ustxtxb_obs_1974_03_15_50_00005-00000_000.pdf

Federal milk order areas AMPI controls the following percentages of the milk pooled under federal milk orders in Texas: Marketing Area’ Percentage of Total Panhandle 100.0% Red River 70.0 Lubbock/Plainview 93.4 South Texas 70.6 North Texas 59.0 Central West Texas 94.6 Austin/Waco 98.6 Corpus Christi 57.3 Rio Grand Valley 57.3 San Antonio 95.4 receive. 500,000 cwt @ $10 $5,000,000 5,000 cwt @ 6 30,000 total milk pool $5,030,000 To get the blend price, divide 55 million into $5,030,000, which comes out to $9.15 per hundred pounds of milk. This is the figure the farmers will receive, minus hauling expenses, co-op dues and the like. Now, under federal orders, a co-op can associate its surplus milk with any market in which it does business. This means that if AMPI has, say, 30 million pounds of surplus milk from the North Texas region, it can, for bookkeeping purposes, associate that milk with the San Antonio market. Surplus milk, by the way, is always designated as Class II milk. The product never has to go to San Antonio. This is just on paper. If AMPI adds 30 million pounds of Class II milk to the San Antonio area’s monthly needs of 55 million pounds that depresses the blend price to $8 cwt. Alamo Milk, which operates exclusively within the San Antonio marketing area, would have to pay its producers $8. But, AMPI members would get more money, because AMPI operates all over the state and in 19 other states besides. AMPI can reblend the milk prices from all these various areas. Thus, all the members of AMPI share the cost of this little price depressing foray into San Antonio. It’s only the small co-op that gets hurt. This is called “blending -down the pool.” The government alleges that blending down the pool to run a competitor out of business is a, predatory practice and that it is illegal. A number of depositions taken in San Antonio support the government’s allegations about AMPI’s marketing practices. Lloyd Knowlton of Knowlton Dairies in San Antonio joined the Alamo co-op when it was formed in 1962. His dairy remained with the small co-op until, as Knowlton puts it, AMPI “finally broke Alamo.” Unable to compete successfully with the larger co-op, Alamo merged with AMPI, but not before a pretty good fight. According to an Alamo newsletter dated had depressed the blend price in San Antonio by 25 cents. “MPI has used the Federal Order in other areas in the same way to intimidate those who choose not to join,” the newsletter said. Between January and February of 1969, the blend price dropped another 19 cents. One Knowlton employee complained to the Agriculture. Department that he had been warned by an AMPI man that Knowlton had better stop receiving milk from Alamo or all of its AMPI deliveries would be discontinued. After Alamo bit the dust, AMPI started directing its attention to the Southern Region of Texas, where MAP, Marketing AssistanCe Plan, was taking a chunk out of its business. MAP has been fighting AMPI in court ever since. One of MAP’s lawyers, Tom McDade of Fulbright, Crooker and Jaworski, won an important court decision in February of 1973. Federal Judge Woodrow Seals of Houston ruled that co-ops’ antitrust exemptions “do not license milk producers’ associations to engage in predatbry commercial activities . . .” THE PURPOSE of a dairy co-op, of course, is to serve the dairy farmer as a handy middleman in getting his product to market for a good price. But, in the case of AMPI, the middlemen ended up with virtually complete control over the products of member farmers. The Observer discussed AMPI’s “Base Plan” in the Jan. useful to review the scheme here. For its southern members, AMPI designed a “base,” which is, in effect, a license to do business. Producer/members must buy the right to market a specific number of pounds of milk through AMPI at a specific price known as the “base price.” The farmer gets substantially less money per pound for all milk exceeding the number of. allotted base pounds, so it is not financially feasible for a dairyman to market his milk through AMPI unless he acquires enough base to cover a substantial percentage of his milk. The clincher is that in order to get enough base to make milk production profitable, members of AMPI must produce and market their excess milk through the co-op at a loss for a number of years or buy another member’s base. At the time the government suit was filed, base was being bought and sold for between $10 and $20 a pound. In the past few years, transfer of AMPI base has gotten more and more difficult. The co-op adopted rules that allowed members to sell their base only if they were going out of the dairy business within a specified geographical region. And in 1969, AMPI went so far as to say that members could not sell milk to competitors for five years after leaving the co-op and could not sell land to anyone who sells milk to AMPI competitors, lest they lose the right to sell their base. The base policy, needless to say, was not very popular with prospective members and so last year, during an energetic membership drive, AMPI altered the plan to give new members non-transferable base for five years. -REMEMBER,” the AMPI magazine reminded members during Stuart Nelson’s reign as general manager, “loners are losers.” Loners, meaning any dairy farmers who didn’t belong to AMPI, were considered “free riders,” cheapskates who weren’t paying their rightful share for AMPI’s efforts on behalf of the entire industry. David Parr, a lawyer-promoter, was Nelson’s right-hand man. Together they dreamed of a vast dominion over milkdom. Parr told government lawyers that what he had in mind was a single national milk co-op that would regulate its farmers’ production, advertise and promote the consumption of milk, distribute the milk and lobby in Washington. This was the “total marketing concept” that President Nixon admired so much. The basic goal was to increase milk prices for farmers. As Parr explained in one deposition, Q. Is that all dairy farmers? A. Yes. Q. Including non-members? A. If it was up to me, there wouldn’t be any. The price to consumers of AMPI’s being March 15, 1974 5 GG