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Federal Reserve Bank of Chicago June 21, 1957

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THE DAIRY INDUSTRY moves into the spotlight in
June. Seasonally large supplies and low prices provide
the industry with the principal ingredients for launching
its annual promotional activity. In recent years, this
sales effort has taken on additional importance as production has persistently exceeded consumption.

Milk
production

Price
support
purchases

Government purchases
as a per cent of
annual output

(million pounds)
1950
1951
1952
1953
1954
1955
1956

116,602
114,681
114,671
120,221
122,094
123,128
125,698

3,666
13
348
9,981
9,141
4,747
5,173

3

8
4
4

* Less than one-half of one per cent.
The "surplus gap" as measured by Government purchases has not changed substantially since 1955, and
this year purchases of about 4 per cent of output on a
milk-equivalent basis are again in prospect. Thus, a
basic imbalance in the industry continues even though
CCC stocks of dairy products have largely been erased.
Per capita consumption of dairy products has increased only slightly since the low reached in 1953, and
most of the gain represents distribution of dairy products
through noncommercial outlets—school lunch, institutions
and donations to the needy. While the growth in population alone expands the market by about 2 billion pounds
each year, total milk production has been increasing
nearly as fast. Moreover, a higher portion of the output
has been sold as whole milk, and relatively less milk is
being used on farms or sold as farm-separated cream.
These production and marketing trends are expected to
persist for some time to come. Thus, if the "surplus
gap" is to be closed at present prices, additional market
outlets must be found.
MILK PRODUCTION in the first five months of this
year was about 1 per cent above the corresponding period
a year ago. For the entire year, the gain in milk output
may be close to 2 billion pounds even though there are
fewer milk cows on farms than last year. Excellent
pasture and the continued high rate of concentrate feeding in most major producing areas assure a new record
output per cow. In the past decade production per cow
has risen to over 6,000 pounds or 20 per cent. The gain
has more than offset the downward trend in dairy cow
numbers, and total output has risen by about 10 per cent
since 1947.

Number 410

Prices recei e.y farmers for milk in early 1957
averaged somewhat above year-ago levels and are expected to continue near year-earlier for the remainder of
1957. A higher portion of the milk supply used in fluid
form and a continuation of price supports at last year's
level largely account for the higher prices.
With milk production above ,year ago and prices the
same or higher, cash receipts from the sale of dairy
products are likely to show an increase for the third conIn many Midwest markets, however,
secutive year.
lower milk prices will restrict any income gain. In April,
for example, blend prices received by farmers in several
Midwest markets were below year ago.
Blend prices
received by farmers

Per cent

April 1957

change from
year ago

$3.45
3.92

—3
—4

Milwaukee
South Bend-LaPorte

3.58
3.73

—3
—2

Quad-Cities
Cedar Rapids-Iowa City

3.48
3.47

—1
+5

Chicago
Detroit

Omaha-Lincoln-Council Bluffs ..
U. S. average price received by
farmers for milk

3.93
3.99

+4

FARMERS _are making_ rapid strides in
per unit of output. Among the more
costs
reducing
spectacular recent developments has been the adoption
of bulk milk handling techniques. Benefits accrue in
the form of lower costs of handling, hauling, reduced
spillage and higher quality product.
DAIRY

Conversion to bulk handling began about 1950 in
most Midwest areas, but the rapidity of its adoption has
For example, in Fort Wayne,
varied substantially.
no milk was received in bulk
City
Sioux
Muskegon and
from producers in early 1957 but in Cedar Rapids and
and Milwaukee 93 and 76 per cent, respectively, of the
milk was received in bulk deliveries. For other selected
Midwest markets the proportion of the milk received from
bulk producers is as follows Chicago 43%, Detroit 9%,
Dubuque 24%, Quad-Cities 28% and South Bend-LaPorte
47%.
Research Department