PRODUCER AND RESALE PRICES

Figure 2.4

this figure was down to 360,000. 62/ In 1973 over 50 percent of total milk production was produced on farms with herds of over 50 cows, while these farms represented only 15.5 percent of all farms reporting milk cows. 63/ As late as 1964, small herds (those with less than 20 head) produced 22.7 percent of the national milk supply. By 1973, they accounted for less than 7 percent. 64/ The total number of dairy cows in the United States has been dropping constantly while the average production per cow has been increasing dramatically:

George C. Tucker, Need for Restructuring Dairy
Cooperatives, Farmer Cooperative Service, U.S.D.A.,
Service Report 125, July 1972, p. 15.

b/ U.S.D.A., Agricultural Statistics 1975, p. 364.

Total milk production has stayed fairly constant over the years. In 1930, approximately 100 billion pounds of milk

62/ George C. Tucker, Need for Restructuring Dairy Cooperatives, Farmer Cooperative Service, U.S.D.A., Service Report 125 (July 1972), p. 13 (hereinafter "Tucker") (1970 figure is for farms with sales of $2,500 and over). 63/ Economic Research Service, U.S.D.A., The Impact of Dairy Imports on the U.S. Dairy Industry, A Report for the Committee on Agriculture and Forestry, United States Senate, 93d Cong., 2d Session (January 2, 1975), p. 8-9.

64/ Id., p. 9.

were produced.

Production peaked during the early 1960's

at approximately 125 billion pounds and is currently in

the vicinity of 115 billion pounds. 65/

The value of farm investment is also going up

rapidly.

The 1969 Census of Agriculture 66/ reveals

that the value of land and buildings has increased 217 percent on a per acre basis since the 1950 Census of Agriculture was taken. The value of dairy farms increased dramatically between the years of 1964, when the per acre value was $189.94, and 1969 when the value per acre was $274.39, an increase of 44 percent. That compares with an increase of 39 percent for farm land in general.

The 1969 Census of Agriculture also revealed that 27.6 percent of the dairy acreage was operated by a lessee. 67/ This statistic is of particular importance when considering the incidence of the benefits which may result from milk price regulation.

Over one fourth

of dairy acreage is rented land. A lessee will be able to earn only a competitive wage for his labor; the cost of the lease would reflect the capitalized value of higher prices for milk that may result. The benefits of

65/ U.S.D.A., Agricultural Statistics 1975, U.S. Government Printing Office, Washington, D.C. 1975, p. 364.

66/ U.S. Dept. of Commerce, 1969 Census of Agriculture, General Report, Vol. 2, Chap. 8, "Type of Farm, p. 33. Comparable data for previous years appears in earlier censuses, which are taken every five years. The 1974 census is not yet available.

67/ Computed from data at id.

the capitalized value of higher prices accure to the

land owner.

Ninety percent of leased dairy acreage

is rented from non-farmer landlords, 68/ a group which

it is unlikely the regulation was intended to benefit.

The percentage of milk producers belonging to

dairy cooperatives is increasing.

In 1960, 80 percent

of the producers delivering to federal milk order markets were cooperative members, 69/ while by 1970 over 86 percent of the milk was delivered by cooperative members. 70/ In addition, the number of cooperatives is decreasing while the average size of cooperatives

in increasing.

B. Handlers

Like the production of raw milk on the farms, the processing of milk has also become more concentrated, both in fluid bottling and in other manufacturing. According to the Census of Manufacturers, the number of fluid milk bottlers declined from 5,828 in 1958 to 3,481 in 1967. 71/ As might be expected with a decreasing number of establishments, the average concentration ratios in local markets have been increasing. Fluid 68/ Id.

69/ Donald R. Davidson, "Impact of Dairy Cooperatives on Federal Order Milk Markets,' Farmer Cooperative Service, U.S.D.A., Gen. Report No. 114 (August 1963), p. 17.

10/ Report of the Milk Pricing Advisory Committee, Part 1, The Milk Pricing Problem, U.S.D.A., (March 1972), p. 32.

11/ Tucker, p. 28.

milk bottling has long been a concentrated industry, and the four-firm sales concentration ratios average in federal milk order areas went from 60 percent in 1953 to 66 percent in 1965. 72/ Because packaged fluid milk products can easily be shipped 250 miles without spoilage problems, the notion that a federal market order area coincides with the true geographic market thas been questioned. Accordingly, when the fluid

sales market was taken to include all processing plants within a 250-mile radius of a central city, whether such plants actually made sales in the city or not, a significantly lower concentration resulted. In 1965, the figure was 41.7 percent 73/ as compared to the 66 percent referred to above. The concentration ratios in smaller markets are considerably higher than those in the larger markets. The four-firm figure for markets of less than 8 million pounds was 70 percent in 1962, while in markets with over 60 million pounds of sales volume the four-firm figure was 48 percent. 74/ Nonetheless, it does not appear that fluid milk processors recently have been able to exercise a great deal of market power.