CALIFORNIA AGRICULTURAL EXPERI ATION THE DAIRY SITUATION IN CALIFORNIA • 1947 J.M.TINLEY FEBRUARY, 1947 CIRCULAR 366 PERCENTAGE UTILIZATION OF MILK FAT IN COMMERCIAL DAIRY PRODUCTS: CALIFORNIA 1930 1935 1940 1945 E COLLEGE OF AGRICULTUR IVERSITY OF CALIFORNIA THE DAIRY SITUATION IN CALIFORNIA Changes Since 1925 Consumption.— The volume of consumption of dairy products in California expanded greatly during the past two decades under the stimulus of almost a 100 per cent increase in popula- tion, a marked expansion of buying power during the war years, and development of consumer preferences for dairy products. Production.— In contrast to the growth of population, milk production in California increased only about 60 per cent. Out- put of milk per capita has thus declined. Production of milk within the state has become more highly localized. One fourth of all the counties in California now produce over three fourths of the state's annual output. Over 90 per cent of all milk pro- duced in 1 945 was sold wholesale or retail as fluid milk. Utilization of Milk Fat.— Important shifts have taken place in the proportion of milk-fat production used in various dairy products. In 1945 about 65 per cent of all milk fat sold by farmers was utilized in market milk, market cream, and ice cream, and another 27 per cent in evaporated and condensed milk and miscellaneous manufactured products. On the other hand, butter used only 6 per cent of all milk fat sold by farmers in 1 945 as contrasted with nearly 50 per cent in 1925. These shifts have been on a relatively higher scale in Califor- nia than in the United States as a whole. War Influence.— These changes were not a wartime phenom- enon. The war merely hastened and magnified trends already under way. The Outlook The immediate and long-time outlook for the California dairy industry, though fraught with some dangers and difficulties, is distinctly favorable. Population.— It is estimated that California's population will reach 10 million before 1950. Buying Power.— Some decline in buying power from the 1 946 level is to be expected. This will tend to reduce the level of per- capita consumption for some dairy products. The total volume of consumption of dairy products, however, will not be greatly reduced because of growth of population. Furthermore, even in 1945, all consumer needs for such products as market milk and market cream were not fully met because of shortage of supply. Production.— It is probable that milk production will continue to expand for several years but at a slower rate than the growth of population. California's deficit position as regards milk pro- duction will thus become more pronounced. Utilization.— A growing proportion of all milk fat sold by farm- ers will be used in market milk, market cream, and ice cream. Although the volume of production of evaporated and con- densed milk and of powdered whole milk will probably decline below the peaks reached during the war years, these products will utilize a substantially greater proportion of California's output of milk fat than they did before the war. It is unlikely that butter and cheese together will utilize much more than 10 per cent of all milk fat produced annually. California will have to import a growing proportion of its consumption needs of butter and cheese. Prices.— Beginning in 1 947, a decline in prices of milk and dairy products is to be expected. On the other hand, most costs are likely to remain fairly rigid. Dairymen would be well advised to give greater attention to reduction of indebtedness and in- crease in efficiency of operation. Digitized by the Internet Archive in 2012 with funding from University of California, Davis Libraries http://archive.org/details/dairysituationin366tinl THE DAIRY SITUATION IN CALIFORNIA J. M. TINLEY 1 DEMAND FACTORS: Over a period of years the volume of con- sumption of milk and dairy products tends to expand or contract in relation to changes in population, in consumer buying power, and in consumer preferences for dairy products. Population. — Between 1925 and 1945 the population of California in- crease4 from 4.6 million to 8.8 million, or about 90 per cent (fig. 1). Almost half of this increase occurred during the war years. Actually, the increase in California's population was somewhat greater, as population estimates for FIGURE 1 RELATIVE INCREASE IN POPULATION UNITED STATES, WESTERN STATES AND CALIFORNIA (1925 = 100) 200 180 160 140 120 100 - - / / / - California-—-^ „**'' / /-— '' .-'' -Western States ^ ^^ United States - 1 I I 1 _. 1.1 1 1 i i i i i i i i 200 180 160 140 120 100 1925 1930 1935 1940 1945 1945 do not include members of the armed forces stationed in California. In contrast to California's increase of 90 per cent, the population of the United States increased during the same period by only 22 per cent and that of the eleven "Western states (including California), by only 56 per cent. Buying Power. — Using an index of income from salaries and wages, cor- rected for changes in population, as a measure of consumer buying power, it is found that between 1929 and 1933 buying power in California declined 1 Professor of Agricultural Economics, Agricultural Economist in the Experiment Station, and Agricultural Economist in the Giannini Foundation. [5] 6 California Experiment Station Circular 366 nearly 55 per cent (fig. 2). Although buying power expanded slowly from 1934 onward, it was not until 1941 that it again reached the 1929 level. During the war years, however, buying power expanded sharply to 1944, with a slight decline in 1945. Even in the latter year, buying power was over twice as high as that of 1940. Trends of consumer buying power in California, the United States, and the Western states were almost identical between 1925 and 1940. During the FIGURE 2 RELATIVE CHANGES IN INCOMES FROM SALARIES AND WAGES IN UNITED STATES, WESTERN STATES AND CALIFORNIA; ADJUSTED FOR CHANGES IN POPULATION (1929 = 100) 180 160 140 I- z LU <-> 120 or LU a. 100 80 60 - California --^// ^^^^^ - Western St lit ates — -^ // / /'/ - P ■ - fif United States -^ / - 4^^ ^^^&*^ - - 1 1 1 1 1 i i i .j I 180 160 140 120 100 80 60 1930 1935 940 1945 war years, however, buying power expanded to a somewhat greater extent in the Western states than in California, and to a greater extent in California than in the United States. Consumer Preferences for Dairy Products. — During the past twenty years, several factors have contributed to a strengthening of consumer preferences for dairy products. Sustained educational work by state dairy councils and other agencies has built up a strong desire on the part of consumers for dairy products. Nutritional programs of the armed forces aided considerably in instilling a desire for milk and dairy products in service personnel. Moreover, with higher buying power, many previously underprivileged families have been able to purchase dairy products and have thus developed a sustained desire for such products. Subsidization of consumption of dairy products and stabilization of retail prices were also important factors in developing con- sumer preferences. Production of a wider variety of finished dairy products and improved methods of processing, storage, and transportation have in- creased the market outlets for milk and milk fat. The Dairy Situation in California SUPPLY FACTORS: Although the number of dairy cows and milk production per cow increased during the past two decades, milk production per capita in California has continued to decline. Dairy Cows. — The number of dairy cows in California expanded more or less steadily from 573,000 in 1925 to 800,000 in 1945, an increase of about 40 per cent (fig. 3). This increase was much greater than that in the United States and in the Western states, where increases were only 19 and 22 per cent, respectively. Because of the more rapid increase in population in California, the number of dairy cows per 100 of population declined from 12.4 in 1925 to only 9.1 in 1945. The Western states also experienced a decline — from 18.1 cows per 100 of population in 1925 to 14.2 cows in 1945. In the United States, however, the number of dairy cows per 100 of population has remained remarkably steady during the whole of this period. In 1945 the average number of cows per 100 of population in the United States was just about double the number in California. Milk-Fat Production. — The volume of milk fat produced in California increased from 133 million pounds in 1925 to 217 million pounds in 1945, an increase of about 63 per cent (fig. 4). Almost two thirds of this increase took place after 1939. As the average milk-fat test for the state remained unchanged during these twenty years, it is apparent that there was an appreciable ex- pansion in milk production per cow. During the years 1925 to 1945 milk-fat production in California expanded to a much greater extent than did milk-fat production in the United States and the Western states, which experienced increases of 37 per cent and 48 per cent, respectively. In California the expansion of milk-fat production did not keep pace with the increase in population. Per-capita production of milk fat declined from 28.7 pounds in 1925 to 24.6 pounds in 1945. In contrast, milk-fat production per capita in the United States expanded from 31 pounds in 1925 to 35 pounds in 1945. During the same period milk-fat production in the Western states declined slightly, from 36 to 34 pounds. In 1925 average milk-fat production per capita in California was only 2 pounds below the national level ; in 1945 it was about 10 pounds lower. These figures emphasize the growing deficit position of California in regard to production of milk and milk fat. Disposition of Milk Produced. — Significant shifts have occurred in the manner in which dairy farmers have disposed of their milk. In 1925 dairy farmers in California retained slightly over 10 per cent of all milk produced for farm consumption or usage, sold about 40 per cent wholesale in the form of farm-separated cream, sold another 39 per cent to manufacturers and other handlers as fluid milk, and retailed 11 per cent as market milk and market cream (fig. 5). By 1945 the proportion retained for farm usage and con- sumption had declined to only 6 per cent; the proportion sold as farm- * - I \ \ JFORNIA DAIRY COWS j - S AND CAL NUMBER OF / I to L C V «/> \i o 'E o o o \ f mm __ LU in \ j z a: LU 1 1. 1 , r u, wig CD li. \U CM s- (/> Q LU H X o I- ° z I Q o o o o o o o o O 00 N CM — SQNVSnOHl in o o >- < - to - o GO ■o 01 'c 3 - 1 i ._ /.!" in CM o en o " m 1/ I i \ 1 1 / / 2 V / / O '\ - 1- \ < _J M 3 o - Q. O a 55 CO c J O 1 O •o a* 5 * / 1 - \ \ a: \ / < 1 1 o / / / / / / / 1 1 ,»" en n tf> io — 0) SMOO dO «39WnN en o o >- \ HI \ £ \ - CO LlI J I- UJ * I * 1 & B _i | s H O Q O q: Ql o o o o o o IO CM - SONflOd Nomiw • «* 1 tt> 1 O 1 - tt> J *5 / v| - y X \ \ - \ i - • ^ 01 0> .2 1 c ■ o / to / o / / \ Y ' / J / V - J '( / / ), I. ( \ / / » to «fr eu o oo \\ ? \\ w 1- Vy < v\ " _l UJ - tc 1 o o o o o o o o o 8 o m o m If) <*■ ! Farm Butter Milk Sold Wholesale- Milk a Cream M Sold Retail • //. wi loor 80 UNITED STATES WESTERN STATES CALIFORNIA b 60 20 100 80 60 40 20 1925 1935 1940 1945 1925 1935 1940 1945 1925 1935 1940 1945 Of special significance in all three areas is the marked decline in the pro- portion of milk used in farm-made butter. In California the decline was from slightly over 2 per cent in 1925 to less than 1 per cent in 1945 ; in the United States, from 14 per cent to somewhat under 6 per cent; and in the Western states, from just over 7 per cent to less than 3 per cent. Location of Milk-Fat Production in California. — Although there has been a two-thirds increase in the volume of milk fat produced in California during the past twenty years, less than half the counties in the state have shared in this increased output (fig. 6). Nineteen of the fifty-eight counties in the state produced less milk in 1945 than they did in 1925, and another twelve counties produced substantially the same volume. Most of the nineteen counties are in the mountain or desert regions of the state where milk production has never been important. A few of the counties, however, are situated along the coast and in southern California, where truck and other types of farming have proved to be relatively more profitable. The Dairy Situation in California 11 FIGURE 6 MILK-FAT PRODUCTION IN CALIFORNIA: 1945 AND RELATIVE CHANGE 1925-1945 NORTH. COAST 0» 10 MILLION POUNDS OF MILKFAT PRODUCED IN 1945 CENTRAL COAST - LEGEND LARGE DECLINE I 1 SMALL DECLINE NO CHANGE MODERATE INCREASE 3REAT INCREASE SACRAMENTO VALLEY 1945 AS PERCENT OF 1925 LESS THAN 70 70 - 90 M - 110 III - 140 MORE THAN 140 Counties in the San Joaquin and Sacramento valleys and in southern Cali- fornia have accounted for all of California's increase in milk-fat production. Just over 75 per cent of all milk fat produced in 1945 came from about one fourth of the counties of the state. The five leading dairy counties (Los An- geles, Stanislaus, Merced, Tulare, and San Joaquin) alone produced nearly 12 California Experiment Station Circular 366 50 per cent of the state's output of milk fat, and one county (Los Angeles), nearly 17 per cent. These data indicate a growing concentration of milk-fat production in a relatively small number of counties in the state. This increased concentration was not a wartime phenomenon ; most of the shifts were well under way long before the outbreak of war. PRODUCTION OF FAT-CONTAINING DAIRY PRODUCTS IN CALIFORNIA: Because of the lag in the production of milk in relation to changes in population, buying power, and con- sumer preferences for dairy products during the period 1925- 1945, there have been important shifts in the volume of produc- tion of various dairy products in California. The war accelerated and intensified these shifts (fig. 7). Market Milk and Market Cream. — Except for a slight decline during the depression years (1930-1933), production and consumption of market milk in California showed a steady growth from 102 million gallons in 1925 to 165 million gallons in 1939. Under the stimulus of a rapid increase in popu- lation and in buying power during the war, production of market milk soared TABLE 1 Consumption of Market Milk and Market Cream: California and United States (in terms of fluid milk) Relative changes 1925-1929 = 100 Average annual per-capita consumption Period California United States California United States Excess United States over California 100 110 127 160 100 104 105 121 Pounds 1925-1929 306 292 304 321 353 348 342 374 47 1930-1934 1935-1939 1940-1944 56 38 53 to 310 million gallons in 1945, a volume almost double that of 1939 and three times that of 1925. Included in the 310 million gallons produced in 1945 were 32 million gallons sold to federal agencies, principally to military forces. Except for a decline during the depression, the volume of market cream distributed in California expanded from 5.8 million gallons in 1925 to 8.5 million gallons in 1939, an increase of almost 50 per cent. Following an in- crease to 8.9 million gallons in 1940, the volume of market cream distributed declined sharply to 3.3 million gallons in 1943, with a slight increase to 4.1 million gallons in 1945, or considerably less than half the volume distributed in 1939. The drastic decline of market-cream production during the war years The Dairy Situation in California 13 \ FIGURE 7 TOTAL PRODUCTION OF PRINCIPAL FAT-CONTAINING DAIRY PRODUCTS IN CALIFORNIA 1925-1945 ALL MARKET MILK & MARKET CREAM MARKET MILK DISTRIBUTED a USED ON FARMS (FLUID MILK EQUIVALENT) w 300 z o 200 2 100 - MILLION POUNDS o o o o o o o o o - - 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 i 1 1 i I i i i i I I I 1925 1930 1935 1940 1945 ICE CREAM 8 MARKET CREAM 40 h 30 1925 1930 1935 1940 BUTTER 1945 20 - - Ice Cream — ; - .^ M . . . . arket Crea ...1 1925 1930 1935 1940 1945 UNSKIMMED EVAPORATED a CONDENSED MILK 1925 1930 1935 1940 1945 CHEESE a POWDERED WHOLE MILK 400 300 2 200 100 1925 v^N^S 25 / 16 »x^ * "*"** / 1 1 leese 12 8 • l l P jwdered W hole Milk- 4 - 1930 1935 1940 1945 1925 1930 1935 1940 1945 14 California Experiment Station Circular 366 was due partly to governmental restrictions on the sale of market cream and partly to shortage of supply of milk suitable for market milk and market cream. The volume of milk fat used in market cream declined to an even greater extent because sale of whipping and pastry cream was prohibited. The volume of fluid milk used in market milk and market cream, including milk and cream consumed on farms, expanded from 1,349 million pounds in 1925 to 2,208 million pounds in 1939, and to 2,954 million pounds in 1945. The wartime increase in fluid milk used in market milk was offset by a drastic decline in fluid milk distributed as market cream and by a lesser decline in milk and cream used on farms. The following data indicate that during the past two decades the volume of fluid milk used in market milk and market cream has increased to a relatively TABLE 2 Butter Production : California and United States Relative changes 1925-1929 = 100 Average annual per-capita production Period California United States California United States Excess United States over California 100 98 87 67 100 109 105 101 Pounds 1925-1929 1930-1934 15 13 10 7 18 18 17 16 3 5 1935-1939 1940-1944 7 9 greater extent in California than in the United States (table 1). Per-capita usage of fluid milk in market milk and market cream has been on a consistently lower level in California than in the United States. Moreover, because of the more rapid increase in population in California, the difference in average annual per-capita usage has tended to widen. Butter. — Butter is the only fat-containing dairy product the output of which has shown a consistent tendency to decline since 1925 — a tendency greatly accelerated during the war period. Production of butter in California (including butter made on farms) declined, albeit irregularly, from 77 million pounds in 1925 to 68 million pounds in 1939, a decrease of about 12 per cent, During the war years, however, output fell sharply to a low of about 18 million pounds in 1945 or less than one fourth of the volume produced in 1925. Even in 1925 California was unable to supply all its consumption needs of butter. In that year net shipments of butter into the state amounted to 17 million pounds. By 1943, in spite of wartime rationing of butter, net shipments of this product into California amounted to 73 million pounds, an amount approximately equal to production twenty years earlier. The data in table 2 serve to emphasize the spectacular decline in butter production in California. Although animal production of butter in the United States has declined since 1930, output during the war years averaged slightly over production The Dairy Situation in California 15 during the period 1925-1929. In contrast, production in California has de- clined consistently. Although average output of butter in the United States has shown a tendency to decline since 1925, the decline is far less marked than in California. During the years 1925-1929, California's average annual output was 3 pounds per capita lower than in the United States ; during the war years it was 9 pounds lower. Cheese. — Production of cheese in California increased from 7.4 million pounds in 1925 to 15.4 million pounds in 1939, an increase of over 100 per cent. During the first three years of the war period, production held up re- markably well but declined sharply in 1944 to only 13.2 million pounds. Out- put rose slightly in 1945. TABLE 3 Cheese Production : California and United States Relative changes 1925-1929 = 100 Average annual per-capita production Period California United States California United States Excess United States over California 100 149 188 181 100 118 152 221 Pounds 1925-1929 1.7 2.2 2.5 2.0 3.7 4.2 5.2 7.2 2 1930-1934 1935-1939 1940-1944 2.0 2.7 5.2 As in the case of butter, California has been unable to meet all its consump- tion needs for cheese. In 1925 net shipments of cheese into California amounted to nearly 19 million pounds. By 1943, in spite of a considerable expansion in production since 1925, net in-shipments had increased to nearly 31 million pounds. A large proportion of California's annual output of cheese consists of spe- cial varieties consumed in large part within the state. The data in table 3 indicate that, up to 1939, cheese production in California increased more rapidly than in the United States. During the war years, how- ever, cheese production in the United States expanded rapidly, whereas in California it was reduced. During the twenty years under review, cheese production per capita in the United States just about doubled. In California production per capita doubled between 1925-1929 and 1935-1939 but has since declined by about one fifth. The excess of production per capita of the United States over California has grown steadily. Evaporated and Condensed Whole Milk. — California has for years ranked (next to Wisconsin and Ohio) as the third most important state in regard to production of evaporated and condensed whole milk. Output of these products expanded from about 129 million pounds in 1925 to 216 million pounds in 1939, an increase of about 66 per cent. During the war years output rose rapidly, in response to national needs, to a peak of 356 million pounds in 1945, an output nearly three times greater than that of 1925. 16 California Experiment Station Circular 366 Over the past two decades the expansion of production of evaporated and condensed whole milk has been somewhat more rapid in the United States than in California (table 4). Furthermore, the figures indicate that although output of these products has been consistently higher in California, the per- capita advantage of California has been declining. TABLE 4 Production of Evaporated and Condensed Whole Milk : California and United States Relative change 1925-1929 = 100 Average annua Jper-capita production Period California United States California United States Excess California over United States 100 133 115 192 100 113 139 215 Pounds 1925-1929 30 34 30 37 13 14 17 25 16 1930-1934 1935-1939 1940-1944 20 13 12 Powdered Whole Milk. — During the years 1925 to 1939, production of powdered whole milk in California fluctuated rather widely from year to year, but showed a moderate upward trend. The 1939 output of 843,000 pounds was only slightly above output in 1925. In response to national needs, TABLE 5 Production of Powdered Whole Milk : California and United States Relative change 1925-1929 = 100 Average annual per-capita production Period California United States California United States California over or under United States 100 123 158 2,036 100 128 181 839 Pounds 1925-1929 .09 .09 .11 1.26 .09 .11 .15 .66 1930-1934 -.02 1935-1939 -.04 1940-1944 + .60 however, production skyrocketed during the war years to reach about 26 million pounds in 1944 and nearly 30 million pounds in 1945. Between 1925 and 1939 production of powdered whole milk expanded somewhat more rapidly in the United States than in California, but during the war years the rate of expansion was far greater in California (table 5). Output per capital in California and the United States was roughly the same during the period 1925-1929. During the next ten years, however, per- The Dairy Situation in California 17 capita output rose more rapidly in the United States than in California. In spite of the much greater wartime increase of population in California, pro- duction of powdered whole milk expanded so rapidly that during the years 1940-1944 output per capita in the state was almost double the national level. Ice Cream. — In California, as in other parts of the United States, pro- duction and consumption of ice cream tends to fluctuate with changes in general business conditions. Production of ice cream increased from 11.5 million gallons in 1925 to 15.4 million gallons in 1929, but then dropped sharply to only 8.8 million gallons in 1933. With the moderate improvement of business conditions after 1933, production again expanded, to reach a total of 19.5 million gallons in 1939. The rapid improvement in buying power TABLE 6 Production of Ice Cream : California and United States Relative change 1925-1929 = 100 Average annual per-capita production Period California United States California United States Excess California over United States 100 88 122 212 100 82 115 178 Gallons 1925-1929 1930-1934 1935-1939 1940-1944 2.6 2.0 2.1 3.6 1.9 1.5 2.0 3.0 .7 .5 .1 .6 and increase in population during the war years caused ice cream produc- tion to soar to 38.7 million gallons in 1945, a volume nearly double that of 1939 and about three and one-half times that of 1925. During the past two decades production and consumption of ice cream have tended to increase at a more rapid rate in California than in the United States (table 6). Per-capita production has been on a consistently higher level in California, although California's advantage during the period 1935- 1939 was slight. Utilization of Milk Fat. — As was pointed out earlier, milk and milk-fat production per capita in California has shown a definite tendency to decline during the past two decades, whereas per-capita production of certain fat- containing products has risen. These diverse tendencies have brought about far-reaching changes in the proportion of annual milk-fat production utilized in different products (see figure on cover). In 1925 butter was the most important outlet for milk fat sold by farmers, absorbing 48 per cent. Market milk and market cream together used only 35 per cent, followed by evaporated and condensed milk (8 per cent), ice cream (5 per cent), cheese (2 per cent), and miscellaneous dairy products (2 per cent). By 1939 the relative importance of butter had declined to a point where it used only 32 per cent of all milk fat sold by farmers. All the other products were utilizing large proportions of milk fat. 18 California Experiment Station Circular 366 During the war years even more far-reaching shifts occurred. Although output of market cream had declined materially from 1939 levels, this prod- uct and market milk utilized nearly 57 per cent of all commercial milk-fat production in 1945. Evaporated milk used nearly 14 per cent, miscellaneous dairy products, nearly 13 per cent, and ice cream, over 8 per cent. Cheese utilized only 2 per cent, about the same proportion as in 1925. Butter, however, had slumped to a mere 6 per cent of all milk fat. PRODUCTION OF NONFAT-CONTAINING DAIRY PROD- UCTS: Output of most products made from skim milk expanded rapidly up to 1939. During the war years, however, output of several products fell off sharply. Moreover, a larger proportion of skim milk was used in products suitable for human con- sumption. Utilization of Skim Milk. — Two factors have served to expand the volume of skim milk available for manufacturing purposes, whereas a third factor has operated, especially in recent years, to decrease the volume of skim milk. Between 1925 and 1939 the volume of skim milk increased greatly as a result of, first, an expansion in the total volume of milk produced in California and, second, the sale by farmers of a larger proportion of the output as whole milk. On the other hand, expansion in the annual output of market milk, ice cream, evaporated and condensed milk, and powdered whole milk has tended to restrict the volume of skim milk available for manufacturing purposes. During the years 1930-1934, the volume of skim milk used in nonfat-contain- ing dairy products was 47 per cent higher than during the years 1925-1929. During the next five years (1935-1939) the volume of skim milk so used in- creased only 9 per cent, and in the war (1940-44), only 2 per cent (fig. 8). Skim Milk and Buttermilk for Human Consumption. — The volume of production of skim milk for human consumption increased irregularly from 1.0 million gallons in 1925 to 5.2 million gallons in 1940, declined sharply to 3.0 million gallons in 1943, but again expanded slightly to 3.4 million gallons in 1945. Output of buttermilk (including cultured buttermilk) for human con- sumption has shown a more consistent growth, from 3.9 million gallons in 1925 to 9.2 million gallons in 1939, and to 11.8 million gallons in 1945. Cottage, Pot, and Bakers' Cheese. — Production of cottage, pot, and bakers' cheese (principally cottage cheese) increased greatly, though ir- regularly, from 6.8 million pounds in 1925 to 30.3 million pounds in 1939, or nearly four and one-half times. Following a sharp decline during the first few war years, output again expanded to reach a new all-time high of 36.0 million pounds in 1945. Evaporated and Condensed Products. — Production of evaporated and condensed skim milk and evaporated and condensed buttermilk in California have been subject to rather violent annual and periodic fluctuations, although output of both products showed a slight upward trend between 1925 and Id to LU UJ Z "en er en P * It. < -I m < o 2 z o o t z o z u. o o Q O en 0. - \ - < ) - 1 V c |J o \ • Jt \: ft o. ]* X' E /: / • w / : *">. c / * o / : \ ^ o / J r / c a \ t \ * w \ > = ! - CO / : o » o 2 J Q ^ 00.* - or Q Q C o c m - c / o 1 Z i / " 2 4 ° / : - u f : O X -1 * *\ • h- / 1 i ~ V , ft - > o o t CM - saNnod Nomiw o o CO \ 2 \ *' O O 2 A , - < 3 \ t \ E 2 o CD V \ CO LU x^ ^ 1 * X' _j > . 2 y or * . LU \ \ - 3 \ CD / Cfi i * / _J N - 2 \ \ 5 1 CO | ).( " r / / < / - \ j* i ► '*; ■ co ^^^ 4> | \- <• o => a ~- — - - ml 1 ™i o or 8i - a. o o\ LU o I - ' Q LU c a> C N- \ _ LU o S i a. o > \ / LU SNomvo Nomiw saNnod NOmilM 20 California Experiment Station Circular 366 1939. During the war years output of evaporated and condensed skim milk doubled from 20.3 million pounds in 1940 to 41.2 million pounds in 1945, whereas output of evaporated and condensed buttermilk fell off sharply from 7.0 million pounds in 1940 to 1.3 million pounds in 1944. (Figures for 1945 are not available.) Dried Products. — Production of nonfat dry milk solids (formerly known as skim milk powder) more than tripled between 1925 and 1933. Following a considerable drop in 1934 and 1935, output again expanded gradually to reach an all-time high of 64 million pounds in 1945. During the years 1943 to 1945 output of nonfat dry milk solids declined rapidly to only 32 million pounds in 1945. _ . ^ TABLE 7 Output Per Capita of Selected Nonfat-Containing Dairy Products : California and United States Product 1925-1929 1940-1944 California United States California United States Cottage, pot, and bakers' cheese... Evaporated and condensed skim milk Evaporated and condensed butter- milk 2.41 3.25 1.21 6.88 1.06 0.66 2.41 0.80 1.08 0.18 3.36 5.00 0.63 7.33 0.94 1.48 4.21 1.09 Nonfat dry milk solids 4.04 Casein 0.25 A growing proportion of all nonfat dry milk solids is being manufactured for human consumption. In 1935 about 71 per cent of the total output was of a form suitable for human consumption ; in 1945, about 98 per cent. Casein production showed a definite upward trend — from 4.8 million pounds in 1925 to 13.6 million pounds in 1937. Since then, however, casein production has declined — at an accelerated rate during the war years. Out- put in 1945 amounted to only 2.7 million pounds, or about one fifth of the output in 1937. Comparisons: California and United States. — Per-capita production of most products manufactured from skim milk has been on a much higher level in California than in the United States, although during the war years California's advantage for most skim products was greatly reduced (table 7) . PRODUCTION IN 1946: Trends of production of milk and dairy products in 1946 are of special significance because the end of the war has brought relaxation of controls over production and prices. Output for the first eight months is shown in table 8. Milk-fat production in 1946 was running about 2.5 per cent above 1945, although the volume of manufacturing milk was running 6 per cent lower. Sales of market milk to the civilian population continued to expand, even in The Dairy Situation in California 21 the face of higher store and home-delivered prices since June, 1946. But of even greater importance are the very material increases in output of market cream, half and half, cheese, and ice cream and the fact that butter produc- tion slumped still further. Output of evaporated and condensed milk de- clined from the high wartime levels. TABLE 8 Output of Dairy Products in California, 1945 and 1946 Product 1945 (January- August) 1946 (January- August) Percentage increase (+) or decrease (— ) 1946 over 1945 Milk-fat production In manufacturing milk (1,000 pounds milk fat) 63,759 78,898 142,657 183,520 2,601 6,150 6,830 22,568 13,423 266,514 24,610 29,049 28,083 1,985 322 60,003 86,320 146,323 197,260 3,805 7,904 9,290 39,357 8,778 206,813 27,272 41,321 30,131 2,779 253 - 6 In market milk (1,000 pounds milk fat) . Total all milk (1,000 pounds milk fat) .... Fat-containing products Market milk (1,000 gallons) (exclusive of sales to federal government) Market cream (1,000 gallons) Half and half (1,000 gallons) + 9 + 2.5 + 7 +46 +29 Cheese (1,000 pounds) +36 Ice cream (1,000 gallons) +74 Butter (1,000 pounds) -35 Condensed and evaporated whole milk (1,000 pounds) -22 Nonfat-containing products Cottage cheese (1,000 pounds) + 11 Evaporated and condensed skim milk (1,000 pounds) +42 Nonfat dry milk solids (1,000 pounds) . . . Dry casein (1,000 pounds) + 7 +40 Dry buttermilk (1,000 pounds) -21 Shifts have also occurred in the output of products made from skim milk. Output of cottage cheese and of evaporated and condensed skim milk con- tinued to rise. Production of dry casein showed a tendency to recover from the low level reached in 1945. PRICES OF MILK AND DAIRY PRODUCTS Limitations of space preclude a detailed analysis of the interrelations of prices of milk and dairy products. During the war, subsidies of production and consumption, restrictions of output of some products, and stimulus of output of others resulted in some distortion of the pattern of production and consumption of dairy products. For these reasons a detailed study of war- time price relations would throw little light on probable postwar trends. 22 California Experiment Station Circular 366 One general conclusion is possible. In spite of unprecedented difficulties and shortages, and in spite of a considerable increase in wages and in other costs of production, the prices received by producers and processors of milk and dairy products were sufficient to encourage a considerable expansion of output of milk and of such dairy products as were deemed essential to the war effort. CONCLUSIONS AND OUTLOOK: During the past five or six years the dairy industry of California has been geared to meet special situations and demands arising out of the war. Many of the long-time trends in the production and consumption were modified or suspended. Dairy processors and consumers are vi- tally interested in the nature and extent of the wartime changes, and are wondering whether these are likely to be relatively per- manent or merely of a transitory character. Although predictions about future trends in the production and consump- tion of dairy products are extremely hazardous, certain tentative conclusions, based upon an analysis of past trends, appear to be warranted. Population. — All informed sources are agreed that the population of Cali- fornia, which nearly doubled during the past twenty years, will reach or ex- ceed 10 million by 1950. Further expansion of population after 1950 is to be expected, but at a reduced rate. Purchasing Power. — Future trends in purchasing power are most uncer- tain. Notwithstanding a tremendous backlog of consumer wants and national programs designed to maintain full employment, most authorities are agreed that some recession in business activities within a few years is to be expected. How soon it will come and how severe it will be are matters of speculation. A general business recession, even of a mild nature, will undoubtedly result in some curtailment of per-capita consumption of several dairy products and a decline in prices. Continued expansion of population, however, and the in- creased consumer preference for dairy products would serve to counteract any marked decline in the total volume of dairy products consumed. The future demand situation, therefore, appears to be favorable. Milk Production. — During the past two decades the number of dairy cows in California increased only 40 per cent and the volume of milk fat produced, only 63 per cent. Although the increase in the number of dairy cows and of milk-fat production was relatively greater in California than in the United States or in the Western states, output of milk failed to keep pace with the increase in population. The completion of the Central Valley Project will be a factor favoring an expansion of dairying in California. New areas will be brought under alfalfa and small grains, and yields per acre on land brought under irrigation will be increased. There is every reason to expect a continued increase in numbers of dairy cows and some further, though limited, expansion in the average yield per dairy cow. On the other hand, continued high prices of concentrate The Dairy Situation in California 23 feeds, high wages of farm labor, shortage of building equipment, fear of labor restrictions, competition with other farm enterprises, and the already heavy concentration of dairy production in California, are likely to act as a brake on any very marked expansion of dairying in the state. All factors considered, there is little reason to expect that milk production will expand at a more rapid rate during the next ten years than it did during the past two decades. Milk-fat production per capita will thus continue to decline. Utilization of Milk Fat. — Past trends in California, as well as experience in the heavily populated Eastern states, indicate that milk and milk fat pro- duced in any region will be utilized first in meeting consumption needs for those products which, for economic or other reasons, cannot be shipped in from distant areas. These products include market milk, market cream, and ice cream. During the last three war years (1943-1945), about 50 per cent of all milk fat produced in California was used in market milk. In spite of shortage of supply and restrictions on the sale of market cream and ice cream, these two products utilized another 5 and 7 per cent of milk fat, respectively. The three products thus absorbed 62 per cent of all milk fat produced. The moderate continued expansion of market milk consumption, the very considerable increase in consumption of market cream, half and half, and ice cream during the first eight months of 1946, together with the removal of restrictions on the fat content of market cream and ice cream, indicate that these products will utilize about 70 per cent of all milk fat produced in 1946 and still higher percentages in subsequent years. In the absence of a severe business recession, market milk, market cream, and ice cream may well utilize as much as 75 per cent of all milk fat produced in 1950. California's large and efficient plants for the manufacture of evaporated and condensed whole milk and powdered whole milk will continue to use large quantities of milk, although the volume of production will probably fall sub- stantially below the high wartime levels. Moreover, California will continue to produce considerable quantities of special varieties of cheese. It is not un- reasonable to suppose that evaporated and condensed whole milk, powdered whole milk, cheese, and miscellaneous dairy products together will use between 15 and 20 per cent of all milk fat produced annually. Butter production, which in 1925 used almost half of all milk fat produced in California, will in future years be relegated to a position of minor impor- tance, using as a maximum not more than 10 per cent of all milk fat produced. It is probable that butter will be produced regularly only in plants in outlying areas and in areas of heavy milk production during the peak seasonal output. During the past two decades an increasingly large number of dairymen have converted their dairies from manufacturing milk to market milk. This process will continue. Moreover, an increasing number of the plants previously en- gaged in the manufature of dairy products, especially butter, will be forced to suspend operation or will be used as assembly stations for market milk and market cream. California will have to ship in the bulk of its consumption requirements of butter as well as a major portion of its needs of cheese. 24 California Experiment Station Circular 366 Skim Milk. — With the continued expansion of consumption of market milk and ice cream and a relatively high level of production of evaporated and con- densed milk, powdered whole milk, cheese, and miscellaneous dairy products, further expansion in the volume of skim milk for manufacturing purposes is not to be expected. A large proportion of skim milk available in the future will be processed in forms suitable for human consumption. Further expan- sion in the output of cottage cheese, skim milk, and buttermilk for human consumption is probable. It is also possible that output of casein may increase somewhat from the low wartime levels, but expansion of output to prewar levels is unlikely. Prices and Costs. — Recovery of the agricultural industries of postwar Europe and Asia will result (in late 1947 or 1948) in some decline in foreign demand for United States agricultural products. It is wise, therefore, to anticipate some decline in the general level of prices of farm products during the next year or two. Although the dairy industry of the United States produces almost entirely for the domestic market, and is, therefore, in a relatively favorable economic position, a decline in prices of commodities presently exported will encourage an increase in acreage in hay and also heavier usage of grain as feeds. This will tend to encourage an increase in number of cows in the United States and also an increase in output per cow. Some decline in prices of milk and dairy products should, therefore, be expected in the near future. On the other hand, wages of farm labor and many other production costs are likely to remain fairly rigid. For these reasons, although the immediate long-time outlook for the dairy industry in California appears to be favorable, it would be wise policy for dairymen to give greater attention to increasing their efficiency of production and to reducing indebtedness. SOURCES OF DATA The summary tables and figures appearing in this paper are based upon data extracted by the author from the following sources : (1) United States Bureau of the Census. Annual Statistical Abstracts of the United States. (2) United States Bureau of Foreign and Domestic Commerce. Survey of Current Business. (3) United States Bureau of Agricultural Economics. Farm Production, Disposition, and Income from Milk (Periodic and Annual Reports). (4) United States Bureau of Agricultural Economics. Production of Manu- factured Dairy Products (Annual Reports) . (5) Calif ornia Department of Agriculture. Statistical Report for California Dairy Products. NOTE Mimeographed copies of the detailed tables can be obtained by writing to the Giannini Foundation of Agricultural Economics. 9Jm-2,*47(A2372s)