The Chicago Milk Inquiry

C. S. Duncan
1918 Journal of Political Economy  
The problem of securing an adequate supply of pure milk for cities has for a long time been the subject of serious consideration. This commodity is such an essential food in the dietary of every household, and at the same time is so highly perishable, so easily contaminated, and so dangerous as a medium for carrying disease that the duty to safeguard its purity and wholesomeness has been recognized in most large centers. It is true that the problem has most generally been viewed from the
more » ... wed from the standpoint of sociology. The economic phases of the problem have until recently remained in the background. So long as there remained large sections of the producing field unexploited, and so long as the distributive organization was on a competitive price basis, the economic problems of milk production and distribution never were acute. Evidences of the impending struggle appeared in the conditions in Boston and New York, where investigations were deemed necessary to break the growing monopolistic power of the milk dealers. It may now be seen that these were only preliminary to the crisis that occurred during the summer and autumn of I9I7. This crisis developed in various large cities from the Atlantic to the Pacific, and led to many investigations. 32I This content downloaded from 168.103. The present discussion, however, will be limited to the situation at Chicago, as representative of the whole movement. A brief survey of the factors at work to bring on the crisis in the Chicago district will afford a background upon which to throw the details of the inquiry. There are three dominating factors in the situation: first, the rise of the large dealer or distributor in the city; second, the growth of the Milk Producers' Association to a position of control in the "Chicago zone"; and, third, the war. Each main factor has brought minor ones in its train, but these may be discussed incidentally. Several years ago a very large proportion of milk was distributed to consumers in Chicago by small dealers. Twenty-five years ago there were said to be as many as 2,700 distributors in the city, and in i906 there were more than I,300 such distributors. By i9ii the tendency toward concentration was clear. At that time there were ten or twelve large dealers who handled almost two-thirds of the milk coming into Chicago. The rest, it was estimated, was in the hands of between i,200 and i,500 small dealers. By I9I7 the number of dealers was reduced to 668, and two companies were distributing 40 per cent of the total. There were several results flowing from this concentration of control. All the savings and economies of large-scale business were secured. At the same time it became possible to offer better service. The large companies sent their own inspectors into the field to help the dairyman protect his herd from disease, to insure against lapses between the rare visits of the municipal inspectors, and to guard as far as possible against infection and contamination at the source. There were better equipment at the country bottling plants, better transportation facilities, and more numerous and better-equipped receiving stations. Along with this growth came also an increased bargaining power. While keen competition in service existed within the city, these large distributing companies made only a single basic offer to the producers. This was not a fixed price, but only another instance of a standard price driven to this common basis by the ruthless competition in service. There came to be known in the trade a "Chicago price." To match this concentrated control over distribution there arose in the producing area an organization of dairymen. This organiza-This content downloaded from 168.103. THE CHICAGO MILK INQUIRY tion is known as the Milk Producers' Association. It has grown by an accretion of local or county associations until today it claims a membership of i6,064. It reaches out into all parts of the Chicago zone; in fact, it consists of the majority of milk producers in this area. While it is not single in its purpose to "fight" the distributors, that is fundamental in securing a unifying motive. Subordinate interest is found in getting a better breed of dairy cows, in determining a balanced ration for the herd, in keeping accounts, and in exchanging ideas on topics connected with the dairy business.' It was in the spring of i9i6 that this Association first made its full strength felt. Milk contracts are made in the Chicago district for six-month periods, one running from May to September inclusive, the other from October to April inclusive. Contracts for the first period are called summer contracts; those for the second period are called winter contracts. One of these is the pasture season; the other, the feeding season. Dairies are also classified on this basis into summer dairies and winter dairies. At the beginning of these two contract periods a price is fixed for the ensuing six months. In the spring the price runs on a butter-fat basis, on what is called a "cheap milk" price. The reason for this is that pasture is cheaper than other feed, and that butter is made from the surplus of this season and stored for the winter market. " The surplus is the vital thing with the distributor."2 These six-month prices must be high enough to cause a sufficient flow of milk to the city, and at the same time low enough to reach the purchasing power of the masses. At the contract-making in April, i9i6, the Milk Producers' Association, now fully organized, demanded an increase in price for whole milk, and when their demand was refused proceeded to cut off the supply 'Amended Constitution adopted at the Annual Convention, 1914. Constitution of the Milk Producers' Association : Preamble SECTION I.-We the Milk Producers, tributary to Chicago, State of Illinois, believe it to be for our mutual interest to hereby organize the Milk Producers' Association, and agree to be bound by the following Constitution: Object SEC. 2.-This association is formed for the purpose of promoting the prosperity of the producers of milk, tributary to Chicago, for mutual protection, and for the general welfare of its membership. 2 Cf. Testimony, pp. 3606-9, and Distributors' Brief, p. 4. This content downloaded from 168.103.074.169 on February 17, 2018 16:55:19 PM All use subject to University of Chicago Press Terms and Conditions (http://www.journals.uchicago.edu/t-and-c 324 JOURNAL OF POLITICAL ECONOMY for the Chicago market by labor-union methods, i.e., by threat of physical violence, by dumping milk out by the roadside, etc. They got their price, and milk to the consumer rose from 8 to 9 cents per quart. The next contract period, October, i9i6, was passed without more trouble. But in April there was another struggle, a "milk war" it was called, with further threats of boycott. The milk dealers again submitted to the producers' demands; the price to producers rose from $I .55 to $2.I2 per hundred pounds; the consumer paid io cents a quart. Meanwhile the United States entered the war, and plans for food conservation were prepared. Farm products began to rise in price. A minimum guaranty for the wheat crop of I9I7 and i9i8 was established by the federal government. A movement was started to encourage the raising of swine by the promise of a price for corn of " I to 13," that is, a bushel of corn to I3 pounds of pork. Then came the unprecedented frosts in August and September to cut short the corn crop. It was inevitable that milk should be affected along with other foods. Under these conditions the dealers and producers met to fix the winter milk price to begin on October I, 1917. The milk producers demanded $3.42 per hundred pounds, basing their demand upon a theoretical feeding formula which had been presented to a conference of the members of the Milk Producers' Association in August. This formula gave the amount of various feedstuffs and of labor required to produce one hundred pounds of milk.' These amounts were translated into price figures, for "illustrative purposes," as the expert who made the formula declared. On the basis of these illustrative monetary values the "cost" of producing one hundred pounds of milk was calculated at $3.43, one cent higher than the price demanded by the Association. The dealers were again forced to accede to the demands of the producers, and signed a contract for the month of October. The I This theoretical formula was made from an average of over 4oo records taken from dairy farms in northern Illinois: Feeding formula on the basis of ioo pounds of milk: grain, 44 pounds; hay, 50 pounds; silage, i88 pounds; bedding, 39 pounds; man-hours, 2.42.-Milk News (October, 1917), p. 6. This content downloaded from 168.103.THE CHICAGO MILK INQUIRY 325 price to the consumers rose from IO to 13 cents per quart. Immediately there was an outcry from the consumers. Consumption fell off from I5 to 25 per cent. A survey of typical districts showed a reduction in every economic group. The group most affected was the middle class, who felt the burden of increased price, and could reduce consumption. There was less reduction among the poorer class for the probable reason that these people were already so near the minimum that they could not go much farther. Even the wealthy North Side group was influenced, especially in the use of cream. A brief experience at this price led the Health Commissioner to declare that "a price of I3 cents a quart makes it practically impossible for the average wage-earner to purchase the amount of milk necessary for a family of three or four small children. Even if babies deprived of mother's milk are allowed a sufficient quantity of cow's milk, there is great danger of children between one and five years of age not securing sufficient quantities of milk necessary for their proper nourishment."' The price held firm at $3.42 a hundred pounds to producers and I3 cents a quart (7 cents a pint) to consumers through the month of October. There continued to be, however, an agitation among consumers; various bodies took up the subject, among them the Department of Health and the Committee on Health of the City Council. As the end of the month approached the dealers refused to renew the contract for November. Again a strike was invoked, and the flow of milk to Chicago was stopped by the Milk Producers' Association. At this juncture the state Food Administrator was prevailed upon to take the matter in hand. He called in representatives of the producers and of the distributors for conference on the question.
doi:10.1086/253091 fatcat:4f23rwemenaphbvh4j3u3dsbpq