Wanted: More Milk
FIVE million American farmers rise from their beds these frosty mornings to milk some 25 million cows. Milk-truck drivers stop at the farms, load the milk, and speed off to railroad stations or city markets. The milk itself is transformed by some 80,000 men into dairy products, or is pasteurized and put in bottles, or fibre or paper containers, for delivery by an army of about 170,000 men to millions of doorsteps and some 400,000 retail stores.
Within a few short decades the dairy industry has grown to gianthood. Milk, one of the most complete of foods, never before has been produced and distributed under such favorable sanitary conditions, and it is estimated that some two million people live today because the milk which they drank as children was made safe. But a costly milk distribution system has been created, so that the housewife now pays about two and a half times more for it than the farmer gets.
The milk distributors are accused of gouging the public and the dairymen, but they claim that they make only small profits. After paying about 5 cents a quart for milk at the farms, it reputedly costs them about 2 cents to haul it to pasteurization plants and to pasteurize it, another 3 cents to get laborers to deliver it to the doorsteps, and 2½ cents more for the maintenance and depreciation of delivery equipment. This makes milk cost 12½ cents a quart retail, on an average, with an allegedly small distributors’ profit included.
Yet this high retail price has an appalling effect on our national well-being. While food authorities insist that each child should have fully a quart of milk a day, each adult a pint, we Americans consume less than two thirds of that quantity. Low-income families consume less than a fourt h of a quart per individual per day, according to a 59-city survey reported by the Consumers Council, Agricultural Adjustment Administration, in 1936; and the daily consumption, in families boasting ten children, falls to less than a tenth of a quart. This suggests that it will take something more than a reduction of milk prices to solve the dietary problems of large families. And the conclusion is unavoidable that the general underconsumption of milk contributes to the prevalence of bad teeth and bad eyes, of rickets and pellagra, and to a lack of robust health on the part of millions.
On the other hand, the low consumption of milk depresses the value of this tremendous farm crop and the incomes of the dairy farmers. Their purchasing power is cut. They cannot buy freely the multiple products and services of our industries, with the result that the value of these products and services decreases with the decreasing demand. This has no inconsequential effect on the national economy, since milk alone accounts for about one fifth of the national farm income, despite the current average low price the farmers get for it. The dairy industry, boasting milk and dairy products valued at 3½ billion dollars annually, is larger than either the automotive or the meat-packing industry, producing respectively 2 billion and 2 5/4 billion dollars’ worth of products annually.
Why do Americans consume less than two-thirds enough milk? To answer this question I must tell a story— the story of the mushroom growth of the dairy industry, a story which involves dairymen, politicians, milk distributors, and organized labor.
The dairy farmers have long produced a lavish quantity of milk. Today the annual milk production is about 49 billion quarts, enough for a quart a day for each of our population of 130 million, although we actually consume a daily average of only about three to four tenths of a quart in its fluid form. The rest of it, except for the small percentage used in feeding farm livestock, goes into cream and the so-called surplus dairy products — butter, cheese, ice cream, condensed and evaporated milk, malted milk, powdered and dried milk.
Conscious of this ever-heavy crop, the dairymen who farm near city markets, starting about twenty-two years ago, bargained with distributors to get a premium price for all milk sold at retail in its fluid form. ‘You pay only one price for milk, whether you retail it in its fluid form or use it in making dairy products,’ the dairymen told the distributors; ‘yet you get much more for it when you sell it in its fluid form, and most of our milk is sold as fluid milk to city families — so you ought to pay us more.’ The distributors capitulated, but made one reservation. ‘We’ll give you a top price for milk that is retailed in its fluid form,’ they said, ‘but you’ll have to take a much lower price for what is used in making dairy products.’ The dairymen agreed, and this is the basis of the so-called classified-price system under which farmers today sell their milk to distributors in most large markets from coast to coast.
How much do farmers get for their milk under this system? For milk that is retailed in its fluid form, they get an average of about 5 cents per quart. That’s the top price. And on the basis of average milk-production costs it’s a fairly good price. But only about a third — perhaps slightly more — of the farmers’ milk is retailed in its fluid form; only this third commands the top price. About two thirds goes into dairy products, for which the farmers get approximately 2 to 3 cents a quart. This milk is of the same quality as that which brings 5 cents, but the farmers get only 2 to 3 cents — hardly enough to pay the cost of feed for cows in some farm areas.
Such a big price differential for the same quality of milk seems ludicrous, yet there is a justification for it. It takes several quarts of milk to make even a small amount of any dairy product. One pound of butter, for example, contains the butterfat content of about eleven quarts of milk, so that the wholesale cost of butterfat for the one pound, at only 2 cents a quart of milk, is 22 cents. Add manufacturing and distribution costs, and the price jumps to what the buying public is currently paying.
When the classified-price system was first established, the farmers in isolated dairy sections were as pleased as those who farmed near cities. Improved roads were being built, automobiles were becoming common, and they began to haul their milk to the cities, selling it to milk distributors and getting the newly established top price. The dairymen on farms nearer the cities, who had bargained to get the top price, saw more and more of their milk being forced into low-return dairy products, and bitterly condemned the dairymen from distant points for flooding the market and cutting their incomes.
They prevailed upon city health boards, who had long been empowered to prohibit the sale of unsanitary milk, to limit the number of farms they would inspect and license to sell milk in the cities. Their object, thinly veiled, was to get the health boards to stop the city sale of milk from distant farms. And the health boards of one city after another gradually responded to their wishes. There were arbitrary refusals to license farms at distant points, the excuse being that the inspection work would be too costly or inconvenient. Thus the distant dairymen were denied a right to sell their milk in many cities.
It is obvious that the farmers of our great dairy states, far removed from a wealth of big city markets, are the victims of these arbitrary restrictions. The dairymen of Wisconsin, Minnesota, and Iowa produced more than 11½ billion quarts of milk in 1937 — 24 per cent of the total national production — and less than 2 billion quarts were consumed in those states in its fluid form. The great majority of the remaining 9½ billion quarts had to be ‘exported’ to other states in the form of dairy products. So it is small wonder that, in the same year, the Wisconsin dairymen received an average of 3.4 cents per quart for their milk, the Iowa dairymen 3.1 cents, and the Minnesota dairymen 3.04 cents, while the dairymen in those states with the metropolitan markets got much higher prices. Massachusetts and Connecticut dairymen averaged 7 cents per quart, considerably more than the national average for milk retailed in its fluid form.
After the city health boards arbitrarily refused to inspect and license distant dairy farms, the dairymen agitated for higher and higher prices for their milk. With the coming of the depression their pleas fell on ever more sympathetic ears, and in 1933 dairy-proud Wisconsin empowered its Department of Agriculture and Markets to establish farm and retail milk prices. Since then nearly half the states, chiefly the big dairy states, have established similar price-fixing bodies, and many county and municipal bodies have displayed little hesitation in passing ordinances designed to limit competition in milk distribution and stabilize prices.
Both the municipal health boards, in limiting the supply of city milk, and the state milk boards, in maintaining high milk prices, led dairymen on farms near the cities to produce more and more milk. This prompted the dairy-farm coöperatives, which have gradually grown in number and size during the past twenty-five years, to take drastic action. They dictated the amount of milk which each of their members could produce, on the basis of each one’s past production record, and ruled that any surplus would have to be sold for making dairy products. This helped curb the overproduction mania, but naturally those dairymen who were given only small production quotas were denied any opportunity to expand their operations, and their initiative was killed.
The price-fixing bodies, in increasing the price of milk, have adhered to the single-track theory that guaranteeing the dairy farmers a reasonable price for their milk would make the farmers prosper. This sounds reasonable. But it has precluded any unbiased consideration of the public, the consumers of the milk; and the public somehow hasn’t bought as much milk when high prices have been maintained in the face of lowered incomes. Unavoidably, the farmers have suffered.
During the severe depression years, the retail price of milk was maintained at a relatively higher level than the price of all other foods, on the basis of 19251927 index figures, and the consumption of milk declined substantially. From 1929 to 1934, according to Agricultural Statistics, 1939, the per capita consumption of milk and cream fell from 163 quarts to 144 quarts annually, a decrease of nearly 12 per cent. Billions of quarts of milk that formerly entered the fluid market, commanding a top price, had to be sold for much less for making dairy products.
Under the AAA, the Department of Agriculture supports a price-fixing program. Instead of setting both the farm and the retail price of milk, it establishes only the price to be paid the farmers by the milk distributors, trusting the distributors to absorb some or all of any increase in the price set for the farmers. This is only a beautiful hope. Whenever the farm price is increased, the retail price goes up. When dairymen of the New York milkshed, in August 1939, were granted an AAA-established price increase of .53 cent a quart, the retail price jumped .50 cent. One month later the same dairymen got another AAA-established price increase, .76 cent a quart, and the retail price advanced 1.00 cent; the next month the dairymen got still another increase, .47 cent a quart, and in the same and two succeeding months the retail price advanced a total of .50 cent. While the dairymen got a combined increase in this period of 1.76 cents a quart, the consumers had to pay 2.00 cents more.
Some state price-fixing bodies have gone to the extreme of establishing the same price for retail-store and homedelivered milk. They know that milk can be sold cheaper in stores, because of lower distribution costs, but they have doggedly insisted, in seeking to help the dairy farmers, on maintaining an arbitrarily high one-price system. Even where store prices have not been elevated by law, the same results have been generally attained through the concerted action of dairymen, unionized milk deliverymen, and distributors. The moment any retailer cuts the regulation retail price, he becomes the target of an often violent conflict. Unionized labor boycotts him, tips over the trucks of anyone selling him milk, and, as has been done in Chicago, may even wreck his store.
Yet it has been demonstrated dramatically that stores can retail milk at drastically reduced prices. In some cities new and revolutionary retail merchandising methods have been introduced. In the San Bernardino-Riverside area of California, the Safeway stores have purchased milk from farmers at 5 cents a quart, pasteurized it, and retailed it for 8 cents — a reduction of 33 1/3 per cent as compared to 12-cent milk. They would like to reduce retail milk prices in other areas, but are restrained by legally fixed prices and other artificial obstacles. On the other hand, just five years ago George A. Johnson established a pasteurization plant in Detroit, contracted with farmers to purchase their milk, and opened retail ‘milk depots’ as sales outlets for his milk and dairy products. When milk was selling at 12 cents a quart, he retailed it at 8 cents. Since then he has sold it for from 2 to 6 cents less per quart than his competitors, including the Detroit subsidiaries of the two giant milk distributors, Borden and National Dairy, and he has paid employees and the dairymen more moncy’than his competitors. Not much more, it is true — but more! Yet he could not have done this without arousing the organized opposit ion of union labor and established distributors if it had not been for the friendly support of the prosecuting attorney of Wayne County, in which Detroit is situated.
In New York City, the Board of Health just recently outlawed the sale of Grade A and B milks, forcing the distributors to market only one grade and thus eliminate high-price Grade A. This action followed a prolonged assault by fiery Mayor Fiorello La Guardia on the sale of Grade A milk, start ing last January. The mayor termed Grade A, selling at 3 cents a quart more than Grade B, a ‘de luxe money-maker’ for the big distributors. ‘Buy Grade B milk,’ he urged consumers. ‘It is just as good; it is just as wholesome; it is just as sanitary as Grade A milk.’
Months before Mayor La Guardia launched his attack, the New York City subsidiaries of Borden and National Dairy took steps to reduce the retail price of all home-delivered milk. To cut the cost of distribution, they introduced a two-quart fibre milk container, the first change in milk distribution methods within thirty years. The new two-quart unit sells for 28 cents — a reduction of 2½ cents.
A similar plan for reducing house-tohouse retail prices is fast gaining favor elsewhere. Distributors in twelve other cities, including Chicago, began selling two-quart and gallon glass jars of milk after the New York plan was launched. The two-quart glass units were first retailed at a saving of 1½ cents a quart; the gallon glass units at a saving of 3½ cents. With the price at about 11 cents for a one-quart bottle in Chicago, four quarts in one glass unit can be bought for about the same price as three quarts in three one-quart bottles.
This is only an encouraging sign of what is to come. The consuming public and the dairymen are still faced with a headstrong situation. In delivering large units of milk at reduced prices to family doorsteps only, the distributors are seeking to discourage the purchase of milk from retail stores. More and more milk has been sold through stores during late years, and the distributors are plainly seeking to rebuild their house-to-house sales volume and thus maintain and safeguard this high-cost delivery system. It enables them to push the sale of their Grade A and Vitamin D milks, from which they make handsome profits, and to maintain direct sales relations with the consuming public, thus minimizing the danger of new and resourceful competition. Chain grocery stores, for instance, are not likely to market and promote the sale of their own brands of milk if all milk continues to be sold chiefly at the doorstep.
If milk can be retailed cheaper in large units at the housewife’s doorstep, in the public interest it can be retailed still more cheaply in stores. A reduced price in the stores would stimulate the purchase and consumption of milk by lowincome families who now get too little of it, and would inevitably lead to improved health on the part of millions. The dairy farmers, too, would greatly benefit. For they would be selling more milk at about 5 cents a quart instead of at 2 to 3 cents. Their purchasing power would be greatly enhanced, and this would stimulate business nationally.
How much can milk consumption be stimulated? One can only conjecture, but there is reason to believe it can be stimulated substantially. In 1939 the Federal Surplus Commodities Corporation, by drastically cutting retail milk prices, increased consumption by 50 per cent on the part of Boston relief families. Those on direct relief were sold milk at 5 cents a quart, the average price paid to farmers for milk retailed in its fluid form, and those on WPA got it at 7 cents.
As a general retail store price, 5 cents per quart is untenable, since it does not allow for any pasteurization or distribution costs, but the Safeway stores in California’s San Bernardino-Riversidc area and George Johnson in Detroit have almost met the 7 cents per quart price. In fact, Johnson has sold milk for as low as 7 cents a quart.
Borden and National Dairy, in distributing milk at a reduced price in large containers in New York City, apparently are increasing sales substantially. They decline as yet to give sales figures, saying it is too early to estimate the increase that may be attained, but two illuminating facts are known. In Rockland County, New York, where the two-quart unit sales plan was tested before being introduced in New York City, the sale of home-delivered milk increased about 45 per cent; secondly, more than half of all New York City families who have milk delivered at their doorsteps are now buying it in cost-saving two-quart containers.
In energetically promoting their New York City sales, Borden and National Dairy are also effectively using advertising. For some reason the advertising of milk has been neglected as a means of stimulating total consumption. The milk distributors, to be sure, have done considerable advertising of high-cost Grade A and Vitamin D, but they have ignored the fact that the potential big market for milk is the Grade B market.
Most of the emphasis seems to have been on increasing the sale and consumption of dairy products. Because the price of milk, when not arbitrarily set by price-fixing bodies, is adversely affected by any huge stocks of dairy products, there is a marked tendency within the industry (even on the part of the dairy farmers) to concentrate on increasing the consumption of butter and cheese. The consumption of milk is generally considered last. It is fair to add that the big dairy companies claim they make substantially more on the sale of dairy products than on Grade B milk.
Dairy farmers now are awakening to the vital need for sustained advertising to stimulate the consumption of milk. In some states they are financing milk advertising campaigns, and there is agitation for a national campaign, to be financed by individual assessments on all dairy farmers on the basis of their individual yearly milk production totals.
One of America’s leading advertising men, who has studied milk marketing problems, recently wrote: —
Any good non-luxury product, particularly one with a strong health story, ought to respond to advertising in a big way. Everyone knows about milk. Everyone accepts the fact that it is good for babies and nourishing for everyone. Most people like it. But they are so familiar with it, in a general way, that it never occurs to them to drink it daily as a regular part of their diet. Advertising could fix all of that — certainly with a reduction in retail milk prices. In fact, I can’t think of an easier advertising job.
Many other means can also be used for stimulating milk consumption. Since distribution costs can be pared to the core by delivering milk in large quantities, why not make large and airtight sanitary milk refrigeration units, from which consumers could get quarts, half gallon and gallon units, by inserting coins, just as diners get glasses of milk in automat cafeterias? These could be made for installation not only in grocery stores, but in large apartment houses where scores, sometimes hundreds, of families live.
Such a merchandising plan is feasible today. Milk keeps much better now than in by-gone decades. The bacteria count is lower, — most health regulations require this, — and refrigeration facilities have been vastly improved. As pasteurized now, milk has been known to be kept by housewives for about a week; in fact, some mistakenly believe that a preservative must be used in it. Surprisingly, however, it can be kept much longer. For many years the big ocean liners have kept it fresh for from sixteen to eighteen days, at a constant temperature of 36 to 38 degrees Fahrenheit, and William K. Vanderbilt is reported to have kept milk fresh on a yacht cruise for six months. The milk was pasteurized three times, once on each of three successive days, by the Walker-Gordon Laboratory, thus being made completely sterile without impairing its taste or odor, then sealed in airtight paraffin-capped bottles and kept at a temperature of from 33 to 40 degrees Fahrenheit. And cream is now being marketed in cans, with its taste and odor seemingly unimpaired.
There is already some undercurrent agitation within the dairy industry for the establishment of a research fund for biochemists. It would be their job to take milk out of the perishable-products class — to get it to consumers in cans, just as condensed and evaporated milk has long been marketed, but with its fresh odor and taste unimpaired. Milk then would take its place on the grocers’ shelves along with, vegetables and fruits, and the whole top-heavy cost of distributing it would vanish overnight. In addition, for those who do not relish the natural taste of milk, the biochemists might produce it in a variety of artificial flavors.
Before biochemists are likely to solve these problems, it is probable that the current artificial barriers against the free competitive sale of milk will be swept aside by the enactment of new and the enforcement of old legislation. A widespread war against restraints on free competitive trade in many fields of endeavor, including those in the dairy industry, is fast gaining momentum. The Council of State Governments is making substantial headway in getting trade-warring states, which have imposed legislative restrictions on the sale of products from other states, to rescind them. The Federal Government’s newly formed Interdepartmental Committee on Interstate Trade Barriers is devising ways and means of sweeping aside all obstructions to interstate commerce and making the United States once again ‘the greatest free-trade area in the world.’
On another front, Thurman Arnold, the Assistant Attorney General, is using the Sherman Antitrust Act as his scalpel in cutting down artificial prices and restraints of free competitive trade. He has a staff of about two hundred lawyers, as compared to Theodore Roosevelt’s trust-busting staff of five; and unionized labor, the building industry, the field of medicine, gasoline distributors and producers, and the dairy industry itself already have felt the sharpness of his attack.
About two years ago Arnold obtained 57 indictments against key figures and organizations in the brutally troublesome Chicago milkshed, charging them with conspiracy to fix prices, to control the milk supply, and to suppress competition; and the price of milk immediately dropped from 12 to 8½ cents a quart in Chicago stores and from 13 to 11 cents at the doorstep. During the two years of litigation, in which the cases went to the United States Supreme Court and back again, the retail prices jumped when the defendants won a legal decision and dropped when the government won a point. Finally, last September, the defendants signed a consent decree, saying in effect that they would refrain from doing the things charged by the government; and Arnold, who had seen the high retail prices broken without adversely affecting the farmers, had the criminal charges dismissed.
‘Milk distribution should become possible,’ Arnold has said, ‘by the various methods which the consuming public may find desirable, and not, as now, so largely by the costly system of back-door delivery.’ Yet this is but half of the objective of Arnold and his associates. The public interest also demands that the dairymen of comparatively isolated areas, such as those of the Midwest dairy empires, should have restored to them their once inalienable right to sell their milk in any markets they see fit.
We now have a wealth of roads and transportation facilities to bring milk from distant points to cities. And we have so greatly reduced the bacteria count of milk that, with the development of vastly improved refrigeration facilities, it can be kept fresh under ideal conditions for a considerable period of time. This presages the day, once the artificial marketing restrictions are removed, when milk from any section of the country can be sold anywhere within the forty-eight states. Unrestricted amounts of milk then will flow into our big city markets. Where there long has been a pronounced underconsumption of one of the most perfect of foods, there will be an abundance at reasonable retail prices. Then the dairymen of Oshkosh, Keokuk, and Mankato will have their day. And so will the consumers.