MILK PRICE DETERMINATION 



JUST what price farmers should get for their milk has been a 

 peculiarly vexing question. Before the war, farmers selling 

 milk to city dealers were in an unusually weak bargaining position. 

 When their position became intolerable, they organized into pow- 

 erful bargaining associations, many of which were said to be illegal 

 under strict interpretation of the law. 



One of the earliest formed and most powerful of these produc- 

 ers' associations has been the Chicago Milk Producers' Association, 

 numbering 16,000 members and controlling most of the milk that 

 is shipped into Chicago or manufactured in the district immedi- 

 ately around Chicago. During the years immediately preceding 

 the entry of the United States into the great war, this association 

 bargained directly with the Chicago milk dealers as to what prices 

 the farmer members of the association could get for their milk. 

 They held a successful strike in April of 1916, and thereafter the 

 Chicago milk dealers seemed to regard the association with con- 

 siderable respect. The city press and the city politicians, how- 

 ever, felt that the farmers were too high-handed in their disregard 

 of certain laws, and forthwith began agitation which finally re- 

 sulted in indictments against the leaders in the Producers' Asso- 

 ciation. 



In the fall of 1917, the milk producers adopted as their guide 

 in arriving at milk prices what has been called Pearson's formula. 

 According to this formula, the cost of producing a hundred pounds 

 of milk in the Chicago milk district is equal to the cost of 44 pounds 

 of grain, plus 188 pounds of silage, plus 50 pounds of hay, plus 39 

 pounds of bedding, plus 2.42 man hours of labor. To the valua- 

 tion thus secured, certain differentials were to be applied to each 

 month of the year, the widest differential being 120.3 per cent, in 

 December, and the narrowest 70.6 per cent, in June. This for- 

 mula was devised by Professor F. A. Pearson, of the Dairy Eco- 

 nomics Division of the University of Illinois, after several years of 

 actual cost accounting work in the Chicago milk district. It really 

 represents actual cost of production on a large number of farms 

 in certain specific years. Using Pearson's formula as a guide, the 

 Chicago milk producers asked the dealers $3.71 per hundredweight 

 for their milk in November, 1917. The dealers refused, and a 

 strike was declared. The Food Administration intervened in an 

 unofficial way and induced the producers to agree to a price of 



