MILK PRICING

Housewives Pay for Outmoded Controls

AT the White House last week, President Eisenhower held a special luncheon for dairymen and heads of civic organizations. The purpose of the luncheon, featuring dishes prepared with milk, was to help the crusade of Agriculture Secretary Benson to increase milk consumption. Even though the U.S. expects a 5.5 billion Ib. milk surplus this year, Americans, by and large, do not drink all the milk they need. But the Eisenhower-Benson campaign alone is not enough to increase milk-drinking. The big reason U.S. milk consumption is no higher is that milk markets all over the nation have been saddled with monopolistic controls that create artificially high prices, thus cut consumption.

As milk prices keep going up, U.S. housewives are beginning to rebel against these restrictive state controls. In Oregon, voters repealed the state law setting arbitrary prices at the doorstep and grocery counter, thereby sent prices down 2-c- a quart. Yet farmers are still collecting as much, or almost as much (10.9 to 10.2-c- a quart) as before, and consumption is headed up. In Florida, after voters failed to abolish their milk-control board, they brought pressure on the legislature for more consumer representatives on the board. In California, Safeway Stores, which preach firm prices for farmers and free competition among bottlers, are leading a campaign to throw out a state law that sets retail prices, thereby guarantee a profit to all bottlers, efficient or not. Even in dairy-rich Pennsylvania, big-city legislators have set out to abolish the state's milk-control commission.

Last week the Senate Agriculture Committee took out after the processors. It found, in a study of ten representative processing plants around the U.S., that the margin between prices paid the farmer and retail prices had increased as much as 27.9% in 3 1/2 years, and a "very substantial portion of the increased spread went into greater profit-taking."

Milk controls were born during the Depression, when farmers were forced to sell milk for as little as 1-c- a quart. In all, 26 states passed laws to protect farmers and bottlers. Some later junked the laws, but 16 states still maintain strict controls. In addition, federal controls can be applied if a majority of the milk producers in an area petition for them. As a result, three of every four U.S. citizens drink price-controlled milk.

The state controls, which are far more restrictive than the federal sys tem, are a patchwork of politics and protection for local milk producers. Alabama, for example, prohibits distributors from increasing out-of-state milk purchases except during a severe shortage, fixes the grocery price of milk 1-c-higher than the home-delivered price, even though it usually costs nearly 3-c- a quart less to sell through a grocery. Thus milk is 26-c- a quart in Birmingham, but in Chattanooga, a freely competitive market about four hours away by truck, milk is only 16-c- a quart. Wisconsin, because of highly efficient mass production and distribution methods, claims it could deliver fresh milk in Manhattan for 11.2-c- a quart wholesale (almost 1-c- less than the New York price). But a New York State control law keeps all Wisconsin milk out.

University of Illinois Agricultural Economist R. W. Bartlett surveyed milk-pricing in 50 U.S. cities last year, found that prices were invariably higher where state controls existed. In 17 cities with free-milk markets, grocery stores charged an average of 20. 1-c- quart, 3.1-c- less than the average home-delivered price. In 18 state-controlled markets, the grocery price averaged 23.6-c- a quart, only 2-c- less than the home-delivered price. Says Economist Bartlett: "Modified federal regulation is absolutely essential to [prevent] chaos in milk markets. [But] state control of consumer prices constitutes a legalized monopoly which is definitely against the public interest."

For health's sake, U.S. families are forced to buy milk, whatever the price. But consumers have demonstrated that they buy more milk when the price goes down. For example, when the price dropped as much as 3-c- a quart in Kansas City, Mo. last year, sales of milk promptly rose 7.4%.

Washington State's Agriculture Director Sverre Omdahl has successfully fought off all attempts for a state-control law because he believes "fixing [farm and retail] prices favors the inefficient producer and makes for a basically false and unhealthy milk market." What Agriculturist Omdahl advocates, along with other milk experts, is more use of the federal marketing law which protects the dairy farmer, but allows the efficient distributors to pass their savings on to housewives. There is little doubt that freer, more flexible milk markets would bring lower prices and increase milk-drinking. This would not only help dairy farmers, but it would also do much to improve the health of the entire nation.

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