278 APPENDIX B 



rectness of tests. Even where the principle has been accepted, 

 the methods of adjusting prices on the butterfat basis have not 

 been uniformly fair to all concerned. 



The adjustment of prices according to butterfat content has 

 usually been done by quoting a definite price per hundred- 

 weight for milk of a given basic test, and then adding a few 

 cents to the price per hundredweight for each additional tenth 

 of one per cent of butterfat (each tenth of one per cent repre- 

 senting one-tenth of a pound of butter in one hundredweight of 

 milk) or deducting the same amount for each tenth of one per 

 cent below the basic test. This base has most usually been a 

 given test as 3.5 per cent though in many instances a broader 

 base has been used 3.3 to 3.7 per cent, for example. The 

 former is the more desirable. This base should be established 

 by taking the average of a number of tests made during the 

 month. 



The differential the premium or penalty allowed for each 

 "point" or tenth of a per cent above or below the base has 

 usually been fairly near the price of butterfat. In Chicago for a 

 number of years it was three cents. In other places it has been 

 2> cents or 3 cents. During the years 1912 to 1914, inclusive, 

 prices of butter at Chicago varied from 24 to 40 cents per 

 pound, with the average close to 30 cents, so that the value of an 

 extra pound of butterfat in milk over a given standard has 

 about equalled its commercial value, though only approx- 

 imately so. In numerous cases the low differential has been 

 retained even with unusually high prices for milk. 



It is obviously unfair to the producer of high-testing milk 

 to pay him no more than is paid the producer of low-testing 

 milk. But just how much more he should be paid is not so 

 easily answered. On the question of cost of production we are 

 completely in the dark. It is known, for example, that it costs 

 more to produce the richer milk. No definite data are available, 

 however, to show the relative costs of producing 3.5 per cent 

 or 4.5 per cent milk. We must therefore fall back on market 

 values. 



