10 MISC. PUBLICATION 14, U. S. DEPT. OF AGRICULTURE 



allocate for convorsion. the inw proiliiot into such uses as ^^•iIl result 

 in the greatest net returns for the in(histry — usually understood to be 

 operative within an ceononiic area, for example, the New York milk 

 shed. This would require the a<rp:re«ration of tho.se interests enihrac- 

 injr the nuirketin<<: functions from the ori<^in of the crop to its final 

 distribution. The decree of uniformity of product and time of 

 maturity of harvesting are, with most commodities, factors wliitli 

 influence materially and sometimes limit lather definitely the area 

 which can be included in the same pool. 



The pooling: featuies found in a cooperative milk-mai"ketin<j: asso- 

 ciation Avill serve to illustrate rather clearly the practices and prob- 

 lems involved in ])oolin<; by larjie areas. In the first place, such a 

 pool requires the selection of the borders of the milk shed, so that all 

 areas which naturally come into competition for the fluitl-milk mai'- 

 ket will be included. If more distant areas, which are not econom- 

 ically competitors with those closer to a ^iven market, are biou^dit 

 into the pool, the total supply is increased and prices to many of those 

 participatin<; in the ))ool are lower than they would otherwise have 

 been. If too small an area is included, uidess the cooperative pos- 

 sesses adequate purchasinir machinery to secure supplies outside the 

 lepular milk shed, times may occur when dealers are short of sup- 

 plies and must themselves <ro outside the milk shed to obtain milk. 

 When this temporary supply fiom outside the borders of the sheW 

 once ^'ains access to the market, it can not easily be prevented from 

 continuing. The final result is an oversupply, except durinir the low- 

 pi(»duction j-yeriods, and a lower avera<re })rice to producers. 



With the extremes of the milk shed defined, the fiuid-milk poolinjz 

 problem involves further the question whether the milk shed is to be 

 divided into a number of pools related to secondary' markets as well 

 as to the primary markets or whether the entire area shall be in- 

 clude(l in a sinijle pool. That there will be differentials to take care 

 of differences in transportation costs and fat content has been j;en- 

 erally reco<;nized as es.^ential. The question of jn'oper differentials 

 to care for inhei'ent economic advanl aires possessed by producers lo- 

 cated near the ))i'imary or princijial market or near a secondary mar- 

 ket is one which coo))erative associations that pool from a relatively 

 larfre area are befrinnin*; to realize is impoi-tant. That is. the pro- 

 ducer located near a market has an economic advantajje other than 

 dill'erences in transportation costs. His ease of makinjx contact with 

 dealers throuirh his close pi'oximity to the market and also the fact 

 that he usually has le.ss seasonal variation in supply, will enable him 

 to stay in business when prices aie too low i'or the more distant 

 shipper to cover costs and have a mar<jin of profit. Unless the coop- 

 erative association is willin<r to recoirnize this, it may find its member- 

 ^hij) gradually decreusin<r in the near-by areas. Generally speakiiifj;, 

 the farmer iicar a city, because of his loufjer experience in fluid-milk 

 marU"tin<2:, has adjusted his i)roduction to his demand; hence he has 

 le.ss seasonal variation in supply. 



Once the limits of the poolin<2: areas have been defined and equita- 

 ble diffei-entials have been set uj) to ( are for economic differences, the 

 problem (»f convei-tinir (he raw ]M"0(Juct into such vai-ious uses as will 

 yield the «5i\'atest net returns for the industry is of prime importance. 



