—Lancaster Farming, Saturday, Dec. 20, 1975
56
Controlled
UNIVERSITY PARK -
Pennsylvania is one of 29
states exercising some type
of control over the price of
fluid milk Fourteen states,
including Pennsylvania,
actually fix minimum or
maximum prices for bottled
milk
Regulations granting
states this authority go back
to chaotic conditions in the
dairy industry during the
depression of the 1930’5,
according to Milton C.
Hallberg, professor
agricultural economics at
Penn State University.
Dr. Hallberg published
findings from a study of 83
U.S. fluid milk markets in
the Fall issue of “Science in
Agriculture,” the quarterly
Peima. farms funded
HARRISBURG, PA. -
Operating and real estate
loans to Pennsylvania far
mers by banks totaled more
than $485 million at year-end
1974, according to the
Pennsylvania Bankers
Association.
William A. Betz, chairman
of the association’s
Agricultural Lending
Committee, said that banks
held $242 million in
production loans, 60 percent
of gll loans in this category,
and $243 million in farm
mortgage loans at the end of
1974.
Betz, who is president of
the New Tripoli National
Bank, said that by com
parison life insurance
companies in the state held
$lB million in real estate
loans. Federal Land Banks
$175 million in real estate
loans, and Production Credit
Associations $129 million in
production loans.
He added that the Farmers
Home Administration held
$35 million in real estate
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magazine ot the Agricultural
Experiment Station at Penn
State.
The study was not intended
to settle long-standing
arguments over state milk
control "once-and-for-all,”
Hallberg stated. Rather, the
work examined the
relationship between milk
control in the 29 states and
two indicators of market
performance in
novativeness and marketing
margins using 1969
figures.
Innovativeness was judged
on the basis of dates of in
troduction of various milk
containers, and
methods of product han
dling. Marketing margins
were measured as the dif
ference between farm price
loans and $22 million in non
real estate operating loans.
Betz said that figures
compiled by the American
Bankers Association show
America’s banks nationwide
at year-end 1974 had $18.2
billion m farm operating
loans outstanding, up 6
percent from the year
before, and $5.9 billion in
real estate farm loans
outstanding, up 9 percent
during the past 12 months
Farmers’ equity totaled
$438.4 billion nationwide at
the end of 1974, increasing
$36.7 billion from the end of
1973.
Farm expenses jumped
$7.6 billion to $73.4 billion at
the end of 1974, with realized
net income from farming
dropping $1.7 billion to $27.7
billion during the year, but
still the second highest in
come level ever, Betz
reported.
The estimated number of
farms at the beginning of
this year totaled 2,830,000 -
It Knows
No Limits
milk
and retail price adjusted
for variations in sales
composition
Of the 83 markets in the
sample, the sale of milk
below cost is prohibited by
state authority in 17
markets. Minimum or
maximum prices at retail or
wholesale are established by
state authority in 22
markets. Minimum prices to
producers only are set in 4
markets by state authority.
Forty of the markets studied
were located in states having
no state milk control.
Performance of fluid milk
markets was found to vary
substantially from market to
market. Larger markets, as
measured by size of
down 14,000 from a year
before, and down 1.1 million
from the total in 1960, Betz
said.
Pennsylvania bankers are
increasingly aware of the
huge capital investments
required by farmers today
and are using improved
lending programs,
correspondent bank services
and secondary market
resources to help meet the
changing credit demands of
the state’s farmers, Betz
noted.
Eighty-seven percent of
the 390 banks in Penn
sylvania extend credit to
farm operators.
w
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markets studied
population served, tended to
be less Innovative and have
higher margins than the
smaller markets.
Markets with a larger
portion of their milk
packaged by union workers
tended to be slightly less
innovative. However, the
degree of unionization did
not appear to have a
significant impact on
margins in ihe sample
markets. Finally, there was
much variation in margins
among different regions of
the nation. This was ap
parently due to differences
in such things as tran
sportation and labor costs.
Dr. Hallberg and
associates found state milk
control to be significantly
related to “performance”
within the sample markets.
On the average, margins
were 4 cents per half-gallon
higher in markets with
resale price fixing than in
markets with no state milk
control.
The average margin in
markets with other types of
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state milk control also dif
fered from that in markets
with no state milk control.
The latter differences,
however, were not
significant. Similarly,
markets with resale prices
fixed by state authority
tended to be less innovative
than markets with no state
milk control.
“Our conclusions must not
be interpreted as suggesting
that a specific fluid milk
market with resale price
fixing will have higher
margins and be less in
novative than a specific
market with no price
fixing,” Hallberg observed.
“Nevertheless, the data
clearly revealed this ten
dency. One would normally
expect markets with resale
price fixing to have higher
margins and to be less in
novative. Thus, proponents
of state milk control should
examine their own situation
critically to determine
whether such results are
likely and whether they are
justified.”
He Indicated there may be
desirable services provided
the public as a result of price
controls that would not be
provided under stiff com
petition such as home
delivery of milk, additional
services to the elderly, and
price stability.
But as this and other
studies have shown, these
services if indeed
provided appear to come
at some expense. The
tradeoff among benefits and
costs must be weighed in
assessing state milk control.
The Penn State study made
no attempt to determine the
additional services provided
by state controlled markets,
and did not place a value on
such services.
The Fall issue of “Science
in Agriculture,” containing
the full article, is available
from 112 Agricultural Ad
ministration Bldg.,
University Park, Pa. 16802.
Individuals may also ask to
have their names placed on
the mailing list for all issues
of “Science in Agriculture.”
4)