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Federal Reserve Bank of Chicago - July 6, 1962

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MILK PRICES received by farmers in the United
States averaged $3.70 per 100 pounds in June for all
wholesale milk-17 cents below a year earlier. The price
has dropped 44 cents from March to June this year, somewhat more than a normal seasonal decline reflecting the
lowering of dairy price supports on April I.

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•
The price of milk for fluid consumption_has declined
relatively less than prices of other dairy products. Most
of the fluid milk sales are under Federal milk market
orders which regulate minimum prices distributors must
pay for the milk going into fluid uses. Nevertheless,
lower prices for other dairy products tend to reduce the
average price farmers receive for milk sold in Federal
order markets, although the decline is more gradual than
for milk used in manufactured dairy products. Milk sold
for fluid uses in May fell 16 cents per 100 pounds from
the year-earlier level while manufacturing milk declined
23 cents. However, the impact of changes in support
levels of milk sold under market orders may not yet fully
reflect the lower supports since prices to farmers set in
these milk markets are based on product prices in preceding months.
With milk prices for the rest of 1962 expected to remain lower than the corresponding period of last year,
farmers will have less incentive to increase production
further. As a result, the U. S. Department of Agriculture
has scaled down its estimate of total production slightly,
but at 127 billion pounds it would still represent an increase of 2 billion pounds above 1961 volume.
Total milk production, of course, reflects both the
number of dairy cows and milk production per cow. When
milk prices decline relative to feed prices—as in recent
months—farmefs tend to feed less grain thereby reducing
production somewhat. If milk prices also decline relative to beef prices, farmers tend to send more of the aged
or low producing cows to market, also helping to curb
production.

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These tendencies are clouded by changes in technology. Farmers have developed means of producing a
larger quantity of milk with fewer cows. The number of
milk cows on farms has declined steadily since 1944,
with the exception • of the single year, 1953. On the
other hand, milk production per cow has increased every
year since 1934, with the exception of three years during
World War II, 1942-44. In 1961 milk production per cow
reached 7,211 pounds-12 per cent above the average
level during the 1950's. Among the factors responsible
for this persistent progress are improvements in animals,
disease control, feeding and management.

— n'stiLTURE
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U.S. Cr'
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Dairy price supports in the year beginning April 1,
1962, were set by the Secretary of Agriculture at $3.11
per 100 pounds for manufacturing milk and 57.2 cents
per pound for butter fat. In the preceding year price supports had been at $3.40 and 60.4 cents, respectively.

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Number 660

JUL2 7 1962

Rising Output Per Cow Offsets
Declining Cow Numbers
per cent of 1940

160 —
production per cow

140 120

total milk
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_ woe'"
100

•

80

milk cows
1 I

1940

•
•

1945

ii

1950

1

11

1 1 111

1955

.I

1

1960

While the number of farmers with milk cows has declined rapidly, modern dairy farmers have increased the
size of their business in order to obtain the benefits of
the changes in technology. In the states in the Seventh
Federal_ Reserve District, the number of farms with 19 or
fewer dairy cows declined by 89 per cent between 1954
and 1959 while the number of farms with 30 or more cows
increased by 53 per cent. The total number of farms with
milk cows declined 59 per cent.
TURKEY GROWERS rejected the proposed national
marketing order in a referendum held in June. Only 43
per cent of the farmers voting favored the proposal and
these farmers produce about 50 per cent of the nation's
turkeys. To be put into effect, the order had to receive
approval of two-thirds of the votes cast (by volume of
production or by number of farmers). Except for Wisconsin, none of the key_ turkey producing states approved
the proposed controls.
CORRECTION: In Agricultural Letter Number 659
of June 29, the third paragraph should read a one per
cent increase in the fall pig crop. The number of sows
farrowing is up 2 per cent.
Research Department