25014 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules

DEPARTMENT OF AGRICULTURE adopted, the proposed rule will not thereof, the Administrator, on preempt any state or local laws, November 21, 1994, issued a Agricultural Marketing Service regulations, or policies, unless they recommended decision containing present an irreconcilable conflict with notice of the opportunity to file written 7 CFR Part 1007 this rule. exceptions thereto. [Docket Nos. AO±366±A36, et al.; DA±93± The Agricultural Marketing The material issues, findings and 21] Agreement Act of 1937, as amended (7 conclusions, rulings, and general U.S.C. 601–674), provides that findings of the recommended decision Milk in the Georgia and Certain Other administrative proceedings must be are hereby approved and adopted and Marketing Areas; Decision on exhausted before parties may file suit in are set forth in full herein, subject to the Proposed Amendments to Marketing court. Under section 608c(15)(A) of the modifications contained in this final Agreements and to Orders Act, any handler subject to an order may decision. Certain sections of this final file with the Secretary a petition stating decision differ from the recommended 7 CFR Marketing area Docket No. that the order, any provision of the decision only by discussing comments part order, or any obligation imposed in that were received, correcting obvious 1007 ..... Georgia ...... AO±366±A36 connection with the order is not in typographical errors, or adding 1093 ..... Alabama-West AO±386±A14 accordance with the law and requesting footnotes to reflect new information, Florida. a modification of an order or to be such as a cooperative merger. These 1094 ..... New Orleans-Mis- AO±103±A56 exempted from the order. A handler is sections include marketing area, unit sissippi. afforded the opportunity for a hearing pooling, producer, producer-handler, 1096 ..... Greater Louisiana AO±257±A43 on the petition. After a hearing, the balancing plants, and seasonal 1099 ..... Paducah, Ken- AO±183±A45 Secretary would rule on the petition. adjustment to Class III and III–A prices. tucky. The Act provides that the district court Other sections have been revised 1108 ..... Central Arkansas AO±243±A46 of the United States in any district in substantially and/or contain actual changes in order provisions. Sections AGENCY: Agricultural Marketing Service, which the handler is an inhabitant, or which fall into this category include USDA. has its principal place of business, has jurisdiction in equity to review the producer milk, product prices, Class III ACTION: Proposed rule. Secretary’s ruling on the petition, price, Class II price, plant location SUMMARY: This decision combines five provided a bill in equity is filed not adjustments, and base-excess plan. In Federal milk order marketing areas with later than 20 days after the entry of the addition to these changes, the Map of unregulated counties in Arkansas, ruling. the Southeast marketing area and the Map Guide (i.e., Table No. 1) have been Georgia, Mississippi, and Tennessee to Prior Documents in This Proceeding form the Southeast marketing area. The revised to reflect the new pricing zones, decision is based on industry proposals Notice of Hearing: Issued September a clarifying paragraph has been added at to merge the individual marketing areas 3, 1993; published September 10, 1993 the end of the discussion of lock-in so as to more equitably divide the (58 FR 47653). provision, and a discussion has been markets’ proceeds in what essentially Supplemental Notice of Hearing: added at the end of the findings and has become a single, large market with Issued October 13, 1993; published conclusions regarding Motions to significantly overlapping sales and October 15, 1993 (58 FR 53436). Reopen the Hearing. Extension of Time for Filing Briefs: procurement areas. Issued January 24, 1994; published Findings and Conclusions FOR FURTHER INFORMATION CONTACT: February 3, 1994 (59 FR 5132). The following findings and Nicholas Memoli, Marketing Specialist, Recommended Decision: Issued conclusions on the material issues are USDA/AMS/Dairy Division, Order November 21, 1994; published based on evidence presented at the Formulation Branch, Room 2971, South November 29, 1994 (59 FR 61070). hearing and the record thereof: Building, P.O. Box 96456, Washington, Extension of Time for Filing 1. Interstate commerce, merger of DC 20090–6456, (202) 690–1932. Exceptions: Issued December 27, 1994; marketing areas under one order, and SUPPLEMENTARY INFORMATION: This published January 3, 1995 (60 FR 65). expansion of the marketing area.1 The administrative action is governed by the Preliminary Statement handling of milk in the proposed provisions of Sections 556 and 557 of merged and expanded marketing area is Title 5 of the United States Code and, A public hearing was held to consider in the current of interstate commerce therefore, is excluded from the proposed amendments to the marketing and directly burdens or obstructs requirements of Executive Order 12866. agreements and the orders regulating the interstate commerce in milk and milk The Regulatory Flexibility Act (5 handling of milk in the aforesaid products. Interstate commerce is U.S.C. 601–612) requires the Agency to marketing areas. The hearing was held involved in both the procurement and examine the impact of a proposed rule pursuant to the provisions of the sales of fluid milk and dairy products by on small entities. Pursuant to 5 U.S.C. Agricultural Marketing Agreement Act handlers operating plants in the 605(b), the Administrator of the of 1937, as amended (7 U.S.C. 601–674), proposed marketing area. Agricultural Marketing Service has and the applicable rules of practice (7 The record evidence clearly shows the certified that this rule will not have a CFR Part 900), in Atlanta, Georgia, on movement of bulk milk from Georgia to significant economic impact on a November 1–5, 1993. Notice of such Alabama and Tennessee; from Alabama substantial number of small entities. hearing was issued on September 3, to Georgia, Mississippi, Louisiana, and The amendments will promote orderly 1993, and published September 10, Tennessee; from Louisiana to Texas, marketing of milk by producers and 1993 (58 FR 47653) and a supplemental Mississippi, and Alabama; from Texas regulated handlers. notice of hearing was issued October 13, to Arkansas, Louisiana and Mississippi; The proposed amendments have been 1993, and published October 15, 1993 from Tennessee to Georgia, Alabama, reviewed under Executive Order 12778, (58 FR 53436). Civil Justice Reform. They are not Upon the basis of the evidence 1 The changes to this section include an updated intended to have a retroactive effect. If introduced at the hearing and the record map of the marketing area and an updated Table 1. Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25015

Kentucky, and Mississippi; from 5), Flav-O-Rich, Montgomery (Zone 8), amended Part 1007, upon issuance, Kentucky to Alabama, Mississippi, and and Meadow Gold, Nashville (Zone 2). would supersede Parts 1093, 1094, Tennessee; and from Arkansas to In addition, one new plant has been 1096, and 1108. Georgia, Tennessee, and Mississippi. In added to the table: Publix Supermarkets, Although the present five orders addition, the record indicates that Zone 7, which is scheduled to would no longer exist upon effectuation packaged fluid milk products regularly commence operations this spring. of the Southeast order, this merger move across States into each of the The proposed Southeast marketing action is not intended to preclude the separate marketing areas involved in area includes the present adjacent completion of those procedures that this proceeding. marketing areas of Orders 7, 93, 94, and would otherwise have existed under the The proposed merged and expanded 96; the Central Arkansas (Order 108) separate orders with respect to milk marketing area, designated as the marketing area; the northeastern Georgia handled prior to the effective date of the ‘‘Southeast’’ marketing area, is shown county of Rabun; the northwestern merger. Such procedures, which would on the map entitled ‘‘Southeast Mississippi counties of Canola, De Soto, need to be carried out after the merger Marketing Area.’’ The map has been Lafayette, Marshall, Tate, and Tunica; date, include the announcement of modified to reflect changes in pricing all of the territory within the State of certain class prices, submission of zones that are discussed under ‘‘plant Tennessee that is not included within reports, computation of uniform prices, location adjustments.’’ Table No. 1 is a the Tennessee Valley Federal marketing payment of obligations and verification map guide for the plants that area; and all of the presently activities. The provisions of the merged corresponds to the numbers shown on unregulated counties in the State of order would apply only to that milk the map. The table has been modified to Arkansas. The proposed merged order handled after the effective date of the delete four plants: McClendon Cheese would use the part number for the merger. (Zone 4), Meadow Gold, Gadsden (Zone present Georgia order, part 1007. The BILLING CODE 3410±02±P 25016 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules

BILLING CODE 3410±02±C Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25017

TABLE NO. 1.ÐMAP GUIDE FOR THE SOUTHEAST MARKETING AREA

No. Plant name Location Zone

1 ...... Foremost Dairy, Inc ...... Shreveport, LA ...... 8 2 ...... Borden, Inc ...... Monroe, LA ...... 8 3 ...... Borden, Inc ...... Lafayette, LA ...... 12 4 ...... Borden, Inc ...... Baton Rouge, LA ...... 12 5 ...... Dairy Fresh of LA ...... Baker, LA ...... 12 6 ...... Kleinpeter Farms Dairy ...... Baton Rouge, LA ...... 12 7 ...... Mid-America Dairymen, Inc ...... Kentwood, LA ...... 11 8 ...... Mid-America Dairymen, Inc ...... Franklinton, LA ...... 11 9 ...... Superbrand Dairy Products ...... Hammond, LA ...... 11 10 ...... Barbe's Dairy ...... Westwego, LA ...... 12 11 ...... Schepps-Foremost ...... New Orleans, LA ...... 12 12 ...... Avent's Dairy, Inc ...... Oxford, MS ...... 5 13 ...... Barber Pure Milk Company ...... Tupelo, MS ...... 5 14 ...... Brookshire Dairy Products ...... Columbus, MS ...... 7 15 ...... LuVel Dairy Products, Inc ...... Kosciusko, MS ...... 7 16 ...... Flav-O-Rich ...... Canton, MS ...... 8 17 ...... Borden, Inc ...... Jackson, MS ...... 9 18 ...... Dairy Fresh Corporation ...... Hattiesburg, MS ...... 10 19 ...... Shoals Cheese ...... Florence, AL ...... 5 20 ...... Dasi Products, Inc ...... Decatur, AL ...... 5 21 ...... Meadow Gold Dairies, Inc ...... Huntsville, AL ...... 5 22 ...... Barber Pure Milk Company ...... Oxford, AL ...... 7 23 ...... Baker and Sons Dairy ...... Birmingham, AL ...... 7 24 ...... Barber Pure Milk Company ...... Birmingham, AL ...... 7 25 ...... Barber Ice Cream ...... Birmingham, AL ...... 7 26 ...... Flav-O-Rich Ice Cream ...... Sylacauga, AL ...... 7 27 ...... Dairy Fresh Ice Cream ...... Greensboro, AL ...... 8 28 ...... McClendon Cheese ...... Uniontown, AL ...... 7 29 ...... Superbrand Dairy Products ...... Montgomery, AL ...... 9 30 ...... Barber Pure Milk Company ...... Montgomery, AL ...... 9 31 ...... Dairy Fresh Corporation ...... Cowarts, AL ...... 10 32 ...... Barber Pure Milk Company ...... Mobile, AL ...... 12 33 ...... Dairy Fresh Corporation ...... Prichard, AL ...... 12 34 ...... Southern Ice Cream ...... Marrietta, GA ...... 7 35 ...... Kraft General Foods ...... Atlanta, GA ...... 7 36 ...... Peeler Jersey Farms ...... Athens, GA ...... 7 37 ...... New Atlanta Dairies, Inc ...... Atlanta, GA ...... 7 38 ...... Publix Supermarkets, Inc ...... Atlanta, GA ...... 7 39 ...... Borden, Inc ...... Macon, GA ...... 8 40 ...... Kinnett Dairies, Inc ...... Columbus, GA ...... 8 41 ...... Kinnett Ice Cream ...... Columbus, GA ...... 8 42 ...... Hershey Chocolate, USA ...... Savannah, GA ...... 10 43 ...... Fleming Companies, Inc ...... Nashville, TN ...... 1 44 ...... Purity Dairies, Inc ...... Nashville, TN ...... 1 45 ...... Cumberland Creamery, Inc ...... Antioch, TN ...... 1 46 ...... Heritage Farms Dairy ...... Murfreesboro, TN ...... 2 47 ...... Mid-America Dairymen, Inc ...... Lewisburg, TN ...... 2 48 ...... Turner Dairies ...... Covington, TN ...... 3 49 ...... Forest Hill Dairy ...... Memphis, TN ...... 4 50 ...... Harbin Mix ...... Memphis, TN ...... 4 51 ...... Borden, Inc ...... Little Rock, AR ...... 4 52 ...... Coleman Dairy ...... Little Rock, AR ...... 4 53 ...... Gold Star Dairy, Inc ...... Little Rock, AR ...... 4 54 ...... Humphrey's Dairy ...... Hot Springs, AR ...... 4

The marketing area proposed herein is the merger of the marketing areas of cooperatives will be referred to as the a combination of several of the Orders 7, 93, 94, 96, together with the ‘‘cooperative coalition,’’ and their proposals presented at the hearing. A former Nashville, Tennessee (Order 98), proposal will be referred to as Proposal group of four cooperative associations, marketing area,3 and the four No. 1. At the time of the hearing, these comprised of Dairymen, Inc., Gulf Dairy unregulated Tennessee counties of groups represented approximately 54 Association, Inc.,2 Southern Milk Sales, Franklin, Lincoln, Moore, and Van percent of the producers and 55 percent Inc., and Carolina Virginia Milk Buren. In this decision, these of the milk pooled under Orders 7, 93, Producers Association, Inc., proposed 94, and 96. 3 Official notice is taken of the termination of the former Memphis, Tennessee (Part 1097), and Malone & Hyde Dairy (aka Fleming 2 Effective March 1, 1994, September 1, 1994, and Nashville, Tennessee (Part 1098) Federal milk Dairy), Nashville, Tennessee, proposed February 1, 1995, respectively, Gulf Dairy marketing orders effective July 31, 1993. The expanding the area proposed by the Association, Dairymen, Inc., and Southern Milk marketing areas of these former orders may be Sales became part of Mid-America Dairymen, Inc. found in §§ 1097.2 and 1098.2 of 7 CFR, revised as cooperative coalition by including the (Mid-Am). of January 1, 1992 and 1993, respectively. one remaining unregulated county in 25018 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules

Georgia (i.e., Rabun County), the six movement of milk to where it is needed, Murfreesboro, Tennessee, and the unregulated counties between the and provide a more equitable sharing Fleming Dairy plant at Nashville, Tennessee Valley marketing area and among producers of higher-valued fluid Tennessee, became regulated under the former Nashville marketing area milk sales. Order 7—35.4 percent of the Class I (four of which were also included in The division manager for milk disposition on Order 7 was marketed by Proposal No. 1), the former Memphis, procurement for The Kroger Company other order distributing plants. He Tennessee (Order 97), marketing area, testified that Heritage Farms Dairy, a pointed out that this was a higher and the remaining unregulated Kroger Company plant located in percentage of other order Class I sales Tennessee counties that are bordered on Murfreesboro, Tennessee, also than that accounted for by any of the the east by former Order 98, on the west expressed qualified support for the other orders involved in the merger by former Order 97, on the north by merger of milk orders in the Southeast, proceeding. Order 99, and on the south by Order 94. but said that Proposal No. 1 fell short of Testimony in support of Proposal No. Malone & Hyde Dairy hereinafter will be addressing all the problems or 9. The assistant operations manager for referred to as ‘‘Fleming Dairy,’’ and their answering all the questions facing Fleming Dairy, Nashville, Tennessee, proposal will be referred to as Proposal Federal milk marketing orders in the testified in support of Proposal No. 9. No. 9. Southeast. He said that markets not He explained that the Fleming Company Arkansas Dairy Cooperative contained in this proceeding present operated two distributing plants: One Association, Inc., which also will be challenges that need to be addressed at plant located in Nashville, Tennessee, referred to as ‘‘ADCA,’’ proposed a future hearing. and a second plant located in Baker, including the Central Arkansas Testimony in opposition to Proposal Louisiana, which is jointly owned with marketing area and the former Memphis No. 1. A consultant for Barber Pure Milk Dairy Fresh of Alabama. marketing area in the merged order Company and Dairy Fresh Corporation The Fleming spokesman testified that proposed by the cooperative coalition. testified that Barber Pure Milk Fleming’s Nashville plant distributed Their proposal will be referred to as Company, a handler under Orders 7, 93, approximately 25 million pounds of Proposal No. 2. and 94, and Dairy Fresh Corporation, a Class I and Class II dairy products per Finally, Associated Milk Producers, handler under Orders 7, 93, 94, and 96, month in the former Nashville and Inc., or ‘‘AMPI,’’ proposed and testified opposed Proposal No. 1 because it did Memphis Federal order marketing areas, in support of a proposal (i.e., Proposal not include Orders 5 (Carolina) and 11 as well as in the marketing areas of No. 13) to merge the former Memphis (Tennessee Valley). He stated that, in Order 46 (Louisville-Lexington- marketing area with the Paducah, May 1993, 52 percent of all Class I sales Evansville), Order 99 (Paducah), Order Kentucky, and Central Arkansas in the Order 7 marketing area were 108 (Central Arkansas), Order 106 marketing areas to form a ‘‘Mid-South’’ made by plants pooled on other orders, (Southwest Plains), Order 94 (New marketing area. Under this proposal, the with 26.4 percent and 11.6 percent from Orleans-Mississippi), Order 93 marketing area also would include all Orders 5 and 11, respectively. (Alabama-West Florida), Order 6 (Upper presently unregulated counties in With respect to raw milk Florida), Order 7 (Georgia), Order 5 Arkansas, the unregulated Missouri procurement, the Barber/Dairy Fresh (Carolina), and Order 11 (Tennessee county of Dunklin, and the two spokesman testified that Order 7 and 93 Valley). He stated that Fleming procured unregulated Texas counties of Bowie handlers competed with Order 5 and 11 most of its raw milk supply from dairy and Cass. handlers for their milk supply. Because farmers located in central Tennessee Testimony in support of Proposal No. of the intermingling of producers among and south central Kentucky, with 1. The Vice President of Dairymen, Inc., these orders, the milk of some producers approximately 55 percent of Fleming’s testified on behalf of the cooperative is shipped alternatively between Orders raw milk supply purchased from coalition in support of Proposal No. 1. 7 and 5 handlers, he said, and Kentucky dairy farmers and 45 percent The thrust of his testimony was that differences in utilization in these purchased from Tennessee dairy fluid milk processors in the proposed markets result in different pay prices for farmers. In addition to purchasing milk merged marketing area had increasingly milk of neighboring producers, creating from independent producers, Fleming expanded their distribution to serve instability in the milk supply. Further, purchases raw milk from Carolina- larger geographic areas and, as a result, to create a large marketing area Virginia Milk Producers and other dairy a larger order is now needed to maintain including most of five or six states with cooperatives and proprietary handlers, market stability, to insure that small orders nearby could lead to he added. producers in the proposed marketing undesirable pooling practices, he added. The witness testified that a southeast area would be able to share pro rata in A representative for Kinnett Dairies merger which does not include the the classified uses of their milk, and to (Kinnett) in Columbus, Georgia, testified Chattanooga area will result in blend provide assurance to handlers that their that Kinnett purchased raw milk from a price differences between the Tennessee competitors were paying at least the group of independent producers located Valley order and the new Southeast order’s minimum prices regardless of in Georgia, Alabama, and Tennessee and order which will cause problems where where their milk supply originated. also purchased a portion of its raw milk the two orders’ procurement areas He also stated that a merged order was needs from Carolina-Virginia Milk overlap. He said the Department should in the public’s interest because it would Producers Association, Charlotte, North address this potential problem of blend establish orderly marketing conditions Carolina. He stated that while Kinnett price differences by considering the for producers and handlers in the generally supported the concept of merger of the Louisville order with the marketing area and assure a continuing, merging Federal Orders 7, 93, 94, and Tennessee Valley order and possibly the adequate supply of high-quality milk. 96, with the area covered by the Carolina order in the very near future The Chairman of the Louisiana Dairy terminated Nashville order, it was and that the implementation of such a Advisory Committee of the Louisiana opposed to Proposal No. 1 because it merger should coincide with the merger Farm Bureau Federation testified that did not include the Tennessee Valley of other Federal orders in the Southeast. the proposal was significant because it and Carolina orders (Orders 11 and 5, The Fleming spokesman stated that could eliminate price disparities among respectively). He explained that in the former Memphis marketing area producers in the Southeast, facilitate the August 1993—after the Kroger plant at should be included in the merged order Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25019 because Fleming Dairy has significant A dairy farmer from Guy, Arkansas, its source of supply over the last 10 sales in that area. However, the merged who farms 300 acres and milks 200 years, the facility continued to rely on order should not include several cows, also testified in support of the cooperative associations to balance its Kentucky counties in former Order 98, inclusion of Central Arkansas in the supply. he said, because those counties do not merged southeastern order and in The AMPI witness pointed out that have a significant level of milk sales opposition the AMPI’s proposal to form throughout 1993 most of the Fulton from Nashville distributing plants. He a Mid-South order. The witness, who is supply originated from Kentucky, stated there were no distributing plants the immediate past president of the Missouri, and Tennessee. In September in that area, but there was a cheese plant Board of Directors of Arkansas Dairy 1993, he noted, 93.5 percent of the there that could attach unnecessary milk Cooperative Association, Inc., stated Fulton supply came from these areas. to the market if that plant were in the that he was speaking on behalf of The spokesman also observed that marketing area. himself, the ADCA Board of Directors, Exhibits 5 and 31, which contain data Testimony in support of Proposal No. and the 113 members of ADCA. introduced by the market administrators 2 and in opposition to Proposal 13. The Testimony in support of Proposal No. of the respective orders, indicate a general manager of the Arkansas Dairy 13. A spokesman representing the significant overlap in procurement Cooperative Association, Incorporated, Associated Milk Producers, among the areas proposed for merger. testified that ADCA, which has 113 Incorporated, Southern Region, He noted that in May 1993, for instance, dairy farmer members located within Arlington, Texas, stated that his 8.2 million pounds of the 22.1 million the State of Arkansas, was formed in testimony in support of Proposal No. 13 pounds of producer milk pooled on the 1991 by its members to provide an was on behalf of the Southern Region of Memphis order came from Arkansas alternative to Associated Milk AMPI, Mid-America Dairymen, Inc. producers (just over 37 percent) and that Producers, Inc. (AMPI), the only outlet (Mid-Am), and Dairymen, Inc. (DI), co- another 30 percent came from nearby then available for their milk. He proponents of Proposals 13, 14, and 15. Tennessee counties from which 6.6 indicated that ADCA sold its milk to the The AMPI spokesman testified that in million pounds of milk were pooled on Borden, Incorporated, plant in Little September 1993 AMPI pooled 18.4 the Central Arkansas order. Rock, the Turner Dairies plants in million pounds of milk in the Central With respect to the Central Arkansas Memphis and Covington, Tennessee, Arkansas market, a quantity which order, the witness testified that in May and the Turner Dairy plant in Fulton, represented 50.1 percent of the milk 1993 about 6.5 percent of the producer Kentucky. pooled on the order during that month. milk originated in nearby counties in The witness stated that ADCA He said the 387 AMPI members who Kentucky and Tennessee while 69.1 supported the merger of Orders 7, 93, produced that milk represented about percent of the producer milk pooled on 94, 96, 97, 98, and 108, and that ADCA 69 percent of the total number of dairy the order originated in Arkansas. Most also supported the inclusion of farmers on the market during of the remainder of the milk originated presently unregulated counties south September. in Missouri and Texas, he said. and west of the present Central According to the witness, AMPI The AMPI spokesman testified that Arkansas marketing area, as well as two supplied the Turner Dairy Covington route disposition in the Memphis area unregulated Arkansas counties plant, which, since the termination of has generally consisted of fluid milk (Mississippi and Crittenden) on the Order 97, had been a partially regulated products from about ten handlers under eastern edge of the Central Arkansas distributing plant. He said that in other Federal orders. He said that marketing area. He said that the sales of September 1993 AMPI supplied about handlers regulated under Orders 99 and Little Rock plants in the former 3.2 million pounds of milk to the 108 consistently distribute fluid milk Memphis area and the overlap of Covington plant but could not divert the products on routes in the Memphis area. procurement areas for the two markets milk of any producer from the plant In Central Arkansas, route disposition supported the adoption of ADCA’s because it was not a fully regulated from handlers regulated under other proposal. facility. Federal orders, including Memphis and The ADCA spokesman indicated that The witness also testified that AMPI Paducah, has ranged from 28.7 percent a larger merged market would provide provided supplemental milk to the in January 1990 to 49.6 percent in market and regulatory stability for Turner plant in Fulton, Kentucky, March 1993, according to the witness. ADCA in the future. He emphasized that jointly with D.I. and Mid-Am. During He noted that specific percentages for since ADCA’s formation, AMPI had September 1993, he said the three route disposition by Order 97 and 99 successfully terminated the Memphis cooperatives supplied about 5.2 million handlers cannot be included because order, attempted to terminate the pounds of the milk required by Turner less than three handlers are involved. Paducah order, terminated the base- to operate the Fulton facility. With respect to the Paducah order, the excess plan on Order 108, and now was The AMPI representative said that the witness said that at the current time the attempting to establish a new Mid-South supply situation at the Fulton facility order operates as an individual-handler order which it could dominate. had changed significantly in recent pool and that, as such, the order The witness stated that with AMPI’s years. He noted that through 1982 the promotes instability among similarly proposed Mid-South order, ADCA plant was completely supplied and situated producers because blend prices would be at the whim of AMPI balanced by cooperative milk and that under the Paducah order exceed management with respect to whether beginning in 1983 a total of 4.41 percent significantly those of surrounding there would be an order at all, or for of the milk came from independent orders. Surrounding markets must carry how long there would be an order. He producers. The percentage of supply to the burden of balancing the supply of said that situation would be intolerable the Fulton facility increased every year the single plant operator under that for ADCA and would create highly since then, he said, except for 1986. For order, he said. disorderly marketing conditions. He the first 10 months of 1993, the The witness testified that blend prices concluded that a seven-market (i.e., percentage of independent supply was generated under the Paducah order are including former Orders 97 and 98) almost 47 percent of the handlers’ unreasonable given the significant merged order would eliminate this needs, he added. He stressed that overlap of supply and distribution problem. although the Turner plant had changed patterns that exists today. He said the 25020 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules situation was very similar to that of the The witness introduced a table Goldstar’s representative said that Milwaukee individual handler pool showing the ratio of other order and based upon September marketings, Gold prior to its inclusion in the Chicago partially regulated plants to pool Star would be pooled under the Texas Regional pool in 1968 and referenced distributing plants. He pointed out that order in the event of a five-order merger the final decision (33 FR 7516) in that the table showed that the ratio is greater and would be regulated under the proceeding. than 2:1 for all of the present orders proposed Gulf States order in the event The AMPI spokesman testified that a under consideration at this hearing, of a seven-market merger. It would not situation similar to that described in the except for Greater Louisiana. The be pooled under the proposed Mid- 1968 decision is currently at play in the Georgia order had a better than 6:1 ratio, South order based upon sales, he added. Paducah milk market. He said that he said, while Memphis and Central He cautioned, however, that much of under the proposed Mid-South order, Arkansas had 5:1 and 3:1 ratios, Gold Star’s sales are to wholesalers so however, producers will share pro rata respectively. that the loss of one customer could in the returns from the sale of milk The SFG spokesman stated that there determine under which order the plant utilized in all classes; all producers will was ample justification for a single large is regulated. carry their fair share of lower prices of order based solely on the existing inter- The witness stated that Gold Star has reserve milk not needed at any order handler competition, the ratio of a manufacturing plant in Clovis, New particular time for fluid purposes. nonpool to pool plants in the separate Mexico, in addition to its bottling plant The witness indicated that the fluid orders, and the volume of out-of-area in Little Rock. He said that the company sector of the dairy industry has evolved shipments of packaged products as also has a bottling agreement with the to fewer but larger handlers who shown in hearing exhibits. He said the Flav-O-Rich Company to distribute distribute their products over an Department should not create a new products out of their Atlanta, Georgia, increasingly larger territory. He merged order without including all facility. predicted that this trend will likely areas which are logically part of it, The witness indicated that Gold Star did not wish to be a high-utilization continue in the future. He concluded particularly if that would leave small plant regulated and pooled in a low- that whenever consolidation of areas is orders right on the border of the new utilization order because eventually it considered, the Department must look at large order. The witness also focused on the would be required to pay more for its the area where the significant majority ability of the market administrator to milk. He added that Gold Star does not of the overlap occurs in sources and in collect and disseminate meaningful wish to be part of an order with a base- distribution to delineate merged statistical data as a basis for supporting excess plan because it would limit Gold marketing areas. a merger of orders. He pointed out that Star’s flexibility in obtaining Testimony in opposition to Proposal confidentiality rules do not permit the supplemental supplies during the base- No. 13. Two dairy farmers from Martin, market administrator to publish data for excess months. He said that the Tennessee (Weakley County), testified a zone or an order if less than three proposed base-excess plan, coupled in opposition to the merger of Order 99 regulated handlers are included in that with the proposed ‘‘dairy farmer for with any other order. Both of these zone or order. More meaningful data other markets’’ provision, potentially witnesses indicated that they were and less cumbersome data can be builds barriers to the movement of milk. independent dairy farmers delivering released for a merged marketing area, he Gold Star’s unique location outside the their milk to the Turner plant in Fulton, concluded. marketing area makes it vulnerable to Kentucky. They stated that they were The witness remarked that while SFG those barriers, he said. He remarked that opposed to making any change to Order did not contest the idea of including the fact that such provisions are needed 99 because it would lower the price to Shreveport, Lake Charles, and the rest of to protect year-round supplies from pool dairy farmers delivering milk to the western Louisiana in the new merged riders indicates that the merger is too Fulton plant. marketing area, it was important to note small. Testimony in support of other merger that handlers in Shreveport and Lake The record supports a Southeast combinations. A consultant appearing Charles sell significant quantities of Federal milk marketing order. The on behalf of Southern Foods Group, Inc. milk into east Texas in competition with evidence in this record clearly indicates (SFG), testified that SFG supported the east Texas handlers and that east Texas the need to merge all but one of the widest possible merger of orders under handlers sell significant quantities of separate orders in this proceeding into consideration. He said the proposed milk into western Louisiana. a ‘‘Southeast’’ order that will encompass marketing area should include not only He also pointed out that the record all of the existing marketing areas of the area covered by Proposal 1, but also data showed that significant quantities these orders as well as the presently the marketing area proposed for of bulk milk from Texas were received unregulated territory specified at the inclusion by both Proposals 2 and 9. He at Louisiana plants and that the surplus outset of this discussion. The basis for stated that there was ample evidence of Texas milk was available for reserve use reaching this conclusion is threefold: (a) milk handlers from those additional in Louisiana. The existence of that There is a clear overlap in milk areas (i.e., former Order 97 and Order reserve supply, he said, is a factor in the production areas—not between every 108) competing with handlers in the analysis of proper pricing in the new order with every other order, but marketing area encompassed by proposed order. significant enough to link the orders Proposal 1 to support the inclusion of A spokesman testifying on behalf of together; (b) there is a clear overlap in those areas in the merged order. Gold Star Dairy, Little Rock, Arkansas, the distribution of packaged fluid milk This witness testified that SFG owns stated that Gold Star supported the products by handlers regulated under and operates six fluid processing plants merger of the Federal orders based on the individual orders; and (c) there is an in Texas and Louisiana. The plants the proposals before the Secretary. He obvious need to insure marketing owned by SFG in Louisiana are the emphasized that the proposed mergers stability for all producers within the Foremost operation in Shreveport in this hearing ‘‘were not big enough for proposed marketing area. Since there (regulated under Order 96) and the Gold Star,’’ commenting that Gold Star’s was overwhelming support for the Brown’s Velvet plant in New Orleans, flexibility would be limited if it were merger of Orders 7, 93, 94, 96, and which is regulated by Order 94. not included in a much larger order. former Order 98, and a clear unanimity Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25021 of opinion expressed with regard to the themselves. Sometimes, this may result the presence of DI’s butter-powder overlap of milk production and sales in in a producer leaving the cooperative manufacturing plant at Franklinton, those areas, this discussion will focus association with which he or she has Louisiana, and Mid-America Dairymen primarily on the need to combine been associated or switching from one Association’s cheese plant at Kentwood, Proposals 1, 2, 9, and 13 to form one proprietary handler to another. It may Louisiana, both of which are Order 94 order comprised of existing orders 7, 93, also result in producers entering into pool plants that process surplus milk 94, 96, and 108, the two orders business relationships with handlers of into lower-valued Class III and III-A terminated in 1993 (Orders 97 and 98), questionable financial stability, which products. The influence of these plants and the unregulated territory in Georgia, could lead to the problem of handler on blend prices in this region is evident Tennessee, and Arkansas. defaults described on the hearing when comparing the difference in Class record. I utilization between Order 94 and its a. Overlap in Milk Production Areas The difference in two orders’ blend neighbors: Orders 7, 96, and 93. As can The overlap in milk production areas prices at a particular location may be be seen from Table 2, in 1991 the among two or more orders often results caused by a variety of factors, including average Class I utilization for Order 94 in producer unrest and market order provisions, institutional factors, was 69.7 percent, compared to 74.6 instability when blend prices differ to and the location of surplus percent for Order 7, 80.4 percent for any extent between the orders. This manufacturing facilities, as well as Order 96, and 79.7 percent for Order 93. happens because producers are obvious differences in class prices. A similar comparison of the utilization generally aware of the prices being In the States of Louisiana, percentages contained in Table 2 shows received by their neighbors and seek to Mississippi, Alabama, and Georgia, the that this pattern continued in 1992 and find the most lucrative market for blend prices are greatly influenced by during the first seven months of 1993.

TABLE 2.ÐPERCENT CLASS I UTILIZATION OF PRODUCER MILK BY FEDERAL ORDER, 1991±93

Order 7 Order 93 Order 94 Order 96 Order 97 Order 98 Order 99 Order 108

1991 ...... 74.6 79.7 69.7 80.4 73.7 80.2 78.6 73.3 1992 ...... 76.5 76.9 68.2 78.9 69.2 80.8 82.6 63.9 1993 1 ...... 80.4 76.1 59.1 69.9 59.8 80.4 87.4 58.7 1 January±July.

The extremely high utilization of the an incentive to keep the utilization as neighboring Central Arkansas and Paducah market (Order 99), which high as possible so as to generate a high Memphis orders dropped by 14 points. increased from 78.6 percent in 1991 to blend price for its non-member The differences in blend prices 87.4 percent during the first nine producers. From a different perspective, resulting from these utilizations can be months of 1993, can be attributed to the it means keeping any reserve supplies seen in Table 3, which compares fact that there is only one handler, associated with the plant to a minimum. average blend prices for 1991, 1992, and Turner Dairy, with a pool plant under This situation is far different from a that order and to the institutional market with manufacturing facilities, the first 7 months of 1993. With respect changes that have occurred in that such as Order 94, which is handling a to Orders 97, 99, and 108, it should be market, particularly the growth of a non- disproportionate share of the region’s noted that the higher Class I utilization member milk supply and a reserve supplies. It is noteworthy that as for the Paducah order more than offset corresponding reduction in cooperative the Class I utilization of the Paducah the fact that its Class I price was 38 association milk. Consequently, the order increased by 19 points from 1991 cents lower than the Class I price for single plant operator in that market has to 1993, the Class I utilizations of the Orders 108 and 97.

TABLE 3.ÐBLEND PRICES BY FEDERAL ORDER 1991±93 [In dollars]

Order 7 Order 93 Order 94 Order 96 Order 97 Order 98 Order 99 Order 108

1991 ...... 1 13.35 1 13.71 13.51 1 $13.84 12.88 12.75 12.67 12.90 1992 ...... 1 14.64 1 14.83 14.63 1 15.01 13.94 13.99 14.02 13.86 1993 2 ...... 1 14.37 1 14.52 14.05 1 14.32 13.31 14.03 13.62 13.32 1 Order 7 price adjusted to southern zone, Order 93 price adjusted to Zone IV, and Order 96 price adjusted to Zone III to be comparable to Order 94, which is reported for the highest-priced, southernmost zone. 2 January±July.

The blend prices shown in Table 3 for When price differences are related to Production data in the record shows Orders 7, 93, and 96 were adjusted to location, there may be adequate grounds a heavy production area in southern the highest-priced, southernmost zone, for justifying such differences. When Mississippi and in the ‘‘Florida to be comparable with the Order 94 they occur within a common production parishes’’ of Louisiana north of New blend price, which is reported in that area, however, they cause market Orleans. Milk from this area moves to way. The lower utilization of Order 94 instability. Data in this record show Orders 96, 94, and 93. The record also is evidenced by its blend price, which many common production areas which indicates there is a very pronounced is far below that of Order 93 on the east are subject to significantly different overlap in production areas between or Order 96 on the west. blend prices. Orders 7 and 93 throughout northern 25022 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules

Georgia. The production area for the Orders 97 and 108; that the Memphis or potentially could exist as a result of Georgia market also overlaps the and Paducah orders shared a common the difference in the blend prices procurement area for the former supply area in four Tennessee counties, prevailing in those areas. A single Nashville market in southeastern four Kentucky counties, three Arkansas merged marketing area will largely Tennessee. In addition, the counties counties, and four counties in south eliminate this problem, but it will, of throughout central Tennessee provide a central Missouri; and that, in aggregate, course, persist to some extent wherever significant share of the milk supply for the production area for Orders 93 and the merged marketing area abuts a Order 93 as well as former Order 98. 98 overlapped in 38 counties in four neighboring marketing area (i.e., the Table 4 shows the number of counties different States. Order combinations Texas order, the Southwest Plains order, in various States from which producer that were left out of the table—for the Louisville-Lexington-Evansville milk was supplied to various example, 108/96—had no production order, the Tennessee Valley order, the combinations of orders. The table counties in common. shows, for example, that in May 1993 In each of the overlapping production Carolina order, and the Upper Florida there were 14 Arkansas counties from areas referenced above, a pricing order). which producer milk was supplied to disparity problem either presently exists

TABLE 4: NUMBER OF COUNTIES IN DESIGNATED STATES PROVIDING MILK TO SPECIFIED FEDERAL ORDER MARKETS IN MAY 1993

State 97/108 97/98 97/99 97/94 108/94 108/99 7/93 93/94 94/96 93/98 7/98

Arizona ...... 14 ...... 3 3 3 3 ...... Missouri ...... 8 ...... 4 4 5 4 ...... Tennessee ...... 1 4 2 ...... 1 ...... 26 5 Kentucky ...... 4 2 ...... 2 ...... Massachusetts ...... 2 ...... 20 7 ...... Georgia ...... 33 ...... 6 14 Alabama ...... 2 ...... 4 ...... Florida ...... 1 ...... Louisana ...... 1 19 ...... Texas ...... 1 ...... Total ...... 22 1 15 13 8 7 33 25 27 38 19 b. Overlap in Sales Distribution Areas regulated plants. In July 1993, 67 Plant/location Federal Market instability may occur when order percent of the Class I sales in the Paducah marketing area originated from handlers in one marketing area have Heritage Farms, Murfreesboro, 7. significant distribution in another other order and partially regulated Tennessee. plants. These sales came from the order’s marketing area. Problems may Gold Star Dairy, Little Rock, Ar- 126. arise because of Class I price kansas. following plants: misalignment between orders resulting Turner Dairies, Fulton, Kentucky . 99. Others ...... 106, 126, Federal in an undue price advantage for a Plant/location order handler in another market. Problems 49. also arise when a handler in one Fleming Dairy, Nashville, Ten- 98. marketing area has enough sales in In July 1993, during the last month of nessee. another order’s marketing area to the Memphis order, the percentage of Heritage Farms, Murfreesboro, 98. become regulated under such other route disposition represented by other Tennessee. order. If the blend prices differ order plants was 30 percent of the total Purity Dairies, Nashville, Ten- 98. significantly at the plant’s location, the route disposition in the marketing area. nessee. handler may be forced to pay over-order These sales came from the following Others ...... 32, 46, charges to maintain its local milk plants: 49. supply, which, in turn, could put it at a competitive disadvantage vis-a-vis its Federal In the Georgia marketing area, other Plant/location order competitors in the marketing area where order and partially regulated it is located. Fleming Dairy, Nashville, Ten- 98. distributing plants accounted for nearly Data in the record indicate a nessee. 34 million pounds of Class I sales in significant overlap in distribution areas Heritage Farms, Murfreesboro, 98. August 1993. These sales, which within the proposed Southeast Tennessee. represented roughly 28 percent of the marketing area. Gold Star Dairy, Little Rock, Ar- 126. total Class I sales that month, came from In August 1993, 37.5 percent of the kansas. the following plants: route disposition in Order 108 came Turner Dairies, Fulton, Kentucky . 99. Avents Dairy, Oxford, Mississippi 94. from plants regulated under Orders 7, Federal Borden, Inc., Little Rock, Arkan- 108. Plant/location order 49 (Indiana), 99, 106, and 126. These sas. sales came from the following plants: Others ...... 106, 126, Baker and Sons Dairy, Inc., Bir- 93. 49. Federal mingham, AL. Plant/location order Barber Pure Milk Company, Bir- 93. The Paducah market also has an mingham, AL. Fleming Dairy, Nashville, Ten- 7. extremely high ratio of Class I sales Barber Pure Milk Company, Mo- 93. nessee. represented by other order and partially bile, AL. Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25023

Federal Federal widen their distribution patterns, blend Plant/location order Plant/location order prices are buffeted by the changing Class I utilization that a large plant can Dairy Fresh Corporation, 93. Meadow Gold Dairies, Inc., 93. cause in a marketwide pool. The Cowarts, AL. Huntsville, AL. shifting of a plant from one order to Flav-O-Rich, Inc., Montgomery, 93. Superbrand Dairy Products, 93. another can, and does, result in AL. Montgomery, AL. Meadow Gold Dairies, Inc., Gads- 93. Borden, Inc., Lafayette, Louisiana 96. handlers being placed in a position den, AL. Dairy Fresh of LA, Baker, LA ...... 96. where they can no longer hold on to Superbrand Dairy Products, 93. Kleinpeter Farms Dairy, Baton 96. their milk supply. Most of these changes Montgomery, AL. Rouge, LA. were described in the record; some were Gold Star Dairy, Inc., Little Rock, 126. Turner Dairies, Fulton, KY ...... 99. not. Official notice is taken of the AR. Forest Hill Dairy, Memphis, TN ... 108. closing of Guth Dairy in Lake Charles, Others ...... 2, 5, 6, Gold Star Dairy, Inc., Little Rock, 126. Louisiana; Acadia Dairy in Thibodaux, 11, 13, AR. Louisiana; and Walker Resources in 49, Others ...... 13, 49, Metairie, Louisiana; and the minority 131. 139. financial interest acquired by Mid- America Dairymen, Inc., in Southern In the Alabama-West Florida market, Finally, in August 1993, other order Foods Group effective February 17, Class I sales accounted for by other and partially regulated distributing 1994. order and partially regulated plants in plants accounted for 16.3 million On the producer side, there have also August 1993 totaled 15.4 million pounds of Class I sales in the Greater been significant changes in marketing pounds or 17 percent of total Class I Louisiana marketing area or roughly 40 arrangements. Producers have left their sales that month. These sales came from percent of the total Class I sales that cooperative associations, formed new the following plants: month. These sales came from the cooperative associations, and merged following plants: existing cooperatives. Official notice Federal Plant/location was previously taken of the merger of order Federal Plant/location order Gulf Dairy Cooperative Association and Borden, Inc., Macon, Georgia ...... 7. Mid-America Dairymen, Inc., effective Flav-O-Rich, Inc., Atlanta, GA ..... 7. Borden, Inc., Baton Rouge, LA .... 94. March 1, 1994. Fleming Companies, Inc., Nash- 7. Borden, Inc., Jackson, MS ...... 94. The record evidence in this ville, TN. Brown's Velvet Dairy Prod., Inc., 94. proceeding—specifically, the overlap of Heritage Farms Dairy, 7. New Orleans, LA. procurement and sales areas, together Murfreesboro, TN. Dairy Fresh Corp., Hattiesburg, 94. with the need for stability in a rapidly Flav-O-Rich, Inc., Atlanta, GA ..... 7. MS. changing marketing environment—lead Kinnett Dairies, Inc., Columbus, 7. Superbrand Dairy Products, Inc., 94. GA. Hammond, LA. us to conclude that orderly marketing Superbrand Dairy Products, Inc., 7. Borden, Inc., Conroe, TX ...... 126. will best be served by a market that is Greenville, SC. Borden, Inc., Tyler, TX ...... 126. large enough to equitably share the Avent's Dairy, Inc., Oxford, MS ... 94. Gold Star Dairy, Inc., Little Rock, 126. region’s reserve supplies, to provide Barber Pure Milk Company, Tu- 94. AR. regulatory stability for the plants in this pelo, MS. Southwest Dairy, Tyler, TX ...... 126. area, and to provide producers with the Borden, Inc., Jackson, MS ...... 94. Vandervoorts Dairy, Fort Worth, 126. freedom to market their milk in Turner Dairies, Fulton, Kentucky . 99. TX. whatever manner and to whomever they Gold Star Dairy, Inc., Little Rock, 126. wish. AR. The Class I sales data discussed above Others ...... 11, 46, Although there are many instances of indicate clearly that each of the markets plants that are located in one market, 49, involved in this proceeding is closely 131. but regulated in another market, there integrated with neighboring Federal are also many price alignment problems Class I sales by other order and order markets. However, it still leaves that result from these situations.4 It is partially regulated distributing plants in open the question of how best to best, if possible, to avoid them. The August 1993 accounted for 12 million combine these orders because sales data Gold Star plant would enjoy a more pounds of Class I sales in the New alone do not provide sufficient guidance stable marketing environment if it were Orleans-Mississippi marketing area or to answer this question. located in the Southeast marketing area, roughly 22 percent of the total Class I c. Market Stability instead of the Mid-South marketing area sales that month. These sales came from proposed by AMPI. The third factor that must be the following plants: The larger Southeast market will give considered in determining the producers in the Central Arkansas and appropriate marketing area is the need former Memphis markets more choices Plant/location Federal order to insure market stability, a prime in marketing their milk. At present, objective of the Agricultural Marketing there are a limited number of Fleming Companies, Inc., Nash- 7. Agreement Act. distributing plants available to ville, TN. The record testimony paints a picture Heritage Farms Dairy, Inc., 7. producers in those markets and those of a rapidly evolving industry. The that are available are primarily supplied Murfreesboro, TN. marketing of milk products continues to Barber Pure Milk Company, Mo- 93. bile, AL. change with ever-wider distribution 4 Official notice is taken of the suspension of Brookshire Dairy Products Co., 93. areas, centralized operations, inter- certain provisions of the Greater Louisiana order Columbus, MS. handler marketing agreements, two-way effective November 1, 1993, (58 FR 63031) to keep containers, back-hauling arrangements, a Lake Charles, Louisiana, plant from becoming Dairy Fresh Corporation, 93. regulated under the Texas order, under which the Prichard, AL. plant closings, and changes in plant would have experienced a sharp reduction in Flav-O-Rich, Montgomery, AL ..... 93. ownership, among others. As handlers its blend price. 25024 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules by AMPI. Under the merged order, to continue under the proposed including the producer milk of Forest however, producers will have a choice Southeast order, the Fulton, Kentucky, Hill Dairy (i.e., Turner Dairies), which of many different handlers and plant would become regulated under had been pooled under Order 97. cooperatives through which to market that order. Combining this amount with the 11.5 their milk. With a uniform set of According to the data in the hearing million pounds of producer milk pooled regulations applicable to the larger record, in July 1993—the most recent under the Paducah market that month market, it will be easier for producers to month in which separate data for the yields a combined total of supply different handlers at different Nashville market was available—33 approximately 50 million pounds, times of the year without fear of being percent of the Class I sales in the which would have made it one of the shut out of the market because of Paducah marketing area were made by smallest Federal order markets that separate base and excess plans that are Turner Dairies, Fulton, Kentucky; 22 month. now, or have in the past, been percent of the sales were made by The point of this comparison is to applicable to several of the individual handlers regulated under Order 32; 18 show that, if the AMPI proposal had orders involved in the merger. percent of the Class I sales were made been adopted, it would have created a As indicated in the record, the by Nashville area plants; and the market that would not have provided Paducah market is, for all intents and remaining 27 percent of Class I sales the marketing stability that is needed in purposes, an individual handler pool. were made by plants that were regulated this area. In fact, it is very likely that the Producers that are fortunate enough to under Orders 46 or 49 (Indiana), or by proposed Mid-South market would have have a market with Turner Dairies enjoy handlers that were partially regulated or been the subject of another lengthy extremely high blend prices and a stable unregulated. With this distribution merger proceeding within the near marketing environment. Their pattern, the Paducah marketing area future. neighbors, on the other hand, who are may fit more appropriately with one of AMPI and Mid-Am filed exceptions not part of Turner Dairies’ nonmember these other orders than it does with the objecting to the denial of the proposal supply but instead belong to cooperative proposed Southeast marketing area. for a Mid-South marketing area. Mid- associations such as AMPI, Mid-Am, or The Memphis market in July 1993, its Am stated that there is very little ADCA, must move their milk to last month of operation, resembled the overlap of distribution and procurement whatever market is available to them Paducah market in having only Turner between the proposed Mid-South and, according to the testimony of Dairies plants. In addition to its marketing area and the other areas Turner producers who have compared Memphis plant, Turner Dairies also included in the Southeast marketing milk checks, receive less money for operated a plant at Covington, area. In addition, Mid-Am argues that their milk. This is not the essence of a Tennessee, 36 miles northeast of the minimal overlap in distribution marketwide pool: To preserve a market Memphis. Unlike the Paducah market, a between Central Arkansas and the rest for one group of producers, while their majority of the other order sales in the of the Southeast marketing area is from neighbors, who balance the Class I Memphis market are from handlers that two plants: the Gold Star plant in Little needs of the market, must ship their would be regulated under the proposed Rock that distributes into the Greater milk hundreds of miles away and Southeast order. Also, there is a Louisiana and New Orleans-Mississippi receive lower prices for it. In fact, the significant overlap in procurement areas marketing areas and the Fleming Dairies fluid market and the reserve market between the Memphis order and the plant in Nashville that distributes into should be shared equally among all Central Arkansas and New Orleans- the Central Arkansas and former producers in a marketwide pool. Mississippi orders. There is clearly Memphis marketing areas. The Paducah market is not equitably sufficient evidence in the record to The findings in this decision distributing returns to producers warrant regulation of the Memphis area specifically note that the Gold Star plant supplying that market and should be as part of the Southeast marketing area. has distribution in the Georgia considered for incorporation within a In August 1993, the Central Arkansas marketing area and the Alabama-West larger market, but it should not be market had four fully regulated Florida marketing area, in addition to incorporated in the proposed Southeast distributing plants: The Borden, Inc., the Greater Louisiana and New Orleans- market. An analysis of the Federal order plant in Little Rock; the Forest Hill Mississippi marketing areas. The former exhibits entered into the record Dairy Plant (i.e., Turner Dairies) that Memphis market not only receives indicates that in August 1993 there were was regulated under the Memphis order distribution from the Fleming Dairies 11.5 million pounds of milk pooled in July 1993; Coleman Dairy, Inc., in plant at Nashville, but also from the under Order 99, of which 88.4 percent Little Rock; and Humphrey’s Dairy in Heritage Farms plant at Murfreesboro, was Class I. Since Turner Dairies’ Hot Springs, 55 miles southwest of Tennessee (Order 7), and Avents Dairy Fulton, Kentucky, plant was the only Little Rock. at Oxford, Mississippi (Order 94). pool plant that month, its Class I sales Before it shifted to the Texas order in Finally, the Heritage plant and the were approximately 10.2 million January 1993, the Gold Star plant also Fleming plant distribute fluid milk pounds (i.e., .884 × 11.5). The exhibits was regulated under the Central products into the Central Arkansas also show that there were 2.0 million Arkansas order. During December, its marketing area. pounds of Class I sales in the marketing last month under Order 108, there were The overlap in procurement between area from the Fulton plant, leaving 49.1 million pounds of producer milk Orders 7, 93, 94, and 96 with Orders about 8.2 million which were pooled under that order; in January the 108, 97, and 99 is not as great as it is distributed in other marketing areas. pounds of producer milk dropped to among other marketing areas being Although the exact distribution of these 24.9 million pounds. There was a merged. Nevertheless, there is an 8.2 million pounds was not shown in similar drop in Class I producer milk, overlap in procurement between Order the record, it is known from the exhibits from 30.2 million pounds in December 94 and former Order 97 (13 counties in that there was distribution from this 1992 to 15.4 million pounds in January May 1993) and between Orders 94 and plant into the Central Arkansas, 1993. 108 (8 counties in May 1993). Moreover, Memphis, New Orleans-Mississippi, In August 1993, there were 38.4 the need to merge these marketing areas and Alabama-West Florida marketing million pounds of producer milk pooled is justified by a combination of factors areas. If this pattern of distribution were under the Central Arkansas order, (distribution, procurement, and Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25025 marketing stability) that justifies the area. It should be included in the point in adding one Missouri county to inclusion of Central Arkansas and marketing area for administrative the marketing area for the sake of map- Memphis in the Southeast marketing convenience. drawing convenience. Therefore, area. The Tennessee counties of Van Buren, Dunklin County, Missouri, should not The Southeast marketing area adopted Bledsoe, Grundy, Franklin, Lincoln, and be part of the Southeast marketing area. in this decision encompasses all of the Moore. These previously unregulated 2(a). Milk to be priced and pooled.5 It areas involved in this proceeding, with counties are located between the is necessary to designate what milk and the exception of the Kentucky portion of Tennessee Valley marketing area on the which persons would be subject to the the former Nashville, Tennessee, order, east, the terminated Nashville marketing merged order. This is accomplished by the Texas counties of Cass and Bowie, area on the west, and the Alabama-West providing definitions to describe the the Missouri county of Dunklin, and the Florida marketing area on the south. persons, plants, and milk to which the Paducah marketing area. This excluded This is a sparsely populated area from applicable provisions of the order relate. area (other than the already discussed which milk is produced for the The definitions included in the order Paducah area), and the previously Nashville and Alabama-West Florida serve to identify the specific types of unregulated area in Tennessee, Georgia, markets. There are no milk plants in milk and milk products to be subject to and Arkansas that has been included are these counties and no currently- regulation and the persons and facilities discussed below. unregulated plants outside of these involved with the handling of such milk Kentucky portion of former Nashville counties would be regulated by the and milk products. Definitions relating marketing area. The Kentucky counties inclusion of these counties in the to handling and facilities are ‘‘route of Allen, Barren, Metcalf, Monroe, marketing area. This area should also be disposition,’’ ‘‘plant,’’ ‘‘distributing Simpson, and Warren, and the Fort included in the proposed marketing plant,’’ ‘‘supply plant,’’ ‘‘pool plant,’’ Campbell military reservation should area. and ‘‘nonpool plant.’’ Definitions of not be included in the Southeast The Tennessee counties of Henry, persons include ‘‘handler,’’ ‘‘producer- marketing area. Carroll, Benton, Decatur, Henderson, handler,’’ ‘‘producer,’’ and ‘‘cooperative Proponents of Proposal No. 1 Chester, and McNairy. These seven association.’’ Definitions relating to milk indicated that they had included these counties, bordered on all sides by the and milk products include ‘‘producer counties in their proposal because they proposed Southeast marketing area, milk,’’ ‘‘other source milk,’’ ‘‘fluid milk had been in the previously regulated should also be part of the marketing product,’’ ‘‘fluid cream product,’’ and Nashville marketing area. area. There are no milk plants in this ‘‘filled milk.’’ There are no plants in these counties, area, nor are there any plants that would Several of these definitions were of except the Glasgow Cheese Plant, become regulated as a result of their particular issue at the hearing: i.e., which, according to the record, is not addition to the marketing area. Since ‘‘route disposition,’’ ‘‘pool plant,’’ capable of supplying the market because they would be bordered on all sides by ‘‘producer-handler,’’ and ‘‘producer.’’ it does not have a Grade A receiving other parts of the marketing area, no All of the remaining definitions are facility. useful purpose would be served in patterned after those contained in one or These counties are surrounded on leaving them out of the marketing area. more of the orders involved in this three sides by the Louisville-Lexington- The unregulated Arkansas counties. proceeding. Official notice of the final Evansville order. There are no These counties, which were proposed decisions setting forth the need and distributing plants in these counties, by AMPI for inclusion in the Mid-South basis of such provisions was taken at the and there are no significant population marketing area, should be included in hearing. A discussion of those centers, other than Bowling Green the Southeast marketing area. There are definitions that were of particular issue (population: 42,017) and Fort Campbell. no distributing plants in these counties, at the hearing, as well as those that According to the witness for Fleming and no new plants will become involve substantive modifications, is set Dairy in Nashville, there are no regulated as a result of the inclusion of forth below. significant sales in these counties from these counties in the marketing area. Route disposition: § 1007.3. The route Nashville distributing plants. The unregulated Texas counties of disposition definition sets forth the type In view of their northernmost location Bowie and Cass. The Texas counties of of deliveries that are considered in and their proximity to the Order 46 Bowie and Cass should not be included determining whether a distributing marketing area, the Fort Campbell in the Southeast marketing area. The plant qualifies for pooling under the Military Reservation and the six apparent reason for including these order. Kentucky counties that were part of the counties in the proposed Mid-South As proposed in Proposal No. 1, route Nashville marketing area should not be marketing area was for administrative disposition means any delivery to a included in the Southeast marketing convenience since these two retail or wholesale outlet (except to a area, but instead should be left unregulated Texas counties would have plant) either direct or through any unregulated at this time. There are no been surrounded by regulated area. This distribution facility (including plants that would be unregulated by is a good reason to include these two disposition from a plant store, vendor or their exclusion from the marketing area. counties, but they may, in fact, be more vending machine) of a fluid milk The Georgia county of Rabun. This closely associated with the Texas product classified as Class I milk. This county, in the extreme northeast portion market. Rather than introduce the State definition should be modified slightly to of the State of Georgia within the of Texas into the Southeast marketing include, for the limited purpose of Chattahoochee National Forest, is area for the sake of two counties that do determining pool plant qualification, surrounded on the west and south by not include any distributing plants, the packaged fluid milk products that are the Georgia marketing area and on the counties of Bowie and Cass should be transferred from a plant with route east and north by the Carolina left unregulated for possible inclusion disposition in the marketing area to a marketing area. There are no milk plants in the Texas marketing area when the located within the county and no opportunity presents itself. 5 The findings and conclusions in this section are identical to those of the recommended decision, change in the regulatory status of any Similarly, since the Paducah except for ‘‘lock-in provision,’’ ‘‘unit pooling,’’ plant would occur as a result of its marketing area has not been included in ‘‘supply plants,’’ ‘‘producer-handler,’’ ‘‘producer,’’ inclusion in the Southeast marketing the Southeast marketing area, there is no and ‘‘producer milk.’’ 25026 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules distributing plant if such transfers are to what constitutes a plant and what of the five existing markets, except for classified as Class I milk. constitutes a reload point. the Georgia market, which has a 15 This language, which is also included The cooperative coalition’s proposed percent in-area requirement. These in the Eastern Colorado Federal milk plant definition is identical to the standards are reasonable and should be order (See § 1137.3) is necessary to definition now found in Order 93. Order adopted for the merged order. preclude a plant from becoming 96 contains a slightly different plant Lock-in provision: § 1007.7(d). With a partially regulated because it ships definition, while Orders 7, 94, and 108 10 percent in-area route disposition significant quantities of packaged fluid do not define this term. requirement, it is possible that a milk products to another distributing The cooperatives’ proposed definition distributing plant may meet the pooling plant, which then distributes those fluid should be adopted for the merged order. standards of more than one order. A milk products to retail and wholesale The proposal defines plant as the land, question then arises concerning under outlets. This precise situation has buildings, facilities, and equipment which order the plant should be occurred in the neighboring Southwest constituting a single operating unit or regulated. Under Proposal No. 1, a Plains order, where a previously fully establishment at which milk or milk distributing plant that met the order’s regulated plant failed to qualify as a products, including filled milk, are pooling standards would be regulated pool plant because it shipped more than received, processed, or packaged. under the Southeast order if the plant is 50 percent of its packaged fluid milk Separate facilities without stationary located in the Southeast marketing area. products to a distributing plant which it storage tanks and used only as reload This is a sensible provision to have in operated in another city.6 As a partially points for transferring bulk milk from this area and should be adopted. regulated plant with a Class I utilization one tank truck to another or separate Testifying in support of the lock-in higher than the market average, the facilities used only as distribution provision, the spokesman for the handler was in a position to pay its points for storing packaged fluid milk cooperative coalition stated that this producers a price in excess of the products in transit for route disposition provision differs slightly from the order’s blend price. In addition, during would not be plants under this traditional Federal order method of one month AMPI was required to definition. determining where a distributing plant depool milk that it had diverted from There was no opposition to this should be regulated when the plant the plant in order to insure that the proposal at the hearing or in the briefs qualifies for pooling under more than plant qualified as a pool plant. This that were filed. This definition is widely one order. He explained that the resulted in financial loss to the used in other Federal orders and is traditional method provides that a plant cooperative. familiar to the industry. It should be should be pooled under the order in To prevent this situation from included in the merged order. which it has the most sales. The Pool plants: § 1007.7. Essential to the occurring in the Southeast marketing principle behind that rule, he added, operation of a marketwide pool is the area, the route disposition definition was to insure that all handlers having establishment of minimum performance should include, for the limited purpose sales in an order area were subject to the standards to distinguish between those of determining pool plant qualification, same price and other regulatory plants substantially engaged in serving packaged fluid milk products that are provisions as their competition. the fluid needs of the regulated market transferred from a plant with route The coalition’s witness stated that and those plants that do not serve the disposition in the marketing area to a with the advent of processing plants market in a way or to a degree that with sales distribution over wide distributing plant if such transfers are warrants their sharing in the Class I geographic areas, the traditional method classified as Class I milk. As a general application of the order, utilization of the market. The pooling of pooling distributing plants is packaged fluid milk products that are standards that are contained in the outdated. He said that another, and transferred from one handler to another attached order would carry out this equally important, reason for adopting a will be treated as an interhandler concept under present marketing lock-in provision is to minimize any transfer. Thus, each transaction should conditions. inequities which may occur between Distributing plants: § 1007.7(a). To be producers located within the same be properly identified and specifically pooled under the merged order, a geographic supply area. These reported as such to the market distributing plant’s total route inequities are created when a administrator. This will facilitate disposition each month must be equal to distributing plant is located within one orderly operations and eliminate 50 percent or more of the fluid milk marketing area and obtains its milk ambiguous or dual reports. The modified route disposition products physically received at the supply within that marketing area, but definition adopted herein will not plant or diverted from the plant during is regulated by another Federal order. The witness referred to an exhibit change this treatment. It merely the month. In addition, the plant’s daily which compared blend prices under the provides that such transfers, which are average route disposition in the Greater Louisiana and the adjacent classified as Class I and emanate from marketing area must be equal to at least Texas orders. He noted that the Greater a plant with route disposition in the 1,500 pounds per day or 10 percent of Louisiana order blend prices, f.o.b. Lake marketing area, shall be considered as the plant’s receipts of fluid milk Charles and Shreveport, Louisiana, have route disposition from the transferor products, except filled milk, physically been substantially above the Texas order plant, rather than the transferee plant, received at the plant or diverted from it prices at similar locations. He said that for the single purpose of qualifying the during the month. Citing an expected Class I utilization the 73 to 77 cents per hundredweight transferor plant as a pool distributing under the merged order that is likely to average difference in blend prices plant under § 1007.7(a). exceed 68 percent during all months of between the two orders, considering the Plant: § 1007.4. A plant definition the year, the cooperative coalition overlap of supply for both plants, would should be included in the merged order proposed a total route disposition create unstable and disruptive to remove any uncertainty with respect requirement of 50 percent each month marketing conditions in the proposed 6 Official notice is taken of the suspension of of the year and an in-area route merged order supply area and that these certain provisions of the Southwest Plains order disposition requirement of 10 percent. differences in producer pay prices effective February 1, 1994 (59 FR 11180). These requirements are similar to those would create difficulties in maintaining Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25027 sales and attracting adequate supplies of marketing area is likely to be higher qualifies as a pool plant and in which milk for handlers under the merged than the blend price at that location marketing area it has more route order. under any of the surrounding orders. disposition. Accordingly, a paragraph is In its brief, Southern Foods Group As indicated, the sole exception to included in the proposed Southeast urged the Secretary to reject any lock-in this statement is in southern Georgia or order, § 1007.7(e)(4), which recognizes provisions, arguing that it was southern Alabama, where there are no the jurisdiction of Order 46 to regulate philosophically opposed to a lock-in plants at the present time that would such a plant. provision unless the provision is qualify for pool status in the Upper A new paragraph—§ 1007.7(d)—has designed to avoid switching the Florida market. In view of this, the lock- been added to the pool plant rules in regulation of a plant from one market to in provision proposed for the Southeast this final decision to clarify the another on a frequent basis. It stated that market is a prudent measure that will application of the lock-in provision. ‘‘in general, a plant should be regulated avoid the disorderly marketing Although the order language would where it has a plurality of its milk conditions that result when a plant clearly regulate such a plant by not distribution since that is where it is becomes regulated in a lower blend releasing it to another order in either competing the most against other price market or switches back and forth § 1007.7(g) (3) or (4), the inclusion of the regulated handlers.’’ The brief also between two orders. new paragraph (d) leaves no doubt stated that the problem experienced by Under the proposed Southeast order, about the matter. Guth Dairy, Lake Charles, Louisiana, is a plant that qualifies as a pool Multiple order pooling. At the irrelevant because that plant has gone distributing plant and which is located hearing, Gold Star suggested another out of business. Finally, focusing on within the marketing area will be way of handling a plant with sales in Gold Star Dairy in Little Rock, SFG regulated under this order even if it has more than one market. It suggested argued that if that plant has greater sales greater sales in another order’s prorating the plant’s sales among the in the Texas marketing area than in the marketing area. The adjacent Texas, markets in which it qualifies for pooling Southeast marketing area it should be Southwest Plains, Paducah, Louisville- and in which it has at least 25 percent regulated under the Texas order. Lexington-Evansville, and Upper of its sales. Producers supplying the The question of where to regulate a Florida orders contain provisions plant would receive a weighted average plant that meets the standards of more (§§ 1126.7(f)(4), 1106.7(f)(2), price based upon the blend prices of the than one order may actually depend 1099.7(c)(3), 1046.7(e)(3), and various markets in which the plant so upon the circumstances involved. While 1006.7(d)(3), respectively) that will qualifies. SFG holds that the plant should be conform to this provision by yielding This proposal should not be adopted. regulated in the market in which it regulation of the plant to the Southeast It would result in paying producers mostly competes for sales, problems that order. However, §§ 1005.7(d)(3) and different prices in a common supply have surfaced in the past year in the 1011.7(d)(3) of the Carolina and area—one of the problems cited for Greater Louisiana, Tennessee Valley, Tennessee Valley orders, respectively, merging these orders—and it would be and Louisville-Lexington-Evansville do not contain this type of provision, cumbersome to administer. With this orders would indicate that a handler’s setting up a potential conflict with merger and perhaps others to follow, the procurement area may be more § 1007.7(d), which will only release a regulatory problems experienced with important than its distribution area in plant that has more sales in another large plants distributing over wide areas determining where the plant should be marketing area if the plant is not located should be significantly diminished. regulated. in the Southeast marketing area. Unit pooling: § 1007.7(e). Barber Pure Given proper Class I price alignment At the present time, there is no Milk Company (Barber) and Dairy Fresh between two orders (i.e., the same Class distributing plant in the Southeast Corporation (Dairy Fresh) proposed the I price at a given location regardless of marketing area that has, or is likely to ‘‘unit pooling’’ of a distributing plant which order a plant is regulated under), have, more sales in the Carolina or and one or more other plants. Under a plant which meets the pooling Tennessee Valley marketing areas than their proposal, a unit consisting of one standards of more than one order will be in the Southeast marketing area. Should distributing plant and one or more in a better position to procure a milk this situation change, however, and a additional plants of a handler at which supply by being regulated in the plant located in the Southeast marketing Class I and/or Class II products only are marketing area in which it is located area does develop more route processed and packaged would be unless it is shipping milk into a market disposition under Order 5 or 11 than considered as one plant for the purpose which is generating a higher blend price under Order 7, the plant should remain of meeting the pool distributing plant at the plant’s location. Even with the regulated under Order 7 requirements if all of the plants in the higher blend price under the other notwithstanding the provisions of unit were located within the marketing order, however, it may still not be Orders 5 and 11. area, and if, prior to the first of the appropriate to regulate the plant under The Southeast order should also month, the handler operating such the higher-priced market if, in doing so, contain a provision releasing a plant plants filed a written request for unit it causes disorderly marketing from regulation if the other order pooling with the market administrator. conditions in the market where the contains a provision that requires The proposal would permit only one plant is located. regulation of the plant because of its unit per handler, require that all plants With the exception of the Upper location within that order’s marketing in a unit be located in the marketing Florida market, the Southeast marketing area. For example, the Louisville- area, and exclude plants producing area is surrounded by markets with Lexington-Evansville order, in frozen desserts from being part of a unit. equal or lower prices. In addition, it is § 1046.7(e)(2)(ii), requires regulation of a Barber’s spokesman testified that expected that the Class I utilization of distributing plant if the plant meets the Barber Pure Milk Company operates two the Southeast market will exceed the pooling standards of § 1046.7(a), is non-pool plants that process and utilization of these surrounding markets located in the marketing area, and is package Class II products, one located in with the exception of the Upper Florida subject to a Class I price under Order 46 Montgomery, Alabama, and the other market. Consequently, the blend price at that is not less than the Class I price located in Oxford, Alabama. The any location within the Southeast under another order in which it also Montgomery plant processes dessert and 25028 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules ice cream mix and buttermilk for baking truck, and reloading the milk adds an As proposed by Barber and Dairy and currently receives about 700,000 additional .20 cents per hundredweight Fresh, a unit should be restricted to pounds of milk from producers per to the cost of the milk at Montgomery plants located in the marketing area that month. The Oxford plant processes and or an additional $95 for each load of make only Class I or Class II products. packages cottage cheese, sour cream, milk received at Birmingham and then If a handler wishes to add or remove and sour cream dip and receives about transferred to Montgomery. plants from the unit, the handler would 400,000 pounds of milk from producers The witness stated that unit pooling have to file a request with the market each month. should not be rejected because of administrator before the first day of the The witness stated that, up until early concerns about attracting additional month in which the change is to be 1992, Barber operated four plants on the supplies of milk to the market for Class effective. Alabama-West Florida order, located at II products. He said that the production The provision adopted here deviates Birmingham, Mobile, Montgomery, and of Class II products was demand driven from the Barber/Dairy Fresh proposal by Oxford, Alabama, which is 60 miles east and that no additional quantity beyond permitting plants that make frozen of Birmingham. Each of the four plants the demand would be produced by the desserts to be included in a unit. No engaged in the manufacture of Class II specialized plants. Nevertheless, to allay convincing rationale was given for products in varying degrees. He said any concerns that these plants would be excluding ice cream or other frozen that, for efficiency purposes, the Class I used for surplus disposal, he said the dessert plants from a unit. This processing and packaging at the proposal restricts unit pooling to plants restriction would be unfair to a handler Montgomery and Oxford plants was which produce Class I and II products who makes ice cream in a separate moved to the Birmingham and Mobile only, excluding ice cream. plant, as compared to another handler plants, while the Class II processing and In its proposal concerning the who bottles milk and makes ice cream packaging at the Birmingham and proposed Mid-South marketing area, in the same plant. It also would require Mobile plants was moved to the AMPI also proposed the unit pooling of a set of standards to determine what is Montgomery and Oxford plants. plants that are located within the a frozen dessert plant and what is not. The Barber witness stated that to marketing area. Unlike the Barber/Dairy For example, if 50 percent of a accommodate this economical Fresh proposal, the AMPI proposal did manufacturing plant’s milk was used to specialization of plant operations and not exclude plants making ice cream make cottage cheese and 50 percent was not create any chaos in the marketplace, from the unit. used to make ice cream, one would have it was necessary to make some changes to determine whether this plant was a In its post-hearing brief, the Fleming in the order. If the unit pooling proposal cottage cheese plant or a frozen dessert Companies urged that unit pooling be is not adopted, he said, it will become plant. There is no basis for rejected. It stated that pool performance necessary to incur unnecessary costs of distinguishing frozen desserts from standards should be fixed so that each moving milk to pool distributing plants, other Class II products for the purpose producer, each plant, and each supply unloading the milk, reloading the milk, of unit pooling. Accordingly, this part of organization demonstrate a close and transporting it back to the Class II the Barber/Dairy Fresh proposal is not association with the Class I specialty plants. He noted that the adopted. diversion provisions will accommodate requirements of the market. One additional restriction should be the movement of some of the needed The unit pooling proposals make added to the proposal, however. It milk directly from the farm to the Class economic sense and should be adopted would be inappropriate to permit a II plants, but not all of the milk for the merged marketing area, but with Class II operation in a higher-priced required. certain restrictions. zone to unit pool with a distributing The Barber witness testified that the The order’s pooling standards insure plant in a lower-priced zone. An milk supply for the Oxford plant comes that each distributing plant and each example will illustrate the point. from six producers located in the unit of plants consisting of at least one If a handler with a plant in Alabama counties of Calhoun, Etowah, distributing plant perform at the same Montgomery, Alabama, processed 6 and Talladega who produce minimum level to be eligible for pool million pounds into Class I products approximately 500,000 pounds of milk plant status. The total route disposition and 4 million pounds into Class II per month or about 80 percent of the requirement—50 percent each month of products, it would pay into the pool— plant’s requirements. He said that the year—recognizes that not all of the based on prices proposed in this without the unit pooling provision, plant’s receipts will be needed for Class decision—a Class I location adjustment about two-thirds of this milk could be I use. That standard permits up to 50 of $12,000 (i.e., 6 million pounds x $.20 diverted to the Oxford plant, but the percent of the plant’s receipts to be used per cwt.), but in paying producers remaining third would have to be in Class II, III, or III-A products. supplying the plant, the handler would delivered to the Birmingham pool plant, If Handler A chooses to operate one draw out of the pool a location unloaded at the plant, reloaded, and large distributing plant in which 40 adjustment value of $20,000 (i.e., 10 hauled the 60 miles back to Oxford. The percent of the plant’s receipts are used million pounds x $.20 per cwt.). In additional cost involved in this, he in Class II products, while Handler B effect, the handler would take out of the estimated, was approximately 47 cents chooses to operate a distributing plant pool in location value $8,000 more than per hundredweight or $225 per load. exclusively for fluid use and another it contributed. This witness also testified that milk to plant exclusively for Class II products It is universally true that a handler in supply the Montgomery plant of and the Class I utilization of both plants a higher-priced zone will draw out of approximately 700,000 pounds per added together is 60 percent, it makes the pool more location value in the month is located in northern Alabama no sense to preclude Handler B from blend price to its producers than it and Tennessee and must be transported separating the operations. Both handlers contributes on the basis of its location through the city of Birmingham on its are performing at precisely the same adjustment for Class I milk. This is way to Montgomery. There is no levels; they simply differ in their modes because the pooling standards do not additional hauling cost if the milk is of operation. They should be permitted require a handler to use all its milk in received at Birmingham; however, the to operate in whatever manner they Class I. Because the market for Class II cost of receiving the milk, washing the deem most efficient. products is more of a regional market, Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25029 location value has not been added to to all of the market’s handlers in is the definition now included in Orders Class II products. The pool, in effect, processing Class II products and to all 93 and 108 and proposed by the absorbs a certain amount of of the market’s producers in the cooperative coalition for the merged transportation cost to provide a handler distribution of pool funds. It also will order. with milk for Class II use. When both tend to encourage milk in lower-priced To qualify as a pool plant, a supply the Class I and II products are processed areas to be used in lower-valued plant should be required to transfer a at the same plant, this subsidization is products while encouraging milk to certain portion of its receipts each limited by the amount of milk that may move to the market’s higher-priced areas month to a pool distributing plant. In be used in Class II at that location. for use in Class I. that way, it will be contributing to the Under the unit pooling proposal of In their exceptions, Barber Pure Milk fluid needs of the market. Barber and Dairy Fresh, it would be Company (Birmingham, Alabama) and As proposed by the cooperative possible to unit pool a Class I Dairy Fresh Corporation (Greensboro, coalition, a supply plant would have to distributing plant in a lower-priced zone Alabama) objected to the additional unit transfer 60 percent of its receipts to pool (e.g., Montgomery, Alabama) with a pooling restriction. They contend that distributing plants during each of the Class II operation in a higher-priced any handler can accomplish the same months of July through November and zone (e.g., Franklinton, Louisiana). result—i.e., pool milk at a higher-priced 40 percent during each of the months of Assuming that in this unit, the location—by diverting milk to a Class II December through June. The supply Montgomery plant processed 6 million plant located in the higher-priced zone. plant’s ‘‘receipts’’ would include milk pounds of Class I milk, while the They argue that it is more efficient to that is diverted from the plant as Franklinton plant processed 4 million permit unit pooling for Class II plants ‘‘producer milk,’’ but would exclude pounds of Class II milk, the handler located in higher-priced zones than the milk that is diverted to the supply plant would contribute $12,000 to the pool in pricing zone of the qualifying from another pool plant. In addition, location value on Class I milk, but it distributing plant and urge that the receipts would include not only the would draw out of the pool $32,000 restriction be removed. milk received from individual dairy (i.e., 6 million pounds x $.20 in First of all, it is not possible to farmers, but also the milk received from Montgomery plus 4 million pounds x accomplish the exact same result by a cooperative association acting as a $.50 cents in Franklinton). In other diverting milk to a Class II plant in a handler on milk delivered directly from words, it would take out of the pool higher-priced zone. The Barber witness producer-members’ farms (i.e., pursuant $20,000 more than it contributed in testified that some milk could be pooled to § 1007.9(c) of the order). location value. in this manner, but not all of the milk At the hearing, a spokesman for Kraft It would not be fair to expect all of the that might be required. Before a handler Foods testified that a pool supply plant market’s producers to subsidize the can divert milk, the milk to be diverted should be allowed to use the most delivery of milk for Class II use in the must become eligible for diversion. This efficient form of milk movement to meet Montgomery/Franklinton unit example is accomplished by delivering the milk supply plant shipping requirements. He described above. As previously noted, a to a pool plant for a minimum number said that in addition to including certain amount of subsidization will of days. Under the Southeast order, at transfers from the plant, diversions to always occur to the extent that Class I least 10 days’ production (4 days’ pool distributing plants directly from route disposition requirements are less production during January through producers’ farms also should be counted than 100 percent and no location value June) must be received at a pool plant in meeting those pooling requirements. is attached to the Class II price. during the months of July through In its Proposal No. 9, the Fleming However, the opportunity to take December. Companies also proposed that advantage of this situation is equally Because of this requirement, there is diversions be used to meet a supply available to all of the market’s handlers. a practical limit on where milk will be plant’s shipping requirement. On the other hand, under the Barber/ diverted in relation to the pool plant The record indicates that distributing Dairy Fresh unit pooling proposal large from which diverted. For example, it is plants in the Southeast marketing area handlers with multiple plants would be unlikely that a handler in Nashville will are supplied with milk that comes able to take a disproportionate share of divert milk to a nonpool plant in directly from producers’ farms. Pool location value out of the pool if their Hattiesburg. With unit pooling, supply plants, as defined in Section 7(b) Class II operation were located in a however, milk going to a Class II of the individual orders, have not been higher-priced zone than their Class I operation may have no association with a factor in this area for many years. To operation. a Class I operation that is hundreds of the extent that any plant milk is To correct this inequity, the miles away. transferred to distributing plants, such composition of units should be further There is no indication of how the milk generally comes from cooperative restricted. Specifically, in a unit removal of this restriction would association ‘‘balancing plants,’’ which consisting of two or more plants, any promote greater efficiencies. However, qualify as pool plants based on the plant that, by itself, would not qualify the decision clearly sets forth the cooperatives’ total deliveries of milk to as a pool plant must be located in a reasons for the restriction: to promote a pool distributing plants, as opposed to pricing zone providing the same or a degree of fairness to all market handlers, individual plant performance. Such lower Class I price than the price whether their Class I and Class II uses deliveries may include transfers of plant applicable at the unit distributing plant are in the same or separate facilities, milk but, as a general rule, the milk that would, by itself, qualify as a pool and to the market’s producers in the comes directly from producers’ farms plant. Thus, for example, a Class II distribution of pool funds. without being first delivered to the operation in Nashville may unit pool Supply plants: § 1007.7(b). A supply cooperative’s plant. with a Class I operation in Atlanta, but plant should be defined as a plant that Despite the fact that this market may a Class II operation in Atlanta may not is approved by a duly constituted have little need for true supply plants, unit pool with a Class I operation in regulatory agency for the handling of the merged order should continue to Nashville. Grade A milk and from which fluid milk accommodate the possible pooling of This additional restriction on unit products are transferred during the such plants in case plant milk from a pooling will insure a degree of fairness month to a pool distributing plant. This distant location is needed to 25030 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules supplement locally-produced milk. In its joint brief, Barber and Dairy To the extent that supply plants are However, there is no reason to facilitate Fresh urged the Secretary to not only necessary, the pooling standards are the the pooling of manufacturing plants as require a balancing plant to be located same for cooperatives and proprietary ‘‘pool supply plants’’ by allowing such in the marketing area, but also to require handlers. The shipping standards are set plants to qualify on the basis of direct the plant to transfer 10 percent of the at a level to ensure a sufficient deliveries from the farm when the very plant’s receipts to pool distributing association with the fluid market to fact that such deliveries can be plants each month. The Fleming warrant a share in the Class I use of the economically made belies the need for Companies made a similar plea in its market. the ‘‘supply plant’’ in the first place. For brief. Cooperative association ‘‘balancing this reason, the Kraft and Fleming These handlers provided no plants’’ serve a different role. These proposals to permit diversions to be convincing reason why any shipments plants are the outlets of last resort. used as qualifying shipments for a from a balancing plant that is located When surplus milk has no other place supply plant should not be adopted. within the marketing area are needed. to go on weekends or during the spring Balancing plants: § 1007.7(c). While Such plants, in fact, provide a service to and summer months, it is manufactured the term ‘‘balancing plant’’ is not the market in balancing its reserve into storable products at Mid-Am’s actually used in the order, as described supplies. The performance standards manufacturing plants in Franklinton in § 1007.7(c) of the proposed Southeast applicable to the cooperatives which and Kentwood, Louisiana, and order it means a plant located in the operate these plants assure that milk Lewisburg, Tennessee. When marketing area and operated by a will be made available to meet the Class production decreases, these plants may cooperative association which delivers I needs of the market. Therefore, in the shut down completely or operate at 60 percent of the producer milk of its absence of a compelling reason for minimal capacity. There has to be some members to pool distributing plants adopting these seemingly unnecessary place for surplus milk to go and dairy during each of the months of July milk handling and transportation farmers, through their cooperative through November and 40 percent requirements, the request for specific associations, have assumed the burden during each of the months of December performance from such a plant is of processing this surplus milk. At the through June. The deliveries to pool denied. same time, the overall pooling standards distributing plants may include The Fleming Companies, Kraft ensure that milk is supplied for fluid deliveries directly from the farms of General Foods, and Southern Foods use, which is a primary objective of the producer members of the association as Group urged that consideration be given cooperative associations supplying the well as transfers from the cooperative’s to establishing pooling provisions for market. plant. proprietary handlers that are the same A proprietary cheese plant operates To be eligible for pool status, the as those for cooperatives. They contend on a different premise. The primary plant must not qualify as a pool that the cooperatives are able to attach objective of a proprietary cheese plant distributing plant or a pool supply plant milk supplies to the market which are operator is to produce as much cheese under the Southeast order or any other devoted exclusively for manufacturing as possible as efficiently as possible. Federal order. Also, the plant must be use, but that proprietary manufacturing Ideally, such plants prefer to operate at approved to handle Grade A milk by a plants and fluid milk handlers are full operating capacity all the time. To duly constituted regulatory agency. prohibited from doing the same thing. give up any more milk than is This provision is essentially the same Specifically, they stated that cooperative absolutely necessary is to forgo profits. as the proposal of the cooperative association ‘‘balancing’’ plants are There is no basis for incorporating coalition, except that it requires a plant allowed to pool based on the order provisions in this market that that qualifies under this paragraph to be organizational performance of the would encourage additional cheese located within the Southeast marketing cooperative, an option that obviously is production by making it easier to pool area. The plants that are likely to not available to proprietary handlers. cheese plants. In an area such as the become cooperative balancing plants Instead, proprietary handlers would Southeast marketing area that has a high under the Southeast order are DI’s have to rely on supply plants that are Class I price to assure an adequate plants in Franklinton, Louisiana, and required to receive, unload, reload, and supply of milk for fluid use, the Lewisburg, Tennessee, and Mid- transfer producer milk to distributing adoption of provisions to facilitate the America Dairymen’s plant in Kentwood, plants in order to qualify as pool supply proliferation of cheese plants is Louisiana. Therefore, the in-area plants. The issue, they argue, is not one unwarranted. There is no shortage of location requirement should not affect of ‘‘need’’ for supply plant milk to milk for cheese in the United States, and the regulatory status of any plant that is supply the fluid market, but whether the there is no reason to encourage expected to be pooled as a balancing order should permit the dominant additional milk production for cheese plant under this order. cooperative to service the market plants in the Southeast. Fluid milk Unlike a supply plant, which must efficiently while requiring non- processors in the Southeast pay incur the cost of shipping milk to the cooperative sources of milk to be relatively high Class I prices to assure market, a balancing plant could be encumbered with great inefficiency. an adequate supply of milk for fluid use, located in New Mexico, Arizona, or It is questionable how the ability of and the blend prices resulting from some other distant location and not proprietary handlers to attach additional those Class I prices should not be incur the cost of shipping milk from supplies of milk for manufacturing use reduced by encouraging additional those locations to the market. Such a with the market promotes inefficiencies production destined for Class III use. plant could qualify based on the direct in supplying the fluid milk needs of the Revisions of pooling standards: deliveries of locally-produced milk. For market. The primary objective of § 1007.7(f). Kraft Foods proposed that this reason, it would be imprudent not pooling provisions is to provide the the market administrator be given the to require a balancing plant to have incentive to supply the fluid milk needs authority to adjust pool supply plant some association with the Southeast of the market and to accommodate the shipping standards. The Kraft witness marketing area, as urged by the Fleming pooling of the reserve supplies of milk stated that this will afford the Companies, Barber, and Dairy Fresh in that are available and are necessary to Department more flexibility in meeting their briefs. serve or balance the fluid milk needs. the changing needs of the market. The Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25031 witness cited the lengthy delays that are limitations would be restricted to not any plant with monthly route now frequently incurred in suspending more than 10 percentage points up or disposition under 100,000 pounds, regulations when market conditions down. Following a written request to whether or not the handler otherwise change. He also noted that while some make such an adjustment, the market meets the criteria for being a producer- orders permit the Director of the Dairy administrator will notify all parties in handler. Division to issue revisions of shipping the market who would have an interest The proposed exemption from standards, this process is also a lengthy in the request. This would include, at a regulation based on monthly route procedure. minimum, every handler and every disposition should be adopted. As a The Kraft proposal should be adopted, cooperative association representing practical matter, the exemption of plants but it should be modified to include the producers in the market. In addition, the of this size would pose no threat to the distributing plant route disposition market administrator will notify the order’s regulated handlers. In addition, standards in § 1007.7(a), the supply Director of the Dairy Division, the regulatory burden on a handler of plant shipping standards in § 1007.7(b), Agricultural Marketing Service, of the this size is much greater than it is on an the cooperative ‘‘balancing plant’’ request. The market administrator will average size handler. Although it is not performance standards in § 1007.7(c), provide at least seven days for the certain that the two producer-handlers the ‘‘touch base’’ standards in submission of written comments, which in this market would be exempt under § 1007.13(d) (1) and (2), and the may be faxed or mailed, before making this provision, it should nevertheless be diversion limitations in § 1007.13(d) (3) a decision concerning the request. Prior included in the order to preclude the and (4). The authority to increase or to making such a decision, the market regulation of any small handler who decrease a percentage performance level administrator will confer with the may distribute fluid milk products in should be restricted to not more than 10 Director of the Dairy Division. the Southeast marketing area. percentage points above or below the The flexibility accorded in the order Handler: § 1007.9. The impact of levels established in the order. The by this provision should be helpful in regulation under a Federal order is authority to increase or decrease the meeting any fluctuating needs of the primarily on handlers. A handler producer ‘‘touch base’’ standards in market in a timely manner. definition is therefore necessary to § 1007.13(d) (1) and (2) should be Nonpool plant: § 1007.8. The nonpool identify those persons from whom the restricted to 50 percent of the standard plant definition proposed for the market administrator must receive specified in the order. merged order should be adopted. The reports, or who have a financial Most milk order actions involve plants defined as nonpool plants responsibility for payment for milk in temporary adjustments to pooling include other order plants, plants of accordance with its classified use value. standards to recognize changes in producer-handlers, partially regulated This will assure that all information supply and demand conditions. These distributing plants, unregulated supply necessary to determine a person’s status adjustments are accomplished in most plants, and exempt plants. With the under the order can be readily orders by ‘‘suspending’’ certain exception of the exempt plant determined by the market administrator. language from a provision of the order definition, these terms are standard As proposed by the cooperative so as to reduce the regulatory burden on among the separate markets involved in coalition, the handler definition should handlers and assure the continued this proceeding. include the operator of a pool plant, a pooling of milk that has been The exempt plant definition proposed cooperative association that diverts milk historically associated with a market by the cooperative coalition includes, in to nonpool plants or delivers milk to without the need for making costly and addition to a plant operated by a pool plants for its account, a producer- inefficient movements of milk. A large governmental agency, a plant with handler, and any person who operates a percentage of these suspensions could monthly route disposition of less than partially regulated distributing plant, be avoided by permitting the order’s 100,000 pounds. an-other order plant, an unregulated pooling standards to be adjusted slightly At the hearing, the cooperative supply plant, or an exempt plant. at the direction of the market coalition spokesman indicated that if With the exception of the operator of administrator, who is the person the two small producer-handlers now in an exempt plant, these terms are delegated by the Secretary to administer the Georgia market—Etowah Maid standard definitions, which are the order. Dairies, Inc., at Canton, Georgia, and included in virtually all Federal milk Suspension actions only provide a Sheppard Brothers Dairy Farm at Stone orders. The inclusion of the operator of means for reducing pooling standards. Mountain, Georgia—were not exempt an exempt plant in the handler These actions cannot be used to increase from regulation under the producer- definition is somewhat unusual. pooling standards in the event that handler provisions proposed for the Although most of the individual orders, additional supplies of milk are needed. merged order, they would be under the except Order 108, exempt government A few orders provide authorization for proposed exempt plant definition. plants from regulation, none of them the Director of the Dairy Division to Although neither producer-handler include the exemption for a plant based either increase or decrease pooling testified at the hearing or filed a post- on minimum route disposition. Because standards as a result of changes in hearing brief, it is not certain that they of this additional basis for exemption, supply and demand conditions. This would, in fact, be exempt from the operator of an exempt plant should authority is intended to provide a regulation under the proposed exempt be included in the handler definition. greater degree of flexibility to adjust plant definition. Although the operator of an exempt performance standards to the varying According to the cooperatives’ plant is, as the name implies, exempt needs of the market. However, the witness, the purpose of the 100,000- from full regulation under the order, the process for implementing the changes pound exemption ‘‘is to exempt from plant operator must still file reports has made it extremely difficult to pricing and pooling those producer- with the market administrator so that respond as expeditiously as is necessary handlers who are fairly small in size, the basis for exemption can be to reflect frequent and rapid changes in whether or not they might otherwise determined and milk handled by the marketing conditions. qualify as a producer-handler.’’ As plant can be properly classified. For this As proposed herein, the authority to written and as explained at the hearing, reason, it is logical to include an exempt modify pooling standards and diversion however, this provision would apply to plant operator in the handler definition. 25032 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules

Producer-handler: § 1007.10. The The witness said that most fluid milk applied to other handlers also apply to merged order should exempt a product disposition now takes place producer-handlers. The coalition producer-handler from regulation if the through wholesale distribution to spokesman testified that the market producer-handler meets certain multiple store outlets. These wholesale administrator must audit producer- specified requirements. The only two accounts are generally high volume in handlers and may do so for no other producer-handlers now operating in the nature and highly sensitive to price reason than to determine that the proposed marketing area have been differentials, he added, and those handler is, in fact, eligible under the subject to the provisions of the Georgia handlers who engage in trade through provisions of the order to be exempt order. Since this provision is short, wholesale channels should not be from pricing and pooling. He said that simple, easily understood and virtually exempt from pricing and pooling, even if producer-handlers do not pay their identical to the producer-handler if such handler deals exclusively with pro-rata share of administrative provisions contained in the separate its own raw milk production. expenses, the total cost would unjustly orders, it should be adopted for the The spokesman argued that the fall on the remaining handlers under the merged order. purpose of Federal orders is to insure an order. The cooperative coalition’s proposed adequate amount of pure and Currently, under each of the separate producer-handler provision defines a wholesome milk for consumers by orders, the administrative assessment is producer-handler as a person who is establishing a regulatory scheme that applied to handlers on their receipts of engaged in the production of milk and insures equitable treatment of all producer milk and on other receipts on also operates a plant from which during handlers and producers. Unless there is which there is a pool obligation. the month fluid milk products are a very good reason to exempt a plant Producer-handlers, on the other hand, disposed of directly to consumers from regulation under an order, each who have no receipts of producer milk through home delivery retail routes or handler should be subject to the same or any pool obligation, are not subject to through a retail store located on the pricing and pooling provisions to insure an administrative assessment. same property as the plant. A person the integrity of the regulatory scheme, To the extent that administrative costs meeting all of the other requirements for he said. are incurred in administering the a producer-handler, but who disposes of The witness also claimed that while producer-handler provisions, fully and fluid milk products through wholesale Congress intended to exempt small partially regulated handlers who bear outlets, jobbers, independent route family production/distribution units the administrative costs associated with distributors, or retail outlets other than from regulation under an order, it did this activity are assured that producer- a plant store would not qualify as a not envision the large, multi-million handlers continue to operate in the producer-handler. pound units that now compete in the manner provided under the order. This As described by the cooperatives’ wholesale milk trade in many parts of insures that producer-handlers are not spokesman, the retail-wholesale the country. For this reason, he said, the able to transfer the costs and risks of distinction is designed to address the cooperatives’ proposed language was their operation to others and, point at which the pricing advantage designed to insure that any single consequently, are not able to gain an granted to producer-handlers person, partnership, or corporation that advantage relative to other producers or contributes to disorderly marketing. The establishes a production/distribution handlers. Despite proponents’ witness testified that a producer of unit of this magnitude and which testimony, there is no basis for the medium farm size who bottles his or her competes in the wholesale market payment of administrative assessments own product and sells to his/her would come under full regulation. by producer-handlers and, therefore, neighbors is not a serious threat to Experience in the markets involved in must deny the proposal. orderly marketing. While such a person this proceeding indicates that effective Mid-Am filed an exception to the still has the same buying advantage, regulation can be achieved without producer-handler provisions contending such savings are less than the additional adopting the type of overly restrictive that there was no basis for denying its cost inherent with small size. producer-handler provision proposed by producer-handler proposal. It reiterated The cooperatives’ spokesman also the cooperative coalition. In particular, its arguments that effective regulation of stated that even a producer-handler of there is no basis for absolutely producer-handlers cannot be achieved substantial size who develops home- precluding a producer-handler from without the adoption of its proposal and delivery routes will probably not pose a having wholesale customers. that producer-handlers should have to serious threat to orderly marketing As adopted in this decision, a pay the administrative assessment that under current economic circumstances. producer-handler is any person who is applied to other handlers. He noted that where such distribution operates a dairy farm and a distributing Mid-Am’s arguments do not provide a does exist, it is far less price sensitive plant which has route disposition of basis for altering the findings and than sales from supermarket shelves. more than 100,000 pounds per month conclusions on this issue. There is no Although the producer-handler would and who receives no Class I milk from indication in the record that producer- have a cost advantage by exemption sources other than his/her own farm handlers are causing marketing from pricing and pooling, this advantage production and pool plants. The problems in the proposed marketing would be eroded through the cost producer-handler must provide proof area. This demonstrates that effective associated with the manner of satisfactory to the market administrator regulation of producer-handlers can be distribution, according to the witness. that the care and management of the achieved without the unduly restrictive The witness also testified that a dairy animals and other resources regulations proposed by Mid-Am. Also, producer-handler who distributes fluid necessary to produce all Class I milk there is not a sufficient basis to milk products through a plant store does handled and the operation of the conclude that there is a need for not pose a serious threat to orderly processing and packaging business are producer-handlers to pay an marketing since the consumer must his/her personal enterprise and risk. administrative assessment. come to the producer-handler’s place of In conjunction with their proposal to Producer: § 1007.12. The term operation. Moreover, the product is not revise the producer-handler definition, producer defines those dairy farmers in the regular price-sensitive channels the cooperative coalition proposed that who constitute the regular source of of distribution. the administrative assessment that is supply for the order. Under the Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25033

Southeast order, producer status should the following months of January through Finally, with the flexibility accorded the be provided for any dairy farmer who July. market administrator in this order, the produces milk approved by a duly The cooperative coalition’s pooling standards and diversion constituted regulatory agency for fluid spokesman explained that this provision limitations can be adjusted quickly to consumption as Grade A milk and was designed to prevent producers of forestall any abuse of the order should whose milk is received at a pool plant other Federal order markets from it occur. For these reasons, there is no directly from the producer’s farm or is pooling their milk on the merged order need to adopt the dairy farmer for other picked up at the farm by a cooperative during the flush spring months [perhaps markets provision in this market. as a bulk tank milk handler for delivery because the blend price was more Mid-Am filed an exception to the to a pool plant. attractive] when such milk was not denial of a ‘‘dairy farmer for other Producer status should also be pooled on the merged order during the markets’’ provision. Mid-Am contends accorded to a dairy farmer who has an fall months [when the milk may have that even though the proposed established association with the market been needed]. This provision was Southeast order contains a base-excess and whose milk is diverted from a pool supported by Barber Pure Milk plan, ‘‘this does not substantially plant to a nonpool plant by a Company, Dairy Fresh Corporation, and remove the incentive for a dairy farmer cooperative association or a pool plant the Arkansas Dairy Cooperative who has been associated with another operator. To establish an association Association. It was opposed by market during the base-forming months with the market, a dairy farmer’s milk Southern Foods Group and Gold Star to become a producer under the must be delivered to a pool plant each Dairy. Southeast market during other months month to be eligible to be diverted to a In its post-hearing brief, Southern of the year.’’ nonpool plant as ‘‘producer milk.’’ Foods Group stated that it strongly The record does not support the These delivery requirements will be opposed this provision because it would adoption of a ‘‘dairy farmer for other explained further under the discussion make it impossible for milk from nearby markets’’ provision. As indicated, there of producer milk. areas to be pooled on the Southeast was considerable opposition to this Since producer-handlers and exempt order except in extraordinary provision both at the hearing and in plants are not subject to the order’s circumstances. SFG acknowledged that post-hearing briefs. Those opposed to pricing and pooling provisions, milk it had brought Texas milk into the the provision argued that it was a barrier which is in excess of the needs of such Greater Louisiana market to provide an that would remove a handler’s operators will not be treated as producer independent milk supply from nearby flexibility to shift milk economically milk when it is moved directly from the areas. It stated that the flexibility to between plants. farms of such operations to a pool plant. deliver a producer’s milk to different The amount of milk that may be Any such milk delivered to a pool plant plants during the month avoids pooled under the Southeast order is would be ‘‘other source milk.’’ uneconomic shipments of milk and has dictated by the order’s pooling A dairy farmer should not be a permitted SFG flexibility in providing standards and diversion limits. The producer under two Federal orders with milk to a deficit market. market cannot be flooded with outside respect to the same milk. The producer The dairy farmer for other markets milk during the months of January definition should exclude a dairy farmer provision was also opposed by Gold through July because four days’ with respect to milk which is received Star Dairy, which characterized the production of a producer’s milk must be at a pool plant under the Southeast provision as a ‘‘trade barrier.’’ Gold Star received at a pool plant during the order by diversion from a pool plant stated that it will interfere with the month, and during the months of under another Federal order if the dairy seamless movement of milk between the December through June only 50 percent farmer is a producer under the other new order and neighboring orders and of the producer milk physically received order with respect to the milk and the noted that it was inappropriate to at a plant may be diverted to nonpool milk is allocated to Class II or Class III penalize a producer for not delivering plants. use under the Southeast order. Also, as milk to the market when it was not The need for marketing flexibility proposed by the cooperative coalition, needed. outweighs the concerns of Mid-Am the producer definition would exclude The ‘‘dairy farmer for other markets’’ regarding the possibility of surplus milk a dairy farmer with respect to milk provision should not be adopted for the pooling on the Southeast market. The which is diverted to a pool plant under merged order. As discussed later in this ‘‘dairy farmer for other markets’’ another Federal order if any portion of decision, the proposed order contains a provision should not be adopted. such person’s milk is assigned to Class base-excess plan which will Producer Milk: 7 § 1007.13. The I milk under the other Federal order. substantially remove the incentive for a producer milk definition of the In its proposed producer definition, dairy farmer who has been associated proposed Southeast order defines the the cooperative coalition included a with another market during the base- milk that will be priced and pooled paragraph dealing with a ‘‘dairy farmer building months to become a producer under the order. The provisions for other markets.’’ This provision under the Southeast market during the proposed by the cooperative coalition, would exclude from the producer base-paying months. In addition, this and adopted, with some modifications, definition during the flush production order has stringent pool plant in this decision, would require that each months a dairy farmer who delivered performance standards and fairly tight individual producer deliver at least 4 more than one-fifth of his/her milk to diversion limitations. In order to be days’ production to a pool plant in each plants as other than producer milk eligible for diversion during the months of the months of December through June during the short season. Specifically, if of July through November (December and 10 days’ production in each of the during the immediately preceding through June), 10 days’ (4 days’) months of July through November. This months of August through December production of a producer’s milk must be requirement will insure that each more than one-fifth of the milk from the received at a pool plant. This ‘‘touch- same farm was caused to be delivered to base’’ requirement will help to keep 7 As explained in the last two paragraphs at the end of this section, the diversion limits applicable plants as other than producer milk, then distant milk from associating with this to pool plant units which are qualified pursuant to no milk of such a dairy farmer would be market when the milk is not really § 1007.7(e) have been changed from those contained considered to be producer milk during needed at a pool distributing plant. in the recommended decision. 25034 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules producer has a direct association with a pool plant to another pool plant. There administrator to respond quickly to pool plant each month of the year. is no limit on this type of diversion. changing market conditions. Without a ‘‘touch base’’ requirement The proposed order also provides a In their exceptions, Barber Pure Milk of this nature, milk of a producer could procedure to be followed for Company and Dairy Fresh Corporation be pooled without ever having to come determining the pool status of milk if a (Greensboro, Alabama) reiterated the to a pool plant. With the provision, pool plant operator or a cooperative request initially made in their hearing however, there is certainty that the milk association diverts milk in excess of the proposal to be permitted to combine all of that producer is at least partially percentage allowances specified in the of the milk physically received at all of associated with a pool plant of the order order. In this case, the excess quantity their pool plants in determining their every month. of milk would not qualify as producer diversion limits rather than compute So long as the touch-base requirement milk and would not be priced under the diversion limits based on each plant’s has been met during the month, all of order. The diverting handler would be receipts. the other milk of a producer that is not required to designate the dairy farmer This modification should be adopted needed at a pool plant may be diverted deliveries that should not be considered for handlers that unit pool their plants. directly from the farm to a nonpool producer milk. Absent such a Like unit pooling, unit diverting also plant if it is not needed at the pool designation, no milk diverted by the will allow handlers to operate their plant. In aggregate, however, the total handler will be producer milk. plants in a more efficient manner. quantity of milk of all producers so A parallel situation occurs when a Rather than having to juggle milk diverted should be restricted to 50 cooperative association’s diversions between two pool plants to meet touch- percent during the months of December from a pool plant to nonpool plants base requirements, handlers will be able through June and 33 percent during the would cause the pool plant to lose its to divert milk from the plant that normally receives it. This provision, in months of July through November. pool status. In such a case, the Ten days’ production is a reasonable conjunction with unit pooling, will cooperative will be responsible for minimum number of days for provide handlers great flexibility in the identifying which dairy farmers’ milk associating an individual producer’s operation of their plants. milk with this market during the short will not be producer milk. If the Other Source Milk: § 1007.14. The production months. Based on data in cooperative fails to designate the dairy other source milk definition has been a the record, the Class I utilization in this farmers’ deliveries that are to be standard definition included in all milk market is expected to exceed 80 percent excluded as producer milk, then no orders since 1974, when a uniform during the months of July through milk diverted by the cooperative to classification plan was instituted for all November and should range from 65 to nonpool plants will be considered milk orders. The definition included in 75 percent during the months of producer milk. the proposed Southeast order is December through June. These Milk that is diverted from a pool plant identical to those included in the projections support a 10-day delivery to a nonpool plant should be priced at individual orders. requirement for the short production the location of the nonpool plant where In addition to milk received from season. If at least 10 days’ production of the milk is physically received. Diverted producers, a regulated pool plant may a producer’s milk is not delivered to a milk is presently priced under the receive milk or milk products from pool plant during the summer and fall individual orders in this manner and sources other than producers. The other months, the milk cannot be considered should continue to be so priced under source milk definition identifies those to be a part of the regular source of the merged order. other sources. supply for the fluid milk market and As discussed above (with reference to Specifically, ‘‘other source milk’’ should not share fully in the Class I pool plants), the market administrator, means all skim milk and butterfat in a utilization of the marketwide pool. upon request of a handler in the market handler’s receipts of fluid milk products In addition to performance by an and following the submission of data, or bulk fluid cream products from any individual producer, the producer milk views, and arguments, should be source other than producers, section of the order also sets specific permitted limited flexibility to adjust cooperative association handlers, or limits on the total amount of producer pooling standards and diversion pool plants. It also includes a handler’s milk which may be diverted by the limitations. With respect to diversion receipts of fluid cream products in operator of a pool plant or a cooperative limitations, the market administrator packaged form from other plants. In association to nonpool plants during the should be permitted to increase or addition, any milk products (other than month. As proposed and adopted here, decrease diversion limitations by 10 fluid milk products, fluid cream diversions to nonpool plants by a pool percentage points. For example, the 33 products, and products produced at the plant operator would be limited to 33 percent limitation could be decreased to plant in the same month) from any percent during the months of July 23 percent or increased to 43 percent. In source which are reprocessed, converted through November, and 50 percent the case of the touch-base requirement, into, or combined with another product during the months of December through the market administrator should be in a handler’s plant during the month June, of the producer milk that is permitted to increase or decrease these would be considered a receipt of other physically received at pool plants as requirements by up to 50 percent. source milk. Finally, receipts of milk producer milk of such handler during Accordingly, the requirement that each products (other than fluid milk products the month. In the case of a cooperative producer deliver 10 days’ production of or fluid cream products) for which a association, these percentages would be milk to a pool plant before being eligible handler fails to establish a disposition based on the producer milk that the for diversion to a nonpool plant may be would also be included under the other cooperative association caused to be increased to 15 days or decreased to five source milk definition. delivered to, and physically received at, days. During the months of December Unlike packaged fluid cream pool plants during the month. through June, when a four day touch- products, which are Class II products For efficiency in the delivery of base requirement applies, the touch base and therefore not included in the fluid producer milk to pool plants, the requirement could be increased to six milk product definition, bulk fluid proposed order provides for the days or decreased to two days. This cream products are treated in the same diversion of producer milk from one flexibility will allow the market manner as fluid milk products for the Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25035 purpose of applying the other source was issued on February 5, 1993 (58 FR is transferred or diverted between milk definition. This facilitates the 12634), and which became effective on plants. Section 43 contains general rules application of the other provisions of July 1, 1993. Official notice is taken of pertaining to the classification of the order. Accordingly, receipts of fluid that decision, including the reasons set producer milk, and Section 1007.44, cream products in packaged form from forth for the standards adopted in these ‘‘classification of producer milk,’’ other plants are considered other source definitions. They are incorporated by describes how to classify producer milk milk. reference in this decision. by allocating a handler’s receipts of Although no handler obligation is Filled Milk: § 1007.17. The term filled skim milk and butterfat to the handler’s involved with these receipts, it is milk also is identical in all milk orders utilization of such receipts. Finally, desirable for accounting purposes that and was proposed for inclusion in the § 1007.45 describes the market such receipts be defined as other source merged order. There was no opposition administrator’s reports and milk. This accounting technique to this provision. announcements concerning precludes the record-keeping difficulties Filled milk is defined as any classification. that might otherwise be experienced in combination of nonmilk fat (or oil) with The classification scheme proposed accounting separately for inventories skim milk (whether fresh, cultured, for the Southeast order is identical to and sales of Class II products processed reconstituted, or modified by the the uniform classification plan now in in the handler’s plant versus those addition of nonfat milk solids), with or use in the five individual orders and in received at the plant in packaged form without butterfat, so that the product most other Federal order markets. A from other plants. Such receipts are (including stabilizers, emulsifiers, or detailed explanation of the purpose and allocated directly to the handler’s Class flavoring) resembles milk or any other application of these provisions is II utilization. fluid milk product, and contains less contained in the Department’s final Manufactured products from any than six (6) percent nonmilk fat (or oil). decisions that were issued February 19, source that are reprocessed, converted In determining the classification of 1974 (39 FR 9012), July 17, 1975 (40 FR into, or combined with another product filled products, the same competitive 30119), and February 5, 1993 (58 FR in the plant also are considered as other criteria should apply to these products 12634). Because these provisions deal source milk. Such products include dry as to fluid milk products. with inter-order, as well as intra-order, curd cottage cheese received at a pool The filled milk definition stems from movements of milk, they should be plant to which cream is added before the Assistant Secretary’s decision for all essentially uniform with the distribution. Such receipts are allocated Federal orders issued October 13, 1969 surrounding orders and adopted, with (34 FR 16881). That decision is to a handler’s Class II or III utilization, only a slight modification, for the incorporated by reference in this depending upon the use of the product. merged order. No handler obligation is applicable. decision. Under the present Georgia order, the Products manufactured in a pool Commercial food processing application of § 1007.42(c) has been plant during the month and then establishment: § 1007.19. A standard unclear with respect to the transfer or reprocessed, converted into, or definition for commercial food diversion of bulk fluid milk products to combined with another product in the processing establishment was added to an exempt governmental agency plant. same plant during the same month are all orders on July 1, 1993. The definition At present, if bulk milk is transferred to not other source milk. Under this contained in the Assistant Secretary’s an exempt plant, it is automatically situation, producer milk is considered February 5, 1993, decision (58 FR classified as Class I, based on the as having been used to produce the final 12675) is just as appropriate for the presumption that the transferred milk is product. merged Southeast order as it is for the Disappearance of manufactured milk individual orders of which it is needed only to supplement the own- products for which the handler fails to comprised. farm production of the exempt handler. establish a disposition is considered as Product prices: § 1007.20. A final However, where the exempt handler has other source milk. Each handler is decision amending the Class II price no own-farm production, this required to account for all milk and under all Federal orders was issued presumption has resulted in a Class I milk products received or processed at January 27, 1995, and published classification for milk that, in fact, was the handler’s plant. Otherwise, a February 2, 1995 (60 FR 6606). The used in a Class II product. Therefore, handler may have an opportunity to decision changed the computation of this paragraph should be modified to gain a competitive advantage over the Class II price in a manner that provide an automatic Class I competitors. Treating the unexplained removed the need for a section dealing classification for transfers or diversions disappearance of manufactured milk with ‘‘product prices.’’ Since the of fluid milk products to a producer- products as other source milk amended language of the Class II handler. It should also provide for a contributes to a uniform application of decision is applicable to the merged Class I classification for a packaged the provisions to all handlers. order proposed in this proceeding, fluid milk product transferred to an Fluid Milk Product/Fluid Cream § 1007.20 has been removed. exempt governmental agency plant Product: §§ 1007.15 and 1007.16. The 2(b). Classification of Milk: defined in § 1007.8(e). However, in the terms fluid milk product and fluid §§ 1007.40 through 1007.45. Under a case of bulk fluid milk products or fluid cream product are standard definitions Federal milk order, milk is priced cream products transferred or diverted in all milk orders and were proposed for according to the form or manner in to an exempt plant, the classification inclusion in the merged order. There which it is used. Section 40 of the should be based on the exempt plant’s was little discussion at the hearing proposed order discusses the four utilization as determined by the market concerning these definitions and no classes of utilization under the order. administrator. 8 opposition to their inclusion in the Section 41 discusses how to classify 2(c). Pricing of Milk: §§ 1007.50– merged order. ‘‘shrinkage,’’ the disappearance of skim 1007.54. Milk pooled under most The fluid milk product and fluid and butterfat that occurs through 8 Several changes in pricing have been made in cream product definitions were most handling, transporting, and processing this final decision. Changes in Class II and III prices recently revised in a national decision milk. Section 42 sets forth rules for are the result of national decisions amending all involving all Federal milk orders that classifying skim milk and butterfat that Continued 25036 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules

Federal orders is now priced in four use butterfat basis using the butterfat The proposal to seasonally adjust classifications: Class I, Class II, Class III, differential for the preceding month Class III and III–A prices cannot be and Class III–A. Class I milk, which is computed pursuant to § 1007.74 and justified on the basis of this hearing generally milk consumed as a beverage, rounded to the nearest cent, plus or record. It is apparent from reviewing the competes for sales on a local or regional minus the change in gross value yield market administrator’s price basis; Class II milk products, which by the butter-nonfat dry milk and announcements from December 1993 include soft dairy products such as Cheddar cheese product price. This through March 1994 that much of the cottage cheese, ice cream, and dips, price will be used in each of the seasonally surplus milk in the proposed compete on a regional basis, and Class individual orders involved in this Southeast marketing area is III milk products (hard cheese and proceeding and in every other Federal manufactured into nonfat dry milk at butter) and Class III–A products (nonfat order. It reflects the value of the Mid-America Dairymen, Inc., plants dry milk) are products which can be manufacturing grade milk used to in Lewisburg, Tennessee, and stored for extended periods of time and produce hard cheese and butter and is Franklinton, Louisiana. As a result of compete for sales on a national basis. equally appropriate for the Southeast the institution of Class III–A pricing in There are several issues to be marketing area. December 1993, the cooperative has discussed in connection with the Seasonal Adjustment to Class III and already obtained substantial relief in the pricing of milk: Class III and III–A III–A Prices. The cooperative coalition pricing of Class III–A milk. For the four prices, the Class II price, the seasonal proposal to seasonally adjust the Class months from December 1993 through adjustment proposed for the Class III III and III–A prices should not be March 1994, the Class III–A price and III–A prices, the Class I price level, adopted. averaged $2.15 below the Class III price. and the location adjustments that are The proposal would reduce Class III This reduction in price for Class III–A needed for the new order. and III–A prices by 10 cents during the milk would have reduced the blend The Class III–A price: § 1007.50(d). months of December, January, and price by approximately nine cents per The present Class III–A price that is February and by 30 cents during the hundredweight in the proposed market applicable to each of the individual months of March, April, and May; it for these months if the merged order orders should be continued for the would increase these prices by 10 cents had been in effect. Southeast marketing area. This price is in June, 20 cents in July, 25 cents in Producers in this marketing area have based on a product formula, specified in August through October, and 15 cents in already contributed to those § 1007.50(d), that is defined as the November. organizations that are balancing the average Central States nonfat dry milk The cooperative coalition’s reserve supplies of the market, and no price for the month, as reported by the spokesman testified that there is compelling reason exists on the basis of Department, less 12.5 cents, times an considerable cost involved in balancing this record to increase this contribution amount computed by subtracting from 9 the seasonal excess supply of the by further reducing the Class III and III– an amount calculated by dividing 0.4 by proposed marketing area. The A prices with the proposed seasonal such nonfat dry milk price, plus the cooperative coalition proposal, he adjustments. The proposal is therefore butterfat differential value per testified, is designed to relieve the denied. hundredweight of 3.5 percent milk and handlers of some of the cost involved in In its exception to the recommended rounded to the nearest cent. assuming this role. decision, Mid-Am repeated its request Class III–A pricing was added to the This proposal was opposed by a for a seasonal adjustment of Class III individual orders on December 1, 1993. handler and a regional cooperative and III–A prices. While conceding that The reasons for moving nonfat dry milk association in post-hearing briefs. Baker Class III–A pricing does provide ‘‘some from Class III to Class III–A and for & Sons Dairy stated in its brief that relief’’ to those handlers manufacturing adopting the product formula described while the simple average of the nonfat dry milk, Mid-Am argued that above were thoroughly explained in a proposed seasonal adjustments would ‘‘Class III–A pricing does not provide final decision issued October 20, 1993, be mathematically neutral, they are far relief from the costs associated with the and published in the Federal Register from neutral on a weighted average seasonal variability of the supply of on October 29, 1993 (58 FR 58112). The basis and would substantially reduce milk utilized to produce nonfat dry milk findings and conclusions of that the blend price and producer income powder.’’ decision are incorporated by reference during the months of December through Mid-Am’s claims for adopting in this decision. There was no May. The handler also argued that this seasonal pricing of Class III and III–A opposition to a continuation of this proposal undermines the principle of milk are insufficient in view of the price under the merged order. pricing Class III and III-A products on reasons set forth for denying seasonal The Class III price: § 1007.50(c). The a national and international basis, and pricing. Class III price for the Southeast order instead would give one area of the Class II price: § 1007.50(b). A final should be the ‘‘basic formula price,’’ as country an advantage over other areas. order amending Class II pricing under defined in § 1007.51(a) and as adopted Milk Marketing, Inc., a cooperative all Federal milk orders was issued on for all Federal milk orders in a final with dairy farmer members in eight January 27, 1995, and published on decision issued January 27, 1995, and states, also submitted a brief opposing February 2, 1995 (60 FR 6606). As published on February 7, 1995 (60 FR any seasonal adjustment to the Class III amended, the Class II price is the basic 7290). The basic formula price is the and III–A prices. MMI wrote that plants formula price for the second preceding preceding month’s average pay price for utilizing milk in Class III and III–A month, plus 30 cents. This price is manufacturing grade milk in Minnesota during the months of March, April, and adopted for the Southeast order for all and Wisconsin using the ‘‘base month’’ May would have a 30-cent per of the reasons set forth in the final series, as reported by the Department for hundredweight advantage over plants decision (i.e., See 59 FR 64524) the month, adjusted to a 3.5 percent regulated under other orders. It stated pertaining to that issue. There was no Federal order Class II and III prices. In addition, that this translates to a price advantage opposition to the adoption of this price plant location adjustments have been changed as a of 3 to 4 cents per pound for nonfat dry at the hearing, in briefs that were filed, result of the comments received. milk powder. or in the exceptions that were received. Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25037

Class I Pricing. The Class I price this decision. Table 1 identifies the east, the Upper Florida order to the under the proposed Southeast order plants designated by the numbers on the south, the Texas and Southwest Plains should be determined by adding a Class map. orders on the west, and the Louisville- I differential to the basic formula price Several changes in location Lexington-Evansville, Paducah, and for the second preceding month. This is adjustments have been made from those Tennessee Valley orders on the north; the method for determining Class I set forth in the recommended decision. they were drawn so as to minimize price prices under all Federal orders and the Zone 1 has been expanded to include 5 changes from one zone to the next zone; method proposed for the merged order. counties that were part of Zone 2; a new as much as possible, the zones were There was no opposition to this zone, designated as Zone 3 on the map, drawn so as to include in the same zone proposal. has been added; several Arkansas all plants located in close proximity to As proposed by the cooperative counties, including the Little Rock area, one another; and they were drawn in a coalition, the Class I differential have been added to the zone that way that will provide an incentive for applicable to the base zone, which encompasses the Memphis area (i.e., milk to move from surplus production includes Birmingham, Alabama, and Zone 4); the changes to Zone 4 have areas to metropolitan areas where Atlanta, Georgia, should be $3.08 per resulted in a slight and non-significant distributing plants are located. hundredweight, the differential that is reconfiguration of the Arkansas counties Zone 7. The base zone, Zone 7 (Zone now applicable to those locations under that are contained in Zones 5 and 6; 6 in the recommended decision), the Georgia and Alabama-West Florida Zones 9 and 10 have been combined includes a band of counties extending orders. into one zone with a $3.40 price; some from South Carolina on the east to Texas In establishing the Class I price level, of Zone 12 has been moved to Zone 11; on the west. The $3.08 Class I a primary consideration must be to and the Zone 12 price has been changed differential applicable to this zone attract an adequate supply of Grade A to $3.65. In addition, because of the borders a $3.08 zone in the Carolina milk for fluid use, taking into addition of the new Zone 3, the order and a $3.16 zone in the Texas consideration production within the recommended Zones 3–8 are now Zones order and a $3.00 zone in the Southwest marketing area relative to the demand 4–9. As a result of these modifications, Plains order. Included within this zone for fluid milk by handlers regulated Class I prices were reduced from those are three distributing plants in Georgia, under the order and the cost of in the recommended decision by 5 cents three in Alabama, and two in transporting bulk milk from surplus at Nashville; 7 cents at Little Rock; 8 Mississippi. The $3.08 adopted for the producing areas to supplement local cents at Hattiesburg, Mississippi, and Georgia and Alabama plants is the same production. However, an equally Cowarts, Alabama; 10 cents at price that is now applicable to these important consideration is to establish a Hammond, Louisiana; and 3 cents at plants and that was proposed by the Class I price that will provide proper Baton Rouge, New Orleans, and Mobile. cooperative coalition and Fleming alignment with Class I prices in Although there is, in reality, one Class Dairy. neighboring markets. A Class I price that I price that will apply to the Southeast The Mississippi portion of Zone 7 is too high could result in excessive marketing area, when this price is includes the Brookshire (Dairy Fresh) milk production within the market and adjusted for location, it results in a Dairy Products, Inc., plant in Columbus a retail price advantage for handlers unique Class I price for each of the 12 (Lowndes County) and LuVel Dairy regulated under lower-priced orders zones of the marketing area. The Class Products, Inc., in Kosciusko (Attala distributing packaged products in the I price that will be shown for the market County). At the present time, the price marketing area. Therefore, the Class I will be the price applicable to Zone 7, at the Columbus plant is $3.10, while price should not exceed the Class I price the base zone (Zone 6 in the the price in Kosciusko is $3.20. Proposal in the closest surplus-producing region recommended decision). This zone number 1 would have maintained these plus the cost of transporting bulk milk includes Atlanta, Georgia, and prices, while the Fleming Dairy from that area to this market. Birmingham, Alabama, two of the proposal would have included the Based on the current cost of market’s key population centers. Columbus plant in its $3.08 zone and transporting milk, which the In arriving at the appropriate location the Kosciusko plant in its $3.18 zone. cooperative coalition’s spokesman adjustments for the Southeast marketing Lowndes and Attala Counties should indicated was in excess of 3.9 cents per area, several factors were taken into be added to Zone 7 of the proposed hundredweight per 10 miles distance, consideration. In addition to Southeast marketing area with a Class I the $3.08 Class I differential proposed considering the prices that are now differential of $3.08. This price ties in for the base zone of the merged order applicable in each of the separate areas well with prices to the east and west should be high enough to ensure an and those embodied in the proposals and will be 10 cents below the Class I adequate supply of milk but not too submitted, it was necessary to consider price applicable to LuVel’s closest high so as to provide a pricing other factors such as the prices in competitor, Flav-O-Rich in Canton, advantage for handlers in lower-priced marketing areas contiguous to the which is about 50 miles southeast of markets to the north of the Southeast Southeast marketing area, whether the Kosciusko. marketing area. prices in the individual marketing areas The $3.08 price in Zone 7 extends Plant location adjustments: § 1007.52. lined up properly on an east-to-west into 6 counties in southern Arkansas, This final decision, like the axis in the merged marketing area, the which are currently not regulated by recommended decision, provides for 12 fluid needs throughout the marketing any order. There are presently no pricing zones. However, unlike the area, the supply of milk locally available distributing plants in this area. Seven recommended decision, which provided to each plant within the marketing area, counties in southern Arkansas, which for a base zone, five minus zones, and the competitive relationship among contain no distributing plants and are six plus zones, this final decision handlers in the marketing area, and the not now regulated, have been removed contains a base zone, six minus zones, exceptions received in response to the from the base zone and placed in Zone and five plus zones. These zones, and recommended decision. 6. This change, and a similar the Class I differential adjusted for The zones in this decision were conforming change to Zone 5, was made location for each zone, are shown on the carefully drawn to provide proper to maintain an orderly price surface in map of the marketing area included in alignment with the Carolina order to the southern Arkansas following the 25038 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules transfer of several counties in the Little roughly 25 miles from Canton to Jackson Barber and Dairy Fresh also objected Rock area to Zone 4. and is necessary to provide a proper to the lower Class I price at LuVel Dairy One exception to the base zone price price relationship with areas to the east Products, Inc., Kosciusko, Mississippi, of $3.08 was filed on behalf of Barber and west of Canton. from $3.20 to $3.08. They stated that (Birmingham) and Dairy Fresh Zone 9. Zone 9 (formerly Zone 8 in there was no support in the record to (Greensboro). This exception is the recommended decision) of the make this change. addressed after the discussion of Zone proposed marketing area includes no As explained in the recommended 9. plants in Louisiana or Georgia, but does decision, the prices at Kosciusko, Zone 8. Zone 8 (Zone 7 in the encompass one plant in Mississippi and Canton, and Jackson were too high in recommended decision) should have a two plants in Alabama. relation to the prices east and west of Class I differential adjusted for location The Mississippi plant in Zone 9 is the those locations. To maintain the existing of $3.18 (i.e., a plus location adjustment Borden plant in Jackson, while the two prices at those locations while reducing of 10 cents). This zone borders a $3.23 Alabama plants are the Superbrand and the prices in northern Louisiana and zone under the Carolina order on its Barber Pure Milk Company plants in northern Mississippi would have put easternmost edge and a $3.16 zone Montgomery. Under Order 94, the those handlers at a competitive under the Texas order on its western Jackson plant now has a Class I disadvantage. Neither Flav-O-Rich nor border. There are five distributing plants differential adjusted for location of Borden nor LuVel excepted to this price in this zone: Foremost Dairies in $3.35. As proposed by the cooperative reduction on grounds that it would Shreveport, Louisiana; the Borden coalition and Fleming Dairy, that would jeopardize their milk supply. In fact, the Company in Monroe, Louisiana; Flav-O- also be the price under the merged blend price under the merged order at Rich in Canton, Mississippi; Kinnett order. The two Montgomery plants also those locations is likely to offset the Dairy in Columbus, Georgia; and the now have a Class I differential adjusted price reduction so that the lower Class Borden Company in Macon, Georgia. for location of $3.35, which was also the I price should have no impact on their The Shreveport and Monroe plants are price proposed for those two areas. ability to attract a supply of milk. now in a $3.28 zone under Order 96, the Zone 10. Zone 10 in this final The price in Jackson, Mississippi, and Flav-O-Rich plant is in a $3.35 zone decision is a combination of Zones 9 Montgomery, Alabama, should be under Order 94, and the Columbus and and 10 as contained in the reduced from $3.35 to $3.28. These Macon, Georgia, plants are in a $3.18 recommended decision. The new Zone plants are on nearly the same east-west zone under Order 7. 10 runs from the Atlantic Ocean on the Testimony at the hearing indicated plane as Dallas, Shreveport, and east to a $3.34 zone under the Texas that handlers in northwestern Louisiana Monroe, which would be subject to a order on the west. The differential price compete with handlers in east Texas $3.18 price. There was no indication of adjusted for location in Zone 10 should who are subject to a $3.16 price. It was a problem attracting a milk supply in be $3.40. There are no distributing also pointed out in testimony and in a this area, and there are no plants in the plants within this zone in Louisiana, but brief that Dallas, Texas, which is immediate area that would be negatively there is one nonpool plant operated by roughly the same latitude as Shreveport, impacted by this modest reduction in Hershey Foods in Savannah, Georgia, a had the same price as Shreveport from price. Accordingly, the pricing in the pool distributing plant operated by 1985 through 1991, after which the four separate marketing areas should be Dairy Fresh Corporation at Cowarts, Dallas price was reduced from $3.28 to integrated by the creation of this $3.28 Alabama, and another Dairy Fresh plant $3.16. zone. at Hattiesburg, Mississippi. The Hershey Data and testimony in the record also Fleming and Purity took exception to plant in Savannah is now subject to a indicated that there are abundant the recommended 7-cent price $3.38 price under Order 7; the Cowarts supplies of milk available to the reduction at Jackson, Mississippi, and plant is subject to a $3.38 price under Shreveport and Monroe handlers in Montgomery, Alabama. They argued Order 93; and the Hattiesburg plant has nearby De Soto Parish and in Hopkins that this change was not proposed or a price of $3.45 under Order 94. Both County, Texas, which produced 74 supported and is untested by the the cooperative coalition and Fleming million pounds of milk in December realities of supply and demand. Finally, Dairy proposed a continuation of 1992. they were concerned that the milk current prices for this area. The $3.28 price that presently applies supply of handlers in Jackson and A price of $3.48 was recommended at Shreveport and Monroe and which Montgomery might be jeopardized by for the Cowarts and Hattiesburg plants was proposed for this area by the the price reduction. in recommended Zone 10 and a price of cooperative coalition is too high in Neither the supplier of the Jackson $3.38 for the Savannah plant in relation to the $3.16 Class I differential and Montgomery plants nor the recommended Zone 9. This price under the Texas order. In the absence of handlers themselves filed comments structure would have resulted in a 10- any testimony indicating that the suggesting a problem with the proposed cent price increase for the Cowarts Shreveport/Monroe area is a deficit area price of $3.28. In terms of inter and plant, a 3-cent price increase for the needing an unusually high price to intra-order alignment, a price of $3.28 Hattiesburg plant, and no change in attract a supply of milk, the price in that appears to line up well with prices to price for the Savannah plant. After area should be reduced to $3.18. the north, south, east and west. It is 170 reviewing the comments submitted and The price at the Flav-O-Rich plant in miles from Mobile to Montgomery. If the further analyzing the market structure in Canton should be reduced by 17 cents transportation cost were computed from this area, Zones 9 and 10 should be to provide proper alignment with areas Mobile, the price at Montgomery would combined with a price of $3.40 to the east and west of Canton. Although be $3.23 (i.e., $3.65 ¥ [17 × .025]). If providing for a smoother pricing the competitive relationship will be transportation cost were added to the transition between Zones 9 and 11. changed between Flav-O-Rich, Canton, price at Birmingham, the price would be Barber (Birmingham) and Dairy Fresh and its nearest competitor, the Borden about $3.33 (i.e., $3.08 + [10 × .025]). (Greensboro) excepted to the price plant in Jackson, Mississippi (Zone 9), Based on prices to the east and west of reduction of 17 cents at the Flav-O-Rich the 10-cent difference in price is not the marketing area, $3.28 is the correct plant at Canton, Mississippi, and the 7- unreasonably wide in view of the price for this area. cent price reduction at the Borden plant Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25039 at Jackson, Mississippi, in relation to the $3.48 price for this area in the At the present time, the Class I 3-cent increase in price at the Dairy recommended decision. Southern differential price at Hammond, Fresh plant at Hattiesburg. The Alabama is a deficit area and milk is Kentwood, and Franklinton is $3.65 exception noted that the price at transported to plants in this area from under Order 94. The cooperative Hattiesburg would be increased by three as far away as central Tennessee. A coalition proposed a continuation of cents to $3.48 while the price at New price of $3.48 for Cowarts was proposed this price level under the merged order, Orleans would be lowered 17 cents to in the recommended decision to ensure as did Fleming Dairy, Dairy Fresh, $3.68. This would lower the difference that the Dairy Fresh plant would be Acadia Dairy, Barber Dairy, Brown’s between the Hattiesburg and New adequately supplied under the merged Velvet Dairy, Guth Dairy, Kleinpeter Orleans Class I prices to 20 cents from order, as well as to provide a smooth Dairy, and Walker Resources. its present 40-cent level. These handlers transition in price from southern In August 1993, Tangipahoa Parish asked: ‘‘What kind of equity is this Alabama and Georgia into the $3.58 produced 23 million pounds of milk, far when price zones are set up so that the price zone of the Upper Florida more than any other parish in price at the plant in Hattiesburg is 30 marketing area. Like the plants in Louisiana. Washington Parish was the cents higher than for a plant located in Mobile, the Cowarts plant now enjoys next highest production parish that Canton 105 miles north of Hattiesburg the relatively high utilization of the month, producing 14.6 million pounds. and only 20 cents lower for plants Alabama-West Florida order. Under the Directly north of Tangipahoa and located in New Orleans 105 miles south merged order, the uniform price will Washington Parishes are the Mississippi of Hattiesburg?’’ probably be lower at Cowarts and the counties of Pike and Walthall, which are Finally, Dairy Fresh Corporation, on plant may have difficulty attracting a the two highest production counties in behalf of its plant in Cowarts, Alabama, supply of milk. Nevertheless, in view of Mississippi, producing 6.9 and 7.0 excepted to the price proposed for its the strong opposition of Dairy Fresh to million pounds, respectively, in August plant at Cowarts. It argues that there was any price increase at Cowarts, the price 1993. no proposal to change this price and no should be lowered to $3.40. Cowarts is Because of the substantial milk record evidence to support the proposed more than 190 miles from Mobile, so the production in this area of southern price. The price should be returned to 25-cent price difference between Mississippi and southeastern Louisiana, its present $3.38 level, it concludes. Cowarts and Mobile is far below the cost this area serves as a reserve supply area The price change at Hattiesburg, from of shipping milk from Cowarts to for much of the Southeast. In August $3.48 in the recommended decision to Mobile. Therefore, the reduction in 1993, for example, more milk was $3.40 in this final decision, will reduce price at Cowarts will cause no supplied to the Alabama-West Florida the Hattiesburg price by five cents from disruption in Class I price alignment market from Washington Parish than any other county or parish in the its present $3.45 level under Order 94. with Mobile. This plant is in a heavy production area Southeast. The Hershey plant at Savannah, so the lowering of its price should not A $3.58 price level for Zone 11 will Georgia, will experience a two-cent affect the plant’s milk supply. From the align properly with the Upper Florida higher Class I price as a result of this standpoint of Class I price alignment, marketing area and will provide a change. This minimal price change the lower price at Hattiesburg will not smooth transition to Zone 12, which disrupt price alignment with nearby should have little impact on this plant, based upon this decision should be competitors. Hattiesburg, for example, is which has a relatively high Class II priced 7 cents above Zone 11. Milk is 109 miles to New Orleans and 98 miles utilization. not needed in Zone 11, but it is needed to Mobile. Based on a transportation Zone 11. Zone 11 of the Southeast in Zone 12. Therefore, the price in Zone allowance of 2.5 cents per 10 miles, the marketing area borders the Upper 11 needs to be high enough to provide price at Hattiesburg in relation to New Florida order on the east, where the proper alignment with lower prices Orleans should be no lower than $3.37 Class I differential price is $3.58, and north of this area and higher prices [i.e., $3.65 ¥ (11 × .025)], while the the Texas order on the west, where the south of the area, but it does not have price at Hattiesburg in relation to price is $3.34. The price in Zone 11 to be kept at its present level, Mobile should be no lower than $3.40 should be $3.58. particularly since the price in Zone 12 [i.e., $3.65 ¥ (10 × .025)]. Zone 11, which has been modified by is being reduced. With these price changes, there will the addition of several parishes and Although Zones 11 and 10 ($3.58 and be a 12-cent difference in price between counties from Zone 12, now includes $3.40, respectively) of the Southeast Hattiesburg and Jackson (i.e., $3.40 ¥ only one county that is split between order abut a $3.34 zone under the Texas $3.28). This is two cents greater than the two zones. The portion of Mobile order, there are no distributing plants in difference that now exists between these County, Alabama, that is within 20 the Texas county of Newton, which two locations and provides no Class I miles of the Mobile City Hall is in Zone borders these zones. Due to the price advantage to the Borden plant in 12, while the remainder of Mobile extremely large zones in the Texas Jackson. The 105-mile distance between County is in Zone 11. marketing area, it is not possible to Jackson and Hattiesburg would support With these modifications, there is gradually increase prices on a north to a price difference of 28 cents (i.e., 11 × now one distributing plant in Zone 11 south axis in Louisiana while .025) between these locations. There is at Hammond, Louisiana, operated by simultaneously matching up perfectly no reason to expect handlers to pay any Superbrand Dairy Products, Inc., and with the zone prices of the Texas more than is necessary to obtain an there are two Mid-Am manufacturing marketing area. Because there are no adequate supply of milk for fluid use. plants in the Louisiana parishes of plants in this area, however, this is not The prices at Jackson and Canton are Tangipahoa and Washington. In a serious problem at the present time. appropriate using this standard. Tangipahoa Parish, Mid-Am operates a Zone 12. Zone 12 contains several of A $3.40 price in the new Zone 10 will cheese plant in Kentwood. In the large population centers in this increase the Cowarts plant’s price by 2 Washington Parish, which is to the east marketing area, including Baton Rouge, cents in comparison to its present $3.38 of Tangipahoa Parish, it operates a New Orleans, and Mobile. It extends level under Order 93, but it will be butter-powder manufacturing plant in from Mobile, Alabama, on the east to the lowered by 8 cents in comparison to the Franklinton. Texas border on the west. The Class I 25040 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules differential adjusted for location for Hammond plant enjoyed a Class I price The SFG witness testified that the Zone 12 should be $3.65 or three cents of $3.65, which is 13 cents lower than largest population center for the below the recommended decision’s the Baton Rouge price of $3.78. Southeast order is Zone 8 of Proposal price of $3.68. The witness testified that the mileage No. 1 (i.e., the Atlanta area) with a At present, the prices at Baton Rouge, allowance between Hammond and New population of 3.3 million. He said the New Orleans, and Mobile are $3.78, Orleans is 3.6 cents per hundredweight next most populous area is the $3.85, and $3.65, respectively. Under per ten miles while the mileage Birmingham, Alabama, area with the cooperative coalition proposal, these allowance between Baton Rouge and 1,717,455 people, followed by the Baton prices would stay at their present levels. New Orleans is 0.8 cents per Rouge-West Louisiana and southern Under the Fleming Dairy proposal, and hundredweight per ten miles. He stated Georgia areas with 1.3 million each, and under Proposal No. 3, which was jointly that the Hammond allowance clearly then New Orleans with 1.2 million. submitted by Dairy Fresh, Barber Dairy, exceeds the prevailing rate of about 2.0 Using data on nearby milk supplies Brown’s Velvet Dairy, and Kleinpeter cents to 2.5 cents per hundredweight and per capita consumption of fluid Dairy, the price at Baton Rouge would per 10 miles that prevails elsewhere in milk, the witness asserted that there is be reduced to $3.65 and the price at the Southeast. more production in relation to New Orleans would be reduced to The Dairy Fresh witness stated that population in southern Louisiana than $3.72. Fleming Dairy also proposed a the third reason why southern Louisiana in any other population center of the price of $3.65 for Mobile. prices should be lowered is that in 1991 marketing area. He said that nearby milk A spokesman representing Dairy the Department lowered the Texas Class supplies in southern Louisiana for Fresh of Louisiana (i.e., part of the I differential by 12 cents per December 1992 exceeded 53.5 million Fleming Companies), which operates a hundredweight. As a result, he said, pounds while all of the milk production distributing plant in Baker, Louisiana milk processors in Texas immediately located in Zone 8 of Proposal No. 1 was (about five miles north of Baton Rouge), received a relative 12-cent advantage in 44.2 million pounds. In contrast, he testified that the Class I prices in their ability to compete with Louisiana pointed out, the population of Zone 8 southern Louisiana should be adjusted processors. Prior to this decision, he exceeded southern Louisiana by 2.4 for three reasons. First, he said that the testified, handlers in the Houston- million people. Therefore, he current Class I price for southern Beaumont zone of the Texas market concluded, the milk price in Baton Louisiana which was established by paid 4 cents per hundredweight more Rouge and New Orleans is higher than Congressional mandate in 1985 has put for their Class I milk than processors in is warranted. this area significantly out of alignment the Baton Rouge area. After the change, In its post-hearing brief, SFG stated with the price grid of other locations in however, these processors paid 8 cents that there should be no difference in the South. The Congressionally- less than the Baton Rouge processors, he mandated Class I pricing in southern added. The witness said that the Texas price between Baton Rouge and New Louisiana, he said, was not justified in plants with regular distribution in Orleans. The brief pointed out that prior the 1985 legislative history and cannot Louisiana include two plants in Tyler, to the 1985 Farm Bill, the Class I price be justified now, particularly since the one in Conroe, and one plant in Fort at Baton Rouge and New Orleans was area north of Lake Pontchartrain and Worth. One of the Tyler plants, he the same. It also emphasized that the Lake Maurepas contains one of the estimated, distributed 4 million pounds distance from the large pool of milk in greatest concentrations of milk cows of of Class I milk per month to retail stores Tangipahoa Parish is roughly the same the deep South. in Louisiana. to New Orleans as to Baton Rouge The witness testified that in the The witness also testified that gross because of the causeway over Lake Federal order system higher Class I margins on Louisiana wholesale milk Pontchartrain. prices at one location compared to prices have tightened up since the A witness appearing on behalf of the another suggest a need to attract milk Department lowered the Texas prices. Louisiana Farm Bureau Federation from distant supply areas. But southern He said it was time to address and stated that processors in Louisiana are Louisiana, he pointed out, is not more correct the problem of competitive losing fluid milk sales and producers deficit in milk production than Florida. inequity and price misalignments are also losing their market. He testified In fact, he added, southern Louisiana without further delay and urged the that it was important that the pricing milk supply is regularly transferred, Department to address the southern structure be aligned appropriately, not primarily by Dairymen, Incorporated, to Louisiana pricing problems by partial only within the consolidated area, but Florida during short production months recommended and final decisions also with the adjacent market areas. He to supplement Florida’s raw milk without waiting for analysis and asked the Department to objectively requirements. He said that Louisiana resolution of other merger issues. evaluate the pricing structures in the shipments to Florida totaled 17 million A spokesman for the Southern Foods proposed consolidated area. Louisiana pounds in 1989, 4 million pounds in Group (SFG) testified that SFG agreed processors cannot be competitive, he 1990, 5 million pounds in 1991, 2.5 with Fleming Dairy that the price in noted, if they are subject to million pounds in 1992, and in August southeastern Louisiana was too high unreasonably high prices relative to 1993 seven loads containing 330,000 relative to other areas. He also stated their competition. pounds. that the price surface that exists there The witness testified that current The second reason why southern today is solely the result of the 1985 Federal order price alignment within, Louisiana prices should be lowered, Farm Bill, which established statutory and adjacent to, Louisiana markets has according to the witness, was that in minimums for Class I differentials in resulted in prices that are jeopardizing September of 1990 a new Superbrand New Orleans and Shreveport. He added the economic well-being of the State’s plant commenced operation in that there is no longer a reason to dairy industry. Just as important, he Hammond, Louisiana, which is about 40 maintain the existing price structure in added, it is contributing to a decline in miles due east of Baton Rouge and 55 southern Louisiana because the the critical mass of services essential to miles north of New Orleans. He said the Congressional mandate to increase a healthy dairy industry (e.g., milk Superbrand plant was 25 miles closer to prices was not binding after April 30, hauling, veterinary services, feed New Orleans than Baton Rouge, yet the 1988. milling, etc.). Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25041

The Louisiana Farm Bureau witness hinder the movement of bulk milk to Under the Barber/Dairy Fresh indicated that ‘‘the decline of our local other areas where it is needed for fluid proposal, handlers in their proposed markets and loss of our processing use. Zone 17–A (i.e., that part of the industry, can be directly linked to From May 1984 to May 1993, the total cooperative’s proposed Zone 17 within imports from adjacent areas.’’ He said packaged distribution of fluid milk the States of Alabama and Florida) that the present price structure has products in the Greater Louisiana would pay a 57-cent location resulted in the importation of unneeded marketing area decreased from 46.7 adjustment on their Class I milk (i.e., milk from Texas which, in turn, has million pounds to 46.4 million pounds, $3.65), but the producers delivering caused the unnecessary movement of or by .6 percent. During this same time milk to these plants would be paid an milk at the expense of Louisiana period, the distribution of packaged additional 79 cents (over the base zone dairymen. fluid milk products in this marketing price) on all of the milk delivered to the It is concluded from the testimony in area by handlers regulated under the plants. this record that a reduction in price is Texas order increased from 2.5 million The spokesman for Barber and Dairy absolutely necessary in the Baton Rouge pounds to 9.8 million pounds, or by Fresh testified that the demand for Class and New Orleans areas and that there is approximately 290 percent. The total I milk in the south Alabama area and no reason for Hammond to be priced 13 distribution in the area from handlers western panhandle section of Florida far cents below Baton Rouge or for Baton regulated under all other Federal orders exceeds the supply. He said that Rouge to be priced seven cents below increased from 11.9 million pounds to historically milk has been shipped New Orleans. Baton Rouge and New 15.2 million pounds (i.e., 28 percent). considerable distances to this area. Orleans should be in the same zone In the Order 94 marketing area, the The witness testified that in December with the same price, and Hammond total packaged distribution of fluid milk 1992 the Barber and Dairy Fresh plants should be priced 7 cents lower. products declined from 64.0 million received approximately 17.9 million The available supplies of milk in the pounds to 61.5 million from May 1984 pounds of producer milk from non- New Orleans/Baton Rouge area do not to May 1993, or by 3.9 percent. During member producers and cooperative justify a continuation of the present this time period, the distribution of association member producers, of which price structure. From December 1983 to packaged fluid milk products from all 7.3 million pounds, or 41 percent, was December 1992, the milk supply in the other orders increased from 9.3 million received from producers located in two Louisiana parishes of Tangipahoa pounds in May 1984 to 13.3 million Louisiana and Mississippi. He stated and Washington grew by more than 29 pounds in May 1993, or by 43 percent. that there is approximately 2.5 million percent, from 39,492,177 pounds of These comparisons paint an pounds of milk per month located in milk per month to 51,125,921 pounds of unhealthy picture for handlers in southern Alabama and the panhandle of milk per month. In December 1992, Mississippi and Louisiana. While their Florida that is not being shipped to the more than 33 million pounds of milk total disposition of fluid milk products Barber and Dairy Fresh plants. Even if produced in Tangipahoa Parish were has gone down, more and more of what this milk were delivered to those plants, pooled on Orders 94 and 96. There is remains of their market is being serviced he said, there would remain a shortfall another 15.9 million pounds of milk by handlers outside the marketing area. of about 4.8 million pounds of milk. To available in Washington Parish and in Although there may be other maintain this supply, based on current excess of 4.6 million pounds for explanations for these statistics, one price relationships, he added, will cost December 1992 from St. Tammany and thing that definitely happened during handlers from 33 cents to 75 cents per St. Helena Parishes. In total, there were this timeframe is that the Class I prices hundredweight. 55 million pounds of milk in parishes in Baton Rouge and New Orleans went The Barber/Dairy Fresh witness close to the New Orleans/Baton Rouge up in relation to all of the surrounding indicated that the incentive for these area. orders. producers to ship their milk to plants The Class I differential adjusted for The pricing structure adopted here for located in the Mobile area has been the location for Zone 12 should be $3.65, Zone 12 will restore proper price Order 93 blend price, which averaged which is 13 cents below the present alignment to this area in relation to 53 cents higher than the Order 94 blend price in Baton Rouge and 20 cents prices in surrounding orders. price in southeastern Louisiana/ below the present price in New Orleans. The Mobile, Alabama, area should southern Mississippi for the 12 months It is also five cents below the adjacent also be part of Zone 12; specifically, that of September 1992 through August Zone 8 price of Order 126. part of Mobile County, Alabama, within 1993. The problem, he stated, was that In this southernmost part of the 20 miles of the Mobile City Hall. The in merging these orders, this blend price Southeast marketing area, there is Zone 12 price of $3.65 is the same price incentive will be eliminated. Without an obviously no reason to provide higher that now applies to Mobile under Order additional incentive to move milk to prices to preserve alignment with more 93 and which was proposed for this area Mobile, according to the witness, it is southerly areas because there is nothing by the cooperative coalition. likely that some handlers in the Mobile but water south of New Orleans. The There are two plants in the Mobile area will be forced out of business. question that must be asked then is area: Barber Pure Milk Company The witness stated that there are whether or not a higher price is needed (Barber) in Mobile and Dairy Fresh several handlers competing for the milk to attract a supply of milk to this area. Corporation (Dairy Fresh) in nearby supply in Louisiana and Mississippi The testimony and data in this record Prichard. who have plants located in that heavy indicate that there is more milk At the hearing, Barber and Dairy production area. Among these, he said, available to handlers in New Orleans Fresh proposed maintaining the present are Mid-America Dairymen, Inc., which and Baton Rouge than to handlers in $3.65 Class I price at Mobile, but operates a cheese manufacturing plant many other parts of the marketing area. increasing the producer location in Kentwood, Louisiana, and a butter- It would therefore appear that, not only adjustment by an additional 22 cents. powder manufacturing plant in are the present Class I price levels in Under the cooperative coalition Franklinton, Louisiana; Flav-O-Rich, Baton Rouge and New Orleans not proposal and the Fleming Company which operates a distributing plant needed to help handlers attract a supply proposal, the Class I price also would located in Canton, Mississippi; of milk to this area, but, in fact, may have remained at the $3.65 level. Superbrand Dairy Products, 25042 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules

Incorporated, which is located in producer blend price by the same between south Louisiana and the Hammond, Louisiana; Borden, Inc., amount. In that way, the higher Class I Houston area prior to 1991, when the which has plants in Baton Rouge, prices of handlers in the Mobile area Texas price was reduced by 12 cents. Louisiana, and Jackson, Mississippi; and will be passed on to consumers, who Barber and Dairy Fresh objected to the Dairy Fresh of Louisiana, which should, appropriately, pay higher prices prices recommended for the Mobile operates a distributing plant in Baker, reflective of the higher costs of bottling area. These handlers stated that the Louisiana. milk in the Mobile area or transporting Department erred in dismissing their According to the witness, Gulf Dairy packaged milk to the Mobile area from proposal for separate Class I and Association charged an additional 30 plants at other locations. producer location adjustments. They cents per hundredweight for milk In its exception, Mid-Am agreed with also wrote that separate location delivered to Mobile on top of the 53- the recommended decision in putting differentials for producers delivering cent blend price difference prevailing Baton Rouge and New Orleans in the milk to pool plants located within the between Orders 93 and 94 between same pricing zone. Mid-Am disagreed, marketing area are a method that could September 1992 and August 1993. He however, with also including Hammond and should be used in addition to the stated that Gulf Coast Dairymen’s in that zone (Zone 12). It argued that the Class I price to move milk to areas Association of Gulfport, Mississippi, distance from Kentwood, Louisiana, within the market where the milk charged an additional 40 cents per which is the center of the Tangipahoa supply is short. hundredweight for milk delivered to Parish supply area, to Hammond is 34 Barber and Dairy Fresh also objected Mobile. miles, but the distance to Baton Rouge to placing Mobile, Alabama, in Zone 12 The Barber/Dairy Fresh proposal was is 82 miles and the distance to New and increasing the price there by three actively opposed by most of the other Orleans is 73 miles. Mid-Am maintains cents. They urged the Department to hearing participants and was supported that the added distance from the supply reduce their price to $3.58 or at least to by no one other than the proponents. area justifies at least a 9-cent higher the present level of $3.65. The effect of this proposal would be to price at New Orleans and Baton Rouge Finally, Gold Star Dairy objected to have producers and handlers in other relative to Hammond. Using the same the price reduction in southern parts of the marketing area subsidize the analysis with respect to the distance Louisiana because it ‘‘upsets the delivery of milk to the Barber and Dairy from Franklinton, Louisiana, to Baton competitive balance.’’ It stated that ‘‘it is Fresh plants in the Mobile area. Those Rouge, New Orleans, and Hammond improper to upset the economic balance parties opposed to the proposal argued justifies a price at Hammond that is 7 without evidence of any change in that they should not have to subsidize cents lower than the New Orleans and marketing conditions justifying a change Barber and Dairy Fresh in attracting a Baton Rouge prices, according to the in prices.’’ milk supply. They contended that if cooperative. Mid-Am concluded that to After reviewing the comments cited higher prices to producers are needed in improve alignment between Hammond, above and further analyzing the market Mobile, the handlers operating plants in Baton Rouge, and New Orleans, the structure of Zone 12 and the Mobile should pay higher Class I prices Louisiana parishes of Livingston, surrounding areas, it is concluded that to reflect those higher costs. Tangipahoa, and St. Tammany and the the Zone 12 price should be lowered The problem posed by the Mobile Mississippi counties of Hancock, from $3.68 to $3.65. Also, as mentioned handlers can be addressed by providing Harrison, and Jackson should be added previously, the Louisiana parishes of a greater transportation allowance to to Zone 11 and the price of Zone 12 Tangipanoa and St. Tammany, and the move milk to the Mobile area. At the should be reduced from $3.68 to $3.65. Mississippi counties of Hancock, present time, the Mobile area is priced Dairy Fresh of Louisiana, Inc., the Harrison, and Jackson should be moved the same as the heavy production area operator of a distributing plant at Baker from Zone 12 to Zone 11. This reduces in southern Mississippi and (Baton Rouge), Louisiana, suggested the price at Hammond by 7 cents. Bulk southeastern Louisiana. Thus, there is expanding Zone 10 to include Zone 11 milk delivered to Hammond is not no incentive for a producer to incur the and applying a price of $3.48 to this worth as much as milk delivered to cost of shipping milk from this area to combined zone. It also suggested Baton Rouge or New Orleans and it is Mobile. By maintaining a $3.65 reducing the price in Zone 12 to $3.58. appropriate to have a lower price at differential price in Mobile and It argued that no point is served in Hammond, as suggested by Mid-Am. decreasing the price at alternative having a separate zone which only Livingston Parish should not be locations—i.e., by 10 cents at Kentwood, contains Mid-Am’s two manufacturing shifted from Zone 12 to Zone 11, as Franklinton, and Hammond, Louisiana; plants at Franklinton and Kentwood; suggested by Mid-Am. Although there by 20 cents in New Orleans; by 7 cents reducing the price at these plants to presently are no plants in this parish, in Jackson, Mississippi, and $3.48 would enhance the blend price for one could be built there in the future Montgomery, Alabama; by 17 cents in the market and would encourage milk to and have a price advantage over nearby Canton, Mississippi; and by 12 cents in move from this high production area to plants in Baton Rouge. Livingston Kosciusko, Mississippi—the blend price distributing plants at Hattiesburg, Parish should remain in Zone 12 to in the Mobile area will cover more of Mississippi; Cowarts, Alabama; and serve as a buffer between Baton Rouge the transportation costs incurred in Mobile, Alabama. and lower-priced Zone 11. shipping milk to Mobile as compared to Dairy Fresh also stated that revamping In Federal order markets, prices these alternative delivery locations. prices in this way will not create any gradually increase from the Upper If, despite these adjustments, the alignment problems with the Upper Midwest to the tip of Florida. The Mobile handlers still find it difficult to Florida order or with the Houston/ present pricing structure, which has attract milk to their plants, the location Beaumont area of the Texas order evolved over time, reflects the fact that adjustment in the Mobile area can be because there are no Texas plants in the some southern areas occasionally need increased further to provide more immediate vicinity of southern to import milk from surplus areas to the transportation allowance for shipping Louisiana. It concluded that its north. This is not true for every milk to Mobile. If this proves necessary, suggested lowering of prices in the southern area. There may be pockets of however, it is only appropriate to Baton Rouge/New Orleans area will heavy production, such as central increase both the Class I price and the restore the relationship that existed Tennessee or southern Louisiana, which Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25043 do not require supplemental milk from zone under the Carolina order. On the proposed a $2.77 Class I price for the other areas, but which have higher west, this zone borders a $3.00 zone Little Rock, Memphis, and northwest prices nevertheless to preserve Class I under the Southwest Plains order. Mississippi areas. price alignment with higher-priced Just north of Zone 6, the Class I price Under the merged order, a price of areas to the south. drops to $2.83 in Zone 5. It is necessary $2.83 should apply in this zone. This As noted above, southern Louisiana is to create an intermediate Zone 6 to price would be 15 cents lower than a heavy production area. The handlers eliminate a sharp 25-cent drop that Zone 6 to the south and 6 cents higher in Hammond, Baton Rouge, and New otherwise would occur between Zone 5 than Zone 4 on the north. The reason for Orleans do not have to import milk from and the base zone. selecting a price of $2.83 is that it lines distant areas because they have an Zone 5. Zone 5 (Zone 4 in the up well with the prices on the east and abundant supply at their doorstep. recommended decision) includes the west of the market and contributes to a Because there are no handlers in the northern tier of counties through smooth north to south transition within Gulf of Mexico, prices do not have to be Georgia, the northern two tiers of the marketing area. increased at 2.5 cents per 10 miles counties through Alabama and Zone 4. Zone 4 (Zone 3 in the through southern Louisiana to preserve Mississippi, and a tier of counties recommended decision) is comprised of price alignment with areas to the south through Arkansas. This zone should the southernmost tier of counties of New Orleans. have a differential price adjusted for through the State of Tennessee and has The argument of Barber and Dairy location of $2.83. As mentioned been reconfigured to include two tiers of Fresh that prices should be higher in previously, the area of Arkansas counties in central Arkansas. It should New Orleans so that Dairy Fresh at included in Zone 5 has been modified have a Class I differential adjusted for Hattiesburg can afford to ship and sell from the recommended decision location of $2.77. packaged milk in New Orleans does not because of the changes made to Zone 4. There are six plants in this zone: meet the standards of the Agricultural With the modification, there are no Forest Hill Dairy and Harbin Mix in Marketing Agreement Act. Location plants in Arkansas in this zone. Memphis, Tennessee; Borden, Inc., adjustments reflect the cost of hauling There are no plants in the Georgia Coleman Dairy, and Gold Star Dairy, in bulk milk from production areas to portion of Zone 5, which cuts through Little Rock, Arkansas; and Humphrey’s processing plants. The adjustments the Chattahoochee National Forest. In Dairy in Hot Springs, Arkansas. At compensate producers for the economic northwest Georgia, there are seven present, the Class I price at these service they provide to handlers. counties that are within the Tennessee Similarly, the position of Gold Star Valley marketing area. Most of these locations under the Central Arkansas Dairy that the reduction in price at New counties also lie within the order is $2.77. The recommended Orleans upsets the competitive balance Chattahoochee National Forest. decision proposed a price of $2.77 for between Little Rock and New Orleans Although there are presently no plants Memphis and a price of $2.83 for the provides no justification for not in this area of Order 11, the location Little Rock area. reducing a price that obviously is higher adjustment for a plant in this area that Gold Star Dairy argued in its than it needs to be. becomes regulated under the Southeast exception that it had no notice that any The goal of the Federal milk order order would be minus 25 cents (i.e., a price change was contemplated for program is to ensure an adequate supply Class I price of $2.83). Little Rock and that to change the price of milk for fluid use and to establish and There are three plants in the Alabama at Little Rock simply to tie together east- maintain orderly marketing conditions. portion of Zone 5: Meadow Gold at west price alignment was inappropriate. Consumers in New Orleans should not Huntsville (Madison County), Dasi It suggested reducing the price at Little have to pay higher milk prices simply Products (partially regulated) at Decatur Rock to $2.77 by moving six Arkansas to reflect the transportation cost of (Morgan County), and Shoals Cheese in counties from Zone 4 to Zone 3. shipping packaged products there from Florence (Lauderdale County). The Gold Star is incorrect in asserting that Hattiesburg, Texas, Little Rock, or Class I price that now applies at these it had no notice. In any merger hearing, anywhere else because there are milk plants under Order 93 is $2.85. all order provisions are to be considered processing plants in the New Orleans In the Mississippi portion of Zone 5, and are within the scope of the hearing. area that can obtain bulk fluid milk at there are two fully regulated distributing However, it is true that no attention was a cost that is less than the cost of plants and one cheese plant. Barber focused on the appropriate price at hauling packaged milk. Dairy operates a distributing plant in Little Rock at the hearing. Proponents Zone 6. Immediately north of the base Tupelo (Lee County), and Avent’s Dairy assumed that the current pricing zone, a new, transition zone (Zone 5 in operates a distributing plant in Oxford structure would be adopted. the recommended decision) should be (Lafayette County). The western border A slightly higher price was created with a Class I differential of this zone adjoins a $3.00 zone and a recommended for the Little Rock area to adjusted for location of $2.98. Currently, $2.77 zone under the Southwest Plains better align prices east to west and to there are no distributing plants in this order. slightly enhance the uniform price at zone. However, at the time of the Under the four separate orders, there that location under the merged order. hearing there was one distributing are now four separate prices that apply This was an increase of six cents and plant—the Meadow Gold plant at to Zone 5: under Order 7, the price is with the zone configuration in the Gadsden, Alabama—in this zone. Since $2.93; under Order 93, the price is recommended decision this price level the hearing, this plant has closed. $2.85; under Order 94, the price is seemed appropriate. However, with the A slightly lower price should apply to $2.90; and under Order 108, the price is reconfiguration of the zones in this final Zone 6 to reflect its closer proximity to $2.77. Under the cooperative coalition decision it is appropriate to return the the heavy production area in south proposal, the prices would remain at price applicable at Little Rock to $2.77. central Tennessee and to provide a their present levels from northern Accordingly, the Arkansas counties of smooth north to south price surface Georgia to northern Mississippi. The Polk, Montgomery, Garland, Saline, through this part of the marketing area. Fleming Company would standardize Pulaski, Lonoke, Prairie, Monroe, and The $2.98 price in Zone 6 borders the the price at $2.85 from northern Georgia Lee have been moved to the new Zone dividing line of a $3.08 zone and $2.93 through northern Mississippi. AMPI 4, thereby reducing the price at Little 25044 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules

Rock to $2.77, the level that now applies Little Rock. It will also help to mitigate I price alignment, it could be argued to that area under Order 108. the price reductions cited by ADCA. that Lewisburg should be priced at Zone 3: A new zone consisting of A $2.70 price for this new zone will $2.70, seven cents lower than Giles three counties in western Tennessee and improve alignment between Zones 2 County, immediately below Lewisburg. nine counties in Arkansas should be and 3. Based on the 36-mile distance These considerations, however, are created after reviewing the exceptions to between Covington and Memphis, a 7- outweighed by the fact that there are no the recommended decision. cent lower price for Covington is a little distributing plants in Tennessee south Fleming and Purity opposed the higher than the 10-cent difference that of Murfreesboro which would require a inclusion of the Turner Dairies plant at would be justified based on 2.5 cents higher price at Lewisburg to preserve Covington, Tennessee, in recommended per 10 miles. Similarly, based on a Class I price alignment. In addition, Zone 2 with a price of $2.60. These distance of approximately 40–50 miles because the Lewisburg plant is a surplus handlers argued that Covington is in the from Damascus to Little Rock, a processing plant, it is not necessary to Memphis Metropolitan Area and that it difference of at least seven cents is increase the price at Lewisburg to $2.70 should retain the same $2.77 price that justified between those two points. Milk to assure that the plant receives an it had under the Memphis order. They should be encouraged to move from adequate supply of milk. Finally, the stated that they compete with the Damascus to Little Rock, where it is price at Lewisburg has been very close Covington plant for route disposition in needed by distributing plants for fluid to the price applicable at the Purity and the Memphis area and would be use. In view of the fact that Covington Fleming plants at Nashville and the seriously affected by the change. and Memphis were in the same zone necessity of keeping this relationship as Arkansas Dairy Cooperative under the Memphis order and Van close as possible overshadows the Association, Inc. (ADCA), also Buren County was part of the base zone potential problem that could arise if a commented on the proposed pricing for under Order 108, it is appropriate to distributing plant is ever built at the Covington plant. It noted that while limit the difference to 7 cents between Lewisburg. the plant now produces mostly Class II Zone 2 and new Zone 3. Zones 1 and 2. With the addition of products, the proposed 17-cent lower The new $2.70 zone is not carried the new Zone 3, as described above, price at this location could encourage through central Tennessee. This is a Zone 2 now consists of 27 counties in the processing of Class I products there. departure from the pricing zones to the central Tennessee and three counties in ADCA also stated that even though north and south of this zone which northwest Arkansas. The price for this Memphis is 36 miles south of extend on an east-west plane through zone should be $2.60. Covington, the 17-cent price difference the marketing area. As noted previously, There are two plants in this zone: The between the two locations would place central Tennessee is a heavy supply area Heritage Farms plant in Murfreesboro suppliers of the Covington plant at a from which milk moves to various parts (Rutherford County) and the Mid- disadvantage vis-a-vis suppliers of the of the marketing area. This area includes America Dairymen, Inc., butter-powder Memphis plant. This would create a Mid-Am’s butter-powder plant at manufacturing plant in Lewisburg substantial disincentive to supply that Lewisburg, which processes the (Marshall County). The Heritage plant plant, they argued. market’s surplus milk. Under the now has a $2.605 price under Order 7 ADCA also commented on other Alabama-West Florida order, the price and the Lewisburg plant has a $2.52 problems which it saw with the at this plant is now $2.52, the same as price under Order 93. proposed Zone 2. It stated that in the price applicable to the Purity plant The cooperative coalition proposed a October 1994 it purchased land in at Nashville and 1.5 cents below the price of $2.60 for these two plants. A Damascus, Arkansas, to build a price at the Fleming Dairy plant, which $2.60 Class I differential adjusted for receiving station/balancing plant. When has been regulated under the Georgia location also was proposed for these it made this commitment, it had no idea order. As proposed in the recommended locations in the recommended decision. that this area would be priced 17 cents decision, the price at Lewisburg was Neither Heritage nor Mid-Am excepted below the price that had applied to Van $2.60, the same as the price applicable to this price, and it is the price adopted Buren County under the Central at Murfreesboro and Nashville. This in this final decision. Arkansas order. It wrote that ‘‘this is an pricing was based, in part, on Fleming’s Zone 1 of the Southeast marketing inequitable result which surely would testimony that the price at Lewisburg area, as modified in this final decision, not have occurred if the plant had been should be no higher than the price at includes 21 counties in northern in place at the time of the rulemaking Murfreesboro because otherwise Tennessee and 8 counties in northern and discussed at the hearing.’’ producers would have an incentive to Arkansas. There are three plants in this A new zone should be added between deliver their milk to Lewisburg for zone: Fleming Companies, Inc., and recommended Zones 2 and 3 in manufacturing use rather than to Purity Dairies, Inc., at Nashville, and Arkansas and western Tennessee. The Murfreesboro for fluid use. The Cumberland Creamery at Antioch, price for this zone is $2.70, which is 7 recommended decision attempted to Tennessee. The price adopted for this cents lower than the Zone 3 price and extend this reasoning to the Nashville zone is $2.55, which is three cents 10 cents higher than the Zone 2 price. area as well by including Nashville in higher than the level proposed by the The new zone consists of the Arkansas the same zone as the Murfreesboro and cooperative coalition and the Fleming counties of Johnson, Pope, Van Buren, Lewisburg plants, but, as explained Company. Cliburne, Independence, Jackson, below, the Nashville handlers excepted This zone borders four different Craighead, Poinsett, and Mississippi; to the higher price at Nashville and it marketing areas with five different and the Tennessee Counties of Tipton, has been changed. prices (i.e., $2.77 on its eastern border Lauderdale, and Haywood. This new With the addition of the new $2.70 with Order 11, $2.11 and $2.26 along its zone, which includes the Turner Dairies zone, a question again arises concerning northern border with Order 46, $2.39 in plant at Covington and the plant which the proper price at Lewisburg. Based on the Order 99 marketing area, and $2.55 ADCA intends to build at Decatur, will higher prices to the east and west of on its western border with Order 106). reduce the price difference between the Lewisburg, some might argue that At present, the Fleming Dairy plant is Turner Dairies plant at Covington and Lewisburg should be in the $2.70 zone. regulated under Order 7 and has a Class handlers in Nashville, Memphis, and Similarly, in terms of north-south Class I price of $2.53, while the Purity Dairy Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25045 plant is regulated under Order 93 and would disrupt price alignment with the is centered around Barren County which has a Class I price of $2.52. Cumberland higher-priced zones south of Tennessee supplies over 10 million pounds per Creamery plant is a nonpool plant that and with the $2.77 price applicable in month to these plants * * *. The Kroger makes condensed milk and milk the adjacent Tennessee Valley Murfreesboro plant, like the two powder. marketing area. The recommended Nashville plants, receives milk supplies The cooperative coalition and the decision concluded that to provide a from southern Kentucky, centered Fleming Company both proposed a common pricing level between the around Glasgow, in Barren County price of $2.52 for the Nashville area. Nashville and Murfreesboro plants, the ** *. By reference to Glasgow, the However, the cooperative coalition Nashville price should be raised to center of the common production area, proposed $2.605 for Lewisburg and $2.60. transportation to Murfreesboro is only Murfreesboro, while the Fleming In its exception, Mid-Am stated that six miles greater than transportation to Company proposed a price of $2.55 for the Tennessee Counties of Dickson, Nashville * * *. The difference in those locations. Cheatham, Davidson, Wilson, and Smith blend prices payable to Central The assistant operations manager for should be moved from Zone 2 to Zone Kentucky producers for milk delivered Fleming Dairy, Nashville, Tennessee, 1, and the price for Zone 1 should be at comparable distances to the plants in testified that their Nashville plant changed from $2.55 to $2.52. The Nashville and Murfreesboro has caused competes with The Kroger Company cooperative argued that putting unrest and discontent between plant (i.e., Heritage Farms) in Nashville in Zone 2, as proposed in the neighboring producers.’’ (Brief at 19– Murfreesboro for sales throughout the recommended decision, results in price 20.) Southeast. He also indicated that both of alignment problems with handlers fully Placing aside any consideration of a these plants, as well as the Purity Dairy regulated under the Louisville- procurement problem faced by either plant in Nashville, compete for milk Lexington-Evansville order (Order 46). Purity or Fleming which would justify supplies from the same general area in In support of this position, Mid-Am a higher Class I price, a $2.60 Class I central Kentucky and central Tennessee. noted that Louisville, which has a price price at Nashville is too high in relation The witness explained that because this of $2.11 under Order 46, is 175 miles to the Class I price at Louisville. Based area is a very high production area, it from Nashville and that, based on a upon the 169-mile distance from serves a balancing function for the transportation cost of 2.5 cents per 10 Louisville to Nashville, the cost of Southeast. When the milk is not needed miles, the price at Nashville should be transporting bulk milk from Louisville for fluid use, it is processed at no more than 44 cents higher than the to Nashville is approximately 43 cents Dairymen, Inc.’s (i.e, Mid-America Louisville price. It concluded, therefore, (i.e., 17×.025). Adding the 43 cents to Dairymen), butter-powder plant in that the price at Nashville should stay the $2.11 price at Louisville would Lewisburg, Tennessee, the Cumberland at $2.52. result in a price of $2.54. Creamery in Antioch, or the Meadow Fleming Companies, Inc., and Purity The recommended decision did not Gold 9 ice cream plant in Nashville. Dairies, Inc., which operate distributing consider the Class I price alignment The Fleming Dairy witness testified plants in Nashville, also opposed the between Somerset, Kentucky, and that the prices between Nashville and $2.60 price proposed for Nashville. Nashville, Tennessee, and between Murfreesboro should be brought into They contend that a higher price is not London, Kentucky, and Nashville, closer alignment because the existing needed for Nashville because there is an Tennessee, because they did not appear price difference at these locations was abundant supply of milk in north to be germane. Somerset and London are causing unrest and discontent among central Tennessee. They further stated northeast of Nashville. Southern Belle neighboring producers. He suggested a in their exception that there was no operates a distributing plant at price difference of no more than three evidence in the record to support a Somerset, and Flav-O-Rich operates a cents. The witness also stated that the higher price at Nashville; the arguments distributing plant at London. Both price at Lewisburg, Tennessee, should made by Fleming Dairy at the hearing plants are regulated under the be no higher than the Murfreesboro were in support of a lower price at Tennessee Valley order. It is 161 miles price because, otherwise, producers Murfreesboro, not a higher price at from Somerset to Nashville and 198 would have an incentive to deliver their Nashville. They also commented that miles from London to Nashville. The milk to Lewisburg for manufacturing the recommended decision ‘‘creates a Class I price at Somerset and London use instead of to a bottling plant for Class I price disadvantage for Nashville under the Tennessee Valley order is fluid use. handlers in competition with Southern $2.45. Based on a hauling cost of 2.5 Based on the testimony of the Fleming Belle and Flav-O-Rich in the southeast cents per 10 miles, the transportation Dairy witness, the recommended Kentucky portion of the Tennessee allowance between Somerset and decision put Nashville and Valley market, and with Louisville- Nashville should be 43 cents (i.e., Murfreesboro in the same zone with a Lexington-Evansville handlers.’’ They 17×.025) and the transportation Class I differential adjusted for location repeated their call for a $2.52 price at allowance between London and of $2.60. The recommended decision Nashville and a $2.55 price at Nashville should be 48 cents (i.e., concluded that there was an abundant Murfreesboro. 19×.025). Adding these allowances to supply of milk available to handlers in The recommended $2.60 for Nashville the $2.45 Class I price at Somerset or central Tennessee and, for this reason, was based upon the testimony of the London would justify a Class I price at it was not necessary to increase the Fleming Dairy witness, who indicated Nashville of between $2.88 and $2.93. price at Murfreesboro relative to that Fleming Dairy was at a competitive This computation would not appear to Nashville to insure that the Heritage disadvantage in procuring milk with the support the Fleming/Purity argument Farms plant in Murfreesboro obtains an nearby Heritage Farms Dairy plant at that a price of $2.60 at Nashville is too adequate supply of milk. It also stated Murfreesboro. In its post-hearing brief, high. that it would not be appropriate to Fleming stated that: ‘‘The supply of The Class I differential adjusted for reduce the Class I price at Murfreesboro milk to the three Nashville-area plants location at Nashville should be changed to the Nashville level because that comes from counties in central from $2.60 to $2.55 by moving the Kentucky and central Tennessee. Most Tennessee counties of Dickson, 9 This plant recently ceased operations. of the supply comes from Kentucky, and Cheatham, Davidson, Wilson, and Smith 25046 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules from Zone 2 to Zone 1. This change will appropriate location adjustment at that month. The rate of payment for this narrow the difference in price between plant location should be based on the milk should be the higher of the Class Nashville and Murfreesboro from the Class I differential adjusted at the III price for the preceding month or 90 present 8 cents to 5 cents. Based on the location under the Federal order percent of the preceding month’s 43-cent transportation cost between regulating that area, except for the seven weighted average price. Louisville and Nashville, and the 43- Georgia counties within the Tennessee On or before the 15th day of each cent transportation cost between Valley marketing area and the Missouri month, a handler would make a final Somerset and Nashville, this modest 3- county of Pemiscot. Thus, for example, payment to producers for milk received cent price increase at Nashville should if a plant located in Louisville, during the preceding month. The rate of pose no Class I price alignment problem Kentucky, were to become regulated payment would be based on the uniform for Nashville-area plants. It will have under the Southeast order, the location price(s) that will have been announced the beneficial effect of increasing adjustment at that plant would be by the market administrator on or before slightly the uniform price at Nashville determined by subtracting the Class I the 11th day of the month. The final in relation to Louisville, Somerset, price under the Louisville-Lexington- payment would be net of the partial London, and Murfreesboro, which may Evansville order at the Louisville payment made on the 26th day of the help Nashville-area handlers retain their location (i.e., $2.11) from the base zone prior month, and will also be adjusted milk supplies from central Kentucky. Class I differential price under the for marketing services deductions No change should be made in the Southeast order (i.e., $3.08), which pursuant to § 1007.86, errors, and other Class I price at Murfreesboro. It should would result in a location adjustment of deductions authorized in writing by the remain in Zone 2 with a Class I minus 97 cents. This treatment is producer. differential adjusted for location of provided in § 1007.52(a)(5) of the If a handler has received milk from a $2.60. Southeast order. producer who is marketing his or her Location adjustments for plants The final situation that must be dealt milk through a cooperative association, outside of the marketing area. Location with concerns a plant that is not located the handler would pay the cooperative adjustments also must be specified for within any other Federal order association for this milk, not the plants that are located outside of the marketing area. Section 1007.52(a)(6) of individual producer. The partial Southeast marketing area. the proposed order provides six basing payment would be made to the There are seven counties in northern points (i.e., Shreveport, Louisiana; Little cooperative on or before the 25th day of Georgia that are within the Tennessee Rock, Arkansas; Memphis, Tennessee; the month, and the final payment would Valley marketing area. There are no Jackson, Tennessee; Nashville, be made on or before the 14th day of the known dairy plants in these counties. Tennessee; and Atlanta, Georgia) in the month. In this way, the cooperative Under the Tennessee Valley order, Southeast marketing area from which to would, in turn, be able to pay its which has no location adjustments determine the shortest hard-surfaced producers on the same day that handlers within the marketing area, the Class I highway distance to the plant location pay their nonmember producers. price in those counties is $2.77. Had as determined by the market These provisions and the remaining those counties been incorporated in the administrator. The location adjustment paragraphs in § 1007.73, are identical to proposed Southeast order, they would would be determined by multiplying the provisions proposed by the have been included in Zone 5, which each 10-mile increment or fraction cooperative coalition. has an adjusted Class I differential price thereof by 2.5 cents and subtracting this The proposed partial payment date is of $2.83. Therefore, the location number from the Class I differential somewhat earlier than the date that is adjustment in those counties under this price adjusted for location at the closest provided in the individual orders—i.e., order, as provided in § 1007.52(a)(2), of the six basing points. To illustrate, the last day of the month—but there was should be minus 25 cents. should a plant in Richmond, Virginia, no testimony to indicate why an earlier The Missouri county of Dunklin is which is 511 miles from Atlanta, date would not be possible or any now unregulated, and Pemiscot County, become regulated under the Southeast apparent reason why the earlier Missouri, is within the Paducah, order, the location adjustment would be payment date would not work. Kentucky, marketing area. Had these 52 x $.025 or minus $1.30. In the case These payment provisions are two counties been included within the of a plant located in Chillicothe, common to all of the individual orders Southeast marketing area, they would Missouri, the location adjustment would and should be familiar to all handlers have been included in Zone 1. be computed by determining the regulated under the merged order. Therefore, the appropriate location mileage (i.e., 424 miles) from the closest A second partial payment to adjustment for any plant that may be basing point (i.e., Little Rock), producers. A proposal that would located in these two counties is minus multiplying 43 times $.025, and establish two partial payments and a 53 cents, as provided in § 1007.52(a)(3). subtracting that number ($1.08) from the final payment to producers should not Had the Texas counties of Bowie and location adjustment at Little Rock (i.e., be adopted. Cass been incorporated within the minus 25 cents) to arrive at a location Georgia Milk Producers, Inc. (GMP), Southeast marketing area, they would adjustment at Chillicothe of minus an organization which represents have fallen within Zone 7, the base $1.33. This method will provide a approximately 195 dairy farmers located zone. Although there are no plants in reasonable transportation allowance to in the State of Georgia, proposed a these two counties at the present time, ship bulk milk from a distant location provision that would require handlers to the applicable location adjustment in to the Southeast marketing area, while pay producers two partial payments and those two counties should be zero, as simultaneously providing a price that is a final payment. The proposal specifies provided in § 1007.52(a)(4). reasonably aligned with other Federal that on or before the 20th day of each Should a plant located within another order prices closer to the plant location. month, producers would be paid for Federal order marketing area become 2(d). Payments to Producers. On or milk received during the first 15 days of regulated under the proposed Southeast before the 26th day of each month, each the month at the rate of 85 percent of order, or should producer milk be handler under the proposed order the weighted average price per diverted to a plant located in another should pay for milk received from hundredweight for the preceding Federal order marketing area, the producers during the first 15 days of the month; on or before the 5th day of the Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25047 following month, producers would that include payment security trade association for manufacturers of receive another payment, based on this provisions. frozen dessert products. According to rate, for milk received from the 16th A dairy farmer testifying on behalf of the witness, the member companies of through the last day of the month; and, the Alabama Farmers Federation Dairy the three associations in total utilize finally, on or before the 15th day of each Committee in support of the three- over 80 percent of all the raw milk month, the producer would receive final payment plan stated that the plan is an produced in the United States to process payment for milk received during the opportunity to begin correcting a milk and manufacture cheese and frozen preceding month based on the uniform problem that exists between the time a dessert products which they market. price(s) for the month. farmer delivers milk to a handler and The IDFA witness pointed out that An agricultural economist at the the time he is paid. He testified that this provisions for three times a month University of Georgia testified on behalf problem needs to be addressed payments to producers are not in effect of GMP, Georgia Farm Bureau nationwide but stated that this regional in any of the milk marketing orders Federation (GFBF), Alabama Farmers hearing is an excellent place to begin. involved in the hearing or in any other Federation (AFF), Louisiana Farm A dairy farmer located in Loudon, milk marketing orders, with the Bureau (LFB), and the Mississippi Farm Tennessee, who is also in the milk exception of three Florida orders. He Bureau Federation (MFBF) in support of hauling business, also testified in said the three-payment plan in the the three-payment proposal. support of the three-payment plan. He Florida markets pre-dated the According to the witness, milk is one stated that over the years changes in the establishment of the orders and was of the few agricultural commodities dairy industry have limited the selling based on prevailing market conditions produced in which the producer and marketing options of dairy farmers. that were mutually agreed upon by supports or actually finances the He said that there are agreements in producers and handlers in those areas at marketing of the product. He stated that place to control producer movement that time. most agricultural commodities are paid between processors and cooperatives. The witness cited several decisions in for at or soon after delivery to the first He also stated that the times of year which the Department denied proposals buyer. He claimed that the dairy farmer when producers can change markets to establish thrice-monthly payments to finances not only the production of his economically are limited because of producers. He said the proposal would or her milk, but also the marketing of base-excess plans, pooling lead to unstable marketing conditions the milk produced through each of the requirements, and cooperative throughout the southern region and marketing channels including the retail procurement needs. Additionally, he would create a competitive store. claimed that producers have limited disadvantage for both producers and The witness argued that the financial access to accurate financial information handlers in the merged order because of risk to producers has increased in recent of handlers. the increased cost of raw milk. He also years. He noted, for example, that from According to this witness, bankruptcy argued that thrice-monthly payments 1982 to 1992, the number of producers is no longer an act of last resort; it is would clearly increase costs to handlers delivering milk to regulated handlers considered a standard business and severely impact their cash flow and under Orders 7, 93, 94, 96, and 98, procedure that is often a pre-meditated cash reserve positions. He claimed that decreased from 5,765 to 4,600 but that planned event. He stated that dairy handlers, and ultimately consumers, the average monthly volume of milk farmers should not carry the risk after would have to pay an additional 2.6 produced increased by 10,000 pounds. the milk leaves the farm when they do cents per hundredweight due to the He also pointed out that the number of not reap the benefits or losses from that accelerated payment. pool distributing plants decreased from product. He also stated that producers The witness stated that there is no 75 to 41 from 1982 to 1992. Thus, he should be paid three times per month evidence which indicates producers in reasoned, there is now a greater because the technology is now available this region have suffered financial financial obligation per plant and a to do it. hardships as a result of the prevailing greater financial risk per producer. A dairy farmer who is the president payment schedules in these orders. In The witness testified that the three- of Georgia Milk Producers, Inc., testified fact, he stated, the financial situation for payment plan would decrease the that the three-payment plan would producers in this area, as well as most financial burden on producers and provide much needed protection against areas of the country, has improved over reduce the risk of nonpayment. By the risk of dairymen losing money when the past few years, indicating no need reducing by one-third the time between handlers go bankrupt and it would to change the payment schedule. He milk delivery by the producer and the improve producers’ cash flow. Finally, a noted that from 1987 through 1990 the payment for the milk by the handler, he dairy farmer located in Barnesville, ratio of current farm business assets to claimed, the financial exposure to Georgia, testified that the three-payment current farm business liabilities for milk producers resulting from a late handler plan was needed because the credit producers in the southeastern region has payment or handler bankruptcy would situation for producers has changed more than tripled from 1.37 to 4.78. also be reduced by about one-third. over the past 10 years. He claimed that The IDFA witness indicated that dairy The witness emphasized that dairy producers have limited selling options. processors also must wait to be paid for farmers do not have the debt protection The vice president of the International their products. Information from IDFA and the type of provisions included in Dairy Foods Association (IDFA) testified member companies, he said, indicates both the Packers and Stockyard Act and in opposition to the three-payment plan. that handlers’ outstanding accounts the Perishable Agricultural IDFA is comprised of Milk Industry receivable generally run from 25 to 40 Commodities Act. He noted that the Foundation (MIF), the national trade days on most commercial accounts, and Agricultural Marketing Act of 1937 association for processors of fluid milk accounts receivable on sales to schools authorizes the Secretary of Agriculture and milk products, the National Cheese and state institutions run longer, to administer milk marketing orders so Institute (NCI), the national trade generally from 60 to 90 days from as to provide for ‘‘assurance and association for manufacturers, billing to collection. security for, the payment by handlers processors and marketers of all varieties Southern Foods Group and Kraft for milk purchased.’’ However, he of cheese, and the International Ice General Foods (Kraft) supported the stated, there are no Federal milk orders Cream Association (IICA), the national opposition testimony of IDFA. The 25048 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules procurement manager for Kraft testified orders. It must be concluded that the from all loss, the AFFC representative that Kraft’s accounts receivables extra costs associated with the said that it was a step in the right averaged 17.3 days in 1993, which does implementation of this plan exceed the direction. The Georgia dairy farmer not include the inventory age of the benefits to producers. related his experience in a bankruptcy product. He also said that, based on The Agricultural Marketing two years ago which resulted in a Kraft’s own receivables and payable Agreement Act of 1937 authorizes the financial loss of about 21 days’ of schedules and other information, it is setting of payment dates under an order production. customary for those in the industry to but it does not specify how frequently The witness for the IDFA testified that extend 20 to 25 days credit on their handlers must pay producers. the members of the IDFA were opposed accounts receivables. Customarily, this is established on the to the establishment of a producer Representatives of Kinnett Dairies, basis of prevailing marketing assurance fund. He said that such a Inc. (Kinnett), and The Kroger Company conditions, including payment practices provision has never existed under (Kroger), proprietary handlers regulated already existing in an area or new Federal milk orders and questioned under Order 7, also testified in payment practices that handlers and whether the Federal order program was opposition to the thrice-monthly producers may find mutually desirable. the appropriate vehicle to implement payment plan proposal. The Kinnett Producers and handlers should continue this type of fund. witness stated that the plan would give to have the option of negotiating The IDFA witness stated that handlers regulated under other orders a payment schedules, including an processors and manufacturers assume a competitive advantage, and the Kroger additional partial payment if mutually significant risk in receiving a steady representative claimed that the proposal desired. However, this practice should supply of raw milk, even as demand would significantly reduce the cash not be institutionalized by being fluctuates throughout the year and does flow of dairy processors, adversely incorporated in the merged order. not always keep up with supply. He affecting the dairy industry. According Producer Assurance Fund. A proposal claimed that most of the businesses to the Kroger witness, reducing the cash to establish a producer security fund within the United States, including flow for processors would reduce the under the merged order should not be dairy processors, do not have any amount of money available for research adopted. protective regulations and/or funds and development of new products A second professor and agricultural which guarantee payment on products which helps to maintain and expand the economist at the University of Georgia, sold. He argued that establishment of a market for dairy farmers’ milk. presented a proposal on behalf of some PAF would limit processors in The University of Georgia agricultural Georgia dairy farmers, the Alabama conducting business and will negatively economist and the other proponent Farmers Federation, and the Louisiana impact producers in the long run. witnesses testified that the thrice- Farm Bureau which provides for the In its post-hearing brief, IDFA claimed monthly payment plan would reduce establishment of a producer assurance that establishment of the fund would the financial risk that dairy farmers face fund (PAF). He claimed that the PAF result in a costly duplication of from handler bankruptcy. Although the would reduce the financial risk of regulations that have already been record evidence reveals that bankruptcy producers in bankruptcy cases. promulgated by some States in the is a problem in the marketing area The witness testified that paragraph Southeast. In addition, IDFA claimed involved, the proposal is not one that 5(E) of Section 8c(2) of the Agricultural that the expense of the fund would guarantees producers protection against Marketing Act of 1937, as amended, place handlers at a competitive financial loss from handlers who provides for the inclusion of provisions disadvantage vis-a-vis unregulated declare bankruptcy. for the ‘‘assurance of, and security for, handlers or handlers regulated under One of the advantages that members payment by handlers for milk other orders. of a cooperative association have in purchased.’’ He stated that the market Representatives of Kraft General bankruptcy situations is that the administrator could administer the PAF Foods, Kinnett Dairy, and The Kroger financial loss is shared equally among at no additional charge, explaining that Company also testified in opposition to all producers and not borne by one processors regulated under the merged implementing a PAF. In their post- producer alone. Perhaps for this reason, order would be assessed two cents per hearing briefs, Southern Foods Group, there was little concern expressed about hundredweight until the fund was fully Barber Pure Milk Company, Dairy Fresh this issue at the hearing by cooperative endowed. He said that the market Corporation, and Baker & Sons Dairy, association representatives or their administrator would review the fund Inc., also indicated their opposition to member producers. annually to determine if adjustments this proposal. While proponents of the thrice- should be made. The PAF proposed for the merged monthly payment plan argued that the The witness stated that operating order would place handlers regulated plan would enhance their cash flow, the cooperatives and chain stores would be under the order at a competitive record does not reveal that producers exempt from the fund and that, if the disadvantage compared to handlers are experiencing financial problems as a order is terminated, processors who regulated elsewhere. Those handlers result of receiving one partial and a final contributed to the fund would be who operate cost efficient businesses payment each month. Although the reimbursed a pro rata amount. While should not be required to pay the debts record does indicate that at least one noting that the best approach would be of insolvent handlers whose businesses dairy farmer pays for feed on a cash-on- to implement this fund on a national were poorly managed. delivery basis and is assessed a penalty level, he said that the next best The record evidence does not reveal for late payment, there is no indication alternative is to initiate it on a regional why a fund which protects producers that a large number of producers are basis. against bankruptcy should be financed buying production items on this basis. The chairman of the Alabama Farmers solely by handlers. In fact, the record Adoption of this proposal would Federation Committee (AFFC) and a shows that the proposal lacked support place handlers regulated under the Barnesville, Georgia, dairy farmer also from a substantial number of producers, merged order at a competitive testified in support of the producer many of whom are protected from loss disadvantage with unregulated handlers assurance fund. While observing that by belonging to a cooperative and handlers regulated under other the fund would not protect producers association, which obviously is better Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25049 equipped to withstand a handler because they were not implemented on use of the plan in paying producers, bankruptcy than a single producer. a regional basis and because some further consideration should be given to While a producer assurance fund may cooperatives did not pay their producers whether the plan is necessary. This have some merit, the concept should be a base and excess price. decision is written, however, on the more fully researched and explored. Opposition to a base-excess plan was basis of the testimony, evidence, and One question that should be answered expressed by Gold Star Dairy, which comments on the record of this hearing is whether such a fund should be indicated that the plan would limit Gold which demonstrate that the plan is implemented on a local, regional, or Star’s flexibility in obtaining desired, needed, and will be used to pay national basis. Another question that supplemental supplies during the producers. should be addressed is whether operative months of the plan. The Under the base plan adopted in this handlers should bear the sole spokesman for AMPI also indicated final decision, a producer can earn a responsibility of supporting the fund, or opposition to a base-excess plan for base by shipping as little as one day’s whether producers also should be AMPI’s proposed Mid-South order but production to the Southeast market required to contribute to it. supported the cooperative coalition’s during the months of July through Due to the lack of information on the proposal to include a base-excess plan December. Of course, such a base will effects of a PAF on producers and in their proposed Gulf States order. He be very small, but the point to be handlers under the proposed order, the stated that the plan would build a fence emphasized is that those who argued overwhelming opposition to it by around the marketing area and impede that the base plan would inhibit the handlers in this market, and the lack of the efficient movement of supplemental movement of milk on and off the market producer support exhibited at both the milk to the market during periods of will have the flexibility to shift milk hearing and in briefs, the proposal increased demand or reduced between plants as conditions may should not be adopted. production. require. The base plan, as modified, Base-excess plan: §§ 1007.90–1007.94. In their exceptions to the should serve its purpose of encouraging A base-excess plan should be adopted recommended decision, Gold Star Dairy producers to level their seasonal for the merged order. The plan adopted and AMPI maintain that Mid-Am, the production pattern but, at the same in this final decision is significantly dominant cooperative in the Southeast time, not be a barrier to the movement different than the one proposed in the marketing area, will not pay its of milk on and off the market. recommended decision. producers base and excess prices. They Base-Forming and Base-Paying Need For a Base-Excess Plan. The stated that, historically, base-excess Months: There was considerable cooperative coalition’s spokesman plans have been used to impede the disagreement concerning the months to testified that a base-excess plan would movement of producers from one be used for the base-forming and base- provide an incentive to producers to market to another and are not necessary paying periods. As contained in the balance their milk production to advance the provisions of the Act. cooperative coalition’s proposal, bases throughout the year. He noted that a AMPI emphasized that the plan will be would be computed based upon base-excess plan is provided in the ‘‘especially onerous—and act as an production during the months of Georgia (Order 7), Alabama-West exclusionary barrier—to the flexible and September through December (i.e., the Florida (Order 93), and the former efficient marketing capability of ‘‘base-forming period’’), and base and Nashville (Order 98) orders. cooperatives whose producers are excess prices would be paid during the There was widespread support at the located to the southwest, west and north following months of February through hearing and in post-hearing briefs for a of the proposed Southeast marketing May. base-excess plan. Representatives of the area.’’ The witness for Fleming Dairy stated Southern Foods Group, Inc., Fleming The Agricultural Marketing that the base-forming period should Dairy, the Louisiana Farm Bureau Agreement Act states that milk orders consist of the months of July through Federation, Georgia Milk Producers, may contain provisions ‘‘to encourage November and that producers should be Inc., and Arkansas Dairy Cooperative seasonal adjustments in the production paid base and excess prices during the Association testified in support of the of milk * * * on the basis of their months of January through May. He plan. Several individual dairy farmers [producers] marketings of milk during a noted that statistics for the five-market also spoke in support of the plan. representative period of time * * *.’’ region indicate that the Class I A dairy farmer who testified on behalf While the performance of the base- utilization exceeded 80% only during of some of the producers supplying excess plans in Orders 7, 93, 98, and the months of July through November Fleming Dairy in Nashville stated that a 108 in leveling out production is subject from 1990 through 1993. For the same base-excess plan will encourage more to some debate, particularly because three-year period, he pointed out, the milk production during seasonally low several of the cooperatives in these percentage of milk utilized in Class III production months and discourage milk markets have not been paying their manufactured products for the five- production during the flush production producers base and excess prices, there market region was the lowest during months. In the past, he said, dairy is no doubt that the overwhelming July through October. He also indicated cooperatives have unsuccessfully built sentiment of producers, as expressed in that Fleming had experienced problems manufacturing plants to help balance the record of this hearing, is that a base- in trying to encourage producers to raw milk production to the demand of excess plan be incorporated in the increase milk production during the the Class I market. He claimed that dairy merged order. Absent any sound reason months of July and August and that producers are the only ones able to for denying this request, the proposal these two months should, therefore, be solve the raw milk balancing problem should be adopted. However, it is time- part of the base-forming period. by leveling out their milk production. consuming and costly for the market Two dairy farmers supplying Fleming The witness and other dairy farmers administrator to administer a base- Dairy agreed that the base-forming who testified on this issue indicated excess plan. If the plan is not used period should be the months of July that much could be done by dairy under the merged order to pay through November and that the base- farmers to balance their seasonal swings producers, it cannot be effective for the paying months should be January in production. Some of the plans have intended purpose of leveling out through May. Their testimony indicated not been effective in the past, they said, production. Absent a demonstration of that cows and heifers that calve in late 25050 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules

August or September will peak in milk farmers), or September–January (GMP), base-forming period. These commentors production in November, December, while the base-paying period would be argued that the recommended and January, which are not the months February–May (cooperative coalition), September through November base- in which additional milk production is January–May (Fleming Dairy and two forming period would place producers needed. dairy farmers), March–June (LFBF), or located in the southern part of the One of the dairy farmer witnesses February–July (GMP). marketing area at a disadvantage explained that ‘‘cull’’ cows or ‘‘turn’’ The appropriate base-paying period compared to producers located in the cows dry early in the spring. He stated for this market is February through May. northern area due to the summer heat. that this option is available to each These are clearly the months when GMP contends that the lingering effects dairy producer whose milk production additional milk is not, in fact, needed. of the hot summer weather on cows as gets out of cycle. Thus, he proposed that July, August, and December should well as the warm temperatures of late the merged order be structured to clearly not be base-paying months summer and early fall prevent cows discourage milk production during because supplemental milk supplies from reaching their peak production those months when milk is typically in may very well be needed during those until the late fall. over-supply by paying producers a base months. June and January are borderline Fleming Dairies reiterated its support and excess price during the months of months. During the past three years, the for the inclusion of the months of July January through May. average Class I utilization was 72.3 and August in the base-forming period. The other dairy farmer witness noted percent in January and 73.3 percent in Fleming argued that while the average that over the past several years many June, both of which are above the producer will find it easier to establish county school systems in the South comparable percentages for the months a ‘‘production benchmark’’ during the have moved their fall start-up date from of February through May: i.e., 69.5, 68.4, fall months, establishing a base-forming September until about the third week of 67.5, and 70.8 percent, respectively. period to provide ease to producers in August, which caused the demand Based on this data and analysis, the building a base is not a goal of a base- created by school start-ups to be moved testimony and the comments received, excess plan. It emphasized that the up two weeks. He claimed that the cooperative coalition’s proposed objective of a base-excess plan is to including the month of July in the base- February–May base-paying period was ‘‘encourage more even production of forming period will send the correct proposed in the recommended decision milk throughout the year.’’ By excluding signal to producers as to when more and is adopted in this final decision. the shortest milk production months of milk is needed. With respect to the base-forming July and August from the base-forming The chairman of the Dairy Advisory period, the recommended decision period, Fleming contends that a major Committee of the Louisiana Farm concluded that the needs of the market’s objective of the statutory seasonal Bureau Federation (LFBF) testified that producers would be met by using the incentive authority would be the months of March through June months of September, October, and abandoned. It urged that this error be should be the base-paying period. He November. However, many comments corrected in the final decision. stated that these are the months of were received opposing these months As a result of the comments received, highest production in relation to Class because they were too restrictive. the recommended base-forming period I needs. Accordingly, this final decision is of September through November should The witness also stated that producers modified to meet the needs of all be expanded to the months of July currently regulated under Orders 94 and producers by expanding the base- through December. However, instead of 96, which do not now have a base- forming months to July through using every month of this six-month excess plan, would be placed at a December. However, only each period to determine a producer’s base, greater disadvantage if the base-forming producer’s highest four production only the highest four production months period began with the month of July or months will be used to determine each should be used. This four-month period August instead of September because producer’s base. will better accomplish the goal of production was down in those months In their exceptions to the establishing the production benchmark, due to the midsummer heat in recommended decision, Mid-America, and it will allow all of the market’s Louisiana. Southern Milk Sales, the Louisiana producers to compete on equally In its post-hearing brief, Georgia Milk Farm Bureau Federation, the favorable conditions. Producers, Inc. (GMP), recommended Mississippi Farm Bureau Federation, As noted above, Fleming claims that that the base-forming period be the and many dairy farmers again stated July and August should be base-forming months of September through January. their support for the months of months because these months are low According to GMP’s brief, adding the September through December. Mid- production months when milk is often month of January as a base-forming America and Southern Milk Sales in short supply. On the other hand, month would provide a period where argued that the merged order should many of the market’s producers would weather conditions are more indicative include a four-month base-forming also like to see the months of December of the norm. Additionally, GMP period of September through December and January included in the base- suggested extending the base-paying because a shorter period would be forming period because they are period to include the month of July, unfair to all producers whose milk will accustomed to these months under their claiming that the extension would allow be pooled under the order. They present base plans and the inclusion of producers who have met the needs of maintain that the four months of these months would boost their daily the market by equalizing their September through December would average production. production in the fall and summer to balance the desires of producers in both The primary reason for initially receive payment for base milk for an the northern and southern areas of the excluding the months of July, August, additional month. proposed marketing area. December, and January from the base- Summarizing the hearing proposals The Georgia Milk Producers forming period was because these and testimony, the base-forming period Association (GMP), Alabama Dairy months would be difficult months for would be September–December Producers, and several dairy farmers some dairy farmers. However, the (cooperative coalition, LFBF), July– reiterated their support for the months modified base-forming period provides November (Fleming Dairy and two dairy of September through January as the producers with much more flexibility. Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25051

While the inclusion of December may result of a catastrophe, certain diseases, Transfer Rules: A base earned by a help producers in the southern-most or a quarantine. Since only the four producer may be transferred. part of the market, the inclusion of July highest months of production out of a Transferability is an appropriate and August, in conjunction with the use total of six months will be used to provision to include in the plan because of the four highest daily average determine base under the base-excess a base is something of value that has production months, should result in a plan adopted in this decision, it is less been earned, and the base-holder or his/ balanced plan that is fair to all of the likely that this provision will be needed. her heirs should be compensated for market’s producers. Nevertheless, such a provision is that value when the base-holder dies or The month of January was not provided in § 1007.92(c) to when the farm of a base holder is sold. included in the base-forming period accommodate those situations when a For ease in administering this provision, because its inclusion would make it producer’s production is severely the amount of base transferable should impossible for the market administrator disrupted by fire, storm, or other natural either be its entirety or in amounts not to determine a producer’s base in time disaster, by brucellosis, bovine less than 300-pounds. for the producer to transfer that base tuberculosis, or other infectious A base transfer will be effective on the with certain knowledge of what the base diseases, or by a Federal or State first day of the month following the date actually is. Under § 1007.93(a) of the quarantine of a producer’s farm. In the on which an application signed by the base rules, in order for a transferred base unlikely event that a disruption in base holder or his/her heirs is received to be effective at the beginning of the production caused by one or more of by the market administrator. However, February 1 base-paying period it must these conditions leaves a dairy farmer base transfers to be effective on be transferred by February 15. However, without four complete months of February 1 must be received by the if January had been included in the production from which to compute a market administrator no later than base-forming period, the market base, the dairy farmer may request a February 15. Although the cooperative administrator would not have had the base computation based on a lessor coalition also specified that the person information to compute a base until number of months by submitting to the receiving the base should be required to near the end of February. With the July- market administrator in writing on or sign the transfer application, this December base-forming period adopted before February 1 a statement that requirement has not been adopted. in this decision, the market establishes to the satisfaction of the There is no apparent reason why the administrator will have the time to market administrator that during four or recipient of a base should be required to compute and announce bases by January more of the months in the immediately sign the application, and this particular 31 so that orderly transfers may take preceding July through December base- requirement merely adds unnecessary place prior to, or close to, the outset of forming period the amount of milk expense to the administration of the the base-paying period. As a result, produced on such producer’s farm was base plan provisions. If a base is held producers will not be placed in the substantially reduced because of one or jointly, the application for transfer position of having to ship their milk for more of the conditions described in should be signed by all joint holders or an entire month without knowing with § 1007.92(c). their heirs to insure that there is no certainty what their base was. By having In addition to discussing the misunderstanding between the parties the information available at the outset of conditions specifically included in involved in the transfer. the base-paying period, producers will § 1007.92(c), the recommended A base established by a partnership be in a better position to make informed decision’s findings and conclusions and timely management decisions. may be divided between partners on any Under the plan adopted in this final referred to a ‘‘temporary loss of market basis agreed on in writing by them as decision, to qualify for a base, a dairy when cut off by a buying handler.’’ The long as written notification of the farmer must be a ‘‘producer’’ under the implication of this language, which agreed-upon division, signed by each Southeast order during one or more of emanated from the testimony of the partner, is received by the market the months of July through December. cooperative coalition’s spokesman but administrator prior to the first day of the To determine each producer’s average which was not in the proposed rules of month in which the division is to be daily production during the base- the coalition, was not explored. effective. forming months, the market Under the base plan provisions To insure that the exchange of bases administrator will divide the producer’s adopted in this decision, order language between producers are bona fide total pounds of producer milk delivered of this nature is unnecessary because a transfers, a producer who transferred all to pool plants or diverted to nonpool producer can have a ‘‘temporary’’ loss of or part of his/her base on or after plants by the number of days in the market for as long as two months and February 1 should not be permitted to month. The sum of the four highest still be eligible for a full base by at least receive other base by transfer that would daily averages so computed will then be qualifying as a producer for the be applicable within the February–May added together and divided by four to remaining four months of the base- period of the same year. In addition, a determine the producer’s daily average building period. Accordingly, no producer who received base by transfer base. If a producer was on the market for specific accommodation has to be made on or after February 1 should not be less than four months, a zero will be for a producer who is temporarily off permitted to transfer a portion of that substituted for each month in which no the market for this reason. base to be applicable within the producer deliveries were made. Unless Producers who do not qualify for a February–May period of the same year, the producer qualifies under the base because they delivered milk to a but should be permitted to transfer the hardship provisions described below, nonpool plant that became a pool plant entire base. the divisor in this base computation will after the beginning of the base-forming Inclusion of a base-excess plan under always be four. period should be assigned bases under the merged order will require the Under the present base plan the order. Such bases should be computation of a uniform price during provisions and those proposed by the calculated as if the nonpool plant had the non-base-paying months of June cooperative coalition, accommodation is been a pool plant during the entire base- through January and uniform prices for made for a producer who experienced a forming period. A base assigned in this base and excess milk during the other substantial reduction in production as a manner also would not be transferable. months of the year. The steps to be 25052 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules followed in computing these prices are 1007.31, and 1007.32 of the proposed average pay part of their total use value contained in § 1007.61. order, are similar to the requirements of milk to the producer-settlement fund. One change should be made in the that are now contained in the five orders This money is, in turn, paid out to computation of the uniform price for to be merged. handlers with lower than average Class excess milk. As now in Orders 7 and 93 To compute the uniform price and the I utilization so that all handlers in the and as proposed by the cooperative prices for base and excess milk, the market, irrespective of the way they use coalition in § 1007.61(b)(1), the uniform market administrator must first receive their milk, can pay their producers the price for excess milk would be a report of receipts and utilization from same uniform price. The success of this computed by multiplying the pounds of each of the handlers in the pool. Section arrangement depends upon the solvency excess milk that do not exceed the 30 of the order describes who should of the producer-settlement fund. pounds of milk assigned to Class III by file a report of receipts and utilization, The prompt payment of funds due the the Class III price, any remaining excess what the report should contain, and administrative and marketing service pounds by the Class II price, and, if when it should be filed. As proposed funds is also essential for the market there are excess pounds remaining, by and adopted here, this report would administrator to perform the various the Class I price. The total value so have to be filed on or before the 5th day administrative functions prescribed by computed then would be divided by the after the end of the month, or not later the order. Delinquent payments to these total pounds of excess milk to arrive at than the 7th day if the report is funds could impair the ability of the the uniform price for excess milk. delivered in person to the office of the market administrator to carry out these This procedure should be modified market administrator. This filing duties in a timely and efficient manner. slightly to reflect the incorporation of deadline will provide the market Payment delinquency also results in Class III–A pricing in the order. administrator with sufficient time to an inequity among handlers. Handlers Specifically, a new step should be receive the reports, review and correct who pay late are, in effect, borrowing added—i.e., § 1007.61(b)(1)(i)—that them for obvious errors, compute each money from producers. In the absence would first multiply the pounds of handler’s value of milk at classified of any late-payment charge equal to at excess milk that do not exceed the prices, compute the uniform price or least the cost of borrowing money from pounds of milk assigned to Class III–A prices, and announce such price or commercial sources, handlers who are by the Class III–A price. The remaining prices by the 11th day of each month. delinquent in their payments would excess pounds would then be Section 31 of the proposed order have a financial advantage relative to multiplied by the Class III price, the discusses the submission of handler those handlers making timely payments. Class II price, and finally, if there are payroll reports. This report shows the The late-payment charges included in any excess pounds left, by the Class I name and address of each producer, the the proposed order are not a substitute price. total pounds of milk received from the for prompt payments by handlers; those Without this modification, any milk producer, the butterfat content of the that was assigned to Class III–A would milk, and the price per hundredweight handlers delinquent in their obligations reduce the uniform price for base milk, paid. This report is due on or before the would still be subject to legal instead of the uniform price for excess 20th day after the end of the month. enforcement action as authorized under milk. This would narrow the difference Section 32 deals with the reporting of the Act. between the two prices, thereby base milk for the months of February Under the late payment provisions, reducing the incentive for producers to through May and any other reports overdue handler obligations would be level out their production, which is the which the market administrator may increased by 1.5 percent on the day after primary purpose of the base-excess request. The aggregate quantity of base the due date. Any remaining unpaid plan. milk received from producers must be portion of the original obligation would Sections 1007.92, 1007.93, and reported on or before the 7th day after be increased by 1.5 percent on the same 1007.94 have been modified to reflect the end of the month, while the pounds date of each succeeding month until the the changes in the base-forming months, of base and excess milk received from obligation is paid. in the computation of a producer’s base, each producer must be reported on or The late payment charge should apply and the base rules. before the 20th day after the end of each not only to the original obligation but 2(e). Administrative Provisions. The month of February through May. also to any unpaid charges previously administrative duties of the market The dates proposed for the filing of assessed. They would apply whether the administrator are detailed under reports, price announcements, and obligation is paid one day late or ten § 1000.3 of the General Provisions, payments were patterned after those in days late, and would be applicable to which pertain to all milk orders. In the Alabama-West Florida order. They both fully regulated and partially § 1000.5 of the General Provisions, a are similar, however, to those provided regulated handlers alike. handler’s responsibility for records and in other Federal orders in the Southeast. The disposition of the late payment facilities are also detailed. Therefore, handlers under the proposed charge would be determined by the Handler Reports. The responsibility of Southeast order will be accustomed to account to which it is due. A charge handlers to establish and maintain meeting these deadlines. Likewise, resulting from an unpaid obligation to certain records of their operations and producers covered by this order will the producer-settlement fund would go to make such records and facilities receive their payments at about the into that fund. By the same token, a available to the market administrator are same time as they have received charge resulting from an unpaid set forth in § 1000.5 of the General payments under the current Federal obligation for order administration or Provisions. That section relates to the orders. marketing services would go into those adequacy of the records of the handler Charge for Overdue Accounts. It is respective funds. and the period of time for which they essential to the effective operation of the The proposed rate of 1.5 percent per should be maintained. proposed order that handlers make their month is reasonable and is not less than The requirements of handlers to payments on time. the current annual rate for short-term maintain such records, and to make Under a marketwide pooling loans. reports of receipts and utilization to the arrangement, handlers with Class I Expenses of Administration. The market administrator under §§ 1007.30, utilizations higher than the market expenses for the administration of the Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25053 proposed order should be borne by assessment on the milk on the same as that now incurred under the separate regulated handlers under the order. basis as all other producer milk received orders. Therefore, the cooperative Section 1007.85 provides that each at the plant. coalition proposal for a seven-cent handler shall pay to the market In the case of unregulated milk maximum fee should be adopted. This administrator his/her pro rata share of entering the market through a regulated is the maximum fee now permitted the expenses of administration of the plant for Class I use, the regulated under Orders 93 and 108, but slightly order. Accordingly, on or before the handler who utilizes the unregulated higher than the level currently 15th day after the end of the month, milk must report to the market permitted under Orders 7, 94, and 96. It each handler will be required to pay the administrator the receipts and use of should be stressed, however, that this is market administrator five cents per such milk. It is appropriate, therefore, a maximum fee that may be charged for hundredweight, or such lesser amount that the regulated handler should be these services; it may be that the market as the Secretary may determine is responsible for payment for the administrator can perform these services necessary, with respect to receipts of administrative assessment on such at a lower rate. Nevertheless, to err on producer milk, including such handler’s unregulated milk. the side of caution, a seven-cent own production, but excluding receipts While the proposed order is designed maximum fee should be provided. from a cooperative association acting as so that the cost of administration is The separate funds that have been a handler for milk delivered to pool shared equitably among handlers accumulated under each of the orders to plants of other handlers. The payment distributing milk in the proposed defray the costs of administration and shall also apply to other source milk marketing area, an assessment should providing marketing services to allocated to Class I and to route not be made on other source milk on producers, as well as the producer- disposition in the marketing area by which an assessment was made under settlement fund reserves, should be partially regulated distributing plants. another Federal milk marketing order. consolidated under the merged order. To administer the order properly, the Marketing Service Deduction. Proper Consolidation of these funds provides market administrator must have payment to producers is assured by the an effective and equitable way of sufficient funds to cover his costs. The verification of producer weights and avoiding an interruption of services and Act specifically states that such cost of producer butterfat tests and by keeping regulation in the area. Any liabilities of administration shall be borne by producers well informed about such funds under the current orders handlers through an assessment on such marketing conditions. should be paid from the appropriate handlers. If a producer is a member of a new fund under the merged order. A principal function of the market cooperative association, these services Similarly, any obligations that are due administrator’s office is to verify the are performed by the cooperative to the several funds under the receipts and disposition of milk from all association and are paid for by the individual orders should be paid to the sources. Equity in sharing the cost of members of the cooperative association. appropriate combined fund under the administration of the order among In the case of nonmember producers, merged order. handlers will be achieved by applying however, the Act authorizes a handler to the administrative assessment on the deduct a fee from the payment to Motions To Reopen the Hearing basis of milk received from dairy nonmember producers for marketing Several parties motioned to reopen farmers as well as on other source milk services, which are provided by the the hearing. Fleming and Purity argued allocated to Class I. market administrator or an agent that there was no proposal to increase The proposed order provides that a selected by the market administrator. the price at Nashville, decrease the price cooperative shall be the handler for its There is no need for the market at Covington, decrease the price at member milk which it delivers in tank administrator to duplicate the services Montgomery, or decrease the price at trucks from the farm to pool plants of which a cooperative association Huntsville. In addition, they state that other handlers. The cooperative is the normally provides for its membership. since the hearing there has been a major handler for such milk basically for the However, since the market restructuring and reorganization of plant purpose of accounting to its individual administrator must rely on the ownership and milk supplies in the member producers. cooperative’s results to insure a proper Southeast and that the dominant The milk is producer milk at the plant accounting of milk and butterfat, it is cooperative association, Mid-America of the receiving handler and is treated essential that the cooperative Dairymen, Inc., has entered into full the same as any other direct receipt association’s performance of these supply agreements with Meadow Gold, from producers. Therefore, the pool marketing services be reviewed by the Borden, and Barber Pure Milk Company plant operator who receives the milk Secretary. A cooperative association plants, effectively requiring should pay the administrative will not be entitled to perform independent producers supplying those assessment on such milk. The marketing services until it files an plants to join the cooperative cooperative, however, would be liable application to do so with the market association or lose the market for their for the administrative assessment for administrator and demonstrates that it is milk. Fleming and Purity maintain that any amount by which the farm weights fully qualified and capable of Mid-Am knew of these changes but of the producer milk exceeds the performing these services. concealed them from the hearing weights at the plant on which the plant Section 1007.86 of the proposed order participants, who should have an operator purchased the milk from the provides the procedure by which opportunity to address them. cooperative. producers pay the cost of marketing Gold Star Dairy requested that the The market administrator must verify, services provided by the market hearing be reopened to receive by audit, the receipts and utilization of administrator. additional testimony and evidence on pool plants whether the plant operator Nonmember producers who will be the Class I price zones and the size of buys milk directly from producers or pooled under the proposed order will be the marketing area. Gold Star excepted through a cooperative association as a dispersed over a wide geographic area. to the increase in Class I price at Little handler. It is appropriate, therefore, that It is likely that the cost to the market Rock, the 17-cent reduction in price at the pool plant operator receiving such administrator of performing marketing Covington, Tennessee, and the price milk should pay the administrative services for nonmembers will be as high reductions in Louisiana, an area that is 25054 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules priced well above Gold Star’s location They were combined and modified as industrial and commercial activity in Little Rock. As far as marketing area deemed to be appropriate and interested specified in, a marketing agreement is concerned, Gold Star states in its parties were given an opportunity to upon which a hearing has been held; exception that ‘‘in large part Gold Star comment on the recommended (d) All milk and milk products does not care which order it is pooled decision. In this final decision, the handled by handlers, as defined in the on so long as its pricing and competitive exceptions to the recommended Southeast order, are in the current of price structure does not change.’’ decision were considered and justified interstate commerce or directly burden, Dairy Fresh Corporation of changes were adopted. There is no obstruct, or affect interstate commerce Greensboro, Alabama, asked for a reason to delay this proceeding for at in milk or its products; and reopened hearing because the price at least another year by reopening the (e) It is hereby found that the its plant in Hattiesburg was increased by hearing to hear facts that are generally necessary expense of the market 3 cents, while the prices at Canton, known to everyone involved with this administrator for the maintenance and Jackson, and Kosciusko, Mississippi, matter. The requests to reopen the functioning of such agency will require were reduced by 17 cents, 7 cents, and hearing, accordingly, are denied. each handler to pay, as its pro rata share 12 cents, respectively, the price at New of such expense, 5 cents per Orleans was reduced by 17 cents, and Rulings on Proposed Findings and hundredweight or such lesser amount as Conclusions the price at Baton Rouge was reduced by the Secretary may prescribe, with 10 cents. In addition, Dairy Fresh did Briefs and proposed findings and respect to milk specified in § 1007.85 of not agree that a 10-cent increase in price conclusions were filed on behalf of the aforesaid tentative marketing was necessary for its Cowarts, Alabama, certain interested parties. These briefs, agreement and the Southeast order. plant. proposed findings and conclusions, and Admittedly, there have been many the evidence in the record were Rulings on Exceptions changes in the Southeast marketing area considered in making the findings and In arriving at the findings and since the November 1993 hearing. Many conclusions set forth above. To the conclusions, and the regulatory of these changes were noted in the extent that the suggested findings and provisions of this decision, each of the recommended decision. Others have conclusions filed by interested parties exceptions received was carefully and been pointed out in this decision. Since are inconsistent with the findings and fully considered in conjunction with the these changes are well known to the conclusions set forth herein, the record evidence. To the extent that the handlers and producers in this market requests to make such findings or reach findings and conclusions and the and to the Department, there is nothing such conclusions are denied for the regulatory provisions of this decision to be gained by reopening the hearing. reasons previously stated in this are at variance with any of the With respect to the arguments of decision. exceptions, such exceptions are hereby Fleming, Purity, Gold Star, Barber, and overruled for the reasons previously General Findings Dairy Fresh that they had no notice of stated in this decision. the price changes and no opportunity to The findings and determinations address the issues, it is determined that, hereinafter set forth supplement those Marketing Agreement and Order on the contrary, they did have notice that were made when the orders were Annexed hereto and made a part and an opportunity to present evidence first issued and when they were hereof are two documents, a Marketing regarding all provisions of the merged amended. The previous findings and Agreement regulating the handling of order. Furthermore, they addressed determinations are hereby ratified and milk in the Southeast marketing area these issues in their exceptions and the confirmed, except where they may and an Order amending the order Department carefully reviewed their conflict with those set forth herein. regulating the handling of milk in the arguments, and, for the most part, made (a) The tentative marketing agreement Southeast marketing area, which have changes as a result of them. In and the Southeast order, which merges been decided upon as the detailed and particular, the price at Nashville was and amends the Georgia, Alabama-West appropriate means of effectuating the reduced from $2.60 to $2.55, the price Florida, Greater Louisiana, New foregoing conclusions. It is hereby at Covington was increased from $2.60 Orleans-Mississippi, and Central ordered that this entire decision and the to $2.70, the price at Little Rock was Arkansas orders, as hereby proposed to two documents annexed hereto be reduced from $2.77 to $2.70, the price be amended, and all of the terms and published in the Federal Register. at Cowarts, Alabama, was reduced from conditions thereof, will tend to Referendum Order to Determine $3.48 to $3.40, the price at Hattiesburg effectuate the declared policy of the Act; was reduced from $3.48 to $3.40, and (b) The parity prices of milk as Producer Approval; Determination of the price at Mobile was reduced from determined pursuant to section 2 of the Representative Period; and Designation $3.68 to $3.65. With respect to price Act are not reasonable in view of the of Referendum Agent reductions that were made in higher- price of feeds, available supplies of It is hereby directed that a referenda priced areas to improve alignment or to feeds, and other economic conditions be conducted and completed on or revise price increases that were made in which affect market supply and demand before the 30th day from the date this 1985, it is concluded that Fleming, for milk in the aforesaid marketing decision is issued, in accordance with Purity, Gold Star, and Dairy Fresh have areas, and the minimum prices specified the procedure for the conduct of no right to expect prices to be in the tentative marketing agreements referenda (7 CFR 900.300–311), to maintained that are higher than and the orders, as hereby proposed to be determine whether the issuance of the necessary simply so that these handlers amended, are such prices as will reflect order as amended and as hereby can sell their milk in higher-priced the aforesaid factors, insure a sufficient proposed to be amended, regulating the markets in Alabama, Mississippi, quantity of pure and wholesome milk, handling of milk in the Southeast Georgia, and Louisiana. and be in the public interest; marketing area is approved or favored The administrative rulemaking (c) The Southeast order will regulate by producers, as defined under the procedure has worked as it is supposed the handling of milk in the same terms of the individual orders (as to work in this proceeding. Many manner as, and will be applicable only amended and as hereby proposed to be different proposals were evaluated. to persons in the respective classes of amended), who during such Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25055 representative period were engaged in conditions thereof, will tend to 1007.13 Producer milk. the production of milk for sale within effectuate the declared policy of the Act; 1007.14 Other source milk. the aforesaid marketing areas. (2) The parity prices of milk, as 1007.15 Fluid milk product. The representative period for the determined pursuant to section 2 of the 1007.16 Fluid cream product. conduct of such referenda is hereby Act, are not reasonable in view of the 1007.17 Filled milk. determined to be March 1995. price of feeds, available supplies of 1007.18 Cooperative association. The agents of the Secretary to conduct feeds, and other economic conditions 1007.19 Commercial food processing such referenda are hereby designated to which affect market supply and demand establishment. be the market administrators of the for milk in the aforesaid marketing Handler Reports aforesaid orders. areas. The minimum prices specified in 1007.30 Reports of receipts and utilization. Determination of Producer Approval the order as hereby amended are such 1007.31 Payroll reports. and Representative Period prices as will reflect the aforesaid 1007.32 Other reports. factors, insure a sufficient quantity of March 1995 is hereby determined to pure and wholesome milk, and be in the Classification of Milk be the representative period for the public interest; and 1007.40 Classes of utilization. purpose of ascertaining whether the (3) The said orders as hereby 1007.41 Shrinkage. issuance of the merged order regulating amended regulate the handling of milk 1007.42 Classification of transfers and the handling of milk in the Southeast in the same manner as, and is applicable diversions. marketing area is approved or favored only to persons in the respective classes 1007.43 General classification rules. by producers as defined under the terms of industrial or commercial activity 1007.44 Classification of producer milk. of the individual orders (as amended specified in, a marketing agreement 1007.45 Market administrator’s reports and and as hereby proposed to be amended) upon which a hearing has been held; announcements concerning who during the representative period (4) All milk and milk products classification. were engaged in the production of milk handled by handlers, as defined in the Class Prices for sale within the aforesaid marketing order as hereby amended, are in the 1007.50 Class prices. areas. current of interstate commerce or 1007.51 Basic formula price. List of Subjects in 7 CFR Part 1007 directly burden, obstruct, or affect 1007.52 Plant location adjustments for interstate commerce in milk or its handlers. Milk marketing orders. products; and 1007.53 Announcement of class prices. Dated: May 3, 1995. (5) It is hereby found that the 1007.54 Equivalent price. Patricia A. Jensen, necessary expense of the market Uniform Prices Acting Assistant Secretary, Marketing and administrator for the maintenance and functioning of such agency will require 1007.60 Handler’s value of milk for Regulatory Programs. computing the uniform price. each handler to pay, as its pro rata share Order Amending the Order Regulating 1007.61 Computation of uniform price of such expense, 5 cents per (including weighted average price and the Handling of Milk in the Southeast hundredweight or such lesser amount as Marketing Area uniform prices for base and excess milk). the Secretary may prescribe, with 1007.62 Announcement of uniform price This order shall not become effective respect to milk specified in § 1007.85. and butterfat differential. unless and until the requirements of Order Relative to Handling Payments for Milk § 900.14 of the rules of practice and procedure governing proceedings to It is therefore ordered that on and 1007.70 Producer-settlement fund. formulate marketing agreements and after the effective date hereof, the 1007.71 Payments to the producer- marketing orders have been met. handling of milk in the Southeast settlement fund. marketing area shall be in conformity to 1007.72 Payments from the producer- Findings and Determinations and in compliance with the terms and settlement fund. The findings and determinations conditions of the following attached 1007.73 Payments to producers and to hereinafter set forth supplement those order. cooperative associations. that were made when the orders were It is proposed to revise 7 CFR part 1007.74 Butterfat differential. first issued and when they were 1007 to read as follows: 1007.75 Plant location adjustments for producers and on nonpool milk. amended. The previous findings and 1007.76 Payments by a handler operating a determinations are hereby ratified and PART 1007ÐMILK IN THE SOUTHEAST MARKETING AREA partially regulated distributing plant. confirmed, except where they may 1007.77 Adjustment of accounts. conflict with those set forth herein. 1007.78 Charges on overdue accounts. (a) Findings. A public hearing was SubpartÐOrder Regulating Handling Administrative Assessment and Marketing held upon certain proposed General Provisions amendments to the tentative marketing Service Deduction agreements and to the orders regulating Sec. 1007.85 Assessment for order 1007.1 General provisions. the handling of milk in the aforesaid administration. marketing areas. The hearing was held Definitions 1007.86 Deduction for marketing services. pursuant to the provisions of the 1007.2 Southeast marketing area. Base-Excess Plan Agricultural Marketing Agreement Act 1007.3 Route disposition. 1007.4 Plant. 1007.90 Base milk. of 1937, as amended (7 U.S.C. 601–674), 1007.91 Excess milk. and the applicable rules of practice and 1007.5 Distributing plant. 1007.6 Supply plant. 1007.92 Computation of base for each procedure (7 CFR Part 900). 1007.7 Pool plant. producer. Upon the basis of the evidence 1007.8 Nonpool plant. 1007.93 Base rules. introduced at such hearing and the 1007.9 Handler. 1007.94 Announcement of established record thereof, it is found that: 1007.10 Producer-handler. bases. (1) The said orders as hereby 1007.11 [Reserved]. Authority: 7 U.S.C. 601–674. amended, and all of the terms and 1007.12 Producer. 25056 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules

SubpartÐOrder Regulating Handling Georgia counties: Gilmer, Towns, and Mississippi counties: Claiborne, Clarke, Union. Copiah, Hinds, Jasper, Lauderdale, Newton, General Provisions Mississippi counties: Alcorn, Benton, Rankin, Scott, Simpson, Smith, and Warren. Coahoma, DeSoto, Itawamba, Lafayette, Lee, § 1007.1 General provisions. Marshall, Panola, Pontotoc, Prentiss, Zone 10 The terms, definitions, and provisions Quitman, Tate, Tippah, Tishomingo, Tunica, Alabama counties: Barbour, Butler, in Part 1000 of this chapter are hereby and Union. Choctaw, Clarke, Coffee, Conecuh, Covington, Crenshaw, Dale, Escambia, incorporated by reference and made a Zone 6 part of this order. Geneva, Henry, Houston, Monroe, Pike, and Alabama counties: Blount, Cherokee, Washington. Definitions Cullman, Etowah, Fayette, Lamar, Marion, Georgia counties: Appling, Atkinson, Walker, and Winston. Bacon, Baker, Ben Hill, Berrien, Brantley, § 1007.2 Southeast marketing area. Arkansas counties: Bradley, Calhoun, Brooks, Bryan, Calhoun, Camden, Charlton, The Southeast marketing area, Cleveland, Dallas, Desha, Drew, Hempstead, Chatham, Clay, Clinch, Coffee, Colquitt, hereinafter called the marketing area, Lincoln, Little River, Nevada, and Ouachita. Cook, Decatur, Dougherty, Early, Echols, means all territory within the bounds of Georgia counties: Bartow, Cherokee, Glynn, Grady, Irwin, Jeff Davis, Lanier, Lee, Dawson, Floyd, Gordon, Habersham, the following Alabama, Florida, Georgia, Liberty, Long, Lowndes, McIntosh, Miller, Lumpkin, Pickens, Rabun, and White. Mitchell, Pierce, Quitman, Randolph, Mississippi, Tennessee, and Arkansas Mississippi counties: Bolivar, Calhoun, Seminole, Terrell, Thomas, Tift, Turner, counties and Louisiana parishes, Chickasaw, Grenada, Monroe, Sunflower, Ware, Wayne, and Worth. including all piers, docks, and wharves Tallahatchie, and Yalobusha. Louisiana parishes: Avoyelles, Catahoula, connected therewith and all craft Zone 7 Concordia, Grant, La Salle, Natchitoches moored thereat, and all territory (south of State Highway 6 and U.S. 84), occupied by government (municipal, Alabama counties: Bibb, Calhoun, Clay, Rapides, Sabine, and Vernon. Cleburne, Jefferson, Pickens, Randolph, State, or Federal) reservations, Mississippi counties: Adams, Amite, Shelby, St. Clair, Talladega, and Tuscaloosa. Covington, Forrest, Franklin, Greene, installations, institutions, or other Arkansas counties: Ashley, Chicot, similar establishments if any part Jefferson, Jefferson Davis, Jones, Lamar, Columbia, Lafayette, Miller, and Union. Lawrence, Lincoln, Marion, Perry, Pike, thereof is within any of the listed Georgia counties: Banks, Barrow, Butts, Walthall, Wayne, and Wilkinson. counties or parishes: Carroll, Clarke, Clayton, Cobb, Coweta, De Kalb, Douglas, Elbert, Fayette, Forsyth, Zone 11 Zone 1 Franklin, Fulton, Greene, Gwinnett, Hall, Alabama counties: Baldwin and Mobile Arkansas counties: Baxter, Clay, Fulton, Haralson, Hart, Heard, Henry, Jackson, (more than 20 miles from the Mobile city Greene, Izard, Lawrence, Randolph, and Jasper, Lincoln, Madison, Morgan, Newton, hall). Sharp. Oconee, Oglethorpe, Paulding, Polk, Putnam, Florida counties: Escambia, Okaloosa, Tennessee counties: Cheatham, Clay, Rockdale, Spalding, Stephens, Taliaferro, Santa Rosa, and Walton. Davidson, Dickson, Fentress, Henry, Walton, and Wilkes. Louisiana parishes: Allen, Beauregard, East Houston, Jackson, Lake, Macon, Montgomery, Mississippi counties: Attala, Carroll, Feliciana, Evangeline, Pointe Coupee, St. Obion, Overton, Pickett, Robertson, Smith, Choctaw, Clay, Holmes, Humphreys, Leflore, Helena, St. Landry, St. Tammany, Stewart, Sumner, Trousdale, Weakley, and Lowndes, Montgomery, Noxubee, Oktibbeha, Tangipahoa, Washington, and West Wilson. Washington, Webster, and Winston. Feliciana. Zone 2 Zone 8 Mississippi counties: George, Hancock, Arkansas counties: Newton, Searcy, and Alabama counties: Chambers, Chilton, Harrison, Jackson, Pearl River, and Stone. Stone. Coosa, Greene, Hale, Lee, Perry, Sumter Zone 12 Tennessee counties: Bedford, Benton, (north of U.S. 80), and Tallapoosa. Alabama counties: Mobile (within 20 miles Bledsoe, Cannon, Carroll, Chester, Coffee, Georgia counties: Baldwin, Bibb, Burke, of the Mobile city hall). Crockett, DeKalb, Decatur, Dyer, Gibson, Columbia, Crawford, Glascock, Hancock, Louisiana parishes: Acadia, Ascension, Grundy, Henderson, Hickman, Humphreys, Harris, Jefferson, Jones, Lamar, McDuffie, Assumption, Calcasieu, Cameron, East Baton Lewis, Madison, Marshall, Maury, Perry, Meriwether, Monroe, Muscogee, Pike, Rouge, Iberia, Iberville, Jefferson, Jefferson Putnam, Rutherford, Van Buren, Warren, Richmond, Talbot, Taylor, Troup, Twiggs, Davis, Lafayette, Lafourche, Livingston, White, and Williamson. Upson, Warren, Washington, and Wilkinson. Orleans, Plaquemines, St. Bernard, St. Louisiana parishes: Bienville, Bossier, Zone 3 Caddo, Claiborne, East Carroll, Jackson, Charles, St. James, St. John the Baptist, St. Arkansas counties: Cleburne, Craighead, Lincoln, Morehouse, Ouachita, Richland, Martin, St. Mary, Terrebonne, Vermilion, and Independence, Jackson, Johnson, Mississippi, Union, Webster, and West Carroll. West Baton Rouge. Poinsett, Pope, and Van Buren. Mississippi counties: Issaquena, Kemper, § 1007.3 Route disposition. Tennessee counties: Lauderdale, Tipton, Leake, Madison, Neshoba, Sharkey, and and Haywood. Yazoo. Route disposition means a delivery to a retail or wholesale outlet (except a Zone 4 Zone 9 plant), either directly or through any Arkansas counties: Conway, Crittenden, Alabama counties: Autauga, Bullock, distribution facility (including Cross, Faulkner, Garland, Lee, Lonoke, Dallas, Elmore, Lowndes, Macon, Marengo, Monroe, Montgomery, Perry, Polk, Prairie, Monroe, Montgomery, Russell, Sumter (south disposition from a plant store, vendor or Pulaski, Saline, St. Francis, White, Woodruff, of U.S. 80), and Wilcox. vending machine) of a fluid milk and Yell. Georgia counties: Bleckley, Bulloch, product classified as Class I milk. Tennessee counties: Fayette, Franklin, Candler, Chattahoochee, Crisp, Dodge, Dooly, Packaged fluid milk products that are Giles, Hardeman, Hardin, Lawrence, Lincoln, Effingham, Emanuel, Evans, Houston, transferred to a distributing plant from McNairy, Moore, Shelby, and Wayne. Jenkins, Johnson, Laurens, Macon, Marion, a plant with route disposition in the Montgomery, Peach, Pulaski, Schley, Zone 5 marketing area and which are classified Screven, Stewart, Sumter, Tattnall, Telfair, as Class I under § 1007.40(a) shall be Alabama counties: Colbert, De Kalb, Toombs, Treutlen, Webster, Wheeler, and Franklin, Jackson, Lauderdale, Lawrence, Wilcox. considered as route disposition from the Limestone, Madison, Marshall, and Morgan. Louisiana parishes: Caldwell, De Soto, transferor plant, rather than the Arkansas counties: Arkansas, Clark, Grant, Franklin, Madison, Natchitoches (north of transferee plant, for the single purpose Hot Spring, Howard, Jefferson, Phillips, Pike, State Highway 6 and U.S. 84), Red River, of qualifying it as a pool plant under and Sevier. Tensas, and Winn. § 1007.7(a). Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25057

§ 1007.4 Plant. such plant) and handlers described in administrator if, following a written Plant means the land, buildings, § 1007.9(c) is transferred to pool request for such a revision, the market facilities, and equipment constituting a distributing plants. administrator finds that such revision is single operating unit or establishment at (c) A plant located within the necessary to assure orderly marketing which milk or milk products, including Southeast marketing area that is and efficient handling of milk in the filled milk, are received, processed, or operated by a cooperative association if marketing area. Before making such a packaged. Separate facilities without pool plant status under this paragraph is finding, the market administrator shall stationary storage tanks that are used requested for such plant by the investigate the need for the revision by only as a reload point for transferring cooperative association and during the conducting an investigation and bulk milk from one tank truck to month producer milk of members of conferring with the Director of the Dairy another or separate facilities used only such cooperative association is Division. If the investigation shows that as a distribution point for storing delivered directly from farms to pool a revision might be appropriate, the packaged fluid milk products in transit distributing plants or is transferred to market administrator shall issue a notice for route disposition shall not be a plant such plants as a fluid milk product from stating that the revision is being under this definition. the cooperative’s plant. Such deliveries, considered and inviting written data, in excess of receipts by transfer from views, and arguments. Any decision to § 1007.5 Distributing plant. pool distributing plants, must equal not revise an applicable percentage must be Distributing plant means a plant that less than 60 percent of the total issued in writing seven days before the is approved by a duly constituted producer milk of such cooperative effective date. regulatory agency for the handling of association in each of the months of July (g) The term pool plant shall not Grade A milk and at which fluid milk through November, and 40 percent of apply to the following plants: products are processed or packaged and such milk in each of the months of (1) A producer-handler plant; from which there is route disposition in December through June. The plant’s (2) An exempt plant as defined in the marketing area during the month. pool plant status shall be subject to the § 1007.8(e); following conditions: (3) A plant qualified pursuant to § 1007.6 Supply plant. (1) The plant does not qualify as a paragraph (a) of this section which is Supply plant means a plant that is pool plant under paragraphs (a) or (b) of not located within the Southeast approved by a duly constituted this section or under the provisions of marketing area, meets the pooling regulatory agency for the handling of another Federal order applicable to a requirements of another Federal order, Grade A milk and from which fluid milk distributing plant or a supply plant; and and has had greater sales in such other products are transferred during the (2) The plant is approved by a duly Federal order marketing area for three month to a pool distributing plant. constituted regulatory agency to handle consecutive months, including the Grade A milk. § 1007.7 Pool plant. current month; (d) A plant located within the (4) A plant qualified pursuant to Pool plant means a plant specified in marketing area (other than a producer- paragraph (a) of this section which is paragraphs (a), (b), (c) or (d) of this handler plant or a governmental agency located in another order’s marketing section, or a unit of plants as specified plant) that meets the qualifications area and which is required to be in paragraph (e) of this section, but described in paragraph (a) of this regulated under such other order excluding a plant specified in paragraph section regardless of its quantity of route because of its location within the other (g) of this section. The pooling disposition in any other Federal order order’s marketing area; and standards described in paragraphs (a) marketing area. (5) A plant qualified pursuant to through (c) of this section are subject to (e) Two or more plants operated by paragraph (b) of this section which also modification pursuant to paragraph (f) the same handler and that are located meets the pooling requirements of of this section: within the Southeast marketing area another Federal order and from which (a) A distributing plant from which may qualify for pool status as a unit by greater qualifying shipments are made during the month: meeting the total and in-area route to plants regulated under such other (1) Total route disposition, except disposition requirements specified in order than are made to plants regulated filled milk, is equal to 50 percent or paragraph (a) of this section and the under this part, or such plant has more of the total quantity of Grade A following additional requirements: automatic pooling status under such fluid milk products, except filled milk, (1) At least one of the plants in the other order. physically received at such plant or unit must qualify as a pool plant diverted therefrom pursuant to pursuant to paragraph (a) of this section; § 1007.8 Nonpool plant. § 1007.13; and (2) Other plants in the unit must Nonpool plant means any milk or (2) Route disposition, except filled process only Class I or Class II products filled milk receiving, manufacturing, or milk, in the marketing area is at least the and must be located in a pricing zone processing plant other than a pool plant. lesser of a daily average of 1,500 pounds providing the same or a lower Class I The following categories of nonpool or 10 percent of the total quantity of price than the price applicable at the plants are further defined as follows: fluid milk products, except filled milk, distributing plant included in the unit (a) Other order plant means a plant physically received or diverted pursuant to paragraph (e)(1) of this that is fully subject to the pricing and therefrom pursuant to § 1007.13. section; and pooling provisions of another order (b) A supply plant from which during (3) A written request to form a unit, issued pursuant to the Act. each of the months of July through or to add or remove plants from a unit, (b) Producer-handler plant means a November 60 percent (40 percent during must be filed with the market plant operated by a producer-handler as each of the months of December through administrator prior to the first day of the defined in any order (including this June) of the total quantity of Grade A month for which it is to be effective. part) issued pursuant to the Act. milk that is received during the month (f) The applicable percentages in (c) Partially regulated distributing from dairy farmers (including producer paragraphs (a) through (c) of this section plant means a nonpool plant that is not milk diverted from the plant pursuant to may be increased or decreased up to 10 an other order plant, a producer-handler § 1007.13 but excluding milk diverted to percentage points by the market plant, or an exempt plant, from which 25058 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules there is route disposition in consumer- monthly route disposition in excess of diverted shall be deemed to have been type packages or dispenser units in the 100,000 pounds per month; received at the location of the plant to marketing area during the month. (b) Receives no Class I milk from which diverted; or (d) Unregulated supply plant means a sources other than his/her own farm (d) Diverted by the operator of a pool supply plant that does not qualify as a production and pool plants; plant or cooperative association to a pool supply plant and is not an other (c) Disposes of no other source milk nonpool plant that is not a producer- order plant, a producer-handler plant, or as Class I milk; and handler plant, subject to the following an exempt plant. (d) Provides proof satisfactory to the conditions: (e) Exempt plant means a plant: market administrator that the care and (1) In any month of December through (1) Operated by a governmental management of the dairy animals and June, not less than four days’ production agency from which fluid milk products other resources necessary to produce all of the producer whose milk is diverted are distributed in the marketing area. Class I milk handled (excluding receipts is physically received at a pool plant Such plant shall be exempt from all from pool plants) and the operation of during the month; provisions of this part; or the processing and packaging business (2) In any month of July through (2) Which has monthly route are his/her personal enterprise and November, not less than ten days’ disposition of 100,000 pounds or less personal risk. production of the producer whose milk during the month. Such plant will be is diverted is physically received at a exempt from the pricing and pooling § 1007.11 [Reserved] pool plant during the month; provisions of this order, but the handler § 1007.12 Producer. will be required to file periodic reports (3) The total quantity of milk so as prescribed by the market (a) Except as provided in paragraph diverted during the month by a administrator to enable determination of (b) of this section, producer means any cooperative association shall not exceed the exempt status of such handler. person who produces milk approved by 33 percent during the months of July a duly constituted regulatory agency for through November, or 50 percent during § 1007.9 Handler. fluid consumption as Grade A milk and the months of December through June, Handler means: whose milk is: of the producer milk that the (a) Any person who operates one or (1) Received at a pool plant directly cooperative association caused to be more pool plants; from such producer; delivered to, and physically received at, (b) Any cooperative with respect to (2) Received by a handler described in pool plants during the month; producer milk which it causes to be § 1007.9(c); or (4) The operator of a pool plant that diverted pursuant to § 1007.13 for the (3) Diverted from a pool plant in is not a cooperative association may account of such cooperative association; accordance with § 1007.13. divert any milk that is not under the (c) Any cooperative association with (b) Producer shall not include: control of a cooperative association that respect to milk that it receives for its (1) A producer-handler as defined in diverts milk during the month pursuant account from the farm of a producer for any order (including this part) issued to paragraph (d) of this section. The delivery to a pool plant of another pursuant to the Act; total quantity of milk so diverted during handler in a tank truck owned and (2) Any person with respect to milk the month shall not exceed 33 percent operated by, or under the control of, produced by such person whose milk is during the months of July through such cooperative association, unless delivered to an exempt plant, excluding November, or 50 percent during the both the cooperative association and the producer milk diverted to such exempt months of December through June, of operator of the pool plant notify the plant pursuant to § 1007.13; the producer milk physically received at market administrator prior to the time (3) Any person with respect to milk such plant (or such unit of plants in the that such milk is delivered to the pool produced by such person which is case of plants that pool as a unit plant that the plant operator will be the diverted to a pool plant from an other pursuant to § 1007.7(d)) during the handler of such milk and will purchase order plant if the other order plant month; designates such person as a producer such milk on the basis of weights (5) Any milk diverted in excess of the under that order and such milk is determined from its measurement at the limits prescribed in paragraphs (d)(3) allocated to Class II or Class III farm and butterfat tests determined from and (4) of this section shall not be utilization pursuant to farm bulk tank samples. Milk for which producer milk. The diverting handler § 1007.44(a)(8)(iii) and the the cooperative association is the shall designate the dairy farmer corresponding step of § 1007.44(b); or handler pursuant to this paragraph shall deliveries that will not be producer milk (4) Any person with respect to milk be deemed to have been received by the pursuant to paragraphs (d)(3) and (4) of produced by such person which is cooperative association at the location this section. If the handler fails to make reported as diverted to an other order of the pool plant to which such milk is such designation, no milk diverted by plant if any portion of such person’s delivered; such handler shall be producer milk; milk so moved is assigned to Class I (d) Any person who operates a (6) To the extent that it would result under the provisions of such other partially regulated distributing plant; in nonpool status for the plant from order. (e) A producer-handler; which diverted, milk diverted for the (f) Any person who operates an other § 1007.13 Producer milk. account of a cooperative association order plant described in § 1007.8(a); from the pool plant of another handler (g) Any person who operates an Producer milk means the skim milk shall not be producer milk; unregulated supply plant; and and butterfat contained in milk of a (h) Any person who operates an producer that is: (7) The cooperative association shall exempt plant. (a) Received at a pool plant directly designate the dairy farm deliveries that from such producer by the operator of are not producer milk pursuant to § 1007.10 Producer-handler. the plant; paragraph (d)(6) of this section. If the Producer-handler means a person (b) Received by a handler described in cooperative association fails to make who: § 1007.9(c); such designation, no milk diverted by it (a) Operates a dairy farm and a (c) Diverted from a pool plant to the to a nonpool plant shall be producer distributing plant from which there is pool plant of another handler. Milk so milk; Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25059

(8) Diverted milk shall be priced at flavored, cultured, modified with added fluid milk products or fluid cream the location of the plant to which nonfat milk solids, sterilized, products other than those that it diverted; and concentrated (to not more than 50 received in consumer type packages. (9) The market administrator may percent total milk solids), or Producer milk diverted to commercial increase or decrease the applicable reconstituted. food processing establishments shall be percentages in paragraphs (d)(3) and (4) (b) The term fluid milk product shall subject to the same provisions relating of this section by up to 10 percentage not include: to diversions to plants, including, but points, and may increase or decrease the (1) Plain or sweetened evaporated not limited to, provisions in §§ 1007.13, 10-day and 4-day delivery requirements milk, plain or sweetened evaporated 1007.41, and 1007.52. in paragraphs (d)(1) and (2) of this skim milk, sweetened condensed milk section by 50 percent if, following a or skim milk, formulas especially Handler Reports written request for such a revision, the prepared for infant feeding or dietary § 1007.30 Reports of receipts and market administrator finds that such use that are packaged in hermetically utilization. revision is necessary to assure orderly sealed containers, any product that On or before the 5th day after the end marketing and efficient handling of milk contains by weight less than 6.5 percent of the month (if postmarked), or not in the marketing area. Before making nonfat milk solids, and whey; and later than the 7th day if the report is (2) The quantity of skim milk in any such a finding, the market administrator delivered in person to the office of the modified product specified in paragraph shall investigate the need for the market administrator, each handler shall (a) of this section that is in excess of the revision by conducting an investigation report for such month to the market quantity of skim milk in an equal and conferring with the Director of the administrator, in the detail and on forms volume of an unmodified product of the Dairy Division. If the investigation prescribed by the market administrator, same nature and butterfat content. shows that a revision might be as follows: appropriate, the market administrator § 1007.16 Fluid cream product. (a) Each handler, with respect to each shall issue a notice stating that the Fluid cream product means cream of its pool plants, shall report the revision is being considered and (other than plastic cream or frozen quantities of skim milk and butterfat inviting written data, views, and cream), including sterilized cream, or a contained in or represented by: arguments. Any decision to revise an mixture of cream and milk or skim milk (1) Receipts of producer milk, applicable percentage must be issued in containing 9 percent or more butterfat, including producer milk diverted by the writing seven days before the effective with or without the addition of other handler from the pool plant to other date. ingredients. plants; (2) Receipts of milk from handlers § 1007.14 Other source milk. § 1007.17 Filled milk. described in § 1007.9(c); Other source milk means all skim Filled milk means any combination of (3) Receipts of fluid milk products milk and butterfat contained in or nonmilk fat (or oil) with skim milk and bulk fluid cream products from represented by: (whether fresh, cultured, reconstituted, other pool plants; (a) Receipts of fluid milk products or modified by the addition of nonfat (4) Receipts of other source milk; and bulk products specified in milk solids), with or without milkfat, so (5) Inventories at the beginning and § 1007.40(b)(1) from any source other that the product (including stabilizers, end of the month of fluid milk products than producers, a handler described in emulsifiers, or flavoring) resembles milk and products specified in § 1007.9(c), or pool plants; or any other fluid milk product, and § 1007.40(b)(1); and (b) Receipts in packaged form from (6) The utilization or disposition of all contains less than 6 percent nonmilk fat other plants of products specified in milk, filled milk, and milk products (or oil). § 1007.40(b)(1); required to be reported pursuant to this (c) Products (other than fluid milk § 1007.18 Cooperative association. paragraph. products, products specified in Cooperative association means any (b) Each handler operating a partially § 1007.40(b)(1), and products produced cooperative marketing association of regulated distributing plant shall report at the plant during the same month) producers which the Secretary with respect to such plant in the same from any source which are reprocessed, determines after application by the manner as prescribed for reports converted into, or combined with association: required by paragraph (a) of this section. another product in the plant during the (a) To be qualified under the Receipts of milk that would have been month; and provisions of the Act of Congress of producer milk if the plant had been (d) Receipts of any milk product February 18, 1922, as amended, known fully regulated shall be reported in lieu (other than a fluid milk product or a as the ‘‘Capper-Volstead Act;’’ and of producer milk. Such report shall product specified in § 1007.40(b)(1)) for (b) To have full authority in the sale show also the quantity of any which the handler fails to establish a of milk of its members and be engaged reconstituted skim milk in route disposition. in making collective sales of, or disposition in the marketing area. (c) Each handler described in § 1007.9 § 1007.15 Fluid milk product. marketing, milk or milk products for its members. (b) and (c) shall report: (a) Except as provided in paragraph (1) The quantities of skim milk and (b) of this section, fluid milk product § 1007.19 Commercial food processing butterfat contained in receipts from means any milk products in fluid or establishment. producers; and frozen form containing less than 9 Commercial food processing (2) The utilization or disposition of all percent butterfat, that are in bulk or are establishment means any facility, other such receipts. packaged, distributed and intended to than a milk or filled milk plant, to (d) Each handler not specified in be used as beverages. Such products which bulk fluid milk products and paragraphs (a) through (c) of this section include, but are not limited to: Milk, bulk fluid cream products are disposed shall report with respect to its receipts skim milk, lowfat milk, milk drinks, of, or producer milk is diverted, that and utilization of milk, filled milk, and buttermilk, and filled milk, including uses such receipts as ingredients in food milk products in such manner as the any such beverage products that are products, and has no disposition of market administrator may prescribe. 25060 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules

§ 1007.31 Payroll reports. (3) Not specifically accounted for as (iii) Any milk product in dry form (a) On or before the 20th day after the Class II or Class III milk. except nonfat dry milk; end of each month, each handler (b) Class II milk shall be all skim milk (iv) Evaporated or sweetened described in § 1007.9 (a), (b), and (c) and butterfat: condensed milk in a consumer-type shall report to the market administrator (1) Disposed in the form of a fluid package and evaporated or sweetened its producer payroll for such month, in cream product or any product condensed skim milk in a consumer- detail prescribed by the market containing artificial fat, fat substitutes, type package; and administrator, showing for each or 6 percent or more nonmilk fat (or oil) (2) In inventory at the end of the producer: that resembles a fluid cream product, month of unconcentrated fluid milk (1) Such producer’s name and except as otherwise provided in products in bulk form and products address; paragraph (c) of this section; specified in paragraph (b)(1) of this (2) The total pounds of milk received (2) In packaged inventory at the end section in bulk form; from such producer, showing separately of the month of the products specified (3) In fluid milk products, products the pounds of milk received from the in paragraph (b)(1) of this section and in specified in paragraph (b)(1) of this producer on each delivery day; bulk concentrated fluid milk products section, and products processed by the (3) The average butterfat content of in inventory at the end of the month; disposing handler that are specified in such milk; and (3) In bulk fluid milk products and paragraphs (b)(4)(i) through (iv) of this (4) The price per hundredweight, the bulk fluid cream products disposed of section, that are disposed of by a gross amount due, the amount and or diverted to a commercial food handler for animal feed; nature of any deduction, and the net processing establishment if the market (4) In fluid milk products, products amount paid. administrator is permitted to audit the specified in paragraph (b)(1) of this (b) Each handler operating a partially records of the commercial food regulated distributing plant who elects section, and products processed by the processing establishment for the disposing handler that are specified in to make payment pursuant to purpose of verification. Otherwise, such § 1007.76(b) shall report for each dairy paragraphs (b)(4) (i) through (iv) of this uses shall be Class I; section, that are dumped by a handler. farmer who would have been a producer (4) Used to produce: The market administrator may require if the plant had been fully regulated in (i) Cottage cheese, lowfat cottage notification by the handler of such the same manner as prescribed for cheese, dry curd cottage cheese, ricotta dumping in advance for the purpose of reports required by paragraph (a) of this cheese, pot cheese, Creole cheese, and having the opportunity to verify such section. any similar soft, high-moisture cheese disposition. In any case, classification resembling cottage cheese in form or § 1007.32 Other reports. under this paragraph requires a handler use; to maintain adequate records of such (a) Each handler described in § 1007.9 (ii) Milkshake and ice milk mixes (or use. If advance notification of such (a), (b), and (c) shall report to the market bases), frozen desserts, and frozen dumping is not possible, or if the market administrator on or before the 7th day dessert mixes distributed in one-quart administrator so requires, the handler after the end of each month of February containers or larger and intended to be must notify the market administrator on through May the aggregate quantity of used in soft or semi-solid form; base milk received from producers (iii) Aerated cream, frozen cream, sour the next business day following such during the month, and on or before the cream, sour half-and-half, sour cream use; 20th day after the end of each month of mixtures containing nonmilk items, (5) In fluid milk products and February through May the pounds of yogurt, and any other semi-solid products specified in paragraph (b)(1) of base milk received from each producer product resembling a Class II product; this section that are destroyed or lost by during the month. In the case of milk (iv) Eggnog, custards, puddings, a handler in a vehicular accident, flood, diverted to another plant, the handler pancake mixes, buttermilk biscuit fire, or in a similar occurrence beyond shall also report the pounds of base milk mixes, coatings, batter, and similar the handler’s control, to the extent that of each producer assigned to the products; the quantities destroyed or lost can be divertee plant. (v) Formulas especially prepared for verified from records satisfactory to the (b) In addition to the reports required infant feeding or dietary use (meal market administrator; pursuant to paragraph (a) of this section replacement) that are packaged in (6) In skim milk in any modified fluid and §§ 1007.30 and 1007.31, each hermetically sealed containers; milk product or in any product handler shall report such information as (vi) Candy, soup, bakery products and specified in paragraph (b)(1) of this the market administrator deems other prepared foods which are section that is in excess of the quantity necessary to verify or establish each processed for general distribution to the of skim milk in such product that was handler’s obligation under the order. public, and intermediate products, included within the fluid milk product definition pursuant to § 1007.15 and the Classification of Milk including sweetened condensed milk, to be used in processing such prepared fluid cream product definition pursuant § 1007.40 Classes of utilization. food products; and to § 1007.16; and Except as provided in § 1007.42, all (vii) Any product not otherwise (7) In shrinkage assigned pursuant to skim milk and butterfat required to be specified in this section. § 1007.41(a) to the receipts specified in reported pursuant to § 1007.30 shall be (c) Class III milk shall be all skim milk § 1007.41(a)(2) and in shrinkage classified as follows: and butterfat: specified in § 1007.41 (b) and (c). (a) Class I milk shall be all skim milk (1) Used to produce: (d) Class III–A milk shall be all skim and butterfat: (i) Cream cheese and other spreadable milk and butterfat used to produce (1) Disposed of in the form of a fluid cheeses, and hard cheese of types that nonfat dry milk. milk product, except as otherwise may be shredded, grated, or crumbled, provided in paragraphs (b) and (c) of and are not included in paragraph § 1007.41 Shrinkage. this section; (b)(4)(i) of this section; For the purposes of classifying all (2) In packaged fluid milk products in (ii) Butter, plastic cream, anhydrous skim milk and butterfat to be reported inventory at the end of the month; and milkfat, and butteroil; by a handler pursuant to § 1007.30, the Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25061 market administrator shall determine that is not in excess of the respective (b) Transfers and diversions to other the following: amount of skim milk and butterfat to order plants. Skim milk or butterfat (a) The pro rata assignment of which percentages are applied in transferred or diverted in the form of a shrinkage of skim milk and butterfat, paragraphs (b)(1), (2), (4), (5), and (6) of fluid milk product or transferred in the respectively, at each pool plant to the this section; and form of a bulk fluid cream product from respective quantities of skim milk and (c) The quantity of skim milk and a pool plant to an other order plant shall butterfat: butterfat, respectively, in shrinkage of be classified in the following manner. (1) In the receipts specified in milk from producers for which a Such classification shall apply only to paragraphs (b) (1) through (6) of this cooperative association is the handler the skim milk or butterfat that is in section on which shrinkage is allowed pursuant to § 1007.9 (b) or (c), but not excess of any receipts at the pool plant pursuant to such paragraph; and in excess of 0.5 percent of the skim milk from the other plant of skim milk and (2) In other source milk not specified and butterfat, respectively, in such milk. butterfat, respectively, in fluid milk in paragraphs (b) (1) through (6) of this If the operator of the plant to which the products and bulk fluid cream products, section which was received in the form milk is delivered purchases such milk respectively, that are in the same of a bulk fluid milk product or a bulk on the basis of weights determined from category as described in paragraph fluid cream product; its measurement at the farm and (b)(1), (2), or (3) of this section. (b) The shrinkage of skim milk and butterfat tests determined from farm (1) If transferred as packaged fluid butterfat, respectively, assigned bulk tank samples, the applicable milk products, classification shall be in pursuant to paragraph (a) of this section percentage under this paragraph for the the classes to which allocated as a fluid to the receipts specified in paragraph cooperative association shall be zero. milk product under the other order; (a)(1) of this section that is not in excess (2) If transferred in bulk form, of: § 1007.42 Classification of transfers and classification shall be in the classes to (1) Two percent of the skim milk and diversions. which allocated under the other order butterfat, respectively, in producer milk (a) Transfers and diversions to pool (including allocation under the (excluding milk diverted by the plant plants. Skim milk or butterfat conditions set forth in paragraph (b)(3) operator to another plant); transferred or diverted in the form of a of this section); (2) Plus 1.5 percent of the skim milk fluid milk product or transferred in the (3) If the operators of both plants so and butterfat, respectively, in milk form of a bulk fluid cream product from request in their reports of receipts and received from a handler described in a pool plant to another pool plant shall utilization filed with their respective § 1007.9(c), except that if the operator of be classified as Class I milk unless the market administrators, transfers or the plant to which the milk is delivered operators of both plants request the diversions in bulk form shall be purchased such milk on the basis of same classification in another class. In classified as Class II or Class III milk to weights determined from its either case, the classification shall be the extent of such utilization available measurement at the farm and butterfat subject to the following conditions: for such classification pursuant to the tests determined from farm bulk tank (1) The skim milk or butterfat allocation provisions of the other order; samples, the applicable percentage shall (4) If information concerning the classified in each class shall be limited be 2 percent; classes to which such transfers or to the amount of skim milk and (3) Plus 0.5 percent of the skim milk diversions were allocated under the butterfat, respectively, remaining in and butterfat, respectively, in producer other order is not available to the market such class at the transferee-plant after milk diverted from such plant by the administrator for the purpose of the computations pursuant to plant operator to another plant, except establishing classification under this § 1007.44(a)(12) and the corresponding that if the operator of the plant to which paragraph, classification shall be Class I step of § 1007.44(b). The amount of skim the milk is delivered purchased such subject to adjustment when such milk or butterfat classified in each class milk on the basis of weights determined information is available; shall include the assigned utilization of from its measurement at the farm and (5) For purposes of this paragraph, if skim milk or butterfat in transfers of butterfat tests determined from farm the other order provides for a different concentrated fluid milk products. bulk tank samples, the applicable number of classes of utilization than is percentage shall be zero; (2) If the transferor-plant received provided for under this part, skim milk (4) Plus 1.5 percent of the skim milk during the month other source milk to or butterfat allocated to the class and butterfat, respectively, in bulk fluid be allocated pursuant to § 1007.44(a)(7) consisting primarily of fluid milk milk products received by transfer from or the corresponding step of products shall be classified as Class I other pool plants; § 1007.44(b), the skim milk or butterfat milk, and skim milk or butterfat (5) Plus 1.5 percent of the skim milk so transferred shall be classified so as to allocated to the other classes shall be and butterfat, respectively, in bulk fluid allocate the least possible Class I classified as Class III milk; and milk products received by transfer from utilization to such other source milk; (6) If the form in which any fluid milk other order plants, excluding the and product that is transferred to an other quantity for which Class II or Class III (3) If the transferor-plant received order plant is not defined as a fluid milk classification is requested by the during the month other source milk to product under such other order, handler; and be allocated pursuant to § 1007.44(a) classification shall be in accordance (6) Plus 1.5 percent of the skim milk (11) or (12) or the corresponding steps with the provisions of § 1007.40. and butterfat, respectively, in bulk fluid of § 1007.44(b), the skim milk or (c) Transfers and diversions to milk products received by transfer from butterfat so transferred, up to the total producer-handlers and to exempt unregulated supply plants, excluding of the skim milk and butterfat, plants. Skim milk or butterfat that is the quantity for which Class II or Class respectively, in such receipts of other transferred or diverted from a pool plant III classification is requested by the source milk, shall not be classified as to a producer-handler under another handler; and Class I milk to a greater extent than Federal order or to an exempt plant (7) Less 1.5 percent of the skim milk would be the case if the other source shall be classified: and butterfat, respectively, in bulk fluid milk had been received at the transferee- (1) As Class I milk if transferred or milk products transferred to other plants plant. diverted to a producer-handler; 25062 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules

(2) As Class I milk if transferred to an (C) Pro rata to receipts of bulk fluid fully regulated under any Federal milk exempt plant in the form of a packaged milk products at such nonpool plant order shall be classified on the basis of fluid milk product; from pool plants; and the second plant’s utilization using the (3) In accordance with the utilization (D) Pro rata to any remaining same assignment priorities at the second assigned to it by the market unassigned receipts of bulk fluid milk plant that are set forth in this paragraph. administrator if transferred or diverted products at such nonpool plant from (e) Transfers by a handler described in the form of a bulk fluid milk product other order plants; in § 1007.9(c) to pool plants. Skim milk or a bulk fluid cream product to an (iii) Any remaining Class I disposition and butterfat transferred in the form of exempt plant. For this purpose, the of packaged fluid milk products from bulk milk by a handler described in transferee’s utilization of skim milk and the nonpool plant shall be assigned to § 1007.9(c) to another handler’s pool butterfat in each class, in series the extent possible pro rata to any plant shall be classified pursuant to beginning with Class III, shall be remaining unassigned receipts of § 1007.44 pro rata with producer milk assigned to the extent possible to its packaged fluid milk products at such received at the transferee-handler’s receipts of skim milk and butterfat, nonpool plant from pool plants and plant. other order plants; respectively, in bulk fluid cream § 1007.43 General classification rules. products, pro rata to each source. (iv) Transfers of bulk fluid milk products from the nonpool plant to a In determining the classification of (d) Transfers and diversions to other plant regulated under any Federal milk producer milk pursuant to § 1007.44, nonpool plants. Skim milk or butterfat order, to the extent that such transfers the following rules shall apply: transferred or diverted in the following to the regulated plant exceed receipts of (a) Each month the market forms from a pool plant to a nonpool fluid milk products from such plant and administrator shall correct for plant that is not an other order plant, a are allocated to Class I at the transferee- mathematical and other obvious errors producer-handler plant, or an exempt plant, shall be classified to the extent all reports filed pursuant to § 1007.30 plant shall be classified: possible in the following sequence: and shall compute separately for each (1) As Class I milk, if transferred in (A) Pro rata to receipts of fluid milk pool plant, and for each cooperative the form of a packaged fluid milk products at such nonpool plant from association with respect to milk for product; and pool plants; and which it is the handler pursuant to (2) As Class I milk, if transferred or (B) Pro rata to any remaining § 1007.9 (b) or (c) that was not received diverted in the form of a bulk fluid milk unassigned receipts of fluid milk at a pool plant, the pounds of skim milk product or transferred in the form of a products at such nonpool plant from and butterfat, respectively, in each class bulk fluid cream product, unless the other order plants; in accordance with §§ 1007.40, 1007.41, following conditions apply: (v) Any remaining unassigned Class I and 1007.42. The combined pounds of (i) If the conditions described in disposition from the nonpool plant shall skim milk and butterfat so determined paragraphs (d)(2)(i) (A) and (B) of this be assigned to the extent possible in the in each class for a handler described in section are met, transfers or diversions following sequence: § 1007.9 (b) or (c) shall be such in bulk form shall be classified on the (A) To such nonpool plant’s receipts handler’s classification of producer basis of the assignment of the nonpool from dairy farmers who the market milk; plant’s utilization to its receipts as set administrator determines constitute (b) If any of the water contained in the forth in paragraphs (d)(2) (ii) through regular sources of Grade A milk for such milk from which a product is made is (viii) of this section: nonpool plant; and removed before the product is utilized (A) The transferor-handler or divertor- (B) To such nonpool plant’s receipts or disposed of by the handler, the handler claims such classification in of Grade A milk from plants not fully pounds of skim milk in such product such handler’s report of receipts and regulated under any Federal milk order that are to be considered under this part utilization filed pursuant § 1007.30 for which the market administrator as used or disposed of by the handler the month within which such determines constitute regular sources of shall be an amount equivalent to the transaction occurred; and Grade A milk for such nonpool plant; nonfat milk solids contained in such (vi) Any remaining unassigned product plus all of the water originally (B) The nonpool plant operator receipts of bulk fluid milk products at associated with such solids; maintains books and records showing the nonpool plant from pool plants and (c) The classification of producer milk the utilization of all skim milk and other order plants shall be assigned, pro for which a cooperative association is butterfat received at such plant which rata among such plants, to the extent the handler pursuant to § 1007.9 (b) or are made available for verification possible first to any remaining Class I (c) shall be determined separately from purposes if requested by the market utilization, then to Class II utilization, the operations of any pool plant administrator; and then to Class III utilization at such operated by such cooperative (ii) Route disposition in the marketing nonpool plant; association; area of each Federal order from the (vii) Receipts of bulk fluid cream (d) Skim milk and butterfat contained nonpool plant and transfers of packaged products at the nonpool plant from pool in receipts of bulk concentrated fluid fluid milk products from such nonpool plants and other order plants shall be milk and nonfluid milk products that plant to plants fully regulated assigned, pro rata among such plants, to are reconstituted for fluid use shall be thereunder shall be assigned to the the extent possible first to any assigned to Class I use, up to the extent possible in the following remaining Class II utilization, then to reconstituted portion of labeled sequence: any remaining Class III utilization, and reconstituted fluid milk products, on a (A) Pro rata to receipts of packaged then to Class I utilization at such pro rata basis (except for any Class I use fluid milk products at such nonpool nonpool plant; and of specific concentrated receipts that is plants from pool plants; (viii) In determining the nonpool established by the handler) prior to any (B) Pro rata to any remaining plant’s utilization for purposes of this assignment under § 1007.44. Any unassigned receipts of packaged fluid paragraph, any fluid milk products and remaining skim milk and butterfat in milk products at such nonpool plants bulk fluid cream products transferred concentrated receipts shall be assigned from other order plants; from such nonpool plant to a plant not to uses under § 1007.44 on a pro rata Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25063 basis, unless a specific use of such (5) Subtract from the remaining remaining in Class II and Class III, in receipts is established by the handler; pounds of skim milk in Class II the sequence beginning with Class III: and pounds of skim milk in products (i) The pounds of skim milk in (e) Class III–A milk shall be allocated specified in § 1007.40(b)(1) in packaged receipts of fluid milk products from an in combination with Class III milk and form and in bulk concentrated fluid unregulated supply plant that were not the quantity of producer milk eligible to milk products that were in inventory at subtracted pursuant to paragraphs be priced in Class III–A shall be the beginning of the month, but not in (a)(2)(i) and (7)(v) of this section for determined by prorating receipts from excess of the pounds of skim milk which the handler requests a pool sources to Class III–A use on the remaining in Class II. This paragraph classification other than Class I, but not basis of the quantity of total receipts of shall apply only if the pool plant was in excess of the pounds of skim milk bulk fluid milk products allocated to subject to the provisions of this remaining in Class II and Class III Class III use at the plant. paragraph or comparable provisions of combined; another Federal milk order in the (ii) The pounds of skim milk in § 1007.44 Classification of producer milk. immediately preceding month; receipts of fluid milk products from an For each month the market (6) Subtract from the remaining unregulated supply plant that were not administrator shall determine for each pounds of skim milk in Class II the subtracted pursuant to paragraphs handler described in § 1007.9(a) for each pounds of skim milk in bulk (a)(2)(i), (7)(v), and (8)(i) of this section pool plant of the handler separately the concentrated fluid milk products and in which are in excess of the pounds of classification of producer milk and milk other source milk (except other source skim milk determined pursuant to received from a handler described in milk received in the form of an paragraphs (a)(8)(ii) (A) through (C) of § 1007.9(c), by allocating the handler’s unconcentrated fluid milk product or a this section. Should the pounds of skim receipts of skim milk and butterfat to fluid cream product) that is used to milk to be subtracted from Class II and the utilization of such receipts by such produce, or added to, any product Class III combined exceed the pounds of handler as follows: specified in § 1007.40(b) (excluding the skim milk remaining in such classes, the (a) Skim milk shall be allocated in the quantity of such skim milk that was pounds of skim milk in Class II and following manner: classified as Class III milk pursuant to Class III combined shall be increased (1) Subtract from the total pounds of § 1007.40(c)(6)), but not in excess of the (increasing as necessary Class III and skim milk in Class III the pounds of pounds of skim milk remaining in Class then Class II to the extent of available utilization in such classes at the nearest skim milk in shrinkage specified in II; other pool plant of the handler, and § 1007.41(b); (7) Subtract in the order specified then at each successively more distant (2) Subtract from the total pounds of below from the pounds of skim milk pool plant of the handler) by an amount skim milk in Class I the pounds of skim remaining in each class, in series equal to such excess quantity to be milk in: beginning with Class III, the pounds of subtracted, and the pounds of skim milk (i) Receipts of packaged fluid milk skim milk in each of the following: in Class I shall be decreased a like products from an unregulated supply (i) Bulk concentrated fluid milk amount. In such case, the pounds of plant to the extent that an equivalent products and other source milk (except skim milk remaining in each class at amount of skim milk disposed of to other source milk received in the form this allocation step at the handler’s such plant by handlers fully regulated of an unconcentrated fluid milk other pool plants shall be adjusted in under any Federal milk order is product) and, if paragraph (a)(5) of this the reverse direction by a like amount; classified and priced as Class I milk and section applies, packaged inventory at (A) Multiply by 1.25 the sum of the is not used as an offset for any other the beginning of the month of products pounds of skim milk remaining in Class payment obligation under any order; specified in § 1007.40(b)(1) that were I at this allocation step at all pool plants (ii) Packaged fluid milk products in not subtracted pursuant to paragraphs of the handler (excluding any inventory at the beginning of the month. (a)(4), (a)(5), and (a)(6) of this section; duplication of Class I utilization This paragraph shall apply only if the (ii) Receipts of fluid milk products resulting from reported Class I transfers pool plant was subject to the provisions (except filled milk) for which Grade A between pool plants of the handler); of this paragraph or comparable certification is not established; (B) Subtract from the above result the provisions of another Federal milk order (iii) Receipts of fluid milk products sum of the pounds of skim milk in in the immediately preceding month; from unidentified sources; receipts at all pool plants of the handler (3) Subtract from the pounds of skim (iv) Receipts of fluid milk products of producer milk, milk from a handler milk remaining in each class the pounds from a producer-handler as defined described in § 1007.9(c), fluid milk of skim milk in fluid milk products under any Federal milk order and from products from pool plants of other received in packaged form from an other an exempt distributing plant; handlers, and bulk fluid milk products order plant, except that to be subtracted (v) Receipts of reconstituted skim from other order plants that were not pursuant to paragraph (a)(7)(vi) of this milk in filled milk from an unregulated subtracted pursuant to paragraph section, as follows: supply plant that were not subtracted (a)(7)(vi) of this section; and (i) From Class III milk, the lesser of pursuant to paragraph (a)(2)(i) of this (C) Multiply any plus quantity the pounds remaining or 2 percent of section; and resulting above by the percentage that such receipts; and (vi) Receipts of reconstituted skim the receipts of skim milk in fluid milk (ii) From Class I milk, the remainder milk in filled milk from an other order products from unregulated supply of such receipts; plant that is fully regulated under any plants that remain at this pool plant is (4) Subtract from the pounds of skim Federal milk order providing for of all such receipts remaining at this milk in Class II the pounds of skim milk individual-handler pooling, to the allocation step at all pool plants of the in products specified in § 1007.40(b)(1) extent that reconstituted skim milk is handler; and that were received in packaged form allocated to Class I at the transferor- (iii) The pounds of skim milk in from other plants, but not in excess of plant; receipts of bulk fluid milk products the pounds of skim milk remaining in (8) Subtract in the order specified from another order plant that are in Class II; below from the pounds of skim milk excess of bulk fluid milk products 25064 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules transferred or diverted to such plant and (ii) Should the pounds of skim milk from Class II and Class III combined that that were not subtracted pursuant to to be subtracted from Class I pursuant exceeds the pounds of skim milk paragraph (a)(7)(vi) of this section, if to paragraph (a)(11) of this section remaining in such classes, the pounds of Class II or Class III classification is exceed the pounds of skim milk skim milk in Class II and Class III requested by the operator of the other remaining in such class, the pounds of combined shall be increased (increasing order plant and the handler, but not in skim milk in Class I shall be increased as necessary Class III and then Class II excess of the pounds of skim milk by an amount equal to such excess to the extent of available utilization in remaining in Class II and Class III quantity to be subtracted, and the such classes at the nearest other pool combined; pounds of skim milk in Class II and plant of the handler, and then at each (9) Subtract from the pounds of skim Class III combined shall be decreased by successively more distant pool plant of milk remaining in each class, in series a like amount (decreasing as necessary the handler) by an amount equal to such beginning with Class III, the pounds of Class III then Class II). In such case, the excess quantity to be subtracted, and the skim milk in fluid milk products and pounds of skim milk remaining in each pounds of skim milk in Class I shall be products specified in § 1007.40(b)(1) in class at this allocation step at the decreased by a like amount. In such inventory at the beginning of the month handler’s other pool plants shall be case, the pounds of skim milk remaining that were not subtracted pursuant to adjusted in the reverse direction by a in each class at this allocation step at paragraphs (a)(2)(ii), (a)(5), and (a)(7)(i) like amount, beginning with the nearest the handler’s other pool plants shall be of this section; plant at which Class I utilization is adjusted in the reverse direction by a (10) Add to the remaining pounds of available; like amount; and skim milk in Class III the pounds of (12) Subtract in the manner specified (iv) Except as provided in paragraph skim milk subtracted pursuant to below from the pounds of skim milk (a)(12)(ii) of this section, should the paragraph (a)(1) of this section; remaining in each class the pounds of computations pursuant to paragraph (11) Subject to the provisions of skim milk in receipts of bulk fluid milk (a)(12) (i) or (ii) of this section result in paragraphs (a)(11) (i) and (ii) of this products from an other order plant that a quantity of skim milk to be subtracted section, subtract from the pounds of are in excess of bulk fluid milk products from Class I that exceeds the pounds of skim milk remaining in each class at the transferred or diverted to such plant that skim milk remaining in such class, the plant, pro rata to the total pounds of were not subtracted pursuant to pounds of skim milk in Class I shall be skim milk remaining in Class I and in paragraphs (a)(7)(vi) and (8)(iii) of this increased by an amount equal to such Class II and Class III combined at this section: excess quantity to be subtracted, and the allocation step at all pool plants of the (i) Subject to the provisions of pounds of skim milk in Class II and handler (excluding any duplication of paragraphs (a)(12) (ii), (iii) and (iv) of Class III combined shall be decreased by utilization in each class resulting from this section, such subtraction shall be a like amount (decreasing as necessary transfers between pool plants of the pro rata to the pounds of skim milk in Class III and then Class II). In such case handler), with the quantity prorated to Class I and in Class II and Class III the pounds of skim milk remaining in Class II and Class III combined being combined, with the quantity prorated to each class at this allocation step at the subtracted first from Class III and then Class II and Class III combined being handler’s other pool plants shall be from Class II, the pounds of skim milk subtracted first from Class III and then adjusted in the reverse direction by a in receipts of fluid milk products from from Class II, with respect to whichever like amount beginning with the nearest an unregulated supply plant that were of the following quantities represents plant at which Class I utilization is not subtracted pursuant to paragraphs the lower proportion of Class I milk: available; (a)(2)(i), (a)(7)(v), (a)(8)(i), and (a)(8)(ii) (A) The estimated utilization of skim (13) Subtract from the pounds of skim of this section and that were not offset milk of all handlers in each class as milk remaining in each class the pounds by transfers or diversions of fluid milk announced for the month pursuant to of skim milk in receipts of fluid milk products to the same unregulated § 1007.45(a); or products and bulk fluid cream products supply plant from which fluid milk (B) The total pounds of skim milk from another pool plant according to the products to be allocated at this step remaining in each class at this classification of such products pursuant were received: allocation step at all pool plants of the to § 1007.42(a); and (i) Should the pounds of skim milk to handler (excluding any duplication of (14) If the total pounds of skim milk be subtracted from Class II and Class III utilization in each class resulting from remaining in all classes exceed the combined pursuant to paragraph (a)(11) transfers between pool plants of the pounds of skim milk in producer milk of this section exceed the pounds of handler); and milk received from a handler skim milk remaining in such classes, the (ii) Should the proration pursuant to described in § 1007.9(c), subtract such pounds of skim milk in Class II and paragraph (a)(12)(i) of this section result excess from the pounds of skim milk Class III combined shall be increased in the total pounds of skim milk at all remaining in each class in series (increasing as necessary Class III and pool plants of the handler that are to be beginning with Class III. Any amount so then Class II to the extent of available subtracted at this allocation step from subtracted shall be known as ‘‘overage’’; utilization in such classes at the nearest Class II and Class III combined (b) Butterfat shall be allocated in other pool plant of the handler, and exceeding the pounds of skim milk accordance with the procedure outlined then at each successively more distant remaining in Class II and Class III at all for skim milk in paragraph (a) of this pool plant of the handler) by an amount such plants, the pounds of such excess section; and equal to such excess quantity to be shall be subtracted from the pounds (c) The quantity of producer milk and subtracted, and the pounds of skim milk remaining in Class I after such proration milk received from a handler described in Class I shall be decreased a like at the pool plants at which such other in § 1007.9(c) in each class shall be the amount. In such case, the pounds of source milk was received; combined pounds of skim milk and skim milk remaining in each class at (iii) Except as provided in paragraph butterfat remaining in each class after this allocation step at the handler’s (a)(12)(ii) of this section, should the the computations pursuant to paragraph other pool plants shall be adjusted in computations pursuant to paragraph (a)(14) of this section and the the reverse direction by a like amount; (a)(12) (i) or (ii) of this section result in corresponding step of paragraph (b) of and a quantity of skim milk to be subtracted this section. Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25065

§ 1007.45 Market administrator's reports (b) The Class II price shall be the basic (2) Nonfat dry milk price. Nonfat dry and announcements concerning formula price for the second preceding milk price means the simple average for classification. month plus $.30. the month of the Western Nonfat Dry The market administrator shall make (c) The Class III price shall be the Milk Low/Medium Heat price, as the following reports and basic formula price for the month. reported by the Department. announcements concerning (d) The Class III-A price for the month (3) Dry buttermilk price. Dry classification: shall be the average Central States buttermilk price means the simple (a) Whenever required for the purpose nonfat dry milk price for the month, as average for the month of the Western of allocating receipts from other order reported by the Department, less 12.5 Dry Buttermilk price, as reported by the plants pursuant to § 1007.44(a)(12) and cents, times an amount computed by Department. the corresponding step of § 1007.44(b), subtracting from 9 an amount calculated by dividing 0.4 by such nonfat dry milk (4) Cheddar cheese price. Cheddar estimate and publicly announce the cheese price means the simple average utilization (to the nearest whole price, plus the butterfat differential value per hundredweight of 3.5 percent for the month of the National Cheese percentage) in each class during the Exchange 40-pound block Cheddar month of skim milk and butterfat, milk and rounded to the nearest cent, and subject to the adjustments set forth cheese price, as reported by the respectively, in producer milk of all Department. handlers. Such estimate shall be based in paragraph (c) of this section for the upon the most current available data applicable month. (5) Grade A butter price. Grade A and shall be final for such purpose. butter price means the simple average § 1007.51 Basic formula price. for the month of the Chicago Mercantile (b) Report to the market administrator The basic formula price shall be the Exchange Grade A butter price, as of the other order, as soon as possible preceding month’s average pay price for reported by the Department. after the report of receipts and manufacturing grade milk in Minnesota (c) Determine the amounts by which utilization for the month is received and Wisconsin using the ‘‘base month’’ the gross value per hundredweight of from a handler who has received fluid series, as reported by the Department, milk used to manufacture butter-nonfat milk products or bulk fluid cream adjusted to a 3.5 percent butterfat basis dry milk and the gross value per products from another order plant, the using the butterfat differential for the hundredweight of milk used to class to which such receipts are preceding month computed pursuant to manufacture Cheddar cheese for the allocated pursuant to §§ 1007.43(d) and § 1007.74 and rounded to the nearest current month exceed or are less than 1007.44 on the basis of such report cent, plus or minus the change in gross the respective gross values for the (including any reclassification of value yielded by the butter-nonfat dry preceding month. inventories of bulk concentrated fluid milk and Cheddar cheese product price milk products), and thereafter, any formula computed pursuant to (d) Compute weighting factors to be change in such allocation required to paragraphs (a) through (e) of this applied to the changes in gross values correct errors disclosed in the section. determined pursuant to paragraph (c) of verification of such report. (a) The gross values of per this section by determining the relative (c) Furnish each handler operating a hundredweight of milk used to proportion that the data included in pool plant who has shipped fluid milk manufacture butter-nonfat dry milk and each of the following paragraphs is of products or bulk fluid cream products to Cheddar cheese shall be computed, the total of the data represented in another order plant the class to which using price data determined pursuant to paragraphs (d)(1) and (d)(2) of this such shipments were allocated by the paragraph (b) of this section and annual section: market administrator of the other order yield factors, for the preceding month (1) Combine the total nonfat dry milk on the basis of the report by the and separately for the current month as production for the States of Minnesota receiving handler, and, as necessary, follows: and Wisconsin, as reported by the any changes in such allocation arising (1) The gross value of milk used to Department, for the most recent from the verification of such report. manufacture butter-nonfat dry milk preceding period, and divide by the (d) On or before the 12th day after the shall be the sum of the following annual yield factor for nonfat dry milk, end of each month, report to each computations: 8.07, to determine the quantity (in cooperative association which so (i) Multiply the Grade AA butter price hundredweights) of milk used in the requests, the percentage of producer by 4.27; production of butter-nonfat dry milk; milk delivered by members of such (ii) Multiply the nonfat dry milk price and by 8.07; and association that was used in each class (2) Combine the total American (iii) Multiply the dry buttermilk price by each handler receiving such milk. cheese production for the States of For the purpose of this report the milk by 0.42. (2) The gross value of milk used to Minnesota and Wisconsin, as reported so received shall be prorated to each by the Department, for the most recent class in accordance with the total manufacture Cheddar cheese shall be the sum of the following computations: preceding period, and divide by the utilization of producer milk by such annual yield factor for Cheddar cheese, handler. (i) Multiply the Cheddar cheese price by 9.87; and 9.87, to determine the quantity (in Class Prices (ii) Multiply the Grade A butter price hundredweights) of milk used in the production of American cheese. § 1007.50 Class prices. by 0.238. (b) The following product prices shall (e) Compute a weighted average of the Subject to the provisions of § 1007.52, be used pursuant to paragraph (a) of this changes in gross values per the class prices for the month per section: hundredweight of milk determined hundredweight of milk containing 3.5% (1) Grade AA butter price. Grade AA pursuant to paragraph (c) of this section butterfat shall be as follows: butter price means the simple average in accordance with the relative (a) The Class I price shall be the basic for the month of the Chicago Mercantile proportions of milk determined formula price for the second preceding Exchange, Grade AA butter price, as pursuant to paragraph (d) of this month plus $3.08. reported by the Department. section. 25066 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules

§ 1007.52 Plant location adjustments for Class I price applies and which are (5) Location adjustment credit for handlers. classified as Class I milk, the Class I butterfat shall be determined in (a) For milk received at a plant from price shall be the Class I price at the accordance with the procedure outlined producers or a handler described in transferee-plant subject to a location for skim milk in paragraphs (b)(1) § 1007.9(c) and which is classified as adjustment credit for the transferor- through (4) of this section. Class I milk without movement in bulk plant which shall be determined by the (c) The market administrator shall form to a pool distributing plant at market administrator for skim milk and determine and publicly announce the which a higher Class I price applies, the butterfat, respectively, as follows: zone location of each plant of each price specified in § 1007.50(a) shall be (1) Subtract from the pounds of skim handler. The market administrator shall adjusted by the amount stated in milk remaining in Class I at the notify the handler on or before the first paragraphs (a)(1) through (6) of this transferee-plant after the computations day of any month in which a change in section for the location of such plant: pursuant to § 1007.44(a)(12) plus the a plant location zone will apply. (1) For a plant located within one of pounds of skim milk in receipts of (d) The Class I price applicable to the zones set forth in § 1007.2, the concentrated fluid milk products from other source milk shall be adjusted at adjustment (cents per hundredweight) other pool plants that are assigned to the rates set forth in paragraph (a) of this shall be as follows: Class I use, an amount equal to: section, except that the adjusted Class I Zone 1 ...... Minus 53 (i) The pounds of skim milk in price shall not be less than the Class III Zone 2 ...... Minus 48 receipts of milk at the transferee-plant price. Zone 3 ...... Minus 38 from producers and handlers described § 1007.53 Announcement of class prices. Zone 4 ...... Minus 31 in § 1007.9(c); and The market administrator shall Zone 5 ...... Minus 25 (ii) The pounds of skim milk in announce publicly on or before the fifth Zone 6 ...... Minus 10 receipts of packaged fluid milk products Zone 7 ...... No adjustment day of each month the Class I price and from other pool plants; Zone 8 ...... Plus 10 Class II prices for the following month, Zone 9 ...... Plus 20 (2) Assign any remaining pounds of and the Class III and Class III–A prices Zone 10 ...... Plus 32 skim milk in Class I at the transferee- for the preceding month. Zone 11 ...... Plus 50 plant to the skim milk in receipts of Zone 12 ...... Plus 57 fluid milk products from other pool § 1007.54 Equivalent price. (2) For a plant located in that portion plants, first to the transferor-plants at If for any reason a price or pricing of the Tennessee Valley marketing area which the highest Class I price applies constituent required by this part for that is within the State of Georgia, the and then to other plants in sequence computing class prices or for other adjustment shall be minus 25 cents. beginning with the plant at which the purposes is not available as prescribed (3) For a plant located in the Missouri next highest Class I price applies; in this part, the market administrator counties of Dunklin or Pemiscot, the (3) Compute the total amount of shall use a price or pricing constituent adjustment shall be minus 53 cents. location adjustment credits to be determined by the Secretary to be (4) For a plant located in the Texas assigned to transferor-plants by equivalent to the price or pricing counties of Bowie or Cass, the multiplying the hundredweight of skim constituent that is required. milk assigned pursuant to paragraph adjustment shall be zero. Uniform Prices (5) For a plant located within another (b)(2) of this section to each transferor- Federal order marketing area, other than plant at which the Class I price is lower § 1007.60 Handler's value of milk for in those counties specified in than the Class I price applicable at the computing the uniform price. paragraphs (2), (3), and (4) of this transferor-plant and the transferee-plant, For the purpose of computing the section, the adjustment shall be and add the resulting amounts; uniform price, the market administrator determined by subtracting the Class I (4) Assign the total amount of location shall determine for each month the differential price in Zone 7 of this order adjustment credits computed pursuant value of milk of each handler with from the Class I differential price, to paragraph (b)(3) of this section to respect to each of the handler’s pool adjusted for the plant’s location, under those transferor-plants that transferred plants and of each handler described in such other Federal order. fluid milk products containing skim § 1007.9 (b) and (c) with respect to milk (6) For a plant located outside the milk classified as Class I milk pursuant that was not received at a pool plant as areas described in paragraphs (a)(1) to § 1007.42(a) and at which the follows: through (5) of this section, the applicable Class I price is less than the (a) Multiply the pounds of producer adjustment shall be computed by Class I price at the transferee-plant, in milk and milk received from a handler multiplying 2.5 cents per 10 miles, or sequence beginning with the plant at described in § 1007.9(c) that were fraction thereof (by the shortest hard- which the highest Class I price applies. classified in each class pursuant to surfaced highway distance as Subject to the availability of such §§ 1007.43(a) and 1007.44(c) by the determined by the market credits, the credit assigned to each plant applicable class prices, and add the administrator), from the nearer of shall be equal to the hundredweight of resulting amounts; Shreveport, Louisiana; Little Rock, such Class I skim milk multiplied by the (b) Add the amounts obtained from Arkansas; Memphis, Tennessee; adjustment rate determined pursuant to multiplying the pounds of overage Jackson, Tennessee; Nashville, paragraph (b)(3) of this section for such subtracted from each class pursuant to Tennessee; or Atlanta, Georgia, and plant. If the aggregate of this § 1007.44(a)(14) and the corresponding subtracting that figure from the location computation for all plants having the step of § 1007.44(b) by the respective adjustment applicable at Shreveport, same adjustment as determined class prices, as adjusted by the butterfat Little Rock, Memphis, Jackson, pursuant to paragraph (b)(3) of this differential specified in § 1007.74, that Nashville, or Atlanta, as the case may section exceeds the credits that are are applicable at the location of the pool be. available to those plants, such credits plant; (b) For fluid milk products transferred shall be prorated to the volume of skim (c) Add the amount obtained from in bulk form from a pool plant to a pool milk in Class I in transfers from such multiplying the difference between the distributing plant at which a higher plants; and Class III price for the preceding month Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25067 and the Class I price applicable at the (h) Exclude, for pricing purposes (1) Compute the total value of excess location of the pool plant or the Class under this section, receipts of nonfluid milk for all handlers included in the II price, as the case may be, for the milk products that are distributed as computations pursuant to paragraph current month by the hundredweight of labeled reconstituted milk for which (a)(1) of this section as follows: skim milk and butterfat subtracted from payments are made to the producer- (i) Multiply the hundredweight Class I and Class II pursuant to settlement fund of another order under quantity of excess milk that does not § 1007.44(a)(9) and the corresponding § 1007.76(a)(5) or (c); and exceed the total quantity of such step of § 1007.44(b); (i) For pool plants that transfer bulk handlers’ producer milk assigned to (d) Add the amount obtained from concentrated fluid milk products to Class III–A by the Class III–A price: multiplying the difference between the other pool plants and other order plants, (ii) Multiply the remaining Class I price applicable at the location add or subtract the amount per hundredweight quantity of excess milk of the pool plant and the Class III price hundredweight of any class price that does not exceed the total quantity by the hundredweight of skim milk and change from the previous month that of such handlers’ producer milk butterfat assigned to Class I pursuant to results from any inventory assigned to Class III by the Class III § 1007.43(d) and the hundredweight of reclassification of bulk concentrated price: skim milk and butterfat subtracted from fluid milk products that occurs at the (iii) Multiply the remaining Class I pursuant to § 1007.44(a)(7) (i) transferee plant. Any such applicable hundredweight quantity of excess milk through (iv) and the corresponding step class price change shall be applied to that does not exceed the total quantity of § 1007.44(b), excluding receipts of the plant that used the concentrated of such handlers’ producer milk bulk fluid cream products from an other milk in the event that the concentrated assigned to Class II by the Class II price: fluid milk products were made from order plant and bulk concentrated fluid (iv) Multiply the remaining bulk unconcentrated fluid milk milk products from pool plants, other hundredweight quantity of excess milk products received at the plant during order plants, and unregulated supply by the Class I price; and plants; the prior month. (v) Add together the resulting (e) Add the amount obtained from § 1007.61 Computation of uniform price amounts; multiplying the difference between the (including weighted average price and (2) Divide the total value of excess Class I price applicable at the location uniform prices for base and excess milk). of the transferor-plant and the Class III milk obtained in paragraph (b)(1) of this (a) The market administrator shall section by the total hundredweight of price by the hundredweight of skim compute the weighted average price for milk and butterfat subtracted from Class such milk and adjust to the nearest cent. each month and the uniform price for The resulting figure shall be the uniform I pursuant to § 1007.44(a)(7) (v) and (vi) each month of June through January per and the corresponding step of price for excess milk; hundredweight of milk of 3.5 percent (3) From the amount resulting from § 1007.44(b); butterfat content as follows: (f) Add the amount obtained from the computations pursuant to (1) Combine into one total the values paragraphs (a)(1) through (a)(3) of this multiplying the Class I price applicable computed pursuant to § 1007.60 for all at the location of the nearest section subtract an amount computed by handlers who filed the reports multiplying the hundredweight of milk unregulated supply plants from which prescribed in § 1007.30 for the month an equivalent volume was received by specified in paragraph (a)(4)(ii) of this and who made payments pursuant to section by the weighted average price; the pounds of skim milk and butterfat § 1007.71 for the preceding month; (4) Subtract the total value of excess in receipts of concentrated fluid milk (2) Add not less than one-half the milk determined by multiplying the products assigned to Class I pursuant to unobligated balance in the producer- uniform price obtained in paragraph § 1007.43(d) and § 1007.44(a)(7)(i) and settlement fund; (b)(2) of this section times the the pounds of skim milk and butterfat (3) Add an amount equal to the total hundredweight of excess milk from the subtracted from Class I pursuant to value of the minus adjustments and amount computed pursuant to § 1007.44(a)(11) and the corresponding subtract an amount equal to the total paragraph (b)(3) of this section; step of § 1007.44(b), excluding such value of the plus adjustments computed skim milk and butterfat in receipts of pursuant to § 1007.75; (5) Divide the amount calculated fluid milk products from an unregulated (4) Divide the resulting amount by the pursuant to paragraph (b)(4) of this supply plant to the extent that an sum of the following for all handlers section by the total hundredweight of equivalent amount of skim milk or included in these computations; base milk included in these butterfat disposed of to such plant by (i) The total hundredweight of computations; and handlers fully regulated under any producer milk; and (6) Subtract not less than 4 cents nor Federal milk order is classified and (ii) The total hundredweight for more than 5 cents from the price priced as Class I milk and is not used which a value is computed pursuant to computed pursuant to paragraph (b)(5) as an offset for any other payment § 1007.60(f); and of this section. The resulting figure, obligation under any order; (5) Subtract not less than 4 cents nor rounded to the nearest cent, shall be the (g) Subtract, for reconstituted milk more than 5 cents per hundredweight. uniform price for base milk. made from receipts of nonfluid milk The resulting figure, rounded to the products, an amount computed by § 1007.62 Announcement of uniform price nearest cent, shall be the weighted and butterfat differential. multiplying $1.00 (but not more than average price for each month and the the difference between the Class I price uniform price for the months of June The market administrator shall applicable at the location of the pool through January. announce publicly on or before: plant and the Class III price) by the (b) For each month of February (a) The fifth day after the end of each hundredweight of skim milk and through May, the market administrator month the butterfat differential for such butterfat contained in receipts of shall compute the uniform prices per month; and nonfluid milk products that are hundredweight for base milk and for (b) The 11th day after the end of the allocated to Class I use pursuant to excess milk, each of 3.5 percent month the applicable uniform price(s) § 1007.43(d); butterfat content, as follows: pursuant to § 1007.61 for such month. 25068 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules

Payments for Milk § 1007.72 Payments from the producer- producers on a pro rata basis but not by settlement fund. more than the amount of the § 1007.70 Producer-settlement fund. On or before the 13th day after the underpayment. Such payments shall be The market administrator shall end of each month, the market completed thereafter not later than the establish and maintain a separate fund administrator shall pay to each handler date for making payments pursuant to known as the producer-settlement fund the amount, if any, by which the this paragraph next following after into which the market administrator amount computed pursuant to receipt of the balance due from the shall deposit all payments made by § 1007.71(a)(2) exceeds the amount market administrator. handlers pursuant to §§ 1007.71, computed pursuant to § 1007.71(a)(1). If, (b) On or before the day prior to the 1007.76, and 1007.77, and out of which at such time, the balance in the dates specified in paragraph (a) (1) and the market administrator shall make all producer-settlement fund is insufficient (2) of this section, each handler shall payments pursuant to §§ 1007.72 and to make all payments pursuant to this make payment to the cooperative 1007.77. Payments due any handler section, the market administrator shall association for milk from producers who shall be offset by any payments due reduce uniformly such payments and market their milk through the from such handler. shall complete such payments as soon cooperative association and who have as the funds are available. authorized the cooperative to collect § 1007.71 Payments to the producer- such payments on their behalf an settlement fund. § 1007.73 Payments to producers and to amount equal to the sum of the (a) On or before the 12th day after the cooperative associations. individual payments otherwise payable end of the month, each handler shall (a) Each handler shall pay each for such producer milk pursuant to pay to the market administrator the producer for producer milk for which paragraph (a) (1) and (2) of this section. amount, if any, by which the amount payment is not made to a cooperative (c) If a handler has not received full specified in paragraph (a)(1) of this association pursuant to paragraph (b) of payment from the market administrator section exceeds the amount specified in this section, as follows: pursuant to § 1007.72 by the 15th day of paragraph (a)(2) of this section: (1) On or before the 26th day of each such month, such handler may reduce (1) The total value of milk of the month, for milk received during the first payments pursuant to paragraph (b) of handler for such month as determined 15 days of the month from such this section to such cooperative pursuant to § 1007.60. producer who has not discontinued association on a pro rata basis, prorating (2) The sum of: delivery of milk to such handler before such underpayment to the volume of (i) The value at the uniform price(s) the 23rd day of the month at not less milk received from such cooperative as adjusted pursuant to § 1007.75, of than the Class III price for the preceding association in proportion to the total such handler’s receipts of producer milk month or 90 percent of the weighted milk received from producers by the and milk received from handlers average price for the preceding month, handler, but not by more than the pursuant to § 1007.9(c); and whichever is higher, less proper amount of the underpayment. Such deductions authorized in writing by the payments shall be completed in the (ii) The value at the weighted average producer. If the producer had following manner: price applicable at the location of the discontinued shipping milk to such (1) If the handler receives full plant from which received of other handler before the 25th day of any payment from the market administrator source milk for which a value is month, or if the producer had no by the 15th day of the month, the computed pursuant to § 1007.60(f). established base upon which to receive handler shall make payment to the (b) On or before the 25th day after the payments during the base paying cooperative association of the full value end of the month each person who months of February through May, the of the underpayment on the 15th day of operated an other order plant that was applicable rate for making payments to the month; regulated during such month under an such producer shall be the Class III (2) If the handler has not received full order providing for individual-handler price for the preceding month; and payment from the market administrator pooling shall pay to the market (2) On or before the 15th day of the by the 15th day of the month, the administrator an amount computed as following month, an amount equal to handler shall make payment to the follows: not less than the uniform price(s), as cooperative association of the full value (1) Determine the quantity of adjusted pursuant to §§ 1007.74 and of the underpayment on or before the reconstituted skim milk in filled milk in 1007.75, multiplied by the date for making such payments route disposition from such plant in the hundredweight of milk or base milk and pursuant to this paragraph next marketing area which was allocated to excess milk received from such following after receipt of the balance Class I at such plant. If there is route producer during the month, subject to due from the market administrator. disposition from such plant in the following adjustments: (d) Each handler pursuant to marketing areas regulated by two or (i) Less payments made to such § 1007.9(a) who receives milk from a more marketwide pool orders, the producer pursuant to paragraph (a)(1) of cooperative association as a handler reconstituted skim milk allocated to this section; pursuant to § 1007.9(c), including the Class I shall be prorated to each order (ii) Less deductions for marketing milk of producers who are not members according to such route disposition in services made pursuant to § 1007.86; of such association, and who the market each marketing area; and (iii) Plus or minus adjustments for administrator determines have (2) Compute the value of the errors made in previous payments made authorized such cooperative association reconstituted skim milk assigned in to such producers; and to collect payment for their milk, shall paragraph (b)(1) of this section to route (iv) Less proper deductions pay such cooperative for such milk as disposition in this marketing area by the authorized in writing by such producer. follows: difference between the Class I price (3) If a handler has not received full (1) On or before the 25th day of the under this part applicable at the payment from the market administrator month for milk received during the first location of the other order plant (but not pursuant to § 1007.72 by the 15th day of 15 days of the month, not less than the to be less than the Class III price) and such month, such handler may reduce Class III price for the preceding month the Class III price. payments pursuant to this paragraph to or 90 percent of the weighted average Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25069 price for the preceding month, Grade A butter price as reported by the the partially regulated distributing plant whichever is higher; and Department. (except that the Class I price and (2) On or before the 14th day of the weighted average price shall not be less § 1007.75 Plant location adjustments for than the Class III price); and following month, not less than the producers and on nonpool milk. appropriate uniform price(s) as adjusted (5) Add the amount obtained from pursuant to §§ 1007.74 and 1007.75, and (a) The uniform price and the uniform multiplying the pounds of labeled less any payments made pursuant to price for base milk shall be adjusted reconstituted milk included in paragraph (d)(1) of this section. according to the location of the plant at paragraph (a)(3) of this section by the (e) If a handler has not received full which the milk was physically received difference between the Class I price payment from the market administrator at the rates set forth in § 1007.52(a); and applicable at the location of the partially pursuant to § 1007.72 by the 14th day of (b) The weighted average price regulated distributing plant less $1.00 such month, such handler may reduce applicable to other source milk shall be (but not to be less than the Class III payments pursuant to paragraph (d) of adjusted at the rates set forth in section price) and the Class III price. For any this section to such cooperative § 1007.52(a) applicable at the location of reconstituted milk that is not so labeled, association and complete such the nonpool plant from which the milk the Class I price shall not be reduced by payments for milk received from such was received, except that the adjusted $1.00. Alternatively, for such cooperative association in its capacity as weighted average price shall not be less disposition, payments may be made to a handler pursuant to § 1007.9(c), in the than the Class III price. the producer-settlement fund of the order regulating the producer milk used manner prescribed in paragraph (c) (1) § 1007.76 Payments by a handler and (2) of this section. operating a partially regulated distributing to produce the nonfluid milk (f) In making payments to producers plant. ingredients at the difference between pursuant to this section, each handler the Class I price applicable under the Each handler who operates a partially other order at the location of the plant shall furnish each producer, except a regulated distributing plant shall pay on producer whose milk was received from where the nonfluid milk ingredients or before the 25th day after the end of were processed (but not to be less than a handler described in § 1007.9(c), a the month to the market administrator supporting statement in such form that the Class III price) and the Class III for the producer-settlement fund the price. This payment option shall apply it may be retained by the recipient amount computed pursuant to only if a majority of the total milk which shall show: paragraph (a) of this section. If the received at the plant that processed the (1) The month and identity of the handler submits pursuant to nonfluid milk ingredients is regulated producer; §§ 1007.30(b) and 1007.31(b) the under one or more Federal orders and (2) The daily and total pounds and the information necessary for making the payment may only be made to the average butterfat content of producer computations, such handler may elect to producer-settlement fund of the order milk; pay in lieu of such payment the amount pricing a plurality of the milk used to (3) For the months of February computed pursuant to paragraph (b) of produce the nonfluid milk ingredients. through May the total pounds of base this section: This payment option shall not apply if milk received from such producer; (a) The payment under this paragraph the source of the nonfluid ingredients (4) The minimum rate(s) at which shall be an amount resulting from the used in reconstituted fluid milk payment to the producer is required following computations: products cannot be determined by the pursuant to this order; (1) Determine the pounds of route market administrator. (5) The rate(s) used in making the disposition in the marketing area from (b) The payment under this paragraph payment if such rate(s) is (are) other the partially regulated distributing shall be the amount resulting from the than the applicable minimum rate(s); plant; following computations: (6) The amount, or rate per (2) Subtract the pounds of fluid milk (1) Determine the value that would hundredweight, and nature of each products received at the partially have been computed pursuant to deduction claimed by the handler; and regulated distributing plant: § 1007.60 for the partially regulated (7) The net amount of payment to (i) As Class I milk from pool plants distributing plant if the plant had been such producer or cooperative and other order plants, except that a pool plant, subject to the following association. subtracted under a similar provision of modifications: another Federal milk order; and (i) Fluid milk products and bulk fluid § 1007.74 Butterfat differential. (ii) From another nonpool plant that cream products received at the partially For milk containing more or less than is not an other order plant to the extent regulated distributing plant from a pool 3.5 percent butterfat, the uniform prices that an equivalent amount of fluid milk plant or another order plant shall be for base and excess milk shall be products disposed of to such nonpool allocated at the partially regulated increased or decreased, respectively, for plant by handlers fully regulated under distributing plant to the same class in each one-tenth percent butterfat any Federal milk order is classified and which such products were classified at variation from 3.5 percent by a butterfat priced as Class I milk and is not used the fully regulated plant; differential, rounded to the nearest one- as an offset for any payment obligation (ii) Fluid milk products and bulk fluid tenth cent, which shall be 0.138 times under any order; cream products transferred from the the current month’s butter price less (3) Subtract the pounds of partially regulated distributing plant to 0.0028 times the preceding month’s reconstituted milk that are made from a pool plant or another order plant shall average pay price per hundredweight, at nonfluid milk products and which are be classified at the partially regulated test, for manufacturing grade milk, in then disposed of as route disposition in distributing plant in the class to which Minnesota and Wisconsin, using the the marketing area from the partially allocated at the fully regulated plant. ‘‘base month’’ series, adjusted pursuant regulated distributing plant; Such transfers shall be computed to the to § 1007.51(a) through (e), as reported (4) Multiply the remaining pounds by extent possible to those receipts at the by the Department. The butter price the difference between the Class I price partially regulated distributing plant means the simple average for the month and the weighted average price, both from pool plants and other order plants of the Chicago Mercantile Exchange, prices to be applicable at the location of that are classified in the corresponding 25070 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules class pursuant to paragraph (b)(1)(i) of (ii) If paragraph (b)(1)(iii) of this beginning with the day following the this section. Any such transfers section applies, the gross payments by date such obligation was due under the remaining after the above allocation the operator of such nonpool supply order. Any remaining amount due shall which are in Class I and for which a plant, adjusted to a 3.5 percent butterfat be increased at the same rate on the value is computed for the handler basis by the butterfat differential corresponding day of each month until operating the partially regulated specified in § 1007.74, for milk received paid. The amounts payable pursuant to distributing plant pursuant to § 1007.60 at the plant during the month that this section shall be computed monthly shall be priced at the uniform price (or would have been producer milk if the on each unpaid obligation and shall at the weighted average price if such is plant had been fully regulated; and include any unpaid charges previously provided) of the respective order (iii) The payments by the operator of made pursuant to this section. The late regulating the handling of milk at the the partially regulated distributing plant charges shall be added to the respective transferee plant, with such uniform to the producer-settlement fund of accounts to which due. For the purpose price adjusted to the location of the another order under which such plant is of this section, any obligation that was nonpool plant (but not to be less than also a partially regulated distributing determined at a date later than the lowest class price of the respective plant and like payments by the operator prescribed by the order because of a order), except that transfers of of the nonpool supply plant if paragraph handler’s failure to submit a report to reconstituted skim milk in filled milk (b)(1)(iii) of this section applies. the market administrator when due shall be priced at the lowest price class (c) Any handler may elect partially shall be considered to have been of the respective order; and regulated distributing plant status for payable by the date it would have been (iii) If the operator of the partially any plant with respect to receipts of due if the report had been filed when regulated distributing plant so requests, nonfluid milk ingredients assigned to due. Class I use under § 1007.43(d). the value of milk determined pursuant Administrative Assessment and Payments may be made to the producer- to § 1007.60 for such handler shall Marketing Service Deduction include, in lieu of the value of other settlement fund of the order regulating source milk specified in § 1007.60(f) less the producer milk used to produce the § 1007.85 Assessment for order the value of such other source milk nonfluid milk ingredients at the administration. specified in § 1007.71(a)(2)(ii), a value difference between the Class I price As each handler’s pro rata share of the of milk determined pursuant to applicable under the other order at the expense of administration of the order, § 1007.60 for each nonpool plant that is location of the plant where the nonfluid each handler shall pay to the market not another order plant which serves as milk ingredients were processed (but administrator on or before the 15th day a supply plant for such partially not less than the Class III price) and the after the end of the month 5 cents per regulated distributing plant by making Class III price. This payment option hundredweight or such lesser amount as shipments to the partially regulated shall apply only if a majority of the total the Secretary may prescribe with respect distributed plant during the month milk received at the plant that processed to: equivalent to the requirements of the nonfluid milk ingredients is (a) Receipts of producer milk § 1007.7(b), subject to the following regulated under one or more Federal (including such handler’s own conditions: orders and payment may only be made production) other than such receipts by (A) The operator of the partially to the producer-settlement fund of the a handler described in § 1007.9(c) that regulated distributing plant submits order pricing a plurality of the milk were delivered to pool plants of other with its reports filed pursuant to used to produce the nonfluid milk handlers; §§ 1007.30(b) and 1007.31(b) similar ingredients. This payment option shall (b) Receipts from a handler described reports for each such nonpool supply not apply if the source of the nonfluid in § 1007.9(c); plant; ingredients used in reconstituted fluid (c) Receipts of concentrated fluid milk (B) The operator of such nonpool milk products cannot be determined by products from unregulated supply plant maintains books and records the market administrator. plants and receipts of nonfluid milk showing the utilization of all skim milk products assigned to Class I use § 1007.77 Adjustment of accounts. pursuant to § 1007.43(d) and other and butterfat received at such plant Whenever audit by the market which are made available if requested source milk allocated to Class I pursuant administrator of any handler’s reports, to § 1007.44(a) (7) and (11) and the by the market administrator for books, records, or accounts, or other verification purposes; and corresponding steps of § 1007.44(b), verification discloses errors resulting in except such other source milk that is (C) The value of milk determined money due the market administrator excluded from the computations pursuant to § 1007.60 for such nonpool from a handler, or due a handler from pursuant to § 1007.60 (d) and (f); and supply plant shall be determined in the the market administrator, or due a (d) Route disposition in the marketing same manner prescribed for computing producer or cooperative association area from a partially regulated the obligation of such partially regulated from a handler, the market distributing plant that exceeds the skim distributing plant; and administrator shall promptly notify milk and butterfat subtracted pursuant (2) From the partially regulated such handler of any amount so due and to § 1007.76(a)(2). distributing plant’s value of milk payment thereof shall be made on or computed pursuant to paragraph (b)(1) before the next date for making § 1007.86 Deduction for marketing of this section, subtract: payments as set forth in the provisions services. (i) The gross payments by the operator under which the error(s) occurred. (a) Except as provided in paragraph of the partially regulated distributing (b) of this section each handler, in plant, adjusted to a 3.5 percent butterfat § 1007.78 Charges on overdue accounts. making payments to producers for milk basis by the butterfat differential Any unpaid obligation due the market (other than milk of such handler’s own specified in § 1007.74, for milk received administrator from a handler pursuant production) pursuant to § 1007.73, shall at the plant during the month that to §§ 1007.71, 1007.76, 1007.77, deduct 7 cents per hundredweight or would have been producer milk had the 1007.78, 1007.85, and 1007.86 shall be such lesser amount as the Secretary may plant been fully regulated; increased 1.5 percent each month prescribe and shall pay such deductions Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Proposed Rules 25071 to the market administrator not later milk delivered by such producer during only to a person who is or will be a than the 15th day after the month. Such each of those months by the number of producer by the end of the month that money shall be used by the market calendar days in the month, adding the transfer is to be effective. A base administrator to verify or establish together the four highest monthly transfer to be effective on February 1 for weights, samples and tests of producer averages so computed, and dividing by the month of February must be received milk and provide market information for four. If a producer operated more than on or before February 15. Such producers who are not receiving such one farm at the same time, a separate application shall be on a form approved services from a cooperative association. computation of base shall be made for by the market administrator and signed Such services shall be performed in each such farm. by the baseholder or the legal whole or in part by the market (b) Any producer who delivered milk representative of the baseholder’s estate. administrator or an agent engaged by to a nonpool plant that became a pool If a base is held jointly, the application and responsible to the market plant after the beginning of the July– shall be signed by all joint holders or administrator; December base-forming period shall be the legal representative of the estate of (b) In the case of producers for whom assigned a base calculated as if the plant any deceased baseholder. a cooperative association that the were a pool plant during such entire (b) A producer who transferred base Secretary has determined is actually base-forming period. A base thus on or after February 1 may not receive performing the services set forth in assigned shall not be transferable. by transfer additional base that would paragraph (a) of this section, each (c) A person who was unable to be applicable during February through handler shall make, in lieu of the qualify as a producer during four or May of the same year. A producer who deduction specified in paragraph (a) of more of the immediately preceding received base by transfer on or after this section, such deductions from the months of July through December or February 1 may not transfer a portion of payments to be made to such producers who did not have at least four complete the base to be applicable during as may be authorized by the months of production, in either case for February through May of the same year, membership agreement or marketing one or more of the reasons specified in but may transfer the entire base. contract between such cooperative this paragraph, may request a base association and such producers, and on computation based upon a lesser (c) The base established by a or before the 15th day after the end of number of months by submitting to the partnership may be divided between the the month, pay such deductions to the market administrator in writing on or partners on any basis agreed to in cooperative association rendering such before February 1 a statement that writing by them if written notification of services accompanied by a statement establishes to the satisfaction of the the agreed upon division of base by each showing the amount of any such market administrator that during four or partner is received by the market deductions and the amount of milk for more of the months in the immediately administrator prior to the first day of the which such deduction was computed preceding July through December base- month in which such division is to be for each producer. forming period the amount of milk effective. produced on such producer’s farm was (d) Two or more producers in a Base-Excess Plan substantially reduced because of partnership may combine their § 1007.90 Base milk. conditions beyond the control of such separately established bases by giving Base milk means the producer milk of person as a result of: notice to the market administrator prior a producer in each month of February (1) The loss by fire, windstorm, or to the first day of the month in which through May that is not in excess of the other natural disaster of a farm building such combination of bases is to be producer’s base multiplied by the used in the production of milk on the effective. number of days in the month. producer’s farm; (2) Brucellosis, bovine tuberculosis or § 1007.94 Announcement of established § 1007.91 Excess milk. other infectious diseases in the bases. Excess milk means the producer milk producer’s milking herd as certified by On or before January 31 of each year, of a producer in each month of February a licensed veterinarian; or the market administrator shall calculate through May in excess of the producer’s (3) A quarantine by a Federal or State a base for each person who was a base milk for the month, and shall authority that prevented the dairy producer during one or more of the include all the producer milk in such farmer from supplying milk from the preceding months of July through months of a producer who has no base. farm of such producer to a plant. December and shall notify each producer and the handler receiving milk § 1007.92 Computation of base for each § 1007.93 Base rules. from such dairy farmer of the base producer. (a) Except as provided in § 1007.92 (b) established by the producer. If requested (a) Subject to paragraph (c) of this and (c) and paragraph (b) of this section, by a cooperative association, the market section, a base for each dairy farmer a base may be transferred in its entirety administrator shall notify the who was a producer pursuant to or in amounts of not less than 300 cooperative association of each § 1007.12 during one or more of the pounds effective on the first day of the producer-member’s base. immediately preceding months of July month following the date on which such through December shall be determined application is received by the market [FR Doc. 95–11311 Filed 5–9–95; 8:45 am] by dividing the total pounds of producer administrator. Base may be transferred BILLING CODE 3410±02±P