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A STUDY OF THE UNITED STATES EXPORT AND IMPORT TRADE IN DAIRY PRODUCTS, WITH SPECIAL CONSIDERATION OF THE TARIFF. THESIS Submitted to the Faculty of the Michigan State College in partial fulfillment of the requirements for the degree of Master of Arts. By Karl Hanchett McDonel 1931 ACKNOWLEDGMENT The writer desires to avail himself of this opportunity to express his sincere appreciation of the many helpful suggestions and kindly criticisms of Dr. Hardfld S. Patton, Head of the Department of Economics, in the preparation of this thesis. 10,238? '7’ TABLE OF CONTENTS Introduction The World Trade in Dairy Products The United States Foreign Trade in Dairy Products: Fluid Milk and Cream Condensed, Evaporated and Powdered Milk Cheese Butter Casein The History of the Tariff Changes Affecting the Dairy Industry of the United States The Tariff in Relation to Imports of Dairy Products: Fluid Milk and Cream Cheese Butter Casein The Effect of Oleomargarine on Butter Prices The Present Dairy Situation as an Indication of the Future Trend in the United States Inter- national Trade in Dairy Products Summary Bibliography 38 48 59 69 79 85 95 97 100 A STUDY OF THE UNITED STATES EXPORT AND IMPORT TRADE IN DAIRY PRODUCTS, WITH SPECIAL CONSIDERATION OF THE TARIFF Dairy husbandry is one of the great agricultural industries that is found in practically every country in the world. In some countries it is of minor importance, while in others it has been deveIOped to one of the fore— most industries. The deveIOpment has been most rapid and successful in.countries having a temperate climate, with sufficient rainfall to produce roughage for winter feed- ing and abundant pasture for summer grazing. A moderately heavy soil is desirable for dairying, for this type of soil with plenty of rainfall will produce large quantities of hay and pasture. The tOpography is not of importance, except that rough land not adapted to other types of farm- ing, as is found in Switzerland, may be used to advantage for summer grazing. Dairying is the largest single agricultural industry in the United States and is most highly developed in the states of Wisconsin, New York, Iowa and Minnesota. One million, five hundred thousand farmers, with a total farm value of nearly three billion dollars, depend upon milk and its products for the greater source of their income. The (\3 average number of wage earners employed in the United States in the manufacture of butter, cheese, condensed and evaporated milk, ice cream, oleomargarine and other butter substitutes for the year 1929 was 51,028 peOple, whose combined wages were $685,226,815. The total milk produced in the United States for the year 1926 was in excess of one hundred and twenty thousand million pounds, which was used or manufactured into dairy'products in the proportion indicated in Table I. Table I. Milk: Production and Uses in the United States 1926 (l) Milk (Thousand) Per cent Pounds Fluid Milk and Cream 56,417,000 46.7 Creamery Butter 50,487,000 25.2 Farm Butter 12,915,000 10.7 Cheese (All Kinds) 4,274,000 3.5 Condensed & Evaporated Milk 4,554,000 5.6 Ice Cream 4,464,000 5.7 Powdered Milk and Cream and Milk Chocolate 510,000 .5 Fed to Calves 5,942,000 5.5 Wasted 5,625,000 5.0 Total Milk Produced 120,766,000 100.0 The dairy industry has been intensely developed near the dense centers of population where there is an adequate market for fresh milk and cream. The demand of the large cities for fluid milk and cream has in many instances necessitated the tranSportation of milk several hundred miles (1) Bureau of Agricultural Economics, Dairy Statistics 1929, page 156. from its source of production. The development of arti- ficial refrigeration and the thermos type truck and tank car have helped to Span the distance between producer and consumer of dairy products. In localities where there is not an adequate market for fluid milk and cream, the milk may be made into butter, cheese, or other dairy products which may be shipped long distances to the place of con- sumption. The Consumption of Dairy Products in the United States The increase in the per capita consumption of dairy products during the past two decades is the result of two important factors: improved quality, and the realization by the masses of the importance of dairy products in the diet. There is a more or less direct relation between consumption and quality, since dairy products to be palatable must be of good quality and flavor, otherwise they will be avoided or other foods substituted in their place. An improvement has taken place in the quality of all dairy products as a result of legislation, education and better methods of refrigeration and tranSportation. Table II. Per capita Consumption of Dairy Products in the United States (1) 1917 1926 Milk and Cream 42.4 gal. 55.5 gal. Butter 14.6 lb. 17.8 lb. Cheese 2.9 lb. 4.5 lb. Condensed and Evaporated Milk 10.4 lb. 14.5 lb. _Ice Cream 2.0 gal. 2.7 gal. (1) Bureau of Agricultural Economics, Dairy Statistics 1929, page 67. During the past few years many educational campaigns have been held throughout the United States to increase the consumption of milk. Public officials, colleges, schools, and various other agencies have assisted in these campaigns because of the belief that it was to the advantage of the people that a larger quantity of milk be consumed. There is, moreover, an increasing number of the urban population working in sedentary occupations, and there has been a tendency for these pe0ple to use dairy products in their diet as a substitute for meat. The leaders in the dairy industry at the present time are attempting to widen or enlarge the market for dairy products by the improvement of quality and by national advertising and educational work. The American dairy farmer may easily meet any normal increase in demand for dairy products in this country by increasing the number of cows per farm and by an increased production per cow. Consumption of Dairy Products in Foreign Countries _There is a great variation in the per capita con— sumption of dairy products in the different foreign countries. In the past decade the trend of consumption has been upward. The increase, however, has not been as great as in the United States. Fluid Milk: Sweden leads all countries with a per capita consumption of seventy gallons. Denmark, Switzerland, was“. and Germany are above the United States, which is fifth in rank with a per capita consumption of fifty-five gallons. Butter: Canada with a per capita consumption of twenty-seven pounds leads all countries, closely followed by Australia and New Zealand. The United States is fifth with a per capita consumption of eighteen pounds. The United Kingdom, Netherlands, Sweden, and Norway all have a per capita consumption varying between fourteen and seventeen pounds. Cheese: Switzerland with a per capita consumption of twenty—five pounds leads all countries in the use of cheese. In fact Switzerland has nearly twice the per capita consumption of any other country. France and Norway vary between seven and fourteen pounds. In some of these countries cheese is used as a substitute for meat in the diet. From 1895 to 1906 there was a decreased per capita consumption of cheese in Great Britain, which was claimed to be due to an abundance of cheap meat during this period. At the close of the World War, when cheap lamb meat reach- ed Switzerland from New Zealand, there was an immediate substitution of meat for cheese in the diet, resulting in an increased surplus of Swiss cheese for export. 6. World Trade in Dairy Products The movement of dairy products between countries is very large, because of geographical and seasonal variations of supplies and the desire of the domestic consumer for the quality or product of the foreign producer. This inter- national trade has had a gradual development over a long period of time. The early trade, because of a lack of refrigeration during tranSportation, was confined to countries close together in the Northern HemiSphere. The development of mechanical refrigeration in recent years has made it possible to tranSport dairy products long distances. This has been a great stimulus to dairying in the Southern HemiSphere countries, which have all the natural conditions necessary for profitable dairy production, but which have to look to foreign countries for their main market. In recent years the exports of New Zealand, Australia, and Argentina have increased to such an extent that they have materially changed the direction and volume of international trade in dairy products. The principal countries producing an excess of dairy products for eXport are Netherlands, New Zealand, Denmark, Australia, Canada, United States, Argentina, and Switzerland. There are many other countries that have smaller quantities of dairy products for export, which are listed in Table III. ' Dairying in Canada is most highly developed in a narrow belt bordering the United States, beginning at Lake Huron and extending east to the city of Quebec, where the farming conditions are very similar to those of the states of 7. Wisconsin and New York. The Provinces of Quebec and Ontario have many of the natural advantages necessary for profitable dairying and with a good market available dairy farming has developed rapidly. Two—thirds of all the milk produced in Canada is used for milk products, and one third for consump- tion as fluid milk and cream. The Dominion government has fostered the dairy industry by state instruction in dairy farm management and a careful inspection service resulting in a high standard of cleanliness and quality of dairy products. There are more than 2800 cheese and butter factories in the two Provinces of Ontario and Quebec. Nine tenths of the cheese exported from Canada is marketed in England. In Europe the dairy industry is concentrated in the northwestern part, where there is good soil, a cool humid climate, providing plenty of green grass for pasture and hay for winter feeding. The northern plains of Europe, from western France to Denmark, Sweden and Russia, is known as the "Continental Dairy Belt." The Channel Islands of Alderney, Jersey, and Guernsey have deve10ped breeds of cattle that have been named after these islands. Even some of the towns in this dairy belt have given their name to brands of cheese that have become world known. Camembert in Normandy and Boquefort in southern France are the names of two well known brands of cheese. Denmark is the chief butter exporting nation of the world, as between thirty and forty per cent of the world's exports of butter come from this little country. The total 8. Table III. Dairy Products: Principal Exporting Countries Average annual net eXports for 1925 to 1928 inclusive (Reported in 1000 pounds) (1) Country Condensed and Butter Cheese Evaporated Milk Europe: Bulgaria ------------- 2,011 Czechoslovakia 825 ------- 5,816 Denmark 55,841 299,055 15,745 Esthonia ------ 15,802 ------ Finland ------ 50,184 6,198 Irish Free State 6,452 50,669 ----- Italy 9,965 5,052 68,647 Jugoslavia ------------- 4,445 LatVia ‘‘‘‘‘ 22,610 ...... Lithuania 7,284 ------------- Netherlands 504,945 94,759 194,454 Norway 18,288 -------------- Russia ----—-- 64,575 460 Sweden ------- 55,108 ------- Switzerland 76,179 ------ 59,299 Austral Asia: Australia * 22,508 96,190 4,085 New Zealand 1,297 148,909 165,151 North America: Canada 51,646 972 124,075 United States 117,544 .............. South America: Argentina ——————— 55,620 ....... * Three year average 1925-1927 inclusive (1) Compiled from United States Department of Agriculture Yearbook 1950. production of butter is about one-sixth that of United States, and is smaller than that of France or Germany, but due to small national consumption a large amount remains to be exported. Denmark has been called the teacher of the science of butter making. The government has been very active in developing the dairy industry, maintaining a rigid inSpection resulting in quality products and disease free herds. Danish butter has had a good export demand due to its uniform high quality. A process has been deve10ped whereby butter can be preserved in tin cans, resulting in this being the standard article of consumption in the trOpics, and remote corners of the globe where the local supply is insufficient or entirely lacking. Sweden is closely copying the example of Denmark and the dairy industry is rapidly developing to a point where it will have an increasing surplus of dairy products available for export. Switzerland has a relatively large area of land available for pasture purposes. The high mountains are habitable in summer and produce an abundance of rich grass as the melting snow recedes, permitting the sun to shine upon the saturated earth. The dairymen take their herds to the high pastures in the summer and stay with them through the whole season. The herders live in little huts, their families occasionally visiting them, bringing supplies and taking away the accumulation of milk and cheese. In 1926 Switzerland exported dairy products to the value of $27,000,000, of 10. which the export of cheese represented $18,000,000. In Switzerland the output of cheese is approximately five times that of butter, while in United States about four pounds of butter are produced to every pound of cheese. (1) The United States imports a large amount of Swiss cheese, for the Swiss producers cater to the American market by furnishing a cheese of high quality, light in color, and mild and sweet. Considerable milk in Switzerland is used in making milk chocolate for which the country is noted, and which is exported in large quantities. New Zealand with its ideal dairy farming conditions and _ water transportation for its exports is developing into one cf the important dairy countries. The government will permit only quality products to be eXported, which has resulted in a heavy export demand for New Zealand butter and cheese. New Zealand is the second largest exporter of butter, exporting about half as much butter as Denmark. Argentina has been primarily interested in beef production as an animal industry. However, with the improved means of tranSportation and refrigeration, the dairy induStry is increasing. It is difficult to make a good quality dairy product in as warm a climate as is found in Argentina. Labor is scarce and of poor quality. Much of the farming is done by tenants who are employed by Spanish landowners. Argentina is one of the leading producers of casein for eXport, ninety per cent of all imports of casein entering the United States during the period of 1921 to 1928, inclusive, coming from that country. Other countries prominent in the production of casein are France and England. 11. Countries Importing Dairy Products The importing countries may be divided into two distinct classes. First, those highly industrialized countries like England and Germany, that have a dense population, an inadequate domestic production, and must therefore depend on a foreign source of supply. The United Kingdom imports about one-half of its total con- sumption of butter, and imports more dairy products than any other country in the world. London is the world's greatest market for imported butter, and the price movements in this city may be used as an indicator of the world's surplus in butter. The second class of import areas includes certain tropical countries and island colonies like the Dutch East Indies, Cuba and the Philippine Islands, of which the white p0pu1ation retains its established desire for dairy products. Dairy production cannot be adapted to the conditions in many of these trOpical countries, consequently they are heavy importers of dairy products. The countries importing large quantities of dairy products are given in Table IV. Table IV. Dairy Products: Principal Importing Countries Average annual net imports 1925-1928 incluSTVe. (1) (Reported in 1000 pounds) Country Condensed and Butter Cheese Evaporated Milk EurOpe: Austria 1,045 2,767 5,921 Belgium 1,419 ----- 55,566 France 4,895 ----- 5,162 Germany 15,591 256,505 146,750 Greece 6,451 1,180 ------- Irish Free State ------------- 2,299 Norway ------ 1,742 457 Spain ------------- 4,812 Switzerland ------ 18,270 ....... United Kingdom 279,870 652,162 526,951 Asia: China 11,962 1,744 ....... Dutch East Indies 20,584 ,709 1,659 India 21,098 ------- 1,219 Indo-China 5,851 .............. Japan 8,151 .............. Philippine Islands 24,794 1,166 ------- Siam * 5,412 .............. North America: Cuba * 48,825 2,254 5,052 Jamaica * 5,764 .............. United States ------- 2,525 70,729 South America: Argentina.* 1,570 .............. Brazil * 1,515 ------- 1,547 Peru 8,574 1,757 ------- Trinidad & Tobago * 2,785 1,100 ------- Africa: Algeria * 2,257 1,552 7,051 Egypt 998 2,550 6,815 Tunis * 2,105 ------- 1,240 Union of S. Africa 11,086 292 274 _ * Three year average 1925-1927 inclusive (1) Compiled from United States Department of Agriculture Yearbook 1950 13. Table V. Dairy Products: Production, Imports, Exports, and Per cent of Production Imported and Exported, for the Principal Countries Exporting and Importing Dairy Products for the Year 1925. (1) (Reported in 1000 pounds) Evaporated Per Per Per and cent Butter cent Cheese cent Condensed of of of Milk Prod. Prod. Prod. Argentina: Production ---- ---- 75,554 ---- 54,022 ---- EXports 5 --—- 59,282 81.0 657 1.9 Imports 1,187 -——- 6 .008 5,402 10.0 Australia: Production 62,009 ---- 515,952 ---— 51,442 --—— Exports 19,951 52.0 128,494 40.9 9,609 50.5 Imports 42 :06 15 .004 ---- 1.7 Canada: Production 78,558 ---~ 215,179 ---- 177,159 ---- Exports 40,614 51.7 26,647 12.5 150,745 85.0 Imports 119 0.14 100 .04 10,275 5.8 Denmark: Production 120,000 ---- 510,855 ---- ---— ---— EXports 58,726 48.9 270,674 80.6 18,785 —--- Imports 56 .04 1,744 0.55 819_ —--- Germany: Production --—— -—-- ---- ---- ---- ---- Exports 1,428 —--- 504 --—- 2,491 —--- Imports 28,572 -—-- 212,995 ---- 162,940 ---- New Zealand: Production --~- ——-- 181,925 ---- 160,895 ---- Exports 1,144 ---- 159,476 76.6 154,196 95.8 Imports 95 ---- 15 .007 2 ---— Netherlands: Production ---- -—-- 164,200 —--- 249,685 —--- Exports 248,676 --—- 87,598 55.5 175,711 70.4 Imports 288 ---- 5,757 5.5 1,165 .46 Switzerland:* Production 71,000 ---- 26,680 -—-— 141,420 --—- Exports 67,555 95.1 177 .66 51,726 56.5 Imports 68 .09 19,092 75.1 5,765 2.6 United Kingdom: Production ---- --- ---- --—- —--— ---- Exports 14,497 ---— 1,445 ---— 1,950 -——- Imports 250,572 --—- 626,525 ---- 551,500 ---- United States: Production 1,408,960 -——- 2,096,256 -—-— 547,240 ---- Exports 147,765 10.4 5,545 .26 9,190 2.6 Imports 4.621 .52 7,212 .54 2,405 17.9 * For year 1924. (1) Compiled from following: Bureau of Agr'l Econ. Dairy Statistics 1929; International Review of Agr'l and Agr'l Statistics, Home 1926; United States Dept. of Agr. Yearbook 1950. 14. The United States Foreign Trade in Dairy Products The foreign trade of the United States in dairy products is small in comparison to the total domestic production. Exports reached their peak relative to domestic production during 1879-1881 when 59,257,000 and 147,996,000 pounds of butter and cheese respectively were annually exported. Since that time there has been a tendency for exports to decline and imports to increase, except for a short period during the World War when exports of condensed milk, butter and cheese reached a volume which in terms of their milk equivalent exceed all previous exports. In 1950 the milk equivalent of imports and exports was 955,000,000 and 216,000,000 pounds reSpectively, showing an excess for imports of 717,000,000 pounds, or less than one per cent of the normal yearly production of the United States. The 1950 imports when reduced to their estimated milk equivalent ranked as follows: cheese, 75 per cent; milk and cream 19 per cent; butter 5 per cent; and other products 5 per cent. Exports from the United States are principally in the form of condensed, evaporated, and powdered milk. These products amounted to about 60 per cent of the total exports in 1950, butter 50 per cent, and cheese 10 per cent. The United States Import and Export Trade in Fresh Milk and Cream The United States exports of fluid milk and cream are very small, as is indicated in Table VI, and are of little relative significance in the foreign trade of this country. 15. The imports, however, have reached a considerable volume and are of importance to the consumers and producers of these products. The population of the eastern section of the United States has grown very rapidly and with this increase has come an increased demand for milk and cream. Table VI. Milk and Cream, Fresh: EXports of the United States, 1912-1929 (1) Year Milk Cream Value (2) Gallons None Reported 1912 $244,915 1915 474,055 1914 555,217 1915 545,595 1916 524,426 1917 255,629 1919 227,042 1919 615,625 ' 1920 1,766,256 1921 440,616 1922 294,219 1925 79,915 89,226 1924 95,974 99,572 1925 67,945 94,666 1926 55,420 55,709 1927 47,520 55,772 1929 54,704 96,657 1929 99,225 165,112 This demand for fresh milk in the large eastern cities of the United States has been greater than the local supply available, and consequently milk has had to be brought in from greater and (1) Bureau of Agricultural Economics, Foreign Trade of the United States, page 52 (2) Reported in value only until 1925 16. greater distances. In some instances fresh milk is being transported one thousand miles to New York City. As the cities of New York and Boston gradually reached out farther and farther for milk, it was only natural that Canada should become a source of supply, since she had all the prerequisites for a profitable dairy husbandry, and the eastern cities of the United States offered a premium over the domestic market for her products. Some indication of the increase in con- sumption of milk in the New England states is given in the following quotation of J. E. Carrigan in his address before the New England Milk Producers' Association in 1928: "In the past six years the consumption of milk in the fluid form in Boston has increased about eight million pounds, enough to take the production of about fifteen thousand cows, and from 1929 to 1927 the increase in fluid milk consumption in New York City amounted to eleven million forty quart cans, equivalent to practically every pound of milk produced in Vermont." Imports have come in to meet a market need, and because it is cheaper to tranSport milk and cream from nearby Canada than from the domestic producers at a farther distance in the United States. Since 1910 there has been a gradual increase in the annual imports of milk and cream from Canada as is indicated in Table VII. For the year 1926 the total import of milk necessary for producing cream at a ratio of one to ten was only four-tenths of one per cent of the total domestic production. A large percentage of the milk imported from Canada comes from a distance of less than two hundred and l7. fifty miles from the point where it is consumed. Less than six per cent of the cream and four one-hundredths of one per cent of the milk imported entered this country west of Buffalo. The imports of cream from Canada reach their peak in June, which is at the time of maximum milk production in this country. If imports were prohibited it would give the midwestern producer a greater market at a time when he has a surplus. The mid- western and southern states of Ohio, Michigan, Illinois, Wis- consin, Minnesota, Missouri, Iowa, Kansas, Virginia, Kentucky, Tennessee, and Oklahoma are shipping sweet cream to New England, Philadelphia, and metropolitan New York, whenever the sweet cream market will return a better price than butter. In 1928, Boston received 5,296,000 quarts of cream from the Midwest as compared to 4,248,000 quarts from Canada. 18. Table VII. Milk and Cream, Fresh: Imports of the United States 1971 to 1950 (1) Milk C a 5 Val e 2 Gallons Gall ns 1871 to 1875 average annual $1442 1876 to 1880 " " 2052 1881 to 1885 " " 1596 1886 to 1890 " " 4520 1891 to 1895 " " 19,942 1886 to 1900 “ " 145,185 1901 to 1905 " " 26,991 1906 to 1910 " " 55,991 1911 215,595 2,552,875 1912 46,924 1,120,427 1915 45,955 1,247,085 1914 607,848 1,775,152 1915 1,265,649 2,077,584 1916 891,951 1,195,745 1917 1,791,546 745,819 1918 1,955,580 711,502 1919 1,511,518 1,079,526 1920 2,852,518 1,156,822 1921 2,672,520 1,718,952 1922 2,524,554 2,211,825 1925 2,729,074 2,597,915 1924 4,645,562 5,557,874 1925 6,418,445 4,765,500 1926 7,479,080 4,797,951 1927 6,106,521 5,272,686 1928 5,424,726 4,818,916 1929 5,016,415 5,172,925 1950 1,857,485 1,585,456 (1) Bureau of Agricultural Economics, Foreign Trade of the United States, pages 51 and 52. (2) Reported in value to 1891 (5) Milk and cream reported together until 1910 19. The United States Import and EXport Trade in Evaporated, Condensed, and Powdered Milk Evaporated and condensed milk are products produced by reducing the moisture content of whole milk. The Federal Food and Drug law requires that they must contain at least 7.8 per cent fat and 54.5 per cent total solids. Sweetened condensed milk is the same as condensed milk except that sugar is added. The fat content must be at least 8.0 per cent, 28.0 per cent milk solids and from 40 to 42 per cent sugar. Powdered skimmed milk is milk from which the fat and moisture has been removed, and must contain from 95 to 98 per cent total solids. In the trade the term "condensed milk" usually means sweetened condensed milk and is sold in small sealed containers for household use. This product will keep for a considerable length of time after the container has been opened. Evaporated milk is not sweetened and is usually placed in somewhat larger containers and hermetically sealed, After the seal is once broken the contents deteriorate very quickly. Unsweetened condensed and evaporated milk are often sold to the local trade such as bakers, candy makers, etc., in large containers which are kept under refrigeration until used. Large quantities of evaporated and condensed milk were used to feed the soldiers during the World War, because they are highly concentrated, non-perishable foods, that may be easily shipped from place to place. 20. Table VIII. Destination of Condensed and Evaporated Milk Exported from United States (1) Year Ended June 50 Article and country Hilk: 1000 lbs. 1000 lbs. 1000 lbs. 1000 lbs. Condensed Total: 42,656 55.799 56.975 59,598 Total Europe 419 424 __, 151 70 Cuba 16,557 12,845 11,462 15,105 Philippine Islands 7,767 6,471 7,575 7,559 Japan 4,744 4,029 5,585 5,475 China 5,811 5,621 2,515 2,840 Hong Kong 1,992 2,065 5,764 5,759 Mexico 1,285 1,508 985 885 Other Countries §!§§% g,0§8 3.142 gil§é Evaporated Total: W? 71% Europe Total: 52,147 50.527 _24,4Q; 22,267 Germany 19,506 1,851 16 71 United Kingdom 29,181 27,418 25,805 21,759 Belgium 427 286 589 265 Other EurOpe 5.255 972 19;, 172 Philippine Islands 12,902 12,806 15,565 16, 572 Peru 5,757 4,215 5,569 5,994 Panama 5,597 4,127 5,589 4,606 Cuba 2,942 2,958 2,647 2,272 China 5,227 5,025 5,055 5,447 lexico 5,295 2,714 2,157 2,185 British Malaya 1,855 1,952 2,817 2,761 Japan 1,512 1,616 2,466 2,544 Other Countries 8,000 9,225 11,724 12,415 —-——— (1) United States Department of Agriculture Year Book 1950, page 908. 21. During this period it was not possible to obtain the normal dairy supplies from the Southern HemiSphere countries resulting in an increased demand for condensed and evaporated milk from the United States. Following the war the European countries were in a state of uncertainty and exhaustion and it was sometime before they could reorganize their productive enterprises. In the meantime the United States Government had extended a large amount of credit to the Allied Governments to be used in the purchase of American products. This, together with the relief work America was doing in Belgium, Russia and in the Balkans greatly increased our exports of condensed and evaporated milk to European countries, for the two years following the war as is indicated in Table IX. This condition changed in 1921 and 1922 and the United States exports of cendensed and evaporated milk were greatly decreased. The supplies from the Southern HemiSphere countries were now availa- ble and the Allied countries were again able to produce a larger portion of their own consumption. A critical situation faced domestic manufacturers, markets became demoralized and numerous factories were forced to cease operation. The EurOpean countries of Germany, United Kingdom, and Belgium, together with the tropical countries such as the Philippine Islands, Cuba and Panama, and oriental countries of Japan and China are the principal importers of American con- densed and evaporated milk as is indicated in Table VIII. The trend of the exports of these products is downward, for the European countries, especially Denmark have greatly A .. ,.( . .. I O E tr.I-.lk: h1l‘i ..’ll‘ [Cl le‘l 22. States, pages 26-29. (2) prior to 1920. (3) (4) Not reported prior to 1920. Quantity not reported prior to 1910. Table IX. Milk, Condensed, Evaporated: Export 1910 to 1950 (l) (in pounds) Year Condensed (4) Evaporated (2) Powdered (5) 1910 15,511,518 1911 12,180,445 1912 20,642,758 1915 16,525,918 1914 16,209,082 1915 57,255,627 1916 159,577,620 1917 259,141,251 1918 528,759,252 1919 728,740,509 1920 607,457,569 101,005,818 2,070,850 1921 147,752,259 114,955,967 5,857,825 1922 79,524,645 197,786,094 11,517,561 1925 47,966,269 109,072,065 2,918,575 1924 67,111,718 146,500,954 2,705,924 1925. 49,297,128 124,250,062 5,622,815 1926 ' 42,655,817 95,209,766 5,269,521 1927 55,798,515 75,145,050 5,007,402 1928 56,975,055 71,968,267 5,288,618 1929 59,598,576 72,861,225 5,065,890 1950 26,648,190 60,810,995 6,225,284 (1) Bureau of Agricultural Economics, Foreign Trade of United Domestic eXports of evaporated milk combined with condensed I“ 23. 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I - - . . . . . , , - . . b- .4 .. I 4 . . - . , . . ‘ _ , . . . . . 1 7 .I ‘. I I I ‘ I ‘ 1920 . .— . . . /, 1918 \j 1916 \ ports 1910-1950’ \ 'Experts ~ +~me—-:Imports if, / 1914 ts and In '9‘" 1912 O , ,_ CHART II 7 'Expor M 1 ese3 v . . 7 T . ffChe 10’ :.:N..: H ..n-.- L- .. 4‘4. :4» - I.- D_."ART.‘~1LN' U! M«"\-I'-}‘E:\‘IAT,CS "O -Ko*. ~ . ‘cvx7.ua. “ ;~ 2 , 7 7 ' . i ' ' . 4.2.5.9.... ..h 1...... . _ A,“ __... _ ’- '.o-.‘:j. €ci ' : -— A a...” . v ..4 4-..»...n.’v .- 1--.... .-.‘ u...“ M._—.os—- ..A -- --...- 1.4 1910 Millirns of Pounds 29. manufactured in the United States at the present time. It is a soft cheese and may be cured ready for the market in six weeks to three months after production, depending upon the degree of aging desired by the trade. We export cheddar cheese to Cuba, Mexico and other South American countries, as is indicated in Table XII. During the World War large amounts of cheese were eXported to feed our army in Europe and help supply the Allied Armies. The United States eXports of cheese have decreased recently because of the competition of the increased production of the European and Southern Hemis- phere countries. The production of Swiss cheese requires a very high quality milk and careful technique in the manufacturing process in order to obtain the prOper texture and flavor. One hundred pounds of milk will yield from eight to ten pounds of cheese, which requires about one year for curing. The distinctly foreign types of cheese imported from France, Italy and Greece are in many cases made from the milk of the sheep and goat. One hundred pounds of milk will yield about seven pounds of this type of cheese, which requires a great deal of hand labor in the manufacturing and about one year for curing. In 1928 sixty-three per cent of the total imports of cheese were of these foreign types; the balance was cheddar cheese, most of which came from Canada. There is a large immigrant population in the United States that originally came from the southern European countries. 50. _ Such people have a desire for the type of cheese produced in their home country. This is one of the reasons for the increase in imports of cheese since 1905, for it was during this time that large numbers of these immigrants were entere ing this country, who desired the cheese of their home land. Table XII. Destination of Cheese EXported from United States (1) Country to which Year ended June 50 exported 1926 1927 1928 1989 1000 lbs. 1000 lbs. 1000 lbs. 1000 lbs. Total 4:994 53775 22873 23572 Canada 216 550 259 170 Cuba 910 852 559 405 Other West Indies 600 479 551 560 Mexico 940 670 581 425 Panama 405 454 452 460 Other Central America 278 284 295 294 China 255 252 145 89 Other Countries 514 472 475 571 (1) United States Department of Agriculture Year Book 1950, page 925. 51. The United States Import and Export Trade in.Butter From 1880 to 1915 the average annual importation of butter never exceeded 1,400,000 pounds. In October 1915 the Underwood tariff went into effect reducing or removing the tariff on many dairy products. The immediate result was an increase in the importation of butter in 1914 to nearly eight million pounds, and for the first time imports exceeded exports. This increase was only temporary for the World War reduced the amount of imports to a very small amount. Immediately following the war imports reached the extreme high points of 20,770,957 and 54,545,655 for 1920 and 1921, respectively. Large quantities of butter had been placed in storage by the Southern HemiSphere countries, during the war because of the lack and uncertainty of shipping facilities. As soon as peace was declared these supplies were available for export, and large quantities of this butter were imported into the United States. During the years 1925 and 1924, Danish production costs had fallen due to a depreciating exchange, and at the same time she lost her principal continental market because of unsettled and chaotic conditions in Germany. These un- usual conditions made it possible for Denmark to enter the United States markets, resulting in much heavier imports of Danish butter during the above period. Since 1924 the imports of butter have steadily decreased and for the years 1928 and 1950 inclusive imports and eXports of butter have It'll I‘ I.- u d U E‘IIiD . H‘. W..’ I... ‘16; 1! 32. Table XIII. Butter: Exports and Imports of the United States 1871 to 1950 (1) (in pounds) United States, pages 15 and 15. Net Exports Imports + Exports -4Imnazis_._.. 1871 to 1875 Average annual ' 5,591,771 5,199,481 + 2,192,290 1876 to 1880- n " 25,098,785 405,914 +22,694,87l 1881 to 1885 " " 20,202,795 894,414 +19,518,579 1886 to 1890 n " 17,458,766 162,479 +17,276,287 1891 to 1895 n " 11,520,715 156,958 .11,165,755 1896 to 1900 n " 22,999,486 59,094 +22,960,592 1901 to 1905 v " 15,792,954 500,445 .15,492,491 1906 to 1910 " " 11,105,794 685,114 +10,4l8,680 1911 4,886,952 1,007,826 . 5,879,106 1912 6,152,586 1,025,668 . 5,106,718 1915 5,589,052 1,162,255 + 2,426,779 1914 5,745,552 7,842,022 . 4,096,490 1915 9,999,400 5,828,227 + 6,171,175 .1916 15,508,746 712,998 +12,790,748 1917 26,857,702 525,575 +26,5l4,l29 1918 17,756,184 1,805,925 415,950,259 1919 55,745,456 4,151,469 +29,611,967 1920 27,257,551 20,770,959 + 6,171,175 1921 8,867,862 54,545,655 -25,475,791 1922 7,640,505 9,551,292 - 1,910,987 1925 10,571,578 15,772,285 - 5,400,907 1924 5,865,104 29,465,824 -25,566,720 1925 9,295,155 7,189,176 . 2,105,959 1926 5,950,960 6,440,448 - 509,488 1927 5,508,048 10,710,155 - 5,402,087 1928 4,408,117 4,954,824 - 546,707 1929 5,967,719 5,298,562 4 669,557 1950 2,954,000 2,472,000 + 482,000 (1) Bureau of Agricultural Economics, Foreign Trade of the a -Hh, .__, I ,~-—-V_ . E L‘, 55. STATE com F.“ MICHIGAN mama mama wmma . mmma omma mama oama wama mama \ I, 4 [LI-“”- a.“ N“ a ‘ “~ L‘ 1% W -.k w I—F,‘ -,. 9M""- W M" ' "W "w— / . ..1. apnoea—Hillel . .1. . 3.39am , ”a ommauoama manomaH can uphonxm unmvpsm. .11. H: 338, Mar». ." Ln‘ :. WIN L); Pounds n ' J. Millions t 34. been very nearly equal in amount. The data in Table XIII indicates the amounts of butter exported slightly exceeded the imports for 1929 and 1950. Exports of butter have constantly declined since 1921, and at the present time are too small to be of any significance. Cuba, the West Indies, and South American countries are the principal importers of our butter, as is indicated in Table XIV. Previous to the war Canada was the greatest single exporter of butter to the United States. Since then how- ever, dairying has deve10ped very rapidly in the Southern 'Hemisphere, Denmark, Netherlands and other European dairy producing countries, resulting in Denmark and New Zealand becoming the principal sources of our imports. Both of these countries produce a superior product that may be marketed in the United States. There are about 900,000,000 pounds of butter produced annually in the world that must seek a market other than in the country in which it is produced. The United Kingdom and Germany are the two countries that absorb the most of this surplus at this time. , 55. Table XIV. Destination of Butter Exported from United States (1) Country to which Year ended June 50 exP°rted 1926 1927 1928 1929 1000 lbs. 1000 lbs. 1000 lbs. 1000 lbs. Total 5,280 5,048 5,965 5,778 W Mexico 1,015 859 724 672 Cuba 782 754 479 570 Panama 719 582 511 227 Haitian Republic 585 498 479 479 Other West Indies 479 550 591 594 Peru 424 556 558 451 Other South America 584 605 590 485 Philippine Islands 250 187 190 152 Other Countries 662 677 645 548 (1) United States Department of Agriculture Yearbook 1950, page 916. 36. The United States Import and Export Trade in Casein Casein is made from skimmed milk, and is used in the manufacture of coated paper, galalith, and aladdinite. The latter two articles are hardened casein from which a number of articles such as combs, brush backs, umbrella handles, buttons and cigarette holders are made. During the past ten years the domestic production of casein has increased from eight to over twenty-two million pounds. During this same period our imports have increased from fourteen to thirty-one pounds, as is indicated in Table XV. About ninety per cent of the casein imported into United States comes from Argentina, the other ten per cent coming from England, Australia, New Zealand and France. ‘French casein is pure and uniform in quality and is consider- ed the best on the market. Until recently the Argentine casein has been superior in quality to domestic because of a natural-sour process of production. Domestic producers have recently deve10ped a process of manufacture whereby a casein equal in qualityjit is claimed to that of Argentina is produced. The Bureau of Agricultural Economics does not report any export trade in casein. 87. Table XV. Casein: Imports of the United States 1907 to 1950 (1) (in pounds) 1907 1,557,904 1908 265,471 1909 2,447,552 1910 5,769,476 1911 15,011,018 1912 9,158,558 1915 8,805,891 1914 10,798,614 1915 7,919,992 1916 10,576,621 1917 12,519,111 1918 12,155,855 1919 8,125,175 1920 24,059,515 1921 14,179,764 1922 10,529,294 1925 26,094,958 1924 17,441,211 1925 19,515,979 1926 25,052,766 1927 26,519,625 1928 24,145,077 1929 51,210,576 1950 (1) Bureau of Agricultural Economics, Foreign trade of United States, page 59. 38. The History of Tariff Changes Affecting the Dairy Industry of the United States The first American tariff law which was enacted and became effective in 1789, was essentially for revenue since there was need of money to pay the Revolutionary War debts and Operate the new government. The early dairy tariffs were very simple and easy to administer as they merely placed a Specific duty on cheese, the only dairy product imported at that time. The first indication of butter being imported is in 1824, when the records show one hundred and fifty-five pounds of butter entering this country. In the tariff act of 1824, butter is listed with a specific duty of 5 cents a pound. In the early tariff acts Specific duties were levied on dairy products which were gradually increased in each succeeding act until 1846, when both butter.and cheese were given ad valorem rates, which remained until 1861, when a Specific duty of 4 cents a pound was again placed on both milk and cheese. The tariff act of 1872 first mentioned condensed milk and milk sugar, indicating that these products were now entering this country as imports. The tariff act‘of 1885 for the first time placed a specific duty of 4 cents a pound on butter substitutes, this being to check the importation of oleomargarine, and in 1897 a similar duty was placed on cheese substitutes in an endeavor to control the importation of filled cheese. In the tariff act of 1909 fresh cream was listed with a duty of 5 cents a gallon. This was the first time cream had been mentioned in ‘ur..§lbvhf .flwlll lum .4 .. Ivabv II. 59. a tariff schedule. The Underwood Tariff Act of 1915 greatly reduced or removed the duties on all dairy products. In the 1922 tariff occurs the first instance of the use of an alternative ad valorem or specific tax, depending on the particular price conditions at the time of import. The law read: "cheese and cheese substitutes, 5 cents per pound, but not less than 25 per cent ad valorem." If 5 cents is not 25 per cent of the foreign or export value (the higher was to be used), then a 25 per cent ad valorem duty was to be assessed. The tendency in recent tariff making has been towards specialization and flexibility. In the Fordney-McCumber Tariff Act of 1922 each dairy product was listed and a particular duty assigned to each. In this tariff a flexible feature was included making it possible for the President, on recommendation of the Tariff Commission to raise or lower duties to the extent of 50 per cent, to equalize differences in the cost of production at home and in the principal competing country. Since 1926, the President on recommendation of the Tariff Commission has increased the duties on butter, cheese, milk and cream. Specific versus Ad Valorem Duties Specific duties are simple and easy to execute, as it is only necessary for custom officials to weigh, measure, or count the merchandise crossing the national boundaries, which requires little technical skill or eXpense to administer 40. and minimizes Opportunities for fraud. The amount of absolute minimum protection is definitely known in the case of Specific duties, but they have the disadvantage of not being readily adaptable to fluctuations of the price level and tend to be regressive in effect. Ad valorem duties have the advantage of being more adaptable to changing market conditions. The higher quality or higher priced goods pay proportionally the same as the lower grades. This system is, however, complicated and expensive to administer, because of the difficulty in determining the prOper value. The Incidence of Tariff Duties Duties on dairy products may or may not raise the domestic price of these products to the extent of the duty: depending upon the particular conditions at the time of importation. Elasticity of demand, availability of substitutes, and dumping by a foreign competitor all have an important place in determining whether the price will be increased and how much. If the demand for a dairy product is highly elastic a part at least of the duty may be assumed by the foreign producer, eSpecially if the producer's margin of profit is wide, and if he is peculiarly dependent on the United States market. If there is not an adequate domestic production of a dairy product, so that an important part must be imported, the import duty will tend to raise the 41. price of the commodity by approximately the amount of the duty, and the consumer will pay the tax not entirely to the government but in part to the domestic producers. The foreign producer may in order to avoid depressing his home market assume the whole amount of the duty, by lowering his export price while maintaining the previous price in his home market. If domestic production is somewhere nearly equal to domestic consumption, little or none is imported in years of high production, and the tariff duty is not effective, or is effective in some months and not in others. If a country has an export surplus then the tariff is not effective. "If a foreign country has lower transportation costs to the principal consuming centers of a country than its own producing areas, the effect of the tariff duty is, in general, lessened by this amount." (1) Without a tariff on dairy products a large volume of cream, milk, and butter would be imported from Canada because of the nearness to the border dairy belt of Quebec and Ontario to our principal consuming centers in Eastern United States. Preventing such imports by tariff barriers raises the price in the locality by the full amount of the duty only if it is still cheaper to import than to tranSport milk and cream from the mid-western states. A high tariff may cause instability of dairy prices, (1) Black, J. D., Agricultural Reform in the United States, pages 194. {‘7 ‘lvl 4." 42. for domestic prices may rise very high before domestic pro- duction catches up and levels them out again. The very high price attracts attention and stimulates domestic production beyond the normal need, causing a surplus and an abrupt fall in prices. With a medium tariff foreign Supplies flow in and keep prices from rising to such high levels while domestic production is catching up. Butter is an outstanding example of a tariff duty pro- ducing instability of price. A tariff of 8, then 12 and finally 14 cents a pound seems to have kept the price in New York about 5 cents higher as an average than that in London, but the premium has ranged from nothing to over 12 cents. During the three years of 1922 to 1924 inclusive, the price of export butter in Denmark varied from 50 to 41 cents a pound and in New York a similar grade varied from 59 to 55 cents a pound, a difference of 16 cents a pound. (1) It is important in making a tariff on dairy products to have the duties on the various products equalized. A good example of the failure to equalize rates was in the case of butter and cream duties in 1926. The duty on butter was in- creased to 12 cents a pound, while 45 per cent cream had a duty of only 20 cents a gallon. The result was the exporting of cream to the United States instead of butter, because a saving was made in duties. _One gallon of 40 per cent cream weighing 8.5 pounds will produce 4 pounds of butter, while a gallon of 45 per cent cream will produce 4.48 pounds of butter, allowing for an overrun of 20 per cent. Based on (1) Black, J. D. Agricultural Reform in the United States, page 205 43. a 12 cent per pound rate on butter the equivalent rate on cream would be 48 cents and 55.6 cents per gallon reSpectively, hon.40 per cent and 45 per cent cream. The United States Tariff Commission found that cream from Canada tested 40 to 45 per cent butterfat. This made it profitable for Canada to import butter from New Zealand, so that she might export more cream to the United States. Rates of Duty on Imports of Dairy Products Date of act—(and I R t f d t when effegtive) a es 0 u y July 4, 1789 (Aug. 1, 1789) Cheese, 4 cents per pound; other, 5 per cent. Aug. 10,.1790 (Jan. 1, 1791) Cheese, 4 cents per pound; other, 5 per cent. May 2, 1792, (July 1, 1792) Cheese remains 4 cents per pound; other 7% per cent. June 7, 1794 (July 1, 1794) Cheese, 7 cents per pound; other 10 per cent. May 15, 1800 (July 1, 1800) Cheese remains 7 cents per pound; other 12% per cent. Mar. 26, 1804 (July 1, 1804) Cheese remains 7 cents per pound; other 15 per cent. July 1, 1812 (July 1, 1812) Existing rates doubled until 1 ’ year after the war. Apr. 27, 1816 (July 1, 1916) Cheese, 9 cents per pound; other, free. May 22, 1824 (July 1, 1824) Cheese remains 9 cents per pound, butter, 5 cents per pound; other remains free. July 14, 1852 (Jan. 1, 1855) Existing rates remain. Aug. 50, 1842 (Aug. 51, 1842)Cheese, 9 cents per pound; butter, 5 cents per pound; other, 20 per cent. . 7 .lllllllllllff J. 44. Date of act(and when effectivel July 50, 1846 (Dec. 2, 1846) Mar. 5, 1857 (July 1, 1857) Mar. 2, 1861 (Apr. 2, 1861) Apr. 29, 1864 (Apr. 29, 1864) June 50, 1864 (July 1, 1864) June 6, 1872 (Aug. 1, 1872) Mar. 5, 1885 (July 1, 1885) Oct. 1, 1890 (Oct. 6, 1890) Aug. 27, 1894 (Aug. 1, 1894) July 24, 1897 (July 24, 1897) Aug. 5, 1909, (Aug. 6, 1909) Rates of duty Cheese, 50 per cent; butter and other, 20 per cent. Cheese, 24 per cent; butter and other, 15 per cent. Cheese and butter, 4 cents per pound; other, raw, 10 per cent; manufactured, 20 per cent. Existing rates increased 50 per cent for 60 days. Duties in effect prior to April 29, 1864, restored. Cheese and butter remain 4 cents per pound; condensed or preserved milk, 20 per cent; sugar of milk, free; other, raw, remains 10 per cent; manufactured remains 20 per cent. Cheese, 4 cents per pound, butter and substitutes, 4 cents per pound; condensed or preserved milk, 20 per cent. Cheese, 6 cents per pound; butter and substitutes, 6 cents per pound; fresh milk, 5 cents per gallon; condensed or preserved milk; 5 cents per pound; sugar of milk, 8 cents per pound. Cheese, 4 cents per pound; butter and substitutes, 4 cents per pound; fresh milk, free; condensed or pre- served milk, 2 cents per pound; sugar of milk, 5 cents per pound. Cheese and substitutes,_butter and substitutes, 6 cents per pound; fresh milk, 2 cents per gallon; condensed or preserved or sterilized milk, 2 cents per pound; sugar of milk, 5 cents per pound. Cheese and substitutes, butter and substitutes, 6 cents per pound; fresh milk, 2 cents per gallon; fresh cream, 5 cents a gallon; 45. Date of act (and when effective) Rates of duty Oct. 5, 1915 (Oct. 4, 1915) May 27, 1921 (May 28, 1921) condensed or preserved or sterilized milk, 2 cents per pound; sugar of milk, 5 cents per pounds. Cheese and substitutes, 20 per cent; butter and substitutes, 2% cents per pound; milk, cream, condensed or preserved or sterilized milk or cream, sugar of milk, free. Cheese and substitutes, 25 per cent; butter and substitutes, 6 cents per pound; fresh milk, 2 cents per gallon; cream, 5 cents per gallon; condensed or preserved or sterilized milk, 2 cents per pound; other rates remain as before. 46. Tariff Rates on Dairy Products Under Tariff Act of 1922 and rates under the Tariff Act of June 17, 1950 Tariff Act of 1922 Tariff Act of 19503 Products _= Rate of duty Rate of duty Whole milk, fresh or sour a] 2# per gal. p] 6%¢ per gal. Cream, fresh or sour a/ 20¢ per gal. b/ 56—6/10¢ per gal. Skimmed milk: Fresh Sour Buttermilk “it: Milk, condensed or evaporated: In air—tight containers I g/ 1; per 1b. l-8/lO¢ per 1b. Unsweetened Sweetened All other Dried whole milk Dried cream Dried Skimmed milk -Dried buttermilk C Halted milk, and compounds or mixtures of or substitutes for milk and cream 2%¢ per gal. b/ 2-1/20¢ per gal. 1¢ per gal. p/ 2-1/20¢ per gal. 1¢ per gal. 2-1/20/ per gal. _/ 1§¢ per lb. 2-5/4¢ per 1b. 1-5/8¢ per lb. 2-55/100¢ per lb. 5¢ per 1b. g/ 6—1/12¢ per 1b. 47¢ per 1b. l2—l/5¢ per lb. l%¢ per lb. 5¢ per 1b. 15¢ per 1b. 5¢ per lb. 20% ad valorem 55% ad valorem Butter .g/ 12¢ per lb. 14¢ per lb. Oleomargarine and other butter substitutes 8¢ per lb. 14¢ per 1b. Cheese and substitutes fl’ 5¢ per lb. but 7¢ per lb. but Casein or lactarene not less than not less than 25% ad valorem 55% ad valorem 2%¢ per 1b. 5%¢ per 1b. a/ ER 47. Provided, That fresh or sour milk containing more than 7 per centum of butter fat shall be dutiable as cream, and cream containing more than 45 per centum of butter fat shall be dutiable as butter. Original rate under Tariff Act of 1922; milk 22 cents a gallon, cream 20 cents a gallon; increased milk to 5% cents a gallon, cream to 50 cents a gallon by proclamation of the President, May 14, 1929. Provided, That fresh or sour milk containing more than 5% per centum of butterfat shall be dutiable as cream, and fresh or sour cream containing more than 45 per centum of butterfat shall be dutiable as butter, and skimmed milk containing more than 1 per centum of butter fat shall be dutiable as whole milk. In hermetically sealed containers. Provided, That dried skimmed milk containing more than 3 per centum of butterfat, and dried buttermilk containing more than 6 per centum of butterfat, shall be dutiable as dried whole milk; and dried whole milk containing more than 55 per centum of butterfat shall be dutiable as dried cream. Original rate under Tariff Act of 1922, 8¢ per pound; increased to 12¢ per pound by proclamation of the President, March 6, 1926, effective April 5, 1926. Rate on Swiss cheese increased to 7%¢ per pound but not less than 57%% ad valorem by proclamation of the President, June 8, 1927, effective July 8, 1927. 48. The Tariff in Relation to Imports of Milk and Cream The rates of duty for milk and cream since the act of 1890 have been as follows: Date of Act 1890 1894 1897 1909 1913 1921 1922 1929 1930 (a) Fresh Milk 5 cents a gallon Free 2 cents a gallon 2 n n It Free 2 cents a gallon n (a) 2% n n 3_,.§ n n n (b) 6-; u n u Cream 5 cents a gallon Free 5 cents a gallon 20 n n n 50 n n n 56% n n n Provided, That fresh or sour milk containing more than 5-1/2 per centum of butterfat shall be dutiable as cream, and fresh or sour cream containing more than 45 per centum of butterfat shall be dutiable as butter, and skimmed milk containing more than 1 per centum of butterfat shall be dutiable as whole milk. (b) Provided, That fresh or sour milk containing more than 7 per centum of butterfat shall be dutiable as cream, and cream containing more than 45 per centum of butter- fat shall be dutiable as butter. The Effect of the Tariff on the Imports of Milk and Cream The tariff of 1909 for the first time mentioned cream and placed a duty of 2 cents a gallon on milk and 5 cents a gallon on cream. This duty was not effective in checking the imports of milk/for in the two years following the passage of this act the annual amount of imports increased from 11,700 to 215,595 gallons. The Underwood Tariff Act of 1915 placed both milk and cream on the free list, result- ing in an almost immediate increase in imports as is indicated in Tables XVI and XVII. Imports probably would have reached 49. Table XVI. Cream: Imports for Consumption 1910-1928 (1) Y Rate of duty Quantity Value Duty ear per gallon gallons dollars collected ~ 1910 Fiscal 5 cents 751,575 577,559 56,569 1911 " " 2,555,459 1,875,506 116,772 1912 " " 1,120,241 925,767 56,012 1915 " " 1,247,551 1,068,109 62,568 1914 " 3 672,594 585,572 55,650 1914 " Free 1,100,519 964,552 1915 " " 2,077,592 1,800,196 .1916 " " 1,195,911 1,042,775 1917 " " 745,819 666,267 1918 " " 711,502 675,012 1918 Calendar " 704,051 765,809 1919 " " 951,416 1,111,150 1920 " " 1,597,160 2,079,865 1921 " " 555,855 442,518 1921 " 5 cents 1,679,914 2,081,094 85,996 1922 " " 1,655,890 2,055,190 82,796 1922 " 20 cents 467,769 716,866 95,554 1925 " " 5,024,665 4,744,955 604,955 1924 " " 4,197,528 6,141,251 859,506 1925 " " 5,171,498 7,585,0611Lp55,859 1926 " " 5,574,151 8,050,912:Lp74,826 1927 " " 4,845,158 7,606,071 968,628 1928 " " 5,620,905 5,897,656 724,180 1929 " 50 .cents CL, 945, 956 5, 548,645 585,180 (1) Source: Foreign Commerce and Navigation of the United , States, volumes 1910—1929. 50. Table XVII. Milk: Imports for Consumption of Fresh Milk 1910-1928 (1) Rate of duty Quantity Value Duty Year per gallon gallons dollars collected 1910 Fiscal 2 cents 140,492 18,244 2,810 1911 " " 215,595 29,024 4,272 1912 " " 46,824 6,285 956 1915 " " 45,955 6,955 919 1914 " " 22,150 2,714 445 1914 " Free 585,698 78,225 1915 " " 1,265,649 252,997 1916 " " 891,951 115,614 1917 " " 1,791,546 285,482 1918 " " 1,955,580 597,762 1918 Calendar " 1,519,966 541,584 1919 " " 2,755,401 759,075 1920 " " 2,520,657 622,407 1921 " " 778,644 159,714 1921 " 2 cents 1,800,596 507,248 56,012 1922 " 2 cents 1,417,241 258,502 28,545 1922 u 2% cents 605,411 112,787 15,155 1925 " 21 " 4,475,141 866,425 111,829 1924 " 2i " 5,159,885 818,960 128,997 1925 " 2- " 7,566,494 1,225,061 184,165 1926 n 2% " 7,586,205 1,245,592 184,655 1927 " 2t " 4,495,067 748,166 112,526 1928 " 2 " 5,499,424 955,965 157,485 1929 " 2 " 1,705,525 514,204 42,588 1929 " " 2,461,504 456,756 92,506 (1) Source: Foreign Commerce and Navigation of the United States Volumes 1910-1929. 51. NHCHIGAN STATE COLLEGE ..ll‘.‘lll‘ll it-el7a,‘lo‘llll’ -.CGI‘]..". |I:‘1’<\V11’.1.“tbol., . oama 5H . ‘ 54 same mama cums .- mamH . name same .w, mama oama my 7 ,. e 1“; t fin H , - -, - - .m-.- ; - - ax.--o,.my.« .h;. a. 1-, .z. 45 sun;: 9.1. »_»ww».4. . , ,. A. sea aaHasa mpzawmmsa ...... ...... I l.1|| (11$ .l . . . coHHmw m 40m . H04 mmHm4a mmmsmoufi.wmzmmom . soaasw a son M onasssqoomm m_ezmnHmumn omnm hung 904 mmHmda QOOEmMQZD coaamw m aw 904 mmHmda Nozmommmm ..x. qwtwm.h QOHHmm m $MN ..g.ueoa.ahamaa mmmsooo: mmznaon ...... w - . i . e58 : oama oama masonsH .ssono one 2H4: ...... ~m_ bH HM4mU._ _ u must- 1.. - - - Mn ‘ ‘_.,-_v. ..1... 3-; -.o ~~qfln MILLIONS OF GALLONS MENT OF MATHEMATICS L‘E’ZI’A R a still higher point in the years following the enactment of this tariff, had it not been for the World War and the necessity of Canada's using her dairy products to supply the British and Allied armies. Following the war the Emergency Tariff Act of 1921 placed a duty of 2 cents a gallon on milk and 5 cents a gallon on cream. This was merely a temporary measure to be in effect until a more complete and careful study could be made of the tariff needs of the country. In 1922 the Fordney-McCumber tariff increased the duty on milk and cream 2% cents and 20 cents a gallon, reSpectively. This increase in duty failed to reduce or check the amount of imports of milk and cream, which continued to increase in the years following the enactment of this tariff until 1926, when an embargo was placed on these products in the Montreal district due to a typhoid fever epidemic. The Comparative Cost of Producing Milk and Cream in the United States and Canada The amount of milk and cream imported is small in comparison to our total production in this country, and these products upon entering the border milk plants soon lose their identity, for the milk companies receive both domestic and Canadian milk. For the fiscal year ending May 1, 1926, 60 per cent of the milk imported lost its identity as fluid milk at border plants, and was utilized as cream, condensed milk, or other milk products; 37 per cent was shipped to New York City; and 5 per cent to Boston 53. and nearby cities. All imported milk is supposed to be pasteurized at the border. This made it necessary for the Tariff Commission in making cost studies to limit the territory to the Canadian and domestic counties contiguous to the border, rather than to take the cost of production figures for the whole industry in the two countries. Table XVIII. Milk for fluid use: Summary of costs of production in the United States and Canada based upon delivery to the United States border plants, May 1,1925, to April 30,1926. (Dollars per gallon). (l) —.V_ United States Canada Northern Northern Western Weighted Vermont New York New York Average Average Butterfat Test Per cent 3.86 3.42 3.51 3.56 3.40 Farm Cost of Pro- duction includ- ing interest $0.253 $0.260 $0.250 $0.255 $0.212 Difference in The above table shows that it cost 4.30 cents a gallon more to produce milk in the Northeastern border sections of the United States than in Canada. One of the most important items causing the difference in cost in the United States is the feeding of concentrates in winter, because of the differ- ence in the system of production. Canadian milk is produced largely during the Spring and summer months so that the peak of production occurs at the time of maximum demand in the United States. The increased demand in the eastern part of (1) United States Tariff Commission Report on Milk and Cream, 1929, page 28. 54. the United States is due to the influx of summer tourists in the New England states and the increase in the consumption of fluid milk and ice cream which normally occurs in the cities during hot or warm weather. Summer dairying does not necessitate the feeding of concentrates because of the availability of good pasture. Fluid milk and cream prices have been slightly higher during the winter season, for this is the time of high cost of production, and the season of low yield. Many domestic dairymen are changing to winter production because of the increase in market price, even though cost of production is greater. The next important item is the difference in labor costs for farm help, which is slightly higher in the United States than in Canada. This is due to the greater competition for labor in the industries in eastern United States. No additional charge for tranSportation was made, because Canadian milk produced near the border and domestic milk produced in northern Vermont and in northern and western New York is shipped to the border plants in a zone extending from North Troy, Vermont to Morristown, New York. The cost of transporting both Canadian and domestic milk received at these plants is a hauling charge, and is already included in the farm costs. However, if a comparison were to be made with the Canadian producers and the United States producers in the Middlewest and South, which could supply 55. milk to the Eastern market, we would find a considerable advantage to the Canadian producer. Table XIX. Cream: Summary of Cost of production in the United States and Canada with an average butterfat test of 40 per cent, including tranSportation to the normal principal market for each of the reSpective milk sheds, May 1, 1925 to April 30, 1926. (Dollar per gallon) (l) United States Canada North Phil. New Boston Weighted Central Milk York Milk Average States Shed Milk Shed Shed Average Butterfat Test Per cent 40 40 40 40 4O 40 Farm Cost of Production milk for cream includ- ing interest $1.69 $2.49 $2.42 $2.48 $2.37 $2.01 Plant Handling Costs .159 .294 .218 .154 .195 .178 TranSportation to the normal princi- pal market for each of the reSpective milk sheds .176 .038 .057 .046 .065 .096 Total Cost 2.025 2.822 2.695 2.680 2.630 2.284 Amount by which United States excees Canadian .346 Cost ‘ Table XIX shows that it costs 34.6 cents a gallon more to produce 40 per cent cream in the northeast section of United States than in Canada. The conditions causing the difference are similar to those for milk, except that there (1) United States Tariff Commission Report on Milk and Cream, 1929, page 39. 56. is a greater variation in tranSportation costs and the additional expense of plant handling. The Disadvantage of a Specific Tariff on Milk and Cream In order to prohibit importation of milk and cream it is necessary to have a very high Specific tariff, because of the summer demand for milk and cream in the Eastern cities. The New York price of cream has been about 25 cents per gallon above Montreal during 1927 and 1928, the differential varying between 14 cents in April 1924, to 47 cents in December 1927. (1) An ad valorem of sliding scale duty would be a better check on importations of milk and cream, for as the price increased the duties would also increase. This would not entirely prohibit imports, but it would be a more satisfactory control for both the domestic consumer and pro- ducer. If the tariff is placed high enough to prohibit all imports of milk and cream, then the domestic producers have the responsibility of producing enough of these products to supply the demand, at a price that is not prohibitive ‘ for the average consumer. In June 1930, the duties on milk and cream were further increased to 6-1/2 cents a gallon for milk and 56-6/10 cents a gallon on cream. Since then there has been a decided drOp in the imports of milk and cream as is shown in Table XX. (1) Hibbard-Commons-Perlman, Agr. l Tariffs, page 33. 57. Table XX. United States: Milk and Cream Im orts July— December 1928 - 1930 (1000 pounds? (1) COMQditI Uni 1: July to W— 1928 1929 1930 Milk: Whole, skimmed and buttermilk gallon 3,013,000 2,242,000 765,000- Cream gallon 1,907,000 1,704,000 815,000 It is too soon to predict the effect of this tariff on imports of milk and cream, except that in the firSt six months there was a decided drop in total imports, and it appears that the tariff is effective in checking imports but is not altogether excluding them. The Effect of the Present Tariff on the Producer and ' Consumer of Milk and Cream It is not easy to estimate the benefit of the tariff on milk and cream to the dairy producers because of the small amounts of imports and the relatively unorganized state of the milk and cream markets. If the tariff eliminiates the imports from Canada, it will then be necessary for the consumers to assume the difference in tranSportation costs between milk and cream produced in Canada and that produced farther South and West in the United States, for the New England dairymen will not be able to increase their production enough to supply the demand. It is not believed that prices (1) Compiled from reports of Bureau of Foreign and Domestic Commerce. 58. will be unduly high, for there is a tendency for increased production in the United States and domestic competition will keep them down. 59. The Tariff in Relation to Imports of Cheese The rates of duty for cheese and cheese substitutes since the act of 1890 are as follows: Date of Act Duty 1890 6 cents per pound 1894 4 cents per pound 1897 6 I! fl 1’! 1909 6, fl " " 1913 20% ad valorem 1921 25% n n 1922 5 cents per pound, but not less than 25% ad valorem 1927 Cheese other than Swiss: 5 cents per pound, but not less than 25% ad valorem Swiss cheese; 7-1/2 cents a pound but not less than 37-1/2% ad valorem. 1930 7 cents per pound but not less than 35% ad valorem. Types of Cheese Imported The imports of cheese may be divided or classified under three distinct types or kinds each of which is associated with a definite area where it is produced. 1. Cheddar imported from Canada. 2. Swiss or Emmenthaler imported from Switzerland. 3. Various types of foreign cheese made chiefly from goats and sheeps milk imported from Italy, France and Greece. From the standpoint of foreign competition and the tariff only the first two classes are of importance. The third class is of a distinctive foreign nature and because of the Special method and requirements for pro- duction necessitating considerable hand labor, this type 60. is not considered an American competitor. The total amount of cheese produced in the United States for the year 1928 was 525,044,000 pounds and the imports were 75,423,343 pounds, indicating that the imports are small in comparison to the total production. Some cheddar cheese is imported from Canada, but the volume of imports is small, for the greater portion of Canada's surplus is marketed in England. When for some reason or other this market will not absorb Canada'Sv surplus as in the year 1927 when there was an over supply in Europe, Canada enters the United States market.‘ If this should happen often it might force domestic producers to sell in a market in which the price was not determined by domestic cost of production but rather in a market set by foreigners. Since, however, this rarely occurs and the total volume is not large it is not such a serious problem. The second type of cheese imported is the Swiss or Emmenthaler for which Switzerland is noted. .ImpOrted Swiss cheese has sold in the American market from four to ten cents more per pound than domestic Swtxscheese due to its prestige, and its superiority in flavor, color and texture. It has been argued that because of the superior quality and greater price, it does not compete with American made Swiss cheese. The total importation of Swiss cheese as compared to the total United States consumption averages about forty- two per cent. Recently the imports and annual domestic 61. production h ve increased in about the same ratio. The imports of cheese for the years 1910 to 1929 inclusive are given in Tables XXI and XXII. The Effect of the Tariff on Cheese Imports For the ten years previous to the enactment of the Underwood Tariff Act of 1913 the import duty on cheese had been 6 cents per pound. This tariff changed the rate from a Specific tax to a 20% ad valorem duty, and it was equivalent to a reduction of about 1-1/2 cents a pound. There was a considerable increase in cheese imports during the following two years; after that the World War reduced imports to an extremely low level. Following the war imports of cheese again reached a higher level and have continued at this level to the present time. The Emergency Tariff of 1921 increased the duty on cheese to 23% ad valorem, and the Fordney-McCumber Act further raised the tariff to 5 cents a pound, but not less than 25% ad valorem. Neither of these acts were effective in checking imports of cheese, for the total importation increased in the following years. In 1927 the President, on recommendation of the Tariff Commission, increased the duty again. This time Swiss cheese was given a different rate. Cheese, other than Swiss, remained the same, but Swiss cheese was given a duty of 7-1/2 cents a pound but not less than 37—1/2% ad valorem. This duty has been effective in keeping the American price of Swiss cheese Table XXI. Total Imports of Cheese from Switzerland 1910 to 1929 Total Imports from Year Switzerland (2) 1910 14,015,000 lbs. 1911 15,508,000 1912 15,147,000 1915 17,572,000 1914 22,490,000 1915 14,767,000 1916 9,514,000 1917 1,641,000 1918 - --— --~ 1919 12,000 1920 802,000 1921 2,559,000 1922 12,011,000 1925 16,982,000 1924 15,652,000 1925 15,995,000 1926 16,756,000 1927 19,065,000 1928 18,563,000 1929 18,858,611 (2) It is estimated that about 90 per cent of total imports is Emmenthaler ...|“Itl’1..ll.ul‘llll’lrv\l.|’r I 65. Table XXII. Cheese and Cheese Substitutes: Imports for Consumptfon 1910 to 1929 (1) Year Rate of Duty Quantity Value Duty per pound ,pounds Dollars Collected 1910 Fiscal 6 cents 40,804,910 7,066,501 2,448,294 1911 v v " 45,426,444 7,925,682 2,725,586 1912 v n " 46,005,550 8,682,455 2,760,521 1915 N " " 48,446,006 9,069,506 2,906,760 1914 " n " 11,675,157 2,015,156 700,509 1914 n 20% 52,814,452 9,160,212 1,852,042 1915 v " " 48,086,864 8,986,052 1,797,206 1916 n " " 51,414,014 7,278,007 1,455,601 1917 " " " 14,682,518 4,520,051 904,006 ' 1918 n n " 8,574,760 5,522,178 704,455 1918 Calendar " n 6,929,069 2,759,292 547,858 1919 n n " 7,559,590 2,990,921 598,184 1920 w n " 14,592,015 5,257,720 1,047,544 1921 " n " 8,058,658 2,762,574 552,470 1921 n 25" 17,855,012 5,664,651 1,502,869 1922 " 25" 28,192,756 8,822,224 2,029,111 1922 " 5 cents 2,489,455 454,555 124,471 1922 n 25% 15,890,056 5,205,551 1,500,882 1925 n 5 cents 5,645,505 965,515 282,165 1925 N 25% 55,460,688 18,948,647 4,757,161 1924 n 5 cents 6,625,249 1,142,675 551,162 1924 n 25% 55,189,057 16,644,912 4,161,228 1925 n 5 cents 5,178,875 905,545 258,945 1925 n 25% 57,441,577 16,654,048 4,165,512 1926 " 5 cents 16,867,871 2,875,551 845,595 1926 " 25% 59,005,569 17,500,568 4,575,092 1927 " cheese except Swiss 5 cents 17,385,711 3,130,716 869,285 25% 56,755,452 19,556,165 4,884,040 1927 " Swiss 7-1/2 cents 58,097 9,505 2,857 57-1/2% 6,657,066 2,024,155 759,050 1928 " cheese except Swiss 5 cents 8,777,041 1,527,299 438,852 25% 52,585,519 17,117,797 4,279,449 1928 " Swiss 7-1/2 cents 56,004 10,626 4,200 57-1/2% 18,528,300 5,644,529 2,116,625 1929 " Cheese except Swiss 5 cents 11,461,060 2,001,704 575,055 25% 46,198,496 14,659,242 5,664,810 1929 " Swiss 7-1/2 cents 6,745 1,268 505 57-1/2% 18,677,580 5,717,158 2,145,926 (1) Compiled from Foreign Commerce and Navigation of the United States, Volumes 1910-1929 64. MICHIGAN STATE COLLEGE 2 0 m 0H ommH 04-0?! .. s-c vve>$'&’—¢- T4.. .9 to at 1 -¢—- 9 i 1 , -¢o.- ...‘....-....4 -.Y— _., b 1 h. 1 09. .llbl.“.ct. 1L... ana enemas. mama OHmH DEPARTM ENT 0F MATHEMATIC cs of Pounds 11110 I 1 I M 65. about 7.7 cents above that of Basel, Switzerland. The 1930 tariff act does not differentiate between Swiss and other varieties of cheese, and the duty for all cheese is increased to 7 cents a pound, but not less than 35% ad valorem. It is too early to predict the effect of this tariff, but the indications are that it may slightly reduce the imports of cheese other than Swiss. The imports of Swiss cheese should remain about the same, since the reduction in duty is too small to be of any significance. From July to December 1930 inclusive, the first six months of Operation of the new tariff, 27,729,000 pounds of cheese of all varieties were imported, as compared to 37,680,000 and 45,904,000 pounds for the corresponding period of 1929 and 1928 reapectively. The Comparative Cost of Producing.Cheese in the United States and Switzerland Switzerland is the principal competing country in the marketing of Swiss cheese in the United States, and for this reason the Tariff Commission in 1923 made a study of the cost of production of this cheese in the United States and Switzer- land. The four areas in the United States that produce Swiss cheese are: (l) southern Wisconsin and northern Illinois, (2) east central Ohio, (3) northern Pennsylvania and western New York, and (4) eastern New York, and it was in these areas that the cost of production study was made. The investigation of agricultural costs of producing milk for domestic Swiss cheese was confined to Wisconsin and Ohio, primarily, because about 86 per cent of the Swiss cheese made in the United States is produced-in these states. "Milk cost studies were made on 267 66. farms, having altogether 5,426 cows and producing in the period for which costs were obtained 29,000,000 pounds of milk, 92 per cent of which went to Swiss cheese manufacture. The cheese made of milk from these farms amounted to approximately 2,000,000 pounds, or 8 per cent of the total production of Swiss cheese in the area studied and 7% of total production in the United States". (1) The cost of production in Switzerland was made in c00peration with the Swiss Farmers' Association with headquarters at Brugg. These studies were based chiefly on records kept by 200 farmers working directly in c00peration with the secretary of the association. 0f the 200 records kept by the association, those for the 34 farms showing that the income from milk represented 40 per cent or more of the gross farm income were used. The farms included had 440 cows and produced 3,067,102 pounds of milk during the year May 1, 1923, to April 30, 1924. At the average yield of 8.5 pounds of Emmenthaler cheese per 100 pounds *ofmilk, this quantity of milk represents 263,157 pounds of cheese. There were two methods used in computing the cost of milk in the United States and Switzerland: Method A - "The Farm Basis? The costs as determined for the farm as a whole were distributed to the various farm products on the sales allocation principle; that is, the total farm costs were allocated to milk and to other products according to the portion of total income obtained from each product. (1) U. S. Tariff Commission, Report on Swiss Cheese 1927, page 16. 67. The cost of production of Swiss cheese by this method was 41.34 cents per pound for the United States and 28.19 cents per pound in Switzerland or 13.5 cents per pound higher for the United States. Method B - Amount Returned to the Farmer Basis. By this method the amount returned to the farmers by the cooperative factories and the prices paid for milk by the independent factories were used in lieu of the costs of production of milk. The costs of production of Swiss cheese by this method was 34.93 cents per pound in the United States and 28.89 cents per pound for Switzerland, or 6.04 cents per pound higher in the United States. The cost of delivery to New York City was 1.11 cents a pound in the United States and 1.43 cents a pound from Switzer- land. For the year 1926 the average wholesale price of imported Swiss cheese in the United States was 4.9 cents per pound more than domestic cheese. If Method A is used there is a difference in the cost of production in the United States and Switzerland of 13.5 cents plus the difference of the wholesale price of 4.9 cents a pound, making a total differential disadvantage of 18.4 cents a pound to the American producer. If Method B is used then the difference is 10.94 cents per pound. The United States Tariff Commission chose the latter figure (10.94 cents) when they made their recommendation to the President in 1927. The Effect of the Tariff on the Producer and Consumer The present tariff on cheddar cheese is of little importance because we produce practically our entire consumption. It is estimated that the present tariff will benefit the dairy farmers 68. and domestic Swiss cheese manufacturers to the extent of about $1,600,000; and the total annual cost to consumers will be about $2,860,000. (1) A large portion of the latter amount will be assumed by foreigners living in this country who desire the foreign cheese of their home country. (1) Hibbard, Commons and Perlman, Agricultural Tariffs, page 34 69. The Tariff in Relation to Imports of Butter The total domestic production of creamery butter in the United States for 1930 was 1,537,764,000 pounds and the total production of farm butter is estimated to be about 615,000,000 pounds, making a total domestic production of 2,142,764,000 pounds of butter. The total amount of butter imports during 1930 was 2,472,000 pounds, which is small and insignificant in comparison to the total domestic production. The rates of duty for butter since the act of 1890 are as follows: Date of Act Butter Butter Substitutes 1890 6 cents per pound 6 cents per pound 1894 4 cents per pound 4 cents per pound 1897 6 cents per pound 6 cents per pound 1909 6 cents per pound 6 cents per pound 1913 2-1/2 cents per pound 2-1/2 cents per pound 1921 6 cents per pound 6 cents per pound 1922 8 cents per pound 8 cents per pound 1926 12 cents per pound 8 cents per pound 1930 14 cents per pound 14 cents per pound From 1897 until 6 cents a pound. 1913 the custom duty on butter had been The Underwood Tariff Act in 1913 reduced the duty on butter to 2-1/2 cents a pound and was followed by an increased importation until the World War which caused a decrease in imports. was a great increase in imports of butter for now the supplies Immediately following the war there of the Southern Hemisphere countries were available. In November 1920, a Republican president and congress pledged to increase the tariff on agricultural products were elected. In anticipation of an increase in duties on butter, imports were extremely heavy, amounting to 11,420,470 pounds be- tween January 1 and May 27, 1921, and from May 28(when 70. the Emergency Tariff Act became effective) to December 31 inclusive they were only 6,314,649 pounds, as is indicated in Table XXIII. The method of making and revising tariffs by legislative action in the United States makes it possible for the importer to anticipate the increase in tariff duties and take advantage of the situation by making heavy importations for the few months previous to the date of the effective increase. Such anticipatory imports are less possible in British countries, where changes in the tariff rates are kept secret until announced in the budget Speech of the Chancellor or Minister of Finance, when the new rate is immediately effective. The Emergency Tariff Act of May 27, 1921, increased the duty on butter from 2-1/2 to 6 cents a pound, which apparently checked the importations of butter, as is shown in Table XXIII. The duty was further increased by the Fordney-McCumber Tariff Act to 8 cents per pound effective September 22, 1922. This did not seem to have any effect on imports at this time, for in the eight and two-thirds months from January 1 until September 22 the imports of butter were 3,025,759 pounds, and for the remaining three and one-third months of the year, with the increased tariff in effect, the imports were 4,085,082 pounds. The United States imports from Europe were heavy during this period, since there was an over-production and a surplus of butter in Denmark, for Germany, her usual market, was not buying because of unsettled conditions within the country following the war. Prior to the World War American imports of butter from Canada were greater than those from any other country. Following the war the imports from Denmark increased and during 71. Table XXIII. Butter: Imports for Consumption 1910 to 1930 (1) Year Rate of Duty Quantity Value Duty Collected 1910 Fiscal 6 cents 1,586,507 $300,898 $85,178 1911 n " " 894,211 225,921 55,652 1912 n " " 1,005,505 256,458 60,550 1915 v " " 1,178,155 515,288 70,688 1914 n n " 224,559 61,411 15,460 1914 " 2-1/2n 7,564,051 1,679,295 189,101 1915 " 2-1/2n 3,695,882 949,901 92,597 1916 " 2-1/2n 720,961 216,604 18,024 1917 " 2-1/2" 525,808 192,758 15,095 1918 " . 2-1/2" 1,595,645 542,580 59,841 1918 Calendar 2-1/2" 1,479,112 516,173 36,978 1919 " 2-1/2" 6,961,925 5,481,959 174,048 1920 " 2-1/2" 57,626,045 18,795,055 940,651 1921 " 2-1/2" 11,420,470 4,907,292 285,512 1921 N 6 cents 6,514,649 2,252,588 578,879 1922 " n " 5,025,759 989,166 181,546 1922 n 8 "I 4,085,082 1,689,445 526,807 1925 n " " 20,809,888 7,545,845 1,664,791 1924 n n " 19,279,509 6,958,572 1,542,545 1925 " " " 6,861,455 2,555,219 548,815 1926 n " " 5,276,024 1,156,581 262,081 1926 n 12 H 5,451,051 1,255,006 414,125 1927 v 12 " 8,456,597 2,875,177 1,875,177 1928 " 12 " 4,574,786 1,579,570 520,167 1929 n 12 " 2,650,225 992,958 510,715 (1) Foreign Commerce and Navigation of the United States, Volumes 1910-1929 72. EGANS Fr 1 I ATE Cf”. .. ~— v1! '7". H P omoH #mma mmma ..111nrlrr canon m mucoo «a 80¢ mmHmda Mmqamm Boosm ;.wmnom a mason ma ZOHH¢E¢QOOfiQ m.BZHQHmmmm 02302 5 59280 m 90¢ hmHmma mmmfiaooa Mazamom omma mama oama mama mama oama \Tnl. 4 1.11/W 4 a 1. . 1 F M. . \Q7 n.m . 1r. \ .r \ 1W 1 - L w _ ,.-oaw 1 canon a mpdmo mm.ov m. . g 1 309m hump on» 8005809 ; 1 1 964 aaHmae noosmmnam. 1 1 .21 o N _ 1 .1 .21 1 @2309 m mpmoo m ”.1 1 sea mmHmas wozmnmmzm . 1 1 . 1 1 1 1 . _ .05” 1 1 mmmauoana npncnaH uncepsm ; 1 11.. 5 Same. ,_ 1 11 .wpa1 Millions of Pounds 73. 1923 and 1924 exceeded those from any other country. It was during this period that the Tariff Commission made the cost of production study, and since Denmark was the principal competing state the cost studies were made in that country. Canada and New Zealand were alternating for second place during this period, and since they ranked second and third to Denmark a cost of pro- duction study was not made in these countries other than general observations of prices of butter-fat in comparison with that of the United States and Denmark. The Comparative Cost of Producing Butter in Denmark and the United States In making the cost studies in the United States a total of 691 farm records were obtained in 26 centers of the seven chief butter producing states — Minnesota, Wisconsin, Iowa, Michigan, Indiana, Ohio and Nebraska. The butter-fat production on the 691 farms studied was 1,521,522 pounds and the number of cows in the herds was 8,290, an average of 12.4 cows per farm. On these farms about 55 per cent of all cash receipts was obtained from butter- fat. About one-third of all domestiC'butter is made on the farm, and two-thirds is manufactured in creameries or factories, of which there are three types: 1. Farmers' cooperative, chiefly in Minnesota, Wisconsin, Iowa and Michigan. 2. Independents, mainly in Nebraska, Indiana and Ohio. 3. Centralized plants in areas of thinly distributed butter- fat production in central states, and areas of Middlewest principally producing corn, hogs, beef and wheat. Ninety per cent of the total costs of production is incurred on the farms and only ten per cent in the creamery or factory 74. processes. In Denmark the production of butter-fat and the conversion of it into butter is done by farmers' cooperative societies, which manufacture about 90 per cent of all Danish butter. Table XXIV. Summary: Comparison of the costs of producing butter in the United States and in Denmark. (13 (Costs in cents per pound, including interest. United States Denmark Average cost of cooperatives and COOperative Creamer es (A; (B5 independents Cost of producing butterfat 60.60 45.71 47.54 Average per cent overrun 25.47 20.48 20.48 Farm cost of the quantity of butterfat used in one pound of butter. 49.07 56.2 59.2 Factory or conversion costs 4.24 5.55 5.55 Total cost of production, not including tranSportation cost. 55.51 59.61 42.64 TranSportation costs to New York 1.57 1.50 1.50 Total costs including trans- portation cost to New York 54.68 41.11 44.14 EA; Kroner costs converted at average exchange rate for years 1925—24 B n n n n n n n n n 1921-24 The above table indicates that the cost of producing one pound of butter delivered to New York City by the cooperative and independent creameries in the United States is 15.57 cents more than it costs to produce one pound of butter by the cooperative societies in Denmark and delivered to New York City. (1) U. 8. Tariff Commission Report on Butter 1926, page 58 75. In the absence of direct cost data, invoice values were used to show relative comparison of the cost of producing butter in Canada, New Zealand and Denmark. This method was not unusual for invoice values are often used as a collateral check upon the accuracy of the cost data secured in the field and also for the purpose of determining whether substantial changes in costs have or have not taken place since the period for which the cost data were secured. Table XXV. Average invoice value of imports of 92 score butter 1925-1925, in cents per pound. (l) Year . ' Country Denmark Canada New Zealand All Countries 1925 average 57.5 58.5 55.0 55.9 1924 " 41.5 54.0 54.1 56.5 1925 " 55.2 55.1 55.2 56.4 Average for 5 years 44.00 55.86 45.10 56.20 For the year 1925 the average invoice value of imports from Canada was 1.2 cents per pound higher than the average invoice value of imports from Denmark. But during the two years 1924 and 1925 the average invoice value of imports-from Canada was reSpectively 7.5 and 18.1 cents per pound lower than the average invoice value of imports from Denmark. For the same three years, 1925 to 1925, the average invoice value of imports from New Zealand are lower than the average invoice value of imports from Denmark by 4.5, 7.4, and 18 cents per pound reSpectively. (l) U. S. Tariff Commission Report on Butter 1926, page 48 1.2‘ II. J Ill-Ill, \ 3 I. it‘ll-II 76. "This comparison of average invoice values, even after making allowance for the different exchange rates at which Danish costs have been converted for the above years, tends to show that the cost of production of butter imported from Canada and New Zealand is lower than that of the butter imported from Denmark." (1) Dean Russel and Professor Macklin of the University of Wisconsin, after making an extensive tour and study of dairying in New Zealand, reportedtinn:accurate figures of costs of pro- duction of butterfat were not available and that the most reliable estimation of costs obtainable for the year 1925-24 indicated a probable cost range of from 52 to 56 cents per pound of butter- fat and running in some cases as low as 28 to 50 cents. (2). The lower cost in New Zealand is largely the result of lower transportation, feed, labor and shelter costs. It is not necessary to feed concentrates because of unusually good grazing, in many cases permitting the pasturing of cattle throughout the entire year. With the warm climate it is not necessary to have expensive sheds, barns and silos such as are required in Denmark, Canada, and the United States. New Zealand is a small country surrounded by water, thus having the advantage of a small cost of tranSportation to the seaboard, from which all the large con- suming centers may be reached by ocean shipment. The cost of production is less in Denmark than in the United States because labor is cheaper and the average production per cow approaches 10,000 pounds of milk annually, while in the United States the average annual production per cow is between four and five thousand pounds. The cooperative system is highly perfected in (l) U. S. Tariff Commission Report on Butter 1926, page 47. (2) Ibid, page 49. 77. Denmark and 90 per cent of all Danish butter is manufactured by farmers' cooperative societies. With the dairy industry so well organized it is possible to curtail expenses and keep operating cost to a minimum; consequently dairying in Denmark has reached a high degree of competitive efficiency. The United States imports of butter since 1924 have continued to drop until the present time. In 1926 the President, upon the recommendation of the Tariff Commission, increased the duty to 12 cents a pound, and in 1950 the duty was further raised to 14 cents a pound. The Effect of the Present Tariff on the Producer and Consumer of Butter The tariff of 12 cents was effective in 1928 to the extent that the United States butter producers received a benefit of about 6 cents a pound above the London or world price, or a total of about $125,000,000. The tariff cost the United States consumer during the same year about $158,000,000. (1). The production of creamery butter has increased greatly during the past eight years, and during 1929 and 1950 eXports have exceeded imports. If the domestic production should increase to a point where the United States has an annual surplus the tariff will be less and less effective. The probability is that there will be a surplus at certain times of the year when production is high and a deficiency at other times , so that the tariff will only be effective at certain periods during the year. In the light of the (l) Hibbard, Commons and Perlman, Agricultural Tariff, page 51 78. above, it does not appear that the increase in the tariff in 1950 from 12 cents to 14 cents will have any effect either on the consumer or the producer. 79. The Tariff in Relation to Imports of Casein The rates of duty for casein since the Act of 1909 have been as follows: Act of 1909 Free Act of 1915 Free Act of 1921 Free Act of 1922 2-1/2 cents a pound Act of 1950 5-1/2 cents a pound For the year 1928, fifty-one million pounds of casein were consumed in the United States, of which 56 per cent was imported. Until the Fordney-McCumber Tariff Act of 1922, casein had been admitted to this country free of duty. This tariff placed a duty of two and one-half cents a pound on casein, but instead of imports decreasing, they increased as is indicated in Table XXVI. In 1950 the tariff on casein was further increased to five and one—half cents a pound, and this duty has not been in effect long enough to indicate its effect. During the period of 1921 to 1924, inclusive, over 90 per cent of the United States' imports of casein came from Argentina, whose product because of superior quality and uniformity sold in the domestic market at a premium of one to one and one-half cents per pound. Some casein is imported from France, England, Australia and New Zealand, but the amounts are too small to be of any significance. The Comparative Cost of Producing Casein in Argentina and the United States In 1922 the Tariff Commission made a study of the cost of producing casein in the United States and in Argentina. Data were .j‘l Ir! 80. Table XXVI. Imports of Casein for Consumotion in the United States ,(1) Year Rate of Duty Pounds Value Duty Collected 1910 Fiscal Free 5,769,476 $504,001 -------- 1911 " " 15,011,018 1,109,466 -------- 1912 " " 9,158,558 850,845 -------- 1915 " " 8,805,659 651,062 -------- 1914 " " 10,799,551 705,505 -------- 1915 " " 7,919,742 498,897 -------- 1916 " " 10,576,641 984,899 -------- 1917 " " 12,516,855 1,845,492 -------- 1918 " " 12,106,711 1,765,655 -------- 1918 Calendar " 7,085,976 964,766 -------- 1919 " " 17,076,956 2,009,791 -------- 1920 " " 21,258,822 2,451,666 -------- 1921 " " 9,717,258 842,755 -------- 1922 " ' " 10,521,599 855,276 -------- 1922 " 2-1/2 cents 5,966,859 506,416 $99,171 1922 " Total 14,288,258 1,559,692 -------- 1925 " 2-1/2 cents 25,405,965 4,215,599 655,149 1924 " per pound 17,245,551 1,598,457 451,159 1925 " " 19,181,256 1,708,995 479,551 1926 " " 26,852,258 2,901,252 670,805 1927 " " 24,260,055 5,117,199 606,501 1928 " " 28,612,560 5,674,505 715,509 1929 " " 27,568,754 5,298,005 684,218 (1) Compiled from Foreign Commerce and Navigation of the United States, volumes 1910-1929 4.. up oama. mmma omma #mma mmma omma mama oama ¢Hma mama oama 1.. . w 4 . amamo . -1411 L 3.4 LN I' (JP (4'? Millions of Pounds obtained and studied from 18 domestic producers whose output was about 70 per cent of the total production in the United States during the year 1922. It was very difficult to obtain authentic information on the costs of producing casein in Argentina, since the industry was not organized and casein is a by-product in the production of other dairy products. In the United States it was difficult to assign a definite cost to the raw material since there is not an organized market for skimmed milk and casein is an alternative or by-product. The three possible methods of evaluating the skimmed milk were as follows: Method 1. Accept the cost of skimmed milk as submitted to the Commission by manufacturers both in the United States and Argentina. Method 2. Allocate the costs of whole milk to casein in the ratio that the sales values of casein bear to the sales values of all products produced from whole milk. . Method 5. Consider skimmed milk as a waste or by-product and assume that it has no value or an equal value in both countries. Table XXVII. Comparison of Domestic and Argentine Costs of Casein, including transportation to New York City — (Dollars per pound). (1) United States Argentina Excess cost Excess cost United States Argentina Method 1 80.1017 $0.1504 $0.0287 Method 2 0.1157 0.1111 90.0046 Method 5 0.0547 0.0504 0.0045 (l) U. S. Tariff Commission report on Casein 1926, pages 19 and 20 85. The second method of evaluating the value of skimmed milk seemed most authentic, but the data available were not adequate and consequently the Tariff Commission did not feel that they had obtained sufficient information to recommend any change in the existing tariff rates. The two large centers of casein consumption are Holyoke, Massachusetts, and Kalamazoo, Michigan, where large paper mills are located. Domestic casein is produced in California and the eastern states. In Argentina most of the casein factories are located from 100 to 200 miles from.Buenos Aires, and the cartage and rail freight from factory to ocean port averaged about 80 cents a hundred in 1922. Ocean freight from Buenos Aires to New York City was 50 cents a hundred; export charges, insurance, consular fees and brokerage an additional 50 cents; making a total tranSportation cost from the factory in Argentina to New York City of $1.40 per hundred. (1) Freight charges from New York City to Kalamazoo are 48 cents a hundred, or a total of $1.88 per hundred pounds from Buenos Aires. The freight rate from California to Kalamazoo is $1.28 per hundred pounds or a saving of 60 cents, and the New York State producer has an advatage of $1.40 per hundred over the Argentina producer when shipping to Kalamazoo, Michigan. The freight rate on casein from San Francisco to New York via Panama Canal is about 50 cents per hundred pounds, subject however to frequent change. (1) United States Tariff Commission Report on Casein, 1926,. page 9. 84. In the United States it is usually considered more profitable to convert skimmed milk into cheese, skimmed milk powder, or condensed skimmed milk, than into the production of casein. In some sections of the country where hogs are raised skimmed milk is often used for hog feed. Tankage and fish meal may be substituted for skimmed milk in hog rations, but the supply of each of these products is limited and it would not be possible to obtain sufficient quantities of these substitutes to take the place of all the skimmed milk now used in hog rations. The Effect of the Present Tariff on the Producer and Consumer of Casein Imported casein is now obtained at a price which makes it more profitable for domestic manufacturers to utilize skimmed milk for purposes other than in the production of casein, except in cases where there is no alternate use for skimmed milk. If the duty on casein were raised sufficiently so that the domestic manufacturer could produce the casein now imported, it is estimated that more than a billion pounds of skimmed milk would find an outlet in the manufacture of casein. This would amount to about $2,700,000 annually, which would benefit the creameries, condensers, and dairy farmers. The price to the consumer would be increased since the consumer would be required to assume the increase in cost of producing domestic casein over that normally imported. 85. The Effect of Oleomargarine on Butter Prices There has been continuous strife between the oleomargarine manufacturers and the dairy producers ever since the first oleomargarine was placed on the market in 1880. This was incited by unscrupulous individuals who took advantage of the layman's inability to distinguish one product from the other, and who fraudulently substituted colored oleomargarine for butter. The dairy interests soon realized that butter on its own merits could not meet the unfair competition of the substitute, and appealed for national aid, which they were able to obtain in legislation that has been very beneficial to the industry. The Various Foods Used in the Manufacture of Oleomargarine The principal articles of food used in the manufacture of oleomargarine are oleo oil, oleo stock, oleo stearin, neutral lard, peanut oil, cocoanut oil, cottonseed oil, milk, butter and salt. It should be borne in mind that no manufacturer ever puts all of these foods into any one brand of margarine. He selects the ones that he likes best or are most readily available for each one of the brands he makes. 86. Table XXVIII. The following are the various amounts of the above foods used in the manufacture of oleomargarine in United States during 1926. (1) Oleo Oil 47,000,000 pounds Oleo stock 5,000,000 " Neutral lard 25,000,000 " Peanut oil 5,000,000 " Cocoanut oil 98,000,000 " Cottonseed oil 20,965,000 " Butter 2,550,000 " Milk 72,000,000 " There has been a gradual increase in the production of oleomargarine since 1900, except for the period of the world war when there was an abnormal increase in production as is indicated in Table XXIX. With the same exception exports have tended to decrease, indicating that more oleomargarine is being consumed in this country. The average annual per capita con— sumption of oleomargarine in United States for the period of 1924 to 1928 inclusive was 2.27 pounds. The Relation of Butter Prices to the Consumption of Oleomargarine There is a close relation between butter prices and the amount of oleomargarine consumed as is indicated by Chart VIII. As butter prices increase more is used, and as butter prices decrease less oleomargarine is consumed. Oleomargarine affects butter prices indirectly, for as the consumption of oleomargarine is increased the available supply of butter is increased, and decreases demand. The result is lower butter prices. (1) Institute of Oleomargarine Manufacturers, Bulletin No. 10, August 1, 1927 {Ill}! «'1‘ 87. Table XXIX. Oleomargarine: Production, EXport and Consumption in the United States 1891 to 1928. (1) (Reported in pounds) Year Production Exports Consumption Total Per_Capita 1891- 95 Aver. annual 57,512,242 4,215,545 55,215,905 .80 1896- 00 68,815,216 5,012,595 65,717,967 .87 1901- 05 " " 81,546,271 6,471,604 74,918,216 .94 1906-10 " " 88,494,474 5,287,529 85,095,867 .95 1911—15 " " 156,964,606 5,654,990 155,250,594 1.59 1916 ' 152,509,915 5,426,221 146,752,525 1.47 1917 255,170,111 5,651,267 226,525,575 2.25 1918 '526,528,859 6,509,896 519,629,407 5.11 1919 559,216,571 18,570,400 541,661,507 5.28 1920 591,285,145 20,952,180 568,785,586 5.49 1921 281,081,514 6,219,165 276,992,980 2.58 1922 190,950,575 2,145,556 188,520,685 1.75 1925 209,182,188 5,765,955 205,056,851 1.85 1924 259,698,749 1,595,996 258,542,704 2.11 1925 215,402,558 887,482 214,401,964 1.87 1926 248,046,818 1,256,251 246,569,208 2.12 1927 294,699,000 752,000 294,079,000 2.46 1928 555,122,000 655,000 551,485,000 2.74 (1) Compiled from Dairy Statistics for 1929, United States Department of Agriculture Yearbook 1950 I‘ll-l1 I 'l 5' 88. Cents per Pound Butter Price onma ww- mm as ..c on .— 1, “\7 A) .11 . -, ' f": A \J Miii' mmma omma dmma mmma omma mama oama ¢ama mama oama rm'ncs venom awn mummo ooanm Hoppsm soapassmdou mpaamo and messed meanmmnmsooaoulias mmmauoama mooapm noppsm on moapmsswsou n. mnanmmumsooao mo noapmamm.enam . HHHb amamo Pounds per capita consumption '5.‘ . Oleomarga;:;"- 89. Two methods have been employed by the dairy industry to protect butter against the competition of oleomargarine: 1, national legislation by the placing of an internal tax on oleomargarine; 2, by a protective tariff on vegetable oils used in the manufacture of oleomargarine, so as to increase the cost of production. In 1886 the dairy interests of the country succeeded in Obtaining national legislation in a law which required 2 cents a pound internal revenue tax on oleomargarine, but which permitted oleomargarine to be colored yellow. As the price of butter increased per pound, it became evident that 2 cents a pound was not a sufficient tax to deter unscrupulous persons from perpetrating the same frauds. In 1902 at the request of the dairy interests the law was amended and the tax was raised to ten cents per pound on artificially colored oleomargarine and 1/4 cent per pound on uncolored. This law was further changed in 1930, whereby oleomargarine was defined as follows: "any fat or oil or any combination of them made in imitation or semblance of butter, and made in any way whatever, is oleo- margarine and is subject to all the provisions of the law of 1902". The tariff on vegetable and animal oils is an important item in the cost of production of oleomargarine for a large percentage of such oils used in the making of oleo are imported. The dairy interests are anxious to have the cost of producing oleomargarine high and therefore wish a high 90. tariff on vegetable oils. Soap, paint, and oleomargarine manufacturers would like to have such oils admitted free in order to keep the cost of their raw materials as low as possible. Cocoanut oil has been the principal oil used in the manufacture of oleomargarine, and is admitted free of duty from the Philippines, our chief source of supply. Table XXX. Vegetable and animal oils: Tariff schedules for the acts of 1922 and 1930 on imports entering the United States. (The Philippines, Virgin Islands, American Samoa and Guam excepted). 1922 1950 Oleo oil l¢ a pound l¢ a pound Oleo stearin l¢ a " l¢ a " Lard l¢ a " 3¢ a " Lard compounds and substitutes 4¢ a " 5¢ a " Peanut oil 4¢ a " * 4¢ a " Cocanut oil 2¢ a " * 2¢ a " Cottonseed oil 5¢ a " * 3¢ a " Soy bean oil 2%! a " *5%¢ a " Palm oil Free * l¢ a " * But not less than 45% ad valorem The American livestock men and farmers producing crops from which vegetable oils are obtained are interested in a high tariff on animal and vegetable oils for they wish to protect the home market. At the same time they wish to see the oleomargarine industry prOSper for it affords a market for their products. Recent Oleomargarine Legislation and its Effect on the Dairy Industry In 1950 some English chemists succeeded in refining palm oil, which has a natural yellow color, in such a way that it can 91 . 1 be successfully used in the manufacture of oleomargarine. David Burnet, Commissioner of Internal Revenue, ruled November 12, 1980, that oleomargarine manufacturers could use palm oil to color oleo yellow in the semblance of butter without paying the ten cents tax required on "artificially" colored oleomargarine. This ruling had the effect of erasing all the previous protection Congress had given butter, and dairy specialists claimed the resulting drOp in butter prices represented a loss of $1,000,000 a day in the United States. This caused great apprehension among the dairy interests of this country, and there was a concerted effort brought to bear on our National Congress during the last session to amend the law so as to cover all oleomargarine manufactured having either a natural or artificial color which resembles butter. The dairy interests were successful in obtaining this amendment in February, 1951, to become effective June 1. The dairy interests are at this time attempting to obtain legislation prohibiting the sale of colored oleomargarine in this respective state and an additional state tax of 6 cents a pound on all oleo sold within the state. This probably would be of some aid to the dairy industry, but it would be detrimental to the farmers producing animal and vegetable oils since it would reduce the consumption of the product for which they supply the raw materials. The Effect of Oleomargarine Legislation on the Consumer and the Producer of Dairy Products The consumer of oleomargarine and the producer of dairy products agree that oleomargarine should be marked so that it is readily recognized, thus preventing the fraudulent substitution ._h_._ 92. of oleomargarine for butter. There is a feeling in some centers that the dairymen are becoming unreasonable in their demands, and this may result in a reaction that will be harmful to the industry. This is eSpecially true in the industrial centers where there has been unemployment with considerable suffering during the past year. There are many peOple at the present time consuming oleomargarine since they cannot afford to buy butter, and they believe it an injustice to them to raise the price of oleomargarine by a state tax in order to give the dairy industry additional protection at this time._ Oleomargarine is used by the state penal and charitable institutions, and by the public welfare departments in the various cities of the state. An increase in the price of oleo means the eXpense of these institutions is increased resulting in an increased burden on the public. On the other hand the dairy industry must be given sufficient protection so that it returns a profit under prOper management and wholesome dairy products are available for consumption at a reasonable price. Public policy while considering the demands of the consumers for lower costs must decide the amount of protection that is eSSential for the dairy industry. 95. The Present Dairy Situation as an Indication of the Future Trend in the United States International Trade in Dairy Products The Domestic Situation There has been a tendency during the past two or more years for farmers to shift from the less remunerative fields to dairying, ‘because the prices of butter, fluid milk and other dairy products have averaged above the general agricultural price level. The production per cow and the number of cows and young cattle on the farms is greater than a year ago, indicating an increased production for the year 1951. Dairy Products in Storage. (1) Pounds Amount in excess of January 1.5-year Jan. 1, 1950 Jan. 1, 1951 .average 1926 to 1929 _——— ‘ Butter 81,955,000 65,549,000 11,521,000 Cheese 65,000,000 65,562,000 5,000,000 Condensed and Evaporated Milk 261,247,000 259,595,000 65,905,000 The amount of dairy products in storage January 1, 1951, in terms of milk equivalents were 14.4 per cent smaller than on January 1, 1950, but considerably above the past five year average for January first. The demand for dairy products has been reduced by the business depression, as is manifested by the curtailed consumption of fluid milk, and the failure of reduced prices to induce any appreciable (1) Bureau Of Agricultural Economics, The Agricultural Outlook 1951, page 29. a .n... \ (T 94. increase in butter consumption. The average price for 92 score butter and cheese in New York City on January 1, 1951 was 9.4 and 4.9 cents, respectively, below the past five year average. Fluid milk has been reduced in price in most of the consuming centers. The Foreign Situation There has been an increased production of butter and cheese in Canada during the past year and the storage holdings of butter and cheese on January 1, 1951, were 61 and 19 per cent, respectively, above that of the same date one year ago. New Zealand has maintained a normal butter production, while cheese has shown some increase. Australia has had a normal production, since a severe drought late in the year prevented an anticipated increase. Denmark exported 25 million pounds more butter in 1950 than in 1929, and practical- ly every European country has shown an increased milk pro- duction during the past year. There has been an increased demand for butter and cheese in Great Britain during the past year. The increase in total butter imports in 1950 over 1929 was 47 million pounds. During the period from November, 1950, to February of 1951, inclusive, the increase in butter and cheese imported into Great Britain was 11 per cent more in each case that in the same period in the previous year; English imports of condensed and evaporated milk have been somewhat lighter. In Germany the demand for dairy products has declined eSpecially since late November when an increase in tariff 95. 3. duties became effective on dairy products. Estimated Future Trend in the United States International Trade in Dairy Products Milk and Cream: The indications are that imports of milk and cream from Canada will be greatly reduced because of the increased tariff duty in 1950. Butter: It appears there will be a continuation of the past two years increased production in the United States, and exports will exceed imports. There has been a sharp decline in domestic prices since last December and the best Danish butter has been quoted in London at prices equivalent or slightly more than 92 score butter in New York. It is possible there will be a small amount of butter imported during the late winter and early Spring, the domestic period of low production. Cheese: It is expected that the imports of the distinctively foreign types of cheese will be well maintained, and that the imports of the Cheddar cheese will decrease because of the increased domestic production. The exports of cheese will be small as in the past. Condensed, Evaporated and Powdered Milk: The exports of these products have declined in recent years. However, with an increased domestic milk production, and the decreas- ing prices for other dairy products, it is expected the production of condensed, evaporated and powdered skimmed milk will be increased, and that we can expect a good eXport 96. trade in these products to the trOpical and oriental countries. The net imports of all dairy products reduced to their milk equivalents have drOpped from one billion pounds in 1928 to 606 millions in 1950, and it is eXpected that this figure will be still further reduced during the next few years. 97. Summary Dairy husbandry is the largest single agricultural industry in the United States. The farm value given by the United States Department of Agriculture in 1929 is nearly three billions of dollars. One million five hundred thousand farmers depend upon milk and its products for the greater source of their incomes. The annual receipts from the sale of dairy products for the states of Wisconsin, New York, Iowa, Minnesota, Illinois and Pennsylvania total about one half those of the entire world. Practically all of the dairy products produced in the United States with the exception of condensed and evaporated milk are now consumed within the country and in addition to the domestic production, foreign supplies equivalent in milk content to something less than one per cent of the total national consumption are imported. The production and consumption of dairy products in the United States are more closely balanced than in any other important dairy country. Even so, foreign competition and demand from the standpoint of the domestic producers is important from the following points of view: (a) As a market for our surplus products. (b) As a source of competitiOn in the domestic market. (c) Since the recent increase in the tariff on dairy products, the domestic producer. is concerned with the possibility of eXpanding the production of the dairy products which hereto— fore have been imported. The increase in the duties on fluid milk and cream caused by the 1950 tariff act has reduced imports of these 98. products from Canada to a very small volume. This will benefit the dairy farmers in the New England states for prices will probably be raised by the amount of the trans- portation costs necessary to bring milk and cream from the mid-western states to replace that imported. The consumer will assume the increase not only of the milk and cream transported a long distance but also the increased price of the local product. This will be true only when the local producers are unable to supply the local demand, and it is not believed that they can increase their production to meet the demand. The tariff on butter has in the past kept the domestic price about six cents above the world price, and has added about one hundred twenty-five million dollars per annum to the gross receipts to dairy farmers selling butterfat. At the same time it has increased the eXpense of the consumer about one hundred fifty-five million dollars. There has recently been an increase in the domestic production of butter and there is a possibility of the United States having a surplus for eXport, which would make the tariff ineffective. Imports of the various types of foreign cheese, have been well maintained deepite increased tariff rates and are the most stable of all our imports of dairy products. The possibility of domestic trade being substituted for foreign imports depends upon the degree to which the technique of production of the foreignetype cheese is deve10ped in 99. the United States. It is believed the present tariff rates are high enough to check foreign imports, which will foster the utilization of milk in the United States for the domestic production of these foreign types of cheese. Casein imports have increased steadily during the past decade. The tariff was increased in 1950 from two and one-half to five and one-half cents a pound, and it is believed this will have a tendency to reduce the volume of imports which will foster the domestic manufacture of skimmed milk into casein, thereby giving the domestic producers an outlet for their surplus skimmed milk. The only products exported from the United States in any important volume is condensed, evaporated and powdered milk. The domestic price level in relation to foreign prices is lower than usual, and continued high production may stimulate the exportation of preserved and dehydrated_ milk. Powdered milk is the only product to have an actual increase volume of eXports during the recent price decline. Oleomargarine used as a substitute for butter has an important bearing on the butter market. Oleomargarine affects butter prices indirectly, as the consumption of oleomargarine is increased the available supply of butter is increased and decreases demand, thus resulting in lower butter prices. 100. BIBLIOGRAPHY Books Black, J. D. Agricultural Reform_in the United States New York, 1929. Pirtle, T. R. History of Dairying, Chicago 1926. Smith, J. R. The_World's Food Resources, New York 1919. Industrial and Commercial Geography,New York 1925. Publications and Authors Finch, V. C., Baker, 0. E. "Geography of World's Agriculture" United States Department of Agriculture, 1917. Gries, Caroline G. "Foreign Trade of the United States, Dairy Cattle and Dairy Products", 1790-1929, Bureau of Agricultural Economics, November 11, 1929.' Hibbard, B. H., Commons, J. 3., Perlman, 5., "Agricultural Tariffs", 1929. Reed, 0. E. "A Three Billion Dollar Industry", United States Department of Agriculture, Bureau of Dairy Husbandry, 1950. Reed, 0. E. "Trends in the Dairy Industry", United States Department of Agriculture, Bureau of Dairy Husbandry, 1950. United States Government Publications: United States Department of Agriculture Yearbooks 1922 and 1950. Foreign Commerce and Navigation of the United States, Volumes 1910 to 1929. Bureau of Agricultural Economics Publications: "Dairy Statistics", Statistical Bulletin No. 25, 1929. "The Outlook for the Dairy Industry", March 1951. "World Dairy PrOSpects", Current numbers. "The Agricultural Outlook" 1951. 101. United States Tariff Commission Publications: "Report on Butter", 1926. "Report on Casein", 1926. "Report on Swiss Cheese", 1927. "Report on Milk and Cream" 1929 __;l. "Tariff Readjustments", Hearing before the Committee on Ways and Means, House of Representatives, Volume 7, Schedule 7, 1929. . ., o ’.7 ‘ it. .. . f v k: l.’- \ I .“"\ a ..T' 'U ‘1'- .‘)".£'.' “v . I \ r ' < - f'. _ - - . ‘1‘»? u. , . 7' "“3". 3.7" a]:- I”: ‘ aft P - d {t Y;' 33:51.45}; xx " _ h ' . - c o ’ 9 I o ( .' x (3': L“ W ‘ .n . . Tricia": 100‘ V 1 Il ' '5'." . I H. 5 ~‘-,’}“Ti"‘ "." vfl‘ ’ I. . .. Hutu .‘Y‘v r"\';.'l.v up!” g i-L ‘ ‘ :, -‘.-‘- § . , \ a“ ,. :9.- -'_.‘ ’ .‘_ . , 4 '; 4 -¢ ‘0' " 5.1.,“4‘7': 9(“3. " ‘vaxl‘ 3- "(.0 'I ‘(.1}9"£$):§‘ ’ .‘ n . ~-..{‘:~-;.'\‘~-'t - I»! ..1. ~;,_\;-. A)“;,'.._’..|\."C‘x -- ' H . ' ' D ‘W. O :i.’ ':0_ .. y 3 _ , a ;v A l l u c , . . o ' l ‘l .. ,. u l I. , , .. ’u. [A 1" ,t. .-.q~.~ u- . ‘4- MICHIGAN STATE UNIVERSITY LIBRARIES III IIIIIIIIIIIIIIH 3 45 4840 III 3 1293