Appendix — Zuber v. Allen

Supreme Court brief1970

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IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1968

No. 861

FREDERICK T. ZUBER, ET AL.,

Petitioners,

¥.

RUSSELL ALLEN, ET AL.,

Respondents.

No. 1076

CLIFFORD M. HARDIN, SECRETARY OF AGRICULTURE,

Petitioner,

¥.

RUSSELL ALLEN, ET AL.,

Respondents.

ON WRITS OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

TABLE OF CONTENTS

PAGE

Excerpts from the Record of the District Court

NT ar re 1

a sialon 6s e kale a a ee RAO Base wae a es 17

Wastungton. 0 C THIEL PRESS - 202 - 393-0625

(ii)

Excerpts from the Record of the District Court

Motion for Preliminary Injunction .....................

Motion of New England Milk Producers’ Association et al.

rps cxeesccy rainy pias dR Re eae

St wires, . spy A RSG POLE RR OTT

sept on ore on EE ESE

Defendant's Motion for Order Consolidating Hearing, etc. .... .

Excerpts from Transcript of Hearing on January 11, 1967... ..

Affidavit of Herman L. occas aly ge Sale ip eee ea

Order Denying Intervention ..........:..............

Hesctarbeseseisies, soveue. gk ORT LEE nT eee

site orcs oa, Ee re

Motion of Plaintiffs to Add Parties Plaintiff, filed January

-cruatasgh REDE CRT CTL STE eT en

Excerpts from Transcript of Hearing January 31, 1967.......

Order entered February 1, 1967 [Class Action Order] .......

Order entered February 1, 1967 [Adding Parties Plaintiff]

Plaintiffs’ Motion for Summary Judgment filed Feb. 24, 1967 .

Plaintiffs’ Statement of Material Facts as to Which There Is

No Genuine Issue

Nr Nair aati Se Sn eo oe eae ae

Motion for Leave To Intervene as Defendants by Zuber et

rashscnisleincassl on, txiena teen ee ee

Opposition of Plaintiff to Motion for Order Directing Action

Be Held in Abeyance, filed March ME cde toe

Order denying Motion To Hold Proceedings in Abeyance .....

Order granting defendant extension of time .............

Designation of Parts of Administrative Record Relating to

Promulgation of Nearby Differential Oct. 1, 1964, filed

Coscia bccwn ere eee Te ara

Modification of Preliminary Injunction entered on March 17,

ig eee CLES CETTE Tee ee, TaN

Plaintiffs’ Consent to Filing of Brief Amicus Curiae by Zuber

et al., filed Feb. 17, 1967

ee Me de wee i Oe TE oe er eh ee fe aa

(itt)

Excerpts from the Record of the District Court PAGE

Opposition to Plaintiffs’ Motion for Summary Judgment ..... 11

Affidavit of Howard Fedderson ...................... 116

Order denying Applicants’ Motion for Intervention ......... 119

nore ere eeu Sk EK Sik Gon ee Wks 120

Affidavit of Charles P. Ryan dated May 22,1967 ......... 120

Order granting Motion for Summary Judgment ........... 121

EN ak 8), ub oe ds kU Acad 6 6s eo 129

, I eRe oe ee eis 131

gs Us pin wa dibs viv ieee eed 132

) — Motion for Order Preserving Effectiveness of Judgment, etc.

EE seek ee wae ae ac aie bh hae OwS 133

| Defendant’s Opposition to Plaintiffs’ Motion, etc., filed July

Er is ee err nee 137

Opposition to Motion for Preservation of Status Quo ....... 139

Teaneoript of Flearing, Sept. S, 1967 .........c0cccccces 148

Order dated Sept. 15, 1967 [Denying Plaintiffs’ Motion] ..... 162

Order dated Sept. 15, 1967 [Granting Motion to Preserve

} the Status Quo and Continue with the Escrow] ......... 163

Notice of Appeal filed July 10, 1967................... 165

) Notice of Appeal filed August 14,1967.................. 165

Excerpts from the Record of the Court of Appeals

Exhibits filed with Appellees’ Motion for Summary Reversal

EE Ea a ee 166

Opinion [Reported at 402 F.2d 669] ................. 187

Judgment entered Sept. 23, 1968 ..............-..000- 216

Response to Appellants’ Opposition to Appellees’ Bill of

Cost

Aad BH OS ee ee ee eee eee eee a es ee a ae ae oe oe a a ee

I Oo oissk's sc ames an eecesivaves 222

ES EE eee ee 222

Order Extending Time To File Petition for Writ of Certiorari

a ie eee keene 222-A

Grant of Writ of Certiorari Issued April 7, 1969

(iv)

Excerpts from the Administrative Record Certified and Filed

with District Court on March 20, 1963

ee eee

MONIES TOUR BGs Iw cee ences ens>

Testimony of Paul Miller, Dairy Section, AAA ......

Testimony of W. A. Bronson, New England Milk Pro-

I Se =k 8 Wb ave a bw 6 6 es

Testimony of Howard Selby, Manager, United Farmers

Creamery

ee ee ee a a a er ee ee

Testimony of Ernest H. Bancroft, President, New Eng-

IID, LS A ene eS bog a iat

RRS ee ee

Testimony of William C. Walker, farmer ...........

Testimony of Mr. Shepard, Federated Dairy Association . . .

Economic Brief of Department of Agriculture... ....

Order for Greater Boston Marketing Area, issued July 30,

op ee eee

Hearings held June 30, July 1-2, 1937, Docket No. A51, O-

PE ee awe eG hid Sk aie Se ak hae ak ae

Testimony of Mr. Aplin for the Market Administrator .

Testimony of W. A. Bronson, New England Milk Pro-

ERE RE ete ere ae or

Testimony of Mr. Carten, President, Nearby Producers

etek ret ess Dice BS don uo Wigieg or

Testimony of Mr. Shepard, Federated Dairy Association . . .

Testimony of Mr. Greer, attorney ...............

Testimony of Shaun Kelley, President, Massachusetts

no acne ia din ow pan 6 e.6

Economic Brief of Department of Agriculture .......

Exhibit No. 2 (2 tables) offered by Mr. Bronson .....

Resolution of Nearby Milk Producers Association, Har-

old McNiff ...

a

Excerpts from the Administrative Record

(v)

Exhibit showing prices received by the Crystal Lake

ae Sk Sah eet PAD Ae AES Ok G eS 'b ek bes

Brief regarding the Economic Advantage of Dairy Pro-

duction Adjunct to the Greater Boston Market .....

Some Reasons Why Milk Production Costs Are Higher

in Massachusetts than in Northern New England

ES SAIS i Ce ee a

Brief of Manchester Dairy, Inc.................... 293

Brief of Donald B. MacCollom, Dairy Farmer of Clinton,

CE Raita koe Sr gs cg ls oie MiSs 0’

Brief of Near By Milk Producers Association .........

I Ns ig ka ik a ohn w wins bo bab ecb cess

Excerpts of Hearings held on April 2-7, 1951, USDA Docket

SEN re 5 ee

Testimony of Clifton Whitney ...................

Testimony of Chester Smith ...............0c000.

Testimony of C. W. Swonger, Economist, New England

Milk Producers Association ...................

Testimony of Jerry Bond, Jr., Needham, Massachusetts . . .

Exhibit 20 - Average deliveries table................

Exhibit 21 - Average deliveries table................

Exhibit 23 - Receipts of Milk table ................

Excerpts from Springfield Decision ...................

Excerpts from Worcester Decision .....................

Excerpts from 1964 Secretary’s Decision, 29 Fed. Reg. 11205,

Promulgating the Massachusetts-Rhode Island Milk Order,

gaa ia a ry aA i a a ae

Excerpts from hearings held commencing Jan. 7, 1963, Dock-

et Nos. AO14-A-35, AO203-A17, AO204-A17, AO302-A9,

ei eae ks >) 6) KO Oe be ba aee

Testimony of James D. Lee, New England Milk Pro-

I 6s 6 6 yg Doyle sb vo. 6 65

DT EE LE NE I TELS DEEN SELIG

(vi)

Excerpts from the Administrative Record

pl Oe ee ee

Testimony of Kenneth Geyer ...................

Testimony of William J. Newman, Local Dairymen’s

eee ID: £30. wine gies we bbe ew wibs6-A os

Testimony of William T. Smith, Fall River Milk Pro-

I Ts laa saa le sis tee ae'ae doe ve

Testimony of Horace B. Wildes, Chairman, Dairy Com-

mittee Rhode Island Farm Bureau..... .........

Testimony of Harry P. Young, Local Dairymen’s Co-

| ee ee ne ne

Testimony of Dr. David Clark, Economist ...........

Testimony of Dr. C. W. Pierce, Connecticut Milk Pro-

I 55 hs ak + 55/6 Hae 40.6 da 5 3's os

Testimony of Stewart Johnson, Connecticut Milk Pro-

IID. Ec oe o cs sc BBG Rkewed ood

Ngo a ibs edhe npn gee Ee he RR EE Ak ee

Testimony of Christopher Sykes .................

Testimony of William E. Flynn ...................

Pe es no revo ebccee haces scare

WO OE TU nic ee cece tivuevas

Exhibit 7 - Number of producers table .............

Exhibit 46 - Producers and deliveries table ...........

Exhibit 77A - Thesis on regulation of milk ...........

Exhibit 77 - Seasonal variation production table .......

Exhibit 19 - Producers and receipts tables ...........

Exhibit 24 - “Market Administrator’s Review” article

Exhibit 93 - Proposal 52 of Mass. Cooperative .......

Excerpts from the Administrative Record PAGE

ITEMS DESIGNATED BY RESPONDENTS TO WHICH

PETITIONERS OBJECT AS MATERIAL NOT OF RECORD

Letter of Charles P. Ryan dated March 15, 1967 ..........-.- 657

Letter of Charles P. Ryan dated May 8, 1967 ......... .. 658

Letter of Charles P. Ryan dated April 20,1967 ........... 660

Plaintiffs’ Summary of 1963 Promulgation Hearing ......... 661

Excerpts from Economic Brief of Department of Agriculture,

1937 (not part of certified record filed with District Court). . . 669

Plaintiffs’ Summary of Hearing Record 1936 ............-. 673

Plaintiffs’ Summary of Hearing Record 1937 ............. 679

Plaintiffs’ Summary of Hearing Records for Worcester, Spring-

field and Southeastern New England ................. 689

Excerpts from Congressional Committee Reports (1937) ..... 705

Excerpts from Memorandum of State of Connecticut in Sup-

port of motion for preservation of the status quo ....... 710

Excerpts of Points and Authorities of NEMPA and CMPA ..... 711

Defendant’s Memorandum of Points and Authorities in Sup-

port of Opposition to Plaintiffs’ Motion for Preliminary

Injunction” filed January 11,1967 ............22500- 712

Exhibits to Statement of Material Facts filed Feb. 24, 1967 ... 715

a a ee eee ee ee eee 723

Plaintiffs’ Reply to Defendant’s Opposition to Proposed Or-

der Granting Motion for Summary Judgment & Judgment

if fe STEEP ELE eres ee eee

as

From the Findings, 14 F.R. 7085 Promulgating the Springfield,

Mass. Federal Milk Order, Nov. 23, 1949

* * * The evidence in this record shows the need for

Federal regulation of all of the sources of milk supplies

for the Springfield market in order to give Massachusetts

producers who are now supplying the market an opportu-

nity to retain the market on an equal basis with out-of-state

producers. Any delay to study possible alternatives as

suggested by the excepters threatens certain producers

with the loss of their market with resulting unstable

marketing conditions.

Producers supplying milk to the Springfield market are

located in Massachusetts, Vermont, New York, New Ham-

shire and Connecticut. Witnesses estimated the number

of producers outside the state of Massachusetts from 30

to 40 percent of the total number supplying the market.

Several handlers who do business in Springfield engage in

the milk business also in adjacent states.

(b) Marketing conditions in the Springfield area indicate

that the issuance of a marketing order such as that set

forth herein will tend to effectuate the declared policy of

the act with respect to milk produced for the Springfield

' market.

The record shows that conditions exist in the Springfield

market which have resulted in a loss of market for several

producers. These conditions must be remedied in order

to establish and maintain such orderly marketing conditions

as will establish prices to producers for milk delivered to

the Springfield market that reflect the price of feeds, the

available supplies of feeds, and other economic conditions

which affect market supply and demand for milk and milk

products in the marketing area and which will insure a

332

sufficient quantity of pure and wholesome milk and be in

the public interest.

The unsettling conditions which are disrupting the

Springfield market result from the opportunity on the part

of milk handlers to purchase milk from producers outside

Massachusetts on a wholly unregulated price basis whereas

the handlers who purchase milk from Massachusetts

producers are required to make payments to producers in

accordance with a classified price plan enforced by the

Massachusetts Milk Control Board. The classified price

plan in the Springfield market is similar to that in use in

several New England markets. Class I milk, principally

fluid milk and milk drinks sold in bottles, is priced relatively

higher than milk for all other uses which is Class IL.

Handlers purchasing milk under the regulations of the

Massachusetts Milk Control Board are required to pay

Massachusetts producers delivering milk to their plants

these prices for the quantities of milk utilized in such

classes. Handlers buying milk out of State are subject to

no governmental price regulation and purchase milk at

a price competitive with the prices paid to producers in

those areas for all milk. The level of the competitive price

is dominated by either the uniform price established for

producers delivering milk to plants regulated by the New

York Federal milk order or the Boston Federal milk order

or both. The uniform prices established under the Boston

and New York Federal milk orders reflect the average per-

centage of Class I and of Class II in each of these markets.

To the extent that any handler in the Springfield area has

sales of Class I milk which give him a higher utilization

of Class I milk than the average for either the New York

or Boston markets, that handler can purchase milk for

such Class I sales at the uniform blend price paid

producers in the Boston and New York markets for all

milk. The evidence in this record indicates that handlers

are aware of this opportunity, that some handlers have

333

gequired milk on this flat price basis and that at least one

handler intends to expand this type of buying in preference

to purchasing milk from Massachusetts producers.

The advantage accruing to a handler purchasing milk

outside the State of Massachusetts has increased in recent

months as the uniform blend prices in the New York and

Boston markets have dropped relative to the Class I price

in each of these markets and in the Springfield market.

The lower uniform prices result from substantial declines

in excess milk values and in an increase in the quantity of

milk utilized in excess classes.

In addition to the disturbing influence of out-of-state

milk in the Springfield market, the lack of a uniform

marketwide price plan for all producers supplying the

market is a disrupting factor. The range in prices paid

by 16 large handlers in the Springfield market to producers

per hundredweight of milk testing 3.7 percent butterfat

was, delivered at city plants, from $5.40 to $6.326 in June

1948 and from $6.05 to $7.005 in November 1948. In May

1949 the range in prices handlers paid producers in that

region was from a low of $4.2162 to a high of $5.8177 per

hundredweight of milk testing 3.7 percent butterfat.

The lack of price regulation effective with respect to all

of the sources of fluid milk for the Springfield market and

the absence of a uniform pricing method are contributing

to the growth of an unstable milk market in this area. A

marketing order is needed in the area to assure producers

of a market for their milk at reasonable and uniform prices.

The sources of milk supply for the various cities and

towns in the proposed marketing area overlap and are

intermingled to such an extent that the general supply area

may be considered as one milkshed for the entire market-

ing area. In many cases handlers receive milk at a plant

supplying several of the towns in the marketing area.

334

The supply area for the Springfield market overlaps with|

the supply areas of other markets. * * *

° « . . . e 7 e @ +

(6) Payments to producers. The percentage of milt

utilized by individual handlers in Class I varies so widely }

that prices to producers have differed under an individual

handler type pool by over $1.00 per hundredweight. Pro.

vision should be made for a market-wide type of pool in

order that all producers delivering milk to all handler

may receive a uniform price for all milk so delivered

irrespective of the uses made of such milk by the individual

handler to whom it is delivered. This method of paying

producers will require a producer-settlement fund fo;

making adjustments in payments by handlers so that th:

total sum paid by each handler shall equal the value of

milk received by him and utilized in the classes establ,shed

by the proposed marketing agreement and order.

e . . a . * << . ‘

Most of the dairy farms in Massachusetts are close ty

urban centers. This probably explains why prices to

Massachusetts farmers for milk sold wholesale averay

considerably more than the prices paid to Vermont farmers,

This difference cannot be attributed to transportation cost

alone. The many opportunities for dairymen to market

their own milk directly influence the price which they

demand for their product.

Certain producers located outside the proposed dif.

ferential area claimed that they should receive differential

payments because they had been supplying the Springfield

market for a number of years and they had received the

Springfield price less a hauling charge. Some of these

producers testified that they received prices approximately

equal to the Boston blend prices at nearby country points

Other producers did testify that they were currently receiv.

ing a price which was about 50 cents over the competitive

| 335

price in their territory. A price difference of that amount

cannot be expected to be maintained in a period of adequate

milk supplies.

. * * *. « . * « Y 7

From Order Regulating the Handling of Milk in the

Springfield, Massachusetts, Marketing Area

(e) Location differentials. The payments to be made

to producers by handlers pursuant to subparagraph (1)

of paragraph (b) of this section shall be subject to the

Class I price differentials applicable pursuant to § 996.7

(c), and to further differentials as follows:

(1) With respect to milk delivered by a producer whose

farm is located in any of the following cities or towns, there

shall be added 22 cents per bundredweight, unless such

addition gives a result greater than the Class I price pur-

suant to § 996.7 (a) and (c) which is effective at the plant

to which such milk is delivered, in which event there shall

be added an amount which will give as a result such price:

Massachusetts: Becket, Florida, Hinsdale, Otis, Peru,

Sandisfield, Savoy, Washington, and Windsor;

New Hampshire: Chesterfield and Westmoreland;

Vermont: Brattleboro, Dover, Dummerston, Marlboro,

Newfane, Putney, and Wilmington.

(2) With respect to milk delivered by a producer whose

- farm is located in Franklin, Hampshire, Hampden, or

Worcester Counties in Massachusetts or in any of the

following cities or towns, there shall be added 46 cents per

hundredweight, unless such addition gives a result greater

than the Class I price pursuant to § 996.7 (a) and (c) which

is effective at the plant to which such milk is delivered, in

which event there shall be added an amount which will give

as a result such price:

“ —_ — — —

i

336

From the Secretary's Decision, 14 F.R. 7097 Promulgating the

Milk Order for Worcester, Mass. Area, Nov. 23, 1949

* * * ‘The evidence in this record shows the need for

Federal regulation of all of the sources of milk supplies }

for the Worcester market in order to give Massachusetts

producers who are now supplying the market an oppor.

tunity to retain the market on an equal basis with out-of.

state producers. Any delay to study possible alternatives

as suggested by the excepters threatens certain producers

with the loss of their market with resulting unstable

marketing conditions.

Producers supplying milk to the Worcester market are

located principally in Massachusetts, Vermont and New

York,

The record shows that conditions exist in the Worcester

market which permit handlers to purchase milk for fluid

use at substantially different prices. These conditions must

be remedied in order to establish and maintain such

orderly marketing conditions as will establish prices to

producers for milk delivered to the Worcester market that

reflect the price of feeds, the available supplies of feeds,

and other economic conditions which affect market supply

and demand for milk and milk products in the marketing

area and which will insure a sufficient quantity of pure and

wholesome milk and be in the public interest,

The unsettling conditions which are disrupting the

Worcester market result from the opportunity on the part

of milk handlers to purchase milk from producers outside

Massachusetts on a wholly unregulated price basis, whereas

the handlers who purchase milk from Massachusetts

producers are required to make payments to producers in

accordance with a classified price plan enforced by the

Massachusetts Milk Control Board. The classified price

| 337

“plan in the Worcester market is similar to that in use in

‘several New England markets. Class I milk, principally

fluid milk and milk drinks sold in bottles, is priced relatively

higher than milk for all other uses which is Class II.

Handlers purchasing milk under the regulations of the

Massachusetts Milk Control Board are required to pay

Massachusetts producers delivering milk to their plants

these prices for the quantities of milk utilized in such

classes. Handlers buying milk out of State arc subject to

no governmental price regulation and purchase milk at a

price competitive with the prices paid to producers in those

areas for all milk. The level of the competitive price is

dominated by either the uniform price established for

producers delivering milk to plants regulated by the New

York Federal milk order or the Boston Federal milk order

or both. The uniform prices established under the Boston

and New York Federal milk orders reflect the average per-

centage of Class I and of Class II in each of these markets.

To the extent that any handler in the Worcester area has

sales of Class I milk which give him a higher utilization

of Class I milk than the average for either the New York

or Boston markets, that handler can purchase milk from

producers outside Massachusetts for such Class I sales at

the uniform blend price paid producers in the Boston and

New York markets for all milk. The evidence in this record

indicates that handlers are aware of this opportunity, that

some handlers have acquired milk on this flat price basis

and that at least one handler intends to expand this type

of buying in preference to purchasing milk from Massa-

chusetts producers.

The advantage accruing to a handler purchasing milk

mtside the state of Massachusetts has increased in recent

nonths as the uniform blend prices in the New York and

boston markets have dropped relative to the Class I price

neach of these markets and in the Worcester market. The

ower uniform prices result from substantial declines in

me — — ————

338 a

excess milk values and in an increase in the quantity ¢

milk utilized in excess classes.

In addition to the disturbing influence of out-of -Sta:;

milk in the Worcester market, the lack of a uniform marke.

wide price plan for all producers supplying the market sf

a disrupting factor. In May 1949 prices paid to producer

delivering to different handlers varied as much as $1.24 pe

hundredweight in this area for milk of basic 3.7 percen:

butterfat content.

The lack of price regulation effective with respect ti

all of the sources of fluid milk for the Worcester marke:

and the absence of a uniform market-wide pricing metho}

are contributing to the growth of an unstable milk marke

in this area, A marketing order is needed in the area ti}

assure producers of a market for their milk at reasoilabl:

and uniform prices.

. * ie * * o * . * ‘

The sources of milk supply for the various cities an}

towns in the proposed marketing area overlap and are inter

mingled to such an extent that the general supply are

may be considered as one milkshed for the entire marketing

area. In many cases handlers receive milk at a plant

supplying several of the towns in the marketing area.

(5) Class prices. Class prices for the Worcester marke:

should be established on a formula basis similar to thai

under which class prices are determined for the Boston

market. The Boston and Worcester milk markets are s0

interrelated that a close correlation of price changes is

necessary to maintain stable market conditions. Boston

is the larger market and therefore the dominant one in

effecting price changes. The milksheds of these two

markets overlap so that there is opportunity for producers

to shift their supply from one market to the other if sub-

stantially different prices are offered. The Worcester

339

market draws milk directly from plants at which milk is

priced ‘under the Boston milk order. Careful alignment of

prices in the two markets is necessary to maintain equal

cost of milk to handlers for milk used similarly.

(6) Payments to producers. The percentage of milk

utilized by individual handlers in Class I varies so widely

that prices to producers have differed under an individual

handler type pool by over $1.00 per hundredweight. Provi-

sion should be made for a market-wide type of pool in order

that all producers delivering milk to all handlers may

receive a uniform minimum price for all milk so delivered,

irrespective of the uses made of such milk by the individual

handler to whom it is delivered. This method of paying

producers will zequire a producer-settlement fund for

making adjustments in payments by handlers so that tie

total sum paid by each handler shall equal the value of

milk received by him and utilized in the classes established

by the proposed mar-

posed the marketing order (sic).

Most of the dairy farms in Massachusetts are close to

urban centers. This probably explains why prices to

Massachusetts farmers for milk sold wholesale average

considerably more than the prices paid to Vermont farmers.

This difference cannot be attributed to transportation cost

alone. The many opportunities for dairymen to market

their own milk directly influence the price which they

demand for their product.

— (e) Location differentials. The payments to be made to

producers by handlers pursuant to subparagraph (1) of

paragraph (b) of this section shall be subject to the Class I ;

_ price applicable pursuant to § 999.7 (c), and to further dif-

- ferentials as follows:

340

With respect to milk delivered by a producer whose farm

is located in Franklin, Hampshire, Hampden, Worcester, |:

Middlesex, or Norfolk counties in Massachusetts, there shal] }

be added 46 cents per hundredweight, unless such addition |

gives a result greater than the Class I price pursuant to

§ 999.7 (a) and (c) which is effective at the plant to which :

such milk is delivered in which event there shall be added |

an amount which will give as a result such price. 4

From the Secretary's Decision, 23 F.R. 8225 Promulgating the

Southeastern Milk Order, Oct. 24, 1958

The Southeastern New England market is an interstate |

market encompassing all of the State of Rhode Island and

a substantial area in Southeastern Massachusetts. Within

this market there is a substantial and continuing interstate

commerce, both in the procurement of milk and in the sale

of fluid milk and its products.

More than one-third of the fluid requirements for the

Southeastern New England area originates from sources

outside the States of Massachusetts, Connecticut and Rhode

Island. Much of the upcountry milk is assembled and re:

ceived at country plants in Vermont and New Hampshire

and is then transported to the Southeastern market for

processing and distribution. Additional quantities are

handled by bulk farm tank pick-up and moved directly from

farms in northern New England to plants in the local

market.

The situation in both Fall River and New Bedford has

continued to deteriorate as handlers, seeking to avail them-

selves of milk supplies at the most advantageous price,

have tended to look to upcountry unregulated supplies which

are generally available at a price comparable with the Bos-

341

‘ton blended price, which on a year-round basis reflects ap-

‘proximately 55 percent utilization in Class I. As a result

Jocal producers have had difficulties in maintaining regular

outlets for their production. This condition is most serious

‘in the Fall River market where the several associations of

_producers whose members are the predominant suppliers

A of fhe market have a substantial volume of milk which is

“not accepted by handlers. Much of this milk is sold at

‘manufacturing milk prices even though the local milk sup-

ply is inadequate to meet market demands.

Producers who are members of New Bedford Milk Pro-

ducers Association, the principal supplier of local handlers

- in the New Bedford area, are in the same situation as that

of regular Fall River producers. The same pressures

which have led to a loss of market for many local Fall River

producers are applicable to the New Bedford area. Pend-

ing consideration of Federal regulation has no doubt fore-

stalled substantial supply changes by local handlers thus

far. However, it is likely that if no action is taken handlers

will seek lower priced unregulated milk supplies.

The situation in the Rhode Island part of the market is

substantially similar to that in the Fall River-New Bedford

area. Early in 1951 the association representing a large

segment of the registered Rhode Island producers requested

a hearing to consider a Federal order for that market be-

cause of the then existent market disorder. On the basis

of the facts presented at that hearing it was recommended

that an order be issued. However, following that decision

the association negotiated a settlement with local handlers

which minimized the effect of the disorder and accordingly

the association asked that the order not be issued.

The increase in available milk supplies generally and the

fact that milk is readily available from upcountry sources

at prices approximating the Boston blend has provided a

strong incentive for handlers to drop local producers in

favor of cheaper sources of supply.

342 |

Less than one-third of the fluid requirements of Rhoif

Island dealers are supplied by Rhode Island dairy farmer}

An additional forty-five percent is supplied by dairy farp.

ers located in nearby Massachusetts and Connecticut ayj

the remainder is secured from other sources, primaril;

from the States of Vermont and New York. Several of thf

larger handlers in the market customarily have Secured g}

lesser proportion of their necessary supplies from loc}

producers than have other handlers. The buying advap.}

tage that these handlers have had on their purchases of|

outside milk has prompted other handlers to drop local pro}

ducers in favor of sources of supply at upcountry Points

also.

While the record does not reveal the specific prices a}

which all of such milk has been purchased it does shor}

that one of the larger handlers in the market secured mili}

in the month of December 1957 from his unregulated plants}

at Benson and Whiting, Vermont at a cost of $5.384 which}

compares with the local city plant Class I price at Provi.}

dence of $7.00. Even when handling and transportation}

are considered it is evident that the buying advantage in}

using unregulated milk deters the use of local milk.

Relatively large quantities of local producer milk wer

dropped during the latter months of 1957 and early 1958;f

4

a

in some cases entire pickup routes were dropped at on}

time. The burden of handling the homeless milk in th:

market has rested with the local producer cooperatives}

whose members are involved.

The Rhode Island Milk Control Board in the latter part F

of 1957 initiated an allocation program which was intended

to assure a market for local producers and to equalize the }

percentage utilization of local and outside milk as among

handlers. Because of the interstate character of the mar-

ket handler participation was necessarily voluntary and,

while the program has resulted in some redistribution of

producers among participating handlers, it has not been

: 343

effective in restoring market stability. Unregulated, lower-

priced milk continues to move into the market in even

greater quantities than before the allocation scheme was

initiated.

Registered Rhode Island producers have enjoyed a pref-

erential market over an extended period of years. The

allocation program and the procedure employed by the

responsible officials of the State in issuing permits for im-

portation of nonregistered milk have tended to maintain

such preferential market to the detriment of other dairy

farmers whose production is an essential part of the mar-

ket supply.

Proponents presented an analysis of the annual statistics

of the Rhode Island Milk Control Board which purported

to show that returns to registered producers reflected «all

the Class II utilization for the market. While the form of

the annual statistics does not permit the precise analysis

made by proponents, such statistics support this general

position. Local producers, however, do not carry an un-

reasonable volume of the necessary market surplus. The

overall Class II utilization for the market is only 5.8 per-

cent of total market utilization and less than 10 percent of

receipts from registered producers which, from experience

in other federally regulated fluid markets, is substantially

less than the necessary reserve which a market such as

Rhode Island must carry to assure a continuing adequate

supply to meet daily and seasonal fluctuations in supply

and demand. Hence, the market relies primarily on up-

country unregulated supplies and surrounding Federal or-

der markets to provide the necessary reserves. Since, as

previously stated, nonregistered milk is purchased at prices

closely related to the Boston blended price, which reflects

an average Class I utilization of about 55 percent, the

crediting of registered producers with the total Class II

utilization tends to enhance the overall buying advantage

of importing handlers.

344

A market structure which grants a preferential price to

registered Rhode Island producers cannot provide a stable

market for such producers over any extended period while

handlers have the opportunity to gain a procurement ad.

vantage through the use of lower priced milk from up-

country sources. The State, as a practical matter, cannot

effectively regulate milk which moves across State lines,

and while local dealers may voluntarily reduce imports of

outside milk temporarily to gain support from local pro-

ducers, it is inevitable that the incentives for using un-

regulated milk will result in a loss of market for local pro.

ducers.

The Southeastern New England market is a deficit mar.

ket and must rely on sources of supply in northern New

England and New York to supplement the local supply.

Recent developments in bulk tank cooling and transporte-

tion facilities have contributed to efficiencies which permit

greater flexibility of handler operations at greater distances

from the consumption center in Southeastern New England.

Handlers serving this market, because of the high demand

for fluid milk locally and the existing opportunity to pro-

cure fluid milk at prices related to the Boston blend price

in the country for fluid use in the marketing area, have a

material competitive advantage over those handlers buying

on a classified use plan in this and other Federal order

markets in the region due to the difference in their product

cost and the Class I price. Premiums over the blend price

which may be offered by local handlers making ‘‘upcoun-

try’’ purchases have a detrimental effect upon adjacent

markets by inducing producers to leave cooperative asso-

ciations and markets with which they have maintained as-

sociation for a number of years to deliver to handlers for

this market. This situation has resulted in uneconomic

short-time shifts in producers between markets and has

had an adversie effect upon not only the Southeastern New

England market but also the adjacent markets in New

England.

345

The marketing situation as it now exists constitutes a

serious and continuing threat to the stable and orderly

marketing of milk and to the maintenance of an adequate

. supply of pure and wholesome milk for the Southeastern

New England marketing area.

The issuance of a marketing agreement and order for the

Southeastern New England marketing area will contribute

togreater stability of the fluid milk market and will tend to

‘effectuate the declared policy of the act. The adoption of

‘a dassified pricing plan based on audited utilization of

handlers will provide a uniform system of pricing through-

‘out the area and assure a fair and equitable return to all

| producers.

Location differentials. Location differentials should be

established for milk received at plants located substantial

distances from the market. Such differentials recognize

| the principle that milk similarly used and located should be

similarly priced. Milk originating nearest the market

should command a higher price than milk located at greater

distances by at least an amount which reflects the difference

in the cost of transporting it to the marketing area.

’ * * * a * “ * * ¢

Provision should be made for the payment of farm loca-

tim differentials to producers in the nearby supply area.

The amount of these differentials will be obtained by an

appropriate deduction from the total value of all milk be-

fore completing the computation of the marketwide uni-

form price.

Seow Kio Be

Producers located in the State of Rhode Island and east

of the Connecticut River in the State of Connecticut and in

the Massachusetts Counties of Barnstable, Bristol, Dukes,

Nantucket, Plymouth, Norfolk and Suffolk and that part of

Worcester and Middlesex south of the Massachusetts turn-

pike should receive a farm location differential over the

basic blended price of 46 cents per hundredweight. Pro-

346

ducers located in the Massachusetts counties of Essex ani}

that part of Worcester and Middlesex north of the Mass,

chusetts turnpike and in the New Hampshire towns of Ney

Ipswich and Greenville should receive a farm location dit}

ferential of 23 cents per hundredweight. However, ip m)

event should the amount of such differential result in;

price higher than the applicable Class I price at the play}

where the milk is received. |

Historically, dairy farmers in the States of Massachy.

setts, Rhode Island and Connecticut, because of their loc,

tion with reference to the large population concentratioy;

of New England have disposed of a substantially large

percentage of their production for fluid uses than have

dairy farmers in the upcountry area. Hence nearby pro

ducers have been able to realize a price higher in relatio,

to more distant producers than can be accounted for by thep

advantage in the cost of transportation to market. Under

the marketwide pooling herein proposed and without som

adjustment mechanism the nearby producer, notwithstand.}

ing, would be paid on the basis of the average utilization of

all milk on the milkshed rather than according to the utilize.

tion of his milk. Under a regulated market, however, by

obtains the benefit of an established Class I price whic

may be higher than in the absence of regulation, and ha}

assurance that his milk will not be displaced by cheap, un.

regulated milk from more distant sources. The distant

producer also benefits from an established Class I price,

and by the fact that he gains a larger share of the fluid

market than is likely without marketwide equalization.

From the Secretary's Decision, 29 F.R. 11205 Promulgating the

Mass.-Rhode Island Milk Order, Aug. 4, 1964

* * * Distinguishable markets for milk in most of eastern

Massachusetts and Rhode Island no longer exist, however.

The population increase of recent years, and particularly

347

the growth of suburban areas around principal cities in Mas-

sachusetts and Rhode Island, has induced handlers in one

defined marketing area to extend their distribution routes

into other such marketing areas. This action has been en-

couraged by the increasing proportion of business done

through supermarkets and by improved roads and trans-

portation facilities. To achieve economies of scale and to

meet consumer demand, a number of handlers have con-

centrated their processing and packaging operations in

larger plants which contain the specialized equipment nec-

essary to package milk in the many sizes and types of con-

tainers in use today. This has resulted in regular distri-

bution to more than one regulated market at the same time

from an individual plant. Also, the Boston, Southeastern

New England, and Worcester marketing areas adjoin each

other and the eastern periphery of the Springfield market-

ing area is relatively close to the western boundary of the

Worcester marketing area. Because distributing plants are

seattered widely throughout these four marketing areas,

only short distances are involved in many cases for oper-

ators of these plants to extend their distribution routes into

another marketing area. The numerous instances of over-

lapping of handler sales areas is thus resulting in inter-

market competition for fluid milk sales throughout an area

which has become essentially a single fluid milk consump-

tion center.

|

It is clear that a single marketing area has developed

where previously separate markets existed. Under this

circumstance, the economic stresses, marketing instability

and price uncertainties which have developed and persisted

must be eliminated by the adoption of a single milk order

with a single marketwide pool.

Some evidence would suggest that the difference between

the receiving costs at country plants and such costs at city

aa

—

348

plants is as low as 5 cents per hundredweight. Other evi-

dence indicates that this cost difference may be significantly

higher. In view of the wide variation in costs apparently

being experienced by handlers, it is concluded that the dif.

ference between country plant and city plant handling of

10 cents per hundredweight, which is now reflected in the

54-cent zone differential, should not be modified on this

record. As marketing practices, conditions, and technology

change, perhaps a somewhat lower handling allowance will

be appropriate. Evidence in this record suggests that a

thorough review of this matter would be warranted at a

future date.

As just indicated there are, however, certain reductions

which have occurred in the costs of handling milk and trans-

porting it from country locations to city plants. This makes

the present zone differential of 54 cents inappropriate for

valuing milk received from producers at city plants in rela-

tion to milk received from producers at plants in the 21st

zone. The present zone differential exceeds the indicated

total additional cost of receiving milk at the city through a

country plant. Therefore, the operator of a city plant who

receives milk directly from producers in fact pays, insofar

as the order is concerned, a greater amount for his milk

supply than does the operator of a city plant who obtains

his fluid supply from country plant sources.

This situation encourages city plant operators to obtain

increasing quantities of milk from country plants for their

fluid requirements. Such plant operators were described

as able to purchase milk from country sources delivered

f.o.b. the city plant at approximately the city plant Class I

price. Under this arrangement, it is conducive for city

plant operators to purchase milk from country sources and

avoid the costs of field service, quality control, bookkeep-

ing, and added receiving costs normally associated with re-

ceiving milk directly from individual producers. Multiple-

plant handlers with both country and city plants are in a

349

ievlarly favorable position to take advantage of the

lower handling and transportation costs than are now re-

flected in the city plant Class I zone differential. One of

the results has been that a major cooperative association

has had to expand its manufacturing facilities in southern

New England in order to market an increasing proportion

of nearby produced milk for which Class I outlets have

" been lost to country plant sources.

It is therefore concluded that the allowance for transpor-

tation to be reflected in the city plant zone differential

should be 37 cents. Further, the plant handling allowance

to be reflected in this differential should continue to be 10

ents. Accordingly, the Class I price applicable at nearby

(city) plants under the Connecticut order and the proposed

Massachusetts-Rhode Island order would be 47 cents greater

than the Class I price at plants located in the 21st zone.

A city plant zone differential of 54 cents per hundred-

weight under the New England orders is applicable also to

the blended price which is returned to producers delivering

milk directly to city plants. The nearby plant zone differ-

ential of 47 cents proposed herein for Class I prices like-

wise should be made applicable to blended prices under

both the Massachusetts-Rhode Island order and the Con-

necticut order. Inasmuch as milk pooled under the orders

is produced primarily for the fluid market, the blended

prices returned to producers by location should reflect the

same differentials which attach to Class I milk.

, * a . & * * * * .

4. Farm location differentials. The farm location differ-

ential provisions under the present New England orders

should be continued under the Mssachusetts-Rhode Island

order and the Connecticut order.

A group of nine cooperative associations, which repre-

sents principally producers whose farms are located out-

350

{

side any of the specified farm location differential arey|

proposed that farm location differentials be eliminated y|

der the New England orders, Three other cooperatin}

associations proposed that a producer whose farm is }

cated within New England and who is presently eligible y)

receive a farm location differential (either 46 cents or #}

cents depending on the location of the farm) under ap}

New England order be eligible to receive the same diffe.)

ential irrespective of the New England order under whi

his milk is pooled. Another cooperative association prof

posed that the farm location differentials be increased x}

an offset to any reduction made in the city plant Class |}

zone differentials under the orders.

Farm location differentials represent payments of 4}

cents and 23 cents per hundredweight to producers who}

farms are located in specified “‘nearby’’ and ‘‘intermed.)

ate’’ areas, respectively, in addition to the applicable zon}

blended price which these producers receive. The pay}

ments are met by deductions from pool funds. The adi}

tional returns to producers who are eligible for these dif}

ferentials are, in essence, monies which, in the absence of

such differentials, would accrue through the blended pric

computation to all producers, including more distant pro.

ducers.

Such farm location differentials have been in effect under

the several New England orders since the inception of the

orders. The differentials were adopted to reflect in the

pricing structure of the orders historical price relationships

by location which prevailed in these markets. It was founi

that customarily somewhat higher values, above those which

normally reflected transportation costs, attached to mil

produced near the principal consumption centers as com-

pared to the market value of milk produced in the mor

distant areas of the milkshed. ,

While considerable testimony in support of removal of

the provisions was received, it was not established that the

|

.

351

farm location differential provisions are resulting in un-

stable or disruptive marketing conditions which warrant

their deletion from the orders at this time. Although cer-

tain marketing problems in the nearby and intermediate

market areas were referred to in the testimony, these prob-

lems are not the result of production increases on farms in

these areas which logically might be attributable to the

higher returns to producers in these areas. Such increases

have not been significantly different from those on farms

not eligible for the farm location differentials.

‘\

During a period of general incerase (sic) in milk produc-

tion throughout the milksheds of the New England markets,

the average daily milk deliveries per farm for those farms

located in the farm location differential areas under the

Boston order and for those farms located outside such —

areas both increased 23 percent in 1962 over the average of

such deliveries in 1960. In the Southeastern New England

market the average daily deliveries per farm for those

farms located in the differential areas increased about 16

percent in 1962 over 1960 while such deliveries from farms

not located in any differential area under the Southeastern

New England order increased about 13 percent during this

period.

Comparable percentage figures for Connecticut market

producers for this period are not available. A comparison

of 1961 with 1960, ho-vever, shows that there was an in-

crease of 8 percent in the average daily deliveries per farm

for those farms located in the differential areas and an in-

erease of 13 percent in such deliveries for those producer

farms located outside the Connecticut differential areas.

In the Springfield market the average daily deliveries per

farm for those producers in the differential areas increased

about 18 percent during the 1960-1962 period. In this mar-

ket very few farms are located outside the differential

areas. Such increase of 13 percent is not out of line with

comparable increases in the other markets, however. In

352

the Worcester market such daily average deliveries from

farms located in the 46-cent differential area (there is no

23-cent differential area under the Worcester order) in-

creased about 17 percent during this two-year period while

such deliveries per farm located outside such differential

_area increased about 32 percent.

The average number of producers with farms located in

the farm location differential areas is decreasing in the

Boston, Upringfield, Southeastern New England, and Con.

necticut markets. The farm location differential area un-

der the Worcester order was expanded in September 1960

and this caused an increase in 1961 over 1960 in the aver-

age number of producers who were eligible to receive such

a differential. The average number of such producers de-

creased in 1962 from such number in 1961, however.

Marketing problems which have been attributed to the

farm location differentials do not relate to the rates of the

differentials as such but rather to the changes in applicable

differential rates which often occur for producers when

they are shifted from one market to another. Problems of

this kind, however, are dealt with by the proposed merger

of orders. Further, an unwarranted decrease in returns to

nearby producers would result at this time if any reduction

were made in the farm location differentials in conjunction

with the 7-cent reduction in the city plant Class I zone dif-

ferential proposed herein. It is therefore appropriate that

the present levels of farm location differentials continue to

be applicable under the New Engiand orders.

The proponent cooperative associations excepted to the

findings and conclusions on this issue and requested that a

decision on the issue be deferred pending a suggested study

of the economic and legal aspects of farm location differ-

entials by industry and governmental representatives. As

indicated above, we believe there are adequate reasons on

this record for continuing the farm location differentials

. 353

at their present rates. An industry study of such differ-

entials may be made, of course, at any time or could have

“been made at any time in the past in preparation for their

‘review. The matter may be reviewed when it is shown that

further consideration in hearing is appropriate. We are

‘not warranted ir deferring the decision until such a study

has been made.

It would not be apropriate to increase the farm location

differentials under the Massachusetts-Rhode Island .and

Connecticut orders, however, by part or all of the proposed

reduction in the city plant Class I zone differential. Pro-

_ ponent of this proposal contended that under a reduced

| transportation differential such an increase in farm loca-

tion differentials should be made to reflect in the returns

to nearby producers the full value of nearby producer milk

as compared to country plant milk.

It is probable that the attractiveness to handlers of

nearby producer sources of milk will be increased under

the circumstance of a reduced city plant Class I zone dif-

ferential. As described under Issue No. 3, country receiv-

ing and transportation costs have decreased in recent years,

indicating that the present zone differential for city plants

is excessive. Reducing the zone differential merely pro-

vides for a proper relationship between the price to the

handler for producer milk received at city plants as com-

pared with the price to the handler for milk purchased

from country plants. While such action may increase the

marketability of nearby milk, the intrinsic value of the milk

has not been increased. Accordingly, this proposal is

denied.

The present farm location differential areas under the

Boston, Springfield, Worcester, and Southeastern New

England orders should be combined under the Massachu-

setts-Rhode Island order. With minor exception as de-

scribed later, all territory which is within the present 46-

ent differential area under any of the four orders should

ERNE SEASONS ARORA SI RT TIO BER Day REE

oe ee —— Caer ~ tae a .

354

constitute the 46-cent differential area under the conse:

dated order. Similarly, all territory (also with minor

ception as described later) which would not be within thi

proposed common 46-cent differential area but is now With

the 23-cent differential area under any of the present foy

orders should constitute the 23-cent differential area unde

the consolidated order.

Producers now under the four orders to be merged woul;

be suppliers of a single marketing area under the Mass.

chusetts-Rhode Island order. Because only one marketir,

area will be involved, producers should receive the highes

farm location differentials for which their farm location;

‘ would have made them eligible under any of the presen:

four orders, regardless of the plant to which their milk i

delivered under the merged order.

The consolidation of the respective farm location differ.

ential areas now provided under the four orders woul

eliminate sometimes unexpected decreases in returns {i

individual producers. When a distributing plant becom«

pooled in another market, the producers delivering milk ti

that plant become associated with the new market als.

This has been a disturbing condition for certain producer;

who were eligible for the 46-cent differential before a plant

shift but who became eligible only for the 23-cent differ

ential, or for no differential at all, after the shift was made

Handlers experience difficulty at times in handling mil

with maximum efficiency because of their reluctance to shit

producers from one market to another when such producers

would experience a reduction in returns. Cooperative as.

sociations also may be handicapped in shifting producers

to plants which have need for additional supplies. It is

appropriate, therefore, that the application of farm loca.

tion differentials under the Massachusetts-Rhode Island

order be as described.

It is not necessary to provide that a New England pro-

ducer who is eligible for a farm location differential under

2

dg. Soe

ange" ene getenerict cess cee sige PIR

SRE OO IS. GE ERE DEOL LIL LL DLO SLE EEL IE BG eee

355

F

|

j

f

the Connecticut order or the Massachusetts-Rhode Island

order be eligible for the same differential when his milk is

pooled under the other New England order. The consoli-

dation of the four orders and the farm location differential

areas provided thereunder will remove, for all practical

purposes, the problem of change in differentials for pro-

ducers who shift, or are shifted, from one to the other of

these markets. This is so since it is likely that there will

be relatively few instances of plant shifts with only two

orders in New England and since virtually all producers

shipping to the merged market but readily available to the

Connecticut macket would be in the 46-cent differential area

under either order.

As indicated, the 46-cent and 23-cent differential areas

under the Boston order are proposed to constitute a part

of the areas in which farm location differentials would je

applicable under the consolidated order. In contrast to the

other four New England orders which now define farm

location differential areas in terms of city and town bound-

aries or easily distinguishable highways or rivers, the dif-

ferential areas under the Boston order are defined by ‘‘40-

mile’’ and ‘‘30-mile”’ airline ares which are measured from

specified locations. To facilitate the administration of the

orders, it is concluded that the peripheries of the two dif-

ferential areas provided under the Massachusetts-Rhode

Island order should be described in terms of city and town

boundaries. The use under the consolidated order of long-

established, well-known, and readily ascertainable political

boundaries will provide a less burdensome procedure for

determining a producer’s eligibility to receive a farm loca-

tion differential than does the use of airline arcs measured

from a base point.

Under this proposed modification of a portion of the

peripheries of the Boston orde: farm location differential

areas, all cities and towns in Maine and New Hampshire

which are wholly within the present 40-mile arc, as meas-

356

ured from Lawrence, Massachusetts, would be included in

the 46-cent differential area under the consolidated order,

In addition, the modification would extend the 46-cent dif.

ferential area to the entire area of the following cities and

towns which are now intersected by the 40-mile arc: the

cities and towns of Barrington, Chichester, Deering, Fran.

eestown, Greenfield, Pembroke, Pittsfield, Rochester, Rol.

linsford, Strafford, and Weare in New Hampshire.

The 23-cent differential area under the merged order

would include those cities and towns in Maine and New

Hampshire which are wholly within the presently defined

80-mile arc under the Boston order but which would not be

included in the Massachusetts-Rhode Island 46-cent differ-

ential area. In addition the entire area of each of the towns [

of Kennebunkport and Lyman in Maine and Gilmanton, )

Middleton, Milton, and Surry in New Hampshire would be |

included in the 23-cent differential area under the merged

order.

The cities and towns individually listed above are those

areas which are intersected by the respective airline arcs

used in defining the differential areas under the Boston

order and from which one or more producers recently have

delivered milk to the Boston market from farms located

inside the respective arcs. The remaining cities and towns

which are intersected by the respective arcs are areas from

which no milk has been delivered to the Boston market since

January 1, 1962. Accordingly, it is appropriate that these

areas not be included within the respective differential

areas. Under this arrangement, only nine Boston pro-

ducers known to have farms located in the 23-cent differ:

ential area at the time of the hearing would be shifted to

the 46-cent differential area and the farm of one known

Boston producer not located in any differential area would

be shifted to the 23-cent differential area.

Exception was taken to the proposed continued use of

certain highways in defining the peripheries of the farm

re

eh ae

Peg oi PE,

eg RRB EIEN RECS EEE. OPES BEAL ROLY ISTE OL IY PDL IE ALE EN ERTIES

357

on differential areas under the Connecticut order.

locati .

Exceptor contended that inasmuch as it was proposed in

the recommended decision that the peripheries of the farm

location differential areas under the consolidated order be

defined in terms of political boundaries similar procedure

’ should be used in all cases under the Connecticut order.

No proposal of this nature was presented at the hearing

which would provide a basis for this action. Moreover, the

; highways used to describe part of the area boundaries are

easily ascertainable lines of delineation. This is in con-

“trast to the more difficult determination of area peripheries

on the basis of airline arcs as currently in use under the

Boston order. The principal purpose of the proposed

change in the manner of de ining farm location differential

reas under the Massachusetts-Rhode Island order is to

establish for both producers and the market administrator

boundaries which can be easily determined. In many in-

stances well-defined highways also meet this requirement

~ for the establishment of boundaries. We know of no prob-

. Jem in this connection under the Connecticut order.

9. Method and scope of pooling. (a) The marketwide

pooling plan for distributing returns to producers pres-

ently in use under the Boston, Springfield, Worcester, and

Southeastern New England orders should be provided un-

der the Massachusetts-Rhode Island order.

A proprietary handler in the Southeastern New England

market proposed that the method of pooling returns to pro-

ducers in that market be changed from marketwide pooling

to individual-handler pooling. Another proposal listed in

the hearing notice but not supported by proponents or

other parties would require that individual-handler pooling

replace the present marketwide pooling under each of the

four orders proposed herein to be merged.

The conclusion that the Southeastern New England or-

der should be merged with the Boston, Springfield, and

EIA PS ENON OAR IGP Mle: eld Ch LP IAG LIM

Kan il sa o Bi Sai ala

358

Worcester orders into a single regulation renders moot the

question of individual-handler pooling under any one of

the now separate orders. The question then is raised al

to the propriety of individual-handler pooling under th)

Massachusetts-Rhode Island order. :

Under such form of pooling all producers supplying the |

same regulated handler would be paid a blended price (sub.

ject to butterfat and location differentials) based upon thy

uses of milk made by such handler. With this arrangement

it is usual that producers supplying one handler receiye ;

blended price different from that paid by other regulated

handlers in the market inasmuch as the proportions of milk}

used in the different classes usually vary among handlers,

This method of pooling is in contrast to marketwide pool:

ing now provided in each New England order, whereby the

values of milk delivered by all producers to all regwated |

handlers in the market are combined into one fund and all |

producers supplying the market are paid the same blended

price except for adjustments for butterfat and location of

the plant of receipt.

Individual-handler pools generally are more practicable

for markets where milk supplies are relatively short and

where reserve supplies are distributed rather evenly among

all handlers in the market. These conditions do not prevail

in the Boston market, and would not prevail in the consoli-

dated market because of the predominance of the Boston

market’s position among the four markets proposed to be

merged. Most distributing plants in New England are not

equipped to handle reserve milk in any volume. Conse.

quently, operators of such plants customarily have relied

on the relatively limited number of manufacturing plants,

most of which are presently associated with the Boston

market, for the disposal of often substantial quantities of

reserve milk. In this situation the institution of individual-

handler pooling under the consolidated order would result

in widely differing blended prices as between those pro-

359

ducers whose milk is received directly at distributing plants

and those whose milk is received at country supply plants

where available manufacturing facilities are maintained.

It is logical to expect that individual handlers and coop-

erative associations would find it necessary to make sub-

stantial changes in the present patterns of milk movements

and disposal in order to obtain for their respective pro-

ducers the highest possible returns. The major readjust-

ment of the entire marketing structure in New England

which undoubtedly would accompany the institution of in-

dividual-handler pooling would add to marketing costs and

thus be uneconomical and undesirable. The differences in

producer prices which could be expected to ensue from such

method of pooling would not promote the objective of more

uniform alignment of prices to producers which, as else-

where described in the decision, is important to orderly

marketing in New England. The application of market-

wide pooling under a merged order will promote market

stability by insuring that all producers supplying the Mas-

sachusetts-Rhode Island market will share on a uniform

basis the Class I and Class II utilization in the entire mar-

ket and thus assist to permit the assembly of supplies in an

economical inanner for available outlets. Accordingly, the

proposals for individual-handler pooling are denied.

(ce) No provision should be made in the New England

orders for a ‘‘base-excess’’ plan of distributing producer

returns. A cooperative association in the Southeastern

New England market proposed that such a plan, which

would provide for a system of Class I bases for all pro-

ducers presently shipping to the New England markets, be

incorporated in the New England orders. Proponent con-

tended that the present method of pricing milk under these

orders does not provide sufficient incentive for producers

to adjust their production to the Class I utilization of milk

in the market.

fdas a : — - . .

= WRC N. GI IEMA ED AINE MOORES Dig AB” BASAL IE IBA MEY TS ASEM CGR Y

360

The Agricultural Marketing Agreement Act of 1937, as

amended, authorizes the inclusion of base plans in Federal

orders. Such plans have been incorporated in a number of

Federal orders, but only for the statutory purpose of mini.

mizing seasonal fluctuations in milk production. The ob.

jective of the type of base plan proposed, i.c., the reduction

of aggregate deliveries of milk by producers to pool plants

in relation to the market’s fluid needs irrespective of price,

would supplant the function which is intended under the

Act to be performed by prices established at the levels re.

quired by the Act. Prices under milk orders must be estab.

.lished at levels which will tend to equate demand and sup.

ply for the market, insure a sufficient supply of pure and

wholesome milk, and be in the public interest. Order pric.

ing is intended to operate under conditions where milk sup-

plies will remain reasonably free to respond to changing —

price conditions. Under a base plan of the type proposed,

total production would be influenced greatly by the impact —

of the base plan rather than by the level of prices provided _

under the order and would be in conflict with the price cri-

teria of the Act. The proposal therefore is denied.

Portions of Hearings Held Commencing January 7, 1963,

Docket Nos. AQ 14-A35, AO203-A17, AO204-A17,

A0302-A9, and AO305-A9

Testimony of James D. Lee for New England

Milk Producers

The Witness: I wish to describe the effect on blended

prices of mergers and of elimination of nearby farm loca-

tion differentials with respect to Proposal No. 3, which

is our own proposal, and Proposal No. 1, of the CDES.

First, with respect to the effects of merging all five

markets—and I shall use as an example the prices and

situation as of August, 1962: In August, 1962, the blended

prices to nearby producers were as follows for each of

the five markets: Boston, $5.70; Connecticut, $5.99;

361

i Southeastern New England, $5.96; Springfield, $3.58; and

| Woreester, $5.36.

- Dr. Young: Would you read those again?

The Witness: Surely.

- Boston, $5.70; Connecticut, $5.99; Southeastern New

England, $5.96; Springfield, $5.58; and Worcester, $5.36.

Dr. Young: Thank you.

The Witness: If the five markets were one in August,

1962, and if there were the same farm location differen-

tials in effect, the price to nearby farmers would have

been $5.82 for the nearby area, $5.50 in the intermediate

zone, $9.36 in city plants from milk coming from dif-

ferent zones, and $4.82 at plants in Zone 21.

Mr. Whitney: That is for Boston?

The Witness: No; all five.

_ Now, if that were the case, the Boston blended price

(1702) would have been—

_ beg your pardon. This five- market price would have

been 12 cents higher tnan the Boston actual price.

I wish to start that again.

Comparing this five-market price with the actual blended

prices in the separate markets, the Boston price would

have been raised 12 cents, and the Connecticut price would

have been dropped 17 cents. The Southeastern New

England price would have been dropped 14 cents. Spring-

feld would have been raised 24 cents, and Worcester

dropped four cents.

Now, if, along with the effects of pooling the utiliza-

tion over five markets, and at the same time we were to

diminate the nearby farm location differentials, the

vhole level of the price structure would be raised

% cents, except for the nearby part of the price

level, and the structure would be as follows:

The price at the 21st zone would be increased from

$1.82 to $5.02. The price at city plants for milk coming

in from different farms would increase from $5.36 to

$1.56. And the prices to all producers at city plants would

be $5.56.

362

Comparing the revised price structure with the acty,

price structure at that time, prices to nearby produeis|.

in Boston would be reduced 14 cents from the actual brit

The five-market price to producers at city plants wou;

he 43 cents less than the actual price to Connecticut pte

ducers. It would be 40 cents less than the actual pris)

to producers in Southeast (1703) New England, two cen,

less than the price to nearby producers last August j

Springfield, and 30 cents less than the price to Worceste)

producers from nearby farms last August. '

In the intermediate area, the effect of this modificatio.

of the price structure would be to increase prices 4

producers in the intermediate area by nine cents, rm

duce them 20 cents in that area for Connecticut, redy

them 17 cents for that area in Southeastern New En.

vo and raise them 21 cents for that area in Sp-ing

eld.

Looking at the Boston up-country producers alow,

under these assumptions, their price would be about %

cents a hundredweight higher than it actually was i:

August, 1962.

If the Boston, Springfield, and Worcester markets wer

in one pool in August, 1962, with nearby farm locatia

differentials substantially as they were, the three-marke

blended price to nearby producers at city plants woul

have been $5.71 a hundredweight, the price to such pro

ducers in the intermediate zone would have been $5.43

the price to distant producers at city plants would haw

been $5.25, and the Zone 21 price would have been $411

The blended prices that would have obtained under this

assumption would have been one cent a hundredweigh'

higher than the actual Boston price. It would have bea

13 cents higher than the Springfield price at city plants

nearby producers and it would have been 15 cents les

than the actual price to Worcester (1704) producers #

nearby plants.

363

If the principle of eliminating the nearby farm loca-

tion differentials were adopted—and such elimination has

not been proposed by us in our testimony on Proposal 3

—the price to distant producers in Zone 21 would have

been raised from $4.71 to $4.81. The price to distant

producers at city plants would have been raised from

$5.25 to $5.35, and we would have had those compari-

sons with the actual prices.

As far as the nearby producers’ prices are concerned,

the change due to a three-market merger with farm loca-

tion differentials out would be to reduce the Boston price

35 cents, the Springfield price 23 cents, and the Worcester

price 51 cents.

Mr. Chermauskas: These are all reductions?

The Witness: Yes.

In the intermediate zone, the price to Boston produce ’s

would be 12 cents lower. Of course, there would be ro

change in Springfield. But in Worcester, the price would

have been 28 cents lower.

Mr. Tipton: Did you say the price in the intermediate

area of Worcester? I did not get what you were talk-

ing about. There is not an intermediate area to Wor-

cester, is there?

The Witness: That is correct. There is no intermedi-

ate. I had those two interchanged.

The price in the intermediate zone in Springfield was

$5.35. Under these assumptions, it would be $5.48, so that

it (1705) would be raised 13 cents; and there is no com-

parison for the intermediate zone in Worcester, so the

figure I gave of 28 cents is to be stricken.

Mr. Aplin: I think maybe there is a basic error in

these figures, in that the actual supply in Southeast. New

England is slightly different than Mr. Lee stated it. I

wonder if that would not affect some of the subsequent

figures.

Is that true, Mr. Lee?

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—

364

Exhibit No. 7, page 2, shows that the blended price

to nearby producers is $5.98, and I think you are using

$5.96.

The Witness: Yes, I did.

Mr. Aplin: That would change some of the figures you

have given, would it not? The comparison of actual prices

and what they would be in Southeastern New England!

The Witness: It would have a slight effect, yes.

Mr. Aplin: There was one other point I wanted to

make before you go on. In the comparison of what it

would be with all markets merged, but with no farm loca.

tion differentials, I think you said that the 21st zone

price would be $5.02, and the price to nearby producers

at city plants $5.56, but would not these have to be 54

cents apart?

Excuse me. I guess I am wrong. I guess they are 54

cents apart. I am fast on that one.

Then this other one would make, I agree, only a slight

difference. But would you not need to revise slightly

these (1706) figures?

The Witness: I am not positive that in my scrap paper

I didn’t use $5.98 and copy on this chart I am using to

talk from $5.96. I would want to check that before I

answered on it. And if I did, I shall attempt to get a

measure of the distortion that is introduced.

Dr. Johnson: Could I ask a question of a somewhat

similar nature?

In making the computations using the month of August,

there was a take-out-and-pay-back plan in effect in Con-

necticut under which money accumulated in April, May,

and June was repaid in July, August, and September, and

in August an amount of approximately 17 cents a hundred-

weight, and my question, J guess, the first question: If

that 17 cents, and the amount of money on which it was

based was not available under Proposal 1, would not

your results on the five-market computations have been

somewhat different?

PAE RN RO NORE am Re RRR E Teme oe Ses Hone ee

365

_ The Witness: Yes, they would, Dr. Johnson.

| Dr. Johnson: And then only one other follow-up ques-

‘ion. And specifically where you made the calculations

Yor Proposai 1, where there was one order, and the loca-

tion differential was eliminated, and you came out with

2 $5.56 city plant price, which you showed was only two

ents lower than Springfield, would not that two cents be

increased to perhaps six cents,.or some figure in any event

Jarger than two cents?

(1707) The Witness: Yes.

Examiner Holstein: Mr. Tipton?

Mr. Tipton: I was late, and I was just wondering if

the method of determining what the price would have

been has been put into the record. 7

The Witness: No, I haven’t explained the basis of the

computation, but I would be glad to tell you.

Mr. Tipton: Second, I wondered if you intended to

present these figures in tabular form, or do anything

further than just reading them into the record at this

time. It is rather difficult to follow the figures, the mean-

ing of them and so forth, their not being in tabular form.

The Witness: I think in view of Mr. Alpin’s comments

and those of Dr. Johnson, it would be appropriate to re-

check them, with those points in mind, and after I have

done that, I would be glad to put them in tabular form

and make them generally available.

Examiner Holstein: Is that satisfactory, Mr.

Tipton?

Mr. Tipton: Yes. .

Were you through with your direct, now?

The Witness: No.

Examiner Holstein: Go ahead.

The Witness: If the prices to up-country producers |

were reduced on the order of 32 cents a hundredweight,

to use as an example the figure that I gave you, and

Sc ia nt se en -_

EP EE AE AOE ee ay RR rie

366

variable sharp (1708) decreases in prices occurred j

producers delivering to city plants from these nearh})

areas, particularly the areas close in to the distributia

centers, we could expect that the volume of productia)

from the northern producers would increase substantiall;|

and that producers, many producers, in a perhaps dq}

perate effort to survive in southern New England, wou

resort to jug operations in peddling their own milk. |

Mr. Geyer: Mr. Lee, I thought you said if the »)

country price was reduced 32 cents. )

The Witness: That was a slip of the tongue. I mean)

increased 32 cents. Thank you. 3

It is obvious that there would follow serious adjust

ments. |

Within perhaps two years the saiishesdinisiud adjuste:

in the Class I price formula could conceivably reduce th |

Class I price 44 cents. This reduction in the Class |

price and a decrease that wonld take place in the per

centage of Class I milk could (1710) wash away ever.

thing gained by up-country producers from the be

and appropriation of the differentials to nearby pm

ducers.

The production in the nearby areas, contrary to th:|

in northern New England, has not been following an »

ward trend over the years. In the Boston niarket ki)

fore amalgamation with the Merrimack market, the pe

centage of nearby milk was substantially less than it i

now, and it is only about three per cent at the preset

time.

The nearby farm location differentials were establish¢}

at the outset of the orders, recognizing the existing pa}

tern of prices prior to Federai regulation. There hi}

been no move over the years to change the original rats

of 46 and 23 cents, to keep them proportionally aligns}

with the upward trend in prices, so that these differenti}

have become a declining percentage of the price. Ther

has been no inflation, in other words, in that farm loc}

tion differential. . °

uae

ore ——

eee

367

Dairy men in southern New England have entered into

many capital commitments during all these years, and

may have done so even very recently, while those dif-

ferentials have been frozen into the price structure.

Doubtless, many loans have been made to producers by

the Federal Land Bank, long-time loans, using normal

prices to producers. The farm location differentials have

been in the orders for so long that I feel it is only rea-

sonable to assume that in considering granting loans, the

differentials would be (1711) certainly considered to be

a part of the normal price. . It is doubtful that they could

Within perhaps two years the supply-demand adjuster

in the Class I price formula could conceivably reduce the

Class I price 44 cents. This reduction in the Class I

price and a decrease that would take place in the per-

centage of Class I milk could (1710) wash away every-

thing gained by up-country producers from the merger

and appropriation of the differentials to nearby pro-

ducers.

The production in the nearby areas, contrary to that

in northern New England, has not been following an up-

ward trend over the years. In the Boston market be-

fore amalgamation with the Merrimack market, the per-

centage of nearby milk was substantially less than it is

now, and it is only about three per cent at the present

time.

The nearby farm location differentials were established

at the outset of the orders, recognizing the existing pat-

tern of prices prior to Federal regulation. There has

been no move over the years to change the original rates

of 46 and 23 cents, to keep them proportionally aligned

with the upward trend in prices, so that these differentials

have become a declining percentage of the price. There

has been no inflation, in other words, in that farm loca-

tion differential.

Dairy men in southern New England have entered into

many capital commitments during all these years, and

368

may have done so even very recently, while those dif.

ferentials have been frozen into the price structure.

Doubtless, many loans have been made to producers by

the Federal Land Bank, long-time loans, using normal |

prices to producers. The farm location differentials have

been in the orders for so long that I feel it is only rea.

sonable to assume that in considering granting loans, the

differentials would be (1711) certainly considered to be

a part of the normal price. It is doubtful that they could |

have foreseen that at one fell swoop the farm location dif.

ferentials would be swept away. |

For the reasons that I have indicated, the credit in.

stitutions serving northern New England producers wonld

be poorly advised if they thought there would be any-

thing but a temporary shot in the arm to returns to the

up-country producers.

I have not time to do any extensive research on this

question, and I might just as well admit now that such

little bit as I have done underlying these comments today

was done in the wee hours of this morning, and I make

no claim to extreme accuracy, and apologcticaily wish to

say that I will do everything I can to try to correct any

numbers that I have made errors on. 7

It seems to me that any radical change in the price

structure of the market warrants long and careful re-

search. The nearby farm location differentials have been

a part of the New England price structure for so many

years that they need not be destroyed summarily without

permitting reasonable time for thorough research to be

made as to the impact of such action on the market and

the dairy economy of the region.

I cannot accept that over the years the Secretary has

permitted outrageous discrimination against up-country

producers to have been perpetrated by the orders, and

that they need to be swept away at one fell swoop.

(1712) I do not feel that the southern New England pro-

ducers or the Secretary of Agriculture have any reason

a

369

+ having any guilt complex over having allegedly dis-

‘nated unfairly in behalf of nearby producers; nor

t nearby producers should feel, as the result of the

stimony presented at this hearing, unless before it is

ncluded overwhelmingly convincing conclusions from ex-

nsive research would warrant it, that they have accepted

‘Nions and millions of dollars to which they were not

titled, or that they have been picking the pockets of

sir fellow producers in northern New England.

As I have said, the price structure that has been recog-

ized is the one that was found by USDA to have existed

nst prior to regulation—I submit that the nearby farm

tion differentials question does not hinge alone on the

uestion of the quality of the milk now versus what it

was then.

Quality premiums were always a matter of negotiation

between handlers and producers. It is not alone the

better roads and larger tank trucks which should decide

this issue, it seems to me. And the argument that hand-

Jers today would not pay a higher price by virtue of the

nearby location of the milk is presumptive.

We have many instances over the country of premiums

being paid. There have been instances in markets in the

country Where premiums over the order price have been

paid, and the prices established under the order seem to

take into account (1713) all of the purely economic fac-

tors involved. _ .

In other words, we cannot conclude that handlers nec-

essarily would not agree to pay at least something more

for nearby milk. Handlers are not always economic men.

) When the Springfield, Worcester, Southeastern New

England and Connecticut orders were promulgated, they

contained the nearby farm location differentials which

had been established in the Boston order, and for the

same reasons. In each case it was unregulated milk from

outside sources which was being sold in these markets,

milk that the state control boards could not control ef-

fectively, that led to the orders.

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EBL LOLERL LEY LE NIL! GERI LE IGCR BELLE ET LEL AI LIGE IY CELE EA IE

370 ,

The problem was not one of the nearby farmers ree. |

ing low prices for their milk, but rather it was large}

one of the regulated milk having to compete unfairly ;|

those markets with ‘the unregulated milk. That ig ,)

say, Boston handlers, for example, were trying to coy,

pete in these southern New England markets with po

milk and were at a disadvantage. The prices under stat

authority to the local producers, as I recollect, were ny

comparatively low.

I do not mean to imply that had not Federal ordex

been instituted in the southern New England markets thy

I have mentioned, marketing conditions could not hay.

degenerated to the point where local producers would hay:

been hurt substantially; but at the time they came i:

the local producer prices were generally favorable.

(1714) Southern New England producer organiz:tion

voted for the new orders, even proposed them. They wer

fully aware that the orders did provide for nearby fam

location differentials which recognized their existing pric

structure; and these pricing provisions seemed to ther

to be fair and equitable and in their long-run be:

interest. |

I know of no one in the NEMPA who anticipated ths

after a period of years, in the case of Southeast Nev

England and Connecticut only a very few years, thi

price structure would be greatly changed.

I am not in accord with Attorney Carroll’s characteriz-

tion of the proposal to eliminate nearby farm locatio:

differentials as “squawks from the North Country.” |

do not believe we are dealing with any “squawks,” but

an honest question of what is right, rather than who is

right, and that we should explore all of the factors ir

volved.

Nevertheless, I do think it is unfortunate at this par-

ticular time that our producers should be divided on this

question. Our New England producers in their cooper:-

tive associations now are and seem destined to be in

——,

peril from outside dangers, from unfavorable court de-

cisions, technological developments in dairy products, and

this does not seem to be an appropriate time to rock our

own boat.

I guess that is al] 1 have to say.

371

Examiner Holstein: We will take a ten minute

recess. ‘

(1715) (Short recess.)

Cross Examination by Mr. Tipton:

Q. I am sure you are very familiar with Exhibit %4,

which contains an article on farm location differentia's.

In this article you portray or make a statement as to

what testimony was entered at a hearing prior to the

issuance of the order in 1937, which happens to correspond

with the differential rate that was put into effect in 1937.

That differential, or the testimony that was given,

closely related to the 46 cent differential, did it not? A.

Yes.

Q. Now can you tell me: Who paid that differential?

I do not mean by name, but as a group. A. Who paid

the differential? There was no differential.

Q. Did the handlers pay the differential? A. The hand-

lers paid the producers who delivered the milk at the

city plants a level of prices which was in relation to the

up-country prices, as the evidence in the hearing record

at (1719) that time, which is quoted in the article, ex-

plains. }

Q: So if the 46 cent differential was based on that dif-

ference, then handlers naturally paid the Mnoney that gave

the basis for writing the 46 cent differential. Is that not

372

correct? A. I wouldn’t want to testify beyond what was

quoted from the record at that time.

There is in the room Professor Ellsworth Bell, who

made statistical investigations at that time of prices actu.

ally received by producers, nearby producers, at that time,

and I would not care to expand on that myself.

Q. You mentioned in your testimony somewhere that you

did not think that it could be fully justified on quality,

and you mentioned some other elements that you did not

think this fully justified it—“it” being the differential.

Can you tell me what your impression or what you

think authorizes a nearby farm location differential under

the Act?

Mr. Hall: I think that that is asking this wit-

ness, who is not a lawyer, a question of law.

Examiner Holstein: That is correct. The ad-

dition of that last phrase put it in the legal realm.

If you are asking for economic justification, I

will allow this witness to answer; but if you are

asking what justifies the differential under the Act,

I do not think Mr. Lee should attempt to answer

that.

(1720) Mr. Geyer: In addition, it seems to me Mr.

Lee spent nearly 30 minutes putting into the

record what he thought was the justification for a

nearby differential.

Examiner Holstein: I think that is correct.

I do not know whether you were here for all

the testimony, Mr. Tipton, but I do not think Mr.

Lee should be required to repeat it.

Mr. Tipton: I am sorry if I was asking you to

repeat it. I had no intention of doing so.

By Mr. Tipton:

Q. Let me ask it this way, then. I take it from your

testimony that you have justified it basically on the

historical fact that nearby differentials were paid, or

SSA ORNL TE ETE POLITIES LEE ELLE LL LGD SLI EEE

_-

373

4 price was paid which reflected the 46 cent differential

rate back in 1937.

Js this true? A. I pointed out that the very fact that

it has existed over this period of time led to decisions,

and they were business decisions by producers and in-

stitutions serving producers, which resulted in the both

short-term and long-term capitalization into the southern

New England dairy industry of the nearby farm loca-

tion differentials, which certainly greatly supplements

the reason which you cited, that they had been, or that

they did, come about as USDA studied the situation at

the time of the promulgation hearings, economic briefs

that were prepared in anticipation of those hearings.

(1721) I don’t wish to say that I have made a study

of the dusty old economic briefs to have at my finger-

tips a long list of economic factors that at the time

justified their inclusion in the order.

Q. Why would a handler—just give me some reasons

as to why a handler would customarily apply a differ-

ential?

Let me make it more specific. Would he customarily

apply a differential because such differentials were his-

torically paid? A. I don’t know how he would pay if we

swept the differentials away and set up under the order

‘the revised structure which would result from plowing

“the money now going to southern New England producers

over the entire milkshed.

Q. Well, would he customarily apply a differential, if

he acted in an economically rational manner, unless the

milk had some additional value over another source of

milk that he might purchase? A. Well, I testified that

handlers don’t always pay prices that we economists would

rationalize as being appropriate.

Q. I realize that. But if he acted in an economically

tational manner—and you are an economist, so you have

some connotation of what an economically rational man-

ner might be. A. Well, I am also a political economist,

EM PLEO CII Ie, DOR LP Reg PEE LES CRE EE EAS

374

I think, and I am not sure that we can conclude thy

handlers will pay farmers always even closely the pric

that location theory and the (1722) traditional econoyj,

rationale of prices would seem to justify.

Q. So you are saying that in general lhendlers 4}

not pay for milk according to its value? A. No, I didn

say that.

Q. Then in general do handlers pay for mik accord

ing to the value, too? A. Yes.

Q. So in general would a handler customarily apply;

differential to milk which did not have an addition)

value to him over some other source?

Examiner Holstein: Now you are asking th

same question you asked him a moment ago, whe

he answered at length. I think you are reveat.

ing.

-Mr. Tipton: I do not think he answered that

“a 3 Piet Meet, ad

Examiner Holstein: Well, I will let Mr. Lee tel

you whether he answered it or not. It sounded

to me like the same question you asked three or

four questions back: Will the handler pay a loca.

tion differential if the mik concerned did not hav

some additional economic value.

Rk Ri ene om

Was that not the question you asked two or three

questions ago?

Mr. Tipton: I said “generally” in this questibr,

which I think changes it considerably.

Examiner Holstein: You said “generally”? You

mean now you said “generally”?

(1723) Mr. Tipton: Yes.

Examiner Holstein: How was the question be-

fore any different?

Mr. Tipton: I think the record will show what

he said, and I cannot remember what he said, but

in my mind it changes it.

. Were, 4

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_—

375

Examiner Holstein: You said this question was

_ different because it contained the word “generally.”

Is the only difference that the question previously

did not contain the word “generally”?

Mr. Tipton: That is the only difference that

I intended it to have.

Examiner Holstein: I do not think that is a

difference, Mr. Tipton. When you asked the ques-

tion before, it was generally, too, was it not?

Perhaps we are wasting more time than we

can save. But do not repeat. You are repeat-

ing, because you did not get an answer that you

thought was satisfactory. I can realize that. You

would like to get a better answer. But I do not

think that you should repeat questions in that at-

tempt.

Go ahead, Mr. Lee.

The Witness: I would not want to speculate now as

to just what handlers would do price-wise, if we had

this changed situation.

By Mr. Tipton:

Q. Well, do you know of handlers that are customarily

(1724) applying the differential today to nearby milk?

A. All handlers who are buying nearby milk are re-

quired by the order to pay producers the differential.

Q. They are paying a differential above the Class I

price? A. No. What I mean is that the handlers are

paying the blended prices established by the order.

Q. Do you know of any handlers in the nearby area

that are paying in addition to the blend price a premium?

A. I don’t of my own knowledge know any handlers who

are now, but if I said I did know that there are such,

your next question would be; “Who are they,” and I

just have the feeling that there are some—

Examiner Holstein: Let’s not anticipate what Mr. Tip-

ton’s next question will be. This question is: Do you

376

know of any? If you can answer that, do so; then when

he asks his next question we will decide on that.

The Witness: I don’t know the names of any handlers

paying premiums.

By Mr. Tipton:

Q. I think you made a statement in connection with

I believe the promulgation of the Connecticut order, or

the hearing leading up to the Connecticut order, or the

conditions prior to the promulgation of the Connecticut

order; but the problem was not one of nearby farmers

receiving low prices for their milk, but rather one of

regulated milk having to compete (1725) largely with

unregulated milk. A. And I made that statement also

with reference to Southeastern New England, and years

before that in Springfield and Worcester.

Q. Was there some difference in the price—

Let me ask first: The regulated milk you are speaking

of would have been regulated under Federal orders! A.

I meant Federal orders.

Q. You also meant regulated under state order, too,

did you not? A. I was thinking of the unregulated milk

as milk shipped in from other states, which couldn't

be effectively regulated under any order.

Q. Yes; but it was competing with milk that was reg-

ulated under Federal order, as well as milk that was

regulated under state order. Is that not correct? A.

That is correct, yes.

Q. Now, you say “compete unfairly.” What was this

unfair competition? A. Well, as I recollect, the handlers

in those markets—

I wish to qualify it. Some handlers in those markets

had a supply of milk which they obtained from sources,

the exact sources of which only brokers could tell us.

It came from unregulated out-of-state areas, which cost

them a basic cost equal to the blended price plus the cost

of getting the milk to Rhode (1726) Island or Con-

necticut.

wks NES DA eh PRIS

377

Q. It cost them a blended price? A. Their basic cost

was a blended price somewhere. And I won’t go so far

‘as to say, although I did hear some comments, that the

‘est could have been as low as the Class II basically in

‘some instances.

Iam not implying that there is anything wrong with

the quality of the milk. If it came from a manufactured

milk company, there is a chance that the basic cost of

that milk would be Class IT value.

And handlers in the regulated markets had a legitimate

complaint that they were having to compete with other

handlers who had a lower cost of product, which was

recognized by the Secretary in establishing the orders,

and I think was the primary reason for extending Fed-

eral regulation into these other markets.

Q. So the handlers were purchasing milk on some kind

of an opportunity basis. They were looking for the

cheapest source of milk that met their demands. Is this

eorrect? A. Well, I don’t want to put all handlers in

bed together on this, because they weren’t all doing

this. Some were paying the prices that the state control

boards specified, and they did not seek this commerce

that we are talking about now.

Q. But if the situation would have continued without

Federal regulation, then you might have anticipated that

all of them would have attempted to have got the cheap-

est supply possible (1727) that still met their demands

as far as quality and regularity and all of these things?

A. Yes, I pointed that out in my testimony.

Mr. Tipton: I think that is all I have.

Examiner Holstein: Is that all, Mr. Tipton?

Dr. Johnson.

By Dr. Johnson:

Q. Did I understand you to say ‘hat although the re-

duction or elimination of location differentials in the first

instance would increase the up-courtry price, because of

378

an increased difference from the New York-New Jersey

blend, more milk would be attracted and the increas

would be washed out in a short period of time? A. No

the increase in production would be washed out in a short

time, no.

Q. If I said “production,” I meant blend price. 4

Well, I said that I thought within a couple of year

it would be washed away, yes.

Q. If this occurred, so that the up-country New England

blend came down to the New York-New Jersey blend

and at the same time the nearby price in New England

was lower, would it not follow that it would tend to have

an adverse effect on milk production in New England!

A. Why, yes.

Q. With less New England milk in the pool of the

merged

—~

—

e e @

(1729) Examiner Holstein: Mr. Tipton.

By Mr. Tipton:

Q. First I would like to ask if you have made such

a detailed study of the movements of milk that might

occur between New York and Boston and the effect on

-the Class I price and the offset on the utilization, that

you can say without qualification that any increase would

be wiped out. I thought you said a flat yes to a ques-

tion, without qualification, that any increase would be

wiped out. A. Looking back on the history of supply

response to price as we have seen it develop over the

years, I concluded that it would take about two years

for these forces to wipe out the gain which would come

from eliminating the location differentials.

I did say also that I thought that the economic effects

of such a radical change in the price structure are s0

significant that it would seem to warrant, after there has

been no urgency about the farm location differentials

for these many years, that a committee of economists

ibs A oa eit A IA aN alte pe. Weaakey alls Betas eR Re

| ae S pics sis hal 1 ipele Deny oi Lok

379

could well devote a considerable amount of research to

: get at some of the answers—or to get at the answers

- to some of the questions we have been discussing here

| today.

I wanted to be the first to admit that such research

| does not seem to be available for our use in considering

the matter here.

_ (1730) Q. You said that one of the reasons why this

| difference would be wiped out would be because we would

have an increase in production up-country as a result

of the higher price, and you said that this, with the

other thing, within the two-year period, would wipe it

out; and then all of a sudden we have a lower price,

and then you said that we would have a _ cut-back

in production.

Now, what period of time are we talking about, bcth

in terms of the increase in price and the effect on

production, and the decrease in price and the effect on

production? A. I haven’t given much thought to where

we would go from a couple of years from now, time-wise.

I wouldn’t want to try to off the cuff estimate how long

before we would be worse off.

Q. Have you stated in the hearing record anywhere

what is the membership or approximate membership of

your organization? A. No, I haven’t.

Q. Do you intend to, or do you wish not to?

Examiner Holstein: You can answer.

The Witness: Frankly, I don’t know myself yet.

By Mr. Tipton:

Q. My next question was going to be, then: What

proportion of your membership is within an area that

is subject. to the farm location differential?

Mr. Hall: I object to that question, Your Honor.

I do (1731) not think that that adds anything to

help the Secretary arrive at a determination.

380

Examiner Holstein: The question has been an.

swered. The witness-does not know.

Mr. Tipton: That is all I have, sir.

Examiner Holstein: Mr. Pelley.

By Mr. Pelley:

Q. In answer to Dr. Johnson’s questions, here, with

respect to the effect of prices on supplies, does not :

the answer to that have to be predicated upon the slope |

of the supply curve, whether it is elastic, inelastic, or

something else? And is this not a one-to-one relation.

ship? A. I will answer your question, Mr. Pelley, in /

this way. I don’t believe the process of contraction js

in proportion to the process of expansion. And involved

also are time periods long enough to allow the forces

that are set up to run their course.

There are short-run responses immediately that dairy

ration feeding could be stepped up. Then a couple of

years later there would be time to make herd adjust-

ments.- And supply response is a phased affair.

Q. Is it. not true that a supply response is a real

thing? A. Yes.

Q. In other words, a supply response to merely the ©

relationship of the flow of product in response to price?

(1732) A. Yes, definitely.

Q. And in answer to Dr. Johnson’s question, I believe

you gave an unqualified “yes,” this would happen.

Now, you could say this generally, that milk would flow

‘in in response to price, as merely accepting the proposi-

tion that the supply response is upwards sloping to the

right. This is all that this indicates, does it not? A.

Yes.

Q. Now, would it not be true that to determine this

would be good or bad for producers, in this area, you

would have to know the slope of the curve? Is that

right? <A. Yes, definitely. |

, sn pbk ey fst Nt aS Saha hg a Ae TN I a i a a ahh Tg i ha Nn a Sa

PRET NT ee Cre eRe tT ee are Pure Thode Se ea

Beiter a srsrncnin tina ei ean

‘

| 381

Q. So without knowing what that slope is, you could not

say whether this was good or bad; you could just say

that price will tend to adjust supply? <A. I would be

more specific than that, because we saw what happened

to production a few years following the end of World

War I. We saw a production response to the higher

prices which we had during the Korean War come along

shortly after the war, in the early 1950’s. We have

geen that the maintenance of the difference between

blended prices in New England and New York of in the

area of a half a cent a quart would lead milk into our

New England markets.

When I said that I expected that there would be a

decrease in production when- the blended price went

down, it (1733) reflects the fact that I just don’t believe

in the doctrine of heresy, you might say, that producers

will increase production in response to a decrease in

price.

As I said, the matter is a phased affair.

Q. As a general proposition, would you think that the

supply response of a given number of producers—now,

-I am separating here supply response of producers al-

Yeady in the market as against a supply and response

inter-market. A. Yes.

Q. Is that the supply and response of producers al-

_Teady in the market was inelastic, or relatively elastic?

A. I would want to sit down with a group of my fellow

economists and explore that whole question before form-

ing an opinion on that.

Q. You would not want to guess whether it is one or

less than one or more than one, even in a general

area?

Mr. Hall: I object to the question on the basis

of asking this witness to make guesses. I thought

we were here to elicit facts.

Examiner Holstein: I think that is right. I

presume Mr. Pelley means an estimate.

382 ’

Do you, sir?

Mr. Pelley: Yes.

Examiner Holstein: Well, we do not have to ente,

into a discussion. You asked him a question. |

the witness will (1734) understand that as a

estimate based on his background and experieng

I will permit an answer, if he can answer.

Mr. Pelley: I would like to say, Mr. Hearin,

Master, that I am just trying to explore further

& positive answer that he gave to Dr. J ohnson,

because I did not understand this thought wen

into this, and I do not think the industry does, }

Examiner Holstein: Do you have a clarification

question, Dr. Johnson?

Dr. Johnson: Were you through?

Examiner Holstein: He has asked the question

and has not gotten an answer yet.

The Witness: Well, I would want to review what litera.

ture is available on the response of producers, the supply

Tesponse of producers, Mr. Pelley, before expressing

anything more than my own conviction that a reduction

in prices to producers, given reasonable time for farmer

to adjust, will cause a contraction in the total output of

producers.

I want to leave out—

ae ee eee

Examiner Holstein: You need not explain the answer.

The answer to your question is “no.”

By Mr. Pelley:

Q. I am traveling on the assumption that in order for

the Secretary to assimilate this information in the record,

he is going to have to make an estimate of what he thinks

it is, in order to respond properly to your testimony.

And I wondered (1735) if you could help him in that

respect by indicating that if the supply response is found

F or decided or determined by the Secretary to be in

elastic, in that case would it not be true that your

_——

northern Vermont producers would be better off by hav-

ing a higher price?

In other words, would it not be true that their total

income, then, would be improved by a higher price, fac-

ing an inelastic supply curve? Is this not the doctrin-

aire principle? A. My memory isn’t sufficiently sharp

this morning on the few bulletins I have read on supply

response to answer.

_ Q. Then I think we can end this- session with this

question.

On this basis, you leave it up to the record to make

this determination, and hope that a determination will

be made such as to maximize returns to your producers,

whatever the case may be? A. I’m anxious that the de-

terminations that the Secretary makes will be in the best

interests of all producers in the long run.

Q. So that if the Secretary should determine or finc,

on the basis of this record, that the supply responses

brought about effects different than you indicated in

your answer to Dr. Johnson, you would like him to re-

verse your judgment on that and maximize price? This

is your consideration? A. You are asking me what I hope.

I hope that he finds that there is a great need for re-

search to be done on this (1736) question of supply

response, given the rather new set of production condi-

tions that have been brought about by the revolution in

dairy farm technology that we have been seeing for the

past few years, and not on the basis of some dusty re-

search experiment station bulletins on supply response

which tried to derive supply response information at a

time when these conditions were quite different.

Q. In view of further delving into this matter, would

you still want to maintain the answer you gave to Dr.

Johnson, or would you want to qualify it. A. I wouldn’t

want to qualify it from the stand new, no. I have indi-

cated time and again that I think it is a matter that

we all ought to be giving a lot of intensive study to,

and not speculating on at this time.

383

PRarbisiicss Ka

4

384

Q. Did I not understand you to indicate to Dr. John.

son that if the differentials were lowered and if PTices

were balanced between New England markets and New

York, then you would have a reduction of supplies jn

these markets, and the supplies would be fulfilled by

substitution or transfer of milk from the New York

market, which in turn would reduce the blend prices

to producers in this area and be to the detriment?

I am saying in view of further delving into this, would |

you still want to maintain that answer? Or would you

want to qualify it? A. No, I wouldn’t want to delve

into that area of prophesy. (1737) For all we know, the

Congress of the United States might institute a quota |

production control plan, which would prevent the in.

crease in production effectively, and a whole new set

of production conditions could be brought about some.

time this vear, 1963, that would upset any—

Q. So it is all pretty indefinite? A. Yes.

Examiner Holstein: Is that all, Mr. Pelley?

Anyone else?

_ Dr. Johnson.

By Dr. Johnson:

Q. You have been answering questions concerned with

supply response. Are there two general types of supply

Tesponse, namely, production response of given produc-

ers, or of producers within a given area? That is one;

and the other, the response in the way of the shifting of

given production or supplies among markets? A. Yes,

And I thought that I made that clear in my original

statement, Dr. Johnson.

Q. Comparing the two types of supply response, the

production response and the shifting among markets, and

thinking of them in terms of the short run, of a few

months or one or two years, and thinking of them in

terms of milk in the Northeast, in which type do you find

the greatest price elasticity?

—

Mr. Pelley: Mr. Hearing Officer?

(1738) Examiner Holstein: Is this a clarification ques-

tion?

Mr. Pelley: Yes.

Examiner Holstein: In other words, you do not

‘understand Dr. Johnson’s question? Is that right?

Mr. Pelley: It is partially an objection, I sup-

pose, to the nature of the question, in asking the

witness, now, to make a judgment between some-

thing that he knows not of and something that

he may know of.

He may know of the inter-area response curve,

but he has indicated that he did not know the

character of the producer supply response, whether

it was elastic, unity, or inelastic, in this range,

and I would not want him to over-burden the

witness now with this kind of a comparison.

Examiner Holstein: I would be extremely puzzled

now to describe exactly what it is the witness said

he did not know and what he said he did know.

But objection on the ground that the witness does

not know the answer to a question is not an ob-

jection.

If Mr. Lee knows the field which is being ex-

plored by Dr. Johnson, he may answer, and if he

does not know, he can say he does not know. And

if you assume a discrepancy between what Mr.

Lee assumes to know now and what he assumed

to know when he was answering your questions,

you can explore that area further when you get

to it.

So the objection is overruled, and he may an-

swer, if (1739) he knows.

The Witness: I would say that the more significant

response is that which comes following the short period

of change in price. I think in the short run, farmers

may even make changes in response to price which don’t

385

| rs

*

386 |

seem to make economic sense. But if the change per.

sists, we see the whole dairy farm picture change,

So that I think the answer to Dr. Johnson’s questig;

is that given more than this short run time for adjus.

ments to take place, there would be significant price

changes.

By Dr. Johnson:

Q. If the market response, the shifting of supplies,

among markets through a price increase, occurred rap

idly, as contrasted to a response of farmers in

ing their milk output, would that not tend to affee

the power position of New England cooperatives relatiy:

to New York adversely more than if the reverse wer

true? A. I believe the answer is “yes.” But I don’

wish to comment on the power position of our cooper.

tives in New England versus our neighbors in Ne

York.

Dr. Johnson: That is all,

Examiner Holstein: Mr. Chernauskas, did yo

have a question?

By Mr. Chernauskas:

Q. In your direct testimony, you mentioned something

to (1740) the effect that if the nearby location differ.

entials were removed, and the price in that area wer

down—I think you mentioned 32 cents as a figure—

producers in that country— A. Up-country?

Q. They would go up 32 cents, up-country? A. Tp

the present Boston producers.

Q. All right. And the producers presently receiving

the nearby differential would have a price reduced by that

amount? A. No. Not that precise amount. No.

Q. Well, it would be reduced? A. It would be reduced

from what they are now in Worcester and Connecticut

and Southeastern New England, yes.

Q. Well, there would be a reduction. And you said

on the basis of that many of these producers mighit

: 387

decide to go into the jug business. Was that your

statement? A. Yes.

Q. And if they went into this jug business, they would

be distributors distributing their own product? A. Yes.

Q. And to that extent they would have to have process-

ing facilities? A. Or they would have to have the milk

processed for them.

Q. Well, they would either become producer-distribu-

tors or producer-handlers? A. Yes.

(1741) We have already seen instances of farmers who

have gone into the jug milk business, selling milk right

from the farm to the neighbors..

Q. Well, would this reverse the trend? The evidence

presently shows the producer-distributors and handlers

declining over the years.

Mr. Hall: Will you speak a little louder so that I

ean hear you?

Examiner Holstein: I will ask Mr. Chernauskas

and Mr. Lee to speak up.

The Witness: Yes, I can visualize many farmers striv-

ing desperately to maintain their incomes by distribut-

ing their own milk. And it seems under present eondi-

tions that the gallon jugging operation is the least

expensive way that they can get into that distribution

business.

By Mr. Chernauskas:

Q. Can you tell us if there is any significant differ-

ence in cost of production—

_ Examiner Holstein: Part of the difficulty here is

because of the murmer of conversation. I do not

like to restrict your conversation, gentlemen, but

it makes it very difficult for those in the back of

the room to hear your questions and the answers.

Will you ask your question over again, Mr.

Chernauskas?

By Mr. Chernauskas:

(1742) Q. Can you tell us whether there is any sig.

nificant difference in the cost of production of a producer

in the socalled nearby area and a producer located in

the up-country area? A. It has been my understanding

down through the years that farm management studies

do show that the costs of production are higher in

southern New England.

Q. Well, do those studies indicate that if there is that

difference in cost, the difference approximates the nearby

differential! A. Mr. Chernauskas, I happen to be one

of the economists who subscribes to the belief that cost

of production on dairy farms is not a suitable basis for

concluding what prices should be to producers.

Q. Well, actually, the intent of my question was to

find out why these nearby producers would go into the

extra curricular business if they received this lower

price. And from what I gather from your testimony,

you are indicating that somehow or other they need

that nearby differential in order to continue to exist.

And I was trying to explore why they needed it, and

why, if they lost it, the results that you say will occur,

will occur. A. We have had testimony from Walter

Lewis. And I will leave it there. I do know that

there is a short-run, anyway, tendency for producers,

whether they be located in southern (1743) New England,

or northern New England, for whatever reason their

blended price is reduced, in view of their fixed com-

mitments for income, who take any and every measure

to try to maintain their income.

That is why I believe that faced with a loss of some:

thing approaching a cent a quart, they would attempt to

realize a higher return by selling their own milk at

resale. And I say that even though resale margins

have been under some pressure,

Q. You also indicated that they would lower their

production or go out of production, as I understand it.

| 389

A. The problem has both a short run and a long run

Eventually, they will probably give up the ghost.

‘We see at the present time, within the past couple of

years, the phenomenon of up-country producers evening

up their production quite sharply in order to increase

their returns.

Only time will tell whether these farmers who have

decided to make less milk on pasture and more in the

f.!l and winter months will increase their income suffici-

ently to stay in business.

In view of rising costs of production factors, it seems

to me that what we have had developing is a situation

in which many producers are going to extreme lengths

to increase their income by shifting in the direction of

more fall and winter milk.

Q. Well, you say that is occurring presently? (1744)

A. It has been for the past two or three years.

Q. Have you any reason to believe that that process

will be discontinued if the nearby differentials are re-

moved? A. I would say that there would be less pres-

sure on farm families in the north country to make what

eventually might turn out to be a bad allocation of their

resources by shifting to more fall and winter milk, simply

because their costs are up and their blended price—

May I have your question read back?

(The pending question was read by the reporter.)

The Witness: I think there would be less pressure on

them to take such extraordinary measures to increase

their income, yes.

By Mr. Chernauskas:

Q. Well, you indicated that your prognosis would be

that there would be a short-run increase in price in

the up-country, and that will result in over-production

and eventually a lowering of the price.

390

Mr. Hall: I do not like to complain, but this j

a private conversation, and if it is on the recor

may we hear it?

Examiner Holstein: Will you read it?

(The question referred to was read by the p.

porter.)

By Mr. Chernauskas:

Q. And if the price lowers, the up-country producen

will again be under the same pressure they are now, |;

that (1745) not true? A. Yes, they would.

Q. And then would they not do the same thing the

‘ are doing now, that you describe, taking these measures:

A. Yes.

Q. In response to a question of Dr. Johinson’s, yo,

indicated that eventually you thought that perhap, th

blended prices of the New England markets would ec uate

or be comparable to the New York prices, and that

would encourage an influx of milk from New York, with

the result that it would encourage producers in Ney

England to go out of business or cut down their pro.

duction. I think that is what you stated. Is that right!

A. Yes, it is.

Q. Now, assume that the prices for the New York

producers and the New England producers are the same

Would: the decisions that would have +. be made by «

New England producer be any different than those which

would have to be made by a New York producer, as to

remaining in production or not? A. No.

Q. Then can you tell us why the New England producer

would go out of business and the New York producer

as to remaining in production or not? A. No.

Q. Then can you tell us why the New England producer

would go out of business and the New York producer

remain in business?

Mr. Hall: I do not like to keep objecting, but

this is getting, from my point of view, pretty far

391

out in the realm of speculation and guessing.

Examiner Holstein: Well, we have had a lot of

guessing (1746) here. Let’s have a little more.

Mr. Hall: I know we have had a lot, but I have

objected to it from time to time as being highly

improper and adding nothing to the record that

would help the Secretary. And while the Adminis-

trative Procedure Act says that any evidence can be

received, whatever it might be, and for whatever

source; nevertheless, in determining the answers

which the fact finding body must make, it must be

based on evidence that is relevant, pertinent, and

material. And I would like to strongly urge the

Hearing Officer that this is neither relevant, perti-

nent, nor material. It is speculative.

Mr. Chernauskas: Mr. Examiner, I am the last

one to try to burden the record with irrelevancies.

I think I have been objecting along that line to

try to keep the record straight. But I think it

is important that this witness did make the state-

ment, and that is his expert opinion as to the re-

sult; and I was endeavoring to find out the basis

of his conclusion in that regard.

Examiner Holstein: Mr. Hall, we are in the area

of economic opinions, than which there is no more

shall I say vague field. I do not know where to

separate fact from estimate, and I am sure you

cannot draw a sharp enough line for me which

would enable me to say yes or no.

I am going to overrule this objection.

Mr. Hall: May I state a further objection on the

‘record?

(1747) Mr. Hall: In response to your ruling.

Examiner Holstein: Mr. Hall, just a moment. I

do not want to restrict anyone, but we need not get

into a debate on every objection. The rules of

practice provide that you should state the grounds

392

for your objections briefly.

Now, you can say that a question is either

irrelevant, immaterial; but state your grounds

briefly. If I want enlargement, I will ask for it.

. Now, what are the grounds?

Mr. Hall: The statement that you have made—

Examiner Holstein: Never mind the statement [

have made.

Mr. Hall: May I preface my statement?

Examiner Holstein: I want to hear your objec.

tion first. I would like to know what you are talk.

ing about before you get into it.

Mr. Hall: I am objecting to this line of inquiry

as being purely estimate, speculation. The ruling

which you have made is that, this being economic

testimony, you cannot distinguish between fact and

estimate and speculation.

When the question is based upon a statement of,

“Do you estimate,” or opinion—that is not fact.

I have stated my objection, and that is it.

Examiner Holstein: The objection is overruled.

The witness may answer the question, if he re-

members it.

(1748) Do you?

(The pending question was read by the reporter.)

The Witness: I didn’t say as a result of a change in

the price structure in New England, New York produc-

ers would go out of business, any more than they are

at the present time going out of business. Producers

in both regions, some producers in both regions, are

going out of business currently all the time.

Examiner Holstein: Maybe I can save some time for

this record.

I did not understand your question to be based on

New York producers going out of business, but upon

New England going out of business and New York

producers staying in business.

———

393

That is the question.

The Witness: Under the present price structure, the

ine of indifference as to which market to ship to on

he part of producers in the country overlapping to the

yest of New England is closer to New England under

he existing price structure, and that that has prevailed

jown the years, than it would have been without the

farm location differentials.

I think I will let it rest there.

Mr. Chernauskas: I have no further question.

Examiner Holstein: Mr. Cobb?

By Mr. Cobb:

Q. Mr. Lee, in your testimony in regard to these

nearby (1749) farm location differentials, do you justify

them essentially on the premise of when they have been

paid historically, and that based on the fact that they

have been paid historically, nearby producers have made

some investments based on the fact that they get these

nearby farm location differentials? Is this basically

what you feel is a justification for these differentials

at the present time? A. Yes, I do. And I would go

further to say that, that being true, it would be logical

even if we could conclude that times have changed

sufficiently, and factors that should be taken into ac-

count in the price structure have changed sufficiently,

that a change should be made, either a sharp reduction

or elimination of the differential, that considerations of

equity would require that a program for the gradual

reduction, maybe over a 10 or 15 or 20 year period,

in that differential, could be and should be made.

Q. I believe maybe you have answered my second ques-

tion, then, but I will ask it anyway.

Then would it be your recommendation that if the

Secretary did decide that nearby farm location differ-

entials perhaps are no longer justified, your recommenda-

tion would be that they not be eliminated abruptly, but

Be... «

oo Ne Tela

, 394 ;

that perhaps a gradual reduction in the nearby farm |;

cation differentials take place, so that nearby produc:

would haves a chance to adjust to the new Condition:

(1750) A. First of all, I want to say that it is py,

coincidence that our statements have been as they »

at this time. Mr. Cobb and I have not discussed th

question at all at any time.

And, yes, I strongly feel that there should be on}!

a gradual adjustment in price, due to a contemplate

eventual elimination, if that should be the concluig,

that should be taken. And that the speed of the redy.

tion could well be one of the topics for extensive resear(

on this whole question.

Examiner Holstein: Is that all, Mr. Cobb?

Mr. Cobb: That is all.

Examiner Holstein: Mr. W. T. Smith.

By Mr. W. T. Smith:

Q. Mr. Lee, just one or two more questions in regari

to this problem of farmers in New England or New Yor

going out of business.

Is it not true, Mr. Lee, that the decision as to. whethe

a farmer were to continue in business or go out of busi.

ness is an individual matter in the individual case? 4

Why, yes. ,

Q. And might that decision not be based very largel;

on the individual set-up of that particular farm? A. I

certainly would.

Q. And is there not a decided difference in the make-y

of the typical New England dairy farm from that 0!

the typical New York dairy farm? (1751) A. I wouldn'

want to answer that. I have driven through all New

England dairy farm country, and I have driven acros

New York State to Buffalo, and I am not sufficiently

acquainted with New York State’s dairy farms, although

as a boy of eight I lived on one, to answer that.

4

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—_—_

395

Q. Weil, would you not agree, Mr. Lee, that many,

many dairy farms in New York are of rather large

size, With a number of enterprises—the selling of hay,

the selling of livestock, the selling of even some grains,

as compared to very little of that type of enterprise in

New England? A. I do know that New England is on the

end of the grain line, the feed line, and has to pay

higher prices for grain. I know that New England dairy

farmers purchase practically all of their dairy feed

for concentrate and in New York State a very sub-

stantial percentage of the grain fed to dairy cattle is

grown on the dairy farms.

Q. In other words, the New England dairy farmer is

a specialist in the production of milk, rather than mak-

ing it a general enterprise, such as is true in many New

York farms? <A. I think it is a question of the propcr-

tion of dairy farms in New England that are highly

specialized, and those in New York. I think, in fact I

knew, the proportion is higher in New England than in

New York, because I have seen evidences of agricultural

enterprises other than dairying on dairy farms in New

York State. But I can’t think of a commercial dairy farm

in (1752) New England that has a beef cattle enter-

prise and possibly some either fruit or some other enter-

prises along with the dairy.

Q. Well, if your total income were being derived from

the dairy enterprise, and there was a sizeable drop in

the prices that you were receiving for your product,

you would be more apt to go out of business than

if you had other sources of income on that same farm,

would you not? A. Alternative sources of income would

be a definite factor in deciding whether you would go

out of the dairy business, yes.

Examiner Holstein: Anyone else?

Mr. Pelley, I believe.

396

By Mr. Pelley:

Q. In regard to that question, do you happen to be

acquainted with the dairy farm of Mr. Stanley James

of Vermont? A. No.

Q. So that I can understand your answer to this last

question better, I will say that Mr. James I think |

is one of the larger apple growers in Vermont, plus

he keeps about 60 head of milking cows. |

Now, would you think that that is the only farm of !

that type in Vermont? A. I know that MacIntosh apples |

are grown in the Connecticut Valley, but I hadn’t ob-

: served that it was in conjunction with dairy farming.

4 I was thinking of Connecticut Valley orchards, (1753) a

“ very extensive MacIntosh apple producer.

; Q. Do you think this is the single exception to your

Z rule? A. I wouldn’t want to say that, because I have not )

a toured in the course of my duties with the Market

% Administrator over the past 21 years over the roads

and by-ways of Vermont to an extensive extent, to a

great extent.

3

3

4

Examiner Holstein: Mr. Garelick.

By Mr. Garelick:

Q. Mr. Lee, you are 21 years in the Market Adminis-

trator’s office. Would you say that the principal reason

for putting in Federal orders in New England has been

_ the competition from unregulated sources of supply? A.

_ Yes, and I have so testified. |

Q. Is it not true that over the years the milk which

has been closer to the markets has been principally sup-

plying the Class I needs? In other words, does not

milk which is closer to market normally go into fluid

consumption, and the milk which is up near the Canadian !

border goes into manufacturing? A. To the extent that

there are departures from that, I would agree that the

conditions should not exist.

Wee pi a theme «

aN at th Se RRL LI na

———

397

Examiner Holstein: That is an honest question. If

you can answer his question, do so.

Do you remember the question, Mr. Lee?

The Witness: The answer is “yes.”

(1754) By Mr. Garelick:

Q. Now, has it not been true, or is it not true, that

when these orders are put into effect, the farmers who

get a chance to vote for or against the order are the

farmers who are currently supplying the market at the

time the promulgation order is under consideration? A.

Yes, and I mentioned that, too.

Q. All right. Now, such being the case, is it not also

true that local producers have voted for these orders,

because they have been willing to sacrifice some of their

Class I sales in return for the protection against un-

regulated supplies? A. Yes.

Q. Now, would you say that the acreage on farms in

Vermont is considerably higher per farm than the acre-

age on farms in Massachusetts? A. Yes. Many farms

in Massachusetts have only exercising lots for the cows.

[1759] MR. PELLEY: It is in relationship to the witness’s

testimony to the effect, in response to different questions,

first of all, that New England dairy farms are more concentrated

single enterprise farms than is true with the New York milk-

shed; that New England farms, as a generality, have fewer alter-

natives. This has been put into the record by the witness. I

want to examine the witness in more detail with respect to

this to find out—

EXAMINER HOLSTEIN: Thank you. You have said

enough to give me an idea of how you connect the two

) things.

[1760] Now, Mr. Hall, do you want to be heard further?

MR. HALL: The only comment I want to make is on the

| basis of Mr. Pelley’s admission that his question had nothing

to do with the issues.

.

RRPAR gr Ae

398 |

EXAMINER HOLSTEIN: No. That is what I thought he

said, but—

MR. HALL: That is the impression I had. And he also was

a little critical, if I may be so bold as to say, that you in your

capacity as the Presiding Officer at this session have let in a lo;

irrelevant testimony, which I did my best to get out.

MR. PELLEY: I object to that characterization and move {

it be stricken from the record. |

EXAMINER HOLSTEIN: Well, we do not generally strike }

things from the record unless it is scurrilous. I do not think

this went that far. ts |

MR. HALL: It was not intended to be that. {

——

EXAMINER HOLSTEIN: This is an example of the amount

of time that can be spent by debating the question rather tha

letting the witness go ahead and answer it.

MR. HALL: Especially when he is going to say, “I dcn’t

know.”

EXAMINER HOLSTEIN: Now for the objection.

I do recall that Mr. Pelley did mention the characteristics

of certain New England farms, of New England farms in [1761]

general, in connection with his discussion of the question of

farm location differential.

On that basis, Mr. Pelley’s question is material, and the ob-

jection is overruled, and Mr. Lee may answer the question if )

he can remember it.

——

THE WITNESS: I remember the question.

EXAMINER HOLSTEIN: Good. |

THE WITNESS: I will answer it this way: that my analy-

ses of dairy farm management records have been limited to

those that I studied at the University of Massachusetts many,

many years ago. And I recall that at that time specialization

in dairying had advanced to a great degree in Massachusetts; a

much greater degree in southern New England than it had in

northern New England.

For two years I did land use planning work for the Exten-

sion Service in Massachusetts, and traveled extensively through-

out the state, and met with groups which included the intelli-

gentsia 2mong the dairy farmers in Massachusetts in many parts

a

399

of the state, and at that time there was great impetus to urge

all dairy farmers in Massachusetts to become highly specializea. *

Now, I would not want to enter into a discussion with you

as to the extent to which the proportions of highly specialized

dairy farms in southern New England versus those in north-

ern New England have changed since that time.

[1762] By Mr. Pelley:

Q. From your study of the agriculture of the area, and the

general organization, my specific question was: Do you find

a dispersion among this totality of areas, where there are,

first of all, other alternative enterprises, and then are there

dispersions of the application of adoption of it?

MR. CHERNAUSKAS: I am going to object to that ques-

tion, because it is based on the primary response of the wit-

ness, and the witness indicated that his study was made years

and years and years ago, and he has not shown any relation to

that in present day conditions.

EXAMINER HOLSTEIN: I think I will sustain that.

I think the witness indicated in short he could not answer

the question. That was the sum and substance of what he

said.

MR. PELLEY: Mr. Hearing Master, how am I going to inter-

pret the prevous answer that he gave to the effect that in gen-

eric generality New England consisted of specialized dairy farm-

ing enterprises? And then if he begs off of interrogation with-

in that realm on the basis of lack of knowledge, where are

we? Am I precluded then from finding out how little he

knows?

| EXAMINER HOLSTEIN: Well, he has told you that he

does not know. So how much further can you go? You

ask me what you can do. You can make the most of it in

your brief.

* * *

rhouae Se ee

Bees seal Sha Was ae ee

a

400

[3392] JAMES D. LEE

was called as a witness, and after having been first duly

sworn by the Hearing Examiner, was examined and testified

as follows:

THE WITNESS: NEMPA is strongly opposed to the elimina-

tion of reduction of farm location differentials suggested in

Proposal 52.

Farm location differentials are deeply imbedded in the New

England orders, and the New York-New Jersey order, and have

been since the inception of the various orders. They have

been in the Boston order since August 1, 1937, a period of

more than 25 years, and in the other New England orders

since their inceptions at the existing rates of 46 cents and

23 cents, depending upon nearness of farm to market. Part

of the testimony on this subject at a public [3393] hearing

held in June-July 1937, given primarily by Mr. Wesley H.

Bronson and by the Late Mr. John L. Carten, Jr., is summar-

ized in the Market Administrator’s Review for August 1962.

(Exhibit 24f¥ Later I shall review the details on farm loca-

tion differentials brought out at this hearing.

Such payments have been justified over the years as a rec-

ognition of the historical pattern of prices which existed prior to

regulation, or as compensating nearby producers for sharing a

part of the fluid milk market which they formerly enjoyed,

with producers more distant from the market. They have the

opportunity to go into direct distribution reducing pool Class

I sales. They do not create, nor are they expected to carry,

the same proportion of surplus as the more uneven, distant

producers. Base ratings might be used to accomplish this same

result, but they have been unacceptable for many years. They

did receive higher prices under the conditions prevailing before

Federal regulation, and the regulation recognized this fact.

The higher prices realized by nearby producers for their milk

have been capitalized into farm values. We believe it is neither

equitable nor necessary to undertake to remake the structure

of milk prices in New England or New York, as between the

nearby and distant producers.

There appears to be a notion that nearby differentials have

a widely different effect as between Boston and [3394] other

—7_7™

401

Federal order markets of New England. Apparently they are

acceptable if they apply to a relatively small proportion of the

milk, but otherwise they constitute an unwarranted “burden”

on the pool. In Boston, nearby differentials apply to about

seven per cent of the milk in the pool. They apply to a much

larger proportion of the milk in other markets of southern

New England for the simple reason that there are relatively

more nearby producers, Yet their effect is the same in each of

the five markets, to establish a particular pattern of relationship

of prices as between nearby and more distant producers, which

is identical for the five markets.

** *

[3397] Farm location values per hundredweight of milk

received from all producers in 1962 amounted to about $.033

in Greater Boston, $.434 in Connecticut, $.272 in Southeast-

ern New England, $.428 in Springfield, and $.341 in Worces-

ter. The total values given in Table 2 show that producers

eligible for location differentials “contributed” to their own

differentials at the rate of seven per cent in Greater Boston,

96 per cent in Connecticut and Springfield, 59 per cent in

Southeastern New England, and 74 per cent in Worcester. The

average for Boston, Springfield and Worcester was 62 per cent

while that for the five markets was 79 per cent. For the three

markets the value from distant producers amounted to $877,-

486 of the $2,325,627 value of location differentials. For the

five markets the “contribution” from distant producers amounted

to $1,797,130 of the $8,670,032 value of location differen-

tials. Expressed as rates per hundredweight on. their own

milk these values from distant producers amounted to about

$.043 a hundredweight for Boston, Springfield and Worcester

producers, on the average, and to about $.077 a hundredweight,

on the average, for the five markets.

If, as NEMPA has proposed, the Greater Boston, [3398]

Springfield, and Worcester markets are consolidated into a

“Massachusetts marketing area,” the value of “Own Contribu-

tion” would drop, using the 1962 data in Table 2 for the sake

of illustration, from $1,448,141, to $474,757, or from rates

of about $.279 to $.091 a hundredweight. On the other hand,

Joe Awe me

—_ as

~

the value from distant producers would rise from $877,486 to,

$1,850,870, or from about $.043 to $.091 a hundred weight.

In a five-market consolidation, the value of own contribution

would drop from $6,872,902 to $3,905,575, or from about

$.358 a hundredweight to $.203 a hundredweight, while the

value from distant producers would rise from $1,797,130 to

$4,764,457, or from about $.077 to $.203 a hundredweight.

* * *

)

[3403] Whether for separate New England markets or

any combination of them, elimination of farm location dif-

ferentials would misalign blended prices.

At this time I should like to call attention to a [3404] |

compilation of the material concerning returns to nearby pro-

ducers which is included in Dr. Gilbert R. Barnhart’s, Doc-

tor’s thesis. Mr. Barnhart, while a graduate student in the

Department of Government, Harvard University, was employed |

by the Market Administrator of Order No. 4 on a part-time

basis because his thesis work was of great historical interest.

Covering the years before USDA issued recommended and

final decisions which describe and explain the milk market-

ing issues and actions concerning them, Dr. Barnhart’s thesis

is entitled “Federal Regulation of Milk Handling in Boston,

1933-46. The Development of the Licenses and Order Regu-

lating the Handling of Milk in the Greater Boston, Massachu- |

setts, Marketing Area, November 3, 1933—June 1, 1946.” The ,

thesis was prepared for—and I might add, with the assistance

of—the Market Administrator. I have excerpted and had

mimeographed all sections pertaining to nearby producers, and

I wish to offer this 9 page compilation of excerpts as an

exhibit.

EXAMINER HOLSTEIN: The document to which Mr. Lee

refers will be marked Exhibit 77A for identification.

(Exhibit No. 77A was marked for identification.)

MR. TIPTON: Mr. Hearing Examiner, I would like to

object to the inclusion of these documents as an Exhibit be-

cause the individual who prepared the statement that is [3405]

included in the exhibit apparently is not available for cross-

examination and I doubt if he can be produced for cross-ex-

amination.

402

—_

403

EXAMINER HOLSTEIN: Mr. Lee, what is your purpose:

in offering Exhibit 77A? Do you intend to make it a part

of your own testimony in connection with your testimony on

Proposal No. 52?

THE WITNESS: Dr. Barnhart’s thesis contained an author-

itatively prepared record of the early history of the Federal

Milk Order Program in the Greater Boston Market.

EXAMINER HOLSTEIN: Does it contain any expressions

of opinion, conclusions?

THE WITNESS: It does not. The material that I have

quoted is descriptive of the terms of the provisions of the

early licenses and insofar as I know does not include any

opinions of Mr. Barnhart. If there are, I would just as soon

that they themselves not be included in the record.

EXAMINER HOLSTEIN: I am not aware that any com-

ments of his could be so classified. I believe Mr. Tipton him-

self has referred to Dr. Barnhart’s thesis in his own testimony

on this subject.

MR. TIPTON: In regard to opinions expressed, I think

there are some interdispersed throughout here. I haven’t had

a chance to review it all, but I find one on one page, the sec-

ond paragraph of the first page, same expression [3406] of

opinion, beginning with the first sentence of that paragraph.

As I say, I haven’t had a chance to—

THE WITNESS: In my statement, I am not quoting all of

Dr. Barnhart’s statements.

EXAMINER HOLSTEIN: In your Exhibit 77, which you

are in the process of reading, I notice that there are various

quotations from statements made by other persons. Do any

of those—are any of those quotations taken from Exhibit 77

Mr. Barnhart’s thesis?

THE WITNESS: Yes, there are some direct quotations

from that material.

EXAMINER HOLSTEIN: Well, with reference to these, the

direct quotations which you have incorporated in Exhibit 77,

do you intend to adopt those as your own viewpoint?

THE WITNESS: Yes.

EXAMINER HOLSTEIN: I will reserve ruling on Mr. Tip-

ton’s objection until we have a chance to examine Exhibit 77-

wit ede

aks

Pract Se

a

A a little more closely. You may proceed with your testi-

mony reading Exhibit 77. In the first place, | overlooked pro |

cedure. Exhibit 77A has not been offered, it has merely been

identified, so your objection was a little bit premature. He

hasn’t offered it yet. The witness hasn’t yet offered it. He

merely asked that it be identified. Go ahead.

THE WITNESS: In the first excerpt in Exhibit 77A, [3407]

it is recorded that under License 15 “. . . producers whose

milk on September 1, 1933, was being trucked directly from

farms to plants located in the marketing area or was being dis-

tributed in the market by the producers who retained their co

Operative association or handler bases, or if no such bases

existed, were allotted bases equal to 90 per cent of their aver-

age daily deliveries of milk during the general base period

(September, October and November, 1932) or any part there-

of, or if no deliveries were made during the general base period,

90 per cent of their average daily deliveries for the first 90

days of deliveries or part thereof elapsed on September 1,

1933;... Producers not covered by an exceptional class and

who delivered milk or cream during the general base period

received bases after the computations were completed, equal

to 64 per cent of their average daily deliveries during the gen-

eral base period.” It is pointed out that under License 38 the

Market Administrator, “acting under his power to revise bases

to maintain equity among producers, allotted preferential bases

to nearby producers to give effect to the historically higher

prices they had received in the market. A study was made of

the eight years 1926 to 1934 to obtain the proper differen-

tial between nearby and distant producers’ returns from the

sale of milk. It was determined that all producers whose milk

was delivered directly to plants located within 35 miles of the

State House in Boston should [3408] have bases equal to 85°

per cent of the higher of their daily average deliveries in the

alternate base periods.”

In the excerpt beginning on page 2 of Exhibit 77A, it is

recorded that NEMPA has introduced a base rating plan in

Boston in 1930. It recalled hearing testimony by Reginald W.

Bird, representing the Massachusetts Producer’s Advisory Com-

404

—

mittee and in general nearby Massachusetts producers, suggest-

ing that nearby producers be those located within a 30 mile

limit from the State House in Boston, and that they bear only

the surplus which they created.

In the excerpt beginning on page 4 of Exhibit 77A, it is

recorded that “Effective March 16, 1935, an administrative

change of considerable significance took place in the percent-

age applied in the establishment of nearby producers’ bases.

Before this date producers whose farms were located within

35 miles of the State House had been assigned bases equal to

85 per cent of their average daily deliveries in September,

October, and November, 1933, or 85 per cent of their aver-

age daily deliveries for the entire calendar year 1933, which-

ever amount was greater.”’ In an effort to gain enforcement

support from the Massachusetts Milk Control Board “‘the co-

operative associations agreed to allow to producers whose farms

were located within 40 miles of the State House bases equal to

100 per cent of the higher figure yielded by the two alterna-

tives mentioned above. These bases became [3409] effective

March 16, 1935.

In the excerpt beginning on page 5 of Exhibit 77A, it is

recorded that Order No. 4 did not provide for preferential

bases to nearby producers and reduced their bases about 25

per cent. “Nearby producer differentials under the order took

the form of a guarantee of payment of the city plant Class I

price of $3.30 per hundredweight for all delivered base milk

testing 3.7 delivered by producers whose farms were located

not more than 40 miles from the Boston State House to han-

dlers’ plants located not more than 40 miles from the State

House.”

In the excerpt beginning on page 6 of Exhibit 77A, it is

pointed out that provision for payment to nearby producers

the Class I price of $3.30 for base milk “had been necessary

under the base rating system as set up after February 9, 1936,

to make a real differential effective to these producers. The

amended order (as of August i, 1937) having omitted base

rating, converted this provision into one providing, in para-

graph 4, section 4, Article VIII, for payment of 46 cents per

—

405

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hundredweight in addition to blended prices to producers whos,

farms were located within the 40 mile zone. Deliveries to

plants located within the zone was omitted as a condition ’

and the differential was thereby converted into one depend.

ing solely on farm location.” Reference is made to testimony

at the hearing preceding the [3410] August 1, 1937 amended

Order No. 4 by Mr. Wesley H. Bronson, then of the NEMPA.

and the late Mr. John L. Carten, representing the Nearby Milk)

Producers Association which led to the establishment of the

farm location differentials. In this excerpt it is recorded that

the Dairy Section had proposed the amendment which recog.

nized the price advantage that intermediate producers had en-

joyed long before the regulation had taken effect in the mar-

ket and which the base rating system had recognized by the

allocation to them of high bases. When base rating disappeared

from the order, some other provision had to be substituted

with respect to intermediate producers, or the order would

operate to their disadvantage.”

The last two excerpts appearing on pages 8 and 9 of Exhibit

77A, record that the nearby differential was, for a time, ex-

tended to producers whose farms were located in Barnstable

and Plymouth Counties, Massachusetts, and “that the total

price payable to both nearby and intermediate producers be

limited to the zone Class I price payable at the plants at

which their milk was received.”

At this time I should like to offer as an Exhibit photocopies

of 26 pages in the record of the hearing which immediately

preceded the issuance of Order No. 4 as amended effective

August 1, 1937. It includes all of this hearing material cited

by Dr. Barnhart in his sources concerning the establishment

of the amounts of the farm location [3411] differentials. Be-

cause of its importance to our present proceedings I feel that

this record should contain this basic information in its orig-

inal form.

MR. CHERNAUSKAS: I am going to object to that, Mr.

Examiner.

EXAMINER HOLSTEIN: I won’t accept the offer of the

exhibit now. I will mark it for identification so we know

a Bist. |

406

—_~"

—

407

what we are talking about when we hear objections and hear

rulings on it. Exhibit 77B for identification.

(Exhibit 77B was marked for identification.)

MR. TIPTON: I would like to also join in that objection

and also point out that—

EXAMINER HOLSTEIN: Objection at the moment is out

of order because I am not considering an offer.

MR. TIPTON: I would like to make one other comment

then, if I may.

EXAMINER HOLSTEIN: Is it in the nature of an objec-

tion?

MR. TIPTON: It is in the nature of support of this, but

not directly.

EXAMINER HOLSTEIN: All Mr. Lee has asked for at the

moment and all I will consider at the moment is a request to

identify a document. You can’t object to that.

MR. TIPTON: My statement then relates to orderly (3412.

procedure, a clarifying question.

EXAMINER HOLSTEIN: All right.

MR. TIPTON: That is that he has quoted from excerpts

from what has been marked for identification as 77A and also

I know that there are quotations throughout the presentation

from what is marked as 77B. Therefore, 1 would think that

it would be appropriate to make a determination as to whether

the items are offerable as Exhibits at this time, whether to let

the quotations go in and then have to make a motion to strike

or something along this line.

EXAMINER HOLSTEIN: Well, I can’t do that until I ex-

amine the material closely. I think that the best procedure

here will be to let it go in. I agree with you that there are so

many references and cross references back and forth that it

would be difficult to make that kind of determination at the

present time. It is marked for identification. Mr. Lee has al-

ready quoted at length from what has been marked for iden-

tification as 77A and I know that in the event that 77A is

ruled not admissible, that those quotations will have to be ig-

nored, but I don’t know how else to handle this since it is

quite complicated because of the cross references back and

Bc

forth. Mr. Lee, perhaps you can tell me at this point, in the

balance of the testimony which you are reading from Exhibit

77, will you quote excerpts from the Hearing record?

3 [3413] THE WITNESS: Yes.

MR. CHERNAUSKAS: Mr. Examiner, I am going to object

to this line of testimony from here on in. He is going into

the—

EXAMINER HOLSTEIN: Excuse me.

MR. CHERNAUSKAS: The witness is going into a prior

record and taking excerpts of testimony frim that record of

witnesses and drawing conclusions from them. I notice that

the great bulk of his testimony are quotations of the testi- |

mony of those witnesses. Now, actually, that record was |

composed of the testimony of a considerable number of wit-

nesses and I imagine, I don’t know what the actual record

contained, but I imagine that it contained conflicting testi- |

: mony and opinions on the topic, and I would say that the best

4 evidence of why location differentials, nearby location differ-

408

= Pt. Khe

entials are in the order would be the decision of the Secretary

in explaining why he put them in there.

THE WITNESS: I have not excerpted from the record only

certain parts of the testimony on nearby farm location differ-

: entials, but went through the record and took all of the in-

Z formation on nearby farm location differentials that appeared

i in the record. I didn’t excerpt it.

‘| EXAMINER HOLSTEIN: What you are saying now is that

what has been Marked Exhibit 77B consists of all testimony

in that hearing record with reference to farm [3414] loca-

tion differentials?

THE WITNESS: That’s right.

MR. CARROLL: Has the witnesses’ statement been given

a number? 5

EXAMINER HOLSTEIN: Yes, it is 77. In reading that

statement, the witness has made reference to various excerpts

from a document which has been identified as Exhibit 77A

consisting of a thesis by Dr. Gilbert R. Barnhart. The witness

now has asked that this be identified as 26 pages of testimony

on the hearing record of the hearing which preceded the issu-

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i

al

ance of Order No. 4 and the testimony that he is reading from

Exhibit 77 will likewise quote excerpts from what has been

identified as Exhibit 77B.

It is getting quite complicated. I think we will have a recess

for 10 minutes.

(Brief recess.)

EXAMINER HOLSTEIN: The hearing will please be in

order. Due to numerous references in Mr. Lee’s testimony,

not only that part which he has already given, but in the

remainder of the material appearing in Exhibit 77, due to the

numerous references in that testimony, and excerpts from

what have been identified here as Exhibits 77A and 77B, I will

reconsider what I said previously about procedure and con-

clude that it is best to determine whether or not Exhibits 77A

and 77B are admissible at this time before Mr. Lee continues

(3415] with the balance of his testimony since he will refer

in the balance of his testimony to these excerpts which are in

these two documents which are under question at the moment.

I might ask Mr. Lee if there are any additional documents

from which you will take excerpts or make reference in the

balance of your testimony?

THE WITNESS: No, there are not.

EXAMINER HOLSTEIN: At this point, I might indicate

to anyone else who has prepared statements of this type that

they request that any such documents be identified at the be-

ginning of their testimony so we know what will be offered

in the course of that testimony as exhibits.

| Mr. Tipton, you entered an objection to 77° ‘s that cor-

rect?

MR. TIPTON: Yes, sir.

EXAMINER HOLSTEIN: And Mr. Chernauskas entered an

ob

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Appendix — Zuber v. Allen · 396 U.S. 168 | Frix