Milk production, farms selling milk and cream, and other factors affecting supply,

1944-65

1 Estimated, DS-307, p. 33, U.S. Department of Agriculture, Economic Research Service, Washington, D.C.

Senator MONDALE. What percentage of the total mass production of milk is now purchased to provide milk for the school milk program? Mr. MEHREN. As I recall, on a national basis it is 22 percent of the fluid milk. May I turn to one of my associates, please, for that answer? That is true, I understand.

Senator HOLLAND. You may, of course, if you find that this is in some degree inaccurate, correct that part of the record.

Mr. MEHREN. Yes.

Senator MONDALE. What is the total milk production for fluid milk, for manufacturing, and otherwise?

Mr. HEALY. The fluid milk production is about, or, rather, the consumption is about, one-half.

Senator HOLLAND. Your name, please?

Mr. HEALY. P. B. Healy. It is about one-half of that which is consumed.

Mr. MEHREN. It would be one and a quarter maximum going through this. That would be the maximum of the total milk production.

Senator MONDALE. One and a quarter percent?

Mr. MEHREN. It is 21⁄2 percent of fluid milk and fluid milk accounts for approximately one-half of the total milk production in normal times.

Senator HOLLAND. I think that these statistics would, also, be developed in connection with the economics. So with what you have already stated, it would be helpful.

Mr. MEHREN. It will be one and a quarter percent going to the school lunch program, and one and one-quarter percent going to the special milk, so that the two programs together would encompass 21⁄2 percent of it.

Senator MONDALE. Of fluid milk?

Mr. MEHREN. Of all milk. You have about as much milk in the school lunch program as you do in the special milk program. (The information is as follows:)

Fluid milk products: Domestic consumption (milk equivalent), 1950–65

Senator MONDALE. I agree with you that milk production has recently been dropping. There is no question about it in Minnesota, Wisconsin, and so on. I think it is a combination of several factors. First of all, the return to the dairy farmer is one of the lowest, if not the lowest, to any class of farmer. I agree with you on that. On Grade A dairy farms in 1963, the return per hour for the operator and family for labor in eastern Wisconsin is 56 cents an hour. For grade B it was 21 cents an hour, and in the Midwest we produced a lot of manufacturing milk. In any event, that is the figure. For the central-northeast it was 42 cents an hour.

So first of all, the dairy farmer is getting a very low return per hour. Secondly, dairy farmers have to more or less be married to their cattle. As Senator Talmadge says, the dairy farmer needs no Sunday clothes and very few everyday clothes. It is a 7-day, 14-hour-aday occupation. Nobody likes to be tied down this way. And with the improved prices for beef, pork, soybeans, and so on, there are alternatives which bring a more desirable return.

Finally, they are able to sell their milk cows for a pretty decent return right now in the market.

But this gets back to another problem. A great part of the reason for the decline in milk production is the absence of a dairy support level which offers reasonable assurance of an improved economic return for the dairy farmer. And that is the way to deal with the problem of supply. I think that if milk production continues to fall, prices will ultimately rise for everybody, including the poor and everybody with a limited income. And I think that is a separate problem. I would say that your figures, since the milk going into this program amounts to 2% percent of the total production, present a very interesting situation. You say one of the arguments against a permanent program is that milk production is going to be slowed down. That is almost irrelevant. We can still afford this for our children. Mr. MEHREN. I will cover that point later on in my statement.

When the special milk program was initiated, milk production far exceeded the capacity of commercial markets to take it at prices that would yield acceptable incomes to producers. There were, as there have been until about a year ago, very large Government acquisitions of dairy products under the price support program.

It was considered-and we think quite properly-that to increase fluid milk consumption among children was a better way to handle part of a long-term surplus of milk than to let it all go into storable dairy products and then to Government storage. We believe that the program has worked well. At present program levels, some 3 billion half-pints of milk are consumed yearly under the special milk program. This is about 21⁄2 percent of national fluid milk consumption. Senator HOLLAND. How much of it went into surplus last year? Mr. MEHREN. I do not have the figures, but it is substantially more than that which is going into surplus now. It is about 14, 15 months ago that what may possibly be a turndown in dairy, really, began to show itself.

Senator HOLLAND. Your economic showing will cover that?
Mr. MEHREN. Yes, sir.

(The information is as follows:)

Dairy products removed from the commercial market by programs of the U.S. Department of Agriculture, marketing years, 1949-66

CCC purchases (delivery basis) of butter, cheese, and nonfat dry milk, as well as PIK exports were lower last marketing year than in 1964-65. Net butter removals were 126 million pounds, 190 million below 1964-65, while those of cheese, 21 million pounds, were 113 million below 1964-65. Nonfat dry milk fell to 881 million from 1,223 million the previous year. Net removals were lower than purchases because USDA sold 35.3 million pounds of butter and 4.7 million pounds of nonfat dry milk for domestic use in 1965–66.

In the 1965-66 marketing year, both USDA dairy product sales and donations fell below a year earlier, reflecting smaller quantities removed and lower carryin stocks on April 1, 1965. Combined CCC utilization and PIK exports for butter and nonfat dry milk last marketing year were the lowest since 1961, while cheese was the lowest since 1960 (table 10).

During April, USDA had purchased no butter or cheese under open-purchase offers, and print butter offers were rejected because offering prices were above the equivalent to support purchase prices. USDA contracted for 65 million pounds of nonfat dry milk for delivery in April-June in 4-pound containers and 50-pound bags for domestic and foreign donations. In April, USDA paid 17.65 cents per pound for vitaminized nonfat dry milk packed in 50-pound bags, 19.093 cents in 41⁄2-pound containers, and 18.793 cents for domestic packs. Prospective U.S. supplies of nonfat dry milk in excess of domestic use are smaller this marketing year than last. Foreign sales are expected to be lower and most of the remaining available supplies are expected to be used for donations. Dairy stocks below year earlier

Storage stocks of nearly all dairy products, as of April 1, 1966, were below a year earlier. Only fluid cream and natural cheese, other than American or Swiss, were higher. In milk equivalent terms, stocks were estimated at 3.4 billion pounds, 1.9 billion below a year earlier. This is the lowest stock level for that date since 1952. While commercial holdings fell slightly in 1965-66, Government stocks dropped to negligible levels.

In the second quarter, milk production is rising seasonally, and so are commercial holdings. Dairy products stocks are expected to continue below a year earlier, but by mid-year likely will rise to about twice the April 1 level. Whether supplies in excess of current requirements move to commercial outlets or into CCC stocks will depend on how rapidly production rises and how the trade views the prospective supply-demand situation in the August-January period, the usual out-of-storage months.

Because of reduced production, butter carryover at end of calendar 1966 may be even lower than last year's low level of 52 million pounds. American cheese stocks at the end of March totaled 229 million pounds, 9 percent below a year earlier; practically all were in commercial hands. Currently, cheese stocks are low relative to use, so storage demand is likely to be strong over the next few months because of the growing cheese demand.

USDA and manufacturers' stocks of nonfat dry milk-not used in computing milk equivalent (fat solids basis) of stocks-were 68 million pounds at the end of March, down from 233 million from a year earlier and 31 percent from the February level. Government holdings were down sharply from a year earlier and manufacturers' holdings are also lower. With supplies continuing lower in 1966, carryover stocks by December 31, 1966, are expected to be about the same as last December's low level.

Mr. MEHREN. The program has not always absorbed a major part of what once were massive milk surpluses, but it clearly has helped maintain incomes of dairy farmers. And there is no doubt that dairy farmers needed and merited income stabilization.

Senator HOLLAND. Is that the same situation now?

Mr. MEHREN. I do not have any recent analysis of earnings, but my own feeling is that if it were not possible to do better in industrial or other activities that the exodus which now appears-at least, the first symptoms of the exodus-indicates that dairying is still not one of the better earnings for farmers.

Senator HOLLAND. From that approach it would still be desirable to continue the school milk program?

Mr. MEHREN. I do not think that this would necessarily say that we should continue it. The point that is being made here is that it is

difficult to foresee in the near future, at least, any major surplus in dairying products, prolonged over any period of time as the basis for the special milk program, but that does not mean, necessarily, that there are not excellent other reasons for special milk.

Senator HOLLAND. Due to the fact that the surplus acquired during the last year largely exceeded the total of milk that went into the school milk program?

Mr. MEHREN. Oh, yes. Last year I would think that that is correct I would have to check it.

Senator HOLLAND. What you fear is that that situation may not always remain?

Mr. MEHREN. But again, speaking quite personally, I would like to be very sure that we will not be short of milk this winter. And I am not certain that we will not. I am not comfortable in feeling that we may be short of milk this winter.

Senator HOLLAND. And the schoolchildren would, certainly, be short of milk if the present budget program went into effect?

Mr. MEHREN. They would have less milk, yes, sir, by that reduction.

Our children benefited-some by getting milk which would not be available otherwise because the child had no access to school lunch milk, and others by getting milk in addition to that served in the school lunch.

Yet it is important to note that a half-pint of milk is and must be served with every national school lunch program meal. The primary purpose of the school lunch program is child nutrition-not surplus removal or price support of any single commodity, although surplus products are regularly used. Milk is required in each meal to help meet the nutritional standards explicitly required in the type A menus. They stated in the case of the milk program, Senator Holland, that it was a surplus removal program.

Senator HOLLAND. I helped to write the bill at that time. I am talking about the present time. Has it not been just as much a part of the food and milk program for children as has been the amount of milk in the special school program?

Mr. MEHREN. I have checked the record, and it is very clear that the Congress over the years has detached the special milk program from its original orientation to surplus, and it has explicitly stated that it is not a welfare program. And those two points, I think, have been clearly established in the record made by the Congress.

Senator HOLLAND. Then, really, the history back of the thing is not controlling at this time.

Mr. MEHREN. I would not think so. Not in terms of the later statements of the Congress.

Thus, 3 billion half pints of milk are served under the national school lunch program annually. This, again, is the same amount as that distributed through the special milk program. Many children in the United States do not get lunches or milk. Those who have access to both the special milk and the school lunch programs may receive subsidized milk from both sources. We want to find means to get milk-at least a half pint daily-to all of our growing children. We would rather do this than to have some of our children get no milk, while others might have two or three additional half pints. We would even more prefer to extend a balanced meal, including at least a half