SOME PROBLEMS IN EXTENDING FEDERAL MILK ORDER REGULATION IN MICHIGAN Thesis for tho 902m 95 Ph. D. MICHIGAN STATE UNIVERSITY Stanton Putney Parry 1958 TH ESES This is to certify that the thesis entitled Some Problems in Extending Federal Milk Order Regulation in Michigan presented by Stanton Putney Parry has been accepted towards fulfillment of the requirements for M degree in Agricultural Economics 7 ,7 . [’3644/47/g6/ (4flz'ét’flgQéI Major professor Date (la—0‘ I] ’95; r I 0-169 nanny Michigan Stan University I l fiflhwmggiil SOME PROBLEMS IN EXTENDING FEDERAL MILK ORDER REGULATION IN MICHIGAN By Stanton Putney Parry ‘ A THESIS Submitted to the School for Advanced Graduate Studies of Michigan State University of Agriculture and Applied Science in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Agricultural Economics l958 ACKNOWLEDGMENTS TWie author wishes to express his gratitude to the many people who assisted in this study. Special appreciation must go to the author's major pro- fessor, Dr. Gerald G. Quackenbush, for his aid in devel0ping the framework of this thesis and for the helpful suggestions during the course of its progress. The author is indebted to Dr. L. L. Boger, Head of the Departnmht of Agricultural Economics, whose financial assis- ‘tance helped to make a graduate program possible. Cooperation given the author in correspondence and inter- view by the city, county and district health department sani- tarians, personnel of the Michigan Department of Health, Michi- gan Department of Agriculture, United States Department of Ag- riculture, the market administrators of various Federal order markets and leaders of several dairy cooperatives greatly facilitated the collection of the data used in this thesis. Thanks are due to other members of the staff and to graduate students for their helpful suggestions made during the deveIOpment of this thesis. The author especially appre- ciates the data freely furnished by Dr. Glynn McBride and Mr. Willard H. Blanchard. Appreciation is also expressed to Mrs. Carolyn Piersma for typing the final manuscript. Last, but not least, the author is grateful for the encouragement, patience and inspiration of his wife, Loraine, who always made the problems of graduate work seem worthwhile. The author assumes full reaponsibility for any errors that remain in this manuscript. Stanton Parry ii SOME PROBLEMS IN EXTENDING FEDERAL MILK ORDER REGULATION IN MICHIGAN 8y Stanton Putney Parry AN ABSTRACT Submitted to the School for Advanced Graduate Studies of Michigan State University of Agriculture and Applied Science in partial fulfullment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Agricultural Economics Year I958 ii; p, I») 1, Approved ( L/Zéiéf If y/M/fié 543454404 ABSTRACT This thesis has considered some of the basic order pro- visions needed in case of Federal milk marketing regulation for the entire Lower Peninsula of Michigan. The provisions considered were as follows: I. Delineation of the marketing area and the number of orders to effectuate regulation in the Lower Peninsula of Michigan. 2. Construction of classes of use. 3. Analysis of transportation differentials. 4. Consideration of a seasonal price plan. 5. Type of pooling arrangment and pool plant require- ments. It was hypothesized that these outlined provisions would need revision in moving from the present regulated and unregu- lated territory in Michigan to an expanded and merged order or orders embracing the entire Lower Peninsula of Michigan. In general, the following procedure was used in reviewing each provision: i. The problem in each case was defined. 2. Criteria were erected for a theoretical framework in which to deveIOp the analysis. 3. Finally, the criteria were analyzed to arrive at what was believed to be the best alternative pro- vision for inclusion as part of the Lower Peninsula order. One of the difficulties encountered in the analysis was the Conflicts of interest between consumers, dealers, and pro- ducers. Also two types of problems were considered, one dealing iv with equity and one dealing with efficiency. These conflicts and the problems of equity were difficult to overcome, but insomuch as possible definite recommendations were made in the light of the best available information, and with some commonly accepted equity objectives in mind. The recommendations were as follows: The Market Area It was recommended, on the basis of eight examined criteria, that there should be one order for the entire Lower Peninsula. The Classification System It was recommended that milk be classified in two use classes. This was based largely on the inspection require- ments actually enforced on the major Lower Peninsula markets. Igansport Differentials The best alternative transport differential system for the Lower Peninsula order appeared to be the f. o. b. price at Detroit less transfer cost to other zones set up by airline miles in the state. This appeared to approach the "perfect market" concept and provided for a decrease in price toward the Wisconsin large surplus area and the "Thumb" small sur- plus areas. Seasonal Price Plan,41ype of Pool and Pool Plant ReQuirement The seasonal price plan recommended for the Lower Pen- lnsula is the base and excess plan largely due to its effective- ness and prior acceptance in the state. A market wide pool was recommended since it appeared to be the most equitable alternative. Pool plant requirements were set up reQuiring minimum sales in the area and a specified percent of producer receipts delivered on routes to qualify a distributing plant as a pool plant or delivered to a distributing plant in the market area to Qualify a supply plant as a pool plant under the order. his was considered necessary for proper functioning of the Classified price system under the order. CHAPTER TABLE OF CONTENTS I SOME PRELIMINARY STATEMENTS . . . . . . . . . . Introduction to the Study . . . . . . . . . . The Need for This Study . . . . . . . . . . . Definition of the Problem . . . . . . . . . . Hypothesis . . . . . . . . . . . . . . . . . Methodology . . . . . . . . . . . . . . . . . Conflict of Interests . . . . . . . . . . . . I I THE MARKET AREA 0 O O O O O O O O O O O O O O 0 Importance of the Market Area . . . . . . . . Dafinition Of a MarkEt O O O O O O O O O O 0 Alternative Criteria for Delineating Market Boundaries O I O I I O O O O O O O O O O 0 Selection of Pertinent Criteria . . . . . . . Application of Criteria to an EXpanded Order. Fetter's Law of Markets . . . . . . . . . . . Area Where the Same Milk Dealers Compete and Where There Are Few Route Sales Over the Designated Line. (Criteria l & 3). . . . . Health Regulations (Criterion 2) . . . . . . Uniform Price Tendencies (Criterion 4) . . . The economies of long hauls . . . . . . . . Health barriers . . . . . . . . . . . . . . Limitation to producers . . . . . . . . . . Area Where Regulation is Not Imposed on Large Numbers of Small Dealers (Criterion 5) . . Supply Area Conditions (Criterion 6) . . . . vi PAGE TABLE OF CONTENTS - Continued CHAPTER III IV Cooperative Activity (Criterion 7) . . . . . . . Cooperative handling of surplus . . . . . . . Federal Regulation (Criterion 8) . . . . . . . Recommendation . . . . . . . . . . . . . . . . . CLASSIFICATION SYSTEM . . . . . . . . . . . . . . Importance of Considering Use Classes in An Expanded Area C O O O O I O O O O O O O O O 0 Historical Use Classes of Milk on Michigan Order Markets 0 O O O O O I O O C O O O O O I O O O DEtrOEt O O O O O O O O O O O O O O O O O O O Muskegon O O O O O O O O O O O O O O O O 0 O O Upstate MiCh‘gan O O O O O O O O O O O O O O 0 Comparison of Detroit with Nearby Michigan and Out-of—State Federal Order Markets . . . . . . Comparison of Detroit with Nearby Michigan Regu- lated and Unregulated Markets . . . . . . . . Recommendation I O O O O O O O O O O O O I O O 0 TRANSPORT DIFFERENTIALS . . . . . . . . . . . . . PAGE 75 B3 86 9| 93 95 93 94 IOO l03 IOT llO ll8 l2! Importance of Considering TranSport Differentials in an Extended Order . . . . . . . . . . . . . What is the Theoretical Basis For Transport Allowances in Respect to Fluid Milk Markets? . What Are the Present and Historical Location Differentials Under the Various Michigan orderS? O O O p. O O O O O O O O O O I O O O 0 Present Class I (Detroit Market) . . . . . . . Present Class II (Detroit Market) . . . . . . l2l |2l l25 l25 l26 Present producer location differential (Detroit Market) 0 O O O O O O O I O O O O O O O O 0 vii l26 '.. o .‘ IA' ‘ vb. V TABLE OF CONTENTS - Continued CHAPTER Historical review (Detroit Market) . . . . . Muskegon . . . . . . . . . . . . . . . . . . Upstate Michigan . . . . . . . . . . . . . . Non regulated major Lower Peninsula markets. What Criteria May Be Used in Devel0ping a Transport Differential? . . . . . . . . . . What Should a Transport Allowance Do? . . . . What Are Some Alternative Location Adjustment Provisions Which Might Be Part of a Lower Peninsula Order? . . . . . . . . . . . . . . Rates That Reflect Actual Cost and Vary In Pr0portion to Distance . . . . . . . . . . . Adjust Size of Zones or Rates Within Zones Which Apply to Supply Plants . . . . . . . . Using Different Zone Differentials For Han- dlers Credit On Class I and For Producer's Location Adjustment on All Milk . . . . . . The Basing Point System . . . . . . . . . . . Application of the Basing Point System Under Federal Orders . . . . . . . . . . . . . . . Single city basing point (modified) . . . . Basing point each major city in Lower Penin- sula area . . . . . . . . . . . . . . . . The center of Montcalm County . . . . . . . Basing point, Eau Claire, Wisconsin plus transfer costs . . . . . . . . . . . . . . Some Possible Modifications of the Eau Claire BaSing Paint 0 O O O O O O 0 O O 0 O O O O O "St. Ignace plus" differentials and "Chicago plus" differentia's O O O O O O O O O O O "St. Ignace minus" differentials and "Chicago minus" differentials . . . . . . . . . . . viii PAGE l27 l2? l2? '30 I30 l3l I34 l34 '36 I37 l40 l4l I4! I43 I45 ”46 ISI ISI '55 I III III. Il‘IIIii wilt TABLE OF CONTENTS - Continued CHAPTER "St. Ignace plus" differentials and "Detroit minus" differentials . . . . . . . . . "St. Ignace plus" differentials and "Eau Claire plus" differentials . . . . . . Blend prices under a surplus area basing DOEnto O O O O O O O O O O O O O O O O F. O. B. farm pricing . . . . . . . . . No location differential . . . . . . . . Direct delivery premiums . . . . . . . . Recommendations . . . . . . . . . . . . . V SEASONAL PRICE PLAN, TYPE OF POOL AND POOL PLANT VI REQUIREMENTS . . . . . . . . . . . . . . . Seasonal Price Plan . . . . . . . . . . . Michigan Order Market Experience . . . . . Recommendation . . . . . . . . . . . . . . Type of Pool . . . . . . . . . . . . . . . Recommendation . . . . . . . . . . . . . . Pool Plant Requirements . . . . . . . . . Compensatory payments and allocation pro- cedures . . . . . . . . . . . . . . . Recommendation . . . . . . . . . . . . . . Distributing Plant to be a Pool Plant . . Supply Plant to be a Pool Plant . . . . . SUMMARY AND CONCLUSIONS . . . . . . . . . . The Market Area . . . . . . . . . . . . . The Classification System . . . . . . . . Transport Differentials . . . . . . . . . ix PAGE '55 '56 '57 I60 I62 l62 I65 I69 I69 l69 '78 '79 l85 l89 I98 20' 202 204 206 207 TO 0 \0 ID TABLE OF CONTENTS - Continued CHAPTER ‘ PAGE Seasonal Price Plan, Type of Pool and Pool Plant Requirements . . . . . . . . . . . . 2i} BIBLIOGRAPHY O O O O O O O O O O O O O O O O O 0 2'6 APPENDIX 0 O O O O O O O O O O O O O O O O O O O 223 I. II ii Iillzfiu . . c _. a. .v E .i F no .AH .1 a. .ll I .L rh IT; . a II II lb I I it. .lll’i .ITIIIIII . 9A] If. P A . in- PL E» .u h u i l Al‘ 9.. I O Q Q on J on a Q. I .II "III. e a v A an ., L .2 - s an 1.4 ..-J i- A... ‘e‘d 2 o 1“ IR. LIST OF TABLES Federal licenses and marketing orders regulat- ing the handling of milk, I934-58 . . . . . . . Local inspection requirements for movement of packaged milk into Detroit and major out-state Michigan cities. June, l958. . . . . . . . . . Schedule of annual milk pasteurizing plant license fee charges in major Michigan cities, June, I958. o o o o o o o o o o o o o o o o o 0 Major milk markets in Michigan - estimates of their requirements for fluid whole milk, l957 . Estimated number of Lower Peninsula fluid milk producers by major Michigan and nearby out-of- state metropolitan market, January I, l958. . . History of use classes Detroit milk order . . . History of use classes Muskegon milk order . . History of use classes Upstate Michigan milk order I O O O O O O O O O O 0 O O O O O O O 0 0 Use classification of major milk products, Detroit and nearby Federal milk market orders . Actual use classification of major milk pro- ducts, Detroit and major out-state Michigan mark€t8, I958 o o o o o o o o o o o o o o o o 0 Historical changes in the Detroit Order's mile- age schedule (September l, l95l-January l, l958) Utilization of milk received at pool plants in different mileage zones and estimated zone differentials. Using different transport costs on Class I milk and on manufactured milk. (De- troit, I957) . . . . . . . . . . . . . . . . . Percent of producer deliveries and of Class I milk received at each zone -Detroit, l954 and .957. O O O O 0 O O O O O O O O O O O O O O O 0 xi PAGE 0\ 4i 44 6| 74 95 lOl '04 lOB ll} l28 cw. .m‘; o c a f, P n./ :- .J..o P» ...iu 0.. D I: I-0. I II 0.1 0 Put nail LIST OF TABLES - Continued TABLE PAGE Percent of producer milk in Class I use-Michi- gan and nearby Federal order markets (l95l- P957) 0 O O O O O O I O O O O O O O O O O O O 0 '86 Percentage Class I utilization by Michigan major markets by months, l957. . . . . . . . . l8? Historical changes in pool plant reQUirements under the Detroit marketing order . . . . . . . l92 Brief summary of current Michigan Federal order pool plant provisions with comparisons (January l, .958) o o o o o o o o o o o o o o o '97 Brief summary to pool plant defintions under l957 merged or expanded Federal orders .‘. . . l99 xii LIST OF FIGURES FIGURE 2-l 2-2 2-5 2-IO Area Status of Effective Federal Milk Market Orders in Michigan as of January l, l958. ... . Shipments of Packaged Milk Between Health De- partment Jurisdictions, Lower Peninsula of Michigan, May, l958 . . . . . . . . . . . . . . Overlapping of Procurement Areas For Detroit, Major Out-State Michigan and Nearby Large Out- of-State Milk Marketing Areas. January, l958. . Differences in the Highway Distance From Mar- ket Center to Market Center-Major Michigan Milk Markets and Toledo, Ohio. . . . . . . . . . . . Producer Blend Prices for 3.5 Percent Milk Re- ceived at Detroit, Toledo, All Detroit Receiv- ing Stations and Selected Major Michigan Mar- kets; Also Differences in These Blend Prices Between Major Markets (Average Prices, l957). . Class I Prices Paid By Handers, F. O. B. De- troit, Toledo, All Detroit Receiving Stations, and Selected Major Michigan Markets. With Differences in Class I Prices Between Major Markets (Average Prices, l957). . . . . . . . . Comparison of Local Minor and Distance Major Market Price Relationships When Transfer Costs Are Proportional to Distance Along the Route and When Transfer Costs Are Assumed to In- crease Less Than Pr0portionate With Distance. . Michigan Estimated Population Density Per Square Mile By Counties January l, I957 . . . . Michigan Population Estimates By County January l, l957 (OOO omitted) . . . . . . ... . Michigan Licensed Fluid Milk Processors By counties OCtOber 20’ .957 O O O O O O O O O O 0 Characteristics of Lower Peninsula Dairy Farms By Economic Area-l954 . . . . . . . . . . . . . xiii PAGE 36 47 4B 49 50 53 57 59 65 69 TI. n.h our lI ..v II D O . CD It» . r .i. -. 4 U: PT n... p. a 7.1 .. O I Fr. At- . I. ill}... iF no a: an .sa .5... o o Fa. Ac Vl|.t.I1. I I Q ~ LIST OF FIGURES - Continued FIGURE 2-Il 2-l2 2-I3 2-l4 2-I5 2-I6 4-3 4-4 4-5 4-5 Inspected Fluid Milk Producers In The Lower Peninsula-January I, I958 . . . . . . . . . . . Michigan Milk Producers' Association and Total Market Daily Deliveries to the Detroit Order Market Area (Sept. l, l95l-Dec. 3|, l95l) . . . Monthly Cooperative and Dealer Receipts For Producer Milk-Detroit Markets I954 and I957 . . Michigan Milk Producers' Association Members by Lower Peninsula Markets and as a Percent of Total Fluid Milk Producers For Each Major Market, I957-58 . . . . . . . . . . . . . . . . Amount of Milk Marketed Annually By Michigan Farmers Through Federal Order Markets In Michi- gan. O O O O O C O O O O O O O O O O O O O O C Area Status of Federal Milk Order Regulation In Michigan June I, I958 . . . . . . . . . . . . . Utilization and Availability of Fluid Milk and Fluid Cream-Detroit By Months (l95l-I957) . . . Theoretical Relationship of Price to Distance and Use of Milk Produced. . . . . . . . . . . . Relationship Between Milk Prices in Manufac- turing and Fluid Milk Regions. With Price Premiums Applicable to the Specified Areas. . . Inter-Order Class I Price Relationships, Actual Average "Order Prices" for I957 . . . . . . . . Modification of the "Eau Claire Plus" (Wisconsin Surplus Area) Basing Point For Setting Class I Paying Prices in Lower Michigan . . . . . . . . Inter Order Blend Price Relationships Actual Average "Order Prices" for I957 . . . . . . . . Price Relationship at Various Portions of Michi- gan's Lower Peninsula Using the "Detroit Minus" 'Transport Differential. . . . . . . . . . . . . PAGE 72 76 78 80 87 90 I23 I24 :47 '53 '58 I67 LIST OF FIGURES - Continued FIGURE 5-l Class I and Class II Sales of Producer Milk- Detroit Order Market (Sept. I, l95I-Dec.3l, '957. O O O O O O O O O O O I O O O O O O O 0 5-2 Index of Class I Sales of Producer Milk- Detroit . . . . . . . . . . . . . . . . . . . 5-3 Seasonal Index of Milk Deliveries to Detroit and Michigan Production Less Detroit-(July, l952-June, .957). o o o o o o o o o o o o o o 5-4 Seasonal Index of Producer Milk Deliveries to Detroit, Toledo, Muskegon and Upstate Federal Order Markets-Dates as Indicated Since Orders Effective (Adjusted medians of percent of centered l2 month moving average). . . . . . XV PAGE '70 '7' I74 I75 CHAPTER I SOME PRELIMINARY STATEMENTS Introduction to the Study This thesis is a study of some of the basic provisions needed in an area wide milk marketing order or orders for the Lower Peninsula of Michigan. It is hoped that this analysis will be of benefit to leaders of producer cooperative organ- lzations, the Dairy Division of the United States Department of Agriculture and others interested in the Federal order program as applied In Michigan. The study is neither an argument for, nor against, the use of Federal orders nor for an order in a particular area of Michigan. The basis for Federal milk market orders has been established by Congress under the Agricultural Marketing Agreement Act of I937, as amended, and the authority for government control of the milk industry has been backed by Several United States Supreme Court decisions. One of the f'rst of these was the State milk control case of Nebbia v. New‘York', where the court stated: \ Milk is an essential item of diet. It cannot long be stored. It is an excellent medium for growth of bacteria. These facts necessitate safeguards of its production and handling for human consumption which INebbia v. New York, 29l L.S. 5'6. 5'7 ('933) greatly increase the cost of business. Failure of producers to receive a reasonable return for their labor and investment over an extended period threaten a relaxation of vigilance against contamination.... The fluid milk industry is affected by factors of instability peculiar to itself which call for special methods of control. The Nebbia case was very important in respect to both state and Federal regulation because it established the validity of price fixing under conditions existing in the early I930's.2 The first case dealing directly with a Fed- eral milk order was that of the United States v. Rock Royal Cooperative, Inc. et. al.3 which established the Constitution- ality of several provisions of the Agricultural Marketing Agreement Act and of Federal order No. 27 (New York City Market). H. P. Hood and Sons, Inc. et. al. v. United States at. al.4 upheld delegation of authority, price fixing and equalization provisions citing the Rock Royal case, settled the same day, as a basis for its decision. Every milk order is issued by the Secretary of Agri- culture at the request of, and with the approval of, the dairy farmers supplying a market with fluid milk when a show- “19 can be made that such an order would tend to effectuate the purposes of the Agricultural Marketing Agreement Act. ¥ eGertrude G. Foelsch and Hugh L. Cook, An Anal sis of Foderal Court gscisions Relating to the Marke n o u d “I'k. Research Bulletin 200, University of Wisconsin, Madi- 8°"9 'January, I957. 5 3United States v. Rock Royal Cooperative Inc. et.al. 33 ('938)T 4 307 U. W v- United States In the final analysis, whether separate orders for different areas of Michigan, one order for the Lower Peninsula, or any order at all is established, depends upon the wishes of the producers and their representatives In the area and upon the recommendation of the Secretary of Agriculture.5 Federal orders for the marketing of milk are not new in Michigan. The order for the Detroit milk market was estab- lished on September I, l95l. Since that time orders have been drawn up for the Muskegon area, October I, I953; and for the Upstate Michigan area, November I, I955. On November 20, l957 a promulgation hearing was completed for an order Which would include all of the Upper Peninsula of Michigan and part of Wisconsin. The area currently under Federal milk order regulation in Michigan is shown in Figure l-I. Federal milk market regulation In the United States has been growing steadily since the first milk license was issued under authority of the Agricultural Adjustment Act of 51n the long run the public also has an interest - Mr. Herrmann has explained this well when he said: "It would Beeni that considerations of public policy should be upper- Most; in our minds in fixing prices, for the public, through '18 and Indiana cities. Physiographic boundaries suffice to i,. . will va53 iii 40 Company of Saginaw brought suit against the city of Flint to obtain a license to sell milk in that market from its pasteur- izing plant in Saginaw. The judgment handed down on February ll, l958, demanded that the city Of Flint issue a license to the plaintiff for its Saginaw pasteurizing plant. After this trial the city ordinance was amended (April l9, l958) to allow milk to come into the city from pasteurizing plants within thirty-one miles of the city. This would allow Borden's in Saginaw to sell milk from their Saginaw bottling plant in the city of Flint (subject to all other provisions of the ordi- nances of the city of Flint), but prohibits sales of Borden's paper packaged milk from their Bay City plant located over thirtyeone miles from Flint; hence, the challenge may once again come to the courts. Although restrictive markets are not as common as previously, milk does not yet flow freely between all major markets in Michigan. The cities of Detroit and Flint have fairly restrictive cLauses in their city ordinances and these are rigidly en- iku-ced to require full farm inspection of all bulk and pack- aQemi milk moving into the area. They also require that all miii< for distribution in their area come from pasteurizing piarrts within certain prescribed mileage limits from the city. There is relatively free flow of milk between the other vari- °u3 <3ut-state large city markets (Table 2-l). Lansing, Grand Rapids, and Saginaw allowed milk in ”0'" markets with certified health departments. Others Spot CheCked some farms and the plants periodically before allowing \‘flhim. £1 a... .4: th «vii 9.31,“ ..Il "r” In! a. .— 4i Table 2-l Local inspection requirements for movement of pack- aged milk into Detroit and major out-state Michigan cities. June, l958. m Local Department Regpjrements Pasteurizing Accept Mar- Plants Within Spot Check kets With Prescribed Full Farm of Farms Comparable Miles of City Inppection and/or Plants Inspection Detroit (city only) X X Muskegon X Flint X . X Lansing X Jackson X Grand Rapids X Battle Creek X Saginaw X Bay City X Kalamazoo x a i icense for sale of milk within their jurisdiction. Mr. Mathis of the Marketing Research Division, United States Department of Agriculture, wrote recently concerning health inspection as a market area criteria: Uniformity of inspection standards is one of the basic determinants of a market area because: (i) Federal orders allow differences between the Class I price and other class prices on the basis of the cost of meeting sanitary inspection; (2) a difference in requirements would hamper the movement of producer milk within the area. Some milk would be more 42 desirable on the basis of quality than other milk. A uniform blend price would not be eQuitable to all producers.2 The first part of Mr. Mathis's statement is covered in Chapter III on use classes in this Thesis. However, it is important to state here that a field survey of the large out-state Michi- gan milk markets indicated that there was uniformity in re- spect to products required to come from the same inspected sources as milk for fluid consumption.24 For all except the Detroit area cities, requirements specified that milk for fluid consumption of all types come from fully inspected sources, plus flavored milk, fluid skim, buttermilk, half- and-half, and fluid cream of all types. The Detroit area Cities do not require that fluid cream be made from full farm-inspected sources. In reference to Mr. Mathis's second point, it should be pointed out that although homogeneity of inspection re- ‘f‘Grand Rapids, and 85% of Battle Creek, were grade A. a"Tiazoo was under survey and Detroit is not yet an approved grade A market. ,1'.\ air Imp... i»... r.4.n‘r~u. ...... i‘ _ e 43 still very real restrictions on movement between Detroit order area cities. The city of Detroit does not accept pack- aged milk from the Detroit order area cities of Ann Arbor, Port Huron, 'or Pontiac, nor do the latter two cities in turn accept Detroit milk in their jurisdictions. There appear to. be three main limits on movement of bulk and packaged milk between jurisdictions: (l) health barriers, (2) fear of re- pr‘isal competition by dealers entering another dealers' mar- ket, and (3) dealers and cooperative limitation on number of producers allowed to enter a given market. Many of the health barriers have been broken down--how- ever, one other possible health barrier should be discussed. One of the limitations on inter-market movement of milk could be a high required annual plant license fee. In LoWer Penin- sula major city markets, fees ranged from $5.00 annual total to $5.00 per hundredweight on average November production. Some plants reported paying as high as $3,000 for an annual Plant license fee (Table 2-2). This occurence was limited, however, and in general it is doubtful if the license fee pre- Vents much inter-area movement of milk. Based only on this health regulation criterion, it Would seem that the Lower Peninsula should be divided into “’0 or more order areas. The restrictive Detroit area cities ““61 be separated from the balance of the State and from each Other- By the same line of reasoning, the restrictive Flint m . arket Would be separated into a single market area. However, th e strength of this criterion for area separation is weakened 44 Table 2-2 Schedule of annual milk pasteurizing plant license fee charges in major Michigan cities, June, l958. l ona ee- xamp e 0 c arge Amount indicated for plant with times average 50,000 lbs. average Minimum daily receipts daily receipts in City *_ ‘_Fixed Fee for November November Muskegon 3l00 $5.00 $2,600 Flint 50 0.50 300 Grand Rapids 25 0.50 275 Port Huron 25 ' 0.50 275 Bay City None 0.25 I25 Saginaw 50 None 50 Kalamazoo 50 ‘ None 50 Ann Arbor l5 . None '5 Detroit l0 None . l0 Lansing 5 None 5 Jackson -------- Being revised - Annual charges as of June 26, I958 $l5.00 for milk plant plus $5.00 for each producer from which milk is received at that plant. New fee will be flat plant fee of 8l00.00 plus $50.00 for each independent distributor. Battles Creek---No charge for local plants - outside plants selling in city limits pay $l0.00 plus $5.00 per mile per year - one way from city limits of Battle Creek to city limits of sending plant. P°ntIaC--------Charge for each plant 825.00 per year for 0-25 producers shipping to the plant plus $25.00 for each additional 25 producers or fraction thereof. a..- .I. ti .§ id 45 somewhat by the one way flow of milk allowed from these re- strictive markets to the other out-state markets. The rela- tively free movement of packaged milk and uniformity of classi- fication and inspection standards between the other out-state major markets would allow them to be grouped under one single order for regulation purposes. Mr. Herrmann, in a recent talk before the Dairy Pro- ducts Improvement Institute, stated, "While city health regu- lations, probably are becoming less restrictive, the growing importance of Statewide sanitary programs, in some instances at least, is raising new obstacles."26 The Michigan Grade A Law requires that all out-of—state suppliers be inspected the sauna as in-state producers with cost of salary, travel, food, and lodging charged to the handler requesting inspection for sale»of grade A milk in Michigan. However, the Michigan Grade A Lawldoes not form a rigid line at the Michigan border since the hfiichigan Department of Agriculture does inspect these out-ofestate shippers and milk is now coming into Michigan from VVisconsin, Indiana and Ohio.27 The criterion on health re9Ula'tions would not, therefore, by itself exclude bringing Northern Ohio' or Indiana cities under one order with the LoWer L. F :26"Trade Barriers in the Dairy Industry", Address by Cogt' *1errmann, Head, Dairy Section, Market Organization and States Branch, Marketing Research Division, A.M.S., United prOVes Department of Agriculture, before Dairy Products Im- ment Institute, New York City, February l3, l958. 23 Dahw' ‘7Interview with Mr. L. Littlefield, deputy director, Di‘vision, Michigan Department of Agriculture, May 7, I958. .. , -!P IN » .le IOI‘fJ’I. ill; 46 Peninsula of Michigan. III. Uniform Price Tendencies (Criterion 4) The map in Figure 2-2 shows the extent of overlapping between the major fluid milk markets' procurement areas in Michigan and nearby large out-of-state cities. The milksheds indicated are those outlined by the respective major cities' health departments in January, l958. This overlapping would lead us to expect fairly uniform blend prices to producers in the fluid milk markets of the Southern portion of the Lower Peninsula. That such is not the case can be seen by referring ix) the iso-price contour maps in Figure 2-4. 0n the other harud, it is shown in Figure 2-5 that Class I prices are com- parwatively close throughout the Lower Peninsula area. This car: be attributed to the bargaining carried on in all major Micfiaigan cities (with the exception of Lansing and Kalamazoo) by'the same producers' cooperative. Blend prices varied be- tween markets due to differences in Class I utilization. Fig- ure :3—3 which is used as a basis for considering Figure 2-4 and 13-5, indicates the difference in mileage between major markets in the Lower Peninsula. Lower Peninsula blend prices for producers are shown in Figure 2-4. Part A of this figure indicates the relationship of t"Tease prices between Detroit, Detroit country receiving staticDris and major out-state Michigan markets. The difference in average blend prices received by producers in I957 are re- C orde<1 in Part B of Figure 2-4, with the markets arrayed by Major Michigan Metropolitan Milksheds DEtroit Flint Saginaw Bay City Lansing-East Lansing Jackson Kalamazoo ‘ Battle Creek - L Grand Rapids Muskegon #Ullu— .000. oiooowoxm O C memo I l. Osmo- Overlap of Milksheds [IE—‘2‘“ t Detroit - Sriipplng milk to one market ‘SPIipping milk to two markets sriipping milk to three or more markets F’igure 2-2 Overlapping of Procurement Areas For Detroit, Major Out-State Michigan and Nearby Large Out-of-State Milk Marketing Areas. January, l958.a ,Areas déTimited by each local heaTth department of Cl ties indicated. January, l958. Major Market Detroit ‘7 Mi les Toledo ’0 Flint 87 Jackson 01 3:22:66 ii i Saginaw ans n- '7“ua.->.“‘!!.’> “‘l=.”“‘£tn”“‘;m.’ :3, Ln. 0,2,M00W0 Battle Creek :3 0 0 0 Ralamazoo "0 %0 l ,6 Grand Rapids 9 Muskegon Llostate Order (Traverse City) “9% To read the table select two markets such as Detroit and Battle Creek, follow dia- gonally downward and to the right from the first market and upward and to the right from the second to the point of inter- section which is in this case ll4 miles. Distance for each to Detroit is read in shaded area. This same type of diagram: is used to show price differences between markets in Figures 2-4 and 2-5. F"figure 2-3 Differences in the Highway Distance From Market Center to Market Center - Major Michigan Milk Markets and Toledo, Ohio. «1.22. A. LOWER PENINSULA.PRODUCERS' _/. it: BLEND PRICE RELATIONSHIPS ‘, ' it‘ AVERAGE PRICES EACH MAJOR , .' - 714 MARKET AND AT DETROIT , -. RECEIVING STATIONS. x“ . ,,._,,, , I ,. l .4 . If .‘.. . r ’1 . “... I. SYMBOLS . , 0 receiving stations ‘13} Ocity market . I Upstate order I”. ' ,' basing point " f f‘ concentric circles / ‘6 \\ based on air miles 3" ----.__ we “’4 ' \ ‘ '“=E!""‘=lzl” fittie CreekW J‘Alamazoo 1'I000€>oaoifferences in price '0- 0 of each market from Detroit Liana Ra ids p 0 and from each of the other mar- Mu 0 M kets listed. The amount each State Order of the Lower cities in the (TraVEr list is over (+) or under (-’) Se CitY) the city aboveit in the list. ii F’igure 2—4 Producer Blend Prices For 3.5 Percent Milk Received at Detroit, Toledo, All Detroit Receiving Stations (see map appendix II) and Selected Major Michigan Markets; Also Differences in These Blend Prices Between Major Markets (Average Prices, l957). , £7; A. LOWER PENINSULA CLASS I , PRICE RELATIONSHIPS- » - m W4”, AVERAGE PRICES AT EACH ‘ 57‘ «v ’ MAJOR MARKET AND AT , _IN‘$7y DETROIT RECEIVING , ,. STATIONS. ./ ' x ' #7; I957 _ . 16 I' ’2? I, l/ s‘ SYMBOLS , ’ -’ n, j wm1 I receiving station ' “1 »‘” 0‘77! (Deity market // ‘ »_ «- Jefifi x Upstate order , ,3 W‘- 7, ,7. basing points 6 .79 . _ f'concentric Circles /‘ wk!“ 0"", 4‘” .7, 7"? based on air miles r #37 ° —' ,fiygg Mi 13 « ’.".io " g \ (9 .y C), T/W__ 7‘4 MW“ "V ”6 4'17 if" 7'.” m .lti ‘%n a“ ffl 4°75 ."m ’ o i . A, '44,): £9 MHRA 0’ \ | i ' . ‘\ |-_ o o , I \ 3 {.75 no ‘\ \ \ \ <3fimjf° a B. DIFFERENCES IN AVERAGE CLASS I PRICES PAID BY HANDLERS FOR 3.5 Detroita 0 PERCENT MILK - MAJOR MICHIGAN MAR- ;7550 $0 KETS AND TOLEDOiggHIoa Jackson $006.0 Sam“ ®W°®®¢¢’¢ Lam "9 :32: 43> 48> ‘2» S1?” ‘y 45> ¢M®¢>¢5e a e Creek a I I Kalamazoo Mam! aDifferences in prices of each market from Detroit Grand R - apids III] IHEZ” MuskeQOna 0 and from each of the other mar- chtate 0 kets listed. The amount each of (Tr the lower cities in the list is ave"se City) over (+) or under (-) the city above it in the list. F'igure 2—5 Class I Prices Paid By Handlers, F.0.B. Detroit, Toledo, All Detroit Receiving Stations, (see map appendix II) and Select- ed Major Michigan Markets. With Differences in Class I Prices Between Major Markets (Aver- age Prices, I957). 5i their distance from Detroit.28 These producer blend prices do not vary in prOportion to the distance from Detroit even though the paying prices at Detroit receiving stations, often located near these out-state markets, are directly related to the Detroit price, less transportation. Each city market is like a hill established on the equal-price contours from Detroit. This has enabled these markets to obtain supplies from nearby sources and to be selective of producers. Producers shipping to Detroit receive the f. O. b. price that city less a transport differential from the receiving station of delivery to Detroit (quoted at point of delivery). Theoretically, out-state markets would have to pay a price eduivalent to the equal-price contours from Detroit. For example, in l957 the Flint blend price would be expected to be near 84.30 for 3.5 percent milk. Actually, this price averaged $4~62 for Flint producers. Thus, other things be- “HJ equal, Flint producers were receiving an average of 30 centts per hundredweight over Detroit producers. Although not as drwastic, similar relationships were true for each of the °ther‘ major out-state milksheds. This relationship enables the <3LIt-state markets to attract nearby shippers and to be selec:t;ive on Shippers, but requires a barrier to the number \ t,0n€3 28In this case and for each of the following presenta- Year the year l957 is used since it is the most recent full were Elvailable and is considered to be a typical year. There the Fr'WQ nmjor milk strikes or other abnormalities. Also, on fer tEderal order markets, negotiated prices were in effect i956..*1e full year (started on the Detroit market in April, ‘the Muskegon market August, l956 and the Upstate market July, .956). of shippers allowed on the market in order to preserve this relationship. These smaller milksheds have been envel0ped by the large, eXpanding Detroit milkshed. They appear to have maintained this unequal price relationship because of (l) the economies of longer hauls, (2) health barriers, and (3) deal- er and cooperative limitations on acceptance of new producers, especially under an individual handler-pooling arrangment. The economies Of long,hauls.--This principle is important lrl giving small buying centers their own supply areas even inwere these centers are located in a route through which fltiid milk passes to reach the major market.29 In Figure 2-6, the gradient of‘delivered price of milk is shown as it would be if transfer costs were proportionate to distance. In such a <:ase, the supply areas of small milk markets A and B would be ‘indeterminate in extent, Since all suppliers to the left of'lA would get the same returns from sales to A, B, or C and are ‘indifferent as to which markets they supply. If the de- Hverecl price at A were to be higher than indicated in the diagraann the large market C would lose the output of all the tern'tory left of A. On the other hand, suppose A's price was be low that lndicated--then A would receive no milk supplies. Part ‘3 appears more realistic and is the situation which helps prodUCe a map Of producer inter-relationship as shown with \ 29 Explanation from Edgar M. Hoover, The Location of E pcfnonii<= Activit , McGraw-Hill Book Company, New‘York, F§48, 53 Detroit and major out-state markets (Figure 2-2). In Figure 2-6 B the gradients appear as would be expected when trans- fer costs increase less than in proportion to distance. A and B each have a supply area to meet their own needs with- out interfering with through shipments of milk to C (the major market) from points to the left of A and of B under cheap long haul rates.3O AL /8Milk / Price A Milés B C Milk Price I U I 3 We H Figure 2-6 \ l i I (IAe Comparison of Local Minor and Distance Major Market Price Relationships When Transfer Costs Are PrOportional to Dis- tance Along the Route (Part A) and When Transfer Costs Are Assumed to Increase Less Than Proportionate With Distance (Part B). (D diffe A rather detailed consideration of transportation r"entials is found in Chapter IV of this thesis. 54 Health barriers.--These were explained in the previous section and except for the specific cases of Flint and the Detroit area cities were no longer considered restrictive in the Lower Peninsula of Michigan. Limitation to_producers.--There-are no data available on dealer acceptance of new producers on the city markets, but it is well known that such limitations do exist especially- under an individual handler pooling arrangement. A survey of several of the major markets in January, I957. indicated that the largest bargaining cooperative also limited member— ship. In each-of the markets studied, membership was restricted to needs.“ However, in the case of Detroit this limitation was not very real at receiving stations, other than those owned by the Michigan Milk Producers' Association. At other stations, when dealers took on shippers, the COOperative was eager to sign them on as members. For at least these three reasons, price differences exist which do not reflect exactly the differences in trans- fer Costs between these markets. However, it does not mean that there are [not uniform price making tendencies with differences super-imposed on this foundation. The overlapping \ Mich: 3'Markets surveyed by Professor G. G. Quackenbush, "Windgan State University as part of North Central Regional '95? Shield survey" of selected Michigan Markets January, ° Those surveyed included Battle Creek, Detroit, Grand Re Did? Jackson, Muskegon and the Saginaw Valley markets. and Muskegon were Federal order markets with market- Wi p02? pc>0ls. The others listed had Association market-wide s 1”or all or a part of the market. 55 of procurement areas, as eXplained earlier, has promoted such uniformity, and the bargaining of one large cooperative in all but two of the major markets has promoted uniformity of Class I prices. Figure 2-5 indicated that the handlers paying price for Class I has been more uniform then blend prices between mar- kets and would seem to point toward the possibility of estab- lishing uniform Class I prices at each of the major Michigan markets. The differences in blend prices have developed due to differences in Class I utilization in the markets. For example, Detroit's Class I utilization in I957 was 69.0 per- cent while Flinthad 79.6 percent Class I utilization. Both paid within one cent of the same Class I price, but Flint was almost thirty cents over Detroit in actual paying price to Producers in that area. Based on this criterion and using Class I prices it aPpear‘s that Federal regulation of all of the Lower Peninsula major cities under a single order is a possibility. Uniform pr“HEB-making tendencies are in effect on the market as pro- Curement areas overlap, health barriers have decreased, and bi”gaining by one cooperative has resulted in fairly uniform Class I prices for handlers. Blend prices to producers now vary due to differences in Class I utilization in the various markEtS and because of the restrictions mentioned earlier; e“nomies of long hauls, remaining health barriers and limit- ation On producer shifts between markets. Based on the uni- for m price tendency criterion and using blend prices the 56 recommendation would seem to preclude using more than one order for regulation in the Lower Peninsula territory. Addi- tional information on uniform price making tendencies appears in Chapter IV on locational differentials at which point the relative importance of Class I and blend prices are discussed. n1. Area Where Re ulation is Not Im osed on Large Numbers of Small Dealers. (Criterion 5) It is important to consider population centers in deter- mirIing market boundaries. Handlers Operating within intensive areas usually handle a large volume of fluid milk per dealer anci are considered to be more easily regulated. In developing thi s criterion it was shown that the United States Department of /\griculture had warned against regulation of rural terri- toryr. In connection with the definition of extensive areas we must guard against the imposition of regulation on large numbers Of very small dealers. This is a danger when marketing areas include large amounts of rural territory.32 Frigure 2-7 indicates the density of pOpulation (persons per sq uare mile) in each county of Michigan. The average den- sity 1.1 the State was l3l persons per square mile. However. —_ 252 H. L. Forest, op. cit. pp. 20-2l (see footnote 7, this :Q‘fter ). However, many area wide Federal order market areas c58,::<:l ude large amounts of rural territory. In the Final De- ter, i: on the New York-New Jersey order it was stated, "Rural a pra Ories need not be excluded as a matter of principle. From Contr?t ical operating point of View, however, rural areas may bute little to the purposes or effectiveness of the regu- to tiar‘ and present an administrative problem out of proportion Milk 'ii‘ benefits to be gained." (Final decision, Handling of FR "I the New York-N h n ew s a - 22 9 3 June 3, .957 o 57 256 7.6 7.3 6.5 8.6 ) 37.3352 l3.6 15.4 l6..9 42.4 9.l 25620.8 l8.l 4L2 3.227.0 32.3 530 l l O 32.9 4 .3 28 1.5 220. I 2 '69.9 60.9 92.6 531- “‘24? 56 52. 4.: 9. . . 658 72°C 26 00 I74. 223.2 4 .8 [6! v 0 29 9.7 75.4‘8.0 66. 9. - 50 or more persons per square mile Figure 2-7 Michigan Estimated Population Density Per Square Mile By Counties January I, I957. a \ Sale aPopulation data used in calculations obtained from: Broth Mana ement. (Survey of Buying Power) May l0,l957. Bill “#6. ers Publishing Co., New York Vol. 78 No. 9 pt. 3, pp.438- 58 the range was from four in Keweenaw County in the Upper Penin- sula to Wayne County's 4,576 persons per square mile. In the Lower Peninsula, the range was from seven persons per square mile to 4.576. The map shows that the Northern portion of the Lower Peninsula has low population density throughout (unshaded area Figure 2-7). In l837, when Michigan became a state, Detroit had a population of 9,763.33 Today Detroit is the fifth largest city in the United States. In l950, the metropolitan area had l,849,568 people and the total Detroit milk marketing area, as defined under the milk order, had 3,122,957.}4 An estimated 3,900,000 were living in this de- f1r1ed marketing area in l957.35 There were twenty—eight other citLies in Michigan in l957 with over 25,000 population. All Wer12 located in the Southern portion of the Lower Peninsula. EiQh'teen of these were in the present Detroit order marketing areal. Figure 2-8 shows the population in Michigan by counties on eLanuary l, I957. The figure also delineates the State Metrrapolitan areas. Note that these metropolitan areas are all s<>uth of a line extending west to east over Muskegon to Bay Chounty. Ninety-one percent of Michigan's population also ‘ Wa :33Floyd R. Dain, D troit and the Westward Movement, We University Press,-5re{roft, p. Tsumg. :Squderal Milk Marketing Orders, op. cit., p. 6. 5Estimated from data on minor civil divisions taken f pgg‘apo ulation Estimates in the Detroit Re ion July I, l957, Regiore by research 9P3!" ment, etro Metropolitan Area Den-o?a 1 Planning Commission, 800 Cadillac Square Building, 1t 26, Michigan. 4.! 9. 7.7 8.0 5. 14.9 ll. 9| l7.8 23.1!8.2 30.3 l.6 3l.6 .7 86l Michigan 9 40. 42. 52.0 29. 4397 5.l 34. 383 .4 l D 9 .Metropolitan areas over l00,000 population tral city over 50,000. eau of Census. with cen- Definition used by U.S. Bur- \ F’igure 2-8 Michigan Population Estimates By January I, Countya I957 (000 omitted) I957 BilW' "survey °f Buying Power". May Io. PD. 17:553-446f08. U 5 ing Co., N. Y. Vol. 78 No. 9 pt. 3. 59 »hlluLF... "IOWNJH'JL nil-I 5419 if: I'd— 60 lies in the area south of this line. The southern portion of the Lower Peninsula is thus becoming a single super-city emerging from these distinct metropolitan areas. It has been stated that there are fourteen of these super metropolitan areas developing in the United States, of which Detroit is one.36 The same source estimated that by l975, 70 percent of all the peOple in the United States will live in these four- teen super-cities or "interurbias". According to this re- port, the Detroit area will extend north to Bay City, from Bay City west to Grand Rapids, south to Kalamazoo and back across the Ohio border to Detroit. What effect will this have on the milk industry? The Saal and Myrich article claims inwat it will lead to the development of more regional plants such as the new Sealtest plant in Lansing, Michigan, and a more extensive movement of milk between existing markets as thel lines between markets become less and less distinct with the inerging of formerly distinct metropolitan areas into one 8i-il>er--metropol is . Table 2-3 indicates the estimated demand for fluid whole ”‘5k in the major Michigan milk markets and for the State in (9573. The annual requirement for fluid whole milk of over 2% biiiiean pounds (including l5 percent operating reserves) tlor, :36Herbert Saal and Norman Myrich, "A Changing Popula- view’ what it Means to the Dairy Industry" American Milk Re- T‘D Urner—Barry C0,, New Yofk’ January. . , O . x O. D . 24-29, lOl-l02. \'QK.PFWf.¥u. II... ~.I...m...,.«4r;A> 3... ...!!!- 6i .co_um_3aoa 000.00. Lw>o m>~c «was seem m_cp 0cm xp.u .mcucmo ecu mc_c_mwcou zacaoo mco omu:_uc_ >__m:w3 meow och .co_pm_:aoa 000.0m Lm>o yo >¢_u .wcvcou m m>mc uwze a. mmc< u_Eocouu cm«__oaoc nus: ovmum m on ow Lmuco cu .mE.» wane mac—o mmmcm o.Eocoum cmu__oaome2 mumum osou ion m>mc no.2: mamcm xmmcu c.9umm 0cm cowxumw .xu-u amm co_u.uum c. 0cm 0mm. .mawcmo wmumum emu—c0 i mmme< u_Eocoum cap—.0aocumz mm m :_uc_ 0cm umuoc as men mmwc< .wmm. .0. an: ecogoa m:.x:m mo xe>czmz .ucmEm new: mw_mm soc» co.um_:aoam mmw.m.o.~ woman.” 0. m_m. m¢.oo_ ow_mmmamm eo_sa.aeoe m a sea _ «seem _sso» mom.mnm.m ~mm.mmm won.mnm.a sm.m. «0.05 oo~.mo~.m wmmem .ocww: m m _m o... ommqom. www.m; mwm.am «me me__ xmqumqqlu »s_o sew m_m.m__ __m.m_ soa.no_ am. 5.. soo_.nm_ eomxuas mes.~n_ onm.~_ mnm.m.. am. m._ soon.ms_ xeseo s_osmm _o~.~¢_ mmm.m_ mne.mm_ am. ..m zoom.mm_ oo~a5a_ex o~_.a~_ m_>.mm mm¢..m. am. s.m moon.om_ sac.mem mc.mcm4 a_n._om mmm.mm mmo.m~. am. m.m coo¢.mom ammuuse.eeme www.0mm som.mm ¢m0.mm_ aw. ..n moow.mmm commxmaz oso.m_n m.w._a mm¢.n~m aw. s.a soon.omm se_eem nests mmm.onm mm..na oo~.~mm am. m.a soom.man se__e ooo.mmm.n ooo.mma ooo.om_.n om. n.mm nooo.oom.n o.oeseo .mmb .wmb .9: e m_ R LmnEDZ x_.5 0_:_u wm>cummw mucoEmL_JMmm le0 cm co_um_anoa mco_am—mmoa «exam: Lop Heme mc_umcmao »__ao Ens co. asamcou m.ovmum mo R flexes: mmc< umc.aomm »__mo i_c_2 n a _ m¢_amo Lea cma_.oaoLuw2 >__ao so; umuee_umm . smm_ .x__e m_oea n_a~c Low mpcmEoL_3dmL L_mcu mo mwpme_umw I :mmwcu_: c. mumxcwe x_.E cOfimz h N o l Tum.» 62 .muwe.pms mu.amo Lea m>.um>cmmcou mLoE a mn.>oca ow memxcms sesame: Lou now: u. scam—w moamww www.cs ecu co.uasnwcou ma.amu Lea mem.c m>mc ow nm>m..wn mum wwmxcms mumwma: cma.cu.2 muc.m .Amume i.uwm co.um.:aoa 000.00m.n an umu.>.u man can one x..E m.o:; 0.3.0 .mn. 00n.mm..m Lo acoamc Lowmcwo.c.50< pmxcmzv xmu emu .wn. 00.0 umuuoomc 5mm. .00 mean a.ocwmo .Ao..a .hmm. .mcaw .owm mo .co.pm:w.m >L_mo. man Lma mp.amu Lea x..s «.02; name» co mocsoa #m.0 pm co.wa53mcoo mw.umu can 0mm. c. nmumo.uc. swan mmamum nov.c3 ammum. on» .m.am..m>m mcm x..e v.3.m Low macaw—c co.aa5:mco0 cam.co.2 mascaoum oz. Apcaoo ammx zucaoo comxumwfi zucaoo caoc.m0_ zucaoo oo~me.mxc chzoo emc.mmmo chaoo assoc.» “amen Lance x._2. mm.wc:ou mamwwo new commxm32m chaoo vcth aucaoo mmwmcuou .fimm.uc:oo zmcmwcmm; 0cm wean; .ncw.xa0 .nsoumfi .L.m.o .«w mmu:.oc. ».cm:ocv Nmm. .co.mm_eeou mc.ccw.a .mco_mmm u.ocumo an .mmcm Lovco ...: «.0me0 c. umu:.uc. .mco.m.>.o ._>.0 Loc_E co mama so.» mums.«mmm 3.2.28. 3 .3: 63 represents about 49 percent of the total milk produced in Mlchlgan.37 The l957 fluid whole milk requirement was esti- inated to be 2,227.9 million pounds (excluding reserves). This compares favorably with the data released by the Michi- gan Crop Reporting Service.38 This brief analysis of concentration of areas of de- mand in Michigan indicates that only the southern portion of the Lower Peninsula would justify Federal regulation, based on the criterion against inclusion of predominantly rural area under regulation. The sparsely pOpulated Northern Lower Peninsula violates this criterion and would not therefore (using this criterion) be recommended for Federal regulation. It should be pointed out, however, that the proposed Upper Peninsula and Northeastern Wisconsin Federal orders now under consideration by the United States Department of Agriculture Is almost entirely rural territory. The present Michigan Upstate order is also almostall rural territory. Therefore, _ 37Total milk production on farms in Michigan in l957 was 981’. imated at 5,436 million pounds. From Milk Production on tics of Dairy Plant Products, l , A.M. ., Farms and Statis United States Department of AngcGTture, February, l958. 38The latest figure released by the Michigan Crop Re- p”Wit-rig Service showed annual fluid whole milk for direct :°"8uwiption in Michigan at 2,092.l million pounds in l956. ‘chigan population was estimated to have increased by 2.7 Bgrcent from l956 to l957 (estimates from Sales Mans ement, Brggvey of Buying Power," l956 and l957 annual issues, Bill tio . Publishing Co., New York) Assuming per capita consump- then In Michigan remained the same over the two years and mat r"eeds of the new population were met--then the l957 esti- e 0f commercial whole milk consumption would be approxi- mate '5' 2,l48.6 million pounds. 64 there is some question as to the use of this criterion in the case in point. The reason cited by the United States Depart- ment of Agriculture for its fear of bringing predominantly rural territory under regulation is the desire to keep from having to administer many small dealers. In Michigan, there has been a considerable reduction in the number of licensed dealers. The number of licensed fluid milk plants dropped 'from 402 in l955 to 335 in l957, a net reduction of 67 plants.39 In l957, the sparsely settled region north of a line running from west to east over Muskegon to Bay County reported only 38 i icensed fluid plants (Figure 2-9). This was the same num- ber as reported in Kent county with the city of Grand Rapids, while the population of this whole Northern area totaled only acuproximateiy l2,000 less than the Kent County metropolitan area (Figure 2-8). As shown earlier in this chapter (Figure 2-i ), this area is now serviced with packaged milk from many large dealers from the more intensive areas of population. This criterion would point toward regulation of only the southern portion of the Lower Peninsula. In should be poilated out, however, that due to changing methods of pro- cessing and marketing of packaged fluid whole milk, fewer dealers are operative in both rural and urban areas and pack- aged milk moves freely to rural areas throughout the Lower pen'flsula. In addition, in recent years the Department of \ Cans 39Michigan Department of Agriculture, records of ii- ea milk processors-dist as of February l7, l955 and as 0 f October 20, I957. (h U1 Upper Peninsula 33 4 \\\\\\\\V//////////// 2 2 Northern Lower Peninsula l 3 Michigan 335 Southern LOWer Peninsula 2 Figure 2-9 Michigan LiCensed Fluid Milk Processors By Countiesa October 20, l957 \ aMichigan Department of Agriculture, List of Licensed Fluid Milk Processors, October 20, I957. 66 Agriculture has brought rural territory under regulation in- cluding, for example, the present Upstate Michigan order area. This would appear to decrease the importance of this single criterion in delineating market areas, at least in the case of Michigan. V. Supgly Area Conditions (Criterion 6) In the preliminary examination of essential criteria, there appeared to be some controversy in the Department of Agriculture over using supply area characteristics as a criterion for delineating market boundaries. In one portion arf the Oklahoma decision it was stated that differences in pro- duction areas are of little consequence in determining whether orders should be merged since a milkshed is not regulated by the order. Earlier in the same decision the Secretary used the fact that there was overlapping of procurement areas as part of the basis for making his decision on uniting the two areas in Oklahoma.“0 Also Mathis was quoted as presenting a “Be for considering supply areas, since Federal orders do regtllate producer prices." That the Secretary of Agriculture 9098 consider these areas of supply important is pointed out ‘" tiie recent final decision for the expanded New York-New “'89)! order area. The Secretary states in this decision: Okla ‘noFinal Decision with Reagect to Handling of Milk in the “-112253 e ropo an ar e ggg rea, op. c . . li'Mathis, o cit., p. 25. Northern New Jersey (and similarly Upstate New York) consumes large quantities of milk all of which comes from a common production area serving both Northern New Jersey and the present marketing area, either from pool plants or from non-pool plants with which pool plants are intermingled throughout the produc- tion area. The present program of milk regulation in the New York milkshed involves establishment of a relatively high price for fluid milk disposed of in the present marketing area while at the same time does not provide a means of establishing a similar price for milk disposed of for fluid use in other centers of urban pOpulation, the largest of which is Northern New Jersey, which depend upon the New York milkshed for a supply of milk. Regulation in Northern New Jersey is necessary in order that the entire cost of the milk regulatory program for the maintenance of orderly marketing conditions in the entire area is paid not only by consumers in the present marketing area while the benefits of such a program accrue equally to the consumers in other urban centers of population depenging upon a common milkshed for its supply of milk.4 One of the considerations of the hearing held for the New York-New Jersey order was whether a separate milk marketing order should be issued for Northern New Jersey or whether regulation in Northern New Jersey should be included under a I”figle milk marketing order applicable both to Northern New Jersey and to the New York marketing area currently under reQUIation and that part of New York recommended for addition. The Supply area conditions played a very real part in aiding the Ssecretary's final decision on this point: ‘The territory consisting of Northern New Jersey, the present Order No. 27 marketing area and additional ‘territory in Upstate New York possesses the essential characteristics of one market for milk, rather than ‘two or more. The densely populated region consisting (of New York City and surrounding urban territory \ New J 42Final decisionJ Handlin of Milk in the New York- “-..Efl[s?7”M3FREfifig”Area,op. lTTJf"(§§FR'Ii§4) 68 together with the major cities and their environs in Northern New Jersey constitute a contiguous urban area from the standpoint of general economic inte- gration and interdependence. Milk for this entire. territory is produced in a common production area. Plants and producers supplying milk for all parts of the territory are extensively intermingled and to a substantial degree the milk is interchange- able between the various portions of the territory. 43 One of the important points to consider in the Lower Peninsula is whether regulation should be accomplished by one, two or more orders. For these reasons it seems important to con- sider the supply area conditions for Detroit and the other rnajor milk markets of the Lower Peninsula territory. The section on uniform price making tendencies showed <>verlapping of procurement areas with the supply of fluid inilk for the maJor markets being obtained from a common supply area. Milk for fluid consumption is produced throughout the Lower Peninsula territory with the largest amount coming from ‘Hae Southern portion. Throughout the state there is an inter- nflrwgling of manufacturing and fluid milk producers. Figure 2-i() shows the principle milk supply areas based on the num- ber'lof dairy farms reported in the Census of Agriculture of 1950 and l954. There were 33,450 dairy farms in the Lower Pen‘lfisula in i954, of which approximately 78 percent were ”mated in an area south of a line running from west to east over Iwuskegon, Montcalm, Isabella, Midland, and Bay Counties. "”5 same Figure (part 8) indicates the number of cows per dalr)! farm by economic area. Economic areas were used in \ 43mm. 9 6 .n.ow mwuauoca ..m mo o:.m> on» mo secs .0 pcwucoa 0m ow nopcsoEm muuzuouo x..e new x..E no.5; Eocv sum» m m. .co.w.c.»mu mamcmu >9 .Ecmw >L.mu L.mo m.:mc.cma Logo; mo mu.pm . a... ...... .Lopumcmco 0.:m oczm_u . www.ms m _ to (— 82m e We —— N0 a ll! 0 mlumlr #3.: .3 _©O.n 7 .9}. my“ a o_.w_ a s . _ when. mo .m em. .n _.¢_ ~_m.o k. _wm.m ‘Q ..a e N. m. _ m m.n omw.m .Jm. mo¢.w ...m _ is O. m... m. . mama o.__nomm_ mama. aam.osnomm_ Mwmaw m mcm>< mampm .myOF m.:mc.coo Logos omm_nwmno.e r 526.. . :3 Emma... $ .omm. ... 3 mos .222 2202 .2. "manor. $20.. .smm..." IOUU >m 2mmum w2mm~arate areas under regulation thus providing differences “lpr’i C=es to neighboring producers in the common production a . rea, |Division of the Lower Peninsula into more than one order, 74 Table 2-4 Estimated number of Lower Peninsula fluid milk producers by major Michigan and nearby out-of- state metropolitan market, January l, l958.a Market Number Market Number Detroit l2,25l Bay City 3549 Flint 800 Battle Creek 250 Grand Rapids 7l4 Jackson l92 Lansing 592 In-State Misc. l,24Oc Muskegon-Holland- 569 Out-of—State Zeeland Cleveland 530 Kalamazoo 407 Toledo 450 Saginaw 426 Chicago 20ld aDetroit and Muskegon data are from respective Market Administrator's Offices and is the December, l957 average ruunber of producers. Other markets are the number of in- spected shippers reported by the various health departments 8X<2ept as noted. Toledo, Chicago and Cleveland data are the number of Michigan producers shipping to those markets. bThe number reported by the health department was conSidered high by the Michigan Milk Producers' Association Whic:h serves lOO percent of that market. Therefore, data fron1 that association was used to adjust this figure. cThe miscellaneous category are inspected shippers to Smal l markets. They are not double counted with major city data, The Upstate order area accounts for 540 of these pro- ducer‘s, Upstate Market Administrators office, December, l957 average number of producers. The others are producers ap- WOVed by minor health department jurisdictions throughout the balance of the Lower Peninsula. C dThe Chicago data was obtained from Mead Johnson and ompany, Zeeland, Michigan, the only Michigan handler shipping t° C"'i'czago (May, l958). 75 for example with Detroit as a separate order, would place the entire milkshed of the Detroit market area in the neighboring order market area or areas. Based on the common supply area criterion, therefore, it could be recommended that the Lower Peninsula be regulated by one market order. VI. Cooperative Activity. (Criterion 7) The importance of examining the cooperative institu- tional structure in an analysis of market area boundaries was stressed in the initial examination of this criterion early in this chapter. This section will analyze the cooperative structure in the Lower Peninsula to determine its affect on the delineation of the market area or areas and to aid in de- ternnning whether such regulation should be carried on with one, two, or more orders. The study will of necessity em- phasize the Michigan Milk Producers' Association, since this is the largest dairy cooperative operative in the State. The Michigan Milk Producers' Association currently bargains for ahmost eighty-five Percent of the producer milk delivered to the (Detroit market and Association shippers are about the same Percent of total shippers to Detroit. The relationship 0" Michigan Milk Producers' Association to the total Detroit market is shown in Figure 2-l2. In addition to its bargain- ”'9 1”l-inction, the Association physically handled, in Associa- tlor‘ 1irucks or at Association receiving stations, approximately l f , /3 or the producer milk delivered to the Detroit marketin 957.46 \ Dede. ‘46I957 Annual Report, printed in Michi an Milk Messen er, '“t3er, I957. Fiscal year ending September 0, 9 . ..II-_. mcmnEmE oa wcoooc >.cpcos co.um.oomm< .mcmoanoca x..2 com—no.2m s.rmm_ ..m consooso i_mm_ ._ .cssm. coc< sexes: cocco e_ocpoo one cs mm_co>._oo z..mo waxes: .mwoh new co.um.oowm< .mcmosnoca x..2 cam.;u_z N.im mc:m_m 76 L53 s s s s s s . s _ mmm. emm_ cum. mmm_ smm_ nmm. «mm. .mm. . a om- om- . ..- 52 0m.. \il/ \I\ I .... dl iii/{l 0m.. R .me.co>..o .ceoe QUCDOQ LO mCOm . ~ ‘3. 77 Although the Michigan Milk Producers' Association is by far the largest cooperative on the Detroit market, there were several other cooperatives operating on the Detroit market in l957. One of the largest of the others is the Michigan Producers' Dairy, an operating cooperative loosely affiliated with the Michigan Milk Producers' Association. Some members of the Michigan Producers' Dairy are also members of the Michigan Milk Producers‘ Association. In addition, there were also five other cooperatives on that market in l957. These cooperatives "in toto" physically handled, at their receiving stations, an average of 37.4 percent of all Detroit producer milk in l954 and almost 42 percent in l957 (Figure 2-l3). Not only is the Michigan Milk Producers' Association important on the Detroit market, but it is important in seven Of the nine large Michigan out-state markets. Only in Lan- sing and in Kalamazoo are they an unimportant bargaining agency. Although they have reportedly signed up a substan- tial portion of the Lansing producers as members, they have not as yet been able to get dealers to bargain for a classi- fied price plan on that market. Kalamazoo has an independent °°°Perative, the Kalamazoo Milk Producers' Association, Inc., "MC“ bargains for 55-60 percent of the milk in that city.‘+7 The independent Milk Producers' Association bargains for an \ 4 Zoo M. 7Estimate by M. R. Bigelow, Secretary-Manager, Kalama- ”< Producers' Association--letter of May l3, l958. 78 mi llionsfi l2§4 4 % Handled of lbs. By COOpS. - . 37.37% Annual Ave. _ % Handled s» 200‘ !_#”,.~.~‘___4¥ COOpS. ’40 |50q _30 IOO. r20 o l e o M‘ II ions % Handled of lbs. L251” , By Coops. 2507 4|.84% Annual Ave. 1- ‘% Handle 200- ~40 * . l ‘ ‘ ifi. ‘ l<>o- ~20 505 t . -l0 ICOOpS.£ C) l 0 J M A M ' J J A S O N D Figure 2-l3 Monthly Cooperative and Dealer Receipts For Producer Milk-Detroit Marketsal954 and l957. \ tc. ___ aCooperative milk includes "cooperative bulk" later shippei 79 estimated 45 percent of the milk in Grand Rapids.“8 The Michigan Milk Producers' Association bargains for approxi- mately 40-45 percent of the milk on the Grand Rapids market.49 Figure 2-l4 shows the location of all Michigan Milk Producers' Association members shipping to fluid markets in the Lower Peninsula of Michigan. Note that the Association controls eighty-four percent of the Detroit market and approximately IOO percent of Battle Creek, Jackson, Muskegon and the Sagi- saaw- Valley markets (Saginaw, Bay City, Mt. Pleasant, and hflldland). It is not known what the opinion of the Michigan Milk F’roducers' Assocation members in out-lying locals is toward a combination with Detroit under a single order. Many may feel that they have lost individual recognition and power. (Tthers may decline due to a difference in Class I utilization.' (and subsequent blend prices to producers) between the limit- eci access out-state markets and pooling in a single state- wicje order. Much will depend upon the educational program carv'ied on by the cooperative to increase the producers' know- 'sage of Federal orders and of a state-wide order. Because Of triis it was,as mentioned in the review of criterion 9,not M 48Estimate from North Central Regional Survey results, °p° C=itn (footnote 3i this chapter). a ‘49Estimate by H. H. Varney, Director Outstate Markets W Market Analysis, Michigan Milk Producers' Association, 'e‘ter May l, i958. Ugstate O 232 - (L“\\“\“‘__ Valle Markets 5 ‘7 8 o T'g'm Muskegon-Hol land- Zeeland """'§EE"""' Flint 6 65% ”3070' 39% Grand Ra ids ‘ 288 l4 { 0 Detroit l5.359 jgalamazoo l2 2 l O ‘40 0 q. 1# Lansin Battle Creek 3: —369J 256 ~ Jackson 2 206 228 8%; 166% 228 T6636 Figure 2-l4 Michigan Milk Producers' Association Members by Lower Peninsula Markets and as a Percent of Total Fluid Milk Producers For Each Major Market. I957-l958.a (The Top Number EQUals MMPA the Lower Number Equals Total Producers On the Market) —_. aMichigan Milk Producers' Association data as of November .7. l957 and obtained from the Detroit office of the Association. Total fluid milk producer numbers obtained from Market Adminis- t"ator's offices in Muskegon, Upstate and Detroit December, l957 ai‘I'erage. Other producer data from respective health departments (~lanuary l, l958) Except where MMPA is known to have l00% of the producers in which case MMPA data were used. 8| felt important to document member opinion in this study. However, a false move in measuring member opinion in this direction can be costly. On August l, l957, the New York City order area,several lJpstate New York counties and part of Northern New Jersey were combined under a single order. The Eastern Milk Pro- ducers' Cooperative had been fighting for a separate New Jersey order. Because of the cooperative leaders' stand against the proposed merger, over 600 central Pennsylvania producers resigned from Eastern in a body and formed five new independent cooperatives.)50 In addition to the possible differences in opinions and power of individual members with- in the large Michigan Milk Producers' Cooperative, thereis the problem of maintaining working relations between coopera- tives. The Michigan Milk Producers' Assocation and the Kala- mazoo Milk Producers' Assocation have in the past worked to- gether to try to obtain an order for the Battle Creek-Kalama- zoo market. However, many of the smaller cooperatives in the Out-state markets may not want to come under‘ a single order with the dominate market and cooperative. The importance of minority groups' opinion is sometimes considered in deciding °" a Federal order market by the Secretary, but is perhaps given lesser importance than it should receive. Vol SOAmerican Milk Review, Urner Barry Co., New York, ' XX- “0- T: Jemery. 1958, p. ”3. One of the reasons advanced by prOponents for a separate order for Northern New Jersey was that otherwise the interests of New Jersey producers would receive only incidental and secondary con- sideration since they were a small minority of the total number of producers Whose milk would be subject to regulation under a single order for the combined New York-New Jersey area. It was argued that under a single order proposals advanced by New Jersey producers for order pro- visions designed to protect the interests of such producers would be likely to be voted down in a milkshed-wide referendum. The facts in this connection are that provisions of a milk marketing order are those found by the Secre- tary to be justified on the basis of evidence in the record of public hearings irrespective of whether such facts were presented by a major- ity or minority group of producers whose milk is subject to regulation under an order is con- trolling as to whether or not an order contain- ing the terms and provisions found to be justi- fied by the Secretary is to be issued, but not as to specific terms and provisions of the order. As stated earlier in the listing of criteria, the con- cept of equity and power within individual groups and between Qffiaups (criterion 9) cannot be documented in this paper but lnayr very well be the basis in public hearing for putting an Order into effect with separate parts of the state under Separate order administration. Another inter-cooperative W‘Oblem develops in considering the Toledo milk market, Which has been shown to have a close tie-in with the Southern Mich- i93" area. Toledo producers are represented by a large COOP- erat ixre, the Northwestern Cooperative Sales Association, Inc.52 ‘ 0rd 5'Final Decision with Respect to New Ygrk-Ngw deg“! ~"\ao—"T'fp. c . (22FR M947. bar 552The Northwestern Cooperative Sales Association, Inc. gained for 90 percent of the milk on the Toledo market in 83 This Toledo cooperative also represents several other large Ohio markets. It is not known of course, what the final attitude of these two groups would be on merger but it would be difficult for two dominant cooperatives to bargain in the same Federal order market area. As pointed out in the initial examination of the list of criteria, Mr. Colebank, market administrator ofthe Chicagoarea, indicated the difficulty in separating markets in which the same cooperative was a bargain- ing agent. On the basis of this criterion, the entire Lower Peninsula, with the exception of Lansing and Kalamazoo, would be recommended for one order area and on the same basis Toledo and the other Ohio markets would be a separate order area. Cooperative handling of sugplus.--Another important ' consideration in respect to cooperative activity is the place and importance of the cooperative or cooperatives in handling surplus on the market. One of the points brought out in the previously mentioned Oklahoma Decision was that under a merged order the c00peratives could better maintain their stated pur- pose of promoting market stability through joint supplies of mi lk in short periods and joint handling of surpluses under a single marketing order.53 In this case in point there were __2 357- although they do not handle any of this milk physically cogledo has an individual handler pool under its order). This pet‘ative is also active in the North Central Ohio order mar- #:gtng area. (Information supplied by Mr. Glen Wagner, Manager, Northwestern Cooperative Sales Association, letter of June 2! '95 the 0 53Final Decision with Res act to Handlin of Milk in WF—Wma e ropo an ar e rig reg, op. c t". T2""2ra""'2'l5i). 84 three major cooperatives, but they had Joined together and were operating as one under the Oklahoma Milk Marketing Feder- ation. The supply of surplus milk on the Detroit order market and on the various out-state markets is handled to a large extend by the Michigan Milk Producers' Association. Many of the out-state markets depend on the Detroit market for their hang-time reserve supply and for much of their supply for seasonal balancing. This is accomplished by buying milk directly from producers or through the Association only to the extent that such purchases can be used entirely for fluid mill< in the period of flush production and supplementing this W‘tJT Detroit milk from the pool in times of short supply. The Micriigan Milk Producers' Association maintains three princi- Ple'inanufacturing plants. Two of these are on the Detroit market at Ovid (Elsie operation included through l957) and at Imlay City. The maximum capacity of the new Ovid plant '8 one million pounds of milk per day and at Imlay City 650:000-?oo,ooo pounds per day. A third is maintained on a stand lay basis for the Upstate and the Muskegon order markets 3‘ Scottviiie. In _addition the Michigan Producers' Dairy, Which is loosely affiliated with the Michigan Milk Producers' Association, has manufacturing plants at Adrian and Sebewaing which Process surplus fluid ,milk. These plants in turn handle surpiu8 fluid milk from other major Michigan markets as follows: ' - The Flint local and the Saginaw Valley (Bay City, Saginaw, Mt. Pleasant and Midland) local of the Michigan Milk Producers' Association use the De- troit surplus plant at Ovid for surplus disposal. 85 2. The Upstate order market and Muskegon, as men- tioned previously, have the Scottville plant on a stand-by basis. This plant is currently manu- facturing cheese, but also cream holding facili- ties and skim powder manufacturing facilities are available. Maximum surplus milk capacity is ll0,000 pounds per day at this plant. These two markets currently contract with Remus Cooper- ative Creamery Company of Remus, Michigan for their surplus milk handling. In addition some Muskegon milk is sent to Mead Johnson and Company at Zeeland, Michigan for baby food. 3. Grand Rapids surplus for the Michigan Milk Pro- ducers' Association is also contracted to Remus. 4. Surplus milk from the Jackson market goes to the Michigan Producers’ Dairy plant at Adrian. 5. Battle Creek milk is shipped under contract to the Constantine Cooperative Creamery Company, Constantine, Michigan. State wide, there are very few large capacity facilities, fXJr handling of surplus milk except those of the Michigan Milk Producers' Association. The most important onesnot actually owned by the Michigan Milk Producers' Association include iaichigan Producers' Dairy facilities, Lansing Dairy Company's Grand Ledge Manufacturing plant and McDonald Cooperative Dairy Company's Chesaning plant. It would appear that the most efficient method of handling surplus would be to concentrate Out-state and Detroit surplus manufacturing facilities in a few large plants. Detroit facilities are now used directly to 'Taxtdle surplus milk from Flint and the Saginaw Valley mar- kets,, It was also stated that this does not represent the true amount handled by Detroit since many out-state markets Operate close to Class I sales and depend on the Detroit market-wide pool for milk in periods of short supply. How- ev ' er-, ‘there appear to be sufficient surplus handling facilities 86 throughout the Lower Peninsula which could handle surplus for a separate out-state order. Based on this criterion alone one order or several orders are possible. If an additional criter- ion is considered on eQuitable handling of surplus by all pro- ducers throughout the State then one order would be recommended. It should be pointed out however, that there is inconsistency among the markets on the concept of equity when it comes to equal sharing of the burden of surplus. Neither does there appear to be any fixed rule under the Federal orders already enacted. VII. Federal Regulation: (Criterion 8) A steadily increasing amount of Michigan's fluid milk has come under Federal Regulation. In l952 approximately 35 percent of the whole milk delivered by farmers to plants and dealers was under regulation by Federal order markets in Michigan. By l956 this had risen to over 42 percent and in 1957 equaled 44.4 percent (Figure 2-l5). An additional amount 01’ Mi chigan's fluid milk production was under out-of—state Federal order market regulation. The Detroit order was the It was effective September I953 first Federal order in Michigan. 'i '95l . Muskegon obtained an order effective October I, and Upstate Michigan on November l, l955. An order for the Western Michigan Market area (Grand Rapids and Muskegon) was proposed at a hearing held in December, '950- This was accept- ab '9 to the Secretary of Agriculture, but was refuted in .mmm_ ...co< .osoucH ocm co_p_womm_o co_woaoouo Econ x__2 Sou» mco_moo ocm mwcm a ow o_om x. E _vaF .mm v\__ o>_wuom»m Lmoco oedema: .mm\_\o_ m>_¢oo»$m Looco co axon: ..m\. m m>_¢ooeuo o co v.0Lumo mmo_uco m.Lomeam_c_Eo< woxcmz _msu.>_ucH nmm. ute_deu new nucm_d on Ben x__2 .e__ .d use .d _I so acoEvcmomo magnum umu_c: .m.2.< .m_m c_wo__:m .mo_wm_gmum no .Lm ouoo mc:w_3o.cm< c_mo wmiomm_m mcmm_zo_2 CH mamxem: Loouo _mcmomu , smoocc» oLmEme com—no.2 am »__m3cc< ompmxcwz x._2 so acaoe< m_iw mesa—u emm__ 0mm. _ Mme. ems. mmm. was. _mm_ _ 0mm. 0 d \.\.\ .\.\ \\\\o\ \x.\ \\\\ \s\\.\\\\ . \x“h\.\\M\\\\\\\\\\\\\\\\“ \\\ \\\\\ \\ x \ wx - \\\\\\ W\\\\\\\\\\\V\\\ Ext a - \ \\\\.. \\\\ .\\\\\\\ \ \\ \\ \ \\ x \ \ \ \\\\\\\\\\ \ \ \\\ \\\\\\\ \\\\ \ .... \\\\\\ \ \\ \ \\\\ \\\ I _ Ox \ \\ \\\\\\\\_ totem—o xxx »\\\\\\ _ x \\ \ \\\ \\ \\\\\\ l \\\\\\\\\\\\U\\\ \\ \\.\\\\v\\\\\\\\\“\ \\\\ I N i u N 1 I n . . n I x_m2 u ompm_3mmcc: I r- : Lm_moo ocm mvcm_a_ 1 0k b_om x__2 m , , Lonuo fl m _w¢éé_ ”&§w~ mad: v mocaoa .+ - i E E aobmmR nco.___m bcaoq co co_.~.m referendum by producers.54 Muskegon came under regulation later as a separate market. An order was proposed for Battle Creek and Kalamazoo in the fall of l956. The Secretary also recommended that this area be put under Federal regulation, but it too was defeated in referendum.55 Both the Muskegon- Grand Rapids and the Battle Creek—Kalamazoo proposed orders were defeated by very narrow margins. A promulgation hear- ing for the entire Upper Peninsula area plus part of North- ern Wisconsin (Northland order) was completed on November 20, '957.55 A recommended decision prOposing separate Upper Pen- insula and Northeastern Wisconsin order markets was issued by the United States Department of Agriculture on May 28, l958.57 A hearing also has been held on the possible exten- sion of the Detroit order area to include Lansing and Jackson 54United States Department of Agriculture, A.M.S., Result of Referendum in Res ect to Handlin of Milk in the Erana Ra ids and Muskegon Marketing Area. ('5 FR l5,2§5. OCTOBer E, |§Slfi 55United States Department of Agriculture, A.M.S., Results of Referendum in Res ect to Handlin of Milk in the Sgttle Creek-Kalamazoo M E gl ( fig 5 2:82 9 ar e ng Area. 2 , , November N 55mm“, States Department of Agriculture, A.M.Su 0 tice of Hearing (Escanaba, Michigan 22FR 7429, September (3&73957 and (Green Bay, Wisconsin) (22FR 8852, November 2, R 57United States Department of Agriculture, A.M.Su GCOmm ended Decision in Respect to Handling of Milk in the 2 er Peninsuia and the Northeastern WTsconsin MarketTng ‘Lséufig. F , June , 87, 89 plus scattered intermediate areas.58 The original Detroit- Muskegon and Upstate order market areas with territory added by amendment and extensions prOposed are shown in Figure 2-l6.59 In addition the proposed Upper Peninsula order and previous order areas defeated in referendum are outlined on this map. In most instances Federal orders have become an accepted institution in the State. The three operative orders plus proposed territory additions and the proposed Upper Peninsula order area would bring approximately two-thirds of the entire land area of Michigan under Federal.regulation. Most of the balance of the territory has been suggested for inclusion under Federal regulation either combined with an existing order or as a separate order area. It would appear, from the stand-point of administration and control, that the entire Lower Peninsula should be under one order even though a pre- cedent has been set for separate orders throughout the state. There appears to be no advantageous place to draw a line sep- arating the order markets for administration purposes. It has been shown in other sections of this chapter that the PhYSiizal characteristics throughout the entire area are com- parat i vely uniform. N 58United States Department of Agriculture A.M.S-a _OHCe of Hearing. (22FR 9294, November 2i, l9575. "B i 59Area proposed for addition to Detroit contained in MMEAEf. in Behalf of Michigan Milk Producers' Association," De ' February 3, l958 submitted to A.M.S., United States Degariflnent of Agriculture regarding proposed amendment to '“Dit order, hearings held December lO-l7, i957. DUE-x 9O Upper PeninSula Upstate Muskeg K Detroit Area under oledo order °rd9Ps in effect June I, l958 area added to original orders by amendment area. Lander consideration-hearings completed.-Upper Pgnins la area_ as pro osed n recommended ecis on <=onsidered and defeated in (23FR38I8, June 3, I958) f‘eferendum.-area as of final decision F“lgure 2-l6 Area Status of Federal Milk Order Regulation In Michigan June I, l958 except as noted. 9| Recommendation: In the beginning of this chapter eight criteria were listed for examination for the construction of the "market area" boundaries. The analysis of this chapter was conducted within the framework of these criteria. In summary, it appears to the author that a single order for the entire Lower Penin- sula is possible and probably could be defended more strongly than several orders. Reasons for a decision on One order are: l. Overlapping sales areas of dealers 2. Increased reciprocity of health regulation within the state 3. Overlapping of procurement areas 4. Some tendency for uniform Class I prices in past years. 5. Few dealers in rural areas 6. Relatively uniform supply conditions 7. One major cooperative bargaining throughout the state 8. Greater ease of Federal order administration These points would seem to point toward a single order. In additzion, if it is desired that all the producers carry an eQual' share of the surplus, which could be an equity objective, a sir1gle order could help achieve this. The proposals in the remaining portion of the thesis are based upon a single order arthCDLJgh portions of them might still be useful if more than one <3r~der is finally effectuated in the area. Not all the criteria, of course, pointed toward a single 92 order and it should be reiterated that there can be strong arguments for more than one order. Although there was in- creased reciprocity of health inspection, it was shown that milk does not flow freely in both directions between all cities. Also, although there was a tendency for uniform Class I prices, producer blend prices varied between city markets due largely to differences in Class I utilization. Local producers and handlers might want to preserve this relationship as long as possible. In addition, there were many areas in the Lower lPeninsula that were predominantly rural and although there iwas one dominant cooperative in the state there were several ‘independent cooperatives which were important in their re- spective markets. It must be pointed out again that in addition to the examined criteria there was one criterion on opinions and attitudes of the people towards regulation under a single orwder or several orders which was not investigated. In the fTImal analysis, this unexamined criterion might well be the most important consideration and, although elusive for docu- menteary purposes, should not be eliminated from final area recranwnendations made after a public hearing. CHAPTER III CLASSIFICATION SYSTEM Importance of Considering Use Classes igAn Expanded Area If regulated areas are expanded and merged with other adjacent areas it becomes important to examine the classified price system of both the old and the new areas to select one system which is compatible with existing systems. Concurrent- ly, the investigation should review the existing and proposed systems to obtain the best alternative plan or plane for the i1ew market area or areas. liistorical Use Classes of Milk on Michigan Order Markets In Federal order markets, Class I milk usually con- sists of whole milk and modified fluid milk products such as i’lavored milk drinks, buttermilk and concentrated milk. These Drtnducts generally must be produced from locally approved milk. Most markets also include fluid sweet and sour cream in this top class. "Sanitary requirements for cream have been changed in many markets during recent years. As a result, cream has been shifted to Class I in most of these (Federal order) mar- kets:."' However, the Detroit market order has had fluid Cream in Class II with manufactured products since the order's “mention in l95l. Several attempts have been made to modify \ FCs 'Stanley F. Krause, Pricing Milk Accordin to Use, E3ulletin No. 6, Washington, D.C., June, l95g, p. IE. 93 94 this situation and they are analyzed below, along with a study of use classes on the Detroit, Muskegon and Upstate Federal order markets. Detroit.--Historical changes in the Detroit order con- cerning classification of milk are shown in Table 3-l. All classification prOposals at the promulgation hearing for the original Detroit order included fluid milk and flavored milk for fluid consumption in Class I. Producers proposed that skim milk and buttermilk for fluid consumption be in Class I- and handlers proposed that these products be in Class II. Representatives of health departments, of the larger cities involved, testified that such skim milk and buttermilk were required to be made from milk approved for fluid uses. There- ‘fore, the United States Department of Agriculture concluded 'that milk required to meet the sanitary standards for fluid iconsumption and the products required to be made from such rnilk (flavored milk, skim milk and buttermilk for fluid con- sumption) should be in Class I. Testimony indicated that iflaere were no farm inspection requirements for other than tJWese four mentioned products. Cottage cheese, cream used 'fOf‘ fluid consumption, or cream used in making ice cream, Were required to be made in approved plants but the farms prOViding the milk used in these products were not inspected by health authorities. Testimony showed no specific difference in ‘tlwe quality of milk used to produce cream and cottage cheese for' tase in the marketing area and the quality of milk manufac- Ih"~‘5<1 into evaporated milk, cheese and other products in the Table 3-l History of use classes Detroit milk ordera Effective September l, [251 _(Inqggtionl-- Class I all skim milk and butterfat disposed of as fluid milk, flavored milk, skim milk or buttermilk and that not accounted for in Class II. Class II all skim milk and butterfat in: products for fluid consumption as sterilized flavored milk drinks or sweet or sour cream -- also ice cream, ice cream mix, cheese (including cottage cheese), dried whole milk, non fat dry milk solids, evaporated or condensed whole or skim milk, sweetened or unsweetened diSposed of in bulk or in hermetically seal- ed cans, butter, livestock feed, dumped, and in shrinkage of producer milk up to 2% of receipts from producer or in shrinkage of other source milk. sgfifective March l, 1222 (amendment #I) No change in use classes jgffective June 20, |2§2 (amendment #2) No change in use classes _4ffective November l, L252 (amendment #3) No change in use classes Eiffective Ogtpber l,l_§2 (amendment #4) No change in use classes Effective March lI l2§4 (amendment #5) In Class I change all skim milk to read (including the skim milk equivalent of concentrated products). In Class II add--or any mixture of cream and milk or skim milk containing lO percent or more of butterfat. Add eggnog also. \ s aSection 924.4l Detroit Milk Market order No. 24 and "ttsequent amendments. See Federal Register Index--Appendix I. 96 Table 3-l (continued) W Effective Novemberi, l9§§ (amendment #6) In Class I add half-and-half; delete this cream mix- ture (half-and-half) from Class II. gifective May l, l9§§ (amendment #7) No change in use classes gfifective September l,_i95§ (amendment #8) No change in use classes 97 various manufacturing plants in the milkshed. Handlers pro- posed that all products, other than those requiring farm in- spected milk, be included in one class. The Secretary of Agriculture concluded that there did not appear to be any justification, on the basis of the quality of milk required for their production, for different classification for milk used to produce cream and the various manufactured products. Butterfat and skim milk used in: cream, in all manufactured dairy products, and in livestock feed and plant loss were therefore classified as Class 11.2 In l952, it was proposed that fluid cream be moved into a separate class. However, the Secretary of Agriculture stated: Testimony disclosed that fluid cream priced under the order must compete directly with cream from unregulated sources which is available to handlers and also may be sold directly at wholesale and re- tail in the marketing area. There was no showing that the marketing of fluid cream is sufficiently different from that of most other Class II pro- ducts to result in significant price differences; separate classification would therefore, be mean- ingless.3 The next suggested change in use classification came in 2United States Department of Agriculture, P.M.A., Final 0 Cision with Res ect to Pro osed Marketin A reement and aSf‘aer R ula‘Eln fianaling of Mill? in Detroit Mi'cfil' an Market- r) (l3 ) JL_£L_A£33, Federal Register,:§486, June 9, l95l . 3United States Department of Agriculture, P.M.A., recommended Decision with Res ect to Pro osed Amendments to NE" Feting Agreements and Grier Re ulatin the Hanalin of I ll< 1 i ('7 Federal Register In Detroit Michi an Market ng Area, C) , August l , I952). rm it?! V 98 a hearing held at Detroit, July 27-28, l953. A proposal was made by handlers to move fluid skim milk from Class I to Class II due to alleged competition with packaged nonfat dry milk solids. Destructive competition was not brought out in testi- mony, but on the other hand, sales of fluid skim milk were shown to have increased. It was also stated in the recommended decision that: So long as fluid skim milk is reQUired by health authorities to be obtained from inspected sources, such quantities as are sold must continue to be priced at such level as will encourage producers to supply inSpected milk. The recommended decision based on a hearing held in [Detroit on March 22-25, l955 which resulted in the classifi- <:ation of half-and-half in Class I stated at the same time ‘that: Such products as aerated cream and egg nog are not required to be made from milk for fluid use and are often purchased from non-handlers instead of being manufactured in the regulated handlers' plants. They should therefore remain in Class II.5 hub testimony was offered at this hearing on a proposal to c:lassify fluid cream in Class I. In respect to half-and-half, ‘trie Secretary of Agriculture said: 4United States Department of Agriculture, P.M.A., Recommended Decision with Res ect to Proposed Amendments to Mar‘ketin ,Agreement and Order Re ulatih the Handlin of Milk 1" (Detroit Michi an Marketing Area, (l8 Federal Register 7540, No VemBer 53. F937) R 5United States Department of Agriculture, A.M.S. ~53£E£Qmmended Decision with Resgect to Progosed Amendments to Mgrketin A reement and Order Re ulatln the Handlin of Milk ’ 955). Since the milk in the milk-and-cream mixture made in handlers' plants comes from sources approved for fluid use and is already a Class I item, half-and- half should also be in Class I. The order, effective November l, l955, was so modified to make this inclusion in Class I. In the hearing held for the order as amended and current- ly in effect, the Michigan Milk Producers' Association pro- posed that a new Class III category be established which i~ould include most of the manufactured products such as butter, twonfat dry milk solids, hard cheese and evaporated milk. They 1’urther proposed that Class 11 be revised to include fluid czream and the manufactured products, other than those in Class I II, mainly, cottage cheese, ice cream, ice cream mix and condensed whole or skim milk. It was prooosed that the Class 11! price be set at forty cents over the perosed Class III rar'ice. Evidence showed that the Detroit Class II prices were low in comparison with those of most Federal order markets in the Midwest and below the prices paid for manufacturing grade mi’il< by plants specializing in the manufacture of butter and Creamery by-products in Michigan and Wisconsin.7 However, the St-Icrretary recommended in his final decision that the manufac- tured milk utilization should not be sub-divided into two 61bid. p, 7United States Department of Agriculture, A. M. S., T“EEELL_Q£gision with Respect to Pro osed Amendments to Market- reement and Order Re ulatin the Handlin of Milk in l 6) 05 9 9 .4 o '-SL.JE£1_t, Mic lga an ar e ng rea, ugus IOO classes as was proposed by the Michigan Milk Producers' Association. He stated: It is apparent from the testimony that Detroit is essentially an open market for fluid cream, cottage cheese, and ice cream ingredients and that there is considerable distribution of all these products throughout the market by non-handler firms. Also, many of the handlers purchase these products from non-handler sources or make them from other source ingredients. It is also evident that most of the handlers who now choose to utilize producer milk in the production of all or a portion of these products whenever it is available could rearrange their operations so as to avoid utilizing producer milk. This would leave only a few handlers who would be obligated to pay the proposed higher Class II price for milk utilized in these products. In these circumstances, it appears that a separate Class II for these products at a premium price would be highly inequitable as between handlers, and would not achieve gny substantially higher returns for producers. (Drice again the Detroit order use classes remained unchanged armd they are currently essentially the same as at the order's irtception. Muskegon.--The use classes and the products included ir1 'these classes under the Muskegon milk order have not been mocjiified since its beginning. The historical use classes of U” 8 order are shown in Table 3-2. It is important to note that the only major difference inthis order from the Detroit order is its classification of sweet and sour cream in Class I. During the Muskegon promulgation hearing, representatives °f major health departments concerned, testified that milk sold fo" f’iuid consumption and that used to DFOGUCG skim Miika \ 8Ibid. lOI Table 3-2 History of use classes--Muskegon milk ordera Effective October l,g19§3 (Inception) Class I all skim milk and butterfat disposed of as fluid milk, skim milk, buttermilk, flavored milk, sweet or sour cream and that not account- ed for in Class II. Class II all skim milk and butterfat used to produce ice cream, ice cream mix, cottage cheese, whole or skimmed condensed or evaporated milk (sweetened or unsweetened) in bulk or hermetically sealed cans, cheese, dried whole milk, non-fat dry milk solids, or butter; in shrinkage of producer milk up to 2%; in shrinkage of other source milk; and in skim milk dumped or accounted for in livestock feed. jgffective May l, l956 (amendment #I) No change in use classes Effective Ma L, IQfl (amendment #2) No change in use classes aSection 985:4l, Muskegon Milk Market Order No. 85 and subsequent amendments. ee edera Register TfideXu-Appendix I. l02 flavored milk, or cream sold for fluid consumption must be produced and handled in compliance with the same sanitation standards; therefore, fluid cream was classified in Class I with other fluid milk products.9 Handlers prOposed that a separate class be established for fluid cream for the purpose of pricing it at a lower level than fluid milk and other Class I products. This was in line with the past custom in the mar- ket of pricing whole milk used to make cream at a lower price. The Secretary stated that the problem was different where the skim milk and butterfat used in each product in each class was accounted for separately: Under this system the butterfat differentials is the major factor in determining the cost of Cream. The handler butterfat differential provided by the order for Class I is somewhat lower than that proposed by the producers at the current prices of butter. As a result, even though a separate class is not estab- lished for cream, its cost to handlers will be no higher than the prices they proposed.’0 VVith the exception of the cream classification and the classi- 1’ication of milk dumped or fed to livestock (producers had r‘equested all such milk be Class II--the Secretary modified this to apply only to skim milk so utilized), there was no oPposition to the proposed classification provisions. There have been no proposed changes in the classes of use in the MUSkegon market since that time. ¥ 9United States Department of Agriculture, P.M.A., Lina] Decision with Res ect to Pro osed Marketin A reement a: Order Re uTatin Handl n of i k Muske on Mic i an '0 bid. l03 Upstate Michigg_.--The history of changes in use classes and products included in these classes under the Upstate Michigan Order is shown in Table 3-3. The initial classifi- cation was the same as that of the Detroit order as amended effective, November l, l955, and currently used on that mar- ket. The products named in Class I (fluid milk, fluid skim, flavored milk, buttermilk, and half-and-half) were those which health authorities in the area required torn derived from milk approved for fluid uses. Cream, for fluid use, was not required to be made from milk approved for fluid use and was therefore classified as Class II utilization." During the hearing there was considerable discussion on whether half- and-half should be considered as milk or cream. The Sec- retary's decision was that, since the skim or whole milk por- tion is from the same quality as that sold for Class I, half- land-haif'should be designated as a Class I product.'2 No other changes were perosed until the hearing for Amendment 3 held on May 24, I956. As a result of this hear- IFHQ, the order was changed to include three classes of use. Class I products remained as previously outlined. Class II (3'1 intermediate class) contained fluid cream, cottage cheese, ice cream, ice cream mix, evaporated and condensed milk. F, "United States Department of Agriculture, A.M.S., hal Decision with Respect to Perosed Marketin A reement 32:! Order Re ulatin the Handrm offlTV—T-Mi n U‘u—state Mi—T'ch an \e ng rea, e era eg 5 er , ep em er , e '2ibid. IO4 Table 3-3 History of use Classes-~Upstate Michigan milk order3 Effective November I, l9§§ (Inception) Class I all skim milk and butterfat disposed of as fluid milk, flavored milk, fluid skim milk, buttermilk, and half-and-half or other mix- tures of cream and milk containing less than 18% butterfat; and not accounted for as Class I. Class II all skim milk and butterfat used to produce any product not specified in Class I; dis- posed of as fluid cream or for livestock feed or skim milk dumped in shrinkage of producer milk up to 2%; or in shrinkage of other source milk. iEffective Mgrch l, l9§§ (amendment #I) No change in use classes. jififective May I, I956, (amendment #2) No change in use classes. fiflflfective October I, L926 (amendment #3) Class I all skim milk and butterfat dISposed for consumption in fluid form as milk, flavored milk, skim milk, buttermilk and half-and-half or other mixtures of cream and milk contain- ing less than l8% butterfat; and not account- ed for in Class II or Class III. Class II all skim milk and butterfat other than those specified in Class I and Class III; dISposed of as fluid cream; in shrinkage of producer milk up to 2%. ———_ s aSection 9l6:4l, U state—Milk Market Order No. I6 and ”bSeQUent amendments, See Federal Register hack-Appendix 1- lO5 Table 3-3 (continued) Class III all skim milk and butterfat used to produce butter, dry milk (whole or non-fat) or cheese (except cottage); disposed of for livestock feed or skim milk dumped and shrinkage of other source milk. Eifective August l. I957 (amendment #4) Add to Class II, fluid milk products and cream in inventory at the end of the month. Otherwise no change in use classes. Class I06 III included butter, dry milk (whole or non-fat) or cheese (except cottage). The deputy administrator writes in the recommended decision: Skim milk and butterfat used in the production of butter, dry milk (whole or non-fat) and cheese other than cottage cheese, disposed of for livestock feed or accounted for as shrinkage of other source milk should be classified separately as Class III milk and be priced twenty cents per hundredweight less than the remaining uses now included in Class II milk. The price for Class II milk should be the basic formula price of the order.'3 111e reasons given for this third class were as follows:‘4 I. Upstate Michigan handlers maintained limited facilities for dISposing of excess milk. Much of this was sent to unregulated manufacturing plants at a twenty cent discount from the regu- lar Class II price. 2. Handlers were therefore accepting little milk beyond their fluid needs, and producers, through their cooperative association, were responsible for marketing most milk in excess of fluid needs. The cooperative association stated that they had realized a net return of approximately twenty cents per hundredweight less than the Class II milk price in disposing of this milk. 3. It was stated that since milk manufacturing plants in the area produced largely butter, non-fat dry milk and hard type cheese, pro- vision for a price for milk used in such _products at approximately the level that can be realized for it in the area will assist in orderly marketing of producer milk supplies. ReCOanended Decisions with R s ect to Pro osed Amendments to 3" e n reemen an r er e u aEIn Efie Handlin of mg n L’ state Mich an ar e n l3United States Department of Agriculture, A.M.S., g g Area, 2 , Augus , 7353?. ”Hold. I07 4. The handler pooling provision of the order was expected to deter handlers from increasing milk supplies solely for manufacturing purposes.I Except for clarification of classification of inventories i n Amendment 4, there have been no changes to these use class- ees since the three classes became effective October I, l956. c:omgarison of Detroit with Nearby Michigan and Out-of-State e era r er arkets milk order is used as a foundation The Detroit Federal f2>r revision of use classes for the expanded Lower Peninsula Miizhigan order.'6 The Detroit order is still the main core of’ the expanded territory; has been operated longer under regulation than the other Michigan order markets and has had its provisions copied by many of the local markets currently urir’egulated but proposed for inclusion in the expanded order area. The major difference in use classification between De- tt‘cit and other nearby Federal order markets is its handling 01’ fluid cream. Table 3-4 shows the use classification "f’ [Detroit and nearby Federal order markets. Note that De- 't'“<>'lt Is the only market with fluid cream in the same class aEB Elli other manufactured products. The most common classifi- cat ion is to put fluid cream in Class I. However. Chicago ¥ Wi l5The Upstate Michigan order was changed to a market ‘39 pool on August I, l957. Or- l6This study of use classes could also be used if two or: rn<>re orders are finally erected; since such orders would nsecessity have pricing provisions closely related. so .x..& .m oomcw sous oo>.coo x.E Emoco on. new mw .Emocu u.umm_a .Eoouo coNocu oLm mum mom.o c. oo_< .mo_mm Hun oom_u on oo.m_wmm.o oLm .uwo .oo_cmaeoo anon .mo.coxao ow ouuaooco x__E ucm x_.E uomes ommo_con . . :o Lo< so acosuumaoo ooumum nou_c: ..m.:.< .wcooco c_uoxca2 x..z _acoo u so oo.cosszm “oucnomm ‘I‘l mun >~ an “an an -~ - an Louwam a, mm a a a an - an 002 mom unm (Hun _~ -~ mm "a HH - x__E oomcmocoo «an (mum um nun an mm an an x__E omwmcoam>u nan (mun nu nun - mum - an om_uo um» :02 "an (nan an nun um um“ um an x..E m_ocs oo.uo -~ >~ an mum an -n n~ - omoozo cum: nu ma - - nu "a an - ooooco ommwvoo an“ nu ma -~ um H~ - nu x_E Emoeo mow -~ - mm "an - an uu Ha anco mom oumauoca cacao 74M a um H a a uu u - Emoco cnom ~ an ~ ~ ~ an H nu Emogu womsm _ - ~ ~ ~ n a a m.mciocmlv_mx u ~ ~ a u — n a x_.ELovu3m a m n a n _ n a mem o_:_u ~ m n H n H n u x__E ooco>m_m a ~ ~ ~ ~ ~ n a x__E v.3.m co.waa:ocoo o_:_u com ._ homoomwmpl decode; comma—cu omxa3.um uco_o>o_o ooo_oh oedema: co axon: v.0caoo atom 59:0 oaoaoocd v.22 semis—2 . .ilullil lulu-IlIlA-IIIIIIII' ... «sconce «exams x._e some; so eoegsueaesssee as; s.n s.ssa _eceeou sates: use a.ocoso .mgosnocq x_.s I09 and Upstate Michigan put fluid cream in an intermediate class. On the basis of the decisions to date, it seems that the Secretary of Agriculture will not put fluid cream in Class II above a Class III manufactured milk or move fluid cream into Class I use as long as the Health Department of the city of Detroit does not require sweet or sour cream to come from inspected sources. No proposal has been made by producers 'to put fluid cream into Class I. Handlers are content with <:ream of high quality being purchased at a low Class II price. .If the inspection requirement is not enforced, than a reclass- ‘ifying of cream to a higher price class will cause a shift 1’rom regulated handler manufacture to shipments to the mar- ket by non-handlers in greater amounts than at present. This wi ll add to the amount of Detroit milk going to manufactured Drwoducts and may lead to a lower quality product for the consumers. As an alternative, the Michigan Milk Producers' Associa- 'ti<>n has attempted to move fluid cream into an intermediate CI ass priced between fluid milk and other manufactured pro- The major reason given for not placing cream under by the De- duCts. fill i inspection is due to the lack of personnel tr<3 i-t Department of Health.'7 However, there seems to be 8‘J‘F‘f‘icient inspected milk under present conditions to meet \ Mr '7ln a letter to the author dated February IO, l958, De-E Russell Palmer, Head Health Inspector, Milk, City of prerOit Department of Health said, "The lack of personnel farg"fisnts our attempting to extend complete inSpection to all "‘8 involved in cream supplies." IIO fluid cream requirements (Figure 3-I). Although not presently enforced, the health ordinance for the city of Detroit does call for sweet and sour cream to be made from farm inspected milk. "There appears to be no scientific reason for treating fluid cream differently from fluid milk on the basis of sanitary requirements".'8 As a rnatter of fact Dahlberg et. al. state that, "It is generally «considered to be more difficult to process cream than milk 'tClassure low bacterial counts and good flavor".'9 Champarison of Detroit with Nearby Michigan Regulated and Un- i’egulated Markets Table 3-5 summarizes the different use classes and prwaducts in these classes in effect on all major Michigan maJrkets with the exception of Lansing, which does not have a <:lassified price plan. Muskegon and Upstate have been com- Pat‘ed with Detroit along with other nearby Federal orders in tI'e' previous section. Except for cream, the remaining mar- ke‘ts are in general quite similar to present Detroit use C' asses. Flint and the Saginaw val Iey markets have the same f l8Interview with G. M. Trout, Professor of Dairy Manu- ai'-=‘|I:t.iring, Michigan State University, East Lansing, Michigan. July 7, l958. l9A. C. Dahlberg, H. S. Adams, and M. E. Held, Sanitary Mi"< (:ontrol and Its R lation to the Sanitar Nutritive and 飥E§JE;_§galitIes of WIIE, PuBIIcation 256, NatIonal Academy of c ences, Na“ onaT Research Council, Washington, D. C., I953, of 5323.. This report showed that fluctuations in bacteria counts cit?‘-‘lr‘nples of fresh pasteurized cream drawn in eight selected ‘5fi3 varied much more within the individual cities than for f rear, pasteurized milk samples drawn in the same cities. w_ouonIEme0 o_3_u ocm x_p2 own—u so >H___nm__m>< ocm co.HmN___HD mas. J ems. L o nmm. n wmm_ o Asmm_l_mm_v messes am nmm. n mmm. o v _im ocsm_u 0 _nm_ m r>L. .u mc_meoo. «seem. U j Loommoua Lb m:_aL3m .3 on Louaoocm _muo moq co____2 on mmm_o “ - L ..weouauoca m o myuocw m .an co____2 II2 .momoaLaa coo_LmoEou Lou H wom_u soc» mc_vomcwo3m Loews seoco o_a_c oae_ xoeo poses ococ . mm\_\_. ooe.m H mom_o ca e_eeloeelc_ezo .m>Lome mc_wmuooo «coocoa m. Low mc_so__m ocm Emoco o_3_s .mvoaooLo H oom_o cw_s eoxcms mc_>_aazm Loews o_nm__m>m x__E :m:_aL:m _mspu<:o .ucm.m>_:co x__E «coouoa m.n ow notoazoo mausooca ..miificoe comm mommco>m 323 lift: ..6 mocaoo «unsound Aoozc.wcoov _im «Lamas nu page so acoucoa on H_opmstoLaom Lou oLm memo muHomm ocmLo one .cm_a ooHLo ooHc .l lHommHU Loco: uoxcms one so pcoouoo omlmm HHovaonLoam Low oo~mEmme Lou memo .mmm. Hm: .coHumHoomm< .mLmoanoca x_H2 cmchon sous wuoxcme cacao __< .mmm. .zmz .o>H«m iLoaooo .oLouauoLa x_H2 ooumsm_mx sous memo oonsm_mx .mmm. ._ Humacmo op conH>oL Homem— so on mLouLo o>HuooaomL sous oumuma: ocm comoxmaz .wHouuoo «oucaomm HHH HHH HH HH HH HH HHH HH HH Lowwam HHH HHH HH HH HH HH HH HH HH moz mom HHH HHH HH HH HH HH HH HH HH somcoocoo HHH HHH HH HH HH HH HH HH HH uoamcoam>m HHH HHH HH HH HH HH HHH HH HH ooHLo emu coz HHH HHH HH HH HH HH HHH HH HH oHoc; ooHLo HHH HHH HH HH HH HH HHH HH HH oooozo use: HHH HHH HH HH HH HH HH HH HH omooco ommuwoo HHH HHH HH HH HH HH HH HH HH xHE Emmcu ooH HHH HHH HH HH HH HH HH HH HH smoco ouH muoaooco Locwo ram HH HH HH HH H HH HH H HH Emoco Loom HH HH HH HH H HH HH H HH Emoco Hoosm HH HH HH uH H uH H H H m_mciucmis_mz HHH H HH oH HH oH H H H xHHeLowaam HHH H H H H H H H H Eon oH3_m H H H H H H H H H xHHE ooLo>mHm H H H H H H H H H x..2 oH:_u coHHmEchow o_:_u Lo“ ._ 1l¢o~me xmwuo onmmm oxo__mmlcomxomo ch_m weapon: acomoxonz «Hocuoo muonooca ie_mx o_Hemm ocmco zecHGem oce_ooN x__s use x..2 mmmm. .muoxcme cmchqu mamvmiuso Loans ocm vHoLHmo .owuaooca x_HE Loams so coHumoHusmmHo om: .m:wu< min oHnm» II4 .mmm. ._ _HLQ< oocHo HHco H ooo_o cH coon o>oc ooonpo ..ooo smchomo .mmm. ._ Hos «oxuos LooLo _ocooom cowoxosz one Looc: oEoo scoHooN oco sea—Horn .oLo: ooLouHocoo «o: woxLoE Lans spec on» Hmchcoq cH coHQ ooHLa ooHLHoooHU o: o» oLoch .woxcoe HooscHacooH min o_oms IID products in each use class as Detroit. Jackson differs by having buttermilk in Class II and fluid cream in Class I. Grand Rapids classifies both buttermilk and half-and-half in Class II. Battle Creek has half-and-half in Class II along with cream products. Other manufactured products are Class III. Holland and Zeeland have been under the Muskegon order since May, I957 and have the same use classes as that mar- ket. Kalamazoo has another cooperative bargaining associa- tion and products included in that market's use classes differ considerably from Detroit and the other markets with half- and-half and fluid cream in Class II and fluid skim and butter- milk in Class III along with all other manufactured products. Only fluid milk and flavored milk drinks are in Class I in this market. Of more importance, than present use classes of the unregulated markets, are the actual milk products required by the various major city health departments to be made of farm inspected milk. It has been shown in the previous re- view of Federal order decisions in Michigan that the United States Department of Agriculture categorizes In Class I, or the highest use classes, only those products requiring full farm inspection by the local health departments. For this reason, fluid cream in Detroit was not included in Class I, but in Muskegon it was so included. During June, l958, the Chief Sanitarian at each of the major out-state Michigan city markets was asked, in a personal interview, to relate which milk products were actually reQuired to be made from milk from II6 the same inspected source as milk for fluid consumption. This was asked in regard to enforcement regardless of what the city ordinance on that market might state. All of the major city markets outside the Detroit area were in agreement on the major products they were enforcing to come from fully in- spected milk.2O These products were as follows: Fluid milk of all types Flavored milk Fluid skim Buttermilk Half-and-half Fluid cream of all types This would seem to indicate that a Federal order which included this Lower Peninsula area would require a high use class for fluid cream of all types. At the same time, such uniform inspection requirements would make it possible to obtain agreement on the use classes under a Federal order area including all of these cities. A major problem develops when these cities are included with Detroit area cities where the inspection of the farm sources of fluid cream is not re- quired. However, it was shown in the previous section of this chapter that there is, under present circumstances, sufficient inspected fluid milk on the Detroit order market to provide that all fluid cream come from farm inspected sources. The first move for uniform classification for a single Lower Pen- Insula order would be to obtain a change in policy enforcement 20These cities included Flint, Grand Rapids. Bay Citi- Saginaw, Lansing, Muskegon, Battle Creek, Kalamazoo and Jack- son. II7 on the Detroit market. This may be accomplished by an in- terested handler making the request to the city of Detroit Health Department (the dominant department in the Detroit order area) and if necessary the request may be carried to the City Council. The excuse, given by the Health Department of the city of Detroit, on insufficient funds for additional personnel would not seem to be a good eXplanation at the pre- sent time sinCe it has been shown that there is enough in- spected producer milk available to meet the needs for fluid cream on the Detroit market. Although some cream comes from outside sources, which are not inspected and is purchased from brokers by small dealers, the Detroit Market Adminis- trator reports that a large part of the fluid Cream used on the Detroit market is from fully inspected milk.2' Fluid cream under the order can be purchased at Class II prices as cheaply and with higher quality than obtainable elsewhere as manufacturing quality milk. This proposal is made on the basis of the best avail- able information recognizing that it may not be acceptable to some groups on the Detroit market. Historically Detroit has desired to be a Class I or fluid milk market as much as possible. This has resulted in a higher blend price to pro- ducers than on many large markets with a market wide pool. Placing cream in Class I would not lower the blend price. 2'Interview with Mr. George Irvine, Market Administrator, Detroit Federal Order Market, January, l958. ll8 However, forcing cream to be made from inspected milk would increase the possibility of a short supply and necessitate admitting new producers on the market, which in turn might lower the blend price if they became a permanent addition. _Fieiommendat ion: This analysis has reviewed testimony and historical development concerning product classification and the use c i asses constructed for the Detroit, Muskegon and the Upstate Mi chigan order markets. In addition use classes and product inclusion were reviewed for the major out-state Michigan mar- kets. The health departments of the major markets were also interviewed in regard to their inspection requirements for the various milk products. The principle criterion which was used to determine product inclusion in the Federal order markets reviewed was the health requirements of the various local markets. This ”’33 prevalent throughout the recommended and final decisions written by the United States Department of Agriculture in connection with these three Michigan orders. Inspection re- quirements were therefore compared for all major Michigan markets. On the basis of this criterion, two groupings of the most important milk products were made. Group I reQuired only p 1 ant or no inspection by the local department. On this basis the following groupings were made: I|9 Group I Group II Fluid whole milk Cottage Cheese Fluid skim milk Ice Cream Chocolate milk Ice Cream Mix Buttermilk Evaporated Milk Half-and-half Condensed Milk Fluid cream, all types Dried whole Milk Dried non-fat Milk Butter Hard Cheese All of the out-state markets required the group I pro- ducts to come from farm inspected sources. Detroit area cities differed by not requiring fluid cream from fully in- spected sources. However, it is recommended that an attempt be made to require this full inSpection of fluid cream on these markets. It was shown that sufficient supplies of in- spected milk appear to be available in the Detroit area to meet this need. In addition, itwas also shown that there is no scientific reason for treating fluid cream different from fluid milk on a sanitary basis. Only these two classes of use are perosed for inclusion in the Lower Peninsula order market. Other criteria did not appear to be used in the develop- ment of use classes or products in these classes on the pre- sent Michigan order markets. The seasonal pattern of supply and demand may be an important consideration for placing flush season products in a lower use category when the flush season products, for example ice cream and cottage cheese, are re- Quired to come from fully inspected sources. Major Lower . Peninsula markets do not require cottage cheese and ice cream to come from fully inspected sources and therefore under the I20 above classification they are already classified in the low- est price surplus use. Transportation costs might be used as a criterion for placing fluid cream, for example, in a lower use class below Class I because of the reduced bulk in shipping this product to market. However, with fluid cream coming from fully in- spected sources it is believed that most Michigan handlers would find it impractical to separate milk from cream in the production area and separation would be made at the pasteur- izing plant with much of the skim separate going for fluid use. This is the method employed on all the out-state mar- kets where cream now comes from inspected sources. Since there is no transport saving realized, there Is no basis for placing fluid cream in a lower use class on the Lower Penin- sula order market. CHAPTER IV TRANSPORT DIFFERENT IALS 1m ortance of Considering Transport Differentials in an Extended Order As regulated areas are expanded and extended into ad- jacent areas, the transport differentials may need revision. Expanded areas are often combined with large segments of intermingled milkshed and consumption areas and a shift in the center of consumption may occur. Methods of milk pickup and transportation are also changing rapidly and the whole system of transport differentials may need examining and modify ing. This chapter approaches the problem of transport allow- ances by asking some deliberative questions about such items as: ( l) the theoretical basis of transport allowances, (2) currently operative allowances in the Lower Peninsula mar- kets, (3) criteria for developing transport allowances, (4) desirable consequences of such allowances, (5) alternative transport allowances, and (6) the best alternative in the light 0f the proposed Lower Peninsula order area. Transport difTEPentials are one of the most important and difficult Consi derations which must be analyzed in this study. Wh - Rezt ‘ s the Theoretical Basis For Transport Allowances % to F uid Mfrk Ma‘eret‘s? Prices for fluid milk and manufactured dairy products in in a single market area with its characteristic surrounding I2I l22 mi lkshed offer a good theoretical beginning for a study of transportation differentials and for a good review of the pro- blem. Assume that competitive conditions are such that the prices of each product are determined by the relative supply and demand for each product in the market. Differences in product prices reflect only differences due to quality, guan- tity of milk used in making the final product, and transfer costs of milk in different forms. Recent United States Department of Agriculture data show the ratio of transportation costs of milk to an equivalent amount of cream is approximately 7 to l, to skim milk powder '5 to l, to American cheese l2 to l, and to butter 25 to l.’ Because of these differences in costs of transporting fluid mi lk and an equivalent amount of manufactured milk products, farm prices for milk used in fluid form in the market area drop more rapidly than manufactured milk prices as we move from the urban market into the milkshed. Specialized zones 0f production would therefore be expected surrounding this consuming center much as von Thunen hypothesised in his develop- me'"; of location theory and as reported in Cassell's, in re- Spect to milk marketing.2 These zones are. of course. subject to physiographic and political boundary conditions (Figure 4")- \ w—fi—w 'Anthony S. Rojko, The Demand and Price Structure for D “Products, Technical Bulletin HEB, Agricultural Market- 9 Service, United States Department of Agriculture, May, l957, p. '22. I 2Originally published in Johann Heinrich von Thunen, Der 30' i Q 0 erte Staat in Bezrehung auf Landwirtschaft and National- texnom e, anuary, l92l. This portion used in many American t3 on Land Economics. In Milk Marketing see John M. Cassells, A \Ma:§“d¥ of Fluid Milk Prices, Harvard University, Cambridge, .9 9 P. 200 l23 von Thunen rela- tionship to pro- von Thunen Rings duct prices T' 8 Per th. Butter ___3.....__9 Hundreds of Miles Figure 4-l Theoretical Relationship of Price to Dis- tance and Use of Milk Produced. In practice, principally due to the seasonal nature of milk introduction, there is no sharp dividing line between the zone (31' fluid milk and manufacturing milk production. Neither must these areas of individual item production be contiguous; intermediate areas may be devoted to other products or even iniii=ii>~‘--H:>le of agricultural production. Prices in this single city nuar1cald be expected to vary by the transfer cost between marketes. The relationship between distance and prices of milk for flLJicj consumption and manufacturing milk when several mar- kets . al.9’ Involved is illustrated in Figure 4-2.3 In this \ 3 Adapted from: Rojko, op. cit.,pp. 202 and 203. I24 diagram, point U is assumed to be the most distant producing area while point 2 is the most distant consuming center. The line UXYZ represents the location of many producing areas and consuming centers between the two extreme areas of production and consumption (U and Z). The price of milk used in manu- facturing dairy products at the market 2 tends to be higher than at producing area U by the amount WZ (which represents the cost of transportation of manufactured products from pro- ducing area U to market 2). Any point on line UVW represents the price premium on manufactured products over production area U reading the vertical distance above the base line UXYZ. At point x, the premium price is above the price in area U by VX. By contrast, prices of fluid milk are closely related between areas only when interregional movement of fluid milk products occurs, or can potentially occur. Barriers prevent movement in man areas. y Price Pre- Manufactured ___*___— Fluid Milk 23:12:: ilaove Milk Region A Region B Area U c. Premium needed /./ Premium ob- to Move Fluid , , tained for Milk from U.\\.}x ’4’ DFluid Milk Premium needed to Manufactured Milk firgdgcg ELULQ MUR— E Premium Required as w is Chan DU X Y 2. Figure 4-2 Relationship Between Milk Prices in Manufac- turing and Fluid Milk Regions. With Price Premiums Applicable to the Specified Areas. U is the most distant producing area. Z is the most distant consuming area. l25 In Figure 4-2, Region A is a manufacturing milk (sur- plus) region while Region B is a fluid milk region. A far- mer on the boundary between the two regions (x) is indifferent as to the use of his milk since he receives the same equivalent price in each outlet. The distance AV is assumed to be the premium needed to produce milk for fluid consumption over that for manufacturing purposes. If a close relationship exists between the two regions, the price of milk in the fluid re- gion would be represented by line ABC, which equals the price of milk for fluid use in region A at point x plus the cost of shipping fluid milk of the same grade from point X to any point in the deficit region B. if the supply and demand situ- ation in the fluid milk region is such that outside milk is not needed, then prices of fluid milk may be below the line ABC or, for example, correspond to the jagged line ABD. Prices for milk in region B cannot exceed the line ABC, in the absence of barriers, because of inshipments which can occur from region A. Nor can they go below the price line AE for any length of time, for it would then become more profitable to produce milk for manufacturing purposes. This theoretical presentation of a fluid milk market located on the edge of a surplus milk pro- ducing region appears to apply to the problem at hand. What Are the Present and Historical Location Differentials Un er e arious M c ,gan r ers The Detroit Market Present Class I.--A handler operating a "regulated 4Data on individual markets from respective Federal orders as written in Federal Register (See Appendix I). l26 supply plant, located more than thirty-four miles from the Detroit City Hall, or a "regulated distributing plant," located more than thirty-four miles from the boundary of the marketing area, receives a transport differential with respect to milk received from producers and used as Class I utilization. A handler operating a "regulated distributing plant" also re- ceives a transport differential with respect to milk received in bulk from a "regulated supply plant" or a "regulated dis- tributing plant" located more than thirty-four miles from the marketing area if such milk is utilized as Class I (pro rating to milk in this category the total utilization of producer milk received at the plant). The applicable differentials based on the distance the plant is located from the Detroit City Hall are as follows: Miles from City Hall Location Differential 35-50 miles l4 cents 5l-7O miles . l5 cents 7| miles and over I additional cent for each 20 miles or fraction thereof Present Class II.--There is no handler transportation differential allowed on Class ii milk. Present Producer Location_Qifferential.--Deductions for location differentials are made on all milk received from pro- ducers or cooperatives or plants according to their location from the Detroit City Hall. Prices quoted at first point of receipt, therefore, are Detroit less this differential. Rates I27 which are applicable are the same as set forth under the Class I handler differential above. Historical RevieW.--The Detroit location differentials have always been equal for both producer and handler. Handler credits apply only to Class I, as has been the case from the beginning. Deductions for producers apply to all milk re- ceived from them at country stations although part may be added back by the amount that the excess price exceeds the Class II price (seventeen cents under present order). The historical rates under the Detroit Order are shown in Table 4-l. Other Michigan Markets Muskegon.--This market has had no transport differentials since the order's inception. Upstate Michigan.--Effective November l, l955, a handler location adjustment was allowed for milk which was received from producers at a fluid milk plant located more than ninety miles but not more than lOO miles, by shortest highway distance, from the court house in either Gaylord or Traverse City. This milk had to be utilized as Class I and the price in this zone was the effective Class 1 price less $O.l8. Beyond the 90-lOO mile zone the differential increased by one additional cent for each additional ten miles or fraction thereof. In making Payments to producers or cooperative associations a handler was allowed to deduct, with respect to all milk received by him from producers at a plant located more than ninety miles |28 A.H x_ncmaam mmwv co_m_>mc couco yo mmymu _msom wmumo ..mm. ._ cmnEmaamm m>_pummwm Hmcaeiicmuco «_ocvmo c_ ow.¢mm co_uumm soc» _m_acmcwmm_u mamm__sicm_ncmxm E:E_xm§ oz mm. mmi_wm m. _n. owmi__m w. on. o_mi_om w. mm. oomi_m. 0. mm. om_i_m_ m. mm. om_a_w_ a. cm>o om. om_i.m_ m. om. ncm mn_ mm E:E_xm2 mm. ow_i_m_ m. mm. wm_iom_ m. oz em. om_i_d_ __ em. mm_imm_ __ m. onmi__m o. o. o¢_i.n_ o. m. _w_id__ 0. mm. o_mi_m_ m mm. om_i_m. 0 mm. n__lmo_ m co>o m. om_i_n_ w _m. om_i___ w _m. mo_iwm m _m. new mm m m. Oh_i_m_ w om. o__i_o_ w om. hmiom n m_. om_i_n_ o m_. oo_i_m e m_. mmimm o m_. on_i___ m w_. omi_m m w.. _wian m e_. o__u_m a n.. own.» a ~_. nwimo a w_. omiom n o_. o>i_m m 0.. moiwm m m_. o~a_m m m_. omu_m m m_. mmaom m a_.oa omimm _ a_. omumm _ a_.oa maumn _ wumm mm__§ % wcoN mama mm__2 k mcom mwmm mm__2 % wcom puma mw__2 mcom 0mm. ._ .eamm ammo ._ .cms mmm. ._ .>oz _mm_ .ei,.eammii:ll Ammm_ ._ scaacmsi_mm_ ._ Langmuqmmv mm_:bmcow mm am_.E w .cmuco u_ocumo ecu c. mmmcmco _mo_coum_I _Ia mama» I29 from either Gaylord or Traverse City, the amount per hundred- weight applicable under the handler schedule above. On March I, l956, the producer location adjustment was revised to read: A handler may deduct with respect to all milk received by him from producers (or assigned as associated producer milk) at a plant located more than ninety miles from either Gaylord or Traverse City the amount per hundredweight applicable under the handlers schedule above. Effective October l, l956, both handler and producer location adjustments were changed (in line with the Detroit order change of September l, I956). The new provision allowed deductions on the Class I price (in case of handler) or deduc- tions on all milk (in case of producers) received from pro- ducers at a fluid milk plant located more than ninety miles but not more than llO miles, by shortest highway distance, from the court house in either Grayling or Manistee. The, amount deducted from the effective price in the 90-llO mile zone equaled twelve cents. One cent additional was allowed for each twenty miles or fraction thereof over llO miles. The Detroit provision previously cited (September I, l956) reduced the location differential for plants more than 50 miles from Detroit. This increased the Detroit prices applicable at plants nearest the Upstate marketing area by six to nine cents in relation to prices f. o. b. Detroit.5 Therefore to keep 5United States Department of Agriculture, A. M. 8., Re- commended Decision with Respect to Propgsed Amendments to Marketing Agreements and Order Re ulatin ‘the Handling of Milk in Upstate Michigan Marketing Area, (2i FR 8235, August l8: l956). '30 Upstate order prices in line with Detroit a change was recom- mended in the amount of differential charged on the Upstate market. The reason for changing the Upstate basing points to Grayling and Manistee is well given in the recommended decision: The basing points used for measuring lodation ad- justments should be changed to points nearer the southern boundary of the marketing area. The geographic location of the marketing area is such that location adjustments have practical appli- cation only to the Southward. Use of Traverse City and Gaylord as basing points provide sub- stantial adjustment to handlers located relatively short distances from the marketing area while han- dlers with plants within thg area compete with each other at greater distances. Non Regulated Major Lower Peninsula Markets.--There are no transport differentials allowed at any of the out-state city markets. Receiving stations are maintained at only three markets and these stations are located within the re- spective city limits with no transport allowances necessary. What Criteria May Be Used In Developing a Transport_9ifferential? There are many criteria which may be considered in develOp- ing transport differentials; some of them are outlined below. The list is by no means exhaustive nor are all of these worthy goals for society. It should also be pointed out that no trans- port allowance could satisfy all groups or meet all of the out- lined criteria, most of which involve equity problems. I. A transport differential may affect equity of prices of near and distant producers. 51pm. l3l 2. --can affect distribution of income between dealers and producers. 3. --may affect dealers' ability to compete on resale. 4. --affects prices paid by consumers. 5. --will affect location of supply of milk for fluid consumption and boundaries of the milkshed. 6. --affects allocation of milk supply to different consuming centers. 7. --can affect location of surplus milk for manufacture. 8. --affects inter and intra-cooperative relations. 9. --can be used to encourage or discourage the supply of fluid milk on various markets. lO. --can be part of strategy of cooperative to get control of transportation and physical handling of market milk, a bargaining weapon. ll. ,--affects efficiency in terms of: mode of trans- portation, location of manufacturing plants, and receiving stations. What Should a Transport Allowance Do? In addition to considering the possible criteria which might be used in evaluating a transport differential, it is important to select from these some standards which might be the most acceptable for construction of a transport differen- tial under a Lower Peninsula order. The United States Department of Agriculture seems to have the following basis for Federal order transport allowances (referring to Federal order markets with country receiving stations); The Federal orders provide location differentials below the established minimum price. These differ- entials reflect, not necessarily exactly, the cost of transporting bulk milk from any point within the supply area to the city processing plants. The '32 purpose of the differentials is to make it possi- ble for handlers to procure milk throughout the supply area at a delivered cost that is uniform with that of other handlers. While location differentnns are based mainly on the cost of transporting whole milk, other factors may be taken into account, such as convenience, availability, regularity, certainty or seasonal uniformity of supplies, existence of competing markets and the historical relationship of prices within the supply area.7 This criterion seems to consider it a "fair" equity principle to allow handlers to purchase milk at the same delivered cost. This is in line with criterion 3 listed above since this crit- erion would allow dealers (other things being equal) to com- pete on resale. It also preserves the "perfect market" con- cept with differences in these prices between the deficit and surplus area varying by approximately the transfer cost be- tween the two areas. Another objective of transport allowances, not explicit in the United States Department of Agriculture reference cited but seemingly important in criteria 5, 6 and 7 outlined above, is to protect the principle of best alternative. The general principle governing exchange and specialization is called the principle of best alternatives. It may be stated as follows: In his endeavor to obtain the commodities he desired, an individual has two possible alternatives. He can either produce the commodities for himself directly, or he can produce some other commodity and exchange it for What he wants. Which alternative he will choose will depend on which is the easier way of getting the commodity he wants, for it is the easier way (least cost way) that he will follow. 7Regulations Affecting the Movement and Merchandising of'lek, Marketing Research Report No. 98, A.M.S. United Etates Department of Agriculture, June, l955, p. 6|. 8K. E. Boulding, Economic Analysis, Harper B Bros., N. Y., '33 The same principle applies in trade between countries and regions. It is the comparative advantage an individual or country has over another, not the absolute advantage, that will determine where production will take place. In constructing a transportation differential for the Lower Peninsula Michigan order, it would seem desirable not to upset this principle any more than necessary to accomplish the other objectives of la efficiency and commonly accepted equity criteria. The efficiency objective is also important. The trans- 9 port differential rates set under the order should be such that total transport cost on the market will approach a minimum. This would be accomplished when the transport differentials under the order promote shipments by producers to consuming centers closest to their farms with a minimum of cross hauling or unnecessary distant hauling. Besides proximity of pro- duction for fluid use, the allowance should keep manufacturing plants located near the outer edges of the milkshed to take advantage of reduced bulk and perishability in shipping manu- factured products. Several other criteria were also listed in the previous section, but they promote the personal gain of some individuals or groups over others and are not commonly accepted objectives. The three criteria as expressed in the "perfect market" concept, the law of comparative advantage and the efficiency criterion seem to be the most commonly acceptable objectives of a trans- port differential. :34 What Are Some Alternative Location Agjustment Provisions Which Might Be Part of a Lower PeninsuTa Order? There are innumerable methods and combinations of methods which might be employed, but the following are considered the most important. In each case the alternative will be described and then examined in light of pertinent criteria. Although these transport differentials are constructed with one Lower Peninsula order in mind, in many instances the alternative might be worthy of consideration under a city type order as with Detroit, or under two or more orders for the Lower Pen- insula area. Because of the equity problems involved, selec- tion of the best alternative would undoubtedly vary as between groups. However, an attempt is made to list some of the con- sequences which might be expected from the use of each suggested alternative under a Lower Peninsula order and what appears to be the best alternative is selected using the commonly accepted criteria as presented in the previous section. l. Rates That Reflect Actual Cost and Vary in Proportion to DTstance . “__ This first alternative would apply as part of most trans- port considerations whether under one order, or two or more for the Lower Peninsula,and regardless of what points were accepted as basing points. This alternative proposes deducting trans- port differentials from producers and crediting handlers at a rate reflecting the actual cost of transportation. The ex- act rate to be used would be constructed on evidence obtained in public hearing. There is a wide disparity in the results '35 of studies on milk transport costs. Cost examples from New York, the United States Department of Agriculture and a re- cent Detroit hearing would indicate that the present Detroit differential is too low.9 However, at the time the Detroit and Upstate differentials were changed to add one additional cent for each twenty miles beyond a base zone instead of the previous one cent for each ten miles, it was stated by some 9Unlted States Department of Agriculture, A.M.S. Final' Decision With Respect to Proposed Amendments to the Tentative Marketing Agreement and to the Order Regulating the HandTTng BT‘mrk in the New York Meg—geolean Marke‘frng Area and in Northern New Jersey. (22 FR ET9ETTJune‘T4, l957. Costs of haufffig on‘the New York Market from country plant to city by tank truck were estimated at a fixed cost of ten cents per hundredweight and a variable cost of l.4 cents per hundred- weight per ten miles. For the average zone (200-2l0 miles) this would amount to an average cost of thirty-eight cents per hundredweight or l.9 cents for each ten miles to that zone. Recent United States Department of Agriculture data com- pares closely to this. Re ulations Affectin the Movement and Merchandising of Milk, Research Report No. 9%, AgricuTturaT Marketing Service, United States Department of Agriculture, June l955, p. 9l. This study showed that dealers' buying price for fluid milk increased an average of l.92 cents per hundredweight per ten miles increase from a point in Wisconsin. This price was also compared with rates charged for large volume haulers. The study showed that their rates varied from l.75 cents to about 2.0 cents per hundredweight per ten miles dis- tance. From A Brief in Behalf of Michi an Milk Producers' Association submitted in the matter 0; preposed‘amendments to Detroit Order, February 3, I958. A prOposal was made at the lwearing for amendment to the Detroit order to raise the sche- dule of rates by two cents, thereby deducting sixteen cents at 'the 34-50 mile zone and one additional cent for each additional ‘twenty miles. Testimony was entered that the Michigan Milk lDroducers' Association, Which is the largest single hauler on 'the Detroit market, has charged two cents above the established rates for hauling milk from receiving stations into the mar- l< _maau< .ma.cwco_um.om ooscm ~ mwm_o cmucOicopcn 7 I4 «*5: oaxguauau D 3M u. 003:0 4\ \\\. «3st (.5 ”2.2w& tulip m-s sc=m_c deuw 00« AP caviar—«(m .zwtoz Je 00. 0.4 I48 and the distance from the region of greatest surplus (centered in Eau Claire, Wisconsin). There were two other local surplus regions in the United States with low Class I prices relative low points occured in to this Wisconsin surplus area. These and on the west Coast. The analy- Vermont and Upstate New York, in- 1‘71 sis showed that the dealers' buying price for fluid milk creased an average of l.92 cents per hundredweight for each tunnfiles increase from Wisconsin. T This method of basing point pricing using Wisconsin as the center contradicts that presented for Montcalm County. However, the new proposed Upper Peninsula and the Northeastern in this manner. Wisconsin order areas have prices indirectly set The recommended decision for these orders prOposes zone Pricing. Prices of Chicago and Milwaukee were used to set Class I prices in this area since they were considered to be the dominant The Eau Claire, Wisconsin price price influence in the area. based on its location from Chicago would be approximately forty cents under the Chicago order Class I in l957. The Chicago order (Slass I price in the Northeastern Wisconsin area had been averaging seventy-four cents over the basic formula price. The Milwaukee price was also directly related to Chicago and had been averaging eighty-six cents over the basic formula price. The differential allowed for movement into a surplus area decreasing at the rate of two cents for each fifteen miles under the [Chicago order beyond the first seventy mile zone. On setting the differential for the Northeastern Wisconsin order, the recommended decision had this to say: :49 Oflmr than this zone differential ($0.74 near-in mntion in Wisconsin order area and 30.84 most mntherly portion of Wisconsin area.) there is normed to provide any reduction in the Class I mflce for plants at distant locations. This is miarea where substantial volumes of milk in ex- cesscfi'local requirements are produced and as a mwmequence producer prices approach a minimum. To the east is Lake Michigan, to the south Chicago and Milwaukee establish competitive prices higher than here provided, and to the north this decision establishes Michigan Upper Peninsula prices higher than those here provided. To the west the nearest regulated markets, Minneapolis-St. Paul and Duluth Superior, are also at higher levels.‘9 In effect, this order uses Wisconsin as the center of the sur- plus area and increases prices on Class I milk for movements from this area. The order for the Upper Peninsula proposes three price zones. These zones were indicated in Figure 4-3, which also showed the location of the order marketing areas of Michigan and other nearby Midwest orders and Class I pricing in these areas for I957. The reason for the proposed method of Zone transport differentials is well summed up in the re- commended decision: The influence of the Northeastern Wisconsin market should be reflected in the level of the Class I price under the Michigan Upper Peninsula order. The Wiscon- sin area is not only a source of alternative supplies of rnilk but provides considerable direct consumption 'for sales from Wisconsin plants. The Michigan Upper Fkywinsula area is however, quite extensive geographi— cal ly, and some portions are much farther from the VVisconsin production area than others. As a conse- anence transportation costs from Wisconsin points arwa substantially higher in certain parts of the area.20 '9Lntited States Department of Agriculture, A.M.S., 53¢ commended Decision With Resp_ect to Proposed Marketin A ree- menfsi1nd UrdersfieguTatan the HandTing of Milk in Micfiigan r' Perrinsula and Northeastern Wisconsin Marketing Areas, Ugge 1; 23 FR 3 F8), June 3 IQSF. 2othid. ' '50 Theanel differential, over the basic formula, was thus set atam mwmal average of $0.94, Zone 2 at $l.l4 and Zone 3 (the This would seem to re- most distant from Wisconsin) at $.34. lOO flmfl.m1approximate difference of twenty cents for each minm amdis close to the estimated $l.92 cents per each ten mium asreported in the United States Department of Agricul- oo. 2i JV. ture Marketing Research Bulletin No. For plants which might be regulated under the Upper Penhwnna order, yet outside the market area in Wisconsin, Minnesota or Lower Michigan, transport differentials from the Zone l price (using Ironwood or Iron Mountain as base points) to the west toward Wisconsin or the Zone 3 price (using St. Ignace as base point) to the south toward the Lower Peninsula of Michigan are allowable. These differentials allow two cents deduction for each twenty miles beyond the additional At the 50-70 mile zone the deduction is ten 50-70 mile zone. The close relationship of the estimated Upper Peninsula cents. order prices to the Wisconsin surplus area (for example, Eau These estimated prices were Claire) were shown hifflgure 4-3. l957 w th annual constrwurted using the basic formula price in It has been cjifferwyTtial suggested in the recommended decision. pren/iOLusly shown that Milwaukee and Chicago prices are so ad- ,justeuj tc> this Wisconsin surplus area. Indirectly, due to the location of Detroit in the southeastern portion of the Lower l Fte ulations Affecting the Movement and Merchandising Of “Ailb OE. Cite, p. 9T0 l5l Pmfinmfla,the order prices of that market are also related n)theihsccnsin surplus area. Based on a ccncentic ring from EmJClaHe passing through Detroit in l957, estimated order mficesvmuid have been predicted to be 34.36--actually they wena$4.fh Negotiated Class I prices were, of course, higher mm.arermt considered in this section since they have not tmen setibr all markets, vary considerably between markets, and tamainto account other things besides transfer costs be- tween markets (for example bargaining power plays a big part). A system using Eau Claire or some similar point in Wis- consin would seem eQuitable. It would approximate the "perfect market" concept of uniform prices over the area, with prices in the deficit area higher than prices in the surplus area by the amount of transfer cost between the two areas. This is considered an acceptable objective. In addition it would maintain the traditionally higher Detroit prices and would help to ameliorate the problem of outside milk replacing Michi- gan producers because of poor alignment of prices between the defi:rit and surplus areas. Some possible modifications to the Eau (:lairtz base point are discussed in the next section. (ea) Some Possible Modifications of the Eau Claire Basing Point. (l ) "St. Ignace_plus" differentials and "Chicago plus" differentials.--One might suggest using road miles instead of in computing transport differentials from the Wis- air miles Ignace consin surplus area to the two points of entrance (St. and Chicago) to the Lower_Peninsula area. Air miles could then '52 betwedfrom these points to calculate the actual pricing zones. Sudialmmification appears more realistic since it is the dis- tancetw'highway which will lead a dealer to decide whether Uncomelnto the Lower Peninsula of Michigan with Wisconsin The Eau Claire base point in this case will not deter- mHk. but milk would be ex- mhwethe place of origin of movement, pectmito come from the intensive production areas of Wiscon- sin nearest to the Upper Peninsula via United States highway No. 2 across the Mackinac bridge (In this case Shawano appears to be the center of intensive production in Northeastern Wis- consin), or south through Chicago around Lake Michigan and north on United States highway No. 3i into Lower Michigan (in on the edge of the Wisconsin surplus area which case Chicago, could be used as a base point). This relationship is shown in Figure 4-4 A.‘ Whereas Class I prices set by air miles from Eau Claire increased prices across the Lake and through Michigan from west to east, the road miles would increase prices from St. Ignace sxnxth and from Chicago to the northeast. Lake Michi- gan iri this case is assumed to be a natural barrier as it has Ignace pricing would be similar to been historically. The St. the Upstate order price relationship with the present Detroit order; however, prices in that case are decreased as the move- rnent. is txaward the south from Grayling and Manistee. The re- conwnerujeci decision for the proposed Upper Penin5ula order uses St. Ignace (or Upper Peninsula Zone 3 prices) minus a trans- port differential into the Lower Peninsula. An increase in 'fii'li |53 fl I "Detront :r. " mm.“ “a minus 1.1“" wpfi ‘ ,—a~f‘-\£:L;).A. "St. Ignace .. s” ' "lama plus" and ‘ 3 5., "Chicago plus" «229%: “.11 °€Z CHICM0\ . o l 26'”. themes gUMMAi-T 0 ' "‘< _mapu< ma_:mco.wm_mm mo_cd ncm_m gouge umch mus mu:m_u mm . \\ I a... .\ \ sat u2 ((3. . AWN \}.$ 6 “EWWQMQ FOW‘U\§U . oo ‘ 40L. . iozun 1.....«3. k m“ k9 Q 1 $ , «II‘ 02133.40 . . . sod / x a \ s a .M A. usesouxw Ww .3» m 223.3}..s: fianfirhzoz n Saaxgwl ox.) KhlLD r; 3’ M :9." '59 can transfer packaged fluid milk. Aiwansport differential should apply to blend prices as well as Class I prices to direct producers to markets where rmeded. The United States of Agriculture bulletin reported before showed the producers' blend price from Eau Claire, Wisconsin was below the calculated Class I price.93 Blend prices were shown to vary l.35 cents per hundredweight per ten miles versus the l.92 cents per ten miles on Class I. This was ex- plained by the fact that the blend price is an average of the Class I price, which in- creases rapidly with distance, and a manufac- turing class price which increases very little with distance. Blend prices do not represent prices at which milk for fluid consumption is available for shipment to other markets. Even if arbitrarily high Class I prices maintained by regulations are in effect or sanitary regu- lations are used to exclude 'other-source' milk, producers are likely to make adjustments by changing markets or expanding output in such a way as to make bLend prices competitive with nearby markets.2 Blend prices under a Lower Peninsula order with a mar- ket wide pool will be uniform and will be based on the en- tire area's percentage of Class I utilization. However, Class Igorices will vary if set under a surplus base point system dependent on location from this base point. This same varia- tion should be reflected in producer prices in movement to- ward tiue surplus area. No producer location differential will be allowed under the proposed Upper Peninsula order, but an individual handler pool will be operative on this market with the differences in Class I prices in the various zones reflected |60 Because a market wide pool is in blend prices to producers. recommended on the Lower Peninsula market and because of the extrmmedistances involved it would appear that producer differ- milk eQual to those transport entials should be allowed on all differentials set for handlers' on Class I. (6) F. O. B. farm pricing?5-All previous discussion of alternative methods of constructing transport differentials ‘71 have assumed that such differentials would be added to the I“ 1 price at the city from a surplus point or Subtracted from the city price at some receiving station. Another method of pricing which is often suggested is to set the rate f. o. b. farm. Under a true f. o. b. farm pricing plan the prices paid to a producer would be based upon his location regardless of An f. o. b. farm pricing plan where he shipped his milk. would require that a transport differential The allowance would have to be large enough to be determined for each farm. encourage handlers to pay the transfer costs of moving this milk from the farm to the handler's plant. Since the farmer would receive the same price at his farm regardless of where l1is milk was delivered, he would not be influenced by the amount of the transport differential to ship to one receiving plant or city market than to another. F. <3. b. farm pricing is not recommended for consider- ati:n1 wit!» the Lower Peninsula order for the following reasons: 25Frnr further development of f. o. b. farm pricing see E. E. Weeks and Associates, Location Differentials in the Pu et Sound Milkshed, Bulletin 577, Btate College of Washing- ton, December,l . l6! l. A transport allowance would have to be set for each farm or group of farms. This would not seem to be administratively feasible on a mar- ket which would have an estimated l6.000 pro- ducers shipping to the major consuming centers. 2. A problem is presented in determining handlers transport differentials. Under the present Michigan orders, where transport allowances are computed, handlers are allowed transport differentials only on Class I milk. The Class II milk price then applies f. o. b. the re- ceiving station or point of first delivery. With f. o. b. farm pricing Class I and Class II prices would have to vary by distance, since it would be impossible to separate out Class I responsibility by location of production. 3. Farm-to-plant hauling rates are currently de- termined by negotiation between the individual producer and the hauler, with the rates varying by local conditions. To put this portion of the farm-to-city hauling rate under an order program would present a difficult task and is one apparently not desired 8y the United States Department of Agriculture.2 4. F. o. b. farm pricing would not seem to have merit if the f. o. b. farm price were set from some point of surplus milk production as dis- cussed under the Eau Claire, Wisconsin and Montcalm County basing points. There would seem to be little justification for setting the f. o. b. farm price at a surplus basing point price plus transfer costs to the farm when in reality, under the "perfect market" criteria, price would be the surplus area's price plus transfer costs to the deficit consuming center. Setting the price in this manner at the farm would not alleviate the problem of later having to set a transport differential from the farm to the central city. 25H. L. Forest, Director Dairy Division, A.M.S., United States Department of Agriculture, Washington, D.C., "New Pro- blems Accompany New Dimensions of Milk Markets," Paper given at the annual meeting of New England Milk Producers' Associa- tion, Boston, Massachusetts, October 3!, i957. l62 (7) No location differential.--Thls alternative pro- visHNIwounleliminate both producer and handler differentials. All handlers would, therefore, pay the same price for Class I andiflass IInfilk regardless of the distance of their receiv- ing plants from the major market. Producers would receive the same price at any plant to which they ship their milk. Each producer would have to pay the cost of hauling milk from his farm to the receiving station (as is true under present provisions). The handlers delivered cost of milk however would vary according to location of his producers. This would be an inequitable situation and violates the basic prin- ciple which is behind establishment of tranSport differentials under Federal orders. It is considered desirable that handlers be allowed to procure milk throughout the supply area at a delivered cost that is uniform with that of other handlers on the same economic market. For this reason a location differ- ential is considered necessary under the Lower Peninsula order. (8) paid by handlers directly to producers delivering milk to Direct delivery premiums.--This refers to premiums locations reflecting factors other than those specified It is largely associated with varying transportation costs. used to eauate the prices for handlers with receiving stations to those who receive milk directly without the additional receiving station expense. Most of the large out-state markets receive all of their milk by direct delivery to the city. th the same time direct deliveries to Detroit are on the increase. Table 4-3 shows that there has been a great I63 change hithe amount of milk delivered to the city plants in Detroit. In l954, l9 percent of total producer milk was de- livered directly While in I957, almost 26 percent of producer milk on the Detroit market was shipped direct to the city plants. For Class I milk these percentages were of course higher due to the higher proportion of nearby milk used in Class I utilization. With Class I milk,24 percent was de- livered directly in l954,while 34 percent arrived direct in l957. Table 4-3 Percent of producer deliveries and of Class I milk received at each zone - Detroit, l954 and I957.a Mileage Zone Percent of mlTk deliveries from Detroit City Hall l95h 257 All producer Class I All producer Class I milk milk Direct deliveries i9.04% 24.03% 25.72% 34.06% 35-50 l2.79 l6.39 8.04 lO.9l 5i-7O l4.29 l5.l4 8.99 6.58 7l-9O l8.26 l8.93 l9.25 20.75 9l-llO 20.38 l7.38 l9.4l l7.42 ill-lBO 7.l8 3.73 7.914 2.62 l3l-l50 3.82 2.32 6.39 5.79 l5l-l70 l.92 0.88 0.85 0.44 l7l-l90 l.6l 0.59 2.2l 0.84 l9l-2l0 - - - - 2ll-230 0.7! 0.6l l.2O 0.52 lO0.00 IO0.00 lO0.00 lO0.00 aSource: Detroit Market Administrator's Records. Another important change which has taken place in the Lower PeninSula supply area is the greattreduction in the number of country receiving stations. Only three of the large outstate markets now have receiving stations and all of these are located l64 in thecfities which they supply. At the end of I957 there werecnfly twenty-five receiving stations in the Detroit pool (Appunflx II). Since that time there have been two further reductions. 'The Michigan Milk Producers' Association Tuscola station was closed on March 3i, and the Detroit Creamery Brighton station on February 28, l958.27 In l930, it was estimated that there were over seventy-nine receiving stations for the Detroit market.28 The reduction in recent years has been very drastic and may lead to complete elimination of such stations in the future. For this reason and because no pre- cedent has been set for direct delivery premiums in Michigan it is not recommended for inclusion under the Lower Peninsula order. Such direct delivery premiums are allowed under the New York-New Jersey order, but basis for these had been set historically and under the order only those dealers in cities which had previously paid such premiums were required to do so under the order.29 27Detroit Market Bulletin, Monthly report from the Market Administra or s fice, Detro , April l958. 28J. T} Horner, "Trends in a Typical Large Industrial Center," paper given at the American Institute of Cooperation at East Lansing, Michigan, July 8, l940. Estimate given for 75 percent of the market. 29 Lkiited States Department of Agriculture, A.M.S., Final Decision With Respect to Agreement and Order Regulating the (If Milk in New York and in Northern New Jersey,5T22 Handlin FR 3191;, June 11, l957I. I65 Recommendations: Several alternative methods of constructing transporta- tion differentials have been considered in this chapter. These alternatives were examined in the light of several criteria considered the most commonly acceptable for construction of a under a Lower Peninsula order. A basing transport differential point centered on the’ large surplus area in Wisconsin seems to be the most equitable for all groups concerned. However, it is recommended that it be somewhat modified to use the "Detroit minus" differentials. The reason for the change will be brought out below. It was shown that this Wisconsin base point had been taken into account (although not explicitly) in construction of Class I prices under many of the Federal milk orders in the Mid-west and was explicitly used in setting Class I prices under the new proposed Upper Peninsula order. This method of pricing would seem to mitigate some of the problems of prices set using other methods which violated the "perfect market" concept. The Detroit minus differential is recommended for the following reasons: i. This method decreases Class I prices toward the Wisconsin surplus area's entrances to the Lower Peninsula via St. Ignace and Chicago. 2. 'This system does not have to assume that Lake ilichigan is always to remain a barrier to ship- inents from Wisconsin since it also provides for a lower Class I price in that direction. 'The plan provides for a decrease in price toward 'the local Michigan surplus areas in central Michi- gan and in the "thumb" area and assures producers in those areas that their milk will have a market at order prices. l66 The plan has some limitations which should be recog- nized. First, it does not represent exactly the "perfect market" concept which has been shown to be an important crit- erion. The equal price lines are convex toward the large surplus area rather than convex toward the deficit area. The equal price lines do allow price to decrease in the same dir- ection as the "perfect market" concept. Secondly, this method provides lower prices in cities directly north of Detroit than justified using the "perfect market" concept. It should be pointed out that this may be justified on the basis of the location of these large out-state Michigan cities in the vicinity of the local surplus area. The author wishes to reiterate that there are actually many sound arguments which could be advanced for using the "perfect market" concept of "Chicago plus" and "St. Ignace plus" differentials. However, it presents one fundamental difficulty since it does not allow for a decrease in price in the "thumb" local surplus area. If the Class I price in this area was maintained at a rate equal to or above Detroit, it would lead dealers to ignore this supply of nearby milk. Wisconsin milk could be purchased at a lower price at the f. o. b. Chicago price less transfer costs. The recommended method of setting price differentials under the proposed "Detroit minus" differential plan is shown with hypothetical price relationships on the map in Figure 4-6. l67 Mac—*4.— v? o. N Ni i. i I J \3 (mass 4.00 103’“ Figure 4-6 Price Relationship at Various Portions of Michigan's Lower Peninsula Using the "Detroit Minus" Transport Differential. This is the same relationship as shown in Figure 4-4 C. Using a "perfect market" concept, St. Ignace Class I would be six cents over Chicago and Detroit would be fifty-four cents over Chicago (transfer'cost assumed to be two cents for each ten miles). If the Chicago price was 84.00, then the price at St. Ignace wwuld be 84.06 and the price at Detroit 84.54. Producers delivering to any plants located within twenty mile radii \\g--ELIOO 90— . 9O 80- . 80 ’~— 3:: OJ [0 J F M A M J J A S O N D Figure 5-2 Index of Class I Sales of Producer Milk- Detroita aSeasonal relatives, adjusted medians percent of centered l2 month moving average, original data monthly average of daily Class I sales, Source, Detroit Market Administrator's Office. '72 year period shows that Class I sales varied only from a high of approximately 2% points above normal to a low of 4 points below.2 The relatively uniform Class I sales and wide variation in seasonal deliveries of producer milk has tended to create a surplus in the spring months on markets which have just sufficient fall supplies. There is much inefficiency from having such a seasonal surplus on a market. Extra receiving stations, hauling equipment, and manufacturing plant capacity must be maintained although operated at much less than capacity much of the year. Farmers, of course, have loss through lower prices for manufactured milk than for milk moved into fluid consumption. To combat this problem, seasonal price plans of many types have been experimented with on most fluid milk markets. Detroit's base and excess plan was first used in January, l923 and has been used continuously on that market since l930. (It was included as a provision in the Federal order for Detroit When it became effective in l95l. It can be shown that this plan has also been very effective. At the Detroit promulgation hearing it also was brought out that, when the base and excess plan of payment was re-introduced in l930, milk deliveries to the market in the highest production month were l75 percent of deliveries in the lowest month. After IO years of operation (l940), milk receipts in the highest production month were only I26 percent of the lowest 2Normal as used in this chapter means--if the same amount was utilized or produced each month of the year., 7“. ' I73 unonth. ‘Hne war caused some change in seasonal production and by l949 the high month was l34 percent of the low month. It was stated that, If the seasonal variation of l930 had prevailed in I949, and November deliveries had been only ade- quate for market needs (ll5 percent of Class I utilization), deliveries in June would have been over 20l percent of Class I and in volume over 60 million pounds of milk in excess of Class I needs.3 It was concluded that this would have completely demoralized the market. '3». kiss-#- The plan was apparently very effective prior to the Federal order and but u r it can be demonstrated that it has been effective since that time. Figure 5-3 shows the seasonal in- dex of milk deliveries by Detroit Federal order producers com- pared with milk production for the balance of Michigan. It is clear that the Detroit producers have a less erratic pattern of deliveries than the State's monthly production less Detroit. In June, Michigan production less Detroit was 28 points over normal while in November it dropped to approximately l9 points below normal. For Detroit producers, the variation was from l0 points over normal in June to about 6 points below in November. This same favorable pattern can be seen for Detroit when compared With other nearby Federal order markets (Figure 5-4). In this case Detroit is contrasted with the other two 3United States Department of Agriculture, P.M.A., Re- commended Decision With RLspect to Pro osed Marketin A er- ment and Order Re uiafin Handen of Em: in the Degroit, Mhflfigan Marketing Area. (l6 ER 2084, March 6, l9 . I74 Index Index l4Q_ _l4O l30_ ._l30 Michigan Production Less Detroit Pro- l20‘ cers' liv ries _I2O llO_ _llO lOO lOO *Detroit Producer Deliveries , 90_ _ 9O 80j L 80 7O. 1- 70 db 4.- J F M A M J J A S O N D Figure 5-3 Seasonal Index of Milk Deliveries to Detroit and Michigan Production Less Detroit - (July l952-June, I957)a aMonthly average of daily deliveries to Detroit Order Mar- ket and of Michigan farm production less Detroit deliveries. Adjusted medians of percent of centered l2 month moving average. Original data from: l-Detroit Market Administrator's Office, 2-Michigan, l956, l957 from Milk Productionfign Farms and Stat- istics of Dairy Plants A.M.S. UfiTfed‘Stafes Deparfmenfof Ag- riEulture‘EZbruary 2B, l958. Data l95l—l955 from Michi an 59;. Statistics, Michigan Department of Agriculture, July, 956 and June, l957. a: n? -- is mmmcm>m mc_>os fiancee mm. umcmucmu co achLma mo m:m.cms pmumamp.uuowmm wcmoc soc. uowau.cc~ mm «name i mwoxcmg meLo _acmnmu oumwman new comoxmsi .22 mm .oco_o» .«.ocumo ow mu_Lo>_.oo x__2 Louapoca so xoncm _acowamm sum mcsm_u mefl.wm.nseesasszom..ne.z ., s F _ i HO .4 a a \ .3 oo. Nmm_lmmm_ IO._ ouo_0F 2 ... s o z o m < a a z a s. a. b n n p n . p p p . p p p . Hb )7 If u .m oo 40— . ill: OO— . +0: V : 50:? NE. co mxmsz H.0meo em. ON. l7 U‘x Michigan Federal order markets and with Toledo, the nearest out-state Federal order market. Muskegon has had a base and excess plan since l929 when the market was organized by the Michigan Milk Producers' Association. This plan has also been used since the beginning of that market's Federal order in October, l953. It has a more variable seasonal pattern than Detroit.4 The Upstate market has very uneven producer deliveries and does not have either a base and excess or a fall premium plan. However, this uneven production pattern is perhaps more efficient on t.ie Upstate market, than it would be on most other United States markets,because of the unusual consumption pattern in the area. At the time of the promulgation hearing concerning the Upstate Michigan order neither a seasonal difference in the Class I differential nor a seasonal price plan were included. It was stated at that time that: The greatly increased demand which characterizes the Upstate area in late June, July and August minimizes the need for any such plan (base rating plan was under consideration). In May and early June there is seasonally excess milk to be dis- posed of for manufacturing, but the flush of pro- duction does not occur until June, when such ex- cess is consumed locally as soon as the resort season opens. 4This can be accounted for in part by the erratic use of the base and excess plan prior to Federal Regulation of the Muskegon market. In November, l943 the market went off the base and excess plan. The plan was resumed again in February, l946, but from October, l946, through February, l947 the market was again off the base and excess plan. 5United States Department of Agriculture, A.M 8., Final Decishwiwith Respect to the Proposed Marketing Agreement and OrderFLgulati_g_the Handling of MiTk in the_gstate Micthan MarketinLArea. (20:! FR 650, September 9, l955)T '77 Due txn'the Class I sales pattern brought about by the large invasion of the Upstate area by tourists during the ordinarily flush season months, a base and excess plan might lower avail- able milk supplies in this area during the summer months and cause an increase in manufacturing during the fall months which in other markets are usually months of short supply. Upstate producer deliveries were 20 points over normal in June and "fif July and almost l5 points under normal in November and Decem- ii ber compared with Muskegon which was about l8 points over nor- (EE mal in May and drOpped to 6 points under in November. Detroit was ll points above normal in the high month of June and 6_ points below in the low month of November. Toledo depends only on a seasonal differential in price and production varied from a high of over l6 points above a seasonal normal to a low of l4 under in the low month of October. This pattern is probably accentuated by Toledo and Detroit competing to some extent in the same production area of Michigan with those pro- ducers with the most uneven production patterns shipping to Toledo (by choice) and the more level producers shipping to the Detroit market with its base and excess plan. Not only has the base and excess plan worked effectively in the Detroit case, but it has become the accepted plan for the leveling of seasonal production in many Federal order markets throughout the United States. On March l, I958, 36 of the 68 Federal order markets had a base and excess plan compared to nine with fall premium plans. Twenty-three had either no seasonal price plan or only a seasonal price differ- ential. The importance of this plan in recent orders is l78 indicated by the revelation that l9 of the 24 orders, Which are currently in effect and which have been established in the last five years (January l, l953-December 3i, l957), in- clude the base-excess plan in their provisions. In addition, all of the recent order expansions and market combinations in the year l957 included this provision. This included the North Central Ohio Order, the New York-New Jersey Order, the Akron- Stark County Order, the Greater Kansas City Order, and the Oklahoma MetrOpolitan Order.6 Major city markets in Michigan .J—n I; .v.-—. c. ‘l ‘1' - .’ u “ with a base rating plan in addition to the Federal order markets of Muskegon and Detroit are Jackson, the valley mar— kets(Bay City, Midland, Mt. Pleasant and Saginaw), Grand Rapids, Battle Creek and Kalamazoo. Recommendation It is recommended that the base and excess plan be in- cluded in the Lower Peninsula order. A large number of pro- ducers, who will be regulated and now produce under the De- troit or Muskegon order, have bases established as do many out-state city markets where there are cooperative bargaining agencies. The plan is therefore well accepted in the State, and its expansion for complete producer coverage will not be too difficult. It was shown that the Upstate resort area would probably not benefit from a base and excess plan. However, 6Summaries of Federal Milk Marketing Orders, A.M.S., Uniged States Department of Agriculture, revised to March I, I95 . l79 with the complete Lower Peninsula under Federal order regu- lation and with the base and excess plan the most favorable seasonal price plan for most of the markets it would not seem beneficial to separate this area for individual consideration. Ample supplies from the other markets would be available at the order prices during the heavy tourist months. It has been shown that it has been successful in Detroit in accomplishing pg its objective to lower seasonal extremes of production. Fin- 'é ally it has become widely accepted as a working device through- out the Federal order program. Type of Pool Another very important consideration in formulating a Federal milk order for the Lower Peninsula of Michigan is the selection of the type of pool and the requirements for deciding which plants and which producers to make a part of this pool. There are essentially four types of pools:7 individual handler, zonal, market wide (or in the large case a state wide market pool) and the association pool. Each has advantages 7Another type of pool, not considered here, but used in California is the individual plant pool. In this case milk is pooled according to physical receipts at an individual plant and the group for which returns are averaged consists of those producers whose milk actually arrives at that plant. D. A. Clarke, Jr. Fluid Milk Price Control in California: A re ort to the Joint Eegisiative Committee on‘AgriEulture and [ive- stock Problems. University of California, Angcultural Ex- periment Station, Berkeley, California, June, l955. p. 89. i80 and disadvantages which are reviewed below: A. The Individual Handler Pool (l) Advantage a. All producers selling to the same firm receive equal prices. b. The plan is easy to administer with little extra costs of administration over those involved in the operation of individual plant pools. c. It tends to limit surpluses. (2) Disadvantages a. The possibility exists for non-uniform treatment of producers shipping to different handlers. There is no problem as long as producers who ship to handlers with rela- tively low blend prices (as a consequence of low Class I sales), are free to transfer to firms with higher blend prices. Under this competitive arrangement prices paid by all firms will tend to be uniform. But such freedom is not apt to exist as each handler attempts to keep within fluid re- quirements by limiting the number of pro- ducers. If one firm handles more Class II (manufacturing class milk) than the others, the producers supplying these plants would receive lower prices than producers supply- ing plants with higher fluid use. b. A form of discrimination occurs for hand- lers who utilize the surplus milk on the market. Such surplus is inevitable even in tight supply markets during the flush season of production; yet the handler, who manufactures, is penalized for carrying this surplus. c. In order to keep receipts close to Class I sales, handlers may cut off producers especially during the flush seasons. d. Inefficiencies may develop in the handling of surplus,with an individual handler pool, since the surplus is usually handled inmany aha” firms. Assuming economies of scale, under a market wide pool the surplus would tend to concentrate in a few large plants. i8i B. Zonal Pools8 (l) Advantage a. Provides for uniform treatment of all pro- ducers in the same zone. The zone may be set on uniform production areas or it may be set for individual major milk markets, distance from major market or some other similar criteria. b. On certain markets and in certain zones it may tend to limit surplus more than for a market wide pool described below. (2) Disadvantage a. Discriminates against producers on the basis of location. For example two neigh- bors on the Opposite sides of the zonal lines would receive different prices de- pending on the utilization in their respec- tive zonal pool. b." Surplus manufacturing facilities may have been established historically in one area or one market may have been responsible for the disposal of surplus. In such a case this pattern may bring about lower prices in the zonal pool handling the surplus re- lative to others because of this historical arrangement. For example the Detroit mar- ket now handles much of the surplus for the rest of Michigan. A zone set up for that area and including all bottling and supply plants for that market in one zone would bring a lower blend price to producers be- cause of the lower percent Class I utili- zation than for the other zones set up in the State. c. It would tend to attract more surpluses than the individual-handler pool. 8Zonal Pools have not been used under Federal order programs nor has the author been able to find a specific ex- ample of such a pool. However, it is included here as a possibility which might be used under Federal Regulation in' an area wide order where production and/or consumption char- acteristics differed. i82 C3. Nkarket Wide and State Wide Pool (Modification of except a larger area—Ts involved) 8. (I) (2) Advantage a. The wider the base of the pool, the smaller is the possibility for discrimination against any producers. Therefore the state wide pool would tend to be more "equitable" than either of the other two types. If there Were no barriers erected Which re- strict freedom of entry to the pool, a state wide pool would thus provide a mech- anism making uniform blend prices to all producers possible. The reserve supply of milk may be more efficiently handled by consolidating the reserve supply in plants most distant from the market and may have large plants special- izing in manufacturing surplus milk on the market. Disadvantage a. The mechanics of establishing appropriate transport allowances would probably be more complex under this type of pool. The pool would tend to attract surpluses as does any market-wide pool and may lead to weak merchandising of milk in fluid out- lets. Handlers are under no pressure to maintain their paying price to farmers by maintaining high Class I sales, since they pay a market blend price. They may even be reluctant to release surplus milk when a fluid market is in need,if they are set up with the primary objective to manufacture and need to maintain high manufacturing volume to break even. The purpose of be- ing in the pool is to enable them to pay blend prices equal to the fluid market for manufacturing milk with the aid of the pool. This occurs where the pool plant require- ments are not strict. Producers who were supplying markets with high percent Class I utilization may find a reduced blend price due to overall lower state wide percent Class I utilization. The exact amount will depend largely on the pool plant requirements of such a pool. l83 D. Association Pool (l) Advantages a. Association pools usually include the mem- bers of a producers' association supplying a fluid milk market. Producers in such a pool are paid a weighted average of the class prices paid by handlers who purchase milk from the association. When one pro- ducers' association represents almost all the producers in a market the association pool approaches a market wide pool and has the advantages listed above associated with that type of pool. b. Association pools may operate along with an individual handler pool or a market wide pool on a Federal order market. In the first instance, a cooperative member would receive a blend price computed from the class utilization of all the handlers to whom the association sold member milk. This would probably be considered an advantage to c00perative members. All members ofthe same association receive an equal price for the same quality milk. An association pool operating under a Federal order with a market wide pool is considered a "super pool". The super pool has been used when higher Class I prices for member milk have been negotiated. Repooling of this milk allows a blend price to producer members over the minimum set using order class prices. This would probably be considered advantageous to the producer members, but is throught to be disrupting to the Federal order program. 9For information on the use of the "Super-pool" under the Federal order program see: United States Department of Agricnakture, A.M.S. Dair Situation, October, l957, pp. 23-26. Also Ph.l.. Forest, "Implications of Super-pools for the Future .uc~nr um_g wwmcmfimz _ooa so some .mmm. ._ so: ponn< .eomeE new—ooNincm__or ou3_uc_ uoc moon; .mmm. ._ pm3m3< .on_3 poxcme ow pomcmLOm .mmm. ._ Lonesoo u>_sosccms .mmm. ._ Lasso>oz o>_eoocch ..mm. ._ consopaom o>.puocwwn .uuxLuE uopm.. sumo so wwcoaoc pox acme _mscca cooco _m:n_>_uc_ EoLc memo nmm. .smm .a .wmm. .LoDOpuo .mcawpso_cm< co pcmEuLmaoo mmwmpm ump_c3 ..m.2.< .w_m c.po__3m _mu_pm_pmpm .ou_pw.pmpm ~H_mom m.o~ s.mk n.on «.0» w.m> m.mw w.nw 2 upcoamuuncsm spasm o.sq m.ms o._m m.~s .o.os m.nm w.¢m 2 ...u .0smu_;o o._o o.sm m.oo m.ms ~.sm ~.oo w.m~ 2 .scu .mcxma been m.mm m.wm m.mw m.sw m._m ¢.mw o.nm x ,o_zo .onm_op m.m~ ..mm o.mo m.mw ..oo s.mo w.m~ 2 0.20 .scm_m>m_o cm.mk o.ms 0.0m m.nn nm.mm a a z .co_2 .c0swxmsz mm.om m.kn o_.sm . u i n x .co_z .mpmpmaa 0.xo m._k ~.m~ _.o~ _._~ ..ss nk.sm 2 .co_2 .p_ocpmo u a a a e e a ems. 0mm. mmm. smm_ nmm. mmm. _mm. .ooa co wasp waxes: Ammm_|_mm_v «.mpmxcme LmuLo _mcmoou macaw: new cmm_co.2 i mm: a wmm_o c. x__e Loonuoca co pcoULoa _im m_nap l87 o>_puoamoL soc» p_ocuoo 6cm spawns: .ucu .psxcme see so Romamm Lou assoc .su_g esxcmzns .Lm.nc~: _aso_>_scun: .co.pm.oomm.wmcoaooo .oonaem_ax “00Laom .mnn «.9m» own >.ucm__m acm> mLousooud x._2 oo~aEm_mx 50L» N mma_o c. mco_m3_ucH "opoza o.mo o.mo m.n~ o.mo s.m~ ..oo m.oo m.mm m.mo «.mo o.n~ n.n~ o.n~ 2 “_ocpoo N.om N.Nm 0.00 m.©m h.ww ¢.nm m.mm N.nm n.m© N.nh w.m~ o.m~ N._w I Luwmpmas s.mw o.mm N.mw 0.0w m._m m.ww w.wm m.mn w.w~ m.m> m.mh m._m n.mw < xo__a> w.mn w.m> ¢.mn w.m~ m.- m.¢m ¢.om 0.40 m.mw m._w n.- ..mw «.mh z acomxmsz ..sw ~.mw m.mm 0.0m ¢.@m m.~m n.mw m.©n n.5w ¢.©w o.mn m.ow ©.wn < cowxomn o.nm m.mw o.mm 0.0m ¢.~m m.©m 0.5m ..mm m.~w .m.c .a.c .m.c .a.: 2 ouca.oo~incm_.or q.mm _.mm w._© s.oo w.mw m.mo «.mm m.mm o.wm m.mm _.m© o.~© n.w© < own.aum ucmco w.mm ¢.mw m.mm n.0m m.nw o.mn ..wh w.so s._w w.mn >.w~ o._w ¢.mm I ac..m m.mn ¢.~> m.ww n.0n o.mn m.mw m.mn o.mm m.¢m m.m~ ..mo «.00 _.mw < xmoco m.u«mm o.m~ o.s~ m.om m.s~ H.o~ s.sm m.nm.m._m «.mm m.m~ m.ms m.mn n.mn < uoo~a5m_mx mmmo o z 0 m < n n 2 < 2 u o n_wwa cam» a.~mm. .mcpcoe an maoxcae LOmmE cmm_cu_z an co_um~___p: u mmm_u mmwucoucod mum m.nmp l88 «oxen: Louco .aconou coooxmaz .kmm_ ._ swssa< mu.;upoxcm2 as easement .o_nm_.a>n #0: «van Lo_Ld .nmm. ._ an: :0 op sense u:a.om~-sca..oz .apmu :«coe ens—mu .ssxcme one as “males coo mesa Ass:c_scoov mum «_nmp l89 a state wide pool. Chapter II prOposed a market area composed of the entire Lower Peninsula of Michigan. A market Wide pool in this area thus is for all intents and purposes a State wide pool. The problem of tranSport differentials has been discussed in Chapter IV With this type of Lower Peninsula pool in mind. In the new market order proposed for the Lower Peninsula of Michigan it would not seem to be desirable to provide for an individual handler type pool. Such an arrangment could lead to inefficient handling of the market's reserve supply, which is now largely concentrated in Michigan Milk Producers' Association and Michigan Producers' Dairy manufacturing plants.'2 A market-wide pool on the Detroit market has promoted this concentration. It would create an unnecessary burden on this cooperative and its producers to change this situation. With a state market wide pool, this consolidation of surplus is made possible since all producers share the entire Class II utilization of the market. Therefore, a market wide pool for the entire Lower Peninsula of Michigan is recommended for in- clusion in the new order. Pool Plant Requirements Under a proposed market wide pool for the entire Lower '21n I957, 365,58l,278 pounds of Detroit inspected milk were shipped by handlers on the Detroit market to non-handler plants. The largest part of this (an estimated 95 percent) was transferred to the Michigan Milk Producers' Association plants and to those of its affiliated Michigan Producers' Dairy. Total Class II utilization for all purposes in l957 was 606,463,865 pounds of milk. IA 92 '90 Peninsula it is important to set up performance requirements for producers and plants to participate in this pool. It is commonly known that market wide pools tend to attract sur- pluses unless some such check is set up. Examples of the protection needed are cited in a recent United States De- partment of Agriculture publication: A plant engaged in supplying short-season require- ments of dealer-pool markets may find that these outlets alone enable it to pay producers as much as the marketwide pool blend price. If in addition, this plant can become part of the market wide pool without any obligation to supply the market's fluid milk needs, it can draw equalization payments, possi- bly exceeding its payments into the pool on account of its outside sales during the short season. There is another type of case, involving a plant possessing extensive manufacturing facilities and located in the milkshed of a market having a market wide pool. Such a plant may persuade its producers to meet the health standards in order to qualify the plant for the pool-~possibly exerting unusual efforts on nonprice methods of milk procurement to influence producers to do so. The plant's objective, and oppor- tunity for profit, lies in being able to buy its milk at the manufacturing class price, and to pay its pro- ducers the market blend price. In pricing the manu- facturing class it may not be possible to set a price high enough to discourage a specialized manufacturing plant of this type from entering the pool, but low enough to assure that othgr handlers will not reject seasonally surplus milk.i The two types of plants discussed above have little or no interest in supplying the fluid milk requirements of the mar- ket in which they are a part of the pool. They may not even i 3Regulations Affectinggthe Movement and Merchandising of Milk, Marketing Research Report No. 98, A.M.S., United States Department of Agriculture, June, l955, pp. 5l-52. i9l furnish fluid milk during the short supply season. This results in pressure to raise the Class I prices, even though the supply may be adequate as measured by the ratio of pool receipts to Class I sales. Mar- ketwide pools, therefore, are under compulsion to adopt 'performance requirements' or some other de- vice that will enable them to attract a sufficient supply of milk While ensuring that the plants in the pool will supply milk to the market.'4 For the first step in investigation of pool plant require- ments, it would be well to review briefly the history of De- troit pool plant requirements, later the other Michigan order markets will also be analyzed. The reason for discussing the Detroit requirements is the same as mentioned in the chapter on classes of use. The Detroit Federal order market was the first under Federal regulation in Michigan. Many of the pro- visions in the Detroit order formed the basis for construction of operating provisions on many of the other Michigan markets either under Federal regulation or cooperative bargaining. In addition the Detroit marketing area will be a large por- tion (volume-wise) of the new Lower Peninsula order. Table 5-3 shows the development of the Detroit pool plant require- ments since the order's inception. Under the Detroit order, prior to the November l, l955 amendment,there were two major categories of milk plants which were subject to regulation. This has continued to be the case historically on this mar- ket. The first category was composed of plants from which milk was distributed directly on routes in the marketing area. 'AIbid, p. 52. '92 Table 5-3 Historical changes in pool plant requirements under the Detroit marketing order. Effective September l,l9§l Pool plant not defined as such. A handler was described as a person who operated a pasteurizing or packaging plant from which Class I milk is distributed on routes in the marketing area. Or a person who operates a supply plant approved by area health authorities and which ships at least lO percent of its dairy farm supply of milk to a distributing plant described above in each of the months of November and December. Effective November l,gl2§4 A handler is also a cooperative association with respect to milk customarily received by a handler (see 9-l-5l above), which is diverted to a person not a handler for the account of the association. Effective November 1, lgfifi A pool plant as well as a handler was defined at this time: Handler, (a) any person who operates a pool plant, (b) any person who operates a non-pool plant from which Class I products are disposed of on a route in the marketing area, or (c) a cooperative association with respect to milk customarily received at a pool plant which is diverted to a non-pool plant for the account of the association. Pool Plant defined as (a) any distributing plant in which milk is pasteurized for distribution in the marketing area and from which Class I milk is disposed of during the month on routes in the marketing area. However, the total quantity distributed during any of the months March through August on all routes operated inside or outside the marketing area must equal 45 per- cent or more of the receipts from producers, or from other plants with milk approved for fluid use. During the months of September through February this must be 55 percent or more. A pool plant is also defined as (b) any supply plant approved by the Depart- ment of Health of area cities from which during the month not less than 25 percent or the call percentage,a which ever is aNote;A call percentage is the percentage of net receipts at a supply plant which a supply plant is required to ship to a distributing plant in order to qualify as a pool plant. A call percentage may be issued by the Market Administrator for any month except April, May, June or July. No call percentage of less than 25 percent can be issued. The call percentage may be reduced at any time during the month when it appears that more milk is being delivered to distributing plants than is needed to fulfill their Class I requirements. This reduction of course can not go below the minimum of 25 percent under the order. '93 Table 5-3 (continued) higher, of its dairy farm supply of milk, less any milk dis- posed of from the plant as Class I is moved to a distributing plant. A plant which has shipped the required percentage dur- ing each of the months of October through January, will be a pool plant for each of the following months of February through September, if it ships the percentage provided for in any call which may be issued by the Market Administrator. l94 These were referred to as "distributing" plants and were fully regulated under the order if they distributed 600 pounds or more of Class I products per day in the defined marketing area. The second category consisted of plants which assembled milk from producers for bulk shipments to distributing plants. These were referred to as "supply" plants. In order to be fully subject to the classification, pricing and payment pro- visions of the order and to participate in the market wide pool, a country supply plant had to be approved by one of the designated health authorities and to ship milk to distributing plants equal to lo percent of total quantity received from producers during the months of November and December. Any plant making such shipments remained qualified as a pool plant during the succeeding ten months. The recommended decision for the November I, l955 amend- ment stated that these standards did not adequately define the plants which constituted the regular and dependable supply of fluid milk for the Detroit market. Only those plants which are, in fact, operated in such fashion as to be regular suppliers should be subject to the complete regulation of the order and entitled to participate in the market wide pool.l5 On the basis of this recommendation the requirements for a pool plant were spelled out in more detail as indicated in the '5United States Department of Agriculture, A.M.S. Recommended Decision With Res ect to Pro osed Amendments to Marketin A reement and Order Re ulatin the H ndlin of Milk in Detroit, Michigan Marketin Area. (20 FR 6622, September 9, L 1 'n‘- ' am. 3. 3.- ._, P. W '95 November l, I955 order (see Table 5-3). Specific percentages Of milk were required to be delivered each month as Class I on routes in the area by distributing plants and the require- ments to qualify as a supply plant under the pool was also tightened as the percentage required was moved to a minimum of 25 percent. This recommendation also provided that plants be allowed to qualify on a combination basis: This principle of combining plants for maintaining pool qualifications should be extended to cover all plants for which a handler is responsible for the marketing of milk rather than being confined to the plants actually Operated by such handler....this ex- tension of the concept of plant systems is based upon the same logic as the combining of plants operated by a single handler (which is also allowed under the Detroit order). Otherwise, the handler could keep all the plants for which he is marketing milk qualified, though he might be forced to make uneconomical shipments in order to do so (for example in periods when the entire supply of producer milk is not needed, it is more economical to draw on those country plants which are farthest from the manufacturing plants for city plant reQuirements and divert to manufacturing plants that milk which is received at the country plants nearest to them.'6 It was also recommended that country plants wishing to qualify in the future as pool plants should be permitted to do so either individually or as part of the marketing system. The Department of Agriculture said: It is obvious that a plant system can qualify a new plant by limiting the shipments from plants already in the system. Therefore, any requirement that each plant qualify individually would have no practical effect, and any transportation saving which may be available through the Operation of a system of plants '6Ibid, inclusions in parenthesis are authors own comments. l96 should be Operative at the outset. Permitting a new plant to become a pool plant as part of a marketing system also avoids even a nominal dis- tinction between new plants and those which have historically served the market. The pooling pro- visions should depend entirely upon present service to the market rather than upon historical association with it.'7 The recent United States Department of Agriculture bulletin on trade barriers for milk said: The requirement that a plant sell some milk in the marketing area in order to become regulated (and ~~ entitled to participate in the market wide pool) is f I ineffectual in screening out plants whose interests 5,. in the pool has little or nothing to do with-supply- ing the market's requirements for fluid milk, or with the levels of prices established by the order. Consequently, some Orders have adapted requirements that a plant sell a specified percggtage of its milk in the market in order to qualify. This appears to have been true in the history of the Detroit order market. The same type of arrangement is used in all current Federal order provisions in Michigan, although the percentages in each case differ (Table 5-4). The most string- ent provisions of the three orders for a distributing plant to qualify for a pool plant are found under the Detroit order, while the qualificiations for a supply plant to qualify as a pool plant are tightest in the Upstate Michigan order area. An examination was also made of the pool plant pro- visions of expanded or merged Federal order markets to try to determine a pattern of pool plant reQuirements for such '7Ibid. '8Regulations Affecting the Movement and Mggchandisigg of Milk, og. ciff, pp.‘53454. '97 Table 5-4 Brief summary of current Michigan Federal order pool plant provisions with comparisons (January I. l958) Detroit (current provisions effective November l, l955) a. Any distributing plant from which fluid milk is dis- tributed on routes in the marketing area. Forty-five percent of producer and other source receipts must be so distributed during the months of March through August. During the months of September through Feb- 1 ruary this must be 55 percent or more. ”'t ..r b. Any supply plant approved by area health depart- l ments from which during the month not less than 25 LN percent or the call percentage (issued by the Mar- ket Administrator), whichever is higher, of its farm supply of milk is moved to a distributing plant. If it meets the required percentage during each of the months of October through January, it will remain a pool plant for February through September provided it meets any issued call percentage. Muskegon (Current Provision effective May l, l957) a. Pool distributing plant if 20 percent or more of the total milk received at such plant during the month is disposed of in the marketing area as fluid milk products. b. Pool supply plant if 20 percent or more of total producer milk received is transferred during'the month to distributing plant (paragraph (a) above). c. Approved plant operated by cooperative, if 75 per- cent (50 percent in May and June) or more of the member producer milk is received at the pool plants of other handlers. Upstate M'Chigafl (Current Provision effective August l, l957) a. Distributing plant from which disposition of fluid milk products on routes in the marketing area equals or exceeds the smaller of (I) 20 percent of producer receipts or l50,000 lbs., and (2) the total dis- position of fluid milk products on routes during the month exceeds 50 percent of producer receipts and receipts from supply plants. b. Supply plant from which during the month 50 percent or more of producer receipts is moved to a pool dis- tributing plant. A supply plant which was a pool plant during each of the months July through January shall continue for each of the following months of February through June. '98 large orders. The only evidence Obtained from this study was that requirements vary considerably between orders and are apparently regulated by the different local conditions (Table 5-5). Compensatory_payments and al[goation_procedures.--Another issue which should be considered briefly in relation to pool plant requirements is compensatory payments and a companion provision whereby outside purchases of milk are allocated to lower class uses. Mr. Luke stated in a recent paper on compensatory pay- ments the real basis for these payments: Compensatory payments have no other purpose under the order program than to insure the effectiveness of a classified pricing program. Congress has authorized milk to be classified and priced in accordance with its utilization. -This cannot be done on a selective basis. Part of the milk entering a market cannOt continue to be regulated and subject to classified prices if another part of it can enter freely, with-. out price fixing of any kind, and displace priced milk whenever it is advantageous to do so. Some provision to prevent this seems to be not only in- cidental but absolutely necessary to ggrmit a classi- fied pricing program to be effective. To date the provision most often used is the compensatory payment and allocation procedure. The use of this plan is controversal, but until another plan is devised (beyond the scope of this study) it is recommended for use with the LOWer Peninsula order market. Its use under the Federal order '9H. Alan Luke, "DevelOpment Of Compensatory Payments in Fluid Milk Markets," paper given at the Midwestern Milk Marketing Conference, Knoxville, Tennessee, April 9, l954. 'TatHe 5-5 Brief summary of pool '99 plant definitions under I957 merged or expanded Federal orders Market Akron-Stark Count} (February l, I957. merged) Okl ahoma Metropolitan (May I. l957. merged) Nortri Central Ohio (July l, l957, expanded) flE!—!2£I<-New Jersey (ALIQust l, I957, expanded) Definition A regulated plant is any plant at which milk is received from dairy farmers and from which milk is packaged and distributed for fluid use on routes wholly or partially within the marketing area. a) Any milk processing plant approved by area health author- ities from which any milk is dis- tributed on routes in the market- ing area. b) A supply plant where inspected milk is received and all or part is transferred to distributing plant described in (a). ' a) A distributing plant which dis- poses of more than iO,DOO pounds of fluid milk products in the mar- keting area during the month. b) A supply plant which ships fluid milk, fluid skim or cream on more than seven days during the month to a "regulated dis- tributing plant". In general such status may be maintained during January through August if the plant had qualified for at least three of the months of September through December. Plants qualify as a "regulated plant" for pool participation after area health approval, either by (l) express designation of the Secretary for those plants .-Tn'... \- . .~—_--c ‘ 5 A. l' - 200 Table 5-5 (continued) previously qualified and coming in under the new order--in which case it is called a regular pool plant, or (2) by the manner of disposing of fluid milk in the market. In this case if it meets the required percentage of fluid utilization it becomes a temporary pool plant. Greater Kansas City (October l, l957, merged) a) Any distributing plant approved by area health author- ities from which specified mini- mum percentages of receipts are sold for fluid use in the mar- keting area. b) A supply plant becomes a pool plant by shipping a specified percentage of pro- ducer milk to regulated dis- tributing plant. 20' programs in the United States is shown in the following para- graph.20 In March, l958, sixteen of the sixty-eight Federal orders had individual handler pools which do not have the need for compensatory payments (using other source milk under an individual handler arrangement would only drive down the pro- ducers' blend price and decrease the handler's bargaining power for selective producers). Forty-two Federal milk orders with market wide pools have a compensatory payment arrangement. Tam-suing”. - f The ten remaining markets have not incorporated this feature into the order. The methods used to assess the payment also vary: In twenty-six markets, it is the difference between the Class I and Class II price (manufacturing price). Another market calls for the compensatory payment to be the difference between the Class I price of milk, and the blend price. In the remaining fifteen markets with compensatory payments, the payment is the difference between the Class I use and the blend price in deficit production months. In other months on these fifteen markets the compensatory payment is the difference between the Class I and the manufacturing price. Concerning allocation provisions, all of the sixty-eight Federal order markets move other source milk into lowest use classes during all or for some portion of the year. figcommendation It is recommended that pool plant requirements be main- tained under the Lower Peninsual order so that manufacturing QOSummaries of Federal Milk Marketigg Orders, op. cit. 202 plants and reserve plants for other markets cannot enter the Lower Peninsula market, to the disadvantage of the Lower Pen- insula pool price, unless they can prove by actual performance that they constitute a supply for the Lower Peninsula fluid milk market. For this reason it is recommended that pool plants requirements be as follows: (I) Distributing plant to be a_pool plant To qualify, 300 points must be distributed in the mar- keting area (one point being defined as one half-pint of cream, one pint of half-and-half or one quart Of any other Class I product). This would approximate the present Detroit minimum requirement of 600 pounds and equal that under the Muskegon order. The Upstate area requires only lOO points but it Is felt that the difference would be made up by definition of wider marketing area and by including fluid cream in computing points. Those handlers in the Lower Peninsula area not meeting these requirements would not be primarily in the business of distributing fluid milk and would amount to a very small por- tion of the total distribution in the area. It is necessary to set some performance requirements in order to prevent a country supply plant or a plant primar- ily engaged in milk manufacturing from becoming pool plants by merely bottling and distributing 300 points per day on a route in the marketing area. This can be done by requiring that the total distribution of milk from the plant on all routes (inside or outside the marketing area) amount to at least 50 percent of the receipts of milk from producers and 203 from country plants. This is the average amount now required on the Detroit market although because of seasonal variation in production, the minimum shipments required are 45 percent from March through August and 55 Percent during September through February. This requirement would also be similar to that of the Upstate order. At the time of the final decision of the present Upstate order, it was stated that: The performance standards for distributing plants should apply only to plants primarily engaged in route disposition of half of their receipts from qualified dairy farmers and from other pool plants during the month. Plants not primarily engaged in route distribution of Class I milk may qualify as supply plants.2 The present order therefore, requires that a distri- buting plant wishing to qualify as a pool plant (I) dispose of milk in the marketing area equal to the smaller of 20 per- cent of a plant's producer receipts or l50,000 pounds; and (2) total disposition of fluid milk on all routes during the month equals or exceeds 50 percent of receipts of fluid milk products from qualified dairy farmers and supply plants. Since the entire Lower Peninsula would be the new marketing area, point number 2 would then read, 50 percent of receipts during the month in the marketing area and the 20 percent and I50,000 pounds reQuirement can be eliminated. Muskegon re- quires only 20 percent diSposition in the area to be a pool 2'United States Department of Agriculture, A.M.S. Final Decision with Res-ect to the A-reement and Order Re-ulatin- the Hand In 0 'i n e [gs a e lC gan ar e ng 'rea 2 ‘ , July , l9 7). 204 plant which was stated at the promulgation hearing to be high enough to insure that any handler participating in the market wide pool had a substantial part of his total sales in the marketing area. At the same time, it was indicated that the 20 percent requirement did not appear likely to necessitate significant readjustment by any plant Operator.22 It is recommended that the 50 percent requirement be put into effect in this area along with all the Lower Penin- sula region since there appears no justification for different treatment in the Muskegon area. It may be desirable to allow present plants in that area a reasonable time to meet the new requirements. It may also be desirable to vary the 50 percent requirement from 45 percent during the spring and summer months and 55 percent during the fall and winter months. However, it should be pointed out that the summer months are not surplus months in the Northern Lower Peninsula with the heavy tourist trade. (2) Supplygplant to be a pool plant Although there are no country supply plants as such, supplying Michigan markets outside of the Detroit market, three receiving stations Operate as supply plants inside city bound- aries. These are all owned by the same cooperative association which also Operates eight of the twenty-three Detroit receiving 22United States Department of Agriculture, A.M.S. Final Decision in Resgect to Progosed Marketing Agreement and Order egu a ng e Han ng o M n g_ uskegon Marketing Order I FR 3Il, July 23, I953 . a! EFIJIIIII “‘l. ”I”! 205 stations. Because of the importance Of the Detroit country receiving stations relative to receiving stations in the rest of the state, it is recommended that the Detroit requirements for a supply plant be operative throughout the Lower Peninsula area. It is believed that these performance requirements will permit free entry to the market but will keep pool requirements so that only those supply and distributing plants contributing V"—*"‘r.““sr to Class I sales will come under regulation. As stated earlier in this section, compensatory payments should apply on other source milk as should the requirement on allocation of other source milk to the lowest use classes in series. CHAPTER VI SUMMARY AND CONCLUSIONS This thesis has considered some of the basic order pro- visions needed in case of Federal milk marketing regulation for the entire Lower Peninsula of Michigan. The provisions considered were as follows: I. Delineation of the marketing area and the number of orders to effectuate regulation in the Lower Penin- sula of Michigan. 2. Construction of classes of use. 3. Analysis of transportation differentials. 4. Consideration of a seasonal price plan. 5. Type of pooling arrangement and pool plant require- ments. It was hypothesized that these outlined provisions would need revision in moving from the present regulated and unregu- lated territory In Michigan to an expanded and merged order or orders embracing the entire Lower Peninsula of Michigan. The pertinent literature was reviewed and employed to help form- ulate definitions and construct criteria in each of the chap- ters. In general, the fOlIOwing procedure was used in each chapter: I. The problem in each case in point was defined. 2. Criteria were erected for a theoretical framework in Which to develop the analysis. 3. Finally, the criteria were analyzed using the best available Information in each case to arrive at what was believed to be the best alternative provision for inclusion as part of the Lower Peninsula order. 206 207 The data used to construct and analyze the criteria were obtained from personal interviews and/or correspondence with lOcaI health departments, from the United States Department of Agriculture, from Market Administrators of Michigan order markets, from cooperative leaders, and from the Michigan De- partment of Agriculture. Historical data were also obtained from the recommended and final decisions concerning these orders as published in the Federal Register. One of the problems encountered in the analysis was the conflicts of interest between consumers, dealers, and producers. Also, two types of problems were considered, one dealing with equity and one dealing with efficiency. These conflicts and the problems of equity were difficult to overcome, but insomuch as possible definite recommendations were made in the light of of the best available information and with some commonly accepted equity objectives in mind. The Market Area The first provision analyzed was that concerning the delineation of the market area. For this purpose the term "market" was defined. "Market," in this paper, was used to indicate the physical area or areas in which price making forces for fluid milk operate. These were areas where buyers and sellers (consumers and milk dealers, respectively) were in communication with each other, and areas where exchange of packaged milk would take place. Eight important criteria Were delimited for analysis of market boundaries in the case of the Lower Peninsula order: 208 l. Criterion I Area where the same milk dealers com- pets. 2. Criterion 2 Area with uniform health regulations. 3. Criteriontfi Area where few route sales cross over designated boundaries. Criterion 4 Area with uniform price tendencies. . Criterion 5 Limited rural area regulation. Criterion 6 Homogeneous supply area conditions. Criterion_1 Extent of cooperative activity. (n -u ox tn .p O . Criterion 8 Previous federal regulation. Another criterion on Opinions and attitudes Of people towards regulation under an order or orders was not investi- gated due to the difficulty of documentation, but it was pointed out that this might very well be one of the most im- portant considerations in delineating the final territory. It was recommended, on the basis of the eight examined criteria, that there should be one order for the entire Lower Peninsula. This conclusion was reached on the basis of the following findings: I. Overlapping sales areas of dealers. 2. Increased reciprocity of health regulations within the state. 3. Overlapping Of procurement areas. 4. Some tendency for uniform Class I prices on all major markets in the past few years. 5. Few dealers in rural areas. 6. Relatively uniform supply conditions. 7. One major cooperative bargains for a large percentage of the fluid milk on all except two Of the major Lower Peninsula markets. 8. Greater ease of Federal order administration. 209 Not all the criteria, of course, pointed toward a single order and it should be reiterated that there could be strong arguments for more than one order. This was shown by the fact that milk did not flow freely in both directions between all city markets, producer-blend prices have varied widely between city markets, many areas in the Lower Peninsula were predomi- nantly rural and several independent cooperatives were im- portant in their respective markets along with the one dominant cooperative throughout the state. The author arrived at this conclusion for one order realizing that there was one un- examined criterion on peOples' Opinions and attitudes toward regulation under one, two, or more orders which might well be the deciding point in the public hearing. The Classification System The next provision examined was the milk classification system for a Lower Peninsula order. Historical data were gathered on operative Michigan Federal order markets and a comparison Of these markets' classification of milk and milk products was compared with nearby Federal milk market orders and with Michigan out-state major city markets. In addition, the basis for classification of the products was studied in order to find a standard criterion for development of use classes. The most important criterion was found to be the health inspection requirements for the various products. For this reason the chief sanitarian at each of the large Lower Peninsula city markets was interviewed to Obtain information 2'0 on actual inspection requirements on these markets. 0n the basis of this criterion, and with the information obtained from these major markets, two groupings were made of the most important milk products. Group I required that milk come from fully inspected farms. The second group required only plant or no inspection by the local department. On this basis, the following groupings were recommended: Ggoug I Groug II Fluid whole milk Cottage Cheese Fluid skim milk Ice Cream Chocolate milk Ice Cream mix Buttermilk Evaporated milk Half-and-half Condensed milk Fluid cream of all types Dried whole milk Dried non-fat milk Butter Hard Cheese All the out-state markets require that Group I products come from farm inspected milk. Detroit area cities differed by not requiring fluid cream from fully inspected sources. It was recommended that an attempt be made to require this full in- spection of fluid cream on these markets since it was shown that sufficient supplies of inspected milk appear to be avail- able in the Detroit marketing area to meet this need. It was also shown that there was no scientific basis for treating fluid cream differently from fluid milk on a sanitary basis. 2" Trangport Differentials The next examined provision deals with transport differ- entials. Transport differentials were examined by asking some deliberative questions about: I. Theoretical basis of transport allowances 2. Currently operative allowances in the Lower Peninsula markets 3. Criteria for developing transport differentials 4. Desirable accomplishments of these differentials 5. Alternative transport differentials 6. The best alternative under Lower Peninsula conditions The alternatives considered were by no means exhaustive but included: I. Rates that reflect actual cost 2. Adjustment of size of zones 3. Use Of different zone differentials for handlers' credit on Class I and for producers' location adjustment on all milk 4. Several types of basing point methods were con- sidered and modified where relevant: a. Single city basing point system b. Multiple basing point, each major city c. Basing point, center of Montcalm County d. Basing point, Eau Claire, Wisconsin and modifi- cation of this system. 5. "F. o. b. farm pricing" 6. No location differential 8. Direct delivery premiums 2'2 These several alternative provisions did not by any means cover all the possible methOds or combination of methods which might be used as transport differential provisions in an order. The author feels that these were the most important alternatives, however. The results of the examination seem to show that with any transport differential, rates should be constructed that reflect actual cost and vary in proportion to distance. It was also suggested by the author that zones or rates within zones be adjusted so that they more nearly represent actual shipping costs from that zone. The use of a basing point centered in the large surplus area seemed to be the most equitable method of constructing a transport differ- ential for all groups concerned. Although not used as such, a modification of this method was recommendedibr inclusion in the Lower Peninsula order. It was shown that this base point had probably been taken into account in the construction of Class I prices under many of the Federal orders in the mid- west. This method of pricing approximates the "perfect market” concept which is a commonly acceptable criterion. An examination was also made of "f. o. b. farm pricing" but the use of this method seemed to present insurmountable problems under current acceptable policy which requires han- dler locational differentials only on Class I milk and which is unfavorable to government setting farm to plant hauling rates. The use of no locational differential appeared to violate the principle which would provide equal delivered prices to all handlers. Direct delivery premiums were considered ' be. 2|} And rejected since no precedent has been set for direct deli- very premiums as such in the Lower Peninsula. In addition, receiving stations are important on only the Detroit market and even there were found to be declining in importance. The best alternative transport differential system appeared to be the "Detroit minus" differentials. This pro— posal, and that of "St. Ignace plus" differentials combined with "Chicago plus" differentials, seemed the most realistic methods of pricing since both were related to the Wisconsin surplus area price and were somewhat in agreement with the "perfect market" concept. The use of the "Detroit minus" differ- ential placed the indifference price point near St. Ignace. Its favorable attributes were as follows: (I) it allows for a decrease in Class I price toward both of the entrances to the Lower Peninsula from Wisconsin; (2) it provides for a price decrease toward Wisconsin in moving across Lake Michigan; (3) finally, it provides for a decrease in prices toward the local surplus areas of central Michigan and the "Thumb" area. Seasonal Price Plan, Type of Pool and Pool Plant Requirements Chapter V of this thesis considered a seasonal price plan, type of pool, and pool plant requirements for a Lower Peninsula order. Michigan order markets' experience with the base and excess plan along with its use on Federal order mar- kets in the United States was examined. Upon this basis, the base and excess seasonal price plan was recommended for the Lower Peninsula order. The plan is well accepted through- out the state and its expansion for complete producer coverage "O L“ would not appear to be too difficult. The plan was shown to have been effective under Michigan conditions and it was shown to have become widely accepted throughout the Federal order program in the United States. Four types Of pools were considered for possible in- clusion in the Lower Peninsula order. Those examined included: I. The individual handler pool 2. Zonal pool 3. Market wide pool 4. Association pool The advantages and disadvantages were reviewed for each. A market wide type of pool was recommended for the Lower Pen- insula order, since, based on quality, it appeared to be the most equitable type Of pool. It was also shown that such an arrangement would probably also lead to more efficient handling of the markets' reserve supply. Lastly, pool plant requirements were examined. His- torical Detroit provisions, currently operative provisions on other Michigan markets, and recently merged and expanded Federal order markets were examined for clues toward standard Department of Agriculture procedure. Recommendations were presented for qualifications believed necessary for both distributing plants and supply plants under a Lower Peninsula market-wide pool. In order to qualify for a distributing plant, it was recommended that 300 points be distributed in the marketing area (one point being defined as one-half l‘O k'i pint Of creanh one pint of half-and~half, or one Quart of any other Class I product). In addition to this it was felt necess— ary that 50 percent of receipts of milk from producers and country plants be distributed on all routes (by nature of the area, this will in most cases be within the marketing area). Because Of the importance of the Detroit supply plants, with twenty-three of the twenty-six supply plants for Lower Pen- insula markets in that area, it was recommended that the current Detroit provisions be continued. This would require that a supply plant be approved by the Department of Health of local cities and, during the month, move not less than twenty-five percent or the call percentage, whichever is higher, of its dairy farm supply of milk to a distributing plant in order to qualify as a pool plant. The author realizes that all or none of these provisions may be incorporated in the final order or orders for the Lower Peninsula. However, it is anticipated that considerations of such an order or orders will be under study in the near future, and it Is hoped that this preliminary investigation of some of the problems in constructing such an area wide order or orders for the Lower Peninsula or Michigan will be of benefit to those groups reaponsible for and affected by such Federal order regu- lations. BIBLIOGRAPHY Anonymous. American Milk Review, Urner Barry Company, New York, XX. No. I, (January, l958) II3. . Outer-Market Distribution of Milk in Paper Con- tainers in the Northi Central RegTOn. North Ce ntraT Regional Publication 39. Purdue Station Bulletin 600, Lafayette, Indiana: October, I953. . "Survey of Buying Power", Sales Mana ement, Bill Brothers Publishing Corporation,TNew‘Yofk, ay 0, l957. . Websters' New International Dictionar of the “English Language. 2nd ed. UnaBriagea. Springfield, Mass: G. & C. Merr am Co., I950. Boulding, K. E. Economic Analysis. New York: Harper and Brothers, I948. Cassells, John M. A Study of Fluid Milk Prices, Harvard Unl- verslty, Cambridge: I937. Colebank, A. W. "Considerations In the Development of City Versus Area-Wide Federal Orders", Proceedin 8 Sixth Annual Midwestern Milk Marketin Conference, University of Kentucky, Lexington: April 4, 5, l95'. City of Detroit Department of Health. Letter from Russell Palmer, Head Health Inspector, Milk, February IO, l958. Chamberlin, E. H. The Theory of Monopolistic Com etition. 6th ed. Cambridge: Harvard University Press, I950. Dahlberg, A. C., Adams, H. S., and Held, M. E. Sanitarngilk Control and Its Relation to the Sanitar Nutritive and her ua es O . u ca on ,‘NationaT Aca- demy of Sciences, NatTonal Research Council, Washington, D.C., I953. Dain, Floyd R. Detroit and the Western Movement. Detroit: Wayne University Press, I949 Dean Milk Comgany v. City_of Madison et. al., 340 U.S. 349. Detroit Federal Order Market. Detroit Market Bulletin, a month- ly report, Detroit, Aprii, l958? . Personal interview with George Irvine, Market Admin- strator, January, l958. 2'6 2'7 Detroit Metropolitan Area Regional Planning Commission, "Population Estimates in the Detroit Region, July I, '957." Feddersen, H. C. "A Changing Concept of a Milk Market." Mimeograph of a paper given at the Annual meeting of International Milk Control Agencies, Berkeley, Cali- fornia, July IO, I957. . "Federal Milk Orders." Paper given at the Arkansas Da ry Products Association Annual State Convention, Little Rock, February 9, I956. Fetter, Frank A. "The Economic Law of Market Areas," Quart- erly Journal of_§gonomics, May I, I924. . The Mas uerade of Monogoly. New York: Harcourt, Brace and Co., ig3l. Foelsch, Gertrude G. and Cook, Hugh L. An Analysis of Federal Court Decision Relating to the Marketin of Fluid Milk. Research Bulletin 200, university of Wisconsin, Madison: January, I957. Forest, H. L. "Considerations in the Development of City Versus Area-Wide Federal Orders", Proceedings Sixth Annual Mid- western Milk Marketin Conference, University of Kentucky, Eexington: Apri' 5. 5. '95T. . "Implications of Super pools for the Future of Federal Milk Order Pricing," Paper given at University of Wis- consin Farm and Home Week Program at Madison, Wisconsin, February 5, I958. . "New Problems Accompany New Dimensions of Milk Mar- kets." Paper given at the Annual meeting of New England Milk Producers' Association, Boston, Massachusetts, Oct- ober 3i, I957. Great Britian, Milk, R_port of Reorganization Commission For Great Britian, Ministry of Agriculture and Fisheries, EbonomiE series No. 44, London: H. M. Stationery Office, '936. Hammerberg, D. 0., Parker, L. W., and Bressler, R. G., Jr. Efficiency of Milk Marketin In Connecticut, University We onnecticut, Folretin We ruary, r942. Herrmann, L. F. "Objectives and Standards in Determining the Price Dealers Pay for Milk." Paper given at the Inter- national Association of Milk Control Agencies, Toronto, Canada, September 26, I956. 2'8 Herrmann, L. F. "Trade Barriers in the Dairy Industry." Address given at the Dairy Products Improvement Insti- tute, New York City, February l3, I958. Hill, E. B., Mawby, R. G. T es of F rmln in Michi an. Special Bulletin 206, Michigan State University, East Cansing: September, I954. H. P. Hood and Sons Inc.J etA 307 U.S. 588 (i938). Hoover, Edgar M. The Location of Economic Activity. New York: McGraw Hill Sock Company, I948. al. v. United States et. al., Horner, J. T. "Trends In A Typical Large Industrial Center," Paper given at the American Institute of Cooperation at East Lansing, Michigan, July 8, I940. Kalamazoo Milk Producers' Association. Letter from M. R. Bigelow, Secretary-Manager, Kalamazoo, Michigan, May I3, I958. Krause, Stanley F. Pricin Milk According_To Use, F.C.S. Bulletin No. 6, Wash ngton, 0.0.: June, i955. Lansing, Michigan. Notes taken by the author at a hearing on Proposed Amendments to the Marketing Agreement and to the Order For EXpansion of Detroit, Michigan Market- ing Area, December l0, I957. Lansing Department of Health. Personal interview with Robert Lyons. June 30, I958. Larson, Adlowe L. Agricultural Marketjgg. New York: Prentice Hall, l95l. Luke, H. Alan. "Development of Compensatory Payments In Fluid Milk Markets," Paper given at the Midwestern Milk Marketing Conference, Knoxville, Tennessee, April 9, I954. Machlup, Fritz. The Basin Point S stems. Philadelphia, Pennsylvania: The SiakTston Company, I948. Mathis, A. G. "Possibilities For Area Pricing and Pooling," Proceedings Twelfth Annual Midwestern Milk Marketigg Conference, M chigan tate University,E§st Lansing: April ”9 '2: i957- McBride, Glynn. "Manufacturing Milk Supplies," guarterlg Bulle- .Elflo Michigan Agriculture Experiment Stat on, c gan State University, East Lansing, Volume 40, NO. l, (Aug- ust, I957) ll3-I24. 1"! ‘11-".- —-u '- 2'9 Michigan Department Of Agriculture. "Grade A Milk Law," Act No. 2l6, Michigan Public Acts, I956. ., Dairy Division. Personal interview with L. Little- tield. May 7, I958. . Records of Licensed Milk Processors, List as of February l7, I955 and as of October 20, I957. Michigan Milk Producers' Association. I957 Annual Report, Michigan Milk Messen er, December, '957. . Brief in behalf df Association submitted to United States Department of Agriculture regarding proposed amendment to the Detroit order, February 3, I958. . Letter from H. H. Varney, Director Outstate Markets and Market Analysis, May I, l958. . Personal interview with H. H. Varney. July I, l958. Michigan State University. Personal interview with G. M. Trout, Professor of Dairy Manufacturing. July 7, I958. Nebbia v. New York, 29l U.S. 5l6-5l7 (l933).. New York Milkshed Committee. Report Transmitted to the United States Department of Agriculture and to the New York Department of Agriculture and Markets, January, I954. Niles Department of Health. Letter from James H. Burrows, City Health Officer, Niles,Michigan, July 9, I958. The Northwestern Cooperative Sales Association. Letter from Glen Wagner, Manager, June 2, I958. Quackenbush, G. G. Unpublished data from North Central Regional Survey of selected Michigan Markets, January, '957. Robbins, Lionel A. An Essay of the Nature and Siggificangg of Economic Science. 2nd ed. London: McMiIlian and Co., Limited, '946. Rojko, Anthony S. The Demand and Price Structure for Dair Products. Technical Bulletin ii68, Agricultural Mar- keting Service, United States Department of Agriculture, May, '957. Saal, Herbert, and Myrich, Norman. "A Changing Population, What It Means to the Dairy Industry," American Milk Review, Urner-Barry Co., New York, xx No. I (January, i958), 24-29, l0I-I02. 220 Scitovsky, Tibor. Welfare and Competition. Chicago: Richard D. Irwin, Inc., l95l. Spencer, Leland. Problems of Milk Pricing on the New York Milkshed and Possible Soifitions, Bulletin AE IO Department ot Agricultural Economics, Cornell University, revised April, I957. Stigler, George Jr. The Theory of Price. Revised edition. New York: The Macmillan Co., 952. Thomsen, F. L. A ricultugalNMrketing. New York: McGraw Hill Book Co., 9 l. Von Thunen, Johann Heinrich, ggr Isolierte Staat, January, I92l. United States v. Rock ngal Cooperative, Inc. et. al., 307 33 ('938i7 United States Department of Agriculture, Agricultural Market- ing Service, Dairy Situation, October, I957. . Dairy Statistics, Agricultural Marketing Service, Bu et n 2 , c ober, I957. . Federal Milk Marketing Orders. Agricultural Marketing Service. A report prepared for Hearings of the Dairy Sub-Committee of the House of Representatives Committee on Agriculture, April I9, I955. . Federal Milk Marketing Orders. Agricultural Marketing Service, Miscelianeous Pub ca ion 732, October, l956. . Fluid Milk and Cream Re ort, Agricultural Marketing Service, February i8, T953. . Fluid Milk and Cream Re ort, Agricultural Marketing SerViCe, February 20, i958. . Milk Production on Farms and Statistics of Dair Plant Products '25:, Agricultural Marketing Service, FeBruary, i958. . Regulations Affecting thgfiMovement and Merchandising of Milk, Agricultural Marketing Service, Marketing Research Report 98, June, I955. . Production Marketing Administration, Recommended lDecision With Respect to Proposed Marketin A reement and Order Rengating_RafiHIifi of Milk in tfie Oetroit, FR 2084 Inichigih Marketing Area. i6 , March 6, I95 . 22' (fluted States Department of Agriculture, Production Marketing Administration, Final Decision With Respect to Proposed MarketingyAgreement andFOfaer Reguiafin Handiin 0 l6 FR 3380, Milk in Detroit Michi an Mgrketigg Area. June 9, i95i. . Agricultural Marketing Service, Result of Referendum In Res ect to Handlin of Milk In the Orana Rapias ana Muskegon MarFeting Area. '6 FR 'O,220, October 6, l95l. . Production Marketing Administration, Recommended Decision With Respect to Proposed Amendments tO‘Market- ing A reements and—Order Re ulatin the Handlin of Ik’ln Oetroit Micfiigan MarRetinggNma. '7 FR iSOO, August I6, l952. .__2_ . Production Marketing Administration, Final Decision With Res ect to Pro osed Marketin A reement and Order Re ulatin Hanaiin 0? Milk MusFe on, Micfiigan MarEet- M . 3 Jury , . . Production Marketing Administration, Recommended Qecision With Respect to Prgposed Amendments to Market- in ,Agreement and Order Regulatin the Handlifi of Milk D troit FMichi an“M§rketingiArea. '8 FR 7556, Nov- n e ember 26, '953. .Agrlcultural Marketing Service, Final Decision With R s ect to Pro osed Marketin A reement and Order Regulating the Handling of Mi'E in Upstate Michigan ar e lng rea. , eptember , . Agricultural Marketing Service, Recommended Decision With Respect to PrOposed Amendments 0 ar e ng gree- ment and Order Re ulatin the Handlin of Miik in De- troitg Michigan Marketing Xrea. 2O FR 6622,78e6tember ' O . Agricultural Marketing Service, Final Decision With ,flgspect to Progpsed Amendments to Marketing Agreement and Order Re ulatin the Handlin of Milk in Detro t, Micfiigan Maraeting Free. 2' FR 6'33, August '6, '956. . Agricultural Marketing Service, Recommended Decision With Resgect to Proposed Amendments to MarRetinggAgre - ment and Order Regulatlgg the Handlin oF—Milk in Up- state Michigan Marketing Area. 2' FR 6234, August 08, . Agricultural Marketing Service, Final Decision With IRespect to a Prgposed MarketingyAgreement and a Pro- losed Order Re ulatin the Handlinggof Milk in the OE'aFloma Metggpoiitan Mark'eting Area. 22 FR 2'5', April 571—937? 222 United States Department of Agriculture, Agricultural Marketa ing Service, Final Decision, Handling Milk in the New York-Northern New Jersey Marketing Area. 22 FR 5'94, Jfihe I4, '957. . Agricultural Marketing Service, Final Decision With Respect to the A reement and Order Re ulatin tfie Ran- dlin of MiTkwin the U state Michigan Marketing Area. 25 F“ 48'6, JU'Y g: '957- . Agricultural Marketing Service, Notice Of Hearin , Escanaba, Michigan. 22 FR 7429, SeptemBer '3, '957. . Agricultural Marketing Service, Notice Of Hearin , Green Bay, Wisconsin. 22 FR 8852, NovemEer 2, '957. . Agricultural Marketing Service, Notice Of Hearigg, 22FR 9294, November 2', I957. . Agricultural Marketing Service, Result of eReferendum I in Respect to Handling of Milk in ree - Kalamazoo Marketing Area. 22 FR 9582, November 22, I957. . Agricultural Marketing Service, Recommended Decision in Res ect to Handlin of Milk in the U er Peninsula ana tfie Nortfieastern Misconsin Markgting Area. 23 FR 38'8, June 3, i958. . Agricultural Marketing Service, Summaries of Federal Milk Marketing Orders, revised to March i, I 5 . United States Department of Commerce, State Economic Areas, Bureau of Census, l95l. Weeks, E. E. Location Differentials in the Puget Sound Milk- shed, Bulletin 577, State College of Washington, Dec- einBe er, '957. Witt, Lawrence w. Course Notes, AgriculturalEconomics 572, Michigan State University, Summer, I957. APPENDIX IIL m“ x _mom n_ “_oLpso mm .puo 2 x meow A. s_obeao w .suo x oomn m. «_omeo w. .m:< x wmmm w. pseupmo em mess x wolu m. commxm3§ cw mcsn x qmmm mm p_Omeo m_ ocso x m_sn s. s_0cpso A. __qu x who. w_ p_oupoo _m .nou x wm¢_ n. p_oueoo s. .nou x cos n. «_oLpoo m. .cmo co>mI cameo x .0. m_ lCOmoanz m .cm mun: x ammo o. ccmpmoa w .poo x wmww m. compose _ poem x mwmw m. compose m a_:o x _smo w. p_uuuoo on mass x omsm o. e_0cpao m mess x _mmq m_ p_ouumo m an: x moon m. p_ocpoo on .us; x smom w_ p_oLpoo w .Lmé flue. x Cam m. accuses m_ .>oz x no_m m. p_ousmo om as; o o. be .eo pruo co_m .ooo cosh _ooo mcmumo: s so .mam. poxuuéllso,mm_psu cmocoe< Lo _mc_u noncoEEooom co oo_poz CH peso LOULO ._o> mocmcowom co pcopcqw Ammm_lo mm_v Amco_psp_o um~w_wot _muoomuv moococowmm compo x__§ _mumnou cmu :omfi H x_ocmsd< M. x moms om bumped: m. .uuo 9. x mmuw om v.0LHOo m .uamm x 0.00 0m spasms: m .psmm x _qwd Om mwmvmaa m z.3n x nmm. Om 9.0LHOQ N. cuum§ www— x 0_sm m_ spasms: _n .umo x mmom m. p.0meo n .pamm x wqu m. «_Ouuoo o pm303< x 0.0m m. p.0upw0 m __L0< x 00.. m. v.0meQ mm .nmu x cum 0. p.0meo m .000 #mum. x _www m. 0000x032 cm .000 x .N0@ 0. «_owao Gm .000 x Odmw w. p.0cpmo ow .>oz x momm w. 9.0Luoo . .uuom x Home a. commxmsz m. .s:< x News 0. spasms: A .msa x mmsq w. «_ocuoo mm x.30 x _.nq w. commanz MN >.3n x .noq w_ p.0cpmo __ >.3o x ms_n 0. “_ocsmo m sass x wmwm m. cemoxmaz m_ an: x 0.0 w. “_OLHOQ d. .mou mo. «Lozpo conco_ co.m.uoo c0_m_umo Allmmwcmox mood .m.u «exams 00:m..030 coccoE< co .mc.u UmccwEEoumm Lo mu.voz CH mama smocol ..0> oucouucom c0 ucmpcoo Auosc_wcoov H x.00000< M0 x one» .0 090900: mm .9000 o. x .009 _m 09m9m0: mm .9000 x mmmw .0 9.00900 mm .m:< x ammo .N 090900: 0. .m:< x nn_0 .0 9.00900 0. .m:< x .50m .0 0000x032 n .m:< x mnmm .0 9.00900 0 0:3: x soon .0 09m9ma: 0 >02 x 000m .0 comoxm:2 m >02 x 0000 .0 9.00900 . >02 x mswm _m m9m9mm: _ as: x 0000 _m comoxm:2 _ >02 x 9000 .0 9.00900 _ as: x NOQN .m cowoxmsz . :02 x H mm 0 9.00900 _ >02 x momm m commxmsz .m ..ca< x nowm .0 9.00900 .0 ..00< x M000 .0 mumsma: _0 __Ls< x _.d_ _N 090900: n 2000: x 90m. .0 m9m9mm: 0 goes: x mmm _m 9.0L900 0_ .000 x 0mm .0 09m9mm: 0. .:00 x .0 _m 09090 : n. .can 0 O. x 0000 00 mum9mm: _ .000 x .w.m om 9.00900 . .>oz . x snow om 9.00900 mm .900 0009.90 00000 co.m.000 co_m_000 lmc.Laox mmMm. .m.u 90xcmz 00:0..030 000:0E< Lo .mc_u successouom 00 00.902 :9 0900 L00Lb, l, ..0> 0000L0000 .00:c_9co0v H x.0:000< 226 .00000 09 00009000000 0:0 0:0000000 0>0909cs9 .5:0:000000 000 05.9 00 :0.m:09x0 .:00m_0s0 000:0550000 09 :009000x0 m:___m 000 05.9 00 :0_m:09x0 .m9_:m00 5:0:000000 .5:0:000000 00 00090: 0003.0:0 00:900 x mw¢m mm .00 0.9900 mm .>02 x 4000 mm 9000900 _m .>0z x mmmm mm 0:a_:90oz N .>oz x N000 mm .00 0.99am ¢ .900 x 0000 mm .00 s099s0 m. .90sm x 0000 mm 0:00:9002 w. .9000 x mnww mm :000x032 0N .m:< x m_¢w mm .00 0_99am 0. .m:< x 0000 mm s0s9mq: 00 0.3: x 0.00 mm 090900: 0 >_:0 x .000 00 s9a9ma: 9 scam x m__0 00 comsxmag on 500s: _ x mum. mm :000x032 m. :000: x n00 00 s9m9ma: m .ns0 x qwn mm :0m0x032 w. .:00 x 000 mm :0 0x032 m. .:«n 50. x ammo. _m comsxmsz 00 .sso x «0.0 _0 cassxmaz 00 .>oz x M000 _m .00 0.9900 0 .>02 000:90 00000 :0000000 :00m00u0 m:_000: smug «m.m¢1 90x002 00:00.0:0 000:05< 00 00:00 000:0550000 00 000902 :H 0900 000w0 ._0> 00:000000 00 9:09:00 A00::_9coov H x00c000< 227 Map Location of 8 Code Receiving 0 Numbe: Station i.fl Adrian Alma Bad Axe Brighton Brown City Elsie Evart 4 Greenville Hi I iman 2‘! .3 Homer . Imlay City - Lansing , .75 .31. Litchfieid 1. ’2' J“ Mar! ette .1 . .5- Mason .f N Ortonville t3 ‘ Otsego O Ovid lb Owosso 1 .105 O Peck \ i 21 Richmond . . . " Sandusky Saranac . Sebewaing Tuscola CD\i0\U1-¥>WI\J'-O\OGD\IO\U1 #010)— m— O\O MMMM Ul-P’WM 0.3 0‘ -—____ —_—-_ fl __- Appendix II Location of the Detroit Milk Market's Country Receiving Stations as of January i, l958. Source: Market Administrator's Office, Detroit, Michigan. Appendix III 228 County, District and City Health Departments In Michigan and Their Location, January i, Healthfifiepartment_' Location I. Alger-Schoolcraft Manistique 2. Allegan County Allegan 3. Barry County Hastings 4. Bay County Bay City 5. Branch Coldwater 6. Hillsdale Hillsdaie 7. Calhoun County Battle Creek 8. Isabella, Mecosta, Osceola Mt. Pleasant and Big Rapids Counties 9. Chippewa-Luce-Mackinac Sault Ste. Maire IO. Houghton, Keweenaw, Baraga, Houghton Ontonagon Counties ll. Delta Escanaba l2. Menominee Menominee l3. Dickinson Stambaugh l4. Iron Iron Mountain l5. Eaton County Charlotte l6. Genessee County Flint l7. Grand Traverse-Leelanau- Traverse City Benzie l8. Ingham County Lansing l9. Kalamazoo City-County Kalamazoo 20. Kent County Grand Rapids 2l. Lenawee County Adrian 22. Macomb County Mt. Clemens 23. Mason County Ludington 24. Manistee County Manistee 25. Midland County Midland 26. Monroe County Monroe 27. Muskegon County Muskegon 28. Oakland County Pontiac 29. Ottawa County Grand Haven 30. Saginaw County Saginaw 3|. Sanllac County ‘ Sandusky 32. Shiawassee County Corunna 33. Livingston County Howell 34. St. Clair County Port Huron 35. St. Joseph County Centerville 36. Van Buren County Paw Paw 37. Washtenaw County Ann Arbor 38. Wayne County Eloise 9. District #l (Kalkaska, Lake City and Cadillac Crawford, Missaukee, Roscommon and Wexford Counties) 40. District #2 (AlcOna, Iosco, Oscoda, and Ogemaw Counties) West Branch 1958 Appendix III 4|. 42. 43. 44. 450 46 47. 48. 49. SO. 5'. 52. NOTE: (continued) Health Department District #3 (Antrim, Charlevoix, Emmet, and Otsego Counties) District #4 (Cheboygan, Montmorency, and PreSQue Isle Counties) Aipena Branch District #5 (Lake, Newaygo, and Oceana Counties) District #7 (Clare, Arenac, and Gladwin Counties) Bay City Detroit City Flint City Grand Rapids City Jackson City Pontiac City Saginaw City _Location Charievoix Rogers City Aipena White Cloud Gladwin Bay City Detroit Flint Grand Rapids Jackson Pontiac Saginaw The counties listed below do not have the services of a full-time local Berrien County Cass County Clinton County Gogebic County Gratiot County Huron County health department: Ionia County Jackson County Lapeer County Marquette County Montcalm County Tuscola County 229 ~ 1- "(,2 L” ROW use can “A”. 30.15 119511! p. I. ...". Ilillfilllsli Mil Ii ll lilililil'llllyllllllillilllms 3 1293 01103 7579