30 MASS. EXPERIMENT STATION BULLETIN 389 



The growth in the independent pricing of the various processes involved from 

 the moment the milk leaves the farm until it reaches the consumer is probably 

 a basic fault. Specific allowances for trucking, for receiving, for pasteurizing and 

 bottling, for paper containers, for wagon delivery in place of store sales must 

 inevitably either increase the total cost of the product to the consumer or lower 

 the returns to the producer. A combination is possible but improbable. 



Pricing milk F.O.B. the farm rather than F.O.B. the city under the condi- 

 tions enumerated, i e., 



L Direct Haul, 

 2. Dealer— Pool, 

 could improve conditions considerably. The primary objection to this method, 

 i. e., discrimination to nearby shippers, is untenable under current conditions. 

 Actually the present system is exceedingly unfair to the nearby producer. Handlers 

 operating throughout several of the sheds have a single cartage rate; a few of 

 them have several rates but only one rate is apt to apply to a particular route 

 even though distances and volumes on any particular route vary noticeably. 



There might be some objection to pricing F.O.B. the farm on the ground 

 that such a practice would defeat one of the essentials to market stability; namely, 

 known and uniform prices for milk having the same use. Such a deduction does 

 not necessarily follow. It should, upon a moment's reflection, be apparent that 

 the point in the marketing process at which prices are to be uniform should bear 

 some relationship to the objectives sought. Because pricing F.O.B. the market 

 seems desirable for primary markets served by common carriers having published 

 transportation rates and a variety of applicable rates, one should not necessarily 

 conclude that the market is the point at which uniform prices should be set for 

 direct-haul areas. In markets characterized by a dealer-pool, product -costs vary 

 even though class prices are uniform. In fact pricing F.O.B. the city in direct- 

 haul areas and with a variety of trucking rates tends to defeat the instrument 

 of control, "known and uniform prices." 



With class prices set F.O.B. the farm, a number of improvements might take 

 place. It is reasonable to assume that, if handlers are to "bear the expense" for 

 getting their supplies to the plant, they will do it as efficiently as possible; i. e., if 

 assembling costs are an important consideration. If other considerations are 

 more significant, their true worth will become apparent. 



Farm pricing might normally cause some adjustments that could be expected to 

 exist in a so-called ideal situation. In markets having dealer-pools and dealers' 

 choice of price plans, the handler settling with his producers on a flat basis is in 

 a preferred competitive position. Handlers owning their purchases on the use- 

 plan would find themselves ranked according to the proportion of purchases in 

 fluid sales. Since the objective of each handler would be low aggregate costs 

 per unit, each one would endeavor to secure his supplies as near the plant as 

 possible; quality and volume per stop being considered. In practice, the flat plan 

 dealers would operate in nearby territory; just beyond them dealers having a 

 high proportion of purchases in fluid sales would be favored; and the handlers 

 having the larger proportion of purchases in Class II would secure their supplies 

 on the outer edge of the milkshed. This progression is certainly desirable and 

 therefore more or less inevitable. Dairy farmers are interested in the value per 

 hundredweight of milk sold as well as in class prices. The ability, generally 

 speaking, of handlers to secure supplies would vary with the blended prices, 

 which in turn depends largely on sales of Class I milk. 



The flat plan dealer, having 100 percent of his purchases in fluid sales, could 

 and would pay the top price and presumably could buy from any shipper in the 

 shed. He might be expected to confine his operations close to the market. Gen- 



