June, 1941] Local Structure of iMilk Prices 27 



This confusion and lack of uniformity in the price quotations to 

 which producers pay attention, prevents the selection of any one of them 

 as the one to which all producers react. Instead, that price comparison 

 to which the producer would react, if he made his decision on the basis 

 of the price \\'hich would have returned him the greatest net income 

 at the farm (setting aside for the moment the many other factors which 

 must be taken into consideration) is selected. 



Using this criterion, the price series used in this comparison are com- 

 posite prices with trucking costs and association dues deducted, expressed 

 on a 3.7 per cent butter fat basis; i.e., net prices on the farm. The average 

 prices presented are calculated by deducting typical transportation 

 charges from not only prices received by those who send their milk on 

 commercial routes, but also those who haul their own milk to the dealer's 

 plant. The situation on a particular farm may vary slightly from this 

 average but not sufficiently to nullify the comparison. Prices are calcu- 

 lated to a uniform butterfat content, and refer to milk of market grade. 

 Premiums received for Grade A milk have not been included. 



This price comparison is presented in figure 11, which shows the 

 differential of Manchester prices over Boston prices and the percentage 

 of producers in the area studied, selling to Manchester. 



Manchester prices, over the whole period, have averaged 4.3 cents 

 over Boston (at the farm in Haverhill). For the first half, 1931-34, Man- 

 chester prices were at a discount of 7.2 cents under Boston, while in the 

 years 1935-38, they averaged 15.9 cents premium over Boston. (These 

 statements, along with others in this and the following sections, refer to 

 M'hat might be termed the general level of prices and do not imply that 

 there have not been short periods during which price relationships have 

 been reversed.) 



Until 1936, both markets purchased milk on a base-rating plan, but 

 following December of that year, Boston shippers have sold on a com- 

 posite or flat price basis. 



Factors Other Than Price Which hifliiejiced Haverhill Producers 

 in Their Choice of a Market 



In attempting to learn the reason why producers sold in the markets 

 in which they did, much was discovered regarding the factors other than 

 price which operate in an area to influence market outlet. 



First, and most important, is that producers are seldom free to shift 

 from one market to another at their own convenience. Many handlers 

 limit the number of producers or the amount of milk which they will 

 purchase, and even though producers may wish to sell to them, no means 

 of "getting into the market" exists. Another way in which free move- 

 ment of producers may be limited, is through existing contracts with the 

 present sales agency which prevent release of a producer to another mar- 

 ket except after a certain length of time. 



Another deterrent to the shifting of markets is the use of a base- 

 rating system or some similar device, whereby a new producer has to 

 take, for a time, a lower price than do regular producers. 



