# Appendix — Zuber v. Allen

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386413_0133%3A02

## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1970
- **Citation:** 396 U.S. 168

## 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 . * ... WTI

OV 2 SNL NILES IIOP ES LS BY CLOT APE yt

458 |

The percentage figures were then multiplied by the
21st Zone uniform price for each respective Order. The
sum of these products represents the figure shown. Table |
III of Exhibit 55 shows the total value of all money }
deducted to pay farm location differentials and the rate
per hundredweight. By adding the rate per hundred.
weight, as determined by combining the total amount de-
-ducted under each of the five Orders and dividing that
sum by the total amount of producer milk pooled under ,
each of the five Orders, to the figures shown under the
(2149) column entitled “Blend Price of One Order with
Farm Location Differential”, I have arrived at the fig-
ures shown under the column entitled “Blend Price of
One Order without Farm Location Differentials”.

This latter column is representative of the effect of
our proposal to put the entire marketing area under
one Order and to delete the farm location differentials
from the merged Order. I recognize that this price is
not an actual price that would have existed under our
entire proposal, as we are also supporting other changes
that will also have some effect on the blend price, but
it was impossible for me to measure the effect of these
changes. The change of the basing point for deterinining
the zone location of country plants in itself will have
an impact on the blend price, but I do not have all the
information necessary to calculate this effect. In any
event, it will be very minor.

With only two exceptions the proposal will provide a
higher 21st Zone blend price than is now provided by
each of the Orders. The two exceptions are for Oc-
tober and November, 1962, for producers under the
Southeastern New England Order.

Table VII of Exhibit No. 55 will better assist in analyz-
ing the changes in prices payable to producers in differ-
ent areas. I have computed the price changes that would
have occurred to producers had our proposal been in
effect for selected months.

. Derg iV EGE “it ‘ee
UE ES Fel ee ENA LOE IIE IE ESLER IL EOE EL A EILEEN, GIVEN BEETLES TOTES

459
i (2150) In all the months shown, producers now receiv-
‘ing nearby farm location differentials would have ex-

' perienced lower prices, ranging from about only 15 cents

" for producers so located under the Boston Order during

October, 1962 to 53 cents for producers similarly located

‘under the Southeastern New England Order. The South-

east New England price was the highest price of all the
blend prices during October. Producers whose farms

were located in the 46-cent farm location differential
received, during October 1962, about $1.36 per hundred-
weight more than Boston producers delivering to plants
in the 21st Zone. When this difference is adjusted by
the transportation differential, the difference is still 82
cents per hundredweight. We maintain that there can
he no justification for any of this difference as illustrated
by our entire testimony.

+
z

[2335] MR. LENT: May I ask a clarifying question?
EXAMINER HOLSTEIN: Yes, Mr. Lent.
i By Mr. Lent:
Q. Just so I can get it straight in my mind what you are
talking about, what do you mean by “make sure’’?

_ As to the dealer changing from nearby to up-state milk.
~ (2336) A» You know, to try to explain that, Mr. Lent,

: if you are buying a load of milk up-country, and you are

going to drop that load, you have got to have another load
| somewhere as soon as you can get it. And I meant by mak-
ing sure that he wanted to get established with the nearby
_ supply as promptly as he could.

Q. May I suggest the words--the context in which you use
the words “‘make sure,” I thought you used them in the context
that the nearby supply was surer than the up-country supply.
A. No.

** *

“Se Cl SLE OI, LEE LEE NOND LS LOPE! TOOLS EEL DATA eee

ta OS FE Ee

460 | ,

[2155] KEN GEYER

was called as a witness and, having been previously duly sworn,
testified further as follows:

DIRECT TESTIMONY

THE WITNESS: In view of the fact, Mr. Examiner, that
Mr. Tipton read into the record excerpts from the Nourse
Committee report, I would like to read into the record part
of a footnote by the late Dr. C. W. Swonger, who was a men: ,
ber of the committee, and the only member, I guess, from New
England, commenting on this particular portion of Mr. Lent’s
and Dr. Spencer’s effort that was quoted by Mr. Tipton.

MR. TIPTON: Excuse me. Is that not included in One of
the exhibits that are already in? Or are there parts of that-

EXAMINER HOLSTEIN: What is the status of the Nourse |
Committee report?

MR. CHERNAUSKAS: It is not in evidence.

EXAMINER HOLSTEIN: No. | didn’t think that was an
exhibit.

THE WITNESS: I don’t desire to clutter up the record
with it, if it is not already in there. }
MR. TIPTON: The report is not, but I thought the en-
tire dissent of Dr. Swonger was in—I am looking for it

[2156] now—Exhibit 24.

EXAMINER HOLSTEIN: Off the record.

(Discussion off the record.) :

THE WITNESS: No, there isn’t enough in that exhibit, Mr.
Tipton.

This is the footnote of dissent by Dr. Swonger, which
appears at II, Sec. 4 in the so-called Nourse Committee report:

“There is so much that I find objectionable in Part II, Sec-
tion 4 of the committee’s report, that I am forced to submit '
extensive dissent. It is impossible effectively to present my
objections to this section of the report without going into
some detail of facts and figures. Besides the narrow regional
context in which much of the section is couched, I object to
a number of unwarranted assumptions, inferences and conclu- '
sions, particularly with respect to the effect of nearby loca-

woes
. — . — - — zachieseentcrnenes auig ye Se
PERSE Pe ONE ERRE RR IE ON ae BRATS at il ohn os Ay EU Ln hae eal teh LAS)

— te

tion differentials, health regulations, and to some extent the
application and effect of compensatory payments or assign-
ment provisions to milk moving in either direction between
federal order pools.

“At numerous points and with minor variations in wording,
this section refers to the desirability of achieving similar pat-
terns of utilization and of uniform prices, as though they were
the same thing, when in fact they are not.

“The reason they are not the same is due to the effect of
nearby location differentials of the distribution of the [2157]
proceeds of the pools and the widely different variations of
the relative proportions of nearby and distant producers.

‘Nearby location differentials’ are deeply imbedded in the
New England order and in the New York-New Jersey order
and have been justified as a recognition of the historical pat-
tern of prices which existed prior to regulation or as compen-
sating nearby producers for sharing a part of the fluid market
which they formerly enjoyed with producers more distant
from the market. The federal orders did not create such dif-
ferences in prices, but merely recognized their existence. They
have been capitalized into land values, or were in the years
prior to regulation.

“It is easy to point out that utilization percentages under
the Connecticut order average higher than for New York—New
Jersey. The same is also true as between Connecticut and
Boston, and by about the same margin. Yet for the year
1961, the simple average of blended price at the Boston 21st
zone was $4.52, and at the same zone for Connecticut was
$4.56. The same relationship applied as between nearby pro-
ducers in the two markets. For December 1961, the blended
prices to producers in the Connecticut market was 7 cents be-
low Boston at all zones.

“It is true, of course, that there are relatively more nearby
producers in Connecticut or southeastern New England, Spring-
field, or Worcester, than in Boston or New York. The Spring-
field market has a higher utilization pattern than [2158] Bos-
ton but blended prices for 1961 averaged 18 cents below Bos-
ton. For the same period blended prices in the New York—

461

— PEERED EI PME EISEN NSS HUE SLND RAE SHS ROY PRS ER ELI SERRA LRG

a

462

New Jersey market for 3.7 percent milk averaged 20 cents be.
low Boston. But this was a period when the New York-New
Jersey Class 3 price was running well below Class II prices in
New England and below the level of competitive prices paid
for manufacturing milk.

‘Apparently nearby differentials are acceptable if they apply
to a relatively small proportion of the milk, but otherwise
they constitute an unwarranted ‘burden’ on the pool. In Bos-
ton, nearby differentials apply to about 6 percent of the milk
in the pool, or considerably less than New York. They apply to
a much larger proportion of the milk in other markets of south-
ern New England where the same reason is stated that there are
relatively more nearby producers. Yet their effect is the same
in Boston or Connecticut—to establish a particular pattern or
relationship of prices as between nearby and more distant pro-
ducers, which is identical in both markets. Elimination of the
nearby differentials contained in the Connecticut order would
aggravate the price disparities in relation to other surrounding
markets. In this connection the report suggests that ‘nearby
differentials could be maintained, but vary inversely with the
percentage of pooled milk used in Class I.’ Such a system as
Suggested would result in serious disproportion of blended
price relationships between markets [2159] in New England
and New York, both to nearby producers and those located
more distant from the market. Reference is made to uniform
pattern of nearby differentials used in New England markets.
Any deviation of the type proposed would, for instance, de-
press blended prices to nearby producers in Connecticut rela-
tive to Boston or New York and raise blended. prices to Con-
necticut producers in more distant zones substantially above
Boston or New York. To create price disparities rather than
remove them as between producers similarly located with re-
spect to the market. If we accept nearby location differen-
tials as a fact of life in New England and New York, it fol-
lows that ‘similar patterns of utilization’ would result in wide
disparities in ‘uniform prices’ as between producers similarly
located with respect to market and vice versa. We cannot
have it both ways. Of the two, it seems to me that approxi-

_ PAgexpresesnoem eee SNe Ts SG
PEL OLE EBS OEE EIDE DOG EEN NREL ELLE ETT LEE AEBS SRY BAER PIES PE Tae SES RR
7 TANS ei Soe bi ainaste ik ee ~ oe

; 463

mate uniformity of blended prices is far more important, and
competition tends to achieve this result.”
That is the end of the quotation I wish to have in the rec-

‘ord from the Nourse Committee report.
* * *

- (2162)
For 1938, the blend price for 3.7 percent milk at

the 201-210 mile zone for Boston averaged $1.09.
For 1930 it was $1.90. For 1940 it was $1.95.
For 1959 the figure was $4.61. For 1960 $4.72 and for
1961 it was $4.52.

The point I am trying to make is that back in those
earlier years when the 48 cent and 23 cent rates were
established, the 48 cent rate was 23 percent of the blend in
1938, 24 percent in 1939 and 24 percent in 1940. For the
past three years, however, the 46 cent rate has been only
10 percent of the 200 mile zone average blend price.

With no change in the rate of the nearby farm loca-
tion differential, therefore, it is obvious the percentage
reward to the nearby producers is much less than half
what it was when the rate was originally established.

Nearby farm location differentials are certainly vital,
also, to enable the Connecticut handlers to compete with
New York handlers in the importent supply area of
Dutchess and Columbia Counties in New York, where there
is competition between New York City and Connecticut
handlers for milk s"pply.

It is certainly our hope that nearby location (2163)
differentials will not be discontinued as a result of this
hearing and that no change will be made in the present
rate.

Cross Examination by Mr. Tipton:

Q. Is it true that the utilization in the Connecticut mar-
_ ket of Class I milk has been much higher percentage-wise

ERS ERS TN AGO EN iW Sr Ta hs ama

464 !
to the total supplies than in the Boston market ; js th;
right? A. For over 50 years, I guess.

Q. And do you attribute any part of that higher utili,
tion to the fact that you have had nearby farm locatiy
differentials? I am talking now about after the feder,
order went into effect in Connecticut. A. Well, obvious:
without nearby farm location differentials, the Conneg
icut price at the 200-mile zone, the month that the orde
went into effect, would have been way higher than th
price at any other New England order in that same are
and I suspect that the utilization would have gone dow
but obviously every country plant in Vermor
would have been anxious to get qualified for the Co.
necticut order to secure the higher blend price.

Q. So the nearby differentials have reduced some of thi
(2164) incentive for plants to enter the market, or fy
milk to enter the market. A. Have reduced some of th
incentive? a:

Q. Yes, sir. A. Well, the incentive has never bee
there; so I guess you couldn’t reduce it; because tl
incentive wasn’t there to any great degree apparently #
the time that the order went into effect. But certain:
they have had an effect. Or to put it the other way, «
I have already stated, the incentive to get into the Cor

necticut market would have been very much higher i
the order had been written without nearby differential

Q. Do you know of any handlers that are buying nearh:
milk that are applying a premium over the order pric
or over the blend price paid their producers for such

milk? A. You are speaking about in the Connecticut:
order?

Q. Yes.
a
7
3

CAENG

BERRA AR

iS Rat hel SS GN See RS ee SO Lk ar age

By Mr. Adams:

Q. Mr. Smith, you stated the 54 cent differential had
given you some trouble, as I understand it, in following the
order, at Fall River. A. I didn’t state that, Mr. Adams; but | |
think the marketing picture in Worcester and Springfield illus.
trates that there [2283] is a lack of balance in the present 54
cent differential that needs adjustment.

Q. Have you had any local producers out of the market’
A. We have had local producers out of the market, and I have
submitted some evidence to that effect. But to say they were
out of a market because of the 54 cents is carrying it beyond
any point that I would be willing to make. A good part of
our producersare out because of handlers going out of busi-
ness.

EXAMINER HOLSTEIN: Mr. Garelick.

By Mr. Garelick:

Q. In answer to a question from Mr. Lent, you mentioned
there was some unregulated milk coming into the market? A.
At the time of the inception of the Southeast Order; not now.

Q. I thought Mr. Lent was asking about current supplies.
A. Well, I misunderstood him, then.

Q. If your answer was in regard to the supplies at the
time of the promulgation hearing, then I withdraw my ques
tion.

EXAMINER HOLSTEIN: Any further questions?

Mr. Carroll.

By Mr. Carroll:

Q. Your organization do I understand to be a coopera-
tive association of farmers producing milk? A. That is cor-
rect.

[2284] Q. And in addition to the production of milk,
what activities does your Organization engage in? A. Well, we
maintain a small balancing plant and provide a home for home-
less producers. We have had, as I mentioned, sizeable quanti-
ties of milk, up to a thousand jugs of milk a day, this past year.

Our biggest problem came when Devine’s Milk Labora-
tory was sold out to the Deary Brothers, and we had without

very much notice as much as 350 jugs of milk from that one
source alone per day.

Bad ba. 5 2
RIDIICE PED ORK SLIM GE ILI TE VES LI EIT MM QATY PPE SLES OLED O EE Pot - we =

506

’

)

hk

507

Q. I take it, then, that aside from the small plant that
you testified to, in the main you are engaged in selling raw
) ‘milk in bulk to handlers in the Southeastern Order area? A.
| The great bulk of our milk, of the milk of our producers,
| moves directly from their farms to the farms of handlers regu-

lated under the Southeastern Order.

Q. You mean plants, do you not? A. I am sorry. If

| didn’t say plants, that is what I meant.

Q. Now, what territory do your members in the main
reside in? Are they in the immediate vicinity, or in the con-
fines of this order, or do they serve in other markets as well?
A. On occasion some of our members have sold their milk in

Boston and in Worcester, but by and large, the membership

delivers milk to handlers regulated under the Southeast Order.

[2285] Q. Now, I take it from your testimony that the
majority of, those handlers are either medium sized or small,
according to your definition. A. Well, not only my definition,
but I think that there are enough statistics in the hearing
record already to indicate the truth of that statement, that
they are relatively small, in terms of the giants that we know
of in Boston and New York and Chicago and other markets.

Q. Are there any of those so-called giants in this market?
A. I don’t know as I should call them giants. There are some
here, yes.

) Q. And who are they? A. Well, of course, the giant of
them all is the H. P. Hood Company. They are pretty much
spread over New England.

Q. Now, I direct your attention to Exhibit No. 7, page
58. A. O.K.

Q. And I direct your attention to that part of the table

which is captioned “Southeastern New England, Class I Sales

on Routes in the Marketing Area, Per Cent of Total,” and |
direct your attention to that line in its entirety, whether it is
for the three or the five largest handlers.

Now, for example, the City of Providence, Rhode Island:
Would the concentration of the three largest handlers have a
tendency to be greater than this, average, in the City of Provi-
dence, in your opinion? [2286] A. Well, let me ask you for
clarification: You are referring now to page 58 of Exhibit No.

mbes i Sec Ra aR

Soros

ee RE SIAR tet ae katie SE oy

ARAM eae

res vere MN TOs

EEE REPORT RRA A ES

7, and in that column which says, “‘Class I Sales on Routes ;-,
the Marketing Area by the Three Largest Handlers,” and the
going down to Southeastern New England we find a figure oi!
33.5 per cent as being the figure referred to—is that the fig
ure you are talking about? |
Q. Yes. A. And your question is: Do I think the thre
largest handlers in Providence, Rhode Island, would have mor
sales than 33 per cent?

Q. Of that market. A. You are talking now about strict
the City of Providence?

Q. Yes. A. Yes, I would say that the three largest hand.
lers in Providence would have considerably more than 33 per
cent of the sales in the City of Providence. ’
Q. Would you say it would be more than 50 per cent?
A. It would have to be purely a guess. My guess is that it

would be in excess of 50 per cent.

Q. Now, did I understand from your testimony that yc
felt that the proposals would foster or tend to foster a mone
poly? A. There isn’t any question in my mind that if these
Proposals were adopted, it would have a very adverse effect
upon [2287] local producers, and the first people who would
feel the effect would be the handlers that received their milk
from local producers, They would be forced to pay either
more for their milk or go out of business.

Q. Now, it is a fact, is it not, that so-called “up-country” '
there is a tendency to shift the bulk tank deliveries of milk?
A. The tendency to shift the bulk tank delivery is pretty uni-
versal throughout New England. It reached its peak in the
State of Connecticut, and I think it can be said that Rhode
Island was perhaps second, and Massachusetts third.

It is beginning to really speed up in the up-country area,
yes.

Q. And does that trend have a tendency to centralize
the control over supply in those areas, on the part of the hand-
lers who are purchasing their milk in the up-country areas? A
Yes, I would say so.

Q. I direct your attention to Exhibit 7, page 50. You
will note at the base of the exhibit, for size group No. 8, be

; | 509

tween 1960 and 1961 there was a decline in the size of plants
in that category; and in the size grouping No. 1, there was a
substantial increase. A. Yes.

Q. Now, is that in part due, in your opinion, to bulk
tank operations? [2288] A. It could be.

Q. So that the plants themselves are tending to become
larger? A. Yes.

Q. And more centralized? A. Yes.

Q. Now, then, directly or indirectly, the handlers who
were presently servicing the Southeastern Order area, who are
medium or small size—will they be required to purchase sup-
plemental supplies from the handlers who are the primary
sources of up-country milk? A. As the supply of milk locally
produced goes down, and the information which has been intro-
duced into this hearing record indicates that that has taken
place, the handlers who are operating in the Southeast New
England area will become more and more dependent upon out-
side supplies of milk; and if those outside supplies of milk are
controlled by a relatively few handlers, which has been indi-
cated by the record, then the answer is “Yes.”

Q. And is it a fair conclusion from your testimony that
you believe that it is possible to alter the Federal order mar-
keting scheme so as to have a tendency to increase monopo-
listic tendencies within a market? A. I made the statement
categorically that if the proposals which have been submitted,
these various merger proposals, [2289] are adopted, there isn’t
any question but what it will tend to increase the trend to-
ward monopoly.

Q. And I direct your attention to Title VII, Section 608C,
subparagraph 18, of the Act, which authorizes the promulga-
tion of these orders, and direct your attention to that part of
the subsection which requires that orders be made in the “‘pub-
lic interest.”

And I ask you whether or not it is in the public interest,

in your opinion, to foster such a trend. A. No.
EXAMINER HOLSTEIN: Is that all?
MR. CARROLL: That is all.

e
ite... re

“’

EXAMINER HOLSTEIN: Did you have something, Mr.
Chernauskas? |

MR. CHERNAUSKAS: Yes.

By Mr. Chernauskas: |

Q. Relating to this concentration of supply in the up-
country area, is it not true that the various cooperatives are
amongst the largest handlers handling the up-country supply?
A. I wish you would spell out what you mean by the various
cooperatives. There are very, very many different types of
cooperatives in the up-country.

Q. With regard to the source of supply in the up-coun-
try area, who handles the greatest quantity of milk, or who
controls the greatest quantity of milk? The cooperatives, as a
group, [2290] individually and as a group, or proprietary hand-
lers? A. Well, if you are asking me the question individually,
it is proprietary handlers. If you are asking me the question
in combination, it would be the cooperatives.

EXAMINER HOLSTEIN: Does anyone else have any
further questions?

If not, that is all

Thank you, Mr. Smith.

Mr. Chernauskas, did you have another one?

MR. CHERNAUSKAS: Yes.

By Mr. Chernauskas:

Q. You made reference to certain premiums which are
being paid to nearby producers. Can you give us a little more
detail on the types of premiums being paid? A. Yes. | will
be glad to. I was perhaps a little vague in my presentation.

We call a premium anything which results in the handler
paying more money than would be required under the pro-
4 visions of the order, or in a producer receiving more than he
; had customarily received prior to a certain period of time.

And I group those premiums under three general headings.
The No. | premium has been the great reduction in trucking

rates, which has resulted in considerable increases in return to
nearby producers.

510

4
A
:
;
4
4
4
Dee. 90:1 6.55 6.13 42 14.4 3.77 5.13 1.36
Average 93.7 $6.26 $5.95 $.31 * 26.4 $3.88 $4.95 $1.07

TABLE 12(b)

1960
Jan. 87.1 $6.25 $5.93 $.32 11.6 $3.59 $4.93 $1.34
Feb. 83.8 6.31 5.96 35 4.1 3.42 4.96 1.54
Mar. 89.9 6.13 5.90 23 5.3 3.27 4.90 1.63
3 87.5 5.47 5.21 26 2.0 3.10 4.21 1.11
iby 79.7 5.24 4.99 25 0.4 2.97 3.99 1.02
June 85.2 5.29 5.16 23 2.8 3.02 4.16 1.14
Jaly 89.3 5.92 5.83 08 38.5 4.13 4.83 70
August 90.6 6.17 6.11 06 44.1 4.46 5.11 65
Bept. 96.9 6.51 6.27 24 43.0 4.53 27 74
Oct. 93.1 6.39 6.20 19 43.9 4.59 5.20 61
Nov, 93.5 6.41 6.21 20 43.32 4.61 §.21 60
Dee. 92.1 6.37 6.01 36 25.1 4.13 5.01 88
Average 89.5 $6.05 $5.82 $.23 22.0 $3.82 $4.82 $1.00

624

TABLE 12(c)

SOUTHEAST ORDER USE VALUE AND PRICES PAID AT CITY PLANTS AND ar
COUNTRY PLANTS PRICE REDUCTION FROM USE VALUE IN FARM
LOCATION DIFFERENTIAL AREA AND PRICE ADDITIONS TO
USE VALUE AT COUNTRY PLANTS

Farm Differential Country Plant Deliveries
Price
Percent Use Blend Reduce- Percent Use Blend Price
ClassI Value Price tion Class I Value Price Additior

1961
Jan. 90.0 $6.10 $5.78 $.32 22.0 $3.98 $4.78 $.80
Feb. 90.0 6.09 5.84 25 33.4 4.19 4.84 65
Mar 90.7 5.90 5.63 27 32.4 3.98 4.63 65
Apr. 86.3 5.39 5.25 14 34.0 3.86 4.25 39
ay 85.6 5.17 5.04 14 28.3 3.64 4.04 AO
June 88.1 5.23 5.07 16 24.8 3.58 4.07 49
July 91.3 5.93 5.93 .00 54.0 4.58 4.93 35
Aug 91.1 5.93 5.88 .05 50.8 4.56 4.88 32
Sep 95.1 6.04 6.02 .02 59.0 4.73 5.02 29
93.2 5.99 5.84 15 38.1 4.28 4.84 56
Nov 94.8 6.24 6.12 12 47.0 4.60 5.12 52
Dec. 90.3 6.11 5.83 ; Vee 4.17 4.83 64
Ave. 90.5 $5.84 $5.69 $.15 37.8 $4.18 $4.69 $51

TABLE 12(d)

1962
Jan. 91.2 $5.94 $5.65 $.29 24.6 $3.95 $4.65 $.70
Feb. 91.8 5.95 5.64 31 23.8 3.93 4.64 wi
Mar. 92.4 5.95 5.58 37 25.2 3.82 4.58 16
Apr 87.1 5.38 5.14 24 25.6 3.54 4.14 60
ay 86.8 5.18 4.95 23 21.6 3.38 3.95 57
June 89.4 5.25 5.02 23 24.2 3.46 4.02 56
July 90.8 5.90 5.77 13 48.0 4.34 4.77 4B
Aug. 89.8 6.08 5.98 13 54.1 4.65 4.98 33
89.2 6.05 5.89 16 46.5 4.43 4.89 M6

_—

625
TABLE I(a) ;
NUMBERS OF PRODUCERS BY STATES
1959 - 1961
Change Change
from August from
1959 1960 1961 1959 1962 1959

Connecticut 411 392 357 -54
Massachusetts 625 $82 535 - 90
Rhode Island 411 376 337 -74

Total Nearby 1447 1350 1229 -218 1148 - 299
NH. & N.Y. 137 133 149 +12

Vermont 566 610 772 +206

Total Distant 703 743 921 +218 1074 +371
Grand Total 2150 2093 2150 2222 + 72
Notes:

(a) Source: Market Administrator’s Southeastern New England Milk
Market Statistics for the years - 1959, 1960 and 1961, and Monthly
Statistical Reports for months of 1962.

(b) Source: Farm location differential receipts were from producers
living in Connecticut, Massachusetts and Rhode Island except that
in 1959, 223 thousand pounds were received from New Hampshire
upon which a differential of 23 cents was paid.

626

TABLE 10
CITY PLANT BLEND PRICES AND CLASS I PERCENTAGES
OF PRODUCER MILK
1961
Blend Prices Class I Percentages
City Plants of Producer Milk
Southeast Springfield Southeast Springfield
January $5.78 $5.72 68.1 72.9
February 5.84 5.72 71.8 75.8
March 5.63 5.41 71.1 73.1
April 5.25 4.98 67.8 68.8
May 5.04 4.77 66.0 66.2
June 5.07 4.71 “65.6 63.4
July 5.93 5.32 82.2 67.7
August 5.88 5.45 79.1 71.7
September 6.02 5.58 86.4 76.7
October 5.84 5.54 78.8 74.6
November 6.12 5.90 81.3 80.9
December 5.83 5.63 70.0 72.5
Average $5.67 $5.37 73.4 71.8
1962
Southern

New England Connecticut Worcester Springfield
April $5.14 67.1 $5.06 73.2 $5.05 68.8 $4.91 684

May 495 65.3 487 72.7 487 68.3 4.83 71.
June 5.02 676 499 76.1 494 69.2 481 72.1
July 3.77 M2 $43 79.1 5.44 68.5 5.32 71.1
August 5.98 778 582 81.1 5.86 77.9 5.58 743
Sept. 5.89 748 582 81.2 5.88 79.4 5.77 793

Average $5.46 71.4 $5.36 77.2 $5.34 72.0 $5.20 728

) 627

ibit 77A
— Excerpts From

FEDERAL REGULATION OF MILK HANDLING IN BOSTON
1933-46

The Development of the Licenses and Order Regula-
ting the Handling of Milk in the Greater Boston,
Massachusetts, Marketing Area, November 3, 1933 -
June 1, 1946
Prepared for the Market Adminstrator under
Federal Milk Order No. 4

Gilbert R. Barnhart
April 1947

(Presented as a Thesis in Partial Fulfillment of the
Requirements for the Degree of Doctor of Philosophy,
Department of Government, Harvard University)

pp. 95 - 97
Title VII

Allocation of Producers’ Shares in the Class I Market

The general base period under License 15 was September,
October, and November, 1932, which applied to all produc-
ers not excepted by special provisions. Of these latter, there
were three types, constituting three special classes of produc-
ers: (1) producers whose milk on September 1, 1933, was
being trucked directly from farms to plants located in the
marketing area or was being distributed in the market by the
producers, who retained their cooperative association or han-
dler bases, or if no such bases existed, were allotted bases
equal to 90 percent of their average daily deliveries of milk
during the general base period or any part thereof, 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; (2)
country producers delivering milk on September 1, 1933,
under base rating plans in effect prior to that date, who
retained their bases under such plans; and (3) Golden Guern-
sey producers, who received a group base equal to the aver-

628

age daily sales of Golden Guernsey milk in the market as
Grade A or under a Golden Guernsey trade name during the
general base period, such total base to be distributed among
individual producers by the American Guernsey Cattle Club,
subject to the market administrator’s approval. Producers
not covered by an exception class and who delivered milk
or cream during the general base period received bases, after
the computations were completed, equal to 64 percent of
their average daily deliveries during the general base period

Those groups of producers who had not been selling milk
under a base rating plan prior to the installation of the fed-
eral base system felt that the provisions of the latter unduly
favored producers who had operated under the New England
Milk Producers’ Association bases. Therefore, the new base
plan under License 38 offered a compromise.° The total of
bases to be established was to equal the total average quan-
tities of milk used daily by handlers in the market as Class
I milk. To determine an individual producer’s base, the per-
centage of Class I use to deliveries in the base period was
applied to such producer’s average daily deliveries during Sep-
tember, October, and November, 1933, or his average daily
deliveries during the calendar year 1933, whichever was higher.
The eis percentage computed for the market was 61 per-
cent.

License 38 did not, in terms, specify any variations from
the general method of computing bases for classes of pro-
ducers, but the administrator, acting under his power to
revise bases to maintain equity among producers, allotted pref-
erential bases to nearby producers to give effect to the his-
torically higher prices they had received in the market. A
study was made of the eight years 1926 to 1934 to obtain
the proper differential between nearby and distant produc-
ers’ 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 have
bases equal to 85 percent of the higher of their daily aver-
age deliveries in the alternative base periods.’

—

629

Under the first license, the provisions relating to the com-
putation of bases did not contemplate any necessity for admin-
istrative discretion to modify bases of individual producers
who, because of unusual circumstances peculiar to their pro-
duction, might be very greatly injured by the allotment to
them of very low bases. In the brief period of its operation,
the original base plan proved to be too rigid. The market
administrator received scores of letters from producers appeal-
ing for relief from what were often absurd bases, but since
neither the license nor the agreement empowered him to modify
the base rating rules, he could only reply with inconclusive
promises to grant the relief when and if he was given the
necessary power through an amendment. As we shall see in
Chapter V, although the power was sought earnestly, it was
never granted, and it remained for License 38 to correct the
defect. Here was an example of too hasty generalization
about the nature of production in the milkshed. The license
attempted to reduce to rule matters whose natural variation
was considerably wider than the experience of the people
who drafted the regulation. Discretion was indispensable to
administration even of general rules relating to the base rat-

ing system.

J Annual Report of the Market Administrator for the Greater Bos-
ton Sales Area for the Year Ended June 30, 1935, Section VIII, p. la.

®Loc. cit.
"Loc. cit.

8 Annual Report of the Market Administrator for the Greater Bos-
ton Sales Area for the Year Ended June 30, 1935, Section VIII, p. 1b.

630

pp. 134 - 137

Title VII.
Allocation of Producers’ Shares in the Class I Market
I. Establishment of bases
A. For regular producers

Dr. Ellenberger proposed changing the 1933 base period
from September, October, and November 1932, to “the five
months, July to November, inclusive, 1932”: and the 1934
base period, comparably, to the five months, July to Novem-
ber, inclusive, 1933. The longer rating period, in Dr. Ellen-
berger’s opinion, would have been more equitable to that
group of producers who had never been under any rating
plan before November 3, 1933, and whose production fol-
lowed seasonal trends more closely than that of the group
of producers who had operated under the base rating plan
introduced for the Boston market by the NEMPA in 1930
This latter group had learned to increase production in the
“open” months of September, October, and November to
improve their bases for succeeding years. Therefore, their
late summer production tended to be short and needed the
complementing supply produced during the months of July
and August by the seasonal producers, if the needs of the
market were to be met. Including July and August in the
base period would have allowed credit to seasonal producers
for high production in these months, resulting in their obtain-
ing higher bases for the subsequent year.” The Hood Com-
pany opposed these amendments. It considered September,
October, and November, the months least disturbed, on the
demand side, by vacations and abnormal business conditions
and therefore the best months to take as the base period.”

B. For new producers

Dr. Ellenberger proposed raising the maximum base ailowed
a new producer from 60 to 65 percent of his average daily
deliveries during the first 90 days. Such a change was thought
more equitable, especially where a new producer had his farm
in nearby territory and knew his neighbors had high bases.”

631

Ellenberger also proposed amending paragraph 3 of section
A of Exhibit D to give cream producers bases if they were
willing to deliver Class I and/or Class II milk on demand of
the handler to whom they usually delivered.”

C. For special classes of producers
1. Nearby producers

Reginald W. Bird, representing the Massachusetts Produc-
ers’ Advisory Committee and in general nearby Massachusetts
producers, offered a proviso to sub-paragraph (a) of paragraph
1, Section A, Exhibit D, as follows:

“Provided however that those Massachusetts Pro-
ducers who truck to a dealer located within a dis-
tance not exceeding 30 miles from the Massachusetts
State House selling in the Boston area shall be regarded
as located in the Boston area, and the producers or
dealers located in the Boston area who ship outside
the Boston area into a secondary market area shall
be regarded as located within the limits of the par-
ticular market in which their product is sold. The
distributor selling within and without the Boston area
shall pool among all his producers the surplus ratings
in the different markets to which he ships in propor-
tion to the volume of his shipments according to the
ratings of his producers.”

As we have seen, there were pending amendments to the
definition of the Greater Boston market which would have
limited the market to the area within some definite radius
of the State House. Bird pointed out that no matter what
radius was selected, there would always be nearby producers
who would be delivering to handlers’ plants located outside
the official market area and who would be ineligible to receive
the high bases provided by the first part of subparagraph (a).
The amendment seems, therefore, to have intended a separa-
; tion of three groups of nearby producers classified on the basis
! of deliveries to handlers who make sales (a) in the Boston
market only, (b) in secondary markets only, or (c) in both
the Boston and secondary markets. The 30-mile limit selected
by Bird merely extended arbitrarily the concept of the mar-

632

ket for the purpose of securing to a larger group of nearby
producers the favorable nearby basing provisions. The next
clause of the amendment did attempt to exclude a group of
nearby producers who delivered to handlers who were deemed
(by the terms of the clause) to be handlers operating in other
markets. These producers would have been cut off definitely
from the benefits of subparagraph (a). The second sentence
of the amendment then provided for allocating the total sur-
plus which a handler would carry as the result of operations in
two or more markets. From Mr. Bird’s testimony, it would
seem he intended that nearby producers bear only the surplus
which they created.” Therefore, this group would gain a still
more preferred position in the market. The Hood Company
approved the first part of this proposal, but objected to the
creation of any special pooling requirements that might have
to be devised to carry out the intent of the remainder of the
amendment.”

Hearing 2, pp. 656-662.

71 Second Memorandum Brief submitted by H. P. Hood & Sons, Inc.,
in connection with Hearing 2, p. 17.

72 Hearing 2, p. 662.
73 Hearing 2, p. 663.
74Hearing 2, pp. 687-689.

75 Second Memorandum Brief submitted by H. P. Hood & Sons, Inc.,
in connection with Hearing 2, p. 16.

633

pp. 231 - 232_

Title VII.
Allocation of Producers’ Shares in the Class I Market
|. Establishment of Bases
C. For special classes of producers
1. Near-by producers

Effective March 16, 1935, an administrative change of con-
siderable significance took place in the percentage applied in
the establishment of near-by producers’ bases. Before this
date producers whose farms were located within 35 miles of the
State House had been assigned bases equal to 85 percent of
their average daily deliveries in September, October, and Novem-
ber, 1933, or 85 percent of their average daily deliveries for
the entire calendar year 1933, whichever amount was greater.
But by the middle of March 1935, a large proportion of
small handiers buying Massachusetts milk were not comply-
ing with the license. So, as a concession to win the coop-
eration of the Massachusetts Milk Control Board in enforc-
ing, or trying to enforce, the terms of the federal license on
intrastate handlers, the cooperative associations agreed to allow
to producers whose farms were located within 40 miles of the
State House bases equal to 100 percent of the higher figure
yielded by the two alternatives mentioned above. These bases
became effective March 16, 1935. Less than five percent of
the producers in the market were within the 40-mile zone./?
Apparently this was the first appearance of the 40-mile zone
as a definite working concept in the market regulation, although
it did not appear in the official language until Order No. 4
became effective.

Il. Rules for Administration of Base Rating System

The wording of the “75 percent rule”, which had been
put into the license on February 24, 1935, in a form such
that it had a quite different result from that of the rule as
applied administratively, was changed to conform to the admin-
istrator’s version, to be effective until July 1, 1936. This
amendment had been requested by the market administrator.

634

See discussion, page 209. A new paragraph, paragraph 2 of
section 4 of Exhibit A, was inserted, providing that as of July
1, 1936, and thereafter, the rule would apply with the effect
of the wording as it stood in the license from February 24 to
April 30, 1935. The net effect was to restore the administra-
tor’s rule until the producers in the market had been afforded
ample warning of the application after July 1, 1936, of the
more drastic version of the rule. This result had been sug-
gested by the administrator. See discussion cited above.

!2 Annual Report of the Market Administrator for the Greater Boston
Sales Area for the Year Ended June 30, 1935, Section VIII, p. 1b.

pp. 332-333
C. For special classes of producers
1. Nearby producers

Order No. 4 included nearby producers under the base rat-
ing provisions applicable to regular producers and new produc-
ers, as the case might be, and made no provision for preferen-
tial bases as the license had done. Nearby producer differen-
tials 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 handlers’ plants located not more than
40 miles from the State House.

Under the order producers having farms located not more
than 40 miles from the State House had their bases reduced
about 25 percent. These producers under the license had been
allotted bases of 100 percent of their daily average deliveries
in the year 1934. Their new bases were computed under the
order by taking 75 percent of their daily average deliveries in
1933, 1934, or the year ending September 30, 1935, which-
ever was the highest./76

126 Annual Report of the Market Administrator for the Greater Boston
Sales Area for the Year Ending June 30, 1936, Section VIII, p. 13.

|

wae

635

pp. 405 - 407

B. Farm location differentials
1. Applicable to near-by producers

Paragraph 2, Section 1, Article VIII of the original order
required payment of $3.30 per hundredweight, the established
city plant Class I price payable to producers, for base milk
delivered by producers whose farms were located within 40
miles of the State House to handlers’ plants similarly located.
This sort of provision had been necessary under the base rat-
ing system as set up after February 9, 1936, to make a real
differential effective to these producers. The amended order,
having omitted base rating, converted this provision into one
providing, in paragraph 4, Section 4, Article VIII, for payment
of 46 cents per hundredweight in addition to blended prices
to producers whose farms were located within the 40 mile
zone. Deliveries to plants located within the zone was omit-
ted as a condition and the differential was thereby converted
into one depending solely on farm location. These producers
could deliver to more distant plants and still receive the differ-
ential, although they would then have their payments subject
to deductions for freight. The 46 cents was subject to reduc-
tion in cases where the blended prices plus 46 cents exceeded
$3.19 per hundredweight, the established city plant Class I
price payable to producers.

In the hearing the government tentatively proposed that this
differential be 36 cents per hundredweight, pending the receipt
of evidence as to the proper amount.” Wesley Bronson testi-
fied that from 1927 through 1930 producers delivering to the
Deerfoot Farms Company at Southboro, Massachusetts, received
on the average for all milk so delivered $1.16 per hundred-
weight more than producers received on the average in the
191-200-mile zone for all milk. Also, in the ten years 1923
through 1932, producers delivering to the J. B. Prescott
Company at Bedford, Massachusetts, received on the average
$1.04 per hundredweight more for all milk than producers in
the 191-200-mile zone.”” Both of these companies mentioned
had their plants located within the 40 mile zone. Since the

636

proposed differential would give near-by producers about 90
cents per hundredweight over 200-mile zone producers,” Bron-
son thought it was adequate.”

John L. Carten, Jr., representing the Nearby Milk Producers
Association whose members had farms in the 40-mile zone,
thought 90 cents was too low and gave evidence that one of
the producers he represented had received between $1.20 and
$1.30 per hundredweight over the NEMPA price in the 200
mile zone for all milk delivered by this producer in the period
1920 to 1930 to the Hood Company at Salem, Massachusetts.
Carten wanted at least a cent a quart differential, or 46 cents
per hundredweight°? In a brief submitted later, the Associa-
tion reiterated the request for 46 cents, which would give
near-by producers about one dollar more per hundredweight
than 200 mile producers, and stated that only on this basis
would its directors and members support the amended order.*/

2. Applicable to intermediate producers

The amendment offered in the hearing by the Dairy Sec-
tion, with respect to the amount of differential payable to
these producers in addition to the blended price for all milk
delivered, proposed 18 cents per hundredweight as a tenta-
tive figure, pending introduction of evidence as to the pro-
per histroical differential.° This provision was new in the
order and was intended to recognize the price advantage these
intermediate producers had enjoyed long before the regulation
had taken effect in the market and which the base rating sys-
tem had recognized by the allocation to them of high bases.
When base rating disappeared from the order, some other pro-
vision had to be substituted with respect to intermediate pro-
ducers, or the order would operate to their disadvantage.”

Evidence of prices paid producers by the Manchester Dairy
System, Inc., of Manchester, New Hampshire, a small operating
cooperative association when then had the only receiving plant
in the 40-80 mile zone was submitted in a brief after the hearing.
This purported to show that for the years 1929-1936, inclu-
sive, Manchester producers had been paid on the average $.594
per hundredweight more than the average prices paid producers

637

in the 200 mile zone. However, the order as issued con-
tained a 23 cent per hundredweight differential, or a half
cent per quart, payable to producers with farms located in
the intermediate zone. Added to the difference in the car-
lot freight allowances for the zone in which the Manchester
plant was located and for the 200 mile zone, this gave Man-
chester producers about 35 cents per hundredweight more
than 200 mile zone producers.

“Hearing 6, pp. 231-232. R. D. Aplin.

7 Hearing 6. p. 266.

78 Hearing 6, p. 267.

Hearing 6, p. 266.

S9Hearing 6, pp. 281-282.

8! Brief subscribed and sworn to by John L. Carten, Jr., July 3, 1937.
$2Hearing 6, pp. 231-232. R. D. Aplin.

8Hearing 6, pp. 10, 232, 356. R.D. Aplin.

*4 Brief regarding proposal to amend Order No. 4 regulating the handl-
ing of milk in the Greater Boston, Massachusetts, marketing area, Arti-
cle VIII, Section 4, Paragraph 3, subscribed and sworn to by Carl A.
Smith, Manager, Manchester Dairy, Inc.

p. 455
ll. Adjustments in Payments to Individual Producers
B: Farm location differentials
1. Applicable to nearby producers

The January 16* amendments extended the payment of the
46 cent near-by differential to milk delivered from farms
located in Barnstable and Plymouth Counties, Massachusetts.
These counties were close enough to the marketing area to
give rise to conditions of production and marketing similar
to those obtaining for milk produced on farms located with-
in the 40-mile zone. These counties were two of the coun-

saat

&
z
4 . ery tee Be yt
rs Veber
‘ eT eee wegeareeat Sack ge eR a LN a NED RETR IE CRA To eee: ES Se sy oa
SER PEER IT GAT OSS TR ES II AE II I OMEN EEE ERS OE PIE SRE ENS See

——_

ties named in section 4, Article IV, relating to outside mar.
ket prices and freight allowances, which were considered to
be too close to the marketing area to permit freight allow-
ances on producer milk sold in markets lying within them.

2. Applicable io intermediate producers

The limitation on the differential payable on milk deliv-
ered from 40-mile farms was extended by the January* amend-
ments to apply to the 23-cent payment on milk delivered
from intermediate farms. In both cases the upper limit was
the city plant Class I price for milk other than that sold to
the Federal Surplus Commodities Corporation.

638

*(1939)

pp. 690 - 692

Title VIII.
Payments to Producers
II. Adjustments in Payments to Individual Producers
B. Farm location differentials

Under Section 10(e)(3) and (4) of the order before the June
1 (1946) amendments the limitations on the amounts of addi-
tional payments to near-by and intermediate producers were
set at the Class I city plant prices. This prevented near-by
producers, whose farms were located in city plant territory
from receiving anything more than the highest price payable
for Class I milk at the plants to which they delivered milk.
But the intermediate producers could be paid a combination
of zone blended prices plus 23 cents or some fractional part
thereof and in effect receive per hundredweight a price higher
than the zone Class I prices applicable to Class I milk received
at the plants to which they delivered milk. The market admin-
istrator recommended 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. The proposal was inserted in the hearing notice
by the Branch and finally adopted.

_—

A study in the market administrator’s office showed that
from 55 to 70 producers in various periods had received over
$3,000 in excess of the value of their milk at the zone Class
I prices. The administrator maintained that the intent of
the order was to limit nearby and intermediate differentials to
the applicable zone Class I prices. Furthermore, the 40-mile
zone runs through Providence, Rhode Island, and Fitchburg
and Worcester, Massachusetts. Outside market handlers oper-
ated plants just outside the 40-mile zone, and if they should
become pool handlers under the order, they would be in a
position to draw credits from the pool in the short season
when the blended prices were high, even though the handlers
had 100 percent Class I use of receipts. They would be cred-
ited with payments of blended prices plus nearby and inter-
mediate differentials which would total greater than their zone
Class I charge.8® There was no opposing testimony.

639

In subparagraph (1) and (2) of Section 10(a) new limita-
tions were established at the zone Class I prices applicable to
plants at which near by and intermediate milk was received.

On June | Barnstable and Plymouth Counties were deleted
as additional areas, farm location in which entitled a producer
to receive the 46 cent near-by differential. The necessary pro-
posal was made by the administrator. A study had showed
that no producers whose farms were located more than 40
miles from the State House in these counties had delivered
milk to pool handlers since June 1942.89

Hearing 16, pp. 1574-1578. R. D. Aplin.
Hearing 16, pp. 1578-1580. R. D. Aplin.

i... MERI SS LSE BS EBS OS ES PN ENP ES SCORE ERE AST RNEATNNCSE SERIE TY ER IIE

640

Exhibit 77

TABLE 7

SEASONAL VARIATION IN 1962 MILK PRODUCTION BY ‘‘NEARBY”’
PRODUCERS IN NEW ENGLAND FEDERAL ORDER MARKETS AND
BY ‘‘DISTANT’’ PRODUCERS IN THE BOSTON MARKET

Boston ‘‘ District’’ Five-Market Nearby
Producers Producers
Daily Percent of Daily Percent
Average 1962 Daily Average of 1962
Deliveries Average Deliveries Deliveries
(1000 Ibs.) (1000 Ibs.)
Jan. 4,373.87 90.84 5,088.84 100.40
Feb. 4,927.21 91.83 5,128.46 101.18
Mar. 5,367.96 100.05 5,245.87 103.50
Apr. 5,963.93 111.15 5,318.33 104.93
May 6,239.29 116.28 5,479.52 108.11
June 6,514.27 121.41 5,224.33 103.07
July 5,276.35 98.34 4,758.06 93.88
Aug. 4,963.71 92.51 4,774.29 94.20
Sept. 5,086.50 94.80 4,921.60 97.10
Oct. 5,300.61 98.79 4,912.19 96.92
Nov. 5,044.20 94.01 4,921.93 97.11
Dec. 4,823.58 89.90 5,057.77 99.79

1962 5,365.52 100.00 5,068.48 100.00

641

Exhibit 19

MARKET ADMINISTRATOR -
CONNECTICUT MARKETING AREA

NUMBER OF PRODUCERS, BY STATES (Preliminary)
January - July 1962 —

Massachusetts,
Rhode Island*,
Connecticut New York and Vermont** All States

January 1,671 1,054 246 2,971
February 1 559 1,048 245 2,952
March 1,625 1,038 244 2,907
April 1,619 1,034 164 2,817
May 1,595 1,020 160 2,775
, June 1,591 1,023 161 2,775
July 1,560 955 157 2,672

RECEIPTS OF MILK FROM PRODUCERS,
BY STATES OF ORIGIN (Preliminary)

January - July 1962
(In Thousands of Pounds)

Massachusetts,
Rhode Island*
Connecticut New York and Vermont** All States

January 44,830 42,250 7,354 94,434
February 40,610 38,751 6,184 85,545
March 45,719 42,855 7,446 96,020
April 44,132 41,656 4,334 90,122
May 46,993 43,727 5,155 95,875
June 42,926 39,281 4,846 87,053
July 40,962 33,254 4,466 78,682

“No milk was received from producers located in Rhode Island during
July 1962.

**No milk was received from producers iocated in Vermont during April-
July 1962.

642

THE MARKET ADMINISTRATOR’S REVIEW

August 1962 Volume 14, No. 7

AUGUST HEARING TO BRING COMPENSATORY
PROVISIONS IN LINE WITH SUPREME COURT DECISION

In an effort to bring the New England Federal milk '
orders into line promptly with the Lehigh Valley
decision of the United States Supreme Court, a public
hearing will be held in Boston's Hotel Bradford, com.
mencing at 10 a.m., on August 28, 1962. In its notice
of the hearing’ the USDA said the “hearing is being |
called in response to a request by a large number of |
producer groups to review particularly the provision;
of the various orders which relate to treatment o°
partially regulated milk. As indicated by the Depart-
ment’s invitation to interested persons for proposed
order amendments, the order provisions pertaining to
the definitions of pool plants, pooling requirements,
and the definitions of producer have a direct bearing |
on the extent and volume of milk partially regulated
in the respective markets. Because of the related
importance of the definitions and pooling requirements
pmicy each of the orders, which assist to determine

scope of class pric-
ind pooling under the

:
3
4

i Rabel Bean nds tyke trations

POA er nit

i ania Raa RN ARO SSR Et

respective orders, such
provisions are open for
review at this hearing
as they relate to the pro-
posals” in the notice of
hearing.

On June 22, twenty-
two producers’ coopera-
tive associations joined
in a petition to the De-

partment for an emer-
gency hearing to consider
substituting for the com-
pensatory payment rate
which now equals the
difference between the
Class I and Class II price
at the plant from which
outside milk may origin-
ate a new rate equal to

I i ee Ae
RES ILRI IESE ELE OT BE OIL ETE LAI TOTS LG IO SELES CELT ;

—

643

the difference between the applicable Class I and
blended prices. On July 13 these cooperatives re- .
affirmed this proposal for consideration at the August
hearing.

On July 30, 1962, Milk Marketing Orders Division
Director Herbert L. Forest met in Boston with the
representatives of the cooperatives. He discussed the
sxichita Plan’ and possible modifications of it in

‘A of the Lehigh Valley decision.

an August 2 the technical committee made up of
economists of the New England cooperatives met again
in the Market Administrator’s office to discuss further
suggestions for the revision of the compensatory pay-

ment provisions of the New England orders, At that
meeting the committee agreed that the handler re:
sponsible for making compensatory payments should
have the choice of inaking them at the rate, as at
present, of the difference between the Class I aid
Class II prices, applicable at the outside plant where
the milk was received from farmers, in Which case the
administrative assessment would apply on only the
quantity of fluid milk products brought in from out-
side and disposed of in the marketing area. Or, pro-
vided that the necessary reports, records, and
facilities are made readily available to the Market Ad-
ministrator, he should have the choice of making them
at the rate of the difference between the Class I and
blended prices of the New Engiand order anriicable at
the outside plant where the milk was received from
farmers, plus any amount by which the classified use
value (at New England class prices) of all of the mulk
received from dairy

farmers at the outside

plant exceeded the sum fluid milk disposed of in
of of the amount actually the marketing area. If
paid to the oustide dairy he chose this latter al-
farmers and the part of ternative the amount of
the compensatory pay- the administration as-
ment based on the differ- sessment would be based
ence between the New on the total quantity of
England order Class I receipts of fluid milk
and blended prices ap- products at the outside
plied to the quantity of plant.

i PINE GEE PG NN BUTANE COE EEDA IE DILLY DICED EAMG IC FIED SOA

2
3
4
j

oo ea iS RR

Se ERE iad Aad sa tietTS A SR ES

s ton
— TT is Yn pee
reer LER ENOL OLLI CLES LOE LIE LED ILLES LOE AGRE NE ae ta os

644

On August 9 the 22 producers’ cooperative associa-
tions joined in sponsoring a new proposal embodying
the plan worked out by their technical committee on
August 2.

The Iiood company’s proposed amendments concern-
ing the compensatory payment features of the orders
are as follows: —

Amend Section 65 of the Greater Boston order and
the corresponding provisions of the other four New
England orders to provide that in order to insure
uniform minimum class prices to all handlexs in the
marketing area, any person having route disposition

* * *

FARM LOCATION DIFFERENTIALS TO BE AIRED AT
NEW ENGLAND MILK HEARING IN NOVEMBER

Often, puble milk hearings are concerned exclusive-
vith technical matters that repair or renew the
Juinery of milk marketing but are of little direct
“cern to producers, The comprehensive hearing
scheduled for next November to consider 51 proposals
is not sucha hearing. It will hear three subjects which
are of great importance to individual producers and
to groups of producers. The time for them to be fully
informed on these subjects is prior to the hearing so
that they may express their views fully, either in per-
son or through their representatives, at the hearing.
There have been times when after a hearing had
twen held, testimony and evidence analyzed by the
USDA, amendments made, and action brought about
by the new amendments, that producers have been
shocked into an unhappy awareness that some changes
had been made. This should not happen. In various
ways producers are being given full notice that pro-
posals for changes in New England milk orders have
been made which, if adopted, will affect them signifi-
cantly through their price for milk. What are these
proposals?
There are three groups of proposals which merit
the serious attention of producers: (1) Proposals -for
merging some or all of the New England orders:

645

9) proposals for reducing the amounts by which
et a blended prices (before addition of the farm
location differential, if any) at city plants exceed prices
in the basic Zone 21; and (3) proposals concerning
the 46¢ and 25¢ farm location differentials. The pur-
3 of this article is to present those in group (3).

Differentials Deeply Rooted

Farm location differentials have been in the Boston
order since August 1, 1937, and in the other New
England orders since their inceptions at the existing
yates of 45¢ and 23¢, depending upon nearness of farm
to market. Why were nearby producers given higher
prices than those to distant producers beyond the
amount justified by transportation cost? There has
been folklore which held that nearby producers have
a “right” to a location differential, that in some way
the markets belonged to them and that upcountry pro-
ducers are “outsiders” whose costs of production are
lower and who are not “entitled” to as high a price.
But all folklore aside, the important fact is that, nis-
torically, nearby producers did receive such higher
prices.

At a public hearing in June 1937 the Government
tentatively proposed farm location differentials of 56¢
and 18¢. Mr. Wesley Bronson, then econumist for the
New England Milk Producers’ Association, testified
that from 1927 through 1930 producers delivering to
Deerfoot Farms Company at Southboro, Massachu-
setts, received on the average $1.16 a hundredweight
more than producers veceived on the average in the
191-20)-mile zone of the Boston milkshed. In the
years from 1925 through 1932, a 10-year period anti-
dating Federal regulation, producers delivering to the

&. Prescott Company at Bedford, Massachusetts,

ived on the averaye $1.04 a hundredweight more
a their milk than did producers in the 191-200-mile
wre. The proposed farm location differential of 36¢
Would give producers delivering to plants within 40
miles of Boston about 90¢ more than the price in the
191-200-mile zone, and Mr. Bronson supported the
proposed differentials.

NIE EEG SS CAEN OA A TP 0 IIE LITE Me SEINE SONGS Sin SE BORY kt

4
‘
4
2
§
s.
5
g
f
4
4A
4
3
5
é
4
4
4

646

The Nearby Milk Producers’ Association, represented
at the hearing in 1957 by the late John L. Carten, Jr,
considered the 90¢ overall differential to producers on
farms within 40 miics of Boston to be inadequate. He
gave evidence that one of the producers in the Asso-
ciation received from $1.20 to $1.50 a hundredweie'
over the NEMPA price in the 191-200-mile zone for
milk delivered during the period 1920-1930 to the
Hood company plant in Salem, Massachusetts, and he
maintained that the nearby farm location differentix!
should be at least a cent a quart, or 46¢ a hundred.
weight, which would give nearby producers about
$1.00 a hundredweight move than the price to pro-
ducers in the 191-200-mile zone.

Prior to August 1, 1927, higher returns to nearby
producers had been provided through granting such
preducers preferential bases. The base-rating plan
was dropped and the farm location differential became
the vehicie in the August 1, 1937, amended Order No. 4
for granting higher returns to nearby producers.

Whether nearby producei's reccived these premiums
over upcouitry prices because they were supplying
handlers selling relatively large proportions of their
milk as fluid milk or for what other reasons, is of
little practical concern at this time. The important
thing is that they did receive higher prices under the
conditions prevailing before Federal regulation, and
that the regulation recoguized this fact. One of the
questions that will be before the November hearing is
whether the farm location differentials of 25 yars ago,
which were about 25% of the price, are appropriate
under conditions existing today.

Prosposals to Change Differentials

The operating cooperatives in the Boston milkshed
have proposed that the present farm location GiiTeren-
tials be reduced percentagewise each month by the per-
centage of Class II milk to producer receipts ii the
Boston pool. In 1961 the resuiting within-40 nearby
differentials, according to this proposal, would have
declined from about 22¢ in January and February to
20¢ in June and climbed back up to 2S¢ in. November

*
Nees ” oan lat

—

and December. It would have averaged 25¢ for the
year, or 21¢ below the present rate. Similarly, the
intermediate zone differential would have varied 7rom
about 14¢ to 10¢ and back up to 11¢ in these months
for an average of 1214¢, reflecting a reduction of
about 10'3¢ from the present 25¢ rate.

In the past there kas been a proposal for raising the
46¢ within-40 rate to make it about 250 of the price
to producers, restoring its relative importance to that
prevailing a generation ago. At the other extreme
there have been repeated proposals for the outright
abolition of the nearby farm location differentials.

The Federal Milk Order Study Committee, widely
known as the Nourse Committee, took a rather diin
view of such differentials in its repo:t issued in
April 1962. The Committee said:

“Precedents for nearby differentials were establisned
during the period of collective bargaining before tacre
were any Federal orders. Various advantages have
been claimed for nearby milk from the viewpoint of
handlers — such as more desirable seasonality, earlier
and more dependable arrival at city plants, easier and
more economical supervision of producers and quality

om the possibility of direct hauling from the farms
eby saving the expense of country plant operation.
CAvever. the major purpose of nearby differentials
apparently has been to compensate nearby producer's

for sharing market Class I sales with more distant
producers in a market-wide pool, This principle seem-

647

ingly was founded on the belief that in the absence of
regulation, a higher percentage of nearby milk would
be suld for fluid use.

“Producers in areas with a long history of nearby
differentials have based their production decisions on
them and capitalized their value into land and facilities.
Consequently the differential payments are no doubt
regarded by the participants as valuable ‘market
rights.’

“On the other hand, the manner in which nearby
differentials are applied has a decided impact on inter-
market relationships. Their use and effect may need
careful re-examination in light of present conditions of
increased mubility of milk supplies, for the payment

TPES

ELIOT AVL ENG LEN AAI DEERE LEIA BERLE PLL ALLIES TS ELIECLY I GAR

a

648

of special nearby differentials out of pool funds de-
presses the uniform price to producers outside the dif-
ferential zones and thus tends to limit the extent of
the supply area and maintain a higher fluid utilization
under an order than would otherwise prevail. At the
present time, this effect is so small in some instances
as to be negligible. In others, it is very significant.

“Under the Boston order, nearby differentials are

paid on only about 66 of the led milk and the

form price is depressed less than 3¢ per hundred-

q peat by these payments. Under the New York-New

sey order, slightly less than 2097 of the pooled. milk

qualifies for the nearby differentials and the uniform
price is depressed about 6¢ per hundredweight.

Effect on Intermarket Relationship

“On the other hand, under the Federal orders for
Worcester. Springtield, Southeast New England and
Connecticnt, nearby differentials are paid on 65°47 to
more than YO of the pooled milk and uniform prices
are Gepvessed from about 30¢ to more than 40¢ per
: hundredweizht. In 1960, 90° of the pooled milk under

the Connecticut order qualified for the 46¢ differential,

and 347 for the 23¢ differential. The total amount
paid in nearby location differentials was equivalent to
i3¢ per nundred pounds of all pooled milk and the
uniform price to producers outside the differential
zones Wis depiessed to that extent. Thus, the attrac-
tion of tie higa blended price resulting from a high
Class T utilization under the order is substantially
reduced with respect to producers in the outlying areas.
“In circumstances where a high percentage of milk
qualifies for the nearby differentials the producers who
participate derive little net gain except for the pool
tightening eifect of the lower blended returns in the
outer zones, Thus, order provisions for nearby differ-
entizls of this magnitude can and do etfectively limit
access to the pools.
sam ae P o,°
‘ "to accomplish both recognition of historical pat-
\ , 33 in tie déstrivution of funds, and at the same
‘“~«.l2@ lo mininze the pool tightening effect of an
arcitrary nature. nearby differentials could be main-

PORN ea DeSean ant Rak Ds ARE

649

tained but varicd inversely with the percentage of
woled milk used in Class I. Thus, the rate would be
very low or possibly zero when a high percentage of
the pooled milk was used in Class I and relatively igi
when fluid utilization falls to a low level. Such a
procedure would tend to modify somewhat the effect
of decreased utilization on the prices of neerby pro-
ducers, and thus protect to some degree their prisi
market rights and their capitalization of these rigiits
into land values by giving them the advantage cf a
' priority on the share of the receipts from tie pooi.
in other words, their blends would be more stable and
fluctuate less widely as Class I utilization increase or
decreased. At the same time the access-limiting effect
of nearby differentials would be more flexible and
would vary according to the utilization in the markcits.
With low utilization the blend price depressing effects
of nearby differentials would be greater and the barricr
to additional producers’ supplies would be stronger
than when the opposite was the case.

“This principle is recognized in the provisions for
nearby differentials under the present New York-New
Jersey order, but not under the other orders which
provide for such payments.”

Exception by Swonger

C. W. Swonger, Research Economist of the New
England Milk Producers’ Association and an outstand-
ing member of the Nourse Committee, disagreed with
many of the foregoing views as seen from the following
quotation from his note on‘ the subject which was
published with the Committee’s report:

“Apparently nearby differentials 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 6% of the milk in the pool, or considerably less
than New York. They apply to a much larger propor-
tion of the milk in other markets of southern New Eng-
land for the simple reason, as stated, that there are
relatively more nearby producers. Yet their effect is
the same, in Boston or Connecticut, to establish a par-

OV PERE TE RLF RENE DG Sat BOREL BE DEEP eR MeO AN

650

ticular pattern or relationship of prices. as Deiween
nearby and more distant producers, which is identiew

Caslacgl
in both markets. Elimination of the nearby i‘feran.
tials contained in the Connecticut order would agora.
vate the price disparities in relation to other surround.
ing markets.

“In this connection, the report suygests that ‘nearby
? differentials could be maintained but varied inversely
with the percentage of pooled miik used in Class [
Such a system as suggested would result in seve
distortion of blended price relationships betwee
markets in New England and New York, both to nearby
producers and those located more distant from the
market. Reference is made to the uniform pattern
nearby differentials used in New England markets,
Any deviation of the type propused would, for insiance. |
depress blended prices to nearby producers in Connect.
cut, relative to Boston or New York, and raise blend.
prices to Connecticut producers in more distant zones.
substantially above Boston or New York. It wowg
create price disparities rather than remove them, ss
between producers similarly located with respect to |
the market. |

“If we accept nearby location differentials as a fact |
of life in New England and New York, it follows tis:
‘similar patterns of utilization’ would result in wice
disparities in ‘uniform prices’ as between producers
similarly located with respect to the market, and vies
versa, We cannot have it both ways. Of the twos, it
seems to me that approximate uniformity of blended
prices is far more important, and con:petition tends to
achieve this result.”

Proposals L,and 16 would reduce the present 54¢

Terence between city and Zone 21 plant Class 1 and

ended prices, 40¢ of which is conceived to represent

iw approximate railroad tank car freight rate from
Zone 21 to Boston, 1¢ of which is the no longer existent
36 Federal transportation tax, and 13¢ of which is
conceived to be the extra cust of receiving milk from
producers at a country plant compared to that at a city
plant. Proposal No, 22 would increase the nearby farm
location differentials by the amount of any reductions
stemming from action on Proposals 1 or 16.

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—

651

Uniform Differentials Proposed Again

A proposal to give to nearby producers the highest
possible location differential, figured from any one of
the five New England markets, regardless of the
market to which his milk is taken, was considered at
the April 2-4, 1962, hearing on the New England
orders. In its decision the USDA concluded that the
record of the hearing “does not contain evidence that
is sufficiently exploratory or comprehensive in nature
to support a substantial deviation from the present
design of the nearby farm differential provisions.” The
subject will be reviewed at the November hearing as
Proposal No. 21:

“Amend the nearby farm location differential provi-

sions of all the New England Federal orders to provide
that payments for milk produced on farms located in
New England will be subject to differentials to the
Xollowing extent.
i Any producer whose farm_ location would now
Antitle him to a differential of 46¢ per hundredweight
under any New England order shall be entitled to a dif-
ferential of 146¢ under whichever New England order
the milk is delivered.

2. Any other producer whose farm location would
now entitle him to a differentiai of 23¢ per hundred-
weight under any New England order shall be entitled
to a differential of 23¢ under whichever New England
order the milk is delivered.”

The large color map in the March issue of the
REVIEW shows the existing nearby farm location
differential areas for the five New England Federal
order markets.

sare i ae i

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OU hd Ea IE ag HOS a hated the

PT. pe NTT Oe STR Ay

652

Exhibit 93
PROPOSAL 52
Massachusetts Cooperative Milk
Producers Federation, Inc.
We are unequivocally Opposed to Proposal 52 whether or
not it be coincident to a merger of any or all of the New
England orders.

It seems pointless for us to include in our testimony any
further analysis of the circumstances and the evidence which
led inescapably and justifiably to the original incorporation
of farm location differential payments at current rates in the
Boston order initially and later in each of the other New
England orders upon promulgation. Exhibit 24 constitutes
an adequate basic record for this purpose taken with direct
testimony already given in this hearing by Mr. Lee for NEMPA
and by Mr. Geyer for CMPA.

It does appear, however, that some additional analysis of
what we believe to be the basic facts as well as a sound critique
of terminology is called for. The facts are that, during the
time antecedent to the inception of federal regulation, milk
dealers were paying more for nearby milk than for distant
milk, not necessarily because of its intrinsic value as milk
was greater but because of its geographical origin. This higher
rate per hundredweight was not arrived at by milk dealers
then through the process of computing a distant price and add-
ing thereto a premium or differential in order to arrive at a
final figure. The current use of the word “differential” can
therefore be misleading in itself, unless one remembers that
Originally it meant only that the prevailing prices for nearby
and for distant milk were different and by an amount which
was determineed probatively to be 46¢ in some instances and
23¢ in others. There was no evidence then, ner has there
since been any new concrew evidence developed, that what
became a “farm location differential” in the New England
orders was ever paid to nearby milk producers by the han-
dlers themselves, except as an inseparable component of a
higher going price for milk.

vot ASS A
— Bes seta st —— — a ARISTON! ARE as
SEP TRS Tdi BRAS PRN LOMO ENTER CS Re IE A NG IR HE SEMIS US HMEB SIT TOS ETERS Pease

653

Given the presence of such price stratification as did exist
in the market at the time, the Secretary appears simply to
have decided, in line with the Act’s prescription that a deter-
mination of parity prices is a prerequisite, that such federal
regulation as was to be instituted in the. Boston marketing
area must, in its provisions governing the determination of
prices to producers, give recognition to the then existing
price structure which was an undeniable and salient feature
of pre-order marketing procedure. We cannot now conceive
of any manner in which this previous relationship of prices
could have been preserved in a market wide pool except through
the specification by regulation that nearby producers would
continue to receive a higher rate of payment for milk and that
such payments would continue to be an obligation of the reg-
ulated pool inasmuch as, before regulation, they had been the
result of simple economics in the milk market which was to
be pooled. The established higher monetary value of nearby
milk in the open market prior to federal regulation was thus
maintained with the inception of the regulated market by
means of provisions requiring the allocation to such milk of
pool funds in a manner designed to preserve a prior status quo,
or uniformity, of price.

Section 608c(5)(b) of the Act provides as follows:

(ii) for the payment to all producers and associations of
producers delivering milk to all handlers of uniform
prices for all milk so delivered, irrespective of the uses
made of such milk by the individual handler to whom
it is delivered; subject, in either case, only to adjust-
ments for * * *

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EOI SIRLOIN LE ANOLE LING

The following material is among that Sewer" ‘ed by the re-
spondents. Petitioners contend that this » «t° ‘al is not of
record and the printing here of this material does not con-
stitute a waiver by petitioners of their objections to the
material as not properly before this Court. Petitioners also
reserve the right to request that the Court assess the cost of
printing this material to the respondents. With respect to “he
plaintiffs’ summaries of administrative proceedings, petitioners
offered to stipulate to print in the appendix any testimony
either party considered relevant which had not been certified
to the District Court below. That offer was rejected by re-
spondents.

—

657

CHARLES PATRICK RYAN
1334 G Street, N.W.
Washington, D. C. 20005

March 15, 1967

Klagsbrunn & Hanes

1200 18th Street, N.W.

Washington, D.C.

Attention: Lawrence D. Hollman, Esq.
Carlyle C Ring, Jr., Esq.

Gentlemen:

I am in receipt of notification from the U.S. District Court
that the motion to intervene as defendants in the case of Rus-
sell Allen, et al. v. Orville Freeman, C.A. No. 3379-66, has
been denied by the Court, the said motion having been filec
by you in behalf of eight individual nearby producers.

It would be appreciated if you would advise me as soon as
pessible concerning whether you desire to file a brief as amicus
curiae in the proceedings in behalf of your clients.

Very truly yours,
/s/ Charles Patrick Ryan

= ERD ORIEL PIGEONS Py SMa ght. ee eneIeES FLEE LAER LEA LELIOA ICL De

—

658

Item 34 STeruinc 3-0004

Law Offices of
CuanLes Patuick Ryan
400 Prudential Building

1334 G Street, N. W.
Washington, D. C. 20005

May 8, 1967

Lawrence D. Hollman, Esquire
Klagsbrunn & Hanes

1200 18th Street, N. W.
Washington, D. C. 20036

Re: Allen, et al. v. Freeman
Dear Mr. Hollman:

I have received a copy of the Order of the U. S. Court of
Appeals denying the motion of Frederick T. Zuber, et al.,
for summary reversal of the Order of the District Court
refusing leave to intervene in the above case.

On March 3, 1967, I stated in the plaintiffs’ opposi-
tion to the motion for intervention that I would consent to
the filing of a brief amicus curiae by Mr. Zuber, and I
filed a formal consent thereto on March 17, 1967. At
that approximate time I also sent you a letter in which
I inquired whether you desired to file such a brief, since
the motion for intervention had been denied. I requested
an expeditious response to preclude any additional delay,
and I believe that your reaction to said offer was of a
negative nature.

If you now desire to file such a brief, I would not in-
terpose any objection to the same, provided that it was filed
and personally served upon me by 5:00 p.m. on May 11th.
Any later date would preclude me from filing opposition
thereto and would probably prevent the Court from ade-
quately reviewing the same.

659

You will recall that I facilitated consideration of your
appeal on an expedited basis, and I also stipulated to the
hearing of your motion in the District Court on an ex-
pedited basis—even though Mr. Ring’s request for the
latter was made in the evening at my home with an alterna-
tive of a preliminary hearing the next morning rather
than the following day. Time is now really of the essence,
but I still wish to accord Mr. Zuber, et al., an opportunity
to present any defense that may be appropriate, consist-

ent with the rules and without waiver of any objections
of any nature that the plaintiffs might choose to present
in this or any other proceeding involving the same or
other parties.

Very truly yours,

Cuartes Patrick Ryan
Charles Patrick Ryan

cc: Irwin Goldbloom, Esq.

NAR pe LIE IPOD! AO OLLILA LICL LOGE SIEM OE TONE ie TE LIA

Se ee ee ee

660
Item 35 STerine 3-0004

Law Offices of
Cuarves Patrick Ryan
400 Prudential Building

1334 G Street, N. W.

Washington, D. C. 20005
April 20, 1967

Irwin Goldbloom, Esq.

U. S. Department of Justice
10th & Pennsylvania Ave., N. W.
Washington, D. C.

Re: Allen, et al., v. Freeman
Civil Action No. 3379-66

Dear. Mr. Goldbloom:

Enclosed is a copy of the plaintiffs’ summary of the testi-
mony presented during the 1963 promulgation hearings in- |
volving the Massachusetts-Rhode Island milk Order. The
proposed brief of Dairymen’s League Cooperative Associa-
tion, Inc., applicant for leave to file a brief amicus curiae,
states that the differential in this case, unlike that in Blair,
‘‘was not designed to compensate for any such loss of the
fluid milk market’’. The testimony set forth is for the
primary purpose of rectifying this possible inaccuracy, and
the statements of those in favor of the nearby differential
have been utilized in this connection. The only reference
that I have made concerning testimony in opposition to the _
differential is that of Mr. E. L. Tipton, economist for
Cooperative Dairy Economics Service, and the same is
illustrative rather than exhaustive of the testimony of
this nature.

I believe that all of the records references are in the
volume of excerpts of the administrative record previously
filed in the case, with the exception of that relating to the
brief or paper filed by the Government in the 1937 Boston —

|

a MOE POM BESS LEY HOLES LANA ETE MEPL ELLE NOE IGANG

661

order hearing, and the latter is attached to the enclosed
summary for your convenience.
. * * « e * . . + «

I understand that the Government has certified the en-
tire administrative record of the 1963 hearings, and I
would appreciate being advised as to whether you consider
any other hearing records necessary in this proceeding.

Very truly yours,

Cuantes P. Ryan

Plaintiffs’ Summary of Record of 1963 Promulgation Hearing

The following summary of the testimony presented dur-
ing the 1963 promulgation hearings resulting in the Massa-
chusetts-Rhode Island milk order, concerning the nearvy
farm location provision of said Order, is set forth for the
convenience of the Court, in that the excerpts from the
administrative record are quite lengthy and contain no
index or other statement of contents that would reflect
the nature of the testimony therein.

In view of the fact that the record of the 1937 Order
for the Greater Boston Arca is not as voluminous, and
inasmuch as many of the same individuals gave the same
testimony in the hearings in respect to the milk orders
that were consolidated (Southeastern New England,
Worcester and Springfield) into the Massachusetts-Rhode
Island milk order as they gave in the said 1963 promulga-
tion hearings for the present Order, the same is not set
forth herein. If the defendant regards the same as neces-
sary in these proceedings, the plaintiffs will furnish a
summary of the same for the convenience of the Court.
The stated former milk orders are found in the Volume
previously furnished by the defendant herein, and a por-
tion of the 1937 hearing in respect to the nearby differen-
tial is also found as an exhibit in the administrative record

—

662

of the 1963 promulgation hearings resulting in the present
milk Order.

The plaintiffs have also attached hereto excerpts from
the brief of the Government filed in the 1937 hearings,
and all of the foregoing should be of assistance to the
Court herein.

The following individuals testified in favor of the nearby
differential provision of the Order during the 1963
hearings:

1. James D. Ler, economist for New England Milk Pro-
ducers Association and formerly an economist with the
Market Administrator’s office in Boston, testified that the
nearby differential payments ‘‘have been justified over the
years as a recognition 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 ...’’ (R., pp. 3393, 3991-93). The brief of New
England Milk Producers Association (Exhibit 77) also
States that the differential payments are for the purpose
_ of ‘compensating nearby producers for sharing a part
_ of the fluid milk market which they formerly enjoyed, with
producers more distant from the market’’.

Mr. Lee referred to the Class I (fluid milk) bases that
» were assigned to nearby producers under the license
_ program of defendant, initially applying to 85% of their
milk and then to 100% of the same ‘‘in an effort to gain
enforcement support from the Massachusetts Milk Con-
trol Board’’. (R., p. 3408). He also stated that the
effect of the differentials is ‘‘to establish a particular
pattern or relationship of prices as between nearby and
more distant producers, which is identical for the five
markets’’. (R., p. 3394).

Under cross-examination, Mr. Lee acknowledged that
evenness of production ‘‘could be compensated for only
under a base rating which we do not have’’, and that dis-

sta i tat ie

i IEF NS Bai ROTA RENO i PED a Pb

= . Le ‘

663

tant producers should be equally compensated if they
| have even production. (R., p. 3981).

He also acknowledged that the factors enumerated by

\ Dr. Ellsworth Bell concerning value of nearby milk and

resultant justification of the nearby differential in 1937

are not present today. (R., p. 4002). Mr. Lee main-

tained that ‘‘accessability’’ of nearby milk was the present

| Teason for the differential. (R., pp. 3991-4002). However,

he admitted that a handler would look to the cheapest

| source for a regular and quality supply of milk. (R.,
pp. 1718-1727).

Dr. Harry P. Younc, economist for Local Dairymen’s
Cooperative Association of Rhode Island, referred to the
base ratings formerly given to nearby producers that re-
turned to them a Class I or fluid price for their milk, the
distant producer recciving a composite price consisting of
the remaining Class I price and the Class II price for
their milk, (R., pp. 2322, 2327, 2328), and he regarded the
differential as a continuation of such payments based upon
the use value of nearby milk for Class I or fluid use. He
justified the differential on the additional ground that
small handlers could not bear the added costs in purchas-
ing upcountry milk (R., p. 2326), but he fails to mention
‘that the distant producer bears such handler’s cost of pay-
ing a differential to the nearby producer as an alternative
to purchasing upcountry milk, and he admits that handlers
would not pay more for nearby milk today. (R., p. 2330).

Dr. C. W. Pierce, economist from Pennsylvania State
College, also testified for Connecticut Milk Producers Asso-
ciation, Modern Milk Marketing Association and Local
Dairymen’s Association. He testified concerning the use
of nearby milk for fluid purposes as justification for the
differential (R., p. 2641). Dr. Pierce also stated that milk
prices are higher because of governmental regulation, but
he illogically maintains that only the nearby producer
should be accorded this governmental benefit. (R., p. 2647).

664

Dr. Stewart Jounson, economist, also testified for the
foregoing organizations, and he stated under cross-examina.
tion that the nearby differential was based upon the nearby
producers’ greater utilization of his milk for Class I or
fluid use, and that the differential was to compensate the
nearby producer for the loss of such Class I or fluid use
sales in a marketwide pool. (R., p. 4066). Dr. Johnson
also acknowledged that the effect of the Connecticut dif-
ferential was to keep dairy farmers in other States from |
shipping into the Connecticut market. (R., pp. 4071-72),

Dr. Davip A. Cuark, economist at the University of Cali-
fornia, also quoted from the Secretary’s decision promul-
gating the Connecticut milk order in respect to justification
for nearby differentials. (R., p. 2525). He maintained that |
the differential was to compensate nearby producers for
sharing fluid utilization under marketwide pooling of m)k |
(R., pp. 2535, 2538). Dr. Clark also testified that the |
Connecticut order was promulgated because the local sup.

3 plies of milk were being replaced by cheap, unregulated

; milk (R., p. 2539), and he acknowledged under cross- |

: examination that the nearby differential had the effect of /
preventing the free flow of milk (R., p. 2542). Dr. Clark
further acknowledged that he did not really know if local

: producers had received preferential treatment prior to

4 State regulation (R., pp. 2550-52), and he admitted that any
such preference in respect to the payments would have
disappeared, in the absence of Federal regulation (R
pp. 2552-53).

SNP Ns eg aa Sa ais es ale ERC SN A ER RRS alan

"

Dr. Clark maintained that the existence of the differ-
entials for several years was reason for their continuance,
but he acknowledged that nearby milk had no additional
value or worth over distant milk at the present time, (R.,
pp. 2539-41), and that the justification for the differential
could require re-examination.

Ban

—

Mr. Witt1am J. Newman, Local Dairymen’s Cooperative
Association, testified that the -differential should be in-
creased, referring to the higher prices that nearby pro-
ducers previously received under State orders (R., pp.
3750, 3770-71), and to the utilization of nearby producers’
milk for fluid purposes. (R., pp. 3751-54). He also ac-
knowledged that the nearby differential is to compensate
nearby producers for sharing’Class J or fluid milk sales
under marketwide pooling. (R., pp. 3757, 3769).

Mr. Frep Bnrivors testified forthe Worcester Milk Dealers
Council, stating that nearby milk had an extra value be-
cause of its accessibility, but he admitted that this factor
constituted a possible value toa handler. (R., pp. 4129-30).
He also admitted that the differential was to compensate
nearby producers for sharing their high Class I percentage
under marketwide pooling, and that their higher prices
had been due to such use. (R., p. 4139).

Mr. CurisrorHer B. Sykrs testified that he did not know
why the nearby producer received higher prices than dis-
tant producers prior to federal rezulation (R., pp. 4032-34),
and he acknowledged that evenness of production would
have no application if a distant producer’s production was
as even as that of a nearby producer. (R., pp. 4044-45).
Mr. Sykes maintained that accessibility of nearby milk
might justify the differential today, but under cross-
examination by Mr. Chernauskas, Government counsel, he
maintained that the differential provision should never be
changed, irrespective of changes in the past 25 years.
(R., pp. 4050-55).

Mr. Horace B. Witpes, Dairy Committee Chairman of the
Rhode Island Farm Bureau, acknowledged that the nearby
differential is to compensate the nearby producer for
sharing his fluid milk market with distant producers, and
that the differential discourages distant producers from
shipping to market. (R., pp. 2307-11).

665

—_

A few of the foregoing individuals who testified in favor
of the nearby differential also stated that production costs
were higher in the nearby area, that taxes were higher in
the State of Massachusetts, that the higher prices to nearby
producers had been capitalized into farm or land values,
etc., but they did not mention that the nearby producers
received a higher price because of his location by virtue
of both the transportation and direci delivery differentials
that are included in the zone differential. Some of them
acknowledged that these reasons did not justify payment
of the differential by distant producers.

666

A number of those testifying maintained that nearby pro-
ducers had never been paid a nearby differential as such,
but that they had been paid an increased price over that

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paid to distant producers and that the differential rep-
resented the difference between such prices. They further
stated that the purpose of the Act was to maintain the
status quo in this regard. Although they maintained that
handlers had never applied the differential as such, they
failed to explain how it could then be regarded as a ‘market
differential customarily applied by handlers’’.
Mr. Ken Gryer, General Manager, Connecticut Milk Pro-
_ ducers Association, also testified for Modern Milk Market-
4 ing Association and Local Dairvmen’s Cooperative Associa-
, tion, and he adopted the testimony of Dr. Swonger, former
_ NEMPA cconomist, that the differential payments ‘‘served
_ to compensate nearby producers for sharing a part of the
_ fluid milk market which they formerly enjoyed, with pro-
_ ducers more distant from the market’’. (R., p. 2161). He

quoted from the final decision of the Secretary in promul-
gating the Connecticut milk order on February 11, 1959:

‘“The Federal order markets in New England and the
New York-New Jersey market provide for similar dif-
ferentials to their producers with nearby farms....
The differentials adopted recognized the higher per-

Bu... eB aGalhdies iendacaiy shatanay

ad

centage of the milk near to the market than of milk
in the more distant zones which customarily has been
used for fluid purposes. Nearby producers have been
able to obtain a price higher, in relation to more distant
producers, than can be accounted for by the advantage
in the cost of transportation to market....’? (BR,
pp. 4463-64).

Under cross-cxamination, Mr. Geyer acknowledged that
handlers would not pay the nearby differential today (R.,
p. 2166), and that such differential served to exclude Ver-
mont dairy farmers from the Connecticut market, a fact
which plaintiffs contend evidences the ‘‘trade barrier’’
aspect of the differentials in any market. (R., pp. 2163-64).

667

Mr. Geyer also referred to the justification and the find-
ings made by the Secretary in 1958 in respect to the nearby
differential provision of the Southeastern New England
(R., p. 2168), which order was consolidated into the pres-
ent milk order in 1964. The former milk order was the
most important one consolidated into the Boston order,
in respect to number of producers and area, and the Secre-
tary’s decision, 23 Fed. Reg. 8238, is included in the
volume containing former milk orders and states as follows:

‘‘Historically, dairy farmers in the States of Massa-
chusetts, Rhode Island and Connecticut, because of
their location with reference to the large population
concentrations of New England have disposed of a
substantially larger percentage of their production for
fluid uses than have dairy farmers in the upcountry
area. Hence nearby producers have been able to
realize a price higher in relation to more distant pro-
ducers than can be accounted for by the advantage in
the cost of transportation to market. Under the mar-
ketwide pooling herein proposed and without some ad-
justment mechanism the nearby producer, notwith-
standing, would be paid on the basis of the average

668

utilization of all milk on the milkshed rather than g.
cording to the utilization of his milk. Under a reg.
ulated market, however, he obtains the benefit of ay
established Class I price which may be higher than jy
the absence of regulation, and has assurance that his |
milk will not be displaced by cheap unregulated milk, |
from more distant sources.... The scheme of nearby
farm location differentials and the amount thereof js

identical with that employed in adjacent Federal orde;
4

markets....’’

The testimony of E. L. Tipton, Economist, Cooperative
Dairy Economics Service, representing about 9 coopera-
tives at the hearing in 1963, brought out the lack of av.
thority under the Act for requiring the differential pay-
ments to be made by other producers, rather than handles, >

% He also maintained that handlers would not pay such df. |
; ferential payments today, and that they had turned to —
3 upcountry milk because of the excess charge of 7 cents in
; the zone differential for nearby milk—a fact which estab. |
j lished that handlers would not pay nearby producers either

: 46 or 23 cents for their milk over the uniform prices. His
testimony also related to the promulgation of the other
milk orders, and to the question of nearby producers hay.
ing an outlet for fluid utilization. (R., pp. 2125-50,
Exhibit 55).
Respectfully submitted,

Cuarles Patrick Ryan
400 Prudential Bldg.
Washington, D. C. 20005
ST 3-0004

Attorney for Plaintiffs.

a». Ss aaa

i

669

From the Economic Brief of USDA, 1937

F. Equalization of fluid milk sales among producers

The use plan of payments for milk puts all handlers in
the market on an equitable competitive basis, and equaliza-
tion of fluid milk sales is intended to do the same thing for
all producers. Equalization of fluid milk sales is simply
an extension of a plan that has been employed by each
handler and each cooperative creamery. If a creamery
sold 75% of its milk as whole milk and the remainder as
cream, it did not pay 75% of its producers the fluid milk
price for all their milk and the remaining 25% the cream
price for all their milk. Such a method obviously would
have been inequitable. Instead each producer was paid
the whole milk price for 75% of his deliveries and the cream
price for the remaining 25%. Under the proposed amer.d-
ment to Order No. 4 the fluid milk sales of the whole market
are distributed among all producers in the milkshed in
exactly the same way as though they were all members of
a cooperative association which equalized its fluid milk sales
among its members.

The lack of any plan for an equitable distribution of fluid
milk sales among all producers has been one of the
principal causes of unsatisfactory conditions in the Greater
Boston Marketing Area during past years, for it has led
to destructive competition among groups of producers.
Under normal conditions in the Eastern markets, whole
milk prices average approximately twice as high as the
prices paid for milk reported for use as cream. However,
the milk used as cream is of the same quality as the milk
used for fluid milk and can at any time be sold as whole
milk in competition with it. A handler’s ability to pay his
producers a favorable composite price, as compared with
the price of competitors, has depended largely upon his not
having so great a volume of surplus sales (in this case
cream) as his competitors. If, by cutting prices, a group

—

succeeded in selling a large percentage of its milk as fluid
milk, its composite price would be higher than that of
another group that received the full market price but
carried a larger percentage of the surplus. Thus it was
that a handler could cut the price of fluid milk in the city
and still pay a composite price in the country, as high or
even higher than that of the competitors who did not cut
prices.

670

A few simple examples will illustrate the situation. If
the Class I price is $3.00 and the Class II price is $1.50, and
if there is 60% of the total milk sold as Class I, then a
group of producers carrying its share of the market’s
surplus would return to its producers per hundredweighit
as follows:

60 pounds as Class I at $3.00 = $1.80
40 pounds as Class Il at 1.50 = 60

Composite price per hundredweight = $2.40

This group of producers has more surplus than it needs
- to take care of the daily fluctuations in its sales. There-
fore, if it can contract to sell a portion of its surplus milk
at any price above $1.50 per hundredweight, it will obtain
a greater return for its milk. If it sold half of its surplus
milk for fluid milk consumption at $2.25 per hundred-
weight, which is slightly more than one-half cent per quart
under the market price for fiuid milk, and still continues
(a practice not uncommon in Boston, particularly in the
wholesale trade), the return to this group of producers per
_ hundredweight would be as follows:

; 60 pounds as Class I at $3.00 = $1.80
2 20 pounds as Class Iat 2.25 = £45
| 20 pounds as Class II at 1.50 = ww

Composite price per hundredweight = $2.55

Re ee a. ee — =

=e

671

This group will have undersold the market by more than
one-half cent per quart and by so doing it will have in-
creased its composite price to producers for all milk by
$.15 per hundredweight. If the handler were a proprietary
concern rather than a cooperative, he probably would con-
tinue to pay his producers approximately the same net
price as competing dealers in the territory and

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386413_0133%3A02. Public record. Not legal advice.