Milk Marketing Before and After Or

_ Z7,4 UNIVERSITY OF OXFORD AGRICULTURAL ECONOMICS RESEARCH INSTITUTE

MILK MARKETING BEFORE AND AFTER OR

A STUDY IN CENTRAL SOMERSET

BY B. L. SMITH

AND H. WHITBY

PRICE 2S. NET

OXFORD issued by the AGRICULTURAL ECONOMICS RESEARCH INSTITUTE 1937 UNIVERSITY OF OXFORD AGRICULTURAL ECONOMICS RESEARCH INSTITUTE

MILK MARKETING BEFORE AND AFTER ORGANIZATION

A STUDY IN CENTRAL SOMERSET

BY B. L. SMITH AND H. WHITBY

OXFORD Issued by the AGRICULTURAL ECONOMICS RESEARCH INSTITUTE 1937 PRINTED IN GREAT BRITAIN IN THE CITY OF OXFORD. AT THE ALDEN PRESS

, FOREWORD

THE central plain of Somerset has for long been a home of the cattle industry. Its rich, alluvial pastures fattened bullocks, and a great dairying industry was maintained mostly for summer milk production for the manufacture of Cheddar cheese. The county contains large districts of moorland and rough grazings, the Quantock and Brendon Hills and Exmoor Forest, but even including these its cattle population is one of the densest of all the English counties. In the agriculture of central Somerset great changes have been made during the last generation. Not only has there been a steady decline in the importance of the beef industry and an increase in the numbers of dairy cattle, but the nature of the dairying industry also has changed, cheese production steadily giving place to the sale of liquid milk. It has been a question of economics; the dairyman's returns came to exceed those of the grazier, and the growth of population and improvements in transport made the liquid milk market more remunerative, to those who could supply it, than the market for cheese. This transition in the county had reached an interesting stage by 1930. By contrast with 1900, the numbers of cattle two years of age and over, mostly for beef, had fallen by 46 per cent., and those of dairy cattle had risen by 27 per cent., and it was common knowledge that the sales of milk to buyers in. the towns were displacing farm-house cheese manufacture. In- deed, the improvements in methods of handling and transport- ing milk had brought many cheese-producing farms within reach of the London and other distant milk markets. There was a scramble to reach them, and farmers were encouraged in this by milk dealers who were looking, naturally enough, for opportunities to promote competition amongst producers. However, there was no precise information available about the utilization of milk from this great dairying district, nor about the changes which were going on. And so, in 1931, the Agri- cultural Economics Research Institute decided to make a survey of a large sample of the area. A region including about 2,000 milk producers, large and small, was selected, and everyone of 4 FOREWORD them was visited for the purpose of getting information about their total milk production and its disposal, whether sold liquid direct to distributors or to creameries, or whether manufactured on the farm into cheese or butter. Figures were collected for the months of June and December, to represent the periods of summer and winter production. As a result very complete information about the quantity of milk production and its disposal for various purposes was obtained. Almost immediately afterwards, the Milk Marketing Scheme was introduced and the Milk Marketing Board was set up. The new organization changed so completely the methods of marketing that no useful purpose would have been served by publishing the results of the Central Somerset survey at that time. In 1935, however, it was felt that a comparison between the organization of marketing before and after the inception of the Scheme would be timely, and the collaboration of the Board was secured, so that information was made available as to production and sale in the same area at that date. The returns of registered producers filed at the Milk Marketing Board made a complete re-survey ofthe region unnecessary, but where changes in tenancy had occurred in the interval local inquiry was made. The results of the two surveys, 1931-2 and 1934-5, and the comparisons between them are embodied in the report which follows here. It is shown that the effects of the pooling system have been to raise farmers' prices, and thus to stimulate an increase of production; that the guaranteed market for all milk at these higher prices has rendered milk selling more profitable than any form of farm-house manufacture, except of cream, so that Caerphilly cheese has become entirely a factory product, and farm-house Cheddar cheese has survived only by the aid of subsidies which have maintained the prices of milk sold in this form at levels as high as or higher than those of liquid milk. On the other hand, the unorganized competition between milk producers in this remote district and the dairy farmers of the suburban counties for the London market, which would soon have led to the exploitation of both, has been eliminated, and the control of supplies under the Scheme has prevented much of the wasteful transport of milk over long distances. Somerset and similar areas are now serving a function as producers mainly of summer milk for manufacture, and as reserves for FOREWORD 5 equalizing supplies for liquid consumption in the areas of concentrated population. The original survey made in 193 I -2 was carried out under the direction of Mr. F. J. Prewett, and Mr. B. L. Smith was responsible for the field work. Later, Mr. Smith was appointed to the staff of the Milk Marketing Board, and he and Mr. H. Whitby, now Assistant to the Advisory Economist at the Department of Agriculture in the University of Leeds, under- took the assembly of the information supplied by the Milk Marketing Board for 1935 and the supplementary local investigations. The Institute desires gratefully to acknowledge the collaboration of the Milk Marketing Board and of farmers and others of Central Somerset in the work.

C. S. 0RWIN Director

AGRICULTURAL ECONOMICS RESEARCH INSTITUTE UNIVERSITY OF OXFORD

October, '937 CONTENTS

I. INTRODUCTION 7 (a) Sizes of Farms 9 (b) Number of Cows I0 II. PRODUCTION AND UTILIZATION 13 (a) The Wholesale Market 15 (1) Local Retailing 18 (2) Direct Consignment 18 (3) Sale to Creameries 20 (b) Producer-Retailing 25 (c) Farm-house Cheese-making 26 (I) Cheddar 29 (2) Caerphilly 31 (d) Farm-house Butter- and Cream-making 32 (e) Milk Consumed on the Farm 33 (I) In the Farm-house 33 (2) By Calves 34

III. THE PRODUCER'S NET RETURNS 35 (a) Wholesale Prices 35 (I) Local Retailing 35 (2) Direct Consignments 35 (3) Sale to Creameries 35 (4) Transport Deductions 39 (i) Transit Risk 39 (ii) Rail Charges 40 (iii) Collecting Charges 41 (5) Premiums and Bonuses 43 (i) Level Delivery 43 (ii) Butter-fat and Cleanliness 43 (b) Producer-Retail Prices 44 (c) Farm-house Cheese Prices 45 (1) Cheddar 45 (2) Caerphilly 47 (d) Farm-house Butter and Cream Prices 49 (e) Prices of Calves 49

IV. CONCLUSIONS 50 6 I. INTRODUCTION

THIS study is a comparison between the production, price and utilization of milk in one of the most intensive dairying districts of England in 1931-2, when the milk industry was relatively unorganized though showing signs of the need for some kind of centralized control, and in 1934-5, when organization had been accomplished through the Milk Marketing Board. In June 1932, the Agricultural Economics Research Institute made a survey of milk production and marketing on 1,920 farms in Central Somerset. Information was obtained for a winter month, December 1931, representing a season of low production, and a summer month, June 1932, a month of high production, and for a few farms for the whole of the year 1931-2. It included the quantity of milk produced, its disposal by the producer, the prices received for it by him, and if sold to a factory, its ultimate utilization. The area surveyed comprised 64 parishes, and practically every dairy farm within it was included. By the summer of 1935 the Milk Marketing Board, which had started operations nearly two years earlier, was firmly established, and, for better or worse, was affecting all those engaged both on the productive and distributive sides of the industry. It was impossible, however, to assess the extent of the changes effected by the Board, owing to the lack of exact information from any considerable number of milk farms about conditions prior to the setting up of the Board. Thus, the data collected in Central Somerset in 1932, though necessarily limited in scope, took on a new value if comparable data from the same area could be obtained from the Board for December 1934 and June 1935, for a comparison would show, in quanti- tative terms, what had been the effect of organized marketing both on production and utilization of milk. The co-operation of the Board was obtained in 1936. It was not possible, of course, to trace in the Board's files all the farms surveyed in 1932. Farmers with four milch cows or under were not compelled to register with the Board, unless 7 8 INTRODUCTION they were producer-retailers,' and there had been a few changes of tenancy in the intervening period. Where for either of these reasons the Board's records were deficient; the information could still be got by local inquiry on the farms in question, and this was done for unmatched farms in i o parishes out of the 64, the selected parishes being picked at random and well scattered throughout the surveyed area. This work, which was done in the autumn of 1935, had a double value. (I) It increased the sample available for comparative purposes; and (2) it provided an opportunity to obtain information from a small number of farms, on the quantity of milk retained and utilized on. the farm, either for cream or butter-making, or for liquid consumption, including whole or skimmed milk fed to calves, about which the Milk Marketing Board has no information. As a result, the study which forms the material for this report is based on information relating to 1,460 farms, at the two periods, being 460 less than the number included in the first survey in 1932. The area surveyed extends to 127,974 acres, of which only 3,664 acres, or 2.9 per cent. of the total, is arable. It extends from the Somerset sea-coast on the west to the Wiltshire border on the east, and from the foot of the Mendip Hills in the north to the Polden Hills, where arable husbandry becomes of some importance, on the south. The land, which is old and rich grass, is used almost entirely for dairying. Glastonbury, Shep- ton Mallet and Wells, each with a population ofjust over 4,000, and Highbridge, a small industrial centre (population 2,600) are the only towns included in the surveyed area, although there is a seaside resort, Weston-super-Mare, population 28,600, adjoining it to the north-west. There are ample supplies of milk in the neighbourhood for this place as well as for Bath and Bristol, the only convenient markets for liquid milk, so that the milk produced in Central Somerset has either to find a market in London, or to be manufactured locally. The area is in. excellent rail communication with London, and there is a net- work of good roads for local communication.

1 Many of the wholesale buyers in Central Somerset required all producers dealing with them to be registered with the Board, irrespective of the number of cows. This enabled the wholesaler to claim rebates from the Board on all milk surplus to liquid requirements, and also facilitated the firm's book- keeping. RAILWAYS OVER 400 FEET BOUNDARY OF 200-400 FEET SURVEYED AREA UNDER 200 FEET 0 CREAMERIES SCALE OF oh INCH TO ONE MILE

INTRODUCTION 9 The region is not homogeneous either physiographically or economically, and differences can best be dealt with by dividing it into two districts, an eastern district consisting of 43 parishes and a western district of 21 parishes. The western district is low-lying and flat, and the 'moors' which lie within it are subject to flooding; the soil is clay and alluvium. The eastern district, on the other hand, is undulating and does not flood at all. The soil is clay, with some calcareous formation along the Wiltshire border. There are a number of differences of economic significance, the most obvious of which is, perhaps, that by long established custom domestic cheese-making is devoted to Cheddar in the eastern district and to Caerphilly in the western. Since the ad- vent of the Milk Marketing Board, however, the number of domestic Caerphilly cheese-makers has decreased so rapidly that there is now little cheese of any description made on farms in the western district. Another important economic factor is that, owing to the existence of railway rate zones, based on mileage in this case from London, farmers in the western district generally pay about one-third of a penny higher freight charge on liquid milk than do those in the east, which makes the export of liquid milk more important in the east than in the west of the area.

(a) SIZES OF FARMS The average size of farm in the surveyed area is 88 acres (Table I). Farms in the east have an average total acreage of 102 and are a good deal larger than those in the west where the average is 69. Table I NUMBER AND SIZE OF FARMS, 1931-2

No. of Total Per cent. Average farms acreage arable size of farm

West • • 630 43,658 2.2 69.3 East • • 830 84,316 3.2 loi.6 Whole area • • *1,460 127,974 2.9 87.7

Farms are not only smaller in the west of the area they also 10 INTRODUCTION , have less arable land, 1.5 acres per farm or 2.2 per cent. of the total acreage compared with 3.3 acres per farm or 3.2 per cent. in the east. Except in a few places, where the farmer has taken over a neighbouring farm, the size of farm and the proportion of arable land per farm has not altered appreciably since 1932.

(b) NUMBER OF COWS In the period between June 1932 and June 1935 the cow population in the surveyed area increased by 4,844 (i6.6 per cent.), equivalent to 4 cows per 100 acres.- This raised the average size of herd per farm from 20 COWS to 23.3.

Table II

NUMBER OF COWS IN MILK, 1931-2 and 1934-5

Number of cows Cows per farm Increase Per cent. 1931-2 1934-5 1931-2 1934-5

West • • 10,339 52,440 16.4 19.7 20.3 East • • 18,863 21,606 22.7 26.0 14-5 Whole area .. 29,202 34,046 20.0 23.3 16.6

The increase in the western district (20.3 per cent.) was relatively greater than in the eastern (14.5 per cent.), the size of herd increasing from 16.4 to 19.7 and from 22.7 to 26.0 cows respectively. Many farmers in Central Somerset, particularly in the west, combine some summer fattening of cattle with their milk production.' In view of the recent depressed state of the beef and store cattle trades, it might be thought that the increase in the numbers of cows in milk reflected some change- over from cattle raising and fattening to milk production, particularly in the western district. But the returns of the numbers of dairy and other cattle in 1932 and in 1935, obtained from the Ministry of Agriculture and Fisheries for all parishes in the surveyed area, show that this is not the explanation.

Calf-rearing too, though this is almost entirely for herd replacement. INTRODUCTION ii

Table III

NUMBERS OF OTHER CATTLE IN THE SURVEYED AREA 1932 and 1935

1932 1935 Decrease Per cent. TVest. No. No. Cattle: Two years and above .. 2,708 2,660 Between one and two years • • 2,442 2,539 Under one year • • • • 2,427 2,287

Total • • • • 7,577 7,486 1.2 East.

Cattle: Two years and above .. • • 2,138 2,107

Between one and two years • • 4,122 3,943

Under one year • • • • 4,602 3,627

Total • • • • 10,862 9;677 10.9

Grand Total • • 18,439 17,163 6.9

There has been a decrease, it is true, in the number of other cattle but only 1,276 beasts (7 per,cent.) for the whole area, and the decrease is a good deal greater in the east than in the west of the area. It may well be that with better grass in the west, grazing and fattening have been more attractive than in the east and there has not been the same incentive to turn from beef to milk, but taking the area as a whole this tendency has been very slight. The chief reason for the greater increase in the size of herds in the western district is the proportionately larger number of small farms, for, as Table IV clearly shows, the small farms have increased their herds more than the large farms. During the intervening period of three years, farms under 15 acres increased their herds on an average by 58 per cent., and the figure falls until it is only 7 per cent. on the largest farms, those of 200 acres and over. Just as striking are the absolute figures which show that while the smallest farms increased their herds by 2 cows, farms in the 150-199 acres group increased theirs only by 4 cows, and the largest farms by only a little over 3 cows. 12 INTRODUCTION

Table IV

RELATIONSHIP BETWEEN SIZE OF FARM AND INCREASE IN NUMBER OF COWS, 1931-2 and 1934-5

Size groups Number of Number of cows Increase in (both districts) farms cows per Acres 1931-2 1934-5 Increase farm Per cent.

Under 15 78 271 428 58.0 2.0 15 — 24 136 775 1,126 45.3 2.6 25 — 49 328 3,192 4,301 34.7 3.4 50— 74 267 4,253 5,129 20.6 3.3 75 — 99 159 3,452 4,063 17.7 3.8 Ioo — 149 • 240 6,780 7,614 12.3 3.5 150 — 199 121 4,423 4,905 10.9 4.0 200 ± 131 6,o56 6,480 7.0 3.2

Total • • 1,460 29,202 34,046 - -

Average • • - - - 16.6 3.3

The reasons for the greater expansion on the small dairy farm are various. The prospect of an assured market for an unlimited quantity of milk under the milk marketing scheme was attractive. The small man had not been able to market his milk so readily as the larger farmer and the Milk Scheme gave him an opportunity to increase his output. Unfortunately, as the quantity of milk handled by the Board increased so did the pool deductions, and the small dairy farmer, especially, could not afford a dwindling monthly milk cheque. A further increase in production seemed the only alternative to falling returns. It was unfortunate that the producers' milk state- ments as rendered by the Board gave undue prominence to the amount of the pool deductions, and producers were more struck with this than with the amount of their net returns. It was a question of psychology, and a vicious circle was started in which producers, both big and small joined, but the bigger producer with more capital to fall back upon did not go into a panic so easily. II. PRODUCTION AND UTILIZATION

Central Somerset is an area showing perhaps better than any other in the country the effects of rationalization of the milk industry in the South of England since the War under the control of a few large distributing and manufacturing firms. The change in the organization of the trade has been striking. Be- fore the War, some producers sold their milk to distributors dealing, chiefly, with the London market. These distributors were equipped to manufacture the surplus over their liquid requirements into cheese, butter or cream on their Somerset premises. Other producers consigned milk direct to the London market on contract. An unknown number of this second and probably larger group, having no information of day-to-day demand, sent forward their whole output and accepted what- ever price they could get 'on the platform' for any surplus over regular purchasers' requirements. Under these conditions more milk was carried to the market than was needed, and was there largely wasted, for the surplus was not concentrated for efficient manufacture. During the years succeeding the War, the liquid trade of Central Somerset, including the disposal of surplus, came largely under the control of a few large firms. These de- velopments considerably facilitated the adjustment of supply to demand, and benefited the farmer to the extent that he received better prices during a long period of deflation than he could have expected in an unorganized industry. Under present conditions, the bulk of the trade is concentrated in a few hands, and the summer surplus can be dealt with still more efficiently by putting a large proportion of the milk output of one part of the country on the liquid market and diverting the bulk of the output of another part into manufacture. Central Somerset is an adjusting area: in winter, when supplies are short, much more of its milk goes to the liquid market than in sumrn'er, the excess throughout the year being manufactured. Areas with more favourable access to London are able to dispose of practically their whole output on the liquid market, winter and summer. Any such reasonable adjustment was impossible so long as farmers either dispatched 3 14 PRODUCTION AND UTILIZATION their milk direct to London, or sold it in.the producing area to one of many small distributors. Milk from Central Somerset is used chiefly for manufacturing purposes, and so on most farms there is every incentive for the farmer, with factory outlets situated near at hand, to make full use of his ample summer grass and to arrange for a maximum production of low cost summer milk, and a minimum of production of high cost winter milk. In the spring, especially in the west of the area, grass sales are held and grass on the 'moors' is sold for the season, the purchaser grazing or making hay as conditions dictate. Most farmers in Central Somerset regard summer milk as more profitable than winter milk. The ratio between winter and summer production is influenced in any one year by weather and price conditions, but generally it may be said that winter production in Central Somerset ranges from 40 to 50 per cent. of summer production. The increase, excluding milk consumed on the farm, in the total milk output of the area during the intervening three years amounted to 13.3 per cent. (Table V). It was due almost entirely to the larger number of cows in milk and hardly at all to increased production per cow, nor was the weather responsible for any marked seasonal irregularities in production either in 1931-2 or 1934-5.

Table V

TOTAL PRODUCTION PER DAY AND METHOD OF DISPOSAL ON 1,460 FARMS, 1931-2 and 1934-5

1931-2 1934-5 Method of disposal Gallons Per cent. Gallons Per cent. of total of total

Sold to wholesalers .. 37,795 77.5 48,293 87.4 Retailed by producers.. 1,225 2.5 864 1.6 Farm-house cheese .. 9,726 20.0 6,081 11.0 100.0 Total .. • • 48,746 100.0 55,238

Other uses* 1,640 ...._ t

* Includes milk made into farm-house butter and cream and milk consumed in the farm household and fed to calves. t Not available. PRODUCTION AND UTILIZATION i5 The Central Somerset producer has five outlets for his milk: (a) The wholesale market, which is the most important outlet and may be sub-divided into: (I) Sales to local retailers who operate in the small towns within the surveyed area. (2) Milk consigned directly by the producer himself to distant markets, including London. (3) Sales to creameries. (b) Retailing by the producer. (c) Farm-house cheese-making. (d) Farm-house butter- and cream-making. (e) Consumption on the farm, which includes milk used in the farm household, and milk fed to calves.

(a) THE WHOLESALE MARKET The tendency since 1931-2 has been for more milk to be sold wholesale: in the winter of 1931, 90 per cent. of the milk output was sold wholesale and as much as 98 per cent. in the winter of 1934, while the figures for the two summers of 1932 and 1935 were 72 per cent. and 83 per cent. respectively. The relatively smaller amount sold wholesale during the summer months is due to the absorption by the farm-house cheese industry of a larger proportion of the total milk output at that particular time. From the entire surveyed area the amount of milk sold wholesale increased by 33 per cent. (8,703 gallons) between December 19311 and December 1934, and by 25 per cent. (12,293 gallons) between June 1932 and June 1935. Comparing the two years 1931-2 and 1934-5, while the total milk output increased by little more than 13 per cent., the amount sold wholesale rose by 28 per cent. The increase was greater, particularly during the summer, in the west of the area than in the east, and this is not surprising for in the intervening three years the Caerphilly farm-house cheese industry, confined almost entirely to the west of the area, virtually ceased.

1 Price conditions were responsible for a milk shortage in December 1931. This increase, therefore, is almost certainly greater than it would have been under more normal conditions of supply. 16 PRODUCTION AND UTILIZATION

Table VI

QUANTITY OF MILK SOLD WHOLESALE AND NUMBER OF PRODUCERS SELLING WHOLESALE, 1931-2 and 1934-5 (Gallons per day)

• December June

Increase Increase 1931 1934 Percent. 1932 1935 Per cent. TVestern District (630 farms) Gallons sold .. .. 9,255 12,827 38.6 18,847 26,283 39.5 Number of producers .. 516 609 18.o 515 603 17.1 Average per producer- wholesaler .. • • 17.9 21.1 17.9 36.6 43.6 19.1

Eastern District (830 farms) Gallons sold .. • • 17,029 22,160 30.2 30,459 35,316 15.9 Number of producers .. 730 792 8.5 661 697 5.4 Average per producer- wholesaler .• • • 23.3 28.0 20.2 46.1 50.7 10.0 Whole Area (1,460 farms) Gallons sold .. .. 26,284 34,987 33.1 49,306 61,599 24.9 Number of producers .. 1,246 1,401 12.4 1,176 1,300 10.5 Average per producer- wholesaler .. .. 21.1 25.0 18.5 41.9 47.4 13.1

An analysis of the data shows that there has been an increase in the number of producers in the area who dispose of their milk to wholesalers, and that there has been a rise in the quantity of milk sold wholesale per farm. The basic cathe of the increase in both cases has been that many producers, more particularly the small ones, guaranteed a market by the Board, have found it less trouble to sell their milk through a wholesaler than to convert it into butter, cheese or cream on the farm. But quite apart from this change-over in utilization there has been, as previously noted, an increase in the total milk output from the area and practically all of this new supply has been marketed through the creameries. The increase in the number of producers selling the whole or some part of their milk on the wholesale market was from 1,316 in 193 1-2 to 1,405 in 1934-5, a rise of nearly 7 per cent. It does PRODUCTION AND UTILIZATION i7 not follow that milk on these farms is sold wholesale throughout the entire year, though on many farms this is so. A small farmer may sell his milk to a wholesaler in the summer, and in the winter he may consume on the farm what little milk he produces: or more commonly, he may utilize his milk for cheese-making in the summer and sell it wholesale in the winter only. Comparing the winter periods, the number of producer-wholesalers increased by 155 (12.4 per cent.) and by 124 (10.5 per cent.) during the summer periods (Table VI). The effect of the disappearance of the Caerphilly farm-house cheese industry in the west of the area can again be traced in these figures, for the rise in the number of producers was much greater in the western district than in the eastern district. Fewer producers now find it worth their while to exploit alternative outlets for the sale of their milk. Between 1931-2 and 1934-5 the number of producers selling their entire output of milk wholesale increased from 731 to 978, or by 34 per cent. As for the rise in the quantity of milk sold wholesale per farm, in 193 1 -2 each producer was selling on an average 21.1 gallons of milk per day in the winter and 41:9 gallons per day in the summer, but by 1934-5, these figures had risen to 25.0 and 47.4 gallons per day, increases of 18.5 per cent. and 13.1 per cent. respectively (Table VI). The question is to what extent is the increase due to a rise in the number of producers selling in this way, and to what extent to an increase in the amount sold wholesale per farm? In the east, 65 per cent. of the increase came from higher sales from existing producers and only 35 per cent. from 'new' producers who were not selling any of their milk wholesale in 1931-2: in the west, on the other hand, 47 per cent. came from the first group and 53 per cent. from the second. Taking the whole area, 'old' producer-wholesalers accounted for 54 per cent. of the increase and 'new' producer- wholesalers for 46 per cent. Those producer-wholesalers who were marketing their entire production through the wholesaler in 1931-2 showed the smallest increase in sales to the wholesaler three years later, as is illustrated in the following table which shows the increase in production from 16o farms, picked at random, which were selling all their milk wholesale both in 1931-2 and 1934-5. i8 PRODUCTION AND UTILIZATION

Table VII INCREASE IN PRODUCTION ON i6o FARMS SELLING ALL MILK WHOLESALE BOTH IN 1931-2 and 1934-5

Gallons per day Gallons per day December Increase June Increase Per cent. Per cent. 1931 1934 1932 1935

2,831 3,337 17.9 6,o86 6,744

On these 16o farms 17.9 per cent. more milk was being marketed through the wholesaler in December 1934 than in December 1931, and io.8 per cent. more in June 1935 than in June 1932. The comparable figures for all wholesale farms are 33.1 per cent. and 24.9 per cent. respectively.

1. Local Retailing. A relatively small amount of the milk which comes within the category 'wholesale' is sold to local retailers who operate chiefly in the small towns within the surveyed area — Burnham, Wells, Shepton Mallet and Glaston- bury. More milk is utilized in this way during the summer, the winter deficiency being made up by accommodation supplies drawn by the retailer from the most convenient creamery (Table VIII). Taking the summer figures which show the position more accurately, in June 1932, 2,216 gallons per day (3.2 per cent. of total wholesale sales) were sold to local retailers as compared with 1,888 gallons (2.5 per cent. of total wholesale sales) in June 1935. This represents a drop of nearly 15 per cent. within the three-year period, which is not easily explained though an increase in retail price of 5-id. per gallon may have had some effect on demand. The number of producers supplying local retailers fell from 62 in June 1932 to 43 in June 1935.

2. Direct Consignment. This class of wholesale milk bound for destinations outside the surveyed area was not very large in 1931-2 and by 1934-5 it had almost disappeared (Table VIII). In June 1932 it represented 4.7 per cent. of Table VIII

DISPOSAL OF WHOLESALE MILK, 1931-2 and 1934-5

December June

1931 1934 1932 1935

Disposal of wholesale nzilh NOLLDflGOIld Gallons Per Gallons Per Gallons Per Gallons Per per day cent. per day cent. per day cent. per day cent. > Z ti

1. Sale to local retailers • • 2,022 6.9 1,471 4.1 2,216 3.2 1,888 2.5

2. Direct consignments by producers to distant markets .. 2,073 7.1 220 o.6 3,210 4.7 534 0.7

3. • • Sales to creameries 22,189 75.6 33,296 92.9 43,880 64.4 59,177 79.3

Total wholesale sales • • 26,284 89.6 34,987 97.6 49,306 72.3 61,599 82.5 NOLLVZVILLE1

CO 20 PRODUCTION AND UTILIZATION wholesale sales and three years later only 0.7 per cent. The figure of 534 gallons per day in June 1935 was only about 16 per cent. ofthat for June 1932. Retailers in Weston-super-Mare, Cardiff, Torquay and London were the chief buyers, though, by 1934-5, all except the London trade were virtually non-existent, and even this was very small. In 1932, 25 farms were sending milk direct to London, 7 to Cardiff and 5 to Weston-super- Mare. By 1935 only 7 farms consigning milk to London carried on this trade. Producers have not found this a satisfactory method of marketing. Milk might be returned under pretext of sourness, often not because it arrived sour but because the purchaser on that particular day had already sufficient for his needs. There was the trouble, too, of settling the small day-to- day disputes on quantity, quality or payment, the loss of churns and the inconvenience of early delivery to the station. These difficulties all played their part in discouraging the direct sender and induced him to sell to a local creamery even at a slightly lower price. 3. Sale to Creameries. By far the largest proportion of the milk produced in Central Somerset is sold to creameries or manufacturing wholesalers. These wholesale firms usually collect the milk from the farm and take it to their premises situated either in the surveyed area or just outside. The milk needed for the liquid market (chiefly London) is there processed and forwarded by road and rail, while the surplus is put to some manufacturing use. The majority of the creameries concerned are equipped with manufacturing facilities, in fact a few manufacture their entire intake. The word 'creamery' is used in preference to 'factory' or 'depot'. 'Factory' rather suggests plant used exclusively in the manufacture of milk products, but usually the 'factory' also processes milk for the liquid market and thus performs the same dual function as the 'creamery'. 'Depot' was formerly used rather loosely and sometimes synonymously with 'creamery', but since the setting up of the Milk Board the former word has come to be used in a more restricted sense as meaning a dairy which holds a special licence from the Board allowing the pro- prietor to charge producers with the transport costs on milk going to liquid markets. The distinction is of significance to the producer in that it affects to some extent the price he PRODUCTION AND UTILIZATION 21 receives for his milk, but it is of no particular relevance to the present discussion which deals with the numbers of creameries in the two years 1931-2 and 1934-5 and the changes, particularly the changes in the disposal of creamery milk, which have occurred during the period 1931-5. Creameries took about 65 per cent. of the total milk output of the surveyed area in 1931-2, and over 8o per cent. in 1934-5. In June 1932, 1,077 producers (out of 1,460) were selling 43,880 gallons per day to creameries, and in June 1935, 1,250 producers sold 59,177 gallons per day, an increase of 15,297 gallons, or nearly 35 per cent. There were 19 creameries receiving this milk in 1931-2 and 22 in 1934-5.1 The change, however, was rather greater than is shown by these figures, for by 1934-5 two additional firms had ceased to buy from producers in the surveyed area, and were obtaining their supplies from other areas where they had business dealings. In the interim, also, one firm closed its Somerset premises and diverted supplies elsewhere, while a second firm changed ownership. Of the five 'new' purchasers, three can be attributed to the Milk Scheme, which made it economically possible to purchase milk for manufacture only, and two are accounted for by the extension into the area of old established firms who were already purchasing in Somerset. Table IX shows the average intake of these creameries in gallons per day. The figures refer to milk produced within the surveyed area only, which in 1934-5 was on an average about 30 per cent. of the total intake.

Table IX AVERAGE INTAKE PER CREAMERY, 1931-2 and 1934-5 (Gallons per day)

Year December rune

From the surveyed area only .. 1931-2 1,015 2,010 1934-5 1,512 2,690

The difference between the June and December figures illustrates the heavy summer production characteristic of this 1 The majority of these creameries draw their supplies not only from farms within the surveyed area, but also from farms at varying distances outside it. 22 PRODUCTION AND UTILIZATION area. On an average each plant in Central Somerset receives ab put 9,000 gallons daily in the month of June, representing the milk from about 200 producers, which is probably many more than the average for the country as a whole. There is a slow though marked tendency towards the concentration of the wholesale milk trade in the hands of a few large firms. In 1931-2, the 7 largest firms working through creameries obtained the milk of 72 per cent. of producers selling wholesale, whereas in 1934-5 these firms handled the milk from 82 per cent. of the producers. This increase was obtained partly at the expense of the small purchasers and partly. as the result of the diversion of milk, formerly made into farm- house cheese, to the wholesale market. Most of the milk is collected by the dairy companies and the organization and capital involved is very considerable. An absolutely reliable service had to be provided throughout the year and operated for the greater part over country and occupation roads. It is usual to collect milk once a day except during the summer months when production is at its peak and during hot weather, when it may be collected twice a day. There was rather a curious and, for the producer, unsatis- factory arrangement in one district. A firm, in addition to the normal collection service which it operated itself, obtained milk through several agents. These agents arranged contracts with the farmer and they also arranged for the transport of milk, but they were not themselves either manufacturers or suppliers toi retailers or the consumer. They offered about d. to id. less per gallon to those farmers who by custom or location could not make contracts with the big manufacturing and distributing firms. During the period under review, the number of these agents decreased from 5 to 4 and the number offarmers dealing with them fell from 176 to 83. The purchasers' desire for increased supplies and the gradual development of transport services, first near centres of liquid consumption, then spreading farther west, has resulted in the milk collection areas of the creameries being most markedly situated on their western side, the only one in which expansion is possible. Many of the early plants were started with the main object of supplying the London liquid market, and no doubt their location was arranged so that when the milk reached the PRODUCTION AND UTILIZATION 23 creamery it was en route to its ultimate destination. This does not apply to newer premises set up primarily for manufacture but, nevertheless, the demand for milk has forced them to collect to the west also. A further consideration is the existence of railway rate zones. The surveyed area comes within the 100-150 mile zone, and consigners of milk had to pay 1.61d. per gallon when sending to the London market. But several of the large purchasers of milk from the surveyed area have creameries situated outside it, in the 75-100 mile zone in which the charge is 1.33d. per gallon. Rail charges are deducted from the farmers' payments so that dairy companies with creameries situated in the lower rail rate zone have an advantage over those situated in the higher rail rate zone, which enables them to obtain supplies by extending to the west. One effect is a lower- ing of collection charges in the eastern district to such an extent that the figure of o.24d. per gallon, which was the average charge for the district must be uneconomic. The dairy companies, for their part, are forced to obtain as much milk as possible to keep down their overhead costs. In the western district there is much less competition between buyers. Most of the larger firms make little attempt to entice producers away from their existing buyer. In fact, under normal conditions, they discourage interchange and sometimes come to an under- standing among themselves on the matter. A feature of the wholesale liquid milk trade during the past few years has been the increased use of rail and road tank wagons, instead of churns, for long distance transport. During the period 1932-5, the rail tankage available for the country has increased in capacity by 6o per cent.; if the figures are confined to the Great Western Railway, which handles the majority of the Central Somerset milk, the increase is still greater. Data giving the actual increase of tanks serving this particular area are not available, but it can be no less than that indicated for the country. During the same period the increase in the available capacity of road tanks was doubled. The tank has several advantages over the churn. Thelatter has to be handled a good deal, its depreciation is high, and the actual rail rate per gallon of milk is significantly more by churn than by tank. The cost of sending 3,000 gallons 100-150 miles by rail tank is approximately id. per gallon. As the dairy companies charge producers 24 PRODUCTION AND UTILIZATION the full churn rate of 1.33d. per gallon whether milk is transported by churn or by tank, they have reaped the whole benefit from this innovation. Turning now from'the disposal of liquid milk to the disposal of milk used for the manufacture of milk products, there have been increases in the amount of all milk products manufactured except condensed milk, the quantity of which decreased in the winter period. The figures show that considerable quantities of milk were diverted to fresh cream in December 1934, giving this product the largest increase compared with December 1931. Table X THE DISPOSAL OF MILK RECEIVED FROM THE SURVEYED AREA BY THE CREAMERIES

Con- Milk Fresh Tinned Liquid Butter Cheese densed Powder Cream Cream Total Milk

Dec. 1931 11,421 804 755 5,894 1,738 1,577* 22,189 ,, 1934 6,229 7,057 4,501 4,133 2,542 8,593 241 33,296 June 1932 9,025 2,658 6,426 17,638 5,517 2,616* 43,880 ,, 1935 4,600 9,192 11,062 17,721 6,288 6,716 3,598 59,177

* Includes tinned cream. Comparing both the winter and summer periods, butter and cheese show the largest increases, and it is these products which have absorbed most of the additional milk. As to cheese, available figures showing the types manufactured in the summer of 1935, indicate that 56 per cent. of the cheese milk was manufactured into Caerphilly and 44 per cent. into Cheddar, and some very small quantities of Stilton and Cheshire cheese. There are no comparable figures available for the summer of 1932, but it is known that factory Caerphilly cheese has increased greatly at the expense offarmhouse Caer- philly. Factory Caerphilly, in June 1935, accounted for approximately 6,000 gallons per day, while farm-house production had fallen from 3,552 gallons per day in June 1932 to 27 gallons per day in June 1935. A larger gallonage was made into milk powder in 1934-5 compared with 1931-2 but this product has not borne its full share of the general increase in the available milk supplies. Considering that the 'fresh' cream figures for 1931-2 include PRODUCTION AND UTILIZATION 25 tinned cream, the subsequent increase is interesting, and must be attributed very largely to the working of the Import Duties Act, 1932, and the Ottawa Agreements Act, 1932. Without import restriction on cream the milk would probably have been made into cheese or butter at a price of about 4d., instead of the 7-2-d.1 which is realized for milk for cream manufacture. In addition to the above products there are large quantities ofthe by-products ofcheese -making and butter-making, namely whey and skimmed milk. The whey in June 1935, was estimated at about 10,000 gallons per day, an increase of 70 per cent., compared with June 1932. Some of it was returned to farmers or used at the factory for pig-feeding, but very large quantities must have been wasted. Skimmed milk increased from 4,700 gallons per day in June 1932 to 17,000 gallons per day in June 1935, an increase of 262 per cent. This was used for the manufacture of condensed skimmed milk, for skimmed milk powder, for the manufacture of Caerphilly cheese (mixed with fresh milk) and, in addition, large quantities went for pig- feeding. There was some wastage also, but not so much as of whey,for an increasing interest has been taken in the utilization of skimmed milk and wastage was considerably cut down between the years 1931 and 1935. (b) PRODUCER-RETAILING Of a total sample of 1,460 farms, 569 (39 per cent.) in 1931-2 and 395 (27 per cent.) in 1934-5 were engaged in retailing a proportion of their milk output. This is a decrease of 174, or 31 per cent. Generally, the tendency was for the larger farms to give up retailing more readily than the smaller farms. Thus,

•••• the number of producer-retailers on farms of over 75 acres decreased from 282 to 178 (37 per cent.) compared with a decrease of from 287 to 217 (24 per cent.) on farms of under 75 acres. Only a few farms specialize as producer-retailers; the majority sell a very small part of their output to local consumers in the villages as an accommodation. Some of these small producer-retailers have stopped retailing because of the trouble involved in filling in Milk Board returns. A further and very important point is that creameries do not encourage producers to retail milk because of the tendency for the best and creamiest milk to be retailed, leaving milk of a poorer quality to be sent to the creameries. 26 PRODUCTION AND UTILIZATION Throughout the year a little more than one-half of the milk retailed by the producer is sold in the villages, the remainder going to several small towns of which Glastonbury, Shepton Mallet and Wells, all in the east of the area, are the chief. In the small towns the producer-retailer shares the trade with the retailer. The majority of producer-retailers — 76 per cent. in 1931-2 and 8o per cent. in 1934-5 — are first and foremost producer-wholesalers, and probably run a retail round more to oblige neighbours and to give their wives opportunities for chatting and pin money than for any pressing economic reason. There are very few specialists — 47, or 8 per cent. of the total in 1931-2, and 49, or 12 per cent. in 1934-5. The specialist's business is invariably bigger, of course, than the non-specialist's. In 1931-2, while they represented only 8 per cent. of the total number of producer-retailers, they retailed 420 gallons per day, or 34 per cent. of the milk sold in this way. In 1934-5, the specialists, representing 12 per cent. of the total number, retailed 320 gallons per day, or 37 per cent. of the total milk producer-retailed. The total amount of milk retailed by the producers was 1,159 gallons per day, or 4 per cent. of the total output, during the winter of 1931, and 1,291 gallons per day, or 1.9 per cent. of the total, during the following summer. The corresponding figures for the winter of 1934 and the summer of 1935 were 8ii gallons per day (2.3 per cent. of total output) and 917 gallons per day (1.2 per cent.). Production is fairly level throughout the year but tends to be slightly higher — about io per cent. — during the summer. In round figures, 1,225 gallons per day were retailed by producers in 1931-2, and 864 gallons per day in 1934-5, a striking decrease of nearly 30 per cent. To the extent that there may have been some evasion of the Milk Mar- keting Board's regulations which require that all producer- retailers must be registered and must submit returns of sales, the decrease may be more apparent than real.

(C) FARM-HOUSE CHEESE-MAKING Farm-house cheese-making is carried on in all parts of Somerset except in the extreme north and to the west of Taunton. In Central Somerset the concentration of cheese- makers is as high as anywhere in the country. As previously PRODUCTION AND UTILIZATION 27 mentioned, two types of cheese are manufactured, Caerphilly and Cheddar. Almost without exception the manufacture of Caerphilly cheese in the farm-house is confined to the western district and is particularly concentrated around Highbridge, where a cheese auction is held every Tuesday. Very little Caerphilly cheese is sold otherwise than through this market. Farms making Cheddar, on the other hand, predominate in the eastern district, though there is no marked concentration. There are a few in the west, but none in the main Caerphilly area near Highbridge. The number of farms engaged in farm-house cheese-making in 1931-2 and in 1934-5 is given in Table XI. Of the 1,460 dairy farms included in the survey, 79 were making cheese during the winter of 1931 but no more than 2 during the winter of 1934, a drop of 97 per cent. As very little Cheddar cheese is made in Central Somerset during the winter, these figures relate almost entirely to Caerphilly, and together with the summer figures for the same type of cheese they illustrate what can only be described as the virtual disappearance of the farm-house Caerphilly industry. The number of farms making Cheddar also declined from 135 to i i i or by 18 per cent. Taking the summer periods of 1932 and 1935, the number of cheese-makers of both types fell from 204 to I 12 or by 45 per cent. Table XI NUMBER OF FARMS MAKING CHEESE, 1931-2 and 1934-5

Type of Size offarm December rune cheese 1931 1934 1932 1935

Caerphilly Under 99 acres 34 38 99 acres and over 38 33

Total .. • • 72 2 71

Cheddar Under 99 acres 7 32 18 99 acres and over 2 103 93

Total .. • • 9 135

All types Total* 79 2 204 112

* The total is adjusted to allow for the fact that in December 1931 and in June 1932, two farms made both Cheddar and Caerphilly, and in December 1934, one farm made both. 28 PRODUCTION AND UTILIZATION There were more changes from one method of utilization to, another than is disclosed by the table. For example, the Caerphilly figures for farms under 99 acres show that there were 34 makers in December '931 and 38 in the following June,. which might be taken to indicate that 4 new makers came in. Actually, however, one changed over to milk selling, 5 to Cheddar cheese-making and io new makers of Caerphilly appeared. Similarly in the Caerphilly group, 99 acres and over, there was a gain of 6 new cheese-makers who had sold liquid milk previously, and a loss of II who had changed to Cheddar cheese-making. This change-over on 16 farms in all from Caerphilly in the winter to Cheddar in the summer is not un- usual. A few farms made Caerphilly cheese in the winter as an established practice; others because they had not been able to sell their milk satisfactorily on the wholesale market. As might be expected, the total daily gallonage made into cheese also fell seriously during the three-year period though to a slightly less extent than in the case ofthe numbers ofcheese - makers. In June 1932, 17,574 gallons (representing 25.8 per cent. of total milk output of the area) were made into cheese compared with 12,111 gallons (16.2 per cent. of total output) in June 1935, a decline of 31 per cent. Comparing the figures for the winters of 1931 and 1934 there is a fall in the daily gallonage from 1,879 to 51 (97 per cent.):

Table XII AMOUNT OF MILK MADE INTO CHEDDAR AND CAERPHILLY CHEESE ON THE FARM, 1931-2 and 1934-5 (In gallons per day)

1931-2 1934-5 December June December June

Cheddar 167 14,022 23 12,084 Caerphilly 1,712 3,552 28 27

Totals .. 1,879 17,574 51

The most important figures are those showing the extent of the decrease in the amount of milk made into Cheddar cheese during the summer period. In 1932 the daily gallonage was PRODUCTION AND UTILIZATION 29 14,022 compared with 12,084 in 1935, a fall of nearly 14 per tcent. The corresponding relative decline in the number of Cheddar cheese-makers over the same period was 19 per cent. (see Table XI). The Cheddar cheese industry is by far the larger and more important. Taking the summer periods, when both industries are normally working at their maximum, Cheddar cheese absorbed 8o per cent. of the milk made into cheese on the farm in 1932 and practically ioo per cent. in 1935. The above figures show the main general tendencies offarmhouse cheese manufacture in Central Somerset between 1932 and 1935, and they form a necessary background to a more detailed discussion of the two industries. (I) Cheddar. Farm-house cheese-making is a traditional practice in Somerest, the Cheddar type having been made for very many generations. Probably the farm-house industry was at its height during the middle of the nineteenth century, prior to factory make both at home and abroad. Since then it has steadily declined. During the survey of 1932, discarded cheese plant was noticed on many of the milk selling farms, and since available scrap metal would have been sold during the late War this plant must have fallen into disuse more recently. The experience of cheese factors over the three-year period prior to 1932 indicated a decline of approximately 23 per cent. in the number offarms making cheese, and a further decline of 18 per cent. between 1932 and 1935. While the technique of manufacture and the type of cheese have altered considerably, Cheddar has always been pre- dominantly a summer-made cheese. Milk production gradually displaced another summer industry, the feeding of cattle, and climatic and other conditions favour summer milk production in Somerset. Grass is plentiful, management is easier than in the winter, and as many farms lack good buildings, cows are often wintered out which results in low winter production. In dairy factories, of course, Cheddar cheese is made throughout the year; it is the demand for winter milk by the large wholesale liquid markets which has maintained the custom of making the farm-house product mainly during the summer. The farm-house cheese-maker plays an important part in the general economy of the Somerset dairy industry, and his 30 PRODUCTION AND UTILIZATION decline, which has only recently been checked, was largely responsible for the summer 'surplus'. He enjoys a larger measure of independence than does the milk -seller, as. he is assured of a market for his liquid milk in the winter while the return from cheese-making during the summer usually compares favourably with that obtained from the sale of liquid milk to the wholesaler. Farm-house Cheddar is made chiefly on the larger farms. During the summer of 1932, 103 of the 135 makers within the area (76 per cent.) had farms of over 99 acres, and during the summer of 1935 as many as 93 out of III makers (84 per cent.) came within the same size group. There are two explanations of the decline in cheese-making on the smaller farms: (I) In- sufficient capital resources to withstand the depressed conditions in the industry, and (2) the fact that the small business does not justify a hired cheese-maker, and the cheese must be made by family labour. Cheese-making is hard work involving long hours and requiring considerable skill and sound judgment. The single process of turning the cheese means the daily handling of at least a month's make, probably amounting to over a ton of cheese. Interesting and responsible work it may be, yet to-day it savours too much of drudgery, and with a guaranteed market for liquid milk, the apathy on the part of the farmers' families who have traditionally made cheese is understandable. Approximately 8o per cent. of the farm-house cheese was sold to 15 buyers, 5 being large wholesale grocers or multiple shops, with their own distributive machinery, and the remaining o, large factors. Cheese factors have storage facilities, and dis- tribute the cheese according to the customer's requirements. The farm-house product varies a good deal not only in quality, but also in flavour. The knowledge and experience of the factor is invaluable in ensuring that the customer, whose taste varies in different parts of the country, gets what he wants. The factor deals with the wholesale grocer, the retail grocer and sometimes with firms who process the cheese and produce the familiar packeted article: he is an essential cog in the distributive machine of a product which varies not only from farm to farm, but from month to month on the same farm. Differences in quality on individual farms are being reduced by PRODUCTION AND UTILIZATION 31 technical improvements which result in a more standardized article, but seasonal differences are far less under the control of the maker. The factor makes a regular round of the farms from which he buys, and purchases the 'whole dairy', good cheese and bad. During inspection he may, if necessary, suggest modifications in the manufacturing process so that a cheese more suitable to his requirements may be produced. The relations between the factor and the farmer are based on the confidence of long personal acquaintance: haggling sometimes occurs over the final price, but the farmer seldom changes his buyer, and on. the whole is well satisfied with the marketing system. Occasion- ally new buyers offer better prices, but usually they only purchase the pick of the cheese, leaving the farmer to market the rest himself. About 8o per cent. of the producers sell their cheese to one purchaser, and the remainder sell to not more than two, excluding small quantities which are occasionally sold to the local grocer or retailer. In June 1932, these last amounted to only 200 lb. of cheese per day or 1.4 per cent. of the total make, and in June 1935, to 30 lb. a day or less than i per cent. (2) Caerphilly. Caerphilly cheese, as its name suggests, originated in Glamorgan, being held in high repute amongst the miners of South Wales, but the increasing demand for liquid milk there led to the transference of the industry to Western Somerset, with its production in excess of the local liquid demand. The cheese is made of necessity all the year round for it cannot be stored for long periods like Cheddar. The establishment of the cheese auction at Highbridge has been a great success: it acts as a link between the area of production and the area ofconsumption both of which are relatively small and very concentrated. In 1932, 97 per cent. of the farm-house product was sold in Highbridge and although the industry has now become almost entirely a factory one, the bulk of the cheese is still sold the same way. The tendency, however, must be more and more towards the development of direct sales, especially with manufacturing firms which have their own selling organizations. Caerphilly cheese is not so variable in type as Cheddar, nor are price variations so great for it is ready for eating within 32 PRODUCTION AND UTILIZATION three weeks and individual qualities have not time to develop. As Tables XI and XII showed, the Caerphilly farm-house industry has collapsed completely since 1932. While there is no direct foreign competition, the low price of other imported cheese inevitably had an effect on the Caerphilly market. With Cheddar prices at an uneconomic level, cheese factories turned to Caerphilly, which resulted in over-production and falling prices. Furthermore, the low price at which the factories obtained milk for cheese-making enabled them to carry on when cheese prices made the farm-house industry uneconomic. The change in the source of supplies to the Highbridge market from farmhouse to factory during the period 1932 to 1935 is shown in Table XIII.

Table XIII

FARM-HOUSE AND FACTORY SUPPLIES OF CAERPHILLY CHEESE AT THE HIGHBRIDGE AUCTION, 1932 to 1935

Farm-house cheese Factory cheese Year Number of Supplies Number of Supplies makers (tons) factories (tons)

1932 302 970 7 241 1933 198 1,117 306 1934 46 186 20 1,174 1935 8 38 22 1,420

While the number of farm-house Caerphilly makers sending their cheese to the Highbridge auction dropped from 302 in 1932 to 8 in 1935 and their supplies from 970 tons to practically nil, the number of factories increased during the same period from 7 to 22 and supplies from 241 tons to 1,420 tons.

(d) FARM-HOUSE BUTTER- AND CREAM-MAKING Data were obtained when the area was surveyed in 1932 showing the amount of farm-house butter and cream made in 1931-2, but as these farm-house products are not involved in. the Milk Marketing Scheme, there is no comparable information concerning them for the year 1934-5. PRODUCTION AND UTILIZATION 33 The amount of milk disposed of as farm-house butter and cream is very small (Table XIV); in December 1931 only 0.4 per cent. of the total milk output of the area was utilized in this way and in June 1932, only 0.3 per cent. On the basis of an inquiry in Do parishes within the surveyed area in 1935, it can be safely assumed that the amount of milk utilized in this way in 1935 was even less than in 1932.

Table XIV AMOUNT OF MILK MANUFACTURED INTO BUTTER AND CREAM, 1931-2

December 1931 June 1932

Gallons Percentage Gallons Percentage per of total per of total day production day production

Butter io6 0.3 198 0.2 Cream 32 0.I 56 0.I

Total .. 138 0.4 254 0.3

In 1931-2, the majority of the 8o farms which sold butter and cream made these products very much a sideline to the sale of liquid milk and cheese. Only 5 farms specialized exclusively in the production of butter, i in cream, and 3 farms in butter and cream.

(e) MILK CONSUMED ON THE FARM As with butter and cream, no comparative data are available showing the amount of milk consumed on the farm during 1934-5, but the inquiry in io of the 64 parishes confirmed the view that little or no change had taken place since 1931-2. The average amount of milk retained per farm for home use and calf rearing is a little less than one gallon per day. This amount, which represents about 1.8 per cent. of the total milk output of the area is extremely low compared with other parts of the country, where more calf rearing takes place, and a smaller proportion of total production is sold. (1) In the Farm-house. The amount of milk retained for use in the farm household varied from about one-half gallon per day on farms under 99 acres in size to approximately 34 PRODUCTION AND UTILIZATION three-quarters of a gallon per day on the larger farms. The average amount was 0.58 of a gallon per farm per day. Taking the entire area during the summer an average of 846 gallons per day were consumed in the farm-house and 8oi gallons per day or about 5 per cent. less during the winter. (2) By Calves. In December 1931, 627 gallons of whole milk per day were fed to calves in the surveyed area, and 615 gallons per day in June 1932, which means that on an average slightly less than one-half gallon a day was used in this way on each farm. While so much as 16 gallons per calf were used on the smaller farms, the average for all farms was only 7-1- gallons per calf.' The figure is low because of the practice of selling most of the calves at about a week old; only about 18 per cent. of the calves produced are retained for herd replacement, and these are generally weaned on to whole-milk substitutes as soon as possible. It may be noted that in parts of West Cornwall where all calves are reared on the farm the average fed per calf was 22 gallons. III. THE PRODUCER'S NET RETURNS (a) WHOLESALE PRICES Having now shown what has been the effect of the Milk Marketing Scheme upon production and utilization of milk in this sample area, it is necessary to consider how farmers' prices and returns have been affected by it. For this purpose, the net prices received by producers selling milk wholesale will be dealt with under the three headings which were used in considering the utilization of wholesale milk, viz: (I) milk sold to local retailers; (2) milk consigned direct by producers; and (3) milk sold to creameries. (I) Local Retailing. Producers supplying local retailers received in 1931-2 net prices ranging from iod. to is. 2d. during the winter and from 8d. to iod. during the summer. In 1934-5, the producer received the Milk Board's pool price, less any charge for collection. This class of purchaser, however, required a 'level delivery' and the lid. per gallon obtained by the producer for this service just about offset the collecting charge. The producers' net return, therefore approximated the pool price which varied monthly but which averaged is. I -id. during the winter and 10-id. during the summer. Thus the net returns from this class of milk were on the whole 02-d. per gallon higher throughout 1934-5 than in 1931-2. In fact, under the Milk Scheme, this is regarded as the best method of selling wholesale milk as there are no deductions for rail transport. Producers are often prepared to pay a higher collecting charge in order to obtain or to retain these local contracts which are very limited in number. (2) Direct Consignments. Milk sent to Cardiff and Weston- super-Mare gave the same net return as the locally sold milk, but in both the years the bulk of the London milk obtained prices approximately -id. per gallon higher than those obtained from milk consigned to creameries, which are given below. This was due to the saving of the creamery charge which was not incurred on direct milk. Road collection charges were also avoided as the milk was delivered to the station by the producer. (3) Sale to Creameries. Except for sales to local retailers practically all wholesale milk transactions, both in 1931-2 and 1934-5, were governed by annual contracts operating as from the beginning of October. In 1931-2 the Permanent 35 36 THE PRODUCER'S NET RETURNS Joint Milk Committee, consisting of producers' and distributors' representatives, negotiated a voluntary price agreement, as it had done for every year since the autumn of 1922 and as it continued to do until the Milk Board was set up in the autumn of 1933. The agreement was optional and was not generally observed throughout the country, but it is of significance to this study because it formed the basis of price contracts made between farmers and a number of dealers serving the London market. Central Somerset, as one of London's main areas of supply, was therefore influenced by these annual agreements to a much greater extent than most other areas. The prices suggested in the Agreement were not followed, however, very closely: it was used as a basis but modifications were made as circumstances dictated. Only two firms dealing in Central Somerset observed the Agreement, but they were firms responsible for handling about 35 per cent. of the milk purchased on wholesale contracts in the area and they exerted a very considerable influence on the prices paid by other dealers. It is to the credit of these firms that any modifications of the contract tended to favour the producer. The category under which these large London dealers, adopting the voluntary agreement, bought their milk was known as Class II (b). Producers selling in this category delivered their whole output, receiving in each month the liquid price for a fixed percentage of their production representing sales on the liquid market, and a manufacturing price for the remainder. Producers not selling under the terms of the voluntary agreement, or modification of it, sold their milk on what may be termed 'a stipulated price basis'. The contract in this case did not incorporate a formula, but set out the total price per gallon to be paid to the producer for the 12 months of the contract year, irrespective of the milk's disposal. The final arrangement of the monthly prices was in many cases settled at the time of signing the contract. The result was to create, in effect, numerous (at least 25) wholesaling contracts, which varied in their monthly prices, but which did not differ very materially in other respects, and all gave approximately the same total net return to the producer during the contract year. The producer, for instance, with a high summer milk output naturally endeavoured to get a satisfactory price at THE PRODUCER'S NET RETURNS 37 that season, and as this milk was cheaply produced, 8d. per gallon for it might pay him as well as a shilling per gallon, or more, for winter milk. In the same way, the farmer with a level output sought a high winter price. Thus, there was some attempt to adjust the price terms of the contract to suit the particular circumstances of the individual producer, provided his bargaining power was strong enough. Compared with producers selling their milk under the voluntary national agreement, the return from these contracts was about d. per gallon less. In 1931-2, therefore, contracts were of two types: (I) those that were modifications of the voluntary national agreement, which recognized the two classes of milk, liquid, and manufacturing or `surplus'; and (2) those that stipulated an agreed price for the whole of the milk irrespective of the purposes to which it was to be applied. In 1934-5, practically all the creamery milk was sold under the Milk Board's contract, for while producers with 4 cows or less were not obliged to register with the Board and to sell through its organization, yet the buyers in this area usually insisted on the producer being registered in order that they might claim buyers' rebates from the Board on all milk used for manufacturing. The 1931-2 and 1934-5 contracts did not differ materially in principle, although it must always be borne in mind that the 1931-2 contract was voluntary, while that for 1934-5 was compulsory. First of all, the wholesale liquid price was agreed upon; this averaged 13.42d. per gallon in 1931-2 and 15.o8d. per gallon in 1934-5. Allowance was then made for that proportion of the total supply which, being surplus to liquid requirements, would have to be manufactured. In both years, of course, the percentage paid for at liquid price varied from month to month but on an average the 1931-2 contract allowed for 75 per cent. to be paid for at liquid prices and 25 per cent. at the manufacturing price, compared with 64 per cent. and 36 per cent. respectively under the 1934-5 contract. The comparison is interesting because in the former year the per- centages were based on hypothetical quantities whereas in 1934-5 they were based on actual quantities, and the difference, no doubt, is largely explained by the increase in the production of contract milk. 38 THE PRODUCER'S NET RETURNS In 1931-2, the price of manufacturing milk _irrespective of its use was determined by the price of certain grades ofimported cheese and averaged tad. per gallon. In 1934-5 the manufacturing price was ascertained from sales at differential prices for the various milk products manufactured. Thus, the butter- and cheese-milk price was still based on the price of Canadian and New Zealand cheese as in 1931-2, but with rather lower making- up allowances, while milk used in the manufacture of other products, such as condensed milk, was sold at varying prices as prescribed by the Board. The average realization price on all manufacturing milk in 1934-5 was 5.82d. per gallon. The three factors- liquid price, manufacturing percentage and manufacturing price broadly determined both the 'basic' price in 1931-2 and the 'pool price' in 1934-5. The producer, however, had to meet a number of charges: (a) for collection; (b) for rail transport; and (c) for transit risk, before he knew his net return. These charges, together with any premiums received by the producer, are discussed later in this section.' After allowing for all deductions applying to producers within the area surveyed, the net returns received in 1931-2 and in 1934-5 were as follows: Table XV COMPARISON OF NET RETURNS TO THE PRODUCER FOR WHOLESALE MILK IN CENTRAL SOMERSET, 1931-2 and 1934-5 (Pence per gallon)

1931-2 1934-5 Month (I) (2) (3) October ...... 8.or 8.04 10.71 November • • • • 9.52 8.85 10.71 December • • • • 12.93 13.02 11.96 January ...... 13./0 12.95 11.71 February ...... 12.20 I I.10 11.21 March ...... 8.14 8.o8 10.21 April ...... 7.89 7.59 9.46 May •. • • • • 7.39 7.04 6.71 June • • • • • • 7.29 6.96 6.96 July • • • • • • 7.74 7.36 7.21 August ...... 8.36 7.97 7.46 September • • • • 8.7o 8.19 10.21

Simple average .. .. 9.27 8.93 9.54 Weighted average • • 9.05 8.72 9.31

1 See pp. 39-41. THE PRODUCER'S NET RETURNS 39 The first column sets out the net prices which the producer would have received in 1931-2 had all wholesale contracts been based on the price agreement of the Permanent Joint Milk Committee. It has been pointed out already, however, that no milk was sold exactly on these terms, although about one- third of the contracts incorporated only slight modifications. The second column gives the prices actually received by producers, based on all the contracts governing the sale of milk in Central Somerset in 1931-2, whether they were modifications of the voluntary agreement or not. These prices are averages weighted by the quantities of milk sold on each of the contracts, and may safely be taken as the average net return received by Central Somerset producers for wholesale milk in 1931-2. The table shows also, the price variations that occur from month to month, which, in the main, are in inverse proportion to the seasonal trends of milk production. The 'actual' prices on an average, were about -id. per gallon lower than the negotiated prices and represented the level at which a creamery could obtain supplies in competition with other creameries and with the alternative outlet of domestic cheese-making. The net return to producers selling their milk to creameries in 1934-5 is given in the final column. This return is the pool price for Region 9, less the various transport charges applying in the surveyed area. Weighted average returns which take into consideration monthly and seasonal changes in production, are also given in the table. These weighted averages both in 1931-2 and 1934-5 are nearly d. per gallon lower than the simple average returns. The increase in the net return of o.6i d. per gallon in 1934-5, compared with 1931-2, is somewhat augmented by premiums received by a small number of producers under various butter-fat bonus schemes operating in that year. The premiums, spread over all wholesale contracts, amounted to o.02d. per gallon and they bring the total increase in the net return up to o.63d. per gallon. (4) Transport Deductions. (i) Transit Risk. The transit risk, or creamery charge, covers losses through spillage and sourage, to which the milk may be subject in transit, and it covers also, the costs involved .in handling and processing milk at the 40 THE PRODUCER'S NET RETURNS creamery. The deduction remained at d. per gallon over the period under review. (ii) Rail Charges. The charge for rail carriage is paid by the producer on the principle that if he had to consign the milk direct to the consuming centre (instead of through a creamery) he would have to pay the carriage. In short, wholesale liquid milk in Somerset is bought 'delivered London'. Only dairy companies with premises licensed by the Board as depots, can claim the rail rate on liquid milk. Producers supplying creameries that manufacture all the milk do not have to pay a rail charge. Instead, a standard transport deduction (S.T.D.) is levied on the milk which goes directly into manufacture, and this deduction is roughly equal to the transport cost the producer would have incurred had his milk gone to a liquid market via a depot. It goes into the regional pool, and raises the amount available for distribution to the producers. Without the S.T.D., producers selling milk for manufacture would be placed in a preferential position, and at contract time every producer would have done his best to contract with a specialist manufacturer to the detriment of the liquid market. The S.T.D., therefore, is an essential part of organized marketing. Rail rate charges are fixed by the Railway Rates Tribunal. Those applying to Central Somerset are as follows:

Table XVI RAIL RATES ON CENTRAL SOMERSET MILK

Standard Standard rate rate less Distance from London (per gallon) De-rating allowance d. d. Exceeding 75 miles but not exceeding Ioo miles .. 1.55 1.33 Exceeding ioo miles but not exceeding 15o miles .. • • • • 1.90 1.61

These charges are all subject to a de-rating allowance of 15 per cent.; they are minimum charges 'as for ten gallons'. The rail charge for each zone depends on the distance of THE PRODUCER'S NET RETURNS 41 that zone from London. Neighbouring producers may pay different rail charges on milk going to the same liquid market if their milk be dispatched from creameries situated in different zones. The producer who gains an advantage through a lower rail charge may have to meet a higher collecting charge, though not necessarily, for the collecting charge for a farm situated near the zone line may not be any higher to a creamery situated on the east of the line and nearer London than it is to one on the west. A great deal depends, too, on the eagerness of a buyer to obtain milk. Rather than undergo the economic disadvantages of a low turnover of milk throughout the contract year, a firm may offer to collect milk from farms situated at considerable distances from the creamery at charges the same as those of firms already operating in that particular district. The creamery must have the milk and it is prepared to lose a little, if necessary, on the collecting charge. In Central Somerset, practically all producers in the west of the area paid a rail charge of 1.61d. per gallon. In the east, a little more than one-third also paid 1.6i d. and the remainder a lower rate varying from I.12d. to 1.33d. per gallon. Much of the milk produced in the east of the area goes by road to premises situated in the 75-100 miles rate zone at lower cost. The average rail rate charge on all the Central Somerset wholesale milk was 1.48d. per gallon in 1934-5. (iii) Collecting Charges. Unlike the rail charge, which is fixed by a body independent of the dairy industry, the amount charged for collection is a matter arranged between the producer and the distributor. Producers need not necessarily accept the purchaser's terms, they may prefer to provide their own transport, or to hire it, but many of them, particularly the smaller ones, have no alternative but to accept the purchaser's terms. In fact, the majority found it more convenient to allow purchasers to collect the milk. The charge made for this service has been reduced considerably during the three years under discussion. In 1931-2, the usual charge was ),Lei. per gallon, but it varied from id. to so much as 2d. per gallon, in exceptional cases; on an average it was o.59d. per gallon both in the east and west of the area. By 1934-5, the average rate for the whole area had dropped to o.31d. per gallon. 42 THE PRODUCER'S NET RETURNS

Table XVII COLLECTING CHARGES IN RELATION TO THE SIZE OF FARM, 1934-35 (in pence per gallon)

Size 0-14 15-2425-49 50-7475-99 100-149 150-199 200 Weighted Group and Average* (acres) over

East 0.21 0.29 0.30 0.26 0.29 0.25 0.24 0.17 0.24 West 0.58 0.54 0.47 0.41 0.43 0.38 0.48 0.41 0.43 Weighted Average* 0.41 0.44 0.40 0.32 0.35 0.31 0.29 0.22 0.31

* By 'number of cows'.

It is significant that the average for the eastern district was o.24d. per gallon compared with o.43d. per gallon in the western. The reason for the lower average rate in the eastern district is that it is adjacent to the 1.33d. per gallon rail zone, and creameries within this zone compete with the more local creameries situated within the 1.61d. per gallon rail zone. The latter are forced to reduce their collecting charge, for the producer otherwise saves o.28d. per gallon by sending his milk to the more distant creamery.' The importance of the collecting charge is very apparent, therefore, under present conditions. The price contracts fixed by the Milk Board in conjunction with the distributive trade are relatively inflexible and do not permit the many adjustments which were regular features of the 1931-2 contracts. Then, a -1-d. per gallon lower or higher price in this or that month could be used to clinch the deal. Now, the collecting charge is the only real bargaining point and any concessions by producer or purchaser are made through this medium. An example of this is given in the above table which shows that, generally speaking, the smaller farms in the area paid a higher collecting charge than the larger farms. This indicates the keenness of purchasers to deal with large farms, which is understandable for several reasons. Milk has to be collected every day of the year; it is obviously very much easier to collect from a few large producers than from many small ones. In addition, the buyer usually finds it 'See p. 23. THE PRODUCER'S NET RETURNS 43 easier to come to an agreement with large producers; the small man is inclined to haggle over matters which are important to him personally, but which to the buyer are not worth the time spent in settling them. Farm inspection is also facilitated with large farms, and, of course, book-keeping at the creamery. (5) Premiums and Bonuses. (i) Level Delivery. In 1934-5 there were two methods of contracting for wholesale milk: (I) the sale of milk from a specified number of cows, and (2) a level delivery of a specified number of gallons per day with a 10 per cent. variation either way. In the latter case the buyer paid the producers an additional -id. per gallon level delivery premium. The buyer is not, however, compelled to accept milk under a level delivery clause. In the surveyed area only the liquid retailer with no manufacturing plant to absorb a 'surplus' buys under the level delivery contract and only about 8 per cent. (i24 producers) received the level delivery premium. The small purchaser is here at a disadvantage compared with the large purchaser, who invariably has manufacturing facilities. The latter can buy his milk at the usual wholesale price and obtain rebates from the Board on milk which is surplus to liquid requirements and goes into manufacture. Thus, the large buyer balances his supplies free of charge. (ii) Butter-fat and Cleanliness. A few purchasers in Central Somerset operate bonus schemes which are the same in principle but vary in detail. These schemes work very well in practice and it is unfortunate that they are not more common, for they go a long way to ensure that a producer who sells high quality milk is suitably recompensed. The principle is recognized in parts of the United States and in many of the Dominions. At the present state of development of milk marketing in this country it is too much to hope that this system could be introduced immediately, but it is the fairest method of buying and selling milk and it should be generally adopted. In the surveyed area during 1931-2 one firm paid a butter-fat bonus. In 1934-5 four firms were paying it, and bonuses were received by 218 farmers of whom 214 were in the eastern district: 44 THE PRODUCER'S NET RETURNS Western Eastern district district Producers receiving -81-d. per gallon bonus • • • • • • • • - 195 Producers receiving -1-d. to id. per gallon bonus .. • • • • 15 Producers receiving 1-d• to id. per gallon bonus .. • • • • 4 Producers receiving over id. per gallon bonus .. • • • • 4

4 214

In July 1935 the Milk Marketing Board started to pay a bonus of id. per gallon for milk from Accredited herds, licensed by the local authority. This bonus must be regarded as one for cleanliness alone, for the licence is given for hygienic methods of production and a reasonably low bacterial count. As the contract year 1934-5 ended in September and as the Scheme started only in the previous July, inferences cannot be drawn as to its effect in Central Somerset over this period of only three months.

(b) PRODUCER-RETAIL PRICES The usual price received by producer-retailers in 1931-2 throughout the surveyed area was is. 4d. per gallon, with a downward tendency during the summer and an upward tendency during the winter. In 1934-5, prices were uniform during the winter but not during the summer. In December 1934, the producer- retailer received 2S. per gallon over the entire area. The retail levy payable to the Milk Board for the month was 217-6d. per gallon so that the net price received by the producer was is. 9 A d. per gallon. The gross price in June 1935 remained at 25. per gallon in the western district except in one parish, where it was is. 8d. In the eastern district during the same month ' 27 parishes received a gross price of 25. per gallon and 16 parishes is. 8d. per gallon giving a weighted average gross price of Is. 1 o-Id. For the whole of the surveyed area in June THE PRODUCER'S NET RETURNS 45 1935 the average gross price was slightly over is. I id. per gallon or is. 8-P. per gallon net after deduction of the levy of ad. Comparing the two years, net prices to the producer- retailer rose from is. 4d. per gallon during the winter of 1931 to is. 9-1-d. per gallon during the winter of 1934, and from is. 3d. during the summer of 1932 to is. 8-P. per gallon three years later, giving increases of 51-d. per gallon in the winter and 5d. per gallon in the summer.

(C) FARM-HOUSE CHEESE PRICES (I ) Cheddar. In the summer of 1932, the wholesale price of cheese was 91s. 8d. per cwt., and the cheese-maker was realizing gd. per gallon for his milk. By June 1934, the wholesale price had fallen to 63s. 6d. per cwt., equivalent to milk at 6d. per gallon. In the ordinary course of events such a drop in th value of cheese-milk would have meant the end of the farm- house cheese industry, but Government help was now forth- coming in the Milk Act, 1934, which provided for a guaranteed price of 5d. per gallon during the summer months and 6d. per gallon during the winter months. This was in respect offactory cheese-milk. A Treasury grant made up the difference between this guaranteed price and the price of factory cheese- milk which was ascertained through a formula based on the quoted price of certain grades of New Zealand and Canadian cheese. In June 1934, the cheese formula price was 3.5d. per gallon; the Government grant, therefore, amounted to 1.5d. per gallon, a sum which, under the Act, could be passed on to the farm-house cheese-maker. The Milk Board added a further id., making a total grant of 2.5d. per gallon, which gave the farm-house cheese-maker a total return of about 8d. per gallon, as much as that obtained by producers in the same area selling their milk on wholesale contracts. Although Somerset Cheddar cheese-makers did much better than Cheshire cheese-makers in the Midlands, they were far from satisfied, and in order to prevent a further decline in the number of farmers making cheese the Milk Board gave additional help the following year. Thus, in June 1935, the farm-house cheese-maker received the grant or deficiency payment under the Milk Act, together with 2-id. per gallon 46 THE PRODUCER'S NET RETURNS from the Board (compared with id. the year before) making a total grant of 4d. per gallon. This, added to the price obtained by the sale of cheese, gave iod. per gallon, a return which compares with that of 7.8d. per gallon received by the producer-wholesaler for the summer, and is id. per gallon higher than the price which the cheesemaker was getting in June 1932.

Table XVIII PRICES RECEIVED BY FARM-HOUSE CHEDDAR CHEESE- MAKERS, JUNE 1932 and JUNE 1935

Size group June 1932 June 1935

per cwt.of cheese s. d. s. d.

Farms under ioo acres • • • • 88 3 62 4 over •• • • 92 z 63 8 Weighted average price • • 91 8 63 6

per gallon of milk d. d. Realization value .. • • • • 9.0 6.1 Realization value (including subsidy) 0.0

In 1935, low prices and the general uncertainty of the market induced the producer to keep his early-made cheese which is usually cleared by the end of August. Consequently more than 85 per cent. of the total made in this year was disposed of in September and October, a proportion considerably higher than usual. Normally cheese made in April, May and June is stored for two months: in 1935 it was stored for three months or more. As the season progresses cheese is held for longer periods reaching a maximum of about 41 months for the September make. The 'early' or grass cheese is less suitable for storage than the 'late' cheese. In comparing the return to the producer selling his milk wholesale with that received by the farm-house cheese-maker, it must be remembered that manufacturing and storage costs and also capital charges have to be borne by the cheese-maker, varying in the aggregate between id. and 2d. per gallon. These costs are partly, if not wholly, offset, however, by the value of whey for pig-feeding. The amount of capital which is THE PRODUCER'S NET RETURNS 47 tied up in the form of cheese stocks is surprisingly high. In 1935 an average of approximately £70 per month was tied up for nearly four months on each farm, so that nearly £300 would be needed to cover the period of heaviest stocks in the latter part of the summer. • Moreover, this figure is based on cheese valued at 63s. 6d. per cwt. which is low for farm-house cheese. If due allowance be made for the depressed state of prices it may safely be said that the figure needed would be nearer £500. This shows the importance of capital to the cheese-maker and suggests that producers with insufficient capital should be discouraged from making cheese, as they will be forced to market their product early in the season and will thus tend to depress the market. (2) Caerphilly. The Caerphilly market is very sensitive to changes in supply and demand, there being no great reserve in store and no imported supply. This was particularly true before factory Caerphilly became important. Winter prices would .be twice the summer ones due entirely to differences in output. The following are the prices received by farm-house Caerphilly cheese-makers in December 1931 and June 1932.

Table XIX PRICES RECEIVED BY FARM-IIOUSE CAERPHILLY CHEESE-MAKERS, 1931-32

Size group December 1931 June 1932

per cwt. of cheese s. d. s. d. o---I oo acres 118 ix 62 II 100—over „ 121 II 64 4

Weighted average price 121 I 63 10

per gallon of milk d. d. Realization value 15.0 7.5

As there were only one or two farms still making Caerphilly cheese in 1934-5 it would be misleading to give the prices for the insignificant amount of the farm-house product. The following prices for first quality factory cheese at Highbridge are comparable, however, with the figures given in Table XIX. 48 THE PRODUCER'S NET RETURNS

Table XX AVERAGE PRICE OF FIRST QUALITY FACTORY CAERPHILLY CHEESE AT HIGHBRIDGE, 1931 to 1935

Average for Contract year December June year

per cwt. of cheese s. d. s. d. s. d.

1931-2 • • • 120 9 65 6 -88 9

1932-3 • • • 82 8 63 3 66 4 1933-4 • 64 8 39 3 53 10 1934-5 • 34 4 31 3 39 I per gallon of milk d. d. d. Realization value in 1934-5- • 4.4 3.7 With the subsidy .. • • 8.o 6.7

The table shows clearly the downward trend of prices at Highbridge during the period 1932 to 1935. When considering the realization value of milk made into Caerphilly cheese, it must be remembered that under the terms of the Milk Board's grant, Caerphilly is classed as 'Soft Cheese'. It does not come under the restriction applied to 'Hard Cheese' that, to qualify for the grant, it must have been made more than fourteen days before being sold. This restriction, together with certain other practical considerations, serves to distin- guish between the quick maturing or high yielding cheeses, such as Caerphilly, and the poorer yielding types on which the rate of subsidy is in fairness higher. In December 1934, the Board made a grant of I -id. per gallon for milk for Caer- philly cheese which, with the payment made under the Milk Act made a total of 3d. per gallon. This, added to the market price of the cheese and corrected for yield gave a value 8d. per gallon of milk as compared with 15d. in December 1931. For June 1935, the Board's grant was id. per gallon (or exactly one-half the grant for 'Hard Cheese') and the total subsidy, with the Government payment was 2.75d. This gave the milk the realization value of 6.7d. per gallon, which is not only lower than the price of 7d. obtained by the producer wholesaler, but compares most unfavourably with the Cheddar cheese-maker's realization of iod. per gallon for that month. THE PRODUCER'S NET RETURNS 49 Retail sales of Caerphilly made a better price of I id. to 12d. per lb. but the quantity was very small. (d) FARM-HOUSE BUTTER AND CHEESE PRICES In 193 1-2, the bulk of the farm-house butter was retailed by the farmer at prices ranging from is. 3d. to 2S. per lb., or from 5.8d. to o.9d. per gallon of milk, using yield figures appro- priate to Central Somerset. A very small quantity was sold wholesale to local dairymen and grocers at prices varying from is. per lb. (4.6d. per gallon) in the summer to Is. 6d. per lb. (8.2d. per gallon) in the winter. For all butter sales the producer received is. 7d. per lb. in December 1931 (8.65d. per gallon) and is. 3i-d. in June 1932 (6.o5d. per gallon). A small amount of cream was sold wholesale, at prices ranging from is. 2d. to 2S. per lb. Cream retailed by the producer fetched from is. 8d. to 2S. 6d. per lb.: the average realization per gallon of milk for all cream sales was is. 4d. A retail price for cream of only 2s. per lb. gives a return of is. 4d. per gallon for the milk. It is surprising at first sight that producers have not developed this outlet for their milk, as the production of cream is little trouble. It requires only a small amount of equipment and, most important of all, gives an attractive return. Yet with considerable tourist traffic in the area scarcely half a dozen farms had deliberately set out to get this business, largely because contracts for wholesale milk are not so readily made where the producer sells cream. Farms which sell milk wholesale and also sell cream invite the suspicion of the milk buyer, who is aware of the temptation to obtain cream by skimming milk at the expense of the dairy firm. (e) PRICES OF CALVES If the sale of calves be regarded as a by-product of milk production, then the prices realized for calves will have some effect on production costs and therefore on returns. In 1932, second quality calves sold on an average for 53s. 4d. each, and in 1935 for 35s. I id., a fall of 17s. 5d. in the three years.' On the basis of a 500-gallon cow, this fall in the value of calves would lower the producer's net return by 0.42 per gallon.

1 These prices, taken from Agricultural Statistics, Part 2, 1932 and 1935, are for England and Wales but they may be taken as indicative of conditions in Somerset. IV. CONCLUSIONS Central Somerset is an ideal dairying area, but with its small population less than 3 per cent. of the total milk output is consumed locally. The bulk, therefore, has to find markets outside. Surveying the dairy industry as a whole the foremost function of Central Somerset is to provide a reservoir of milk for the London market, to be drawn upon when supplies cannot be obtained from more contiguous areas. Under normal conditions this happens chiefly during the winter months. The area is just too far from London to warrant, certainly under present conditions, the development of regular connections for the purchase of fixed quantities of milk throughout the year, and although many survive from a time when conditions were different, the tendency now is to encourage the purchase of the main London supplies from areas nearer the centre of consumption, reserving dairying districts of the Somerset type for balancing supplies and for periods of emergency. It is in the public interest that milk should be transported as little as possible in order to conserve its quality. With the Milk Scheme it is also in the best interests of the whole body of producers to reduce the transport of milk, for with the present pooling system any saving on rail charges increases the producer's net return. In the period of free marketing prior to the setting up of the Milk Board, it was incumbent upon creameries to sell a fairly large proportion of their supply in the liquid market, otherwise they could not retain their supplies in the face of the competition of firms who, by selling a higher percentage liquid, could afford to pay the producer a better price for his milk. This induced a scramble for the liquid markets. Each firm was, in effect, a small pool into which was placed the amounts received from the sale of milk and milk products. The individual firms then shared out the proceeds to the producers dealing with them according to their contracts after meeting, of course, their own profits and expenses. The Milk Scheme has had the effect of removing this incentive to sell liquid milk, as the basic or pool price paid to the producer 'is now outside the purchaser's control. The price the producer 50 CONCLUSIONS 51 in Central Somerset now receives is a pool price based on the receipts from liquid and manufacturing sales in the whole of Region 9. In fact, it is more than the pooling in the region, for the inter-regional compensation fund assists the pools of regions where the percentage of milk going into manufacture is high and which would therefore, without the fund, have a lower pool price. As this fund tends to equalize the prices paid to producers the present system may be regarded as a modified national pool. There can be no doubt that Central Somerset has benefited very greatly from this arrangement, for without the inter-regional compensation fund the pool prices would have been far lower than those actually returned, owing to the large amount of milk manufactured in Region 9. The practical outcome of this change may be illustrated by noting that the three 'new' creameries which have appeared in the surveyed area since the inception of the Board are manufacturing their entire intake, which previously they certainly could not have done. Creameries whose main interest was manufacture, but who had previously to sell milk liquid to maintain their prices to producers, are now independent of the liquid market and have been able to concentrate more on the manufacturing side of their business. In 1931-2, nearly 31 per cent. of milk sold wholesale went on the liquid market, compared with only 11.7 per cent. in 1934-5. Without the inter-regional compensation levy already referred to, the effect of this change would have been detrimental to Central Somerset producers, but as it is the change is all to their advantage, as the area, owing to its situation, must be regarded, certainly from the national point of view, as primarily a manufacturing one. Comparing the two years 1931-2 and 1934-5, there was a rise in the total milk output of the surveyed area of 13.3 per cent., due almost entirely to an increase in the number of cows. It is of interest to consider to what extent the rise in output was due to the Milk Board's guarantee of a market for every gallon of milk produced. In England and Wales, the milk output, as measured by the cow population, was on the increase before the Milk Board started in the autumn of 1933. Subsequently, as the following table shows, the increase continued, but at a diminished rate. 52 CONCLUSIONS

Table XXI COW POPULATION* OF ENGLAND AND WALES, 1930-6

Year Number Percentage' (as at 4th June) (coo omitted) increase

1930 2,322 1931 2,365 1.8 1932 2,469 4.4 1933 2,537 2.7 1934 2,578 1.6 1,935 2,614 1.4 1936 2,630 o.6

* Includes cows and heifers in milk and cows in calf but not in milk. The diminishing rate of the increase in the cow population after the Milk Board came into being is an important fact not sufficiently realized. One important reason why the Milk Scheme, with its plan for more organized marketing, was a necessity, was this increase in total output, which exposed the weaknesses of 'free' marketing under modern transport conditions. It cannot fairly be said that the Milk Board was in any great degree the cause of this fresh volume of milk for much of the increase had already occurred. But exceptions must be made of certain areas, notably those with only occasional access to liquid markets, of which Central Somerset is a good example, where, undoubtedly the effect of the Milk Scheme was to accelerate a rise in output. This is shown by the marked increase in total output in the surveyed area between 1931-2 and 1934-5, of 13.3 per cent. mentioned above. It is substantiated by the fact that whereas the cow population in England and Wales between 1932 and 1935 increased by 6 per cent. (Table XXI), the increase in Central Somerset was 16.6 per cent., a rise not associated with any material change-over from beef production or store raising. Central Somerset, therefore, responded to the prospect of an assured market to a much greater extent than most other dairying areas. The reason, probably, is that a very large proportion of the milk output, particularly of the summer milk which is cheaply produced, had been sold to manufacturing wholesalers in the years prior to the setting up of the Board, at fairly low prices. There seemed a very good chance that the Board's CONCLUSIONS 53 'pool' price, with the help of the inter-regional compensation levy, would give better returns, and this judgment proved to be sound. Although the milk sold on wholesale contracts in 1934-5 was 28 per cent. more than in 1931-2 and there was a considerable fall in the value of milk for manufacture, the net returns to the producers for milk sold wholesale were o.63d. per gallon higher than in 1931-2. Had there been no Milk Scheme and had marketing conditions in 1934-5 been similar to those in 1931-2, producers in Central Somerset would have been rather more than a penny per gallon worse off with the world prices for milk products as they were in 1934-5, even without taking into account the additional milk, which would have depressed prices still further. It was this increasing volume of milk sold on wholesale contracts rather than the smaller increases in total output which caused the Milk Board so much embarrassment during the first two and a half years of its existence. There are signs, however, that the worst is now over, for while there was a rise of 10.9 per cent. in the total milk sold through the Board on wholesale contracts in 1935-6 compared with the previous year, the figure estimated for 1936-7 shows an increase of only 1.7 per cent. over the 1935-6 figure. The producer's main problem in Central Somerset is to obtain the most profitable use of the summer milk which, from the national view point, is an evil which has to be endured to ensure a winter milk reservoir for the London market. Summer production in the surveyed area is usually nearly double winter production, and many farmers regard their summer milk as more profitable. As mentioned above, the creameries have been handling the bulk of the extra supply which has been marketed since 1931-2, and generally this is a fairly satisfactory solution of the 'surplus' problem provided that the manufactured products give a reasonably good return on the milk. In the country generally, increased creamery supplies have been utilized chiefly for the production of butter and cheese, with milk bought at low prices. Central Somerset has perhaps been more fortunate in this respect than many other areas, for while the creameries in the surveyed area utilized a larger proportion of their input for butter and cheese in 1934-5 than in 1931-2, the milk products which give 54 CONCLUSIONS better returns than these have not fallen in amount to the same extent as elsewhere. In fact, the amount of milk utilized as fresh cream showed a substantial increase. Ideally, farm-house cheese-making affords the best outlet for the summer surplus, and while this will never solve the whole problem, much more milk could be made into cheese on the farm if conditions were sufficiently attractive. Con- sidering, first, the farm-house Cheddar cheese industry, which is in every way more important than the Caerphilly, there was a serious decline in the number of farmers making Cheddar cheese — from 135 in the surveyed area in the summer of 1932 to iii during the summer of 1935, a drop of 17 per cent. The decrease would undoubtedly have been a good deal heavier but for the combined effect of the Milk Board's grant, and the financial provisions of the Milk Act of 1934. The following table summarizes very well what has happened to the farm-house Cheddar cheese industry in Central Somerset since 1931-2.

Table XXII INDEX NUMBERS OF FARM-HOUSE CHEESE-MAKERS (SURVEYED AREA ONLY) AND WHOLESALE CHEESE PRICES, 1931-2 to 1935-6 (1931-2=100)

Number of farm- Wholesale Wholesale Year house cheese-makers cheese price* cheese price plus subsidy

1931-2 100 100 loo 1932-3 93 1933-4 95 86 108 1934-5 83 78 "5 1935-6 87 79 "9

*Average 1st and 2nd Quality English Dairy Cheddar, taken from Agricul- tural Market Reports.

Compared with 1931-2, the number of cheese-makers dropped to its lowest in 1934-5, but there has been an improve- ment since, and the index for 1936-7 has risen to ioo which was the 1931-2 level. The figures show clearly the difference which financial aid has made to the Cheddar cheese-maker's return. CONCLUSIONS 55 On the other hand, the farm-house Caerphilly industry has disappeared almost completely since 1931-2, displaced by the factory process. There are no imports of Caerphilly, but the low price of other imported cheese affected the Caerphilly market. With Cheddar cheese prices at an uneconomic level, factories turned their attention to the production of Caerphilly which is cheaper to make;' it has also a much quicker turnover and there is a saving in storage. The completeness with which the factory has displaced the farm-house in the manufacture of this cheese may be judged by the change between 1932 and 1935 in the sources of supplies to the Highbridge Auction which distributes the bulk of Caerphilly cheese. While the factory tonnage sent to this Auction increased from 241 tons to 1,420, the tonnage of farm-house cheese-makers dropped from 970 to 38 tons. These figures refer to a wider area than Central Somerset, but they are applicable relatively to the surveyed area. The farm-house Caerphilly industry cannot be defended on the same grounds as the Cheddar industry. Caerphilly is a high yielding cheese and it is made all the year round. Its potentialities, therefore, as an outlet for the summer 'surplus' milk are strictly limited and not nearly so great as those of Cheddar cheese, a summer product in the main. One of the most interesting effects of the Milk Scheme on marketing in Central Somerset has been the importance that it has given to the collecting charge. In the period of 'free' marketing any adjustment which producer or purchaser thought necessary in order to come to terms could be made through the price contract, which was a matter arranged between two individuals. Under the Milk Scheme, on the other hand, prices are fixed by the Milk Board, the price contract is relatively inflexible, and its terms may not be readjusted by the individual producer or purchaser. Hence the collecting charge is now the only real bargaining point, and any concessions on one side or the other are made through this medium. The result has been that while in 1931-2 the average collecting charge paid by producers in the surveyed 1 With cheese-milk prices at 2.91d. per gallon (the price for June 1935), and assuming normal yields and the use of skimmed milk, there is a saving in the manufacture of Caerphilly cheese of not less than los. per cwt. of finished cheese, compared with Cheddar. 56 CONCLUSIONS area was o.md. per gallon, in 1934-5 it had dropped to 0.31d. and so low as o.24d. in the eastern part of the area. These lower figures illustrate the keenness of buyers to procure milk even if they had to transport it long distances and to reduce the charge of collection to an uneconomic level. This they prefer to a lower turnover and higher overheads, but it is a choice of evils, for while from the producer's point of view, lower collecting charges are welcome, it would be much better if they came as a result of a more rational collection service, rather than from cut-throat competition. The dominant position of the creamery in the dairy industry of Central Somerset is now almost complete. The manufacture of butter, cream and Caerphilly cheese on the farm has virtually ceased, and Cheddar cheese-making is only kept alive by the Milk Marketing Board's subsidy. But a comparison between conditions in 1931-2 and 1934-5 indicate that the effect of the Milk Scheme on Central Somerset producers has been favourable. Producer-wholesalers, producer-retailers and farm-house cheese-makers all showed returns in 1934-5 greater than they could reasonably have expected had the industry been allowed to continue in an unorganized condition. In addition, some progress has undoubtedly been made in the rationalization of the industry, for the logical position of Central Somerset as, at one and the same time, a manufacturing area and a reservoir for the London liquid market, has become much more clearly defined.