BULLETIN OCTOBER

371 1966

Size Adjustments A Grd ofAlbm

Milk Producers

rxemn AgYulua
V tk Smt Dieco

Staio
Auun Alabama

x

q

CONTENTS
Page
M ETHOD OF-STUDY --------SOURCES OF DATA------ --

- -- - - - -------

- - - - - - 8---- - -

4

GENERAL

TRENDS, 1959-1964-----

--

-5

GENERAL CHARACTERISTICS OF PRODUCERS, 1968-6 PRODUCER CHARACTERISTICS AND SIZE CHANGES BY SUPPLY AREAS-- - - - - - - - - - - - - - - - - -

--

-

6

Definition of Size Categories_____8

North Suppiy Area9____________________ 11__---------_Central Suply Are a 12 Soth Suppiyl Area O ut-of-State Producers------------------------------14
PROJECTIONS OF PRODUCER NUMBERS AND SIZE D ISTRIBUTIONS ----------------------SUPPLY Method
Projected

-----------------

18 21
22

PROJECTIONS ------------------------of Making
Supplies in

Projections ----------------------- 21
1969 and

1974 -------------------

Supply-Dem and Balance-----------------------------24
SUMMARY AND CONCLUSIONS

---------------------------- 25
26

IM PLICA TIO N S--LITERATURE

-- ----

-- ------------------- -- ---------

CITED------------------------------------29

A PP E ND IX -- - -- - -

---- - - - - - - - - - - - - - - - -8-- - - - - - - - - - - - - - - -

0

FIRST PRINTING

3M,

OCTOBER

1966

Size Adjustments of

ALABAMA GRADE A MILK PRODUCERS*
HAROLD M. HARRIS, JR., Instructor of Agricultural Economics LOWELL E. WILSON, Associate Professor of Agricultural Economics

A

COMMON CHARACTERISTIC of many American industries is the change toward fewer but larger firms. Because such changes have far-reaching effects on competition and market structure, and thus on policy objectives, it is important that they be analyzed. In recent years, the dairy industry has been characterized by a sharp decline in numbers of firms producing, processing, and distributing milk, and by a large increase in the size and output of remaining firms. The study reported here was concerned with changes in number and size of Grade A milk production units in Alabama. The analysis focused primarily on adjustments made by individual milk producers. Objectives of the study were to summarize changes in number and size of milk producing firms in Alabama, and to obtain estimates of number and size of producers and total milk supply for future time periods.

METHOD OF STUDY The technique used in measuring the effect of changes in size of milk producing firms in the State was a Markov process analysis, a procedure used by economists in recent years to study size
The study reported was supported with funds provided by the Research and Marketing Act of 1946 and by State Research funds. Carried out as Hatch Research Projects 178 and 602, it contributes to the Southern Regional Dairy Marketing Project SM-28, "The Impact of Changing Market Structure upon the Competitive Position of the Dairy Industry in the South for" Current and Future Time Periods." The assistance of Victor M. Yellen in analyzing the data used in the study is gratefully acknowledged.

4

ALABAMA AGRICULTURAL EXPERIMENT STATION

changes among firms. This procedure utilizes the assumption that the probability of an individual firm moving from one size class to another is the same in each succeeding time priod. The Markov chain process can describe a large amount of empirical data in a condensed version, and results in a more detailed description of the data than if they were analyzed by standard statistical methods. Since the static theory of the firm is sometimes inadequate in dealing with changes occurring over time, the Markov chain procedure provides a useful tool in making such analyses. Researchers in Louisiana, North Dakota, and California have used the technique to analyze changes in the market structure of the dairy industry (1, 4, 6). The process has been used in studying income and wage distributions, business concentration, social mobility, and food purchases, as well as size changes of business enterprises.' SOURCES OF DATA Identification of individual milk producers and volume of sales for each producer licensed by the Alabama Milk Control Board were obtained from the Board for the base-building periods of 1958-1959 and 1963-1964. The base-building periods were the 6 months from September 1 through the last day of February. Sales records were obtained from distributors for unlicensed Alabama Grade A producers and for producers located in adjoining states who sold milk to Alabama distributors. The data resulted in a complete enumeration of Alabama producers supplying milk for fluid consumption within the State and a partial enumeration of out-of-state suppliers. 2 Information about characteristics of Alabama dairymen was obtained from a 1964 survey of 800 Grade A milk producers.
1 For a discussion of uses of Markov chains in agricultural economics, see: Judge, G. G., and Swanson, E. R., Markov Chains: Basic Concepts and Suggested Uses in Agricultural Economics, Ill. Agr. Expt. Sta. Research Report AERR-49, December 1961. 2 Some out-of-state milk supplies are from producers who ship directly to the distributors. Other out-of-state supplies are obtained from producer associations or milk handlers who sell milk in large quantities to distributors, some of which is supplied seasonally. Almost all of the former group of producers were enumerated; however, none of the out-of-state producers selling milk through producer associations or bulk milk handlers was included in the analysis. Out-of-state producers included in the study accounted for about one-fourth of milk imports during both periods.

SIZE ADJUSTMENTS of GRADE A MILK PRODUCERS

5

GENERAL TRENDS, 1959-1964 During the 5-year period between 1959 and 1964, many significant changes occurred in the Alabama fluid milk industry. In 1959 there were 1,673 Grade A producers in the State, plus 301 in Mississippi, Tennessee, Florida, and Georgia who were regular suppliers to Alabama markets. Average annual sales of these 1,974 dairymen were approximately 265,600 pounds of milk in 1959.3 By 1964, producer numbers had declined to 1,231 instate and 163 out-of-state, but average sales had increased to 478,500 pounds annually. Total Grade A sales to handlers increased at a rate of about 5 per cent a year during this period. Imports accounted for 20 per cent of the milk supplied to Alabama markets in both 1959 and 1964. Out-of-state producers in the study accounted for about one-fourth of these imports in each year. There are many reasons for changes in size and number of Alabama producers. One of the most important influences causing many dairymen to expand herd size was the adoption of the bulk tank and other modern equipment requiring substantial investment. Most dairymen who were not willing to make these additional investments left the business. Better management practices and an increasing percentage of cows of higher producing breeds have caused production per cow to rise. Advancing age of some dairymen and labor shortages may have forced some producers out of farming, or into beef production or other less intensive enterprises. Quota provisions in Alabama may also have had an effect on the trend toward fewer but larger dairies. It was apparent in the late 1950's that in some areas there was a "race for base" situation, which no doubt influenced some dairymen to leave the business (7). Later during the period, more liberal quota transfer provisions gave producers who were willing to purchase quotas the opportunity to expand sales at relatively low cost. The windfall gain from selling quota may also have hastened some dairymen's decisions to cease production. Although the quota system used in Alabama is not a barrier to potential new producers, the
3Annual production was estimated by multiplying sales during the periods times two. For the 12-month periods beginning September September 1, 1968, 49 per cent and 50 per cent, respectively, of livered to Alabama handlers was supplied during the base-building base-building 1, 1958, and the milk deperiods.

6

ALABAMA AGRICULTURAL

EXPERIMENT STATION

need for base increases initial investment in dairying and probably has caused fewer producers to enter the market (5). Blend prices may have had some effect on changes in producer numbers and herd size. Average blend prices for the State have remained fairly level, dropping from $5.82 in 1959 to $5.64 in 1962, but rising to $5.87 by 1964. Alabama dairymen operate under an individual handler pool, and blend prices paid by some handlers have varied widely from the State average. As a result of these and other factors, 839 dairymen, or 42 per cent of those in business in 1959, had ceased selling Grade A milk by 1964. Since only 259 producers entered the market during the same period, there was a net loss of 580' producers. GENERAL CHARACTERISTICS OF PRODUCERS, 1963 In October 1963 the average Grade A herd in Alabama consisted of 76 cows. Of this number, 59 were being milked and 17 were dry. Deliveries per milk cow averaged 733 pounds during October 1963. The average producer in Alabama was 48 years old and had been in the dairy business for 16 years. The Holstein breed was found to predominate in most Alabama Grade A herds. About 60 per cent of the herds in the State were mainly Holstein; however, three-fourths of the herds included some Jersey cows. Although sale of milk was the most important source of income in 1963 for most Alabama dairymen, 40 per cent received income from other farm enterprises-mostly cotton and beef production. Only 17 per cent of the dairymen worked at off-farm jobs. Most Alabama milk producers owned all land used in the dairy enterprise, although 43 per cent replied that they rented some land. Stanchion barns were used by about 70 per cent of the producers, while the remaining 30 per cent used milking parlors. About 40 per cent of the grain feeding systems in the State were either fully or partly mechanized in 1963. More than half of the producers reported use of artificial insemination, and about 40 per cent used production testing. The typical dairymen in the State raised all hay and silage fed, and purchased all grain fed (3). PRODUCER CHARACTERISTICS AND SIZE CHANGES BY SUPPLY AREAS In this study the State was divided into three major supply areas, North, Central, and South, Figure 1. Producers were classi-

SIZE ADJUSTMENTS of GRADE A MILK PRODUCERS

7

FIG. 1. The map identifies the three milk supply areas used in the study.

8

ALABAMA AGRICULTURAL EXPERIMENT STATION
TABLE 1. NUMBER OF PRODUCERS, AVERAGE SALES, AND TOTAL SALES OF PRODUCERS SUPPLYING MILK IN ALABAMA, BY SUPPLY AREAS,

1959 AND 1964

Producers Area
1959 1964

Average annual sales per producer
1959 1964

Total sales
1959 1964

North Central South----------------------. Total Alabama_ Out-of-state .......... TOTAL .------------

No. 827 510 836 1,673 301 1,974

No. 634 373 224 1,231 163 1,394

1,000 lb. 1,000 lb. 427.2 221.6 637.0 402.0 456.9 269.5 496.2 286.2 345.0 150.7 478.5 265.6

1,000 lb. 183,298 205,042 90,550 478,890 45,360 524,250

1,000 lb. 270,814 237,610 102,348 610,772 56,234 667,006

fled as to supply areas on the basis of their mailing addresses. There was much homogeneity within each region regarding size of farm, types of supplementary or alterative enterprises available, and geographic characteristics. On the other hand, there were many differences among the regions regarding volume of sales, production changes, and producer characteristics. For the sake of simplicity, all out-of-state producers were grouped together. Actually, the term "supply group" would provide a more accurate description of these producers since they were widely scattered among four adjoining states. Number of producers and size data are given for the four regions in Table 1.
Definition of Size Categories

Size categories used in the study were based on annual sales, Table 2. The table may also be used as a general guide for readers who commonly think of milk production in terms of
TABLE 2.

SIZE CATEGORIES USED IN THE STUDY AND CONVERSION OF ANNUAL
SALES TO APPROXIMATE DAILY SALES

Size category

Annual sales

Approximate daily sales

Pounds A .............. . B ------------------.. C -............ D E F -...............-.. G..............
1

Pounds 1- 274 275- 549 550- 824 825-1,099 1,100-1,649 1,650-2,199 2,200 and over

1- 99,999 100,000-199,999 200,000-299,999 300,000-399,999 400,000-599,999 600,000-799,999 800,000 and over

This category was included to provide a reservoir of potential producers, and

it includes producers leaving the business.

SIZE ADJUSTMENTS of GRADE A MILK PRODUCERS

9

daily, rather than annual, deliveries. Because of the wide range in milk sales, it was necessary to select unequal categories. The "O0" category must be included for the analysis because producers entered and left the business during the period studied.
North Supply Area

Dairy farms in the North Area can be characterized generally as being smaller than those in the other two supply areas. Average herd size in 1963 was 63 cows, of which 13 were dry. Sales per herd increased from 221,600 pounds annually in 1959 to 427,200 pounds in 1964.- There were 827 Grade A dairies in the North Supply Area in 1959 and 634 in 1964. Pct. of Dairies
50

4030
20

NORTH AREA, ALABAMA
./ s,)
,,*1964
10

', 1959

/
200

0

400

600

800

1000

1200

Annual

Pounds per Dairy, (000)

FIG. 2. Changes in size of dairies between 1959 and 1964 in the North Supply Area of Alabama are illustrated by this graph, which shows the percentage in 12 production classes during the two study years.

Figure 2 shows the size distributions of dairies in the North Area in 1959 and 1964. Size changes made by individual producers between the two periods are summarized in Tables 3 and 4. The two left hand columns of Table 3 list the number of producers in the various size categories in 1959, while the remaining columns give the corresponding numbers in 1964. For example, in 1959 there were 210 dairymen in size category A, the smallest sized firms. By 1964, 129 of these producers had ceased Grade A production, 24 were still in category A, and the remaining 57 dairymen had moved into categories B, C, D, E, and F. Numbers to the right of the diagonal represent producers who increased

10

ALABAMA AGRICULTURAL EXPERIMENT STATION

A.i \NIixiA. 1959-N964
Produlicers inI each izei
catcgiilx

in 194'

hcr of
OS dutcc.ii

it, 1959)

A

B3

C No.
18

D)
No. 25 .5
.31 44

? \ o. 25 .3
21 .35 2

I N~o. 1(0 1
4 10

G

INo. (4 A
210

No.
129

No.

~No.
2.5
36

No.
9

31,01(13089

12
49 22 1

0
2

288
163

102
414 15

18 0 11

61. 6 II I; I) 9l 1213

78

7 1
)

17 7
2 11

19

41
2.5 22
To)
S:I

11 9 2

11 1) 0

I
)

13~
.5

8
9

0
106

0
113

2
62

L8
58

31.8.37 :31.20:3'

118

B twi-eii 19159 and1 1964: thiose in the dIiagoinal me ploilin c ho madeh lupli.uit lioi llschnges duiiing th pliioid: anid niumbeis to the left of tlic 5(1 miilk silhs e vv Sho deIrit ilicrs iuu ducitiion lietxi 19.59 and 1964 aIrc als i ol.odedi iioomli i hiilll)s of commercuUial farms. I("Tl
liidol

noi si,'

pro-i

"0 iatu'oi )'or

19614.

of Gradel

A milk plodiiuh

Txiii i

4.

I iiNT\(.

CEI

I'iiiinijLHS

NL\I Sx
S\IA5

SPi' 111111
1959-1964

Size

(IHuSi;LS

\itiii

Si

ir)

-Xiii-.5,

Ai Li

ill 19.59

(4
Pct.

\
Jc.

B
Pu-.

C
P0.

1)

il.

F
Pcit.
Prt.

19- Pc. it.

61.5 :35.4

11.4
0.2

17.1 21.2 3.7
0 II 1

5.7 17.01 1'3,5 5.1
2.4 (1

2.4

1.1I

0.,5 1.4

0) (1.7

101.8 7.; 27.0
2.5

2.
19.2
26i.S

1

21.
1'r.1. 8.0)

6.
3L7

1i .2
19.3 36.0)

(1
(

:31.0)
9.1

(1
(1

1

20.0

\innhcrs to the right of the diaconal arc proportion of prodncen shiftin , to larger categories bets ecn 1959 aml 1964: thorsc oo the diagonal represent proportion remaining in same category and nnmbcrs to the left of the line are proportion echo dropped to smaller size categories. Less than 0.05 per cent.

SIZE ADJUSTMENTS

of GRADE A MILK PRODUCERS

11

sales between 1959 and 1964; those on the diagonal are producers who remained within the same class; and numbers to the left of the diagonal show producers who decreased milk sales. The O (no production) category was included to show movements out of the dairy business, as well as to indicate a reservoir of potential entrants into the market. This is the number of commercial farms in the region minus number of Grade A dairies. 4 The relative movements among size categories in the North Area are given in Table 4. Each row of the table adds to 100 per cent. This table also may be referred to as a "transition probability matrix" and provides the basis for the Markov process. A North Area producer whose annual sales placed him in size category C (200,000-300,000, pounds per year) in 1959 had a 27 per cent probability of being out of business in 1964. His probability of remaining in the same category was only 13 per cent, but his chances of moving up to categories D and E were 27 per cent and 21 per cent, respectively. In comparison with the other two areas, the North Area dairymen showed a greater tendency toward increased size, particularly among the smaller operations. Average sales per farm increased 93 per cent between 1959 and 1964. This increase was the major factor in allowing the North Area to overtake the Central Region in total milk supplied between 1959 and 1964. Total supplies in the North Supply Area increased 48 per cent, while the statewide increase was only 28 per cent.
Central Supply Area

The 11-county Central Supply Area is composed basically of counties in the Alabama Black Belt. Nearly all soils in the area are naturally adapted to growing grasses and legumes for pasture and forage. Three Black Belt counties, Montgomery, Hale, and Perry, accounted for one-fourth of the total Grade A milk production in the State in 1964. Number of Grade A producers declined from 510 in 1959 to 373 in 1964 for the region. Average sales per farm in this area were the highest in the State in both periods studied - 402,000 pounds annually in 1959 and 637,000 pounds in 1964. About 23 per cent of the farms in
SThe number used to represent the pool of entrants is necessary for the analytical technique used and may be varied widely without appreciably affecting results of the analysis.

12

ALABAMA AGRICULTURAL EXPERIMENT

STATION

Pct. of Dairies
50

40
30 -

CENTRAL AREA, ALABAMA

20/
10
0

1964

/

1959

-

---....

200

400

600

800

1000

1200

Annual Pounds per Dairy, (000)
FIG. 3. Changes in size of dairies between 1959 and 1964 in the Central Supply Area of Alabama are illustrated by this graph, which shows the percentage in 12 production classes during the two study years.

the Central Area sold more than 800,000 pounds of milk in 1964, Figure 3. Almost two-thirds of these producers sold more than one million pounds annually in 1964. In 1963 average herd size was 102 mature cows. Size changes of producers are given in Tables 5 and 6. These tables show a high rate of attrition between 1959 and 1964, particularly among the smaller producers. Almost half of the producers in the three smallest size categories quit production during the study period. The dropout rate for the two largest size groups, howeverwas lower in the Central Region than in the however, other two areas. Of the 510 producers in business in 1959, 185 quit producing milk by 1964. On the other hand, only 48 new producers entered the market. Even though average sales per farm were one and a half times as great in 1964 as in 1959, total supplies increased only 16 per cent. South Supply Area The South Supply Area had fewest producers and lowest total volume of sales of the three regions. Total sales were 90 million pounds in 1959 and 102 million pounds in 1964. Half of this production was concentrated in 2 of 22 counties in the area. These were the Gulf Coast counties of Baldwin and Mobile. Major farming enterprises in the southern Alabama region are production of peanuts, corn, cotton, and hogs.

SIZE ADJUSTMENTS of GRADE A MILK PRODUCERS T~inL

13
CLN IIIAL SU1PPLY AmEA,

5. SoIE

CHANGEkS

o1

GOADF

A M1ILK

PHOIDi.. Lii,

AL ABAMA,

1959-1964I

lhcr of Size caeoisprodiogr,(ucers (p in 19t)59N\o. Nit.

Producers in echizeO~ A No.

category in 1964' 1) No. E F G

13 No. 1
2

C Nt o.

Not, 16 2 :3 16 24 21

N o. 101 1
(1

N'o. 10
1

0'

8,94W

8,88

1 3

.3

7
(0 9 2:3

5 .19

2

o
E F 110 47 :39 11 2
90

(1 (1
1 7

5 (t 1 0
(1 17

-IM4 2 (1
(1 51

-N7 1
( 66

5
2
89

4 II 22 1. 1
.59

:3 R

18
2(1 26
84

_
TOiLAi

.31
9,450)

to the ri ght of tdiaigonla prCeent p1(odu.cers whoii increased sales 1964; those onl the di18gonlal are produc Iers wxho made no siz~e clas changies diiring the peiod anlod numbrs to ther left of the line represent produlers \Nho diecreasedi milk sales. The "0 c ategoryN repiresents potential pirducer x. laii men whoi stoippedl producitin bitwxeen 19.59 andi 1964 arc ailso iclded tinder category "0'' for 1964. TtiaI nuimber of ciomerci al fairms, Ie n umber of Grade A noi1k prou1crs.
'Num1e1rs

bercei i 19.59 andl

ITABLE 6.

1PLO(EN IA(.E OF PODUCERS MAK,\1ING'aSPIF111. SIZE CHANCESL CLNTnAL Sr i'L AREA. ALABAMAi , 1959-1964 Pecenitage shifting to eich size categori l1 by F
9 64

Size r ateor its in 19.59

' C'

0 pct.

A

B

C

Dl

E

pct.

pct.
7.

pct.

pct.
01.1

pct.
(1.2 .0(

pct. (.i
2.5 (1

I'ct. 11.1
()

67.5

.71

(

.52.9 .35.5

2.3 1.8 (
ii

8.1
4.5
(.9

21.8 16.4 4.7 1.8
(1

10.3 2(1.9 22_'. 6.-1 2.1 0

.3.4 14.6 28.2 19.1 1(16 6.5

1j -----)4T
E I -----=5.4 2:. 4

71.6 12.9 2(0.0
21.:3

1.2 2.7 7.1 1(6.4
_42.6

()

(1

G

6.4

0

0

O

:3.

8'.11

\iiohr to the righit orf thi diiagional airc piopotiotn of priiitucers shiftinig ti laigi aitegioi betw een 19.59 anri1964 those on the diagonal reI i es 0 preseot propor-i tiont iriim-ainig ini simc caitcgoi . and niimbers to the l1ft ofth(le line ai c prorionl~it rihit dripped tio smaller re cite goies., Ltxx (tiai(0.015 pei cnt.

14

ALABAMA AGRICULTURAL

EXPERIMENT STATION

Pct. of Dairies
50

40 300

SOUTH AREA,

ALABAMA

.....

0II 0

I

200

400

600

800

1000

1200

Annual Pounds per Dairy,(OOO)
FIG. 4. Changes in size of dairies between 1959 and 1964 in the South Supply

Area of Alabama are illustrated by this graph, which shows the percentage in 12 production classes during the two study years.

Dairy farms in the South Area averaged somewhat larger than in the North Area, but were smaller than Black Belt production units. Average production per farm was 269,500 pounds in 1959, but had increased to 456,900 pounds in 1964. Herd sizes in this supply area averaged 61 milking cows and 18 dry cows in October 1963. Figure 4 shows the size distribution curves for South Area producers in 1959 and 1964. The area's dropout rate was highest of the three regions, Tables 7 and 8. About half of the dairymen in each size class except category G ceased sale of milk in the 5-year period beginning in 1959. However, more than 50 per cent of the producers in 1964 had entered Grade A production since 1959. As a result, producer numbers declined only one-third - from 336 to 224. Average sales per farm increased 70 per cent, yet total supplies increased by only 13 per cent during the study period.
Out-of-State Producers

Few data were available on locations and characteristics of most of the regular out-of-state suppliers to the Alabama market. A large majority of these producers, however, were located in Mississippi, with most of the remainder in Tennessee. Both Tennessee and Mississippi have surplus milk supplies, while Florida and Georgia, like Alabama, are deficit milk producing states.

SIZE ADJUSTMENTS of GRADE A MILK PRODUCERS 1
Xisi

15 Sot
iii

7. SIZii

ClI\(I~x 1

Gaii (;P

A

MILK

l'lilll~rt li,

St

ALABAMA~i,

19.59-19(64

~cixApiEA

Numer hie ofi ro ies catgo in 19.59 Nou. 0' Nu.

A Nu.

13 No.
it)

C

D

E

F No.

G No. 9

No.
9

No.
7

N'i.
14

16,2171 16,157

8

61
:38

29 19 15
7 2 16,:3291

(t

7
1 (t

8 3 (1
(1 (1

l1t
2

4
7

:3
4

(1
2 5~ 6 10I

tt

.31
17

1 (t
It

t
O tt It

6
1

4
2 It

)
(1

1.3
-1"() 1A 16,553

49

:3.5

24

44

21

:32

SNumbr I the i- ht if the tdi agonal repiresent prodiicers xb ito hi1ntcreasxed sailes betwxeten 19.59 and1( 1964; those on the ia giona ai e produiciti els I hi) madei( noi siz~e cilss chani 'es duinl the peiod aiii numb 1ipiiers to the left of the lint i epreseint proi-

duiers who de) tised milk sales. tcr iii. 0' tcateg~or irepreen'ts piotetl prt iocers. IDaiirymen wxho sto ppted piidution bi tween 1959 iint 1964 ai e also e xii1ncilded undl t.tegr cat "ii " fo0' 1964. l 1)otal nube i oficcomtmilneria ifa ims, less nmber of Cradec A inilk producxieirs.

XIII 1

8.

PERCELNTAG X(f. PiiOiUCER MAI NKING. xPcai (iDl SIZF CHA NGE'S, Soc iii SUPiPLY AiEA, ALXAAMA, 195o9-1964

Sizc ctPgoits

Peren'italge shifting to each size cegoiry by 1964' 0 Pet. 66.2 A Pct. 14.3 4.10 0 (1 :3.2 B Pit. 9. 1 24.2 11.5 2.6 (1 0 0 0 0) C Pit. 6.5 10. I 123.1 7.9 0 I) Pct. i 5.1 16.4 5.3 O 1 01
(

in 1959

Epct. :3.9 7.1 6.6 18.4

F Pct. It
1

G Pct.

49.5
47.5 50.0 48.1
F

19.4
11.8 7.7

4.9 10.5 12.9

0 5.3 16.1 :3.:3 76.9

-------

41.1

)
0I

11.8
0

G1.5.4 NuimbetoiI Ilai er cte'otiesi
tiiii
ir

miiig

tht riight iif till (idional nir' piropiirtion iif proucr if htiiig to iisiti btI ten It)59 and 196)4; those lip thlt iagnnal repiresent propirin samet ctego'iil andi nuimlbers to thet left of thlit'he .111 piroportioin
cittat'egories.

hoii

dii ppel I tii snalle iz Lessx thini 0.015 per cent.

16

ALABAMA

AGRICULTURAL

EXPERIMENT

STATION

Pct. of Dairies
50

40

.

OUT-OF- STATE

10 0

1959 0 200

I-N-).......
I -9 ,-

400

600

800

1000

1200

Annual Pounds per Dairy(OOO)
FIG. 5. Changes in size of out-of-state dairies that shipped milk into Alabama during 1959 and 1964 are illustrated by this graph, which shows the percentage in 12 production classes during the two study years.

Out-of-state producers had the most pronounced shift in size distribution between the two periods, Figure 5. Average sales per production unit were less than those of Alabama producers, 150,700 pounds in 1959 and 345,000 pounds in 1964. A much higher proportion of the out-of-state producers left the market between 1959 and 1964 than was true for Alabama Grade A dairymen. However, it cannot be assumed that all of the dropouts left Grade A milk production. Some may have shifted to markets within their states. There were 801 out-of-state producers who were identified as suppliers of milk into Alabama in 1959. More than half of these producers no longer supplied milk to Alabama markets in 1964, Tables 9 and 10. Of the 170 dropouts, 152 were in categories A and B (sold less than 200,000 pounds annually). Only 82 out-ofstate dairymen entered the market since 1959. Average sales of the entrants were about 70,000 pounds a year more than the average for out-of-state producers who were in dairying both periods. This is in contrast to each of the Alabama supply areas, where market entrants had smaller average sales than old producers. Total milk supplied by these regular out-of-state shippers increased 24 per cent between 1959 and 1964. In 1959 about 45 million pounds were shipped and in 1964 about 56 million pounds. As stated previously, these shipments accounted for only about 25 per cent of the milk imported into Alabama.

SIZE ADJUSTMENTS of GRADE A MILK PRODUCERS
TABLE:! 9.
SIZE. CHA;E

17
i, OI 01OFS FAIL

OFnI CIx GRD Ai MIL.t K P10,1)1.1 N SUPPLeIERS,. 1959-1964
Plroduncers ill each siz/t'egoryIF

o11 f Silt caeoispro' 1 t'li' dtictrs 1
ini 1959

in 1964'

O

A No. .3 1fi 4 1 0 0 0
24

B3

C N\o. 4 4 1:3
7

1) No. 5 1 10 6 L 1 0 1 25

E
Ano. 5
()

F N'o.
51
(

G~

N'o. 0 A-B -C_ 1) E F -2 -)-0 GC-

INo.

No.
7

No.
'

10, 107' 1"~75 126 9.3 11.3
'11

12 14 2 0 0 0
35

0

59 1 6 1) 0) 1
10,2~45"

10 6 2 4 0 1) 27

:3 1 0 1 0
tI

0 .3 1 1 2 2~
12

7

12 7 2 4

2 1) 0 (1 30

TOTAL~ 1(0.408

betweenoi 1959 and c'Ilass chaniges dingi

thle dliagonial represent prodlucti(s XXII inc1 eased sales' are who'F mad I ii~t not 1size those't on1 thet dlilgona~ilit prodcer thet period; aindl inmbers to the~ left of the I lit' repr~lesent1 producers xv5 derese miltl.It85t 11k sale1s. *Tilt "0" caitegory repr1)1esenit poltentialI produc(.el s. DatiFrymen wXhII stoppedt 1pr1) Numbers to the right [964;
(If

0" for' 1964. duclttionl betwxeen 19.59 and 1964 aIre listedI uinder' caitegorF ; To tal numberht' of commnll'eiail farmsY1, less~ n umbier of Gra1de1 A mil1k prFod1(1erI. (1
ers to Grade A producer't's wtas thet same as -was fond in A~lamaI.
PtttDUCERt MAKING.Xl~ SlEI IE RODUCER.1 1959- 19614 S, to echli
S111)Z1E CHANGELS,

I XABIL 1t). PLRIA\l
Sizet'egois in11959

(E

O1'

FUT-O' SFvT IL

0 Pct.

ProporIititonI shiftiil A B

sizte catt -orF't

1 9614'

C Pc't. '3.2 11.5 1K,0 16.7 0 0 0)

D

E

t'

G

Pct.

Pct. 0.1 9.5

Pct. .8 8.9 16.2 £ 14.3 ) 2.5.1)

Pct. 0. 1 1) 8.9 16.2

Pc. 0.1l 0 2.6 2.7 0 14.3 t1 U

Pct. 1) 0 8.1 8.3 14.3 100.0 7)".)

o _-A B

--

7.3.8 .52.2 29.5 50.0 F ) 2.5.0

~'
01 1) 0 11

C
1)

:3.5 -- 12.4 2.7 5.4 1 0 0 0

16.7
X5 (1 0

F -1
_

Less than11 0.0)5 per ceint.

18

ALABAMA AGRICULTURAL

EXPERIMENT STATION

PROJECTIONS OF PRODUCER NUMBERS AND SIZE DISTRIBUTIONS

Projections of future size distributions of milk producers were obtained by using the Markov chain process. Tables 3 through 10 record the basic input data for the procedure. It is necessary to make the following assumptions regarding the projections: (1) price and production relationships existing in the base period will continue to exist in the future; (2) producers will continue to react similarly to the given relationships; and (3) locational advantages and disadvantages of producers within each of the supply areas will remain constant. Assumptions 1 and 2, however, are no different from those that must be made when projecting any trend based on past occurrences. Assumption 3 limits
TABLE 11. NUMBER OF MILK PRODUCERS PER SIZE CATEGORY, BY SUPPLY AREAS, ALABAMA, 1959 AND 1964, AND PROJECTIONS FOR 1969 AND 1974

Year and supply area North 1959 1964 1969 1974 Central 1959 1964 1969 1974 South 1959 1964 ....... 19691974 ....... Total Alabama 1959 1964 ....... 19691974 Out-of-state 1959 1964 ...... 1969. 1974 Total suppliers 1959 1964 1969 1974

A No. 210 49 21 13 40 7 3 1 77 19 9

Producers in each size category F E D C B No. 288 128 65 45 87 17, 6 3 99 No. 163 106 66 46 110 51 21 11 61 35 22 17 334 192 109 74 37 30 19 13 371 222 128 87 No. 78 113 82 61 85 66 41 27 38 24 17 13 201 203 140 101 12 25 22 23 213 228 162 124 No. 41 118 119 99 110 89 72 59 31 44 38 35 182 251 229 193 7 27 33 32 189 278 262 225 No. 25 62 98 101 47 59 54 46 17 21 20 19 89 142 172 166 2 10 11 11 91 152 183 177

Total G No. 22 58 119 176 31 84 126 154 13 32 49 61 66 174 294 391 4 12 27 35 70 186 321 426 No. 827 634 570 541 510 373 323 301 336 224 183 173 1,673 1,231 1,076 1,015 301 163 135 180 1,974 1,394 1,211 1,145

49
28 21 474 194 99 69 113 35 15 11 587 229 114 80

7
327 75 33 21 126 24 8 5 453 99 41 26

SIZE ADJUSTMENTS of GRADE A MILK PRODUCERS

19

conclusions regarding changes in milk production in a particular

supply area in relation to changes occurring in other areas. Projections of producer numbers are summarized by supply areas in Table 11. Producer numbers in Alabama are projected to decline about 20 per cent by 1974. The projections indicate a net decline from 1964 of 93 producers in the North Area, 72 in the Central Area, and 51 in the South Supply Area. Summarized in Table 12 are projected changes in numbers of producers and annual sales per producer by Alabama regions and out-of-state suppliers.
TABLE 12. NUMBER OF PRODUCERS AND AVERAGE ANNUAL SALES PER PRODUCER, 1964 AND 1974 PROJECTIONS, ALABAMA AND OUT-OF-STATE

Supply area

Number of producers 1964 No. 1974 No. 541 301 173 1,015 130 1,145

Average annual sales per producer 1964 1974 1,000 lb. 1,000 lb. 427.2 637.0 456.9 496.2 345.0 478.5 746.0 1,036.2 765.3 835.4 590.0 807.5

North Central South Alabama total_______________ Out-of-state -...................... TOTAL________________________.

634 373 224 1,231 163 1,394

Numbers of producers shipping less than 400,000 pounds (categories A-D) are expected to decline greatly in all regions. This decrease by 1974 is expected to be 74 per cent of suppliers in category A, 65 per cent in category B, 61 per cent in class C, and 46 per cent in category D. Number of producers in category E (400,000-600,000 pounds per year) is also expected to decrease, although not as drastically as in the smaller size classifications. In the case of size category F, producer numbers are expected to increase by 31 in 1969 followed by a small decrease during the following 5 years. Offsetting the drop in producer numbers in the smaller categories will be a great increase in number of producers in the largest size category. The projections call for an increase of 240 producers in category G by 1974. About half of this increase will be accounted for by North Area producers. Percentage distribution of producers among size categories is also expected to change markedly within the next decade, Table 18. In 1959, one-fifth of Alabama producers were in the smallest size group. Percentage of dairymen in this class declined to 6

20

20 ALABAMA AGRICULTURAL EXPERIMENT

STATION

TABLE 13. PERCENTAGE OF MILK PRODUCERS PER SIZE CATEGORY, BY SUPPLY AREAS, ALABAMA, 1959 AND 1964, AND PROJECTIONS FOR 1969 AND 1974

Year and
supply area

Percentage of producers in each size categor

A

B

C

D

E

F

Total
Pct. Pct.

Pct.
North 1959 1964 1969.----- 1974 Central 1959 ------ 1964 1969 1974 South 1959 1964 1969 1974 Total Alahama 1959------ 1964 .-----1969 ------1974 ------Out-of-state

Pct. 35
20 11 8 17 4 2 1 30 22 15 12 28 16 9

Pct. 20
17 12 9 22 14 6 4 18 16 12 10 20 16 10

Pct.
9 18 14 11 16 18 13 9 11 11 9 8 12 16 13 10

Pct.
5 18 21 18 22 24 22 20 9 20 21 20 11 20 21 19

Pct.
3 10 17 19 9 16 17 15

25
8

3

4
2 8 2 1 23 8 5

9
21 33 6 22 39 51

100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

5
9 11 11 5 12 16 16

4
14

4

27
35

20 6 3

4
14

2
42 15 6

7
38 22 11 8 30 17 9

28
39 1

7
12 18 14 10 19 16 11 8

1959 ------1964 ------ 1969 ------ 1974 ------ Total 1959 ------1964 ------ 1969 ------ 1974 ------1'Less

4
15 16 18 11 16 13 11

2
17 25 25 10. 20 22

4
23

7 20 27 4
11 15 15 3 13

7
3 2

7

20

27
37

than 0.5 per cent.

per cent in 1964 and is projected to drop to only 2 per cent within 10. years. The proportion of producers whose sales place them in categories B-D likewise will decline by 1974. Percentage of dairymen in size category E will remain almost constant. A slightly higher percentage of producers is projected for category F group (600,000-800,000 pounds per year). By 1974 it is anticipated that almost 40 per cent of the Alabama producers will be included in the largest size class (over 800,000 pounds annually), up from 4 per cent in 1959.

SIZE ADJUSTMENTS of GRADE A MILK PRODUCERS

21

SUPPLY PROJECTIONS Method of Making Projections

One of the useful features of an analysis that projects size distributions for future periods is that estimates of future supplies can be obtained. Supply estimates were calculated by multiplying average sales per producer in each size category by the projected number of producers within that size category and obtaining a total. For categories B-F, the midpoint of each size category was used. The actual average sales of producers within each size classification were computed for 1959 and 1964 and it was found that averages within these groups were clustered around the midpoint. For size category A (up to 100,000 pounds annually), average yearly production was assumed to be 60,000 pounds. Average production for dairies in this group was around 60,000 pounds in both 1959 and 1964. Milk supplied by producers in size category A, however, is expected to have little effect on total supplies. There was a problem in computing averages for the open-end category, G. In 1959 and 1964 average sales of all Alabama dairymen in this category were almost identical, about 1,340,000 pounds annually in both years. However, average sales of category G producers located in the Central and South Areas declined during the period, while average in the North Area increased from 1,175,000 pounds in 1959 to 1,410,000 pounds in 1964. Average size of the large producers in 1969 and 1974 was estimated by assuming a 20 per cent increase in sales every 5 years for producers already in class G at the beginning of the period. Then, number of producers expected to enter Class G from lower classes was calculated from the transition matrices. Average size of producers entering category G from lower size classifications was assumed to be a function of the size category in the earlier period, e.g., producers who enter class G from class F will be larger on the average than producers who enter from category E, D, C, B, or A. Annual average sales for 1969 and 1974 obtained in this manner were as follows:
Supply area 1964 North Central South Out-of-state 1,412 1,352 -1,230 1,167 Average annual sales of producers in size category G 1969 1,000 pounds 1,332 1,417 1,330 1,100 1974 1,380 1,541 1,460 1,140

22

ALABAMA

AGRICULTURAL

EXPERIMENT

STATION

Projected Supplies in 1969 and 1974

Estimated supplies produced within the State are projected to be about 730 million pounds in 1969 and almost 850 million pounds in 1974, Table 14. By 1974 it is anticipated that 48 per cent of the Grade A milk produced in Alabama will be produced in the North Supply Area, 37 per cent in the Central Area, and 15 per cent in the South Area. The out-of-state producers included in the study were expected to supply about 77 million pounds by 1974. Supplies in 1969 and 1974 were also estimated by the method of least squares using records of the Alabama Milk Control Board.
TABLE 14. ANNUAL VOLUME OF MILK SOLD PER SIZE CATEGORY, BY SUPPLY AREAS, ALABAMA, 1959 AND 1964, AND PROJECTIONS FOR 1969 AND 1974

Year and supply area

A

Annual milk sales by size category F E D C B

Tota
G

Mil. lb. Mil. lb. Mil. lb. Mil. lb. Mil. lb. Mil. lb. Mil. lb. Mil. lb. North 1959 1964 ...... 1969 ...... 1974 Central 1959 1964 ----1969 1974 ...... South 1959 1964 1969 ...... 1974 ...... Total Alabama 1959 1964 1969 1974 ...... Out-of-state 1959 1964 ..... . 1969 1974 ...... Total sales 1959
1964 -----

13.6 3.7 1.3 .8 2.4 .6 .2 .1 4.7 1.3 .5 .4 20.7 5.6 2.0 1.3 7.8 1.3 .5 .3 28.5 6.9 2.5 1.6

41.0 19.4 9.8 6.8 13.1 2.6 .9 .5 14.4 7.8 4.2 3.2 68.5 29.8 14.9 10.5 15.5 5.1 2.2 1.6 84.0 34.9 17.1 12.1

39.6 25.5 16.5 11.5 27.4 12.6 5.3 2.8 14.9 8.5 5.5 4.3 81.9 46.6 27.3 18.6 9.1 7.5 4.8 3.2 91.0 54.1 32.1 21.8

26.7 38.8 28.7 21.4 29.6 22.9 14.4 9.5 13.2 8.3 6.0 4.6 69.5 70.0 49.1 35.5

19.6 58.6 59.5 49.5 53.7 44.2 36.0 29.5 14.9 22.4 19.0 17.5 88.2 125.2 114.5 96.5 3.1 13.1 16.5 16.0 91.3 138.3 131.0 112.5

17.0 42.9 68.6 70.7 32.2 41.1 37.8 32.2 11.7 14.6 14.0 13.3 60.9 98.6 120.4 116.2 1.4 6.6 7.7 7.7 62.3 105.2 128.1 123.9

25.8 81.9 158.5 242.9 46.6 113.6 178.5 237.3 16.7 39.4 65.2 89.1 89.1 234.9 402.2 569.3 4.2 14.0 29.7 39.9 93.3 248.9 431.9 609.2

183.3 270.8 342.9 403.6 205.0 237.6 273.1 311.9 90.5 102.3 114.4 132.4 478.8 610.7 730.4 847.9 45.3 56.1 69.1 76.7 524.1 666.8 799.5 924.6

4.2
8.5

7.7
8.0 73.7 78.5 56.8 43.5

1969 1974 ...... urll

i.r\

-~

1 Because of rounding error, some totals for 1959 and 1964 do not precisely agree with those given in Table 1.

SIZE ADJUSTMENTS

of GRADE A MILK PRODUCERS

23

2

The equation used in estimating future supplies was Yc 506,943,000 - 22,882,000X, using 1959 as a base, with X one year. Projected Alabama produced supplies were estimated by this method to be 735,763,000 pounds in 1969 and 850,173,000 pounds in 1974. These figures are almost identical with the projections given in Table 14. This similarity of estimates gives confidence to the results obtained by the Markov process technique. The key role of the largest producers in Alabama's dairy industry is further shown in Table 15. By 1974, more than twothirds of the milk produced in Alabama will be by dairymen in size category C. On the other hand, less than 10 per cent of Alabama supplies will come from all producers in categories A,
-

B, C, and D. The largest producers will have the greatest

rela-

TABLE

15. PERCENTAGE OF MILK SUPPLIED PER SIZE CATEGORY, BY SUPPLY AREAS, ALABAMA, 1959 AND 1964, AND PROJECTIONS FOR 1969 AND 1974
Percentage of supplies from each size category

Year and supply area

A

B
Pct.

C
Pet.

D
Pet.

E

F

G
Pct.

Pet.
North 1959-------1964 -------1969

Pct.
10.7 21.7 17.3 12.3 26.2 18.6 13.2

Pct.
9.3 15.8 20.0 17.5 15.7 17.3 13.8 10.3 12.9 14.3 12.2 10.0 12.7 16.1 16.5 13.7 3.1 11.8 11.1 10.0 11.9

Pct.

1974 1974
1969

------- --------

7.4 1.4 .4 .2 1.2 .3 .1

22.3 7.2 2.9 1.7 6.4 1.1 .3 .2 15.9

21.6 9.4 4.8 2.8 13.4 5.3 1.9 .9 16.5 8.3 4.8 3.3 17.1 7.6 3.7 2.2 20.1 13.4 7.0 4.2 17.4 8.1 4.0 2.3

14.6 14.3 8.4

5.3
14.4 9.6

14.1 30.2 46.2 60.2 22.7 47.8

100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Central 1959 ------- 1964 --------

---------------

5.3
3.0 14.6 8.1 5.3

9.5
16.5 21.9 16.6 13.2 18.4 20.5 15.7 11.4 6.8 23.3 23.9 20.9 17.4 20.8 16.4 12.2

65.4
76.1 18.4 38.5 57.0 67.3 18.6 38.5 55.1 67.1 9.3 25.0 43.0 52.0 17.8 37.3

South 1959------- 1964 ------- 1969-------1974-------Total Alabama 1959 ------- 1964-------1969

5.2
1.3 .4 .3 4.3 .9 .3 .2

7.6
3.7 2.4 14.4 4.9 2.0 1.2 34.2 9.1 3.2 2.1 16.0

3.5
14.5 11.5 6.7 4.2 9.3 15.1 11.1 10.4 14.1 11.8 7.1 4.7

--------

1974 -------Out-of-state 17.2 1959 -------2.3 1964------- .7 1969 -------.4 1974 -------Total 1959---------- 5.4 1964---------- 1.0 1969 ----------- .3 1974.2
1Less

5.2
2.2 1.3

15.8
16.0 13.4

54.0
65.9

than 0.1 per cent.

24 24

ALABAMA

AGRICULTURAL

EXPERIMENT

STATION

ALABMA

AGRICULTUA

XEIMN

TTO

tive importance in the Central Supply Area, supplying threefourths of the milk in that region. If it is assumed that the out-of-state producers included in the study continue to account for 25 per cent of all imports, total imports will amount to about 807 million pounds in 1974. Thus, total supplies would be expected to amount to around 1,155 million pounds annually.
Supply-Demand Balance

Based on a recent study of the demand for fluid milk in the South, consumption estimates were obtained for Alabama in 1974 as follows: (2)
Projected levels Proected levels Low_____-----------High--------.---------- ---------.. Demand for fluid products 851.8 949.1 Demand for nonfluid products Million pounds 168.7 170.9 Total demand5

1,020.5 1,120.0

Alabama produced supplies will be about adequate, disregarding seasonality of milk supplies and demand, to meet the projected low level of demand for fluid products only. If total imports continue to be in the same proportion to imports from outof-state producers studied, then supplies in 1974 should be adequate to fulfill either the high or low level of aggregate demand.
Demand estimates were adjusted downward from 1975 to obtain a 1974 estimate. Consumption estimates shown were calculated using a fat solids basis. Aggregate demand was based on a low level per capita demand of 232.8 pounds and 46.1 pounds for fluid and non-fluid products, respectively, and high level was based on a per capita demand of 259.4 pounds and 46.7 pounds.

SIZE

ADJUSTMENTS

of

GRADE

A

MILK

PRODUCERS

25

SUMMARY AND CONCLUSIONS Number of Grade A milk producers in Alabama declined from 1,673 in 1959 to 1,231 in 1964. Number of out-of-state producers included in this study who were regular suppliers to Alabama markets dropped 46 per cent, from 301 to 163, during the same period. Average annual sales per producer increased markedly during the study period, from 265,600 pounds in 1959 to 478,500 pounds in 1964. The net result of these two trends was an increase in total milk supplied by the producers studied from 524 million pounds in 1959 to 667 million pounds in 1964. Size changes of individual producers in each of the four supply areas were characterized by the following: 1. Producers in the smaller size categories had the highest probability of leaving the business. 2. A relatively low percentage of producers in each size category with the exception of the largest, category G, stayed in the same category for both periods. 3. Decreases in size, except for exits, were uncommon. 4. Most increases in sales were small, with producers moving up by only one or two categories (moving one or two columns to the right of the diagonal in Tables 3-10). Large increases in size were uncommon. 5. Only 10 per cent of the largest suppliers (over 800,000 pounds per year) left the business between 1959 and 1964. Greatest tendency toward increased size was exhibited by producers in the North Area. Highest mobility into and out of the business was in the South Region. Central Area producers in the two largest size categories (over 600,000 pounds annually) were less likely to leave the business and more likely to increase volume of sales than the largest producers in the other regions. Projections call for a continuing decline in number of producers and a continuing increase in average sales. On the basis of the projections, it appears that Alabama will continue to rely heavily on imports to meet the demand for fluid milk. Alabama produced supplies, disregarding seasonality of demand and production, will be adequate to meet only the low level of projected demand for fluid products. However, if quantities imported in 1974 are in proportion to supplies from out-of-state producers studied in 1959 and 1964, there should be adequate milk to meet the

26

ALABAMA AGRICULTURAL

EXPERIMENT STATION

projected high level demand for both fluid and non-fluid products in the State. IMPLICATIONS Because of changes in price, technology, and market organization, dairymen evaluate their operations and adjust their production units to increase profits (or reduce losses). In recent years individual Alabama producers have commonly adjusted to changes by either rapidly expanding sales or by leaving the dairy business. These adjustments, brought about by a dynamic market situation, have important implications for the industry. One question in this regard is the determination of the optimum size of production units under given price and technology situations. This analysis was not designed to determine optimum size of production units; however, farm management studies at Auburn University Agricultural Experiment Station concerning costs and returns of Grade A dairy operations should provide such information. Although supply projections made in this study call for a continuing increase in size of milk producing units, at some point there will probably be a "leveling off" in herd sizes. If Alabama dairymen are able to expand to sizes now being reached by producers in southeastern Florida, it may be assumed that adequate supplies can be produced in the State. Economic studies in some Southern States, however, have implied that the point of diminishing returns to scale may occur at herd sizes already reached by many Alabama dairymen. Development of producer cooperatives and bargaining associations in Alabama has lagged far behind cooperative efforts of other states. In view of the trend toward fewer but larger production units, Alabama dairymen are likely to find cooperative marketing of milk a feasible alternative. Many producer cooperatives handle the entire procurement operation, including management of surplus and other marketing services. It appears unlikely that Alabama will become a self-sufficient milk producing state within the next decade. Continued sales expansion by Alabama dairymen is needed to meet the expected demand for 1974 and to prevent milk shortages - especially seasonal deficits. Otherwise, the State may become increasingly dependent on out-of-state supplies.

SIZE ADJUSTMENTS

of GRADE A MILK PRODUCERS

27

It is doubtful that increased supplies will be forthcoming from entrants into the market, because of several reasons. One is that current quota regulations tend to restrict entries. In addition, this study has brought out the fact that a high rate of failure exists for small production units. Large firms exhibited a greater survival tendency; however, the sizeable investment required to enter the Grade A market at a large size will probably be a deterring factor for potential new producers.

28

ALABAMA AGRICULTURAL

EXPERIMENT STATION

SIZE

ADJUSTMENTS

of

GRADE

A

MILK

PRODUCERS

29

LITERATURE CITED (1) ALEXANDER, W. H., AND WILLIAMS, D. C. Growth Patterns and Survival Tendencies of Firms in the Louisiana Dairy Industry. La. State Agr. Expt. Sta. Bul. 593, March 1965. (2) CARLEY, D. H., AND PURCELL, J. C. Patterns of Fluid Milk Distribution in the Southeast, 1959 and Projected 1975. Southern Cooperative Series Bul. 105, June 1965. (3) COBB, K. H. An Analysis of the Supply-Demand Balance f6r Grade A Milk in Alabama. Unpublished M. S. Thesis, Auburn University, August 1965.
(4) HAMMOND, J. W., AND COX, R. W. Structural Changes in the North Market Values and Transfers

Dakota Dairy Industry. N. D. State Agr. Expt. Sta. Bul. 454, June 1965. (5)
HARRIS, H. M., AND WILSON, LOWELL E.

of Milk

Quotas in Alabama. Ala. Agr. Expt. Sta. Bul. 366, March 1966.
D. I. The Use of Markov Processes in Measuring Changes

(6)
(7)

PADBERG,

in Market Structure, pp. 189-199.
WILSON, LOWELL

J. Farm Economics, XLIV, No. 1, February 1962,
BLACKSTONE,

E.,

J.

H.,

AND

HARNESS,

VERNON

L.

Producer Marketing Problems in Alabama's Fluid Milk Industry. Ala. Agr. Expt. Sta. Bul. 331, May 1961.

30

ALABAMA

AGRICULTURAL

EXPERIMENT

STATION

30

ALABAMA AGRICULTUA

XEIMN

TTO

APPENDIX
NUMBER OF GRADE A MILK PRODUCERS, ESTIMATED TOTAL SALES, AND ESTIMATED SALES PER PRODUCER, BY COUNTIES, 1959 AND 19641

County

Number of producers 1959 1964

Average sales 1959 1964

Total sales 1959 1964

No.

No.

1,000 lb.

1,000 lb.
2,120

Autauga----------------------------- 209.3 6 6 353.3 1,256 Baldwin_____________________________ 86 61 241.6 390.4 20,776 Bibb___________________________________746.0 1 4 624.0 746 Blount ._______________________________ 19 16 328.1 780.0 6,234 Bullock ____ __________________________ 4 6 253.3 339.0 1,520 Butler -------------------------------10 5 253.6 486.4 2,538 Calhoun_____________________________ 63 45 152.7 270.7 9,620 Chambers__________________________ 17 11 289.8 498.9 4,926 Cherokee___________________________ 13 8 210.6 529.0 2,738 Chilton ------------------------------ 4,844 16 15 302.8 417.6 Clay___________________________________ 18 17 147.0 276.0 2,646 Cleburne____________________________ 5 5 134.8 175.2 674 Coffee _______________________________ 8 13 164.9 434.5 2,144 Colbert _____________________________ 8 9 144.0 362.2 1,296 Conecuh.___________________________ 10 8 245.8 448.7 2,458 Covington_____________________ 5 3 80.4 268.7 402 Crenshaw --------------------------3 3 490.7 178.7 1,472 Cullman____________________________ 31 24 143.6 294.1 4,452 Dale_____________________________ 5 3 280.4 735.3 1,402 Dallas --------------------------------70 50 347.5 549.2 24,324 DeKalb__________________________ 28 36 177.9 382.6 4,980 Elmore_______________________________ 39 31 404.6 831.3 15,778 Escambia___________________________ 5 10 468.4 473.2 2,342 Etowah_____________________________ 29 28 240.0 420.8 6,960 Fayette ------------------------------19 19 146.7 312.2 2,788 Franklin_____________________________ 12 9 263.2 388.4 3,158 Geneva ------------------------------ 1,988 14 9 142.0 383.8

23,814
2,496
12,480

1,356
2,432

12,182 5,488 4,232
6,264

4,692
876

3,476 2,898 3,590 806
536

7,058 2,206
27,458

13,772 25,770 4,732 11,782
5,932

3,496
3,454 4,480 43,104 1,824

Greene.--------------Hale Henry_________________

-----------------

9 116 3

10 84 4

237.3 328.7 190.0

448.0 513.1 460.5

2,136 38,132 570

Houston_______________ Jackson_______________
Jefferson---------------

15 18
57

10 18
41

290.4 177.8
489.1

569.2 283.9
840.8

4,356 3,200
27,876

5,692 5,110
34,472

Lamar________________ Lauderdale____________

Lawrence-------------Lee------------------Limestone ------------Lowndes______________
Macon---------------Madison_______________

23 11
11 25 58

15 10
10 12 38

112.3 298.2
254.4 323.6 150.2

175.5 729.8
571.4 576.3 279.2

2,582 3,280
2,798 8,090 8,712

2,632 7,298
5,714 6,916 10,610

34
11 42

23
6 34

327.3
237.6 167.4

459.1
353.7 318.5

11,128
2,614 7,030

10,560
2,122 10,830

Marengo______________ Marion________________

Marshall --------------

44 13
19

29 11
17

533.6 161.4
162.6

512.8 343.5
268.4

23,478 2,098
3,090

14,872

3,778
4,562

Mobile________________ Montgomery___________ Morgan_______________ Perry_________________

94 129 36 62

63 87 26 52

259.0 490.5 183.2 410.4

436.1 830.5 349.5 709.6

24,346 63,276 6,596 25,442

27,476 72,250 9,088 86,898

(Continued)

SIZE ADJUSTMENTS

of GRADE A MILK PRODUCERS

31

NUMBER OF GRADE A MILK PRODUCERS, ESTIMATED TOTAL SALES, AND ESTIMATED SALES PER PRODUCER, BY COUNTIES, 1959 AND 19641

(Continued)
1959

County

Number of producers 1959 1964

Average sales 1959 1964

Total sales 1964 9,288
1,214 1,772

No.

No.

1,000 lb.

1,000 lb.

26 133.1 357.2 6,254 PiCkens______________________________ 47 303.5 1,904 9 4 211.6 Pike -----------------------------------354.4 1,198 5 149.8 8 Randolph -------------------------11,374 19 9 598.6 1,111.7 Russell_______________________________ 212.4 413.1 5,522 26 St. Clair_____________________________16 21,010 56 375.2 747.5 Shelby ---------------- 43 _-------------

10,006 6,610
32,144 11,092

Talladega ------------Tallapoosa_____________ Tuscaloosa_____________ W alker_________________ Winston________________ Others=________________
TOTALI______________
1Based

40

25

272.0

443.7

10,880

15 34 11 18 8 1,673

12 21 11 8 5 1,231

241.1 210.9 122.2 125.1 134.0 286.2

358.5 3,616 4,302 7,172 7,764 369.7 443.5 1,344 4,878 578.0 2,252 4,624 278.4 1,072 1,392 496.2 478,890 610,772

on sales during base-building periods of 1958-1959 and 196b3-1964.

Coosa, Monroe, and Sumter counties. There were no Grade A dairies reported in either period for Choctaw, Clarke, Washington, and Wilcox counties.

2 Barbour,