MILK CARTAGE 23 



increased operating efficiency which would result. Distributors now performing 

 their own cartage service might prefer a standard rate structure to relinquishing 

 their direct producer contacts on a reorganized route basis. Since a standard 

 rate structure should generally lower producer unit marketing costs, an immediate 

 gain would be assured to one group in the industry. 



The nature of milk pricing, the relation of cartage rates to it, and the nature 

 of the cartage service are such that cartage rates are a matter of concern to the 

 Milk Control Board and might be to the Department of Public Utilities. It is 

 not out of place to note that the function of the Control Board is to stabilize 

 producer prices by establishing dealers' prices f. o. b. the market. Dealers' 

 prices f. o. b. the market, as indicated by Cassels, Rowe and others, are made 

 up of a combination of prices representing payment for milk and for services. 

 It is evident that the objective of fixing f. o. b. the market prices can scarcely be 

 achieved if the prices paid for the intervening services are seriously out of line. 



A sound rate structure has but two characteristics: simplicity and flexibility. 

 The rate structure is the basis on which rates are determined; consequently it 

 should be easily and readily understood and sufficiently adaptable to assure 

 fulfilling the established objectives. 



The objectives of a rate structure are three. It should assure maintenance of 

 service through establishing proper rate levels. It should be equitable, and 

 equity can be achieved through a standard method of rate determination. It 

 should bear some relationship to the transportation ser\'ice performed. 



A tentative rate structure has been devised which could be generally applied 

 throughout the shed. Distance from market and farm location, principal operat- 

 ing cost factors, are the bases. 



The distance principle is applied on a zone basis, zones increasing in a geometric 

 ratio beyond the first zone. The center of the city (market) was determined as 

 closely as possible by observation with due regard for the center of population. 

 For plants located in towns in the market area but outside the population centers, 

 the plant itself was taken as the center from which to determine zones. The 

 zones and widths are given in Table 15. 



Table 15. — Proposed R.-^te Zones for the Springfield Milkshed .-vnd Zone 

 Rates Proposed for On- and Off-Route Producers 



Using this method of determination, all producers in the section were located 

 no farther than Zone C from Springfield, in which city the most distant plant 

 was located. 



Rates would be calculated in arithmetic progression from a fixed minimum 

 applicable in Zone A. The rates given in Table 15 are based on a minimum rate 

 of 15 cents per hundredweight and a zone dilTerential of 5 cents. 



