1.2 cessation of hostilities in Europe ended the high export demand for condensed and evaporated milk, and saw a return of European production capacity. The price paid for manufacturing milk fell suddenly, and precipitously. The falling price for surplus milk quickly disrupted the price paid for graded milk sold to fluid dairies. 29/ It was in response to this downward pressure on the post-war fluid prices that cooperatives turned to the classified pricing systems. 30/ Cooperative Development: The Capper-Volstead Act A. Early Strivings Cooperative activities up to the end of the first World War were really just meager beginnings. "Previous to 1916, cooperative fluid-milk marketing on a large 29/ The sudden supply of ungraded, lower cost milk on the 30/ Reuben A. Kessel, "Economic Effects of Federal Rather, scale had gained little permanent foothold." 31/ This early experience with cooperative activity laid the foundation for future successes, but it would be misleading to create the impression that cooperative activities achieved its goals from the beginning. Metzger details the various attempts by cooperatives to enforce their position on price by the use of milk strikes, generally with mixed results. 32/ The first strike reported occurred in the Chicago market, and was successful. The strike spread to southern Illinois, but failed there because "these producers were unable to restrict the supply enough to enforce their demands." 33/ If milk not controlled by cooperatives was available, dealers could merely ignore the cooperative's demands and turn to the alternative source. Several other strikes followed, in New York, Boston, and Cincinnati, which in the first two instances were more successful in achieving the stated goal of higher prices. Metzger notes, however, 31/ Metzger, p. 3. 32/ Id., p. 11. 33/ Id. The focus on control of supply or movement of milk to market should be noted, as this is a recurrent theme of cooperative activity. that demand for fluid milk was high, so that although transportation improvements and pasteurization spread slowly, the trends in milk marketing to wider production areas and less market isolation was easy to perceive. Changing Marketing Patterns C. It is not clear whether the knowledge of the process of pasteurization raised the public's expectations for healthy milk or whether it was a growing, general concern for health matters that lead to growth of milk ordinances. However, it is clear that the adoption of milk health regulation directly lead to two situations that substantially affected the developing patterns of milk marketing. These health regulations, local in nature, protected local milk producers from outside competition by erecting barriers to movement. 8/ Perhaps of greater impact was the increased costs incurred in producing raw milk that met the health standards. 9/ These increased costs, and the resultant qualification of milk for fluid consumption soon created two different raw milk products: graded, or grade A milk, and ungraded milk. 10/ 8/ Beal, p. 143; W. Webster Jones, "Sanitary Regulation of Fluid Milk Industry," M. R.S. No. 889, U.S.D.A., Eco. Res. Service (June 1970), P. 1. 9/ Beal, p. 216. 10/ Id. As regions began to enforce health regulations, pro blems of supply developed. Milk cows do not produce con sistent volumes of milk through the year. Further, demand for fluid milk is irregular throughout the year, generally running in a counter-cyclical pattern to supply. 11/ In order to ensure that sufficient quantities would be available to meet the demand year round, farmers must produce a surplus in all but the slack production months. Prior to the establishment of sanitary regulations and standards, milk dealers obtained their supplies by expanding the area from which they obtained their supplies in the short season and contracting it during the flush season. 12/ This approach was foreclosed to fluid milk dealers in some markets after imposition of health regulations, which defined boundaries outside of which milk dealers could not obtain milk supplies. 13/ Once health regulations were implemented, only those farmers 11/ Cows can be regulated so as to give their higher level of production some time other than in the spring; however, in doing this, a cow's annual production will be lowered somewhat. 12/ Beal, p. 201. For example, an early processor may have been able to obtain his supplies in the flush season from farmers within a few miles of his plant. In the slack season, he may have had to seek supplies 10 or 20 miles away. 13/ See, e.g., Dean Milk Co. v. City of Madison, 340 U.S. 349 T1951). within a few miles of a dairy, assured of a year-round Meeting Because of the increased production costs, dealers had to assure farmers of a regular annual market to induce them to meet the sanitary regulations. 14/ Dealers offered higher prices to farmers at certain times of the year, generally in the fall when demand rose. demand in the fall meant generally that there would be a surplus in the spring, when demand dropped but production rose from the fall levels. 15/ This seasonal surplus was used in manufactured products, in competition with lower cost, ungraded milk. 16/ Because this "surplus" milk was thus less valuable to the dealer, milk prices often dropped drastically during the flush season, or 14/ Beal, p. 201-2. 15/ An excessive spring surplus was not necessary; seasonal adjustment plans implemented in the 1920s reportedly resulted in substantial reduction in excessive swings in production. Hutzel Metzger, "Cooperative Marketing of Fluid Milk," U.S.D.A. Tech. Bull. No. 179 (May 1930), D. 36-38 (hereinafter "Metzger"). 16/ Id. milk and thus could be shipped substantial distances creating Manufactured products were not as perishable as fluid a national market. |
