16 MASS. EXPERIMENT STATION BULLETIN 365 



of all or of any combination of them. The market pool, however, which assures 

 producers the same f. o. b. market prices for standard milk, introduces questions 

 relative to producers' rights in the market and the effect on the total supply of a 

 price superior or inferior to that currently being received. 



In May 1935, 62.6 percent of the full-time producers sold dealers whose product- 

 costs, i. e., producers' f. o. b. prices, were below the market average. A third 

 of this group, which is 20.9 percent of all the full-time producers, sold dealers in 

 group IV. Had dealers' product -costs been determined on a market-pool basis, 

 producers selling dealers in group IV in May 1935, other things remaining un- 

 changed, would have received 37 cents more per hundredweight for their product 

 than they did. This difference is 15.5 percent over their weighted average price. 

 The increase over the price paid by any individual dealer ranged from 27 to 56 

 cents per hundredweight. Producers in this group delivered 24.6 percent of the 

 supply on the market in May. 



Dealers in group I during this month had product -costs that were 20.7 cents, or 

 7.5 percent, above the pool cost. Of the total nurnber of full-time producers, 26.8 

 percent sold to these dealers. These producers represented 72.6 percent of all the 

 producers who sold dealers having product-costs better than average. 



Dealers in group I handled 23.8 percent of the deliveries to the market in May, 

 and dealers in group IV handled slightly more, or 24.6 percent. 



Analysis of relationships in terms of annual data shows but minor changes com- 

 pared with those existing in May. The pool price was 30.5 cents, or 12.1 percent, 

 higher than the product-cost of dealers in group IV, and 12.2 cents, or 4.1 percent, 

 below the product-cost of dealers in group I. The proportion of the total volume 

 of milk which was handled by each of the two groups changed slightly. Dealers 

 in group IV handled 21.9 percent and in group I, 24.7 percent of the total. The 

 ratios of full-time producers remained unchanged. 



It is probable that producers selling to these two groups of dealers would show 

 the most marked response to a market-pool price basis. The size of the variation 

 between prices necessary to stimulate action has not been determined, nor does 

 it appear certain that it can be determined exactly. It is probable, however, 

 that the greater the deviation from a central price, the greater the incentive to 

 make adjustments. 



Although it has been and can be demonstrated that a market pool will eliminate 

 the variations in dealers' product-costs, it does not follow that the market pool 

 is desirable. 



The producers supplying dealers whose product -costs deviate most widely from 

 the pool cost would probably react most promptly to the establishment of a 

 market pool. The course which their reaction would follow is a matter of specu- 

 lation. Producers selling to dealers who had a low product-cost had low average 

 daily deliveries of milk. Product-cost may have been a factor tending toward 

 a small volume of production. It is more probable, however, that lack of adequate 

 barn space, lack of carrying capacity, and pressure of other enterprises kept the 

 volume of production down. Should this assumption be reasonable, an increase of 

 30.0 cents per hundredweight would not greatly affect the deliveries of this group. 

 Producers selling to dealers having a high product-cost were and are probably 

 very dependent on their dairy business for their income. Their large volume of 

 average daily deliveries indicates a larger business. It is not inconceivable that, 

 should their price be lowered and their unit profits reduced, they might increase 

 their volume of average daily deliveries somewhat in order to maintain their 

 total income. 



