The Cooperative 



Creamery 



Better 



By Dr. Frank A. Cougler 



V ^^UTTERFAT prices, grades and 

 ^~-/J tests under market conditions 

 _y y of today have created much 

 confusion among cream producers. A 

 better understanding about each one of 

 these is sorely 

 needed. This 

 discussion will 

 be about prices. 

 First, it 

 should be made 

 clear that coop- 

 erative associa- 

 tions such as Il- 

 linois Produc- 

 ers' Creameries 

 and other coop- 

 erative cream- 

 eries in the U. 

 S. have had lit- 

 on the price of 

 demand largely 



Dr. Gougler 



tie influence, if any, 

 butter. Supply and 

 govern the butter market. 



Cooperative marketing, however, has 

 had a tremendous influence on the price 

 paid the producer for butterfat. Even 

 a casual review of what happened in 

 Illinois since cooperative cream market- 

 ing was started in 1922, bears out this 

 assertion. In the I. A. A. annual report 

 of 1922 the following statement ap- 

 pears: 



"Last Spring the price of butterfat 

 for sour cream was low, especially in 

 the southern part of the state. The price 

 then ranged betwen eight and thirteen 

 cents below Chicago Extras." 



Later in 1924 when the first meeting 

 was held at Paxton, Ford county in 

 the interest of organizing a cream pool, 

 it was reported that the local butter- 

 fat price was 37 cents with the 90 

 score butter market in Chicago at 45 

 cents. The present price schedule under 

 which all Producer Creameries operate 

 calls for 49 cent butterfat price if the 

 90 score Chicago butter market were 45 

 cents. This is 12 cents higher than the 

 1924 local price. . .^ .. .... 



Only a small percentage of our cream 

 producers understand the true rela- 

 tionship in price of butterfat to butter 

 at various price levels. A creamery 

 operated on an efficient basis can pay 

 approximately the prices for butterfat 

 in relation to butter quotations, accord- 

 ing to the table below: 



It will be noted in the table that at 

 one point, namely 25c, the price paid 

 for butterfat is the same as the value 

 of butter. An efficiently operated plant 

 can pay for good cream delivered, the 

 same price as the market quotation 

 for 90 score butter. In other words, 

 the "overrun" pays all manufacturing 

 and sales cost. Approximately 80 

 pounds of butterfat are required to 

 make 100 p>ounds of butter. If 25 cents 

 a pound is paid for the fat, 80 pounds 

 cost $20.00, making butter worth 

 $25.00, leaving $5.00 as the value of 

 the overrun. Figured in the same man- 

 ner at the 50 cent butter level, 80 

 pounds of butterfat at 55 cents costs 

 $44.00, making 100 p>ounds butter 

 worth $50.00, giving the overrun a 

 value of $6.00 per 100 pounds of 

 butter. 



This variation in overrun values at 

 different price levels has a marked in- 

 fluence on the prices producers have 

 received for butterfat. Prior to the 



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 Beautiiul horses and the cream oi the 

 nation's livestock will soon rie ior honors 

 at the 1939 International Livestock Exposi- 

 tion, Chicago. Dec. 2-9. This year Man- 

 ager B. H. Heid4 is promising another out- 

 standing exhibitton vrith record entries in 

 all classes. 



• 

 World War, butter prices were low 

 compared to war prices. The margin 

 between butterfat and butter was rela- 

 tively wide as already shown and as the 

 price of butter advanced due to the 

 World War, in many cases the same 

 margin was maintained. Thus the busi- 

 ness of processing butter became a 

 very profitable industry. 



One of the largest private creamery 

 operators who at one time purchased 

 a lot of f>ooled butterfat is authority 

 tor the statement that the creamery in- 

 dustry did not establish its butterfat 

 prices on the basis of overrun values 

 until p>ools began to operate in Illinois. 

 When the first pools were organized, 

 a pKjlicy was adopted which required 

 the purchaser to submit bids reflecting 

 the true value of overruns. The pur- 

 chaser also had to buy on Associations 

 weights and tests. 



At this point it is of interest to com- 

 pare some of the early bids received 

 for pooled butterfat with prices pro- 

 ducers are getting today. Early in 1928 

 a pool was organized at Mason City, 

 Illinois. One of the bids received 

 from a large centralizer in February 

 was as follows: 



NOVEMBER, 1939 



