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further shows the comparison with the 3 heavy producing States which accounted for 33 percent of the increase between the years 1952 and 1954.

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This and other information compiled in tables by Prof. Stewart Johnson of the University of Connecticut indicate conclusively that milk production increases during the past few years are not a result of Federal orders.

The prime consideration of the New England dairy industry is to maintain an adequate supply of pure and wholesome fluid milk with reserves sufficient to absorb the seasonal as well as the day-to-day variations in supply and demand. With such a situation, it became an economic problem as to which producers would receive the benefits of the fluid milk sales and which would assume the burden of maintaining the reserve supplies. In the absence of a Federal order program, this situation places the average milk producer at the mercy of the distributor and leads inevitably to ruinous prices and the constant threat of homeless milk.

In the spring of 1933, the Boston milk market was chaotic from the standpoint of producers. In the midst of a nationwide depression, collective bargaining between associations of producers and dealers had broken down.

Milk was sold freely by various associations at whatever prices were necessary to meet competition and to move the product. At that time, the Boston 200-mile zone class I price dropped to $1.31 per hundredweight.

Blended prices to producers from February through May of that year were estimated at an average of $1.16. One cooperative creamery paid a price as low at 70 cents per hundredweight for 3.7 percent milk delivered in March 1933. These were the conditions which led to the establishment of the Boston Federal milk order. The principal objectives of this order were as follows:

1. A ready outlet for all producers' milk.

2. An equitable sharing of fluid milk sales and of surplus among all producers.

3. Known and uniform price to all dealers shifting competition to quality and efficiency in plant operations, transportation, and distribution.

4. Fluid milk price in line with general economic conditions and local supply-demand situation.

5. A strict accounting of the use of milk by all dealers.

6. A minimum blended price to all producers upon a uniform basis and with a clear statement of all deductions.

In the light of present-day conditions, the principle of fluid milk prices in line with the general economic conditions and the local supply-demand situation is most important.

The fundamental policy of using economic conditions rather than manufacturing milk prices as a basing point has had important effects. This procedure has tended to restrict both the rise and fall of milk prices in this area. Specifically, during the period, 1950 to 1952, Midwest condensery prices rose 83 cents per hundredweight as compared to only 58 cents in the Boston fluid milk price. The formula-pricing system used in New England follows the general trends of the dairy industry, but avoids the price extremes.

Briefly, the Boston fluid milk pricing formula recognizes a wholesale price index as a measure of the consumer's ability to pay and a grain-farm-labor index as a measure of the cost of production. There is further a supply-demand factor that tends to prevent extremes of overproduction and to guard against a deficiency of supply. Finally, there is a seasonality adjustment designed to prevent extremes during the year and which, in turn, will encourage a more complete usage in the more desirable fluid milk outlet.

The New England area has long been a leader in milk education, advertising, and sales promotion. Dairy councils in this area have long been active and effective. In our principal market, Greater Boston, advertising under the direction of the American Dairy Association is maintained at the local level. Contributions are also made by our New England producers to the national program of the same organization. During the latest 11 months of record, namely, November 1954 through September 1955, sales increases of better than 2 percent over the same months of the previous year have been consistently maintained. In our Greater Boston market, sales are currently running at the rate of approximately 40,000 quarts per day ahead of a year ago. It has been conservatively estimated that no more than half of this increase can be attributed to population increases and the school-lunch program. There is ample evidence to indicate a general downtrend of sales in this market were it not for the hardhitting promotional and educational programs we are conducting.

The maintenance of top quality is an essential attribute of any sales program, more particularly dairy products. It is no longer a matter of maintaining a position with one's competitors in the market. It is rather a matter of fluid milk getting its share of the total beverage business.

We have found that the customary yardsticks of bacteria content and the maintenance of certain facilities on the dairy farm are insufficient in controlling a product that will maintain its place in the 1955 beverage market. Excellence of flavor has become a prime requisite in maintaining fluid-milk sales. Modern feed practices including increased use of grass silage have presented a particular problem in this respect. In our own organization, we have found that constant vigilance is necessary to maintain this perfection in flavor.

These new and stringent quality requirements with particular respect to milk flavors must be enforced against our entire milk supply. As illustrated by the extreme variations in production and demand, milk going into manufacturing uses today will be needed for fluid milk in the future. As further illustrated above, these changes can come on short notice and substantial degree. Unless our reserve as well as our current supplies are thus carefully controlled, there is a constant danger of consumers' receiving milk which is not up to standard. It is an axion in the sales of milk as well as any other product that it is difficult to gain a new customer, but very easy to lose an old one. It is important to note here again that we are talking about the loss of sales to a competing nondairy beverage and not to a shuffling of customers between dairy companies.

Quality maintenance on our complete supply of fluid milk both current and reserve, calls for effective control by our individual distributors supervised by our local health agencies. Occasional sales of fluid milk from other areas and subject to different quality control standards could only lead to consumer dissatisfaction and to a decline in per capita fluid-milk sales. Such a development would be damaging both to our New England dairy farmers and to the national dairy economy itself.

For

Milk from midwestern sources cannot be economically shipped into our New England markets. This point is illustrated by tables showing the cost of milk which would have prevailed over the past 5 years had it been purchased in the Minneapolis-St. Paul market and shipped via tank car to Boston. purposes of this table, we have taken the class I price in that market which has already been noted by the Governor of Minnesota as one which is just and equitable. Tank-car freight to Boston has been added. Finally, we have taken our own Boston class I price delivered and shown the differences, 1950 through 1954, together with the first 9 months of 1955, a total of 69 months. We find that there have been only 7 months where this Minnesota milk could have been delivered to Boston as cheaply as our own New England product was priced. The average differences by which the Minneapolis-St. Paul price plus freight exceeded the Boston delivered price are as follows:

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Large quantities of milk produced in the Middle West are delivered in the form of farm-separated cream. Approximately one-half of the butter produced in the United States each year comes from this farm-separated cream, the quality of which is such that the butter fails to qualify under the minimum standards prescribed under the Government-support buying program.

We know of no instance where Massachusetts State authorities have declined to approve any source of supply which met minimum sanitary standards. The condition of farm buildings, equipment, and bacteria standards as prescribed by the Commonwealth of Massachusetts and by the city of Boston are reasonable and could be readily met by any producer who recognizes his proper responsibility as the operator of a vital food production plant.

In essence, any differential in fluid-milk prices in our New England Federal order markets represents the necessary incentive to encourage our dairy farmers to take the needed pains to produce the high quality fluid milk we must have to maintain our sales, and to maintain an adequate supply.

Increased consumption of fluid milk in this market is also in the best interests of the consumer. A study of all food prices indicates that a quantity which could have been purchased for $1 in 1940 now costs $2.17. In the case of fluid milk, however, $1 worth of product in 1940 cost only $1.80 in 1955. Another way of expressing the same matter is to say that 1 hour of labor would buy 2.1 quarts of milk in 1900, 4.3 quarts in 1940, and 7.0 quarts in 1955.

We are convinced that our Federal orders here in New England have been necessary to maintain a stable market for our dairy farmers and to secure an adequate supply of pure and wholesome milk through the varying conditions which have prevailed during the past 22 years. It is further evident that these Federal orders have not caused an undue increase in milk production, but have rather been designed to prevent extremes of production or a shortage of supply. It is our further contention that effective quality control and supervision of dairy farms and plant operations are essential ingredients of milk sales and do not unfairly discriminate against other dairy farmers in other parts of the country who are willing to accept a responsibility for producing a vital food product under sanitary conditions. Fluid-milk sales are extremely important to our New England farmers. An increase in the consumption of fluid milk represents the finest possible solution to the problem of milk surplus, support buying, and burdensome storage accumulations of butter, cheese and dry milk solids. This increased fluid usage because of the relatively low cost of fluid milk as compared to other foods would be in the best interests of the consumer as an individual as well as a taxpayer.

The CHAIRMAN. The next witness is Mr. J. Leo Edson of Plainfield, Vt.

You have heard Mr. Gray's testimony. Are you in accord with the statements made and the answers he gave to the questions asked? Mr. EDSON. Yes, sir.

The CHAIRMAN. Have you anything new to add to what he statedare you satisfied with the law as it is now on the statute books, and these orders, the 4 or 5 that he has mentioned?

STATEMENT OF J. LEO EDSON, PRESIDENT, NEW ENGLAND MILK PRODUCERS' ASSOCIATION, PLAINFIELD, VT.

Mr. EDSON. Speaking for myself and the organization which I represent, we would like to get additional funds, we think, for promotion, education and research. There could be a provision in the Federal order, and the easiest way to raise these funds would be by the provisions of the Federal order.

The CHAIRMAN. Do you know whether or not that could be done under the law now or would you have to amend it in order to carry out your views?

Mr. EDSON. As I understand it, our producers at the present time operate under orders similar to the ones under which other producers are given that privilege.

Senator AIKEN. I think that when we enacted the last legislation we gave the right to make deductions for promotional purposes to all commodities except milk and what Mr. Edson means is that it would be helpful from his organizational standpoint if they had the right to make these deductions on milk, as well as other commodities.

The CHAIRMAN. In order to accomplish that, it would be necessary to amend the present law.

Mr. EDSON. Yes, sir.

The CHAIRMAN. That is what you are advocating?

Mr. EDSON. Yes, sir.

The CHAIRMAN. Is there anything else that you advocate?
Mr. EDSON. No, sir; not at this time.

The CHAIRMAN. All right; have you any particular point that you would like to raise in your testimony that has not been covered?

Mr. EDSON. No, sir. The statement that I have here covers what has been done in promotion and research and education up to the present time.

The CHAIRMAN. I understand. Vermont has been able to raise quite a sum from the milk producers in order to carry on a campaign for milk?

Mr. EDSON. The State of Vermont has a tax of 1 cent.

The CHAIRMAN. You are only suggesting then to amend the law so that the order itself would provide that and make it applicable to the area?

Mr. EDSON. That is the way we wish, speaking for myself and the organization which I represent.

The CHAIRMAN. I understand that there is a State in which the Constitution prevents the imposition of a tax, such as is collected in Vermont?

Mr. EDSON. That is right.

The CHAIRMAN. You may run into conflict as to whether you can override that, but I will give you assurance that the committee will look into it with a view of trying to conform to what you are suggesting there.

Mr. EDSON. Thank you.

The CHAIRMAN. Do you desire to add anything else?

Mr. EDSON. No, sir.

The CHAIRMAN. If not, I wish to say, unless you want to read your statement, it will be printed in the record at this point just as though you had read it.

Mr. EDSON. All right, sir, thank you.

(The prepared statement of Mr. Edson is as follows:)

I am speaking as a dairy farmer, and as one of some 12,000 producers supplying milk to the Greater Boston market. About 70 percent of the supply of milk for the Boston market comes from producers located in Vermont. While there is substantial production of milk in southern New England, most of it is absorbed in the so-called secondary markets, of Lowell-Lawrence-Haverhill, Springfield, and Worcester. For many years, Boston has had to reach out and draw the bulk of its milk supply from producers located in Vermont, Maine, New Hampshire, Massachusetts, and eastern New York. It is a 5-State milkshed.

Time was when the milk producer delivered his product direct to the consumers' doorsteps. He was producer, salesman, and distributor.

This simple man-to-man relationship with his customer went by the board as our cities grew and reached farther and farther into the country for supplies. The producer, as a rule, has no direct contact with consumers. And in order to have a voice in his faraway market, he has banded together with other farmers in cooperative associations. Through these associations he has representation in the market place, can bargain with distributors in respect to the marketing of his milk, and, through the staff of milk marketing experts he employs, has able representation wherever supply, demand, and price problems are being considered.

Naturally producer and distributor do not always see eye to eye in the complex business in which they are engaged. One of the problems on which they

are agreed is that we must sell more milk. And to a degree, they go down the road together in this important task.

When direct contact between the milk producer and his customer gave way to the more elaborate marketing program made necessary by the growth of cities, producers began to feel that selling milk was the distributor's job. In these latter years, however, with so much competition for the consumer's dollar, with imitations cutting into the market for bona fide dairy products, with distributors taking on and promoting competing products, the dairyman began to realize that selling milk, if it ever ceased to be part of his job, was once again a task he must assume.

In the summer of 1949 Boston producer and distributor representatives got together to revive the Boston unit of the National Dairy Council. The Council promotes the use of milk through educational programs in schools, through doctors, dentists, nurses, and in industrial cafeterias, and in-plant health units. Until 1953 the work was financed by funds provided by a deduction of a halfcent a hundredweight on the milk production of about four-fifths of the producers in the milkshed, with a matching contribution by cooperating milk distributors, prorated in accordance with the volume of fluid milk sales. When one of the distributors refused to support the 1953 program, a few followed suit. Some supported the program but reduced their contributions. The Council work continued on the basis of a reduced budget.

Producer representatives went to work to meet the problem of financing the work of milk promotion. Expansion rather than contraction of milk sales activities was their goal. With no regional framework of organization, they attacked the problem State-by-State in northern New England.

In New Hampshire, constitutional roadblocks made it impossible to develop a plan of self-taxation by farmers to support milk promotion. But in the neighboring States of Maine and Vermont there was no such hurdle, and legislative efforts in these two States bore fruit.

Vermont and Maine have passed laws requiring dealers to pay taxes on milk received from producers located within the respective States. For such milk distributed within the State, the tax of 2 cents a hundredweight in Vermont is paid by the handler, and 1 cent of this tax is passed along to the producers. Funds from this tax are authorized for promotional and educational purposes, experimental planning, research, advertising and the necessary compensation and expense of the Vermont Dairy Commission. For Vermont-produced milk shipped out-of-State, the tax of 1 cent a hundredweight is deductible by the handler from the producer price and payable to the Vermont Dairy Industry Commission, whose duties parallel those of the Vermont Dairy Commission. The 2-cent tax on milk sold within the State went into effect July 20, 1953, applying to milk sold during the preceding month. The tax on milk sold outside the State took effect on January 1, 1954.

Starting in 1951 the Maine Milk Commission began to collect a milk promotion tax on milk produced and sold within the State. Effective August 8, 1953, the contribution for milk sales promotion was raised from 1.5 cents to 2 cents a hundredweight on such milk. Of this, 1 cent is deductible from producers, the same as in Vermont. The milk promotion fund is used by the Maine Dairy Council under the supervision of the Maine Development Commission. On all Maine-produced milk a tax of 2 cents a hundredweight went into effect September 1, 1953, and all of it is deductible from producers. The Maine Milk Tax Committee is authorized to use the tax to foster promotional, educational, advertising and research programs without being restricted to supervision by the Maine Development Commission. Maine went a step further and authorized the Maine Milk Tax Committee to cooperate with other States and to pay a New England committee as much of its tax receipts as it considers to be in the best interests of the dairy industry in Maine. This action anticipates New England-wide action on milk promotion.

In Maine, funds for direct advertising are being expended by the Maine Milk Tax Committee. Material is being furnished by the American Dairy Association in whose national advertising program the Maine committee cooperates.

In December 1953, the American Dairy Association of Vermont was formed. Support by dairy farmers on a voluntary basis, at the rate of 1 cent per hundred pounds of milk, was developed for the national and local programs of milk advertising and promotion.

Boston is the major market for the dairy farmers of Vermont. An advertising program for the Boston market was developed to start on January 1, 1954, with 64440-56-pt. 7—2

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