4802 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

DEPARTMENT OF AGRICULTURE structure and proposes replacing the SUPPLEMENTARY INFORMATION: basic formula price with a multiple Table of Contents Agricultural Marketing Service component pricing system. This proposed rule also establishes a new I. Legislative and Background Requirements 7 CFR Parts 1000, 1001, 1002, 1004, Legislative Requirements Class IV which would include milk Background 1005, 1006, 1007, 1012, 1013, 1030, used to produce nonfat dry milk, butter, 1032, 1033, 1036, 1040, 1044, 1046, Actions Completed and other dry milk powders; reclassifies Public Interaction 1049, 1050, 1064, 1065, 1068, 1076, eggnog and cream cheese; and addresses Public Input 1079, 1106, 1124, 1126, 1131, 1134, other minor classification changes. Part Executive Order 12988 1135, 1137, 1138 and 1139 1000 is proposed to be expanded to Executive Order 12866 [DA±97±12] include sections that are identical to all The Regulatory Flexibility Act and the of the consolidated orders to assist in Effects on Small Businesses Milk in the New England and Other Paperwork Reduction Act of 1995 simplifying and streamlining the orders. Preliminary Statement Marketing Areas; Proposed Rule and II. Discussion of Material Issues and Opportunity To File Comments, DATES: Comments must be submitted on or before March 31, 1998. Proposed Amendments to the Orders Including Written Exceptions, on Consolidation of marketing areas Proposed Amendments to Marketing ADDRESSES: Comments (two copies) Basic formula price replacement and other Agreements and Orders should be submitted to Richard M. class price issues McKee, Deputy Administrator, Dairy Class I price structure 7 CFR part Marketing area Programs, USDA/AMS, Room 2968, Classification of milk and related issues South Building, P.O. Box 96456, Provisions applicable to all orders 1000 ...... General Provisions of Federal Washington, DC 20090–6456. Regional Issues: Milk Marketing Orders. Northeast Region 1001 ...... New England. Comments also may be sent by fax to Southeast Region 1002 ...... New York-New Jersey. (202) 690–3410. Additionally, Midwest Region 1004 ...... Middle Atlantic. comments may be submitted via E-mail Western Region 1005 ...... Carolina. to: [email protected]. Miscellaneous and Administrative: 1006 ...... Upper Florida. All comments should be identified Consolidation of the marketing service, 1007 ...... Southeast. administrative expense, and producer- 1012 ...... Tampa Bay. with the docket number found in settlement funds 1013 ...... Southeastern Florida. brackets in the heading of this Consolidation of the transportation credit 1030 ...... Chicago Regional. document. To facilitate the review balancing funds 1032 ...... Southern Illinois-Eastern Mis- process, please state the particular Proposed general findings souri. topic(s) addressed, from the following III. Order Language 1033 ...... Ohio Valley. list, at the beginning of the comment: General provisions 1036 ...... Eastern Ohio-Western Pennsyl- consolidation, basic formula price, Class Northeast order provisions vania. I price structure, other class prices, Appalachian order provisions 1040 ...... Southern Michigan. classification, provisions applicable to Florida order provisions 1044 ...... Michigan Upper Peninsula. Southeast order provisions 1046 ...... Louisville-Lexington-Evansville. all orders, regional issues (please Mideast order provisions 1049 ...... Indiana. specify: Northeast, Southeast, Midwest, Upper Midwest order provisions 1050 ...... Central Illinois. Western), and miscellaneous and Central order provisions 1064 ...... Greater Kansas City. administrative. If comments submitted Southwest order provisions 1065 ...... Nebraska-Western Iowa. pertain to a specific order, please Arizona-Las Vegas order provisions 1068 ...... Upper Midwest. identify such order. Western order provisions 1076 ...... Eastern South Dakota. Pacific Northwest order provisions 1079 ...... Iowa. Comments are also being requested on IV. Appendix 1106 ...... Southwest Plains. the Executive Order 12866 analysis, the A: Summary of Preliminary Suggested 1124 ...... Pacific Northwest. Regulatory Flexibility Act analysis, and Order Consolidation Report 1126 ...... Texas. the Paperwork Reduction Act analysis. B: Summary of Pricing Options 1131 ...... Central Arizona. Additionally, comments may be sent C: Summary of Classification Report 1134 ...... Western Colorado. via E-mail to: D: Summary of Identical Provisions Report 1135 ...... Southwestern Idaho-Eastern Or- l l E: Summary of Basic Formula Price Report egon. Milk Order [email protected]. F: Summary of Revised Preliminary 1137 ...... Eastern Colorado. All comments submitted in response Suggested Order Consolidation Report 1138 ...... New Mexico-West Texas. to this proposal will be available for I. Legislative and Background 1139 ...... Great Basin. public inspection at the USDA/AMS/ Requirements Dairy Programs, Order Formulation AGENCY: Agricultural Marketing Service, Branch, Room 2968, South Building, Legislative Requirements USDA. 14th and Independence Ave., S.W., Section 143 of the Federal Agriculture ACTION: Proposed rule. Washington, D.C., during normal Improvement and Reform Act of 1996. SUMMARY: This proposed rule business hours (7 CFR 1.27(b)). All (Farm Bill), 7 U.S.C. 7253, requires that consolidates the current 31 Federal milk persons wanting to view the comments by April 4, 1999,1 the current Federal marketing orders into 11 orders. This are requested to make an appointment consolidation is proposed to comply in advance by calling Richard M. McKee 1 Section 143(b)(2) requires that a proposed rule with the 1996 Farm Bill which at (202) 720–4392. be published by April 4, 1998 and Section 143(b)(3) provides that ‘‘in the event that the Secretary is mandates that the current Federal milk FOR FURTHER INFORMATION CONTACT: John enjoined or otherwise restrained by a court order orders be consolidated into between 10 F. Borovies, Branch Chief, USDA/AMS/ from publishing or implementing the consolidation to 14 orders by April 4, 1999. This Dairy Programs, Order Formulation and related reforms under subsection (a), the length proposed rule also sets forth two of time for which that injunction or other Branch, Room 2971, South Building, restraining order is effective shall be added to the options for consideration as a P.O. Box 96456, Washington, DC 20090– time limitations specified in paragraph (2) thereby replacement for the Class I price 6456, (202) 720–6274. extending those time limitations by a period of time Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4803 milk marketing orders be consolidated The informal rulemaking process does approval of the consolidated orders and into between 10 to 14 orders. The not require these procedures. Instead, related reforms by the required number Secretary of Agriculture (Secretary) is informal rulemaking provides for the of producers in each marketing area, a also directed to designate the State of issuance of a proposed rule by the final order implementing the new orders California as a Federal milk order if Agricultural Marketing Service, a period will be issued and published in the California dairy producers petition for of time for the filing of comments by Federal Register. and approve such an order. In addition, interested parties, and the issuance of a Although all of the issues regarding the Farm Bill provided that the final rule by the Secretary, which would Federal milk order reform are Secretary may address related issues become effective if approved by the interrelated, USDA has established such as the use of utilization rates and requisite number of producers in a several committees to address specific multiple basing points for the pricing of referendum. issues. The use of committees has fluid milk and the use of uniform Full participation by interested allowed the reform process to be multiple component pricing when parties is essential in the reform of divided into more manageable tasks. developing one or more basic prices for Federal milk orders. The issues are too The committees will work throughout manufacturing milk. Besides important and complex for this the developmental and rulemaking designating a date for completion of the proposed rule to be developed without phases. The committees that have been required consolidation, the Farm Bill significant input from all facets of the established are: Price Structure, Basic further requires that no later than April dairy industry. The experience, Formula Price, Identical Provisions, 1, 1997, the Secretary shall submit a knowledge, and expertise of the Classification, and Regional. The report to Congress on the progress of the industry and public are integral to the Regional committee is divided into four Federal order reform process. The report development of the proposed rule. To sub-committees: Midwest, Northeast, must cover three areas: a description of ensure maximum public input into the Southeast, and West. Committee the progress made towards process while still meeting the membership consists of both field and implementation, a review of the Federal legislated deadline of April 4, 1999, headquarters Dairy Programs personnel. order system in light of the reforms USDA developed a plan of action and The committees have been given required, and any recommendations projected time line. The plan of action specific assignments related to their considered appropriate for further developed consists of three phases: designated issue and have been meeting improvements and reforms. This report developmental, rulemaking, and since May 1996. was submitted to Congress on April 1, implementation. In addition to utilizing USDA 1997. Finally, the 1996 Farm Bill The first phase of the plan was the personnel, partnerships have been specifies that USDA use informal developmental phase. The use of a established with two university rulemaking to implement these developmental phase allowed USDA to consortia to provide expert analyses on interact freely with the public to reforms.2 the issues relating to price structure and develop viable proposals that basic formula price options. Dr. Andrew Background accomplish the Farm Bill mandates, as Novakovic of Cornell University led the The authorization of informal well as related reforms. The USDA met analysis on price structure and rulemaking to achieve the mandated with interested parties to discuss the published a staff paper entitled ‘‘U.S. reforms of the Farm Bill has resulted in reform progress, assisted in developing Dairy Sector Simulator: A Spatially a rulemaking process that is ideas or provided data and analysis on Disaggregated Model of the U.S. Dairy substantially different from the formal various possibilities, issued program Industry’’ and a research bulletin rulemaking process required to announcements, and requested public entitled ‘‘An Economic and input on all aspects of the Federal order promulgate or amend Federal orders. Mathematical Description of the U.S. program. The developmental phase The formal rulemaking process requires Dairy Sector Simulator’’3 Dr. Ronald began on April 4, 1996, and concludes that decisions by USDA be based solely Knutson of Texas A&M University led with the issuance of this proposed rule. on the evidentiary record of a public The second phase of the plan is the the analysis on basic formula price hearing held before an Administrative rulemaking phase. The rulemaking options and published two working Law Judge. Formal rulemaking involves phase begins with the issuance and papers entitled ‘‘An Economic the presentation of sworn testimony, the publication of this proposed rule. This Evaluation of Basic Formula Price (BFP) cross-examination of witnesses, the proposed rule provides the public 60 Alternatives’’ and ‘‘The Modified filing of briefs, the issuance of a days to submit written comments on the Product Value and Fresh Milk Base 4 recommended decision, the filing of proposal to USDA. These comments Price Formulas as BFP Alternatives.’’ exceptions, the issuance of a final will be reviewed and considered prior Actions Completed decision that is voted on by affected to the issuance of a final rule. producers, and upon approval by The third and final phase of the plan USDA has maintained continual producers, the issuance of a final order. is the implementation phase. The contact with the industry regarding the implementation phase will begin after reform process. To begin, on May 2, equal to the period of time for which the injunction the final rule is published in the Federal 1996, the Agricultural Marketing or other restraining order is effective.’’ Service (AMS) Dairy Division issued a 2 Since this proceeding was initiated on May 2, Register. This phase will consist of informational meetings conducted by memorandum to interested parties 1996, the Black Hills, South Dakota and the announcing the planned procedures for Tennessee Valley orders have been terminated. Market Administrator personnel. The Effective October 1, 1996, the operating provisions objective of the informational meetings of the Black Hills were terminated (61 FR 47038), 3 Copies of this report may be obtained by and the remaining administrative provisions were is to inform producers and handlers contacting Ms. Wendy Barrett, Cornell University, terminated effective December 31, 1996 (61 FR about the newly consolidated orders ARME, 348 Warren Hall, Ithaca, NY 14853–7801, 67927). Effective October 1, 1997, the operating and explain the projected effects on (607) 255–1581. provisions of the Tennessee Valley order were producers and handlers in the new 4 Copies of these reports may be obtained by terminated (62 FR 47923). The remaining contacting Dr. Ronald Knutson, Agricultural and administrative provisions of the Tennessee Valley marketing order areas. After Food Policy Center, Dept. of Ag. Economics, Texas order will be terminated before this consolidation informational meetings have been held, A&M University, College Station, TX 77843–2124, process is completed. referendums will be conducted. Upon (409) 845–5913. 4804 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules implementing the Farm Bill.5 In this dry milk. (See Appendix C for report Public Interaction memorandum, all interested parties summary.) The identical provisions As a result of these announcements were requested to submit ideas on report recommended simplifying, and the forum, more than 1,600 reforming Federal milk orders, modifying, and eliminating unnecessary individual comments have been specifically as to the consolidation and differences in Federal order provisions. received by USDA. In addition to the pricing structure of orders. Input was (See Appendix D for report summary.) individual comments, more than 3000 requested by July 1, 1996. Comments on the contents of these form letters have been received. All On June 24, 1996, USDA issued a reports, as well as on any other aspect comments were reviewed by USDA press release announcing that a public of the program, was requested from personnel and are available for public forum would be held in Madison, interested parties by June 1, 1997. inspection at USDA. To assist the public Wisconsin, on July 29, 1996. The forum On April 18, 1997, AMS Dairy would address price discovery Division issued a memorandum to in accessing the comments, USDA techniques for the value of milk used in interested parties announcing the contracted to have the comments manufactured dairy products. Thirty- release of the preliminary report on scanned and published on a CD. The one Senators, Congressmen, university Alternatives to the Basic Formula Price use of this technology has allowed professors, representatives of processor (BFP). The report contained suggestions, interested parties throughout the United and producer organizations, and dairy ideas, and initial findings for BFP States access to the information received farmers made presentations at the alternatives. Over eight categories of by USDA. forum. options were identified with four USDA also made all publications and On October 24, 1996, AMS Dairy options recommended for further review requests for information available on the Division issued a memorandum to and discussion. (See Appendix E for Internet. A separate page under the interested parties requesting input report summary.) The memorandum Dairy Division section of the AMS regarding all aspects of Federal milk requested input from all interested Homepage was established to provide order reform and specifically as to its parties on a BFP alternative and on any information about the reform process. impact on small businesses. USDA other aspect of the milk marketing order To assist in transmitting correspondence anticipates that the consolidation of program by June 1, 1997. to USDA, a special electronic mail Federal orders will have an economic On May 20, 1997, AMS Dairy Division account— l l impact on handlers and producers issued a memorandum to interested Milk Order [email protected]—was affected by the program, and USDA parties announcing the release of a opened to receive input on Federal milk wants to ensure that, while revised preliminary report on Federal order reforms. accomplishing their intended purpose, milk order consolidation. The revisions USDA personnel met continually with the newly consolidated Federal orders were based on the input received from interested parties from May 1996 will not unduly inhibit the ability of interested parties in response to the through the issuance of this proposed small businesses to compete. initial preliminary report on order rule to gather information and ideas on On December 3, 1996, AMS Dairy consolidation. (See Appendix F for the consolidation of Federal milk Division issued a memorandum to report summary.) Instead of orders. During this time period, USDA interested parties announcing the recommending 10 consolidated orders personnel addressed over 250 groups release of the preliminary report on as in the first report, the revised report comprised of more than 22,000 Federal milk order consolidation. The recommended 11 consolidated orders individuals on various issues related to report recommends the consolidation of and suggested the inclusion of some Federal order reform. the current 32 Federal milk orders into currently unregulated territory. The USDA personnel also conducted in- ten orders. (See Appendix A for report memorandum requested comments from person briefings for both the Senate and summary.) The memorandum requested all interested parties on the House Agricultural Committees on the input from all interested parties on the recommended consolidated orders and progress of Federal milk order reforms. recommended consolidated orders and on any other aspect of the milk Since May 1996, seven briefings were on any other aspect of the milk marketing order program by June 15, conducted for the committees. The marketing order program by February 1997. briefings advised the committees of the 10, 1997. To elicit further input on the role of plan of action for implementing the On March 7, 1997, AMS Dairy the National Cheese Exchange price in Farm Bill mandates; explained the Division issued a memorandum to calculating the basic formula price, on preliminary report on the consolidation interested parties announcing the January 29, 1997, the Secretary sissued of Federal milk orders; explained the release of three reports that addressed a press release announcing steps being contents of the reports addressing Class the Class I price structure, the taken by USDA to address concerns I price structure, classification of milk, classification of milk, and the identical raised by dairy producers about how identical provisions and basic formula provisions contained in a Federal milk milk prices are calculated. In the press price; and discussed the congressional order. The price structure report release, the Secretary requested further report. consisted of a summary report and a comments from interested parties about technical report and discussed several the use of the National Cheese Exchange Public Input options for modifying the Class I price in the determination of the basic To ensure the involvement of all structure. (See Appendix B for report formula price, which is the minimum interested parties, particularly small summary.) The classification report price that handlers must pay dairy businesses as defined in the following recommended the reclassification of farmers for milk used to manufacture Initial Regulatory Flexibility Analysis, certain dairy products, including the Class III products (butter and cheese) in the process of Federal order reform, removal of Class III–A pricing for nonfat and the price used to establish the Class three primary methods of contact have I and Class II prices. These comments been used: direct written notification, 5 Copies of this announcement and all subsequent were requested by March 31, 1997, and publication of notices through various announcements and reports can be obtained from have been useful in analyzing media forms, and speaking and meeting Dairy Programs at (202) 720–4392, any Market Administrator office, or via the Internet at http:// alternatives to the basic formula price in with organizations and individuals www.ams.usda.gov/dairy/. context of the order reform process. regarding the issue of Federal order Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4805 reforms. In addition, information has Analysis, and the Paperwork Reduction Internet at http://www.ams.usda.gov/ been made available to the public via Analysis. dairy. the Internet. USDA also made one Executive Order 12988 This rule proposes the consolidation written program announcement of the current 31 Federal milk marketing specifically requesting information from This proposed rule has been reviewed order areas into 11 marketing order small businesses. under Executive Order 12988, Civil areas. The proposed marketing areas are: All announcements made by USDA Justice Reform. This rule is not intended Northeast, Mideast, Upper Midwest, have been mailed to over 20,000 to have a retroactive effect. If adopted, Central, Appalachian, Southeast, interested parties, State Governors, State this proposed rule will not preempt any Florida, Southwest, Arizona-Las Vegas, Department of Agriculture Secretaries or state or local laws, regulations, or Western, and Pacific Northwest. The Commissioners, and the national and policies, unless they present an consolidated marketing areas consist ten regional Small Business irreconcilable conflict with the rule. primarily of territory that is in the Administration offices. In addition, The Agricultural Marketing current Federal order markets. In most dairy producers under the orders Agreement Act of 1937, as amended (7 addition, they would include some were notified through regular market U.S.C. 601–674), provides that previously unregulated territory. At this service bulletins published by Market administrative proceedings must be time, California is not proposed as a Administrators on a monthly basis. exhausted before parties may file suit in Federal order. This consolidation is Press releases were issued by USDA for court. Under section 608c(15)(A) of the proposed to comply with the 1996 Farm the May 2, 1996, December 3, 1996, Act, any handler subject to an order may Bill that mandates the current Federal January 29, 1997, March 7, 1997, and request modification or exemption from milk order marketing areas be May 20, 1997, announcements, and for such order by filing with the Secretary consolidated into between 10 to 14 the July 31, 1996, public forum.6 These a petition stating that the order, any marketing areas by April 4, 1999. This press releases were distributed to provision of the order, or any obligation proposed rule also sets forth two approximately 33 wire services and imposed in connection with the order is options for consideration as a trade publications and to each State not in accordance with law. A handler replacement for the Class I price Department of Agriculture is afforded the opportunity for a hearing structure and proposes replacing the Communications Officer. These on the petition. After a hearing, the basic formula price with a multiple methods of notification helped to ensure Secretary would rule on the petition. component pricing system. These that virtually all identified small The Act provides that the district court changes are proposed to address businesses were contacted. of the United States in any district in concerns that the current system of Departmental personnel, both in the which the handler is an inhabitant, or pricing Class I milk may not adequately field and from Washington, actively met has its principal place of business, has reflect the value of Class I milk at with interested parties to gather input jurisdiction in equity to review the various locations or the value of milk and to clarify and refine ideas already Secretary’s ruling on the petition, used in manufacturing products. The submitted. Formal presentations, round provided a bill in equity is filed not 1996 Farm Bill identified these as table discussions, and individually later than 20 days after the date of the related issues that may be addressed in scheduled meetings between industry entry of the ruling. the consolidation of milk marketing representatives and Departmental orders. The proposed rule further Executive Order 12866 personnel were held. Over 250 proposes changes to classification of organizations and more than 22,000 The Department is issuing this milk by establishing a new Class IV individuals were reached through this proposed rule in conformance with which would include milk used to method. Of these individuals, Executive Order 12866. This proposed produce nonfat dry milk, butter, and approximately 13,400 were identified as rule has been determined to be other dry milk powders; the small businesses. economically significant for the reclassification of eggnog and cream As a result of the requests for purposes of Executive Order 12866. cheese; and other minor changes. These information, publication of When proposing a regulation which is proposed changes should improve informational reports, meetings with determined to be economically handler reporting and accounting interested parties, and the comments, significant, agencies are required, procedures thereby providing for greater AMS has prepared this proposed rule among other things, to: assess the costs market efficiencies. Finally, this which contains proposals addressing and benefits of available regulatory proposed rule expands Part 1000 to the following issues: the consolidation alternatives; base regulatory decisions include provisions that are identical of marketing areas; basic formula price on the best reasonably-obtainable within each consolidated order to assist replacement and other class price technical, economic, and other in simplifying the orders. These issues; Class I price structure; information; avoid duplicative provisions include the definitions of classification of milk; provisions regulations; and tailor regulations to route disposition, plant, distributing applicable to all orders; regional issues impose the least burden on society plant, supply plant, nonpool plant, relating to the Northeast, Southeast, consistent with obtaining regulatory handler, other source milk, fluid milk Midwest, and Western areas; and objectives. Therefore, to assist in product, fluid cream product, various other miscellaneous and fulfilling the objectives of Executive cooperative association, and commercial administrative issues. Each proposal is Order 12866, the USDA prepared an food processing establishment. In discussed in detail following this initial Regulatory Impact Analysis addition, the milk classification section, preliminary statement that includes (RIA). Information contained in the RIA pricing provisions, and most of the Executive Order 12988 and 12866 pertaining to the costs and benefits of provisions relating to payments have discussions, the Regulatory Flexibility the revised regulatory structure are been included in the General summarized in the following analysis. Provisions. These proposed changes 6 Copies of these press releases may be obtained from Dairy Programs at (202) 720–4392, or via the Copies of the RIA can be obtained from adhere with the efforts of the National Internet at http://www.ams.usda.gov/news/ Dairy Programs at (202) 720–4392, any Performance Review—Regulatory newsrel.htm. Market Administrator office, or via the Reform Initiative to simplify, modify, 4806 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules and eliminate unnecessary repetition of quantifying the economic effects of various class prices. Such estimates, of regulations. Unique regional issues or consolidation. necessity, would reflect only anticipated marketing conditions have been Handlers would be affected by class changes in blend prices, using class considered and included in each prices, which would be determined by prices that would no longer be in effect market’s order provisions. Not all of the Class I price surface option that is under the consolidated orders. To the these changes would be considered selected, and by the minimum prices extent that the WAUV computations economically significant; however, contained in all of the orders for milk reflect some of the effect of the effect of changes dealing with marketing area used in Classes II, III and IV. Handlers consolidation on producer prices, they similarly located would be subject to the consolidation, the basic formula price, are included in this analysis. It should and the Class I pricing structure may be same minimum Class I, Class II, Class III be noted, however, that all producers in significant and are described further in and Class IV prices for milk. Such any given current area would be affected the following sections. handlers would also be subject to the same minimum prices to be paid to to an equal extent by the consolidation Economic Impacts of Consolidation producers. factor. It is impossible to determine the Dairy farmers would be affected by The following table shows the economic effects of the proposed the proposed consolidation of marketing potential impact of three order marketing area consolidation on areas because changes in utilization consolidation options on producers who handlers, producers and consumers percentages would result in changes in supply each of the current Federal milk without using assumptions about the blend prices. As in the case of effects on marketing order areas via WAUV specific order provisions contained in handlers, however, it is impossible to ‘‘prices’’. The three consolidated the consolidated order areas. The only accurately determine a separate options are (1) the consolidated effect consolidation, as a single factor, consolidation effect on producers, marketing areas suggested in the can have on the various market defined in monetary terms. The closest December 1996 initial Preliminary participants is its effect on the approximation to such an estimate Report on Order Consolidation; (2) the percentage of milk used in different would be the ‘‘weighted average classes within the proposed utilization value’’ (WAUV). These consolidated marketing areas suggested consolidated orders. Without ‘‘prices’’ reflect only the change in value in the May 1997 Revised Preliminary assumptions that include the specific that can be attributed to changes in Report on Order Consolidation; and (3) class prices and milk uses in different utilization rates, with no assumptions the consolidated marketing areas products, there are no means of about changes in the levels of the suggested in this proposed rule.

WEIGHTED AVERAGE UTILIZATION VALUES (WAUV) [Based on October 1995 information]

Consolidated Market Marketing areas in Initial Marketing Areas in Revised Marketing Areas in Proposed Consol. Report (Dec. 96) Consol. Report (May 97) Rule (Option 1) (Option 2) (Option 3) Consol. Mkt. WAUV Consol. Mkt. WAUV Consol. Mkt. WAUV ($/cwt) ($/cwt) ($/cwt) Current Markets WAUV using WAUV using WAUV using WAUV using WAUV using WAUV using Current Mkt. Consol. Mkt. Current Mkt. Consol. Mkt. Current Mkt. Consol. Mkt. Utilization Utilization Utilization Utilization Utilization Utilization ($/cwt) ($/cwt) ($/cwt) ($/cwt) ($/cwt) ($/cwt)

Northeast ...... $13.46 ...... $13.48 ...... $13.47 New England (F.O. 1) ...... $13.50 13.48 $13.52 13.51 $13.52 13.49 NY-NJ (F.O. 2) ...... 13.44 13.48 13.48 13.50 13.45 13.48 Middle Atlantic (F.O. 4) ...... 13.45 13.39 13.45 13.41 13.44 13.40 Appalachian ...... 14.13 ...... 13.96 ...... 13.97 Carolina (F.O. 5) ...... 14.23 14.21 14.23 14.19 14.23 14.20 Tenn. Valley (F.O. 11) ...... 13.92 13.95 13.92 13.93 13.92 13.94 Lville-Lex-Evan (F.O. 46) ...... n/a n/a 13.35 13.39 13.35 13.40 Florida ...... 15.05 ...... 15.05 ...... 15.05 Upper Florida (F.O. 6) ...... 14.67 14.78 14.67 14.78 14.67 14.78 Tampa Bay (F.O. 12) ...... 15.09 15.04 15.09 15.04 15.09 1504 SE Florida (F.O. 13) ...... 15.42 15.31 15.42 15.31 15.42 15.31 Southeast ...... 14.26 ...... 14.25 ...... 14.24 Southeast (F.O. 7) ...... 14.26 14.26 14.25 14.25 14.24 14.27 Mideast ...... 12.96 ...... 12.94 ...... 12.92 Ohio Valley (F.O. 33) ...... 12.99 13.02 12.99 13.01 12.99 13.00 E. Ohio-W. PA (F.O. 36) ...... 13.07 13.00 13.10 12.99 13.07 12.97 S. Michigan (F.O. 40) ...... 12.75 12.86 12.75 12.84 12.75 12.83 MI Upper Penin. (F.O. 44) ...... 12.81 12.62 12.81 12.62 12.81 12.61 Lville-Lex-Evan (F.O. 46) ...... 13.35 13.06 n/a n/a n/a n/a Indiana (F.O. 49) ...... 12.97 12.94 12.97 12.93 12.97 12.92 Upper Midwest ...... 12.60 ...... 12.62 ...... 12.60 Chicago Reg. (F.O. 30) ...... 12.62 12.62 12.62 12.61 12.62 12.62 MI Upper Penin. (F.O. 44) ...... R R R R R R Neb.-W. Iowa (F.O. 65) ...... n/a n/a 12.63 12.74 n/a n/a Upper Midwest (F.O. 68) ...... 12.55 12.56 12.55 12.54 12.55 12.56 E. South Dakota (F.O. 76) ...... n/a n/a 12.81 12.65 n/a n/a Iowa (F.O. 79) ...... n/a n/a 12.69 12.67 n/a n/a Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4807

WEIGHTED AVERAGE UTILIZATION VALUES (WAUV)ÐContinued [Based on October 1995 information]

Consolidated Market Marketing areas in Initial Marketing Areas in Revised Marketing Areas in Proposed Consol. Report (Dec. 96) Consol. Report (May 97) Rule (Option 1) (Option 2) (Option 3) Consol. Mkt. WAUV Consol. Mkt. WAUV Consol. Mkt. WAUV ($/cwt) ($/cwt) ($/cwt) Current Markets WAUV using WAUV using WAUV using WAUV using WAUV using WAUV using Current Mkt. Consol. Mkt. Current Mkt. Consol. Mkt. Current Mkt. Consol. Mkt. Utilization Utilization Utilization Utilization Utilization Utilization ($/cwt) ($/cwt) ($/cwt) ($/cwt) ($/cwt) ($/cwt)

Central ...... 13.16 ...... 13.21 ...... 12.95 S. IL-E. MO (F.O. 32) ...... 12.93 12.90 13.00 12.95 13.00 12.88 Central IL (F.O. 50) ...... 13.03 12.74 13.03 12.78 13.03 12.72 Greater K. City (F.O. 64) ...... 13.22 12.90 13.22 12.95 13.22 12.88 Neb.-W. Iowa (F.O. 65) ...... 12.63 12.81 n/a n/a 12.63 12.79 E. South Dakota (F.O. 76) ...... 12.81 12.68 n/a n/a 12.81 12.67 Iowa (F.O. 79) ...... 12.71 12.71 n/a n/a 12.71 12.70 SW Plains (F.O. 106) ...... 13.31 13.33 13.31 13.41 13.08 13.29 E. Colorado (F.O. 137) ...... 13.27 13.31 13.27 13.38 13.27 13.27 Southwest ...... 13.36 ...... 13.39 ...... 13.39 Texas (F.O. 126) ...... 13.49 13.48 13.49 13.46 13.49 13.46 Central AZ (F.O. 131) ...... 13.26 13.17 n/a n/a n/a n/a NM-W. Texas (F.O. 138) ...... 13.00 13.09 13.00 13.07 13.00 13.07 Arizona-Las Vegas ...... n/a ...... 13.26 ...... 13.26 Central AZ (F.O. 131) ...... n/a n/a 13.26 13.29 13.26 13.29 Western ...... 12.79 ...... 12.78 ...... 12.78 W. Colorado (F.O. 134) ...... 13.41 12.84 13.41 12.82 13.41 12.82 SW ID-E. OR (F.O. 135) ...... 12.63 12.68 12.63 12.68 12.63 12.68 Great Basin (F.O. 139) ...... 12.83 12.81 12.81 12.79 12.81 12.79 Pacific Northwest ...... 12.45 ...... 12.44 ...... 12.44 Pacific NW (F.O. 124) ...... 12.45 12.45 12.44 12.44 12.44 12.44 n/a: Not applicable R: Restricted

For each option, a weighted average Economic Impact of Basic Formula Price Division, AMS; 8 and the following use value (WAUV) is computed for (a) Proposal reports from the Agricultural and Food the consolidated order; (b) the current Policy Center, Texas A&M University order with current use of milk; and (c) A number of options for determining System: the current order with projected use of a basic formula price were considered ‘‘An Economic Evaluation of Basic milk in the consolidated order. The and analyzed in the process of Formula Price (BFP) Alternatives,’’ difference between the weighted average developing the proposed basic formula AFPC Working Paper 97–2, June 1997. use values in (b) and (c) represents the price (BFP). In addition to the proposed ‘‘Evaluation of Final Four Basic potential impact on producers. method of pricing components based on Formula Price Options,’’ AFPC Working their value in manufactured products, Paper 97–9, August 1997.9 For example, in this proposed rule, other options examined by both the The primary criterion used by the BFP the New England (F.O. 1) market’s Agricultural Marketing Service’s Basic Committee was that any replacement WAUV using its current utilization is Formula Price Replacement Committee 7 BFP option reflect the supply of and $13.52 per cwt. When the three markets and the University Study Committee demand for milk used in manufactured are consolidated and the new (USC), led by Dr. Ronald D. Knutson of dairy products. At the same time, one of consolidated utilization is used to Texas A & M University, were: the USC’s critical criteria for a calculate the WAUV, New England’s economic formulas, futures markets, replacement BFP was that it reliably reflect market conditions for all WAUV would be $13.49 per cwt. In this cost of production, competitive pay manufactured products. comparison, the potential impact on pricing, and pricing differentials only. producers supplying the New England In trying to determine the most market area would be a decrease of three Descriptions of the two Committees’ appropriate replacement for the current cents per cwt. analyses, and results of their work are BFP, which uses a survey of prices paid included in ‘‘A Preliminary Report on by manufacturing plants for non-Grade Each of the three options assumes the Alternatives to the Basic Formula A milk updated by a product price pool distributing plant standards Price,’’ published in April 1997 by the suggested for each of the consolidated Basic Formula Price Committee, Dairy 8 Copies of this report can be obtained from Dairy orders in this proposed rule; thus the Programs at (202) 720–4392, any Market calculated values in the preceding table Administrator office, or via the Internet at http:// 7 The Basic Formula Price Committee was are not directly comparable to the www.ams.usda.gov/dairy/. established in May 1996 to consider replacements 9 Copies of these reports may be obtained by WAUV values published with either the for the basic formula price during the Federal order contacting Dr. Ronald Knutson, Agricultural and initial or the revised reports on order reform process. This committee and others Food Policy Center, Dept. of Ag. Economics, Texas consolidation. established are described further in the A&M University, College Station, TX 77843–2124, ‘‘Background’’ portion of this proposed rule. or (409) 845–5913. 4808 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules formula, the goal of both groups was a handler for all producer receipts, orders involved for handlers who are market-based alternative. The BFP including milk diverted by the handler, not equipped to make all of the Committee measured the extent to receipts from cooperatives as handlers determinations required under the which each pricing option met its pursuant to § 1000.9(c), and, in some amended orders. This policy would primary goal by tracking the options cases, receipts of bulk milk received by continue under this proposed rule. against the current BFP for a period of transfer or diversion. Thus, handlers who are unable to obtain prior months.10 The USC Committee Since producers would be receiving the equipment and personnel needed to used an econometric procedure to test payments based on the component accomplish the required testing for the ability of the alternatives they levels of their milk, the payroll reports component pricing would be able to rely considered to reflect supply and that handlers supply to producers must on the market administrators to verify or demand. reflect the basis for such payment. establish the tests under which To the extent the goal of identifying Therefore, the handler would be producers are paid. a BFP that reflects the value of milk required to supply the producer not only with the information currently Economic Impacts of Class I Price used in manufactured products is Changes capable of attainment, all market supplied, but also: (a) the pounds of participants—handlers, producers, and butterfat, the pounds of protein, and the Several different options were consumers—would be affected by the pounds of other solids contained in the considered for pricing fluid or Class I BFP replacement in the same manner as producer’s milk, as well as the milk. These pricing options included if they were operating in a free market, producer’s average somatic cell count; using a market-driven basic formula with no external impacts caused by and (b) the minimum rates that are price plus differentials based on regulation. Consumers can be assured required for payment for each pricing location, differentials based on the ratio that the prices generally charged for factor and, if a different rate is paid, the of milk used for fluid purposes dairy products are prices that reflect, as effective rate also. It should be noted compared to all other uses, flat closely as possible, the forces of supply that handlers already are required to differentials, flat differentials modified and demand in the market. report information relative to pounds of in high Class I use areas, and Of the options considered and production, butterfat, and rates of differentials based on the demand for analyzed, both groups studying the payment for butterfat and fluid milk within a designated issue determined that the option of hundredweight of milk. marketing area and the associated pricing components of milk according to Of over 74,000 producers whose milk transportation costs. Other options their value in manufactured products, as was pooled in December 1996 under 23 considered would have decoupled Class reflected by the sales prices of those orders that would be part of I pricing from the basic formula price or products, best approximates the consolidated orders providing for pooled Class I differentials only (i.e., intersection of supply and demand for multiple component pricing, the milk of eliminated the basic formula price milk used in manufactured dairy 52,500 of these producers was pooled entirely). Finally, suggestions were products. under 13 orders that currently have considered to base Class I pricing on the MCP. Handlers in these markets already cost of production and to base Economic Impact of Multiple have incurred the initial costs of testing differentials on only regional supply Component Pricing Provisions milk for its component content and have and demand conditions. After analyzing Seven of the 11 proposed orders already made the needed transition to these options and more than 1400 letters provide for milk to be paid for on the reporting the additional information that were submitted from interested basis of its components (multiple required for component pricing of milk. persons, the Department narrowed the component pricing, or MCP). Five of the Of the remaining 21,750 producers pricing options to four and conducted 7 MCP orders also provide for milk who would be affected by MCP extensive quantitative and qualitative values to be adjusted according to the provisions under a Federal order, the analysis on them. The four options somatic cell count of producer milk. milk of approximately 13,000 of these selected include location-specific The equipment needed for testing milk producers currently is received by differentials, relative value-specific for its component content can be very handlers who test or have the capability differentials, and decoupled Class I expensive to purchase, and requires of testing for multiple components and, prices with adjustors. Although four highly-skilled personnel to maintain in many cases, somatic cells. Many of Class I price structure options are and operate. The cost of infra-red these handlers also report component analyzed in the RIA, only two options analyzers ranges from just under results to the producers with their are considered as viable replacements $100,000 to $200,000. The infra-red payments. Almost all of the producers for the current Class I price structure in machines that are used by most whose milk currently is not being tested the proposed rule. However, comments laboratories will test for total solids and or paid for on the basis of components are requested on all options prior to somatic cells at the same time the are located in the New England and determining which option should be butterfat and protein tests are done. New York-New Jersey marketing areas, adopted. Three of the four pricing options in Some additional information is which would be consolidated with the the RIA assume that milk would be necessary from handlers on their Middle Atlantic area into the proposed classified in the four classes of use monthly reports of receipts and Northeast order. Accommodation has been made to detailed in the proposed rule. One utilization to assure that producers are ameliorate handlers’ expenses of testing option in the RIA has only two classes paid correctly. In particular, handlers producer milk for component content. of milk and thus is not detailed in the would be required to report pounds of As component pricing plans have been proposed rule. For purposes of the RIA protein, pounds of other solids, and, in adopted under a number of the present analysis, Class IV milk is priced using 5 of the orders, somatic cell information. Federal milk orders since 1988, the the proposed butter-nonfat dry milk This data would be required from each component testing needed to implement product formula, but since the product 10 It was assumed that the current BFP these pricing plans has been performed prices proposed for use in the formula successfully reflects the supply and demand for by the market administrators are not presently available, the Chicago milk used in manufactured products. responsible for the administration of the Mercantile Exchange spot price for Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4809 butter and the average nonfat dry milk which would have the city of Charlotte (¥$0.34). The annual average all-milk wholesale price reported by USDA’s as its base pricing point, prices also price in the previously-unregulated Dairy Market News for the Western were identified for Knoxville and areas of New York and New England States are substituted. Also, Class III Louisville. These 3 pricing points declined $0.87 per cwt. milk is priced using the proposed correspond with the base pricing points Changes in gross cash receipts, as cheese product formula, and the Class II of the 3 markets that are to be combined expected, moved in the same direction milk price for the month is equal to the into the Appalachian regional order. as the change in the all-milk price in a Class IV price for the month plus 70 given market. Over the period 1999– cents per hundredweight (cwt). Location-Specific Differentials (Option 2004, location-specific differentials The initial RIA assesses costs and 1A) Analysis raised gross receipts in 18 markets. It benefits for dairy farmers, fluid milk This option would establish a appears that the estimated average processors, dairy product nationally coordinated system of annual receipts for producers in the manufacturers, and consumers. The location-specific Class I price current New York-New Jersey market impact of each of the four Class I pricing differentials reflecting the relative increased by $37.2 million. However, options is measured as a change from a economic value of milk by location. An most of this increase was the result of baseline. The model baseline was important feature of the option is that it adding to the all-milk price the current adapted from the USDA dairy baseline would also include location adjustments $0.15 reduction on all milk marketings estimate published as part of the that geographically align minimum for transportation. It is expected that President’s Budget for Fiscal Year Class I milk prices paid by fluid milk this apparent increase in the all-milk 1998.11 That baseline, which is a processors nationwide regardless of price and dairy farmer income would be national annual projection of the defined milk marketing area boundaries offset by a like amount by increased supply-demand-price situation for milk or order pooling provisions. It is based transportation costs paid by the and dairy products, was the basis for the on the economic efficiency rationale producer. The markets with the greatest market-by-market baseline of the model. presented in Cornell University research estimated increase in gross receipts for Both the President’s Budget Baseline on the U.S. dairy sector.13 A basic milk marketing were Southwest Plains and the model baseline assume the same premise of this option is that the value ($11.8 million), Chicago Regional ($10.9 program assumptions: namely, that the of milk varies according to location million), Southern Michigan ($10.7 price support program will be phased across the United States. The concepts million), New England ($7.4 million), out by December 31, 1999, that the of spatial price value and relative price and Eastern Colorado ($7.2 million). Dairy Export Incentive Program will relationships together with marketing Gross receipts in the current Chicago continued to be utilized, and that the data and expert knowledge of local Regional and Upper Midwest markets Federal Milk Order Program will be conditions and marketing practices and may have been expected to increase continued at the same level of class a review of supply and demand more since this option increased the prices currently in existence. conditions are used to develop a Class I differentials at those points Assumptions also are made concerning national Class I price structure. substantially. However, this option also the cost of production—especially feed, Overall, the magnitude of changes in envisions the expansion of the commercial utilization of milk and price and income under this option transportation credits within the merged dairy products, commercial inventories, compared to the baseline are small. The order to move milk which is expected and imports. All parameters, except all-milk price for all Federal order to use 20 percent of the dollars those associated with the changes in the markets combined during the 1999– generated by the higher Class I Federal Milk Order Program, are 2004 period is estimated to average 5 differentials. Over-order charges which assumed to remain unchanged. cents per cwt higher. For all of the U.S. currently fund transportation credits are To evaluate the impacts on dairy the all-milk price is estimated to average expected to be reduced by a like farmers, fluid milk processors, and dairy 3 cents higher. The average all-milk amount. product manufacturers of the four price at the basing point of 18 current The largest estimated decreases in selected Class I pricing options, a markets could experience increases of 1 cash receipts occur in the Southern baseline estimate was constructed to 29 cents per cwt. At the basing point Illinois-Eastern Missouri (¥$8.5 assuming that the current 32 orders 12 of the 13 markets, the average all-milk million), Great Basin (¥$4.1 million), would continue through the study price could decrease from 3 to 83 cents Middle Atlantic (¥$2.9 million), Texas period, 1999–2004. To make per cwt. (¥$2.5 million), and Greater Kansas comparisons, proposed pricing points The 5 markets with the greatest City (¥$2.5 million) markets. Nine for the proposed 11 consolidated orders increases in all-milk prices were Eastern other current markets would lose were identified to correspond with the Colorado ($0.29), New York-New Jersey average annual gross cash receipts base pricing zones of the 32 current ($0.28), Tampa Bay ($0.26), Southwest during the period 1999–2004 of less marketing orders. For example, for the Plains ($0.25), and Upper Florida than $2.0 million each. The previously consolidated Appalachian Region order, ($0.24). The market with the greatest unregulated areas of New York and New reduction in price was Western England would lose an estimated average of $16.9 million in annual gross 11 See Agricultural Baseline Projections to 2005, Colorado (¥$0.83), Central Illinois Reflecting the 1996 Farm Act, Interagency (¥$0.66), Greater Kansas City (¥$0.53), receipts from milk marketings. Under Agricultural Projections Committee, U.S. Eastern South Dakota (¥$0.51), and location-specific differentials the Department of Agriculture, Office of the Chief Southern Illinois-Eastern Missouri estimated average annual gross receipts Economist, World Agricultural Outlook Board, Staff for all Federal order markets combined Report, WAOB–97–1 and ‘‘Budget of the United States Government, Fiscal Year 1998.’’ 13 Bishop, Phillip, James Pratt, Eric Erba, Andrew increased by $68.1 million and the 12 The following analyses were completed prior to Novakovic, and Mark Stephenson, An Economic entire US increased $53.1 million the termination of the Tennessee Valley marketing and Mathematical Description of the U.S. Dairy compared to the baseline for the 1999– order and thus the results identify it as a pricing Sector Simulator, Research Bulletin 97–09, A 2004 period. point. Most of the plants and milk of the former Publication of the Cornell Program on Dairy Tennessee Valley market have become regulated Markets and Policy, Department of Agricultural, Fluid processors in 21 of the 32 under either the Southeast order or the Carolina Resource, and Managerial Economics, Cornell Federal order market areas face order. University, July 1997. increased Class I differentials if this 4810 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules option were adopted compared with Phase-in Method 1 called-for transition differentials. At the Class I differentials under the baseline. With the gradual phase-in, the beginning of the fifth year, Class I Fluid processors in four of the Federal estimated all-milk price for all Federal differentials would be fully phased in order markets and in the previously- order markets combined during the and no assistance provided. Under this phase-in method, the unregulated areas of New York and New 1999–2004 period could average 8 cents estimated all-milk price for all Federal England would see no changes in Class per cwt lower than the baseline. The order markets combined during the I differentials. Fluid processors in the estimated average all-milk price at the 1999–2004 period could average 4 cents remaining seven Federal order markets basing point of 11 Federal order markets per cwt lower than the baseline. The would see decreases in Class I could increase from 1 to 32 cents per estimated average all-milk price at the differentials compared with the cwt. At the basing point of the other 21 basing point of 12 Federal order markets baseline. The increases in differentials Federal order markets, the all-milk price ranged from $0.01 per cwt in the New could increase from 3 to 36 cents per is estimated to decrease from 1 to 58 cwt. At the basing point of 20 Federal England and New York-New Jersey cents per cwt. markets to $0.50 per cwt in the Upper order markets, the all-milk price is The 5 markets with the greatest estimated to decrease from 2 to 53 cents Midwest. Decreases in Class I estimated increases in average all-milk differentials would range from $0.03 per per cwt from the baseline. prices, for the 1999–2004 period are: The five markets with the greatest cwt in the Middle Atlantic to $0.25 per New Mexico-West Texas ($0.32), cwt in New Mexico-West Texas. Those estimated increases in average all-milk Chicago Regional ($0.19), Tampa Bay prices, per cwt, for the 1999–2004 fluid processors facing higher Class I ($0.19), Nebraska-Western Iowa ($0.17), differentials would see their monthly period are: New Mexico-West Texas and Southwest Idaho-Eastern Oregon ($0.36), Tampa Bay ($0.32), Nebraska- obligations to the markets’ producer- ($0.15). The 5 Federal order markets settlement funds increase while those Western Iowa ($0.22), Upper Florida with the greatest estimated reductions ($0.20), and Chicago Regional ($0.23). facing lower Class I differentials would in price are: Eastern South Dakota see their obligations decrease. The five markets with the greatest (¥$0.58), Michigan Upper Peninsula estimated reductions in price are: With virtually no change in the (¥$0.55), Western Colorado (¥$0.55), Eastern South Dakota (¥$0.53), Western amount of milk available for Greater Kansas City (¥$0.53), and Colorado (¥$0.52), Michigan Upper manufacturing, manufacturers of dairy Carolina (¥$0.46). The annual average Peninsula (¥$0.49), Greater Kansas City products would face nearly the same all-milk price in the previously (¥$0.48), and Texas (¥$0.34). The supply and demand conditions that they unregulated areas of New York and the annual average all-milk price in the now face when buying milk or selling New England states is estimated to previously unregulated areas of New dairy products. Manufacturers in the decline by $0.96 per cwt compared to York and the New England states is Southwest, where milk marketings are the baseline. estimated to decline by $0.93 per cwt expected to decline, may have less milk Over the period 1999–2004, 1B compared to the baseline. to process while manufacturers in the differentials could lower producer gross Over the period 1999–2004, this Upper Midwest may find that they have cash receipts from minimum order phase-in option would lower estimated slightly more milk for manufacturing. prices in 21 of the Federal order producer gross cash receipts attributable Relative Value-Specific Differentials markets. The five current markets that to minimum order prices in 19 of the (Option 1B) Analysis would have the greatest decreases were: Federal order markets. The 5 markets Texas (¥$36.8 million), Middle Atlantic with the greatest estimated decreases Like a location-specific differential (¥$26.2 million), Upper Midwest were Texas (¥$32.6 million), Middle structure, a relative value-specific (¥$15.9 million), Carolina (¥$15.2 Atlantic (¥$22.8 million), Upper differential structure would also million), and Southeast (¥$12.5 Midwest (¥$13.9 million), Carolina establish a nationally coordinated million). The annual average reduction (¥$10.7 million), and Arizona-Las system of Class I price differentials and in estimated gross receipts in the Vegas (¥$7.6 million). The annual adjustments that recognizes several low previously unregulated areas of New average reduction in estimated gross pricing areas. Option 1B relies on a least York and the New England states is receipts in the previously unregulated cost optimal solution from the USDSS estimated at $18.5 million from the areas of New York and the New England model to develop a Class I price baseline. Estimated gross receipts states is $17.8 million lower than the structure that is based on the most increased in 11 markets. The five baseline. Gross receipts from milk efficient assembly and shipment of milk markets that would have the greatest marketings could increase in the and dairy products to meet all market increases in gross receipts were: Chicago following markets: Chicago Regional demands for milk and its products. Regional ($31.5 million), New Mexico- ($34.4 million), New York-New Jersey Option 1B relies more on the market West Texas ($9.1 million), Southern ($11.7 million), Southern Michigan and the negotiating ability of processors Michigan ($6.6 million), Southwestern ($10.4 million), New Mexico-West and producers to generate higher prices Idaho-Eastern Oregon ($5.8 million), Texas ($10.4 million), and Tampa Bay when needed to provide the necessary and New York-New Jersey ($5.3 ($7.0 million). Total estimated cash incentive to move milk in order to million). receipts for the combined current satisfy demand. Phase-in Method 2 Federal orders would average $40 Three methods of phasing into the million less for the 6-year period. Class I differentials under Option 1B A possible modification to the relative were evaluated. First, a 20-percent value-specific differentials would be to Phase-in Method 3 gradual phase-in was analyzed; then, a initially raise Class I differentials by 55 Another phase-in option would transitional phase-in that would offset cents per cwt above the level called for enhance prices during the transition any lost revenue was analyzed; and in the first year of transition. During the period by $1.10 for first year phase-in finally, a revenue-enhancement phase- second year, Class I differentials would differentials, $0.70 in the second year, in that would add additional revenue be set at 35 cents above the transition $.40 in the third year, and $.20 in the into the Class I price structure was level; the third year, 20 cents above; and fourth year. The additional price analyzed. the fourth year, 10 cents above the enhancement provided to dairy farmers Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4811 under this method is intended to help Decoupled Baseline Class I Price with less than the baseline for the 6-year producers make the necessary Adjustors (Option 5) Analysis period. Cash receipts would be lower in investments and other changes to A third option analyzed in the RIA 23 markets and higher in 9 markets. compete in a more market-oriented would retain the current Class I Because of this decline in cash receipts economy. At the beginning of the fifth differentials, but floor Class I prices in and since it is inconsistent with the year, Class I differentials would be fully all markets at their 1996 average levels. four-class system contained in the phased in at the Option 1B levels. Adjustments to this price would be proposed rule, this Class I price option is not detailed in the Class I price With the use of additional revenue made based on changes in fluid use rates and short term costs of production structure section of the proposed rule. under this phase-in option, the This two-class pricing system was found estimated all-milk price for all Federal (i.e., feed costs). Under this option, the all-milk price for all Federal order to be insufficient to recognize the order markets combined during the different use-values of milk for reasons 1999–2004 period could be expected to markets combined would increase $0.07 per cwt and the U.S. is projected to set forth in the Basic Formula be unchanged from the baseline. The Replacement and Classification portions estimated average all-milk price at the increase $0.03 per cwt over the 6-year period. In 19 of the Federal order of this proposed rule. basing point of 15 Federal order markets markets, the average all-milk price would increase from 1 to 43 cents per Other Impacts of Pricing Options would be higher by $0.01 to $0.50 per cwt. At the basing point of the other 17 cwt. In 12 Federal order markets, the The potential impacts of the options Federal order markets, the all-milk price average all-milk price would decrease analyzed in the initial RIA on retail is estimated to decrease from 3 to 52 from $0.03 to $0.82 per cwt. prices, and thus consumers, is less cents per cwt. Flooring the Class I prices at the certain than the impacts on other sectors The five markets with the greatest average 1996 levels would result in of the dairy industry. In general, estimated increases in average all-milk higher Class I prices in all markets in changes in farm milk prices and wholesale prices are passed onto prices, per cwt, for the 1999–2004 1999 and 2000 and higher all-milk consumers. However, the timing and the period were: Tampa Bay ($0.43) New prices in most markets when compared degree of these pass-throughs is Mexico-West Texas ($0.41), Upper to the baseline. These increased uncertain. It is assumed that all changes Florida ($0.32), Nebraska-Western Iowa incentives for milk production would result in greater volumes of milk for in farm milk prices (fluid processor ($0.26), and South Eastern Florida costs) and the wholesale costs of ($0.26). The five markets with the manufacturing and lower manufacturing prices. manufactured products would be passed greatest estimated reductions in price on to the retail level without any were: Western Colorado (¥$0.52), Location-Specific Differentials (Option changes in the farm-processor-retail or Eastern South Dakota (¥$0.49), Greater 6) Analysis farm-wholesale-retail margins. ¥ Kansas City ( $0.44), Michigan Upper This option would establish Because of the bulky and perishable Peninsula (¥$0.43), and Texas minimum prices for milk used in Class nature of packaged fluid milk, all (¥$0.33). The annual average all-milk I by adding market-specific Class I international trading of dairy products, price in the previously unregulated differentials to the proposed Class II with the exception of limited exports of areas of New York and the New England price. Class II would contain all fluid milk to Mexico, is in manufactured states is estimated to decline by $0.88 manufactured products and would be products. An appendix table in the per cwt compared to the baseline. Total priced by a cheese product price initial RIA details USDA’s baseline estimated cash receipts for the formula using the National Agricultural estimates of international and domestic combined current Federal order markets Statistical Service surveyed 40-pound prices for butter and nonfat dry milk. would average $34.9 million higher for cheddar cheese price times 9.87 plus the Neither location-specific differentials the 6-year period. Chicago Mercantile Exchange Grade A nor relative value-specific differentials Over the period 1999–2004, this butter price times 0.238 less $1.80. The are expected to have a significant phase-in option could lower estimated Class I differentials in this option would impact on domestic, wholesale dairy product prices and therefore little effect producer gross cash receipts from milk be phased in over a five-year period. on international trade of manufactured marketings in 16 of the current markets. In general, the Class I differentials in dairy products. The five current markets with the the central section of the country would be reduced while those in the greatest decreases were: Texas (¥$28.2 Economic Impacts of Classification Northwest, New England and Florida million), Middle Atlantic (¥$19.0 Changes are increased. After the proposed price million), Upper Midwest (¥$14.6 surface is fully phased in, 20 markets The classification of milk ¥ million), Carolina ( $6.5 million) and would have Class I differentials that are recommendations should not have a Arizona-Las Vegas (¥$6.0 million). The reduced and 10 markets would have significant economic impact on any annual average reduction in estimated increases. dairy industry participants. This gross receipts in the previously Under this option, the all-milk price proposed rule provides uniform milk unregulated areas of New York and the for all Federal order markets combined classification provisions for the newly New England states is estimated at $16.9 would decline $0.10 per cwt over the consolidated milk orders. The million from the baseline. Gross receipts six year period. In 23 of the Federal recommendations should improve from milk marketings increased in 16 order markets, the average all-milk price reporting and accounting procedures for markets. The five markets that would would decline by less than $0.01 to handlers and provide for greater market have the greatest increases were: $0.95 per cwt. In 9 orders, the all-milk efficiencies. Chicago Regional ($33.5 million), New price would increase $0.02 to $0.19 per Most of the changes regarding milk York-New Jersey ($19.0 million), cwt. classification provisions proposed for Southern Michigan ($14.4 million), New Gross cash receipts from milk the newly consolidated orders would Mexico-West Texas ($11.7 million), and marketings in the combined Federal simplify order language and remove Tampa Bay ($9.8 million). orders would average $148.8 million obsolete language. 4812 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

This proposed rule contains a discussed in the ‘‘Shrinkage and developing one or more basic formula modified fluid milk product definition Overage’’ section of this proposed rule, prices for manufacturing milk. This and recommends that certain products this modification should result in a proposed rule also sets forth two be reclassified. The revised fluid milk slight increase (i.e., one cent per cwt.) options for consideration as a product definition proposed for the new in the blend price paid to producers. replacement for the Class I price orders should provide more consistency For the reasons stated above, the milk structure and proposes replacing the in determining the classification of classification provisions proposed basic formula price with a multiple products. The inclusion of eggnog to the herein should have little economic component pricing system. These list of fluid milk products and the impact on dairy industry participants. changes are proposed to address reclassification of cream cheese from The Regulatory Flexibility Act and the concerns that the current system of Class III to Class II will cause a nominal Effects on Small Businesses pricing Class I milk may not adequately increase in the cost of the finished reflect the value of Class I milk at product. However, these changes, which Pursuant to the requirements set forth various locations or the value of milk will be applicable to all handlers in the Regulatory Flexibility Act (RFA) used in manufacturing products. The regulated under the new orders, should (5 U.S.C. 601 et seq.), the Agricultural 1996 Farm Bill identified these as not have a significant impact on the Marketing Service (AMS) has related issues that may be addressed in retail price of these products. Although considered the economic impact of the the consolidation of milk marketing producers will benefit from these proposed rule on small entities and has orders. The proposed rule further products being reclassified into higher prepared this initial regulatory proposes changes to classification of utilization classes, the impact of the flexibility analysis. The RFA provides milk by establishing a new Class IV product classification changes on the that when preparing such analysis an which would include milk used to blend price to producers will be agency shall address: the reasons, produce nonfat dry milk, butter, and objectives, and legal basis for the marginal. other dry milk powders; the proposed rule; the kind and number of Another modification includes the reclassification of eggnog and cream small entities which would be affected; reclassification of butter and whole milk cheese; and other minor changes. These the projected recordkeeping, reporting, powder from Class III to Class IV. This proposed changes should improve and other requirements; and federal change merely places these market- handler reporting and accounting rules which may duplicate, overlap, or clearing products in the new Class IV procedures thereby providing for greater conflict with the proposed rule. Finally, with nonfat dry milk. The change market efficiencies. Finally, this any significant alternatives to the promotes market efficiency and should proposed rule expands Part 1000 to proposal should be addressed. This have a minimal impact on producers’ include provisions that are identical initial regulatory flexibility analysis blend prices. within each consolidated order to assist One recommendation with possible considers these points and the impact of in simplifying the orders. These economic implications concerns the this proposed regulation on small provisions include the definitions of treatment of milk used to produce bulk entities, and evaluates alternatives that route disposition, plant, distributing sweetened condensed milk/skim milk. would accomplish the objectives of the plant, supply plant, nonpool plant, Some commenters argued that the wide rule without unduly burdening small handler, other source milk, fluid milk price difference that sometimes exists entities or erecting barriers that would product, fluid cream product, between the Class II price and the Class restrict their ability to compete in the cooperative association, and commercial III–A price has put manufacturers of dairy industry. food processing establishment. In sweetened condensed milk at a This regulatory action is being addition, the milk classification section, competitive disadvantage with considered in accordance with Section manufacturers of nonfat dry milk, which 143 of the Federal Agriculture pricing provisions, and most of the can be substituted for bulk sweetened Improvement and Reform Act of 1996, provisions relating to payments have condensed milk and skim milk in some 7 U.S.C. 7253, (the Farm Bill) which been included in the General higher-valued products. requires the Secretary of Agriculture Provisions. These proposed changes Although this proposed rule does not (Secretary) to consolidate the existing 31 adhere with the efforts of the National recommend a reclassification for milk Federal milk marketing orders, as Performance Review—Regulatory used in bulk sweetened condensed authorized by the Agricultural Reform Initiative to simplify, modify, milk, it does propose a change in the Marketing Agreement Act of 1937, into and eliminate unnecessary repetition of relationship between the Class II and IV between 10 and 14 orders. The Secretary regulations. Unique regional issues or prices which should eliminate the price is also directed to designate the State of marketing conditions have been disparity that now, at times, exists. As California as a Federal milk order if considered and included in each discussed in the ‘‘Class III and Class III– California dairy producers petition for market’s order provisions. A (i.e., Class IV) Milk’’ section of this and approve such an order. Finally, the The purpose of the RFA is to fit proposed rule, the proposed new Class Farm Bill specifies that the Department regulatory actions to the scale of II price will be equal to the Class IV of Agriculture use informal rulemaking business subject to the actions in order price plus a 70-cent differential. The to implement these reforms. The Farm that small businesses would not be coupling of the Class II and Class IV Bill requires that a proposed rule be unduly or disproportionately burdened. prices will largely remove the incentive published by April 4, 998, and all To accomplish this purpose, it first is to substitute nonfat dry milk for bulk reforms of the Federal milk order necessary to define a small business. sweetened condensed milk. program be completed by April 4, 1999. According to the Small Business The recommendations regarding In addition to these required Administration’s definition of a ‘‘small shrinkage provisions should provide mandates, the Farm Bill provides that business,’’ a dairy farm is a ‘‘small equity among handlers, improve market the Secretary may address related issues business’’ if it has an annual gross efficiencies, and facilitate accounting such as the use of utilization rates and revenue of less than $500,00 and a procedures. This proposed rule provides multiple basing points for the pricing of handler is a ‘‘small business’’ if it has that shrinkage be assigned pro rata fluid milk and the use of uniform fewer than 500 employees. For the based on a handler’s utilization. As multiple component pricing when purposes of determining which dairy Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4813 farms are ‘‘small businesses,’’ the other provisions, only becomes effective between current order areas has been $500,000 per year criterion was used to after approval, through a referendum, by included in the proposed consolidated establish a production guideline of dairy farmers associated with the order. marketing areas where such expansion 326,000 pounds per month. Although Development of the proposed rule would not have the effect of fully this guideline does not factor in began with the premise that no regulating plants that are not now additional monies that may be received additional burdens should be placed on regulated. The addition can benefit by dairy producers, it should be an the industry as a result of Federal order regulated handlers by eliminating the inclusive standard for most ‘‘small’’ consolidation and reform. As a step in necessity of reporting sales outside the dairy farmers. For purposes of accomplishing the goal of imposing no Federal order marketing area for the determining a handler’s size, if the plant additional regulatory burdens, a review purpose of determining pool is part of a larger company operating of the current reporting requirements qualification. Where such areas can be multiple plants that collectively exceed was completed pursuant to the added to a consolidated area without the 500-employee limit, the plant will Paperwork Reduction Act of 1995 (44 having the effect of causing the be considered a large business even if U.S.C. Chapter 35). In light of this regulation of any currently-unregulated the local plant has fewer than 500 review, it was determined that this handler, they are proposed to be added. employees. During the process of proposed rule would have little impact Handlers not currently fully regulated developing this proposed rule, USDA on reporting, recordkeeping, or other under Federal orders may become identified approximately 80,000 of the compliance requirements because these regulated for two main reasons: first, in 83,000 dairy producers (farmers) that would remain almost identical to the the process of consolidating marketing have their milk pooled under a Federal current Federal order program. No new areas, some handlers who currently are order as small businesses. Thus, small forms have been proposed; however, partially regulated may become fully businesses represent approximately 96 some additional reporting would be regulated because their sales in the percent of the producers in the United necessary in the proposed orders that combined marketing areas would meet States. On the processing side, there are would be adopting multiple component the pooling standards of a suggested over 1,200 plants associated with pricing if the current orders do not consolidated order area. Second, Federal orders, and of these plants, already have these provisions. previously unregulated area in New approximately 700 qualify as ‘‘small There are two principal reporting York, Vermont, New Hampshire and businesses’’ representing about 55 forms for handlers to complete each Massachusetts was added on the basis of percent of the total. month that are needed to administer the requests and supporting information. As During August 1997, there were 524 Federal milk marketing orders. The a result, previously unregulated fully regulated handlers (343 forms are used to establish the quantity handlers would become fully regulated. distributing and 181 supply plants), 134 of milk used and received by handlers, Because of these two reasons, 24 partially regulated handlers and 111 the pooling status of the handler, the additional plants are expected to producer-handlers submitting reports class-use of the milk used by the become fully regulated under the under the Federal milk marketing order handler, and the butterfat content and program. Of these 24 plants, it is program. During 1996, 83,012 dairy amounts of other components of the estimated that 15 are small businesses farmers delivered over 104.5 billion milk. This information is used to that would need to comply with the pounds of milk to handlers regulated compute the monthly uniform price reporting, recordkeeping, and under the milk orders. This volume paid to producers in each of the compliance requirements. The represents 69 percent of all milk markets. Handlers in the marketing completion of these reports would marketed in the U.S. and 72 percent of areas adopting multiple component require a person knowledgeable about the milk of bottling quality (Grade A) pricing would be required to complete the receipt and utilization of milk and sold in the country. The value of the additional information regarding the milk products handled at the plant. This milk delivered to Federal milk order components of the milk. This most likely would be a person already handlers at minimum order blend prices information would be necessary to on the payroll of the business such as was nearly $14.6 billion. Producer enable their values of milk to be a bookkeeper, controller or plant deliveries of milk used in Class I determined on the basis of these manager. The completion of the products (mainly fluid milk products) components and to assure that necessary reporting, recordkeeping, and totaled 45.5 billion pounds—43.5 producers are paid correctly. Many compliance requirements would not percent of total Federal order producer handlers already collect and report this require any highly specialized skills and deliveries. More than 200 million information. should not require the addition of Americans reside in Federal order This proposed rule does not require personnel to complete. In fact, much of marketing areas—77 percent of the total additional information collection that the information that handlers report to U.S. population. requires clearance by the OMB beyond the market administrator is readily The Federal milk order program is the currently approved information available from normally maintained designed to set forth the terms of trade collection. The primary source of data business records, and as such, the between buyers and sellers of fluid used to complete the forms are routinely burden on handlers to complete these milk. A Federal order enforces the used in most business transactions. recordkeeping and reporting minimum price that processors Forms require only a minimal amount of requirements is expected to be minimal. (handlers) in a given marketing area information which can be supplied In addition, assistance in completing must pay producers or farmers for milk without data processing equipment or a forms is readily available from market according to how it is utilized. A trained statistical staff. Thus, the administrator offices. A description of Federal order further requires that the information collection and reporting the forms and a complete Paperwork payments for milk be pooled and paid burden is relatively small. Requiring the Reduction Act analysis follows this to individual dairy farmers or same reports for all handlers does not section. cooperative associations on the basis of significantly disadvantage any handler No other burdens are expected to fall a uniform or average price. It is that is smaller than industry average. upon the dairy industry as a result of important to note that a Federal milk New territory, or pockets of overlapping Federal rules. This order, including the pricing and all unregulated territory within and proposed regulation does not duplicate, 4814 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules overlap or conflict with any existing proposed consolidated orders. Without ‘‘prices’’ reflect only the change in value Federal rules. assumptions that include the specific that can be attributed to changes in To ensure that small businesses are class prices and milk uses in different utilization rates, with no assumptions not unduly or disproportionately products, there are no means of about changes in the levels of the burdened based on this proposed quantifying the economic effects of various class prices. Such estimates, of regulation, consideration was given to consolidation. necessity, reflect only anticipated several options with the intention of Handlers would be affected by class changes in blend prices, using class mitigating negative impacts. Three prices, which would be determined by prices that would no longer be in effect options, including two suggested in the the Class I price surface option that is under the consolidated orders. To the preliminary reports issued by AMS in selected, and by the minimum prices extent that the WAUV computations December 1996 and May 1997, were contained in all of the orders for milk reflect some of the effect of considered with regard to the used in Classes II, III and IV. The Class consolidation on producer prices, they consolidation of Federal orders, five I price surface options considered could are included in this analysis under each options were considered as have impacts on small handler entities, option discussion. It should be noted, replacements for the basic formula however, handlers similarly located however, that all producers in any given price, and seven options were would be subject to the same minimum current area would be affected to an considered with regard to the Class I prices, regardless of the size of equal extent by the consolidation factor, development of a new Class I price their operations, and all handlers would with no disproportionate effect on small structure. The following options were be subject to the same minimum prices dairy farmer entities. considered by AMS prior to and during for Class II, Class III and Class IV milk. the development of the proposed Such handlers would also be subject to The following table shows the regulation. the same minimum prices to be paid to potential impact of three order producers. consolidation options on producers who Consolidation Options Producers may be somewhat more supply each of the current Federal milk It is impossible to determine the affected by consolidation of marketing marketing order areas via WAUV economic effects of marketing area areas because changes in utilization ‘‘prices’’. The three consolidated consolidation on handlers, producers percentages would result in changes in options are (1) the consolidated and consumers without using blend prices. As in the case of effects on marketing areas suggested in the assumptions about the specific order handlers, however, it is impossible to December 1996 initial Preliminary provisions contained in the determine a separate consolidation Report on Order Consolidation; (2) the consolidated order areas. The only effect effect on producers, defined in consolidated marketing areas suggested consolidation, as a single factor, can monetary terms. The closest in the May 1997 Revised Preliminary have on the various market participants approximation to such an estimate Report on Order Consolidation; and (3) is through changes in the percentage of would be the ‘‘weighted average the consolidated marketing areas milk used in different classes within the utilization value’’ (WAUV). These suggested in this proposed rule.

WEIGHTED AVERAGE UTILIZATION VALUES (WAUV) [Based on October 1995 information ($/cwt)]

Consolidated Market Marketing Areas in Initial Marketing Areas in Revised Marketing Areas in Proposed Consol. Report (Dec. 96) Consol. Report (May 97) Rule (Option 1) (Option 2) (Option 3) Consol. Mkt. WAUV Consol. Mkt. WAUV Consol. Mkt. WAUV ($/cwt) ($/cwt) ($/cwt) Current Markets WAUV using WAUV using WAUV using WAUV using WAUV using WAUV using Current Mkt. Consol. Mkt. Current Mkt. Consol. Mkt. Current Mkt. Consol. Mkt. Utilization Utilization Utilization Utilization Utilization Utilization ($/cwt) ($/cwt) ($/cwt) ($/cwt) ($/cwt) ($/cwt)

Northeast ...... $13.46 $13.48 $13.47 New England (F.O. 1) ...... 13.50 13.48 13.52 13.51 13.52 13.49 NY±NJ (F.O. 2) ...... 13.44 13.48 13.48 13.50 13.45 13.48 Middle Atlantic (F.O.4) ...... 13.45 13.39 13.45 13.41 13.44 13.40 Appalachian ...... 14.13 13.96 13.97 Carolina (F.O. 5) ...... 14.23 14.21 14.23 14.19 14.23 14.20 Tenn. Valley (F.O. 11) ...... 13.92 13.95 13.92 13.93 13.92 13.94 Lville-Lex-Evan (F.O. 46) ...... n/a n/a 13.35 13.39 13.35 13.40 Florida ...... 15.05 15.05 15.05 Upper Florida (F.O. 6) ...... 14.67 14.78 14.67 14.78 14.67 14.78 Tampa Bay (F.O. 12) ...... 15.09 15.04 15.09 15.04 15.09 15.04 SE Florida (F.O. 13) ...... 15.42 15.31 15.42 15.31 15.42 15.31 Southeast ...... 14.26 14.25 14.24 Southeast (F.O. 7) ...... 14.26 14.26 14.25 14.25 14.24 14.27 Mideast ...... 12.96 12.94 12.92 Ohio Valley (F.O. 33) ...... 12.99 13.02 12.99 13.01 12.99 13.00 E. Ohio-W. PA (F.O. 36) ...... 13.07 13.00 13.10 12.99 13.07 12.97 S. Michigan (F.O. 40) ...... 12.75 12.86 12.75 12.84 12.75 12.83 MI Upper Penin. (F.O. 44) ...... 12.81 12.62 12.81 13.262 12.81 12.61 Lville-Lex-Evan (F.O. 46) ...... 13.35 13.06 n/a n/a n/a n/a Indiana (F.O. 49) ...... 12.97 12.94 12.97 12.93 12.97 12.92 Upper Midwest ...... 12.60 12.62 12.60 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4815

WEIGHTED AVERAGE UTILIZATION VALUES (WAUV)ÐContinued [Based on October 1995 information ($/cwt)]

Consolidated Market Marketing Areas in Initial Marketing Areas in Revised Marketing Areas in Proposed Consol. Report (Dec. 96) Consol. Report (May 97) Rule (Option 1) (Option 2) (Option 3) Consol. Mkt. WAUV Consol. Mkt. WAUV Consol. Mkt. WAUV ($/cwt) ($/cwt) ($/cwt) Current Markets WAUV using WAUV using WAUV using WAUV using WAUV using WAUV using Current Mkt. Consol. Mkt. Current Mkt. Consol. Mkt. Current Mkt. Consol. Mkt. Utilization Utilization Utilization Utilization Utilization Utilization ($/cwt) ($/cwt) ($/cwt) ($/cwt) ($/cwt) ($/cwt)

Chicago Reg. (F.O. 30) ...... 12.62 12.62 12.62 12.61 12.62 12.62 MI Upper Penin. (F.O. 44) ...... R R R R R R Neb.-W. Iowa (F.O. 65) ...... n/a n/a 12.63 12.74 n/a n/a Upper Midwest (F.O. 68) ...... 12.55 12.56 12.55 12.54 2.55 12.56 E. South Dakota (F.O. 76) ...... n/a n/a 12.81 12.65 n/a n/a Iowa (F.O. 79) ...... n/a n/a 12.69 12.67 n/a n/a Central ...... 13.16 13.21 12.95 S. IL±E MO (F.O. 32) ...... 12.93 12.90 13.00 12.95 13.00 12.88 Central IL (F.O. 50) ...... 13.03 12.74 13.03 12.78 13.03 12.72 Greater K. City (F.O. 64) ...... 13.22 12.90 13.22 12.95 13.22 12.88 Neb.-W. Iowa (F.O. 65) ...... 12.63 12.81 n/a n/a 12.63 12.79 E. South Dakota (F.O. 76) ...... 12.81 12.68 n/a n/a 12.81 12.67 Iowa (F.O. 79) ...... 12.71 12.71 n/a n/a 12.71 12.70 SW Plains (F.O. 106) ...... 13.31 13.33 13.31 13.41 13.08 13.29 E. Colorado (F.O. 137) ...... 13.27 13.31 13.27 13.38 13.27 13.27 Southwest ...... 13.36 13.39 13.39 Texas (F.O. 126) ...... 13.49 13.48 13.49 13.46 13.49 13.46 Central AZ (F.O. 131) ...... 13.26 13.17 n/a n/a n/a n/a NW±W Texas (F.O. 138) ...... 13.00 13.09 13.00 13.07 13.00 13.07 Arizona±Las Vegas ...... n/a 13.26 13.26 Central AZ (F.O. 131) ...... n/a n/a 13.26 13.29 13.26 13.29 Western ...... 12.79 12.78 12.78 W. Colorado (F.O. 134) ...... 13.41 12.84 13.41 12.82 13.41 12.82 SW ID±E. OR (F.O. 135) ...... 12.63 12.68 12.63 12.68 12.63 12.68 Great Basin (F.O. 139) ...... 12.83 12.81 12.81 12.79 12.81 12.79 Pacific Northwest ...... 12.45 12.44 12.44 Pacific NW (F.O. 124) ...... 12.45 12.45 12.44 12.44 12.44 12.44 n/a: not applicable. R: Restricted.

For each option, a weighted average WAUV values published with either the in the revised report and in the use value (WAUV) is computed for (a) initial or the revised reports on order proposed consolidation in this rule the consolidated order; (b) the current consolidation. (Option 3) are both information order with current use of milk; and (c) During the process of developing this contained in the comments as well as the current order with projected use of proposed rule, AMS issued two reports data gathered to update the information milk in the consolidated order. The suggesting 10 and 11 marketing area on which the earlier report(s) were difference between the weighted average boundaries, respectively, to meet the based where questions were raised use values in (b) and (c) represents the requirements of the 1996 Farm Bill. The about the boundaries of suggested potential impact on producers. marketing areas defined in these reports marketing areas and where marketing For example, in this proposed rule, were based primarily on an analysis of changes had occurred. the New England (F.O. 1) market’s receipt and distributing data from fluid WAUV using its current utilization is distributing plants in October 1995. Option 1 (Preliminary Report on Order $13.52 per cwt. When the three markets Over 900 comments regarding Consolidation, December 1996) are consolidated and the new consolidation issues received thus far in Based on seven criteria: ((1) consolidated utilization is used to the development process also have been Overlapping route disposition; (2) calculate the WAUV, New England’s considered: almost 50 comments prior overlapping areas of milk supply; (3) WAUV would be $13.49 per cwt. In this to the December 1996 release of the number of handlers within a market; (4) comparison, the potential impact on Preliminary Report on Order natural boundaries; (5) cooperative producers supplying the New England Consolidation (Option 1); an additional association service areas; (6) features market area would be a decrease of three 60 comments prior to the May 1997 common to existing orders, such as cents per cwt. release of the Revised Preliminary similar multiple component pricing Each of the three options assumes the Report on Order Consolidation (Option plans; and (7) milk utilization in pool distributing plant standards 2); and another 800 comments since common dairy products), 10 marketing suggested for each of the consolidated release of the revised report. These areas (Northeast, Appalachian, Florida, orders in this proposed rule; thus the comments were filed primarily by Southeast, Mideast, Upper Midwest, calculated values in the preceding table producers and handlers. Incorporated in Central, Southwest, Western and Pacific are not directly comparable to the the marketing area boundaries suggested Northwest) were suggested in this 4816 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules report. Data were gathered relating to Based on the WAUV calculations virtually the same as it does currently the receipts and distribution of fluid shown in the previous table, utilization and thus, no or little impact on milk products for all known distributing rate changes due to consolidation could producer prices would be expected. plants located in the 47 contiguous affect producer prices. The column Of approximately 83,000 dairy States, not including the State of labeled ‘‘Option 1’’ shows the WAUV producers delivering milk to handlers California, for the month of October for the consolidated order and each of regulated under the milk orders, about 1995. the current orders suggested in the 80,000 are considered to be small The current Federal orders that December 1996 report. businesses under the production comprise the initially-suggested In the Northeast market, producers guideline of less than 326,000 pounds consolidated areas are as follows: currently affiliated with the New per month. NORTHEAST—current marketing areas England and Middle Atlantic would As stated above, handlers are impacted more significantly by class of the New England, New York-New have negative impacts on their WAUV, prices and minimum prices than by Jersey, and Middle Atlantic Federal respectively, while New York-New expected utilization changes resulting milk orders; APPALACHIAN—current Jersey producers would be positively from consolidation. Of the 371 marketing areas of the Carolina and impacted. In the Appalachian market, distributing plants expected to be fully Tennessee Valley Federal milk orders, Carolina producers should expect some regulated under this 10-market and a portion of the Louisville- negative impacts due to consolidation, suggested configuration under the Lexington-Evansville Federal milk while Tennessee Valley producers assumptions used in the December 1996 order; FLORIDA—current marketing would experience positive effects from report, an estimated 193 plants are small areas of the Upper Florida, Tampa Bay, this consolidation. In the Florida businesses under the criteria provided and Southeastern Florida Federal milk market, Upper Florida producers would by the SBA (under 500 employees). orders; SOUTHEAST—current gain while Tampa Bay and Southeastern marketing areas of the Southeast Federal Florida producers would have a Option 2 (Revised Preliminary Report milk order, plus 1 county from the negative impact resulting from this on Order Consolidation, May 1997) Louisville-Lexington-Evansville Federal consolidation. The Southeast market Eleven marketing areas were milk order marketing area, 15 currently remains virtually the same as it does suggested in this second report. Because unregulated Kentucky counties, and 2 currently and thus, no or little impact numerous comments indicated that the currently unregulated northeast Texas on producer prices would be expected. boundaries of some marketing areas counties; MIDEAST—current marketing In the Mideast market, producers should be re-evaluated, and also areas of the Ohio Valley, Eastern Ohio- affiliated with the Ohio Valley and because regulatory shifts and Western Pennsylvania, Southern Southern Michigan Federal orders distributing plant distribution areas had Michigan, and Indiana Federal milk would probably see increases in blend occurred, more detailed and updated orders, plus most of the current prices due to this consolidation, while data was obtained. The same seven marketing area of the Louisville- producers affiliated with the Eastern criteria used in Option 1 were applied Lexington-Evansville Federal milk Ohio-Western Pennsylvania, Michigan in this option as well. Modifications order, Zone 2 of the Michigan Upper Upper Peninsula, Louisville-Lexington- were made to the Northeast, Peninsula Federal milk order, and 12 Evansville and Indiana Federal orders Appalachian, Southeast, Mideast, Upper counties of the Southern Illinois-Eastern would see decreases. In the Upper Midwest, Central, Southwest and Missouri Federal milk order; UPPER Midwest market, the Upper Midwest Western regions, as follows (only the MIDWEST—current marketing areas of producers should see slight increases changes to these orders are noted): the Chicago Regional and Upper while Chicago Regional producers NORTHEAST—Addition of contiguous Midwest Federal milk orders, plus would probably have no impact due to unregulated areas of New Hampshire, Zones I and I(a) of the Michigan Upper this consolidation. Of all the Vermont and New York; the western Peninsula Federal milk order and seven consolidated markets, producers in the non-Federally regulated portion of unregulated or partly regulated current Orders that compose the Central Massachusetts, the Western New York Wisconsin counties; CENTRAL—current market probably would see the largest State order area, and Pennsylvania Milk marketing areas of the Southern Illinois- changes due to this consolidation: Marketing Board Areas 2 and 3 in Eastern Missouri (less 12 counties producers with the Nebraska-Western northeastern Pennsylvania; included in the suggested Mideast Iowa, Southwest Plains and Eastern APPALACHIAN—Addition of all of the marketing area), Central Illinois, Greater Colorado markets may see increases, Louisville-Lexington-Evansville Federal Kansas City, Nebraska-Western Iowa while producers affiliated with the order (with the exception of one county (less 11 currently-regulated counties Southern Illinois-Eastern Missouri, included in the suggested Southeast suggested to be unregulated), Eastern Central Illinois, Greater Kansas City, market) and 26 currently-unregulated South Dakota, Iowa, Southwest Plains, and Eastern South Dakota markets may counties in Indiana and Kentucky; and Eastern Colorado Federal milk see decreases. Producers with the Iowa SOUTHEAST—Minus 2 currently- orders, plus 63 currently-unregulated market would probably have no impact unregulated counties in northeast Texas counties in seven of the states; due to this suggested Central market (in the suggested Southwest market); SOUTHWEST—current marketing areas consolidation. In the Southwest market, MIDEAST—Addition of Pennsylvania of the Texas, New Mexico-West Texas, producers affiliated with the New Milk Marketing Board Area 6 (in and Central Arizona Federal milk Mexico-West Texas would see increases western/central Pennsylvania) and 2 orders; WESTERN—current marketing due to this consolidation while Texas currently-unregulated counties in New areas of the Western Colorado, and Central Arizona producers would York, and minus the Louisville- Southwestern Idaho-Eastern Oregon, see decreases. In the Western market, Lexington-Evansville Federal order area, and Great Basin Federal milk orders; Southwestern Idaho-Eastern Oregon 12 counties in Illinois, and unregulated and PACIFIC NORTHWEST—current producers would see increases but counties in Indiana and Kentucky (in marketing area of the Pacific Northwest Western Colorado and Great Basin the suggested Appalachian market); Federal milk order plus 1 currently- producers would see decreases. The UPPER MIDWEST—Addition of the unregulated county in Oregon. Pacific Northwest market remains Iowa, Eastern South Dakota, and most of Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4817 the Nebraska-Western Iowa Federal increases, while Chicago Regional, consolidated marketing areas, the order areas, plus currently-unregulated Upper Midwest, Eastern South Dakota, revised Preliminary Report (Option 2) counties in Iowa and Nebraska; and Iowa producers would have a suggests that such areas be added to CENTRAL—Addition of 12 counties in decrease in producer prices due to this several consolidated areas, the the current Southern Illinois-Eastern consolidation. In the Central market, Northeast and Mideast market areas in Missouri Federal order that initially producers with the Southwest Plains particular. Approximately 20 handlers were suggested as part of the and Eastern Colorado markets would see who would have been affected by the consolidated Mideast area, and minus increases, while producers affiliated expansion of Federal order areas into the Eastern South Dakota, Iowa, and with Southern Illinois-Eastern Missouri, currently non-Federally regulated areas most of the Nebraska-Western Iowa Central Illinois, and Greater Kansas City were notified of the possible change in Federal order marketing area; markets may see decreases. In the their status and encouraged to comment. SOUTHWEST—Addition of 2 currently- Southwest market, producers affiliated Handlers located in Pennsylvania unregulated northeast Texas counties with New Mexico-West Texas would see Milk Marketing Board Areas 2, 3 and 6 that initially were suggested as part of increases due to this consolidation are regulated under the State of the consolidated Southeast market and while Texas producers would see Pennsylvania if they do not have 47 currently-unregulated counties in decreases. The added Arizona-Las Vegas enough sales in any Federal order area southwest Texas, and minus the Central market is virtually the same as the to meet an order’s pooling standards. If Arizona marketing area; ARIZONA-LAS Central Arizona market but a positive such plants do meet Federal order VEGAS—this new eleventh marketing impact on producer prices may result pooling standards, the State continues area composed of the current marketing from an additional handler. In the to enforce some of its regulations in area of the Central Arizona Federal Western market, Southwestern Idaho- addition to Federal order regulations. As order and the Clark County, Nevada, Eastern Oregon producers would see state-regulated handlers, they must pay portion of the current Great Basin increases but Western Colorado and a Class I price for milk used in fluid marketing area, plus eight currently- Great Basin producers would see products which is often higher than the unregulated Arizona counties; and decreases. The Pacific Northwest market Federal order price would be. Inclusion WESTERN—Minus Clark County, remains virtually the same as it does of the Pennsylvania-regulated handlers Nevada. The FLORIDA and PACIFIC currently and thus, no or little impact in the consolidated marketing area NORTHWEST marketing areas did not on producer prices would be expected. would have little effect on handlers’ change from the preliminary report. Of approximately 83,000 dairy costs of Class I milk (or might reduce Based on the WAUV calculations producers delivering milk to handlers them), while reducing producer returns. shown in the previous table, utilization regulated under the milk orders, about Option 3: The Proposed Consolidation rate changes due to consolidation could 80,000 are considered to be small affect producer prices. The column businesses under the production The proposed consolidation is a result labeled ‘‘Option 2’’ shows the WAUV guideline of less than 326,000 pounds of extensive analysis of data as for the consolidated order and each of per month. In addition, it is estimated previously indicated and consideration the current orders suggested in the May that about 13 percent of the total milk of public comments submitted in 1997 report. production in Pennsylvania is response to Options 1 and 2. Extensive In the Northeast market, producers represented only by the Pennsylvania outreach, which is explained in the currently affiliated with the New Milk Marketing Board. Under this ‘‘Public Input’’ section, was completed. England and Middle Atlantic orders option, this production would be added After compiling this information, the would have negative impacts on their to the Federal order pool and affect an proposed order consolidation was WAUV, respectively, while New York- undetermined number of businesses developed to ensure industry integrity. New Jersey producers would remain which would include both small and Eleven marketing areas are proposed unchanged. In the Appalachian market, large producers. in this rule, including modifications to Carolina producers should expect some As stated above, handlers are some of the 11 marketing orders negative impacts due to consolidation, impacted more significantly by class suggested in Option 2. Marketing data while Tennessee Valley and Louisville- prices and minimum prices than by was further examined for some of the Lexington-Evansville producers would expected utilization changes resulting suggested consolidated marketing areas experience positive effects from this from consolidation. Of the 379 plants to determine the most appropriate consolidation. In the Florida market, expected to be fully regulated under this configurations of the consolidated areas. Upper Florida producers would gain 11-market suggested configuration Primary criteria continues to be the while Tampa Bay and Southeastern under the assumptions used in the May seven used in the two earlier reports on Florida producers would have a 1997 report, 175 plants are estimated to order consolidation. As a result of negative impact resulting from this be small businesses on the basis of further analysis, the configurations of consolidation. The Southeast market fewer than 500 employees. the Northeast, Mideast, Southeast, remains virtually the same as it does The preliminary consolidation report Upper Midwest and Central areas have currently and thus, little impact on (Option 1) stated that the Farm Bill changed significantly from those producer prices would be expected. In requirement to consolidate existing suggested in Option 2, and minor the Mideast market, producers affiliated marketing areas did not specify changes have been made to the with the Ohio Valley and Southern expansion of regulation to previously Appalachian area. The modifications for Michigan Federal orders would non-Federally regulated areas where these areas from the revised preliminary probably see increases in blend prices such expansion would have the effect of report (Option 2) are as follows: due to this consolidation, while regulating handlers not currently NORTHEAST—Minus some previously producers affiliated with the Eastern regulated. However, on the basis of data, suggested area to be included in the Ohio-Western Pennsylvania, Michigan views and arguments filed by interested Northeast (the southern tier of 3 western Upper Peninsula, and Indiana Federal persons in response to the initial New York counties and Pennsylvania orders would see decreases. In the Preliminary Report (Option 1) Milk Marketing Board Areas 2 and 3); Upper Midwest market, the Nebraska- requesting that currently non-Federally APPALACHIAN—Minus five Kentucky Western Iowa producers should see regulated areas be added to some counties that were part of the former 4818 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Paducah order area, now suggested to be Michigan Federal orders would exceed or equal those that would be in the Southeast market; probably see increases in blend prices established under Federal milk order SOUTHEAST—Addition of 11 due to this consolidation, while regulation. Such regulation would have northwest Arkansas and 22 entire and 1 producers affiliated with the Eastern the effect of reducing returns to partial Missouri counties currently part Ohio-Western Pennsylvania, Michigan producers already included under State of the Southwest Plains Federal order, 6 Upper Peninsula, and Indiana Federal regulation without significantly Missouri counties currently part of the orders would see decreases. In the affecting prices paid by handlers who Southern Illinois-Eastern Missouri Upper Midwest market, the Upper compete with Federally-regulated Federal order, 16 currently unregulated Midwest producers should see slight handlers. southeast Missouri counties, 20 increases, while Chicago Regional In an effort to avoid extending Federal currently unregulated Kentucky producers would have no impact due to regulation to handlers whose primary counties (were suggested to be in the this consolidation. In the Central sales areas are outside current Federal Appalachian market); MIDEAST— market, producers with the Nebraska- order marketing areas, but who already Minus the current Pennsylvania Milk Western Iowa and Southwest Plains are subject to similar minimum uniform Marketing Board Area 6 and two markets would see increases, producers pricing under State regulation, the in- southwestern New York counties, all affiliated with Southern Illinois-Eastern area Class I disposition percentage currently non-Federally regulated; Missouri, Central Illinois, Greater portion of the pool distributing plant UPPER MIDWEST—Minus the Iowa, Kansas City, Eastern South Dakota, and definition is proposed to be 25 percent Eastern South Dakota, Nebraska- Iowa markets may see decreases, and for the Northeast order and 30 percent Western Iowa Federal order areas; Eastern Colorado producers would see for the Mideast order, instead of the 10 CENTRAL—Addition of the Iowa, no impact. In the Southwest market, or 15 percent used in the other nine Eastern South Dakota, Nebraska- producers affiliated with New Mexico- consolidated order areas. It is estimated Western Iowa Federal order areas, 68 West Texas would see increases due to that five plants in Pennsylvania, currently-unregulated counties in this consolidation while Texas Maryland and Virginia that would have Kansas, Missouri, Illinois, Iowa, producers would see decreases. been fully regulated using 15 percent Nebraska and Colorado, and minus 11 Producers in the Arizona-Las Vegas would remain partially regulated, as northwest Arkansas and 22 entire and 1 market may receive a positive impact on they currently are, using 25 and 30 partial Missouri counties currently part producer prices due to an additional percent, respectively. At least three of of the Southwest Plains Federal order, 6 handler regulated in this order area. In these five handlers meet the small Missouri counties currently part of the the Western market, Southwestern business criteria. Southern Illinois-Eastern Missouri Idaho-Eastern Oregon producers would Exempt Plants Federal order, and 16 currently see increases but Western Colorado and unregulated southeast Missouri Great Basin producers would see Options 2 and 3 both recognize the counties. The FLORIDA, SOUTHWEST, decreases. The Pacific Northwest market Identical Provisions Committee 14 ARIZONA-LAS VEGAS, WESTERN and remains virtually the same as it does determination than a handler PACIFIC NORTHWEST marketing areas currently and thus, no or little impact distributing less than 150,000 pounds did not change from the revised on producer prices would be expected. per month of fluid milk products does preliminary report. Of approximately 83,000 dairy not have a significant competitive effect Based on the WAUV calculations producers delivering milk to handlers on the market, and that handlers of such shown in the previous table, utilization regulated under the milk orders, about size should, therefore, be exempt from rate changes due to consolidation could 80,000 are considered to be small the pricing and pooling provisions of affect producer prices. The column businesses under the production the orders. The level of route labeled ‘‘Proposed Rule’’ shows the guideline of less than 326,000 pounds disposition required before an exempt WAUV for the consolidated order and per month. The additional estimated 13 plant becomes regulated varies in the each of the current orders suggested in percent of Pennsylvania’s total milk current orders. As recommended, any this proposed rule. production represented by the plant with route disposition during the In the Northeast market, for producers Pennsylvania Milk Marketing Board month of 150,000 pounds or less would currently affiliated with the New York- which would have been added in be exempt in the consolidated orders. New Jersey order, the proposed option Option 2, would not be included under This limit reflects the maximum amount would have positive impacts on their this option. of fluid milk products allowed by an WAUV, while New England and Middle As stated above, handlers are exempt plant in any current Federal Atlantic producers would be negatively impacted more significantly by class milk order and ensures plants that are impacted. In the Appalachian market, prices and minimum prices than by currently exempt from regulation would Carolina producers should expect some expected utilization changes resulting remain so. Under this proposed rule, it negative impacts due to consolidation, from consolidation. Of the 337 plants is expected that 36 distributing plants while Tennessee Valley and Louisville- expected to be fully regulated under this that otherwise would be identified as Lexington-Evansville producers would 11-market proposed configuration, 164 fully regulated plants are identified as experience positive effects from this plants are estimated to be small exempt plants. Therefore under this consolidation. In the Florida market, businesses on the basis of fewer than provision, these plants would not be Upper Florida producers would gain 500 employees. subject to the pricing and pooling while Tampa Bay and Southeastern Based on the comments received in provisions of their respective order. Florida producers would have a response to the revised preliminary Although 150,000 pounds of fluid negative impact resulting from this report (Option 2) it has been determined milk disposition per month may consolidation. With the addition of that consolidation of the existing orders marketing area to the Southeast, the does not necessitate expansion of the 14 The Identical Provisions Committee was WAUV for Southeast producers may be consolidated orders into areas in which established in May 1996 to address uniformity in order provisions during the Federal order reform expected to be positively impacted. In handlers are subject to minimum Class process. This committee and others established are the Mideast market, producers affiliated I pricing under State regulation, described further in the ‘‘Background’’ portion of with the Ohio Valley and Southern especially when the states’ Class I prices this proposed rule. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4819 represent a level at which exempting a entities are customarily small successfully reflects the supply and distributing plant could be expected not businesses that operate essentially in a demand for milk used in manufactured to have a serious detrimental impact on self-sufficient manner. During August products. The USC Committee used an the ability of a Federal milk order to 1997, 111 producer-handlers submitted econometric procedure to test the ability provide for uniform pricing to handlers reports under the Federal milk of the alternatives they considered to and producers, it would be quite marketing order program. reflect supply and demand. difficult to select a higher level of To the extent the goal of identifying Basic Formula Price Options exemption without compromising the a BFP that reflects the value of milk purposes of the regulation. The under- A number of options for determining used in manufactured products is 500-employee definition of a small a basic formula price were considered capable of attainment, all market business assures that nearly all single- and analyzed in the process of participants would be affected by the plant milk handlers would qualify as a developing the proposed basic formula BFP replacement in the same manner as small business. Many of the ‘‘small’’ price (BFP). In addition to the proposed if they were operating in a free market, businesses may be among the largest method of pricing components based on with no external impacts caused by competitors in a particular market. their value in manufactured products, regulation. To the extent the goal is In addition, numbers of employees other options examined, by both the achieved, then, there would be no could be expected to vary greatly with Agricultural Marketing Service’s Dairy uneven impact on market participants the nature of a plant’s operation. For Division Basic Formula Price on the basis of size. All market instance, the number of persons Replacement Committee and by the participants, (handlers, producers and employed by two plants processing and University Study Committee (USC), led consumers), would be affected in the distributing equal volumes of fluid milk by Dr. Ronald D. Knutson of Texas same manner as if there were no products could be very different if one A& M University, were: economic regulation. However, the existence of plant contracts out its producer milk formulas, futures markets, cost of minimum order pricing serves to assure hauling, laboratory operations and production, competitive pay pricing, that small handlers pay no more for packaged product distribution, while and pricing differentials only. their milk than larger entities (unless the other plant performs all of these Descriptions of the two Committees’ the market allows higher prices to be operations with its own employees. For analyses, and results of their work are exacted from small buyers), and that this reason alone, it would be included in ‘‘A Preliminary Report on small producers receive the same inappropriate to exempt handlers from Alternatives to the Basic Formula minimum uniform price for the milk or regulation, or to impose differing Price,’’ published in April 1997 by the components of milk they produce as regulatory burdens, on the basis of their Basic Formula Price Committee, Dairy large producers. Consumers can be size beyond the minimal size Division, AMS; and the following assured that the prices generally determined to be less than a significant reports from the Agricultural and Food charged for dairy products are prices competitive force in the market. Policy Center, Texas A&M University that reflect, as closely as possible, the Many current Federal orders also System: forces of supply and demand in the provide regulatory exemption for a plant ‘‘An Economic Evaluation of Basic market. operated by a state or Federal Formula Price (BFP) Alternatives,’’ Of the options considered and government agency. For example, some AFPC Working Paper 97–2, June 1997. analyzed, both groups studying the states have dairy farm and plant ‘‘Evaluation of ‘Final’ Four Basic issue determined that the option of operations that provide milk for their Formula Price Options,’’ AFPC Working pricing components of milk according to prison populations. As recommended, Paper 97–9, August 1997.15 their value in manufactured products, as regulatory exemption would be The primary criterion used by the reflected by the sales prices of those continued under the consolidated Dairy Division BFP Committee was that products, best approximates the orders unless pool plant status is any replacement BFP option reflect the intersection of supply and demand for desired. Additionally, regulatory supply of and demand for milk used in milk used in manufactured dairy exemption is intended to include manufactured dairy products. At the products. colleges, universities and charitable same time, one of the USC’s critical institutions because these institutions criteria for a replacement BFP was that Manufacturing Allowances generally handle fluid milk products it reliably reflect market conditions for Make allowances or manufacturing internally and have little or no impact all manufactured products. allowances, one of the factors in the mainstream commercial market. In trying to determine the most incorporated in the formulas for However, in the event that these entities appropriate replacement for the current determining component values, may do distribute fluid milk through BFP, which uses a survey of prices paid reflect more closely the manufacturing commercial channels, route sales by by manufacturing plants for non-Grade costs of large firms than those of small such entities, including government A milk updated by a product price firms. These manufacturing costs would agencies, would be monitored to formula, the goal of both groups was a be used to adjust the sales prices of determine if Federal regulations should market-based alternative. The BFP dairy products to the value of milk apply. Under this proposed rule, it is Committee measured the extent to purchased to make the products. To the expected that 18 distributing plants which each pricing option met its extent these allowances fail to reflect would be identified as exempt based on primary goal by tracking the options the full cost of manufacturing, they may their institutional status. against the current BFP for a period of require handlers to pay more for milk prior months, on the basis of the than they can realize from the sale of Producer-handlers assumption that the current BFP their products. On the other hand, if the Also exempt from full regulation manufacturing allowances more than would be those entities that operate as 15 These reports can be obtained from the cover the cost of manufacturing, both a producer and a handler. A Agricultural and Food Policy Center, Department of handlers may be assured of extra Agricultural Economics, Texas A&M University, primary basis for exempting producer- College Station, Texas 77843–2124, telephone (409) margins. handlers from the pricing and pooling 845–5913 or on the Internet at http:// Although it may appear that the use provisions of a milk order is that these AFPC1.TAMU.EDU. of make allowances in the computation 4820 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules of component prices would advantage handlers would be required to report consolidated with the Middle Atlantic large processors because of possible pounds of protein, pounds of other area into the proposed Northeast order. economies of scale, these economies solids, and, in 5 of the orders, somatic Accommodation has been made to exist regardless of whether they are cell information. This data would be ameliorate handlers’ expenses of testing recognized in price computations. If the required from each handler for all producer milk for component content assumption is made that economies of producer receipts, including milk scale exist in dairy plants and that large diverted by the handler, receipts from As component pricing plans have plants are more efficient than small cooperatives as 9(c) handlers (that is, been adopted under a number of the plants, a manufacturing allowance that the cooperative acts as a handler); and, present Federal milk orders since 1988, fully covers a small handler’s cost of in some cases, receipts of bulk milk the component testing needed to making products would merely increase received by transfer or diversion. implement these pricing plans has been the profit margin of its larger Since producers would be receiving performed by the market administrators competitors. At the same time, payments based on the component responsible for the administration of the producers unfairly would be required to levels of their milk, the payroll reports orders involved for handlers who have subsidize the manufacturing costs of that handlers supply to producers must not been equipped to make all of the handlers who use their milk, and reflect the basis for such payment. determinations required under the consumers would pay more for their Therefore the handler would be amended orders. It has been made clear dairy products than the costs of required to supply the producer not in the decisions under which these production and processing would only with the information currently plans have been adopted that handlers justify. supplied, but also, (a) the pounds of who would find it unduly burdensome An attempt has been made, using butterfat, the pounds of protein, and the to obtain the equipment and personnel Cornell University studies of pounds of other solids contained in the needed to accomplish the required manufacturing costs at a number of producer’s milk, as well as the testing may rely on the market manufacturing plants distributed producer’s average somatic cell count, administrators to verify or establish the around the U.S., to arrive at and (b) the minimum rates that are tests under which producers are paid. economically defensible make required for payment for each pricing As noted above, however, many allowances. Since it is difficult to factor and, if a different rate is paid, the handlers not now subject to MCP distinguish the differential effects of effective rate also. Many handlers provisions under Federal orders have market-based component pricing on already report this additional nevertheless already undertaken small and large firms engaged in information. It should be noted that multiple component testing and manufacturing dairy products, reliance handlers already are required to report payment programs. would be placed on industry information relative to pounds of Pricing Options participants to comment on these facets production, butterfat and rates of of the proposed BFP replacement. payment for butterfat and Several pricing options, as discussed hundredweight of milk to the below, were considered as replacements Impact of Multiple Component Pricing appropriate Market Administrator. for the current Class I price structure. Provisions on Small Entities Of over 74,000 producers whose milk Five of the options were determined to Seven of the eleven proposed orders was pooled in December 1996 under 23 have a negative impact on small provide for milk to be paid for on the of the current orders that would be part businesses, albeit slight or significant. basis of its components (multiple of consolidated orders providing for These options included relative use component pricing, or MCP). Five of the multiple component pricing, the milk of differentials, flat differentials, modified seven MCP orders also provide for milk 52,500 of these producers was pooled flat differentials, demand based values to be adjusted according to the under 13 current orders that have MCP. differentials, and a decoupled baseline somatic cell count of producer milk. Handlers in these markets already have Class I price with adjustors. In addition The equipment needed for testing milk incurred the initial costs of testing milk to the impacts on small businesses, for its component content can be very for its component content, and have these options were not considered expensive to purchase, and requires made the needed transition to reporting viable based on additional qualitative highly-skilled personnel to maintain the component contents of milk receipts analysis contained in the findings and and operate. The cost of infra-red on their handler reports to the market conclusions of the proposed rule. analyzers ranges from just under administrators, and on their reports of $100,000 to $200,000. The infra-red what they have paid producers. Relative Use Differentials machines that are used by most Of the remaining 21,750 producers The use of relative use differentials laboratories would test for total solids who would be affected by MCP based on Class I utilizations was and somatic cells at the same time the provisions under a Federal order considered as an option for replacing butterfat and protein tests are done. (including an estimated 20,650 the Class I price structure. Using this No new report forms are needed producers qualifying as small concept, the relative use Class I under multiple component pricing; businesses), the milk of approximately differential would equal $1.60 per however, some additional reporting is 13,000, or 60 percent, currently is hundredweight plus the relative use necessary to enable handlers’ values of received by handlers who test or have ratio times $1.00. A 25 percent limit milk to be determined on the basis of the capability of testing for multiple would be applied so the new differential components, and to assure that components and, in many cases, would not exceed 125 percent of the producers are paid correctly. For the somatic cells. Many of these handlers current differential nor fall to less than market administrators to compute the also report component results to the 75 percent of the current differential. A producer price differential, handlers producers with their payments. Almost percentage limit was placed on the would need to supply additional all of the producers whose milk differential changes to temper information on their currently-required currently is not being tested or paid for adjustments based on market supply monthly reports of receipts and on the basis of components are located and demand conditions. utilization. In addition to the product in the New England and New York-New The advantages of the system are that pounds and butterfat currently reported, Jersey marketing areas, which would be it allows Class I differentials to adapt to Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4821 supply and demand conditions within a consolidated orders. These differentials is computed by multiplying the given marketing area based on changes are not location-specific within the percentage of Class I milk in each of the in the utilization. However, because the applicable orders. For purposes of this current orders that comprise the differentials would be allowed to analysis and to provide a basis for consolidated order by the applicable change independently from neighboring comparison within the proposed current order differential and adding the areas, serious problems arise with order- consolidated orders, a weighted average resulting amounts. This weighted to-order alignment. Class I differential has been calculated average differential is not location The next table illustrates the Class I for each order, based on October 1995 specific for the consolidated order. differentials under the proposed data. This weighted average differential

RELATIVE USE CLASS I DIFFERENTIALS IN PROPOSED ORDERS [Based on October 1995 Data]

Relative use + $1.60 = Weighted av- Maximum diff. New diff Change in diff. Proposed order 1 2 ratio class I diff. erage diff. range ($/cwt) ($/cwt) (percent) ($/cwt) ($/cwt) 3 (75%±125%)

Northeast ...... 0.92 2.52 3.14 2.35±3.93 2.52 ¥0.62 Appalachian ...... 4.60 6.20 2.79 2.09±3.49 3.49 0.70 Southeast ...... 5.76 7.36 3.04 2.28±3.80 3.80 0.76 Florida ...... 7.54 9.14 3.89 2.92±4.86 4.86 0.97 Mideast ...... 1.26 2.86 1.91 1.43±2.39 2.39 0.48 Central ...... 0.95 2.55 2.52 1.89±3.15 2.55 0.03 Up. Midwest ...... 0.53 2.13 1.32 0.99±1.65 1.65 0.33 Southwest ...... 0.93 2.53 3.01 2.26±3.76 2.53 ¥0.48 AZ-Las Vegas ...... 1.04 2.64 2.46 1.85±3.08 2.64 0.18 Western ...... 0.42 2.02 1.84 1.38±2.30 2.02 0.18 Pacific NW ...... 0.55 2.15 1.90 1.43±2.38 2.15 0.25 1 Based on the 11 proposed orders contained in this proposed rule. 2 Relative use ratio = Class I ÷all other uses. 3 Weighted average differential for the consolidated order is computed by summing the product of the percentage of Class I milk in each cur- rent order multiplied by the applicable current order differential.

The review of this option indicates resources needed to effectively negotiate prices. Over-order charges currently are that differentials would probably have a for supplies of milk. However, relatively small in this market and an minimal impact on small businesses, historically this region has had attempt to increase the charges would both processors and producers. For a difficulty maintaining a large over-order likely occur. However, producer groups majority of the Federal order system, premium structure and assumptions are have had the same difficulty as the producers and processors would that this would continue. If so, then all Northeast in maintaining an over-order experience Class I price increases. producer income would decrease structure. A $0.48 drop in the average However, due to offsetting factors slightly possibly impacting the market’s differential in the Southwestern market impacts would be reduced. milk supplies. would surely be felt by producers and Class I differentials are estimated to Large increases in Class I differentials accelerate the exodus of producers from increase from $0.00 to $0.48 in the would occur in the orders located in the the East Texas supply area, most likely Central, Mideast, and Midwestern Southeast. There are approximately smaller producers who may not have regions. Currently, over-order charges 4,000 small producers and 30 small significant resources to adapt to the are significantly higher and would handlers in the Florida and Southeast lowered prices or who would not be largely absorb these differential areas. Class I handlers would experience able to negotiate for higher over-order increases. Impacts on small producers increased competition from lower cost prices. Producers in New Mexico and and processors would be minimal. handlers in nearby markets. This may West Texas would also be affected, but The Northeastern marketing area have a greater impact on small the impact may not be as severe. could be affected significantly by the processors because of their ability to Processors in this region may benefit adoption of a relative use differential compete based on available resources. from the decrease in Federal order because of the decrease in Class I prices Although higher differentials would be prices. However, if there is an increase and because this area has a high returned to producers through the in the over-order prices that the concentration of small businesses, both Federal order uniform price, overall processors must pay, then the amount producers and processors. There are producers in the Southeast markets gained from the decrease would be approximately 18,860 small producers would probably not experience any lessened. In fact, if over-order pricing is and 280 small processors located in this significant gains from these increased implemented then small processors may region. Processors would pay on average differentials due to reduced over-order be at a disadvantage because they may $0.62 less for Class I milk as compared premiums being charged. However, this not be able to compete for milk beyond to the current system. Producers would would benefit small producers who may the reduction in Class I prices. likely turn to over-order charges to try not be able to negotiate as effectively for In the Western regions, Class I to make up for their lost revenue. If this over-order prices. differentials are expected to increase were to occur, then small processors The Southwest market is the other slightly. Over-order charges in these and producers would be placed at a market to experience decreases in markets are not as great as in the competitive disadvantage to large differentials. Approximately 1,400 small Midwestern markets and would businesses because often the small producers and 30 small handlers would probably be unable to totally absorb the businesses do not maintain the be impacted by the decrease in Class I Class I price increase. Producer pay 4822 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules prices and Class I handler costs would increases in the Class I differentials between bordering orders would increase slightly. All producers would would experience increased increase competition in areas where benefit from the price increase, competition from lower cost regions. Class I price differences are significant including about 690 small producers. Location advantages of some small having a greater impact on small However, about 50 small processors handlers would disappear while others businesses. may be at a disadvantage. Small emerge. Handler equity in these processors may not have the additional competing markets could erode placing Flat Differentials revenue necessary to adapt to the $0.18 some small handlers under greater risk. The use of flat differentials was to $0.25 per hundredweight increase in Approximately 300 handlers in the Class I prices. Northeast and Southwest markets are considered as an option for replacing Because of the limited effect of overall categorized as small handlers, about half the Class I price structure. Under this Class I differential changes within of the total number of handlers. system, all Class I differentials would be individual orders, relative use However, the adoption of a relative established at $1.60 regardless of the differentials would have a minimal use differential could have a significant location. Establishing the differentials at effect on small businesses, both impact on small businesses, both an equal level throughout the United producers and processors. Areas that producers and processors that are States does not recognize the location have decreases in Class I differentials located in adjacent orders. Because value associated with milk. Because this would have a minimal negative impact Class I prices would be able to change value would not be reflected in the on producer pay prices. Over 20,000 independently from each other, minimum price under the Federal order producers, or about 95 percent of all significant Class I price variances may program, flat differentials could affect producers, in these regions are begin to exist. As Class I utilization small businesses, as shown by the categorized as small businesses. On the changes, these changes may be following table. other hand, handlers in areas with larger significant. This lack of alignment

FLAT CLASS I DIFFERENTIALS IN PROPOSED ORDERS (Based on October 1995 Data)

Weighted Flat average Change Suggested consolidated order 1 differential ($/cwt) differential ($/cwt) ($/cwt) 2

Northeast ...... 1.60 3.14 ¥1.54 Appalachian ...... 1.60 2.79 ¥1.19 Southeast ...... 1.60 3.04 ¥1.44 Florida ...... 1.60 3.89 ¥2.29 Mideast ...... 1.60 1.91 ¥0.31 Central ...... 1.60 2.52 ¥0.92 Upper Midwest ...... 1.60 1.32 0.28 Southwest ...... 1.60 3.01 ¥1.41 AZ-Las Vegas ...... 1.60 2.46 ¥0.86 Western ...... 1.60 1.84 ¥0.24 Pacific NW ...... 1.60 1.90 ¥0.30 1 Based on the 11 proposed orders contained in this proposed rule. 2 Weighted average differential for the consolidated order is computed by summing the product of the percentage of Class I milk in each cur- rent order multiplied by the applicable current order differential.

The review of this option indicates uniform price paid to producers. among processors could occur in the that flat differentials could change the Although over-order pricing has been marketplace. More of the value of milk competitive relationship between large effective in Florida, it is unlikely that would be negotiated above the Federal and small processors and producers. the over-order prices would be able to order minimum. Because this value is Large processors could have a offset this total decrease. Data regarding outside of the regulatory minimum competitive advantage over small over-order pricing are not published but price, there is little that would ensure processors in negotiating with an indication of the level is provided by that processors are paying similar prices producers for supplies of milk at prices comparing the Federal order Class I for milk. This could impact small above the established minimum price. milk price to the announced processors more than larger processors Likewise, large producers could have a cooperatives Class I price. In Miami, because of their lack of resources better bargaining position when Florida, during 1996, the cooperatives needed to negotiate and obtain needed competing with small producers to announced price averaged $2.25 per supplies of milk. hundredweight higher than the supply a processor. The results of implementing flat Class Southeastern Florida Federal order In all areas of the United States, with I pricing would be the same throughout Class I price.16 the exception of the Upper Midwest, the United States where decreases producers and processors would Not only could producers suffer from occur. Areas where flat differentials experience significant decreases in the a loss in the value of the Class I price would have the greatest impact are reflected under the order, but inequity Class I price. The largest decrease would located in the Northeast, Southeast, occur in the Florida order with the Class Southwest, and Central areas. 16 I price decreasing $2.29 per Table 35—1996 Annual Average Announced Approximately 34,400 small producers Cooperative Class I Prices in Selected Cities, Dairy hundredweight. This would result in Market Statistics, 1996 Annual Summary, USDA, and 480 small handlers are located in approximately a $2.06 decrease in the AMS. these regions of the United States. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4823

The Upper Midwest would Although the use of flat differentials additional value would be added to the experience a slight increase in Class I would require no additional reporting, flat differential. Deficit orders were prices if a $1.60 flat differential were recordkeeping, or compliance deemed to have a Class I utilization implemented. The Class I price would requirements it is not being considered greater than 70 percent. If Class I use increase by $0.19 per hundredweight as a viable replacement for the current exceeds 70 percent, the Class I which would result in about a $0.04 Class I price surface because, in differential in an order would be $2.00 increase in the uniform price. Although addition to other reasons addressed in + $0.075* (Class I use percent—70 there are a substantial number of small the proposed rule, of the impact that flat percent). This option assumes that producers located in this region, differentials could have on a substantial markets with Class I use equal to or approximately 28,400, this increase number of small businesses both below 70 percent have an adequate would not impact the price that producers and processors. Flat reserve supply of milk to meet fluid producers in this area receive for their differentials of $1.60 per hundredweight needs and that markets with Class I use would negatively impact more than about 70 percent require additional milk milk. Over-order pricing is predominant 52,000 total small businesses. supplies to meet fluid demand.18 in this region. Next to Florida, the As with the relative use option Upper Midwest region has the highest Modified Flat Differentials (Option 2), the estimated Class I announced cooperative Class I prices, The use of modified flat differentials differentials presented in the table are between $1.19 to $1.79 17 higher than was considered as an option for not entirely location-specific within the the Federal order Class I price. Because replacing the Class I price structure. consolidated order. To provide a basis the over-order prices are substantial in This option is based on the flat Class I for comparison, a weighted average this area, the $0.19 increase in Class I price concept modified by the relative differential has been calculated based prices would likely be offset by a slight use price concept. Under this system, an on current differentials for the decrease in over-order prices, thus the equal differential would be established consolidated orders using October 1995 180 small handlers and the 28,400 small in all orders and then, in orders that data, as shown in the following table. producers would likely not see any were determined to be deficit based on These differentials are also not location- increase in overall prices. a Class I utilization percentage, an specific.

MODIFIED FLAT CLASS I DIFFERENTIALS IN PROPOSED ORDERS [Based on October 1995 Data]

Class I use Mod. flat Weighted Change Proposed order 1 diff. avg diff.2 (percent) ($/cwt) ($/cwt) ($/cwt)

Northeast ...... 47.9 2.00 3.14 ¥1.14 Appalachian ...... 81.5 2.86 2.79 0.07 Southeast ...... 85.2 3.07 3.04 0.03 Florida ...... 88.3 3.37 3.89 ¥0.52 Mideast ...... 55.8 2.00 1.91 0.09 Central ...... 48.8 2.00 2.52 ¥0.52 Upper Midwest ...... 34.5 2.00 1.32 0.68 Southwest ...... 48.1 2.00 3.01 ¥1.01 AZ-Las Vegas ...... 48.9 2.00 2.46 ¥0.46 Western ...... 29.6 2.00 1.84 0.16 Pacific NW ...... 35.6 2.00 1.90 0.10 1 Based on the eleven proposed orders contained in this proposed rule. 2 Weighted average differential for the consolidated order is computed by summing the product of the percentage of Class I milk in each cur- rent order multiplied by the applicable current order differential.

Like flat differentials, modified flat minimum price. Likewise, large differential is established at $2.00 differentials do not recognize location producers might retain strong instead of $1.60. values associated with milk. Because bargaining positions when competing As with the flat differential, the Upper this value would not be reflected in the with small producers to supply a Midwest producers and processors minimum price under the Federal order processor. would experience Federal order Class I program, modified flat differentials price increases. In this example, the Under this modified flat differential, estimated price would increase by $0.59 could have a dramatic effect on small only three orders would meet the businesses because modified flat which would return approximately necessary requirement to have a $0.12 to the producers in a higher differentials would change the differential established above the $2.00 uniform price. The largest decrease competitive relationship between large flat portion, Appalachian, Southeast, would occur in the Southwest and and small processors and producers. and Florida. Basically, this system Northeast orders with a Class I price Just as with flat differentials, large would be equivalent to adopting a flat decrease of $1.01 and $1.13, processors could maintain a competitive Class I pricing system in most of the respectively. The use of a modifier to advantage over small processors in United States. Although in this example the flat differential based on the Class I negotiating with producers for supplies the impacts appear to be different, with utilization would help to mitigate the of milk at prices above the established five of the proposed orders reflecting price decreases in the Southeast orders. differential increases, this is only 17 Table 35—1996 Annual Average Announced because the flat portion of the Class I 18 The 70 percent figure was merely selected for Cooperative Class I Prices in Selected Cities, Dairy illustrative purposes and no analysis has been Market Statistics, 1996 Annual Summary, USDA, conducted to determine if this is an appropriate AMS. percentage. 4824 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

With the use of the modifier, the three differentials would require no from the reserve area to the fluid Southeast orders would not all additional reporting, recordkeeping, or demand area. Monies paid by Class I experience decreases in Class I prices. compliance requirements. However, up handlers through the second part of the The Appalachian order would have a to 34,000 small businesses could be Class I differential would be used to $0.07 increase while the Florida order impacted by this proposal. fund the order’s system of and the Southeast order would lose Demand Based Differentials transportation credits and balancing $0.52 and $0.01, respectively. payments. These transportation credits Ultimately about 4,000 producers in the The use of demand based differentials and balancing payments would be Southeast and Florida areas would was also considered as an option for the provided to organizations that supply experience a decline in the Class I price Class I price structure. Under this the order’s fluid market. received under Federal orders, while system, an equal differential would be applied to all orders, and in defined To encourage movement of the nearly 4,200 producers in the nearest milk supply for fluid use, two Appalachian area would find their Class demand centers, an additional restrictions would be needed. First, a I price increasing. component would be added to reflect handler’s total transportation credits The competitive position among the costs of transporting milk from processors could become altered under reserve supply areas to demand centers. would be limited to the variable amount modified Class I differentials. More of This option would increase the paid in by the handler for the value of milk would be negotiated regulatory burden on all businesses, transportation. Second, a handler’s total above the Federal order minimum. both small and large, through additional transportation credit would not exceed Because this value is outside of the reporting, recordkeeping, and 80 percent of the handler’s regulatory minimum price, nothing compliance requirements. Small transportation bill on each Class I would ensure that processors are paying processors could be disadvantaged shipment or 2.8 cents per similar prices for milk. This could under this option. hundredweight per 10 miles (28 cents impact small processors more than This proposal involves establishing a per 100 miles), whichever is less. Any larger processors if the smaller fluid supply area for each market from residual left after paying transportation processors lack the resources needed to which milk production around the credits would be added to the $1.00 negotiate and obtain needed supplies of major bottler locations is procured and differential and paid to all producers in milk. In addition, processors in areas a reserve supply area would be the pool. where the modifier becomes effective established that would be outside the The following table contains a few would be placed at a disadvantage fluid supply area from which milk examples of differentials that would because the regulated minimum price production is sometimes supplied to apply to specific locations. These would be allowed to fluctuate and their fluid handlers in the major fluid bottling differentials are based on the farthest minimum costs would not be the same locations. The Class I differential for the distance that milk for fluid use is as those with the flat differential or reserve area under this proposal would transported, using the USDSS 19 model where the Class I price is allowed to be set at $1.00 per hundredweight. For to solve for each consumption point adjust. The use of $2.00 per fluid supply areas, the differential individually as a guide for establishing hundredweight modified flat would be $1.00 plus transportation costs the differentials.

DEMAND-BASED CLASS I DIFFERENTIALS FOR SELECTED CITIES

Demand- Current based Change Selected location differential differential ($/cwt) ($/cwt) ($/cwt)

Miami, FL ...... 4.18 3.88 ¥0.30 Tampa, FL ...... 3.88 2.05 ¥1.83 Orlando, FL ...... 3.88 3.08 ¥0.80 New Orleans, LA ...... 3.65 1.28 ¥2.37 Atlanta, GA ...... 3.08 2.38 ¥0.70 New York City, NY ...... 3.14 1.80 ¥1.34 Chicago, IL ...... 1.40 1.49 ¥0.09 Minneapolis, MN ...... 1.20 1.11 ¥0.09 Phoenix, AZ ...... 2.52 1.00 ¥1.52 Dallas, TX ...... 3.16 1.40 ¥1.76 Denver, CO ...... 2.73 1.19 ¥1.54 Portland, OR ...... 1.90 1.13 ¥0.77 Seattle, WA ...... 1.90 1.31 ¥0.59 Boise, ID ...... 1.50 1.06 ¥0.44

The review of this option from a result in income losses for all producers, at a lower level that would negatively producer viewpoint reveals that a both large and small. Although impact all 82,900 producers because of demand based differential system is additional money is generated by the the decrease in the actual value of Class comparable to a flat differential option. demand based differential above the I revenue that is reflected in the Federal Producers would only be ensured that $1.00, this additional money would be order minimum price. Thus, the the $1.00 portion of the differential used to fund transportation costs disadvantages that producers, especially would be returned through the blend associated with servicing the Class I small producers, might experience price. Ultimately, this option could market. The differentials are established under a flat or modified flat differential 19 US Dairy Sector Simulator model developed and run by Cornell University to solve for the geographical spatial relationships of milk for particular uses of milk, primarily fluid. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4825 system are applicable to demand based based differentials are not considered a base for comparing a 2-percentage point differentials. viable alternative. change up or down is 42 percent. Like the two previous options, small In addition to the supply/demand handlers also could be disadvantaged, Decoupled Baseline Class I Price with adjustor, a cost of production indicator because less of the actual value of Class Adjustors would be developed whereby Class I I milk is reflected under the regulated The use of a decoupled baseline Class prices would be increased in a timely price which may lead to both processors I price with adjustors was considered as manner when input costs to dairy and producer inequity. The potential an option for replacing the Class I price farmers are increasing. One such negative effects discussed under flat structure. Under this system, the Class economic indicator might be feed costs. differentials and modified flat I price would be decoupled from the While one such adjustor was developed differentials also apply to demand based basic formula price, or the Class I price and submitted, it was received too late differentials. In addition, the adoption mover, and a base price would be to be included in this analysis. The following table illustrates the of demand-based differentials would established at a specified level. result in a significant increase in initial Class I differentials under the Adjustments to this base price would be reporting, recordkeeping, and proposed consolidated orders. These made utilizing a supply/demand compliance activities which would differentials are not location-specific adjustor and possibly a cost of impact all 1,450 handlers, but is likely within the applicable orders. For production indicator. to be a greater burden on small purposes of this analysis and to provide handlers. To ensure reimbursement for Under this option for Class I purposes a basis for comparison within the a portion or all of a processors handling the base price would be floored at proposed consolidated orders, a charges, complete and detailed $13.63 per hundredweight, the weighted average Class I differential has transportation records must be kept. November 1995 to October 1996 average been calculated for each order based on New forms would be required for BFP. This price level would be used to October 1995 data. This weighted submission, along with copies of all establish Class I prices using current average differential is computed by transportation invoices. The additional differentials. A supply/demand adjustor multiplying the percentage of Class I information could require more of $0.12 per hundredweight for each 2 milk in each of the current orders that personnel, training, and technology to percent change in the rolling average comprise the consolidated order by the automatically keep track of such utilization would be used to change applicable current order differential and information. While the costs associated prices in each of the orders to reflect adding the resulting amounts. The with this degree of recordkeeping are long-term trends. For example, a Class weighted average differential is not not available, they could be significant I utilization change from 44 percent to location-specific for the consolidated enough to disadvantage small 46 percent in a market would result in order. businesses. a $0.12 per hundredweight gain in the Initially the differentials would be the Because the use of demand-based market’s Class I differential. Once the same. However, as this option impacts differentials could result in a significant utilization level changes, the new production (supply) and use (demand), increase in regulatory burdens to all utilization rate becomes the base for there would be a change in the handlers as well as inequity among future changes. Thus, if a market falls utilization percentage, thereby causing producers and processors, demand- from 44 percent to 42 percent, the new the differentials to vary.

INITIAL CLASS I DIFFERENTIALS IN PROPOSED ORDERS BASED ON 1995 DATA UNDER DECOUPLED BASELINE CLASS I PRICE WITH ADJUSTORS SYSTEM

Weighted Initial class I Change in Proposed order average dif- differential differential ferential ($/cwt) ($/cwt) ($/cwt) 1

Northeast ...... 3.14 3.14 0.00 Appalachian ...... 2.79 2.79 0.00 Southeast ...... 3.04 3.04 0.00 Florida ...... 3.89 3.89 0.00 Mideast ...... 1.91 1.91 0.00 Central ...... 2.52 2.52 0.00 Up Midwest ...... 1.32 1.32 0.00 Southwest ...... 3.01 3.01 0.00 AZ-Las Vegas ...... 2.46 2.46 0.00 Western ...... 1.84 1.84 0.00 Pacific NW ...... 1.90 1.90 0.00 1 Weighted average differential for the consolidated order is computed by summing the product of the percentage of Class I milk in each cur- rent order multiplied by the applicable current order differential.

The review of this option indicates processors, particularly small producers impact on a small business’s ability to that the decoupled baseline Class I price and processors. If Class I differentials compete in the marketplace. with adjustors would create some are allowed to adjust frequently, price Analysis completed by the multi- disruption in inter-market price alignments established between and regional ERS model 20 indicates that the alignment because Class I differentials among markets would disappear increase in prices experienced would would be allowed to adjust causing inequity among competing independently from each other and may handlers. It is this inequity amongst 20 Economic Research Service multi-regional have a serious impact on producers and handlers that would have a significant model of the dairy industry. 4826 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules not be sustainable. The results of the The Proposed Class I Price Options differentials reflecting the relative model analysis indicate that the higher The options proposed in this rule are economic value of milk by location. An floored Class I prices would impact the a result of extensive review of the important feature of the option is all milk price and after 3 years, current marketing structure and other including location adjustments that producers would begin experiencing a pertinent information. Extensive geographically align minimum Class I decrease in the revenue initially outreach, as explained previously, milk prices paid by fluid milk generated by this option. This would resulted in substantial input from the processors nationwide regardless of occur because the higher blend prices public. After gathering the necessary defined milk marketing area boundaries (caused by higher Class I prices) would information, two options were or order pooling provisions. A basic stimulate milk production which would developed and are advanced in this premise of this option is that the value then lead to lower manufacturing prices. proposed regulation as viable Class I of milk varies according to location Because it is the blend price that is paid price structures. across the United States. to producers, the increase in the Class Currently, the Class I price structure The level of the location-specific I prices would not be enough to offset recognizes that milk has value by differentials proposed in this regulation the decrease in prices of the other location. By recognizing that milk has are such that small businesses would classes of use and the changes in value by location, small businesses are experience minimal impacts if the utilization which would affect the placed more on the same competitive differential levels. footing as large businesses in the regulations were implemented. The Initially Class I differentials would minimum prices they pay for milk. The differentials are based on economic 21 not change however, Class I prices use of either location-specific model results, current marketing would increase because of the inclusion differentials or relative-value conditions, and the costs of obtaining of a higher floor price. With the use of differentials would provide the alternative supplies of milk. Since a a floor, the variability in Class I prices necessary recognition of the location price is established for every county would be moderated. However, the use value of milk but at different levels. under this option, the following table of the floor price may impact the 79,600 sets forth examples of adjusted smaller producers differently than the Location-Specific Differentials (Option differentials at selected cities. Map 2 8,400 larger producers because the 1A) and General Provisions § 1000.52, as smaller producers may not have the This option would establish a contained in the discussion on price necessary financial resources to endure nationally coordinated system of structure, set forth the location adjusted such a transition. location-specific Class I price differentials in every county.

COMPARATIVE LOCATION-SPECIFIC CLASS I DIFFERENTIALS AT SELECTED CITIES

Class I differential City Loc.-specific Difference Current diff

Dollars Per Hundredweight

New York City, NY ...... 3.14 3.15 .01 Charlotte, NC ...... 3.08 3.10 .02 Atlanta, GA ...... 3.08 3.10 .02 Tampa, FL ...... 3.88 4.00 .12 Cleveland, OH ...... 2.00 2.00 .00 Kansas City, MO ...... 1.92 2.00 .08 Minneapolis, MN ...... 1.20 1.70 .50 Chicago, IL ...... 1.40 1.80 .40 Dallas, TX ...... 3.16 3.00 (.16) Salt Lake City, UT ...... 1.90 1.90 .00 Phoenix, AZ ...... 2.52 2.35 (.17) Seattle, WA ...... 1.90 1.90 .00

Other than in the southwestern because the price is established for each $0.03 in the all-milk price. Overall, this portions of the United States, this county regardless of where the milk is pricing option would result in $55 proposed option would have little pooled. Because more of the actual million increase in cash receipts. impact on most producers both large value of Class I milk is reflected in the The use of location-specific and small. Likewise, processors should minimum regulated price, both small differentials would require no not experience any substantial changes producers and processors can be additional reporting, recordkeeping, or in their abilities to compete for milk assured of maintaining their ability to compliance requirements. supplies. In fact, producers and compete for a supply of milk. A review of the six year average Relative-Value Specific Differentials processors should experience quantitative analysis conducted using (Option 1B). improvements because location-specific the ERS model, assuming A nationally coordinated system of differentials provide improvements in implementation of the consolidated relative-value specific Class I price areas under the current system that are orders, four classes of use, BFP as differentials and adjustments that not as well aligned. In addition proposed, and using location-specific recognizes several low pricing areas is processors would experience differentials would result in a decrease the second of two options proposed. improvements in competing for milk in Class I utilization but an increase of These differentials rely on a least cost 21 USDSS results using May and October 1996 data. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4827 optimal solution from the USDSS Relative-value specific differentials the dairy industry to rely on the Cornell model to develop a Class I price are designed to move the dairy industry negotiating abilities of both dairy structure that is based on the most into more market-oriented environment farmers and processors to determine efficient assembly and shipment of milk by reducing reliance on Federal actual Class I values. Less efficient small and dairy products to meet all market regulations in establishing actual Class businesses could be disadvantaged demands for milk and its products. This I milk prices. By lowering the because of the lack of resources and option relies more on the market and differentials in most of the United knowledge necessary to effectively the negotiating ability of processors and States, marketing practices would have negotiate and maintain necessary price producers to generate higher prices a greater impact on Class I values in the levels. Map 3 and General Provisions when needed to provide the necessary form of over-order prices and only the § 1000.52, as contained in the proposed incentive to move milk in order to producers who perform for the market rule, set forth the differentials in every satisfy demand. would benefit. Hence, the adoption of county. The following table sets forth relative-value differentials would move adjusted differentials at selected cities.

COMPARATIVE RELATIVE VALUE-SPECIFIC CLASS I DIFFERENTIALS AT SELECTED CITIES

Rel. value- City Current diff. specific diff. Difference

Dollars Per Hundredweight

New York City, NY ...... 3.14 2.07 (1.07) Charlotte, NC ...... 3.08 1.89 (1.19) Atlanta, GA ...... 3.08 2.46 (0.62) Tampa Bay, FL ...... 3.88 3.81 (0.07) Cleveland, OH ...... 2.00 1.54 (0.46) Kansas City, MO ...... 1.92 1.45 (0.47) Minneapolis, MN ...... 1.20 1.20 0.00 Chicago, IL ...... 1.40 1.65 0.25 Dallas, TX ...... 3.16 1.68 (1.48) Salt Lake City, UT ...... 1.90 1.08 (0.82) Phoenix, AZ ...... 2.52 1.14 (1.38) Seattle, WA ...... 1.90 1.00 (0.90)

The level of the relative value-specific However, with the use of a phase-in in relative value-specific differentials to differentials proposed in this rule are together with one of the proposed minimize the market disruption that such that without a phase-in and a transitional program alternatives, the may initially occur. Each utilizes the transitional program, small businesses, impacts on small businesses could be difference between the current particularly producers, would mitigated during the transition period. differentials and the final relative value- experience significant economic The use of a transition program specific differentials as the basis of the impacts. Reviewing the change in Class alternative would also allow both phase-in. This difference is then I differentials on an individual order producers and processors the reduced by 20 percent during each basis reveals that, with the exception of opportunity to adapt their marketing phase-in year until the final relative practices to adjust to a new level of producers located in the Upper Midwest value-specific differential price is Class I differentials. At the conclusion region, all producers would likely face achieved. The phase-in would begin in of the transition period, small reduced income due to lower minimum businesses should have adjusted to 1999 and be completed by 2003. The Class I prices if relative value-specific lower regulated Class I differentials and base differentials resulting from this differentials were implemented be able to compete in a more market- transitional phase-in are set forth in the immediately. Producers located in the oriented environment. following table. The first alternative Northeast and Southwest would Three possible alternatives are would be to phase-in to these experience the greatest decrease. presented for consideration of phasing differentials.

RELATIVE VALUE-SPECIFIC BASE DIFFERENTIALS FOR USE IN PHASE-IN PROGRAM OPTIONS

Relative Value-Specific Base Differentials 1 City Current 1999 2000 2001 2002 2003

Dollars Per Hundredweight

New York City ...... 3.14 2.93 2.71 2.50 2.28 2.07 Charlotte ...... 3.08 2.84 2.60 2.37 2.13 1.89 Atlanta ...... 3.08 2.96 2.83 2.71 2.58 2.46 Tampa Bay ...... 3.88 3.87 3.85 3.84 3.82 3.81 Cleveland ...... 2.00 1.91 1.82 1.72 1.63 1.54 Kansas City ...... 1.92 1.83 1.73 1.64 1.54 1.45 Minneapolis ...... 1.20 1.20 1.20 1.20 1.20 1.20 Chicago ...... 1.40 1.45 1.50 1.55 1.60 1.65 Dallas ...... 3.16 2.86 2.57 2.27 1.98 1.68 Salt Lake City ...... 1.90 1.74 1.57 1.41 1.24 1.08 4828 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

RELATIVE VALUE-SPECIFIC BASE DIFFERENTIALS FOR USE IN PHASE-IN PROGRAM OPTIONSÐContinued

Relative Value-Specific Base Differentials 1 City Current 1999 2000 2001 2002 2003

Phoenix ...... 2.52 2.24 1.97 1.69 1.42 1.14 Seattle ...... 1.90 1.72 1.54 1.36 1.18 1.00 1 Base differential obtained by taking the difference between the current differential and the final relative value-specific differential (year 2003) and multiplying by 20 percent. This value is then subtracted from the current differential to yield the 1999 base differential. This value is then de- ducted from each consecutive year's value until the relative value-specific differentials are achieved in 2003.

The second alternative for phasing-in through lowered Class I differentials in per hundredweight in 2002. This to the relative value-specific most markets. To provide the industry offsetting of revenue is designed to differentials would consist of adding a an opportunity to prepare for this temporarily reduce the impacts of decreasing ‘‘transitional payment’’ to change, a transitional payment would be implementing relative value-specific the base differential. It would be equal added to the base differential for Class differentials, thus allowing producers an to the decrease in revenue that would I milk. The payment would be higher in opportunity to adjust their marketing occur with the implementation of the first year and gradually be reduced practices to adapt to more market- relative value-specific differentials thereafter to result in implementation of determined Class I pricing. The during the four years of transitioning to the relative value-specific differentials following table sets forth the adjusted these differentials (1999 to 2002). by 2003. The additional payment would Class I differentials under this revenue- During this four-year period, it is equal $0.55 per hundredweight in 1999, neutral phase-in option for selected projected that $388.6 million would be $0.35 per hundredweight in 2000, $0.20 cities. removed from the Federal order system per hundredweight in 2001, and $0.10

RELATIVE VALUE-SPECIFIC CLASS I DIFFERENTIALS WITH REVENUE NEUTRAL PHASE-IN PAYMENTS

Class I diff. with revenue neutral phase-in City Current 1999 1 2000 2 2001 3 2002 4 2003 5

Dollars Per Hundredweight

New York City, NY ...... 3.14 3.48 3.06 2.70 2.38 2.07 Charlotte, NC ...... 3.08 3.39 2.95 2.57 2.23 1.89 Atlanta, GA ...... 3.08 3.51 3.18 2.91 2.68 2.46 Tampa Bay, FL ...... 3.88 4.42 4.20 4.04 3.92 3.81 Cleveland, OH ...... 2.00 2.46 2.17 1.92 1.73 1.54 Kansas City, MO ...... 1.92 2.38 2.08 1.84 1.64 1.45 Minneapolis, MN ...... 1.20 1.75 1.55 1.40 1.30 1.20 Chicago, IL ...... 1.40 2.00 1.85 1.75 1.70 1.65 Dallas, TX ...... 3.16 3.41 2.92 2.47 2.08 1.68 Salt Lake City, UT ...... 1.90 2.29 1.92 1.61 1.34 1.08 Phoenix, AZ ...... 2.52 2.79 2.32 1.89 1.52 1.14 Seattle, WA ...... 1.90 2.27 1.89 1.56 1.28 1.00 1 1999 applicable base differential from the previous table plus $0.55. 2 2000 applicable base differential from the previous table plus $0.35. 3 2001 applicable base differential from previous table plus $0.20. 4 2002 applicable base differential from the previous table plus $0.10. 5 Final relative value-specific differentials.

The use of a revenue-neutral phase-in milk price would increase an average of differential that would enhance revenue program would decrease the amount of $0.13 per cwt, and total cash receipts beyond what the Class I system would cash receipts removed from the Federal would be increased by $193.9 million have generated during the four years of order system from $388.6 million during compared with the baseline. Although transitioning to the relative value- the four-year phase-in to a gain of $47.8 these values would be decreased by the specific differentials. During this four- million with the offsetting sixth year, with Class I prices projected year period, it is projected that $878.4 compensation implementation and then to decrease for all Federal order an million would be added to the Federal effective relative-value differentials. The average of $0.51, the all-milk prices order system through the revenue- decrease in the all-milk price paid to projected to decrease an average of enhanced payment. This would result in producers would also be reduced from $0.09, and total cash receipts projected a net increase of $489.8 million added $0.04 per cwt to $0.02 per cwt for the to decrease $128.5 million, all to the system once the projected six-year average. producers would benefit from the decrease resulting from the relative In fact, during the first year of lessening of the impacts of moving value-specific differentials during this offsetting compensation implementation towards the relative-value differentials. period is deducted. This additional the Class I price would increase for all The third approach to phasing in the money would not only provide but one of the Federal orders. On relative value-specific differentials producers with an opportunity to average, for all markets, the Class I price would consist of adding a decreasing prepare for and restructure their would increase $0.39 per cwt, the all- ‘‘transitional payment’’ to the base marketing practices to adapt to more Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4829 market determined Class I pricing but the highest with reductions occurring 2000, $0.40 per hundredweight in 2001, would also allow producers to obtain thereafter to result in implementation of and $0.20 per hundredweight in 2002. the education and resources necessary the relative value-specific differentials The following table sets forth the to become more effective in a more by 2003. The additional payment would adjusted Class I differentials under this market-oriented environment. Again, equal $1.10 per hundredweight of Class revenue-enhancement phase-in option the payment in the first year would be I in 1999, $0.70 per hundredweight in for selected cities.

RELATIVE VALUE-SPECIFIC CLASS I DIFFERENTIALS WITH REVENUE ENHANCEMENT PHASE-IN PAYMENTS

Class I diff. with revenue enhancement City Current 1999 1 2000 2 2001 3 2002 4 2003 5

Dollars Per Hundredweight

New York City, NY ...... 3.14 4.03 3.41 2.90 2.48 2.07 Charlotte, NC ...... 3.08 3.94 3.30 2.77 2.33 1.89 Atlanta, GA ...... 3.08 4.06 3.53 3.11 2.78 2.46 Tampa Bay, FL ...... 3.88 4.97 4.55 4.24 4.02 3.81 Cleveland, OH ...... 2.00 3.01 2.52 2.12 1.83 1.54 Kansas City, MO ...... 1.92 2.93 2.43 2.04 1.74 1.45 Minneapolis, MN ...... 1.20 2.30 1.90 1.60 1.40 1.20 Chicago, IL ...... 1.40 2.55 2.20 1.95 1.80 1.65 Dallas, TX ...... 3.16 3.96 3.27 2.67 2.18 1.68 Salt Lake City, UT ...... 1.90 2.84 2.27 1.81 1.44 1.08 Phoenix, AZ ...... 2.52 3.34 2.67 2.09 1.62 1.14 Seattle, WA ...... 1.90 2.82 2.24 1.76 1.38 1.00 1 1999 applicable base differential from the second previous table plus $1.10. 2 2000 applicable base differential from the second previous table plus $0.70. 3 2001 applicable base differential from the second previous plus $0.40. 4 2002 applicable base differential from the second previous plus $0.20. 5 Final relative value-specific differentials.

The use of a revenue-enhancement benefit from having more of the total and recommends that certain products phase-in program would increase the cost of the milk reflected in the be reclassified. The revised fluid milk amount of cash receipts within the minimum price. This may increase the product definition proposed for the new Federal order system by an average equity amongst the competing handlers orders should provide more consistency $34.9 million for a six-year period that in these regions. There are in determining the classification of includes implementing and then approximately 200 small handlers products. The inclusion of eggnog to the effective relative value-specific located in these two regions. About 600 list of fluid milk products and the differentials. For the six-year average, small handlers located most other reclassification of cream cheese from the all-milk price would be unchanged. places in the United States may find Class III to Class II will cause a nominal During the first year of implementation that the increase in the Class I price increase in the cost of the finished Class I prices would increase an average could change their competitive product. However, these changes, which of $0.91 per cwt, all-milk prices would relationships. will be applicable to all handlers increase an average of $0.30 per cwt, No additional recordkeeping, regulated under the new orders, should and total cash receipts would increase reporting, or compliance requirements not have a significant impact on the $425 million. Although these values would be necessary to implement the retail price of these products. Although would decrease by the sixth year, with relative value-specific differentials producers will benefit from these Class I prices down an average of $0.48, discussed above. products being reclassified into higher all-milk prices down $0.06, and total utilization classes, the impact of the cash receipts down $80.5 million, all The Proposed Classification Options product classification changes on the producers would benefit from the The classification of milk blend price to producers will be lessening of the impacts of moving recommendations should not have a marginal. towards relative value-specific significant economic impact on a Another modification includes the differentials that are more market- substantial number of small businesses. reclassification of butter and whole milk oriented and less governmentally This proposed rule provides uniform powder from Class III to Class IV. This regulated. milk classification provisions for the change merely places these market- Although producers would benefit newly consolidated milk orders. The clearing products in the new Class IV from the initial increases in the Class I recommendations should improve with nonfat dry milk. The change prices, this may put small businesses at reporting and accounting procedures for promotes market efficiency and should a disadvantage because the cost of the handlers and provide for greater market have a minimal impact on producers’ raw product during the initial efficiencies. blend prices. implementation years would be higher Most of the changes regarding milk One recommendation with possible than the current regulated minimum classification provisions proposed for small business implications concerns prices. In areas such as the Upper the newly consolidated orders would the treatment of milk used to produced Midwest and Southeast where over- simplify order language and remove bulk sweetened condensed milk/skim order pricing has been effective in obsolete language. milk. Some commenters argued that the establishing the actual value of Class I This proposed rule contains a wide price difference that sometimes milk, small processors may actually modified fluid milk product definition exists between the Class II price and the 4830 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Class III–A price has put manufacturers OMB Control Number: 0581–0032. the Secretary of Agriculture. Part of the of sweetened condensed milk at a Expiration Date of Approval: May 31, market administrator’s duties are to competitive disadvantage with 1998. prescribe reports required of each manufacturers of nonfat dry milk, which Type of Request: Extension and handler, and to assure that handlers can be substituted for bulk sweetened revision of a currently approved properly account for milk and milk condensed milk and skim milk in some information collection. products, and that such handlers pay higher-valued products. Abstract: Federal Milk Marketing producers and associations of producers Although this proposed rule does not Order regulations authorized under the according to the provisions of the order. recommend a reclassification for milk Agricultural Marketing Agreement Act The market administrator employs a used in bulk sweetened condensed of 1937, as amended (7 U.S.C. 601–674), staff that verifies handlers’ reports by milk, it does propose a change in the require milk handlers to report in detail examining records to determine that the relationship between the Class II and IV the receipt and utilization of milk and required payments are made to prices which should eliminate the price milk products handled at each of their producers. Most reports required from disparity that now, at times, exists. As plants that are regulated by a Federal handlers are submitted monthly to the discussed in the ‘‘Class III and Class III– Order. The data are needed to market administrator. Confidentiality of A (i.e., Class IV) Milk’’ section of this administer the classified pricing system information collection is assured proposed rule, the proposed new Class and related requirements of each through Section 608(d) of the Act, II price will be equal to the Class IV Federal Order. which imposes substantial penalties on Rulemaking amendments to the price plus a 70-cent differential. The anyone violating these confidentiality orders must be approved in referenda coupling of the Class II and Class IV requirements. conducted by the Secretary. prices will largely remove the incentive The forms used by the market to substitute nonfat dry milk for bulk The terms of each of the current milk marketing orders are found at 7 CFR administrators are required by the sweetened condensed milk. respective milk orders that are The recommendations regarding Parts 1001–1199; the terms of each of the proposed orders in this document authorized by the Act. The forms are shrinkage provisions should provide authorized either in the general equity among handlers, improve market are found at 7 CFR Parts 1001–1134. The authority for requiring reports is provisions (Part 1000) or in the sections efficiencies, and facilitate accounting of the respective orders. The forms are procedures. This proposed rule provides found at 8c (5) and (7) and 8d of the Act. The current authority for requiring used to establish the quantity of milk that shrinkage be assigned pro rata received by handlers, the pooling status based on a handler’s utilization. As records to be kept is found in the general provisions at 7 CFR Part 1000.5. of handlers, the class-use of the milk discussed in the ‘‘Shrinkage and used by the handler and the butterfat Overage’’ section of this proposed rule, In this proposed rule, this authority is found in the general provisions at 7 CFR content and amounts of other this modification should result in a components of the milk. slight increase (i.e., one cent per cwt.) Part 1000.27. The Act also provides for The frequency of performing these in the blend price paid to producers. milk marketing agreements, but there For the reasons stated above, the milk are none in effect. recordkeeping and reporting duties classification provisions proposed A Federal milk marketing order is a varies according to the form; the herein should have little economic and regulation issued by the Secretary of frequency ranges from ‘‘on occasion’’ to regulatory impact on small businesses. Agriculture that places certain ‘‘annually’’ but ‘‘monthly’’ is perhaps requirements on the handling of milk in most common. In general, most of the Paperwork Reduction Act of 1995 the area it covers. It requires that information that handlers report to the The information collection handlers of milk for a marketing area market administrator is readily available requirements contained in this proposed pay not less than certain minimum class from normally maintained business rule previously were approved by the prices according to how the milk is records. Thus, the burden on handlers Office of Management and Budget used. These prices are established under to complete these recordkeeping and (OMB) pursuant to the Paperwork an order on the basis of evidence reporting requirements is expected to be Reduction Act of 1995 (44 U.S.C. concerning the supply and demand minimal. In addition, assistance in chapter 35) under OMB control number conditions for milk in the market. A completing forms is readily available 0581–0032, through May 31, 1998. A milk order requires that payments for from market administrator offices. notice of request for a three-year milk be pooled and paid to individual Regarding the use of improved extension and revision of this currently farmers or cooperative associations of information technology to reduce the approved information collection was farmers of the basis on a uniform or reporting and recordkeeping burden, the published in the December 2, 1997, average price. Thus, all eligible farmers information requested is the minimum Federal Register (62 FR 63693), which (producers) share in the market wide necessary to carry out the program. invited comments from the public use-values of milk by regulated Since the type of information required through February 2, 1998. handlers. to be collected and the certification and The amendments set forth in this The Report of Receipts and Utilization reporting of that information is required, proposed rule do not contain additional and the Producer Payroll Report are no other alternative to the mode of information collections that require completed by regulated milk handlers information collection has been found. clearance by the OMB under the and milk marketing cooperatives and However, where possible, reported provisions of 44 U.S.C. Chapter 35. are the principal reporting forms needed information is accepted using computer Following is a general description of the to administer the 31 Federal milk tapes or diskettes as alternatives to reporting and recordkeeping marketing orders. submitting the requested information on requirements, reasons for these The orders also provide for the public these report forms. Comments are requirements and an estimate of the dissemination of market statistics and requested to help assess the number of annual burden on the dairy industry. other information for the benefit of handlers using computers, word Title: Report Forms Under Federal producers, handlers, and consumers. processors and other electronic Milk Orders (From Milk Handlers and Each milk order is administered by a equipment to create and store Milk Marketing Cooperatives). market administrator who is an agent of documents, as well as the extent to Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4831 which the Internet is used to exchange is estimated to average 0.87 hours per Preliminary Statement information. response. The material issues in this proposed We are confident that the information Respondents: Milk Handlers and Milk rule relate to: we collect does not duplicate Marketing Cooperatives. information already available. Dairy 1. Consolidation of marketing areas. Programs has an ongoing relationship Estimated Number of Respondents: 2. Basic formula price replacement and other 772. class price issues. with many organizations in the dairy 3. Class I price structure. industry that also respond to other Estimated Number of Responses per 4. Classification of milk and related issues. governmental agencies. Thus, we are Respondent: 35. 5. Provisions applicable to all orders. aware of the reports dairy industry Estimated Total Annual Burden on 6. Regional issues: organizations are submitting to other a. Northeast Region. Respondents: 23,858 hours. government agencies. b. Southeast Region. Information collection requirements Estimated annual cost to respondents c. Midwest Region. have been reduced to the minimum for report preparation: $276,514 (23,858 d. Western Region. requirements of the order, thus hours at $11.59 per hour). Although 7. Miscellaneous and administrative matters. minimizing the burden on all hourly rates vary among handlers in a. Consolidation of the marketing service, administrative expense, and producer- handlers—those considered to be small various localities, the wage paid to settlement funds. as well as large entities. Forms require clerical workers engaged in report b. Consolidation of the transportation only a minimal amount of information preparation is estimated to be credit balancing funds. which can be supplied without data comparable to about a grade GS–7, step c. Proposed general findings. processing equipment or a trained 1. statistical staff. The primary source of II. Discussion of Material Issues and It is important to note that the burden Proposed Amendments to the Orders data used to complete the forms is being reported is an estimate of the A discussion and explanation of the routinely used in all business amount of time that would be required transactions. Thus, the information material issues and proposals contained of current program participants, as was collection and reporting burden is in this rule are as follows: published in the Notice of Request for relatively small. Requiring the same Extension, referenced in the 1. Consolidation of Marketing Areas reporting requirements for all handlers introductory text of this section. does not significantly disadvantage any Subtitle D, Chapter 1 of the 1996 Farm handler that is smaller than industry It is expected that this proposed rule Bill, entitled ‘‘Consolidation and Reform average. would have little impact on the of Federal Milk Marketing Orders,’’ If the collection of this information reporting and recordkeeping burden on requires, among other things, that the were conducted less frequently, data handlers regulated under the Federal Federal milk marketing orders be needed to keep the Secretary informed milk marketing order program. In fact, limited to not less than 10 and not more concerning industry operations would as a result of the consolidation of than 14. Over 400 public comments not be available. Timing and frequency Federal orders from 31 to 11 as have been received in response to of the various reports are such to meet proposed, an overall reduction in requests from USDA for public input on the needs of the industry and yet reporting and recordkeeping the subject of order consolidation. Two minimize the burden of the reporting requirements may occur due to greater preliminary reports on order public. uniformity in forms used and fewer consolidation have been issued by the The collection of the required ‘‘special’’ forms that currently apply to Agricultural Marketing Service’s Dairy information is conducted in a manner one or a few orders. Division. The initial Preliminary Report consistent with guidelines in 5 CFR on Order Consolidation was issued in Non-substantial changes would be 1320.6. The orders require that the December 1996, and the Revised necessary on the required reports and market administrator compute monthly Preliminary Report was issued in May records to correctly identify the new minimum prices to producers based on 1997. The December 1996 Report Federal market order (e.g. the current— monthly information. Without monthly suggested that the 32 Federal milk and separate—reports for the Upper information, the market administrator, marketing orders then in existence be Florida, Tampa Bay and Southeastern for example, would not have the consolidated to 10, and the May 1997 Florida marketing areas would be information to compute each monthly Report suggested 11. All comments combined into one report for the Florida price, nor to know if handlers were received by the Department have been marketing area). paying producers on dates prescribed in considered in the development of this the order, such as the advance payment Request for Public Input proposed rule. for milk received the first 15 days of the Although the Farm Bill specifically month and the final payment which is Comments on the Executive Order provides for the inclusion of California payable after the end of the month. The 12866 analysis, the initial regulatory as a separate Federal milk order, the Act imposes penalties for order flexibility analysis, and the paperwork provision is contingent upon petition violations, such as the failure to pay reduction analysis are requested. and approval by California producers. producers not later than prescribed Specifically, interested parties are Interest in a Federal milk order has been dates. The orders require payments to invited to submit comments on the expressed by some California producers, and from the producer-settlement fund regulatory and informational impacts of but the degree of interest expressed and to be made monthly. Also, class prices this proposed rule on small businesses. the input provided by the producers has are based on the monthly Basic Formula Comments are requested within 60 days not been adequate to proceed with a price series. of publication of this proposed rule in proposed order for California. the Federal Register. Comments should The preliminary reports concerning Annual Reporting and Recordkeeping be mailed to USDA/AMS/Dairy order consolidation and this proposal Burden Programs, Order Formulation Branch, were prepared using data gathered about Estimate of Burden: Public reporting Room 2968, South Building, P.O. Box receipts and distribution of fluid milk burden for this collection of information 96456, Washington, D.C. 20090–6456. products by all known distributing 4832 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules plants located in the 47 contiguous Division (November 1996 and May a disruptive factor in larger markets. states, not including the State of 1997). The criteria are as follows: Also, the existence of Federal order California. Data describing the sources markets with handlers too few in 1. Overlapping Route Disposition and disposition of fluid milk products number to allow meaningful statistics to for the month of October 1995 was used The movement of packaged milk be published without disclosing to compile the initial Preliminary between Federal orders indicates that proprietary information should be Report. In response to comments and plants from more than one Federal order avoided. questions about certain marketing area are in competition with each other for 4. Natural Boundaries boundaries and changes in marketing Class I sales. In addition, a degree of conditions in some of the markets after overlap that results in the regulatory Natural boundaries and barriers such publication of the initial Preliminary status of plants shifting between orders as mountains and deserts often inhibit Report, data concerning these markets creates disorderly conditions in the movement of milk between areas, was updated to January 1997, and more changing price relationships between and generally reflect a lack of detailed information was gathered competing handlers and neighboring population (limiting the range of the regarding the geographic distribution of producers. This criterion is considered consumption area) and lack of milk route sales by individual handlers and to be the most important. production. Therefore, they have an their specific sources of producer milk. 2. Overlapping Areas of Milk Supply effect on the placement of marketing Specifically, such information was area boundaries. In addition, for the This criterion applies principally to gathered for all or parts of the initially- purposes of market consolidation, large areas in which major proportions of the suggested Northeast, Appalachian, unregulated areas and political milk supply are shared between more Southeast, Mideast, Central, and boundaries also are considered a type of than one order. The competitive factors Western marketing areas. natural barrier. affecting the cost of a handler’s milk The eleven marketing areas suggested supply are influenced by the location of 5. Cooperative Association Service in the Revised Preliminary Report on the supply. The pooling of milk Areas Order Consolidation have, in some produced within the same procurement cases, been modified for this proposed While not one of the first criteria used area under the same order facilitates the to determine marketing areas, rule. Several of the suggested marketing uniform pricing of producer milk. areas were the subjects of numerous cooperative membership often may be Consideration of the criterion of an indication of market association. comments containing information that overlapping procurement areas does not indicated that the boundaries of those Therefore, data concerning cooperative mean that all areas having overlapping membership can provide additional areas should be re-evaluated. As a result areas of milk procurement should be of the comments received, marketing support for combining certain marketing consolidated. An area that supplies a areas. data was further examined and analyzed minor proportion of an adjoining area’s for some of the suggested consolidated milk supply with a minor proportion of 6. Features or Regulatory Provisions marketing areas to determine the most its own total milk production while Common to Existing Orders appropriate configurations of the handlers located in the area are engaged Markets that already have similar consolidated areas to be included in this in minimal competition with handlers regulatory provisions that recognize proposed rule. The result of the located in the adjoining area likely do similar marketing conditions may have examination and analysis was to modify not have a strong enough association a head start on the consolidation significantly from the Revised with the adjoining area to require process. With calculation of the basic Preliminary Report the marketing areas consolidation. formula price replacement on the basis of the proposed Northeast, Mideast, For a number of the proposed of components, however, this criterion Upper Midwest, Central, and Southeast consolidated areas it would be very becomes less important. The orders, and to make minor difficult, if not impossible to find a consolidation of markets having modifications to the marketing area of boundary across which significant different payment plans will be more the proposed Appalachian order. quantities of milk are not procured for dependent on whether the basic formula As in the case of data referring to the other marketing areas. In such cases, component pricing plan is appropriate operations of less than three handlers or analysis was done to determine where for a given consolidated market, or producers in the initial and Revised the minimal amount of route disposition whether it would be more appropriate to Preliminary Consolidation Reports, overlap between areas occurred, and the adopt a pricing plan using some of the data used to arrive at the criterion of overlapping route hundredweight pricing derived from proposed consolidated areas is disposition generally was given greater component prices. restricted from use by the public weight than overlapping areas of milk because it refers to individual fluid milk supply. Some analysis also was done to 7. Milk Utilization in Common Dairy distributing plants and the origins of determine whether milk pooled on Products producer milk supply for those plants. adjacent markets reflects actual Utilization of milk in similar However, the basis for the proposed movements of milk between markets, or manufactured products (cheese vs. marketing area boundaries is described whether the variations in amounts butter-powder) was also considered to as specifically as possible without pooled under a given order may indicate be an important criterion in determining divulging such proprietary information. that some milk is pooled to take how to consolidate the existing orders. Seven primary criteria were used in advantage of price differences rather Comments on Consolidation Criteria determining which markets exhibit a than because it is needed for Class I use sufficient degree of association in terms in the other market. Most of the comments received of sales, procurement, and structural relative to order consolidation criteria relationships to warrant consolidation. 3. Number of Handlers Within a Market agreed that overlapping route These are the same criteria which were Formation of larger-size markets is a disposition and milk procurement are used in the two reports on order stabilizing factor. Shifts of milk and/or the most important criteria to consider consolidation issued by the Dairy plants between markets becomes less of in the consolidation process. In Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4833 addition, Class I use percentages and Superbrand Dairy Products distributing Pennsylvania continues to enforce some regulation on the basis of handler plant in Greenville, South Carolina; and of its regulations in addition to Federal location were noted as criteria to the Ryan Milk Company plant in order regulations). As State-regulated consider. To some extent, the Murray, Kentucky. The Superbrand handlers, they must pay a Class I price consolidated marketing areas included plant likely will qualify for pooling for milk used in fluid products, often in this proposed rule do combine under the proposed Southeast order, higher than the Federal order price markets with similar Class I utilization and the Ryan Milk Company plant, due would be. Inclusion of the rates rather than markets that would to the nature of its extended shelf-life Pennsylvania-regulated handlers in the result in Class I use percentages being products, may qualify under any of consolidated marketing area, as in the more uniform between markets. This several orders, depending on its case of including Maine or Virginia, result occurs because adjoining markets, dispositions in any particular month. would have little effect on handlers’ where most of the sales and Additional lock-in provisions are costs of Class I milk (or might reduce procurement competition takes place incorporated in both of these cases to them), while reducing producer returns. between handlers regulated under assure that the plants are pooled in the different orders, tend to have similar area in which they compete for a Based on the comments received in utilization rates rather than because the producer milk supply and, in the case response to the Revised Preliminary criterion is one that should be used to of the Ryan plant, that it will be pooled Report on Order Consolidation it has determine appropriate consolidations. consistently under one order. been determined that consolidation of Also, Class I utilization rates are a Several comments advocated that all the existing orders does not necessitate function of how much milk is pooled on of a state’s territory should be included expansion of the consolidated orders an order with a given amount of Class in one Federal order to assure that all into areas in which handlers are subject I use. Differences in rates, to the extent producers in a state are paid on an to minimum Class I pricing under State they result in differences in blend prices equitable basis, or to make it easier to regulation, especially when the states’ paid to producers, provide an incentive maintain state statistical data. One of Class I prices exceed or equal those that for milk to move from markets with the primary reasons for Federal milk would be established under Federal lower Class I utilization percentages to orders is that milk marketing occurs milk order regulation. Such regulation markets with higher Class I use. readily across state boundaries, making would have the effect of reducing Regulation of processors on the basis state milk marketing regulation more returns to producers already included of their location rather than their sales difficult to enforce. It is important that under State regulation without areas has largely been incorporated in Federal milk marketing areas continue significantly affecting prices paid by the proposed orders by a provision that to recognize the free interstate handlers who compete with Federally- would pool a handler under the order movement of milk to and from milk regulated handlers. for the area in which the handler is plants. There are cases where natural In order to avoid extending Federal located unless more than 50 percent of boundaries such as mountains or rivers regulation to handlers whose primary the handler’s Class I route dispositions may result in part of a state having a sales areas are outside current Federal are distributed in another order area. closer marketing relationship with an order marketing areas, but who already This provision should help to assure adjoining state than with other areas of are subject to similar minimum uniform that the order under which a the same state. pricing under State regulation, the in- distributing plant is pooled will change The initial Preliminary Report on area Class I disposition percentage from month to month, and that a plant Order Consolidation stated that the portion of the pool distributing plant operator is subject to the same Farm Bill requirement to consolidate definition is proposed to be 25 percent provisions, such as producer pay prices, existing marketing areas does not for the Northeast order and 30 percent as are its primary competitors. specify expansion of regulation to for the Mideast order, instead of the 10 The proposed orders also include a previously non-Federally regulated or 15 percent used in the other nine provision that locks plants processing areas where such expansion would have consolidated order areas. The higher primarily ultra-high temperature (UHT) the effect of regulating handlers not level of in-area sales required for pool milk into regulation under the order for currently regulated. However, on the status under these proposed orders will the area in which the plant is located. basis of data, views and arguments filed allow State-regulated plants to operate Such plants often have widely dispersed by interested persons in response to the at their current level of sales within route sales into a number of order areas, initial Preliminary Report requesting Federal order areas without being with sporadic deliveries to different that currently non-Federally regulated subject to full Federal order regulation. areas. Without some type of lock-in areas be added to some consolidated provision, a UHT plant may be pooled marketing areas, the Revised As in both the initial and revised in several different orders in as many Preliminary Report suggested that such preliminary reports, ‘‘pockets’’ of months. At the same time, the plant’s areas be added to several of the unregulated areas within and between milk supply generally is procured from consolidated areas. Handlers who current order areas are included in the a given group of producers located in would be affected by the expansion of proposed consolidated marketing areas. the same area as the UHT plant. Having Federal order areas into currently non- The addition of currently-unregulated the plant pooled under a succession of Federally regulated areas were notified areas to Federal milk order areas can different orders with widely varying of the possible change in their status, benefit regulated handlers by blend prices creates a disorderly and encouraged to comment. eliminating the necessity of reporting condition for the producers involved. Handlers located in Pennsylvania sales outside the Federal order On the basis of the distributing plant Milk Marketing Board (PMMB) areas 2, marketing area for the purpose of pooling standards included for all 3, and 6 are regulated under the State of determining pool qualification. Where eleven orders in this proposed rule, Pennsylvania if they do not have such areas can be added to a there are only two distributing plants enough sales in any Federal order area consolidated order area without having that would be fully regulated under an to meet an order’s pooling standards. (If the effect of causing the regulation of order other than the ones in which they such plants do meet Federal order any currently-unregulated handler, they are located. These plants are the pooling standards, the State of are proposed to be added. 4834 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Cornell University Study basis of a resulting set of optimal, receipts and distribution information for efficient simulated flows of milk and October 1995, with more current In addition to AMS’ analysis of the dairy products between locations. information used as needed for further receipt and distribution data in the Although the USDSS model considers analysis. The data gathered by the Dairy development of this proposal, important factors such as milk supply, Division from Federal Milk Market researchers at Cornell University also processing, and demand locations and Administrators reflects actual provided input on potential transportation constraints in movements of milk, both from consolidated marketing areas. This determining the optimal consolidated production areas to processing plants, input was part of Cornell’s partnership marketing areas, it does not include and from processing plants to agreement with AMS to provide several other important circumstances consumption areas. This proposal alternative analyses on Federal order that influence dairy industry and considers this data, the seven criteria reform issues. These researchers used an Federal order participants or the described fully above, and the factors econometric model (the Cornell U.S. movement of milk which must be not recognized in the USDSS model. Dairy Sector Simulator, or USDSS), to considered in this reform process. The Use of the USDSS may be an excellent determine 10–14 optimal marketing USDSS model does not recognize that way of determining where processing areas. Cornell’s first options for 10–14 large areas, such as California, Virginia, plants should be located to maximize marketing areas were presented at an Maine, Montana, large portions of the efficiencies of milk assembly and October 1996 invitational workshop for Pennsylvania, and Wyoming, currently distribution, but is a less accurate means dairy economists and policy analysts are not included in Federal milk order of determining where existing handlers held in Atlanta, Georgia. Based on regulation, and does not recognize the actually compete for milk supplies and USDSS model results, these options Farm Bill requirement that, if included sales. The consolidated marketing area would result in minimum cost flows of as a Federal order, the State of options presented by Cornell are not milk using the known concentrations of California be brought in as one order adopted because the USDSS model does milk production and population, confined to the borders of California. not adequately reflect issues or factors without considering the location of milk Although the USDSS model that strongly affect which current plants. The marketing area maps that incorporates highway mileage between marketing areas are most closely related. were circulated using these first results milk production areas and milk plants, For this reason, this proposed rule is were those referenced by interested and between milk plants and based on data reflecting actual persons who cited the Cornell results in consumers, it does not recognize distribution and procurement by fluid their comments on the initial features such as mountain ranges that milk processing plants. Preliminary Report on Order affect hauling costs and may inhibit Consolidation. milk from moving. By attempting to Proposed Marketing Areas A second set of options was presented maximize efficiencies in milk Following are maps of the current by Cornell researchers in spring 1997. marketing, the model also does not marketing areas and the 11 proposed These options were generated with a recognize the existence of competing marketing areas, followed by brief further-developed USDSS model. In handlers operating plants in the same descriptions of the proposed areas (with updating the model, the researchers city or having the extent of handlers’ those modified from the Revised enhanced the inputs to its model as a route dispositions influenced by the Preliminary Report, and the means of better reflecting the actual existence of plants operated by the same modifications, marked by *) and the structure of the national market for fluid handler in other locations. In addition, major reasons for consolidation. A more milk products. These model updates the model does not recognize that detailed description of each proposed allowed for determination of the movements of producer milk often are consolidated order follows this minimum cost flows of: milk, determined by supply contracts between summary. intermediate and final products from cooperatives and handlers or by the producers to plants; from plants to location of a handler’s nonmember At the end of the Order Consolidation plants; and from plants to consumers on supply. portion of the proposed rule is the basis of the locations of milk AMS is unaware of any other analyses appended a list of distributing plants supplies, dairy product processing performed to determine or suggest associated with each proposed plants, and consumers. The enhanced consolidated marketing areas. marketing area, with each plant’s model is intended to provide for As noted before, AMS’ analysis expected regulatory status. geographic market definition on the focused primarily on distributing plant BILLING CODE 3410±02±P Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4835 4836 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

BILLING CODE 3410±02±C Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4837

Proposed Eleven Marketing Areas needed movements of milk between the Michigan Upper Peninsula Federal milk * 1. Northeast—current marketing three Florida Federal orders. orders, and unregulated portions of * 4. Southeast—current marketing areas of the New England, New York- Wisconsin. The * Iowa, * Eastern South area of the Southeast Federal milk order, New Jersey and Middle Atlantic Federal Dakota and * Nebraska-Western Iowa plus 1 county from the Louisville- milk orders, with the addition of: the Federal order areas suggested to be Lexington-Evansville Federal milk order contiguous unregulated areas of New added to this consolidated area in the marketing area; * plus 11 northwest Hampshire, northern New York and revised report are proposed instead to Arkansas counties and 22 entire and 1 Vermont; the non-Federally regulated be included in the Central consolidated partial Missouri county that currently portions of Massachusetts; and the area. are part of the Southwest Plains Major consolidation criteria include Western New York State order area. marketing area; * plus 6 Missouri an overlapping procurement area * The areas previously suggested to be counties that currently are part of the between the Chicago Regional and included in the expanded Northeast Southern Illinois-Eastern Missouri Upper Midwest orders and overlapping order area (the southern tier of 3 marketing area; * plus 16 currently procurement and route disposition area western New York counties and unregulated southeast Missouri counties between the western end of the Pennsylvania Milk Marketing Board (including 4 that were part of the former Michigan Upper Peninsula order and Areas 2 and 3) have not been included Paducah marketing area); plus 20 the Chicago Regional order. A number in the proposed Northeast marketing currently-unregulated Kentucky of the same cooperative associations area. The handlers who would be added counties (* including 5 from the former market member milk throughout the to those currently fully regulated under Paducah marketing area that previously proposed area. the three separate orders either have a had been suggested for inclusion with The overlapping of procurement sufficient percentage of their route the Appalachian area). between the Chicago Regional and disposition within the consolidated Major reasons for this consolidation Upper Midwest order areas and the marketing area to meet the proposed include sales and procurement area Iowa, Eastern South Dakota and pooling requirements or are those overlaps between the Southeast order Nebraska-Western Iowa order areas is, it located in the area proposed to be and these counties. The proposed was pointed out in comments received added. addition of the Kentucky portion of the in response to the Revised Preliminary Reasons for consolidation include the former Paducah, Kentucky, order area to Report, due largely to milk pooled on existence of overlapping sales and the Southeast is in the nature of a fine- the more southern orders when procurement areas between New tuning adjustment in order boundaries. advantageous because of price England and New York-New Jersey and The addition of the Arkansas and differences. As a result, the volume of between New York-New Jersey and Missouri counties recognizes a number milk pooled on the Iowa, Eastern South Middle Atlantic. An important measure of industry comments. Dakota and Nebraska-Western Iowa of association is evidenced by industry * 5. Mideast—current marketing areas orders from Minnesota and Wisconsin efforts to study and pursue of the Ohio Valley, Eastern Ohio- fluctuates greatly, without any consolidation of the three Federal orders Western Pennsylvania, Southern discernable relationship to amounts of prior to the 1996 Farm Bill. Michigan and Indiana Federal milk milk needed from those areas at plants * 2. Appalachian—current marketing orders, plus Zone 2 of the Michigan in the more southern areas. areas of the Carolina and Louisville- Upper Peninsula Federal milk order, The other consolidation criteria Lexington-Evansville (minus Logan and currently-unregulated counties in mentioned in the Revised Preliminary County, Kentucky) Federal milk orders Michigan, Indiana and Ohio. * The Report as reasons for consolidating the plus the recently-terminated Tennessee current Pennsylvania Milk Marketing Iowa, Eastern South Dakota and Valley area, with the addition of * 21 Board Area 6 and the two most western Nebraska-Western Iowa order areas with currently-unregulated counties in of the southern tier of counties in New the Chicago Regional and Upper Indiana and Kentucky. Five Kentucky York are not included in the proposed Midwest areas also are applicable to the counties that were part of the former Mideast marketing area. combination of these areas with the Paducah order area and previously were Major criteria for this proposed consolidated Central area. suggested to be added to the consolidation include the overlap of * 7. Central—current marketing areas Appalachian order area have been fluid sales in the Ohio Valley marketing of the Southern Illinois-Eastern proposed for addition to the Southeast area by handlers from the other areas Missouri, Central Illinois, Greater order instead. proposed to be consolidated. With the Kansas City, Southwest Plains, Eastern Overlapping sales and procurement consolidation, most route disposition by Colorado, * Nebraska-Western Iowa, areas between these marketing areas are handlers located within the suggested * Eastern South Dakota and * Iowa major factors for proposing this Mideast order would be within the Federal milk orders, minus * 11 consolidation. marketing area. Also, nearly all milk northwest Arkansas counties and 22 3. Florida—current marketing areas of produced within the area would be entire and 1 partial Missouri county that the Upper Florida, ampa Bay, and pooled under the consolidated order. are part of the current Southwest Plains Southeastern Florida Federal milk The portion of the Michigan Upper marketing area, minus * 6 Missouri orders. Peninsula marketing area proposed to be counties that are part of the current Natural boundary limitations and included in the Mideast consolidated Southern Illinois-Eastern Missouri overlapping sales and procurement area has sales and milk procurement marketing area, plus * 54 currently- areas among the three orders are major areas in common with the Southern unregulated counties in Kansas, reasons for consolidation, as well as a Michigan area and has minimal Missouri, Illinois, Iowa, Nebraska and measure of association evidenced by association with the western end of the Colorado, * plus 14 counties in central cooperative association proposals to current Michigan Upper Peninsula Missouri that are not considered to be consolidate these three marketing areas. marketing area. part of the distribution area of an Further, the cooperative associations in * 6. Upper Midwest—current unregulated handler in central Missouri. this area have worked together for a marketing areas of the Chicago Regional, This configuration would leave 25 number of years to accommodate Upper Midwest, Zones I and I(a) of the unregulated counties in central Missouri 4838 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules that are intended to delineate the both orders. Addition of the currently- which the proposed consolidation is distribution area of Central Dairy at unregulated Texas counties will result based include overlapping sales Jefferson City, Missouri. in the regulation of no additional between Southwestern Idaho-Eastern Major criteria on which this proposed handlers, and will reduce handlers’ Oregon and Great Basin, as well as a consolidation is based include recordkeeping and reporting burden and significant overlap in procurement for overlapping route disposition and the market administrator’s the two orders in five Idaho counties. procurement between the current administrative costs. The two orders also have similar orders. The proposed consolidation 9. Arizona-Las Vegas—current multiple component pricing plans. The would result in a concentration of both marketing area of Central Arizona, plus Western Colorado order is included the sales and supplies of milk within the Clark County, Nevada, portion of the because it is a small market where data the consolidated marketing area. The current Great Basin marketing area, plus cannot be released without revealing proposed consolidation would combine eight currently-unregulated Arizona confidential information unless several relatively small orders and counties. combined with data pertaining to provide for the release of market data The major criterion on which the another marketing area, and has at least without revealing proprietary proposed consolidation is based is sales as great a relationship with the adjacent information. In addition, many of the overlap between the sole Las Vegas, Great Basin market as with any other. producers in these areas share Nevada, handler and handlers regulated Collection of detailed data for membership in several common under the Central Arizona order in both individual handlers indicates that the cooperatives. Clark County, Nevada, and unregulated 8. Southwest—current marketing portions of northern Arizona. The Grand strength of earlier relationships between areas of Texas and New Mexico-West Canyon and sparsely populated areas in the former Great Basin and Lake Mead Texas Federal milk orders, with the the northwest part of Arizona, and the orders that justified their 1988 merger addition of two currently-unregulated sparsely populated desert region of have dwindled significantly, with the northeast Texas counties and 47 eastern Arizona constitute natural Las Vegas area now more closely related currently-unregulated counties in barriers between this and adjacent to southern California and competing southwest Texas. marketing areas. In addition, significant most heavily with Central Arizona Major criteria supporting this volumes of bulk and packaged milk are handlers. proposed consolidation include sales exchanged between the Arizona-Las 11. Pacific Northwest—current and procurement area overlaps and Vegas area and Southern California. marketing area of the Pacific Northwest common cooperative association 10. Western—current marketing areas Federal milk order plus 1 currently- membership between the Texas and of the Western Colorado, Southwestern unregulated county in Oregon. The New Mexico-West Texas marketing Idaho-Eastern Oregon, and Great Basin degree of association with other areas, and similar marketing concerns Federal milk orders, minus Clark marketing areas is insufficient to with respect to trade with Mexico for County, Nevada. The major criteria on warrant consolidation.

TABLE 1.ÐMARKET INFORMATION: POPULATION, UTILIZATION, PRODUCER MILK AND WEIGHTED AVERAGE UTILIZATION VALUE (WAUV) IN PROPOSED MARKETING AREAS

Class I Producer Population 1 WAUV 2,3 Market utilization 2 milk 2 (millions) (percent) (1000 lbs.) (per cwt)

Northeast ...... 51.3 47.7 2,031,976 $13.47 Appalachian ...... 17.1 82.2 440,965 13.97 Florida ...... 13.8 88.3 204,541 15.05 Southeast ...... 26.7 85.2 486,301 14.24 Mideast ...... 31.0 55.8 1,050,656 12.92 Upper Midwest ...... 18.5 34.5 1,034,318 12.60 Central ...... 21.0 48.8 859,405 12.95 Southwest ...... 20.9 48.1 680,232 13.39 Arizona-Las Vegas ...... 5.5 48.9 181,075 13.26 Western ...... 3.3 29.6 293,714 12.78 Pacific Northwest ...... 8.8 35.6 493,207 12.44

Total ...... 216.0 N/A 7,756,390 N/A 1 Based on July 1, 1996 estimates. 2 Based on October 1995 information, for plants which would be fully regulated under assumptions used in this report. 3 Not a blend priceÐshown solely for the purpose of showing impact of consolidation on utilization.

TABLE 2.ÐMARKET INFORMATION: NUMBER OF PLANTS IN PROPOSED MARKETING AREAS

1 Distributing plants Manufacturing Market and supply Fully regulated 2 FR small 3 (FR) Exempt businesses plants

Northeast ...... 79 17 42 106 Appalachian ...... 29 1 13 13 Florida ...... 15 2 3 4 Southeast ...... 36 1 20 37 Mideast ...... 56 2 36 59 Upper Midwest ...... 29 1 15 301 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4839

TABLE 2.ÐMARKET INFORMATION: NUMBER OF PLANTS IN PROPOSED MARKETING AREASÐContinued

1 Distributing plants Manufacturing Market and supply Fully regulated 2 FR small 3 (FR) Exempt businesses plants

Central ...... 34 2 8 83 Southwest ...... 23 3 7 17 Arizona-Las Vegas ...... 5 1 2 3 Western ...... 11 3 6 19 Pacific Northwest ...... 20 3 12 27

Total ...... 337 36 164 669 1 Based on October 1995 information. Excludes: (1) out-of-business plants through May 1997; and (2) new plants since October 1995. 2 Exempt based on size (less than 150,000 lbs. route distribution per month). 3 Based on May 1997 information.

Descriptions of Proposed Consolidated metropolitan statistical areas (PMSAs). Other plants. The presence of Marketing Areas For purposes of the marketing area manufacturing and supply plants in and Each of the proposed consolidated descriptions in this proposed rule, the near the proposed order areas, and the order areas is described in the text term ‘‘MSA’’ also includes CMSAs and products processed at these plants, are following this introduction. The criteria PMSAs. described for each proposed which were used to determine which Per capita consumption. Available consolidated area. This information was areas should be consolidated are data pertaining to per capita collected by market administrators’ explained in detail. For each proposed consumption is discussed to help offices. area, the following information is describe how much milk is needed to Cooperative Associations. The included: supply the fluid needs of the population number of cooperative associations Geography. The political units (states, of each proposed marketing area. Per pooling member milk under each of the counties, and portions of counties) capita consumption numbers were current individual orders included in included in each area, the topography, estimated by state using data from a each consolidated area, and the number and the climatic conditions are report on ‘‘Per Capita Sales of Fluid that pool milk in more than one of the described for the purpose of delineating Milk Products in Federal Order areas. This information was obtained the territory to be incorporated in each Markets,’’ published in the December from market administrators’ offices. proposed marketing area and describing 1992 issue of Federal Milk Order Market Criteria for Consolidation. The extent its characteristics pertaining to milk Statistics, #391, issued May 1993. to which the criteria used in identifying production and consumption. This Production. A description of the markets to be consolidated are information was derived principally supported by the marketing conditions   amount and sources of milk production from Microsoft Encarta 96 for the market is included for the present in each of the proposed Encyclopedia, and augmented by purpose of identifying the supply area consolidated areas is discussed. several U.S. atlases. for each proposed marketing area. Discussion of comments and Population. The total population of Production data by state and county for alternatives. Comments filed in each area and its distribution within the each Federal milk order was compiled response to the two preliminary reports area is included for the purpose of from information collected by the on consolidation and alternatives to the identifying where milk is consumed. offices administering the current proposed consolidation are summarized July 1, 1996, population estimates were Federal milk orders (market and discussed for each proposed obtained from ‘‘CO–96–8 Estimates of administrators’ offices). consolidated area. the Population of Counties and Northeast Demographic Population Change,’’ Distributing plants-route disposition. Population Estimates Division of the For each marketing area the number and The proposed consolidated Northeast U.S. Bureau of the Census. types of distributing plants are marketing area is comprised of the Metropolitan Statistical Area (MSA) included, with the locations of plants by current New England, New York-New information is provided by the United population centers, to identify where Jersey, and Middle Atlantic Federal States Office of Management and Budget milk must be delivered. This milk order marketing areas (Orders 1, 2, (OMB), which defines metropolitan information was collected by market and 4), with currently-unregulated areas areas according to published standards administrators’ offices. in western and northern New York and that are applied to Census Bureau data. Utilization. The utilization northern Vermont and New Hampshire To be described as an MSA, an area (one percentages of the current individual added. The entire areas of the States of or more counties) must include at least orders and the effect of consolidation on Connecticut (8 counties), Delaware (3 one city with 50,000 or more the proposed consolidated orders are counties), Massachusetts (14 counties), inhabitants, or a Census Bureau-defined described for each proposed marketing New Hampshire (10 counties), New urbanized area (of at least 50,000 area, with an estimate of the effect of Jersey (21 counties), Rhode Island (5 inhabitants) and a total metropolitan consolidation on each current counties), and Vermont (14 counties) population of at least 100,000 (75,000 in individual order’s blend price. The would be contained within the New England). Areas with more than 1 current utilization data is published proposed Northeast order area. In million population may be described as each month for each Federal milk order addition, the District of Columbia, 21 ‘‘consolidated metropolitan statistical market. Pool data was used to calculate counties and the City of Baltimore in areas’’ (CMSAs) made up of component the effects of consolidation on Maryland, 54 complete and 2 partial parts designated as primary utilization. counties and New York City in New 4840 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

York, the 15 Pennsylvania counties Population Fluid Per Capita Consumption currently included in the Middle According to July 1, 1996, population Fluid per capita consumption Atlantic marketing area, and 4 counties estimates vary within the Northeast and 5 cities in Virginia would be estimates, the total population in the proposed consolidated Northeast from 16.7 pounds per month in the included in the consolidated order. more southern parts of the region to 20 There are 169 complete and 2 partial marketing area is 51.3 million. The area is very densely populated, especially pounds per month in New England. counties and 8 cities, including the These rates would result in a weighted District of Columbia, in the proposed along a coastal strip extending from Boston, Massachusetts, in the northeast average of 18 pounds per month, and an Northeast marketing area. to Washington, D.C., in the southwest. estimated total fluid milk consumption rate of 920 million pounds per month Geography In this proposed marketing area of for the Northeast marketing area. approximately 170 counties, 103 are Approximately 730 million pounds of The proposed Northeast marketing included within Metropolitan Statistical this fluid milk consumption would be area extends from the Canadian border Areas (MSAs). The 22 Metropolitan required along the heavily-populated on the north, south to northern Virginia, Statistical Areas in the proposed coastal area extending from northeast eastern Maryland and Delaware, with its Northeast marketing area account for Massachusetts southwest through eastern edge along the western border of 91.7 percent of the total market area Washington, D.C. and northern Virginia. Maine at the northern end of the population. marketing area, and along the Atlantic Northeast handlers distributed 883.7 Over half of the marketing area million pounds within the proposed Ocean for the remainder. The total population is located in 6 northeast-southwest extent of the marketing area during October 1995. interconnected MSAs in 48 counties, Sales within the proposed marketing marketing area is approximately 600 extending from central New Jersey to area by handlers that would be miles. The marketing area extends southern New Hampshire. The six regulated by other orders totaled 9.3 westward to Lake Ontario and Lake Erie MSAs are: Springfield, Massachusetts; million pounds, sales by partially in New York State (about 450 miles east Boston-Worcester-Lawrence, regulated handlers within the area were to west), goes only as far west as the Massachusetts/New Hampshire/Maine/ 10.8 million, and an additional .8 northern part of New Jersey (about 60 Connecticut; Providence-Fall River- million pounds were distributed by miles), and expands westward again Warwick, Rhode Island/Massachusetts; handlers who would be partially across the eastern half of southern New London-Norwich, Connecticut/ regulated under other orders. Sales in Pennsylvania, taking in a small part of Rhode Island; Hartford, Connecticut; the marketing area by exempt and northeast Virginia, eastern Maryland, and New York-N. New Jersey-Long government plants, and by producer- and Delaware (about 230 miles east to Island, New York/New Jersey/ handlers totaled 6.2 million pounds. west). There would be a large State- Connecticut/Pennsylvania. The Milk Production regulated area in Pennsylvania just to population in this northeastern portion the west of the Northeast marketing of the marketing area is concentrated In December 1996, over 19,000 area; and most of the State of Virginia most heavily at its northern and producers from 13 states pooled 1.9 to the south of the marketing area also southern ends—the New York City area billion pounds of milk on the three is regulated under a State order. The has a population of approximately 20 orders comprising the proposed proposed Northeast marketing area is million, and the Boston area’s Northeast order. With the addition of contiguous to no other proposed population is approximately 5.5 million. the Western New York State milk order consolidated marketing areas, but parts Two of the other MSAs, Hartford and and several currently-unregulated of it, in western New York State and Providence, each have over 1 million handlers, it is probable that the south central Pennsylvania, are very population. Although each of these six Northeast pool regularly will exceed 2 close to the proposed Mideast area. MSAs is described as a separate area in billion pounds of milk per month. the population data, many of the Eleven of the 13 states supplying milk The northern and northwestern parts to the three Federal order pools are at of the Northeast area are large areas of counties involved are divided between separate MSAs. least partly in the marketing area, and coniferous forests that are somewhat 83 percent of the producer milk pooled mountainous. To the south and Just southwest of the New York City under the three orders in December southeast of the forested areas are areas MSA is the Philadelphia-Wilmington- 1996 came from just 3 states—New York where dairy farming predominates as Atlantic City, Pennsylvania/New Jersey/ (41.5 percent), Pennsylvania (31.7 the primary type of agriculture. In fact, Delaware/Maryland MSA, with a percent), and Vermont (10 percent). for 4 of the 10 states that are contained population of 6 million. Some counties Over 10 million pounds of milk was within the proposed Northeast of these two MSAs are adjacent. produced in each of fifty-eight counties: marketing area (New Hampshire, New Southwest of the Philadelphia MSA and 1 county in northeast Connecticut, 3 in York, Pennsylvania and Vermont) dairy separated from it by only one county is the most northwestern of the Maryland products were the number 1 agricultural the Washington, DC/Baltimore, portion of the marketing area, 31 spread commodity in terms of cash receipts Maryland/northern Virginia MSA, with over most of New York, 1 on the during 1996. Principally along the a population in the proposed marketing western edge of northern Virginia, and Atlantic coastline is a flatter area where area of 5.7 million. 22 in southeast to south central other agricultural activities, including Of the 14 other MSAs in the proposed Pennsylvania and in the eastern part of greenhouse and nursery, fruit, truck and marketing area, 8 are located in New the northern tier of Pennsylvania mixed farming, take place. A near- York State, with an average population counties, with an additional continuous strip along the east coast of of nearly 600,000 each. Two are located Pennsylvania county, Lancaster, the area, from northeast Massachusetts in Pennsylvania, with populations of .6 accounting for over 150 million pounds southwest to the Baltimore area, is a and .45 million. One MSA in Vermont, of milk. Eighty percent of the markets’ major industrial area and is heavily 1 in Delaware, and 2 in Massachusetts total producer milk was produced populated. have average populations of 160,000. within the proposed marketing area. In Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4841 addition, of the 81.1 million pounds the Boston-Worcester-Lawrence area, 10 in Class II. Currently, all three of the pooled under the Western New York in the Philadelphia-Wilmington- orders have Class II utilization between State milk order, over 90 percent was Atlantic City area, and 11 in the New 15 and 20 percent. When the markets produced within the proposed York-Northern New Jersey-Long Island are combined the average for the marketing area. area. The Hartford, Connecticut, area consolidated market will be Less than 40 percent of the milk would have 3 pool distributing plants, approximately 17 percent. production for the consolidated market Providence-Fall River-Warwick would Other Plants was produced within 100 miles of the have 3, and the Washington-Baltimore heavily populated coastal corridor. area would have 6 pool distributing Located within the proposed Although the Northeast area contains plants. Three pool distributing plants consolidated Northeast marketing area two out of the top five milk-producing would be located in the Buffalo-Niagara during May 1997 were 106 supply or states in the U.S. (New York and Falls area, and 1 in the Rochester, New manufacturing plants: 13 in Vermont (4 Pennsylvania), the population of the York, area. in the Burlington area), 1 in New proposed marketing area is 20 million Of the remaining 70 distributing Hampshire and 10 in Massachusetts (all more than the next most-populated plants, 14 pool distributing plants were in the Boston-Worcester-Lawrence area), proposed consolidated area (the Mideast located in other MSAs as follows: 8 in 1 in Rhode Island (in the Providence- area, with 31 million people). The New York; 5 in Pennsylvania; and 1 in Fall River-Warwick area), 7 in Northeast, therefore, is a very significant Massachusetts. Thirty-nine of the Connecticut (3 in the Hartford area and milk production area with a very high remaining distributing plants, including 4 in the New York-Northern New Jersey- demand for fluid milk and dairy 11 pool distributing plants, were not Long Island area), 12 in New Jersey (all products. located in MSAs. in the New York-Northern New Jersey- For the proposed Northeast order, the Long Island area), 2 in Delaware (one in Distributing Plants—Route Disposition in-area route disposition standard has the Philadelphia-Wilmington-Atlantic Using distributing plant lists included been adjusted to 25 percent of total City area), 7 in Maryland (four in the in both the Preliminary and Revised route dispositions from the 15-percent Washington-Baltimore area), 13 in Preliminary Reports, with the pooling standard that was common to all of the Pennsylvania (5 in the Philadelphia- standards used in the Revised suggested consolidated areas in the Wilmington-Atlantic City area), and 40 Preliminary Report adjusted to 25 Revised Preliminary Report. This in New York (9 in the New York- percent of route dispositions as in-area adjustment has been made to assure that Northern New Jersey-Long Island area, 6 sales (as discussed previously in State-regulated plants in Virginia and in the Buffalo-Niagara Falls area and 2 Comments on Consolidation), and Pennsylvania that have sales in the in the Rochester area). updated for known plant closures proposed marketing area will not be Seventeen of the 106 plants are pool through May 1997, 156 distributing pooled under Federal order regulation. plants. Of these pool plants, 9 are plants would be expected to be manufacturing plants—1 manufactures associated with the Northeast marketing Utilization primarily Class II products, 5 area. The plants associated would According to October 1995 pool manufacture primarily powder, 2 include 79 fully regulated distributing statistics for handlers who would be manufacture primarily cheese and 1 plants (64 currently fully regulated, 10 fully regulated under this Northeast manufactures primarily other products. currently partially regulated, and 5 order, the Class I utilization percentages There are 8 pool supply plants—1 has currently unregulated), 15 partially for the New England, New York-New no primary product, but ships only to regulated (3 currently fully regulated, 11 Jersey, and Middle Atlantic markets distributing plants; 5 are supply plants currently partially regulated and 1 were 51, 44, and 53 percent, that manufacture primarily Class II currently unregulated), 17 exempt respectively. Based on calculated products, and 2 supply plants plants having less than 150,000 pounds weighted average use values for (1) the manufacture primarily cheese. Of the of total route disposition per month (2 current order with current use of milk, remaining 89 nonpool plants in the currently fully regulated, 4 currently and (2) the current order with projected Northeast marketing area, 82 are partially regulated, 2 currently exempt use of milk in the consolidated manufacturing plants—41 manufacture based on size, and 9 currently Northeast order, the potential impact of primarily Class II products, 1 unregulated), 43 producer-handlers (42 this proposed rule on producers who manufactures primarily butter, 1 currently producer-handlers and 1 supply the current market areas is manufactures primarily powder, 37 currently unregulated), and 2 exempt estimated to be: New England, a 3-cent manufacture primarily cheese and 2 plants based on institutional status (1 per cwt decrease (from $13.52 to manufacture primarily other products. currently unregulated and 1 currently $13.49); New York-New Jersey, a 3-cent Seven of the remaining nonpool plants exempt based on institutional status). per cwt increase (from $13.45 to are supply plants—2 are supply plants Since October 1995, 10 distributing $13.48); and Middle Atlantic, a 4-cent that manufacture primarily Class II plants (3 in New York, 3 in per cwt decrease (from $13.44 to products and 5 are supply plants that Massachusetts, 3 in Pennsylvania, and 1 $13.40). The weighted average use value manufacture primarily cheese. in Connecticut), have gone out of for the consolidated Northeast order A pool supply plant that business. market is estimated to be $13.47 per manufactures primarily cheese and a Over half (88) of the Northeast cwt. For December 1996, combined nonpool cheese manufacturing plant are distributing plants which were Class I utilization for Orders 1, 2 and 4 located in the currently-unregulated identified as being in business in was 44.4 percent based on 852.7 million portions of Steuben County that are October 1995 were located in the 8 pounds of producer milk used in Class proposed to be added to the Northeast MSAs that have over a I out of 1.919 billion total producer milk consolidated Northeast marketing area. million people each. This number pounds. There are also four supply or includes 49 (or two-thirds) of the pool The Northeast area is one of two manufacturing plants in the unregulated distributing plants. Under the proposed proposed consolidated marketing areas area of New York—one in the consolidation, it is anticipated that there that would have a significantly higher- unregulated county of Chautauqua, one would be 12 pool distributing plants in than-average percentage of its milk used in the unregulated portion of 4842 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Cattaraugus County, and two in the adjoining Maine State milk order also Several comments suggested unregulated portion of Allegany County. serves as somewhat of a barrier to milk including currently-unregulated One is a pool supply plant marketing in the northeast by limiting portions of Massachusetts in the manufacturing primarily Class II the association of non-Maine milk with Northeast marketing area. According to products, and the remaining three are the Maine pool. comments from a cooperative nonpool manufacturing plants—two The merger of these markets has been association, the ‘‘corridor’’ in manufacture primarily cheese and one previously proposed by interested Massachusetts that was suggested to manufactures primarily Class II parties. A committee comprised chiefly remain unregulated has raised questions products. of Northeast region cooperatives was from handlers and producers regarding formed over two years ago to study a equity, since the handler within the Cooperative Associations merger of the three Federal orders. In corridor competes with regulated During December 1995, 43 support of a Northeast consolidation, handlers. This association also stated cooperative associations pooled their the committee and other interested that the wide dispersion of the towns members’ milk on the three Northeast parties, including handlers and suggested to remain unregulated would orders. Three of the cooperatives pooled regulatory agencies, have noted: cause added expense to handlers in milk on all three orders, 2 pooled milk overlapping sales and procurement reporting Class I sales inside and on both the New England and New areas; a trend toward consolidation of outside the marketing area of the York-New Jersey orders, and 2 others cooperative processors and handlers in Northeast order. The Massachusetts pooled milk on both the New York-New the region (leaving the remaining Farm Bureau Federation, Inc., Jersey and Middle Atlantic orders. handlers with larger distributing areas comments favored regulating all areas in Sixty-eight percent of the milk pooled in and volumes); and regulation of plants the Federal order to protect the Northeast is cooperative association by an order in which they are not Massachusetts dairy producers from the milk, with 79.3 percent of Federal Order located. The proponents of unfair marketing conditions created by 1 milk, 50.5 percent of Federal Order 2 consolidation have indicated that current ‘‘pass-through’’ provisions of the milk, and 91.8 percent of Federal Order consolidation would tend to solve some New York-New Jersey order. In 4 milk pooled by cooperatives. of the presently existing inequities and addition, a comment filed by the The 5 cooperatives that market milk would lead to greater efficiency for Commissioner of the Massachusetts only under Order 1 account for 25.5 handlers and order administration. Department of Food and Agriculture percent of the milk marketed under that favored including all of Massachusetts order by cooperative associations, and Discussion of Comments and Alternatives in the consolidated order, stating that 20.2 percent of total milk marketed inclusion of the currently-unregulated under Order 1. In Order 2, only 28 A large number of comments, ‘‘corridor’’ would not disadvantage any percent of cooperative association milk primarily from producers and producer handlers currently located there. The is marketed by the 27 co-ops that market groups, supported expansion of the letter stated that the dairy farmers of milk only under Order 2. Milk marketed Northeast consolidated marketing area Massachusetts will be best served with by these 27 cooperatives represent 14.1 into non-federally regulated areas. uniform regulation, which would also percent of the total milk pooled for Comments supported the suggestions in foster fair competition. December 1995. Four cooperative the Revised Preliminary Report on A comment filed by the State of associations marketed 45.4 percent of Order Consolidation that would have Vermont favored inclusion of the the milk marketed by cooperatives extended federal order marketing areas currently-unregulated portions of that under Order 4. This amount of milk to non-federally regulated areas which State in the consolidated area on the represented 41.7 percent of total milk are part of the same milksheds and fluid basis that expansion creates cost equity pooled under Order 4 in December milk markets, arguing that the between processors. 1995. surrounding federal order pool(s) are Maine has been and continues under carrying the necessary surplus for the this proposal to be excluded from Criteria for Consolidation Class I sales distributed by non- Federal order regulation. Although The current New England, New York- regulated handlers. limited support was expressed for New Jersey, and Middle Atlantic Comments favoring expansion into Maine’s inclusion in the Northeast Federal milk order marketing areas the non-federally regulated Northeast consolidated order, approximately 5 (Orders 1, 2, and 4) should be tended to include the unregulated areas comments supporting Maine’s exclusion consolidated because of the of Pennsylvania, and sometimes the from Federal orders have been received. interrelationship between Orders 1 and unregulated counties in Maryland and Comments filed by the Maine Milk 2 and between Orders 2 and 4 regarding West Virginia. Among the comments Commission stated that Maine route disposition and milk supply. supporting regulation of the entire state successfully regulates prices, resulting Ninety-four percent of fluid milk of Pennsylvania, there were differing in Maine producers receiving higher disposition by handlers who would be opinions on whether the Pennsylvania prices than farmers whose milk is fully regulated under the consolidated Milk Marketing Board (PMMB) area 6 pooled under Federal orders. The order is distributed within the proposed should be in the Northeast or the comments further stated that consumer marketing area. Fully regulated handlers Mideast. Comments on behalf of the prices in Maine are lower than those in account for 97 percent of the fluid milk Association of Dairy Cooperatives in the New England’s states and counties. The products distributed within the Northeast (ADCNE), for example, American, New York and New Jersey proposed marketing area. The supported including PMMB Area 6 in Farm Bureaus all supported Maine’s utilization of the three markets is the Northeast. These comments also exclusion. similar, and several cooperative supported expansion to include Over 115 comments, including associations market their members’ milk Allegany and Garrett counties in petitions with numerous signatures, in all three markets. The three markets western Maryland. Comments from the opposed expansion into Pennsylvania. are surrounded by unregulated areas to Pennsylvania State Grange supported Some of the comments cited the the west and south, the Atlantic ocean regulating the entire state, but including enjoyment by Pennsylvania producers to the east, and Canada to the north. The all of it in the Northeast area. of price stability for the more than 50 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4843 years during which the PMMB has been footing with handlers currently Order 46, 16 formerly part of Order 11, regulating milk marketing within the unregulated, while having no negative and 18 currently unregulated), all North state. Comments from producers stated effect on the producers who would be Carolina and South Carolina counties a desire to avoid additional government affected. (100 and 46, respectively, and all regulations and fees. Comments stated The ‘‘corridor’’ cited in Massachusetts currently in Order 5), 33 Tennessee that the PMMB individual handler pools should be included in the consolidated counties (formerly part of Order 11), 8 result in greater returns to producers, order area, partly because the sole counties and 2 cities in Virginia and producer returns would decline if handler who would be affected by the (formerly part of Order 11), and 2 West handlers are required to pay the regulation of that area has gone out of Virginia counties (formerly part of Order additional fluid value into the business. Inclusion of the area at this 11). marketwide pool to subsidize cheese/ time would not have the negative effect The proposed Appalachian market powder plants. of imposing regulation on a small reaches from the Atlantic coastline As stated in the introduction to the handler, as was feared earlier, but westward to southern Indiana and consolidation discussion, it has been would lighten handlers’ reporting western Kentucky’s border with Illinois. determined that consolidation of the burden and the market administrator’s It is surrounded by Illinois on the west, existing orders does not necessitate administrative burden in keeping Indiana, northeastern Kentucky, West expansion of the consolidated orders separate data on sales in this small Virginia and Virginia to the north, the into areas in which handlers are subject unregulated area. In addition, the Atlantic ocean on the east, and Georgia, to minimum Class I pricing under State offshore Massachusetts counties of Alabama, western Tennessee and regulation, especially when the states’ Dukes and Nantucket should be added southwestern Kentucky to the south. Class I prices exceed those that would to the marketing area. The only entity Measuring the extreme dimensions, this be established under Federal milk order currently operating in those counties (a market extends about 625 miles from its regulation. Handlers located in PMMB producer-handler on Martha’s Vineyard) northwest corner in Indiana to its areas 2, 3, and 6 are regulated under the would be exempt from the pooling and southeastern corner on the South State of Pennsylvania if they do not pricing provisions of the order by virtue Carolina-Georgia border, about 300 have enough sales in any Federal order of its status as a producer-handler and miles south-to-north from the South area to meet an order’s pooling by having fewer than 150,000 pounds of Carolina-Georgia border to the North standards. When such plants do meet route disposition per month. Mainland Carolina-Virginia border, about 500 Federal order pooling standards, the handlers distributing milk in these two miles west-to-east from the State of Pennsylvania continues to counties would find their reporting Appalachian-Southeast markets’ border enforce some of its regulations in burden eased if these counties become in Tennessee to eastern North Carolina, addition to Federal order regulations. As part of the marketing area. and about 375 miles west-to-east from State-regulated handlers, they must pay The Western New York State order the Illinois-Indiana border to West a Class I price for milk used in fluid area is proposed to be added to the Virginia and Virginia. products that often is higher than the consolidated Northeast area because the The Appalachian market is Federal order price would be. Inclusion persons regulated under that order have contiguous to 3 proposed consolidated of the Pennsylvania-regulated handlers so requested. Regarding New York State, marketing areas: the Southeast area to in the consolidated marketing area, as in only the southern tier of western New the southwest and south, the Central the case of including Maine, would have York counties should not be included in area to the west and the Mideast area to little effect on handlers’ costs of Class I the consolidated area because their the north. Unregulated counties in West milk (or might reduce them), while addition would make more likely the Virginia and State-regulated area in reducing producer returns. In view of full regulation of PMMB-regulated Virginia also border this market to the these situations, it appears that stable distributing plants with sales in that north. North and South Carolina have and orderly marketing conditions can be small area of New York (1 full county almost 500 miles of coastline on the maintained without extending full and 2 partial counties). Atlantic Ocean. Federal regulation to State-regulated In terms of physical geography, handlers. Appalachian similarities exist across the states or Regulated plants competing for Class The proposed Appalachian marketing areas included in this market. Southern I sales with unregulated distributing area is comprised of the current Indiana and central Kentucky are in the plants in northern Vermont and New Carolina (Order 5) and Louisville- Interior Low Plateau region where York would be subject to a competitive Lexington-Evansville (Order 46) valleys and steep hillsides are typical. disadvantage if the currently- marketing areas (less one Kentucky In this market, the Appalachian or unregulated handlers are not included county that is included in the proposed Cumberland and Alleghany Plateaus are within the consolidated marketing area. Southeast marketing area) as well as 64 found in West Virginia, Virginia, This result would occur because the counties and 2 cities formerly Kentucky, Tennessee and northwestern ‘‘pass-through’’ provision of the current comprising the marketing area of the Georgia on the western edge of the New York-New Jersey order, which recently-terminated Tennessee Valley Appalachian Mountains. Eastern exempts from minimum pricing a Federal Order (Order 11) and currently- Tennessee and both western North and volume of milk equivalent to a regulated unregulated counties in Indiana and South Carolina are in the Blue Ridge handler’s sales in unregulated areas in Kentucky. There are 297 counties and 2 region, which is part of the Appalachian competition with unregulated handlers, cities in this proposed marketing area. Mountain range. Moving eastward is not proposed for inclusion in the toward the Atlantic Ocean, the central consolidated Northeast order. Inclusion Geography part of the Carolinas are in the Piedmont of the currently unregulated areas of The Appalachian market is described Plateau, with the Atlantic Coastal Plain northern New York and Vermont in the geographically as follows: 7 unregulated covering approximately the remaining consolidated Northeast order area will Georgia counties (formerly part of Order eastern half of both these states. assure that distributing plant operators 11), 20 Indiana counties (17 currently in Climatic types in this region vary that currently are fully regulated would Order 46 and 3 currently unregulated), somewhat. Humid subtropical climates be placed on an equal competitive 81 Kentucky counties (47 currently in typical in most of North and South 4844 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Carolina, as well as Virginia (which is people, is approximately at the Appalachian market have a total affected by elevation differences) and midpoint of South Carolina’s coast. population of .1 million. southern Indiana. Humid continental The Tennessee portion of the Fluid Per Capita Consumption climates are typical for northwestern proposed Appalachian market has a Georgia, western North and South population of 2 million, with three Estimates of fluid per capita Carolina and southern West Virginia. MSA’s that are included in the largest consumption within the proposed Temperate climates are common in 17 in the market. These three areas Appalachian marketing area vary from eastern Tennessee and central contain 1.6 million, or over 80 percent 15.8 per month for South Carolina to Kentucky. of the population in that part of 20.4 pounds per month for Indiana. Use Much of the proposed Appalachian Tennessee that is proposed to be part of of 17 pounds per month as a weighted area does not provide a hospitable the Appalachian marketing area. The average results in an estimated 291 climate or topography for dairy farming. largest Tennessee MSA is Knoxville, million pounds of fluid milk As an agricultural pursuit, dairy farming which is in the eastern end of Tennessee consumption for the Appalachian is far down the list in the area, near North Carolina. Six counties make marketing area. Appalachian handlers’ accounting for an average of less than up the Knoxville MSA with a combined route disposition within the area during five percent of all receipts from farm population of 650,000. The Johnson January 1997 totaled 290 million commodities for the states involved. City-Kingsport-Bristol area, the second- pounds, with another 18 million Crops such as tobacco, corn and largest Tennessee MSA, is located in the distributed by producer-handlers, soybeans, and other livestock northeastern tip of Tennessee along the partially regulated plants and other commodities such as cattle/calves, Virginia and North Carolina border, and order plants. turkeys and broiler chickens are more contains almost half a million people. Milk Production prevalent in this region. Chattanooga, the third-largest MSA in Tennessee, is located on the Tennessee- In December 1996, over 4,000 Population Georgia border, and has a population of producers from 359 counties in 15 states According to July 1, 1996, population 446,000. The three MSAs run northeast pooled 443.3 million pounds of estimates, the total population in the to southwest just west of the North producer milk on Orders 5, 11 and 46. proposed marketing area is 17.1 million. Carolina border. Approximately 71 percent of the milk There are 24 Metropolitan Statistical The Kentucky portion of the proposed pooled on the three orders was Areas (MSAs) within the proposed Appalachian market contains 2.7 produced within the proposed marketing area, containing 62.3 percent million people. There are two MSAs consolidated marketing area. of the area’s population. The largest 17 within the state that are included in the North and South Carolina are the only contain 50 percent of the population of largest 17 in the market. The largest is States that are located entirely within the market. Charlotte, North Carolina, is Louisville, which lies on the border the proposed consolidated marketing the largest MSA in the marketing area with Indiana and has a population of area, and provided nearly all of their with a population of 1.3 million. one million. Lexington, the second- producers’ milk to Order 5 Charlotte is located near the South largest Kentucky MSA, is located in the (encompassing the entire States of North Carolina border about at the mid point center of the state and has just under and South Carolina), with 103.7 and 34 of the North and South Carolina border, half a million people. Generally, the million pounds, respectively. Neither of and about 250 miles west of the Atlantic Kentucky counties in the proposed these states produces enough milk to coast. Less than 100 miles to the north Appalachian marketing area are not meet even the fluid milk requirements lies the second-largest MSA of heavily populated. Only two have of its population. Kentucky producers Greensboro-Winston-Salem-High Point, populations over 100,000. They are pooled 101.1 million pounds on the North Carolina, with a population of 1.1 Jefferson county, where Louisville is three orders, with 89 percent produced million. About 50 miles east of located, and Fayette county, home to within the proposed marketing area. Greensboro is the third-largest MSA, Lexington. Tennessee producers pooled 69.9 Raleigh-Durham-Chapel Hill, with one Indiana counties in the Appalachian million pounds on the three orders, million people. The Raleigh MSA abuts market have a population of .8 million. principally on Order 11, with 84 percent the Greensboro MSA. An additional four Only Vanderburgh county has a produced within the proposed North Carolina MSAs are among the population over 100,000. Evansville, the marketing area. Although Virginia is largest of the 17 MSAs containing 50 only MSA in the portion of Indiana primarily outside the marketing area, percent of the population of the included in the Appalachian market, is producers from 40 Virginia counties proposed marketing area, for a in Vanderburgh county. Evansville’s supplied 68.5 million pounds of milk combined population of one million. MSA contains 289,000 and is located on for the FO 11 and FO 5 markets in North Carolina is the most populous the Indiana-Kentucky border, near the December 1996. Georgia producers state in the proposed marketing area Illinois state line. pooled 27.6 million pounds and Indiana with 7.3 million; over half the There are seven Georgia counties producers pooled 21 million pounds in population of North Carolina is located within the proposed Appalachian December, with the balance of the milk in these seven MSAs. marketing area, with a total population pooled on the three orders originating in South Carolina is the second-most of .3 million. Three of them, Catoosa, Alabama, Connecticut, Illinois, populous state in the proposed Dade, and Walker, are part of the Maryland, Massachusetts, New Mexico, consolidated area, with 3.7 million Chattanooga MSA. These three counties Pennsylvania, and West Virginia. people. The Carolinas contain two have a combined population of 124,000. Thirty-four counties each supplied thirds of the proposed market’s The 12 Virginia counties in the over 3 million pounds of milk to the population. Greenville is the largest proposed Appalachian market have a three markets consolidated in this MSA in the state with a population of population of .3 million. Three of the proposed area. One such county was 900,000. Greenville is located in the counties, Scott, Washington and Bristol located in New Mexico, and another in northwest corner of the state. City, are part of the Johnson City- Pennsylvania. Eight were located in Charleston, the second-largest MSA in Kingsport-Bristol MSA. The two West Kentucky, south and southwest of South Carolina, with half a million Virginia counties within the Lexington, and southeast of Louisville. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4845

Eleven were located in North Carolina Evansville areas would each have 1 pool Other Plants west of the Raleigh-Durham area, with distributing plant. The Raleigh-Durham Also located within the proposed all but one located near Greensboro, area would have one government agency consolidated Appalachian marketing Winston-Salem, Asheville, Charlotte or plant. area during May 1997 were 13 supply or Durham. Of the two South Carolina Of the remaining 11 distributing manufacturing plants: 4 in Kentucky (1 counties that supplied over 3 million plants located in the marketing area, one in the Louisville area), 5 in North pounds each, one was located northwest pool plant would be located in a North Carolina (1 in the Charlotte-Gastonia- of Columbia, and the other northwest of Carolina MSA and one pool plant would Rock Hill area and one in the Charleston. The five Tennessee counties be located in a South Carolina MSA. Greensboro-Winston-Salem-High Point that pooled over 3 million pounds of The nine remaining distributing plants, area), 1 in Tennessee, and 3 nonpool milk on the three orders are located in all expected to be pool plants, would cheese plants in Indiana (1 in the northeast and southeast Tennessee; two not be located in MSAs. Four would be Lexington area and one in the Louisville in the Johnson City-Kingsport-Bristol in North Carolina, 3 in Kentucky, 1 in area). Three of the 13 plants are pool area and three southwest of Knoxville. Indiana, and 1 in Tennessee. plants, or have a ‘‘pool side.’’ Two of the Only one of the six counties in Virginia three pool plants (one in Kentucky and The 27 fully regulated plants in the that supplied over 3 million pounds to the one in Tennessee) are ‘‘split plants,’’ Appalachian marketing area had Orders 5 and 11 is located within the that is, one side of a plant is a distribution totaling 362 million pounds marketing area. Five of the six are manufacturing facility, and the other in January 1997, with eighty percent located in southwest Virginia, with the side receives and ships Grade A milk, within the proposed marketing area. other in the northwest part of the State. and accounting is done separately. Of Distributing Plants—Route Distribution A South Carolina plant included these pool plants, the pool sides of the above in the description of fully 2 split plants have no primary product, Using distributing plant lists included regulated distributing plants— shipping only to distributing plants. The in both the Preliminary and Revised Superbrand Dairy Products, Inc., in nonpool side of one of these plants Preliminary Reports and the pooling Greenville (about 140 miles northeast of manufactures cheese, while the nonpool standards used in the Revised Atlanta)—has a greater proportion of its side of the other manufactures powder. Preliminary Report, updated for known sales in the Southeast market than in the The other pool plant is a supply plant plant closures through May 1997, 33 Appalachian market. This plant that manufactures primarily Class II distributing plants would be expected to currently is locked into regulation under products. Of the other nonpool plants in be associated with the Appalachian the Carolina order based on its need to the proposed Appalachian marketing marketing area, including 29 fully procure a milk supply in the Carolina area, 5 manufacture primarily cheese regulated distributing plants (28 order, although it has greater route and 5 manufacture primarily Class II currently fully regulated and 1 currently disposition in the Southeast. This lock- products. partially regulated), 2 partially regulated in is included in the proposed (both currently partially regulated), 1 Cooperative Associations Appalachian order provisions. exempt plant, on the basis of having less In December 1995, there were ten than 150,000 pounds of total route Utilization cooperatives representing producers in disposition per month (currently fully the proposed Appalachian marketing regulated), and 1 government agency According to October 1995 pool statistics for handlers who would be area. One cooperative pooled milk on all plant (currently a government agency three markets. The Tennessee Valley plant). Four of the 33 distributing plants fully regulated under this Appalachian order, the Class I utilization percentages and Louisville-Lexington-Evansville expected to be associated with the Federal orders had two cooperatives in for the Carolina and Louisville- proposed area are not in the area but are common, while the Tennessee Valley Lexington-Evansville markets and the located in Virginia, including 2 fully and Carolina Federal orders had one former Tennessee Valley market were regulated plants (1 currently fully cooperative in common. For December 84, 78, and 81 percent, respectively. regulated and 1 currently partially 1995, 80 percent of the producer milk Based on calculated weighted average regulated), and 2 partially regulated pooled on the three markets was use values for (1) the current order with plants (both currently partially associated with cooperatives, and 85 current use of milk, and (2) the current regulated). Since October 1995, 2 percent of the cooperative-marketed order with projected use of milk in the distributing plants in North Carolina milk was pooled by the four consolidated Appalachian order, the have gone out of business. cooperatives that marketed milk on Under the proposed Appalachian potential impact of this proposed rule more than one of the three orders. order, there would be 17 distributing on producers who supply the current plants in the largest Appalachian MSAs market areas is estimated to be: Criteria for Consolidation having distributing plants. There would Carolina, a 3-cent per cwt decrease Overlapping route disposition and be 3 pool distributing plants in the (from $14.23 to $14.20); Louisville- procurement are the primary criteria on Greensboro-Winston-Salem-High Point Lexington-Evansville , a 5-cent per cwt which this proposed consolidation is area. The Charleston area would have 2 increase (from $13.35 to $13.40); and based. There is a stronger relationship pool distributing plants. The Johnson Tennessee Valley, a 2-cent per cwt between the three marketing areas City-Kingsport-Bristol, Tennessee, area increase (from $13.92 to $13.94). The involved than between any one of them would have 2 pool distributing plants. weighted average use value for the and any other marketing area on the The Greenville-Spartanburg-Anderson, consolidated Appalachian order market basis of both criteria. There is also South Carolina, area would have 2 pool is estimated to be $13.97 per cwt. For common cooperative association distributing plants. The Knoxville area December 1996, combined Class I affiliation between the markets. would have 1 pool distributing plant utilization for Orders 5, 11 and 46 was and 1 exempt plant, with less than 75.6 percent based on 335.2 pounds of Discussion of Comments and 150,000 pounds of total route producer milk used in Class I out of Alternatives disposition per month. The Charlotte, 443.5 million total producer milk A comment filed on behalf of Barber Chattanooga, Lexington, Louisville, and pounds pooled. Pure Milk Company and Dairy Fresh 4846 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Corporation, both in Alabama, proposed the route disposition of Appalachian commodity is as important in Florida as that the Florida orders and the Carolina handlers is distributed in the proposed dairy farming. and Tennessee Valley orders be merged Southeast area. In total, Appalachian Population with the Southeast. The commenter handlers distribute 11 percent of their stated that evidence shows the Florida route dispositions in the Southeast area, According to July 1, 1996, population markets are vitally involved with other while Southeast handlers distribute less estimates, the total population in the areas of the Southeast in Class I sales, than 3 percent of their route proposed Florida marketing area is 13.8 obtaining milk supply, and in the dispositions in the Appalachian area. million. Ninety-three percent of the disposition of surplus milk. A number There would be very little basis for population of the marketing area is of comments, including those filed by splitting the current Order 46 area located in Metropolitan Statistical Areas Mid-America Dairymen, Inc., and (Louisville-Lexington-Evansville) to (MSAs). The two largest MSAs are Carolina Virginia Milk Producers include northern Kentucky with the Miami-Fort Lauderdale (Miami) on the Association, urged that the Appalachian proposed Appalachian area. Only 3 eastern side of the southern end of the area be combined with the Southeast percent of Appalachian handlers’ route peninsula, and Tampa-St. Petersburg- order area, primarily on the basis of disposition is distributed within the Clearwater (Tampa) midway on the milk procurement overlap in south Ohio Valley order area, while less than western side of the peninsula. Broward central Kentucky. Several commenters, one million pounds of Class I sales and Dade Counties comprise the Miami mainly producers, favored putting all of moves from the Ohio Valley area into population center (currently in Order Kentucky in one order and most the Order 46 area. 13) with a population of 3.5 million. suggested adding it to the Southeast. The Tampa population center (currently Comments from Trauth Dairy, a Mideast Florida in Order 12) is comprised of Hernando, pool plant under this proposed The proposed Florida marketing area Hillsborough, Pasco and Pinellas consolidation, did not specifically ask is comprised of the three current counties with a population of 2.2 that Kentucky be put into one order, but Federal order marketing areas contained million. The six counties in these two that Trauth (at Newport, Kentucky) be wholly in the state of Florida: Upper population centers represent about 41 placed in the same order (Appalachian) Florida (Order 6), Tampa Bay (Order 12) percent of the total marketing area as the handlers Trauth described as its and Southeastern Florida (Order 13). population. primary competition for producer milk There are 63 counties in this proposed Fluid Per Capita Consumption and for retail sales in the marketplace. area (40 in Order 6, 13 in Order 12, and As discussed under the description of Florida customarily is considered a 10 in Order 13). the proposed consolidated Florida deficit milk production state. For much market, overlapping milk distribution Geography of the year, milk needs to be imported and procurement involving the three from other states in order to meet the The proposed Florida marketing area current Florida markets is much greater demand for fluid consumption. Based is described geographically as all within the Florida markets than on the population figure of 13.8 million counties in the State of Florida, with the between any of the Florida markets and and an estimated per capita fluid milk exception of the four westernmost any other market. As stated in the consumption rate of 17 pounds of fluid counties in the Florida Panhandle. This description of consolidation criteria, milk per month, total fluid milk proposed marketing area is a large areas that supply a minor proportion of consumption in the Florida marketing an adjoining area’s milk supply with a peninsula, ranging from about 140 miles area is estimated at 234.6 million minor proportion of their own total milk in width in the north to about 50 miles pounds per month. production while handlers located in in width in the south, that extends During October 1995, 205 million the area are engaged in minimal south from the southeast U.S. about 400 pounds of milk were disposed of in the competition with handlers located in miles between the Atlantic Ocean and proposed marketing area by all Florida the adjoining area do not necessarily the Gulf of Mexico. Also included in the distributing plants. Plants located have a strong enough association with Florida market is approximately 150 outside the marketing area (mostly from the adjoining area to be consolidated miles of the Panhandle, a narrow strip the Southeast market [Order 7]) had with it. It is impossible to find a of land extending west along the Gulf of route disposition within Florida of 20 boundary across which significant Mexico from the northern part of the million pounds. The discrepancy quantities of milk are not procured for peninsula. The water surrounding most between the actual total route other marketing areas. of Florida’s peninsula constitutes a disposition of 225 million pounds and Consolidation of the Carolina and natural boundary, as east-to-west travel the estimated consumption level of Tennessee Valley markets with the is limited. 234.6 million pounds may be explained Southeast is not proposed because of the Almost all of Florida has a humid by the older than average population in minor degree of overlapping route subtropical climate. The southern end of Florida. disposition and producer milk between the state and the islands south of the these areas. Less than one-tenth of the peninsula have a tropical wet and dry Milk Production milk produced in the Kentucky counties climate. In general, the state’s climate In December 1996, 222 million proposed to be in the Appalachian area can and does affect levels of milk pounds of milk produced in Florida would be pooled under the Southeast production negatively. Seasonal were pooled in four Federal orders; 98.5 order, and approximately one-fifth of variation in production for this market percent of this milk was pooled on the the production from the Kentucky typically is greater than for most other three current Florida orders. About 370 portion of the Southeast area would be U.S. regions. The importance of dairy producers located in Florida (96 percent pooled under the Appalachian order. farming as an agricultural pursuit in of all Florida producers having With the exception of two Florida is relatively minor (7 percent of association with Federal orders) had Appalachian handlers who account for total receipts from agricultural producer milk pooled on at least one of two-thirds of the disposition by commodities), with several crops the three Florida markets. A small Appalachian handlers in the Southeast contributing more total receipts to the number of Florida producers had order area, only a minor proportion of State’s income. However, no livestock producer milk associated with Order 7, Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4847 while more than 100 Georgia producers fully regulated under this Florida order, association evidenced by cooperative had producer milk associated with the the Class I utilization percentages for association proposals to consolidate Florida markets. Additionally, 34 the Upper Florida, Tampa Bay, and these three marketing areas. Further, the million pounds of Georgia milk was Southeastern Florida markets were 85, cooperative associations in this area pooled on the three Florida markets; 85 90, and 91 percent, respectively. Based have worked together for a number of percent of this milk went to Order 12. on calculated weighted average use years to accommodate needed There are 44 counties in Florida that values for (1) the current order with movements of milk between the three pooled milk in at least one of the three current use of milk, and (2) the current Florida Federal orders, and into and out current Florida orders. Seven of these order with projected use of milk in the of the area. counties produced 62.6 percent of the consolidated Florida order, the potential Discussion of Comments and milk pooled. impact of this proposed rule on Alternatives Three counties (Gilchrist, Lafayette producers who supply the current and Suwannee, about 75 miles west of market areas is estimated to be: Upper One comment, filed on behalf of two Jacksonville) had 53.9 million pounds of Florida, an 11-cent per cwt increase Alabama handlers, suggested that the producer milk. For these three counties, (from $14.67 to $14.78); Tampa Bay, a order areas of Florida, the Carolinas and 85.5 percent of the December 1996 5-cent per cwt decrease (from $15.09 to Tennessee Valley be merged with the producer milk was pooled on the Tampa $15.04); and Southeastern Florida, an Southeast. The comment stated that the Bay order, which is located 11-cent per cwt decrease (from $15.42 to Florida markets are vitally involved approximately 150 miles southeast of $15.31). The weighted average use value with other areas of the southeast in the counties. for the consolidated Florida order Class I sales, procurement of milk More than 80 percent of Clay County’s market is estimated to be $15.05 per supplies, and disposition of surplus producer milk was pooled in Order 6. cwt. For December 1996, combined milk. Although there is some overlap in This county is in the Jacksonville MSA, Class I utilization for the three Florida these functions between the Florida which is the largest population center in markets was 83.9 percent based on markets and the Southeast order area, it Order 6. 211,712,000 pounds of producer milk is not great enough to warrant the About 20 million pounds of producer used in Class I out of 252,402,000 total combination of these three order areas, milk came from Hillsborough and producer milk pounds. which have a greater degree of affinity Highland Counties, both part of the among themselves than with any other Order 12 market. However, this milk Other Plants market, with the Southeast. Given the was pooled about evenly between Also located within the Florida closeness of the relationship between Orders 12 and 13. marketing area are four supply or the current Florida markets, and the Okeechobee County, located in the manufacturing plants, three of which lack of any significant overlap of sales Order 13 marketing area about 125 miles are not associated with the current or production with other order areas, no northwest of the Miami area, is by far markets’ pools. Three ice cream plants alternatives other than those discussed the largest milk producing county in are located in the Tampa area and one were considered with regard to this Florida. The county had 54.5 million pool supply plant is in the Jacksonville area. pounds of producer milk in December area. Southeast 1996, almost all of which was pooled on Cooperative Associations Order 13. The proposed Southeast marketing Four cooperatives market milk in the area is comprised of the current Distributing Plants—Route Distribution Florida markets, and represent nearly Southeast (Order 7) marketing area, Using plant lists included in both the 100 percent of the milk marketed. portions of the current Southwest Plains Preliminary and Revised Preliminary Florida Dairy Farmers Association is the (Order 106) marketing area in northwest Reports and the pooling standards used only cooperative with membership in Arkansas and southern Missouri, and in the Revised Preliminary Report, all three current markets. In December six southeastern Missouri counties from updated for known plant closures 1995, 60 percent of the producer milk the current Southern Illinois-Eastern through May 1997, 15 plants would be associated with the three markets came Missouri (Order 32) marketing area. expected to be fully regulated under the from members of this cooperative. Also included are 16 currently proposed Florida market. Five of these During this same month, Tampa unregulated Missouri counties, 21 plants are located in the Miami MSA Independent Dairy Farmers Association currently unregulated Kentucky and three in the Tampa MSA. Three members were affiliated with the Tampa counties, and 1 Kentucky county that plants are located in mid-Florida, one in Bay and Southeastern Florida markets, currently is part of the Louisville- the Orlando area and two in the while Mid-America Dairymen, Inc., and Lexington-Evansville (Order 46) Lakeland-Winter Haven area. Three Select Milk Producers, Inc., members marketing area. There are 572 whole more are located in northeast Florida; had producer milk on the Tampa Bay counties and 1 partial county (Pulaski two in the Jacksonville area, and one in pool. County, Missouri) in this proposed area. Daytona Beach. Two plants having route Criteria for Consolidation Geography disposition of less than 150,000—one in the Tampa MSA and the other in Citrus As suggested in both the initial and The Southeast market is described County (north of Tampa and west of Revised Preliminary Reports on Order geographically as follows: all counties Orlando)—would be exempt. Consolidation, the consolidated Florida in Alabama, Arkansas, Louisiana, and Slightly less than two-thirds of the market should encompass the current Mississippi (67, 75, 64 and 82 counties, proposed market’s population is marketing areas of the Upper Florida, respectively), 4 in Florida, 152 in contained in the MSAs where fully Tampa Bay and Southeastern Florida Georgia, 44 whole and 1 partial in regulated plants are located. Federal milk orders. Natural boundary Missouri, 62 in Tennessee and 22 in limitations and overlapping sales and Kentucky (one—Logan County— Utilization procurement areas among the three currently is in Order 46, and 21 According to October 1995 pool orders are major reasons for currently are unregulated). Of these 21 statistics for handlers who would be consolidation, as well as a measure of counties, 14 were part of the former 4848 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Paducah, Kentucky (Order 99) Population in the center of Arkansas, has the 7th marketing area. Eleven Arkansas and 23 According to July 1, 1996, population largest population concentration in the Missouri counties (including part of estimates, the total population in the Southeast market area with 550,000. The portion of Tennessee in the Pulaski County) are part of the current proposed Southeast marketing area is Southeast marketing area is the fourth Order 106 marketing area. Six Missouri 26.7 million. The 42 Metropolitan most populated with 3.3 million people counties are part of the current Order 32 Statistical Areas (MSAs) in the proposed and is home to the third and fourth marketing area. Sixteen southeastern market account for 62 percent of the largest MSAs in the Southeast. The Missouri counties currently are total marketing area population. Almost Nashville area, with a population of 1.1 unregulated (4 of these were part of the half of the Southeast population is million, is located in central Tennessee. former Paducah Federal milk order). located in the 17 most populous MSAs. The Memphis, Tennessee/Arkansas/ The Southeast market spans the Eight MSAs have populations greater Mississippi MSA, also with a southeastern area of the United States than 500,000 each; their total population of 1.1 million, is located from the Gulf of Mexico and the population is about 35 percent of the near these three states’ borders. Alabama/Georgia-Florida border north Southeast population. Because of the Other states or portions of states in to central Missouri, Kentucky, large number of MSAs in the Southeast the Southeast marketing area do not Tennessee and South Carolina, and from market and also because no large (i.e., have MSAs with greater than 500,000 the Atlantic Ocean west to Texas, greater than 500,000) population centers population. Mississippi, the Southeast’s Oklahoma, and Kansas. Measuring the are added to this market under this 5th most populous state, has a total extreme dimensions, this market proposal, only those areas with population of 2.7 million. The Missouri, extends about 575 miles north to south populations greater than 500,000 are Florida and Kentucky counties in the from central Missouri to southern described in greater detail. Southeast market have populations of Louisiana and 750 miles west to east Over 25 percent of the Southeast 1.3 million, 590,000 and 520,000, from Louisiana’s border with Texas to market’s population is located in respectively. the Atlantic Ocean coast in southern Georgia, the most populous of the Georgia. Southeast market states, with 7.1 Fluid Per Capita Consumption The Southeast marketing area is million people. Almost half of Georgia’s Fluid per capita consumption contiguous to 4 other proposed population is concentrated in the estimates vary throughout the Southeast consolidated marketing areas: Florida to Atlanta MSA, located about 60 miles market from a low of 16 pounds of fluid the southeast, the Southwest to the south of the Southeast-Appalachian milk per month in Mississippi to a high west, the Central to the northwest and marketing area boundary in the of 19 pounds in Arkansas and Kentucky. the Appalachian to the northeast and northwest portion of the state. Atlanta is Multiplying the individual states’ east. Georgia’s coastline on the Atlantic the largest city in the Southeast market consumption rates by their population Ocean is about 100 miles in length, with a population of 3.5 million. results in an estimated fluid milk while western Florida, Alabama, With 4.3 million people, Alabama is consumption rate of 467 million pounds Mississippi and Louisiana extend about the Southeast market area’s third most of fluid milk per month for the 600 miles along the Gulf of Mexico populous state. Birmingham and Southeast marketing area. With route coastline. Also contiguous to the current Mobile, the state’s two largest MSA distribution from the current Southeast Southeast market are currently regions, are among the top eight in order handlers (not including the 3 unregulated counties in Texas, population in the Southeast. The Arkansas and Missouri plants) equaling Missouri, Kentucky (and as of October Birmingham area has a population of 334 million pounds within the 1, 1997, the Tennessee Valley [Order 11] about 900,000 and ranks 5th in size Southeast marketing area, route marketing area). The proposed among all Southeast area MSAs. distribution from these handlers is consolidated marketing areas would Birmingham is located about 150 miles approximately 100 million pounds less encompass all of these counties into the west of Atlanta in north central than the expected consumption. Southwest, Central, Appalachian or Alabama. The Mobile area is a Gulf of In January 1997, Georgia had the Southeast marketing areas, with some Mexico port city in southwestern greatest ‘‘deficit’’—with route currently-unregulated counties in Alabama. With a population of 520,000, distribution from Order 7 handlers central Missouri remaining unregulated Mobile is the 8th largest population falling about 42 million pounds short of under this proposal. center in the Southeast market area. the 122 million pounds of expected Louisiana is the second most In terms of physical geography, the consumption. The state’s fluid needs populated state in the Southeast market were met by the route distribution of Southeast region is generally flat or area with 4.4 million people. Two of the gently rolling low-lying land. Relatively about 44 million pounds into Georgia by Southeast’s 8 largest MSAs are located fully regulated handlers in the proposed higher elevations which might in Louisiana—New Orleans, the second potentially form natural barriers or Appalachian and Florida markets. largest MSA with 1.3 million people Other states’ ‘‘deficits’’ generally obstruct easy transportation exist in and Baton Rouge, the 6th largest MSA ranged from 4 to 11 million pounds. It northwest Arkansas and northeast with almost .6 million people. New is likely that handlers regulated under Georgia. Orleans is located in the state’s ‘‘toe’’ in other Federal orders had distribution Moving from the south to the north of southeastern Louisiana. Baton Rouge into the Southeast area. Alabama is the the Southeast market, climates range also is located in Louisiana’s ‘‘toe,’’ only state in which the amount of route from humid subtropical in coastal areas about 80 miles west of New Orleans. distribution by Order 7 handlers is to warm and humid or humid Arkansas has a total population of 2.5 about the same as the expected continental to temperate in Tennessee million—2 million from the current consumption level. and Kentucky. Warm, humid summers Southeast marketing area and an and mild winters are typical in the additional 500,000 from the Arkansas Milk Production Southeast. These types of climates can portion of the Southwest Plains In January 1997, 4,180 producers from severely limit the production level of marketing area. The Little Rock-North 388 counties pooled 477.4 million dairy herds in the summer. Little Rock, Arkansas (Little Rock) MSA, pounds of producer milk on the current Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4849

Southeast market. Over 85 percent of production area in Louisiana. The agency plants (including university and the Southeast’s producer milk came counties contributed 15 million pounds state prison plants). None of these from Southeast market area counties. Of of producer milk to the Order 7 pool in plants’ regulatory status is expected to the 388 counties, 19 pooled over 5 January 1997. change as a result of the consolidation million pounds each, accounting for 39 About 32 million pounds of milk were process. Of the 36 fully regulated plants, percent of Order 7’s producer milk. Of pooled on the Southeast market from 18 are located in the largest eight MSA these 19 counties, 2 Texas counties are 408 producers in 19 Kentucky counties regions. One distributing plant located located outside the proposed Southeast in January 1997. Additionally, 116 in the proposed Appalachian marketing market area. Because of the large producers in 15 of these counties pooled area that has more than half of its route number of counties, only the locations almost 9 million pounds of producer disposition within the Southeast for those top 19 production counties are milk on Orders 11 and 46 (Louisville- marketing area would be locked into described in greater detail. However, the Lexington-Evansville). Two counties, regulation under the Appalachian order. volume of producer milk, number of Barren and Monroe, contributed over 13 Since October 1995, it is known that producers (farms) and number of million pounds of producer milk. These 7 distributing plants (6 fully regulated counties is provided for each state contiguous counties are in south central and 1 exempt) have gone out of within the market area. Kentucky about 80 miles northeast of business. These plants were located in Almost 73 million pounds of milk Nashville, Tennessee. Alabama, Arkansas, Georgia, and were pooled on the Southeast market Four Missouri counties—Wright, Missouri (1 plant each), and Mississippi from 581 producers in 28 Louisiana Texas, Laclede and Howell— pooled 33 (3 plants). Also, one fully regulated parishes in January 1997. Top million pounds of producer milk on distributing plant, Centennial Dairy production parishes are Tangipahoa, Order 7. All of these counties currently Farms, Inc., in Atlanta, GA, began Washington and St. Helena, all located are located in the Order 106 (Southwest packaging and distributing products in in the state’s ‘‘toe,’’ north of New Plains) marketing area in southern October 1996. Information for this plant Orleans and northeast of Baton Rouge, Missouri. is included in route dispositions each bordering Mississippi. Another Other Southeast marketing area states reported for January 1997, the month high production area is centered on De or areas contribute producer milk to the used in this analysis. Soto Parish in northwestern Louisiana. Southeast marketwide pool. About 37 Of the 47 distributing plants, Georgia These four parishes account for over 62 million pounds of milk were pooled on has 7; Louisiana, 12; Mississippi, 6; million pounds of producer milk, with the Southeast market from 205 Alabama, 7; Arkansas, 6; Tennessee, 5; 76 percent coming from Tangipahoa and producers in 51 Alabama counties, and Missouri, 2; and Kentucky, 2. No Washington parishes. 25 million pounds were pooled from distributing plants are located in the Almost 67 million pounds of milk 343 producers in 39 Arkansas counties. Florida counties included in the were pooled on the Southeast market Sixteen Florida producers from 6 Southeast market area. from 331 producers in 68 Georgia counties (2 in the Southeast market In January 1997, the 34 plants fully counties in January 1997. Of this area) pooled 3.5 million pounds on regulated under Order 7 at that time had volume, 64 million came from 312 Order 7 in January 1997. route distributions totaling 372 million producers in 64 Georgia counties in the In January 1997, Order 7 producer pounds. About 90 percent, or 334 Order 7 marketing area. The balance is milk also originated in Missouri million pounds, was distributed within associated with Georgia producers counties not included in the Southeast the Order 7 marketing area. Route located in the marketing area of the marketing area, Texas, New Mexico, distribution volumes from the 11 recently-terminated Order 11 Indiana and Oklahoma. Large amounts nonpool distributing plants were (Tennessee Valley). Top production of milk from Missouri (21 million relatively insignificant and are not counties are Putnam, Morgan and pounds in addition to the 33 million included here. These data do not Macon, which pooled 27 million described previously) and Texas (46 include distribution information from pounds of producer milk on Order 7. million pounds—20 million from the 3 fully regulated plants in northwest About 65 million pounds of milk were Hopkins and Erath Counties) were Arkansas and southern Missouri that pooled on the Southeast market from associated with the Order 7 pool. It would be included in the proposed 580 producers in 46 Tennessee counties should be noted that milk does not need Southeast pool. All 3 plants are in January 1997. Of this volume, 62 to be physically received at a Federal operated by one handler; thus this data million came from 562 producers in 42 order plant regulated under the order in is proprietary information and is Tennessee counties in the Order 7 which the milk is pooled. restricted. These plants’ information is marketing area. The balance is included, however, in the market Distributing Plants—Route Distribution associated with Tennessee producers information presented in the Central located in the marketing area of the Using distributing plant lists included market discussion. recently-terminated Federal Order 11. in both the Preliminary and Revised In Georgia, three pool distributing Two high production counties in the Preliminary Reports and the pooling plants are located in the Atlanta area, state are Marshall and Lincoln, located standards used in the Revised with 2 others elsewhere in the State. in south central Tennessee. These Preliminary Report, updated for known Georgia also has 1 partially regulated counties contributed over 12 million plant closures through May 1997, 47 handler and 1 government agency (state pounds of producer milk to the Order 7 distributing plants located in the prison) plant. pool in January 1997. proposed Southeast marketing area Nine of Louisiana’s 12 distributing About 61 million pounds of milk were would be expected to be associated with plants currently are and would continue pooled on the Southeast market from the Southeast market (including the to be fully regulated (pool plants) in this 443 producers in 48 Mississippi added territory in northwestern proposed marketing area. Five of these counties in January 1997. Top Arkansas and southern Missouri). These 9 are located in either the New Orleans production counties are Walthall and plants include 36 fully regulated or Baton Rouge areas (2 and 3, Pike, in southern Mississippi on the distributing plants, 2 partially regulated, respectively). Four other pool state’s border with Louisiana. These two one exempt plant based on size, one distributing plants are located in counties adjoin the heavy milk producer-handler, and 7 government Louisiana. The remaining three plants 4850 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules are affiliated with universities or the the Birmingham area), 5 in Arkansas Discussion of Comments and state prison. (including 1 in the Little Rock area), 7 Alternatives Four of Mississippi’s 6 currently in Georgia (including 4 in the Atlanta Several commenters, primarily operational distributing plants would be area), 3 in Louisiana (including 1 in the producers, favored putting Kentucky all fully regulated pool plants in the Baton Rouge area), 11 in Missouri, 2 in in one order and most suggested adding Southeast market. Two universities also Mississippi, and 3 in Tennessee it to the Southeast. In a comment that have plants. (including 1 each in the Memphis and was considered in the Revised All seven of Alabama’s distributing Nashville areas). Eight of the 37 plants Preliminary Consolidation Report, plants are fully regulated. One is located are pool plants. Of these pool plants, 2 Georgia Milk Producers had suggested in the Birmingham area and 2 are primarily ship to distributing plants, 3 dividing the Southeast Order on the located in the Mobile area. Of the manufacture cheese, 1 manufactures state line between Mississippi and remaining four, 2 are in northern Class II products, 1 manufactures Alabama. Over 35 form letters opposed Alabama, one is in central Alabama, and powder and 1 primarily manufactures the separation of the Southeast one is in the state’s southeastern corner. other products. Of the Southeast marketing area between Mississippi and Four of Arkansas’ 6 currently marketing area’s 28 nonpool plants, 13 operational distributing plants are fully Alabama. A more recent Georgia Milk manufacture primarily Class II products, Producers comment rescinded this regulated; two are in the Little Rock 3 manufacture cheese, 10 manufacture area, and the other 2 are located in position. primarily other products, and 1 each A comment filed on behalf of Barber northwest Arkansas. Also located manufacture primarily butter and Pure Milk Company and Dairy Fresh within Arkansas are an exempt cheese. One plant is a ‘‘split plant,’’ Corporation, both in Alabama, suggested distributing plant and a state prison with one side serving as a that the Florida orders and the Carolina plant. All five of Tennessee’s manufacturing facility primarily for and Tennessee Valley orders be merged distributing plants are fully regulated. Class II products, while the other side with the Southeast. The comment stated Three of the 5 are located in the receives and ships Grade A milk. that evidence shows the Florida markets Nashville area and the remaining two Accounting is done separately. are vitally involved with other areas of are in the Memphis area. Two distributing plants that would be Cooperative Associations the Southeast in Class I sales, obtaining fully regulated under the Southeast milk supply, and in the disposition of In December 1995, six cooperative surplus milk. As discussed under the market are located in the currently associations represented members unregulated Kentucky counties that are description of the proposed marketing 78 percent of the milk pooled consolidated Florida market, the proposed to be added to this marketing on the Southeast market: Mid-America area. One is located in Fulton in the greatest overlap in sales distribution and Dairymen, Inc.; Associated Milk milk supply involving the Florida southwest corner of Kentucky on the Producers, Inc., Southern Region; Tennessee border, and the other about markets occurs between the three Carolina-Virginia Milk Producers current Florida markets. A discussion of 30 miles east of Fulton. Association, Inc.; Arkansas Dairy Two Missouri plants are located in the issue of consolidating the Carolina Cooperative Association (ADCA); and Tennessee Valley markets with the the counties proposed to be included in Vanguard Milk Producers Cooperative the Southeast area. One fully regulated Southeast can be found in the (VMPC); and National Farmers description of the proposed plant is located in Springfield; a Organization, Inc. ADCA and VMPC partially regulated plant based on Appalachian market. members marketed milk only in the Approximately 10 commenters October 1995 data, but exempt (by Southeast Federal order, while the other virtue of having less than 150,000 suggested that southern Missouri and/or 4 cooperatives’ members marketed milk northwest Arkansas should be included pounds of route dispositions) based on in multiple Federal orders. January 1997 data, is located northeast in the Southeast marketing area. Mid- of Springfield. Criteria for Consolidation Am supported making both areas part of the Southeast Federal order to correct Utilization Retention of the Southeast marketing the inequity perceived by the According to January 1997 pool area as a single area is based on cooperative to be caused by southwest statistics, the Class I utilization for the overlapping route dispositions within Missouri manufacturing plants Southeast market was about 78 percent. the marketing area to a greater extent balancing the Southeast without being Changes to this percentage are likely to than with other marketing areas. able to pool, and inefficient milk occur with the addition of 3 pool plants Procurement of producer milk also movements caused by blend price or potential changes in plants’ overlaps between states within the discrepancies. AMPI concurred, regulatory status. It is not expected that market. The need for milk from outside suggesting that southern Missouri the addition of the plants would have a the market is primarily seasonal, and is historically has been a supply source for significant impact on producer returns not as great as the volume of milk that the Southeast. The Director of the in the Southeast as a result of is pooled from other areas. There is Missouri Department of Agriculture consolidation. For December 1996, Class common cooperative association contended that southern Missouri has I utilization for the Southeast market membership within the marketing area. the largest concentration of milk was 73.4 percent based on 339,275,000 The addition of northwest Arkansas production in the state and serves as the pounds of producer milk used in Class and southern Missouri to the marketing reserve supply for southeastern markets. I out of 462,455,000 total producer milk area is primarily in response to The Missouri Farm Bureau Federation pounds. comments received during the public also suggested including some southern comment period. The association that Missouri counties with the Southeast. Other Plants exists between these 2 areas, the One producer also supported including Also located within the Southeast Southeast marketing area, and the southern Missouri in the Southeast marketing area during May 1997 are 37 proposed Central market should Marketing Area. supply or manufacturing plants: 1 in continue to be monitored throughout It appears that a substantial amount of Kentucky, 5 in Alabama (including 1 in the reform process. the milk supply pooled under the Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4851

Southeast order has been shifted from the commenters. The commenters The east-to-west distance across the Texas to Missouri. Between December claimed that due to its heat, humidity proposed marketing area is 1996 and May 1997 the percentage of and rainfall, milk production conditions approximately 450 miles, from locations milk pooled under the Southeast order in eastern Texas have more in common on the eastern edge of the area in that was produced in Texas declined with the Southeast than with the western Pennsylvania to the border of from over 10 percent to under 7 percent. Southwest area. The dry climate of Indiana and Illinois. Northwest to During the same time period, the Central Texas and New Mexico permits southeast, from Marquette, Michigan, in Missouri share of the Southeast pool dairies to become much larger and the Upper Peninsula to the northeast increased from 10 percent to 15 percent. produce 10–15% more milk per cow, at area of Kentucky in the marketing area This shift may reflect a change in the a lower cost than East Texas producers is just over 800 miles. From the relative price relationships between the are able to achieve. This issue is northern tip of lower Michigan to Southeast, Texas and Southwest Plains discussed in detail under the southern Indiana the more direct north- orders, which could be subject to description of the proposed south distance is 530 miles. change in the opposite direction in the consolidated Southwest market area. The proposed Mideast marketing area future. While the percentage of southern is contiguous to 3 other proposed Missouri milk pooled under the Mideast consolidated marketing areas. The Southeast order increased from less than The proposed consolidated Mideast proposed Central marketing area would one-third to nearly one-half, less than marketing area is comprised of the provide the western border of the one-half of the volume pooled on the current Ohio Valley (Order 33), Eastern Mideast marketing area along the Southeast order is actually delivered to Ohio-Western Pennsylvania (Order 36), Indiana-Illinois border, and the Southeast plants, with over half of the Southern Michigan (Order 40), part of proposed Appalachian area would volume being diverted to manufacturing the Michigan Upper Peninsula (Order provide the southern boundary. The plants in Missouri, Illinois, Minnesota 44), and Indiana (Order 49) marketing western end of Michigan’s Upper and Wisconsin. areas plus 6 currently unregulated Peninsula, part of the proposed Upper Production pooled under the Indiana counties, 2 whole and 3 partial Midwest area, would adjoin the Mideast Southeast order from the northwest currently unregulated Michigan portion of the Upper Peninsula. Arkansas counties located in the current counties, and 6 whole and 3 partial In terms of physical geography, most Southwest Plains marketing area currently unregulated Ohio counties. of the proposed Mideast marketing area increased from less than 10 percent of There would be 304 whole and 2 partial is at low elevations, and relatively flat. those counties’ production in December counties in this proposed area. The climate and topography are 1996 to about 13 percent in May 1997. favorable to milk production, with dairy Arkansas milk represented 5 percent of Geography being the number one agricultural the total milk pooled under the The Mideast market is described commodity in terms of financial receipts Southeast order in December 1996, and geographically as follows: in the State of Michigan in 1996. Dairy just under 6 percent in May 1997. Indiana—72 counties (64 currently in also ranks high in terms of financial The commenters state that if the Order 49, 2 currently in Order 33, and receipts in the rest of the area; 3rd in portions of Arkansas and Missouri that 6 currently unregulated on the western Ohio and West Virginia, and 5th in currently are in the Southwest Plains edge of the State, just south of the Indiana. marketing area are shifted to the northwest corner). Population Southeast order area, the route Kentucky—18 counties (all currently disposition by distributing plants in Order 33). According to July 1, 1996, population located within this area would become Michigan—77 counties. Two whole estimates, the total population in the in-area dispositions from Southeast pool and 3 partial counties currently are proposed marketing area is 31 million. distributing plants. The most recent unregulated. The rest of the area The 34 MSAs in the proposed Mideast information available shows that more currently is included in Orders 40, 44, marketing area include 79.2 percent of than half of the dispositions from the 49, and 33. Of the total 83 Michigan the area’s population. Over 55 percent three plants in question would be counties, only 6 in the western end of of the area’s population is contained in within the Southeast marketing area if the Upper Peninsula are not included in the 8 most populous MSAs, which each the area in which they are located were the proposed Mideast marketing area. have over 950,000 people. Two-thirds of part of the Southeast area. Ohio—all 88 counties. Six whole and the population is located in the states of Several commenters also suggested 3 partial counties currently are Michigan and Ohio. that the proposed consolidated unregulated. The rest of the State The Mideast area’s largest and 7th Appalachian order area (the current currently is included in Orders 33 and largest of the 34 MSAs are located in Carolina and Louisville-Lexington- 36. Michigan. Detroit-Ann Arbor-Flint, with Evansville areas and the former Pennsylvania—12 whole and 2 partial 5.1 million population, is the largest Tennessee Valley area) be combined counties, currently in the Order 36 area. MSA, and is located in the southeast with the Southeast marketing area West Virginia—37 counties; 20 portion of the state between Lakes because of a common procurement area currently in Order 33, 17 currently in Huron and Erie. Grand Rapids- in south central Kentucky for the Order 36. Muskegon-Holland is the 7th largest Southeast and Tennessee Valley The proposed Mideast marketing area Mideast MSA, is located approximately markets, causing different blend prices lies directly south of the Great Lakes, 150 miles west-northwest of Detroit, and to exist. This issue is discussed in some with the State of Michigan enclosed on has a population of 1 million. These two detail under the description of the the east and west sides by Lakes Huron MSAs contain two-thirds of the proposed consolidated Appalachian and Michigan. On the eastern border of population of Michigan. There are 5 market. the marketing area, between the other MSAs in Michigan. Three have A number of comments from east proposed Mideast and Northeast approximately 400,000 population each, Texas suggested combining that portion marketing areas, is Pennsylvania State- and the other two average of Texas with the Southeast marketing regulated territory and the Allegheny approximately 150,000 apiece. Eighty- area to resolve inequities identified by and Appalachian Mountains. four percent of the population of 4852 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Michigan is located in these 7 MSAs, all distributed by 20 handlers fully million pounds each during December in the lower half of southern Michigan. regulated under other orders. An 1996, and 1 county pooling over 40 Four of the 8 largest Mideast MSAs additional 1.9 million pounds was million pounds. A smaller production are located in the State of Ohio. These distributed by 8 handlers that would be area in Ohio is located in the central are: (1) Cleveland-Akron, the second- partially regulated under the proposed portion of the western edge of the State largest, with a population of 2.9 million, Mideast order, 6 handlers that would be within 80 miles of the Dayton MSA, and located on Lake Erie in northwestern regulated under other consolidated includes two counties with over 10 Ohio; (2) Cincinnati-Hamilton, OH-KY- orders and 2 under the proposed million pounds production and 1 IN, the 4th largest, with a population of Mideast order. One million eight county with over 20 million. The only 1.9 million, located in the southwest hundred thousand pounds was population centers of the marketing area corner of Ohio; (3) Columbus, the 6th distributed by producer-handlers, and that do not appear to have adequate largest, with a population of 1.4 million, less than 1 million pounds by 2 supplies of nearby milk are Indianapolis located approximately midway between handlers that would be exempt under and Cincinnati, in the southern portion Cincinnati and Cleveland; and (4) this proposed rule on the basis of each of the area. Dayton, the 8th largest, with a having less than 150,000 pounds of Distributing Plants—Route Distribution population of .95 million. route disposition per month. There are 6 additional MSAs in Ohio, Using distributing plant lists included 2 with populations of approximately .6 Milk Production in both the Preliminary and Revised million each, 1 with a population of .4 In December 1996, over 12,000 Preliminary Reports, with the pooling million, and 3 that average just over producers from 376 counties in 11 states standards used in the Revised 150,000 each. Eighty-one percent of the pooled 1.1 billion pounds of milk on Preliminary Report adjusted to 30 population of Ohio is located in MSAs, Federal Orders 33, 36, 40, 44 and 49. percent of route dispositions as in-area most in the northern part of the State. Over 90 percent of this producer milk sales, updated for known plant closures The third-largest MSA in the Mideast came from Mideast marketing area through May 1997, 78 distributing area is Pittsburgh, Pennsylvania, with a counties. The States of Indiana, plants would be expected to be population of 2.4 million. Pittsburgh is Michigan, Ohio and Pennsylvania associated with the Mideast marketing 127 miles southeast of Cleveland. There supplied 93 percent of the milk (13%, area, including 56 fully regulated are two smaller MSAs in the 37.9%, 30.4% and 11.6%, respectively), distributing plants (55 currently fully Pennsylvania portion of the proposed with 89 percent coming from counties regulated, and 1 currently partially Mideast marketing area, having an that would be in the proposed Mideast regulated), 4 partially regulated (all average population of about 200,000 area. Just over two-thirds of the milk currently partially regulated), 2 exempt each. Eighty-seven percent of the pooled under these orders was plants that would have less than population of the Pennsylvania portion produced in Michigan and Ohio 150,000 pounds of total route of the Mideast area is located in MSAs. counties located within the proposed disposition per month (both currently Indianapolis, Indiana, is the 5th consolidated marketing area. fully regulated), and 16 producer- largest MSA in the proposed Mideast Other states pooling milk on the handlers (all currently producer- marketing area, with a population of 1.5 orders proposed to be consolidated in handlers). Four of these 78 distributing million. Indiana contains 9 additional the proposed Mideast area were Illinois plants would not be in the marketing MSAs, 2 with populations of .5 and .6 (1.4%), Kentucky (0.5%), Maryland area, including 3 partially regulated million, and 7 others that average (0.4%), New York (2.5%), Virginia plants (all currently partially regulated) 155,000 population. All but 2 of the 9 (0.1%), West Virginia (1.0%), and and 1 producer-handler (currently a smaller MSAs are located north of Wisconsin (1.2%). These states producer-handler). Since October 1995, Indianapolis. Seventy-four percent of contributed a total of 7.2 percent of the 8 distributing plants (3 in Pennsylvania, the population of the portion of Indiana milk pooled on the 5 orders. 2 in Ohio, 1 in West Virginia, 1 in that is in the proposed Mideast area is Sixty-three of the counties that had Indiana and 1 in Michigan), have gone located in MSAs. production pooled under the five out of business. The portion of West Virginia that is current orders supplied more than 5 There would be 43 distributing plants within the proposed Mideast area million pounds of milk each during in the 8 Mideast MSA’s that each have contains 4 MSAs, 3 of which are located December 1996. Seven of the counties over a million people (including on the West Virginia-Ohio border, along were in northern and northeast Indiana, Dayton-Springfield which has .95 the Ohio River. The population of these over 100 miles from Indianapolis; 11 million). Twenty-nine of these plants MSAs averages just over 200,000. Forty- were in western Pennsylvania—7 of would be pool plants—6 in the five percent of the population of the them within 100 miles of Pittsburgh, Pittsburgh area, 6 in the Detroit area, 4 West Virginia portion of the proposed and the others, including those with the each in the Grand Rapids and Cleveland Mideast area is located in MSAs. most production (10–25 million areas, 3 each in the Indianapolis and pounds), in the northwest corner of the Cincinnati areas, 2 in Columbus and 1 Fluid Per Capita Consumption state. Twenty-six Michigan counties in Dayton. Eleven of the plants in the Estimates of fluid per capita pooled more than 5 million pounds large MSA areas would be producer- consumption within the proposed each under the 5 orders, including 15 handlers, 2 would be exempt on the Mideast area vary from 18.75 pounds counties with more than 10 million basis of having less than 150,000 per month for Michigan to 20.4 pounds pounds and 2 counties with more than pounds of milk per month in Class I per month for Indiana. Use of 19 pounds 25 million pounds. All of these counties route dispositions, and 1 partially per month as a weighted average results are located within 110 miles of Detroit regulated. in an estimated 588 million pounds of or Grand Rapids, the two largest MSAs Of the remaining 31 distributing fluid milk consumption for the Mideast in Michigan. The heaviest milk plants located in the marketing area, 19 marketing area. Mideast handlers’ route production area of Ohio is the northeast would be located in other MSA’s as disposition within the area during quadrant of the State and within 50 follows: 5 pool plants and 1 producer- October 1995 totaled 537 million miles of the Akron-Cleveland MSA, handler in Ohio; 5 pool plants in pounds, with another 27 million including 6 counties supplying over 10 Indiana; 4 pool plants in Michigan; 2 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4853 pool plants in Pennsylvania; 1 pool The Mideast is one of two proposed boundaries, and multiple component plant in Kentucky; and 1 pool plant in consolidated marketing areas that would pricing are all criteria that support the West Virginia. Twelve of the remaining have a significantly higher-than-average consolidation of these current order distributing plants would not be located percentage of its milk used in Class II. areas into a consolidated Mideast in MSA’s. Three of these pool plants Currently, the Southern Michigan, Ohio marketing area. Handlers who would be and 2 producer-handlers would be Valley and Indiana markets have Class fully regulated under the consolidated located in Michigan, 4 pool plants II utilization over 20 percent. When the order distribute approximately 90 would be located in Ohio; 2 pool plants markets are combined the average for percent of their route dispositions would be located in Indiana; and 1 the consolidated market will be just within the proposed marketing area, and producer-handler would be located in under 20 percent. nearly 95 percent of the milk distributed West Virginia. within the marketing area is from Other Plants There are 4 distributing plants that handlers who would be regulated under would not be in the marketing area. Also located within the Mideast the order. These would be 2 partially regulated marketing area during May 1997 were Many of the counties from which milk plants and 1 producer-handler in 59 supply or manufacturing plants: 1 in was pooled on the individual orders Pennsylvania, and 1 partially regulated Charleston, West Virginia, 4 in supplied milk to three or four of those plant in Virginia. Pennsylvania, 18 in Michigan, 9 in orders. For instance, milk from several The in-area route disposition standard Indiana and 27 in Ohio. Nine of the 59 of the same Michigan counties was has been adjusted to 30 percent of total plants are pool plants. Of these pool pooled on the Ohio Valley, Eastern route dispositions from the 15 percent plants, 6 are supply plants—1 Ohio-Western Pennsylvania, Indiana standard that was used for all of the manufactures primarily Class II and Southern Michigan orders; milk suggested consolidated areas in the products, 3 manufacture primarily from a number of the same Indiana Revised Preliminary Report. This powder, and 2 have no primary product, counties was pooled on the Ohio Valley, adjustment has been made to assure that only shipping to distributing plants. Southern Michigan and Indiana State-regulated plants in Virginia and Three pool plants are manufacturing counties; and milk from some of the Pennsylvania that have sales in the plants, manufacturing primarily cheese. same Ohio counties was pooled on the proposed marketing area would not be Of the 50 nonpool plants in the Mideast Ohio Valley, Indiana, and Southern pooled under Federal order regulation. marketing area, one is a supply plant Michigan orders. The Great Lakes serve as natural Utilization that manufactures primarily cheese. The other 49 nonpool plants are boundaries on the northern edge of the According to October 1995 pool manufacturing plants. In this area of area and on the eastern and western statistics for handlers who would be high Class II use, 28 of the nonpool sides of Michigan, as do the mountains fully regulated under this Mideast order, plants manufacture primarily Class II in central Pennsylvania. All of the the Class I utilization percentages for products. In addition, 1 manufactures orders involved in the proposed the Ohio Valley, Eastern Ohio-Western primarily butter, 1 manufactures consolidated Mideast area contain Pennsylvania, Southern Michigan, primarily powder, 27 manufacture multiple component pricing provisions. Michigan Upper Peninsula, and Indiana primarily cheese, and 2 manufacture Although the Southern Michigan markets were 59, 57, 48, 79, and 66 primarily other products. component pricing plan is not the same percent, respectively. Based on There are also two manufacturing as the plan common to the Indiana and calculated weighted average use values plants in the currently-unregulated area the two Ohio orders, interest in for (1) the current order with current use of Ohio—a nonpool plant that adopting the Southern Michigan of milk, and (2) the current order with manufactures primarily Class II component pricing plan has been projected use of milk in the products in the unregulated county of expressed by industry participants in consolidated Mideast order, the Erie, Ohio and a nonpool plant that the other orders. potential impact of this proposed rule manufactures primarily cheese in the Discussion of Comments and on producers who supply the current unregulated area of Sandusky, Ohio. market areas is estimated to be: Ohio Alternatives Valley, a 1-cent per cwt decrease (from Cooperative Associations Comments regarding the Mideast $13.00 to $12.99); Eastern Ohio-Western In December 1995, 18 cooperative region have been received from Pennsylvania, a 10-cent per cwt associations pooled member milk under cooperatives, proprietary handlers, and decrease (from $13.07 to $12.97); the 5 orders proposed to be individual producers throughout the Southern Michigan, an 8-cent per cwt consolidated. One of the cooperatives developmental period of this increase (from $12.75 to $12.83); pooled milk on the four principal rulemaking process, but responses to the Michigan Upper Peninsula, a 20-cent orders, 4 cooperatives had member milk Revised Preliminary Report on Order per cwt decrease (from $12.81 to pooled on 3 of the orders, 2 cooperatives Consolidation focused mostly on the $12.61); and Indiana, a 5-cent per cwt pooled milk on 2 of the orders, and 11 suggested addition of currently non- decrease (from $12.97 to $12.92). The of the cooperatives pooled milk on only Federally regulated territory. Several large decrease for Michigan Upper one of the orders. The percentage of comments supported the addition of Peninsula is because of its current cooperative member milk pooled on Pennsylvania Milk Marketing Board individual handler pool provisions each of the orders varied from 43 (PMMB) Area 6 to the suggested Mideast (very little reserve milk is pooled under percent under Order 36 to 86 percent order area, and one handler urged the Order 44—instead, it is pooled on the under Order 40. Of the total milk pooled addition of currently-unregulated areas Southern Michigan order). For on the 5 orders in December 1995, 78 of Maryland and West Virginia. December 1996, combined Class I percent was marketed by cooperative However, a large number of producers utilization for Orders 33, 36, 40, 44 and associations. whose milk currently is pooled at 49 was 52 percent based on 563.4 PMMB-regulated fluid milk plants, and million pounds of producer milk used Criteria for Consolidation the operators of some of those plants, in Class I out of 1082 million total Overlapping route disposition, argued strenuously that including producer milk pounds pooled. overlapping production areas, natural PMMB Area 6 in the proposed Mideast 4854 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules order would reduce returns to current Upper Midwest (Order 68) and Population Pennsylvania producers unnecessarily Chicago Regional (Order 30) marketing According to July 1, 1996, population without reducing costs to handlers. areas, with the addition of the western estimates, the total population of the For the reasons discussed previously portion of the Michigan Upper proposed Upper Midwest marketing in reference to the Northeast market, Peninsula (Order 44) marketing area. area is approximately 18.5 million. PMMB Area 6 should not be added to There are 205 counties in this proposed Using Metropolitan Statistical Areas the proposed Mideast order area. area. (MSAs), there are 3 population centers Consolidation of the existing orders over 1 million. The Chicago-Gary- does not necessitate expansion of the Geography Kenosha area, primarily in northeastern consolidated orders into areas in which The proposed consolidated Upper Illinois, is the largest, with a 7.8 million handlers are subject to minimum Class Midwest marketing area is described population in the marketing area. The I pricing under State regulation, geographically as follows: 16 counties in Minneapolis-St. Paul area, located especially when the states’ Class I prices Illinois (all currently in Order 30), 6 exceed those that would be established mostly in Minnesota, is next with 2.8 counties in Iowa (all currently in Order million; and the third-largest MSA is under Federal milk order regulation. 68), 6 counties in Michigan (all Handlers located in PMMB areas 2, 3, Milwaukee-Racine, Wisconsin, with a currently in Zones I and IA of Order 44), population of 1.6 million. The Chicago and 6 are regulated under the State of 83 counties in Minnesota (all currently Pennsylvania if they do not have area is located in the southeast corner of in Order 68), 16 counties in North the marketing area, on the west side of enough sales in any Federal order area Dakota (all currently in Order 68), 8 to meet an order’s pooling standards. If the southern end of Lake Michigan, with counties in South Dakota (all currently Milwaukee approximately 85 miles such plants do meet Federal order in Order 68), and 70 counties in pooling standards, the State of north, also along Lake Michigan. Wisconsin (43 currently in Order 30, 20 Minneapolis is located 400 miles Pennsylvania continues to enforce some currently in Order 68, and 7 currently of its regulations in addition to Federal northwest of Chicago, along the unregulated). This market is about 600 Minnesota-Wisconsin border. order regulations. As State-regulated miles east to west and about the same handlers, they must pay a Class I price Approximately two-thirds of the distance north to south. population of the proposed marketing for milk used in fluid products, often The area described above is higher than the Federal order price area is within the three largest MSA’s, contiguous to the proposed Central with over 80 percent of the population would be. Inclusion of the market to the south, a small corner of Pennsylvania-regulated handlers in the contained within the area’s 17 MSA’s the proposed Mideast market to the consolidated marketing area would have (with the 14 smaller MSA’s averaging southeast, and the eastern portion of little effect on handlers’ costs of Class I 195,000 population). Michigan’s Upper Peninsula, also part milk (or might reduce them), while Sixty percent of the population of the of the proposed Mideast market, to the reducing producer returns. In view of market is concentrated in the Illinois northeast. North of the Upper Midwest these situations, it appears that stable and southeast Wisconsin portion of the market is Lake Superior and the and orderly marketing conditions can be marketing area. In Wisconsin, nearly 90 Canadian border, and west of the market maintained without extending full percent of the population is located in is a large sparsely-populated and Federal regulation to State-regulated the southern two-thirds of the state, and unregulated area. Most of the eastern handlers. in Minnesota 85 percent of the Comments from a large cooperative border of the marketing area is Lake population is in the southern half of the association and a fluid handler urged Michigan. state. The proposed Upper Midwest that southern Ohio and part of West Fluid Per Capita Consumption Virginia be included in the proposed marketing area is generally low-lying, Appalachian order to assure that a large with some local differences in elevation Based on the population figure of 18.5 distributing plant located in Winchester, in Wisconsin and the upper peninsula million and an estimated per capita Kentucky, remains pooled under the of Michigan. Natural vegetation in the fluid milk consumption rate of 20 consolidated Appalachian order. Both western part of the area is tall-grass pounds of fluid milk per month, total comments argued that order provisions prairie, with the eastern two-thirds of fluid milk consumption in the proposed should specify that plants be regulated the northern portion being broadleaf Upper Midwest marketing area is according to their location rather than forest, coniferous forest, and mixed estimated at 370 million pounds per their fluid milk distribution area. The broadleaf and coniferous forest. Annual month. Plants that would be fully pooling provisions proposed herein precipitation averages 30–35 inches per regulated distributing plants under the would assure that plants are regulated year. Most of the area experiences Upper Midwest order had route where located unless their route summer temperatures that average about disposition within the market of 321.5 disposition within another marketing 75 degrees; the northern and western million pounds in October 1995. The 3 area is over 50 percent. This provision portions average winter temperatures producer handlers operating in the should assure that the plant in question are in the low ’teens, while the southern combined marketing areas during this remains regulated under the proposed and more eastern portions experience month had a combined route Appalachian order. If a plant’s route average winter temperatures in the 20’s. disposition of .1 million pounds, 5 disposition in a marketing area other The far western part of the market partially regulated handlers distributed than where it is located is over 50 predominantly grows mixed field crops, 1.7 million pounds in the marketing percent, other handlers competing for with cattle and soybeans more to the area, and an additional .1 million sales with that handler should be southwest. Both Minnesota and pounds was distributed by unregulated assured that their competitor is paying Wisconsin are included in the top five handlers. Twenty handlers fully a like amount for its milk. milk-producing states, and dairy is the regulated under 10 other Federal orders, number 1 agricultural enterprise in from New York-New Jersey to Great Upper Midwest Wisconsin, generating over half of the Basin, distributed 36.5 million pounds The proposed Upper Midwest State’s income derived from agricultural in the combined marketing areas during marketing area is comprised of the commodities. October 1995. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4855

Milk Production plants and 1 partially regulated plant). plants, or have a ‘‘pool side.’’ Eighty- In December 1996, 2.2 billion pounds Of the remaining 21 distributing plants, five of the 105 pool plants (1 in Iowa, of milk were pooled in the proposed 14 are located in other MSAs as follows: 4 in Illinois, 16 in Minnesota and 64 in Upper Midwest market from more than 4 pool plants in Minnesota, 2 pool Wisconsin) are ‘‘split plants;’’ that is, 27,700 producers located in 10 states plants in North Dakota, 1 pool plant in one side of a plant is a manufacturing from Tennessee to Minnesota, and from Illinois, and 6 pool plants and 1 facility and the other side receives and South Dakota to Michigan. However, partially regulated plant in Wisconsin. ships Grade A milk, and accounting is over 95 percent of the producer milk Seven of the remaining distributing done separately. In most cases, the plants are not located in MSAs: 2 pool nonpool portion of such a plant is a was produced within the proposed plants in Minnesota, 2 partially manufacturing operation, primarily marketing area, and 93.4 percent was regulated plants in North Dakota, 1 cheese-making. Most of the other pool produced within the states of Wisconsin producer-handler and 1 exempt plant plants are pool supply plants, located and Minnesota. As with population (less than 150,000 pounds of total route primarily in Wisconsin, that ship milk density and milk plant density, most distribution per month) in Wisconsin to pool distributing plants. milk production in Minnesota and and 1 pool plant in Michigan. The 196 nonpool plants in the Wisconsin occurs in the southern parts proposed Upper Midwest marketing of these states. Over 82 percent of Utilization area are manufacturing plants—103 Wisconsin milk pooled under the According to October 1995 pool manufacture primarily cheese, 16 combined Chicago Regional-Upper statistics for handlers who would be manufacture primarily Class II products, Midwest orders in December 1996 was fully regulated under this Upper 15 manufacture primarily butter, 23 produced in the southern two-thirds of Midwest order, the Class I utilization manufacture primarily milk powders, the State, while 84 percent of the percentages for the Chicago Regional and 39 manufacture primarily other Minnesota milk pooled under the two and Upper Midwest were 30 and 46 products. orders was produced in the southern percent, respectively. Based on Also associated with the Upper half of Minnesota. calculated weighted average use values Midwest order, but not within the Forty counties, 3 in Iowa, 12 in for (1) the current order with current use marketing area, are 2 pool supply plants Minnesota, and 25 in Wisconsin supply of milk, and (2) the current order with and 6 manufacturing plants (3 pool milk to both the current Chicago projected use of milk in the manufacturing primarily cheese, 2 Regional and Upper Midwest orders. consolidated Upper Midwest order, the making Class II products, and 1 butter The largest part of the common potential impact of this proposed rule plant) in North Dakota. production area is in Wisconsin, where on producers who supply the current 25 counties supply 25 percent of the market areas is estimated to be: Chicago Cooperative Associations milk pooled under Order 30, and 27 Regional, no change ($12.62 in both In December 1995, 67 cooperative percent of the milk pooled under Order cases), and Upper Midwest, a 1-cent per associations pooled member milk on the 68. When data for the 40 counties is cwt increase (from $12.55 to $12.56). Chicago Regional and Upper Midwest combined, 26 percent of the Chicago However, a substantial amount of milk orders, providing 83 percent of the milk Regional pool and 39 percent of the was omitted from both pools for October pooled under the two orders. Seventy- Upper Midwest pool is supplied by this 1995 because of unusual class price six percent of the milk pooled under common production area. relationships. Annual Class I utilization Order 30 and 93.9 percent of the milk Distributing Plants—Route Distribution percentages may be considered more pooled under Order 68 was supplied by representative for these markets. For the cooperative associations. Eight of the Using distributing plant lists included year 1996, the annual Class I utilization cooperatives marketed milk in both in both the Preliminary and Revised percentage for the Chicago Regional orders, accounting for nearly two-thirds Preliminary Reports and the pooling market was 20.4, with 19.6 for the of the milk pooled in the Upper standards used in the Revised Upper Midwest. The Class I use Midwest (and 68.8 percent of the Preliminary Report, updated for known percentage for the Michigan Upper cooperative member milk), and 42.5 plant closures through May 1997, 37 Peninsula market, which has a percent of the milk pooled in the distributing plants would be expected to individual handler pool and represents Chicago Regional market (55.9 percent be associated with the Upper Midwest a very small portion of the producer of total cooperative member milk). In marketing area, including 29 fully milk that would be expected to be the two markets, 15 cooperatives pooled regulated distributing plants (3 pooled under the proposed consolidated milk only under Order 30, and 44 currently partially regulated and 26 order, was 78.3 percent. It is estimated cooperatives pooled milk only under currently pool plants), 4 partially that the Class I use percentage for the Order 68. regulated (3 currently partially regulated consolidated order would be in the Criteria for Consolidation and 1 currently fully regulated), 1 neighborhood of 20 percent. unregulated (currently partially As suggested in the initial Preliminary regulated), 2 producer-handlers, and 1 Other Plants Report on Order Consolidation, the exempt plant (currently unregulated, Located within the proposed Chicago Regional and Upper Midwest with less than 150,000 pounds of total consolidated Upper Midwest marketing marketing areas should be combined, route disposition per month). Since area during May 1997 were 301 supply with the addition of the western end of October 1995, one distributing plant in or manufacturing plants: 1 in South Michigan’s Upper Peninsula, into a Wisconsin has gone out of business. Dakota, 3 in Iowa, 28 in Illinois (12 in consolidated Upper Midwest Federal There would be 7 distributing plants the Chicago area), 39 in Minnesota (over order marketing area. Although these in the Chicago area (5 pool plants, 1 three-quarters of which are located in areas do not have a considerable degree producer-handler, and 1 unregulated the southeastern quarter of the State), of overlapping fluid milk disposition, plant). The Milwaukee-Racine area and 230 in Wisconsin (over 90 percent they do have an extensive overlapping would have 2 pool distributing plants. of which are scattered throughout the procurement area. Handlers regulated There would be 7 distributing plants in southern three-quarters of the state). under both of the principal markets the Minneapolis-St. Paul area (6 pool One hundred five of the plants are pool distribute milk into more southern 4856 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules markets, and approximately 10 percent areas, and to the inclusion of the 3 total that would be pooled under the 11 of the fluid milk distributed within the additional areas with the Upper orders. Based on these considerations proposed area is distributed by handlers Midwest. Producer organizations and comments received, the extent of regulated under other orders. However, operating principally in the proposed the proposed Upper Midwest marketing these other order areas are more closely Upper Midwest consolidated area area should be limited to the areas of the related to markets to the south than to argued that additional Class I use current Chicago Regional and Upper the proposed Upper Midwest order area. should be included in the area to Midwest marketing areas, with the On that basis, it is more appropriate to enhance blend prices to producers. addition of the western part of the include them in other consolidated Producer organizations and handlers Michigan Upper Peninsula marketing marketing areas. operating in the other 3 areas, area. Other aspects of the proposed particularly Iowa, argued that inclusion Central consolidation also fit the criteria set of those areas with the 2 upper midwest forth. The proposed Upper Midwest order areas would severely affect Iowa The proposed Central order marketing area is bounded on three sides by Lakes handlers’ ability to attract a sufficient area consolidates the current 8 Federal Michigan and Superior, the supply of milk, and that the milk pooled order marketing areas of Central Illinois, international border with Canada, and a on those orders from Minnesota and most of Southern Illinois-Eastern large unregulated area. A significant Wisconsin is not needed to meet Iowa Missouri, most of Southwest Plains, portion of both markets’ milk is handlers’ Class I needs, but is pooled on Greater Kansas City, Iowa, Eastern supplied by the same cooperative the Iowa market to obtain the higher South Dakota, Nebraska-Western Iowa, associations. The markets have identical blend price. and Eastern Colorado (Federal orders multiple component pricing plans, and The addition to the consolidated 50, 32, 106, 64, 79, 76, 65, and 137, both have large reserves of milk that Upper Midwest marketing area of respectively). Moving to the proposed normally is used in manufactured marketing areas with higher Class I use Southeast marketing area are 6 Missouri products, primarily cheese. for the sole purpose of increasing the counties currently in Federal order 32 Approximately 90 percent of the milk Upper Midwest Class I utilization and, from Order 106, 11 northwest used in manufacturing in these markets percentage and Upper Midwest Arkansas counties and 22 whole and 1 is used to make cheese. The amount of producer returns is not consistent with partial (Pulaski County) southern cheese manufactured from milk pooled the criteria examined to determine Missouri counties. Order 106 counties under these milk orders is enough to defensible order consolidations. The in Kansas and Oklahoma would remain supply a population 3 times greater than numerous markets recommended by in the Central market, as suggested in that of the proposed consolidated upper midwest producer groups to be the 2 preliminary reports. In addition, marketing area. Fluid milk handlers in consolidated with the Chicago Regional some counties in Colorado, Illinois, both markets must compete with cheese and Upper Midwest order areas have Iowa, Kansas, Missouri and Nebraska manufacturers for a milk supply, and very little distribution or procurement that currently are not part of any order marketing order provisions for both overlap with those areas, aside from area would be included in the proposed markets must provide for attracting an occasional need for reserve milk Central market. There are 565 whole adequate supply of milk for fluid use. supplies. When reserve supplies are counties and 3 partial counties in this needed by the other markets, upper Discussion of Comments and proposed area. midwest milk can be, and is, pooled on Alternatives the more southern markets and shares in Geography Comments received before issuance of their pools. The potential gain of adding The proposed Central marketing area the Revised Preliminary Report on areas recommended by upper midwest would include the following territory: Order Consolidation largely favored the producer groups would be much less Colorado—33 counties in eastern consolidation of ten marketing areas— than the loss to producers whose milk Colorado, including the 30 Colorado Federal orders 30, 32, 44, 49, 50, 64, 65, is pooled under orders proposed to be counties currently in the Eastern 68, 76, and 79. The Revised Report consolidated in the Central, Mideast and Colorado marketing area, and adding 3 suggested the addition of 3 order areas Appalachian marketing areas. currently-unregulated counties in the (Eastern South Dakota, most of For example, if 9 nearby marketing southeast corner of the state between the Nebraska-Western Iowa, and Iowa) to areas were combined with the Upper Eastern Colorado and Southwest Plains the earlier suggestion of consolidating Midwest and Chicago Regional areas, marketing areas. the Chicago Regional and Upper the combined utilization for the 11 Illinois—88 counties, including the 6 Midwest areas. The revised markets would be about 10 percentage counties (4 entire and 2 partial) configuration would have increased the points higher than that for the 2 currently in the Iowa marketing area, population and Class I use of the markets, and the blend price could be the 19 counties currently in the Central consolidated Upper Midwest area. Any expected to increase by approximately 7 Illinois marketing area, the 49 counties increase in a consolidated marketing cents per hundredweight. At the same currently in the Southern Illinois- area that would include the Chicago time, the percentage Class I utilization Eastern Missouri marketing area and 8 Regional and Upper Midwest order for the other markets that would be currently-unregulated adjacent counties areas could not be justified on the basis affected would be reduced by an average in southern Illinois, and 6 currently- of the criteria of overlapping sales and of 26 percentage points and by as many unregulated counties in western Illinois procurement areas beyond the addition as 54 percentage points, resulting in an located between the current Central of the three areas suggested to be added average reduction in the blend price of Illinois and Southern Illinois-Eastern in the Revised Consolidation Report. 27 cents, and as much as 54 cents, per Missouri order areas and the Mississippi Addition of the five orders advocated by hundredweight. These results occur River. the cementers is not supported on the because, with the addition of 9 other Iowa—93 counties and the City of basis of any data available. orders, the combined volume of milk Osage in Mitchell County; including the After issuance of the Revised Report pooled under the Upper Midwest and 68 counties and the City of Osage a number of objections were received, Chicago Regional markets would currently in the Iowa marketing area, both to the addition of only 3 more represent nearly three-quarters of the the 17 counties currently in the Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4857

Nebraska-Western Iowa marketing area, Indiana-Illinois border to Denver, population gain of the marketing area the 1 county currently in the Eastern Colorado, is approximately 1,000 miles. from the addition of previously- South Dakota marketing area, 6 Geographically, the Central marketing unregulated territory. Plants that would currently unregulated counties in the area includes a wide range of be fully regulated distributing plants in northwestern part of Iowa, and 1 topography and climate types, ranging the Central order, including 3 plants currently unregulated county in the from the foothills of the Rocky operated by one handler that currently southeastern corner of Iowa. Mountains on the west to the central are fully regulated under the Southwest Kansas—the entire State (105 section of the Mississippi River Valley Plains order (Order 106) but are counties). toward the eastern part of the area. expected to be regulated under the Minnesota—the 4 southwestern Precipitation ranges from less than 15 proposed Southeast market pool, had Minnesota counties that currently are in inches per year in Denver, Colorado, to route disposition within the eight the Eastern South Dakota marketing more than 30 inches at St. Louis, marketing areas included in the area. Missouri. Most of the area experiences consolidated Central area of 384.2 Missouri—45 counties and 1 city, fairly hot summer temperatures, while million in October 1995. It is likely that including 6 counties and 1 city that winter temperatures vary somewhat most of the milk distributed within currently are in the Southern Illinois- more than summer, with colder winter formerly unregulated areas by Central Eastern Missouri marketing area, the 20 temperatures occurring in the northern order handlers would be distributed counties that currently are in the Greater part of the Central area. Much of the within the consolidated Central Kansas City marketing area, the 5 nation’s cornbelt is included within the marketing area. The 10 producer- counties that currently are in the Iowa Central area, with significant wheat- handlers operating in the Central market marketing area; and 14 currently- growing areas in western Kansas. The during October 1995 had a combined unregulated counties distributed around natural vegetation ranges from short route disposition of 2.2 million pounds, the center area proposed to remain grass prairie in eastern Colorado partially regulated plants and plants unregulated. through tall grass prairie in eastern that would be exempt distributed 3 Nebraska—66 counties in the South Dakota, Nebraska, Kansas and million pounds in the marketing area, southern and eastern parts of Nebraska; Oklahoma, and much of Illinois; to and other order plants distributed 22.2 broadleaf forest on both sides of the omitting the 11 counties in the million pounds during October 1995. Mississippi River. panhandle that currently are part of the Milk Production Nebraska-Western Iowa marketing area, Population In December 1996, 1.1 billion pounds and adding 5 currently-unregulated According to July 1, 1996, population of milk were pooled under the orders counties in the southwest corner of the estimates, the total population in the consolidated in the proposed Central State between the Nebraska-Western proposed Central marketing area is market (including all of the milk pooled Iowa and Eastern Colorado marketing approximately 21 million. Using under Orders 32 and 106) from more areas and 3 currently-unregulated Metropolitan Statistical Areas (MSAs), than 10,000 producers located in 21 counties in the southeast corner of the there are four population centers over 1 states from Idaho to Tennessee, and State between the Nebraska-Western million. The St. Louis, Missouri/Illinois, from Texas to Minnesota. Seventy-four Iowa and Greater Kansas City marketing area is the largest, with over 2.5 million percent of the producer milk was areas. population, and the Denver-Boulder- produced within the proposed Oklahoma—the entire State (77 Greeley, Colorado, area is next with marketing area. The states contributing counties). approximately 2.3 million. Kansas City, the most producer milk were, in South Dakota—the 26 eastern South Missouri/Kansas, has a population of descending order of volume, Iowa, Dakota counties (including the portion 1.7 million, and Oklahoma City, Missouri, Colorado, Kansas, Oklahoma of Union County that currently is in the Oklahoma, is just over 1 million. and Illinois. However, over 80 percent Nebraska-Western Iowa marketing area) Approximately one-third of the of the Missouri producer milk came that currently are in the Eastern South population of the proposed marketing from farms in counties which are Dakota marketing area. area is within these four largest MSAs, included in the proposed consolidated Wisconsin—the 2 southwest with nearly two-thirds of the population Southeast marketing area. These 6 States Wisconsin counties that currently are in contained within the area’s 31 MSA’s accounted for 71 percent of the the Iowa marketing area. (with the 27 smaller MSAs averaging producer milk pooled under the eight The proposed Central marketing area 230,786 population). The Colorado current orders proposed to be is adjacent to the proposed Upper portion of the proposed marketing area consolidated. All of the states having Midwest consolidated order area on the has 93.6 percent of its population substantial portions of their areas in the north and northeast, the proposed concentrated in 4 MSA’s. The Missouri proposed Central market contribute Mideast and Appalachian areas on the portion has 89 percent. producer milk to at least two of the east, and the northwest corner of the current eight individual orders, with Fluid Per Capita Consumption Southeast order area and the proposed four of the states (Iowa, Kansas, Southwest area on the south. The Rocky Based on the population figure of 21 Missouri, and Nebraska) supplying milk Mountains and some unregulated area million and a per capita fluid milk to five of the order areas each. form a natural barrier on the west consumption rate of 19 pounds of fluid between this proposed marketing area milk per month (a weighted average Distributing Plants—Route Distribution and the proposed Western area. The based on state populations in the Using distributing plant lists included area north of approximately the western marketing area and fluid per capita in both the Preliminary and Revised third of the proposed Central area also consumption estimates for each state), Preliminary Reports and the pooling is unregulated. The north-south distance total fluid milk consumption in the standards used in the Revised covered by the area is approximately proposed Central marketing area would Preliminary Report, updated for known 800 miles, from Watertown, South be approximately 400 million pounds plant closures through May 1997, 54 Dakota, to Ardmore, Oklahoma. The per month, including 11.7 million distributing plants would be expected to east-west extent of the area, from the pounds associated with the net be associated with the Central marketing 4858 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules area, including 34 fully regulated percentage of just over 50 percent Cooperative Associations distributing plants (one currently (including the utilization of the 3 plants Twenty-six cooperative associations unregulated and the remainder that would be included in the Southeast pooled milk in December 1995 under currently pool plants), 2 partially marketing area). the eight orders proposed to be Based on calculated weighted average regulated (1 currently partially regulated consolidated in the proposed Central use values for (1) the current order with and 1 currently unregulated), 2 exempt market. Of these cooperatives, 1 pooled current use of milk, and (2) the current plants (both currently are pool plants milk under 6 of the orders, 1 under 5 order with projected use of milk in the but have less than 150,000 pounds of orders, 3 cooperatives associated consolidated Central order, the potential total route disposition per month), 11 producer milk with 3 orders each, and producer-handlers (all currently impact of this proposed rule on 3 others pooled milk under 2 orders producer-handlers), 1 unregulated producers who supply the current each. Eighteen of the 26 cooperatives (located in the unregulated central market areas is estimated to be: pooled milk under only one order, and portion of Missouri), and 4 government Southern Illinois-Eastern Missouri, a 12- for 11 of these organizations that was agency plants (all currently government cent per cwt decrease (from $13.00 to the Iowa order. agency plants). Since October 1995, it is $12.88); Central Illinois, a 21-cent per The percentage of cooperative milk known that 4 distributing plants (all of cwt decrease (from $13.03 to $12.72); pooled under the eight orders was 93.6, which were fully regulated—2 in Greater Kansas City, a 34-cent per cwt with a range of 80.6 percent cooperative Illinois, 1 in Iowa, and 1 in Oklahoma) decrease (from $13.22 to $12.88); milk under the Southwest Plains order have gone out of business. Nebraska-Western Iowa, a 16-cent There would be 10 distributing plants increase (from $12.63 to $12.79); Eastern to 100 percent cooperative member milk in the Denver area (7 pool plants and 3 South Dakota, a 14-cent decrease (from under the Central Illinois, Greater partially regulated plants). The Kansas $12.81 to $12.67); Iowa, a 1-cent Kansas City and Eastern South Dakota City area would have 1 pool distributing decrease (from $12.71 to $12.70); and orders. plant. The St. Louis area would have 5 Southwest Plains, a 21-cent increase Criteria for Consolidation distributing plants (4 pool plants and 1 (from $13.08 to $13.29). The weighted Most of the criteria used in exempt plant). There would be 1 pool average use value for the consolidated determining the optimum consolidation distributing plant and 1 partially Central order market is estimated to be regulated plant in the Oklahoma City $12.95 per cwt. of order areas apply to the proposed area. Of the remaining 36 distributing Central marketing area. The Federal Other Plants plants, 16 are located in other MSAs as order markets proposed to be follows: 1 pool plant and 1 producer- Also located within the Central consolidated in the Central area are handler in Colorado; 2 pool plants in marketing area during May 1997 were strongly related to each other through Illinois; 4 pool plants, 1 producer- 83 supply or manufacturing plants: 7 in overlapping route disposition. The great handler and 1 exempt plant in Iowa; 1 Colorado (4 in the Denver area), 15 in majority of sales by handlers who would pool plant in Kansas; 3 pool plants in Illinois (2 in the Decatur area), 23 in be regulated under the proposed Central Nebraska; 1 producer-handler in Iowa (2 in the Des Moines area and 1 in order are distributed within the Oklahoma; and 1 pool plant in South the Dubuque area), 6 in Kansas, 7 in proposed marketing area, and the Dakota. Missouri (5 in the St. Louis area), 7 in markets proposed to be consolidated Twenty of the remaining distributing Nebraska, 7 in South Dakota (1 in the have a greater relationship in terms of plants are not located in MSAs. They Sioux Falls area), 4 in Oklahoma (1 in overlapping sales areas than with any are: 1 government agency plant in the Tulsa area), and 7 in Wisconsin. other markets. In addition, sales within Colorado; 4 pool plants and 1 Twenty-two of the 83 plants are pool the currently-unregulated areas government agency plant in Illinois; 1 plants, or have a ‘‘pool side.’’ Twelve of proposed to be included in the pool plant and 1 producer-handler in the 22 pool plants (6 in Iowa, 1 in consolidated Central area are Iowa; 1 pool plant and 1 government Nebraska, 2 in South Dakota, and 3 in overwhelmingly from handlers that agency plant in Kansas; 1 unregulated Wisconsin) are ‘‘split plants;’’ that is, would be pooled under the proposed and 2 producer-handlers in Missouri; 1 one side of a plant is a manufacturing Central order. Inclusion of these areas producer-handler in Nebraska; 2 pool facility, and the other side receives and would reduce handlers’ burden of plants in Oklahoma; 1 partially ships Grade A milk, and accounting is reporting out-of-area sales and take in regulated and 1 government agency done separately. In most cases, the pockets of currently-unregulated plant in South Dakota; and 1 pool and nonpool portion of such a plant is a counties that occur between the current 1 partially regulated plant in Wyoming. manufacturing operation, primarily order areas. As discussed above, the cheese-making. Of the pool plants, 8 milk procurement areas for the markets Utilization have no primary product, but are only proposed to be combined also have a According to October 1995 pool shipping to distributing plants, and 6 significant degree of overlap. statistics for handlers who would be are pooled manufacturing plants. Some of the currently-unregulated fully regulated under this Central order, Of the 61 nonpool plants in the counties in western Illinois and central the Class I utilization percentages for proposed Central marketing area, 58 are Missouri have been added to the the individual markets ranged from 42 manufacturing plants—23 are plants proposed Central marketing area. The percent for the Nebraska-Western Iowa that manufacture primarily Class II omission from the proposed marketing market to 73 percent for the Central products, 3 manufacture primarily area of the counties in central Missouri Illinois, Greater Kansas City and Eastern butter, 6 manufacture primarily powder, that are not included in the proposed South Dakota markets combined. Data 25 manufacture primarily cheese, and 1 Central marketing area are based on an for these three markets are combined manufactures primarily other products. estimation of the marketing area of because each of them has only one Also associated with the proposed Central Dairy, located in Jefferson City, handler, and individual handler Central order, but not within the Missouri. There is no intention of information cannot be released. proposed marketing area, are 2 nonpool causing the regulation of this handler, Combined utilization for the eight cheese plants and a nonpool supply but minimizing the extent of the markets would result in a Class I plant located in South Dakota. unregulated counties in the middle of Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4859 the proposed marketing area would help portion of the Iowa area that might areas occurred, with the criterion of to reduce the reporting burden on justifiably be added to the proposed overlapping route disposition given handlers in determining which route Upper Midwest consolidated order area greater weight than overlapping areas of dispositions are inside, and which are would be the northeastern portion of milk supply. outside the marketing area. The Iowa, containing Dubuque. For the most part, it was found that administrative burden of verifying such Comments from the National Farmers’ the principal relationship in terms of reporting also would be eliminated. Organization, Inc., supported the route disposition between Iowa Three of the current Federal order approach taken in the May 1997 Revised handlers and the proposed consolidated markets (Central Illinois, Greater Kansas Report on Order Consolidation under Upper Midwest market is represented City, and Eastern South Dakota) which the consolidation of Iowa with by one Iowa handler. That handler’s included in this proposed consolidated the Upper Midwest was suggested. The sales in order areas that are proposed to area have too few pool plants to be able comments stated that a large, integrated comprise the Upper Midwest to publish market data without contiguous milkshed area in consolidated order marketing area revealing confidential information. In southwestern Wisconsin, northeast represent a large majority of sales by addition to these three markets, the Iowa, and southeast Minnesota serves as Iowa handlers in marketing areas number of handlers regulated under a source of seasonal or year-round fluid outside the proposed Central marketing each of the Nebraska-Western Iowa, supplies for several marketing areas, area. This handler has many of its sales Iowa and Eastern Colorado orders is in including Iowa. Lakeshore Federated in the Chicago Regional marketing area. the single digits. Consolidation of these Dairy Cooperative comments insisted In fact, if the eastern edge of the Iowa markets will enable the market that the revised area be expanded to marketing area were added to the administrator’s office to provide more include even more area to enhance the proposed consolidated Upper Midwest informative market data. utilization percentage of the Upper order, this handler not only would have Midwest order. the majority of its sales and qualify Discussion of Comments and One commenter pointed out that the regularly as a pool distributing plant Alternatives suggested consolidation was not under the consolidated Upper Midwest Although the Preliminary Report on supported by the criteria of overlapping order (as it occasionally does now under Order Consolidation, issued in sources of milk because the degree of the current Chicago Regional order on December 1996, suggested a Central competition for milk supplies cannot be the basis of its sales in that area), but marketing area that resembles the area judged properly on the basis of the total inter-order sales between the two proposed herein (but included the source of milk pooled from an area. consolidated marketing areas would be northwest Arkansas and southern According to the comment, a significant reduced. This proposed rule does not Missouri counties that now are included portion of the Minnesota and Wisconsin include the division of the Iowa order, in the proposed Southeast area), the milk pooled on the Iowa order is pooled but comments on the desirability of Revised Preliminary Report, issued in on the basis of where it will return the such a division would be welcomed. May 1997, suggested that the Iowa, most revenue to the supplying The other order area that Nebraska-Western Iowa and Eastern producers rather than whether the milk demonstrates the strongest relationship South Dakota order areas would more supply is needed in the market on with the proposed consolidated Upper appropriately be included with the which it is pooled. The same Midwest order is the Eastern South Chicago Regional and Upper Midwest commenter, citing the difficulty Iowa Dakota area. Nearly one-fifth of the areas in a consolidated Upper Midwest handlers often have experienced in Eastern South Dakota handler’s sales are order. A number of comments received obtaining an adequate supply of milk, distributed in the current Upper after issuance of the Revised Report on went on to state that the competition for Midwest order, while a nearly equal Order Consolidation argued that the supplies of producer milk between the amount is distributed in unregulated Iowa and the Nebraska-Western Iowa Iowa and Central Illinois markets areas. However, route disposition in the orders should, more logically, be necessitates that these two markets be Eastern South Dakota order area by the consolidated with the Greater Kansas included in the same consolidated Eastern South Dakota handler and other City marketing area, as in the November order. handlers that would be regulated under 1996 report. Because of the strong objections in the the proposed Central order represents Among others, the Upper Midwest comments that opposed the addition of the total fluid milk disposition that Dairy Coalition, Mid-America the Iowa, Nebraska-Western Iowa and would be estimated for the total Dairymen, Andersen-Erickson Dairy Eastern South Dakota order areas to the population of the Eastern South Dakota Company, and Swiss Valley Farms filed consolidated Upper Midwest marketing marketing area, using an estimate of 265 comments stating that the revised area and the slight preponderance of pounds of fluid milk consumption per marketing areas would harm Iowa fluid data upon which the suggestions of the capita. Therefore, it would not be milk processors competing for sales in initial Preliminary Report were changed expected that Upper Midwest handlers Kansas City and St. Louis. The Iowa to those of the Revised Preliminary would have significant amounts of fluid Dairy Foods Association and the Iowa Report, an even closer look was taken at milk distributed into the Eastern South Dairy Producers Association, destinations of route dispositions and Dakota area. representing all Iowa dairy processors, sources of producer milk receipts, using Approximately 85 percent of the total emphasized that Iowa must be included data for individual handlers instead of fluid milk dispositions distributed by within the same order area as the for the market as a whole. As with a handlers regulated under the three order Greater Kansas City, Central Illinois and number of other proposed consolidated areas that were suggested to be included Southern Illinois-Eastern Missouri areas order areas, it would be impossible to in the Central area in the initial because Iowa fluid processors would be find a boundary across which Preliminary Report, and in the Upper financially disadvantaged due to the significant quantities of milk are not Midwest area in the Revised substantial competition within these procured for other marketing areas. As Preliminary Report, are disposed of in areas for packaged route disposition and in some other cases, analysis was done the proposed Central market. The raw milk supply. Mid-America to determine where the minimal amount disposition by other Central marketing Dairymen suggested that the only of route disposition overlap between area handlers within the proposed 4860 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Central area is somewhat greater than comments contended that excluding Central to the north and Southeast to the the proportion for the three more Nebraska counties in which Gillette is east. Unregulated counties in Colorado northern order areas. the majority distributor of fluid milk also form a relatively small border in the The milk receipts at Iowa pool plants would follow the Department’s intent northwest corner of the market. Texas from sources in Minnesota and not to regulate currently unregulated has over 350 miles of coastline on the Wisconsin vary greatly from month to handlers. These 14 counties would be in Gulf of Mexico, while Texas and New month, leaving a strong impression that addition to the 11 western Nebraska Mexico share about 970 miles of these areas are not regular or reliable counties of the current Nebraska- boundary with northern Mexico. sources of milk for the Iowa market. As Western Iowa order area that the two In terms of physical geography, stated in the description of preliminary reports had suggested be diverse topographic relief exists in the consolidation criteria, not all areas omitted from the Central order. The 14 Southwest market area, particularly in having overlapping areas of milk counties are located between the current New Mexico (ranging from deserts to procurement should be consolidated. Nebraska-Western Iowa and Eastern high mountain ranges). Northwest New The volumes of Minnesota and Colorado marketing areas, which are Mexico is part of the Colorado Plateau, Wisconsin milk pooled on the Iowa proposed to be consolidated as part of an area of broad valleys and plains as order represent a significant share of the the proposed Central market. Handlers well as deep canyons and mesas. The total milk pooled there. In the first 9 regulated under both of those orders Rocky Mountains extend into the north months of 1997, 6 percent of the milk have sales in the counties in question, central area of the state. The Basin and pooled on the Iowa order was from and there is no data reliably indicating Range region, generally characterized by Minnesota, and 22 percent was from that Gillette Dairy distributes milk there, ranges or isolated mountains Wisconsin. However, the variation in or in what amounts relative to regulated interspersed with valleys, desert basins the volume of Minnesota milk pooled handlers. Therefore, these counties or high plains, is located in central and was three times that of Iowa milk continue to be included in the proposed southwestern New Mexico, as well as pooled, and the variation in the volume Central marketing area. western Texas. The Great Plains cover of Wisconsin milk was five times greater After considering all the comments the eastern third of New Mexico and than that of Iowa milk. Less than five and other relevant information, it was extend through the Texas Panhandle in percent of either State’s total pooled determined that the territory north Texas and much of central Texas. production is pooled under the Iowa encompassed in the proposed Central This area is characteristically dry and order. marketing area best meets the criteria treeless and also encompasses Texas hill A number of commenters suggested used. country and the Edwards Plateau. The that southern Missouri and/or northwest Osage Plains covers area in Texas from Arkansas should be included in the Southwest the Oklahoma-Texas border into the Southeast Marketing Order. Mid- The proposed Southwest marketing south central part of the state and the America Dairymen, Inc.; Associated area is comprised of the current Texas low and flat West Gulf Coastal Plain Milk Producers, Inc.; Carolina-Virginia (Order 126) and New Mexico-West covers the eastern two-fifths of the state. Milk Producers Association, and several Texas (Order 138) marketing areas as Climates in this region also vary. The other producer groups supported well as 49 currently unregulated Texas western part of the region, including removing both areas from the current counties. There are 290 counties in this New Mexico, southwest Texas and the Southwest Plains order area and making proposed area. Texas Panhandle, is semi-arid to arid them a part of the Southeast Federal with wide ranges in both daily and order. The commenters stated that the Geography annual temperatures. The southern tip reason for such a change would be to The proposed Southwest market is of Texas and the Gulf coast are more correct inequities they claim are caused described geographically as follows: humid and subtropical. For some of the by southwest Missouri manufacturing three counties in Colorado (currently in area there are few agricultural uses other plants balancing the Southeast without Order 138), all New Mexico counties than dairy farming. Dairy products were being able to pool, and inefficient milk (33, currently in Order 138) and all 254 the 2nd and 3rd highest revenue- movements caused by blend price Texas counties (162 currently in Order producing agricultural commodities in discrepancies between orders. Several 126, 43 currently in Order 138, and 49 New Mexico and Texas, respectively, in commenters added that southern currently unregulated). Two currently 1996, accounting for nearly one-third of Missouri historically has been a source unregulated counties are located in agricultural receipts in New Mexico, but of reserve milk supply for the Southeast. northeast Texas, while the remaining 47 less than 10 percent in Texas. This recommended change, of territory are in southwest Texas. Population currently in the Southwest Plains The Southwest market spans the marketing area to the proposed south central area of the United States. According to July 1, 1996, population Southeast marketing area instead of the It is surrounded by Arizona on the west, estimates, the total population in the proposed Central marketing area, has Colorado and Oklahoma on the north, proposed marketing area is 20.9 million. been adopted in the proposed rule and Arkansas, Louisiana and the Gulf of The 26 Metropolitan Statistical Areas is discussed further under the Mexico in the northeast, east, and (MSAs) in the proposed Southwest description of the Southeast marketing southeast, and Mexico to the south. market account for about 82 percent of area. Measuring the extreme dimensions, this the total market area population. About Several comments supported the market extends about 800 miles north to 54 percent of the Southwest population position of Gillette Dairy, Rapid City, south from southern to northern Texas is located in the 4 most populous MSAs. South Dakota, that 14 counties in and about 875 miles east to west from Six MSAs have populations greater than Nebraska proposed to be included in the Texas’ border with Louisiana and 500,000; their total population is about proposed Central order area be Arkansas to New Mexico’s border with 61 percent of the Southwest population. excluded. Five of these counties are Arizona. Because of the large number of MSAs in currently unregulated, while the other The Southwest market is contiguous the Southwest market, only those areas nine are in the present Nebraska- to 3 proposed consolidated marketing with populations greater than 500,000 Western Iowa Federal order. The areas: Arizona-Las Vegas to the west, are described in detail. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4861

Almost 92 percent of the Southwest About 455 million pounds of milk expected to change as a result of the market’s population is located in Texas, were pooled on either Order 126 or 138 consolidation process. Of the 23 fully which has 19.1 million people. 23 of the from 1,566 producers in 131 Texas regulated plants, 17 are located in the 26 Southwest market MSAs are in counties in December 1996. Three Texas top six MSA regions. Texas. About 63 percent of Texas’ counties were among the top 6 in Since October 1995, it is known that population is concentrated in 5 areas, volume pooled: Erath (1st), Hopkins 5 plants (4 fully regulated and 1 which are also the Southwest area’s top (4th) and Comanche (6th). Erath producer-handler) have gone out of 5 population centers: the Dallas-Fort County—located about 75 miles west of business. The four fully regulated plants Worth (Dallas) MSA in northeastern Dallas—pooled 111 million pounds on were located in Corpus Christi, Lubbock Texas, with a population of 4.6 million; Order 126 (and an additional 10 million and Lufkin (all in Texas), and in Clovis, the Houston-Galveston-Brazoria pounds on 3 other Federal orders). New Mexico. The producer-handler was (Houston) MSA in southeastern Texas Hopkins County—located about 50 located in Decatur, Texas. One fully near the Gulf of Mexico, with a miles east of Dallas—pooled 52 million regulated distributing plant, Promised population of 4.3 million; the San pounds on Order 126 and another 12 Land Dairy in Floresville, Texas, began Antonio MSA in south central Texas, million pounds on 2 other Federal packaging and distributing products in with a population of 1.5 million; the orders. Contiguous to and lying March 1996. Because market analysis Austin-San Marcos (Austin) MSA in southwest of Erath County, Comanche for this area is based on October 1995 central Texas, with a population of 1 County pooled 34 million pounds on information, Promised Land Dairy million; and the El Paso MSA located in Order 126 and about 3 million pounds information is not included in route the far western corner of Texas on the on 2 other Federal orders. dispositions reported; however, the Texas-New Mexico-Mexico border, with Of the 283 million pounds of milk route dispositions for the non- a population of 680,000. pooled on either Order 126 or 138 from operational plants are included. Of the 33 distributing plants that New Mexico’s population is about 1.7 179 producers in 16 New Mexico would be located in the proposed million. The remaining 3 of the 26 counties, 75 percent was produced in Southwest marketing area, 24 are in Southwest market MSAs are located in the following three counties, all among Texas, and 9 are in New Mexico. New Mexico. About 39 percent of the the top 6 in volume pooled: Chaves Twenty-one of the Texas plants would state’s population is located in the (2nd), Dona Ana (3rd) and Roosevelt be fully regulated. They are as follows: Albuquerque area, just northwest of (5th). Chaves County—located about 200 miles southeast of Albuquerque— 6 in the Dallas area, 3 in the Houston central New Mexico. pooled 107 million pounds on Orders area, 2 in the San Antonio area, 1 in the In the remainder of the Southwest 126 and 138 in December 1996 and an Austin area, and 3 in the El Paso area, marketing area, the 3 Colorado counties additional 6 million pounds on 3 other and 6 located throughout the state. One have a population of about 70,000. Federal orders. Dona Ana County, of the Texas distributing plants was Fluid Per Capita Consumption located over 200 miles south of associated with Order 30 (Chicago Albuquerque, contiguous to El Paso Regional) in October 1995, and is Estimates of fluid per capita County, TX, and the U.S.-Mexico expected to be partially regulated in the consumption vary from 17.1 pounds of border, pooled 64 million pounds of Southwest market. Two producer- fluid milk per month per person in producer milk on Order 138. Contiguous handlers are located in Texas, one in the Texas to 17.5 in New Mexico to 18.8 in to and lying northeast of Chaves County, El Paso area and the other in the central Colorado. Multiplying the individual Roosevelt County pooled 39 million part of the state. states’ consumption rate by its pounds on Orders 126 and 138 and Over half of New Mexico’s 9 population in the proposed marketing another 3 million on another Federal distributing plants are located in the area results in a fluid milk consumption order. Albuquerque area. Two fully regulated rate of 358 million pounds of fluid milk In December 1996, producer milk for handlers, 1 exempt plant and 2 per month for the proposed Southwest Orders 126 and 138 also originated in producer-handlers are located in this marketing area. With Southwest one of the Colorado counties in the population center. Of the remaining 4 handlers’ (fully regulated and producer- Southwest marketing area, and in plants located in New Mexico, there are handlers) route distribution of 322 counties in Arkansas, Louisiana, 2 exempt plants (both located in million pounds within the Southwest Mississippi, Missouri and Oklahoma. southeastern New Mexico) and 2 marketing area, route distribution from However, the combined amount of producer-handlers (one located these handlers is 36 million pounds less producer milk pooled from these areas southeast and the other northeast of than the expected consumption. Even is less than 2 percent of the total Albuquerque). with the addition of 23 million pounds producer milk pooled in these Orders. In October 1995, the fully regulated from other Federal order handlers, the plants in Orders 126 and 138 had route Southwest market area had 13 million Distributing Plants—Route Distribution distribution totaling 320 million pounds less than the expected Using distributing plant lists included pounds. Almost 98 percent, or 313 consumption rate during October 1995. in both the Preliminary and Revised million pounds, was distributed within Preliminary Reports and the pooling the proposed Southwest marketing area. Production standards used in the Revised The nonpool handlers (i.e. producer- In December 1996, 1,838 producers Preliminary Report, updated for known handlers) in the Southwest area are from 180 counties in 8 states pooled 746 plant closures and openings through larger than in most other marketing million pounds of producer milk on May 1997, 33 distributing plants located areas; these handlers had about 9 Orders 126 and 138. Nearly 99 percent in the proposed Southwest marketing million pounds of route distribution in of this producer milk came from area would be expected to be associated the Southwest marketing area for counties proposed to be included in the with the Southwest market, including October 1995. Additionally, handlers proposed Southwest marketing area. 23 fully regulated distributing plants, 1 fully regulated under other Federal About 55 percent of the combined partially regulated, 3 exempt and 6 orders had about 23 million pounds of market’s producer milk was provided by producer-handlers. With one exception, route distribution into the Southwest producers in six counties. none of these plants’ regulatory status is market area. 4862 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Utilization with fewer Federal orders than Mid- Southeast order. This limited Am’s and AMPI’s. association does not support including According to October 1995 pool east Texas in the Southeast marketing Criteria for Consolidation statistics for handlers who would be area. fully regulated under this Southwest Nearly all of the route disposition by order, the Class I utilization percentages Order 126 and 138 handlers is Arizona-Las Vegas for the Texas and New Mexico-West distributed within these two current As suggested in the Revised Texas markets were 50 and 42 percent, marketing areas, and within the Preliminary Report on Order respectively. Based on calculated currently unregulated portions of Texas Consolidation, the proposed Arizona- weighted average use values for (1) the proposed to be added. In addition, Las Vegas marketing area is comprised current order with current use of milk, nearly all of the milk production for the of the current Central Arizona (Order and (2) the current order with projected proposed consolidated area originates 131) marketing area, one county in use of milk in the consolidated within the marketing area. Two Nevada which currently is in the Great Southwest order, the potential impact of cooperatives market the vast majority of Basin (Order 139) marketing area, and this proposed rule on producers who cooperative milk within the proposed currently unregulated counties in supply the current market areas is area. Arizona. There are 16 counties in this proposed area. estimated to be: Texas, a 3-cent per cwt Discussion of Comments and decrease (from $13.49 to $13.46), and Alternatives Geography New Mexico-West Texas, a 7-cent per cwt increase (from $13.00 to $13.07). A number of comments from east The Arizona-Las Vegas market is The weighted average use value for the Texas suggested combining that portion described geographically as follows: All consolidated Southwest order market is of Texas with the Southeast marketing counties (15) in Arizona (6 whole and estimated to be $13.39 per cwt. For area to resolve inequities identified by 1 partial currently are part of Order 131, December 1996, combined Class I the commenters. The commenters and 8 whole and 1 partial currently are utilization for Orders 126 and 138 was claimed that due to its heat, humidity unregulated) and Clark County, Nevada, 42.7 percent based on 318,664,000 and rainfall, milk production conditions which currently is part of the Great pounds of producer milk used in Class in eastern Texas have more in common Basin marketing area. The market I out of 745,890,000 total producer milk with the Southeast than with the extends about 400 miles north to south pounds. Southwest area. According to the from Arizona’s border with Utah (and comments, the dry climate of Central Nevada’s southernmost county) to the Other Plants Texas and New Mexico permits dairies U.S.-Mexico border. The market ranges to become much larger and produce 10– from 300 to 375 miles east to west from Also located within the Southwest 15% more milk per cow at a lower cost the Arizona-New Mexico border to marketing area during May 1997 are 17 than East Texas producers are able to theArizona/southern Nevada-California manufacturing plants: 11 in Texas (2 in achieve. border. the Dallas MSA and 1 in the El Paso Alternatives listed by the commenters The Arizona-Las Vegas marketing area MSA) and six in New Mexico. Six of the include developing pricing mechanisms is contiguous to two proposed 17 plants are pool plants. All of these within the proposed consolidated consolidated marketing areas, the Great pool plants are manufacturing plants— Southwest order that would compensate Basin portion of the proposed Western one manufactures primarily Class II East Texas producers at a price midway area to the north and the New Mexico- products, two manufacture primarily between those of the Southeast and the West Texas portion of the Southwest powder, two manufacture primarily Southwest markets, or using Atlanta, area to the east. California, not currently cheese and one manufactures primarily Georgia, as a price basing point with a part of the Federal order system, lies to other products. Of the 11 nonpool zone differential that would decrease the west and Mexico is south of this plants in the Southwest marketing area, the price of milk, based on marketing area. all are manufacturing plants—one transportation costs, from Atlanta to Arizona can be divided into three manufactures primarily powder, four Roswell,New Mexico. geographic regions—the Sonoran Desert, manufacture primarily cheese, one There is very little overlap of either in the southwest; the Colorado Plateau, manufactures primarily other products fluid milk product disposition or in the north; and the Mexican Highland, and five manufacture primarily Class II producer milk movements between the mainly in the central and southeastern products. Texas and Southeast marketing areas. parts of the state. With each of these Cooperative Associations The amount of route disposition overlap regions, three distinct climatic zones that exists is, not surprisingly, generally exist: the Sonoran Desert is hot in the In December 1995, three cooperative found between eastern Texas and summer but can experience frost in the associations marketed nearly 99 percent Louisiana, and represents winter; the Colorado Plateau is hot and of the milk pooled under the two orders approximately three percent of each dry in the summer and cold and windy proposed to be consolidated in the order’s total route disposition. In terms in the winter; and the Mexican Southwest area: Associated Milk of milk production, only 19 of the 57 Highland receives significant Producers, Inc., Southern Region counties suggested by the commenters precipitation in both summer and (AMPI); Mid-America Dairymen, Inc. to become part of the Southeast order winter. This region is cooler in both (Mid-Am); and Select Milk Producers, area had milk production pooled under summer and winter than the Sonoran Inc. (Select). AMPI and Mid-Am theSoutheast order in either December Desert region. members marketed milk in both Orders 1996 or May 1997. All of these 19 These topographical and climatic 126 and 138, while Select producers counties were located in the conditions apparently are conducive to were affiliated only with Order 126. northernmost of 3 sections of Texas milk production. Dairy products Although all three cooperatives proposed by commenters to be added to represent one of the principal marketed milk in other Federal orders as the Southeast area, and less than 20 agricultural commodities (2nd and 3rd) well during this particular month, percent of the milk production from in the States of Arizona and Nevada, Select producers’ milk was affiliated these counties was pooled under the respectively, representing 16.6 and 21.7 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4863 percent of total agricultural receipts of Anderson Dairy, the Las Vegas handler milk in Class I out of 200,939,000 total the two States in 1996. who has been pooled on Order 139. pounds of producer milk. There is only one producer located in Population Other Plants Clark County, Nevada. The portion of Arizona is one the fastest-growing Anderson’s milk supply that is not For May 1997, 3 supply or states in the United States. According to supplied by the single Clark County manufacturing plants were located July 1, 1996, population estimates, the producer comes from southern within the Arizona-Las Vegas marketing total population in the proposed California. area: 2 in Arizona (both in the Phoenix marketing area is 5.5 million. Using Distributing Plants—Route Distribution area) and 1 in Nevada (in the Las Vegas Metropolitan Statistical Areas (MSAs), area). One Arizona plant is a pool plant the largest population center is the Using distributing plant lists included operated by the cooperative, Phoenix-Mesa (Phoenix) area, located in in both the Preliminary and Revised manufacturing primarily cheese, while central Arizona approximately 125 Preliminary Reports and the pooling the other plants are nonpool plants miles north of the U.S.-Mexico border in standards used in the Revised manufacturing primarily Class II the Sonoran Desert region. About 250 Preliminary Report, updated for known products. miles to the northwest of Phoenix is the plant closures through May 1997, 9 Las Vegas, Nevada, area, the second- distributing plants would be expected to Cooperative Associations largest population center in this be associated with the proposed For December 1995, the only marketing area. The Las Vegas MSA is Arizona-Las Vegas marketing area, cooperative having membership in the comprised of three counties: Clark and including 5 fully regulated distributing Arizona-Las Vegas marketing area was Nye counties in Nevada and Mohave plants (all currently pool plants), 1 United Dairymen of Arizona, which County in Arizona. Half of this market’s exempt plant and 3 producer-handlers. represented approximately 90 percent of population is in the Phoenix area, and Two distributing plants (1 pool plant the milk pooled under the Central over 70 percent is accounted for when and 1 producer-handler, both located in Arizona order. Las Vegas is added. the Phoenix area) that were operating in October 1995 are now out of business. Criteria for Consolidation Fluid Per Capita Consumption There are 4 distributing plants in the Market data indicate that there are Based on the population figure of 5.5 Phoenix area (all pool plants). Located extensive sales into the Las Vegas area million and an estimated per capita in the Las Vegas MSA are one pool plant by Central Arizona pool plants, and fluid milk consumption rate of 20 and a producer-handler located in a sales by both Phoenix and Las Vegas pounds of fluid milk per month, total currently-unregulated Arizona county. fluid milk consumption in the Arizona- This producer-handler has no sales into handlers into the unregulated areas Las Vegas marketing area is estimated at either the Order 131 or 139 marketing along the southern part of the Nevada- 110 million pounds per month. Plants area, but would meet the producer- Arizona border. Rapid population that would be fully regulated handler definition upon order growth in the area between the two distributing plants in the Arizona-Las consolidation and market area areas has greatly increased competition Vegas order had route disposition expansion. Two other producer- between the handlers in Phoenix and within the market of approximately 96 handlers are located in the Yuma, Las Vegas. In addition, both areas million pounds in January 1997. Arizona, MSA (located in southwestern exchange significant volumes of bulk Another 3.3 million pounds of milk was Arizona on the California-Arizona- and packaged milk with Southern sold in the Las Vegas area, all by Mexico border). The exempt plant is California. At the same time, the handlers fully regulated under the Great located in a currently-unregulated strength of the earlier relationship Basin Federal order (Order 139). Arizona county with no sales into the between the Las Vegas area and Utah current Central Arizona marketing area, clearly has declined since the merger of Milk Production and with total route disposition of less the Lake Mead and Great Basin order In December 1996, almost 201 million than 150,000 pounds. All of the plants areas in 1988, which was based on data pounds of milk was pooled in the that are expected to be fully regulated compiled up to 1986. Central Arizona market, supplied by under this proposed order are located in The Grand Canyon serves as a natural over 100 producers located in fewer areas that contain over 70 percent of the barrier in northwestern Arizona than 10 counties in Arizona and proposed market’s population. between this area and Great Basin. California. Over 90 percent of the Although the actual proposed order area Central Arizona milk was produced Utilization extends to the Utah border, the portion within the marketing area. Further, over According to October 1995 pool of Arizona between the Grand Canyon 90 percent of the producer milk statistics, the Class I utilization for the and Utah is very sparsely populated, produced within the Order 131 area was Central Arizona market was about 49 and is included in the proposed produced in Maricopa County, Arizona, percent. Due to restricted information, marketing area primarily for the purpose where Phoenix, this market’s largest this calculation excludes receipts for the of simplifying the marketing area city, also is located. With 181 million Las Vegas handler who currently is description and easing handlers’ burden pounds of producer milk for December regulated under Order 139. Because the of reporting out-of-area sales. The 1996, Maricopa County produces almost degree of consolidation proposed for Colorado River forms much of the twice the amount of milk required to this market is very minor, little change western boundary with California and meet the fluid milk needs of the entire in the Class I utilization percentage, and Nevada. A north-south strip along the marketing area. Arizona producers did thus little change in producer returns, is eastern edge of Arizona constituting not supply milk to any other Federal expected in the Arizona-Las Vegas area approximately 30 percent of the State’s order; however, it is known that as a result of the proposed territory is very sparsely populated, producer milk moves from both Arizona consolidation. For December 1996, Class containing just over 5 percent of the and Clark County, Nevada, to southern I utilization for the Central Arizona population of the proposed marketing California. These figures do not reflect market was 41.7 percent based on the area. This lightly populated desert area the producer milk associated with use of 83,757,000 pounds of producer can be seen as another form of natural 4864 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules barrier to the movement of bulk and Colorado (Order 134), Southwestern Population packaged milk. Idaho-Eastern Oregon (Order 135), and According to July 1, 1996, population Discussion of Comments and Great Basin (Order 139) marketing areas, estimates, the total population in the Alternatives less one Nevada county (Clark) in Order proposed marketing area is 3.3 million. 139 that is proposed to be in the Using Metropolitan Statistical Areas Two comments filed in response to Arizona-Las Vegas marketing area. the Revised Preliminary Report on (MSAs), the largest population center is There are 71 counties in this proposed the Salt Lake City-Ogden, Utah area Order Consolidation recommended that area. Clark County, Nevada, be returned to (Salt Lake City). Salt Lake City is located the Western marketing area, with the Geography in north central Utah. The Boise City, Great Basin, Western Colorado and Idaho, area (Boise), the second largest Southeastern Idaho-Eastern Oregon The Western market is described population center in this marketing marketing areas. Anderson Dairy, the geographically as follows: 4 counties in area, is located about 300 miles to the handler located in Las Vegas, Nevada, western Colorado (all currently in Order northwest of Salt Lake City. Provo- requested that the Western marketing 134), 28 in Idaho (18 currently in Order Orem, Utah, (Provo) the third largest order remain as it was in the initial 135 and 10 in Order 139), 3 in eastern population center, lies 40 miles south of Preliminary Report. Anderson stated Nevada (all currently in Order 139), 5 in Salt Lake City. Grand Junction, that its major competition comes from eastern Oregon (all currently in Order Colorado, (Grand Junction), located southern California and northern Utah, 135), all counties (29) in Utah (currently about 290 miles southeast of Salt Lake and that one or the other of these areas in Order 139) and 2 in the southwest City, is the fourth largest population could gain a significant advantage if corner of Wyoming (currently in Order center in the Western market; but is less Anderson becomes an island between 139). Measuring the extreme than 10 percent the size of Salt Lake these two powerful competitive areas dimensions, this market extends about City. Slightly over one-third of the with different marketing systems. 625 miles north to south from Oregon market’s population is in the Salt Lake Comments from Darigold also supported and Idaho to Utah’s boundary with City area, and over 60 percent is the original proposed Western Arizona, ranging from 125 miles in accounted for when Boise, Provo and marketing area. Darigold stated that Colorado to 475 miles from Idaho to the Grand Junction are added. because Class I sales in Las Vegas Utah-Arizona border. Similarly, this Fluid Per Capita Consumption historically have been associated with market’s extreme east-to-west the Great Basin producer pool rather Based on the population figure of 3.3 dimension is 650 miles from the million and an estimated per capita than with the Phoenix market, shifting westernmost edge in central/eastern those sales would be controversial and fluid milk consumption rate of 23 Oregon to the easternmost edge in west/ pounds of fluid milk per month, total should be reviewed carefully. central Colorado. Comments from a California fluid milk consumption in the Western cooperative indicated support for the The proposed Western marketing area marketing area is estimated at 75.9 proposed Arizona-Las Vegas order. The is contiguous to three of the proposed million pounds per month. Plants that cooperative referenced its earlier consolidated marketing areas, the would have been fully regulated concern about milk moving between Pacific Northwest to the west and north distributing plants in the Western order southern California and both the State of of the Oregon portion of this market, had route disposition within the market Arizona and Clark County, Nevada, on Arizona-Las Vegas to the south and the of 76.5 million pounds in October 1995; a daily basis. Southwest to the extreme southeast almost 75 percent of this total is from The increase in sales by Central corner. Non-Federally regulated Order 139 pool plants. The 10 producer Arizona pool plants into the Las Vegas territory borders the Western market on handlers operating during this month area, and increased sales by both the west-southwest (Nevada) and the had a combined route disposition of 1.7 Phoenix and Las Vegas handlers into the north-northeast (Idaho and Wyoming). million pounds. Additionally, 2.8 unregulated area of rapidly-increasing To the east lie the Rocky Mountains in million pounds of route disposition population along the southern part of central Colorado, serving as a natural came from handlers outside the market. the Nevada-Arizona border, are factors barrier between the Western market and Milk Production that have greatly increased overlapping the Central market, whose westernmost route distribution in these two areas. In edge begins in eastern Colorado. The In December 1996, nearly 450 million addition, both areas exchange Continental Divide lies just to the east pounds of milk was pooled in the significant volumes of bulk and of the Western market. proposed Western market from more packaged milk with Southern California. than 1,000 producers located in more In terms of physical geography, the The Las Vegas area’s earlier relationship than 70 counties in California, Colorado, Western marketing area has several with southern Utah was based primarily Idaho, Oregon and Utah. Over 95 regions: the Columbia Plateau in on Utah as an important milk supply percent of the producer milk was area for Las Vegas at the time of the southern Idaho and northeastern produced within the marketing area. merger of the Lake Mead and Great Nevada, characterized by fertile soils; Four counties produced 50 percent of Basin order areas in 1988. That the Great Basin in southeast Idaho, the milk pooled. The three top relationship clearly has ceased to exist. nearly all of Nevada and the western producing counties in Idaho, Jerome, Therefore, the proposal by cementers third of Utah, described by ranges and Gooding and Twin Falls counties, are all that the Las Vegas, Nevada, area parallel valleys; and the Colorado located in southwestern Idaho, about continue to be included in the same Plateau in the eastern half of Utah and 130 miles southeast of Boise and 230 marketing area with Utah does not western part of Colorado, characterized miles northwest of Salt Lake City. reflect current marketing conditions. by gorges in Utah and canyons, mesas Jerome and Gooding counties each and valleys in Colorado. In general, the provided twice as much producer milk Western Western market is quite dry, with as Twin Falls County, the third-largest The proposed Western marketing area temperatures tending to be extreme and county in terms of producer milk in the is comprised of the current Western affected by elevation. Western market. The fourth-largest Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4865 production county was Cache County in Based on calculated weighted average overlap exists between Southwestern northeastern Utah, located about 80 use values for (1) the current order with Idaho-Eastern Oregon and Great Basin, miles north of Salt Lake City. current use of milk, and (2) the current as well as a significant overlap in The three Idaho counties provided order with projected use of milk in the procurement for the two orders in producer milk for both Order 135 and consolidated Western order, the Idaho. The two orders also share similar Order 139 in December 1996. potential impact of this proposed rule multiple component pricing plans. The Specifically, Jerome County producers on producers who supply the current Western Colorado order has some route had the greatest amount of producer market areas is estimated to be: Western disposition within the Great Basin milk on both Order 135 and Order 139. Colorado, a 59-cent per cwt decrease order, and must be included in a Gooding and Twin Falls counties were (from $13.41 to $12.82); Southwestern consolidated order area because it is a in the top four for volume in Order 139 Idaho-Eastern Oregon, a 5-cent per cwt small market for which data cannot be and were second and third for volume increase (from $12.63 to $12.68); and released without revealing confidential in Order 135. Great Basin, a 3-cent per cwt decrease information unless combined with the Distributing Plants—Route Distribution (from $12.81 to $12.79). The weighted adjacent Great Basin order. average use value for the consolidated Discussion of Comments and Using distributing plant lists included Western order market is estimated to be Alternatives in both the Preliminary and Revised $12.78 per cwt. For December 1996, Preliminary Reports and the pooling combined Class I utilization for Orders Several comments opposed standards used in the Revised 135 and 139 (Western Colorado consolidating the Southwestern Idaho- Preliminary Report, updated for known information is restricted) was 19.9 Eastern Oregon order area with the plant closures through May 1997, 28 percent based on 87.7 million pounds of Great Basin marketing area. A primary distributing plants would be expected to producer milk used in Class I out of basis for opposition to the consolidation be associated with the Western 440.1 million total producer milk is the disparity in the two regions’ marketing area, including 11 fully pounds. utilization of Class I fluid milk: the regulated distributing plants (all Southwestern Idaho-Eastern Oregon currently pool plants), 1 partially Other Plants order has a very low percentage of Class regulated (currently partially regulated), Nineteen supply or manufacturing I use, while the Great Basin order’s 3 exempt plants based on size (2 plants were located within the proposed Class I use percentage is higher at about currently are pool plants but have less Western marketing area during May 35 percent, and Western Colorado’s is than 150,000 pounds of total route 1997: 1 in Colorado (in the Grand higher still. Commenters fear that the distribution and the other is currently Junction area), 8 in Idaho (3 in the Boise consolidation of these orders would unregulated), 9 producer-handlers, and area), 9 in Utah (2 in the Salt Lake City result in lower returns to producers who 4 exempt plants based on institutional area) and 1 in Wyoming. Two of the 19 currently are pooled under the Great status (all were exempt as defined under plants were pool plants; both Basin and Western Colorado orders. current federal orders). Since October manufacture primarily cheese. Of the 17 Some comments suggest that the 1995, it is known that 1 distributing nonpool plants, 12 manufacture Southwestern Idaho-Eastern Oregon plant (a producer-handler) in Utah has primarily cheese and 5 manufacture marketing area should remain under a gone out of business. primarily soft or Class II products separate order, with the Great Basin There would be 11 distributing plants (including ice cream). Of the 8 Idaho market consolidated with markets such in the Salt Lake City area (5 pool plants, plants, all but one manufacture cheese, as Arizona, Western Colorado, or 3 producer-handlers and 3 exempt while of the 9 Utah plants, 6 Eastern Colorado. One comment plants). The Boise area would have 2 manufacture cheese and 3 manufacture supported keeping both the pool distributing plants, the Provo area soft products. Southwestern Idaho-Eastern Oregon and would have 1 producer-handler and the Great Basin marketing areas separate Grand Junction area would have 1 Cooperative Associations because of the differences in Class I use. exempt plant. The remaining 14 For December 1995, four cooperatives Comments filed by Western Colorado distributing plants are located in representing 56 percent of the milk producers and their cooperative state Colorado (1 plant, fully regulated); pooled under the three orders had that the Western Colorado area should Idaho (4 plants: 2 pool, 1 exempt, and membership in the proposed Western be combined with the Central market 1 producer-handler), Nevada (2 plants, marketing area. Western Dairymen because: (1) It’s data has always been both unregulated), and Utah (7 plants: 1 Cooperative, Inc., had membership in combined with that for Eastern pool, 1 partial, 1 exempt, 4 producer- Western Colorado, Southwestern Idaho- Colorado, (2) the Eastern Colorado blend handlers). Eastern Oregon and Great Basin; Magic price to producers is higher than Great Fully regulated distributing plants are Valley Quality Milk Producers, Inc., had Basin’s, (3) Colorado is a milk import located in MSAs containing about half membership in Orders 135 and 139; state, whereas Utah is a milk export of the proposed market’s population, Darigold Farms had membership in state, (4) the Western and Eastern including the Pocatello, Idaho, MSA, Order 135, and Security Milk Producers’ Colorado order areas operate under with 2.2 percent of this market’s Association had membership in Order quota plans, while the Great Basin area population. 139. does not, and (5) Western Colorado is a milk surplus area ‘‘with a freight Utilization Criteria for Consolidation history.’’ According to October 1995 pool As suggested in the Revised Report on The effects of the proposed order statistics, the Class I utilization Order Consolidation, the consolidated consolidation on returns to producers percentages for the individual markets Western market should be composed of pooled under the current Southeastern ranged from 18 percent for the current marketing areas of the Idaho-Eastern Oregon and Great Basin Southwestern Idaho-Eastern Oregon to Western Colorado, Southwestern Idaho- marketing areas are not expected to be 35 percent for Great Basin. Information Eastern Oregon and Great Basin markets substantial. However, the proposed for Western Colorado is restricted due to (minus the Clark County, Nevada, consolidation would reduce the blend fewer than three handlers in the market. portion of the Great Basin area). Sales price to be paid to producers whose 4866 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules milk is currently pooled under the association under the proposed Washington, turns west, and becomes Western Colorado order. This market consolidated orders. For the foregoing the western two-thirds of the border must be included in a consolidated reasons, the rationale is stronger for between Oregon and Washington. The order because it currently has too few including the Western Colorado portion of Idaho included in the current pooled handlers to allow market data to marketing area in the Western and proposed Pacific Northwest be published without revealing consolidated order area than in the marketing area is within the Rocky confidential data. The Western area is Central area. Mountains. This area has a generally continental climate with the higher the most logical. The adjoining Great Pacific Northwest Basin marketing area represents the elevations having long and severe closest reserve supply of milk and the The proposed Pacific Northwest winters. closest available manufacturing outlets marketing area is comprised of the Much of the area is conducive to the for surplus production; and the largest current Pacific Northwest (Order 124) production of milk and many other cooperative association in the Great marketing area and one currently- agricultural commodities. Although Basin area is the same cooperative unregulated county in southwest dairy products ranked 2nd among representing the Western Colorado Oregon. There are 75 counties in this receipts of agricultural commodities in producers. Small amounts of packaged proposed area. the State of Washington in 1996, and fluid milk products are exchanged Geography 4th in Oregon, they accounted for only between Eastern and Western Colorado 13.8 percent and 7.9 percent, The proposed Pacific Northwest handlers, some packaged milk is respectively, of such receipts. Apples market is described geographically as distributed on routes in the Western (in Washington) and greenhouse/ follows: All counties (39) in nursery, wheat, and cattle and calves (in Colorado area by Eastern Colorado Washington, 30 counties in Oregon (29 handlers, and bulk cream regularly Oregon) ranked ahead of dairy, currently are part of Order 124 and one, accounting for 19.8 percent and 33.8 moves from Western Colorado plants to Curry County, is unregulated) and six the Eastern Colorado area. A volume of percent, respectively, of agricultural counties in northwestern Idaho. The commodity receipts. route dispositions similar to that market extends about 490 miles north- distributed by Eastern Colorado to-south from Washington’s northern Population handlers in Western Colorado is border with the Canadian province of According to July 1, 1996, population distributed by Western Colorado British Columbia to Oregon’s southern estimates, the total population in the handlers in the Great Basin area. In border with California and Nevada. proposed marketing area is 8.8 million. addition, movements of bulk milk from East-to-west, the market ranges from Seventy-seven percent of the marketing Western Colorado to Great Basin plants about 450 miles in the northern half of area population is located in occur in volumes about 3 times those the market (covering territory from Metropolitan Statistical Areas (MSAs). distributed on routes from Eastern into Washington’s western boundary with The two largest MSAs are located on the Western Colorado, and from Western the Pacific Ocean to the eastern border western side of the Cascade Range. The Colorado into the Great Basin area. The of Idaho with Montana) to about 250 Seattle-Tacoma-Bremerton (Seattle) Rocky Mountains represent a very large miles in the southern half of the market area, with a population of 3.3 million natural barrier between Western (covering approximately two-thirds of (37.5% of the marketing area Colorado and the more eastern Oregon from the state’s western border population), is in northwestern marketing areas. with the Pacific Ocean to central Washington. Over seventy percent of the Data for the Eastern and Western Oregon). population of the State of Washington is Colorado orders have been reported on The proposed Pacific Northwest located west of the Cascade Mountains, a combined basis for a number of years marketing area is contiguous to the in the western third of the State. as a matter of administrative proposed consolidated Western Federal Another 14.5% of the State’s population convenience because of the restricted order marketing area in eastern Oregon. is contained in 3 MSA’s east of the nature of Western Colorado data, rather The remainder of the marketing area is Cascades. than on the basis of any close affinity surrounded by currently non-Federally The Portland-Salem (Portland) area in between the two markets. While regulated areas (California and northwestern Oregon is located on the Colorado may be a net import state, that northwestern Nevada to the south and Oregon-Washington border, with assertion does not apply to the western Montana, Idaho, and one northeastern Portland just south of the Columbia portion of the State. Milk production Oregon county to the east), political River. The population of this MSA is 2.1 data for December 1996 and May 1997 boundaries (Canada to the north), and million, or 23.5% of the marketing area show no milk from other states pooled the Pacific Ocean to the west. population. Ninety percent of the under the Western Colorado order. Along the Oregon and Washington population of Oregon is concentrated in Surplus production from the western coasts lies the Coast Range. The Cascade the western one-third of the State, or in Colorado counties generally is shipped Range is located further inland in both the western half of the Oregon portion to Utah manufacturing plants rather states. Both ranges are north-south in of the marketing area. than across the Rocky Mountains direction, and the Cascade Range (except for very minor volumes during effectively divides both states into two Fluid Per Capita Consumption 7 of 32 months in 1995–97). The issue distinct climates: a year-round mild, Based on the population figure of 8.8 raised by the Western Colorado humid climate with abundant million and an estimated per capita producers of quota in the Colorado precipitation predominates in the fluid milk consumption rate of 22 orders is not related to Federal milk western part of the states, and a dry pounds of fluid milk per month, total order provisions; there are no quota climate with little precipitation but fluid milk consumption in the Pacific provisions in any of the Federal orders. greater temperature extremes prevails Northwest marketing area is estimated The quota referred to apparently is a east of the Cascade Range. The mild at 193.6 million pounds per month. For pooling plan operated by the producers’ climate of the western portion results in October 1995, plants that would be fully cooperative, and certainly can be longer growing seasons. The Columbia regulated distributing plants under the continued by the cooperative River flows south through eastern proposed Pacific Northwest order had Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4867 route disposition within the market of 4 pool plants and 7 producer-handlers. of which manufactures primarily 170 million pounds. In addition, the 18 In addition to these two main cheese, and the other nonfat dry milk. producer-handlers operating during this population centers, the Spokane, Of the 10 nonpool manufacturing plants month had a combined route Washington, MSA, located in the located in Oregon, 8 manufacture disposition of 18 million pounds. eastern area of the state near the Idaho primarily Class II products (including Additionally, slightly over 1 million border with a population of 405,000, has ice cream), 1 manufactures butter, and pounds of route disposition (less than 3 pool plants. One of these plants, the other makes cheese. one percent of total route disposition in Wilcox Farms, Cheney, Washington, The 15 manufacturing/supply plants the marketing area) came from handlers began packaging and distributing located in the State of Washington are outside the market. Because the products in the spring of 1997 and is not all nonpool plants. Three manufacture handlers associated with this market are included in the market’s route primarily Class II products, 3 able to fulfill the market’s Class I or disposition data for October 1995, the manufacture primarily butter, 2 fluid needs, and because of the month used for analysis. manufacture primarily powder, and 7 somewhat geographic isolation of the Of the 9 distributing plants that manufacture primarily cheese. would be operating in Oregon, 5 would market, maintaining the current Pacific Cooperative Associations Northwest order as a separate market is be fully regulated. Four are located in appropriate. western Oregon, and the fifth in central Five cooperative associations have Oregon. Of the 4 Oregon plants members in the Pacific Northwest Milk Production anticipated to be non-pool distributing market. Darigold Farms is the largest, In December 1996, the 540 million plants, one would be partially regulated and the only cooperative that had pounds of milk pooled in the Pacific (but currently is fully regulated), one membership affiliated with another Northwest market were produced by would be exempt, and two would be order (Order 135) in December 1995. 1,280 producers located in 57 counties producer-handlers. Two other producer- Other cooperatives in this market are in California, Oregon, Idaho and handlers have gone out of business Farmers Cooperative Creamery, Washington. Four counties produced 50 since October 1995. Tillamook County Creamery percent of the milk pooled. Three of Of the 6 distributing plants in Association, and Northwest these counties are in Washington State. Washington that would be in operation, Independent Milk Producers They are Whatcom and Skagit counties, one was and will continue to be a pool Association. These five cooperatives which are less than 100 miles north of plant, one would be exempt (that pooled 78 percent of the total producer Seattle; and Yakima County, which is currently is a pool plant), and 4 would milk pooled under the Pacific located in central Washington about 100 be producer-handlers. Two other Northwest order in December 1995. miles southeast of Seattle on the eastern distributing plants (one pool plant and Criteria for Consolidation side of the Cascade Range. The fourth one producer-handler) have gone out of county is in Oregon. It is Tillamook business since October 1995. As suggested in both the initial and County, which is located on the Pacific Distributing plants fully regulated Revised Preliminary Reports on Order Ocean, about 60 miles west of the under the proposed Pacific Northwest Consolidation, the consolidated Pacific Portland area on the western side of the order are located in MSAs where 71 Northwest market should add one Coast Range. Less than two percent of percent of the proposed market’s currently unregulated Oregon county to the milk pooled in the Pacific Northwest population is concentrated. the Pacific Northwest milk order. The was produced outside of the marketing degree of association of this market with area, in Idaho and California. The Utilization other Federal order marketing areas is largest portion is from producers in two According to October 1995 pool insufficient under any criteria to northern California counties who statistics, the Class I utilization warrant consolidation with any other pooled 6 million pounds of milk or 89.6 percentage for the Pacific Northwest order areas. market was about 36 percent. Because percent of the pooled milk produced Discussion of Comments and this market is proposed to remain outside the Pacific Northwest marketing Alternatives area. separate, expected utilization changes due to the reform process result only Several comments on the Pacific Distributing Plants—Route Distribution from potential changes in plants’ Northwest marketing area suggested in Using distributing plant lists included regulatory status; thus very little change the 2 preliminary reports were filed by in both the initial Preliminary and in producer returns under the Pacific cooperative associations operating in Revised Preliminary Reports and the Northwest order is expected as a result the area. Darigold, the area’s largest pooling standards used in the Revised of consolidation. For December 1996, cooperative, commented that there is Preliminary Report, updated for known Class I utilization for the Pacific strong justification for the order plant closures through May 1997, 39 Northwest market was 32.5 percent boundaries of the current Pacific distributing plants would be expected to based on 175,712,000 pounds of Northwest order area. Two other be associated with the Pacific Northwest producer milk used in Class I out of cooperatives had earlier supported a market, including 20 fully regulated 540,334,000 total producer milk broader consolidation, including at least distributing plants, 1 partially regulated pounds. the Southwestern Idaho-Eastern Oregon plant, 3 exempt plants (below 150,000 and, perhaps, the Great Basin order pounds in total route disposition), and Other Plants areas. However, as discussed in the two 15 producer-handlers. It is known that Also located within the proposed preliminary reports on order 4 distributing plants (1 pool plant and Pacific Northwest marketing area in consolidation, there is virtually no 3 producer handlers) have gone out of May 1997 were 27 supply or relationship with regard to either business since the initial report. manufacturing plants; 12 in Oregon (5 overlapping route dispositions or There are 11 distributing plants in the Portland area), 15 in Washington overlapping milk procurement between within the Portland area, including 7 (7 in the Seattle area) and none in Idaho. the Pacific Northwest and Southwestern pool plants, 2 exempt plants and 2 Two of the 27 plants (both in Oregon) Idaho-Eastern Oregon milk marketing producer-handlers. The Seattle area has are Order 124 pool supply plants, one areas. 4868 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

LIST OF PLANTS AND REGULATORY STATUS

Expected Plant name City State October 1995 order Status 1 status 1

NORTHEAST

ALDRICH DAIRY ...... FREDONIA ...... NY ...... 5 3B ARRUDA, GEORGIANNA (ESTATE OF) .. TIVERTON ...... RI New England ...... 4 4 BANGMA, LEONARD & DONALD ...... UXBRIDGE ...... MA New England ...... 4 4 BECHTEL DAIRIES, INC ...... ROYERSFORD ...... PA Mid Atlantic ...... 1 1 BOICE BROS. DAIRY (RICHARD P. KINGSTON ...... NY NY±NJ ...... 1 1 BOICE). BOOTH BROTHERS DAIRY, INC ...... BARRE ...... VT New England ...... 2 1 BRIGGS, ROBERT A ...... WEST MEDWAY ...... MA New England ...... 4 4 BROOKSIDE DAIRY ...... FITCHBURG ...... MA New England ...... 4 4 BYRNE DAIRY, INC ...... SYRACUSE ...... NY NY±NJ ...... 1 1 CAMPHILL VILLAGE ...... KIMBERTON ...... PA ...... 5 3B CHARLAP DAIRY FARMS, INC ...... HAMBURG ...... NY ...... 5 1 CHRISTIANSEN DAIRY CO., INC ...... NO. PROVIDENCE ...... RI New England ...... 1 1 CHROME DAIRY FARMS ...... OXFORD ...... PA Mid Atlantic ...... 1 1 CIENIEWICZ, JOSEPH ...... BERLIN ...... CT New England ...... 4 4 CLIFFORD W. & MARIE B. MOYER ...... DUBLIN ...... PA ...... 5 3B CLINTON MILK CO ...... NEWARK ...... NJ NY±NJ ...... 1 1 CLOVER FARMS DAIRY COMPANY ...... READING ...... PA NY±NJ ...... 1 1 CLOVERLAND/GREEN SPRING DAIRY .. BALTIMORE ...... MD Mid Atlantic ...... 1 1 CLOVERLAND/GREEN SPRING DAIRY .. BALTIMORE ...... MD Mid Atlantic ...... 1 1 COOPER'S HILLTOP DAIRY FARM ...... ROCHDALE ...... MA New England ...... 4 4 CORBY, CHARLES ...... PITTSFORD ...... NY ...... 5 3B CORNELL UNIVERSITY ...... ITHACA ...... NY ...... 5 6B CRESCENT RIDGE DAIRY, INC ...... SHARON ...... MA New England ...... 4 4 CROWLEY FOODS, INC ...... BINGHAMTON ...... NY NY±NJ ...... 1 1 CROWLEY FOODS, INC ...... ALBANY ...... NY NY±NJ ...... 1 1 CROWLEY FOODS, INC ...... CONCORD ...... NH New England ...... 1 1 CUMBERLAND DAIRY, INC ...... BRIDGETON ...... NJ Mid Atlantic ...... 1 2 CUMBERLAND FARMS, INC ...... EAST GREENBUSH ...... NY NY±NJ ...... 1 1 CUMBERLAND FARMS, INC ...... CANTON ...... MA New England ...... 1 1 CUMBERLAND FARMS, INC ...... FLORENCE ...... NJ Mid Atlantic ...... 1 1 DAIRY MAID DAIRY, INC ...... FREDERICK ...... MD Mid Atlantic ...... 1 1 DAVID F. ARMSTRONG (SUNSET WHITESBORO ...... NY NY±NJ ...... 1 1 DAIRY). DAVID NICHOLS ...... CHESTERFIELD ...... MA ...... 3B 2 DELLWOOD FOODS, INC. (TUSCAN YONKERS ...... NY NY±NJ ...... 1 OOB DAIRY FARMS, INC.). DUNAJSKI DAIRY, INC ...... PEABODY ...... MA New England ...... 4 4 DUTCH VALLEY FOOD CO., INC ...... SUNBURY ...... PA Mid Atlantic ...... 1 1 DUTCH WAY FARM MARKET ...... MYERSTOWN ...... PA Mid Atlantic ...... 4 4 EDWARDS, CHARLES (& KURT & GLOVERSVILLE ...... NY NY±NJ ...... 4 4 KEITHÐMODEL DAIRY FARM). ELMHURST DAIRY, INC ...... JAMAICA ...... NY NY±NJ ...... 1 1 EMBASSY DAIRY, INC ...... WALDORF ...... MD Mid Atlantic ...... 1 1 EMMONS WILLOW BROOK FARM, INC .. PEMBERTON ...... NJ Mid Atlantic ...... 4 4 FAIRDALE FARMS, INC ...... BENNINGTON ...... VT New England ...... 2 1 FARMERS COOP. DAIRY, INC ...... HAZELTON ...... PA ...... 5 5 FARMLAND DAIRIES, INC. &/OR WALLINGTON ...... NJ NY±NJ ...... 1 1 FAIRDALE MILK COMPANY, INC. FISH FAMILY FARM, INC ...... BOLTON ...... CT New England ...... 4 4 FREDDY HILL FARM DAIRY ...... LANSDALE ...... PA Mid Atlantic ...... 4 4 FREDRICK HINE ...... ORANGE ...... CT ...... 5 3B FRIENDSHIP DAIRIES, INC ...... FRIENDSHIP ...... NY NY±NJ ...... 1 2 GARELICK FARMS, INC ...... FRANKLIN ...... MA New England ...... 1 1 GIANT FOOD, INC ...... LANDOVER ...... MD Mid Atlantic ...... 1 1 GRATERFORD STATE ...... GRATERFORD ...... PA Mid Atlantic ...... 6A 6B GUERS DY., INC ...... POTTSVILLE ...... PA Mid Atlantic ...... 2 2 GUIDA-SEIBERT DAIRY CO ...... NEW BRITAIN ...... CT New England ...... 1 1 HALO FARM, INC ...... TRENTON ...... NJ Mid Atlantic ...... 1 1 HARBY, JOSEPH F ...... WALTON ...... NY NY±NJ ...... 1 OOB HARRISBURG DAIRIES ...... HARRISBURG ...... PA Mid Atlantic ...... 1 1 HERITAGE'S DAIRY, INC ...... THOROFARE ...... NJ Mid Atlantic ...... 1 1 HERMANY FARMS, INC ...... BRONX ...... NY NY±NJ ...... 1 1 HIGHLAWN FARM ...... LEE ...... MA ...... 5 3B HILL FARM OF VERMONT ...... PLAINFIELD ...... VT ...... 5 3B HILLCREST DAIRY, INC. (MICHAEL J. MORAVIA ...... NY NY±NJ ...... 4 4 JANAS). HOGAN, FRANCIS J. (& ANDREW J. & HUDSON FALLS ...... NY NY±NJ ...... 4 4 SEAN P.ÐHOGAN'S DAIRY). HOMESTEAD DAIRIES, INC ...... MASSENA ...... NY ...... 5 1 HOOVER DAIRY ...... SANBORN ...... NY ...... 5 3B HOWARD HATCH ...... N. HAVERHILL ...... NH New England ...... 1 1 HUDAK, RUDOLPH ...... SHELTON ...... CT New England ...... 4 OOB HY POINT DAIRY FARMS, INC ...... WILMINGTON ...... DE Mid Atlantic ...... 1 1 H.E.A., INC ...... CRANSTON ...... RI New England ...... 1 1 H.P. HOOD, INC ...... NEWINGTON ...... CT New England ...... 2 2 H.P. HOOD, INC ...... PORTLAND ...... ME New England ...... 1 1 H.P. HOOD, INC ...... AGAWAM ...... MA New England ...... 1 1 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4869

LIST OF PLANTS AND REGULATORY STATUSÐContinued

Expected Plant name City State October 1995 order Status 1 status 1

H.P. HOOD, INC ...... CHARLESTON ...... MA New England ...... 1 OOB H.P. HOOD, INC ...... BURLINGTON ...... VT New England ...... 2 1 H.P. HOOD, INC ...... ONEIDA ...... NY NY±NJ ...... 2 1 KEMPS FOODS, INC ...... LANCASTER ...... PA Mid Atlantic ...... 1 1 KOLB'S FARM STORE ...... SPRING CITY ...... PA Mid Atlantic ...... 4 4 KREIDER DAIRY FARMS, INC ...... MANHEIM ...... PA NY±NJ ...... 2 1 KRISCO FARMS, INC. (KRISCO FARMS) CAMPBELL HALL ...... NY NY±NJ ...... 4 4 LAPP VALLEY FARM ...... NEW HOLLAND ...... PA Mid Atlantic ...... 4 4 LEHIGH VALLEY DAIRIES, INC ...... FORT WASHINGTON ...... PA Mid Atlantic ...... 1 OOB LEHIGH VALLEY DAIRIES, INC ...... LANSDALE ...... PA NY±NJ ...... 1 1 LEHIGH VALLEY DAIRIES, INC ...... SCHUYKILL HAVEN ...... PA NY±NJ ...... 2 2 LEWES DAIRY, INC ...... LEWES ...... DE Mid Atlantic ...... 1 1 LEWIS COUNTY DAIRY CORP ...... LOWVILLE ...... NY NY±NJ ...... 1 1 LONGACRE'S MODERN DAIRY, INC ...... BARTO ...... PA Mid Atlantic ...... 2 2 LUNDGREN & JONAITIS DAIRY FARMS, SHREWSBURY ...... MA New England ...... 1 1 INC. (WHITTIER CREAMERY CO., INC.). MANINO, ROSE (DARI-DELL) ...... FRANKFORT ...... NY NY±NJ ...... 2 3B MAPLE HILL FARMS, INC ...... BLOOMFIELD ...... CT New England ...... 1 1 MAPLEDALE DAIRY, INC ...... ROME ...... NY NY±NJ ...... 1 OOB MAPLEHOFE DAIRY, INC ...... QUARRYVILLE ...... PA Mid Atlantic ...... 4 4 MARCUS DAIRY, INC ...... DANBURY ...... CT NY±NJ ...... 1 1 MASON-DIXON FARM DAIRY ...... GETTYSBURG ...... PA Mid Atlantic ...... 1 OOB MEADOW BROOK FARMS, INC ...... POTTSTOWN ...... PA Mid Atlantic ...... 1 1 MERCERS DAIRY, INC ...... BOONVILLE ...... NY NY±NJ ...... 2 3B MERRYMEAD FARM ...... LANSDALE ...... PA Mid Atlantic ...... 4 4 MOHAWK DAIRY (Z & R CORP.) ...... AMSTERDAM ...... NY NY±NJ ...... 1 1 MONUMENT FARMS, INC ...... MIDDLEBURY ...... VT ...... 5 1 MOUNT WACHUSETT DAIRY, INC ...... W. BOYLSTON ...... MA New England ...... 1 1 MOUNTAINSIDE FARMS, INC ...... ROXBURY ...... NY NY±NJ ...... 1 1 MUNROE, A B DAIRY, INC ...... EAST PROVIDENCE ...... RI New England ...... 1 1 NEW ENGLAND DAIRIES, INC ...... HARTFORD ...... CT New England ...... 1 1 NICASTRO, JOSEPH & CROSS (RIVER- FRANKFORT ...... NY NY±NJ ...... 4 4 SIDE FARMS) (NICASTRO FARMS, INC.). NIP N TUCK FARMS ...... VINEYARD HAVEN ...... MA ...... 5 4 OAK TREE FARM DAIRY, INC ...... EAST NORTHPORT ...... NY NY±NJ ...... 1 1 OAKHURST DAIRY ...... PORTLAND ...... ME New England ...... 2 2 OREGON DAIRY FARM MKT ...... LITITZ ...... PA Mid Atlantic ...... 4 4 PARKER, A C & SONS, INC ...... CLINTON ...... MA New England ...... 1 OOB PARMALAT WEST DAIRIES, INC ...... SPRING CITY ...... PA Mid Atlantic ...... 2 3B PATRICK MCNAMARA ...... WEST LEBANON ...... NH New England ...... 4 4 PAYNES DAIRY ...... KNOXVILLE ...... PA ...... 5 5 PEACEFUL MEADOWS ICE CREAM, INC WHITMAN ...... MA New England ...... 4 4 PEARSON, ROBERT L ...... WEST MILLBURY ...... MA New England ...... 4 4 PECORA'S DAIRY ...... DRUMS ...... PA ...... 5 5 PEDRO, JOSEPH ...... FALL RIVER ...... MA New England ...... 4 4 PENNVIEW FARMS ...... PERKASIE ...... PA Mid Atlantic ...... 4 4 PERRYDELL FARMS ...... YORK ...... PA Mid Atlantic ...... 4 4 PETER FLINT ...... CHELSEA ...... VT New England ...... 1 1 PINE VIEW ACRES, INC ...... LANCASTER ...... PA Mid Atlantic ...... 4 4 PIONEER DAIRY, INC ...... SOUTHWICK ...... MA New England ...... 1 1 PLEASANT VIEW FARMS DAIRY ...... ST THOMAS ...... PA Mid Atlantic ...... 4 OOB POTOMAC FARMS DAIRY, INC ...... CUMBERLAND ...... MD Mid Atlantic ...... 2 2 PULEO'S DAIRY ...... SALEM ...... MA New England ...... 1 3B QUALITY MILK, INC ...... WARE ...... MA ...... 5 1 QUEENSBORO FARM PRODUCTS, INC CANASTOTA ...... NY NY±NJ ...... 1 2 READINGTON FARMS, INC ...... WHITEHOUSE ...... NJ NY±NJ ...... 1 1 READY FOODS, INC ...... PHILADELPHIA ...... PA Mid Atlantic ...... 2 2 RICHARDSON FARMS, INC ...... MIDDLETON ...... MA New England ...... 4 4 RICHARDSONS G. H. DAIRY ...... DRACUT ...... MA New England ...... 3A 3B RIDGE VIEW FARMS ...... ELIZABETHTOWN ...... PA Mid Atlantic ...... 4 4 RITCHEY'S DAIRY ...... MARTINSBURG ...... PA Mid Atlantic ...... 2 2 RONNYBROOK FARM DAIRY, INC ...... ANCRAMDALE ...... NY NY±NJ ...... 4 4 ROSENBERGER'S DAIRY, INC ...... HATFIELD ...... PA Mid Atlantic ...... 1 1 RUDOLPH STEINER EDUCATION & GHENT ...... NY NY±NJ ...... 4 4 FARMING ASSOC., INC. RUSSELL SEARS ...... CUMMINGTON ...... MA New England ...... 4 OOB RUTTER BROS. DAIRY, INC ...... YORK ...... PA Mid Atlantic ...... 1 1 SALEM VALLEY FARMS, INC ...... SALEM ...... CT New England ...... 4 4 SARATOGA DAIRY, INC. (STEWART'S SARATOGA SPRINGS ...... NY NY±NJ ...... 1 1 PROCESSING CORP.). SCHNEIDER/VALLEY FARMS, INC ...... WILLIAMSPORT ...... PA NY±NJ ...... 2 1 SEWARD DAIRY, INC ...... RUTLAND ...... VT New England ...... 2 1 SHAW FARM DAIRY, INC ...... DRACUT ...... MA New England ...... 4 4 SHENANDOAH'S PRIDE DAIRY ...... SPRINGFIELD ...... VA Mid Atlantic ...... 1 1 STEARNS, WILLARD J. & SONS, INC ..... STORRS ...... CT New England ...... 4 4 STEWART J. LEONARD ...... NORWALK ...... CT New England ...... 1 1 STOP & SHOP COMPANIES, INC ...... READVILLE ...... MA New England ...... 1 1 STUMP ACRES DAIRY FARMS ...... YORK ...... PA ...... 5 3B 4870 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

LIST OF PLANTS AND REGULATORY STATUSÐContinued

Expected Plant name City State October 1995 order Status 1 status 1

SULOMAN'S MILK ...... GILBERTSVILLE ...... PA Mid Atlantic ...... 4 4 SUNNYDALE FARMS, INC ...... BROOKLYN ...... NY NY±NJ ...... 1 1 SYNAKOWSKI WALTER J (VALLEY SIDE REMSEN ...... NY NY±NJ ...... 4 4 FARM). TANNER BROS. DAIRY ...... WARMINSTER ...... PA Mid Atlantic ...... 4 4 THOMAS, ORIN & SONS, INC ...... RUTLAND ...... VT New England ...... 2 1 TRINITY FARM ...... ENFIELD ...... CT New England ...... 3A 3B TURKEY HILL DAIRY, INC ...... CONESTOGA ...... PA Mid Atlantic ...... 1 1 TURNER'S DAIRY, INC ...... SALEM ...... NH New England ...... 1 1 TUSCAN DAIRY FARMS, INC ...... UNION ...... NJ NY±NJ ...... 1 1 TUSCAN DAIRY FARMS, INC ...... FRASER ...... NY NY±NJ ...... 2 2 UPSTATE MILK COOPERATIVES, INC ... JAMESTOWN ...... NY ...... 5 2 UPSTATE MILK COOPERATIVES, INC ... ROCHESTER ...... NY NY±NJ ...... 2 1 UPSTATE MILK COOPERATIVES, INC ... BUFFALO ...... NY NY±NJ ...... 2 1 VALLEY OF VIRGINIA COOP ...... MT. CRAWFORD ...... VA Mid Atlantic ...... 2 2 VAN WIE, CHARLES F. CLARKSVILLE ...... NY NY±NJ ...... 4 4 (MEADOWBROOK FARMS DAIRY). WAWA DAIRY FARMS ...... WAWA ...... PA Mid Atlantic ...... 1 1 WAY-HAR FARMS ...... BERNVILLE ...... PA NY±NJ ...... 2 3B WELSH FARMS, INC ...... LONG VALLEY ...... NJ NY±NJ ...... 1 1 WENDTS DAIRY DIV NIAGARA CO ...... NIAGARA FALLS ...... NY ...... 5 1 WENGERTS DAIRY, INC ...... LEBANON ...... PA Mid Atlantic ...... 1 1 WEST LYNN CREAMERY, INC ...... LYNN ...... MA New England ...... 1 1 WILLIAM WALSH ...... SIMSBURY ...... CT New England ...... 4 4 WINSOR, S. B. DAIRY, INC ...... JOHNSTON ...... RI New England ...... 1 3B WRIGHT'S DAIRY FARM, INC ...... NORTH SMITHFIELD ...... RI New England ...... 4 4

APPALACHIAN

BROADACRE DAIRIES ...... POWELL ...... TN Tenn Valley ...... 1 1 CAROLINA DAIRIES ...... KINSTON ...... NC Carolina ...... 1 1 COBURG DAIRY, INC ...... N. CHARLESTON ...... SC Carolina ...... 1 1 DAIRY FRESH, LP ...... WINSTON-SALEM ...... NC Carolina ...... 1 1 DEAN MILK CO ...... LOUISVILLE ...... KY Louis-Lex-Evans ...... 1 1 FLAV-O-RICH, INC ...... WILKESBORO ...... NC Carolina ...... 1 1 FLAV-O-RICH, INC ...... LONDON ...... KY Tenn Valley ...... 1 1 FLAV-O-RICH, INC ...... BRISTOL ...... VA TennValley ...... 1 1 FLAV-O-RICH, INC ...... FLORENCE ...... SC Carolina ...... 1 1 FLAV-O-RICH, INC ...... GOLDSBORO ...... NC Carolina ...... 1 OOB GOLDEN GALLON, INC ...... CHATTANOOGA ...... TN Tenn Valley ...... 1 1 HOLLAND DAIRIES, INC ...... HOLLAND ...... IN Louis-Lex-Evans ...... 1 1 HUNTER FARMS ...... HIGHPOINT ...... NC Carolina ...... 1 1 HUNTER FARMS ...... CHARLOTTE ...... NC Carolina ...... 1 1 IDEAL AMERICAN DAIRY ...... EVANSVILLE ...... IN Louis-Lex-Evans ...... 1 1 JACKSON DAIRY ...... DUNN ...... NC Carolina ...... 1 1 JERSEY RIDGE DAIRY, INC ...... KNOXVILLE ...... TN Tenn Valley ...... 1 3B LAND-O-SUN DAIRIES, INC ...... KINGSPORT ...... TN Tenn Valley ...... 1 1 LAND-O-SUN DAIRIES, INC ...... PORTSMOUTH ...... VA Mid Atlantic ...... 2 2 LAND-O-SUN DAIRIES, INC ...... SPARTANBURG ...... SC Carolina ...... 1 1 MAOLA MILK & ICE CREAM CO ...... NEW BERN ...... NC Carolina ...... 1 1 MAPLEVIEW FARMS ...... HILLSBORO ...... NC ...... 1 2 MARVA MAID DAIRY ...... NEWPORT NEWS ...... VA Mid Atlantic ...... 2 2 MAYFIELD DAIRY FARMS, INC ...... ATHENS ...... TN Tenn Valley ...... 1 1 MILKCO, INC ...... ASHEVILLE ...... NC Carolina ...... 1 1 NORTH CAROLINA ST. UNIV ...... RALEIGH ...... NC Carolina ...... 6A 6B PEELER JERSEY FARMS, INC ...... GAFFNEY ...... SC Carolina ...... 1 1 PINE STATE CREAMERY CO ...... RALEIGH ...... NC Carolina ...... 1 OOB REGIS MILK CO ...... CHARLESTON ...... SC Carolina ...... 1 1 RICHFOOD DAIRY ...... RICHMOND ...... VA Mid Atlantic ...... 2 1 SOUTHERN BELLE DAIRY, INC ...... SOMERSET ...... KY Tenn Valley ...... 1 1 SUPERBRAND DY. PRODS., INC ...... GREENVILLE ...... SC Southeast ...... 1 1 SUPERBRAND DAIRY, INC ...... HIGHPOINT ...... NC Carolina ...... 1 1 U C MILK CO ...... MADISONVILLE ...... KY Louis-Lex-Evans ...... 1 1 WESTOVER DAIRIES ...... LYNCHBURG ...... VA Carolina ...... 1 1 WINCHESTER FARMS DAIRY ...... WINCHESTER ...... KY Louis-Lex-Evans ...... 1 1

FLORIDA

BORDEN, INC.(TRI-STATE DAIRY) ...... MIAMI ...... FL Southeast Florida ...... 1 1 FARMS STORES, INC. (REW JB DAIRY MIAMI ...... FL Southeast Florida ...... 1 1 PLANT ASSOCIATES dba FARM STORES). GOLDEN FLEECE DAIRY ...... LECANTO ...... FL Tampa Bay ...... 1 3B GUSTAFSON'S DAIRY, INC ...... GREEN COVE ...... FL Upper Florida ...... 1 1 LIFE STYLE/DIV TG LEE FOODS (T.G. ORANGE CITY ...... FL Upper Florida ...... 1 1 LEE FOODS). LONGLIFE DAIRY PRODUCTS, INC ...... JACKSONVILLE ...... FL Southeast ...... 1 1 M & B DAIRY PRODUCTS, INC ...... TAMPA ...... FL Tampa Bay ...... 1 3B MCARTHUR DAIRY, INC ...... PLANTATION ...... FL Southeast Florida ...... 1 1 MORNINGSTAR FOODS, INC. (VELDA, WINTER HAVEN ...... FL Tampa Bay ...... 1 1 INC.). Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4871

LIST OF PLANTS AND REGULATORY STATUSÐContinued

Expected Plant name City State October 1995 order Status 1 status 1

MORNINGSTAR FOODS, INC. (VELDA, MIAMI ...... FL Southeast Florida ...... 1 1 INC.). PUBLIX SUPER MKTS., INC ...... DEERFIELD BEACH ...... FL Southeast Florida ...... 1 1 PUBLIX SUPER MKTS., INC ...... LAKELAND ...... FL Upper Florida ...... 1 1 SKINNERS DAIRY, INC ...... JACKSONVILLE ...... FL Upper Florida ...... 1 OOB SUPERBRAND DAIRY PRODUCTS, INC PLANT CITY ...... FL Tampa Bay ...... 1 1 SUPERBRAND DAIRY PRODUCTS, INC MIAMI ...... FL Southeast Florida ...... 1 1 T.G. LEE FOODS, INC ...... ORLANDO ...... FL Tampa Bay ...... 1 1 VELDA FARMS, LP (VELDA, INC.) ...... ST. PETERSBURG ...... FL Tampa Bay ...... 1 1 WIGGINS DAIRY PRODUCTS, INC ...... PLANT CITY ...... FL Tampa Bay ...... 1 1

SOUTHEAST

ALCORN STATE UNIVERSITY ...... LORMAN ...... MS Southeast ...... 6A 6B ARKANSAS DEPT. OF CORREC ...... GRADY ...... AR Southeast ...... 6A 6B AVENT'S DAIRY NC ...... OXFORD ...... MS Southeast ...... 1 1 BAKER & SONS DAIRY, INC ...... BIRMINGHAM ...... AL Southeast ...... 1 OOB BARBER PURE MILK CO ...... BIRMINGHAM ...... AL Southeast ...... 1 1 BARBER PURE MILK CO ...... MOBILE ...... AL Southeast ...... 1 1 BARBER PURE MILK CO ...... TUPELO ...... MS Southeast ...... 1 OOB BARBE'S DAIRY, INC ...... WESTWEGO ...... LA Southeast ...... 1 1 BORDEN DAIRY ...... LITTLE ROCK ...... AR Southeast ...... 1 OOB BORDEN, INC ...... MONROE ...... LA Southeast ...... 1 1 BORDEN, INC ...... BATON ROUGE ...... LA Southeast ...... 1 1 BORDEN, INC ...... MACON ...... GA Southeast ...... 1 OOB BORDEN, INC ...... LAFAYETTE ...... LA Southeast ...... 1 1 BORDEN, INC ...... JACKSON ...... MS Southeast ...... 1 OOB BROOKSHIRE DAIRY PRODUCTS ...... COLUMBUS ...... MS Southeast ...... 1 OOB BROWNS VELVET DY. PRODUCTS NEW ORLEANS ...... LA Southeast ...... 1 1 (SOUTHERN FOODS GROUP, LP dba BROWN'S VELVET). CENTENNIAL FARMS DAIRY, INC ...... ATLANTA ...... GA ...... 1 2 COLEMAN DAIRY, INC ...... LITTLE ROCK ...... AR Southeast ...... 1 1 COLLEGE OF THE OZARKS ...... POINT LOOKOUT ...... MO Southwest Plains ...... 1 OOB DAIRY FRESH CORP ...... COWARTS ...... AL Southeast ...... 1 1 DAIRY FRESH CORP ...... HATTIESBURG ...... MS Southeast ...... 1 1 DAIRY FRESH CORP ...... PRICHARD ...... AL Southeast ...... 1 1 DAIRY FRESH OF LA ...... BAKER ...... LA Southeast ...... 1 1 DASI PRODUCTS, INC ...... DECATUR ...... AL Southeast ...... 2 1 ETOWAH MAID DAIRIES, INC ...... CANTON ...... GA Southeast ...... 4 4 FLAV-O-RICH, INC ...... CANTON ...... MS Southeast ...... 1 1 FOREMOST DAIRY, INC ...... SHREVEPORT ...... LA Southeast ...... 1 1 FOREST HILL DAIRY ...... MEMPHIS ...... TN Southeast ...... 1 1 GEORGIA STATE PRISON ...... REIDSVILLE ...... GA Southeast ...... 6A 6B GOLD STAR DAIRY ...... LITTLE ROCK ...... AR Southeast ...... 1 1 HERITAGE FARMS DAIRY ...... MURFREESBORO ...... TN Southeast ...... 1 1 HERSHEY CHOCOLATE U.S.A ...... SAVANNAH ...... GA Tampa Bay ...... 2 2 HILAND DAIRY CO ...... FAYETTEVILLE ...... AR Southwest Plains ...... 1 1 HILAND DAIRY CO ...... FORT SMITH ...... AR Southwest Plains ...... 1 1 HILAND DAIRY CO ...... SPRINGFIELD ...... MO Southwest Plains ...... 1 1 HUMPHREY DAIRY ...... HOT SPRINGS ...... AR Southeast ...... 3A 3B KINNETT DAIRIES, INC ...... COLUMBUS ...... GA Southeast ...... 1 1 KLEINPETER DAIRY, INC ...... BATON ROUGE ...... LA Southeast ...... 1 1 LOUISIANA STATE PEN ...... ANGOLA ...... LA Southeast ...... 6A 6B LOUISIANA TECH ...... RUSTON ...... LA Southeast ...... 6A 6B LUVEL DAIRY PRODUCTS, INC ...... KOSCIUSKO ...... MS Southeast ...... 1 1 MALONE & HYDE DAIRY/FLEMING NASHVILLE ...... TN Southeast ...... 1 1 COMPANIES, INC. MEADOW GOLD DAIRIES, INC. (TRI- HUNTSVILLE ...... AL Southeast ...... 1 1 STATE DAIRY). MID-AMERICA DAIRYMEN, INC ...... LEBANON ...... MO Southwest Plains ...... 1 2 MISSISSIPPI STATE UNIVERSITY ...... MISS. STATE ...... MS Southeast ...... 6A 6B NEW ATLANTA DAIRIES, INC ...... ATLANTA ...... GA Southeast ...... 1 1 PEELER JERSEY FARMS, INC ...... ATHENS ...... GA Southeast ...... 1 1 PUBLIX SUPERMARKETS, INC ...... LAWRENCEVILLE ...... GA Southeast ...... 1 1 PURITY DAIRIES, INC ...... NASHVILLE ...... TN Southeast ...... 1 1 RYAN MILK COMPANY ...... MURRAY ...... KY Southeast ...... 2 1 SOUTHERN UNIVERSITY ...... BATON ROUGE ...... LA Southeast ...... 6A 6B SUPERBRAND DY. PRODUCTS, INC ...... MONTGOMERY ...... AL Southeast ...... 1 1 SUPERBRAND DY. PRODS., INC ...... HAMMOND ...... LA Southeast ...... 1 1 TURNER DAIRIES, INC ...... COVINGTON ...... TN Southeast ...... 1 1 TURNER DAIRIES, INC ...... FULTON ...... KY Southeast ...... 1 1

MIDEAST

ALBERT MIHALY AND SON DAIRY ...... LOWELLVILLE ...... OH E Ohio-W Penn ...... 4 4 ARPS DAIRY, INC ...... DEFIANCE ...... OH Ohio Valley ...... 1 1 BAREMAN DAIRY, INC ...... HOLLAND ...... MI Southern Michigan ...... 1 1 BARKER'S FARM DAIRY, INC ...... PECKS MILL ...... WV Ohio Valley ...... 4 4 BORDEN, INC ...... YOUNGSTOWN ...... OH E Ohio-W Penn ...... 1 OOB BROUGHTON FOODS CO ...... MARIETTA ...... OH Ohio Valley ...... 1 1 4872 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

LIST OF PLANTS AND REGULATORY STATUSÐContinued

Expected Plant name City State October 1995 order Status 1 status 1

BRUNTON DAIRY ...... ALIQUIPPA ...... PA E Ohio-W Penn ...... 4 4 BURGER DAIRY CO ...... NEW PARIS ...... IN Indiana ...... 1 1 BURGER, C.F., CREAMERY, INC ...... DETROIT ...... MI Southern Michigan ...... 2 2 CALDER BROTHERS DAIRY ...... LINCOLN PARK ...... MI Southern Michigan ...... 1 1 COLTERYAHN DAIRY, INC ...... PITTSBURGH ...... PA E Ohio-W Penn ...... 1 1 CON-SUN FOOD INDUSTRIES, INC...... ELYRIA ...... OH E Ohio-W Penn ...... 1 1 COOK'S FARM DAIRY, INC ...... ORTONVILLE ...... MI Southern Michigan ...... 4 4 COUNTRY DAIRY ...... NEW ERA ...... MI Southern Michigan ...... 4 4 COUNTY FRESH, INC ...... GRAND RAPIDS ...... MI Southern Michigan ...... 1 1 CROOKED CREEK FARM DAIRY ...... ROMEO ...... MI Southern Michigan ...... 4 4 DEAN DAIRY PRODUCTS CO ...... SHARPSVILLE ...... PA E Ohio-W Penn ...... 1 1 DEAN FOODS COMPANY ...... ROCHESTER ...... IN Indiana ...... 1 1 DIXIE DAIRY CO ...... GARY ...... IN Indiana ...... 1 1 EASTSIDE JERSEY DAIRY, INC ...... ANDERSON ...... IN Indiana ...... 1 1 ELMVIEW DAIRY ...... COLUMBUS ...... PA E Ohio-W Penn ...... 4 4 EMBEST, INC ...... LIVONIA ...... MI Southern Michigan ...... 1 1 FIKE, R BRUCE & SONS DAIRY ...... UNIONTOWN ...... PA E Ohio-W Penn ...... 1 1 FISHER'S DAIRY, R.V. FISHER ...... PORTERSVILLE ...... PA E Ohio-W Penn ...... 4 4 FLEMINGS DAIRY ...... UTICA ...... OH Ohio Valley ...... 1 1 GALLIKER DAIRY CO ...... JOHNSTOWN ...... PA E Ohio-W Penn ...... 2 2 GLEN EDEN FARM-DIANNE TEETS ...... ROCHESTER ...... PA E Ohio-W Penn ...... 4 4 GOSHEN DAIRY COMPANY ...... NEW PHILADELPHIA ...... OH E Ohio-W Penn ...... 1 1 GREEN VALE FARM ...... COOPERSVILLE ...... MI Southern Michigan ...... 4 4 GREEN VALLEY DAIRY ...... GEORGETOWN ...... PA E Ohio-W Penn ...... 4 4 GUERNSEY FARMS DAIRY ...... NORTHVILLE ...... MI Southern Michigan ...... 1 1 HARTZLER FAMILY DAIRY ...... WOOSTER ...... OH 3B ...... 2 HILLSIDE DAIRY CO ...... CLEVELAND HGHTS ...... OH E Ohio-W Penn ...... 1 1 HUTTER FARM DAIRY ...... MT. PLEASANT ...... PA E Ohio-W Penn ...... 4 4 INVERNESS DAIRY, INC ...... CHEBOYGAN ...... MI Michigan U P ...... 1 1 JACKSON ALL STAR DAIRY ...... JACKSON ...... MI Southern Michigan ...... 1 OOB JACKSON FARMS ...... NEW SALEM ...... PA E Ohio-W Penn ...... 4 4 JILBERT DAIRY, INC ...... MARQUETTE ...... MI Michigan U P ...... 1 1 JOHNSON'S DAIRY, INC ...... ASHLAND ...... KY Ohio Valley ...... 1 1 KERBER'S DAIRY ...... N. HUNTINGDON ...... PA E Ohio-W Penn ...... 1 3B KROGER COMPANY, THE ...... INDIANAPOLIS ...... IN Indiana ...... 1 1 LANSING DAIRY, INC. (MELODY LANSING ...... MI Southern Michigan ...... 1 1 FARMS, INC.). LIBERTY DAIRY CO ...... EVART ...... MI Southern Michigan ...... 1 1 LONDON'S FARM DAIRY, INC ...... PORT HURON ...... MI Southern Michigan ...... 1 1 MAPLEHURST FARMS, INC ...... INDIANAPOLIS ...... IN Indiana ...... 1 1 MARBURGER FARM DAIRY, INC ...... EVANS CITY ...... PA E Ohio-W Penn ...... 1 1 MCDONALD DAIRY COMPANY ...... FLINT ...... MI Southern Michigan ...... 1 1 MCMAHONS DAIRY, INC ...... ALTOONA ...... PA ...... 5 5 MEADOW BROOK DAIRY ...... ERIE ...... PA E Ohio-W Penn ...... 1 1 MEYER H & SONS DAIRY ...... CINCINNATI ...... OH Ohio Valley ...... 1 1 MICHIGAN DAIRY ...... LIVONIA ...... MI Southern Michigan ...... 1 1 MILLER CORPORATION ...... CAMBRIDGE CITY ...... IN Indiana ...... 1 OOB MONG DAIRY CO ...... SENECA ...... PA E Ohio-W Penn ...... 1 OOB MURPHY'S DAIRY ...... JAMESTOWN ...... PA E Ohio-W Penn ...... 4 OOB NICOL'S FARM DAIRY ...... BEAVER ...... PA E Ohio-W Penn ...... 4 OOB OBERLIN FARMS DAIRY, INC ...... CLEVELAND ...... OH E Ohio-W Penn ...... 1 1 OSBORN DAIRY ...... SAULT STE MARIE ...... MI Michigan U P ...... 4 4 PLEASANT VIEW DAIRY CORP ...... HIGHLAND ...... IN Indiana ...... 1 1 PRAIRIE FARMS DAIRY, INC ...... FT. WAYNE ...... IN Indiana ...... 1 1 QUALITY CREAMERY, INC ...... COMSTOCK PARK ...... MI Southern Michigan ...... 1 1 QUALITY DAIRY CO B.T.U ...... LANSING ...... MI Southern Michigan ...... 1 1 RAEMELTON FARM DAIRY ...... MANSFIELD ...... OH Ohio Valley ...... 4 OOB REITER DAIRY CO ...... SPRINGFIELD ...... OH Ohio Valley ...... 1 1 REITER DAIRY, INC ...... AKRON ...... OH E Ohio-W Penn ...... 1 1 ROELOF DAIRY ...... GALESBURG ...... MI Southern Michigan ...... 1 1 SANI DAIRY ...... JOHNSTOWN ...... PA E Ohio-W Penn ...... 2 2 SCHENKEL'S ALL-STAR DAIRY, INC ...... HUNTINGTON ...... IN Indiana ...... 1 1 SCHIEVER FARM DAIRY ...... HARMONY ...... PA E Ohio-W Penn ...... 1 3B SCHNEIDERS DAIRY, INC ...... PITTSBURGH ...... PA E Ohio-W Penn ...... 1 1 SMITH DAIRY PRODUCTS CO ...... ORRVILLE ...... OH Ohio Valley ...... 1 1 SMITH'S DAIRY PRODUCTS CO ...... RICHMOND ...... IN Ohio Valley ...... 1 1 STERLING MILK CO ...... WAUSEON ...... OH Ohio Valley ...... 1 1 SUPERIOR DAIRIES, INC ...... SAGINAW ...... MI Southern Michigan ...... 1 1 SUPERIOR DAIRY, INC ...... CANTON ...... OH E Ohio-W Penn ...... 1 1 TAMARACK FARMS ...... NEWARK ...... OH Ohio Valley ...... 1 1 TAYLOR MILK CO., INC ...... AMBRIDGE ...... PA E Ohio-W Penn ...... 1 1 THE SPRINGHOUSE ...... EIGHTY FOUR ...... PA E Ohio-W Penn ...... 4 4 TOFT DAIRY INC ...... SANDUSKY ...... OH Ohio Valley ...... 2 1 TOLEDO MILK PROCESSING, INC. MAUMEE ...... OH Ohio Valley ...... 1 1 (COUNTRY FRESH OF OHIO). TRAUTH, LOUIS DAIRY ...... NEWPORT ...... KY Ohio Valley ...... 1 1 TURNER DAIRY FARMS, INC ...... PITTSBURGH ...... PA E Ohio-W Penn ...... 1 1 UNITED DAIRY FARMERS ...... CINCINNATI ...... OH Ohio Valley ...... 1 1 UNITED DAIRY, INC ...... MARTINS FERRY ...... OH E Ohio-W Penn ...... 1 1 UNITED DAIRY, INC ...... CHARLESTON ...... WV Ohio Valley ...... 1 1 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4873

LIST OF PLANTS AND REGULATORY STATUSÐContinued

Expected Plant name City State October 1995 order Status 1 status 1

VALEWOOD FARMS ...... CRESSON ...... PA ...... 5 5 VALLEY RICH DAIRY ...... ROANOKE ...... VA Ohio Valley ...... 2 2 WEST VIRGINIA UNIVERSITY DAIRY ..... MORGANTOWN ...... WV E Ohio-W Penn ...... 4 OOB WHITE KNIGHT PACKAGING CORP. WYOMING ...... MI Southern Michigan ...... 1 1 (PARMALAT WHITE KNIGHT PACKAG- ING CORP.). YOUNG'S JERSEY DAIRY, INC ...... YELLOW SPRINGS ...... OH Ohio Valley ...... 4 4

UPPER MIDWEST

ASSOC. MILK PRODUCERS, INC. DEPERE ...... WI Chicago Regional ...... 1 1 (FOREMOST FARMS COOPERATIVE). AYSTA DAIRY, INC ...... VIRGINIA ...... MN Upper Midwest ...... 1 1 CASS-CLAY CREAMERY, INC ...... GRAND FORKS ...... ND Upper Midwest ...... 1 1 CASS-CLAY CREAMERY, INC ...... FARGO ...... ND Upper Midwest ...... 1 1 CASS-CLAY CREAMERY, INC ...... MANDAN ...... ND Upper Midwest ...... 2 2 CENTRAL MINNESOTA ...... SAUK CENTRE ...... MN Upper Midwest ...... 1 1 COUNTRY LAKE FOODS, INC. (LAND BISMARCK ...... ND Upper Midwest ...... 2 2 O'LAKES, INC.). COUNTRY LAKE FOODS, INC. (LAND THIEF RIVER ...... MN Upper Midwest ...... 1 1 O'LAKES, INC.). COUNTRY LAKE FOODS, INC. (LAND WOODBURY ...... MN Upper Midwest ...... 1 1 O'LAKES, INC.). DEAN FOODS CO ...... HUNTLEY ...... IL Chicago Regional ...... 1 1 DEAN FOODS CO ...... HARVARD ...... IL Chicago Regional ...... 1 1 FOREMOST FARMS USA ...... WAUKESHA ...... WI Chicago Regional ...... 1 1 FOREMOST FARMS USA ...... WAUSAU ...... WI Chicago Regional ...... 1 1 FRANKLIN FOODS ...... DULUTH ...... MN Upper Midwest ...... 1 1 HANSENS DAIRY, INC ...... GREEN BAY ...... WI Chicago Regional ...... 2 1 HASTINGS COOPERATIVE ...... HASTINGS ...... MN Upper Midwest ...... 1 1 KOHLER MIX SPECIALITIES, INC ...... WHITE BEAR ...... MN Upper Midwest ...... 2 2 KWIK TRIP DAIRY ...... LA CROSSE ...... WI Chicago Regional ...... 1 1 LAMERS DAIRY, INC ...... KIMBERLY ...... WI Chicago Regional ...... 2 1 LIFEWAY FOODS, INC ...... SKOKIE ...... IL Chicago Regional ...... 2 1 MARIGOLD FOODS, INC ...... ROCHESTER ...... MN Upper Midwest ...... 1 1 MARIGOLD FOODS, INC ...... CEDARBURG ...... WI Chicago Regional ...... 1 1 MARIGOLD FOODS, INC ...... MINNEAPOLIS ...... MN Upper Midwest ...... 1 1 MEYER BROTHERS DAIRY ...... WAYZATA ...... MN Upper Midwest ...... 1 1 MULLER-PINEHURST, INC ...... ROCKFORD ...... IL Chicago Regional ...... 1 1 NORTH BRANCH DAIRY, INC ...... NORTH BRANCH ...... MN Upper Midwest ...... 1 1 OAK GROVE DAIRY ...... NORWOOD ...... MN Upper Midwest ...... 1 1 OBERWEIS DAIRY, INC ...... AURORA ...... IL Chicago Regional ...... 1 1 POLLARD DAIRY, INC ...... NORWAY ...... MI Michigan U P ...... 1 1 ROCK I FARMS ...... OSWEGO ...... IL Chicago Regional ...... 4 4 SCHROEDER MILK CO., INC ...... ST PAUL ...... MN Upper Midwest ...... 1 1 STAR SPECIALTY FOODS, INC. MADISON ...... WI Chicago Regional ...... 1 2 (MORNINGSTAR FOODS, INC.). STOER DAIRY FARMS, INC ...... TWO RIVERS ...... WI Chicago Regional ...... 4 OOB SWISS VALLEY FARMS CO ...... CHICAGO ...... IL Chicago Regional ...... 1 1 TETZNER DAIRY ...... WASHBURN ...... WI Upper Midwest ...... 4 4 UNITED WORLD IMPORTS ...... CHICAGO ...... IL Chicago Regional ...... 2 5 VERIFINE DAIRY PRODUCTS CO ...... SHEBOYGAN ...... WI Chicago Regional ...... 1 1 WEBERS, INC ...... MARSHFIELD ...... WI ...... 5 3B

CENTRAL

ANDERSON-ERICKSON DAIRY CO ...... DES MOINES ...... IA Iowa ...... 1 1 ASHER DAIRY ...... MARCELINE ...... MO ...... 4 4 BAKER'S DAIRY COMPANY ...... MOLINE ...... IL Iowa ...... 1 OOB BRAUM'S ICE CREAM AND DAIRY (W.H. TUTTLE ...... OK Southwest Plains ...... 1 1 BRAUM, INC.). CENTRAL DAIRY & ICE CREAM ...... JEFFERSON CITY ...... MO ...... 5 5 CHESTER DAIRY CO ...... CHESTER ...... IL S Ill-E Missouri ...... 1 1 COUNTRY LAKE FOODS, INC. (LAND SIOUX FALLS ...... SD E South Dakota ...... 1 1 O'LAKES, INC.). DAIRY GOLD FOODS CO ...... CHEYENNE ...... WY ...... 5 1 DEPT. OF CORRECTIONS ...... CANON CITY ...... CO Eastern Colorado ...... 6A 6B DILLON DAIRY CO ...... DENVER ...... CO Eastern Colorado ...... 1 1 ELDON MOSS ...... IOWA CITY ...... IA Iowa ...... 4 4 FARM FRESH DAIRY, INC ...... CHANDLER ...... OK Southwest Plains ...... 1 1 GALESBURG CORR. CENTER ...... GALESBURG ...... IL Central Illinois ...... 6A 6B GILLETTE DAIRY OF BLACK HILLS ...... RAPID CITY ...... SD Black Hills ...... 1 2 GRAVES GRADE A DAIRY ...... BELLVUE ...... CO Eastern Colorado ...... 4 4 HILAND DAIRY CO ...... NORMAN ...... OK Southwest Plains ...... 1 1 HILAND DAIRY CO ...... WICHITA ...... KS Southwest Plains ...... 1 1 JACKSON ICE CREAM CO ...... HUTCHINSON ...... KS Southwest Plains ...... 1 1 KANSAS STATE UNIV ...... MANHATTAN ...... KS Greater Kansas City ...... 6A 6B KARL'S FARM DAIRY, INC ...... EASTLAKE ...... CO Eastern Colorado ...... 4 4 LAESCH DAIRY CO ...... BLOOMINGTON ...... IL S Ill-E Missouri ...... 1 1 LAND-O-SUN DAIRIES, INC ...... O'FALLON ...... IL S Ill-E Missouri ...... 1 1 LENZ DAIRY ...... PRAIRIE HOME ...... MO Greater Kansas City ...... 4 4 4874 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

LIST OF PLANTS AND REGULATORY STATUSÐContinued

Expected Plant name City State October 1995 order Status 1 status 1

LONGMONT DAIRY FARM ...... LONGMONT ...... CO Eastern Colorado ...... 4 4 LOWELL-PAUL DAIRY, INC ...... GREELEY ...... CO Eastern Colorado ...... 4 4 MEADOW GOLD DAIRIES, INC ...... GREELEY ...... CO Eastern Colorado ...... 1 1 MEADOW GOLD DAIRIES, INC ...... ENGLEWOOD ...... CO Eastern Colorado ...... 1 1 MEADOW GOLD DAIRIES, INC. (MOD- CHAMPAIGN ...... IL S Ill-E Missouri ...... 1 OOB ERN DAIRY OF CHAMPAIGN, INC.). MEADOW GOLD DAIRIES, INC. (MOD- TULSA ...... OK Southwest Plains ...... 1 OOB ERN DAIRY OF CHAMPAIGN, INC.). MEADOW GOLD DAIRY, INC ...... LINCOLN ...... NE Nebraska-W Iowa ...... 1 1 MID-STATES DAIRY COMPANY ...... HAZELWOOD ...... MO SIll-E Missouri ...... 1 1 PATKE FARM DAIRY ...... WASHINGTON ...... MO SIll-E Missouri ...... 1 3B PEVELY DAIRY CO ...... ST LOUIS ...... MO SIll-E Missouri ...... 1 1 PRAIRIE FARM DAIRIES, INC ...... CARLINVILLE ...... IL SIll-E Missouri ...... 1 1 PRAIRIE FARMS DAIRY, INC ...... GRANITE CITY ...... IL SIll-E Missouri ...... 1 1 PRAIRIE FARMS DAIRY, INC ...... OLNEY ...... IL SIll-E Missouri ...... 1 1 PRAIRIE FARMS DAIRY, INC ...... PEORIA ...... IL Central Illinois ...... 1 1 PRAIRIE FARMS DAIRY ...... QUINCY ...... IL SIll-E Missouri ...... 1 1 RADIANCE DAIRY ...... FAIRFIELD ...... IA Iowa ...... 4 4 ROBERTS DAIRY CO ...... DES MOINES ...... IA Iowa ...... 1 1 ROBERTS DAIRY CO ...... IOWA CITY ...... IA Iowa ...... 1 1 ROBERTS DAIRY CO. (FAIRMONT- KANSAS CITY ...... MO Greater Kansas City ...... 1 1 ZARDA DAIRY, DIVISION OF ROB- ERTS DAIRY CO.). ROBERTS DAIRY CO ...... OMAHA ...... NE Nebraska-W Iowa ...... 1 1 ROBINSON DAIRY, INC ...... DENVER ...... CO Eastern Colorado ...... 1 1 ROYAL CREST DAIRY, INC ...... DENVER ...... CO Eastern Colorado ...... 1 1 SAFEWAY STORES, INC., MK PLNT ...... DENVER ...... CO Eastern Colorado ...... 1 1 SCHRANT ROADSIDE DAIRY (ROAD- WINSIDE ...... NE Nebraska-W Iowa ...... 4 4 SIDE DAIRY). SHOENBERG FARMS, INC ...... ARVADA ...... CO Eastern Colorado ...... 1 1 SINTON DAIRY FOODS CO., LLC ...... COLORADO SPRINGS ...... CO Eastern Colorado ...... 1 1 SOUTH DAKOTA STATE UNIV ...... BROOKINGS ...... SD E South Dakota ...... 6A 6B SWAN BROS. DAIRY, INC ...... CLAREMORE ...... OK Southwest Plains ...... 4 4 SWISS VALLEY FARMS CO ...... CEDAR RAPIDS ...... IA Iowa ...... 1 3B SWISS VALLEY FARMS CO ...... DUBUQUE ...... IA Iowa ...... 1 1 TEGELERS DAIRY ...... DYERSVILLE ...... IA Iowa ...... 1 OOB WELLS DAIRY, INC ...... LE MARS ...... IA Nebraska-W Iowa ...... 1 1 WELLS DAIRY, INC ...... OMAHA ...... NE Nebraska-W Iowa ...... 1 1 WESTERN DAIRYMEN COOP, INC ...... RIVERTON ...... WY Eastern Colorado ...... 2 2 WILD'S BROTHER'S DAIRY ...... EL RENO ...... OK Southwest Plains ...... 4 4

SOUTHWEST

BELL DAIRY PRODUCTS, INC ...... LUBBOCK ...... TX New Mex-W Texas ...... 1 1 BORDEN, INC ...... CORPUS CHRISTI ...... TX Texas ...... 1 OOB BORDEN, INC ...... EL PASO ...... TX New Mex-W Texas ...... 1 1 BORDEN, INC ...... DALLAS ...... TX Texas ...... 1 1 BORDEN, INC ...... ALBUQUERQUE ...... NM New Mex-W Texas ...... 1 1 BORDEN, INC ...... LUBBOCK ...... TX New Mex-W Texas ...... 1 OOB BORDEN, INC ...... CONROE ...... TX Texas ...... 1 1 CREAMLAND DAIRIES ...... ALBUQUERQUE ...... NM New Mex-W Texas ...... 1 1 DAVID'S SUPERMARKETS, INC ...... GRANDVIEW ...... TX Texas ...... 1 1 DEAN DAIRY PRODUCTS ...... CLOVIS ...... NM New Mex-W Texas ...... 1 OOB FARMERS DAIRIES ...... EL PASO ...... TX New Mex-W Texas ...... 1 1 HOBBS DRIVE IN DAIRY ...... HOBBS ...... NM New Mex-W Texas ...... 3A 3B HYGEIA DAIRY ...... CORPUS CHRISTI ...... TX Texas ...... 1 1 H. E. BUTT GROCERY CO ...... HOUSTON ...... TX Texas ...... 1 1 H. E. BUTT GROCERY CO ...... SAN ANTONIO ...... TX Texas ...... 1 1 JERSEYLAND ...... DECATUR ...... TX Texas ...... 4 OOB LAND O' PINES ...... LUFKIN ...... TX Texas ...... 1 1 LANE'S DAIRY ...... EL PASO ...... TX New Mex-W Texas ...... 4 4 LILLY DAIRY PRODUCTS, INC ...... BYRAN ...... TX Texas ...... 1 1 LOS LUNAS PRISON DAIRY ...... ALBUQUERQUE ...... NM New Mex-W Texas ...... 3A 3B MICKEY'S DRIVE IN DAIRY ...... ALBUQUERQUE ...... NM New Mex-W Texas ...... 4 4 MIDWEST MIX CO ...... SULPHUR SPRINGS ...... TX ...... 2 2 MORNINGSTAR SPECIALTY ...... SULPHUR SPRINGS ...... TX Chicago Regional ...... 1 2 MOUNTAIN GOLD DAIRY ...... CARRIZOZO ...... NM New Mex-W Texas ...... 3A 3B NATURE'S DAIRY, INC ...... ROSWELL ...... NM New Mex-W Texas ...... 4 4 OAK FARMS DAIRIES ...... HOUSTON ...... TX Texas ...... 1 1 OAK FARMS DAIRIES ...... SAN ANTONIO ...... TX Texas ...... 1 1 OAK FARMS DAIRIES ...... DALLAS ...... TX Texas ...... 1 1 PLAINS CREAMERY ...... AMARILLO ...... TX New Mex-W Texas ...... 1 1 PRICES CREAMERY, INC ...... EL PASO ...... TX New Mex-W Texas ...... 1 1 PROMISED LAND DAIRY ...... FLORESVILLE ...... TX ...... 4 2 PURE MILK CO (OAK FARMS DAIRY) .... WACO ...... TX Texas ...... 4 4 RANCHO LAS LAGUNAS ...... SANTA FE ...... NM New Mex-W Texas ...... 4 4 RASBAND DAIRY ...... ALBUQUERQUE ...... NM New Mex-W Texas ...... 4 4 SCHEPPS DAIRY, INC ...... DALLAS ...... TX Texas ...... 1 1 SOUTHWEST DAIRY ...... TYLER ...... TX Texas ...... 1 1 SUPERBRAND DAIRY PRODS, INC ...... FT WORTH ...... TX Texas ...... 1 1 SUPERIOR DAIRIES (BORDEN, INC.) ..... AUSTIN ...... TX Texas ...... 1 1 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4875

LIST OF PLANTS AND REGULATORY STATUSÐContinued

Expected Plant name City State October 1995 order Status 1 status 1

VANDERVOORTS DAIRY ...... FT WORTH ...... TX Texas ...... 1 1

ARIZONA-LAS VEGAS

ANDERSON DAIRY, INC ...... LAS VEGAS ...... NV Great Basin ...... 1 1 ETHINGTON DAIRY ...... GILBERT ...... AZ Central Arizona ...... 4 OOB GOLDEN WEST DAIRIES ...... WELLTON ...... AZ Central Arizona ...... 4 4 HEIN & ELLEN HETTINGA ...... YUMA ...... AZ Central Arizona ...... 4 4 JACKSON ICE CREAM CO., INC ...... PHOENIX ...... AZ Central Arizona ...... 1 1 MEADOWWAYNE DAIRY ...... COLORADO CITY ...... AZ Central Arizona ...... 4 4 SAFEWAY STORES, INC ...... TEMPE ...... AZ Central Arizona ...... 1 1 SHAMROCK FOODS, INC ...... PHOENIX ...... AZ Central Arizona ...... 1 1 SMITH'S FOOD & DRUG CENTERS, INC TOLLESON ...... AZ Central Arizona ...... 1 1 SUNRISE DAIRY ...... TAYLOR ...... AZ ...... 5 3B SUNSTREET DAIRY, INC ...... PHOENIX ...... AZ Central Arizona ...... 1 OOB

WESTERN

BROWN DAIRY, INC ...... COALVILLE ...... UT Great Basin ...... 4 4 CHURCH OF JESUS CHRIST OF LAT- OGDEN ...... UT Great Basin ...... 3A 6B TER-DAY. CHURCH OF JESUS CHRIST OF LAT- SALT LAKE CITY ...... UT Great Basin ...... 3A 6B TER-DAY. COUNTRY BOY DAIRY ...... OGDEN ...... UT Great Basin ...... 4 4 CREAM O'WEBER DAIRY, INC ...... SALT LAKE CITY ...... UT Great Basin ...... 1 1 DALE BARKER ...... MOUNT PLEASANT ...... UT Great Basin ...... 4 4 DARIGOLD, INC ...... BOISE ...... ID SW Idaho-E Oregon ...... 1 1 DESERET MILK PLANT ...... SALT LAKE CITY ...... UT Great Basin ...... 3A 6B FARM FRESH ...... SALEM ...... UT Great Basin ...... 4 4 GOSSNER FOODS, INC ...... LOGAN ...... UT Great Basin ...... 1 1 GRAFF DAIRY ...... GRAND JCT ...... CO W Colorado ...... 1 3B IDEAL DAIRY, INC ...... RICHFIELD ...... UT Great Basin ...... 4 4 JOHNNY'S DAIRY ...... SOUTH WEBER ...... UT Great Basin ...... 4 4 JONES DAIRY & HEALTH FOODS ...... TAYLORSVILLE ...... UT Great Basin ...... 4 4 KDK, INC ...... DRAPER ...... UT Great Basin ...... 1 1 MEADOW GOLD DAIRIES, INC ...... POCATELLO ...... ID Great Basin ...... 1 1 MEADOW GOLD DAIRIES, INC ...... DELTA ...... CO W Colorado ...... 1 1 MEADOW GOLD DAIRIES, INC ...... BOISE ...... ID SW Idaho-E Oregon ...... 1 1 MEADOW GOLD DAIRIES, INC ...... SALT LAKE CITY ...... UT Great Basin ...... 1 1 REEDER SHADY BROOK DAIRY ...... BRIGHAM CITY ...... UT Great Basin ...... 4 OOB REED'S DAIRY, INC ...... IDAHO FALLS ...... ID Great Basin ...... 4 4 ROSEHILL DAIRY ...... MORGAN ...... UT Great Basin ...... 4 4 SMITH FOOD&DRUG CENTERS, INC ..... LAYTON ...... UT Great Basin ...... 1 1 SMITH'S DAIRY ...... BUHL ...... ID SW Idaho-E Oregon ...... 1 3B STOKER WHOLESALE, INC ...... BURLEY ...... ID SW Idaho-E Oregon ...... 1 1 UTAH STATE UNIVERSITY ...... LOGAN ...... UT Great Basin ...... 3A 6B VALLEY DAIRY, INC ...... YERINGTON ...... NV ...... 5 3B WESTERN QUALITY FOOD PRODUCTS CEDAR CITY ...... UT Great Basin ...... 2 2 WINDER DAIRY ...... SALT LAKE CITY ...... UT Great Basin ...... 1 1

PACIFIC NORTHWEST

ALLISON HARDY ...... ELMA ...... WA Pacific Northwest ...... 4 4 ALPENROSE DAIRY ...... PORTLAND ...... OR Pacific Northwest ...... 1 1 ANDERSEN DAIRY, INC ...... BATTLE GROUND ...... WA Pacific Northwest ...... 1 1 BILLANJO DAIRY ...... EAGLE POINT ...... OR Pacific Northwest ...... 4 OOB CAL-WASH INVESTMENTS, INC ...... COLLEGE PLACE ...... WA Pacific Northwest ...... 1 OOB CURLY'S DAIRY, INC ...... SALEM ...... OR Pacific Northwest ...... 1 1 DARIGOLD, INC ...... MEDFORD ...... OR Pacific Northwest ...... 1 1 DARIGOLD, INC ...... SPOKANE ...... WA Pacific Northwest ...... 1 1 DARIGOLD, INC ...... PORTLAND ...... OR Pacific Northwest ...... 1 1 DARIGOLD, INC ...... SEATTLE ...... WA Pacific Northwest ...... 1 1 DEPT. OF CORRECTIONS STATE OF SALEM ...... OR Pacific Northwest ...... 1 3B OREGON. EBERHARD CREAMERY, INC ...... REDMOND ...... OR Pacific Northwest ...... 1 1 ECHO SPRING DAIRY, INC ...... EUGENE ...... OR Pacific Northwest ...... 1 1 EDWARD & AILEEN BRANDSMA ...... LYNDEN ...... WA Pacific Northwest ...... 4 4 EVERGREEN DAIRY, INC. (WEIKS) ...... OLYMPIA ...... WA Pacific Northwest ...... 4 4 FAITH DAIRY, INC ...... TACOMA ...... WA Pacific Northwest ...... 4 4 FOREMAN'S DAIRY ...... GRANTS PASS ...... OR Pacific Northwest ...... 4 OOB FRED MEYER, INC ...... PORTLAND ...... OR Pacific Northwest ...... 1 1 GARY & MARGO WINEGAR ...... ELLENSBURG ...... WA Pacific Northwest ...... 1 3B GERALD GILBERT, ET AL ...... OTHELLO ...... WA Pacific Northwest ...... 4 4 GRAAFSTRA DAIRY, INC ...... ARLINGTON ...... WA Pacific Northwest ...... 4 4 INLAND NORTHWEST DAIRIES, INC ...... SPOKANE ...... WA Pacific Northwest ...... 1 1 LOCHMEAD FARMS, INC ...... JUNCTION CITY ...... OR Pacific Northwest ...... 4 4 MALLORIE'S DAIRY, INC ...... SILVERTON ...... OR Pacific Northwest ...... 4 4 MIKE HARVEY ...... VANCOUVER ...... WA Pacific Northwest ...... 4 4 PACIFIC FOODS OF OREGON, INC ...... CLACKAMAS ...... OR Pacific Northwest ...... 1 3B PALMER ZOTTOLA ...... GRANTS PASS ...... OR Pacific Northwest ...... 1 1 RICHARD AND LINDA KLINE ...... CHEWELAH ...... WA Pacific Northwest ...... 4 OOB 4876 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

LIST OF PLANTS AND REGULATORY STATUSÐContinued

Expected Plant name City State October 1995 order Status 1 status 1

ROY KROPF ...... HALSEY ...... OR Pacific Northwest ...... 4 4 SAFEWAY `85, INC ...... MOSES LAKE ...... WA Pacific Northwest ...... 1 1 SAFEWAY STORES, INC ...... CLACKAMAS ...... OR Pacific Northwest ...... 1 1 SAFEWAY STORES, INC ...... BELLEVUE ...... WA Pacific Northwest ...... 1 1 SMITH BROTHERS FARMS, INC ...... KENT ...... WA Pacific Northwest ...... 4 4 SPRINGFIELD CREAMERY ...... EUGENE ...... OR ...... 5 1 STATE OF WASHINGTON ...... MONROE ...... WA Pacific Northwest ...... 4 4 SUNSHINE DAIRY, INC ...... PORTLAND ...... OR Pacific Northwest ...... 1 1 TILLAMOOK COUNTY CREAMERY TILLAMOOK ...... OR Pacific Northwest ...... 1 2 ASSN. UMPQUA DAIRY PRODUCTS CO ...... ROSEBURG ...... OR Pacific Northwest ...... 1 1 VITAMILK DAIRY, INC ...... SEATTLE ...... WA Pacific Northwest ...... 1 1 WALTER DE JONG ...... MONROE ...... WA Pacific Northwest ...... 4 4 WAYNE STRATTON ...... PULLMAN ...... WA Pacific Northwest ...... 4 4 WILCOX FARMS, INC ...... CHENEY ...... WA ...... 1 2 WILCOX FARMS, INC ...... ROY ...... WA Pacific Northwest ...... 1 1 WILLIAM VENN (TIMOTHY BERNDT) ...... NORTH BEND ...... WA Pacific Northwest ...... 4 4 1 DISTRIBUTING PLANT STATUS: 1: POOL 2: PARTIALLY REGULATED 3: EXEMPT BASED ON SIZE: A. AS DEFINED UNDER CURRENT FEDERAL ORDERS B. AS DEFINED UNDER PROPOSED RULE; WITH ROUTE DISPOSITION LESS THAN 150,000 LBS. PER MONTH. 4: PRODUCER-HANDLER 5: UNREGULATED 6: EXEMPT BASED ON INSTITUTIONAL STATUS: A. AS DEFINED UNDER CURRENT FEDERAL ORDERS B. AS DEFINED UNDER PROPOSED ORDERS (GOVERNMENT, UNIVERSITY, AND CHARITABLE) 2 NEW SINCE OCT. 95: INFORMATION NOT INCLUDED IN ANALYSIS.

2. Basic Formula Price Replacement and component pricing system has been obtained from a survey of payments Other Class Price Issues expressed would maintain a made by manufacturing plants in hundredweight skim/butterfat pricing Minnesota and Wisconsin to producers This proposed rule would replace the system instead of the component pricing of Grade B (manufacturing grade) milk. basic formula price (BFP) with a plan. The hundredweight prices would Approximately 50 percent of total U.S. multiple component pricing system that be determined by using the component Grade B milk marketings were would determine butterfat prices for price formulas contained in this accounted for by these two states when milk used in Class II, Class III and Class decision and computing an appropriate the M–W was adopted. The base month IV products from a butter price; protein hundredweight price using standard M–W was updated using a second and other solids prices for milk used in component levels. In addition, the survey of a sub-sample of the plants in Class III products from cheese and whey proposed Mideast order area, for which the base month survey. This sub-sample prices; and nonfat solids prices for milk a multiple component pricing plan of plants reported pay prices for the first used in Class IV products from nonfat similar to that now in effect in the half, and an estimate of pay prices for dry milk product prices. Prices for Class Southern Michigan order has been the last half, of the month following the I and Class II would be determined on supported (containing a ‘‘fluid carrier’’ base month. the basis of skim milk prices for Class component instead of an ‘‘other solids’’ Over time the production of Grade B III and Class IV, computed from the component), would be modified to milk has declined steadily. In 1970, 46 respective component prices. A Class I incorporate such provisions. percent of Wisconsin milk marketings skim milk price for each order would be and 71 percent of Minnesota milk determined by computing a six month Background marketings were Grade B. By 1989, declining average of the higher of the In the early years of the Federal milk these shares had declined to 17 and 26 Class III or Class IV skim milk prices for order program, prices that served the percent, respectively. Around this time the second preceding month and adding function of the present BFP were (1989) USDA’s National Agricultural a fixed Class I differential to the result. determined primarily from evaporated Statistics Service (NASS), which The Class I butterfat price would be milk prices or condensery pay prices. conducts the survey, considered the determined by adding the fixed Class I Some markets developed formulas to number of plants eligible for the smaller differential to the six month declining determine the basic price for milk used updating survey to be too few to be average of the butterfat price used for in manufactured products and fluid statistically reliable as an indicator of Class II, Class III and IV butterfat for the milk prices. These, however, did not the value of milk. second preceding month. The Class II always reflect the actual relationship Therefore, in June of 1992, a national skim milk price, on a current month between supply and demand. hearing was held to consider changes to basis, would be computed by adding Furthermore, when adjacent markets the M–W price series. The result was $0.70 to the Class IV skim milk price. A priced milk using different formulas, the current BFP, which replaced the M– table showing current and proposed price disparities occurred between W in 1995. The current BFP uses the prices for the period 1994 through 1997 competing handlers regulated under same base month competitive pay price appears at the end of this discussion of different orders. as the M–W, but updates the base month the proposed BFP replacement. The Minnesota-Wisconsin price with a formula that uses changes Provisions for Federal milk orders manufacturing grade milk price series from the base month to the next month regulating the handling of milk in areas (M–W) was adopted in the early 1960s. in prices paid for butter, nonfat dry for which no support for a multiple The M–W was a competitive pay price milk, and cheese. An updating process Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4877 is necessary to attempt to capture basic formula price. These goals are: (a) override other criteria. For instance, current supply and demand conditions, the replacement must meet the supply supply and demand factors that result in since the base month survey price is not and demand criteria set forth in the significant price fluctuations may come available until a month after the milk Agricultural Marketing Agreement Act at the expense of stability; simplicity has already been marketed. of 1937 (the Act), (b) the replacement may conflict with the need to The problem of using a declining price should not deviate greatly from incorporate important supply and volume of Grade B milk to accurately the general level of the current BFP, and demand factors reflecting market represent the value of milk used for (c) the replacement should demonstrate conditions for milk. A degree of manufacturing was not solved with the the ability to change in reaction to complexity may be necessary to implementation of the current BFP. By changes in supply and demand. accommodate sound economics. 1995, the percentage of milk marketed To achieve the basic goals of BFP Finally, reduced regulation is a as Grade B milk had fallen to 8 percent replacement, a set of criteria was desirable trait of a new basic formula of total Wisconsin marketings and 11 established to evaluate the various price, to the extent that it does not come percent of total Minnesota marketings. alternatives. The criteria were: (a) at the expense of sound economics. One Nationally, Grade B milk constituted stability and predictability; (b) function of the BFP is to represent a less than 5 percent of total U.S. milk simplicity, uniformity, and market-clearing price for milk used in marketings in 1995, compared with 9 transparency; (c) sound economics— manufactured dairy products. Reducing percent in 1989—a decline of 45 e.g., consistency with market regulation should be attempted while percent. Minnesota and Wisconsin conditions; and (d) reduced regulation. discovering such a price, but the goal of accounted for 2.9 billion pounds, or Stability refers to a moderation of reduced regulation is of less importance about 42 percent of the national Grade month-to-month fluctuations in the than accurately reflecting the market B milk marketed in 1995; but this was basic formula price. A price that forces of supply and demand. fluctuates less than the current BFP less than 2 percent of all milk marketed A replacement for the BFP could in the U.S. that year. In fact the decision would improve the wholesale and retail affect regulation in two ways. In based on the basic formula price hearing pricing structure in the industry and reporting price information to determine recognized that ‘‘the adoption of the facilitate an improved planning horizon the basic formula price, many plants base month M–W price, or any Grade B for both producers and processors. A currently report payroll information on milk series, is only a short term predictable basic formula price would a monthly basis. A revised method for solution, since the amount of Grade B allow the industry to improve long- determining the BFP could entail milk production is expected to continue range planning, thereby contributing to reporting manufactured product declining.’’ economic efficiency. The 1996 Farm Bill, enacted in early The new basic formula price should transaction prices, manufacturing costs April 1996, requires consolidation of the be simple to derive and easy for the and yields, and additional auditing to Federal milk marketing orders into dairy industry to understand, since it assure data accuracy. Second, a system between 10 and 14 orders, and, among would be used in all Federal milk of pricing milk used in manufactured other provisions, authorizes the orders. The BFP also should be dairy products based on components Secretary to implement the use of transparent. That is, it should be might require increased reporting and uniform multiple component pricing possible to see and understand the accounting to determine component when developing one or more basic derivation of the BFP, even if a complex usage. formula prices for manufacturing milk. formula is used to determine the price. University Study Committee As part of the process of implementing Further, the new basic formula price the provisions of the Farm Bill, several should be applied uniformly within In recognition of the expertise committees were formed to deal with orders and on a national basis. available within the academic specific issues involved in restructuring The most important criterion is sound community, a University Study the Federal milk order system, and economics—the ability of the BFP to Committee (USC) was commissioned to public comments were requested. reflect the supply and demand for raw conduct objective analyses of the milk. Currently, the BFP is intended to performance of numerous alternatives to Basic Formula Price Replacement represent the interaction of supply and the current basic formula price. The ten Committee demand for manufacturing milk and members of the USC represent six land One of the committees formed to thereby, the supply and demand for grant universities around the country. assist in the restructuring process was fluid milk at a minimum level. A The USC established its own criteria the Basic Formula Price Replacement replacement that fits this traditional role for screening potential replacements for Committee. This committee hosted a suggests that the supply and demand for the basic formula price. Alternatives public forum on dairy price discovery manufacturing milk should be reflected that met the USC’s threshold criteria techniques in Madison, Wisconsin, in in the new price. were then subjected to further analysis. late July 1996, considered numerous Sound economics also implies that The USC’s first level criteria were: (a) a comments submitted by interested minimum prices for milk used in long life—alternatives that were persons, established criteria for a new manufactured products will be market- expected to have a useful life of less BFP, conducted extensive study and clearing. The use of two classes to price than 10 years were eliminated; (b) analysis, and issued a preliminary milk used in traditional ‘‘surplus’’ understandable and transparent—the report on BFP replacement in April products of butter, nonfat dry milk, and procedure of deriving a price must be 1997. The report generated additional cheese (that is, milk in excess of that easy to see and understand; (c) comments, and the committee studied, amount needed to fill fluid demand), geographic uniformity—the same basic incorporated, and developed responses helps assure that only one product will formula price would serve as the to these comments, as well as those have to be priced at a level that clears minimum price across the country; and received earlier, in the development of the market. The market-clearing product (d) reflect the manufactured milk this proposed new basic formula price. in most cases is butter/nonfat dry milk. market—the values of milk used in The Committee began with a set of The criterion of sound economics is butter, powder, and cheese would be goals to be met by a replacement for the sufficiently important that it may combined into a single formula price. 4878 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

For its second level of criteria, the prices. This formula also included a a formula-derived BFP. Thus, there is a USC used a form of time-series analysis productivity index to allow the formula significant risk in using methodology to called vector autoregression (VAR), to to automatically adjust for changes in develop formulas that result in a price test whether the proposed basic formula productivity over time. announced on the basis of data that is price replacements would satisfy the Proponents of economic formulas not publicly known, with only those following: (a) reflect national market expressed the view that since these announcing the price knowing the conditions for manufactured dairy formulas incorporate both the supply specific details of the derivation of the products—the price for milk used in side and the demand side, economic price. Further, when the methodology is manufacturing should reflect the supply formulas would truly represent the unveiled, further debate and scrutiny and demand for milk used in those value of milk, and would therefore be are invited. products, measured by simulating a appropriate for use in determining the Additionally, data availability can be change in the level of stocks of the BFP. Additionally, proponents a problem. Some data may be available products and observing the impact on expressed the view that economic only on an annual basis, whereas the prices generated by each basic formula formulas would diminish price BFP must be established monthly. price option; (b) reflect changes in the volatility and reduce the effect of the Substituting or estimating data is very value of milk used in manufacturing— cheese market on prices, which likely to introduce a bias into the observing how well each option proponents viewed as a positive formula. The developer must exercise responds to changes in the prices of outcome. considerable judgment in constructing butter, powder, and cheese; and, (c) Opponents of economic formulas the formula price, and a major criticism provide price stability—as reflected by expressed the view that since economic of economic formulas is that they are low standard deviations and low price formulas do not react to changing difficult to understand, with the variation in response to a change in conditions, particularly technology, the developer frequently being the only one stocks. formulas would not yield a value of to fully understand its intricacies. milk that represented the true supply The USC divided economic formulas Comments and demand for milk. Since many into three categories: (1) cost of Over 1,600 comments were received economic formulas have a tendency to production formulas, which will be relative to the basic formula price in be static rather than dynamic, the discussed later, (2) econometric models, response to the invitation to comment formulas do not react to changing and (3) formulas which included either under Federal Order Restructuring. The economic conditions as rapidly as may a feed cost snubber or a stock snubber. comments ranged from one-page letters be necessary. Opponents went on to The USC dismissed econometric models from dairy producers to lengthy explain that economic formulas are on the basis of the first level criteria, as discussions of a particular alternative to difficult to adjust; in many cases the being too difficult to understand and in the BFP from trade associations or only people who understand them are constant need of maintenance, re- cooperatives. Most of the comments the people who constructed them in the specification, re-estimation, etc. The may be grouped into five categories first place. formulas which included the feed cost representing alternatives to the current Economic formulas can, if properly snubber or the stocks snubber passed BFP. These five alternatives are: constructed, have a tendency to reflect the first level criteria, but did not economic formulas, futures markets, the supply and demand for milk used in perform as well as other alternatives cost of production, competitive pay manufactured dairy products, at least in when subjected to the level two price, and product price and component the short run. Stability of economic analysis. formulas. In addition, numerous formulas depends on the variables used Futures Markets comments were received relative to the in the formula and the weight they use of National Cheese Exchange prices receive. Since agricultural commodity A number of comments were received in particular and exchange prices in markets can be relatively unstable proposing that the futures market be general in the determination of a basic because of inherent characteristics such used to replace the basic formula price. formula price. as seasonality, weather, perishability, One proponent proposed using a etc., the more weight a commodity price monthly weighted average of milk Economic Formulas has in a formula the more unstable the futures transactions on the Coffee, Economic formulas are mathematical formula is likely to be. Thus, a formula Sugar, and Cocoa Exchange (CSCE) or statistical formulas that incorporate that attributes less weight to commodity computed on a daily basis. Proponents factors reflecting the supply and prices will be somewhat more stable explained that since the commodity demand for a particular commodity or than a formula that attributes greater exchange allows free and open trading product. Typically, economic formulas weight to such prices. The trade-off, of the price established would represent include factors such as consumer course, is that higher commodity- the national supply and demand for income, production, prices of competing weighted formulas react more quickly to milk. A proponent went on to explain products, population levels or per capita changes in market conditions. By that open trading on a daily basis on the consumption, and inventories. Several contrast, factors such as cost of commodity exchange allows everyone comments were received supporting the production, per capita consumption, in the dairy industry to track the use of an economic formula for population, and income tend to be more established prices on a daily basis rather determining the BFP. Two parties stable in periods of little or no inflation, than under the current system where the submitted specific formulas. One and thus have a more stabilizing price is just announced. formula included the cost of milk influence on formula-driven price Opponents to the use of the futures production and a commodity reference series. market in establishing the BFP price, plus consumer prices to reflect Changing technology should lead to explained that the futures markets for the demand side of the supply/demand reevaluating the weights of various cost dairy, and milk in particular, have not equation. A second formula included components, but this subjects the been trading for a sufficient period of such factors as disposable per capita formula to legitimate debate and time to determine what the exchange income, a dairy parity index, and an scrutiny that in turn diminish the price represents. Opponents also index of manufactured dairy product simplicity, transparency, and stability of expressed a concern that the volume Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4879 and open interest, at least for the would be difficult to convince Cost of production would be more present, are relatively small, and individuals that a futures-derived BFP is stable than the current BFP, and more questioned the future viability of the simple or predictable. stable than other options based heavily dairy futures markets. Several Finally, futures markets are not, and on commodity market prices. Stability is opponents also expressed a lack of faith were not intended to be, cash price- due to the fact that many of the input in having the BFP established by setting mechanisms. They were values do not change rapidly or as commodity traders rather than by the established to transfer price risk. There rapidly as commodity prices. In fact, dairy industry although many, if not is no reason to expect them to be some cost factors may move in opposite most, agricultural commodity prices are suitable in serving a price-setting directions, reducing the net effect of any determined on futures markets. function for which they were not one input factor. This is also one of the Both proponents and opponents of intended. There are also questions about drawbacks to a cost of production-based futures markets agreed that once a solid the long term viability of the milk BFP. The cost of production may not history of trading dairy futures is futures contract. Although volumes respond quickly enough, or sufficiently available, it may be feasible to use the traded increased last summer, they have to reflect changes in supply conditions futures market to establish a BFP. since declined, even more after the if, indeed, there is any observable link There are currently two different opening of the basic formula price cash between cost of production and levels of futures contracts for pricing milk. The settlement contract. Even if the milk milk production. Coffee, Sugar, and Cocoa Exchange futures markets continue to operate, A basic formula price based on cost of (CSCE) has a fluid milk contract. In they are very thin. Their use in production would be more complicated addition, the CSCE and the Chicago establishing Federal order prices would than many other options suggested, Mercantile Exchange have basic formula result in a very small amount of trading since considerably more data would be price contracts, which are cash setting prices across the nation. needed to accurately estimate cost of settlement contracts using the current The USC rejected use of the futures production. And, although a uniform basic formula price. The cash settlement market to replace the basic formula price could be calculated if national contract would not make a viable price for many of the same reasons averages are used, there is a wide range alternative to the current basic formula of cost differences by region, which price because it is settling against an discussed above. The USC expressed would introduce problems of uniformity announced price that will not continue particular concern about what is priced in prices. to be announced. by milk futures contracts, and about the The fluid milk contract has behaved future viability of the milk futures The most serious drawback with somewhat erratically when compared to market. using cost of production to replace the BFP, and the reason the USC dropped the basic formula price, leading Cost of Production economists to question what market the cost of production from consideration fluid milk contract is pricing. Early A considerable number of comments based on their level one criteria, is that research indicates that the fluid milk received, predominantly from dairy cost of production represents only the futures market is reflecting the spot producers, supported determining the supply side of the market, ignoring value of Grade A milk rather than the basic formula price on the basis of the factors underlying demand or changes value of milk used in manufactured cost of producing milk. Proponents in demand for milk and milk products. explained that the minimum price for products. Since the BFP is intended to Competitive Pay Price represent the value of milk used for milk should be no less than the cost to manufacturing, use of the futures market produce the milk, and many proponents A number of producer groups and in its determination would not be expressed the opinion that a profit cooperative associations submitted appropriate. should also be included in the cost of comments supporting the use of a Futures markets are not necessarily production figure. Other proponents competitive pay price to establish the stable, nor are they intended to be. suggested a yearly adjustment or basic formula price. These proponents Futures prices fluctuate on a daily basis, updater to account for inflation. Some expressed the view that a competitive reflecting changes in expectations about proponents suggested the pay price is a good indicator of the supply and demand. A weighted implementation of a quota system in national supply and demand for milk monthly average would introduce more addition to using the cost of production and would provide a simple, stability, but the commodity influence to determine the BFP, realizing that a economically defensible method of would still drive the BFP and introduce guaranteed cost of production would calculating the true value of milk used significant variation into the price undoubtedly lead to over-production. in manufactured dairy products. Many series. Very few of the proponents discussed of the proponents suggested adding The use of futures markets to derive what cost of production figures should additional states to the competitive pay the BFP could generate a price that is be used or how to implement a cost of price survey of purchasers of applied nationally. However, the futures production basis across an industry manufacturing grade milk in Minnesota basic formula price, although with substantially different costs, even and Wisconsin. Some of these conceptually global in terms of within the same region. proponents also suggested that a participation, must be heavily Very few comments opposed the use competitive pay price be adjusted for influenced by supply and demand of cost of production to establish the hauling subsidies, that premiums be conditions in the upper Midwest region, BFP. Those filing opposing comments removed, and that adjustments be since this region is the defined delivery pointed out that cost of production provided for any unique payments that area in the contracts. represents only the supply factor for would not necessarily reflect true There is a significant lack of milk, including no demand factor. The supply/demand conditions. Several familiarity, particularly at the producer opponents also observed that there are proponents suggested including a level, with futures markets. Thus, great difficulties in determining a cost of competitive pay price for Grade A milk, transparency would not be a feature of production regionally, let alone with some adjustments, as a way to a futures-driven BFP. Since most people nationally, because cost of production improve the size and representativeness do not understand futures markets it varies greatly across regions. of the competitive pay price. 4880 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Some of the comments favoring a Most competitive pay price particularly as the price support competitive pay price addressed the alternatives are not structurally different program has declined in importance in issue of adjusting the competitive pay from the current BFP and will not yield the market. price to the current month. For the most a price series any more stable than the In response to comments concerning part, proponents were opposed to using current BFP. Some improvement in the declining base of manufacturing a formula containing a cheese price stability might be possible with a more milk in Minnesota and Wisconsin from established on the National Cheese stable ‘‘updater’’ to adjust the which to draw survey information and Exchange or the Chicago Mercantile competitive pay price. However, the the limited geographical area Exchange, but supported the use of the updater may then result in a encompassed by the current survey, NASS cheese survey price for such a competitive price that fails to reflect the Grade A manufacturing milk data was purpose. current value of milk used in gathered to analyze alternatives to the Opponents of a competitive pay price manufacturing. Minnesota-Wisconsin base month price. expressed the view that the current BFP, Competitive pay prices may have A Grade A pay price series was then which uses a competitive pay price problems associated with uniformity, computed. The price series included determined in Minnesota and simplicity, and sound economics. With nine states’ pay prices for Grade A milk Wisconsin, does not represent the regard to simplicity, an updater would that is used in manufacturing. These national supply and demand for milk be necessary in conjunction with a nine states, California, Idaho, Iowa, used in manufacturing but represents method to determine premiums and Minnesota, New Mexico, New York, the value of such milk in Minnesota and federal order payments to deduct from Pennsylvania, Washington, and Wisconsin. These comments stated that the competitively set price. These Wisconsin, account for approximately supply/demand situations in other adjustment mechanisms are neither very 75% of the Grade A milk used for regions of the country may vary simple nor transparent. A competitive manufacturing in the U.S. The Grade A significantly from Minnesota and pay price may be uniformly applied, but pay prices were adjusted for protein Wisconsin, with regional price as the competitive pay price often content, performance premiums, over- distortions resulting from the use of reflects the use of prices in just one order premiums, and hauling subsidies. prices from a specific region. region, the derived price may not be The Grade A competitive pay price was fully applicable across regions. below the current BFP base month price A competitive pay price results from The concept of a competitive pay in 27 of the 35 months included in the open market negotiation between dairy price has appeal from the standpoint of study. When the product price formula farmers (or their cooperatives) and milk sound economics. But the submitted updater was included, the Grade A pay processors. Competition requires proposals, as well as the current basic price averaged $0.11 per hundredweight sufficient numbers of buyers and sellers formula price construction, raise below the current BFP. so that no one participant or group of concerns about the degree of The determination that a Grade A pay participants can unduly influence the competition reflected in a price based price is lower than the current BFP price. In addition, the price can not be on the declining volume of Grade B conflicts with the hypothesis presented a Federal- or State-regulated price, such milk produced and purchased, or the earlier. However, further analysis as the price for Grade A milk currently introduction of Grade A milk that, even indicates that the result is not surprising priced under Federal milk orders. if unregulated, is significantly when one considers the relative pay Identifying a competitive pay price in influenced by minimum order prices price and the quantity of milk used for today’s dairy industry, where 70 percent and therefore suspect as a ‘‘competitive’’ manufacturing in each of the states that of the milk is currently covered under price. were included. Also, the 5-percent Federal milk marketing orders, is a The addition of a Grade A price to a weighting of butter/powder versus 95 challenge. After accounting for state competitive pay price survey has been percent cheese production in the regulations, only about two percent of considered likely to raise the level of the current BFP updating formula changed Grade A milk is unregulated, and it is BFP significantly above the level of the significantly, to approximately 30 unlikely that even this small amount of current basic formula price. The percent butter/powder and 70 percent milk is not affected by regulated prices. Minnesota-Wisconsin Grade A/B price cheese with the use of national Only about five percent of the total milk currently collected by NASS has production data rather than the marketed in the U.S. is Grade B or averaged about $0.75 per Minnesota-Wisconsin production data. unregulated, and 42 percent of that milk hundredweight above the BFP over the The reduced price level that would is located in Minnesota and Wisconsin. past five years. While the proposal to result from this study certainly provides The remainder is scattered among 23 exclude performance premiums and the justification for discarding a competitive states in amounts too small and need for adjustment for the current pay price as a replacement for the basic delivered to too few processing plants to month may help to minimize problems formula price. One reason for the lower generate a competitive pay price. In associated with the regulated price price level is the inclusion of prices areas where alternative markets exist, serving as the competitive price, serious from western states, especially the price for unregulated milk likely issues are raised by this proposal. More California. California has become the will not be below the price paid for data would be necessary, increasing the nation’s largest milk-producing state, regulated milk, since producers would burden of reporting premiums paid to and a major percentage of California prefer to sell their milk to regulated producers, the basis for such premiums, milk is used in manufactured products. handlers to receive the higher regulated hauling subsidies, and hauling cost California has its own State milk order price. Thus, unregulated handlers are data. regulation, and maintains prices for compelled to meet the regulated price in The changes in market conditions and milk used in manufactured products at order to attract sufficient supplies of limited information would reduce the levels below those in other areas of the milk. The circular result is that the predictability of the new basic formula nation, largely through use of very regulated price ultimately becomes the price, and transparency would not be generous manufacturing allowances in competitive price. This process does not assured, particularly if the price is based computing milk prices from product lead to a representative competitive pay on a survey. The current BFP suffers prices. Handlers in other western states, price for milk. from these same shortcomings, even those under Federal order price Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4881 regulation, must compete with determined, they would be difficult to manufactured product, rather than for California handlers to sell their adjust and would not react to changes raw milk used to produce the product, manufactured products. As a result, pay in manufacturing conditions. and therefore may be criticized for not prices to producers in these areas tend Opponents also argued that when an adequately representing market to be lower than in the rest of the United incorrect make allowance is established, conditions for milk used in States. plants are guaranteed a return, or profit, manufacturing. They should, however, The USC evaluated several different to the detriment of dairy farmers. Other reflect accurately the market values of competitive pay price series. Two of opponents explained that an incorrect the products made from such milk. these price series, an A/B series and an yield or make allowance may force Product price formulas can require adjusted A/B series, passed the level payment for milk at a level that would increased data collection, particularly if one criteria, but even these two series not allow a return to the manufacturing industry insists on audited make were questionable in their ability to plant. allowances and actual transaction prices reflect the manufactured milk market. The USC tested several product price to be used in the formulas. Neither one of these two price series formulas, including a one-class multiple The predictability of prices computed performed well when tested using the component pricing formula and a set of from product price formulas should be level two criteria and therefore were formulas similar to the formulas reasonably good, or at least no worse dropped from further consideration. recommended in this decision. Based on than predictability of the underlying the results of the USC analysis commodity prices. Short run Product Price Formulas and Component measured against their level two predictability should even improve Pricing criteria, the multiple component pricing since all information needed to compute In comments supporting the use of a formulas had the best overall prices is reported on an ongoing basis, product price formula to replace the performance of any of those alternatives unless survey information is used. This current basic formula price, proponents reaching the level two testing. contrasts with the present BFP expressed the opinion that a price computation in which a major part of determined from the national finished Commodity Prices the formula, the base month Minnesota- product markets more accurately A considerable number of comments Wisconsin price, is not available until reflects the value of milk for were received concerning the use of the actual basic formula price is manufacturing than other methods of commodity prices in determining a announced. determining a milk price. Proponents basic formula price. Most of the Product price formulas are explained that the price handlers can comments were directed at the use of transparent, since the information to afford to pay for milk is determined by National Cheese Exchange prices in the compute the price is available, and the the price for which the finished product computation of the current BFP. effect of a change in commodity prices can be sold. Therefore, a pricing system Commenters expressed the view that the or one of the other factors may be that translates finished product prices to prices were being manipulated by the observed and quantified. a price for raw milk would result in the big cheese companies in order to keep This proposed rule recommends that most representative raw milk price for milk prices low so that the cheese the BFP be replaced with a multiple both producers and handlers. companies could make a larger profit. component pricing system which will Proponents of product price formulas determine butterfat, protein, and other explained that component pricing, with Proposed Basic Formula Price solids prices for milk used in Class III prices determined for butterfat, protein, Replacement products and butterfat and nonfat solids nonfat solids, etc., would best be Application of the BFP and USC prices for milk used in Class IV accomplished through product price Committees’ criteria for BFP products. formulas, to reflect the value of each replacement to the various BFP Numerous comments were received component in finished product prices. alternatives resulted in the concerning whether the revised orders Proponents also explained that product determination that the proposed should keep Class III–A (i.e. a four class price formulas are relatively easy to use component pricing product price market) or whether all hard and understand, and that the value of formulas best meet the stated goals and manufactured products should be milk may be computed on an on-going criteria. priced in Class III. The opposition to basis by everyone in the dairy industry Prices derived from product price Class III–A centered around two issues: by following commodity markets. formulas that use commodity prices as (1) the integrity of the classified pricing Proponents of multiple component the basis for the computed price are system, and (2) the perception that a pricing (MCP) explained that since the subject to the same problems of stability butter/nonfat dry milk class would components of milk are what give milk as the underlying commodity prices. For reduce producer pay prices. The its value, particularly in manufactured the most part product price formulas do supply/demand for butter and nonfat products, it is the components that not include a factor to improve stability. dry milk is sufficiently different from should be priced; particularly butterfat Product price formulas are relatively the supply/demand for cheese to justify and protein, and to a lesser extent the simple to compute and understand, and separate classification and pricing. In other solids contained in the milk. may be applied uniformly, or on a addition, the recommendation to use the Opposition to product price formulas regional basis, accommodating higher of the Class III or Class IV price was directed at the need for product differences in yields or make for determining the Class I price, and yields and make allowances in allowances. Product prices established base the Class II price on the Class IV determining a milk price or component in a relatively free and open interaction price, should more accurately reflect the prices. Opponents expressed the view between supply and demand directly value of these different categories of use. that yields and make allowances would translate the value of the finished Changes in the cheese markets have a not reflect the true results in products to the value of milk and its major impact on the dairy industry. The manufacturing plants, and therefore components. Therefore, they have a cheese industry has evolved from would not yield an accurate price for sound economic underpinning. cheese production being a means of milk. Opponents further explained that Arguably, product price formulas reflect surplus milk storage and removal to a when yields and make allowances are the supply and demand for the competitive consumer demand-driven 4882 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules industry. Currently, more milk is used The different supply and demand milk price. The Class I butterfat price in cheese production than is used in characteristics for the cheese and butter/ would be determined by adding a fixed Class I. The nonfat dry milk industry is nonfat dry milk market segments Class I differential to a 6-month now one which balances surplus milk warrant separate classification and declining average of the second storage and removals. This category is prices. Research by Emmons (discussed preceding month’s butterfat price (used also evolving, with increasing in the BFP Committee Preliminary in Classes II, III, & IV). The Class I skim commercial uses for nonfat dry milk, Report) concluded that no single pricing milk price would be determined by and dry milk products formulated for system is appropriate for all classes of adding a Class I differential to a 6- specific needs. Increasing quantities of milk and, in fact, that multiple pricing month declining average of the second nonfat dry milk are being produced for formulas are appropriate. Each product preceding month’s skim milk price use in other dairy products and the food would be allowed to achieve its market (using the higher of Class III or Class IV and pharmaceutical industries. clearing level independent of the other skim prices). The calculation of Class I The separation of manufacturing milk products. Dairy farmers will be paid a prices would be the same for both MCP into two classes will assure that shifts price which is more representative of and non-MCP markets. in demand for any one manufactured the level at which the market values Announcement of Class I butterfat product will not lower the prices for their milk. and skim milk prices in advance milk used in all other classifications, The current BFP serves two functions: eliminates current problems caused by including Class I prices. Recent milk (1) a fixed differential is added to the butterfat differential fluctuations. price increases have been attributed to current BFP to establish the Class I and Handlers would have true advance Class increased cheese values. Many people Class II prices; and (2) the current BFP I pricing. There would be two different expect that per capita cheese serves as the Class III price, or the price butterfat prices each month but no consumption will continue to grow. for milk used in manufactured products. butterfat differential. The separate Class However, some warn of impending In some Federal milk orders a seasonal I butterfat price should integrate easily market saturation as more cheese plant adjuster is added to the BFP to since Class I butterfat testing and capacity materializes and consumer determine the Class III price. The reporting currently exists. tastes and preferences change. Cheese proposed replacement would function The prices for butterfat, protein, and consumption patterns are based on in a similar fashion, using component other solids used in Class III would be many factors outside the dairy prices. Class IV (butter/nonfat dry milk) computed as follows: would be priced on a butterfat and industry’s control. Health concerns Butterfat price=(NASS AA Butter survey nonfat solids basis. Class III (hard relating to changing demographics, price¥0.079)/0.82) cheese) would be priced on a butterfat, changes in pizza consumption and Protein price=((NASS block cheese protein, and other solids basis. The income growth, as well as retail and survey price¥0.127)x1.32)+((((NASS price of butterfat would be the same in wholesale inventory decisions, etc., will block cheese survey Class II, Class III, and Class IV. impact consumption and prices. A price¥0.127)x1.582)¥butterfat Payments to producers under MCP recent report by the Food and price)x1.20) would be based on the Class III prices Agricultural Policy Research Institute Other solids price=((NASS dry whey for butterfat, protein, and other solids in noted that ‘‘anything that results in survey price¥.10)/0.968). addition to a producer price differential demand weakness for cheese will likely The butterfat price for Class IV computed from the value differences products is the same as for Class III result in a markedly different outlook between other classes and Class III for the entire dairy sector . . .’’ The while the nonfat solids price is components and from differences in computed as follows: proposed pricing system will allow butterfat and other solids values other manufactured products (i.e. Class between classes. Producer pay prices Nonfat solids price=((NASS nonfat dry IV) to move Class I prices, helping to also would be adjusted for the somatic milk survey price¥0.125)/0.96) reduce the volatility in milk prices. cell count of producers’ milk under This system of pricing best fits the three Over the last six years cheese prices, orders with MCP. established goals and criteria, discussed and to a lesser extent butter prices, have Because nonfat dry milk may be previously, for a replacement to the shown considerable fluctuation while substituted for fresh milk or wet solids BFP. the nonfat dry milk price remained in the production of many Class II The first goal, that a replacement for relatively stable. Price changes for these products, the Class II price should be the basic formula price meet the supply/ finished products are indicative of determined using Class IV butterfat and demand criteria set forth in the Act, may various supply/demand situations over nonfat solids prices plus a fixed per be the most difficult to evaluate time. The stable nonfat dry milk prices hundredweight differential of $0.70 over definitively since the Act specifically and the butter prices prior to the fall of the Class IV skim price. The $0.70 mentions minimum prices to producers. 1995 were a reflection of large stocks differential represents the cost of The BFP, as part of a classified pricing being carried in storage and flat converting concentrated milk to dry system, does contribute to minimum demand. Prices for nonfat dry milk and solids, plus rehydration. Class II would prices to producers. However, the basic butter became more volatile once be priced on a current basis rather than formula price does not need to be set at government inventories were depleted in advance to enable the Class II price a level to ‘‘assure an adequate supply of and were no longer a factor in to be aligned with the Class IV price. wholesome milk.’’ The proposed BFP stabilizing prices. Butter prices This alignment should also reduce replacement meets the supply and increased during May and June of 1997 perceived problems in the use of nonfat demand criteria for milk used in butter/ in response to demand for cream, while dry milk to make Class II products. nonfat dry milk and cheese even though both cheese and nonfat dry milk prices Tying the Class II price to the Class IV they are established from finished remained relatively flat. These price by this fixed differential should product commodity prices. The differences in price movements indicate reduce the incentive to produce nonfat commodity prices are based on a separate supply and demand balances dry milk for use in Class II products. competitive marketplace and reflect the for different manufactured dairy The Class I price should consist of a supply and demand for those products products. Class I butterfat price and a Class I skim (Class III and Class IV) that utilize Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4883 approximately 50% of the Grade A milk tracked exchange prices becomes representative of the dry product supply. apparent to industry observers. markets. However, the prices are The supply and demand for Grade A Regulation should be reduced since reported as a range. A simple average of milk is not limited to one category of NASS is collecting the weekly cheese the prices is used to compute a monthly products. The same milk may be used survey, and the manufacturing plant price and may not reflect the weighted for fluid or soft manufactured products survey would no longer be required. average price at which the product as well as the Class III and Class IV Regulation could increase, however, moved. In many instances multiple heat products used to determine the BFP. As make allowances are audited. treatment products are involved, and a a result, the minimum prices The proposed formulas used in the substantial number of forward contracts established for Class III and Class IV basic formula price replacement may are included. The DMN prices are not reflect supply and demand not only for result in prices that are less stable than intended to establish prices but are finished products but for the milk used the current BFP. Unlike the current BFP, provided for market information. to make them. in which commodity updates are used NASS data traditionally have been The second goal is that a BFP to adjust the producer pay price survey, collected via a survey with voluntary replacement should not deviate greatly changes in product prices would be the participation. The price information in from the price level of the current BFP. sole determinant of changes in the current cheese price survey, like Several comparisons of this proposed component prices. The current BFP is most NASS data, is not audited. NASS basic formula price replacement were based primarily on the base month applies various statistical techniques made to the current BFP to determine survey price, which does not move as and cross-checking with other sources whether the proposed formulas resulted rapidly as the commodity markets (as to provide the most reliable information in a price level for milk used in noted by many respondents). As a available. manufactured products that is result, the current BFP reacts more Alternatives and comments regarding reasonably close to the current BFP. slowly to changes in the commodity exchange trading and the use of NASS Protein, butterfat, and other solids markets than does the proposed survey prices are invited. This decision values were combined to compute a commodity-driven price series. proposes the use of NASS survey prices Class III hundredweight price using There has been considerable criticism for computing the component values standard factors of 3.15 for protein and of the use of exchange prices used in the BFP replacement. 5.5 for other solids. The resulting price (particularly cheese) in determining the Make Allowances averaged $0.26 or 2 percent above the basic formula price. This criticism current BFP for the 69-month period of ranged from inaccurate representation of Several characteristics of Federal milk September 1991 through May 1997. The commodity values to accusations of orders should be kept in mind Class IV hundredweight price, market manipulation. The National concerning make allowances. First, computed from the butterfat price and Cheese Exchange eventually closed and federal milk order prices are minimum the nonfat solids price using a constant the Department decided to use a new prices. Second, the BFP and its 8.65 for nonfat solids, averaged $0.22 or NASS Cheddar cheese price survey in replacement should price milk used in 2 percent below the current BFP during the computation of the basic formula what have been considered surplus the same period. The proposed Class III price and in federal milk order products. The BFP is not intended to and Class IV prices were both highly component pricing plans. Cheese represent the total value of all milk. correlated with the current basic transactions occurring during the week Third, most dairy manufacturing plants formula price. The Class III price had a are surveyed and released by NASS on are not required to participate in the .963 correlation coefficient while the the following Friday. From the weekly federal milk order pool and are not Class IV price had a .749 correlation price and sales volume a monthly required to pay federal milk order coefficient. weighted average price is determined. prices. The proposed basic formula price The BFP Committee recommended An economic engineering approach to replacement also meets the third using NASS cheese survey prices and determine appropriate make allowances primary goal. The proposed formulas having NASS develop a price survey for was investigated. Neither the time nor have the ability to respond to supply/ butter. This survey would have to be the resources are available to construct demand changes. The Class III and Class expanded and data released more often. models for determining appropriate IV prices should respond appropriately Nonfat dry milk and dry whey prices are make allowances at this time. As an since the formulas use NASS-surveyed currently surveyed and published, but alternative, various sources were used to commodity prices that reflect the supply will need to be published on a more determine appropriate make allowances and demand for these commodities. timely basis if they are used in for the basic formula price replacement. Overall, the proposed BFP component price computations. Research by Stephenson and Novakovic replacement formulas (for Class III and Several alternatives to a NASS price of Cornell University indicates that Class IV) meet the established criteria survey were considered. There is a cash results obtained by using an economic necessary for a BFP replacement. The butter market at the Chicago Mercantile engineering approach can be formulas are relatively simple to use Exchange (CME). These prices are comparable to a survey of plants. and can be applied uniformly. The currently used to determine the butterfat Resources may need to be devoted to formulas are transparent and the Class differential and butterfat price in all developing an economic engineering III and Class IV formulas meet the sound federal milk orders. Dairy Market News model, a survey, or a combination of the economics criterion. (DMN) publishes a wholesale butter two. The proposed use of NASS survey price. Both of these price series have The proposed butter make allowance prices may reduce the ability to predict been criticized due to the ‘‘thinness’’ of of $0.079 per pound and the nonfat prices, at least in the near term, since trading. There is no exchange trading of solids make allowance of $0.125 per there is a limited history of using NASS dry milk products. Alternatives to a pound were developed from an analysis survey prices for computing Federal NASS survey are limited to prices of several sources. Research by order prices. Predictability should published by Dairy Market News or a Stephenson and Novakovic on surveyed improve over time as the relationship California survey. The prices reported data from butter and nonfat dry milk between the survey prices and easily- by DMN are generally considered to be manufacturing plants resulted in 4884 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules equations for estimating the long-run determination of the other solids make factors derived from the Van Slyke average cost per pound of producing allowance. cheese yield formula. The 1.32 factor butter and nonfat dry milk. As in the case of the other solids make times the cheese price is used in the Applying these equations to national allowance, the proposed $0.127 per protein price formulas in many current average nonfat dry milk production pound protein make allowance reflects Federal order component pricing plans. resulted in make allowances ranging the point where the long-run average Both the 1.32 and 1.582 are determined from $0.1166 to $0.1561 per pound. cost curve begins to level off for by calculating the change in cheese These values are in alignment with the Cheddar cheese production. This cost yield if an additional tenth of a pound seven-year average, $0.1392 per pound, curve was developed by Mesa- of protein or butterfat is contained in based on audited cost of production Dishington, Barbano, and Aplin of the milk, holding everything else data published by the California Cornell University. The combination of constant. Accounting for the additional Department of Food and Agriculture. the cheese and other solids (dry whey) value of butterfat in cheese is necessary. This California average included a make allowances result in a total Class This additional value is included with return on investment. These computed III make allowance approximately $0.10 the protein price calculation as a means costs straddle the proposed $0.125 make below the reported California audited of quantifying the amount by which the allowance. The proposed $0.125 make make allowance. value of butterfat in cheese exceeds the allowance is approximately 90 percent The proposed make allowances used value of butterfat in butter, and because of the California production costs. The in computing the component prices for it is the casein in protein that forms the $0.125 make allowance is appropriate, Class III and Class IV result in per molecular matrix that retains the as it covers the costs of most plants but hundredweight prices which did not butterfat in cheese. The ratio of butterfat does not cover the costs of all deviate greatly on average from the to protein is calculated from the protein manufacturing plants. Several current BFP over the period analyzed, and butterfat yield factors of 1.32 and comments in support of product price one of the criteria for a basic formula 1.582. formulas also suggested that a make price replacement. During the The nonfat solids formula uses the September 1991 through May 1997 allowance of $0.125 for nonfat dry milk 0.96 factor as the percent or quantity of period on which this analysis is based, was appropriate. nonfat solids in a pound of nonfat dry Class III prices would average $0.26 per milk. The 0.82 in the butterfat formula The determination of the $0.079 hundredweight above the current BFP, represents the percent or quantity of butter make allowance is also based on with Class IV prices averaging $0.22 per butterfat in one pound of butter. The research by Stephenson and Novakovic. hundredweight below. 0.968 factor in the other solids formula However, applying the long run cost Changes in make allowances will represents the percentage of other solids equations to national production results affect component prices and per in whey powder. in national make allowances ranging hundredweight milk values. A one-cent This proposed pricing system from $0.1318 to $0.1013. These values per pound change in the butter make eliminates the need for regional yields are considerably higher than the seven- allowance will affect the butterfat price based on regional differences in milk year average of $0.0879 reported by in the opposite direction by $0.0122 per composition. The value of milk would California. Variation in plant size, or pound. This would be $0.0427 per be adjusted automatically based on the capacity, is the main reason for the hundredweight for milk at 3.5 percent level of components contained in the differences between the computed butterfat. The butterfat price also is used milk in each order even though the values and the average for California in the computation of the protein price. component prices are the same butter plants. Many plants produce The protein price will change inversely nationally. This automatic adjustment small quantities of butter, resulting in to the butter make allowance by $0.0146 means that handlers would pay the an understated average plant size and per pound or $0.046 per hundredweight same price per pound of component but overstated cost figures. This rapidly for milk with 3.15 percent protein. A have differing per hundredweight becomes apparent when comparing positive make allowance change for values based on the milk component California data to the national average nonfat dry milk will result in a decline levels, creating equity in the minimum data. California produces approximately in the nonfat solids price. A one-cent cost of milk used for manufacturing three times more butter per plant than change in the nonfat dry milk make purposes. the national average at a lower cost. The allowance will result in a $0.0104 per An analysis of the basic formula price $0.079 make allowance is set at 90 pound or $0.094 per hundredweight replacement requires several percent of the California audited cost of opposite change in the nonfat solids assumptions. Historic commodity price production. This make allowance price. A one-cent change in the cheese surveys are not available for all of the should allow an efficient butter plant to make allowance will cause an opposite commodities. Prices used as substitutes operate. change in the protein price by $0.0322 for historic price survey data in this The other solids make allowance is per pound or $0.1014 per analysis include: the National Cheese based on research conducted by Hurst, hundredweight for milk with 3.15 Exchange 40-pound block prices for Aplin, and Barbano of Cornell percent protein. Finally, a one-cent computing protein prices; the Chicago University. Their research indicated a change in the other solids (dry whey) Mercantile Exchange Grade AA butter make allowance range of $0.079 to make allowance will change the other prices for computing butterfat prices; $0.259 per pound of whey powder, solids price by $0.0103 per pound or and the Dairy Market News Central depending on plant size. The $0.10 used $0.0567 per hundredweight in the States dry whey price for computing the in the other solids price computation opposite direction. other solids prices. Available survey corresponds to the area of the The factors used in the proposed prices used were nonfat dry milk prices manufacturing cost curve at which formulas to compute component prices published monthly by NASS in ‘‘Dairy manufacturing costs per unit, that are determined by the quantity of the Products’’. diminish as volume of production component in the commodity, except One of the requirements of a basic increases, begin to level off. This part of for protein, for which the Van Slyke formula price replacement, based on the the cost curve would appear to be the yield formula is used. In the protein assumption that the current basic most appropriate to use for formula, the 1.32 and 1.582 are yield formula price reflects the national Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4885 supply and demand for manufacturing basic formula price. Correlation butter and nonfat dry milk had changed, milk, is that the price level not deviate coefficients were computed to and the prices become more volatile, the greatly from the current basic formula statistically test the relationships proposed Class IV price averaged $13.82 price. All comparisons are thus made to between the Class III and Class IV prices with a standard deviation of 2.19 versus the current basic formula price. and the current basic formula price. the 1996 BFP average of $13.39 with a Three different comparisons were Statistically, the correlation coefficients standard deviation of 1.26, and the examined. First, standard component are positive and significant, indicating proposed Class III average price of levels were used to compute a positive relationships between the $14.04 with a standard deviation of hundredweight price that was compared current basic formula price and the 1.33. to the current basic formula price. The Class III and Class IV prices. The The Class III and Class IV prices standards for computing Class III prices correlation coefficient between the Class clearly reflect the value of the milk used were 3.5 percent butterfat, 3.15 percent III price and the current basic formula in the respective manufactured protein, and 5.5 percent other solids. price is generally above .95 while the products, whereas the current basic The standards for computing Class IV correlation coefficient between the Class formula price reflects primarily the prices were 3.5 percent butterfat and IV price and the current basic formula value of milk used to manufacture 8.65 percent nonfat solids. The second price is approximately .75. These cheese. Therefore, to the extent the comparison computed a per relationships are expected since the proposed Class III and Class IV formulas hundredweight price using actual current basic formula price is weighted deviate from the present level of the component tests to determine an ‘‘at more heavily on milk used for the BFP, they may be more appropriate test’’ value. A third comparison manufacture of cheese than on the value indicators of the value of milk used in computed hundredweight prices at 3.5 of milk used in the manufacture of those products than the current BFP. percent butterfat with protein and other butter and nonfat dry milk. Class I solids adjusted to reflect the change in The proposed Class III and Class IV skim milk that occurs as the butterfat is formulas are computed from product The basic formula price replacement changed from ‘‘at test’’ to 3.5 percent. prices representing the use of milk in also will act as a mover for the Class I The latter two comparisons: (1) each class. That is, the Class III price price in addition to establishing prices eliminate any bias occurring from the would be derived from the value of for milk used in Class III and Class IV. use of ‘‘standard’’ component levels, cheese while the Class IV price would Several comments were filed relative to and (2) address seasonality of be derived from the value of butter and the use of the basic formula price component levels. These latter two nonfat dry milk. Therefore the Class III replacement to establish the Class I comparisons require tests for protein and Class IV prices could, and would, price. These comments ranged from and other solids and were only vary significantly from the current BFP continuing the current system to performed for months in which test data in individual months, reflecting the establishing the Class I price was available (September 1991 through economic (supply and demand) independently of the basic formula May 1997). conditions for cheese, butter, and nonfat price(s) for milk used in manufactured Statistically, the Class III dry milk. This situation is particularly products. One comment suggested hundredweight price and the Class IV true of the Class IV price. For example, eliminating the basic formula price and hundredweight price did not equal the during 1993 and 1994 the price of butter pooling only the Class I and Class II current basic formula price for all and nonfat dry milk was relatively low differentials. comparisons. However, in absolute and stable compared to the price of In comments suggesting that the Class terms, the average differences were cheese. The degree of variability of I price not be computed from the basic relatively small. When compared to the individual months’ prices from the formula price, commenters expressed Class III and Class IV prices computed average for the year is expressed by a the opinion that the Class I price should using the constants, the current basic standard deviation. A lower standard not be based on prices for milk used in formula price averaged $0.26 per deviation indicates that individual manufactured products because these hundredweight below the Class III price observations (in this case, monthly prices do not reflect the market for Class and $0.22 per hundredweight above the product prices) vary less from the mean I milk. The comments noted that Class IV price during the September than would be indicated by higher fluctuations in the Class I price do not 1991 through May 1997 period. standard deviations. These statistical result in corresponding changes in the Comparing the Class III and Class IV descriptions indicate the difference in retail price for fluid milk, particularly prices at test to the current basic variability of prices between butter/ when the Class I price is declining. formula price at test, the Class III price powder and cheese in 1993 and 1994. These commenters suggested including averaged $0.35 per hundredweight Further examples are included in the the retail milk price, as well as other above the current basic formula price attached table. factors, in computing the Class I price. while the Class IV price averaged $0.19 During 1993 the proposed Class IV The result would be to determine the below the current basic formula price. price would have averaged $11.51 with Class I price from an economic formula. The third comparison, in which the a standard deviation of .15, compared to Other commenters expressed the Class III and Class IV prices are adjusted the 1993 BFP average of $11.80 with a opinion that the Class I price should be to 3.5 percent butterfat, had the Class III standard deviation of .72, and the more stable, and that with advance price averaging $0.32 per average Class III price of $11.99 with a pricing it is very difficult to price fluid hundredweight above the current BFP, standard deviation of .83. In 1994, the milk products because of large while the Class IV price averaged $0.22 proposed Class IV price would have fluctuations in the butter market. (It is per hundredweight below the current averaged $11.15 with a standard the Class I hundredweight price at 3.5 BFP. deviation of .13, compared to the 1994 percent butterfat that is announced in In addition to comparing the absolute BFP average of $12.00 with a standard advance. Fluctuations in the butterfat Class III and Class IV prices to the deviation of .57, and the average differential, which is not announced in current BFP, it is important to compare proposed Class III price of $12.18 with advance, result in corresponding the relationship between the Class III a standard deviation of .65. For 1996, fluctuations in the skim price, which is and Class IV prices and the current when the economic conditions for predominately applicable to Class I 4886 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules milk.) Other commenters suggested that of the butterfat price. The skim milk declining average contributes a weight if the current basic formula price price is determined for Class III by of 28.6 percent of the price to the most reflects the demand for fluid milk, the combining the result of multiplying 3.3 current month, while a 6-month moving basic formula price and the Class I price by the protein price and 5.7 by the other average reflects only 16.7 percent of the should at least move in the same solids price, and for Class IV by current month’s price in the average. By direction, rather than in opposite multiplying the nonfat solids price by 9. reflecting current economic conditions directions as they have done at times These factors represent the quantities of more rapidly than the longer moving over the past several years. In addition, the respective components in 100 averages, the 6-month declining average commenters expressed the opinion that pounds of skim milk. The use of a 6- strikes an acceptable balance between the elasticity of demand for fluid milk month declining average would responsiveness to current market values products is significantly different from significantly decrease monthly Class I and the goal of stability. the elasticity of demand for price volatility while minimally The combination of advanced manufactured products, justifying affecting the long-run price. Application butterfat and skim milk pricing and a 6- separate pricing of Class I and the basic of the 6-month declining average of the month declining average will allow formula price. higher of the Class III or Class IV prices Class I handlers true advanced Class I Proponents of eliminating the BFP to the computation of Class I prices for pricing and increased price stability. and pooling only the Class I and Class the period February 1992 through May Increased producer pay price stability as II differentials explained that this 1997 would have resulted in prices a result of increased Class I price proposal would eliminate the need and which averaged only two cents below stability will remain dependent on the controversy of determining a basic the average price computed by adding a Class I utilization of each market. formula price while still distributing the fixed differential to the higher of the Improving price stability has other proceeds of the Class I and Class II Class III or Class IV skim milk price for advantages. Dairy processors, markets to producers. The remainder of the second preceding month. consumers, and producers will benefit the producer value of milk would be The Class I butterfat price from less month-to-month variation in determined directly by the market rather computation adds the Class I differential prices than is experienced under the than from an administratively- to the 6-month declining average of the current pricing mechanisms. Increased established value for milk used in butterfat price. Application of the Class Class I price stability may result in manufacturing. I differential to both the skim and lower prices to consumers. The concept of pooling differentials butterfat pounds rather than to total As discussed previously, the price only would eliminate the need to product pounds achieves true Class I link between Class I use and Grade A determine a basic formula price. advance pricing. A Class I handler milk used to manufacture Class III and However, the Act states that the consequently would know both the Class IV products should be maintained Secretary shall establish minimum skim milk and butterfat prices in since Grade A milk can be used for fluid prices for milk and classify milk in advance. uses as well as for manufacturing uses. accordance with the purpose for which Several options were analyzed with Because handlers compete for the same it is used. The differential milk value respect to selecting the appropriate milk for different uses, Class I prices would not be the minimum value nor Class I price mover. The options should exceed Class III and Class IV differentiate between classes as included using the second preceding prices to assure an adequate supply of specified in the Act. As interpreted month’s prices, using a moving average, milk for fluid use. Federal milk orders herein, the Act does not provide for and using a declining average. A traditionally have viewed fluid use as pooling differentials only and new declining average weights the current having a higher value than legislative authority would be required price most heavily, with the next most manufacturing use. The proposed Class in order to do so. current price receiving a smaller weight, I price mover reflects this philosophy by There certainly are some reasons for and so forth for the number of months using the higher of the Class III or Class partially breaking the direct link included. For example, a three month IV price for computing the Class I price. between Class I prices and the BFP. This declining average would weight the In some markets the use of a simple proposed rule includes a method for most current price by three, the next or even weighted average of the various pricing Class I based on a six-month most current by 2, and the third price manufacturing values would inhibit the declining average of the higher of the by 1, with the resulting sum divided by ability of Class I handlers to procure Class III or Class IV prices. A complete 6 to determine the average. milk supplies in competition with those separation should not occur since All options were evaluated on the plants that make the higher-valued of handlers compete for the same ability to improve price stability while the manufactured products. Use of the undifferentiated milk to use in Class I maintaining appropriate producer price higher of the Class III or Class IV price fluid milk products as well as in cheese signals. A Class I price mover using the will make it more difficult to draw milk and other manufactured dairy products. higher of the Class III and Class IV skim away from Class I uses for Therefore, an appropriate price milk prices for the second preceding manufacturing. For example, if the Class relationship must be maintained month (most resembling the current IV price were used as the Class I mover between Class I and the manufacturing mover) was the least stable option, with there would be months in which the classes to assure an adequate supply of a standard deviation of 1.3188. A 12- Class III price would be more than two milk for Class I uses. month moving average of the higher of dollars above the Class IV price. As a Partially breaking the direct link the Class III and Class IV skim milk result, the Class I differential would between Class I prices and the basic prices resulted in the most price have to be well over two dollars for the formula price replacement would stability with a standard deviation of Class I price to remain above the Class reduce the volatility in producer prices. .8840. However, a 12-month moving III price. Certainly, in this scenario the This rule proposes that the fixed Class average tends to react more slowly to economic decision would be to sell milk I differential for each order be added to economic signals since the most current for Class III manufacturing, at least in a 6-month declining average of the month, which most nearly reflects those markets with a Class I differential higher of Class III or Class IV skim current economic conditions, has a below two dollars, since the price is prices and a 6-month declining average weight of only 8.3 percent. The 6-month above the Class I price. If the Class III Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4887 price is used as the Class I price mover, pricing. For example, on July 3rd the levels are not only an indicator of the reverse situation of having the Class June basic formula price was general milk quality, but also are an IV price well above the Class III price announced, establishing the August indicator of the potential yield of milk would result in the same problem. The Class II price for milk containing 3.5 in cheese and other products that potential of having a Class III or IV price percent butterfat at $11.04 per require casein for their structure and in excess of the Class I price is not hundredweight. The June butterfat body. Research has shown a direct link entirely eliminated by using the higher differential was $0.114, which if applied between increased somatic cell counts of the Class III or Class IV price because to the $11.04 would have resulted in a and decreased cheese yields. Milk with of the advance Class I pricing feature, butterfat price of $1.2105 per pound of the same protein content but different and, to some extent, because of the butterfat and $0.0705 per pound of skim somatic cell counts has different values effect of using a 6-month declining milk. However, the August butterfat due to the difference in cheese yields average on which to base the Class I differential was $0.106. The actual caused by varying somatic cell counts. price. However, use of the higher of the butterfat price would therefore have Second, many producers currently are two manufacturing prices for each of the been $1.11333 per pound, and the subject to some type of multiple months averaged and weighting the actual skim milk price would have been component pricing plan or quality average toward the most recent month $0.0733. This example illustrates that premium program that adjusts their pay should reduce the popential even though the Class II price is prices for somatic cell levels even if the considerably, allowing Class I handlers announced in advance, the price of the order in which their milk is pooled does to compete more effectively with skim milk and butterfat used in Class II not incorporate such adjustments. manufacturing plants for fluid milk. currently is not known in advance. The Although many producers’ returns are further a product varies from a 3.5 affected by the somatic cell count of the Class II percent butterfat content, the greater milk, there is little, if any, oversight of Under this proposed rule, the value of will be the effect of the butterfat price the testing for somatic cells if the order Class II milk would be determined by changes between the announcement does not include pricing adjustments. multiplying the pounds of nonfat solids date and the month in which the milk Fair and accurate testing can be assured in producer milk allocated to Class II by is used. by incorporating multiple component the nonfat solids price, the pounds of Second, although advance pricing pricing and somatic cell adjustments butterfat by the butterfat price, and the would be possible under the proposed into Federal orders. Third, somatic cell hundredweight of Class II skim milk by component plan, a problem occurs in counts have taken on greater importance $0.70. Generally, the source of inputs accounting for the skim milk and in the world dairy market, as evidenced alternative to producer milk for the butterfat, particularly butterfat, in Class by the recent debate between the manufacture of Class II products is dry II products. Additional finished product European Community and the United milk products and butterfat. Basing the testing and accountability, and therefore States over allowable somatic cell price of milk used to make Class II increased regulation, would be needed counts in milk used to make exported products on these alternative to account properly for butterfat used in dairy products. It is now more ingredients should help considerably to Class II since it would have to have a important that the somatic cell level of remedy a situation in which it is different price than the butterfat, priced producer milk be verifiable. perceived that a separate product class on a current basis, used in other The somatic cell adjustment should for dry milk (Class III–A) has a manufacturing classes. apply on a hundredweight basis and be competitive advantage over producer Third, pricing Class II on a current computed by subtracting the somatic milk used to produce Class II products. basis would allow the price relationship cell count (in thousands) from 350 and The 70-cent differential between the between the nonfat solids and butterfat multiplying the result by the product of Class IV and Class II skim milk prices in Class IV and Class II to remain .0005 times the monthly average cheese is an estimate of the cost of drying constant from month to month. With a price. This level of adjustment has condensed milk and re-wetting the constant price relationship between worked well in orders currently solids to be used in Class II products. these two classes, competition and containing somatic cell adjustments, One commenter suggested that there substitution between milk and the Class and is supported by data and research should be a $1.00 difference between IV products used to make Class II contained in Federal order milk hearing Class IV and Class II. Additional products will be based on the relative records. comments on the appropriate level of merit of the alternative inputs rather Application of the Proposed Basic this differential, with supporting data, than on regulated price relationships. Formula Price are encouraged. The use of product price formulas, for The proposed rule would not provide Class II and well as for Class IV, should Under this proposed rule, producers for advance pricing on Class II milk, for allow industry participants to track in most Federal order markets would be several reasons. First, although the price trends throughout the month, paid on a multiple component basis current Class II price is announced in enabling them to estimate changes in since the basic formula price advance on the basis of the second price. replacement is based on individual milk preceding month’s BFP, it is announced component prices. Producers will be as a hundredweight price for milk Quality Adjustments paid for the pounds of butterfat, pounds containing 3.5% butterfat. When the This proposed rule would adjust of protein, pounds of other solids, a per butterfat price changes between the time producer payments for the somatic cell hundredweight price known as the the price is announced and the month count of producers’ milk under orders producer price differential, and a per to which the price applies, the 3.5% using multiple component pricing. hundredweight somatic cell adjustment. hundredweight price is still applicable, Payments made by handlers for milk The producer price differential returns but the balance between the skim milk used in Class II, Class III, and Class IV to producers their pro rata share of the price and the butterfat price may have should also be adjusted on the basis of proceeds of the classified pricing shifted significantly. This phenomenon the somatic cell count of the milk. A system. The butterfat price for effectively eliminates the advance somatic cell adjustment is appropriate producers would be the same butterfat announcement feature of Class II for several reasons. First, somatic cell price computed for Class III and Class 4888 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

IV butterfat. The protein and other Payments by handlers to cooperative protein times the protein price, (d) the solids prices would be the same protein associations for Class I milk would be total pounds of other solids times the and other solids prices computed for calculated on the basis of Class I skim other solids price, (e) the total value of Class III. pounds times the Class I skim price plus the somatic cell adjustments to the Handler obligations and producer the pounds of Class I butterfat times the producer milk, and (f) the value of other payments under the orders that are not Class I butterfat price. Payment for Class source milk at the producer price proposed to have component pricing II milk would be paid for based on the differential with any applicable location provisions would be based on Class II differential times the adjustment at the plant from which the hundredweight prices computed from hundredweight of producer skim milk milk was shipped deducted from the these component prices. in Class II, the pounds of nonfat solids handler’s value of milk. All of the Federal milk orders will in Class II times the nonfat solids price, Payments to producers traditionally require changes to accommodate and the pounds of butterfat in Class II have been made in two payments, a replacement of the current BFP with the times the butterfat price. Class III milk partial payment based, in most cases, on proposed multiple component pricing will be paid for based on the pounds of the prior month’s Class III price and a plan or with its hundredweight price protein in Class III times the protein final payment at the uniform price. This equivalent. There would no longer be a price, the pounds of other solids in traditional payment system will butterfat differential under any order, Class III times the other solids price, continue, with any exceptions for local but a butterfat price. The same butterfat and the pounds of butterfat in Class III marketing practices noted in the price would be used for butterfat in times the butterfat price. The pounds of regional discussions. The partial Class II, Class III, and Class IV, while a nonfat solids in Class IV times the payment will be paid on a per separate butterfat price, announced in nonfat solids price, and the pounds of hundredweight basis with the price advance, would apply to butterfat used butterfat in Class IV times the butterfat equaling the combined value of the skim in Class I. price would be used to calculate and butterfat prices for the lowest- For purposes of allocation of producer obligations for Class IV milk. The priced class in the previous month. By receipts the assumption will be made appropriate somatic cell adjustment will computing the partial payment on a that the protein and other solids (nonfat apply to milk in Class II, Class III, and hundredweight basis, confusion about solids) can not be separated easily from Class IV. the use of partial month component test the skim milk. The protein and other The Class I value of milk to handlers averages will be eliminated and solids will therefore be allocated would be calculated by multiplying the handler’s partial payroll processing proportionately with the skim milk skim pounds of producer milk in Class costs should not be affected. Final based on the percentage of protein and I times the Class I skim price plus the payments to producers and for 9(c) milk other solids in the skim milk received pounds of Class I butterfat times the will be based on: (a) the hundred weight from producers. Accordingly, the Class I butterfat price. Class II milk of milk times the producer price pounds of protein and other solids will value would be computed on the basis differential adjusted for location, (b) the be determined by multiplying the of the Class II differential times the pounds of protein times the protein percent protein or percent other solids hundredweight of producer skim milk price, (c) the pounds of other solids in the skim milk of the total producer allocated to Class II, the pounds of times the other solids price, (d) the milk received by the handler times the nonfat solids in Class II times the nonfat pounds of butterfat times the butterfat pounds of skim milk allocated to each solids price, and the pounds of butterfat price, and (f) the somatic cell class. The assumption that the nonfat in Class II times the butterfat price. adjustment rate times the components follow the skim milk may Class III milk value would be computed hundredweight of milk. need to be revisited as the fractionation based on the pounds of protein in Class Since producers will be receiving technology of milk continues to improve III times the protein price, the pounds payments based on the component and the pricing system falls short of of other solids in Class III times the levels of their milk, the payroll reports meeting the needs of marketing other solids price, and the pounds of that handlers supply to producers and practices. At the present time such a butterfat in Class III times the butterfat to the Market Administrator must reflect problem is not apparent. price. The pounds of nonfat solids in the basis for such payment. Therefore For the Market Administrator to Class IV times the nonfat solids price, the handler will be required to supply compute the producer price differential, and the pounds of butterfat in Class IV the producer not only with the handlers will need to supply additional times the butterfat price would information currently supplied, but information on their monthly reports of comprise the value of Class IV producer also: (a) the pounds of butterfat, protein, receipts and utilization. Handlers that milk. Also included would be the and other solids in the producer’s milk, are filing reports in orders that currently appropriate somatic cell adjustment as well as the average somatic cell count have multiple component pricing and a applied to milk in Class II, Class III, and of the producer’s milk, and (b) the somatic cell adjustment will see little or Class IV, the value of overage, the value minimum rates that are required for no change in their reporting of inventory reclassification, the value payment for each pricing factor and, if requirements. Under orders that would of other source receipts and receipts a different rate is paid, the effective rate be adopting component pricing for the from unregulated supply plants also. The requirement that payment first time, the pounds of protein, the allocated to Class I, and the value of factors be reported to producers when pounds of other solids, and somatic cell handler location adjustments. producers are paid currently exists in all information will be needed in addition The handler’s obligation to the of the orders. Addition of the to the product pounds and the butterfat producer settlement fund will be component information is purely a currently reported. This data will be determined by subtracting from the conforming change. Administration of required from each handler for all handler’s value of milk the following these provisions should not be changed producer receipts, including milk values: (a) the total pounds of producer from current practices. diverted by the handler, receipts from milk times the producer price With advance pricing of Class I and cooperatives as 9(c) handlers and, in differential adjusted for location, (b) the the inherent instability of the some cases, receipts of bulk milk total pounds of butterfat times the commodity markets there may be received by transfer or diversion. butterfat price, (c) the total pounds of occasions when the computation of the Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4889 producer price differential results in a range of 63 cents to $1.00 more than the how they might be avoided, are value of zero or below. In such a BFP. Over the same period, the welcome. situation, the producer price differential proposed Class IV price has averaged The pricing formulas contained in will be as computed. $1.01 more than the BFP, with this proposed rule are suggested as The following table is of actual and differences ranging from 3 cents under viable replacements for the current basic proposed class prices and the proposed to $1.97 over. Comments on this failure formula price for use in establishing Class I price mover for the period of of the more recent data to fit the minimum prices for milk and the January 1994 through December 1997. relationship between the BFP and the components of milk. Comments should The proposed prices are shown for proposed Class III and IV prices address whether the formulas suggested information purposes only. These prices observed over the earlier and longer are appropriate or whether other pricing result from the strict application of the period are invited. methods would be preferable. In proposed formulas using current market A feature of the relationships between addition, comments are welcomed on situations. These prices should not be the proposed class prices that should be the specific details of the suggested interpreted as prices that would have pointed out is that there is no assurance pricing formulas. This would include actually occurred throughout the data that the class prices will retain the comments on the appropriate period because industry participants relative values that their designations commodity prices from which likely would have reacted differently to might imply. Because of the advance component prices are to be calculated, the proposed price levels than they pricing feature for Class I, and because the method of obtaining such prices, the reacted to the actual price levels. the Class I price would be based on a content of each component to be priced Although the proposed formulas for declining average of former months’ in the relevant commodity, the calculating the Class III and Class IV prices, there is some possibility that the appropriate make allowance to be used prices resulted in prices fairly close to Class I price level for some markets may in the determination of each component the BFP for the period over which data fall below the levels of one or more of price, the optimum method of was collected and analyzed (September the other classes. At the same time, determining the Class I price mover, as 1991 through May 1997), the price basing the Class II price on the Class IV well as the appropriate level of the Class differences during the last six months of component values might, at times, result II skim milk differential. Such 1997 have been considerably greater. in the Class II price falling below the comments should incorporate relevant The proposed Class II price has level of the Class III price. Comments on data and rationale to support the averaged 83 cents over the BFP during whether such changing price adoption of factors that differ from those July through December 1997, with a relationships are appropriate and, if not, proposed herein.

ACTUAL CLASS PRICES, PROPOSED CLASS PRICES, AND PROPOSED CLASS I PRICE MOVER, BY MONTH [January 1994 through December 1997]

Proposed Basic Class I Proposed Class III-A Proposed Class II Proposed Year and month formula price Class III price Class IV price Class II price mover * price price price

Dollars per cwt

1994: January ...... $12.41 $12.55 $12.36 $10.22 $11.00 $13.25 $11.67 February ...... 12.41 12.55 12.43 10.23 11.01 12.26 11.68 March ...... 12.77 12.69 13.09 10.32 11.22 12.61 11.90 April ...... 12.99 12.88 13.36 10.34 11.31 13.19 11.99 May ...... 11.51 12.57 11.69 10.24 11.08 13.88 11.75 June ...... 11.25 12.16 11.15 10.09 11.02 12.18 11.70 July ...... 11.41 12.01 11.85 10.13 11.08 10.35 11.76 August ...... 11.73 11.96 12.08 10.38 11.21 11.84 11.88 September ...... 12.04 12.03 12.44 10.35 11.25 12.95 11.92 October ...... 12.29 12.16 12.55 10.36 11.29 12.15 11.97 November ...... 11.86 12.14 11.88 10.40 11.29 12.53 11.97 December ...... 11.38 11.94 11.31 10.17 10.99 12.24 11.67 Average ...... 12.00 12.30 12.18 10.27 11.15 12.45 11.82 1995: January ...... 11.35 11.78 11.44 10.06 10.83 11.02 11.51 February ...... 11.79 11.78 11.96 10.12 11.05 11.35 11.72 March ...... 11.89 11.85 12.17 10.22 11.14 12.20 11.81 April ...... 11.16 11.72 11.42 10.27 11.17 12.09 11.84 May ...... 11.12 11.62 11.36 10.21 11.19 12.19 11.87 June ...... 11.42 11.64 11.69 10.37 11.28 11.46 11.96 July ...... 11.23 11.65 11.70 10.61 11.49 11.42 12.17 August ...... 11.55 11.83 12.36 10.82 11.72 11.72 12.40 September ...... 12.08 12.24 13.22 10.90 11.82 11.53 12.50 October ...... 12.61 12.74 13.69 11.66 12.45 11.85 13.12 November ...... 12.87 13.18 13.89 12.40 12.89 12.38 13.56 December ...... 12.91 13.54 14.01 11.24 11.99 12.91 12.66 Average ...... 11.83 12.13 12.41 10.74 11.58 11.84 12.26 1996: January ...... 12.73 13.62 13.43 11.16 11.95 13.17 12.63 February ...... 12.59 13.59 13.31 10.39 11.54 13.21 12.21 March ...... 12.70 13.54 13.41 10.32 11.40 13.03 12.07 4890 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

ACTUAL CLASS PRICES, PROPOSED CLASS PRICES, AND PROPOSED CLASS I PRICE MOVER, BY MONTHÐContinued [January 1994 through December 1997]

Proposed Basic Class I Proposed Class III-A Proposed Class II Proposed Year and month formula price Class III price Class IV price Class II price mover * price price price

April ...... 13.09 13.61 13.88 10.52 11.55 12.89 12.23 May ...... 13.77 13.80 14.32 11.90 12.66 13.00 13.34 June ...... 13.92 14.23 14.18 15.12 15.24 13.39 15.91 July ...... 14.49 14.91 14.86 16.01 16.33 14.07 17.01 August ...... 14.94 15.46 15.71 15.82 16.33 14.22 17.00 September ...... 15.37 16.10 16.31 15.85 17.17 14.79 17.84 October ...... 14.13 16.21 15.04 14.94 15.91 15.24 16.58 November ...... 11.61 15.42 12.45 12.18 13.12 15.67 13.80 December ...... 11.34 14.56 11.59 11.75 12.67 14.43 13.34 Average ...... 13.39 14.59 14.04 13.00 13.82 13.93 14.50 1997: January ...... 11.94 13.77 11.92 11.50 12.48 11.91 13.16 February ...... 12.46 13.36 12.36 12.36 13.18 11.64 13.86 March ...... 12.49 13.25 12.47 12.78 13.73 12.24 14.40 April ...... 11.44 13.12 11.51 12.10 13.06 12.76 13.73 May ...... 10.70 12.97 10.69 11.56 12.49 12.79 13.17 June ...... 10.74 12.98 10.76 12.22 12.98 11.74 13.66 July ...... 10.86 12.93 11.51 12.06 12.83 11.00 13.50 August ...... 12.07 12.94 13.07 11.88 12.69 11.04 13.36 September ...... 12.79 13.06 13.42 11.87 12.76 11.16 13.43 October ...... 12.83 13.43 13.71 13.50 14.27 12.37 14.95 November ...... 12.96 13.89 13.88 14.01 14.79 13.09 15.47 December ...... 13.29 14.08 14.23 12.46 13.53 13.13 14.20 Average ...... 12.05 13.32 12.46 12.36 13.23 12.07 13.91 48-Month Avg ...... 12.32 13.09 12.77 11.59 12.45 12.58 13.12 * To be used to calculate Class I price for second succeeding month.

3. Class I Pricing Structure To assist in analyzing and developing across plant volumes (no economies of Although not required by the 1996 a Class I price structure, USDA scale). Therefore, processing is allowed Farm Bill, the legislation provided established a partnership with Cornell to move among available locations to authorization for the Secretary to review University (Cornell). Cornell’s analysis, find the least cost solution in terms of the Class I (fluid milk) price structure in part, was based on the U.S. Dairy assembly from supply points through (as part of the consolidation of the Sector Simulator Model (USDSS). The distribution to consumption points. USDSS is used to evaluate the orders) including the consideration of Transportation costs are categorized utilization rates and multiple basing geographic or ‘spatial’ value of milk and milk components across the U.S. under by raw milk assembly, interplant bulk points for developing a pricing system. shipments, refrigerated and non- In any event, the consolidation of orders the assumption of globally efficient markets. Using 240 supply locations, refrigerated finished products. requires the review of the pricing Transportation costs among regions system because historically Class I 334 consumption locations, 622 dairy reflect not only distance traveled, but pricing provisions, as well as other processing plant locations, 5 product also differences in wage rates and actual Federal order provisions, have been groups, 2 milk components (fat and reviewed on an individual market basis. solids-not-fat) and transportation and highway weight limit restrictions. While The 1996 Farm Bill suggested two distribution costs among all locations, assembly costs and interplant bulk possible methods for establishing a USDSS determines mathematically shipments are calculated using a linear Class I price structure, and USDA also consistent location values for milk and cost function, the refrigerated and non- specifically requested input from the milk components. The model uses data refrigerated finished product functions public on this issue. As a result of these from May and October 1995. are non-linear. In fact, refrigerated costs requests, more than 1400 letters were The supply and consumption at the (e.g., packaged milk) fell below raw milk received that addressed Class I pricing. county level are aggregated to assembly costs on an equivalent unit The ideas submitted were divided into geographic points-cities central to a basis in many cases at distances more several categories including: basic multi-county farm or population than 900 miles. Previous spatial formula price (market driven) plus a density-to simplify a very complex modeling at Cornell had assumed differential established on location, problem. The production of milk and constantly higher finished product demand-based, or flat; decoupling Class the consumption of dairy products are transportation costs versus raw milk I pricing from the basic formula price; fixed at the various supply and assembly costs for all distances.22 pooling Class I differentials only; basing consumption points used. Plant Class I pricing on the cost of production; locations are restricted to those 22 Earlier research that has been reported end product pricing for all classes of presently processing products but plant elsewhere was based on an older version of the milk; and various other ideas including processing locations were not model. Present revisions have made substantial changes to the various transportation cost functions. farm point pricing, a two-class milk constrained with respect to the volume In particular, distribution costs for refrigerated system, and differentials reflecting only processed. Processing costs are assumed products were reduced substantially and now are regional supply and demand conditions. to be uniform between locations and on par with bulk milk assembly costs. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4891

The output from the USDSS model change virtually daily and would reflect prices. In evaluating a national Class I provides information as to optimal a host of influences not represented in pricing structure, consideration was processing locations and volumes at the model. That notwithstanding, the given to whether the proposed prices those locations, milk assembly, and USDSS model provides an objective reflect enough of the milk value to intermediate and finished product guidepost from which to compare maintain sufficient revenue for distribution flows. It represents a least current federal order differentials and to producers to maintain an adequate cost, or ‘efficient’ organization of the consider possible alternatives. supply of milk and provide equity to industry. Importantly for the research, Several factors must be considered handlers with regard to raw product the model provides the marginal values when selecting a replacement for the costs. (i.e., the value of one more unit) of milk current 23 Class I price structure. First, a Of the numerous Class I price at each location. These values, Class I price structure must be proposals submitted, seven broad technically known as shadow prices, are considered from a national, as well as a categories of proposals were selected for indicative of values that are consistent local or regional, perspective. As further evaluation. These seven with the optimized solution. A shadow expected, many comments from categories of proposals are all based on price on one unit of milk at any industry address Class I pricing issues a basic formula price plus a differential. processing location can be interpreted from a local or regional perspective. The seven categories of proposals were as follows: If the processor at a These comments provide valuable selected because they basically adhered particular location had one more unit of information about particular markets to these four standards. The seven milk, the entire pattern of milk but do not consider the feasibility or options considered in further detail are assembly, and product transportation impact of a local or regional issue on a location specific differentials, flat could be reorganized in such a way that national basis. While remaining mindful differentials, relative use differentials, marketing costs, equal to the shadow of local and regional concerns, USDA demand-based differentials, and price, could be saved. This notion of has also evaluated structures from a decoupled baseline with adjusted marginal value is consistent with national perspective. differentials. These options will be economic theory on how prices are Second, a Class I price structure must explained in more detail later. determined in a competitive market. recognize the location value of milk. Several comments were received that The significance of the shadow value Results from the USDSS model confirm suggested pooling only Class I in terms of milk price regulation may be that milk has value at location. As differentials as a replacement for the stated. If the regulated price, or cost of described earlier, the model provides current Class I price structure. This milk, is arbitrarily set higher than the shadow prices reflecting the relative proposal was eliminated from further shadow price at a particular processing values of milk and milk components at analysis because it would require new location, a lower cost solution could be geographic locations. While shadow legislative authority to implement since found by processing more milk at other prices do not suggest Class I the AMAA requires the Secretary to locations. This would imply higher differentials for specific locations, they establish minimum prices for milk. This transportation costs for either raw milk do provide a means to evaluate price proposal would result in the elimination assembly, finished product distribution, relationships among locations. of all manufacturing milk classes. or both. Such a result clearly leads to a Third, a Class I price structure must Processors and manufacturers would higher cost, less efficient system. It is recognize all uses of milk. The classified compete for available milk supplies also contrary to what is generally pricing system contained in the Federal providing producers with a basic thought of as ‘‘orderly’’ marketing of milk order program values milk for fluid competitive price for their milk. milk which is a fundamental reason for use higher than milk used for soft or The AMAA requires in 7 U.S.C. the existence of federal milk marketing hard manufactured products. The higher 608c(5)(A) that the Department classify orders. Class I price encourages all milk to be ‘‘* * * milk in accordance with the It should be stressed that for the used first to satisfy Class I needs. At the form in which or the purpose for which purposes of looking at Class I values, the point where the cost of moving milk it is used * * *’’ and establish ‘‘* ** calculated shadow prices provide from an alternate location for Class I use minimum prices for each such use of information regarding the relationship is equal to the cost to supply milk for classification.’’ If the Department did of the prices between geographic manufactured products, demand for not differentiate between the uses of locations. They do not provide guidance manufactured products influences a milk as suggested in this proposal, it is regarding the overall level of Class I market’s ability to procure milk for difficult to determine how this would be price or differential values. That is, the Class I needs. Thus, all uses of milk accomplished. Moreover, Section model does not help us understand must be considered when evaluating a 8c(5)(B) provides ‘‘* * * for the whether the Class I prices should be $14 national Class I pricing structure. payment to all producers and in Minneapolis and $15 in New York Finally, a Class I price structure must associations of producers delivering City, or $15 in Minneapolis and $16 in meet the requirements of the AMAA. milk to all handlers of uniform prices New York City. However, it does tell us The broad tenet of the AMAA is to for all milk so delivered, irrespective of that the Class I price difference between establish and maintain orderly the uses made of such milk by the the two locations should be about one marketing conditions. For the Federal individual handlers to whom it is dollar. milk order program this is achieved delivered * * *.’’ This further indicates A relative merit of the USDSS model primarily through classified pricing and that the intent of the authorizing is the degree of detail available in the pooling. With regard to pricing, it is legislation is the classification and output. This detail is achieved through recognized that the objective of the pricing of all producer deliveries. the careful assembly of spatially AMAA is to stabilize the marketplace Otherwise, it would be difficult to pay disaggregated data. However, it should with minimum prices, not to set market producers a uniform price for all of their be remembered that by its construction milk ‘‘* * * irrespective of the uses the USDSS is a ‘model’ and thus a 23 Any references to the ‘‘current’’ system of Class made of such milk by the individual simplification of a complex dairy I prices or the ‘‘current’’ price structure are to be interpreted as those established in or after the final handler to whom it is delivered.’’ industry. In actuality, both the level and decision based on the 1990 national hearing issued Several proposals were submitted relative values between locations would March 5, 1993 (58 FR 12634). supporting ‘‘decoupling’’ Class I prices 4892 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules from Class III prices. The term However, technology is on the horizon hundredweight. A location adjusted ‘‘decoupling’’ has been construed in a that may substantially change milk price differential for every county is number of ways; however, a review of composition. If it results in a consumer established by evaluating differences the proposals indicates that the primary acceptable product at some point in the between nearby Class I differential concern is about how the BFP future, end product pricing to establish pricing points generated by the USDSS influences Class I prices. The purist fluid milk prices may need to be model. definition of decoupling is to determine revisited. Option 2: Relative Use Differentials— Class I prices without relating them to Several comments supported the $1.60 per hundredweight fixed the Class III price through differentials. adoption of a cost of production factor differential plus a formula-based This approach implies no relationship in the determination of a Class I price. differential driven by the ratio of Class between the value of milk for fluid use Milk prices are a result of the supply I milk to all other uses of milk. and milk used for manufacturing. With and demand conditions in the Option 3A: Flat Differentials—$1.60 this in mind, in general, decoupled marketplace. The cost of producing milk per hundredweight flat differential, prices could be determined in two ways: is obviously a factor in the supply uniformly applied across all orders to (1) Set Class I prices administratively; or function. However, many other factors generate an identical minimum Class I (2) Set Class I prices based on a affect the price of milk. Demand price at all locations. relationship that does not include the influences such as household income Option 3B: Flat Differentials Modified Class III price. levels, prices of substitutes or by Class I Use—$2.00 per While it is true that milk for fluid use complements, and availability all have a hundredweight differential in markets and milk for manufacturing use have significant impact on the price. Pricing where Class I utilization is less than 70 different values, the realities of the milk solely on the cost of production percent on an annual basis and a characteristics of milk supply and lacks economic justification. differential equal to $2.00+$0.075 (Class Numerous other Class I pricing demand, and the AMAA mandate ‘‘to I use %¥70%) in markets where the proposals were presented to the provide an adequate supply of milk’’ for Class I utilization is equal to or exceeds Department. At this time they are not fluid use, suggests the necessity of a 70 percent. relationship between the price of milk being further considered primarily Option 4: Demand-based for fluid use and milk used for because they are regionally based and Differentials—$1.00 per hundredweight manufacturing. Adopting a Class I price are not feasibly adaptable on a fixed differential plus a transportation based on the purist definition of nationwide basis, do not adhere to the credit based on location of reserve milk decoupling would not provide a requirements of the AMAA, do not supplies. relationship between fluid and recognize the location value of milk, or manufacturing uses. In this context, do not recognize all class uses of milk. Option 5: Decoupled Baseline Class I decoupling Class I prices from Class III Of the seven categories of options Prices with Adjustors—Baseline 1996 prices has been eliminated. However, selected for further review, six options Class I prices adjusted by a supply/ the use of a ‘‘decoupled’’ price based on were contained in the pricing reports demand adjustor that uses a 12-month the Class III price is considered in issued by AMS Dairy Programs in rolling average utilization to determine further detail later. March 1997. Based on the feedback a 2 percent change that results in a Some comments were received received from these reports, another $0.12 per hundred weight price recommending the use of end product pricing option was submitted for adjustment. A short-term cost of pricing. One comment specifically consideration by USDA and has been production adjustor may also be applied recommended it on all classes of milk included for further review. In addition, to this option. while others were unclear if end further analysis and development of the Evaluation Criteria product pricing should apply to all modified location-specific differentials classes of milk. Under end product (Option 1B), presented in the March In order to evaluate the Class I pricing pricing, milk components would be pricing reports, has resulted in a options, nine performance criteria, priced according to their value in the revision of this proposal and it is now based upon the regulatory objectives product mix. referred to as relative value-specific and limitations of the AMAA, were A number of questions arise with the differentials. The seven options developed. Economic principles of recommendation of end product pricing. analyzed in further detail, representing efficiency and equity were used to Mathematically it is relatively easy to a broad spectrum of views expressed by describe market performance. These take commodity prices and work interested parties, are as follows: evaluation criteria established an initial backward on the average. However, Option 1A: Location-Specific framework for analysis of the Class I where is the appropriate ‘‘end’’ to work Differentials—$1.60 per hundredweight pricing options. The nine evaluation backward from? Nonfat dry milk, for fixed differential for three surplus zones criteria were divided into two example, is not an end product at the (Upper Midwest, West, and Southwest) categories, objective and administrative. consumption level. Likewise, sweet within a nine-zone national price Six objective criteria were identified butter can be used for ice cream, etc. surface, plus for the other six zones, an and defined as follows: Other questions raised by this option added component that reflects regional 1. Ensure an adequate supply of milk include: Is a Class I milk value properly differences in the value of fluid and for fluid use. Class I price levels need discovered based on component value manufacturing milk. to provide a sufficient price signal to in manufacturing products? Do make Option 1B: Relative Value-Specific maintain an adequate supply of milk for allowances protect inefficiencies in the Differentials—Class I differentials are fluid use. This supply level can be manufacturing sector and thereby established based on a relationship achieved through either the movement transfer costs to the other sectors? between prices and geographic location. of milk to where it is needed, increased At this point in time there is no need This option establishes the differential production, or some combination of to price Class I milk on end product levels by equating the relative value- both. components. The market system has specific differential in Minneapolis, 2. Recognize quality (Grade A) value limited ability to value additional Minnesota, to current Class I differential of milk. Grade A milk is required for nonfat solids in fluid milk sales. level at this location of $1.20 per fluid use. Additional costs of obtaining Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4893 and maintaining Grade A status need to The nine evaluation criteria listed more than adequate to meet the local be reflected in Class I prices. above were used to qualitatively needs. 3. Provide appropriate market signals. evaluate each of the seven options. Each One possible option of a utilization- A Class I price should send timely option was evaluated based on how the based differential is relative use. Under signals to the market regarding supply/ option performed compared to the this concept, a marketing area’s demand conditions. current system, either better than, worse differential would be determined by a 4. Recognize value of milk at location. than, or the same as, for each formula based on the ratio of Class I Basic economic theory, validated by performance criterion. The results of the milk to milk in all other classes. In order actual market observations and qualitative analysis provided a to prevent widely fluctuating prices, a University-based research, affirms that preliminary framework from which to percentage limit could be placed on milk for Class I use has a different value identify options that would be analyzed differential changes to temper at different locations. This value needs quantitatively using a multi-regional adjustments based on market supply to be reflected in the Class I price in model developed by the Economic and demand conditions. For this order for the system to recognize and Research Service of the Department. analysis, a limit of 25 percent has been resemble the market rather than Based on the qualitative analysis, four applied. The relative use ratio could be interfere with the market. of the seven options were eliminated computed on a monthly, quarterly, or 5. Facilitate orderly marketing with from further analysis. These options annually moving average basis. coordinated system of prices. A system were: Option 2—Relative Use Using this concept, the relative use of Class I prices needs to be coordinated Differentials, Option 3A—Flat Class I differential would equal $1.60 on a national level. Appropriate levels Differentials, Option 3B—Modified Flat per hundredweight plus the relative use of prices will provide alignment both Differentials, and Option 4—Demand- ratio times $1.00. A 25 percent limit within and among marketing areas. This Based Differentials. These options were would be applied so the new differential coordination is necessary for the eliminated for various reasons including would not exceed 125 percent of the efficient and orderly marketing of milk. failure to adhere to AMAA, creation of 6. Recognize handler equity with current differential nor fall to less than disorderly marketing conditions, and regard to raw product costs. 75 percent of the current differential. impacts on small businesses. A Appropriate levels of Class I prices The $1.60 base differential was selected discussion of the four eliminated provide known and visible prices at all to be comparable with other options options, including the evaluation locations thereby ensuring that handlers considered in this rule such as Option against the evaluation criteria follows. are able to compete for available milk 1A, location-specific differentials. supplies on an equitable basis. Option 2: Relative Use Differential. Further discussion of the $1.60 base Three administrative criteria were Utilization-based differentials were differential will be addressed under the identified and described as follows: discussed extensively during the Farm discussion of Option 1A later in this 1. Minimize regulatory burden. The Bill debate and have been discussed by proposed rule. Class I price structure should not the industry for several years. The 1996 The table below illustrates the Class I significantly increase the burden on Farm Bill specifically authorizes the differentials under the proposed handlers, particularly small businesses. Secretary to consider utilization rates consolidated orders. These differentials This would include increased reporting when establishing Class I differentials. are not location-specific within the requirements and recordkeeping, as well This is perceived to be based on an applicable orders. For purposes of this as possible increases in administrative order’s marketwide utilization. A analysis and to provide a basis for assessment should Market utilization-based differential would comparison within the proposed Administrators be required to manage a allow Class I differentials to adjust consolidated orders, a weighted average more complex regulatory system. automatically with changing market Class I differential for each order has 2. Minimize impact on small supply and demand conditions. An been calculated, based on October 1995 businesses. The Class I price should be increased demand for fluid milk relative data. This weighted average differential set at a level that does not disadvantage to supply would generate an increase in is computed by multiplying the small businesses in competition with the Class I differential. Hence an percentage of Class I milk in each of the large businesses. incentive is provided to increase local current orders that comprise the 3. Provide long-term viability. The production or attract alternate supplies. consolidated order by the applicable Class I price structure should be Likewise, if milk supplies increase in current order differential and adding the expected to operate for an extended relation to fluid sales, the differential resulting amounts. This weighted time period without major would adjust downward signaling to average differential is not location- modifications. producers and handlers that milk is specific for the consolidated orders.

TABLE 1.ÐCLASS I DIFFERENTIALS IN PROPOSED ORDERS BASED ON OCTOBER 1995 DATA UNDER OPTION 2ÐRELATIVE USE

Relative use + $1.60=Class Weighted av- Maximum diff. 1 2 New diff. Change in diff. Proposed order ratio I diff. erage diff. range ($/cwt) ($/cwt) (%) ($/cwt) 3 ($/cwt) 3 (75%±125%)

Northeast ...... 0.92 2.52 3.14 2.35±3.93 2.52 ¥0.62 Appalachian ...... 4.60 6.20 2.79 2.09±3.49 3.49 0.70 Southeast ...... 5.76 7.36 3.04 2.28±3.80 3.80 0.76 Florida ...... 7.54 9.14 3.89 2.92±4.86 4.86 0.97 Mideast ...... 1.26 2.86 1.91 1.43±2.39 2.39 0.48 Central ...... 0.95 2.55 2.52 1.89±3.15 2.55 0.03 Upper Midwest ...... 0.53 2.13 1.32 0.99±1.65 1.65 0.33 Southwest ...... 0.93 2.53 3.01 2.26±3.76 2.53 ¥0.48 AZ-Las Vegas ...... 1.04 2.64 2.46 1.85±3.08 2.64 0.18 4894 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

TABLE 1.ÐCLASS I DIFFERENTIALS IN PROPOSED ORDERS BASED ON OCTOBER 1995 DATA UNDER OPTION 2ÐRELATIVE USEÐContinued

Relative use + $1.60=Class Weighted av- Maximum diff. 1 2 New diff. Change in diff. Proposed order ratio I diff. erage diff. range ($/cwt) ($/cwt) (%) ($/cwt) 3 ($/cwt) 3 (75%±125%)

Western ...... 0.42 2.02 1.84 1.38±2.30 2.02 0.18 Pacific NW ...... 0.55 2.15 1.90 1.43±2.38 2.15 0.25 1 Based on the 11 proposed orders contained in this proposed rule. 2 Relative use ratio = Class I÷all other uses. 3 Weighted average differential for the consolidated order is computed by summing the product of the percentage of Class I milk in each cur- rent order multiplied by the applicable current order differential.

Analysis Based on Evaluation Criteria Option 2 does not recognize that exist between adjacent markets creating In one of the nine criteria, Option 2 utilization percentages may be affected handler inequity and disorderly may perform slightly better than the by factors such as decisions to pool or marketing conditions. 6. Recognize handler equity with current system. In five of the nine not pool manufacturing plants, shifting regard to raw product costs. Markets can criteria, Option 2 performs poorer than supplies among markets, market adjust rapidly depending on pooling the current system, while in the incentives or disincentives such as decisions of cooperatives. In 1996, the remaining three criteria, it performed transportation credits, and pool plant New Mexico-West Texas Order had a about the same as the current system. and producer definitions. These may or Class I utilization high of 52.1% in May Option 2 was evaluated against the may not be appropriate factors to falling to a low of 23.9% in December. objective criteria as follows: consider in determining supply/demand Heavy manufacturing markets regularly 1. Ensure an adequate supply of milk conditions accurately but these factors have larger volumes of milk depooled for fluid use. In terms of ensuring an will directly impact the relative use during periods of rapidly increasing adequate supply of milk for the fluid ratio. prices. If Class I differentials were market, Option 2 provides for the 4. Recognize value of milk at location. allowed to adjust too frequently, price appropriate minimum price levels Cornell’s economic research indicates alignments established between and necessary to bring forth adequate milk that milk has different values based on location and use. The relative use among markets would disappear supplies to meet the needs of the fluid causing inequity among competing market. Based on the comparisons of concept suggests that a market has only some average value and not a value at handlers. To prevent extreme weighted average current differentials differential changes, percentage limits versus the relative use ratio any specific location. Markets such as the Arizona-Las Vegas and Southwest are proposed to limit differential differentials, eight of the proposed changes. However when a change is orders would receive moderate to would have similar utilizations but are quite different in size and in the warranted, a significant price significant increases while three adjustment could occur requiring markets would have slight to significant distance milk must be hauled to provide sufficient supplies for the fluid market. realignment of zones between adjacent decreases. Differential changes of these markets. Thus, the main attraction of Phoenix, Arizona handlers receive milk magnitudes could have some effect on this concept, the self-adjustment of from relatively close supplies, less than milk supplies in some regions. differentials, actually creates problems 50 miles, whereas the San Antonio, However, the availability of milk for with price alignment and handler equity Texas handlers must reach out 200–500 fluid use would not be significantly between orders. different from what exists today. miles and Houston, Texas handlers Option 2 was evaluated against the 2. Recognize quality (Grade A) value must reach out 270–650 miles to administrative criteria as follows: of milk. Option 2 does recognize the adequately supply their total needs. The 1. Minimize regulatory burden. quality value (Grade A) of milk with the relative use concept does not take this Option 2 would not likely increase the $1.60 base differential. into account. Location adjustments regulatory burden on handlers. 3. Provide appropriate market signals. could not overcome this deficiency Differentials would be set until market One of the benefits of a self-adjusting since they would create disorderly conditions warranted a change. No system is to provide producers with a marketing conditions at points where additional reporting would be necessary better signal of the market conditions. In they bordered on neighboring orders. to implement such a system. theory, when supplies increase in Market structure with regard to supply 2. Minimize impact on small relation to fluid demand, the Class I areas and demand centers must be businesses. Small handlers in markets utilization would decrease precipitating considered, thus Option 2 performs where Class I differentials are a downward adjustment in the worse than the current system. decreasing might be somewhat differential thereby signaling producers 5. Facilitate orderly marketing with disadvantaged since over-order charges to decrease production. Likewise, if coordinated system of prices. The need would probably increase. This tends to supplies decrease relative to demand, for coordination of prices between and affect small and large handlers the Class I utilization would increase among markets is not recognized under disproportionately. Small milk precipitating an upward adjustment in the relative use concept. Markets with producers in these markets could also the differential signaling producers to high Class I utilization could be experience a small decline in their pay increase production and/or signaling adjacent to low utilization markets. prices. processors of the need to reach further Prices in adjacent markets need to be 3. Provide long-term viability. As for the milk supply. Option 2 provides aligned to facilitate orderly marketing supply and demand conditions in for a faster market signal than the conditions. If utilization is the primary markets adjust to the point where current system of simply pooling the criteria for establishing Class I differentials need to be changed, various classes of milk. differentials, price alignment may not administrative input may be required to Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4895 align markets and maintain handler decreases in differentials. Over-order significant equity problems among equity. Thus, the system becomes an charges currently are relatively small in competing handlers thus impacting administered system such as we have this market and an attempt to increase small businesses on a continual basis. today rather than a self-adjusting the charges would likely occur. Consequently, this proposal would lead procedure. This fact, as well as the other However, producer groups have had the to disorderly marketing conditions shortcomings, mentioned tends to same difficulty as the Northeast in throughout the Federal order program negate its appeal as a viable long-term maintaining an over-order structure. A and is not given further consideration as option. $0.48 drop in the average differential in a possible Class I price structure. Although Option 2 appears to perform the Southwestern market would surely Option 3A: Flat Differential. Under better than the current system in be felt by producers and accelerate the this option, an equal differential would providing appropriate market signals to exodus of producers from the East Texas be applied in all orders resulting in an producers, this becomes a major supply area. Producers in New Mexico identical minimum Class I price at all obstacle with this proposal. In fact, it is and West Texas would also be affected, locations. For example, the Class I because of this self-adjustment that but the impact may not be as severe. differential in Atlanta, Georgia, would Option 2 performs poorer than the Arizona-Las Vegas, Western, and be the same as the Class I differential in current system in five of the criteria. Pacific Northwest. In the Western Minneapolis, Minnesota. For Even though independent of other regions, Class I differentials are comparison to other Class I price factors Option 2 provides more expected to increase slightly. Over-order options discussed in this proposed rule, appropriate price signals, it does so in charges in these markets are not as great a flat $1.60 differential level has been a way that will have significant impacts as in the Midwestern markets and evaluated even though some public on certain regions of the country. The would probably be unable to totally comments proposed flat differentials of projected impacts of Option 2 by region absorb any significant Class I price $2.00 or more per hundredweight. are discussed below: increase. Producer pay prices and Class The concept of flat Class I Central, Mideast, and Upper Midwest. I handler costs would increase slightly. differentials across all orders is largely Class I differentials are estimated to Because of the limited effect of overall predicated on the view that current increase from $0.00–$0.48 in the Class I differential changes, Option 2 Class I differential levels are too high in Central, Mideast, and Midwestern would have a minimal effect on small many parts of the country. Accordingly, regions. Currently, over-order charges businesses, both producers and regionally differentiated Class I prices are significantly higher and likely processors. Areas that have decreases in are generally unwarranted and have led would largely absorb these differential Class I differentials would have a to or have not been properly adjusted to increases. Impacts on producers and minimal negative impact on producer reflect changes in milk production. The processors would be minimal. pay prices. The majority of producers most recent consideration of a flat Class Northeast. The Northeastern impacted in these regions are I price plan was considered during a marketing area would be affected categorized as small businesses. On the National Hearing held in Fall 1990. significantly by the adoption of a other hand, handlers in areas with larger relative use differential. Processors increases in the Class I differentials Proponents of flat Class I pricing would pay on average $0.58 less for would experience increased maintain that the marketplace should Class I milk as compared to the current competition from lower cost regions. establish more of the value required to system. Producers would likely turn to Location advantages of some small draw milk to fluid outlets than is over-order charges to try to make up for handlers would disappear while others reflected in the minimum prices their lost revenue. Historically, this emerge. Handler equity in these established by the current Class I region has had difficulty maintaining a competing markets could erode placing system. Increased reliance on the large over-order premium structure and some small handlers under greater risk. marketplace in determining a price has assumptions are that this would It is difficult to quantify the impact to appeal because the competitive normal continue. Producer incomes would consumers under this option. Federal marketplace, where there are many decrease possibly impacting the total Order Class I differentials around the buyers and sellers with equal market market’s milk supplies. country would likely increase slightly. knowledge and power, is generally Southeast. Large increases in Class I Over-order charges may decline to offset viewed as the most efficient differentials would occur in the orders this increase. It is expected that overall determinant of values and prices. located in the Southeast. Class I handler costs would change slightly The following table illustrates the handlers would experience increased under this option resulting in little differential-level impact on the competition from lower cost handlers in change to consumer prices. suggested consolidated orders based on nearby markets. Producers in these Although this option would provide October 1995 data assuming a flat markets would probably not experience more appropriate and timely market differential level of $1.60. As indicated any significant gains from these signals to producers, setting Class I in the table, a flat $1.60 differential level increased differentials due to the over- differentials based solely on utilization is significantly less than the calculated order premiums that are currently being presents price alignment problems. weighted average differential level in charged. Because Class I differentials would be most marketing areas, except for the Southwest. The Southwest market is allowed to change independently from suggested Upper Midwest regional the only other market to experience adjacent markets, this would result in order. 4896 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

TABLE 2.ÐCLASS I DIFFERENTIALS IN PROPOSED ORDERS BASED ON OCTOBER 1995 DATA UNDER OPTION 3AÐFLAT DIFFERENTIALS

Weighted New average Change Suggested consolidated order 1 differential ($/cwt) differential ($/cwt) ($/cwt) 2

Northeast ...... 1.60 3.14 ¥1.54 Appalachian ...... 1.60 2.79 ¥1.19 Southeast ...... 1.60 3.04 ¥1.44 Florida ...... 1.60 3.89 ¥2.29 Mideast ...... 1.60 1.91 ¥0.31 Central ...... 1.60 2.52 ¥0.92 Up Midwest ...... 1.60 1.32 0.28 Southwest ...... 1.60 3.01 ¥1.41 Arizona-Las Vegas ...... 1.60 2.46 ¥0.86 Western ...... 1.60 1.84 ¥0.24 Pacific NW ...... 1.60 1.90 ¥0.30 1 Based on the 11 proposed orders contained in this proposed rule. 2 Weighted average differential for the consolidated orders is computed by summing the product of the percentage of Class I milk in each cur- rent order multiplied by the applicable current order differential.

Analysis Based on Evaluation Criteria location value. At all locations, the producer-incurred cost of moving milk In two of the nine evaluation criteria, Class I differential value needs to to Atlanta. In this example, the total the concept of a flat Class I price represent a reasonable sum of such price incentives that would encourage structure performs equal to the current factors that, taken as a whole, milk to move must come from outside Class I system. In all the other criteria, accomplish the goal of assuring an the pricing structure. a flat Class I price structure performs adequate supply of milk to meet The following real-world intra-market worse than the current Class I price demands. In this context, there does not example demonstrates problems with system. appear to be a sufficient economic flat Class I pricing. In Texas, the cities Option 3A was evaluated against the rationale to apply a flat Class I of Dallas and Houston are major milk objective criteria as follows: differential value that may be consumption centers. Dallas is located 1. Ensure an adequate supply of milk appropriate to one market and apply it nearly equidistant (about 70 miles) from for fluid use. A flat Class I price to all other markets. Doing so would not two major milk supply areas to the east structure performs worse than the reflect the important and measurable and south. Houston is located much current Class I price structure in characteristic that fluid milk takes on further (about 255 miles) from the same ensuring an adequate supply of milk for different relative value depending on two milk supply areas and, like Dallas, fluid use because it ignores the where it is located and where it needs relies on the same two milksheds for fundamental fact that Class I milk has to go to satisfy demand. Therefore, the satisfying its Class I demands. A flat different values depending on its Class I milk pricing plan needs to Class I price surface applicable to both location. As a result, the marketplace establish a price level that provides cities does not, in and of itself, provide would have to establish all of the sufficient economic incentives for the the price difference necessary to cause appropriate values of milk within and movement of Class I milk. Such a basis producers to deliver their milk to between markets. The current method of is consistent with the supply and Houston. The additional dollars (value) establishing Class I differentials reflects demand pricing criteria of the AMAA. that would need to attach to milk to the sufficiency and availability of local 2. Recognize quality (Grade A) value cause it to be delivered to Houston milk supplies together with valuing of milk. A flat Class I price structure would fall outside of the regulated alternative milk supplies. Because some does recognize the quality value (Grade price. Producers might not share in the milk is produced just about everywhere, A) of milk with the $1.60 flat value above the minimum regulated a Class I differential needs only to be differential. price if handlers have the market power high enough to bring forth enough 3. Provide appropriate market signals. to play one producer against another to milk—‘‘local’’ and milk from alternative Because a flat Class I price option does lower prices. Because this additional and more distant supply areas—at any not recognize the observable fact that value is not represented in a regulated location to meet Class I demand. The milk has differing location values, it price charged to handlers, a degree of cost of transporting alternative milk cannot provide the appropriate price market power is returned to handlers. supplies into an area places an upper signals to ensure that, in all markets, the Those producers located nearer to limit constraint on the value of milk at differential level is sufficiently high Houston would have no marketing that location and thus provides a enough to bring forth the amount of alternative since they could only haul measure by which to evaluate whether milk needed to satisfy demand. their milk greater distances to a or not the differential level established Additionally, a flat Class I price option manufacturing outlet for surplus is reasonable. does not provide appropriate market disposal. Additionally, handlers at Under a flat Class I price plan, the signals on how a deficit market can Houston would also be less certain of assumption is made that the minimum obtain needed supplemental milk the price their competitors were paying differential value of Class I milk is the supplies. For example, if the Class I for milk than they were with a regulated same at all locations. Reforming the price in Chicago is the same as Atlanta, price that more adequately reflected Class I price structure should continue where supplemental supplies are often different location values of milk. to recognize the observable and needed, a flat Class I price provides no Location adjustments, which address measurable fact that Class I milk has a economic incentive to absorb the such problems, could not be used under Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4897 a flat differential option since they that handlers’ costs for milk are more proposed Upper Midwest order would would create disorderly marketing equitable and uniform. Because there be an increase, all other areas conditions at points where they differential levels largely represent would lose revenue. However, even bordered on neighboring orders. location value, adjusting the level by with the increase in the Class I Examining an inter-market example location relative to all other locations differential in the Upper Midwest, given moves the analysis to one that is more from the lowest point level (price the relatively low Class I utilization of regional and national in scope. Using alignment), assures that all handlers are this market the actual change in prevailing Class I utilization rates paying the same relative price for their producer blend prices would be much between the Ohio and Carolina markets milk supply. The need or incentive for smaller than the change in the at an assumed flat Class I differential of handlers to compete on the basis of the differential. $2.00 results in nearly no change in the cost of a milk supply, otherwise a As discussed earlier, flat Class I blend price to producers in the Ohio burden borne by dairy farmers, is pricing could effect small businesses, market. However, in the higher Class I mitigated because of the location both producers and handlers, depending use Carolina market, producer blend adjustments on the minimum on where they are located and the prices are reduced by 81 cents, changing procurement prices paid by their magnitude of change in the Class I the blend price differences between the competitors. Mitigated also is the differential. Plants located further from two markets from $1.27 (current blend possible disorder from price uncertainty significant surplus regions would price difference) to only 46 cents. Since for both handlers and producers. experience losses. Similarly producers the blend price provides the price signal Because milk is valued on an equitable more distantly located would also to producers in a market to alter basis, handlers compete with each other experience significant revenue losses. production, and should provide the on the basis of plant operations and on Apparent advantages of a flat Class I incentive to move milk from the Ohio the basis of service to their customers. price plan are the initial equity among market to the Carolina market, the 46- Option 3A was evaluated against the all producers regardless of their location cent price difference is simply not administrative criteria as follows: and the short-run potential for lower enough of a price signal difference to 1. Minimize regulatory burden. The prices to consumers in areas that would achieve this outcome. flat differential price structure performs experience a lowering of Class I prices. 4. Recognize value of milk at location. equal to the current system in The long-run effect on producers in Flat Class I pricing does not fully minimizing the regulatory burden on distant and generally milk deficit recognize that milk has value at handlers because no additional markets is unclear. location. Instead, it assumes that all information would be required under Because flat Class I pricing does not Class I milk has the same value at any this option than is currently required. ensure an adequate supply of milk for location. To the extent that milk would 2. Minimize the impact on small fluid uses as well as the current system, take on additional value above a businesses. Flat Class I pricing can it is unclear that over the long run specified flat differential, that additional impact small businesses, both producers consumers would actually enjoy lower value would be determined by the and handlers. Flat Class I pricing milk prices. Should a flat Class I price marketplace and be outside of the changes the competitive relationship structure negatively affect producer minimum regulated value which is between large and small handlers. income, there is diminished certainty shared with producers. Research Under the current Class I pricing system that the order program would ensure conducted by Cornell University all handlers, regardless of size, compete consumers with an adequate supply of suggests that Class I prices would vary equally on the cost of their milk supply. milk at reasonable prices. in the absence of regulation on the basis Under a flat pricing system, a large A problem in employing a flat Class of supply and demand conditions under handler could have a greater I differential was demonstrated in the assumptions of a rational, competitive competitive advantage in procuring a intra-market example discussed market. Results of the USDSS model milk supply because it may be able to, previously. Producers might not share conclude that there is a location value in the short run, offer producers a price in the value above the minimum for milk used in fluid uses and that somewhat above the flat minimum level regulated prices which more fully value does not resemble a flat Class I or above what a small handler is able to represents the value of Class I milk price surface. Because flat Class I pay. Over a longer time period, the because handlers have the market power pricing does not fully recognize the small handler might not be able to to obtain price concessions from value of milk at location, it can only be procure a supply of milk. producers. Likewise, those producers concluded that it does not perform as 3. Provide long-term viability. An who are located more distant from the well as the current Class I price system. important objective in the reform of the primary milk sheds could have reduced 5. Facilitate orderly marketing with a Class I price structure is that the market power since the alternative coordinated system of Class I prices. resulting price structure be viable for a would be to haul their milk greater Flat Class I pricing does not assure longer period of time. Given the distances to a manufacturing outlet for orderly marketing with a coordinated potential competitive problems surplus disposal. Handlers at greater system of Class I prices. Flat Class I associated with flat Class I pricing distances from the milkshed would be pricing sets an equal value on Class I addressed above, a flat Class I price less certain of the price their milk in all markets even when such a structure would seem to fail the competitors are paying for their milk price is not warranted. Flat Class I criterion of offering an alternative that supply than they were with a regulated pricing does not provide for would endure. price that more fully reflected the value coordination of Class I milk value on a Flat Class I pricing performs worse of milk at location. national scale because the location than the current system, raising a In the inter-market example also value is not reflected in the regulated number of issues regarding its impact on discussed earlier, flat Class I pricing price but left for the producers and dairy farmers. As Table 2 suggests, there introduces another variable, Class I processors to individually negotiate. is significantly less Class I revenue that utilization rates, into the increased 6. Recognize handler equity with could be shared with producers market power transferred from the regard to raw product costs. Class I resulting in a lowering of producer producer to the handler. Flat Class I values that are location-based assure blend prices everywhere. Only in the pricing combined with Class I 4898 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules utilization rates results in an brought in from outside the state at an adequate reserve supply of milk to insignificant change in the blend price lower prices and displaced the Class I meet fluid needs and that markets with paid to producers in an adequately marketings of local producers. Class I use above 70 percent require supplied market. However, in higher Finally, adoption of a flat Class I additional milk supplies to meet fluid Class I utilization and deficit markets, pricing plan was rejected by the demand. This 70 percent figure was producer blend prices are significantly Secretary in the recommended and final merely selected for illustrative purposes reduced. Since the blend price provides decisions of the 1990 National Hearing and no analysis has been done to the price signal to producers in a market because it did not meet the supply and determine if this is an appropriate to alter production based on demand, demand pricing standard of the AMAA, percentage. and provides the incentive to move namely § 608c(18). In light of this A level of $2.00 per hundredweight needed milk between two markets, the statutory requirement that Federal milk for the flat portion of the differential narrower price difference may not order prices be established based on was selected because such a level has provide an adequate price difference for economic conditions that affect supply been suggested in comments concerning more adequately supplied markets to and demand, flat Class I pricing has no the flat Class I price concept. ship needed milk to deficit markets. legal foundation. There are few real experiences on Option 3B: Flat Differential Modified The differentials resulting from this what might happen under a system of by Class I Use. option are listed in the table below. As flat Class I differentials. The Mississippi Under this option, an equal with the relative use option (Option 2), milk order was voted out during May differential of $2.00 per hundredweight the estimated Class I differentials 1973 (38 FR 8751) through March 1976. would apply in an order if the Class I presented in the table are not entirely In the absence of the order, ‘‘flat’’ use is less than or equal to 70 percent. location-specific within the pricing replaced classified pricing. If Class I use exceeds 70 percent, the consolidated order. To provide a basis Sharp variations in prices paid to Class I differential in an order would be for comparison, a weighted average producers by individual handlers $2.00 + $0.075* (Class I use percent— differential for each order has been developed as sales shifted from handler 70 percent). This option is based on the calculated based on current differentials to handler within the market. Producers flat Class I price concept modified by for the consolidated orders using shifted from handler to handler, and the relative use price concept. This October 1995 data. These differentials milk that would otherwise have been option assumes that markets with Class are also not location-specific for the used for manufacturing purposes was I use equal to or below 70 percent have consolidated orders.

TABLE 3.ÐCLASS I DIFFERENTIALS IN PROPOSED ORDERS BASED ON OCTOBER 1995 DATA UNDER OPTION 3BÐFLAT DIFFERENTIAL MODIFIED BY CLASS I USE

Class I use New Weighted Change Proposed order 1 differential avg diff 2 (percent) ($/cwt) ($/cwt) ($/cwt)

Northeast ...... 47.9 2.00 3.14 ¥1.14 Appalachian ...... 81.5 2.86 2.79 0.07 Southeast ...... 85.2 3.07 3.04 +0.03 Florida ...... 88.3 3.37 3.89 ¥0.52 Mideast ...... 55.8 2.00 1.91 0.09 Central ...... 48.8 2.00 2.52 ¥0.52 Upper Midwest ...... 34.5 2.00 1.32 0.68 Southwest ...... 48.1 2.00 3.01 ¥1.01 AZ-Las Vegas ...... 48.9 2.00 2.46 ¥0.46 Western ...... 29.6 2.00 1.84 0.16 Pacific NW ...... 35.6 2.00 1.90 0.10 1 Based on the 11 proposed orders contained in this proposed rule. 2 Weighted average differential for the consolidated order is computed by summing the product of the percentage of Class I milk in each cur- rent order multiplied by the applicable current order differential.

Analysis Based on Evaluation criteria. 1. Ensure an adequate supply of milk does not exceed 70 percent. It is unlikely that an adequate supply of milk Of the nine evaluation criteria for fluid use. The concept of a modified for fluid use would be ensured. developed to evaluate Class I pricing flat Class I price structure performs options, the concept of a modified flat poorer than the current Class I price 2. Recognize quality (Grade A) value Class I price structure performs equal to structure in ensuring an adequate of milk. A modified flat Class I price the current system in two of the criteria supply of milk for fluid use for the same structure does recognize the quality and worse than the current system in reasons articulated in Option 3A. In (Grade A) value of milk with the $2.00 the rest of the criteria. However, this three of the suggested orders with over base differential. option does perform marginally better 70% Class I utilization, this option does 3. Provide appropriate market signals. than Option 3A in the three proposed give marginal increased recognition to The concept of a modified flat Class I southern orders. Nevertheless, Option the inherent location value of milk by price structure that changes based on 3B would still perform worse than the relying on Class I utilization to trigger Class I utilization appears to provide current system because the remainder of price incentives for attracting Class I marginally superior market signals in the proposed orders retain a purely flat milk. However, a majority of the three of the proposed new orders than differential. suggested new orders continue to does the purely flat option. The Option 3B was evaluated against the employ a lower and purely flat modified flat Class I price structure objective criteria as follows: differential because Class I utilization offers the potential for being self- Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4899 adjusting in both deficit and adequately 1. Minimize regulatory burden. The These problems are exhibited for this supplied markets as relative use flat differential modified by Class I use modified flat pricing option. Using an changes. However, a majority of markets concept performs equal to the current intra-market example, producers would would maintain a purely flat differential system in minimizing the regulatory not likely share in the value above the and likely would experience the same burden on handlers because no minimum regulated prices that more problems that a flat Class I price additional information than what is fully represents the value of Class I milk structure presents. While the modified currently required would be requested because handlers would have the greater flat Class I price structure may provide under this option. degree of market power. In the inter- more appropriate market signals by 2. Minimize the impact on small market example, blend price differences establishing economic incentives that businesses. As with Option 3A a would not provide adequate price will encourage milk to move to more modified flat Class I pricing structure differences for more adequately deficit markets, it fails to provide could have dramatic impacts on small supplied markets to ship needed milk to appropriate market signals for a majority businesses, both producers and deficit markets, although the modified of the orders. handlers. Like Option 3A, the modified flat option may perform marginally 4. Recognize the value of milk at flat pricing concept changes the better than a purely flat differential location. A modified flat Class I price competitive relationship between large structure. structure, like Option 3A, does not fully and small handlers. Large handlers in Option 4: Demand-based Differential. recognize the location value of milk. As areas where the differential is flat would Under this option, an equal differential discussed in Option 3A and Option 2, have a competitive advantage in would be applied in all orders and in the relative use adjustor to the flat procuring milk supplies over small defined demand centers an additional differential only recognizes that a handlers because they may be able to component would be added to reflect market with a certain utilization has an pay more than the flat price. In markets the cost of transporting milk from average value above markets that are where the relative use modifier becomes reserve supply areas to demand centers. more deficit and does not recognize the effective, small handlers could further The differentials would be adjusted value of milk at location. In fact Option be at a competitive disadvantage to periodically to reflect changes in 3B assumes that milk has the same neighboring handlers merely required to supply/demand conditions. value in a majority of the orders. pay the flat portion of the differential. One possible option of a demand- Because Option 3B does not fully Price variances between large and small based differential concept was proposed recognize the value of milk at location, producers are likely to increase as well. by the Upper Midwest Dairy Coalition The analysis for this option is it does not perform as well as the (UMDC). Under this proposal, a fluid fundamentally the same as discussed current system. supply area would be established for previously in Option 3A and Option 2. 5. Facilitate orderly marketing with 3. Provide long-term viability. Given each market from which milk coordinated system of Class I prices. the difficulties associated with Option production around the major bottler Independently, both a flat Class I price 3A and Option 2, a system that locations is procured. Also, for each structure and a relative use Class I price combines the two into a Class I pricing market, a reserve supply area would be structure fail to provide a coordinated structure would perform worse than the established that would be outside the system of Class I prices. Hence, when current Class I price structure. fluid supply area from which milk the two price structures are combined in Because a modified flat Class I pricing production is generally supplied to fluid the modified flat Class I price structure option performs worse than the current handlers in the major fluid bottling it can be concluded that the combined system and is so similar in application locations. price structure will not facilitate orderly to a purely flat pricing structure, it too The Class I differential for the reserve marketing with a coordinated system of raises a number of issues regarding its area under this proposal would be set at Class I prices. The flat differential impact on dairy farmers. These issues $1.00 per hundredweight. For fluid portion imposes an equal value on Class are nearly identical to those applicable supply areas, the differential would be I milk in all markets with less than a to purely flat pricing. Using October $1.00 plus transportation costs from the specified Class I utilization, in this 1995 data, almost 87 percent of all milk reserve area to the fluid demand area. example 70 percent, even when such a would have been in the eight markets Fluid handlers in the fluid supply area differential level is not warranted. with a flat price under this option. In would pay the higher differential, and Producers and processors are left to the consolidated markets with transportation and balancing credits negotiate the real value of the milk utilization above 70 percent would be drawn from the market order resulting in an uncoordinated system of (Appalachian, Southeast, and Florida), pool. Class I prices. Then, when the relative this option, based on October 1995 data, Using this demand-based option, a use factor is utilized to adjust the prices, would still lower Class I differentials in market with a 100-mile supply area problems arise because of a lack of two of the three markets. would have a differential of $1.00 + alignment between orders. As with Option 3A, Option 3B would ($0.35*1) = $1.35 (if the cost of 6. Recognizes handler equity with have a significant economic impact on transportation is 35 cents per regards to raw product costs. Since both a substantial number of small hundredweight per 100 miles). A market Option 3A and Option 2 do not businesses depending on where they are with a 700-mile supply area, on the adequately recognize handler equity located and the magnitude of the change other hand, would have a differential of with regards to raw product costs as from the current Class I differential. The $1.00 + ($0.35*7) = $3.45. Monies paid well as the current system, this estimated impact on consumers for this by Class I handlers through the second modified flat Class I price structure modified flat Class I pricing option is part of the Class I differential would be option similarly cannot recognize nearly identical to that presented in the used to fund the order’s system of handler equity for raw product costs for Option 3A analysis. transportation credits and balancing the same reasons discussed in the The same problems presented and payments. These transportation credits analysis of the other individual options. discussed in the analysis of Option 3A and balancing payments would be Option 3B was evaluated against the using both inter- and intra-market provided to organizations that supply objective criteria as follows: examples are applicable to Option 3B. the order’s fluid market. 4900 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

To encourage movement of the credits would be added to the $1.00 apply to specific locations. These nearest milk supply for fluid use, two differential and paid to all producers in differentials are based on the furthest restrictions would be implemented. the pool. distance milk for fluid use is First, a handler’s total transportation While Class I handlers would be transported using the USDSS model credits would be limited to the variable required to pay the established Class I solving for each consumption point amount paid in by the handler for price ($1.00 + transportation), from a individually. Such demand-based transportation. Secondly, a handler’s producer point of view, this option is in differentials would be established at total transportation credit would not essence a flat differential proposal. No every fluid milk processing location. amount over the $1.00 is guaranteed to exceed 80% of the handler’s UMDC has suggested that the USDSS return to producers in a blend price. transportation bill on each Class I model be used as a guide in establishing Thus, this option suffers from the shipment or 2.8 cents per shortcomings of a flat differential differentials and that expert judgment hundredweight per 10 miles (28 cents option. will be employed to adjust for proper per 100 miles), whichever is less. Any The table below contains a few alignment in pricing relationships. residual left after paying transportation examples of differentials that would

TABLE 4.ÐCLASS I DIFFERENTIALS FOR SELECTED CITIES UNDER OPTION 4: DEMAND-BASED DIFFERENTIALS

Demand- Current based Change Selected location differential differential ($/cwt) ($/cwt) ($/cwt)

Miami, FL ...... 4.18 3.88 ¥0.30 Tampa, FL ...... 3.88 2.05 ¥1.83 Orlando, FL ...... 3.88 3.08 ¥0.80 New Orleans, LA ...... 3.65 1.28 ¥2.37 Atlanta, GA ...... 3.08 2.38 ¥0.70 New York City, NY ...... 3.14 1.80 ¥1.34 Chicago, IL ...... 1.40 1.49 0.09 Minneapolis, MN ...... 1.20 1.11 ¥0.09 Phoenix, AZ ...... 2.52 1.00 ¥1.52 Dallas, TX ...... 3.16 1.40 ¥1.76 Denver, CO ...... 2.73 1.19 ¥1.54 Portland, OR ...... 1.90 1.13 ¥0.77 Seattle, WA ...... 1.90 1.31 ¥0.59 Boise, ID ...... 1.50 1.06 ¥0.44

Analysis Based on Evaluation Criteria I prices that must meet the basic tenets when milk supply is plentiful, local of the AMAA. fluid handlers may need to go a In eight of the nine criteria, Option 4 2. Recognize quality (Grade A) value relatively short distance to procure performs poorer than the current of milk. As with all of the seven options, milk. Thus, there may be residual system. In the remaining criterion, Option 4 does recognize the quality transportation credit revenues in the Option 4 performs about the same as the (Grade A) value of milk with the $1.00 pool to be paid to producers in the current system. base differential. blend price signaling that supplies are Option 4 was evaluated against the 3. Provide appropriate market signals. short and more production is needed. objective criteria as follows: The net result of Option 4 failing to However, when handlers bring milk in 1. Ensure an adequate supply of milk provide Class I differentials that from long distances, all transportation for fluid use. In terms of ensuring an recognize an appropriate price level for credit revenue would be used up and adequate supply of milk for the fluid milk at location is that appropriate producers would only share in the $1.00 market, proponents argue that the market signals are not sent to market differential indicating to producers that package of Class I differentials and pool participants. Federal orders should there are ample supplies of milk. Thus, structure established under this option provide known and visible prices to blend prices could be lower when local would produce an adequate supply of market participants at all locations. The supplies are tight than when local milk for the fluid market. It is apparent, net effect of Option 4 would be to supplies are plentiful. however, that the Class I differentials on provide frequently shifting prices to 4. Recognize value of milk at location. their own would not. This is a prime market participants that fail to provide Option 4 would result in differing Class function of Federal milk marketing appropriate market signals. I levels at different locations that may orders. While Class I differentials Currently, blend prices and changes significantly underrepresent the true should be set at the minimum level in blend prices provide signals to Class I value at many locations. This necessary to bring forth adequate milk producers to make production would force a greater portion of the true supplies, Option 4 would not result in adjustments. Under this option, the Class I value outside of the order differentials that would perform this transportation portion of the Class I structure. Moreover, higher or lower function. Substantial over-order values differential (the amount above $1.00) price levels for fluid milk in an area would be required in many areas to would be paid to those responsible for may not be reflected in Federal order attract adequate milk supplies for fluid transporting milk, while producers blend prices to producers in the area purposes plus a reserve. Over-order would be guaranteed only $1.00 on due to transportation costs. In terms of prices are useful tools for allowing the Class I milk. Thus, the option by design blend prices, producers in all areas market to find the final value of Class could send distorted price signals to would share in $1.00 plus potentially a I milk; however, it is Federal order Class producers in blend prices. At times variable residual of their respective Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4901 differential. Hence, Option 4 performs could change over time as milk supply/ impact on the processing side of the worse than the current system. demand conditions change. As such, the industry in the Northeast. 5. Facilitate orderly marketing with system could remain viable for a long Southeast. In the Southeast, Class I coordinated system of prices. Another period of time if the problems outlined differentials would be substantially problem with Option 4 is that resulting above did not jeopardize the viability of reduced from current levels under Class I differentials are not coordinated this proposal. There is a certain Option 4 in many areas. For example, across wide areas and thus do not attractiveness to a system which is self- the Class I differential in Atlanta would facilitate orderly marketing. Milk, both adjusting. The difficulty is in deriving a be set at $0.70 less than the current packaged and bulk, moves long system where the self-adjusting feature system, while the Class I differential in distances. Class I differentials should stays current over time. New Orleans would be $2.37 less than encourage milk to move in directions This proposal could have a significant under the current system. It is unclear indicated by underlying economics, impact on various sectors of the dairy if over-order charges in most parts of the essentially from areas that have relative industry. The impact would likely vary Southeast could be increased enough to surpluses of milk to areas that are by region, with large impacts on regions compensate for the drop in Federal relatively deficit. Option 4 performs where Class I differentials would change order Class I differentials. Thus, worse than the current system in this significantly and lesser impacts in producer income and milk production area. regions with small changes in Class I would be expected to decrease in total 6. Recognize handler equity with differentials. The impacts by region are in this area. Much of this area is deficit regard to raw product costs. Processor discussed below: of milk production and, at certain times equity suffers under Option 4 because Midwest. Class I differentials in the of the year, for fluid needs. Dropping Class I over-order charges would need to Midwest would be similar to current the Class I differentials substantially increase in many areas. While it may be differentials under Option 4. In would likely increase this deficit and desirable for the market to set the final addition, the vast majority of milk make it increasingly difficult to meet the Class I price charged to bottlers, when produced in the Midwest is used for AMAA requirements for meeting the a large portion of this price occurs manufactured products, not for Class I. needs of the fluid market. outside of regulation, Federal orders As such, the impact on producers and Southwest. In the Southwest, Class I cannot assure a reasonable degree of processors would be expected to be differentials would be substantially handler equity concerning prices paid relatively small. Producer groups and reduced from current levels under for Class I milk. Additionally, the net cooperatives in this area fully recognize Option 4. For example, the Class I effect of the Class I price paid by that, due to low Class I utilization in differential in Dallas would be set at handlers less the transportation credits this area, changes in Class I differentials $1.76 less than the current system, received would likely create inequity will have relatively less impact here while the Class I differential in Denver among handlers. than in other areas which have higher would be $1.54 less than under the Option 4 was evaluated against the rates of Class I utilization. current system. It is unlikely that over- administrative criteria as follows: Northeast. In the Northeast, Class I order charges in most parts of the 1. Minimize regulatory burden. differentials would be substantially Southwest could be increased enough to Option 4 would increase the regulatory reduced from current levels under compensate for the drop in Federal burden on handlers as compared to the Option 4. For example, the Class I order Class I differentials. Thus, present system. Additional reporting on differential in New York City would be producer income and milk production sources of milk and transportation costs $1.34 less than the current differential, would be expected to decrease in total would be required. Fluid handlers while the Class I differential in in this area. The impacts would likely would be required to report, and Market Baltimore would be $1.80 less than vary within this region as lower Administrators to verify, hauling cost under the current system. Producer production costs in West Texas and information on each load of bulk milk organizations in the Northeast have New Mexico could offset the drop in received. This additional regulatory historically had a difficult time Class I revenues, but higher production requirement may also result in an enforcing Class I over-order charges cost areas (e.g., East Texas) would likely increase in administrative assessments significantly above Federal order show substantial drops in milk to handle the additional record minimums. Cooperatives have production. verifications. depended heavily upon Federal order Pacific Northwest. In the Pacific 2. Minimize impact on small business. minimums, and more recently upon the Northwest, Class I differentials would It is likely that small handlers might be Northeast Dairy Compact, to try to be reduced from current levels under disadvantaged by this option. With maintain revenues from Class I sales. Option 4 in many areas. For example, demand-based differentials, a Processors in this area have the Class I differential in Portland, substantial part of the Class I value historically had significant marketing Oregon, would be set at $0.77 less than needed to attract adequate milk supplies power over cooperatives. Substantial the current system, while the Class I would likely come from over-order drops in Class I differentials would differential in Seattle would be $0.59 payments. Federal order Class I prices likely increase processor marketing less than under the current system. It is are mandatory and should affect power and prevent cooperatives from unlikely that over-order charges in most handlers in an area equally. Over-order establishing over-order prices that parts of the Pacific Northwest could be pricing is not mandatory and may or would reflect the full Class I value thus, increased enough to compensate fully may not affect different handlers dairy farmers would see a decline in for the drop in Federal order Class I equally. The potential exists under their revenue. differentials. Option 4 for large handlers to have an Producer income levels in this area This proposal would, all else being advantage over small handlers in would be expected to decrease with a equal, result in lower blend prices to competing for milk for Class I purposes resulting decline in producer numbers, producers in most parts of the country. because they will be able to outbid milk production and, eventually, It is expected that mailbox prices to smaller handlers for a supply of milk. manufacturing capacity. The decline in producers would also decline in most 3. Provide long-term viability. Option manufacturing capacity, over time, regions. The vast majority of producers 4 would involve Class I differentials that would likely be the most significant pooled on Federal orders are considered 4902 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules as small businesses. Thus, this proposal calculating transportation. Arguably, the economic impact results are included in would have a negative impact on small distance from each farm to each the initial regulatory impact analysis.24 business producers through a loss of distributing plant that the farm supplies, Based on this analysis, Option 5 was income. as well as the distance from each supply eliminated from further consideration as In addition, it is expected that in plant or reserve processing plant to each a viable replacement for the Class I price regions that are deficit of milk for some distributing plant, would need to be structure. Although Option 5 appeared or all uses, an increased reliance on determined. appealing in the qualitative analysis, the over-order prices would result from this Option 4 is not a pure pricing quantitative analysis revealed that proposal. Experience has shown that in concept, but an allocation of costs. It Option 5 would create an unsustainable an unregulated or partially-regulated proposes ‘‘Class I differentials’’ at situation, based on the degree of environment, such as where substantial location, thereby intimating value of increased price levels, given the over-order premiums are paid, large milk at location. However, such a dynamics of milk marketing. The producers often have greater leverage surface conclusion is erroneous when it analysis of Option 5 follows: with milk buyers than small producers. becomes operational. It essentially Option 5: Decoupled Baseline Class I This advantage can take many forms becomes a flat price proposal insofar as Price with Adjustors. Option 5, as including volume premiums, lower milk value (price) is concerned. proposed by Mid-America Dairymen, hauling rates, and the ability to Inc. (Mid-Am), is a price structure that This option in essence proposes that negotiate individually with handlers in would decouple Class I prices from the regulators intervene in the contractual a manner difficult for small producers. volatility of the commodity markets. relationships among producers, This proposal could likely increase Since the Class I price would be processors and haulers. Rather than the regulatory burden on handlers that decoupled from the basic formula price, creating a system whereby producers are are small businesses. Maintenance of the proponents suggest that 1996 paid a price for a product (valued to transportation credit records and average Class I prices become the base, include all costs of producing and increased verification that may be with adjustments made utilizing delivering the product to market), this required could burden small business changes in fluid use rates and short term proposal seeks to administratively handlers. Moreover, setting Class I costs of production (i.e., feed costs). isolate transportation cost and differentials at levels significantly below Thus, for Class I purposes the BFP reimburse that cost at a fixed rate. To the full economic value of Class I milk would be floored at $13.63 per attempt to intervene in marketplace at location has the impact of hundredweight, the 1996 annual relationships in this way, particularly deregulating the effective price of Class average BFP. This price level would be under the umbrella of price, does not I milk. As such, small handlers would used to establish Class I prices using seem appropriate. be competing for milk supplies with current differentials. large handlers with no assurance of As a result of this analysis, it is A supply/demand adjustor would be similar prices. Equity among handlers is concluded that Option 4 would merely used to change prices in each of the one of the benefits of the Federal order result in a greater degree of regulation orders to reflect long-term trends. system. By setting Class I differentials at with less money returned to producers. Proponents suggest using a 12-month a level well under the full economic Thus, based on the issues discussed, rolling average Class I utilization, value, some of the handler equity is lost. Option 4 is not further considered as a rounded to the nearest full percentage. It is expected that such a scenario replacement for the Class I price Class I prices would be adjusted by would provide a greater burden on structure. $0.12 per hundredweight for each 2 small business handlers than on large Based on the qualitative analysis, percent change in the rolling average business handlers. three pricing options were selected for utilization. For example, a Class I It is difficult to quantify the impact to further quantitative analysis. The utilization change from 44 percent to 46 consumers under this option. Federal Department determined that the three percent in a market would result in a order Class I differentials around the options selected represented a broad country would likely be lower than $0.12 per hundredweight gain in the spectrum of possible Class I price under the current system at many market’s Class I differential. Once the structures. These three options are locations. Increased over-order charges utilization level changes, the new Option 1A, Option 1B, and Option 5. may make up part of the difference, at utilization rate becomes the base for least at locations with strong supply To further analyze these options, future changes. Thus, if a market falls organization cooperation. It is expected beyond the evaluation criteria and basic from 44 percent to 42 percent, the new that the overall impact on consumer quantitative analyses, a multi-regional base for comparing a 2-percentage point prices would be slight. model of the U.S. dairy sector, change up or down is 42 percent. Option 4 presents certain attractive developed by the Economic Research In addition to the supply/demand provisions when viewed as a theoretical Service of USDA, was used to generate adjustor, a cost of production indicator model for establishing Class I both the ‘‘model baseline’’ results and would be developed whereby Class I differentials. While it is intellectually analysis of the three pricing options. prices would be increased in a timely appealing to have frequently adjusting The model has been specified to manner when input costs to dairy Class I differentials, this type of generate a long-term outlook that is farmers are increasing. One such proposal contains significant challenges consistent with the Department’s official economic indicator might be feed costs. to actual implementation. A substantial baseline forecast for the dairy sector. The table below illustrates the initial set of calculations would be necessary, The model baseline serves as a Class I differentials under the proposed together with strong assumptions benchmark for comparing price and consolidated orders. These differentials regarding transportation costs, to income changes of an option. For are not location-specific within the determine Class I differentials under example, price impacts are reported as applicable orders. For purposes of this this option. The proponents of Option 4 differences from the baseline for each of six years (1999–2004) and from the 24 Copies of this analysis can be obtained from utilized the USDSS model to estimate Dairy Programs at (202) 720–4392, any Market their Class I differentials. Proponents 6-year average. A more detailed Administrator office, or via the Internet at were unclear as to the specific points for explanation of the model and the http://www.ams.usda.gov/dairy/. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4903 analysis and to provide a basis for multiplying the percentage of Class I orders. Initially the differentials will be comparison within the proposed milk in each of the current orders that the same. However, as Option 5 impacts consolidated orders, a weighted average comprise the consolidated order by the production and utilization, and when an Class I differential for each order has applicable current order differential and economic indicator (such as feed costs) been calculated for each order based on adding the resulting amounts. The is calculated, the differentials will vary. October 1995 data. This weighted weighted average differential is not average differential is computed by location-specific for the consolidated

TABLE 5.ÐINITIAL CLASS I DIFFERENTIALS IN PROPOSED ORDERS BASED ON 1995 DATA UNDER OPTION 5: DECOUPLED BASELINE CLASS I PRICE WITH ADJUSTORS

Weighted average Initial Change in Proposed order 1 differential differential differential ($/cwt) ($/cwt) ($/cwt) 2

Northeast ...... 3.14 3.14 0.00 Appalachian ...... 2.79 2.79 0.00 Southeast ...... 3.04 3.08 0.00 Florida ...... 3.89 3.89 0.00 Mideast ...... 1.91 1.92 0.00 Central ...... 2.52 2.41 0.00 Up Midwest ...... 1.32 1.41 0.00 Southwest ...... 3.01 3.01 0.00 AZ-Las Vegas ...... 2.46 2.46 0.00 Western ...... 1.84 1.84 0.00 Pacific NW ...... 1.90 1.90 0.00 1 Based on the 11 proposed orders contained in this proposed rule. 2 Weighted average differential for the consolidated order is computed by summing the product of the percentage of Class I milk for each cur- rent order multiplied by the applicable current order differential.

Analysis Based on the Evaluation market signal for fluid use milk should 6. Recognize handler equity with Criteria be fairly static. regard to raw product costs. As long as Proponents have suggested an no adjustment is made to the baseline Option 5 performs about equal to the economic indicator (feed cost adjustor) prices, handler equity would be current system in five of the nine of some kind be used to adjust prices maintained fairly well. Option 5 does evaluation criteria. The option performs short term. While it is likely true that ignore the relationship of handlers in poorer than the current system in the inclusion of such an index would mute adjacent markets. If prices are increased other four evaluation criteria. declines in milk prices when feed costs or decreased in a market, the handler Option 5 was evaluated against the are rising, market driven declines in regulated in an adjacent market may be objective criteria as follows: milk prices also could be accelerated if affected by the misalignment of prices. 1. Ensure an adequate supply of milk feed costs were declining at the same Misaligned prices could create for fluid use. With a high baseline and time. Thus, even combined with a disorderly conditions as industry a supply/demand adjustor (and possibly supply/demand adjustor, this option participants between and among the an economic adjustor), Option 5 would not perform as well in providing markets seek other measures to regain performs on a national level about the appropriate market signals as the alignment in prices. same as the current system, particularly current system. Option 5 was evaluated against the in the short term. 4. Recognize value of milk at location. administrative criteria as follows: Option 5 would include the current 1. Minimize regulatory burden. 2. Recognize quality (Grade A) value system of differentials. Therefore, this Option 5 is not likely to increase the of milk. As with all of the options, option does recognize the value of milk regulatory burden on handlers when Option 5 does recognize the quality at location and performs as well as the compared to the current system. The (Grade A) value of milk. Use of the current system. addition of adjustors would create some current differentials to achieve the Class 5. Facilitate orderly marketing with additional burden on regulators; I price recognizes this value. coordinated system of Class I prices. As however, this would not be substantial. 3. Provide appropriate market signals. long as no adjustment is made to the 2. Minimize impact on small business. Option 5 decouples the Class I price baseline prices, alignment would be Option 5 performs worse than the from the basic formula price and thus maintained fairly well. However, Option current system with regards to small the commodity market. A rolling 5 has no provision to align prices when businesses. It is likely that the average Class I utilization is proposed as price changes occur. A possible $0.24 individual market supply/demand the appropriate measure of supply/ price spread between two markets adjustor will create some disruption in demand. A rolling average further within one month could exist. inter-market price alignment over time. delays any market signal sent by Class Moreover, misaligned prices could Such a system may result in the need for I utilization. Moreover, the option create disorderly conditions as industry over-order charges in some markets. proposes to change the Class I price participants between and among the Small handlers would likely be affected only when the rolling average markets seek other measures to regain in their ability to compete with large utilization changes by 2 percent or alignment in prices. Hence, Option 5 handlers for a raw milk supply. more. Option 5 essentially freezes performs worse than the current system 3. Provide long-term viability. The use prices, albeit, at a historically high level. because it would lead to disorderly of a historic baseline price as the major In fact, it appears to suggest that the marketing conditions. portion of a price fails to factor into the 4904 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules competitive price of milk any of the model indicates that the increase in present national price structures influences of the national milk market. prices experienced will not be developed utilizing the USDSS model. It ignores advances in technology and sustainable. The results of the model The options vary in their reliance and increased efficiencies. In addition, it analysis indicate that the higher floored application of the USDSS model but fails to recognize trends in the overall Class I prices will impact the all-milk both are based on economic principles economy such as inflation and interest price, and after 3 years, producers will contained within the model. Both price rates. Thus, this option does not provide begin seeing a decrease in the revenue structures have been evaluated long-term viability. initially generated by Option 5. This qualitatively against the evaluation Upon implementation, all Class I will occur because the higher Class I criteria and quantitatively utilizing the differentials would be equal to current prices will stimulate milk production, multi-regional ERS model discussed differentials. With the baseline which will then lead to lower earlier. In addition to analysis utilizations established at 1996 levels, manufacturing prices. Because it is the conducted by the multi-regional ERS producers would experience Class I blend price that is paid to producers, model, a static Federal order pool price increases since 1996 was a record the increase in the Class I prices will not analysis has been conducted for Option high year for milk prices. Every existing be enough to offset the decrease in 1A and Option 1B to provide an order area would see increases in Class prices of the other classes of use and the estimate of how the options would have I prices of $0.85 per hundredweight changes in utilization which will affect impacted producer prices during above the baseline in the initial year. the differential level. Further details of October 1996. The results of the pool However, even with this increase, some the model results are included in the analyses will be addressed in a producers may see declines in blend economic impact analysis published in prices as a result of the proposed conjunction with this proposed rule. discussion comparing the two price consolidation of orders contained in this Next, Option 5 may cause disorderly structures. proposed rule. marketing with the introduction of It should be noted that both Option Initially, Option 5 would not have a inter-market disparities based on 1A and Option 1B may require significant impact on the temporary changes in use. Producers in additional fine-tuning of the Class I competitiveness of small businesses, high Class I markets would benefit at differentials and adjustments for producers, or processors because prices the expense of producers in low Class location when actual implementation of would remain relatively the same. I markets. In addition, flooring the Class the selected price structure occurs However, as the supply/demand I price will shift volatility to milk prices within the Federal order program. adjustor modifies the differentials based in manufacturing markets. If the feed However, this fine-tuning would only on changes in Class I utilization, price cost adjustor only affects Class I prices, slightly alter the impacts of either alignment between markets will become high utilization markets will gain option. The price surfaces presented an issue that would affect a small relative to producers in lower Class I provide a reasonable indication of the business’ ability to compete. This option use markets, who would also bear the level of Class I differentials that may would increase the retail cost of fluid higher feed costs. result under each price surface. milk in the initial year or two but would Finally, Option 5 uses current lower the cost of manufactured dairy differentials to establish Class I prices. Option 1A: Location-Specific products. Although, the 1990 hearing resulted in Differentials. Option 1A would establish This option appears attractive on the changes to many of the current Class I a nationally coordinated system of surface since higher Class I prices will differentials, many of the current location-specific Class I price help most producers. If utilization and differentials are similar to those that differentials reflecting the relative feed costs do not move abruptly, or if were prescribed in the 1985 Farm Bill. economic value of milk by location. An the feed cost formula is designed in Thus, arguments could be made that important feature of the option is that it such a way as to moderate any abrupt using the current 1996 Class I would also include location adjustments price movements, then variability in differentials as a base for a new Class I that geographically align minimum Class I prices would be moderated. pricing surface runs counter to the 1996 Class I milk prices paid by fluid milk However, it seems likely that milk Farm Bill mandate that the new Class I processors nationwide regardless of prices will be increasing or decreasing differentials cannot be based on the defined milk marketing area boundaries in the same direction as feed prices (i.e., differentials described in the 1985 Farm or order pooling provisions. It is based higher feed prices means less milk Bill. on the economic efficiency rationale production thus higher milk prices, As discussed, Option 5 will create presented in Cornell University research lower feed prices means more milk several problems if implemented as a on the U.S. dairy sector.25 A basic production thus lower milk prices.) Class I price structure. Furthermore, premise of Option 1A, confirmed by the Another attractive feature of this questions arise as to whether or not Cornell research, is that the value of option is that the use of a feed cost Option 5 is legal as it may violate the milk varies according to location across adjustor would adhere to requirements mandates of the 1996 Farm Bill. Finally, the United States. Option 1A combines of the AMAA that the Department proponents may no longer be actively these concepts of spatial price value and consider such costs and other economic supporting this option as a viable relative price relationships together conditions in the establishment of replacement for the Class I price with marketing data and expert prices. In addition, an automatic structure. Thus, based on this knowledge of local conditions and utilization adjustor could reduce the qualitative and quantitative analysis, need to have hearings to change Class I Option 5 is eliminated from further 25 Pratt, James E., Phillip M. Bishop, Eric M. Erba, differentials if changes in production or consideration as a Class I price structure Andrew M. Novakovic, and Mark W. Stephenson, consumption in an area make the replacement. ‘‘A Description of the Methods and Data Employed existing differentials inappropriate. With the elimination of Option 5, in the U.S. Dairy Sector Simulator, Version 97.3,’’ Although attractive on the surface, only two Class I price structure options Research Bulletin 97–09, A Publication of the Cornell Program on Dairy Markets and Policy, further analyses of Option 5 reveals remain as possible replacements for the Department of Agricultural, Resource, and significant problems. First, analysis current Class I price structure, Option Managerial Economics, Cornell University, July completed by the multi-regional ERS 1A and Option 1B. These two options 1997. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4905 marketing practices to develop a manufacturing is required to balance the Peninsula, and parts of South Dakota, national Class I price structure. markets. Manufacturing facilities are Nebraska, Missouri, and Illinois. Compared to other Class I price readily accessible in the milk producing This zone includes two of the nation’s structure options which have been areas. Zone 1 has excess supplies of top five milk producing states, proposed by interested parties and/or milk, and therefore, could be an Wisconsin and Minnesota, as well as the are under consideration by the additional source of milk for other substantial milk supplies available in Department, this option reflects the regions of the country. parts of surrounding states. The vast current Class I pricing surface more than It is expected that Zone 1 will majority of milk in Zone 3 is used for the others. Although similar to the continue to maintain adequate supplies manufacturing purposes throughout the current Class I price surface, there are of milk for the Northwestern United year. In addition, as was readily distinct differences. States. The supplies of milk are within apparent in the fall of 1996, this area Under Option 1A, Class I differentials relatively short distances of plants thus provides large quantities of milk to are lowest in geographical areas not requiring significant location distant markets at times of shortages for evidencing the largest supplies of milk adjustments within the zone. fluid purposes in those markets. The relative to local/regional fluid milk Zone 2. The suggested differentials $1.60 differential equates to the Class I needs. The differentials become within Zone 2 would range from $1.60 differential in base zones to the progressively higher as they move from to $2.65 per hundredweight. Zone 2 is Southwest and West that also use these areas to markets with less a large region encompassing the substantial quantities of milk for production relative to demand for fluid Southwestern United States. It consists manufacturing purposes throughout the milk. Nine differential zones provide of Arizona, New Mexico, Colorado, year. The 20-cent range provides some the basis for establishing the price Southern California, Southeastern flexibility in setting Class I differentials structure. These zones were established Nevada, Southern Utah, Southeastern that align with neighboring zones and in based on results of the USDSS model, Wyoming, Southwestern Kansas, West encouraging shipments to high Class I knowledge of current supply and Texas, and the Panhandle of Oklahoma. demand areas within the zone. demand conditions, and recognition of The area defined includes portions of In addition, a Class I differential of other marketing conditions such as fluid two of the top ten states in milk $1.60 to $1.80 in this zone will provide versus manufacturing markets, urban production as well as two more in the a greater incentive for manufacturing versus rural areas, and surplus versus top twenty. Milk production in this organizations in this zone to pool milk. deficit markets. zone has grown significantly over the Historically, there have been small pool Class I differentials under this option last several years, but has recently draws (that at times fluctuate between range from a low of $1.60 per slowed. Milk production in this zone positive and negative) and negative hundredweight in the base zones of the tends to be concentrated in five areas: location adjustments. Generally, over- Upper Midwest, Southwest, and West, the Southern Valley of California, the order charges have been required to where there are abundant supplies of Phoenix area of Arizona, North Central ensure adequate milk supplies for fluid milk in excess of fluid milk use, to a Colorado, the El Paso area of Texas and purposes. Hence, the additional revenue high of $4.30 per hundredweight in New Mexico, and the Roswell area of generated in this region will be used to Florida, where there are deficit supplies New Mexico. Much of this region is move some of these over-order charges of milk for fluid use, thus reflecting the rural and sparsely populated due to the under the Federal order program in the location value of milk for fluid use. The mountainous and arid terrain. The only form of transportation credits. As a nine zones, differential ranges, and basis heavily populated area is the Coastal result, the $1.60 to $1.80 Class I for establishing the Class I differential region of Southern California. For the differentials will help to establish levels are as follows: rest of the zone, populated areas tend to higher pool draws and enable more Zone 1. The suggested differentials congregate around the capital cities of market participants to share in the within Zone 1 range from $1.60 to $1.90 the Southwestern states. benefits of servicing the fluid market. per hundredweight. Geographically this Class I utilization for this area is For a number of years, prevailing zone is very large and encompasses the slightly greater than the average for the over-order charges in this zone have entire Northwestern United States. It United States. Manufacturing is needed resulted in effective Class I prices to consists of Washington, Oregon, to balance these markets; however, only fluid milk processors that are well above Montana, Idaho, Northern and Central a limited number of plants are located the Federal order minimums herein California, Northern and Western within the zone. Milk supplies in the proposed. Thus, Class I processors Nevada, Northern and Western zone are ample for Class I demand, but should see no increase in their milk Wyoming, and Northern Utah. not always within a short distance of procurement costs, but would likely The area defined includes the top these needs. Distant manufacturing only see a partial redistribution of their milk production state as well as two facilities are used at times for balancing. costs from over-order charges to Federal more of the top ten milk producing Other regions of the country have relied order obligations. states. Milk production in this region on this zone as a supplemental supply Zone 4. The suggested differentials has grown and continues to do so. Milk source. However, a slight change in the within Zone 4 would range from $2.65 production in this zone tends to be manufacturing capacity of this zone to $3.65 per hundredweight. concentrated in three areas: Western could change milk availability for other Geographically, this zone is fairly small Washington and Oregon, the Southern regions. Some location adjustments are and primarily covers two states: Valley of Idaho and Northern Utah, and needed for alignment purposes with the Louisiana, west of the Mississippi River, the Central Valley of California. Due to more deficit markets to the East. and central and east Texas. the numerous mountain ranges it Zone 3. The suggested differentials The zone defined has a significant encompasses, much of the zone is rural within Zone 3 would range from $1.60 amount of milk production and and sparsely populated. The exception to $1.80 per hundredweight. population. Texas ranks as the sixth is the heavily populated Western Geographically this zone encompasses largest milk-producing state and is the Coastal areas. the Upper Midwest region including the second most populated. Milk Class I utilization for this zone is states of Minnesota, Wisconsin, Iowa, production in this zone is concentrated fairly low and a significant amount of and North Dakota, the Michigan Upper in two areas: East of Dallas and 4906 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Southwest of Dallas. Population centers Georgia, Alabama, Mississippi, and The price range in this zone would are spread throughout the region with parts of Louisiana and Florida. provide for alignment with markets to significant population along the Gulf This is a zone of deficient milk the north, south, and east, and set Coast of Texas and Louisiana. supplies and declining milk production. differentials at a level that would Class I utilization is moderately high This zone contains many rural areas recognize the supply/demand and the zone has primarily been with a heavy concentration of conditions in this area. Alignment of considered a fluid market. Much of the population along a corridor from Zone 8 with neighboring zones, manufacturing in this zone is based on Raleigh, North Carolina, to Atlanta, particularly to the east and south, weekly and seasonal balancing. Georgia. It is a zone which currently has minimizes disruptions to the existing Excesses tend to be limited to Spring a high Class I utilization and little competitive relationships for Class I flush periods while Fall usually brings access to manufacturing milk facilities. handlers in these areas. a deficit. Local demand along the The differentials increase moving Zone 9. The proposed differentials in Southern Coastal area requires supplies toward the south and southeastern parts Zone 9 range from $3.00 to $3.25 per to travel significant distances to meet of Zone 6. The Atlantic and Gulf Coast hundredweight. Geographically Zone 9 fluid demands. Seasonal deficits are areas are also in the higher end of the encompasses the north Atlantic coastal handled by various other regions of the range because these areas are not heavy area of the United States. The zone country. milk production areas. Zone 6 may includes the major cities of Boston, New The differential range proposed is depend increasingly on milk supplies York, Philadelphia, Baltimore, and needed to move milk supplies south and from outside the areas; however, the Washington, D.C. The differentials in east to align with Southeastern deficit differential range proposed should be Zone 9 allow for recognition of the need markets. Zone 4 may depend adequate to provide a milk supply to to move milk to major metropolitan increasingly on milk suppliers from meet the fluid demand in the zone. areas on the Atlantic coast. The 25-cent other regions of the country. However, Zone 7. The proposed differentials range will provide the pool structure to the range of differentials suggested within Zone 7 range from $3.75 to $4.30 compensate for individual locations should be adequate to maintain a local per hundredweight. Geographically it within a narrow geographic area. milk supply. encompasses all of the lower two-thirds Zone 9 represents a major Zone 5. The suggested differentials of Florida. Annual milk production in consumption area. The zone will need within Zone 5 range from $2.00 to $3.00 the zone does not meet Class I needs or to look to the milk production areas per hundredweight. Geographically, this provide an adequate volume. Milk north and west of the cities for milk zone ranges from Maine in the east to supplies needed to meet the demand in supplies. The differentials proposed for Oklahoma and southeastern Kansas in this zone are procured from distant this zone should allow the area to the west. The zone encompasses parts of areas of the country. The price increases maintain adequate milk supplies the milk-producing areas of New York as the surface moves from north to south relative to fluid demand. and Pennsylvania and the more allowing milk to move to the deficient This price variance in Class I dispersed production in the eastern areas of Florida. Population density differentials across the country mountains, the Ohio and mid- relative to viable milk-producing areas presented in Option 1A is less than the Mississippi River basins, and reaches within this zone is creating increasing range in relative values for milk (i.e., into the southwestern United States. land-use pressure. The differentials shadow prices) determined through the This zone is populated with a mix of proposed should be adequate to attract USDSS model and lower than the rural areas plus a number of medium- necessary milk supplies to meet the difference in the current price structure. sized metropolitan areas. The suggested fluid demand. The range of differentials developed by price flow is generally from north to Zone 8. The suggested differentials the USDSS model is $3.60 based on south and from west to east within this within Zone 8 range from $1.80 to October 1995 data, typically a more long narrow zone. $2.00. The zone covers parts of 12 states deficit month, and $3.40 based on May The range of differentials from $2.00 ranging from the southwest corner of 1995 data, typically a more surplus to $3.00 provides a transition from the South Dakota to the western corner of month. The price spread for Option 1A surplus areas of the North and West to New York. This zone, together with is $2.70. The ranges discussed above are the deficit areas of the Southeast. parts of Zone 5, form an intermediate set forth in Map 1. The differentials Zone 6. The suggested differentials area between Zone 3, where milk is adjusted for location established for within Zone 6 range from $3.00 to $3.75 used primarily for manufacturing each county are set forth in Maps 2A, per hundredweight. Geographically this purposes, and Zones 4, 6, 7, and 9, 2B, and 2C. Table 6 sets forth examples zone encompasses all of South Carolina, where milk is used primarily for Class of differentials adjusted for location at most of the states of North Carolina, I purposes. selected cities.

TABLE 6.ÐCOMPARATIVE CLASS I DIFFERENTIALS ADJUSTED FOR LOCATION AT SELECTED CITIES UNDER OPTION 1AÐ LOCATION-SPECIFIC DIFFERENTIALS

Class I differential City Difference Current Option 1A

Dollars per hundredweight

New York City, NY ...... 3.14 3.15 .01 Charlotte, NC ...... 3.08 3.10 .02 Atlanta, GA ...... 3.08 3.10 .02 Tampa, FL ...... 3.88 4.00 .12 Cleveland, OH ...... 2.00 2.00 .00 Kansas City, MO ...... 1.92 2.00 .08 Minneapolis, MN ...... 1.20 1.70 .50 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4907

TABLE 6.ÐCOMPARATIVE CLASS I DIFFERENTIALS ADJUSTED FOR LOCATION AT SELECTED CITIES UNDER OPTION 1AÐ LOCATION-SPECIFIC DIFFERENTIALSÐContinued

Class I differential City Difference Current Option 1A

Chicago, IL ...... 1.40 1.80 .40 Dallas, TX ...... 3.16 3.00 (.16) Salt Lake City, UT ...... 1.90 1.90 .00 Phoenix, AZ ...... 2.52 2.35 (.17) Seattle, WA ...... 1.90 1.90 .00

Analysis Based on Evaluation Criteria farmer returns regionally during the past their relative competitive bargaining Option 1A performs equal to or better decade were reviewed. Second, the position vis-a-vis large businesses. This than the current Class I system in each results of the USDSS model, explained is based on the concept that large of the evaluation criteria. This is largely previously, that obtained the relative businesses (producers, cooperatives or explained by the adjustments made to values of milk and milk components at handlers) are better able to negotiate the current system based on current geographic locations throughout the premiums above minimum order prices marketing conditions and USDSS model United States, were used. Together, the due to advantages attained from size. results. However, Option 1A leaves results of these studies provided the Overall, this option is not expected to essentially unchanged the role of market basis to construct the Option 1A price materially impact small businesses forces and the Federal government, in surface. differently than the current price determining Class I prices and the 5. Facilitate orderly marketing with structure. incentives to move milk to deficit areas. coordinated system of prices. A primary 3. Provide long-term viability. To the Option 1A was evaluated against the element of Option 1A is the extent the proposed location adjusted objective criteria as follows: coordination of Class I differential levels Class I differentials under Option 1A 1. Ensure an adequate supply of milk and location adjustments within and will correct instances of price for fluid use. Option 1A performs among regional marketing areas. As misalignment and more accurately essentially the same as the current price such, Option 1A is an improvement reflect the economic value of milk by structure in ensuring an adequate over the current price structure which location, the long-term viability of supply of milk for fluid use. Proposed evolved in a piecemeal fashion. The Option 1A is expected to exceed that of changes from current differential levels Class I differentials and location the current price structure. by region or locality to more accurately adjustments in Option 1A will facilitate Option 1A utilizes the USDSS model reflect current milk supply-demand orderly marketing of milk for fluid use results as a basis for development. All conditions and inter-market price through the nationwide coordination of results, including the preliminary alignment contributes to more prices. results based on 1993 annual data and appropriate market by market supply 6. Recognize handler equity with the preliminary results based on May adjustments. Option 1A will have regard to raw product costs. Class I 1995 and October 1995 data, were used. minimal impacts on farm level milk differentials proposed under Option 1A However, the variance of price prices and should continue to ensure reflect differences in economic costs of differentials under Option 1A are adequate supplies of milk for fluid use. procuring and marketing milk somewhat less than the range in relative 2. Recognize quality (Grade A) value depending upon geographic location. values of milk (shadow prices) of milk. Option 1A does recognize the This coordination and alignment of determined through the USDSS model. quality value (Grade A) of milk through prices based upon cost differences and There are several explanations for the the addition of a differential that begins current marketing conditions better differences, including the fact that the at $1.60 per hundredweight in the base ensures handlers of equity in competing model generates value differences zone. for available milk supplies and sales of between geographic locations, not actual 3. Provide appropriate market signals. fluid milk products. prices. That is, it computes the marginal Option 1A adjusts and refines the Option 1A was evaluated against the value of an additional hundredweight of existing Class I price structure to more objective criteria as follows: milk supplied to a plant at a specific accurately reflect recent prices. In some 1. Minimize regulatory burden. location for fluid use. This approach geographical areas, Class I differentials Option 1A would not change the results in a pricing or value surface for would be modestly increased. In certain regulatory burden of the Federal order Class I milk but does not take into other areas, Class I differentials would program. Because Option 1A is similar account marketwide pooling and other be lowered somewhat, suggesting that to the current Class I pricing structure, factors affecting the supply of and they now exceed levels necessary to it would not result in increased demand for milk. adequately supply the associated reporting, record keeping, compliance, Since the USDSS model only markets with their fluid milk needs. or administrative costs to handlers. The determines the spatial value differences 4. Recognize value of milk at location. role of regulation in influencing Class I for fluid milk between location and not The spatial values of milk as reflected prices would also be about the same as the price level, Option 1A utilizes $1.60 in Option 1A recognize the value of the current system. as the minimum price in the three base milk at location more accurately than 2. Minimize impact on small zones. Currently, the lowest differential the current system for two principal businesses. In regions where more of the in Federal orders is $1.04 ($1.20 in reasons. First, in structuring the actual value of fluid milk would be Minneapolis) in the Upper Midwest differentials in Option 1A, the effect of reflected in the differentials than is order. current Class I differential levels on currently reflected, small businesses A review of current marketing milk supplies, demand, and dairy may have a marginal improvement in practices has revealed that the $1.04 per 4908 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules hundredweight base zone differential approximately $0.40 per manufacturing facilities are willing to may not be established at a level high hundredweight.28 pay more than the Federal order enough to ensure adequate milk Traditionally, the additional portion minimum price, the basic formula price supplies for fluid use. First, a portion of of the Class I differential reflects the (BFP), for Grade A milk used in the Class I differential must reflect the marketing costs incurred in supplying manufactured products. For example, value associated with maintaining the Class I market. These marketing during 1995, Minnesota manufacturing Grade A milk supplies since this is the costs include such things as seasonal plants paid, on average, $0.77 per only milk available for fluid use. and daily reserve balancing of milk hundredweight more than the BFP for Originally the differential needed to be supplies, transportation to more distant Grade A milk; price premiums in excess established at a level that would processing plants, shrinkage, of the BFP ranged from $0.38 per encourage conversion from Grade B to administrative costs, and opportunity or hundredweight in June to $1.24 per Grade A status. With approximately 96 ‘‘give-up’’ charges at manufacturing hundredweight in December. In 1996, percent of all milk already converted to milk plants that service the fluid Class the average pay price for Grade A Grade A,26 this value now needs to I markets. This value has typically manufacturing milk in Minnesota was represented approximately $0.60 per reflect the cost of maintaining Grade A $0.94 per hundredweight more than the milk supplies. Although it may be hundredweight. Originally recognizing these two BFP, ranging from $0.68 per difficult to quantify the cost to maintain hundredweight in October to $1.18 per Grade A status, there are specific factors in the base zone was sufficient to bring forth enough milk to meet Class hundredweight in November. Similar associated costs, as described below. I demands given the abundant volumes pay price patterns occur in Wisconsin There are several requirements for of milk and the abundance of for Grade A milk used in manufactured producers to meet to convert to a Grade manufacturing plants. However, products. In 1995, the average pay price A dairy farm and then maintain it. A recognizing just these two factors at the for Grade A milk used in manufacturing Grade A farm requires an approved values specified may no longer be was $0.85 per hundredweight more than water system (typically one of the adequate to ensure sufficient supplies of the BFP, with pay prices ranging from greatest conversion expenses), specific Class I milk in the Upper Midwest $0.55 per hundredweight above the BFP facility construction and plumbing region. in July to $1.22 per hundredweight in requirements, certain specifications on The Upper Midwest region is December. During 1996, the average pay the appearance of the facilities, and considered a surplus market for fluid price for Grade A milk used in specific equipment. After achieving use because its average Class I manufacturing was $0.93 per Grade A status, producers must utilization is only approximately 20 hundredweight more than the BFP, maintain the required equipment and percent.29 However, as a result of the ranging from $0.82 per hundredweight facilities, and adhere to certain abundance of manufacturing facilities (January) to $1.10 per hundredweight management practices.27 Often, this will that require milk, the Upper Midwest (September). Table 7 sets forth specific require additional labor, resource, and region is actually a highly competitive data for pay prices for Grade A milk utility expenses. It has been estimated area in which to procure Grade A milk. used in manufacturing for 1995 and that this value may be worth Because of this competitiveness, 1996.

TABLE 7.ÐCOMPARISON OF PRICES PAID FOR GRADE A MILK USED IN MANUFACTURING PRODUCTS IN MINNESOTA AND WISCONSIN TO THE BASIC FORMULA PRICE

Minnesota Wisconsin Basic Diff. between Diff. between Year/Month formula Grade A pay BFP and Grade A pay BFP and price price @ price @ 1 grade A pay 1 grade A pay 3.5% price 3.5% price

$ /hundredweight

1995: January ...... 11.35 12.13 0.78 12.24 0.89 February ...... 11.79 12.56 0.77 12.63 0.84 March ...... 11.89 12.52 0.63 12.64 0.75 April ...... 11.16 11.77 0.61 11.92 0.76 May ...... 11.12 11.67 0.55 11.79 0.67 June ...... 11.42 11.80 0.38 12.07 0.65 July ...... 11.23 11.81 0.58 11.78 0.55 August ...... 11.55 12.14 0.59 12.14 0.59 September ...... 12.08 12.95 0.87 13.04 0.96 October ...... 12.61 13.66 1.05 13.74 1.13 November ...... 12.87 14.11 1.24 14.09 1.22 December ...... 12.91 14.12 1.21 14.13 1.22

26 Milk Production, Disposition and Income, 1996 Requirements for Manufacturing Purposes and Its order approximately $.06/hundredweight would be Summary, National Agricultural Statistics Service, Production and Processing For Adoption by State returned to producers to cover the costs associated USDA, DA 1–2 (97). Regulatory Agencies, USDA, AMS, Dairy Division, with maintaining Grade A milk supplies. 27 August 1, 1976. References: Grade ‘‘A’’ Pasteurized Milk 29 Federal Milk Order Statistics, 1996 Annual Ordinance, 1993 Revision, U.S. Department of 28 This is the value associated with Class I milk. Summary, USDA, Marketing and Regulatory Health and Human Services, Public Health Service, The amount of this value actually returned to a Food and Drug Administration and General producer is dependent upon a marketing order’s Programs, Agricultural Marketing Service, Dairy Instructions for Performing Farm Inspections Class I utilization and is reflected in the blend Division, Statistical Bulletin 938. According to the USDA Recommended price. For example, in the proposed Upper Midwest Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4909

TABLE 7.ÐCOMPARISON OF PRICES PAID FOR GRADE A MILK USED IN MANUFACTURING PRODUCTS IN MINNESOTA AND WISCONSIN TO THE BASIC FORMULA PRICEÐContinued

Minnesota Wisconsin Basic Year/Month formula Grade A pay Diff. between Grade A pay Diff. between price price @ BFP and price @ BFP and 1 grade A pay 1 grade A pay 3.5% price 3.5% price

Average ...... 11.83 12.60 0.77 12.68 0.85 1996: January ...... 12.73 13.78 1.05 13.55 0.82 February ...... 12.59 13.56 0.97 13.44 0.85 March ...... 12.70 13.68 0.98 13.72 1.02 April ...... 13.09 14.01 0.92 14.11 1.02 May ...... 13.77 14.57 0.80 14.65 0.88 June ...... 13.92 14.71 0.79 14.78 0.86 July ...... 14.49 15.32 0.83 15.39 0.90 August ...... 14.94 16.00 1.06 15.96 1.02 September ...... 15.37 16.33 0.96 16.47 1.10 October ...... 14.13 14.81 0.68 15.06 0.93 November ...... 11.61 12.79 1.18 12.47 0.86 December ...... 11.34 12.39 1.05 12.18 0.84 Average ...... 13.39 14.33 0.94 14.32 0.93 1 Fluid Grade A pay price for milk used in all manufacturing products in Minnesota and Wisconsin as reported by the National Agricultural Sta- tistic Service adjusted by butterfat differential used under Federal milk orders.

Because manufacturing facilities are differential. Option 1A values this low utilization and surplus markets will willing to pay these values above the competitive factor to be worth about have similar differentials. However, BFP to ensure adequate supplies of milk $0.60 per hundredweight. This value having a larger portion of Class I value into their plants, fluid processors must reflects approximately two-thirds of the pooled could mute price signals to pay at least these values to attract the actual competitive costs incurred by producers more than prices determined necessary supplies of fluid milk to the fluid plants to simply compete with strictly by market forces. If the blend bottling plants. Although data manufacturing plants for a supply of price exceeds the marginal value of milk indicating the exact value that fluid milk. in manufacturing, there would be an plants are willing to pay to ensure this An additional benefit of establishing incentive to overproduce for fluid supply is not published, an indication the minimum Class I differential at a needs. of the market value of this milk can be level that more accurately reflects the Quantitative analysis using the ERS obtained from the announced actual value of milk for fluid purposes multi-regional model which assumed cooperative Class I prices.30 Other than is the added monies generated in the the eleven market order consolidation, in Miami, Florida, which is a deficit Federal order pool. Class I milk four classes of utilization, and the BFP Class I market with a 1996 annual provides the vast majority of pool value as proposed, suggests that most average Class I utilization of nearly 90 in Federal orders. If an order has a low producers for the 6-year average would percent,31 the announced cooperative Class I differential and a low Class I see little to modest changes in revenue Class I prices are the highest in the utilization, it frequently does not have due to Class I price increases resulting Upper Midwest region. These prices enough pool value to provide proper from Option 1A when compared to the range from $1.19 per hundredweight price signals to pool participants. In baseline. However, some producers above the minimum Class I price in these orders, the Class I price is would experience Class I price Minneapolis, Minnesota, to $1.79 per established by the suppliers of milk at decreases. Producers located in the hundredweight above the minimum levels above the Federal order following Federal milk markets would Class I price in Milwaukee, Wisconsin, minimums. When these over-order experience revenue reductions due to and Chicago, Illinois. markets dictate substantially higher average Class I price decreases: New Option 1A presumes that the $1.04 prices than the order minimums there is Mexico-West Texas—($0.19/cwt), per hundredweight minimum Class I a risk that handlers may not face equal Eastern Colorado—($0.12/cwt), Central differential is no longer adequate to raw product costs for various reasons. Arizona—($0.11/cwt), Southwest ensure a sufficient supply of milk due Thus, having a larger proportion of the Plains—($0.11/cwt), and Texas—($0.10/ to the competitive nature of the actual value of Class I milk in the cwt). All other orders for the 6-year manufacturing facilities in this region. market order pool in these areas, than is average would have a Class I price Thus, Option 1A establishes an now the case, should promote pricing increase. The Chicago Regional, additional competitive factor into the equity among market participants. The Michigan Upper Peninsula, and Upper development of the base zone Class I $1.60 minimum differential level Midwest orders would experience the proposed is perceived to be the lowest largest increases: $0.46, $0.51, and $0.56 30 Table 35—1996 Annual Average Announced value necessary under present supply per hundredweight, respectively. Cooperative Class I Prices in Selected Cities, Dairy and demand conditions to maintain Overall, the magnitude of price and Market Statistics, 1996 Annual Summary, USDA, stable and viable pools of milk for Class income changes under Option 1A is AMS. I use in markets that are predominantly small when compared to the baseline. 31 Federal Milk Order Statistics, 1996 Annual Summary, USDA, Marketing and Regulatory manufacturing oriented. Applying this Option 1A results in a 10-cent increase Programs, Agricultural Marketing Service, Dairy minimum differential to each of the in the average Class I price for all Division, Statistical Bulletin 938. three low pricing areas will ensure that current Federal orders. Further details 4910 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules of the impact of these Class I price relationship of prices between Option 1B would move the dairy changes on the all-milk price and cash geographic locations but do not industry into a more market-oriented receipts based on the model results are determine the level of Class I system. By establishing differentials on available in the economic analysis differentials. Option 1B utilizes the basis of optimal milk movements, statement. geographic relationships as its market conditions will play a greater Option 1B—Relative Value-Specific foundation and maintains the current role in determining Class I prices. To Differentials. Option 1B establishes a Class I differential of $1.20 at the extent that higher Class I prices are nationally coordinated system of Minneapolis, Minnesota. A location needed and negotiated to attract milk relative value-specific Class I price adjusted price differential for every supplies, the higher prices will accrue differentials and adjustments that county is established by evaluating to those producers who service the fluid recognizes several low pricing areas. differences between nearby Class I market. Hence, Option 1B places more Option 1B relies on a least cost optimal differential pricing points generated by emphasis on negotiations between dairy solution from the USDSS Cornell model the model. The marginal values (shadow to develop a Class I price structure that prices) are used to determine the price farmers and processors to determine is based on the most efficient assembly structure because they reflect the value actual Class I prices. The location and shipment of milk and dairy of additional milk supplied to a plant at adjusted differentials established for products to meet all market demands for a specific location for fluid use. This each county are set forth in Maps 3A, milk and its products. price surface recognizes several low 3B, and 3C and in General Provisions The results of the USDSS model pricing areas located primarily in the § 1000.52. Table 8 sets forth the location provide information regarding the Upper Midwest and Western regions. adjusted differentials at selected cities.

TABLE 8.ÐCOMPARATIVE CLASS I DIFFERENTIALS AT SELECTED CITIES UNDER OPTION 1B-RELATIVE VALUE-SPECIFIC DIFFERENTIALS

City Current Option 1B Difference

Dollars per hundredweight

New York City, NY ...... 3.14 2.07 (1.07) Charlotte, SC ...... 3.08 1.89 (1.19) Atlanta, GA ...... 3.08 2.46 (0.62) Tampa Bay, FL ...... 3.88 3.81 (0.07) Cleveland, OH ...... 2.00 1.54 (0.46) Kansas City, MO ...... 1.92 1.45 (0.47) Minneapolis, MN ...... 1.20 1.20 0.00 Chicago, IL ...... 1.40 1.65 0.25 Dallas, TX ...... 3.16 1.68 (1.48) Salt Lake City, UT ...... 1.90 1.08 (0.82) Phoenix, AZ ...... 2.52 1.14 (1.38) Seattle, WA ...... 1.90 1.00 (0.90)

Because Option 1B would involve practices to adapt to more market- transitional option simply spreads the changes in both the level of Class I determined Class I prices. phase-in over the 5-year period, with 20 differentials and the method for Three possible alternatives are percent of the adjustment in 1999, 40 establishing them, it is proposed that presented for phasing in Option 1B. percent in 2000 and so forth. The base they be implemented through a Each utilizes the difference between the differentials resulting from this transitional phase-in program. The use current differentials and the Option 1B transitional phase-in are set forth in of a phase-in program would provide differentials as the basis of the phase-in Table 9. The first alternative would be dairy farmers and processors the over a 5-year period, beginning in 1999 to phase-in to these differentials as opportunity to adjust marketing and being completed by 2003. The first shown in Table 9.

TABLE 9.ÐOPTION 1B BASE DIFFERENTIALS

Option 1BÐBase differentials 1 City Current 1999 2000 2001 2002 2003

Dollars per hundredweight

New York City, NY ...... 3.14 2.93 2.71 2.50 2.28 2.07 Charlotte, NC ...... 3.08 2.84 2.60 2.37 2.13 1.89 Atlanta, GA ...... 3.08 2.96 2.83 2.71 2.58 2.46 Tampa Bay, FL ...... 3.88 3.87 3.85 3.84 3.82 3.81 Cleveland, OH ...... 2.00 1.91 1.82 1.72 1.63 1.54 Kansas City, MO ...... 1.92 1.83 1.73 1.64 1.54 1.45 Minneapolis, MN ...... 1.20 1.20 1.20 1.20 1.20 1.20 Chicago, IL ...... 1.40 1.45 1.50 1.55 1.60 1.65 Dallas, TX ...... 3.16 2.86 2.57 2.27 1.98 1.68 Salt Lake City, UT ...... 1.90 1.74 1.57 1.41 1.24 1.08 Phoenix, AZ ...... 2.52 2.24 1.97 1.69 1.42 1.14 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4911

TABLE 9.ÐOPTION 1B BASE DIFFERENTIALSÐContinued

Option 1BÐBase differentials 1 City Current 1999 2000 2001 2002 2003

Seattle, WA ...... 1.90 1.72 1.54 1.36 1.18 1.00 1 Base differential obtained by taking the difference between the current differential and the final Option 1B differential (year 2003) and mul- tiplying by 20 percent. This value is then subtracted from the current differential to yield the 1999 base differential. This value is then deducted from each consecutive year's value until the Option 1B differentials are achieved in 2003.

The second alternative for phasing-in for the changed pricing structure under hundredweight in 2002. This offsetting Option 1B would consist of adding a Option 1B, a transitional payment of revenue is designed to temporarily decreasing ‘‘transitional payment’’ to would be added to the base differential reduce the impacts of implementing the base differential. It would be equal for Class I milk. The payment would be Option 1B, thus allowing producers an to the decrease in revenue that would higher in the first year and gradually be opportunity to adjust their marketing otherwise occur during the phase-in reduced thereafter to result in practices to adapt to more market- period of Option 1B. Over this four-year implementation of the Option 1B determined pricing. Table 10 sets forth period, it is projected that $388.6 differentials in 2003. The additions to the location adjusted Class I million would be removed from the the base differential would equal $0.55 differentials under this revenue-neutral per hundredweight in 1999, $0.35 per Federal order system through the phase-in alternative for selected cities. lowered Class I differential. To provide hundredweight in 2000, $0.20 per the industry an opportunity to prepare hundredweight in 2001, and $0.10 per

TABLE 10.ÐOPTION 1B CLASS I DIFFERENTIALS WITH REVENUE NEUTRAL PHASE-IN PAYMENTS

Class I diff. with revenue neutral City Current 1999 1 2000 2 2001 3 2002 4 2003 5

Dollars per hundredweight

New York City, NY ...... 3.14 3.48 3.06 2.70 2.38 2.07 Charlotte, NC ...... 3.08 3.39 2.95 2.57 2.23 1.89 Atlanta, GA ...... 3.08 3.51 3.18 2.91 2.68 2.46 Tampa Bay, FL ...... 3.88 4.42 4.20 4.04 3.92 3.81 Cleveland, OH ...... 2.00 2.46 2.17 1.92 1.73 1.54 Kansas City, MO ...... 1.92 2.38 2.08 1.84 1.64 1.45 Minneapolis, MN ...... 1.20 1.75 1.55 1.40 1.30 1.20 Chicago, IL ...... 1.40 2.00 1.85 1.75 1.70 1.65 Dallas, TX ...... 3.16 3.41 2.92 2.47 2.08 1.68 Salt Lake City, UT ...... 1.90 2.29 1.92 1.61 1.34 1.08 Phoenix, AZ ...... 2.52 2.79 2.32 1.89 1.52 1.14 Seattle, WA ...... 1.90 2.27 1.89 1.56 1.28 1.00 1 1999 applicable base differential from Table 9 plus $0.55. 2 2000 applicable base differential from Table 9 plus $0.35. 3 2001 applicable base differential from Table 9 plus $0.20. 4 2002 applicable base differential from Table 9 plus $0.10. 5 Final Option 1B differentials.

The third approach to phasing in the projected decrease resulting from occurring thereafter to result in Option 1B would consist of adding a Option 1B phased in during this period implementation of the Option 1B decreasing ‘‘transitional payment’’ to is deducted. This additional money differentials by 2003. The addition to the base differential that would enhance would not only provide producers with the base differential would equal $1.10 revenue beyond what the current Class an opportunity to prepare and per hundredweight in 1999, $0.70 per I system would have generated during restructure their marketing practices to hundredweight in 2000, $0.40 per the four years of transitioning to Option adapt to more market-determined hundredweight in 2001, and $0.20 per 1B. During this four-year period, it is pricing but would also allow them to hundredweight in 2002. Table 11 sets projected that $878.4 million would be obtain the education and resources forth the location adjusted Class I added to the Federal order system necessary to become more effective in a differentials under this revenue- through the revenue-enhanced payment. more market-oriented environment. enhanced alternative for selected cities. This would result in a net increase of Again, the payment in the first year $489.8 million added to the system once would be the highest with reductions 4912 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

TABLE 11.ÐOPTION 1B CLASS I DIFFERENTIALS WITH REVENUE ENHANCED PAYMENTS

Class I diff. with revenue enhancement City Current 1999 1 2000 2 2001 3 2002 4 2003 5

Dollars Per Hundredweight

New York City, NY ...... 3.14 4.03 3.41 2.90 2.48 2.07 Charlotte, NC ...... 3.08 3.94 3.30 2.77 2.33 1.89 Atlanta, GA ...... 3.08 4.06 3.53 3.11 2.78 2.46 Tampa Bay, FL ...... 3.88 4.97 4.55 4.24 4.02 3.81 Cleveland, OH ...... 2.00 3.01 2.52 2.12 1.83 1.54 Kansas City, MO ...... 1.92 2.93 2.43 2.04 1.74 1.45 Minneapolis, MN ...... 1.20 2.30 1.90 1.60 1.40 1.20 Chicago, IL ...... 1.40 2.55 2.20 1.95 1.80 1.65 Dallas, TX ...... 3.16 3.96 3.27 2.67 2.18 1.68 Salt Lake City, UT ...... 1.90 2.84 2.27 1.81 1.44 1.08 Phoenix, AZ ...... 2.52 3.34 2.67 2.09 1.62 1.14 Seattle, WA ...... 1.90 2.82 2.24 1.76 1.38 1.00 1 1999 applicable base differential from Table 9 plus $1.10. 2 2000 applicable base differential from Table 9 plus $0.70. 3 2001 applicable base differential from Table 9 plus $0.40. 4 2002 applicable base differential from Table 9 plus $0.20. 5 Final Option 1B differentials.

Analysis Based on Evaluation Criteria milk at location. Option 1B is based on substantial part of the Class I value Option 1B performs equal to or better the least cost movement of milk and needed to attract adequate milk supplies than the current system when combined dairy products based on the May 1995 would likely come from over-order with a phase-in program option because results of the USDSS model. Thus the payments negotiated outside the Federal it provides the industry time to adapt to resulting price structure reflects the order system. a more market-oriented system. most efficient assembly and Smaller, less efficient businesses Option 1B was evaluated against the transportation of milk and dairy would likely have a greater objective criteria as follows: products and performs better than the responsibility under Option 1B to 1. Ensure an adequate supply of milk current system. bargain with processors for over-order for fluid use. Option 1B suggests lower 5. Facilitate orderly marketing with premiums that adequately cover their differentials than current levels in most coordinated system of prices. Like costs. With processors less likely to face of the proposed markets when using a Option 1A, Option 1B also establishes a similar raw product costs, less efficient $1.20 differential at Minneapolis, coordinated system of differentials and small processors may have to negotiate Minnesota. Option 1B relies more on the location adjustments that sets a and/or sustain over-order price levels use of over-order premiums in many minimum value for Class I milk in every necessary to attract and maintain a areas to attract adequate milk supplies county. Prices will be aligned within sufficient supply of milk, while efficient for fluid purposes. Over-order prices are and among orders, thereby facilitating large businesses may be in a better useful tools for allowing the market to orderly marketing of milk. competitive position to do this. The use find the final value of Class I milk, and 6. Recognize handler equity with of a transitional payment program Option 1B would ensure an adequate regard to raw product costs. Class I would help provide less efficient small supply of milk for fluid use by differentials proposed under Option 1B businesses make the needed rewarding those producers who service reflect differences in economic costs of investments to move to a more the Class I market needs. The use of procuring and marketing milk competitive position in the market. ‘‘transitional payment’’ alternatives depending on geographic location. This 3. Provide long-term viability. When would ensure an adequate supply of coordination and alignment of Option 1B is combined with one of the milk for fluid purposes by providing the minimum prices provides an equitable transitional phase-in program options, industry time to adapt to adjust their foundation upon which handlers can the long-term viability of Option 1B is marketing practices in adapting to more compete for available milk supplies and increased and is expected to exceed that market-determined pricing. sales of fluid products in a more market- of the current price structure. Gradually 2. Recognize quality (Grade A) value oriented environment. moving from a regulated system to one of milk. Option 1B recognizes the Option 1B was evaluated against the that is less regulated will require quality (Grade A) value of milk through administrative criteria as follows: adaptation of all entities within the the use of a differential added to the 1. Minimize regulatory burden. dairy industry. A transitional period basic formula price. Option 1B would not change the will allow market participants to make 3. Provide appropriate market signals. regulatory burden of the Federal order necessary adjustments in marketing Under Option 1B, greater reliance is program in terms of reporting, practices to continue in the industry for placed on market forces to establish recordkeeping, compliance, and years to come. prices which will allow for clearer administrative costs to handlers. The Option 1B would establish a market- transmission of supply and demand role of regulation in determining oriented approach to Class I pricing, by signals between producers and minimum prices would be reduced, as reducing the traditional role the Federal consumers than does the current more responsibility would be placed on order program has maintained with system. market forces. regards to Class I pricing. Historically 4. Recognize value of milk at location. 2. Minimize impact on small the Class I price established under Option 1B does recognize the value of businesses. Under Option 1B, a Federal orders represented the Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4913 minimum value of Class I milk in the phase-in program alternatives from the Comparison of Options 1A and 1B marketplace based on the cost of current differentials. Option 1A and Option 1B have maintaining Grade A milk and The revenue-neutral phase-in similarities but rely on differing additional marketing costs with the cost alternative from current differentials to methods to establish a Class I price of alternative milk supplies placing an Option 1B differentials would minimize structure. First, both options recognize upper limit on this value. Option 1B the impact of Option 1B during the that milk has a location value. Secondly, provides an opportunity for free-market phase-in period. Through a gradual both options establish a price surface conditions to determine more of the phase-in, both producers and processors that assigns a price to every county in value of fluid milk, but prices would would be given time to adjust their the United States. Currently, a price at still be undergirded by minimum prices marketing practices in preparing for the any particular location may vary based on the best available estimates of new minimum Class I price levels. depending upon the order under which milk transportation costs. Ultimately, Results of the model analysis indicate the milk is pooled. Finally, both options Option 1B should promote more market that almost all producers would utilized the USDSS model results to efficiencies; however, adjustments will experience increased revenue because of establish the price surface. be required by both producers and Class I price increases during the first Although similar in these respects, processors. revenue-neutral phase-in year when the two pricing options differ on several Quantitative Analysis compared to the baseline. In fact, the issues. First, the options differ on the Class I price would be higher in all but level at which Class I differentials are Using ERS multi-regional model one of the current Federal order established. Option 1A is based on the analyses of the 11 order consolidations, markets. The price increases range from premise that Class I differentials be four classes of utilization, and a Class I $0.25 per hundredweight to $0.59 per established at a minimum price that price mover as proposed, suggests that hundredweight and for all 32 Federal reflects more closely the current value most producers would experience lower order markets the average first year of the Class I milk based on local supply prices, when compared to the baseline, Class I price would be up $0.39 per and demand conditions and agency if Option 1B were phased-in with no hundredweight. In year two, producers judgement on the costs of obtaining transition assistance. The 6-year average located in 25 of the Federal order alternative supplies of milk. Option 1B Class I price in all current Federal order markets would continue to experience relies on the premise that a lower markets would decline $0.37 per increased revenue because of Class I minimum price should be established hundredweight. However, producers price increases compared with the strictly on the basis of the best available located in the Chicago Regional, Upper baseline ranging from $0.01 per estimates of transportation costs to Midwest, Iowa, Central Illinois, Tampa hundredweight to $0.48 per provide for a more market-oriented Bay and Southeastern Florida orders hundredweight. In year three, 17 orders structure that allows dairy farmers and would benefit from Class I price would experience Class I price increases processors more freedom to negotiate increases ranging from $0.07 to $0.28 compared with the baseline. By year fluid milk price levels. per hundredweight. Producers in all four, only the Florida, Upper Midwest, Second, the two options differ in how other current orders would experience and parts of the Central areas would the price surface should be established losses of revenue because of Class I remain with price increases from the regardless of the level. Option 1A price decreases ranging from $0.03 to baseline. provides for a surface that is smoother $1.07 per hundredweight. The smallest Like the revenue-neutral phase-in, the and flows primarily from north to south decline occurs in the Upper Florida revenue-enhancement phase-in would and west to east. Option 1B establishes order with the greatest declines provide producers and processors a a price surface that is flatter throughout occurring in the current Carolina period of time to adjust their marketing a majority of the United States and then ($¥0.68), Middle Atlantic ($¥0.72), practices in preparing for the new increases significantly in the deficit Southwest Plains ($¥0.76), Central minimum price levels by initially milk production areas of the Southeast. Arizona ($¥0.80), Texas ($¥0.87) and providing payment assistance. The use A comparison of the price surfaces Eastern Colorado ($¥1.07) orders. of the revenue-enhancement phase-in established under Options 1A and 1B Both the increases and decreases are option would provide producers with from Minneapolis to Miami mitigated somewhat by the amount of additional income to adjust their demonstrates this difference. milk used in Class I. Thus no market operations and obtain necessary The total distance from Minneapolis would see declines in the all-milk price education and resources to prepare for to Miami is approximately 1775 miles. in excess of $0.60 per hundredweight. a more market-oriented system. Since Atlanta is the first major Further details of the impact of these Results of the ERS multi-regional metropolitan center located in the Class I price changes on the all-milk model indicate that during the first year, Southeast order, and is considered a price and cash receipts based on the all current orders would experience deficit area, a review of the two price model results are available in the Class I price increases over the baseline. surfaces between Minneapolis and economic analysis statement. In year two, all but one order would Atlanta and Atlanta and Miami Because current Federal order have increased Class I prices. By year highlights the differences in the price producers and processors have three, 21 orders would continue to surface pattern. The distance between developed and designed their marketing experience increases. During year four, Minneapolis and Atlanta is about 1110 practices based on the existing Class I 11 orders would maintain a Class I price miles, or 63 percent of the total price structure which has been in place increase over the baseline, while 21 distance. The distance between Atlanta for several years, moving immediately to orders would have price decreases of and Miami is approximately 665 miles, a more market-oriented system could be between $0.01 per hundredweight and or 37 percent of the total distance. disruptive for some producers and $1.05 per hundredweight. Further Under Option 1A the differential handlers. To reduce this marketplace details of the model results for both established in Minneapolis is $1.70 per disruption, Option 1B has been transitional payment program options hundredweight and $1.20 per analyzed by the ERS multi-regional are available in the economic analysis hundredweight under Option 1B. The model in conjunction with transitional statement. Option 1A differential in Atlanta is 4914 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

$3.10 per hundredweight and under evenly dispersed Class I price surface producers and processors, static Federal Option 1B, the differential is $2.50 per from north to south. order pool analyses were completed. hundredweight. The Class I differential Under Option 1B, the change in The pool analyses, although static, in Miami under both options is about differentials from Minneapolis to provide some indication on how the $4.30 per hundredweight. The Atlanta represents about 42 percent of revenue will be distributed in the newly difference in differentials between the change whereas between Atlanta consolidated pools given the pricing Minneapolis and Atlanta under Option and Miami, 58 percent of the differential structure. The pool analyses are based 1A is $1.40 per hundredweight and change is reflected in only 37 percent of on October 1996 data. The analyses the total distance. As demonstrated, $1.30 per hundredweight under Option utilized all producer milk in each of the Option 1B results in a price surface that 1B. The difference in differentials current Federal milk order pools. The is flatter over a greater portion of the classification of producer milk, between Atlanta and Miami under United States and significantly steeper Option 1A is $1.20 per hundredweight including Class III–A milk, remained as in the deficit areas of the Southeast. it is currently classified under each and $1.80 per hundredweight under Third, the options differ in their order. The data were collected for all Option 1B. The total difference between reliance on the USDSS model results. Minneapolis and Miami under Option Option 1A recognizes the value plants and prices and were adjusted for 1A is $2.60 per hundredweight and associated with the model results but location. These data were then $3.10 per hundredweight under Option incorporates judgement on existing combined into the 11 proposed orders, 1B. specific marketing conditions and and the pools were re-computed to reflect the impacts on the uniform price Under Option 1A, the change in practices to make adjustments to the model results. Option 1B, on the other of consolidation only and then to reflect differentials from Minneapolis to the impacts of consolidation combined Atlanta represents 54 percent of the hand, utilizes the most recently available USDSS model results to reflect with Option 1A and Option 1B price total $2.60 differential change with the optimal values for fluid milk at different surfaces. Class II, Class III, and Class III– differential changes from Atlanta to locations that will promote market A and the basic formula price were held Miami representing 46 percent of the efficiencies within the dairy industry. at the actual prices for October 1996. change. This helps to demonstrate that To further compare and analyze the Table 12 sets forth the results of the Option 1A results in a smoother, more impacts of Options 1A and 1B on analyses.

TABLE 12.ÐCONSOLIDATION PLUS OPTION 1A AND OPTION 1B PRICE STRUCTURE IMPACTS ON PROPOSED ORDERS' ESTIMATED UNIFORM PRICESÐOCTOBER 1996

Estimated uniform price Difference between pool im- pacts of consolidation plus op- tions 1A & 1B and consolida- Proposed order Consolidation Cons. plus Cons. plus tion only option 1A option 1B (Col. 1) (Col. 2) (Col. 3) Col. 2 ¥ Col. 3 ¥ Col. 1 Col. 1

$/hundredweight

Northeast ...... 16.55 16.60 16.07 0.05 (0.48) Appalachian ...... 17.27 17.57 16.53 0.30 (0.74) Southeast ...... 17.12 17.12 16.69 0.00 (0.43) Florida ...... 18.52 18.55 18.37 0.03 (0.15) Mideast ...... 15.95 16.01 15.64 0.06 (0.31) Upper Midwest ...... 14.78 14.85 14.79 0.07 0.01 Central ...... 15.69 15.68 15.44 (0.01) (0.25) Southwest ...... 16.54 16.45 15.66 (0.09) (0.88) Western ...... 15.01 14.94 14.54 (0.07) (0.47) AZ-Las Vegas ...... 15.91 15.82 15.28 (0.09) (0.63) Pacific NW ...... 15.35 15.34 14.98 (0.01) (0.37)

Table 12 provides an indication of the still present evidence or arguments a minimum price that reflects existing impacts of the two Class I pricing regarding any of the Options or ideas. marketing conditions and the current surfaces when combined with the All of the provisions of Federal milk value of milk used for fluid purposes. proposed orders. This pool analysis marketing orders continue, in addition Option 1B focuses on reducing does not reveal the impacts of the three to a pricing surface as proposed under government intervention, to provide possible alternatives for phasing-in Options 1A or 1B. Thus, recordkeeping, more room for market forces to Option 1B. prompt payment provisions, auditing determine the actual value of Class I milk. Conclusion plant receipts and utilization, and verification of farm weights and tests At this time Option 1B is preferred for As previously indicated, the still continues. Both Option 1A and 1B several reasons. First, this option is Department, based on the evidence and also recognize that milk used for fluid based on model results that reflects the arguments currently before it, does not purposes should be valued higher than best available estimates of least cost believe Options 2–5 or the other ideas milk used in other products. The two assembly and shipment of milk and discussed with less detail are viable options differ in their approach for dairy products to meet all dairy product options. But this proceeding is still a establishing minimum values for fluid demands. By promoting market proposal. Therefore, commenters may milk. Option 1A focuses on establishing efficiencies, it would be expected to Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4915 result in the most preferable allocation A second variation provides transition Therefore, comments should address at of resources over time. assistance at increases Class I least the following questions: Option 1B would move the dairy differentials initially to offset reduced —Should the Class I price structure be industry into a more market-determined revenue that may occur to producers designed to move the dairy industry pricing system. By lowering due to the decline in Class I towards a more market-oriented differentials, marketing conditions will differentials. In this variation, the Class system that relies less on government have a greater impact on actual Class I I differentials in all market order areas regulation in establishing the pricing prices in the form of higher prices that would be increased by $0.55 per terms of trade between handlers and are provided to those producers who hundredweight in the first year of the dairy farmers or should the Class I service the Class I market. In this way, phase-in, $0.35 per hundredweight in price structure be established at the the revenue necessary to obtain milk for the second year, $0.20 in the third year, estimated current value of Class I fluid use may be minimized since the and $0.10 per hundredweight in the milk? Class I value is not shared marketwide fourth year of phase-in. This level of with those producers that do not service assistance would restore income to —What is the appropriate Class I the fluid market. dairy farmers that might be lost in the differential level in surplus areas? U.S. agriculture is transitioning to a transition, and if the market generates How low can a Class I differential be more market-determined environment, additional premiums, these assistance established to ensure an adequate relying less on traditional government levels would more than make up for supply of fluid milk? What Class I involvement typified by price and lower producer revenue due to lower differential level is necessary for income support programs. This minimum Class I prices. producers to maintain sufficient transition is emphasized in the 1996 A third variation offers transition revenue for ensuring an adequate Farm Bill, which specifically provided assistance that initially increases the supply of milk? Is that level $1.00, for the gradual phase-out of traditional Class I differentials even more, while $1.60, or is it another value and why? price and income support programs, still phasing toward a more market- —Option 1B has been presented with including the dairy price support oriented price surface by 2004. Under three phase-in programs; which of program that has existed since 1950. this variation, all Class I differentials in these phase-in programs would be Because Option 1B is more market all market order areas would be preferred and why? Is five years a oriented and reduces the government increased by $1.10 per hundredweight sufficient time period for the industry presence in establishing minimum Class in the first year of phase-in, $0.70 in the to make necessary adjustments to I prices, three methods of transitioning second year, $0.40 in the third year, and move towards a more market- to Option 1B are offered. One variation $0.20 in the fourth year before reaching oriented, less governmentally is a gradual phase-in to lower Class I the final Class I differentials described regulated system? differentials with no transition by Option 1B. The assistance provided —How will the California state program assistance to offset any lower revenue to by this variation would enable dairy interact with either Option 1A or dairy farmers that may occur. This farmers to make the adjustments Option 1B? variation would reduce Class I necessary to succeed in a more market- differentials in market order areas by 20 oriented environment. —To what extent would consumers percent each year until the final Class I While Option 1B is preferred at this benefit from reduced differentials differentials under Option 1B are time, Option 1A and other pricing under Option 1B versus Option 1A? reached in 2003. options are still under consideration. BILLING CODE 3410±02±P 4916 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4917 4918 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4919 4920 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4921 4922 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

BILLING CODE 3410±02±C Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4923

4. Classification of Milk skim milk and butterfat to the handler’s products. The proposed addition of Under this proposal, the Federal milk utilization of such receipts, and eggnog to the list of fluid milk products order system would continue to contain provisions concerning the market results in a change of the product’s uniform classification provisions, but administrator’s reports and classification from a Class II product to with some modification. The proposed announcements concerning a Class I product. The elimination of the modifications would be consistent with classification. The classification and term ‘‘filled milk’’ from the fluid milk the Agricultural Marketing Agreement classification-related provisions are product definition is discussed later. Act of 1937, which requires that milk proposed to be restructured and Section 15(b)(1) of the fluid milk must be classified ‘‘in accordance with redrafted to achieve part of the goal of product definition would be modified to the form in which or the purpose for standardizing and simplifying the exclude any product from the fluid milk regulatory program. which it is used.’’ product definition if the product is a In response to a Classification The proposed uniform provisions formula especially prepared for infant Committee draft report released during would provide for 4 classes of use. They feeding or a meal replacement without the developmental stage for this are similar to the uniform classification regard to the type of container used to proposed rule, comments letters were provisions contained in the current package the product. The reference to received regarding the classification of orders. The purpose and application of ‘‘dietary use,’’ which is an imprecise milk. The comments ranged from the current classification and term, would be deleted as a standard for suggestions that the entire classification classifying milk products. classification-related provisions are system be revised by providing 2, 4, or contained in the Department’s final At present, ‘‘formulas especially 5 classes of milk to suggestions prepared for infant feeding or dietary decisions that were issued February 19, regarding the classification of individual 1974 (39 FR 9012), July 17, 1975 (40 FR use that are packaged in hermetically products. Some comments supported sealed containers’’ are not ‘‘fluid milk 30119), February 5, 1993 (58 FR 12634), the classification method the California and October 20, 1993 (58 FR 58112). products’’ but the exact same formula state order provides and recommended packaged in a conventional container The differences in this proposal from a review of that method. The comments the current classification system are may be considered to be a fluid milk will be discussed according to each product if it otherwise meets the discussed herein and are the result of a issue. thorough review of Federal order standards for such products. This classification provisions since passage 4a. Fluid Milk Product (§ 1000.15) possible difference in classification of of the 1996 Farm Bill. The new orders would include a these formulas would be eliminated. Major proposed changes from the modified fluid milk product definition The consolidated orders would current classification plan include the in § 1000.15. The proposed changes to continue to exclude from the fluid milk formation of a new Class IV which the fluid milk product definition product definition formulas designed as includes milk used to produce nonfat include eliminating the term filled milk, ‘‘meal replacements’’ but, as noted dry milk (currently in Class III–A) and including eggnog in the list of specified above, any reference to ‘‘dietary use’’ milk used to produce butter and other fluid milk products, and revising the should be removed as a classification dry milk powders (currently in Class word buttermilk to read cultured standard. The words ‘‘dietary use’’ have III). Other classification changes include buttermilk. The revised fluid milk not been helpful in distinguishing the reclassifying eggnog as a fluid milk product definition would read ‘‘any products that are really beverages from product, moving cream cheese from milk products in fluid or frozen form other products that are meant to be Class III to Class II, broadening the Class containing less than 9 percent butterfat much more than just beverages. II classification for infant formulas and and more than 6.5% nonfat milk solids As intended for the consolidated meal replacement to include all such that are intended to be used as orders, the words ‘‘meal replacement’’ formulas meeting redefined criteria for beverages. Such products include, but would pertain to the type of specialty such products regardless of the type of are not limited to, milk, skim milk, product that one might find in a container they come in, removing the lowfat milk, milk drinks, eggnog, and hospital or nursing home for people words ‘‘dietary use’’ from the fluid milk cultured buttermilk, including any such who have a swallowing disability, some product definition and eliminating the beverage products that are flavored, type of digestive impairment, or other term ‘‘filled milk.’’ cultured, modified with added nonfat health or medical problems. Such In addition to the class uses of milk, milk solids, sterilized, concentrated (to products include those that are consideration has been given in this not more than 50% total milk solids), or thickened with a thickening agent, such proposal to a number of modifications reconstituted.’’ as waxy maize starch, which make them related to order definitions and The term ‘‘buttermilk,’’ as used in the consumable for a person with special provisions that are necessary to fluid milk product definition, would be dietary needs. Such products do not administer an effective classified pricing changed to read ‘‘cultured buttermilk.’’ compete with fluid milk products as a plan. Related definitions include the The revised term clearly distinguishes beverage. They are prepared for a definitions of fluid milk, filled milk, the ‘‘beverage’’ buttermilk product from limited market and are not sold as milk and commercial food processing the buttermilk byproduct which is to the general public. establishments. Also, modifications produced from a continuous churning The term ‘‘meal replacement’’ would have been considered for administrative operation. not include various types of shake rules related to the classification of The fluid milk product definition also products that are designed for people milk. These include rules for classifying would be modified to exclude ‘‘filled who are trying to gain or lose weight. skim milk and butterfat that is milk’’ and to include eggnog in its list Neither would the term apply to transferred or diverted between plants, of products. Although it is apparent that products that are advertised as ‘‘protein general rules pertaining to the eggnog is a beverage milk product and supplements,’’ ‘‘instant breakfasts,’’ or classification of producer milk clearly meets many of the criteria for ‘‘high in fibre.’’ These products clearly (including the determination of being considered a fluid milk product, may be consumed as beverages and are shrinkage and overage), rules describing it is not now included in the list of sold to the general public. Therefore, how to allocate a handler’s receipts of products identified as fluid milk like other fluid milk products, it is 4924 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules proposed that they be classified[ as however, several comments were Although there were no comment letters Class I. received in support of the current directed specifically to this point, this The meal replacement standard definition. problem has come to the attention of proposed for the consolidated orders is market administrator personnel. While 4c. Filled Milk more stringent than the one that is proposing that packaged fluid milk currently applied. At the present time, It is proposed that the definition of products be permitted to be transferred for instance, products such as filled milk be eliminated and the term to a CFPE in any size, it is also proposed ‘‘Sportshake,’’ ‘‘Powergetic,’’ ‘‘Carnation be removed from the fluid milk product that only milk which is shipped in Instant Breakfast,’’ ‘‘Resource Dairy definition and other provisions within larger-than-consumer-sized packages Thick,’’ ‘‘ReadyCare Thickened Dairy the orders. Filled milk is a product that (i.e., larger than one gallon) should be Drink,’’ and ‘‘Ultra Slim-Fast’’ are contains a combination of nonmilk fat eligible for a Class II classification. If classified as ‘‘meal replacements.’’ As or oil with skim milk (whether fresh, milk is received in gallon containers or redefined in this proposal, however, cultured, reconstituted, or modified by smaller, the milk should be priced as only ‘‘Resource Dairy Thick,’’ the addition of nonfat milk solids). Class I milk since there is no way of ‘‘ReadyCare Thickened Dairy Drink,’’ Filled milk was first produced and guaranteeing that such products will not and similar products would fall within marketed in the 1960s. In 1968, the be sold for fluid use. Permitting milk in the meaning of ‘‘meal replacement,’’ as orders were amended to provide a any sized container to be sold to a CFPE described above. definition of filled milk. Currently, there for Class II use if the container had a Fluid milk products that contain less is little or no filled milk being produced special label, such as ‘‘for commercial than 6.5% nonfat milk solids are under Federal orders. The term filled food processing use only,’’ was excluded from the current and proposed milk is used 18 times in a milk order. considered, but such a provision would fluid milk product definition. It serves little purpose today except to be impractical and it would be Consideration was given to eliminating complicate and lengthen the regulatory prohibitively expensive for a handler to or lowering this standard because there language. For this reason, the definition prepare specially labeled products for are some products that resemble fluid of filled milk would be eliminated and small accounts. The current restriction milk products but are excluded from the the term removed from the fluid milk barring a CFPE from having any fluid milk product category because product definition and other provisions disposition of fluid milk products other their nonfat solids content falls slightly within the orders. than those in consumer-sized packages below the 6.5% standard. The form of filled milk and purpose (one gallon or less) should be retained Several comment letters were for which it is used are the same as the under the new orders. received opposing any adjustment of the form and purpose for which whole milk These two restrictions are based upon 6.5% standard. Some interested parties is used. Filled milk is marketed by practical considerations. The integrity of pointed out that elimination of the 6.5% handlers in the same types of packages the classified pricing system would be nonfat milk solids standard would and in the same trade channels as whole much more difficult to maintain if the greatly expand the fluid milk product milk, and is mainly intended to be used market administrator were forced to category to include many essentially as a beverage substitute for milk. audit every CFPE on a regular basis. By non-milk products that contain very Whether made from vegetable fat and prohibiting the sale of fluid milk little milk in them. This could greatly fresh or reconstituted skim milk, or any products in consumer-sized packages to increase market administrator auditing combination thereof, the resulting a CFPE for anything but Class I use, costs in following these products and product resembles whole milk in there would be less need to regularly could regulate several new facilities that appearance. Therefore, any filled milk audit CFPE’s to be sure that such would not reasonably be considered to produced and marketed in the future products are not being sold to the be milk plants. In addition, several dairy would be classified as a Class I product public. Similarly, since packaged fluid product manufacturers argued that their under the revised fluid milk product milk products in containers larger than products would be detrimentally definition. one gallon are rarely, if ever, found in affected as other shelf-stable One cooperative association retail outlets, it is unlikely that such competitive products would gain a submitted a comment supporting the products will be sold for fluid use. By substantial economic advantage. The suggestion to eliminate the definition of restricting fluid milk product letters stated that the increase in cost filled milk. No comments were received disposition by CFPE’s to packaged associated with the Class I price would in opposition to this idea. products not larger than one gallon in force manufacturers to reformulate their size, there is reasonable assurance that 4d. Commercial Food Processing products so that no fluid milk or milk priced as Class II will not be Establishment (§ 1000.19) substantially less fluid milk would be disposed of as fluid milk sold by the used. The definition of commercial food glass from a bulk dispenser. After carefully weighing these processing establishment (CFPE) is One handler submitted a comment in arguments, it is concluded that any proposed to be revised by removing the support of the Committee’s suggestions competitive problems that may now filled milk reference, for the reasons regarding the commercial food exist as a result of the 6.5% standard are previously discussed, and by removing processing establishment definition; very minor and that no change in the the word ‘‘bulk’’ from the definition. none were received in opposition to standard is warranted at this time. The removal of the word ‘‘bulk’’ would these suggestions. allow a CFPE to receive fluid milk 4b. Fluid Cream Product (§ 1000.16) products and fluid cream products for 4e. Classes of Utilization (§ 1000.40) No change would be made to the fluid Class II use in certain sized packages as Historically, the fluid or beverage uses cream product definition. The current well as in bulk. of milk have been classified in the definition is uniform under all the Presently, the CFPE definition highest-priced class (Class I), and soft or orders and should be used in the newly prohibits the receipt of fluid milk spoonable products, those from which merged orders. No comment letters were products for Class II use in relatively some of the moisture has been removed, received which suggested changing the small pre-measured packages that might have been classified in the intermediate current fluid cream product definition; reduce the CFPE’s production costs. class of milk (Class II). The final Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4925 decision issued on February 5, 1993 (58 the only commodity in the country that classified on the basis of solids not-fat FR 12634) provided 3 uniform classes of is priced according to its use. and butterfat. milk for all orders. Classes I and II A major dairy foods association A few comments addressed the issue continued the traditional classification suggested that there be two classes of of an export class. One comment letter of milk, while the lowest-priced class milk (i.e., Class I and all other). supported the concept of continuing to (Class III) contained the hard, storable However, if multiple classes of milk are develop export markets and providing products. In a final decision that became maintained, the association proposed for Class III–A or Class IV to compete in effective December 1993, a fourth that some products be reclassified to the international marketplace. A class—Class III–A (actually a sub- Class III and that Class III–A be Missouri dairy farmer wrote that an section of Class III)—was established for discontinued. The association also export class is needed so that the cost most orders for milk used to produce stated that no new milk classifications of clearing the U.S. market can be nonfat dry milk. should be established such as an export shared across Federal order and state It is recommended that the fluid and class of milk. Another commenter order lines. beverage uses of milk continue to be the suggested that more than one class of Another commenter, a dairy products highest-priced class of milk, Class I. Soft non-fluid utilization of milk is manufacturer, recommended an export or spoonable products, or those used in unnecessary and does little to enhance class be established for Class I products. the manufacture of other food products producer income. The handler stated it is engaged in the or sweetened condensed milk, would be A manufacturer of shelf-stable packaging and selling of UHT (i.e., ultra classified as Class II products. Class III products also supported a two-class high temperature) processed shelf-stable would contain primarily the hard system for clarification and dairy products sold within the United cheeses, but also such storable products simplification reasons, and stated that States and abroad. According to the as plain or sweetened evaporated or such a system would also eliminate the handler, its inability to compete with sweetened condensed milk (or skim need for future hearings to determine the price offered by its competitors is milk) in a consumer-type package. the classification of new products. The the principal reason it has been unable Finally, a new Class IV would contain commenter strongly opposed the to increase its volume of business in the all skim milk and butterfat used to reclassification of Class II products in international market. The handler aseptic containers to Class I and argued contends that changes in the Federal produce butter or any milk product in that these products do not compete with order system are needed to allow the dried form. current Class I products, but rather American dairy industry to become Comments filed regarding the number compete in the juice market. competitive in the international market. of classes of utilization for the proposed Another handler stated that it The handler suggested that the export merged orders varied from supporters of supported 3 classes of milk, but stated class price be established just above the one class, which would eliminate all that many products that are currently in Class III level because it would allow manufacturing classes, to supporters of Class III should be reclassified as Class milk to flow into either the cheese 5 classes of milk. Comments concerning II. The handler contended that market or export markets, whichever the addition of an export class were also classification should be based upon provides the greater opportunity. The received. Some comments urged the demand elasticity and suggested that the handler claims that the addition of an immediate suspension or termination of criteria for placing various products into export-oriented, value-added, product Class III–A, while others recommended classes should be expanded. Very few class would yield greater returns to a thorough review of Class III–A. products are processed to utilize true producers than exporting skim or whole Many commenters suggested that surplus supplies of milk, it stated. milk powder (i.e., currently Class III-A there be one class of milk. A dairy A major cooperative association’s products). farmer stated that dry milk powder can comment letter supported a 4-class A northwest cooperative association be used for making cheese or fluid milk system where Class IV would include also recommended that consideration be and could be easily stored, and later butter and nonfat dry milk products, given to establishing an export-oriented dumped on the market again which thus serving as the class for market- class to facilitate the development of could influence the milk price. A large clearing products. The cooperative export markets and to promote fair cheese manufacturer maintains that stated that a 3-class system would not trade. Products produced for the world multiple classes of utilization for provide enough differentiation for market would be included in a class competing manufactured product uses market clearing. It stated that a distorted with a price that reflects ‘‘world create market distortion and regulatory market may result when pooled market’’ levels. With such a class, adjustments, and argues that a single, handlers must pay the same prices for according to the cooperative, the dairy market-clearing price for all non-fluid milk used in nonfat dry milk as for milk industry would be in a better position uses would allow competitive forces to used in cheese. Another cooperative to promote exports and contribute to the determine supply and demand. also supported the separate U.S. balance of trade. The commenter Another commenter, also a dairy classification for cheese (Class III) and contends that processors with exporting producer, stated that manufacturing butter and powder (Class IV). potential will benefit from an export Class II and Class III products is the Two trade associations recommended class and that producers also will only means of storing excess milk. 5 classes of milk for the merged orders. benefit because expanded exports will According to the producer, at one time One association recommended that the lead to reduced dairy surpluses. much of the country’s milk was 5 classes be divided into Classes I, II, III, After careful consideration of the produced at Grade B standards and, IVA, and IVB and that products be comments and arguments, 4 classes of consequently, at a lower cost of classified on the basis of product yields. utilization are proposed for the production. However, he contends, this The other association stated that the 5 consolidated orders, as described below. is not true today. The producer asserts classes of milk should consist of Classes Inclusion of an export class is not that the current Federal order system of I, IIA, IIB, IIIA, and IIIB, and that Classes proposed because classification is based milk classification is the reason why the IIA and IIB should be classified on the on form and use without regard to sales dairy industry is not unified and unable basis of protein and butterfat, whereas area. In addition, it would be difficult to to come to a consensus and that milk is Classes IVA and IVB should be support a concept of dual pricing of a 4926 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules product—one price for domestic use not all non-fluid uses of milk are perishable as fluid products nor perform and a lower price for export. Moreover, market-clearing in nature and thus a balancing function for the market. to adopt such dual pricing would be should not be placed in the same class. Many Class II products have longer inconsistent with the principles of the A shift to a two-class system would shelf-lives than fluid milk products, World Trade Organization. benefit processors and manufacturers at while being less storable than markets’ the expense of producers, according to surplus uses of milk. 4f. Class I Milk this commenter. The primary distinction between Under this proposal, Class I milk Class I Used-to-Produce. In order to Class II products and the products used would be all skim milk and butterfat simplify the accountability for milk to balance the market is existing contained in milk products that are products classified as Class I that may consumer demand. Although cream intended to be consumed in fluid form contain nonmilk ingredients and/or cheese may be used as a substitute for as beverages. Class I should include all previously processed and priced skim butter, it is not made to be stored when the products included in Class I in the milk and butterfat, we recommend no other outlets are available, as is 1993 uniform classification decision adding a ‘‘used-to-produce’’ category to butter. It is a consumer convenience plus eggnog. Class I. The used-to-produce product that is produced to meet The 1974 uniform classification accountability method would preclude consumer demand and not to utilize decision classified eggnog as a Class II the need to develop and maintain surplus supplies of milk. Handlers do product. The decision recognized that nonstandard conversion factors and not process milk into perishable or eggnog was prepared to be consumed as non-milk credits (i.e., salt, flavoring, semi-perishable dairy products if they a beverage and that it was classified in stabilizers) for milk product do not have a consumer market for those 9 of the 32 orders as a Class I product. accountability. This method should products. Accordingly, it is proposed However, the decision stated that improve the accuracy of handler that cream cheese be reclassified from eggnog was a highly seasonal product reporting and minimize audit its current Class III classification to with limited sales. It was also estimated corrections without sacrificing any Class II. that approximately 40% of the sales of statistical information, pricing Three comment letters stated that this product was in the form of considerations, or classification criteria. there is no basis for reclassifying cream imitation eggnog. The decision stated No comments were received in response cheese into Class II and it should remain that a Class II classification would to the recommendation that this with other cheeses in Class III. At least enhance the competitive position of the category be added to the proposal. 2 comment letters supported the revised product in the marketplace. classification of cream cheese. One In 1991, the recommended decision of 4g. Class II Milk commenter argued that cream cheese the national hearing changed the Most of the products included in competes for consumer market share classification of eggnog from its Class II as a result of the 1993 uniform with butter, which is currently a Class historical Class II classification to Class classification amendments would III product, and should be classified I. However, the 1993 final decision for continue to be classified as Class II according to its ‘‘use’’ which supersedes the proceeding reversed the products under the new orders, with 3 any ‘‘form’’ criterion argument. The recommended decision classification. exceptions. The exceptions include: (1) letter stated that while the The primary reason for the change in Cream cheese, which would be reclassification will have no appreciable the product’s Class I classification back reclassified from a Class III product to effect on the blend price, it may be to the historical Class II classification a Class II product; (2) eggnog, as financially detrimental to plants that was based on exceptions to the discussed already, which would be produce cream cheese. recommended decision. At the same reclassified as a Class I product; and (3) Some comments addressed the time, however, the final decision left any fluid product in a hermetically- classification of cottage cheese and low-fat eggnog as a fluid milk product sealed, all-metal container which would ricotta cheese, in addition to cream with a Class I classification, as it was be classified as a Class II product. cheese. A national manufacturer of prior to the 1990 national hearing. The 1993 national hearing decision cheese products supports the Class I products are generally included cream cheese in Class III. The reclassification of milk used to produce classified on the basis of their fluid form decision placed spreadable cheeses and cottage cheese and ricotta cheese from and intended use. Eggnog, a highly cheeses that can be crumbled into Class II to Class III. The handler states seasonal product, is clearly intended to separate pieces in Class III, while other that due to falling demand for cottage be consumed as a beverage. Since this more liquid ‘‘spoonable’’ products were cheese, it should be placed with other product is manufactured, packaged and placed in Class II. The decision stated cheeses in Class III. Another cottage distributed to the consumer as a that cream cheese is used as a substitute cheese manufacturer made the same drinkable beverage, it is proposed to be for butter because it functions as a suggestion. classified as a Class I product. The spread and, thus, classified cream These suggestions should not be modest change in the ingredient cost of cheese in Class III. incorporated in this proposal. Great care the finished product should have little The classification of cream cheese should be taken in reclassifying dairy or no effect on its sales in the should be changed from Class III to farmers’ milk to any class below Class marketplace. Comments received Class II. The milk used in Class II I. Such reclassification may occur when regarding the reclassification of eggnog products, generally described as ‘‘soft’’ it is necessary to dispose of surplus milk were generally in support of its products, is used to process or or to allow intermediate dairy products reclassification into Class I. manufacture products for which to compete with a nondairy substitute to A western producer organization handlers know a consumer demand the benefit of dairy farmers. Neither of supports the recommendation to exists. Generally, these products have these reasons would appear to fit the include all milk consumed in beverage some of the water removed from situation facing milk used in cottage form in Class I. The organization rejects producer milk or contain a high enough cheese. a two-class system as proposed by butterfat content that they will not be The declining market for cottage processor groups, arguing that such a used as beverages. Products included in cheese is likely the result of several system makes no economic sense since Class II are those that are neither as factors besides its price. Some of these Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4927 factors may be the substitution of newer accuracy in the reporting and auditing Class III–A pricing will offer a way to or improved dairy products for cottage of these products. This method should capture changing price relationships cheese, changing consumer tastes, or be extended to the remaining Class II between cheese, butter, and powder. consumer preference for lower fat products that are currently accounted Michigan Milk Producers Association products. There is no indication that for on a disposition basis, specifically (MMPA) and Independent Cooperative reducing the ingredient cost of this creamers, light cream, milk and cream Milk Producers Association (ICMPA) product by a fraction of a cent per mixtures, and heavy cream. argued that the elimination of Class III– container would do much to stimulate A will competitively disadvantage those consumer preference for it. 4h. Class III and Class III–A (i.e., Class parties who currently provide market As discussed above, the phrase in IV) Milk balancing services. They note that as §§ 1000.15(b)(1) and 40(b)(v), ‘‘or The July 1993 national hearing long as California remains outside of the dietary use (meal replacement)’’ would decision provided that hard, storable Federal order program, the West Coast be removed and any fluid product products be included in Class III. Class nonfat dry milk price, plus a packaged in a hermetically-sealed, all- III–A became effective in 3 Federal transportation differential, will continue metal container would be reclassified as orders in November 1992 and was to effectively establish a price ceiling for a Class II product. Formulas especially implemented in 27 Federal orders in Midwest nonfat dry milk. This product, prepared for infant feeding should December 1993. The amendments according to MMPA and ICMPA, is still continue to be classified as Class II established a Class III–A milk class that a market-clearing product for Michigan, products without regard to the type of included only nonfat dry milk. It is Indiana, Kentucky, and parts of Ohio. container in which they are packaged. recommended that the products A major Northeast cooperative Although no change is intended for currently included in Class III continue association, Agri-Mark, also opposed the present classification of buttermilk to be classified in that class with two any suggestion to eliminate Class III–A. for drinking purposes and buttermilk for exceptions. As discussed under the According to Agri-Mark, arguments that baking purposes, some changes are Class II section, the classification of Class III–A pricing has encouraged needed to clarify the distinction cream cheese should be changed from unneeded nonfat dry milk production between the 2 products. First, as noted Class III to Class II. Also, butter and all are false. Class III–A pricing, in Agri- previously, drinking buttermilk should milk powders that are currently in Class Mark’s view, has allowed nonfat dry be labeled as ‘‘cultured buttermilk.’’ In III should be moved to Class IV. milk manufacturers to resume their role addition, some changes are needed to The 1993 Class III–A decision stated of efficiently balancing Class I markets distinguish this product, which is a that the separate class for milk used to and disposing of reserve supplies. While Class I product, from buttermilk biscuit produce nonfat dry milk (NFDM) was vigorously supporting the retention of mix, buttermilk for baking, or simply needed to allow handlers to recover the Class III–A pricing, Agri-Mark also baking buttermilk, which is a Class II cost of producing NFDM. The Class III– stated that it is necessary to modify product. A price is calculated from a product Class III–A pricing in two primary areas. Currently, the criteria used to price formula, which provides a make The first modification involves the distinguish drinking buttermilk from allowance, to arrive at a price for milk replacement of the Central states price buttermilk for baking is that the latter used to produce NFDM. with a Class III–A price calculation product must contain food starch in There has been a good deal of using a California nonfat dry milk price excess of 2% of the total solids in the criticism of Class III–A. Some of the announced each week. The second product. However, this criteria is not arguments made by critics of III–A are modification involves including milk specified in the orders themselves, but that: used to manufacture buttermilk powder rather in administrative guidelines that • Class III–A has resulted in lower in the Class III–A definition. have been issued. This guideline should uniform prices under Federal milk Agri-Mark contends that Class III–A be formalized by stating the standard in orders; should be continued in all Federal the general provisions that will contain • A significant amount of milk was marketing areas in order to allow their the classification section for the not pooled when the Class III–A price nonfat dry milk manufacturing plants to consolidated orders. As now specified exceeded the uniform price adjusted for remain competitive with California and in Section 1000.40(b)(2)(v), the Class II location; therefore be available to balance Class I classification is limited to ‘‘buttermilk • The wide gap between the Class II needs and facilitate the handling of biscuit mixes and other buttermilk for price and the Class III–A price was reserve milk supplies in each market. It baking that contain food starch in excess destroying the market for bulk is also Agri-Mark’s view that the current of 2% of the total solids, provided that sweetened condensed milk; and Class III–A pricing formula has worked the product is labeled to indicate the • The Class III–A pricing system was well and has not given an advantage to food starch content.’’ It should be undermining the Class II and Class III nonfat dry milk manufacturers relative emphasized that the proposed standard price by allowing milk that is to cheese manufacturers. not only requires buttermilk for baking manufactured into NFDM at a lower Agri-Mark acknowledges that the or buttermilk biscuit mix to contain the price to be utilized in increasingly large problem of using nonfat dry milk to required amount of food starch but, in quantities to make soft products and replace fresh milk in traditional dairy addition, the label must indicate the cheese. uses when Class III–A prices are food starch content of the product. Supporters of Class III–A argue that it significantly below Class II and III Class II Used-to-Produce. The 1993 should be retained for several reasons. prices does exist; however, it argues that uniform classification amendments One argument that appeared in several the elimination of Class III–A pricing changed the accountability method of letters was the need to remain will not alleviate this problem because several products from a disposition competitive with butter/powder plants low-priced nonfat dry milk basis to a used-to-produce basis. Except under California’s 4a pricing program. manufactured in California will still be for some fluid cream products, all The Pennsylvania Farm Bureau noted available to replace local fresh milk. In products were moved to the used-to- that as the dairy industry moves toward the absence of Class III–A, local fresh produce category. The change resulted the elimination of support prices and milk may be unable to find a nearby in simplification and improved more into the international market, outlet, particularly on a seasonal basis, 4928 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules resulting in disorderly marketing Furthermore, it is argued that stated that other products that compete conditions. suggestions to increase the Class III–A with nonfat dry milk, including Another commenter, the Alliance of price to make it closer to the Class III evaporated milk, should be placed in Western Milk Producers (AWMP), stated price is unsound policy. The commenter the same class as nonfat dry. that separate butter/powder and cheese argues that it makes no economic sense A great deal of consideration was milk pricing classes would not be to artificially increase the lowest class given to the argument that bulk detrimental to producers, but rather that price which typically clears the sweetened condensed milk/skim milk a single price class would cause market.32 should be reclassified to be in the same producers economic disaster. The Dairylea, a cooperative association class as nonfat dry milk, i.e., Class IV in AWMP supports a two-class system for with members in the Northeast, also the proposed new orders. In fact, such manufactured products. It recommends supports continuation of Class III–A for a change was recommended in a that Class III include cheese and Class milk used to produce nonfat dry milk preliminary Dairy Program IV include butter, nonfat dry milk, and stating that the incorporation of this Classification Committee report. With whole milk powder. class allowed for a more equitable the change in class pricing formulas Darigold, a cooperative association sharing of costs among all producers in proposed for the new orders, however, based in Seattle, Washington, submitted balancing weekly and seasonal supplies the problems leading to this a comment in support of separate of a market via nonfat dry milk recommendation will be removed. classes for butter/powder (Class III–A) production. While acknowledging that Consequently, bulk sweetened and for cheese (Class III) and offered the substitution of nonfat dry milk for condensed milk and skim milk should several arguments why separate classes fresh milk in Class II and III products remain in Class II. for butter, powder, and cheese should decreases producer blend prices, Bulk sweetened condensed milk/skim be adopted. Darigold states that the Dairylea contends that this would milk is used as an intermediate product reconstitution of nonfat dry milk should continue to occur in the absence of in ice cream, candy, and other be viewed as a means to economic Class III–A pricing because lower-priced manufactured products. However, these efficiency rather than a pricing powder from California would be manufactured products can also be disruption or distortion. Darigold points available. made from powdered milk. When out that it is inefficient to have milk Some commenters, while supporting powder prices are low relative to the transported several hundred miles if Class III–A, urged the Department to Class II price, there is an economic cheaper solids could be transported at a broaden the class to include more incentive for powder to be substituted lower cost. Darigold also states that products, such as dry whole milk. In for bulk sweetened condensed milk. As reconstitution is actually consistent addition, several comments were a result, there must be an economic with the purposes of Federal orders received urging the reclassification of relationship between the Class II price because it promotes the goal of making sweetened condensed milk from Class II and the cost of using alternative dry or adequate supplies of milk solids to Class III or to the same class which concentrated products to make Class II available within a deficit market. includes nonfat dry milk. The products. Under current pricing Darigold also states that reconstitution commenters explained that sweetened provisions, the Class II price can be of nonfat dry milk into higher-classed condensed milk is primarily used in excessive relative to using nonfat dry dairy products is much more demand- commercial food processing milk since the Class II price is a measure driven than price-driven and that the establishments and in the confections of the value of milk in cheese (the Class increased use of nonfat dry milk in the industry and that it is interchangeable III price) plus a differential. processing of higher-valued products with powdered milk products and sugar As proposed in this rule, the Class II may be explained by the shortages of in ingredient markets for processed price for the new orders would be based milk and continuing declines in milk foods and candy. They argued that upon the Class IV price plus a production that have occurred in some manufacturers of sweetened condensed differential of 70 cents. This fixed regions, not by price incentives milk are currently at a competitive difference precludes the much wider associated with Class III–A. The disadvantage with manufacturers of price differences that have existed at cooperative also states that milk nonfat dry milk. Another commenter times between Class II and Class III–A movements in recent years to the Upper also stated that it was losing business prices. Consequently, sweetened Midwest would have occurred even because nonfat dry milk is substantially condensed milk should continue to be without Class III–A because milk cheaper than fluid dairy ingredients. classified as a Class II use. production was decreasing in the Upper A major dairy manufacturer stated 4i. Shrinkage and Overage Midwest but growing in the West. that product classifications should not Darigold maintains that concerns create price discrimination among milk The shrinkage provisions of the new about ‘‘artificial drying’’ (i.e., drying products used for similar purposes. orders should be modified to reflect a milk just to be able to obtain nonfat dry Therefore, it supports the same pro rata assignment of shrinkage based milk solids as a substitute for fresh milk classification for nonfat dry milk, on handler utilization. In other words, in Class II products) overstate the sweetened condensed milk, and each handler’s ‘‘shrinkage’’ or lost milk problem and should be kept in condensed skim milk, which are largely should be classified according to the perspective. In addition to interchangeable. According to the handler’s use of milk that was not lost acknowledging that such practice would commenter, the current system of in transit or processing. Adoption of be inconsistent with Federal order classification places sweetened such modification will simplify both program goals, the cooperative points condensed milk at a significant order language and accounting out that it would also be inconsistent disadvantage and has virtually procedures. Shrinkage is experienced by handlers with economic efficiency. Darigold destroyed the market for sweetened in milk processing operations and in the states that only a limited amount of condensed milk. The commenter also nonfat dry milk reconstitution has been receipt of farm bulk tank milk at driven by a price difference between 32 See Issue Number 3 of this proposed rule for receiving stations and processing plants. Class III and III–A sufficient to offset the a comprehensive discussion of Class III and IV Milk is unavoidably lost as it remains in costs of drying and reconstitution. prices. pipe lines, adheres to tanker walls and/ Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4929 or other plant equipment, and is washed keeping, reporting and auditing plant milk is assigned to Class III up to this away in the cleaning operations. In loss has little value to the producer, allowance. addition, unexpected losses, including consumer, or handler. One cooperative If a handler receives fluid other spillage or leaking packages, also association expressed support for the source milk, it receives a pro rata share contribute to shrinkage. elimination of accounting for animal of the total loss which is assigned to A shift from the current shrinkage feed and dumped products; no opposing Class III without limit. Any shrinkage allowance provisions to a pro rata comments were received. exceeding the total of these two assignment of shrinkage based on One handler proposed that shrinkage assignments is assigned to Class I. utilization would improve market be assigned all at the lowest When comparing the dairy industry to efficiencies, create a more equitable classification or all Class I with a other industries, there is a difference in situation among handlers, and facilitate monetary credit. The monetary credit how waste, or shrinkage, is handled. A accounting procedures involving would be based on a fixed allowance non-dairy manufacturing plant has a shrinkage and overage assignment. Over depending on where the handler’s loss certain amount of waste, and it pays the time, changing conditions within milk is assumed. The handler stated that this same for wasted material as that going markets have led to the adoption of a would eliminate a substantial number of into the product made. It does not pay rather complex shrinkage provision. words from the order language. This less or assign a lower value for the This provision can be both modified handler also suggested expanding the ‘‘shrinkage’’ as is done in the dairy and simplified without compromising shrinkage rules to allow for aseptic industry. Although some may argue that the objectives of the Federal milk packaging because shrinkage in aseptic shrinkage should be assigned to the marketing program. The proposed packaging is far greater than in a plant lowest class because handlers receive no provision should meet the goals of processing milk in containers, according return on milk losses experienced in the simplification and improvement of to the handler. The handler suggested a receiving and processing operations, a Federal milk marketing orders. 4% shrinkage allowance for aseptic pro rata assignment should result in Arguments in support of the proposal packaging. handlers’ limiting milk loss throughout illustrate the advantages of a shift to pro In Section 30 of each order, pool plant the dairy process. In a bottling plant, rata shrinkage assignment as opposed to operators and certain other handlers are shrinkage would be assigned to Class I either continuation of the current required to report their total receipts in a larger proportion than the current shrinkage class assignment and and disposition of skim milk and method. This would have the effect of allocation system or adoption of other butterfat. In Section 40, the total creating more costs for a Class I handler. alternatives. Several of the major reported receipts are classified In other words, placing a higher value cooperative associations expressed according to usage. Any positive on shrinkage by having milk assigned support for the suggestion to prorate difference between receipts and pro rata to all classes, as is shrinkage based on plant utilization. utilization is referred to as shrinkage recommended, would encourage a According to one commenter, plants and any negative difference is called handler to reduce costs associated with should account to the pool at a price overage. The proposed orders would shrinkage, resulting in more efficient that is the intended use for milk provide that for each pool plant and dairy operations. Also, as proposed processed at that plant. The commenter each cooperative association bulk tank here, shrinkage would be assigned to added that this will encourage and handler, the market administrator Class II for the first time. This would assure plant efficiency. would determine the shrinkage or also encourage less shrinkage, hence, Simplification of order language was overage by subtracting the handler’s greater efficiency. one of the more frequent comments utilization of milk from its receipts of Pro-rata shrinkage assignment would received in response to the preliminary milk, and then prorate the shrinkage to more closely reflect the nature of the reports on classification. The shrinkage the respective quantities of skim milk plant’s operation. If milk is to be provision undoubtedly falls within this and butterfat in each class by using the classified on the basis of form and use, category. As pointed out earlier, the handler’s total reported utilization. In it would appear logical that any loss shrinkage provision has become rather contrast to the current lengthy provision associated with a particular use should complex. A comment letter submitted for assigning shrinkage, the new be classified the same as the usage. If a by one industry member argues that the shrinkage provision would remove the handler has a high Class I utilization, it retainment of the shrinkage provision is necessity for computing shrinkage seems appropriate that the same unnecessary and that any milk which is allowances on various sources of utilization percentage would apply to its not accounted for should be classified as receipts. loss/shrinkage. A handler with a multi- Class I. While this suggestion seems to Currently, the shrinkage provision class operation would have shrinkage provide an incentive to inefficient plant maintains allowances for various prorated to all classes of utilization operators to minimize the amount of sources of receipts. Milk that a handler based on the percentage used in each milk loss by placing a higher value on receives at its plant on the basis of class. If a handler has only Class III shrinkage than presently exists in the weights determined from its utilization, all shrinkage would be current system, a more equitable measurement at the farm and butterfat assigned to Class III. method is to assign shrinkage pro rata tests determined from bulk tank samples In doing its cost accounting for Class based on a handler’s utilization. This (farm weights and test) receives a 2 I fluid milk, a handler would have to will prevent any handler with solely percent allowance to be classified as factor in the extra cost for shrinkage as Class III utilization from being Class III. If the handler receives milk on part of its calculations. The handler responsible to the pool for shrinkage other than farm weights and tests from would feel secure knowing that its assigned to Class I. a cooperative bulk tank handler or competition is going to have the same Other comment letters suggested that another pool plant, a 1.5 percent method of prorating shrinkage applied shrinkage should be eliminated, along allowance is given to the receiving to its operation. The benefit of greater with some other order provisions, handler and a 0.5 percent shrinkage uniformity is apparent. Class I handlers because it reduces income to dairy allowance is given to the bulk tank would have a greater incentive to farmers. Some commenters argued that handler or other pool plant selling the operate more efficiently if they are to the costs associated with record milk. Any shrinkage assigned to pooled account for milk lost at the higher class 4930 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules value; hence, greater consideration 4j. Classification of Transfers and be least disruptive to individual dairy would be given to minimizing shrinkage Diversions (§ 1000.42) farmers. to reduce costs. Certain changes should be made to A market administrator does not know until handlers’ reports have been The additional money paid into the the classification of transfers and received that some portion of milk pool by handlers operating pool diversions section of the orders to reported as diverted to another order simplify and clarify order language. At distributing plants with high Class I cannot be absorbed by the amount of the present time, in many orders if any utilization would not be offset by a non-Class I utilization in the receiving milk that is diverted from one order to lesser amount paid into the pool by order’s plant. In such case, the diverting another for requested Class II or III use handlers operating plants that handler should be given the option of is assigned to Class I, the dairy farmer manufacture primarily Class II and III designating the entire load of diverted who shipped that milk is defined as a products. Therefore, the blend price to milk as producer milk at the plant producer under the order receiving the producers would be enhanced by this physically receiving the milk. milk with respect to that portion of the change in the shrinkage rules, but it is Alternatively, if the diverting handler milk assigned to Class I. In other orders estimated that it would be less than an wishes, it may designate which dairy average of one cent per cwt. under similar conditions, the dairy farmers on the diverted load of milk will farmer becomes a producer on the Historically, overage has been be designated as producers under the receiving order for all of the milk order physically receiving the milk. As allocated pursuant to Section 44 diverted even though only a portion of (Classification of producer milk) starting a last resort, the market administrator the milk was classified as Class I. When would prorate the portion of diverted with Class III. Since shrinkage would be this type of adjustment is necessary, the assigned pro rata based on the milk among all the dairy farmers whose diverting handler is informed by the milk was received from the diverting utilization in each class, it would market administrator’s office that there handler on the last day of the month, appear logical to assign overage on the is not enough Class II or III use then the second-to-last day, and same basis. Utilization would be remaining in the receiving plant to continuing in that fashion until the adjusted to arrive at gross utilization. absorb all of the milk diverted. In such diverted milk that is in excess of Class The references to overage and shrinkage case, the diverting handler may pick II, III, and IV use has been assigned as would be removed from Section 44. In which load or loads of diverted milk producer milk under the receiving computing a handler’s value of milk, the will become producer milk under the order. method of pricing overage in Section receiving order. A conforming change that should be 60(b) would not change. However, the Since the orders are not precisely made in each order relates to milk that reference to Sections 44(a)(14) and 44(b) clear on how inter-order diverted milk is transferred or diverted for Class II or would be replaced with Section 43. should be handled, some modification III use. Presently, milk may be Also, as explained under the discussion is needed in the order language. Under transferred or diverted on a requested of ‘‘General classification rules,’’ most orders, and as provided in this Class II or III basis. However, with 4 Section 41 would be removed entirely proposed rule, milk may be diverted classes of utilization recommended for and the remaining shrinkage provision from one order to another for a the new orders, milk could be diverted would be incorporated in Section 43. requested use other than Class I. for requested Class IV use also. Rather However, if there is not enough Class II, than specifying ‘‘Class II, III, or IV,’’ There would be minimal impact on III, or IV utilization in the receiving however, the orders should simply state the blend price by assigning overage plant to be assigned to the diverted ‘‘other than Class I’’ to accommodate a before allocation begins rather than in milk, some milk may have to be system of more than 3 classes. This the current step 14 of Section 44. The assigned to Class I. When this happens, language is simpler, shorter, and total value of milk classified plus the the practical administrative problems accomplishes the same end. overage value would be the same using involve determining which milk of Comments received from interested either method. However, if a handler which dairy farmers and which loads of parties involving transfers and had receipts from an unregulated supply milk will be shifted as producer milk diversions suggested general plant or a plant regulated under another from one order to another. simplification and clarification of order Federal order, the assignment of such Market administrators should be language, as well as some suggestions receipts may be slightly different than given some flexibility to handle these on how to facilitate the administration the current assignment method. administrative problems on a market-by- of these provisions. Generally, the Animal feed and dumped products market and case-by-case basis. As a comment letters suggest that the orders should be removed from Class III in practical matter, most milk diverted be amended so that inter-market Section 40 and included in shrinkage. between orders is diverted by transfers are allocated to Class I in the This would place less of a regulatory cooperative associations that reblend same manner as transfers within proceeds to their members. In most burden on handlers who are required to markets. These letters state that, cases, it makes little difference to a otherwise, a barrier to the movement of file reports regarding these types of cooperative association whether a dairy milk is created. It was argued that such disposition. It would also simplify farmer is a producer on one order or modification would help to assure market administrator auditing another order; any differences in blend distributing plants an adequate supply procedures considerably. prices between the orders will be of milk for fluid use whenever and The suggestion to include a dollar washed out in the reblending process. In wherever it is needed. Other comments credit at the difference between Class III the case of nonmember producers argued that if a shipment between and Class I prices for unaccounted milk diverted inter-order, however, orders is designated as Class I, it is only was also considered. This alternative differences could arise in a producer’s logical and fair that the entire shipment would result in additional time and net proceeds for the month depending should be Class I, rather than be subject resource allocation, and would not upon how much milk was pooled in to current pro rata allocation simplify the orders, but rather each order. Therefore, these situations procedures. Proponents of this view complicate them. should be handled in such a way as to argued that this would lead to a more Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4931 equitable situation in the treatment of possible first to any remaining Class I now would be classified in Section 44 inter- and intra-order transfers, allow for utilization and then to all other of the orders. greater equity among handlers, and utilization, in sequence beginning with 4l. Classification of Producer Milk contribute to the simplification and the lowest class at the nonpool plant. (§ 1000.44) reduction of administrative procedure This change returns the order language and cost. to the assignment sequence that was A handler may receive milk from a A cooperative association and a adopted in the Uniform Classification producer, a cooperative association handler filed comments endorsing a Decision of 1974. Receipts from pool acting as a handler on bulk tank milk, prelimary suggestion of allowing milk to plants should not be given preference by by transfer from another pool plant, or be diverted inter-order for any use, but assigning such milk to the available from ‘‘other sources’’ such as nonpool a dairy farmer association submitted one Class II use before assigning receipts plants, partially regulated plants, and comment critical of the idea. The from dairy farmers who constitute the plants that are regulated under other association which opposed the idea regular source of milk for such nonpool orders. Because of this diversity in implied that milk received on a diverted plant. Generally, milk transferred or sources of receipt, it is necessary in a basis from another order would get a diverted from pool plants to nonpool milk order to go through an allocation priority Class I assignment over local plants is surplus milk and would be sequence to determine which source of producer milk. This was not the used in storable manufactured products, milk gets priority to a particular class of intention behind this suggesion. Any such as nonfat dry milk and butter. By utilization and to determine how milk that was diverted from one market assigning transferred or diverted milk to producer milk was used. In some orders, to another would have been assigned a nonpool plant’s Class II utilization this allocation sequence is done on a based upon the lower of the receiving first, the pool plant operator is forced to system-wide basis; in others, it is done plant’s Class I utilization or the account for this milk at the Class II for each plant receiving producer milk. receiving market’s Class I utilization. In price, even though the nonfat dry milk Section 44 is one of the most view of the concern about the possible or other surplus product that was made complicated and difficult-to-understand impact of permitting milk to be diverted with the milk is of a lesser value. This sections in a milk order. Consequently, for any use between orders, no change process will prevent the assignment of an attempt has been made to simplify in this regard is proposed for the receipts at a higher utilization than the and shorten it. Part of this task was consolidated orders. actual utilization. made easier by proposed changes to Inter-order transfers would continue Receipts of bulk fluid cream products other sections (e.g., elimination of filled to be allocated based on the lower of the at nonpool plants from pool plants and milk, elimination of individual handler receiving plant’s or receiving market’s plants regulated under other Federal pools, and modification of the treatment utilization rate. Preference should not orders, similarly, would be assigned to of inter-order transfers and diversions). be given to such other order bulk milk the lowest class utilization first. Also, because shrinkage and overage are in the manner suggested by various Generally, a plant operator will use its prorated to a handler’s gross utilization, commenters. Even within markets with regular source of supply in the highest these items do not have to be allocated. high Class I utilization rates, there are valued uses before using alternative All orders are not now uniform in the times when milk is used in surplus supplies. Thus, if a nonpool plant classification of producer milk. For products, and classified as other than receives cream from a pool plant or a example, some orders (e.g., Chicago Class I. There is no reason why milk plant regulated under another Federal Regional) provide for system allocation from an other order should be classified order, it is likely that the regulated while others allocate receipts on a plant- as completely Class I when local milk plants were trying to dispose of their by-plant basis for a multiple plant inevitably is classified other than Class excess cream. The nonpool plant handler. I. Both types of receipts should share receiving the cream will most likely use Under the consolidated orders, milk equally in the Class I and surplus it for manufacturing purposes; therefore, would be allocated on a plant-by-plant utilization. it should be assigned to the lowest class basis, as modified to reflect the other In § 1000.42(d)(2)(i), the phrase, first. The priority given to regular source changes proposed herein. The system ‘‘excluding the milk equivalent of both supplies is recognized and the provision allocation method that is found in some nonfat milk solids and concentrated modified to reflect this. orders is based upon a set of marketing milk used in the plant during the conditions concerning the locations of month,’’ is proposed to be added to this 4k. General Classification Rules handlers’ plants and the market’s sub-paragraph to more directly arrive at (§ 1000.43) available milk supply in relation to transfer and diversion classification on For classification purposes, the milk those plants. These provisions were the basis of the assignment of a nonpool of a cooperative bulk tank handler—i.e., intended to stop abuses that occurred plant’s utilization to its receipts. The ‘‘a 9(c) handler’’—should be treated as when milk was imported from one recommended modification will prevent ‘‘producer milk’’ of a pool plant market to another. Rather than permit unnecessary accounting steps which operator. This change will shorten and an inter-order transfer to be assigned at serve no purpose in verifying the simplify the allocation section. a handler’s high Class I utilization plant, utilization at the nonpool plant. In Accordingly, paragraph (a) of Section while the handler’s producer milk was classifying receipts of fluid milk and 43, as revised, no longer contains a assigned to lower use value at another cream products at nonpool plants from reference to the classification of of its plants, the system allocation Federal order plants, an accounting producer milk with respect to a handler provisions assigned the transfers on the balance function serves no purpose. described in Section 9(c). basis of the handler’s utilization at all In § 1000.42(d)(2)(vi), the allocation The computation and classification of plants combined. The objective was to process for bulk fluid milk transferred shrinkage and overage have been added prevent more distant other order milk from pool plants to nonpool plants is to this section. This will eliminate from being assigned to Class I use at the proposed to be modified such that any Section 41, the section previously used expense of producers who were located remaining unassigned receipts of bulk for this purpose. Also, the last nearer to the city markets and who fluid products be assigned, pro rata paragraph of Section 43 should be represented the normal source of supply among such plants, to the extent removed because milk for Class IV use for the markets’ fluid milk needs. 4932 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

The 11 new orders proposed here do whether such products are physically modifications such as the changes in the not fit within the parameters of the received at the regulated handler’s plant treatment of shrinkage and overage. classical model where a major or whether they are ‘‘acquired for 4n. Organic Milk consumption area is surrounded by distribution’’ at some other location. production areas. The marketing areas The additional words, ‘‘acquired for During the development stage of the proposed for the consolidated orders distribution,’’ would clarify the order reform process, a proposal was span several states and have a number application of this provision in those received from Horizon Foods to exempt of major population centers. They also orders that do not now contain this organic milk from pricing and pooling have pockets of milk production that, in language. under Federal milk orders. a number of cases, are in higher-priced A key basis for exempting producer- In 1990, Congress passed, and the areas than some of the fluid milk plants handlers from regulation rests on the President signed into law, the Organic within the marketing area. This milk presumption that producer-handlers Food Production Act of 1990 (7 U.S.C. may not be economically available to a will be responsible for disposing of their 6501 et seq.), establishing the first fluid milk plant several hundred miles surplus milk. This is why milk received Federal standards for organic food away. In fact, it may be that a plant near from a producer-handler is down- products. A proposed rule was issued the periphery of a multi-state market allocated to the lowest possible on December 5, 1997, and published in may find its closest and cheapest source utilization. If this were not done, a the Federal Register on December 16, of supply from outside the market rather producer-handler could undercut the 1997 (62 FR 65849), to implement the than from within the marketing area. minimum order Class I price by selling National Organic Program. Accordingly, the foundation on which its surplus milk to regulated handlers Organic dairy products can now be the system allocation rules are based for fluid use. found in many, if not most, major does not support current marketing In some isolated cases, producer- grocery chains in metropolitan areas. conditions. Therefore, all orders are handlers have avoided lowest-class The retail price of organic dairy proposed to be modified to allocate milk pricing of their surplus milk by selling products is well above non-organic only on a plant-by-plant basis rather their packaged fluid milk products to products. For example, in one than on a system basis. regulated handlers at a non-plant Washington-area supermarket a half- Another change that should be made location, such as a warehouse, from gallon of regular 1% milk sells for $1.59, in the allocation section concerns the which it is then distributed on routes by while a half-gallon of Horizon Organic ‘‘98/2’’ rule. At the present time, only 98 the regulated handler. Under some 1% milk sells for $2.29. In addition to percent of the packaged fluid milk orders, this milk would not be carrying organic milk, many products transferred between orders is considered a receipt from a producer- supermarkets now also carry organic allocated to Class I; the remaining 2 handler and thus would not be priced. yogurt, sour cream, butter, and other percent is allocated to Class III. This As proposed herein, however, such organic dairy products. All of these provision, originating from the June 19, fluid milk products that are acquired at products are priced well above their 1964, ‘‘compensatory payment’’ the non-plant location will nevertheless non-organic counterparts. decision, was adopted to provide an be treated as if they had been received Processors of organic milk have asked allowance for ‘‘route returns.’’ at the regulated handler’s plant and will for exemption from Federal regulation. According to that decision, ‘‘it is be priced accordingly. In a May 20 letter to the Department, reasonable to expect some route returns In addition to the changes discussed Horizon Foods argued that (1) organic will be associated with inter-market above, Section 44 is proposed to be milk is a different commodity; (2) the transfers just as there are in connection shortened and simplified by removing market for organic dairy products is a with milk locally processed in the unnecessary references that serve to niche market; and (3) Federal order receiving market * * * a small confuse the language rather than make regulation of organic milk is contrary to allowance of 2 percent for such returns, it easier to understand. Where possible, the intent of the Organic Foods which must fall into surplus use, should simpler language has been used to Production Act because it does not be included to avoid such over- replace lengthy section references. ‘‘facilitate interstate commerce in fresh and processed food that is organically assignment in Class I.’’ (29 FR 9120). 4m. Conforming Changes to Other The 2 percent Class III allowance on produced.’’ Horizon’s proposed solution Sections (§§ llll.14, llll.41, inter-market packaged transfers would is to exempt organic milk from the and llll.60) be eliminated. As explained above in producer milk definition if the milk is connection with the proposed changes Paragraph (b) of § llll.14 should produced on a certified organic farm to the shrinkage provisions, animal feed be removed to reflect the fact that all and if the broker pays the producer at and dumped products would no longer packaged fluid cream products now least 110% of the month’s Class I price receive an automatic Class III would be accounted for on a used-to- for such milk. classification, but instead would be produce basis. Also, as previously The proposal to exempt organic milk treated as shrinkage and prorated to the noted, the simpler and shorter treatment from Federal order pricing should be plant’s utilization. Similarly, inter-order for shrinkage shortens the existing denied for several reasons. First, packaged transfers would no longer provision to the point where it is no contrary to the assertions of Horizon receive an automatic Class III longer necessary to keep a separate Foods that all organic milk is priced at classification for 2 percent of those section for it. Therefore, Section 41 110% of the Class I price, regardless of transfers but instead should be allocated should be eliminated and the revised how the milk is used, there is evidence 100 percent to Class I utilization. contents of that section should be that some organic milk is pooled and In § 1000.44(a)(3)(iv), some new incorporated as a new paragraph (b) in priced as non-organic milk under some language to most, but not all, orders is Section 43. Finally, conforming changes orders, including the Chicago Regional proposed to be added to make it clear should be made to Section 60 (Handler’s and Southern Michigan orders, for that any fluid milk products received by value of milk for computing the uniform example. Second, if special treatment is a regulated handler from a producer- price) to reflect the elimination of filled provided for organic milk, a ‘‘Pandora’s handler will be assigned to the receiving milk from the order, and to reflect box’’ would be opened for special handler’s lowest utilization available changes in references due to other treatment for other kinds of milk as Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4933 well. Third, although the retail price of milk receipts directly from producers, At the end of the month, however, when organic milk is well above non-organic then to bulk milk received from a the allocation of location adjustment milk, many people believe that organic cooperative bulk tank handler, then to credits takes place, it may appear that milk competes with the regulated milk received by diversion from another there was more than enough local milk market and, therefore, also must be fully pool plant, and then to packaged fluid to meet the distributing plant’s fluid regulated. Fourth, if Congress wished to milk products received from other pool needs, even though this was not the case exempt organic milk from Federal milk plants. The remaining Class I use in the when recapped on a daily basis. order regulation, they could have done distributing plant is then assigned to Nevertheless, the allocation provision so either in the Organic Foods bulk milk received by transfer from allocates location adjustment credits Production Act or in the 1996 Federal other pool plants. In some orders, this based on monthly volumes of milk, not Agricultural Improvement and Reform remaining Class I use is assigned pro daily volumes, so the supply plant Act; but they did not. Fifth, there is no rata to all of the pool plants from which could be in a position where it receives indication that all processors of organic bulk milk was obtained. In other orders, no Class I location adjustment credit milk price their receipts the same way the remaining Class I milk is first even though the milk was indeed as Horizon Foods. Even if they did, assigned to pool plants with the same shipped for Class I use. however, the one class/one price system Class I price and then, in sequence, to Finally, the current application of the currently used by Horizon could be a pool plants with progressively lower provision in question can result in a temporary phenomenon due to the Class I prices. situation where there is more incentive rapidly expanding market for organic This provision has varying usage in to receive bulk milk transferred from a products. The day may come when the orders today. Some orders use it; but plant regulated under another Federal organic market becomes saturated and most orders never use it. Accordingly, it order than from a plant regulated under milk in excess of fluid needs must be is not clear whether it should be the same order, whether or not any disposed at competitive prices. If and included in the consolidated orders. other transportation credits are when this happens, it is likely that some This proposed rule is based on the involved. Should this occur, it can form of classified pricing will be premise that Class I milk does not have result in a transfer of Class I sales to the implemented. Finally, the Act provides the same value at every location. For transferring plant’s Federal order for classifying and pricing milk on the this reason, Class I differentials have market. been established for each order with basis of its form and use. As a result, 5. Provisions Applicable to All Orders different costs that may be associated location adjustments that result in with producing organic milk or other establishing a unified Class I price In addition to the terms and types of milk are not relevant. For these structure that applies to every county conditions of milk orders previously reasons, it would be inappropriate at and city in the contiguous 48 states. described, there are a number of other this time to exempt organic milk from Given this approach, it may no longer be provisions that need to be contained in pooling or to provide any other type of necessary to classify a bulk movement milk orders that describe and define special treatment for it under the guise of milk as Class I milk in one section of those affected by the regulatory plan of of Federal order reform. the order and then in another section of the program and that provide for the order depart from the principle of common descriptions of entities, 4o. Allocation of Location Adjustment pricing such Class I milk at the plant persons, terms of measurement, pooling, Credits where it was physically received. and other administrative needs so that A provision that is now common to Some of the proposed orders have an order can be administered most orders is not suggested for the transportation credit provisions that effectively. Many of these provisions proposed consolidated orders. This provide for hauling credits on bulk milk can be uniform across all proposed provision, which allocates location received by transfer from a plant consolidated orders. However, different adjustment credits that are applied to regulated under another Federal order marketing conditions in the transfers of bulk fluid milk products and assigned to Class I use at the consolidated areas, together with between pool plants, is commonly receiving plant. To arrive at the institutional factors, do not lend found in Section 52 of most current classification of such milk, the milk is themselves to an entirely uniform set of orders (See, for example, §§ 1001.53(h), assigned to the lower of the receiving provisions for all orders. Consequently, 1007.52(b), 1030.52(c), or 1079.52(d)). plant’s or the receiving market’s Class I in each of the proposed consolidated Under most orders, intra market utilization. With the long distances orders there are provisions that are shipments of milk between handlers are exhibited by milk movements today and unique to each order. assigned to Class I use, unless both the use of transportation credit As part of the reform process, an handlers agree on a lower classification. provisions that help defray the costs for Identical Provisions Committee (IPC) Milk that is assigned to Class I use is such movements, it may not be was established to investigate and priced at the receiving plant subject to appropriate to continue location recommend needed order provisions a location adjustment credit that may adjustment credit provisions that could that could be uniformly applied across apply if it is demonstrated that such discourage milk from being transferred the consolidated system of Federal milk milk is actually needed for Class I use. from pool plants located closer to orders. The IPC was formed with a three If the credit is applied, the milk is distributing plants needing point purpose: to develop Federal order priced at the transferring plant. This supplemental supplies of milk. provisions that can or should be assignment of location adjustment In actual practice, a distributing plant uniform among orders, to explain why credits is intended to prevent the use of does not receive a fixed amount of milk the adoption of the recommended pool proceeds to pay the hauling cost each day of the week. Some days are provisions are needed, and to simplify for the transfer of bulk milk between heavy bottling days when more milk is and streamline proposed order pool plants when the intended use of needed for Class I use. On such days, a provisions where feasible. While the the milk is for other than Class I use. distributing plant may not be able to previously discussed issues such as To carry out this concept, the obtain enough local milk to meet its classification, the basic formula price, provision typically assigns a pool Class I needs and may have to import and Class I milk pricing lend themselves distributing plant’s Class I use first to its plant milk from more distant locations. to uniform applicability across all 4934 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules orders, the IPC mission tended to focus There were a number of proposals and Pool plant eligibility continues to be on other aspects of milk order public comments considered in dependent upon plant operators and provisions such as uniform definitions, determining how Federal milk orders handlers meeting certain performance pooling criteria, reporting requirements should pool milk and which producers standards geared to satisfying the fluid and handler payment obligations. would be eligible to have their milk demands of the market. Because of This part of the proposed rule pooled in the consolidated orders. In the differences between the consolidated discusses the nature of the proposed broadest sense, most public comments markets, mainly the level of Class I consolidated order provisions, explains and proposals advocated a policy of demand and the seasonality of milk why they are needed, and details liberal pooling, thereby allowing the production, a uniform standard for pool whether or not a provision can be greatest number of dairy farmers the plants for the consolidated markets is uniformly applied in all consolidated ability to share in the economic benefits not recommended. Such standards need orders. When a provision does not lend that arise from the classified pricing of to be specific to each of the consolidated itself to uniform application, the milk. While there were also a number of orders. Additionally, the market provision is described in subsequent public comments supporting identical administrator should be authorized to sections of this proposed rule where the pooling provisions in all orders, other react to changing market conditions if provisions unique to each of the proposals voiced comments on the need there is a need to change performance individual orders are discussed. to have pooling provisions reflect the standards and to promote the efficient To the extent that provisions can be unique and prevailing supply and movement of milk and in satisfying uniformly applicable across all of the demand conditions in each marketing expected demands of the fluid market. proposed consolidated orders, they are area. Fundamental to most pooling These needs are reflected and included in Part 1000, the General proposals and comments was the notion accommodated in the definitions of the Provisions of Federal Milk Marketing that the pooling of producer milk types of pool supply plants in the Orders which are, by reference, already should be performance oriented in consolidated orders. Providing for a part of each milk order. Thus, as meeting the needs of the fluid market. differences between markets ensures proposed here, the General Provisions The pooling provisions proposed for the more equitable distribution of the benefits and burdens of marketwide includes the definitions of route consolidated orders provide a balance pooling. disposition, plant, distributing plant, between reasonable and needed Taken as a whole, the pooling supply plant, nonpool plant, handler, performance criteria and a liberal pooling policy. provisions also are designed to properly other source milk, fluid milk product, specify which producers are associated fluid cream product, cooperative The pooling provisions for the with the marketwide pool, thereby association, and commercial food consolidated orders are overall less assuring their ability to share in the processing establishment. In addition, restrictive in the movement of milk economic benefits that accrue from the General Provisions include the milk between orders and make it easier for classified pricing. Orders do require classification section of the order, producers to become associated with some criteria for determining when a pricing provisions, and most of the and pooled on a market. Additionally, producer has an association with a provisions relating to payments. These the provisions are more ‘‘market market under which their milk will be additions to the General Provisions oriented’’ because they allow milk to pooled and priced. In this context, a should make milk order provisions become pooled and priced where the minimal ‘‘touch-base’’ requirement for more understandable to the general greatest needs are exhibited for producer milk is called for in most public by removing the differences that satisfying fluid demands. Additionally, consolidated orders for pooling now exist and by consolidating uniform there is enhanced flexibility in how qualification. This provision allows a provisions in one place. Thus, an plants can be pooled without producer’s milk to be received at a pool interested person would only have to diminishing the ability of the regulatory plant a minimum number of times to be read one ‘‘nonpool plant’’ section, for plan to satisfy the fluid demands of a eligible for diversion to nonpool plants instance, to understand how that term is market. For example, this decision thereby ensuring that the milk is applied to all orders. By contrast, at the recognizes that in some markets, fluid available for fluid use if needed. present time, ‘‘nonpool plant’’ is milk processors handle a significant The producer and producer milk defined in every order and there are volume of milk for Class II uses. Much provisions for the consolidated orders slight differences in the definition from of the time this milk may be processed also recognize that disorderly marketing one order to the next. in a separate processing plant. To conditions can arise from the actions of accommodate this, unit pooling is an Pooling Issues handlers that seek to pool milk on an option if at least one plant of the unit order only when more favorable How producers share in the qualified as a pool distributing plant alternatives are not otherwise available. additional revenue that is derived from and the other plants of the pool unit are Reasonable measures are provided to classified pricing is one of the most located in the marketing area and prevent producers who are not regularly important features of a milk marketing process only Class I or Class II products. a part of a marketwide pool from order. How milk is pooled sets the basis The separate processing plant would deriving the benefits of the marketwide for returning a blend price to producers also need to be located in the same or pool if certain performance criteria are by accounting for the use-value, or lower price zone than the qualifying not met. Similarly, it is recognized that classified value, of milk charged to pool distributing plant. For supply producer milk might not be pooled handlers. Marketwide pooling is the plants, system pooling offers flexibility because of changes in class-price method advocated for distributing these where handlers operate more than one relationships in any given month. returns as indicated by an supply plant. Further, the consolidated Public comments and proposals offered overwhelming majority of public orders have identical performance to address these issues included ‘‘lock- participants. It is the prevailing method requirements for pooling cooperative in’’ or ‘‘lock-out’’ provisions that, as employed in the current system of milk and proprietary handlers alike, thereby proposed, would have the effect of orders, and should continue to be making plant ownership irrelevant for regulating producers. They are not employed in the consolidated orders. pooling purposes. recommended. The provisions Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4935 presented for both the producer and The recommended route disposition containing 3.5 percent fat, 3.1 percent producer milk definitions provide definition differs from the definition protein, and 4.9 percent lactose is run reasonable measures and safeguards for contained in some current orders. through a UF membrane until half of the determining conditions where Presently, the route disposition original volume is eliminated, the producers and their milk should definition of several orders makes remaining product not passing through participate in a marketwide pool reference to plant movements of the membrane (i.e., retentate) will without causing producers to become packaged fluid milk products between contain all of the fat and protein but regulated in their capacity as producers. distributing plants with respect to only half of the lactose. The permeate A suggestion for ‘‘open pooling,’’ determining if such transfers should be (i.e., that part of the original milk that where milk can be pooled anywhere, is considered ‘‘route disposition’’ of the does pass through the membrane) will not provided for in the consolidated transferring or receiving plant. As contain water, lactose, non-protein orders. There are two reasons for this. proposed here, however, this issue is nitrogen, and about one-sixth of the First, open pooling is not based on addressed in the pool plant section, minerals. performance, that is, open pooling which deals with the pooling standards Reverse osmosis (RO) is also a provides no reasonable assurance that applicable to a distributing plant. membrane process, but the membranes milk will be made available in satisfying have much smaller pores than UF the fluid demand of a market. Second, Plant membranes, allowing only the water to advocates of open pooling have A plant definition is included in all pass through. The end product presented this pooling option in the orders to specify what constitutes an essentially is concentrated milk. context of a ‘‘package’’ of other order operating entity for pricing and At the present time, both reverse provisions, including Class I pricing, regulatory purposes. As provided in osmosis and ultrafiltration systems are that conflict with the method of Class I § 1000.4 of the General Provisions, a being utilized on some farms, pricing recommended in this decision. plant is the land, buildings, facilities, principally large farms in the For this reason open pooling is and equipment constituting a single southwestern United States. The unworkable. For this reason also, operating unit or establishment at which product shipped from these farms (i.e., proposals to create and fund ‘‘stand-by’’ milk or milk products are received, the retentate) currently is sent to pools are similarly rejected. processed, or packaged. This is meant to processing plants for use in Where a handler’s plants are regulated encompass all departments, including manufactured products but it could be continues to be based primarily on the those where milk products are stored, used in a range of milk products. basis of where sales are made, rather such as a cooler. The plant definition The retentate received from a farm than where plants are physically does not include a physically separate with a UF or RO system will be treated located, with only minor exceptions. facility without stationary storage tanks as producer milk at the pool plant at The change in where a distributing that is used only as a reload point for which the milk is physically received plant will be regulated will require a transferring bulk milk from one tank to or, if the retentate is shipped to a reasonable measure of at least three another, or a physically separate facility nonpool plant, as producer milk consecutive months of more sales in that is used only as a distribution point diverted to a nonpool plant. In either another market area before the for storing packaged fluid milk products case, the milk or milk components will regulatory status of a plant and producer in transit for route disposition. be priced at the pool plant or nonpool milk associated with the plant will shift To account for regional differences plant where the milk is physically to another milk order. Supply plants and practices in transporting milk, some received. will be regulated under the order in orders provide for the use of reload To be considered a farm and a which the greatest portion of its points for transporting bulk milk that do producer, as opposed to a plant and a qualifying shipments have been made. not have stationary storage tanks. handler, an RO or UF unit must be The proposed definition of an exempt under the same ownership as the farm plant recognizes that some handler Farm-Separated Milk on which it is located and only milk operations are too small to have a With the advent of new technology for from that farm or other farms under the significant impact on the competitive on-farm separation of milk into its same ownership may be processed relationship of competing fluid components, some additional regulatory through the unit. The producer processors in the market. In recognition language is needed to specify who is the operating the unit shall be responsible of this, the amount of milk for an responsible handler for the milk or milk for providing records of the daily exempt plant has been liberalized components leaving the farm and how weights of the milk going through the without references to daily average these components will be classified and unit. Also, the producer must provide deliveries criteria that are currently priced. This determination will be samples for each load of milk going applicable in some orders. based, in part, on whether the farm through the unit and must furnish the processing facility is a plant. receiving plant with a manifest on each Route Disposition Ultrafiltration (UF) is a membrane load of retentate showing the scale Route disposition is a measurement of process that transfers water and low- weight along with samples of the sales used to determine a distributing molecular weight compounds through a retentate. Finally, the producer plant’s association with a marketing membrane while retaining suspended operating the RO or UF unit must area. It is defined to mean the amount solids, colloids, and large organic maintain records of all transactions of milk delivered by a distributing plant molecules. It selectively fractionates which must be available to the Market to a retail or wholesale outlet (except a some milk solids components and Administrator upon request. If the plant), either directly or through any selectively concentrates other solids producer does not meet these distribution facility (including components of milk. recordkeeping and reporting disposition from a plant store, vendor or When a UF membrane is used, water, requirements, the unit will be vending machine), of a fluid milk lactose, uncomplexed minerals and considered to be a plant. product in consumer-type packages or other low-molecular-weight organic RO and UF retentate will be dispenser units that is classified as Class compounds pass through the membrane. considered to be producer milk at the I milk. For example, if unaltered milk plant which receives it. The pounds of 4936 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

RO and UF retentate received will be distributing plant definition in some Performance standards for pool priced according to the skim-equivalent current orders. However, whether route supply plants are designed to attract an pounds of such milk. The skim- disposition occurred during the month adequate supply of milk to meet the equivalent pounds for RO retentate will or, within the marketing area, are more demands for fluid milk in a market. be determined by dividing the solids- appropriately determined to be pooling Historically, a pool supply plant did not not-fat pounds in the retentate by the issues. Therefore, they are discussed include any portion of a plant that was average producer solids-not-fat in the and included in each consolidated not approved for handling Grade A milk skim portion of the producer milk used order’s pool plant definition. and that was physically separated from in the product. The butterfat pounds a portion of the plant that had approval. would then be added to this number to Supply Plant Currently, inspection agencies most arrive at the product skim-equivalent A supply plant is a regular or reserve commonly render only one type of pounds. supplier of bulk milk for the fluid approval for an operation, but provision In computing the fluid equivalent of market that seasonally contributes to is made to designate a physically UF retentate, the fluid equivalent factor coordinating the supply of milk with the separated portion of the plant as a should be computed by dividing the demand for milk in a market. As defined ‘‘nonpool plant.’’ true protein test in the skim milk in this decision, a supply plant is a portion of the retentate by the true Types of Pool Plants and Pool plant other than a distributing plant that Qualifications Pool Distributing Plant protein test in the skim milk portion of is approved by a duly constituted the producer milk used in the product. regulatory agency to handle Grade A Many orders presently refer to Grade Adding the butterfat pounds to this milk and at which fluid milk products A milk in defining a pool distributing computation will yield the product are received or from which fluid milk plant. However, a distributing plant, by equivalent pounds. products are transferred or diverted. definition, can only handle Grade A In addition to having UF and RO milk, so this qualification is redundant equipment, some farms today may have Pool Plant and has been removed from the a separator to separate skim milk from The pool plant definition of each structure of the pool plant section. Also, cream before they leave the farm. Rules proposed consolidated order provides as proposed here, the proportion of must also be established for this type of standards to distinguish between those route disposition to receipts is derived operation. plants engaged in serving the fluid from a divisor of receipts of bulk fluid milk products as opposed to receipts of Skim milk and cream going through a needs of the marketing area and those total fluid milk products. farm separator also should be treated as plants that do not. Pool plants serve the producer milk if received at a pool plant The recommended ratio of route market to a degree that warrants their disposition to total receipts of bulk fluid or diverted to a nonpool plant. The producers sharing in the added value producer will be required to obtain scale milk products for pool distributing plant that derives from the classified pricing qualification will vary among orders, weights and tests on each load of skim of milk. While the pool plant definition and cream shipped along with samples but for most orders it will be at least 25 in every consolidated order provides for percent. This is the lowest ratio of each. The same ownership, a set of common principles, the recordkeeping, sampling and reporting currently used among all orders, and definition is specific and unique to each will prevent depooling of plants that requirements that apply to RO and UF consolidated order. units will also be applicable. presently enjoy pool plant status. To the In formulating a policy for the Each type of pool plant can be extent this percentage is found to be too treatment of RO and UF retentate, it is generically described to share certain low for certain milk ‘‘deficit’’ regions, important to recognize that the milk common characteristics. However, to higher percentages are provided in those produced on a farm with RO or UF the extent that marketing conditions and proposed consolidated orders. equipment is fully available to meet the other related factors vary across the Performance standards are also needs of the fluid market, either before country, the proposed consolidated needed to establish a minimum or after passing through such units. orders need differing terms of threshold of market participation, as Therefore, there should be no question applicability and performance standards measured by route dispositions in a concerning the propriety of pooling this in order to determine the regulatory marketing area, which when met or milk along with other producers’ milk. status of a plant. surpassed, cause a distributing plant to At this writing, the Food and Drug All pool distributing plants in the be fully regulated in that market. Administration (FDA) has not yet consolidated orders will base pool plant Currently, the proportion of route decided whether UF retentate can be status on two performance measures: (1) disposition in the marketing area is reconstituted and sold as fluid milk. the proportion of its route disposition to expressed in some orders as a However, FDA has approved the use of bulk receipts, and (2) the proportion of percentage of total route disposition and UF retentate in certain cheese products route disposition in the marketing area. in other orders as a percentage of total on a trial basis. Therefore, before If a pool distributing plant operates in receipts of fluid milk products. A receiving UF retentate for use in any more than one market, the plant’s percentage of total route disposition is product, handlers should be certain that primary association with a marketing recommended for the consolidated such use has been approved by the FDA. area generally will be determined on the orders. basis of where the majority of fluid sales Some current orders require a daily Distributing Plant occur. In the event that a plant is not average minimum of route disposition A distributing plant is defined as a primarily associated with any marketing in the marketing area. This standard has plant that is approved by a duly area, it will be regulated in the been removed because it is covered constituted regulatory agency to handle marketing area in which it is located under the exempt distributing plant Grade A milk and at which fluid milk provided the plant meets the order’s definition described below. The products are processed or packaged and pooling standards. If it is not located recommended ratio of 15–25 percent of from which there is route disposition. within any marketing area, it will be a plant’s route disposition in the The time and location of route regulated wherever it has the most route marketing area provides a reasonable disposition are included in the disposition. measure of a distributing plant’s Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4937 association with a marketing area, assembly of raw milk supplies at the removed. This should promote while, at the same time, precluding a farm and shipment of these supplies to increased handler equity in the ability change in the regulatory status of plants distributing plants. There are proposed for plants to compete for milk supplies that are currently partially regulated or marketing areas where just a pool and for producers associated with such regulated by a state regulatory program. supply plant provision would be plants to have their milk priced and To facilitate proper administration adequate, without the additional pooled under the order. Additionally, and accounting, all orders currently distinction of a pool reserve supply there are manufacturing plants located provide that packaged fluid milk plant. For those marketing areas where in some marketing areas that are products transferred from one handler it is preferable to distinguish between currently designated as pool plants. to another be treated as interhandler plants located in and out of the This provision will ensure the retention transfers, with each transaction properly marketing area, different performance of pool status of such plants. identified and specifically reported to requirements are recommended to fit Location in the marketing area should affected market administrators. This the needs of the consolidated order. also be a requirement for pool reserve should continue in the consolidated supply plant status. This is orders. However, for the single purpose Pool Reserve Supply Plant recommended because it will preclude of qualifying a plant as a pool A pool reserve supply plant is defined the pooling of a plant that is outside the distributing plant, a subsection in each as a plant capable of handling the marketing area and not in a position to consolidated order is included to reserve milk required for a marketing economically supply the market with address the transfer of packaged fluid area that also stands ready to make milk supplemental milk or to efficiently milk products to a distributing plant. available to meet the fluid needs of the handle its reserve supplies. In addition, Packaged fluid milk products that are market. Such a plant must be approved it will preclude the pooling of milk on transferred to a distributing plant shall to handle Grade A milk, and must be a market when such milk has no real be considered as route disposition from located in the marketing area. In association with the market at all and the transferring plant rather than the addition, the plant must provide milk in only serves to lower a market’s Class I receiving plant. In addition to transfers fluid use to pool distributing plants utilization, thereby making it more that occur for sales in the marketing certain month of the year when milk difficult to attract milk needed for fluid area, this subsection is also meant to production declines. Finally, a reserve use. When a distributing plant needs address the concern of properly pooling supply plant must apply for, and more milk, a reserve supply plant a plant with sales outside of the receive, formal acknowledgment of pool located in the marketing area can most marketing area that are made through status by the market administrator. rapidly and economically route milk another plant. This is necessary to Because deliveries of a pool reserve directly to where it is needed. preclude a plant from becoming supply plant to a distributing plant will For those orders providing for reserve partially regulated if the plant shipped specify seasonal performance standards, supply plants, pool plant status will be significant quantities of packaged fluid they cannot be uniform across all conveyed by the market administrator milk products to another distributing orders. Therefore, each proposed after notification is filed in writing by plant. consolidated order having a pool reserve the plant operator. The notification supply plant definition will differ with should be filed no later than June 15 of Pool Supply Plant respect to the level and timing of each year. Pool status would begin on Currently, pool supply plants are performance required. July 1 of the same year and continue for generally defined by their association In qualifying a supply plant’s milk the remainder of the year unless: (1) the with a marketing area and their ability receipts for pooling, several current plant operator later requests nonpool to move milk to pool distributing plants orders allow direct milk shipment from plant status; (2) the plant subsequently that service the marketing area. Pool farms to distributing plants, while other fails to meet the specified performance supply plants should continue to be current orders require all of the milk, or standards, or; (3) the plant qualifies as defined in this way. However, the pool at least some of it, to be transferred a pool plant under another Federal supply plant definition does not lend through a plant. Transferring deliveries order. If a plant operator requests itself to uniform application in all through a plant may often be nonpool status for any month, such consolidated orders. Therefore, pool uneconomical and inefficient when nonpool status should remain in effect supply plant performance standards compared to the direct delivery of milk until the following June, when the cycle should be established according to from farms. Therefore, for most of the of notification for pool reserve supply regional needs. The specific standards consolidated orders, both supply plants plant status begins anew. Notification to adopted in each order are described in and reserve supply plants are allowed the market administrator serves to the pool plant section of each new the flexibility to meet delivery demonstrate a commitment to the order. For orders outside the requirements by direct deliveries from market and to act as a deterrent to southeastern United States, provisions farms to distributing plants if the supply temporary changes in pooling status to are provided for two types of supply plant operator deems that to be the most the detriment of the market. plants: a pool supply plant and pool efficient means of moving milk. reserve supply plant. Pool reserve A number of orders currently provide Pooling Options supply plants are generally defined as for special pool status for supply plants Unit pooling. Unit pooling allows two plants located within the marketing area located in the marketing area but such or more plants located in the marketing that are involved primarily in status is generally limited to area and operated by the same handler manufacturing nonfluid milk products. cooperatives. Several of the orders to qualify for pool status as a unit by They nevertheless serve to balance the which have this provision will retain it meeting the total and in-area route market by providing a ready supply of under the consolidated orders. In other disposition standard as if they were a fluid milk when needed and a orders, however, especially those with single pool distributing plant. To qualify manufacturing alternative when milk for many manufacturing plants operated by as a unit, at least one of the plants in fluid uses is not needed. By contrast, proprietary handlers, ownership the unit—i.e., the primary plant— must pool supply plants are generally defined distinction as a condition for pool qualify as a pool distributing plant on as plants involved predominately in the reserve supply plant status has been its own standing and the other plants in 4938 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules the unit must process only Class I or orders. Such a provision would replace with route disposition during the month Class II milk products. the ‘‘call’’ provision that is now of 150,000 pounds or less would be Unit pooling serves to accommodate included in some orders. This change exempt in the consolidated orders. This and provide a flexible regulatory allows all market administrators to limit reflects the maximum amount of approach in addressing the adjust the shipping standards for pool fluid milk products allowed by an specialization of plant operations. It also supply and pool reserve supply plants exempt plant in any current Federal minimizes unintended regulatory effects if they find that such revision is milk order and ensures plants that are that may cause the uneconomical and necessary to encourage needed currently exempt from regulation will inefficient movement of milk for the shipments or to prevent uneconomic remain so. sole purpose of retaining pool status. shipments of milk. For most Many current Federal orders also However, some conditions need to be consolidated orders, it is also provide regulatory exemption for a plant satisfied for unit pooling. The ‘‘other’’ recommended that the market operated by a state or Federal plant(s) of the pool unit—i.e., the plants administrator be authorized to adjust governmental agency. For example, that would not qualify for pool status as the total and in-area route disposition some states have dairy farm and plant a single plant—must be located in an requirements for pool distributing operations that provide milk for their equivalent or a lower price zone than plants. This flexibility could be prison populations. As recommended, the primary pool distributing plant. This particularly beneficial during a plant regulatory exemption would be condition is required to assure that the breakdown, a labor strike, the sudden continued under the consolidated transportation of milk for Class II uses loss or change in accounts, or some orders unless pool plant status is will not be subsidized through the other conditions that would otherwise desired. Additionally, regulatory marketwide pool and to assure pricing result in regulatory instability or market exemption is intended to include equity to all handlers processing Class disruption. colleges, universities and charitable II products that do not use unit pooling. A finding by the market administrator institutions because these institutions Unit pooling arrangements status must that adjustments are warranted would generally handle fluid milk products be requested in writing and approved by follow an investigation conducted on internally and have no impact in the the market administrator for its proper the market administrator’s own mainstream commercial market. implementation and administration. initiative or at the request of interested However, in the event that these entities System pooling. As previously parties. This provision allows the do distribute fluid milk through discussed, supply plants and reserve market administrator to respond commercial channels, route sales by supply plants provide a benefit to the promptly to changes in local marketing such entities, including government market because they are required to conditions. Granting the authority for agencies, will be monitored for meet certain performance standards in the market administrator to make determining if Federal regulation should supplying the needs of the fluid market. needed adjustments in the manner apply. They also serve to balance the market. specified currently exists in some The determination and verification of Because handlers often operate more Federal orders and has proven to be exempt plant status will, from time to than one supply plant within the responsive, efficient, effective, and time, necessitate the need for the market market, they should be afforded commensurate with the authorities administrator to require reports and flexibility in meeting the performance already delegated by the Secretary to the information deemed appropriate for the standards for pooling. System pooling market administrator. sole purpose of making this can provide this flexibility. A system of determination. Such authority is Nonpool Plant plants can be established if the plants currently provided in orders and should meet applicable performance standards A definition is provided in all orders continue. in the same manner as any single plant. describing plants which receive, process Handler A system may consist of two or more or package milk, but which do not supply plants, or two or more reserve satisfy the standards for being a pool Federal milk orders regulate those supply plants, operated by the same plant. While providing for such a persons who buy milk from dairy handler or by one or more cooperative definition may appear redundant, this farmers. Such persons are called associations. provision is useful to more clearly handlers under the order. These persons System pooling should be declared by define the extent of regulation have a financial responsibility for a handler in writing to the market applicable to plants. Nonpool plants payments to dairy farmers for milk in administrator so that pooling of the should include a plant that is fully accordance with its classified use. They system can be properly administered. If regulated under another Federal order, a must file reports with the market a handler causes one of the plants to producer-handler plant, a partially administrator detailing their receipts become ineligible for system pooling, regulated distributing plant, an and utilization of milk. As that plant will not be part of the system unregulated supply plant and an exempt recommended, the handler definition for the duration of the calendar year. plant. The definitions for these nonpool includes the operator of a pool plant, a Likewise, plants, except for the plants are not materially different than cooperative association that diverts milk proposed Upper Midwest consolidated those provided in the current orders to nonpool plants or delivers milk to marketing area, cannot be added to the with the possible exception of an pool plants for its account, and the system after the written request for ‘‘exempt plant.’’ operator of a ‘‘nonpool plant,’’ which system pooling is acknowledged by the A number of Federal orders exempt would encompass a producer-handler, a market administrator. from regulation small distributing plants partially regulated distributing plant, a which, because of their size, do not plant fully regulated under another Adjustment of Pooling Standards significantly impact competitive Federal order, an unregulated supply The consolidated orders should relationships among handlers in the plant, and an exempt plant. provide the market administrator with market. The level of route disposition In addition, ‘‘third party’’ authority to adjust various pooling required before an exempt plant organizations that are not otherwise standards, including pool plant becomes regulated varies in the current regulated under provisions of an order shipping standards in most consolidated orders. As recommended, any plant are included in the handler definition. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4939

This category includes any person who As proposed, any handler, including accorded to producers pooled on the engages in the business of receiving a producer-handler, is exempt from the market. This restriction also prevents a milk from any plant for resale and pooling and pricing provisions of an fully regulated handler from purchasing distribution to wholesale and retail order during any month in which route Class I milk at less than the minimum outlets, brokers or others who negotiate disposition is less than 150,000 pounds. order price that other fully regulated the purchase or sale of fluid milk Thus, the producer-handler exemption handlers must pay. Accordingly, a products or fluid cream products from only applies to producer-handlers with producer-handler will not be allowed to or to any plant, and persons who, by route disposition of 150,000 pounds or dispose of fluid milk products using the purchase or direction, cause the milk of more. Since such producer-handlers are distribution system of another handler, producers to be picked up at the farm not subject to the pricing and pooling nor through any other channel, division, and/or moved to a plant. Such provisions of an order as are fully or department of a pool handler and intermediaries provide a service to the regulated handlers, it is appropriate to retain exemption from full regulation dairy industry. These persons are not, continue to require producer-handlers under an order. Since a producer- however, recognized or regulated as to rely on their own-farm production in handler must control its own entities required to make minimum meeting their fluid sales and to distribution, it will not be allowed to payments to producers. The expanded independently market their surplus have disposed of milk to any marketing chain brought about by such milk production without participation independent distributor. Route intermediaries has made it increasingly in the marketwide pool. However, a disposition to retail stores (owned by difficult for the market administrator to producer-handler should be allowed any entity and not located in a regulated track the movement of milk from farms some marginal flexibility on plant) or to a distribution facility owned to consumers. The recommended supplemental milk purchases provided by retail stores (and not by a regulated handler definition enables the market they are from regulated sources. plant or independent entity) would be administrator to more readily identify Relatively small supplemental allowed. those entities for the information purchases do not undermine the Notwithstanding the exemption of needed to properly administer an order. concepts of classified pricing and producer-handlers from regulation, there may be instances where it is to the Producer-Handler marketwide pooling. As proposed, producer-handlers are allowed to advantage of the person who is both a It has been a long-standing policy to purchase some specified amount of producer and a handler to operate such exempt from full regulation many of supplemental fluid milk products each businesses as two distinct entities. The those entities that operate as both a month from pool sources. As is proposed new orders provide the producer and a handler. Generally, a currently the case, any supplemental producer-handler with the flexibility to producer-handler is any person who requirements of fluid milk products by realize this advantage. Upon request by provides satisfactory proof to the market a producer-handler will continue to be a producer-handler to the market administrator that the care and limited to receipts from regulated administrator, the plant portion of the management of the dairy farm and other sources, thus insuring that producers operation would be a fully regulated resources necessary for own-farm associated with the marketwide pool distributing plant while the farm production and the management and share in the economic benefit of all portion of the operation would be operation of the processing plant are the Class I sales over and above what a accorded producer status. personal enterprise and risk of such Public comments were received producer-handler’s own production may person. A primary basis for exempting regarding the extent of regulation that not have satisfied. producer-handlers from the pricing and should apply to producer-handlers. The pooling provisions of a milk order is It is appropriate to continue requiring majority of public comments supported that these entities are customarily small producer-handlers to rely primarily on the status-quo regarding the regulatory businesses that operate essentially in a their own-farm production to balance treatment of producer handlers, self-sufficient manner. Also, during the their fluid sales and to find outlets for emphasizing that they should remain history of producer-handler exemption their surplus production. Producer- exempt from regulation in accordance from full regulation there has been no handlers must also rely upon their own with current order provisions and that demonstration that such entities have an distribution system to find outlets for the provisions should be regional in advantage as either producers or their milk. A producer-handler will be nature so as not to affect or change the handlers so long as they are responsible allowed to distribute milk to the plant current regulatory status of producer- for balancing their fluid milk needs and of a fully regulated handler. However, handlers. One of the public comments cannot transfer balancing costs, disposal of surplus milk production by received proposed that the exemption of including the cost of disposing of a producer-handler to the plant of a producer-handlers from the regulatory reserve milk supplies, to other market fully regulated handler, whether in bulk plan of milk orders be eliminated. This participants. or packaged form, will be allocated at proposal is denied. In the legislative The current orders have varying the pool plant to the lowest class-use of actions taken by the Congress to amend producer-handler definitions that the receiving plant, thereby preserving the AMAA since 1965, the legislation address specific marketing conditions the Class I share of the market for has consistently and specifically and circumstances. For example, they producers who bear the burden of exempted producer-handlers from specify different limits on the amount of balancing a market’s surplus disposal. regulation. The 1996 Farm Bill, unlike milk that producer-handlers may Disposal of packaged fluid milk previous legislation, did not amend the purchase and retain their exempt status. products by a producer-handler to a AMAA and was silent on continuing to Some modifications are being made to distribution facility operated by a fully preserve the exemption of producer- the producer-handler provisions in the regulated handler should not be handlers from regulation. However, past consolidated orders for standardization. permitted. It would allow a producer- legislative history is replete with the However, these changes are not handler to dispose of its surplus specific intent of Congress to exempt intended to fully regulate any producer- production by capturing a greater share producer-handlers from regulation. If it handler that is currently exempt from of the Class I market thereby receiving had been the intent of Congress to regulation. an unearned economic benefit not remove the exemption, Congress would 4940 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules likely have spoken directly to the issue plant only to derive an economic benefit order provisions for the diversion of rather than through omission of from the marketwide pool. milk. Should a handler exceed specified language that had, for over 30 years, An unregulated plant operator, often diversion limits, only the over-diverted specifically addressed the regulatory a cooperative association, may receive milk is removed from the pool; the treatment of producer-handlers. all of a dairy farmer’s milk at its plant producer should maintain ‘‘producer’’ Since producer-handlers are intended when milk supplies are tight and, status for other milk delivered that to be exempt from most regulation, during such times, not share the higher- month. some means must be provided to use value of such milk with other dairy The recommended method for determine and to verify producer- farmers through the marketwide pool. determining when a dairy farmer is not handler status. Accordingly, the market On the other hand, during a period of properly associated with a market is administrator is provided with the flush production, the same plant may commonly referred to as a ‘‘dairy farmer authority to require reports and other seek to dispose of surplus milk through for other markets’’ provision, which is a information deemed appropriate to a market’s pool plants to pass the cost component of the producer definition in determine that an entity satisfies the of balancing milk supplies to dairy some of the consolidated orders. Under requirements of producer-handler farmers that regularly supply the fluid this type of provision, milk deliveries to status. Such authority is currently market through the mechanism of the nonpool plants that are not reported by provided in the orders and should marketwide pool. Under such handlers as diversions from pool plants continue. circumstances, producer status should would result in the loss of producer not be accorded to those dairy farmers status for a dairy farmer’s milk for some Producer under an order. Doing so would place fixed time period. While the receipt of, Under all orders, producers are dairy producers who regularly fulfill a or diversion by, a pool handler of other farmers that supply the market with market’s fluid milk needs with the milk from the same producer during milk for fluid use or who are at least burden of carrying the surplus costs of that fixed time period is not restricted, capable of doing so if necessary. balancing unregulated fluid markets the minimum payment obligation of the Producers are eligible to share in the without the benefit of sharing in the handler for that milk would not be revenue that accrues from marketwide additional revenue that is derived from regulated under the Federal milk pooling of milk. The producer those markets when circumstances are marketing orders. Such milk would be definitions of the individual orders are more favorable. treated as ‘‘other source milk,’’ and the described under the regional Another circumstance can also arise dairy farmer’s milk would not be when it may be advantageous not to discussions later in this document. included in the pool. pool milk, a practice commonly referred Where this provision is provided, the Responding to regional needs, producer to as ‘‘depooling.’’ When manufacturing loss of producer status would remain in definitions will differ by order with class prices for a month are higher than effect for the current month and for the respect to the degree of association that an order’s uniform, or blend price, milk following two months. Exception is a dairy farmer must demonstrate with a at manufacturing plants is often made to accommodate the market market. depooled because the operators of such demands for milk during the ‘‘short’’ A dairy farmer may not be considered plants otherwise would be required to season. If milk is depooled during the a producer under two Federal milk pay into the marketwide producer- ‘‘short’’ season, the loss of producer orders with respect to the same milk. If settlement fund. Such payments would status should remain in effect for the a dairy farmer’s milk is diverted by a benefit the marketwide pool but would current month only; otherwise, it would handler regulated under one Federal be disadvantageous to those having to discourage the pooling of milk during order to a plant regulated under another make them. This practice is generally the remainder of the ‘‘short’’ season. Federal order, and the milk is allocated disruptive to the marketwide pool and Once the short season ends, however, at the receiving plant (by request of the is not conducive to maintaining orderly the dairy farmer should not be eligible diverting handler) to Class II, III or IV, market conditions. In instances for producer status during the the dairy farmer will maintain producer involving depooled milk, it is a subsequent flush production season. status in the original order from which handler’s decision in moving milk that Producer status will be lost until the milk was diverted. impacts producers and pool milk value. beginning of the following ‘‘short’’ Since producer-handlers and exempt It is also a handler’s action that season. The relevant time periods that plants are specifically exempt from determines whether a farmer retains describe which months are applicable in Federal order pricing provisions, the producer status or becomes associated defining the ‘‘short’’ season are term producer should not include a with another marketing area. described in each of the consolidated producer-handler as defined in any The proposed orders that are orders. Federal order. Likewise, the term vulnerable to this type of abuse contain producer should not apply to any a provision to deter handlers from Producer Milk person whose milk is delivered to an moving milk in a manner that is All orders currently provide for exempt plant, excluding producer milk disadvantageous to the market’s regular defining and identifying the milk of diverted to such exempt plant. producers. Handlers who choose to producers which is eligible for inclusion It would not be appropriate to share regularly supply nonpool plants as their in a particular marketwide pool and the economic benefits that arise from primary market, and handlers who should continue to do so. However, this classified pricing through marketwide move milk in and out of the regulated definition is specific to each pooling with dairy farmers whose milk market, should not consistently enjoy consolidated order and is therefore not is not regularly associated with the the benefits of equalization payments uniform across all orders. market. For example, a dairy farmer may from the marketwide pool. However, In general, the definition of producer decide to deliver milk to a market’s pool this should not apply in the event that milk for all consolidated orders plants only when a more favorable a handler moves milk supplied by a continues to include the milk of a unregulated market is not available, or producer under one Federal order to producer which is received at a pool an unregulated plant may attempt to another Federal order, nor are these plant or which is received by a move its surplus milk to a market’s pool provisions intended to overlap with cooperative association in its capacity as Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4941 a handler. Most current orders consider virtually unlimited diversions would be Several current orders also provide a milk to be ‘‘received’’ when it is appropriate for most of the consolidated definition for a federation of two or physically unloaded at the plant and the Federal orders, it is recognized that it more cooperative associations. As proposed orders would continue that may not be appropriate for certain recommended herein, all consolidated treatment. However, to ensure that ‘‘deficit’’ markets. In these cases, the orders would recognize a federation of producers are promptly paid for their order may provide for diversion limits cooperatives as satisfying the milk, milk picked up from the to ensure an adequate supply of fluid cooperative definition for the purposes producer’s farm, but not received at a milk for that particular market. In these of determining milk payments and plant until the following month, will be cases, the alternate standards for pooling. Individual cooperatives of a considered as having been received by diversion privileges specify the federation of cooperatives must also the handler during the month in which minimum number of days that milk of meets the criteria as set forth for it is picked up at the producer’s farm. a producer must be physically received individual cooperative associations and In this situation, milk will be priced at a pool plant and the percent of total their federations as incorporated under under an order at the location of the producer receipts that may be diverted state laws. plant where it is physically received in by the handler. The months during Handler Reports the following month. which such minimums must be met are In order to promote the efficient also identified in both cases. Reports of receipts and utilization, movement of milk, all orders currently In order to provide regulatory payroll and other reports. All current allow a handler to move producer milk, flexibility and marketing efficiencies, all orders require handlers to submit within certain specified limits, from a of the proposed orders having diversion monthly reports detailing the sources producer’s farm to a plant other than the limits allow the market administrator to and uses of milk and milk products so handler’s own plant. This is referred to increase or decrease the delivery that market average use values, or blend as a ‘‘diversion’’ of milk. As proposed requirements for producers and the prices, can be determined and for the consolidated orders, the aggregate diversion limits applicable to administered. Payroll reports and other definition of producer milk allows handlers. Granting the authority for the reports required by the market unlimited diversions to other pool market administrator to make needed administrator are also provided for in plants, thereby providing maximum adjustments in the manner specified the orders. The proposed language for flexibility in efficiently supplying the currently exists in some Federal orders the consolidated orders for handler fluid market. and has proven to be a responsive, reports is similar to that contained in Under some orders, unlimited efficient, and effective way to deal with current orders. The dates when reports diversions to nonpool plants would also rapidly changing marketing conditions. are due in the market administrator’s be allowed once a dairy farmer has office differ slightly by order according Cooperative Association become associated with a particular to custom and industry practice. order. Under other orders, however, a All current orders provide a definition producer would be required to ‘‘touch for dairy farmer cooperative associations Announcements by the Market base’’ at a pool plant one or more times that market milk on behalf of their dairy Administrator each month and, in addition, aggregate farmer members and should continue to Public announcements by market diversion limits may be applied to a do so in the consolidated orders. administrators. Four sections of each handlers’ total diversions. Providing for a uniform definition of a consolidated order provide for requiring For pool distributing plants, route cooperative association facilitates the the market administrator to make disposition as a percent of total receipts administration of the various order certain announcements in the course of of bulk milk automatically limits provisions as they apply to such order administration. These include: diversions by those plants. With respect producer organizations and recognizes § 100l.45, Market administrator’s to pool supply plants and pool reserve the unique standing granted to dairy reports and announcements concerning supply plants, the specific shipping farmer cooperatives under the Capper- classification; § 100l.53, standards will ensure that a sufficient Volstead Act. Moreover, dairy farmer Announcement of class prices and quantity of milk is available for the fluid cooperatives are responsible for component prices; § 100l.54, market. Since some orders may allow marketing the majority of the milk Equivalent price; and § 100ll.62, for unlimited diversions, the maximum supplied to regulated handlers under Announcement of producer prices, or in quantity of milk that a pool plant would the Federal order system. orders without component pricing, be able to divert and still maintain its As provided herein, a cooperative Announcement of uniform price, pool plant status would be 100% less association means any cooperative uniform butterfat price, and uniform the pool plant shipping standards for marketing association of producers skim milk price. These announcements the month. This will mitigate the need which the Secretary determines, after are currently required by market for suspending order diversion application for such recognition by the administrators in all orders and should limitations, an action that is quite cooperative, is qualified as such under continue. As proposed, these provisions common in some of the current orders. the provisions of the Act of Congress of are uniform to all consolidated orders Unlimited diversions would also allow February 18, 1922, as amended, known and are nearly identical to current order for maximum efficiency in balancing the as the ‘‘Capper-Volstead Act’’. provisions. However, § 100ll.62, is market’s milk supply. The market Additionally, most orders currently unique to each order and is described in administrator’s ability to adjust require that a cooperative association each of the consolidated orders. shipping percentages for pool supply have full authority in the sale of the plants and pool reserve supply plants milk of its members and that it be Payments for Milk will further ensure that an adequate engaged in making collective sales or Producer-settlement fund. All of the supply of milk is available for the fluid marketings of milk or milk products for current orders provide for minimum market without the imposition of its dairy farmer members. This should payment terms and obligations by diversion limits. continue. The cooperative association regulated handlers and such provisions While it is expected that a one time definition provides for universal should continue to be part of the producer ‘‘touch base’’ standard and applicability in all consolidated orders. consolidated orders. Handlers are 4942 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules charged with minimum class prices. fund. This goal is consistent with the the next business day. While this has However, producers are returned a average time lapse between payment the effect of delaying payment to uniform, or blend, price through the into the producer-settlement fund and cooperatives and producers, the delay is marketwide pooling of milk. The payments from the fund in existing offset by the shift from ‘‘date of mechanism for the equalization of a orders. As in the prior section, payment’’ to ‘‘date of payment receipt.’’ handler’s use value of milk is the payments would be made on the next Minimum payments to producers. In producer-settlement fund. It is business day when the required a proceeding involving the current established and administered by the payment date falls on a Saturday, Carolina, Southeast, Louisville- market administrator for each order. Sunday, or national holiday. Lexington-Evansville, and the former The producer-settlement fund ensures Payments to producers and to Tennessee Valley Federal milk orders that all handlers are able to return the cooperative associations. The AMAA (Orders 5, 7, 46, and 11), a proposal was market blend price to producers whose provides that handlers must pay to all made to clarify what constitutes a milk was pooled under the order. producers and producer associations the minimum payment to producers. The Payments into the producer-settlement uniform price. The existing orders proposal was recommended by Hunter fund are made each month by handlers generally allow proper deductions Farms (Hunter) and Milkco Inc. whose total classified use-value of milk authorized by the producer in writing. (Milkco), two handlers regulated under exceeds the value of such milk Proper deductions are those that are the current Carolina order. Under the calculated at the uniform price or at unrelated to the minimum value of milk proposal, a handler (except a component prices for those orders with in the transaction between the producer cooperative acting in its capacity as a component pricing. Similarly, payments and handler. Producer associations are handler pursuant to paragraph 9(b) or out of the producer-settlement fund are allowed by the statue to ‘‘reblend’’ their 9(c)) may not reduce its obligations to made each month to any handler whose payments to their producer members. producers or cooperatives by permitting use-value is below the value of milk at The Capper Volstead Act and the producers or cooperatives to provide the uniform price or component prices, AMAA make it clear that cooperative services which are the responsibility of as the case may be. The transfer of funds associations have a unique role in this the handler. According to the Hunter/ enables handlers with a use-value below regard. Milkco proposal, such services include: the average for the market to pay their The payment provisions to producers (1) Preparation of producer payroll; (2) producers the same uniform price as and cooperatives vary greatly among the conduct of screening tests of tanker handlers whose Class I utilization current Federal orders, particularly in loads of milk; and (3) any services for exceeds the market average. This regard to partial payment frequency, processing or marketing of raw milk or provision is uniform for all consolidated timing, and amount. The proposed marketing of packaged milk by the orders. provisions are consistent with the needs handler. Payments to and from the producer- of the consolidated orders. Each order At the May 1996 hearing, settlement fund. The current orders vary currently requires handlers to make at representatives of Hunter and Milkco with respect to dates for payments to the least one partial payment to producers testified that both handlers receive milk producer-settlement fund, due largely to in advance of the announcement of the from cooperative associations and industry practices and how certain applicable uniform prices. The partial Piedmont Milk Sales, a marketing agent orders evolved over time to reflect those payment varies across orders by the handling the milk of non-member practices. Each consolidated order required payment date, rate of payment, producers. The Hunter representative provides for payment dates, and they and volume of milk for which payment explained, due to competitive marketing are specific for each consolidated order. is made. This provision continues to conditions in the Southeast in late 1994 Also, as proposed, payment to the require partial payments, although they and early 1995, handlers were able to producer-settlement fund would be will vary by consolidated order. Full purchase milk supplies at Federal order considered made upon receipt by the payment is required to be made so that minimum prices without any over-order market administrator. In view of the it is received by producers no later than premiums being charged. As a result of need to make timely payment to two days after the required pay-out date the absence of over-order premiums, the handlers from the producer-settlement of monies from the producer-settlement representative stated, Hunter received fund, it is essential that money due the fund. underpayment notices from the market fund be received by the due date. Cooperatives will be paid by handlers administrator on milk that it had Additionally, payment cannot be for bulk milk and skim milk on the received from Piedmont Milk Sales. received on a nonbusiness day. terms described for individual Hunter contends the problem of what Therefore, if the due date is a Saturday, producers except that required receipt constitutes a minimum payment to Sunday, or national holiday, payment of payment will be one day earlier. producers should be clarified in the would not be due until the next Providing for an earlier payment date event that premiums again disappear in business day. This is specified in for cooperative associations is the future. If this issue is not resolved, § 1000.90 of the General Provisions. warranted because it will permit the according to Hunter, it will suffer a loss Payments from the producer- cooperative association the time needed of milk sales and its producers will settlement fund provide for payments to to distribute payments to individual receive lower prices. Hunter argues that those handlers whose milk use-value is producer-members. The cooperative the current policy is discriminatory and below the value of milk at the uniform payment language in each of the unfair and that everyone would benefit price. As proposed, this section is consolidated orders has been expanded from a clarification of the rules defining similar to those contained in current to include bulk milk and skim sold by Federal order minimum prices. orders. As with payments to the cooperative pool plants as well as by Milkco supported Hunter’s position producer-settlement fund, the payments cooperatives acting as a handler. and stated that it also received from the fund are specific to each All of the payment dates are receipt underpayment notices from the market consolidated order. Generally, payments dates. Since payment cannot be received administrator for the December 1994 from the producer-settlement fund on a non-business day, payment dates through October 1995 period on milk would be required one day after the that fall on a Saturday, Sunday, or received from independent dairy required date for payments into the national holiday will be delayed until farmers, but did not receive Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4943 underpayment notices on milk received would specify the responsibility of all It is recognized under current orders under the same or similar conditions handlers with respect to producer milk that the purchase of Class I milk by a from cooperative associations. and thereby rectify any inconsistency partially regulated handler of milk that Carolina-Virginia Milk Producers that may currently exist in order is priced under a Federal order in an Association offered qualified support for language concerning this issue. amount equal to, or in excess of, the Hunter/Milkco proposal. The Hunter and Milkco also stated that quantities sold by partially regulated cooperative suggested expanding any disagreement within the industry handlers in the marketing area ensures handlers’ responsibilities to cover concerning which services are the that price equality is maintained tanker washing and tagging, supplying responsibility of the handler is between these entities. In these milk to handlers on an irregular delivery secondary to the issue under review and circumstances, a partially regulated schedule, field work, disposing of does not warrant the denial of their handler will not be required to make surplus milk during months when the proposal. The commenters contend that payments to the producer-settlement supply is above local needs, and the central principle surrounding this fund so that the use-value of milk has importing supplemental milk for Class I issue is uniformity in the treatment of been equalized between fully regulated use during periods of short production. handlers purchasing milk supplies from and partially regulated handlers. Mid-America Dairymen, Inc. (Mid- cooperatives or independent producers. For those instances in which a Am) testified and filed a post-hearing The precise list of services is of partially regulated handler purchases no brief strongly objecting to the Hunter/ secondary importance, they state, and milk from fully regulated handlers, or Milkco proposal. Mid-Am argued that industry disagreement concerning these where purchases are less than the the issue of minimum payments to services should not prevent the quantity of route disposition in the producers is national in scope and Department from embracing the central marketing area by the partially regulated suggested that the issue be addressed on thrust of their proposal. handler, a payment may be made by the a national basis within the context of Regardless of the short-term outcome partially regulated handler into the the Federal order reform as required by in the pending rulemaking, there is a producer-settlement fund of the the 1996 Farm Bill. Furthermore, Mid- long-term issue that transcends regulated market at a rate equal to the Am stated that clearly the costs for individual orders and should be difference between the Class I price and butterfat testing are borne by all uniformly applied in the interpretation the uniform price of the regulated producers, and the costs of testing milk and administration of all Federal milk market. in tankers for antibiotics are borne by all orders if possible. Accordingly, Many current orders also allow the handlers, regardless of their source of interested parties are invited to submit operator of a partially regulated plant to supply. According to Mid-Am, no comments concerning this issue. demonstrate that the payment for its confusion exists as to who is Payments by a handler operating a total supply of milk received from dairy responsible for these tests and, partially regulated distributing plant. farmers was in an amount equal to the therefore, they should not be included All current and consolidated orders amount which the partially regulated in the proposed amendments. provide a method for determining the plant would have been required to pay Several handlers either supported the payment obligations due to producers if the plant were fully regulated. This Milkco/Hunter proposal or stated the by handlers that operate plants which amount may be paid entirely to the proposal should be considered by the are not fully regulated under any dairy farmers that supplied the Secretary for all Federal milk marketing Federal order. These unregulated handlers, or in part to those dairy orders within the context of Federal handlers are not required under the farmers with the balance paid into the milk order reform. scope of Federal milk order regulation producer-settlement fund of the Based on the testimony presented at to account to dairy farmers for their regulated market. This should be the public hearing and comments milk at classified prices or in returning adopted in all orders. received, the Department’s a minimum uniform price to producers All of the current orders also provide, recommendation issued on July 17, who have supplied the handler with under certain circumstances, for 1997 (62 FR 39470), was to consider this milk. However, such handlers may sell payment options by partially regulated issue as part of Federal order reform. fluid milk on routes in a regulated area handlers relating to reconstituted milk. The decision stated that no changes in competition with handlers who are All of the payment options available to were being recommended for the 4 fully regulated. a partially regulated handler are southeastern orders involved in the Therefore, the regulatory plan of retained under the consolidated orders. proceeding because this issue is central Federal milk orders needs to provide a This provision is now found in to all Federal milk orders and should minimum degree of regulation to all § 1000.76 of the General Provisions. not be interpreted differently from one handlers who enjoy routes sales of fluid Adjustment of accounts. All current order to another. The decision also milk in a regulated marketing area. This orders provide for the market noted the conceptual differences among is necessary so that classified pricing administrator to adjust, based on market participants concerning what and pooling provisions of an order can verification of a handler’s reports, constitutes minimum prices to be maintained. It is also necessary so books, records, or accounts, any amount producers. The record was not extensive that orderly marketing conditions can be due to or from the market administrator, in detailing the particular services to be assured with respect to handlers being or to a producer or a cooperative assigned to each party, nor in providing charged the classified value under an association. This provision continues to guidance concerning the cost of these order for the milk they purchase from be included in the consolidated orders. services which appeared to vary dairy farmers. Without this provision, The provision requires the market considerably from organization to milk prices in an order would not be administrator to provide prompt organization. uniform among handlers competing for notification to a handler of any amount Hunter and Milkco, Inc., filed an sales in the marketing area, a milk so due and requires payment adjustment exception to the Department’s partial pricing requirement of the AMAA. to be made on or before the next date recommended decision and urged There are 3 regulatory options that are for making payments as set forth in the adoption of their proposal. These available at the option of the partially provisions under which the error(s) handlers stated that their proposal regulated handler. occurred. 4944 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Charges on overdue accounts. All provided. The assessment would apply In addition to the different pricing current orders provide for an additional to all of a handler’s receipts pooled provisions of the three existing orders, charge to handlers who fail to make under the order. other important differences and related required payments to the producer- provisions need to be addressed in Deduction for Marketing Services settlement fund when due. Such recommending a complete Northeast payments include payments to the As in most current orders, the regional order that will accomplish the producer-settlement fund, payments to consolidated orders should provide for goals of the AMAA. These include what producers and cooperative associations, the furnishing of marketing services to is commonly referred to in the New- payments by a partially regulated producers for whom cooperative York-New Jersey order as the ‘‘pass distributing plant, assessments for order associations do not perform services. through’’ provision, the need for administration, and marketing service Such services should include providing providing marketwide service payments and certain other payment obligations in market information and establishing or in the form of cooperative service orders with specialized provisions such verifying weights, samples and tests of payments and balancing payments that as transportation credits. This should milk received from such producers. In currently exist in the New York-New continue to be provided for in the accordance with the Act, a marketing Jersey order and do not exist in either consolidated orders. services provision must benefit all the current New England or Middle In order to discourage late payments, nonmember producers under the order. Atlantic orders. Additionally, the three it is proposed that a 1.0 percent charge They are not uniform in the current northeast orders also provide for per month be incorporated in the consolidated orders. seasonal adjustments to the Class III and consolidated orders. This rate represents The market administrator may IIIA price, which may no longer be the mid-point in the range of charges by contract with a qualified agent necessary in light of the replacement all orders presently. Overdue charges including a cooperative association to being recommended for the BFP. shall begin the day following the date an provide such services. The cost of such It is fair to observe that the current obligation was due. Any remaining services should be borne by the order most affected by the amount due will be increased at the rate producers for whom the services are recommended consolidation is the New of 1.0 percent on the corresponding day provided. Accordingly, it is proposed York-New Jersey order. In addition to of each month until the obligation is that each handler be required to deduct the differences already described, paid in full. a maximum of 7 cents per certain terms and provisions of the As proposed, all overdue charges hundredweight from amounts due each recommended Northeast order are also would accrue to the administrative producer for whom a cooperative different in how they are described and assessment fund. The late-payment association is not providing such presented but are nevertheless charge is to be a penalty that is meant services. All amounts deducted should consistent with existing provisions that to induce compliance with the payment be paid to the market administrator not accomplish the goals of the AMAA. This terms of the order. If late-payment later than the due date for payments to is less of an issue for those entities that charges for monies due on producer the producer-settlement fund. are accustomed to the terminology of milk were to accrue to the balance owed provisions used in the New England and to either producers, cooperatives or 6a. Northeast Region Middle Atlantic orders. The following producers/cooperatives via the The Northeast Marketing Area presents a discussion of the producer-settlement fund, it could recommended order provisions and result in such producers and The recommended consolidated issues that are unique to the cooperatives being less concerned Northeast order differs significantly consolidated Northeast order. whether they are paid on time, thus from other consolidated orders. In being counterproductive to the purpose addition to merging three existing Plant of late payment provisions. Under the Federal milk orders, the proposed The plant definition for the proposed provision recommended, cooperatives Northeast order also recommends consolidated Northeast order should and producers would not be placed in expansion in the western and northern differ from that of the other a position where they would prefer to be regions of New York state, and all consolidated orders by allowing paid several days late so that they currently unregulated areas of the New stationary storage tanks to be used as would receive the late-payment charges England states (except Maine). reload points. This exception to the or increase the level of producer prices While the current New England plant definition is warranted for the due to late payment fee accrual to the (Order 1) and Middle Atlantic (Order 4) consolidated Northeast order due to producer-settlement fund. This is of order have similar pricing provisions for certain unique conditions that affect the particular concern in markets with a adjusting producer blend prices in a ability of producers to assemble milk in single dominant cooperative. manner identical to how plant prices are an efficient manner and subsequently Additionally, by having late-payment charged, the current New York-New transport it to a plant that actually fees accrue to the administrative fund, Jersey (Order 2) order employs a ‘‘farm- processes milk into finished dairy monies are made available to enforce point’’ pricing method. This decision products, including fluid milk products. late-payment provisions that would recommends that the pricing of milk This exception would not consider the otherwise have to be generated through should employ a plant-point pricing reload point or facility as a point from handlers’ administrative assessments. methodology in the consolidated which to price producer milk. Rather, Northeast order. This method is used in milk once assembled would be shipped Assessment for Order Administration every other current marketing area and to a processing plant where it would be The AMAA provides that the cost of in every recommended consolidated priced. order administration shall be financed marketing area. This represents a A portion of the Northeast milk by an assessment on handlers. All considerable change in how milk will be supply is derived from some 200 small current orders provide for proportionate priced for those handlers and producers dairy farms located in Maine. Because per hundredweight assessments of who currently are priced under the much of this state is serviced by varying rates. As proposed, a maximum provisions of the New York-New Jersey secondary and rural winding roads, the rate of 5 cents per hundredweight is order. current New England order has Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4945 provided for reload points as a workable in their current regulatory status under Producer solution to the inherent hauling the Federal program that result from The producer definition of the difficulties in transporting relatively consolidation of the three northeast proposed consolidated Northeast order small loads of milk from the countryside marketing areas into a single new order. should be defined as described in the to reload points and facilities with Unit pooling, wherein two or more proposed order language for the order. stationary storage tanks that do not plants operated by the same handler This definition describes those dairy serve as a pricing point. This should located in the marketing area can farmers who are properly associated continue to be provided for in the qualify for pooling as a unit by meeting with the Northeast marketing area and consolidated Northeast order. Not to the total and in-area route distribution who should share in the benefits that provide this accommodation would requirements of a pool distributing accrue from the marketwide pooling of adversely affect a substantial number of plant, is recommended for inclusion in milk in this area. small producers and the milk haulers the consolidated Northeast order. The months specified in the producer that service them. Providing for unit pooling provides a definition for defining when a dairy Pool Plant degree of regulatory flexibility for farmer would not be considered a The pool distributing and pool supply handlers by recognizing specialization producer under the order are so plant definitions of the proposed of plant operations. indicated because they tend to consolidated Northeast order should use Due primarily to positions offered by accurately reflect the seasonality of the standard order language format used many of the major Northeast dairy supply for meeting the market demands in other orders, combined with cooperatives and their for milk during the ‘‘short’’ season in performance standards that are adapted recommendations on appropriate pool the proposed Northeast marketing area. to marketing conditions in the supply plant performance requirements, Accordingly, the producer definition Northeast. the consolidated Northeast order supply should not include dairy farmers who’s The proposed pool distributing plant plant performance requirements milk during any month of December definition specifies that a pool initially should be set to require that in through June is received as producer distributing plant must have 25 percent the months of August and December, at milk at a pool plant or by a cooperative or more of its total physical receipts of least 10 percent of the total quantity of association handler if the operator of the bulk fluid milk distributed as route bulk milk that is physically received at pool plant or the cooperative association disposition and that route disposition a supply plant be shipped to caused the milk from such producer’s within the marketing area be at least 25 distributing plant. For the months of farm to be delivered to any plant as percent. The 25 percent level of total September through November, such other than producer milk as defined in receipts distributed on routes is a shipments by pool supply plants should the producer milk provision of the reasonably high enough level to be at least 20 percent. To the extent that proposed Northeast order, or any other establish a distributing plant’s a supply plant has met these Federal milk order during the same association with the marketing area. The performance requirements, no month, in either of the two preceding in-area route distribution performance performance requirement is months, or during any of the months of requirement of 25 percent is recommended for the months of January July through November. recommended for two reasons. First, as through July. However, a supply plant Similarly a dairy farmer would not be one of the intents of Federal milk order that has not met these performance considered a producer under the order, reform was to adopt liberal pooling requirements will need to meet a 10 for any month of July through standards, a 25 percent level provides a percent performance requirement in November, any dairy farmer whose milk level of association with the market that each of the months of January through is received as producer milk at a pool is liberal yet sufficiently high enough to July in order to qualify as a pool supply plant or by a cooperative association assure pooling standards that are plant. handler if the pool plant operator or the performance oriented. Second, it tends cooperative association caused the dairy to minimize changing the regulatory While this decision has recommended farmer’s milk to be delivered to any status of handlers from their current providing for pool reserve supply plant as other than producer milk, as regulatory status by the Federal order plants, it is not recommended for defined in this proposed order, or in any program through the consolidation of inclusion in the provisions for the other Federal milk order during the existing orders. This also seems a consolidated Northeast order. However, same month. reasonable standard in light of providing for a system of supply plants individual state regulatory plans is recommended for the consolidated Producer Milk currently in place in Maine, Northeast order and this provision is The producer milk definition of the Pennsylvania, and Virginia are sufficiently self-explanatory in the consolidated Northeast order should applicable. proposed order language. follow the general structure and format As already discussed, the Producer-Handler of other consolidated orders. It differs recommended consolidated Northeast from other consolidated orders in that it order and other nearby consolidated The producer-handler definition for requires cooperative handlers to marketing orders do not recommend the consolidated Northeast order should organize reports of producer receipts expansion to include currently conform to the limitations on receipts at that are outside of the states included in unregulated areas. This includes areas its plant or acquiring for route the marketing area, or that are outside in the states of Pennsylvania, Virginia, disposition no more than 150,000 of the states of Maine or West Virginia, and the entire state of Maine. Some pounds of fluid milk products from into state units with each unit distributing plants in these areas are not handlers fully regulated under any separately reporting receipts. currently regulated, or are only partially Federal order. This should cause no As previously discussed, not all regulated to the extent they enjoy Class change in the regulatory status of any consolidated orders set diversion limits I sales in regulated areas. A 25 percent known producer-handler currently in for producer milk. For the proposed in-area route distribution level will operation in the proposed consolidated Northeast order, no diversion limits are serve to ensure or minimize any change Northeast order region. established as they are, for example in 4946 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules the proposed Florida order. However, pricing has been in effect in Order 2 Numerous problems arose in diversions are limited in functional since 1961. While the fundamental regulating the handling of bulk tank terms. The maximum quantity of milk concept of farm-point pricing has been milk in an order where pooling that a pool plant would be able to divert retained with respect to its overall depended upon direct delivery from the and still maintain pool plant status structure of mileage zones, other order farm to a pool plant and under which would be 100 percent minus the provisions were adopted subsequent to minimum class prices and the uniform applicable shipping standard. its establishment and modified over prices to be paid to producers was reflective of the location of the plant Component Pricing time so that farm-point pricing could remain viable. where delivery was made: The consolidated Northeast order In the decision that established farm- 1. Administrative problems associated should employ a component pricing point pricing (25 FR 8610, Sept. 7, with bulk tank handling arose, plan in the classified pricing of milk 1960), prevailing marketing conditions particularly where and when milk was under the order as previously discussed served to warrant this type of pricing regarded to have been received. Bulk in the BFP section of this recommended system. At that time, the emergence of tank milk provided the opportunity to decision. This recommendation is bulk-tank milk began to take on a degree deliver milk to different plants, some consistent with positions taken and of prominence in the milk supply of pool and some nonpool. Where a given proposals offered by major cooperative Order 2. Prior to the adoption of farm- tank load of milk was unloaded if it groups in the Northeast who supply a point pricing (1959), about 8 percent of went to two or more plants of the same large percentage of the milk needs of the the producers had bulk tanks, or different handlers on the same day market. This also conforms with the accounting for at least 14 percent of the was difficult to determine. recommendations discussed earlier in volume of milk associated with the 2. The incentive arose (because of the this decision on replacing the BFP. market. About 92 percent of producers administrative difficulty of determining when and where milk was received) for Farm-Point vs. Plant Point Pricing delivered their milk at their own expense directly to plants in 40 quart handlers to behave in a way that would At issue in the suggested merging of result in the maximum exclusion of cans. Most of the milk can-delivered the three northeast marketing areas is milk from the pool for fluid use outside was from farms within a radius of not the use of two distinct pricing methods. the marketing area. The Middle Atlantic and New England more than 15 miles from the plant. The 3. The incentive arose for the marketing area employ a system of milk of producers who had converted to maximum inclusion in the pool of milk plant-point pricing. This pricing method bulk tanks, in some instances, had been in fluid and manufacturing uses. is also employed in every other hauled more than 200 miles from farm 4. The incentive and opportunity marketing area in the Federal order to city plants, but the majority of bulk arose for handlers to select one of system. Only the New York-New Jersey tank milk was moved much shorter several plants for receipt of bulk tank marketing area uses what is called distances to country receiving plants. milk, with or without manipulation of ‘‘farm-point’’ pricing. This decision The decision cited that in October, hauling charges. This distorted and recommends the adoption of plant point 1959, milk was received from 49,719 impinged upon the effectiveness of the pricing as the pricing method for the producers at 691 plants. minimum price provisions of the order, consolidated Northeast order. When milk was delivered in cans to especially in the case of relatively long Plant-point pricing of milk that is a handler’s plant, the plant was the hauls of bulk tank milk. pooled under an order prices milk f.o.b. location of where milk was weighed, The 1961 decision that established the plant of first receipt. The cost of sampled for butterfat and quality, and farm-point pricing provided 8 scenarios hauling from the farm to the plant is the where cans were washed. It was at the that demonstrated how handlers responsibility of the producer. When the plant that milk was accepted or rejected. behaved so as to minimize their pricing receiving handler is also the hauler, It was the place where milk was cooled obligations to producers. Most of the orders permit the handlers in making and co-mingled with other individual scenarios arose from the inability to payments to each producer to deduct producer’s milk. More importantly, it determine when milk was received at a hauling costs up to the full amount was the place where control of the milk plant. In order to mitigate such authorized in writing by the producer. passed from producer to the plant circumstances, several things were As originally employed in the New operator or moved by the plant to other done. Foremost, was the establishment York-New Jersey order (Order 2), farm- plants for fluid or manufacturing uses. of farm-point pricing on the basis of point pricing establishes the price for Minimum prices required by the order bulk tank units and the designation of milk by the zone (distance from market to be paid by handlers were adjusted for each bulk tank unit as either a pool or computed the nearer of the basing the location of the plant at which milk nonpool unit and defining the points) of the township in which a was received from dairy farmers. circumstances under which producer’s milkhouse is located. While Bulk tank milk brought a set of new designations could be changed. termed ‘‘farm-point’’ farms are grouped factors. When milk is transferred from a The pricing of milk at the farm by their township location. However, producer’s bulk tank to the hauler, the eliminated the incentive for handlers to this is the nearest practicable proxy for point of transfer is also the point where attempt to make it appear that the plant farm location. In functional terms, when several functions are performed. Milk in of receipt was other than the plant a handler picks up milk at a producer’s a producer’s bulk tank has already been where milk is actually received and farm, the handler takes title of the milk cooled, and therefore not subject to the handled. It was made crystal clear that at the time and point of pickup. early delivery deadlines. The weight of delivery and receipt of bulk milk takes Accordingly, there are no adjustments milk is determined at the bulk tank and place at the farm. Once acquired by the in payments to producers to cover any is also the place where samples are handler, the plant or plants to which the part of the cost of pickup or hauling in taken for butterfat and quality. It is also milk may be delivered depended on the moving milk to the handler’s plant. here that the individual producer’s milk decision of the handler, not the Farm-point pricing fundamentally shifts is accepted or rejected and loses its producer. Under these circumstances, the cost of transporting milk from the identity by being co-mingled with other where the milk is actually used is not producer to the handler. Farm-point milk. a factor to be reflected in the minimum Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4947 producer price. The operator of the bulk largely based on the fact that handlers adopting this transportation credit for tank unit was defined as the handler were not then charging for bulk tank handlers, there was no need to adopt and the point of receipt of milk. This pickup and hauling, but rather were other proposals that would have entity was responsible for establishing paying premiums for bulk tank milk. lowered the manufacturing price for the unit, and the entity held the Additionally, can milk direct delivered milk under the other northeastern responsibility for reporting, accounting, by producers to plants was still very orders or lower the Class I price for milk pooling and paying producers. much the norm. While bulk tank milk in Order 2 as had been proposed and Additionally, the decision concluded was growing, it had not yet accounted denied. that the price at which the farm bulk for a majority of milk pooled on the By 1977, some 16 years since the tank is accounted for to the pool should order. The 10-cent negotiable hauling adoption of farm-point pricing, be the minimum class price adjusted for charge was found to provide the needed marketing conditions had changed again location of the farm, that payments by flexibility for handlers to receive bulk and the issue of providing for more handlers directly to producers be tank milk from individual producers. equitable competition both within the adjusted to reflect all location This decision raised, for the first time Order 2 market and between other differentials based on where farms are with respect to farm-point pricing, the orders took on primary importance. By located and where bulk tank milk is maintenance of orderly conditions and this point in time, can milk was about received. the uniform pricing to handlers on all 3 percent of the market, with the A proposal that would have allowed milk priced and pooled under the order. balance represented by bulk tank milk, a tank truck service charge authorized Because bulk tank milk is priced by the near inverse of the marketing by the producer but not in excess of 20 township zone (the best proxy for a conditions prevailing in 1961. The cents per hundredweight (cwt.), and farm’s location) all farms in any transportation credit that had been payments to cooperatives which serve particular township have the same value established for handlers in the 1970 as handlers operating a bulk tank unit assigned to their milk. However, the decision for manufacturing milk was should be at the price reflecting decision found it necessary to reflect now extended to all milk received by transportation and (the then existing) appropriate uniform pricing of bulk tank handlers. The transportation credit was direct delivery differential applicable at milk because it has differing value increased to 15 cents per cwt., plus an the handler’s plant where milk is dependent on the accessibility and additional 15-cent maximum negotiable delivered by the cooperative was not relative location of individual farms credit above the ‘‘automatic’’ 15 cents incorporated into the order. At that within the township. With this finding, because total average transportation time, it was found that plant hauling it was determined that responsibility for costs was found to be about 30 cents per charges averaged nearly 20 cents per hauling to the township pricing point cwt. For reasons nearly identical to the cwt. This was offered as rationale for a should be borne by the producer with 1963 and 1970 decisions, ‘‘formalizing’’ negotiable 20 cent per cwt. charge by appropriate safeguards to protect the the negotiable hauling charge was not handlers for hauling. Arguments producer. Therefore, a maximum adopted because of the need of notwithstanding, the underlying negotiable hauling charge from handlers flexibility in accounting for milk concepts embodied in farm-point of 10 cents per cwt. was brought under movements from the farm to the pricing caused the Department to not the order. township pricing point (42 FR 41582, allow for any hauling deduction by By 1970, marketing conditions in the Aug. 17, 1977). In that decision the handlers. New York-New Jersey market had Secretary also raised the direct delivery Shortly after the implementation of changed to the point where handlers differential from 5 cents to 15 cents per farm-point pricing, the need to amend were authorized to receive a full 10-cent cwt. in the 1–70 mile zone for can milk the order to keep farm-point pricing hauling credit for each cwt. of bulk tank delivered by farmers to plants within viable arose. The first occurrence was in milk which was disposed of for this zone, changed the transportation 1963. In the 1963 decision (28 FR manufacturing uses. Additionally, the adjustment rate from 1.2 cents per cwt. 11956, Oct. 31, 1963), it was noted that negotiable 10-cent hauling charge to for each 10 miles to 1.5 cents per cwt. there had been significant changes in producers for a handler’s cost offset for each 10-mile zone beyond the 201– marketing conditions that arose from established by the 1963 decision was 210 zone, and 1.8 cents per cwt. for each establishing farm-point pricing in 1961. retained. However, the 10-cent 10-mile zone within the 201–210 mile These included the reduction in negotiable limit was limited to zone. premiums to bulk tank producers in manufacturing milk. Can milk at this Cooperatives were of the strong general; the reluctance of proprietary time represented about 25 percent of the opinion that the cost of milk assembly handlers to receive bulk tank milk from total amount of milk pooled in Order 2, and transportation are the marketing individual producers in order to avoid with the balance being bulk tank milk. costs of the handler and not by the hauling costs; the differences in Proponents supporting this change to producers. However, they also indicated pricing can and bulk tank milk; and a the order claimed, and the decision that changes are warranted in the order slowdown in the trend of conversion affirmed, that the manufacturing price because of the failure of neighboring from can milk to bulk tank milk. The for milk in Order 2 was not properly markets to adopt farm-point pricing. 1963 decision, in acknowledging aligned with manufacturing class prices Comparative examples of handler changing marketing conditions, in adjacent Federal orders. In this price inequities with respect to their incorporated into the Order, an decision (35 FR 15927, Oct. 9, 1970) the cost of milk was amply demonstrated authorized 10-cent per cwt. charge for Secretary found that to the extent that for both intra and inter market hauling, provided that producers Order 2 handlers had borne the situations. With respect to inappropriate authorize this maximum level in transportation costs associated with the price alignment between orders, the writing. pickup and movement of bulk tank milk competitive relationships between In the 1963 decision the Secretary used in manufacturing from the farm to Order 2 and Order 4 (then known as the found that allowing for a limited the plant, Order 2 handler costs Delaware Valley Order) were closely authorized service charge for hauling exceeded the price which handlers in examined. On intra-order movements of bulk tank milk at a maximum rate of 10 adjacent order markets were required to milk, it was shown that Class I handlers cents per cwt. was sufficient. This was pay for milk used in manufacturing. By in New York City had a significantly 4948 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules lower procurement cost for direct-ship found that Order 2 plants located in units was received seems far removed over bulk tank milk because bulk tank northern New Jersey received direct from present-day marketing conditions milk from ‘‘distant’’ supply plants had shipped milk as did handlers located in and the rationale for continuing it. higher transfer and over-the-road Order 4. Thus, inter market price There were a number of years that hauling costs. Supply plant milk at the alignment needed to be structured hearings were necessary to first city represented about 80 percent of primarily on the basis of handlers recognize that the burden of milk receipts at city plants. The inter- obtaining direct shipped milk. transportation costs rested with market situation demonstrated that A federation of cooperative handlers. This resulted in handlers handlers in Philadelphia accounted for associations representing Order 4 being able to successfully argue that milk at prices lower than New York producers proposed that Order 2 be with this burden, it becomes much more handlers. Order 4 handlers were in a amended to return to plant-point difficult for the order to establish and position to establish lower resale prices pricing, with the direct delivery maintain uniform prices to handlers as for fluid milk than their competitors in differential being reduced to 10 cents required by § 608(5)(c) of the AMAA. the New York market because the per cwt, and that the Class I differential This is evidenced by the nature of the burden of increased hauling costs fell at the base zone of Order 2 be increased decisions of 1963, 1970, 1977, and 1981. largely on Order 2 handlers. As in 1970, from the $2.25 level then in effect, to Much ‘‘repair’’ to other order provisions other proposals were denied in light of $2.40. This federation of cooperatives was also needed to retain farm-point adopting the 15-cent hauling credit for believed that this ‘‘package’’ of order pricing. Accordingly, farm-point pricing handlers. These other proposals modifications would provide for proper has outlived its intended purpose and included lowering Class I and the price alignment between Order 2 and the Secretary proposes that it should not manufacturing price for milk in the Order 4. While the decision did apply be retained in a consolidated Northeast order by 15 cents per cwt. different transportation rates at a rate of order. By 1981, bulk tank milk accounted for 1.8 cents per cwt. outside the base zone nearly the entire milk supply pooled on of the Order (201–210) and a rate of 2.2 The Need for a Producer-Price Order 2—about 99.6 percent. As the cents per cwt. inside the base zone, it Mechanism result of a hearing held in June 1980, in did not provide for a return to plant- As discussed above, farm-point the final decision (FR 46 33008, June 25, point pricing. pricing for producers did provide some 1981) the Secretary again amended the While the decision did not adopt rational pricing incentives to promote transportation credit provisions of the plant point pricing, the decision does efficiency within the Order 2 marketing order. The 15 cents per cwt credit for acknowledge that the amendments area. This can reasonably be summed up handlers was retained, however, the 15- adopted tended to establish plant by concluding that farm-point pricing cent negotiable transportation service pricing with respect to the classified would not provide, as plant-point charge was modified to allow handlers prices to handlers. However, farm-point pricing would, incentives to haul direct- to negotiate with producers for any pricing was retained with respect to shipped milk to city plants for farm-to-first plant hauling cost in excess uniform prices to producers. With this manufacturing uses, since there would of the 15-cent transportation credit, plus being the case, the basic substantive not be a credit from the pool for the full ‘‘the amount that the class use value of difference between the amendments and amount that a uniform price the milk at the location of the plant of plant pricing is the impact on the transportation differential at the city first receipt was in excess of its class use movement of milk to higher-priced plant exceeds the transportation value at the location where milk was zones for manufacturing use. Under differential for the zone of the bulk tank received in the bulk tank unit from plant pricing, the minimum uniform unit. Adopting plant pricing would have which the milk was transferred.’’ price payable to producers applies at the had the effect of encouraging milk to According to the 1981 decision, this location of the plant of first receipt and move long distances to city plants for amendment would adjust hauling handlers receive a credit from the manufacturing uses when transportation allowances for handlers to more closely producer settlement fund at such savings could be realized if such milk relate the location value of milk to the uniform price. The decision also stayed nearer to manufacturing plants costs incurred in transporting milk from concluded that plant-point pricing for generally located in the milkshed. farms and country plants to distributing producers would provide a greater In an effort to address the dairy plants in the major consuming markets incentive to haul direct-shipped milk to industry structures that have evolved of the market. Additionally, the decision city plants for manufacturing uses, since over the past four decades in the three indicated that this change was necessary there would be a credit from the pool for current northeast marketing areas, to reflect current marketing conditions the full amount that the uniform price efforts were undertaken by a major and permit a more equitable competitive transportation differential at the city group of dairy farmer cooperatives in situation for regulated handlers, both on plant exceeds the transportation the northeast to address what the an intra market and inter market basis. differential for the zone of the bulk tank pricing implications are to producers The decision also applied a 15-cent unit. Adopting plant-point pricing for and handlers as the region moves to a direct delivery differential for bulk tank producers would have had the effect of unified plant-point pricing method. milk from New York City out to the 61– encouraging milk to move long This has resulted in a proposal by the 70 mile price zone, on the basis that distances to city plants for Association of Dairy Cooperatives in the direct delivery differential is applicable manufacturing uses when transportation Northeast (ADCNE) that include St. to milk received in cans at a plant in the savings could be realized if such milk Albans Cooperative Creamery, Inc., 1–70 mile zone. stayed nearer to manufacturing plants Land O’Lakes, Upstate Farms In the 1981 decision the Secretary generally located in the milkshed. Cooperative, Inc., Agri-Mark, Inc., Milk found that the majority of milk moved Farm-point pricing has undergone Marketing Inc., Dairylea Cooperative to distributing plants in 1979 from the many evolutionary changes from its Inc., and Maryland & Virginia Milk 1–70 mile zone moved directly from inception in 1961. The original rationale Producers Cooperative Association Inc. farms, accounting for about 58 percent for farm-point pricing, free hauling and These dairy farmer cooperatives account of plants in this zone with 48 percent the administrative difficulty of for well over half of the milk that would being reloaded. Moreover, the decision determining when milk from bulk tank be pooled and priced under the Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4949 proposed consolidated Northeast order. marketwide benefit conferred a pricing when milk is marketed by Their proposal calls for establishing a distributing plant’s utilization. transporting it from a higher priced zone producer differential structure that For the Western New York State order to a lower priced zone, and provides a would ‘‘overlay’’ the Class I differential area of the order, ADCNE also proposed structure that allows for adequate blend structure that would apply in the a broad area in which a producer price levels in all areas of the Northeast consolidated Northeast order. differential of $2.40 per cwt. to milkshed. The structure proposed is a county- producers would be payable on Dairylea further comments that in based plant-point price structure, deliveries of producer milk at all plant addressing adopting plant-point pricing, providing for 14 zones that locations in this area. This portion of existing ‘‘near-in’’ manufacturing plants accommodate the need to reflect the price surface proposed by ADCNE (plants located in a relatively high existing and longstanding competitive purports to be reflective of the major differential location) would enjoy a price relationships among plants, while historical movements of milk from east procurement advantage relative to their integrating the farm and plant point to west in the region which returned the competitors that are located in a lower pricing systems currently used in Order eastern farm point price to dairy farmers priced location. Dairylea recommends 1, 2, and 4 and with currently state- under Order 2’s farm-point price narrowing the price difference between regulated areas that fall outside of the system, and that the Western New York manufacturing plants that compete for proposed marketing area. Further, the State order has not had any location producer milk and/or finished dairy ADCNE proposed prices at the major differentials, thereby establishing a product sales. To do this, Dairylea cities in the Northeast, including ‘‘flat’’ price surface in the area. If those supports lowering producer differentials Boston, New York City, Philadelphia, plants, for producer pricing purposes, for manufacturing plants that are Baltimore, and Washington, D.C. to have were zoned lower in value reflecting the located in high-valued locations and specific Class I differential levels that westerly and northerly distance from increasing those differentials at are somewhat different from those New York City or Philadelphia, ADCNE manufacturing plants in areas that have recommended in the Option 1A Class I is of the view that the ability of both lower location values. Dairylea price surface. For example, this decision distributing and supply plants of plants advocates the ADCNE proposal for a recommends a New York City Class I to attract an adequate supply of milk producer differential that is 5-cents differential of $3.15, while ADCNE could be in jeopardy. Furthermore, the lower than those of Class I plants when proposes $3.20. In general, the ADCNE expectation that Class I utilization of the such plants are located in the same proposed Mideast order will be nearly proposal assumes that the Class I pricing zones. Dairylea’s view of this 10 percent higher than the Class I differential structure that will be design results in maintaining, or slightly utilization in the Northeast order was adopted is Option 1A, is the Class I increasing, producer differentials also offered in support of ADCNE- pricing option they strongly support, applicable at Class I plants and reducing proposed producer differential level in and is also the Class I pricing option those applicable at ‘‘near-in’’ this area. overwhelmingly supported in public The ADCNE proposal also manufacturing plants. At the same time comments received from interested recommends producer differential levels this would provide for increasing parties from the northeast. in areas that they believed should be producer differentials at manufacturing With respect to a producer differential included in either the consolidated plants in central, western, and northern surface, the ADCNE proposed that a Northeast order or the Mideast order New York. According to Dairylea, this debit of 5 cents per cwt. be made to the through expansion that this proposed producer pricing surface would present blend price applicable at non- rule does include for consideration. a more equitable marketing environment distributing plants in certain zones. The Additionally, the ADCNE proposal also than strict plant-point pricing currently need for the debit, according to the addresses producer differential levels at employed in Orders 1 and 4, while at ADCNE proposal, is to make deliveries other locations outside of the Northeast the same time not threatening the to distributing plants somewhat more region. viability of manufacturing plants in attractive to producers, while decreasing Additional supporting and amplifying those areas of a consolidated Northeast the amount by which manufacturing comments were also provided by marketing area. plants draw on the marketwide pool for Dairylea. These comments supported A major theme of Dairylea is its view transportation values, offering also that the major themes offered in the ADCNE that Federal milk orders and their such a debit is economically justified proposal for a producer differential provisions should foster an environment and authorized by the AMAA. overlay to Class I differential levels. under which manufacturing plants are According to ADCNE, it is distributing Dairylea states that moving directly to a provided equal cost and procurement plants that provide the revenue, in the plant-point pricing method would ability, and not to disfavor such form of Class I values which form the accentuate ‘‘existing inequities and manufacturing plants located in high blend price paid to producers. market dysfunctions.’’ Dairylea further milk production areas where Class I Deliveries to manufacturing plants do commented that a plant-point differentials are lower. This view, as not contribute to increasing the value to differential schedule would maintain expressed, seems a departure from the the marketwide pool. The debit, current inter-plant price differences in intent of Class I differentials serving to according to ADCNE, is a reflection in the current New England and Middle attract an adequate supply of milk at part of the Order 2 system, which has Atlantic orders, but would worsen them locations to satisfy fluid demands. priced some 50 percent of the milk in for New York manufacturing plants, Dairylea also states that the final rule of the northeast region, and which does many of which are cooperatively 1991 that realigned intra-order prices in not provide location-based owned. Their view of the ADCNE Order 2 resulted in harm to producers transportation payments for movements pricing proposal is that it maintains in northern and western New York. from farms to manufacturing plants. The economic incentives for milk to move to While it is not appropriate to ADCNE proposal provides that Class I distributing plants, would specifically revisit this issue and deliveries to Class I plants are rewarded provide for more balanced procurement decision here, official notice is taken of under this system with an additional 5- equity among competing manufacturing the final decision (55 FR 50934, cent payment from the pool for the plants, maintain equitable producer December 11, 1990) that realigned Class 4950 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

I differentials in the three existing price integrity by promoting or causing pricing structure of Option 1A. northeast marketing areas. producers to compete for Class I sales. Nevertheless, under either Option 1A or Comments supporting the ADCNE This is best accomplished, according to Option 1B, further analysis is needed in proposal for a producer pricing surface Agri-Mark, with appropriate pooling determining the need for adjusting were also offered by Upstate Farms requirements and Class I differentials to producer blend prices by a method that Cooperative, Inc. The Upstate Farms satisfy the Class I demands of the differs from that currently applied to all views served to reiterate the major market. Agri-Mark fears that if the orders, including the development of themes developed in the ADCNE regulatory pricing plan gives a appropriate order language. proposal. distributing plant an advantage over a Competitive equity between Agri-Mark, a part of ADCNE, filed cooperative manufacturing/balancing manufacturing plants is already ensured separate and dissenting views on the plant in the same zone, that plant can by the classified prices applicable to ADCNE proposal. Conceptually, Agri- use this advantage for itself instead of handlers who operate such plants. In Mark notes that plant and farm-point passing it along to farmers to offset fact, this proposed rule suggests a pricing are different, but notes further transporting their milk to market. A 5- uniform Class III and Class IV price be that the differences are not always cent debit to the Class I differential applicable for all locations. The more unfavorable. Agri-Mark submits that schedule is, in the view of Agri-Mark, appropriate issue this proposal seems to under plant-point pricing, all producers significant. If so set, Agri-Mark submits, address is that manufacturing plants are shipping to the same plant receive the pressure will come from distributing often cooperatively owned. All entities, same minimum order blend price plants to see this 5-cent price difference including cooperatives in their capacity regardless of where their farm is located. grow. as handlers, account to the marketwide Under farm-point pricing, farmers Lastly, in their opposition to the pool at the manufacturing price for milk shipping to the same plant receive ADCNE proposal, Agri-Mark notes that received at their plants. The price paid different prices under the order no manufacturing plant has been built to producers is the blend price for all depending on where their farm is in any city zone for decades, noting that milk pooled on the market and that was located. Farms closer to New York City, the only significant plants in such areas priced according to its use. Agri-Mark notes, receive a higher price for the northeast are older plants Cooperatively owned manufacturing than farms farther from the city, even producing nonfat dry milk and butter plants located in higher priced areas though their milk ends up in the same and serve to balance the Class I needs will pay a higher blend price to place. of city markets, concluding that such producers who deliver milk to that As to the efficiency arguments touted plants are there for common sense and location provided they meet the to be derived from farm-point pricing, efficiency reasons. In support of this performance requirements for being Agri-Mark notes that most observation, Agri-Mark notes that pooled thereby demonstrating the manufacturing plants, especially cheese existing Class I differentials have not appropriate degree of association with plants, were built in the northeast prior been adjusted to more fully account for the market. In this regard, it is worthy to the adoption of farm-point pricing increases in hauling costs. to note that not all manufacturing plants and not in response to it. Rather, says A recommendation on whether or not in the high-valued zones in the New Agri-Mark, these plants were built at to adopt a producer pricing differential York marketing area are pool plants. their present locations because of their structure that differs from a Class I Blend prices are adjusted everywhere proximity to abundant milk supplies. differential cannot be made in this according to the location value of the The procurement problems for proposed rule. The issue before the plant. Adjusting producer blend prices manufacturing plants that Order 2 Department is to examine the impact of on the basis of whether or not milk was entities alert us to, did not arise in New the change from farm-point to plant- delivered to a distributing plant or to a England manufacturing plants under point pricing on producers as part of manufacturing plant seems to create a plant-point pricing even though these recommending the adoption of plant- form of producer price discrimination plants were located as far north as point pricing for the new consolidated that classified pricing and the possible within the milkshed for New order. The change to plant-point pricing mechanism of marketwide pooling and England. will affect approximately one-half of the its related provisions attempt to Simply put, Agri-Mark believes that producers in the consolidated marketing mitigate. Such pooling provisions rather than decreasing the differential area and is a significant departure from provide a degree of equity to producers between manufacturing plants and city historical methods of distributing the in the form of a uniform blend price distributing plants, an increase is revenue that accrues from classified adjusted only for the location value on justified. They are also of the opinion pricing to producers. Plants will not all milk pooled on the market. Classified that manufacturing plants located far experience significant change since pricing and marketwide pooling have from higher-priced zones will maintain plants currently regulated under Order served well to mitigate the price an advantage even with the adoption of 2 already account to the marketwide competition between producers seeking strict plant-point pricing because this pool at the Class I location differential preferred higher-valued outlets for their milk does not need to travel long value. The issue then, tends to focus on milk, while at the same time ensuring distances to reach manufacturing plants. how to pool and distribute the revenue handlers uniform prices, adjusted only The ADCNE proposal would cause Agri- as equitable as possible to producers. for location, in the prices they pay for Mark producers to receive lower prices There are significant differences milk. This proposal, as currently that competitive price relationships do between Option 1A and Option 1B that developed, seems to take a step not warrant. may result in price relationships never backward in that it may be inadvertently The Agri-Mark view of Federal milk before experienced by either producers creating a degree of price competition marketing orders differs substantially or handlers in the northeast. This, in between producers that classified from the views expressed by Dairylea. and of itself, may cause both proponents pricing and marketwide pooling sought Agri-Mark states that the role of Federal for and against a producer price to minimize. milk marketing orders is to treat all differential to reconsider their position As Dairylea commented, the 1991 rule producers equitably relative to how in the need for and development of a that realigned prices in the three current their milk is used and not to weaken producer price surface founded on the northeast orders may not have gone far Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4951 enough is establishing a Class I specified under the order and does not largely issues of the self-interest of differential structure and indeed may provide for such payments to non- entities. As such, self-interest may or have resulted in harm to producers cooperative entities. may not be of marketwide benefit. located in northern and western New Rationale offered in support for a Balancing Payments. The Secretary York. Prior to the 1991 final rule, the cooperative service type payment to proposes that a marketwide service price difference between the New York cooperatives and non-cooperative payment plan offered for inclusion in base zone and New York City was 59 entities were based on recognizing that the consolidated Northeast order cents. The 1991 final rule increased this in a regulatory pool structure, private includes a 4-cent per cwt. marketwide to 72 cents, but in doing so, the parties provide important services that service payment to qualified handlers differential at the base zone was are of benefit to everyone involved in that perform market balancing from the lowered by 13 cents. This resulted in a the marketwide pool, including the marketwide pool should not be lowering of blend prices to producers in promulgation, amendments to, and included in the consolidated Northeast the far reaches of the milkshed. This administration of the order. Not to order. observation may provide the basis for provide a mechanism for the recovery of The proposal for balancing payments further examination of the Class I a portion of the expense involved in from the marketwide pool is intended to differential structure presented under providing such services would reflect that there are costs that handlers Option 1A. Specifically, a 5-cent disadvantage those incurring these incur in balancing the Class I needs of increase in the New York Class I expenses while everyone in the market the market and in providing for clearing differential and a similar increase in the benefits as a result of these services. the market of temporary surpluses. Class I differential at Philadelphia, Qualification criteria presented for According to the proponents, these together with appropriate location entities eligible to receive this payment balancing costs are not fully recoverable adjustments between these pricing included a demonstration to the market from Class I handlers, however the points, may accomplish what a administrator that it provides benefit that results from this service producer price differential schedule information with respect to market being provided is a benefit of all does not seem to accomplish at its order prices and marketing conditions, producers in the market. current state of development. that it has retained legal and economic Handlers that incur the costs would A submission from New York State staff or consulting personnel available to be those handlers that would receive Dairy Foods, Inc., (NYSDF) a trade participate in marketing order partial cost reimbursement. association representing dairy product amendatory proceedings, to consult Cooperatives would be eligible to form manufacturers and retailers voiced the with the market administrator with common marketing agencies or need for raising the New York City Class respect to marketing order issues, and federations for purposes of qualifying I differential. NYSDF proposed an 8- that the entity pool at least 2.5 percent for balancing payments. Such handlers cent per cwt. increase to reflect the of the order’s total milk volume. would include those who: (1) reality of higher hauling rates. If this As presently presented there is not a demonstrate ownership or operation of proposal is accepted, this would raise compelling reason to adopt this sort of a balancing plant with the capacity to the Class I differential in New York City compensatory plan to reimburse those process a million pounds of milk per from the current $3.14 to $3.22. entities that incur these costs. Market day into storable products such as According to NYSDF, the 8-cent administrators and their staffs make cheese, butter, and nonfat dry milk and increase may not be sufficient themselves available to meet with, that such handler also represent at least depending on the length of time needed discuss, and aid in formulating 2.5 percent of the total volume of milk to implement milk order reforms. positions that are reflective of the need pooled under the order; (2) have under NYSDF also commented on their of the marketing area as a normal part contract and the obligation to pool on a support for retaining farm-point pricing, of their duties. Additionally, there are year-round basis at least 8 percent of the but offered no compelling arguments for numerous provisions in the order that market’s milk volume; (3) own a doing so. require as a matter of course, the balancing plant that must be made issuance of reports, prices, and other available to other handlers or Marketwide Service Payments information that affect all marketing cooperatives at the request of the market Cooperative Service Payments. The order participants and to provide administrator; (4) qualify to provide Secretary proposes that cooperative service to the entities affected by the pool producers with a temporary market service payments as part of a regulatory plan of the order. Finally, no for their milk for up to 30 days at the marketwide service payment provision other current or recommended request of the market administrator; and for the consolidated Northeast order consolidated order recommends (5) demonstrate to the market should not be included in a providing for such cost compensation. administrator that their utilization of consolidated Northeast order. As Cooperative and proprietary handlers in milk in Class I uses is greater than the proposed by ADCNE a 2-cent per cwt. the New England and Middle Atlantic minimum shipments required for pool payment would be made out of the marketing areas included in the plant qualification under the order. marketwide pool to cooperatives and consolidated Northeast order, as well as There are several reasons for not non-cooperative entities for funding entities in all other marketing areas have recommending balancing payments for ‘‘information and policy services’’ that not experienced or have demonstrated the consolidated Northeast order. First, would be of marketwide benefit. any of the harm or ‘‘disadvantage’’ that the proposed Northeast order Cooperative service payments of this arises, or may arise, if such costs are not consolidates two current orders, New sort currently are provided for under shared by the entire pool of producers England and the Middle Atlantic, that terms of the New York-New Jersey in the marketing area. This proposed do not currently provide for balancing order, but are not provided for in either rule can only assume that industry cost offsets to handlers for such the New England or Middle Atlantic participants that have an interest in purposes and that these markets have orders. However, under the New York- developing the promulgation and not experienced any undue harm or New Jersey order, cooperative service amendments to marketing orders would disadvantage by not providing for this payments are made only to qualified be willing to do so at their own expense. sort of cost offset. Secondly, and in cooperatives that meet the conditions The positions and arguments offered are addition to expressed opposition to 4952 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules compensate handlers for balancing the would fall under Federal milk order maximum amount of milk in Class I market, an appropriate class price has regulation, the need for the pass-through uses. been provided for market clearing would be moot. By the mid-1970’s, the M–W was purposes—the Class III—A price. It is a The Secretary proposes that a pass adopted to replace the US. average price price that is applicable in all current through provision, even in light of the series and the seasonal adjustors were Northeast orders, and is continued in limited expansion suggested for the retained. The reason for retaining these this proposed rule as the Class IV price. consolidated Northeast order, should adjustments were indicated to While these two class prices are not the not be included. Class I prices charged encourage handlers to make more milk same (as explained in the BFP section to handlers that compete within the readily available for fluid use in the of this decision), they are conceptually marketing area for fluid sales are short production months and to similar in that handlers have been determined by the location value of facilitate the orderly disposition of provided with a market clearing price their plants. The Class I differential excess reserve milk supplies in flush and further compensation beyond this is structure recommended by either production months. Although some not warranted. Lastly, the proposed 4- Option 1A or Option 1B both recognize regional price disparity was cent per cwt. level is unexplained with the location value of milk for Class I acknowledged to result from retaining respect to how adequately it tends to uses and are both designed to establish these adjustments, they were offset balancing costs. Class I differential values to cause milk nevertheless retained because there was to be delivered to bottling plant to no evidence that providing for such The ‘‘Pass-Through’’ Provision satisfy fluid demands. Accordingly, any adjustment had led to any interregional Currently, the New York order handler located in high-valued pricing problems in the marketing of the reserve provides for what is commonly referred areas will be charged for the location milk supply. to as the ‘‘pass-through’’ provision. The value of Class I milk at their plant Agri-Mark, a major cooperative in the intent of this provision is to provide for location regardless of whether or not northeast, has proposed that seasonal a degree of competitive equity for they compete with other handlers for adjustments continue in the handlers that pay the order’s Class I fluid sales in areas where the location consolidated Northeast order. The main price for milk so that they can compete value of Class I milk at these plant thrust of their proposal is that markets with handlers in unregulated areas that locations are lower. This location value with relatively high Class I use create a do not. This provision has been in place pricing principle should be extended to burden on the manufacturing sector in in the New York order since 1957 and address handlers competing for sales their areas. They view seasonal is a part of how the order allocates and with handlers who do not pay the same adjustments as also assisting in sending classifies milk. In functional terms, the price for Class I milk in unregulated the proper economic signal to pass-through provision removes the areas. manufacturers. This is important, amount of milk distributed outside of according to Agri-Mark because the the marketing area from the full Class I Seasonal Adjustments to the Class III seasonal adjustment provides an allocation provisions of the order, and Class IV Prices economic ‘‘disincentive’’ for Class III thereby providing a degree of price The three northeast orders to be and Class IV manufacturers to use milk relief to handlers who compete with consolidated into a single Northeast in the fall when less producer milk is other handlers who are not held to the order currently provide for a seasonal available and additional supplies are pricing provisions of the order in adjustor on Class III and Class IIIA milk needed for Class I uses. unregulated areas. Regulated New York prices. These provisions have been a The Secretary proposes that as handlers currently compete with part of these three orders for more than presently formulated, seasonal adjustors unregulated handlers in the unregulated 30 years. Prior to the adoption of the to the Class III and Class IV prices areas of Pennsylvania and other areas in Minnesota-Wisconsin (M–W) price should not be incorporated into the the Northeast region. series in the mid-1970’s, these markets provisions of the consolidated Northeast The current provisions of the New established the equivalent of the order. This proposed rule proposes a England and Middle Atlantic orders do modern Class III price on the basis of much more permanent replacement for not have this provision although they what was known as the U.S. Average the current BFP. If the suggested BFP is too adjoin similar non-federally Manufacturing Grade Milk-Price Series adopted in all new consolidated orders, regulated areas. Handlers regulated by (U.S. average price). there is no compelling reason offered at these two orders also compete with The U.S. average price series was a this time to contemplate continuing these same handlers for Class I sales. competitive pay price series, but seasonal adjustments to Class III and The merging and expansion of these differed from the M–W in that it Class IV prices in light of how these three Northeast orders continue to result recorded price averages consistently prices would be derived. They are also in areas that adjoin the recommended below the M–W that was rapidly being not proposed for orders that are Northeast order that would not be adopted elsewhere in the country as the expected to have Class I utilizations regulated. appropriate price for surplus uses of similar to those anticipated in the While there were proposals both for milk and used as a price mover for consolidated Northeast order and who and against retaining a pass-through higher-valued class prices. Given the similarly have important manufacturing provision in the consolidated order, the national marketplace in which surplus activity in such markets. need for it was expresses on the basis of diary products compete for sales, a the extent the Northeast consolidated mechanism was needed to align these 6b. Southeast Regional Issues order would be expanded to include two differing price series. Accordingly, The 3 proposed orders for the currently unregulated areas. Generally, seasonal adjustments to the Class III Southeastern United States—Florida, handlers support continuing to provide price were developed and made a part Southeast, and Appalachian—are faced for a pass-through provision, and this of these orders. These seasonal adjustors with a different set of marketing position can only be considered were found not only to be warranted for conditions than other orders. The reinforced given the limited degree of better price coordination between these Southeastern United States is one of the expansion of the consolidated Northeast two price series, but also served to fastest growing areas of the country but order. If the entire Northeast region encourage handlers to dispose of the the most deficit area in terms of milk Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4953 production per capita. From 1988 to amendments became effective on Pooling Standards 33 1995, the population of the 12 August 1, 1997, in 3 of the 4 orders. A number of comments were Southeastern states rose from 57.9 The Secretary proposes that submitted regarding the issue of pooling million to 63.5 million. By the year transportation credit provisions should standards in the southeast region. The 2000, the population is expected to be retained in the new Southeast and Southeast Dairy Farmers Association reach 66.8 million people. Appalachian orders but should not be (SDFA) recommended that pooling While population increases in the included in the Florida order. Written standards be maintained at levels that Southeast, milk production in the 12 comments received in response to the are as strict or stricter than current Southeast states (i.e., Alabama, advance notice of proposed rulemaking regulations and that southeastern milk Arkansas, Florida, Georgia, Kentucky, indicate that producers in the Southeast marketing orders contain pooling Louisiana, Mississippi, North Carolina, favor retention of these provisions for requirements that reflect the deficit South Carolina, Tennessee, Virginia, these two orders. The Secretary nature of these markets. SDFA argued and West Virginia) has been proposes that the provisions should not that such provisions would discourage decreasing—from 15.4 billion pounds in be included in the Florida order, the movement of milk into and out of 1988 to 13.7 billion pounds in 1996. however, because that market is largely a Federal marketing area that does not The net result of these opposite trends supplied by 2 cooperative associations normally serve the area unless the milk is a widening gap between the local which are able to recoup their costs of was actually needed. The association supplying the market with supply of milk for fluid use and the stated that performance requirements supplemental milk. demand for such milk. for plants are an important element in With the consolidation of orders, the ensuring that southeastern fluid markets Unlike other parts of the country, the Secretary proposes that some are adequately supplied on a year-round Southeast has few facilities for handling conforming changes should be made to basis and in ensuring that only those surplus milk. Consequently, surplus the transportation credit provisions of plants that have as their principle production during the months of the Southeast and Appalachian orders. purpose the supplying of the markets’ January through June must, in some Section 82(c)(1) of the present orders fluid milk requirements receive the cases, be shipped hundreds of miles for limits transportation credits on benefits of higher uniform prices. processing at manufacturing plants transferred bulk milk to plants that are Currently, pooling standards vary generally to the north. For this reason, regulated under orders other than the between markets and regions, and the the provisions in these orders must be southeast orders that currently have the association believes that these varying aimed at the twin goals of encouraging provisions, and section 82(c)(2)(ii) standards should be maintained. SDFA supplemental milk to move to these limits the area where farms may be supports a 50% route disposition markets during the short production located to be eligible for transportation requirement for pool distributing plants months—generally July through credits on milk shipped directly from and recommends that the in-area route December—but they must also producers’ farms. In §§ 1005.82(c)(1), disposition requirement be standardized discourage supplemental milk to move 1007.82(c)(1), 1005.82(c)(2)(ii), and at 15% and the 1500-pound daily to these markets when it is not needed 1007.82(c)(2)(ii), the references to ‘‘1011 average exemption be changed to in the flush production months— and 1046’’ should be removed. 150,000 pounds per month. generally January through June— The addition of northwest Arkansas The National Farmers Organization because such milk would simply and southern Missouri to the Southeast (NFO), recommends that pooling displace local milk and increase marketing area will make those 2 areas standards for all of the orders recognize cooperative organizations’ costs to ineligible for transportation credits. This and accommodate the pooling on a year- dispose of the milk. change in the application of the credits round basis of milk supplies which are actually required for that market’s Class Transportation Credits would naturally follow from the logic for incorporating these 2 areas in the I needs on a seasonal basis. NFO As a result of the need to import milk Southeast marketing area. Specifically, suggests that each order should be to the Southeast from many areas northwest Arkansas and southern viewed separately in determining the outside the Southeast during certain Missouri are regular sources of supply standards and urges the Department to months of the year, transportation credit for handlers in the Southeast marketing carefully evaluate pooling provisions to provisions were incorporated in the area and, in addition, include plants assure equity throughout the system. Carolina, Southeast, Tennessee Valley, that compete for sales with handlers Another commentor, Middlefield and Louisville-Lexington-Evansville regulated under the Southeast order. Cheese of Ohio (Middlefield), orders in August 1996. These provisions Accordingly, the producers in these 2 recommends that all orders have the provide credits to handlers that import areas should, and will, regularly share same pooling requirements. Middlefield supplemental milk for fluid use to the in the pool proceeds of the Southeast states that varying pooling standards market during the short production market. Of course, since transportation between orders create great difficulty in months of July through December. The credits are designed to attract procuring milk for small businesses. It provisions restrict credits to producers supplemental milk to the market for argues that uniformity would allow milk and plants outside of the marketing fluid use from producers who are not to be economically and efficiently areas. The credits are also restricted to regularly associated with the market, marketed to where it is needed as producers who supply the markets transportation credits should not, and opposed to a ‘‘large co-op dictating during the short season and are not will not, apply to a farm or a plant in control over the milk market.’’ applicable to producers who are on the northwest Arkansas or that portion of One of the major cooperatives market throughout the year. southern Missouri that is to be included operating within the Southeast, Mid- in the Southeast marketing area. America Dairymen, Inc. (Mid-Am), Following the initial implementation recommends that the pooling standard of transportation credits in August 1996, 33 for distributing plants in high utilization the provisions were modified in a final The Tennessee Valley order, as amended, was not approved by producers. The order was markets should be 50% Class I. Mid-Am decision issued on May 12, 1997. The terminated effective October 1, 1997. also recommends that market 4954 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules administrators be given the authority to greater assurance of a milk supply in the Jacksonville, Florida and Murray, adjust shipping requirements in all short production months when Kentucky. orders. additional milk is needed. Land O’Lakes Unlike a typical distributing plant, a A number of comments addressed the (LOL) recommended the elimination of plant specializing in aseptically issue of where a plant should be shipping requirements for supply packaged products may have a more regulated and whether there should be plants, but suggested that supply plant erratic processing schedule, reflecting a ‘‘lock-in’’ provision which would keep operators make a commitment to supply the longer shelf life of the products a distributing plant regulated under the the market when additional milk is packaged at the plant. Consequently, a order where it is located rather than needed. LOL also supports the adoption plant’s Class I utilization may vary where it may have the most sales. SDFA of a ‘‘call’’ provision in each order that considerably from month to month. In supports the adoption of lock-in would allow the market administrator to the past, such variability has resulted in provisions in the consolidated southeast require supply plant shipments on an shifting pool status for some of these orders. Prairie Farms Dairy, Inc. states as-needed basis. plants from one order to another. In that pool distributing plants should be Another cooperative operating in the some months, the plant may have been regulated where located rather than Southeast wrote that reserve supply partially regulated, even though all of where route disposition occurs. Another plant qualification should be based on the milk received at the plant was cooperative association, Milk Marketing total cooperative performance but that priced under the order. This type of Inc. (MMI), states that competition for such plants should not be required to be regulatory instability is not conducive to local milk supply and a competitive pay located in the marketing area. This orderly marketing. To guarantee greater price with neighboring plants is much cooperative contends that if a regulatory stability for these plants, they more important to both producers and cooperative is performing a balancing should be fully regulated pool plants if processors than a price that is function for the market, it should not be they are located in the marketing area competitive with other plants that discriminated against just because its and have route disposition in the compete for sales in a given area. plant is not located in the marketing marketing area. However, if the plant Therefore, MMI recommends regulating area. has no route disposition in the a distributing plant in the market where Suggestions were also received marketing area during the month, the it is located rather than on the location concerning certain specialty plants that plant operator may request nonpool of its sales. MMI contends that the are located in the Southeast. SDFA status for the plant. Federal milk order program should be recommended amending the route The Secretary proposes that each of concerned with attracting milk to a disposition definition to accommodate a the three orders also should specify plant, not the retail location. The specialty fluid milk plant in pooling standards for a supply plant. cooperative states that plants in Jacksonville that disposes of long shelf For the Appalachian and Southeast unregulated areas should continue to be life dairy products. SDFA states that orders, a supply plant must ship at least regulated based on sales areas. although a large portion of its fluid 50 percent of the milk physically Some comments received addressed supply is disposed for Class I use, received during the month from dairy supply plant requirements. SDFA because of the nature of its business, it farmers and cooperative bulk tank recommends that for the southeastern is likely that the plant would not meet handlers. In the case of the Florida orders the supply plant shipping the 50% route disposition requirement order, the shipping percentage should requirement be 60% of a plant’s receipts for pool status. be slightly higher at 60 percent. during July through November and 40% Proposal: The Secretary proposes that Unlike supply plant provisions in during December through June. the pool plant provisions for the other orders, the supply plant However, SDFA also acknowledges that Appalachian, Florida, and Southeast provisions in the three southeast orders specific exceptions to this principle may orders under consideration should should not recognize shipments directly be necessary to accommodate specific closely follow the provisions now from producers’ farms as qualifying needs and should be considered on a contained in the southeast orders. The shipments for a supply plant. At the case by case basis. performance standards proposed are present time, there are no plants SDFA states that supply plant appropriate for the needs of these qualifying as ‘‘pool supply plants’’ performance requirements should not be seasonally-deficit markets. under any of the southeast orders. changed in an effort to allow all Grade Section 7(a) of each Federal milk Almost all of the plants that balance A milk to be included in a marketwide order describes the pooling standards the fluid needs of the Southeast are pool. Such a change, it contends, would for a distributing plant. To qualify for operated by cooperative associations. result in disorderly marketing and pooling under each of the 3 orders, a These ‘‘balancing plants’’ qualify for jeopardize the viability of local distributing plant must dispose of 50 pooling based upon the performance of supplies. SDFA requested year-round percent of the total fluid milk products the cooperative association and not shipping requirements for supply plants received at the plant as route based upon shipments from the plant under Orders 5, 6, and 7. disposition. In addition, at least 10 alone. The Secretary proposes that SDFA also states that automatic percent of the plant’s receipts must be balancing plant provisions should be pooling should be provided for disposed of as route disposition in the maintained for the three southeast manufacturing or receiving plants marketing area. These standards would orders. located in the marketing area if the plant indicate that a distributing plant is A balancing plant may qualify based is operated by a cooperative association, closely associated with the fluid market upon shipments directly from but only if the cooperative has a and, therefore, should be part of the producers’ farms as well as shipments substantial association with the market. marketwide pool. from the plant. To qualify as a balancing MMI maintains that southeastern Paragraph (b) of Section 7 would plant, the plant must be located within orders would be well-served by accommodate the pooling of plants that the order’s marketing area. This provisions which allow reserve supply specialize in aseptically-packaged requirement ensures that milk pooled plants in the North and West to products. There are at least two such through the balancing plant is participate in higher blend prices plants in the southeast markets: the economically available to processors of throughout the year, in exchange for Ryan Foods Company plants in fluid milk if needed. However, in the Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4955 case of the Appalachian order only, a that a different standard should apply. during the month (i.e., this is called a balancing plant also may be located in Since, in this case, it cannot be ‘‘touch-base’’ requirement). Under the the State of Virginia. This provision has presumed with certainty that a plant is Appalachian order, six days’ production been in the Carolina order and should most closely associated with the market should be received at a pool plant be continued in the Appalachian order. in which it is located, its association during each of the months of July The performance standards for a with a market should be determined through December, and two days’ balancing plant should be 60 percent of based upon where it has the most sales. production should be received at a pool producer receipts under each of the plant during each of the other months Producer-Handler orders every month of the year. of the year. Under the Southeast order, There is no necessity to seasonally The Secretary proposes that the ten days’ production should be required adjust the supply plant and balancing producer-handler provisions for the to be delivered to a pool plant during plant shipping requirements for the three southeast orders should be very each of the months of July through three southeast orders because the similar to the current provisions. To December to qualify a producer’s milk standards proposed are flexible enough qualify as a producer-handler, a dairy for diversion to a nonpool plant. During to accommodate the disposal of surplus farmer would have to have route the months of January through June, 4 milk during the flush production disposition in excess of 150,000 pounds days’ production should be required to season. In addition, the Secretary per month; otherwise, the producer’s be delivered to a pool plant. proposes that each of the three orders plant would be exempt from regulation Under the proposed Florida order, should contain a provision to allow the pursuant to a provision that has been which will have a higher Class I market administrator to increase or uniformly adopted for all orders. utilization and less need to divert milk, decrease shipping requirements and To qualify as a producer-handler, a a producer should be required to deliver other pooling standards by up to 10 dairy farmer may receive no fluid milk at least ten days’ production to a pool percentage points. This provision also products from sources other than his or plant during every month of the year in should be included in the producer milk her farm and may dispose of no fluid order to be eligible for diversion to a section of all three orders with respect milk products using the distribution nonpool plant. These proposed to the percentage of milk that may be system of another handler. Finally, the standards are comparable to those diverted and the number of days in dairy farmer must provide proof required under the separate Florida which a producer’s milk must be satisfactory to the market administrator orders. received at a pool plant. that the care and management of the The total quantity of milk which may In addition to the provisions dairy animals and other resources be diverted by a pool plant operator or described above, the Secretary proposes necessary to produce all Class I milk cooperative association during the that each of the southeast orders should handled, and the processing, packaging, month also should vary by market as contain a provision to allow unit and distribution operations, are his/her well as by month. Under the pooling of distributing plants operated own enterprise and are operated at his/ Appalachian order, a pool plant by the same handler. The proposed rule her own risk. operator or cooperative association is based upon the provision that has At the present time, there are three or should be permitted to divert 25 percent been in the Southeast order since 1995. four producer-handlers operating in the of their producer milk during the Some distributing plants may meet southeast markets. None of these months of July through November, the pooling standards of more than one operations would lose their status as January and February. During the order. Consequently, the Secretary producer-handlers under the provision months of December and March through proposes that it is necessary to specify recommended for new southeast orders. June, the total diversion limit should the rules for determining where a plant increase to 40 percent of producer milk will be regulated. Under the southeast Producer/Producer Milk receipts. The Secretary proposes that the orders, if a plant meets the pooling The Secretary proposes that the Southeast order should provide a total standards of the order and is located in producer and producer milk definitions diversion limit of 33 percent during the the order’s respective marketing area, recommended for the three southeast months of July through December, and the plant should be regulated under that orders should be nearly identical to the 50 percent during the other months. The order even if it has greater sales in some provisions now in the individual orders. proposed diversion limits under the other order’s marketing area. This These provisions define which dairy Florida order should be 20 percent provision has evolved as a result of farmers are eligible to share in the during the months of July through several price alignment problems in the proceeds of the marketwide pool. November, 25 percent during the Southeast involving a plant located in A producer should be defined as a months of December through February, one marketing area but regulated under dairy farmer whose milk is received at and 40 percent during all other months. another order. In every such case, a a pool plant, diverted to a nonpool The proposed ‘‘touch base’’ plant’s supply of milk was put in plant, or received by a cooperative requirements and gross diversion limits jeopardy as a result of a lower blend association acting as a bulk tank described above should be adjustable by price under the order in which it handler. It excludes a producer-handler, the market administrator to assure became regulated based on its sales. a dairy farmer whose milk is delivered orderly marketing and/or efficient Notwithstanding the merging of several to an exempt plant, or a dairy farmer handling of milk in the marketing area. of the smaller markets in the Southeast, whose milk is reported as diverted milk This procedure is described in the Secretary proposes that this under the provisions of another Federal §§ 1005.13(d)(7), 1006.13(d)(6), and provision should be retained for the order. 1007.13(d)(7). southeast orders to preclude a repetition The proposed diversion limits that are Although a ‘‘dairy farmer for other of this problem. There was widespread specified in the producer milk section markets’’ provision was requested for support in comment letters for retention should be slightly different among the the new orders by some producer of this provision. three southeast orders. To qualify for organizations, it was opposed by others. In the case of a distributing plant that diversion to a nonpool plant, a The Secretary does not propose is not located within any order’s minimum amount of a producer’s milk inclusion of this provision in the three marketing area, the Secretary proposes should be received at a pool plant southeast orders at this time. Such a 4956 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules provision would restrict the free The rate of final payment for all 3 orders receipts used to compute the route movement of milk as needed between should be the preceding month’s disposition percentage. market. The proposed diversion limits uniform price adjusted for butterfat, The Identical Provisions Committee and touch-base requirements in the plant location, partial payments, recommended that the in-area southeast orders should preclude the marketing services, and proper distribution criteria for pool distributing association of milk with these markets deductions authorized in writing by the plants be 15 percent of total route when such milk is not needed at pool producer. disposition. The Committee explained plants. Each order now requires payment to that use of total route disposition rather than bulk receipts as the denominator Report of Receipts and Utilization a cooperative association to be made one day earlier than the payment to an would reduce opportunities for handlers The Secretary proposes that to individual producer. The Secretary to manipulate the manner in which they accommodate the payment schedule proposes that this practice should may report their operations to avoid desired for the three southeast orders, continue under the new orders. regulation. Currently in the Chicago the handler’s report of receipts and Regional and Upper Midwest orders the utilization must be in the market 6c. Midwest Region in-area route disposition standard is administrator’s office no later than the Upper Midwest Order computed using the same basis (bulk 7th day of the month. The producer receipts, including diversions) as is payroll report will be required by the Pool Plant used to determine whether a plant 20th day of the month. The information The Secretary proposes that the pool meets the definition of a pool to be included in these proposed reports distributing and pool supply plant distributing plant. is essentially identical to the current definitions of the proposed consolidated The Secretary proposes that provision order provisions. Upper Midwest order should use the be made for a single handler to form a unit of distributing plants and Payments for Milk standard order language used in other manufacturing plants, all of which must The Secretary proposes that the orders, adapted to marketing conditions in the Upper Midwest. be located within the marketing area. southeast orders should provide The unit would have to meet the The proposed pool distributing plant uniform payment schedules for requirements for a pool distributing definition specifies that for a plant to be payments to and from the producer- plant and at least one of the plants in a pool distributing plant, it must have settlement fund and to producers and the unit would be required to meet the 15 percent or more of its total receipts cooperative associations. Payment to the pool distributing plant requirements as of bulk fluid milk distributed as route producer-settlement fund should be a separate plant. Plants not meeting the made by the 12th day of the month and disposition. This percentage is pool distributing plant definition would payment from the producer-settlement considerably lower than the percentage be required to have disposition of fund should be made one day later. used in the Chicago Regional order, packaged fluid milk products, packaged In the case of payments to producers which varies from 30 percent to 45 fluid cream products, or cottage cheese and cooperative associations, the percent depending on the month. and other soft manufactured products of Secretary proposes that the merged However, the current Upper Midwest at least half of their receipts of Grade A Florida order should maintain the order uses a percentage based on the bulk fluid milk products, including milk longstanding three-payment schedule marketwide Class I percentage for the diverted by the plant operator. that has been part of the present Florida same month of the previous year. Manufacturing plants traditionally orders for many years. The partial During ‘‘normal’’ months this have been included in units with payments to producers under the new percentage is approximately 15 percent. distributing plants because the Florida order should be made on the When some milk is held off the pool for manufacturing plants produced 20th day of the month for milk received economic reasons (primarily unusual products such as packaged fluid cream, during the first 15 days of the month price differences between classes), the sour cream, and cottage cheese that are and on the 5th day of the following percentage may vary considerably, marketed in conjunction with bottled month for milk received during the ranging from the ‘‘normal’’ 15 percent to fluid milk products. In addition, some remainder of the month. The rate of over 50 percent. Use of a constant of these plants produce a limited payment should be at not less than 85 percentage at approximately the market quantity of fluid milk products. percent of the preceding month’s Class I percentage will reduce the Handlers have argued that the operator uniform price, adjusted for plant current opportunities available to of a free-standing manufacturing plant location and for proper deductions distributing plants to become partially that manufactures these complementary authorized in writing by the producer. regulated by manipulating their products should be able to pool its milk The final payment for milk received reported receipts and diversions of milk. supply for both (or for several) plants as during the previous month should be In addition, the proposed language if all of the products were made in the made on or before the 15th day of the should eliminate month-to-month bottling plant. month. uncertainty caused by basing handlers’ Both the Chicago Regional and Upper The Secretary proposes that the regulatory status on the market’s Midwest orders contain a provision for Appalachian and Southeast orders fluctuating utilization percentage. a distributing plant unit. Although the should have identical payment In addition to specifying the route current Chicago Regional order does not schedules. The partial payment for milk disposition percentage at 15 percent, the specify the types of products that may received during the first 15 days of the proposed percentage would be be manufactured at plants in the unit, month should be made on the 26th day calculated on the basis of the total the Upper Midwest order does. The of the month. The rate of payment receipts of bulk fluid milk products Secretary proposes that it is reasonable should be 90 percent of the preceding physically received at the distributing to place restrictions on the types of month’s uniform price. The final plant. Currently both the Chicago products that are disposed of from the payment should be required to be Regional and Upper Midwest orders manufacturing plants in the unit, since received by the producer on or before include milk diverted from the these plants would receive the benefits the 15th day of the following month. distributing plant in the total bulk reserved for pool distributing plants and Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4957 shipments from supply plants to the distributing plant operators as the they maintain continuous pool plant plants in the unit would be considered handlers, rather than as producer milk status. in determining pool supply plant pooled by cooperatives and other The Secretary proposes that handlers qualifications. handlers. The milk pooled by may form supply plant systems by filing A pool supply plant operator should distributing plant handlers accounted a written request by July 15, listing the ship as qualifying shipments at least 10 for approximately 12 percent of the total plants to be in the system. The system percent of the plant’s receipts of milk milk pooled in September 1997 (or would remain in effect from August 1 from producers, including milk diverted approximately 5 percent of the total through July 31 of the following year. by the handler, each month. As in the milk that would have been pooled if all These dates deviate from those current Chicago Regional order, it is of the milk eligible to be pooled in proposed for other orders because of the proposed that such shipments may be September 1997 had been pooled). difference in seasonal production made to pool distributing plants, pool Approximately 7 percent of the Class I variations between this and other distributing plant units, plants of producer milk, or approximately 2 orders. The handler or handlers producer-handlers, partially regulated percent of the total producer milk, establishing the system may also delete distributing plants, or distributing pooled under the Upper Midwest order a plant from the system or dissolve the plants fully regulated by other Federal is pooled by distributing plant system by submitting a written request milk orders. The extent of shipments to operators. The combination of the to the market administrator. Any plant partially regulated distributing plants to supply plant shipping percentage and deleted from a system, or plants that be used for qualification would be the percentage of milk pooled directly were part of a system that was limited to the quantity classified as by distributing plant handlers would discontinued, may not be part of a Class I. Qualifying shipments to appear sufficient to meet anticipated system until the following August. distributing plants regulated by other Class I needs in the proposed Upper Provisions that allow handlers to add Federal milk orders should be limited to Midwest order. The proposed 10 plants to a system under certain the quantity shipped to pool percent supply plant shipping circumstances and to allow systems to distributing plants, and may not be percentage also should be appropriate to reorganize in the event a plant changes agreed-upon Class II, Class III or Class avoid unnecessary and uneconomic ownership or in the event of a business IV utilization. Shipments directly from shipments. failure by a handler are also farms to pool distributing plants and to The proposed rule would allow the incorporated in the proposed order. plants contained in pool distributing market administrator to increase or A system failing to meet pooling plant units should be included as decrease the required shipping standards would be allowed to drop shipments that help to meet the percentage on a marketwide or selected plants from the system until the system percentage qualification standard. area basis if deemed necessary to assure does qualify. The handler responsible The proposed 10 percent shipping an adequate supply of milk to pool for assuring that the system qualifies requirement is approximately 5 distributing plants or to prevent percentage points less than the uneconomic shipments of milk. If the should notify the market administrator anticipated Class I percentage for the shipping percentage is increased by the of which plants are to be deleted from proposed consolidated Upper Midwest market administrator, shipments made the system. If the handler does not order. The 10 percent shipping standard for the purpose of meeting the increased notify the market administrator, the is greater than the current individual percentage may be made only to pool market administrator would exclude supply plant shipping standard and distributing plants or plants contained plants from the system beginning with equal to the maximum shipping in pool distributing plant units. the plant at the bottom of the list of percentage required of pool units during Groups of two or more supply plants plants submitted by the handler the qualifying period in the current should be allowed to form systems of responsible for qualifying the system, Chicago Regional order. The standard supply plants for the purpose of meeting and continuing up the list until the under the current Upper Midwest order, the shipping requirements, by shipping system qualifies. which uses the Class I use percentage of the same percentage as that required for The provisions for supply plant the same month in the previous year as individual pool supply plants that are systems are very similar to the the supply plant shipping percentage, not part of such a system. These pool provisions currently contained in both would exceed the proposed percentage. supply plant systems may consist of the Chicago Regional and Upper Also under the current Upper Midwest plants of the same handler, more than Midwest orders. Unlike the Chicago order, a reserve supply plant must ship one handler, and may contain both Regional and the Upper Midwest orders, 10 percent of its receipts to pool proprietary and cooperative handlers. however, the proposed order does not distributing plants during January The only requirement affecting an contain a specific shipping requirement through June, and the marketwide Class individual plant within the unit is that for individual plants within a supply I percentage for the same months of the the plant must be physically located plant system. In the current Chicago preceding year for the months of July within the marketing area. This Regional order, pool supply plant through December. restriction is necessary to prevent systems have twice the percentage Although the proposed shipping distant plants from receiving the shipping standard of individual supply percentage is below the estimated Class benefits of participating in the plants, with individual plants within I percentage for the proposed Upper marketwide pool without having an the systems required to ship 47,000 Midwest order, the 10 percent shipping actual association with the market. pounds or three percent of their standard should be appropriate, in view Several plants located outside the producer receipts, whichever is less, in of the fact that many distributing plants boundaries of the proposed marketing five of the six months of August through have a supply of milk from their own area currently are included in supply January. The current Upper Midwest producers. In September 1997, plant units by a ‘‘grandfather clause’’ in order requires handlers with supply approximately 27 percent of the milk the Upper Midwest order. The proposed plants in a supply plant system to ship pooled or received at distributing plants order provides that these plants may five percent of each handler’s Grade A in the Chicago Regional order was continue to be included in a supply receipts, including milk diverted by the pooled as producer milk with the plant unit if they so desire as long as handler to nonpool plants, during one of 4958 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules the months of August through are limited to the same quantity shipped that a new producer or a producer who December. to pool distributing plants and may not has broken association with the market This proposed rule does not propose be shipped as agreed-upon Class II, be received at a pool plant prior to the providing for the category of supply Class III or Class IV utilization. These milk being diverted to a nonpool plant. plants referred to as reserve supply are the same performance requirements There is little or no justification for plants. Reserve supply plants ceased to that would apply to supply plants. forcing producer milk to be received at be included in the Chicago Regional Likewise, the same performance a pool plant to maintain or prove order in 1987, while the Upper Midwest requirements that apply to supply association with the market. Supply continues to provide for them. With plants would apply to cooperative plants and cooperatives would be year-round shipping requirements, the associations acting as handlers if the required to ship a fixed percentage of unlimited ability of the market market administrator adjusts the their total milk supply, not just that administrator to change shipping shipping percentages. portion received at their plants, to the percentages both in level and in area, The Secretary proposes that there fluid market. Since both cooperatives and the ability of supply plants to form would be no significant differences in and proprietary handlers can move milk systems, it is proposed that there is no the treatment of milk received at pool directly from the farm to the fluid compelling reason to have two plants under the proposed order and market there is little reason to force milk categories of supply plants. under the Chicago Regional or Upper into a pool plant for regulatory purposes A provision to allow plants to remain Midwest orders. There are, however, only. Certainly the extra cost to the qualified for up to two consecutive several differences relating to diverted handler of moving milk for regulatory months due to unavoidable milk. The proposed order would allow purposes does not enhance economic circumstances, such as a natural the operator of a pool plant to divert, or efficiency or milk quality and in fact disaster, fire, breakdown of equipment, ship milk directly from the farm to decreases economic efficiency and milk or work stoppage is included in this another pool plant, the milk of quality to the detriment of the entire proposed order. The provision is producers for which it is the handler, market. contained in the Chicago Regional order and account for the milk as producer The proposed order provides that and has worked quite well in giving milk at the shipping plant. Allowing producer milk be priced in the month in handlers some administrative relief in either a proprietary pool plant or a which it is picked up at the farm and the face of certain unavoidable cooperative pool plant to divert milk to at the location of the plant at which the circumstances. another pool plant is consistent with the milk is physically unloaded into processing facilities or a storage tank. In Producer Milk Chicago Regional order. In the Upper Midwest order, milk that is received at the current Chicago Regional order milk The definition of producer milk a pool plant and for which a cooperative is priced where milk is pumped within determines which milk will be eligible association is the handler is considered the confines of a plant. The proposed to participate in the Federal order pool. producer milk at the receiving plant. order would eliminate the pricing of The proposed order provides that milk The Upper Midwest order specifies that milk where it is pumped from truck to received at a pool plant directly from a proprietary handler may divert milk to truck and price the milk where it is producers or from a cooperative another pool plant and that such milk eventually unloaded into processing association acting as a handler should will be considered producer milk of the facilities or a storage tank. be eligible to be producer milk. Milk for diverting proprietary handler. The which the operator of a pool plant is the Location Adjustments and proposed language leaves to the Transportation Credits handler that is delivered directly from discretion of the cooperative association the farm to another pool plant should the option of diverting milk to another To help move milk to the fluid market also be considered producer milk. pool plant from its own pool plant or a transportation credit and a Under certain circumstances, milk delivering the milk to the pool plant in procurement credit to be applied to delivered to a nonpool plant may also its capacity as a handler of producer Class I milk are contained in the be considered producer milk. Milk milk pursuant to § 1030.9(c). proposed Upper Midwest order. The delivered directly from a farm to a The proposed Upper Midwest order transportation credit would be nonpool plant may be considered would require that a new producer or a computed by multiplying the producer milk if at least one day’s producer who has broken association hundredweight of Class I milk production is received at a pool plant with the market have at least one day’s contained in transfers of bulk fluid milk during the dairy farmer’s first month as production received at a pool plant from pool plants to pool distributing a producer. during the first month in which the plants by the value obtained by In order to qualify as producer milk producer’s milk is reported as producer multiplying .0028 times the number of the milk pooled by a cooperative milk. Currently the Chicago Regional miles between the shipping plant and association acting as a handler order requires a new producer on the the receiving plant. The transportation described in § 1030.9(c), the cooperative market or a producer who has broken credit should be paid to the shipping must deliver at least 10 percent of the association with the market to have at handler, since the milk would be priced milk for which it is the handler least one day’s production received at at the location at which it is first pursuant to § 1030.9(c) to pool the pool plant at which the milk is received. distributing plants, units of pool reported during the first month in The proposed transportation credit is distributing plants, plants of producer- which the producer’s milk is considered similar to the transportation credit handlers, partially regulated distributing to be producer milk eligible for currently contained in the Chicago plants, or distributing plants fully diversion to a nonpool plant. In Regional order. Both the proposed regulated by other Federal milk orders. addition, at least one day’s production transportation credit and the current The shipments to partially regulated of a producer’s milk must be received at credit, which use the same .0028 rate, distributing plants are limited to the a pool plant in each of the months of are applied to Class I milk only. quantity classified as Class I. Qualifying August through January to be eligible for However, in the current Chicago shipments to distributing plants diversion to a nonpool plant. The Regional order the credit is based on regulated by other Federal milk orders current Upper Midwest order requires 110 percent of the Class I milk received Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4959 at the pool distributing plant, rather included in this consolidated order total receipts of bulk fluid milk products than on the Class I milk delivered by the because Michigan Upper Peninsula is physically received at the distributing shipping handler, as proposed. Since the only remaining individual handler plant. Currently all four of the larger the transportation credit is computed on pool in the current Federal order orders to be included in the the basis of milk classified as Class I at system. Therefore, pooling provisions consolidated Mideast order include the shipping plant, the credit would be are discussed in relation to the 4 milk diverted from the distributing paid to the shipping handler. principal markets included in the plant in the total bulk receipts used to Unlike the transportation credit, proposed Mideast order. compute the route disposition which is based on mileage and paid percentages. only on transfers of bulk milk to pool Pool Plant To assure continued pool distributing plants, the procurement The proposed Mideast pool qualification for all of the handlers who credit would be paid at the rate of 8 distributing plant definition would currently are associated with the cents per hundredweight of Class I milk differ from that contained in most of the Mideast markets, the pool supply plant transferred or diverted by a pool plant other proposed orders to make less definition of the consolidated Mideast to a pool distributing plant. A likely the full Federal regulation of three order would provide for all of the types procurement credit also will be applied State-regulated plants, two in of supply plants that currently qualify to milk received from producers and Pennsylvania and one in Virginia, that for pooling under the 4 principal orders. from cooperative associations acting as currently are partially regulated under The Eastern Ohio-Western Pennsylvania handlers pursuant to § 1030.9(c) based one or more of these orders. These State- pool plant provision includes a plant on the pro rata share of producer milk regulated handlers must pay a minimum operated by a cooperative if the delivered to a pool distributing plant Class I price for milk used in fluid cooperative association delivers to and allocated to Class I. products, often a higher price than distributing plants at least 35 percent of A transportation credit and would be applied under Federal order the milk for which it is the handler procurement credit would be regulation. At the same time, Federal during the current month or over the incorporated in the proposed order to regulation of the Pennsylvania and preceding 12 months. The Southern assist handlers in supplying the Class I Virginia-regulated handlers under the Michigan order includes as pool supply market. These transportation and consolidated order would reduce plants: (a) a plant that has been a pool procurement credits, to be paid on Class producer returns while having little plant for 12 consecutive months and has I milk only in combination with the effect on handlers’ costs of Class I milk. a marketing agreement with a Class I price surface discussed Specifically, the percentage of a cooperative association, and (b) a elsewhere in this proposed rule, will handler’s total route dispositions system of supply plants operated by one help handlers move milk to the fluid distributed within the marketing area or more handlers. Order 40 also market by distributing the cost of that would result in the handler being includes some shipments to other supplying the fluid market to all market fully regulated under the Mideast order Federal order plants and partially participants who share in the should be 30 percent under this order regulated distributing plants, in marketwide pool. Handlers and rather than the 15-percent standard addition to pool distributing plants, as producers who supply the Class I proposed for all but one of the other 10 qualifying shipments by supply plants. market on a regular basis should not be orders. This level of sales in the The percentage of receipts as expected to bear the entire cost of marketing area can be compared to the qualifying shipments to distributing supplying the Class I market while current pooling standards for plants currently ranges from 30 to 40 handlers and producers who meet only distributing plants in the Eastern Ohio- percent for these orders, with direct the minimum requirements derive the Western Pennsylvania and Indiana deliveries from farms rather than plant benefits of marketwide pooling. orders. These orders currently have transfers limited to half of the required Incorporation of a transportation credit variable (30–50 percent) pooling deliveries under three of the orders. All and procurement credit on Class I milk standards for the percentage of a four of the orders require performance in the marketwide pool will assure that distributing plant’s receipts distributed of pooling standards by supply plants at least some of the cost of supplying the on routes, combined with a 10–15 for the months of September through Class I market is shared among all percent standard for receipts distributed February, followed by a ‘‘free ride’’ market participants. within the marketing area. Plants that period during which shipping meet the total dispositions standard at percentages need not be met by supply Mideast Order the lower end of the range (35 or 40 plants that met the shipping standards Many of the provisions of the percent) and distribute only 10 or 15 during the required period. The Indiana proposed Mideast order are explained in percent of their receipts on routes in the order contains a provision allowing the the ‘‘Identical Provisions’’ portion of marketing area would actually distribute continued pooling of a plant that fails to this proposed rule, and need not be approximately 30 percent of their route meet pooling standards because of addressed here. The provisions that dispositions on routes in the marketing circumstances beyond the handler’s deviate somewhat from those proposed area. At the same time, it would be control. for other order areas are the provisions difficult to justify establishing a pooling The proposed shipping standards for dealing with standards for determining standard so high that the significant role pool supply plants are 35 percent for all the pool status of producers and played in a market by a handler having months, with plants meeting the handlers, and those describing the more than 30 percent of its route standard for the months of September pricing of milk under a component disposition in the marketing area would through February being allowed to pricing plan that differs slightly from fail to be recognized by inclusion in the retain their pool status for the that common to the other orders with marketwide pool. immediately following months of March proposed multiple component pricing In addition to specifying the in-area through August. For the purpose of provisions. For the most part, pooling route disposition percentage at 30 making the 35 percent level of shipping provisions have less effect on the percent of total routes, the total and in- standard less burdensome, up to 90 current Michigan Upper Peninsula area route disposition percentages percent of required shipments should be market than on the 4 other markets would be calculated on the basis of the allowed to be made directly from farms 4960 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules to distributing plants. The cooperative Central Order marketed in conjunction with bottled association plant provided for in the Many of the provisions of the fluid milk products. In addition, some Eastern Ohio-Western Pennsylvania proposed Central order are explained in of these plants produce a limited order would be retained, as would the the ‘‘Identical Provisions’’ portion of quantity of fluid milk products. supply plant provisions peculiar to the this proposed rule, and need not be Handlers have argued that the operator Southern Michigan order. addressed here. The provisions that of a free-standing manufacturing plant deviate somewhat from those proposed that manufactures these complementary Producer Milk products should be able to pool its milk for other order areas are the provisions supply for both (or for several) plants as The producer and producer milk dealing with standards for determining if all of the products were made in the the pool status of producers and provisions of the orders to be bottling plant. consolidated in the Mideast order are handlers. An effort is made to explain The pool supply plant definition of quite similar and differ little from those significant differences between the the consolidated Central order would to be incorporated in the other pooling provisions of the 8 individual contain provisions that assure consolidated orders. The principal orders included in this consolidation continued pool qualification for any difference between some of the and those of the consolidated order. handlers or milk currently associated individual orders and the consolidated Pool Plant with the markets consolidated into the order would be the limit on the proposed Central market. The Iowa The proposed Central pool percentage of a handler’s pooled order contains no limit on the amount distributing plant definition should producer milk that may be diverted to of direct-shipped milk that can be used follow closely the provisions contained nonpool plants. The Ohio Valley, to qualify a supply plant, and several of in most of the other proposed orders. the other orders allow such deliveries to Indiana and Eastern Ohio-Western The proposed provisions would make Pennsylvania orders all contain 50 make up a portion of qualifying no difference in the pool status of shipments. The proposed order allows percent diversion limits for the months distributing plants currently pooled of September through November, direct-shipped milk to be counted as under the individual orders. pool qualifying shipments without January and February and a 60 percent Specifically, the percentage of a limit for the month of December, with limit. handler’s total route disposition The Greater Kansas City, Nebraska- no diversion limit for the months of distributed within the marketing area March through August. The Southern Western Iowa, Southern Illinois-Eastern that would result in the handler being Missouri, and Southwest Plains orders Michigan order contains a 60-percent fully regulated under the Central order contain cooperative balancing plant diversion limit for the months of should be the 15-percent standard provisions, allowing cooperative- September through February, with no proposed for most of the other 10 operated plants to be pooled if the limit for the months of March through orders. The minimum percentage of a cooperative delivers a given percentage August. In order to assure that all of the pool distributing plant’s actual physical of the milk for which it is the handler milk that has been pooled under these receipts of bulk fluid milk products that to pool distributing plants. The orders continues to qualify for pooling, would have to be distributed on route is proposed Central order also contains the diversion limit proposed for the proposed to be 25. Currently most of the such a provision, including in the pool Mideast order is 60 percent for the orders to be included in the plant definition a cooperative months of September through February, consolidated Central order include milk association plant that supplies at least with no limit for the March through diverted from the distributing plant in 35 percent of the milk for which it is the August period. At the same time, the the total bulk receipts used to compute handler to pool distributing plants, market administrator would be the route disposition percentages. either during the current month or for authorized to increase or reduce the The proposed order would provide the immediately preceding 12-month diversion limit as needed to maintain that a single handler be allowed to form period. The deliveries to pool orderly marketing and efficient handling a unit of distributing plants and Class II distributing plants may include of milk in the marketing area. manufacturing plants, all of which must deliveries directly from the farms of be located within the marketing area. producers for whom the co-op is the Multiple Component Pricing The unit would have to meet the handler, as well as transfers from the requirements for a pool distributing cooperative’s plant. The reporting and payment provisions plant, and at least one of the plants in Cooperative association ‘‘balancing of the proposed consolidated Mideast the unit would be required to meet the plants’’ serve the market as the outlet of order differ somewhat from those of the pool distributing plant requirements as last resort. When surplus milk has no other consolidated orders that provide a separate plant. Plants in the unit that other place to go on weekends, holidays, for multiple component pricing (MCP) do not meet the pool distributing plant or during months of surplus production, by retaining the current Southern definition would be required to have it moves to cooperative association Michigan component pricing plan. The disposition of packaged fluid milk ‘‘balancing plants’’ where it is Southern Michigan multiple component products, packaged fluid cream manufactured into storable products. pricing plan is very similar to that products, or cottage cheese and other When production decreases, these proposed for the other MCP orders, but Class II products of at least half of their plants operate at minimal capacity or prices ‘‘fluid carrier’’ instead of ‘‘other receipts of Grade A bulk fluid milk may be shut down completely. solids.’’ The Mideast order language is products, including milk diverted by the Cooperative members assume the changed accordingly. This difference plant operator. burden and cost of processing surplus appears to be favored by market The proposed inclusion of Class II milk through such plants. participants in the Mideast, and would manufacturing plants in units with Most of the Central orders allow a result in very little difference in total distributing plants is supported because period during which supply plants do payments, either by handlers or to the manufacturing plants produce not have to meet shipping percentages producers whose milk is pooled under products such as packaged fluid cream, if they have done so for the months the differing provisions. sour cream, and cottage cheese that are during which milk production levels are Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4961 low and demand for fluid milk is high. on the percentage of a handler’s pooled the U.S., relying significantly on more The Iowa order has reduced shipping producer milk that may be diverted to distant milk supplies to meet the standards for such months. The nonpool plants. The percentage of a market’s Class I and II needs. This proposed order should include a period handler’s milk that may be diverted to scenario currently is true for the during which supply plants that have nonpool plants varies under the southern parts of Texas. served the needs of the market when individual orders from 20 percent of The State of New Mexico has milk supplies are tight are not required milk received at pool plants during experienced relatively slow population to meet shipping standards, but it is some months under the Eastern growth, but dramatic increases in milk reduced from the 5–7 month period Colorado order to 70 percent for some production—from 1.099 billion pounds existing in the current orders to a 3- months under the Nebraska-Western in 1988 to an estimated 4.020 billion month period from May through July. Iowa and Iowa orders. Most of the pounds in 1997. With the declining The percentage of receipts as orders require each producer’s milk to production in Texas, the New Mexico qualifying shipments to distributing be received at a pool plant at least once milkshed will be drawn upon more plants currently ranges from 30 to 50 each month. often to supply Class I and II needs in percent for these orders, the Iowa In order to assure that all of the milk the Texas demand centers, 500–600 percentage reduced to 20 for the months that has been pooled under these orders miles distant. Procurement costs would of December through August. continues to qualify for pooling, the be expected to increase dramatically. In The proposed shipping standards for diversion limit proposed for the Central light of these circumstances, proposed pool supply plants under the proposed order is 65 percent for the months of provisions in the proposed Southwest consolidated order are 35 percent for the September through November and order would provide flexibility to months of September through November January, and 75 percent for the months handlers supplying the market to and January and 25 percent for all other of February through April and prevent inefficient movements of milk months, with plants meeting the December. Allowable diversions for the and unnecessary costs of operation percentage standard for the months of months of May through July would be incurred for the purpose of participating August through April being allowed to unlimited. There would be no in the marketwide pool. retain their pool status for the requirement that each producer’s milk Prior to enactment of the 1996 Farm immediately following months of May be received at pool plants for a Bill, cooperatives operating in the through July. minimum number of days per month. At Southwestern Markets had determined Groups of two or more supply plants the same time, the market administrator that the two milk orders in the region should be allowed to form systems of would be authorized to increase or were being operated as one and should supply plants for the purpose of meeting reduce the diversion limit as needed to be merged. Much discussion took place the shipping requirements, by shipping maintain orderly marketing and efficient and proposed order provisions were the same percentage as that required for handling of milk in the marketing area. developed by the principal cooperatives individual pool supply plants that are involved. These comments, with not part of such a system. These pool Multiple Component Pricing numerous others, were considered in supply plant systems may consist of The reporting and payment provisions the development of this proposed rule plants of the same handler or more than of the proposed consolidated Central for the Southwest marketing area. one handler, and may contain both order would include those common to Pooling Standards proprietary and cooperative handlers. other orders with multiple component Most of the pooling standards in the The only requirement affecting each pricing. These markets have a Texas and New Mexico-West Texas plant within the system is that the plant significant amount of milk used in must be physically located within the orders have been suspended for some manufactured products, and component time. The rapid expansion of milk marketing area. This restriction is pricing will enable producers to be paid necessary to prevent distant plants from production in the region during the late according to the valuable components of 1980’s created a situation in which receiving the benefits of participating in their milk. the marketwide pool without having an handlers operating in the region could actual association with the market. 6d. Western Region no longer meet the provisions of the orders while pooling all of their milk As in the other proposed consolidated Southwest Order orders, the market administrator would supplies. have the authority to increase or reduce The proposed consolidated Southwest Pool Distributing Plant. The identical the order’s pooling provisions as marketing area is comprised principally provisions committee recommended marketing conditions change for the of the current Texas and New Mexico- that a pool distributing plant distribute purpose of assuring that an adequate West Texas marketing areas. With as route disposition at least 25% of its supply of milk will be available for fluid regard to milk production and bulk fluid milk receipts at the plant, and use, or to assure that the order does not population (consumption), these areas distribute at least 15% of its total route require handlers to undertake are both in the process of change, but in disposition within the marketing area. uneconomic movements of milk to different ways. Texas has one of the One partially regulated plant located in maintain the pool status of their plants. fastest-growing populations in the U.S., the Texas marketing area would become and until recently has been able to fully regulated under this provision. Producer Milk maintain milk production on a per The plant has been partially regulated The producer and producer milk capita basis. After a significant increase under the Texas order and, periodically, provisions of the orders to be in milk production during the 1988– fully regulated under the Chicago consolidated in the Central order are 1994 period, Texas milk production has Regional order. The proposed quite similar to each other and differ been declining somewhat, accompanied percentages for pool distributing plants little from those to be incorporated in by the exit of approximately 29 percent will cause this plant to become fully the other consolidated orders. The of the State’s Grade A dairy farmers. If regulated under the Southwest order principal difference between some of the current trend continues, the Texas and alleviate the disorderly conditions the individual orders and the market could come to resemble more caused by its shifts between orders. consolidated order would be the limit closely those of the Southeast portion of There should be no change in the 4962 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules plant’s costs, since their supply of milk deliveries to individual pool plants, not be addressed here. Those provisions comes from Southwest pool sources. greatly exacerbating the time and effort that deviate to some extent from the Pool Supply Plant. The Texas and required to keep track of milk ‘‘Identical Provisions’’ are addressed in New Mexico-West Texas orders movements. The total performance this discussion. currently contain a 50% pool supply standard will allow handlers to meet Pool Plant plant shipping percentage during the diversion limits more easily with more Fall months, with a lower percentage or efficient movements of milk. In The proposed pool distributing plant an automatic pooling provision for the addition, the increased percentage of definition is similar to that contained in remaining months. Currently there are allowable diversions will assure that all most of the other proposed orders. The no pool supply plants regulated under of the producers whose milk would minimum percentage of a pool either of the Southwest orders, but qualify for pooling under either of the distributing plant’s physical receipts of provision is made for such an operation two orders being consolidated would bulk fluid milk products that are if it should meet the proposed order’s continue to meet pooling qualifications. disposed of as route disposition is definition. A provision defining proposed to be 25%. The percentage of cooperative plants located in the Transportation Credits for Surplus Milk a handler’s total route disposition into marketing area would base pool The Texas order currently has a the marketing area that would result in qualification on total cooperative market-wide service payment provision a distributing plant becoming fully performance in delivering at least 30 that gives credits for hauling surplus regulated under the Arizona-Las Vegas percent of the cooperative’s milk supply milk located in certain zones in Texas order is proposed to be 15%. While this pooled under this order to pool to nonpool plants outside the State for definition differs slightly from the distributing plants. use in manufactured products. The current order language, it provides Although neither the Texas nor New provision has not been included in the uniformity with other proposed orders Mexico-West Texas orders currently proposed Southwest order language and should result in no additional have provisions for split-plant because of declining production and distributing plants being pooled under operations (plants that have both pool increasing balancing plant capacity in the proposed order or any change in the and nonpool portions) or the authority the affected areas of Texas. pool status of distributing plants for the Market Administrator to adjust currently pooled. shipping requirements, these provisions Payment Provision The proposed pool supply plant are included in the proposed order, as The Texas order is one of only a few definition would require a supply plant recommended by the identical marketing orders that require handlers to ship 50% of its physical receipts of provisions committee. to submit the full classified value during milk from dairy farmers to pool the month to the market Administration. distributing plants during the month in Producer Milk In turn, the Market Administrator acts order to be a pool supply plant. This The current Texas and New Mexico- as a clearing house and forwards these definition would provide for easy, West Texas orders have provisions that proceeds on to the respective effective order administration and require a producer’s milk to be received organizations. Interested persons have would result in no additional handlers at a pool plant, or touch base, before expressed an interest in retaining these being regulated under the order. There milk of the producer is eligible to be provisions, not only for the proposed are currently no pool supply plants in diverted. Based on comments received, Southwest order, but for all other the proposed marketing area. the order would limit diversions of orders. The current Central Arizona order producer milk on the basis of a portion The current Texas payment provision permits a manufacturing plant located of a handler’s total milk supply. At least was found necessary because of in the marketing area that is operated by fifty percent of the milk pooled by a problems encountered in assuring a cooperative association to be a pool handler should be received at pool timely payments by pooled handlers. plant, provided that the cooperative plants for the handler’s entire milk The provision has been in the Texas ships at least 50% of its member milk supply to be pooled. Milk produced by order since 1979, and the earlier to pool plants of other handlers during producers located in the marketing area payment problems have been remedied. the current month or the previous 12- should be eligible for pooling without a Such a provision involves a rather large month period ending with the current particular percentage or number of days’ degree of regulatory intervention month. This percentage requirement is production being required to be between milk processors and their currently suspended. The proposed received at a pool plant. For producers suppliers that should be shown to be order would reduce this percentage to located outside the marketing area, necessary to correct existing problems. 35%. In conjunction with the market however, the currently-suspended There is no indication that such administrator being authorized to ‘‘touch-base’’ provision of 15% problems currently exist, or would exist increase or reduce the percentage in delivered to pool plants during the in the absence of the provision. Nearly response to market conditions, the month (rather than before diversions are all of the milk that will be pooled under reduced performance standard should allowed), is continued in this proposed the consolidated Southwest order is enable the continued pooling of rule. produced by cooperative members and producer milk that currently is pooled Diversion limits are suggested to be pooled by the cooperatives. These large, without resulting in uneconomic 50% of a handler’s total milk supply. business-oriented organizations should handling or disorderly marketing. The current Texas order allows an be able to assure that they receive full The proposed Arizona-Las Vegas amount equal to one-third of the milk payment for their members’ milk in a order should provide that a single delivered to pool plants to be diverted timely manner. handler be allowed to form a unit of (this provision is currently suspended), distributing plants and Class II while the (currently suspended) New Arizona-Las Vegas Order manufacturing plants provided each Mexico-West Texas provision allows Many of the provisions of the plant is located within the marketing 50% of a handler’s total milk supply to proposed Arizona-Las Vegas order are area. The unit in total would be required be diverted. The current Texas order explained in the ‘‘Identical Provisions’’ to meet the requirements for a pool provisions base allowable diversions on portion of this proposed rule and need distributing plant and at least one of the Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4963 plants in the unit would be required to level that would, in some other orders, March through August period during meet the pool distributing plant be an indication that component pricing which a supply plant that has met the definition individually. This provision would be appropriate. However, the order’s shipping percentages for the would provide uniformity with other Class I utilization at the five distributing preceding months of September through federal orders and would not change the plants is more than 80 percent. With the February to be able to continue to be a status of any plants currently pooled. exception of the one cooperative pool plant without meeting the shipping Class II manufacturing plants are balancing plant, the handlers to be standards. As with other proposed included for unit pooling with regulated constitute predominantly a orders, the market administrator would distributing plants operated by the same Class I market. They have expressed no have the authority to increase or handler because such plants produce interest in component pricing, and the decrease the order’s supply plant products that are marketed in fluid nature of much of the market pooling standards as marketing conjunction with fluid milk products. would not seem to warrant multiple conditions change. A provision permitting the market component pricing at this time. The proposed order contains a administrator to adjust the percentages provision that would permit a specified in the pool plant definition Western Order manufacturing plant operated by a will provide the flexibility to respond in Many of the provisions of the cooperative association and located in a timely manner to changing marketing proposed Western order are explained the marketing area to be a pool plant if conditions without the need for a formal in the ‘‘Identical Provisions’’ portion of 35% of the milk for which the hearing process. this proposed rule and need not be cooperative is the handler is received at addressed here. Those provisions that pool distributing plants during the Producer differ from those explained in the month or during the immediately The proposed order contains a dairy ‘‘Identical Provisions,’’ or those preceding 12-month period. This farmer for other markets definition. A currently contained in the orders to be provision is similar to one currently producer could not be pooled under the consolidated, are discussed below. contained in the Great Basin order and proposed Arizona-Las Vegas order Pool Plant in some of the other proposed orders. unless all of the milk from the same The proposed order retains the ‘‘bulk farm was pooled under this or some The proposed pool distributing plant tank handler’’ provision that is currently other federal order or unless such definition is similar to that contained in in the Southwestern Idaho-Eastern nonpooled milk went to a plant with most of the other proposed orders. The Oregon order, permitting a handler only Class III or Class IV utilization. minimum percentage of a pool other than a cooperative association to This differs slightly from the current distributing plant’s physical receipts of divert milk to nonpool plants for the definition in the Central Arizona Order. bulk fluid milk products that are handler’s account based on shipments Such a provision is needed in the disposed of as route disposition is of milk to pool plants of other handlers. proposed order to prevent dairy farmers proposed to be 25%. The percentage of Although the three current orders whose milk is regularly used for fluid a handler’s total route disposition proposed to be consolidated do not disposition in other markets from distributed into the marketing area that contain such a provision, the proposed pooling the surplus portion of their would result in a distributing plant Western order would provide that a production under the proposed order. becoming fully regulated under the single handler be allowed to form a unit Western order is proposed to be 15%. of distributing plants and Class II Producer Milk While this definition differs slightly manufacturing plants provided each The percentage of a handler’s pooled from the current language of the orders plant is located within the marketing milk that may be diverted to nonpool involved in this proposed consolidation, area, as suggested by the Identical plants is proposed to be 20% in any it provides uniformity with other Provisions committee. The unit in total month. Currently, diversions under the proposed orders and should result in no would be required to meet the Central Arizona order are limited to additional distributing plants being requirements for a pool distributing eight days’ production of a producer pooled under the proposed order or any plant and at least one of the plants in during four months of the year, with change in the pool status of distributing the unit would be required to meet the unlimited diversions the remainder of plants currently pooled. pool distributing plant definition the year. The 20% diversion limit The proposed pool supply plant individually. This provision would would result in the amount of milk definition would require a supply plant provide uniformity with other federal eligible for diversion being operator to ship 35% of the milk pooled orders and would not change the status approximately equivalent to eight days’ at the supply plant, either by transfer or of any plants currently pooled. Class II production and would be easier to diversion, to pool distributing plants manufacturing plants are proposed to be administer. The 20% limit year round during the month in order to qualify for included for unit pooling with will assure that pooled milk will have pooling. This definition would provide distributing plants operated by the same a close association with the market’s for more efficient order administration handler because such plants produce fluid processing plants. and would result in no additional products that are marketed in handlers being regulated under the conjunction with fluid milk products. Component Pricing order. The proposed percentage is The proposed Arizona-Las Vegas slightly higher than that contained in Producer order does not provide for multiple the current Southwest Idaho-Eastern The proposed order contains a dairy component pricing. There are six plants Oregon order and slightly lower than farmer for other markets definition. A that are expected to be regulated under that contained in the current Great producer would not qualify for pooling the proposed order: five proprietary Basin and Western Colorado orders. under the proposed Western order distributing plants, and one This change should result in no milk unless all of the milk from the same manufacturing plant operated by a that is currently associated with any of farm was pooled under this or some cooperative association. The Class I the three orders losing such association. other federal order or unless such utilization for the proposed order is The proposed pool supply plant nonpooled milk went to a plant with expected to be less than 50 percent, a definition includes provision for a only Class III or Class IV utilization. 4964 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

This differs slightly from the current Multiple Component Pricing represent very little or no change from definition in the Great Basin order. Such Both the Great Basin order and the the orders’ present payment dates. The a provision is proposed for the Southwestern Idaho-Eastern Oregon proposed partial payment dates are consolidated order to prevent dairy order currently have multiple earlier than those required under the farmers whose milk is regularly used for component pricing based on protein; the current orders, but are very close to those suggested by the Identical fluid disposition in other markets from Western Colorado order does not. The Provisions committee, and compliance pooling the surplus portion of their multiple component pricing provisions should present no hardship to handlers production on the proposed order. of the proposed Western order should who would already have had the use of be the same as those for other proposed Producer Milk the producers’ milk for 9 to 23 days. orders that provide for multiple The percentage of a handler’s pooled component pricing based on protein. Pacific Northwest Order milk that may be diverted to nonpool The proposed Western order has a Many of the provisions of the plants is proposed to be 80% in any significant amount of milk used in proposed Pacific Northwest order are month. This is identical to the manufactured products, especially explained in the ‘‘Identical Provisions’’ percentage currently included in the cheese, and component pricing will portion of this proposed rule, and need Southwestern Idaho-Eastern Oregon enable producers to be paid according to not be addressed here. The provisions order and is only slightly higher than the value of the components of their that deviate somewhat from those that for the present Great Basin order, milk. However, the somatic cell proposed for other order areas are the which is 75% for cooperatives and 70% adjustment included in most of the rest provisions dealing with standards for for proprietary handlers. The 80% limit of the orders for which component determining the pool status of producers on movements of pooled milk to pricing is proposed is not warranted by and handlers, the definition of nonpool plants should permit all milk marketing conditions under the Western producer-handlers, the factors upon associated with the market that is not order, and such an adjustment is not which payments to producers are needed at pool plants during the month included. calculated, and reporting and payment to be pooled and priced under the order. Payments to and From the Producer dates. Because this order is not These percentages are higher than those Settlement Fund proposed to be consolidated with any contained in the Western Colorado other orders, there is little reason for Payments to the producer settlement changing the substance of many of the order, but should not have the effect of fund under the proposed order are due encouraging additional amounts of provisions that are not included in the on or before the 14th day after the end General Provisions. unneeded milk to be pooled in that area. of the month. This is two days after the Reports of Receipts and Utilization and announcement of uniform producer Pool Distributing Plant Payroll Reports prices, which is an identical time period The pool distributing plant provisions to that which exists in the three current of the proposed Pacific Northwest Order The proposed order requires pool orders proposed to be consolidated. would be changed from the current handlers to file a ‘‘report of receipts and Payments from the producer definition to one that more closely utilization’’ on or before the seventh day settlement fund under the proposed resembles the definition suggested in after the end of the month. This is order would be due on or before the the identical provisions report. Rather identical to the current reporting date in 15th day after the end of the month. than basing the identification of a pool the Western Colorado and Great Basin This is the same date as under the distributing plant on only 10 percent of orders but two days earlier than the current Great Basin order, three days the plant’s receipts as in-area route same provision in the Southwestern earlier than under the Southwestern dispositions, the order should specify Idaho-Eastern Oregon order. Almost all Idaho-Eastern Oregon order, and one that such a plant have at least 25 handlers currently file reports by FAX day later than the Western Colorado percent of its physical receipts or some other form of electronic data order. This payment date should be distributed as route disposition, and at transfer, which eliminates delays due to practicable given the use of current least 15 percent of its route disposition mail handling. A seven-day reporting banking and transmission techniques. distributed within the marketing area. period should allow adequate time for Payments to Producers and Cooperative It is not expected that the proposed handlers to prepare reports and will Associations pooling standard will affect the pool allow the computation and release of status of any plant that currently does producer price information to occur on Under the proposed order, partial or does not meet the pooling standard or before the 12th day after the end of payments would be due from handlers of the Pacific Northwest order. In the month. to producers who are not members of addition, it would remedy a provision cooperative associations on or before the that could result in fully regulating a The date on which the report of 25th day of the month in an amount not plant that has minimal association with payments to producers is proposed to be less than 1.2 times the lowest class price the marketing area. due to the market administrator under for the preceding month multiplied by the Western order is on or before the the hundredweight of milk received Pool Supply Plant 21st day after the end of the month. This from such producers during the first 15 For the most part, the current pool is the same date as that under the Great days of the month. Final payments supply plant definition of the Pacific Basin order, but one day earlier than would be due on or before the 17th day Northwest order is appropriate to the under the Southwestern Idaho-Eastern after the end of the month. marketing conditions in the area. Oregon order and two days earlier than Partial payments to cooperative However, the provision that currently the Western Colorado order. The earlier associations would be due on or before requires a handler to include producer reporting date and announcement of the 24th day of the month at the same milk moved directly to pool distributing producer prices should assure that an rate as above, with final payments due plants in the shipments on which pool earlier payroll reporting date would not on or before the 16th day after the end plant performance is calculated would be burdensome. of the month. These final payment dates be changed to allow the handler to Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4965 include such movements if the handler competitive market. State institutions provided in this order but which is wants to qualify its plant for pooling. A may have any number of cost included in several of the proposed plant operator who receives milk at a advantages over regulated handlers in consolidated orders. plant only for manufacturing use also the production and processing of milk, Under the terms of the present would be able to supply producer milk such as not having to pay a minimum provision, the cooperative members of directly to distributing plants without a wage and not having to pay property the reserve supply unit must be located requirement that the manufacturing taxes. It would be unjust to allow such near a pool distributing plant, as a plant be a supply plant. institutions to compete with fully reserve supply plant must be located in The Pacific Northwest order’s current regulated handlers in regular the marketing area. Both the reserve pool supply plant performance standard commercial channels as if the playing supply unit and the reserve supply of 20 percent of milk receipts shipped field were level. Therefore, state and plant provisions require that the plant to distributing plants should continue to other institutions that compete with or unit operator request prior approval be appropriate for this market. The regulated handlers in regular of the market administrator to initiate current March through August period commercial channels, such as bids for and cancel their status, both require during which supply plants do not have school milk programs, would also be long-term association with the market, to ship the minimum percentage to fully regulated. and both provide substantial penalties distributing plants if they have done so for failing to meet all required during the previous September through Producer-Handler conditions. Although the cooperative February period would continue to be The current Pacific Northwest unit does not have monthly included in the pool supply plant producer-handler provisions should qualification requirements, it is subject definition. remain essentially untouched. Some of to a call by the market administrator As in the other proposed consolidated the ‘‘Identical Provisions’’ features of after the market administrator’s orders, the market administrator is the producer-handler definition, such as investigation of the need for proposed to have the authority to the 150,000-pound thresholds for route supplemental supplies of milk. Because increase or decrease the order’s pooling dispositions, own farm production, and of the current existence of this provisions as marketing conditions receipts from pool plants; and the provision, based on the need shown at change for the purpose of assuring that ability to request to operate as both a a public hearing, and its similarities to an adequate supply of milk will be pool plant and a producer, would be a pooling mechanism suggested for available for fluid use, or to assure that adopted. The rest of the current other orders, provision for the the order does not require handlers to producer-handler provisions would cooperative reserve supply unit would undertake uneconomic movements of remain in effect for administrative continue to be included in the proposed milk to maintain: (1) the pool status of purposes. Pacific Northwest order. their plants, or (2) the pooling of Producer-handlers represent a much Producer and Producer Milk producers who have historically been larger portion of the Class I dispositions associated with the market and who in the Pacific Northwest marketing area The proposed Pacific Northwest order help serve Class I needs. than in most other Federal order areas. would contain a ‘‘dairy farmer for other markets’’ provision for each month of Nonpool Plant In many marketing areas, producer- handlers supply 1 percent or less of the the year. The large volume of milk The current definition and exemption Class I sales. In the Pacific Northwest production in California and for milk produced and processed by area, however, they furnish almost 10 California’s quota system give dairy state institutions, as contained in the percent of the market’s Class I farmers an incentive to pool production present order’s producer-handler dispositions. The larger average size of in a volume equal to their quota pounds definition, would be expanded and the dairy farmers in the western United on the California order, and then moved to be included in the ‘‘Nonpool States makes more likely the existence attempt to share in the Pacific plant’’ definition contained in the of a producer-handler that is a Northwest Class I market with their General Provisions. Such entities, along significant factor in the market. over-quota production, for which with colleges and universities and The current order’s producer-handler returns under the California order are charitable organizations, would not be provisions are based on the history of much less. At the same time, none of the subject to the orders’ pricing and producer-handler operations in this California Class I returns would be pooling provisions as long as they have marketing area, reflecting difficulties shared with Pacific Northwest no sales in commercial channels. encountered in order administration, producers. Similarly, the reserve The present Pacific Northwest order attempts to circumvent order supplies for the State-regulated markets provisions allow a state institution to provisions, and court challenges. of Western Nevada and Montana should avoid any regulation on the portion of In addition to the current order not be allowed to share in returns from its milk that is used only within the provisions, the producer-handler the Pacific Northwest order’s higher institution, and apply some pricing definition would also contain language classes of utilization while enjoying the regulation to that portion that is clarifying that milk received by the benefits of the State orders’ Class I distributed in commercial channels. In producer-handler at a location other returns. some respects, this arrangement is than the producer-handler’s processing The current provisions of the Pacific similar to the situation of partially plant for distribution on routes will be Northwest order do not require that a regulated distributing plants. However, included as a receipt from another producer’s milk be received at pool partially regulated distributing plant handler. plants for the producer’s first pooled operators, to avoid obligations under delivery on the market or for any Federal orders, must show that they pay Reserve Supply Unit specified period. If a handler meets its the dairy farmers who ship milk to them The Pacific Northwest order would overall performance requirements for at a rate at least commensurate with that continue to provide for a cooperative supplying milk to the market, it should paid to producers whose milk is pooled reserve supply unit. The existing make no difference which individual under the order. In any case, they must provision has many similarities to a producer’s milk is actually delivered to procure a milk supply in the reserve supply plant, which is not pool plants as long as the milk of each 4966 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules producer participating in the pool is negative effect of somatic cells on the that are due the separate funds under Grade A and available to the market if cheese yields. Although cheese the individual orders would be paid to and when needed. It is expensive, manufacturing in the Northwest is the appropriate combined fund of the inefficient, and unnecessary to move increasing, most cheese manufacturing applicable consolidated order. milk from areas close to nonpool is done by cooperative associations who In most cases, the entire marketing manufacturing plants to bottling plants have expressed the opinion that an area of an order or orders is included in in the city markets when that milk is not adjustment for somatic cells is a quality the proposed consolidated marketing needed for bottling. For the above issue best dealt with internally. The area of one of the 11 regional orders. reasons and the physical fact that there somatic cell adjustments in the Three present marketing areas would be are often great distances and proposed consolidated orders are not split between two consolidated orders. mountainous terrain between plants and incorporated in the proposed Pacific One county of the present Louisville- farms in the more sparsely populated Northwest order. Lexington-Evansville (Order 46) West, no ‘‘touch base’’ requirements marketing area would be included in the should be included. Announcement of Producer Prices Southeast order, and the rest of the This order and other western orders The dates on which handler reports, territory in the Order 46 marketing area have allowed producers to pool milk on market administrator’s announcement of would be included under the more than one order during the same producer prices, and payment to Appalachian order. Even though one month. Because of the locations of a producers would remain unchanged Order 46 county is included in the number of dairy farmers, their milk may from those of the current order. proposed Southeast order, all of the be used by pool plants regulated under present Order 46 producers and more than one order in a single month. 8. Miscellaneous and Administrative handlers are expected to be covered These producers also represent a reserve (a) Consolidation of the Marketing under the proposed consolidated supply for more than one market. Large, Service, Administrative Expense, and Appalachian order. Accordingly, the multi-market handlers should be given Producer-Settlement Funds balances in the Order 46 marketing the flexibility to market and transport service, administrative expense, and their milk to fulfill the needs of their To complete the proposed producer settlement funds should be customers in the most efficient way consolidation of the present 31 Federal consolidated into the three separate possible. orders effectively and equitably, the funds established for the consolidated The small degree of change from the reserve balances in the marketing Appalachian market. current provisions necessary in the service, administrative expense, and Different regulatory situations, pooling provisions of the proposed producer-settlement funds that have however, will occur in the other two Pacific Northwest results in very little resulted under the individual orders instances where a current marketing change proposed for the order’s would be combined. area is divided between two proposed diversion limits. The limit of 80% of the The balances in these three funds consolidated orders. One county of the handler’s supply of producer milk should be combined on the same basis current Great Basin (Order 139) should remain unchanged, with the that the marketing areas are marketing area would be included in the months during which the percentage is consolidated into regional orders herein. consolidated Arizona-Las Vegas order effective changed from September For instance, the Texas and New and the rest of the Order 139 marketing through April to September through Mexico-West Texas marketing areas are area would be included in the February. These months will correspond merged into a new regional Southwest consolidated marketing area for the to the months during which supply order. Accordingly, the reserve balances West. Some of the present Order 139 plants must ship 20 percent of their in the marketing service, administrative producers and handlers would become receipts to pool distributing plants. expense and producer-settlement funds regulated under the Arizona-Las Vegas There would be no limit on diversions of the two individual orders likewise consolidated order and others would of producer milk for the months of should be combined into three separate become regulated under the regional March through August. These delivery funds established under the order for the West. Similarly, two zones standards have not been overly consolidated Southwest order. of the Michigan Upper Peninsula (Order restrictive nor associated unneeded The marketing areas of the proposed 44) marketing area would be included in supplies with the market and should be 11 consolidated orders essentially the consolidated Upper Midwest allowed to continue without change. represent the territory covered by the 31 marketing area and the other zone of the individual orders plus the territory Order 44 marketing area would be Payments to Producers and Cooperative included in the former Tennessee Valley included in the marketing area for the Associations marketing area. Because of this, the Mideast regional order. Accordingly, Although the current Pacific handlers and producers servicing the any reserve balances in the marketing Northwest order contains a multiple milk needs of the individual markets service, administrative expense and component pricing plan very like that will continue to furnish the milk needs producer-settlement funds of these two proposed to be standard for the of the applicable regional market for the individual orders should be divided consolidated orders, it does not now most part. equitably among the applicable and would not under this reform In that regard, the reserve balances in consolidated orders. process contain a somatic cell the funds that have resulted under the The money accumulated in the adjustment provision. The level of 31 individual orders should be marketing service funds of the somatic cells in the western U.S. is combined on a marketing area basis into individual orders is that which has been generally lower than in the east, with an the appropriate separate fund paid by producers for whom the market overall average of approximately established for each of the 11 regional administrators are performing such 250,000 instead of 350,000. This lower orders. Any liabilities of such funds services. Since the marketing areas of somatic cell count would seem to under the individual orders would be the proposed 11 regional orders reduce the need for such a provision. paid from the appropriate newly encompass the territory covered by the Historically, the principal argument for established fund of the applicable individual orders, for the most part, the a somatic cell adjuster has been the regional order. Similarly, obligations producers who have contributed to the Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4967 marketing service funds of the handlers is divided (as in the case of the remaining balance in the producer- individual orders are expected to Michigan Upper Peninsula and Great settlement fund of the Great Basin order continue supplying milk for the Basin orders) between two consolidated should be prorated between the consolidated orders. Since marketing marketing areas, the remaining balance consolidated Arizona-Las Vegas order service programs will be continued for in the administrative expense fund and the regional order for the West on these producers under the regional should be prorated between the two the basis of the amount of milk that will orders, it would be appropriate to regional orders on the basis of the be pooled and priced under each combine the reserve balances in the amount of milk that would be pooled respective proposed consolidated order marketing service funds of the order or and priced under each respective (using producer milk deliveries during orders that are represented in the consolidated order (using producer milk the last month the individual orders are consolidation of each of the proposed 11 deliveries during the last month the in effect but assuming that the orders regional orders. individual orders are in effect but had been consolidated). When the proposed consolidated assuming that the orders had been (b) Consolidation of the Transportation marketing area includes the marketing consolidated). area of one or more individual orders, Likewise, the producer-settlement Credit Balancing Funds any remaining balance in the marketing fund balances of the individual orders To complete the consolidation service fund of the individual order or should be combined. They should be process, the reserve balances in the orders should be combined in the combined on the same basis as the transportation credit balancing funds marketing service fund established for marketing areas are consolidated herein. that are in effect now under three the applicable consolidated order. If a This will enable the producer- Southeast orders (Carolina, Order 5; current marketing area is split between settlement funds of the consolidated Southeast, Order 7; and Louisville- two consolidated markets and the orders to continue without interruption. Lexington-Evansville, Order 46) should regulatory status of producers and The producers currently supplying be consolidated also. These funds handlers is divided between the two the individual markets are expected to should be combined on a marketing area regional orders, as is the case with the supply milk for the proposed basis. In that regard, the reserve Michigan Upper Peninsula and Great consolidated markets. Thus, monetary balances in the transportation credit Basin orders, any balance in the balances in the producer-settlement balancing funds of the Carolina and marketing service fund of the individual funds of the individual orders now Louisville-Lexington-Evansville orders order should be prorated between the would be reflected in the pay prices of should be consolidated into a newly two consolidated orders on the basis of the producers who will benefit from the established transportation credit the amount of milk subject to the applicable consolidated orders. The balancing fund for the Appalachian marketing service deduction that will be combined fund for each proposed order, which also includes the current covered by each respective regional consolidated order also would serve as marketing areas of these two orders with order (using producer deliveries in the a contingency fund from which money the exception of one county. Similarly, last month the individual orders are in would be available to meet obligations the reserve balance in the transportation effect but assuming that the marketing (resulting from audit adjustments and credit balancing fund of the present areas had been consolidated). otherwise) occurring under the Southeast order should be transferred to The money paid to the administrative individual orders. the consolidated Southeast order, which expense fund is each handler’s The same procedure used in includes all of the marketing area of the proportionate share of the cost of combining the remaining balances in present Southeast order. These administering the order. For the most the marketing service and procedures will enable the part, handlers currently regulated under administrative expense funds of the transportation credits to continue the individual orders will continue to be individual orders should be followed in without interruption under these two regulated under the proposed combining the producer-settlement fund proposed consolidated orders. consolidated orders. In view of this, it balances when the individual orders are would be an unnecessary administrative consolidated. For orders where the (c) Proposed General Findings and financial burden to allocate the consolidated marketing area includes The proposed findings and reserve funds of the individual orders the marketing area of one or more determinations hereinafter set forth back to handlers and then accumulate orders, any remaining balance in the supplement those that were made when an adequate reserve for each of the producer-settlement fund of the the aforesaid orders were first issued consolidated orders. It would be as individual order or orders would be and when they were amended. The equitable and more efficient to combine combined into the producer-settlement previous findings and determinations the remaining administrative monies fund established for the applicable are hereby ratified and confirmed, accumulated under the individual consolidated order. In the two situations except where they may conflict with orders in the same manner as the (Michigan Upper Peninsula and Great those set forth herein. marketing areas are proposed to be Basin) where the marketing area of a (1) The tentative marketing combined. current order is split between two agreements and the orders, as hereby For the orders where the proposed proposed consolidated orders and some proposed to be amended, and all of the consolidated marketing area includes of the individual market’s producers terms and conditions thereof, will tend the regulated territory of one or more of and handlers would be regulated under to effectuate the declared policy of the the individual orders, any remaining one consolidated order and others Act; balance in the administrative expense would be regulated under another (2) The parity prices of milk as fund of the individual order or orders consolidated order, the balance in the determined pursuant to section 2 of the would be combined into the producer-settlement fund should be Act are not reasonable in view of the administrative expense fund established divided equitably between the two price of feeds, available supplies of for the applicable consolidated order. In consolidated orders. Since the Michigan feeds, and other economic conditions the situations where the current Upper Peninsula order is an individual- which affect market supply and demand individual marketing area is split and handler pool market, no producer- for milk in each of the aforesaid the regulatory status of producers and settlement fund is provided. The marketing areas, and the minimum 4968 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules prices specified in the tentative PART 1000ÐGENERAL PROVISIONS Subpart JÐMiscellaneous Regulations marketing agreements and the orders, as OF FEDERAL MILK MARKETING 1000.90 Dates. hereby proposed to be amended, are ORDERS 1000.91–1000.92 [Reserved] such prices as will reflect the aforesaid 1000.93 OMB control number assigned factors, insure a sufficient quantity of Subpart AÐScope and Purpose pursuant to the Paperwork Reduction Act. pure and wholesome milk, and be in the Sec. Authority: 7 U.S.C. 601–674. public interest; 1000.1 Scope and purpose of Part 1000. (3) The tentative marketing Subpart BÐDefinitions Subpart AÐScope and Purpose agreements and the orders, as hereby 1000.2 General definitions. § 1000.1 Scope and purpose of Part 1000. proposed to be amended, will regulate 1000.3 Route disposition. This part sets forth certain terms, the handling of milk in the same 1000.4 Plant. definitions, and provisions which shall manner as, and will be applicable only 1000.5 Distributing plant. 1000.6 Supply plant. be common to and part of each Federal to persons in the respective classes of 1000.8 Nonpool plant. milk marketing order in 7 CFR, chapter industrial and commercial activity 1000.9 Handler. X except as specifically defined specified in the marketing agreements; 1000.14 Other source milk. otherwise, or modified, or otherwise (4) All milk and milk products 1000.15 Fluid milk product. provided, in an individual order in 7 handled by handlers, as defined in the 1000.16 Fluid cream product. CFR, chapter X. 1000.17 [Reserved] tentative marketing agreements and the 1000.18 Cooperative association. Subpart BÐDefinitions orders as hereby proposed to be 1000.19 Commercial food processing amended, are in the current of interstate establishment. § 1000.2 General definitions. commerce or directly burden, obstruct, Subpart CÐRules of Practice and (a) Act means Public Act No. 10, 73d or affect interstate commerce in milk or Procedure Governing Market Congress, as amended and as reenacted its products; and Administrators and amended by the Agricultural (5) It is hereby found that the 1000.25 Market administrator. Marketing Agreement Act of 1937, as necessary expense of the market amended (7 U.S.C. 601 et seq.). Subpart DÐRules Governing Order (b) Order means the applicable part of administrator for the maintenance and Provisions functioning of such agency will require Title 7 of the Code of Federal 1000.26 Continuity and separability of Regulations issued pursuant to Section the payment by each handler, as his pro provisions. 8c of the Act as a Federal milk rata share of such expense, 5 cents per marketing order (as amended). hundredweight or such lesser amount as Subpart EÐRules of Practice and Procedure Governing Handlers (c) Department means the U.S. the Secretary may prescribe, with Department of Agriculture. respect to milk specified in § 1000.85 of 1000.27 Handler responsibility for records (d) Secretary means the Secretary of the General Provisions. and facilities. Agriculture of the United States or any 1000.28 Termination of obligations. Proposed Marketing Agreements and officer or employee of the Department to Subpart FÐClassification of Milk whom authority has heretofore been Order Amending the Orders 1000.40 Classes of utilization. delegated, or to whom authority may The proposed marketing agreements 1000.41 [Reserved] hereafter be delegated, to act in his are not included in this proposed rule 1000.42 Classification of transfers and stead. because the regulatory provisions diversions. (e) Person means any individual, 1000.43 General classification rules. partnership, corporation, association, or thereof would be the same as those 1000.44 Classification of producer milk. other business unit. contained in the orders, as hereby 1000.45 Market administrator’s reports and proposed to be amended. The following announcements concerning § 1000.3 Route disposition. order amending the orders regulating classification. Route disposition means a delivery to the handling of milk in the respective Subpart GÐClass Prices a retail or wholesale outlet (except a marketing areas of these orders is plant), either directly or through any 1000.50 Class prices and component prices. distribution facility (including proposed as the detailed and 1000.51 [Reserved] appropriate means by which the 1000.52 Adjusted Class I differentials. disposition from a plant store, vendor, foregoing conclusions may be carried 1000.53 Announcement of class prices and or vending machine) of a fluid milk out. component prices. product in consumer-type packages or 1000.54 Equivalent price. dispenser units classified as Class I List of Subjects in 7 CFR Chapter X milk. Subpart HÐPayments for Milk Milk marketing orders. 1000.70 Producer-settlement fund. § 1000.4 Plant. For the reasons set forth in the 1000.71 Payments to the producer- (a) Except as provided in paragraph preamble and under the authority of 7 settlement fund. (b) of this section, plant means the land, 1000.72 Payments from the producer- U.S.C. 601–674, Title 7, chapter X, CFR buildings, facilities, and equipment settlement fund. constituting a single operating unit or parts 1002, 1004, 1012, 1013, 1036, 1000.76 Payments by a handler operating a establishment at which milk or milk 1040, 1044, 1046, 1049, 1050, 1064, partially regulated distributing plant. products are received, processed, or 1065, 1068, 1076, 1079, 1106, 1135, 1000.77 Adjustment of accounts. packaged, including a facility described 1000.78 Charges on overdue accounts. 1137, 1138, and 1139 are proposed to be in paragraph (b)(2) of this section if the removed, and Parts 1000, 1001, 1005, Subpart IÐAdministrative Assessment and facility receives the milk of more than 1006, 1007, 1030, 1032, 1033, 1124, Marketing Service Deduction one dairy farmer. 1126, 1131, and 1134 are proposed to be 1000.85 Assessment for order (b) Plant shall not include: revised as follows: administration. (1) A separate building without 1000.86 Deduction for marketing services. stationary storage tanks that is used only Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4969 as a reload point for transferring bulk disposing of fluid milk products only fluid cream product) for which the milk from one tank truck to another or through the operation of its own campus handler fails to establish a disposition. a separate building used only as a with no route disposition in commercial distribution point for storing packaged channels; § 1000.15 Fluid milk product. fluid milk products in transit for route (3) A plant from which the total route (a) Except as provided in paragraph disposition; or disposition is for individuals or (b) of this section, fluid milk product (2) An on-farm facility operated as institutions for charitable purposes means any milk products in fluid or part of a single dairy farm entity for the without remuneration; or frozen form containing less than 9 separation of cream and skim or the (4) A plant that has route disposition percent butterfat that are intended to be removal of water from milk. of 150,000 pounds or less during the used as beverages. Such products month. include, but are not limited to: Milk, fat- § 1000.5 Distributing plant. free milk, lowfat milk, light milk, Distributing plant means a plant that § 1000.9 Handler. reduced fat milk, milk drinks, eggnog is approved by a duly constituted Handler means: and cultured buttermilk, including any regulatory agency for the handling of (a) Any person who operates a pool such beverage products that are Grade A milk and at which fluid milk plant or a nonpool plant. flavored, cultured, modified with added products are processed or packaged and (b) Any person who receives packaged nonfat milk solids, sterilized, from which there is route disposition. fluid milk products from a plant for concentrated (to not more than 50 percent total milk solids), or § 1000.6 Supply plant. resale and distribution to retail or wholesale outlets, any person who as a reconstituted. Supply plant means a plant, other (b) The term fluid milk product shall broker negotiates a purchase or sale of than a distributing plant, that is not include: fluid milk products or fluid cream approved by a duly constituted (1) Plain or sweetened evaporated products from or to any pool or nonpool regulatory agency for the handling of milk/skim milk, sweetened condensed plant, and any person who by purchase Grade A milk and at which fluid milk milk/skim milk, formulas especially or direction causes milk of producers to products are received or from which prepared for infant feeding or meal be picked up at the farm and/or moved fluid milk products are transferred or replacement, any product that contains to a plant. Persons who qualify as diverted. by weight less than 6.5 percent nonfat handlers only under this paragraph milk solids, and whey; and § 1000.8 Nonpool plant. under any Federal milk order in 7 CFR, (2) The quantity of skim milk Nonpool plant means any milk chapter X are not subject to the payment equivalent in any modified product receiving, manufacturing, or processing provisions of §§ ll.70, ll.71, ll ll ll ll specified in paragraph (a) of this section plant other than a pool plant. The .72, .73, .76, and .85 of that is greater than an equal volume of following categories of nonpool plants that order. an unmodified product of the same are further defined as follows: (c) Any cooperative association with nature and butterfat content. (a) A plant fully regulated under respect to milk that it receives for its another Federal order means a plant account from the farm of a producer and § 1000.16 Fluid cream product. that is fully subject to the pricing and delivers to pool plants or diverts to Fluid cream product means cream pooling provisions of another Federal nonpool plants pursuant to § l.13 of (other than plastic cream or frozen order. the order. The operator of a pool plant cream), including sterilized cream, or a (b) Producer-handler plant means a receiving milk from a cooperative mixture of cream and milk or skim milk plant operated by a producer-handler as association may be the handler for such containing 9 percent or more butterfat, defined under any Federal order. milk if both parties notify the market with or without the addition of other (c) Partially regulated distributing administrator of this agreement prior to ingredients. plant means a nonpool plant that is not the time that the milk is delivered to the a plant fully regulated under another pool plant and the plant operator § 1000.17 [Reserved] Federal order, a producer-handler plant, purchases the milk on the basis of § 1000.18 Cooperative association. or an exempt plant, from which there is weights determined from its Cooperative association means any route disposition in the marketing area measurement at the farm and butterfat cooperative marketing association of during the month. tests determined from farm bulk tank producers which the Secretary (d) Unregulated supply plant means a samples. determines is qualified under the supply plant that does not qualify as a § 1000.14 Other source milk. provisions of the Capper-Volstead Act, pool supply plant and is not a plant has full authority in the sale of milk of Other source milk means all skim fully regulated under another Federal its members, and is engaged in milk and butterfat contained in or order, a producer-handler plant, or an marketing milk or milk products for its represented by: exempt plant. members. A federation of two or more (a) Receipts of fluid milk products (e) An exempt plant means a plant cooperatives incorporated under the and bulk fluid cream products from any described in this paragraph that is laws of any state will be considered a source other than producers, handlers exempt from the pricing and pooling cooperative association under any described in § 1000.9(c), or pool plants; provisions of any order provided that Federal milk order if all member the operator of the plant files reports as (b) Products (other than fluid milk cooperatives meet the requirements of prescribed by the market administrator products, fluid cream products, and this section. to enable determination of the handler’s products produced at the plant during exempt status: the same month) from any source which § 1000.19 Commercial food processing (1) A plant that is operated by a are reprocessed, converted into, or establishment. governmental agency that has no route combined with another product in the Commercial food processing disposition in commercial channels; plant during the month; and establishment means any facility, other (2) A plant that is operated by a duly (c) Receipts of any milk product than a milk plant, to which fluid milk accredited college or university (other than a fluid milk product or a products and fluid cream products are 4970 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules disposed of, or producer milk is Secretary, surrender the records to a (b) Suspension or termination. The diverted, that uses such receipts as successor or such other person as the Secretary shall suspend or terminate ingredients in food products and has no Secretary may designate; any or all of the provisions of the order other disposition of fluid milk products (4) Furnish information and reports whenever he/she finds that such other than those received in consumer- requested by the Secretary and submit provision(s) obstructs or does not tend type packages (1 gallon or less). office records for examination by the to effectuate the declared policy of the Producer milk diverted to commercial Secretary; Act. The order shall terminate whenever food processing establishments shall be (5) Announce publicly at his/her the provisions of the Act authorizing it subject to the same provisions relating discretion, unless otherwise directed by cease to be in effect. to diversions to plants, including, but the Secretary, by such means as he/she (c) Continuing obligations. If upon the not limited to, §§ ll.13 and ll.52 of deems appropriate, the name of any suspension or termination of any or all each Federal milk order in 7 CFR, handler who, after the date upon which of the provisions of the order there are chapter X. the handler is required to perform such any obligations arising under the order, act, has not: the final accrual or ascertainment of Subpart CÐRules of Practice and (i) Made reports required by the order; which requires acts by any handler, by Procedure Governing Market (ii) Made payments required by the the market administrator or by any other Administrators order; or person, the power and duty to perform (iii) Made available records and § 1000.25 Market administrator. such further acts shall continue facilities as required pursuant to notwithstanding such suspension or (a) Designation. The agency for the § 1000.27; termination. administration of the order shall be a (6) Prescribe reports required of each (d) Liquidation. (1) Upon the market administrator selected by the handler under the order. Verify such suspension or termination of any or all Secretary and subject to removal at the reports and the payments required by provisions of the order, the market Secretary’s discretion. The market the order by examining records administrator, or such other liquidating administrator shall be entitled to (including such papers as copies of agent designated by the Secretary, shall, compensation determined by the income tax reports, fiscal and product if so directed by the Secretary, liquidate Secretary. accounts, correspondence, contracts, the business of the market (b) Powers. The market administrator documents or memoranda of the administrator’s office, dispose of all shall have the following powers with handler, and the records of any other property in his/her possession or respect to each order under his/her persons that are relevant to the control, including accounts receivable, administration: handler’s obligation under the order), by and execute and deliver all assignments (1) Administer the order in examining such handler’s milk handling or other instruments necessary or accordance with its terms and facilities, and by such other appropriate to effectuate any such provisions; investigation as the market disposition; and (2) Maintain funds outside of the administrator deems necessary for the (2) If a liquidating agent is so United States Department of the purpose of ascertaining the correctness designated, all assets and records of the Treasury for the purpose of of any report or any obligation under the market administrator shall be administering the order; order. Reclassify skim milk and butterfat transferred promptly to such liquidating (3) Make rules and regulations to received by any handler if such agent. If, upon such liquidation, the effectuate the terms and provisions of examination and investigation discloses funds on hand exceed the amounts the order; that the original classification was required to pay outstanding obligations (4) Receive, investigate, and report incorrect; of the office of the market administrator complaints of violations to the (7) Furnish each regulated handler a and to pay necessary expenses of Secretary; and written statement of such handler’s liquidation and distribution, such (5) Recommend amendments to the accounts with the market administrator excess shall be distributed to Secretary. promptly each month. Furnish a contributing handlers and producers in (c) Duties. The market administrator corrected statement to such handler if an equitable manner. shall perform all the duties necessary to verification discloses that the original (e) Separability of provisions. If any administer the terms and provisions of statement was incorrect; and provision of the order or its application each order under his/her (8) Prepare and disseminate publicly to any person or circumstances is held administration, including, but not for the benefit of producers, handlers, invalid, the application of such limited to, the following: and consumers such statistics and other provision and of the remaining (1) Employ and fix the compensation information concerning operation of the provisions of the order to other persons of persons necessary to enable him/her order and facts relevant to the or circumstances shall not be affected to exercise the powers and perform the provisions thereof (or proposed thereby. duties of the office; provisions) as do not reveal confidential (2) Pay out of funds provided by the information. Subpart EÐRules of Practice and administrative assessment, except Procedure Governing Handlers expenses associated with functions for Subpart DÐRules Governing Order which the order provides a separate Provisions § 1000.27 Handler responsibility for charge, all expenses necessarily records and facilities. incurred in the maintenance and § 1000.26 Continuity and separability of Each handler shall maintain and functioning of the office and in the provisions. retain records of its operations and performance of the duties of the office, (a) Effective time. The provisions of make such records and its facilities including the market administrator’s the order or any amendment to the order available to the market administrator. If compensation; shall become effective at such time as adequate records of a handler, or of any (3) Keep records which will clearly the Secretary may declare and shall other persons, that are relevant to the reflect the transactions provided for in continue in force until suspended or obligation of such handler are not the order, and upon request by the terminated. maintained and made available, any Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4971 skim milk and butterfat required to be further written notification from the applicable 2-year period indicated reported by such handler for which market administrator. The market below, the obligation of the market adequate records are not available shall administrator shall give further written administrator: be considered as used in the highest- notification to the handler promptly (1) To pay a handler any money priced class. upon the termination of the litigation or which such handler claims is due under (a) Records to be maintained. (1) Each when the records are no longer the terms of the order shall terminate 2 handler shall maintain records of its necessary in connection therewith. years after the end of the month during operations (including, but not limited which the skim milk and butterfat to, records of purchases, sales, § 1000.28 Termination of obligations. involved in the claim were received; or processing, packaging, and disposition) The provisions of this section shall (2) To refund any payment made by as are necessary to verify whether such apply to any obligation under the order a handler (including a deduction or handler has any obligation under the for the payment of money: offset by the market administrator) shall order, and if so, the amount of such (a) Except as provided in paragraphs terminate 2 years after the end of the obligation. Such records shall be such as (b) and (c) of this section, the obligation month during which payment was made to establish for each plant or other of any handler to pay money required to by the handler. receiving point for each month: be paid under the terms of the order (i) The quantities of skim milk and shall terminate 2 years after the last day Subpart FÐClassification of Milk butterfat contained in, or represented of the month during which the market by, products received in any form, administrator receives the handler’s § 1000.40 Classes of utilization. including inventories on hand at the report of receipts and utilization on Except as provided in § 1000.42, all beginning of the month, according to which such obligation is based, unless skim milk and butterfat required to be form, time, and source of each receipt; within such 2-year period, the market reported pursuant to § ll.30 of each (ii) The utilization of all skim milk administrator notifies the handler in Federal milk order in 7 CFR, chapter X and butterfat showing the respective writing that such money is due and shall be classified as follows: quantities of such skim milk and payable. Service of such written notice (a) Class I milk shall be all skim milk butterfat in each form disposed of or on shall be complete upon mailing to the and butterfat: hand at the end of the month; and handler’s last known address and it (1) Disposed of in the form of fluid (iii) Payments to producers, dairy shall contain, but need not be limited to, milk products, except as otherwise farmers and cooperative associations, the following information: provided in this section; including the amount and nature of any (1) The amount of the obligation; (2) Used to produce fluid milk deductions and the disbursement of (2) The month(s) on which such products modifed in volume by the money so deducted. obligation is based; and addition of nonmilk ingredients and/or (2) Each handler shall keep such other (3) If the obligation is payable to one previously processed and priced skim specific records as the market or more producers or to a cooperative milk and butterfat, including milkshake administrator deems necessary to verify association, the name of such and milkshake drinks sold in containers or establish such handler’s obligation producer(s) or such cooperative less than one half-gallon; under the order. association, or if the obligation is (3) In packaged fluid milk products in (b) Availability of records and payable to the market administrator, the inventory at the end of the month, facilities. Each handler shall make account for which it is to be paid. exclusive of skim milk and butterfat available all records pertaining to such (b) If a handler fails or refuses, with accounted for in paragraph (a)(2) of this handler’s operations and all facilities respect to any obligation under the section; and the market administrator finds are order, to make available to the market (4) In shrinkage assigned pursuant to necessary to verify the information administrator all records required by the § 1000.43(b). required to be reported by the order order to be made available, the market (b) Class II milk shall be all skim milk and/or to ascertain such handler’s administrator may notify the handler in and butterfat: reporting, monetary or other obligation writing, within the 2-year period (1) In fluid milk products in under the order. Each handler shall provided for in paragraph (a) of this containers larger than 1 gallon and fluid permit the market administrator to section, of such failure or refusal. If the cream products disposed of or diverted weigh, sample, and test milk and milk market administrator so notifies a to a commercial food processing products and observe plant operations handler, the said 2-year period with establishment if the market and equipment and make available to respect to such obligation shall not administrator is permitted to audit the the market administrator such facilities begin to run until the first day of the records of the commercial food as are necessary to carry out his/her month following the month during processing establishment for the duties. which all such records pertaining to purpose of verification. Otherwise, such (c) Retention of records. All records such obligation are made available to uses shall be Class I; required under the order to be made the market administrator. (2) Used to produce: available to the market administrator (c) Notwithstanding the provisions of (i) Cottage cheese, lowfat cottage shall be retained by the handler for a paragraphs (a) and (b) of this section, a cheese, dry curd cottage cheese, ricotta period of 3 years to begin at the end of handler’s obligation under the order to cheese, pot cheese, Creole cheese, cream the month to which such records pay money shall not be terminated with cheese and any similar soft, high- pertain. If, within such 3-year period, respect to any transaction involving moisture cheese resembling cottage the market administrator notifies the fraud or willful concealment of a fact, cheese in form or use; handler in writing that the retention of material to the obligation, on the part of (ii) Milkshake and ice milk mixes (or such records, or of specified records, is the handler against whom the obligation bases), frozen desserts, and frozen necessary in connection with a is sought to be imposed. dessert mixes distributed in half-gallon proceeding under section 8c(15)(A) of (d) Unless the handler files a petition containers or larger and intended to be the Act or a court action specified in pursuant to section 8c(15)(A) of the Act used in soft or semi-solid form; such notice, the handler shall retain and the applicable rules and regulations (iii) Aerated cream, frozen cream, sour such records, or specified records, until (7 CFR 900.50 et seq.) within the cream, sour half-and-half, sour cream 4972 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules mixtures containing nonmilk items, § 1000.41 [Reserved] (i) If the operators of both plants so yogurt, and any other semi-solid request in their reports of receipts and § 1000.42 Classification of transfers and product resembling a Class II product; diversions. utilization filed with their respective (iv) Custards, puddings, pancake market administrators, transfers in bulk mixes, coatings, batter, and similar (a) Transfers and diversions to pool form shall be classified as other than products; plants. Skim milk or butterfat Class I to the extent that such utilization (v) Buttermilk biscuit mixes and other transferred or diverted in the form of a is available for such classification buttermilk for baking that contain food fluid milk product or transferred in the pursuant to the allocation provisions of starch in excess of 2% of the total form of a bulk fluid cream product from the other order; solids, provided that the product is a pool plant to another pool plant shall (ii) If diverted, the diverting handler labeled to indicate the food starch be classified as Class I milk unless the must request a classification other than content; operators of both plants request the Class I. If the plant receiving the (vi) Formulas especially prepared for same classification in another class. In diverted milk does not have sufficient infant feeding or meal replacement; either case, the classification shall be utilization available for the requested (vii) Candy, soup, bakery products subject to the following conditions: classification and some of the diverted and other prepared foods which are (1) The skim milk and butterfat milk is consequently assigned to Class processed for general distribution to the classified in each class shall be limited I use, the diverting handler shall be public, and intermediate products, to the amount of skim milk and given the option of designating the including sweetened condensed milk, to butterfat, respectively, remaining in entire load of diverted milk as producer be used in processing such prepared such class at the receiving plant after milk at the plant physically receiving food products; the computations pursuant to the milk. Alternatively, if the diverting (viii) A fluid cream product or any § 1000.44(a)(9) and the corresponding handler so chooses, it may designate product containing artificial fat or fat step of § 1000.44(b); which dairy farmers whose milk was substitutes that resembles a fluid cream (2) If the transferring plant received diverted during the month will be product, except as otherwise provided during the month other source milk to designated as producers under the order in paragraph (c) of this section; be allocated pursuant to § 1000.44(a)(3) physically receiving the milk. If the (ix) Any product not otherwise or the corresponding step of diverting handler declines to accept specified in this section; and § 1000.44(b), the skim milk or butterfat either of these options, the market (3) In shrinkage assigned pursuant to so transferred shall be classified so as to administrator will prorate the portion of § 1000.43(b). allocate the least possible Class I diverted milk in excess of Class II, III, (c) Class III milk shall be all skim milk utilization to such other source milk; and IV use among all the dairy farmers and butterfat: and whose milk was received from the (1) Used to produce: (3) If the transferring handler received diverting handler on the last day of the (i) Spreadable cheeses (other than during the month other source milk to month, then the second-to-last day, and cream cheese) and hard cheese of types be allocated pursuant to § 1000.44(a)(8) continuing in that fashion until the that may be shredded, grated, or or (9) or the corresponding steps of excess diverted milk has been assigned crumbled and that are not included in § 1000.44(b), the skim milk or butterfat as producer milk under the receiving paragraph (b)(2)(i) of this section; so transferred, up to the total of the skim order; and (ii) Plastic cream, anhydrous milkfat, milk and butterfat, respectively, in such (iii) If information concerning the and butteroil; and receipts of other source milk, shall not classes to which such transfers or (iii) Evaporated or sweetened be classified as Class I milk to a greater diversions were allocated under the condensed milk/skim milk in a extent than would be the case if the other order is not available to the market consumer-type package; other source milk had been received at administrator for the purpose of (2) In inventory at the end of the the receiving plant. establishing classification under this month of fluid milk products and fluid paragraph, classification shall be Class I, (b) Transfers and diversions to a plant cream products in bulk form; subject to adjustment when such regulated under another Federal order. (3) In any products classified information is available. pursuant to paragraphs (a) or (b) of this Skim milk or butterfat transferred or (c) Transfers and diversions to section that are destroyed or lost by a diverted in the form of a fluid milk producer-handlers and to exempt handler in a vehicular accident, flood, product or transferred in the form of a plants. Skim milk or butterfat that is fire, or in a similar occurrence beyond bulk fluid cream product from a pool transferred or diverted from a pool plant the handler’s control, to the extent that plant to a plant regulated under another to a producer-handler under any Federal the quantities destroyed or lost can be Federal order shall be classified in the order in 7 CFR, chapter X or to an verified from records satisfactory to the following manner. Such classification exempt plant shall be classified: market administrator; shall apply only to the skim milk or (1) As Class I milk if transferred or (4) In the skim milk equivalent of butterfat that is in excess of any receipts diverted to a producer-handler; nonfat milk solids used to modify a at the pool plant from a plant regulated (2) As Class I milk if transferred to an fluid milk product that has not been under another Federal order of skim exempt plant in the form of a packaged accounted for in Class I; and milk and butterfat, respectively, in fluid fluid milk product; and (5) In shrinkage assigned pursuant to milk products and bulk fluid cream (3) In accordance with the utilization § 1000.43(b). products, respectively, that are in the assigned to it by the market (d) Class IV milk shall be all skim same category as described in paragraph administrator if transferred or diverted milk and butterfat: (b)(1) or (2) of this section: in the form of a bulk fluid milk product (1) Used to produce: (1) As Class I milk, if transferred as or transferred in the form of a bulk fluid (i) Butter; and packaged fluid milk products; cream product to an exempt plant. For (ii) Any milk product in dried form; (2) If transferred or diverted in bulk this purpose, the receiving handler’s and form, classification shall be in the utilization of skim milk and butterfat in (2) In shrinkage assigned pursuant to classes to which allocated under the each class, in series beginning with § 1000.43(b). other order: Class IV, shall be assigned to the extent Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4973 possible to its receipts of skim milk and (iii) Any remaining Class I disposition on the basis of the second plant’s butterfat, in bulk fluid cream products, of packaged fluid milk products from utilization using the same assignment and bulk fluid milk products, the nonpool plant shall be assigned to priorities at the second plant that are set respectively, pro rata to each source. the extent possible pro rata to any forth in this paragraph. (d) Transfers and diversions to other remaining unassigned receipts of nonpool plants. Skim milk or butterfat packaged fluid milk products at such § 1000.43 General classification rules. transferred or diverted in the following nonpool plant from pool plants and In determining the classification of forms from a pool plant to a nonpool plants regulated under other Federal producer milk pursuant to § 1000.44, plant that is not a plant regulated under orders in 7 CFR, chapter X; the following rules shall apply: another order in 7 CFR, chapter X, an (iv) Transfers of bulk fluid milk (a) Each month the market exempt plant, or a producer-handler products from the nonpool plant to a administrator shall correct for plant shall be classified: plant regulated under any Federal order mathematical and other obvious errors (1) As Class I milk, if transferred in in 7 CFR, chapter X, to the extent that all reports filed pursuant to § ll.30 of the form of a packaged fluid milk such transfers to the regulated plant each Federal milk order in 7 CFR, product; and exceed receipts of fluid milk products chapter X and shall compute separately (2) As Class I milk, if transferred or from such plant and are allocated to for each pool plant, and for each diverted in the form of a bulk fluid milk Class I at the receiving plant, shall be cooperative association with respect to product or transferred in the form of a assigned to the extent possible in the milk for which it is the handler bulk fluid cream product, unless the following sequence: pursuant to § 1000.9(c) the pounds of following conditions apply: (A) Pro rata to receipts of fluid milk skim milk and butterfat, respectively, in (i) If the conditions described in products at such nonpool plant from each class in accordance with paragraphs (d)(2)(i)(A) and (B) of this pool plants; and §§ 1000.40 and 1000.42, and paragraph section are met, transfers or diversions (B) Pro rata to any remaining (b) of this section. in bulk form shall be classified on the unassigned receipts of fluid milk (b) For purposes of classifying all milk basis of the assignment of the nonpool products at such nonpool plant from reported by a handler pursuant to plant’s utilization, excluding the milk plants regulated under other Federal § ll.30 of each Federal milk order in equivalent of both nonfat milk solids orders in 7 CFR, chapter X; 7 CFR, chapter X, the market and concentrated milk used in the plant (v) Any remaining unassigned Class I administrator shall: during the month, to its receipts as set disposition from the nonpool plant shall (1) Determine the shrinkage or forth in paragraphs (d)(2)(ii) through be assigned to the extent possible in the overage of skim milk and butterfat for (viii) of this section: following sequence: each pool plant and for each handler (A) The transferring handler or (A) To such nonpool plant’s receipts described in § 1000.9(c) by subtracting diverting handler claims such from dairy farmers who the market total utilization from total receipts. Any classification in such handler’s report of administrator determines constitute positive difference would be shrinkage, receipts and utilization filed pursuant to regular sources of Grade A milk for such and any negative difference would be § ll.30 of each Federal milk order in nonpool plant; and overage; 7 CFR, chapter X for the month within (B) To such nonpool plant’s receipts (2) Prorate the shrinkage or overage which such transaction occurred; and of Grade A milk from plants not fully computed in paragraph (b)(1) of this (B) The nonpool plant operator regulated under any Federal order in 7 section to the respective quantities of maintains books and records showing CFR, chapter X which the market skim milk and butterfat reported in each the utilization of all skim milk and administrator determines constitute class. In the case of a handler described butterfat received at such plant which regular sources of Grade A milk for such in § 1000.9(c), the proration of shrinkage are made available for verification nonpool plant; shall be based upon the utilization of purposes if requested by the market (vi) Any remaining unassigned the plants to which the milk was administrator; receipts of bulk fluid milk products at delivered; and (ii) Route disposition in the marketing the nonpool plant from pool plants and (3) Add the prorated shrinkage to, or area of each Federal milk order in 7 plants regulated under other Federal subtract the prorated overage from, the CFR, chapter X from the nonpool plant orders in 7 CFR, chapter X shall be handler’s reported utilization. The and transfers of packaged fluid milk assigned, pro rata among such plants, to results shall be known as the gross products from such nonpool plant to the extent possible first to any utilization in each class. plants fully regulated thereunder shall remaining Class I utilization and then to (c) If any of the water contained in the be assigned to the extent possible in the all other utilization, in sequence milk from which a product is made is following sequence: beginning with Class IV at such nonpool removed before the product is utilized (A) Pro rata to receipts of packaged plant; or disposed of by the handler, the fluid milk products at such nonpool (vii) Receipts of bulk fluid cream pounds of skim milk in such product plant from pool plants; products at the nonpool plant from pool that are to be considered under this part (B) Pro rata to any remaining plants and plants regulated under other as used or disposed of by the handler unassigned receipts of packaged fluid Federal orders in 7 CFR, chapter X shall shall be an amount equivalent to the milk products at such nonpool plant be assigned, pro rata among such plants, nonfat milk solids contained in such from plants regulated under other to the extent possible to any remaining product plus all of the water originally Federal orders in 7 CFR, chapter X; utilization, in sequence beginning with associated with such solids. (C) Pro rata to receipts of bulk fluid Class IV at such nonpool plant; and (d) Skim milk and butterfat contained milk products at such nonpool plant (viii) In determining the nonpool in receipts of bulk concentrated fluid from pool plants; and plant’s utilization for purposes of this milk and nonfluid milk products that (D) Pro rata to any remaining paragraph, any fluid milk products and are reconstituted for fluid use shall be unassigned receipts of bulk fluid milk bulk fluid cream products transferred assigned to Class I use, up to the products at such nonpool plant from from such nonpool plant to a plant not reconstituted portion of labeled plants regulated under other Federal fully regulated under any Federal order reconstituted fluid milk products, on a orders in 7 CFR, chapter X; in 7 CFR, chapter X shall be classified pro rata basis (except for any Class I use 4974 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules of specific concentrated receipts that is beginning with Class IV, the pounds of requested, but not in excess of the established by the handler) prior to any skim milk in: pounds of skim milk remaining in these assignments under § 1000.44. Any (i) Receipts of bulk concentrated fluid classes combined. remaining skim milk and butterfat in milk products and other source milk (7) Subtract from the pounds of skim concentrated receipts shall be assigned (except other source milk received in milk remaining in each class, in series to uses under § 1000.44 on a pro rata the form of an unconcentrated fluid beginning with Class III (or Class IV if basis, unless a specific use of such milk product); the plant had only Class IV utilization), receipts is established by the handler. (ii) Receipts of fluid milk products the pounds of skim milk in fluid milk and bulk fluid cream products for which products and bulk fluid cream products § 1000.44 Classification of producer milk. appropriate health approval is not in inventory at the beginning of the For each month the market established and from unidentified month that were not previously administrator shall determine for each sources; subtracted in this section. handler described in § 1000.9(a) for each (iii) Receipts of fluid milk products (8) Subtract from the pounds of skim pool plant of the handler separately and and bulk fluid cream products from an milk remaining in each class at the for each handler described in § 1000.9(c) exempt plant; plant, pro rata to the total pounds of the classification of producer milk by (iv) Fluid milk products and bulk skim milk remaining in Class I and in allocating the handler’s receipts of skim fluid cream products received, or all other classes combined, and in milk and butterfat to the gross acquired for distribution, from a sequence beginning with Class IV, the utilization of such receipts pursuant to producer-handler as defined under this pounds of skim milk in receipts of fluid § 1000.43(b)(3) by such handler as order or any other Federal order in 7 milk products from an unregulated follows: CFR, chapter X; and supply plant that were not previously (a) Skim milk shall be allocated in the (v) Any receipts not subtracted subtracted in this section and that were following manner: pursuant to paragraphs (a)(1) and (a)(2) not offset by transfers or diversions of (1) Subtract from the pounds of skim of this section. fluid milk products to the unregulated milk in Class I the pounds of skim milk (4) Subtract from the pounds of skim supply plant from which fluid milk in: milk remaining in all classes other than products to be allocated at this step Class I, in sequence beginning with (i) Receipts of packaged fluid milk were received. Class IV, the receipts of fluid milk products from an unregulated supply (9) Subtract in the manner specified products from an unregulated supply plant to the extent that an equivalent below from the pounds of skim milk plant that were not previously amount of skim milk disposed of to remaining in each class the pounds of subtracted in this section for which the such plant by handlers fully regulated skim milk in receipts of bulk fluid milk handler requests classification other under any Federal order in 7 CFR, products from a handler regulated under than Class I, but not in excess of the chapter X is classified and priced as another Federal order in 7 CFR, chapter pounds of skim milk remaining in these Class I milk and is not used as an offset X that are in excess of bulk fluid milk other classes combined. for any other payment obligation under products transferred or diverted to such (5) Subtract from the pounds of skim any order in 7 CFR, chapter X; handler that were not subtracted in milk remaining in all classes other than paragraph (a)(6) of this section; (ii) Packaged fluid milk products in Class I, in sequence beginning with inventory at the beginning of the month. (i) Such subtraction shall be pro rata Class IV, receipts of fluid milk products to the pounds of skim milk in Class I This paragraph shall apply only if the from an unregulated supply plant that pool plant was subject to the provisions and in all other classes combined, with were not subtracted in previous the quantity prorated to all classes of this paragraph or comparable paragraphs, and which are in excess of provisions of another Federal order in 7 combined being subtracted in sequence the pounds of skim milk determined beginning with Class IV, with respect to CFR, chapter X in the immediately pursuant to paragraphs (a)(5)(i) through preceding month; whichever of the following quantities (iii) of this section; represents the lower proportion of Class (iii) Fluid milk products received in (i) Multiply by 1.25 the pounds of packaged form from plants regulated I milk: skim milk remaining in Class I at this (A) The estimated utilization of skim under other Federal orders in 7 CFR, allocation step; milk of all handlers in each class as chapter X; (ii) Subtract from the above result the announced for the month pursuant to (iv) Any remaining receipts of skim pounds of skim milk in receipts of § 1000.45(a); or milk shall be allocated pursuant to producer milk and fluid milk products (B) The total pounds of skim milk paragraph (a)(3)(iv) of this section. from pool plants of other handlers; and remaining in each class at this (2) Subtract from the pounds of skim (iii) Multiply any plus quantity allocation step. milk in Class II the pounds of skim milk resulting above by the percentage that (ii) [Reserved] in the receipts of skim milk in bulk the receipts of skim milk in fluid milk (10) Subtract from the pounds of skim concentrated fluid milk products and in products from unregulated supply milk remaining in each class the pounds other source milk (except other source plants remaining at this pool plant is of of skim milk in receipts of fluid milk milk received in the form of an all such receipts remaining pursuant to products and bulk fluid cream products unconcentrated fluid milk product or a this allocation step. from another pool plant according to the fluid cream product) that is used to (6) Subtract from the pounds of skim classification of such products pursuant produce, or added to, any product in milk remaining in all classes other than to § 1000.42(a). Class II (excluding the quantity of such Class I, in sequence beginning with (b) Butterfat shall be allocated in skim milk that was classified as Class III Class IV, the pounds of skim milk in accordance with the procedure outlined milk pursuant to § 1000.40(c)(4)). Any receipts of bulk fluid milk products for skim milk in paragraph (a) of this remaining receipts of skim milk shall be from a handler regulated under another section; and allocated pursuant to paragraph Federal order in 7 CFR, chapter X that (c) The quantity of producer milk in (a)(3)(iv) of this section. are in excess of bulk fluid milk products each class shall be the combined (3) Subtract from the pounds of skim transferred or diverted to such handler, pounds of skim milk and butterfat milk remaining in each class, in series if other than Class I classification is remaining in each class after the Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4975 computations pursuant to paragraphs (a) price plus 3.5 times the Class I butterfat hundredth cent, shall be the National and (b) of this section. price. Agricultural Statistical Service (NASS) (b) Class II price. The Class II price AA Butter survey price as reported by § 1000.45 Market administrator's reports shall be .965 times the Class II skim and announcements concerning the Department less .079 (make classification. milk price plus 3.5 times the month’s allowance), with the result divided by butterfat price. 0.82. (a) Whenever required for the purpose (c) Class III price. The Class III price of allocating receipts from other Federal shall be .965 times the Class III skim (m) Nonfat solids price. The nonfat order plants pursuant to § 1000.44(a)(9) milk price plus 3.5 times the month’s solids price per pound, rounded to the and the corresponding step of butterfat price. nearest one-hundredth cent, shall be the § 1000.44(b), the market administrator (d) Class IV price. The Class IV price NASS nonfat dry milk survey price as shall estimate and publicly announce shall be .965 times the Class IV skim reported by the Department less $0.125 the utilization (to the nearest whole milk price plus 3.5 times the month’s (make allowance), with the result percentage) in Class I during the month butterfat price. divided by 0.96. of skim milk and butterfat, respectively, (e) Class I differential price. The Class (n) Protein price. The protein price in producer milk of all handlers. The I differential price shall be the estimate shall be based upon the most per pound, rounded to the nearest one- difference between the current month’s hundredth cent shall be the total of: current available data and shall be final Class I and Class III prices (this price for such purpose. may be negative). (1) The NASS 40-lb block cheese (b) The market administrator shall (f) Class II differential price. The Class survey price as reported by the report to the other Federal order market II differential price shall be the Department less 12.7 cents, with the administrators, as soon as possible after difference between the current month’s result multiplied by 1.32; and the handlers’ reports of receipts and Class II and Class IV prices. utilization are received, the class to (2) Multiply by 1.20 an amount (g) Class I skim milk price. The Class computed as follows: The NASS 40-lb which receipts from other Federal order I skim milk price per hundredweight, plants are allocated pursuant to block cheese survey price as reported by rounded to the nearest cent, shall be the the Department less 12.7 cents, with the §§ 1000.43(d) and 1000.44 (including adjusted Class I differential effective at any reclassification of inventories of result multiplied by 1.582 then reduced the location of the plant as specified in by the butterfat price. bulk concentrated fluid milk products), § 1000.52(a) plus a six month declining and thereafter any change in allocation average computed by totaling the value (o) Other solids price. The other solids required to correct errors disclosed on of the higher of Class III or Class IV skim price per pound, rounded to the nearest the verification of such report. milk price for each month, starting with one-hundredth cent, shall be the NASS (c) The market administrator shall the second preceding month, multiplied dry whey survey price as reported by furnish each handler operating a pool by a factor of six and reducing the factor the Department minus 10 cents, with plant who has shipped fluid milk by one for each preceding month and the result divided by 0.968. products or bulk fluid cream products to dividing the sum by 21. a plant fully regulated under another (p) Somatic cell adjustment. (1) The (h) Class II skim milk price. The Class Federal order in 7 CFR, chapter X the somatic cell adjustment rate, per 1,000 II skim milk price per hundredweight class to which the shipments were somatic cells, rounded to five decimal shall be the Class IV skim milk price for allocated by the market administrator of places, shall be computed by the month plus 70 cents. multiplying .0005 times the monthly the other Federal order in 7 CFR, (i) Class III skim milk price. The Class NASS 40-pound block cheese survey chapter X on the basis of the report by III skim milk price per hundredweight, price; the receiving handler and, as necessary, rounded to the nearest cent, shall be the any changes in the allocation arising protein price per pound times 3.3 (2) The somatic cell adjustment, per from the verification of such report. pounds of protein plus the other solids hundredweight, shall be determined by (d) The market administrator shall price per pound times 5.7 pounds of subtracting from 350 the somatic cell report to each cooperative association other solids; count (in thousands) of the milk, which so requests, the percentage of (j) Class IV skim milk price. The Class multiplying the difference by the producer milk delivered by members of IV skim milk price per hundredweight, somatic cell adjustment rate, and the association that was used in each rounded to the nearest cent, shall be the rounding to the nearest full cent. class by each handler receiving the nonfat solids price per pound times 9 milk. For the purpose of this report, the pounds of nonfat solids. § 1000.51 [Reserved] milk so received shall be prorated to (k) Class I butterfat price. The Class I § 1000.52 Adjusted Class I differentials. each class in accordance with the total butterfat price per pound, rounded to utilization of producer milk by the the nearest one-hundredth cent, shall be The Class I differential adjusted for handler. the adjusted Class I differential effective location to be used in § 1000.50(g) and Subpart GÐClass Prices at the location of the plant as specified (k) shall be as follows, except that: in § 1000.52(a) divided by 100, plus a (1) Under the Option 1B Revenue- § 1000.50 Class prices and component six month declining average computed Enhancement Phase-In, the differential prices. by totaling the value of the butterfat shall be increased by $1.10 in 1999, $.70 Subject to the provisions of § 1000.52, price for each month, starting with the in 2000, $.40 in 2001, and $.20 in 2002; the class prices per hundredweight of second preceding month, multiplied by and milk containing 3.5 percent butterfat a factor of six and reducing the factor by and the component prices for the month one for each preceding month and (2) Under the Option 1B Revenue shall be as follows: dividing the sum by 21. Neutral Phase-In, the differential shall (a) Class I price. The Class I price (l) Butterfat price. The butterfat price be increased by $.55 in 1999, $.35 in shall be .965 times the Class I skim milk per pound, rounded to the nearest one- 2000, $.20 in 2001, and $.10 in 2002: 4976 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

AUTAUGA ...... AL 3.30 3.12 2.96 2.79 2.63 2.47 BALDWIN ...... AL 3.50 3.43 3.29 3.14 3.00 2.85 BARBOUR ...... AL 3.45 3.27 3.14 3.00 2.87 2.74 BIBB ...... AL 3.10 2.93 2.78 2.63 2.48 2.33 BLOUNT ...... AL 3.10 2.80 2.62 2.45 2.27 2.09 BULLOCK ...... AL 3.30 3.16 3.04 2.91 2.79 2.67 BUTLER ...... AL 3.45 3.26 3.11 2.97 2.82 2.68 CALHOUN ...... AL 3.10 2.92 2.75 2.59 2.42 2.26 CHAMBERS ...... AL 3.10 3.05 2.92 2.79 2.66 2.53 CHEROKEE ...... AL 3.10 2.82 2.66 2.51 2.35 2.19 CHILTON ...... AL 3.10 3.02 2.86 2.71 2.55 2.39 CHOCTAW ...... AL 3.30 3.23 3.06 2.90 2.73 2.56 CLARKE ...... AL 3.45 3.25 3.10 2.94 2.79 2.64 CLAY ...... AL 3.10 2.94 2.80 2.65 2.51 2.37 CLEBURNE ...... AL 3.10 2.93 2.78 2.63 2.48 2.33 COFFEE ...... AL 3.45 3.28 3.16 3.05 2.93 2.81 COLBERT ...... AL 2.90 2.67 2.50 2.34 2.17 2.01 CONECUH ...... AL 3.45 3.27 3.13 3.00 2.86 2.73 COOSA ...... AL 3.10 3.02 2.86 2.71 2.55 2.39 COVINGTON ...... AL 3.45 3.28 3.15 3.03 2.90 2.78 CRENSHAW ...... AL 3.45 3.26 3.12 2.97 2.83 2.69 CULLMAN ...... AL 3.10 2.79 2.60 2.41 2.22 2.03 DALE ...... AL 3.45 3.28 3.16 3.05 2.93 2.81 DALLAS ...... AL 3.30 3.13 2.98 2.82 2.67 2.52 DE KALB ...... AL 2.90 2.68 2.53 2.38 2.23 2.08 ELMORE ...... AL 3.30 3.12 2.96 2.81 2.65 2.49 ESCAMBIA ...... AL 3.45 3.28 3.16 3.04 2.92 2.80 ETOWAH ...... AL 3.10 2.81 2.65 2.48 2.32 2.15 FAYETTE ...... AL 3.10 2.83 2.68 2.54 2.39 2.24 FRANKLIN ...... AL 2.90 2.68 2.53 2.39 2.24 2.09 GENEVA ...... AL 3.45 3.29 3.19 3.08 2.98 2.87 GREENE ...... AL 3.10 3.03 2.88 2.72 2.57 2.42 HALE ...... AL 3.10 3.03 2.88 2.73 2.58 2.43 HENRY ...... AL 3.45 3.28 3.17 3.05 2.94 2.82 HOUSTON ...... AL 3.45 3.29 3.19 3.08 2.98 2.87 JACKSON ...... AL 2.90 2.66 2.50 2.33 2.17 2.00 JEFFERSON ...... AL 3.10 2.90 2.72 2.55 2.37 2.19 LAMAR ...... AL 3.10 2.84 2.70 2.55 2.41 2.27 LAUDERDALE ...... AL 2.90 2.65 2.48 2.30 2.13 1.95 LAWRENCE ...... AL 2.90 2.66 2.49 2.31 2.14 1.97 LEE ...... AL 3.30 3.06 2.95 2.83 2.72 2.60 LIMESTONE ...... AL 2.90 2.64 2.44 2.25 2.05 1.86 LOWNDES ...... AL 3.30 3.14 2.99 2.85 2.70 2.56 MACON ...... AL 3.30 3.14 3.01 2.87 2.74 2.60 MADISON ...... AL 2.90 2.64 2.44 2.25 2.05 1.86 MARENGO ...... AL 3.30 3.13 2.98 2.83 2.68 2.53 MARION ...... AL 3.10 2.81 2.65 2.48 2.32 2.15 MARSHALL ...... AL 2.90 2.66 2.49 2.33 2.16 1.99 MOBILE ...... AL 3.50 3.43 3.27 3.12 2.96 2.81 MONROE ...... AL 3.45 3.26 3.12 2.97 2.83 2.69 MONTGOMERY ...... AL 3.30 3.13 2.99 2.84 2.70 2.55 MORGAN ...... AL 2.90 2.65 2.47 2.30 2.12 1.94 PERRY ...... AL 3.10 3.03 2.89 2.74 2.60 2.45 PICKENS ...... AL 3.10 2.93 2.78 2.64 2.49 2.34 PIKE ...... AL 3.45 3.26 3.12 2.98 2.84 2.70 RANDOLPH ...... AL 3.10 2.95 2.82 2.69 2.56 2.43 RUSSELL ...... AL 3.30 3.16 3.05 2.93 2.82 2.70 SHELBY ...... AL 3.10 2.91 2.75 2.58 2.42 2.25 ST. CLAIR ...... AL 3.10 2.90 2.72 2.54 2.36 2.18 SUMTER ...... AL 3.10 3.04 2.90 2.75 2.61 2.47 TALLADEGA ...... AL 3.10 2.92 2.76 2.61 2.45 2.29 TALLAPOOSA ...... AL 3.10 3.04 2.90 2.76 2.62 2.48 TUSCALOOSA ...... AL 3.10 2.92 2.76 2.61 2.45 2.29 WALKER ...... AL 3.10 2.81 2.65 2.48 2.32 2.15 WASHINGTON ...... AL 3.45 3.25 3.11 2.96 2.82 2.67 WILCOX ...... AL 3.30 3.14 3.00 2.86 2.72 2.58 WINSTON ...... AL 3.10 2.80 2.61 2.43 2.24 2.06 ARKANSAS ...... AR 2.90 2.71 2.59 2.46 2.34 2.22 ASHLEY ...... AR 3.10 2.92 2.76 2.60 2.44 2.28 BAXTER ...... AR 2.60 2.36 2.17 1.97 1.78 1.59 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4977

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

BENTON ...... AR 2.60 2.30 2.04 1.79 1.53 1.28 BOONE ...... AR 2.60 2.33 2.11 1.88 1.66 1.44 BRADLEY ...... AR 2.90 2.82 2.66 2.50 2.34 2.18 CALHOUN ...... AR 2.90 2.80 2.62 2.45 2.27 2.09 CARROLL ...... AR 2.60 2.31 2.07 1.82 1.58 1.34 CHICOT ...... AR 3.10 2.93 2.78 2.64 2.49 2.34 CLARK ...... AR 2.90 2.64 2.45 2.27 2.08 1.89 CLAY ...... AR 2.60 2.42 2.30 2.17 2.05 1.92 CLEBURNE ...... AR 2.80 2.53 2.36 2.18 2.01 1.84 CLEVELAND ...... AR 2.90 2.81 2.63 2.46 2.28 2.11 COLUMBIA ...... AR 3.10 2.86 2.64 2.42 2.20 1.98 CONWAY ...... AR 2.80 2.56 2.36 2.15 1.95 1.74 CRAIGHEAD ...... AR 2.60 2.58 2.46 2.33 2.21 2.09 CRAWFORD ...... AR 2.80 2.51 2.26 2.00 1.75 1.49 CRITTENDEN ...... AR 2.80 2.69 2.61 2.53 2.45 2.37 CROSS ...... AR 2.80 2.67 2.57 2.46 2.36 2.26 DALLAS ...... AR 2.90 2.78 2.58 2.39 2.19 1.99 DESHA ...... AR 2.90 2.84 2.70 2.56 2.42 2.28 DREW ...... AR 2.90 2.83 2.68 2.53 2.38 2.23 FAULKNER ...... AR 2.80 2.59 2.41 2.22 2.04 1.86 FRANKLIN ...... AR 2.80 2.52 2.27 2.01 1.76 1.51 FULTON ...... AR 2.60 2.38 2.20 2.03 1.85 1.68 GARLAND ...... AR 2.80 2.58 2.39 2.19 2.00 1.81 GRANT ...... AR 2.90 2.66 2.50 2.33 2.17 2.00 GREENE ...... AR 2.60 2.44 2.33 2.23 2.12 2.01 HEMPSTEAD ...... AR 2.90 2.75 2.51 2.28 2.04 1.81 HOT SPRING ...... AR 2.90 2.64 2.45 2.27 2.08 1.89 HOWARD ...... AR 2.90 2.60 2.38 2.15 1.93 1.70 INDEPENDENCE ...... AR 2.60 2.54 2.38 2.22 2.06 1.90 IZARD ...... AR 2.60 2.39 2.23 2.07 1.91 1.75 JACKSON ...... AR 2.60 2.57 2.44 2.30 2.17 2.04 JEFFERSON ...... AR 2.90 2.69 2.55 2.41 2.27 2.13 JOHNSON ...... AR 2.80 2.47 2.24 2.02 1.79 1.56 LAFAYETTE ...... AR 3.10 2.84 2.60 2.35 2.11 1.87 LAWRENCE ...... AR 2.60 2.43 2.30 2.18 2.05 1.93 LEE ...... AR 2.80 2.68 2.58 2.49 2.39 2.30 LINCOLN ...... AR 2.90 2.82 2.66 2.51 2.35 2.19 LITTLE RIVER ...... AR 2.90 2.72 2.46 2.20 1.94 1.68 LOGAN ...... AR 2.80 2.53 2.30 2.06 1.83 1.59 LONOKE ...... AR 2.80 2.62 2.46 2.31 2.15 2.00 MADISON ...... AR 2.60 2.32 2.08 1.85 1.61 1.38 MARION ...... AR 2.60 2.34 2.13 1.93 1.72 1.51 MILLER ...... AR 3.10 2.82 2.57 2.31 2.06 1.80 MISSISSIPPI ...... AR 2.60 2.59 2.48 2.37 2.26 2.15 MONROE ...... AR 2.80 2.66 2.55 2.45 2.34 2.23 MONTGOMERY ...... AR 2.80 2.57 2.37 2.16 1.96 1.76 NEVADA ...... AR 2.90 2.77 2.55 2.34 2.12 1.91 NEWTON ...... AR 2.60 2.38 2.15 1.93 1.70 1.48 OUACHITA ...... AR 2.90 2.79 2.59 2.40 2.20 2.01 PERRY ...... AR 2.80 2.57 2.38 2.18 1.99 1.79 PHILLIPS ...... AR 2.90 2.73 2.63 2.52 2.42 2.32 PIKE ...... AR 2.90 2.62 2.40 2.19 1.97 1.76 POINSETT ...... AR 2.60 2.59 2.49 2.38 2.28 2.17 POLK ...... AR 2.80 2.54 2.31 2.07 1.84 1.61 POPE ...... AR 2.80 2.49 2.28 2.06 1.85 1.64 PRAIRIE ...... AR 2.80 2.64 2.52 2.39 2.27 2.14 PULASKI ...... AR 2.80 2.61 2.45 2.28 2.12 1.96 RANDOLPH ...... AR 2.60 2.41 2.27 2.12 1.98 1.84 SALINE ...... AR 2.80 2.60 2.43 2.26 2.09 1.92 SCOTT ...... AR 2.80 2.54 2.31 2.07 1.84 1.61 SEARCY ...... AR 2.60 2.40 2.19 1.99 1.78 1.58 SEBASTIAN ...... AR 2.80 2.53 2.28 2.04 1.79 1.55 SEVIER ...... AR 2.90 2.59 2.35 2.11 1.87 1.63 SHARP ...... AR 2.60 2.41 2.26 2.12 1.97 1.83 ST. FRANCIS ...... AR 2.80 2.68 2.58 2.49 2.39 2.30 STONE ...... AR 2.60 2.43 2.26 2.08 1.91 1.74 UNION ...... AR 3.10 2.89 2.70 2.51 2.32 2.13 VAN BUREN ...... AR 2.80 2.50 2.31 2.11 1.92 1.72 WASHINGTON ...... AR 2.60 2.31 2.07 1.82 1.58 1.34 WHITE ...... AR 2.80 2.61 2.46 2.30 2.15 1.99 4978 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

WOODRUFF ...... AR 2.80 2.64 2.51 2.39 2.26 2.13 YELL ...... AR 2.80 2.55 2.33 2.12 1.90 1.68 APACHE ...... AZ 1.90 2.25 2.11 1.96 1.82 1.67 COCHISE ...... AZ 2.10 2.20 1.98 1.75 1.53 1.31 COCONINO ...... AZ 1.90 2.24 2.07 1.90 1.73 1.56 GILA ...... AZ 2.10 2.18 1.95 1.73 1.50 1.28 GRAHAM ...... AZ 2.10 2.28 2.03 1.79 1.54 1.30 GREENLEE ...... AZ 2.10 2.21 2.00 1.80 1.59 1.38 LA PAZ ...... AZ 2.10 2.23 2.06 1.88 1.71 1.54 MARICOPA ...... AZ 2.35 2.24 1.97 1.69 1.42 1.14 MOHAVE ...... AZ 1.90 2.10 2.00 1.90 1.80 1.70 NAVAJO ...... AZ 1.90 2.18 2.02 1.87 1.71 1.56 PIMA ...... AZ 2.35 2.37 2.10 1.82 1.55 1.28 PINAL ...... AZ 2.35 2.26 2.00 1.73 1.47 1.21 SANTA CRUZ ...... AZ 2.10 2.28 2.04 1.79 1.55 1.31 YAVAPAI ...... AZ 1.90 2.20 2.00 1.81 1.61 1.41 YUMA ...... AZ 2.10 2.25 2.08 1.92 1.75 1.58 ALAMEDA ...... CA 1.80 1.69 1.59 1.48 1.38 1.27 ALPINE ...... CA 1.70 1.53 1.36 1.20 1.03 0.86 AMADOR ...... CA 1.70 1.54 1.39 1.23 1.08 0.92 BUTTE ...... CA 1.70 1.72 1.60 1.47 1.35 1.23 CALAVERAS ...... CA 1.70 1.54 1.37 1.21 1.04 0.88 COLUSA ...... CA 1.70 1.62 1.54 1.46 1.38 1.30 CONTRA COSTA ...... CA 1.80 1.68 1.57 1.45 1.34 1.22 DEL NORTE ...... CA 1.80 1.73 1.65 1.58 1.50 1.43 EL DORADO ...... CA 1.70 1.55 1.39 1.24 1.08 0.93 FRESNO ...... CA 1.60 1.59 1.41 1.24 1.06 0.89 GLENN ...... CA 1.70 1.63 1.55 1.48 1.40 1.33 HUMBOLDT ...... CA 1.80 1.73 1.66 1.58 1.51 1.44 IMPERIAL ...... CA 2.00 1.92 1.84 1.77 1.69 1.61 INYO ...... CA 1.60 1.51 1.43 1.34 1.26 1.17 KERN ...... CA 1.80 1.68 1.57 1.45 1.34 1.22 KINGS ...... CA 1.60 1.50 1.39 1.29 1.18 1.08 LAKE ...... CA 1.80 1.71 1.63 1.54 1.46 1.37 LASSEN ...... CA 1.70 1.57 1.44 1.32 1.19 1.06 LOS ANGELES ...... CA 2.10 2.03 1.82 1.61 1.40 1.19 MADERA ...... CA 1.60 1.45 1.30 1.15 1.00 0.85 MARIN ...... CA 1.80 1.71 1.62 1.53 1.44 1.35 MARIPOSA ...... CA 1.70 1.52 1.34 1.16 0.98 0.80 MENDOCINO ...... CA 1.80 1.72 1.65 1.57 1.50 1.42 MERCED ...... CA 1.70 1.54 1.39 1.23 1.08 0.92 MODOC ...... CA 1.70 1.59 1.48 1.38 1.27 1.16 MONO ...... CA 1.60 1.45 1.30 1.14 0.99 0.84 MONTEREY ...... CA 1.80 1.77 1.74 1.72 1.69 1.66 NAPA ...... CA 1.80 1.69 1.59 1.48 1.38 1.27 NEVADA ...... CA 1.70 1.57 1.44 1.30 1.17 1.04 ORANGE ...... CA 2.10 1.93 1.76 1.60 1.43 1.26 PLACER ...... CA 1.70 1.56 1.41 1.27 1.12 0.98 PLUMAS ...... CA 1.70 1.58 1.45 1.33 1.20 1.08 RIVERSIDE ...... CA 2.00 1.88 1.76 1.65 1.53 1.41 SACRAMENTO ...... CA 1.70 1.58 1.46 1.34 1.22 1.10 SAN BENITO ...... CA 1.80 1.74 1.69 1.63 1.58 1.52 SAN BERNARDINO ...... CA 1.80 1.72 1.64 1.57 1.49 1.41 SAN DIEGO ...... CA 2.10 2.07 1.91 1.74 1.58 1.41 SAN FRANCISCO ...... CA 1.80 1.74 1.64 1.53 1.43 1.33 SAN JOAQUIN ...... CA 1.70 1.56 1.42 1.29 1.15 1.01 SAN LUIS OBISPO ...... CA 1.80 1.73 1.66 1.60 1.53 1.46 SAN MATEO ...... CA 1.80 1.72 1.64 1.56 1.48 1.40 SANTA BARBARA ...... CA 1.80 1.74 1.67 1.61 1.54 1.48 SANTA CLARA ...... CA 1.80 1.73 1.65 1.58 1.50 1.43 SANTA CRUZ ...... CA 1.80 1.75 1.70 1.65 1.60 1.55 SHASTA ...... CA 1.70 1.74 1.64 1.53 1.43 1.33 SIERRA ...... CA 1.70 1.57 1.44 1.31 1.18 1.05 SISKIYOU ...... CA 1.80 1.71 1.63 1.54 1.46 1.37 SOLANO ...... CA 1.80 1.68 1.56 1.45 1.33 1.21 SONOMA ...... CA 1.80 1.71 1.63 1.54 1.46 1.37 STANISLAUS ...... CA 1.70 1.53 1.36 1.20 1.03 0.86 SUTTER ...... CA 1.70 1.61 1.52 1.42 1.33 1.24 TEHAMA ...... CA 1.70 1.63 1.55 1.48 1.40 1.33 TRINITY ...... CA 1.80 1.72 1.65 1.57 1.50 1.42 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4979

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

TULARE ...... CA 1.60 1.48 1.37 1.25 1.14 1.02 TUOLUMNE ...... CA 1.70 1.52 1.35 1.17 1.00 0.82 VENTURA ...... CA 1.80 1.71 1.61 1.52 1.42 1.33 YOLO ...... CA 1.70 1.60 1.50 1.39 1.29 1.19 YUBA ...... CA 1.70 1.60 1.50 1.39 1.29 1.19 ADAMS ...... CO 2.55 2.40 2.07 1.75 1.42 1.09 ALAMOSA ...... CO 1.90 2.35 2.20 2.05 1.90 1.75 ARAPAHOE ...... CO 2.55 2.42 2.11 1.79 1.48 1.17 ARCHULETA ...... CO 1.90 1.73 1.76 1.80 1.83 1.86 BACA ...... CO 2.35 2.29 2.08 1.86 1.65 1.44 BENT ...... CO 2.35 2.35 2.11 1.86 1.62 1.37 BOULDER ...... CO 2.45 2.31 2.01 1.72 1.42 1.13 CHAFFEE ...... CO 1.90 2.31 2.12 1.92 1.73 1.54 CHEYENNE ...... CO 2.35 2.25 2.00 1.74 1.49 1.24 CLEAR CREEK ...... CO 2.45 2.33 2.06 1.78 1.51 1.24 CONEJOS ...... CO 1.90 2.29 2.18 2.06 1.95 1.84 COSTILLA ...... CO 1.90 2.35 2.20 2.04 1.89 1.74 CROWLEY ...... CO 2.45 2.47 2.20 1.94 1.67 1.41 CUSTER ...... CO 2.45 2.39 2.18 1.98 1.77 1.56 DELTA ...... CO 2.00 1.95 1.89 1.84 1.78 1.73 DENVER ...... CO 2.55 2.41 2.09 1.78 1.46 1.14 DOLORES ...... CO 1.90 1.80 1.80 1.80 1.80 1.80 DOUGLAS ...... CO 2.55 2.43 2.13 1.83 1.53 1.23 EAGLE ...... CO 1.90 1.72 1.64 1.56 1.48 1.40 EL PASO ...... CO 2.45 2.43 2.13 1.83 1.53 1.23 ELBERT ...... CO 2.55 2.45 2.18 1.90 1.63 1.35 FREMONT ...... CO 2.45 2.38 2.16 1.94 1.72 1.50 GARFIELD ...... CO 2.00 1.92 1.83 1.75 1.66 1.58 GILPIN ...... CO 2.45 2.32 2.04 1.76 1.48 1.20 GRAND ...... CO 1.90 2.25 2.00 1.74 1.49 1.24 GUNNISON ...... CO 1.90 1.77 1.74 1.70 1.67 1.64 HINSDALE ...... CO 1.90 1.79 1.78 1.78 1.77 1.76 HUERFANO ...... CO 2.45 2.40 2.21 2.01 1.82 1.62 JACKSON ...... CO 1.90 2.24 1.98 1.72 1.46 1.20 JEFFERSON ...... CO 2.55 2.43 2.13 1.82 1.52 1.22 KIOWA ...... CO 2.35 2.34 2.08 1.83 1.57 1.31 KIT CARSON ...... CO 2.35 2.24 1.97 1.71 1.44 1.18 LA PLATA ...... CO 1.90 2.29 2.08 1.87 1.66 1.45 LAKE ...... CO 1.90 1.73 1.76 1.78 1.81 1.84 LARIMER ...... CO 2.45 2.30 2.00 1.69 1.39 1.09 LAS ANIMAS ...... CO 2.35 2.41 2.22 2.04 1.85 1.66 LINCOLN ...... CO 2.45 2.33 2.06 1.78 1.51 1.24 LOGAN ...... CO 2.35 2.21 1.91 1.62 1.32 1.03 MESA ...... CO 2.00 1.95 1.89 1.84 1.78 1.73 MINERAL ...... CO 1.90 1.71 1.73 1.74 1.76 1.77 MOFFAT ...... CO 1.90 1.71 1.62 1.53 1.44 1.35 MONTEZUMA ...... CO 1.90 1.72 1.74 1.77 1.79 1.81 MONTROSE ...... CO 2.00 1.96 1.91 1.87 1.82 1.78 MORGAN ...... CO 2.35 2.29 1.98 1.66 1.35 1.04 OTERO ...... CO 2.45 2.47 2.21 1.95 1.69 1.43 OURAY ...... CO 1.90 1.80 1.80 1.79 1.79 1.79 PARK ...... CO 2.45 2.35 2.10 1.85 1.60 1.35 PHILLIPS ...... CO 2.35 2.13 1.87 1.60 1.34 1.07 PITKIN ...... CO 1.90 1.74 1.68 1.63 1.57 1.51 PROWERS ...... CO 2.35 2.27 2.04 1.80 1.57 1.34 PUEBLO ...... CO 2.45 2.48 2.23 1.99 1.74 1.49 RIO BLANCO ...... CO 1.90 1.73 1.66 1.60 1.53 1.46 RIO GRANDE ...... CO 1.90 2.27 2.15 2.02 1.90 1.77 ROUTT ...... CO 1.90 1.70 1.60 1.50 1.40 1.30 SAGUACHE ...... CO 1.90 1.69 1.67 1.66 1.64 1.63 SAN JUAN ...... CO 1.90 1.80 1.80 1.80 1.80 1.80 SAN MIGUEL ...... CO 1.90 1.80 1.80 1.80 1.80 1.80 SEDGWICK ...... CO 2.35 2.13 1.85 1.58 1.30 1.03 SUMMIT ...... CO 1.90 2.27 2.04 1.80 1.57 1.34 TELLER ...... CO 2.45 2.46 2.20 1.93 1.67 1.40 WASHINGTON ...... CO 2.35 2.30 1.99 1.69 1.38 1.08 WELD ...... CO 2.45 2.28 1.96 1.63 1.31 0.99 YUMA ...... CO 2.35 2.22 1.95 1.67 1.40 1.12 FAIRFIELD ...... CT 3.10 2.91 2.72 2.54 2.35 2.17 HARTFORD ...... CT 3.10 2.92 2.70 2.47 2.25 2.03 4980 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

LITCHFIELD ...... CT 3.00 2.91 2.68 2.44 2.21 1.98 MIDDLESEX ...... CT 3.10 2.97 2.77 2.58 2.38 2.18 NEW HAVEN ...... CT 3.10 2.95 2.75 2.56 2.36 2.17 NEW LONDON ...... CT 3.10 2.99 2.80 2.62 2.43 2.25 TOLLAND ...... CT 3.10 2.97 2.76 2.54 2.33 2.11 WINDHAM ...... CT 3.10 3.00 2.80 2.61 2.41 2.22 DISTRICT OF COLUMBIA ...... DC 3.00 2.74 2.45 2.17 1.88 1.59 KENT ...... DE 3.00 2.69 2.47 2.25 2.03 1.81 NEW CASTLE ...... DE 3.00 2.81 2.53 2.24 1.96 1.68 SUSSEX ...... DE 3.00 2.68 2.49 2.29 2.10 1.91 ALACHUA ...... FL 3.70 3.55 3.52 3.50 3.47 3.44 BAKER ...... FL 3.70 3.52 3.47 3.41 3.36 3.30 BAY ...... FL 3.70 3.47 3.37 3.26 3.16 3.05 BRADFORD ...... FL 3.70 3.54 3.51 3.47 3.44 3.40 BREVARD ...... FL 4.00 3.86 3.84 3.83 3.81 3.79 BROWARD ...... FL 4.30 4.19 4.20 4.20 4.21 4.22 CALHOUN ...... FL 3.70 3.47 3.36 3.26 3.15 3.04 CHARLOTTE ...... FL 4.30 3.91 3.95 3.98 4.02 4.05 CITRUS ...... FL 4.00 3.82 3.77 3.71 3.66 3.60 CLAY ...... FL 3.70 3.55 3.51 3.48 3.44 3.41 COLLIER ...... FL 4.30 3.94 4.00 4.07 4.13 4.19 COLUMBIA ...... FL 3.70 3.52 3.47 3.41 3.36 3.30 DADE ...... FL 4.30 4.20 4.22 4.25 4.27 4.29 DE SOTO ...... FL 4.30 3.91 3.93 3.96 3.98 4.01 DIXIE ...... FL 3.70 3.54 3.50 3.45 3.41 3.37 DUVAL ...... FL 3.70 3.54 3.49 3.45 3.40 3.36 ESCAMBIA ...... FL 3.45 3.44 3.30 3.16 3.02 2.88 FLAGLER ...... FL 4.00 3.81 3.74 3.68 3.61 3.54 FRANKLIN ...... FL 3.70 3.50 3.42 3.35 3.27 3.19 GADSDEN ...... FL 3.70 3.48 3.37 3.27 3.16 3.06 GILCHRIST ...... FL 3.70 3.54 3.50 3.47 3.43 3.39 GLADES ...... FL 4.30 4.16 4.14 4.11 4.09 4.07 GULF ...... FL 3.70 3.49 3.40 3.30 3.21 3.12 HAMILTON ...... FL 3.70 3.50 3.42 3.35 3.27 3.19 HARDEE ...... FL 4.30 3.89 3.91 3.92 3.94 3.95 HENDRY ...... FL 4.30 4.17 4.15 4.14 4.12 4.11 HERNANDO ...... FL 4.00 3.84 3.80 3.77 3.73 3.69 HIGHLANDS ...... FL 4.30 3.90 3.92 3.94 3.96 3.98 HILLSBOROUGH ...... FL 4.00 3.87 3.85 3.84 3.82 3.81 HOLMES ...... FL 3.70 3.45 3.31 3.18 3.04 2.91 INDIAN RIVER ...... FL 4.00 4.13 4.07 4.02 3.96 3.91 JACKSON ...... FL 3.70 3.46 3.33 3.21 3.08 2.96 JEFFERSON ...... FL 3.70 3.49 3.40 3.32 3.23 3.14 LAFAYETTE ...... FL 3.70 3.55 3.52 3.48 3.45 3.42 LAKE ...... FL 4.00 3.84 3.80 3.75 3.71 3.67 LEE ...... FL 4.30 3.92 3.97 4.01 4.06 4.10 LEON ...... FL 3.70 3.49 3.39 3.30 3.20 3.11 LEVY ...... FL 4.00 3.80 3.72 3.64 3.56 3.48 LIBERTY ...... FL 3.70 3.48 3.39 3.29 3.20 3.10 MADISON ...... FL 3.70 3.49 3.40 3.30 3.21 3.12 MANATEE ...... FL 4.30 3.89 3.91 3.92 3.94 3.95 MARION ...... FL 4.00 3.81 3.75 3.68 3.62 3.55 MARTIN ...... FL 4.30 4.15 4.12 4.09 4.06 4.03 MONROE ...... FL 4.30 4.21 4.23 4.26 4.28 4.31 NASSAU ...... FL 3.70 3.51 3.45 3.38 3.32 3.25 OKALOOSA ...... FL 3.45 3.44 3.30 3.17 3.03 2.89 OKEECHOBEE ...... FL 4.30 4.14 4.11 4.07 4.04 4.00 ORANGE ...... FL 4.00 3.85 3.82 3.78 3.75 3.72 OSCEOLA ...... FL 4.00 3.87 3.86 3.84 3.83 3.82 PALM BEACH ...... FL 4.30 4.17 4.16 4.14 4.13 4.12 PASCO ...... FL 4.00 3.85 3.82 3.78 3.75 3.72 PINELLAS ...... FL 4.00 3.87 3.85 3.84 3.82 3.81 POLK ...... FL 4.00 3.87 3.86 3.85 3.84 3.83 PUTNAM ...... FL 3.70 3.57 3.55 3.54 3.52 3.51 SANTA ROSA ...... FL 3.45 3.44 3.30 3.16 3.02 2.88 SARASOTA ...... FL 4.30 3.90 3.93 3.95 3.98 4.00 SEMINOLE ...... FL 4.00 3.84 3.80 3.77 3.73 3.69 ST. JOHNS ...... FL 3.70 3.55 3.53 3.50 3.48 3.45 ST. LUCIE ...... FL 4.30 4.14 4.10 4.05 4.01 3.97 SUMTER ...... FL 4.00 3.83 3.79 3.74 3.70 3.65 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4981

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

SUWANNEE ...... FL 3.70 3.51 3.45 3.38 3.32 3.25 TAYLOR ...... FL 3.70 3.51 3.44 3.37 3.30 3.23 UNION ...... FL 3.70 3.53 3.49 3.44 3.40 3.35 VOLUSIA ...... FL 4.00 3.83 3.78 3.72 3.67 3.62 WAKULLA ...... FL 3.70 3.50 3.41 3.33 3.24 3.16 WALTON ...... FL 3.45 3.45 3.32 3.20 3.07 2.94 WASHINGTON ...... FL 3.70 3.46 3.33 3.21 3.08 2.96 APPLING ...... GA 3.45 3.28 3.17 3.05 2.94 2.82 ATKINSON ...... GA 3.45 3.31 3.22 3.12 3.03 2.94 BACON ...... GA 3.45 3.30 3.20 3.11 3.01 2.91 BAKER ...... GA 3.45 3.30 3.19 3.09 2.98 2.88 BALDWIN ...... GA 3.10 3.03 2.88 2.72 2.57 2.42 BANKS ...... GA 3.10 2.93 2.77 2.62 2.46 2.31 BARROW ...... GA 3.10 2.94 2.81 2.67 2.54 2.40 BARTOW ...... GA 3.10 2.85 2.72 2.58 2.45 2.32 BEN HILL ...... GA 3.45 3.28 3.16 3.03 2.91 2.79 BERRIEN ...... GA 3.45 3.31 3.22 3.12 3.03 2.94 BIBB ...... GA 3.30 3.02 2.86 2.70 2.54 2.38 BLECKLEY ...... GA 3.30 3.13 2.98 2.84 2.69 2.54 BRANTLEY ...... GA 3.45 3.33 3.26 3.20 3.13 3.06 BROOKS ...... GA 3.45 3.33 3.26 3.18 3.11 3.04 BRYAN ...... GA 3.45 3.29 3.18 3.07 2.96 2.85 BULLOCH ...... GA 3.30 3.16 3.04 2.93 2.81 2.69 BURKE ...... GA 3.30 3.05 2.91 2.78 2.64 2.51 BUTTS ...... GA 3.10 2.95 2.82 2.70 2.57 2.44 CALHOUN ...... GA 3.45 3.29 3.18 3.06 2.95 2.84 CAMDEN ...... GA 3.45 3.36 3.31 3.27 3.22 3.18 CANDLER ...... GA 3.30 3.16 3.04 2.93 2.81 2.69 CARROLL ...... GA 3.10 2.95 2.82 2.68 2.55 2.42 CATOOSA ...... GA 2.80 2.64 2.51 2.38 2.25 2.12 CHARLTON ...... GA 3.45 3.36 3.32 3.27 3.23 3.19 CHATHAM ...... GA 3.45 3.30 3.20 3.09 2.99 2.89 CHATTAHOOCHEE ...... GA 3.30 3.16 3.05 2.93 2.82 2.70 CHATTOOGA ...... GA 2.80 2.65 2.53 2.42 2.30 2.18 CHEROKEE ...... GA 3.10 2.86 2.73 2.61 2.48 2.36 CLARKE ...... GA 3.10 2.94 2.80 2.67 2.53 2.39 CLAY ...... GA 3.45 3.28 3.16 3.04 2.92 2.80 CLAYTON ...... GA 3.10 2.96 2.84 2.72 2.60 2.48 CLINCH ...... GA 3.45 3.34 3.27 3.21 3.14 3.08 COBB ...... GA 3.10 2.95 2.82 2.69 2.56 2.43 COFFEE ...... GA 3.45 3.30 3.19 3.09 2.98 2.88 COLQUITT ...... GA 3.45 3.31 3.21 3.12 3.02 2.93 COLUMBIA ...... GA 3.10 3.02 2.86 2.71 2.55 2.39 COOK ...... GA 3.45 3.31 3.22 3.13 3.04 2.95 COWETA ...... GA 3.10 2.96 2.84 2.71 2.59 2.47 CRAWFORD ...... GA 3.30 3.04 2.90 2.77 2.63 2.49 CRISP ...... GA 3.45 3.17 3.06 2.95 2.84 2.73 DADE ...... GA 2.80 2.64 2.50 2.37 2.23 2.10 DAWSON ...... GA 3.10 2.85 2.71 2.58 2.44 2.31 DE KALB ...... GA 3.45 3.32 3.24 3.15 3.07 2.99 DECATUR ...... GA 3.10 2.96 2.83 2.71 2.58 2.46 DODGE ...... GA 3.45 3.15 3.02 2.89 2.76 2.63 DOOLY ...... GA 3.45 3.15 3.02 2.89 2.76 2.63 DOUGHERTY ...... GA 3.45 3.29 3.17 3.06 2.94 2.83 DOUGLAS ...... GA 3.10 2.95 2.82 2.70 2.57 2.44 EARLY ...... GA 3.45 3.30 3.19 3.09 2.98 2.88 ECHOLS ...... GA 3.45 3.34 3.29 3.23 3.18 3.12 EFFINGHAM ...... GA 3.30 3.17 3.06 2.95 2.84 2.73 ELBERT ...... GA 3.10 2.92 2.77 2.61 2.46 2.30 EMANUEL ...... GA 3.30 3.14 3.01 2.87 2.74 2.60 EVANS ...... GA 3.45 3.18 3.08 2.97 2.87 2.77 FANNIN ...... GA 2.80 2.65 2.53 2.42 2.30 2.18 FAYETTE ...... GA 3.10 2.96 2.84 2.72 2.60 2.48 FLOYD ...... GA 3.10 2.84 2.69 2.55 2.40 2.26 FORSYTH ...... GA 3.10 2.94 2.79 2.65 2.50 2.36 FRANKLIN ...... GA 3.10 2.92 2.76 2.59 2.43 2.27 FULTON ...... GA 3.10 2.96 2.83 2.71 2.58 2.46 GILMER ...... GA 3.10 2.71 2.59 2.46 2.34 2.22 GLASCOCK ...... GA 3.10 3.03 2.88 2.74 2.59 2.44 GLYNN ...... GA 3.45 3.34 3.28 3.22 3.16 3.10 4982 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

GORDON ...... GA 3.10 2.83 2.68 2.54 2.39 2.24 GRADY ...... GA 3.45 3.32 3.24 3.15 3.07 2.99 GREENE ...... GA 3.10 2.94 2.81 2.67 2.54 2.40 GWINNETT ...... GA 3.10 2.95 2.82 2.69 2.56 2.43 HABERSHAM ...... GA 3.10 2.83 2.68 2.54 2.39 2.24 HALL ...... GA 3.10 2.93 2.78 2.64 2.49 2.34 HANCOCK ...... GA 3.10 3.03 2.88 2.72 2.57 2.42 HARALSON ...... GA 3.10 2.93 2.79 2.64 2.50 2.35 HARRIS ...... GA 3.30 3.06 2.95 2.83 2.72 2.60 HART ...... GA 3.10 2.92 2.75 2.59 2.42 2.26 HEARD ...... GA 3.10 2.96 2.83 2.71 2.58 2.46 HENRY ...... GA 3.10 2.96 2.84 2.71 2.59 2.47 HOUSTON ...... GA 3.30 3.12 2.96 2.81 2.65 2.49 IRWIN ...... GA 3.45 3.28 3.17 3.05 2.94 2.82 JACKSON ...... GA 3.10 2.94 2.79 2.65 2.50 2.36 JASPER ...... GA 3.10 2.95 2.82 2.68 2.55 2.42 JEFF DAVIS ...... GA 3.45 3.28 3.16 3.05 2.93 2.81 JEFFERSON ...... GA 3.30 3.04 2.90 2.76 2.62 2.48 JENKINS ...... GA 3.30 3.14 3.00 2.87 2.73 2.59 JOHNSON ...... GA 3.30 3.13 2.99 2.84 2.70 2.55 JONES ...... GA 3.10 3.02 2.86 2.71 2.55 2.39 LAMAR ...... GA 3.10 3.04 2.90 2.75 2.61 2.47 LANIER ...... GA 3.45 3.33 3.26 3.18 3.11 3.04 LAURENS ...... GA 3.30 3.14 3.00 2.85 2.71 2.57 LEE ...... GA 3.45 3.28 3.15 3.03 2.90 2.78 LIBERTY ...... GA 3.45 3.30 3.20 3.09 2.99 2.89 LINCOLN ...... GA 3.10 2.93 2.79 2.64 2.50 2.35 LONG ...... GA 3.45 3.30 3.20 3.09 2.99 2.89 LOWNDES ...... GA 3.45 3.33 3.26 3.18 3.11 3.04 LUMPKIN ...... GA 3.10 2.84 2.70 2.55 2.41 2.27 MACON ...... GA 3.10 3.02 2.87 2.71 2.56 2.40 MADISON ...... GA 3.45 3.32 3.24 3.15 3.07 2.99 MARION ...... GA 3.30 3.15 3.01 2.88 2.74 2.61 MCDUFFIE ...... GA 3.10 2.93 2.79 2.64 2.50 2.35 MCINTOSH ...... GA 3.30 3.16 3.03 2.91 2.78 2.66 MERIWETHER ...... GA 3.10 3.05 2.92 2.79 2.66 2.53 MILLER ...... GA 3.45 3.30 3.20 3.11 3.01 2.91 MITCHELL ...... GA 3.45 3.30 3.20 3.11 3.01 2.91 MONROE ...... GA 3.10 3.03 2.88 2.73 2.58 2.43 MONTGOMERY ...... GA 3.45 3.17 3.05 2.94 2.82 2.71 MORGAN ...... GA 3.10 2.95 2.82 2.68 2.55 2.42 MURRAY ...... GA 2.80 2.66 2.54 2.43 2.31 2.20 MUSCOGEE ...... GA 3.30 3.08 2.98 2.87 2.77 2.67 NEWTON ...... GA 3.10 2.95 2.82 2.70 2.57 2.44 OCONEE ...... GA 3.10 2.94 2.81 2.67 2.54 2.40 OGLETHORPE ...... GA 3.10 2.94 2.79 2.65 2.50 2.36 PAULDING ...... GA 3.10 2.94 2.81 2.67 2.54 2.40 PEACH ...... GA 3.30 3.12 2.97 2.81 2.66 2.50 PICKENS ...... GA 3.10 2.84 2.70 2.57 2.43 2.29 PIERCE ...... GA 3.45 3.32 3.24 3.15 3.07 2.99 PIKE ...... GA 3.10 3.04 2.91 2.77 2.64 2.50 POLK ...... GA 3.10 2.92 2.77 2.61 2.46 2.30 PULASKI ...... GA 3.45 3.14 3.01 2.87 2.74 2.60 PUTNAM ...... GA 3.10 2.95 2.81 2.68 2.54 2.41 QUITMAN ...... GA 3.45 3.27 3.14 3.02 2.89 2.76 RABUN ...... GA 3.10 2.81 2.65 2.48 2.32 2.15 RANDOLPH ...... GA 3.45 3.28 3.16 3.03 2.91 2.79 RICHMOND ...... GA 3.30 3.03 2.88 2.72 2.57 2.42 ROCKDALE ...... GA 3.10 2.95 2.83 2.70 2.58 2.45 SCHLEY ...... GA 3.30 3.16 3.03 2.91 2.78 2.66 SCREVEN ...... GA 3.30 3.15 3.02 2.88 2.75 2.62 SEMINOLE ...... GA 3.45 3.31 3.22 3.12 3.03 2.94 SPALDING ...... GA 3.10 2.96 2.84 2.72 2.60 2.48 STEPHENS ...... GA 3.10 2.91 2.75 2.58 2.42 2.25 STEWART ...... GA 3.45 3.17 3.06 2.95 2.84 2.73 SUMTER ...... GA 3.45 3.16 3.05 2.93 2.82 2.70 TALBOT ...... GA 3.30 3.06 2.94 2.81 2.69 2.57 TALIAFERRO ...... GA 3.10 2.94 2.81 2.67 2.54 2.40 TATTNALL ...... GA 3.45 3.18 3.09 2.99 2.90 2.80 TAYLOR ...... GA 3.30 3.06 2.94 2.82 2.70 2.58 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4983

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

TELFAIR ...... GA 3.45 3.17 3.07 2.96 2.86 2.75 TERRELL ...... GA 3.45 3.28 3.15 3.03 2.90 2.78 THOMAS ...... GA 3.45 3.32 3.25 3.17 3.10 3.02 TIFT ...... GA 3.45 3.29 3.18 3.08 2.97 2.86 TOOMBS ...... GA 3.45 3.17 3.06 2.94 2.83 2.72 TOWNS ...... GA 3.10 2.70 2.56 2.43 2.29 2.16 TREUTLEN ...... GA 3.30 3.15 3.02 2.88 2.75 2.62 TROUP ...... GA 3.10 3.05 2.91 2.78 2.64 2.51 TURNER ...... GA 3.45 3.28 3.16 3.03 2.91 2.79 TWIGGS ...... GA 3.30 3.04 2.90 2.75 2.61 2.47 UNION ...... GA 3.10 2.70 2.57 2.45 2.32 2.19 UPSON ...... GA 3.10 3.05 2.91 2.78 2.64 2.51 WALKER ...... GA 2.80 2.64 2.51 2.39 2.26 2.13 WALTON ...... GA 3.10 2.95 2.82 2.68 2.55 2.42 WARE ...... GA 3.45 3.32 3.25 3.17 3.10 3.02 WARREN ...... GA 3.10 3.03 2.87 2.72 2.56 2.41 WASHINGTON ...... GA 3.30 3.04 2.90 2.75 2.61 2.47 WAYNE ...... GA 3.45 3.31 3.21 3.12 3.02 2.93 WEBSTER ...... GA 3.45 3.17 3.06 2.96 2.85 2.74 WHEELER ...... GA 3.45 3.16 3.05 2.93 2.82 2.70 WHITE ...... GA 3.10 2.84 2.70 2.55 2.41 2.27 WHITFIELD ...... GA 2.80 2.65 2.53 2.42 2.30 2.18 WILCOX ...... GA 3.45 3.17 3.05 2.94 2.82 2.71 WILKES ...... GA 3.10 2.94 2.79 2.65 2.50 2.36 WILKINSON ...... GA 3.30 3.03 2.89 2.74 2.60 2.45 WORTH ...... GA 3.45 3.29 3.18 3.06 2.95 2.84 ADAIR ...... IA 1.80 1.55 1.54 1.54 1.53 1.53 ADAMS ...... IA 1.80 1.55 1.55 1.54 1.54 1.54 ALLAMAKEE ...... IA 1.75 1.23 1.21 1.18 1.16 1.13 APPANOOSE ...... IA 1.80 1.54 1.53 1.51 1.50 1.49 AUDUBON ...... IA 1.80 1.54 1.53 1.53 1.52 1.51 BENTON ...... IA 1.80 1.48 1.48 1.47 1.47 1.47 BLACK HAWK ...... IA 1.75 1.37 1.36 1.36 1.35 1.34 BOONE ...... IA 1.80 1.53 1.51 1.49 1.47 1.45 BREMER ...... IA 1.75 1.33 1.31 1.29 1.28 1.26 BUCHANAN ...... IA 1.75 1.38 1.37 1.35 1.34 1.32 BUENA VISTA ...... IA 1.75 1.50 1.46 1.41 1.37 1.32 BUTLER ...... IA 1.75 1.38 1.37 1.35 1.34 1.32 CALHOUN ...... IA 1.75 1.52 1.49 1.46 1.43 1.40 CARROLL ...... IA 1.80 1.53 1.51 1.49 1.47 1.45 CASS ...... IA 1.80 1.71 1.67 1.62 1.58 1.54 CEDAR ...... IA 1.80 1.48 1.49 1.49 1.50 1.50 CERRO GORDO ...... IA 1.75 1.30 1.28 1.27 1.25 1.24 CHEROKEE ...... IA 1.75 1.66 1.57 1.48 1.39 1.30 CHICKASAW ...... IA 1.75 1.29 1.27 1.24 1.22 1.20 CLARKE ...... IA 1.80 1.54 1.54 1.53 1.53 1.52 CLAY ...... IA 1.75 1.22 1.24 1.26 1.27 1.29 CLAYTON ...... IA 1.75 1.29 1.24 1.20 1.16 1.12 CLINTON ...... IA 1.80 1.47 1.46 1.46 1.45 1.44 CRAWFORD ...... IA 1.80 1.69 1.63 1.56 1.50 1.44 DALLAS ...... IA 1.80 1.54 1.53 1.52 1.51 1.50 DAVIS ...... IA 1.80 1.54 1.52 1.51 1.49 1.48 DECATUR ...... IA 1.80 1.54 1.54 1.53 1.53 1.52 DELAWARE ...... IA 1.75 1.34 1.31 1.29 1.26 1.24 DES MOINES ...... IA 1.80 1.55 1.54 1.54 1.53 1.53 DICKINSON ...... IA 1.75 1.20 1.21 1.23 1.24 1.25 DUBUQUE ...... IA 1.75 1.34 1.31 1.29 1.26 1.24 EMMET ...... IA 1.75 1.22 1.22 1.23 1.24 1.25 FAYETTE ...... IA 1.75 1.33 1.29 1.25 1.20 1.16 FLOYD ...... IA 1.75 1.31 1.29 1.27 1.25 1.23 FRANKLIN ...... IA 1.75 1.35 1.35 1.34 1.34 1.33 FREMONT ...... IA 1.85 1.71 1.67 1.62 1.58 1.54 GREENE ...... IA 1.80 1.53 1.51 1.49 1.47 1.45 GRUNDY ...... IA 1.75 1.40 1.40 1.39 1.38 1.37 GUTHRIE ...... IA 1.80 1.54 1.53 1.52 1.51 1.50 HAMILTON ...... IA 1.75 1.42 1.41 1.41 1.40 1.39 HANCOCK ...... IA 1.75 1.33 1.32 1.31 1.29 1.28 HARDIN ...... IA 1.75 1.41 1.40 1.39 1.39 1.38 HARRISON ...... IA 1.80 1.70 1.65 1.60 1.55 1.50 HENRY ...... IA 1.80 1.54 1.53 1.52 1.51 1.50 4984 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

HOWARD ...... IA 1.75 1.19 1.18 1.17 1.16 1.15 HUMBOLDT ...... IA 1.75 1.34 1.34 1.34 1.34 1.34 IDA ...... IA 1.75 1.67 1.60 1.52 1.45 1.37 IOWA ...... IA 1.80 1.49 1.49 1.50 1.50 1.51 JACKSON ...... IA 1.80 1.38 1.38 1.38 1.38 1.38 JASPER ...... IA 1.80 1.54 1.52 1.51 1.49 1.48 JEFFERSON ...... IA 1.80 1.54 1.53 1.51 1.50 1.49 JOHNSON ...... IA 1.80 1.49 1.49 1.50 1.50 1.51 JONES ...... IA 1.80 1.47 1.45 1.44 1.42 1.41 KEOKUK ...... IA 1.80 1.48 1.49 1.49 1.50 1.50 KOSSUTH ...... IA 1.75 1.22 1.23 1.25 1.26 1.28 LEE ...... IA 1.80 1.53 1.52 1.50 1.49 1.47 LINN ...... IA 1.80 1.48 1.49 1.49 1.50 1.50 LOUISA ...... IA 1.80 1.49 1.50 1.50 1.51 1.52 LUCAS ...... IA 1.80 1.54 1.53 1.53 1.52 1.51 LYON ...... IA 1.75 1.44 1.39 1.33 1.28 1.22 MADISON ...... IA 1.80 1.54 1.54 1.53 1.53 1.52 MAHASKA ...... IA 1.80 1.54 1.53 1.52 1.51 1.50 MARION ...... IA 1.80 1.54 1.53 1.52 1.51 1.50 MARSHALL ...... IA 1.80 1.47 1.47 1.46 1.46 1.45 MILLS ...... IA 1.85 1.71 1.67 1.64 1.60 1.56 MITCHELL ...... IA 1.75 1.20 1.19 1.19 1.18 1.18 MONONA ...... IA 1.80 1.68 1.61 1.54 1.47 1.40 MONROE ...... IA 1.80 1.54 1.53 1.51 1.50 1.49 MONTGOMERY ...... IA 1.80 1.71 1.67 1.64 1.60 1.56 MUSCATINE ...... IA 1.80 1.49 1.50 1.51 1.52 1.53 O'BRIEN ...... IA 1.75 1.45 1.41 1.36 1.32 1.27 OSCEOLA ...... IA 1.75 1.43 1.38 1.34 1.29 1.24 PAGE ...... IA 1.80 1.71 1.67 1.63 1.59 1.55 PALO ALTO ...... IA 1.75 1.27 1.27 1.28 1.28 1.29 PLYMOUTH ...... IA 1.75 1.50 1.44 1.38 1.32 1.26 POCAHONTAS ...... IA 1.75 1.30 1.31 1.32 1.33 1.34 POLK ...... IA 1.80 1.54 1.53 1.52 1.51 1.50 POTTAWATTAMIE ...... IA 1.85 1.71 1.67 1.64 1.60 1.56 POWESHIEK ...... IA 1.80 1.48 1.48 1.49 1.49 1.49 RINGGOLD ...... IA 1.80 1.55 1.54 1.54 1.53 1.53 SAC ...... IA 1.75 1.68 1.61 1.54 1.47 1.40 SCOTT ...... IA 1.80 1.49 1.50 1.52 1.53 1.54 SHELBY ...... IA 1.80 1.70 1.65 1.61 1.56 1.51 SIOUX ...... IA 1.75 1.65 1.55 1.44 1.34 1.24 STORY ...... IA 1.80 1.53 1.51 1.49 1.47 1.45 TAMA ...... IA 1.80 1.47 1.46 1.46 1.45 1.44 TAYLOR ...... IA 1.80 1.55 1.55 1.54 1.54 1.54 UNION ...... IA 1.80 1.55 1.54 1.54 1.53 1.53 VAN BUREN ...... IA 1.80 1.53 1.51 1.50 1.48 1.46 WAPELLO ...... IA 1.80 1.54 1.53 1.51 1.50 1.49 WARREN ...... IA 1.80 1.54 1.53 1.53 1.52 1.51 WASHINGTON ...... IA 1.80 1.49 1.49 1.50 1.50 1.51 WAYNE ...... IA 1.80 1.54 1.53 1.52 1.51 1.50 WEBSTER ...... IA 1.75 1.48 1.46 1.44 1.42 1.40 WINNEBAGO ...... IA 1.75 1.20 1.21 1.21 1.22 1.22 WINNESHIEK ...... IA 1.75 1.19 1.18 1.16 1.15 1.14 WOODBURY ...... IA 1.75 1.55 1.49 1.44 1.38 1.32 WORTH ...... IA 1.75 1.20 1.20 1.20 1.20 1.20 WRIGHT ...... IA 1.75 1.37 1.36 1.35 1.34 1.33 ADA ...... ID 1.60 1.31 1.21 1.12 1.02 0.93 ADAMS ...... ID 1.60 1.16 1.12 1.07 1.03 0.99 BANNOCK ...... ID 1.60 1.52 1.39 1.25 1.12 0.99 BEAR LAKE ...... ID 1.60 1.52 1.39 1.27 1.14 1.01 BENEWAH ...... ID 1.90 1.72 1.54 1.35 1.17 0.99 BINGHAM ...... ID 1.60 1.47 1.34 1.20 1.07 0.94 BLAINE ...... ID 1.60 1.39 1.28 1.17 1.06 0.95 BOISE ...... ID 1.60 1.39 1.28 1.16 1.05 0.94 BONNER ...... ID 1.90 1.72 1.53 1.35 1.16 0.98 BONNEVILLE ...... ID 1.60 1.46 1.32 1.19 1.05 0.91 BOUNDARY ...... ID 1.90 1.72 1.55 1.37 1.20 1.02 BUTTE ...... ID 1.60 1.39 1.27 1.16 1.04 0.93 CAMAS ...... ID 1.60 1.39 1.28 1.16 1.05 0.94 CANYON ...... ID 1.60 1.27 1.19 1.10 1.02 0.94 CARIBOU ...... ID 1.60 1.51 1.38 1.24 1.11 0.97 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4985

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

CASSIA ...... ID 1.60 1.52 1.38 1.25 1.11 0.98 CLARK ...... ID 1.60 1.42 1.29 1.15 1.02 0.89 CLEARWATER ...... ID 1.60 1.73 1.57 1.40 1.24 1.07 CUSTER ...... ID 1.60 1.39 1.28 1.18 1.07 0.96 ELMORE ...... ID 1.60 1.35 1.24 1.14 1.03 0.93 FRANKLIN ...... ID 1.60 1.52 1.40 1.27 1.15 1.02 FREMONT ...... ID 1.60 1.46 1.31 1.17 1.02 0.88 GEM ...... ID 1.60 1.27 1.19 1.10 1.02 0.94 GOODING ...... ID 1.60 1.39 1.28 1.17 1.06 0.95 IDAHO ...... ID 1.60 1.61 1.47 1.34 1.20 1.06 JEFFERSON ...... ID 1.60 1.46 1.32 1.18 1.04 0.90 JEROME ...... ID 1.60 1.39 1.28 1.18 1.07 0.96 KOOTENAI ...... ID 1.90 1.71 1.53 1.34 1.16 0.97 LATAH ...... ID 1.90 1.72 1.54 1.35 1.17 0.99 LEMHI ...... ID 1.60 1.40 1.30 1.20 1.10 1.00 LEWIS ...... ID 1.60 1.61 1.46 1.32 1.17 1.03 LINCOLN ...... ID 1.60 1.47 1.34 1.21 1.08 0.95 MADISON ...... ID 1.60 1.46 1.32 1.17 1.03 0.89 MINIDOKA ...... ID 1.60 1.47 1.35 1.22 1.10 0.97 NEZ PERCE ...... ID 1.60 1.60 1.45 1.31 1.16 1.01 ONEIDA ...... ID 1.60 1.52 1.39 1.27 1.14 1.01 OWYHEE ...... ID 1.60 1.29 1.21 1.12 1.04 0.95 PAYETTE ...... ID 1.60 1.23 1.16 1.09 1.02 0.95 POWER ...... ID 1.60 1.52 1.38 1.25 1.11 0.98 SHOSHONE ...... ID 1.90 1.73 1.56 1.39 1.22 1.05 TETON ...... ID 1.60 1.36 1.25 1.13 1.02 0.90 TWIN FALLS ...... ID 1.60 1.45 1.33 1.20 1.08 0.96 VALLEY ...... ID 1.60 1.40 1.30 1.19 1.09 0.99 WASHINGTON ...... ID 1.60 1.22 1.16 1.09 1.03 0.96 ADAMS ...... IL 1.80 1.68 1.61 1.54 1.47 1.40 ALEXANDER ...... IL 2.20 2.03 1.97 1.90 1.84 1.77 BOND ...... IL 2.00 1.85 1.78 1.70 1.63 1.56 BOONE ...... IL 1.75 1.32 1.33 1.35 1.36 1.37 BROWN ...... IL 1.80 1.70 1.66 1.61 1.57 1.52 BUREAU ...... IL 1.80 1.61 1.62 1.62 1.63 1.63 CALHOUN ...... IL 2.00 1.86 1.79 1.73 1.66 1.60 CARROLL ...... IL 1.80 1.78 1.68 1.58 1.48 1.38 CASS ...... IL 1.80 1.61 1.61 1.62 1.62 1.62 CHAMPAIGN ...... IL 1.80 1.72 1.69 1.67 1.64 1.61 CHRISTIAN ...... IL 2.00 1.86 1.80 1.75 1.69 1.63 CLARK ...... IL 2.00 1.84 1.76 1.68 1.60 1.52 CLAY ...... IL 2.00 1.84 1.75 1.67 1.58 1.50 CLINTON ...... IL 2.00 1.84 1.77 1.69 1.62 1.54 COLES ...... IL 2.00 1.85 1.77 1.70 1.62 1.55 COOK ...... IL 1.80 1.45 1.50 1.55 1.60 1.65 CRAWFORD ...... IL 2.00 1.84 1.76 1.67 1.59 1.51 CUMBERLAND ...... IL 2.00 1.84 1.76 1.69 1.61 1.53 DE KALB ...... IL 1.80 1.35 1.39 1.42 1.46 1.50 DE WITT ...... IL 1.80 1.74 1.74 1.73 1.73 1.72 DOUGLAS ...... IL 2.00 1.72 1.68 1.65 1.61 1.58 DU PAGE ...... IL 1.80 1.44 1.49 1.53 1.58 1.62 EDGAR ...... IL 2.00 1.71 1.67 1.63 1.59 1.55 EDWARDS ...... IL 2.20 1.85 1.77 1.70 1.62 1.55 EFFINGHAM ...... IL 2.00 1.84 1.76 1.69 1.61 1.53 FAYETTE ...... IL 2.00 1.84 1.77 1.69 1.62 1.54 FORD ...... IL 1.80 1.62 1.63 1.65 1.66 1.67 FRANKLIN ...... IL 2.20 1.93 1.85 1.77 1.69 1.61 FULTON ...... IL 1.80 1.63 1.65 1.66 1.68 1.70 GALLATIN ...... IL 2.20 2.01 1.93 1.84 1.76 1.67 GREENE ...... IL 2.00 1.85 1.79 1.72 1.66 1.59 GRUNDY ...... IL 1.80 1.62 1.63 1.64 1.65 1.66 HAMILTON ...... IL 2.20 1.93 1.85 1.76 1.68 1.60 HANCOCK ...... IL 1.80 1.69 1.64 1.58 1.53 1.47 HARDIN ...... IL 2.20 2.02 1.94 1.87 1.79 1.71 HENDERSON ...... IL 1.80 1.55 1.55 1.56 1.56 1.56 HENRY ...... IL 1.80 1.51 1.53 1.56 1.58 1.61 IROQUOIS ...... IL 1.80 1.61 1.61 1.60 1.60 1.60 JACKSON ...... IL 2.20 1.94 1.86 1.79 1.71 1.64 JASPER ...... IL 2.00 1.84 1.75 1.67 1.58 1.50 JEFFERSON ...... IL 2.00 1.85 1.78 1.70 1.63 1.56 4986 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

JERSEY ...... IL 2.00 1.86 1.80 1.73 1.67 1.61 JO DAVIESS ...... IL 1.75 1.50 1.44 1.39 1.33 1.28 JOHNSON ...... IL 2.20 2.02 1.95 1.87 1.80 1.72 KANE ...... IL 1.80 1.43 1.46 1.50 1.53 1.56 KANKAKEE ...... IL 1.80 1.61 1.61 1.62 1.62 1.62 KENDALL ...... IL 1.80 1.44 1.48 1.53 1.57 1.61 KNOX ...... IL 1.80 1.62 1.64 1.65 1.67 1.68 LA SALLE ...... IL 1.80 1.43 1.46 1.49 1.52 1.55 LAKE ...... IL 1.80 1.62 1.63 1.65 1.66 1.67 LAWRENCE ...... IL 2.00 1.84 1.76 1.67 1.59 1.51 LEE ...... IL 1.80 1.31 1.35 1.40 1.45 1.50 LIVINGSTON ...... IL 1.80 1.63 1.65 1.66 1.68 1.70 LOGAN ...... IL 1.80 1.75 1.75 1.75 1.75 1.75 MACON ...... IL 1.80 1.60 1.59 1.59 1.58 1.57 MACOUPIN ...... IL 1.80 1.37 1.40 1.42 1.45 1.48 MADISON ...... IL 1.80 1.75 1.75 1.74 1.74 1.74 MARION ...... IL 1.80 1.73 1.71 1.70 1.68 1.66 MARSHALL ...... IL 2.00 1.86 1.80 1.73 1.67 1.61 MASON ...... IL 2.00 1.93 1.85 1.78 1.70 1.62 MASSAC ...... IL 2.00 1.84 1.76 1.68 1.60 1.52 MCDONOUGH ...... IL 1.80 1.64 1.67 1.70 1.73 1.76 MCHENRY ...... IL 1.80 1.63 1.65 1.68 1.70 1.72 MCLEAN ...... IL 2.20 2.03 1.96 1.89 1.82 1.75 MENARD ...... IL 1.80 1.74 1.73 1.71 1.70 1.69 MERCER ...... IL 1.80 1.50 1.52 1.54 1.56 1.58 MONROE ...... IL 2.00 1.94 1.87 1.79 1.72 1.65 MONTGOMERY ...... IL 2.00 1.86 1.79 1.73 1.66 1.60 MORGAN ...... IL 1.80 1.72 1.69 1.67 1.64 1.61 MOULTRIE ...... IL 2.00 1.72 1.69 1.66 1.63 1.60 OGLE ...... IL 1.80 1.28 1.31 1.34 1.36 1.39 PEORIA ...... IL 1.80 1.65 1.69 1.74 1.78 1.82 PERRY ...... IL 2.00 1.93 1.85 1.76 1.68 1.60 PIATT ...... IL 1.80 1.73 1.71 1.69 1.67 1.65 PIKE ...... IL 1.80 1.70 1.66 1.61 1.57 1.52 POPE ...... IL 2.20 2.02 1.95 1.87 1.80 1.72 PULASKI ...... IL 2.20 2.03 1.96 1.89 1.82 1.75 PUTNAM ...... IL 1.80 1.63 1.65 1.66 1.68 1.70 RANDOLPH ...... IL 2.00 1.93 1.86 1.78 1.71 1.63 RICHLAND ...... IL 2.00 1.83 1.74 1.66 1.57 1.48 ROCK ISLAND ...... IL 1.80 1.50 1.52 1.53 1.55 1.57 SALINE ...... IL 2.20 1.94 1.87 1.80 1.73 1.66 SANGAMON ...... IL 1.80 1.73 1.71 1.69 1.67 1.65 SCHUYLER ...... IL 1.80 1.71 1.68 1.64 1.61 1.57 SCOTT ...... IL 1.80 1.71 1.68 1.64 1.61 1.57 SHELBY ...... IL 2.00 1.85 1.78 1.71 1.64 1.57 ST. CLAIR ...... IL 2.00 1.94 1.87 1.79 1.72 1.65 STARK ...... IL 1.80 1.63 1.66 1.68 1.71 1.73 STEPHENSON ...... IL 1.75 1.25 1.26 1.27 1.28 1.29 TAZEWELL ...... IL 1.80 1.66 1.70 1.75 1.79 1.84 UNION ...... IL 2.20 2.02 1.94 1.87 1.79 1.71 VERMILION ...... IL 1.80 1.72 1.68 1.65 1.61 1.58 WABASH ...... IL 2.20 1.85 1.78 1.70 1.63 1.56 WARREN ...... IL 1.80 1.61 1.61 1.60 1.60 1.60 WASHINGTON ...... IL 2.00 1.85 1.77 1.70 1.62 1.55 WAYNE ...... IL 2.20 1.84 1.77 1.69 1.62 1.54 WHITE ...... IL 2.20 1.93 1.85 1.78 1.70 1.62 WHITESIDE ...... IL 1.80 1.25 1.30 1.36 1.42 1.48 WILL ...... IL 1.80 1.45 1.50 1.54 1.59 1.64 WILLIAMSON ...... IL 2.20 1.94 1.87 1.79 1.72 1.65 WINNEBAGO ...... IL 1.75 1.31 1.31 1.32 1.32 1.32 WOODFORD ...... IL 1.80 1.65 1.69 1.74 1.78 1.82 ADAMS ...... IN 1.80 1.71 1.62 1.52 1.43 1.34 ALLEN ...... IN 1.80 1.71 1.61 1.52 1.42 1.33 BARTHOLOMEW ...... IN 2.20 1.82 1.73 1.65 1.56 1.48 BENTON ...... IN 1.80 1.75 1.71 1.66 1.62 1.57 BLACKFORD ...... IN 1.80 1.72 1.64 1.56 1.48 1.40 BOONE ...... IN 2.00 1.83 1.75 1.68 1.60 1.53 BROWN ...... IN 2.20 1.82 1.74 1.66 1.58 1.50 CARROLL ...... IN 1.80 1.74 1.68 1.61 1.55 1.49 CASS ...... IN 1.80 1.73 1.66 1.58 1.51 1.44 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4987

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

CLARK ...... IN 2.20 1.97 1.83 1.68 1.54 1.40 CLAY ...... IN 2.00 1.82 1.75 1.67 1.60 1.52 CLINTON ...... IN 1.80 1.82 1.74 1.67 1.59 1.51 CRAWFORD ...... IN 2.20 1.99 1.86 1.74 1.61 1.49 DAVIESS ...... IN 2.20 1.99 1.87 1.76 1.64 1.52 DE KALB ...... IN 2.20 1.98 1.85 1.71 1.58 1.45 DEARBORN ...... IN 2.20 1.81 1.73 1.64 1.56 1.47 DECATUR ...... IN 1.80 1.62 1.54 1.45 1.37 1.29 DELAWARE ...... IN 2.00 1.81 1.72 1.63 1.54 1.45 DUBOIS ...... IN 2.20 1.99 1.87 1.76 1.64 1.52 ELKHART ...... IN 1.80 1.61 1.53 1.44 1.36 1.27 FAYETTE ...... IN 2.00 1.81 1.72 1.64 1.55 1.46 FLOYD ...... IN 2.20 1.97 1.83 1.69 1.55 1.41 FOUNTAIN ...... IN 1.80 1.83 1.76 1.69 1.62 1.55 FRANKLIN ...... IN 2.00 1.81 1.72 1.64 1.55 1.46 FULTON ...... IN 1.80 1.72 1.64 1.56 1.48 1.40 GIBSON ...... IN 2.20 2.01 1.90 1.80 1.69 1.59 GRANT ...... IN 1.80 1.80 1.70 1.61 1.51 1.41 GREENE ...... IN 2.20 1.82 1.74 1.67 1.59 1.51 HAMILTON ...... IN 2.00 1.82 1.74 1.67 1.59 1.51 HANCOCK ...... IN 2.00 1.82 1.74 1.66 1.58 1.50 HARRISON ...... IN 2.20 1.98 1.84 1.71 1.57 1.44 HENDRICKS ...... IN 2.00 1.83 1.76 1.68 1.61 1.54 HENRY ...... IN 2.00 1.81 1.73 1.64 1.56 1.47 HOWARD ...... IN 1.80 1.81 1.72 1.64 1.55 1.46 HUNTINGTON ...... IN 1.80 1.71 1.62 1.54 1.45 1.36 JACKSON ...... IN 2.20 1.89 1.78 1.68 1.57 1.46 JASPER ...... IN 1.80 1.66 1.63 1.59 1.56 1.52 JAY ...... IN 1.80 1.72 1.64 1.55 1.47 1.39 JEFFERSON ...... IN 2.20 1.89 1.77 1.66 1.54 1.43 JENNINGS ...... IN 2.20 1.89 1.78 1.67 1.56 1.45 JOHNSON ...... IN 2.00 1.82 1.75 1.67 1.60 1.52 KNOX ...... IN 2.20 1.99 1.87 1.76 1.64 1.52 KOSCIUSKO ...... IN 1.80 1.61 1.52 1.42 1.33 1.24 LA PORTE ...... IN 1.80 1.61 1.52 1.44 1.35 1.26 LAGRANGE ...... IN 1.80 1.55 1.55 1.56 1.56 1.56 LAKE ...... IN 1.80 1.65 1.60 1.54 1.49 1.44 LAWRENCE ...... IN 2.20 1.90 1.80 1.69 1.59 1.49 MADISON ...... IN 2.00 1.82 1.73 1.65 1.56 1.48 MARION ...... IN 2.00 1.83 1.75 1.68 1.60 1.53 MARSHALL ...... IN 1.80 1.63 1.56 1.49 1.42 1.35 MARTIN ...... IN 2.20 1.99 1.87 1.74 1.62 1.50 MIAMI ...... IN 1.80 1.72 1.64 1.56 1.48 1.40 MONROE ...... IN 2.20 1.82 1.74 1.66 1.58 1.50 MONTGOMERY ...... IN 2.00 1.83 1.76 1.68 1.61 1.54 MORGAN ...... IN 2.00 1.83 1.75 1.68 1.60 1.53 NEWTON ...... IN 1.80 1.67 1.64 1.62 1.59 1.56 NOBLE ...... IN 1.80 1.62 1.53 1.45 1.36 1.28 OHIO ...... IN 2.20 1.98 1.84 1.71 1.57 1.44 ORANGE ...... IN 2.20 1.99 1.86 1.74 1.61 1.49 OWEN ...... IN 2.00 1.82 1.75 1.67 1.60 1.52 PARKE ...... IN 2.00 1.83 1.76 1.68 1.61 1.54 PERRY ...... IN 2.20 1.99 1.87 1.75 1.63 1.51 PIKE ...... IN 2.20 2.00 1.89 1.78 1.67 1.56 PORTER ...... IN 1.80 1.54 1.53 1.51 1.50 1.49 POSEY ...... IN 2.20 2.02 1.92 1.83 1.73 1.64 PULASKI ...... IN 1.80 1.65 1.60 1.56 1.51 1.46 PUTNAM ...... IN 2.00 1.83 1.75 1.68 1.60 1.53 RANDOLPH ...... IN 2.00 1.80 1.71 1.61 1.52 1.42 RIPLEY ...... IN 2.20 1.89 1.78 1.67 1.56 1.45 RUSH ...... IN 2.00 1.82 1.73 1.65 1.56 1.48 SCOTT ...... IN 1.80 1.63 1.55 1.48 1.40 1.33 SHELBY ...... IN 2.20 1.89 1.77 1.66 1.54 1.43 SPENCER ...... IN 2.00 1.82 1.74 1.66 1.58 1.50 ST. JOSEPH ...... IN 2.20 2.00 1.90 1.79 1.69 1.58 STARKE ...... IN 1.80 1.65 1.60 1.54 1.49 1.44 STEUBEN ...... IN 1.80 1.62 1.53 1.45 1.36 1.28 SULLIVAN ...... IN 2.20 1.82 1.74 1.67 1.59 1.51 SWITZERLAND ...... IN 2.20 1.89 1.78 1.66 1.55 1.44 TIPPECANOE ...... IN 1.80 1.83 1.75 1.68 1.60 1.53 4988 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

TIPTON ...... IN 1.80 1.82 1.73 1.65 1.56 1.48 UNION ...... IN 2.00 1.81 1.72 1.63 1.54 1.45 VANDERBURGH ...... IN 2.20 2.01 1.92 1.82 1.73 1.63 VERMILLION ...... IN 2.00 1.83 1.76 1.69 1.62 1.55 VIGO ...... IN 2.00 1.83 1.75 1.68 1.60 1.53 WABASH ...... IN 1.80 1.71 1.63 1.54 1.46 1.37 WARREN ...... IN 1.80 1.83 1.76 1.70 1.63 1.56 WARRICK ...... IN 2.20 2.01 1.91 1.82 1.72 1.62 WASHINGTON ...... IN 2.20 1.98 1.85 1.71 1.58 1.45 WAYNE ...... IN 2.00 1.81 1.72 1.63 1.54 1.45 WELLS ...... IN 1.80 1.71 1.63 1.54 1.46 1.37 WHITE ...... IN 1.80 1.74 1.68 1.61 1.55 1.49 WHITLEY ...... IN 1.80 1.62 1.54 1.46 1.38 1.30 ALLEN ...... KS 2.20 2.11 1.92 1.72 1.53 1.34 ANDERSON ...... KS 2.00 1.81 1.70 1.58 1.47 1.36 ATCHISON ...... KS 2.00 1.83 1.74 1.64 1.55 1.46 BARBER ...... KS 2.20 2.11 1.92 1.72 1.53 1.34 BARTON ...... KS 2.20 2.10 1.89 1.69 1.48 1.28 BOURBON ...... KS 2.20 2.11 1.92 1.72 1.53 1.34 BROWN ...... KS 2.00 1.83 1.74 1.64 1.55 1.46 BUTLER ...... KS 2.20 2.10 1.90 1.71 1.51 1.31 CHASE ...... KS 2.20 1.80 1.69 1.57 1.46 1.34 CHAUTAUQUA ...... KS 2.20 2.11 1.92 1.74 1.55 1.36 CHEROKEE ...... KS 2.20 2.10 1.90 1.70 1.50 1.30 CHEYENNE ...... KS 2.20 2.15 1.91 1.66 1.42 1.17 CLARK ...... KS 2.20 2.27 2.04 1.81 1.58 1.35 CLAY ...... KS 2.00 1.80 1.69 1.57 1.46 1.34 CLOUD ...... KS 2.00 1.80 1.68 1.57 1.45 1.33 COFFEY ...... KS 2.00 1.81 1.69 1.58 1.46 1.35 COMANCHE ...... KS 2.20 2.11 1.92 1.73 1.54 1.35 COWLEY ...... KS 2.20 2.11 1.92 1.72 1.53 1.34 CRAWFORD ...... KS 2.20 2.10 1.90 1.71 1.51 1.31 DECATUR ...... KS 2.00 1.91 1.73 1.54 1.36 1.17 DICKINSON ...... KS 2.00 1.80 1.68 1.56 1.44 1.32 DONIPHAN ...... KS 2.00 1.83 1.74 1.66 1.57 1.48 DOUGLAS ...... KS 2.00 1.82 1.72 1.62 1.52 1.42 EDWARDS ...... KS 2.20 2.10 1.90 1.70 1.50 1.30 ELK ...... KS 2.20 2.11 1.92 1.72 1.53 1.34 ELLIS ...... KS 2.00 2.09 1.88 1.68 1.47 1.26 ELLSWORTH ...... KS 2.00 2.10 1.89 1.69 1.48 1.28 FINNEY ...... KS 2.20 2.26 2.02 1.79 1.55 1.31 FORD ...... KS 2.20 2.27 2.03 1.80 1.56 1.33 FRANKLIN ...... KS 2.00 1.81 1.71 1.60 1.50 1.39 GEARY ...... KS 2.00 1.80 1.69 1.57 1.46 1.34 GOVE ...... KS 2.20 2.25 2.00 1.74 1.49 1.24 GRAHAM ...... KS 2.00 1.92 1.75 1.57 1.40 1.22 GRANT ...... KS 2.20 2.27 2.04 1.82 1.59 1.36 GRAY ...... KS 2.20 2.27 2.03 1.80 1.56 1.33 GREELEY ...... KS 2.20 2.26 2.01 1.77 1.52 1.28 GREENWOOD ...... KS 2.20 2.11 1.91 1.72 1.52 1.33 HAMILTON ...... KS 2.20 2.27 2.03 1.80 1.56 1.33 HARPER ...... KS 2.20 2.11 1.91 1.72 1.52 1.33 HARVEY ...... KS 2.20 2.10 1.90 1.69 1.49 1.29 HASKELL ...... KS 2.20 2.27 2.03 1.80 1.56 1.33 HODGEMAN ...... KS 2.20 2.26 2.02 1.77 1.53 1.29 JACKSON ...... KS 2.00 1.82 1.72 1.63 1.53 1.43 JEFFERSON ...... KS 2.00 1.82 1.72 1.63 1.53 1.43 JEWELL ...... KS 2.00 1.93 1.76 1.60 1.43 1.26 JOHNSON ...... KS 2.00 1.82 1.73 1.63 1.54 1.44 KEARNY ...... KS 2.20 2.27 2.03 1.80 1.56 1.33 KINGMAN ...... KS 2.20 2.10 1.90 1.70 1.50 1.30 KIOWA ...... KS 2.20 2.10 1.91 1.71 1.52 1.32 LABETTE ...... KS 2.20 2.10 1.91 1.71 1.52 1.32 LANE ...... KS 2.20 2.25 2.01 1.76 1.52 1.27 LEAVENWORTH ...... KS 2.00 1.83 1.73 1.64 1.54 1.45 LINCOLN ...... KS 2.00 2.10 1.90 1.69 1.49 1.29 LINN ...... KS 2.00 1.81 1.71 1.60 1.50 1.39 LOGAN ...... KS 2.20 2.13 1.91 1.68 1.46 1.24 LYON ...... KS 2.00 1.81 1.69 1.58 1.46 1.35 MARION ...... KS 2.20 2.10 1.90 1.69 1.49 1.29 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4989

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

MARSHALL ...... KS 2.20 2.10 1.90 1.71 1.51 1.31 MCPHERSON ...... KS 2.00 1.81 1.71 1.60 1.50 1.39 MEADE ...... KS 2.20 2.27 2.04 1.82 1.59 1.36 MIAMI ...... KS 2.00 1.82 1.72 1.61 1.51 1.41 MITCHELL ...... KS 2.00 1.94 1.78 1.61 1.45 1.29 MONTGOMERY ...... KS 2.20 2.11 1.92 1.73 1.54 1.35 MORRIS ...... KS 2.00 1.80 1.69 1.57 1.46 1.34 MORTON ...... KS 2.20 2.28 2.06 1.84 1.62 1.40 NEMAHA ...... KS 2.00 1.82 1.73 1.63 1.54 1.44 NEOSHO ...... KS 2.20 2.11 1.91 1.72 1.52 1.33 NESS ...... KS 2.20 2.25 2.01 1.76 1.52 1.27 NORTON ...... KS 2.00 1.92 1.74 1.55 1.37 1.19 OSAGE ...... KS 2.00 1.81 1.70 1.60 1.49 1.38 OSBORNE ...... KS 2.00 1.93 1.76 1.59 1.42 1.25 OTTAWA ...... KS 2.00 1.80 1.68 1.55 1.43 1.31 PAWNEE ...... KS 2.20 2.10 1.90 1.69 1.49 1.29 PHILLIPS ...... KS 2.00 1.92 1.74 1.56 1.38 1.20 POTTAWATOMIE ...... KS 2.00 1.81 1.71 1.60 1.50 1.39 PRATT ...... KS 2.20 2.10 1.90 1.71 1.51 1.31 RAWLINS ...... KS 2.00 1.91 1.72 1.53 1.34 1.15 RENO ...... KS 2.20 2.10 1.90 1.69 1.49 1.29 REPUBLIC ...... KS 2.00 1.80 1.68 1.55 1.43 1.31 RICE ...... KS 2.20 2.10 1.89 1.69 1.48 1.28 RILEY ...... KS 2.00 1.81 1.70 1.59 1.48 1.37 ROOKS ...... KS 2.00 1.93 1.75 1.58 1.40 1.23 RUSH ...... KS 2.20 2.09 1.89 1.68 1.48 1.27 RUSSELL ...... KS 2.00 2.09 1.89 1.68 1.48 1.27 SALINE ...... KS 2.00 1.80 1.67 1.55 1.42 1.30 SCOTT ...... KS 2.20 2.26 2.01 1.77 1.52 1.28 SEDGWICK ...... KS 2.20 2.10 1.90 1.69 1.49 1.29 SEWARD ...... KS 2.20 2.27 2.05 1.82 1.60 1.37 SHAWNEE ...... KS 2.00 1.82 1.71 1.61 1.50 1.40 SHERIDAN ...... KS 2.00 1.92 1.74 1.56 1.38 1.20 SHERMAN ...... KS 2.20 2.16 1.91 1.67 1.42 1.18 SMITH ...... KS 2.00 1.93 1.75 1.58 1.40 1.23 STAFFORD ...... KS 2.20 2.10 1.90 1.69 1.49 1.29 STANTON ...... KS 2.20 2.27 2.05 1.82 1.60 1.37 STEVENS ...... KS 2.20 2.27 2.05 1.82 1.60 1.37 SUMNER ...... KS 2.20 2.11 1.91 1.72 1.52 1.33 THOMAS ...... KS 2.00 1.92 1.74 1.55 1.37 1.19 TREGO ...... KS 2.20 2.25 2.00 1.75 1.50 1.25 WABAUNSEE ...... KS 2.00 2.20 1.99 1.79 1.58 1.38 WALLACE ...... KS 2.20 2.25 2.00 1.74 1.49 1.24 WASHINGTON ...... KS 2.00 1.81 1.70 1.58 1.47 1.36 WICHITA ...... KS 2.20 2.26 2.01 1.77 1.52 1.28 WILSON ...... KS 2.20 2.11 1.91 1.72 1.52 1.33 WOODSON ...... KS 2.20 2.11 1.92 1.72 1.53 1.34 WYANDOTTE ...... KS 2.00 1.83 1.73 1.64 1.54 1.45 ADAIR ...... KY 2.40 1.98 1.85 1.72 1.59 1.46 ALLEN ...... KY 2.40 2.12 1.98 1.85 1.71 1.57 ANDERSON ...... KY 2.20 1.97 1.83 1.69 1.55 1.41 BALLARD ...... KY 2.40 2.27 2.15 2.03 1.91 1.79 BARREN ...... KY 2.40 2.11 1.97 1.82 1.68 1.53 BATH ...... KY 2.20 2.00 1.89 1.78 1.67 1.56 BELL ...... KY 2.40 2.30 2.15 1.99 1.84 1.69 BOONE ...... KY 2.20 1.98 1.85 1.71 1.58 1.45 BOURBON ...... KY 2.20 1.99 1.86 1.74 1.61 1.49 BOYD ...... KY 2.20 2.02 1.93 1.85 1.76 1.67 BOYLE ...... KY 2.20 1.97 1.83 1.69 1.55 1.41 BRACKEN ...... KY 2.20 1.99 1.87 1.74 1.62 1.50 BREATHITT ...... KY 2.20 2.28 2.11 1.94 1.77 1.60 BRECKINRIDGE ...... KY 2.20 1.99 1.87 1.74 1.62 1.50 BULLITT ...... KY 2.20 1.97 1.83 1.69 1.55 1.41 BUTLER ...... KY 2.40 2.00 1.90 1.79 1.69 1.58 CALDWELL ...... KY 2.40 2.15 2.05 1.94 1.84 1.73 CALLOWAY ...... KY 2.40 2.28 2.18 2.07 1.97 1.86 CAMPBELL ...... KY 2.20 1.98 1.85 1.72 1.59 1.46 CARLISLE ...... KY 2.40 2.28 2.17 2.05 1.94 1.83 CARROLL ...... KY 2.20 1.97 1.84 1.70 1.57 1.43 CARTER ...... KY 2.20 2.01 1.92 1.82 1.73 1.63 4990 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

CASEY ...... KY 2.40 1.97 1.83 1.69 1.55 1.41 CHRISTIAN ...... KY 2.40 2.15 2.04 1.92 1.81 1.70 CLARK ...... KY 2.20 1.99 1.87 1.74 1.62 1.50 CLAY ...... KY 2.40 2.28 2.11 1.93 1.76 1.59 CLINTON ...... KY 2.40 2.00 1.89 1.78 1.67 1.56 CRITTENDEN ...... KY 2.40 2.15 2.04 1.94 1.83 1.72 CUMBERLAND ...... KY 2.40 2.00 1.89 1.77 1.66 1.55 DAVIESS ...... KY 2.20 2.01 1.91 1.81 1.71 1.61 EDMONSON ...... KY 2.40 1.99 1.87 1.76 1.64 1.52 ELLIOTT ...... KY 2.20 2.01 1.92 1.82 1.73 1.63 ESTILL ...... KY 2.20 1.99 1.87 1.76 1.64 1.52 FAYETTE ...... KY 2.20 1.98 1.85 1.72 1.59 1.46 FLEMING ...... KY 2.20 2.00 1.89 1.77 1.66 1.55 FLOYD ...... KY 2.20 2.09 1.98 1.88 1.77 1.67 FRANKLIN ...... KY 2.20 1.97 1.84 1.70 1.57 1.43 FULTON ...... KY 2.40 2.29 2.19 2.10 2.00 1.90 GALLATIN ...... KY 2.20 1.98 1.84 1.71 1.57 1.44 GARRARD ...... KY 2.20 1.97 1.84 1.70 1.57 1.43 GRANT ...... KY 2.20 1.98 1.85 1.71 1.58 1.45 GRAVES ...... KY 2.40 2.28 2.17 2.07 1.96 1.85 GRAYSON ...... KY 2.40 1.99 1.87 1.75 1.63 1.51 GREEN ...... KY 2.40 1.98 1.85 1.71 1.58 1.45 GREENUP ...... KY 2.20 2.01 1.92 1.82 1.73 1.63 HANCOCK ...... KY 2.20 2.00 1.89 1.77 1.66 1.55 HARDIN ...... KY 2.20 1.98 1.85 1.72 1.59 1.46 HARLAN ...... KY 2.40 2.30 2.15 2.00 1.85 1.70 HARRISON ...... KY 2.20 1.98 1.86 1.73 1.61 1.48 HART ...... KY 2.40 1.98 1.86 1.73 1.61 1.48 HENDERSON ...... KY 2.20 2.02 1.92 1.83 1.73 1.64 HENRY ...... KY 2.20 1.97 1.83 1.70 1.56 1.42 HICKMAN ...... KY 2.40 2.28 2.18 2.07 1.97 1.86 HOPKINS ...... KY 2.40 2.15 2.03 1.92 1.80 1.69 JACKSON ...... KY 2.20 2.26 2.07 1.89 1.70 1.51 JEFFERSON ...... KY 2.20 1.97 1.82 1.68 1.53 1.39 JESSAMINE ...... KY 2.20 1.98 1.85 1.71 1.58 1.45 JOHNSON ...... KY 2.20 2.08 1.97 1.87 1.76 1.65 KENTON ...... KY 2.20 1.98 1.85 1.72 1.59 1.46 KNOTT ...... KY 2.40 2.29 2.14 1.98 1.83 1.67 KNOX ...... KY 2.40 2.28 2.11 1.95 1.78 1.61 LARUE ...... KY 2.20 1.98 1.84 1.71 1.57 1.44 LAUREL ...... KY 2.40 2.27 2.08 1.90 1.71 1.53 LAWRENCE ...... KY 2.20 2.09 1.98 1.88 1.77 1.67 LEE ...... KY 2.20 2.27 2.09 1.91 1.73 1.55 LESLIE ...... KY 2.40 2.29 2.13 1.98 1.82 1.66 LETCHER ...... KY 2.40 2.30 2.15 1.99 1.84 1.69 LEWIS ...... KY 2.20 2.00 1.90 1.79 1.69 1.58 LINCOLN ...... KY 2.20 1.97 1.83 1.70 1.56 1.42 LIVINGSTON ...... KY 2.40 2.26 2.13 2.01 1.88 1.75 LOGAN ...... KY 2.40 2.13 2.00 1.88 1.75 1.62 LYON ...... KY 2.40 2.16 2.06 1.97 1.87 1.77 MADISON ...... KY 2.40 2.27 2.15 2.03 1.91 1.79 MAGOFFIN ...... KY 2.40 2.27 2.09 1.92 1.74 1.56 MARION ...... KY 2.20 2.02 1.92 1.83 1.73 1.64 MARSHALL ...... KY 2.20 1.98 1.85 1.73 1.60 1.47 MARTIN ...... KY 2.20 2.08 1.97 1.85 1.74 1.63 MASON ...... KY 2.20 1.97 1.83 1.70 1.56 1.42 MCCRACKEN ...... KY 2.40 2.27 2.15 2.04 1.92 1.80 MCCREARY ...... KY 2.20 2.09 1.99 1.89 1.79 1.69 MCLEAN ...... KY 2.20 1.99 1.88 1.76 1.65 1.53 MEADE ...... KY 2.20 1.98 1.85 1.73 1.60 1.47 MENIFEE ...... KY 2.20 2.00 1.89 1.79 1.68 1.57 MERCER ...... KY 2.20 1.97 1.83 1.69 1.55 1.41 METCALFE ...... KY 2.40 1.99 1.87 1.74 1.62 1.50 MONROE ...... KY 2.40 2.00 1.89 1.77 1.66 1.55 MONTGOMERY ...... KY 2.20 1.99 1.88 1.76 1.65 1.53 MORGAN ...... KY 2.20 2.07 1.96 1.84 1.73 1.61 MUHLENBERG ...... KY 2.40 2.14 2.01 1.89 1.76 1.64 NELSON ...... KY 2.20 1.97 1.83 1.70 1.56 1.42 NICHOLAS ...... KY 2.20 1.99 1.87 1.76 1.64 1.52 OHIO ...... KY 2.40 2.01 1.90 1.80 1.69 1.59 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4991

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

OLDHAM ...... KY 2.20 1.97 1.83 1.68 1.54 1.40 OWEN ...... KY 2.20 1.98 1.84 1.71 1.57 1.44 OWSLEY ...... KY 2.20 2.27 2.10 1.92 1.75 1.57 PENDLETON ...... KY 2.20 1.98 1.86 1.73 1.61 1.48 PERRY ...... KY 2.40 2.29 2.13 1.97 1.81 1.65 PIKE ...... KY 2.40 2.09 1.99 1.89 1.79 1.69 POWELL ...... KY 2.20 2.00 1.88 1.77 1.65 1.54 PULASKI ...... KY 2.40 2.24 2.03 1.83 1.62 1.41 ROBERTSON ...... KY 2.20 1.99 1.87 1.74 1.62 1.50 ROCKCASTLE ...... KY 2.20 2.25 2.05 1.86 1.66 1.46 ROWAN ...... KY 2.20 2.01 1.90 1.80 1.69 1.59 RUSSELL ...... KY 2.40 1.98 1.85 1.73 1.60 1.47 SCOTT ...... KY 2.20 1.98 1.85 1.71 1.58 1.45 SHELBY ...... KY 2.20 1.97 1.83 1.68 1.54 1.40 SIMPSON ...... KY 2.40 2.01 1.91 1.80 1.70 1.60 SPENCER ...... KY 2.20 1.97 1.83 1.68 1.54 1.40 TAYLOR ...... KY 2.40 1.97 1.84 1.70 1.57 1.43 TODD ...... KY 2.40 2.14 2.02 1.90 1.78 1.66 TRIGG ...... KY 2.40 2.16 2.07 1.97 1.88 1.78 TRIMBLE ...... KY 2.20 1.97 1.83 1.70 1.56 1.42 UNION ...... KY 2.20 2.02 1.94 1.85 1.77 1.68 WARREN ...... KY 2.40 2.00 1.89 1.78 1.67 1.56 WASHINGTON ...... KY 2.20 1.97 1.83 1.69 1.55 1.41 WAYNE ...... KY 2.40 1.99 1.88 1.76 1.65 1.53 WEBSTER ...... KY 2.40 2.02 1.94 1.85 1.77 1.68 WHITLEY ...... KY 2.40 2.28 2.11 1.94 1.77 1.60 WOLFE ...... KY 2.20 2.07 1.95 1.83 1.71 1.59 WOODFORD ...... KY 2.20 1.97 1.84 1.70 1.57 1.43 ACADIA ...... LA 3.50 3.43 3.21 3.00 2.78 2.56 ALLEN ...... LA 3.50 3.36 3.13 2.91 2.68 2.46 ASCENSION ...... LA 3.60 3.40 3.16 2.91 2.67 2.42 ASSUMPTION ...... LA 3.60 3.41 3.18 2.94 2.71 2.47 AVOYELLES ...... LA 3.40 3.21 3.01 2.82 2.62 2.43 BEAUREGARD ...... LA 3.50 3.35 3.12 2.88 2.65 2.42 BIENVILLE ...... LA 3.30 2.97 2.76 2.56 2.35 2.14 BOSSIER ...... LA 3.10 2.94 2.69 2.45 2.20 1.96 CADDO ...... LA 3.10 2.93 2.68 2.42 2.17 1.92 CALCASIEU ...... LA 3.50 3.42 3.19 2.97 2.74 2.51 CALDWELL ...... LA 3.30 3.10 2.91 2.73 2.54 2.36 CAMERON ...... LA 3.60 3.43 3.21 3.00 2.78 2.56 CATAHOULA ...... LA 3.40 3.20 3.00 2.80 2.60 2.40 CLAIBORNE ...... LA 3.10 2.96 2.75 2.53 2.32 2.10 CONCORDIA ...... LA 3.40 3.20 3.00 2.81 2.61 2.41 DE SOTO ...... LA 3.30 3.04 2.79 2.55 2.30 2.06 EAST BATON ROUGE ...... LA 3.60 3.40 3.15 2.90 2.65 2.40 EAST CARROLL ...... LA 3.10 3.02 2.86 2.70 2.54 2.38 EAST FELICIANA ...... LA 3.50 3.34 3.11 2.87 2.64 2.40 EVANGELINE ...... LA 3.50 3.36 3.14 2.91 2.69 2.47 FRANKLIN ...... LA 3.30 3.10 2.92 2.75 2.57 2.39 GRANT ...... LA 3.40 3.19 2.97 2.76 2.54 2.33 IBERIA ...... LA 3.60 3.44 3.22 3.01 2.79 2.58 IBERVILLE ...... LA 3.60 3.41 3.16 2.92 2.67 2.43 JACKSON ...... LA 3.30 3.00 2.82 2.63 2.45 2.27 JEFFERSON ...... LA 3.60 3.41 3.16 2.92 2.67 2.43 JEFFERSON DAVIS ...... LA 3.50 3.43 3.20 2.98 2.75 2.53 LA SALLE ...... LA 3.60 3.44 3.23 3.01 2.80 2.59 LAFAYETTE ...... LA 3.60 3.41 3.18 2.94 2.71 2.47 LAFOURCHE ...... LA 3.40 3.19 2.98 2.78 2.57 2.36 LINCOLN ...... LA 3.10 2.99 2.79 2.60 2.40 2.21 LIVINGSTON ...... LA 3.60 3.40 3.15 2.90 2.65 2.40 MADISON ...... LA 3.30 3.10 2.93 2.75 2.58 2.40 MOREHOUSE ...... LA 3.10 3.01 2.84 2.67 2.50 2.33 NATCHITOCHES ...... LA 3.30 3.17 2.94 2.70 2.47 2.24 ORLEANS ...... LA 3.60 3.41 3.17 2.93 2.69 2.45 OUACHITA ...... LA 3.10 3.01 2.84 2.66 2.49 2.32 PLAQUEMINES ...... LA 3.60 3.43 3.21 2.99 2.77 2.55 POINTE COUPEE ...... LA 3.50 3.35 3.12 2.90 2.67 2.44 RAPIDES ...... LA 3.40 3.20 2.99 2.79 2.58 2.38 RED RIVER ...... LA 3.30 3.05 2.82 2.58 2.35 2.12 RICHLAND ...... LA 3.10 3.02 2.86 2.70 2.54 2.38 4992 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

SABINE ...... LA 3.30 3.16 2.92 2.68 2.44 2.20 ST. BERNARD ...... LA 3.60 3.41 3.18 2.94 2.71 2.47 ST. CHARLES ...... LA 3.60 3.41 3.16 2.92 2.67 2.43 ST. HELENA ...... LA 3.50 3.35 3.11 2.88 2.64 2.41 ST. JAMES ...... LA 3.60 3.41 3.17 2.92 2.68 2.44 ST. JOHN THE BAPTIST ...... LA 3.60 3.41 3.16 2.92 2.67 2.43 ST. LANDRY ...... LA 3.50 3.36 3.14 2.93 2.71 2.49 ST. MARTIN ...... LA 3.60 3.43 3.21 3.00 2.78 2.56 ST. MARY ...... LA 3.60 3.43 3.21 3.00 2.78 2.56 ST. TAMMANY ...... LA 3.50 3.36 3.14 2.91 2.69 2.47 TANGIPAHOA ...... LA 3.60 3.40 3.16 2.91 2.67 2.42 TENSAS ...... LA 3.30 3.10 2.93 2.75 2.58 2.40 TERREBONNE ...... LA 3.60 3.42 3.20 2.97 2.75 2.52 UNION ...... LA 3.10 2.99 2.80 2.61 2.42 2.23 VERMILION ...... LA 3.60 3.44 3.23 3.03 2.82 2.61 VERNON ...... LA 3.40 3.18 2.97 2.75 2.54 2.32 WASHINGTON ...... LA 3.50 3.36 3.13 2.91 2.68 2.46 WEBSTER ...... LA 3.10 2.94 2.70 2.46 2.22 1.98 WEST BATON ROUGE ...... LA 3.60 3.40 3.16 2.91 2.67 2.42 WEST CARROLL ...... LA 3.10 3.02 2.85 2.69 2.52 2.36 WEST FELICIANA ...... LA 3.50 3.35 3.12 2.88 2.65 2.42 WINN ...... LA 3.30 3.08 2.88 2.69 2.49 2.29 BARNSTABLE ...... MA 3.25 3.06 2.87 2.69 2.50 2.32 BERKSHIRE ...... MA 2.80 2.71 2.49 2.28 2.06 1.85 BRISTOL ...... MA 3.25 3.07 2.89 2.72 2.54 2.37 DUKES ...... MA 3.25 3.06 2.88 2.71 2.53 2.35 ESSEX ...... MA 3.25 3.04 2.83 2.63 2.42 2.22 FRANKLIN ...... MA 3.00 2.80 2.58 2.36 2.14 1.92 HAMPDEN ...... MA 3.00 2.90 2.68 2.45 2.23 2.01 HAMPSHIRE ...... MA 3.00 2.91 2.67 2.44 2.20 1.97 MIDDLESEX ...... MA 3.25 3.04 2.84 2.64 2.44 2.24 NANTUCKET ...... MA 3.25 3.06 2.88 2.69 2.51 2.33 NORFOLK ...... MA 3.25 3.05 2.87 2.68 2.50 2.31 PLYMOUTH ...... MA 3.25 3.06 2.88 2.71 2.53 2.35 SUFFOLK ...... MA 3.25 3.06 2.87 2.69 2.50 2.32 WORCESTER ...... MA 3.10 2.99 2.78 2.58 2.37 2.17 ALLEGANY ...... MD 2.60 2.58 2.33 2.09 1.84 1.60 ANNE ARUNDEL ...... MD 3.00 2.75 2.47 2.18 1.90 1.62 BALTIMORE ...... MD 3.00 2.73 2.44 2.14 1.85 1.55 BALTIMORE CITY ...... MD 3.00 2.74 2.45 2.15 1.86 1.57 CALVERT ...... MD 3.00 2.77 2.50 2.24 1.97 1.71 CAROLINE ...... MD 3.00 2.78 2.53 2.28 2.03 1.78 CARROLL ...... MD 2.80 2.72 2.41 2.10 1.79 1.48 CECIL ...... MD 3.00 2.80 2.51 2.22 1.93 1.64 CHARLES ...... MD 3.00 2.76 2.48 2.21 1.93 1.66 DORCHESTER ...... MD 3.00 2.68 2.46 2.24 2.02 1.80 FREDERICK ...... MD 2.80 2.72 2.41 2.10 1.79 1.48 GARRETT ...... MD 2.60 2.55 2.32 2.09 1.86 1.63 HARFORD ...... MD 3.00 2.74 2.45 2.15 1.86 1.57 HOWARD ...... MD 3.00 2.73 2.44 2.14 1.85 1.55 KENT ...... MD 3.00 2.75 2.48 2.20 1.93 1.65 MONTGOMERY ...... MD 3.00 2.73 2.44 2.14 1.85 1.55 PRINCE GEORGE'S ...... MD 3.00 2.75 2.47 2.19 1.91 1.63 QUEEN ANNE'S ...... MD 3.00 2.76 2.49 2.23 1.96 1.69 SOMERSET ...... MD 3.00 2.77 2.52 2.26 2.01 1.75 ST. MARY'S ...... MD 3.00 2.64 2.46 2.27 2.09 1.91 TALBOT ...... MD 3.00 2.78 2.52 2.27 2.01 1.76 WASHINGTON ...... MD 2.80 2.71 2.39 2.08 1.76 1.44 WICOMICO ...... MD 3.00 2.66 2.47 2.28 2.09 1.90 WORCESTER ...... MD 3.00 2.65 2.48 2.30 2.13 1.96 ANDROSCOGGIN ...... ME 2.80 2.67 2.43 2.18 1.94 1.69 AROOSTOOK ...... ME 2.60 2.09 1.91 1.72 1.54 1.35 CUMBERLAND ...... ME 3.00 2.76 2.53 2.29 2.06 1.83 FRANKLIN ...... ME 2.60 2.37 2.16 1.96 1.75 1.54 HANCOCK ...... ME 2.80 2.26 2.07 1.87 1.68 1.49 KENNEBEC ...... ME 2.80 2.37 2.18 1.98 1.79 1.59 KNOX ...... ME 2.80 2.38 2.19 1.99 1.80 1.61 LINCOLN ...... ME 2.80 2.47 2.27 2.08 1.88 1.68 OXFORD ...... ME 2.80 2.42 2.24 2.05 1.87 1.69 PENOBSCOT ...... ME 2.80 2.25 2.03 1.80 1.58 1.36 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4993

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

PISCATAQUIS ...... ME 2.60 2.24 2.03 1.81 1.60 1.39 SAGADAHOC ...... ME 2.80 2.70 2.46 2.23 1.99 1.75 SOMERSET ...... ME 2.60 2.33 2.12 1.90 1.69 1.47 WALDO ...... ME 2.80 2.32 2.12 1.91 1.71 1.51 WASHINGTON ...... ME 2.80 2.16 1.98 1.79 1.61 1.42 YORK ...... ME 3.00 2.87 2.65 2.42 2.20 1.98 ALCONA ...... MI 1.80 1.58 1.47 1.37 1.26 1.16 ALGER ...... MI 1.80 1.28 1.21 1.14 1.07 1.00 ALLEGAN ...... MI 1.80 1.62 1.54 1.45 1.37 1.29 ALPENA ...... MI 1.80 1.57 1.46 1.34 1.23 1.12 ANTRIM ...... MI 1.80 1.55 1.42 1.29 1.16 1.03 ARENAC ...... MI 1.80 1.59 1.50 1.40 1.31 1.22 BARAGA ...... MI 1.70 1.27 1.19 1.10 1.02 0.94 BARRY ...... MI 1.80 1.62 1.53 1.45 1.36 1.28 BAY ...... MI 1.80 1.66 1.56 1.47 1.37 1.28 BENZIE ...... MI 1.80 1.58 1.48 1.38 1.28 1.18 BERRIEN ...... MI 1.80 1.64 1.57 1.51 1.44 1.38 BRANCH ...... MI 1.80 1.62 1.53 1.45 1.36 1.28 CALHOUN ...... MI 1.80 1.62 1.54 1.46 1.38 1.30 CASS ...... MI 1.80 1.62 1.53 1.45 1.36 1.28 CHARLEVOIX ...... MI 1.80 1.55 1.41 1.28 1.14 1.01 CHEBOYGAN ...... MI 1.80 1.55 1.42 1.30 1.17 1.04 CHIPPEWA ...... MI 1.80 1.32 1.30 1.27 1.25 1.22 CLARE ...... MI 1.80 1.60 1.52 1.44 1.36 1.28 CLINTON ...... MI 1.80 1.68 1.62 1.55 1.49 1.42 CRAWFORD ...... MI 1.80 1.55 1.42 1.30 1.17 1.04 DELTA ...... MI 1.70 1.11 1.07 1.04 1.00 0.96 DICKINSON ...... MI 1.70 1.09 1.03 0.98 0.92 0.86 EATON ...... MI 1.80 1.64 1.57 1.51 1.44 1.38 EMMET ...... MI 1.80 1.55 1.42 1.28 1.15 1.02 GENESEE ...... MI 1.80 1.67 1.59 1.51 1.43 1.35 GLADWIN ...... MI 1.80 1.59 1.50 1.41 1.32 1.23 GOGEBIC ...... MI 1.70 1.12 1.09 1.07 1.04 1.01 GRAND TRAVERSE ...... MI 1.80 1.57 1.46 1.35 1.24 1.13 GRATIOT ...... MI 1.80 1.67 1.59 1.52 1.44 1.36 HILLSDALE ...... MI 1.80 1.66 1.57 1.49 1.40 1.31 HOUGHTON ...... MI 1.70 1.27 1.19 1.12 1.04 0.96 HURON ...... MI 1.80 1.66 1.56 1.47 1.37 1.28 INGHAM ...... MI 1.80 1.68 1.61 1.55 1.48 1.41 IONIA ...... MI 1.80 1.63 1.56 1.49 1.42 1.35 IOSCO ...... MI 1.80 1.58 1.48 1.39 1.29 1.19 IRON ...... MI 1.70 1.10 1.04 0.99 0.93 0.88 ISABELLA ...... MI 1.80 1.61 1.54 1.46 1.39 1.32 JACKSON ...... MI 1.80 1.67 1.59 1.52 1.44 1.36 KALAMAZOO ...... MI 1.80 1.61 1.51 1.42 1.32 1.23 KALKASKA ...... MI 1.80 1.56 1.44 1.33 1.21 1.09 KENT ...... MI 1.80 1.62 1.53 1.45 1.36 1.28 KEWEENAW ...... MI 1.70 1.28 1.20 1.13 1.05 0.98 LAKE ...... MI 1.80 1.61 1.54 1.48 1.41 1.34 LAPEER ...... MI 1.80 1.67 1.59 1.50 1.42 1.34 LEELANAU ...... MI 1.80 1.56 1.45 1.33 1.22 1.10 LENAWEE ...... MI 1.80 1.71 1.62 1.53 1.44 1.35 LIVINGSTON ...... MI 1.80 1.67 1.60 1.52 1.45 1.37 LUCE ...... MI 1.80 1.30 1.25 1.21 1.16 1.11 MACKINAC ...... MI 1.80 1.30 1.25 1.21 1.16 1.11 MACOMB ...... MI 1.80 1.68 1.60 1.53 1.45 1.38 MANISTEE ...... MI 1.80 1.60 1.52 1.43 1.35 1.27 MARQUETTE ...... MI 1.80 1.27 1.18 1.10 1.01 0.93 MASON ...... MI 1.80 1.62 1.56 1.49 1.43 1.37 MECOSTA ...... MI 1.80 1.61 1.54 1.48 1.41 1.34 MENOMINEE ...... MI 1.70 1.11 1.07 1.03 0.99 0.95 MIDLAND ...... MI 1.80 1.60 1.53 1.45 1.38 1.30 MISSAUKEE ...... MI 1.80 1.59 1.49 1.40 1.30 1.21 MONROE ...... MI 1.80 1.72 1.63 1.55 1.46 1.38 MONTCALM ...... MI 1.80 1.63 1.56 1.48 1.41 1.34 MONTMORENCY ...... MI 1.80 1.55 1.42 1.29 1.16 1.03 MUSKEGON ...... MI 1.80 1.63 1.57 1.50 1.44 1.37 NEWAYGO ...... MI 1.80 1.61 1.55 1.48 1.42 1.35 OAKLAND ...... MI 1.80 1.67 1.59 1.50 1.42 1.34 OCEANA ...... MI 1.80 1.62 1.56 1.50 1.44 1.38 4994 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

OGEMAW ...... MI 1.80 1.58 1.47 1.37 1.26 1.16 ONTONAGON ...... MI 1.70 1.12 1.08 1.05 1.01 0.98 OSCEOLA ...... MI 1.80 1.61 1.53 1.46 1.38 1.31 OSCODA ...... MI 1.80 1.56 1.44 1.33 1.21 1.09 OTSEGO ...... MI 1.80 1.54 1.40 1.25 1.11 0.97 OTTAWA ...... MI 1.80 1.62 1.54 1.46 1.38 1.30 PRESQUE ISLE ...... MI 1.80 1.56 1.44 1.33 1.21 1.09 ROSCOMMON ...... MI 1.80 1.57 1.46 1.35 1.24 1.13 SAGINAW ...... MI 1.80 1.67 1.59 1.50 1.42 1.34 SANILAC ...... MI 1.80 1.66 1.57 1.49 1.40 1.31 SCHOOLCRAFT ...... MI 1.80 1.29 1.22 1.16 1.09 1.03 SHIAWASSEE ...... MI 1.80 1.68 1.61 1.53 1.46 1.39 ST. CLAIR ...... MI 1.80 1.68 1.60 1.53 1.45 1.38 ST. JOSEPH ...... MI 1.80 1.61 1.52 1.44 1.35 1.26 TUSCOLA ...... MI 1.80 1.66 1.57 1.48 1.39 1.30 VAN BUREN ...... MI 1.80 1.62 1.54 1.45 1.37 1.29 WASHTENAW ...... MI 1.80 1.67 1.59 1.52 1.44 1.36 WAYNE ...... MI 1.80 1.67 1.60 1.52 1.45 1.37 WEXFORD ...... MI 1.80 1.59 1.50 1.42 1.33 1.24 AITKIN ...... MN 1.65 1.13 1.13 1.12 1.12 1.11 ANOKA ...... MN 1.70 1.15 1.15 1.16 1.16 1.17 BECKER ...... MN 1.65 1.09 1.04 0.98 0.93 0.88 BELTRAMI ...... MN 1.65 1.13 1.05 0.98 0.90 0.83 BENTON ...... MN 1.70 1.13 1.12 1.12 1.11 1.10 BIG STONE ...... MN 1.70 1.11 1.08 1.05 1.02 0.99 BLUE EARTH ...... MN 1.70 1.20 1.19 1.19 1.18 1.18 BROWN ...... MN 1.70 1.19 1.19 1.18 1.18 1.17 CARLTON ...... MN 1.65 1.15 1.17 1.18 1.20 1.21 CARVER ...... MN 1.70 1.15 1.15 1.16 1.16 1.17 CASS ...... MN 1.65 1.10 1.07 1.03 1.00 0.96 CHIPPEWA ...... MN 1.70 1.12 1.11 1.09 1.08 1.06 CHISAGO ...... MN 1.70 1.14 1.14 1.15 1.15 1.15 CLAY ...... MN 1.65 1.13 1.06 1.00 0.93 0.86 CLEARWATER ...... MN 1.65 1.13 1.05 0.98 0.90 0.83 COOK ...... MN 1.65 1.17 1.13 1.10 1.06 1.03 COTTONWOOD ...... MN 1.70 1.20 1.19 1.19 1.18 1.18 CROW WING ...... MN 1.65 1.12 1.10 1.08 1.06 1.04 DAKOTA ...... MN 1.70 1.14 1.15 1.15 1.16 1.16 DODGE ...... MN 1.70 1.14 1.13 1.13 1.12 1.12 DOUGLAS ...... MN 1.70 1.10 1.07 1.03 1.00 0.96 FARIBAULT ...... MN 1.70 1.20 1.20 1.21 1.21 1.21 FILLMORE ...... MN 1.70 1.14 1.14 1.13 1.13 1.13 FREEBORN ...... MN 1.70 1.20 1.19 1.19 1.18 1.18 GOODHUE ...... MN 1.70 1.14 1.13 1.13 1.12 1.12 GRANT ...... MN 1.70 1.10 1.06 1.03 0.99 0.95 HENNEPIN ...... MN 1.70 1.20 1.20 1.20 1.20 1.20 HOUSTON ...... MN 1.70 1.15 1.15 1.16 1.16 1.17 HUBBARD ...... MN 1.65 1.09 1.05 1.00 0.96 0.91 ISANTI ...... MN 1.70 1.14 1.14 1.15 1.15 1.15 ITASCA ...... MN 1.65 1.16 1.12 1.09 1.05 1.01 JACKSON ...... MN 1.70 1.20 1.20 1.21 1.21 1.21 KANABEC ...... MN 1.70 1.14 1.14 1.14 1.14 1.14 KANDIYOHI ...... MN 1.70 1.13 1.11 1.10 1.08 1.07 KITTSON ...... MN 1.60 1.13 1.06 1.00 0.93 0.86 KOOCHICHING ...... MN 1.65 1.14 1.09 1.03 0.98 0.92 LAC QUI PARLE ...... MN 1.70 1.17 1.14 1.10 1.07 1.04 LAKE ...... MN 1.65 1.18 1.16 1.15 1.13 1.11 LAKE OF THE WOODS ...... MN 1.60 1.12 1.05 0.97 0.90 0.82 LE SUEUR ...... MN 1.70 1.15 1.15 1.16 1.16 1.17 LINCOLN ...... MN 1.70 1.33 1.27 1.22 1.16 1.11 LYON ...... MN 1.70 1.19 1.17 1.16 1.14 1.13 MAHNOMEN ...... MN 1.70 1.14 1.14 1.14 1.14 1.14 MARSHALL ...... MN 1.65 1.13 1.05 0.98 0.90 0.83 MARTIN ...... MN 1.65 1.12 1.05 0.97 0.90 0.82 MCLEOD ...... MN 1.70 1.20 1.20 1.21 1.21 1.21 MEEKER ...... MN 1.70 1.13 1.12 1.12 1.11 1.10 MILLE LACS ...... MN 1.70 1.13 1.13 1.12 1.12 1.11 MORRISON ...... MN 1.70 1.12 1.10 1.08 1.06 1.04 MOWER ...... MN 1.70 1.19 1.18 1.16 1.15 1.14 MURRAY ...... MN 1.70 1.19 1.19 1.18 1.18 1.17 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4995

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

NICOLLET ...... MN 1.70 1.15 1.15 1.16 1.16 1.17 NOBLES ...... MN 1.70 1.37 1.33 1.28 1.24 1.20 NORMAN ...... MN 1.65 1.13 1.07 1.00 0.94 0.87 OLMSTED ...... MN 1.70 1.18 1.16 1.14 1.12 1.10 OTTER TAIL ...... MN 1.65 1.10 1.05 1.01 0.96 0.92 PENNINGTON ...... MN 1.65 1.10 1.00 0.91 0.81 0.71 PINE ...... MN 1.70 1.15 1.16 1.16 1.17 1.18 PIPESTONE ...... MN 1.70 1.36 1.31 1.25 1.20 1.15 POLK ...... MN 1.65 1.13 1.06 0.99 0.92 0.85 POPE ...... MN 1.70 1.11 1.08 1.06 1.03 1.00 RAMSEY ...... MN 1.70 1.20 1.20 1.20 1.20 1.20 RED LAKE ...... MN 1.65 1.11 1.02 0.93 0.84 0.75 REDWOOD ...... MN 1.70 1.19 1.18 1.16 1.15 1.14 RENVILLE ...... MN 1.70 1.14 1.13 1.13 1.12 1.12 RICE ...... MN 1.70 1.14 1.15 1.15 1.16 1.16 ROCK ...... MN 1.70 1.41 1.36 1.30 1.25 1.20 ROSEAU ...... MN 1.60 1.12 1.03 0.95 0.86 0.78 SCOTT ...... MN 1.65 1.18 1.16 1.15 1.13 1.11 SHERBURNE ...... MN 1.70 1.15 1.15 1.16 1.16 1.17 SIBLEY ...... MN 1.70 1.14 1.14 1.13 1.13 1.13 ST. LOUIS ...... MN 1.70 1.14 1.15 1.15 1.16 1.16 STEARNS ...... MN 1.70 1.12 1.11 1.09 1.08 1.06 STEELE ...... MN 1.70 1.14 1.14 1.15 1.15 1.15 STEVENS ...... MN 1.70 1.11 1.08 1.04 1.01 0.98 SWIFT ...... MN 1.70 1.12 1.10 1.07 1.05 1.03 TODD ...... MN 1.70 1.11 1.08 1.05 1.02 0.99 TRAVERSE ...... MN 1.70 1.10 1.07 1.03 1.00 0.96 WABASHA ...... MN 1.70 1.13 1.12 1.12 1.11 1.10 WADENA ...... MN 1.65 1.10 1.06 1.02 0.98 0.94 WASECA ...... MN 1.70 1.15 1.15 1.16 1.16 1.17 WASHINGTON ...... MN 1.70 1.19 1.18 1.17 1.16 1.15 WATONWAN ...... MN 1.70 1.20 1.20 1.19 1.19 1.19 WILKIN ...... MN 1.65 1.09 1.05 1.00 0.96 0.91 WINONA ...... MN 1.70 1.14 1.14 1.15 1.15 1.15 WRIGHT ...... MN 1.70 1.14 1.14 1.14 1.14 1.14 YELLOW MEDICINE ...... MN 1.70 1.18 1.16 1.13 1.11 1.09 ADAIR ...... MO 1.80 1.67 1.61 1.56 1.50 1.45 ANDREW ...... MO 1.80 1.84 1.75 1.67 1.58 1.50 ATCHISON ...... MO 1.80 1.84 1.76 1.68 1.60 1.52 AUDRAIN ...... MO 2.00 1.84 1.76 1.68 1.60 1.52 BARRY ...... MO 2.20 2.01 1.82 1.64 1.45 1.27 BARTON ...... MO 2.20 2.10 1.90 1.71 1.51 1.31 BATES ...... MO 2.00 1.81 1.71 1.60 1.50 1.39 BENTON ...... MO 2.00 1.82 1.71 1.61 1.50 1.40 BOLLINGER ...... MO 2.20 1.95 1.89 1.83 1.77 1.71 BOONE ...... MO 2.00 1.85 1.78 1.71 1.64 1.57 BUCHANAN ...... MO 1.80 1.83 1.75 1.66 1.58 1.49 BUTLER ...... MO 2.20 2.11 2.04 1.96 1.89 1.81 CALDWELL ...... MO 1.80 1.83 1.75 1.66 1.58 1.49 CALLAWAY ...... MO 2.00 1.85 1.78 1.70 1.63 1.56 CAMDEN ...... MO 2.00 2.03 1.87 1.72 1.56 1.40 CAPE GIRARDEAU ...... MO 2.20 1.95 1.89 1.84 1.78 1.72 CARROLL ...... MO 1.80 1.67 1.63 1.58 1.54 1.49 CARTER ...... MO 2.20 2.10 2.00 1.91 1.81 1.72 CASS ...... MO 2.00 1.82 1.72 1.63 1.53 1.43 CEDAR ...... MO 2.20 2.02 1.84 1.67 1.49 1.32 CHARITON ...... MO 1.80 1.84 1.75 1.67 1.58 1.50 CHRISTIAN ...... MO 2.20 2.02 1.84 1.67 1.49 1.32 CLARK ...... MO 1.80 1.66 1.60 1.55 1.49 1.43 CLAY ...... MO 1.80 1.83 1.74 1.65 1.56 1.47 CLINTON ...... MO 1.80 1.83 1.75 1.66 1.58 1.49 COLE ...... MO 2.00 1.84 1.76 1.69 1.61 1.53 COOPER ...... MO 2.00 1.84 1.76 1.69 1.61 1.53 CRAWFORD ...... MO 2.00 1.92 1.84 1.75 1.67 1.58 DADE ...... MO 2.20 2.01 1.83 1.65 1.47 1.29 DALLAS ...... MO 2.20 2.01 1.84 1.66 1.49 1.31 DAVIESS ...... MO 1.80 1.84 1.76 1.67 1.59 1.51 DE KALB ...... MO 1.80 1.84 1.75 1.67 1.58 1.50 DENT ...... MO 2.00 2.06 1.94 1.81 1.69 1.56 DOUGLAS ...... MO 2.20 2.03 1.88 1.72 1.57 1.41 4996 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

DUNKLIN ...... MO 2.20 2.44 2.32 2.21 2.09 1.98 FRANKLIN ...... MO 2.00 1.93 1.85 1.77 1.69 1.61 GASCONADE ...... MO 2.00 2.07 1.94 1.82 1.69 1.57 GENTRY ...... MO 1.80 1.84 1.76 1.68 1.60 1.52 GREENE ...... MO 2.20 2.01 1.84 1.66 1.49 1.31 GRUNDY ...... MO 1.80 1.54 1.53 1.52 1.51 1.50 HARRISON ...... MO 1.80 1.54 1.54 1.53 1.53 1.52 HENRY ...... MO 2.00 1.82 1.72 1.61 1.51 1.41 HICKORY ...... MO 2.00 2.02 1.85 1.69 1.52 1.35 HOLT ...... MO 1.80 1.84 1.75 1.67 1.58 1.50 HOWARD ...... MO 2.00 1.84 1.77 1.69 1.62 1.54 HOWELL ...... MO 2.20 2.07 1.95 1.84 1.72 1.60 IRON ...... MO 2.00 2.08 1.97 1.87 1.76 1.65 JACKSON ...... MO 2.00 1.83 1.74 1.64 1.55 1.46 JASPER ...... MO 2.20 2.10 1.89 1.69 1.48 1.28 JEFFERSON ...... MO 2.00 1.94 1.87 1.79 1.72 1.65 JOHNSON ...... MO 2.00 1.82 1.73 1.63 1.54 1.44 KNOX ...... MO 1.80 1.66 1.60 1.54 1.48 1.42 LACLEDE ...... MO 2.20 2.03 1.86 1.70 1.53 1.37 LAFAYETTE ...... MO 2.00 1.83 1.74 1.66 1.57 1.48 LAWRENCE ...... MO 2.20 2.01 1.83 1.64 1.46 1.28 LEWIS ...... MO 1.80 1.65 1.58 1.51 1.44 1.37 LINCOLN ...... MO 2.00 1.85 1.78 1.72 1.65 1.58 LINN ...... MO 1.80 1.67 1.62 1.58 1.53 1.48 LIVINGSTON ...... MO 1.80 1.68 1.63 1.59 1.54 1.50 MACON ...... MO 2.20 2.01 1.82 1.64 1.45 1.27 MADISON ...... MO 1.80 1.67 1.62 1.56 1.51 1.46 MARIES ...... MO 2.20 2.09 1.99 1.88 1.78 1.68 MARION ...... MO 2.00 2.05 1.92 1.78 1.65 1.51 MCDONALD ...... MO 1.80 1.65 1.59 1.52 1.46 1.39 MERCER ...... MO 1.80 1.54 1.53 1.53 1.52 1.51 MILLER ...... MO 2.00 1.83 1.74 1.65 1.56 1.47 MISSISSIPPI ...... MO 2.20 2.28 2.17 2.05 1.94 1.83 MONITEAU ...... MO 2.00 1.84 1.77 1.69 1.62 1.54 MONROE ...... MO 1.80 1.67 1.62 1.57 1.52 1.47 MONTGOMERY ...... MO 2.00 1.85 1.78 1.70 1.63 1.56 MORGAN ...... MO 2.00 1.83 1.74 1.64 1.55 1.46 NEW MADRID ...... MO 2.20 2.29 2.19 2.09 1.99 1.89 NEWTON ...... MO 2.20 2.09 1.89 1.68 1.48 1.27 NODAWAY ...... MO 1.80 1.84 1.76 1.69 1.61 1.53 OREGON ...... MO 2.20 2.09 1.99 1.90 1.80 1.70 OSAGE ...... MO 2.00 1.85 1.77 1.70 1.62 1.55 OZARK ...... MO 2.20 2.05 1.91 1.77 1.63 1.49 PEMISCOT ...... MO 2.20 2.44 2.33 2.21 2.10 1.99 PERRY ...... MO 2.20 1.94 1.87 1.79 1.72 1.65 PETTIS ...... MO 2.00 1.83 1.74 1.65 1.56 1.47 PHELPS ...... MO 2.00 2.05 1.92 1.78 1.65 1.51 PIKE ...... MO 2.00 1.68 1.64 1.59 1.55 1.51 PLATTE ...... MO 1.80 1.83 1.74 1.65 1.56 1.47 POLK ...... MO 2.20 2.01 1.83 1.66 1.48 1.30 PULASKI ...... MO 2.20 2.04 1.90 1.75 1.61 1.46 PUTNAM ...... MO 1.80 1.54 1.52 1.51 1.49 1.48 RALLS ...... MO 2.00 1.66 1.61 1.55 1.50 1.44 RANDOLPH ...... MO 1.80 1.84 1.76 1.67 1.59 1.51 RAY ...... MO 1.80 1.67 1.63 1.58 1.54 1.49 REYNOLDS ...... MO 2.20 2.08 1.97 1.87 1.76 1.65 RIPLEY ...... MO 2.20 2.11 2.03 1.96 1.88 1.80 SALINE ...... MO 2.00 1.93 1.85 1.78 1.70 1.62 SCHUYLER ...... MO 1.80 1.53 1.51 1.50 1.48 1.46 SCOTLAND ...... MO 1.80 1.66 1.61 1.55 1.50 1.44 SCOTT ...... MO 2.20 2.27 2.15 2.02 1.90 1.78 SHANNON ...... MO 2.20 2.08 1.96 1.85 1.73 1.62 SHELBY ...... MO 1.80 1.66 1.60 1.55 1.49 1.43 ST. CHARLES ...... MO 2.00 1.93 1.85 1.78 1.70 1.62 ST. CLAIR ...... MO 2.00 1.81 1.70 1.58 1.47 1.36 ST. FRANCOIS ...... MO 2.00 1.94 1.86 1.79 1.71 1.64 ST. LOUIS ...... MO 2.00 1.94 1.87 1.80 1.73 1.66 ST. LOUIS CITY ...... MO 2.00 1.94 1.87 1.81 1.74 1.67 STE. GENEVIEVE ...... MO 2.00 1.94 1.86 1.79 1.71 1.64 STODDARD ...... MO 2.20 2.11 2.04 1.96 1.89 1.81 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4997

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

STONE ...... MO 2.20 2.01 1.84 1.66 1.49 1.31 SULLIVAN ...... MO 1.80 1.67 1.63 1.58 1.54 1.49 TANEY ...... MO 2.20 2.03 1.86 1.70 1.53 1.37 TEXAS ...... MO 2.20 2.05 1.91 1.77 1.63 1.49 VERNON ...... MO 2.20 2.11 1.92 1.73 1.54 1.35 WARREN ...... MO 2.00 1.93 1.84 1.76 1.67 1.59 WASHINGTON ...... MO 2.00 1.93 1.85 1.78 1.70 1.62 WAYNE ...... MO 2.20 2.10 2.01 1.92 1.83 1.74 WEBSTER ...... MO 2.20 2.01 1.83 1.64 1.46 1.28 WORTH ...... MO 1.80 1.84 1.76 1.69 1.61 1.53 WRIGHT ...... MO 2.20 2.03 1.87 1.70 1.54 1.38 ADAMS ...... MS 3.40 3.20 3.00 2.81 2.61 2.41 ALCORN ...... MS 2.90 2.70 2.57 2.43 2.30 2.17 AMITE ...... MS 3.40 3.20 3.01 2.81 2.62 2.42 ATTALA ...... MS 3.10 2.95 2.82 2.70 2.57 2.44 BENTON ...... MS 2.90 2.72 2.61 2.50 2.39 2.28 BOLIVAR ...... MS 3.10 2.85 2.72 2.60 2.47 2.34 CALHOUN ...... MS 3.10 2.86 2.74 2.63 2.51 2.39 CARROLL ...... MS 3.10 2.95 2.82 2.68 2.55 2.42 CHICKASAW ...... MS 3.10 2.85 2.73 2.60 2.48 2.35 CHOCTAW ...... MS 3.10 2.95 2.82 2.68 2.55 2.42 CLAIBORNE ...... MS 3.30 3.11 2.94 2.76 2.59 2.42 CLARKE ...... MS 3.30 3.13 2.98 2.84 2.69 2.54 CLAY ...... MS 3.10 2.94 2.80 2.65 2.51 2.37 COAHOMA ...... MS 2.90 2.74 2.64 2.55 2.45 2.36 COPIAH ...... MS 3.30 3.11 2.94 2.78 2.61 2.44 COVINGTON ...... MS 3.40 3.22 3.04 2.87 2.69 2.51 DE SOTO ...... MS 2.90 2.75 2.66 2.58 2.49 2.41 FORREST ...... MS 3.40 3.23 3.06 2.90 2.73 2.56 FRANKLIN ...... MS 3.40 3.20 3.01 2.81 2.62 2.42 GEORGE ...... MS 3.40 3.41 3.23 3.06 2.88 2.71 GREENE ...... MS 3.40 3.25 3.10 2.95 2.80 2.65 GRENADA ...... MS 3.10 2.87 2.75 2.64 2.52 2.41 HANCOCK ...... MS 3.50 3.37 3.16 2.96 2.75 2.54 HARRISON ...... MS 3.50 3.39 3.20 3.02 2.83 2.64 HINDS ...... MS 3.30 3.11 2.94 2.78 2.61 2.44 HOLMES ...... MS 3.10 2.95 2.82 2.68 2.55 2.42 HUMPHREYS ...... MS 3.10 2.95 2.81 2.68 2.54 2.41 ISSAQUENA ...... MS 3.10 3.02 2.86 2.71 2.55 2.39 ITAWAMBA ...... MS 2.90 2.71 2.59 2.46 2.34 2.22 JACKSON ...... MS 3.50 3.41 3.24 3.08 2.91 2.74 JASPER ...... MS 3.30 3.13 2.98 2.82 2.67 2.52 JEFFERSON ...... MS 3.40 3.20 3.01 2.81 2.62 2.42 JEFFERSON DAVIS ...... MS 3.40 3.22 3.04 2.85 2.67 2.49 JONES ...... MS 3.40 3.23 3.06 2.88 2.71 2.54 KEMPER ...... MS 3.10 3.03 2.89 2.74 2.60 2.45 LAFAYETTE ...... MS 2.90 2.74 2.65 2.55 2.46 2.37 LAMAR ...... MS 3.40 3.23 3.05 2.88 2.70 2.53 LAUDERDALE ...... MS 3.30 3.12 2.96 2.81 2.65 2.49 LAWRENCE ...... MS 3.40 3.21 3.02 2.84 2.65 2.46 LEAKE ...... MS 3.10 3.04 2.89 2.75 2.60 2.46 LEE ...... MS 2.90 2.72 2.60 2.49 2.37 2.26 LEFLORE ...... MS 3.10 2.94 2.81 2.67 2.54 2.40 LINCOLN ...... MS 3.40 3.21 3.02 2.82 2.63 2.44 LOWNDES ...... MS 3.10 2.93 2.79 2.64 2.50 2.35 MADISON ...... MS 3.10 3.03 2.88 2.74 2.59 2.44 MARION ...... MS 3.40 3.22 3.04 2.85 2.67 2.49 MARSHALL ...... MS 2.90 2.74 2.64 2.55 2.45 2.36 MONROE ...... MS 3.10 2.84 2.71 2.57 2.44 2.30 MONTGOMERY ...... MS 3.10 2.95 2.82 2.68 2.55 2.42 NESHOBA ...... MS 3.10 3.04 2.89 2.75 2.60 2.46 NEWTON ...... MS 3.30 3.12 2.96 2.80 2.64 2.48 NOXUBEE ...... MS 3.10 2.95 2.81 2.68 2.54 2.41 OKTIBBEHA ...... MS 3.10 2.94 2.81 2.67 2.54 2.40 PANOLA ...... MS 2.90 2.74 2.66 2.57 2.49 2.40 PEARL RIVER ...... MS 3.40 3.37 3.16 2.94 2.73 2.52 PERRY ...... MS 3.40 3.24 3.08 2.92 2.76 2.60 PIKE ...... MS 3.40 3.21 3.02 2.82 2.63 2.44 PONTOTOC ...... MS 2.90 2.73 2.63 2.53 2.43 2.33 PRENTISS ...... MS 2.90 2.70 2.57 2.44 2.31 2.18 4998 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

QUITMAN ...... MS 2.90 2.74 2.65 2.57 2.48 2.39 RANKIN ...... MS 3.30 3.12 2.95 2.79 2.62 2.46 SCOTT ...... MS 3.30 3.12 2.96 2.79 2.63 2.47 SHARKEY ...... MS 3.10 3.02 2.87 2.71 2.56 2.40 SIMPSON ...... MS 3.30 3.12 2.96 2.79 2.63 2.47 SMITH ...... MS 3.30 3.12 2.96 2.81 2.65 2.49 STONE ...... MS 3.40 3.38 3.19 2.99 2.80 2.60 SUNFLOWER ...... MS 3.10 2.86 2.74 2.62 2.50 2.38 TALLAHATCHIE ...... MS 3.10 2.86 2.75 2.63 2.52 2.40 TATE ...... MS 2.90 2.74 2.66 2.57 2.49 2.40 TIPPAH ...... MS 2.90 2.71 2.60 2.48 2.37 2.25 TISHOMINGO ...... MS 2.90 2.69 2.54 2.40 2.25 2.11 TUNICA ...... MS 2.90 2.74 2.65 2.57 2.48 2.39 UNION ...... MS 2.90 2.72 2.61 2.51 2.40 2.29 WALTHALL ...... MS 3.40 3.21 3.02 2.84 2.65 2.46 WARREN ...... MS 3.30 3.11 2.94 2.76 2.59 2.42 WASHINGTON ...... MS 3.10 2.94 2.80 2.65 2.51 2.37 WAYNE ...... MS 3.40 3.24 3.08 2.91 2.75 2.59 WEBSTER ...... MS 3.10 2.95 2.81 2.68 2.54 2.41 WILKINSON ...... MS 3.40 3.20 3.00 2.81 2.61 2.41 WINSTON ...... MS 3.10 2.95 2.82 2.69 2.56 2.43 YALOBUSHA ...... MS 3.10 2.86 2.75 2.63 2.52 2.40 YAZOO ...... MS 3.10 3.03 2.88 2.73 2.58 2.43 BEAVERHEAD ...... MT 1.60 1.47 1.34 1.21 1.08 0.95 BIG HORN ...... MT 1.60 1.50 1.40 1.31 1.21 1.11 BLAINE ...... MT 1.60 1.53 1.45 1.38 1.30 1.23 BROADWATER ...... MT 1.60 1.48 1.36 1.24 1.12 1.00 CARBON ...... MT 1.60 1.49 1.38 1.26 1.15 1.04 CARTER ...... MT 1.65 1.48 1.35 1.23 1.10 0.98 CASCADE ...... MT 1.60 1.54 1.48 1.42 1.36 1.30 CHOUTEAU ...... MT 1.60 1.54 1.48 1.41 1.35 1.29 CUSTER ...... MT 1.60 1.49 1.38 1.28 1.17 1.06 DANIELS ...... MT 1.60 1.50 1.41 1.31 1.22 1.12 DAWSON ...... MT 1.60 1.49 1.38 1.28 1.17 1.06 DEER LODGE ...... MT 1.60 1.50 1.40 1.29 1.19 1.09 FALLON ...... MT 1.65 1.48 1.36 1.25 1.13 1.01 FERGUS ...... MT 1.60 1.52 1.43 1.35 1.26 1.18 FLATHEAD ...... MT 1.60 1.52 1.43 1.35 1.26 1.18 GALLATIN ...... MT 1.60 1.44 1.28 1.11 0.95 0.79 GARFIELD ...... MT 1.60 1.51 1.42 1.34 1.25 1.16 GLACIER ...... MT 1.60 1.53 1.46 1.38 1.31 1.24 GOLDEN VALLEY ...... MT 1.60 1.50 1.41 1.31 1.22 1.12 GRANITE ...... MT 1.60 1.52 1.43 1.35 1.26 1.18 HILL ...... MT 1.60 1.53 1.47 1.40 1.34 1.27 JEFFERSON ...... MT 1.60 1.48 1.36 1.25 1.13 1.01 JUDITH BASIN ...... MT 1.60 1.52 1.44 1.36 1.28 1.20 LAKE ...... MT 1.60 1.52 1.44 1.35 1.27 1.19 LEWIS AND CLARK ...... MT 1.60 1.52 1.44 1.35 1.27 1.19 LIBERTY ...... MT 1.60 1.54 1.47 1.41 1.34 1.28 LINCOLN ...... MT 1.80 1.50 1.40 1.29 1.19 1.09 MADISON ...... MT 1.60 1.50 1.40 1.30 1.20 1.10 MCCONE ...... MT 1.60 1.45 1.31 1.16 1.02 0.87 MEAGHER ...... MT 1.60 1.49 1.38 1.26 1.15 1.04 MINERAL ...... MT 1.80 1.51 1.42 1.32 1.23 1.14 MISSOULA ...... MT 1.60 1.52 1.44 1.37 1.29 1.21 MUSSELSHELL ...... MT 1.60 1.51 1.42 1.33 1.24 1.15 PARK ...... MT 1.60 1.45 1.29 1.14 0.98 0.83 PETROLEUM ...... MT 1.60 1.51 1.43 1.34 1.26 1.17 PHILLIPS ...... MT 1.60 1.52 1.44 1.36 1.28 1.20 PONDERA ...... MT 1.60 1.54 1.47 1.41 1.34 1.28 POWDER RIVER ...... MT 1.60 1.49 1.37 1.26 1.14 1.03 POWELL ...... MT 1.60 1.51 1.42 1.34 1.25 1.16 PRAIRIE ...... MT 1.60 1.49 1.39 1.28 1.18 1.07 RAVALLI ...... MT 1.60 1.52 1.44 1.37 1.29 1.21 RICHLAND ...... MT 1.60 1.49 1.38 1.27 1.16 1.05 ROOSEVELT ...... MT 1.60 1.50 1.39 1.29 1.18 1.08 ROSEBUD ...... MT 1.60 1.50 1.40 1.31 1.21 1.11 SANDERS ...... MT 1.80 1.51 1.41 1.32 1.22 1.13 SHERIDAN ...... MT 1.60 1.50 1.39 1.29 1.18 1.08 SILVER BOW ...... MT 1.60 1.49 1.37 1.26 1.14 1.03 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4999

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

STILLWATER ...... MT 1.60 1.48 1.36 1.24 1.12 1.00 SWEET GRASS ...... MT 1.60 1.47 1.34 1.21 1.08 0.95 TETON ...... MT 1.60 1.54 1.48 1.42 1.36 1.30 TOOLE ...... MT 1.60 1.54 1.47 1.41 1.34 1.28 TREASURE ...... MT 1.60 1.51 1.41 1.32 1.22 1.13 VALLEY ...... MT 1.60 1.51 1.42 1.34 1.25 1.16 WHEATLAND ...... MT 1.60 1.50 1.39 1.29 1.18 1.08 WIBAUX ...... MT 1.60 1.49 1.37 1.26 1.14 1.03 YELLOWSTONE ...... MT 1.60 1.51 1.42 1.33 1.24 1.15 YELLOWSTONE NATIONAL PARK ...... MT 1.60 1.45 1.30 1.15 1.00 0.85 ALAMANCE ...... NC 3.10 2.86 2.63 2.41 2.18 1.96 ALEXANDER ...... NC 2.95 2.70 2.48 2.25 2.03 1.80 ALLEGHANY ...... NC 2.95 2.69 2.45 2.22 1.98 1.74 ANSON ...... NC 3.10 2.88 2.68 2.49 2.29 2.09 ASHE ...... NC 2.95 2.69 2.45 2.22 1.98 1.74 AVERY ...... NC 2.95 2.70 2.47 2.24 2.01 1.78 BEAUFORT ...... NC 3.20 3.06 2.90 2.73 2.57 2.40 BERTIE ...... NC 3.20 3.03 2.84 2.64 2.45 2.25 BLADEN ...... NC 3.30 3.07 2.91 2.76 2.60 2.44 BRUNSWICK ...... NC 3.30 3.11 2.99 2.86 2.74 2.62 BUNCOMBE ...... NC 2.95 2.72 2.51 2.29 2.08 1.87 BURKE ...... NC 2.95 2.71 2.49 2.26 2.04 1.82 CABARRUS ...... NC 3.10 2.84 2.61 2.37 2.14 1.90 CALDWELL ...... NC 2.95 2.70 2.47 2.25 2.02 1.79 CAMDEN ...... NC 3.20 3.03 2.84 2.64 2.45 2.25 CARTERET ...... NC 3.20 3.09 2.95 2.81 2.67 2.53 CASWELL ...... NC 3.10 2.84 2.60 2.36 2.12 1.88 CATAWBA ...... NC 3.10 2.83 2.58 2.33 2.08 1.83 CHATHAM ...... NC 3.10 2.88 2.68 2.48 2.28 2.08 CHEROKEE ...... NC 2.95 2.77 2.60 2.44 2.27 2.11 CHOWAN ...... NC 3.20 3.03 2.83 2.64 2.44 2.24 CLAY ...... NC 2.95 2.77 2.61 2.46 2.30 2.14 CLEVELAND ...... NC 3.10 2.84 2.61 2.37 2.14 1.90 COLUMBUS ...... NC 3.30 3.09 2.95 2.82 2.68 2.54 CRAVEN ...... NC 3.20 3.08 2.93 2.79 2.64 2.49 CUMBERLAND ...... NC 3.30 3.04 2.84 2.65 2.45 2.26 CURRITUCK ...... NC 3.20 3.03 2.83 2.64 2.44 2.24 DARE ...... NC 3.20 3.05 2.88 2.70 2.53 2.35 DAVIDSON ...... NC 3.10 2.85 2.62 2.38 2.15 1.92 DAVIE ...... NC 3.10 2.83 2.59 2.34 2.10 1.85 DUPLIN ...... NC 3.30 3.07 2.91 2.75 2.59 2.43 DURHAM ...... NC 3.10 2.87 2.66 2.46 2.25 2.04 EDGECOMBE ...... NC 3.20 3.03 2.83 2.64 2.44 2.24 FORSYTH ...... NC 3.10 2.84 2.59 2.35 2.10 1.86 FRANKLIN ...... NC 3.10 2.88 2.68 2.49 2.29 2.09 GASTON ...... NC 3.10 2.84 2.60 2.35 2.11 1.87 GATES ...... NC 3.20 3.02 2.81 2.60 2.39 2.18 GRAHAM ...... NC 2.95 2.76 2.58 2.41 2.23 2.06 GRANVILLE ...... NC 3.10 2.86 2.65 2.43 2.22 2.00 GREENE ...... NC 3.20 3.05 2.87 2.70 2.52 2.34 GUILFORD ...... NC 3.10 2.85 2.62 2.38 2.15 1.92 HALIFAX ...... NC 3.10 2.89 2.70 2.51 2.32 2.13 HARNETT ...... NC 3.30 3.02 2.81 2.59 2.38 2.17 HAYWOOD ...... NC 2.95 2.73 2.54 2.34 2.15 1.95 HENDERSON ...... NC 2.95 2.74 2.54 2.35 2.15 1.96 HERTFORD ...... NC 3.20 3.02 2.81 2.59 2.38 2.17 HOKE ...... NC 3.30 3.03 2.83 2.64 2.44 2.24 HYDE ...... NC 3.20 3.07 2.91 2.75 2.59 2.43 IREDELL ...... NC 3.10 2.83 2.58 2.33 2.08 1.83 JACKSON ...... NC 2.95 2.75 2.57 2.40 2.22 2.04 JOHNSTON ...... NC 3.20 3.03 2.82 2.62 2.41 2.21 JONES ...... NC 3.20 3.08 2.93 2.77 2.62 2.47 LEE ...... NC 3.10 2.89 2.70 2.50 2.31 2.12 LENOIR ...... NC 3.20 3.07 2.91 2.75 2.59 2.43 LINCOLN ...... NC 3.10 2.83 2.59 2.34 2.10 1.85 MACON ...... NC 2.95 2.71 2.49 2.27 2.05 1.83 MADISON ...... NC 2.95 2.76 2.59 2.42 2.25 2.08 MARTIN ...... NC 2.95 2.71 2.50 2.28 2.07 1.85 MCDOWELL ...... NC 3.20 3.04 2.86 2.67 2.49 2.30 MECKLENBURG ...... NC 3.10 2.84 2.60 2.37 2.13 1.89 5000 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

MITCHELL ...... NC 2.95 2.70 2.48 2.25 2.03 1.80 MONTGOMERY ...... NC 3.10 2.87 2.66 2.44 2.23 2.02 MOORE ...... NC 3.10 2.89 2.69 2.50 2.30 2.11 NASH ...... NC 3.10 2.90 2.72 2.54 2.36 2.18 NEW HANOVER ...... NC 3.30 3.11 2.98 2.86 2.73 2.61 NORTHAMPTON ...... NC 3.10 2.88 2.69 2.49 2.30 2.10 ONSLOW ...... NC 3.30 3.09 2.95 2.80 2.66 2.52 ORANGE ...... NC 3.10 2.87 2.65 2.44 2.22 2.01 PAMLICO ...... NC 3.20 3.08 2.93 2.78 2.63 2.48 PASQUOTANK ...... NC 3.20 3.03 2.84 2.64 2.45 2.25 PENDER ...... NC 3.30 3.09 2.95 2.81 2.67 2.53 PERQUIMANS ...... NC 3.20 3.04 2.84 2.65 2.45 2.26 PERSON ...... NC 3.10 2.85 2.62 2.38 2.15 1.92 PITT ...... NC 3.20 3.05 2.88 2.70 2.53 2.35 POLK ...... NC 3.10 2.85 2.63 2.40 2.18 1.95 RANDOLPH ...... NC 3.10 2.86 2.64 2.42 2.20 1.98 RICHMOND ...... NC 3.10 2.90 2.72 2.53 2.35 2.17 ROBESON ...... NC 3.30 3.05 2.88 2.70 2.53 2.35 ROCKINGHAM ...... NC 2.95 2.71 2.50 2.28 2.07 1.85 ROWAN ...... NC 3.10 2.84 2.60 2.37 2.13 1.89 RUTHERFORD ...... NC 3.10 2.84 2.60 2.37 2.13 1.89 SAMPSON ...... NC 3.30 3.05 2.87 2.70 2.52 2.34 SCOTLAND ...... NC 3.30 3.03 2.83 2.64 2.44 2.24 STANLY ...... NC 3.10 2.86 2.64 2.41 2.19 1.97 STOKES ...... NC 2.95 2.70 2.47 2.25 2.02 1.79 SURRY ...... NC 2.95 2.70 2.47 2.23 2.00 1.77 SWAIN ...... NC 2.95 2.75 2.57 2.39 2.21 2.03 TRANSYLVANIA ...... NC 2.95 2.75 2.56 2.38 2.19 2.01 TYRRELL ...... NC 3.20 3.05 2.87 2.70 2.52 2.34 UNION ...... NC 3.10 2.86 2.65 2.43 2.22 2.00 VANCE ...... NC 3.10 2.86 2.64 2.43 2.21 1.99 WAKE ...... NC 3.10 2.89 2.70 2.50 2.31 2.12 WARREN ...... NC 3.10 2.86 2.65 2.43 2.22 2.00 WASHINGTON ...... NC 3.30 3.05 2.87 2.69 2.51 2.33 WATAUGA ...... NC 2.95 2.70 2.46 2.23 1.99 1.76 WAYNE ...... NC 3.20 3.05 2.87 2.68 2.50 2.32 WILKES ...... NC 2.95 2.70 2.47 2.24 2.01 1.78 WILSON ...... NC 3.20 3.03 2.83 2.62 2.42 2.22 YADKIN ...... NC 3.10 2.71 2.49 2.26 2.04 1.82 YANCEY ...... NC 2.95 2.71 2.49 2.26 2.04 1.82 ADAMS ...... ND 1.65 1.15 1.10 1.05 1.00 0.95 BARNES ...... ND 1.65 1.15 1.10 1.05 1.00 0.95 BENSON ...... ND 1.60 1.15 1.11 1.06 1.02 0.97 BILLINGS ...... ND 1.60 1.16 1.12 1.09 1.05 1.01 BOTTINEAU ...... ND 1.60 1.16 1.12 1.07 1.03 0.99 BOWMAN ...... ND 1.65 1.15 1.11 1.06 1.02 0.97 BURKE ...... ND 1.60 1.16 1.13 1.09 1.06 1.02 BURLEIGH ...... ND 1.65 1.15 1.10 1.06 1.01 0.96 CASS ...... ND 1.65 1.14 1.08 1.01 0.95 0.89 CAVALIER ...... ND 1.60 1.15 1.10 1.06 1.01 0.96 DICKEY ...... ND 1.65 1.15 1.10 1.05 1.00 0.95 DIVIDE ...... ND 1.60 1.17 1.14 1.10 1.07 1.04 DUNN ...... ND 1.60 1.16 1.12 1.07 1.03 0.99 EDDY ...... ND 1.65 1.16 1.11 1.07 1.02 0.98 EMMONS ...... ND 1.65 1.15 1.10 1.05 1.00 0.95 FOSTER ...... ND 1.65 1.15 1.11 1.06 1.02 0.97 GOLDEN VALLEY ...... ND 1.60 1.16 1.13 1.09 1.06 1.02 GRAND FORKS ...... ND 1.65 1.16 1.12 1.08 1.04 1.00 GRANT ...... ND 1.65 1.15 1.10 1.05 1.00 0.95 GRIGGS ...... ND 1.65 1.15 1.11 1.06 1.02 0.97 HETTINGER ...... ND 1.65 1.15 1.10 1.06 1.01 0.96 KIDDER ...... ND 1.65 1.15 1.11 1.06 1.02 0.97 LA MOURE ...... ND 1.65 1.15 1.10 1.05 1.00 0.95 LOGAN ...... ND 1.65 1.15 1.10 1.05 1.00 0.95 MCHENRY ...... ND 1.60 1.16 1.11 1.07 1.02 0.98 MCINTOSH ...... ND 1.65 1.15 1.10 1.05 1.00 0.95 MCKENZIE ...... ND 1.60 1.17 1.13 1.10 1.06 1.03 MCLEAN ...... ND 1.60 1.16 1.11 1.07 1.02 0.98 MERCER ...... ND 1.60 1.16 1.11 1.07 1.02 0.98 MORTON ...... ND 1.65 1.15 1.10 1.06 1.01 0.96 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5001

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

MOUNTRAIL ...... ND 1.60 1.16 1.12 1.09 1.05 1.01 NELSON ...... ND 1.65 1.16 1.11 1.07 1.02 0.98 OLIVER ...... ND 1.60 1.15 1.11 1.06 1.02 0.97 PEMBINA ...... ND 1.60 1.14 1.09 1.03 0.98 0.92 PIERCE ...... ND 1.60 1.15 1.11 1.06 1.02 0.97 RAMSEY ...... ND 1.60 1.16 1.11 1.07 1.02 0.98 RANSOM ...... ND 1.65 1.14 1.09 1.03 0.98 0.92 RENVILLE ...... ND 1.60 1.16 1.12 1.08 1.04 1.00 RICHLAND ...... ND 1.65 1.14 1.08 1.03 0.97 0.91 ROLETTE ...... ND 1.60 1.16 1.11 1.07 1.02 0.98 SARGENT ...... ND 1.65 1.15 1.09 1.04 0.98 0.93 SHERIDAN ...... ND 1.60 1.15 1.11 1.06 1.02 0.97 SIOUX ...... ND 1.65 1.15 1.10 1.05 1.00 0.95 SLOPE ...... ND 1.65 1.16 1.12 1.07 1.03 0.99 STARK ...... ND 1.60 1.16 1.12 1.07 1.03 0.99 STEELE ...... ND 1.65 1.15 1.11 1.06 1.02 0.97 STUTSMAN ...... ND 1.65 1.15 1.10 1.05 1.00 0.95 TOWNER ...... ND 1.60 1.15 1.11 1.06 1.02 0.97 TRAILL ...... ND 1.65 1.15 1.10 1.05 1.00 0.95 WALSH ...... ND 1.60 1.15 1.10 1.06 1.01 0.96 WARD ...... ND 1.60 1.16 1.12 1.07 1.03 0.99 WELLS ...... ND 1.65 1.15 1.11 1.06 1.02 0.97 WILLIAMS ...... ND 1.60 1.17 1.13 1.10 1.06 1.03 ADAMS ...... NE 1.80 1.65 1.54 1.44 1.33 1.23 ANTELOPE ...... NE 1.75 1.54 1.44 1.33 1.23 1.12 ARTHUR ...... NE 1.80 1.22 1.17 1.12 1.07 1.02 BANNER ...... NE 1.80 1.72 1.54 1.37 1.19 1.01 BLAINE ...... NE 1.75 1.37 1.29 1.22 1.14 1.07 BOONE ...... NE 1.80 1.64 1.52 1.41 1.29 1.18 BOX BUTTE ...... NE 1.80 1.72 1.53 1.35 1.16 0.98 BOYD ...... NE 1.75 1.45 1.35 1.25 1.16 1.06 BROWN ...... NE 1.75 1.42 1.32 1.22 1.13 1.03 BUFFALO ...... NE 1.80 1.63 1.51 1.40 1.28 1.16 BURT ...... NE 1.80 1.68 1.61 1.53 1.46 1.39 BUTLER ...... NE 1.80 1.67 1.59 1.50 1.42 1.34 CASS ...... NE 1.85 1.70 1.66 1.61 1.57 1.52 CEDAR ...... NE 1.75 1.56 1.46 1.35 1.25 1.14 CHASE ...... NE 1.80 1.62 1.49 1.35 1.22 1.09 CHERRY ...... NE 1.75 1.39 1.29 1.19 1.08 0.98 CHEYENNE ...... NE 1.80 1.72 1.55 1.37 1.20 1.02 CLAY ...... NE 1.80 1.65 1.55 1.46 1.36 1.26 COLFAX ...... NE 1.80 1.66 1.57 1.48 1.39 1.30 CUMING ...... NE 1.80 1.59 1.52 1.44 1.37 1.29 CUSTER ...... NE 1.80 1.62 1.49 1.37 1.24 1.11 DAKOTA ...... NE 1.75 1.65 1.56 1.46 1.37 1.27 DAWES ...... NE 1.80 1.71 1.52 1.34 1.15 0.96 DAWSON ...... NE 1.80 1.62 1.50 1.37 1.25 1.12 DEUEL ...... NE 1.80 1.73 1.55 1.38 1.20 1.03 DIXON ...... NE 1.75 1.64 1.53 1.42 1.31 1.20 DODGE ...... NE 1.80 1.68 1.61 1.54 1.47 1.40 DOUGLAS ...... NE 1.85 1.70 1.66 1.61 1.57 1.52 DUNDY ...... NE 1.80 1.62 1.50 1.37 1.25 1.12 FILLMORE ...... NE 1.80 1.66 1.57 1.49 1.40 1.31 FRANKLIN ...... NE 1.80 1.64 1.54 1.43 1.33 1.22 FRONTIER ...... NE 1.80 1.62 1.50 1.37 1.25 1.12 FURNAS ...... NE 1.80 1.62 1.50 1.37 1.25 1.12 GAGE ...... NE 1.85 1.68 1.61 1.54 1.47 1.40 GARDEN ...... NE 1.80 1.72 1.54 1.37 1.19 1.01 GARFIELD ...... NE 1.75 1.46 1.37 1.28 1.20 1.11 GOSPER ...... NE 1.80 1.63 1.51 1.38 1.26 1.14 GRANT ...... NE 1.75 1.23 1.17 1.11 1.05 0.99 GREELEY ...... NE 1.80 1.63 1.52 1.40 1.29 1.17 HALL ...... NE 1.80 1.64 1.53 1.43 1.32 1.21 HAMILTON ...... NE 1.80 1.65 1.55 1.45 1.35 1.25 HARLAN ...... NE 1.80 1.64 1.53 1.41 1.30 1.19 HAYES ...... NE 1.80 1.62 1.49 1.37 1.24 1.11 HITCHCOCK ...... NE 1.80 1.63 1.50 1.38 1.25 1.13 HOLT ...... NE 1.75 1.51 1.40 1.29 1.19 1.08 HOOKER ...... NE 1.75 1.29 1.22 1.14 1.07 1.00 HOWARD ...... NE 1.80 1.63 1.52 1.40 1.29 1.17 5002 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

JEFFERSON ...... NE 1.80 1.67 1.59 1.51 1.43 1.35 JOHNSON ...... NE 1.85 1.69 1.63 1.57 1.51 1.45 KEARNEY ...... NE 1.80 1.64 1.53 1.41 1.30 1.19 KEITH ...... NE 1.80 1.61 1.47 1.32 1.18 1.04 KEYA PAHA ...... NE 1.75 1.42 1.32 1.22 1.13 1.03 KIMBALL ...... NE 1.80 1.72 1.55 1.37 1.20 1.02 KNOX ...... NE 1.75 1.62 1.49 1.36 1.23 1.10 LANCASTER ...... NE 1.85 1.68 1.61 1.54 1.47 1.40 LINCOLN ...... NE 1.80 1.61 1.48 1.34 1.21 1.07 LOGAN ...... NE 1.80 1.32 1.26 1.20 1.15 1.09 LOUP ...... NE 1.75 1.43 1.35 1.26 1.18 1.10 MADISON ...... NE 1.80 1.27 1.22 1.16 1.11 1.05 MCPHERSON ...... NE 1.80 1.64 1.53 1.41 1.30 1.19 MERRICK ...... NE 1.80 1.65 1.54 1.44 1.33 1.23 MORRILL ...... NE 1.80 1.72 1.54 1.36 1.18 1.00 NANCE ...... NE 1.80 1.64 1.54 1.43 1.33 1.22 NEMAHA ...... NE 1.85 1.70 1.65 1.60 1.55 1.50 NUCKOLLS ...... NE 1.80 1.65 1.56 1.46 1.37 1.27 OTOE ...... NE 1.85 1.70 1.65 1.59 1.54 1.49 PAWNEE ...... NE 1.85 1.69 1.62 1.56 1.49 1.43 PERKINS ...... NE 1.80 1.61 1.47 1.33 1.19 1.05 PHELPS ...... NE 1.80 1.63 1.52 1.40 1.29 1.17 PIERCE ...... NE 1.75 1.57 1.46 1.35 1.24 1.13 PLATTE ...... NE 1.80 1.65 1.55 1.46 1.36 1.26 POLK ...... NE 1.80 1.66 1.56 1.47 1.37 1.28 RED WILLOW ...... NE 1.80 1.63 1.51 1.40 1.28 1.16 RICHARDSON ...... NE 1.85 1.70 1.64 1.59 1.53 1.48 ROCK ...... NE 1.75 1.43 1.34 1.24 1.15 1.05 SALINE ...... NE 1.80 1.67 1.59 1.52 1.44 1.36 SARPY ...... NE 1.85 1.71 1.67 1.62 1.58 1.54 SAUNDERS ...... NE 1.85 1.69 1.63 1.56 1.50 1.44 SCOTTS BLUFF ...... NE 1.80 1.72 1.54 1.37 1.19 1.01 SEWARD ...... NE 1.80 1.67 1.59 1.51 1.43 1.35 SHERIDAN ...... NE 1.80 1.71 1.53 1.34 1.16 0.97 SHERMAN ...... NE 1.80 1.63 1.51 1.39 1.27 1.15 SIOUX ...... NE 1.80 1.71 1.53 1.34 1.16 0.97 STANTON ...... NE 1.80 1.65 1.54 1.44 1.33 1.23 THAYER ...... NE 1.80 1.66 1.58 1.49 1.41 1.32 THOMAS ...... NE 1.75 1.32 1.24 1.17 1.09 1.02 THURSTON ...... NE 1.75 1.66 1.57 1.48 1.39 1.30 VALLEY ...... NE 1.80 1.63 1.51 1.38 1.26 1.14 WASHINGTON ...... NE 1.85 1.70 1.64 1.59 1.53 1.48 WAYNE ...... NE 1.75 1.64 1.53 1.42 1.31 1.20 WEBSTER ...... NE 1.80 1.65 1.55 1.44 1.34 1.24 WHEELER ...... NE 1.75 1.52 1.42 1.32 1.23 1.13 YORK ...... NE 1.80 1.66 1.57 1.47 1.38 1.29 BELKNAP ...... NH 2.80 2.80 2.58 2.36 2.14 1.92 CARROLL ...... NH 2.80 2.76 2.52 2.29 2.05 1.82 CHESHIRE ...... NH 2.80 2.82 2.60 2.38 2.16 1.94 COOS ...... NH 2.60 2.41 2.22 2.02 1.83 1.64 GRAFTON ...... NH 2.60 2.49 2.31 2.12 1.94 1.76 HILLSBOROUGH ...... NH 3.00 2.95 2.72 2.50 2.27 2.05 MERRIMACK ...... NH 3.00 2.86 2.63 2.41 2.18 1.95 ROCKINGHAM ...... NH 3.00 2.96 2.75 2.54 2.33 2.12 STRAFFORD ...... NH 3.00 2.86 2.65 2.44 2.23 2.02 SULLIVAN ...... NH 2.80 2.74 2.51 2.28 2.05 1.82 ATLANTIC ...... NJ 3.00 2.73 2.53 2.33 2.13 1.93 BERGEN ...... NJ 3.15 2.92 2.69 2.47 2.24 2.02 BURLINGTON ...... NJ 3.00 2.82 2.58 2.35 2.11 1.88 CAMDEN ...... NJ 3.00 2.84 2.59 2.34 2.09 1.84 CAPE MAY ...... NJ 3.00 2.71 2.52 2.33 2.14 1.95 CUMBERLAND ...... NJ 3.00 2.72 2.49 2.27 2.04 1.82 ESSEX ...... NJ 3.15 2.91 2.67 2.44 2.20 1.97 GLOUCESTER ...... NJ 3.00 2.83 2.57 2.32 2.06 1.80 HUDSON ...... NJ 3.15 2.92 2.69 2.47 2.24 2.02 HUNTERDON ...... NJ 3.10 2.82 2.57 2.31 2.06 1.81 MERCER ...... NJ 3.10 2.86 2.62 2.39 2.15 1.92 MIDDLESEX ...... NJ 3.10 2.87 2.64 2.42 2.19 1.97 MONMOUTH ...... NJ 3.10 2.83 2.63 2.42 2.22 2.01 MORRIS ...... NJ 3.10 2.85 2.62 2.38 2.15 1.91 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5003

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

OCEAN ...... NJ 3.10 2.74 2.56 2.37 2.19 2.00 PASSAIC ...... NJ 3.15 2.90 2.66 2.43 2.19 1.95 SALEM ...... NJ 3.00 2.82 2.55 2.29 2.02 1.75 SOMERSET ...... NJ 3.10 2.84 2.61 2.37 2.14 1.91 SUSSEX ...... NJ 3.10 2.77 2.53 2.30 2.06 1.83 UNION ...... NJ 3.15 2.91 2.67 2.44 2.20 1.97 WARREN ...... NJ 3.10 2.79 2.53 2.28 2.02 1.77 BERNALILLO ...... NM 2.35 2.25 2.16 2.06 1.97 1.87 CATRON ...... NM 2.10 2.18 2.01 1.84 1.67 1.50 CHAVES ...... NM 2.10 2.04 1.89 1.73 1.58 1.42 CIBOLA ...... NM 1.90 2.23 2.11 1.99 1.87 1.75 COLFAX ...... NM 2.35 2.24 2.12 2.01 1.89 1.78 CURRY ...... NM 2.10 2.13 1.92 1.70 1.49 1.27 DE BACA ...... NM 2.10 2.17 1.99 1.81 1.63 1.45 DONA ANA ...... NM 2.10 2.15 1.95 1.76 1.56 1.36 EDDY ...... NM 2.10 2.06 1.92 1.78 1.64 1.50 GRANT ...... NM 2.10 2.16 1.96 1.77 1.57 1.38 GUADALUPE ...... NM 2.35 2.21 2.06 1.92 1.77 1.63 HARDING ...... NM 2.35 2.20 2.05 1.90 1.75 1.60 HIDALGO ...... NM 2.10 2.15 1.94 1.74 1.53 1.33 LEA ...... NM 2.10 2.07 1.94 1.80 1.67 1.54 LINCOLN ...... NM 2.10 2.18 2.01 1.84 1.67 1.50 LOS ALAMOS ...... NM 2.35 2.29 2.23 2.16 2.10 2.04 LUNA ...... NM 2.10 2.15 1.95 1.76 1.56 1.36 MCKINLEY ...... NM 1.90 2.23 2.11 1.99 1.87 1.75 MORA ...... NM 2.35 2.25 2.16 2.06 1.97 1.87 OTERO ...... NM 2.10 2.17 1.99 1.80 1.62 1.44 QUAY ...... NM 2.35 2.17 1.99 1.81 1.63 1.45 RIO ARRIBA ...... NM 1.90 2.28 2.20 2.13 2.05 1.98 ROOSEVELT ...... NM 2.10 2.13 1.91 1.69 1.47 1.25 SAN JUAN ...... NM 2.35 2.27 2.19 2.12 2.04 1.96 SAN MIGUEL ...... NM 1.90 2.13 2.06 1.98 1.91 1.84 SANDOVAL ...... NM 2.35 2.26 2.16 2.07 1.97 1.88 SANTA FE ...... NM 2.35 2.28 2.22 2.15 2.09 2.02 SIERRA ...... NM 2.10 2.17 1.99 1.82 1.64 1.46 SOCORRO ...... NM 2.10 2.20 2.05 1.90 1.75 1.60 TAOS ...... NM 1.90 2.27 2.18 2.10 2.01 1.93 TORRANCE ...... NM 2.35 2.23 2.11 2.00 1.88 1.76 UNION ...... NM 2.35 2.19 2.04 1.88 1.73 1.57 VALENCIA ...... NM 2.35 2.23 2.11 2.00 1.88 1.76 CARSON CITY ...... NV 1.70 1.16 1.08 0.99 0.91 0.83 CHURCHILL ...... NV 1.70 1.22 1.14 1.05 0.97 0.88 CLARK ...... NV 2.00 1.65 1.69 1.74 1.78 1.83 DOUGLAS ...... NV 1.70 1.15 1.08 1.00 0.93 0.85 ELKO ...... NV 1.90 1.72 1.54 1.36 1.18 1.00 ESMERALDA ...... NV 1.60 1.24 1.20 1.15 1.11 1.06 EUREKA ...... NV 1.70 1.49 1.39 1.28 1.18 1.07 HUMBOLDT ...... NV 1.70 1.42 1.30 1.19 1.07 0.95 LANDER ...... NV 1.70 1.43 1.32 1.22 1.11 1.00 LINCOLN ...... NV 1.60 1.59 1.59 1.58 1.58 1.57 LYON ...... NV 1.70 0.97 0.94 0.90 0.87 0.84 MINERAL ...... NV 1.60 1.17 1.10 1.04 0.97 0.90 NYE ...... NV 1.60 1.47 1.39 1.30 1.22 1.14 PERSHING ...... NV 1.70 1.39 1.27 1.16 1.04 0.93 STOREY ...... NV 1.70 1.15 1.06 0.98 0.89 0.81 WASHOE ...... NV 1.70 1.16 1.09 1.02 0.95 0.88 WHITE PINE ...... NV 1.90 1.77 1.63 1.50 1.36 1.23 ALBANY ...... NY 2.60 2.42 2.24 2.06 1.88 1.70 ALLEGANY ...... NY 2.30 2.08 1.89 1.70 1.51 1.32 BRONX ...... NY 3.15 2.93 2.71 2.50 2.28 2.07 BROOME ...... NY 2.60 2.31 2.07 1.84 1.60 1.36 CATTARAUGUS ...... NY 2.10 1.93 1.77 1.60 1.44 1.27 CAYUGA ...... NY 2.30 2.14 1.93 1.73 1.52 1.31 CHAUTAUQUA ...... NY 2.10 1.86 1.70 1.55 1.39 1.23 CHEMUNG ...... NY 2.40 2.18 1.96 1.74 1.52 1.30 CHENANGO ...... NY 2.40 2.28 2.06 1.84 1.62 1.40 CLINTON ...... NY 2.20 2.07 1.94 1.82 1.69 1.56 COLUMBIA ...... NY 2.80 2.52 2.34 2.17 1.99 1.81 CORTLAND ...... NY 2.40 2.22 2.00 1.77 1.55 1.32 DELAWARE ...... NY 2.60 2.35 2.15 1.95 1.75 1.55 5004 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

DUTCHESS ...... NY 2.80 2.59 2.43 2.26 2.10 1.94 ERIE ...... NY 2.20 1.93 1.79 1.64 1.50 1.36 ESSEX ...... NY 2.40 2.17 2.02 1.87 1.72 1.57 FRANKLIN ...... NY 2.20 2.00 1.88 1.75 1.63 1.51 FULTON ...... NY 2.60 2.31 2.13 1.94 1.76 1.58 GENESEE ...... NY 2.20 2.01 1.85 1.70 1.54 1.38 GREENE ...... NY 2.60 2.51 2.31 2.12 1.92 1.73 HAMILTON ...... NY 2.40 2.24 2.06 1.89 1.71 1.53 HERKIMER ...... NY 2.40 2.27 2.07 1.88 1.68 1.48 JEFFERSON ...... NY 2.20 2.04 1.88 1.73 1.57 1.41 KINGS ...... NY 3.15 2.92 2.70 2.48 2.26 2.04 LEWIS ...... NY 2.20 2.14 1.96 1.78 1.60 1.42 LIVINGSTON ...... NY 2.30 2.01 1.84 1.68 1.51 1.35 MADISON ...... NY 2.40 2.19 1.99 1.78 1.58 1.37 MONROE ...... NY 2.30 2.02 1.86 1.71 1.55 1.40 MONTGOMERY ...... NY 2.60 2.36 2.17 1.97 1.78 1.59 NASSAU ...... NY 3.15 2.94 2.73 2.53 2.32 2.12 NEW YORK ...... NY 3.15 2.92 2.70 2.47 2.25 2.03 NIAGARA ...... NY 2.20 1.94 1.80 1.67 1.53 1.40 ONEIDA ...... NY 2.40 2.18 1.98 1.79 1.59 1.40 ONONDAGA ...... NY 2.40 2.14 1.93 1.73 1.52 1.31 ONTARIO ...... NY 2.30 2.09 1.90 1.72 1.53 1.35 ORANGE ...... NY 3.00 2.81 2.58 2.34 2.11 1.88 ORLEANS ...... NY 2.20 2.02 1.86 1.71 1.55 1.40 OSWEGO ...... NY 2.30 2.11 1.92 1.73 1.54 1.35 OTSEGO ...... NY 2.60 2.30 2.10 1.91 1.71 1.51 PUTNAM ...... NY 3.00 2.84 2.64 2.44 2.24 2.04 QUEENS ...... NY 3.15 2.93 2.71 2.50 2.28 2.07 RENSSELAER ...... NY 2.60 2.43 2.26 2.09 1.92 1.75 RICHMOND ...... NY 3.15 2.92 2.69 2.47 2.24 2.02 ROCKLAND ...... NY 3.15 2.91 2.68 2.46 2.23 2.00 SARATOGA ...... NY 2.60 2.35 2.17 2.00 1.82 1.65 SCHENECTADY ...... NY 2.60 2.41 2.22 2.04 1.85 1.66 SCHOHARIE ...... NY 2.60 2.40 2.20 2.01 1.81 1.61 SCHUYLER ...... NY 2.30 2.16 1.94 1.73 1.51 1.30 SENECA ...... NY 2.30 2.08 1.89 1.70 1.51 1.32 ST. LAWRENCE ...... NY 2.20 1.99 1.85 1.72 1.58 1.45 STEUBEN ...... NY 2.30 2.12 1.92 1.72 1.52 1.32 SUFFOLK ...... NY 3.15 2.96 2.79 2.61 2.44 2.26 SULLIVAN ...... NY 2.80 2.50 2.30 2.10 1.90 1.70 TIOGA ...... NY 2.40 2.28 2.03 1.79 1.54 1.30 TOMPKINS ...... NY 2.40 2.24 2.00 1.77 1.53 1.30 ULSTER ...... NY 2.80 2.56 2.37 2.18 1.99 1.80 WARREN ...... NY 2.60 2.25 2.09 1.92 1.76 1.59 WASHINGTON ...... NY 2.60 2.31 2.14 1.98 1.81 1.65 WAYNE ...... NY 2.30 2.09 1.91 1.72 1.54 1.36 WESTCHESTER ...... NY 3.15 2.93 2.71 2.50 2.28 2.07 WYOMING ...... NY 2.20 2.01 1.85 1.68 1.52 1.36 YATES ...... NY 2.30 2.12 1.92 1.72 1.52 1.32 ADAMS ...... OH 2.20 2.00 1.89 1.78 1.67 1.56 ALLEN ...... OH 2.00 1.77 1.65 1.52 1.40 1.27 ASHLAND ...... OH 2.00 1.88 1.76 1.64 1.52 1.40 ASHTABULA ...... OH 2.00 1.88 1.77 1.65 1.54 1.42 ATHENS ...... OH 2.00 2.01 1.91 1.81 1.71 1.61 AUGLAIZE ...... OH 2.00 1.78 1.66 1.55 1.43 1.31 BELMONT ...... OH 2.00 1.92 1.84 1.75 1.67 1.59 BROWN ...... OH 2.20 1.99 1.87 1.75 1.63 1.51 BUTLER ...... OH 2.00 1.92 1.80 1.69 1.57 1.45 CARROLL ...... OH 2.00 1.90 1.80 1.70 1.60 1.50 CHAMPAIGN ...... OH 2.00 1.93 1.81 1.70 1.58 1.47 CLARK ...... OH 2.00 1.92 1.81 1.69 1.58 1.46 CLERMONT ...... OH 2.20 1.98 1.86 1.73 1.61 1.48 CLINTON ...... OH 2.00 1.93 1.82 1.72 1.61 1.50 COLUMBIANA ...... OH 2.00 1.90 1.80 1.69 1.59 1.49 COSHOCTON ...... OH 2.00 1.93 1.82 1.70 1.59 1.48 CRAWFORD ...... OH 2.00 1.80 1.69 1.59 1.48 1.38 CUYAHOGA ...... OH 2.00 1.91 1.82 1.72 1.63 1.54 DARKE ...... OH 2.00 1.80 1.70 1.61 1.51 1.41 DEFIANCE ...... OH 1.80 1.69 1.59 1.48 1.38 1.27 DELAWARE ...... OH 2.00 1.93 1.82 1.70 1.59 1.48 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5005

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

ERIE ...... OH 2.00 1.73 1.65 1.58 1.50 1.43 FAIRFIELD ...... OH 2.00 1.95 1.86 1.76 1.67 1.58 FAYETTE ...... OH 2.00 1.94 1.84 1.74 1.64 1.54 FRANKLIN ...... OH 2.00 1.95 1.85 1.76 1.66 1.57 FULTON ...... OH 1.80 1.70 1.61 1.51 1.42 1.32 GALLIA ...... OH 2.20 2.02 1.93 1.84 1.75 1.66 GEAUGA ...... OH 2.00 1.90 1.79 1.69 1.58 1.48 GREENE ...... OH 2.00 1.93 1.82 1.70 1.59 1.48 GUERNSEY ...... OH 2.00 1.94 1.84 1.73 1.63 1.53 HAMILTON ...... OH 2.20 1.98 1.85 1.71 1.58 1.45 HANCOCK ...... OH 2.00 1.69 1.59 1.48 1.38 1.27 HARDIN ...... OH 2.00 1.79 1.68 1.56 1.45 1.34 HARRISON ...... OH 2.00 1.91 1.82 1.74 1.65 1.56 HENRY ...... OH 1.80 1.69 1.58 1.48 1.37 1.26 HIGHLAND ...... OH 2.20 1.99 1.88 1.76 1.65 1.53 HOCKING ...... OH 2.00 1.95 1.86 1.78 1.69 1.60 HOLMES ...... OH 2.00 1.89 1.77 1.66 1.54 1.43 HURON ...... OH 2.00 1.72 1.64 1.57 1.49 1.41 JACKSON ...... OH 2.20 2.01 1.91 1.82 1.72 1.62 JEFFERSON ...... OH 2.00 1.92 1.84 1.76 1.68 1.60 KNOX ...... OH 2.00 1.92 1.80 1.69 1.57 1.45 LAKE ...... OH 2.00 1.90 1.80 1.69 1.59 1.49 LAWRENCE ...... OH 2.20 2.02 1.93 1.85 1.76 1.67 LICKING ...... OH 2.00 1.94 1.84 1.73 1.63 1.53 LOGAN ...... OH 2.00 1.80 1.70 1.59 1.49 1.39 LORAIN ...... OH 2.00 1.89 1.79 1.68 1.58 1.47 LUCAS ...... OH 1.80 1.72 1.64 1.55 1.47 1.39 MADISON ...... OH 2.00 1.94 1.83 1.73 1.62 1.52 MAHONING ...... OH 2.00 1.89 1.79 1.68 1.58 1.47 MARION ...... OH 2.00 1.80 1.70 1.60 1.50 1.40 MEDINA ...... OH 2.00 1.89 1.78 1.67 1.56 1.45 MEIGS ...... OH 2.00 2.02 1.93 1.83 1.74 1.65 MERCER ...... OH 2.00 1.79 1.68 1.57 1.46 1.35 MIAMI ...... OH 2.00 1.92 1.79 1.67 1.54 1.42 MONROE ...... OH 2.00 1.92 1.84 1.75 1.67 1.59 MONTGOMERY ...... OH 2.00 1.92 1.80 1.69 1.57 1.45 MORGAN ...... OH 2.00 1.95 1.86 1.76 1.67 1.58 MORROW ...... OH 2.00 1.80 1.71 1.61 1.52 1.42 MUSKINGUM ...... OH 2.00 1.94 1.84 1.73 1.63 1.53 NOBLE ...... OH 2.00 1.94 1.85 1.75 1.66 1.56 OTTAWA ...... OH 2.00 1.72 1.64 1.56 1.48 1.40 PAULDING ...... OH 1.80 1.69 1.59 1.48 1.38 1.27 PERRY ...... OH 2.00 1.95 1.85 1.76 1.66 1.57 PICKAWAY ...... OH 2.00 1.95 1.85 1.76 1.66 1.57 PIKE ...... OH 2.20 2.01 1.90 1.80 1.69 1.59 PORTAGE ...... OH 2.00 1.89 1.78 1.68 1.57 1.46 PREBLE ...... OH 2.00 1.92 1.80 1.69 1.57 1.45 PUTNAM ...... OH 1.80 1.68 1.56 1.45 1.33 1.21 RICHLAND ...... OH 2.00 1.80 1.70 1.59 1.49 1.39 ROSS ...... OH 2.00 2.00 1.90 1.79 1.69 1.58 SANDUSKY ...... OH 2.00 1.72 1.63 1.55 1.46 1.38 SCIOTO ...... OH 2.20 2.01 1.91 1.82 1.72 1.62 SENECA ...... OH 2.00 1.71 1.62 1.54 1.45 1.36 SHELBY ...... OH 2.00 1.80 1.69 1.59 1.48 1.38 STARK ...... OH 2.00 1.88 1.76 1.64 1.52 1.40 SUMMIT ...... OH 2.00 1.89 1.79 1.68 1.58 1.47 TRUMBULL ...... OH 2.00 1.89 1.78 1.66 1.55 1.44 TUSCARAWAS ...... OH 2.00 1.89 1.79 1.68 1.58 1.47 UNION ...... OH 2.00 1.81 1.71 1.62 1.52 1.43 VAN WERT ...... OH 1.80 1.78 1.66 1.54 1.42 1.30 VINTON ...... OH 2.00 2.01 1.91 1.81 1.71 1.61 WARREN ...... OH 2.00 1.93 1.81 1.70 1.58 1.47 WASHINGTON ...... OH 2.00 2.01 1.90 1.80 1.69 1.59 WAYNE ...... OH 2.00 1.88 1.76 1.65 1.53 1.41 WILLIAMS ...... OH 1.80 1.70 1.59 1.49 1.38 1.28 WOOD ...... OH 2.00 1.71 1.61 1.52 1.42 1.33 WYANDOT ...... OH 2.00 1.79 1.68 1.57 1.46 1.35 ADAIR ...... OK 2.60 2.35 2.11 1.86 1.62 1.38 ALFALFA ...... OK 2.40 2.35 2.10 1.86 1.61 1.37 ATOKA ...... OK 2.80 2.69 2.37 2.06 1.74 1.43 5006 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

BEAVER ...... OK 2.40 2.35 2.11 1.88 1.64 1.40 BECKHAM ...... OK 2.40 2.37 2.15 1.92 1.70 1.48 BLAINE ...... OK 2.40 2.36 2.12 1.89 1.65 1.42 BRYAN ...... OK 2.80 2.68 2.37 2.05 1.74 1.42 CADDO ...... OK 2.60 2.51 2.25 1.98 1.72 1.46 CANADIAN ...... OK 2.60 2.51 2.24 1.98 1.71 1.45 CARTER ...... OK 2.80 2.69 2.37 2.06 1.74 1.43 CHEROKEE ...... OK 2.60 2.35 2.11 1.88 1.64 1.40 CHOCTAW ...... OK 2.80 2.69 2.38 2.06 1.75 1.44 CIMARRON ...... OK 2.40 2.37 2.15 1.92 1.70 1.48 CLEVELAND ...... OK 2.60 2.51 2.24 1.98 1.71 1.45 COAL ...... OK 2.80 2.50 2.23 1.97 1.70 1.43 COMANCHE ...... OK 2.60 2.69 2.38 2.08 1.77 1.46 COTTON ...... OK 2.80 2.69 2.39 2.08 1.78 1.47 CRAIG ...... OK 2.40 2.34 2.09 1.84 1.59 1.34 CREEK ...... OK 2.60 2.36 2.14 1.91 1.69 1.46 CUSTER ...... OK 2.40 2.36 2.13 1.90 1.67 1.44 DELAWARE ...... OK 2.40 2.34 2.09 1.83 1.58 1.33 DEWEY ...... OK 2.40 2.36 2.13 1.89 1.66 1.43 ELLIS ...... OK 2.40 2.35 2.12 1.88 1.65 1.41 GARFIELD ...... OK 2.40 2.35 2.11 1.88 1.64 1.40 GARVIN ...... OK 2.60 2.50 2.24 1.97 1.71 1.44 GRADY ...... OK 2.60 2.51 2.24 1.98 1.71 1.45 GRANT ...... OK 2.40 2.34 2.10 1.85 1.61 1.36 GREER ...... OK 2.60 2.70 2.40 2.09 1.79 1.49 HARMON ...... OK 2.60 2.70 2.40 2.11 1.81 1.51 HARPER ...... OK 2.40 2.35 2.11 1.86 1.62 1.38 HASKELL ...... OK 2.80 2.51 2.25 2.00 1.74 1.48 HUGHES ...... OK 2.60 2.51 2.24 1.98 1.71 1.45 JACKSON ...... OK 2.60 2.70 2.40 2.10 1.80 1.50 JEFFERSON ...... OK 2.80 2.69 2.38 2.07 1.76 1.45 JOHNSTON ...... OK 2.80 2.68 2.37 2.05 1.74 1.42 KAY ...... OK 2.40 2.35 2.10 1.86 1.61 1.37 KINGFISHER ...... OK 2.40 2.36 2.12 1.89 1.65 1.42 KIOWA ...... OK 2.60 2.70 2.39 2.09 1.78 1.48 LATIMER ...... OK 2.80 2.51 2.25 2.00 1.74 1.48 LE FLORE ...... OK 2.80 2.52 2.27 2.03 1.78 1.53 LINCOLN ...... OK 2.60 2.51 2.24 1.98 1.71 1.45 LOGAN ...... OK 2.40 2.36 2.13 1.89 1.66 1.43 LOVE ...... OK 2.80 2.69 2.37 2.06 1.74 1.43 MAJOR ...... OK 2.60 2.50 2.24 1.97 1.71 1.44 MARSHALL ...... OK 2.80 2.71 2.42 2.13 1.84 1.55 MAYES ...... OK 2.60 2.51 2.25 1.98 1.72 1.46 MCCLAIN ...... OK 2.40 2.35 2.11 1.87 1.63 1.39 MCCURTAIN ...... OK 2.80 2.68 2.37 2.05 1.74 1.42 MCINTOSH ...... OK 2.40 2.35 2.11 1.86 1.62 1.38 MURRAY ...... OK 2.80 2.69 2.37 2.06 1.74 1.43 MUSKOGEE ...... OK 2.60 2.36 2.13 1.91 1.68 1.45 NOBLE ...... OK 2.40 2.35 2.12 1.88 1.65 1.41 NOWATA ...... OK 2.40 2.34 2.10 1.85 1.61 1.36 OKFUSKEE ...... OK 2.60 2.51 2.24 1.98 1.71 1.45 OKLAHOMA ...... OK 2.60 2.51 2.24 1.98 1.71 1.45 OKMULGEE ...... OK 2.60 2.36 2.14 1.91 1.69 1.46 OSAGE ...... OK 2.40 2.35 2.11 1.88 1.64 1.40 OTTAWA ...... OK 2.40 2.33 2.07 1.82 1.56 1.30 PAWNEE ...... OK 2.40 2.36 2.13 1.90 1.67 1.44 PAYNE ...... OK 2.40 2.36 2.13 1.90 1.67 1.44 PITTSBURG ...... OK 2.80 2.51 2.25 1.98 1.72 1.46 PONTOTOC ...... OK 2.80 2.50 2.23 1.97 1.70 1.43 POTTAWATOMIE ...... OK 2.60 2.51 2.24 1.98 1.71 1.45 PUSHMATAHA ...... OK 2.80 2.69 2.39 2.08 1.78 1.47 ROGER MILLS ...... OK 2.40 2.36 2.14 1.91 1.69 1.46 ROGERS ...... OK 2.40 2.35 2.11 1.88 1.64 1.40 SEMINOLE ...... OK 2.60 2.51 2.24 1.98 1.71 1.45 SEQUOYAH ...... OK 2.80 2.51 2.26 2.00 1.75 1.49 STEPHENS ...... OK 2.80 2.69 2.38 2.07 1.76 1.45 TEXAS ...... OK 2.40 2.35 2.12 1.88 1.65 1.41 TILLMAN ...... OK 2.60 2.70 2.40 2.09 1.79 1.49 TULSA ...... OK 2.60 2.36 2.14 1.91 1.69 1.46 WAGONER ...... OK 2.60 2.36 2.13 1.89 1.66 1.43 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5007

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

WASHINGTON ...... OK 2.40 2.35 2.11 1.86 1.62 1.38 WASHITA ...... OK 2.40 2.36 2.14 1.91 1.69 1.46 WOODS ...... OK 2.40 2.35 2.10 1.86 1.61 1.37 WOODWARD ...... OK 2.40 2.35 2.11 1.88 1.64 1.40 BAKER ...... OR 1.60 1.40 1.29 1.19 1.08 0.98 BENTON ...... OR 1.90 1.73 1.57 1.40 1.24 1.07 CLACKAMAS ...... OR 1.90 1.71 1.52 1.34 1.15 0.96 CLATSOP ...... OR 1.90 1.72 1.54 1.35 1.17 0.99 COLUMBIA ...... OR 1.90 1.71 1.53 1.34 1.16 0.97 COOS ...... OR 1.90 1.71 1.60 1.50 1.39 1.28 CROOK ...... OR 1.75 1.61 1.46 1.32 1.17 1.03 CURRY ...... OR 1.90 1.73 1.64 1.55 1.46 1.37 DESCHUTES ...... OR 1.75 1.61 1.48 1.34 1.21 1.07 DOUGLAS ...... OR 1.90 1.77 1.64 1.52 1.39 1.26 GILLIAM ...... OR 1.75 1.59 1.44 1.28 1.13 0.97 GRANT ...... OR 1.60 1.40 1.30 1.19 1.09 0.99 HARNEY ...... OR 1.60 1.40 1.30 1.21 1.11 1.01 HOOD RIVER ...... OR 1.90 1.71 1.53 1.34 1.16 0.97 JACKSON ...... OR 1.90 1.73 1.64 1.56 1.47 1.38 JEFFERSON ...... OR 1.75 1.60 1.46 1.31 1.17 1.02 JOSEPHINE ...... OR 1.90 1.74 1.65 1.57 1.48 1.40 KLAMATH ...... OR 1.75 1.65 1.55 1.46 1.36 1.26 LAKE ...... OR 1.75 1.62 1.50 1.37 1.25 1.12 LANE ...... OR 1.90 1.75 1.59 1.44 1.28 1.13 LINCOLN ...... OR 1.90 1.74 1.58 1.41 1.25 1.09 LINN ...... OR 1.90 1.73 1.56 1.39 1.22 1.05 MALHEUR ...... OR 1.60 1.39 1.28 1.18 1.07 0.96 MARION ...... OR 1.90 1.72 1.54 1.36 1.18 1.00 MORROW ...... OR 1.75 1.59 1.44 1.28 1.13 0.97 MULTNOMAH ...... OR 1.90 1.71 1.52 1.33 1.14 0.95 POLK ...... OR 1.90 1.73 1.55 1.38 1.20 1.03 SHERMAN ...... OR 1.75 1.59 1.44 1.28 1.13 0.97 TILLAMOOK ...... OR 1.90 1.72 1.54 1.37 1.19 1.01 UMATILLA ...... OR 1.75 1.59 1.44 1.28 1.13 0.97 UNION ...... OR 1.60 1.40 1.29 1.19 1.08 0.98 WALLOWA ...... OR 1.60 1.60 1.45 1.29 1.14 0.99 WASCO ...... OR 1.75 1.60 1.44 1.29 1.13 0.98 WASHINGTON ...... OR 1.90 1.71 1.52 1.34 1.15 0.96 WHEELER ...... OR 1.75 1.60 1.45 1.30 1.15 1.00 YAMHILL ...... OR 1.90 1.72 1.54 1.36 1.18 1.00 ADAMS ...... PA 2.80 2.70 2.38 2.05 1.73 1.40 ALLEGHENY ...... PA 2.10 1.91 1.81 1.72 1.62 1.53 ARMSTRONG ...... PA 2.30 1.89 1.78 1.67 1.56 1.45 BEAVER ...... PA 2.10 1.90 1.81 1.71 1.62 1.52 BEDFORD ...... PA 2.30 2.23 2.05 1.88 1.70 1.52 BERKS ...... PA 2.80 2.55 2.30 2.05 1.80 1.55 BLAIR ...... PA 2.30 2.18 2.01 1.83 1.66 1.49 BRADFORD ...... PA 2.40 2.37 2.11 1.84 1.58 1.32 BUCKS ...... PA 3.00 2.83 2.57 2.32 2.06 1.80 BUTLER ...... PA 2.10 1.89 1.78 1.66 1.55 1.44 CAMBRIA ...... PA 2.30 2.51 2.27 2.04 1.80 1.56 CAMERON ...... PA 2.30 1.87 1.74 1.62 1.49 1.36 CARBON ...... PA 2.80 2.55 2.32 2.08 1.85 1.61 CENTRE ...... PA 2.30 2.14 1.95 1.77 1.58 1.40 CHESTER ...... PA 3.00 2.80 2.51 2.21 1.92 1.63 CLARION ...... PA 2.30 1.88 1.75 1.63 1.50 1.38 CLEARFIELD ...... PA 2.30 2.16 1.98 1.79 1.61 1.42 CLINTON ...... PA 2.30 2.19 2.01 1.82 1.64 1.45 COLUMBIA ...... PA 2.60 2.46 2.23 1.99 1.76 1.52 CRAWFORD ...... PA 2.10 1.87 1.74 1.61 1.48 1.35 CUMBERLAND ...... PA 2.80 2.71 2.39 2.06 1.74 1.42 DAUPHIN ...... PA 2.80 2.48 2.23 1.97 1.72 1.47 DELAWARE ...... PA 3.00 2.81 2.53 2.25 1.97 1.69 ELK ...... PA 2.30 1.87 1.74 1.61 1.48 1.35 ERIE ...... PA 2.10 1.87 1.73 1.60 1.46 1.33 FAYETTE ...... PA 2.30 1.92 1.84 1.77 1.69 1.61 FOREST ...... PA 2.30 1.86 1.72 1.59 1.45 1.31 FRANKLIN ...... PA 2.80 2.58 2.26 1.95 1.63 1.31 FULTON ...... PA 2.60 2.59 2.30 2.01 1.72 1.43 GREENE ...... PA 2.10 1.92 1.85 1.77 1.70 1.62 5008 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

HUNTINGDON ...... PA 2.30 2.21 2.02 1.82 1.63 1.44 INDIANA ...... PA 2.30 2.18 2.01 1.85 1.68 1.51 JEFFERSON ...... PA 2.30 1.88 1.76 1.65 1.53 1.41 JUNIATA ...... PA 2.60 2.55 2.27 1.98 1.70 1.41 LACKAWANNA ...... PA 2.60 2.45 2.22 2.00 1.77 1.55 LANCASTER ...... PA 2.80 2.61 2.33 2.06 1.78 1.50 LAWRENCE ...... PA 2.10 1.89 1.78 1.67 1.56 1.45 LEBANON ...... PA 2.80 2.62 2.34 2.05 1.77 1.49 LEHIGH ...... PA 2.80 2.80 2.51 2.21 1.92 1.63 LUZERNE ...... PA 2.60 2.43 2.21 1.98 1.76 1.54 LYCOMING ...... PA 2.60 2.30 2.11 1.91 1.72 1.53 MCKEAN ...... PA 2.30 1.98 1.80 1.63 1.45 1.28 MERCER ...... PA 2.10 1.88 1.75 1.63 1.50 1.38 MIFFLIN ...... PA 2.60 2.21 2.01 1.80 1.60 1.40 MONROE ...... PA 2.80 2.73 2.47 2.20 1.94 1.67 MONTGOMERY ...... PA 3.00 2.81 2.53 2.26 1.98 1.70 MONTOUR ...... PA 2.60 2.46 2.23 1.99 1.76 1.53 NORTHAMPTON ...... PA 2.80 2.61 2.38 2.16 1.93 1.70 NORTHUMBERLAND ...... PA 2.60 2.46 2.22 1.99 1.75 1.51 PERRY ...... PA 2.60 2.58 2.29 2.01 1.72 1.43 PHILADELPHIA ...... PA 3.00 2.83 2.56 2.30 2.03 1.77 PIKE ...... PA 2.80 2.74 2.48 2.23 1.97 1.71 POTTER ...... PA 2.30 2.09 1.90 1.72 1.53 1.35 SCHUYLKILL ...... PA 2.80 2.51 2.26 2.02 1.77 1.53 SNYDER ...... PA 2.60 2.43 2.19 1.96 1.72 1.49 SOMERSET ...... PA 2.30 2.20 2.05 1.91 1.76 1.61 SULLIVAN ...... PA 2.60 2.33 2.10 1.88 1.65 1.43 SUSQUEHANNA ...... PA 2.60 2.44 2.19 1.93 1.68 1.42 TIOGA ...... PA 2.30 2.16 1.96 1.77 1.57 1.38 UNION ...... PA 2.60 2.42 2.19 1.97 1.74 1.51 VENANGO ...... PA 2.10 1.87 1.74 1.62 1.49 1.36 WARREN ...... PA 2.10 1.85 1.70 1.55 1.40 1.25 WASHINGTON ...... PA 2.10 1.92 1.84 1.75 1.67 1.59 WAYNE ...... PA 2.60 2.47 2.25 2.02 1.80 1.57 WESTMORELAND ...... PA 2.30 1.91 1.83 1.74 1.66 1.57 WYOMING ...... PA 2.60 2.39 2.16 1.92 1.69 1.46 YORK ...... PA 2.80 2.72 2.40 2.09 1.77 1.46 BRISTOL ...... RI 3.25 3.07 2.89 2.72 2.54 2.37 KENT ...... RI 3.25 3.06 2.89 2.71 2.54 2.36 NEWPORT ...... RI 3.25 3.07 2.89 2.72 2.54 2.37 PROVIDENCE ...... RI 3.25 3.06 2.87 2.69 2.50 2.32 WASHINGTON ...... RI 3.25 3.06 2.88 2.70 2.52 2.34 ABBEVILLE ...... SC 3.10 2.92 2.75 2.59 2.42 2.26 AIKEN ...... SC 3.30 3.07 2.90 2.74 2.57 2.41 ALLENDALE ...... SC 3.30 3.10 2.96 2.83 2.69 2.56 ANDERSON ...... SC 3.10 2.90 2.73 2.55 2.38 2.20 BAMBERG ...... SC 3.30 3.09 2.94 2.80 2.65 2.51 BARNWELL ...... SC 3.30 3.08 2.93 2.78 2.63 2.48 BEAUFORT ...... SC 3.30 3.14 3.05 2.95 2.86 2.77 BERKELEY ...... SC 3.30 3.11 2.98 2.86 2.73 2.61 CALHOUN ...... SC 3.30 3.06 2.90 2.73 2.57 2.40 CHARLESTON ...... SC 3.30 3.12 3.01 2.89 2.78 2.67 CHEROKEE ...... SC 3.10 2.86 2.63 2.41 2.18 1.96 CHESTER ...... SC 3.10 2.88 2.68 2.47 2.27 2.07 CHESTERFIELD ...... SC 3.30 3.02 2.81 2.61 2.40 2.19 CLARENDON ...... SC 3.30 3.08 2.92 2.77 2.61 2.46 COLLETON ...... SC 3.30 3.11 2.99 2.86 2.74 2.62 DARLINGTON ...... SC 3.30 3.05 2.86 2.68 2.49 2.31 DILLON ...... SC 3.30 3.06 2.89 2.72 2.55 2.38 DORCHESTER ...... SC 3.30 3.11 2.98 2.86 2.73 2.61 EDGEFIELD ...... SC 3.30 3.05 2.87 2.69 2.51 2.33 FAIRFIELD ...... SC 3.30 3.02 2.81 2.59 2.38 2.17 FLORENCE ...... SC 3.30 3.07 2.90 2.74 2.57 2.41 GEORGETOWN ...... SC 3.30 3.11 3.00 2.88 2.77 2.65 GREENVILLE ...... SC 3.10 2.88 2.68 2.49 2.29 2.09 GREENWOOD ...... SC 3.10 2.91 2.75 2.58 2.42 2.25 HAMPTON ...... SC 3.30 3.11 2.99 2.88 2.76 2.64 HORRY ...... SC 3.30 3.11 2.98 2.86 2.73 2.61 JASPER ...... SC 3.30 3.13 3.03 2.94 2.84 2.74 KERSHAW ...... SC 3.30 3.03 2.83 2.62 2.42 2.22 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5009

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

LANCASTER ...... SC 3.10 2.88 2.68 2.48 2.28 2.08 LAURENS ...... SC 3.10 2.90 2.72 2.53 2.35 2.17 LEE ...... SC 3.30 3.05 2.87 2.68 2.50 2.32 LEXINGTON ...... SC 3.30 3.04 2.85 2.66 2.47 2.28 MARION ...... SC 3.10 2.93 2.78 2.63 2.48 2.33 MARLBORO ...... SC 3.30 3.08 2.92 2.77 2.61 2.46 MCCORMICK ...... SC 3.30 3.04 2.84 2.65 2.45 2.26 NEWBERRY ...... SC 3.30 3.02 2.81 2.61 2.40 2.19 OCONEE ...... SC 3.10 2.90 2.72 2.55 2.37 2.19 ORANGEBURG ...... SC 3.30 3.07 2.92 2.76 2.61 2.45 PICKENS ...... SC 3.10 2.89 2.70 2.51 2.32 2.13 RICHLAND ...... SC 3.30 3.04 2.85 2.66 2.47 2.28 SALUDA ...... SC 3.30 3.04 2.85 2.65 2.46 2.27 SPARTANBURG ...... SC 3.10 2.87 2.66 2.46 2.25 2.04 SUMTER ...... SC 3.30 3.06 2.89 2.71 2.54 2.37 UNION ...... SC 3.10 2.88 2.68 2.47 2.27 2.07 WILLIAMSBURG ...... SC 3.30 3.10 2.96 2.83 2.69 2.56 YORK ...... SC 3.10 2.86 2.64 2.41 2.19 1.97 AURORA ...... SD 1.70 1.41 1.32 1.22 1.13 1.04 BEADLE ...... SD 1.70 1.41 1.31 1.22 1.12 1.03 BENNETT ...... SD 1.70 1.39 1.27 1.16 1.04 0.93 BON HOMME ...... SD 1.75 1.42 1.34 1.26 1.18 1.10 BROOKINGS ...... SD 1.70 1.34 1.28 1.22 1.17 1.11 BROWN ...... SD 1.70 1.15 1.11 1.06 1.02 0.97 BRULE ...... SD 1.70 1.40 1.31 1.21 1.12 1.02 BUFFALO ...... SD 1.70 1.29 1.22 1.15 1.07 1.00 BUTTE ...... SD 1.65 1.14 1.08 1.03 0.97 0.91 CAMPBELL ...... SD 1.65 1.08 1.05 1.01 0.98 0.95 CHARLES MIX ...... SD 1.75 1.41 1.32 1.24 1.15 1.06 CLARK ...... SD 1.70 1.41 1.31 1.22 1.12 1.03 CLAY ...... SD 1.75 1.43 1.37 1.30 1.24 1.17 CODINGTON ...... SD 1.70 1.41 1.32 1.22 1.13 1.04 CORSON ...... SD 1.65 1.08 1.04 1.01 0.97 0.94 CUSTER ...... SD 1.80 1.82 1.59 1.36 1.13 0.90 DAVISON ...... SD 1.70 1.41 1.33 1.24 1.16 1.07 DAY ...... SD 1.70 1.16 1.12 1.07 1.03 0.99 DEUEL ...... SD 1.70 1.41 1.32 1.24 1.15 1.06 DEWEY ...... SD 1.65 1.12 1.08 1.03 0.99 0.94 DOUGLAS ...... SD 1.75 1.41 1.32 1.24 1.15 1.06 EDMUNDS ...... SD 1.70 1.15 1.10 1.05 1.00 0.95 FALL RIVER ...... SD 1.80 1.83 1.60 1.38 1.15 0.93 FAULK ...... SD 1.70 1.21 1.15 1.09 1.02 0.96 GRANT ...... SD 1.70 1.16 1.13 1.09 1.06 1.02 GREGORY ...... SD 1.75 1.40 1.31 1.21 1.12 1.02 HAAKON ...... SD 1.70 1.11 1.06 1.01 0.97 0.92 HAMLIN ...... SD 1.70 1.29 1.23 1.18 1.12 1.06 HAND ...... SD 1.70 1.27 1.20 1.13 1.07 1.00 HANSON ...... SD 1.70 1.42 1.33 1.25 1.16 1.08 HARDING ...... SD 1.65 1.71 1.52 1.33 1.14 0.95 HUGHES ...... SD 1.70 1.20 1.14 1.08 1.02 0.96 HUTCHINSON ...... SD 1.75 1.42 1.34 1.26 1.18 1.10 HYDE ...... SD 1.70 1.24 1.18 1.12 1.05 0.99 JACKSON ...... SD 1.70 1.38 1.27 1.15 1.04 0.92 JERAULD ...... SD 1.70 1.41 1.31 1.22 1.12 1.03 JONES ...... SD 1.70 1.21 1.15 1.08 1.02 0.95 KINGSBURY ...... SD 1.70 1.41 1.33 1.24 1.16 1.07 LAKE ...... SD 1.70 1.42 1.34 1.27 1.19 1.11 LAWRENCE ...... SD 1.80 1.82 1.59 1.36 1.13 0.90 LINCOLN ...... SD 1.75 1.44 1.38 1.31 1.25 1.19 LYMAN ...... SD 1.70 1.23 1.17 1.10 1.04 0.98 MARSHALL ...... SD 1.70 1.42 1.35 1.27 1.20 1.12 MCCOOK ...... SD 1.70 1.15 1.10 1.05 1.00 0.95 MCPHERSON ...... SD 1.70 1.15 1.10 1.06 1.01 0.96 MEADE ...... SD 1.65 1.78 1.56 1.33 1.11 0.89 MELLETTE ...... SD 1.70 1.39 1.28 1.16 1.05 0.94 MINER ...... SD 1.70 1.42 1.33 1.25 1.16 1.08 MINNEHAHA ...... SD 1.70 1.44 1.37 1.31 1.24 1.18 MOODY ...... SD 1.70 1.43 1.36 1.28 1.21 1.14 PENNINGTON ...... SD 1.80 1.81 1.58 1.34 1.11 0.87 PERKINS ...... SD 1.65 1.71 1.51 1.32 1.12 0.93 5010 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

POTTER ...... SD 1.70 1.20 1.14 1.08 1.01 0.95 ROBERTS ...... SD 1.70 1.15 1.11 1.06 1.02 0.97 SANBORN ...... SD 1.70 1.41 1.32 1.23 1.14 1.05 SHANNON ...... SD 1.80 1.82 1.60 1.37 1.15 0.92 SPINK ...... SD 1.70 1.40 1.30 1.20 1.10 1.00 STANLEY ...... SD 1.70 1.20 1.13 1.07 1.00 0.94 SULLY ...... SD 1.70 1.18 1.12 1.07 1.01 0.96 TODD ...... SD 1.70 1.39 1.28 1.18 1.07 0.96 TRIPP ...... SD 1.70 1.40 1.30 1.19 1.09 0.99 TURNER ...... SD 1.75 1.43 1.36 1.30 1.23 1.16 UNION ...... SD 1.75 1.44 1.38 1.32 1.26 1.20 WALWORTH ...... SD 1.70 1.15 1.10 1.04 0.99 0.94 YANKTON ...... SD 1.75 1.42 1.34 1.27 1.19 1.11 ZIEBACH ...... SD 1.65 1.42 1.30 1.17 1.05 0.92 ANDERSON ...... TN 2.80 2.58 2.39 2.21 2.02 1.83 BEDFORD ...... TN 2.60 2.44 2.27 2.11 1.94 1.78 BENTON ...... TN 2.60 2.46 2.31 2.17 2.02 1.88 BLEDSOE ...... TN 2.60 2.46 2.32 2.18 2.04 1.90 BLOUNT ...... TN 2.80 2.61 2.45 2.29 2.13 1.97 BRADLEY ...... TN 2.80 2.64 2.50 2.37 2.23 2.10 CAMPBELL ...... TN 2.80 2.56 2.35 2.15 1.94 1.73 CANNON ...... TN 2.60 2.43 2.26 2.09 1.92 1.75 CARROLL ...... TN 2.60 2.47 2.34 2.20 2.07 1.94 CARTER ...... TN 2.80 2.57 2.37 2.17 1.97 1.77 CHEATHAM ...... TN 2.60 2.37 2.20 2.02 1.85 1.67 CHESTER ...... TN 2.80 2.49 2.38 2.28 2.17 2.06 CLAIBORNE ...... TN 2.80 2.57 2.37 2.16 1.96 1.76 CLAY ...... TN 2.60 2.36 2.17 1.98 1.79 1.60 COCKE ...... TN 2.80 2.59 2.42 2.24 2.07 1.89 COFFEE ...... TN 2.60 2.45 2.30 2.14 1.99 1.84 CROCKETT ...... TN 2.60 2.49 2.38 2.28 2.17 2.06 CUMBERLAND ...... TN 2.80 2.58 2.39 2.20 2.01 1.82 DAVIDSON ...... TN 2.60 2.37 2.19 2.01 1.83 1.65 DE KALB ...... TN 2.60 2.47 2.34 2.22 2.09 1.96 DECATUR ...... TN 2.60 2.43 2.25 2.08 1.90 1.73 DICKSON ...... TN 2.60 2.39 2.23 2.06 1.90 1.74 DYER ...... TN 2.60 2.49 2.38 2.26 2.15 2.04 FAYETTE ...... TN 2.80 2.67 2.57 2.48 2.38 2.28 FENTRESS ...... TN 2.60 2.37 2.20 2.02 1.85 1.67 FRANKLIN ...... TN 2.80 2.59 2.42 2.24 2.07 1.89 GIBSON ...... TN 2.60 2.48 2.36 2.23 2.11 1.99 GILES ...... TN 2.80 2.58 2.39 2.21 2.02 1.83 GRAINGER ...... TN 2.80 2.58 2.39 2.21 2.02 1.83 GREENE ...... TN 2.80 2.58 2.40 2.21 2.03 1.84 GRUNDY ...... TN 2.60 2.47 2.33 2.20 2.06 1.93 HAMBLEN ...... TN 2.80 2.58 2.40 2.21 2.03 1.84 HAMILTON ...... TN 2.80 2.64 2.50 2.37 2.23 2.10 HANCOCK ...... TN 2.80 2.57 2.37 2.16 1.96 1.76 HARDEMAN ...... TN 2.80 2.65 2.53 2.42 2.30 2.18 HARDIN ...... TN 2.80 2.62 2.47 2.33 2.18 2.03 HAWKINS ...... TN 2.80 2.58 2.38 2.19 1.99 1.80 HAYWOOD ...... TN 2.60 2.59 2.48 2.37 2.26 2.15 HENDERSON ...... TN 2.60 2.48 2.35 2.23 2.10 1.98 HENRY ...... TN 2.60 2.41 2.27 2.14 2.00 1.86 HICKMAN ...... TN 2.60 2.44 2.28 2.11 1.95 1.79 HOUSTON ...... TN 2.60 2.40 2.25 2.09 1.94 1.79 HUMPHREYS ...... TN 2.60 2.45 2.29 2.14 1.98 1.83 JACKSON ...... TN 2.60 2.37 2.19 2.00 1.82 1.64 JEFFERSON ...... TN 2.80 2.59 2.41 2.24 2.06 1.88 JOHNSON ...... TN 2.80 2.56 2.36 2.15 1.95 1.74 KNOX ...... TN 2.80 2.59 2.42 2.24 2.07 1.89 LAKE ...... TN 2.60 2.43 2.31 2.19 2.07 1.95 LAUDERDALE ...... TN 2.60 2.59 2.48 2.36 2.25 2.14 LAWRENCE ...... TN 2.80 2.59 2.41 2.24 2.06 1.88 LEWIS ...... TN 2.60 2.45 2.30 2.14 1.99 1.84 LINCOLN ...... TN 2.80 2.58 2.39 2.21 2.02 1.83 LOUDON ...... TN 2.80 2.60 2.44 2.27 2.11 1.94 MACON ...... TN 2.80 2.62 2.47 2.33 2.18 2.03 MADISON ...... TN 2.80 2.63 2.50 2.36 2.23 2.09 MARION ...... TN 2.60 2.36 2.17 1.97 1.78 1.59 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5011

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

MARSHALL ...... TN 2.60 2.49 2.39 2.28 2.18 2.07 MAURY ...... TN 2.80 2.62 2.46 2.31 2.15 2.00 MCMINN ...... TN 2.60 2.44 2.27 2.11 1.94 1.78 MCNAIRY ...... TN 2.60 2.44 2.27 2.11 1.94 1.78 MEIGS ...... TN 2.80 2.61 2.45 2.30 2.14 1.98 MONROE ...... TN 2.80 2.62 2.47 2.32 2.17 2.02 MONTGOMERY ...... TN 2.60 2.38 2.21 2.05 1.88 1.71 MOORE ...... TN 2.80 2.58 2.39 2.21 2.02 1.83 MORGAN ...... TN 2.80 2.57 2.37 2.18 1.98 1.78 OBION ...... TN 2.60 2.42 2.30 2.17 2.05 1.92 OVERTON ...... TN 2.60 2.37 2.20 2.02 1.85 1.67 PERRY ...... TN 2.60 2.46 2.32 2.18 2.04 1.90 PICKETT ...... TN 2.60 2.36 2.17 1.97 1.78 1.59 POLK ...... TN 2.80 2.64 2.51 2.38 2.25 2.12 PUTNAM ...... TN 2.60 2.42 2.24 2.06 1.88 1.70 RHEA ...... TN 2.80 2.60 2.44 2.27 2.11 1.94 ROANE ...... TN 2.80 2.59 2.42 2.24 2.07 1.89 ROBERTSON ...... TN 2.60 2.37 2.19 2.00 1.82 1.64 RUTHERFORD ...... TN 2.60 2.42 2.24 2.07 1.89 1.71 SCOTT ...... TN 2.80 2.41 2.23 2.04 1.86 1.67 SEQUATCHIE ...... TN 2.80 2.61 2.45 2.29 2.13 1.97 SEVIER ...... TN 2.80 2.60 2.43 2.27 2.10 1.93 SHELBY ...... TN 2.80 2.69 2.61 2.54 2.46 2.38 SMITH ...... TN 2.60 2.37 2.19 2.01 1.83 1.65 STEWART ...... TN 2.60 2.40 2.25 2.10 1.95 1.80 SULLIVAN ...... TN 2.80 2.57 2.37 2.16 1.96 1.76 SUMNER ...... TN 2.60 2.36 2.18 1.99 1.81 1.62 TIPTON ...... TN 2.80 2.61 2.52 2.42 2.33 2.24 TROUSDALE ...... TN 2.60 2.36 2.18 1.99 1.81 1.62 UNICOI ...... TN 2.80 2.58 2.39 2.19 2.00 1.81 UNION ...... TN 2.80 2.58 2.39 2.19 2.00 1.81 VAN BUREN ...... TN 2.60 2.45 2.30 2.16 2.01 1.86 WARREN ...... TN 2.60 2.44 2.28 2.13 1.97 1.81 WASHINGTON ...... TN 2.80 2.57 2.38 2.18 1.99 1.79 WAYNE ...... TN 2.80 2.60 2.44 2.27 2.11 1.94 WEAKLEY ...... TN 2.60 2.42 2.29 2.17 2.04 1.91 WHITE ...... TN 2.60 2.43 2.27 2.10 1.94 1.77 WILLIAMSON ...... TN 2.60 2.42 2.24 2.05 1.87 1.69 WILSON ...... TN 2.60 2.37 2.19 2.02 1.84 1.66 ANDERSON ...... TX 3.15 3.04 2.77 2.50 2.23 1.96 ANDREWS ...... TX 2.40 2.70 2.46 2.21 1.97 1.72 ANGELINA ...... TX 3.15 3.10 2.86 2.61 2.37 2.13 ARANSAS ...... TX 3.65 3.49 3.29 3.08 2.88 2.68 ARCHER ...... TX 2.80 2.63 2.35 2.07 1.79 1.51 ARMSTRONG ...... TX 2.40 2.29 2.10 1.90 1.71 1.51 ATASCOSA ...... TX 3.45 2.70 2.60 2.51 2.41 2.31 AUSTIN ...... TX 3.60 3.44 3.18 2.93 2.67 2.41 BAILEY ...... TX 2.40 2.26 2.03 1.80 1.57 1.34 BANDERA ...... TX 3.30 2.66 2.52 2.37 2.23 2.09 BASTROP ...... TX 3.30 3.20 2.93 2.67 2.40 2.14 BAYLOR ...... TX 2.60 2.64 2.37 2.10 1.83 1.56 BEE ...... TX 3.65 3.45 3.21 2.98 2.74 2.50 BELL ...... TX 3.15 3.05 2.79 2.52 2.26 2.00 BEXAR ...... TX 3.45 3.30 3.03 2.75 2.48 2.20 BLANCO ...... TX 3.30 2.63 2.46 2.29 2.12 1.95 BORDEN ...... TX 2.40 2.70 2.45 2.19 1.94 1.69 BOSQUE ...... TX 3.15 3.02 2.73 2.45 2.16 1.87 BOWIE ...... TX 3.00 2.79 2.51 2.22 1.94 1.65 BRAZORIA ...... TX 3.60 3.48 3.26 3.03 2.81 2.59 BRAZOS ...... TX 3.30 3.16 2.96 2.77 2.57 2.37 BREWSTER ...... TX 2.40 2.13 2.06 1.99 1.92 1.85 BRISCOE ...... TX 2.40 2.30 2.11 1.91 1.72 1.53 BROOKS ...... TX 3.65 3.59 3.36 3.12 2.89 2.66 BROWN ...... TX 2.80 2.72 2.48 2.25 2.01 1.78 BURLESON ...... TX 3.30 3.14 2.93 2.71 2.50 2.28 BURNET ...... TX 3.30 3.15 2.84 2.52 2.21 1.90 CALDWELL ...... TX 3.45 3.29 3.00 2.70 2.41 2.12 CALHOUN ...... TX 3.65 3.47 3.25 3.04 2.82 2.60 CALLAHAN ...... TX 2.80 2.70 2.46 2.21 1.97 1.72 CAMERON ...... TX 3.65 3.67 3.43 3.19 2.95 2.71 5012 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

CAMP ...... TX 3.00 2.85 2.54 2.23 1.92 1.61 CARSON ...... TX 2.40 2.29 2.10 1.90 1.71 1.51 CASS ...... TX 3.00 2.81 2.54 2.27 2.00 1.73 CASTRO ...... TX 2.40 2.28 2.07 1.85 1.64 1.43 CHAMBERS ...... TX 3.60 3.46 3.23 2.99 2.76 2.52 CHEROKEE ...... TX 3.15 3.03 2.76 2.48 2.21 1.93 CHILDRESS ...... TX 2.40 2.30 2.11 1.91 1.72 1.53 CLAY ...... TX 2.80 2.62 2.34 2.05 1.77 1.48 COCHRAN ...... TX 2.40 2.27 2.05 1.83 1.61 1.39 COKE ...... TX 2.60 2.72 2.48 2.25 2.01 1.78 COLEMAN ...... TX 2.80 2.72 2.49 2.25 2.02 1.79 COLLIN ...... TX 3.00 2.84 2.51 2.19 1.86 1.54 COLLINGSWORTH ...... TX 2.40 2.29 2.10 1.90 1.71 1.51 COLORADO ...... TX 3.60 3.44 3.18 2.92 2.66 2.40 COMAL ...... TX 3.45 3.29 2.99 2.70 2.40 2.11 COMANCHE ...... TX 2.80 3.00 2.69 2.37 2.06 1.75 CONCHO ...... TX 2.80 2.45 2.29 2.14 1.98 1.83 COOKE ...... TX 3.00 2.82 2.48 2.13 1.79 1.45 CORYELL ...... TX 3.15 3.03 2.75 2.47 2.19 1.91 COTTLE ...... TX 2.40 2.31 2.12 1.94 1.75 1.57 CRANE ...... TX 2.40 2.13 2.05 1.98 1.90 1.83 CROCKETT ...... TX 2.60 2.30 2.20 2.11 2.01 1.91 CROSBY ...... TX 2.40 2.31 2.14 1.96 1.79 1.61 CULBERSON ...... TX 2.40 2.08 1.95 1.83 1.70 1.58 DALLAM ...... TX 2.40 2.29 2.10 1.90 1.71 1.51 DALLAS ...... TX 3.00 2.86 2.57 2.27 1.98 1.68 DAWSON ...... TX 2.40 2.70 2.45 2.19 1.94 1.69 DE WITT ...... TX 2.40 2.28 2.07 1.85 1.64 1.43 DEAF SMITH ...... TX 3.00 2.81 2.46 2.10 1.75 1.40 DELTA ...... TX 3.00 2.84 2.51 2.19 1.86 1.54 DENTON ...... TX 3.60 3.34 3.11 2.87 2.64 2.40 DICKENS ...... TX 2.40 2.34 2.19 2.03 1.88 1.73 DIMMIT ...... TX 3.45 2.70 2.60 2.49 2.39 2.29 DONLEY ...... TX 2.40 2.30 2.10 1.91 1.71 1.52 DUVAL ...... TX 3.65 3.57 3.32 3.08 2.83 2.58 EASTLAND ...... TX 2.80 2.70 2.45 2.21 1.96 1.71 ECTOR ...... TX 2.40 2.72 2.49 2.25 2.02 1.79 EDWARDS ...... TX 2.80 2.49 2.37 2.26 2.14 2.03 EL PASO ...... TX 3.00 2.89 2.62 2.35 2.08 1.81 ELLIS ...... TX 2.25 2.15 1.95 1.75 1.55 1.35 ERATH ...... TX 3.00 2.99 2.68 2.36 2.05 1.73 FALLS ...... TX 3.15 3.07 2.82 2.58 2.33 2.09 FANNIN ...... TX 3.00 2.81 2.46 2.12 1.77 1.42 FAYETTE ...... TX 3.60 3.42 3.14 2.86 2.58 2.30 FISHER ...... TX 2.60 2.70 2.45 2.21 1.96 1.71 FLOYD ...... TX 2.40 2.30 2.12 1.93 1.75 1.56 FOARD ...... TX 2.60 2.67 2.39 2.12 1.84 1.56 FORT BEND ...... TX 3.60 3.46 3.23 2.99 2.76 2.52 FRANKLIN ...... TX 3.00 2.83 2.50 2.16 1.83 1.50 FREESTONE ...... TX 3.15 3.05 2.80 2.54 2.29 2.03 FRIO ...... TX 3.45 2.70 2.60 2.49 2.39 2.29 GAINES ...... TX 2.40 2.31 2.13 1.95 1.77 1.59 GALVESTON ...... TX 3.60 3.48 3.25 3.03 2.80 2.58 GARZA ...... TX 2.40 2.32 2.16 1.99 1.83 1.66 GILLESPIE ...... TX 3.30 2.63 2.46 2.30 2.13 1.96 GLASSCOCK ...... TX 2.60 2.72 2.49 2.27 2.04 1.81 GOLIAD ...... TX 3.65 3.45 3.21 2.98 2.74 2.50 GONZALES ...... TX 3.45 3.32 3.06 2.79 2.53 2.27 GRAY ...... TX 2.40 2.29 2.09 1.90 1.70 1.50 GRAYSON ...... TX 3.00 2.82 2.47 2.13 1.78 1.44 GREGG ...... TX 3.00 2.89 2.62 2.34 2.07 1.80 GRIMES ...... TX 3.30 3.16 2.97 2.77 2.58 2.38 GUADALUPE ...... TX 3.45 3.29 3.01 2.72 2.44 2.15 HALE ...... TX 2.40 2.30 2.10 1.91 1.71 1.52 HALL ...... TX 2.40 2.30 2.11 1.91 1.72 1.53 HAMILTON ...... TX 3.15 3.01 2.71 2.42 2.12 1.82 HANSFORD ...... TX 2.40 2.28 2.07 1.87 1.66 1.45 HARDEMAN ...... TX 2.60 2.63 2.36 2.08 1.81 1.53 HARDIN ...... TX 3.60 3.44 3.19 2.93 2.68 2.42 HARRIS ...... TX 3.60 3.46 3.22 2.99 2.75 2.51 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5013

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

HARRISON ...... TX 3.00 2.89 2.63 2.36 2.10 1.83 HARTLEY ...... TX 2.40 2.29 2.09 1.90 1.70 1.50 HASKELL ...... TX 2.60 2.68 2.42 2.15 1.89 1.62 HAYS ...... TX 3.45 3.27 2.95 2.64 2.32 2.01 HEMPHILL ...... TX 2.40 2.28 2.08 1.87 1.67 1.46 HENDERSON ...... TX 3.00 3.02 2.73 2.43 2.14 1.85 HIDALGO ...... TX 3.65 3.66 3.40 3.15 2.89 2.64 HILL ...... TX 3.15 3.02 2.73 2.45 2.16 1.87 HOCKLEY ...... TX 2.40 2.29 2.10 1.90 1.71 1.51 HOOD ...... TX 3.00 2.87 2.58 2.29 2.00 1.71 HOPKINS ...... TX 3.00 2.81 2.47 2.12 1.78 1.43 HOUSTON ...... TX 3.15 3.09 2.84 2.58 2.33 2.08 HOWARD ...... TX 2.40 2.71 2.48 2.24 2.01 1.77 HUDSPETH ...... TX 2.25 2.18 2.01 1.83 1.66 1.49 HUNT ...... TX 3.00 2.86 2.56 2.27 1.97 1.67 HUTCHINSON ...... TX 2.40 2.29 2.09 1.89 1.69 1.49 IRION ...... TX 2.60 2.29 2.18 2.08 1.97 1.86 JACK ...... TX 2.80 2.66 2.38 2.09 1.81 1.52 JACKSON ...... TX 3.60 3.37 3.16 2.95 2.74 2.53 JASPER ...... TX 3.30 3.14 2.94 2.73 2.53 2.33 JEFF DAVIS ...... TX 2.40 2.09 1.99 1.88 1.78 1.67 JEFFERSON ...... TX 3.60 3.46 3.22 2.97 2.73 2.49 JIM HOGG ...... TX 3.65 2.83 2.76 2.70 2.63 2.56 JIM WELLS ...... TX 3.65 3.58 3.34 3.09 2.85 2.61 JOHNSON ...... TX 3.00 2.88 2.60 2.31 2.03 1.75 JONES ...... TX 2.60 2.69 2.44 2.18 1.93 1.67 KARNES ...... TX 3.65 3.43 3.17 2.91 2.65 2.39 KAUFMAN ...... TX 3.00 2.87 2.58 2.29 2.00 1.71 KENDALL ...... TX 3.30 2.65 2.50 2.35 2.20 2.05 KENEDY ...... TX 3.65 3.60 3.38 3.16 2.94 2.72 KENT ...... TX 2.60 2.69 2.43 2.18 1.92 1.66 KERR ...... TX 3.30 2.64 2.48 2.33 2.17 2.01 KIMBLE ...... TX 2.80 2.47 2.33 2.20 2.06 1.93 KING ...... TX 2.60 2.68 2.41 2.14 1.87 1.60 KINNEY ...... TX 3.30 2.66 2.52 2.37 2.23 2.09 KLEBERG ...... TX 3.65 3.60 3.38 3.15 2.93 2.71 KNOX ...... TX 2.60 2.68 2.41 2.13 1.86 1.59 LA SALLE ...... TX 3.00 2.81 2.46 2.12 1.77 1.42 LAMAR ...... TX 2.40 2.28 2.07 1.85 1.64 1.43 LAMB ...... TX 3.15 3.02 2.74 2.45 2.17 1.88 LAMPASAS ...... TX 3.45 2.71 2.62 2.52 2.43 2.34 LAVACA ...... TX 3.60 3.34 3.09 2.85 2.60 2.36 LEE ...... TX 3.30 3.21 2.95 2.70 2.44 2.19 LEON ...... TX 3.15 3.10 2.86 2.63 2.39 2.15 LIBERTY ...... TX 3.60 3.45 3.19 2.94 2.68 2.43 LIMESTONE ...... TX 3.15 3.06 2.81 2.55 2.30 2.05 LIPSCOMB ...... TX 2.40 2.28 2.07 1.85 1.64 1.43 LIVE OAK ...... TX 3.65 3.46 3.22 2.99 2.75 2.52 LLANO ...... TX 3.30 2.62 2.44 2.25 2.07 1.89 LOVING ...... TX 2.40 2.09 1.98 1.88 1.77 1.66 LUBBOCK ...... TX 2.40 2.31 2.13 1.96 1.78 1.60 LYNN ...... TX 2.40 2.32 2.15 1.97 1.80 1.63 MADISON ...... TX 2.80 2.45 2.29 2.14 1.98 1.83 MARION ...... TX 3.15 3.05 2.79 2.52 2.26 2.00 MARTIN ...... TX 3.45 2.72 2.64 2.57 2.49 2.41 MASON ...... TX 3.30 3.14 2.92 2.69 2.47 2.25 MATAGORDA ...... TX 3.00 2.88 2.60 2.33 2.05 1.77 MAVERICK ...... TX 2.40 2.71 2.47 2.24 2.00 1.76 MCCULLOCH ...... TX 2.80 2.46 2.32 2.18 2.04 1.90 MCLENNAN ...... TX 3.60 3.38 3.19 2.99 2.80 2.60 MCMULLEN ...... TX 3.30 2.67 2.55 2.42 2.30 2.17 MEDINA ...... TX 3.30 2.68 2.56 2.43 2.31 2.19 MENARD ...... TX 2.80 2.46 2.32 2.17 2.03 1.89 MIDLAND ...... TX 2.40 2.72 2.49 2.27 2.04 1.81 MILAM ...... TX 3.30 3.12 2.87 2.63 2.38 2.14 MILLS ...... TX 2.80 3.01 2.71 2.41 2.11 1.81 MITCHELL ...... TX 2.60 2.71 2.47 2.23 1.99 1.75 MONTAGUE ...... TX 2.80 2.62 2.33 2.03 1.74 1.45 MONTGOMERY ...... TX 3.60 3.45 3.19 2.94 2.68 2.43 MOORE ...... TX 2.40 2.29 2.09 1.90 1.70 1.50 5014 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

MORRIS ...... TX 3.00 2.85 2.55 2.24 1.94 1.63 MOTLEY ...... TX 2.40 2.31 2.12 1.94 1.75 1.57 NACOGDOCHES ...... TX 3.15 3.07 2.81 2.54 2.28 2.01 NAVARRO ...... TX 3.15 3.03 2.75 2.47 2.19 1.91 NEWTON ...... TX 3.30 3.14 2.94 2.75 2.55 2.35 NOLAN ...... TX 2.60 2.71 2.47 2.22 1.98 1.74 NUECES ...... TX 3.65 3.59 3.37 3.14 2.92 2.69 OCHILTREE ...... TX 2.40 2.28 2.07 1.86 1.65 1.44 OLDHAM ...... TX 2.40 2.29 2.09 1.88 1.68 1.48 ORANGE ...... TX 3.60 3.46 3.22 2.97 2.73 2.49 PALO PINTO ...... TX 2.80 2.69 2.43 2.16 1.90 1.64 PANOLA ...... TX 3.00 2.92 2.68 2.43 2.19 1.95 PARKER ...... TX 3.00 2.85 2.54 2.23 1.92 1.61 PARMER ...... TX 2.40 2.26 2.03 1.80 1.57 1.34 PECOS ...... TX 2.40 2.13 2.05 1.98 1.90 1.83 POLK ...... TX 3.30 3.13 2.92 2.70 2.49 2.28 POTTER ...... TX 2.40 2.29 2.10 1.90 1.71 1.51 PRESIDIO ...... TX 2.40 2.11 2.01 1.92 1.82 1.73 RAINS ...... TX 3.00 2.84 2.52 2.20 1.88 1.56 RANDALL ...... TX 2.40 2.29 2.09 1.90 1.70 1.50 REAGAN ...... TX 2.60 2.29 2.18 2.08 1.97 1.86 REAL ...... TX 3.30 2.65 2.51 2.36 2.22 2.07 RED RIVER ...... TX 3.00 2.83 2.49 2.16 1.82 1.49 REEVES ...... TX 2.40 2.09 1.99 1.88 1.78 1.67 REFUGIO ...... TX 3.65 3.47 3.26 3.04 2.83 2.61 ROBERTS ...... TX 2.40 2.29 2.09 1.88 1.68 1.48 ROBERTSON ...... TX 3.30 3.13 2.90 2.68 2.45 2.22 ROCKWALL ...... TX 3.00 2.85 2.54 2.24 1.93 1.62 RUNNELS ...... TX 2.80 2.72 2.49 2.25 2.02 1.79 RUSK ...... TX 3.00 2.91 2.66 2.40 2.15 1.90 SABINE ...... TX 3.15 3.12 2.89 2.67 2.44 2.22 SAN AUGUSTINE ...... TX 3.15 3.11 2.87 2.64 2.40 2.17 SAN JACINTO ...... TX 3.30 3.43 3.15 2.88 2.60 2.33 SAN PATRICIO ...... TX 3.65 3.58 3.35 3.11 2.88 2.64 SAN SABA ...... TX 2.80 2.45 2.30 2.14 1.99 1.84 SCHLEICHER ...... TX 2.80 2.46 2.32 2.17 2.03 1.89 SCURRY ...... TX 2.60 2.70 2.45 2.20 1.95 1.70 SHACKELFORD ...... TX 2.80 2.69 2.44 2.18 1.93 1.67 SHELBY ...... TX 3.15 3.09 2.83 2.58 2.32 2.07 SHERMAN ...... TX 2.40 2.29 2.08 1.88 1.67 1.47 SMITH ...... TX 3.00 2.90 2.64 2.38 2.12 1.86 SOMERVELL ...... TX 3.00 2.88 2.60 2.33 2.05 1.77 STARR ...... TX 3.65 2.83 2.76 2.70 2.63 2.56 STEPHENS ...... TX 2.80 2.69 2.43 2.18 1.92 1.66 STERLING ...... TX 2.60 2.72 2.49 2.27 2.04 1.81 STONEWALL ...... TX 2.60 2.69 2.43 2.17 1.91 1.65 SUTTON ...... TX 2.80 2.47 2.33 2.20 2.06 1.93 SWISHER ...... TX 2.40 2.29 2.09 1.89 1.69 1.49 TARRANT ...... TX 3.00 2.86 2.57 2.27 1.98 1.68 TAYLOR ...... TX 2.60 2.71 2.46 2.22 1.97 1.73 TERRELL ...... TX 2.60 2.30 2.20 2.11 2.01 1.91 TERRY ...... TX 2.40 2.31 2.13 1.95 1.77 1.59 THROCKMORTON ...... TX 2.80 2.68 2.41 2.15 1.88 1.61 TITUS ...... TX 3.00 2.84 2.52 2.20 1.88 1.56 TOM GREEN ...... TX 2.80 2.73 2.50 2.28 2.05 1.83 TRAVIS ...... TX 3.30 3.16 2.85 2.55 2.24 1.94 TRINITY ...... TX 3.30 3.11 2.88 2.64 2.41 2.18 TYLER ...... TX 3.30 3.13 2.92 2.72 2.51 2.30 UPSHUR ...... TX 3.00 2.87 2.58 2.29 2.00 1.71 UPTON ...... TX 2.40 2.13 2.06 2.00 1.93 1.86 UVALDE ...... TX 3.30 2.66 2.53 2.39 2.26 2.12 VAL VERDE ...... TX 2.80 2.48 2.36 2.24 2.12 2.00 VAN ZANDT ...... TX 3.00 2.88 2.59 2.31 2.02 1.74 VICTORIA ...... TX 3.65 3.46 3.22 2.99 2.75 2.52 WALKER ...... TX 3.30 3.15 2.94 2.74 2.53 2.32 WALLER ...... TX 3.60 3.45 3.19 2.94 2.68 2.43 WARD ...... TX 2.40 2.11 2.02 1.94 1.85 1.76 WASHINGTON ...... TX 3.30 3.43 3.16 2.90 2.63 2.36 WEBB ...... TX 3.45 2.73 2.65 2.58 2.50 2.43 WHARTON ...... TX 3.60 3.37 3.15 2.94 2.72 2.51 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5015

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

WHEELER ...... TX 2.40 2.29 2.09 1.89 1.69 1.49 WICHITA ...... TX 2.80 2.63 2.35 2.06 1.78 1.50 WILBARGER ...... TX 2.60 2.63 2.35 2.08 1.80 1.52 WILLACY ...... TX 3.65 3.67 3.42 3.18 2.93 2.69 WILLIAMSON ...... TX 3.30 3.16 2.87 2.57 2.28 1.98 WILSON ...... TX 3.45 3.32 3.06 2.81 2.55 2.29 WINKLER ...... TX 2.40 2.10 2.01 1.91 1.82 1.72 WISE ...... TX 3.00 2.83 2.50 2.16 1.83 1.50 WOOD ...... TX 3.00 2.85 2.54 2.24 1.93 1.62 YOAKUM ...... TX 2.40 2.30 2.10 1.91 1.71 1.52 YOUNG ...... TX 2.80 2.67 2.39 2.12 1.84 1.56 ZAPATA ...... TX 3.65 2.82 2.75 2.67 2.60 2.52 ZAVALA ...... TX 3.30 2.68 2.56 2.45 2.33 2.21 BEAVER ...... UT 1.60 1.58 1.56 1.54 1.52 1.50 BOX ELDER ...... UT 1.90 1.73 1.55 1.38 1.20 1.03 CACHE ...... UT 1.90 1.73 1.56 1.38 1.21 1.04 CARBON ...... UT 1.90 1.78 1.66 1.53 1.41 1.29 DAGGETT ...... UT 1.90 1.77 1.64 1.50 1.37 1.24 DAVIS ...... UT 1.90 1.74 1.58 1.41 1.25 1.09 DUCHESNE ...... UT 1.90 1.76 1.62 1.49 1.35 1.21 EMERY ...... UT 1.90 1.80 1.70 1.59 1.49 1.39 GARFIELD ...... UT 1.60 1.60 1.60 1.60 1.60 1.60 GRAND ...... UT 1.90 1.84 1.79 1.73 1.68 1.62 IRON ...... UT 1.60 1.60 1.61 1.61 1.62 1.62 JUAB ...... UT 1.90 1.75 1.60 1.46 1.31 1.16 KANE ...... UT 1.60 1.62 1.63 1.65 1.66 1.68 MILLARD ...... UT 1.90 1.78 1.67 1.55 1.44 1.32 MORGAN ...... UT 1.90 1.74 1.57 1.41 1.24 1.08 PIUTE ...... UT 1.60 1.58 1.56 1.54 1.52 1.50 RICH ...... UT 1.90 1.73 1.56 1.39 1.22 1.05 SALT LAKE ...... UT 1.90 1.74 1.57 1.41 1.24 1.08 SAN JUAN ...... UT 1.60 1.63 1.66 1.68 1.71 1.74 SANPETE ...... UT 1.90 1.77 1.64 1.52 1.39 1.26 SEVIER ...... UT 1.90 1.81 1.72 1.62 1.53 1.44 SUMMIT ...... UT 1.90 1.74 1.58 1.41 1.25 1.09 TOOELE ...... UT 1.90 1.74 1.57 1.41 1.24 1.08 UINTAH ...... UT 1.90 1.79 1.68 1.57 1.46 1.35 UTAH ...... UT 1.90 1.73 1.55 1.38 1.20 1.03 WASATCH ...... UT 1.90 1.73 1.56 1.39 1.22 1.05 WASHINGTON ...... UT 1.60 1.63 1.65 1.68 1.70 1.73 WAYNE ...... UT 1.60 1.59 1.57 1.56 1.54 1.53 WEBER ...... UT 1.90 1.73 1.57 1.40 1.24 1.07 ACCOMACK ...... VA 3.00 2.98 2.73 2.49 2.24 1.99 ALBEMARLE ...... VA 2.80 2.66 2.38 2.11 1.83 1.56 ALEXANDRIA CITY ...... VA 3.00 2.75 2.46 2.18 1.89 1.61 ALLEGHANY ...... VA 2.80 2.67 2.41 2.14 1.88 1.62 AMELIA ...... VA 3.10 2.82 2.56 2.30 2.04 1.78 AMHERST ...... VA 2.80 2.68 2.43 2.18 1.93 1.68 APPOMATTOX ...... VA 2.80 2.69 2.45 2.20 1.96 1.72 ARLINGTON ...... VA 3.00 2.74 2.45 2.17 1.88 1.59 AUGUSTA ...... VA 2.80 2.66 2.39 2.12 1.85 1.58 BATH ...... VA 2.80 2.67 2.41 2.14 1.88 1.62 BEDFORD ...... VA 2.80 2.68 2.43 2.17 1.92 1.67 BEDFORD CITY ...... VA 2.80 2.68 2.43 2.17 1.92 1.67 BLAND ...... VA 2.80 2.68 2.43 2.19 1.94 1.69 BOTETOURT ...... VA 2.80 2.67 2.41 2.14 1.88 1.62 BRISTOL CITY ...... VA 2.80 2.56 2.35 2.15 1.94 1.73 BRUNSWICK ...... VA 3.10 2.86 2.64 2.42 2.20 1.98 BUCHANAN ...... VA 2.80 2.56 2.35 2.13 1.92 1.71 BUCKINGHAM ...... VA 2.80 2.80 2.52 2.24 1.96 1.68 BUENA VISTA CITY ...... VA 2.80 2.67 2.41 2.16 1.90 1.64 CAMPBELL ...... VA 2.80 2.69 2.45 2.20 1.96 1.72 CAROLINE ...... VA 3.10 2.80 2.53 2.25 1.98 1.70 CARROLL ...... VA 2.80 2.69 2.45 2.20 1.96 1.72 CHARLES CITY ...... VA 3.10 2.84 2.60 2.37 2.13 1.89 CHARLOTTE ...... VA 3.10 2.83 2.57 2.32 2.06 1.81 CHARLOTTESVILLE CITY ...... VA 2.80 2.66 2.38 2.11 1.83 1.56 CHESAPEAKE CITY ...... VA 3.20 3.02 2.80 2.59 2.37 2.16 CHESTERFIELD ...... VA 3.10 2.83 2.58 2.33 2.08 1.83 CLARKE ...... VA 2.80 2.77 2.46 2.15 1.84 1.53 5016 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

CLIFTON FORGE CITY ...... VA 2.80 2.67 2.41 2.15 1.89 1.63 COLONIAL HEIGHTS CITY ...... VA 3.10 2.84 2.60 2.35 2.11 1.87 COVINGTON CITY ...... VA 2.80 2.67 2.41 2.14 1.88 1.62 CRAIG ...... VA 2.80 2.67 2.41 2.15 1.89 1.63 CULPEPER ...... VA 2.80 2.78 2.48 2.17 1.87 1.57 CUMBERLAND ...... VA 2.80 2.80 2.53 2.25 1.98 1.70 DANVILLE CITY ...... VA 2.80 2.71 2.49 2.26 2.04 1.82 DICKENSON ...... VA 2.80 2.56 2.35 2.13 1.92 1.71 DINWIDDIE ...... VA 3.10 2.84 2.61 2.37 2.14 1.90 EMPORIA CITY ...... VA 3.00 2.87 2.66 2.45 2.24 2.08 ESSEX ...... VA 3.10 2.94 2.65 2.36 2.07 1.78 FAIRFAX ...... VA 3.00 2.74 2.45 2.17 1.88 1.59 FAIRFAX CITY ...... VA 3.00 2.74 2.45 2.16 1.87 1.58 FALLS CHURCH CITY ...... VA 3.00 2.74 2.45 2.16 1.87 1.58 FAUQUIER ...... VA 3.00 2.78 2.47 2.17 1.86 1.56 FLOYD ...... VA 2.80 2.68 2.43 2.19 1.94 1.69 FLUVANNA ...... VA 2.80 2.79 2.50 2.21 1.92 1.63 FRANKLIN ...... VA 2.80 2.68 2.43 2.19 1.94 1.69 FRANKLIN CITY ...... VA 3.00 2.74 2.45 2.16 1.87 1.58 FREDERICK ...... VA 3.00 2.74 2.45 2.16 1.87 1.58 FREDERICKSBURG CITY ...... VA 2.80 2.79 2.50 2.22 1.93 1.64 GALAX CITY ...... VA 2.80 2.69 2.45 2.21 1.97 1.73 GILES ...... VA 2.80 2.68 2.43 2.17 1.92 1.67 GLOUCESTER ...... VA 3.20 2.98 2.73 2.48 2.23 1.98 GOOCHLAND ...... VA 3.10 2.80 2.52 2.25 1.97 1.69 GRAYSON ...... VA 2.80 2.69 2.45 2.21 1.97 1.73 GREENE ...... VA 2.80 2.65 2.38 2.10 1.83 1.55 GREENSVILLE ...... VA 3.10 2.87 2.65 2.44 2.22 2.01 HALIFAX ...... VA 3.10 2.71 2.49 2.28 2.06 1.84 HAMPTON CITY ...... VA 3.20 3.00 2.77 2.54 2.31 2.08 HANOVER ...... VA 3.10 2.82 2.55 2.29 2.02 1.76 HARRISONBURG CITY ...... VA 2.80 2.65 2.38 2.10 1.83 1.55 HENRICO ...... VA 3.10 2.82 2.56 2.30 2.04 1.78 HENRY ...... VA 2.80 2.82 2.55 2.29 2.02 1.76 HIGHLAND ...... VA 2.80 2.67 2.40 2.14 1.87 1.61 HOPEWELL CITY ...... VA 3.10 2.84 2.60 2.37 2.13 1.89 ISLE OF WIGHT ...... VA 3.20 3.00 2.76 2.53 2.29 2.06 JAMES CITY ...... VA 3.10 2.98 2.72 2.47 2.21 1.96 KING AND QUEEN ...... VA 3.10 2.95 2.67 2.39 2.11 1.83 KING GEORGE ...... VA 3.10 2.80 2.53 2.25 1.98 1.70 KING WILLIAM ...... VA 3.10 2.82 2.56 2.31 2.05 1.79 LANCASTER ...... VA 3.10 2.96 2.69 2.42 2.15 1.88 LEE ...... VA 2.80 2.56 2.36 2.15 1.95 1.74 LEXINGTON CITY ...... VA 2.80 2.67 2.41 2.15 1.89 1.63 LOUDOUN ...... VA 3.00 2.71 2.41 2.12 1.82 1.53 LOUISA ...... VA 2.80 2.79 2.50 2.21 1.92 1.63 LUNENBURG ...... VA 3.10 2.84 2.59 2.35 2.10 1.86 LYNCHBURG CITY ...... VA 2.80 2.69 2.45 2.20 1.96 1.72 MADISON ...... VA 2.80 2.77 2.47 2.16 1.86 1.55 MANASSAS CITY ...... VA 3.00 2.72 2.43 2.15 1.86 1.58 MANASSAS PARK CITY ...... VA 3.00 2.78 2.48 2.18 1.88 1.58 MARTINSVILLE CITY ...... VA 2.80 2.70 2.46 2.23 1.99 1.76 MATHEWS ...... VA 3.20 2.98 2.73 2.48 2.23 1.98 MECKLENBURG ...... VA 3.10 2.85 2.62 2.38 2.15 1.92 MIDDLESEX ...... VA 3.10 2.96 2.70 2.43 2.17 1.90 MONTGOMERY ...... VA 2.80 2.68 2.42 2.17 1.91 1.66 NELSON ...... VA 2.80 2.67 2.41 2.14 1.88 1.62 NEW KENT ...... VA 3.10 2.83 2.59 2.34 2.10 1.85 NEWPORT NEWS CITY ...... VA 3.20 2.99 2.75 2.52 2.28 2.04 NORFOLK CITY ...... VA 3.20 3.01 2.79 2.56 2.34 2.12 NORTHAMPTON ...... VA 3.00 2.99 2.75 2.52 2.28 2.04 NORTHUMBERLAND ...... VA 3.10 2.80 2.57 2.33 2.10 1.87 NORTON CITY ...... VA 2.80 2.56 2.35 2.15 1.94 1.73 NOTTOWAY ...... VA 3.10 2.83 2.59 2.34 2.10 1.85 ORANGE ...... VA 2.80 2.78 2.48 2.18 1.88 1.58 PAGE ...... VA 2.80 2.77 2.47 2.16 1.86 1.55 PATRICK ...... VA 2.80 2.69 2.46 2.22 1.99 1.75 PETERSBURG CITY ...... VA 3.10 2.84 2.61 2.37 2.14 1.90 PITTSYLVANIA ...... VA 2.80 2.70 2.47 2.24 2.01 3.00 POQUOSON CITY ...... VA 3.20 2.99 2.75 2.52 2.28 2.04 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5017

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

PORTSMOUTH CITY ...... VA 3.20 3.01 2.79 2.56 2.34 2.12 POWHATAN ...... VA 3.10 2.81 2.54 2.27 2.00 3.10 PRINCE EDWARD ...... VA 3.10 2.82 2.55 2.29 2.02 1.76 PRINCE GEORGE ...... VA 3.10 2.85 2.61 2.38 2.14 1.91 PRINCE WILLIAM ...... VA 3.00 2.72 2.44 2.15 1.87 1.59 PULASKI ...... VA 2.80 2.68 2.43 2.18 1.93 1.68 RADFORD CITY ...... VA 2.80 2.68 2.43 2.17 1.92 1.67 RAPPAHANNOCK ...... VA 2.80 2.77 2.47 2.16 1.86 1.55 RICHMOND ...... VA 3.10 2.95 2.66 2.38 2.09 1.81 RICHMOND CITY ...... VA 3.10 2.82 2.56 2.30 2.04 1.78 ROANOKE ...... VA 2.80 2.67 2.41 2.14 1.88 1.62 ROANOKE CITY ...... VA 2.80 2.67 2.41 2.15 1.89 1.63 ROCKBRIDGE ...... VA 2.80 2.67 2.41 2.15 1.89 1.63 ROCKINGHAM ...... VA 2.80 2.65 2.38 2.10 1.83 1.55 RUSSELL ...... VA 2.80 2.56 2.35 2.13 1.92 1.71 SALEM CITY ...... VA 2.80 2.79 2.50 2.20 1.91 1.62 SCOTT ...... VA 2.80 2.57 2.37 2.16 1.96 1.76 SHENANDOAH ...... VA 2.80 2.77 2.47 2.16 1.86 1.55 SMYTH ...... VA 2.80 2.69 2.44 2.20 1.95 1.71 SOUTH BOSTON CITY ...... VA 3.10 2.70 2.48 2.25 2.03 1.80 SOUTHAMPTON ...... VA 3.10 2.88 2.67 2.47 2.26 2.06 SPOTSYLVANIA ...... VA 2.80 2.79 2.50 2.21 1.92 1.63 STAFFORD ...... VA 3.00 2.79 2.50 2.21 1.92 1.63 STAUNTON CITY ...... VA 2.80 2.66 2.39 2.11 1.84 1.57 SUFFOLK CITY ...... VA 3.20 3.01 2.79 2.56 2.34 2.12 SURRY ...... VA 3.10 2.86 2.64 2.42 2.20 1.98 SUSSEX ...... VA 3.10 2.87 2.65 2.44 2.22 2.01 TAZEWELL ...... VA 2.80 2.56 2.34 2.13 1.91 1.70 VIRGINIA BEACH CITY ...... VA 3.20 3.01 2.80 2.58 2.37 2.15 WARREN ...... VA 2.80 2.77 2.46 2.16 1.85 1.54 WASHINGTON ...... VA 2.80 2.56 2.35 2.14 1.93 1.72 WAYNESBORO CITY ...... VA 2.80 2.66 2.39 2.11 1.84 1.57 WESTMORELAND ...... VA 3.10 2.82 2.56 2.29 2.03 1.77 WILLIAMSBURG CITY ...... VA 3.10 2.86 2.63 2.41 2.18 1.96 WINCHESTER CITY ...... VA 2.80 2.77 2.46 2.15 1.84 1.53 WISE ...... VA 2.80 2.56 2.35 2.15 1.94 1.73 WYTHE ...... VA 2.80 2.68 2.44 2.19 1.95 1.70 YORK ...... VA 3.20 2.98 2.74 2.49 2.25 2.00 ADDISON ...... VT 2.60 2.38 2.19 1.99 1.80 1.61 BENNINGTON ...... VT 2.80 2.52 2.32 2.13 1.93 1.73 CALEDONIA ...... VT 2.60 2.41 2.22 2.03 1.84 1.65 CHITTENDEN ...... VT 2.60 2.34 2.16 1.97 1.79 1.61 ESSEX ...... VT 2.60 2.36 2.18 1.99 1.81 1.62 FRANKLIN ...... VT 2.40 2.24 2.07 1.91 1.74 1.58 GRAND ISLE ...... VT 2.40 2.21 2.05 1.90 1.74 1.58 LAMOILLE ...... VT 2.60 2.34 2.16 1.97 1.79 1.61 ORANGE ...... VT 2.60 2.42 2.24 2.06 1.88 1.70 ORLEANS ...... VT 2.40 2.32 2.14 1.95 1.77 1.59 RUTLAND ...... VT 2.60 2.44 2.24 2.03 1.83 1.62 WASHINGTON ...... VT 2.60 2.37 2.19 2.01 1.83 1.65 WINDHAM ...... VT 2.80 2.76 2.53 2.30 2.07 1.84 WINDSOR ...... VT 2.60 2.69 2.45 2.20 1.96 1.71 ADAMS ...... WA 1.75 1.58 1.41 1.25 1.08 0.91 ASOTIN ...... WA 1.75 1.60 1.45 1.29 1.14 0.99 BENTON ...... WA 1.75 1.59 1.43 1.27 1.11 0.95 CHELAN ...... WA 1.75 1.58 1.41 1.23 1.06 0.89 CLALLAM ...... WA 1.90 1.58 1.41 1.24 1.07 0.90 CLARK ...... WA 1.90 1.71 1.52 1.33 1.14 0.95 COLUMBIA ...... WA 1.75 1.59 1.43 1.27 1.11 0.95 COWLITZ ...... WA 1.90 1.71 1.53 1.34 1.16 0.97 DOUGLAS ...... WA 1.75 1.58 1.40 1.23 1.05 0.88 FERRY ...... WA 1.90 1.70 1.49 1.29 1.08 0.88 FRANKLIN ...... WA 1.75 1.59 1.43 1.26 1.10 0.94 GARFIELD ...... WA 1.75 1.59 1.43 1.28 1.12 0.96 GRANT ...... WA 1.75 1.58 1.41 1.24 1.07 0.90 GRAYS HARBOR ...... WA 1.90 1.72 1.53 1.35 1.16 0.98 ISLAND ...... WA 1.90 1.70 1.50 1.29 1.09 0.89 JEFFERSON ...... WA 1.90 1.59 1.43 1.27 1.11 0.95 KING ...... WA 1.90 1.72 1.54 1.36 1.18 1.00 KITSAP ...... WA 1.90 1.72 1.54 1.36 1.18 1.00 5018 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

KITTITAS ...... WA 1.75 1.59 1.43 1.26 1.10 0.94 KLICKITAT ...... WA 1.75 1.59 1.43 1.28 1.12 0.96 LEWIS ...... WA 1.90 1.72 1.53 1.35 1.16 0.98 LINCOLN ...... WA 1.90 1.70 1.49 1.29 1.08 0.88 MASON ...... WA 1.90 1.72 1.54 1.35 1.17 0.99 OKANOGAN ...... WA 1.75 1.57 1.39 1.22 1.04 0.86 PACIFIC ...... WA 1.90 1.72 1.54 1.35 1.17 0.99 PEND OREILLE ...... WA 1.90 1.71 1.51 1.32 1.12 0.93 PIERCE ...... WA 1.90 1.72 1.54 1.36 1.18 1.00 SAN JUAN ...... WA 1.90 1.57 1.38 1.20 1.01 0.83 SKAGIT ...... WA 1.90 1.68 1.46 1.24 1.02 0.80 SKAMANIA ...... WA 1.90 1.71 1.52 1.34 1.15 0.96 SNOHOMISH ...... WA 1.90 1.70 1.50 1.31 1.11 0.91 SPOKANE ...... WA 1.90 1.70 1.50 1.29 1.09 0.89 STEVENS ...... WA 1.90 1.70 1.50 1.29 1.09 0.89 THURSTON ...... WA 1.90 1.72 1.54 1.35 1.17 0.99 WAHKIAKUM ...... WA 1.90 1.72 1.54 1.35 1.17 0.99 WALLA WALLA ...... WA 1.75 1.59 1.43 1.27 1.11 0.95 WHATCOM ...... WA 1.90 1.63 1.42 1.21 1.00 0.79 WHITMAN ...... WA 1.90 1.71 1.52 1.32 1.13 0.94 YAKIMA ...... WA 1.75 1.59 1.43 1.27 1.11 0.95 ADAMS ...... WI 1.70 1.11 1.11 1.12 1.12 1.13 ASHLAND ...... WI 1.70 1.10 1.10 1.10 1.10 1.10 BARRON ...... WI 1.70 1.11 1.11 1.12 1.12 1.13 BAYFIELD ...... WI 1.70 1.11 1.12 1.14 1.15 1.16 BROWN ...... WI 1.75 1.14 1.16 1.19 1.21 1.23 BUFFALO ...... WI 1.70 1.10 1.11 1.11 1.12 1.12 BURNETT ...... WI 1.70 1.14 1.15 1.15 1.16 1.16 CALUMET ...... WI 1.75 1.17 1.20 1.24 1.27 1.30 CHIPPEWA ...... WI 1.70 1.10 1.10 1.11 1.11 1.11 CLARK ...... WI 1.70 1.05 1.06 1.08 1.09 1.10 COLUMBIA ...... WI 1.75 1.15 1.15 1.16 1.16 1.17 CRAWFORD ...... WI 1.75 1.14 1.14 1.14 1.14 1.14 DANE ...... WI 1.75 1.20 1.19 1.19 1.18 1.17 DODGE ...... WI 1.75 1.17 1.21 1.24 1.28 1.31 DOOR ...... WI 1.75 1.10 1.11 1.11 1.12 1.12 DOUGLAS ...... WI 1.70 1.16 1.18 1.19 1.21 1.23 DUNN ...... WI 1.70 1.10 1.10 1.10 1.10 1.10 EAU CLAIRE ...... WI 1.70 1.10 1.11 1.11 1.12 1.12 FLORENCE ...... WI 1.70 1.09 1.03 0.98 0.92 0.86 FOND DU LAC ...... WI 1.75 1.17 1.20 1.24 1.27 1.30 FOREST ...... WI 1.70 1.07 1.03 1.00 0.96 0.93 GRANT ...... WI 1.75 1.15 1.15 1.16 1.16 1.17 GREEN ...... WI 1.75 1.21 1.22 1.22 1.23 1.23 GREEN LAKE ...... WI 1.70 1.15 1.16 1.18 1.19 1.20 IOWA ...... WI 1.75 1.14 1.14 1.15 1.15 1.15 IRON ...... WI 1.70 1.13 1.11 1.09 1.07 1.05 JACKSON ...... WI 1.70 1.06 1.08 1.10 1.12 1.14 JEFFERSON ...... WI 1.75 1.31 1.30 1.30 1.29 1.29 JUNEAU ...... WI 1.70 1.11 1.11 1.12 1.12 1.13 KENOSHA ...... WI 1.75 1.34 1.38 1.41 1.45 1.48 KEWAUNEE ...... WI 1.75 1.13 1.16 1.20 1.23 1.26 LA CROSSE ...... WI 1.70 1.12 1.14 1.15 1.17 1.19 LAFAYETTE ...... WI 1.75 1.15 1.17 1.18 1.20 1.21 LANGLADE ...... WI 1.70 1.03 1.02 1.00 0.99 0.98 LINCOLN ...... WI 1.70 1.03 1.03 1.02 1.02 1.01 MANITOWOC ...... WI 1.75 1.19 1.24 1.29 1.34 1.39 MARATHON ...... WI 1.70 1.04 1.05 1.05 1.06 1.06 MARINETTE ...... WI 1.70 1.04 1.02 1.01 0.99 0.98 MARQUETTE ...... WI 1.70 1.11 1.12 1.13 1.14 1.15 MENOMINEE ...... WI 1.70 1.04 1.03 1.03 1.02 1.02 MILWAUKEE ...... WI 1.75 1.34 1.37 1.41 1.44 1.47 MONROE ...... WI 1.70 1.11 1.12 1.13 1.14 1.15 OCONTO ...... WI 1.70 1.04 1.05 1.05 1.06 1.06 ONEIDA ...... WI 1.70 1.03 1.02 1.00 0.99 0.98 OUTAGAMIE ...... WI 1.75 1.10 1.11 1.11 1.12 1.12 OZAUKEE ...... WI 1.75 1.21 1.28 1.35 1.42 1.49 PEPIN ...... WI 1.70 1.10 1.10 1.10 1.10 1.10 PIERCE ...... WI 1.70 1.13 1.12 1.12 1.11 1.10 POLK ...... WI 1.70 1.14 1.14 1.14 1.14 1.14 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5019

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

PORTAGE ...... WI 1.70 1.05 1.06 1.06 1.07 1.08 PRICE ...... WI 1.70 1.05 1.05 1.06 1.06 1.07 RACINE ...... WI 1.75 1.34 1.37 1.39 1.42 1.45 RICHLAND ...... WI 1.75 1.14 1.14 1.14 1.14 1.14 ROCK ...... WI 1.75 1.30 1.29 1.29 1.28 1.27 RUSK ...... WI 1.70 1.10 1.10 1.11 1.11 1.11 SAUK ...... WI 1.75 1.14 1.14 1.13 1.13 1.13 SAWYER ...... WI 1.70 1.11 1.11 1.12 1.12 1.13 SHAWANO ...... WI 1.70 1.04 1.04 1.05 1.05 1.05 SHEBOYGAN ...... WI 1.75 1.21 1.29 1.36 1.44 1.51 ST. CROIX ...... WI 1.70 1.13 1.13 1.12 1.12 1.11 TAYLOR ...... WI 1.70 1.05 1.06 1.06 1.07 1.08 TREMPEALEAU ...... WI 1.70 1.11 1.12 1.13 1.14 1.15 VERNON ...... WI 1.75 1.14 1.15 1.15 1.16 1.16 VILAS ...... WI 1.70 1.08 1.05 1.03 1.00 0.98 WALWORTH ...... WI 1.75 1.32 1.33 1.35 1.36 1.37 WASHBURN ...... WI 1.70 1.11 1.12 1.14 1.15 1.16 WASHINGTON ...... WI 1.75 1.19 1.25 1.30 1.36 1.41 WAUKESHA ...... WI 1.75 1.33 1.34 1.36 1.37 1.39 WAUPACA ...... WI 1.75 1.10 1.09 1.09 1.08 1.08 WAUSHARA ...... WI 1.70 1.10 1.11 1.11 1.12 1.12 WINNEBAGO ...... WI 1.75 1.15 1.16 1.16 1.17 1.18 WOOD ...... WI 1.70 1.05 1.06 1.08 1.09 1.10 BARBOUR ...... WV 2.30 1.93 1.86 1.79 1.72 1.65 BERKELEY ...... WV 2.60 1.85 1.76 1.66 1.57 1.47 BOONE ...... WV 2.20 2.10 2.01 1.93 1.84 1.75 BRAXTON ...... WV 2.20 1.94 1.87 1.81 1.74 1.68 BROOKE ...... WV 2.10 1.92 1.85 1.77 1.70 1.62 CABELL ...... WV 2.20 2.09 1.99 1.90 1.80 1.70 CALHOUN ...... WV 2.20 2.02 1.94 1.85 1.77 1.68 CLAY ...... WV 2.20 2.09 2.00 1.90 1.81 1.71 DODDRIDGE ...... WV 2.10 1.93 1.86 1.78 1.71 1.64 FAYETTE ...... WV 2.20 2.09 2.00 1.90 1.81 1.71 GILMER ...... WV 2.20 2.02 1.93 1.85 1.76 1.67 GRANT ...... WV 2.60 1.92 1.84 1.76 1.68 1.60 GREENBRIER ...... WV 2.20 2.55 2.33 2.10 1.88 1.66 HAMPSHIRE ...... WV 2.60 1.91 1.83 1.74 1.66 1.57 HANCOCK ...... WV 2.10 1.92 1.84 1.75 1.67 1.59 HARDY ...... WV 2.60 1.92 1.83 1.75 1.66 1.58 HARRISON ...... WV 2.10 1.93 1.86 1.79 1.72 1.65 JACKSON ...... WV 2.20 2.09 1.99 1.88 1.78 1.68 JEFFERSON ...... WV 2.60 1.90 1.80 1.70 1.60 1.50 KANAWHA ...... WV 2.20 2.10 2.02 1.93 1.85 1.76 LEWIS ...... WV 2.10 1.93 1.86 1.80 1.73 1.66 LINCOLN ...... WV 2.20 2.10 2.01 1.91 1.82 1.73 LOGAN ...... WV 2.20 2.10 2.00 1.91 1.81 1.72 MARION ...... WV 2.80 2.56 2.35 2.13 1.92 1.71 MARSHALL ...... WV 2.10 1.93 1.86 1.78 1.71 1.64 MASON ...... WV 2.10 1.92 1.85 1.77 1.70 1.62 MCDOWELL ...... WV 2.20 2.09 1.98 1.88 1.77 1.67 MERCER ...... WV 2.80 2.55 2.34 2.12 1.91 1.69 MINERAL ...... WV 2.60 1.92 1.84 1.76 1.68 1.60 MINGO ...... WV 2.20 2.09 2.00 1.90 1.81 1.71 MONONGALIA ...... WV 2.10 1.93 1.85 1.78 1.70 1.63 MONROE ...... WV 2.20 2.55 2.32 2.10 1.87 1.65 MORGAN ...... WV 2.60 1.82 1.74 1.66 1.58 1.50 NICHOLAS ...... WV 2.20 2.09 1.99 1.89 1.79 1.69 OHIO ...... WV 2.10 1.92 1.84 1.77 1.69 1.61 PENDLETON ...... WV 2.60 1.92 1.84 1.76 1.68 1.60 PLEASANTS ...... WV 2.20 2.01 1.91 1.80 1.70 1.60 POCAHONTAS ...... WV 2.20 2.54 2.32 2.09 1.87 1.64 PRESTON ...... WV 2.30 1.93 1.86 1.78 1.71 1.64 PUTNAM ...... WV 2.20 2.10 2.01 1.91 1.82 1.73 RALEIGH ...... WV 2.20 2.09 2.00 1.90 1.81 1.71 RANDOLPH ...... WV 2.30 1.93 1.85 1.78 1.70 1.63 RITCHIE ...... WV 2.20 2.01 1.92 1.82 1.73 1.63 ROANE ...... WV 2.20 2.09 1.99 1.89 1.79 1.69 SUMMERS ...... WV 2.20 2.55 2.33 2.11 1.89 1.67 TAYLOR ...... WV 2.30 1.93 1.86 1.79 1.72 1.65 TUCKER ...... WV 2.30 1.92 1.85 1.77 1.70 1.62 5020 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

OPTION 1B DIFFERENTIAL OPTION 1A (Per Year) COUNTY/PARISH STATE DIFFEREN- TIAL 2003 & 1999 2000 2001 2002 beyond

TYLER ...... WV 2.10 1.93 1.85 1.78 1.70 1.63 UPSHUR ...... WV 2.30 1.93 1.86 1.79 1.72 1.65 WAYNE ...... WV 2.20 2.09 1.99 1.89 1.79 1.69 WEBSTER ...... WV 2.20 1.93 1.86 1.80 1.73 1.66 WETZEL ...... WV 2.10 1.93 1.85 1.78 1.70 1.63 WIRT ...... WV 2.20 2.02 1.93 1.84 1.75 1.66 WOOD ...... WV 2.20 2.01 1.91 1.82 1.72 1.62 WYOMING ...... WV 2.20 2.10 2.00 1.91 1.81 1.72 ALBANY ...... WY 1.90 1.86 1.68 1.49 1.31 1.12 BIG HORN ...... WY 1.60 1.65 1.49 1.34 1.18 1.03 CAMPBELL ...... WY 1.65 1.84 1.63 1.41 1.20 0.99 CARBON ...... WY 1.90 1.67 1.53 1.40 1.26 1.13 CONVERSE ...... WY 1.70 1.84 1.63 1.43 1.22 1.01 CROOK ...... WY 1.65 1.83 1.61 1.38 1.16 0.94 FREMONT ...... WY 1.60 1.49 1.37 1.26 1.14 1.03 GOSHEN ...... WY 1.90 1.85 1.64 1.44 1.23 1.03 HOT SPRINGS ...... WY 1.60 1.48 1.36 1.25 1.13 1.01 JOHNSON ...... WY 1.65 1.64 1.48 1.33 1.17 1.01 LARAMIE ...... WY 2.45 1.86 1.67 1.48 1.29 1.10 LINCOLN ...... WY 1.60 1.49 1.37 1.26 1.14 1.03 NATRONA ...... WY 1.70 1.65 1.49 1.34 1.18 1.03 NIOBRARA ...... WY 1.70 1.84 1.62 1.41 1.19 0.98 PARK ...... WY 1.60 1.47 1.34 1.21 1.08 0.95 PLATTE ...... WY 1.90 1.85 1.65 1.46 1.26 1.06 SHERIDAN ...... WY 1.60 1.65 1.50 1.35 1.20 1.05 SUBLETTE ...... WY 1.60 1.48 1.37 1.25 1.14 1.02 SWEETWATER ...... WY 1.90 1.51 1.42 1.33 1.24 1.15 TETON ...... WY 1.60 1.46 1.33 1.19 1.06 0.92 UINTA ...... WY 1.90 1.50 1.40 1.31 1.21 1.11 WASHAKIE ...... WY 1.60 1.64 1.49 1.33 1.18 1.02 WESTON ...... WY 1.70 1.82 1.59 1.36 1.13 0.90

§ 1000.53 Announcement of class prices Agricultural Marketing Service, to be section exceeds the amount specified in and component prices. equivalent to the price or pricing (b) or (c) of this section: On or before the 5th day of the month, constituent that is required. (a) The total value of milk of the the market administrator shall announce handler for the month as determined for each Federal milk marketing order in Subpart HÐPayments for Milk pursuant to § ll.60 of the order; and (b) For orders in 7 CFR, chapter X 7 CFR, chapter X the following § 1000.70 Producer-settlement fund. applicable prices: with component pricing, the sum of: (a) For the following month: The market administrator shall (1) An amount obtained by (1) The Class I price; establish and maintain a separate fund multiplying the total hundredweight of (2) The Class I skim milk price; known as the producer-settlement fund producer milk as determined pursuant (3) The Class I butterfat price; into which the market administrator to § 1000.44(c) by the producer price (b) For the preceding month: shall deposit all payments made by differential, adjusted pursuant to (1) The Class II price; handlers pursuant to §§ ll.71, § ll.75 of the order; (2) The Class III price; ll.76, and ll.77 of each Federal (2) An amount obtained by (3) The Class IV price; milk order in 7 CFR, chapter X, and out multiplying the pounds of protein, other (4) The Class II skim milk price; of which the market administrator shall solids, and butterfat contained in (5) The Class III skim milk price; make all payments pursuant to producer milk by the protein, other (6) The Class IV skim milk price; §§ ll.72 and ll.77 of each Federal solids, and butterfat prices, respectively; (7) The butterfat price; milk order in 7 CFR, chapter X. (3) The total value of the somatic cell (8) The nonfat solids price; Payments due any handler shall be adjustment to producer milk; and (9) The protein price; offset by any payments due from that (4) An amount obtained by (10) The other solids price; and handler. multiplying the pounds of skim milk (11) The somatic cell adjustment rate. and butterfat for which a value was § 1000.71 Payments to the producer- computed pursuant to § ll.60(i) of the settlement fund. § 1000.54 Equivalent price. order by the producer price differential If for any reason a price or pricing Each handler shall make a payment to as adjusted pursuant to § ll.75 of the constituent required for computing class the producer-settlement fund in a order for the location of the plant from prices or for other purposes is not manner that provides receipt of the which received; or available as prescribed in any Federal funds by the market administrator no (c) For orders in 7 CFR, chapter X milk order, the market administrator later than the date specified in § ll.71 with skim milk and butterfat pricing, shall use a price or pricing constituent of each order in 7 CFR, chapter X. the sum of the value at the uniform determined by the Deputy Payment shall be the amount, if any, by prices for skim milk and butterfat, Administrator, Dairy Programs, which the amount specified in (a) of this adjusted for plant location, of the Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5021 handler’s receipts of producer milk; and of as route disposition in the marketing (i) Fluid milk products and bulk fluid the value at the uniform price as area; cream products received at the plant adjusted pursuant to § ll.75 of the (2) For orders in 7 CFR, chapter X from a pool plant or a plant fully order applicable at the location of the with multiple component pricing, regulated under another Federal order plant from which received of other multiply the remaining pounds by the plant shall be allocated at the partially source milk for which a value is amount by which the Class I differential regulated distributing plant to the same computed pursuant to § ll.60(e) of the price exceeds the producer price class in which such products were order. differential, both prices to be applicable classified at the fully regulated plant; at the location of the partially regulated (ii) Fluid milk products and bulk fluid § 1000.72 Payments from the producer- cream products transferred from the settlement fund. distributing plant except that neither the adjusted Class I differential price nor partially regulated distributing plant to No later than one day after the date of the adjusted producer price differential a pool plant or a plant fully regulated payment receipt required under shall be less than zero; under another Federal order in 7 CFR, § 1000.71, the market administrator (3) For orders in 7 CFR, chapter X chapter X shall be classified at the shall pay to each handler the amount, if with skim milk and butterfat pricing, partially regulated distributing plant in any, by which the amount computed multiply the remaining pounds by the the class to which allocated at the fully pursuant to § 1000.71(b) or (c), as the amount by which the Class I price regulated plant. Such transfers shall be case may be, exceeds the amount exceeds the uniform price, both prices computed to the extent possible to those computed pursuant to § 1000.71(a). If, at to be applicable at the location of the receipts at the partially regulated such time, the balance in the producer- partially regulated distributing plant distributing plant from the pool plant settlement fund is insufficient to make except that neither the adjusted Class I and plants fully regulated under other all payments pursuant to this section, price nor the adjusted uniform price Federal orders in 7 CFR, chapter X that the market administrator shall reduce differential shall be less than the lowest are classified in the corresponding class uniformly such payments and shall announced class price; and pursuant to paragraph (b)(1)(i) of this complete the payments as soon as the (4) Add the amount obtained from section. Any such transfers remaining funds are available. multiplying the pounds of labeled after the above allocation which are in Class I and for which a value is reconstituted milk included in § 1000.76 Payments by a handler computed pursuant to § ll.60 of the operating a partially regulated distributing paragraph (a)(1)(iii) of this section by order for the partially regulated plant. any positive difference between the distributing plant shall be priced at the Class I price applicable at the location On or before the 25th day after the statistical uniform price or uniform of the partially regulated distributing end of the month, the operator of a price, whichever is applicable, of the plant less $1.00 and the Class IV price. partially regulated distributing plant respective order regulating the handling For any reconstituted milk that is not so shall pay to the market administrator for of milk at the receiving plant, with such labeled, the Class I price shall not be the producer-settlement fund the statistical uniform price or uniform reduced by $1.00. Alternatively, for amount computed pursuant to price adjusted to the location of the paragraph (a) of this section or, if the such disposition, payments may be nonpool plant (but not to be less than handler submits the information made to the producer-settlement fund of the lowest announced class price of the ll ll specified in §§ .30(b) and .31(b) the order regulating the producer milk respective order); and of the order, the handler may elect to used to produce the nonfluid milk (iii) If the operator of the partially pay the amount computed pursuant to ingredients at the positive difference regulated distributing plant so requests, paragraph (b) of this section: between the Class I price applicable the handler’s value of milk determined (a) The payment under this paragraph under the other Federal order in 7 CFR, pursuant to § ll.60 of the order shall shall be an amount resulting from the chapter X at the location of the plant include a value of milk determined for following computations: where the nonfluid milk ingredients each nonpool plant that is not a plant (1) From the plant’s route disposition were processed and the Class IV price. fully regulated under another Federal in the marketing area: This payment option shall apply only if order in 7 CFR, chapter X which serves (i) Subtract receipts of fluid milk a majority of the total milk received at as a supply plant for the partially products classified as Class I milk from the plant that processed the nonfluid regulated distributing plant by making pool plants and plants fully regulated milk ingredients is regulated under one shipments to the partially regulated under other Federal orders in 7 CFR, or more Federal orders in 7 CFR, distributing plant during the month chapter X, except that subtracted under chapter X and payment may only be equivalent to the requirements of a similar provision of another Federal made to the producer-settlement fund of Section 7(c) of the order, subject to the milk order in 7 CFR, chapter X; the order pricing a plurality of the milk following conditions: (ii) Subtract receipts of fluid milk used to produce the nonfluid milk (A) The operator of the partially products from another nonpool plant ingredients. This payment option shall regulated distributing plant submits that is not a plant fully regulated under not apply if the source of the nonfluid with its reports filed pursuant to another Federal order in 7 CFR, chapter ingredients used in reconstituted fluid §§ ll.30(b) and ll.31(b) of the order X to the extent that an equivalent milk products cannot be determined by similar reports for each such nonpool amount of fluid milk products disposed the market administrator. supply plant; of to the nonpool plant by handlers fully (b) The payment under this paragraph (B) The operator of the nonpool plant regulated under any Federal order in 7 shall be the amount resulting from the maintains books and records showing CFR, chapter X is classified and priced following computations: the utilization of all skim milk and as Class I milk and is not used as an (1) Determine the value that would butterfat received at the plant which are offset for any payment obligation under have been computed pursuant to made available if requested by the any order; and § ll.60 of the order for the partially market administrator for verification (iii) Subtract the pounds of regulated distributing plant if the plant purposes; and reconstituted milk made from nonfluid had been a pool plant, subject to the (C) The value of milk determined milk products which are then disposed following modifications: pursuant to § ll.60 for the 5022 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules unregulated supply plant shall be from a handler, the market pursuant to § ll.60(d) and (e) of Parts determined in the same manner administrator shall promptly notify 1005, 1006, and 1007 or § ll.60(h) and prescribed for computing the obligation such handler of any amount so due and (i) of Parts 1001, 1030, 1032, 1033, 1124, of the partially regulated distributing payment thereof shall be made on or 1126, 1131, and 1134 in 7 CFR, chapter plant; and before the next date for making X; and (2) From the partially regulated payments as set forth in the provisions (d) Route disposition in the marketing distributing plant’s value of milk under which the error(s) occurred. area from a partially regulated computed pursuant to paragraph (b)(1) distributing plant that exceeds the skim of this section, subtract: § 1000.78 Charges on overdue accounts. milk and butterfat subtracted pursuant (i) The gross payments by the operator Any unpaid obligation due the market to § 1000.76(a)(1)(i)and (ii). of the partially regulated distributing administrator, producers, or cooperative plant for milk received at the plant associations from a handler pursuant to § 1000.86 Deduction for marketing during the month that would have been the provisions of the order shall be services. producer milk had the plant been fully increased 1.0 percent each month (a) Except as provided in paragraph regulated; beginning with the day following the (b) of this section, each handler in (ii) If paragraph (b)(1)(iii) of this date such obligation was due under the making payments to producers for milk section applies, the gross payments by order. Any remaining amount due shall (other than milk of such handler’s own the operator of such nonpool supply be increased at the same rate on the production) pursuant to § ll.73 of plant for milk received at the plant corresponding day of each succeeding each Federal milk order in 7 CFR, during the month that would have been month until paid. The amounts payable chapter X, shall deduct an amount producer milk if the plant had been pursuant to this section shall be specified by the market administrator fully regulated; and computed monthly on each unpaid that is no more than 7 cents per (iii) The payments by the operator of obligation and shall include any unpaid hundredweight and shall pay the the partially regulated distributing plant charges previously computed pursuant amount deducted to the market to the producer-settlement fund of to this section. The late charges shall administrator not later than the payment another Federal order in 7 CFR, chapter accrue to the administrative assessment receipt date specified under § ll.71 of X under which the plant is also a fund. For the purpose of this section, each Federal milk order in 7 CFR, partially regulated distributing plant any obligation that was determined at a chapter X. The money shall be used by and like payments by the operator of the date later than prescribed by the order the market administrator to verify or nonpool supply plant if paragraph because of a handler’s failure to submit establish weights, samples and tests of (b)(1)(iii) of this section applies. a report to the market administrator producer milk and provide market (c) Any handler may elect partially when due shall be considered to have information for producers who are not regulated distributing plant status for been payable by the date it would have receiving such services from a any plant with respect to receipts of been due if the report had been filed cooperative association. The services nonfluid milk ingredients assigned to when due. shall be performed in whole or in part Class I use under § 1000.43(d). by the market administrator or an agent Payments may be made to the producer- Subpart IÐAdministrative Assessment engaged by and responsible to the settlement fund of the order regulating and Marketing Service Deduction market administrator; the producer milk used to produce the (b) In the case of producers for whom nonfluid milk ingredients at the positive § 1000.85 Assessment for order administration. the market administrator has difference between the Class I price determined that a cooperative applicable under the other order at the On or before the payment receipt date ll association is actually performing the location of the plant where the nonfluid specified under § .71 of each services set forth in paragraph (a) of this milk ingredients were processed and the Federal milk order in 7 CFR, chapter X, section, each handler shall make Class IV price. This payment option each handler shall pay to the market deductions from the payments to be shall apply only if a majority of the total administrator its pro rata share of the made to producers as may be authorized milk received at the plant that processed expense of administration of the order at by the membership agreement or the nonfluid milk ingredients is a rate specified by the market marketing contract between the regulated under one or more Federal administrator that is no more than 5 cooperative association and the orders in 7 CFR, chapter X and payment cents per hundredweight with respect producers. On or before the 15th day may only be made to the producer- to: after the end of the month, such settlement fund of the order pricing a (a) Receipts of producer milk deductions shall be paid to the plurality of the milk used to produce the (including the handler’s own cooperative association rendering the nonfluid milk ingredients. This production) other than such receipts by services accompanied by a statement payment option shall not apply if the a handler described in § 1000.9(c) that showing the amount of any deductions source of the nonfluid ingredients used were delivered to pool plants of other and the amount of milk for which the in reconstituted fluid milk products handlers; deduction was computed for each cannot be determined by the market (b) Receipts from a handler described producer. These deductions shall be administrator. in § 1000.9(c); made in lieu of the deduction specified (c) Receipts of concentrated fluid milk in paragraph (a) of this section. § 1000.77 Adjustment of accounts. products from unregulated supply Whenever audit by the market plants and receipts of nonfluid milk Subpart JÐMiscellaneous Provisions administrator of any handler’s reports, products assigned to Class I use books, records, or accounts, or other pursuant to § 1000.43(d) and other § 1000.90 Dates. verification discloses errors resulting in source milk allocated to Class I pursuant If a date required for a report, money due the market administrator to § 1000.44(a)(3) and (8) and the payment, or announcement contained in from a handler, or due a handler from corresponding steps of § 1000.44(b), a Federal milk order in 7 CFR, chapter the market administrator, or due a except other source milk that is X falls on a Saturday, Sunday, or producer or cooperative association excluded from the computations national holiday, such report, payment, Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5023 or announcement will be on the next Payments for Milk Fairfax, Falls Church, Manassas, and day that the market administrator’s 1001.70 Producer-settlement fund. Manassas Park. office is open for public business. 1001.71 Payments to the producer- § 1001.3 Route disposition. settlement fund. §§ 1000.91Ð1000.92 [Reserved] 1001.72 Payments from the producer- See § 1000.3 of this chapter. settlement fund. § 1000.93 OMB control number assigned § 1001.4 Plant. 1001.73 Payments to producers and to pursuant to the Paperwork Reduction Act. cooperative associations. (a) Except as provided in paragraph The information collection 1001.74 [Reserved] (b) of this section, plant means the land, requirements contained in this 1001.75 Plant location adjustments for buildings, facilities, and equipment regulation have been approved by the producer milk and nonpool milk. constituting a single operating unit or Office of Management and Budget 1001.76 Payments by a handler operating a establishment at which milk or milk (OMB) under the provisions of Title 44 partially regulated distributing plant. products are received, processed, or U.S.C. chapter 35 and have been 1001.77 Adjustment of accounts. packaged, including a facility described 1001.78 Charges on overdue accounts. assigned OMB control number 0581– in paragraph (b)(2) of this section if the 0032. Administrative Assessment and Marketing facility receives the milk of more than Service Deduction one dairy farmer. PART 1001ÐMILK IN THE 1001.85 Assessment for order (b) Plant shall not include: NORTHEAST MARKETING AREA administration. (1) A separate building without 1001.86 Deduction for marketing services. SubpartÐOrder Regulating Handling stationary storage tanks that is used only Authority: 7 U.S.C. 601–674. as a reload point for transferring bulk General Provisions milk from one tank truck to another or Sec. SubpartÐOrder Regulating Handling a separate building used only as a 1001.1 General Provisions. General Provisions distribution point for storing packaged Definitions fluid milk products in transit for route § 1001.1 General provisions. disposition; or 1001.2 Northeast marketing area. 1001.3 Route disposition. The terms, definitions, and provisions (2) An on-farm facility operated as 1001.4 Plant. in part 1000 of this chapter apply to and part of a single dairy farm entity for the 1001.5 Distributing plant. are hereby made a part of this order. separation of cream and skim milk; or 1001.6 Supply plant. (3) Bulk reload points where milk is 1001.7 Pool plant. Definitions transferred from one tank truck to 1001.8 Nonpool plant. § 1001.2 Northeast marketing area. another while en route from a dairy 1001.9 Handler. farmer’s farms to a plant. If stationary The marketing area means all the 1001.10 Producer-handler. storage tanks are used for transferring territory within the bounds of the 1001.11 [Reserved] milk at the premises, the operator of the 1001.12 Producer. following states and political facility shall make an advance written 1001.13 Producer milk. subdivisions, including all piers, docks request to the market administrator that 1001.14 Other source milk. and wharves connected therewith and the facility shall be treated as a reload 1001.15 Fluid milk product. all craft moored thereat, and all territory point. The cooling of milk, collection of 1001.16 Fluid cream product. occupied by government (municipal, 1001.17 [Reserved] samples, and washing and sanitizing of State or Federal) reservations, 1001.18 Cooperative association. tank trucks at the premises shall not installations, institutions, or other 1001.19 Commercial food processing disqualify it as a bulk reload point. establishment. similar establishments if any part thereof is within any of the listed states § 1001.5 Distributing plant. Handler Reports or political subdivisions: See § 1000.5 of this chapter. 1001.30 Reports of receipts and utilization. Connecticut, Delaware, Massachusetts, New 1001.31 Payroll reports. § 1001.6 Supply plant. 1001.32 Other reports. Hampshire, New Jersey, Rhode Island, Vermont and District of Columbia See § 1000.6 of this chapter. Classification of Milk All of the States of Connecticut, Delaware, § 1001.7 Pool plant. 1001.40 Classes of utilization. Massachusetts, New Hampshire, New Jersey, Pool plant means a plant, unit of 1001.41 [Reserved] Rhode Island, Vermont and the District of 1001.42 Classification of transfers and Columbia. plants, or a system of plants as specified diversions. in paragraphs (a) through (f) of this 1001.43 General classification rules. Maryland Counties and City section. The pooling standards 1001.44 Classification of producer milk. All of the State of Maryland except the described in paragraphs (c) and (f) of 1001.45 Market administrator’s reports and counties of Allegany and Garrett. this section are subject to modification announcements concerning New York Counties and Cities pursuant to paragraph (g) of this section: classification. (a) A distributing plant from which All counties within the State of New York Class Prices except Chautauqua, Allegany (except the during the month total route disposition 1001.50 Class prices and component prices. township Hume) and Cattaraugus (except the is equal to 25 percent or more of the 1001.51 Class I differential and price. township Yorkshire). total quantity of bulk fluid milk 1001.52 Adjusted Class I differentials. products physically received at the 1001.53 Announcement of class prices and Pennsylvania Counties plant; and route disposition in the component prices. Adams, Bucks, Chester, Cumberland, marketing area is at least 25 percent of 1001.54 Equivalent price. Dauphin, Delaware, Franklin, Fulton, Juniata, total route disposition. For purposes of Lancaster, Lebanon, Montgomery, Perry, this section, packaged fluid milk Producer Price Differential Philadelphia, and York. 1001.60 Handler’s value of milk. products that are transferred to a 1001.61 Computation of producer price Virginia Counties and Cities distributing plant shall be considered as differential. Counties of Arlington, Fairfax, Loudoun, route disposition from the transferring 1001.62 Announcement of producer prices. and Prince William, and cities of Alexandria, plant, rather than the receiving plant, 5024 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules for the single purpose of qualifying the and subject to the following additional adjustment is necessary to encourage transferring plant as a pool distributing requirements: needed shipments or to prevent plant. (1) At least one of the plants in the uneconomic shipments. Before making (b) A distributing plant located in the unit qualifies as a pool plant pursuant such a finding, the market administrator marketing area at which the majority of to paragraph (a) of this section; shall investigate the need for adjustment milk received is processed into (2) Other plants in the unit must either on the market administrator’s aseptically packaged fluid milk process only Class I or Class II products own initiative or at the request of products unless there are no sales from and must be located in a pricing zone interested parties. If the investigation the plant into any marketing area and providing the same or a lower Class I shows that an adjustment of the the plant operator in writing requests price than the price applicable at the shipping percentages might be nonpool plant status for the plant for the distributing plant included in the unit; appropriate, the market administrator month. and shall issue a notice stating that an (c) A supply plant from which fluid (3) A written request to form a unit, adjustment is being considered and milk products are transferred or or to add or remove plants from a unit, invite data, views and arguments. If the diverted to plants described in or to cancel a unit, must be filed with market administrator determines that an paragraph (a) or (b) of this section the market administrator prior to the adjustment to the shipping percentages subject to the following additional first day of the month for which unit is necessary, the market administrator conditions: formation it is to be effective. shall notify the industry within one day (f) Two or more supply plants of the effective date of such adjustment. (1) During the months of August operated by the same handler, or by one through December, such shipments (h) The term pool plant shall not or more cooperative associations, apply to the following plants: must equal not less than 10 percent of qualified for pooling as a system of the total quantity of bulk milk that is (1) A producer-handler plant; supply plants by meeting the applicable (2) An exempt plant as defined in physically received at the plant during percentage requirements of paragraph § 1000.8(e); the month; (c) of this section in the same manner (3) A plant qualified pursuant to (2) During the months of September as a single plant and subject to the paragraph (a) of this section that is through November, such shipments following additional requirements: located within the marketing area if the must equal not less than 20 percent of (1) A written notification to the plant also meets the pooling the total quantity of bulk milk that is market administrator listing the plants requirements of another Federal order physically received at the plant during to be included in the system prior to the and more than 50 percent of its route the month; first day of August that a system of distribution has been in such other (3) A plant which meets the shipping supply plants will be effective for the Federal order marketing area for three requirements of this paragraph during period of September 1 through August consecutive months; each of the months of August through 31 of the following year. The listed (4) A plant qualified pursuant to December shall be a pool plant during plants included in the system shall also paragraph (a) of this section which is the following months of January through be in the sequence in which they shall not located within any Federal order July unless the milk received at the qualify for pool plant status based on marketing area that meets the pooling plant fails to meet the requirements of the minimum deliveries required. If the requirements of another Federal order a duly constituted regulatory agency, deliveries made are insufficient to and has had greater sales in such other the plant fails to meet a shipping qualify the entire system for pooling, the Federal order’s marketing area for 3 requirement instituted pursuant to last listed plant shall be excluded from consecutive months; paragraph (f) of this section, or the plant the system, followed by the plant next- (5) A plant qualified pursuant to operator requests nonpool status for the to-last on the list, and continuing in this paragraph (a) of this section that is plant. The shipping requirement for any sequence until remaining listed plants located in another Federal order plant which has not met the have met the minimum shipping marketing area if the plant meets the requirements of paragraphs (c)(1) and requirements; and pooling requirements of such other (c)(2) of this section must equal not less (2) Each plant that qualifies as a pool Federal order and does not have a than 10 percent of the total quantity of plant within a system shall continue majority of its route distribution in this bulk milk that is physically received at each month as a plant in the system marketing area for 3 consecutive months the plant during each of the months of through the following August unless the or if the plant is required to be regulated January through July in order for the plant subsequently fails to qualify for under such other Federal order without plant to be a pool plant in each of those pooling, the handler submits a written regard to its route disposition in any months; and notification to the market administrator other Federal order marketing area; (4) If milk is delivered directly from prior to the first day of the month that (6) A plant qualified pursuant to producers’ farms that are located the plant be deleted from the system, or paragraph (c) of this section which also outside of the states included in the that the system be discontinued. Any meets the pooling requirements of marketing area or outside Maine or West plant that has been so deleted from the another Federal order and from which Virginia, such producers must be system, or that has failed to qualify as greater qualifying shipments are made grouped by state into units and each a pool plant in any month, will not be to plants regulated under the other such unit must independently meet the part of the system for the remaining Federal order than are made to plants shipping requirements of this months through August. No plant may regulated under this order, or the plant paragraph. be added in any subsequent month has automatic pooling status under the (d) [Reserved] through the following August to a other Federal order; and (e) Two or more plants operated by system that qualifies in September. (7) That portion of a pool plant the same handler and located in the (g) The applicable shipping designated as a ‘‘nonpool plant’’ that is marketing area qualified for pool status percentages of paragraphs (c) and (f) of physically separate and operated as a unit by meeting the total and in- this section may be increased or separately from the pool portion of such area route distribution requirements decreased by the market administrator if plant. The designation of a portion of a specified in paragraph (a) of this section the market administrator finds that such regulated plant as a nonpool plant must Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5025 be requested in writing by the handler (1) Received at a pool plant directly during the month in which it is picked and must be approved by the market from the producer or diverted by the up at the producer’s farm. All milk administrator. plant operator in accordance with received pursuant to this paragraph § 1001.13; or shall be priced at the location of the § 1001.8 Nonpool plant. (2) Received by a handler described in plant where it is first physically See § 1000.8 of this chapter. § 1000.9(c). received; (b) Producer shall not include: (b) Received by a handler described in § 1001.9 Handler. (1) A producer-handler as defined in See § 1000.9 of this chapter. § 1000.9(c) in excess of the quantity any Federal order; delivered to pool plants subject to the (2) A dairy farmer whose milk is § 1001.10 Producer-handler. following conditions: received at an exempt plant, excluding Except as provided in paragraph (g) of producer milk diverted to the exempt (1) The producers whose farms are this section, producer-handler means a plant pursuant to § 1001.13(d); outside of the states included in the person who: (3) A dairy farmer whose milk is marketing area or outside of Maine or (a) Operates a dairy farm and a received by diversion at a pool plant West Virginia shall be organized into distributing plant from which there is from a handler regulated under another state units and each such unit shall be monthly route disposition in excess of Federal order if the other Federal order reported separately; and 150,000 pounds during the month; designates the dairy farmer as a (2) For pooling purposes, each state (b) Receives no fluid milk products producer under that order and that milk unit so reported must satisfy the from sources other than own farm is allocated by request to a utilization shipping standards specified for a production, pool handlers, and plants other than Class I; supply plant pursuant to § 1001.7(c); fully regulated under another Federal (4) A dairy farmer whose milk is (c) Diverted by a proprietary pool order. reported as diverted to a plant fully plant operator to another pool plant. (c) Receives at its plant or acquires for regulated under another Federal order Milk so diverted shall be priced at the route disposition no more than 150,000 with respect to that portion of the milk location of the plant to which diverted; pounds of fluid milk products from so diverted that is assigned to Class I or handlers fully regulated under any under the provisions of such other Federal order. This limitation shall not order; and (d) Diverted by the operator of a pool apply if the producer-handler’s own (5) For any month of December plant or by a handler described in farm production is less than 150,000 through June, any dairy farmer whose § 1000.9(c) to a nonpool plant, subject to pounds during the month. milk is received at a pool plant or by a the following conditions: (d) Disposes of no other source milk cooperative association handler (1) Milk of a dairy farmer shall not be as Class I milk except by increasing the described in § 1000.9(c) if the pool plant eligible for diversion unless milk of nonfat milk solids content of the fluid operator or the cooperative association such dairy farmer was physically milk products received from own-farm caused milk from the same farm to be received as producer milk at a pool production or pool handlers; delivered to any plant as other than plant and the dairy farmer has (e) Disposes of no fluid milk products producer milk, as defined under this continuously retained producer status using the distribution system of another order or any other Federal milk order, since that time. If a dairy farmer loses handler except for direct deliveries to during the same month, either of the 2 producer status under this order (except retail outlets or to a pool handler’s preceding months, or during any of the as a result of a temporary loss of Grade plant; preceding months of July through A approval), the dairy farmer’s milk (f) Provides proof satisfactory to the November; and shall not be eligible for diversion until market administrator that the care and (6) For any month of July through milk of the dairy farmer has been management of the dairy animals and November, any dairy farmer whose milk physically received as producer milk at other resources necessary to produce all is received at a pool plant or by a a pool plant; Class I milk handled (excluding receipts cooperative association handler (2) [Reserved] described in § 1000.9(c) if the pool plant from handlers fully regulated under any (3) Diverted milk shall be priced at Federal order) and the processing, operator or the cooperative association caused milk from the same farm to be the location of the plant to which packaging, and distribution operations diverted; and are the producer-handler’s own delivered to any plant as other than enterprise and at its own risk; and producer milk, as defined under this (4) [Reserved] order or any other Federal milk order, (g) Producer-handler shall not include § 1001.14 Other source milk. any producer who also operates a during the same month. See § 1000.14 of this chapter. distributing plant if the producer- § 1001.13 Producer milk. handler so requests that the two be Producer milk means the skim milk § 1001.15 Fluid milk product. operated as separate entities with the (or the skim equivalent of components distributing plant regulated under See § 1000.15 of this chapter. of skim milk) and butterfat contained in § 1001.7(a) and the farm operated as a milk of a producer that is: 1001.16 Fluid cream product. producer under § 1001.12. (a) Received by the operator of a pool See § 1000.16 of this chapter. § 1001.11 [Reserved] plant directly from a producer or from a handler described in § 1000.9(c). Any § 1001.17 [Reserved] § 1001.12 Producer. milk picked up from the producer’s (a) Except as provided in paragraph farm tank in a tank truck under the § 1001.18 Cooperative association. (b) of this section, producer means any control of the operator of a pool plant See § 1000.18 of this chapter. person who produces milk approved by or a handler described in § 1000.9(c) but a duly constituted regulatory agency for which is not received at a plant until the § 1001.19 Commercial food processing establishment. fluid consumption as Grade A milk and following month shall be considered as whose milk (or components of milk) is: having been received by the handler See § 1000.19 of this chapter. 5026 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Handler Reports showing for each producer the the market administrator shall information specified in § 1001.73(e); determine for each month the value of § 1001.30 Reports of receipts and (b) Each handler operating a partially milk of each handler with respect to utilization. regulated distributing plant who elects each of the handler’s pool plants and of Each handler shall report monthly so to make payment pursuant to each handler described in § 1000.9(c) as that the market administrator’s office § 1000.76(b) shall report for each dairy follows: receives the report on or before the 9th farmer who would have been a producer (a) Class I value. (1) Multiply the day after the end of the month, in the if the plant had been fully regulated in pounds of skim milk in Class I as detail and on prescribed forms, as the same manner as prescribed for determined pursuant to § 1000.44(a) by follows: reports required by paragraph (a) of this the applicable Class I skim milk price; (a) Each pool plant operator and each section. and handler described in § 1000.9(c), shall (2) Add an amount obtained by report for each of its operations the § 1001.32 Other reports. multiplying the total pounds of butterfat following information: In addition to the reports required in Class I as determined pursuant to (1) Product pounds, pounds of pursuant to §§ 1001.30 and 1001.31, § 1000.44 (b) by the Class I butterfat butterfat, pounds of protein, pounds of each handler shall report any price. nonfat solids other than protein (other information the market administrator (b) Class II value. (1) Add an amount solids), and the value of the somatic cell deems necessary to verify or establish obtained by multiplying the adjustment contained in or represented each handler’s obligation under the hundredweight of milk in Class II as by: order. determined pursuant to § 1000.44(a) by (i) Receipts of producer milk, 70 cents; including producer milk diverted by the Classification of Milk (2) Add an amount obtained by reporting handler; and § 1001.40 Classes of utilization. multiplying the pounds of skim milk in (ii) Receipts of milk from handlers See § 1000.40 of this chapter. Class II as determined pursuant to described in § 1000.9(c); § 1000.44(a) by the average nonfat solids (2) Product pounds and pounds of § 1001.41 [Reserved] content of producer skim milk received butterfat contained in: by the handler, and multiplying the (i) Receipts of fluid milk products and § 1001.42 Classification of transfers and resulting pounds of nonfat solids by the diversions. bulk fluid cream products from other nonfat solids price; and pool plants; See § 1000.42 of this chapter. (3) Add an amount obtained by (ii) Receipts of other source milk; and § 1001.43 General classification rules. multiplying the pounds of butterfat in (iii) Inventories at the beginning and Class II as determined pursuant to end of the month of fluid milk products See § 1000.43 of this chapter. § 1000.44(b) by the butterfat price. and bulk fluid cream products; and § 1001.44 Classification of producer milk. (c) Class III value. (1) Add an amount (3) The utilization or disposition of all obtained by multiplying the pounds of See § 1000.44 of this chapter. milk and milk products required to be skim milk in Class III as determined reported pursuant to this paragraph; and § 1001.45 Market administrator's reports pursuant to § 1000.44(a) by the average (4) Such other information with and announcements concerning protein content of producer skim milk respect to the receipts and utilization of classification. received by the handler, and skim milk, butterfat, milk protein, other See § 1000.45 of this chapter. multiplying the resulting pounds of nonfat solids, and somatic cell protein by the protein price; information as the market administrator Class Prices (2) Add an amount obtained by may prescribe. § 1001.50 Class prices and component multiplying the pounds of skim milk in (b) Each handler operating a partially prices. Class III as determined pursuant to regulated distributing plant shall report See § 1000.50 of this chapter. § 1000.44(a) by the average other solids with respect to such plant in the same content of producer skim milk received manner as prescribed for reports § 1001.51 Class I differential and price. by the handler, and multiplying the required by paragraph (a) of this section. The Class I differential shall be the resulting pounds of other solids by the Receipts of milk that would have been differential established for Suffolk other solids price; and producer milk if the plant had been County, Massachusetts, which is (3) Add an amount obtained by fully regulated shall be reported in lieu reported in § 1000.52. The Class I price multiplying the pounds of butterfat in of producer milk. The report shall show shall be the price computed pursuant to Class III as determined pursuant to also the quantity of any reconstituted § 1000.50(a) for Suffolk County, § 1000.44(b) by the butterfat price. skim milk in route disposition in the Massachusetts. (d) Class IV value. (1) Add an amount marketing area. obtained by multiplying the pounds of (c) Each handler not specified in § 1001.52 Adjusted Class I differentials. skim milk in Class IV as determined paragraphs (a) or (b) of this section shall See § 1000.52 of this chapter. pursuant to § 1000.44(a) by the average report with respect to its receipts and nonfat solids content of producer skim utilization of milk and milk products in § 1001.53 Announcement of class and milk received by the handler, and component prices. such manner as the market multiplying the resulting pounds of administrator may prescribe. See § 1000.53 of this chapter. nonfat solids by the nonfat solids price; § 1001.54 Equivalent price. and § 1001.31 Payroll reports. (2) Add an amount obtained by (a) On or before the 22nd day after the See § 1000.54 of this chapter. multiplying the pounds of butterfat in end of each month, each handler Producer Price Differential Class IV as determined pursuant to described in § 1000.9(a) and (c) shall § 1000.44(b) by the butterfat price. report to the market administrator its § 1001.60 Handler's value of milk. (e) Add an adjustment for somatic cell producer payroll for the month, in detail For the purpose of computing a content as determined by multiplying prescribed by the market administrator, handler’s obligation for producer milk, the value reported pursuant to Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5027

§ 1001.30(a)(1) by the percentage of the multiplying $1.00 (but not more than (f) Subtract not less than 4 cents nor total producer milk allocated to Class II, the difference between the Class I price more than 5 cents from the price Class III, and Class IV pursuant to applicable at the location of the pool computed pursuant to paragraph (e) of § 1000.44(c). plant and the Class IV price) by the this section. The result, rounded to the (f) Add the amounts obtained from hundredweight of skim milk and nearest cent, shall be known as the multiplying the pounds of skim milk butterfat contained in receipts of producer price differential for the and butterfat overage assigned to each nonfluid milk products that are month. class pursuant to § 1000.43(b)(2) by the allocated to Class I use pursuant to respective class skim milk prices and § 1000.43(d); and § 1001.62 Announcement of producer prices. the respective class butterfat prices (k) Exclude, for pricing purposes (Class I butterfat price for Class I and the under this section, receipts of nonfluid On or before the 13th day after the butterfat price for all other classes) milk products that are distributed as end of the month, the market applicable at the location of the pool labeled reconstituted milk for which administrator shall announce the plant; payments are made to the producer- following prices and information: (g) Add the amount obtained from settlement fund of another Federal order (a) The producer price differential; multiplying the difference between the under § 1000.76(a)(5) or (c). (b) The protein price; Class III price for the preceding month (c) The other solids price; § 1001.61 Computation of producer price and the Class I price applicable at the (d) The butterfat price; location of the pool plant or the Class differential. (e) The somatic cell adjustment rate; II price, as the case may be, for the For each month the market (f) The average butterfat, nonfat current month by the hundredweight of administrator shall compute a producer skim milk and butterfat subtracted from solids, protein, and other solids content price differential per hundredweight. If of producer milk; and Class I and Class II pursuant to the unreserved balance in the producer- (g) The statistical uniform price for § 1000.44(a)(7) and the corresponding settlement fund to be included in the milk containing 3.5 percent butterfat. step of § 1000.44(b); computation is less than 2 cents per (h) Add the amount obtained from hundredweight of producer milk on all Payments for Milk multiplying the difference between the reports, the report of any handler who Class I price applicable at the location has not made payments required § 1001.70 Producer-settlement fund. of the pool plant and the Class III price pursuant to § 1001.71 for the preceding See § 1000.70 of this chapter. by the hundredweight of skim milk and month shall not be included in the butterfat assigned to Class I pursuant to § 1001.71 Payments to the producer- computation of the producer price settlement fund. § 1000.43(d) and the hundredweight of differential. The report of such handler skim milk and butterfat subtracted from shall not be included in the The payments to the producer- Class I pursuant to § 1000.44(a)(3)(i) computation for succeeding months settlement fund specified in § 1000.71 through (iii) and the corresponding step until the handler has made full payment are due no later than the 15th day after of § 1000.44(b), excluding receipts of of outstanding monthly obligations. the end of the month. bulk fluid cream products from a plant Subject to the aforementioned regulated under other Federal orders § 1001.72 Payments from the producer- conditions, the market administrator settlement fund. and bulk concentrated fluid milk shall compute the producer price See § 1000.72 of this chapter. products from pool plants, plants differential in the following manner: regulated under other Federal orders, (a) Combine into one total the values § 1001.73 Payments to producers and to and unregulated supply plant; cooperative associations. (i) Add the amount obtained from computed pursuant to § 1001.60 for all multiplying the difference between the handlers required to file reports (a) Each pool plant operator that is not Class I price and the Class III price prescribed in § 1001.30; paying a cooperative association for applicable at the location of the nearest (b) Subtract the total of the values producer milk shall pay each producer unregulated supply plants from which obtained by multiplying each handler’s as follows: an equivalent volume was received by total pounds of protein, other solids, (1) Partial payment. For each the pounds of skim milk and butterfat and butterfat contained in the milk for producer who has not discontinued in receipts of concentrated fluid milk which an obligation was computed shipments as of the 23rd day of the products assigned to Class I pursuant to pursuant to § 1001.60 by the protein month, payment shall be made so that §§ 1000.43(d) and 1000.44(a)(3)(i) and price, other solids price, and the it is received by the producer on or the pounds of skim milk and butterfat butterfat price, respectively, and the before the 26th day of the month for subtracted from Class I pursuant to total value of the somatic cell milk received during the first 15 days of § 1000.44(a)(8) and the corresponding adjustment pursuant to § 1001.60(e); the month at not less than the lowest step of § 1000.44(b), excluding such (c) Add an amount equal to the sum announced class price for the preceding skim milk and butterfat in receipts of of the location adjustments computed month, less proper deductions fluid milk products from an unregulated pursuant to § 1001.75; authorized in writing by the producer; supply plant to the extent that an (d) Add an amount equal to not less (2) Final payment. For milk received equivalent amount of skim milk or than one-half of the unobligated balance during the month, payment shall be butterfat disposed of to such plant by in the producer-settlement fund; made so that it is received by each handlers fully regulated under any (e) Divide the resulting amount by the producer no later than the day after the Federal milk order is classified and sum of the following for all handlers payment date required in § 1000.72 in priced as Class I milk and is not used included in these computations: an amount computed as follows: as an offset for any other payment (1) The total hundredweight of (i) Multiply the hundredweight of obligation under any order; producer milk; and producer milk received times the (j) Subtract, for reconstituted milk (2) The total hundredweight for which producer price differential for the made from receipts of nonfluid milk a value is computed pursuant to month as adjusted pursuant to products, an amount computed by § 1001.60(i); and § 1001.75; 5028 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

(ii) Multiply the pounds of butterfat (iii) Multiply the hundredweight of (e) In making payments to producers received times the butterfat price for the Class II skim milk by the Class II pursuant to this section, each pool plant month; differential price for the month; operator shall furnish each producer, (iii) Multiply the pounds of protein (iv) Multiply the pounds of nonfat except a producer whose milk was received times the protein price for the solids received in Class II and Class IV received from a cooperative association month; milk times the nonfat solids price for handler described in § 1000.9(a) or (c), (iv) Multiply the pounds of other the month; a supporting statement in such form that solids received times the other solids (v) Multiply the pounds of butterfat in it may be retained by the recipient price for the month; Class II, III, and IV milk times the which shall show: (v) Multiply the hundredweight of butterfat price for the month; (1) The name, address, Grade A milk received times the somatic cell (vi) Multiply the pounds of protein identifier assigned by a duly constituted adjustment for the month; received in Class III milk times the regulatory agency, and the payroll (vi) Add the amounts computed in protein price for the month; number of the producer; (vii) Multiply the pounds of other paragraph (a)(2)(i) through (v) of this (2) The month and dates that milk solids received in Class III milk times section, and from that sum: was received from the producer, the other solids price for the month; (A) Subtract the partial payment made (viii) Multiply the hundredweight of including the daily and total pounds of pursuant to paragraph (a)(1) of this Class II, Class III, and Class IV milk milk received; section; received times the somatic cell (3) The total pounds of butterfat, (B) Subtract the deduction for adjustment; protein, and other solids contained in marketing services pursuant to (ix) Add together the amounts the producer’s milk; § 1000.86; computed in paragraph (b)(3)(i) through (4) The somatic cell count of the (C) Add or subtract for errors made in (viii) of this section and from that sum producer’s milk; previous payments to the producer; and deduct any payment made pursuant to (5) The minimum rate or rates at (D) Subtract proper deductions paragraph (b)(2) of this section. which payment to the producer is authorized in writing by the producer. (4) Final payment to a cooperative required pursuant to this order; (b) One day before partial and final association for bulk milk received (6) The rate used in making payment payments are due pursuant to paragraph directly from producers’ farms. For bulk if the rate is other than the applicable (a) of this section, each pool plant milk received from a cooperative minimum rate; operator shall pay a cooperative association during the month, including (7) The amount, or rate per association for milk received as follows: the milk of producers who are not hundredweight, or rate per pound of (1) Partial payment to a cooperative members of such association and who component, and the nature of each association. For bulk milk/skimmed the market administrator determines deduction claimed by the handler; and milk received during the first 15 days of have authorized the cooperative (8) The net amount of payment to the the month from a cooperative association to collect payment for their producer or cooperative association. association in any capacity, except as milk, the final payment for such milk the operator of a pool plant, the shall be an amount equal to the sum of § 1001.74 [Reserved] payment shall be equal to the the individual payments otherwise § 1001.75 Plant location adjustments for hundredweight of milk received payable for such milk pursuant to producer milk and nonpool milk. multiplied by the lowest announced paragraph (a)(2) of this section. (a) The producer price differential for class price for the preceding month; (c) If a handler has not received full producer milk shall be adjusted (2) Partial payment to a cooperative payment from the market administrator according to the location of the plant at association for milk transferred from its pursuant to § 1001.72 by the payment which the milk was physically received pool plant. For bulk milk/skimmed milk date specified in paragraph (a) or (b) of by subtracting from the price the products received during the first 15 this section, the handler may reduce amount by which the Class I price days of the month from a cooperative payments pursuant to paragraphs (a) specified in § 1001.50 exceeds the Class association in its capacity as the and (b) of this section, but by not more I price at the plant’s location. If the operator of a pool plant, the partial than the amount of the underpayment. Class I price at the plant location payment shall be at the pool plant The payments shall be completed on the exceeds the Class I price specified in operator’s estimated use value of the next scheduled payment date after § 1001.50, the difference shall be added milk using the most recent class prices receipt of the balance due from the to the producer price differential; and available, adjusted for butterfat value market administrator. and plant location; (d) If a handler claims that a required (b) The producer price differential (3) Final payment to a cooperative payment to a producer cannot be made applicable for other source milk shall be association for milk transferred from its because the producer is deceased or adjusted following the procedure pool plant. Following the classification cannot be located, or because the specified in paragraph (a) of this of bulk fluid milk products and bulk cooperative association or its lawful section, except that the adjusted fluid cream products received during successor or assignee is no longer in producer price differential shall not be the month from a cooperative existence, the payment shall be made to less than zero. association in its capacity as the the producer-settlement fund, and in the § 1001.76 Payments by a handler operator of a pool plant, the final event that the handler subsequently operating a partially regulated distributing payment for such receipts shall be locates and pays the producer or a plant. determined as follows: lawful claimant, or in the event that the See § 1000.76 of this chapter. (i) Multiply the hundredweight of handler no longer exists and a lawful Class I skim milk by the Class I skim claim is later established, the market § 1001.77 Adjustment of accounts. milk price for the month; administrator shall make the required See § 1000.77 of this chapter. (ii) Multiply the pounds of Class I payment from the producer-settlement butterfat by the Class I butterfat price for fund to the handler or to the lawful § 1001.78 Charges on overdue accounts. the month; claimant as the case may be. See § 1000.78 of this chapter. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5029

Administrative Assessment and 1005.71 Payments to the producer- Madison, Marion, McCreary, McLean, Meade, Marketing Service Deduction settlement fund. Menifee, Mercer, Montgomery, Morgan, 1005.72 Payments from the producer- Muhlenberg, Nelson, Nicholas, Ohio, § 1001.85 Assessment for order settlement fund. Oldham, Owen, Owsley, Perry, Powell, administration. 1005.73 Payments to producers and to Pulaski, Rockcastle, Rowan, Russell, Scott, See § 1000.85 of this chapter. cooperative associations. Shelby, Spencer, Taylor, Trimble, Union, 1005.74 [Reserved] Washington, Wayne, Webster, Whitley, § 1001.86 Deduction for marketing 1005.75 Plant location adjustments for Wolfe, and Woodford. services. producer milk and nonpool milk. North Carolina and South Carolina See § 1000.86 of this chapter. 1005.76 Payments by a handler operating a partially regulated distributing plant. All of the States of North Carolina and PART 1005ÐMILK IN THE 1005.77 Adjustment of accounts. South Carolina. APPALACHIAN MARKETING AREA 1005.78 Charges on overdue accounts. Tennessee Counties Marketwide Service Payments SubpartÐOrder Regulating Handling Anderson, Blount, Bradley, Campbell, 1005.80 Transportation credit balancing Carter, Claiborne, Cocke, Cumberland, General Provisions fund. Grainger, Greene, Hamblen, Hamilton, Sec. 1005.81 Payments to the transportation Hancock, Hawkins, Jefferson, Johnson, Knox, 1005.1 General provisions. credit balancing fund. Loudon, Marion, McMinn, Meigs, Monroe, 1005.82 Payments from the transportation Morgan, Polk, Rhea, Roane, Scott, Definitions credit balancing fund. Sequatchie, Sevier, Sullivan, Unicoi, Union, 1005.2 Appalachian marketing area. and Washington. 1005.3 Route disposition. Administrative Assessment and Marketing 1005.4 Plant. Service Deduction Virginia Counties and Cities 1005.5 Distributing plant. 1005.85 Assessment for order Buchanan, Dickenson, Lee, Russell, Scott, 1005.6 Supply plant. administration. Tazewell, Washington, and Wise, and cities 1005.7 Pool plant. 1005.86 Deduction for marketing services. of Bristol and Norton. 1005.8 Nonpool plant. Authority: 7 U.S.C. 601–674. West Virginia Counties 1005.9 Handler. 1005.10 Producer-handler. SubpartÐOrder Regulating Handling McDowell and Mercer. 1005.11 [Reserved] 1005.12 Producer. General Provisions § 1005.3 Route disposition. 1005.13 Producer milk. See § 1000.3 of this chapter. 1005.14 Other source milk. § 1005.1 General provisions. § 1005.4 Plant. 1005.15 Fluid milk product. The terms, definitions, and provisions 1005.16 Fluid cream product. in part 1000 of this chapter apply to and See § 1000.4 of this chapter. 1005.17 [Reserved] are hereby made a part of this order. 1005.18 Cooperative association. § 1005.5 Distributing plant. 1005.19 Commercial food processing Definitions See § 1000.5 of this chapter. establishment. § 1005.2 Appalachian marketing area. § 1005.6 Supply plant. Handler Reports The marketing area means all the See § 1000.6 of this chapter. 1005.30 Reports of receipts and utilization. 1005.31 Payroll reports. territory within the bounds of the § 1005.7 Pool plant. 1005.32 Other reports. following states and political subdivisions, including all piers, docks Pool plant means a plant specified in Classification of Milk and wharves connected therewith and paragraphs (a) through (d) of this 1005.40 Classes of utilization. all craft moored thereat, and all territory section, or a unit of plants as specified 1005.41 [Reserved] occupied by government (municipal, in paragraph (e) of this section, but 1005.42 Classification of transfers and State or Federal) reservations, excluding a plant specified in paragraph diversions. installations, institutions, or other (g) of this section. The pooling 1005.43 General classification rules. standards described in paragraphs (a), 1005.44 Classification of producer milk. similar establishments if any part thereof is within any of the listed states (c), and (d) of this section are subject to 1005.45 Market administrator’s reports and modification pursuant to paragraph (f) announcements concerning or political subdivisions: classification. of this section: Georgia Counties (a) A distributing plant from which Class Prices Catoosa, Chattooga, Dade, Fannin, Murray, during the month the total route 1005.50 Class prices, component prices, Walker, and Whitfield. disposition is equal to 50 percent or Class I differential and price. Indiana Counties more of the total quantity of fluid milk 1005.51 [Reserved] products physically received at such 1005.52 Adjusted Class I differentials. Clark, Crawford, Daviess, Dubois, Floyd, plant and route disposition in the Gibson, Greene, Harrison, Knox, Martin, 1005.53 Announcement of class prices and marketing area is at least 10 percent of component prices. Orange, Perry, Pike, Posey, Scott, Spencer, 1005.54 Equivalent price. Sullivan, Vanderburgh, Warrick, and such receipts. Packaged fluid milk Washington. products that are transferred to a Uniform Prices distributing plant shall be considered as Kentucky Counties 1005.60 Handler’s value of milk. route disposition from the transferring 1005.61 Computation of uniform price, Adair, Anderson, Bath, Bell, Bourbon, plant, rather than the receiving plant, uniform butterfat price and uniform skim Boyle, Breathitt, Breckinridge, Bullitt, Butler, for the purpose of determining the milk price. Carroll, Carter, Casey, Clark, Clay, Clinton, transferring plant’s pool status under Cumberland, Daviess, Edmonson, Elliott, 1005.62 Announcement of uniform price, this paragraph. uniform butterfat price and uniform skim Estill, Fayette, Fleming, Franklin, Gallatin, milk price. Garrard, Grayson, Green, Hancock, Hardin, (b) Any distributing plant located in Harlan, Hart, Henderson, Henry, Hopkins, the marketing area which during the Payments for Milk Jackson, Jefferson, Jessamine, Knott, Knox, month processed a majority of its milk 1005.70 Producer-settlement fund. Larue, Laurel, Lee, Leslie, Letcher, Lincoln, receipts into aseptically packaged fluid 5030 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules milk products. If the plant had no route arguments. Any decision to revise an route disposition, from sources other disposition in the marketing area during applicable percentage must be issued in than own farm production; the month, the plant operator may writing at least one day before the (c) Disposes of no other source milk request nonpool status for the plant. effective date. as Class I milk except by increasing the (c) A supply plant from which 50 (g) The term pool plant shall not nonfat milk solids content of the fluid percent of the total quantity of milk that apply to the following plants: milk products received from own farm is physically received during the month (1) A producer-handler plant; production; from dairy farmers and handlers (2) An exempt plant as defined in (d) Disposes of no fluid milk products described in § 1000.9(c) is transferred to § 1000.8(e); using the distribution system of another pool distributing plants. (3) A plant qualified pursuant to handler; and (d) A plant located within the paragraph (a) of this section which is (e) Provides proof satisfactory to the marketing area or in the State of Virginia not located within any Federal order market administrator that the care and that is operated by a cooperative marketing area, meets the pooling management of the dairy animals and association if pool plant status under requirements of another Federal order, other resources necessary to produce all this paragraph is requested for such and has had greater route disposition in Class I milk handled, and the plant by the cooperative association and such other Federal order marketing area processing, packaging, and distribution during the month at least 60 percent of for 3 consecutive months; operations, are the producer-handler’s the producer milk of members of such (4) A plant qualified pursuant to own enterprise and are operated at the cooperative association is delivered paragraph (a) of this section which is producer-handler’s own risk. directly from farms to pool distributing located in another Federal order plants or is transferred to such plants as marketing area, meets the pooling § 1005.11 [Reserved] a fluid milk product from the standards of the other Federal order, § 1005.12 Producer. cooperative’s plant. and has not had a majority of its route (a) Except as provided in paragraph (e) Two or more plants operated by disposition in this marketing area for 3 (b) of this section, producer means any the same handler and that are located consecutive months or is locked into person who produces milk approved by within the marketing area may qualify pool status under such other Federal a duly constituted regulatory agency for for pool status as a unit by meeting the order without regard to its route fluid consumption as Grade A milk and total and in-area route disposition disposition in any other Federal order whose milk (or components of milk) is: requirements specified in paragraph (a) marketing area; (1) Received at a pool plant directly of this section and the following (5) A plant qualified pursuant to from the producer or diverted by the additional requirements: paragraph (c) of this section which also plant operator in accordance with (1) At least one of the plants in the meets the pooling requirements of § 1005.13; or unit must qualify as a pool plant another Federal order and from which (2) Received by a handler described in pursuant to paragraph (a) of this section; greater qualifying shipments are made (2) Other plants in the unit must § 1000.9(c). to plants regulated under such other process only Class I or Class II products (b) Producer shall not include: order than are made to plants regulated and must be located in a pricing zone (1) A producer-handler as defined in under this order, or such plant has providing the same or a lower Class I any Federal order; automatic pooling status under such price than the price applicable at the (2) A dairy farmer whose milk is other order; and distributing plant included in the unit received at an exempt plant, excluding (6) That portion of a pool plant pursuant to paragraph (e)(1) of this producer milk diverted to the exempt designated as a ‘‘nonpool plant’’ that is section; and plant pursuant to § 1005.13(d); physically separate and operated (3) A written request to form a unit, (3) A dairy farmer whose milk is separately from the pool portion of such or to add or remove plants from a unit, received by diversion at a pool plant plant. The designation of a portion of a must be filed with the market from a handler regulated under another regulated plant as a nonpool plant must administrator prior to the first day of the Federal order if the other Federal order be requested in writing by the handler month for which it is to be effective. designates the dairy farmer as a and must be approved by the market (f) The applicable percentages in producer under that order and that milk administrator. paragraphs (a), (c), and (d) of this is allocated by request to a utilization section may be increased or decreased § 1005.8 Nonpool plant. other than Class I; and up to 10 percentage points by the See § 1000.8 of this chapter. (4) A dairy farmer whose milk is market administrator if the market reported as diverted to a plant fully administrator finds that such revision is § 1005.9 Handler. regulated under another order with necessary to assure orderly marketing See § 1000.9 of this chapter. respect to that portion of the milk so and efficient handling of milk in the diverted that is assigned to Class I under marketing area. Before making such a § 1005.10 Producer-handler. the provisions of such other order. finding, the market administrator shall Producer-handler means a person investigate the need for the revision who: § 1005.13 Producer milk. either on the market administrator’s (a) Operates a dairy farm and a Producer milk means the skim milk own initiative or at the request of distributing plant from which there is (or the skim equivalent of components interested parties if the request is made monthly route disposition in excess of of skim milk) and butterfat contained in in writing at least 15 days prior to the 150,000 pounds per month, unless the milk of a producer that is: date for which the requested revision is person requests that the two be operated (a) Received by the operator of a pool desired effective. If the investigation as separate entities with the distributing plant directly from a producer or a shows that a revision might be plant regulated under § 1005.7(a) and handler described in § 1000.9(c). Any appropriate, the market administrator the farm operated as a producer under milk picked up from the producer’s shall issue a notice stating that the § 1005.12; farm tank in a tank truck under the revision is being considered and (b) Receives no fluid milk products, control of the operator of a pool plant inviting written data, views, and and acquires no fluid milk products for or a handler described in § 1000.9(c) but Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5031 which is not received at a plant until the (6) Diverted milk shall be priced at (6) Receipts of producer milk following month shall be considered as the location of the plant to which described in § 1005.82(c)(2), including having been received by the handler diverted; and the identity of the individual producers during the month in which it is picked (7) The delivery day requirements and whose milk is eligible for the up at the producer’s farm. All milk the diversion percentages in paragraphs transportation credit pursuant to that received pursuant to this paragraph (d)(1) through (4) of this section may be paragraph and the date that such milk shall be priced at the location of the increased or decreased by the market was received; plant where it is first physically administrator if the market (7) For handlers submitting received; administrator finds that such revision is transportation credit requests, transfers (b) Received by a handler described in necessary to assure orderly marketing of bulk milk to nonpool plants, § 1000.9(c) in excess of the quantity and efficient handling of milk in the including the dates that such milk was delivered to pool plants; marketing area. Before making such a transferred; (c) Diverted by a pool plant operator finding, the market administrator shall (8) Inventories at the beginning and to another pool plant. Milk so diverted investigate the need for the revision end of the month of fluid milk products shall be priced at the location of the either on the market administrator’s and bulk fluid cream products; and plant to which diverted; or own initiative or at the request of (9) The utilization or disposition of all (d) Diverted by the operator of a pool interested persons. If the investigation milk and milk products required to be plant or a handler described in shows that a revision might be reported pursuant to this paragraph. § 1000.9(c) to a nonpool plant, subject to appropriate, the market administrator the following conditions: (b) Each handler operating a partially shall issue a notice stating that the regulated distributing plant shall report (1) In any month of July through revision is being considered and December, not less than 6 days’ with respect to such plant in the same inviting written data, views, and manner as prescribed for reports production of the producer whose milk arguments. Any decision to revise an required by paragraph (a) of this section. is diverted is physically received at a applicable percentage must be issued in Receipts of milk that would have been pool plant during the month; writing at least one day before the producer milk if the plant had been (2) In any month of January through effective date. June, not less than 2 days’ production of fully regulated shall be reported in lieu the producer whose milk is diverted is § 1005.14 Other source milk. of producer milk. The report shall show physically received at a pool plant See § 1000.14 of this chapter. also the quantity of any reconstituted during the month; skim milk in route disposition in the (3) The total quantity of milk so § 1005.15 Fluid milk product. marketing area. diverted during the month by a See § 1000.15 of this chapter. (c) Each handler described in cooperative association shall not exceed § 1005.16 Fluid cream product. § 1000.9(c) shall report: (1) The quantities of all skim milk and 25 percent during the months of July See § 1000.16 of this chapter. through November, January, and butterfat contained in receipts of milk February, and 40 percent during the § 1005.17 [Reserved] from producers; months of December and March through (2) The utilization or disposition of all June, of the producer milk that the § 1005.18 Cooperative association. such receipts; and cooperative association caused to be See § 1000.18 of this chapter. (3) With respect to milk for which a delivered to, and physically received at, § 1005.19 Commercial food processing cooperative association is requesting a pool plants during the month; establishment. transportation credit pursuant to (4) The operator of a pool plant that See § 1000.19 of this chapter. § 1005.82, all of the information is not a cooperative association may required in paragraph (a)(5), (a)(6), and divert any milk that is not under the Handler Reports (a)(7) of this section. control of a cooperative association that § 1005.30 Reports of receipts and (d) Each handler not specified in diverts milk during the month pursuant utilization. paragraphs (a) through (c) of this section to paragraph (d) of this section. The Each handler shall report monthly so shall report with respect to its receipts total quantity of milk so diverted during that the market administrator’s office and utilization of milk and milk the month shall not exceed 25 percent receives the report on or before the 7th products in such manner as the market during the months of July through day after the end of the month, in the administrator may prescribe. November, January, and February, and detail and on prescribed forms, as § 1005.31 Payroll reports. 40 percent during the months of follows: December and March through June, of (a) With respect to each of its pool (a) On or before the 20th day after the the producer milk physically received at plants, the quantities of skim milk and end of each month, each handler such plant (or such unit of plants in the butterfat contained in or represented by: described in § 1000.9(a) and (c) shall case of plants that pool as a unit (1) Receipts of producer milk, report to the market administrator its pursuant to § 1005.7(d)) during the including producer milk diverted by the producer payroll for the month, in detail month, excluding the quantity of plant operator to other plants; prescribed by the market administrator, producer milk received from a handler (2) Receipts of milk from handlers showing for each producer the described in § 1000.9(c); described in § 1000.9(c); information specified in § 1005.73(e). (5) Any milk diverted in excess of the (3) Receipts of fluid milk products (b) Each handler operating a partially limits prescribed in paragraphs (d)(3) and bulk fluid cream products from regulated distributing plant who elects and (4) of this section shall not be other pool plants; to make payment pursuant to producer milk. If the diverting handler (4) Receipts of other source milk; § 1000.76(b) shall report for each dairy or cooperative association fails to (5) Receipts of bulk milk from a plant farmer who would have been a producer designate the dairy farmers’ deliveries regulated under another Federal order, if the plant had been fully regulated in that will not be producer milk, no milk except Federal Order 1007, for which a the same manner as prescribed for diverted by the handler or cooperative transportation credit is requested reports required by paragraph (a) of this association shall be producer milk; pursuant to § 1005.82; section. 5032 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

§ 1005.32 Other reports. (a) Multiply the pounds of skim milk applicable at the location of the pool (a) On or before the 20th day after the and butterfat in producer milk that were plant and the Class IV price) by the end of each month, each handler classified in each class pursuant to hundredweight of skim milk and described in § 1000.9(a) and (c) shall § 1000.44(c) by the applicable skim milk butterfat contained in receipts of report to the market administrator any and butterfat prices, and add the nonfluid milk products that are adjustments to transportation credit resulting amounts; allocated to Class I use pursuant to requests as reported pursuant to (b) Add the amounts obtained from § 1000.43(e); and § 1005.30(a)(5), (6), and (7). multiplying the pounds of skim milk (g) Exclude, for pricing purposes (b) In addition to the reports required and butterfat overage assigned to each under this section, receipts of nonfluid pursuant to §§ 1005.30, 31, and 32(a), class pursuant to § 1000.43(b)(2) by the milk products that are distributed as each handler shall report any respective skim milk and butterfat labeled reconstituted milk for which information the market administrator prices applicable at the location of the payments are made to the producer- deems necessary to verify or establish pool plant; settlement fund of another Federal order each handler’s obligation under the (c) Add the amount obtained from under § 1000.76(a)(5) or (c). order. multiplying the difference between the Class III price for the preceding month § 1005.61 Computation of uniform price, Classification of Milk uniform butterfat price and uniform skim and the Class I price applicable at the milk price. location of the pool plant or the Class § 1005.40 Classes of utilization. II price, as the case may be, for the (a) Uniform price. For each month the See § 1000.40 of this chapter. current month by the hundredweight of market administrator shall compute the uniform price per hundredweight. If the § 1005.41 [Reserved] skim milk and butterfat subtracted from Class I and Class II pursuant to unreserved balance in the producer- § 1005.42 Classification of transfers and § 1000.44(a)(7) and the corresponding settlement fund to be included in the diversions. step of § 1000.44(b); computation is less than 2 cents per See § 1000.42 of this chapter. (d) Add the amount obtained from hundredweight of producer milk on all multiplying the difference between the reports, the report of any handler who § 1005.43 General classification rules. Class I price applicable at the location has not made payments required See § 1000.43 of this chapter. of the pool plant and the Class III price pursuant to § 1005.71 for the preceding by the hundredweight of skim milk and month shall not be included in the § 1005.44 Classification of producer milk. butterfat assigned to Class I pursuant to computation of the uniform price. The See § 1000.44 of this chapter. § 1000.43(d) and the hundredweight of report of such handler shall not be included in the computation for § 1005.45 Market administrator's reports skim milk and butterfat subtracted from Class I pursuant to § 1000.44(a)(3)(i) succeeding months until the handler and announcements concerning has made full payment of outstanding classification. through (iii) and the corresponding step monthly obligations. Subject to the See § 1000.45 of this chapter. of § 1000.44(b), excluding receipts of bulk fluid cream products from a plant aforementioned conditions, the market Class Prices regulated under other Federal orders administrator shall compute the and bulk concentrated fluid milk uniform price in the following manner: § 1005.50 Class prices, component prices, (1) Combine into one total the values Class I differential and price. products from pool plants, plants regulated under other Federal orders, computed pursuant to § 1005.60 for all Class prices and component prices are and unregulated supply plants; handlers required to file reports described in § 1000.50. The Class I (e) Add the amount obtained from prescribed in § 1005.30; differential shall be the differential multiplying the Class I price applicable (2) Add an amount equal to the sum established for Meklenburg County, at the location of the nearest of the location adjustments computed North Carolina, which is reported in unregulated supply plants from which pursuant to § 1005.75; (3) Add an amount equal to not less § 1000.52. The Class I price shall be the an equivalent volume was received by than one-half of the unobligated balance price computed pursuant to § 1000.50(a) the pounds of skim milk and butterfat for Meklenburg County, North Carolina. in the producer-settlement fund; in receipts of concentrated fluid milk (4) Add or subtract, as the case may § 1005.51 [Reserved] products assigned to Class I pursuant to be, to obtain an all-producer milk test of § 1000.43(d) and § 1000.44(a)(3)(i) and 3.5 percent butterfat, the value of the § 1005.52 Adjusted Class I differentials. the pounds of skim milk and butterfat required pounds of butterfat times the See § 1000.52 of this chapter. subtracted from Class I pursuant to uniform butterfat price computed in § 1000.44(a)(8) and the corresponding paragraph (b) of this section; § 1005.53 Announcement of class prices step of § 1000.44(b), excluding such and component prices. (5) Divide the resulting amount by the skim milk and butterfat in receipts of sum of the following for all handlers See § 1000.53 of this chapter. fluid milk products from an unregulated included in these computations: § 1005.54 Equivalent price. supply plant to the extent that an (i) The total hundredweight of equivalent amount of skim milk or See § 1000.54 of this chapter. producer milk; and butterfat disposed of to such plant by (ii) The total hundredweight for Uniform Price handlers fully regulated under any which a value is computed pursuant to Federal milk order is classified and § 1005.60(f); and § 1005.60 Handler's value of milk. priced as Class I milk and is not used (6) Subtract not less than 4 cents nor For the purpose of computing the as an offset for any other payment more than 5 cents from the price uniform price, the market administrator obligation under any order; computed pursuant to paragraph (e) of shall determine for each month the (f) Subtract, for reconstituted milk this section. The result, rounded to the value of milk of each handler with made from receipts of nonfluid milk nearest cent, shall be known as the respect to each of the handler’s pool products, an amount computed by ‘‘uniform price’’ for the month. plants and of each handler described in multiplying $1.00 (but not more than (b) Uniform butterfat price. The § 1000.9(c) as follows: the difference between the Class I price uniform butterfat price per pound, Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5033 rounded to the nearest one-hundredth (2) Final payment. For milk received prices for the month, adjusted for plant cent, shall be obtained by multiplying during the month, payment shall be location and butterfat value, and the pounds of butterfat in producer milk made so that it is received by each subtracting from this sum the partial allocated to each class pursuant to producer one day after the payment date payment made pursuant to paragraph § 1000.44(b) by the respective class required in § 1000.72 an amount (b)(2) of this section. butterfat prices (Class I butterfat price computed as follows: (4) Final payment to a cooperative for Class I and the butterfat price for all (i) Multiply the hundredweight of association for bulk milk received other classes) and dividing the sum of producer milk received times the directly from producers’ farms. For bulk such values by the total pounds of such uniform price for the month as adjusted milk received from a cooperative butterfat. pursuant to § 1005.75; association during the month, including (c) Uniform skim milk price. The (ii) Multiply the hundredweight of the milk of producers who are not uniform skim milk price per producer skim milk received times the members of such association and who hundredweight, rounded to the nearest uniform skim milk price for the month; the market administrator determines cent, shall be the uniform price for the (iii) Multiply the pounds of butterfat have authorized the cooperative month pursuant to pursuant to received times the uniform butterfat association to collect payment for their paragraph (a) of this section less the price for the month; milk, the final payment for such milk (iv) Add the amounts computed in uniform butterfat price for the month shall be an amount equal to the sum of paragraph (a)(2)(i), (ii), and (iii) of the pursuant to paragraph (b) of this section the individual payments otherwise section, and from that sum: multiplied by 3.5 pounds of butterfat, payable for such milk pursuant to (A) Subtract the partial payment made with the result divided by .965. paragraph (a)(2) of this section. pursuant to paragraph (a)(1) of this § 1005.62 Announcement of uniform price, section; (c) If a handler has not received full uniform butterfat price and uniform skim (B) Subtract the deduction for payment from the market administrator milk price. marketing services pursuant to pursuant to § 1005.72 by the payment On or before the 11th day after the § 1000.86; date specified in paragraph (a) or (b) of end of the month, the market (C) Add or subtract for errors made in this section, the handler may reduce administrator shall announce the previous payments to the producer; and payments pursuant to paragraphs (a) following prices and information: (D) Subtract proper deductions and (b) of this section, but by not more (a) The uniform price pursuant to authorized in writing by the producer. than the amount of the underpayment. § 1005.61 for such month; (b) One day before partial and final The payments shall be completed on the (b) The uniform butterfat price payments are due pursuant to paragraph next scheduled payment date after pursuant to § 1005.61(b) for such month; (a) of this section, each pool plant receipt of the balance due from the and operator shall pay a cooperative market administrator. (c) The uniform skim milk price association for milk received as follows: (d) If a handler claims that a required pursuant to § 1005.61(c) for such month. (1) Partial payment to a cooperative payment to a producer cannot be made Payments for Milk association. For bulk milk/skimmed because the producer is deceased or milk received during the first 15 days of cannot be located, or because the § 1005.70 Producer-settlement fund. the month from a cooperative cooperative association or its lawful See § 1000.70 of this chapter. association in any capacity, except as successor or assignee is no longer in the operator of a pool plant, the existence, the payment shall be made to § 1005.71 Payments to the producer- payment shall be equal to the settlement fund. the producer-settlement fund, and in the hundredweight of milk received event that the handler subsequently The payments to the producer- multiplied by 90 percent of the locates and pays the producer or a settlement fund specified in § 1000.71 preceding month’s uniform price, lawful claimant, or in the event that the are due no later than the 12th day after adjusted for plant location pursuant to handler no longer exists and a lawful the end of the month. § 1005.75; claim is later established, the market § 1005.72 Payments from the producer- (2) Partial payment to a cooperative administrator shall make the required settlement fund. association for milk transferred from its payment from the producer-settlement See § 1000.72 of this chapter. pool plant. For bulk fluid milk products fund to the handler or to the lawful and bulk fluid cream products received claimant as the case may be. § 1005.73 Payments to producers and to during the first 15 days of the month (e) In making payments to producers cooperative associations. from a cooperative association in its pursuant to this section, each pool plant (a) Each pool plant operator that is not capacity as the operator of a pool plant, operator shall furnish each producer, paying a cooperative association for the partial payment shall be at the pool except a producer whose milk was producer milk shall pay each producer plant operator’s estimated use value of received from a handler described in as follows: the milk using the most recent class § 1000.9(a) or (c), a supporting statement (1) Partial payment. For each prices available, adjusted for butterfat in such form that it may be retained by producer who has not discontinued value and plant location; the recipient which shall show: shipments as of the 23rd day of the (3) Final payment to a cooperative month, payment shall be made so that association for milk transferred from its (1) The name, address, Grade A it is received by the producer on or pool plant. For bulk fluid milk products identifier assigned by a duly constituted before the 26th day of the month for and bulk fluid cream products received regulatory agency, and the payroll milk received during the first 15 days of during the month from a cooperative number of the producer; the month at not less than the 90 association in its capacity as the (2) The month and dates that milk percent of the preceding month’s operator of a pool plant, the final was received from the producer, uniform price, adjusted for plant payment shall be the classified value of including the daily and total pounds of location pursuant to § 1005.75 and such milk as determined by multiplying milk received; proper deductions authorized in writing the pounds of milk assigned to each (3) The total pounds of butterfat in the by the producer; class pursuant to § 1000.44 by the class producer’s milk; 5034 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

(4) The minimum rate at which assigned pursuant to § 1005.44 by proration of transportation credit payment to the producer is required $0.065 per hundredweight or such payments for the preceding month pursuant to this order; lesser amount as the market pursuant to paragraph (a) of this section. (5) The rate used in making payment administrator deems necessary to Handlers will be promptly notified of an if the rate is other than the applicable maintain a balance in the fund equal to overpayment of credits based upon this minimum rate; the total transportation credits final computation and remedial (6) The amount, or rate per disbursed during the prior June-January payments to or from the transportation hundredweight, and nature of each period. In the event that during any credit balancing fund will be made on deduction claimed by the handler; and month of the June-January period the or before the next payment date for the (7) The net amount of payment to the fund balance is insufficient to cover the following month; producer or cooperative association. amount of credits that are due, the (3) Transportation credits paid assessment should be based upon the pursuant to paragraph (a)(1) and (2) of § 1005.74 [Reserved] amount of credits that would have been this section shall be subject to final § 1005.75 Plant location adjustments for disbursed had the fund balance been verification by the market administrator producer milk and nonpool milk. sufficient. pursuant to § 1000.77. Adjusted (a) The uniform price for producer (b) The market administrator shall payments to or from the transportation announce publicly on or before the 5th credit balancing fund will remain milk shall be adjusted according to the day of the month the assessment subject to the final proration established location of the plant at which the milk pursuant to paragraph (a) of this section pursuant to paragraph (a)(2) of this was physically received by subtracting for the following month. section; and from the price the amount by which the (4) In the event that a qualified Class I price specified in § 1005.50 § 1005.82 Payments from the cooperative association is the exceeds the Class I price at the plant’s transportation credit balancing fund. responsible party for whose account location. If the Class I price at the plant (a) Payments from the transportation such milk is received and written location exceeds the Class I price credit balancing fund to handlers and documentation of this fact is provided specified in § 1005.50, the difference cooperative associations requesting to the market administrator pursuant to shall be added to the uniform price; and transportation credits shall be made as § 1005.30(c)(3) prior to the date payment (b) The uniform price applicable for follows: is due, the transportation credits for other source milk shall be adjusted (1) On or before the 13th day after the such milk computed pursuant to this following the procedure specified in end of each of the months of July section shall be made to such paragraph (a) of this section, except that through December and any other month cooperative association rather than to the adjusted uniform price shall not be in which transportation credits are in the operator of the pool plant at which less than the lowest announced class effect pursuant to paragraph (b) of this the milk was received. price. section, the market administrator shall (b) The market administrator may pay to each handler that received, and § 1005.76 Payments by a handler extend the period during which operating a partially regulated distributing reported pursuant to § 1005.30(a)(5), transportation credits are in effect (i.e., plant. bulk milk transferred from a plant fully the transportation credit period) to the regulated under another Federal order See § 1000.76 of this chapter. months of January and June if a written as described in paragraph (c)(1) of this request to do so is received 15 days § 1005.77 Adjustment of accounts. section or that received, and reported prior to the beginning of the month for See § 1000.77 of this chapter. pursuant to § 1005.30(a)(6), milk which the request is made and, after directly from producers’ farms as conducting an independent § 1005.78 Charges on overdue accounts. specified in paragraph (c)(2) of this investigation, finds that such extension See § 1000.78 of this chapter. section, a preliminary amount is necessary to assure the market of an determined pursuant to paragraph (d) of Marketwide Service Payments adequate supply of milk for fluid use. this section to the extent that funds are Before making such a finding, the § 1005.80 Transportation credit balancing available in the transportation credit market administrator shall notify the fund. balancing fund. If an insufficient Director of the Dairy Division and all The market administrator shall balance exists to pay all of the credits handlers in the market that an extension maintain a separate fund known as the computed pursuant to this section, the is being considered and invite written Transportation Credit Balancing Fund market administrator shall distribute the data, views, and arguments. Any into which shall be deposited the balance available in the transportation decision to extend the transportation payments made by handlers pursuant to credit balancing fund by reducing credit period must be issued in writing § 1005.81 and out of which shall be payments prorata using the percentage prior to the first day of the month for made the payments due handlers derived by dividing the balance in the which the extension is to be effective. pursuant to § 1005.82. Payments due a fund by the total credits that are due for (c) Transportation credits shall apply handler shall be offset against payments the month. The amount of credits to the following milk: due from the handler. resulting from this initial proration shall (1) Bulk milk received from a plant be subject to audit adjustment pursuant regulated under another Federal order, § 1005.81 Payments to the transportation to paragraph (a)(2) of this section; except Federal Orders 1007, and credit balancing fund. (2) The market administrator shall allocated to Class I milk pursuant to (a) On or before the 12th day after the accept adjusted requests for § 1000.44(a)(12); and end of the month, each handler transportation credits on or before the (2) Bulk milk received directly from operating a pool plant and each handler 20th day of the month following the the farms of dairy farmers at pool specified in § 1000.9(a) and (c) shall pay month for which such credits were distributing plants subject to the to the market administrator a requested pursuant to § 1005.32(a). After following conditions: transportation credit balancing fund such date, a preliminary audit will be (i) The quantity of such milk that assessment determined by multiplying conducted by the market administrator, shall be eligible for the transportation the pounds of Class I producer milk who will recalculate any necessary credit shall be determined by Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5035 multiplying the total pounds of milk (v) Multiply the remainder computed PART 1006ÐMILK IN THE FLORIDA received from producers meeting the in paragraph (d)(2)(iv) of this section by MARKETING AREA conditions of this paragraph by the the hundredweight of milk described in lower of: paragraph (d)(2) of this section. SubpartÐOrder Regulating Handling (A) The marketwide estimated Class I (3) For the remaining milk described General Provisions utilization of all handlers for the month in paragraph (c)(2) of this section after Sec. pursuant to § 1000.45(a); or computations described in paragraph 1006.1 General provisions. (B) The Class I utilization of all (d)(1) of this section, the market Definitions producer milk of the pool plant operator administrator shall: receiving the milk after the (i) Determine an origination point for 1006.2 Florida marketing area. computations described in § 1000.44; each load of milk by locating the nearest 1006.3 Route disposition. 1006.4 Plant. (ii) The dairy farmer was not a city to the last producer’s farm from which milk was picked up for delivery 1006.5 Distributing plant. ‘‘producer’’ under this order during 1006.6 Supply plant. more than 2 of the immediately to the receiving pool plant. 1006.7 Pool plant. preceding months of January through Alternatively, the milk hauler that is 1006.8 Nonpool plant. June and not more than 50 percent of transporting the milk of producers 1006.9 Handler. the production of the dairy farmer described in paragraph (c)(2) of this 1006.10 Producer-handler. during those 2 months, in aggregate, was section may establish an origination 1006.11 [Reserved] received as producer milk under this point following the last farm pickup by 1006.12 Producer. 1006.13 Producer milk. order during those 2 months. However, stopping at the nearest independently- operated truck stop with a certified 1006.14 Other source milk. if January and/or June are months in 1006.15 Fluid milk product. which transportation credits are truck scale and obtaining a weight 1006.16 Fluid cream product. disbursed pursuant to paragraph (a) of certificate indicating the weight of the 1006.17 [Reserved] this section, these months shall not be truck and its contents, the date and time 1006.18 Cooperative association. included in the 2-month limit provided of weighing, and the location of the 1006.19 Commercial food processing in this paragraph; and truck stop; establishment. (iii) The farm on which the milk was (ii) Determine the shortest hard- Handler Reports produced is not located within the surface highway distance between the receiving pool plant and the truck stop 1006.30 Reports of receipts and utilization. specified marketing area of this order or 1006.31 Payroll reports. the marketing area of Federal Order or city, as the case may be; 1006.32 Other reports. 1007. (iii) Subtract 85 miles from the Classification of Milk (d) Transportation credits shall be mileage so determined; (iv) Multiply the remaining miles so computed as follows: 1006.40 Classes of utilization. computed by 0.35 cent; 1006.41 [Reserved] (1) The market administrator shall (v) If the origination point determined 1006.42 Classification of transfers and subtract from the pounds of milk pursuant to paragraph (d)(3)(i) of this diversions. described in paragraphs (c)(1) and (2) of section is in a Federal order marketing 1006.43 General classification rules. this section the pounds of bulk milk area, subtract the Class I price 1006.44 Classification of producer milk. transferred from the pool plant receiving 1006.45 Market administrator’s reports and applicable at the origination point the supplemental milk if milk was announcements concerning pursuant to the provisions of such other transferred to a nonpool plant on the classification. order (as if the origination point were a same calendar day that the plant location) from the Class I price Class Prices supplemental milk was received. For applicable at the distributing plant 1006.50 Class prices, component prices, this purpose, the transferred milk shall receiving the milk. If the origination Class I differential and price. be subtracted from the most distant load point is not in any Federal order 1006.51 [Reserved] of supplemental milk received, and then 1006.52 Adjusted Class I differentials. marketing area, determine the Class I in sequence with the next most distant 1006.53 Announcement of class prices and price at the origination point based load until all of the transfers have been component prices. upon the provisions of this order and offset; 1006.54 Equivalent price. subtract this price from the Class I price (2) With respect to the pounds of milk applicable at the distributing plant Uniform Prices described in paragraph (c)(1) of this receiving the milk; 1006.60 Handler’s value of milk. section that remain after the (vi) Subtract any positive difference 1006.61 Computation of uniform price, computations described in paragraph computed in paragraph (d)(3)(v) of this uniform butterfat price, and uniform (d)(1) of this section, the market section from the amount computed in skim milk price. 1006.62 Announcement of uniform price, administrator shall: paragraph (d)(3)(iv) of this section; and (i) Determine the shortest hard-surface uniform butterfat price, and uniform (vii) Multiply the remainder skim milk price. highway distance between the shipping computed in paragraph (d)(3)(vi) by the plant and the receiving plant; hundredweight of milk described in Payments for Milk (ii) Multiply the number of miles so paragraph (d)(3) of this section. 1006.70 Producer-settlement fund. determined by 0.35 cent; 1006.71 Payments to the producer- (iii) Subtract the other order’s Class I Administrative Assessment and settlement fund. price applicable at the shipping plant’s Marketing Service Deduction 1006.72 Payments from the producer- settlement fund. location from the Class I price § 1005.85 Assessment for order applicable at the receiving plant as 1006.73 Payments to producers and to administration. cooperative associations. specified in § 1005.53; See § 1000.85 of this chapter. 1006.74 [Reserved] (iv) Subtract any positive difference 1006.75 Plant location adjustments for computed in paragraph (d)(2)(iii) of this § 1005.86 Deduction for marketing producer milk and nonpool milk. section from the amount computed in services. 1006.76 Payments by a handler operating a paragraph (d)(2)(ii) of this section; and See § 1000.86 of this chapter. partially regulated distributing plant. 5036 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

1006.77 Adjustment of accounts. transferring plant’s pool status under shows that a revision might be 1006.78 Charges on overdue accounts. this paragraph. appropriate, the market administrator Administrative Assessment and Marketing (b) Any distributing plant located in shall issue a notice stating that the Service Deduction the marketing area which during the revision is being considered and 1006.85 Assessment for order month processed a majority of its milk inviting written data, views, and administration. receipts into aseptically packaged fluid arguments. Any decision to revise an 1006.86 Deduction for marketing services. milk products. If the plant had no route applicable percentage must be issued in disposition in the marketing area during Authority: 7 U.S.C. 601–674. writing at least one day before the the month, the plant operator may effective date. SubpartÐOrder Regulating Handling request nonpool status for the plant. (g) The term pool plant shall not (c) A supply plant from which 60 apply to the following plants: General Provisions percent of the total quantity of milk that (1) A producer-handler plant; is physically received during the month § 1006.1 General provisions. (2) An exempt plant as defined in from dairy farmers and handlers § 1000.8(e); The terms, definitions, and provisions described in § 1000.9(c) is transferred to (3) A plant qualified pursuant to in part 1000 of this chapter apply to and pool distributing plants. paragraph (a) of this section which is are hereby made a part of this order. (d) A plant located within the not located within any Federal order Definitions marketing area that is operated by a marketing area, meets the pooling cooperative association if pool plant requirements of another Federal order, § 1006.2 Florida marketing area. status under this paragraph is requested and has had greater route disposition in The marketing area means all the for such plant by the cooperative such other Federal order marketing area territory within the State of Florida, association and during the month 60 for 3 consecutive months; except the counties of Escambia, percent of the producer milk of (4) A plant qualified pursuant to Okaloosa, Santa Rosa, and Walton., members of such cooperative paragraph (a) of this section which is including all piers, docks and wharves association is delivered directly from located in another Federal order connected therewith and all craft farms to pool distributing plants or is marketing area, meets the pooling moored thereat, and all territory transferred to such plants as a fluid milk standards of the other Federal order, occupied by government (municipal, product from the cooperative’s plant. and has not had a majority of its route State or Federal) reservations, (e) Two or more plants operated by disposition in this marketing area for 3 installations, institutions, or other the same handler and that are located consecutive months or is locked into similar establishments if any part within the marketing area may qualify pool status under such other Federal thereof is within any of the listed states for pool status as a unit by meeting the order without regard to its route or political subdivisions. total and in-area route disposition disposition in any other Federal order requirements specified in paragraph (a) § 1006.3 Route disposition. marketing area; and of this section and the following (5) A plant qualified pursuant to See § 1000.3 of this chapter. additional requirements: paragraph (c) of this section which also (1) At least one of the plants in the § 1006.4 Plant. meets the pooling requirements of unit must qualify as a pool plant See § 1000.4 of this chapter. another Federal order and from which pursuant to paragraph (a) of this section; greater qualifying shipments are made (2) Other plants in the unit must § 1006.5 Distributing plant. to plants regulated under such other process only Class I or Class II products See § 1000.5 of this chapter. order than are made to plants regulated and must be located in a pricing zone under this order, or such plant has § 1006.6 Supply plant. providing the same or a lower Class I automatic pooling status under such price than the price applicable at the See § 1000.6 of this chapter. other order. distributing plant included in the unit § 1006.7 Pool plant. pursuant to paragraph (e)(1) of this § 1006.8 Nonpool plant. Pool plant means a plant specified in section; and See § 1000.8 of this chapter. paragraphs (a) through (d) of this (3) A written request to form a unit, section, or a unit of plants as specified or to add or remove plants from a unit, § 1006.9 Handler. in paragraph (e) of this section, but must be filed with the market See § 1000.9 of this chapter. excluding a plant specified in paragraph administrator prior to the first day of the (g) of this section. The pooling month for which it is to be effective. § 1006.10 Producer-handler. standards described in paragraphs (a), (f) The applicable percentages in Producer-handler means a person (c), and (d) of this section are subject to paragraphs (a), (c), and (d) of this who: modification pursuant to paragraph (f) section may be increased or decreased (a) Operates a dairy farm and a of this section: up to 10 percentage points by the distributing plant from which there is (a) A distributing plant from which market administrator if the market monthly route disposition in excess of during the month the total route administrator finds that such revision is 150,000 pounds per month, unless the disposition is equal to 50 percent or necessary to assure orderly marketing person requests that the two be operated more of the total quantity of fluid milk and efficient handling of milk in the as separate entities with the distributing products physically received at such marketing area. Before making such a plant regulated under § 1006.7(a) and plant and route disposition in the finding, the market administrator shall the farm operated as a producer under marketing area is at least 10 percent of investigate the need for the revision § 1006.12; such receipts. Packaged fluid milk either on the market administrator’s (b) Receives no fluid milk products, products that are transferred to a own initiative or at the request of and acquires no fluid milk products for distributing plant shall be considered as interested parties if the request is made route disposition, from sources other route disposition from the transferring in writing at least 15 days prior to the than own farm production; plant, rather than the receiving plant, date for which the requested revision is (c) Disposes of no other source milk for the purpose of determining the desired effective. If the investigation as Class I milk except by increasing the Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5037 nonfat milk solids content of the fluid during the month in which it is picked necessary to assure orderly marketing milk products received from own farm up at the producer’s farm. All milk and efficient handling of milk in the production; received pursuant to this paragraph marketing area. Before making such a (d) Disposes of no fluid milk products shall be priced at the location of the finding, the market administrator shall using the distribution system of another plant where it is first physically investigate the need for the revision handler; and received; either on the market administrator’s (e) Provides proof satisfactory to the (b) Received by a handler described in own initiative or at the request of market administrator that the care and § 1000.9(c) in excess of the quantity interested persons. If the investigation management of the dairy animals and delivered to pool plants; shows that a revision might be other resources necessary to produce all (c) Diverted by a pool plant operator appropriate, the market administrator Class I milk handled, and the to another pool plant. Milk so diverted shall issue a notice stating that the processing, packaging, and distribution shall be priced at the location of the revision is being considered and operations, are the producer-handler’s plant to which diverted; or inviting written data, views, and own enterprise and are operated at the (d) Diverted by the operator of a pool arguments. Any decision to revise an producer-handler’s own risk. plant or a handler described in applicable percentage must be issued in § 1000.9(c) to a nonpool plant, subject to writing at least one day before the § 1006.11 [Reserved] the following conditions: effective date. (1) In any month, not less than 10 § 1006.12 Producer. days’ production of the producer whose § 1006.14 Other source milk. (a) Except as provided in paragraph milk is diverted is physically received at See § 1000.14 of this chapter. (b) of this section, producer means any a pool plant during the month; person who produces milk approved by (2) The total quantity of milk so § 1006.15 Fluid milk product. a duly constituted regulatory agency for diverted during the month by a See § 1000.15 of this chapter. fluid consumption as Grade A milk and cooperative association shall not exceed whose milk (or components of milk) is: 20 percent during the months of July § 1006.16 Fluid cream product. (1) Received at a pool plant directly through November, 25 percent during See § 1000.16 of this chapter. from the producer or diverted by the the months of December through § 1006.17 [Reserved] plant operator in accordance with February, and 40 percent during all § 1006.13; or other months, of the producer milk that § 1006.18 Cooperative association. (2) Received by a handler described in the cooperative association caused to be See § 1000.18 of this chapter. § 1000.9(c). delivered to, and physically received at, (b) Producer shall not include: pool plants during the month; § 1006.19 Commercial food processing (1) A producer-handler as defined in (3) The operator of a pool plant that establishment. any Federal order; is not a cooperative association may See § 1000.19 of this chapter. (2) A dairy farmer whose milk is divert any milk that is not under the Handler Reports received at an exempt plant, excluding control of a cooperative association that producer milk diverted to the exempt diverts milk during the month pursuant § 1006.30 Reports of receipts and plant pursuant to § 1006.13(d); to paragraph (d) of this section. The utilization. (3) A dairy farmer whose milk is total quantity of milk so diverted during Each handler shall report monthly so received by diversion at a pool plant the month shall not exceed 20 percent that the market administrator’s office from a handler regulated under another during the months of July through receives the report on or before the 7th Federal order if the other Federal order November, 25 percent during the day after the end of the month, in the designates the dairy farmer as a months of December through February, detail and on prescribed forms, as producer under that order and that milk and 40 percent during all other months, follows: is allocated by request to a utilization of the producer milk physically received (a) With respect to each of its pool other than Class I; and at such plant (or such unit of plants in plants, the quantities of skim milk and (4) A dairy farmer whose milk is the case of plants that pool as a unit butterfat contained in or represented by: reported as diverted to a plant fully pursuant to § 1006.7(d)) during the (1) Receipts of producer milk, regulated under another Federal order month, excluding the quantity of including producer milk diverted by the with respect to that portion of the milk producer milk received from a handler plant operator to other plants; so diverted that is assigned to Class I described in § 1000.9(c); (2) Receipts of milk from handlers under the provisions of such other (4) Any milk diverted in excess of the described in § 1000.9(c); order. limits prescribed in paragraphs (d)(3) (3) Receipts of fluid milk products and (4) of this section shall not be and bulk fluid cream products from § 1006.13 Producer milk. producer milk. If the diverting handler other pool plants; Producer milk means the skim milk or cooperative association fails to (4) Receipts of other source milk; (or the skim equivalent of components designate the dairy farmers’ deliveries (5) Inventories at the beginning and of skim milk) and butterfat contained in that will not be producer milk, no milk end of the month of fluid milk products milk of a producer that is: diverted by the handler or cooperative and bulk fluid cream products; and (a) Received by the operator of a pool association shall be producer milk; (6) The utilization or disposition of all plant directly from a producer or a (5) Diverted milk shall be priced at milk and milk products required to be handler described in § 1000.9(c). Any the location of the plant to which reported pursuant to this paragraph. milk picked up from the producer’s diverted; and (b) Each handler operating a partially farm tank in a tank truck under the (6) The delivery day requirements and regulated distributing plant shall report control of the operator of a pool plant the diversion percentages in paragraphs with respect to such plant in the same or a handler described in § 1000.9(c) but (d)(1) through (3) of this section may be manner as prescribed for reports which is not received at a plant until the increased or decreased by the market required by paragraph (a) of this section. following month shall be considered as administrator if the market Receipts of milk that would have been having been received by the handler administrator finds that such revision is producer milk if the plant had been 5038 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules fully regulated shall be reported in lieu Class Prices regulated under other Federal orders of producer milk. The report shall show and bulk concentrated fluid milk also the quantity of any reconstituted § 1006.50 Class prices, component prices, products from pool plants, plants Class I differential and price. skim milk in route disposition in the regulated under other Federal orders, marketing area. Class prices and component prices are and unregulated supply plants; described in § 1000.50. (c) Each handler described in (e) Add the amount obtained from The Class I differential shall be the multiplying the Class I price applicable § 1000.9(c) shall report: differential established for Hillsborough (1) The quantities of all skim milk and at the location of the nearest County, Florida, which is reported in unregulated supply plants from which butterfat contained in receipts of milk § 1000.52. The Class I price shall be the from producers; and an equivalent volume was received by price computed pursuant to § 1000.50(a) the pounds of skim milk and butterfat (2) The utilization or disposition of all for Hillsborough County, Florida. in receipts of concentrated fluid milk such receipts. § 1006.51 [Reserved] products assigned to Class I pursuant to (d) Each handler not specified in § 1000.43(d) and § 1000.44(a)(3)(i) and paragraphs (a) through (c) of this section § 1006.52 Adjusted Class I differentials. the pounds of skim milk and butterfat shall report with respect to its receipts See § 1000.52 of this chapter. subtracted from Class I pursuant to and utilization of milk and milk § 1000.44(a)(8) and the corresponding products in such manner as the market § 1006.53 Announcement of class prices step of § 1000.44(b), excluding such and component prices. administrator may prescribe. skim milk and butterfat in receipts of See § 1000.53 of this chapter. § 1006.31 Payroll reports. fluid milk products from an unregulated supply plant to the extent that an (a) On or before the 20th day after the § 1006.54 Equivalent price. See § 1000.54 of this chapter. equivalent amount of skim milk or end of each month, each handler butterfat disposed of to such plant by described in § 1000.9 (a) and (c) shall Uniform Price handlers fully regulated under any report to the market administrator its Federal milk order is classified and § 1006.60 Handler's value of milk. producer payroll for the month, in detail priced as Class I milk and is not used prescribed by the market administrator, For the purpose of computing the as an offset for any other payment showing for each producer the uniform price, the market administrator obligation under any order; information specified in § 1006.73(e). shall determine for each month the (f) Subtract, for reconstituted milk (b) Each handler operating a partially value of milk of each handler with made from receipts of nonfluid milk regulated distributing plant who elects respect to each of the handler’s pool products, an amount computed by to make payment pursuant to plants and of each handler described in multiplying $1.00 (but not more than § 1000.76(b) shall report for each dairy § 1000.9(c) as follows: the difference between the Class I price farmer who would have been a producer (a) Multiply the pounds of skim milk applicable at the location of the pool if the plant had been fully regulated in and butterfat in producer milk that were plant and the Class IV price) by the the same manner as prescribed for classified in each class pursuant to hundredweight of skim milk and reports required by paragraph (a) of this § 1000.44(c) by the applicable skim milk butterfat contained in receipts of section. and butterfat prices, and add the resulting amounts; nonfluid milk products that are § 1006.32 Other reports. allocated to Class I use pursuant to (b) Add the amounts obtained from § 1000.43(e); and (a) In addition to the reports required multiplying the pounds of skim milk (g) Exclude, for pricing purposes pursuant to §§ 1006.30 and 1006.31, and butterfat overage assigned to each under this section, receipts of nonfluid each handler shall report any class pursuant to § 1000.43 (b)(2) by the milk products that are distributed as information the market administrator respective skim milk and butterfat labeled reconstituted milk for which deems necessary to verify or establish prices applicable at the location of the payments are made to the producer- each handler’s obligation under the pool plant; settlement fund of another Federal order order. (c) Add the amount obtained from under § 1000.76(a)(5) or (c). multiplying the difference between the (b) [Reserved] Class III price for the preceding month § 1006.61 Computation of uniform price, Classification of Milk and the Class I price applicable at the uniform butterfat price and uniform skim location of the pool plant or the Class milk price. § 1006.40 Classes of utilization. II price, as the case may be, for the (a) Uniform price. For each month the See § 1000.40 of this chapter. current month by the hundredweight of market administrator shall compute the skim milk and butterfat subtracted from uniform price per hundredweight. If the § 1006.41 [Reserved] Class I and Class II pursuant to unreserved balance in the producer- § 1006.42 Classification of transfers and § 1000.44(a)(7) and the corresponding settlement fund to be included in the diversions. step of § 1000.44(b); computation is less than 2 cents per See § 1000.42 of this chapter. (d) Add the amount obtained from hundredweight of producer milk on all multiplying the difference between the reports, the report of any handler who § 1006.43 General classification rules. Class I price applicable at the location has not made payments required See § 1000.43 of this chapter. of the pool plant and the Class III price pursuant to § 1006.71 for the preceding by the hundredweight of skim milk and month shall not be included in the § 1006.44 Classification of producer milk. butterfat assigned to Class I pursuant to computation of the uniform price. The See § 1000.44 of this chapter. § 1000.43(d) and the hundredweight of report of such handler shall not be skim milk and butterfat subtracted from included in the computation for § 1006.45 Market administrator's reports Class I pursuant to § 1000.44(a)(3) (i) succeeding months until the handler and announcements concerning through (iii) and the corresponding step has made full payment of outstanding classification. of § 1000.44(b), excluding receipts of monthly obligations. Subject to the See § 1000.45 of this chapter. bulk fluid cream products from a plant aforementioned conditions, the market Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5039 administrator shall compute the Payments for Milk (B) Subtract the deduction for uniform price in the following manner: marketing services pursuant to (1) Combine into one total the values § 1006.70 Producer-settlement fund. § 1000.86; computed pursuant to § 1006.60 for all See § 1000.70 of this chapter. (C) Add or subtract for errors made in handlers required to file reports previous payments to the producer; and § 1006.71 Payments to the producer- (D) Subtract proper deductions prescribed in § 1006.30; settlement fund. (2) Add an amount equal to the sum authorized in writing by the producer. of the location adjustments computed The payments to the producer- (b) One day before partial and final pursuant to § 1006.75; settlement fund specified in § 1000.71 payments are due pursuant to paragraph (3) Add an amount equal to not less are due no later than the 12th day after (a) of this section, each pool plant than one-half of the unobligated balance the end of the month. operator shall pay a cooperative association for milk received as follows: in the producer-settlement fund; § 1006.72 Payments from the producer- (4) Add or subtract, as the case may settlement fund. (1) Partial payment to a cooperative association. For bulk milk/skimmed be, to obtain an all-producer milk test of See § 1000.72 of this chapter. 3.5 percent butterfat, the value of the milk received during the first 15 days of required pounds of butterfat times the § 1006.73 Payments to producers and to the month from a cooperative uniform butterfat price computed in cooperative associations. association in any capacity, except as the operator of a pool plant, the paragraph (b) of this section; (a) Each pool plant operator that is not payment shall be equal to the (5) Divide the resulting amount by the paying a cooperative association for hundredweight of milk received sum of the following for all handlers producer milk shall pay each producer multiplied by 90 percent of the included in these computations: as follows: preceding month’s uniform price, (i) The total hundredweight of (1) Partial payments. (i) For each adjusted for plant location pursuant to producer milk; and producer who has not discontinued (ii) The total hundredweight for § 1006.75; shipments as of the 15th day of the (2) Partial payment to a cooperative which a value is computed pursuant to month, payment shall be made so that § 1006.60(f); and association for milk transferred from its it is received by the producer on or pool plant. For bulk fluid milk products (6) Subtract not less than 4 cents not before the 20th day of the month for more than 5 cents from the price and bulk fluid cream products received milk received during the first 15 days of during the first 15 days of the month computed pursuant to paragraph (e) of the month at not less than the 85 this section. The result, rounded to the from a cooperative association in its percent of the preceding month’s capacity as the operator of a pool plant, nearest cent, shall be known as the uniform price, adjusted for plant ‘‘uniform price’’ for the month. the partial payment shall be at the pool location pursuant to § 1006.75 and plant operator’s estimated use value of (b) Uniform butterfat price. The proper deductions authorized in writing uniform butterfat price per pound, the milk using the most recent class by the producer; and prices available, adjusted for butterfat rounded to the nearest one-hundredth (ii) For each producer who has not cent, shall be obtained by multiplying value and plant location; discontinued shipments as of the last (3) Final payment to a cooperative the pounds of butterfat in producer milk day of the month, payment shall be allocated to each class pursuant to association for milk transferred from its made so that it is received by the pool plant. For bulk fluid milk products § 1000.44(b) by the respective class producer on or before the 5th day of the butterfat prices (Class I butterfat price and bulk fluid cream products received following month for milk received from during the month from a cooperative for Class I and the butterfat price for all the 16th to the last day of the month at other classes) and dividing the sum of association in its capacity as the not less than the 85 percent of the operator of a pool plant, the final such values by the total pounds of such preceding month’s uniform price, butterfat. payment shall be the classified value of adjusted for plant location pursuant to such milk as determined by multiplying (c) Uniform skim milk price. The 1006.75 and proper deductions uniform skim milk price per the pounds of milk assigned to each authorized in writing by the producer. class pursuant to § 1000.44 by the class hundredweight, rounded to the nearest (2) Final payment. For milk received cent, shall be the uniform price for the prices for the month, adjusted for plant during the month, payment shall be location and butterfat value, and month pursuant to pursuant to made so that it is received by each paragraph (a) of this section less the subtracting from this sum the partial producer one day after the payment date payment made pursuant to paragraph uniform butterfat price for the month required in § 1000.72 an amount pursuant to paragraph (b) of this section (b)(2) of this section. computed as follows: (4) Final payment to a cooperative multiplied by 3.5 pounds of butterfat, (i) Multiply the hundredweight of with the result divided by .965. association for bulk milk received producer milk received times the directly from producers’ farms. For bulk § 1006.62 Announcement of uniform price, uniform price for the month as adjusted milk received from a cooperative uniform butterfat price and uniform skim pursuant to § 1006.75; association during the month, including milk price. (ii) Multiply the hundredweight of the milk of producers who are not On or before the 11th day after the producer skim milk received times the members of such association and who end of the month, the market uniform skim milk price for the month; the market administrator determines administrator shall announce the (iii) Multiply the pounds of butterfat have authorized the cooperative following prices and information: received times the uniform butterfat association to collect payment for their (a) The uniform price pursuant to price for the month; milk, the final payment for such milk § 1006.61 for such month; (iv) Add the amounts computed in shall be an amount equal to the sum of (b) The uniform butterfat price paragraph (a)(2)(i), (ii), and (iii) of the the individual payments otherwise pursuant to § 1006.61(b) for such month; section, and from that sum: payable for such milk pursuant to and (A) Subtract the partial payment made paragraph (a)(2) of this section. (c) The uniform skim milk price pursuant to paragraph (a)(1) of this (c) If a handler has not received full pursuant to § 1006.61(c) for such month. section; payment from the market administrator 5040 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules pursuant to § 1006.72 by the payment location exceeds the Class I price 1007.45 Market administrator’s reports and date specified in paragraph (a) or (b) of specified in § 1006.50, the difference announcements concerning this section, the handler may reduce shall be added to the uniform price; and classification. payments pursuant to paragraphs (a) (b) The uniform price applicable for Class Prices and (b) of this section, but by not more other source milk shall be adjusted 1007.50 Class prices, component prices, than the amount of the underpayment. following the procedure specified in Class I differential and price. The payments shall be completed on the paragraph (a) of this section, except that 1007.51 [Reserved] next scheduled payment date after the adjusted uniform price shall not be 1007.52 Adjusted Class I differentials. receipt of the balance due from the less than the lowest announced class 1007.53 Announcement of class and market administrator. price. component prices. (d) If a handler claims that a required 1007.54 Equivalent price. payment to a producer cannot be made § 1006.76 Payments by a handler operating a partially regulated distributing Uniform Price because the producer is deceased or plant. 1007.60 Handler’s value of milk. cannot be located, or because the See § 1000.76 of this chapter. 1007.61 Computation of uniform price, cooperative association or its lawful uniform butterfat price, and uniform successor or assignee is no longer in § 1006.77 Adjustment of accounts. skim milk price. existence, the payment shall be made to See § 1000.77 of this chapter. 1007.62 Announcement of uniform price, the producer-settlement fund, and in the uniform butterfat price, and uniform event that the handler subsequently § 1006.78 Charges on overdue accounts. skim milk price. locates and pays the producer or a See § 1000.78 of this chapter. Payments for Milk lawful claimant, or in the event that the 1007.70 Producer-settlement fund. handler no longer exists and a lawful Adminstrative Assessment and Marketing Service Deduction 1007.71 Payments to the producer- claim is later established, the market settlement fund. administrator shall make the required § 1006.85 Assessment for order 1007.72 Payments from the producer- payment from the producer-settlement administration. settlement fund. 1007.73 Payments to producers and to fund to the handler or to the lawful See § 1000.85 of this chapter. claimant as the case may be. cooperative associations. (e) In making payments to producers § 1006.86 Deduction for marketing 1007.74 [Reserved] services. 1007.75 Plant location adjustments for pursuant to this section, each pool plant producer milk and nonpool milk. operator shall furnish each producer, See § 1000.86 of this chapter. 1007.76 Payments by a handler operating a except a producer whose milk was partially regulated distributing plant. received from a handler described in PART 1007ÐMILK IN THE SOUTHEAST 1007.77 Adjustment of accounts. § 1000.9(a) or (c), a supporting statement MARKETING AREA 1007.78 Charges on overdue accounts. in such form that it may be retained by SubpartÐOrder Regulating Handling Marketwide Service Payments the recipient which shall show: (1) The name, address, Grade A General Provisions 1007.80 Transportation credit balancing identifier assigned by a duly constituted fund. Sec. 1007.81 Payments to the transportation regulatory agency, and the payroll 1007.1 General provisions. credit balancing fund. number of the producer; Definitions 1007.82 Payments from the transportation (2) The month and dates that milk credit balancing fund. was received from the producer, 1007.2 Southeast marketing area. 1007.3 Route disposition. including the daily and total pounds of Administrative Assessment and Marketing 1007.4 Plant. Service Deduction milk received; 1007.5 Distributing plant. 1007.85 Assessment for order (3) The total pounds of butterfat in the 1007.6 Supply plant. producer’s milk; administration. 1007.7 Pool plant. 1007.86 Deduction for marketing services. (4) The minimum rate at which 1007.8 Nonpool plant. payment to the producer is required 1007.9 Handler. Authority: 7 U.S.C. 601–674. 1007.10 Producer-handler. pursuant to this order; SubpartÐOrder Regulating Handling (5) The rate used in making payment 1007.11 [Reserved] if the rate is other than the applicable 1007.12 Producer. General Provisions 1007.13 Producer milk. minimum rate; 1007.14 Other source milk. § 1007.1 General provisions. (6) The amount, or rate per 1007.15 Fluid milk product. hundredweight, and nature of each 1007.16 Fluid cream product. The terms, definitions, and provisions deduction claimed by the handler; and 1007.17 [Reserved] in part 1000 of this chapter apply to and (7) The net amount of payment to the 1007.18 Cooperative association. are hereby made a part of this order. producer or cooperative association. 1007.19 Commercial food processing establishment. Definitions § 1006.74 [Reserved] Handler Reports § 1007.2 Southeast marketing area. § 1006.75 Plant location adjustments for 1007.30 Reports of receipts and utilization. The marketing area means all territory producer milk and nonpool milk. 1007.31 Payroll reports. within the bounds of the following (a) The uniform price for producer 1007.32 Other reports. states and political subdivisions, milk shall be adjusted according to the Classification of Milk including all piers, docks and wharves location of the plant at which the milk connected therewith and all craft 1007.40 Classes of utilization. was physically received by subtracting 1007.41 [Reserved] moored thereat, and all territory from the price the amount by which the 1007.42 Classification of transfers and occupied by government (municipal, Class I price specified in § 1006.50 diversions. State or Federal) reservations, exceeds the Class I price at the plant’s 1007.43 General classification rules. installations, institutions, or other location. If the Class I price at the plant 1007.44 Classification of producer milk. similar establishments if any part Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5041 thereof is within any of the listed states plant and route disposition in the finding, the market administrator shall or political subdivisions: marketing area is at least 10 percent of investigate the need for the revision Alabama, Arkansas, Louisiana, and such receipts. Packaged fluid milk either on the market administrator’s Mississippi products that are transferred to a own initiative or at the request of distributing plant shall be considered as interested parties if the request is made All of the States of Alabama, Arkansas, Louisiana, and Mississippi. route disposition from the transferring in writing at least 15 days prior to the plant, rather than the receiving plant, date for which the requested revision is Florida Counties for the purpose of determining the desired effective. If the investigation Escambia, Okaloosa, Santa Rosa, and transferring plant’s pool status under shows that a revision might be Walton. this paragraph. appropriate, the market administrator Georgia Counties (b) Any distributing plant located in shall issue a notice stating that the the marketing area which during the revision is being considered and All of the State of Georgia except for the month processed a majority of its milk counties of Catoosa, Chattooga, Dade, Fannin, inviting written data, views, and Murray, Walker, and Whitfield. receipts into aseptically packaged fluid arguments. Any decision to revise an milk products. If the plant had no route applicable percentage must be issued in Kentucky Counties disposition in the marketing area during writing at least one day before the Allen, Ballard, Barren, Caldwell, Calloway, the month, the plant operator may effective date. Carlisle, Christian, Crittenden, Fulton, request nonpool status for the plant. (g) The term pool plant shall not Graves, Hickman, Livingston, Logan, Lyon, (c) A supply plant from which 50 apply to the following plants: Marshall, McCracken, Metcalfe, Monroe, percent of the total quantity of milk that Simpson, Todd, Trigg, and Warren. (1) A producer-handler plant; is physically received during the month (2) An exempt plant as defined in Missouri Counties from dairy farmers and handlers § 1000.8(e); Barry, Barton, Bollinger, Butler, Cape described in § 1000.9(c) is transferred to (3) A plant qualified pursuant to Girardeau, Carter, Cedar, Christian, Crawford, pool distributing plants. paragraph (a) of this section which is Dade, Dallas, Dent, Douglas, Dunklin, (d) A plant located within the not located within any Federal order Greene, Howell, Iron, Jasper, Laclede, marketing area that is operated by a marketing area, meets the pooling Lawrence, Madsion, McDonald, Mississippi, cooperative association if pool plant requirements of another Federal order, New Madrid, Newton, Oregon, Ozark, status under this paragraph is requested Pemiscot, Perry, Polk, Pulaski, Reynolds, and has had greater route disposition in for such plant by the cooperative such other Federal order marketing area Ripley, Scott, Shannon, St. Francois, association and during the month at Stoddard, Stone, Taney, Texas, Vernon, for 3 consecutive months; Washington, Wayne, Webster, and Wright. least 60 percent of the producer milk of (4) A plant qualified pursuant to members of such cooperative Tennessee Counties paragraph (a) of this section which is association is delivered directly from located in another Federal order All of the State of Tennessee except for the farms to pool distributing plants or is marketing area, meets the pooling counties of Anderson, Blount, Bradley, transferred to such plants as a fluid milk standards of the other Federal order, Campbell, Carter, Claiborne, Cocke, product from the cooperative’s plant. Cumberland, Grainger, Greene, Hamblen, and has not had a majority of its route (e) Two or more plants operated by disposition in this marketing area for 3 Hamilton, Hancock, Hawkins, Jefferson, the same handler and located within the Johnson, Knox, Loudon, Marion, McMinn, consecutive months or is locked into Meigs, Monroe, Morgan, Polk, Rhea, Roane, marketing area may qualify for pool pool status under such other Federal Scott, Sequatchie, Sevier, Sullivan, Unicoi, status as a unit by meeting the total and order without regard to its route Union, and Washington. in-area route disposition requirements disposition in any other Federal order specified in paragraph (a) of this section § 1007.3 Route disposition. marketing area; and and the following additional (5) A plant qualified pursuant to See § 1000.3 of this chapter. requirements: paragraph (c) of this section which also (1) At least one of the plants in the § 1007.4 Plant. meets the pooling requirements of unit must qualify as a pool plant See § 1000.4 of this chapter. another Federal order and from which pursuant to paragraph (a) of this section; greater qualifying shipments are made (2) Other plants in the unit must § 1007.5 Distributing plant. to plants regulated under such other process only Class I or Class II products See § 1000.5 of this chapter. order than are made to plants regulated and must be located in a pricing zone under this order, or such plant has § 1007.6 Supply plant. providing the same or a lower Class I automatic pooling status under such price than the price applicable at the See § 1000.6 of this chapter. other order. distributing plant included in the unit § 1007.7 Pool plant. pursuant to paragraph (e)(1) of this § 1007.8 Nonpool plant. Pool plant means a plant specified in section; and See § 1000.8 of this chapter. paragraphs (a) through (d) of this (3) A written request to form a unit, section, or a unit of plants as specified or to add or remove plants from a unit, § 1007.9 Handler. in paragraph (e) of this section, but must be filed with the market See § 1000.9 of this chapter. excluding a plant specified in paragraph administrator prior to the first day of the (g) of this section. The pooling month for which it is to be effective. § 1007.10 Producer-handler. standards described in paragraphs (a), (f) The applicable percentages in Producer-handler means a person (c), and (d) of this section are subject to paragraphs (a), (c), and (d) of this who: modification pursuant to paragraph (f) section may be increased or decreased (a) Operates a dairy farm and a of this section: up to 10 percentage points by the distributing plant from which there is (a) A distributing plant from which market administrator if the market monthly route disposition in excess of during the month the total route administrator finds that such revision is 150,000 pounds per month, unless the disposition is equal to 50 percent or necessary to assure orderly marketing person requests that the two be operated more of the total quantity of fluid milk and efficient handling of milk in the as separate entities with the distributing products physically received at such marketing area. Before making such a plant regulated under § 1007.7(a) and 5042 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules the farm operated as a producer under handler described in § 1000.9(c). Any that will not be producer milk, no milk § 1007.12; milk picked up from the producer’s diverted by the handler or cooperative (b) Receives no fluid milk products, farm tank in a tank truck under the association shall be producer milk; and acquires no fluid milk products for control of the operator of a pool plant (6) Diverted milk shall be priced at route disposition, from sources other or a handler described in § 1000.9(c) but the location of the plant to which than own farm production; which is not received at a plant until the diverted; and (c) Disposes of no other source milk following month shall be considered as (7) The delivery day requirements and as Class I milk except by increasing the having been received by the handler the diversion percentages in paragraphs nonfat milk solids content of the fluid during the month in which it is picked (d)(1) through (4) of this section may be milk products received from own farm up at the producer’s farm. All milk increased or decreased by the market production; received pursuant to this paragraph administrator if the market (d) Disposes of no fluid milk products shall be priced at the location of the administrator finds that such revision is using the distribution system of another plant where it is first physically necessary to assure orderly marketing handler; and received; and efficient handling of milk in the (e) Provides proof satisfactory to the (b) Received by a handler described in marketing area. Before making such a market administrator that the care and § 1000.9(c) in excess of the quantity finding, the market administrator shall management of the dairy animals and delivered to pool plants; investigate the need for the revision other resources necessary to produce all (c) Diverted by a pool plant operator either on the market administrator’s Class I milk handled, and the to another pool plant. Milk so diverted own initiative or at the request of processing, packaging, and distribution shall be priced at the location of the interested persons. If the investigation operations, are the producer-handler’s plant to which diverted; or shows that a revision might be own enterprise and are operated at the (d) Diverted by the operator of a pool appropriate, the market administrator producer-handler’s own risk. plant or a handler described in shall issue a notice stating that the § 1000.9(c) to a nonpool plant, subject to revision is being considered and § 1007.11 [Reserved] the following conditions: inviting written data, views, and (1) In any month of January through arguments. Any decision to revise an § 1007.12 Producer. June, not less than 4 days’ production of applicable percentage must be issued in (a) Except as provided in paragraph the producer whose milk is diverted is writing at least one day before the (b) of this section, producer means any physically received at a pool plant effective date. person who produces milk approved by during the month; a duly constituted regulatory agency for (2) In any month of July through § 1007.14 Other source milk. fluid consumption as Grade A milk and December, not less than 10 days’ See § 1000.14 of this chapter. whose milk (or components of milk) is: production of the producer whose milk § 1007.15 Fluid milk product. (1) Received at a pool plant directly is diverted is physically received at a from the producer or diverted by the pool plant during the month; See § 1000.15 of this chapter. plant operator in accordance with (3) The total quantity of milk so § 1007.16 Fluid cream product. § 1007.13; or diverted during the month by a See § 1000.16 of this chapter. (2) Received by a handler described in cooperative association shall not exceed § 1000.9(c). 33 percent during the months of July § 1007.17 [Reserved] (b) Producer shall not include: through December, and 50 percent § 1007.18 Cooperative association. (1) A producer-handler as defined in during the months of January through any Federal order; June, of the producer milk that the See § 1000.18 of this chapter. (2) A dairy farmer whose milk is cooperative association caused to be § 1007.19 Commercial food processing received at an exempt plant, excluding delivered to, and physically received at, establishment. producer milk diverted to the exempt pool plants during the month; See § 1000.19 of this chapter. plant pursuant to § 1007.13(d); (4) The operator of a pool plant that (3) A dairy farmer whose milk is is not a cooperative association may Handler Reports received by diversion at a pool plant divert any milk that is not under the § 1007.30 Reports of receipts and from a handler regulated under another control of a cooperative association that utilization. Federal order if the other Federal order diverts milk during the month pursuant Each handler shall report monthly so designates the dairy farmer as a to paragraph (d) of this section. The that the market administrator’s office producer under that order and that milk total quantity of milk so diverted during receives the report on or before the 7th is allocated by request to a utilization the month shall not exceed 33 percent day after the end of the month, in the other than Class I; and during the months of July through detail and on prescribed forms, as (4) A dairy farmer whose milk is December, or 50 percent during the follows: reported as diverted to a plant fully months of January through June, of the (a) With respect to each of its pool regulated under another Federal order producer milk physically received at plants, the quantities of skim milk and with respect to that portion of the milk such plant (or such unit of plants in the butterfat contained in or represented by: so diverted that is assigned to Class I case of plants that pool as a unit (1) Receipts of producer milk, under the provisions of such other pursuant to § 1007.7(e)) during the including producer milk diverted by the order. month, excluding the quantity of plant operator to other plants; producer milk received from a handler (2) Receipts of milk from handlers § 1007.13 Producer milk. described in § 1000.9(c); described in § 1000.9(c); Producer milk means the skim milk (5) Any milk diverted in excess of the (3) Receipts of fluid milk products (or the skim equivalent of components limits prescribed in paragraphs (d)(3) and bulk fluid cream products from of skim milk) and butterfat contained in and (4) of this section shall not be other pool plants; milk of a producer that is: producer milk. If the diverting handler (4) Receipts of other source milk; (a) Received by the operator of a pool or cooperative association fails to (5) Receipts of bulk milk from a plant plant directly from a producer or a designate the dairy farmers’ deliveries regulated under another Federal order, Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5043 except Federal Order 1005, for which a the same manner as prescribed for respect to each of the handler’s pool transportation credit is requested reports required by paragraph (a) of this plants and of each handler described in pursuant to § 1007.82; section. § 1000.9(c) as follows: (6) Receipts of producer milk (a) Multiply the pounds of skim milk described in § 1007.82(c)(2), including § 1007.32 Other reports. and butterfat in producer milk that were the identity of the individual producers (a) On or before the 20th day after the classified in each class pursuant to whose milk is eligible for the end of each month, each handler § 1000.44(c) by the applicable skim milk transportation credit pursuant to that described in § 1000.9(a) and (c) shall and butterfat prices, and add the paragraph and the date that such milk report to the market administrator any resulting amounts; was received; adjustments to transportation credit (b) Add the amounts obtained from (7) For handlers submitting requests as reported pursuant to multiplying the pounds of skim milk transportation credit requests, transfers § 1007.30(a)(5), (6), and (7). and butterfat overage assigned to each of bulk milk to nonpool plants, (b) In addition to the reports required class pursuant to § 1000.43(b)(2) by the including the dates that such milk was pursuant to §§ 1007.30, 31, and 32(a), respective skim milk and butterfat transferred; each handler shall report any prices applicable at the location of the (8) Inventories at the beginning and information the market administrator pool plant; end of the month of fluid milk products deems necessary to verify or establish (c) Add the amount obtained from and bulk fluid cream products; and each handler’s obligation under the multiplying the difference between the (9) The utilization or disposition of all order. Class III price for the preceding month and the Class I price applicable at the milk and milk products required to be Classification of Milk reported pursuant to this paragraph. location of the pool plant or the Class (b) Each handler operating a partially § 1007.40 Classes of utilization. II price, as the case may be, for the regulated distributing plant shall report See § 1000.40 of this chapter. current month by the hundredweight of with respect to such plant in the same skim milk and butterfat subtracted from manner as prescribed for reports § 1007.41 [Reserved] Class I and Class II pursuant to § 1000.44(a)(7) and the corresponding required by paragraph (a)(1), (a)(2), § 1007.42 Classification of transfers and (a)(3), (a)(4), and (a)(8) of this section. diversions. step of § 1000.44(b); (d) Add the amount obtained from Receipts of milk that would have been See § 1000.42 of this chapter. producer milk if the plant had been multiplying the difference between the fully regulated shall be reported in lieu § 1007.43 General classification rules. Class I price applicable at the location of producer milk. The report shall show See § 1000.43 of this chapter. of the pool plant and the Class III price also the quantity of any reconstituted by the hundredweight of skim milk and skim milk in route disposition in the § 1007.44 Classification of producer milk. butterfat assigned to Class I pursuant to marketing area. See § 1000.44 of this chapter. § 1000.43(d) and the hundredweight of (c) Each handler described in skim milk and butterfat subtracted from § 1007.45 Market administrator's reports § 1000.9(c) shall report: Class I pursuant to § 1000.44(a)(3)(i) and announcements concerning through (iii) and the corresponding step (1) The quantities of all skim milk and classification. butterfat contained in receipts of milk of § 1000.44(b), excluding receipts of See § 1000.45 of this chapter. from producers; bulk fluid cream products from a plant (2) The utilization or disposition of all Class Prices regulated under other Federal orders such receipts; and and bulk concentrated fluid milk (3) With respect to milk for which a § 1007.50 Class prices, component prices, products from pool plants, plants Class I differential and price. cooperative association is requesting a regulated under other Federal orders, transportation credit pursuant to Class prices and component prices are and unregulated supply plants; § 1007.82, all of the information described in § 1000.50. The Class I (e) Add the amount obtained from required in paragraph (a)(5), (a)(6), and differential shall be the differential multiplying the Class I price applicable (a)(7) of this section. established for Fulton County, Georgia, at the location of the nearest (d) Each handler not specified in which is reported in § 1000.52. The unregulated supply plants from which paragraphs (a) through (c) of this section Class I price shall be the price computed an equivalent volume was received by shall report with respect to its receipts pursuant to § 1000.50(a) for Fulton the pounds of skim milk and butterfat and utilization of milk and milk County, Georgia. in receipts of concentrated fluid milk products assigned to Class I pursuant to products in such manner as the market § 1007.51 [Reserved] administrator may prescribe. § 1000.43(d) and § 1000.44(a)(3)(i) and § 1007.52 Adjusted Class I differentials. the pounds of skim milk and butterfat § 1007.31 Payroll reports. See § 1000.52 of this chapter. subtracted from Class I pursuant to (a) On or before the 20th day after the § 1000.44(a)(8) and the corresponding end of each month, each handler § 1007.53 Announcement of class prices step of § 1000.44(b), excluding such described in § 1000.9(a) and (c) shall and component prices. skim milk and butterfat in receipts of report to the market administrator its See § 1000.53 of this chapter. fluid milk products from an unregulated producer payroll for the month, in detail supply plant to the extent that an § 1007.54 Equivalent price. prescribed by the market administrator, equivalent amount of skim milk or showing for each producer the See § 1000.54 of this chapter. butterfat disposed of to such plant by information specified in § 1007.73(e). Uniform Price handlers fully regulated under any (b) Each handler operating a partially Federal milk order is classified and regulated distributing plant who elects § 1007.60 Handler's value of milk. priced as Class I milk and is not used to make payment pursuant to For the purpose of computing the as an offset for any other payment § 1000.76(b) shall report for each dairy uniform price, the market administrator obligation under any order; farmer who would have been a producer shall determine for each month the (f) Subtract, for reconstituted milk if the plant had been fully regulated in value of milk of each handler with made from receipts of nonfluid milk 5044 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules products, an amount computed by nearest cent, shall be known as the uniform price, adjusted for plant multiplying $1.00 (but not more than ‘‘uniform price’’ for the month. location pursuant to § 1007.75 and the difference between the Class I price (b) Uniform butterfat price. The proper deductions authorized in writing applicable at the location of the pool uniform butterfat price per pound, by the producer; plant and the Class IV price) by the rounded to the nearest one-hundredth (2) Final payment. For milk received hundredweight of skim milk and cent, shall be obtained by multiplying during the month, payment shall be butterfat contained in receipts of the pounds of butterfat in producer milk made so that it is received by each nonfluid milk products that are allocated to each class pursuant to producer one day after the payment date allocated to Class I use pursuant to § 1000.44(b) by the respective class required in § 1000.72 an amount § 1000.43(e); and butterfat prices (Class I butterfat price computed as follows: (g) Exclude, for pricing purposes for Class I and the butterfat price for all (i) Multiply the hundredweight of under this section, receipts of nonfluid other classes) and dividing the sum of producer milk received times the milk products that are distributed as such values by the total pounds of such uniform price for the month as adjusted labeled reconstituted milk for which butterfat. pursuant to § 1007.75; payments are made to the producer- (c) Uniform skim milk price. The (ii) Multiply the hundredweight of settlement fund of another Federal order uniform skim milk price per producer skim milk received times the under § 1000.76(a)(5) or (c). hundredweight, rounded to the nearest uniform skim milk price for the month; cent, shall be the uniform price for the (iii) Multiply the pounds of butterfat § 1007.61 Computation of uniform price, month pursuant to paragraph (a) of this received times the uniform butterfat uniform butterfat price and uniform skim section less the uniform butterfat price price for the month; milk price. for the month pursuant to paragraph (b) (iv) Add the amounts computed in (a) Uniform price. For each month the of this section multiplied by 3.5 pounds paragraph (a)(2)(i), (ii), and (iii) of the market administrator shall compute the of butterfat, with the result divided by section, and from that sum: uniform price per hundredweight. If the .965. (A) Subtract the partial payment made unreserved balance in the producer- pursuant to paragraph (a)(1) of this settlement fund to be included in the § 1007.62 Announcement of uniform price, section; computation is less than 2 cents per uniform butterfat price and uniform skim (B) Subtract the deduction for hundredweight of producer milk on all milk price. marketing services pursuant to reports, the report of any handler who On or before the 11th day after the § 1000.86; has not made payments required end of the month, the market (C) Add or subtract for errors made in pursuant to § 1007.71 for the preceding administrator shall announce the previous payments to the producer; and month shall not be included in the following prices and information: (D) Subtract proper deductions computation of the uniform price. The (a) The uniform price pursuant to authorized in writing by the producer. report of such handler shall not be § 1007.61 for such month; (b) One day before partial and final included in the computation for (b) The uniform butterfat price payments are due pursuant to paragraph succeeding months until the handler pursuant to § 1007.61(b) for such month; (a) of this section, each pool plant has made full payment of outstanding and operator shall pay a cooperative monthly obligations. Subject to the (c) The uniform skim milk price association for milk received as follows: aforementioned conditions, the market pursuant to § 1007.61(c) for such month. (1) Partial payment to a cooperative administrator shall compute the Payments for Milk association. For bulk milk/skimmed uniform price in the following manner: milk received during the first 15 days of (1) Combine into one total the values § 1007.70 Producer-settlement fund. the month from a cooperative computed pursuant to § 1007.60 for all See § 1000.70 of this chapter. association in any capacity, except as handlers required to file reports the operator of a pool plant, the § 1007.71 Payments to the producer- payment shall be equal to the prescribed in § 1007.30; settlement fund. (2) Add an amount equal to the sum hundredweight of milk received of the location adjustments computed The payments to the producer- multiplied by 90 percent of the pursuant to § 1007.75; settlement fund specified in § 1000.71 preceding month’s uniform price, (3) Add an amount equal to not less are due no later than the 12th day after adjusted for plant location pursuant to than one-half of the unobligated balance the end of the month. § 1007.75; in the producer-settlement fund; § 1007.72 Payments from the producer- (2) Partial payment to a cooperative (4) Add or subtract, as the case may settlement fund. association for milk transferred from its be, to obtain an all-producer milk test of See § 1000.72 of this chapter. pool plant. For bulk fluid milk products 3.5 percent butterfat, the value of the and bulk fluid cream products received required pounds of butterfat times the § 1007.73 Payments to producers and to during the first 15 days of the month uniform butterfat price computed in cooperative associations. from a cooperative association in its paragraph (b) of this section; (a) Each pool plant operator that is not capacity as the operator of a pool plant, (5) Divide the resulting amount by the paying a cooperative association for the partial payment shall be at the pool sum of the following for all handlers producer milk shall pay each producer plant operator’s estimated use value of included in these computations: as follows: the milk using the most recent class (i) The total hundredweight of (1) Partial payment. For each prices available, adjusted for butterfat producer milk; and producer who has not discontinued value and plant location; (ii) The total hundredweight for shipments as of the 23rd day of the (3) Final payment to a cooperative which a value is computed pursuant to month, payment shall be made so that association for milk transferred from its § 1007.60(f); and it is received by the producer on or pool plant. For bulk fluid milk products (6) Subtract not less than 4 cents not before the 26th day of the month for and bulk fluid cream products received more than 5 cents from the price milk received during the first 15 days of during the month from a cooperative computed pursuant to paragraph (e) of the month at not less than the 90 association in its capacity as the this section. The result, rounded to the percent of the preceding month’s operator of a pool plant, the final Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5045 payment shall be the classified value of including the daily and total pounds of pay to the market administrator a such milk as determined by multiplying milk received; transportation credit balancing fund the pounds of milk assigned to each (3) The total pounds of butterfat in the assessment determined by multiplying class pursuant to § 1000.44 by the class producer’s milk; the pounds of Class I producer milk prices for the month, adjusted for plant (4) The minimum rate at which assigned pursuant to § 1000.44 by $0.07 location and butterfat value, and payment to the producer is required per hundredweight or such lesser subtracting from this sum the partial pursuant to this order; amount as the market administrator payment made pursuant to paragraph (5) The rate used in making payment deems necessary to maintain a balance (b)(2) of this section. if the rate is other than the applicable in the fund equal to the total (4) Final payment to a cooperative minimum rate; transportation credits disbursed during association for bulk milk received (6) The amount, or rate per the prior June–January period. In the directly from producers’ farms. For bulk hundredweight, and nature of each event that during any month of the milk received from a cooperative deduction claimed by the handler; and June–January period the fund balance is association during the month, including (7) The net amount of payment to the insufficient to cover the amount of the milk of producers who are not producer or cooperative association. credits that are due, the assessment should be based upon the amount of members of such association and who § 1007.74 [Reserved] the market administrator determines credits that would have been disbursed have authorized the cooperative § 1007.75 Plant location adjustments for had the fund balance been sufficient. association to collect payment for their producer milk and nonpool milk. (b) The market administrator shall milk, the final payment for such milk (a) The uniform price for producer announce publicly on or before the 5th shall be an amount equal to the sum of milk shall be adjusted according to the day of the month the assessment the individual payments otherwise location of the plant at which the milk pursuant to paragraph (a) of this section payable for such milk pursuant to was physically received by subtracting for the following month. paragraph (a)(2) of this section. from the price the amount by which the § 1007.82 Payments from the (c) If a handler has not received full Class I price specified in § 1007.50 transportation credit balancing fund. payment from the market administrator exceeds the Class I price at the plant’s (a) Payments from the transportation pursuant to § 1007.72 by the payment location. If the Class I price at the plant credit balancing fund to handlers and date specified in paragraph (a) or (b) of location exceeds the Class I price cooperative associations requesting this section, the handler may reduce specified in § 1007.50, the difference transportation credits shall be made as payments pursuant to paragraphs (a) shall be added to the uniform price; and follows: and (b) of this section, but by not more (b) The uniform price applicable for (1) On or before the 13th day after the than the amount of the underpayment. other source milk shall be adjusted end of each of the months of July The payments shall be completed on the following the procedure specified in through December and any other month next scheduled payment date after paragraph (a) of this section, except that in which transportation credits are in receipt of the balance due from the the adjusted uniform price shall not be effect pursuant to paragraph (b) of this market administrator. less than the lowest announced class section, the market administrator shall (d) If a handler claims that a required price. pay to each handler that received, and payment to a producer cannot be made reported pursuant to § 1007.30(a)(5), because the producer is deceased or § 1007.76 Payments by a handler operating a partially regulated distributing bulk milk transferred from a plant fully cannot be located, or because the plant. regulated under another Federal order cooperative association or its lawful as described in paragraph (c)(1) of this See § 1000.76 of this chapter. successor or assignee is no longer in section or that received, and reported existence, the payment shall be made to § 1007.77 Adjustment of accounts. pursuant to § 1007.30(a)(6), milk the producer-settlement fund, and in the See § 1000.77 of this chapter. directly from producers’ farms as event that the handler subsequently specified in paragraph (c)(2) of this locates and pays the producer or a § 1007.78 Charges on overdue accounts. section, a preliminary amount lawful claimant, or in the event that the See § 1000.78 of this chapter. determined pursuant to paragraph (d) of handler no longer exists and a lawful this section to the extent that funds are Marketwide Service Payments claim is later established, the market available in the transportation credit administrator shall make the required § 1007.80 Transportation credit balancing balancing fund. If an insufficient payment from the producer-settlement fund. balance exists to pay all of the credits fund to the handler or to the lawful The market administrator shall computed pursuant to this section, the claimant as the case may be. maintain a separate fund known as the market administrator shall distribute the (e) In making payments to producers Transportation Credit Balancing Fund balance available in the transportation pursuant to this section, each pool plant into which shall be deposited the credit balancing fund by reducing operator shall furnish each producer, payments made by handlers pursuant to payments prorata using the percentage except a producer whose milk was § 1007.81 and out of which shall be derived by dividing the balance in the received from a handler described in made the payments due handlers fund by the total credits that are due for § 1000.9 (a) or (c), a supporting pursuant to § 1007.82. Payments due a the month. The amount of credits statement in such form that it may be handler shall be offset against payments resulting from this initial proration shall retained by the recipient which shall due from the handler. be subject to audit adjustment pursuant show: to paragraph (a)(2) of this section; (1) The name, address, Grade A § 1007.81 Payments to the transportation (2) The market administrator shall identifier assigned by a duly constituted credit balancing fund. accept adjusted requests for regulatory agency, and the payroll (a) On or before the 12th day after the transportation credits on or before the number of the producer; end of the month, each handler 20th day of the month following the (2) The month and dates that milk operating a pool plant and each handler month for which such credits were was received from the producer, specified in § 1000.9 (a) and (c) shall requested pursuant to § 1007.32(a). After 5046 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules such date, a preliminary audit will be (i) The quantity of such milk that section from the amount computed in conducted by the market administrator, shall be eligible for the transportation paragraph (d)(2)(ii) of this section; and who will recalculate any necessary credit shall be determined by (v) Multiply the remainder computed proration of transportation credit multiplying the total pounds of milk in paragraph (d)(2)(iv) of this section by payments for the preceding month received from producers meeting the the hundredweight of milk described in pursuant to paragraph (a) of this section. conditions of this paragraph by the paragraph (d)(2) of this section. Handlers will be promptly notified of an lower of: (3) For the remaining milk described overpayment of credits based upon this (A) The marketwide estimated Class I in paragraph (c)(2) of this section after final computation and remedial utilization of all handlers for the month computations described in paragraph payments to or from the transportation pursuant to § 1000.45(a); or (d)(1) of this section, the market credit balancing fund will be made on (B) The Class I utilization of all administrator shall: producer milk of the pool plant operator or before the next payment date for the (i) Determine an origination point for receiving the milk after the following month; each load of milk by locating the nearest (3) Transportation credits paid computations described in § 1000.44; city to the last producer’s farm from pursuant to paragraphs (a)(1) and (2) of (ii) The dairy farmer was not a which milk was picked up for delivery this section shall be subject to final ‘‘producer’’ under this order during to the receiving pool plant. verification by the market administrator more than 2 of the immediately Alternatively, the milk hauler that is pursuant to § 1000.77. Adjusted preceding months of January through transporting the milk of producers payments to or from the transportation June and not more than 50 percent of described in paragraph (c)(2) of this credit balancing fund will remain the production of the dairy farmer section may establish an origination subject to the final proration established during those 2 months, in aggregate, was point following the last farm pickup by pursuant to paragraph (a)(2) of this received as producer milk under this stopping at the nearest independently- section; and order during those 2 months. However, operated truck stop with a certified (4) In the event that a qualified if January and/or June are months in truck scale and obtaining a weight cooperative association is the which transportation credits are certificate indicating the weight of the responsible party for whose account disbursed pursuant to paragraph (a) of truck and its contents, the date and time such milk is received and written this section, these months shall not be of weighing, and the location of the documentation of this fact is provided included in the 2-month limit provided truck stop; to the market administrator pursuant to in this paragraph; and § 1007.30(c)(3) prior to the date payment (iii) The farm on which the milk was (ii) Determine the shortest hard- is due, the transportation credits for produced is not located within the surface highway distance between the such milk computed pursuant to this specified marketing area of this order or receiving pool plant and the truck stop section shall be made to such the marketing area of Federal Order or city, as the case may be; cooperative association rather than to 1005. (iii) Subtract 85 miles from the the operator of the pool plant at which (d) Transportation credits shall be mileage so determined; the milk was received. computed as follows: (iv) Multiply the remaining miles so (b) The market administrator may (1) The market administrator shall computed by 0.35 cent; extend the period during which subtract from the pounds of milk (v) If the origination point determined transportation credits are in effect (i.e., described in paragraphs (c)(1) and (2) of pursuant to paragraph (d)(3)(i) of this the transportation credit period) to the this section the pounds of bulk milk section is in a Federal order marketing months of January and June if a written transferred from the pool plant receiving area, subtract the Class I price request to do so is received 15 days the supplemental milk if milk was applicable at the origination point prior to the beginning of the month for transferred to a nonpool plant on the pursuant to the provisions of such other which the request is made and, after same calendar day that the order (as if the origination point were a conducting an independent supplemental milk was received. For plant location) from the Class I price investigation, finds that such extension this purpose, the transferred milk shall applicable at the distributing plant is necessary to assure the market of an be subtracted from the most distant load receiving the milk. If the origination adequate supply of milk for fluid use. of supplemental milk received, and then point is not in any Federal order Before making such a finding, the in sequence with the next most distant marketing area, determine the Class I market administrator shall notify the load until all of the transfers have been price at the origination point based Director of the Dairy Division and all offset; upon the provisions of this order and handlers in the market that an extension (2) With respect to the pounds of milk subtract this price from the Class I price is being considered and invite written described in paragraph (c)(1) of this applicable at the distributing plant data, views, and arguments. Any section that remain after the receiving the milk; decision to extend the transportation computations described in paragraph (vi) Subtract any positive difference credit period must be issued in writing (d)(1) of this section, the market computed in paragraph (d)(3)(v) of this prior to the first day of the month for administrator shall: section from the amount computed in which the extension is to be effective. (i) Determine the shortest hard-surface paragraph (d)(3)(iv) of this section; and (c) Transportation credits shall apply highway distance between the shipping (vii) Multiply the remainder to the following milk: plant and the receiving plant; (1) Bulk milk received from a plant (ii) Multiply the number of miles so computed in paragraph (d)(3)(vi) by the regulated under another Federal order, determined by 0.35 cent; hundredweight of milk described in except Federal Orders 1005, and (iii) Subtract the other order’s Class I paragraph (d)(3) of this section. allocated to Class I milk pursuant to price applicable at the shipping plant’s Administrative Assessment and § 1000.44(a)(12); and location from the Class I price Marketing Service Deduction (2) Bulk milk received directly from applicable at the receiving plant as the farms of dairy farmers at pool specified in § 1007.53; § 1007.85 Assessment for order distributing plants subject to the (iv) Subtract any positive difference administration. following conditions: computed in paragraph (d)(2)(iii) of this See § 1000.85 of this chapter. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5047

§ 1007.86 Deduction for marketing 1030.75 Plant location adjustments for § 1030.4 Plant. services. producer milk and nonpool milk. See § 1000.4 of this chapter. See § 1000.86 of this chapter. 1030.76 Payments by a handler operating a partially regulated distributing plant. § 1030.5 Distributing plant. PART 1030ÐMILK IN THE UPPER 1030.77 Adjustment of accounts. See § 1000.5 of this chapter. MIDWEST MARKETING AREA 1030.78 Charges on overdue accounts. § 1000.6 Supply plant. Administrative Assessment and Marketing SubpartÐOrder Regulating Handling Service Deduction See § 1000.6 of this chapter. General Provisions 1030.85 Assessment for order § 1030.7 Pool plant. Sec. administration. Pool plant means a plant, unit of 1030.86 Deduction for marketing services. 1030.1 General provisions. plants, or a system of plants as specified Definitions Authority: 7 U.S.C. 601–674. in paragraphs (a) through (f) of this section. The pooling standards SubpartÐOrder Regulating Handling 1030.2 Upper Midwest marketing area. described in paragraphs (a), (c), (d), (e), 1030.3 Route disposition. 1030.4 Plant. General Provisions and (f) of this section are subject to 1030.5 Distributing plant. modification pursuant to paragraph (g) § 1030.1 General provisions. 1030.6 Supply plant. of this section: 1030.7 Pool plant. The terms, definitions, and provisions (a) A distributing plant from which 1030.8 Nonpool plant. in Part 1000 of this chapter apply to and during the month: 1030.9 Handler. are hereby made a part of this order. (1) Total route disposition is equal to 1030.10 Producer-handler. 15 percent of more of the total quantity Definitions 1030.11 [Reserved] of bulk fluid milk products physically 1030.12 Producer. § 1030.2 Upper Midwest marketing area. received at the plant; 1030.13 Producer milk. The marketing area means all territory (2) Route disposition in the marketing 1030.14 Other source milk. area is at least 15 percent of total route 1030.15 Fluid milk product. within the bounds of the following 1030.16 Fluid cream product. states and political subdivisions, disposition; and 1030.17 [Reserved] including all piers, docks, and wharves (3) For purposes of this section, 1030.18 Cooperative association. connected therewith and all craft packaged fluid milk products that are transferred to a distributing plant shall 1030.19 Commercial food processing moored thereat, and all territory be considered as route disposition from establishment. occupied by government (municipal, the transferring plant, rather than the State, or Federal) reservations, Handler Reports receiving plant, for the single purpose of installations, institutions, or other 1030.30 Reports of receipts and utilization. qualifying the transferring plant as a similar establishments if any part 1030.31 Payroll reports. pool distributing plant. 1030.32 Other reports. thereof is within any of the listed states (b) A distributing plant located in the or political subdivisions: Classification of Milk marketing area at which the majority of Illinois Counties milk received is processed into 1030.40 Classes of utilization. Boone, Carroll, Cook, De Kalb, Du Page, Jo aseptically packaged fluid milk 1030.41 [Reserved] Daviess (except the city of East Dubuque), products unless there are no sales from 1030.42 Classification of transfers and Kane, Kendall, Lake, Lee, McHenry, Ogle, the plant into any marketing area and diversions. Stephenson, Whiteside (the townships of the plant operator in writing requests 1030.43 General classification rules. Caloma, Hahnaman, Hopkins, Hume, Jordan, 1030.44 Classification of producer milk. nonpool plant status for the plant for the Montmorency, Sterling, and Tampico only), month. 1030.45 Market administrator’s reports and Will, and Winnebago. announcements concerning (c) A supply plant from which the classification. Iowa Counties quantity of bulk fluid milk products shipped to, received at, and physically Class Prices Howard, Kossuth, Mitchell (except the city of Osage), Winnebago, Winneshiek, and unloaded into plants described in 1030.50 Class and component prices. Worth. paragraph (a) or (b) of this section as a 1030.51 Class I differential and price. Michigan Counties percent of the Grade A milk received at 1030.52 Adjusted Class I differentials. the plant from dairy farmers (except 1030.53 Announcement of class prices and Delta, Dickinson, Gogebic, Iron, dairy farmers described in § 1030.12(b)) Menominee, and Ontonagon. component prices. and handlers described in § 1000.9(c), as 1030.54 Equivalent price. Minnesota 1030.55 Transfer credits and assembly reported in § 1030.30(a), is not less than credits. All counties except Lincoln, Nobles, 10 percent of the milk received from Pipestone, and Rock. dairy farmers, including milk diverted Producer Price Differential North Dakota Counties pursuant to § 1030.13, subject to the 1030.60 Handler’s value of milk. following conditions: Barnes, Cass, Cavalier, Dickey, Grand (1) Qualifying shipments pursuant to 1030.61 Computation of producer price Forks, Griggs, La Moure, Nelson, Pembina, differential. Ramsey, Ransom, Richland, Sargent, Steele, this paragraph may be made to the 1030.62 Announcement of producer prices. Traill, and Walsh. following plants, except whenever the Payments for Milk authority provided in paragraph (g) of South Dakota Counties this section is applied to increase the 1030.70 Producer-settlement fund. Brown, Day, Edmunds, Grant, Marshall, shipping requirements specified in this 1030.71 Payments to the producer- McPherson, Roberts, and Walworth. section, only shipments to pool plants settlement fund. 1030.72 Payments from the producer- Wisconsin Counties described in § 1030.7(a) and (b), and settlement fund. All counties except Crawford and Grant. units described in § 1030.7(e) shall 1030.73 Payments to producers and to count as qualifying shipments for the cooperative associations. § 1030.3 Route disposition. purpose of meeting the increased 1030.74 [Reserved] See § 1000.3 of this chapter. shipments: 5048 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

(i) Pool plants described in maintain pool status. Cooperative investigation shows that a revision § 1030.7(a), (b) and (e); associations may not use shipments might be appropriate, a notice shall be (ii) Plants of producer-handlers; pursuant to § 1000.9(c) to qualify plants issued stating that a revision is being (iii) Partially regulated distributing located outside the marketing area; considered and inviting data, views, and plants, except that credit for such (2) The handler(s) establishing the arguments. If the market administrator shipments shall be limited to the system submits a written request to the determines that an adjustment to the amount of such milk classified as Class market administrator on or before July shipping percentages is necessary, the I at the transferee plant; and 15 requesting that such plants qualify as market administrator shall notify the (iv) Distributing plants fully regulated a system for the period of August industry within one day of the effective under other Federal orders, except that through July of the following year. Such date of such adjustment. credit for shipments to such plants shall request will contain a list of the plants (h) The term pool plant shall not be limited to the quantity shipped to participating in the system in the order, apply to the following plants: pool distributing plants during the beginning with the last plant, in which (1) A producer-handler as defined month and credits for shipments to the plants will be dropped from the under any Federal order; other order plants shall not include any system if the system fails to qualify. (2) An exempt plant as defined in such shipments made on the basis of Each plant that qualifies as a pool plant § 1000.8(e); agreed-upon Class II, Class III, or Class within a system shall continue each (3) A plant located within the IV utilization. month as a plant in the system through marketing area and qualified pursuant (2) The operator of a supply plant may the following July unless the handler(s) to paragraph (a) or (e) of this section include as qualifying shipments establishing the system submits a which meets the pooling requirements deliveries to pool distributing plants written request to the market of another Federal order, and from and deliveries to plants described in administrator that the plant be deleted which more than 50 percent of its route § 1030.7(e) directly from farms of from the system or that the system be disposition has been in the other producers pursuant to § 1030.13(c). discontinued. Any plant that has been Federal order marketing area for three (d) [Reserved] so deleted from a system, or that has consecutive months; (e) Two or more plants operated by failed to qualify in any month, will not (4) A plant located outside the the same handler and located in the be part of any system for the remaining marketing area and qualified pursuant marketing area may qualify for pool months through July. The handler(s) to paragraph (a) of this section that status as a unit by meeting the total and that established a system may add a meets the pooling requirements of in-area route disposition requirements plant operated by such handler(s) to a another Federal order and has had of a pool distributing plant specified in system, if such plant has been a pool greater sales in such other Federal paragraph (a) of this section and subject plant each of the six prior months and order’s marketing area for 3 consecutive to the following additional would otherwise be eligible to be in a months; requirements: system, upon written request to the (5) A plant located in another Federal (1) At least one of the plants in the market administrator no later than the order marketing area and qualified unit must qualify as a pool plant 15th day of the prior month. In the pursuant to paragraph (a) of this section pursuant to paragraph (a) of this section; event of an ownership change or that meets the pooling requirements of (2) Other plants in the unit must business failure of a handler that is a such other Federal order and does not process Class I or Class II products, participant in a system, the system may have a majority of its route distribution using 50 percent or more of the total be reorganized to reflect such changes in this marketing area for 3 consecutive Grade A fluid milk products received in by submitting a written request to file a months or if the plant is required to be bulk form at such plant or diverted new marketing agreement with the regulated under such other Federal therefrom by the plant operator in Class market administrator; and order without regard to its route I or Class II products; and (3) If a system fails to qualify under disposition in any other Federal order (3) The operator of the unit has filed the requirements of this paragraph, the marketing area; a written request with the market handler responsible for qualifying the (6) A plant qualified pursuant to administrator prior to the first day of the system shall notify the market paragraph (c) of this section which also month for which such status is desired administrator which plant or plants will meets the pooling requirements of to be effective. The unit shall continue be deleted from the system so that the another Federal order and from which from month-to-month thereafter without remaining plants may be pooled as a greater qualifying shipments are made further notification. The handler shall system. If the handler fails to do so, the to plants regulated under the other notify the market administrator in market administrator shall exclude one Federal order than are made to plants writing prior to the first day of any or more plants, beginning at the bottom regulated under this order, or the plant month for which termination or any of the list of plants in the system and has automatic pooling status under the change of the unit is desired. continuing up the list as necessary until other Federal order; and (f) A system of supply plants may be the deliveries are sufficient to qualify (7) That portion of a regulated plant qualified for pooling by the association the remaining plants in the system. designated as a nonpool plant that is of two or more supply plants operated (g) The performance standards of physically separate and operated by one or more handlers by meeting the paragraphs (a), (c), (d), (e) and (f) of this separately from the pool portion of such applicable percentage requirements of section may be increased or decreased, plant. The designation of a portion of a paragraph (c) of this section in the same for part or all of the marketing area, by regulated plant as a nonpool plant must manner as a single plant and subject to the market administrator if found be requested in advance and in writing the following additional requirements: necessary to obtain needed shipments or by the handler and must be approved by (1) Each plant in the system is located to prevent uneconomic shipments. the market administrator. within the marketing area, or was a pool Before making a finding that a change is (i) Any plant that qualifies as a pool supply plant pursuant to § 1068.7(b) for necessary the market administrator shall plant in each of the immediately each of the three months immediately investigate the need for revision, either preceding three months pursuant to preceding the effective date of this on such person’s own initiative or at the paragraph (a) of this section or the paragraph so long as it continues to request of interested persons. If such shipping percentages in paragraph (c) of Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5049 this section that is unable to meet such § 1030.7(a) and the farm operated as a (d) Diverted by the operator of a pool performance standards for the current producer under § 1030.12. plant or a cooperative association month because of unavoidable described in § 1000.9(c) to a nonpool circumstances determined by the market § 1030.11 [Reserved] plant, subject to the following administrator to be beyond the control § 1030.12 Producer. conditions: of the handler operating the plant, such (a) Except as provided in paragraph (1) Milk of a dairy farmer shall not be as a natural disaster (ice storm, wind (b) of this section, producer means any eligible for diversion unless at least one storm, flood), fire, breakdown of person who produces milk approved by day’s production of such dairy farmer is equipment, or work stoppage, shall be a duly constituted regulatory agency for physically received as producer milk at considered to have met the minimum fluid consumption as Grade A milk and a pool plant during the first month the performance standards during the whose milk is: dairy farmer is a producer. If a dairy period of such unavoidable (1) Received at a pool plant directly farmer loses producer status under this circumstances, but such relief shall not from the producer or diverted by the order (except as a result of a temporary be granted for more than two plant operator in accordance with loss of Grade A approval or as a result consecutive months. § 1030.13; or of the handler of the dairy farmer’s milk (2) Received by a handler described in failing to pool the milk under any § 1030.8 Nonpool plant. § 1000.9(c). order), the dairy farmer’s milk shall not See § 1000.8 of this chapter. (b) Producer shall not include: be eligible for diversion unless at least § 1030.9 Handler. (1) A producer-handler as defined in one day’s production of the dairy farmer any Federal order; has been physically received as See § 1000.9 of this chapter. (2) A dairy farmer whose milk is producer milk at a pool plant during the § 1030.10 Producer-handler. received at an exempt plant, excluding first month the dairy farmer is re- producer milk diverted to the exempt Except as provided in paragraph (g) of associated with the market; plant pursuant to § 1030.13(d); this section, producer-handler means a (2) The quantity of milk delivered to (3) A dairy farmer whose milk is person who: plants described in § 1030.7(c)(1) as a received by diversion at a pool plant (a) Operates a dairy farm and a percentage of the total milk accounted from a handler regulated under another distributing plant from which there is for by the cooperative association Federal order if the other Federal order monthly route disposition in excess of described in § 1000.9(c) must be at least designates the dairy farmer as a 150,000 pounds during the month; 10 percent, subject to § 1030.7(g); producer under that order and that milk (b) Receives no fluid milk products (3) Diverted milk shall be priced at is allocated by request to a utilization from sources other than own farm the location of the plant to which other than Class I; and diverted. production, pool handlers, and plants (4) A dairy farmer whose milk is fully regulated under another Federal reported as diverted to a plant fully § 1030.14 Other source milk. order; regulated under another Federal order See § 1000.14 of this chapter. (c) Receives at its plant or acquires for with respect to that portion of the milk route disposition no more than 150,000 so diverted that is assigned to Class I § 1030.15 Fluid milk product. pounds of fluid milk products from under the provisions of such other See § 1000.15 of this chapter. handlers fully regulated under any order. Federal order. This limitation shall not § 1030.16 Fluid cream product. apply if the producer-handler’s own § 1030.13 Producer milk. See § 1000.16 of this chapter. farm production is less than 150,000 Producer milk means the skim milk pounds during the month. (or the skim equivalent of components § 1030.18 Cooperative association. (d) Disposes of no other source milk of skim milk), including nonfat See § 1000.18 of this chapter. as Class I milk except by increasing the components, and butterfat in milk of a nonfat milk solids content of the fluid § 1030.19 Commercial food processing producer that is: establishment. milk products received from own farm (a) Received by the operator of a pool production or pool handlers; plant directly from a producer or a See § 1000.19 of this chapter. (e) Disposes of no fluid milk products handler described in § 1000.9(c). Any Handler Reports using the distribution system of another milk picked up from the producer’s handler except for direct deliveries to farm tank in a tank truck under the § 1030.30 Reports of receipts and retail outlets or to a pool handler’s control of the operator of a pool plant utilization. plant; or a handler described in § 1000.9(c) but Each handler shall report monthly so (f) Provides proof satisfactory to the which is not received at a plant until the that the market administrator’s office market administrator that the care and following month shall be considered as receives the report on or before the 9th management of the dairy animals and having been received by the handler day after the end of the month, in the other resources necessary to produce all during the month in which it is picked detail and on the prescribed forms, as Class I milk handled (excluding receipts up at the producer’s farm. All milk follows: from handlers fully regulated under any received pursuant to this paragraph (a) Each handler that operates a pool Federal order) and the processing, shall be priced at the location of the plant pursuant to § 1030.7 and each packaging, and distribution operations plant where it is first physically handler described in § 1000.9(c) shall are the producer-handler’s own received; report for each of its operations the enterprise and at its own risk; and (b) Received by a handler described in following information: (g) Producer-handler shall not include § 1000.9(c) in excess of the quantity (1) Product pounds, pounds of any producer who also operates a delivered to pool plants; butterfat, pounds of protein, pounds of distributing plant if the producer- (c) Diverted by a pool plant operator solids-not-fat other than protein (other handler so requests that the two be to another pool plant. Milk so diverted solids), and the value of the somatic cell operated as separate entities with the shall be priced at the location of the adjustment pursuant to § 1000.50(p), distributing plant regulated under plant to which diverted; or contained in or represented by: 5050 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

(i) Receipts of producer milk, each handler’s obligation under the (d) For each handler operating a pool including producer milk diverted by the order. distributing plant pursuant to handler; and § 1030.7(a) or (b), a procurement credit Classification of Milk (ii) Receipts of milk from handlers for bulk fluid milk received shall be described in § 1000.9(c); § 1030.40 Classes of utilization. calculated by multiplying the producer (2) Product pounds and pounds of See § 1000.40 of this chapter. milk classified as Class I at the pool butterfat contained in: distributing plant by 8 cents per (i) Receipts of fluid milk products and § 1030.42 Classification of transfers and hundredweight. bulk fluid cream products from other diversions. (e) For purposes of this section, the pool plants; See § 1000.42 of this chapter. distances to be computed shall be (ii) Receipts of other source milk; and § 1000.43 General classification rules. determined by the market administrator (iii) Inventories at the beginning and using the shortest available state and/or end of the month of fluid milk products See § 1000.43 of this chapter. Federal highway mileage. Mileage and bulk fluid cream products; § 1000.44 Classification of producer milk. determinations are subject to (3) The utilization or disposition of all See § 1000.44 of this chapter. redetermination at all times. In the milk and milk products required to be event a handler requests a reported pursuant to this paragraph; and § 1000.45 Market administrator's reports redetermination of the mileage (4) Such other information with and announcements concerning pertaining to any plant, the market respect to the receipts and utilization of classification. administrator shall notify the handler of skim milk, butterfat, milk protein, other See § 1000.45 of this chapter. such redetermination within 30 days nonfat solids, and somatic cell Class Prices after the receipt of such request. Any information, as the market administrator financial obligations resulting from a may prescribe. § 1030.50 Class prices and component change in mileage shall not be (b) Each handler operating a partially prices. retroactive for any periods prior to the regulated distributing plant shall report See § 1000.50 of this chapter. redetermination by the market with respect to such plant in the same administrator. manner as prescribed for reports § 1030.51 Class I differential and price. required by paragraph (a) of this section. The Class I differential shall be the Producer Price Differential Receipts of milk that would have been differential established for Cook County, § 1030.60 Handler's value of milk. producer milk if the plant had been Illinois, which is reported in § 1000.52. fully regulated shall be reported in lieu The Class I price shall be the price For the purpose of computing a of producer milk. The report shall show computed pursuant to § 1000.50(a) for handler’s obligation for producer milk, also the quantity of any reconstituted Cook County, Illinois. the market administrator shall skim milk in route disposition in the determine for each month the value of § 1030.52 Adjusted Class I differentials. marketing area. milk of each handler with respect to (c) Each handler not specified in See § 1000.52 of this chapter. each of its pool plants, and of each handler described in § 1000.9(c) as paragraphs (a) and (b) of this section § 1030.53 Announcement of class prices shall report with respect to its receipts follows: and component prices. (a) Class I value. and utilization of milk and milk See § 1000.53 of this chapter. products in such manner as the market (1) Multiply the hundredweight of administrator may prescribe. § 1030.54 Equivalent price. skim milk in Class I as determined pursuant to § 1000.44(a) by the Class I See § 1000.54 of this chapter. § 1030.31 Payroll reports. skim milk price applicable at the (a) On or before the 22nd day after the § 1030.55 Transfer credits and assembly handler’s location; and end of each month, each handler that credits on Class I milk. (2) Add an amount obtained by operates a pool plant pursuant to (a) For bulk milk transferred from a multiplying the pounds of butterfat in § 1030.7 and each handler described in pool plant to a pool distributing plant, Class I as determined pursuant to § 1000.9(c) shall report to the market and which is classified as Class I milk, § 1000.44(b) by the Class I butterfat administrator its producer payroll for the shipping handler shall receive a price applicable at the handler’s the month, in the detail prescribed by transportation credit computed by location. the market administrator, showing for multiplying the pounds of Class I milk (b) Add the Class II value, computed each producer the information by the product of .0028 times the as follows: described in § 1030.73(f). number of miles between the transferor (1) Multiply the hundredweight of (b) Each handler operating a partially plant and the transferee plant. skim milk in Class II as determined regulated distributing plant who elects (b) For each handler who transfers or pursuant to § 1000.44(a) by 70 cents; to make payment pursuant to diverts bulk fluid milk from a pool plant (2) Add an amount obtained by § 1000.76(b) shall report for each dairy to a pool distributing plant a multiplying the pounds of skim milk in farmer who would have been a producer procurement credit shall be determined Class II as determined pursuant to if the plant had been fully regulated in by multiplying the hundredweight of § 1000.44(a) by the average nonfat solids the same manner as prescribed for milk classified as Class I at the pool content of producer skim milk received reports required by paragraph (a) of this plant by 8 cents. by the handler, and multiply the section. (c) For each handler described in resulting pounds of nonfat solids by the § 1000.9(c), a procurement credit for nonfat solids price; § 1030.32 Other reports. bulk fluid milk received as producer (3) Add an amount obtained by In addition to the reports required milk at a pool distributing plant shall be multiplying the pounds of butterfat in pursuant to §§ 1030.30 and 1030.31, determined by prorating the producer Class II as determined pursuant to each handler shall report any milk classified as Class I at the pool § 1000.44(b) by the butterfat price; information the market administrator distributing plant, and multiplying by 8 (c) Add the Class III value computed deems necessary to verify or establish cents per hundredweight. as follows: Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5051

(1) Multiply the pounds of skim milk regulated under other Federal orders of outstanding monthly obligations. in Class III as determined pursuant to and bulk concentrated fluid milk Subject to the aforementioned § 1000.44(a) by the average protein products from pool plants, plants conditions, the market administrator content of producer skim milk received regulated under other Federal orders, shall compute the producer price by the handler, and multiply the and unregulated supply plants; differential in the following manner: resulting pounds of protein by the (i) Add the amount obtained from (a) Combine into one total the values protein price; multiplying the difference between the computed pursuant to § 1030.60 for all (2) Add an amount obtained by Class I price and the Class III price handlers required to file reports multiplying the pounds of skim milk in applicable at the location of the nearest prescribed in § 1030.30; Class III as determined pursuant to unregulated supply plants from which (b) Subtract the total values obtained § 1000.44(a) by the average other solids an equivalent volume was received by by multiplying each handler’s total content of producer skim milk received the pounds of skim milk and butterfat pounds of protein, other solids, and by the handler, and multiply the in receipts of concentrated fluid milk butterfat contained in the milk for resulting pounds of other solids by the products assigned to Class I pursuant to which an obligation was computed other solids price; and § 1000.43(d) and § 1000.44(a)(3)(i) and pursuant to § 1030.60 by the protein (3) Add an amount obtained by the pounds of skim milk and butterfat price, the other solids price, and the multiplying the pounds of butterfat in subtracted from Class I pursuant to butterfat price, respectively, and the Class III as determined pursuant to § 1000.44(a)(8) and the corresponding total value of the somatic cell § 1000.44(b) by the butterfat price; step of § 1000.44(b), excluding such adjustment pursuant to § 1030.30(a)(1); (d) Add the Class IV value computed skim milk and butterfat in receipts of (c) Add an amount equal to the sum as follows: bulk fluid milk products from an of the location adjustments computed (1) Multiply the pounds of skim milk unregulated supply plant to the extent pursuant to § 1030.75; in Class IV as determined pursuant to that an equivalent amount of skim milk (d) Add an amount equal to not less § 1000.44(a) by the average nonfat solids or butterfat disposed of to such plant by than one-half of the unobligated balance content of producer skim milk received handlers fully regulated under any in the producer-settlement fund; by the handler, and multiply the Federal milk order is classified and (e) Divide the resulting amount by the resulting pounds of nonfat solids by the priced as Class I milk and is not used sum of the following for all handlers nonfat solids price; and as an offset for any other payment included in these computations: (2) Add an amount obtained by obligation under any order; (1) The total hundredweight of multiplying the pounds of butterfat in (j) Subtract an amount equal to any producer milk; and Class IV as determined pursuant to credits applicable pursuant to § 1030.55; (2) The total hundredweight for which § 1000.44(b) by the butterfat price; (k) Subtract, for reconstituted milk a value is computed pursuant to (e) Add an adjustment for somatic cell made from receipts of nonfluid milk § 1030.60(i); and content of producer milk determined by products, an amount computed by (f) Subtract not less than 4 cents nor multiplying the value reported pursuant multiplying $1.00 (but not more than more than 5 cents from the price to § 1030.30(a)(1) by the percentage of the difference between the Class I price computed pursuant to paragraph (e) of the total producer milk allocated to applicable at the location of the pool this section. The result shall be known Class II, Class III, and Class IV pursuant plant and the Class IV price) by the as the producer price differential for the to § 1000.44(c); hundredweight of skim milk and month. (f) Add the amounts obtained from butterfat contained in receipts of multiplying the pounds of skim milk nonfluid milk products that are § 1030.62 Announcement of producer and butterfat overage assigned to each allocated to Class I pursuant to prices. class pursuant to § 1000.43(b)(2) by the § 1000.43(d); and On or before the 13th day after the respective skim milk and butterfat (l) Exclude, for pricing purposes end of each month, the market prices applicable at the location of the under this section, receipts of nonfluid administrator shall announce publicly pool plant; milk products that are distributed as the following prices and information: (g) Add the amount obtained from labeled reconstituted milk for which (a) The producer price differential; multiplying the difference between the payments are made to the producer- (b) The protein price; Class III price for the preceding month settlement fund of another order under (c) The other solids price; and the Class I price applicable at the § 1000.76(a)(5) or (c). (d) The butterfat price; location of the pool plant or the Class (e) The somatic cell adjustment rate; II price, as the case may be, for the § 1030.61 Computation of producer price (f) The average butterfat, protein and current month by the hundredweight of differential. other solids content of producer milk; skim milk and butterfat subtracted from For each month the market and Class I and Class II pursuant to administrator shall compute a producer (g) The statistical uniform price for § 1000.44(a)(7) and the corresponding price differential per hundredweight. If milk containing 3.5 percent butterfat, step of § 1000.44(b); the unreserved balance in the producer- computed by combining the Class III (h) Add the amount obtained from settlement fund to be included in the price and the producer price multiplying the difference between the computation is less than 2 cents per differential. Class I price applicable at the location hundredweight of producer milk on all Payments for Milk of the pool plant and the Class III price reports, the report of any handler who by the hundredweight of skim milk and has not made payments required § 1030.70 Producer-settlement fund. butterfat assigned to Class I pursuant to pursuant to § 1030.71 for the preceding See § 1000.70 of this chapter. § 1000.43(d) and the hundredweight of month shall not be included in the skim milk and butterfat subtracted from computation of the producer price § 1030.71 Payments to the producer- Class I pursuant to § 1000.44(a)(3)(i) differential. The report of such handler settlement fund. through (iii) and the corresponding step shall not be included in the Each handler shall make payment to of § 1000.44(b), excluding receipts of computation for succeeding months the producer-settlement fund in a bulk fluid cream products from a plant until the handler has made full payment manner that provides receipt of the 5052 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules funds by the market administrator no (2) Final payment. For milk received pursuant to § 1000.9(c) during the first later than the 15th day after the end of during the month, payment shall be 15 days of the month, at not less than the month. Payment shall be the made so that it is received by each the lowest announced class price per amount, if any, by which the amount producer no later than the 17th day after hundredweight for the preceding specified in (a) of this section exceeds the end of the month in an amount month; the amount specified in (b) of this equal to not less than the sum of: (2) For the total quantity of bulk fluid section: (i) The hundredweight of producer milk products and bulk fluid cream (a) The total value of milk to the milk received times the producer price products received from a cooperative handler for the month as determined differential for the month as adjusted association in its capacity as the pursuant to § 1030.60. pursuant to § 1030.75; operator of a pool plant, at not less than (b) The sum of: (ii) The pounds of butterfat received the total value of such products received (1) An amount obtained by times the butterfat price for the month; from the association’s pool plants, as multiplying the total hundredweight of (iii) The pounds of protein received determined by multiplying the producer milk as determined pursuant times the protein price for the month; respective quantities assigned to each to § 1000.44(c) by the producer price (iv) The pounds of other solids class under § 1000.44, as follows: differential as adjusted pursuant to received times the other solids price for (i) The hundredweight of Class I skim § 1030.75; the month; milk times the Class I skim milk price (2) An amount obtained by (v) The hundredweight of milk for the month plus the pounds of Class multiplying the total pounds of protein, received times the somatic cell I butterfat times the Class I butterfat other solids, and butterfat contained in adjustment for the month; price for the month. The Class I price to producer milk by the protein, other (vi) Less any payment made pursuant be used shall be that price effective at solids, and butterfat prices respectively; to paragraph (a)(1) of this section; the location of the shipping plant; (3) The total value of the somatic cell (vii) Less proper deductions (ii) The hundredweight of Class II adjustment to producer milk; and authorized in writing by such producer skim milk times $ .70; (4) An amount obtained by and plus or minus adjustments for (iii) The pounds of nonfat solids multiplying the pounds of skim milk errors in previous payments to such received in Class II and Class IV milk and butterfat for which a value was producer; and times the nonfat solids price for the (viii) Less deductions for marketing computed pursuant to § 1030.60(i) by month; services pursuant to § 1000.86. (iv) The pounds of butterfat received the producer price differential as (b) Payments for milk received from in Class II, Class III, and Class IV milk adjusted pursuant to § 1030.75 for the cooperative association members. On or times the butterfat price for the month; location of the plant from which before the day prior to the dates (v) The pounds of protein received in received. specified in paragraphs (a)(1) and (a)(2) Class III milk times the protein price for § 1030.72 Payments from the producer- of this section, each handler shall pay the month; settlement fund. to a cooperative association for milk (vi) The pounds of other solids No later than the 16th day after the from producers who market their milk received in Class III milk times the other end of each month, the market through the cooperative association and solids price for the month; (vii) The hundredweight of Class II, administrator shall pay to each handler who have authorized the cooperative to Class III, and Class IV milk received the amount, if any, by which the collect such payments on their behalf an amount equal to the sum of the times the somatic cell adjustment; and amount computed pursuant to (viii) Add together the amounts § 1030.71(b) exceeds the amount individual payments otherwise payable for such producer milk pursuant to computed in paragraphs (c)(2)(i) computed pursuant to § 1030.71(a). If, at through (vii) of this section and from such time, the balance in the producer- paragraphs (a)(1) and (a)(2) of this section. that sum deduct any payment made settlement fund is insufficient to make pursuant to paragraph (c)(1) of this all payments pursuant to this section, (c) Payment for milk received from cooperative association pool plants or section. the market administrator shall reduce (3) For the total quantity of milk uniformly such payments and shall from cooperatives as handlers pursuant to § 1000.9(c). On or before the day prior received during the month from a complete the payments as soon as the cooperative association in its capacity as to the dates specified in paragraph (a)(1) funds are available. a handler under § 1000.9(c) as follows: and (a)(2) of this section, each handler (i) The hundredweight of producer § 1030.73 Payments to producers and to who receives fluid milk products at its cooperative associations. milk received times the producer price plant from a cooperative association in differential as adjusted pursuant to (a) Each handler shall pay each its capacity as the operator of a pool § 1030.75; producer for producer milk for which plant or who receives milk from a (ii) The pounds of butterfat received payment is not made to a cooperative cooperative association in its capacity as times the butterfat price for the month; association pursuant to paragraph (b) of a handler pursuant to § 1000.9(c), (iii) The pounds of protein received this section, as follows: including the milk of producers who are times the protein price for the month; (1) Partial payment. For each not members of such association and (iv) The pounds of other solids producer who has not discontinued who the market administrator received times the other solids price for shipments as of the date of this partial determines have authorized the the month; payment, payment shall be made so that cooperative association to collect (v) The hundredweight of milk it is received by each producer on or payment for their milk, shall pay the received times the somatic cell before the 26th day of the month for cooperative for such milk as follows: adjustment for the month; and milk received during the first 15 days of (1) For bulk fluid milk products and (vi) Add together the amounts the month from the producer at not less bulk fluid cream products received from computed in paragraphs (c)(3)(i) than the lowest announced class price a cooperative association in its capacity through (v) of this section and from that for the preceding month, less proper as the operator of a pool plant and for sum deduct any payment made deductions authorized in writing by the milk received from a cooperative pursuant to paragraph (c)(1) of this producer; and association in its capacity as a handler section. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5053

(d) If a handler has not received full § 1030.74 [Reserved] 1032.19 Commercial food processing payment from the market administrator establishment. § 1030.75 Plant location adjustments for pursuant to § 1030.72 by the payment producer milk and nonpool milk. Handler Reports date specified in paragraph (a), (b) or (a) The producer price differential for 1032.30 Reports of receipts and utilization. (c)(2) of this section, the handler may producer milk shall be adjusted 1032.31 Payroll reports. reduce pro rata its payments to according to the location of the plant at 1032.32 Other reports. producers or to the cooperative which the milk was physically received Classification of Milk association (with respect to receipts by subtracting from the price differential described in paragraph (b), prorating the 1032.40 Classes of utilization. the amount by which the Class I price underpayment to the volume of milk 1032.41 [Reserved] specified in § 1030.51 exceeds the Class 1032.42 Classification of transfers and received from the cooperative I price at the plant’s location. If the diversions. association in proportion to the total Class I price at the plant location 1032.43 General classification rules. milk received from producers by the exceeds the Class I price specified in 1032.44 Classification of producer milk. handler), but not by more than the § 1030.51, the difference shall be added 1032.45 Market administrator’s reports and amount of the underpayment. The announcements concerning to the producer price differential price; payments shall be completed on the classification. and next scheduled payment date after (b) The producer price differential Class Prices receipt of the balance due from the applicable to other source milk shall be 1032.50 Class prices and component prices. market administrator. 1032.51 Class I differential and price. (e) If a handler claims that a required adjusted following the procedure specified in paragraph (a) of this 1032.52 Adjusted Class I differentials. payment to a producer cannot be made 1032.53 Announcement of class prices and because the producer is deceased or section, except that the adjusted producer price differential shall not be component prices. cannot be located, or because the 1032.54 Equivalent price. less than zero. cooperative association or its lawful Producer Price Differential successor or assignee is no longer in § 1030.76 Payments by a handler 1032.60 Handler’s value of milk. existence, the payment shall be made to operating a partially regulated distributing 1032.61 Computation of producer price plant. the producer-settlement fund, and in the differential. event that the handler subsequently See § 1000.76 of this chapter. 1032.62 Announcement of producer prices. locates and pays the producer or a lawful claimant, or in the event that the § 1030.77 Adjustment of accounts. Payments for Milk handler no longer exists and a lawful See § 1000.77 of this chapter. 1032.70 Producer-settlement fund. 1032.71 Payments to the producer- claim is later established, the market § 1030.78 Charges on overdue accounts. administrator shall make the required settlement fund. payment from the producer-settlement See § 1000.78 of this chapter. 1032.72 Payments from the producer- settlement fund. fund to the handler or to the lawful Administrative Assessment and 1032.73 Payments to producers and to claimant, as the case may be. Marketing Service Deduction cooperative associations. (f) In making payments to producers 1032.74 [Reserved] pursuant to this section, each handler § 1030.85 Assessment for order 1032.75 Plant location adjustments for shall furnish each producer, except a administration. producer milk and nonpool milk. producer whose milk was received from See § 1000.85 of this chapter. 1032.76 Payments by a handler operating a a cooperative association handler partially regulated distributing plant. § 1030.86 Deduction for marketing 1032.77 Adjustment of accounts. described in § 1000.9(a) or (c), a services. supporting statement in a form that may 1032.78 Charges on overdue accounts. See § 1000.86 of this chapter. be retained by the recipient which shall Administrative Assessment and Marketing show: PART 1032ÐMILK IN THE CENTRAL Service Deduction (1) The name, address, Grade A MARKETING AREA 1032.85 Assessment for order identifier assigned by a duly constituted administration. regulatory agency, and payroll number SubpartÐOrder Regulating Handling 1032.86 Deduction for marketing services. of the producer; General Provisions Authority: 7 U.S.C. 601–674. (2) The daily and total pounds, and the month and dates such milk was Sec. SubpartÐOrder Regulating Handling 1032.1 General provisions. received from that producer; (3) The total pounds of butterfat, Definitions General Provisions protein, and other solids contained in 1032.2 Central marketing area. § 1032.1 General provisions. the producer’s milk; 1032.3 Route disposition. The terms, definitions, and provisions (4) The somatic cell count of the 1032.4 Plant. in Part 1000 of this chapter apply to and producer’s milk; 1032.5 Distributing plant. are hereby made a part of this order. (5) The minimum rate or rates at 1032.6 Supply plant. which payment to the producer is 1032.7 Pool plant. Definitions required pursuant to this order; 1032.8 Nonpool plant. (6) The rate used in making payment 1032.9 Handler. § 1032.2 Central marketing area. if the rate is other than the applicable 1032.10 Producer-handler. The marketing area means all territory minimum rate; 1032.11 [Reserved] within the bounds of the following 1032.12 Producer. states and political subdivisions, (7) The amount, or rate per 1032.13 Producer milk. hundredweight, or rate per pound of 1032.14 Other source milk. including all piers, docks, and wharves component, and the nature of each 1032.15 Fluid milk product. connected therewith and all craft deduction claimed by the handler; and 1032.16 Fluid cream product. moored thereat, and all territory (8) The net amount of payment to the 1032.17 [Reserved] occupied by government (municipal, producer or cooperative association. 1032.18 Cooperative association. State, or Federal) reservations, 5054 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules installations, institutions, or other Charles, St. Clair, Ste. Genevieve, St. (b) A distributing plant located in the similar establishments if any part Louis, Sullivan, Warren, and Worth; and marketing area at which the majority of thereof is within any of the listed states (2) The city of St. Louis. milk received is processed into or political subdivisions: (g) In the State of Nebraska, the aseptically packaged fluid milk (a) In the State of Colorado, the counties of: Adams, Antelope, Boone, products unless there are no sales from counties of: Adams, Arapahoe, Baca, Buffalo, Burt, Butler, Cass, Cedar, Chase, the plant into any marketing area and Bent, Boulder, Clear Creek, Cheyenne, Clay, Colfax, Cuming, Custer, Dakota, the plant operator in writing requests Crowley, Custer, Denver, Douglas, El Dawson, Dixon, Dodge, Douglas, Dundy, nonpool plant status for the plant for the Paso, Elbert, Gilpin, Huerfano, Jefferson, Fillmore, Franklin, Frontier, Furnas, month. Kiowa, Kit Carson, Larimer, Las Gage, Gosper, Greeley, Hall, Hamilton, (c) A supply plant from which the Animas, Lincoln, Logan, Morgan, Otero, Harlan, Hayes, Hitchcock, Howard, quantity of bulk fluid milk products Park, Phillips, Prowers, Pueblo, Jefferson, Johnson, Kearney, Keith, transferred or diverted to plants Sedgwick, Teller, Washington, Weld, Knox, Lancaster, Lincoln, Madison, described in paragraph (a) or (b) of this and Yuma. Merrick, Nance, Nemaha, Nuckolls, section during each of the months of (b) In the State of Illinois, the counties Otoe, Pawnee, Perkins, Phelps, Pierce, September through November and of: Platte, Polk, Red Willow, Richardson, January is 35 percent or more of the (1) Adams, Alexander, Bond, Brown, Saline, Sarpy, Saunders, Seward, total Grade A milk received at the plant Bureau, Calhoun, Cass, Champaign, Sherman, Stanton, Thayer, Thurston, from dairy farmers (except dairy farmers Christian, Clark, Clay, Clinton, Coles, Valley, Washington, Wayne, Webster, described in § 1032.12(b)) and handlers Crawford, Cumberland, De Witt, and York. described in § 1000.9(c), including milk Douglas, Edgar, Edwards, Effingham, (h) All of the State of Oklahoma. diverted by the plant operator, and 25 Fayette, Ford, Franklin, Fulton, Gallatin, (i) In the State of South Dakota, the percent for all other months, subject to Greene, Grundy, Hamilton, Hancock, counties of: Aurora, Beadle, Bon the following conditions: Hardin, Henderson, Henry, Iroquois, Homme, Brookings, Clark, Clay, (1) A supply plant that has qualified Jackson, Jasper, Jefferson, Jersey, Codington, Davison, Deuel, Douglas, as a pool plant during each of the Johnson, Kankakee, Knox, La Salle, Hamlin, Hanson, Hutchinson, Jerauld, immediately preceding months of August through April shall continue to Lawrence, Livingston, Logan, Kingsbury, Lake, Lincoln, McCook, so qualify in each of the following McDonough, McLean, Macon, Miner, Minnehaha, Moody, Sanborn, months of May through July, unless the Macoupin, Madison, Marion, Marshall, Spink, Turner, Union, and Yankton. plant operator files a written request Mason, Massac, Menard, Mercer, (j) In the State of Wisconsin, the with the market administrator that such Monroe, Montgomery, Morgan, counties of: Crawford and Grant. plant not be a pool plant, such nonpool Moultrie, Peoria, Perry, Piatt, Pike, § 1032.3 Route disposition. status to be effective the first month Pope, Pulaski, Putnam, Randolph, See § 1000.3 of this chapter. following such request and thereafter Richland, Rock Island, Saline, until the plant qualifies as a pool plant Sangamon, Schuyler, Scott, Shelby, St. § 1032.4 Plant. on the basis of milk shipments; Clair, Stark, Tazewell, Union, See § 1000.4 of this chapter. (2) A pool plant operator may include Vermilion, Wabash, Warren, § 1032.5 Distributing plant. as qualifying shipments milk diverted to Washington, Wayne, White, pool distributing plants pursuant to § 1000.5 of this chapter. Williamson, and Woodford; § 1032.13(c); (2) In Jo Daviess County, the city of § 1032.6 Supply plant. (3) The operator of a supply plant may East Dubuque; and § 1000.6 of this chapter. include as qualifying shipments (3) In Whiteside County, the transfers of fluid milk products to townships of Fulton, Ustick, Clyde, § 1032.7 Pool plant. distributing plants regulated under any Genesee, Mount Pleasant, Union Grove, Pool plant means a plant, unit of other Federal order, except that credit Garden Plain, Lyndon, Fenton, Newton, plants, or a system of plants as specified for such transfers shall be limited to the Prophetstown, Portland, and Erie. in paragraphs (a) through (f) of this amount of milk, including milk shipped (c) In the State of Iowa: section. The pooling standards directly from producers’ farms, (1) All of the counties except: described in paragraphs (a), (c), (d), (e), delivered to distributing plants qualified Howard, Kossuth, Mitchell (except the and (f) of this section are subject to as pool plants pursuant to paragraphs city of Osage), Winnebago, Winneshiek, modification pursuant to paragraph (g) (a) or (b) of this section; and Worth; and of this section: (4) No plant may qualify as a pool (2) In Mitchell County the city of (a) A distributing plant from which plant due to a reduction in the shipping Osage. during the month: percentage pursuant to paragraph (g) of (d) All of the State of Kansas. (1) Total route disposition is equal to this section unless it has been a pool (e) In the State of Minnesota, the 25 percent of more of the total quantity supply plant during each of the counties of: Lincoln, Nobles, Pipestone, of bulk fluid milk products physically immediately preceding three months. and Rock. received at the plant; and (d) A plant located in the marketing (f) In the State of Missouri: (1) The (2) Route disposition in the marketing area and operated by a cooperative counties of: area is at least 15 percent of total route association if, during the month or the Andrew, Atchison, Bates, Buchanan, disposition. immediately preceding 12-month Caldwell, Carroll, Cass, Clark, Clay, (3) For purposes of this section, period, 35 percent or more of the Clinton, Daviess, De Kalb, Franklin, packaged fluid milk products that are producer milk of members of the Gentry, Grundy, Harrison, Henry, transferred to a distributing plant shall association (and any producer milk of Hickory, Holt, Jackson, Jefferson, be considered as route disposition from nonmembers and members of another Johnson, Knox, Lafayette, Lewis, the transferring plant, rather than the cooperative association which may be Lincoln, Livingston, Marion, Mercer, receiving plant, for the single purpose of marketed by the cooperative Nodaway, Pettis, Platte, Putnam, Ray, qualifying the transferring plant as a association) is physically received in the Saline, Schuyler, Scotland, Shelby, St. pool distributing plant. form of bulk fluid milk products at Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5055 plants specified in paragraph (a) or (b) contain a list of the plants participating written application made by the plant of this section either directly from farms in the system. operator at least 15 days prior to the or by transfer from supply plants (3) Each plant included within a pool date for which a determination of the operated by the cooperative association supply plant system shall continue each market administrator is to be effective, and from plants of the cooperative month as a plant in the system through the market administrator may determine association for which pool plant status the following August unless the that the route disposition in the has been requested under this paragraph handler(s) establishing the system respective marketing areas to be used for subject to the following conditions: submits a written request to the market purposes of this paragraph shall exclude (1) The plant does not qualify as a administrator that the plant be deleted (for a specified period of time) route pool plant under paragraph (a), (b) or (c) from the system or that the system be disposition made under limited term of this section or under comparable discontinued. Any plant that has been contracts to governmental bases and provisions of another Federal order; and so deleted from a system, or that has institutions; (2) The plant is approved by a duly failed to qualify in any month, will not (4) A plant located outside the constituted regulatory agency for the be part of any system for the remaining marketing area and qualified pursuant handling of milk approved for fluid months through August. No plant may to paragraph (a) of this section that consumption in the marketing area. be added in any subsequent month meets the pooling requirements of (e) Two or more plants operated by through the following August to a another Federal order and has had the same handler and located in the system that qualifies in September. greater sales in such other Federal marketing area may qualify for pool (4) If a system fails to qualify under order’s marketing area for 3 consecutive status as a unit by meeting the total and the requirements of this paragraph, the months; in-area route disposition requirements handler responsible for qualifying the (5) A plant located in another Federal of a pool distributing plant specified in system shall notify the market order marketing area and qualified paragraph (a) of this section and subject administrator which plant or plants will pursuant to paragraph (a) of this section be deleted from the system so that the to the following additional that meets the pooling requirements of remaining plants may be pooled as a requirements: such other Federal order and does not system. If the handler fails to do so, the (1) At least one of the plants in the have a majority of its route distribution market administrator shall exclude one unit must qualify as a pool plant in this marketing area for 3 consecutive or more plants, beginning at the bottom pursuant to paragraph (a) of this section; months or if the plant is required to be of the list of plants in the system and (2) Other plants in the unit must regulated under such other Federal continuing up the list as necessary until process Class I or Class II products, order without regard to its route the deliveries are sufficient to qualify using 50 percent or more of the total disposition in any other Federal order the remaining plants in the system; Grade A fluid milk products received in marketing area; (g) The applicable shipping (6) A plant qualified pursuant to bulk form at such plant or diverted percentages of paragraphs (a), (c), (d), therefrom by the plant operator in Class paragraph (c) of this section which also and (f) of this section may be increased meets the pooling requirements of I or Class II products, and must be or decreased by the market located in a pricing zone providing the another Federal order and from which administrator if found necessary to greater qualifying shipments are made same or a lower Class I price than the obtain needed shipments or to prevent price applicable at the distributing plant to plants regulated under the other uneconomic shipments. Before making a Federal order than are made to plants included in the unit pursuant to finding that a change is necessary the paragraph (e)(1) of this section; and regulated under this order, or the plant market administrator shall investigate has automatic pooling status under the (3) The operator of the unit has filed the need for revision, either on the a written request with the market other Federal order; and market administrator’s own initiative or (7) That portion of a regulated plant administrator prior to the first day of the at the request of interested persons. If month for which such status is desired designated as a nonpool plant that is such investigation shows that a revision physically separate and operated to be effective. The unit shall continue might be appropriate, a notice shall be from month to month thereafter without separately from the pool portion of such issued stating that a revision is being plant. The designation of a portion of a further notification. The handler shall considered and inviting data, views, and notify the market administrator in regulated plant as a nonpool plant must arguments. If the market administrator be requested in advance and in writing writing prior to the first day of any determines that an adjustment to the month for which termination or any by the handler and must be approved by shipping percentages is necessary, the the market administrator. change of the unit is desired. market administrator shall notify the (f) A system of supply plants may be industry within one day of the effective § 1032.8 Nonpool plant. qualified for pooling by the association date of such adjustment. See § 1000.8 of this chapter. of two or more supply plants operated (h) The term pool plant shall not by one or more handlers by meeting the apply to the following plants: § 1032.9 Handler. applicable percentage requirements of (1) A producer-handler as defined See § 1000.9 of this chapter. paragraph (c) of this section in the same under any Federal order; manner as a single plant, subject to the (2) An exempt plant as defined in § 1032.10 Producer-handler. following additional requirements: § 1000.8(e); Except as provided in paragraph (g) of (1) Each plant in the system is located (3) A plant located within the this section, producer-handler means a within the marketing area; marketing area and qualified pursuant person who: (2) The handler(s) establishing the to paragraph (a) or (e) of this section (a) Operates a dairy farm and a system submits a written request to the which meets the pooling requirements distributing plant from which there is market administrator on or before of another Federal order, and from monthly route disposition in excess of September 1 requesting that such plants which more than 50 percent of its route 150,000 pounds during the month; qualify as a system for the period of disposition has been in the other (b) Receives no fluid milk products September through August of the Federal order marketing area for three from sources other than own farm following year. Such request will consecutive months. On the basis of a production, pool handlers, and plants 5056 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules fully regulated under another Federal (4) A dairy farmer whose milk is (3) Diverted milk shall be priced at order; reported as diverted to a plant fully the location of the plant to which (c) Receives at its plant or acquires for regulated under another Federal order diverted; route disposition no more than 150,000 with respect to that portion of the milk (4) Any milk diverted in excess of the pounds of fluid milk products from so diverted that is assigned to Class I limits prescribed in (d)(2) of this section handlers fully regulated under any under the provisions of such other shall not be producer milk. If the Federal order. This limitation shall not order. diverting handler or cooperative apply if the producer-handler’s own association fails to designate the dairy farm production is less than 150,000 § 1032.13 Producer milk. farmers’ deliveries that are not to be pounds during the month. Producer milk means the skim milk producer milk, no milk diverted by the (d) Disposes of no other source milk (or the skim equivalent of components handler or cooperative association as Class I milk except by increasing the of skim milk), including nonfat during the month to a nonpool plant nonfat milk solids content of the fluid components, and butterfat in milk of a shall be producer milk; and milk products received from own farm producer that is: (5) The applicable diversion limits in production or pool handlers; (a) Received by the operator of a pool paragraph (d)(2) of this section may be (e) Disposes of no fluid milk products plant directly from a producer or a increased or decreased by the market using the distribution system of another handler described in § 1000.9(c). Any administrator if the market handler except for direct deliveries to milk picked up from the producer’s administrator finds that such revision is retail outlets or to a pool handler’s farm tank in a tank truck under the necessary to assure orderly marketing plant; control of the operator of a pool plant and efficient handling of milk in the (f) Provides proof satisfactory to the or a handler described in § 1000.9(c) but marketing area. Before making such a market administrator that the care and which is not received at a plant until the finding, the market administrator shall management of the dairy animals and following month shall be considered as investigate the need for the revision other resources necessary to produce all having been received by the handler either on the market administrator’s Class I milk handled (excluding receipts during the month in which it is picked own initiative or at the request of from handlers fully regulated under any up at the producer’s farm. All milk interested persons. If the investigation Federal order) and the processing, received pursuant to this paragraph shows that a revision might be packaging, and distribution operations shall be priced at the location of the appropriate, the market administrator are the producer-handler’s own plant where it is first physically shall issue a notice stating that the enterprise and at its own risk; and received; revision is being considered and (g) Producer-handler shall not include inviting written data, views, and (b) Received by a handler described in any producer who also operates a arguments. Any decision to revise an § 1000.9(c) in excess of the quantity distributing plant if the producer- applicable percentage must be issued in delivered to pool plants; handler so requests that the two be writing at least one day before the operated as separate entities with the (c) Diverted by a pool plant operator effective date. distributing plant regulated under to another pool plant. Milk so diverted § 1032.7(a) and the farm operated as a shall be priced at the location of the § 1032.14 Other source milk. producer under § 1032.12. plant to which diverted; or See § 1000.14 of this chapter. (d) Diverted by the operator of a pool § 1032.15 Fluid milk product. § 1032.11 [Reserved] plant or a cooperative association See § 1000.15 of this chapter. § 1032.12 Producer. described in § 1000.9(c) to a nonpool plant, subject to the following (a) Except as provided in paragraph § 1032.16 Fluid cream product. conditions: (b) of this section, producer means any See § 1000.16 of this chapter. person who produces milk approved by (1) Milk of a dairy farmer shall not be § 1032.17 [Reserved] a duly constituted regulatory agency for eligible for diversion unless at least one fluid consumption as Grade A milk and day’s production of such dairy farmer § 1032.18 Cooperative association. has been physically received as whose milk (or components of milk) is: See § 1000.18 of this chapter. (1) Received at a pool plant directly producer milk at a pool plant and the from the producer or diverted by the dairy farmer has continuously retained § 1032.19 Commercial food processing plant operator in accordance with producer status since that time. If a establishment. § 1032.13; or dairy farmer loses producer status under See § 1000.19 of this chapter. this order (except as a result of a (2) Received by a handler described in Handler Reports § 1000.9(c). temporary loss of Grade A approval), the (b) Producer shall not include: dairy farmer’s milk shall not be eligible § 1032.30 Reports of receipts and (1) A producer-handler as defined in for diversion until milk of the dairy utilization. any Federal order; farmer has been physically received as Each handler shall report monthly so (2) A dairy farmer whose milk is producer milk at a pool plant; that the market administrator’s office received at an exempt plant, excluding (2) Of the quantity of producer milk receives the report on or before the 7th producer milk diverted to the exempt received during the month (including day after the end of the month, in the plant pursuant to § 1032.13(d); diversions, but excluding the quantity of detail and on the prescribed forms, as (3) A dairy farmer whose milk is producer milk received from a handler follows: received by diversion at a pool plant described in § 1000.9(c)) the handler (a) Each handler that operates a pool from a handler regulated under another diverts to nonpool plants not more than plant pursuant to § 1032.7 and each Federal order if the other Federal order 65 percent during the months of handler described in § 1000.9(c) shall designates the dairy farmer as a September through November and report for each of its operations the producer under that order and that milk January, and not more than 75 percent following information: is allocated by request to a utilization during the months of February through (1) Product pounds, pounds of other than Class I; and August and December; butterfat, pounds of protein, pounds of Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5057 solids-not-fat other than protein (other each handler shall report any price applicable at the handler’s solids), and the value of the somatic cell information the market administrator location. adjustment pursuant to § 1000.50(p), deems necessary to verify or establish (b) Add the Class II value, computed contained in or represented by: each handler’s obligation under the as follows: (i) Receipts of producer milk, order. (1) Multiply the hundredweight of including producer milk diverted by the skim milk in Class II as determined handler; and Classification of Milk pursuant to § 1000.44(a) by 70 cents; (ii) Receipts of milk from handlers § 1032.40 Classes of utilization. (2) Add an amount obtained by described in § 1000.9(c); multiplying the pounds of skim milk in See § 1000.40 of this chapter. (2) Product pounds and pounds of Class II as determined pursuant to butterfat contained in: § 1032.41 [Reserved] § 1000.44(a) by the average nonfat solids (i) Receipts of fluid milk products and content of producer skim milk received bulk fluid cream products from other § 1032.42 Classification of transfers and by the handler, and multiply the diversions. pool plants; resulting pounds of nonfat solids by the (ii) Receipts of other source milk; and See § 1000.42 of this chapter. nonfat solids price; and (iii) Inventories at the beginning and § 1032.43 General classification rules. (3) Add an amount obtained by end of the month of fluid milk products multiplying the pounds of butterfat in and bulk fluid cream products; See § 1000.43 of this chapter. Class II as determined pursuant to (3) The utilization or disposition of all § 1000.44(b) by the butterfat price; milk and milk products required to be § 1032.44 Classification of producer milk. See § 1000.44 of this chapter. (c) Add the Class III value computed reported pursuant to this paragraph; and as follows: (4) Such other information with § 1032.45 Market administrator's reports (1) Multiply the pounds of skim milk respect to the receipts and utilization of and announcements concerning in Class III as determined pursuant to skim milk, butterfat, milk protein, other classification. § 1000.44(a) by the average protein nonfat solids, and somatic cell See § 1000.45 of this chapter. content of producer skim milk received information, as the market administrator by the handler, and multiply the may prescribe. Class Prices resulting pounds of protein by the (b) Each handler operating a partially protein price; regulated distributing plant shall report § 1032.50 Class prices and component (2) Add an amount obtained by with respect to such plant in the same prices. multiplying the pounds of skim milk in manner as prescribed for reports See § 1000.50 of this chapter. Class III as determined pursuant to required by paragraph (a) of this section. § 1032.51 Class I differential and price. § 1000.44(a) by the average other solids Receipts of milk that would have been content of producer skim milk received producer milk if the plant had been The Class I differential shall be the by the handler, and multiply the fully regulated shall be reported in lieu differential established for Jackson of producer milk. The report shall show County, Missouri, which is reported in resulting pounds of other solids by the also the quantity of any reconstituted § 1000.52. The Class I price shall be the other solids price; and (3) Add an amount obtained by skim milk in route disposition in the price computed pursuant to § 1000.50(a) multiplying the pounds of butterfat in marketing area. for Jackson County, Missouri. Class III as determined pursuant to (c) Each handler not specified in § 1032.52 Adjusted Class I differentials. paragraphs (a) and (b) of this section § 1000.44(b) by the butterfat price; shall report with respect to its receipts See § 1000.52 of this chapter. (d) Add the Class IV value computed and utilization of milk and milk as follows: § 1032.53 Announcement of class prices (1) Multiply the pounds of skim milk products in such manner as the market and component prices. in Class IV as determined pursuant to administrator may prescribe. See § 1000.53 of this chapter. § 1000.44(a) by the average nonfat solids § 1032.31 Payroll reports. § 1032.54 Equivalent price. content of producer skim milk received by the handler, and multiply the (a) On or before the 20th day after the See § 1000.54 of this chapter. end of each month, each handler that resulting pounds of nonfat solids by the operates a pool plant pursuant to Producer Price Differential nonfat solids price; and (2) Add an amount obtained by § 1032.7 and each handler described in § 1032.60 Handler's value of milk. § 1000.9(c) shall report to the market multiplying the pounds of butterfat in administrator its producer payroll for For the purpose of computing a Class IV as determined pursuant to the month, in the detail prescribed by handler’s obligation for producer milk, § 1000.44(b) by the butterfat price; the market administrator, showing for the market administrator shall (e) Add an adjustment for somatic cell each producer the information determine for each month the value of content of producer milk determined by described in § 1032.73(f). milk of each handler with respect to multiplying the value reported pursuant (b) Each handler operating a partially each of its pool plants, and of each to § 1032.30(a)(1) by the percentage of regulated distributing plant who elects handler described in § 1000.9(c) as the total producer milk allocated to to make payment pursuant to follows: Class II, Class III, and Class IV pursuant § 1000.76(b) shall report for each dairy (a) Class I value. to § 1000.44(c); farmer who would have been a producer (1) Multiply the hundredweight of (f) Add the amounts obtained from if the plant had been fully regulated in skim milk in Class I as determined multiplying the pounds of skim milk the same manner as prescribed for pursuant to § 1000.44(a) by the Class I and butterfat overage assigned to each reports required by paragraph (a) of this skim milk price applicable at the class pursuant to § 1000.43(b)(2) by the section. handler’s location; and respective skim milk and butterfat (2) Add an amount obtained by prices applicable at the location of the § 1032.32 Other reports. multiplying the pounds of butterfat in pool plant; In addition to the reports required Class I as determined pursuant to (g) Add the amount obtained from pursuant to §§ 1032.30 and 1032.31, § 1000.44(b) by the Class I butterfat multiplying the difference between the 5058 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Class III price for the preceding month § 1032.61 Computation of producer price (f) The average butterfat, protein and and the Class I price applicable at the differential. other solids content of producer milk; location of the pool plant or the Class For each month the market and II price, as the case may be, for the administrator shall compute a producer (g) The statistical uniform price for current month by the hundredweight of price differential per hundredweight. If milk containing 3.5 percent butterfat, skim milk and butterfat subtracted from the unreserved balance in the producer- computed by combining the Class III Class I and Class II pursuant to settlement fund to be included in the price and the producer price § 1000.44(a)(7) and the corresponding computation is less than 2 cents per differential. step of § 1000.44(b); hundredweight of producer milk on all (h) Add the amount obtained from reports, the report of any handler who Payments for Milk multiplying the difference between the has not made payments required § 1032.70 Producer-settlement fund. Class I price applicable at the location pursuant to § 1032.71 for the preceding of the pool plant and the Class III price month shall not be included in the See § 1000.70 of this chapter. by the hundredweight of skim milk and computation of the producer price § 1032.71 Payments to the producer- butterfat assigned to Class I pursuant to differential. The report of such handler settlement fund. § 1000.43(d) and the hundredweight of shall not be included in the Each handler shall make payment to skim milk and butterfat subtracted from computation for succeeding months the producer-settlement fund in a Class I pursuant to § 1000.44(a)(3)(i) until the handler has made full payment manner that provides receipt of the through (iii) and the corresponding step of outstanding monthly obligations. funds by the market administrator no of § 1000.44(b), excluding receipts of Subject to the aforementioned later than the 14th day after the end of bulk fluid cream products from a plant conditions, the market administrator the month. Payment shall be the regulated under other Federal orders shall compute the producer price amount, if any, by which the amount and bulk concentrated fluid milk differential in the following manner: specified in (a) of this section exceeds products from pool plants, plants (a) Combine into one total the values the amount specified in (b) of this regulated under other Federal orders, computed pursuant to § 1032.60 for all section: and unregulated supply plants; handlers required to file reports (i) Add the amount obtained from prescribed in § 1032.30; (a) The total value of milk to the multiplying the difference between the (b) Subtract the total values obtained handler for the month as determined Class I price and the Class III price by multiplying each handler’s total pursuant to § 1032.60. applicable at the location of the nearest pounds of protein, other solids, and (b) The sum of: unregulated supply plants from which butterfat contained in the milk for (1) An amount obtained by an equivalent volume was received by which an obligation was computed multiplying the total hundredweight of the pounds of skim milk and butterfat pursuant to § 1032.60 by the protein producer milk as determined pursuant in receipts of concentrated fluid milk price, the other solids price, and the to § 1000.44(c) by the producer price products assigned to Class I pursuant to butterfat price, respectively, and the differential as adjusted pursuant to § 1000.43(d) and § 1000.44(a)(3)(i) and total value of the somatic cell § 1032.75; the pounds of skim milk and butterfat adjustment pursuant to § 1032.30(a)(1); (2) An amount obtained by subtracted from Class I pursuant to (c) Add an amount equal to the sum § 1000.44(a)(8) and the corresponding multiplying the total pounds of protein, of the location adjustments computed other solids, and butterfat contained in step of § 1000.44(b), excluding such pursuant to § 1032.75; skim milk and butterfat in receipts of producer milk by the protein, other (d) Add an amount equal to not less solids, and butterfat prices respectively; bulk fluid milk products from an than one-half of the unobligated balance unregulated supply plant to the extent (3) The total value of the somatic cell in the producer-settlement fund; adjustment to producer milk; and that an equivalent amount of skim milk (e) Divide the resulting amount by the or butterfat disposed of to such plant by sum of the following for all handlers (4) An amount obtained by handlers fully regulated under any included in these computations: multiplying the pounds of skim milk Federal milk order is classified and (1) The total hundredweight of and butterfat for which a value was priced as Class I milk and is not used producer milk; and computed pursuant to § 1032.60(i) by as an offset for any other payment (2) The total hundredweight for which the producer price differential as obligation under any order; a value is computed pursuant to adjusted pursuant to § 1032.75 for the (j) Subtract, for reconstituted milk § 1032.60(i); and location of the plant from which made from receipts of nonfluid milk (f) Subtract not less than 4 cents nor received. products, an amount computed by more than 5 cents from the price multiplying $1.00 (but not more than § 1032.72 Payments from the producer- computed pursuant to paragraph (e) of settlement fund. the difference between the Class I price this section. The result shall be known No later than the 15th day after the applicable at the location of the pool as the producer price differential for the end of each month, the market plant and the Class IV price) by the month. hundredweight of skim milk and administrator shall pay to each handler butterfat contained in receipts of § 1032.62 Announcement of producer the amount, if any, by which the nonfluid milk products that are prices. amount computed pursuant to allocated to Class I pursuant to On or before the 11th day after the § 1032.71(b) exceeds the amount § 1000.43(d); and end of each month, the market computed pursuant to § 1032.71(a). If, at (k) Exclude, for pricing purposes administrator shall announce publicly such time, the balance in the producer- under this section, receipts of nonfluid the following prices and information: settlement fund is insufficient to make milk products that are distributed as (a) The producer price differential; all payments pursuant to this section, labeled reconstituted milk for which (b) The protein price; the market administrator shall reduce payments are made to the producer- (c) The other solids price; uniformly such payments and shall settlement fund of another order under (d) The butterfat price; complete the payments as soon as the § 1000.76(a)(5) or (c). (e) The somatic cell adjustment rate; funds are available. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5059

§ 1032.73 Payments to producers and to who receives fluid milk products at its (i) The hundredweight of producer cooperative associations. plant from a cooperative association in milk received times the producer price (a) Each handler shall pay each its capacity as the operator of a pool differential as adjusted pursuant to producer for producer milk for which plant or who receives milk from a § 1032.75; payment is not made to a cooperative cooperative association in its capacity as (ii) The pounds of butterfat received association pursuant to paragraph (b) of a handler pursuant to § 1000.9(c), times the butterfat price for the month; this section, as follows: including the milk of producers who are (iii) The pounds of protein received (1) Partial payment. For each not members of such association and times the protein price for the month; producer who has not discontinued who the market administrator (iv) The pounds of other solids shipments as of the date of this partial determines have authorized the received times the other solids price for payment, payment shall be made so that cooperative association to collect the month; it is received by each producer on or payment for their milk, shall pay the (v) The hundredweight of milk before the 26th day of the month for cooperative for such milk as follows: received times the somatic cell milk received during the first 15 days of (1) For bulk fluid milk products and adjustment for the month; and the month from the producer at not less bulk fluid cream products received from (vi) Add together the amounts than the lowest announced class price a cooperative association in its capacity computed in paragraphs (c)(3)(i) for the preceding month, less proper as the operator of a pool plant and for through (v) of this section and from that deductions authorized in writing by the milk received from a cooperative sum deduct any payment made producer; and association in its capacity as a handler pursuant to paragraph (c)(1) of this (2) Final payment. For milk received pursuant to § 1000.9(c) during the first section. (d) If a handler has not received full during the month, payment shall be 15 days of the month, at not less than payment from the market administrator made so that it is received by each the lowest announced class price per pursuant to § 1032.72 by the payment producer no later than the 17th day after hundredweight for the preceding date specified in paragraph (a), (b) or (c) the end of the month in an amount month; equal to not less than the sum of: (2) For the total quantity of bulk fluid of this section, the handler may reduce (i) The hundredweight of producer milk products and bulk fluid cream pro rata its payments to producers or to milk received times the producer price products received from a cooperative the cooperative association (with differential for the month as adjusted association in its capacity as the respect to receipts described in pursuant to § 1032.75; operator of a pool plant, at not less than paragraph (b), prorating the (ii) The pounds of butterfat received the total value of such products received underpayment to the volume of milk times the butterfat price for the month; from the association’s pool plants, as received from the cooperative (iii) The pounds of protein received determined by multiplying the association in proportion to the total times the protein price for the month; respective quantities assigned to each milk received from producers by the (iv) The pounds of other solids class under § 1000.44, as follows: handler), but not by more than the received times the other solids price for (i) The hundredweight of Class I skim amount of the underpayment. The the month; milk times the Class I skim milk price payments shall be completed on the (v) The hundredweight of milk for the month plus the pounds of Class next scheduled payment date after received times the somatic cell I butterfat times the Class I butterfat receipt of the balance due from the adjustment for the month; price for the month. The Class I price to market administrator. (vi) Less any payment made pursuant be used shall be that price effective at (e) If a handler claims that a required to paragraph (a)(1) of this section; the location of the shipping plant; payment to a producer cannot be made (vii) Less proper deductions (ii) The hundredweight of Class II because the producer is deceased or authorized in writing by such producer skim milk times $.70; cannot be located, or because the and plus or minus adjustments for (iii) The pounds of nonfat solids cooperative association or its lawful errors in previous payments to such received in Class II and Class IV milk successor or assignee is no longer in producer; and times the nonfat solids price for the existence, the payment shall be made to (viii) Less deductions for marketing month; the producer-settlement fund, and in the services pursuant to § 1000.86. (iv) The pounds of butterfat received event that the handler subsequently (b) Payments for milk received from in Class II, Class III, and Class IV milk locates and pays the producer or a cooperative association members. On or times the butterfat price for the month; lawful claimant, or in the event that the before the day prior to the dates (v) The pounds of protein received in handler no longer exists and a lawful specified in paragraphs (a)(1) and (a)(2) Class III milk times the protein price for claim is later established, the market of this section, each handler shall pay the month; administrator shall make the required to a cooperative association for milk (vi) The pounds of other solids payment from the producer-settlement from producers who market their milk received in Class III milk times the other fund to the handler or to the lawful through the cooperative association and solids price for the month; claimant, as the case may be. who have authorized the cooperative to (vii) The hundredweight of Class II, (f) In making payments to producers collect such payments on their behalf an Class III, and Class IV milk received pursuant to this section, each handler amount equal to the sum of the times the somatic cell adjustment; and shall furnish each producer, except a individual payments otherwise payable (viii) Add together the amounts producer whose milk was received from for such producer milk pursuant to computed in paragraphs (c)(2)(i) a cooperative association handler paragraphs (a)(1) and (a)(2) of this through (vii) of this section and from described in § 1000.9(a) or (c), a section. that sum deduct any payment made supporting statement in a form that may (c) Payment for milk received from pursuant to paragraph (c)(1) of this be retained by the recipient which shall cooperative association pool plants or section. show: from cooperatives as handlers pursuant (3) For the total quantity of milk (1) The name, address, Grade A to § 1000.9(c). On or before the day prior received during the month from a identifier assigned by a duly constituted to the dates specified in paragraph (a)(1) cooperative association in its capacity as regulatory agency, and payroll number and (a)(2) of this section, each handler a handler under § 1000.9(c) as follows: of the producer; 5060 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

(2) The daily and total pounds, and PART 1033ÐMILK IN THE MIDEAST Administrative Assessment and Marketing the month and dates such milk was MARKETING AREA Service Deduction received from that producer; 1033.85 Assessment for order SubpartÐOrder Regulating Handling (3) The total pounds of butterfat, administration. 1033.86 Deduction for marketing services. protein, and other solids contained in General Provisions Authority: 7 U.S.C. 601–674. the producer’s milk; Sec. (4) The somatic cell count of the 1033.1 General provisions. SubpartÐOrder Regulating Handling producer’s milk; Definitions General Provisions (5) The minimum rate or rates at 1033.2 Mideast marketing area. which payment to the producer is 1033.3 Route disposition. § 1033.1 General provisions. required pursuant to this order; 1033.4 Plant. The terms, definitions, and provisions 1033.5 Distributing plant. (6) The rate used in making payment in Part 1000 of this chapter apply to and 1033.6 Supply plant. are hereby made a part of this order. if the rate is other than the applicable 1033.7 Pool plant. minimum rate; 1033.8 Nonpool plant. Definitions 1033.9 Handler. (7) The amount, or rate per § 1033.2 Mideast marketing area. hundredweight, or rate per pound of 1033.10 Producer-handler. component, and the nature of each 1033.11 [Reserved] The marketing area means all territory deduction claimed by the handler; and 1033.12 Producer. within the bounds of the following 1033.13 Producer milk. states and political subdivisions, (8) The net amount of payment to the 1033.14 Other source milk. including all piers, docks, and wharves producer or cooperative association. 1033.15 Fluid milk product. connected therewith and all craft 1033.16 Fluid cream product. § 1032.74 [Reserved] moored thereat, and all territory 1033.17 [Reserved] occupied by government (municipal, § 1032.75 Plant location adjustments for 1033.18 Cooperative association. State, or Federal) reservations, producer milk and nonpool milk. 1033.19 Commercial food processing installations, institutions, or other establishment. similar establishments if any part (a) The producer price differential for Handler Reports thereof is within any of the listed states producer milk shall be adjusted or political subdivisions: according to the location of the plant at 1033.30 Reports of receipts and utilization. which the milk was physically received 1033.31 Payroll reports. Ohio 1033.32 Other reports. by subtracting from the price differential All of the State of Ohio. the amount by which the Class I price Classification of Milk Indiana Counties specified in § 1032.51 exceeds the Class 1033.40 Classes of utilization. Adams, Allen, Bartholomew, Benton, I price at the plant’s location. If the 1033.41 [Reserved] Blackford, Boone, Brown, Carroll, Cass, Clay, 1033.42 Classification of transfers and Class I price at the plant location Clinton, Dearborn, Decatur, De Kalb, diversions. exceeds the Class I price specified in Delaware, Elkhart, Fayette, Fountain, 1033.43 General classification rules. § 1032.51, the difference shall be added Franklin, Fulton, Grant, Hamilton, Hancock, 1033.44 Classification of producer milk. to the producer price differential; and Hendricks, Henry, Howard, Huntington, 1033.45 Market administrator’s reports and Jackson, Jasper, Jay, Jefferson, Jennings, (b) The producer price differential announcements concerning applicable to other source milk shall be Johnson, Kosciusko, Lagrange, Lake, La Porte, classification. Lawrence, Madison, Marion, Marshall, adjusted following the procedure Class Prices Miami, Monroe, Montgomery, Morgan, specified in paragraph (a) of this Newton, Noble, Ohio, Owen, Parke, Porter, 1033.50 Class prices and component prices. section, except that the adjusted Pulaski, Putnam, Randolph, Ripley, Rush, 1033.51 Class I differential and price. producer price differential shall not be Shelby, St. Joseph, Starke, Steuben, 1033.52 Adjusted Class I differentials. less than zero. Switzerland, Tippecanoe, Tipton, Union, 1033.53 Announcement of class prices and Vermillion, Vigo, Wabash, Warren, Wayne, § 1032.76 Payments by a handler component prices. Wells, White, and Whitley. operating a partially regulated distributing 1033.54 Equivalent price. Kentucky Counties plant. Producer Price Differential Boone, Boyd, Bracken, Campbell, Floyd, See § 1000.76 of this chapter. 1033.60 Handler’s value of milk. Grant, Greenup, Harrison, Johnson, Kenton, 1033.61 Computation of producer price Lawrence, Lewis, Magoffin, Martin, Mason, § 1032.77 Adjustment of accounts. differential. Pendleton, Pike, and Robertson. 1033.62 Announcement of producer prices. See § 1000.77 of this chapter. Michigan Counties Payments for Milk § 1032.78 Charges on overdue accounts. All counties except Delta, Dickinson, 1033.70 Producer-settlement fund. Gogebic, Iron, Menominee, and Ontonagon. See § 1000.78 of this chapter. 1033.71 Payments to the producer- settlement fund. Pennsylvania Counties Administrative Assessment and 1033.72 Payments from the producer- Allegheny, Armstrong, Beaver, Butler, Marketing Service Deduction settlement fund. Crawford, Erie, Fayette, Greene, Lawrence, 1033.73 Payments to producers and to Mercer, Venango, and Washington. § 1032.85 Assessment for order cooperative associations. In Clarion County only the townships of administration. 1033.74 [Reserved] Ashland, Beaver, Licking, Madison, Perry, See § 1000.85 of this chapter. 1033.75 Plant location adjustments for Piney, Richland, Salem, and Toby. producer milk and nonpool milk. All of Westmoreland County except the § 1032.86 Deduction for marketing 1033.76 Payments by a handler operating a townships of Cook, Donegal, Fairfield, services. partially regulated distributing plant. Ligonier, and St. Clair, and the boroughs of 1033.77 Adjustment of accounts. Bolivar, Donegal, Ligonier, New Florence, See § 1000.86 of this chapter. 1033.78 Charges on overdue accounts. and Seward. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5061

West Virginia Counties (1) Qualifying shipments pursuant to have met the percentage shipping Barbour, Boone, Brooke, Cabell, Calhoun, this paragraph may be made to the requirements of paragraph (c) of this Doddridge, Fayette, Gilmer, Hancock, following plants, except whenever the section for 6 consecutive months; and Harrison, Jackson, Kanawha, Lewis, Lincoln, authority provided in paragraph (g) of (4) A supply plant that does not meet Logan, Marion, Marshall, Mason, Mingo, this section is applied to increase the the minimum delivery requirements Monongalia, Ohio, Pleasants, Preston, shipping requirements specified in this specified in this paragraph to qualify for Putnam, Raleigh, Randolph, Ritchie, Roane, pool status in the current month Taylor, Tucker, Tyler, Upshur, Wayne, section, only shipments to pool plants Wetzel, Wirt, Wood, and Wyoming. described in § 1033.7(a) and (b), and because a distributing plant to which units described in § 1033.7(e) shall the supply plant delivered its fluid milk § 1033.3 Route disposition. count as qualifying shipments for the products during such month failed to See § 1000.3 of this chapter. purpose of meeting the increased qualify as a pool plant pursuant to shipments: paragraph (a) or (b) of this section shall § 1033.4 Plant. (i) Pool plants described in continue to be a pool plant for the See § 1000.4 of this chapter. § 1033.7(a), (b) and (e); current month if such supply plant (ii) Plants of producer-handlers; qualified as a pool plant in the three § 1033.5 Distributing plant. (iii) Partially regulated distributing See § 1000.5 of this chapter. immediately preceding months. plants, except that credit for such (d) A plant operated by a cooperative § 1033.6 Supply plant. shipments shall be limited to the association if, during the month, 35 See § 1000.6 of this chapter. amount of such milk classified as Class percent or more of the producer milk of I at the transferee plant; and members of the association is delivered § 1033.7 Pool plant. (iv) Distributing plants fully regulated to a distributing pool plant(s) or to a Pool plant means a plant, unit of under other Federal orders, except that nonpool plant(s), and classification plants, or a system of plants as specified credit for transfers to such plants shall other than Class I is not requested. in paragraphs (a) through (f) of this be limited to the quantity shipped to Deliveries for qualification purposes section. The pooling standards pool distributing plants during the may be made directly from the farm or described in paragraphs (a), (c), (d), (e), month. Qualifying transfers to other by transfer from such association’s and (f) of this section are subject to order plants shall not include transfers plant, subject to the following modification pursuant to paragraph (g) made on the basis of agreed-upon Class conditions: of this section: II, Class III, or Class IV utilization. (1) The cooperative requests pool (a) A distributing plant from which (2) The operator of a supply plant may status for such plant; during the month: include deliveries to pool distributing (2) The 35-percent delivery (1) Total route disposition is equal to plants directly from farms of producers requirement may be met for the current 30 percent or more of the total quantity pursuant to § 1033.13(c) as up to 90 month or it may be met on the basis of of bulk fluid milk products physically percent of the supply plant’s qualifying deliveries during the preceding 12- received at the plant; shipments; month period ending with the current (2) Route disposition in the marketing (3) A supply plant that meets the month; area is at least 30 percent of total route shipping requirements of this paragraph (3) The plant is approved by a duly disposition. during each of the immediately constituted regulatory authority to (3) For purposes of this section, preceding months of September through handle milk for fluid consumption; and packaged fluid milk products that are February shall be a pool plant during (4) The plant does not qualify as a transferred to a distributing plant shall the following months of March through pool plant under (a), (b), or (c) of this be considered as route disposition from August unless the milk received at the section or under the similar provisions the transferring plant, rather than the plant fails to meet the requirements of of another Federal order applicable to a receiving plant, for the single purpose of a duly constituted regulatory agency, distributing plant or supply plant. qualifying the transferring plant as a the plant fails to meet a shipping (e) A plant located inside the pool distributing plant. requirement instituted pursuant to marketing area which has been a pool (b) A distributing plant located in the paragraph (f) of this section, or the plant plant under this order or its predecessor marketing area at which the majority of operator requests nonpool status for the orders for twelve consecutive months, milk received is processed into plant. Such nonpool status shall be but is not otherwise qualified under this aseptically packaged fluid milk effective on the first day of the month paragraph, if it has a marketing products unless there are no sales from following the receipts of such request agreement with a cooperative the plant into any marketing area and and thereafter until the plant again association and it fulfills the following the plant operator in writing requests qualifies as a pool plant on the basis of conditions: nonpool plant status for the plant for the its deliveries to a pool distributing (1) The aggregate monthly quantity month. plant(s). supplied by all parties to such an (c) A supply plant from which the The automatic pool qualification of a agreement as a percentage of the quantity of bulk fluid milk products plant can be waived if the handler or producer milk receipts included in the shipped to, received at, and physically cooperative requests in writing to the unit during the month is not less than unloaded into plants described in market administrator the nonpool status 35 percent; and paragraph (a) or (b) of this section as a of such plant. The request must be made (2) Shipments for qualification percent of the Grade A milk received at prior to the beginning of any month purposes shall include both transfers the plant from dairy farmers (except during the March through August from supply plants to plants described dairy farmers described in § 1033.12(b)) period. The plant shall be a nonpool in paragraph (c)(1) of this section, and and handlers described in § 1033.9(c), as plant for such month and thereafter deliveries made direct from the farm to reported in § 1033.30(a), is not less than until it requalifies under paragraph (c) plants qualified under paragraph (a) of 30 percent of the milk received from of this section on the basis of actual this section. dairy farmers, including milk diverted shipments therefrom. To requalify as a (f) A system of supply plants may be pursuant to § 1033.13, subject to the pool plant under paragraph (d), (e) or (f) qualified for pooling by the association following conditions: of this section, such plant must first of two or more supply plants operated 5062 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules by one or more handlers by meeting the own initiative or at the request of preceding three months pursuant to applicable percentage requirements of interested persons. If such investigation paragraph (a) of this section or the paragraph (c) of this section in the same shows that a revision might be shipping percentages in paragraph (c) of manner as a single plant and subject to appropriate, the market administrator this section that is unable to meet such the following additional requirements: shall issue a notice stating that a performance standards for the current (1) Each plant in the system is located revision is being considered and month because of unavoidable within the marketing area, or was a pool inviting data, views, and arguments. If circumstances determined by the market supply plant for each of the three the market administrator determines administrator to be beyond the control months immediately preceding the that an adjustment to the shipping of the handler operating the plant, such effective date of this paragraph so long percentages is necessary, the market as a natural disaster (ice storm, wind as it continues to maintain pool status. administrator shall notify the industry storm, flood), fire, breakdown of Cooperative associations may not use within one day of the effective date of equipment, or work stoppage, shall be shipments pursuant to § 1033.9(c) to such adjustment. considered to have met the minimum qualify plants located outside the (h) The term pool plant shall not performance standards during the marketing area; apply to the following plants: period of such unavoidable (2) A written notification to the (1) A producer-handler as defined circumstances, but such relief shall not market administrator listing the plants under any Federal order; be granted for more than two to be included in the system and the (2) An exempt plant as defined in consecutive months. handler that is responsible for meeting § 1000.8(e); the performance requirements of this (3) A plant located within the § 1033.8 Nonpool plant. paragraph under a marketing agreement marketing area and qualified pursuant See § 1000.8 of this chapter. certified to the market administrator by to paragraph (a) of this section that the designated handler and any others meets the pooling requirements of § 1033.9 Handler. included in the system, and the period another Federal order, and from which See § 1000.9 of this chapter. during which such consideration shall more than 50 percent of its route § 1033.10 Producer-handler. apply. Such notice, and notice of any disposition has been in the other change in designation, shall be Federal order marketing area for three Except as provided in paragraph (g) of furnished on or before the fifth working consecutive months; this section, producer-handler means a day following the month to which the (4) A plant located outside any person who: notice applies. The listed plants Federal order marketing area and (a) Operates a dairy farm and a included in the system shall also be in qualified pursuant to paragraph (a) of distributing plant from which there is the sequence in which they shall qualify this section that meets the pooling monthly route disposition in excess of for pool plant status based on the requirements of another Federal order 150,000 pounds during the month; minimum deliveries required. If the and has had greater sales in such other (b) Receives no fluid milk products deliveries made are insufficient to Federal order’s marketing area for 3 from sources other than own farm qualify the entire system for pooling, the consecutive months; production, pool handlers, and plants last listed plant shall be excluded from (5) A plant located in another Federal fully regulated under another Federal the system, followed by the plant next- order marketing area and qualified order; to-last on the list, and continuing in this pursuant to paragraph (a) of this section (c) Receives at its plant or acquires for sequence until remaining listed plants that meets the pooling requirements of route disposition no more than 150,000 have met the minimum shipping such other Federal order and does not pounds of fluid milk products from requirements; and have a majority of its route distribution handlers fully regulated under any (3) Each plant that qualifies as a pool in this marketing area for 3 consecutive Federal order. This limitation shall not plant within a system shall continue months or if the plant is required to be apply if the producer-handler’s own each month as a plant in the system regulated under such other Federal farm production is less than 150,000 unless the plant subsequently fails to order without regard to its route pounds during the month. qualify for pooling, or the responsible disposition in any other Federal order (d) Disposes of no other source milk handler submits a written notification to marketing area; as Class I milk except by increasing the the market administrator prior to the (6) A plant qualified pursuant to nonfat milk solids content of the fluid first day of the month that the plant is paragraph (c) or (d) of this section that milk products received from own farm to be deleted from the system, or that also meets the pooling requirements of production or pool handlers; the system is to be discontinued. In any another Federal order and from which (e) Disposes of no fluid milk products month of March through August, a greater qualifying shipments are made using the distribution system of another system shall not contain any plant to plants regulated under the other handler except for direct deliveries to which was not qualified under this Federal order than are made to plants retail outlets or to a pool handler’s paragraph, either individually or as a regulated under this order, or the plant plant; member of a system, during the has automatic pooling status under the (f) Provides proof satisfactory to the previous September through February. other Federal order; and market administrator that the care and (g) The performance standards of (7) That portion of a regulated plant management of the dairy animals and paragraphs (a), (c), (d), (e) and (f) of this designated as a nonpool plant that is other resources necessary to produce all section may be increased or decreased physically separate and operated Class I milk handled (excluding receipts by the market administrator if the separately from the pool portion of such from handlers fully regulated under any market administrator finds that such plant. The designation of a portion of a Federal order) and the processing, adjustment is necessary to obtain regulated plant as a nonpool plant must packaging, and distribution operations needed shipments or to prevent be requested in advance and in writing are the producer-handler’s own uneconomic shipments. Before making by the handler and must be approved by enterprise and at its own risk; and such a finding, the market administrator the market administrator. (g) Producer-handler shall not include shall investigate the need for revision, (i) Any plant that qualifies as a pool any producer who also operates a either on the market administrator’s plant in each of the immediately distributing plant if the producer- Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5063 handler so requests that the two be (c) Diverted by a pool plant operator arguments. Any decision to revise an operated as separate entities with the to another pool plant. Milk so diverted applicable percentage must be issued in distributing plant regulated under shall be priced at the location of the writing at least one day before the § 1033.7(a) and the farm operated as a plant to which diverted; or effective date. producer under § 1033.12. (d) Diverted by the operator of a pool plant or by a cooperative association § 1033.14 Other source milk. § 1033.11 [Reserved] described in § 1033.9(c) to a nonpool See § 1000.14 of this chapter. plant, subject to the following § 1033.12 Producer. § 1033.15 Fluid milk product. conditions: (a) Except as provided in paragraph (1) Milk of a dairy farmer shall not be See § 1000.15 of this chapter. (b) of this section, producer means any eligible for diversion until milk of such § 1033.16 Fluid cream product. person who produces milk approved by dairy farmer has been physically a duly constituted regulatory agency for received as producer milk at a pool See § 1000.16 of this chapter. fluid consumption as Grade A milk and plant and the dairy farmer has § 1033.17 [Reserved] whose milk is: continuously retained producer status (1) Received at a pool plant directly since that time. If a dairy farmer loses § 1033.18 Cooperative association. from the producer or diverted by the producer status under this order (except See § 1000.18 of this chapter. plant operator in accordance with as a result of a temporary loss of Grade § 1033.13; or A approval), the dairy farmer’s milk § 1033.19 Commercial food processing establishment. (2) Received by a handler described in shall not be eligible for diversion until § 1033.9(c). milk of the dairy farmer has been See § 1000.19 of this chapter. (b) Producer shall not include: physically received as producer milk at Handler Reports (1) A producer-handler as defined in a pool plant; any Federal order; (2) The equivalent of at least one day’s § 1033.30 Reports of receipts and (2) A dairy farmer whose milk is production is caused by the handler to utilization. received at an exempt plant, excluding be physically received at a pool plant in Each handler shall report monthly so producer milk diverted to the exempt each of the months of September that the market administrator’s office plant pursuant to § 1033.13(d); through November; receives the report on or before the 7th (3) A dairy farmer whose milk is (3) Of the total quantity of producer day after the end of the month, in the received by diversion at a pool plant milk received during the month detail and on the prescribed forms, as from a handler regulated under another (including diversions but excluding the follows: Federal order if the other Federal order quantity of producer milk received from (a) Each handler that operates a pool designates the dairy farmer as a a handler described in § 1000.9(c)), the plant pursuant to § 1033.7 and each producer under that order and that milk handler diverted to nonpool plants not handler described in § 1000.9(c) shall is allocated by request to a utilization more than 60 percent during the months report for each of its operations the other than Class I; and of September through February; following information: (4) A dairy farmer whose milk is (4) Diverted milk shall be priced at (1) Product pounds, pounds of reported as diverted to a plant fully the location of the plant to which butterfat, pounds of protein, and the regulated under another Federal order diverted; value of the somatic cell adjustment with respect to that portion of the milk (5) Any milk diverted in excess of the pursuant to § 1000.50(p), contained in so diverted that is assigned to Class I limits set forth in paragraph (d)(3) of or represented by: under the provisions of such other this section shall not be producer milk. (i) Receipts of producer milk, order. The diverting handler shall designate including producer milk diverted by the the dairy farmer deliveries that shall not reporting handler; and § 1033.13 Producer milk. be producer milk. If the handler fails to (ii) Receipts of milk from handlers Producer milk means the skim milk designate the dairy farmer deliveries described in § 1000.9(c); (or the skim equivalent of components which are ineligible, producer milk (2) Product pounds and pounds of of skim milk), including nonfat status shall be forfeited with respect to butterfat contained in: components, and butterfat in milk of a all milk diverted to nonpool plants by (i) Receipts of fluid milk products and producer that is: such handler; and bulk fluid cream products from other (a) Received by the operator of a pool (6) The delivery day requirements and pool plants; plant directly from a producer or a the diversion percentages in paragraphs (ii) Receipts of other source milk; and handler described in § 1000.9(c). Any (d)(2) and (d)(3) of this section may be (iii) Inventories at the beginning and milk picked up from the producer’s increased or decreased by the market end of the month of fluid milk products farm tank in a tank truck under the administrator if the market and bulk fluid cream products; control of the operator of a pool plant administrator finds that such revision is (3) The utilization or disposition of all or a handler described in § 1000.9(c) but necessary to assure orderly marketing milk and milk products required to be which is not received at a plant until the and efficient handling of milk in the reported pursuant to this paragraph; and following month shall be considered as marketing area. Before making such a (4) Such other information with having been received by the handler finding, the market administrator shall respect to the receipts and utilization of during the month in which it is picked investigate the need for the revision skim milk, butterfat, milk protein, and up at the producer’s farm. All milk either on the market administrator’s somatic cell information as the market received pursuant to this paragraph own initiative or at the request of administrator may prescribe. shall be priced at the location of the interested persons. If the investigation (b) Each handler operating a partially plant where it is first physically shows that a revision might be regulated distributing plant shall report received; appropriate, the market administrator with respect to such plant in the same (b) Received by a handler described in shall issue a notice stating that the manner as prescribed for reports § 1000.9(c) in excess of the quantity revision is being considered and required by paragraph (a) of this section. delivered to pool plants; inviting written data, views, and Receipts of milk that would have been 5064 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules producer milk if the plant had been § 1033.51 Class I differential and price. to § 1000.44(a) the pounds of protein fully regulated shall be reported in lieu The Class I differential shall be the determined in § 1033.60(c)(1) and of producer milk. The report shall show differential established for Cuyahoga multiplying the resulting pounds of also the quantity of any reconstituted County, Ohio which is reported in fluid carrier by a price determined by skim milk in route disposition in the § 1000.52. The Class I price shall be the multiplying 5.7 times the other solids marketing area. price computed pursuant to § 1000.50(a) price and dividing the result by 91 (the (c) Each handler not specified in for Cuyahoga County, Ohio. resulting price, rounded to the 4th paragraphs (a) and (b) of this section decimal place, shall be known as the § 1033.52 Adjusted Class I differentials. shall report with respect to its receipts fluid carrier price); and and utilization of milk and milk See § 1000.52 of this chapter. (3) Add an amount obtained by products in such manner as the market § 1033.53 Announcement of class prices multiplying the pounds of butterfat in administrator may prescribe. and component prices. Class III as determined pursuant to § 1000.44(b) by the butterfat price; See § 1000.53 of this chapter. § 1033.31 Payroll reports. (d) Add the Class IV value computed (a) On or before the 22nd day after the § 1033.54 Equivalent price. as follows: end of each month, each handler that See § 1000.54 of this chapter. (1) Multiply the pounds of skim milk operates a pool plant pursuant to in Class IV as determined pursuant to § 1033.7 and each handler described in Producer Price Differential § 1000.44(a) by the average nonfat solids § 1033.9(c) shall report to the market § 1033.60 Handler's value of milk. content of producer skim milk received administrator its producer payroll for For the purpose of computing a by the handler, and multiply the the month, in the detail prescribed by handler’s obligation for producer milk, resulting pounds of nonfat solids by the the market administrator, showing for the market administrator shall nonfat solids price; and each producer the information determine for each month the value of (2) Add an amount obtained by described in § 1033.73(e). milk of each handler with respect to multiplying the pounds of butterfat in (b) Each handler operating a partially each of its pool plants, and of each Class IV as determined pursuant to regulated distributing plant who elects handler described in § 1033.9(c) as § 1000.44(b) by the butterfat price; to make payment pursuant to follows: (e) Add an adjustment for the somatic § 1000.76(b) shall report for each dairy (a) Class I value. cell content of producer milk farmer who would have been a producer (1) Multiply the hundredweight of determined by multiplying the value if the plant had been fully regulated in skim milk in Class I as determined reported pursuant to § 1033.30(a)(1) by the same manner as prescribed for pursuant to § 1000.44(a) by the Class I the percentage of the total producer reports required by paragraph (a) of this skim milk price applicable at the milk allocated to Class II, Class III, and section. handler’s location; and Class IV pursuant to § 1000.44(c); (2) Add an amount obtained by (f) Add the amounts obtained from § 1033.32 Other reports. multiplying the pounds of butterfat in multiplying the pounds of skim milk In addition to the reports required Class I as determined pursuant to and butterfat overage assigned to each pursuant to §§ 1033.30 and 1033.31, § 1000.44(b) by the Class I butterfat class pursuant to § 1000.43(b)(2) by the each handler shall report any price applicable at the handler’s respective skim milk and butterfat information the market administrator location; prices applicable at the location of the deems necessary to verify or establish (b) Add the Class II value computed pool plant; each handler’s obligation under the as follows: (g) Add the amount obtained from order. (1) Multiply the hundredweight of multiplying the difference between the Class III price for the preceding month Classification of Milk skim milk in Class II as determined pursuant to § 1000.44(a) by 70 cents; and the Class I price applicable at the § 1033.40 Classes of utilization. (2) Add an amount obtained by location of the pool plant or the Class II price, as the case may be, for the See § 1000.40 of this chapter. multiplying the pounds of skim milk in Class II as determined pursuant to current month by the hundredweight of § 1033.41 [Reserved] § 1000.44(a) by the average nonfat solids skim milk and butterfat subtracted from content of producer skim milk received Class I and Class II pursuant to § 1033.42 Classification of transfers and by the handler, and multiply the § 1000.44(a)(7) and the corresponding diversions. resulting pounds of nonfat solids by the step of § 1000.44(b); See § 1000.42 of this chapter. nonfat solids price; and (h) Add the amount obtained from (3) Add an amount obtained by multiplying the difference between the § 1033.43 General classification rules. multiplying the pounds of butterfat in Class I price applicable at the location See § 1000.43 of this chapter. Class II as determined pursuant to of the pool plant and the Class III price by the hundredweight of skim milk and § 1033.44 Classification of producer milk. § 1000.44(b) by the butterfat price; (c) Add the Class III value computed butterfat assigned to Class I pursuant to See § 1000.44 of this chapter. as follows: § 1000.43(d) and the hundredweight of skim milk and butterfat subtracted from § 1033.45 Market administrator's reports (1) Multiply the pounds of skim milk and announcements concerning in Class III as determined pursuant to Class I pursuant to § 1000.44(a)(3)(i) classification. § 1000.44(a) by the average protein through (iii) and the corresponding step content of producer skim milk received of § 1000.44(b), excluding receipts of See § 1000.45 of this chapter. by the handler, and multiply the bulk fluid cream products from plants Class Prices resulting pounds of protein by the regulated under other Federal orders protein price; and bulk concentrated fluid milk § 1033.50 Class prices and component (2) Add an amount obtained by products from pool plants, plants prices. subtracting from the pounds of skim regulated under other Federal orders, See § 1000.50 of this chapter. milk in Class III as determined pursuant and unregulated supply plants; Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5065

(i) Add the amount obtained from handlers required to file reports (a) The total value of milk to the multiplying the difference between the prescribed in § 1033.30; handler for the month as determined Class I price and the Class III price (b) Subtract the total values obtained pursuant to § 1033.60. applicable at the location of the nearest by multiplying each handler’s total (b) The sum of: unregulated supply plants from which pounds of protein, fluid carrier, and (1) An amount obtained by an equivalent volume was received by butterfat contained in the milk for multiplying the total hundredweight of the pounds of skim milk and butterfat which an obligation was computed producer milk as determined pursuant in receipts of concentrated fluid milk pursuant to § 1033.60 by the protein to § 1000.44(c) by the producer price products assigned to Class I pursuant to price, the fluid carrier price, and the differential as adjusted pursuant to § 1000.43(d) and § 1000.44(a)(3)(i) and butterfat price, respectively, and the § 1033.75; the pounds of skim milk and butterfat total value of the somatic cell (2) An amount obtained by subtracted from Class I pursuant to adjustment pursuant to § 1033.30(a)(1); multiplying the total pounds of protein § 1000.44(a)(8) and the corresponding (c) Add an amount equal to the sum and butterfat contained in producer step of § 1000.44(b), excluding such of the location adjustments computed milk by the protein and butterfat prices, skim milk and butterfat in receipts of pursuant to § 1033.75; respectively; bulk fluid milk products from an (d) Add an amount equal to not less (3) An amount obtained by unregulated supply plant to the extent than one-half of the unobligated balance multiplying the total hundredweight of that an equivalent amount of skim milk in the producer-settlement fund; fluid carrier contained in producer milk or butterfat disposed of to such plant by (e) Divide the resulting amount by the by the fluid carrier price computed handlers fully regulated under any sum of the following for all handlers pursuant to § 1033.60(c)(2); Federal milk order is classified and included in these computations: (4) The total value of the somatic cell priced as Class I milk and is not used (1) The total hundredweight of adjustment to producer milk; and as an offset for any other payment producer milk; and (5) An amount obtained by obligation under any order; (2) The total hundredweight for which multiplying the pounds of skim milk (j) Subtract, for reconstituted milk a value is computed pursuant to and butterfat for which a value was made from receipts of nonfluid milk § 1033.60(i); and computed pursuant to § 1033.60(i) by products, an amount computed by (f) Subtract not less than 4 cents nor the producer price differential as multiplying $1.00 (but not more than more than 5 cents from the price adjusted pursuant to § 1033.75 for the the difference between the Class I price computed pursuant to paragraph (e) of location of the plant from which applicable at the location of the pool this section. The result shall be known received. plant and the Class IV price) by the as the producer price differential for the § 1033.72 Payments from the producer- hundredweight of skim milk and month. butterfat contained in receipts of settlement fund. nonfluid milk products that are § 1033.62 Announcement of producer No later than the 16th day after the allocated to Class I pursuant to prices. end of each month, the market § 1000.43(d); and On or before the 13th day after the administrator shall pay to each handler (k) Exclude, for pricing purposes end of each month, the market the amount, if any, by which the under this section, receipts of nonfluid administrator shall announce publicly amount computed pursuant to milk products that are distributed as the following prices and information: § 1033.71(b) exceeds the amount labeled reconstituted milk for which (a) The producer price differential; computed pursuant to § 1033.71(a). If, at payments are made to the producer- (b) The protein price; such time, the balance in the producer- settlement fund is insufficient to make settlement fund of another order under (c) The fluid carrier price; all payments pursuant to this section, § 1000.76(a)(5) or (c). (d) The butterfat price; the market administrator shall reduce (e) The somatic cell adjustment rate; § 1033.61 Computation of producer price uniformly such payments and shall differential. (f) The average butterfat and protein complete the payments as soon as the For each month the market content of producer milk; and funds are available. administrator shall compute a producer (g) The statistical uniform price for price differential per hundredweight. If milk containing 3.5 percent butterfat, § 1033.73 Payments to producers and to the unreserved balance in the producer- computed by combining the Class III cooperative associations. settlement fund to be included in the price and the producer price (a) Each handler shall pay each computation is less than 2 cents per differential. producer for producer milk for which hundredweight of producer milk on all Payments for Milk payment is not made to a cooperative reports, the report of any handler who association pursuant to paragraph (b) of has not made payments required § 1033.70 Producer-settlement fund. this section, as follows: pursuant to § 1033.71 for the preceding See § 1000.70 of this chapter. (1) Partial payment. For each month shall not be included in the producer who has not discontinued computation of the producer price § 1033.71 Payments to the producer- shipments as of the date of this partial differential. The report of such handler settlement fund. payment, payment shall be made so that shall not be included in the Each handler shall make payment to it is received by each producer on or computation for succeeding months the producer-settlement fund in a before the 26th day of the month for until the handler has made full payment manner that provides receipt of the milk received during the first 15 days of of outstanding monthly obligations. funds by the market administrator no the month from the producer at not less Subject to the aforementioned later than the 15th day after the end of than the lowest announced class price conditions, the market administrator the month. Payment shall be the for the preceding month, less proper shall compute the producer price amount, if any, by which the amount deductions authorized in writing by the differential in the following manner: specified in (a) of this section exceeds producer; and (a) Combine into one total the values the amount specified in (b) of this (2) Final payment. For milk received computed pursuant to § 1033.60 for all section: during the month, payment shall be 5066 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules made so that it is received by each § 1033.60(a) and location adjustments (5) The minimum rate or rates at producer no later than the 17th day after pursuant to § 1033.75, minus the which payment to the producer is the end of the month in an amount amount of the payment made to the required pursuant to this order; equal to not less than the sum of: association pursuant to paragraph (a)(1) (6) The rate used in making payment (i) The hundredweight of producer of this section. if the rate is other than the applicable milk received times the producer price (4) Final payment to a cooperative minimum rate; differential for the month as adjusted association for bulk milk received (7) The amount, or rate per pursuant to § 1033.75; directly from producers’ farms. For bulk hundredweight, or rate per pound of (ii) The pounds of butterfat received milk received from a cooperative component, and the nature of each times the butterfat price for the month; association during the month, including deduction claimed by the handler; and (iii) The pounds of protein received the milk of producers who are not (8) The net amount of payment to the times the protein price for the month; members of such association and who producer or cooperative association. (iv) The hundredweight of fluid the market administrator determines carrier received times the fluid carrier have authorized the cooperative § 1033.74 [Reserved] price for the month; association to collect payment for their § 1033.75 Plant location adjustments for (v) The hundredweight of milk milk, the final payment for such milk producer milk and nonpool milk. received times the somatic cell shall be an amount equal to the sum of (a) The producer price differential for adjustment for the month; the individual payments otherwise producer milk shall be adjusted (vi) Less any payment made pursuant payable for such milk pursuant to to paragraph (a)(1) of this section; according to the location of the plant at paragraph (a)(2) of this section. which the milk was physically received (vii) Less proper deductions (c) If a handler has not received full by subtracting from the price differential authorized in writing by such producer payment from the market administrator the amount by which the Class I price and plus or minus adjustments for pursuant to § 1033.72 by the payment specified in § 1033.51 exceeds the Class errors in previous payments to such date specified in paragraph (a) or (b) of I price at the plant’s location. If the producer; and this section, the handler may reduce Class I price at the plant location (viii) Less deductions for marketing payments pursuant to paragraphs (a) exceeds the Class I price specified in services pursuant to § 1000.86. and (b) of this section, but not by more § 1033.51, the difference shall be added (b) Payments for milk received from than the amount of the underpayment. to the producer price differential; and cooperative associations. On or before The payments shall be completed on the the day prior to the dates specified in (b) The producer price differential next scheduled payment date after applicable to other source milk shall be paragraphs (a)(1) and (a)(2) of this receipt of the balance due from the section, each handler shall pay to a adjusted following the procedure market administrator. specified in paragraph (a) of this cooperative association for milk (d) If a handler claims that a required section, except that the adjusted received as follows: payment to a producer cannot be made producer price differential shall not be (1) Partial payment to a cooperative because the producer is deceased or less than zero. association. For bulk fluid milk/ cannot be located, or because the skimmed milk received during the first cooperative association or its lawful § 1033.76 Payments by a handler 15 days of the month from a cooperative successor or assignee is no longer in operating a partially regulated distributing association in any capacity, except as existence, the payment shall be made to plant. the operator of a pool plant, the partial the producer-settlement fund, and in the See § 1000.76 of this chapter. payment shall be equal to the event that the handler subsequently hundredweight of milk received locates and pays the producer or a § 1033.77 Adjustment of accounts. multiplied by the lowest announced lawful claimant, or in the event that the See § 1000.77 of this chapter. class price for the preceding month; handler no longer exists and a lawful § 1033.78 Charges on overdue accounts. (2) Partial payment to a cooperative claim is later established, the market association for milk transferred from its administrator shall make the required See § 1000.78 of this chapter. pool plant. For bulk milk/skimmed milk payment from the producer-settlement Administrative Assessment and products received during the first 15 fund to the handler or to the lawful Marketing Service Deduction days of the month from a cooperative claimant, as the case may be. association in its capacity as the (e) In making payments to producers § 1033.85 Assessment for order operator of a pool plant, the partial pursuant to this section, each handler administration. payment shall be at the pool plant shall furnish each producer, except a See § 1000.85 of this chapter. operator’s estimated use value of the producer whose milk was received from milk using the most recent class prices § 1033.86 Deduction for marketing a cooperative association handler services. available, adjusted for butterfat and described in § 1000.9(c), a supporting See § 1000.86 of this chapter. plant location; statement in a form that may be retained (3) Final payment to a cooperative by the recipient which shall show: association for milk transferred from its PART 1124ÐMILK IN THE PACIFIC (1) The name, address, Grade A NORTHWEST MARKETING AREA pool plant. Following the classification identifier assigned by a duly constituted of bulk fluid milk products and bulk regulatory agency, and payroll number SubpartÐOrder Regulating Handling fluid cream products received during of the producer; General Provisions the month from a cooperative (2) The daily and total pounds, and association in its capacity as the the month and dates such milk was Sec. operator of a pool plant, the final received from that producer; 1124.1 General provisions. payment for such receipts shall be not (3) The total pounds of butterfat, Definitions less than an amount computed by protein, and fluid carrier contained in 1124.2 Pacific Northwest marketing area. multiplying the respective quantities the producer’s milk; 1124.3 Route disposition. assigned to each class under § 1000.44 (4) The average somatic cell count of 1124.4 Plant. by the value calculated pursuant to the producer’s milk; 1124.5 Distributing plant. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5067

1124.6 Supply plant. Definitions milk received is processed into 1124.7 Pool plant. aseptically packaged fluid milk 1124.8 Nonpool plant. § 1124.2 Pacific Northwest marketing area. products unless there are no sales from 1124.9 Handler. The marketing area means all territory the plant into any marketing area and 1124.10 Producer-handler. within the bounds of the following the plant operator in writing requests 1124.11 Cooperative reserve supply unit. states and political subdivisions, 1124.12 Producer. nonpool plant status for the plant for the 1124.13 Producer milk. including all piers, docks, and wharves month. 1124.14 Other source milk. connected therewith and all craft (c) A supply plant from which during 1124.15 Fluid milk product. moored thereat, and all territory any month not less than 20 percent of 1124.16 Fluid cream product. occupied by government (municipal, the total quantity of milk that is 1124.17 [Reserved] State, or Federal) reservations, physically received at such plant from 1124.18 Cooperative association. installations, institutions, or other dairy farmers eligible to be producers 1124.19 Commercial food processing similar establishments if any part pursuant to § 1124.12 (excluding milk establishment. thereof is within any of the listed states received at such plant as diverted milk Handler Reports or political subdivisions: from another plant, which milk is 1124.30 Reports of receipts and utilization. Washington classified in Class III under this order 1124.31 Payroll reports. and is subject to the pricing and pooling 1124.32 Other reports. All of the State of Washington. provisions of this or another order Classification of Milk Idaho Counties issued pursuant to the Act) or diverted 1124.40 Classes of utilization. Benewah, Bonner, Boundary, Kootenai, as producer milk to another plant 1124.41 [Reserved] Latah, and Shoshone. pursuant to § 1124.13, is shipped in the form of a fluid milk product to a pool 1124.42 Classification of transfers and Oregon Counties diversions. distributing plant or is a route 1124.43 General classification rules. Benton, Clackamas, Clatsop, Columbia, disposition in the marketing area of 1124.44 Classification of producer milk. Coos, Crook, Curry, Deschutes, Douglas, fluid milk products processed and 1124.45 Market administrator’s reports and Gilliam, Hood River, Jackson, Jefferson, packaged at such plant; announcements concerning Josephine, Klamath, Lake, Lane, Lincoln, (1) A supply plant that has qualified classification. Linn, Marion, Morrow, Multnomah, Polk, Sherman, Tillamook, Umatilla, Wasco, as a pool plant during each of the Class Prices Washington, Wheeler, and Yamhill. immediately preceding months of 1124.50 Class prices and component prices. September through February shall 1124.51 Class I differential and price. § 1124.3 Route disposition. continue to so qualify in each of the 1124.52 Adjusted Class I differentials. See § 1000.3 of this chapter. following months of March through 1124.53 Announcement of class prices and August, unless the plant operator files a § 1124.4 Plant. component prices. written request with the market 1124.54 Equivalent price. See § 1000.4 of this chapter. administrator that such plant not be a Producer Price Differential § 1124.5 Distributing plant. pool plant, such nonpool status to be 1124.60 Handler’s value of milk. See § 1000.5 of this chapter. effective the first month following such 1124.61 Computation of producer price request and thereafter until the plant differential. § 1124.6 Supply plant. qualifies as a pool plant on the basis of 1124.62 Announcement of producer prices. See § 1000.6 of this chapter. milk shipments; Payments for Milk (2) A cooperative association that § 1124.7 Pool plant. operates a supply plant may include as 1124.70 Producer-settlement fund. Pool plant means a plant, unit of qualifying shipments its deliveries to 1124.71 Payments to the producer- settlement fund. plants, or a system of plants as specified pool distributing plants directly from 1124.72 Payments from the producer- in paragraphs (a) through (f) of this farms of producers pursuant to settlement fund. section. The pooling standards § 1000.9(c); 1124.73 Payments to producers and to described in paragraphs (a), (c), (d), (e), (3) A pool plant operator may include cooperative associations. and (f) of this section are subject to as qualifying shipments milk diverted to 1124.74 [Reserved] modification pursuant to paragraph (g) pool distributing plants pursuant to 1124.75 Plant location adjustments for of this section: § 1124.13(c); producer milk and nonpool milk. (a) A distributing plant from which (4) No plant may qualify as a pool 1124.76 Payments by a handler operating a during the month: plant due to a reduction in the shipping partially regulated distributing plant. (1) Total route disposition is equal to percentage pursuant to paragraph (g) of 1124.77 Adjustment of accounts. 1124.78 Charges on overdue accounts. 25 percent of more of the total quantity this section unless it has been a pool of bulk fluid milk products physically supply plant during each of the Administrative Assessment and Marketing received at the plant; and immediately preceding three months. Service Deduction (2) Route disposition in the marketing (d)–(f) [Reserved] 1124.85 Assessment for order area is at least 15 percent of total route (g) The applicable shipping administration. disposition. percentages of paragraphs (a) and (c) of 1124.86 Deduction for marketing services. (3) For purposes of this section, this section may be increased or Authority: 7 U.S.C. 601–674. packaged fluid milk products that are decreased by the market administrator if transferred to a distributing plant shall found necessary to obtain needed SubpartÐOrder Regulating Handling be considered as route disposition from shipments or to prevent uneconomic General Provisions the transferring plant, rather than the shipments. Before making a finding that receiving plant, for the single purpose of a change is necessary the market § 1124.1 General provisions. qualifying the transferring plant as a administrator shall investigate the need The terms, definitions, and provisions pool distributing plant. for revision, either on the market in Part 1000 of this chapter apply to and (b) A distributing plant located in the administrator’s own initiative or at the are hereby made a part of this order. marketing area at which the majority of request of interested persons. If such 5068 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules investigation shows that a revision pounds during the month and who has and distributing resources and facilities, might be appropriate, a notice shall be been so designated by the market all of which shall be deemed to issued stating that a revision is being administrator upon determination that constitute an integrated operation, as considered and inviting data, views, and all of the requirements of this section follows: arguments. If the market administrator have been met, providing that none of (1) As milk production resources and determines that an adjustment to the the conditions therein for cancellation facilities. All resources and facilities shipping percentages is necessary, the of such designation exists. (milking herd(s), buildings housing such market administrator shall notify the (a) Requirements for designation. The herd(s), and the land on which such industry within one day of the effective producer-handler provides proof buildings are located) used for the date of such adjustment. satisfactory to the market administrator production of milk: (h) The term pool plant shall not that: (i) Which are directly, indirectly or apply to the following plants: (1) In its capacity as a dairy farmer, partially owned, operated or controlled (1) A producer-handler as defined the care and management of the dairy by the producer-handler; under any Federal order; animals and other resources and (ii) In which the producer-handler in (2) An exempt plant as defined in facilities (designated as such pursuant any way has an interest, including any § 1000.8(e); to paragraph (b)(1) of this section) contractual arrangement; and (3) A plant located within the necessary to produce all Class I milk (iii) Which are directly, indirectly or marketing area and qualified pursuant handled (excluding receipts from partially owned, operated or controlled to paragraph (a) of this section which handlers fully regulated under any by any partner or stockholder of the meets the pooling requirements of Federal order); and producer-handler. However, for another Federal order, and from which (2) In its capacity as a handler, the purposes of this paragraph, any such more than 50 percent of its route plant operation at which it processes milk production resources and facilities disposition has been in the other and packages and from which it which the producer-handler proves to Federal order marketing area for three distributes its own milk production the satisfaction of the market consecutive months; (designated as such pursuant to administrator do not constitute an (4) A plant located outside the paragraph (b)(2) of this section) are actual or potential source of milk supply marketing area and qualified pursuant under the complete and exclusive for the producer-handler’s operation as to paragraph (a) of this section that control and management of the such shall not be considered a part of meets the pooling requirements of producer-handler and are at its own the producer-handler’s milk production another Federal order and has had enterprise and at its sole risk. resources and facilities. greater sales in such other Federal (3) The producer-handler neither (2) As milk handling, processing and order’s marketing area for 3 consecutive receives at its designated milk distributing resources and facilities. All months; production resources and facilities nor resources and facilities (including store (5) A plant located in another Federal receives, handles, processes or outlets) used for handling, processing order marketing area and qualified distributes at or through any of its and distributing any fluid milk product: pursuant to paragraph (a) of this section designated milk handling, processing or (i) Which are directly, indirectly or that meets the pooling requirements of distributing resources and facilities partially owned, operated or controlled such other Federal order and does not other source milk products for by the producer-handler; or have a majority of its route distribution reconstitution into fluid milk products, (ii) In which the producer-handler in in this marketing area for 3 consecutive or fluid milk products derived from any any way has an interest, including any months or if the plant is required to be source other than: contractual arrangement, or with respect regulated under such other Federal (i) Its designated milk production to which the producer-handler directly order without regard to its route resources and facilities (own farm or indirectly exercises any degree of disposition in any other Federal order production); management or control. (3) All designations shall remain in marketing area; and (ii) Pool handlers and plants regulated effect until canceled pursuant to (6) A plant qualified pursuant to under any Federal order within the paragraph (c) of this section. paragraph (c) of this section which also limitation specified in paragraph (c)(2) (c) Cancellation. The designation as a meets the pooling requirements of of this section; or producer-handler shall be canceled another Federal order and from which (iii) nonfat milk solids which are used upon determination by the market greater qualifying shipments are made to fortify fluid milk products. (4) The producer-handler is neither administrator that any of the to plants regulated under the other directly nor indirectly associated with requirements of paragraph (a)(1) through Federal order than are made to plants the business control or management of, (4) of this section are not continuing to regulated under this order, or the plant nor has a financial interest in, another be met, or under any of the following has automatic pooling status under the handler’s operation; nor is any other conditions: other Federal order. handler so associated with the (1) Milk from the milk production § 1124.8 Nonpool plant. producer-handler’s operation. resources and facilities of the producer- See § 1000.8 of this chapter. (5) Designation of any person as a handler, designated in paragraph (b)(1) producer-handler following a of this section is delivered in the name § 1124.9 Handler. cancellation of its prior designation of another person as producer milk to See § 1000.9 of this chapter. shall be preceded by performance in another handler; accordance with paragraph (a)(1) (2) The producer-handler handles § 1124.10 Producer-handler. through (4) of this section for a period fluid milk products derived from Except as provided in paragraph (f) of of 1 month. sources other than the milk production this section, producer-handler means a (b) Designation of resources and facilities and resources designated in person who operates a dairy farm and a facilities. Designation of a person as a paragraph (b)(1) of this section, except distributing plant from which there is producer-handler shall include the that it may receive at its plant or acquire monthly route disposition within the determination and designation of the for route disposition fluid milk products marketing area in excess of 150,000 milk production, handling, processing from fully regulated plants and handlers Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5069 under any Federal order if such receipts (a) The cooperative shall file a request (2) Received by a handler described in do not exceed 150,000 pounds monthly. with the market administrator for § 1000.9(c). This limitation shall not apply if the cooperative reserve supply unit status at (b) Producer shall not include: producer-handler’s own farm least 15 days prior to the first day of the (1) A producer-handler as defined in production is less than 150,000 pounds month in which such status is desired any Federal order; during the month; or to be effective. Once qualified as a (2) A dairy farmer whose milk is (3) The producer-handler disposes of cooperative reserve supply unit received at an exempt plant, excluding fluid milk products using the pursuant to this paragraph, such status producer milk diverted to the exempt distribution system of another handler, shall continue to be effective unless the plant pursuant to § 1124.13(d); except for direct deliveries by the cooperative requests termination prior (3) A dairy farmer whose milk is producer-handler to retail outlets or to to the first day of the month that change received by diversion at a pool plant a pool handler’s plant. of status is requested, or the cooperative from a handler regulated under another (4) Cancellation of a producer- fails to meet all of the conditions of this Federal order if the other Federal order handler’s status pursuant to this section; designates the dairy farmer as a paragraph shall be effective on the first (b) The cooperative reserve supply producer under that order and that milk day of the month following the month unit supplies fluid milk products to is allocated by request to a utilization in which the requirements were not pool distributing plants located within other than Class I; met, or the conditions for cancellation 125 miles of a majority of the (4) A dairy farmer whose milk is occurred. cooperative’s member producers in reported as diverted to a plant fully (d) Public announcement. The market compliance with any announcement by regulated under another Federal order administrator shall publicly announce the market administrator requesting a with respect to that portion of the milk the name, plant location and farm minimum level of shipments as further so diverted that is assigned to Class I location(s) of persons designated as provided below: under the provisions of such other producer-handlers, of those whose (1) The market administrator may order; and designations have been canceled, and (5) A dairy farmer whose milk, at any require such supplies of bulk fluid milk the effective dates of producer-handler time during the month, has been pooled from cooperative reserve supply units status or loss of producer-handler status under a State milk order. whenever the market administrator for each. Such announcements shall be finds that milk supplies for Class I use controlling with respect to the § 1124.13 Producer milk. are needed for plants defined in accounting at plants of other handlers Producer milk means the skim milk § 1124.7(a) or (b). Before making such a for fluid milk products received from (or the skim equivalent of components finding, the market administrator shall any producer-handler. of skim milk), including nonfat (e) Burden of establishing and investigate the need for such shipments components, and butterfat in milk of a maintaining producer-handler status. either on the market administrator’s producer that is: The burden rests upon the handler who own initiative or at the request of (a) Received by the operator of a pool is designated as a producer-handler to interested persons. If the market plant directly from a producer or a establish through records required administrator’s investigation shows that handler described in § 1000.9(c). Any pursuant to § 1000.5 that the such shipments might be appropriate, milk picked up from the producer’s requirements set forth in paragraph (a) the market administrator shall issue a farm tank in a tank truck under the of this section have been and are notice stating that a shipping control of the operator of a pool plant continuing to be met, and that the announcement is being considered and or a handler described in § 1000.9(c) but conditions set forth in paragraph (c) of inviting data, views and arguments with which is not received at a plant until the this section for cancellation of respect to the proposed shipping following month shall be considered as designation do not exist. announcement. having been received by the handler (f) Producer-handler shall not include (2) Failure of a cooperative reserve during the month in which it is picked any producer who also operates a supply unit to comply with any up at the producer’s farm. All milk distributing plant if the producer- announced shipping requirements, received pursuant to this paragraph handler so requests that the two be including making any significant change shall be priced at the location of the operated as separate entities with the in the unit’s marketing operation that plant where it is first physically distributing plant regulated pursuant to the market administrator determines has received; § 1124.7(a) and the farm operated as a the impact of evading or forcing such an (b) Received by a handler described in producer pursuant to § 1124.12. announcement, shall result in § 1000.9(c) in excess of the quantity immediate loss of cooperative reserve delivered to pool plants; § 1124.11 Cooperative reserve supply unit. supply unit status until such time as the (c) Diverted by a pool plant operator Cooperative reserve supply unit unit has been a handler pursuant to to another pool plant. Milk so diverted means any cooperative association or its § 1000.9(c) for at least 12 consecutive shall be priced at the location of the agent that is a handler pursuant to months. plant to which diverted; or § 1000.9(c) that does not own or operate (d) Diverted by the operator of a pool a plant, if such cooperative has been § 1124.12 Producer. plant or a cooperative association qualified to receive payments pursuant (a) Except as provided in paragraph described in § 1000.9(c) to a nonpool to § 1124.73 and has been a handler of (b) of this section, producer means any plant, subject to the following producer milk under this or its person who produces milk approved by conditions: predecessor order during each of the 12 a duly constituted regulatory agency for (1) Of the quantity of producer milk previous months, and if a majority of fluid consumption as Grade A milk and received during the month (including the cooperative’s member producers are whose milk (or components of milk) is: diversions, but excluding the quantity of located within 125 miles of a pool (1) Received at a pool plant directly producer milk received from a handler distributing plant. A cooperative reserve from the producer or diverted by the described in § 1000.9(c)) the handler supply unit shall be subject to the plant operator in accordance with diverts to nonpool plants not more than following conditions: § 1124.13; or 65 percent during the months of 5070 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

September through November and report for each of its operations the § 1124.32 Other reports. January, and not more than 75 percent following information: In addition to the reports required during the months of February through (1) Product pounds, pounds of pursuant to §§ 1124.30 and 1124.31, August and December; butterfat, pounds of protein, and pounds each handler shall report any (3) Diverted milk shall be priced at of solids-not-fat other than protein information the market administrator the location of the plant to which (other solids) contained in or deems necessary to verify or establish diverted; represented by: each handler’s obligation under the (4) Any milk diverted in excess of the (i) Receipts of producer milk, order. limits prescribed in paragraph (d)(2) of including producer milk diverted by the Classification of Milk this section shall not be producer milk. handler; and If the diverting handler or cooperative (ii) Receipts of milk from handlers § 1124.40 Classes of utilization. association fails to designate the dairy described in § 1000.9(c); See § 1000.40 of this chapter. farmers’ deliveries that are not to be (2) Product pounds and pounds of producer milk, no milk diverted by the butterfat contained in: § 1124.41 [Reserved] handler or cooperative association (i) Receipts of fluid milk products and § 1124.42 Classification of transfers and during the month to a nonpool plant bulk fluid cream products from other diversions. shall be producer milk; and pool plants; See § 1000.42 of this chapter. (5) The applicable diversion limits in (ii) Receipts of other source milk; and paragraph (d)(2) of this section may be (iii) Inventories at the beginning and § 1124.43 General classification rules. increased or decreased by the market end of the month of fluid milk products See § 1000.43 of this chapter. administrator if the market and bulk fluid cream products; § 1124.44 Classification of producer milk. administrator finds that such revision is (3) The utilization or disposition of all necessary to assure orderly marketing milk and milk products required to be See § 1000.44 of this chapter. and efficient handling of milk in the reported pursuant to this paragraph; and marketing area. Before making such a § 1124.45 Market administrator's reports (4) Such other information with and announcements concerning finding, the market administrator shall respect to the receipts and utilization of classification. investigate the need for the revision skim milk, butterfat, milk protein, and See § 1000.45 of this chapter. either on the market administrator’s other nonfat solids, as the market own initiative or at the request of administrator may prescribe. Class Prices interested persons. If the investigation (b) Each handler operating a partially shows that a revision might be § 1124.50 Class prices and component regulated distributing plant shall report prices. appropriate, the market administrator with respect to such plant in the same shall issue a notice stating that the See § 1000.50 of this chapter. manner as prescribed for reports revision is being considered and required by paragraph (a) of this section. § 1124.51 Class I differential and price. inviting written data, views, and Receipts of milk that would have been The Class I differential shall be the arguments. producer milk if the plant had been differential established for King County, Any decision to revise an applicable fully regulated shall be reported in lieu Washington, which is reported in percentage must be issued in writing at of producer milk. The report shall show § 1000.52. The Class I price shall be the least one day before the effective date. also the quantity of any reconstituted price computed pursuant to § 1000.50(a) § 1124.14 Other source milk. skim milk in route disposition in the for King County, Washington. See § 1000.14 of this chapter. marketing area. § 1124.52 Adjusted Class I differentials. (c) Each handler not specified in See § 1000.52 of this chapter. § 1124.15 Fluid milk product. paragraphs (a) and (b) of this section See § 1000.15 of this chapter. shall report with respect to its receipts § 1124.53 Announcement of class prices and utilization of milk and milk and component prices. § 1124.16 Fluid cream product. products in such manner as the market See § 1000.53 of this chapter. See § 1000.16 of this chapter. administrator may prescribe. § 1124.54 Equivalent price. § 1124.17 [Reserved] § 1124.31 Payroll reports. See § 1000.54 of this chapter. § 1124.18 Cooperative association. (a) On or before the 20th day after the Producer Price Differential See § 1000.18 of this chapter. end of each month, each handler that operates a pool plant pursuant to § 1124.60 Handler's value of milk. § 1124.19 Commercial food processing § 1124.7 and each handler described in For the purpose of computing a establishment. § 1000.9(c) shall report to the market handler’s obligation for producer milk, See § 1000.19 of this chapter. administrator its producer payroll for the market administrator shall Handler Reports the month, in the detail prescribed by determine for each month the value of the market administrator, showing for milk of each handler with respect to § 1124.30 Reports of receipts and each producer the information each of its pool plants, and of each utilization. described in § 1124.73(f). handler described in § 1000.9(c) as Each handler shall report monthly so (b) Each handler operating a partially follows: that the market administrator’s office regulated distributing plant who elects (a) Class I value. receives the report on or before the 9th to make payment pursuant to (1) Multiply the hundredweight of day after the end of the month, in the § 1000.76(b) shall report for each dairy skim milk in Class I as determined detail and on the prescribed forms, as farmer who would have been a producer pursuant to § 1000.44(a) by the Class I follows: if the plant had been fully regulated in skim milk price applicable at the (a) Each handler that operates a pool the same manner as prescribed for handler’s location; and plant pursuant to § 1124.7 and each reports required by paragraph (a) of this (2) Add an amount obtained by handler described in § 1000.9(c) shall section. multiplying the pounds of butterfat in Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5071

Class I as determined pursuant to skim milk and butterfat subtracted from price differential per hundredweight. If § 1000.44(b) by the Class I butterfat Class I and Class II pursuant to the unreserved balance in the producer- price applicable at the handler’s § 1000.44(a)(7) and the corresponding settlement fund to be included in the location. step of § 1000.44(b); computation is less than 2 cents per (b) Add the Class II value, computed (g) Add the amount obtained from hundredweight of producer milk on all as follows: multiplying the difference between the reports, the report of any handler who (1) Multiply the hundredweight of Class I price applicable at the location has not made payments required skim milk in Class II as determined of the pool plant and the Class III price pursuant to § 1124.71 for the preceding pursuant to § 1000.44(a) by 70 cents; by the hundredweight of skim milk and month shall not be included in the (2) Add an amount obtained by butterfat assigned to Class I pursuant to computation of the producer price multiplying the pounds of skim milk in § 1000.43(d) and the hundredweight of differential. The report of such handler Class II as determined pursuant to skim milk and butterfat subtracted from shall not be included in the § 1000.44(a) by the average nonfat solids Class I pursuant to § 1000.44(a)(3)(i) computation for succeeding months content of producer skim milk received through (iii) and the corresponding step until the handler has made full payment by the handler, and multiply the of § 1000.44(b), excluding receipts of of outstanding monthly obligations. resulting pounds of nonfat solids by the bulk fluid cream products from a plant Subject to the aforementioned nonfat solids price; regulated under other Federal orders conditions, the market administrator (3) Add an amount obtained by and bulk concentrated fluid milk shall compute the producer price multiplying the pounds of butterfat in products from pool plants, plants differential in the following manner: Class II as determined pursuant to regulated under other Federal orders, (a) Combine into one total the values § 1000.44(b) by the butterfat price; and unregulated supply plants; computed pursuant to § 1124.60 for all (c) Add the Class III value computed (h) Add the amount obtained from handlers required to file reports as follows: multiplying the difference between the prescribed in § 1124.30; (1) Multiply the pounds of skim milk Class I price and the Class III price (b) Subtract the total values obtained in Class III as determined pursuant to applicable at the location of the nearest by multiplying each handler’s total § 1000.44(a) by the average protein unregulated supply plants from which pounds of protein, other solids, and content of producer skim milk received an equivalent volume was received by butterfat contained in the milk for by the handler, and multiply the the pounds of skim milk and butterfat which an obligation was computed resulting pounds of protein by the in receipts of concentrated fluid milk pursuant to § 1124.60 by the protein protein price; products assigned to Class I pursuant to price, the other solids price, and the (2) Add an amount obtained by § 1000.43(d) and § 1000.44(a)(3)(i) and butterfat price, respectively; multiplying the pounds of skim milk in the pounds of skim milk and butterfat (c) Add an amount equal to the sum Class III as determined pursuant to subtracted from Class I pursuant to of the location adjustments computed § 1000.44(a) by the average other solids § 1000.44(a)(8) and the corresponding pursuant to § 1124.75; content of producer skim milk received step of § 1000.44(b), excluding such (d) Add an amount equal to not less by the handler, and multiply the skim milk and butterfat in receipts of than one-half of the unobligated balance resulting pounds of other solids by the bulk fluid milk products from an in the producer-settlement fund; other solids price; and unregulated supply plant to the extent (e) Divide the resulting amount by the (3) Add an amount obtained by that an equivalent amount of skim milk sum of the following for all handlers multiplying the pounds of butterfat in or butterfat disposed of to such plant by included in these computations: (1) The total hundredweight of Class III as determined pursuant to handlers fully regulated under any § 1000.44(b) by the butterfat price; producer milk; and Federal milk order is classified and (2) The total hundredweight for which (d) Add the Class IV value computed priced as Class I milk and is not used as follows: a value is computed pursuant to as an offset for any other payment § 1124.60(i); and (1) Multiply the pounds of skim milk obligation under any order; in Class IV as determined pursuant to (f) Subtract not less than 4 cents nor (i) Subtract, for reconstituted milk more than 5 cents from the price § 1000.44(a) by the average nonfat solids made from receipts of nonfluid milk content of producer skim milk received computed pursuant to paragraph (e) of products, an amount computed by this section. The result shall be known by the handler, and multiply the multiplying $1.00 (but not more than resulting pounds of nonfat solids by the as the producer price differential for the the difference between the Class I price month. nonfat solids price; and applicale at the location of the pool (2) Add an amount obtained by plant and the Class IV price) by the § 1124.62 Announcement of producer multiplying the pounds of butterfat in hundredweight of skim milk and prices. Class IV as determined pursuant to butterfat contained in receipts of On or before the 14th day after the § 1000.44(b) by the butterfat price; nonfluid milk products that are end of each month, the market (e) Add the amounts obtained from allocated to Class I pursuant to administrator shall announce publicly multiplying the pounds of skim milk § 1000.43(d); and the following prices and information: and butterfat overage assigned to each (j) Exclude, for pricing purposes (a) The producer price differential; class pursuant to § 1000.43(b)(2) by the under this section, receipts of nonfluid (b) The protein price; respective skim milk and butterfat milk products that are distributed as (c) The other solids price; prices applicable at the location of the labeled reconstituted milk for which (d) The butterfat price; pool plant; payments are made to the producer- (e) The average butterfat, protein and (f) Add the amount obtained from settlement fund of another order under other solids content of producer milk; multiplying the difference between the § 1000.76(a)(5) or (c). and Class III price for the preceding month (f) The statistical uniform price for and the Class I price applicable at the § 1124.61 Computation of producer price milk containing 3.5 percent butterfat, location of the pool plant or the Class differential. computed by combining the Class III II price, as the case may be, for the For each month the market price and the producer price current month by the hundredweight of administrator shall compute a producer differential. 5072 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Payment for Milk so that it is received by each producer (1) For bulk fluid milk products and on or before the last day of the month bulk fluid cream products received from § 1124.70 Producer-settlement fund. for milk received during the first 15 a cooperative association in its capacity See § 1000.70 of this chapter. days of the month from the producer at as the operator of a pool plant and for § 1124.71 Payments to the producer- not less than the lowest announced milk received from a cooperative settlement fund. class price for the preceding month, less association in its capacity as a handler Each handler shall make payment to proper deductions authorized in writing pursuant to § 1000.9(c) during the first the producer-settlement fund in a by the producer; and 15 days of the month, at not less than manner that provides receipt of the (2) Final payment. For milk received the lowest announced class price per funds by the market administrator no during the month, payment shall be hundredweight for the preceding later than the 16th day after the end of made so that it is received by each month; the month. Payment shall be the producer no later than the 19th day after (2) For the total quantity of bulk fluid amount, if any, by which the amount the end of the month in an amount milk products and bulk fluid cream specified in (a) of this section exceeds equal to not less than the sum of: products received from a cooperative (i) The hundredweight of producer the amount specified in (b) of this association in its capacity as the milk received times the producer price section: operator of a pool plant, at not less than differential for the month as adjusted (a) The total value of milk to the the total value of such products received pursuant to § 1124.75; handler for the month as determined from the association’s pool plants, as (ii) The pounds of butterfat received pursuant to § 1124.60. determined by multiplying the times the butterfat price for the month; (b) The sum of: respective quantities assigned to each (iii) The pounds of protein received (1) An amount obtained by class under § 1000.44, as follows: times the protein price for the month; multiplying the total hundredweight of (i) The hundredweight of Class I skim (iv) The pounds of other solids milk times the Class I skim milk price producer milk as determined pursuant received times the other solids price for to § 1000.44(c) by the producer price for the month plus the pounds of Class the month; I butterfat times the Class I butterfat differential as adjusted pursuant to (v) Less any payment made pursuant price for the month. The Class I price to § 1124.75; to paragraph (a)(1) of this section; (2) An amount obtained by (vi) Less proper deductions be used shall be that price effective at multiplying the total pounds of protein, authorized in writing by such producer the location of the shipping plant; other solids, and butterfat contained in and plus or minus adjustments for (ii) The hundredweight of Class II producer milk by the protein, other errors in previous payments to such skim milk times $ .70; solids, and butterfat prices respectively; producer; and (iii) The pounds of nonfat solids and (vii) Less deductions for marketing received in Class II and Class IV milk (3) An amount obtained by services pursuant to § 1000.86. times the nonfat solids price for the multiplying the pounds of skim milk (b) Payments for milk received from month; and butterfat for which a value was cooperative association members. On or (iv) The pounds of butterfat received computed pursuant to § 1124.60(i) by before the 2nd day prior to the dates in Class II, Class III, and Class IV milk the producer price differential as specified in paragraphs (a)(1) and (a)(2) times the butterfat price for the month; adjusted pursuant to § 1124.75 for the of this section, each handler shall pay (v) The pounds of protein received in location of the plant from which to a cooperative association for milk Class III milk times the protein price for received. from producers who market their milk the month; (vi) The pounds of other solids § 1124.72 Payments from the producer- through the cooperative association and settlement fund. who have authorized the cooperative to received in Class III milk times the other solids price for the month; and No later than the 18th day after the collect such payments on their behalf an (vii) Add together the amounts end of each month, the market amount equal to the sum of the computed in paragraphs (c)(2)(i) administrator shall pay to each handler individual payments otherwise payable through (vi) of this section and from that the amount, if any, by which the for such producer milk pursuant to sum deduct any payment made amount computed pursuant to paragraphs (a)(1) and (a)(2) of this pursuant to paragraph (c)(1) of this § 1124.71(b) exceeds the amount section. section. computed pursuant to § 1124.71(a). If, at (c) Payment for milk received from (3) For the total quantity of milk such time, the balance in the producer- cooperative association pool plants or received during the month from a settlement fund is insufficient to make from cooperatives as handlers pursuant cooperative association in its capacity as all payments pursuant to this section, to § 1000.9(c). On or before the 2nd day a handler under § 1000.9(c) as follows: the market administrator shall reduce prior to the dates specified in paragraph (i) The hundredweight of producer uniformly such payments and shall (a)(1) and (a)(2) of this section, each milk received times the producer price complete the payments as soon as the handler who receives fluid milk differential as adjusted pursuant to funds are available. products at its plant from a cooperative association in its capacity as the § 1124.75; § 1124.73 Payments to producers and to operator of a pool plant or who receives (ii) The pounds of butterfat received cooperative associations. milk from a cooperative association in times the butterfat price for the month; (a) Each handler shall pay each its capacity as a handler pursuant to (iii) The pounds of protein received producer for producer milk for which § 1000.9(c), including the milk of times the protein price for the month; payment is not made to a cooperative producers who are not members of such (iv) The pounds of other solids association pursuant to paragraph (b) of association and who the market received times the other solids price for this section, as follows: administrator determines have the month; and (1) Partial payment. For each authorized the cooperative association (v) Add together the amounts producer who has not discontinued to collect payment for their milk, shall computed in paragraphs (c)(3)(i) shipments as of the 18th day of the pay the cooperative for such milk as through (iv) of this section and from that month, partial payment shall be made follows: sum deduct any payment made Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5073 pursuant to paragraph (c)(1) of this § 1124.74 [Reserved] Handler Reports section. § 1124.75 Plant location adjustments for 1126.30 Reports of receipts and utilization. (d) If a handler has not received full producer milk and nonpool milk. 1126.31 Payroll reports. payment from the market administrator 1126.32 Other reports. (a) The producer price differential for pursuant to § 1124.72 by the payment Classification of Milk date specified in paragraph (a), (b) or (c) producer milk shall be adjusted of this section, the handler may reduce according to the location of the plant at 1126.40 Classes of utilization. 1126.41 [Reserved] pro rata its payments to producers or to which the milk was physically received by subtracting from the price differential 1126.42 Classification of transfers and the cooperative association (with diversions. respect to receipts described in the amount by which the Class I price specified in § 1124.51 exceeds the Class 1126.43 General classification rules. paragraph (b), prorating the 1126.44 Classification of producer milk. I price at the plant’s location. If the underpayment to the volume of milk 1126.45 Market administrator’s reports and received from the cooperative Class I price at the plant location announcements concerning association in proportion to the total exceeds the Class I price specified in classification. § 1124.51, the difference shall be added milk received from producers by the Class Prices handler), but not by more than the to the producer price differential; and (b) The producer price differential 1126.50 Class prices and component prices. amount of the underpayment. The applicable to other source milk shall be 1126.51 Class I differential and price. payments shall be completed on the adjusted following the procedure 1126.52 Adjusted Class I differentials. next scheduled payment date after specified in paragraph (a) of this 1126.53 Announcement of class prices and receipt of the balance due from the component prices. section, except that the adjusted market administrator. 1126.54 Equivalent price. producer price differential shall not be (e) If a handler claims that a required Producer Price Differential payment to a producer cannot be made less than zero. because the producer is deceased or 1126.60 Handler’s value of milk. § 1124.76 Payments by a handler 1126.61 Computation of producer price cannot be located, or because the operating a partially regulated distributing differential. cooperative association or its lawful plant. 1126.62 Announcement of producer prices. successor or assignee is no longer in See § 1000.76 of this chapter. existence, the payment shall be made to Payments for Milk the producer-settlement fund, and in the § 1124.77 Adjustment of accounts. 1126.70 Producer-settlement fund. event that the handler subsequently See § 1000.77 of this chapter. 1126.71 Payments to the producer- settlement fund. locates and pays the producer or a § 1124.78 Charges on overdue accounts. lawful claimant, or in the event that the 1126.72 Payments from the producer- See § 1000.78 of this chapter. settlement fund. handler no longer exists and a lawful 1126.73 Payments to producers and to claim is later established, the market Administrative Assessment and cooperative associations. administrator shall make the required Marketing Service Deduction 1126.74 [Reserved] payment from the producer-settlement 1126.75 Plant location adjustments for § 1124.85 Assessment for order producer milk and nonpool milk. fund to the handler or to the lawful administration. claimant, as the case may be. 1126.76 Payments by a handler operating a (f) In making payments to producers See § 1000.85 of this chapter. partially regulated distributing plant. 1126.77 Adjustment of accounts. pursuant to this section, each handler § 1124.86 Deduction for marketing 1126.78 Charges on overdue accounts. shall furnish each producer, except a services. producer whose milk was received from See § 1000.86 of this chapter. Administrative Assessment and Marketing a cooperative association handler Service Deduction described in § 1000.9(a) or (c), a PART 1126ÐMILK IN THE 1126.85 Assessment for order supporting statement in a form that may SOUTHWEST MARKETING AREA administration. be retained by the recipient which shall 1126.86 Deduction for marketing services. SubpartÐOrder Regulating Handling show: Authority: 7 U.S.C. 601–674. (1) The name, address, Grade A General Provisions identifier assigned by a duly constituted Sec. SubpartÐOrder Regulating Handling regulatory agency, and payroll number 1126.1 General Provisions. General Provisions of the producer; Definitions (2) The daily and total pounds, and § 1126.1 General provisions. the month and dates such milk was 1126.2 Southwest marketing area. 1126.3 Route disposition. The terms, definitions, and provisions received from that producer; in part 1000 of this chapter apply to and (3) The total pounds of butterfat, 1126.4 Plant. 1126.5 Distributing plant. are hereby made a part of this order. protein, and other solids contained in 1126.6 Supply plant. the producer’s milk; 1126.7 Pool plant. Definitions (4) The minimum rate or rates at 1126.8 Nonpool plant. § 1126.2 Southwest marketing area. which payment to the producer is 1126.9 Handler. required pursuant to this order; 1126.10 Producer-handler. The marketing area means all territory (5) The rate used in making payment 1126.11 [Reserved] within the bounds of the following if the rate is other than the applicable 1126.12 Producer. states and political subdivisions, minimum rate; 1126.13 Producer milk. including all piers, docks and wharves (6) The amount, or rate per 1126.14 Other source milk. connected therewith and all craft 1126.15 Fluid milk product. moored thereat, and all territory hundredweight, or rate per pound of 1126.16 Fluid cream product. component, and the nature of each 1126.17 [Reserved] occupied by government (municipal, deduction claimed by the handler; and 1126.18 Cooperative association. State or Federal) reservations, (7) The net amount of payment to the 1126.19 Commercial food processing installations, institutions, or other producer or cooperative association. establishment. similar establishments if any part 5074 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules thereof is within any of the listed states members of such cooperative (4) A plant qualified pursuant to or political subdivisions: association is delivered directly from paragraph (a) of this section which is New Mexico and Texas farms to pool distributing plants or is not located within any Federal order transferred to such plants as a fluid milk marketing area that meets the pooling All of the States of New Mexico and Texas. product from the cooperative’s plant. requirements of another Federal order Colorado Counties (e) Two or more plants operated by and has had greater sales in such other Archuleta, LaPlata, and Montezuma. the same handler and located within the Federal order’s marketing area for 3 marketing area may qualify for pool consecutive months; § 1126.3 Route disposition. status as a unit by meeting the total and (5) A plant qualified pursuant to See § 1000.3 of this chapter. in-area route disposition requirements paragraph (a) of this section that is specified in paragraph (a) of this section located in another Federal order § 1126.4 Plant. and the following additional marketing area if the plant meets the See § 1000.4 of this chapter. requirements: pooling requirements of such other (1) At least one of the plants in the Federal order and does not have a § 1126.5 Distributing plant. unit must qualify as a pool plant majority of its route distribution in this See § 1000.5 of this chapter. pursuant to paragraph (a) of this section; marketing area for 3 consecutive months (2) Other plants in the unit must § 1126.6 Supply plant. or if the plant is required to be regulated process only Class I or Class II products under such other Federal order without See § 1000.6 of this chapter. and must be located in a pricing zone regard to its route disposition in any § 1126.7 Pool plant. providing the same or a lower Class I other Federal order marketing area; price than the price applicable at the (6) A plant qualified pursuant to Pool plant means a plant specified in distributing plant included in the unit paragraph (c) or (d) of this section paragraphs (a) through (d) of this pursuant to paragraph (e)(1) of this which also meets the pooling section, or a unit of plants as specified section; and requirements of another Federal order in paragraph (e) of this section, but (3) A written request to form a unit, and from which greater qualifying excluding a plant specified in paragraph or to add or remove plants from a unit, shipments are made to plants regulated (g) of this section. The pooling must be filed with the market under the other Federal order than are standards described in paragraphs (a), administrator prior to the first day of the made to plants regulated under this (c), and (d) of this section are subject to month for which it is to be effective. order, or the plant has automatic modification pursuant to paragraph (f) (f) The applicable percentages in pooling status under the other Federal of this section: paragraphs (a), (c), and (d) of this order; and (a) A distributing plant from which section may be increased or decreased (7) That portion of a pool plant during the month the total route up to 10 percentage points by the designated as a nonpool plant that is disposition is equal to 25 percent or market administrator if the market physically separate and operated more of the total quantity of fluid milk administrator finds that such revision is separately from the pool portion of such products physically received at such necessary to assure orderly marketing plant. The designation of a portion of a plant and route disposition in the and efficient handling of milk in the regulated plant as a nonpool plant must marketing area is at least 15 percent of marketing area. Before making such a be requested in writing by the handler total route distribution. Packaged fluid finding, the market administrator shall and must be approved by the market milk products that are transferred to a investigate the need for the revision administrator. distributing plant and which are either on the market administrator’s § 1126.8 Nonpool plant. classified as Class I milk shall be own initiative or at the request of considered as route disposition from the interested parties if the request is made See § 1000.8 of this chapter. transferring plant, rather than the in writing at least 15 days prior to the § 1126.9 Handler. receiving plant, for the single purpose of date for which the requested revision is See § 1000.9 of this chapter. determining the transferring plant’s pool desired effective. If the investigation status under this paragraph. shows that a revision might be § 1126.10 Producer-handler. (b) A distributing plant located in the appropriate, the market administrator Except as provided in paragraph (g) of marketing area at which the majority of shall issue a notice stating that the this section, producer-handler means a milk received is processed into revision is being considered and person who: aseptically packaged fluid milk inviting written data, views, and (a) Operates a dairy farm and a products unless there are no sales from arguments. Any decision to revise an distributing plant from which there is the plant into any marketing area and applicable percentage must be issued in monthly route disposition in excess of the plant operator in writing requests writing at least one day before the 150,000 pounds during the month; nonpool status for the plant for the effective date. (b) Receives no fluid milk products month. (g) The term pool plant shall not from sources other than own farm (c) A supply plant from which 50 apply to the following plants: production, pool handlers, and plants percent of the total quantity of milk that (1) A producer-handler plant; fully regulated under another Federal is physically received during the month (2) An exempt plant as defined in order. from dairy farmers and handlers § 1000.8(e); (c) Receives no more than 150,000 described in § 1000.9(c) is transferred to (3) A plant qualified pursuant to pounds of fluid milk products from pool distributing plants. paragraph (a) of this section that is handlers fully regulated under any (d) A plant located within the located within the marketing area if the Federal order, including such products marketing area that is operated by a plant also meets the pooling received at a location other than the cooperative association if pool plant requirements of another Federal order, producer-handler’s processing plant for status under this paragraph is requested and more than 50 percent of its route distribution on routes. This limitation for such plant by the cooperative distribution has been in such other shall not apply if the producer-handler’s association and during the month at Federal order marketing area for 3 own farm production is less than least 30 percent of the producer milk of consecutive months; 150,000 pounds during the month. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5075

(d) Disposes of no other source milk of skim milk), including nonfat (5) Diverted milk shall be priced at as Class I milk except by increasing the components, and butterfat contained in the location of the plant to which nonfat milk solids content of the fluid milk of a producer that is: diverted; and milk products received from own farm (a) Received by the operator of a pool (6) The delivery day requirements in production or pool handlers; plant directly from a producer or a paragraph (d)(1) and the diversion (e) Disposes of no fluid milk products handler described in § 1000.9(c). Any percentages in paragraphs (d)(2) and (3) using the distribution system of another milk picked up from the producer’s of this section may be increased or handler except for direct deliveries to farm tank in a tank truck under the decreased by the market administrator if retail outlets or to a pool handler’s control of the operator of a pool plant the market administrator finds that such plant; or a handler described in § 1000.9(c) but revision is necessary to assure orderly (f) Provides proof satisfactory to the which is not received at a plant until the marketing and efficient handling of milk market administrator that the care and following month shall be considered as in the marketing area. Before making management of the dairy animals and having been received by the handler such a finding, the market administrator other resources necessary to produce all during the month in which it is picked shall investigate the need for the Class I milk handled (excluding receipts up at the producer’s farm. All milk revision either on the market from handlers fully regulated under any received pursuant to this paragraph administrator’s own initiative or at the Federal order) and the processing, shall be priced at the location of the request of interested persons. If the packaging, and distribution operations plant where it is first physically investigation shows that a revision are the producer-handler’s own received; might be appropriate, the market enterprise and at its own risk; and administrator shall issue a notice stating (b) Received by a handler described in (g) Producer-handler shall not include that the revision is being considered and § 1000.9(c) in excess of the quantity any producer who also operates a inviting written data, views, and delivered to pool plants; distributing plant if the producer- arguments. Any decision to revise an handler so requests that the two be (c) Diverted by a pool plant operator applicable percentage must be issued in operated as separate entities with the for the account of the handler operating writing at least one day before the distributing plant regulated under such plant to another pool plant. Milk effective date. § 1126.7(a) and the farm operated as a so diverted shall be priced at the § 1126.14 Other source milk. producer under § 1126.12. location of the plant to which diverted; or See § 1000.14 of this chapter. § 1126.11 [Reserved] (d) Diverted by the operator of a pool § 1126.15 Fluid milk product. plant or a handler described in § 1126.12 Producer. See § 1000.15 of this chapter. § 1000.9(c) to a nonpool plant, subject to (a) Except as provided in paragraph the following conditions: § 1126.16 Fluid cream product. (b) of this section, producer means any person who produces milk approved by (1) Milk of a producer whose dairy See § 1000.16 of this chapter. farm is located outside the marketing a duly constituted regulatory agency for § 1126.17 [Reserved] fluid consumption as Grade A milk and area shall not be eligible for diversion whose milk (or components of milk) is: unless at least 15% of the producer’s § 1126.18 Cooperative association. (1) Received at a pool plant directly milk is physically received at a pool See § 1000.18 of this chapter. from the producer or diverted by the plant during the month; plant operator in accordance with (2) The total quantity of milk so § 1126.19 Commercial food processing establishment. § 1126.13; or diverted during the month by a (2) Received by a handler described in cooperative association shall not exceed See § 1000.19 of this chapter. § 1000.9(c). the total quantity of producer milk that Handler Reports (b) Producer shall not include: the cooperative association caused to be (1) A producer-handler as defined in delivered to, and physically received at, § 1126.30 Reports of receipts and any Federal order; pool plants during the month; utilization. (2) A dairy farmer whose milk is (3) The operator of a pool plant that Each handler shall report monthly so received at an exempt plant, excluding is not a cooperative association may that the market administrator’s office producer milk diverted to the exempt divert any milk that is not under the receives the report on or before the 8th plant pursuant to § 1126.13(d); control of a cooperative association that day after the end of the month, in the (3) A dairy farmer whose milk is diverts milk during the month pursuant detail and on prescribed forms, as received by diversion at a pool plant to this paragraph. The total quantity of follows: from a handler regulated under another (a) Each pool plant operator and each milk so diverted during the month shall Federal order if the other Federal order handler described in § 1000.9(c), shall not exceed the total quantity of the designates the dairy farmer as a report for each of its operations the producer milk physically received at producer under that order and the milk following information: such plant (or such unit of plants in the is allocated by request to a utilization (1) Product pounds, pounds of case of plants that pool as a unit other than Class I; and butterfat, pounds of protein, pounds of (4) A dairy farmer whose milk is pursuant to § 1126.7(e)) during the nonfat solids other than protein (other reported as diverted to a plant fully month; solids), and the value of the somatic cell regulated under another Federal order (4) Any milk diverted in excess of the adjustment pursuant to § 1000.50(p) with respect to that portion of the milk limits prescribed in paragraphs (d)(2) contained in or represented by: so diverted that is assigned to Class I and (3) of this section shall not be (i) Receipts of producer milk, under the provisions of such other producer milk. If the diverting handler including producer milk diverted by the order. or cooperative association fails to reporting handler; and designate the dairy farmers’ deliveries (ii) Receipts of milk from handlers § 1126.13 Producer milk. that will not be producer milk, no milk described in § 1000.9(c); Producer milk means the skim milk diverted by the handler or cooperative (2) Product pounds and pounds of (or the skim equivalent of components association shall be producer milk; butterfat contained in: 5076 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

(i) Receipts of fluid milk products and § 1126.41 [Reserved] § 1000.44(a) by the average nonfat solids bulk fluid cream products from other content of producer skim milk received § 1126.42 Classification of transfers and pool plants; diversions. by the handler, and multiplying the (ii) Receipts of other source milk; and resulting pounds of nonfat solids by the See § 1000.42 of this chapter. (iii) Inventories at the beginning and nonfat solids price; and end of the month of fluid milk products § 1126.43 General classification rules. (3) Add an amount obtained by and bulk fluid cream products; and See § 1000.43 of this chapter. multiplying the pounds of butterfat in (3) The utilization or disposition of all Class II as determined pursuant to milk and milk products required to be § 1126.44 Classification of producer milk. § 1000.44(b) by the butterfat price. reported pursuant to this paragraph; and See § 1000.44 of this chapter. (c) Add the Class III value, computed (4) Such other information with as follows: respect to the receipts and utilization of § 1126.45 Market administrator's reports (1) Multiply the pounds of skim milk and announcements concerning in Class III as determined pursuant to skim milk, butterfat, milk protein, other classification. nonfat solids, and somatic cell § 1000.44(a) by the average protein information, as the market administrator See § 1000.45 of this chapter. content of producer skim milk received may prescribe. Class Prices by the handler, and multiply the (b) Each handler operating a partially resulting pounds of protein by the regulated distributing plant shall report § 1126.50 Class prices and component protein price; with respect to such plant in the same prices. (2) Add an amount obtained by manner as prescribed for reports See § 1000.50 of this chapter. multiplying the pounds of skim milk in required by paragraph (a) of this section. § 1126.51 Class I differential and price. Class III as determined pursuant to Receipts of milk that would have been § 1000.44(a) by the average other solids producer milk if the plant had been The Class I differential shall be the content of producer skim milk received fully regulated shall be reported in lieu differential established for Dallas by the handler, and multiplying the of producer milk. The report shall show County, Texas, which is reported in resulting pounds of other solids by the also the quantity of any reconstituted § 1000.52. The Class I price shall be the other solids price; and skim milk in route disposition in the price computed pursuant to § 1000.50(a) (3) Add an amount obtained by marketing area. for Dallas County, Texas. multiplying the pounds of butterfat in (c) Each handler not specified in § 1126.52 Adjusted Class I differentials. Class III as determined pursuant to paragraphs (a) or (b) of this section shall See § 1000.52 of this chapter. § 1000.44(b) by the butterfat price. report with respect to its receipts and (d) Add the Class IV value, computed utilization of milk and milk products in § 1126.53 Announcement of class prices as follows: such manner as the market and component prices. (1) Multiply the pounds of skim milk administrator may prescribe. See § 1000.53 of this chapter. in Class IV as determined pursuant to § 1000.44(a) by the average nonfat solids § 1126.31 Payroll reports. § 1126.54 Equivalent price. content of producer skim milk received (a) On or before the 20th day after the See § 1000.54 of this chapter. by the handler, and multiply the end of each month, each handler that Producer Price Differential resulting pounds of nonfat solids by the operates a pool plant pursuant to nonfat solids price; and § 1126.7 and each handler described in § 1126.60 Handler's value of milk. (2) Add an amount obtained by § 1000.9(c) shall report to the market For the purpose of computing a multiplying the pounds of butterfat in administrator its producer payroll for handler’s obligation for producer milk, Class IV as determined pursuant to the month, in the detail prescribed by the market administrator shall § 1000.44(b) by the butterfat price. the market administrator, showing for determine for each month the value of (e) Add an adjustment for somatic cell each producer the information specified milk of each handler with respect to content of producer milk as determined in § 1126.73(e); each of the handler’s pool plants and of by multiplying the value reported (b) Each handler operating a partially each handler described in § 1000.9(c) as pursuant to § 1126.30(a)(1) by the regulated distributing plant who elects follows: percentage of the total producer milk to make payment pursuant to (a) Class I value. allocated to Class II, Class III, and Class § 1000.76(b) shall report for each dairy (1) Multiply the hundredweight of IV pursuant to § 1000.44(c). farmer who would have been a producer skim milk in Class I as determined (f) Add the amounts obtained from if the plant had been fully regulated in pursuant to § 1000.44(a) by the Class I multiplying the pounds of skim milk the same manner as prescribed for skim milk price applicable at the and butterfat overage assigned to each reports required by paragraph (a) of this handler’s location; and class pursuant to § 1000.43(b)(2) by the section. (2) Add an amount obtained by respective skim milk and butterfat § 1126.32 Other reports. multiplying the total pounds of butterfat prices applicable at the location of the in Class I as determined pursuant to pool plant; In addition to the reports required § 1000.44(b) by the Class I butterfat (g) Add the amount obtained from pursuant to §§ 1126.30 and 1126.31, price applicable at the handler’s multiplying the difference between the each handler shall report any location. Class III price for the preceding month information the market administrator (b) Add the Class II value, computed and the Class I price applicable at the deems necessary to verify or establish as follows: location of the pool plant or the Class each handler’s obligation under the (1) Multiply the hundredweight of II price, as the case may be, for the order. milk in Class II as determined pursuant current month by the hundredweight of Classification of Milk to § 1000.44(a) by 70 cents; skim milk and butterfat subtracted from (2) Add an amount obtained by Class I and Class II pursuant to § 1126.40 Classes of utilization. multiplying the pounds of skim milk in § 1000.44(a)(7) and the corresponding See § 1000.40 of this chapter. Class II as determined pursuant to step of § 1000.44(b); Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5077

(h) Add the amount obtained from hundredweight of producer milk on all Payments for Milk multiplying the difference between the reports, the report of any handler who Class I price applicable at the location has not made payments required § 1126.70 Producer-settlement fund. of the pool plant and the Class III price pursuant to § 1126.71 for the preceding See § 1000.70 of this chapter. by the hundredweight of skim milk and month shall not be included in the § 1126.71 Payments to the producer- butterfat assigned to Class I pursuant to computation of the producer price settlement fund. § 1000.43(d) and the hundredweight of differential. The report of such handler Each handler shall make payment to skim milk and butterfat subtracted from shall not be included in the the producer-settlement fund in a Class I pursuant to § 1000.44(a)(3)(i) computation for succeeding months manner that provides receipt of the through (iii) and the corresponding step until the handler has made full payment funds by the market administrator no of § 1000.44(b), excluding receipts of of outstanding monthly obligations. later than the 16th day after the end of bulk fluid cream products from a plant Subject to the aforementioned the month. Payment shall be the regulated under other Federal orders conditions, the market administrator amount, if any, by which the amount and bulk concentrated fluid milk shall compute the producer price specified in paragraph (a) of this section products from pool plants, plants differential in the following manner: exceeds the amount specified in regulated under other Federal orders, (a) Combine into one total the values paragraph (b) of this section: and unregulated supply plants; computed pursuant to § 1126.60 for all (a) The total value of milk to the (i) Add the amount obtained from handlers required to file reports handler for the month as determined multiplying the difference between the prescribed in § 1126.30; pursuant to § 1126.60. Class I price and the Class III price (b) Subtract the total of the values (b) The sum of: applicable at the location of the nearest obtained by multiplying each handler’s (1) An amount obtained by unregulated supply plants from which total pounds of protein, other solids, multiplying the total hundredweight of an equivalent volume was received by and butterfat contained in the milk for producer milk as determined pursuant the pounds of skim milk and butterfat which an obligation was computed to § 1000.44(c) by the producer price in receipts of concentrated fluid milk pursuant to § 1126.60 by the protein differential as adjusted pursuant to products assigned to Class I pursuant to price, other solids price, and the § 1126.75; § 1000.43(d) and § 1000.44(a)(3)(i) and butterfat price, respectively, and the (2) An amount obtained by the pounds of skim milk and butterfat total value of the somatic cell multiplying the total pounds of protein, subtracted from Class I pursuant to adjustment pursuant to § 1126.30(a)(1); other solids, and butterfat contained in § 1000.44(a)(8) and the corresponding (c) Add an amount equal to the sum producer milk by the protein, other step of § 1000.44(b), excluding such of the location adjustments computed solids, and butterfat prices respectively; skim milk and butterfat in receipts of pursuant to § 1126.75; (3) The total value of the somatic cell bulk fluid milk products from an (d) Add an amount equal to not less adjustment to producer milk; and unregulated supply plant to the extent than one-half of the unobligated balance (4) An amount obtained by that an equivalent amount of skim milk in the producer-settlement fund; multiplying the pounds of skim milk or butterfat disposed of to such plant by (e) Divide the resulting amount by the and butterfat for which a value was handlers fully regulated under any sum of the following for all handlers computed pursuant to § 1126.60(i) by Federal milk order is classified and included in these computations: the producer price differential as priced as Class I milk and is not used (1) The total hundredweight of adjusted pursuant to § 1126.75 for the as an offset for any other payment producer milk; and location of the plant from which obligation under any order; (2) The total hundredweight for which received. (j) Subtract, for reconstituted milk a value is computed pursuant to made from receipts of nonfluid milk § 1126.60(i); and § 1126.72 Payments from the producer- products, an amount computed by (f) Subtract not less than 4 cents nor settlement fund. multiplying $1.00 (but not more than more than 5 cents from the price No later than the 17th day after the the difference between the Class I price computed pursuant to paragraph (e) of end of each month, the market applicable at the location of the pool this section. The result shall be known administrator shall pay to each handler plant and the Class IV price) by the as the producer price differential for the the amount, if any, by which the hundredweight of skim milk and month. amount computed pursuant to butterfat contained in receipts of § 1126.71(b) exceeds the amount nonfluid milk products that are § 1126.62 Announcement of producer computed pursuant to § 1126.71(a). If, at prices. allocated to Class I use pursuant to such time, the balance in the producer- § 1000.43(d); and On or before the 13th day after the settlement fund is insufficient to make (k) Exclude, for pricing purposes end of each month, the market all payments pursuant to this section, under this section, receipts of nonfluid administrator shall announce the the market administrator shall reduce milk products that are distributed as following prices and information: uniformly such payments and shall labeled reconstituted milk for which (a) The producer price differential; complete the payments as soon as the payments are made to the producer- (b) The protein price; funds are available. settlement fund of another Federal order (c) The other solids price; under § 1000.76(a)(5) or (c). (d) The butterfat price; § 1126.73 Payments to producers and to (e) The somatic cell adjustment rate; cooperative associations. § 1126.61 Computation of producer price (f) The average butterfat, nonfat (a) Each handler shall pay each differential. solids, protein, and other solids content producer for producer milk for which For each month the market of producer milk; and payment is not made to a cooperative administrator shall compute a producer (g) The statistical uniform price for association pursuant to paragraph (b) of price differential per hundredweight. If milk containing 3.5 percent butterfat, this section, as follows: the unreserved balance in the producer- computed by combining the Class III (1) Partial payment. For each settlement fund to be included in the price and the producer price producer who has not discontinued computation is less than 2 cents per differential. shipments as of the 23rd day of the 5078 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules month, payment shall be made so that operator’s estimated use value of the but by not more than the amount of the it is received by the producer on or milk using the most recent class prices underpayment. The payments shall be before the 26th day of the month for available, adjusted for butterfat value completed on the next scheduled milk received during the first 15 days of and plant location; payment date after receipt of the balance the month at not less than the lowest (3) Final payment to a cooperative due from the market administrator. announced class price for the preceding association for milk transferred from its (d) If a handler claims that a required month, less proper deductions pool plant. Following the classification payment to a producer cannot be made authorized in writing by the producer; of bulk fluid milk products and bulk because the producer is deceased or and fluid cream products received during cannot be located, or because the (2) Final payment. For milk received the month from a cooperative cooperative association or its lawful during the month, payment shall be association in its capacity as the successor or assignee is no longer in made so that it is received by each operator of a pool plant, the final existence, the payment shall be made to producer no later than the 18th day after payment for such receipts shall be the producer-settlement fund, and in the the end of the month in an amount determined as follows: event that the handler subsequently computed as follows: (i) Multiply the hundredweight of locates and pays the producer or a (i) Multiply the hundredweight of Class I skim milk by the Class I skim lawful claimant, or in the event that the producer milk received times the milk price for the month applicable at handler no longer exists and a lawful producer price differential for the the location of the shipping plant; claim is later established, the market month as adjusted pursuant to (ii) Multiply the pounds of Class I administrator shall make the required § 1126.75; butterfat by the Class I butterfat price for payment from the producer-settlement (ii) Multiply the pounds of butterfat the month applicable at the location of fund to the handler or to the lawful received times the butterfat price for the the shipping plant; claimant as the case may be. month; (iii) Multiply the hundredweight of (e) In making payments to producers (iii) Multiply the pounds of protein Class II skim milk by $.70; pursuant to this section, each pool plant received times the protein price for the (iv) Multiply the pounds of nonfat operator shall furnish each producer, month; solids received in Class II and Class IV except a producer whose milk was (iv) Multiply the pounds of other milk by the nonfat solids price for the received from a cooperative association solids received times the other solids month; handler described in § 1000.9(a) or (c), price for the month; (v) Multiply the hundredweight of a supporting statement in a form that (v) Multiply the hundredweight of butterfat in Class II, III, and IV milk by may be retained by the recipient which milk received times the somatic cell the butterfat price for the month; shall show: (vi) Multiply the pounds of protein adjustment for the month; (1) The name, address, Grade A received in Class III milk by the protein (vi) Add the amounts computed in identifier assigned by a duly constituted price for the month; paragraph (a)(2)(i) through (v) of this regulatory agency, and the payroll (vii) Multiply the pounds of other section, and from that sum: number of the producer; solids received in Class III milk by the (A) Subtract the partial payment made (2) The month and dates that milk pursuant to paragraph (a)(1) of this other solids price for the month; (viii) Multiply the hundredweight of was received from the producer, section; including the daily and total pounds of (B) Subtract the deduction for Class II, Class III, and Class IV milk milk received; marketing services pursuant to received times the somatic cell (3) The total pounds of butterfat, § 1000.86; adjustment; protein, and other solids contained in (C) Add or subtract for errors made in (ix) Add together the amounts the producer’s milk; previous payments to the producer; and computed in paragraph (b)(3)(i) through (D) Subtract proper deductions (viii) of this section and from that sum (4) The somatic cell count of the authorized in writing by the producer. deduct any payment made pursuant to producer’s milk; (b) On or before the day prior to the paragraph (b)(2) of this section. (5) The minimum rate or rates at dates specified for partial and final (4) Final payment to a cooperative which payment to the producer is payments pursuant to paragraph (a) of association for bulk milk received required pursuant to this order; this section, each pool plant operator directly from producers’ farms. For bulk (6) The rate used in making payment shall pay a cooperative association for milk received from a cooperative if the rate is other than the applicable milk received as follows: association during the month, including minimum rate; (1) Partial payment to a cooperative the milk of producers who are not (7) The amount, or rate per association. For bulk milk/skimmed members of such association and who hundredweight, or rate per pound of milk received during the first 15 days of the market administrator determines component, and the nature of each the month from a cooperative have authorized the cooperative deduction claimed by the handler; and association in any capacity, except as association to collect payment for their (8) The net amount of payment to the the operator of a pool plant, the milk, the final payment for such milk producer or cooperative association. payment shall be equal to the shall be an amount equal to the sum of § 1126.74 [Reserved] hundredweight of milk received the individual payments otherwise multiplied by the lowest announced payable for such milk pursuant to § 1126.75 Plant location adjustments for class price for the preceding month; paragraph (a)(2) of this section. producer milk and nonpool milk. (2) Partial payment to a cooperative (c) If a handler has not received full (a) The producer price differential for association for milk transferred from its payment from the market administrator producer milk shall be adjusted pool plant. For bulk milk/skimmed milk pursuant to § 1126.72 by the payment according to the location of the plant at products received during the first 15 date specified in paragraph (a) or (b) of which the milk was physically received days of the month from a cooperative this section, the handler may reduce pro by subtracting from the price differential association in its capacity as the rata its payments to producers or to the amount by which the Class I price operator of a pool plant, the partial cooperative associations pursuant to specified in § 1126.51 exceeds the Class payment shall be at the pool plant paragraphs (a) and (b) of this section, I price at the plant’s location. If the Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5079

Class I price at the plant location 1131.44 Classification of producer milk. Nevada Counties exceeds the Class I price specified in 1131.45 Market administrator’s reports and Clark. § 1126.51, the difference shall be added announcements concerning to the producer price differential; and classification. § 1131.3 Route disposition. (b) The producer price differential Class Prices See § 1000.3 of this chapter. applicable for other source milk shall be 1131.50 Class prices, component prices, § 1131.4 Plant. adjusted following the procedure Class I differential and price. See § 1000.4 of this chapter. specified in paragraph (a) of this 1131.51 [Reserved] section, except that the adjusted 1131.52 Adjusted Class I differentials. § 1131.5 Distributing Plant. producer price differential shall not be 1131.53 Announcement of class prices and See § 1000.5 of this chapter. less than zero. component prices. 1131.54 Equivalent price. § 1131.6 Supply Plant. § 1126.76 Payments by a handler See § 1000.6 of this chapter. operating a partially regulated distributing Uniform Price plant. 1131.60 Handler’s value of milk. § 1131.7 Pool plant. See § 1000.76 of this chapter. 1131.61 Computation of uniform price, Pool Plant means a plant or unit of uniform butterfat price and uniform skim plants specified in paragraphs (a) § 1126.77 Adjustment of accounts. milk price. through (e) of this section. The pooling See § 1000.77 of this chapter. 1131.62 Announcement of uniform price, uniform butterfat price and uniform skim standards described in paragraphs (a), § 1126.78 Charges on overdue accounts. milk price. (c), and (d) of this section are subject to modification pursuant to paragraph (f) See § 1000.78 of this chapter. Payments for Milk of this section. Administrative Assessment and 1131.70 Producer-settlement fund. (a) A distributing plant from which Marketing Service Deduction 1131.71 Payments to the producer- during the month there is route settlement fund. disposition equal to 25 percent or more § 1126.85 Assessment for order 1131.72 Payments from the producer- settlement fund. of the total quantity of bulk fluid milk administration. products physically received at such See § 1000.85 of this chapter. 1131.73 Payments to producers and to cooperative associations. plant; and route disposition in the § 1126.86 Deduction for marketing 1131.74 [Reserved] marketing area of at least 15 percent of services. 1131.75 Plant location adjustments for total route disposition. For purposes of producers and nonpool milk. this section, packaged fluid milk See § 1000.86 of this chapter. 1131.76 Payments by a handler operating a products that are transferred to a partially regulated distributing plant. PART 1131ÐMILK IN ARIZONA-LAS distributing plant shall be considered as 1131.77 Adjustment of accounts. route disposition from the transferring VEGAS MARKETING AREA 1131.78 Charges on overdue accounts. plant, rather than the receiving plant, SubpartÐOrder Regulating Handling Administrative Assessment and Marketing for the single purpose of qualifying the Service Deduction General Provisions transferring plant as a pool distributing 1131.85 Assessment for order plant. Sec. administration. (b) A distributing plant located in the 1131.1 General provisions. 1131.86 Deduction for marketing services. marketing area which during the month Definitions Authority: 7 U.S.C. 601—674. processes a majority of its receipts of 1131.2 Arizona-Las Vegas marketing area. milk products into aseptically packaged 1131.3 Route disposition. SubpartÐOrder Regulating Handling fluid milk products. If during the month 1131.4 Plant. the plant had no route disposition into 1131.5 Distributing Plant. General Provisions any federal milk order the plant 1131.6 Supply Plant. § 1131.1 General provisions. operator may request nonpool status for 1131.7 Pool plant. such plant for the month. 1131.8 Nonpool plant. The terms, definitions, and provisions (c) A supply plant from which 50% or 1131.9 Handler. in Part 1000 of this chapter apply to and 1131.10 Producer-handler. more of the total quantity of milk that 1131.11 [Reserved] are hereby made a part of this order. is physically received at such plant from 1131.12 Producer. Definitions dairy farmers and handlers described in 1131.13 Producer milk. § 1000.9(c) is transferred to pool 1131.14 Other source milk. § 1131.2 Arizona-Las Vegas marketing distributing plants. 1131.15 Fluid milk product. area. (d) A plant located within the 1131.16 Fluid cream product. marketing area and operated by a 1131.17 [Reserved] The marketing area means all territory within the bounds of the following cooperative association if, during the 1131.18 Cooperative association. month, or the immediately preceding 1131.19 Commercial food processing states and political subdivisions, establishment. including all piers, docks and wharves 12-month period, 35 percent or more of the producer milk of members of the Handler Reports connected therewith and all craft moored thereat, and all territory association (and any producer milk of 1131.30 Reports of receipts and utilization. occupied by government (municipal, nonmembers and members of another 1131.31 Payroll reports. cooperative association which may be 1131.32 Other reports. State or Federal) reservations, installations, institutions, or other marketed by the cooperative Classification of Milk similar establishments if any part association) is physically received in the 1131.40 Classes of utilization. thereof is within any of the listed states form of bulk fluid milk products at 1131.41 [Reserved] or political subdivisions: plants specified in paragraph (a) or (b) 1131.42 Classification of transfers and of this section either directly from farms diversions. Arizona or by transfer from supply plants 1131.43 General classification rules. All of the State of Arizona. operated by the cooperative association 5080 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules and from plants of the cooperative (1) A producer-handler as defined production, pool handlers, and plants association for which pool plant status under any Federal order; fully regulated under another Federal has been requested under this paragraph (2) An exempt plant as defined in order; subject to the following conditions: § 1000.8(e). (c) Receives at its plant or acquires for (1) The plant does not qualify as a (3) A plant located within the route disposition no more than 150,000 pool plant under paragraph (a), (b) or (c) marketing area and qualified pursuant pounds of fluid milk products from or this section or under comparable to paragraph (a) or (e) of this section handlers fully regulated under any provisions of another Federal order; and which meets the pooling requirements Federal order. This limitation shall not (2) The plant is approved by a duly of another Federal order, and from apply if the producer-handler’s own constituted regulatory agency for the which more than 50 percent of its route farm production is less than 150,000 handling of milk approved for fluid disposition has been in the other pounds during the month. consumption in the marketing area. Federal order marketing area for three (d) Disposes of no other source milk (e) Two or more plants operated by consecutive months. as Class I milk except by increasing the the same handler and located in the (4) A plant located outside the nonfat milk solids content of the fluid marketing area may qualify for pool marketing area and qualified pursuant milk products received from own farm plant status as a unit by together to paragraph (a) of this section that production or pool handlers; meeting the requirements specified in meets the pooling requirements of (e) Disposes of no fluid milk products paragraph (a) of this section and subject another Federal order or a State order using the distribution system of another to all of the following additional providing for marketwide pooling, and handler except for direct deliveries to requirements: has had greater sales in such other retail outlets or to a pool handler’s (1) At least one of the plants in the Federal order’s marketing area for 3 plant; unit must qualify as a pool plant consecutive months; (f) Does not distribute fluid milk pursuant to paragraph (a) of this section; (5) A plant located in another Federal products to a wholesale customer who (2) Other plants in the unit must order marketing area and qualified also is serviced by a handler described process Class I or Class II products, pursuant to paragraph (a) of this section in § 1000.9(a) or (d) that supplied the using 50 percent or more of the total that meets the pooling requirements of same product in the same-sized package Grade A fluid milk products received in such other Federal order and does not with a similar label to the wholesale bulk form at such plant or diverted have a majority of its route distribution customer during the month; therefrom by the plant operator in Class in this marketing area for 3 consecutive (g) Provides proof satisfactory to the I or Class II products, and must be months or if the plant is required to be market administrator that the care and located in a pricing zone providing the regulated under such other Federal management of the dairy animals and same or lower Class I price than the order without regard to its route other resources necessary to produce all price applicable at the distributing plant disposition in any other Federal order Class I milk handled (excluding receipts included in the unit pursuant to marketing area; from handlers fully regulated under any paragraph (e)(1) of this section; (6) A plant qualified pursuant to Federal order) and the processing, (3) A written request to form a unit paragraph (c) of this section which also packaging, and distribution operations must be filed by the handler with the meets the pooling requirements of are the producer-handler’s own market administrator prior to the first another Federal order and from which enterprise and at its own risk; and day of the month for which such status greater qualifying shipments are made (h) Producer-handler shall not include is desired to be effective. The unit shall to plants regulated under the other any producer who also operates a continue from month to month Federal order than are made to plants distributing plant if the producer- thereafter without further notification. regulated under this order, or the plant handler so requests that the two be The handler shall notify the market has automatic pooling status under the operated as separate entities with the administrator in writing prior to the first other Federal order; and distributing plant regulated under day of any month for which termination (7) That portion of a regulated plant § 1131.7(a) and the farm operated as a or any change of the unit is desired. designated as a nonpool plant that is (f) The applicable percentages in physically separate and operated producer under § 1131.12. paragraphs (a), (b), (c), and (d) of this separately from the pool portion of such § 1131.11 [Reserved] section may be increased or decreased plant. The designation of a portion of a by the market administrator if found regulated plant as a nonpool plant must § 1131.12 Producer. necessary to obtain needed shipments or be requested in advance and in writing (a) Except as provided in paragraph to prevent uneconomic shipments. by the handler and must be approved by (b) of this section, producer means any Before making such a finding, the the market administrator. person who produces milk approved by market administrator shall investigate a duly constituted regulatory agency for § 1131.8 Nonpool plant. the need for revision, either on the fluid consumption as Grade A milk and market administrator’s own initiative or See § 1000.8 of this chapter. whose milk (or components of milk) is: at the request of interested parties. If § 1131.9 Handler. (1) Received at a pool plant directly such investigation shows that a revision See § 1000.9 of this chapter. from the producer or diverted by the might be appropriate, a notice shall be plant operator in accordance with issued stating that a revision adjustment § 1131.10 Producer-handler. § 1131.13; or is being considered and inviting data, Except as provided in paragraph (g) of (2) Received by a handler described in views, and arguments. If the market this section, producer-handler means a § 1000.9(c). administrator determines that an person who: (b) Producer shall not include: adjustment to the shipping percentages (a) Operates a dairy farm and a (1) A producer-handler as defined in is necessary, the market administrator distributing plant from which there is any Federal order; shall notify the industry within one day monthly route disposition in excess of (2) A dairy farmer whose milk is of the effective date of such adjustment. 150,000 pounds during the month; received at an exempt plant, excluding (g) The term pool plant shall not (b) Receives no fluid milk products producer milk diverted to the exempt apply to the following plants: from sources other than own farm plant pursuant to § 1131.13(d); Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5081

(3) A dairy farmer whose milk is (3) Diverted milk shall be priced at (a) With respect to each of its pool received by diversion at a pool plant the location of the plant to which plants, the quantities of skim milk and from a handler regulated under another diverted; butterfat contained in or represented by: Federal order if the other Federal order (4) Any milk diverted in excess of the (1) Receipts of producer milk, designates the dairy farmer as a limits prescribed in (d)(2) of this section including producer milk diverted by the producer under that order and that milk shall not be producer milk. If the plant operator to other plants; is allocated by request to a utilization diverting handler or cooperative (2) Receipts of milk from handlers other than Class I; association fails to designate the dairy described in § 1000.9(c); (4) A dairy farmer whose milk is farmers’ deliveries that are not to be (3) Receipts of fluid milk products reported as diverted to a plant fully producer milk, no milk diverted by the and bulk fluid cream products from regulated under another Federal order handler or cooperative association other pool plants; with respect to that portion of the milk during the month to a nonpool plant (4) Receipts of other source milk; so diverted that is assigned to Class I shall be producer milk. In the event (5) Inventories at the beginning and under the provisions of such other some of the milk of any producer is end of the month of fluid milk products order; and determined not to be producer milk and bulk fluid cream products; and (5) A dairy farmer whose milk is pursuant to this paragraph, other milk (6) The utilization or disposition of all received at a pool plant if during the delivered by such producer as producer milk and milk products required to be month milk from the same farm is milk during the month will not be reported pursuant to this paragraph. received at a nonpool plant (except a subject to § 1131.12(b)(5); and (b) Each handler operating a partially nonpool plant that has no utilization or (5) The applicable diversion limits in regulated distributing plant shall report milk products in any class other than paragraph (d)(2) of this section may be with respect to such plant in the same Class III or Class IV) other than as a increased or decreased by the market manner as prescribed for reports diversion under this or some other administrator if the market required by paragraph (a) of this section. Federal order. administrator finds that such revision is Receipts of milk that would have been necessary to assure orderly marketing producer milk if the plant had been § 1131.13 Producer milk. and efficient handling of milk in the fully regulated shall be reported in lieu Producer milk means the skim milk marketing area. Before making such a of producer milk. Such report shall (or the skim equivalent of components finding, the market administrator shall show also the quantity of any of skim milk) and butterfat in milk of a investigate the need for the revision reconstituted skim milk in route producer that is: either on the market administrator’s disposition in the marketing area. (a) Received by the operator of a pool own initiative or at the request of (c) Each handler described in plant directly from a producer or a interested persons. If the investigation § 1000.9(c) shall report: (1) The quantities of all skim milk and handler described in § 1000.9(c). Any shows that a revision might be butterfat contained in receipts of milk milk picked up from the producer’s appropriate, the market administrator from producers; and farm tank in a tank truck under the shall issue a notice stating that the (2) The utilization or disposition of all control of the operator of the pool plant revision is being considered and such receipts. or a handler described in § 1000.9(c) but inviting written data, views, and (d) Each handler described in which is not received at a plant until the arguments. Any decision to revise an § 1131.10 shall report: following month shall be considered as applicable percentage must be issued in having been received by the handler (1) The pounds of milk received from writing at least one day before the each of the handler’s own-farm during the month in which it was effective date. picked up at the producer’s farm. All production units, showing separately milk received pursuant to this § 1131.14 Other source milk. the production of each farm unit and the paragraph shall be priced at the location See § 1000.14 of this chapter. number of dairy cows in production at of the plant where it is first physically each farm unit; received. § 1131.15 Fluid milk product. (2) Fluid milk products and bulk fluid cream products received at its plant or (b) Received by a handler described in See § 1000.15 of this chapter. acquired for route disposition from pool § 1000.9(c) in excess of the quantity § 1131.16 Fluid cream product. plants, other order plants, and handlers delivered to pool plants. See § 1000.16 of this chapter. described in § 1000.9(c); (c) Diverted by a pool plant operator (3) Receipts of other source milk not to another pool plant. Milk so diverted § 1131.17 [Reserved] reported pursuant to paragraph (d)(2) of shall be priced at the location of the § 1131.18 Cooperative association. this section; plant to which diverted; or (4) Inventories at the beginning and (d) Diverted by the operator of a pool See § 1000.18 of this chapter. end of the month of fluid milk products plant or a cooperative association and fluid cream products; and described in § 1000.9(c) to a nonpool § 1131.19 Commercial food processing establishment. (5) The utilization or disposition of all plant, subject to the following milk and milk products required to be See § 1000.19 of this chapter. conditions: reported pursuant to this paragraph. (1) Milk of a dairy farmer shall not be Handler Reports (e) Each handler not specified in eligible for diversion unless at least one paragraphs (a) through (d) of this section day’s production of such dairy farmer is § 1131.30 Reports of receipts and shall report with respect to its receipts utilization. physically received at a pool plant and utilization of milk and milk during the month; Each handler shall report monthly so products in such manner as the market (2) The total quantity of milk diverted that the market administrator’s office administrator may prescribe. by a handler in any month shall not received the report on or before the 7th exceed 20 percent of the total producer day after the end of the month, in the § 1131.31 Payroll reports. milk caused by the handler to be detail and on the forms prescribed by (a) On or before the 20th day after the received at pool plants or diverted; the market administrator, as follows: end of each month, each handler 5082 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules described in § 1000.9(a) and (c) shall § 1131.53 Announcement of class prices steps of § 1000.44(b), excluding such report to the market administrator its and component prices. skim milk and butterfat in receipts of producer payroll for such month, in the See § 1000.53 of this chapter. bulk fluid milk products from an detail prescribed by the market unregulated supply plant to the extent § 1131.54 Equivalent price. administrator, showing for each that an equivalent amount of skim milk producer: See § 1000.54 of this chapter. or butterfat disposed of to such plant by (1) The producer’s name and address; Uniform Price handlers fully regulated under any (2) The total pounds of milk received Federal milk order is classified and from the producer; § 1131.60 Handler's value of milk. priced as Class I milk and is not used (3) The average butterfat content of For the purpose of computing the as an offset for any other payment such milk; and uniform price, the market administrator obligation under any order; (4) The price per hundredweight, the shall determine for each month the (f) Subtract, for reconstituted milk gross amount due, the amount and value of milk of each handler with made from receipts of nonfluid milk nature of any deductions, and the net respect to each of the handler’s pool products, an amount computed by amount paid. plants and of each handler described in multiplying $1.00 (but not more than (b) Each handler operating a partially § 1000.9(c) as follows: the difference between the Class I price regulated distributing plant who elects (a) Multiply the pounds of skim milk applicable at the location of the pool to make payment pursuant to and butterfat in producer milk that were plant and the Class IV price) by the § 1000.76(b) shall report for each dairy classified in each class pursuant to hundredweight of skim milk and farmer who would have been a producer § 1000.44(c) by the applicable skim milk butterfat contained in receipts of if the plant had been fully regulated in and butterfat prices and add the nonfluid milk products that are the same manner as prescribed for resulting amounts; allocated to Class I use pursuant to reports required by paragraph (a) of this (b) Add the amounts obtained from § 1000.43(d); section. multiplying the pounds of skim milk and butterfat overage assigned to each (g) Exclude, for pricing purposes § 1131.32 Other reports. class pursuant to § 1000.43(b)(2) by the under this section, receipts of nonfluid In addition to the reports required respective skim milk and butterfat milk products that are distributed as pursuant to § 1131.30 and § 1131.31, prices applicable at the location of the labeled reconstituted milk for which each handler shall report any pool plant; payments are made to the producer- information the market administrator (c) Add the amount obtained from settlement fund of another order under deems necessary to verify or establish multiplying the difference between the § 1000.76(a)(5) or (c). each handler’s obligation under the Class III price for the preceding month § 1131.61 Computation of uniform price, order. and the Class I price applicable at the uniform butterfat price and uniform skim location of the pool plant or the Class Classification of Milk milk price. II price, as the case may be, for the (a) For each month the market § 1131.40 Classes of utilization. current month by the hundredweight of administrator shall compute the skim milk and butterfat subtracted from See § 1000.40 of this chapter. uniform price per hundredweight. If the Class I and Class II pursuant to unreserved balance in the producer- § 1131.41 [Reserved] § 1000.44(a)(7) and the corresponding settlement fund to be included in the step of § 1000.44(b); § 1131.42 Classification of transfers and computation is less than two cents per diversions. (d) Add the amount obtained from multiplying the difference between the hundredweight of producer milk on all See § 1000.42 of this chapter. Class I price applicable at the location reports, the report of any handler who has not made payments required § 1131.43 General classification rules. of the pool plant and the Class III price pursuant to § 1131.71 for the preceding See § 1000.43 of this chapter. by the hundredweight of skim milk and butterfat assigned to Class I pursuant to month shall not be included in the § 1131.44 Classification of producer milk. § 1000.43(d) and the hundredweight of computation of the uniform price. The See § 1000.44 of this chapter. skim milk and butterfat subtracted from report of such handler shall not be Class I pursuant to § 1000.44(a)(3)(i) included in the computation for § 1131.45 Market administrator's reports through (iii), and the corresponding step succeeding months until the handler and announcements concerning has made full payment of outstanding classification. of § 1000.44(b), excluding receipts of bulk fluid cream products from a plant monthly obligations. Subject to the See § 1000.45 of this chapter. regulated under other Federal orders aforementioned conditions, the market Class Prices and bulk concentrated fluid milk administrator shall compute the products from pool plants, plants uniform price in the following manner: § 1131.50 Class prices, component prices, (1) Combine into one total the values Class I differential and price. regulated under other Federal orders, and unregulated supply plants; computed pursuant to § 1131.60 for all Class prices and component prices are (e) Add the amount obtained from handlers required to file reports described in § 1000.50. The Class I multiplying the Class I price applicable prescribed in § 1131.30; differential shall be the differential at the location of the nearest (2) Add an amount equal to the sum established for Maricopa County, unregulated supply plants from which of the location adjustments computed Arizona, which is reported in § 1000.52. an equivalent volume was received by pursuant to § 1131.75; The Class I price shall be the price the pounds of skim milk and butterfat (3) Add an amount equal to not less computed pursuant to § 1000.50(a) for in receipts of concentrated fluid milk than one-half of the unobligated balance Maricopa County, Arizona. products assigned to Class I pursuant to in the producer-settlement fund; § 1131.51 [Reserved] § 1000.43(d) and § 1000.44(a)(3)(i) and (4) Add or subtract, as the case may the pounds of skim milk and butterfat be, to obtain an all-producer milk test of § 1131.52 Adjusted Class I differentials. subtracted from Class I pursuant to 3.5% butterfat, the value of the required See § 1000.52 of this chapter. § 1000.44(a)(8) and the corresponding pounds of butterfat times the uniform Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5083 butterfat price computed pursuant to administrator’s office, or deposited into (ii) The hundredweight of producer paragraph (b) of this section; the market administrator’s bank skim milk received times the uniform (5) Divide the resulting amount by the account. Payment shall be the amount, skim milk price for the month; sum of the following for all handlers if any, by which the amount specified (iii) The pounds of producer butterfat included in these computations: in paragraph (a) of this section exceeds received times the uniform butterfat (i) The total hundredweight of the amount specified in paragraph (b) of price for the month; producer milk; this section: (iv) Less payments made pursuant to (ii) The total hundredweight for (a) The total value of milk to the paragraph (a) of this section; which a value is computed pursuant to handler for the month as determined (v) Less deductions made for § 1131.60(f); and pursuant to § 1131.60. marketing service pursuant to § 1000.86; (6) Subtract not less than 4 cents nor (b) The sum of: (vi) Plus or minus adjustments for more than 5 cents per hundredweight. (1) The value at the uniform prices for errors made in previous payments to The result shall be the uniform price for skim milk and butterfat, adjusted for such producer; and milk received from producers during the plant location, of the handler’s receipts (vii) Less proper deductions month. of producer milk; and authorized in writing by such producer. (b) Uniform butterfat price. The (2) The value at the uniform price as (b) Two days prior to the dates on Uniform butterfat price per pound, adjusted pursuant to § 1131.75 which partial and final payments are rounded to the nearest one-hundredth applicable at the location of the plant due pursuant to paragraph (a) of this cent, shall be obtained by multiplying from which received of other source section, each pool plant operator shall the pounds of butterfat in producer milk milk for which a value is computed pay a cooperative association for milk allocated to each class pursuant to pursuant to § 1131.60(e). received as follows: § 1000.44(b) by the respective class (1) Partial payment to a cooperative § 1131.72 Payments from the producer- association. On or before the 25th day butterfat prices (Class I butterfat price settlement fund. for Class I and the butterfat price for all of the month each handler shall pay to No later than the 14th day after the a cooperative association that the other classes) and dividing the sum of end of each month, the market such values by the total pounds of such market administrator determines is administrator shall pay to each handler authorized by its members to collect butterfat. the amount, if any, by which the (c) Uniform skim milk price. The payment for their milk, an amount not amount computed pursuant to less than 1.3 times the lowest class price uniform skim milk price per § 1131.71(b) exceeds the amount hundredweight, rounded to the nearest for the preceding month multiplied by computed pursuant to § 1131.71(a). If, at the hundredweight of milk received cent, shall be the uniform price for the such time, the balance in the producer- month computed pursuant to paragraph during the first 15 days of the month settlement fund is insufficient to make from such cooperative association, (a) of this section, less the uniform all payments pursuant to this section, butterfat price for the month computed including the milk of producers not the market administrator shall reduce members of such cooperative pursuant to paragraph (b) of this section uniformly such payments and shall multiplied by 3.5, with the result association who the market complete the payments as soon as the administrator determines have divided by .965. funds are available. authorized the cooperative association § 1131.62 Announcement of uniform price, § 1131.73 Payments to producers and to to collect payment for their milk; uniform butterfat price and uniform skim cooperative associations. (2) Final Payment to a cooperative milk price. (a) Except as provided in paragraphs association. On or before the 13th day On or before the 11th day after the (b) and (c) of this section, each handler of the following month, each handler end of each month, the market shall make payment to each producer shall pay to a cooperative association administrator shall announce the from whom milk is received during the which the market administrator following prices and information: month as follows: determines is authorized by its members (a) The uniform price computed (1) Partial Payment. For each to collect payment for their milk not less pursuant to § 1131.61 for such month; producer who has not discontinued than an amount computed pursuant to (b) The uniform butterfat price shipments as of the 25th day of the paragraph (a)(2) of this section for milk computed pursuant to § 1131.61(b) for month, payment shall be made so that received from such cooperative such month; and it is received by the producer on or association during the month, including (c) The uniform skim milk price before the 27th day of each month to the milk of producers not members of computed pursuant to § 1131.61(c) for each producer who did not discontinue such cooperative association who the such month. shipping milk to such handler before market administrator determines have Payments for Milk the 25th day of the month, for milk authorized the cooperative association received from such producer during the to collect payment for their milk; § 1131.70 Producer-settlement fund. first 15 days of the month at not less (c) If a handler has not received full See § 1000.70 of this chapter. than 1.3 times the lowest class price for payment from the market administrator the preceding month, adjusted for plant pursuant to § 1131.72 by the payment § 1131.71 Payments to the producer- location pursuant to § 1131.75 and date specified in paragraph (a) or (b) of settlement fund. proper deductions authorized in writing this section, the handler may reduce pro Each handler shall make payment to by the producer; and rata his payments pursuant to such the producer-settlement fund in a (2) Final Payment. On or before the paragraphs, but by not more than the manner that provides receipt of the 15th day of the following month, not amount of such underpayment. funds by the market administrator no less than an amount computed by the Payments to producers shall be later than the 13th day after the end of sum of the following: completed on the next scheduled the month. Payments due the market (i) The hundredweight of producer payment date after receipt of the balance administrator shall be deemed not to milk received times the uniform price due from the market administrator. have been made until the money owed for the month as adjusted pursuant to (d) If a handler claims that a required has been received at the market § 1131.75; payment to a producer cannot be made 5084 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules because the producer is deceased or § 1131.78 Charges on overdue accounts. 1134.71 Payments to the producer- cannot be located, or because the See § 1000.78 of this chapter. settlement fund. cooperative association or its lawful 1134.72 Payments from the producer- successor or assignee is no longer in Administrative Assessment and settlement fund. Marketing Service Deduction 1134.73 Payments to producers and to existence, the payment shall be made to cooperative associations. the producer-settlement fund. In the § 1131.85 Assessment for order 1134.74 [Reserved] event the handler subsequently locates administration. 1134.75 Plant location adjustments for and pays the producer or a lawful See § 1000.85 of this chapter. producer milk and nonpool milk. claimant, or in the event that the 1134.76 Payments by a handler operating a handler no longer exists and a lawful § 1131.86 Deduction for marketing partially regulated distributing plant. claim is later established, the market services. 1134.77 Adjustment of accounts. 1134.78 Charges on overdue accounts. administrator shall make the required See § 1000.86 of this chapter. payment from the producer-settlement Administrative Assessment and Marketing fund to the handler or the lawful PART 1134ÐMILK IN THE WESTERN Service Deduction claimant, as the case may be. MARKETING AREA 1134.85 Assessment for order (e) In making payments to producers administration. pursuant to this section, each pool plant SubpartÐOrder Regulating Handling 1134.86 Deduction for marketing services. operator shall furnish each producer, General Provisions Authority: 7 U.S.C. 601–674. except a producer whose milk was Sec. received from a handler described in 1134.1 General provisions. SubpartÐOrder Regulating Handling § 1000.9(a) or (c), a supporting statement in such form that it may be retained by Definitions General Provisions the recipient which shall show: 1134.2 Western marketing area. § 1134.1 General provisions. (1) The month, and identity of the 1134.3 Route disposition. 1134.4 Plant. The terms, definitions, and provisions producer; in Part 1000 of this chapter apply to and (2) The daily and total pounds and the 1134.5 Distributing plant. are hereby made a part of this order. total pounds of butterfat content of 1134.6 Supply plant. 1134.7 Pool plant. producer milk; 1134.8 Nonpool plant. Definitions (3) The minimum rate at which 1134.9 Handler. § 1134.2 Western marketing area. payment to the producer is required 1134.10 Producer-handler. pursuant to this order; 1134.11 Proprietary bulk tank handler. The marketing area means all territory (4) The rate used in making payments 1134.12 Producer. within the bounds of the following if the rate is other than the applicable 1134.13 Producer milk. states and political subdivisions, minimum rate; 1134.14 Other source milk. including all piers, docks and wharves (5) The amount, rate per 1134.15 Fluid milk product. connected therewith and all craft hundredweight, and nature of each 1134.16 Fluid cream product. moored thereat, and all territory deduction claimed by the handler; and 1134.17 [Reserved] occupied by government (municipal, (6) The net amount of payment to the 1134.18 Cooperative association. State or Federal) reservations, 1134.19 Commercial food processing producer. establishment. installations, institutions, or other similar establishments if any part § 1131.74 [Reserved] Handler Reports thereof is within any of the listed states § 1131.75 Plant location adjustments for 1134.30 Reports of receipts and utilization. or political subdivisions: producers and on nonpool milk. 1134.31 Payroll reports. 1134.32 Other reports. Utah (a) The uniform price for producer All of the State of Utah. milk shall be adjusted according to the Classification of Milk location of the plant at which the milk 1134.40 Classes of utilization. Colorado Counties was first physically received by 1134.41 [Reserved] Delta, Garfield, Mesa, and Montrose. subtracting from the price the amount 1134.42 Classification of transfers and Idaho Counties by which the Class I price specified in diversions. § 1131.50 exceeds the Class I price at the 1134.43 General classification rules. Ada, Adams, Bannock, Bear Lake, 1134.44 Classification of producer milk. Bingham, Blaine, Boise, Bonneville, Camas, plant’s location. If the Class I price at Canyon, Caribou, Cassia, Elmore, Franklin, the plant location exceeds the Class I 1134.45 Market administrator’s reports and announcements concerning Gem, Gooding, Jefferson, Jerome, Lincoln, price specified in § 1131.50, the classification. Madison, Minidoka, Oneida, Owyhee, difference shall be added to the uniform Payette, Power, Twin Falls, Valley, and price; and Class Prices Washington. (b) The uniform price applicable to 1134.50 Class prices and component prices. Nevada Counties other source milk shall be adjusted 1134.51 Class I differential and price. following the procedure specified in 1134.52 Adjusted Class I differentials. Elko, Lincoln, and White Pine. paragraph (a) of this section, except that 1134.53 Announcement of class and Oregon Counties the adjusted uniform price shall not be component prices. 1134.54 Equivalent price. Baker, Grant, Harney, Malheur, and Union. less than the lowest announced class price. Producer Price Differential Wyoming Counties 1134.60 Handler’s value of milk. Lincoln and Uinta. § 1131.76 Payments by handler operating 1134.61 Computation of producer price a partially regulated distributing plant. § 1134.3 Route disposition. differential. See § 1000.76 of this chapter. 1134.62 Announcement of producer prices. See § 1000.3 of this chapter. § 1131.77 Adjustment of accounts. Payments for Milk § 1134.4 Plant. See § 1000.77 of this chapter. 1134.70 Producer-settlement fund. See § 1000.4 of this chapter. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5085

§ 1134.5 Distributing plant. (2) A pool plant operator may include The handler shall notify the market See § 1000.5 of this chapter. as qualifying shipments milk diverted to administrator in writing prior to the first pool distributing plants pursuant to day of any month for which termination § 1134.6 Supply plant. § 1134.13(c); or any change of the unit is desired. See § 1000.6 of this chapter. (3) No plant may qualify as a pool (f) The applicable percentages in plant due to a reduction in the shipping paragraphs (a), (c), and (d) of this § 1134.7 Pool plant. percentage pursuant to paragraph (f) of section may be increased or decreased Pool Plant means a plant or unit of this section unless it has been a pool by the market administrator if found plants specified in paragraphs (a) supply plant during each of the necessary to obtain needed shipments or through (e) of this section. The pooling immediately preceding three months. to prevent uneconomic shipments. standards described in paragraphs (a), (d) A milk manufacturing plant Before making a finding that a change is (c), and (d) of this section are subject to located within the marketing area that is necessary, the market administrator modification pursuant to paragraph (f) operated by a cooperative association if, shall investigate the need for revision, of this section. during the month or the immediately either on the market administrator’s (a) A distributing plant from which preceding 12-month period ending with own initiative or at the request of during the month there is route the current month, 35% or more of such interested persons. If such investigation disposition equal to 25 percent or more cooperative’s member producer milk shows that a revision might be of the total quantity of bulk fluid milk (and any producer milk of nonmembers appropriate, a notice shall be issued products physically received at such and members of another cooperative stating that such a revision is being plant and there is route disposition in association which may be marketed by considered and inviting written data, the marketing area of at least 15 percent the cooperative association) is views, and arguments. If the market of total route disposition. For purposes physically received in the form of bulk administrator determines that an of this section, packaged fluid milk fluid milk products at plants specified adjustment to the shipping percentages products that are transferred to a in paragraph (a) or (b) of this section is necessary, the market administrator distributing plant shall be considered as either directly from farms or by transfer shall notify the industry within one day route disposition from the transferring from supply plants operated by the of the effective date of such adjustment. plant, rather than the receiving plant, cooperative association and from plants (g) The term pool plant shall not for the single purpose of determining of the cooperative association for which apply to the following plants: the pool status of the transferring plant pool plant status has been requested (1) A producer-handler as defined under this section. under this paragraph subject to the under any Federal order; (2) An exempt plant as defined in (b) A distributing plant located in the following conditions: (1) The plant does not qualify as a 1000.8(e). marketing area which during the month pool plant under paragraph (a), (b) or (c) (3) A plant located within the processes a majority of its receipts of of this section or under comparable marketing area and qualified pursuant milk products into aseptically packaged provisions of another Federal order; and to paragraph (a) or (e) of this section fluid milk products. If during the month (2) The plant is approved by a duly which meets the pooling requirements the plant had no route disposition into constituted regulatory agency for the of another Federal order, and from any federal milk order the plant handling of milk approved for fluid which more than 50 percent of its route operator may request nonpool status for consumption in the marketing area. disposition has been in the other such plant for the month. (e) Two or more plants located in the Federal order marketing area for three (c) A supply plant from which during marketing area and operated by the consecutive months; the month the quantity of bulk fluid same handler may qualify for pool plant (4) A plant located outside the milk products transferred or diverted to status as a unit by together meeting the marketing area and qualified pursuant plants described in paragraph (a) or (b) requirements specified in paragraph (a) to paragraph (a) of this section that of this section is 35 percent of more of of this section and subject to the meets the pooling requirements of the total Grade A milk received at the following additional requirements: another Federal order and has had plant from dairy farmers (except dairy (1) At least one of the plants in the greater sales in such other Federal farmers described in § 1134.12(b)) and unit must individually qualify as a pool order’s marketing area for 3 consecutive handlers described in § 1000.9(c), plant pursuant to paragraph (a) of this months; including milk diverted by the plant section. (5) A plant located in another Federal operator, subject to the following (2) Other plants in the unit must order marketing area and qualified conditions: process Class I or Class II products, pursuant to paragraph (a) of this section (1) A supply plant that has qualified using 50 percent or more of the total that meets the pooling requirements of as a pool plant during each of the Grade A fluid milk products received in such other Federal order and does not immediately preceding months of bulk form at such plant or diverted have a majority of its route distribution September through February shall therefrom by the plant operator in Class in this marketing area for 3 consecutive continue to so qualify in each of the I or Class II products, and must be months or if the plant is required to be following months of March through located in a pricing zone providing the regulated under such other Federal August unless the plant operator files a same or a lower Class I price than the order without regard to its route written request with the market price applicable at the distributing plant disposition in any other Federal order administrator that such plant not be a included in the unit pursuant to marketing area; pool plant, such nonpool status to be paragraph (e)(1) of this section; and (6) A plant qualified pursuant to effective the first month following such (3) A written request to form a unit paragraph (c) of this section which also request. A plant withdrawn from pool must be filed by the handler with the meets the pooling requirements of supply plant status may not be market administrator prior to the first another Federal order and from which reinstated for any subsequent month of day of the month for which such status greater qualifying shipments are made the March through July period unless it is to be effective. The unit shall to plants regulated under the other qualifies as a pool plant on the basis of continue from month to month Federal order than are made to plants milk shipments; thereafter without further notification. regulated under this order, or the plant 5086 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules has automatic pooling status under the § 1134.11 Proprietary bulk tank handler. Class III or Class IV) other than as a other Federal order; and (a) Any person, except a cooperative diversion under this or some other (7) That portion of a regulated plant association, with respect to milk that it Federal order. receives for its account from the farm of designated as a nonpool plant that is § 1134.13 Producer milk. physically separate and operated a producer in a tank truck owned and separately from the pool portion of such operated by, or under the control of, Producer milk means the skim milk plant. The designation of a portion of a such person and which is delivered (or the skim equivalent of components regulated plant as a nonpool plant must during the month for the account of of skim milk), including nonfat be requested in advance and in writing such person to the pool plant of another components, and butterfat in milk of a by the handler and must be approved by handler or diverted pursuant to producer that is: (a) Received by the operator of a pool the market administrator. § 1134.13, subject to the following conditions: plant directly from a producer, by a § 1134.8 Nonpool plant. (1) Such person (who, if qualified handler described in § 1000.9(c), or by a handler described in § 1134.11. Any See § 1000.8 of this chapter. pursuant to this paragraph, shall be known as a proprietary bulk tank milk picked up from the producer’s § 1134.9 Handler. handler) must operate a plant located in farm tank in a tank truck under the control of the operator of the pool plant See § 1000.9 of this chapter. the marketing area at which milk is processed only into Class II, Class III, or or a handler described in § 1000.9(c) but § 1134.10 Producer-handler. Class IV products; and which is not received at a plant until the Except as provided in paragraph (g) of (2) Prior to operating as a handler following month shall be considered as this section, producer-handler means a pursuant to this paragraph, such person having been received by the handler person who: must submit to the marker administrator during the month in which it was a statement signed by the applicant and picked up at the producer’s farm. All (a) Operates a dairy farm and a milk received pursuant to this distributing plant from which there is the operator of the pool plant to which the milk will be delivered specifying paragraph shall be priced at the location monthly route disposition in excess of of the plant where it is first physically 150,000 pounds during the month; that the applicant will be the responsible handler for the milk. received; (b) Receives no fluid milk products (b) Received by a handler described in from sources other than own farm § 1134.12 Producer. § 1000.9(c) or in § 1134.11 in excess of production, pool handlers, and plants (a) Except as provided in paragraph the quantity delivered to pool plants. fully regulated under another Federal (b) of this section, producer means any (c) Diverted by a pool plant operator order; person who produces milk approved by to another pool plant. Milk so diverted (c) Receives at its plant or acquires for a duly constituted regulatory agency for shall be priced at the location of the route disposition no more than 150,000 fluid consumption as Grade A milk and plant to which diverted; or pounds of fluid milk products from whose milk (or components of milk) is: (d) Diverted by the operator of a pool handlers fully regulated under any (1) Received at a pool plant directly plant, a cooperative association Federal order. This limitation shall not from the producer or diverted by the described in § 1000.9(c), or a proprietary apply if the producer-handler’s own plant operator in accordance with bulk tank handler described in farm production is less than 150,000 § 1134.13; or § 1134.11, to a nonpool plant, subject to pounds during the month. (2) Received by a handler described in the following conditions: (d) Disposes of no other source milk § 1000.9(c). (1) Milk of a dairy farmer shall not be as Class I milk except by increasing the (b) Producer shall not include: eligible for diversion unless at least one nonfat milk solids content of the fluid (1) A producer-handler as defined in day’s milk production of such dairy milk products received from own farm any Federal order; farmer has been physically received as production or pool handlers; (2) A dairy farmer whose milk is producer milk at a pool plant and the delivered to an exempt plant, excluding dairy farmer has continuously retained (e) Disposes of no fluid milk products producer milk diverted to the exempt producer status since that time. If a using the distribution system of another plant pursuant to § 1134.13(d); dairy farmer loses producer status under handler except for direct deliveries to (3) A dairy farmer whose milk is this order (except as a result of a retail outlets or to a pool handler’s diverted to a pool plant by a handler temporary loss of Grade A approval), the plant; regulated under another Federal order if dairy farmer’s milk shall not be eligible (f) Provides proof satisfactory to the the other Federal order designates the for diversion until milk of the dairy market administrator that the care and dairy farmer as a producer under that farmer has been physically received as management of the dairy animals and order and that milk is allocated by producer milk at a pool plant; other resources necessary to produce all request to a utilization other than Class (2) Of the quantity of producer milk Class I milk handled (excluding receipts I; and received during the month (including from handlers fully regulated under any (4) A dairy farmer whose milk is diversions) the handler diverts to Federal order) and the processing, reported as diverted to a plant fully nonpool plants not more than 80 packaging, and distribution operations regulated under another Federal order percent; are the producer-handler’s own with respect to that portion of the milk (3) Diverted milk shall be priced at enterprise and at its own risk; and so diverted that is assigned to Class I the location of the plant to which (g) Producer-handler shall not include under the provisions of such other diverted; any producer who also operates a order. (4) Any milk diverted in excess of the distributing plant if the producer- (5) A dairy farmer whose milk was limits prescribed in (d)(2) of this section handler so requests that the two be received at a pool plant if during the shall not be producer milk. If the operated as separate entities with the month milk from the same farm was diverting handler, cooperative distributing plant regulated under received at a nonpool plant (except a association, or proprietary bulk tank § 1134.7(a) and the farm operated as a nonpool plant that has no utilization of handler fails to designate the dairy producer under § 1134.12. milk products in any Class other than farmers’ deliveries that are not to be Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5087 producer milk, no milk diverted by the (other solids), contained in or deems necessary to verify or establish handler, cooperative association, or represented by: each handler’s obligation under the proprietary bulk tank handler during the (i) Receipts of producer milk, order. month to a nonpool plant shall be including producer milk diverted by the Classification of Milk producer milk. In the event some of the handler; and milk of any producer is determined not (ii) Receipts of milk from handlers § 1134.40 Classes of utilization. to be producer milk pursuant to this described in § 1000.9(c); See § 1134.40 of this chapter. paragraph, other milk delivered by such (2) Product pounds and pounds of producer as producer milk during the butterfat contained in: § 1134.41 [Reserved] month will not be subject to (i) Receipts of fluid milk products and bulk fluid cream products from other § 1134.42 Classification of transfers and § 1134.12(b)(5); and diversions. (5) The applicable diversion limits in pool plants; See § 1000.42 of this chapter. paragraph (d)(2) of this section may be (ii) Receipts of other source milk; and increased or decreased by the market (iii) Inventories at the beginning and § 1134.43 General classification rules. end of the month of fluid milk products administrator if the market See § 1000.43 of this chapter. administrator finds that such revision is and bulk fluid cream products; necessary to assure orderly marketing (3) The utilization or disposition of all § 1134.44 Classification of producer milk. and efficient handling of milk in the milk and milk products required to be See § 1000.44 of this chapter. marketing area. Before making such a reported pursuant to this paragraph; and finding, the market administrator shall (4) Such other information with § 1134.45 Market administrator's reports respect to the receipts and utilization of and announcements concerning investigate the need for the revision classification. either on the market administrator’s skim milk, butterfat, milk protein, and own initiative or at the request of other nonfat solids, as the market See § 1000.45 of this chapter. administrator may prescribe. interested persons. If the investigation Class Prices shows that a revision might be (b) Each handler operating a partially appropriate, the market administrator regulated distributing plant shall report § 1134.50 Class prices and component shall issue a notice stating that the with respect to such plant in the same prices. revision is being considered and manner as prescribed for reports See § 1000.50 of this chapter. required by paragraph (a) of this section. inviting written data, views, and § 1134.51 Class I differential and price. arguments. Any decision to revise an Receipts of milk that would have been applicable percentage must be issued in producer milk if the plant had been The Class I differential shall be the writing at least one day before the fully regulated shall be reported in lieu differential established at Salt Lake effective date. of producer milk. The report shall show County, Utah, which is reported in also the quantity of any reconstituted § 1000.52. The Class I price shall be the § 1134.14 Other source milk. skim milk in route disposition in the price computed pursuant to § 1000.50(a) See § 1000.14 of this chapter. marketing area. for Salt Lake County, Utah. (c) Each handler not specified in § 1134.15 Fluid milk product. paragraphs (a) and (b) of this section § 1134.52 Adjusted Class I differentials. See § 1000.15 of this chapter. shall report with respect to its receipts See § 1000.52 of this chapter. and utilization of milk and milk § 1134.16 Fluid cream product. § 1134.53 Announcement of class prices products in such manner as the market and component prices. See § 1000.16 of this chapter. administrator may prescribe. See § 1000.53 of this chapter. § 1134.17 [Reserved] § 1134.31 Payroll reports. § 1134.54 Equivalent price. (a) On or before the 21st day after the § 1134.18 Cooperative association. See § 1000.54 of this chapter. end of each month, each handler that See § 1000.18 of this chapter. operates a pool plant pursuant to Producer Price Differential § 1134.7 and each handler described in § 1134.19 Commercial food processing § 1134.60 Handler's value of milk. establishment. § 1000.9(c) and in § 1134.11 shall report For the purpose of computing a See § 1000.19 of this chapter. to the market administrator its producer payroll for the month, in the detail handler’s obligation for producer milk, Handler Reports prescribed by the market administrator, the market administrator shall showing for each producer the determine for each month the value of § 1134.30 Reports of receipts and milk of each handler with respect to utilization. information described in § 1134.73(f). (b) Each handler operating a partially each of its pool plants, and of each Each handler shall report monthly so regulated distributing plant who elects handler described in § 1000.9(c) and that the market administrator receives to make payment pursuant to § 1134.11 as follows: the report on or before the 7th day after § 1000.76(b) shall report for each dairy (a) Class I value. the end of each month, in the detail and farmer who would have been a producer (1) Multiply the hundredweight of on the forms prescribed by the market if the plant had been fully regulated in skim milk in Class I as determined administrator, as follows: the same manner as prescribed for pursuant to § 1000.44(a) by the Class I (a) Each handler that operates a pool reports required by paragraph (a) of this skim milk price applicable at the plant pursuant to § 1134.7, and each section. handler’s location; and handler described in § 1000.9(c) or in (2) Add an amount obtained by § 1134.11, shall report for each of its § 1134.32 Other reports. multiplying the pounds of butterfat in operations the following information: In addition to the reports required Class I as determined pursuant to (1) Product pounds, pounds of pursuant to §§ 1134.30 and 1134.31, § 1000.44(b) by the Class I butterfat butterfat, pounds of protein, nd pounds each handler shall report any price applicable at the handler’s of solids-not-fat other than protein information the market administrator location. 5088 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

(b) Add the Class II value, computed § 1000.44(a)(7) and the corresponding settlement fund to be included in the as follows: step of § 1000.44(b); computation is less than 2 cents per (1) Multiply the hundredweight of (h) Add the amount obtained from hundredweight of producer milk on all skim milk in Class II as determined multiplying the difference between the reports, the report of any handler who pursuant to § 1000.44(a) by 70 cents; Class I price applicable at the location has not made payments required (2) Add an amount obtained by of the pool plant and the Class III price pursuant to § 1134.71 for the preceding multiplying the pounds of skim milk in by the hundredweight of skim milk and month shall not be included in the Class II as determined pursuant to butterfat assigned to Class I pursuant to computation of the producer price § 1000.44(a) by the average nonfat solids § 1000.43(d) and the hundredweight of differential. The report of such handler content of producer skim milk received skim milk and butterfat subtracted from shall not be included in the by the handler, and multiply the Class I pursuant to § 1000.44(a)(3)(i) computation for succeeding months resulting pounds of nonfat solids by the through (iii) and the corresponding step until the handler has made full payment nonfat solids price; and of § 1000.44(b), excluding receipts of of outstanding monthly obligations. (3) Add an amount obtained by bulk fluid cream products from a plant Subject to the aforementioned multiplying the pounds of butterfat in regulated under other Federal orders conditions, the market administrator Class II as determined pursuant to and bulk concentrated fluid milk shall compute the producer price § 1000.44(b) by the butterfat price; products from pool plants, plants differential in the following manner: (c) Add the Class III value computed regulated under other Federal orders, (a) Combine into one total the values as follows: and unregulated supply plants; computed pursuant to § 1134.60 for all (1) Multiply the pounds of skim milk (i) Add the amount obtained from handlers required to file reports in Class III as determined pursuant to multiplying the difference between the prescribed in § 1134.30; § 1000.44(a) by the average protein Class I price and the Class III price (b) Subtract the total values obtained content of producer skim milk received applicable at the location of the nearest by multiplying each handler’s total by the handler, and multiply the unregulated supply plants from which pounds of protein, other solids, and resulting pounds of protein by the an equivalent volume was received by butterfat contained in the milk for protein price; the pounds of skim milk and butterfat which an obligation was computed (2) Add an amount obtained by in receipts of concentrated fluid milk pursuant to § 1134.60 by the protein multiplying the pounds of skim milk in products assigned to Class I pursuant to price, the other solids price, and the Class III as determined pursuant to § 1000.43(d) and § 1000.44(a)(3)(i) and butterfat price, respectively; § 1000.44(a) by the average other solids the pounds of skim milk and butterfat (c) Add an amount equal to the sum content of producer skim milk received subtracted from Class I pursuant to of the location adjustments computed by the handler, and multiply the § 1000.44(a)(8) and the corresponding pursuant to § 1134.75; resulting pounds of other solids by the step of § 1000.44(b), excluding such (d) Add an amount equal to not less other solids price; and skim milk and butterfat in receipts of than one-half of the unobligated balance (3) Add an amount obtained by bulk fluid milk products from an in the producer-settlement fund; multiplying the pounds of butterfat in unregulated supply plant to the extent (e) Divide the resulting amount by the Class III as determined pursuant to that an equivalent amount of skim milk sum of the following for all handlers § 1000.44(b) by the butterfat price; or butterfat disposed of to such plant by included in these computations: (d) Add the Class IV value computed handlers fully regulated under any (1) The total hundredweight of as follows: Federal milk order is classified and producer milk; and (1) Multiply the pounds of skim milk priced as Class I milk and is not used (2) The total hundredweight for which in Class IV as determined pursuant to as an offset for any other payment a value is computed pursuant to § 1000.44(a) by the average nonfat solids obligation under any order; § 1134.60(i); and (j) Subtract, for reconstituted milk content of producer skim milk received (f) Subtract not less than 4 cents nor made from receipts of nonfluid milk by the handler, and multiply the more than 5 cents from the price products, an amount computed by resulting pounds of nonfat solids by the computed pursuant to paragraph (e) of multiplying $1.00 (but not more than nonfat solids price; and this section. The result shall be known the difference between the Class I price (2) Add an amount obtained by as the producer price differential for the applicable at the location of the pool multiplying the pounds of butterfat in month. plant and the Class IV price) by the Class IV as determined pursuant to hundredweight of skim milk and § 1134.62 Announcement of producer § 1000.44(b) by the butterfat price; butterfat contained in receipts of prices. (e) [Reserved] nonfluid milk products that are On or before the 12th day after the (f) Add the amounts obtained from allocated to Class I pursuant to end of each month, the market multiplying the pounds of skim milk § 1000.43(d); and administrator shall announce publicly and butterfat overage assigned to each (k) Exclude, for pricing purposes the following prices and information: class pursuant to § 1000.43(b)(2) by the under this section, receipts of nonfluid (a) The producer price differential; respective skim milk and butterfat milk products that are distributed as (b) The protein price; prices applicable at the location of the labeled reconstituted milk for which (c) The other solids price; pool plant; payments are made to the producer- (d) The butterfat price; (g) Add the amount obtained from settlement fund of another order under (e) [Reserved] multiplying the difference between the § 1000.76(a)(5) or (c). (f) The average butterfat, protein and Class III price for the preceding month other solids content of producer milk; and the Class I price applicable at the § 1134.61 Computation of producer price and location of the pool plant or the Class differential. (g) The statistical uniform price for II price, as the case may be, for the For each month the market milk containing 3.5 percent butterfat, current month by the hundredweight of administrator shall compute a producer computed by combining the Class III skim milk and butterfat subtracted from price differential per hundredweight. If price and the producer price Class I and Class II pursuant to the unreserved balance in the producer- differential. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5089

Payments for Milk preceding month multiplied by the (d) If a handler has not received full hundredweight of milk received from payment from the market administrator § 1134.70 Producer-settlement fund. such producer during the first 15 days pursuant to § 1134.72 by the payment See § 1000.70 of this chapter. of the month, less proper deductions date specified in paragraph (a), (b), or (c) § 1134.71 Payments to the producer- authorized by such producer to be made of this section, the handler may reduce settlement fund. from payments due pursuant to this pro rata its payments to producers or to Each handler shall make payment to paragraph; and the cooperative association by not more the producer-settlement fund in a (2) Final Payment. On or before the than the amount of such underpayment. manner that provides receipt of the 17th day of the following month, not The payments shall be completed on the funds by the market administrator no less than an amount computed by the next scheduled payment date after later than the 14th day after the end of sum of the following: receipt of the balance due from the the month. Payment shall be the (i) The hundredweight of producer market administrator. amount, if any, by which the amount milk received times the producer price (e) If a handler claims that a required specified in paragraph (a) of this section differential for the month as adjusted payment to a producer cannot be made exceeds the amount specified in pursuant to § 1134.75; because the producer is deceased or paragraph (b) of this section: (ii) The pounds of butterfat in cannot be located, or because the (a) The total value of milk to the producer milk received times the cooperative association or its lawful handler for the month as determined butterfat price for the month; successor or assignee is no longer in pursuant to § 1134.60. (iii) The pounds of protein in existence, the payment shall be made to (b) The sum of: producer milk received times the the producer settlement fund, and in the (1) An amount obtained by protein price for the month; event the handler subsequently locates multiplying the total hundredweight of (iv) The pounds of other solids in and pays the producer or a lawful producer milk as determined pursuant producer milk received times the other claimant, or in the event that the to § 1000.44(c) by the producer price solids price for the month; handler no longer exists and a lawful differential as adjusted pursuant to (v) [Reserved] claim is later established, the market § 1134.75; (vi) Less any payments made pursuant administrator shall make the required (2) An amount obtained by to paragraph (a)(1) of this section; payment from the producer-settlement multiplying the total pounds of protein, (vii) Less proper deductions fund to the handler or to the lawful other solids, and butterfat contained in authorized in writing by such producer claimant, as the case may be. producer milk by the protein, other and plus or minus adjustments for (f) In making payments to producers solids, and butterfat prices respectively; errors in previous payments to such pursuant to this section, each handler (3) [Reserved] producer; and shall furnish each producer, except a (4) An amount obtained by (viii) Less deductions made for producer whose milk was received from multiplying the pounds of skim milk marketing service pursuant to § 1000.86; a cooperative association handler and butterfat for which a value was (b) Partial payment to a cooperative described in § 1000.9(a) or (c), a computed pursuant to § 1134.60(i) by association. On or before the 24th day supporting statement in a form that may the producer price differential as of each month each handler shall pay to be retained by the recipient which shall adjusted pursuant to § 1134.75 for the a cooperative association, which the show: location of the plant from which market administrator determines is (1) The name, address, Grade A received. authorized by its members to collect identifier assigned by a duly constituted payment for their milk, an amount not regulatory agency, and payroll number § 1134.72 Payments from the producer- of the producer; settlement fund. less than 1.2 times the lowest class price for the preceding month multiplied by (2) The daily and total pounds, and No later than the 15th day after the the month and dates such milk was end of each month, the market the hundredweight of milk received during the first 15 days of the month received from that producer; administrator shall pay to each handler (3) The total pounds of butterfat, the amount, if any, by which the from such cooperative association, including the milk of producers not protein, and other solids contained in amount computed pursuant to the producer’s milk; § 1134.71(b) exceeds the amount members of such cooperative association who the market (4) [Reserved]; computed pursuant to § 1134.71(a). If, at (5) The minimum rate or rates at such time, the balance in the producer- administrator determines have authorized the cooperative association which payment to the producer is settlement fund is insufficient to make required pursuant to this order; all payments pursuant to this section, to collect payment for their milk; (c) Final Payment to a cooperative (6) The rate used in making payment the market administrator shall reduce if the rate is other than the applicable uniformly such payments and shall association. On or before the 16th day of the following month, each handler minimum rate; complete the payments as soon as the (7) The amount, or rate per funds are available. shall pay to a cooperative association which the market administrator hundredweight, or rate per pounds of § 1134.73 Payments to producers and to determines is authorized by its members component, and the nature of each cooperative associations. to collect payment for their milk not less deduction claimed by the handler; and (a) Except as provided in paragraph than an amount computed pursuant to (8) The net amount of payment to the (b) and (c) of this section, each handler paragraph (a)(2) of this section for milk producer or cooperative association. shall make payment to each producer received from such cooperative § 1134.74 [Reserved] from whom milk is received during the association during the month, including month as follows: the milk of producers not members of § 1134.75 Plant location adjustments for (1) Partial Payment. On or before the such cooperative association who the producer milk and nonpool milk. 25th day of each month to each market administrator determines have (a) The producer price differential for producer an amount not less than 1.2 authorized the cooperative association producer milk shall be adjusted times the lowest class price for the to collect payment for their milk; according to the location of the plant at 5090 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules which the milk was first physically plants, along with other factors, was used to Florida Federal milk orders. Natural received by subtracting from the price determine which order areas were most boundary limitations and overlapping sales differential the amount by which the closely related. Proposals submitted by the and procurement areas among the three public were also taken into account. The orders are major reasons for consolidation, as Class I price specified in § 1134.51 primary criteria used in determining which exceeds the Class I price at the plant’s well as a measure of association evidenced markets exhibit a sufficient degree of by cooperative association proposals to location. If the Class I price at the plant association in terms of sales, procurement, consolidate these three marketing areas. location exceeds the Class I price and structural relationships to warrant Further, the cooperative associations in this specified in § 1134.51, the difference consolidation were: area have worked together for a number of shall be added to the producer price 1. Overlapping route disposition. years to accommodate needed movements of differential; and 2. Overlapping areas of milk supply. milk between the three Florida Federal 3. Number of handlers within a market. (b) The producer price differential orders. applicable to other source milk shall be 4. Natural boundaries. 5. Cooperative association service areas. 4. Southeast adjusted following the procedure 6. Features common to existing orders, Current marketing area of the Southeast specified in paragraph (a) of this such as similar multiple component pricing Federal milk order, plus 1 county from the section, except that the adjusted payment plans. Louisville-Lexington-Evansville Federal milk producer price differential shall not be 7. Milk utilization in common dairy order marketing area, 15 currently less than zero. products. The requirement to consolidate existing unregulated Kentucky counties, and 2 § 1134.76 Payments by a handler marketing areas does not specify expansion currently unregulated northeast Texas operating a partially regulated distributing of regulation to previously nonfederally counties. Major reasons for this consolidation plant. regulated areas where such expansion would include sales and procurement area overlaps See § 1000.76 of this chapter. have the effect of regulating handlers not between the Southeast order and the currently regulated. However, a number of Kentucky and Texas counties suggested for § 1134.77 Adjustment of accounts. the current marketing areas enclose inclusion. There is minimal sales area See § 1000.77 of this chapter. unregulated areas. These ‘‘pockets’’ are overlap with handlers regulated under other included in the suggested merged marketing Federal orders. § 1134.78 Charges on overdue accounts. areas only if their inclusion does not change 5. Mideast See § 1000.78 of this chapter. the current regulatory status of a plant. In the process of consolidating marketing areas, Current marketing areas of the Ohio Administrative Assessment and some handlers who currently are partially Valley, Eastern Ohio-Western Pennsylvania, Marketing Service Deduction regulated may become fully regulated Southern Michigan, and Indiana Federal because their sales in a combined marketing milk orders, plus most of the current § 1134.85 Assessment for order area will likely meet the pooling standards of marketing area of the Louisville-Lexington- administration. a suggested consolidated order. Further Evansville Federal milk order, Zone 2 of the See § 1000.85 of this chapter. expansion of the marketing areas, which Michigan Upper Peninsula Federal milk would result in regulating additional order, and 12 counties of the Southern § 1134.86 Deduction for marketing handlers, is an issue that should be Illinois-Eastern Missouri Federal milk order. services. addressed by the industry. Proposals to take Major criteria suggesting this consolidation See § 1000.86 of this chapter. such action should be accompanied by include the overlap of fluid sales in the Ohio supporting data, views, and arguments Valley marketing area by handlers from the Dated: January 21, 1998. concerning the need and basis for any such other areas suggested to be consolidated. Michael V. Dunn, expansion. With the consolidation, most route Assistant Secretary for Marketing and The 10 suggested consolidated marketing disposition by handlers located within the Regulatory Programs. areas and the major reasons for consolidation suggested Mideast order would be within the Note: The following appendices will not are: marketing area. Also, nearly all milk appear in the Code of Federal Regulations. 1. Northeast produced within the area would be pooled under the consolidated order. The portion of Appendix A: Summary of Preliminary Current marketing areas of the New the Michigan Upper Peninsula marketing Suggested Order Consolidation Report England, New York-New Jersey, and Middle area suggested to be included in the Mideast Atlantic Federal milk orders. Reasons for consolidated area has sales and milk Ten marketing areas are suggested in the consolidation include the existence of preliminary consolidation report. As a means procurement areas in common with the overlapping sales and procurement areas Southern Michigan area and has minimal of determining where interrelationships between New England and New York-New association with the western end of the among the current marketing areas are Jersey and between New York-New Jersey current Michigan Upper Peninsula marketing strongest, data relating to the receipts and and Middle Atlantic. The orders are also area. distribution of fluid milk products by surrounded by nonfederally regulated distributing plants were gathered for all territory. A further measure of association is 6. Upper Midwest known distributing plants located in the 47 evident by industry efforts to study and Current marketing areas of the Chicago contiguous States, not including the State of pursue consolidation of the three Federal Regional and Upper Midwest Federal milk California, for the month of October 1995. At orders, as well as some of the nonfederally orders, plus Zones I and I(a) of the Michigan this time, California is not included as a regulated territory, prior to the 1996 Farm Upper Peninsula Federal milk order and suggested order area. The 1996 Farm Bill Bill. allows for the inclusion of a California seven unregulated or partly unregulated Federal milk order if California producers 2. Appalachian Wisconsin counties. Major consolidation petition for and approve an order. If a Current marketing areas of the Carolina criteria include an overlapping procurement California order were included in the and Tennessee Valley Federal milk orders, area between the Chicago Regional and suggested Federal order structure at a later and a portion of the Louisville-Lexington- Upper Midwest orders, overlapping time, it would encompass the entire State Evansville Federal milk order. Overlapping procurement and route disposition area and would include no area outside the State sales and procurement areas between these between the western end of the Michigan of California. Although interest in a Federal marketing areas are major factors for Upper Peninsula order and the Chicago order has been expressed by some California supporting such a consolidation. Regional order, natural boundary limitations, producer groups, no definite action has been and the prevalence of cheese as a major taken. 3. Florida manufactured product for the substantial An analysis of the distribution and Current marketing areas of the Upper reserve milk supplies that exceed fluid milk procurement patterns of the fluid processing Florida, Tampa Bay, and Southeastern needs. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5091

7. Central share membership in several common Oregon, and Great Basin Federal milk orders. Current marketing areas of the Southern cooperatives. Major criteria suggesting consolidation include overlapping sales between Illinois-Eastern Missouri (less 12 counties 8. Southwest included in the suggested Mideast marketing Southwestern Idaho-Eastern Oregon and area), Central Illinois, Greater Kansas City, Current marketing areas of the Texas, New Great Basin, as well as a significant overlap Nebraska-Western Iowa (less 11 currently- Mexico-West Texas, and Central Arizona in procurement for the two orders in five regulated counties suggested to be Federal milk orders. Major criteria suggesting Idaho counties. The two orders also share a unregulated), Eastern South Dakota, Iowa, consolidation include sales and procurement similar multiple component pricing plan. Southwest Plains, and Eastern Colorado area overlaps and common cooperative The Western Colorado order is included Federal milk orders, plus 63 currently- association membership between the Texas because it is a small market where data unregulated counties in seven of the states. and New Mexico-West Texas marketing cannot be released without revealing Major criteria suggesting this consolidation areas, and similar marketing concerns with confidential information unless combined include the overlapping procurement and respect to trade with Mexico for all three with the adjacent Great Basin order. route disposition between the current orders. orders. In addition, there is some route The suggested consolidation would result in disposition by Central Arizona handlers into 10. Pacific Northwest a concentration of both the sales and supplies the New Mexico-West Texas marketing area, Current marketing area of the Pacific of milk within the consolidated marketing and the Central Arizona market contains a Northwest Federal milk order plus 1 area. The suggested consolidation would small number of handlers. currently-unregulated county in Oregon. The combine several relatively small orders and degree of association with other marketing provide for the release of market data without 9. Western areas is insufficient to warrant consolidation. revealing proprietary information. In Current marketing areas of the Western Following is a table summarizing relevant addition, most of the producers in these areas Colorado, Southwestern Idaho-Eastern data for the consolidated markets:

CONSOLIDATED MARKET SUMMARY [Based on October 1995 data]

Number of Combined Total pro- fully regu- class I utili- Consolidated order ducer milk lated distrib- zation (1,000 lbs.) uting plants (percent)

Northeast ...... 1,934,833 85 46.7 Appalachian ...... 320,198 25 82.5 Florida ...... 200,397 18 88.3 Southeast ...... 443,921 38 84.3 Mideast ...... 1 1,140,952 68 57.8 Upper Midwest ...... 2 1,046,539 4 27 34.2 Central ...... 3 932,929 42 50.6 Southwest ...... 861,307 31 48.3 Western ...... 304,793 14 5 31.7 Pacific Northwest ...... 501,257 23 36.3

Total ...... 7,687,126 371 n/a 1 Producer milk for F.O. 44 is included. Producer milk for a F.O. 32 handler who would be pooled under the suggested Mideast market is in- cluded in the Central consolidated market. 2 Producer milk for F.O. 30 and F.O. 68 only. 3 Producer milk for a F.O. 32 handler that would be in the Mideast consolidated market is included. 4 A significant amount of producer milk was not pooled in October 1995. Estimated total producer milk would result in a 15.3% combined Class I utilization. 5 A significant amount of producer milk was not pooled in October 1995. Estimated total producer milk would result in a 21.8% combined Class I utilization.

Appendix B: Summary of Pricing Option 1A: Location-Specific Differential Option 3A: Flat Differential Option Options $1.60 per hundredweight fixed differential $1.60 per hundredweight flat differential, uniformly applied across all orders to Several options for modifying Class I for three surplus regions (Upper Midwest, generate an identical minimum Class I price. pricing under the Federal milk market order West, and Southwest) within a nine-zone program, representing a spectrum of views, national price surface, plus for the other six Option 3B: Flat Differential Modified by are discussed in this summary report. The zones an added component that reflects Class I Use— accompanying technical report summarizes regional differences in the value of fluid and $2.00 per hundredweight differential in all of the comments and proposals received manufacturing milk. markets where Class I utilization is less than 70 percent on an annual basis and a by the Department related to Class I pricing Option 1B: Modified Location-Specific differential equal to $2.00 + $0.075(Class I under Federal orders. Differential Option Most Class I pricing concepts that were use %—70%) in markets where the Class I suggested would continue to employ a $1.00 per hundredweight fixed differential utilization is equal to or exceeds 70 percent. plus an added component that reflects the market-driven basic formula price (BFP) with Option 4: Demand-Based Differential— cost of moving bulk milk to deficit markets. an added differential. Differentials are a $1.00 per hundredweight fixed differential composite of one or more of the following Option 2: Relative Use Differential plus a transportation credit based on location elements: (1) A fixed component, (2) a $1.60 per hundredweight fixed differential of reserve milk supplies. location adjustment, (3) an adjustor relating plus a formula-based differential driven by Estimated Class I differentials are to utilization, or (4) the cost of balancing the presented for each option to provide a the ratio of Class I milk to all other uses of market. Based on the pricing concepts preliminary basis for determining impacts received, the following options were milk. that may occur. The report provides developed: estimated differentials for the suggested 10 5092 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules consolidated orders and for the current 32 The technical report does the following: researchers, and conducted extensive study Federal milk marketing orders. • Suggests a model for establishing the and analysis of its own. The BFP Committee The report concludes by soliciting consolidated orders and provides suggestions evaluated alternatives to the BFP against the comments on the options presented and on the order language that can be adopted criteria of stability, predictability, simplicity, poses a series of questions for the public to uniformly throughout all orders. uniformity, transparency, sound economics address when submitting comments back to • Reviewed, simplified, modified, and and reduced regulation. Options identified the Department on the issue of Class I eliminated differences in order provisions by the Committee were grouped into the pricing. that: following categories: • Define various terms used in the orders Options Considered: Economic formulas, Appendix C: Summary of Classification • Establish regulatory standards for plants Report Product price and component formulas, and handlers Futures markets, California pricing, Cost of • The Agricultural Marketing Agreement Act Provide for uniform reporting dates of production, Informal rulemaking, of 1937 provides that all milk should be milk receipts and utilization Competitive pay price, Pooling differentials • classified ‘‘in accordance with the form in Provide for uniform dates for payment of only. which or the purpose for which it is used.’’ milk At this time, the Committee has identified • This has resulted in a system of uniform Provide for computation of a uniform four options for further discussion and classification provisions that places milk price • debate: used for fluid purposes in the highest use Reduces performance standards to make • A four-class, multiple component pricing class, Class I, and other manufactured it easier for producers to associate with a plan to price butterfat, protein and lactose products in lower classes, Classes II, III, and market. used in cheese (Class III), and butterfat and III–A. At this time, it is impossible to determine nonfat solids used in butter/powder (Class if there would be any financial impact on Currently products packaged for fluid IV). producers, handlers, or consumers as a result consumption such as whole milk, skim milk, • A three-class, multiple component of any of these suggested provision revisions. buttermilk, and flavored milk drinks are pricing plan to price protein used in cheese, It is projected that there will be little impact classified as Class I products. Class II butterfat used in butter, and other nonfat products include ice cream, yogurt, cottage on the overall program because the changes primarily provide for uniformity. There may solids used in powder (Class III—one cheese, and cream. Class III and Class III–A manufacturing class). products include cheese, butter, and nonfat be minimal impact on selected individual • producers, handlers, or consumers, but this A product price formula computed from dry milk. the butter, powder and cheese shares of U.S. Among the changes in classification cannot be determined until more specific information is developed regarding the production, using seasonal product yields recommended in the technical report are the and a California cost-based make allowance; following: orders (i.e., marketing area and pricing). The • suggested identical provisions will be and Eggnog would be reclassified from Class • A competitive pay price series using a II to Class I. applied to each of the suggested consolidated national weighted average price paid for • Any fluid beverage having less than 6.5 orders and determinations will be based on Grade A milk used in manufactured percent nonfat milk solids would be the marketing conditions of the given region. products, updated by a product price reclassified from Class II to Class I. One suggested change in the report that formula. The price series would contain an • Cream cheese would be reclassified from may stimulate some debate is the definition adjuster to attempt to remove the effect of Class III to Class II. of a producer-handler. The technical report current regulation and to reduce it to a level The technical report recommends changing suggests applying the most liberal standard to more comparable to the current BFP. the classification of milk used in nonfat dry the producer-handler definition to prevent As a basis for Class I prices, the BFP could milk from Class III–A to Class III. The report any producer-handler from becoming be made more stable by using an economic recommends that if Class III–A pricing is not regulated as a result of milk order reform. eliminated, the following four alternatives be Producer-handlers have been exempt from formula or using a moving average of a considered: full regulation because they assume the full manufacturing price. Class II prices could be • Place a floor beneath the Class III–A risks associated with being a producer and a based on components or continue to include price; distributor of milk produced with only a differential from the manufacturing price • Restrict III–A pricing to certain months occasional and small volumes of milk being level. or to certain markets; purchased from other dairy farmers. The BFP Committee is continuing to study • and analyze alternatives in response to Provide an up-charge for nonfat dry milk Appendix E: Summary of Basic used in higher-valued products; or public comments. • Formula Price Report Provide for a combination of these Appendix F: Summary of Revised options. The basic formula price (BFP) is used to Preliminary Suggested Order Maintaining the classification of milk used determine Federal order prices for milk used Consolidation Report to make nonfat dry milk in Class III–A is also in manufactured products and, with the an option, although not discussed in the addition of differentials, to determine The ten marketing areas suggested in the technical report. minimum Class I and II prices for milk initial preliminary consolidation report have The technical report addresses Class III–A pooled under the Federal orders. The current increased to eleven and been modified to pricing because of industry concerns about BFP is based on a survey of prices paid for some extent in this revised preliminary the substitution of nonfat dry milk for fluid manufacturing grade (Grade B) milk by plants report. Several of the initially suggested milk in Class II and III uses when the Class in Minnesota and Wisconsin, updated by marketing areas were the subjects of III–A price is substantially below the Class III month-to-month changes in commodity numerous comments containing information price. prices (especially cheese). The continuing that indicated that the boundaries of those Appendix D: Summary of Identical decline in the volume of Grade B milk areas should be re-evaluated. In addition, produced in the upper Midwest and shifts in regulation and distributing plant Provisions Report nationally is an indication that, in the near distribution areas were known to have Federal milk marketing orders contain future, the M–W price series may not be occurred. As a result, more detailed and numerous provisions that establish the statistically reliable as an indicator of the updated (January 1997) data was obtained regulations for the operation of the orders. value of milk used in manufactured products. relating to the receipts of producer milk and Over the years, the orders have been The BFP Committee has received input distribution of fluid milk products by individualized to account for specific provided during a public BFP Forum held in distributing plants in a number of the situations associated with a given marketing Madison, Wisconsin, and from over 200 initially-suggested order marketing areas. As area. However, there are several provisions written public comments, and conducted a a result, changes were made in the suggested within the orders that are similar or that survey of transaction prices for manufactured marketing areas of the Northeast, could be similar and still provide for efficient dairy products. The Committee also has Appalachian, Southeast, Mideast, Upper and orderly marketing of milk. sponsored analysis by a group of university Midwest, Central, Southwest, and Western Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5093 regions, and a new Arizona-Las Vegas area order area, and Pennsylvania Milk Marketing Southern Michigan, and Indiana Federal milk was added. Board Areas 2 and 3 in northeastern orders, plus Zone 2 of the Michigan Upper An analysis of the distribution and Pennsylvania. Peninsula Federal milk order, and currently- procurement patterns of the fluid processing Reasons for consolidation include the unregulated counties in Michigan, Indiana, plants, along with other factors, was used to existence of overlapping sales and and Ohio *with the addition of: Pennsylvania determine which order areas were most procurement areas between New England Milk Marketing Board Area 6 (in western/ closely related. Proposals submitted by the and New York-New Jersey and between New central Pennsylvania) and 2 currently- public were also taken into account. The York-New Jersey and Middle Atlantic. In unregulated counties in New York, and primary criteria used in determining which several cases, handlers who would become *minus the Louisville-Lexington-Evansville markets exhibit a sufficient degree of regulated because their total sales in the order area, 12 counties in Illinois, and association in terms of sales, procurement, combined areas would meet pooling unregulated counties in Indiana and and structural relationships to warrant standards are located in areas where they Kentucky that are being suggested for consolidation continued to be: compete with handlers who would not be inclusion in the Appalachian area. 1. Overlapping route disposition. similarly regulated. Handler equity suggests Major criteria suggesting this consolidation 2. Overlapping areas of milk supply. that these handlers, too, should become include the overlap of fluid sales in the Ohio 3. Number of handlers within a market. regulated. Another important measure of Valley marketing area by handlers from the 4. Natural boundaries. association is evidenced by industry efforts other areas suggested to be consolidated. 5. Cooperative association service areas. to study and pursue consolidation of the With the consolidation, most route 6. Features common to existing orders, three Federal orders, as well as some of the disposition by handlers located within the such as similar multiple component pricing nonfederally regulated territory, prior to the suggested Mideast order would be within the plans. 1996 Farm Bill. marketing area. Also, nearly all milk 7. Milk utilization in common dairy Sixteen additional distributing plants produced within the area would be pooled products. would be pooled as a result of the expansion under the consolidated order. The portion of In the initial preliminary report, it was of the consolidated area. Nine of these plants the Michigan Upper Peninsula marketing observed that the Farm Bill requirement to currently are partially regulated. area suggested to be included in the Mideast consolidate existing marketing areas does not *2. Appalachian consolidated area has sales and milk specify expansion of regulation to previously procurement areas in common with the non-Federally regulated areas where such Current marketing areas of the Carolina Southern Michigan area and has minimal expansion would have the effect of regulating and Tennessee Valley Federal milk orders, association with the western end of the handlers not currently regulated. This *with the addition of: all of the Louisville- current Michigan Upper Peninsula marketing revised preliminary report suggests that some Lexington-Evansville Federal order area area. currently non-Federally regulated area be (except one county—in the suggested Collection of additional data and recent added on the basis of comments supported Southeast area) and 26 currently-unregulated changes in marketing patterns indicate that by data, views and arguments filed by counties in Indiana and Kentucky. the relationship between the Louisville- interested persons. Specifically, unregulated More detailed and updated data showing Lexington-Evansville (L-L-E) area and the areas contiguous to the initial suggested overlapping sales and procurement areas order areas initially included in the consolidated Northeast and Mideast between these marketing areas are major suggested Appalachian area is closer than marketing areas are suggested for inclusion in factors for supporting such a consolidation. relationship between L-L-E and the Mideast those suggested order areas. Some handlers 3. Florida area. currently not subject to full Federal order Seven distributing plants that would not Current marketing areas of the Upper regulation would become pool plants if the have been pool plants as a result of the Florida, Tampa Bay, and Southeastern suggested areas are added. Handlers who Florida Federal milk orders. initially-suggested consolidation would would be affected will be notified of the Natural boundary limitations and become pool plants due to the suggested possible change in their status, and overlapping sales and procurement areas expansion of the consolidated area into encouraged to comment. among the three orders are major reasons for Pennsylvania and New York. The number of As in the initial preliminary report, consolidation, as well as a measure of pool plants also is affected by a shift of pool ‘‘pockets’’ of unregulated areas enclosed in association evidenced by cooperative plants from one consolidated area to another the current marketing areas are included in association proposals to consolidate these because of the shift of territory from the the suggested consolidated marketing areas if three marketing areas. Further, the initially-suggested Mideast area to the their inclusion does not change the current cooperative associations in this area have revised suggested Appalachian area. regulatory status of a plant. However, in the worked together for a number of years to *6. Upper Midwest process of consolidating marketing areas, accommodate needed movements of milk some handlers who currently are partially between the three Florida Federal orders. Current marketing areas of the Chicago regulated may become fully regulated Regional, Upper Midwest, Zones I and I(a) of because their sales in a combined marketing *4. Southeast the Michigan Upper Peninsula Federal milk area will meet the pooling standards of a Current marketing area of the Southeast orders, and unregulated portions of suggested consolidated order area. As a Federal milk order, plus 1 county from the Wisconsin, *with the addition of: the Iowa, result, this report suggests that some Louisville-Lexington-Evansville Federal milk Eastern South Dakota, and most of the unregulated areas contiguous to currently- order marketing area, plus 15 currently- Nebraska-Western Iowa Federal order areas, regulated areas be added to Federal order unregulated Kentucky counties, *minus 2 plus currently-unregulated counties in Iowa areas where additional handlers would be currently-unregulated counties in northeast and Nebraska. affected. Texas (in the suggested Southwest area). Major consolidation criteria include an The 11 modified suggested marketing areas Major reasons for this consolidation overlapping procurement area between the (with those modified from the initial include sales and procurement area overlaps Chicago Regional and Upper Midwest orders preliminary report, and the modifications, between the Southeast order and this county. and overlapping procurement and route marked by *) and the major reasons for There is minimal sales area overlap with disposition area between the western end of consolidation are: handlers regulated under other Federal the Michigan Upper Peninsula order and the orders. Collection of additional data showed Chicago Regional order. More-detailed and *1. Northeast greater disposition in the two Texas counties updated information revealed more Current marketing areas of the New from Texas handlers than from Southeast significant overlapping procurement and England, New York-New Jersey, and Middle handlers. There are no handlers in these two route disposition areas between the Iowa, Atlantic Federal milk orders, *with the counties that would be affected. Eastern South Dakota and Nebraska-Western addition of: contiguous unregulated areas of orders and Chicago Regional and Upper New Hampshire, Vermont and New York; the *5. Mideast Midwest orders than had been observed in western non-Federally regulated portion of Current marketing areas of the Ohio Valley, the initial study. In addition, a common Massachusetts, the Western New York State Eastern Ohio-Western Pennsylvania, pricing plan for producers, natural boundary 5094 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules limitations, and the prevalence of cheese as *8. Southwest portions of northern Arizona. In addition, a major manufactured product for the Current marketing areas of Texas and New both areas exchange significant volumes of substantial reserve milk supplies that exceed Mexico-West Texas Federal milk orders, bulk and packaged milk with Southern fluid milk needs exist in these orders. Some *with the addition of: two northeast Texas California. of the western Nebraska area is more closely counties previously suggested to be added to The suggested Arizona-Las Vegas associated with the Eastern Colorado area, the Southeast marketing area, and 47 marketing area would include five fully however, and is suggested to remain with the currently-unregulated counties in southwest regulated handlers, with no additional Central consolidated area. Texas, and *minus the Central Arizona handlers regulated because of the addition of Eleven additional handlers that would marketing area. the currently-unregulated northern Arizona Major criteria suggesting consolidation have been pooled under the consolidated area. include sales and procurement area overlaps Central order in the initial Preliminary and common cooperative association *10. Western Report would be pooled under a consolidated membership between the Texas and New Current marketing areas of the Western Upper Midwest order under this revised Mexico-West Texas marketing areas, and Colorado, Southwestern Idaho-Eastern report. similar marketing concerns with respect to Oregon, and Great Basin Federal milk orders, trade with Mexico for both orders. Addition *7. Central *minus Clark County, Nevada. Major criteria of the currently-unregulated Texas counties suggesting consolidation include overlapping Current marketing areas of the Southern will result in the regulation of no additional sales between Southwestern Idaho-Eastern Illinois-Eastern Missouri, Central Illinois, handlers, and will reduce handlers’ Oregon and Great Basin, as well as a Greater Kansas City, Southwest Plains, and recordkeeping and reporting burden and the significant overlap in procurement for the Eastern Colorado Federal milk orders, 10 market administrator’s administrative costs. two orders in five Idaho counties. The two counties currently in the Nebraska-Western In the initial consolidation report, the Central orders also share a similar multiple Iowa Federal order area, plus 55 currently- Arizona area was found to have a minimal component pricing plan. The Western unregulated counties in Kansas, Missouri, association with the New Mexico-West Texas Colorado order is included because it is a and Texas order areas. Further analysis Illinois, Nebraska and Colorado, *plus the 12 small market where data cannot be released showed that it has a much more significant without revealing confidential information counties in the current Southern Illinois- degree of association with the Clark County, unless combined with the adjacent Great Eastern Missouri area that initially were Nevada, portion of the current Great Basin suggested as part of the consolidated Mideast order area. Basin order. area, *minus the Eastern South Dakota, Iowa The revised suggested consolidated Collection of more-detailed data indicates and most of the Nebraska-Western Iowa Southwest area would include 4 fewer fully that the strength of earlier relationships Federal order marketing areas. regulated pool plants as a result of the between the former Great Basin and Lake Major criteria suggesting this consolidation removal of the Central Arizona area. Mead orders that justified their 1988 merger have dwindled significantly, with the Las include the overlapping procurement and *9. Arizona-Las Vegas route disposition between the current orders. Vegas area now more closely related to southern California and competing most The suggested consolidation would result in *An eleventh marketing area composed of the current marketing area of the Central heavily with Central Arizona handlers. a concentration of both the sales and supplies Arizona order and the Clark County, Nevada, of milk within the consolidated marketing 11. Pacific Northwest portion of the current Great Basin marketing area. The suggested consolidation would area, plus eight currently-unregulated Current marketing area of the Pacific combine several relatively small orders and Arizona counties. Northwest Federal milk order plus 1 provide for the release of market data without The major criterion suggesting currently-unregulated county in Oregon. The revealing proprietary information. In consolidation is sales overlap between the degree of association with other marketing addition, most of the producers in these areas sole Las Vegas, Nevada, handler and handlers areas is insufficient to warrant consolidation. share membership in several common regulated under the Central Arizona order in Following is a table summarizing relevant cooperatives. both Clark County, Nevada, and unregulated data for the consolidated markets.

CONSOLIDATED MARKET SUMMARY [Based on October 1995 Data]

Number of fully regulated Total producer milk Combined class I use Weighted average distributing plants (1000 lbs.) (percent) utilization value Consolidated order Initial Revised Initial Revised Initial Revised Initial Revised report report report report 1 report report report report

Northeast ...... 85 92 1,934,833 2,102,620 46.7 49.0 $13.44 $13.49 Appalachian ...... 25 29 320,198 2 412,813 82.5 81.5 $14.11 $13.94 Florida ...... 18 16 3 200,397 204,541 88.3 88.3 $15.05 $15.05 Southeast ...... 38 40 4 443,921 442,705 84.3 84.3 $14.26 $14.25 Mideast ...... 68 68 5 1,140,952 1,103,366 57.8 57.2 $12.96 $12.94 Upper Midwest ...... 27 39 6 1,046,539 1,354,209 7 34.2 8 37.6 $12.59 $12.62 Central ...... 42 30 9 932,929 599,334 50.6 53.5 $13.15 $13.21 Southwest ...... 31 26 861,307 680,232 48.3 48.1 $13.36 $13.39 ArizonaÐLas Vegas ...... N/A 7 N/A 10 181,075 N/A 48.9 N/A $13.26 Western ...... 14 11 304,793 293,714 11 31.7 12 29.6 $12.79 $12.78 Pacific Northwest ...... 23 21 501,257 493,207 36.3 35.6 $12.45 $12.44

Total ...... 371 379 7,687,126 7,867,816 N/A N/A N/A N/A 1 Initial report producer deliveries, adjusted to include only those handlers who would be fully regulated (i.e. Status = 1) in the revised suggested marketing area, unless otherwise noted. When applicable, producer deliveries for currently non-Federally regulated plants which would be fully regulated in a revised suggested con- solidated order are included in the appropriate suggested consolidated order. 2 Includes producer milk for one currently fully regulated plant which would be exempt (i.e. Status = 3B) in the Appalachian market in the revised preliminary report. 3 Excludes producer milk for one currently fully regulated F.O. 7 plant which would be regulated in the Florida market in the initial preliminary report. 4 Includes producer milk for one currently fully regulated F.O. 7 plant which would be regulated in the Florida market in the initial preliminary report. 5 Producer milk for F.O. 44 is included. Producer milk for a F.O. 32 handler who would be pooled under the initially-suggested Mideast market is included in the ini- tially-suggested Central market. 6 Producer milk for F.O. 30 and F.O. 68 only. 7 A significant amount of producer milk was not pooled in October 1995. Estimated total producer milk would result in a 15.3% combined Class I utilization. 8 A significant amount of producer milk was not pooled in October 1995. Estimated total producer milk would result in a 19.7% combined Class I utilization. 9 Includes producer milk for a F.O. 32 handler that would be in the initially-suggested Mideast market. Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5095

10 Excludes producer milk for one currently fully regulated F.O. 139 plant and one currently unregulated plant which would be regulated in the Arizona-Las Vegas market in the revised preliminary report. 11 A significant amount of producer milk was not pooled in October 1995. Estimated total producer milk would result in a 21.8% combined Class I utilization. 12 A significant amount of producer milk was not pooled in October 1995. Estimated total producer milk would result in a 21.6% combined Class I utilization.

[FR Doc. 98–1758 Filed 1–23–98; 8:45 am] BILLING CODE 3410±02±P