[Federal Register Volume 59, Number 6 (Monday, January 10, 1994)]
[Proposed Rules]
[Pages 1305-1307]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-424]
[[Page Unknown]]
[Federal Register: January 10, 1994]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Parts 1005, 1007, 1011, and 1046
[DA-93-29]
Milk in the Carolina, Georgia, Tennessee Valley, and Louisville-
Lexington-Evansville Marketing Areas; Revised Proposed Suspension of
Certain Provisions of the Orders
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed suspension of rules.
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SUMMARY: This document invites written comments on a proposal that
would suspend for nearly two years certain provisions of the Carolina,
Georgia, Tennessee Valley, and Louisville-Lexington-Evansville Federal
milk orders. If adopted, the proposal would regulate a plant at
Kingsport, Tennessee, under the Tennessee Valley order, instead of the
Carolina order, and it would keep regulated under the Tennessee Valley
order a plant at Somerset, Kentucky, that otherwise might become
regulated under the Louisville-Lexington-Evansville order. The
proposals were submitted by Land-O-Sun Dairies, which operates the
Kingsport, Tennessee, plant, and Southern Bell Dairy, Inc., which
operates the Somerset, Kentucky, plant. These handlers contend that
without the suspension they would be subject to pricing disparities
that could jeopardize their business.
DATES: Comments are due no later than January 20, 1994.
ADDRESSES: Comments (two copies) should be sent to USDA/AMS/Dairy
Division, Order Formulation Branch, room 2968, South Building, P.O. Box
96456, Washington, DC 20090-6456.
FOR FURTHER INFORMATION CONTACT: Nicholas Memoli, Marketing Specialist,
USDA/AMS/Dairy Division, Order Formulation Branch, room 2968, South
Building, P.O. Box 96456, Washington, DC 20090-6456, (202) 690-1932.
SUPPLEMENTARY INFORMATION: Prior document in this proceeding:
Notice of Proposed Suspension (DA-93-29): Issued October 22, 1993;
published October 28, 1993 (58 FR 57970).
The Regulatory Flexibility Act (5 U.S.C. 601-612) requires the
Agency to examine the impact of a proposed rule on small entities.
Pursuant to 5 U.S.C. 605(b), the Administrator of the Agricultural
Marketing Service has certified that this action would not have a
significant economic impact on a substantial number of small entities.
This action would lessen the regulatory burden on small entities by
removing pricing disparities that are causing or could cause financial
hardship for certain distributing plants.
The Department is issuing this proposed action in conformance with
Executive Order 12866.
This proposed suspension has been reviewed under Executive Order
12778, Civil Justice Reform. This action is not intended to have a
retroactive effect. This action will not preempt any state or local
laws, regulations, or policies, unless they present an irreconcilable
conflict with the rule.
The Agricultural Marketing Agreement Act of 1937, as amended (7
U.S.C. 601-674), provides that administrative proceedings must be
exhausted before parties may file suit in court. Under section
608c(15)(A) of the Act, any handler subject to an order may file with
the Secretary a petition stating that the order, any provisions of the
order, or any obligation imposed in connection with the order is not in
accordance with law and requesting a modification of the order or to be
exempted from the order. A handler is afforded the opportunity for a
hearing on the petition. After a hearing, the Secretary would rule on
the petition. The Act provides that the district court of the United
States in any district in which the handler is an inhabitant, or has
its principal place of business, has jurisdiction in equity to review
the Secretary's ruling on the petition, provided a bill in equity is
filed not later than 20 days after the date of the entry of the ruling.
Notice of proposed rulemaking was published in the Federal Register
(58 FR 57970) on October 28, 1993, concerning the proposed suspension
of certain provisions of the Georgia, Carolina, and Tennessee Valley
Federal milk orders (DA-93-29). The public was afforded the opportunity
to comment on the notice by submitting written data, views, and
arguments by November 4, 1993. Six comment letters were received
concerning the three-market proposed suspension.
Subsequent to the issuance of the above proposed suspension, a
suspension request was received from a handler regulated under the
Tennessee Valley order that in effect expands the initial suspension
issue to the Louisville-Lexington-Evansville order. It also affects a
proposed suspension that was issued earlier for the Louisville order.
Because of the interrelationship of these several requests, it has been
determined that a revised proposed suspension involving all four orders
should be issued for comment. Therefore, notice is hereby given that,
pursuant to the provisions of the Agricultural Marketing Agreement Act
of 1937, as amended (7 U.S.C. 601-674), the suspension of the following
provisions of the orders regulating the handling of milk in the
Carolina, Georgia, Tennessee Valley, and Louisville-Lexington-
Evansville marketing areas is being considered for a 23-month period
beginning February 1, 1994:
1. In Sec. 1005.7(d)(3) of the Carolina order, the words ``from'',
``there'', ``a greater quantity of route disposition, except filled
milk, during the month'', and ``than in this marketing area'';
2. In Sec. 1007.7(e)(3) of the Georgia order, the words ``, except
as provided in paragraph (e)(4) of this section,'';
3. In Sec. 1007.7 of the Georgia order, paragraph (e)(4);
4. In Sec. 1011.7(d)(3) of the Tennessee Valley order, the words
``from'', ``there'', ``a greater quantity of route disposition, except
filled milk, during the month'', and ``than in this marketing area'';
and
5. In Sec. 1046.2 of the Louisville-Lexington-Evansville order, the
word ``Pulaski''.
All persons who desire to send written data, views or arguments
about the proposed suspension should send two copies of them to the
USDA/AMS/Dairy Division, Order Formulation Branch, Room 2968, South
Building, P.O. Box 96456, Washington, DC 20090-6456, by the 10th day
after publication of this notice in the Federal Register.
The comment period is limited to 10 days so that the suspension, if
found appropriate, can be implemented quickly and thereby minimize
financial hardship and disruptive marketing conditions.
The comments that are sent will be made available for public
inspection in the Dairy Division during normal business hours (7 CFR
1.27(b)).
Statement of Consideration
This proposed suspension would allow a distributing plant at
Kingsport, Tennessee, that is located within the Tennessee Valley
marketing area and that meets all of the pooling standards of the
Tennessee Valley order to be regulated under that order rather than the
Carolina order, as now, despite the plant having greater sales in the
Carolina marketing area. It would also allow a distributing plant
located at Somerset, Kentucky, that has been regulated under the
Tennessee Valley order to remain regulated there even if it should
develop greater sales in the Louisville-Lexington-Evansville (Order 46)
marketing area. In addition, the proposed suspension would allow a
supply plant at Springfield, Kentucky, that has been supplying the
Somerset plant to remain pooled under the Tennessee Valley order
without having to make uneconomic shipments of milk that it contends
would be necessary if the Southern Belle plant shifted to Order 46.
1. The problem of Land-O-Sun Dairies, Inc. In recent months, the
blend price to producers at Kingsport, Tennessee, under the Tennessee
Valley order has been significantly higher than the blend price at that
location under the Carolina order. For example, during the months of
July through October 1993, the Tennessee Valley blend price at
Kingsport was 32 cents, 29 cents, 20 cents, and 20 cents, respectively,
higher than the Carolina blend price at Kingsport. Although the Class I
price at Kingsport is identical under both of these orders, the
Tennessee Valley order's higher Class I utilization has resulted in a
higher blend price at Kingsport during nearly every month for the past
two years.
The difference in blend prices at Kingsport requires Land-O-Sun
Dairies, as a Carolina order handler, to pay significant over-order
prices to retain its milk supply in competition with nearby handlers
regulated under the Tennessee Valley order. Land-O-Sun has indicated
that it cannot continue to pay these over-order prices without
jeopardizing the existence of its business. It therefore proposed a
suspension of certain provisions of Orders 5 and 11 that would allow it
to become regulated under Order 11.
As noted in the earlier proposed suspension, the paragraph that is
proposed to be suspended from the Georgia order is merely a conforming
change to preserve the status quo between the Carolina and Georgia
orders. This change is necessary to continue the regulation of a
Greenville, South Carolina, plant under the Georgia order. Without the
suspension, the plant would become regulated under the Carolina order.
2. The problem of Southern Belle Dairy Company. Southern Belle
Dairy at Somerset, Kentucky, has been regulated under Order 11 for the
past four years. However, recently it has acquired accounts that could
cause it to shift to Order 46.
In recent months, the blend price at Somerset under Order 11 has
been significantly higher than the blend price at that location under
Order 46. For example, during the months of July through October 1993,
the blend price under Order 11 at Somerset was 67 cents, 62 cents, 49
cents, and 25 cents, respectively, higher than the Order 46 price at
that location. Of these amounts, 19 cents is attributable to a 19-cent
higher Class I price at that location under Order 11. Southern Belle
contends that if it should shift to Order 46 it would have to pay
substantial over-order prices to its producers to retain its milk
supply. Moreover, slight changes in sales could cause it to shift back
and forth between the two orders, causing market instability and
uncertainty under the base-excess programs applicable to both orders.
3. The problem of Armour Food Ingredients Company. Armour Food
operates a supply plant and a nonpool manufacturing plant at
Springfield, Kentucky. The supply plant has been regulated under Order
11 since August 1992. If the Southern Belle plant shifts to Order 46,
Armour's supply plant would also become subject to the regulations of
Order 46 because the plant is supplying milk to the Southern Belle
plant. Armour contends that the plant would not qualify as a pool plant
based on its present milk handling practices because, under the net
shipment provision of Order 46, all of the shipments sent to its
manufacturing facility from pool distributing plants for surplus
disposal would be subtracted from its shipments to pool distributing
plants. Armour states that to keep the milk of its producers pooled
under Order 46 it would have to incur substantial increases in
transportation and assembly costs. To avoid these costs, Armour
proposed suspending language in the net shipment provision of Order 46.
4. Industry responses to the earlier proposed suspensions (DA-93-29
and DA-93-26). On the basis of the Land-O-Sun request, a notice of
proposed suspension of provisions in Orders 5, 7, and 11 was issued on
October 22, 1993 (DA-93-29)(58 FR 57970). Four comments were submitted
in support of the action, and two comments were filed in opposition to
it.
Milkco, Inc., a handler regulated under the Carolina order with a
plant in Asheville, North Carolina, stated that it supported the
proposed suspension. Southern Belle Dairy also submitted a letter in
support of the suspension.
A letter supporting the suspension also was received from Mid-
America Dairymen, Inc., on behalf of Southern Milk Sales, Inc., a dairy
cooperative with producer milk pooled on the Tennessee Valley, Georgia,
and Carolina orders. The cooperative notes in its letter that ``paying
higher over-order values to maintain its supply of milk would
jeopardize the existence of the affected distributing plant.''
Additionally, an individual dairy farmer who supplies producer milk
to Land-O-Sun filed a comment in support of the suspension. He stated
that if Land-O-Sun paid him a lesser price for his milk he would have
to sell to another handler.
Coburg Dairy, a Carolina order handler located in Charleston, South
Carolina, filed a comment opposing the suspension. Coburg competes with
the Kingsport plant for Class I sales in the Carolina market. The
handler argued that the regulation of the Kingsport plant under the
Tennessee Valley order would give the plant a competitive advantage in
the Carolina market since it has a lower Class I price and because it
presumably would not have to pay over-order prices to its producers.
The North Carolina Farm Bureau Federation, a general farm
organization, also objected to the proposed suspension on the grounds
that regulation of the Kingsport plant under Order 11 would jeopardize
the over-order prices in the Carolina market. The Federation indicated
that eroding Class I premiums and lower Class I utilization were
threatening the health of the dairy industry in North Carolina.
In response to the Armour Food request, a notice of proposed
suspension of the net shipment provision of Order 46 was issued on
September 22, 1993 (DA-93-26) (58 FR 50526). Three comments were
submitted.
Southern Belle supported the suspension, indicating that Armour was
supplying it with milk and could encounter problems of assembly and
transportation if the plant became subject to the provisions of Order
46 because of a shift in regulation of the Southern Belle plant from
Order 11 to Order 46.
Milk Marketing, Inc., a cooperative association with 688 dairy
farmers under Order 46, and The Kroger Company, a handler operating
Winchester Farms Dairy at Winchester, Kentucky, filed comments opposing
the proposed suspension of the net shipment provision. MMI argued that
if the net shipment provision is suspended, the intent of the order
would not be carried out appropriately and that the needs of the order
would not be met in an efficient manner. Kroger stated that there was
not an abundant amount of milk available for fluid use under Order 46
and that the net shipment provision was needed to help assure that
distributing plants have sufficient supplies of milk to meet their
fluid requirements. It contends that there is no justification to relax
the performance provisions of the order during the season when milk
availability is reduced and Class I sales increase simply because there
is a ``possibility'' that a distributing plant may switch regulation
from Order 11 to Order 46.
No final action has been taken on Armour's request to suspend the
net shipment provision. However, since that issue would become moot
under the proposed suspension being considered herein, final action on
the Armour proposal is being held in abeyance pending the outcome of
the current proposal.
List of Subjects in 7 CFR Parts 1005, 1007, 1011, and 1046
Milk marketing orders.
Authority: Secs. 1-19, 48 Stat. 31, as amended; 7 U.S.C. 601-
674.
Dated: January 3, 1994.
Lon Hatamiya,
Administrator.
[FR Doc. 94-424 Filed 1-7-94; 8:45 am]
BILLING CODE 3410-02-P
