price is usually not calculated. It is readily obtainable, however, by dividing the total value of the milk by the number of 100 pounds sold. The base-surplus plans used at the four markets differ considerably in the methods of establishing producer bases and in arriving at the base and surplus prices. At the Omaha-Council Bluffs market and the Quad Cities, an effort has been made to keep total producer bases in line with fluid sales (class 1 and class 2). This is accomplished by adjusting bases by that percentage figure which represents the relationship between fluid sales and total bases first established under the scheme. At Omaha the bases, once established according to 1933 production, remain fixed except as altered by an adjusting board; whereas, under the Quad City plan, new bases can be established according to the production in the fall months of the previous year.

It should also be pointed out that while the class 1 and class 2 use prices are fixed, the price paid for base milk depends on the percentage of base milk used for these and sometimes lower-valued uses. Therefore, even though the adjustment between established bases and fluid sales is not perfect, variations in the value of base milk are automatically compensated for by variations in the base price to producers. This, the most refined system used in any of the markets, was worked out in connection with Federal milk licenses.

The alternative system used at Iowa City and Burlington allows producers to establish bases without regard to fluid sales. As a result, the total bases tend to be far in excess of fluid sales. A fixed basic price is then paid on the percentage of base milk sold as class 1. The remainder, that is, excess within the base and all over the base, is paid for at the surplus price. These two associations recognize but two uses fluid and surplus.

One significant difference between the plans is that the first method gives the producer a relatively high average price for his base milk and the latter affords a relatively high base. The base price also tends to be relatively high with the high-base plan, but this is offset by the fact that only a portion of the base milk is paid for at the base price.

The present base-surplus plans are relatively new, and an adequate appraisal of their results would be difficult. The plans appear to be working with reasonable satisfaction, in the opinion of the officials in charge. These officials agree that some attempt should be made to divide the surplus more equitably by rewarding the producer who maintains an even production throughout the year. There is no evidence to date, however, that the aggregate production since adoption of these plans has seasonal variations any less pronounced than formerly, though some of the variations may be attributed to abnormal production conditions during the last few years.

At some other Iowa markets forms of the base-surplus plan have been tried and subsequently discontinued because the results were unsatisfactory. At Sioux City, for example, a 3-month trial in 1932

is said to have nearly disrupted the new association. The feeling is quite widespread on the part of marketing officials in these markets that the base-surplus plan in any of its modified forms is ill-adapted to heavy surplus areas, such as many of those surrounding Iowa markets. When the membership of the cooperative includes a large proportion of the available or potential milk supply, control schemes are usually much more workable. In any case, the local situation is an important consideration. There is also the danger that any present arrangements may create new and more difficult problems unless an enlightened management is continually available to make necessary adjustments. Some of the managers not using the base-surplus plan expressed the opinion that its use by other Iowa associations had merely resulted in additional marketing machinery without improving any of the market conditions. The plan has not been used for a sufficient period to warrant definite conclusions as to its adaptation to conditions in Iowa.

MEMBERSHIP POLICIES

ALL OF the organizations operating in Iowa use a written market

ing agreement between the association and the producers. The contracts in the different markets are all similar or identical, since most of them are patterned after the agreement used by the Des Moines Cooperative Dairy Marketing Association. (See Appendix, p. 70.)

The number of producers reported under contract in each of the 10 associations in 1935 is listed below according to location:

The contracts, for the most part, apply to whole-milk patrons only and customarily run for a limited period, with the provision that either party may terminate the contract by means of a written notice 30 days in advance of a specified date.

t

The agreements call for full consignment of all milk produced on farms occupied or controlled by the producer except for home-consumption requirements. In many cases, especially with bargaining associations operating a base-surplus plan of payment to producers, this provision has not been enforced. On the contrary, producers are given the specific privilege of keeping on the farm milk in excess of the base quantities and frequently are actually encouraged to do so. If a producer, under the agreement, refuses to sell any milk through the organization, it is definitely considered a violation of the contract and steps are taken to bring the producer in line.

The contracts provide a $25 fine for each violation. Most associations, however, have had no occasion to resort to legal means of enforcing the contracts. Such violations as there are often arise out of misunderstandings, and disputes are settled without difficulty. Moreover, the associations are usually more interested in compliance than in collecting liquidated damages.

The association at Des Moines recently adopted a resolution to change to a new producer contract which takes cognizance of the courts' objections to the existing agreement and otherwise simplifies the language. The resolution requires that 90 percent of the active producers agree before the change can be made. If the new contract is adopted, it is not unlikely that the other Iowa associations will follow this lead in revising their producer contracts.

EXPANSION OF MEMBERSHIP

Five associations reported that it was their policy to limit the number of milk patrons to somewhere near the existing number, and the remainder reported membership open to all in the established trade territory who could qualify from a quality standpoint. This, in some cases, involved meeting the sanitation requirements of the city. The mere statement that membership is limited or open means little, except as a statement of policy. Membership may be open with many limitations and may be closed with many exceptions. For example, some associations announce an open policy, yet the requirements for new producers are such that they tend to discourage prospective members from joining the association.

The larger associations generally require a written application for membership which is acted upon by the board of directors. The producer's location relative to established truck routes, his facilities for producing high-quality milk, and the quantity of milk available are important considerations. Also the alternatives of the prospective shipper are taken into account. If he has been a producerdistributor, or has been selling milk to an independent pasteurizer, or may reasonably be expected to obtain one of these outlets in the near future, he is likely to be considered a desirable association member.

The cream shippers mentioned on previous occasions represent nonmembers, and the patronage in every case is open to all who can be reached on established or expanded truck routes and direct hauls, unless they should be refused on the basis of quality.

One of the principal reasons for attempting to limit fluid-milk patronage is to hold the market for the old and relatively nearby producers. If the membership is expanded the result is a larger volume of milk, and unless fluid sales happen to be expanding, a lower average price to all shippers. The old and nearby producers, being more experienced in the sale of fluid milk, tend to produce milk of higher quality and more uniform in flow. If a large membership results in a heavy surplus it may not be to the interests of the old producers to sell through the association pool. Thus, the holding of these most desired members in line often dictates a policy of limited membership.

On the other hand, insofar as nonmembers are a potential, if not a real source of competition for the fluid-milk market, the nearby producers may have less to lose by expanding the membership. In this way the fluid-milk market is maintained by the association. The surplus of milk over fluid requirements surrounding most Iowa markets, therefore, tends to result in a membership which supplies milk well in excess of fluid needs.

The expansion tends to stop sooner than one might at first expect in view of the heavy milk production in the State, together with a system of improved roads and modern truck transportation. Except for numerous improvised means for limiting membership, the answer seems to lie in the fact that most Iowa farmers are not typically dairymen and they are not interested in supplying fresh whole milk daily as a side-line enterprise even at some premium. As the membership expands, the premium becomes smaller and the price approaches that of milk for manufacturing only. It is then more profitable to sell farm-separated cream, since the transportation charges are lower and the skim milk is available for feeding on the farm.

PROCUREMENT OF MILK AND CREAM

PROCE

years.

ROCUREMENT of milk, and in some cases cream, represents a major problem in the operation of nearly all of the associations under consideration. However, in most instances, reasonably satisfactory arrangements have been worked out during the last few The trend is markedly toward more stable trucking conditions. The developments at Des Moines and Omaha are of particular interest. Information regarding the routes operated by 10 associations is summarized in table 12.

Range Average

8489°-37-5

1 2 trucks haul mixed loads.