 t/
1930
11 , 9^:1
5, 709
1 no 7
XUO , 1
1 1 A Q
XXD «s
129.7
1931
12,122
5,824
1 nQ
xuy » c
1 1 fl .
XX o • o
X ^X • v'
1932
12 202
5, 894
Tin ^
XXU ,0
1 1 Q l
XX^ .4
133,5
1933
12,330
5,9^3
Tin 0
X X J » V
1 pn 7
1 3S 1
1934
126,373
12, 451
6 j055
111.6
121.9
137 .1
1935
12,666
6,175
IIP /■
XX£;
1 p/i p
139.9
1936
128,053
12,959
5,341
113,1
126.8
143.6
1937
128,824
13,253
6,528
113.8
129,7
147.9
1938
129,824
13,462
6 , 656
114.7
131.8
150.8
1939
130,879
13,680
b,785
115.6
133.9
153.7
1940
131,970
13,960
6,S6i
116.6
136,6
157.7
1941
133,203
l-.,283
7,228
117.7
139,8
163.7
19 c 2
133,665
l.,813
7,664
12.8.1
145,0
173.6
19 ^3
136,497
16,151
8,4b8
120.6
158.1
191.6
1944
138,101
16,361
8,756
122. C
160.1
198,3
19i5
139,800
16,385
8,823
123.5
160.4
199 .8
Source; of data:
Compiled from U.S. Bur. of the Census. Annual Statistical Abstracts
of the Unites States, and
U, S. Bureau of the Census, Estirjted Population of the United States
by states: 19i0 to 1945. Washington, D .C . , 1946. (Series P--.6, no. 3)
Note: The di^ta for the United States includes estim.tes of population
in the armed forces; those for California do not.
4
TriBL 2
Incomt Pa"'--ents, United Statc!S a-'d California
Total income
(Miilion dollars)
Per cent change,
1929 =100
Year
United
United
States
California
States
California
ly c9
82,617
5,217
100,0
100
.0
ly 30
73,3i5
-x,878
88.8
S3
.5
ly oi
61,990
'.^,151
75.0
79
.6
ly id
47,376
3,182
57 .5
61
.0
it
46,273
3,113
56.0
59
.7
ivc-±
52,883
3,530
64,0
67
.7
58, i:96
3,904
70.8
74
.8
1 V D
67,917
4,730
82.2
90
.7
lyo /
72,200
5,047
87.4
96
.7
66,022
4,772
79.9
91
.5
ly oy
70,601
5,0^.7
85.4
96
.7
1940
75,852
5,605
91.8
107
.4
19.1
92,269
7,04,
111.7
1:5
.0
1912
115,3C1
9,205
139.6
176
• -J.
19 'x3
138,653
12,035
■ 168.1
230
.7
19-i^
148,086
12,948
179..2
248
.2
Source of Data: |
U.S. Deot. of Com,, .i^ur. of For,, and Dom. Com. Survey of Current
Business. Issues of Jul^, 1C12; Aug., 19i.-i-; and Aug., 1945.
It -
V « -
■
■
•J
Nu'-.ber of Dai.ry C;o.;S in t- e Unitac' St'-^tes , 'Aest rn Gt-tes, ^nd oalif oir.ia
NuT,ber
of dc::.ry
cov/s
r
- ber of
cows
(t
houspnds
)
rer cent c:-.-.rpe, ^.924-100
P3r IOC poDul-..tion
Year
U-ited
we jterr.
j
U'; ited
7/ astern
United
'Western
O "t S 3
states
iOalif ornia
States
States
Golif ornia
State s
states
1
California
1924
21 ,417
1,881
i 1
i
i 569
IOC .C
100.0
' 1
18.9
18.4
IPG
J — - »/
! 21,505
1, ; 03
' 573
100 .4
ICi .2
i 100.7
IS .7
IS.l
l«i
1926
21 , 312
l,91t
1 591
99.5
101 .9
103 ,9
18.3
17.7
12.2
1927
21,191
1,930
1 601
QP 9
102.6
105.6
17.9
17 .4
11.8
1928
21,223
1,943
603
9S 1
103. 3
106 .0
17.7
17 .1
11.4
1929
21 , :18
1,977
olO
100 9
105 .1
1C7 .2
17 .8
16 .9
11 .1
1930
22,218
2,011
611
10 ■^■•7
106,9
107.4
18.1
16.8
10.7
1931
23-108
2,067
614
107 .9
109.9
107.9
18.6
17.0
10.5
1932
24,105
2,120
624
112.5
112.7
109.7
19 .3
17.4
10.6
1933
25,062
2,188
630
117.0
116.3
110.7
20.0
17.7
10.6
1934
25,198
2,188
624
117.7
116.3
109.7
19.9
17-6
10.3
1955
24,276
^,,091
615
113.3
111.2
108.1
19.1
16.5
10.0
1936
23,988
2,071
630
112.0
110.1
110.7
18.7
16 .0
9.9
1937
23,710
2,063
634
110.7
109.7
111.4
18.4
15.6
9.7
1938
23,717
2,060
632
110.7
109.5
111.1
16-3
15.3
9.5
. 1939
23,923
2,081
658
111.7
110.6
112.1
18.3
15.2
9.4
1940
24,276
2,125
651
113.3
113.0
114.4
18.4
15.2
9.3
1941
24,361
2,299
740
113.7
122 .2
130.0
18.3
16.1
10.2
1942
25,167
2,310
754
117.5
122.8
132.5
18.8
15.6
9.8
1943
25 , 663
2,341
757
119.8
124.4
13^ .0
18.8
14.5
8.9
1944
25,982
3)353
775
121.3
125.6
13 1. 2
18.8
14.4
8.9
Sources of data:
(1) Farm Product io-.^. Disposition and Incone from Milk. 1924-1940. U. S. D. A. Agr.
i:V<rtg. Service. May 1941. —
(2) Farm Production, Dis osition and Income from falk. 1940-1943. U. S. D. A. Bur.
Agr. 3con. April 15, 1944.
(3) Farm Production, DispositiOii and Income from iViilk. 1943-4.4. U..j. D. A. Bur. Agr.
Econ. April 16, 1945.
T — ""^t"
Production of iAiiy.f.i-i in Unitsd States, "est-rn Str.tes, ;-rd U.lifor .ia
-..z:.-: j
irod'-ction
1
froduotio>- :.or c
a; ita
( •
nds)
5 er cent c . . n^e
. 1924-100 ;
(
i-'ounds )
Year
United
"Web L/C I I!
United
Western
1
United
'v'e stern
States
f ^ a "1 T i"\ r •n 1 -
Ct- tes
States 1
Oililornia iStates
3t.^te3
Oalif ornia
j
1
1924 1
3,495 '
365
1
127
100 .0
100 .0 '
100 .0 *
30.9
35.7
28 .8
1925
3,iol
37 7
133 :
101. 5
103 ,3
104.7
30.9
35.9
26.7
1926
O ^ C 0 ^
130
104.7 \
1
104.9
102.4
31.3
. 35.5
26.8
1927
3,734
4C3
13 9 i
iCv.e 1
110.4
109.4
31. c.
36 .3
27 .4
1928 .
3,762
407
140 1
107 . £ •
lil.5
110.2
31.4
3. .7
26 .4
1929
3,584
149
111.1 *
117.3
117.3
32.0
3o • 7
27 .0
19oC
3 , t' <d 9
438
i?5 '
112.4
1--.0.C
119.7
31.9
36.7
26.6
1931
4,0,5
4i3
Hi. 7
121.4
121.3
32.6
3t>.5
2o .4
1932
4,CVi'
4 ^4
156
116.7
121.6
122.8
32.7
36-4
26 .5
1933
4,114
4-i2 i 155
443 j 153
117.7
121.1
122.0
32.8
35.6
26.0
19 i4
3,996
114.3
121 . 4
120.3
35 .6
25.3
1935
3,994
439
154
114.3
120. 3
121. -3
31.4
34.6
24.9
1936
4,C56
443
x54
116 .0
121.4
121.3
31.7
34.2
24.3
1937
4,0o3
4^4
157
116.3
121 .6
123.6
31.5
33.5
24.0
1938
4 , 227
454
159
120.9
124.4
125 .2
32.6
33.7
23.9
1939
4,..?3
458
161
128 .2
12 6.6
32.7
34.2
25.7
1940
4,379
434
166
125.3
132.6
130.7
33.2
34.7
23.8
19 ;l
4,577
521
193
131.0
142.7
152.0
34.4
3o.5
26.7
1942
4,731
o'6-
197
135.4
14 7 .7
155.1
35.4
36.4
25.6
1943
4,695
543
198
134.3
148.8
155.9
34.4
33.6
23.4 ,
1944
4,728
555
208
135 .3
152.0
163.8
:^4.2
33.9
23.8
1945
1
■
Sources of d--ta:
(1) Farx: Proda tior , Disposition and Inco-ie from iViilV. 1924-1940. U.S.D.-i. Agr.
^-^tg. Service, i.'lay 1941. : .
(2) Farm t-roduction, Disiosit^on and Inco/ie from MilV. 1940-1 943. U.S.D.A. Bur.
Agr. 'ticon. April 15, 1944.
(3) far.T. troduction, Dispositio^^ and Income from idik. 1943-44. U.S.D.-i. Bur. Agr.
Econ. April Ifa, 1945.
7,
In the United States, the output of milkfat increased from 3,495 million
pounds in 1924 to 4,728 million pounds in 1944 — a rise of about 35 per cent.
For the Western States, the increase was from 365 million pounds in 1924 to 555
million pounds in 1944 — or about 52 per cent. It is thus apparent that milk-
fat production has risen more rapidly in California than in the United States,
as a whole, or in the Western States.
However, in view of the very rapid increase in the population of California,
especially since 1940, the output of milkfat per capita in California has shown a
persistent decline since 1924 — a decline from 28.8 pounds per capita in 1924 to
23.8 pounds in 1944. In contrast, output of milkfat per capita in the United
States, which has been consistently above that of California, increased from 30.9
pounds in 1924 to 34.2 pounds in 1944. In the ■,7estern States there was a small
decline in output per capita — from 35.7 pounds in 1924 to 33.9 pounds in 1944.
However, the average in 1944 for the Western States was just about the same as
for the United States. |
It is possible to conclude from these data that California, which, because
of its high per capita income, should have a per capita consumption of dairy
products above the national level, has been progressively less able to meet its
co-nsumption requirements out of its own production of milkfat. Under the circum-
stances, it is to be expected that an increasing proportion of milk and milkfat
produced in the state will be used in market milk, market cream, ice cream, and
cottage cheese — products which, for several reasons, are not imported in large
volume from other states. As a corollary, it is to be expected that output of
certain types of manufactured dairy products — especially butter — will have
shown a consistent tendency to decline, both absolutely and relatively — con-
sumption needs for these products being met by a progressive increase in imports
from other states.
It is also to be expected that the long-time trends in utilization of milk
and milkfat will have been accelerated in some directions and modified in others,
because of the impact of the war production programs.
Production of Dairy Products .--practically all the milkfat produced in
California is used in: (1) butter,' (2) market milk, (3) market cream, (4) evap-
orated and condensed milk, (5) cheese, (6) ice cream, (7) ice milk, (8) whole
milk povifder, and (9) cottage cheese. An analysis of the output of each of these
products justifies the broad conclusions arrived at in regard to output of milk-
fat (tables 5 and 6, and figure 1). j
(1) Butter. During the years 1924-1934 the production of butter in
California averaged 74.8 million pounds annually; from 1935-1941, it averaged
o5.5 million pounds. Since 1942, however, butter production has declined precip-
itously, and in 1945 it averaged only about 15 million pounds, or one fifth the
volume produced during the period 1924-1934. |
The decline in output of butter per capita is even more marked. In 1924
California produced about 18 pounds of buttor per capita. From then on, output
per capita declined more or loss steadily to 13 pounds in 1930, to 10 pounds in
1940, and then precipitately to only about 1.8 pounds in 1945.
Even in 1924, butter production in California was inadequate to meet con-
sumption needs, and some 20.0 million pounds had to be imported from other states.
The shipments of buttor into California increased steadily to 31. d million pounds
Tri.EL.-; 5
!-ro{i.;,tion of .Cuiry i rofiucts in California
— ^ ■
' Dutter
1
i ,
Year ; ( 1,000
i pounds)
■ • ■
Market
milk
(1,000
gallons )
i_, ... ■■
Market
Cream
(1,000
g-llons'
1
jEi^vaporated
and Condensed
imilk (1,000
pounds)
Cheese
(1,000
pounds )
Ice cream
(l ,000
g-allons)
Ice milk; Pondered j Cott^-ge
i whole milk cheese
(1,000 1 (1,000 1 (1,000
gallons)i pounds)! pounds)
1924
78, 562
92,470
3,992
120,311
7,9 18
9,059
i
1 OXD
1 2 2^"^
19£5
73 , 600
101,706
5,766
138,991
7,408
11,456
jldu
! / oo
1 1 n Q
! jLU , \jzic.
1S26
74,118
108,362
5,905
150,063
8,119
12,097
133
405
11 , . 73
1927
77 ,325
123,177
6,128
183,946
8, £59
12,079
13,504
1928
76 , 786
128,827
o • 0 So
175,386
9,604
14,057
-z r~ rj
357
18 ,673
19c;9
132,000
7,075
189,062
9 , 229
15,378
"Z n ^;
1 /. ,71b
1 O "2 Pi
1930
n 1 n 17 o
7 D , vl d
131,774
7,389
200,240
9,813
14,278
390
407
17,958
132,419
7,605
203,833
10,097
13,547
16 , o2b
T /~i "2 O
1932
73,8^4
127,857
6,670
218,456
11,995
10 , 086
1 , 803
12,291
1933
77,406
122,104
6,019
235,694
16,600
8,784
3,093
618
12,386
1934
70 »y86
128,155
5,993
216,542
15,938
11,168
3 , 524
712
13,276
1935
64,144
133,442
6,510
225,516
15,-885
l?,6b6
5,471
842
15,225
1936
64,341
146,223
7,013
219,691
16,182
15 ,665
7,191
626
18,043
1937
65,192
149,024
7,349
188,802
17,171
16,205
6,635
429
17,788
1938
67,082
151,829
7,871
201,783
17,086
16 ,564
5,924
641
24,718
1939
65,254
164,631
8,504
236,536
15,381
19,501
6,569
843
30,305
1940
69,865
173,464
8,897
270,857
15,489
20,360
6,851
1,588
25,076
1941
62,o36
186,035
8,751
354,441
17,067
23,548
7,401
2,898
25,302
1942
49,412
219»668
7,308
328,019
17,105
30,826
7,660
9,276
25,693
1943
37,523
267,504
3,313
314,454
16,651
30,836
5,359
12,683
26,009
1944
29,466
288,588
4,040
375,946
13,235
34,333
4,248
1/
29,451
//I 94 5
15,431
329,800
1/
397,354
13,512
38,285
5,074
1/
35,004
^/ I'/Ot av-ilable.
£/ Prelim - ni.ry .
Source of data: : ■. , .
Clifornia State Dept. Aerr. Annual Statistical Reports of California Dairy Products.
Sacramento. 1924 to 1944.
CD
T.-iBL- 6
Annual fer Cirita Production of Dairy Products in California
I'.arl'et
I
'ar'-'et
livaporated
1
Whole Milk
Cottage
Year
Ertter
.>'iilk
cream j
mil'-
C!-eese
Ice cream
Ice milk
Powder
cheese
( nouadsj
(.gall ms )
(gallons); (-'ounds)
(pounds j
\ gs lions ;
(gallons J
(pounds)
(pounds )
1924
17 .7^.
2C.9'i
j
0.90 1
27.25
1.80
2.05
0.01
0.07
.73
1925
lo. Se-
21.65
1.24 1
29.99
1.60
2.47
0.03
0.17
2.17
1926 ■
lf. 27
;-.2.32
1.22 '
30.92
1.67
2.49
0.03
0.08
2.28
1927
15.24
24-28
1
1.21
36 •£6
1.77
2.58
0.04
0.04
2.66
19£8
14. ol
24.34
1.23 !
33.14
1.81
2.66
0.04
0.07
3.53
1929
13.21
23.94
1.26 i
34.29
1.67
2.79
0.05
0.07
3.21
1930
12.96
23.08
1.29
35.07
1.72
2.50
0.07
0.07
3.15
1931
12.51
22.74
1.31
35.00
1.73
2.33
0.08
0.07
2.84
1922
12.53
21.69
1.13
37.06
2.03
1.71
0.31
0.08
2.09
1933
12.98
20 .4:8
1,01
39.53
2 . ',' 8
1.47
0.-j2
0.10
2.08
1934
11.72
£1.17
0.99
35.76
2.63
1.84
0,58
0.12
2.19
1935
10.39
21.61
1.05
3c .52
2.57
2.05
0.89
0.14
2.45
1956
lO.l^j
23.06
x.ll
34. o5
2.56
2.47
1.13
oao
2.85
1937
9.99
22.83
1.13
28.92
2 . b3
2.48
1.02
0-07
2.72
1938
[ 10.08
22.81
1.18
30.32
2.57
2.49
0.89
0.10
3.71
■ 1939 ■
9.j2
24. 2o
1.25
34.86
2.27
2.87
0.97
0.12
4.47
194C
10.03
24.91
1.28
38.89 ^
2.23
2.92
0.98
0.23
3.60
1941
8.66
25.72
1.21
49.00
2.36
'7 r\ ,
O . CO
1.02
0.40
3.50
1942
6.43
26.59
0.95
42.69
2 • 23
4-01
1.00
1.21
3.34
1943
4.43
31.59
0.39
37.13
1.97
3.64
0.53
1.50
3.07
1944
3.37
32.99
0.46
43.44
1.51
3.93
1
0.49
1/
3.37
Not available.
Source of data:
Compiled by ai thors from data in ta- les 1 and 5.
TOTAL AND PER CARTA PRODUCTION OF DAIRY PRODUCTS IN CALIFORNIA
Capita
8
7
6
&
4
I
2
>k It 3c j2 M- z« a* 4a 42
It^ARKET CREAM
ffit s
CAP!''*
Ili
7
t.2
6
IX>
5
S
4
.6
3
.4
2
.2
1
M 34 u JO U 94 J«. J« 40 4Z 4i
ICE MILK
\A
12
LO
e
.«
.4
.2
b
\(iALLO{IS
40
ID
20
U>
M 4a 42 «4
b»t> M ZC U JO 59 34
■400 .
EVAI>ORATED MILK
M 26 2S JO T2 J4 34 >> 4a 42
300
200
100
4b
CAUTA
L2
U>
.2
FIGURE i: IMPORTANT CHANCES HAVE OCCURRED SINCE 1924
IN THE OUTPUT OF VARIOUS DAIRY PRODUCTS IN
CALIFORNIA. (DAfA FROM TABLES 5*6)
10
in 1930, 44.2 million pounds in 1940, and 73.2 million pounds in 1943. It is
significant in this respect that butter consumption per capita in California has
shovm a consistent tendency to decline. Consumption of butter per capita in
California averaged during the 1920' s about 20 pounds per capita annually; during
the 1930' s, about 17 pounds; and during the years 1940-1943, only about 14
pounds . £_/
(2) Market milk. The volume of market milk distributed in cities, towns,
and villages increased steadily from 92.5 million gallons annually to 132.0
million gallons in 1929, then declined during the depression years to 122,1
million gallons in 1935. From then on the volume distributed increased each year,
and at a greatly accelerated pace since 1940. In 1945, nearly 330 million gallons
of milk were distributed, about double the volume in 1939, and more than three
tLiies the volume in 1924.
Except for a decline during the first fav/ years of the depression (1930-
1933), the per capita consumption of market milk increased steadily from 21
■ gallons yearly in 1924 to nearly 25 gallons in 1940, and then increased rapidly
to about 36 gallons in 1945. The actual increase in per capita since 1941 should
be somev/hat lovrer than the figures shown in Table 6 because the data on population
do not include members of the armed forces stationed in California, whereas the
figures on volume of milk distributed include consumption by the armed forces. ^
It is probable that if the volume of milk consumed by the armed forces
were excluded, the average annual per capita consumption for the years 1942 to
1945 would bo 1 to 3 gallons less a year. On the other hand, distributors state
that, because of shortages of supply and difficulties of distribution, it was not
possible to provide civilian consumers with all the market milk required. Several
distributors who were interviewed stated that if consumers could have had all the
market feilk they required during the war years, the total volume of milk distrib-
uted would have been from 5 to 10 per cent higher.
(3) Market cream . The consumption of market cream, as of market milk,
increased steadily, from about 4.0 million gallons in 1924 to 7.6 million gallons
in 1931; declined during the early depression years to 6.0 millions in 1934 and
then again increased steadily to about 8.9 million gallons in 19<tO. Unlike milk,
howeve'r, the total volume of cream distributed declined appreciably since 1940,
and in 1943 was considerably less than half the volume in 1940. This v;as due to
wartime planning which aimo-d at diverting cream and milkfat to otht/r uses.
per capita consumption of cream increased to 1931, declined somewhat during
the depression years, and then again increased slowly until 1940. For the reasons
stated above, per capita consumption declined rapidly from 1940 on, and in 1944
was just about one half of the per capita consumption in 1924.
(4) Evaporated and condensed milk. The production of evaporated and con-
densed milk increased at an irregular rate, from 120.3 million pounds in 1924 to
about 270.9 million pounds in 1940. Unlike the upward trend in production of
market milk, market cream, and ice crt-am, that of evaporated and condensed milk
was maintained during the early depression years. Output increased sharply in
3/ Based on calculations made by the authors.
11.
1941 and was maintained at a slightly lower level for the remaining war years.
This was in accordance with national \vartime food planning.
As only a small proportion of the evaporated and condensed milk produced
in California is consumed in the state, the trend in per capita production is not
of the same significance as for other dairy products. It is to be noted, however,
that output of evaporated and condensed milk per capita showed a consistent, if
irregular, tendency to increase — from about 27 pounds in 1924 to 49 pounds in
1941, vfith some decline since.
(5) Cheese. Except for minor year-to-year fluctuations, production of
cheese increased steadily from 7.9 million pounds in 1924 to 16. d million pounds
in 1933. Since 1933, there has been no consistent tendency toward expansion,
output fluctuating between 15.4 million and 17.2 million pounds. In 1944 and 1945,
the output of cheese declined appreciably, due, in large measure, to the general
shortage of milkfat in the state.
Output of cheese per capita increased irregularly from 1.80 pounds in 1924
to 2.78 pounds in 1933. Between 1935 and 1942, although total volume of output
was maintained, per capita output has declined. Because of general shortage of
milkfat, the decline in per capita output has been accelerated since 1942, and
in 1944 fell to below the 1924 level.
It is important to note that California produces many special types of
cheese in favor with important elements in the state's population. Production
of cheese has always been insufficient to meet consumption requirements, so that
imports into the state have had to be increased steadily from 18.9 million pounds
in 1925 (figures for 1924 not available) to 30.6 million pounds in 1943.
(6) Ice cream . The production of ice cream in California has expanded
enormously since 1924, in spite of an appreciable decline during the years 1930-
1933. In 1924, output amounted to 9.1 million gallons; in 1929, to 15.4 million;
in 1939, to 19.5 million; and in 1934, to 34.3 million gallons. Preliminary
indications are that output for 1945 virill be not far short of 40.0 million gal-
lons, or nearly four and one half times the production in 1924.
Except for the depression years (1930-1934), per capita production in-
creased steadily from 2.0 gallons annually in 1924, to about 2.9 gallons in 1939,
and to 3.9 gallons in 1944. The 1945 production will exceed 4.0 gallons per
capita .
(7) Ice milk. Output of ice milk, which can be regarded as a lovrer-quality
substitute for ice cream, has made an even more phenomenal growth. In 1924, vifhen
the product vras comparatively new, output amounted to only 23,000 gallons; by
1929, production had increased to 269,000 gallons. Consumption (and hence output)
of ice milk expanded enormously during the depression years when consumers shift-
ed from the higher-priced product — ice cream. By 1936, output of ice milk had
expanded to nearly 7.2 million gallons. Thereafter, there was some decline to
5.9 million gallons in 1938, and again a rapid increase to a new peak of nearly
7.7 million gallons in 1942. With the improvement of buying power during the vrar
years and the general shortage of milkfat, consumers shifted their preference to
ice cream. As a result, output of ioe milk declined to 4.2 million gallons in
1944. I
Annual per capita output of ice milk increased from a mere .01 of a gallon
in 1924, to 1.13 gallons in 1936 — fluctuated around 1.00 gallons until 1942,
and has since declined to .49 of a gallon in 1944.
12.
(8) Whole milk powder. Between 1924 and 1939, output of whole milk powder
(a comparatively new product in 1924) fluctuated considerably from year to year
from a low of 219,000 pounds in 1927 to 843,000 pounds in 1939. In response to war
needs, however, output was rapidly expanded to 1.6 million pounds in 1940, and to
nearly 12.7 million pounds in 1943. Figures are not available for 1944 and 1945.
(9) Cottage cheese. Although very little milkfat is used in cottage cheese,
it is important for its use of solids-not-fat, especially as the great bulk of
cottag^e cheese produced is consumed in the state. Around 1920 in California, a
new method of making cottage cheese was perfected, which greatly improved its
quality. As a result, output (and consumption) expanded rapidly from 3.2 million
pounds in 1923, to 10.1 million pounds in 1925, and to nearly 18.7 million pounds
in 1928. During the depression years, output declined rapidly to about 12.3
million pounds in 1932 and 1933. Thereafter, output again expanded rapidly,
though irregularly, reaching a new peak of 30.3 million pounds in 1939. During
the war years, output held steadily around 25 million pounds, with an increase to
29.4 million pounds in 1944. Preliminary estimates indicate an output for 1945
not far short of 35.0 million pounds . ^
Output per capita increased from .73 of a pound annually in 1924 to 3.53
pounds in 1928, declined to 2.08 pounds in 1933, and then increased irregularly
to a new high of 4.47 pounds in 1939. During the war years, output per capita
declined rapidly to 3.07 pounds in 1943, but has since shown a definite tendency
to increase. ^
Percentage Utilization of Milkfat . — An analysis of the trend of production
for the various dairy products does not give an entirely adequate picture of the
manner in which the milk produced in the state is utilized. This is due to the
fact that the milkfat content of such products as market milk, market cream, and
ice cream may vary from time to tL'.e . For instance, during the 1920' s, when the
cream line in bottles of milk was used as a "selling point," there was a tendency
for distributors to raise gradually the milkfat content of market milk. It is
probable that during the 1930' s the great bulk of market milk sold had an average
milkfat content of 4.0 per cent or better.
With the advent of the fiber container and the shortage of milkfat during
the war years, the milkfat content of market milk v/as gradually reduced so that,
from 1943 to 1944 on, the major bulk of market milk sold had a milkfat content
not greatly in excess of 3.5 per cent. |
Moreover, in order to conserve milk and milkfat, successive Federal War
Food Control agencies prohibited the sale of market cream and ice cream of high
milkfat content. It is probable that, during the last few years, the average milk-
fat content of ice cream has not greatly exceeded 10.0 per cent, and of market
cream, 20.0 per cent milkfat. 1
In view of these facts, it is important to consider the relative importance
of various dairy products in their utilization of milkfat. On the basis of re-
ports received from distributors and processors, the California Department of
Agriculture makes an estimate each year of the per cent of all milkfat used in
various dairy products. These data are shown in Table 7 and Figure 2.
In 1924, about 52 per cent of all milkfat produced was used in the manu-
facture of butter. By 1940, butter was utilizing only 31.8 per cent, and in
1944, only about 12.2 per cent. Preliminary estimates indicate that in 1945
about 6.25 per cent of all milkfat produced was used in the manufacture of butter.
TAbLi
Prrcentag-e Utilization of Mil
7
kfat Produced in California
Year
Butter
k', a T V" P +
milk
Mar ''ot
cream
Evaporatod
n Ki rl
condensed
Illi. JL A
C4c£S£
Ice cream
i
i
(
3tn--r
19£.:
52.0
24.0
8.0
7.0
2.0
I-.O
3.0
1925
48.0
26.0
9.0
8,0
1.9
5.0
2.1
1925
.6.1
27.5
11.6
8,3
1.6
-;.7
1927
28.8
9.1
9.4
1.9
4.6
2.7
1928
42 . 3
29.6
9 .6
8.5
2.0
,.9
3.2
1929
39 . a
29,9
10. .
9.1
1.9
0.1
-:-.0
1930
•2 C O
•
29.0
10. D
9.6
1.9
'■>.7
-..9
1931
38.7
2S.3
11.0
10.0
1.9
a •
~ • -I
4 , c
1932
39.,
27 .7
11.1
10.8
2...
3.3
5,2
1933
iO.9
26 * 2
9.8
11.3
3.3
3.0
5 ,6
1934
38...
28.1
10.1
10.3
3.8
6 .0
1935
35.7
30.1
11.2
11.0
3.2
1.3
- .3
1936
3-i .2
29.0
11.-^
11.3
3.2
4.6
6 .0
1937
■^J a.
31.8
11.^
8 •
■7.
v> . --
'i.8 ■
5.7
1938
34.0
31.9
12.5
9.0
3.4
4.8
3.7
1939
32.2
31.8
13.2
9.7
2.7
5.8
. 5
19-.0
31.8
32.0
12.6
11.1
2.5
5.7
-'i.3
19 .1
27 .9
33.5
12.1
1 b . i
2.7
6,4
2.0
19'.2
22.0
or' . O
10.1
12.3
2.6
7.7
5.5
kT. 7
OU . (
11.6
2,5
6 ,2
8.9
19i%
12.2
52.5
5.2
1.8
D.9
7.0
*/l945
6 ^2
54 .'6
2.3
16.0
1
2.C
7.5
11.5
1/ Preliminary estimate.
Source of data:
^tlio®- ^'oP'^' Statistical Reports of Calif, D..iry Prod'oct-^
I « . ♦
PERCENT MILK FAT USED IN VARIOUS DAIRY PRODUCTS CALIFORNIA
1*14 ini rtzt, itrr rtu iu» '»* mi isti im iiv im i»40 lui i*4£ ikj
t>eK
cm
so
3C
10
ft
PER CENT MILK FAT USED IN
BUTTER
P0t
CKMT
It
10
S
I* U> U M it lA Jla it 40 4t ^
PER CENT MILK FAT USED Ihl
MARKET CFiEAM
UMT
,0 PCR CENT MILK FAT USED IN CHEESE
trriirrrrlJ
In
UK
c«yr
SO
20
IB
PER CENT MILK FAT USED IN
MARKET MILK
3f 40 42 *t
Fen
It
10
s
PERCENT MILK FAT USED IN
EVAPORATED AND CONDENSED MILK
U U 30 tt J4 U Jt 40 4Z 44-
^'"^ ICECREAM
J/ ^* to U U ie SB 4n *i 44 i4 H it iO iz U M IS 46 4i 44
MISC. DAIRY PRODUCTS
rneatf
10
t4 M it *) U U U n 40 4t H
FIGURE i: 5INCE l»^4 THE VOLUME OF MILK FAT USED IN BUTTER HAS DECLINED STEADILY WHEREAS
THAT USED IN OTHER DAIRY PRODUCTS HAS 5H0WN A PERSISTENT TENDENCY TO INCREASE.
EXCEPT DURINO WAR YEARS ^DATA FROM TABLE /)
14.
The position of market milk was almost the complete reverse of that for
butter. In 1924, only 24 per cent of all milkfat produced in California was used
in market milk. By 1940, the utilization of milkfat in market milk had increased
to 52.0 per cent. From 1941 to 1945, in spite of a reduction in the average milk-
fat content of market milk, milkfat utilization in this product shot up to 52.5
per cent in 1944, and about 55 per cent in 1945.
The proportion of all milkfat used in market cream, ice cream, evaporated
and condensed milk, cheese, and miscellaneous dairy products increased gradually
bet/reen 1924 and 1940. In 1924, these products used about 24 per cent of all
milkfat produced in California. By 1940, the proportion had increased to 36.2
per cent. Although these products used about the same proportion of milkfat in
1944, their relative importance had changed considerably.
Under the stress of a phenomenal growth of population and of buying power
in California, and of a resultant shortage of milkfat and of wartime restrictions
on the use of certain dairy products and the promotion of others, the proportion
of milkfat used in market cream declined from 12. o per cent in 1940 to only 3.6
per cent in 1943, and 5.2 per cent in 1944. This decline is considerably greater
than the decline in volume of cream used, largely because of the reduction in the
average milkfat content of cream. Cheese also showed a decrease in the volume of
milkfat used — from 2.5 per cent in 1940 to 1.8 per cent in 1944.
On the other hand, the proportion of all milkfat used in ice cream, evap-
orated and condensed milk, and other dairy products increased considerably, al-
though the relative importance of these three groups changed somewhat from year
to year .
Outlook for the Dairy Industry in California
The analysis thus far has ahown that there has been a gradual upward trend
in milkfat production since 1924, but that the increase in production has not
kept pace with the increase in population. As a result, the output of milkfat
per capita has declined steadily between 1924 and 1940 and at a greatly acceler-
ated rate since then.
!
The total volum.e of production, as well as output per capita of market
milk, cheose, evaporated and condensed milk, and ice cream, rose gradually during
the period 1924 to 1940. Yifith the exception of cheese, all of these products
showed an even more rapid use between 1940 and 1944. Output of cheuse declined
slightly during the war years. Although total production of market cream increased
up to the outbreak of the war, per capita output has shown no significant trend.
Due to wartime restrictions, both total volume of production and output per capita
of market cream have declined precipitately since 1940. ^
Production of butter has declined consistently since 1924, the rate of
decline being greatly accelerated since the war. On a per capita basis, the rate
of decline has been even more rapid.
Are these trends permanent or, during the next few years, can the follow-
ing events be expected?
1. Either a more rapid expansion of output of milkfat in the state? or
2. A slov/ing down, or even a diminution, of the population of the state? or
3. A very marked decline in purchasing power which will cause a drop in the
consumption of the higher priced dairy products — market milk,
market cream, and ice cream?
15.
Trends .--Predictions of the future are extremely hazardous, especially at
the present time when the country is in the throes of reconversion from a war-
time to a peacetime basis. Certain broad generalizations, however, may be made
with regard to such factors in the situation as: (1) population, (2) purchasing
power, (3) output of milkfat, and (4) utilization of dairy products.
(1} Population. The population of the state did not decline to nearly the
extent expected with the cessation of wartime production. The estimate of
8,823,000 for July 1, 1945, shows some increase over that for 1944. Moreover,
the above figure does not include citizens of the state who were in the armed
forces, most of whom have since returned to civilian life. Many servicemen from
other states, who were stationed in California during the war, are taking up
residence in California. Marriages have increased, and many families separated
during the war have been reunited. This should indicate an increase in the birth
rate.
These factors would indicate a continued increase in the population of the
state for several years. An increase in the ratio of very young children would,
moreover, favor a larger per capita consumption of dairy products.
(2) Purchasing power. Although buying power is bound to decline somewhat
from the high levels reached in 1944 and 1945, any marked recession in business
activity is unlikely to occur during the next five years or so. There exists a
huge backlog of civilian needs for consumer goods of all types. There is also
much pent-up buying power. When the present labor difficulties are settled, a
considerable expansion in industrial activity reasonably may be expected. This
will mean heavy employment and a continued generation of consumer buying power
for several years.
Moreover, the country is agreed upon the necessity of reorganizing our
economy to ensure "full employment." Although there is, as yet, no general
a^^reement as to the essential bases of a "full employment program," this factor
alone should warrant some optimism as to the continuance of a fairly high level
of purchasing power.
(3) Output of milkfat. Although the dairy industry of California probably
will continue to expand during the next few years, little evidence exists to
warrant an assumption that the expansion will be at a relatively more rapid rate
than that for population.
Shortage of feed during the next year or tvro v/ill serve to curtail produc-
tion. With the removal of the patriotic urge, it is doubtful v/hether farmers
will push their production as vigorously as they did during the war years. It is
not unlikely that a larger number of employees in the state will become "unionized."
This will lead to some difficulties, especially during the period of adjustment.
In some parts of the state, v;here conditions are favorable, farmers may tend to
shift to other lines of production, e.g., raising of beef cattle and sheep, which
are less dependent upon a large labor force. On the other hand, the return of
younger and more vigorous men as agricultural employees should tend to increase
output per man-hour. Other favorable factors are the availability of more water
from the Central Water Authority and an expansion in the acreage and quality of
pasture .
Weighing all these factors together, it is possible to predict a decline
in production of milkfat in California for 194d -- a decline v.rhich may easily
reach 10 per cent below the 1945 level. It is doubtful whether the feed situation
(especially concentrates) will be very greatly improved in 1947. Thereafter, the
16
favorable factors should encourage an expanded output of milkfat, but it is
extremely doubtful whether this will be accomplished at as rapid a rate as that
for population. In other words, the output of milkfat per capita is expected
to decline for several years to come.
(4) Utilization of dairy products. The removul of price controls over
dairy products , or a readjustment of prices between products, will undoubtedly
cause some shifts in the proportion of all milkfat used in various dairy products.
There can be little doubt that price relations bet'ween "jutter and other dairy
products during the war years hastened and aggravated the decline in output of
butter, both in California and in the United States as a whole. j
In fact, it is difficult to see how, even under the most favorable condi-
tions, butter can regain its former position in the dairy industry of California.
Output of butter had declined, both relatively and absolutely, for over fifteen
years before the outbreak of the war. The great increase in population and in
buying pov/er since 1940 merely accelerated the decline in use of milkfat in butter.
In 1944, about 65 per cent of all milkfat produced in California was
utilized in three products ~- market milk, market cream, and ice cream. From
preliminary data available, it would appear that these products used not far
short of 70 per cent of all milkfat in 1945, ^
It should be stressed, moreover, that if restrictions are removed, all
three of these products would easily utilize an even greater pro.iortion of milk-
fat. Several distributors have stated that shortages of supply had restricted
use of market milk during the war years. For consumer demand to have been met
fully, at least 5 per cent and probably 10 per cent more market milk would have
been required. Further, because of the shortage (as well as for several other
reasons), the milkfat content of market milk was restricted to an average for the
state of about 3.6 per cent. Although it is doubtful v/hether distributors in
the future will again try to stabilize their standard milk at 4.0 per cent, removal
of restrictions -will probably effect some increase in the average milkfat content,
say to 3.7 or 3.8 per cent.
In 1944, the total volume of market cream consumed in the state was less
than half that consumed in 1940. Iloreover, only coffee cream vras available. If
restrictions are removed or modified, it is not unlikely that the total volume of
consuiiiption of market cream v/i 11 rise to above 1940 levels (8.9 million pounds)
and that the milkfat test would also increase.
The utilization of miliifat in ice cream during recent years has been cur-
tailed by tvro important restrictions. First, a limitation on the milkfat content
of icu cream was made by the War Food Administration. Second, a shortage of sugar
placed a definite curb on the volume of ice cream that could be manufactured. A
removal of these two restrictive factors would result in an upward surge of ice-
cream production and a greatly increased utilization of milkfat in this product.
If population grovrth and a high level of buying power are maintained, and
if restrictions (price and other) on output of dairy products are removed, it is
not unlikely that during the next few years market milk, market cream, and ice
cream will utilize between 75 and 80 per cent of all milkfat produced in the state.
Under less favorable conditions of population growth and buying power, the per-
centage of all milkfat used by those throfj products would probably not fall much
below 70 per cent.
17.
Thus, the total volme of milkfat available for all uses other than market
milk, market cream, and ice cream would be between 20 and 30 per cent. How much
of this would go to butter? Production of cheese will take between 2 and 3.5
per cent of all milkfat; ice milk, dried whole milk, and miscellaneous dairy pro-
ducts vrould probably require between 4 and 7 per cent. This will account for a
minimum of 6 per cent and a maximum of 10.5 per cent. The evaporated milk plants
of California are very efficient and, under ordinary conditions, v/ould compete
successfully with butter-manufacturing plants for milk. ^
All these considerations lead to the conclusion that, during the next five
years or so, butter will be manufactured regularly only in a few outlying plants
in the state, or in other plants only during spring and early summer months when
production of milkfat is at a peak. Under the most favorable conditions, California
may produce 30 million pounds of butter a year — more probably, output v/ill run
betv/een 10 and 15 million pounds annually.
T/ith these tentative conclusions as a background, attention may now be
directed to a consideration of the status of the Bodega Cooperative Creamery
Incorporateri and the Point Reyes Dairymen's Association.
Operations of the Bodega Cooperative Creamery Incorporated
and the Point Reyes Dairymen's Association
Development .--Both of these producer cooperative associations have been in
operation for over a quarter of a century. The Bodega Co'dperative Creamery Incor-
porated is located at Bodega, a small village in the western part of Sonoma County,
roughly fifty miles northwest of San Francisco. The Point Reyes Dairymen's Asso-
ciation is located at Point Reyes, a small village in the western part of Marin
County, about thirty miles northv/ost of San Francisco. Although those tivo asso-
ciations are only tvrenty odd miles apart, they do not overlap to any extent, as
they are separated by miles of hilly country. It should be pointed out, however,
that the Petaluma Cooperative Creamery, located at Petaluma, draws milk from the
territory covered by both the above associations. j
Although, during the course of time, the operation methods of both the
Bodega and the Point Reyes associations have been modified, their primary function
has been to manufacture butter. YiThen they were first organized, all milkfat
received was in the form of cream. During the 1920' s, however, increasing quan-
tities of whole milk v/ere received from patrons and separated at the plants. The
milkfat in the whole milk, as well as that in the cream, was manufactured into
butter, the skim milk into either skim-milk powder (now known as non-fat-solids
povfder) or casein. Small quantities of cream were at times sold as manufacturing
cream; and, at times, some of the skim milk was also processed into cottage cheese.
Both associations also manufactured cheese for a number of years.
As late as 1940, both associations received from member patrons over half
of their milkfat in the form of sweet cream. Since 1940, however, svreet-cream
shipments have declined precipitately, so that in 1945 only about one tenth of
the milkfat for manufacturing purposes was in the form of sweet cream. In 1938,
a few members in both associations equipped their dairies to ship market milk and
market cream. The volume of markot-milk shipments has grown to such proportions
that it accounts for over half of the milkfat received by both of these associa-
tions .
Both the Bodega and the Point Reyes associations are members of the
Challenge Cream and Butter Association, a federated selling association vdth
members in the Western States. The head office of Challenge is in Los Angeles,
I X8.
and branch offices and plants are operated in several cities in California, in-
cluding, San Francisco and Oakland. Both the Bodega and Point Reyes associations
are under contractual obligation to sell their products through Challenge.
The Petaluma Cooperative Creamery, above referred to, v/hich draws part of
its supplies of milk from the territories of the Bodega and Point Reyes associa-
tions, is not a member of Challenge. Although from time to time moves have been
made both from v^ithin and outside the Petaluma Cooperative Creamery for its af-
filiation with Challenge, the members of the association have considered that
they earned higher returns, over the years, than they vrould have if they had sold
their finished products tlirough Challenge.
Although this study is not directly concerned with the operations of the
Petaluma Cooperative Creamery, indirect consideration of its operations and pol-
icies has been necessary because, first, it covers some of the territory covered
b'- the other two associations, and, second, during the last t-wo years, at least,
it has been able to make better returns to its patrons than have the Bodega and
Point Reyes associations. As a result, both of the latter associations have lost
members to the Petaluma association and stand to lose even more at the end of this
fiscal year (June 30). ,
The Bodega Cooperative Creamery Incorporated
Milkfat Received. — An analysis of the volume of milkfat handled by the
Bodega CoWperative Creamery Incorporated, between 1934-35 and 1944-45, indicates
that there has been a fairly consistent grovrth in receipts from member patrons.
Durinji; the year 1944-45, the volume handled was double that for 1935. There has
been, moreover, a marked shift in volume of milkfat received in croam, manufactur-
ing^ milk, and market milk. In 1934-35, milkfat in manufacturing cream amounted
roughly to one third of all milkfat received; the balance v/as in the form of
manufacturing milk. In 1939-40, manufacturing cream accounted for 25 per cent
of all milkfat, manufacturing milk for 67 per cent, and market milk for 8 per
cent. By 1944-45, manufacturing cream accounted for only 2 per cent of all milk-
fat received, manufacturing milk for about 50 per cent, and market milk for
about 48 per cent (table 8). I
During the period July 1-Deoember 31, 1945, receipts of milkfat in manu-
facturing milk wore only 145,000 pounds, compared with 214,000 pounds during the
last six months of the previous year; and milkfat in manufacturing cream amounted
to only 3,000 pounds, compared with 10,000 pounds the previous year. This was
due, in large measure, to a drastic decline in the number of shippers since the
end of the last fiscal year. Receipts of milkfat in market milk wore not greatly
different.
Membership. --The number of active members has shown a tendency to decline
within recent years . In 1938-39 there vreve 128 shippers; in 1944-45 only 115
(table 9). Market-milk shippers increased from 8 in the previous year to 27 in
the latter, whereas manufacturing-milk and cream shippers declined from 120 to
88. A count of active shippers made in February, 1946, gave only 26 market-milk
shippers and only 51 manufacturing-milk and cream shippers, indicating another
serious decline in membership. j
The turnover in membership in recent years has been very heavy, "especially
for manufacturing-milk shippers. It is apparent that only a small number of the
present membership has been active for any leng^th of time. The removals from
membership of manufacturing shippers is due largely to dairymen selling their
herds, partly to transfers to market-milk shipping, and partly to transfer of
!
10.
TA3LL 8
Bodega Coo eritive Creamery Incorporated
(Deliveries by Patrons)
Milkfat in
Total
1/ Year
<
Manufacturing-
cream
l.OOC- pounds)
Manufacturing
milk
(1,000 pounds)
Total
manufacturing
( 1,000 pounds)
Market
milk
(1,000 pounds
milk-
fat
\ i , UUO
.pounds) 1
Change
1935=100
per cent)
1934-35
195
413
608
0
608
100.0
1935-36
159
426
565
0
585
96,1
1936-37
142
454
606
0
606
99.2
1937-38
142
663
805
11
816
134.2
1938-3C
255
501
756
34
790
130.0
1939-40
210
555
765
59
834
137.1
19^C-il
182
657
839
133
972
159.8
1941-42
117
6u7
784
229
1P13
166.5
1942-43
75
620
695
275
970
159.5
1943-44
40
583
623
450
lp73
176.3
1944-45
22
621
643
591
]^34
202.8
V Fiscal year ends on June 30.
Source of data:
Compiled from t^-e records of the Bodega Coopert.ive CreaTiery Incorporated.
TABLi 9
Bodega Go6p9r?tive Greariery Incorporated
(Ch'-»",B-e in Active Membership)
f.iarket-rnilk shippers
tvlanuf acturing-milk s
hippers
Total
1
1
members
Year
Number at
Mew
Number '-it
Number at
New
Number at
at end of
beginning
Removals
end of
beginning
Removals
end of
of year
Kiembers
year
of year
Members
y e ar
year
19- 8-3S
0
8
8
149
29
0
120
128
1939-40
8
6
13
15
120
30
30
120
135
1? 40-41
15
1
3
17
120
31
30
119
136
1941-42
17
3
5
19
119
57
46
108
127
1942-43
19
4
8
23
108
44
34
98
121
1943-44
23
3
6
26
. 98
37
32
93
119
1944-45
26
1
2
27
93
26
21
78
115
Source of data:
Compiled from records of the Bodega Cooperative Cream.ery Incorporated.
I
21.
patrona{i,6 to other plants opei-ating in the aroa. The new shippers represent
dairymen who have purchased farms and herds from dairymen who have gone out of
business .
Although the number of active shippers declined materially between 1938-39
and 1944-45, the increase in volume of milkfat handled by the association indicates
an increase in size of herds •
Table 10 shows the size of the dairy herds of market-milk, manufacturing-
milk, and cream shippers in February, 1946. As is to be expected, the herds of
the market-milk shippers are much larger than those of the manufacturing-milk and
cream shippers. The 26 market-milk shippers had a total of 2,179 cows (in milk
and dry), or an average of about 84 cows per herd, v^hereas the 53 manufacturing-
milk and cream shippers had only 1,406 cows (in milk and dry), or an average of
26 cows per herd. ^
All the manufacturing-milk and cream dairies were located in the area west
of Santa Rosa. The market-milk dairymen, hov/ever, v/ere more scattered, seven
being located between Cotati and Petaluma, and four south of Petaluma. As each
member's milk is picked up by truck and taken directly to Oakland, this scatter-
ing of market-milk shippers does not increase the cost of collection.
Financial Aspects . — Income and expense for only the last four fiscal years
were analyzed, as these were the most crucial years from the standpoint of this
analysis. The gross value of sales increased each year from 1941-42 to 1944-45,
due partly to increased volume and to higher prices. Payments to members show a
similar rise. Manufacturing expenses have increased steadily, partly as a result
of increased volume, and partly as a result of a rise in the price of cost factors •
especially supplies and labor. The unit cost of manufacturing increased from 3.11
cents per pound in 1941-42, to 3.22 cents in 1942-43, to 4.04 cents in 1943-44,
and 4.23 cents in 1944-45. The sharp increase in the last two years is due large-
ly to smaller volume.
Unit cost of manufacturing casein increased from 2.54 cents a pound in
1941-42, to 2.70 cents in 1942-43, and then declined to 2.22 cents in 1943-44.
In 1944-45 the association began manufacturing non-fat-solids powder, the total
cost of manufacturing being higher than that for casein. This was, hov/ever, off-
set by higher returns for the sale of non-fat-solids milk powder.
General and administrative expenses have been very greatly reduced from
126,182.00 in 1941-42 to only $15,188.00 in 1944-45. General and administrative
expenses have been reduced from 3.85 cents per dollar of gross sales in 1941-42
to 1.39 cents in 1944-45. ^
The association attempts to pay to its members, for milk and cream, prices
comparable vdth those paid concurrently by other private and cooperative cream-
eries operating in the same general territory. Average prices paid to producers
per pound of milkfat are shown in the follov/ing statement: |
To shippers of 1941-42 1942-43 1943-44 1944-45
Cream 4 .4161 (. .5278 4- .5395 i .5453
Manufacturing milk .5377 .6570 .7346 .7467
Market milk .8119 1.0004 .9515 .9301
If, at the end of the year, a sufficient net operating profit (from
retains from members plus other income) exists, and if the cash situation permits.
22.
TABLl 10
Bodsga Goo-; rai,iVo Cre._.,nar7 Incorooratnd
(f:'..mb r of D:';:r;' Co-iis in Herds of Shippers, P'obru:ir'/,l-:.;6)
Size of h rd Z/
Shi-jDi.rs of
Shipp ers of i manufacturine- milk
mar'^et milk
0-10
11 - 20
21 - iC
ol - 75
76 - IOC
101 - IbO
over 15C
Total
0
3
26
and
manufacturing cream
18
12
13
9
1
0
0
53
Total
\
15
17
17
el
I
2
79
1/ Ir'Cludcs cov.s in milk and dry.
Source of data;
tompilr.d from data su ^lied bv thu :'an. par of f d
Creamery Incor >oratad.
sor'ega Coop-^rative
T:\BLE 11
Bodega Cooperative Creamery Incorporated
(income and Expenses)
! 1941
jQuantity j
-42
1942-43
Value 'Quantity j Value
Net proceeds of sales
Butter (pounds)
Casein (pounds)
Whey (lOO pounds)
Skim milk (pounds)
Buttermilk (pounds)
Manufacturing milk and crea>n (local)
and miscellaneous
Market milk (pounds)
Non-fat-solids powder (pounds)
Total
Change in inventory
Gross proceeds of sales
Payments to producers
Cream (pounds milkfat)
Manufacturing milk (pounds milkfat)
Other milk and cream (pounds)
Skim milk (pounds)
Market m.ilk (pounds)
Total
Cost of manufacturing and handling
Butter
Casein
Skim powder
Market milk
Total
Adm.inistrative and general expense
Total cost and expense
Net operating revenue
Add other income
Net income for year
973,764
387,568
129,477
373,916
212,180
229,485
116,761
666 , 555
137,491
229,485
389,669
74,178
11,518
2,881
1,072
920,602
400»999
122,829
189,998
153,576
3,036
184,330 274,958
666,685
-t-11.948
678,633
48,581
277,287
2,758
81,096
182,980
592,702
30,265
9,834
1.545
41 , 444
26,182
660,328
18,305
3 , 205 '
21,508
75,039
617,781
1,834
128,815
274,958
465,656
65,931
18,831
1,552
840
1,193
277,391
1945-44
1944-45
Quantity^ Value
785,596
470,554
97,065
1,056
324,460
449,764
77,423
831,394
- 9,829
821,565
39,609 39,557
326,165 585,470
1,046
79,822
276.055
722,697
29,687
10,816
1.352
41,835
24,717
789,249
32,316
3.797
36,115!
221,260
449,764
404,007
98,712
23,870
8
2,355
44
430,004
10.825
969,803
-15.010
956,795
21,544
514,782
115,878
427 .944
877,948
51,724
10,445
6,205
5.445
51,815
24,504
954,067
2,726
10.775 ,
15,499 ■
Quantity
795,046
Value
550,519
804
5 90 , 756-
1,165,94C
21 , 733
620,518
590,756
2,178
570,814
165.818
1,090,133
■» 235
1,090,366
10,503
425,008
2,211
549,449
987,176
55,602
47
57,426
71,075
15,188
1,075,459
16,927
18.645
55,572
24.
thb association pays a bonus to its members for all milkfat delivered during the
course of the year. The amounts available for bonuses (and reserves), in each
of the four years, is shovm in the last line in Table 11. In 1944-45, however,
the cash position was such that the board of directors decided to defer payment
of a bonus. Although confirmation was not possible, a statement was made that
during the last tv/o years the Petaluma Cooperative Creamery was able to pay its
manufacturing-milk patrons bonuses considerably in excess of those paid by the
Bodega Cooperative Creamery Incorporated. This was one of the main causes for
dissatisfaction amone: members of the latter association.
I
Balance Sheet. — The financial position of the Bodega Cooperative Creamery
Incorporated, as of June 30, 1945, is shown in Table 12. Current liabilities vrere
just about equal to currant assets. The association v;ould thus experience diffi-
culty in meeting any emergency expenses. Because of the lack of funds, a decision
was made not to distribute the proceeds from the 1944-45 operations to members in
the form of a bonus .
Long-term liabilities are of tvro categories: a long-term facilities loan
from the Berkeley Bank for Cooperatives, of which 5^20,088 v/as outstanding, and
liability to merabers. The liabilities to members consisted of about 4,17,000 for
stocks issued and outstanding and ^:.60,828 in revolving-fund certificates and
;);35,572 in undistributed proceeds from 1944-45 operations.
In the event of liquidation, the ^, 20, 088 ov/ed to the Berkeley Bank for
Cooperatives would be a first call against assets. This is fully covered by
sound long-term investments in the Challenge Crean and Butter Association and in
the Berkeley Bank for Cooperatives. Membership equity would be evidenced by the
balance of long-term investments (4 66,771), less the amount owed to Berkeley
Bank for Cooperatives (5^20,088), plus vriiat could be realized from the sale of
fixed assets.
The original investment in land, buildings, equipment, and improvements
was 137,466. Depreciation to June 30, 1945, amounted to 76,808, with a book
balance for fixed assets of 460,658. It is difficult to estim.ate the current
market value of the fixed assets. In view of current general shortages and high
prices for equipment and property, the association, even under adverse conditions,
should be able to realize at least 50 per cent of the net book value of assets.
This would mean that members' equity of $113,603 would be met as follows:
Investments ii6G,771
Less liability to Berkeley Bank
for Cooperatives 20,088
t46,683
Plus 50 per cent of fixed assets 30,32 9
The association would be able to pay approxim.ately 68 cents on the dollar.
It is necessary to stress, hov/ever, that the total loss involved (even
using a conservative estimate of fixed assets) would not be large (about t30*000)*
Continued operation of the association, Y/ith a dwindling volume of manufacturing
milk and cream, could easily result in yearly losses of income to members of
amounts in excess of ij, 30,000.
TABLE 12
25.
Bodega Cooperative Creamery Incorporated
(Condensed Balance Sheet, at June 30, 1945)
ASSETS
Current assets
Cash on hand in bank
Accounts receivable
Less reserve for bad debts
Trade acceptances
Inventory
Investments
Certificates of interest and revolving capital
in Challenge Cream and Butter Association
Stock — Berkeley Bank for Cooperatives
Fixed Assets
Land
Water and sewer system
Buildings and improvements
Machinery and equipment
Trucks
Office equipment
Milk cans
Other assets and prepaid expenses
Insurance
Supplies inventory
Total
LIABILITIES
Current liabilities
Accounts payable
Notes payable — Berkeley Bank for Cooperatives
Interest, unclaimed checks, etc.
Advances payable to members (June deliveries)
Long-term liabilities
Berkeley Bank for CoSperatives
Capital and reserves
Stock of $8.00 par value per share
2,104 issued and outstanding
Stock purchase credits
Patrons equity reserves
Revolving fund
Manufacturing-milk shippers
Market-milk shippers
Undistributed proceeds (June 30, 1945)
Manufacturing-milk shippers
Market-milk shippers
Total
Cost
3,166
3,326
38,955
80,460
1,618
1,400
8,541
137,466
Depre-
0 iation
3,165
166
32,295
32,018
1,209
1,348
6,607
75,806
18,293
7,750
Net
1
3,160
6,660
48,442
409
52
1,934
2,398
3,689
16,832
371
IV, 1^03
51,621
9,207
60,828
14,206
21,366
35,572
dollars
13,825
10,543
78,817
12,650
115,815
65,371
1,400
66,771
60,658
6,086
249,330
10,288
4,934
1,186
99,231
116,635
20,088
113,603
249, 3S0
i •
26.
Operations of Point Reyes Dairymen's Association
Milkfat Received. — The total volume of milk:f:it received from members
shov/ed a steady growth botv/een 1934-35 and 1944-45 (table 13). Significant changes,
hovraver, have taken place in the form in which this milkfat was received. In
1933-34, about 70 per cent of all milkfat received was in the form of manufac-
turing cream, the balance in manufacturing milk. Market milk was received from
members for the first time in 1937-38, when market milk accounted for about 10
per cent of all milkfat received, market cream for about 60 per cent, and manu-
facturing milk for the rest. In 1944-45, market milk accounted for just over
50 per cent of all milkfat, and manufacturing milk for about 42 per cent. Manu-
facturing cream had shrunk to a mere 4 per cent.
During the last six months of 1945, the association received from its
members 13,400 pounds of milkfat in manufacturing cream, compared with 12,300
pounds during the same period of the previous year. Manufacturing-milk producers,
hov/ever, delivered only 125,500 pounds of milkfat compared with 175,000 pounds
the same period of the previous year. Shipments of milkfat in market milk in-
creased from 239,400 in the months June-December , 1944, to 307,200 in the period
June-December, 1945. These figures thus indicate that the trend away from manu-
facturing milk and cream and toward market milk is still under way.
Membership. — The number of active members in the association increased
fairly steadily from 74 in 1934-35 to 120 in 1944-46. In the latter year, how-
ever, the association lost 63 members and gained no new members. At the end of
1944-45, its membership had thus declined to 57 — a loss of over 50 per cent.
In February, 1945, a total of 18 shippers of market milk and 26 shippers of manu-
facturing milk and cream indicated a still further decline in active membership.
The position of the Point Reyes Dairymen's Association in this respect appears to
be less satisfactory than that of the Bodega Cooperative Creamery Incorporated
(table 14 J.
Table 15 shows the size of herds of market-milk and manufacturing-milk
shippers in February, 1946. Although in February only 18 members were shipping
market milk, 22 shippers v^ere included in Table 15. Four dairymen now shipping
manufacturing milk are equipped or are equipping their ranches to ship market
milk. There are an average of 130 oov/s (in milk and dry) in the market-milk
herds. The smallest herd had 46 cows and the largest, 260. ^
The average size herd of manufacturing-milk shippers is much larger than
that of shippers to the Bodega Cooperative Creamery Incorporated. Only 4 herds
hud less than 26 cows. On the other hand, there were 7 herds of 100 cows or
more- • I
Practically all the dairymen shipping milk to the association are located
in Marin County, the majority being along the coast or around Tomales Bay. The
membership is thus fairly well concentrated, an important factor in a hilly area
with winding country roads.
Financial Aspects. — The annual volume of sales increased from 4-635,000 in
1941-42 to 4,1,065,000 in 1944-45, an increase of nearly 70 per cent. This rise
is due in part to an increase in the total volume of milk and milkfat handled, in
part to a change in the type of products sold, and in part to a general rise in
pricws of all dairy products (table Id). ^
The total volume of milkfat handled increased from 1,039,000 pounds in
1941-42 to 1,199,000 pounds in 1944-45. More important, however, was a shift in
i
27.
TABLE 13
point Reyes Duiryinen's Association
(Deliv.ricis of Milkfat liy members)
Fiscal
yi3Sir
':':[ dnufacturin?
cream
(1,000 pounds)
i' ian u fa o tu r in g
mi Ik
(1,000 pounds)
Total
manufacturing
milk and cream
(1,000 pounds)
Market milk
( 1,000 pounds)
Total
man uf a c tu r in g
and market
(1,000 pounds'
19:vl-35
580
242
822
0
822
19.::)-36
592
271
8G3
0
863
1936-37
233
786
0
786
J. V O ' ~ ^Jt,'
Til n
PRO
QQ
979
193r-o9
567
359
926
71
997
1. o9-40
540
525
86 J
lb9
1,
004
1940-41
479
384
863
174
1,
037
1941-42
314
505
619
220
1,
039
1942-43
187
5£9
776
340
1,
nr.
1940-44
10 'j
525
630
449
1,
079
1944-45
51
508
559
641
1.
200
Source of data:
Compiled from, the records of the Point Reyes DairviTien's Association.
r?
'.I ABLE 14
Point ReyeE Dairymen's Association
(Common Stockholder's feembership Gains and Losses
For Each Year)
Fiscal
yoar
TvTi iTTiVi or* i~
1") p "i TTTi "1 n P
IJ O t,. J-liJ. iJ-ii
n f ^ '\ re o Y*
T <^ c e
VGQ. I*
Crc\ i n
during
Gnd of*
VP ^ T
1954-35
85
11
0
74
1935-36
74
7
0
67
1936-57
67
2
0
65
X O 1 — o u
12
74
19S8-39
74
5
10
79
1939-40
79
14
25
90
1940-41
90
4
16
102
1941-42
lv.2
6
15
111
1942-43
111
6
11
116
1943-44
116
2
6
120
1944-45
120
63
0
57
Source of Data:
Compiled from the records of the Point Revos Dair^'men's
Association,
29.
Table 15
Point Aeyes Dairvmen's Association
(Number of Dtiiry Co' s in iierds of Shippers, February, 1946)
Market milk
Manufacturing milk
Size of
h ?rd
F amber of
shi[D6rs
Number of
0OW6
Averaee
for size
group
Number of
shippers
Number of
COV.'S
AvGra|i,e
for size
group
0-10
0
0
0
2
i;;
7
11 - 25
0
0
0
2
33
]
6
9 p. -
1
46
46
7
298
4
•3
'A - 75
5
312
62
3
217
12
76 - 100
3
251
84
4
570
c
)2
101 - 150
5
678
138
2
259
129
151 - 200
5
903
181
4
705
176
over 200
3
660
227
1_
300
300
22
L
2,670
130
25
2,1S7
I
34
Source of Data:
Compiled from the records of the Point Reyes Dairymen's Association.
30.
the types of products handled. In 1941-42, butter accounted for nearly 45 per
cent of the total proceeds of sales, cheese for 21 per cent, by-products for 6
per cent, and market milk for 27 per cent. In 1944-45, butter accounted for only
24 per cent of the total value of sales, cheese for only 5 per cent, and by-prod-
ucts for 12 per cent. The importance of market milk had grown to 58 per cent of
total sales.
The average annual advances per pound of milkfat made to members are shovm
in the following statement:
Shippers of 1941-42 1942-45 i /l945-44 j / 1944-45
Manufacturing cream 40.9l/ 48.46/ 50.03/ 48.22/
Manufacturing milk 55.31 63.00 63.92 66.62
Market milk 79.20 87.27 93.75 93.58
This association has not departmentalized its expenses, and a segregation
under the headings of operating expenses, general, and overhead, was made only for
the last two years. For this reason, all expenses are grouped together in Table
16 under the heading "Operating Expenses." Total operating expenses increased from
4,63,108 in 1941-42 to $81,347 in 1942-43, dropped to ^.64,429 in 1943-44, and again
increased to 73, 069 in 1944-45. It is difficult to make a detailed analysis of
these expenses to determine whether and to what extent the association has effect-
ed economies in its operations. It is known, of course, that wages and the cost
of supplies rose appreciably during the war years. An increase in volume of
products handled would also presuppose some increase in total costs. On the other
hand, the shift in the relative importance of types of products handled (from
butter and cheese to market milk) should work in the direction of lower total
operating costs because market milk requires no processing.
It is safe to assume that unit costs of manufacturing butter and cheese
were very much higher in 1944-45 than in 1941-42; first, bucauso of a rise in cost
factors, and second, because of a considerable decline in volume of output of
butter and by-products. Less efficient use was made of plant and facilities. The
situation has since deteriorated still further because of the continued decline in
volume of manufacturing milk and croaro. received by the association.
The net operating income of the association fluctuated considerably in the
four years. It increased from |14,042 in 1941-42 to $;42,049 in 1942-43, declined
sharply to ^13,775 in 1943-44, and then increased to i,Z0,678 in 1944-45. Other
nonoperating income increased rapidly from $273 in 1941-42 to |,18,453 in 19''^4-45»
The importance of total net income arises from the fact that this amount is avail-
able for payments of bonuses to producers on milkfat delivered and, if neoessaiy,
for building reserves. The association attempts to meet the monthly prices paid
by competitors for various grades of milkfat and plans on prorating back to mem-
bers any savings effected on each year's operations. During the last two years,
the association has been unable to pay a bonus to its members as high as that paid
by the Potaluma Cooperative Creamery. This fact vras largely responsible for the
withdrawal of so many members during 1944-45. If the association continues to
operate as at present, it virill find continually more difficult the meeting of
prices paid concurrently by competitors, and even more difficult the providing of
satisfactory bonuses at the end of each year.
4/ These figures do not include federal subsidy.
I
I
TABLE 16
Point Reyas Da-irymen' s Associa,tion
(Income and Expenses)
1941-^
. „ , ^
f2 i
19 (
1943-44
1944-45
Quantity
Value j
,
Quantity
r
Vslue
Qiuantity
V cxxue
C^uant ity
vdlue
Proceeds of Sales
1
1
]
Butter (pounds)
774,601
289,492 i
742,701
352,661
44y , •il'i
coo Q ^ 1
Dried non-fat-solids
]
(pounds)
352,591
2b, 526 !
920,870
75,429
>53 203
22 295
861 P79
119-536
Cheese (pounds)
;>75,77i
135,430 .
452,555
122,533
572 605
158 305
195.601
54,590
Casein
j
72,277
10,730
lOR T^7
20 505
13,184
3,141
Market milk (pounds
1
milkf at)
219,707
174.010
339,904
323,012
462 231
640 827
622.059
:"'iscellaneous
9,306 ;
12.191
.^c , OX D
1 1 PPA
634,764 ,
895,556
917 ,485
1 .055.836
Change in inventory
+ 6,789
-12,546
577
+ 3,4b3
Freight
-
3.083
641,553
884,010
916 908
1 .tJbo-.£:ilD
* v V ^ ^ W
Payments to producers
Milkfat in cream (poufuds)
313,222
128,109
186,718
90,473
OA A AO
<i ^ ** C
iviilkfat in ma.nuf acturing
milk (pounds)
506,357
280,059
589,553
371,433
524,962
335,606
507,876
338,360
Milkfat in market
milk (pounds)
219,707
155,235
339.904
298,708
449,258
450.418
640.827
599.669
1 O'^g 286
5S4 403
1.115 175
760 614
1 079 502
P3P 704
■ 1 199 392
962,471
Operatinpr exoenses
\ 64,429
Manufactured products
49,069
64,730
] 52,256
Market milk (including
i
3
freight)
14,Uo9
16 , ol /
Ov rhea.d expense
10.811
63,108
81,347
64,429
73,067
Payments to producers
plus operating costs
527,511
841,961
903,133
1,035,538
Net op.-- rating income
14,042
42,049
13,775
30,678
Other nonopsratine- income
r'73
1.785
2,055
18.453
Total net income
14,315
;?,634
15,830
49,131
Source of data: Compiled from records of the Point Reyes Dairym.en's Associ-tion.
32.
Balance Sheet.— As of June 30, 1945, current assets exceeded current
liabilities by about ^,4,000, to which may be added 4,5,085 prepaid insurance and
supplies inventory. However, in view of the fact that it is customary for the
association to pay to patrons most of the undistributed proceeds of operations
for the year (^,49,131 at the end of 1944-45), the ratio of current assets to
current liabilities was not too satisfactory. Long-term investments in ^Challenge
Cream and Butter Association and stock held in the Berkeley Bank for Cooperatives
amounted to 464,628. Fixed assets in land, buildings, and equipment depreciated
more than two thirds and stood at (,40,215 (table 17).
The equity of patrons and stockholders in the association amounted to
i;114,196, of which only 430,701 is evidenced by preferred and common stock.
In view of the appreciation in the value of land and buildings in recent
years, the association should be able, in the event of liquidation, to realize
more than the present book value shovm for land, buildings, and improvements. It
is probable, too, that the current market valuu of trucks, office furniture and
equipment, and milk cans will equal, if not exceed, the book value of these assets.
The only loss that may occur, therefore, would be on sale of machinery and equip-
ment. Most of the machinery and equipment appears to be in very good shape and,
in viev/ of prosont scarcities and high prices, could probably be sold at prices
not greatly below their book value. It is probable, therefore, that in the event
of liquidation, the association will be able to meet its obligations to stock-
holders and patrons to very nearly 100 cents on the dollar.
Conclusions and Recommendations
Conclusions.— The analysis of consumption trend of dairy products and
utilization of milkfat in California indicated that butter production in Califor-
nia has declined consistently in the state since 1924, the rate of decline being
greatly accelerated since 1940. With the tremendous gro\vth of population since
1940 and the high level of buying povrer, consumption of market milk, cottage
cheese, and ice cream has soared. Increased consumption of market cream has been
held in check by shortage of supply and by wartime control measures. If popula-
tion continues to increase, even at a slower rate, distributors of market milk
and market cream and processors,. of ice cream and cottage cheese will find increas-
^ /sufricient; , , ,, . . .
ing difficulty in securing/supplies of milk to meet their requirements. The pros-
pects of greatly increased output of milk in California are not too bright, at
least for the next year or two.
Under the circumstances, distributors and processors of these four products
will go farther afield for supplies of milk. They will offer inducements of every
possible kind to producers who are within reasonable distance of the larger popu-
lation centers, to equip themselves for the shipping of market milk and market
cream.
Although the Bodega Cooperative Creamery Incorporated and the Point Reyes
Dairymen's Association were originally organized to manufacture butter, cheese,
and by-products, both associations since 1940 have shipped an increasingly large
proportion of their milk to the East Bay cities in the form of market milk —
30 much so, that in 1944-45 over half of their volume of milkfat v/as shipped as
market milk. Because of the decline in volume of manufacturing milk and cream
manufactured into butter and by-products, unit costs of operation have risen
appreciably and the tm associations have experienced increasing difficulty in
paying to their patrons returns equal to those paid to dairymen by their compet-
itors. This, during the last two or three years, has caused considerable dis-
satisfaction among both manufacturing- and market-milk patrons. Shippers of
33.
Table n
Point I'eyes Dairj(?uen's Association
(Condensed Balance Sheet, at June 30, 1945)
ASSETS
Current ass ets
Cash on hand and in bank
ATCounts receivable
Trade acceptances receivable
Inventory — products
Investments
Chi'llenge Cream und Butter
Association (me;.ibership ,
certificates of interest,
and revolving fijnd)
S'cock — Berl.'eley Bank for
Cooperatives
Fixed Assets
Land
Buildings and improvoincnts
Machinery and equipment
Trucks
Office furniture and equipment
iiilk cans
Other assets and propaid
expenses
Total
LIAblLmES
Cur-ent liabilities
Accounts ^'ayable
Taxes payable
J o be payable — Bank of Amsrica
AdvaiiCe payable — patrons
June deliveries
Capital
Preferred stock — nonvoting,
Coiiiiiion stock (and j ur chase
credits)
Rese.-ve for special purposes
Patrons equity reserve
Undistributed proceeds, y^^ar
ending June 50, 194 5
Total
Cost
900
31,918
96,567
2,396
2,435
11,008
Accumulated
depreciation
Net Value
900
4,253
25,480
677
771
8,154
27,490
3,211
3,108
31,256
49,131
dollars
43,218
13,390
55,016
6,871
118,496
o4,228
400
40,215
5,085
S'26,4S3
4,128
1,300
10,000
98,799
11 4,196
^,423
34.
manufacturing milk consider that shippers of market milk aro not contributing
sufficiently to the operations of the associations. Karket-milk shippers, on the
other hand, claim that they are being penalized by having to contribute toward
the expenses of manufacturing butter and other products. The large decline in
membership (especially of manufacturing-milk producers) in both associations
during 1944-45 was the outcome of this general dissatisfaction.
The decreased volume of manufacturing milk now being delivered to both
associations will serve merely to aggravate the situation. Both associations
have a plant equipped to handle two and three times the volume of manufacturing
milk now available. Expenses of upkeep continue, regardless of volume handled.
Unit costs of processing are bound to rise. It is significant that both associ-
ations have had so little manufacturing milk since December last that only one or
t-wo churnings have been made.
Another cause for dissatisfaction among manufacturing-milk shippers is the
fact that the associations have continued to manufacture butter or cheese, skim
milk, and casein when more profitable manufacturing milk outlets (particularly
cream for ice cream and cottage cheese) have been available. The boards of
directors admit that other manufacturing outlets would net higher returns, but
dra-.7 attention to the fact that their associations are under contract to ship all
their products through Challenge Cream and Butter Association. This association,
for various reasons, has been unable to handle ice cream and cottage cheese in
its Oakland and San Francisco plants and has urged the two associations to induce
more members to equip themselves to ship market milk.
It is safe to conclude that the Bodega Cooperative Creamery Incorporated
and the Point Reyes Dairjnnen's Association are fighting a losing battle if they
continue to operate as they have in the past few years. Dissatisfaction will
continue to grow among both market-milk and manufacturing-milk shippers. As
conditions stand, both associations may expect to lose many members at the end of
this year -r unless prospects for the future are greatly improved, A further
decline in membership will see both associations either operating at a loss or
paving to producers considerably lov/er returns than are paid by competitors to
their patrons.
There appears to be little prospect of a comeback for butter manufacture
in the state. Even if there is some recovery in the relative importance of butter
manufacture, both associations aro so close to the Da-f cities that their output
should logically go to those cities in the most profitable forms — market milk,
market cream, manufacturing cream for ice creara, and cottage cheese.
If either or both associations continues to operate as at present, failure
within the next year or two seems unavoidable. The situation calls for drastic
reorganization. Several plans of reorganization are recommended below, together
with the apparent advantages and disadvantages of each. Final decision as to
which, if any, of the recommended plans is adopted, of course, rests with the
directors and membership of the tv;o associations. In submittint, these recommend-
ations, the authors are guided primarily by considerations for the vrelfare of the
two associations.
Discontinuation of Both Associ-ations
Plan No. 1." This plan v/ould call for early cessation of operation of the
two associations — say at the end of the current fiscal year. The tv/o associa-
tions vrould go into liquidation. Plant and equipment v/ould be sold to best
advanta ge .
35.
No nev/ association would be formed. Members of the two associations would
be free to seek other markets for their milkfat. These would include the Petaluma
Cooperative Creamery or independent operators in the area.
The main advantages of Plan No. 1 would be that:
a) Members would be assured higher returns for their milkfat, at least for
the time" being, than they would be likely to receive if they continue to support
the tvio associations under existing conditions.
b) Immediate sale of land, buildings, and equipment would net higher returns
than are" likely to be obtained within a year or tvro, vihen the equipraent-supply
situfition is improved.
The chief disadvantages of Plan No. 1 are:
a) The members situated in the more outlying parts of the territory served
by these" two associations v/ould have no assurance of being served by a cooperative
association. The Petaluma Cooperative Creamery, which already has a large member-
ship, may be now, or at some time in the future, unvj-illing to serve producers who
are outside of its main territory. Experience in the past has shovna that in areas
not served by cooperative associations, producers have been subjected to trade and
other practices which have been to their disadvantage.
b) Many dairymen v/ould regard the absence of a cooperative association in
their aFea as a distinct loss. Cooperative associations have served as more than
a mere business agency to handle members' products. It is a community organization
that fosters public spirit. Members of cooperative organizations are usually eager
to serve on boards of directors of their associations. It gives them prestige in
their community and the satisfaction of rendering public service. So deeply are
many farmers imbued with the co'dperative principle that they v/ould willingly accept
lovrer returns on their products, rather than be without an association.
c) The plan involves a loss of volume to the Challenge Cream and Butter
Association. Both the Bodega and the Point Reyes associations have been members
of Challenge for many years and have benefited from its growth and operations.
Although they have been critical of the operations and policies of Challenge,
many directors of the tv/o associations consider that continued affiliation with
Challenge would be to their advantage as well as to the advantage of the dairy
industry as a v;hole.
d) The loss of the market milk shipped by the two associations would
seriousTy embarrass the Challenge Cream and Butter Association in its operation
of the San Francisco and Oakland plants.
e) It would make no provision for employees of the two associations, many
of whom~have served the associations faithfully for several years.
Merging of Operations
Plan Ko. 2. — This plan would call for merging the manufacture of butter,
cheese, and other by-products in only one plant. Under such a plan it would be
more logical to operate the Point Reyes plant, as it is in better condition than
that of the Bodega creamery. Moreover, it is nearer the Bay cities and thus
would involve less crosshauling than if all manufacturing milk and cream were
hauled to Bodega. If Plan No. 2 is followed, the Bodega plant could be operated
merely as an assembly station. All unnecessary equipment could be sold.
36*
Actually, neither plant is strategically located. Erection of another
plant in a more strategic location would be expensive and would involve losses in
the sale of equipment at tho present locations.
Market milk would continue to go to Challenge as at present.
The advantages of Plan Vo. 2 would be that:
a) Both associations would continue to operate as separate entities, but
operating costs on manufactured products would be reduced by operating only one
plant.
b) Most of the personnel of the t^vo associations could be retained.
The d isadvantages of Plan No. 2 are:
a) As stated above, nuithbr of the t-TO plants is suitably located to handle
the milk of all dairymen now served by the two associations. Erection of a plant
in a more suitable area vrould be expensive.
b) Conflict of interest between market-milk and manufacturing-milk producers
would n'ot be eliminated.
o) A satisfactory division of expenses between the two associations v/ould
be difficult to work out.
d) The plan viould not overcome the fact that the manufacture of butter and
cheese Ts not the most profitable outlet for manufacturing milk in the area. The
situation could be improved if Challenge would accept manufacturing cream and
cottage cheese for sale in the Bay area.
e) If more members equipped their ranches to ship market milk, it would
merely mean postponing the evil day. vnthin a few years, the volume of manufac-
turing milk'will decline to a point where processing costs will be so high that
the associations will be unable to make satisfactory returns to their members.
f) Many members of the tavo associations will be opposed to such a merger
of manuFacturing operations.
Dissolution of Old Associations and Formation of New Bargaining Association
(For both market milk and manufacturing milk)
Plan No. 3.— This plan vrould involve closing the tvro existing plants, sale
of all land, buildings, machinery and equipment, liquidation us rapidly as possible
of the t.70 existing associations, and formation by the present members of the tero
associations of a new cooperative bargaining association to arrange for the sale
of both market milk and manufacturing milk.
The market milk oould be sold, as at present, through the Challenge plants
in Oakland or San Francisco, the manufacturing milk in bulk to Challenge, the
Petaluma Cooperative Creamery, or whatever other satisfactory outlet may be avail-
able. Tentative inquiries at the office of the Petaluma Cooperative Creamery
have indicated that this organization would be willing, if not eager, to obtain
an increased volume of manufacturing milk.
The advantages of Plan No. 3 are:
a) Continued operation of a cobpurative association in the area now served
by the 't<Ho associations.
37.
b) Continued supply of market milk for Challenge.
c) Higher returns for manufacturing milk producers because
(1) Manufacturing milk will be used in more profitable manufactured
products, such as ice cream and cottage cheese.
(2) The cost of processing will be greatly reduced. There will be no
processing costs for the nev/ association and lower processing costs through new
sales outlet.
(3) Overhead costs will be lov/er as a result of the combination of
volume of the two associations into only one bargaining association.
d) Higher returns for market-milk producers because of spread of total
costs over a larger volume.
e) The nev>r association will be able to continue vrork to induce manufactur-
ing-milk producers to equip themselves to handle market milk.
f) More economical arrangements could be made for the collection and haul-
ing of members' milk.
g) Some, at least, of the employees of the tv/o existing associations could
be used~by the new association on management and field v/ork.- It appears highly
desirable for the new association to undertake a well-rounded and permanent pro-
gram for improving membership relations.
h) The head office of the nev; association could be located at a more
centralTzed and convenient place.
The disadvantages of Plan Fo. 3 are:
a) The services of many of the employees of the -tm existing associations
7/ould have to be dispensed with.
b) There may still be some conflict of interest betvreen manufacturing-milk
and marFet-milk producers. Separate outlets for the milkfat of the t7/o groups of
producers should be stressed, however. It vrould thus be possible to segregate
returns. As the new association "vvill serve merely as a bargaining association,
both groups vrould probably contribute equally (on a milkfat basis) toward over-
head and administrative expenses.
o) Fewer dairymen vrould be required to serve on the board of directors of
a single" association than is true at present.
d) The Petaluma Cooperative Creamery and private operators in the area may
be unwiTling to cooperate in an arrangement that may result in loss of a large
volume of manufacturing milk at some time in the future. This difficulty could
possibly be overcome by a contract to guarantee supply for a year or more.
Dissolution of Old Associations and Formation of Kew Bargaining Association
(For market milk only)
Plan No. 4« — This plan is similar in all respects to Plan Mo. 3, except
that the new' bargaining association would be confined to market-m.ilk producers
only. Manufacturing-milk producers vrould be free to open nev; marP:et outlets for
their milkfat.
38.
The advantages of Plan No. 4 are:
a) There would be no possibility of conflict between market-milk and manu-
facturirTg-milk producers.
b) Manufacturing-milk producers would be able to secure a ready market for
their pFoduot at the present time. For instance, the Petaluma CoSperative Creamery
has indicated that it would welcome additional manufacturing milk.
c) Overhead costs for the new association would be reduced, but probably
not as much as vrould be true if it handled manufacturing milk as well.
d) Other advantages would be the same as for Plan No. 3.
The disadvantages of Plan No. 4 are:
a) Overhead and administrative costs would probably be somewhat higher than
under PTan No. 3.
b) The new association would not be assured of the volume expansion of
market milk from manufacturing-milk producers, who may equip their dairies during
the next year or two.
c) Challenge vrould not be assured of a volume of manufacturing milk for its
Oakland~and San Francisco plants, should it in the near future be in a position
to handle ice cream and cottage cheese.
d) Disadvantages a)and c) of Plan No. 3 would also apply to Plan No. 4.
The authors consider that, if the co'dperation of all parties can be obtain-
ed. Plan No. 3 offers the best prospects for successful operation in the future.