Pricing of Class I Milk Under Federal Orders

HE search for "better" methods for pricing milk has been going on for a long time. The current crop of "experts" are unlikely to find the method except possibly in terms of the present situation. Five and ten years from now the environment in which milk prices function will be different and at least the details of pricing techniques will need to be changed. Most economists and probably most producers and distributors have concluded that market place prices like those we have for grains and livestock cannot be made to work for fluid milk because of the nature of the product and the health regulations surrounding its production and distribution. At one time bargaining between producer leaders and the distributors appeared to be the perfect substitute for market place prices. Bargaining was done by those most intimately acquainted with the local effects of price making forces. All too often, however, the bargaining parties used only that part of their knowledge which would help them as farmers to get higher prices or as buyers to justify lower prices. Combined with honest differences of interpretation, this attitude of selfprotection led to repeated failures of bargaining. The result frequently was arbitration by an impartial third party. Public hearings with government taking over the arbitrator's position were only a short step from bargaining conferences. Hearings preserved the theoretical advantages of bargaining, namely, the introduction of evidence by those closest to the local situation and the opportunity to give consideration to all of the price making forces. But the legal formality of hearings plus frequent window dressing by witnesses for the benefit of their customers has detracted seriously from the so called advantages provided by public hearings. Even more important, the protracted delays incidental to using government as the arbitrator has made public hearings inefficient as the sole means of establishing prices. More recently, Class I formulas have been devised and used. Until the adoption of the Boston formula this year, all Class I