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s l e s t I. Sib Oil I, so. I. Ns f I’. O 6 e. # 05 11 5 s. I fo MILKING IT San Antonio As every school child knows, the dairy farmer gets up real early in the morning and milks his cows. Then he puts his milk out by the side of the road in big metal cans. A man in a truck picks up the milk and drives it to town, where it is bottled and delivered to the grocery story or to your door. Ha. And ha again. For most of the past two weeks, this writer has been in San Antonio, the Emerald City of milkdom, listening to the current Milk Wizard explain the vagaries of the milk market to some very skeptical anti-trust lawyers. The Wizard expounded at length concerning federal milk marketing orders, flooding the pool, base plans, overbase prices, the Minnesota-Wisconsin series and other bizarre pricing mechanisms. Dr. George Mehren, general manager of the biggest dairy cooperative in the nation, Associated Milk Producers, Inc., has been the Wizard only since January of 1972. That’s when his predecessor, Harold Nelson, was deposed by some very irate co-op members. The co-op had gotten some bad publicity because one of Nelson’s employees had promised President Nixon two million dollars in exchange for some sympathetic understanding of the industry. Then, to make matters even more awkward, some ingrates in the Justice Department went and filed suit against the co-op. The new Wizard is suffering the ignominy of explaining the excesses of the old Wizard. Mehren and his lawyers coped with charges that Nelson and his friends hoped to gain control of every single drop of milk produced in the United States, explained how a hundred thousand dollars in illegal corporate cash was given to President Nixon’s attorney, winced at documents claiming the co-op controlled Congressional committee chairmen and admitted that some documents had been burned, others hidden, to keep them out of the court record. It was an eye-opening lesson in the economics of milk. THE MILK market was pretty much like school children think it is up until the 1930’s. But the farmers who milked the cows felt they weren’t getting a very good deal. As individuals they had to take whatever the processors would give them for their product and the market was unstable. If the price of beef went up or the price of milk went down, lots of farmers would sell their. cows to the canners and the cutters, making for drastic fluctuations in the milk supply. This, at least, is the history of the American milk industry as told by the U.S. Department of Agriculture. Two pieces of legislation during the Thirties radically altered the market situation. The Agricultural Adjustment Act of 1933 set a parity price designed to give a unit of a farm commodity the same purchasing power \(in terms of the goods commodity had at a specific prior period. The Agricultural Marketing Agreement Act of 1937 set up a federal market order system to provide stable and orderly marketing conditions. While urban laborers were joining unions, farmers were forming co-ops to give them some bargaining power with processors. Through the years, the co-ops, like the unions, became very powerful and very fat. Associated Milk Producers, Inc., result of the merger of a number of large cooperatives, including Milk Producers, Inc. Headquartered in San Antonio, AMPI is the largest dairy co-op in the nation. It has more than 40,000 members in 20 states and its assets last year were $170 million. AMPI’s first executives had a tendency to flaunt their clout. They bought airplanes a Sabre jet, a Lear jet and a plebeian little Piper to hurry them to political meetings in Washington, to the endless regional co-op meetings and to their “think tank in Arkansas. AMPI had a fleet of lawyers at its disposal and a whole herd of high-priced expert consultants. Two AMPI apartments in D.C. were available for congressmen to use, and if that didn’t soften them up, there was always dirty old money. HAROLD Nelson and his crew were genuine high rollers. In 1971 at AMPI’s annual convention in Chicago, President Nixon addressed 40,000 dairy people who had just finished an elegant sit-down dinner. “This is the biggest indoor crowd I have ever seen in my life,” the President said. “I just wonder who is home milking the cows.” Nixon told the farmers that they had “pioneered in developing a ‘total marketing concept,’ a concept which many other producers, I think, would do well to consider. All this you have done on your own. You haven’t whimpered helplessly about the uncontrollable economic forces nor waited passively for government to bail you out.” Meanwhile, in another part of town, the Chicago office of the Justice Department was taking a very jaundiced view of AMPI’s “total marketing concept.” The Justice laWyers wanted to file criminal anti-trust charges against the co-op, but Atty. Gen. John Mitchell insisted upon a civil suit instead \(Obs., filed early in 1972, accused AMPI of flooding certain markets with cheap milk to drive down the price received by non-members, of buying and liquidating assets of truckers and processors who handled non-members’ milk, of forcing other truckers and processors to refuse to handle non-member milk as a condition of doing business with AMPI and of enforcing an unjust base plan on member farmers. It should be noted that the Capper-Volstead Act allows dairy cooperatives to form monopolies under certain conditions, but the Justice March 15, 19 74 3