Appendix — Zuber v. Allen
Supreme Court brief1970
Ask Donna
What actually matters in this document.
Text
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?
Boe fen a eee ee —
Le POE PENI IELAEC A AONE a SL NEO AEE SIE OLE ASE CINE LEESON tag Neg Pe a ta
i WASURIGE SRO ia ta Ma GP i dec ce a A ae an a Ce a Tet OTT NA ee CRN Ca
—
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.
ae ARE CRAP OR GI OPTRA PLL OE RL ie Sin OL HE Cte ID papaseismeeaeoamenees 7 _
RS Mt LIE top RI ORE ERAGE EE ELLE AMET SOE A
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
1S, Pa BEIGE 3.
eae a Ta em aa SAS EO Pe Gt A og ae ae ee Bae isnt
_—
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
,
4
Pa
©
7 . . a
- . —_ " y ’ i _
—_—_
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
a ARPES Rt HN .
Fae teie PS IAG SS
Rese RELA ET A PRPS OLB ES
Probie
:
:
j
4
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-
Sais
5
4
mi
Q
ee |
5
¥
4
%
4
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
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.