2CX) THE MARKETING OF WHOLE MILK 



producers. This is the "bulk Hne" * idea of establishing 

 the price at such a point as will cover the cost of produc- 

 ing the great bulk of the commodity coming to the market. 

 Even here, however, a study of costs alone would not 

 necessarily keep sufficient supplies coming to the market, 

 as the above analysis of the normal relation between cost 

 and price shows. 



Largely as a result of the attempt to use cost of pro- 

 duction as a basis for a determination of milk prices, 

 there came into prominence, early in 191 8, what is known 

 as the formula method. The Chicago Milk Commission 

 had been in session for several months during the close 

 of 1917 and the beginning of 191 8, attempting to deter- 

 mine a fair price for milk in the Chicago district. After 

 taking nearly six thousand pages of testimony the Com- 

 mission was really more at sea than when the inquiry 

 started. Costs varying from $2.05 to J12.00 per hundred- 

 weight were shown by the producers. ^ This variation 

 alone showed, in the opinion of the Commission, "the 

 impossibility of determining cost of production from such 

 evidence." In addition there were all sorts of conflicting 

 opinions expressed as to proper methods of charging 

 feeds, — whether, for example, feeds were to be charged 

 at cost of production or at market price. As a last resort 

 the Commission adopted the formula method, which 

 had been proposed by Hoard's Dairyman some time 

 earlier.' 



The formula plan was based upon the assumption that 

 the relative quantities of the different elements going to 



' See Price Fixing by a Price Fixer, F. W. Taussig in Quar. Jour, of Econ., 

 Vol. XXXIII, Feb., 1919, p. 219. 



'Report of Commission, Milk News, Feb., 1918, p. i. 

 ' Hoard's Dairyman, Dec. 14, 1917, p. 732. 



