917 
‘Ihs RURAL N n V/ - V O R K E R 
Cost of Production Plus Profit 
Statement from the New York Milk Conference Board 
An article by Clarence Johnson in your issue of May 
10. page S21. headed “Suggestions for the Dairymen's 
League,” proposes that the producer contract to furnish 
n given quantity of milk pet day on each day of the 
year, with a stipulated allowance for variations, and 
that all milk delivered in accordance with that contract 
be paid for at “cost of production plus a reasonable 
profit.” and for an over-production the producer to ac¬ 
cept for the surplus the value of the butterfat in such 
surplus, or if an under-production, he shall take the 
butterfat value until he brings the quantity up to his 
contract. 
Assuming that the actual cost of production could he 
fairly demonstrated, and a “reasonable profit” deter¬ 
mined. it seems to me the suggestion has merit. If this 
could be done it is safe to assume that buyers generally 
could accept such a plan. Mr. Johnson frankly recog¬ 
nizes that the enormous surplus production in Summer 
months is the fundamental evil of the producing end of 
the industry. It is this situation which has made it im¬ 
possible for the buyers to agree to handle all the milk 
offered by their patrons at all times regardless of quan¬ 
tity at a price other than one based on the value of the 
product into which the surplus would normally have to 
be made, with, of course, a reasonable and proper al¬ 
lowance for the expense and care necessary to produce 
milk for market. 
Heretofore, the demand has always been “take all the 
milk offered regardless of quantity; if a surplus results, 
that is the buyer’s problem, and it is likewise his respon¬ 
sibility to arrange to make good from outside sources 
any deficiency in the supply, regardless of what it may 
coot to do this.” 
To meet this demand, the buyers recently suggested 
the plan to base the price on the value of butter and 
cheese, with reasonable allowances for skim-milk and 
whey, and for the care necessary to produce market 
milk. The Dairymen’s League accepted the proposal, 
and it was approved by the Governor’s Milk Commis¬ 
sion. Under this plan all producers receive the same 
basic price, including not only the dairyman who farms 
intelligently by equalizing his production throughout 
the year, but as well the man who is responsible for the 
Summer surplus, and whom Mr. Johnson condemns. 
Under Mr. Johnson’s plan the latter would be penalized 
by a lower price should it happen the value of butter fell 
below the “cost of production ” Perhaps he should be. 
but up to the present no distinction such as is drawn 
by Mr. Johnson between the “intelligent” farmer as dis¬ 
tinguished from the “grass” man has been favorably 
regarded by the League. 
So. therefore, with this condition to be met. both pro¬ 
ducers and buyers seem to be agreed that the present 
plan is the best and most logical arrangement yet pre¬ 
sented. It should not be assumed that this plan ignores 
the "cost of production.” It is fundamental that the 
producer of any commodity shall receive costs and a fair 
profit. It therefore naturally follows that butter and 
cheese cannot continuously be sold at prices which do 
not protect the producers of the raw material. This 
being so, any prices based upon the value of butter and 
cheese, plus reasonable allowances for skim-milk, whey 
and conditions, must necessarily give the producer his 
costs plus a fair profit. If not, there would be no butter 
or cheese. 
There may be limited periods of time when the inex¬ 
orable law of supply and demand may cause the pro¬ 
ducer to receive either more or less than the actual cost 
of production. Just at the present time, due to unusual 
export demands, the new plan undoubtedly gives the 
'•roducer more than the cost of production plus a fair 
profit. These conditions can be but temporary, but when 
they exist why should not the milk producer benefit, as 
do other manufacturers under similar circumstances? 
And if there comes a time when the supply exceeds the 
demand, he must then also do as other manufacturers— 
take a temporary loss under costs. But in the cycle of 
a year, the same all-controlling law of supply and de¬ 
mand will give him his proper return. The present fa¬ 
vorable position of the producer merely demonstrates the 
soundness of the new plan—the value is there and the 
buyer can take no exception to the result. 
Under this plan the buyer at all times must take 
some loss on surplus because he is buying milk of better 
quality than the average from which butter and cheese 
are made, and is paying accordingly. But any plan 
which assures the buyer the price he pays is based on 
values, and also assures the producer he is receiving 
the maximum which lie could hope to secure from any 
other disposition of bis product must surely inspire con¬ 
fidence and ultimately set at rest any dissatisfaction 
which may have previously existed. 
I. ELKIN NATHANS. 
X< w York Milk Conference Board. 
Comment on Mr. Nathan’s Letter 
ANOTHER SIDE.—While we (lo not subscribe to 
the philosophy of the accompanying letter by Mr. I. 
Elkin Nathans, secretary of the New York Milk Con¬ 
ference Board, which is the milk dealers' organiza¬ 
tion. we give space to it because we have invited open 
and frank discussion of the subject from all sides, 
and it reveals situations and conditions with which 
producers should be familiar. 
FLUID MILK.—The persistent implied contention 
of the milk dealers is that the liquid milk market is 
their exclusive prerogative or franchise, and this is. 
as we see it. the basis of Mr. Nathans’ letter. Ac¬ 
cording to this theory, the farmer is entitled to any 
profit he can extract from the commission dealer for 
butter and cheese, hut the milk dealer has a vested 
right in the liquid milk business, and is justly en¬ 
titled to any profit it affords over and above the by¬ 
product value of the milk. On this theory the farmer 
must increase his investment in farm and cows and 
equipment to produce cleaner and better milk and 
more of it. but he must let the dealers profit by a 
monopoly of its distribution, and content himself 
with returns based on the value of surplus or by¬ 
products made from cheaper grades of milk. This 
Is the logic of the dealers’ contention, anjfl in accept¬ 
ing this basis of price-making we have for the time 
being at least accepted the principle. It is as if we 
were to say the city apple trade belongs to the com¬ 
mission dealers. The price of apples should be what 
they are worth for manufacturing purposes. The 
apple grower may Increase his acreage, and the cost 
of trimming and fertilizing and spraying and hand¬ 
picking to produce dessert fruit, but he must stay 
out of the city market. The commission dealer has 
an exclusive franchise, thereby right of possession, 
and the farmer must be content with a price for his 
apples based on their value for cider and vinegar. 
THE FAIR SHARE.—It is not enough that under 
the present unusual export demand the price of milk 
for a month has been fairly satisfactory, though not 
so far exceeding the cost of production if we con¬ 
sider all the elements of cost as Mr. Nathans as¬ 
sumes. Every general industry is today making 
profits. The profits in the distribution of dairy pro¬ 
ducts, including liquid milk, are most attractive. 
The producer is entitled to a fair share of these 
profits produced by world conditions, and while with 
his modest demands the producer may consider him¬ 
self doing fairly well, we all know that he is not get¬ 
ting a fair share of the profits realized from the in¬ 
dustry as a whole. He will never get it through 
any system of manufacture or of care of surplus 
alone. The solution of the milk problem is in the 
city wholesale milk market. The by-products are 
easily and cheaply transported. They compete in 
normal times with the products of the world in our 
New York market. The price of butter is affected by 
the cost of oleo and other inferior and low-priced 
substitutes. Liquid milk is a local product. There 
are no substitutes for it. 
JUSTICE TO THE PRODUCER.—The consumer 
pays proportionately more for it than for butter or 
cheese. The dealer now gets the whole difference. 
So long as they dominate the wholesale market they 
will have it. So long as we furnish just as much 
milk as they need we shall never induce them to 
divide the extra profit with the consumer or with us. 
Mr. Nathans’ law of supply and demand was ap¬ 
pealed by the milk trust forty-odd years ago and has 
not been in operation since. We may force a better 
price for the volume they take, but the consumer 
will pay it. and consumption will be curtailed. Dairy 
herds will decrease. If we want to develop our 
dairy industry we must dominate the city wholesale 
market ourselves, and after demonstrating the cost 
of economic distribution, increase consumption by a 
fair division of the savings with the city consumer. 
The Postmaster-General and New York 
Rural Routes 
Early in the week a strong committee representing 
the New York farmers went to Washington to protest 
against the rural route changes. Among others on 
this committee were S. .T. Lowell, Master of the 
Grange; C. Fred Boshart, of the State Agricultural 
Society; II. E. Babcock, of the Farm Bureau Asso¬ 
ciation; a representative of the Rochester Chamber 
of Commerce and newspaper men. On May 5, 50 of 
the rural routes were dropped in Central New York, 
and since 191s many changes have been made which 
inconvenienced the farmers. Both Senators from 
New York, and Congressmen as well, went with this 
delegation to Postmaster-General Burleson. They 
carried a trunkful of petitions and personal letters. 
These were secured largely through the activity of 
the Grange and the Farm Bureaus. There are over 
2,000 replies to the questions sent out by the Farm 
Bureaus. Mr. Burleson made a long speech to the 
delegation, attempting to explain why these changes 
were made, but he was promptly told that the mail 
service had not been improved, but was being de¬ 
moralized. Mr. Babcock presented a vast amount 
of evidence, which proved beyond question; 
1. Mail collected by the rural free delivery man, in 
some cases, does not get back to the postoffice in time to 
go out that day. 
2. The greater length of routes makes it impossible 
to cover them in bad weather. 
3. Service in being received so late in the day by 
some farmers that their business interests are being 
affected. 
4. By shifting service from one postoffice to another 
the organization of communities is broken down by the 
Post office Department. 
5. Through this same shifting of postoffice it is be¬ 
coming difficult to communicate by mail with one's near 
neighbors in any reasonable length of time. 
6. Many farmers who formerly received door service 
have had their boxes moved from their gates to from a 
quarter to a half mile distant. 
The delegation then presented their argument to 
fbe Fourth Assistant Postmaster-General, and the 
Superintendent of Rural Route Mails. The facts 
they presented compelled an agreement to send a 
group of inspectors to go over the whole service 
immediately. During this conference Mr. Babcock 
asked if the farmers of New York State may expect 
reasonably prompt mail service in bad weather. 
The answer was yes. It was stated that incidental 
expense money is now in the hands of postmasters, 
and they may hire assistants to rural carriers to 
cover their routes in bad weather. The documents 
collected by the Farm Bureaus showed plenty of 
instances where farmers have not received their 
mail, even during the past mild Winter and Spring. 
The Fourth Assistant Postmaster-General was then 
asked if the farmers in New York have any right 
to look forward to 100 per cent door delivery of 
mail. In answer that official said, “If they have 
not, then I have no business here.” He was asked 
if he will investigate and correct any legitimate 
complaint. The answer was, “Yes, if farmers will 
give me the specific instance in writing.” These 
answers were later shown to Mr. Burleson, and he 
at once approved them. One trouble which we have 
run upon in trying to straighten out these postal 
tangles is what is known as “Burleson gag.” This 
means an order that postmasters must not talk about 
their troubles. Mr. Burleson denied any knowledge 
of any such rule. The delegation has come back to 
New York determined to take Mr. Burleson right at 
his word. They will gather every possible instance 
of inefficiency in rural delivery service and put every 
case right up to the Postoffice Department. Mr. 
Burleson has now expressed a desire to hear the 
truth, and he should have a full-size dose of it. 
Every farmer in New York -who has just cause or 
complaint about rural mail service should at once 
put his case iu writing. Send one copy direct to the 
Department and another copy to the local Farm 
Bureau Agent. In that way it will be possible to 
collect a mass of evidence which cannot be dodged 
or overcome. 
A Discussion of the Milk Plan 
The letter by Mr. Nichols in last week’s Rural 
inspire the following reflections: 
1. Some of us did not need the experience of the 
January strike to convince us that the League needed 
to be reconstructed. That was apparent to everyone 
familiar with organization work from the start. At 
the first annual meeting. Mr. Dillon called attention to 
this need, and the members agreed with him. and 
ordered a reorganization, but it was officially defeated. 
The R. N.-Y. has called attention to this need several 
times since, and suggested reforms. By all means let 
us have it now. 
2. There need have been no contracts requiring the 
delivery of milk to members of the milk trust during 
the .strike, if the executive committee had not authorized 
such contracts and executed them for the plants in 
which its members were interested. The League could 
avoid such contracts as well as a new company, and the 
new organization could repeat them as well as the old. 
It is a strange contention to say that men require new 
laws or regulations to restrain themselves from repeat¬ 
ing an acknowledged blunder. 
3. If “central control” had the magic promised for 
it. the League ought to have been successful. It had 
central control without limit. In 1016. the State De¬ 
partment of Markets controlled every quart of milk and 
sold every quart of milk produced by its members for 
six months, whether it belonged to a co-operative plant 
or otherwise. Dealers accepted the milk and paid for 
it. The League has had the same central control since. It 
has exactly the same central control as the Standard Oil 
and the harvester trust. It gets its authority from the 
same New Jersey corporation law. It is the strongest 
control from the top that astute lawyers have been able 
to devise. The members . concentrated all selling 
authority in the League, and it divided the control. It 
created the Marketing Association and the Country 
Milk Company, and authorized them and 2S creameries 
to sell milk. We then had 30 units selling milk instead 
of one. The League had the central authority and gave 
it up. Forming a new company will not correct this 
policy. Either the new or the old company could pre¬ 
vent this error; either one could repeat it. Moreover, 
the new plan includes two companies and two heads, 
and makes central control impossible. Clearly the 
failure was not due to lack of central control, nor can 
a new control promise more. The error was in admin¬ 
istration. The remedy must be in management. 
4. Milk is received at probably 2.250 places. The 
manufactured product will be iu competition with plants 
and experts of the whole world. The surplus is an 
incident of a few weeks. Is it the “simplest and surest 
and only logical way” to buy up all these plants and 
operate them from one point? Can we so surely outdo 
the local plants and other experienced manufacturers? 
Are we so sure of a market way strewn with roses? 
The same men promised the same success with the plans 
they now admit failed. The point I want to make is 
the fact that we have as yet no facts and no figures to 
justify the assurance of success, and without facts and 
figures any assurance of either success or failure is 
merely a guess. We ought to have something better 
than guesses for such a big investment. 
5. Why should we have such a colossal plan as this 
thrown over us like a Mother Hubbard skirt? There 
is nothing new in these organizations except to adjust 
details to peculiar needs. These organizations have 
been in successful operation for years in other places. 
When the members retained control they succeeded: 
when the control became autocratic, they failed. Why 
lose time and money repeating the mistakes others have 
made and corrected? Make the organization co-opera¬ 
tive. Bring iu your best men with successful business 
experience. Let them devise a plan, and then give every 
member an opportunity to vote his approval or objection. 
(Continued on page 927) 
