F. Issue: The Price Needed to Yield a Reasonable Rate of Return to
Processors of Fluid Milk Products

    This inquiry is derived directly from Section 9(e) of the Compact
and is significant in view of the Compact's emphasis on the financial
health of the entire dairy industry. The focus of the inquiry is the
determination of a price that ensures a reasonable rate of return. It
is of present significance for the baseline determination of whether
processing plants are currently covering costs of production.
    The Compact Commission did not receive information with regard to
the price required to yield a reasonable rate of return specifically to
New England fluid processors. According to the extract of the Aplin et
al, Cornell study cited above, return for cost of capital for the
nearby New York metro area plant equaled $0.06 per gallon.
    The Compact Commission concludes that this data may be relied upon
to determine that the region's fluid processors are presently covering
their costs with a return on capital, however slight. As noted, the
Aplin study was a number of nationally representative fluid plants, of
which fourteen were from the Northeast. It is reasonable to assume that
a representative number of these region-wide plants in turn were from
the New England area, and that the extract chosen by the authors may be
understood as representing this group as a whole, including New England
plants.