June, 1941] Local Structure of Milk Prices 23 



PRODUCERS' RESPONSE TO PRICE 



Farmers respond to price in many ways. These responses can be 

 grouped in two categories: first, responses having to do with production, 

 either the amount produced, the methods of production used or the prod- 

 uct; and second, responses which have to do with marketing, i.e., where, 

 and in what form, the product is sold. While this classification is not 

 sharp, a useful distinction can be made between supply responses affect- 

 ing production and those affecting marketing. 



The former group of supply responses, (those affecting production) 

 have received attention from many students." This is particularly true 

 as far as the short time responses of milk producers are concerned. 



Despite the many aspects of milk producers' response to price which 

 remain unexplained, this study makes no attempt to investigate the field 

 of production responses. Instead, efforts are concentrated on marketing 

 responses, a phase of the subject which has received much less attention 

 from students. 



With widespread price fixing, it is becoming more and more desir- 

 able to have some knowledge of the extent of price differentials and the 

 length of period required to influence producers to transfer from one 

 market to another. At the present time it is sometimes said that there is a 

 tendency for prices of two different markets in the same territory to ap- 

 proach equality, other factors being equal. But there is little evidence to 

 support such a statement, even when it is qualified with that convenient 

 phrase "in the long run." 



In attempting to throw some light on this matter of producers' re- 

 sponse to differing prices in two markets, two areas in New Hampshire 

 were selected. Selection of these particular areas was carefully made. 

 Using the individual producer maps described in the first publication of 

 this series," those areas where two milksheds overlapped were located. Of 

 seven of these, the two in which intermingling of producers, non-inter- 

 ference of a local market which might offer the alternative of retail dis- 

 tribution, and availability of price records all seemed most propitious, 

 were selected. 



These two were the town of Jefferson, where Boston, Mass. and 

 Berlin, N. H. compete for milk, and the town of Haverhill, where Boston 

 and Aianchester, N. H. compete for milk. The location of these areas is 

 indicated in figure 9. In both of these areas the competition is between 

 wholesale outlets, truck routes of the two markets intermingle and there 

 has been some shifting of producers between markets. 



^For example see: , ,,^ , t^ . ■,,•,1 -r. j i- • ..i. 



Allen R H Hole, Erling, and Mighell, R. L.. "Supply Responses in Milk Production m the 

 Cabot-Marshfi'eld Area, Vermont," U. S. D. A. Tech. Bui. 709,_ 1940. ,.,.„, 

 Cassels, J. M., and Malenbautn, Wilfred, "Doubts About Statistical Supply Analysis, Jour, tarm 

 Econ. 20, 448-461. 1938. _ ^ , „ " -r. . • . 



E::ckial, Mordecai, Rauchcnstein, Emil, and Wells, O. V., "Farmers Response to Price in the 

 Production of Market Milk," U. S. D. A.. B. A. E. mimeograph, 1932. , ^ , „ . „ . „ 



Cans A R "Elasticity of Supply of Milk from Vermont Plants, I The Milk Feed-Price Ratio, 

 Vermont AgVi. Expt. Sta. Bui. 269, 1927. . „ • t^ ,. 



Johnson S M "Elasticity of Supply of Milk from Vermont Plants, II Factors Affecting Deliver- 

 ies in Cabot and Marshfield, Vt., 1920-1935," Vermont Agri. Expt. Sta. Bui. 429, 1937. 

 Parsons M. S., "Effect of Changes in Milk and Feed Prices and m Other Factors Upon Milk 

 Production in New York," N. Y. (Cornell) Agri. Expt. Sta. Bui. 688, 1938. 



"MacLeod, opus cit. 1937. 



