Research Progress Reporl197 july, 1965 Intermarket Milk Price Relationships 1961-1964 E. M. Babb, Department of Agricultural Economics Summary 1. Compared to earlier years, mini- mum Federal order fluid milk prices were in better alignment in 1961-1964. But, markets with relatively high prices con- tinued to be located in the Northeast and the Minnesota-Iowa-Dakota area. Those with relatively low prices continued to be found in the Missouri -Kansas -Tennessee area. Distance from Eau Claire, Wisconsin, ex- plained almost 90 percent of the variation in fluid milk prices among markets. 2. Markets with relatively high fluid milk prices tended to have similar blend prices. About 80 percent of the variation in blend prices was associated with distance from Eau Claire. 3. Potential least-cost sour c es of milk were analyzed. When over -order rather than minimum fluid milk prices were con- sidered' least-cost sources of milk for Federal order markets were changed appre- ciably. Not only would producers in order with premiums gain income, but to a lesse extent producers in markets where no premiums were applicable also would re- ceive higher prices. This would occur be- cause the level of prices in the Federal . order system of markets was raised. When over-order prices were considered, least- cost procurement of milk would involve les; milk movement from one market to another and distance of movement was much shorte: 4. The premiums negotiated added about $5 million monthly to the value of producer milk. Introduction This report updates two earlier studies of intermarket milk price relation- ships, with particular attention focused on changes that have taken place . ij The prob- 1em of proper price alignment among mar- kets continues to be one of vital interest to both milk processors and producers. Mis- Helpful suggestions were given by C _ E. French and K. W. Kepner and by R . E . Freeman and R. W. March of USDA. ij E. M. Babb, Intermarket Milk Price Relationships, Indiana Exp. Sta . Res. Bul . 760 Jan. 1963; and R. E. Freeman and E _ M. Babb, Marketing Area and Related Issues in Federa Milk Orders, Indiana Agr. Exp. Sta. Bu!. 782, June 1964.
E. M. Babb, Department of Agricultural Economics
Summary
1. Compared to earlier years, mini mum Federal order fluid milk
prices were in better alignment in 1961-1964. But, markets with
relatively high prices con tinued to be located in the Northeast
and the Minnesota-Iowa-Dakota area. Those with relatively low
prices continued to be found in the Missouri -Kansas -Tennessee
area. Distance from Eau Claire, Wisconsin, ex plained almost 90
percent of the variation in fluid milk prices among markets.
2. Markets with relatively high fluid milk prices tended to have
similar blend prices. About 80 percent of the variation in blend
prices was associated with distance from Eau Claire.
3. Potential least-cost sourc es of milk were analyzed. When over
-order rather than minimum fluid milk prices were con sidered'
least-cost sources of milk for Federal order markets were changed
appre-
ciably. Not only would producers in order with premiums gain
income, but to a lesse extent producers in markets where no
premiums were applicable also would re ceive higher prices. This
would occur be cause the level of prices in the Federal . order
system of markets was raised. When over-order prices were
considered, least cost procurement of milk would involve les; milk
movement from one market to another and distance of movement was
much shorte:
4. The premiums negotiated added about $5 million monthly to the
value of producer milk.
Introduction
This report updates two earlier studies of intermarket milk price
relation ships, with particular attention focused on changes that
have taken place . ij The prob- 1em of proper price alignment among
mar kets continues to be one of vital interest to both milk
processors and producers. Mis-
Helpful suggestions were given by C _ E. French and K. W. Kepner
and by R . E . Freeman and R. W. March of USDA.
ij E . M. Babb, Intermarket Milk Price Relationships, Indiana Exp.
Sta . Res. Bul . 760 Jan. 1963; and R. E. Freeman and E _ M. Babb,
Marketing Area and Related Issues in Federa Milk Orders, Indiana
Agr. Exp. Sta. Bu!. 782, June 1964.
-2 -
Table 1. Regression coefficients, standard errors and correlation
coefficients from regres sion analysis of the relationship between
Federal order Class I and blend prices in markets east of the Rocky
Mounta ins and distance from Eau Claire, Wisconsin, 1961-1964. ~
===================================================================================
Class I Price Regression Coefficients Q/
Year a b sb t r r2 s
1961 3.67 .0162 :00074 21.84 .935 .874 .220 1962 3.53 .0162 .00079
20.59 .925 .855 .235 1963 3.49 .0169 ;00069 24.71 .944 .892 .211
1964 3.57 .0166 .0070 24.28 .943 .889 .202
Blend Price Regression Coefficients c:J Year a b b t r y2 . s
1961 3.43 .0135 .00083 16.20 .890 .792 .247 1962 3.29 .0135 .00085
15.91 .882 .778 .255 1963 3.25 .0149 .00074 20.19 .920 .846 .228
1964 3.31 .0150 .00080 18.75 .915 .838 .228
===================================================================:================
~ Where Y = Class I or blend price per hundredweight for 3.5% milk
and X = distance in 10 mile zones from Eau Claire, Wisconsin.
!V These coefficients are comparable to those in Table 3, page 8,
of Purdue Res. Bul. 760. c:J These coefficients are comparable to
those in Table 5, page 10, Purdue Res. Bul. 760.
alignment of prices can cause serious com petitive handicaps for
process ors, equity problems for producers, and shifts of
production to areas that do not have a com parative advantage in
dairying.
If the fluid milk price in a market ex ceeded that in other
markets by more than transfer cost, an incentive would be created
for handlers to seek the lower priced sources. Whether milk would
move in re sponse to the price incentive depends on the existence
of barriers (including economic, institutional, lack of knowledge,
and the like) to the movement of milk. Of course there is some
inertia in the system. Con versely , a market with a low fluid
price relative to alternative sources would ex perience
difficulties attracting or holding supplies , if needed.
The current basis for establishing fluid milk prices in most
Federal markets in-
volves using competitive manufacturing milk prices in the heavy ,
low -cos t milk production region of Wisconsin and Minnesota as a
base price. To this base price is add ed a differential which
represents the cost of meeting Grade A requirements and a dif
ferential reflecting transportation cost from the
Wisconsin-Minnesota area to the specific market. Seasonal and
supply-demand factors may further affect price.
This method of establishing prices is not an arbitrary one invented
for Federal order usage. To some extent, this price pattern was in
existence before Federal order regulation. Except for barriers to
milk movements and imperfections in the marketing systems, th e
same type of price relationships would prevail in the absence of
Federal orders. Milk in New Orleans could still command the price
at Chicago (or other intermediate markets) plus transporta tion
costs.
>- '"" (J)
\I) If) « ~ u
5 .. 10 t Q"7.9 JI IPi "'. .108 4.90 , 10 'P'
4.70 • .So
Predicted price based on Y =
$3.49 + .0169 (X). Numbers are those used by USDA to identify
markets and are lis ted in Appendix Table 1.
MILES FROM £AU CLAIRE, WISCONSIN (lO-NILE ZDNfS) X
Figure 1. Federal Order Class I prices (1963) for 3.5% Milk and
Class I prices predicted on basis of distance from Eau Claire,
Wisconsin.
Prices based on milk prices in Minne sota and Wisconsin plus
transportation cost also correspond to production costs (with some
notable exceptions such as the New York-Vermont area). Y That is,
milk production costs tend to increase with dis tance from
Chicago. The fact that milk prices increase in areas with higher
produc tion costs undoubtedly makes the system of pricing more
acceptable to producers.
Minimum Federal Order Fluid Milk Price Relationships
In the analys is which follows, Class I and blend prices in the
various markets were related to their distance from Eau Claire,
Wisconsin, by means of regression analysis . This analysis shows
what the price-distance relationship was and which markets had
rela tively high or low prices based on this price-
2/ M. M. Snodgrass and C. E. French , Linear Programming Approach
to the Study of Inter-;::egional Competition in Dairying, p . 9,
Indiana Agr. Exp. Sta. Res. Sul. 637 , May 1958.
-4-
Eau Claire - base point $3.49 $6.00 $5.50 $6.00
Figure 2. Theoretical Minimum Federal Order Class I Price Zones
1963, Based on Class I Prices in Markets as Related to Distance
from Eau Claire, Wisconsin. *
$5.50 $5 00 o $4.50
$6.00
Figure 3, Actual Minimum Federal Order Class I Price Zones
1963.*
-;:-l~unbers on map are those used by LO.lJA "(,0 identify Federal
order markets
distance relationship. These results only describe the situations
that existed and do not necessarily mean that prices are too high
or too low. Under competitive conditions and with no barriers to
the movement of milk among markets, the price-distance relation
ship would become an upper limit on pric es if the rela tionship
approxima ted transporta tion costs. That is, milk would tend to
be attracted to markets with relatively high Class I prices. But
prices in a market may be relatively low or below prices in surplus
markets plus transportation because of lower production cost or for
other reasons. In summary, use of regression analysis or actual
transportation costs can be used only to establish what upper limit
on Class I prices would be expected under competitive conditions.
The lower limit on Class I prices, from a normative standpoint, can
not be established by these methods.
If minimum fluid milk (Class I) prices in 1963 in Federal order
markets had been perfectly aligned on the basis of transporta tion
costs, using Eau Claire, Wisconsin, as the base pOint of the heavy
milk produc tion region, the price structure would be that
reflected by the rising line in Figure 1 and by the concentric
equal price circles shown in Figure 2. Y Fluid prices in Federal
order markets deviated from this perfect alignment as shown by the
scattered dots in Figure 1 and the distorted circles in Figure
3.
The relationship between minimum Federal order Class I price (Y)
and distance from Eau Claire, Wisconsin (X) for all Federal order
markets east of the Rocky
-5-
Mountains in 1961-64 is illustrated by the regression coefficients
in Table 1. There is little change in these statistics from ear
lier years, although the "b" value does ap pear to have declined
slightly and is more in line with transportation costs.
There appears to have been some im provement in price alignment
(in terms of deviations from expected prices) during the 1961-64
period, but relatively low and high markets are still found (see
Appendix Table 1 and Figure 1 for individual markets). Markets with
relatively high minimum Class I prices continue to be located in
the North east and in the Minnesota -Iowa -Dakota area. The New
York-New Jersey, Delaware Valley and Washington markets are in
better align ment than before. Markets with relatively low prices
continue to be found in the Missouri - Kansas -Tennessee
area.
The improvements in price alignment resulted primarily from changes
in the basic formula price, action of supply-demand adjusters, and
suspension or actions of a temporary nature (compare Table 26 and
Table 36 of Stat. Bul. 345 and Stat. Bul. 248, USDA, which show
formula factors which determine Class I price). For example, from
1960 to 1963, the basic formula price in the New England orders was
reduc ed 19 cents and the supply-demand adjuster re duced price 3
additional cents. The basic price was reduced 1 cent, the
supply-demand adjuster reduced price 26 cents, and there was no
suspension action which added 6 cents in 1960 for the New York-New
Jersey order. The basic price was reduced 15 cents, the supply
-demand adjuster raised
3/ For some similar studies of fluid milk price relationships see
Agricultural Market ing S~rvice, Regulations Affecting the
Movement and Merchandising of Milk, Mkt. Res. Rept. No. 98, USDA,
1955; A. S. Rojko, The Demand and Price Structure for Dairy
Products, Tech. Bul. 1168, USDA, 1957; W. T. Butz, . Geographic
Structure of Milk Prices, 1960-61, ERS-:-71, USDA, 1962; L. F.
Herrmann and H. V. Smith, "Geographic Structure of Milk Prices,
1957- 58, " Marketing and Transportation Situation, USDA, July
1959.
-6-
>-
~. 4.50 u ·
,Ii6 Til .98 .101 .Tot .2
"ot a: 8 3,90 l1..
3.70
3.50
3.30
o
Predicted prices based on Y =
$3.25 + .0149 (X). Numbers are those used by USDA to iden tify
markets and are lis ted in Appendix Table 1.
120 140 160 180 MILES FROM EAU CLAIRE, WISCONSIN (lO-MILE
ZONE/X
price 10 cents, and other fa ctors reduced price 18 cents in
Philadelphia. Washington and Baltimore prices are tied to
Philadelphia and New York-New Jersey so consequently
declined.
The above fluid price relationships were a nnual averages. On a
month -by month ba sis , price relationships are not a s good. The
action of independent supply demand adjusters and seasonal
pricing
arrangements in different orders may seriously distort fluid price
relationships in a given month. For example, in 1963 the average
Dallas price was only 2 cents below the Chicago price plus
transportation cost on an annual bas is, but varied from 25 cents
above to 17 cents below in individual months.
Distortions in fluid price alignment can have serious consequences
for milk dealers and milk producers, whether on a month-by-month
basis or annually. A 25- cent deviation is approximately 0.5 cent
per quart and when One compares it to profits per quart on milk or
possible cost savings in processing or distribution, it is easy to
understand the milk dealer's concern over price alignment. The
importance of month by-month alignment stems in part from the
nature of bidding for military, school and some store business.
Sales could shift from one market to another and cause needless
dealer and producer problems, Distortions in fluid price alignment
invariably create distortions in blend price alignment (because
level of fluid prices is a major determinant of blend prices) and
consequent producer prob lems discussed later.
Minimum Federal Order Blend Price Re lationships
The relationship between minimum Federal order blend (producer)
prices and distance from Eau Claire, Wisconsin, in 1961-64 is shown
by the regression coefficients in Table 1. Again, the "b" value
appears to have declined somewhat, as would be expected with the
decline in the comparable Class I coefficient. Pre dicted blend
prices and deviations from ex pected values are shown in Appendix
Table 1 and Figure 4.
In general, areas that have relatively high or low fluid milk
prices have corre sponding high or low, blend prices. Blend price
alignment has also shown impr ove ment in recent years. This may
be due to greater uniformity of order provisions, al lowance of
freer movement of milk among orders, increased mobility of milk
with bulk tank farm pickup as well as better fluid price alignment.
It is clear, how ever, that perfect alignment of fluid prices will
not necessarily lead to proper align ment of producer prices.
Differences in type of pooling, pool plant provisions,
classification and aSSignment provisions, local health ordinances
and uncertainty are only a few of the possible reasons for devia
tions. Producers and their organiza tions must have considerable
freedom in being able to shift markets in response to price
incentives if blend alignment is to be achieved within the present
framework of semi -independent orders.
The above does not mean that each separate market should have an
identiCal percentage usage of milk for fluid purposes. Producers in
the high -cost production areas, such as in Florida, Texas
and
-7 -
Arizona, should not be encouraged to produce milk above fluid
requirements. It is probable that milk from low-cost areas could be
moved into these markets to sup plement local supplies so as to
result in substantial economic savings. The orders must, of course,
accommodate such move ments. Under this arrangement, fluid
utilization in markets would tend to increase with distance from
Eau Claire.
Where blend price misalignments persist, problems of producer
equity arise and the cooperative may experience mem bership or
marketing problems. Blend price misalignments may also result in
procurement problems for milk dealers.
Competitive Sources of Milk Supply
As in the earlier price alignment study (Purdue Research Bulletin
760), the Chicago supply area was used as the com petitive source
of supply. The Ozarks region would probably better serve some
southern and southwestern markets, but Chicago is typically used
where a single comparison is made. Both the minimum Chicago order
Class I price and the Chicago superpool price adjusted to Eau
Claire were used as competitive base prices.
Transportation costs to receiving markets were added to thes e
prices. The earlier study used a transportation ra te of 1.7 cents
per hundredweight per 10 miles, while 1.5 cents was used here. The
1.5 cents is more typical of costs where large tankers are us ed
for regular long distance hauls. i! It is recognized that costs may
be higher on some hauls. No consideration was given to plant
handling charges in Chicago or comparable charges in effect for
local milk in receiving markets.
i! F. W. Groves and H. L. Cook, Hauling and Transportation Cost
Functions for Wisconsin Milk, Ag. Econ. 31, Wisconsin Agr. Exp.
Sta., 1961.
6.50
6.30
6.10
5.90
5.70
>- 5.50
4.90
~ 4.70
3.90
3.70
3.50
5.50 UJ u ~ 5.30
~ 5.10 « (j 4 90 a: ~ 4.70 ~ .....I 4.50 ~ ~ 4.30 lJ.J lL.
4.10
3.90
3.70
o
o
20
.1:1
40
;Ul .
·72
,13
-8-
' •• &1 ~.
5 IOf I~~
,50
Figure S. Class I prices for 3,5% milk com pared with Chicago
order Class I price.
60 80 100
Expected prices based on Y =
$3 .43 + .015 (X). Numbers are those used by USDA to identify
markets and a re listed in Appen dix Table 1.
120 NILES FROM (AU CLAIRE, WISCONSIN Q(H1/LE ZONES) X
,aI . .-1 .1.904
tis ..a '1~ .7+
Figure 6. Class I prices for 3.5% mille com pared wih Chicago
superpool Class I price.
Expected prices based on $3.95 + .015 (X). Numbers are those used
by USDA to identify mar kets and are lis ted in Appendix Table
1.
60 80 100 120 140 160 MiltS FRON EAU CLAIRE, WISCONSIN OO-MILE
ZONE) X
180
The two Chicago prices used as a base give an indication of the
range in competitive prices. The Pure Milk Association, a major
Chicago order supplier of milk to other markets in 1963, generally
followed the policy of charging the superpool premium only to the
extent that the Chicago order price plus their handling charge plus
trans portation to the receiving market was less than the Class I
price in the receiving mar ket. The minimum Federal Order price
might be the appropriate basic cost of milk in some cases and the
superpool price in others.
Potential competitive prices based on the two basic Chicago prices
plus transporta tion are shown for individual markets in Appendix
Table 2 and are illustrated in Figures 5 and 6. Where the Chicago
super pool Class I price was used as the basic cost of milk, the
minimum Class I price in all but seven markets was below the
potential competitive cost. Under these circumstan ces, there
would be less incentive for hand lers to import Chicago
milk.
Effect of Over-Order Prices on Least-Cost Sources of Milk
One approach to the study of inter market price relationships has
been through the use of a transportation model. This model is a
mathematical procedure which allows the researcher to determine
least cost dispositions of milk in all markets simultaneously when
production, consump tion, prices and transportation costs are
given. The indicated flows and dispositions of milk emphasize price
alignment problems and show the consequences of whatever price
structures is used. This provides a more complete solution than
price comparisons alone, because prices indicate only potential
cost advantages without relation to require ments and available
supplies.
The total receipts of producer milk in each of the Federal order
markets com-
-9 -
prised the quantity at each source and was valued at the local
Class I price. The quantities needed at each market were equal to
the fluid milk utilization at that market plus a 20 percent
operating reserve. Costs from each source to each market consisted
of the Class I price in the source market plus any transportation
costs for the dis tances to the receiving markets. Thus, the
least-cost solution would call for dealers in each market to draw
on local supplies at the local Class I price unless this price was
higher than the Class I price plus transporta tion cost from some
other market. Other markets might also have to be drawn upon if
local supplies were less than local require ments; such
supplemental supplies would come from the cheapest available source
but might cost more than local milk.
This application of the transportation model assumes that (1) all
milk is of ac ceptable quality and is free to move from any source
to any market in response to price incentives; (2) transportation
costs are at a fixed rate per hundredweight per mile re gardless
of distance and directions or exist ence of a part load; (3)
perfect knowledge on the part of buyers and sellers; (4) dealers
have no preference for local milk and will purchase supplies from
the cheapest source available; (5) consumption requirements and
milk production in each market are fixed, and (6) there will be no
adjustment in price in any market in response to milk move ments
indicated in the solution. The last as sumption probably departs
from reality to a greater extent than do the others and implies an
extreme short-run situation . Accordingly, the solutions indicated
should not be taken as equilibrium dispositions. Rather, they in
dicate the pressures of milk movements on a given price structure.
It is quite probable that adjustments in price would be made in
response to these pressures.
The transportation model was used to examine price relationships in
Purdue Re search Bulletin 782. This part of the report
Table 2. Regional summary of optimum sources of flui.d milk for
Federal order markets at 1961 over-order Class Iprices. V
=====================================:============================================================================
Region and group
Western Group
East South Central
Mountain
Pacific
Totals
78
68
3,267
Dis pos i tion Local To other Manu- fluid markets factured
(million pounds)
Intraregional & Chicago Intraregional
Kansas & Missouri Missouri, Kansas & Intraregional
==================================================================================================================
V This table is comparable to Table 5 in Research Bulletin 782,
Purdue University Agr. Exp. Sta., except over -order rather than
minimum order Class I prices were used as the basis for milk
cost.
I ..... o
-11-
examines least-cost disposition of milk if over-order, rather than
minimum Class I prices, had been used as the cost of milk in the
transportation model. Over-order prices are applicable to a large
volume of milk moved among orders, because most inter order
movement is in the form of route sales from handlers' plants
located in the origina ting market which is often subject to the
premium.
Federal orders establish minimum prices handlers must pay for milk
according to use, and prices paid to producers are consequently
minimum prices. There are a number of markets that have maintained
prices above the minimum prices establish ed by the order during
one or more years. Usually these premiums over order prices have
been obtained by milk producers through the process or bargaining
with milk handlers. In 1961 there were 32 order markets with annual
average over-order prices ranging from 2 to 78 cents (Appendix
Table 3). In other markets, such premiums have been obtained, at
least in part, by action on the part of a state agency which
established a price above the Federal order price in the particular
market.
Markets where over-order prices prevail tend to be found in
clusters. These clusters are found primarily in the Middle Atlantic
states, Ohio, Michigan, Illinois, Tennessee, Mississippi, and
Arkansas. Because these markets are dispersed geo graphically,
they do not alter price-distance relationships in the aggregate
very much from those that exist for minimum prices. In some cases
the amount of premium var ied from month to month, and in
other
cases a uniform monthly premium was maintained. These different
premium pat terns may have further intensified price alignment
problems among markets on a monthly basis, as di~cussed
elsewhere.
In the analysis presented, it was assumed that no change in
production or
consumption would be associated with over order prices. In other
words, the same market and total production and consumption figures
were us ed here as in the earlier study where minimum order prices
were used. Production and consumption in 1961 were probably more
nearly associated with the over -order price structure than with
the minimum order prices. Thus, changes in production and
consumption associated with premiums would be measured in terms of
a return to minimum order prices. It is very difficult to determine
whether minimum or over-order prices should be the basic cost for
milk moved to other markets. Both cases, as well as a mixture of
the two, can be found in specific markets. Consequently, least
cost intermarket movements and dispositions probably lie between
the two cases presented.
If all fluid requirements in those orders with premiums had been
purchased On the basis of the over-order price , the total value
added by premiums would amount to approxi mately $5 million a
month. Over time, some of this gain to producers would be los t due
to consumers' response to higher prices and produc tion attracted
by the gain.
The same transportation model used in the earlier study was used to
examine price relationships and least-cost movements of milk among
markets under the over-order price structure. The only difference
in data in the two analyses was that negotiated Class I prices were
substituted for minimum prices where applicable. For all markets
combined, the October 1961 supply of producer milk was 4.1 billion
pounds, and fluid requirements were 3.3 billion pounds (Table 2).
This left an excess of 818 million pounds for manu facturing
purposes, which was distributed over all regions. The least-cost
solution utilized 2.7 billion pounds of local milk for fluid
purposes, and 582 million pounds were received from other markets.
Total cost to handlers would have been $194,207,460.
There were important changes in move ments and dispositions of
milk when over-
Table 3. Regiona l summary of optimum sources of fluid milk for
Federal order markets at 1961 Class I prices ~
======================================================================================================:==========
Number Receipts Total Disposition Receipts of from fluid Local To
other Manufac- from other markets
Region and group markets producers requirements fluid markets tured
Quantity Origin
(million pounds)
New England 5 350 296 35 0 315 261 . East North Central
Middle Atlantic 2 1,002 790 675 0 327 115 East North Central and
So. Atlantic
South Atlantic 8 264 247 199 55 10 48 East South Central
Intraregional
East North Central: Eastern Group 10 642 506 341 286 15 165
lntraregional Western Group 10 721 484 462 259 ° 22
Intraregional
West North Central: Northern Group 11 235 200 166 37 32 34
lntraregional
I
Southern Group 7 201 165 156 45 ° 9 Intraregional >-' tv
I
East South Central 9 171 157 147 24 ° 10 Kansas City
West South Central: Northern Group 5 105 93 79 10 16 14
Kansas
Southern Group 7 198 183 135 12 51 84 Mo., Ark. Intraregional
Mountain 4 85 78 76 0 9 2 Kansas
Pacific 2 III 68 68 0 43 00 ------ -- --
Totals 80 4,085 3,267 2,539 728 818 728
=================================================================================================================
a/ For details of individual markets see Purdue Research Bulletin
782.
-13 -
order rather than minimum Class I prices were used (compare Table 2
with Table 3). There were three types of gains to producers which
were traceable to the over-order prices. These were (1) higher
payments to producers in the markets which negotiated the premiums,
(2) higher payments to pro ducers in markets without premiums but
who benefited from negotiated prices in that handler prices for
alternative sources of milk were raised, and (3) higher payments to
both types of producers due to substantial reductions in milk
movements among markets which improved producer returns through
lower transportation costs.
When over -order rather than mini mum Class I prices were used,
handler pay ments for milk increased by $5,815,599. But, the
increase in value of milk actually used for Class I purposes where
a premium was applicable was only $4,502,885. This meant that in
spite of substantially lower transportation costs on intermarket
shipments
when premiums were considered (discussed later), and some
displacement of local milk for Class I sales where premiums were in
effect, handlers would have paid producers over $1.3 million more
for Class I milk in markets where no price premium was ap
plicable. In other words, producers in mar kets where no price
premium was in effect would have benefited from the fact that such
a premium was negotiated in other markets, or premiums had the
effect of lifting the level of Class I prices paid by milk handlers
in the whole Federal order system and not just in markets with
premiums. An example will clarify this pOint. Under the least-cost
solution where minimum prices were used, much of the milk in excess
of Chicago's fluid needs would be shipped to Boston and displace
local milk for C lass I sales there. When the over -order price in
Chicago was cons idered,
Boston handlers would purchas e local milk so that Boston producers
would realize higher blend prices and payments. In effect, some of
the fixed amount of surplus in the system was transferred from
Boston to Chicago.
Premiums in Chicago, Southern Michi gan and Northeastern Ohio
appear to have triggered many of the changes in dispos itions and
movements when over-order prices in stead of minimum prices were
used (detailed market dispositions under the over -order price
structure are given in Appendix Table 4). When minimum prices were
used, milk from these and other nearby markets displaced large
quantities of local milk in New England. When premiums were added,
none of this milk would go to New England. Rather, a lesser amount
of New York-New Jersey milk would be used there. Under the revised
model, the Washington premium would at tract increased shipments
from Ohio markets. All of Chicago'S excess milk would move to
Southern Michigan and would displace about half the Class I sales
of local producer milk. Changes in dispos itions in other regions
were not as grea t .
In general, manufacturing of milk would be shifted from the
Northeast to the Midwest when premiums were considered. There would
be a smaller volume of milk moved from one market to another and
average dis tance of movements was greatly reduced. As expected,
where premiums pushed prices above competitive prices from other
markets, there would be some displacement of local milk . There was
no displacement of local milk in many markets with premiums, how
ever. For example, Chicago would continue to find a Class I outlet
for all local producer milk even when their negotiated price is
taken into account.
-14-
Appendix Table 1 . Minimum Federal order Class I and blend prices
for 3.5 percent milk compared to prices predicted on basis of
distance from Eau Claire, Wisconsin , 1963.
====================================================================================
Minimum Class I price Minimum blend price Dif - Dif-
Act- Pre- fer- Act- Pre- fer- No. Ma rket ual~ dicted !v' ence ual
c:J dicted § ence
1 Boston (zone 21) $5.48 $5 .39 $ .09 $4.33 $4.92 $-.59 6
Springfield 6.00 5.58 .42 5.25 5.09 .16 7 Worcester 5.98 5.66 .32
5.38 5.16 .22
14 S. E. New England 6 . 00 5.71 .29 5.46 5.21 .25 15 Connecticut
6.02 5.61 .41 5.50 5.12 .38
2 N.Y. - N.J. (zone 21) 5.22 5.10 .12 4.11 4.67 -.56 4 Delaware
Valley 5.33 5.31 .02 4.78 4.85 -.07 3 Washington 5.22 5.21 .01 4.56
4.76 - .20 8 Wheeling 4.68 4.77 -.09 4.32 4.38 -.06 9 Clarksburg
:5.01 4.90 .11 4.71 4 .49 .22 5 Tri -State 4'.81 4.75 .06 4.54 4.36
.18
16 Upper Cheasapeake 5.22 5.17 .05 4.52 4.73 -.21 11 Appalachian
5.03 5.07 - . 04 4.85 4.64 .21 13 S. E. Florida 6.39 6.37 .02 6.05
5.79 .26 43 Upper Michigan 4.41 4.39 .02 3.82 4.04 -.22 42 Muskegon
4.37 4.35 .02 3.90 4.01 - .11 40 S. Michigan 4.09 4.50 -.41 3.70
4.14 -.44 41 Toledo :,4,;41. 4.44, -.03 4.12 4.09 .03 36 N. E. Ohio
4 ':'5i' 4.63 ..;; .,12 4.02 4.25 -.23 37 N. C. Ohio 4.23 4.42 -.19
3.98 4.07 -.08 35 Columbus 4.30 4.57 -.27 4.09 4.20 - .11 34 Da
yton -Springfield 4.47 4.51 -.04 4.10 4.15 -.05 33 Cincinnati 4.73
4.55 .18 4.13 4.18 -.05 44 Mich. Up. Peninsula 4.03 3.95 .08 3.73
3.66 .07 45 N. E. Wisconsin 3.62 3.82 -.20 3.41 3.54 -.13 39
Milwaukee 3.75 3.92 - .17 3.65 3.62 .03 38 Rock River Valley 3.79
3.92 -.13 3.65 3.63 . 02 30 Chicago (55 m i. zone) 3.77 3.95 -.18
3.47 3.66 -.19 31 South Bend 4.16 4.19 -.03 3.86 3.87 -.01 47 Fort
Wayne 4 . 30 4.31 -.01 3.99 3.97 .02 69 Duluth -Superior 4.01 3.76
.25 3.52 3.49 .03 68 Minneapolis -St. Paul 3.86 3.66 .20 3 . 62
3.39 .23 76 E. S. Dakota 4.50 4.00 .50 4.02 3.70 .32 72 Sioux Falls
-Mitchell 4.41 4.04 .37 3.96 3.74 .22 75 Black Hills 5.25 4.63 .62
4.64 4.26 .38 78 N. C. Iowa 3.92 3.85 .07 3.83 3.57 .26 70 ' Cedar
Rapids -Iowa City 3.93 3.91 .02 3.61 3.62 -.01 63 Quad Cities - -
Dubuque 3.97 3.97 .00 3.67 3.67 .00 79 Des Moines 4.26 4.03 .23 4 .
00 3.73 .27 66 Sioux City 4.51 4.10 .41 4.02 3.78 .24 65 Nebraska -
W . Iowa 4.50 4.25 .25 4.19 3.92 .27 32 Suburban St . Louis 4.21
4.38 -.17 3.91 4.03 - . 12 62 St. Louis 4.32 4.37 -.05 4.00 4.02
-.02 67 Ozarks 4.07 4.57 - .50 3.77 4.20 -.43 64 Kansas City 4.41
4.38 -.03 4.07 4 .04 .03
-15-
Minimum Class I Price Minimum Blend Price Dif- Dif -
Act- Pre- fer- Act- Pre- fer - . No. Market ual al dieted bl ence
ual cl dicted dl ence
71 Neosho Valley $4.44 $4.86 $-.42 $4.02 $4.46 $-.44 73 Witchita
4.62 4.74 -.12 4.20 .4.35 -.15 74 S.W. Kansas 4.64 4.90 -.26 4.14
4.50 -.36 95 Louis ville - Lex. - Evans. 4.59 4.55 .04 4.20 4.18
.02 99 Paducah 4.43 4.60 -.17 4.29 4.23 .06 98 Nashville 4.51 4 .
79 -.28 4.20 4.40 - .20 97 Memphis 4.98 4.87 .11 4 . 81 4.46
.35
101 Knoxville 4.53 4.96 -.43 4.19 4.54 -.35 90 Chattanooga 4.76
5.03 -.27 4.33 4.60 -.27
105 Mississippi Delta 5.10 5.09 .01 4.71 4.66 .05 103 Central
Mississippi 5.27 5.23 .04 4.60 4.78 -.18 107 Mississippi Gulf Coast
5.36 5.45 - . 09 4.89 4.98 -.09 108 Central Arkansas 4.94 4.96 -.02
4.82 4.54 .28 102 Fort Smith 4.88 4.86 .02 4.70 4.46 .24 106
Oklahoma Metro. 4.85 4.98 -.13 4.34 4.56 -.22 104 Red River Valley
4.99 5.16 -.17 4.55 4.72 - .17 132 Texas Panhandle 5.16 5.32 -.16
4.72 4 . 86 - .14
96 North Louis iana 5.38 5.29 .09 5.04 4.83 .21 94 New Orleans (61
mi. zone) 5.49 5.44 .05 4.74 4.96 -.22
126 North Texas 5.19 5.23 -.04 4.68 4.78 - .10 128 C. West Texas
5.44 5.48 -.04 5.20 5.00 .20 129 Austin-Waco 5.58 5.57 . 01 5.46
5.08 .38 127 San Antonio 5.60 5.70 - .10 5.26 5.19 .07 130 Corpus
Christi 5.94 5.90 .04 5.58 5.37 .21 135 Colorado Springs -Pueblo
5.20 5.14 .06 4.75 4 . 70 .05
48 Youngstown -Warren 4.62 4.70 -.08 4.30 4.32 -.02 49 Indianapolis
4.38 4.35 .03 4.07 4.01 .06 61 St. Joseph 4.31 4.34 -.03 4.09 4.00
.09 51 Madison 3.75 3.80 -.05 3.58 3.52 .06
120 Lubock - Plainview $5.28 $5.49 $-.21 $5.23 $5.02 $ .21
==========================================~=========================================
~ Average minimum Federal order Class I price in markets east of
the Rocky Moun tains for 3.5 percent milk, 1963.
!V Calculated Class I price based on regression coefficients from
analysis of relation ships between Class I prices in markets (Y)
and distance (10-mile zone) from Eau Claire, Wisconsin (X) where Y
= 3.49 + .0169 (X).
c:J Average minimum Federal order blend prices in markets east of
the Rocky Moun tains for 3.5 percent milk, 1963.
~ Calculated blend price based on regression coefficients from
analysis of relation ships between blend prices in markets (Y) and
distance (10-mile zones) from Eau Claire, Wisconsin (X) where Y =
3.25 + . 0149(x).
-16-
Appendix Table 2. Minimum Federal Order Class I Prices Compared to
Competitive Chicago Mini- mum Order Class I Price and Superpool
Price for 3.5 Percent Milk, 1963.
==========================================================================================
Actual Actual Price Price
Competitive Less Competitive Less Chicago Competitive Chicago
Competitive
Order Order Chicago Superpool Chicago Class I Class I Order Class I
Superpool
No. Market Price V Price b/ Price Price c/ Price
1 Boston (zone 21) $5.48 $5.11 $ .37 $ 5.63 $ - .15 6 Springfield
6.00 5.28 .72 5.80 . 20 7 Worcester 5.98 5.35 .63 5.87 .11
14 S. E. New England 6.00 5.40 .60 5.92 .08 15 Connecticut 6.02
5.31 .71 5.83 .19
2 N.Y.-N.]. (zone 21) 5.22 4.86 .36 5.38 -.16 4 Delaware Valley
5.33 5.04 .29 5.56 -.23 3 Was hington 5.22 4.95 .27 5.44 -.25
;. 8 Wheeling 4.68 4.57 .11 5.09 -.41 . ' 9 Clarksburg 5.01 4.68
.33 5.20 -.19 5 Tri -State 4.81 4.54 .27 5.06 -.25
16 Upper Cheasapeake 5.22 4.92 .30 5.44 -.22 11 Appalachian 5.03
4.83 .2:0 5.35 -.32 13 S. E . Florida 6.39 5.98 .41 6.50 - .11 43
Upper Michigan 4.41 4.23 .1 8 4.75 -.34 42 Muskegon 4.37 4.19 .18
4.71 -.34 40 S. Michigan 4.09 4.33 - .24 4.85 -.76 41 Toledo 4.41
4.27 .14 4.79 -.38 36 N. E. Ohio 4.51 4.44 .07 4.96 -.45 37 N. C.
Ohio 4.23 4.25 -.02 4.77 -.54 35 Columbus 4.30 4.39 -.09 4.91 -.61
34 Dayton -Springfield 4.47 4.33 .14 4.85 - .38 33 Cincinnati 4.73
4.36 .37 4.88 - .15 44 Mich. Up. Peninsula 4.03 3.84 .19 4.36 -.33
45 N. E. Wisconsin 3.62 3.73 - .11 4.25 -.63 39 Milwaukee 3.75 3.81
- .06 4.33 -.58 38 Rock River Valley 3.79 3.81 -.02 4.33 -.54
;30 Chicago (55 mi . zone) 3.77 3.84 -.07 4.36 -.59
31 South Bend 4.16 4.05 .11 4.57 -.41 47 Fort Wayne 4.30 4.16 .14
4.68 -.38
69 Duluth -Superior 4.01 3.67 .34 4.19 -.18
68 MinneapCllis - St. Paul 3.86 3.58 .28 4.10 - .24
76 E. S. Dakota 4.50 3.88 .62 4.40 .10
72 Sioux Falls - Mitchell 4.41 3.92 .49 4.44 -.03
75 Black Hills 5.25 4.44 .81 4.96 .29 78 N. C. Iowa 3.92 3.75 .17
4.27 -.35 70 Cedar Rapids -Iowa City 3.93 3.80 .13 4.32 -.39 63
Quad Cities - Dubuque 3.97 3.86 .11 4.38 -.41
79 Des Moines 4.26 3 .91 .35 4.43 - .17
66 Sioux City 4.51 3.97 .54 4.49 .02
-17-
No.
65 32 62 67 64 71 73 74 95 99 98 97
101 90
105 103 107 108 102 106 104 132 96 94
126 128 129 127 130 135
48 49 61 51
120
Market
Nebraska-W. Iowa Suburban St. Louis St. Louis Ozarks Kansas City
Neosho Valley Witchita S. W. Kansas Louisville- Lex. - Evans.
Paducah Nashville Memphis Knoxville Chattanooga Mississippi Delta
Central Miss iss ippi Mississippi Gulf Coast Central Arkansas Fort
Smith Oklahoma Metro. Red River Valley Texas Panhandle
Order Class I Price a/
4.50.,. 4.21 4.32 4.07 4.41 4.44 4.62 4.64 4.59 4.43 4.51 4.98 4.53
4.76 5.10 5.27 5.36 4.94 4.88 4.85 4.99 5.16
N. Louis iana 5.38 New Orleans (61-mi.zone) 5.49 North Texas 5.19
C. West Texas Austin - Waco San Antonio Corpus Christi Colorado
Springs -Pueblo Youngstown - Warren Indianapolis St . Joseph
Madison Lubock - Plainview
5.44 5.58 5.60 5.94 5.20 4.62 4.38 4.31 3.75
$5.28
Competitive Chicago
Order Class I Pric e !:V 4.10 4.21 4.21 4.38 4.22 4.65 4.54 4.68
4.37 4.42 4.59 4.65 4.73 4.79 4.85 4.97 5.17 4.73 4.65 4.75 4.90
5.05 5.02 5.15 4.97 5.19 5.27 5.38 5.56 4.89 4.51 4.19 4.18
3.70
$5.20
Superpool Class I Price c/
4.62 4.73 4.73 4.90 4.74 5.17 5.06 5.20 4.89 4.94 5.11 5.17 5.25
5.31 5.37 5.49 5.69 5.25 5. I -
5.2.7 5.42 5.57 5.54 5.67 5.49 5.71 5.79 5.90 6.08 5.41 5.03 4.71
4.70 4.22
$5.72
Price
-.12 -.52 -.41 - . 83 -.33 -.73 -.44 -.56 -.30 -.51 -.60 -.19 -.72
-.55 -.27 -.22 -.33 -.31 -.29 -.42 -.43 -.41 -.16 -.18 -.30 -.27
-.21 -.30 - .14 - .21 -.41 -.33 -.39 -.47
$-.44
==========================================================================================
V Average minimum Federal Order Class I price at market or zone
location for 3.5 per cent milk 1963 for markets east of Rocky
Mountains.
e! Average minimum Chicago Federal order Class I price adjusted to
Eau Claire, Wisconsin, location for 1963 ($3.77 - .34 = $3.43) plus
cost of transportation to receiving market (1.5 cents per
hundredweight per 10 miles).
cd Average of reported Chicago superpool prices paid for Class I
milk used in the Chicago area adjusted to Eau Claire, Wisconsin,
location for 1963 ($4.29 - .34 = $3.95) plus cost of trans
portation to receiving market (l.5 cents per hundredweight per 10
miles).
-18-
Appendix Table 3. Class I premiums in Federal order markets, 1961.
?J
============================================================
Market
Philadelphia Upper Chesapeake Bay Washington Upstate Michigan
Muskegon Southern Michigan Toledo Northeastern Ohio North Central
Ohio Columbus Milwaukee Rockford - Freeport Chicago South Bend -
LaPorte - Elkhart Quad Cities Kansas City Nashville Knoxville
Chattanooga Mississippi Delta Central Mississippi Mississippi Gulf
Coast Central Arkansas Fort Smith Oklahoma Metro. Central Arizona
Puget Sound Appalachian Michigan Upper Peninsula Northern Louisiana
New Orleans Sioux City
Average
Ave. premium
$ .28 .06 .33 .33 .41 .78 .23 .31 .24 .03 .46 .40 .43 .06 .
..
.19
.06
.36
.47
.35
.06
.04
.09
.07
.06
.37
.02
.15
.04
.04
.02
$.23
===========================================================
al Source: Table 1 and 7, Fluid Milk and Cream Report, USDA.
bl Oklahoma City only. cl Tucson only.
- AppendL able 4. Least-cost source and disposition of Federal
order Class I milk, October 1961, where over-order pri< paid are
used (10,000 pounds). ~
-----=================================================================================================================
Order no.
Total
Total
Wheeling Clarksburg
Total
Muskegon* Southern Michigan *
17 , 793 1,592 1,891 4,895 8,823
34 , 994
87,717 12,478
29,589
24,669
15 , 784
382 789
10,835 o
9,015 New York 10, 835
o 7,221 Chicago, 3,384 Northeastern! Ohio, 327 Ft. Wayne, 107 North
Central Ohio, 420 Wilmington
11 , 459
903 Cincinnati, 2 Clarksburg, 284 Northeastern Ohio, 544 Dayton
-Springfield,
1 , 663 Ft. Wayne, 550 Wheeling , 2, 742 Toledo
113 Columbus, 477 Indianapolis o
91 Louisville o
19, 384 11, 366 Chicago
I f-' ~
Total Disposition c/ fluid To
Order Producer require- Local other Manu- no. Region and market
receipts ments b/ fluid markets factured Receipts from other
markets
41 Toledo* 2, 742 2,767 0 2, 742 0 2,767 Chicago 36 Northeastern
Ohio* 14,432 10, 747 10,747 3,685 0 0 48 Youngstown -Warren 2,013
2,030 2,013 0 0 17 Northeastern Ohio 37 North Central Ohio * 2,238
2,131 2,131 107 0 0 35 Columbus* 2,963 2,850 2,850 113 0 0 34 Da
yton -Springfield 3,898 3,354 3,354 544 0 0 33 Cincinnati 5,252
4,349 4,349 903 0 0
Total 64,235 50,578 36,422 8,094 19, 719 l4,156
East North Central-West Group 44 Michigan Upper Peninsula * 942 936
936 6 0 0 45 Northeastern Wisconsin 3,572 2,812 2,812 760 0 0 39
Milwaukee * 6,088 5,892 5,132 956 0 760 Northeastern Wisconsin 38
Rockford - Freeport* 597 574 574 23 0 0 30 Chic~go* 46,206 24,379
23,400 22,806 0 956 Milwaukee, 23 Rockford-
Freeport 31 South Bend* 1,663 1,452 0 1,663 0 1, 452 Chicago
I
47 Fort Wayne 1,574 1,515 1,247 327 0 268 Quad Cities N 0
46 Ohio Valley 1,640 1,539 1,539 101 0 0 I
49 Indianapolis 7,243 6,766 6, 766 477 0 0 32 Suburban St. Louis
2,573 2,560 2,560 13 0 0
Total 72,098 48,425 44,966 27,132 0 3,459
West North Central- North Group 69 Duluth -Superior 1,237 922 922 0
315 0 68 Minneapolis -St. Paul 8,176 6,487 6,487 1,689 0 0 76
Eastern South Dakota 321 324 0 0 321 324 Minneapolis -St. Paul 72
Sioux Falls -Mitchell 806 795 795 11 0 0 75 Black Hills 395 369 0 0
395 358 Minneapolis -St. Paul,
11 Sioux Falls 78 North Central Iowa 2,202 1,806 1,806 396 0 0 70
Cedar Rapids-Iowa City 1, 610 1,294 1,294 316 0 0 63 Quad Cities
-Dubuque* 1, 805 1,537 1, 537 268 0 0 79 Des Moines 2,538 2,312 1,
916 622 0 396 North Central Iowa 66 Sioux City* 511 439 0 0 511 439
Minneapolis -St. Paul 65 Nebraska -Iowa 3,887 3,687 2,514 0 1, 373
551 Minneapolis -St. Paul,
622 Des Moines --
Appendix Table 4. ( continued)
West North Central-South Group 61 St. Joseph 1,203 1, 029 1,029 174
0 0 62 St. Louis 6,041 5,878 5,878 163 0 0 67 Ozarks 2,012 1,428
1,428 584 0 0 64 Kansas City* 6,325 5,012 5,012 1,313 0 0 71 Neosho
Valley 1, 336 942 942 394 0 0 73 Wichita 2,632 1,743 1, 743 889 0 0
74 Southwest Kansas 590 480 480 110 0 0 --
Total 20,139 16,512 16,512 3,627 0 0 East South Central
95 Louisville- Lexington 4,617 3,960 3,960 657 0 0 99 Paducah 803
888 803 0 0 13 Suburban St. Louis, 72 Ohio
Valley 98 Nashville* 2,642 2,362 2, .362 280 0 0 97 Memphis 2,356
2,538 2,059 297 0 316 Cedar Rapids, 163 St. Louis
101 Knoxville)~ 1,664 1, 615 1,615 49 0 0 90 Chattanooga * 1,501
1,332 486 1,015 0 566 Louisville, 280 Nashville
105 Mississippi Delta * 948 860 860 0 88 0 103 Central Mississippi
* 1,797 1,561 1,264 0 533 297 Memphis 107 Mississippi Gulf Coast*
710 570 570 140 0 0
Total 17,038 15,686 13,979 2,438 621 1,707 I N
West South Central-North Group f- I
108 Central Arkansas * 1, 883 1,799 1,799 84 0 102 Fort Smith* 403
420 403 0 0 17 Neosho Valley 106 Oklahoma Metropolitan* 5,062 4,182
2,414 0 2,648 772 Kansas City, 107 St. Joseph,
889 Wichita 104 Red River Valley 1,544 1,611 1,544 0 0 67 St.
Joseph 132 Texas Panhandle 1,585 1,342 1,232 0 353 110 Southwest
Kansas
Total 10,477 9,354 7,392 84 3,001 1,962
West South Central-South Group 96 Northern Louisiana * 1,517 1,586
0 0 1,517 377 Neosho Valley, 541 Kansas
City, 84 Central Arkansas, 584 Ozarks
94 New Orleans * 3,606 2,862 2,693 0 913 140 Mississippi Gulf
Coast, 29 Ohio Valley
126 North Texas 8,700 7,471 7,471 1,229 0 0 128 Central West Texas
1,523 1,587 1,523 0 0 64 North Texas 129 Austin -Waco 1, 250 1,232
1,232 18 0 0 127 San Antonio 1,899 2,098 1,899 0 0 199 North Texas
130 Corpus Christi 1,341 1,524 540 0 801 ~ Austin -Waco, 966 North
Texas --
Total 19,836 18,360 15,358 1,247 3,231 3,002
Appendix Table 4. (continued)
=======================================================================================================================
Total Dispos ition U fluid To
Order Producer require- Local other Manu- no. Region and market
receipts ments bl fluid markets factured Receipts from other
markets
Mountain 136 Great Basin 3,407 2, 766 2,766 0 641 0 134 Western
Colorado 319 309 309 0 10 0 135 Colorado Springs -Pueblo 959 976
959 0 0 17 Minneapolis -St. Paul 131 Central Arizona * 3,862 3, 765
3,765 0 97 0
. -- Total 8,547 7,816 7,799 0 748 17
Pacific 125 Puget Sound* 9,785 5,587 5,587 0 4,198 0 133 Inland
Empire 1,285 1,199 1,199 0 86 0 -- -- --
Total 11,070 6,786 6, 786 0 4,284 0
Grand Total 408,486 326, 705 268,522 58,183 81,781 58,183 ========
======= ======= ====== ====== =======
Total Cost to Handlers $194,265,935
======================================================================================================================
§j Available supplies and fluid milk requirements based on data for
October 1961, a month when supplies are seasonally low in relation
to Class I needs.
~ The "fluid needs" quantities are the total disposition of fluid
milk products (whole, skimmed, and flavored milk and cream and
cream mixtures) from the fully regulated plants under each order
during October 1961 as shown on line 994 of the Product Report
submitted monthly by the market administrators to USDA. This
quantity differs from the Gross Class I sales as published monthly
in Table 5 of Federal Milk Order M;~:Fket Statistics in the
following respects: (1) Class I sales of milk outside the market
ing area, in bulk form, are excluded, since these do not usually
constitute a regular outlet for milk; (2) in some orders fluid
cream and similar fluid milk products are not in Class I; and (3)
gross Class I includes some sales by partially regulated handlers
and by producer -handlers. The quantities from line 994 were
increased by 20% to cover the operating res erve.
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