GENERAL FARM PROGRAM 897 



For the reasons set forth above, we recommend that for the re- 

 mainder of the year 1949 the Congress provide that parity be computed 

 in such fashion as to include an allowance for farm wage rates. The 

 inclusion of farm wage rates in the parity index raises the index about 

 14 points and increases the parity price of milk sold wholesale 22 

 cents per hundredweight. 



The Department of Agriculture in computing the support level for 

 milk used in manufacturing has chosen a method which gives a con- 

 siderably lower support level than those indicated above. The 

 Department takes 90 percent of the parity price for milk sold whole- 

 sale and then adjusts this to a manufacturing milk support price 

 level by taking the 90 percent of parity price figure and multiplying it 

 by 88.5 percent. This is because the Department feels that manu- 

 facturing milk prices bear a normal relationship to the price of all 

 milk sold wholesale at about 88.5 percent. I merely want to state 

 that we do not feel this is an appropriate method of computing the 

 support level for the price of milk used in manufacturing outlets. 



During the 1909-14 base period, there was very little differential, 

 pricewise, between milk used in fluid-milk markets and milk used in 

 manufactured dairy products. There have been great improvements 

 in marketing methods in fluid-milk markets since that period. In 

 addition, fluid-milk markets have tended to become somewhat segre- 

 gated from manufacturing milk markets by the imposition of stringent 

 sanitation regulations in most of our cities. These sanitation regula- 

 tions necessarily increase the cost of milk for fluid purposes as com- 

 pared to the cost of producing milk for manufacturing dairy products. 

 We feel, therefore, that the price of all milk sold wholesale in the 

 1909-14 base period is more representative of the price of milk for 

 manufacturing purposes during that period than it is today. If 

 parity were computed for manufacturing milk prices on the basis of 

 parity for all milk sold wholesale in the base period, the price of 

 manufacturing milk today would be supported at 3.53 per hundred- 

 weight. Under the Department's interpretation and methods of 

 computing manufacturing milk price support levels the support level 

 now is 3.12 per hundredweight. Different methods of computing 

 parity give the results shown in table 1. 



However, the Department has already set in motion its price- 

 support program for this year under the methods which we described 

 above. We believe it would be entirely proper, at this time, to 

 provide that the Department of Agriculture make allowance for farm 

 wage rates in computing manufacturing milk price support levels. 

 This would raise the support level 18 cents per hundredweight which, 

 when spread over the milk production of this country for a year's 

 time, would mean an increase of about $100,000,000 in the value of 

 milk and butterfat sold from farms. 



For the period starting January 1, 1950, when title II of the Agri- 

 cultural Act of 1948 becomes effective, we propose modiflcations in 

 the methods of computing parity and the factors to be used in the 

 several series involved. 



First we propose that the index of prices paid by farmers for com- 

 modities bought be adjusted to include farm wage rates. This would 

 increase the parity price for milk sold wholesale from farms about 24 

 cents per hundredweight. As compared to current methods of com- 



