Economic analysis of alternative uses of surplus grade A milk in fourteen north central markets

Abstract

"During the period 1950-1957 one-third of the milk received in Federal Order Markets in the United States was in excess of bottling uses. The 14 markets included in this study had a surplus of 37 percent. Dairy farmers receive a lower price for that portion of their output which is manufactured than for the part consumed in fresh fluid form, which means that their returns are adversely affected by the surplus. In addition to this aspect, however, firms manufacturing this excess milk face peculiar problems due to the extreme variation in the amount available from month to month. Nevertheless it is important that this surplus milk be handled in the most efficient manner possible so as to maximize returns from it. Since milk in excess of current bottling needs cannot be stored for future fluid use, it quickly must be processed into relatively nonperishable products. Because of the differing elasticities of demand for fluid milk and manufactured products, a classified pricing system according to use has developed and is the basis for payments to dairymen for nearly all Grade A milk. This study is based on detailed monthly data from 14 of the largest markets In the North Central Region. It points out the various market opportunities available for use of surplus Grade A milk and analyzes the different systems employed in handling it. Trends in the produetion of surplus butterfat and skimmilk and in the amounts used for different classes of products are computed to aid in developing plans for handling surplus milk in the future. It is recognized that the production of Grade A and of manufacturing milk are closely interrelated in the North Central Region, but this study deals almost exclusively with the problems associated with surplus Grade A and only incidentally with manufacturing milk. In the analysis of production of the various manufactured products, only that portion made from surplus Grade A milk was considered."--Preface.