98-1758. Milk in the New England and Other Marketing Areas; Proposed Rule and Opportunity To File Comments, Including Written Exceptions, on Proposed Amendments to Marketing Agreements and Orders

[Federal Register Volume 63, Number 20 (Friday, January 30, 1998)]
[Proposed Rules]
[Pages 4802-5095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1758]

[[Page 4801]]

_______________________________________________________________________

Part II

Department of Agriculture

_______________________________________________________________________

Agricultural Marketing Service

_______________________________________________________________________

7 CFR Part 1000 et al.

Milk in the New England and Other Marketing Areas; Opportunity To File
Comments, Including Written Exceptions, on Proposed Amendments to
Marketing Agreements and Orders; Proposed Rule

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

[[Page 4802]]

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 1000, 1001, 1002, 1004, 1005, 1006, 1007, 1012, 1013,
1030, 1032, 1033, 1036, 1040, 1044, 1046, 1049, 1050, 1064, 1065,
1068, 1076, 1079, 1106, 1124, 1126, 1131, 1134, 1135, 1137, 1138
and 1139

[DA-97-12]

Milk in the New England and Other Marketing Areas; Proposed Rule
and Opportunity To File Comments, Including Written Exceptions, on
Proposed Amendments to Marketing Agreements and Orders

------------------------------------------------------------------------
7 CFR part Marketing area
------------------------------------------------------------------------
1000.............................. General Provisions of Federal Milk
Marketing Orders.
1001.............................. New England.
1002.............................. New York-New Jersey.
1004.............................. Middle Atlantic.
1005.............................. Carolina.
1006.............................. Upper Florida.
1007.............................. Southeast.
1012.............................. Tampa Bay.
1013.............................. Southeastern Florida.
1030.............................. Chicago Regional.
1032.............................. Southern Illinois-Eastern Missouri.
1033.............................. Ohio Valley.
1036.............................. Eastern Ohio-Western Pennsylvania.
1040.............................. Southern Michigan.
1044.............................. Michigan Upper Peninsula.
1046.............................. Louisville-Lexington-Evansville.
1049.............................. Indiana.
1050.............................. Central Illinois.
1064.............................. Greater Kansas City.
1065.............................. Nebraska-Western Iowa.
1068.............................. Upper Midwest.
1076.............................. Eastern South Dakota.
1079.............................. Iowa.
1106.............................. Southwest Plains.
1124.............................. Pacific Northwest.
1126.............................. Texas.
1131.............................. Central Arizona.
1134.............................. Western Colorado.
1135.............................. Southwestern Idaho-Eastern Oregon.
1137.............................. Eastern Colorado.
1138.............................. New Mexico-West Texas.
1139.............................. Great Basin.
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AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule consolidates the current 31 Federal milk
marketing orders into 11 orders. This consolidation is proposed to
comply with the 1996 Farm Bill which mandates that the current Federal
milk orders be consolidated into between 10 to 14 orders by April 4,
1999. This proposed rule also sets forth two options for consideration
as a replacement for the Class I price structure and proposes replacing
the basic formula price with a multiple component pricing system. This
proposed rule also establishes a new Class IV which would include milk
used to produce nonfat dry milk, butter, and other dry milk powders;
reclassifies eggnog and cream cheese; and addresses other minor
classification changes. Part 1000 is proposed to be expanded to include
sections that are identical to all of the consolidated orders to assist
in simplifying and streamlining the orders.

DATES: Comments must be submitted on or before March 31, 1998.

ADDRESSES: Comments (two copies) should be submitted to Richard M.
McKee, Deputy Administrator, Dairy Programs, USDA/AMS, Room 2968, South
Building, P.O. Box 96456, Washington, DC 20090-6456. Comments also may
be sent by fax to (202) 690-3410. Additionally, comments may be
submitted via E-mail to: Milk__Order__Reform@usda.gov.
All comments should be identified with the docket number found in
brackets in the heading of this document. To facilitate the review
process, please state the particular topic(s) addressed, from the
following list, at the beginning of the comment: consolidation, basic
formula price, Class I price structure, other class prices,
classification, provisions applicable to all orders, regional issues
(please specify: Northeast, Southeast, Midwest, Western), and
miscellaneous and administrative. If comments submitted pertain to a
specific order, please identify such order.
Comments are also being requested on the Executive Order 12866
analysis, the Regulatory Flexibility Act analysis, and the Paperwork
Reduction Act analysis.
Additionally, comments may be sent via E-mail to:
Milk__Order__Reform@usda.gov.
All comments submitted in response to this proposal will be
available for public inspection at the USDA/AMS/Dairy Programs, Order
Formulation Branch, Room 2968, South Building, 14th and Independence
Ave., S.W., Washington, D.C., during normal business hours (7 CFR
1.27(b)). All persons wanting to view the comments are requested to
make an appointment in advance by calling Richard M. McKee at (202)
720-4392.

FOR FURTHER INFORMATION CONTACT: John F. Borovies, Branch Chief, USDA/
AMS/Dairy Programs, Order Formulation Branch, Room 2971, South
Building, P.O. Box 96456, Washington, DC 20090-6456, (202) 720-6274.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Legislative and Background Requirements
Legislative Requirements
Background
Actions Completed
Public Interaction
Public Input
Executive Order 12988
Executive Order 12866
The Regulatory Flexibility Act and the Effects on Small
Businesses
Paperwork Reduction Act of 1995
Preliminary Statement
II. Discussion of Material Issues and Proposed Amendments to the
Orders
Consolidation of marketing areas
Basic formula price replacement and other class price issues
Class I price structure
Classification of milk and related issues
Provisions applicable to all orders
Regional Issues:
Northeast Region
Southeast Region
Midwest Region
Western Region
Miscellaneous and Administrative:
Consolidation of the marketing service, administrative expense,
and producer-settlement funds
Consolidation of the transportation credit balancing funds
Proposed general findings
III. Order Language
General provisions
Northeast order provisions
Appalachian order provisions
Florida order provisions
Southeast order provisions
Mideast order provisions
Upper Midwest order provisions
Central order provisions
Southwest order provisions
Arizona-Las Vegas order provisions
Western order provisions
Pacific Northwest order provisions
IV. Appendix
A: Summary of Preliminary Suggested Order Consolidation Report
B: Summary of Pricing Options
C: Summary of Classification Report
D: Summary of Identical Provisions Report
E: Summary of Basic Formula Price Report
F: Summary of Revised Preliminary Suggested Order Consolidation
Report

I. Legislative and Background Requirements

Legislative Requirements

Section 143 of the Federal Agriculture Improvement and Reform Act
of 1996. (Farm Bill), 7 U.S.C. 7253, requires that by April 4, 1999,\1\
the current Federal

[[Page 4803]]

milk marketing orders be consolidated into between 10 to 14 orders. The
Secretary of Agriculture (Secretary) is also directed to designate the
State of California as a Federal milk order if California dairy
producers petition for and approve such an order. In addition, the Farm
Bill provided that the Secretary may address related issues such as the
use of utilization rates and multiple basing points for the pricing of
fluid milk and the use of uniform multiple component pricing when
developing one or more basic prices for manufacturing milk. Besides
designating a date for completion of the required consolidation, the
Farm Bill further requires that no later than April 1, 1997, the
Secretary shall submit a report to Congress on the progress of the
Federal order reform process. The report must cover three areas: a
description of the progress made towards implementation, a review of
the Federal order system in light of the reforms required, and any
recommendations considered appropriate for further improvements and
reforms. This report was submitted to Congress on April 1, 1997.
Finally, the 1996 Farm Bill specifies that USDA use informal rulemaking
to implement these reforms.\2\
---------------------------------------------------------------------------

\1\ Section 143(b)(2) requires that a proposed rule be published
by April 4, 1998 and Section 143(b)(3) provides that ``in the event
that the Secretary is enjoined or otherwise restrained by a court
order from publishing or implementing the consolidation and related
reforms under subsection (a), the length of time for which that
injunction or other restraining order is effective shall be added to
the time limitations specified in paragraph (2) thereby extending
those time limitations by a period of time equal to the period of
time for which the injunction or other restraining order is
effective.''
\2\ Since this proceeding was initiated on May 2, 1996, the
Black Hills, South Dakota and the Tennessee Valley orders have been
terminated. Effective October 1, 1996, the operating provisions of
the Black Hills were terminated (61 FR 47038), and the remaining
administrative provisions were terminated effective December 31,
1996 (61 FR 67927). Effective October 1, 1997, the operating
provisions of the Tennessee Valley order were terminated (62 FR
47923). The remaining administrative provisions of the Tennessee
Valley order will be terminated before this consolidation process is
completed.
---------------------------------------------------------------------------

Background

The authorization of informal rulemaking to achieve the mandated
reforms of the Farm Bill has resulted in a rulemaking process that is
substantially different from the formal rulemaking process required to
promulgate or amend Federal orders. The formal rulemaking process
requires that decisions by USDA be based solely on the evidentiary
record of a public hearing held before an Administrative Law Judge.
Formal rulemaking involves the presentation of sworn testimony, the
cross-examination of witnesses, the filing of briefs, the issuance of a
recommended decision, the filing of exceptions, the issuance of a final
decision that is voted on by affected producers, and upon approval by
producers, the issuance of a final order.
The informal rulemaking process does not require these procedures.
Instead, informal rulemaking provides for the issuance of a proposed
rule by the Agricultural Marketing Service, a period of time for the
filing of comments by interested parties, and the issuance of a final
rule by the Secretary, which would become effective if approved by the
requisite number of producers in a referendum.
Full participation by interested parties is essential in the reform
of Federal milk orders. The issues are too important and complex for
this proposed rule to be developed without significant input from all
facets of the dairy industry. The experience, knowledge, and expertise
of the industry and public are integral to the development of the
proposed rule. To ensure maximum public input into the process while
still meeting the legislated deadline of April 4, 1999, USDA developed
a plan of action and projected time line. The plan of action developed
consists of three phases: developmental, rulemaking, and
implementation.
The first phase of the plan was the developmental phase. The use of
a developmental phase allowed USDA to interact freely with the public
to develop viable proposals that accomplish the Farm Bill mandates, as
well as related reforms. The USDA met with interested parties to
discuss the reform progress, assisted in developing ideas or provided
data and analysis on various possibilities, issued program
announcements, and requested public input on all aspects of the Federal
order program. The developmental phase began on April 4, 1996, and
concludes with the issuance of this proposed rule.
The second phase of the plan is the rulemaking phase. The
rulemaking phase begins with the issuance and publication of this
proposed rule. This proposed rule provides the public 60 days to submit
written comments on the proposal to USDA. These comments will be
reviewed and considered prior to the issuance of a final rule.
The third and final phase of the plan is the implementation phase.
The implementation phase will begin after the final rule is published
in the Federal Register. This phase will consist of informational
meetings conducted by Market Administrator personnel. The objective of
the informational meetings is to inform producers and handlers about
the newly consolidated orders and explain the projected effects on
producers and handlers in the new marketing order areas. After
informational meetings have been held, referendums will be conducted.
Upon approval of the consolidated orders and related reforms by the
required number of producers in each marketing area, a final order
implementing the new orders will be issued and published in the Federal
Register.
Although all of the issues regarding Federal milk order reform are
interrelated, USDA has established several committees to address
specific issues. The use of committees has allowed the reform process
to be divided into more manageable tasks. The committees will work
throughout the developmental and rulemaking phases. The committees that
have been established are: Price Structure, Basic Formula Price,
Identical Provisions, Classification, and Regional. The Regional
committee is divided into four sub-committees: Midwest, Northeast,
Southeast, and West. Committee membership consists of both field and
headquarters Dairy Programs personnel. The committees have been given
specific assignments related to their designated issue and have been
meeting since May 1996.
In addition to utilizing USDA personnel, partnerships have been
established with two university consortia to provide expert analyses on
the issues relating to price structure and basic formula price options.
Dr. Andrew Novakovic of Cornell University led the analysis on price
structure and published a staff paper entitled ``U.S. Dairy Sector
Simulator: A Spatially Disaggregated Model of the U.S. Dairy Industry''
and a research bulletin entitled ``An Economic and Mathematical
Description of the U.S. Dairy Sector Simulator''\3\ Dr. Ronald Knutson
of Texas A&M University led the analysis on basic formula price options
and published two working papers entitled ``An Economic Evaluation of
Basic Formula Price (BFP) Alternatives'' and ``The Modified Product
Value and Fresh Milk Base Price Formulas as BFP Alternatives.''\4\
---------------------------------------------------------------------------

\3\ Copies of this report may be obtained by contacting Ms.
Wendy Barrett, Cornell University, ARME, 348 Warren Hall, Ithaca, NY
14853-7801, (607) 255-1581.
\4\ Copies of these reports may be obtained by contacting Dr.
Ronald Knutson, Agricultural and Food Policy Center, Dept. of Ag.
Economics, Texas A&M University, College Station, TX 77843-2124,
(409) 845-5913.
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Actions Completed

USDA has maintained continual contact with the industry regarding
the reform process. To begin, on May 2, 1996, the Agricultural
Marketing Service (AMS) Dairy Division issued a memorandum to
interested parties announcing the planned procedures for

[[Page 4804]]

implementing the Farm Bill.\5\ In this memorandum, all interested
parties were requested to submit ideas on reforming Federal milk
orders, specifically as to the consolidation and pricing structure of
orders. Input was requested by July 1, 1996.
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\5\ Copies of this announcement and all subsequent announcements
and reports can be obtained from Dairy Programs at (202) 720-4392,
any Market Administrator office, or via the Internet at http://
www.ams.usda.gov/dairy/.
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On June 24, 1996, USDA issued a press release announcing that a
public forum would be held in Madison, Wisconsin, on July 29, 1996. The
forum would address price discovery techniques for the value of milk
used in manufactured dairy products. Thirty-one Senators, Congressmen,
university professors, representatives of processor and producer
organizations, and dairy farmers made presentations at the forum.
On October 24, 1996, AMS Dairy Division issued a memorandum to
interested parties requesting input regarding all aspects of Federal
milk order reform and specifically as to its impact on small
businesses. USDA anticipates that the consolidation of Federal orders
will have an economic impact on handlers and producers affected by the
program, and USDA wants to ensure that, while accomplishing their
intended purpose, the newly consolidated Federal orders will not unduly
inhibit the ability of small businesses to compete.
On December 3, 1996, AMS Dairy Division issued a memorandum to
interested parties announcing the release of the preliminary report on
Federal milk order consolidation. The report recommends the
consolidation of the current 32 Federal milk orders into ten orders.
(See Appendix A for report summary.) The memorandum requested input
from all interested parties on the recommended consolidated orders and
on any other aspect of the milk marketing order program by February 10,
1997.
On March 7, 1997, AMS Dairy Division issued a memorandum to
interested parties announcing the release of three reports that
addressed the Class I price structure, the classification of milk, and
the identical provisions contained in a Federal milk order. The price
structure report consisted of a summary report and a technical report
and discussed several options for modifying the Class I price
structure. (See Appendix B for report summary.) The classification
report recommended the reclassification of certain dairy products,
including the removal of Class III-A pricing for nonfat dry milk. (See
Appendix C for report summary.) The identical provisions report
recommended simplifying, modifying, and eliminating unnecessary
differences in Federal order provisions. (See Appendix D for report
summary.) Comments on the contents of these reports, as well as on any
other aspect of the program, was requested from interested parties by
June 1, 1997.
On April 18, 1997, AMS Dairy Division issued a memorandum to
interested parties announcing the release of the preliminary report on
Alternatives to the Basic Formula Price (BFP). The report contained
suggestions, ideas, and initial findings for BFP alternatives. Over
eight categories of options were identified with four options
recommended for further review and discussion. (See Appendix E for
report summary.) The memorandum requested input from all interested
parties on a BFP alternative and on any other aspect of the milk
marketing order program by June 1, 1997.
On May 20, 1997, AMS Dairy Division issued a memorandum to
interested parties announcing the release of a revised preliminary
report on Federal milk order consolidation. The revisions were based on
the input received from interested parties in response to the initial
preliminary report on order consolidation. (See Appendix F for report
summary.) Instead of recommending 10 consolidated orders as in the
first report, the revised report recommended 11 consolidated orders and
suggested the inclusion of some currently unregulated territory. The
memorandum requested comments from all interested parties on the
recommended consolidated orders and on any other aspect of the milk
marketing order program by June 15, 1997.
To elicit further input on the role of the National Cheese Exchange
price in calculating the basic formula price, on January 29, 1997, the
Secretary sissued a press release announcing steps being taken by USDA
to address concerns raised by dairy producers about how milk prices are
calculated. In the press release, the Secretary requested further
comments from interested parties about the use of the National Cheese
Exchange in the determination of the basic formula price, which is the
minimum price that handlers must pay dairy farmers for milk used to
manufacture Class III products (butter and cheese) and the price used
to establish the Class I and Class II prices. These comments were
requested by March 31, 1997, and have been useful in analyzing
alternatives to the basic formula price in context of the order reform
process.

Public Interaction

As a result of these announcements and the forum, more than 1,600
individual comments have been received by USDA. In addition to the
individual comments, more than 3000 form letters have been received.
All comments were reviewed by USDA personnel and are available for
public inspection at USDA. To assist the public in accessing the
comments, USDA contracted to have the comments scanned and published on
a CD. The use of this technology has allowed interested parties
throughout the United States access to the information received by
USDA.
USDA also made all publications and requests for information
available on the Internet. A separate page under the Dairy Division
section of the AMS Homepage was established to provide information
about the reform process. To assist in transmitting correspondence to
USDA, a special electronic mail [email protected]
was opened to receive input on Federal milk order reforms.
USDA personnel met continually with interested parties from May
1996 through the issuance of this proposed rule to gather information
and ideas on the consolidation of Federal milk orders. During this time
period, USDA personnel addressed over 250 groups comprised of more than
22,000 individuals on various issues related to Federal order reform.
USDA personnel also conducted in-person briefings for both the
Senate and House Agricultural Committees on the progress of Federal
milk order reforms. Since May 1996, seven briefings were conducted for
the committees. The briefings advised the committees of the plan of
action for implementing the Farm Bill mandates; explained the
preliminary report on the consolidation of Federal milk orders;
explained the contents of the reports addressing Class I price
structure, classification of milk, identical provisions and basic
formula price; and discussed the congressional report.

Public Input

To ensure the involvement of all interested parties, particularly
small businesses as defined in the following Initial Regulatory
Flexibility Analysis, in the process of Federal order reform, three
primary methods of contact have been used: direct written notification,
publication of notices through various media forms, and speaking and
meeting with organizations and individuals regarding the issue of
Federal order

[[Page 4805]]

reforms. In addition, information has been made available to the public
via the Internet. USDA also made one written program announcement
specifically requesting information from small businesses.
All announcements made by USDA have been mailed to over 20,000
interested parties, State Governors, State Department of Agriculture
Secretaries or Commissioners, and the national and ten regional Small
Business Administration offices. In addition, most dairy producers
under the orders were notified through regular market service bulletins
published by Market Administrators on a monthly basis. Press releases
were issued by USDA for the May 2, 1996, December 3, 1996, January 29,
1997, March 7, 1997, and May 20, 1997, announcements, and for the July
31, 1996, public forum.\6\ These press releases were distributed to
approximately 33 wire services and trade publications and to each State
Department of Agriculture Communications Officer. These methods of
notification helped to ensure that virtually all identified small
businesses were contacted.
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\6\ Copies of these press releases may be obtained from Dairy
Programs at (202) 720-4392, or via the Internet at http://
www.ams.usda.gov/news/newsrel.htm.
---------------------------------------------------------------------------

Departmental personnel, both in the field and from Washington,
actively met with interested parties to gather input and to clarify and
refine ideas already submitted. Formal presentations, round table
discussions, and individually scheduled meetings between industry
representatives and Departmental personnel were held. Over 250
organizations and more than 22,000 individuals were reached through
this method. Of these individuals, approximately 13,400 were identified
as small businesses.
As a result of the requests for information, publication of
informational reports, meetings with interested parties, and the
comments, AMS has prepared this proposed rule which contains proposals
addressing the following issues: the consolidation of marketing areas;
basic formula price replacement and other class price issues; Class I
price structure; classification of milk; provisions applicable to all
orders; regional issues relating to the Northeast, Southeast, Midwest,
and Western areas; and various other miscellaneous and administrative
issues. Each proposal is discussed in detail following this preliminary
statement that includes Executive Order 12988 and 12866 discussions,
the Regulatory Flexibility Analysis, and the Paperwork Reduction
Analysis.

Executive Order 12988

This proposed rule has been reviewed under Executive Order 12988,
Civil Justice Reform. This rule is not intended to have a retroactive
effect. If adopted, this proposed rule 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 request
modification or exemption from such order by filing with the Secretary
a petition stating that the order, any provision of the order, or any
obligation imposed in connection with the order is not in accordance
with law. 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.

Executive Order 12866

The Department is issuing this proposed rule in conformance with
Executive Order 12866. This proposed rule has been determined to be
economically significant for the purposes of Executive Order 12866.
When proposing a regulation which is determined to be economically
significant, agencies are required, among other things, to: assess the
costs and benefits of available regulatory alternatives; base
regulatory decisions on the best reasonably-obtainable technical,
economic, and other information; avoid duplicative regulations; and
tailor regulations to impose the least burden on society consistent
with obtaining regulatory objectives. Therefore, to assist in
fulfilling the objectives of Executive Order 12866, the USDA prepared
an initial Regulatory Impact Analysis (RIA). Information contained in
the RIA pertaining to the costs and benefits of the revised regulatory
structure are summarized in the following analysis. Copies of the RIA
can be obtained from Dairy Programs at (202) 720-4392, any Market
Administrator office, or via the Internet at http://www.ams.usda.gov/
dairy.
This rule proposes the consolidation of the current 31 Federal milk
marketing order areas into 11 marketing order areas. The proposed
marketing areas are: Northeast, Mideast, Upper Midwest, Central,
Appalachian, Southeast, Florida, Southwest, Arizona-Las Vegas, Western,
and Pacific Northwest. The consolidated marketing areas consist
primarily of territory that is in the current Federal order markets. In
addition, they would include some previously unregulated territory. At
this time, California is not proposed as a Federal order. This
consolidation is proposed to comply with the 1996 Farm Bill that
mandates the current Federal milk order marketing areas be consolidated
into between 10 to 14 marketing areas by April 4, 1999. This proposed
rule also sets forth two options for consideration as a replacement for
the Class I price structure and proposes replacing the basic formula
price with a multiple component pricing system. These changes are
proposed to address concerns that the current system of pricing Class I
milk may not adequately reflect the value of Class I milk at various
locations or the value of milk used in manufacturing products. The 1996
Farm Bill identified these as related issues that may be addressed in
the consolidation of milk marketing orders. The proposed rule further
proposes changes to classification of milk by establishing a new Class
IV which would include milk used to produce nonfat dry milk, butter,
and other dry milk powders; the reclassification of eggnog and cream
cheese; and other minor changes. These proposed changes should improve
handler reporting and accounting procedures thereby providing for
greater market efficiencies. Finally, this proposed rule expands Part
1000 to include provisions that are identical within each consolidated
order to assist in simplifying the orders. These provisions include the
definitions of route disposition, plant, distributing plant, supply
plant, nonpool plant, handler, other source milk, fluid milk product,
fluid cream product, cooperative association, and commercial food
processing establishment. In addition, the milk classification section,
pricing provisions, and most of the provisions relating to payments
have been included in the General Provisions. These proposed changes
adhere with the efforts of the National Performance Review--Regulatory
Reform Initiative to simplify, modify,

[[Page 4806]]

and eliminate unnecessary repetition of regulations. Unique regional
issues or marketing conditions have been considered and included in
each market's order provisions. Not all of these changes would be
considered economically significant; however, changes dealing with
marketing area consolidation, the basic formula price, and the Class I
pricing structure may be significant and are described further in the
following sections.
Economic Impacts of Consolidation
It is impossible to determine the economic effects of the proposed
marketing area consolidation on handlers, producers and consumers
without using assumptions about the specific order provisions contained
in the consolidated order areas. The only effect consolidation, as a
single factor, can have on the various market participants is its
effect on the percentage of milk used in different classes within the
proposed consolidated orders. Without assumptions that include the
specific class prices and milk uses in different products, there are no
means of quantifying the economic effects of consolidation.
Handlers would be affected by class prices, which would be
determined by the Class I price surface option that is selected, and by
the minimum prices contained in all of the orders for milk used in
Classes II, III and IV. Handlers similarly located would be subject to
the same minimum Class I, Class II, Class III and Class IV prices for
milk. Such handlers would also be subject to the same minimum prices to
be paid to producers.
Dairy farmers would be affected by the proposed consolidation of
marketing areas because changes in utilization percentages would result
in changes in blend prices. As in the case of effects on handlers,
however, it is impossible to accurately determine a separate
consolidation effect on producers, defined in monetary terms. The
closest approximation to such an estimate would be the ``weighted
average utilization value'' (WAUV). These ``prices'' reflect only the
change in value that can be attributed to changes in utilization rates,
with no assumptions about changes in the levels of the various class
prices. Such estimates, of necessity, would reflect only anticipated
changes in blend prices, using class prices that would no longer be in
effect under the consolidated orders. To the extent that the WAUV
computations reflect some of the effect of the effect of consolidation
on producer prices, they are included in this analysis. It should be
noted, however, that all producers in any given current area would be
affected to an equal extent by the consolidation factor.
The following table shows the potential impact of three order
consolidation options on producers who supply each of the current
Federal milk marketing order areas via WAUV ``prices''. The three
consolidated options are (1) the consolidated marketing areas suggested
in the December 1996 initial Preliminary Report on Order Consolidation;
(2) the consolidated marketing areas suggested in the May 1997 Revised
Preliminary Report on Order Consolidation; and (3) the consolidated
marketing areas 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 3)
(Option 1) (Option 2) -------------------------------
---------------------------------------------------------------- Consol. Mkt. WAUV ($/cwt)
Consol. Mkt. WAUV ($/cwt) Consol. Mkt. WAUV ($/cwt) -------------------------------
----------------------------------------------------------------
Current Markets WAUV using WAUV using WAUV using WAUV using WAUV using WAUV using
Current Mkt. Consol. Mkt. Current Mkt. Consol. Mkt. Current Mkt. Consol. Mkt.
Utilization Utilization Utilization Utilization Utilization Utilization
($/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

[[Page 4807]]

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

\7\ The Basic Formula Price Committee was established in May
1996 to consider replacements for the basic formula price during the
Federal order reform process. This committee and others established
are described further in the ``Background'' portion of this proposed
rule.
---------------------------------------------------------------------------

Descriptions of the two Committees' analyses, and results of their
work are included in ``A Preliminary Report on Alternatives to the
Basic Formula Price,'' published in April 1997 by the Basic Formula
Price Committee, Dairy Division, AMS; \8\ and the following reports
from the Agricultural and Food Policy Center, Texas A&M University
System:
---------------------------------------------------------------------------

\8\ Copies of this report can be obtained from Dairy Programs at
(202) 720-4392, any Market Administrator office, or via the Internet
at http://www.ams.usda.gov/dairy/.
---------------------------------------------------------------------------

``An Economic Evaluation of Basic Formula Price (BFP)
Alternatives,'' AFPC Working Paper 97-2, June 1997.
``Evaluation of Final Four Basic Formula Price Options,'' AFPC
Working Paper 97-9, August 1997.\9\
---------------------------------------------------------------------------

\9\ Copies of these reports may be obtained by contacting Dr.
Ronald Knutson, Agricultural and Food Policy Center, Dept. of Ag.
Economics, Texas A&M University, College Station, TX 77843-2124, or
(409) 845-5913.
---------------------------------------------------------------------------

The primary criterion used by the BFP Committee was that any
replacement BFP option reflect the supply of and demand for milk used
in manufactured dairy products. At the same time, one of the USC's
critical criteria for a replacement BFP was that it reliably reflect
market conditions for all manufactured products.
In trying to determine the most appropriate replacement for the
current BFP, which uses a survey of prices paid by manufacturing plants
for non-Grade A milk updated by a product price

[[Page 4808]]

formula, the goal of both groups was a market-based alternative. The
BFP Committee measured the extent to which each pricing option met its
primary goal by tracking the options against the current BFP for a
period of prior months.\10\ The USC Committee used an econometric
procedure to test the ability of the alternatives they considered to
reflect supply and demand.
---------------------------------------------------------------------------

\10\ It was assumed that the current BFP successfully reflects
the supply and demand for milk used in manufactured products.
---------------------------------------------------------------------------

To the extent the goal of identifying a BFP that reflects the value
of milk used in manufactured products is capable of attainment, all
market participants--handlers, producers, and consumers--would be
affected by the BFP replacement in the same manner as if they were
operating in a free market, with no external impacts caused by
regulation. Consumers can be assured that the prices generally charged
for dairy products are prices that reflect, as closely as possible, the
forces of supply and demand in the market.
Of the options considered and analyzed, both groups studying the
issue determined that the option of pricing components of milk
according to their value in manufactured products, as reflected by the
sales prices of those products, best approximates the intersection of
supply and demand for milk used in manufactured dairy products.
Economic Impact of Multiple Component Pricing Provisions
Seven of the 11 proposed orders provide for milk to be paid for on
the basis of its components (multiple component pricing, or MCP). Five
of the 7 MCP orders also provide for milk values to be adjusted
according to the somatic cell count of producer milk. The equipment
needed for testing milk for its component content can be very expensive
to purchase, and requires highly-skilled personnel to maintain and
operate. The cost of infra-red analyzers ranges from just under
$100,000 to $200,000. The infra-red machines that are used by most
laboratories will test for total solids and somatic cells at the same
time the butterfat and protein tests are done.
Some additional information is necessary from handlers on their
monthly reports of receipts and utilization to assure that producers
are paid correctly. In particular, handlers would be required to report
pounds of protein, pounds of other solids, and, in 5 of the orders,
somatic cell information. This data would be required from each handler
for all producer receipts, including milk diverted by the handler,
receipts from cooperatives as handlers pursuant to Sec. 1000.9(c), and,
in some cases, receipts of bulk milk received by transfer or diversion.
Since producers would be receiving payments based on the component
levels of their milk, the payroll reports that handlers supply to
producers must reflect the basis for such payment. Therefore, the
handler would be required to supply the producer not only with the
information currently supplied, but also: (a) the pounds of butterfat,
the pounds of protein, and the pounds of other solids contained in the
producer's milk, as well as the producer's average somatic cell count;
and (b) the minimum rates that are required for payment for each
pricing factor and, if a different rate is paid, the effective rate
also. It should be noted that handlers already are required to report
information relative to pounds of production, butterfat, and rates of
payment for butterfat and hundredweight of milk.
Of over 74,000 producers whose milk was pooled in December 1996
under 23 orders that would be part of consolidated orders providing for
multiple component pricing, the milk of 52,500 of these producers was
pooled under 13 orders that currently have MCP. Handlers in these
markets already have incurred the initial costs of testing milk for its
component content and have already made the needed transition to
reporting the additional information required for component pricing of
milk.
Of the remaining 21,750 producers who would be affected by MCP
provisions under a Federal order, the milk of approximately 13,000 of
these producers currently is received by handlers who test or have the
capability of testing for multiple components and, in many cases,
somatic cells. Many of these handlers also report component results to
the producers with their payments. Almost all of the producers whose
milk currently is not being tested or paid for on the basis of
components are located in the New England and New York-New Jersey
marketing areas, which would be consolidated with the Middle Atlantic
area into the proposed Northeast order.
Accommodation has been made to ameliorate handlers' expenses of
testing producer milk for component content. As component pricing plans
have been adopted under a number of the present Federal milk orders
since 1988, the component testing needed to implement these pricing
plans has been performed by the market administrators responsible for
the administration of the orders involved for handlers who are not
equipped to make all of the determinations required under the amended
orders. This policy would continue under this proposed rule. Thus,
handlers who are unable to obtain the equipment and personnel needed to
accomplish the required testing for component pricing would be able to
rely on the market administrators to verify or establish the tests
under which producers are paid.
Economic Impacts of Class I Price Changes
Several different options were considered for pricing fluid or
Class I milk. These pricing options included using a market-driven
basic formula price plus differentials based on location, differentials
based on the ratio of milk used for fluid purposes compared to all
other uses, flat differentials, flat differentials modified in high
Class I use areas, and differentials based on the demand for fluid milk
within a designated marketing area and the associated transportation
costs. Other options considered would have decoupled Class I pricing
from the basic formula price or pooled Class I differentials only
(i.e., eliminated the basic formula price entirely). Finally,
suggestions were considered to base Class I pricing on the cost of
production and to base differentials on only regional supply and demand
conditions. After analyzing these options and more than 1400 letters
that were submitted from interested persons, the Department narrowed
the pricing options to four and conducted extensive quantitative and
qualitative analysis on them. The four options selected include
location-specific differentials, relative value-specific differentials,
and decoupled Class I prices with adjustors. Although four Class I
price structure options are analyzed in the RIA, only two options are
considered as viable replacements for the current Class I price
structure in the proposed rule. However, comments are requested on all
options prior to determining which option should be adopted.
Three of the four pricing options in the RIA assume that milk would
be classified in the four classes of use detailed in the proposed rule.
One option in the RIA has only two classes of milk and thus is not
detailed in the proposed rule. For purposes of the RIA analysis, Class
IV milk is priced using the proposed butter-nonfat dry milk product
formula, but since the product prices proposed for use in the formula
are not presently available, the Chicago Mercantile Exchange spot price
for

[[Page 4809]]

butter and the average nonfat dry milk wholesale price reported by
USDA's Dairy Market News for the Western States are substituted. Also,
Class III milk is priced using the proposed cheese product formula, and
the Class II milk price for the month is equal to the Class IV price
for the month plus 70 cents per hundredweight (cwt).
The initial RIA assesses costs and benefits for dairy farmers,
fluid milk processors, dairy product manufacturers, and consumers. The
impact of each of the four Class I pricing options is measured as a
change from a baseline. The model baseline was adapted from the USDA
dairy baseline estimate published as part of the President's Budget for
Fiscal Year 1998.\11\ That baseline, which is a national annual
projection of the supply-demand-price situation for milk and dairy
products, was the basis for the market-by-market baseline of the model.
Both the President's Budget Baseline and the model baseline assume the
same program assumptions: namely, that the price support program will
be phased out by December 31, 1999, that the Dairy Export Incentive
Program will continued to be utilized, and that the Federal Milk Order
Program will be continued at the same level of class prices currently
in existence. Assumptions also are made concerning the cost of
production--especially feed, the commercial utilization of milk and
dairy products, commercial inventories, and imports. All parameters,
except those associated with the changes in the Federal Milk Order
Program, are assumed to remain unchanged.
---------------------------------------------------------------------------

\11\ See Agricultural Baseline Projections to 2005, Reflecting
the 1996 Farm Act, Interagency Agricultural Projections Committee,
U.S. Department of Agriculture, Office of the Chief Economist, World
Agricultural Outlook Board, Staff Report, WAOB-97-1 and ``Budget of
the United States Government, Fiscal Year 1998.''
---------------------------------------------------------------------------

To evaluate the impacts on dairy farmers, fluid milk processors,
and dairy product manufacturers of the four selected Class I pricing
options, a baseline estimate was constructed assuming that the current
32 orders \12\ would continue through the study period, 1999-2004. To
make comparisons, proposed pricing points for the proposed 11
consolidated orders were identified to correspond with the base pricing
zones of the 32 current marketing orders. For example, for the
consolidated Appalachian Region order, which would have the city of
Charlotte as its base pricing point, prices also were identified for
Knoxville and Louisville. These 3 pricing points correspond with the
base pricing points of the 3 markets that are to be combined into the
Appalachian regional order.
---------------------------------------------------------------------------

\12\ The following analyses were completed prior to the
termination of the Tennessee Valley marketing order and thus the
results identify it as a pricing point. Most of the plants and milk
of the former Tennessee Valley market have become regulated under
either the Southeast order or the Carolina order.
---------------------------------------------------------------------------

Location-Specific Differentials (Option 1A) Analysis
This option would establish a nationally coordinated system of
location-specific Class I price differentials reflecting the relative
economic value of milk by location. An important feature of the option
is that it would also include location adjustments that geographically
align minimum Class I milk prices paid by fluid milk processors
nationwide regardless of defined milk marketing area boundaries or
order pooling provisions. It is based on the economic efficiency
rationale presented in Cornell University research on the U.S. dairy
sector.\13\ A basic premise of this option is that the value of milk
varies according to location across the United States. The concepts of
spatial price value and relative price relationships together with
marketing data and expert knowledge of local conditions and marketing
practices and a review of supply and demand conditions are used to
develop a national Class I price structure.
---------------------------------------------------------------------------

\13\ Bishop, Phillip, James Pratt, Eric Erba, Andrew Novakovic,
and Mark Stephenson, An Economic and Mathematical Description of the
U.S. Dairy Sector Simulator, Research Bulletin 97-09, A Publication
of the Cornell Program on Dairy Markets and Policy, Department of
Agricultural, Resource, and Managerial Economics, Cornell
University, July 1997.
---------------------------------------------------------------------------

Overall, the magnitude of changes in price and income under this
option compared to the baseline are small. The all-milk price for all
Federal order markets combined during the 1999-2004 period is estimated
to average 5 cents per cwt higher. For all of the U.S. the all-milk
price is estimated to average 3 cents higher. The average all-milk
price at the basing point of 18 current markets could experience
increases of 1 to 29 cents per cwt. At the basing point of the 13
markets, the average all-milk price could decrease from 3 to 83 cents
per cwt.
The 5 markets with the greatest increases in all-milk prices were
Eastern Colorado ($0.29), New York-New Jersey ($0.28), Tampa Bay
($0.26), Southwest Plains ($0.25), and Upper Florida ($0.24). The
market with the greatest reduction in price was Western Colorado
(-$0.83), Central Illinois (-$0.66), Greater Kansas City (-$0.53),
Eastern South Dakota (-$0.51), and Southern Illinois-Eastern Missouri
(-$0.34). The annual average all-milk price in the previously-
unregulated areas of New York and New England declined $0.87 per cwt.
Changes in gross cash receipts, as expected, moved in the same
direction as the change in the all-milk price in a given market. Over
the period 1999-2004, location-specific differentials raised gross
receipts in 18 markets. It appears that the estimated average annual
receipts for producers in the current New York-New Jersey market
increased by $37.2 million. However, most of this increase was the
result of adding to the all-milk price the current $0.15 reduction on
all milk marketings for transportation. It is expected that this
apparent increase in the all-milk price and dairy farmer income would
be offset by a like amount by increased transportation costs paid by
the producer. The markets with the greatest estimated increase in gross
receipts for milk marketing were Southwest Plains ($11.8 million),
Chicago Regional ($10.9 million), Southern Michigan ($10.7 million),
New England ($7.4 million), and Eastern Colorado ($7.2 million). Gross
receipts in the current Chicago Regional and Upper Midwest markets may
have been expected to increase more since this option increased the
Class I differentials at those points substantially. However, this
option also envisions the expansion of transportation credits within
the merged order to move milk which is expected to use 20 percent of
the dollars generated by the higher Class I differentials. Over-order
charges which currently fund transportation credits are expected to be
reduced by a like amount.
The largest estimated decreases in cash receipts occur in the
Southern Illinois-Eastern Missouri (-$8.5 million), Great Basin (-$4.1
million), Middle Atlantic (-$2.9 million), Texas (-$2.5 million), and
Greater Kansas City (-$2.5 million) markets. Nine other current markets
would lose average annual gross cash receipts during the period 1999-
2004 of less than $2.0 million each. The previously unregulated areas
of New York and New England would lose an estimated average of $16.9
million in annual gross receipts from milk marketings. Under location-
specific differentials the estimated average annual gross receipts for
all Federal order markets combined increased by $68.1 million and the
entire US increased $53.1 million compared to the baseline for the
1999-2004 period.
Fluid processors in 21 of the 32 Federal order market areas face
increased Class I differentials if this

[[Page 4810]]

option were adopted compared with Class I differentials under the
baseline. Fluid processors in four of the Federal order markets and in
the previously-unregulated areas of New York and New England would see
no changes in Class I differentials. Fluid processors in the remaining
seven Federal order markets would see decreases in Class I
differentials compared with the baseline. The increases in
differentials ranged from $0.01 per cwt in the New England and New
York-New Jersey markets to $0.50 per cwt in the Upper Midwest.
Decreases in Class I differentials would range from $0.03 per cwt in
the Middle Atlantic to $0.25 per cwt in New Mexico-West Texas. Those
fluid processors facing higher Class I differentials would see their
monthly obligations to the markets' producer-settlement funds increase
while those facing lower Class I differentials would see their
obligations decrease.
With virtually no change in the amount of milk available for
manufacturing, manufacturers of dairy products would face nearly the
same supply and demand conditions that they now face when buying milk
or selling dairy products. Manufacturers in the Southwest, where milk
marketings are expected to decline, may have less milk to process while
manufacturers in the Upper Midwest may find that they have slightly
more milk for manufacturing.
Relative Value-Specific Differentials (Option 1B) Analysis
Like a location-specific differential structure, a relative value-
specific differential structure would also establish a nationally
coordinated system of Class I price differentials and adjustments that
recognizes several low pricing areas. Option 1B relies on a least cost
optimal solution from the USDSS model to develop a Class I price
structure that is based on the most efficient assembly and shipment of
milk and dairy products to meet all market demands for milk and its
products. Option 1B relies more on the market and the negotiating
ability of processors and producers to generate higher prices when
needed to provide the necessary incentive to move milk in order to
satisfy demand.
Three methods of phasing into the Class I differentials under
Option 1B were evaluated. First, a 20-percent gradual phase-in was
analyzed; then, a transitional phase-in that would offset any lost
revenue was analyzed; and finally, a revenue-enhancement phase-in that
would add additional revenue into the Class I price structure was
analyzed.
Phase-in Method 1
With the gradual phase-in, the estimated all-milk price for all
Federal order markets combined during the 1999-2004 period could
average 8 cents per cwt lower than the baseline. The estimated average
all-milk price at the basing point of 11 Federal order markets could
increase from 1 to 32 cents per cwt. At the basing point of the other
21 Federal order markets, the all-milk price is estimated to decrease
from 1 to 58 cents per cwt.
The 5 markets with the greatest estimated increases in average all-
milk prices, for the 1999-2004 period are: New Mexico-West Texas
($0.32), Chicago Regional ($0.19), Tampa Bay ($0.19), Nebraska-Western
Iowa ($0.17), and Southwest Idaho-Eastern Oregon ($0.15). The 5 Federal
order markets with the greatest estimated reductions in price are:
Eastern South Dakota (-$0.58), Michigan Upper Peninsula (-$0.55),
Western Colorado (-$0.55), Greater Kansas City (-$0.53), and Carolina
(-$0.46). The annual average all-milk price in the previously
unregulated areas of New York and the New England states is estimated
to decline by $0.96 per cwt compared to the baseline.
Over the period 1999-2004, 1B differentials could lower producer
gross cash receipts from minimum order prices in 21 of the Federal
order markets. The five current markets that would have the greatest
decreases were: Texas (-$36.8 million), Middle Atlantic (-$26.2
million), Upper Midwest (-$15.9 million), Carolina (-$15.2 million),
and Southeast (-$12.5 million). The annual average reduction in
estimated gross receipts in the previously unregulated areas of New
York and the New England states is estimated at $18.5 million from the
baseline. Estimated gross receipts increased in 11 markets. The five
markets that would have the greatest increases in gross receipts were:
Chicago Regional ($31.5 million), New Mexico-West Texas ($9.1 million),
Southern Michigan ($6.6 million), Southwestern Idaho-Eastern Oregon
($5.8 million), and New York-New Jersey ($5.3 million).
Phase-in Method 2
A possible modification to the relative value-specific
differentials would be to initially raise Class I differentials by 55
cents per cwt above the level called for in the first year of
transition. During the second year, Class I differentials would be set
at 35 cents above the transition level; the third year, 20 cents above;
and the fourth year, 10 cents above the called-for transition
differentials. At the beginning of the fifth year, Class I
differentials would be fully phased in and no assistance provided.
Under this phase-in method, the estimated all-milk price for all
Federal order markets combined during the 1999-2004 period could
average 4 cents per cwt lower than the baseline. The estimated average
all-milk price at the basing point of 12 Federal order markets could
increase from 3 to 36 cents per cwt. At the basing point of 20 Federal
order markets, the all-milk price is estimated to decrease from 2 to 53
cents per cwt from the baseline.
The five markets with the greatest estimated increases in average
all-milk prices, per cwt, for the 1999-2004 period are: New Mexico-West
Texas ($0.36), Tampa Bay ($0.32), Nebraska-Western Iowa ($0.22), Upper
Florida ($0.20), and Chicago Regional ($0.23). The five markets with
the greatest estimated reductions in price are: Eastern South Dakota
(-$0.53), Western Colorado (-$0.52), Michigan Upper Peninsula (-$0.49),
Greater Kansas City (-$0.48), and Texas (-$0.34). The annual average
all-milk price in the previously unregulated areas of New York and the
New England states is estimated to decline by $0.93 per cwt compared to
the baseline.
Over the period 1999-2004, this phase-in option would lower
estimated producer gross cash receipts attributable to minimum order
prices in 19 of the Federal order markets. The 5 markets with the
greatest estimated decreases were Texas (-$32.6 million), Middle
Atlantic (-$22.8 million), Upper Midwest (-$13.9 million), Carolina
(-$10.7 million), and Arizona-Las Vegas (-$7.6 million). The annual
average reduction in estimated gross receipts in the previously
unregulated areas of New York and the New England states is $17.8
million lower than the baseline. Gross receipts from milk marketings
could increase in the following markets: Chicago Regional ($34.4
million), New York-New Jersey ($11.7 million), Southern Michigan ($10.4
million), New Mexico-West Texas ($10.4 million), and Tampa Bay ($7.0
million). Total estimated cash receipts for the combined current
Federal orders would average $40 million less for the 6-year period.
Phase-in Method 3
Another phase-in option would enhance prices during the transition
period by $1.10 for first year phase-in differentials, $0.70 in the
second year, $.40 in the third year, and $.20 in the fourth year. The
additional price enhancement provided to dairy farmers

[[Page 4811]]

under this method is intended to help producers make the necessary
investments and other changes to compete in a more market-oriented
economy. At the beginning of the fifth year, Class I differentials
would be fully phased in at the Option 1B levels.
With the use of additional revenue under this phase-in option, the
estimated all-milk price for all Federal order markets combined during
the 1999-2004 period could be expected to be unchanged from the
baseline. The estimated average all-milk price at the basing point of
15 Federal order markets would increase from 1 to 43 cents per cwt. At
the basing point of the other 17 Federal order markets, the all-milk
price is estimated to decrease from 3 to 52 cents per cwt.
The five markets with the greatest estimated increases in average
all-milk prices, per cwt, for the 1999-2004 period were: Tampa Bay
($0.43) New Mexico-West Texas ($0.41), Upper Florida ($0.32), Nebraska-
Western Iowa ($0.26), and South Eastern Florida ($0.26). The five
markets with the greatest estimated reductions in price were: Western
Colorado (-$0.52), Eastern South Dakota (-$0.49), Greater Kansas City
(-$0.44), Michigan Upper Peninsula (-$0.43), and Texas (-$0.33). The
annual average all-milk price in the previously unregulated areas of
New York and the New England states is estimated to decline by $0.88
per cwt compared to the baseline. Total estimated cash receipts for the
combined current Federal order markets would average $34.9 million
higher for the 6-year period.
Over the period 1999-2004, this phase-in option could lower
estimated producer gross cash receipts from milk marketings in 16 of
the current markets. The five current markets with the greatest
decreases were: Texas (-$28.2 million), Middle Atlantic (-$19.0
million), Upper Midwest (-$14.6 million), Carolina (-$6.5 million) and
Arizona-Las Vegas (-$6.0 million). The annual average reduction in
estimated gross receipts in the previously unregulated areas of New
York and the New England states is estimated at $16.9 million from the
baseline. Gross receipts from milk marketings increased in 16 markets.
The five markets that would have the greatest increases were: Chicago
Regional ($33.5 million), New York-New Jersey ($19.0 million), Southern
Michigan ($14.4 million), New Mexico-West Texas ($11.7 million), and
Tampa Bay ($9.8 million).
Decoupled Baseline Class I Price with Adjustors (Option 5) Analysis
A third option analyzed in the RIA would retain the current Class I
differentials, but floor Class I prices in all markets at their 1996
average levels. Adjustments to this price would be made based on
changes in fluid use rates and short term costs of production (i.e.,
feed costs). Under this option, the all-milk price for all Federal
order markets combined would increase $0.07 per cwt and the U.S. is
projected to increase $0.03 per cwt over the 6-year period. In 19 of
the Federal order markets, the average all-milk price would be higher
by $0.01 to $0.50 per cwt. In 12 Federal order markets, the average
all-milk price would decrease from $0.03 to $0.82 per cwt.
Flooring the Class I prices at the average 1996 levels would result
in higher Class I prices in all markets in 1999 and 2000 and higher
all-milk prices in most markets when compared to the baseline. These
increased incentives for milk production would result in greater
volumes of milk for manufacturing and lower manufacturing prices.
Location-Specific Differentials (Option 6) Analysis
This option would establish minimum prices for milk used in Class I
by adding market-specific Class I differentials to the proposed Class
II price. Class II would contain all manufactured products and would be
priced by a cheese product price formula using the National
Agricultural Statistical Service surveyed 40-pound cheddar cheese price
times 9.87 plus the Chicago Mercantile Exchange Grade A butter price
times 0.238 less $1.80. The Class I differentials in this option would
be phased in over a five-year period.
In general, the Class I differentials in the central section of the
country would be reduced while those in the Northwest, New England and
Florida are increased. After the proposed price surface is fully phased
in, 20 markets would have Class I differentials that are reduced and 10
markets would have increases.
Under this option, the all-milk price for all Federal order markets
combined would decline $0.10 per cwt over the six year period. In 23 of
the Federal order markets, the average all-milk price would decline by
less than $0.01 to $0.95 per cwt. In 9 orders, the all-milk price would
increase $0.02 to $0.19 per cwt.
Gross cash receipts from milk marketings in the combined Federal
orders would average $148.8 million less than the baseline for the 6-
year period. Cash receipts would be lower in 23 markets and higher in 9
markets. Because of this decline in cash receipts and since it is
inconsistent with the four-class system contained in the proposed rule,
this Class I price option is not detailed in the Class I price
structure section of the proposed rule. This two-class pricing system
was found to be insufficient to recognize the different use-values of
milk for reasons set forth in the Basic Formula Replacement and
Classification portions of this proposed rule.
Other Impacts of Pricing Options
The potential impacts of the options analyzed in the initial RIA on
retail prices, and thus consumers, is less certain than the impacts on
other sectors of the dairy industry. In general, changes in farm milk
prices and wholesale prices are passed onto consumers. However, the
timing and the degree of these pass-throughs is uncertain. It is
assumed that all changes in farm milk prices (fluid processor costs)
and the wholesale costs of manufactured products would be passed on to
the retail level without any changes in the farm-processor-retail or
farm-wholesale-retail margins.
Because of the bulky and perishable nature of packaged fluid milk,
all international trading of dairy products, with the exception of
limited exports of fluid milk to Mexico, is in manufactured products.
An appendix table in the initial RIA details USDA's baseline estimates
of international and domestic prices for butter and nonfat dry milk.
Neither location-specific differentials nor relative value-specific
differentials are expected to have a significant impact on domestic,
wholesale dairy product prices and therefore little effect on
international trade of manufactured dairy products.
Economic Impacts of Classification Changes
The classification of milk recommendations should not have a
significant economic impact on any dairy industry participants. This
proposed rule provides uniform milk classification provisions for the
newly consolidated milk orders. The recommendations should improve
reporting and accounting procedures for handlers and provide for
greater market efficiencies.
Most of the changes regarding milk classification provisions
proposed for the newly consolidated orders would simplify order
language and remove obsolete language.

[[Page 4812]]

This proposed rule contains a modified fluid milk product
definition and recommends that certain products be reclassified. The
revised fluid milk product definition proposed for the new orders
should provide more consistency in determining the classification of
products. The inclusion of eggnog to the list of fluid milk products
and the reclassification of cream cheese from Class III to Class II
will cause a nominal increase in the cost of the finished product.
However, these changes, which will be applicable to all handlers
regulated under the new orders, should not have a significant impact on
the retail price of these products. Although producers will benefit
from these products being reclassified into higher utilization classes,
the impact of the product classification changes on the blend price to
producers will be marginal.
Another modification includes the reclassification of butter and
whole milk powder from Class III to Class IV. This change merely places
these market-clearing products in the new Class IV with nonfat dry
milk. The change promotes market efficiency and should have a minimal
impact on producers' blend prices.
One recommendation with possible economic implications concerns the
treatment of milk used to produce bulk sweetened condensed milk/skim
milk. Some commenters argued that the wide price difference that
sometimes exists between the Class II price and the Class III-A price
has put manufacturers of sweetened condensed milk at a competitive
disadvantage with manufacturers of nonfat dry milk, which can be
substituted for bulk sweetened condensed milk and skim milk in some
higher-valued products.
Although this proposed rule does not recommend a reclassification
for milk used in bulk sweetened condensed milk, it does propose a
change in the relationship between the Class II and IV prices which
should eliminate the price disparity that now, at times, exists. As
discussed in the ``Class III and Class III-A (i.e., Class IV) Milk''
section of this proposed rule, the proposed new Class II price will be
equal to the Class IV price plus a 70-cent differential. The coupling
of the Class II and Class IV prices will largely remove the incentive
to substitute nonfat dry milk for bulk sweetened condensed milk.
The recommendations regarding shrinkage provisions should provide
equity among handlers, improve market efficiencies, and facilitate
accounting procedures. This proposed rule provides that shrinkage be
assigned pro rata based on a handler's utilization. As discussed in the
``Shrinkage and Overage'' section of this proposed rule, this
modification should result in a slight increase (i.e., one cent per
cwt.) in the blend price paid to producers.
For the reasons stated above, the milk classification provisions
proposed herein should have little economic impact on dairy industry
participants.

The Regulatory Flexibility Act and the Effects on Small Businesses

Pursuant to the requirements set forth in the Regulatory
Flexibility Act (RFA) (5 U.S.C. 601 et seq.), the Agricultural
Marketing Service (AMS) has considered the economic impact of the
proposed rule on small entities and has prepared this initial
regulatory flexibility analysis. The RFA provides that when preparing
such analysis an agency shall address: the reasons, objectives, and
legal basis for the proposed rule; the kind and number of small
entities which would be affected; the projected recordkeeping,
reporting, and other requirements; and federal rules which may
duplicate, overlap, or conflict with the proposed rule. Finally, any
significant alternatives to the proposal should be addressed. This
initial regulatory flexibility analysis considers these points and the
impact of this proposed regulation on small entities, and evaluates
alternatives that would accomplish the objectives of the rule without
unduly burdening small entities or erecting barriers that would
restrict their ability to compete in the dairy industry.
This regulatory action is being considered in accordance with
Section 143 of the Federal Agriculture Improvement and Reform Act of
1996, 7 U.S.C. 7253, (the Farm Bill) which requires the Secretary of
Agriculture (Secretary) to consolidate the existing 31 Federal milk
marketing orders, as authorized by the Agricultural Marketing Agreement
Act of 1937, into between 10 and 14 orders. The Secretary is also
directed to designate the State of California as a Federal milk order
if California dairy producers petition for and approve such an order.
Finally, the Farm Bill specifies that the Department of Agriculture use
informal rulemaking to implement these reforms. The Farm Bill requires
that a proposed rule be published by April 4, 998, and all reforms of
the Federal milk order program be completed by April 4, 1999.
In addition to these required mandates, the Farm Bill provides that
the Secretary may address related issues such as the use of utilization
rates and multiple basing points for the pricing of fluid milk and the
use of uniform multiple component pricing when developing one or more
basic formula prices for manufacturing milk. This proposed rule also
sets forth two options for consideration as a replacement for the Class
I price structure and proposes replacing the basic formula price with a
multiple component pricing system. These changes are proposed to
address concerns that the current system of pricing Class I milk may
not adequately reflect the value of Class I milk at various locations
or the value of milk used in manufacturing products. The 1996 Farm Bill
identified these as related issues that may be addressed in the
consolidation of milk marketing orders. The proposed rule further
proposes changes to classification of milk by establishing a new Class
IV which would include milk used to produce nonfat dry milk, butter,
and other dry milk powders; the reclassification of eggnog and cream
cheese; and other minor changes. These proposed changes should improve
handler reporting and accounting procedures thereby providing for
greater market efficiencies. Finally, this proposed rule expands Part
1000 to include provisions that are identical within each consolidated
order to assist in simplifying the orders. These provisions include the
definitions of route disposition, plant, distributing plant, supply
plant, nonpool plant, handler, other source milk, fluid milk product,
fluid cream product, cooperative association, and commercial food
processing establishment. In addition, the milk classification section,
pricing provisions, and most of the provisions relating to payments
have been included in the General Provisions. These proposed changes
adhere with the efforts of the National Performance Review--Regulatory
Reform Initiative to simplify, modify, and eliminate unnecessary
repetition of regulations. Unique regional issues or marketing
conditions have been considered and included in each market's order
provisions.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to the actions in order that small businesses would
not be unduly or disproportionately burdened. To accomplish this
purpose, it first is necessary to define a small business. According to
the Small Business Administration's definition of a ``small business,''
a dairy farm is a ``small business'' if it has an annual gross revenue
of less than $500,00 and a handler is a ``small business'' if it has
fewer than 500 employees. For the purposes of determining which dairy

[[Page 4813]]

farms are ``small businesses,'' the $500,000 per year criterion was
used to establish a production guideline of 326,000 pounds per month.
Although this guideline does not factor in additional monies that may
be received by dairy producers, it should be an inclusive standard for
most ``small'' dairy farmers. For purposes of determining a handler's
size, if the plant is part of a larger company operating multiple
plants that collectively exceed the 500-employee limit, the plant will
be considered a large business even if the local plant has fewer than
500 employees. During the process of developing this proposed rule,
USDA identified approximately 80,000 of the 83,000 dairy producers
(farmers) that have their milk pooled under a Federal order as small
businesses. Thus, small businesses represent approximately 96 percent
of the producers in the United States. On the processing side, there
are over 1,200 plants associated with Federal orders, and of these
plants, approximately 700 qualify as ``small businesses'' representing
about 55 percent of the total.
During August 1997, there were 524 fully regulated handlers (343
distributing and 181 supply plants), 134 partially regulated handlers
and 111 producer-handlers submitting reports under the Federal milk
marketing order program. During 1996, 83,012 dairy farmers delivered
over 104.5 billion pounds of milk to handlers regulated under the milk
orders. This volume represents 69 percent of all milk marketed in the
U.S. and 72 percent of the milk of bottling quality (Grade A) sold in
the country. The value of the milk delivered to Federal milk order
handlers at minimum order blend prices was nearly $14.6 billion.
Producer deliveries of milk used in Class I products (mainly fluid milk
products) totaled 45.5 billion pounds--43.5 percent of total Federal
order producer deliveries. More than 200 million Americans reside in
Federal order marketing areas--77 percent of the total U.S. population.
The Federal milk order program is designed to set forth the terms
of trade between buyers and sellers of fluid milk. A Federal order
enforces the minimum price that processors (handlers) in a given
marketing area must pay producers or farmers for milk according to how
it is utilized. A Federal order further requires that the payments for
milk be pooled and paid to individual dairy farmers or cooperative
associations on the basis of a uniform or average price. It is
important to note that a Federal milk order, including the pricing and
all other provisions, only becomes effective after approval, through a
referendum, by dairy farmers associated with the order.
Development of the proposed rule began with the premise that no
additional burdens should be placed on the industry as a result of
Federal order consolidation and reform. As a step in accomplishing the
goal of imposing no additional regulatory burdens, a review of the
current reporting requirements was completed pursuant to the Paperwork
Reduction Act of 1995 (44 U.S.C. Chapter 35). In light of this review,
it was determined that this proposed rule would have little impact on
reporting, recordkeeping, or other compliance requirements because
these would remain almost identical to the current Federal order
program. No new forms have been proposed; however, some additional
reporting would be necessary in the proposed orders that would be
adopting multiple component pricing if the current orders do not
already have these provisions.
There are two principal reporting forms for handlers to complete
each month that are needed to administer the Federal milk marketing
orders. The forms are used to establish the quantity of milk used and
received by handlers, the pooling status of the handler, the class-use
of the milk used by the handler, and the butterfat content and amounts
of other components of the milk. This information is used to compute
the monthly uniform price paid to producers in each of the markets.
Handlers in the marketing areas adopting multiple component pricing
would be required to complete additional information regarding the
components of the milk. This information would be necessary to enable
their values of milk to be determined on the basis of these components
and to assure that producers are paid correctly. Many handlers already
collect and report this information.
This proposed rule does not require additional information
collection that requires clearance by the OMB beyond the currently
approved information collection. The primary source of data used to
complete the forms are routinely used in most business transactions.
Forms require only a minimal amount of information which can be
supplied without data processing equipment or a trained statistical
staff. Thus, the information collection and reporting burden is
relatively small. Requiring the same reports for all handlers does not
significantly disadvantage any handler that is smaller than industry
average.
New territory, or pockets of unregulated territory within and
between current order areas has been included in the proposed
consolidated marketing areas where such expansion would not have the
effect of fully regulating plants that are not now regulated. The
addition can benefit regulated handlers by eliminating the necessity of
reporting sales outside the Federal order marketing area for the
purpose of determining pool qualification. Where such areas can be
added to a consolidated area without having the effect of causing the
regulation of any currently-unregulated handler, they are proposed to
be added.
Handlers not currently fully regulated under Federal orders may
become regulated for two main reasons: first, in the process of
consolidating marketing areas, some handlers who currently are
partially regulated may become fully regulated because their sales in
the combined marketing areas would meet the pooling standards of a
suggested consolidated order area. Second, previously unregulated area
in New York, Vermont, New Hampshire and Massachusetts was added on the
basis of requests and supporting information. As a result, previously
unregulated handlers would become fully regulated. Because of these two
reasons, 24 additional plants are expected to become fully regulated
under the program. Of these 24 plants, it is estimated that 15 are
small businesses that would need to comply with the reporting,
recordkeeping, and compliance requirements. The completion of these
reports would require a person knowledgeable about the receipt and
utilization of milk and milk products handled at the plant. This most
likely would be a person already on the payroll of the business such as
a bookkeeper, controller or plant manager. The completion of the
necessary reporting, recordkeeping, and compliance requirements would
not require any highly specialized skills and should not require the
addition of personnel to complete. In fact, much of the information
that handlers report to the market administrator is readily available
from normally maintained business records, and as such, the burden on
handlers to complete these recordkeeping and reporting requirements is
expected to be minimal. In addition, assistance in completing forms is
readily available from market administrator offices. A description of
the forms and a complete Paperwork Reduction Act analysis follows this
section.
No other burdens are expected to fall upon the dairy industry as a
result of overlapping Federal rules. This proposed regulation does not
duplicate,

[[Page 4814]]

overlap or conflict with any existing Federal rules.
To ensure that small businesses are not unduly or
disproportionately burdened based on this proposed regulation,
consideration was given to several options with the intention of
mitigating negative impacts. Three options, including two suggested in
the preliminary reports issued by AMS in December 1996 and May 1997,
were considered with regard to the consolidation of Federal orders,
five options were considered as replacements for the basic formula
price, and seven options were considered with regard to the development
of a new Class I price structure. The following options were considered
by AMS prior to and during the development of the proposed regulation.
Consolidation Options
It is impossible to determine the economic effects of marketing
area consolidation on handlers, producers and consumers without using
assumptions about the specific order provisions contained in the
consolidated order areas. The only effect consolidation, as a single
factor, can have on the various market participants is through changes
in the percentage of milk used in different classes within the proposed
consolidated orders. Without assumptions that include the specific
class prices and milk uses in different products, there are no means of
quantifying the economic effects of consolidation.
Handlers would be affected by class prices, which would be
determined by the Class I price surface option that is selected, and by
the minimum prices contained in all of the orders for milk used in
Classes II, III and IV. The Class I price surface options considered
could have impacts on small handler entities, however, handlers
similarly located would be subject to the same minimum Class I prices,
regardless of the size of their operations, and all handlers would be
subject to the same minimum prices for Class II, Class III and Class IV
milk. Such handlers would also be subject to the same minimum prices to
be paid to producers.
Producers may be somewhat more affected by consolidation of
marketing areas because changes in utilization percentages would result
in changes in blend prices. As in the case of effects on handlers,
however, it is impossible to determine a separate consolidation effect
on producers, defined in monetary terms. The closest approximation to
such an estimate would be the ``weighted average utilization value''
(WAUV). These ``prices'' reflect only the change in value that can be
attributed to changes in utilization rates, with no assumptions about
changes in the levels of the various class prices. Such estimates, of
necessity, reflect only anticipated changes in blend prices, using
class prices that would no longer be in effect under the consolidated
orders. To the extent that the WAUV computations reflect some of the
effect of consolidation on producer prices, they are included in this
analysis under each option discussion. It should be noted, however,
that all producers in any given current area would be affected to an
equal extent by the consolidation factor, with no disproportionate
effect on small dairy farmer entities.
The following table shows the potential impact of three order
consolidation options on producers who supply each of the current
Federal milk marketing order areas via WAUV ``prices''. The three
consolidated options are (1) the consolidated marketing areas suggested
in the December 1996 initial Preliminary Report on Order Consolidation;
(2) the consolidated marketing areas suggested in the May 1997 Revised
Preliminary Report on Order Consolidation; and (3) the consolidated
marketing areas suggested in this proposed rule.

Weighted Average Utilization Values (WAUV)
[Based on October 1995 information ($/cwt)]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consolidated Market Marketing Areas in Initial Marketing Areas in Revised Marketing Areas in Proposed
--------------------------------------------------------- Consol. Report (Dec. 96) Consol. Report (May 97) Rule (Option 3)
(Option 1) (Option 2) -------------------------------
---------------------------------------------------------------- Consol. Mkt. WAUV ($/cwt)
Consol. Mkt. WAUV ($/cwt) Consol. Mkt. WAUV ($/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

[[Page 4815]]

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 use value (WAUV) is computed
for (a) the consolidated order; (b) the current order with current use
of milk; and (c) the current order with projected use of milk in the
consolidated order. The difference between the weighted average use
values in (b) and (c) represents the potential impact on producers.
For example, in this proposed rule, the New England (F.O. 1)
market's WAUV using its current utilization is $13.52 per cwt. When the
three markets are consolidated and the new consolidated utilization is
used to calculate the WAUV, New England's WAUV would be $13.49 per cwt.
In this comparison, the potential impact on producers supplying the New
England market area would be a decrease of three cents per cwt.
Each of the three options assumes the pool distributing plant
standards suggested for each of the consolidated orders in this
proposed rule; thus the calculated values in the preceding table are
not directly comparable to the WAUV values published with either the
initial or the revised reports on order consolidation.
During the process of developing this proposed rule, AMS issued two
reports suggesting 10 and 11 marketing area boundaries, respectively,
to meet the requirements of the 1996 Farm Bill. The marketing areas
defined in these reports were based primarily on an analysis of receipt
and distributing data from fluid distributing plants in October 1995.
Over 900 comments regarding consolidation issues received thus far in
the development process also have been considered: almost 50 comments
prior to the December 1996 release of the Preliminary Report on Order
Consolidation (Option 1); an additional 60 comments prior to the May
1997 release of the Revised Preliminary Report on Order Consolidation
(Option 2); and another 800 comments since release of the revised
report. These comments were filed primarily by producers and handlers.
Incorporated in the marketing area boundaries suggested in the revised
report and in the proposed consolidation in this rule (Option 3) are
both information contained in the comments as well as data gathered to
update the information on which the earlier report(s) were based where
questions were raised about the boundaries of suggested marketing areas
and where marketing changes had occurred.
Option 1 (Preliminary Report on Order Consolidation, December 1996)
Based on seven criteria: ((1) Overlapping route disposition; (2)
overlapping areas of milk supply; (3) number of handlers within a
market; (4) natural boundaries; (5) cooperative association service
areas; (6) features common to existing orders, such as similar multiple
component pricing plans; and (7) milk utilization in common dairy
products), 10 marketing areas (Northeast, Appalachian, Florida,
Southeast, Mideast, Upper Midwest, Central, Southwest, Western and
Pacific Northwest) were suggested in this

[[Page 4816]]

report. Data were gathered relating to the receipts and distribution of
fluid milk products for all known distributing plants located in the 47
contiguous States, not including the State of California, for the month
of October 1995.
The current Federal orders that comprise the initially-suggested
consolidated areas are as follows: NORTHEAST--current marketing areas
of the New England, New York-New Jersey, and Middle Atlantic Federal
milk orders; APPALACHIAN--current marketing areas of the Carolina and
Tennessee Valley Federal milk orders, and a portion of the Louisville-
Lexington-Evansville Federal milk order; FLORIDA--current marketing
areas of the Upper Florida, Tampa Bay, and Southeastern Florida Federal
milk orders; SOUTHEAST--current marketing areas of the Southeast
Federal milk order, plus 1 county from the Louisville-Lexington-
Evansville Federal milk order marketing area, 15 currently unregulated
Kentucky counties, and 2 currently unregulated northeast Texas
counties; MIDEAST--current marketing areas of the Ohio Valley, Eastern
Ohio-Western Pennsylvania, Southern Michigan, and Indiana Federal milk
orders, plus most of the current marketing area of the Louisville-
Lexington-Evansville Federal milk order, Zone 2 of the Michigan Upper
Peninsula Federal milk order, and 12 counties of the Southern Illinois-
Eastern Missouri Federal milk order; UPPER MIDWEST--current marketing
areas of the Chicago Regional and Upper Midwest Federal milk orders,
plus Zones I and I(a) of the Michigan Upper Peninsula Federal milk
order and seven unregulated or partly regulated Wisconsin counties;
CENTRAL--current marketing areas of the Southern Illinois-Eastern
Missouri (less 12 counties included in the suggested Mideast marketing
area), Central Illinois, Greater Kansas City, Nebraska-Western Iowa
(less 11 currently-regulated counties suggested to be unregulated),
Eastern South Dakota, Iowa, Southwest Plains, and Eastern Colorado
Federal milk orders, plus 63 currently-unregulated counties in seven of
the states; SOUTHWEST--current marketing areas of the Texas, New
Mexico-West Texas, and Central Arizona Federal milk orders; WESTERN--
current marketing areas of the Western Colorado, Southwestern Idaho-
Eastern Oregon, and Great Basin Federal milk orders; and PACIFIC
NORTHWEST--current marketing area of the Pacific Northwest Federal milk
order plus 1 currently-unregulated county in Oregon.
Based on the WAUV calculations shown in the previous table,
utilization rate changes due to consolidation could affect producer
prices. The column labeled ``Option 1'' shows the WAUV for the
consolidated order and each of the current orders suggested in the
December 1996 report.
In the Northeast market, producers currently affiliated with the
New England and Middle Atlantic would have negative impacts on their
WAUV, respectively, while New York-New Jersey producers would be
positively impacted. In the Appalachian market, Carolina producers
should expect some negative impacts due to consolidation, while
Tennessee Valley producers would experience positive effects from this
consolidation. In the Florida market, Upper Florida producers would
gain while Tampa Bay and Southeastern Florida producers would have a
negative impact resulting from this consolidation. The Southeast market
remains virtually the same as it does currently and thus, no or little
impact on producer prices would be expected. In the Mideast market,
producers affiliated with the Ohio Valley and Southern Michigan Federal
orders would probably see increases in blend prices due to this
consolidation, while producers affiliated with the Eastern Ohio-Western
Pennsylvania, Michigan Upper Peninsula, Louisville-Lexington-Evansville
and Indiana Federal orders would see decreases. In the Upper Midwest
market, the Upper Midwest producers should see slight increases while
Chicago Regional producers would probably have no impact due to this
consolidation. Of all the consolidated markets, producers in the
current Orders that compose the Central market probably would see the
largest changes due to this consolidation: producers with the Nebraska-
Western Iowa, Southwest Plains and Eastern Colorado markets may see
increases, while producers affiliated with the Southern Illinois-
Eastern Missouri, Central Illinois, Greater Kansas City, and Eastern
South Dakota markets may see decreases. Producers with the Iowa market
would probably have no impact due to this suggested Central market
consolidation. In the Southwest market, producers affiliated with the
New Mexico-West Texas would see increases due to this consolidation
while Texas and Central Arizona producers would see decreases. In the
Western market, Southwestern Idaho-Eastern Oregon producers would see
increases but Western Colorado and Great Basin producers would see
decreases. The Pacific Northwest market remains virtually the same as
it does currently and thus, no or little impact on producer prices
would be expected.
Of approximately 83,000 dairy producers delivering milk to handlers
regulated under the milk orders, about 80,000 are considered to be
small businesses under the production guideline of less than 326,000
pounds per month.
As stated above, handlers are impacted more significantly by class
prices and minimum prices than by expected utilization changes
resulting from consolidation. Of the 371 distributing plants expected
to be fully regulated under this 10-market suggested configuration
under the assumptions used in the December 1996 report, an estimated
193 plants are small businesses under the criteria provided by the SBA
(under 500 employees).
Option 2 (Revised Preliminary Report on Order Consolidation, May 1997)
Eleven marketing areas were suggested in this second report.
Because numerous comments indicated that the boundaries of some
marketing areas should be re-evaluated, and also because regulatory
shifts and distributing plant distribution areas had occurred, more
detailed and updated data was obtained. The same seven criteria used in
Option 1 were applied in this option as well. Modifications were made
to the Northeast, Appalachian, Southeast, Mideast, Upper Midwest,
Central, Southwest and Western regions, as follows (only the changes to
these orders are noted): NORTHEAST--Addition of contiguous unregulated
areas of New Hampshire, Vermont and New York; the western non-Federally
regulated portion of Massachusetts, the Western New York State order
area, and Pennsylvania Milk Marketing Board Areas 2 and 3 in
northeastern Pennsylvania; APPALACHIAN--Addition of all of the
Louisville-Lexington-Evansville Federal order (with the exception of
one county included in the suggested Southeast market) and 26
currently-unregulated counties in Indiana and Kentucky; SOUTHEAST--
Minus 2 currently-unregulated counties in northeast Texas (in the
suggested Southwest market); MIDEAST--Addition of Pennsylvania Milk
Marketing Board Area 6 (in western/central Pennsylvania) and 2
currently-unregulated counties in New York, and minus the Louisville-
Lexington-Evansville Federal order area, 12 counties in Illinois, and
unregulated counties in Indiana and Kentucky (in the suggested
Appalachian market); UPPER MIDWEST--Addition of the Iowa, Eastern South
Dakota, and most of

[[Page 4817]]

the Nebraska-Western Iowa Federal order areas, plus currently-
unregulated counties in Iowa and Nebraska; CENTRAL--Addition of 12
counties in the current Southern Illinois-Eastern Missouri Federal
order that initially were suggested as part of the consolidated Mideast
area, and minus the Eastern South Dakota, Iowa, and most of the
Nebraska-Western Iowa Federal order marketing area; SOUTHWEST--Addition
of 2 currently-unregulated northeast Texas counties that initially were
suggested as part of the consolidated Southeast market and 47
currently-unregulated counties in southwest Texas, and minus the
Central Arizona marketing area; ARIZONA-LAS VEGAS--this new eleventh
marketing area composed of the current marketing area of the Central
Arizona Federal order and the Clark County, Nevada, portion of the
current Great Basin marketing area, plus eight currently-unregulated
Arizona counties; and WESTERN--Minus Clark County, Nevada. The FLORIDA
and PACIFIC NORTHWEST marketing areas did not change from the
preliminary report.
Based on the WAUV calculations shown in the previous table,
utilization rate changes due to consolidation could affect producer
prices. The column labeled ``Option 2'' shows the WAUV for the
consolidated order and each of the current orders suggested in the May
1997 report.
In the Northeast market, producers currently affiliated with the
New England and Middle Atlantic orders would have negative impacts on
their WAUV, respectively, while New York-New Jersey producers would
remain unchanged. In the Appalachian market, Carolina producers should
expect some negative impacts due to consolidation, while Tennessee
Valley and Louisville-Lexington-Evansville producers would experience
positive effects from this consolidation. In the Florida market, Upper
Florida producers would gain while Tampa Bay and Southeastern Florida
producers would have a negative impact resulting from this
consolidation. The Southeast market remains virtually the same as it
does currently and thus, little impact on producer prices would be
expected. In the Mideast market, producers affiliated with the Ohio
Valley and Southern Michigan Federal orders would probably see
increases in blend prices due to this consolidation, while producers
affiliated with the Eastern Ohio-Western Pennsylvania, Michigan Upper
Peninsula, and Indiana Federal orders would see decreases. In the Upper
Midwest market, the Nebraska-Western Iowa producers should see
increases, while Chicago Regional, Upper Midwest, Eastern South Dakota,
and Iowa producers would have a decrease in producer prices due to this
consolidation. In the Central market, producers with the Southwest
Plains and Eastern Colorado markets would see increases, while
producers affiliated with Southern Illinois-Eastern Missouri, Central
Illinois, and Greater Kansas City markets may see decreases. In the
Southwest market, producers affiliated with New Mexico-West Texas would
see increases due to this consolidation while Texas producers would see
decreases. The added Arizona-Las Vegas market is virtually the same as
the Central Arizona market but a positive impact on producer prices may
result from an additional handler. In the Western market, Southwestern
Idaho-Eastern Oregon producers would see increases but Western Colorado
and Great Basin producers would see decreases. The Pacific Northwest
market remains virtually the same as it does currently and thus, no or
little impact on producer prices would be expected.
Of approximately 83,000 dairy producers delivering milk to handlers
regulated under the milk orders, about 80,000 are considered to be
small businesses under the production guideline of less than 326,000
pounds per month. In addition, it is estimated that about 13 percent of
the total milk production in Pennsylvania is represented only by the
Pennsylvania Milk Marketing Board. Under this option, this production
would be added to the Federal order pool and affect an undetermined
number of businesses which would include both small and large
producers.
As stated above, handlers are impacted more significantly by class
prices and minimum prices than by expected utilization changes
resulting from consolidation. Of the 379 plants expected to be fully
regulated under this 11-market suggested configuration under the
assumptions used in the May 1997 report, 175 plants are estimated to be
small businesses on the basis of fewer than 500 employees.
The preliminary consolidation report (Option 1) stated that the
Farm Bill requirement to consolidate existing marketing areas did not
specify expansion of regulation to previously non-Federally regulated
areas where such expansion would have the effect of regulating handlers
not currently regulated. However, on the basis of data, views and
arguments filed by interested persons in response to the initial
Preliminary Report (Option 1) requesting that currently non-Federally
regulated areas be added to some consolidated marketing areas, the
revised Preliminary Report (Option 2) suggests that such areas be added
to several consolidated areas, the Northeast and Mideast market areas
in particular. Approximately 20 handlers who would have been affected
by the expansion of Federal order areas into currently non-Federally
regulated areas were notified of the possible change in their status
and encouraged to comment.
Handlers located in Pennsylvania Milk Marketing Board Areas 2, 3
and 6 are regulated under the State of Pennsylvania if they do not have
enough sales in any Federal order area to meet an order's pooling
standards. If such plants do meet Federal order pooling standards, the
State continues to enforce some of its regulations in addition to
Federal order regulations. As state-regulated handlers, they must pay a
Class I price for milk used in fluid products which is often higher
than the Federal order price would be. Inclusion of the Pennsylvania-
regulated handlers in the consolidated marketing area would have little
effect on handlers' costs of Class I milk (or might reduce them), while
reducing producer returns.
Option 3: The Proposed Consolidation
The proposed consolidation is a result of extensive analysis of
data as previously indicated and consideration of public comments
submitted in response to Options 1 and 2. Extensive outreach, which is
explained in the ``Public Input'' section, was completed. After
compiling this information, the proposed order consolidation was
developed to ensure industry integrity.
Eleven marketing areas are proposed in this rule, including
modifications to some of the 11 marketing orders suggested in Option 2.
Marketing data was further examined for some of the suggested
consolidated marketing areas to determine the most appropriate
configurations of the consolidated areas. Primary criteria continues to
be the seven used in the two earlier reports on order consolidation. As
a result of further analysis, the configurations of the Northeast,
Mideast, Southeast, Upper Midwest and Central areas have changed
significantly from those suggested in Option 2, and minor changes have
been made to the Appalachian area. The modifications for these areas
from the revised preliminary report (Option 2) are as follows:
NORTHEAST--Minus some previously suggested area to be included in the
Northeast (the southern tier of 3 western New York counties and
Pennsylvania Milk Marketing Board Areas 2 and 3); APPALACHIAN--Minus
five Kentucky counties that were part of the former

[[Page 4818]]

Paducah order area, now suggested to be in the Southeast market;
SOUTHEAST--Addition of 11 northwest Arkansas and 22 entire and 1
partial Missouri counties currently part of the Southwest Plains
Federal order, 6 Missouri counties currently part of the Southern
Illinois-Eastern Missouri Federal order, 16 currently unregulated
southeast Missouri counties, 20 currently unregulated Kentucky counties
(were suggested to be in the Appalachian market); MIDEAST--Minus the
current Pennsylvania Milk Marketing Board Area 6 and two southwestern
New York counties, all currently non-Federally regulated; UPPER
MIDWEST--Minus the Iowa, Eastern South Dakota, Nebraska-Western Iowa
Federal order areas; CENTRAL--Addition of the Iowa, Eastern South
Dakota, Nebraska-Western Iowa Federal order areas, 68 currently-
unregulated counties in Kansas, Missouri, Illinois, Iowa, Nebraska and
Colorado, and minus 11 northwest Arkansas and 22 entire and 1 partial
Missouri counties currently part of the Southwest Plains Federal order,
6 Missouri counties currently part of the Southern Illinois-Eastern
Missouri Federal order, and 16 currently unregulated southeast Missouri
counties. The FLORIDA, SOUTHWEST, ARIZONA-LAS VEGAS, WESTERN and
PACIFIC NORTHWEST marketing areas did not change from the revised
preliminary report.
Based on the WAUV calculations shown in the previous table,
utilization rate changes due to consolidation could affect producer
prices. The column labeled ``Proposed Rule'' shows the WAUV for the
consolidated order and each of the current orders suggested in this
proposed rule.
In the Northeast market, for producers currently affiliated with
the New York-New Jersey order, the proposed option would have positive
impacts on their WAUV, while New England and Middle Atlantic producers
would be negatively impacted. In the Appalachian market, Carolina
producers should expect some negative impacts due to consolidation,
while Tennessee Valley and Louisville-Lexington-Evansville producers
would experience positive effects from this consolidation. In the
Florida market, Upper Florida producers would gain while Tampa Bay and
Southeastern Florida producers would have a negative impact resulting
from this consolidation. With the addition of marketing area to the
Southeast, the WAUV for Southeast producers may be expected to be
positively impacted. In the Mideast market, producers affiliated with
the Ohio Valley and Southern Michigan Federal orders would probably see
increases in blend prices due to this consolidation, while producers
affiliated with the Eastern Ohio-Western Pennsylvania, Michigan Upper
Peninsula, and Indiana Federal orders would see decreases. In the Upper
Midwest market, the Upper Midwest producers should see slight
increases, while Chicago Regional producers would have no impact due to
this consolidation. In the Central market, producers with the Nebraska-
Western Iowa and Southwest Plains markets would see increases,
producers affiliated with Southern Illinois-Eastern Missouri, Central
Illinois, Greater Kansas City, Eastern South Dakota, and Iowa markets
may see decreases, and Eastern Colorado producers would see no impact.
In the Southwest market, producers affiliated with New Mexico-West
Texas would see increases due to this consolidation while Texas
producers would see decreases. Producers in the Arizona-Las Vegas
market may receive a positive impact on producer prices due to an
additional handler regulated in this order area. In the Western market,
Southwestern Idaho-Eastern Oregon producers would see increases but
Western Colorado and Great Basin producers would see decreases. The
Pacific Northwest market remains virtually the same as it does
currently and thus, no or little impact on producer prices would be
expected.
Of approximately 83,000 dairy producers delivering milk to handlers
regulated under the milk orders, about 80,000 are considered to be
small businesses under the production guideline of less than 326,000
pounds per month. The additional estimated 13 percent of Pennsylvania's
total milk production represented by the Pennsylvania Milk Marketing
Board which would have been added in Option 2, would not be included
under this option.
As stated above, handlers are impacted more significantly by class
prices and minimum prices than by expected utilization changes
resulting from consolidation. Of the 337 plants expected to be fully
regulated under this 11-market proposed configuration, 164 plants are
estimated to be small businesses on the basis of fewer than 500
employees.
Based on the comments received in response to the revised
preliminary report (Option 2) it has been determined that consolidation
of the existing orders does not necessitate expansion of the
consolidated orders into areas in which handlers are subject to minimum
Class I pricing under State regulation, especially when the states'
Class I prices exceed or equal those that would be established under
Federal milk order regulation. Such regulation would have the effect of
reducing returns to producers already included under State regulation
without significantly affecting prices paid by handlers who compete
with Federally-regulated handlers.
In an effort to avoid extending Federal regulation to handlers
whose primary sales areas are outside current Federal order marketing
areas, but who already are subject to similar minimum uniform pricing
under State regulation, the in-area Class I disposition percentage
portion of the pool distributing plant definition is proposed to be 25
percent for the Northeast order and 30 percent for the Mideast order,
instead of the 10 or 15 percent used in the other nine consolidated
order areas. It is estimated that five plants in Pennsylvania, Maryland
and Virginia that would have been fully regulated using 15 percent
would remain partially regulated, as they currently are, using 25 and
30 percent, respectively. At least three of these five handlers meet
the small business criteria.
Exempt Plants
Options 2 and 3 both recognize the Identical Provisions Committee
\14\ determination than a handler distributing less than 150,000 pounds
per month of fluid milk products does not have a significant
competitive effect on the market, and that handlers of such size
should, therefore, be exempt from the pricing and pooling provisions of
the orders. The level of route disposition required before an exempt
plant becomes regulated varies in the current orders. As recommended,
any plant with route disposition during the month of 150,000 pounds or
less would be exempt in the consolidated orders. This limit reflects
the maximum amount of fluid milk products allowed by an exempt plant in
any current Federal milk order and ensures plants that are currently
exempt from regulation would remain so. Under this proposed rule, it is
expected that 36 distributing plants that otherwise would be identified
as fully regulated plants are identified as exempt plants. Therefore
under this provision, these plants would not be subject to the pricing
and pooling provisions of their respective order.
---------------------------------------------------------------------------

\14\ The Identical Provisions Committee was established in May
1996 to address uniformity in order provisions during the Federal
order reform process. This committee and others established are
described further in the ``Background'' portion of this proposed
rule.
---------------------------------------------------------------------------

Although 150,000 pounds of fluid milk disposition per month may

[[Page 4819]]

represent a level at which exempting a distributing plant could be
expected not to have a serious detrimental impact on the ability of a
Federal milk order to provide for uniform pricing to handlers and
producers, it would be quite difficult to select a higher level of
exemption without compromising the purposes of the regulation. The
under-500-employee definition of a small business assures that nearly
all single-plant milk handlers would qualify as a small business. Many
of the ``small'' businesses may be among the largest competitors in a
particular market.
In addition, numbers of employees could be expected to vary greatly
with the nature of a plant's operation. For instance, the number of
persons employed by two plants processing and distributing equal
volumes of fluid milk products could be very different if one plant
contracts out its producer milk hauling, laboratory operations and
packaged product distribution, while the other plant performs all of
these operations with its own employees. For this reason alone, it
would be inappropriate to exempt handlers from regulation, or to impose
differing regulatory burdens, on the basis of their size beyond the
minimal size determined to be less than a significant competitive force
in the market.
Many current Federal orders also provide regulatory exemption for a
plant operated by a state or Federal government agency. For example,
some states have dairy farm and plant operations that provide milk for
their prison populations. As recommended, regulatory exemption would be
continued under the consolidated orders unless pool plant status is
desired. Additionally, regulatory exemption is intended to include
colleges, universities and charitable institutions because these
institutions generally handle fluid milk products internally and have
little or no impact in the mainstream commercial market. However, in
the event that these entities do distribute fluid milk through
commercial channels, route sales by such entities, including government
agencies, would be monitored to determine if Federal regulations should
apply. Under this proposed rule, it is expected that 18 distributing
plants would be identified as exempt based on their institutional
status.
Producer-handlers
Also exempt from full regulation would be those entities that
operate as both a producer and a handler. A primary basis for exempting
producer-handlers from the pricing and pooling provisions of a milk
order is that these entities are customarily small businesses that
operate essentially in a self-sufficient manner. During August 1997,
111 producer-handlers submitted reports under the Federal milk
marketing order program.
Basic Formula Price Options
A number of options for determining a basic formula price were
considered and analyzed in the process of developing the proposed basic
formula price (BFP). In addition to the proposed method of pricing
components based on their value in manufactured products, other options
examined, by both the Agricultural Marketing Service's Dairy Division
Basic Formula Price Replacement Committee and by the University Study
Committee (USC), led by Dr. Ronald D. Knutson of Texas A & M
University, were: economic formulas, futures markets, cost of
production, competitive pay pricing, and pricing differentials only.
Descriptions of the two Committees' analyses, and results of their
work are included in ``A Preliminary Report on Alternatives to the
Basic Formula Price,'' published in April 1997 by the Basic Formula
Price Committee, Dairy Division, AMS; and the following reports from
the Agricultural and Food Policy Center, Texas A&M University System:
``An Economic Evaluation of Basic Formula Price (BFP)
Alternatives,'' AFPC Working Paper 97-2, June 1997.
``Evaluation of `Final' Four Basic Formula Price Options,'' AFPC
Working Paper 97-9, August 1997.\15\
---------------------------------------------------------------------------

\15\ These reports can be obtained from the Agricultural and
Food Policy Center, Department of Agricultural Economics, Texas A&M
University, College Station, Texas 77843-2124, telephone (409) 845-
5913 or on the Internet at http://AFPC1.TAMU.EDU.
---------------------------------------------------------------------------

The primary criterion used by the Dairy Division BFP Committee was
that any replacement BFP option reflect the supply of and demand for
milk used in manufactured dairy products. At the same time, one of the
USC's critical criteria for a replacement BFP was that it reliably
reflect market conditions for all manufactured products.
In trying to determine the most appropriate replacement for the
current BFP, which uses a survey of prices paid by manufacturing plants
for non-Grade A milk updated by a product price formula, the goal of
both groups was a market-based alternative. The BFP Committee measured
the extent to which each pricing option met its primary goal by
tracking the options against the current BFP for a period of prior
months, on the basis of the assumption that the current BFP
successfully reflects the supply and demand for milk used in
manufactured products. The USC Committee used an econometric procedure
to test the ability of the alternatives they considered to reflect
supply and demand.
To the extent the goal of identifying a BFP that reflects the value
of milk used in manufactured products is capable of attainment, all
market participants would be affected by the BFP replacement in the
same manner as if they were operating in a free market, with no
external impacts caused by regulation. To the extent the goal is
achieved, then, there would be no uneven impact on market participants
on the basis of size. All market participants, (handlers, producers and
consumers), would be affected in the same manner as if there were no
regulation. However, the existence of minimum order pricing serves to
assure that small handlers pay no more for their milk than larger
entities (unless the market allows higher prices to be exacted from
small buyers), and that small producers receive the same minimum
uniform price for the milk or components of milk they produce as large
producers. Consumers can be assured that the prices generally charged
for dairy products are prices that reflect, as closely as possible, the
forces of supply and demand in the market.
Of the options considered and analyzed, both groups studying the
issue determined that the option of pricing components of milk
according to their value in manufactured products, as reflected by the
sales prices of those products, best approximates the intersection of
supply and demand for milk used in manufactured dairy products.
Manufacturing Allowances
Make allowances or manufacturing allowances, one of the factors
incorporated in the formulas for determining component values, may
reflect more closely the manufacturing costs of large firms than those
of small firms. These manufacturing costs would be used to adjust the
sales prices of dairy products to the value of milk purchased to make
the products. To the extent these allowances fail to reflect the full
cost of manufacturing, they may require handlers to pay more for milk
than they can realize from the sale of their products. On the other
hand, if the manufacturing allowances more than cover the cost of
manufacturing, handlers may be assured of extra margins.
Although it may appear that the use of make allowances in the
computation

[[Page 4820]]

of component prices would advantage large processors because of
possible economies of scale, these economies exist regardless of
whether they are recognized in price computations. If the assumption is
made that economies of scale exist in dairy plants and that large
plants are more efficient than small plants, a manufacturing allowance
that fully covers a small handler's cost of making products would
merely increase the profit margin of its larger competitors. At the
same time, producers unfairly would be required to subsidize the
manufacturing costs of handlers who use their milk, and consumers would
pay more for their dairy products than the costs of production and
processing would justify.
An attempt has been made, using Cornell University studies of
manufacturing costs at a number of manufacturing plants distributed
around the U.S., to arrive at economically defensible make allowances.
Since it is difficult to distinguish the differential effects of
market-based component pricing on small and large firms engaged in
manufacturing dairy products, reliance would be placed on industry
participants to comment on these facets of the proposed BFP
replacement.
Impact of Multiple Component Pricing Provisions on Small Entities
Seven of the eleven proposed orders provide for milk to be paid for
on the basis of its components (multiple component pricing, or MCP).
Five of the seven MCP orders also provide for milk values to be
adjusted according to the somatic cell count of producer milk. The
equipment needed for testing milk for its component content can be very
expensive to purchase, and requires highly-skilled personnel to
maintain and operate. The cost of infra-red analyzers ranges from just
under $100,000 to $200,000. The infra-red machines that are used by
most laboratories would test for total solids and somatic cells at the
same time the butterfat and protein tests are done.
No new report forms are needed under multiple component pricing;
however, some additional reporting is necessary to enable handlers'
values of milk to be determined on the basis of components, and to
assure that producers are paid correctly. For the market administrators
to compute the producer price differential, handlers would need to
supply additional information on their currently-required monthly
reports of receipts and utilization. In addition to the product pounds
and butterfat currently reported, handlers would be required to report
pounds of protein, pounds of other solids, and, in 5 of the orders,
somatic cell information. This data would be required from each handler
for all producer receipts, including milk diverted by the handler,
receipts from cooperatives as 9(c) handlers (that is, the cooperative
acts as a handler); and, in some cases, receipts of bulk milk received
by transfer or diversion.
Since producers would be receiving payments based on the component
levels of their milk, the payroll reports that handlers supply to
producers must reflect the basis for such payment. Therefore the
handler would be required to supply the producer not only with the
information currently supplied, but also, (a) the pounds of butterfat,
the pounds of protein, and the pounds of other solids contained in the
producer's milk, as well as the producer's average somatic cell count,
and (b) the minimum rates that are required for payment for each
pricing factor and, if a different rate is paid, the effective rate
also. Many handlers already report this additional information. It
should be noted that handlers already are required to report
information relative to pounds of production, butterfat and rates of
payment for butterfat and hundredweight of milk to the appropriate
Market Administrator.
Of over 74,000 producers whose milk was pooled in December 1996
under 23 of the current orders that would be part of consolidated
orders providing for multiple component pricing, the milk of 52,500 of
these producers was pooled under 13 current orders that have MCP.
Handlers in these markets already have incurred the initial costs of
testing milk for its component content, and have made the needed
transition to reporting the component contents of milk receipts on
their handler reports to the market administrators, and on their
reports of what they have paid producers.
Of the remaining 21,750 producers who would be affected by MCP
provisions under a Federal order (including an estimated 20,650
producers qualifying as small businesses), the milk of approximately
13,000, or 60 percent, currently is received by handlers who test or
have the capability of testing for multiple components and, in many
cases, somatic cells. Many of these handlers also report component
results to the producers with their payments. Almost all of the
producers whose milk currently is not being tested or paid for on the
basis of components are located in the New England and New York-New
Jersey marketing areas, which would be consolidated with the Middle
Atlantic area into the proposed Northeast order.
Accommodation has been made to ameliorate handlers' expenses of testing
producer milk for component content
As component pricing plans have been adopted under a number of the
present Federal milk orders since 1988, the component testing needed to
implement these pricing plans has been performed by the market
administrators responsible for the administration of the orders
involved for handlers who have not been equipped to make all of the
determinations required under the amended orders. It has been made
clear in the decisions under which these plans have been adopted that
handlers who would find it unduly burdensome to obtain the equipment
and personnel needed to accomplish the required testing may rely on the
market administrators to verify or establish the tests under which
producers are paid. As noted above, however, many handlers not now
subject to MCP provisions under Federal orders have nevertheless
already undertaken multiple component testing and payment programs.
Pricing Options
Several pricing options, as discussed below, were considered as
replacements for the current Class I price structure. Five of the
options were determined to have a negative impact on small businesses,
albeit slight or significant. These options included relative use
differentials, flat differentials, modified flat differentials, demand
based differentials, and a decoupled baseline Class I price with
adjustors. In addition to the impacts on small businesses, these
options were not considered viable based on additional qualitative
analysis contained in the findings and conclusions of the proposed
rule.
Relative Use Differentials
The use of relative use differentials based on Class I utilizations
was considered as an option for replacing the Class I price structure.
Using this concept, the relative use Class I differential would equal
$1.60 per hundredweight plus the relative use ratio times $1.00. A 25
percent limit would be applied so the new differential would not exceed
125 percent of the current differential nor fall to less than 75
percent of the current differential. A percentage limit was placed on
the differential changes to temper adjustments based on market supply
and demand conditions.
The advantages of the system are that it allows Class I
differentials to adapt to

[[Page 4821]]

supply and demand conditions within a given marketing area based on
changes in the utilization. However, because the differentials would be
allowed to change independently from neighboring areas, serious
problems arise with order-to-order alignment.
The next table illustrates the Class I differentials under the
proposed consolidated orders. These differentials are not location-
specific within the applicable orders. For purposes of this analysis
and to provide a basis for comparison within the proposed consolidated
orders, a weighted average Class I differential has been calculated for
each order, based on October 1995 data. This weighted average
differential is computed by multiplying the percentage of Class I milk
in each of the current orders that comprise the consolidated order by
the applicable current order differential and adding the resulting
amounts. This weighted average differential is not location specific
for the consolidated order.

Relative Use Class I Differentials in Proposed Orders
[Based on October 1995 Data]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Relative use + $1.60 = Weighted Maximum diff.
Proposed order \1\ ratio \2\ class I diff. average diff. range (75%- New diff ($/ Change in
(percent) ($/cwt) ($/cwt) \3\ 125%) cwt) diff. ($/cwt)
--------------------------------------------------------------------------------------------------------------------------------------------------------
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 current order
multiplied by the applicable current order differential.

The review of this option indicates that differentials would
probably have a minimal impact on small businesses, both processors and
producers. For a majority of the Federal order system, producers and
processors would experience Class I price increases. However, due to
offsetting factors impacts would be reduced.
Class I differentials are estimated to increase from $0.00 to $0.48
in the Central, Mideast, and Midwestern regions. Currently, over-order
charges are significantly higher and would largely absorb these
differential increases. Impacts on small producers and processors would
be minimal.
The Northeastern marketing area could be affected significantly by
the adoption of a relative use differential because of the decrease in
Class I prices and because this area has a high concentration of small
businesses, both producers and processors. There are approximately
18,860 small producers and 280 small processors located in this region.
Processors would pay on average $0.62 less for Class I milk as compared
to the current system. Producers would likely turn to over-order
charges to try to make up for their lost revenue. If this were to
occur, then small processors and producers would be placed at a
competitive disadvantage to large businesses because often the small
businesses do not maintain the resources needed to effectively
negotiate for supplies of milk. However, historically this region has
had difficulty maintaining a large over-order premium structure and
assumptions are that this would continue. If so, then all producer
income would decrease slightly possibly impacting the market's milk
supplies.
Large increases in Class I differentials would occur in the orders
located in the Southeast. There are approximately 4,000 small producers
and 30 small handlers in the Florida and Southeast areas. Class I
handlers would experience increased competition from lower cost
handlers in nearby markets. This may have a greater impact on small
processors because of their ability to compete based on available
resources. Although higher differentials would be returned to producers
through the Federal order uniform price, overall producers in the
Southeast markets would probably not experience any significant gains
from these increased differentials due to reduced over-order premiums
being charged. However, this would benefit small producers who may not
be able to negotiate as effectively for over-order prices.
The Southwest market is the other market to experience decreases in
differentials. Approximately 1,400 small producers and 30 small
handlers would be impacted by the decrease in Class I prices. Over-
order charges currently are relatively small in this market and an
attempt to increase the charges would likely occur. However, producer
groups have had the same difficulty as the Northeast in maintaining an
over-order structure. A $0.48 drop in the average differential in the
Southwestern market would surely be felt by producers and accelerate
the exodus of producers from the East Texas supply area, most likely
smaller producers who may not have significant resources to adapt to
the lowered prices or who would not be able to negotiate for higher
over-order prices. Producers in New Mexico and West Texas would also be
affected, but the impact may not be as severe.
Processors in this region may benefit from the decrease in Federal
order prices. However, if there is an increase in the over-order prices
that the processors must pay, then the amount gained from the decrease
would be lessened. In fact, if over-order pricing is implemented then
small processors may be at a disadvantage because they may not be able
to compete for milk beyond the reduction in Class I prices.
In the Western regions, Class I differentials are expected to
increase slightly. Over-order charges in these markets are not as great
as in the Midwestern markets and would probably be unable to totally
absorb the Class I price increase. Producer pay

[[Page 4822]]

prices and Class I handler costs would increase slightly. All producers
would benefit from the price increase, including about 690 small
producers. However, about 50 small processors may be at a disadvantage.
Small processors may not have the additional revenue necessary to adapt
to the $0.18 to $0.25 per hundredweight increase in Class I prices.
Because of the limited effect of overall Class I differential
changes within individual orders, relative use differentials would have
a minimal effect on small businesses, both producers and processors.
Areas that have decreases in Class I differentials would have a minimal
negative impact on producer pay prices. Over 20,000 producers, or about
95 percent of all producers, in these regions are categorized as small
businesses. On the other hand, handlers in areas with larger increases
in the Class I differentials would experience increased competition
from lower cost regions. Location advantages of some small handlers
would disappear while others emerge. Handler equity in these competing
markets could erode placing some small handlers under greater risk.
Approximately 300 handlers in the Northeast and Southwest markets are
categorized as small handlers, about half of the total number of
handlers.
However, the adoption of a relative use differential could have a
significant impact on small businesses, both producers and processors
that are located in adjacent orders. Because Class I prices would be
able to change independently from each other, significant Class I price
variances may begin to exist. As Class I utilization changes, these
changes may be significant. This lack of alignment between bordering
orders would increase competition in areas where Class I price
differences are significant having a greater impact on small
businesses.
Flat Differentials
The use of flat differentials was considered as an option for
replacing the Class I price structure. Under this system, all Class I
differentials would be established at $1.60 regardless of the location.
Establishing the differentials at an equal level throughout the United
States does not recognize the location value associated with milk.
Because this value would not be reflected in the minimum price under
the Federal order program, flat differentials could affect small
businesses, as shown by the following table.

Flat Class I Differentials in Proposed Orders
(Based on October 1995 Data)
----------------------------------------------------------------------------------------------------------------
Weighted
Flat average Change ($/
Suggested consolidated order \1\ differential differential cwt)
($/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 current order multiplied by the applicable current order differential.

The review of this option indicates that flat differentials could
change the competitive relationship between large and small processors
and producers. Large processors could have a competitive advantage over
small processors in negotiating with producers for supplies of milk at
prices above the established minimum price. Likewise, large producers
could have a better bargaining position when competing with small
producers to supply a processor.
In all areas of the United States, with the exception of the Upper
Midwest, producers and processors would experience significant
decreases in the Class I price. The largest decrease would occur in the
Florida order with the Class I price decreasing $2.29 per
hundredweight. This would result in approximately a $2.06 decrease in
the uniform price paid to producers. Although over-order pricing has
been effective in Florida, it is unlikely that the over-order prices
would be able to offset this total decrease. Data regarding over-order
pricing are not published but an indication of the level is provided by
comparing the Federal order Class I milk price to the announced
cooperatives Class I price. In Miami, Florida, during 1996, the
cooperatives announced price averaged $2.25 per hundredweight higher
than the Southeastern Florida Federal order Class I price.\16\
---------------------------------------------------------------------------

\16\ Table 35--1996 Annual Average Announced Cooperative Class I
Prices in Selected Cities, Dairy Market Statistics, 1996 Annual
Summary, USDA, AMS.
---------------------------------------------------------------------------

Not only could producers suffer from a loss in the value of the
Class I price reflected under the order, but inequity among processors
could occur in the marketplace. More of the value of milk would be
negotiated above the Federal order minimum. Because this value is
outside of the regulatory minimum price, there is little that would
ensure that processors are paying similar prices for milk. This could
impact small processors more than larger processors because of their
lack of resources needed to negotiate and obtain needed supplies of
milk.
The results of implementing flat Class I pricing would be the same
throughout the United States where decreases occur. Areas where flat
differentials would have the greatest impact are located in the
Northeast, Southeast, Southwest, and Central areas. Approximately
34,400 small producers and 480 small handlers are located in these
regions of the United States.

[[Page 4823]]

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

Modified Flat Class I Differentials in Proposed Orders
[Based on October 1995 Data]
----------------------------------------------------------------------------------------------------------------
Weighted avg
Proposed order \1\ Class I use Mod. flat diff.\2\ ($/ Change ($/
(percent) diff. ($/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 current order multiplied by the applicable current order differential.

Like flat differentials, modified flat differentials do not
recognize location values associated with milk. Because this value
would not be reflected in the minimum price under the Federal order
program, modified flat differentials could have a dramatic effect on
small businesses because modified flat differentials would change the
competitive relationship between large and small processors and
producers. Just as with flat differentials, large processors could
maintain a competitive advantage over small processors in negotiating
with producers for supplies of milk at prices above the established
minimum price. Likewise, large producers might retain strong bargaining
positions when competing with small producers to supply a processor.
---------------------------------------------------------------------------

\17\ Table 35--1996 Annual Average Announced Cooperative Class I
Prices in Selected Cities, Dairy Market Statistics, 1996 Annual
Summary, USDA, AMS.
---------------------------------------------------------------------------

Under this modified flat differential, only three orders would meet
the necessary requirement to have a differential established above the
$2.00 flat portion, Appalachian, Southeast, and Florida. Basically,
this system would be equivalent to adopting a flat Class I pricing
system in most of the United States. Although in this example the
impacts appear to be different, with five of the proposed orders
reflecting differential increases, this is only because the flat
portion of the Class I differential is established at $2.00 instead of
$1.60.
---------------------------------------------------------------------------

\18\ The 70 percent figure was merely selected for illustrative
purposes and no analysis has been conducted to determine if this is
an appropriate percentage.
---------------------------------------------------------------------------

As with the flat differential, the Upper Midwest producers and
processors would experience Federal order Class I price increases. In
this example, the estimated price would increase by $0.59 which would
return approximately $0.12 to the producers in a higher uniform price.
The largest decrease would occur in the Southwest and Northeast orders
with a Class I price decrease of $1.01 and $1.13, respectively. The use
of a modifier to the flat differential based on the Class I utilization
would help to mitigate the price decreases in the Southeast orders.

[[Page 4824]]

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

\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.

Demand-Based Class I Differentials for Selected Cities
----------------------------------------------------------------------------------------------------------------
Current Demand-based
Selected location differential differential Change ($/
($/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 producer viewpoint reveals that a
demand based differential system is comparable to a flat differential
option. Producers would only be ensured that the $1.00 portion of the
differential would be returned through the blend price. Ultimately,
this option could result in income losses for all producers, both large
and small. Although additional money is generated by the demand based
differential above the $1.00, this additional money would be used to
fund transportation costs associated with servicing the Class I market.
The differentials are established at a lower level that would
negatively impact all 82,900 producers because of the decrease in the
actual value of Class I revenue that is reflected in the Federal order
minimum price. Thus, the disadvantages that producers, especially small
producers, might experience under a flat or modified flat differential

[[Page 4825]]

system are applicable to demand based differentials.
Like the two previous options, small handlers also could be
disadvantaged, because less of the actual value of Class I milk is
reflected under the regulated price which may lead to both processors
and producer inequity. The potential negative effects discussed under
flat differentials and modified flat differentials also apply to demand
based differentials. In addition, the adoption of demand-based
differentials would result in a significant increase in reporting,
recordkeeping, and compliance activities which would impact all 1,450
handlers, but is likely to be a greater burden on small handlers. To
ensure reimbursement for a portion or all of a processors handling
charges, complete and detailed transportation records must be kept. New
forms would be required for submission, along with copies of all
transportation invoices. The additional information could require more
personnel, training, and technology to automatically keep track of such
information. While the costs associated with this degree of
recordkeeping are not available, they could be significant enough to
disadvantage small businesses.
Because the use of demand-based differentials could result in a
significant increase in regulatory burdens to all handlers as well as
inequity among producers and processors, demand-based differentials are
not considered a viable alternative.
Decoupled Baseline Class I Price with Adjustors
The use of a decoupled baseline Class I price with adjustors was
considered as an option for replacing the Class I price structure.
Under this system, the Class I price would be decoupled from the basic
formula price, or the Class I price mover, and a base price would be
established at a specified level. Adjustments to this base price would
be made utilizing a supply/demand adjustor and possibly a cost of
production indicator.
Under this option for Class I purposes the base price would be
floored at $13.63 per hundredweight, the November 1995 to October 1996
average BFP. This price level would be used to establish Class I prices
using current differentials. A supply/demand adjustor of $0.12 per
hundredweight for each 2 percent change in the rolling average
utilization would be used to change prices in each of the orders to
reflect long-term trends. For example, a Class I utilization change
from 44 percent to 46 percent in a market would result in a $0.12 per
hundredweight gain in the market's Class I differential. Once the
utilization level changes, the new utilization rate becomes the base
for future changes. Thus, if a market falls from 44 percent to 42
percent, the new base for comparing a 2-percentage point change up or
down is 42 percent.
In addition to the supply/demand adjustor, a cost of production
indicator would be developed whereby Class I prices would be increased
in a timely manner when input costs to dairy farmers are increasing.
One such economic indicator might be feed costs. While one such
adjustor was developed and submitted, it was received too late to be
included in this analysis.
The following table illustrates the initial Class I differentials
under the proposed consolidated orders. These differentials are not
location-specific within the applicable orders. For purposes of this
analysis and to provide a basis for comparison within the proposed
consolidated orders, a weighted average Class I differential has been
calculated for each order based on October 1995 data. This weighted
average differential is computed by multiplying the percentage of Class
I milk in each of the current orders that comprise the consolidated
order by the applicable current order differential and adding the
resulting amounts. The weighted average differential is not location-
specific for the consolidated order.
Initially the differentials would be the same. However, as this
option impacts production (supply) and use (demand), there would be a
change in the utilization percentage, thereby causing 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
average I Change in
Proposed order differential differential differential
($/cwt) \1\ ($/cwt) ($/cwt)
----------------------------------------------------------------------------------------------------------------
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 current order multiplied by the applicable current order differential.

The review of this option indicates that the decoupled baseline
Class I price with adjustors would create some disruption in inter-
market price alignment because Class I differentials would be allowed
to adjust independently from each other and may have a serious impact
on producers and processors, particularly small producers and
processors. If Class I differentials are allowed to adjust frequently,
price alignments established between and among markets would disappear
causing inequity among competing handlers. It is this inequity amongst
handlers that would have a significant impact on a small business's
ability to compete in the marketplace.
Analysis completed by the multi-regional ERS model \20\ indicates
that the increase in prices experienced would

[[Page 4826]]

not be sustainable. The results of the model analysis indicate that the
higher floored Class I prices would impact the all milk price and after
3 years, producers would begin experiencing a decrease in the revenue
initially generated by this option. This would occur because the higher
blend prices (caused by higher Class I prices) would stimulate milk
production which would then lead to lower manufacturing prices. Because
it is the blend price that is paid to producers, the increase in the
Class I prices would not be enough to offset the decrease in prices of
the other classes of use and the changes in utilization which would
affect the differential levels.
---------------------------------------------------------------------------

\20\ Economic Research Service multi-regional model of the dairy
industry.
---------------------------------------------------------------------------

Initially Class I differentials would not change however, Class I
prices would increase because of the inclusion of a higher floor price.
With the use of a floor, the variability in Class I prices would be
moderated. However, the use of the floor price may impact the 79,600
smaller producers differently than the 8,400 larger producers because
the smaller producers may not have the necessary financial resources to
endure such a transition.
The Proposed Class I Price Options
The options proposed in this rule are a result of extensive review
of the current marketing structure and other pertinent information.
Extensive outreach, as explained previously, resulted in substantial
input from the public. After gathering the necessary information, two
options were developed and are advanced in this proposed regulation as
viable Class I price structures.
Currently, the Class I price structure recognizes that milk has
value by location. By recognizing that milk has value by location,
small businesses are placed more on the same competitive footing as
large businesses in the minimum prices they pay for milk. The use of
either location-specific differentials or relative-value differentials
would provide the necessary recognition of the location value of milk
but at different levels.
Location-Specific Differentials (Option 1A)
This option would establish a nationally coordinated system of
location-specific Class I price differentials reflecting the relative
economic value of milk by location. An important feature of the option
is including location adjustments that geographically align minimum
Class I milk prices paid by fluid milk processors nationwide regardless
of defined milk marketing area boundaries or order pooling provisions.
A basic premise of this option is that the value of milk varies
according to location across the United States.
The level of the location-specific differentials proposed in this
regulation are such that small businesses would experience minimal
impacts if the regulations were implemented. The differentials are
based on economic model results,\21\ current marketing conditions, and
the costs of obtaining alternative supplies of milk. Since a price is
established for every county under this option, the following table
sets forth examples of adjusted differentials at selected cities. Map 2
and General Provisions Sec. 1000.52, as contained in the discussion on
price structure, set forth the location adjusted differentials in every
county.
---------------------------------------------------------------------------

\21\ USDSS results using May and October 1996 data.

Comparative Location-Specific Class I Differentials at Selected Cities
----------------------------------------------------------------------------------------------------------------
Class I differential
--------------------------------
City Loc.-specific Difference
Current diff
----------------------------------------------------------------------------------------------------------------

(2)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 portions of the United States, this
proposed option would have little impact on most producers both large
and small. Likewise, processors should not experience any substantial
changes in their abilities to compete for milk supplies. In fact,
producers and processors should experience improvements because
location-specific differentials provide improvements in areas under the
current system that are not as well aligned. In addition processors
would experience improvements in competing for milk because the price
is established for each county regardless of where the milk is pooled.
Because more of the actual value of Class I milk is reflected in the
minimum regulated price, both small producers and processors can be
assured of maintaining their ability to compete for a supply of milk.
A review of the six year average quantitative analysis conducted
using the ERS model, assuming implementation of the consolidated
orders, four classes of use, BFP as proposed, and using location-
specific differentials would result in a decrease in Class I
utilization but an increase of $0.03 in the all-milk price. Overall,
this pricing option would result in $55 million increase in cash
receipts.
The use of location-specific differentials would require no
additional reporting, recordkeeping, or compliance requirements.
Relative-Value Specific Differentials (Option 1B).
A nationally coordinated system of relative-value specific Class I
price differentials and adjustments that recognizes several low pricing
areas is the second of two options proposed. These differentials rely
on a least cost

[[Page 4827]]

optimal solution from the USDSS Cornell model to develop a Class I
price structure that is based on the most efficient assembly and
shipment of milk and dairy products to meet all market demands for milk
and its products. This option relies more on the market and the
negotiating ability of processors and producers to generate higher
prices when needed to provide the necessary incentive to move milk in
order to satisfy demand.
Relative-value specific differentials are designed to move the
dairy industry into more market-oriented environment by reducing
reliance on Federal regulations in establishing actual Class I milk
prices. By lowering the differentials in most of the United States,
marketing practices would have a greater impact on Class I values in
the form of over-order prices and only the producers who perform for
the market would benefit. Hence, the adoption of relative-value
differentials would move the dairy industry to rely on the negotiating
abilities of both dairy farmers and processors to determine actual
Class I values. Less efficient small businesses could be disadvantaged
because of the lack of resources and knowledge necessary to effectively
negotiate and maintain necessary price levels. Map 3 and General
Provisions Sec. 1000.52, as contained in the proposed rule, set forth
the differentials in every county. The following table sets forth
adjusted differentials at selected cities.

Comparative Relative Value-Specific Class I Differentials at Selected Cities
----------------------------------------------------------------------------------------------------------------
Rel. value-
City Current diff. specific diff. Difference
----------------------------------------------------------------------------------------------------------------

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

(5) 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

[[Page 4828]]

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 deducted from each consecutive
year's value until the relative value-specific differentials are achieved in 2003.

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

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\
----------------------------------------------------------------------------------------------------------------

(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 program would decrease the
amount of cash receipts removed from the Federal order system from
$388.6 million during the four-year phase-in to a gain of $47.8 million
with the offsetting compensation implementation and then effective
relative-value differentials. The decrease in the all-milk price paid
to producers would also be reduced from $0.04 per cwt to $0.02 per cwt
for the six-year average.
In fact, during the first year of offsetting compensation
implementation the Class I price would increase for all but one of the
Federal orders. On average, for all markets, the Class I price would
increase $0.39 per cwt, the all-milk price would increase an average of
$0.13 per cwt, and total cash receipts would be increased by $193.9
million compared with the baseline. Although these values would be
decreased by the sixth year, with Class I prices projected to decrease
for all Federal order an average of $0.51, the all-milk prices
projected to decrease an average of $0.09, and total cash receipts
projected to decrease $128.5 million, all producers would benefit from
the lessening of the impacts of moving towards the relative-value
differentials.
The third approach to phasing in the relative value-specific
differentials would consist of adding a decreasing ``transitional
payment'' to the base differential that would enhance revenue beyond
what the Class I system would have generated during the four years of
transitioning to the relative value-specific differentials. During this
four-year period, it is projected that $878.4 million would be added to
the Federal order system through the revenue-enhanced payment. This
would result in a net increase of $489.8 million added to the system
once the projected decrease resulting from the relative value-specific
differentials during this period is deducted. This additional money
would not only provide producers with an opportunity to prepare for and
restructure their marketing practices to adapt to more

[[Page 4829]]

market determined Class I pricing but would also allow producers to
obtain the education and resources necessary to become more effective
in a more market-oriented environment. Again, the payment in the first
year would be the highest with reductions occurring thereafter to
result in implementation of the relative value-specific differentials
by 2003. The additional payment would equal $1.10 per hundredweight of
Class I in 1999, $0.70 per hundredweight in 2000, $0.40 per
hundredweight in 2001, and $0.20 per hundredweight in 2002. The
following table sets forth the adjusted Class I differentials under
this revenue-enhancement phase-in option 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\
----------------------------------------------------------------------------------------------------------------

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

[[Page 4830]]

Class III-A price has put manufacturers of sweetened condensed milk at
a competitive disadvantage with manufacturers of nonfat dry milk, which
can be substituted for bulk sweetened condensed milk and skim milk in
some higher-valued products.
Although this proposed rule does not recommend a reclassification
for milk used in bulk sweetened condensed milk, it does propose a
change in the relationship between the Class II and IV prices which
should eliminate the price disparity that now, at times, exists. As
discussed in the ``Class III and Class III-A (i.e., Class IV) Milk''
section of this proposed rule, the proposed new Class II price will be
equal to the Class IV price plus a 70-cent differential. The coupling
of the Class II and Class IV prices will largely remove the incentive
to substitute nonfat dry milk for bulk sweetened condensed milk.
The recommendations regarding shrinkage provisions should provide
equity among handlers, improve market efficiencies, and facilitate
accounting procedures. This proposed rule provides that shrinkage be
assigned pro rata based on a handler's utilization. As discussed in the
``Shrinkage and Overage'' section of this proposed rule, this
modification should result in a slight increase (i.e., one cent per
cwt.) in the blend price paid to producers.
For the reasons stated above, the milk classification provisions
proposed herein should have little economic and regulatory impact on
small businesses.

Paperwork Reduction Act of 1995

The information collection requirements contained in this proposed
rule previously were approved by the Office of Management and Budget
(OMB) pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C.
chapter 35) under OMB control number 0581-0032, through May 31, 1998. A
notice of request for a three-year extension and revision of this
currently approved information collection was published in the December
2, 1997, Federal Register (62 FR 63693), which invited comments from
the public through February 2, 1998.
The amendments set forth in this proposed rule do not contain
additional information collections that require clearance by the OMB
under the provisions of 44 U.S.C. Chapter 35. Following is a general
description of the reporting and recordkeeping requirements, reasons
for these requirements and an estimate of the annual burden on the
dairy industry.
Title: Report Forms Under Federal Milk Orders (From Milk Handlers
and Milk Marketing Cooperatives).
OMB Control Number: 0581-0032.
Expiration Date of Approval: May 31, 1998.
Type of Request: Extension and revision of a currently approved
information collection.
Abstract: Federal Milk Marketing Order regulations authorized under
the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C.
601-674), require milk handlers to report in detail the receipt and
utilization of milk and milk products handled at each of their plants
that are regulated by a Federal Order. The data are needed to
administer the classified pricing system and related requirements of
each Federal Order.
Rulemaking amendments to the orders must be approved in referenda
conducted by the Secretary.
The terms of each of the current milk marketing orders are found at
7 CFR Parts 1001-1199; the terms of each of the proposed orders in this
document are found at 7 CFR Parts 1001-1134. The authority for
requiring reports is found at 8c (5) and (7) and 8d of the Act. The
current authority for requiring records to be kept is found in the
general provisions at 7 CFR Part 1000.5. In this proposed rule, this
authority is found in the general provisions at 7 CFR Part 1000.27. The
Act also provides for milk marketing agreements, but there are none in
effect.
A Federal milk marketing order is a regulation issued by the
Secretary of Agriculture that places certain requirements on the
handling of milk in the area it covers. It requires that handlers of
milk for a marketing area pay not less than certain minimum class
prices according to how the milk is used. These prices are established
under an order on the basis of evidence concerning the supply and
demand conditions for milk in the market. A milk order requires that
payments for milk be pooled and paid to individual farmers or
cooperative associations of farmers of the basis on a uniform or
average price. Thus, all eligible farmers (producers) share in the
market wide use-values of milk by regulated handlers.
The Report of Receipts and Utilization and the Producer Payroll
Report are completed by regulated milk handlers and milk marketing
cooperatives and are the principal reporting forms needed to administer
the 31 Federal milk marketing orders.
The orders also provide for the public dissemination of market
statistics and other information for the benefit of producers,
handlers, and consumers. Each milk order is administered by a market
administrator who is an agent of the Secretary of Agriculture. Part of
the market administrator's duties are to prescribe reports required of
each handler, and to assure that handlers properly account for milk and
milk products, and that such handlers pay producers and associations of
producers according to the provisions of the order. The market
administrator employs a staff that verifies handlers' reports by
examining records to determine that the required payments are made to
producers. Most reports required from handlers are submitted monthly to
the market administrator. Confidentiality of information collection is
assured through Section 608(d) of the Act, which imposes substantial
penalties on anyone violating these confidentiality requirements.
The forms used by the market administrators are required by the
respective milk orders that are authorized by the Act. The forms are
authorized either in the general provisions (Part 1000) or in the
sections of the respective orders. The forms are used to establish the
quantity of milk received by handlers, the pooling status of handlers,
the class-use of the milk used by the handler and the butterfat content
and amounts of other components of the milk.
The frequency of performing these recordkeeping and reporting
duties varies according to the form; the frequency ranges from ``on
occasion'' to ``annually'' but ``monthly'' is perhaps most common. In
general, most of the information that handlers report to the market
administrator is readily available from normally maintained business
records. Thus, the burden on handlers to complete these recordkeeping
and reporting requirements is expected to be minimal. In addition,
assistance in completing forms is readily available from market
administrator offices.
Regarding the use of improved information technology to reduce the
reporting and recordkeeping burden, the information requested is the
minimum necessary to carry out the program. Since the type of
information required to be collected and the certification and
reporting of that information is required, no other alternative to the
mode of information collection has been found. However, where possible,
reported information is accepted using computer tapes or diskettes as
alternatives to submitting the requested information on these report
forms. Comments are requested to help assess the number of handlers
using computers, word processors and other electronic equipment to
create and store documents, as well as the extent to

[[Page 4831]]

which the Internet is used to exchange information.
We are confident that the information we collect does not duplicate
information already available. Dairy Programs has an ongoing
relationship with many organizations in the dairy industry that also
respond to other governmental agencies. Thus, we are aware of the
reports dairy industry organizations are submitting to other government
agencies.
Information collection requirements have been reduced to the
minimum requirements of the order, thus minimizing the burden on all
handlers--those considered to be small as well as large entities. Forms
require only a minimal amount of information which can be supplied
without data processing equipment or a trained statistical staff. The
primary source of data used to complete the forms is routinely used in
all business transactions. Thus, the information collection and
reporting burden is relatively small. Requiring the same reporting
requirements for all handlers does not significantly disadvantage any
handler that is smaller than industry average.
If the collection of this information were conducted less
frequently, data needed to keep the Secretary informed concerning
industry operations would not be available. Timing and frequency of the
various reports are such to meet the needs of the industry and yet
minimize the burden of the reporting public.
The collection of the required information is conducted in a manner
consistent with guidelines in 5 CFR 1320.6. The orders require that the
market administrator compute monthly minimum prices to producers based
on monthly information. Without monthly information, the market
administrator, for example, would not have the information to compute
each monthly price, nor to know if handlers were paying producers on
dates prescribed in the order, such as the advance payment for milk
received the first 15 days of the month and the final payment which is
payable after the end of the month. The Act imposes penalties for order
violations, such as the failure to pay producers not later than
prescribed dates. The orders require payments to and from the producer-
settlement fund to be made monthly. Also, class prices are based on the
monthly Basic Formula price series.

Annual Reporting and Recordkeeping Burden

Estimate of Burden: Public reporting burden for this collection of
information is estimated to average 0.87 hours per response.
Respondents: Milk Handlers and Milk Marketing Cooperatives.
Estimated Number of Respondents: 772.
Estimated Number of Responses per Respondent: 35.
Estimated Total Annual Burden on Respondents: 23,858 hours.
Estimated annual cost to respondents for report preparation:
$276,514 (23,858 hours at $11.59 per hour). Although hourly rates vary
among handlers in various localities, the wage paid to clerical workers
engaged in report preparation is estimated to be comparable to about a
grade GS-7, step 1.
It is important to note that the burden being reported is an
estimate of the amount of time that would be required of current
program participants, as was published in the Notice of Request for
Extension, referenced in the introductory text of this section.
It is expected that this proposed rule would have little impact on
the reporting and recordkeeping burden on handlers regulated under the
Federal milk marketing order program. In fact, as a result of the
consolidation of Federal orders from 31 to 11 as proposed, an overall
reduction in reporting and recordkeeping requirements may occur due to
greater uniformity in forms used and fewer ``special'' forms that
currently apply to one or a few orders.
Non-substantial changes would be necessary on the required reports
and records to correctly identify the new Federal market order (e.g.
the current--and separate--reports for the Upper Florida, Tampa Bay and
Southeastern Florida marketing areas would be combined into one report
for the Florida marketing area).

Request for Public Input

Comments on the Executive Order 12866 analysis, the initial
regulatory flexibility analysis, and the paperwork reduction analysis
are requested. Specifically, interested parties are invited to submit
comments on the regulatory and informational impacts of this proposed
rule on small businesses. Comments are requested within 60 days of
publication of this proposed rule in the Federal Register. Comments
should be mailed to USDA/AMS/Dairy Programs, Order Formulation Branch,
Room 2968, South Building, P.O. Box 96456, Washington, D.C. 20090-6456.

Preliminary Statement

The material issues in this proposed rule relate to:

1. Consolidation of marketing areas.
2. Basic formula price replacement and other class price issues.
3. Class I price structure.
4. Classification of milk and related issues.
5. Provisions applicable to all orders.
6. Regional issues:
a. Northeast Region.
b. Southeast Region.
c. Midwest Region.
d. Western Region.
7. Miscellaneous and administrative matters.
a. Consolidation of the marketing service, administrative
expense, and producer-settlement funds.
b. Consolidation of the transportation credit balancing funds.
c. Proposed general findings.

II. Discussion of Material Issues and Proposed Amendments to the
Orders

A discussion and explanation of the material issues and proposals
contained in this rule are as follows:

1. Consolidation of Marketing Areas

Subtitle D, Chapter 1 of the 1996 Farm Bill, entitled
``Consolidation and Reform of Federal Milk Marketing Orders,''
requires, among other things, that the Federal milk marketing orders be
limited to not less than 10 and not more than 14. Over 400 public
comments have been received in response to requests from USDA for
public input on the subject of order consolidation. Two preliminary
reports on order consolidation have been issued by the Agricultural
Marketing Service's Dairy Division. The initial Preliminary Report on
Order Consolidation was issued in December 1996, and the Revised
Preliminary Report was issued in May 1997. The December 1996 Report
suggested that the 32 Federal milk marketing orders then in existence
be consolidated to 10, and the May 1997 Report suggested 11. All
comments received by the Department have been considered in the
development of this proposed rule.
Although the Farm Bill specifically provides for the inclusion of
California as a separate Federal milk order, the provision is
contingent upon petition and approval by California producers. Interest
in a Federal milk order has been expressed by some California
producers, but the degree of interest expressed and the input provided
by the producers has not been adequate to proceed with a proposed order
for California.
The preliminary reports concerning order consolidation and this
proposal were prepared using data gathered about receipts and
distribution of fluid milk products by all known distributing

[[Page 4832]]

plants located in the 47 contiguous states, not including the State of
California. Data describing the sources and disposition of fluid milk
products for the month of October 1995 was used to compile the initial
Preliminary Report. In response to comments and questions about certain
marketing area boundaries and changes in marketing conditions in some
of the markets after publication of the initial Preliminary Report,
data concerning these markets was updated to January 1997, and more
detailed information was gathered regarding the geographic distribution
of route sales by individual handlers and their specific sources of
producer milk. Specifically, such information was gathered for all or
parts of the initially-suggested Northeast, Appalachian, Southeast,
Mideast, Central, and Western marketing areas.
The eleven marketing areas suggested in the Revised Preliminary
Report on Order Consolidation have, in some cases, been modified for
this proposed rule. Several of the suggested marketing areas were the
subjects of numerous comments containing information that indicated
that the boundaries of those areas should be re-evaluated. As a result
of the comments received, marketing data was further examined and
analyzed for some of the suggested consolidated marketing areas to
determine the most appropriate configurations of the consolidated areas
to be included in this proposed rule. The result of the examination and
analysis was to modify significantly from the Revised Preliminary
Report the marketing areas of the proposed Northeast, Mideast, Upper
Midwest, Central, and Southeast orders, and to make minor modifications
to the marketing area of the proposed Appalachian order.
As in the case of data referring to the operations of less than
three handlers or producers in the initial and Revised Preliminary
Consolidation Reports, some of the data used to arrive at the proposed
consolidated areas is restricted from use by the public because it
refers to individual fluid milk distributing plants and the origins of
producer milk supply for those plants. However, the basis for the
proposed marketing area boundaries is described as specifically as
possible without divulging such proprietary information.
Seven primary criteria were used in determining which markets
exhibit a sufficient degree of association in terms of sales,
procurement, and structural relationships to warrant consolidation.
These are the same criteria which were used in the two reports on order
consolidation issued by the Dairy Division (November 1996 and May
1997). The criteria are as follows:
1. Overlapping Route Disposition
The movement of packaged milk between Federal orders indicates that
plants from more than one Federal order are in competition with each
other for Class I sales. In addition, a degree of overlap that results
in the regulatory status of plants shifting between orders creates
disorderly conditions in changing price relationships between competing
handlers and neighboring producers. This criterion is considered to be
the most important.
2. Overlapping Areas of Milk Supply
This criterion applies principally to areas in which major
proportions of the milk supply are shared between more than one order.
The competitive factors affecting the cost of a handler's milk supply
are influenced by the location of the supply. The pooling of milk
produced within the same procurement area under the same order
facilitates the uniform pricing of producer milk. Consideration of the
criterion of overlapping procurement areas does not mean that all areas
having overlapping areas of milk procurement should be consolidated. An
area that supplies a minor proportion of an adjoining area's milk
supply with a minor proportion of its own total milk production while
handlers located in the area are engaged in minimal competition with
handlers located in the adjoining area likely do not have a strong
enough association with the adjoining area to require consolidation.
For a number of the proposed consolidated areas it would be very
difficult, if not impossible to find a boundary across which
significant quantities of milk are not procured for other marketing
areas. In such cases, analysis was done to determine where the minimal
amount of route disposition overlap between areas occurred, and the
criterion of overlapping route disposition generally was given greater
weight than overlapping areas of milk supply. Some analysis also was
done to determine whether milk pooled on adjacent markets reflects
actual movements of milk between markets, or whether the variations in
amounts pooled under a given order may indicate that some milk is
pooled to take advantage of price differences rather than because it is
needed for Class I use in the other market.
3. Number of Handlers Within a Market
Formation of larger-size markets is a stabilizing factor. Shifts of
milk and/or plants between markets becomes less of a disruptive factor
in larger markets. Also, the existence of Federal order markets with
handlers too few in number to allow meaningful statistics to be
published without disclosing proprietary information should be avoided.
4. Natural Boundaries
Natural boundaries and barriers such as mountains and deserts often
inhibit the movement of milk between areas, and generally reflect a
lack of population (limiting the range of the consumption area) and
lack of milk production. Therefore, they have an effect on the
placement of marketing area boundaries. In addition, for the purposes
of market consolidation, large unregulated areas and political
boundaries also are considered a type of natural barrier.
5. Cooperative Association Service Areas
While not one of the first criteria used to determine marketing
areas, cooperative membership often may be an indication of market
association. Therefore, data concerning cooperative membership can
provide additional support for combining certain marketing areas.
6. Features or Regulatory Provisions Common to Existing Orders
Markets that already have similar regulatory provisions that
recognize similar marketing conditions may have a head start on the
consolidation process. With calculation of the basic formula price
replacement on the basis of components, however, this criterion becomes
less important. The consolidation of markets having different payment
plans will be more dependent on whether the basic formula component
pricing plan is appropriate for a given consolidated market, or whether
it would be more appropriate to adopt a pricing plan using
hundredweight pricing derived from component prices.
7. Milk Utilization in Common Dairy Products
Utilization of milk in similar manufactured products (cheese vs.
butter-powder) was also considered to be an important criterion in
determining how to consolidate the existing orders.

Comments on Consolidation Criteria

Most of the comments received relative to order consolidation
criteria agreed that overlapping route disposition and milk procurement
are the most important criteria to consider in the consolidation
process. In

[[Page 4833]]

addition, Class I use percentages and regulation on the basis of
handler location were noted as criteria to consider. To some extent,
the consolidated marketing areas included in this proposed rule do
combine markets with similar Class I utilization rates rather than
markets that would result in Class I use percentages being more uniform
between markets. This result occurs because adjoining markets, where
most of the sales and procurement competition takes place between
handlers regulated under different orders, tend to have similar
utilization rates rather than because the criterion is one that should
be used to determine appropriate consolidations. Also, Class I
utilization rates are a function of how much milk is pooled on an order
with a given amount of Class I use. Differences in rates, to the extent
they result in differences in blend prices paid to producers, provide
an incentive for milk to move from markets with lower Class I
utilization percentages to markets with higher Class I use.
Regulation of processors on the basis of their location rather than
their sales areas has largely been incorporated in the proposed orders
by a provision that would pool a handler under the order for the area
in which the handler is located unless more than 50 percent of the
handler's Class I route dispositions are distributed in another order
area. This provision should help to assure that the order under which a
distributing plant is pooled will change from month to month, and that
a plant operator is subject to the same provisions, such as producer
pay prices, as are its primary competitors.
The proposed orders also include a provision that locks plants
processing primarily ultra-high temperature (UHT) milk into regulation
under the order for the area in which the plant is located. Such plants
often have widely dispersed route sales into a number of order areas,
with sporadic deliveries to different areas. Without some type of lock-
in provision, a UHT plant may be pooled in several different orders in
as many months. At the same time, the plant's milk supply generally is
procured from a given group of producers located in the same area as
the UHT plant. Having the plant pooled under a succession of different
orders with widely varying blend prices creates a disorderly condition
for the producers involved.
On the basis of the distributing plant pooling standards included
for all eleven orders in this proposed rule, there are only two
distributing plants that would be fully regulated under an order other
than the ones in which they are located. These plants are the
Superbrand Dairy Products distributing plant in Greenville, South
Carolina; and the Ryan Milk Company plant in Murray, Kentucky. The
Superbrand plant likely will qualify for pooling under the proposed
Southeast order, and the Ryan Milk Company plant, due to the nature of
its extended shelf-life products, may qualify under any of several
orders, depending on its dispositions in any particular month.
Additional lock-in provisions are incorporated in both of these cases
to assure that the plants are pooled in the area in which they compete
for a producer milk supply and, in the case of the Ryan plant, that it
will be pooled consistently under one order.
Several comments advocated that all of a state's territory should
be included in one Federal order to assure that all producers in a
state are paid on an equitable basis, or to make it easier to maintain
state statistical data. One of the primary reasons for Federal milk
orders is that milk marketing occurs readily across state boundaries,
making state milk marketing regulation more difficult to enforce. It is
important that Federal milk marketing areas continue to recognize the
free interstate movement of milk to and from milk plants. There are
cases where natural boundaries such as mountains or rivers may result
in part of a state having a closer marketing relationship with an
adjoining state than with other areas of the same state.
The initial Preliminary Report on Order Consolidation stated that
the Farm Bill requirement to consolidate existing marketing areas does
not specify expansion of regulation to previously non-Federally
regulated areas where such expansion would have the effect of
regulating handlers not currently regulated. However, on the basis of
data, views and arguments filed by interested persons in response to
the initial Preliminary Report requesting that currently non-Federally
regulated areas be added to some consolidated marketing areas, the
Revised Preliminary Report suggested that such areas be added to
several of the consolidated areas. Handlers who would be affected by
the expansion of Federal order areas into currently non-Federally
regulated areas were notified of the possible change in their status,
and encouraged to comment.
Handlers located in Pennsylvania Milk Marketing Board (PMMB) areas
2, 3, and 6 are regulated under the State of Pennsylvania if they do
not have enough sales in any Federal order area to meet an order's
pooling standards. (If such plants do meet Federal order pooling
standards, the State of Pennsylvania continues to enforce some of its
regulations in addition to Federal order regulations). As State-
regulated handlers, they must pay a Class I price for milk used in
fluid products, often higher than the Federal order price would be.
Inclusion of the Pennsylvania-regulated handlers in the consolidated
marketing area, as in the case of including Maine or Virginia, would
have little effect on handlers' costs of Class I milk (or might reduce
them), while reducing producer returns.
Based on the comments received in response to the Revised
Preliminary Report on Order Consolidation it has been determined that
consolidation of the existing orders does not necessitate expansion of
the consolidated orders into areas in which handlers are subject to
minimum Class I pricing under State regulation, especially when the
states' Class I prices exceed or equal those that would be established
under Federal milk order regulation. Such regulation would have the
effect of reducing returns to producers already included under State
regulation without significantly affecting prices paid by handlers who
compete with Federally-regulated handlers.
In order to avoid extending Federal regulation to handlers whose
primary sales areas are outside current Federal order marketing areas,
but who already are subject to similar minimum uniform pricing under
State regulation, the in-area Class I disposition percentage portion of
the pool distributing plant definition is proposed to be 25 percent for
the Northeast order and 30 percent for the Mideast order, instead of
the 10 or 15 percent used in the other nine consolidated order areas.
The higher level of in-area sales required for pool status under these
proposed orders will allow State-regulated plants to operate at their
current level of sales within Federal order areas without being subject
to full Federal order regulation.
As in both the initial and revised preliminary reports, ``pockets''
of unregulated areas within and between current order areas are
included in the proposed consolidated marketing areas. The addition of
currently-unregulated areas to Federal milk order areas can benefit
regulated handlers by eliminating the necessity of reporting sales
outside the Federal order marketing area for the purpose of determining
pool qualification. Where such areas can be added to a consolidated
order area without having the effect of causing the regulation of any
currently-unregulated handler, they are proposed to be added.

[[Page 4834]]

Cornell University Study

In addition to AMS' analysis of the receipt and distribution data
in the development of this proposal, researchers at Cornell University
also provided input on potential consolidated marketing areas. This
input was part of Cornell's partnership agreement with AMS to provide
alternative analyses on Federal order reform issues. These researchers
used an econometric model (the Cornell U.S. Dairy Sector Simulator, or
USDSS), to determine 10-14 optimal marketing areas. Cornell's first
options for 10-14 marketing areas were presented at an October 1996
invitational workshop for dairy economists and policy analysts held in
Atlanta, Georgia. Based on USDSS model results, these options would
result in minimum cost flows of milk using the known concentrations of
milk production and population, without considering the location of
milk plants. The marketing area maps that were circulated using these
first results were those referenced by interested persons who cited the
Cornell results in their comments on the initial Preliminary Report on
Order Consolidation.
A second set of options was presented by Cornell researchers in
spring 1997. These options were generated with a further-developed
USDSS model. In updating the model, the researchers enhanced the inputs
to its model as a means of better reflecting the actual structure of
the national market for fluid milk products. These model updates
allowed for determination of the minimum cost flows of: milk,
intermediate and final products from producers to plants; from plants
to plants; and from plants to consumers on the basis of the locations
of milk supplies, dairy product processing plants, and consumers. The
enhanced model is intended to provide for geographic market definition
on the basis of a resulting set of optimal, efficient simulated flows
of milk and dairy products between locations.
Although the USDSS model considers important factors such as milk
supply, processing, and demand locations and transportation constraints
in determining the optimal consolidated marketing areas, it does not
include several other important circumstances that influence dairy
industry and Federal order participants or the movement of milk which
must be considered in this reform process. The USDSS model does not
recognize that large areas, such as California, Virginia, Maine,
Montana, large portions of Pennsylvania, and Wyoming, currently are not
included in Federal milk order regulation, and does not recognize the
Farm Bill requirement that, if included as a Federal order, the State
of California be brought in as one order confined to the borders of
California. Although the USDSS model incorporates highway mileage
between milk production areas and milk plants, and between milk plants
and consumers, it does not recognize features such as mountain ranges
that affect hauling costs and may inhibit milk from moving. By
attempting to maximize efficiencies in milk marketing, the model also
does not recognize the existence of competing handlers operating plants
in the same city or having the extent of handlers' route dispositions
influenced by the existence of plants operated by the same handler in
other locations. In addition, the model does not recognize that
movements of producer milk often are determined by supply contracts
between cooperatives and handlers or by the location of a handler's
nonmember supply.
AMS is unaware of any other analyses performed to determine or
suggest consolidated marketing areas.
As noted before, AMS' analysis focused primarily on distributing
plant receipts and distribution information for October 1995, with more
current information used as needed for further analysis. The data
gathered by the Dairy Division from Federal Milk Market Administrators
reflects actual movements of milk, both from production areas to
processing plants, and from processing plants to consumption areas.
This proposal considers this data, the seven criteria described fully
above, and the factors not recognized in the USDSS model. Use of the
USDSS may be an excellent way of determining where processing plants
should be located to maximize the efficiencies of milk assembly and
distribution, but is a less accurate means of determining where
existing handlers actually compete for milk supplies and sales. The
consolidated marketing area options presented by Cornell are not
adopted because the USDSS model does not adequately reflect issues or
factors that strongly affect which current marketing areas are most
closely related. For this reason, this proposed rule is based on data
reflecting actual distribution and procurement by fluid milk processing
plants.

Proposed Marketing Areas

Following are maps of the current marketing areas and the 11
proposed marketing areas, followed by brief descriptions of the
proposed areas (with those modified from the Revised Preliminary
Report, and the modifications, marked by *) and the major reasons for
consolidation. A more detailed description of each proposed
consolidated order follows this summary.
At the end of the Order Consolidation portion of the proposed rule
is appended a list of distributing plants associated with each proposed
marketing area, with each plant's expected regulatory status.

BILLING CODE 3410-02-P

[[Page 4835]]

[GRAPHIC] [TIFF OMITTED] TP30JA98.000

[[Page 4836]]

[GRAPHIC] [TIFF OMITTED] TP30JA98.001

BILLING CODE 3410-02-C

[[Page 4837]]

Proposed Eleven Marketing Areas

* 1. Northeast--current marketing areas of the New England, New
York-New Jersey and Middle Atlantic Federal milk orders, with the
addition of: the contiguous unregulated areas of New Hampshire,
northern New York and Vermont; the non-Federally regulated portions of
Massachusetts; and the Western New York State order area. * The areas
previously suggested to be included in the expanded Northeast order
area (the southern tier of 3 western New York counties and Pennsylvania
Milk Marketing Board Areas 2 and 3) have not been included in the
proposed Northeast marketing area. The handlers who would be added to
those currently fully regulated under the three separate orders either
have a sufficient percentage of their route disposition within the
consolidated marketing area to meet the proposed pooling requirements
or are those located in the area proposed to be added.
Reasons for consolidation include the existence of overlapping
sales and procurement areas between New England and New York-New Jersey
and between New York-New Jersey and Middle Atlantic. An important
measure of association is evidenced by industry efforts to study and
pursue consolidation of the three Federal orders prior to the 1996 Farm
Bill.
* 2. Appalachian--current marketing areas of the Carolina and
Louisville-Lexington-Evansville (minus Logan County, Kentucky) Federal
milk orders plus the recently-terminated Tennessee Valley area, with
the addition of * 21 currently-unregulated counties in Indiana and
Kentucky. Five Kentucky counties that were part of the former Paducah
order area and previously were suggested to be added to the Appalachian
order area have been proposed for addition to the Southeast order
instead.
Overlapping sales and procurement areas between these marketing
areas are major factors for proposing this consolidation.
3. Florida--current marketing areas of the Upper Florida, ampa Bay,
and Southeastern Florida Federal milk orders.
Natural boundary limitations and overlapping sales and procurement
areas among the three orders are major reasons for consolidation, as
well as a measure of association evidenced by cooperative association
proposals to consolidate these three marketing areas. Further, the
cooperative associations in this area have worked together for a number
of years to accommodate needed movements of milk between the three
Florida Federal orders.
* 4. Southeast--current marketing area of the Southeast Federal
milk order, plus 1 county from the Louisville-Lexington-Evansville
Federal milk order marketing area; * plus 11 northwest Arkansas
counties and 22 entire and 1 partial Missouri county that currently are
part of the Southwest Plains marketing area; * plus 6 Missouri counties
that currently are part of the Southern Illinois-Eastern Missouri
marketing area; * plus 16 currently unregulated southeast Missouri
counties (including 4 that were part of the former Paducah marketing
area); plus 20 currently-unregulated Kentucky counties (* including 5
from the former Paducah marketing area that previously had been
suggested for inclusion with the Appalachian area).
Major reasons for this consolidation include sales and procurement
area overlaps between the Southeast order and these counties. The
proposed addition of the Kentucky portion of the former Paducah,
Kentucky, order area to the Southeast is in the nature of a fine-tuning
adjustment in order boundaries. The addition of the Arkansas and
Missouri counties recognizes a number of industry comments.
* 5. Mideast--current marketing areas of the Ohio Valley, Eastern
Ohio-Western Pennsylvania, Southern Michigan and Indiana Federal milk
orders, plus Zone 2 of the Michigan Upper Peninsula Federal milk order,
and currently-unregulated counties in Michigan, Indiana and Ohio. * The
current Pennsylvania Milk Marketing Board Area 6 and the two most
western of the southern tier of counties in New York are not included
in the proposed Mideast marketing area.
Major criteria for this proposed consolidation include the overlap
of fluid sales in the Ohio Valley marketing area by handlers from the
other areas proposed to be consolidated. With the consolidation, most
route disposition by handlers located within the suggested Mideast
order would be within the marketing area. Also, nearly all milk
produced within the area would be pooled under the consolidated order.
The portion of the Michigan Upper Peninsula marketing area proposed to
be included in the Mideast consolidated area has sales and milk
procurement areas in common with the Southern Michigan area and has
minimal association with the western end of the current Michigan Upper
Peninsula marketing area.
* 6. Upper Midwest--current marketing areas of the Chicago
Regional, Upper Midwest, Zones I and I(a) of the Michigan Upper
Peninsula Federal milk orders, and unregulated portions of Wisconsin.
The * Iowa, * Eastern South Dakota and * Nebraska-Western Iowa Federal
order areas suggested to be added to this consolidated area in the
revised report are proposed instead to be included in the Central
consolidated area.
Major consolidation criteria include an overlapping procurement
area between the Chicago Regional and Upper Midwest orders and
overlapping procurement and route disposition area between the western
end of the Michigan Upper Peninsula order and the Chicago Regional
order. A number of the same cooperative associations market member milk
throughout the proposed area.
The overlapping of procurement between the Chicago Regional and
Upper Midwest order areas and the Iowa, Eastern South Dakota and
Nebraska-Western Iowa order areas is, it was pointed out in comments
received in response to the Revised Preliminary Report, due largely to
milk pooled on the more southern orders when advantageous because of
price differences. As a result, the volume of milk pooled on the Iowa,
Eastern South Dakota and Nebraska-Western Iowa orders from Minnesota
and Wisconsin fluctuates greatly, without any discernable relationship
to amounts of milk needed from those areas at plants in the more
southern areas.
The other consolidation criteria mentioned in the Revised
Preliminary Report as reasons for consolidating the Iowa, Eastern South
Dakota and Nebraska-Western Iowa order areas with the Chicago Regional
and Upper Midwest areas also are applicable to the combination of these
areas with the consolidated Central area.
* 7. Central--current marketing areas of the Southern Illinois-
Eastern Missouri, Central Illinois, Greater Kansas City, Southwest
Plains, Eastern Colorado, * Nebraska-Western Iowa, * Eastern South
Dakota and * Iowa Federal milk orders, minus * 11 northwest Arkansas
counties and 22 entire and 1 partial Missouri county that are part of
the current Southwest Plains marketing area, minus * 6 Missouri
counties that are part of the current Southern Illinois-Eastern
Missouri marketing area, plus * 54 currently-unregulated counties in
Kansas, Missouri, Illinois, Iowa, Nebraska and Colorado, * plus 14
counties in central Missouri that are not considered to be part of the
distribution area of an unregulated handler in central Missouri. This
configuration would leave 25 unregulated counties in central Missouri

[[Page 4838]]

that are intended to delineate the distribution area of Central Dairy
at Jefferson City, Missouri.
Major criteria on which this proposed consolidation is based
include overlapping route disposition and procurement between the
current orders. The proposed consolidation would result in a
concentration of both the sales and supplies of milk within the
consolidated marketing area. The proposed consolidation would combine
several relatively small orders and provide for the release of market
data without revealing proprietary information. In addition, many of
the producers in these areas share membership in several common
cooperatives.
8. Southwest--current marketing areas of Texas and New Mexico-West
Texas Federal milk orders, with the addition of two currently-
unregulated northeast Texas counties and 47 currently-unregulated
counties in southwest Texas.
Major criteria supporting this proposed consolidation include sales
and procurement area overlaps and common cooperative association
membership between the Texas and New Mexico-West Texas marketing areas,
and similar marketing concerns with respect to trade with Mexico for
both orders. Addition of the currently-unregulated Texas counties will
result in the regulation of no additional handlers, and will reduce
handlers' recordkeeping and reporting burden and the market
administrator's administrative costs.
9. Arizona-Las Vegas--current marketing area of Central Arizona,
plus the Clark County, Nevada, portion of the current Great Basin
marketing area, plus eight currently-unregulated Arizona counties.
The major criterion on which the proposed consolidation is based is
sales overlap between the sole Las Vegas, Nevada, handler and handlers
regulated under the Central Arizona order in both Clark County, Nevada,
and unregulated portions of northern Arizona. The Grand Canyon and
sparsely populated areas in the northwest part of Arizona, and the
sparsely populated desert region of eastern Arizona constitute natural
barriers between this and adjacent marketing areas. In addition,
significant volumes of bulk and packaged milk are exchanged between the
Arizona-Las Vegas area and Southern California.
10. Western--current marketing areas of the Western Colorado,
Southwestern Idaho-Eastern Oregon, and Great Basin Federal milk orders,
minus Clark County, Nevada. The major criteria on which the proposed
consolidation is based include overlapping sales between Southwestern
Idaho-Eastern Oregon and Great Basin, as well as a significant overlap
in procurement for the two orders in five Idaho counties. The two
orders also have similar multiple component pricing plans. The Western
Colorado order is included because it is a small market where data
cannot be released without revealing confidential information unless
combined with data pertaining to another marketing area, and has at
least as great a relationship with the adjacent Great Basin market as
with any other.
Collection of detailed data for individual handlers indicates that
the strength of earlier relationships between the former Great Basin
and Lake Mead orders that justified their 1988 merger have dwindled
significantly, with the Las Vegas area now more closely related to
southern California and competing most heavily with Central Arizona
handlers.
11. Pacific Northwest--current marketing area of the Pacific
Northwest Federal milk order plus 1 currently-unregulated county in
Oregon. The degree of association with other marketing areas is
insufficient to warrant consolidation.

Table 1.--Market Information: Population, Utilization, Producer Milk and Weighted Average Utilization Value
(WAUV) in Proposed Marketing Areas
----------------------------------------------------------------------------------------------------------------
Class I Producer milk
Market Population \1\ utilization \2\ (1000 WAUV \2\^{,\3\
(millions) \2\ (percent) 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 price--shown solely for the purpose of showing impact of consolidation on utilization.

Table 2.--Market Information: Number of Plants in Proposed Marketing Areas
----------------------------------------------------------------------------------------------------------------
Distributing plants \1\
------------------------------------------------ Manufacturing
Market Fully FR small and supply
regulated (FR) Exempt \2\ businesses plants \3\
----------------------------------------------------------------------------------------------------------------
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

[[Page 4839]]

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 Marketing Areas

Each of the proposed consolidated order areas is described in the
text following this introduction. The criteria which were used to
determine which areas should be consolidated are explained in detail.
For each proposed area, the following information is included:
Geography. The political units (states, counties, and portions of
counties) included in each area, the topography, and the climatic
conditions are described for the purpose of delineating the territory
to be incorporated in each proposed marketing area and describing its
characteristics pertaining to milk production and consumption. This
information was derived principally from Microsoft
Encarta 96 Encyclopedia, and augmented by several U.S.
atlases.
Population. The total population of each area and its distribution
within the area is included for the purpose of identifying where milk
is consumed. July 1, 1996, population estimates were obtained from
``CO-96-8 Estimates of the Population of Counties and Demographic
Population Change,'' Population Estimates Division of the U.S. Bureau
of the Census.
Metropolitan Statistical Area (MSA) information is provided by the
United States Office of Management and Budget (OMB), which defines
metropolitan areas according to published standards that are applied to
Census Bureau data. To be described as an MSA, an area (one or more
counties) must include at least one city with 50,000 or more
inhabitants, or a Census Bureau-defined urbanized area (of at least
50,000 inhabitants) and a total metropolitan population of at least
100,000 (75,000 in New England). Areas with more than 1 million
population may be described as ``consolidated metropolitan statistical
areas'' (CMSAs) made up of component parts designated as primary
metropolitan statistical areas (PMSAs). For purposes of the marketing
area descriptions in this proposed rule, the term ``MSA'' also includes
CMSAs and PMSAs.
Per capita consumption. Available data pertaining to per capita
consumption is discussed to help describe how much milk is needed to
supply the fluid needs of the population of each proposed marketing
area. Per capita consumption numbers were estimated by state using data
from a report on ``Per Capita Sales of Fluid Milk Products in Federal
Order Markets,'' published in the December 1992 issue of Federal Milk
Order Market Statistics, #391, issued May 1993.
Production. A description of the amount and sources of milk
production for the market is included for the purpose of identifying
the supply area for each proposed marketing area. Production data by
state and county for each Federal milk order was compiled from
information collected by the offices administering the current Federal
milk orders (market administrators' offices).
Distributing plants-route disposition. For each marketing area the
number and types of distributing plants are included, with the
locations of plants by population centers, to identify where milk must
be delivered. This information was collected by market administrators'
offices.
Utilization. The utilization percentages of the current individual
orders and the effect of consolidation on the proposed consolidated
orders are described for each proposed marketing area, with an estimate
of the effect of consolidation on each current individual order's blend
price. The current utilization data is published each month for each
Federal milk order market. Pool data was used to calculate the effects
of consolidation on utilization.
Other plants. The presence of manufacturing and supply plants in
and near the proposed order areas, and the products processed at these
plants, are described for each proposed consolidated area. This
information was collected by market administrators' offices.
Cooperative Associations. The number of cooperative associations
pooling member milk under each of the current individual orders
included in each consolidated area, and the number that pool milk in
more than one of the areas. This information was obtained from market
administrators' offices.
Criteria for Consolidation. The extent to which the criteria used
in identifying markets to be consolidated are supported by the
marketing conditions present in each of the proposed consolidated areas
is discussed.
Discussion of comments and alternatives. Comments filed in response
to the two preliminary reports on consolidation and alternatives to the
proposed consolidation are summarized and discussed for each proposed
consolidated area.

Northeast

The proposed consolidated Northeast marketing area is comprised of
the current New England, New York-New Jersey, and Middle Atlantic
Federal milk order marketing areas (Orders 1, 2, and 4), with
currently-unregulated areas in western and northern New York and
northern Vermont and New Hampshire added. The entire areas of the
States of Connecticut (8 counties), Delaware (3 counties),
Massachusetts (14 counties), New Hampshire (10 counties), New Jersey
(21 counties), Rhode Island (5 counties), and Vermont (14 counties)
would be contained within the proposed Northeast order area. In
addition, the District of Columbia, 21 counties and the City of
Baltimore in Maryland, 54 complete and 2 partial counties and New York
City in New

[[Page 4840]]

York, the 15 Pennsylvania counties currently included in the Middle
Atlantic marketing area, and 4 counties and 5 cities in Virginia would
be included in the consolidated order. There are 169 complete and 2
partial counties and 8 cities, including the District of Columbia, in
the proposed Northeast marketing area.
Geography
The proposed Northeast marketing area extends from the Canadian
border on the north, south to northern Virginia, eastern Maryland and
Delaware, with its eastern edge along the western border of Maine at
the northern end of the marketing area, and along the Atlantic Ocean
for the remainder. The total northeast-southwest extent of the
marketing area is approximately 600 miles. The marketing area extends
westward to Lake Ontario and Lake Erie in New York State (about 450
miles east to west), goes only as far west as the northern part of New
Jersey (about 60 miles), and expands westward again across the eastern
half of southern Pennsylvania, taking in a small part of northeast
Virginia, eastern Maryland, and Delaware (about 230 miles east to
west). There would be a large State-regulated area in Pennsylvania just
to the west of the Northeast marketing area; and most of the State of
Virginia to the south of the marketing area also is regulated under a
State order. The proposed Northeast marketing area is contiguous to no
other proposed consolidated marketing areas, but parts of it, in
western New York State and south central Pennsylvania, are very close
to the proposed Mideast area.
The northern and northwestern parts of the Northeast area are large
areas of coniferous forests that are somewhat mountainous. To the south
and southeast of the forested areas are areas where dairy farming
predominates as the primary type of agriculture. In fact, for 4 of the
10 states that are contained within the proposed Northeast marketing
area (New Hampshire, New York, Pennsylvania and Vermont) dairy products
were the number 1 agricultural commodity in terms of cash receipts
during 1996. Principally along the Atlantic coastline is a flatter area
where other agricultural activities, including greenhouse and nursery,
fruit, truck and mixed farming, take place. A near-continuous strip
along the east coast of the area, from northeast Massachusetts
southwest to the Baltimore area, is a major industrial area and is
heavily populated.
Population
According to July 1, 1996, population estimates, the total
population in the proposed consolidated Northeast marketing area is
51.3 million. The area is very densely populated, especially along a
coastal strip extending from Boston, Massachusetts, in the northeast to
Washington, D.C., in the southwest. In this proposed marketing area of
approximately 170 counties, 103 are included within Metropolitan
Statistical Areas (MSAs). The 22 Metropolitan Statistical Areas in the
proposed Northeast marketing area account for 91.7 percent of the total
market area population.
Over half of the marketing area population is located in 6
interconnected MSAs in 48 counties, extending from central New Jersey
to southern New Hampshire. The six MSAs are: Springfield,
Massachusetts; Boston-Worcester-Lawrence, Massachusetts/New Hampshire/
Maine/Connecticut; Providence-Fall River-Warwick, Rhode Island/
Massachusetts; New London-Norwich, Connecticut/Rhode Island; Hartford,
Connecticut; and New York-N. New Jersey-Long Island, New York/New
Jersey/Connecticut/Pennsylvania. The population in this northeastern
portion of the marketing area is concentrated most heavily at its
northern and southern ends--the New York City area has a population of
approximately 20 million, and the Boston area's population is
approximately 5.5 million. Two of the other MSAs, Hartford and
Providence, each have over 1 million population. Although each of these
six MSAs is described as a separate area in the population data, many
of the counties involved are divided between separate MSAs.
Just southwest of the New York City MSA is the Philadelphia-
Wilmington-Atlantic City, Pennsylvania/New Jersey/Delaware/Maryland
MSA, with a population of 6 million. Some counties of these two MSAs
are adjacent. Southwest of the Philadelphia MSA and separated from it
by only one county is the Washington, DC/Baltimore, Maryland/northern
Virginia MSA, with a population in the proposed marketing area of 5.7
million.
Of the 14 other MSAs in the proposed marketing area, 8 are located
in New York State, with an average population of nearly 600,000 each.
Two are located in Pennsylvania, with populations of .6 and .45
million. One MSA in Vermont, 1 in Delaware, and 2 in Massachusetts have
average populations of 160,000.
Fluid Per Capita Consumption
Fluid per capita consumption estimates vary within the Northeast
from 16.7 pounds per month in the more southern parts of the region to
20 pounds per month in New England. These rates would result in a
weighted average of 18 pounds per month, and an estimated total fluid
milk consumption rate of 920 million pounds per month for the Northeast
marketing area. Approximately 730 million pounds of this fluid milk
consumption would be required along the heavily-populated coastal area
extending from northeast Massachusetts southwest through Washington,
D.C. and northern Virginia. Northeast handlers distributed 883.7
million pounds within the proposed marketing area during October 1995.
Sales within the proposed marketing area by handlers that would be
regulated by other orders totaled 9.3 million pounds, sales by
partially regulated handlers within the area were 10.8 million, and an
additional .8 million pounds were distributed by handlers who would be
partially regulated under other orders. Sales in the marketing area by
exempt and government plants, and by producer-handlers totaled 6.2
million pounds.
Milk Production
In December 1996, over 19,000 producers from 13 states pooled 1.9
billion pounds of milk on the three orders comprising the proposed
Northeast order. With the addition of the Western New York State milk
order and several currently-unregulated handlers, it is probable that
the Northeast pool regularly will exceed 2 billion pounds of milk per
month.
Eleven of the 13 states supplying milk to the three Federal order
pools are at least partly in the marketing area, and 83 percent of the
producer milk pooled under the three orders in December 1996 came from
just 3 states--New York (41.5 percent), Pennsylvania (31.7 percent),
and Vermont (10 percent). Over 10 million pounds of milk was produced
in each of fifty-eight counties: 1 county in northeast Connecticut, 3
in the most northwestern of the Maryland portion of the marketing area,
31 spread over most of New York, 1 on the western edge of northern
Virginia, and 22 in southeast to south central Pennsylvania and in the
eastern part of the northern tier of Pennsylvania counties, with an
additional Pennsylvania county, Lancaster, accounting for over 150
million pounds of milk. Eighty percent of the markets' total producer
milk was produced within the proposed marketing area. In

[[Page 4841]]

addition, of the 81.1 million pounds pooled under the Western New York
State milk order, over 90 percent was produced within the proposed
marketing area.
Less than 40 percent of the milk production for the consolidated
market was produced within 100 miles of the heavily populated coastal
corridor. Although the Northeast area contains two out of the top five
milk-producing states in the U.S. (New York and Pennsylvania), the
population of the proposed marketing area is 20 million more than the
next most-populated proposed consolidated area (the Mideast area, with
31 million people). The Northeast, therefore, is a very significant
milk production area with a very high demand for fluid milk and dairy
products.
Distributing Plants--Route Disposition
Using distributing plant lists included in both the Preliminary and
Revised Preliminary Reports, with the pooling standards used in the
Revised Preliminary Report adjusted to 25 percent of route dispositions
as in-area sales (as discussed previously in Comments on
Consolidation), and updated for known plant closures through May 1997,
156 distributing plants would be expected to be associated with the
Northeast marketing area. The plants associated would include 79 fully
regulated distributing plants (64 currently fully regulated, 10
currently partially regulated, and 5 currently unregulated), 15
partially regulated (3 currently fully regulated, 11 currently
partially regulated and 1 currently unregulated), 17 exempt plants
having less than 150,000 pounds of total route disposition per month (2
currently fully regulated, 4 currently partially regulated, 2 currently
exempt based on size, and 9 currently unregulated), 43 producer-
handlers (42 currently producer-handlers and 1 currently unregulated),
and 2 exempt plants based on institutional status (1 currently
unregulated and 1 currently exempt based on institutional status).
Since October 1995, 10 distributing plants (3 in New York, 3 in
Massachusetts, 3 in Pennsylvania, and 1 in Connecticut), have gone out
of business.
Over half (88) of the Northeast distributing plants which were
identified as being in business in October 1995 were located in the 8
Northeast MSAs that have over a million people each. This number
includes 49 (or two-thirds) of the pool distributing plants. Under the
proposed consolidation, it is anticipated that there would be 12 pool
distributing plants in the Boston-Worcester-Lawrence area, 10 in the
Philadelphia-Wilmington-Atlantic City area, and 11 in the New York-
Northern New Jersey-Long Island area. The Hartford, Connecticut, area
would have 3 pool distributing plants, Providence-Fall River-Warwick
would have 3, and the Washington-Baltimore area would have 6 pool
distributing plants. Three pool distributing plants would be located in
the Buffalo-Niagara Falls area, and 1 in the Rochester, New York, area.
Of the remaining 70 distributing plants, 14 pool distributing
plants were located in other MSAs as follows: 8 in New York; 5 in
Pennsylvania; and 1 in Massachusetts. Thirty-nine of the remaining
distributing plants, including 11 pool distributing plants, were not
located in MSAs.
For the proposed Northeast order, the in-area route disposition
standard has been adjusted to 25 percent of total route dispositions
from the 15-percent standard that was common to all of the suggested
consolidated areas in the Revised Preliminary Report. This adjustment
has been made to assure that State-regulated plants in Virginia and
Pennsylvania that have sales in the proposed marketing area will not be
pooled under Federal order regulation.
Utilization
According to October 1995 pool statistics for handlers who would be
fully regulated under this Northeast order, the Class I utilization
percentages for the New England, New York-New Jersey, and Middle
Atlantic markets were 51, 44, and 53 percent, respectively. Based on
calculated weighted average use values for (1) the current order with
current use of milk, and (2) the current order with projected use of
milk in the consolidated Northeast order, the potential impact of this
proposed rule on producers who supply the current market areas is
estimated to be: New England, a 3-cent per cwt decrease (from $13.52 to
$13.49); New York-New Jersey, a 3-cent per cwt increase (from $13.45 to
$13.48); and Middle Atlantic, a 4-cent per cwt decrease (from $13.44 to
$13.40). The weighted average use value for the consolidated Northeast
order market is estimated to be $13.47 per cwt. For December 1996,
combined Class I utilization for Orders 1, 2 and 4 was 44.4 percent
based on 852.7 million pounds of producer milk used in Class I out of
1.919 billion total producer milk pounds.
The Northeast area is one of two proposed consolidated marketing
areas that would have a significantly higher-than-average percentage of
its milk used in Class II. Currently, all three of the orders have
Class II utilization between 15 and 20 percent. When the markets are
combined the average for the consolidated market will be approximately
17 percent.
Other Plants
Located within the proposed consolidated Northeast marketing area
during May 1997 were 106 supply or manufacturing plants: 13 in Vermont
(4 in the Burlington area), 1 in New Hampshire and 10 in Massachusetts
(all in the Boston-Worcester-Lawrence area), 1 in Rhode Island (in the
Providence-Fall River-Warwick area), 7 in Connecticut (3 in the
Hartford area and 4 in the New York-Northern New Jersey-Long Island
area), 12 in New Jersey (all in the New York-Northern New Jersey-Long
Island area), 2 in Delaware (one in the Philadelphia-Wilmington-
Atlantic City area), 7 in Maryland (four in the Washington-Baltimore
area), 13 in Pennsylvania (5 in the Philadelphia-Wilmington-Atlantic
City area), and 40 in New York (9 in the New York-Northern New Jersey-
Long Island area, 6 in the Buffalo-Niagara Falls area and 2 in the
Rochester area).
Seventeen of the 106 plants are pool plants. Of these pool plants,
9 are manufacturing plants--1 manufactures primarily Class II products,
5 manufacture primarily powder, 2 manufacture primarily cheese and 1
manufactures primarily other products. There are 8 pool supply plants--
1 has no primary product, but ships only to distributing plants; 5 are
supply plants that manufacture primarily Class II products, and 2
supply plants manufacture primarily cheese. Of the remaining 89 nonpool
plants in the Northeast marketing area, 82 are manufacturing plants--41
manufacture primarily Class II products, 1 manufactures primarily
butter, 1 manufactures primarily powder, 37 manufacture primarily
cheese and 2 manufacture primarily other products. Seven of the
remaining nonpool plants are supply plants--2 are supply plants that
manufacture primarily Class II products and 5 are supply plants that
manufacture primarily cheese.
A pool supply plant that manufactures primarily cheese and a
nonpool cheese manufacturing plant are located in the currently-
unregulated portions of Steuben County that are proposed to be added to
the consolidated Northeast marketing area.
There are also four supply or manufacturing plants in the
unregulated area of New York--one in the unregulated county of
Chautauqua, one in the unregulated portion of

[[Page 4842]]

Cattaraugus County, and two in the unregulated portion of Allegany
County. One is a pool supply plant manufacturing primarily Class II
products, and the remaining three are nonpool manufacturing plants--two
manufacture primarily cheese and one manufactures primarily Class II
products.
Cooperative Associations
During December 1995, 43 cooperative associations pooled their
members' milk on the three Northeast orders. Three of the cooperatives
pooled milk on all three orders, 2 pooled milk on both the New England
and New York-New Jersey orders, and 2 others pooled milk on both the
New York-New Jersey and Middle Atlantic orders. Sixty-eight percent of
the milk pooled in the Northeast is cooperative association milk, with
79.3 percent of Federal Order 1 milk, 50.5 percent of Federal Order 2
milk, and 91.8 percent of Federal Order 4 milk pooled by cooperatives.
The 5 cooperatives that market milk only under Order 1 account for
25.5 percent of the milk marketed under that order by cooperative
associations, and 20.2 percent of total milk marketed under Order 1. In
Order 2, only 28 percent of cooperative association milk is marketed by
the 27 co-ops that market milk only under Order 2. Milk marketed by
these 27 cooperatives represent 14.1 percent of the total milk pooled
for December 1995. Four cooperative associations marketed 45.4 percent
of the milk marketed by cooperatives under Order 4. This amount of milk
represented 41.7 percent of total milk pooled under Order 4 in December
1995.
Criteria for Consolidation
The current New England, New York-New Jersey, and Middle Atlantic
Federal milk order marketing areas (Orders 1, 2, and 4) should be
consolidated because of the interrelationship between Orders 1 and 2
and between Orders 2 and 4 regarding route disposition and milk supply.
Ninety-four percent of fluid milk disposition by handlers who would be
fully regulated under the consolidated order is distributed within the
proposed marketing area. Fully regulated handlers account for 97
percent of the fluid milk products distributed within the proposed
marketing area. The utilization of the three markets is similar, and
several cooperative associations market their members' milk in all
three markets. The three markets are surrounded by unregulated areas to
the west and south, the Atlantic ocean to the east, and Canada to the
north. The adjoining Maine State milk order also serves as somewhat of
a barrier to milk marketing in the northeast by limiting the
association of non-Maine milk with the Maine pool.
The merger of these markets has been previously proposed by
interested parties. A committee comprised chiefly of Northeast region
cooperatives was formed over two years ago to study a merger of the
three Federal orders. In support of a Northeast consolidation, the
committee and other interested parties, including handlers and
regulatory agencies, have noted: overlapping sales and procurement
areas; a trend toward consolidation of cooperative processors and
handlers in the region (leaving the remaining handlers with larger
distributing areas and volumes); and regulation of plants by an order
in which they are not located. The proponents of consolidation have
indicated that consolidation would tend to solve some of the presently
existing inequities and would lead to greater efficiency for handlers
and order administration.
Discussion of Comments and Alternatives
A large number of comments, primarily from producers and producer
groups, supported expansion of the Northeast consolidated marketing
area into non-federally regulated areas. Comments supported the
suggestions in the Revised Preliminary Report on Order Consolidation
that would have extended federal order marketing areas to non-federally
regulated areas which are part of the same milksheds and fluid milk
markets, arguing that the surrounding federal order pool(s) are
carrying the necessary surplus for the Class I sales distributed by
non-regulated handlers.
Comments favoring expansion into the non-federally regulated
Northeast tended to include the unregulated areas of Pennsylvania, and
sometimes the unregulated counties in Maryland and West Virginia. Among
the comments supporting regulation of the entire state of Pennsylvania,
there were differing opinions on whether the Pennsylvania Milk
Marketing Board (PMMB) area 6 should be in the Northeast or the
Mideast. Comments on behalf of the Association of Dairy Cooperatives in
the Northeast (ADCNE), for example, supported including PMMB Area 6 in
the Northeast. These comments also supported expansion to include
Allegany and Garrett counties in western Maryland. Comments from the
Pennsylvania State Grange supported regulating the entire state, but
including all of it in the Northeast area.
Several comments suggested including currently-unregulated portions
of Massachusetts in the Northeast marketing area. According to comments
from a cooperative association, the ``corridor'' in Massachusetts that
was suggested to remain unregulated has raised questions from handlers
and producers regarding equity, since the handler within the corridor
competes with regulated handlers. This association also stated that the
wide dispersion of the towns suggested to remain unregulated would
cause added expense to handlers in reporting Class I sales inside and
outside the marketing area of the Northeast order. The Massachusetts
Farm Bureau Federation, Inc., comments favored regulating all areas in
the Federal order to protect Massachusetts dairy producers from the
unfair marketing conditions created by current ``pass-through''
provisions of the New York-New Jersey order. In addition, a comment
filed by the Commissioner of the Massachusetts Department of Food and
Agriculture favored including all of Massachusetts in the consolidated
order, stating that inclusion of the currently-unregulated ``corridor''
would not disadvantage any handlers currently located there. The letter
stated that the dairy farmers of Massachusetts will be best served with
uniform regulation, which would also foster fair competition.
A comment filed by the State of Vermont favored inclusion of the
currently-unregulated portions of that State in the consolidated area
on the basis that expansion creates cost equity between processors.
Maine has been and continues under this proposal to be excluded
from Federal order regulation. Although limited support was expressed
for Maine's inclusion in the Northeast consolidated order,
approximately 5 comments supporting Maine's exclusion from Federal
orders have been received. Comments filed by the Maine Milk Commission
stated that Maine successfully regulates prices, resulting in Maine
producers receiving higher prices than farmers whose milk is pooled
under Federal orders. The comments further stated that consumer prices
in Maine are lower than those in New England's states and counties. The
American, New York and New Jersey Farm Bureaus all supported Maine's
exclusion.
Over 115 comments, including petitions with numerous signatures,
opposed expansion into Pennsylvania. Some of the comments cited the
enjoyment by Pennsylvania producers of price stability for the more
than 50

[[Page 4843]]

years during which the PMMB has been regulating milk marketing within
the state. Comments from producers stated a desire to avoid additional
government regulations and fees. Comments stated that the PMMB
individual handler pools result in greater returns to producers, and
producer returns would decline if handlers are required to pay the
additional fluid value into the marketwide pool to subsidize cheese/
powder plants.
As stated in the introduction to the consolidation discussion, it
has been determined that consolidation of the existing orders does not
necessitate expansion of the consolidated orders into areas in which
handlers are subject to minimum Class I pricing under State regulation,
especially when the states' Class I prices exceed those that would be
established under Federal milk order regulation. Handlers located in
PMMB areas 2, 3, and 6 are regulated under the State of Pennsylvania if
they do not have enough sales in any Federal order area to meet an
order's pooling standards. When such plants do meet Federal order
pooling standards, the State of Pennsylvania continues to enforce some
of its regulations in addition to Federal order regulations. As State-
regulated handlers, they must pay a Class I price for milk used in
fluid products that often is higher than the Federal order price would
be. Inclusion of the Pennsylvania-regulated handlers in the
consolidated marketing area, as in the case of including Maine, would
have little effect on handlers' costs of Class I milk (or might reduce
them), while reducing producer returns. In view of these situations, it
appears that stable and orderly marketing conditions can be maintained
without extending full Federal regulation to State-regulated handlers.
Regulated plants competing for Class I sales with unregulated
distributing plants in northern Vermont and New York would be subject
to a competitive disadvantage if the currently-unregulated handlers are
not included within the consolidated marketing area. This result would
occur because the ``pass-through'' provision of the current New York-
New Jersey order, which exempts from minimum pricing a volume of milk
equivalent to a regulated handler's sales in unregulated areas in
competition with unregulated handlers, is not proposed for inclusion in
the consolidated Northeast order. Inclusion of the currently
unregulated areas of northern New York and Vermont in the consolidated
Northeast order area will assure that distributing plant operators that
currently are fully regulated would be placed on an equal competitive
footing with handlers currently unregulated, while having no negative
effect on the producers who would be affected.
The ``corridor'' cited in Massachusetts should be included in the
consolidated order area, partly because the sole handler who would be
affected by the regulation of that area has gone out of business.
Inclusion of the area at this time would not have the negative effect
of imposing regulation on a small handler, as was feared earlier, but
would lighten handlers' reporting burden and the market administrator's
administrative burden in keeping separate data on sales in this small
unregulated area. In addition, the offshore Massachusetts counties of
Dukes and Nantucket should be added to the marketing area. The only
entity currently operating in those counties (a producer-handler on
Martha's Vineyard) would be exempt from the pooling and pricing
provisions of the order by virtue of its status as a producer-handler
and by having fewer than 150,000 pounds of route disposition per month.
Mainland handlers distributing milk in these two counties would find
their reporting burden eased if these counties become part of the
marketing area.
The Western New York State order area is proposed to be added to
the consolidated Northeast area because the persons regulated under
that order have so requested. Regarding New York State, only the
southern tier of western New York counties should not be included in
the consolidated area because their addition would make more likely the
full regulation of PMMB-regulated distributing plants with sales in
that small area of New York (1 full county and 2 partial counties).

Appalachian

The proposed Appalachian marketing area is comprised of the current
Carolina (Order 5) and Louisville-Lexington-Evansville (Order 46)
marketing areas (less one Kentucky county that is included in the
proposed Southeast marketing area) as well as 64 counties and 2 cities
formerly comprising the marketing area of the recently-terminated
Tennessee Valley Federal Order (Order 11) and currently-unregulated
counties in Indiana and Kentucky. There are 297 counties and 2 cities
in this proposed marketing area.
Geography
The Appalachian market is described geographically as follows: 7
unregulated Georgia counties (formerly part of Order 11), 20 Indiana
counties (17 currently in Order 46 and 3 currently unregulated), 81
Kentucky counties (47 currently in Order 46, 16 formerly part of Order
11, and 18 currently unregulated), all North Carolina and South
Carolina counties (100 and 46, respectively, and all currently in Order
5), 33 Tennessee counties (formerly part of Order 11), 8 counties and 2
cities in Virginia (formerly part of Order 11), and 2 West Virginia
counties (formerly part of Order 11).
The proposed Appalachian market reaches from the Atlantic coastline
westward to southern Indiana and western Kentucky's border with
Illinois. It is surrounded by Illinois on the west, Indiana,
northeastern Kentucky, West Virginia and Virginia to the north, the
Atlantic ocean on the east, and Georgia, Alabama, western Tennessee and
southwestern Kentucky to the south. Measuring the extreme dimensions,
this market extends about 625 miles from its northwest corner in
Indiana to its southeastern corner on the South Carolina-Georgia
border, about 300 miles south-to-north from the South Carolina-Georgia
border to the North Carolina-Virginia border, about 500 miles west-to-
east from the Appalachian-Southeast markets' border in Tennessee to
eastern North Carolina, and about 375 miles west-to-east from the
Illinois-Indiana border to West Virginia and Virginia.
The Appalachian market is contiguous to 3 proposed consolidated
marketing areas: the Southeast area to the southwest and south, the
Central area to the west and the Mideast area to the north. Unregulated
counties in West Virginia and State-regulated area in Virginia also
border this market to the north. North and South Carolina have almost
500 miles of coastline on the Atlantic Ocean.
In terms of physical geography, similarities exist across the
states or areas included in this market. Southern Indiana and central
Kentucky are in the Interior Low Plateau region where valleys and steep
hillsides are typical. In this market, the Appalachian or Cumberland
and Alleghany Plateaus are found in West Virginia, Virginia, Kentucky,
Tennessee and northwestern Georgia on the western edge of the
Appalachian Mountains. Eastern Tennessee and both western North and
South Carolina are in the Blue Ridge region, which is part of the
Appalachian Mountain range. Moving eastward toward the Atlantic Ocean,
the central part of the Carolinas are in the Piedmont Plateau, with the
Atlantic Coastal Plain covering approximately the remaining eastern
half of both these states.
Climatic types in this region vary somewhat. Humid subtropical
climates typical in most of North and South

[[Page 4844]]

Carolina, as well as Virginia (which is affected by elevation
differences) and southern Indiana. Humid continental climates are
typical for northwestern Georgia, western North and South Carolina and
southern West Virginia. Temperate climates are common in eastern
Tennessee and central Kentucky.
Much of the proposed Appalachian area does not provide a hospitable
climate or topography for dairy farming. As an agricultural pursuit,
dairy farming is far down the list in the area, accounting for an
average of less than five percent of all receipts from farm commodities
for the states involved. Crops such as tobacco, corn and soybeans, and
other livestock commodities such as cattle/calves, turkeys and broiler
chickens are more prevalent in this region.
Population
According to July 1, 1996, population estimates, the total
population in the proposed marketing area is 17.1 million. There are 24
Metropolitan Statistical Areas (MSAs) within the proposed marketing
area, containing 62.3 percent of the area's population. The largest 17
contain 50 percent of the population of the market. Charlotte, North
Carolina, is the largest MSA in the marketing area with a population of
1.3 million. Charlotte is located near the South Carolina border about
at the mid point of the North and South Carolina border, and about 250
miles west of the Atlantic coast. Less than 100 miles to the north lies
the second-largest MSA of Greensboro-Winston-Salem-High Point, North
Carolina, with a population of 1.1 million. About 50 miles east of
Greensboro is the third-largest MSA, Raleigh-Durham-Chapel Hill, with
one million people. The Raleigh MSA abuts the Greensboro MSA. An
additional four North Carolina MSAs are among the largest of the 17
MSAs containing 50 percent of the population of the proposed marketing
area, for a combined population of one million. North Carolina is the
most populous state in the proposed marketing area with 7.3 million;
over half the population of North Carolina is located in these seven
MSAs.
South Carolina is the second-most populous state in the proposed
consolidated area, with 3.7 million people. The Carolinas contain two
thirds of the proposed market's population. Greenville is the largest
MSA in the state with a population of 900,000. Greenville is located in
the northwest corner of the state. Charleston, the second-largest MSA
in South Carolina, with half a million people, is approximately at the
midpoint of South Carolina's coast.
The Tennessee portion of the proposed Appalachian market has a
population of 2 million, with three MSA's that are included in the
largest 17 in the market. These three areas contain 1.6 million, or
over 80 percent of the population in that part of Tennessee that is
proposed to be part of the Appalachian marketing area. The largest
Tennessee MSA is Knoxville, which is in the eastern end of Tennessee
near North Carolina. Six counties make up the Knoxville MSA with a
combined population of 650,000. The Johnson City-Kingsport-Bristol
area, the second-largest Tennessee MSA, is located in the northeastern
tip of Tennessee along the Virginia and North Carolina border, and
contains almost half a million people. Chattanooga, the third-largest
MSA in Tennessee, is located on the Tennessee-Georgia border, and has a
population of 446,000. The three MSAs run northeast to southwest just
west of the North Carolina border.
The Kentucky portion of the proposed Appalachian market contains
2.7 million people. There are two MSAs within the state that are
included in the largest 17 in the market. The largest is Louisville,
which lies on the border with Indiana and has a population of one
million. Lexington, the second-largest Kentucky MSA, is located in the
center of the state and has just under half a million people.
Generally, the Kentucky counties in the proposed Appalachian marketing
area are not heavily populated. Only two have populations over 100,000.
They are Jefferson county, where Louisville is located, and Fayette
county, home to Lexington.
Indiana counties in the Appalachian market have a population of .8
million. Only Vanderburgh county has a population over 100,000.
Evansville, the only MSA in the portion of Indiana included in the
Appalachian market, is in Vanderburgh county. Evansville's MSA contains
289,000 and is located on the Indiana-Kentucky border, near the
Illinois state line.
There are seven Georgia counties within the proposed Appalachian
marketing area, with a total population of .3 million. Three of them,
Catoosa, Dade, and Walker, are part of the Chattanooga MSA. These three
counties have a combined population of 124,000. The 12 Virginia
counties in the proposed Appalachian market have a population of .3
million. Three of the counties, Scott, Washington and Bristol City, are
part of the Johnson City-Kingsport-Bristol MSA. The two West Virginia
counties within the Appalachian market have a total population of .1
million.
Fluid Per Capita Consumption
Estimates of fluid per capita consumption within the proposed
Appalachian marketing area vary from 15.8 per month for South Carolina
to 20.4 pounds per month for Indiana. Use of 17 pounds per month as a
weighted average results in an estimated 291 million pounds of fluid
milk consumption for the Appalachian marketing area. Appalachian
handlers' route disposition within the area during January 1997 totaled
290 million pounds, with another 18 million distributed by producer-
handlers, partially regulated plants and other order plants.
Milk Production
In December 1996, over 4,000 producers from 359 counties in 15
states pooled 443.3 million pounds of producer milk on Orders 5, 11 and
46. Approximately 71 percent of the milk pooled on the three orders was
produced within the proposed consolidated marketing area.
North and South Carolina are the only States that are located
entirely within the proposed consolidated marketing area, and provided
nearly all of their producers' milk to Order 5 (encompassing the entire
States of North and South Carolina), with 103.7 and 34 million pounds,
respectively. Neither of these states produces enough milk to meet even
the fluid milk requirements of its population. Kentucky producers
pooled 101.1 million pounds on the three orders, with 89 percent
produced within the proposed marketing area. Tennessee producers pooled
69.9 million pounds on the three orders, principally on Order 11, with
84 percent produced within the proposed marketing area. Although
Virginia is primarily outside the marketing area, producers from 40
Virginia counties supplied 68.5 million pounds of milk for the FO 11
and FO 5 markets in December 1996. Georgia producers pooled 27.6
million pounds and Indiana producers pooled 21 million pounds in
December, with the balance of the milk pooled on the three orders
originating in Alabama, Connecticut, Illinois, Maryland, Massachusetts,
New Mexico, Pennsylvania, and West Virginia.
Thirty-four counties each supplied over 3 million pounds of milk to
the three markets consolidated in this proposed area. One such county
was located in New Mexico, and another in Pennsylvania. Eight were
located in Kentucky, south and southwest of Lexington, and southeast of
Louisville.

[[Page 4845]]

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

[[Page 4846]]

Corporation, both in Alabama, proposed that the Florida orders and the
Carolina and Tennessee Valley orders be merged with the Southeast. The
commenter stated that evidence shows the Florida markets are vitally
involved with other areas of the Southeast in Class I sales, obtaining
milk supply, and in the disposition of surplus milk. A number of
comments, including those filed by Mid-America Dairymen, Inc., and
Carolina Virginia Milk Producers Association, urged that the
Appalachian area be combined with the Southeast order area, primarily
on the basis of milk procurement overlap in south central Kentucky.
Several commenters, mainly producers, favored putting all of Kentucky
in one order and most suggested adding it to the Southeast. Comments
from Trauth Dairy, a Mideast pool plant under this proposed
consolidation, did not specifically ask that Kentucky be put into one
order, but that Trauth (at Newport, Kentucky) be placed in the same
order (Appalachian) as the handlers Trauth described as its primary
competition for producer milk and for retail sales in the marketplace.
As discussed under the description of the proposed consolidated
Florida market, overlapping milk distribution and procurement involving
the three current Florida markets is much greater within the Florida
markets than between any of the Florida markets and any other market.
As stated in the description of consolidation criteria, areas that
supply a minor proportion of an adjoining area's milk supply with a
minor proportion of their own total milk production while handlers
located in the area are engaged in minimal competition with handlers
located in the adjoining area do not necessarily have a strong enough
association with the adjoining area to be consolidated with it. It is
impossible to find a boundary across which significant quantities of
milk are not procured for other marketing areas.
Consolidation of the Carolina and Tennessee Valley markets with the
Southeast is not proposed because of the minor degree of overlapping
route disposition and producer milk between these areas. Less than one-
tenth of the milk produced in the Kentucky counties proposed to be in
the Appalachian area would be pooled under the Southeast order, and
approximately one-fifth of the production from the Kentucky portion of
the Southeast area would be pooled under the Appalachian order.
With the exception of two Appalachian handlers who account for two-
thirds of the disposition by Appalachian handlers in the Southeast
order area, only a minor proportion of the route disposition of
Appalachian handlers is distributed in the proposed Southeast area. In
total, Appalachian handlers distribute 11 percent of their route
dispositions in the Southeast area, while Southeast handlers distribute
less than 3 percent of their route dispositions in the Appalachian
area.
There would be very little basis for splitting the current Order 46
area (Louisville-Lexington-Evansville) to include northern Kentucky
with the proposed Appalachian area. Only 3 percent of Appalachian
handlers' route disposition is distributed within the Ohio Valley order
area, while less than one million pounds of Class I sales moves from
the Ohio Valley area into the Order 46 area.

Florida

The proposed Florida marketing area is comprised of the three
current Federal order marketing areas contained wholly in the state of
Florida: Upper Florida (Order 6), Tampa Bay (Order 12) and Southeastern
Florida (Order 13). There are 63 counties in this proposed area (40 in
Order 6, 13 in Order 12, and 10 in Order 13).
Geography
The proposed Florida marketing area is described geographically as
all counties in the State of Florida, with the exception of the four
westernmost counties in the Florida Panhandle. This proposed marketing
area is a large peninsula, ranging from about 140 miles in width in the
north to about 50 miles in width in the south, that extends south from
the southeast U.S. about 400 miles between the Atlantic Ocean and the
Gulf of Mexico. Also included in the Florida market is approximately
150 miles of the Panhandle, a narrow strip of land extending west along
the Gulf of Mexico from the northern part of the peninsula. The water
surrounding most of Florida's peninsula constitutes a natural boundary,
as east-to-west travel is limited.
Almost all of Florida has a humid subtropical climate. The southern
end of the state and the islands south of the peninsula have a tropical
wet and dry climate. In general, the state's climate can and does
affect levels of milk production negatively. Seasonal variation in
production for this market typically is greater than for most other
U.S. regions. The importance of dairy farming as an agricultural
pursuit in Florida is relatively minor (7 percent of total receipts
from agricultural commodities), with several crops contributing more
total receipts to the State's income. However, no livestock commodity
is as important in Florida as dairy farming.
Population
According to July 1, 1996, population estimates, the total
population in the proposed Florida marketing area is 13.8 million.
Ninety-three percent of the population of the marketing area is located
in Metropolitan Statistical Areas (MSAs). The two largest MSAs are
Miami-Fort Lauderdale (Miami) on the eastern side of the southern end
of the peninsula, and Tampa-St. Petersburg-Clearwater (Tampa) midway on
the western side of the peninsula. Broward and Dade Counties comprise
the Miami population center (currently in Order 13) with a population
of 3.5 million. The Tampa population center (currently in Order 12) is
comprised of Hernando, Hillsborough, Pasco and Pinellas counties with a
population of 2.2 million. The six counties in these two population
centers represent about 41 percent of the total marketing area
population.
Fluid Per Capita Consumption
Florida customarily is considered a deficit milk production state.
For much of the year, milk needs to be imported from other states in
order to meet the demand for fluid consumption. Based on the population
figure of 13.8 million and an estimated per capita fluid milk
consumption rate of 17 pounds of fluid milk per month, total fluid milk
consumption in the Florida marketing area is estimated at 234.6 million
pounds per month.
During October 1995, 205 million pounds of milk were disposed of in
the proposed marketing area by all Florida distributing plants. Plants
located outside the marketing area (mostly from the Southeast market
[Order 7]) had route disposition within Florida of 20 million pounds.
The discrepancy between the actual total route disposition of 225
million pounds and the estimated consumption level of 234.6 million
pounds may be explained by the older than average population in
Florida.
Milk Production
In December 1996, 222 million pounds of milk produced in Florida
were pooled in four Federal orders; 98.5 percent of this milk was
pooled on the three current Florida orders. About 370 producers located
in Florida (96 percent of all Florida producers having association with
Federal orders) had producer milk pooled on at least one of the three
Florida markets. A small number of Florida producers had producer milk
associated with Order 7,

[[Page 4847]]

while more than 100 Georgia producers had producer milk associated with
the Florida markets. Additionally, 34 million pounds of Georgia milk
was pooled on the three Florida markets; 85 percent of this milk went
to Order 12.
There are 44 counties in Florida that pooled milk in at least one
of the three current Florida orders. Seven of these counties produced
62.6 percent of the milk pooled.
Three counties (Gilchrist, Lafayette and Suwannee, about 75 miles
west of Jacksonville) had 53.9 million pounds of producer milk. For
these three counties, 85.5 percent of the December 1996 producer milk
was pooled on the Tampa Bay order, which is located approximately 150
miles southeast of the counties.
More than 80 percent of Clay County's producer milk was pooled in
Order 6. This county is in the Jacksonville MSA, which is the largest
population center in Order 6.
About 20 million pounds of producer milk came from Hillsborough and
Highland Counties, both part of the Order 12 market. However, this milk
was pooled about evenly between Orders 12 and 13.
Okeechobee County, located in the Order 13 marketing area about 125
miles northwest of the Miami area, is by far the largest milk producing
county in Florida. The county had 54.5 million pounds of producer milk
in December 1996, almost all of which was pooled on Order 13.
Distributing Plants--Route Distribution
Using plant lists included in both the Preliminary and Revised
Preliminary Reports and the pooling standards used in the Revised
Preliminary Report, updated for known plant closures through May 1997,
15 plants would be expected to be fully regulated under the proposed
Florida market. Five of these plants are located in the Miami MSA and
three in the Tampa MSA. Three plants are located in mid-Florida, one in
the Orlando area and two in the Lakeland-Winter Haven area. Three more
are located in northeast Florida; two in the Jacksonville area, and one
in Daytona Beach. Two plants having route disposition of less than
150,000--one in the Tampa MSA and the other in Citrus County (north of
Tampa and west of Orlando)--would be exempt.
Slightly less than two-thirds of the proposed market's population
is contained in the MSAs where fully regulated plants are located.
Utilization
According to October 1995 pool statistics for handlers who would be
fully regulated under this Florida order, the Class I utilization
percentages for the Upper Florida, Tampa Bay, and Southeastern Florida
markets were 85, 90, and 91 percent, respectively. Based on calculated
weighted average use values for (1) the current order with current use
of milk, and (2) the current order with projected use of milk in the
consolidated Florida order, the potential impact of this proposed rule
on producers who supply the current market areas is estimated to be:
Upper Florida, an 11-cent per cwt increase (from $14.67 to $14.78);
Tampa Bay, a 5-cent per cwt decrease (from $15.09 to $15.04); and
Southeastern Florida, an 11-cent per cwt decrease (from $15.42 to
$15.31). The weighted average use value for the consolidated Florida
order market is estimated to be $15.05 per cwt. For December 1996,
combined Class I utilization for the three Florida markets was 83.9
percent based on 211,712,000 pounds of producer milk used in Class I
out of 252,402,000 total producer milk pounds.
Other Plants
Also located within the Florida marketing area are four supply or
manufacturing plants, three of which are not associated with the
current markets' pools. Three ice cream plants are located in the Tampa
area and one pool supply plant is in the Jacksonville area.
Cooperative Associations
Four cooperatives market milk in the Florida markets, and represent
nearly 100 percent of the milk marketed. Florida Dairy Farmers
Association is the only cooperative with membership in all three
current markets. In December 1995, 60 percent of the producer milk
associated with the three markets came from members of this
cooperative. During this same month, Tampa Independent Dairy Farmers
Association members were affiliated with the Tampa Bay and Southeastern
Florida markets, while Mid-America Dairymen, Inc., and Select Milk
Producers, Inc., members had producer milk on the Tampa Bay pool.
Criteria for Consolidation
As suggested in both the initial and Revised Preliminary Reports on
Order Consolidation, the consolidated Florida market should encompass
the current marketing areas of the Upper Florida, Tampa Bay and
Southeastern Florida Federal milk orders. Natural boundary limitations
and overlapping sales and procurement areas among the three orders are
major reasons for consolidation, as well as a measure of association
evidenced by cooperative association proposals to consolidate these
three marketing areas. Further, the cooperative associations in this
area have worked together for a number of years to accommodate needed
movements of milk between the three Florida Federal orders, and into
and out of the area.
Discussion of Comments and Alternatives
One comment, filed on behalf of two Alabama handlers, suggested
that the order areas of Florida, the Carolinas and Tennessee Valley be
merged with the Southeast. The comment stated that the Florida markets
are vitally involved with other areas of the southeast in Class I
sales, procurement of milk supplies, and disposition of surplus milk.
Although there is some overlap in these functions between the Florida
markets and the Southeast order area, it is not great enough to warrant
the combination of these three order areas, which have a greater degree
of affinity among themselves than with any other market, with the
Southeast. Given the closeness of the relationship between the current
Florida markets, and the lack of any significant overlap of sales or
production with other order areas, no alternatives other than those
discussed were considered with regard to this area.

Southeast

The proposed Southeast marketing area is comprised of the current
Southeast (Order 7) marketing area, portions of the current Southwest
Plains (Order 106) marketing area in northwest Arkansas and southern
Missouri, and six southeastern Missouri counties from the current
Southern Illinois-Eastern Missouri (Order 32) marketing area. Also
included are 16 currently unregulated Missouri counties, 21 currently
unregulated Kentucky counties, and 1 Kentucky county that currently is
part of the Louisville-Lexington-Evansville (Order 46) marketing area.
There are 572 whole counties and 1 partial county (Pulaski County,
Missouri) in this proposed area.
Geography
The Southeast market is described geographically as follows: all
counties in Alabama, Arkansas, Louisiana, and Mississippi (67, 75, 64
and 82 counties, respectively), 4 in Florida, 152 in Georgia, 44 whole
and 1 partial in Missouri, 62 in Tennessee and 22 in Kentucky (one--
Logan County--currently is in Order 46, and 21 currently are
unregulated). Of these 21 counties, 14 were part of the former

[[Page 4848]]

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

[[Page 4849]]

Southeast market. Over 85 percent of the Southeast's producer milk came
from Southeast market area counties. Of the 388 counties, 19 pooled
over 5 million pounds each, accounting for 39 percent of Order 7's
producer milk. Of these 19 counties, 2 Texas counties are located
outside the proposed Southeast market area. Because of the large number
of counties, only the locations for those top 19 production counties
are described in greater detail. However, the volume of producer milk,
number of producers (farms) and number of counties is provided for each
state within the market area.
Almost 73 million pounds of milk were pooled on the Southeast
market from 581 producers in 28 Louisiana parishes in January 1997. Top
production parishes are Tangipahoa, Washington and St. Helena, all
located in the state's ``toe,'' north of New Orleans and northeast of
Baton Rouge, each bordering Mississippi. Another high production area
is centered on De Soto Parish in northwestern Louisiana. These four
parishes account for over 62 million pounds of producer milk, with 76
percent coming from Tangipahoa and Washington parishes.
Almost 67 million pounds of milk were pooled on the Southeast
market from 331 producers in 68 Georgia counties in January 1997. Of
this volume, 64 million came from 312 producers in 64 Georgia counties
in the Order 7 marketing area. The balance is associated with Georgia
producers located in the marketing area of the recently-terminated
Order 11 (Tennessee Valley). Top production counties are Putnam, Morgan
and Macon, which pooled 27 million pounds of producer milk on Order 7.
About 65 million pounds of milk were pooled on the Southeast market
from 580 producers in 46 Tennessee counties in January 1997. Of this
volume, 62 million came from 562 producers in 42 Tennessee counties in
the Order 7 marketing area. The balance is associated with Tennessee
producers located in the marketing area of the recently-terminated
Federal Order 11. Two high production counties in the state are
Marshall and Lincoln, located in south central Tennessee. These
counties contributed over 12 million pounds of producer milk to the
Order 7 pool in January 1997.
About 61 million pounds of milk were pooled on the Southeast market
from 443 producers in 48 Mississippi counties in January 1997. Top
production counties are Walthall and Pike, in southern Mississippi on
the state's border with Louisiana. These two counties adjoin the heavy
milk production area in Louisiana. The counties contributed 15 million
pounds of producer milk to the Order 7 pool in January 1997.
About 32 million pounds of milk were pooled on the Southeast market
from 408 producers in 19 Kentucky counties in January 1997.
Additionally, 116 producers in 15 of these counties pooled almost 9
million pounds of producer milk on Orders 11 and 46 (Louisville-
Lexington-Evansville). Two counties, Barren and Monroe, contributed
over 13 million pounds of producer milk. These contiguous counties are
in south central Kentucky about 80 miles northeast of Nashville,
Tennessee.
Four Missouri counties--Wright, Texas, Laclede and Howell-- pooled
33 million pounds of producer milk on Order 7. All of these counties
currently are located in the Order 106 (Southwest Plains) marketing
area in southern Missouri.
Other Southeast marketing area states or areas contribute producer
milk to the Southeast marketwide pool. About 37 million pounds of milk
were pooled on the Southeast market from 205 producers in 51 Alabama
counties, and 25 million pounds were pooled from 343 producers in 39
Arkansas counties. Sixteen Florida producers from 6 counties (2 in the
Southeast market area) pooled 3.5 million pounds on Order 7 in January
1997.
In January 1997, Order 7 producer milk also originated in Missouri
counties not included in the Southeast marketing area, Texas, New
Mexico, Indiana and Oklahoma. Large amounts of milk from Missouri (21
million pounds in addition to the 33 million described previously) and
Texas (46 million pounds--20 million from Hopkins and Erath Counties)
were associated with the Order 7 pool. It should be noted that milk
does not need to be physically received at a Federal order plant
regulated under the order in which the milk is pooled.
Distributing Plants--Route Distribution
Using distributing plant lists included in both the Preliminary and
Revised Preliminary Reports and the pooling standards used in the
Revised Preliminary Report, updated for known plant closures through
May 1997, 47 distributing plants located in the proposed Southeast
marketing area would be expected to be associated with the Southeast
market (including the added territory in northwestern Arkansas and
southern Missouri). These plants include 36 fully regulated
distributing plants, 2 partially regulated, one exempt plant based on
size, one producer-handler, and 7 government agency plants (including
university and state prison plants). None of these plants' regulatory
status is expected to change as a result of the consolidation process.
Of the 36 fully regulated plants, 18 are located in the largest eight
MSA regions. One distributing plant located in the proposed Appalachian
marketing area that has more than half of its route disposition within
the Southeast marketing area would be locked into regulation under the
Appalachian order.
Since October 1995, it is known that 7 distributing plants (6 fully
regulated and 1 exempt) have gone out of business. These plants were
located in Alabama, Arkansas, Georgia, and Missouri (1 plant each), and
Mississippi (3 plants). Also, one fully regulated distributing plant,
Centennial Dairy Farms, Inc., in Atlanta, GA, began packaging and
distributing products in October 1996. Information for this plant is
included in route dispositions reported for January 1997, the month
used in this analysis.
Of the 47 distributing plants, Georgia has 7; Louisiana, 12;
Mississippi, 6; Alabama, 7; Arkansas, 6; Tennessee, 5; Missouri, 2; and
Kentucky, 2. No distributing plants are located in the Florida counties
included in the Southeast market area.
In January 1997, the 34 plants fully regulated under Order 7 at
that time had route distributions totaling 372 million pounds. About 90
percent, or 334 million pounds, was distributed within the Order 7
marketing area. Route distribution volumes from the 11 nonpool
distributing plants were relatively insignificant and are not included
here. These data do not include distribution information from the 3
fully regulated plants in northwest Arkansas and southern Missouri that
would be included in the proposed Southeast pool. All 3 plants are
operated by one handler; thus this data is proprietary information and
is restricted. These plants' information is included, however, in the
market information presented in the Central market discussion.
In Georgia, three pool distributing plants are located in the
Atlanta area, with 2 others elsewhere in the State. Georgia also has 1
partially regulated handler and 1 government agency (state prison)
plant.
Nine of Louisiana's 12 distributing plants currently are and would
continue to be fully regulated (pool plants) in this proposed marketing
area. Five of these 9 are located in either the New Orleans or Baton
Rouge areas (2 and 3, respectively). Four other pool distributing
plants are located in Louisiana. The remaining three plants

[[Page 4850]]

are affiliated with universities or the state prison.
Four of Mississippi's 6 currently operational distributing plants
would be fully regulated pool plants in the Southeast market. Two
universities also have plants.
All seven of Alabama's distributing plants are fully regulated. One
is located in the Birmingham area and 2 are located in the Mobile area.
Of the remaining four, 2 are in northern Alabama, one is in central
Alabama, and one is in the state's southeastern corner.
Four of Arkansas' 6 currently operational distributing plants are
fully regulated; two are in the Little Rock area, and the other 2 are
located in northwest Arkansas. Also located within Arkansas are an
exempt distributing plant and a state prison plant. All five of
Tennessee's distributing plants are fully regulated. Three of the 5 are
located in the Nashville area and the remaining two are in the Memphis
area.
Two distributing plants that would be fully regulated under the
Southeast market are located in the currently unregulated Kentucky
counties that are proposed to be added to this marketing area. One is
located in Fulton in the southwest corner of Kentucky on the Tennessee
border, and the other about 30 miles east of Fulton.
Two Missouri plants are located in the counties proposed to be
included in the Southeast area. One fully regulated plant is located in
Springfield; a partially regulated plant based on October 1995 data,
but exempt (by virtue of having less than 150,000 pounds of route
dispositions) based on January 1997 data, is located northeast of
Springfield.
Utilization
According to January 1997 pool statistics, the Class I utilization
for the Southeast market was about 78 percent. Changes to this
percentage are likely to occur with the addition of 3 pool plants or
potential changes in plants' regulatory status. It is not expected that
the addition of the plants would have a significant impact on producer
returns in the Southeast as a result of consolidation. For December
1996, Class I utilization for the Southeast market was 73.4 percent
based on 339,275,000 pounds of producer milk used in Class I out of
462,455,000 total producer milk pounds.
Other Plants
Also located within the Southeast marketing area during May 1997
are 37 supply or manufacturing plants: 1 in Kentucky, 5 in Alabama
(including 1 in the Birmingham area), 5 in Arkansas (including 1 in the
Little Rock area), 7 in Georgia (including 4 in the Atlanta area), 3 in
Louisiana (including 1 in the Baton Rouge area), 11 in Missouri, 2 in
Mississippi, and 3 in Tennessee (including 1 each in the Memphis and
Nashville areas). Eight of the 37 plants are pool plants. Of these pool
plants, 2 primarily ship to distributing plants, 3 manufacture cheese,
1 manufactures Class II products, 1 manufactures powder and 1 primarily
manufactures other products. Of the Southeast marketing area's 28
nonpool plants, 13 manufacture primarily Class II products, 3
manufacture cheese, 10 manufacture primarily other products, and 1 each
manufacture primarily butter and cheese. One plant is a ``split
plant,'' with one side serving as a manufacturing facility primarily
for Class II products, while the other side receives and ships Grade A
milk. Accounting is done separately.
Cooperative Associations
In December 1995, six cooperative associations represented members
marketing 78 percent of the milk pooled on the Southeast market: Mid-
America Dairymen, Inc.; Associated Milk Producers, Inc., Southern
Region; Carolina-Virginia Milk Producers Association, Inc.; Arkansas
Dairy Cooperative Association (ADCA); Vanguard Milk Producers
Cooperative (VMPC); and National Farmers Organization, Inc. ADCA and
VMPC members marketed milk only in the Southeast Federal order, while
the other 4 cooperatives' members marketed milk in multiple Federal
orders.
Criteria for Consolidation
Retention of the Southeast marketing area as a single area is based
on overlapping route dispositions within the marketing area to a
greater extent than with other marketing areas. Procurement of producer
milk also overlaps between states within the market. The need for milk
from outside the market is primarily seasonal, and is not as great as
the volume of milk that is pooled from other areas. There is common
cooperative association membership within the marketing area.
The addition of northwest Arkansas and southern Missouri to the
marketing area is primarily in response to comments received during the
public comment period. The association that exists between these 2
areas, the Southeast marketing area, and the proposed Central market
should continue to be monitored throughout the reform process.
Discussion of Comments and Alternatives
Several commenters, primarily producers, favored putting Kentucky
all in one order and most suggested adding it to the Southeast. In a
comment that was considered in the Revised Preliminary Consolidation
Report, Georgia Milk Producers had suggested dividing the Southeast
Order on the state line between Mississippi and Alabama. Over 35 form
letters opposed the separation of the Southeast marketing area between
Mississippi and Alabama. A more recent Georgia Milk Producers comment
rescinded this position.
A comment filed on behalf of Barber Pure Milk Company and Dairy
Fresh Corporation, both in Alabama, suggested that the Florida orders
and the Carolina and Tennessee Valley orders be merged with the
Southeast. The comment stated that evidence shows the Florida markets
are vitally involved with other areas of the Southeast in Class I
sales, obtaining milk supply, and in the disposition of surplus milk.
As discussed under the description of the proposed consolidated Florida
market, the greatest overlap in sales distribution and milk supply
involving the Florida markets occurs between the three current Florida
markets. A discussion of the issue of consolidating the Carolina and
Tennessee Valley markets with the Southeast can be found in the
description of the proposed Appalachian market.
Approximately 10 commenters suggested that southern Missouri and/or
northwest Arkansas should be included in the Southeast marketing area.
Mid-Am supported making both areas part of the Southeast Federal order
to correct the inequity perceived by the cooperative to be caused by
southwest Missouri manufacturing plants balancing the Southeast without
being able to pool, and inefficient milk movements caused by blend
price discrepancies. AMPI concurred, suggesting that southern Missouri
historically has been a supply source for the Southeast. The Director
of the Missouri Department of Agriculture contended that southern
Missouri has the largest concentration of milk production in the state
and serves as the reserve supply for southeastern markets. The Missouri
Farm Bureau Federation also suggested including some southern Missouri
counties with the Southeast. One producer also supported including
southern Missouri in the Southeast Marketing Area.
It appears that a substantial amount of the milk supply pooled
under the

[[Page 4851]]

Southeast order has been shifted from Texas to Missouri. Between
December 1996 and May 1997 the percentage of milk pooled under the
Southeast order that was produced in Texas declined from over 10
percent to under 7 percent. During the same time period, the Missouri
share of the Southeast pool increased from 10 percent to 15 percent.
This shift may reflect a change in the relative price relationships
between the Southeast, Texas and Southwest Plains orders, which could
be subject to change in the opposite direction in the future. While the
percentage of southern Missouri milk pooled under the Southeast order
increased from less than one-third to nearly one-half, less than one-
half of the volume pooled on the Southeast order is actually delivered
to Southeast plants, with over half of the volume being diverted to
manufacturing plants in Missouri, Illinois, Minnesota and Wisconsin.
Production pooled under the Southeast order from the northwest
Arkansas counties located in the current Southwest Plains marketing
area increased from less than 10 percent of those counties' production
in December 1996 to about 13 percent in May 1997. Arkansas milk
represented 5 percent of the total milk pooled under the Southeast
order in December 1996, and just under 6 percent in May 1997.
The commenters state that if the portions of Arkansas and Missouri
that currently are in the Southwest Plains marketing area are shifted
to the Southeast order area, the route disposition by distributing
plants located within this area would become in-area dispositions from
Southeast pool distributing plants. The most recent information
available shows that more than half of the dispositions from the three
plants in question would be within the Southeast marketing area if the
area in which they are located were part of the Southeast area.
Several commenters also suggested that the proposed consolidated
Appalachian order area (the current Carolina and Louisville-Lexington-
Evansville areas and the former Tennessee Valley area) be combined with
the Southeast marketing area because of a common procurement area in
south central Kentucky for the Southeast and Tennessee Valley markets,
causing different blend prices to exist. This issue is discussed in
some detail under the description of the proposed consolidated
Appalachian market.
A number of comments from east Texas suggested combining that
portion of Texas with the Southeast marketing area to resolve
inequities identified by the commenters. The commenters claimed that
due to its heat, humidity and rainfall, milk production conditions in
eastern Texas have more in common with the Southeast than with the
Southwest area. The dry climate of Central Texas and New Mexico permits
dairies to become much larger and produce 10-15% more milk per cow, at
a lower cost than East Texas producers are able to achieve. This issue
is discussed in detail under the description of the proposed
consolidated Southwest market area.

Mideast

The proposed consolidated Mideast marketing area is comprised of
the current Ohio Valley (Order 33), Eastern Ohio-Western Pennsylvania
(Order 36), Southern Michigan (Order 40), part of the Michigan Upper
Peninsula (Order 44), and Indiana (Order 49) marketing areas plus 6
currently unregulated Indiana counties, 2 whole and 3 partial currently
unregulated Michigan counties, and 6 whole and 3 partial currently
unregulated Ohio counties. There would be 304 whole and 2 partial
counties in this proposed area.
Geography
The Mideast market is described geographically as follows:
Indiana--72 counties (64 currently in Order 49, 2 currently in
Order 33, and 6 currently unregulated on the western edge of the State,
just south of the northwest corner).
Kentucky--18 counties (all currently in Order 33).
Michigan--77 counties. Two whole and 3 partial counties currently
are unregulated. The rest of the area currently is included in Orders
40, 44, 49, and 33. Of the total 83 Michigan counties, only 6 in the
western end of the Upper Peninsula are not included in the proposed
Mideast marketing area.
Ohio--all 88 counties. Six whole and 3 partial counties currently
are unregulated. The rest of the State currently is included in Orders
33 and 36.
Pennsylvania--12 whole and 2 partial counties, currently in the
Order 36 area.
West Virginia--37 counties; 20 currently in Order 33, 17 currently
in Order 36.
The proposed Mideast marketing area lies directly south of the
Great Lakes, with the State of Michigan enclosed on the east and west
sides by Lakes Huron and Michigan. On the eastern border of the
marketing area, between the proposed Mideast and Northeast marketing
areas, is Pennsylvania State-regulated territory and the Allegheny and
Appalachian Mountains.
The east-to-west distance across the proposed marketing area is
approximately 450 miles, from locations on the eastern edge of the area
in western Pennsylvania to the border of Indiana and Illinois.
Northwest to southeast, from Marquette, Michigan, in the Upper
Peninsula to the northeast area of Kentucky in the marketing area is
just over 800 miles. From the northern tip of lower Michigan to
southern Indiana the more direct north-south distance is 530 miles.
The proposed Mideast marketing area is contiguous to 3 other
proposed consolidated marketing areas. The proposed Central marketing
area would provide the western border of the Mideast marketing area
along the Indiana-Illinois border, and the proposed Appalachian area
would provide the southern boundary. The western end of Michigan's
Upper Peninsula, part of the proposed Upper Midwest area, would adjoin
the Mideast portion of the Upper Peninsula.
In terms of physical geography, most of the proposed Mideast
marketing area is at low elevations, and relatively flat. The climate
and topography are favorable to milk production, with dairy being the
number one agricultural commodity in terms of financial receipts in the
State of Michigan in 1996. Dairy also ranks high in terms of financial
receipts in the rest of the area; 3rd in Ohio and West Virginia, and
5th in Indiana.
Population
According to July 1, 1996, population estimates, the total
population in the proposed marketing area is 31 million. The 34 MSAs in
the proposed Mideast marketing area include 79.2 percent of the area's
population. Over 55 percent of the area's population is contained in
the 8 most populous MSAs, which each have over 950,000 people. Two-
thirds of the population is located in the states of Michigan and Ohio.
The Mideast area's largest and 7th largest of the 34 MSAs are
located in Michigan. Detroit-Ann Arbor-Flint, with 5.1 million
population, is the largest MSA, and is located in the southeast portion
of the state between Lakes Huron and Erie. Grand Rapids-Muskegon-
Holland is the 7th largest Mideast MSA, is located approximately 150
miles west-northwest of Detroit, and has a population of 1 million.
These two MSAs contain two-thirds of the population of Michigan. There
are 5 other MSAs in Michigan. Three have approximately 400,000
population each, and the other two average approximately 150,000
apiece. Eighty-four percent of the population of

[[Page 4852]]

Michigan is located in these 7 MSAs, all in the lower half of southern
Michigan.
Four of the 8 largest Mideast MSAs are located in the State of
Ohio. These are: (1) Cleveland-Akron, the second-largest, with a
population of 2.9 million, located on Lake Erie in northwestern Ohio;
(2) Cincinnati-Hamilton, OH-KY-IN, the 4th largest, with a population
of 1.9 million, located in the southwest corner of Ohio; (3) Columbus,
the 6th largest, with a population of 1.4 million, located
approximately midway between Cincinnati and Cleveland; and (4) Dayton,
the 8th largest, with a population of .95 million.
There are 6 additional MSAs in Ohio, 2 with populations of
approximately .6 million each, 1 with a population of .4 million, and 3
that average just over 150,000 each. Eighty-one percent of the
population of Ohio is located in MSAs, most in the northern part of the
State.
The third-largest MSA in the Mideast area is Pittsburgh,
Pennsylvania, with a population of 2.4 million. Pittsburgh is 127 miles
southeast of Cleveland. There are two smaller MSAs in the Pennsylvania
portion of the proposed Mideast marketing area, having an average
population of about 200,000 each. Eighty-seven percent of the
population of the Pennsylvania portion of the Mideast area is located
in MSAs.
Indianapolis, Indiana, is the 5th largest MSA in the proposed
Mideast marketing area, with a population of 1.5 million. Indiana
contains 9 additional MSAs, 2 with populations of .5 and .6 million,
and 7 others that average 155,000 population. All but 2 of the 9
smaller MSAs are located north of Indianapolis. Seventy-four percent of
the population of the portion of Indiana that is in the proposed
Mideast area is located in MSAs.
The portion of West Virginia that is within the proposed Mideast
area contains 4 MSAs, 3 of which are located on the West Virginia-Ohio
border, along the Ohio River. The population of these MSAs averages
just over 200,000. Forty-five percent of the population of the West
Virginia portion of the proposed Mideast area is located in MSAs.
Fluid Per Capita Consumption
Estimates of fluid per capita consumption within the proposed
Mideast area vary from 18.75 pounds per month for Michigan to 20.4
pounds per month for Indiana. Use of 19 pounds per month as a weighted
average results in an estimated 588 million pounds of fluid milk
consumption for the Mideast marketing area. Mideast handlers' route
disposition within the area during October 1995 totaled 537 million
pounds, with another 27 million distributed by 20 handlers fully
regulated under other orders. An additional 1.9 million pounds was
distributed by 8 handlers that would be partially regulated under the
proposed Mideast order, 6 handlers that would be regulated under other
consolidated orders and 2 under the proposed Mideast order. One million
eight hundred thousand pounds was distributed by producer-handlers, and
less than 1 million pounds by 2 handlers that would be exempt under
this proposed rule on the basis of each having less than 150,000 pounds
of route disposition per month.
Milk Production
In December 1996, over 12,000 producers from 376 counties in 11
states pooled 1.1 billion pounds of milk on Federal Orders 33, 36, 40,
44 and 49. Over 90 percent of this producer milk came from Mideast
marketing area counties. The States of Indiana, Michigan, Ohio and
Pennsylvania supplied 93 percent of the milk (13%, 37.9%, 30.4% and
11.6%, respectively), with 89 percent coming from counties that would
be in the proposed Mideast area. Just over two-thirds of the milk
pooled under these orders was produced in Michigan and Ohio counties
located within the proposed consolidated marketing area.
Other states pooling milk on the orders proposed to be consolidated
in the proposed Mideast area were Illinois (1.4%), Kentucky (0.5%),
Maryland (0.4%), New York (2.5%), Virginia (0.1%), West Virginia
(1.0%), and Wisconsin (1.2%). These states contributed a total of 7.2
percent of the milk pooled on the 5 orders.
Sixty-three of the counties that had production pooled under the
five current orders supplied more than 5 million pounds of milk each
during December 1996. Seven of the counties were in northern and
northeast Indiana, over 100 miles from Indianapolis; 11 were in western
Pennsylvania--7 of them within 100 miles of Pittsburgh, and the others,
including those with the most production (10-25 million pounds), in the
northwest corner of the state. Twenty-six Michigan counties pooled more
than 5 million pounds each under the 5 orders, including 15 counties
with more than 10 million pounds and 2 counties with more than 25
million pounds. All of these counties are located within 110 miles of
Detroit or Grand Rapids, the two largest MSAs in Michigan. The heaviest
milk production area of Ohio is the northeast quadrant of the State and
within 50 miles of the Akron-Cleveland MSA, including 6 counties
supplying over 10 million pounds each during December 1996, and 1
county pooling over 40 million pounds. A smaller production area in
Ohio is located in the central portion of the western edge of the State
within 80 miles of the Dayton MSA, and includes two counties with over
10 million pounds production and 1 county with over 20 million. The
only population centers of the marketing area that do not appear to
have adequate supplies of nearby milk are Indianapolis and Cincinnati,
in the southern portion of the area.
Distributing Plants--Route Distribution
Using distributing plant lists included in both the Preliminary and
Revised Preliminary Reports, with the pooling standards used in the
Revised Preliminary Report adjusted to 30 percent of route dispositions
as in-area sales, updated for known plant closures through May 1997, 78
distributing plants would be expected to be associated with the Mideast
marketing area, including 56 fully regulated distributing plants (55
currently fully regulated, and 1 currently partially regulated), 4
partially regulated (all currently partially regulated), 2 exempt
plants that would have less than 150,000 pounds of total route
disposition per month (both currently fully regulated), and 16
producer-handlers (all currently producer-handlers). Four of these 78
distributing plants would not be in the marketing area, including 3
partially regulated plants (all currently partially regulated) and 1
producer-handler (currently a producer-handler). Since October 1995, 8
distributing plants (3 in Pennsylvania, 2 in Ohio, 1 in West Virginia,
1 in Indiana and 1 in Michigan), have gone out of business.
There would be 43 distributing plants in the 8 Mideast MSA's that
each have over a million people (including Dayton-Springfield which has
.95 million). Twenty-nine of these plants would be pool plants--6 in
the Pittsburgh area, 6 in the Detroit area, 4 each in the Grand Rapids
and Cleveland areas, 3 each in the Indianapolis and Cincinnati areas, 2
in Columbus and 1 in Dayton. Eleven of the plants in the large MSA
areas would be producer-handlers, 2 would be exempt on the basis of
having less than 150,000 pounds of milk per month in Class I route
dispositions, and 1 partially regulated.
Of the remaining 31 distributing plants located in the marketing
area, 19 would be located in other MSA's as follows: 5 pool plants and
1 producer-handler in Ohio; 5 pool plants in Indiana; 4 pool plants in
Michigan; 2

[[Page 4853]]

pool plants in Pennsylvania; 1 pool plant in Kentucky; and 1 pool plant
in West Virginia. Twelve of the remaining distributing plants would not
be located in MSA's. Three of these pool plants and 2 producer-handlers
would be located in Michigan, 4 pool plants would be located in Ohio; 2
pool plants would be located in Indiana; and 1 producer-handler would
be located in West Virginia.
There are 4 distributing plants that would not be in the marketing
area. These would be 2 partially regulated plants and 1 producer-
handler in Pennsylvania, and 1 partially regulated plant in Virginia.
The in-area route disposition standard has been adjusted to 30
percent of total route dispositions from the 15 percent standard that
was used for all of the suggested consolidated areas in the Revised
Preliminary Report. This adjustment has been made to assure that State-
regulated plants in Virginia and Pennsylvania that have sales in the
proposed marketing area would not be pooled under Federal order
regulation.
Utilization
According to October 1995 pool statistics for handlers who would be
fully regulated under this Mideast order, the Class I utilization
percentages for the Ohio Valley, Eastern Ohio-Western Pennsylvania,
Southern Michigan, Michigan Upper Peninsula, and Indiana markets were
59, 57, 48, 79, and 66 percent, respectively. Based on calculated
weighted average use values for (1) the current order with current use
of milk, and (2) the current order with projected use of milk in the
consolidated Mideast order, the potential impact of this proposed rule
on producers who supply the current market areas is estimated to be:
Ohio Valley, a 1-cent per cwt decrease (from $13.00 to $12.99); Eastern
Ohio-Western Pennsylvania, a 10-cent per cwt decrease (from $13.07 to
$12.97); Southern Michigan, an 8-cent per cwt increase (from $12.75 to
$12.83); Michigan Upper Peninsula, a 20-cent per cwt decrease (from
$12.81 to $12.61); and Indiana, a 5-cent per cwt decrease (from $12.97
to $12.92). The large decrease for Michigan Upper Peninsula is because
of its current individual handler pool provisions (very little reserve
milk is pooled under Order 44--instead, it is pooled on the Southern
Michigan order). For December 1996, combined Class I utilization for
Orders 33, 36, 40, 44 and 49 was 52 percent based on 563.4 million
pounds of producer milk used in Class I out of 1082 million total
producer milk pounds pooled.
The Mideast is one of two proposed consolidated marketing areas
that would have a significantly higher-than-average percentage of its
milk used in Class II. Currently, the Southern Michigan, Ohio Valley
and Indiana markets have Class II utilization over 20 percent. When the
markets are combined the average for the consolidated market will be
just under 20 percent.
Other Plants
Also located within the Mideast marketing area during May 1997 were
59 supply or manufacturing plants: 1 in Charleston, West Virginia, 4 in
Pennsylvania, 18 in Michigan, 9 in Indiana and 27 in Ohio. Nine of the
59 plants are pool plants. Of these pool plants, 6 are supply plants--1
manufactures primarily Class II products, 3 manufacture primarily
powder, and 2 have no primary product, only shipping to distributing
plants. Three pool plants are manufacturing plants, manufacturing
primarily cheese. Of the 50 nonpool plants in the Mideast marketing
area, one is a supply plant that manufactures primarily cheese. The
other 49 nonpool plants are manufacturing plants. In this area of high
Class II use, 28 of the nonpool plants manufacture primarily Class II
products. In addition, 1 manufactures primarily butter, 1 manufactures
primarily powder, 27 manufacture primarily cheese, and 2 manufacture
primarily other products.
There are also two manufacturing plants in the currently-
unregulated area of Ohio--a nonpool plant that manufactures primarily
Class II products in the unregulated county of Erie, Ohio and a nonpool
plant that manufactures primarily cheese in the unregulated area of
Sandusky, Ohio.
Cooperative Associations
In December 1995, 18 cooperative associations pooled member milk
under the 5 orders proposed to be consolidated. One of the cooperatives
pooled milk on the four principal orders, 4 cooperatives had member
milk pooled on 3 of the orders, 2 cooperatives pooled milk on 2 of the
orders, and 11 of the cooperatives pooled milk on only one of the
orders. The percentage of cooperative member milk pooled on each of the
orders varied from 43 percent under Order 36 to 86 percent under Order
40. Of the total milk pooled on the 5 orders in December 1995, 78
percent was marketed by cooperative associations.
Criteria for Consolidation
Overlapping route disposition, overlapping production areas,
natural boundaries, and multiple component pricing are all criteria
that support the consolidation of these current order areas into a
consolidated Mideast marketing area. Handlers who would be fully
regulated under the consolidated order distribute approximately 90
percent of their route dispositions within the proposed marketing area,
and nearly 95 percent of the milk distributed within the marketing area
is from handlers who would be regulated under the order.
Many of the counties from which milk was pooled on the individual
orders supplied milk to three or four of those orders. For instance,
milk from several of the same Michigan counties was pooled on the Ohio
Valley, Eastern Ohio-Western Pennsylvania, Indiana and Southern
Michigan orders; milk from a number of the same Indiana counties was
pooled on the Ohio Valley, Southern Michigan and Indiana counties; and
milk from some of the same Ohio counties was pooled on the Ohio Valley,
Indiana, and Southern Michigan orders.
The Great Lakes serve as natural boundaries on the northern edge of
the area and on the eastern and western sides of Michigan, as do the
mountains in central Pennsylvania. All of the orders involved in the
proposed consolidated Mideast area contain multiple component pricing
provisions. Although the Southern Michigan component pricing plan is
not the same as the plan common to the Indiana and the two Ohio orders,
interest in adopting the Southern Michigan component pricing plan has
been expressed by industry participants in the other orders.
Discussion of Comments and Alternatives
Comments regarding the Mideast region have been received from
cooperatives, proprietary handlers, and individual producers throughout
the developmental period of this rulemaking process, but responses to
the Revised Preliminary Report on Order Consolidation focused mostly on
the suggested addition of currently non-Federally regulated territory.
Several comments supported the addition of Pennsylvania Milk Marketing
Board (PMMB) Area 6 to the suggested Mideast order area, and one
handler urged the addition of currently-unregulated areas of Maryland
and West Virginia. However, a large number of producers whose milk
currently is pooled at PMMB-regulated fluid milk plants, and the
operators of some of those plants, argued strenuously that including
PMMB Area 6 in the proposed Mideast

[[Page 4854]]

order would reduce returns to Pennsylvania producers unnecessarily
without reducing costs to handlers.
For the reasons discussed previously in reference to the Northeast
market, PMMB Area 6 should not be added to the proposed Mideast order
area. Consolidation of the existing orders does not necessitate
expansion of the consolidated orders into areas in which handlers are
subject to minimum Class I pricing under State regulation, especially
when the states' Class I prices exceed those that would be established
under Federal milk order regulation. Handlers located in PMMB areas 2,
3, and 6 are regulated under the State of Pennsylvania if they do not
have enough sales in any Federal order area to meet an order's pooling
standards. If such plants do meet Federal order pooling standards, the
State of Pennsylvania continues to enforce some of its regulations in
addition to Federal order regulations. As State-regulated handlers,
they must pay a Class I price for milk used in fluid products, often
higher than the Federal order price would be. Inclusion of the
Pennsylvania-regulated handlers in the consolidated marketing area
would have little effect on handlers' costs of Class I milk (or might
reduce them), while reducing producer returns. In view of these
situations, it appears that stable and orderly marketing conditions can
be maintained without extending full Federal regulation to State-
regulated handlers.
Comments from a large cooperative association and a fluid handler
urged that southern Ohio and part of West Virginia be included in the
proposed Appalachian order to assure that a large distributing plant
located in Winchester, Kentucky, remains pooled under the consolidated
Appalachian order. Both comments argued that order provisions should
specify that plants be regulated according to their location rather
than their fluid milk distribution area. The pooling provisions
proposed herein would assure that plants are regulated where located
unless their route disposition within another marketing area is over 50
percent. This provision should assure that the plant in question
remains regulated under the proposed Appalachian order. If a plant's
route disposition in a marketing area other than where it is located is
over 50 percent, other handlers competing for sales with that handler
should be assured that their competitor is paying a like amount for its
milk.

Upper Midwest

The proposed Upper Midwest marketing area is comprised of the
current Upper Midwest (Order 68) and Chicago Regional (Order 30)
marketing areas, with the addition of the western portion of the
Michigan Upper Peninsula (Order 44) marketing area. There are 205
counties in this proposed area.
Geography
The proposed consolidated Upper Midwest marketing area is described
geographically as follows: 16 counties in Illinois (all currently in
Order 30), 6 counties in Iowa (all currently in Order 68), 6 counties
in Michigan (all currently in Zones I and IA of Order 44), 83 counties
in Minnesota (all currently in Order 68), 16 counties in North Dakota
(all currently in Order 68), 8 counties in South Dakota (all currently
in Order 68), and 70 counties in Wisconsin (43 currently in Order 30,
20 currently in Order 68, and 7 currently unregulated). This market is
about 600 miles east to west and about the same distance north to
south.
The area described above is contiguous to the proposed Central
market to the south, a small corner of the proposed Mideast market to
the southeast, and the eastern portion of Michigan's Upper Peninsula,
also part of the proposed Mideast market, to the northeast. North of
the Upper Midwest market is Lake Superior and the Canadian border, and
west of the market is a large sparsely-populated and unregulated area.
Most of the eastern border of the marketing area is Lake Michigan.
The proposed Upper Midwest marketing area is generally low-lying,
with some local differences in elevation in Wisconsin and the upper
peninsula of Michigan. Natural vegetation in the western part of the
area is tall-grass prairie, with the eastern two-thirds of the northern
portion being broadleaf forest, coniferous forest, and mixed broadleaf
and coniferous forest. Annual precipitation averages 30-35 inches per
year. Most of the area experiences summer temperatures that average
about 75 degrees; the northern and western portions average winter
temperatures are in the low 'teens, while the southern and more eastern
portions experience average winter temperatures in the 20's. The far
western part of the market predominantly grows mixed field crops, with
cattle and soybeans more to the southwest. Both Minnesota and Wisconsin
are included in the top five milk-producing states, and dairy is the
number 1 agricultural enterprise in Wisconsin, generating over half of
the State's income derived from agricultural commodities.
Population
According to July 1, 1996, population estimates, the total
population of the proposed Upper Midwest marketing area is
approximately 18.5 million. Using Metropolitan Statistical Areas
(MSAs), there are 3 population centers over 1 million. The Chicago-
Gary-Kenosha area, primarily in northeastern Illinois, is the largest,
with a 7.8 million population in the marketing area. The Minneapolis-
St. Paul area, located mostly in Minnesota, is next with 2.8 million;
and the third-largest MSA is Milwaukee-Racine, Wisconsin, with a
population of 1.6 million. The Chicago area is located in the southeast
corner of the marketing area, on the west side of the southern end of
Lake Michigan, with Milwaukee approximately 85 miles north, also along
Lake Michigan. Minneapolis is located 400 miles northwest of Chicago,
along the Minnesota-Wisconsin border.
Approximately two-thirds of the population of the proposed
marketing area is within the three largest MSA's, with over 80 percent
of the population contained within the area's 17 MSA's (with the 14
smaller MSA's averaging 195,000 population).
Sixty percent of the population of the market is concentrated in
the Illinois and southeast Wisconsin portion of the marketing area. In
Wisconsin, nearly 90 percent of the population is located in the
southern two-thirds of the state, and in Minnesota 85 percent of the
population is in the southern half of the state.
Fluid Per Capita Consumption
Based on the population figure of 18.5 million and an estimated per
capita fluid milk consumption rate of 20 pounds of fluid milk per
month, total fluid milk consumption in the proposed Upper Midwest
marketing area is estimated at 370 million pounds per month. Plants
that would be fully regulated distributing plants under the Upper
Midwest order had route disposition within the market of 321.5 million
pounds in October 1995. The 3 producer handlers operating in the
combined marketing areas during this month had a combined route
disposition of .1 million pounds, 5 partially regulated handlers
distributed 1.7 million pounds in the marketing area, and an additional
.1 million pounds was distributed by unregulated handlers. Twenty
handlers fully regulated under 10 other Federal orders, from New York-
New Jersey to Great Basin, distributed 36.5 million pounds in the
combined marketing areas during October 1995.

[[Page 4855]]

Milk Production
In December 1996, 2.2 billion pounds of milk were pooled in the
proposed Upper Midwest market from more than 27,700 producers located
in 10 states from Tennessee to Minnesota, and from South Dakota to
Michigan. However, over 95 percent of the producer milk was produced
within the proposed marketing area, and 93.4 percent was produced
within the states of Wisconsin and Minnesota. As with population
density and milk plant density, most milk production in Minnesota and
Wisconsin occurs in the southern parts of these states. Over 82 percent
of Wisconsin milk pooled under the combined Chicago Regional-Upper
Midwest orders in December 1996 was produced in the southern two-thirds
of the State, while 84 percent of the Minnesota milk pooled under the
two orders was produced in the southern half of Minnesota.
Forty counties, 3 in Iowa, 12 in Minnesota, and 25 in Wisconsin
supply pool milk to both the current Chicago Regional and Upper Midwest
orders. The largest part of the common production area is in Wisconsin,
where 25 counties supply 25 percent of the milk pooled under Order 30,
and 27 percent of the milk pooled under Order 68. When data for the 40
counties is combined, 26 percent of the Chicago Regional pool and 39
percent of the Upper Midwest pool is supplied by this common production
area.
Distributing Plants--Route Distribution
Using distributing plant lists included in both the Preliminary and
Revised Preliminary Reports and the pooling standards used in the
Revised Preliminary Report, updated for known plant closures through
May 1997, 37 distributing plants would be expected to be associated
with the Upper Midwest marketing area, including 29 fully regulated
distributing plants (3 currently partially regulated and 26 currently
pool plants), 4 partially regulated (3 currently partially regulated
and 1 currently fully regulated), 1 unregulated (currently partially
regulated), 2 producer-handlers, and 1 exempt plant (currently
unregulated, with less than 150,000 pounds of total route disposition
per month). Since October 1995, one distributing plant in Wisconsin has
gone out of business.
There would be 7 distributing plants in the Chicago area (5 pool
plants, 1 producer-handler, and 1 unregulated plant). The Milwaukee-
Racine area would have 2 pool distributing plants. There would be 7
distributing plants in the Minneapolis-St. Paul area (6 pool plants and
1 partially regulated plant). Of the remaining 21 distributing plants,
14 are located in other MSAs as follows: 4 pool plants in Minnesota, 2
pool plants in North Dakota, 1 pool plant in Illinois, and 6 pool
plants and 1 partially regulated plant in Wisconsin. Seven of the
remaining distributing plants are not located in MSAs: 2 pool plants in
Minnesota, 2 partially regulated plants in North Dakota, 1 producer-
handler and 1 exempt plant (less than 150,000 pounds of total route
distribution per month) in Wisconsin and 1 pool plant in Michigan.
Utilization
According to October 1995 pool statistics for handlers who would be
fully regulated under this Upper Midwest order, the Class I utilization
percentages for the Chicago Regional and Upper Midwest were 30 and 46
percent, respectively. Based on calculated weighted average use values
for (1) the current order with current use of milk, and (2) the current
order with projected use of milk in the consolidated Upper Midwest
order, the potential impact of this proposed rule on producers who
supply the current market areas is estimated to be: Chicago Regional,
no change ($12.62 in both cases), and Upper Midwest, a 1-cent per cwt
increase (from $12.55 to $12.56). However, a substantial amount of milk
was omitted from both pools for October 1995 because of unusual class
price relationships. Annual Class I utilization percentages may be
considered more representative for these markets. For the year 1996,
the annual Class I utilization percentage for the Chicago Regional
market was 20.4, with 19.6 for the Upper Midwest. The Class I use
percentage for the Michigan Upper Peninsula market, which has a
individual handler pool and represents a very small portion of the
producer milk that would be expected to be pooled under the proposed
consolidated order, was 78.3 percent. It is estimated that the Class I
use percentage for the consolidated order would be in the neighborhood
of 20 percent.
Other Plants
Located within the proposed consolidated Upper Midwest marketing
area during May 1997 were 301 supply or manufacturing plants: 1 in
South Dakota, 3 in Iowa, 28 in Illinois (12 in the Chicago area), 39 in
Minnesota (over three-quarters of which are located in the southeastern
quarter of the State), and 230 in Wisconsin (over 90 percent of which
are scattered throughout the southern three-quarters of the state). One
hundred five of the plants are pool plants, or have a ``pool side.''
Eighty-five of the 105 pool plants (1 in Iowa, 4 in Illinois, 16 in
Minnesota and 64 in Wisconsin) are ``split plants;'' that is, one side
of a plant is a manufacturing facility and the other side receives and
ships Grade A milk, and accounting is done separately. In most cases,
the nonpool portion of such a plant is a manufacturing operation,
primarily cheese-making. Most of the other pool plants are pool supply
plants, located primarily in Wisconsin, that ship milk to pool
distributing plants.
The 196 nonpool plants in the proposed Upper Midwest marketing area
are manufacturing plants--103 manufacture primarily cheese, 16
manufacture primarily Class II products, 15 manufacture primarily
butter, 23 manufacture primarily milk powders, and 39 manufacture
primarily other products.
Also associated with the Upper Midwest order, but not within the
marketing area, are 2 pool supply plants and 6 manufacturing plants (3
manufacturing primarily cheese, 2 making Class II products, and 1
butter plant) in North Dakota.
Cooperative Associations
In December 1995, 67 cooperative associations pooled member milk on
the Chicago Regional and Upper Midwest orders, providing 83 percent of
the milk pooled under the two orders. Seventy-six percent of the milk
pooled under Order 30 and 93.9 percent of the milk pooled under Order
68 was supplied by cooperative associations. Eight of the cooperatives
marketed milk in both orders, accounting for nearly two-thirds of the
milk pooled in the Upper Midwest (and 68.8 percent of the cooperative
member milk), and 42.5 percent of the milk pooled in the Chicago
Regional market (55.9 percent of total cooperative member milk). In the
two markets, 15 cooperatives pooled milk only under Order 30, and 44
cooperatives pooled milk only under Order 68.
Criteria for Consolidation
As suggested in the initial Preliminary Report on Order
Consolidation, the Chicago Regional and Upper Midwest marketing areas
should be combined, with the addition of the western end of Michigan's
Upper Peninsula, into a consolidated Upper Midwest Federal order
marketing area. Although these areas do not have a considerable degree
of overlapping fluid milk disposition, they do have an extensive
overlapping procurement area. Handlers regulated under both of the
principal markets distribute milk into more southern

[[Page 4856]]

markets, and approximately 10 percent of the fluid milk distributed
within the proposed area is distributed by handlers regulated under
other orders. However, these other order areas are more closely related
to markets to the south than to the proposed Upper Midwest order area.
On that basis, it is more appropriate to include them in other
consolidated marketing areas.
Other aspects of the proposed consolidation also fit the criteria
set forth. The proposed Upper Midwest area is bounded on three sides by
Lakes Michigan and Superior, the international border with Canada, and
a large unregulated area. A significant portion of both markets' milk
is supplied by the same cooperative associations. The markets have
identical multiple component pricing plans, and both have large
reserves of milk that normally is used in manufactured products,
primarily cheese. Approximately 90 percent of the milk used in
manufacturing in these markets is used to make cheese. The amount of
cheese manufactured from milk pooled under these milk orders is enough
to supply a population 3 times greater than that of the proposed
consolidated marketing area. Fluid milk handlers in both markets must
compete with cheese manufacturers for a milk supply, and marketing
order provisions for both markets must provide for attracting an
adequate supply of milk for fluid use.
Discussion of Comments and Alternatives
Comments received before issuance of the Revised Preliminary Report
on Order Consolidation largely favored the consolidation of ten
marketing areas--Federal orders 30, 32, 44, 49, 50, 64, 65, 68, 76, and
79. The Revised Report suggested the addition of 3 order areas (Eastern
South Dakota, most of Nebraska-Western Iowa, and Iowa) to the earlier
suggestion of consolidating the Chicago Regional and Upper Midwest
areas. The revised configuration would have increased the population
and Class I use of the consolidated Upper Midwest area. Any increase in
a consolidated marketing area that would include the Chicago Regional
and Upper Midwest order areas could not be justified on the basis of
the criteria of overlapping sales and procurement areas beyond the
addition of the three areas suggested to be added in the Revised
Consolidation Report. Addition of the five orders advocated by the
cementers is not supported on the basis of any data available.
After issuance of the Revised Report a number of objections were
received, both to the addition of only 3 more areas, and to the
inclusion of the 3 additional areas with the Upper Midwest. Producer
organizations operating principally in the proposed Upper Midwest
consolidated area argued that additional Class I use should be included
in the area to enhance blend prices to producers. Producer
organizations and handlers operating in the other 3 areas, particularly
Iowa, argued that inclusion of those areas with the 2 upper midwest
order areas would severely affect Iowa handlers' ability to attract a
sufficient supply of milk, and that the milk pooled on those orders
from Minnesota and Wisconsin is not needed to meet Iowa handlers' Class
I needs, but is pooled on the Iowa market to obtain the higher blend
price.
The addition to the consolidated Upper Midwest marketing area of
marketing areas with higher Class I use for the sole purpose of
increasing the Upper Midwest Class I utilization percentage and Upper
Midwest producer returns is not consistent with the criteria examined
to determine defensible order consolidations. The numerous markets
recommended by upper midwest producer groups to be consolidated with
the Chicago Regional and Upper Midwest order areas have very little
distribution or procurement overlap with those areas, aside from
occasional need for reserve milk supplies. When reserve supplies are
needed by the other markets, upper midwest milk can be, and is, pooled
on the more southern markets and shares in their pools. The potential
gain of adding areas recommended by upper midwest producer groups would
be much less than the loss to producers whose milk is pooled under
orders proposed to be consolidated in the Central, Mideast and
Appalachian marketing areas.
For example, if 9 nearby marketing areas were combined with the
Upper Midwest and Chicago Regional areas, the combined utilization for
the 11 markets would be about 10 percentage points higher than that for
the 2 markets, and the blend price could be expected to increase by
approximately 7 cents per hundredweight. At the same time, the
percentage Class I utilization for the other markets that would be
affected would be reduced by an average of 26 percentage points and by
as many as 54 percentage points, resulting in an average reduction in
the blend price of 27 cents, and as much as 54 cents, per
hundredweight. These results occur because, with the addition of 9
other orders, the combined volume of milk pooled under the Upper
Midwest and Chicago Regional markets would represent nearly three-
quarters of the total that would be pooled under the 11 orders. Based
on these considerations and comments received, the extent of the
proposed Upper Midwest marketing area should be limited to the areas of
the current Chicago Regional and Upper Midwest marketing areas, with
the addition of the western part of the Michigan Upper Peninsula
marketing area.

Central

The proposed Central order marketing area consolidates the current
8 Federal order marketing areas of Central Illinois, most of Southern
Illinois-Eastern Missouri, most of Southwest Plains, Greater Kansas
City, Iowa, Eastern South Dakota, Nebraska-Western Iowa, and Eastern
Colorado (Federal orders 50, 32, 106, 64, 79, 76, 65, and 137,
respectively). Moving to the proposed Southeast marketing area are 6
Missouri counties currently in Federal order 32 and, from Order 106, 11
northwest Arkansas counties and 22 whole and 1 partial (Pulaski County)
southern Missouri counties. Order 106 counties in Kansas and Oklahoma
would remain in the Central market, as suggested in the 2 preliminary
reports. In addition, some counties in Colorado, Illinois, Iowa,
Kansas, Missouri and Nebraska that currently are not part of any order
area would be included in the proposed Central market. There are 565
whole counties and 3 partial counties in this proposed area.
Geography
The proposed Central marketing area would include the following
territory:
Colorado--33 counties in eastern Colorado, including the 30
Colorado counties currently in the Eastern Colorado marketing area, and
adding 3 currently-unregulated counties in the southeast corner of the
state between the Eastern Colorado and Southwest Plains marketing
areas.
Illinois--88 counties, including the 6 counties (4 entire and 2
partial) currently in the Iowa marketing area, the 19 counties
currently in the Central Illinois marketing area, the 49 counties
currently in the Southern Illinois-Eastern Missouri marketing area and
8 currently-unregulated adjacent counties in southern Illinois, and 6
currently-unregulated counties in western Illinois located between the
current Central Illinois and Southern Illinois-Eastern Missouri order
areas and the Mississippi River.
Iowa--93 counties and the City of Osage in Mitchell County;
including the 68 counties and the City of Osage currently in the Iowa
marketing area, the 17 counties currently in the

[[Page 4857]]

Nebraska-Western Iowa marketing area, the 1 county currently in the
Eastern South Dakota marketing area, 6 currently unregulated counties
in the northwestern part of Iowa, and 1 currently unregulated county in
the southeastern corner of Iowa.
Kansas--the entire State (105 counties).
Minnesota--the 4 southwestern Minnesota counties that currently are
in the Eastern South Dakota marketing area.
Missouri--45 counties and 1 city, including 6 counties and 1 city
that currently are in the Southern Illinois-Eastern Missouri marketing
area, the 20 counties that currently are in the Greater Kansas City
marketing area, the 5 counties that currently are in the Iowa marketing
area; and 14 currently-unregulated counties distributed around the
center area proposed to remain unregulated.
Nebraska--66 counties in the southern and eastern parts of
Nebraska; omitting the 11 counties in the panhandle that currently are
part of the Nebraska-Western Iowa marketing area, and adding 5
currently-unregulated counties in the southwest corner of the State
between the Nebraska-Western Iowa and Eastern Colorado marketing areas
and 3 currently-unregulated counties in the southeast corner of the
State between the Nebraska-Western Iowa and Greater Kansas City
marketing areas.
Oklahoma--the entire State (77 counties).
South Dakota--the 26 eastern South Dakota counties (including the
portion of Union County that currently is in the Nebraska-Western Iowa
marketing area) that currently are in the Eastern South Dakota
marketing area.
Wisconsin--the 2 southwest Wisconsin counties that currently are in
the Iowa marketing area.
The proposed Central marketing area is adjacent to the proposed
Upper Midwest consolidated order area on the north and northeast, the
proposed Mideast and Appalachian areas on the east, and the northwest
corner of the Southeast order area and the proposed Southwest area on
the south. The Rocky Mountains and some unregulated area form a natural
barrier on the west between this proposed marketing area and the
proposed Western area. The area north of approximately the western
third of the proposed Central area also is unregulated. The north-south
distance covered by the area is approximately 800 miles, from
Watertown, South Dakota, to Ardmore, Oklahoma. The east-west extent of
the area, from the Indiana-Illinois border to Denver, Colorado, is
approximately 1,000 miles.
Geographically, the Central marketing area includes a wide range of
topography and climate types, ranging from the foothills of the Rocky
Mountains on the west to the central section of the Mississippi River
Valley toward the eastern part of the area. Precipitation ranges from
less than 15 inches per year in Denver, Colorado, to more than 30
inches at St. Louis, Missouri. Most of the area experiences fairly hot
summer temperatures, while winter temperatures vary somewhat more than
summer, with colder winter temperatures occurring in the northern part
of the Central area. Much of the nation's cornbelt is included within
the Central area, with significant wheat-growing areas in western
Kansas. The natural vegetation ranges from short grass prairie in
eastern Colorado through tall grass prairie in eastern South Dakota,
Nebraska, Kansas and Oklahoma, and much of Illinois; to broadleaf
forest on both sides of the Mississippi River.
Population
According to July 1, 1996, population estimates, the total
population in the proposed Central marketing area is approximately 21
million. Using Metropolitan Statistical Areas (MSAs), there are four
population centers over 1 million. The St. Louis, Missouri/Illinois,
area is the largest, with over 2.5 million population, and the Denver-
Boulder-Greeley, Colorado, area is next with approximately 2.3 million.
Kansas City, Missouri/Kansas, has a population of 1.7 million, and
Oklahoma City, Oklahoma, is just over 1 million. Approximately one-
third of the population of the proposed marketing area is within these
four largest MSAs, with nearly two-thirds of the population contained
within the area's 31 MSA's (with the 27 smaller MSAs averaging 230,786
population). The Colorado portion of the proposed marketing area has
93.6 percent of its population concentrated in 4 MSA's. The Missouri
portion has 89 percent.
Fluid Per Capita Consumption
Based on the population figure of 21 million and a per capita fluid
milk consumption rate of 19 pounds of fluid milk per month (a weighted
average based on state populations in the marketing area and fluid per
capita consumption estimates for each state), total fluid milk
consumption in the proposed Central marketing area would be
approximately 400 million pounds per month, including 11.7 million
pounds associated with the net population gain of the marketing area
from the addition of previously-unregulated territory. Plants that
would be fully regulated distributing plants in the Central order,
including 3 plants operated by one handler that currently are fully
regulated under the Southwest Plains order (Order 106) but are expected
to be regulated under the proposed Southeast market pool, had route
disposition within the eight marketing areas included in the
consolidated Central area of 384.2 million in October 1995. It is
likely that most of the milk distributed within formerly unregulated
areas by Central order handlers would be distributed within the
consolidated Central marketing area. The 10 producer-handlers operating
in the Central market during October 1995 had a combined route
disposition of 2.2 million pounds, partially regulated plants and
plants that would be exempt distributed 3 million pounds in the
marketing area, and other order plants distributed 22.2 million pounds
during October 1995.
Milk Production
In December 1996, 1.1 billion pounds of milk were pooled under the
orders consolidated in the proposed Central market (including all of
the milk pooled under Orders 32 and 106) from more than 10,000
producers located in 21 states from Idaho to Tennessee, and from Texas
to Minnesota. Seventy-four percent of the producer milk was produced
within the proposed marketing area. The states contributing the most
producer milk were, in descending order of volume, Iowa, Missouri,
Colorado, Kansas, Oklahoma and Illinois. However, over 80 percent of
the Missouri producer milk came from farms in counties which are
included in the proposed consolidated Southeast marketing area. These 6
States accounted for 71 percent of the producer milk pooled under the
eight current orders proposed to be consolidated. All of the states
having substantial portions of their areas in the proposed Central
market contribute producer milk to at least two of the current eight
individual orders, with four of the states (Iowa, Kansas, Missouri, and
Nebraska) supplying milk to five of the order areas each.
Distributing Plants--Route Distribution
Using distributing plant lists included in both the Preliminary and
Revised Preliminary Reports and the pooling standards used in the
Revised Preliminary Report, updated for known plant closures through
May 1997, 54 distributing plants would be expected to be associated
with the Central marketing

[[Page 4858]]

area, including 34 fully regulated distributing plants (one currently
unregulated and the remainder currently pool plants), 2 partially
regulated (1 currently partially regulated and 1 currently
unregulated), 2 exempt plants (both currently are pool plants but have
less than 150,000 pounds of total route disposition per month), 11
producer-handlers (all currently producer-handlers), 1 unregulated
(located in the unregulated central portion of Missouri), and 4
government agency plants (all currently government agency plants).
Since October 1995, it is known that 4 distributing plants (all of
which were fully regulated--2 in Illinois, 1 in Iowa, and 1 in
Oklahoma) have gone out of business.
There would be 10 distributing plants in the Denver area (7 pool
plants and 3 partially regulated plants). The Kansas City area would
have 1 pool distributing plant. The St. Louis area would have 5
distributing plants (4 pool plants and 1 exempt plant). There would be
1 pool distributing plant and 1 partially regulated plant in the
Oklahoma City area. Of the remaining 36 distributing plants, 16 are
located in other MSAs as follows: 1 pool plant and 1 producer-handler
in Colorado; 2 pool plants in Illinois; 4 pool plants, 1 producer-
handler and 1 exempt plant in Iowa; 1 pool plant in Kansas; 3 pool
plants in Nebraska; 1 producer-handler in Oklahoma; and 1 pool plant in
South Dakota.
Twenty of the remaining distributing plants are not located in
MSAs. They are: 1 government agency plant in Colorado; 4 pool plants
and 1 government agency plant in Illinois; 1 pool plant and 1 producer-
handler in Iowa; 1 pool plant and 1 government agency plant in Kansas;
1 unregulated and 2 producer-handlers in Missouri; 1 producer-handler
in Nebraska; 2 pool plants in Oklahoma; 1 partially regulated and 1
government agency plant in South Dakota; and 1 pool and 1 partially
regulated plant in Wyoming.
Utilization
According to October 1995 pool statistics for handlers who would be
fully regulated under this Central order, the Class I utilization
percentages for the individual markets ranged from 42 percent for the
Nebraska-Western Iowa market to 73 percent for the Central Illinois,
Greater Kansas City and Eastern South Dakota markets combined. Data for
these three markets are combined because each of them has only one
handler, and individual handler information cannot be released.
Combined utilization for the eight markets would result in a Class I
percentage of just over 50 percent (including the utilization of the 3
plants that would be included in the Southeast marketing area).
Based on calculated weighted average use values for (1) the current
order with current use of milk, and (2) the current order with
projected use of milk in the consolidated Central order, the potential
impact of this proposed rule on producers who supply the current market
areas is estimated to be: Southern Illinois-Eastern Missouri, a 12-cent
per cwt decrease (from $13.00 to $12.88); Central Illinois, a 21-cent
per cwt decrease (from $13.03 to $12.72); Greater Kansas City, a 34-
cent per cwt decrease (from $13.22 to $12.88); Nebraska-Western Iowa, a
16-cent increase (from $12.63 to $12.79); Eastern South Dakota, a 14-
cent decrease (from $12.81 to $12.67); Iowa, a 1-cent decrease (from
$12.71 to $12.70); and Southwest Plains, a 21-cent increase (from
$13.08 to $13.29). The weighted average use value for the consolidated
Central order market is estimated to be $12.95 per cwt.
Other Plants
Also located within the Central marketing area during May 1997 were
83 supply or manufacturing plants: 7 in Colorado (4 in the Denver
area), 15 in Illinois (2 in the Decatur area), 23 in Iowa (2 in the Des
Moines area and 1 in the Dubuque area), 6 in Kansas, 7 in Missouri (5
in the St. Louis area), 7 in Nebraska, 7 in South Dakota (1 in the
Sioux Falls area), 4 in Oklahoma (1 in the Tulsa area), and 7 in
Wisconsin. Twenty-two of the 83 plants are pool plants, or have a
``pool side.'' Twelve of the 22 pool plants (6 in Iowa, 1 in Nebraska,
2 in South Dakota, and 3 in Wisconsin) are ``split plants;'' that is,
one side of a plant is a manufacturing facility, and the other side
receives and ships Grade A milk, and accounting is done separately. In
most cases, the nonpool portion of such a plant is a manufacturing
operation, primarily cheese-making. Of the pool plants, 8 have no
primary product, but are only shipping to distributing plants, and 6
are pooled manufacturing plants.
Of the 61 nonpool plants in the proposed Central marketing area, 58
are manufacturing plants--23 are plants that manufacture primarily
Class II products, 3 manufacture primarily butter, 6 manufacture
primarily powder, 25 manufacture primarily cheese, and 1 manufactures
primarily other products.
Also associated with the proposed Central order, but not within the
proposed marketing area, are 2 nonpool cheese plants and a nonpool
supply plant located in South Dakota.
Cooperative Associations
Twenty-six cooperative associations pooled milk in December 1995
under the eight orders proposed to be consolidated in the proposed
Central market. Of these cooperatives, 1 pooled milk under 6 of the
orders, 1 under 5 orders, 3 cooperatives associated producer milk with
3 orders each, and 3 others pooled milk under 2 orders each. Eighteen
of the 26 cooperatives pooled milk under only one order, and for 11 of
these organizations that was the Iowa order.
The percentage of cooperative milk pooled under the eight orders
was 93.6, with a range of 80.6 percent cooperative milk under the
Southwest Plains order to 100 percent cooperative member milk under the
Central Illinois, Greater Kansas City and Eastern South Dakota orders.
Criteria for Consolidation
Most of the criteria used in determining the optimum consolidation
of order areas apply to the proposed Central marketing area. The
Federal order markets proposed to be consolidated in the Central area
are strongly related to each other through overlapping route
disposition. The great majority of sales by handlers who would be
regulated under the proposed Central order are distributed within the
proposed marketing area, and the markets proposed to be consolidated
have a greater relationship in terms of overlapping sales areas than
with any other markets. In addition, sales within the currently-
unregulated areas proposed to be included in the consolidated Central
area are overwhelmingly from handlers that would be pooled under the
proposed Central order. Inclusion of these areas would reduce handlers'
burden of reporting out-of-area sales and take in pockets of currently-
unregulated counties that occur between the current order areas. As
discussed above, the milk procurement areas for the markets proposed to
be combined also have a significant degree of overlap.
Some of the currently-unregulated counties in western Illinois and
central Missouri have been added to the proposed Central marketing
area. The omission from the proposed marketing area of the counties in
central Missouri that are not included in the proposed Central
marketing area are based on an estimation of the marketing area of
Central Dairy, located in Jefferson City, Missouri. There is no
intention of causing the regulation of this handler, but minimizing the
extent of the unregulated counties in the middle of

[[Page 4859]]

the proposed marketing area would help to reduce the reporting burden
on handlers in determining which route dispositions are inside, and
which are outside the marketing area. The administrative burden of
verifying such reporting also would be eliminated.
Three of the current Federal order markets (Central Illinois,
Greater Kansas City, and Eastern South Dakota) included in this
proposed consolidated area have too few pool plants to be able to
publish market data without revealing confidential information. In
addition to these three markets, the number of handlers regulated under
each of the Nebraska-Western Iowa, Iowa and Eastern Colorado orders is
in the single digits. Consolidation of these markets will enable the
market administrator's office to provide more informative market data.
Discussion of Comments and Alternatives
Although the Preliminary Report on Order Consolidation, issued in
December 1996, suggested a Central marketing area that resembles the
area proposed herein (but included the northwest Arkansas and southern
Missouri counties that now are included in the proposed Southeast
area), the Revised Preliminary Report, issued in May 1997, suggested
that the Iowa, Nebraska-Western Iowa and Eastern South Dakota order
areas would more appropriately be included with the Chicago Regional
and Upper Midwest areas in a consolidated Upper Midwest order. A number
of comments received after issuance of the Revised Report on Order
Consolidation argued that the Iowa and the Nebraska-Western Iowa orders
should, more logically, be consolidated with the Greater Kansas City
marketing area, as in the November 1996 report.
Among others, the Upper Midwest Dairy Coalition, Mid-America
Dairymen, Andersen-Erickson Dairy Company, and Swiss Valley Farms filed
comments stating that the revised marketing areas would harm Iowa fluid
milk processors competing for sales in Kansas City and St. Louis. The
Iowa Dairy Foods Association and the Iowa Dairy Producers Association,
representing all Iowa dairy processors, emphasized that Iowa must be
included within the same order area as the Greater Kansas City, Central
Illinois and Southern Illinois-Eastern Missouri areas because Iowa
fluid processors would be financially disadvantaged due to the
substantial competition within these areas for packaged route
disposition and raw milk supply. Mid-America Dairymen suggested that
the only portion of the Iowa area that might justifiably be added to
the proposed Upper Midwest consolidated order area would be the
northeastern portion of Iowa, containing Dubuque.
Comments from the National Farmers' Organization, Inc., supported
the approach taken in the May 1997 Revised Report on Order
Consolidation under which the consolidation of Iowa with the Upper
Midwest was suggested. The comments stated that a large, integrated
contiguous milkshed area in southwestern Wisconsin, northeast Iowa, and
southeast Minnesota serves as a source of seasonal or year-round fluid
supplies for several marketing areas, including Iowa. Lakeshore
Federated Dairy Cooperative comments insisted that the revised area be
expanded to include even more area to enhance the utilization
percentage of the Upper Midwest order.
One commenter pointed out that the suggested consolidation was not
supported by the criteria of overlapping sources of milk because the
degree of competition for milk supplies cannot be judged properly on
the basis of the source of milk pooled from an area. According to the
comment, a significant portion of the Minnesota and Wisconsin milk
pooled on the Iowa order is pooled on the basis of where it will return
the most revenue to the supplying producers rather than whether the
milk supply is needed in the market on which it is pooled. The same
commenter, citing the difficulty Iowa handlers often have experienced
in obtaining an adequate supply of milk, went on to state that the
competition for supplies of producer milk between the Iowa and Central
Illinois markets necessitates that these two markets be included in the
same consolidated order.
Because of the strong objections in the comments that opposed the
addition of the Iowa, Nebraska-Western Iowa and Eastern South Dakota
order areas to the consolidated Upper Midwest marketing area and the
slight preponderance of data upon which the suggestions of the initial
Preliminary Report were changed to those of the Revised Preliminary
Report, an even closer look was taken at destinations of route
dispositions and sources of producer milk receipts, using data for
individual handlers instead of for the market as a whole. As with a
number of other proposed consolidated order areas, it would be
impossible to find a boundary across which significant quantities of
milk are not procured for other marketing areas. As in some other
cases, analysis was done to determine where the minimal amount of route
disposition overlap between areas occurred, with the criterion of
overlapping route disposition given greater weight than overlapping
areas of milk supply.
For the most part, it was found that the principal relationship in
terms of route disposition between Iowa handlers and the proposed
consolidated Upper Midwest market is represented by one Iowa handler.
That handler's sales in order areas that are proposed to comprise the
Upper Midwest consolidated order marketing area represent a large
majority of sales by Iowa handlers in marketing areas outside the
proposed Central marketing area. This handler has many of its sales in
the Chicago Regional marketing area. In fact, if the eastern edge of
the Iowa marketing area were added to the proposed consolidated Upper
Midwest order, this handler not only would have the majority of its
sales and qualify regularly as a pool distributing plant under the
consolidated Upper Midwest order (as it occasionally does now under the
current Chicago Regional order on the basis of its sales in that area),
but total inter-order sales between the two consolidated marketing
areas would be reduced. This proposed rule does not include the
division of the Iowa order, but comments on the desirability of such a
division would be welcomed.
The other order area that demonstrates the strongest relationship
with the proposed consolidated Upper Midwest order is the Eastern South
Dakota area. Nearly one-fifth of the Eastern South Dakota handler's
sales are distributed in the current Upper Midwest order, while a
nearly equal amount is distributed in unregulated areas. However, route
disposition in the Eastern South Dakota order area by the Eastern South
Dakota handler and other handlers that would be regulated under the
proposed Central order represents the total fluid milk disposition that
would be estimated for the total population of the Eastern South Dakota
marketing area, using an estimate of 265 pounds of fluid milk
consumption per capita. Therefore, it would not be expected that Upper
Midwest handlers would have significant amounts of fluid milk
distributed into the Eastern South Dakota area.
Approximately 85 percent of the total fluid milk dispositions
distributed by handlers regulated under the three order areas that were
suggested to be included in the Central area in the initial Preliminary
Report, and in the Upper Midwest area in the Revised Preliminary
Report, are disposed of in the proposed Central market. The disposition
by other Central marketing area handlers within the proposed

[[Page 4860]]

Central area is somewhat greater than the proportion for the three more
northern order areas.
The milk receipts at Iowa pool plants from sources in Minnesota and
Wisconsin vary greatly from month to month, leaving a strong impression
that these areas are not regular or reliable sources of milk for the
Iowa market. As stated in the description of consolidation criteria,
not all areas having overlapping areas of milk procurement should be
consolidated. The volumes of Minnesota and Wisconsin milk pooled on the
Iowa order represent a significant share of the total milk pooled
there. In the first 9 months of 1997, 6 percent of the milk pooled on
the Iowa order was from Minnesota, and 22 percent was from Wisconsin.
However, the variation in the volume of Minnesota milk pooled was three
times that of Iowa milk pooled, and the variation in the volume of
Wisconsin milk was five times greater than that of Iowa milk. Less than
five percent of either State's total pooled production is pooled under
the Iowa order.
A number of commenters suggested that southern Missouri and/or
northwest Arkansas should be included in the Southeast Marketing Order.
Mid-America Dairymen, Inc.; Associated Milk Producers, Inc.; Carolina-
Virginia Milk Producers Association, and several other producer groups
supported removing both areas from the current Southwest Plains order
area and making them a part of the Southeast Federal order. The
commenters stated that the reason for such a change would be to correct
inequities they claim are caused by southwest Missouri manufacturing
plants balancing the Southeast without being able to pool, and
inefficient milk movements caused by blend price discrepancies between
orders. Several commenters added that southern Missouri historically
has been a source of reserve milk supply for the Southeast. This
recommended change, of territory currently in the Southwest Plains
marketing area to the proposed Southeast marketing area instead of the
proposed Central marketing area, has been adopted in the proposed rule
and is discussed further under the description of the Southeast
marketing area.
Several comments supported the position of Gillette Dairy, Rapid
City, South Dakota, that 14 counties in Nebraska proposed to be
included in the proposed Central order area be excluded. Five of these
counties are currently unregulated, while the other nine are in the
present Nebraska-Western Iowa Federal order. The comments contended
that excluding Nebraska counties in which Gillette is the majority
distributor of fluid milk would follow the Department's intent not to
regulate currently unregulated handlers. These 14 counties would be in
addition to the 11 western Nebraska counties of the current Nebraska-
Western Iowa order area that the two preliminary reports had suggested
be omitted from the Central order. The 14 counties are located between
the current Nebraska-Western Iowa and Eastern Colorado marketing areas,
which are proposed to be consolidated as part of the proposed Central
market. Handlers regulated under both of those orders have sales in the
counties in question, and there is no data reliably indicating that
Gillette Dairy distributes milk there, or in what amounts relative to
regulated handlers. Therefore, these counties continue to be included
in the proposed Central marketing area.
After considering all the comments and other relevant information,
it was determined that the territory encompassed in the proposed
Central marketing area best meets the criteria used.

Southwest

The proposed Southwest marketing area is comprised of the current
Texas (Order 126) and New Mexico-West Texas (Order 138) marketing areas
as well as 49 currently unregulated Texas counties. There are 290
counties in this proposed area.
Geography
The proposed Southwest market is described geographically as
follows: three counties in Colorado (currently in Order 138), all New
Mexico counties (33, currently in Order 138) and all 254 Texas counties
(162 currently in Order 126, 43 currently in Order 138, and 49
currently unregulated). Two currently unregulated counties are located
in northeast Texas, while the remaining 47 are in southwest Texas.
The Southwest market spans the south central area of the United
States. It is surrounded by Arizona on the west, Colorado and Oklahoma
on the north, Arkansas, Louisiana and the Gulf of Mexico in the
northeast, east, and southeast, and Mexico to the south. Measuring the
extreme dimensions, this market extends about 800 miles north to south
from southern to northern Texas and about 875 miles east to west from
Texas' border with Louisiana and Arkansas to New Mexico's border with
Arizona.
The Southwest market is contiguous to 3 proposed consolidated
marketing areas: Arizona-Las Vegas to the west, Central to the north
and Southeast to the east. Unregulated counties in Colorado also form a
relatively small border in the northwest corner of the market. Texas
has over 350 miles of coastline on the Gulf of Mexico, while Texas and
New Mexico share about 970 miles of boundary with northern Mexico.
In terms of physical geography, diverse topographic relief exists
in the Southwest market area, particularly in New Mexico (ranging from
deserts to high mountain ranges). Northwest New Mexico is part of the
Colorado Plateau, an area of broad valleys and plains as well as deep
canyons and mesas. The Rocky Mountains extend into the north central
area of the state. The Basin and Range region, generally characterized
by ranges or isolated mountains interspersed with valleys, desert
basins or high plains, is located in central and southwestern New
Mexico, as well as western Texas. The Great Plains cover the eastern
third of New Mexico and extend through the Texas Panhandle in north
Texas and much of central Texas. This area is characteristically dry
and treeless and also encompasses Texas hill country and the Edwards
Plateau. The Osage Plains covers area in Texas from the Oklahoma-Texas
border into the south central part of the state and the low and flat
West Gulf Coastal Plain covers the eastern two-fifths of the state.
Climates in this region also vary. The western part of the region,
including New Mexico, southwest Texas and the Texas Panhandle, is semi-
arid to arid with wide ranges in both daily and annual temperatures.
The southern tip of Texas and the Gulf coast are more humid and
subtropical. For some of the area there are few agricultural uses other
than dairy farming. Dairy products were the 2nd and 3rd highest
revenue-producing agricultural commodities in New Mexico and Texas,
respectively, in 1996, accounting for nearly one-third of agricultural
receipts in New Mexico, but less than 10 percent in Texas.
Population
According to July 1, 1996, population estimates, the total
population in the proposed marketing area is 20.9 million. The 26
Metropolitan Statistical Areas (MSAs) in the proposed Southwest market
account for about 82 percent of the total market area population. About
54 percent of the Southwest population is located in the 4 most
populous MSAs. Six MSAs have populations greater than 500,000; their
total population is about 61 percent of the Southwest population.
Because of the large number of MSAs in the Southwest market, only those
areas with populations greater than 500,000 are described in detail.

[[Page 4861]]

Almost 92 percent of the Southwest market's population is located
in Texas, which has 19.1 million people. 23 of the 26 Southwest market
MSAs are in Texas. About 63 percent of Texas' population is
concentrated in 5 areas, which are also the Southwest area's top 5
population centers: the Dallas-Fort Worth (Dallas) MSA in northeastern
Texas, with a population of 4.6 million; the Houston-Galveston-Brazoria
(Houston) MSA in southeastern Texas near the Gulf of Mexico, with a
population of 4.3 million; the San Antonio MSA in south central Texas,
with a population of 1.5 million; the Austin-San Marcos (Austin) MSA in
central Texas, with a population of 1 million; and the El Paso MSA
located in the far western corner of Texas on the Texas-New Mexico-
Mexico border, with a population of 680,000.
New Mexico's population is about 1.7 million. The remaining 3 of
the 26 Southwest market MSAs are located in New Mexico. About 39
percent of the state's population is located in the Albuquerque area,
just northwest of central New Mexico.
In the remainder of the Southwest marketing area, the 3 Colorado
counties have a population of about 70,000.
Fluid Per Capita Consumption
Estimates of fluid per capita consumption vary from 17.1 pounds of
fluid milk per month per person in Texas to 17.5 in New Mexico to 18.8
in Colorado. Multiplying the individual states' consumption rate by its
population in the proposed marketing area results in a fluid milk
consumption rate of 358 million pounds of fluid milk per month for the
proposed Southwest marketing area. With Southwest handlers' (fully
regulated and producer-handlers) route distribution of 322 million
pounds within the Southwest marketing area, route distribution from
these handlers is 36 million pounds less than the expected consumption.
Even with the addition of 23 million pounds from other Federal order
handlers, the Southwest market area had 13 million pounds less than the
expected consumption rate during October 1995.
Production
In December 1996, 1,838 producers from 180 counties in 8 states
pooled 746 million pounds of producer milk on Orders 126 and 138.
Nearly 99 percent of this producer milk came from counties proposed to
be included in the proposed Southwest marketing area. About 55 percent
of the combined market's producer milk was provided by producers in six
counties.
About 455 million pounds of milk were pooled on either Order 126 or
138 from 1,566 producers in 131 Texas counties in December 1996. Three
Texas counties were among the top 6 in volume pooled: Erath (1st),
Hopkins (4th) and Comanche (6th). Erath County--located about 75 miles
west of Dallas--pooled 111 million pounds on Order 126 (and an
additional 10 million pounds on 3 other Federal orders). Hopkins
County--located about 50 miles east of Dallas--pooled 52 million pounds
on Order 126 and another 12 million pounds on 2 other Federal orders.
Contiguous to and lying southwest of Erath County, Comanche County
pooled 34 million pounds on Order 126 and about 3 million pounds on 2
other Federal orders.
Of the 283 million pounds of milk pooled on either Order 126 or 138
from 179 producers in 16 New Mexico counties, 75 percent was produced
in the following three counties, all among the top 6 in volume pooled:
Chaves (2nd), Dona Ana (3rd) and Roosevelt (5th). Chaves County--
located about 200 miles southeast of Albuquerque--pooled 107 million
pounds on Orders 126 and 138 in December 1996 and an additional 6
million pounds on 3 other Federal orders. Dona Ana County, located over
200 miles south of Albuquerque, contiguous to El Paso County, TX, and
the U.S.-Mexico border, pooled 64 million pounds of producer milk on
Order 138. Contiguous to and lying northeast of Chaves County,
Roosevelt County pooled 39 million pounds on Orders 126 and 138 and
another 3 million on another Federal order.
In December 1996, producer milk for Orders 126 and 138 also
originated in one of the Colorado counties in the Southwest marketing
area, and in counties in Arkansas, Louisiana, Mississippi, Missouri and
Oklahoma. However, the combined amount of producer milk pooled from
these areas is less than 2 percent of the total producer milk pooled in
these Orders.
Distributing Plants--Route Distribution
Using distributing plant lists included in both the Preliminary and
Revised Preliminary Reports and the pooling standards used in the
Revised Preliminary Report, updated for known plant closures and
openings through May 1997, 33 distributing plants located in the
proposed Southwest marketing area would be expected to be associated
with the Southwest market, including 23 fully regulated distributing
plants, 1 partially regulated, 3 exempt and 6 producer-handlers. With
one exception, none of these plants' regulatory status is expected to
change as a result of the consolidation process. Of the 23 fully
regulated plants, 17 are located in the top six MSA regions.
Since October 1995, it is known that 5 plants (4 fully regulated
and 1 producer-handler) have gone out of business. The four fully
regulated plants were located in Corpus Christi, Lubbock and Lufkin
(all in Texas), and in Clovis, New Mexico. The producer-handler was
located in Decatur, Texas. One fully regulated distributing plant,
Promised Land Dairy in Floresville, Texas, began packaging and
distributing products in March 1996. Because market analysis for this
area is based on October 1995 information, Promised Land Dairy
information is not included in route dispositions reported; however,
the route dispositions for the non-operational plants are included.
Of the 33 distributing plants that would be located in the proposed
Southwest marketing area, 24 are in Texas, and 9 are in New Mexico.
Twenty-one of the Texas plants would be fully regulated. They are as
follows: 6 in the Dallas area, 3 in the Houston area, 2 in the San
Antonio area, 1 in the Austin area, and 3 in the El Paso area, and 6
located throughout the state. One of the Texas distributing plants was
associated with Order 30 (Chicago Regional) in October 1995, and is
expected to be partially regulated in the Southwest market. Two
producer-handlers are located in Texas, one in the El Paso area and the
other in the central part of the state.
Over half of New Mexico's 9 distributing plants are located in the
Albuquerque area. Two fully regulated handlers, 1 exempt plant and 2
producer-handlers are located in this population center. Of the
remaining 4 plants located in New Mexico, there are 2 exempt plants
(both located in southeastern New Mexico) and 2 producer-handlers (one
located southeast and the other northeast of Albuquerque).
In October 1995, the fully regulated plants in Orders 126 and 138
had route distribution totaling 320 million pounds. Almost 98 percent,
or 313 million pounds, was distributed within the proposed Southwest
marketing area. The nonpool handlers (i.e. producer-handlers) in the
Southwest area are larger than in most other marketing areas; these
handlers had about 9 million pounds of route distribution in the
Southwest marketing area for October 1995. Additionally, handlers fully
regulated under other Federal orders had about 23 million pounds of
route distribution into the Southwest market area.

[[Page 4862]]

Utilization
According to October 1995 pool statistics for handlers who would be
fully regulated under this Southwest order, the Class I utilization
percentages for the Texas and New Mexico-West Texas markets were 50 and
42 percent, respectively. Based on calculated weighted average use
values for (1) the current order with current use of milk, and (2) the
current order with projected use of milk in the consolidated Southwest
order, the potential impact of this proposed rule on producers who
supply the current market areas is estimated to be: Texas, a 3-cent per
cwt decrease (from $13.49 to $13.46), and New Mexico-West Texas, a 7-
cent per cwt increase (from $13.00 to $13.07). The weighted average use
value for the consolidated Southwest order market is estimated to be
$13.39 per cwt. For December 1996, combined Class I utilization for
Orders 126 and 138 was 42.7 percent based on 318,664,000 pounds of
producer milk used in Class I out of 745,890,000 total producer milk
pounds.
Other Plants
Also located within the Southwest marketing area during May 1997
are 17 manufacturing plants: 11 in Texas (2 in the Dallas MSA and 1 in
the El Paso MSA) and six in New Mexico. Six of the 17 plants are pool
plants. All of these pool plants are manufacturing plants--one
manufactures primarily Class II products, two manufacture primarily
powder, two manufacture primarily cheese and one manufactures primarily
other products. Of the 11 nonpool plants in the Southwest marketing
area, all are manufacturing plants--one manufactures primarily powder,
four manufacture primarily cheese, one manufactures primarily other
products and five manufacture primarily Class II products.
Cooperative Associations
In December 1995, three cooperative associations marketed nearly 99
percent of the milk pooled under the two orders proposed to be
consolidated in the Southwest area: Associated Milk Producers, Inc.,
Southern Region (AMPI); Mid-America Dairymen, Inc. (Mid-Am); and Select
Milk Producers, Inc. (Select). AMPI and Mid-Am members marketed milk in
both Orders 126 and 138, while Select producers were affiliated only
with Order 126. Although all three cooperatives marketed milk in other
Federal orders as well during this particular month, Select producers'
milk was affiliated with fewer Federal orders than Mid-Am's and AMPI's.
Criteria for Consolidation
Nearly all of the route disposition by Order 126 and 138 handlers
is distributed within these two current marketing areas, and within the
currently unregulated portions of Texas proposed to be added. In
addition, nearly all of the milk production for the proposed
consolidated area originates within the marketing area. Two
cooperatives market the vast majority of cooperative milk within the
proposed area.
Discussion of Comments and Alternatives
A number of comments from east Texas suggested combining that
portion of Texas with the Southeast marketing area to resolve
inequities identified by the commenters. The commenters claimed that
due to its heat, humidity and rainfall, milk production conditions in
eastern Texas have more in common with the Southeast than with the
Southwest area. According to the comments, the dry climate of Central
Texas and New Mexico permits dairies to become much larger and produce
10-15% more milk per cow at a lower cost than East Texas producers are
able to achieve.
Alternatives listed by the commenters include developing pricing
mechanisms within the proposed consolidated Southwest order that would
compensate East Texas producers at a price midway between those of the
Southeast and the Southwest markets, or using Atlanta, Georgia, as a
price basing point with a zone differential that would decrease the
price of milk, based on transportation costs, from Atlanta to
Roswell,New Mexico.
There is very little overlap of either fluid milk product
disposition or producer milk movements between the Texas and Southeast
marketing areas. The amount of route disposition overlap that exists
is, not surprisingly, generally found between eastern Texas and
Louisiana, and represents approximately three percent of each order's
total route disposition. In terms of milk production, only 19 of the 57
counties suggested by the commenters to become part of the Southeast
order area had milk production pooled under theSoutheast order in
either December 1996 or May 1997. All of these 19 counties were located
in the northernmost of 3 sections of Texas proposed by commenters to be
added to the Southeast area, and less than 20 percent of the milk
production from these counties was pooled under the Southeast order.
This limited association does not support including east Texas in the
Southeast marketing area.

Arizona-Las Vegas

As suggested in the Revised Preliminary Report on Order
Consolidation, the proposed Arizona-Las Vegas marketing area is
comprised of the current Central Arizona (Order 131) marketing area,
one county in Nevada which currently is in the Great Basin (Order 139)
marketing area, and currently unregulated counties in Arizona. There
are 16 counties in this proposed area.
Geography
The Arizona-Las Vegas market is described geographically as
follows: All counties (15) in Arizona (6 whole and 1 partial currently
are part of Order 131, and 8 whole and 1 partial currently are
unregulated) and Clark County, Nevada, which currently is part of the
Great Basin marketing area. The market extends about 400 miles north to
south from Arizona's border with Utah (and Nevada's southernmost
county) to the U.S.-Mexico border. The market ranges from 300 to 375
miles east to west from the Arizona-New Mexico border to theArizona/
southern Nevada-California border.
The Arizona-Las Vegas marketing area is contiguous to two proposed
consolidated marketing areas, the Great Basin portion of the proposed
Western area to the north and the New Mexico-West Texas portion of the
Southwest area to the east. California, not currently part of the
Federal order system, lies to the west and Mexico is south of this
marketing area.
Arizona can be divided into three geographic regions--the Sonoran
Desert, in the southwest; the Colorado Plateau, in the north; and the
Mexican Highland, mainly in the central and southeastern parts of the
state. With each of these regions, three distinct climatic zones exist:
the Sonoran Desert is hot in the summer but can experience frost in the
winter; the Colorado Plateau is hot and dry in the summer and cold and
windy in the winter; and the Mexican Highland receives significant
precipitation in both summer and winter. This region is cooler in both
summer and winter than the Sonoran Desert region.
These topographical and climatic conditions apparently are
conducive to milk production. Dairy products represent one of the
principal agricultural commodities (2nd and 3rd) in the States of
Arizona and Nevada, respectively, representing 16.6 and 21.7

[[Page 4863]]

percent of total agricultural receipts of the two States in 1996.
Population
Arizona is one the fastest-growing states in the United States.
According to July 1, 1996, population estimates, the total population
in the proposed marketing area is 5.5 million. Using Metropolitan
Statistical Areas (MSAs), the largest population center is the Phoenix-
Mesa (Phoenix) area, located in central Arizona approximately 125 miles
north of the U.S.-Mexico border in the Sonoran Desert region. About 250
miles to the northwest of Phoenix is the Las Vegas, Nevada, area, the
second-largest population center in this marketing area. The Las Vegas
MSA is comprised of three counties: Clark and Nye counties in Nevada
and Mohave County in Arizona. Half of this market's population is in
the Phoenix area, and over 70 percent is accounted for when Las Vegas
is added.
Fluid Per Capita Consumption
Based on the population figure of 5.5 million and an estimated per
capita fluid milk consumption rate of 20 pounds of fluid milk per
month, total fluid milk consumption in the Arizona-Las Vegas marketing
area is estimated at 110 million pounds per month. Plants that would be
fully regulated distributing plants in the Arizona-Las Vegas order had
route disposition within the market of approximately 96 million pounds
in January 1997. Another 3.3 million pounds of milk was sold in the Las
Vegas area, all by handlers fully regulated under the Great Basin
Federal order (Order 139).
Milk Production
In December 1996, almost 201 million pounds of milk was pooled in
the Central Arizona market, supplied by over 100 producers located in
fewer than 10 counties in Arizona and California. Over 90 percent of
the Central Arizona milk was produced within the marketing area.
Further, over 90 percent of the producer milk produced within the Order
131 area was produced in Maricopa County, Arizona, where Phoenix, this
market's largest city, also is located. With 181 million pounds of
producer milk for December 1996, Maricopa County produces almost twice
the amount of milk required to meet the fluid milk needs of the entire
marketing area. Arizona producers did not supply milk to any other
Federal order; however, it is known that producer milk moves from both
Arizona and Clark County, Nevada, to southern California. These figures
do not reflect the producer milk associated with Anderson Dairy, the
Las Vegas handler who has been pooled on Order 139. There is only one
producer located in Clark County, Nevada. The portion of Anderson's
milk supply that is not supplied by the single Clark County producer
comes from southern California.
Distributing Plants--Route Distribution
Using distributing plant lists included in both the Preliminary and
Revised Preliminary Reports and the pooling standards used in the
Revised Preliminary Report, updated for known plant closures through
May 1997, 9 distributing plants would be expected to be associated with
the proposed Arizona-Las Vegas marketing area, including 5 fully
regulated distributing plants (all currently pool plants), 1 exempt
plant and 3 producer-handlers. Two distributing plants (1 pool plant
and 1 producer-handler, both located in the Phoenix area) that were
operating in October 1995 are now out of business. There are 4
distributing plants in the Phoenix area (all pool plants). Located in
the Las Vegas MSA are one pool plant and a producer-handler located in
a currently-unregulated Arizona county. This producer-handler has no
sales into either the Order 131 or 139 marketing area, but would meet
the producer-handler definition upon order consolidation and market
area expansion. Two other producer-handlers are located in the Yuma,
Arizona, MSA (located in southwestern Arizona on the California-
Arizona-Mexico border). The exempt plant is located in a currently-
unregulated Arizona county with no sales into the current Central
Arizona marketing area, and with total route disposition of less than
150,000 pounds. All of the plants that are expected to be fully
regulated under this proposed order are located in areas that contain
over 70 percent of the proposed market's population.
Utilization
According to October 1995 pool statistics, the Class I utilization
for the Central Arizona market was about 49 percent. Due to restricted
information, this calculation excludes receipts for the Las Vegas
handler who currently is regulated under Order 139. Because the degree
of consolidation proposed for this market is very minor, little change
in the Class I utilization percentage, and thus little change in
producer returns, is expected in the Arizona-Las Vegas area as a result
of the proposed consolidation. For December 1996, Class I utilization
for the Central Arizona market was 41.7 percent based on the use of
83,757,000 pounds of producer milk in Class I out of 200,939,000 total
pounds of producer milk.
Other Plants
For May 1997, 3 supply or manufacturing plants were located within
the Arizona-Las Vegas marketing area: 2 in Arizona (both in the Phoenix
area) and 1 in Nevada (in the Las Vegas area). One Arizona plant is a
pool plant operated by the cooperative, manufacturing primarily cheese,
while the other plants are nonpool plants manufacturing primarily Class
II products.
Cooperative Associations
For December 1995, the only cooperative having membership in the
Arizona-Las Vegas marketing area was United Dairymen of Arizona, which
represented approximately 90 percent of the milk pooled under the
Central Arizona order.
Criteria for Consolidation
Market data indicate that there are extensive sales into the Las
Vegas area by Central Arizona pool plants, and sales by both Phoenix
and Las Vegas handlers into the unregulated areas along the southern
part of the Nevada-Arizona border. Rapid population growth in the area
between the two areas has greatly increased competition between the
handlers in Phoenix and Las Vegas. In addition, both areas exchange
significant volumes of bulk and packaged milk with Southern California.
At the same time, the strength of the earlier relationship between the
Las Vegas area and Utah clearly has declined since the merger of the
Lake Mead and Great Basin order areas in 1988, which was based on data
compiled up to 1986.
The Grand Canyon serves as a natural barrier in northwestern
Arizona between this area and Great Basin. Although the actual proposed
order area extends to the Utah border, the portion of Arizona between
the Grand Canyon and Utah is very sparsely populated, and is included
in the proposed marketing area primarily for the purpose of simplifying
the marketing area description and easing handlers' burden of reporting
out-of-area sales. The Colorado River forms much of the western
boundary with California and Nevada. A north-south strip along the
eastern edge of Arizona constituting approximately 30 percent of the
State's territory is very sparsely populated, containing just over 5
percent of the population of the proposed marketing area. This lightly
populated desert area can be seen as another form of natural

[[Page 4864]]

barrier to the movement of bulk and packaged milk.
Discussion of Comments and Alternatives
Two comments filed in response to the Revised Preliminary Report on
Order Consolidation recommended that Clark County, Nevada, be returned
to the Western marketing area, with the Great Basin, Western Colorado
and Southeastern Idaho-Eastern Oregon marketing areas. Anderson Dairy,
the handler located in Las Vegas, Nevada, requested that the Western
marketing order remain as it was in the initial Preliminary Report.
Anderson stated that its major competition comes from southern
California and northern Utah, and that one or the other of these areas
could gain a significant advantage if Anderson becomes an island
between these two powerful competitive areas with different marketing
systems. Comments from Darigold also supported the original proposed
Western marketing area. Darigold stated that because Class I sales in
Las Vegas historically have been associated with the Great Basin
producer pool rather than with the Phoenix market, shifting those sales
would be controversial and should be reviewed carefully.
Comments from a California cooperative indicated support for the
proposed Arizona-Las Vegas order. The cooperative referenced its
earlier concern about milk moving between southern California and both
the State of Arizona and Clark County, Nevada, on a daily basis.
The increase in sales by Central Arizona pool plants into the Las
Vegas area, and increased sales by both Phoenix and Las Vegas handlers
into the unregulated area of rapidly-increasing population along the
southern part of the Nevada-Arizona border, are factors that have
greatly increased overlapping route distribution in these two areas. In
addition, both areas exchange significant volumes of bulk and packaged
milk with Southern California. The Las Vegas area's earlier
relationship with southern Utah was based primarily on Utah as an
important milk supply area for Las Vegas at the time of the merger of
the Lake Mead and Great Basin order areas in 1988. That relationship
clearly has ceased to exist. Therefore, the proposal by cementers that
the Las Vegas, Nevada, area continue to be included in the same
marketing area with Utah does not reflect current marketing conditions.

Western

The proposed Western marketing area is comprised of the current
Western Colorado (Order 134), Southwestern Idaho-Eastern Oregon (Order
135), and Great Basin (Order 139) marketing areas, less one Nevada
county (Clark) in Order 139 that is proposed to be in the Arizona-Las
Vegas marketing area. There are 71 counties in this proposed area.
Geography
The Western market is described geographically as follows: 4
counties in western Colorado (all currently in Order 134), 28 in Idaho
(18 currently in Order 135 and 10 in Order 139), 3 in eastern Nevada
(all currently in Order 139), 5 in eastern Oregon (all currently in
Order 135), all counties (29) in Utah (currently in Order 139) and 2 in
the southwest corner of Wyoming (currently in Order 139). Measuring the
extreme dimensions, this market extends about 625 miles north to south
from Oregon and Idaho to Utah's boundary with Arizona, ranging from 125
miles in Colorado to 475 miles from Idaho to the Utah-Arizona border.
Similarly, this market's extreme east-to-west dimension is 650 miles
from the westernmost edge in central/eastern Oregon to the easternmost
edge in west/central Colorado.
The proposed Western marketing area is contiguous to three of the
proposed consolidated marketing areas, the Pacific Northwest to the
west and north of the Oregon portion of this market, Arizona-Las Vegas
to the south and the Southwest to the extreme southeast corner. Non-
Federally regulated territory borders the Western market on the west-
southwest (Nevada) and the north-northeast (Idaho and Wyoming). To the
east lie the Rocky Mountains in central Colorado, serving as a natural
barrier between the Western market and the Central market, whose
westernmost edge begins in eastern Colorado. The Continental Divide
lies just to the east of the Western market.
In terms of physical geography, the Western marketing area has
several regions: the Columbia Plateau in southern Idaho and
northeastern Nevada, characterized by fertile soils; the Great Basin in
southeast Idaho, nearly all of Nevada and the western third of Utah,
described by ranges and parallel valleys; and the Colorado Plateau in
the eastern half of Utah and western part of Colorado, characterized by
gorges in Utah and canyons, mesas and valleys in Colorado. In general,
the Western market is quite dry, with temperatures tending to be
extreme and affected by elevation.
Population
According to July 1, 1996, population estimates, the total
population in the proposed marketing area is 3.3 million. Using
Metropolitan Statistical Areas (MSAs), the largest population center is
the Salt Lake City-Ogden, Utah area (Salt Lake City). Salt Lake City is
located in north central Utah. The Boise City, Idaho, area (Boise), the
second largest population center in this marketing area, is located
about 300 miles to the northwest of Salt Lake City. Provo-Orem, Utah,
(Provo) the third largest population center, lies 40 miles south of
Salt Lake City. Grand Junction, Colorado, (Grand Junction), located
about 290 miles southeast of Salt Lake City, is the fourth largest
population center in the Western market; but is less than 10 percent
the size of Salt Lake City. Slightly over one-third of the market's
population is in the Salt Lake City area, and over 60 percent is
accounted for when Boise, Provo and Grand Junction are added.
Fluid Per Capita Consumption
Based on the population figure of 3.3 million and an estimated per
capita fluid milk consumption rate of 23 pounds of fluid milk per
month, total fluid milk consumption in the Western marketing area is
estimated at 75.9 million pounds per month. Plants that would have been
fully regulated distributing plants in the Western order had route
disposition within the market of 76.5 million pounds in October 1995;
almost 75 percent of this total is from Order 139 pool plants. The 10
producer handlers operating during this month had a combined route
disposition of 1.7 million pounds. Additionally, 2.8 million pounds of
route disposition came from handlers outside the market.
Milk Production
In December 1996, nearly 450 million pounds of milk was pooled in
the proposed Western market from more than 1,000 producers located in
more than 70 counties in California, Colorado, Idaho, Oregon and Utah.
Over 95 percent of the producer milk was produced within the marketing
area. Four counties produced 50 percent of the milk pooled. The three
top producing counties in Idaho, Jerome, Gooding and Twin Falls
counties, are all located in southwestern Idaho, about 130 miles
southeast of Boise and 230 miles northwest of Salt Lake City. Jerome
and Gooding counties each provided twice as much producer milk as Twin
Falls County, the third-largest county in terms of producer milk in the
Western market. The fourth-largest

[[Page 4865]]

production county was Cache County in northeastern Utah, located about
80 miles north of Salt Lake City.
The three Idaho counties provided producer milk for both Order 135
and Order 139 in December 1996. Specifically, Jerome County producers
had the greatest amount of producer milk on both Order 135 and Order
139. Gooding and Twin Falls counties were in the top four for volume in
Order 139 and were second and third for volume in Order 135.
Distributing Plants--Route Distribution
Using distributing plant lists included in both the Preliminary and
Revised Preliminary Reports and the pooling standards used in the
Revised Preliminary Report, updated for known plant closures through
May 1997, 28 distributing plants would be expected to be associated
with the Western marketing area, including 11 fully regulated
distributing plants (all currently pool plants), 1 partially regulated
(currently partially regulated), 3 exempt plants based on size (2
currently are pool plants but have less than 150,000 pounds of total
route distribution and the other is currently unregulated), 9 producer-
handlers, and 4 exempt plants based on institutional status (all were
exempt as defined under current federal orders). Since October 1995, it
is known that 1 distributing plant (a producer-handler) in Utah has
gone out of business.
There would be 11 distributing plants in the Salt Lake City area (5
pool plants, 3 producer-handlers and 3 exempt plants). The Boise area
would have 2 pool distributing plants, the Provo area would have 1
producer-handler and the Grand Junction area would have 1 exempt plant.
The remaining 14 distributing plants are located in Colorado (1 plant,
fully regulated); Idaho (4 plants: 2 pool, 1 exempt, and 1 producer-
handler), Nevada (2 plants, both unregulated), and Utah (7 plants: 1
pool, 1 partial, 1 exempt, 4 producer-handlers).
Fully regulated distributing plants are located in MSAs containing
about half of the proposed market's population, including the
Pocatello, Idaho, MSA, with 2.2 percent of this market's population.
Utilization
According to October 1995 pool statistics, the Class I utilization
percentages for the individual markets ranged from 18 percent for
Southwestern Idaho-Eastern Oregon to 35 percent for Great Basin.
Information for Western Colorado is restricted due to fewer than three
handlers in the market. Based on calculated weighted average use values
for (1) the current order with current use of milk, and (2) the current
order with projected use of milk in the consolidated Western order, the
potential impact of this proposed rule on producers who supply the
current market areas is estimated to be: Western Colorado, a 59-cent
per cwt decrease (from $13.41 to $12.82); Southwestern Idaho-Eastern
Oregon, a 5-cent per cwt increase (from $12.63 to $12.68); and Great
Basin, a 3-cent per cwt decrease (from $12.81 to $12.79). The weighted
average use value for the consolidated Western order market is
estimated to be $12.78 per cwt. For December 1996, combined Class I
utilization for Orders 135 and 139 (Western Colorado information is
restricted) was 19.9 percent based on 87.7 million pounds of producer
milk used in Class I out of 440.1 million total producer milk pounds.
Other Plants
Nineteen supply or manufacturing plants were located within the
proposed Western marketing area during May 1997: 1 in Colorado (in the
Grand Junction area), 8 in Idaho (3 in the Boise area), 9 in Utah (2 in
the Salt Lake City area) and 1 in Wyoming. Two of the 19 plants were
pool plants; both manufacture primarily cheese. Of the 17 nonpool
plants, 12 manufacture primarily cheese and 5 manufacture primarily
soft or Class II products (including ice cream). Of the 8 Idaho plants,
all but one manufacture cheese, while of the 9 Utah plants, 6
manufacture cheese and 3 manufacture soft products.
Cooperative Associations
For December 1995, four cooperatives representing 56 percent of the
milk pooled under the three orders had membership in the proposed
Western marketing area. Western Dairymen Cooperative, Inc., had
membership in Western Colorado, Southwestern Idaho-Eastern Oregon and
Great Basin; Magic Valley Quality Milk Producers, Inc., had membership
in Orders 135 and 139; Darigold Farms had membership in Order 135, and
Security Milk Producers' Association had membership in Order 139.
Criteria for Consolidation
As suggested in the Revised Report on Order Consolidation, the
consolidated Western market should be composed of the current marketing
areas of the Western Colorado, Southwestern Idaho-Eastern Oregon and
Great Basin markets (minus the Clark County, Nevada, portion of the
Great Basin area). Sales overlap exists between Southwestern Idaho-
Eastern Oregon and Great Basin, as well as a significant overlap in
procurement for the two orders in Idaho. The two orders also share
similar multiple component pricing plans. The Western Colorado order
has some route disposition within the Great Basin order, and must be
included in a consolidated order area because it is a small market for
which data cannot be released without revealing confidential
information unless combined with the adjacent Great Basin order.
Discussion of Comments and Alternatives
Several comments opposed consolidating the Southwestern Idaho-
Eastern Oregon order area with the Great Basin marketing area. A
primary basis for opposition to the consolidation is the disparity in
the two regions' utilization of Class I fluid milk: the Southwestern
Idaho-Eastern Oregon order has a very low percentage of Class I use,
while the Great Basin order's Class I use percentage is higher at about
35 percent, and Western Colorado's is higher still. Commenters fear
that the consolidation of these orders would result in lower returns to
producers who currently are pooled under the Great Basin and Western
Colorado orders. Some comments suggest that the Southwestern Idaho-
Eastern Oregon marketing area should remain under a separate order,
with the Great Basin market consolidated with markets such as Arizona,
Western Colorado, or Eastern Colorado. One comment supported keeping
both the Southwestern Idaho-Eastern Oregon and Great Basin marketing
areas separate because of the differences in Class I use.
Comments filed by Western Colorado producers and their cooperative
state that the Western Colorado area should be combined with the
Central market because: (1) It's data has always been combined with
that for Eastern Colorado, (2) the Eastern Colorado blend price to
producers is higher than Great Basin's, (3) Colorado is a milk import
state, whereas Utah is a milk export state, (4) the Western and Eastern
Colorado order areas operate under quota plans, while the Great Basin
area does not, and (5) Western Colorado is a milk surplus area ``with a
freight history.''
The effects of the proposed order consolidation on returns to
producers pooled under the current Southeastern Idaho-Eastern Oregon
and Great Basin marketing areas are not expected to be substantial.
However, the proposed consolidation would reduce the blend price to be
paid to producers whose

[[Page 4866]]

milk is currently pooled under the Western Colorado order. This market
must be included in a consolidated order because it currently has too
few pooled handlers to allow market data to be published without
revealing confidential data. The Western area is the most logical. The
adjoining Great Basin marketing area represents the closest reserve
supply of milk and the closest available manufacturing outlets for
surplus production; and the largest cooperative association in the
Great Basin area is the same cooperative representing the Western
Colorado producers. Small amounts of packaged fluid milk products are
exchanged between Eastern and Western Colorado handlers, some packaged
milk is distributed on routes in the Western Colorado area by Eastern
Colorado handlers, and bulk cream regularly moves from Western Colorado
plants to the Eastern Colorado area. A volume of route dispositions
similar to that distributed by Eastern Colorado handlers in Western
Colorado is distributed by Western Colorado handlers in the Great Basin
area. In addition, movements of bulk milk from Western Colorado to
Great Basin plants occur in volumes about 3 times those distributed on
routes from Eastern into Western Colorado, and from Western Colorado
into the Great Basin area. The Rocky Mountains represent a very large
natural barrier between Western Colorado and the more eastern marketing
areas.
Data for the Eastern and Western Colorado orders have been reported
on a combined basis for a number of years as a matter of administrative
convenience because of the restricted nature of Western Colorado data,
rather than on the basis of any close affinity between the two markets.
While Colorado may be a net import state, that assertion does not apply
to the western portion of the State. Milk production data for December
1996 and May 1997 show no milk from other states pooled under the
Western Colorado order. Surplus production from the western Colorado
counties generally is shipped to Utah manufacturing plants rather than
across the Rocky Mountains (except for very minor volumes during 7 of
32 months in 1995-97). The issue raised by the Western Colorado
producers of quota in the Colorado orders is not related to Federal
milk order provisions; there are no quota provisions in any of the
Federal orders. The quota referred to apparently is a pooling plan
operated by the producers' cooperative, and certainly can be continued
by the cooperative association under the proposed consolidated orders.
For the foregoing reasons, the rationale is stronger for including the
Western Colorado marketing area in the Western consolidated order area
than in the Central area.

Pacific Northwest

The proposed Pacific Northwest marketing area is comprised of the
current Pacific Northwest (Order 124) marketing area and one currently-
unregulated county in southwest Oregon. There are 75 counties in this
proposed area.
Geography
The proposed Pacific Northwest market is described geographically
as follows: All counties (39) in Washington, 30 counties in Oregon (29
currently are part of Order 124 and one, Curry County, is unregulated)
and six counties in northwestern Idaho. The market extends about 490
miles north-to-south from Washington's northern border with the
Canadian province of British Columbia to Oregon's southern border with
California and Nevada. East-to-west, the market ranges from about 450
miles in the northern half of the market (covering territory from
Washington's western boundary with the Pacific Ocean to the eastern
border of Idaho with Montana) to about 250 miles in the southern half
of the market (covering approximately two-thirds of Oregon from the
state's western border with the Pacific Ocean to central Oregon).
The proposed Pacific Northwest marketing area is contiguous to the
proposed consolidated Western Federal order marketing area in eastern
Oregon. The remainder of the marketing area is surrounded by currently
non-Federally regulated areas (California and northwestern Nevada to
the south and Montana, Idaho, and one northeastern Oregon county to the
east), political boundaries (Canada to the north), and the Pacific
Ocean to the west.
Along the Oregon and Washington coasts lies the Coast Range. The
Cascade Range is located further inland in both states. Both ranges are
north-south in direction, and the Cascade Range effectively divides
both states into two distinct climates: a year-round mild, humid
climate with abundant precipitation predominates in the western part of
the states, and a dry climate with little precipitation but greater
temperature extremes prevails east of the Cascade Range. The mild
climate of the western portion results in longer growing seasons. The
Columbia River flows south through eastern Washington, turns west, and
becomes the western two-thirds of the border between Oregon and
Washington. The portion of Idaho included in the current and proposed
Pacific Northwest marketing area is within the Rocky Mountains. This
area has a generally continental climate with the higher elevations
having long and severe winters.
Much of the area is conducive to the production of milk and many
other agricultural commodities. Although dairy products ranked 2nd
among receipts of agricultural commodities in the State of Washington
in 1996, and 4th in Oregon, they accounted for only 13.8 percent and
7.9 percent, respectively, of such receipts. Apples (in Washington) and
greenhouse/nursery, wheat, and cattle and calves (in Oregon) ranked
ahead of dairy, accounting for 19.8 percent and 33.8 percent,
respectively, of agricultural commodity receipts.
Population
According to July 1, 1996, population estimates, the total
population in the proposed marketing area is 8.8 million. Seventy-seven
percent of the marketing area population is located in Metropolitan
Statistical Areas (MSAs). The two largest MSAs are located on the
western side of the Cascade Range. The Seattle-Tacoma-Bremerton
(Seattle) area, with a population of 3.3 million (37.5% of the
marketing area population), is in northwestern Washington. Over seventy
percent of the population of the State of Washington is located west of
the Cascade Mountains, in the western third of the State. Another 14.5%
of the State's population is contained in 3 MSA's east of the Cascades.
The Portland-Salem (Portland) area in northwestern Oregon is
located on the Oregon-Washington border, with Portland just south of
the Columbia River. The population of this MSA is 2.1 million, or 23.5%
of the marketing area population. Ninety percent of the population of
Oregon is concentrated in the western one-third of the State, or in the
western half of the Oregon portion of the marketing area.
Fluid Per Capita Consumption
Based on the population figure of 8.8 million and an estimated per
capita fluid milk consumption rate of 22 pounds of fluid milk per
month, total fluid milk consumption in the Pacific Northwest marketing
area is estimated at 193.6 million pounds per month. For October 1995,
plants that would be fully regulated distributing plants under the
proposed Pacific Northwest order had

[[Page 4867]]

route disposition within the market of 170 million pounds. In addition,
the 18 producer-handlers operating during this month had a combined
route disposition of 18 million pounds. Additionally, slightly over 1
million pounds of route disposition (less than one percent of total
route disposition in the marketing area) came from handlers outside the
market. Because the handlers associated with this market are able to
fulfill the market's Class I or fluid needs, and because of the
somewhat geographic isolation of the market, maintaining the current
Pacific Northwest order as a separate market is appropriate.
Milk Production
In December 1996, the 540 million pounds of milk pooled in the
Pacific Northwest market were produced by 1,280 producers located in 57
counties in California, Oregon, Idaho and Washington. Four counties
produced 50 percent of the milk pooled. Three of these counties are in
Washington State. They are Whatcom and Skagit counties, which are less
than 100 miles north of Seattle; and Yakima County, which is located in
central Washington about 100 miles southeast of Seattle on the eastern
side of the Cascade Range. The fourth county is in Oregon. It is
Tillamook County, which is located on the Pacific Ocean, about 60 miles
west of the Portland area on the western side of the Coast Range. Less
than two percent of the milk pooled in the Pacific Northwest was
produced outside of the marketing area, in Idaho and California. The
largest portion is from producers in two northern California counties
who pooled 6 million pounds of milk or 89.6 percent of the pooled milk
produced outside the Pacific Northwest marketing area.
Distributing Plants--Route Distribution
Using distributing plant lists included in both the initial
Preliminary and Revised Preliminary Reports and the pooling standards
used in the Revised Preliminary Report, updated for known plant
closures through May 1997, 39 distributing plants would be expected to
be associated with the Pacific Northwest market, including 20 fully
regulated distributing plants, 1 partially regulated plant, 3 exempt
plants (below 150,000 pounds in total route disposition), and 15
producer-handlers. It is known that 4 distributing plants (1 pool plant
and 3 producer handlers) have gone out of business since the initial
report.
There are 11 distributing plants within the Portland area,
including 7 pool plants, 2 exempt plants and 2 producer-handlers. The
Seattle area has 4 pool plants and 7 producer-handlers. In addition to
these two main population centers, the Spokane, Washington, MSA,
located in the eastern area of the state near the Idaho border with a
population of 405,000, has 3 pool plants. One of these plants, Wilcox
Farms, Cheney, Washington, began packaging and distributing products in
the spring of 1997 and is not included in the market's route
disposition data for October 1995, the month used for analysis.
Of the 9 distributing plants that would be operating in Oregon, 5
would be fully regulated. Four are located in western Oregon, and the
fifth in central Oregon. Of the 4 Oregon plants anticipated to be non-
pool distributing plants, one would be partially regulated (but
currently is fully regulated), one would be exempt, and two would be
producer-handlers. Two other producer-handlers have gone out of
business since October 1995.
Of the 6 distributing plants in Washington that would be in
operation, one was and will continue to be a pool plant, one would be
exempt (that currently is a pool plant), and 4 would be producer-
handlers. Two other distributing plants (one pool plant and one
producer-handler) have gone out of business since October 1995.
Distributing plants fully regulated under the proposed Pacific
Northwest order are located in MSAs where 71 percent of the proposed
market's population is concentrated.
Utilization
According to October 1995 pool statistics, the Class I utilization
percentage for the Pacific Northwest market was about 36 percent.
Because this market is proposed to remain separate, expected
utilization changes due to the reform process result only from
potential changes in plants' regulatory status; thus very little change
in producer returns under the Pacific Northwest order is expected as a
result of consolidation. For December 1996, Class I utilization for the
Pacific Northwest market was 32.5 percent based on 175,712,000 pounds
of producer milk used in Class I out of 540,334,000 total producer milk
pounds.
Other Plants
Also located within the proposed Pacific Northwest marketing area
in May 1997 were 27 supply or manufacturing plants; 12 in Oregon (5 in
the Portland area), 15 in Washington (7 in the Seattle area) and none
in Idaho. Two of the 27 plants (both in Oregon) are Order 124 pool
supply plants, one of which manufactures primarily cheese, and the
other nonfat dry milk. Of the 10 nonpool manufacturing plants located
in Oregon, 8 manufacture primarily Class II products (including ice
cream), 1 manufactures butter, and the other makes cheese.
The 15 manufacturing/supply plants located in the State of
Washington are all nonpool plants. Three manufacture primarily Class II
products, 3 manufacture primarily butter, 2 manufacture primarily
powder, and 7 manufacture primarily cheese.
Cooperative Associations
Five cooperative associations have members in the Pacific Northwest
market. Darigold Farms is the largest, and the only cooperative that
had membership affiliated with another order (Order 135) in December
1995. Other cooperatives in this market are Farmers Cooperative
Creamery, Tillamook County Creamery Association, and Northwest
Independent Milk Producers Association. These five cooperatives pooled
78 percent of the total producer milk pooled under the Pacific
Northwest order in December 1995.
Criteria for Consolidation
As suggested in both the initial and Revised Preliminary Reports on
Order Consolidation, the consolidated Pacific Northwest market should
add one currently unregulated Oregon county to the Pacific Northwest
milk order. The degree of association of this market with other Federal
order marketing areas is insufficient under any criteria to warrant
consolidation with any other order areas.
Discussion of Comments and Alternatives
Several comments on the Pacific Northwest marketing area suggested
in the 2 preliminary reports were filed by cooperative associations
operating in the area. Darigold, the area's largest cooperative,
commented that there is strong justification for the order boundaries
of the current Pacific Northwest order area. Two other cooperatives had
earlier supported a broader consolidation, including at least the
Southwestern Idaho-Eastern Oregon and, perhaps, the Great Basin order
areas. However, as discussed in the two preliminary reports on order
consolidation, there is virtually no relationship with regard to either
overlapping route dispositions or overlapping milk procurement between
the Pacific Northwest and Southwestern Idaho-Eastern Oregon milk
marketing areas.

[[Page 4868]]

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
KEITH--MODEL 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 MORAVIA........... NY NY-NJ............. 4 4
J. JANAS).
HOGAN, FRANCIS J. (& ANDREW J. HUDSON FALLS...... NY NY-NJ............. 4 4
& SEAN P.--HOGAN'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

[[Page 4869]]

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 CAMPBELL HALL..... NY NY-NJ............. 4 4
FARMS).
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 SHREWSBURY........ MA New England....... 1 1
FARMS, 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 FRANKFORT......... NY NY-NJ............. 4 4
(RIVERSIDE 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

[[Page 4870]]

SULOMAN'S MILK................. GILBERTSVILLE..... PA Mid Atlantic...... 4 4
SUNNYDALE FARMS, INC........... BROOKLYN.......... NY NY-NJ............. 1 1
SYNAKOWSKI WALTER J (VALLEY REMSEN............ NY NY-NJ............. 4 4
SIDE 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 MIAMI............. FL Southeast Florida. 1 1
DAIRY 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 ORANGE CITY....... FL Upper Florida..... 1 1
(T.G. 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.).

[[Page 4871]]

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

[[Page 4872]]

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

[[Page 4873]]

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
PACKAGING 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 TUTTLE............ OK Southwest Plains.. 1 1
(W.H. 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 6A 6B
City.
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 4 4
City.

[[Page 4874]]

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. CHAMPAIGN......... IL S Ill-E Missouri.. 1 OOB
(MODERN DAIRY OF CHAMPAIGN,
INC.).
MEADOW GOLD DAIRIES, INC. TULSA............. OK Southwest Plains.. 1 OOB
(MODERN 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 1 1
ZARDA DAIRY, DIVISION OF City.
ROBERTS 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 WINSIDE........... NE Nebraska-W Iowa... 4 4
(ROADSIDE 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

[[Page 4875]]

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, TOLLESON.......... AZ Central Arizona... 1 1
INC.
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 OGDEN............. UT Great Basin....... 3A 6B
LATTER-DAY.
CHURCH OF JESUS CHRIST OF SALT LAKE CITY.... UT Great Basin....... 3A 6B
LATTER-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

[[Page 4876]]

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 ASSN. TILLAMOOK......... OR Pacific Northwest. 1 2
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 Other Class Price Issues

This proposed rule would replace the basic formula price (BFP) with
a multiple component pricing system that would determine butterfat
prices for milk used in Class II, Class III and Class IV products from
a butter price; protein and other solids prices for milk used in Class
III products from cheese and whey prices; and nonfat solids prices for
milk used in Class IV products from nonfat dry milk product prices.
Prices for Class I and Class II would be determined on the basis of
skim milk prices for Class III and Class IV, computed from the
respective component prices. A Class I skim milk price for each order
would be determined by computing a six month declining average of the
higher of the Class III or Class IV skim milk prices for the second
preceding month and adding a fixed Class I differential to the result.
The Class I butterfat price would be determined by adding the fixed
Class I differential to the six month declining average of the
butterfat price used for Class II, Class III and IV butterfat for the
second preceding month. The Class II skim milk price, on a current
month basis, would be computed by adding $0.70 to the Class IV skim
milk price. A table showing current and proposed prices for the period
1994 through 1997 appears at the end of this discussion of the proposed
BFP replacement.
Provisions for Federal milk orders regulating the handling of milk
in areas for which no support for a multiple component pricing system
has been expressed would maintain a hundredweight skim/butterfat
pricing system instead of the component pricing plan. The hundredweight
prices would be determined by using the component price formulas
contained in this decision and computing an appropriate hundredweight
price using standard component levels. In addition, the proposed
Mideast order area, for which a multiple component pricing plan similar
to that now in effect in the Southern Michigan order has been supported
(containing a ``fluid carrier'' component instead of an ``other
solids'' component), would be modified to incorporate such provisions.

Background

In the early years of the Federal milk order program, prices that
served the function of the present BFP were determined primarily from
evaporated milk prices or condensery pay prices. Some markets developed
formulas to determine the basic price for milk used in manufactured
products and fluid milk prices. These, however, did not always reflect
the actual relationship between supply and demand. Furthermore, when
adjacent markets priced milk using different formulas, price
disparities occurred between competing handlers regulated under
different orders.
The Minnesota-Wisconsin manufacturing grade milk price series (M-W)
was adopted in the early 1960s. The M-W was a competitive pay price
obtained from a survey of payments made by manufacturing plants in
Minnesota and Wisconsin to producers of Grade B (manufacturing grade)
milk. Approximately 50 percent of total U.S. Grade B milk marketings
were accounted for by these two states when the M-W was adopted. The
base month M-W was updated using a second survey of a sub-sample of the
plants in the base month survey. This sub-sample of plants reported pay
prices for the first half, and an estimate of pay prices for the last
half, of the month following the base month.
Over time the production of Grade B milk has declined steadily. In
1970, 46 percent of Wisconsin milk marketings and 71 percent of
Minnesota milk marketings were Grade B. By 1989, these shares had
declined to 17 and 26 percent, respectively. Around this time (1989)
USDA's National Agricultural Statistics Service (NASS), which conducts
the survey, considered the number of plants eligible for the smaller
updating survey to be too few to be statistically reliable as an
indicator of the value of milk.
Therefore, in June of 1992, a national hearing was held to consider
changes to the M-W price series. The result was the current BFP, which
replaced the M-W in 1995. The current BFP uses the same base month
competitive pay price as the M-W, but updates the base month price with
a formula that uses changes from the base month to the next month in
prices paid for butter, nonfat dry milk, and cheese. An updating
process

[[Page 4877]]

is necessary to attempt to capture current supply and demand
conditions, since the base month survey price is not available until a
month after the milk has already been marketed.
The problem of using a declining volume of Grade B milk to
accurately represent the value of milk used for manufacturing was not
solved with the implementation of the current BFP. By 1995, the
percentage of milk marketed as Grade B milk had fallen to 8 percent of
total Wisconsin marketings and 11 percent of total Minnesota
marketings. Nationally, Grade B milk constituted less than 5 percent of
total U.S. milk marketings in 1995, compared with 9 percent in 1989--a
decline of 45 percent. Minnesota and Wisconsin accounted for 2.9
billion pounds, or about 42 percent of the national Grade B milk
marketed in 1995; but this was less than 2 percent of all milk marketed
in the U.S. that year. In fact the decision based on the basic formula
price hearing recognized that ``the adoption of the base month M-W
price, or any Grade B milk series, is only a short term solution, since
the amount of Grade B milk production is expected to continue
declining.''
The 1996 Farm Bill, enacted in early April 1996, requires
consolidation of the Federal milk marketing orders into between 10 and
14 orders, and, among other provisions, authorizes the Secretary to
implement the use of uniform multiple component pricing when developing
one or more basic formula prices for manufacturing milk. As part of the
process of implementing the provisions of the Farm Bill, several
committees were formed to deal with specific issues involved in
restructuring the Federal milk order system, and public comments were
requested.

Basic Formula Price Replacement Committee

One of the committees formed to assist in the restructuring process
was the Basic Formula Price Replacement Committee. This committee
hosted a public forum on dairy price discovery techniques in Madison,
Wisconsin, in late July 1996, considered numerous comments submitted by
interested persons, established criteria for a new BFP, conducted
extensive study and analysis, and issued a preliminary report on BFP
replacement in April 1997. The report generated additional comments,
and the committee studied, incorporated, and developed responses to
these comments, as well as those received earlier, in the development
of this proposed new basic formula price.
The Committee began with a set of goals to be met by a replacement
for the basic formula price. These goals are: (a) the replacement must
meet the supply and demand criteria set forth in the Agricultural
Marketing Agreement Act of 1937 (the Act), (b) the replacement price
should not deviate greatly from the general level of the current BFP,
and (c) the replacement should demonstrate the ability to change in
reaction to changes in supply and demand.
To achieve the basic goals of BFP replacement, a set of criteria
was established to evaluate the various alternatives. The criteria
were: (a) stability and predictability; (b) simplicity, uniformity, and
transparency; (c) sound economics--e.g., consistency with market
conditions; and (d) reduced regulation.
Stability refers to a moderation of month-to-month fluctuations in
the basic formula price. A price that fluctuates less than the current
BFP would improve the wholesale and retail pricing structure in the
industry and facilitate an improved planning horizon for both producers
and processors. A predictable basic formula price would allow the
industry to improve long-range planning, thereby contributing to
economic efficiency.
The new basic formula price should be simple to derive and easy for
the dairy industry to understand, since it would be used in all Federal
milk orders. The BFP also should be transparent. That is, it should be
possible to see and understand the derivation of the BFP, even if a
complex formula is used to determine the price. Further, the new basic
formula price should be applied uniformly within orders and on a
national basis.
The most important criterion is sound economics--the ability of the
BFP to reflect the supply and demand for raw milk. Currently, the BFP
is intended to represent the interaction of supply and demand for
manufacturing milk and thereby, the supply and demand for fluid milk at
a minimum level. A replacement that fits this traditional role suggests
that the supply and demand for manufacturing milk should be reflected
in the new price.
Sound economics also implies that minimum prices for milk used in
manufactured products will be market-clearing. The use of two classes
to price milk used in traditional ``surplus'' products of butter,
nonfat dry milk, and cheese (that is, milk in excess of that amount
needed to fill fluid demand), helps assure that only one product will
have to be priced at a level that clears the market. The market-
clearing product in most cases is butter/nonfat dry milk.
The criterion of sound economics is sufficiently important that it
may override other criteria. For instance, supply and demand factors
that result in significant price fluctuations may come at the expense
of stability; simplicity may conflict with the need to incorporate
important supply and demand factors reflecting market conditions for
milk. A degree of complexity may be necessary to accommodate sound
economics.
Finally, reduced regulation is a desirable trait of a new basic
formula price, to the extent that it does not come at the expense of
sound economics. One function of the BFP is to represent a market-
clearing price for milk used in manufactured dairy products. Reducing
regulation should be attempted while discovering such a price, but the
goal of reduced regulation is of less importance than accurately
reflecting the market forces of supply and demand.
A replacement for the BFP could affect regulation in two ways. In
reporting price information to determine the basic formula price, many
plants currently report payroll information on a monthly basis. A
revised method for determining the BFP could entail reporting
manufactured product transaction prices, manufacturing costs and
yields, and additional auditing to assure data accuracy. Second, a
system of pricing milk used in manufactured dairy products based on
components might require increased reporting and accounting to
determine component usage.

University Study Committee

In recognition of the expertise available within the academic
community, a University Study Committee (USC) was commissioned to
conduct objective analyses of the performance of numerous alternatives
to the current basic formula price. The ten members of the USC
represent six land grant universities around the country.
The USC established its own criteria for screening potential
replacements for the basic formula price. Alternatives that met the
USC's threshold criteria were then subjected to further analysis. The
USC's first level criteria were: (a) a long life--alternatives that
were expected to have a useful life of less than 10 years were
eliminated; (b) understandable and transparent--the procedure of
deriving a price must be easy to see and understand; (c) geographic
uniformity--the same basic formula price would serve as the minimum
price across the country; and (d) reflect the manufactured milk
market--the values of milk used in butter, powder, and cheese would be
combined into a single formula price.

[[Page 4878]]

For its second level of criteria, the USC used a form of time-
series analysis called vector autoregression (VAR), to test whether the
proposed basic formula price replacements would satisfy the following:
(a) reflect national market conditions for manufactured dairy
products--the price for milk used in manufacturing should reflect the
supply and demand for milk used in those products, measured by
simulating a change in the level of stocks of the products and
observing the impact on prices generated by each basic formula price
option; (b) reflect changes in the value of milk used in
manufacturing-- observing how well each option responds to changes in
the prices of butter, powder, and cheese; and, (c) provide price
stability--as reflected by low standard deviations and low price
variation in response to a change in stocks.

Comments

Over 1,600 comments were received relative to the basic formula
price in response to the invitation to comment under Federal Order
Restructuring. The comments ranged from one-page letters from dairy
producers to lengthy discussions of a particular alternative to the BFP
from trade associations or cooperatives. Most of the comments may be
grouped into five categories representing alternatives to the current
BFP. These five alternatives are: economic formulas, futures markets,
cost of production, competitive pay price, and product price and
component formulas. In addition, numerous comments were received
relative to the use of National Cheese Exchange prices in particular
and exchange prices in general in the determination of a basic formula
price.

Economic Formulas

Economic formulas are mathematical or statistical formulas that
incorporate factors reflecting the supply and demand for a particular
commodity or product. Typically, economic formulas include factors such
as consumer income, production, prices of competing products,
population levels or per capita consumption, and inventories. Several
comments were received supporting the use of an economic formula for
determining the BFP. Two parties submitted specific formulas. One
formula included the cost of milk production and a commodity reference
price, plus consumer prices to reflect the demand side of the supply/
demand equation. A second formula included such factors as disposable
per capita income, a dairy parity index, and an index of manufactured
dairy product prices. This formula also included a productivity index
to allow the formula to automatically adjust for changes in
productivity over time.
Proponents of economic formulas expressed the view that since these
formulas incorporate both the supply side and the demand side, economic
formulas would truly represent the value of milk, and would therefore
be appropriate for use in determining the BFP. Additionally, proponents
expressed the view that economic formulas would diminish price
volatility and reduce the effect of the cheese market on prices, which
proponents viewed as a positive outcome.
Opponents of economic formulas expressed the view that since
economic formulas do not react to changing conditions, particularly
technology, the formulas would not yield a value of milk that
represented the true supply and demand for milk. Since many economic
formulas have a tendency to be static rather than dynamic, the formulas
do not react to changing economic conditions as rapidly as may be
necessary. Opponents went on to explain that economic formulas are
difficult to adjust; in many cases the only people who understand them
are the people who constructed them in the first place.
Economic formulas can, if properly constructed, have a tendency to
reflect the supply and demand for milk used in manufactured dairy
products, at least in the short run. Stability of economic formulas
depends on the variables used in the formula and the weight they
receive. Since agricultural commodity markets can be relatively
unstable because of inherent characteristics such as seasonality,
weather, perishability, etc., the more weight a commodity price has in
a formula the more unstable the formula is likely to be. Thus, a
formula that attributes less weight to commodity prices will be
somewhat more stable than a formula that attributes greater weight to
such prices. The trade-off, of course, is that higher commodity-
weighted formulas react more quickly to changes in market conditions.
By contrast, factors such as cost of production, per capita
consumption, population, and income tend to be more stable in periods
of little or no inflation, and thus have a more stabilizing influence
on formula-driven price series.
Changing technology should lead to reevaluating the weights of
various cost components, but this subjects the formula to legitimate
debate and scrutiny that in turn diminish the simplicity, transparency,
and stability of a formula-derived BFP. Thus, there is a significant
risk in using methodology to develop formulas that result in a price
announced on the basis of data that is not publicly known, with only
those announcing the price knowing the specific details of the
derivation of the price. Further, when the methodology is unveiled,
further debate and scrutiny are invited.
Additionally, data availability can be a problem. Some data may be
available only on an annual basis, whereas the BFP must be established
monthly. Substituting or estimating data is very likely to introduce a
bias into the formula. The developer must exercise considerable
judgment in constructing the formula price, and a major criticism of
economic formulas is that they are difficult to understand, with the
developer frequently being the only one to fully understand its
intricacies.
The USC divided economic formulas into three categories: (1) cost
of production formulas, which will be discussed later, (2) econometric
models, and (3) formulas which included either a feed cost snubber or a
stock snubber. The USC dismissed econometric models on the basis of the
first level criteria, as being too difficult to understand and in
constant need of maintenance, re-specification, re-estimation, etc. The
formulas which included the feed cost snubber or the stocks snubber
passed the first level criteria, but did not perform as well as other
alternatives when subjected to the level two analysis.

Futures Markets

A number of comments were received proposing that the futures
market be used to replace the basic formula price. One proponent
proposed using a monthly weighted average of milk futures transactions
on the Coffee, Sugar, and Cocoa Exchange (CSCE) computed on a daily
basis. Proponents explained that since the commodity exchange allows
free and open trading the price established would represent the
national supply and demand for milk. A proponent went on to explain
that open trading on a daily basis on the commodity exchange allows
everyone in the dairy industry to track the established prices on a
daily basis rather than under the current system where the price is
just announced.
Opponents to the use of the futures market in establishing the BFP
explained that the futures markets for dairy, and milk in particular,
have not been trading for a sufficient period of time to determine what
the exchange price represents. Opponents also expressed a concern that
the volume

[[Page 4879]]

and open interest, at least for the present, are relatively small, and
questioned the future viability of the dairy futures markets. Several
opponents also expressed a lack of faith in having the BFP established
by commodity traders rather than by the dairy industry although many,
if not most, agricultural commodity prices are determined on futures
markets.
Both proponents and opponents of futures markets agreed that once a
solid history of trading dairy futures is available, it may be feasible
to use the futures market to establish a BFP.
There are currently two different futures contracts for pricing
milk. The Coffee, Sugar, and Cocoa Exchange (CSCE) has a fluid milk
contract. In addition, the CSCE and the Chicago Mercantile Exchange
have basic formula price contracts, which are cash settlement contracts
using the current basic formula price. The cash settlement contract
would not make a viable alternative to the current basic formula price
because it is settling against an announced price that will not
continue to be announced.
The fluid milk contract has behaved somewhat erratically when
compared to the basic formula price, leading economists to question
what market the fluid milk contract is pricing. Early research
indicates that the fluid milk futures market is reflecting the spot
value of Grade A milk rather than the value of milk used in
manufactured products. Since the BFP is intended to represent the value
of milk used for manufacturing, use of the futures market in its
determination would not be appropriate.
Futures markets are not necessarily stable, nor are they intended
to be. Futures prices fluctuate on a daily basis, reflecting changes in
expectations about supply and demand. A weighted monthly average would
introduce more stability, but the commodity influence would still drive
the BFP and introduce significant variation into the price series.
The use of futures markets to derive the BFP could generate a price
that is applied nationally. However, the futures basic formula price,
although conceptually global in terms of participation, must be heavily
influenced by supply and demand conditions in the upper Midwest region,
since this region is the defined delivery area in the contracts.
There is a significant lack of familiarity, particularly at the
producer level, with futures markets. Thus, transparency would not be a
feature of a futures-driven BFP. Since most people do not understand
futures markets it would be difficult to convince individuals that a
futures-derived BFP is simple or predictable.
Finally, futures markets are not, and were not intended to be, cash
price-setting mechanisms. They were established to transfer price risk.
There is no reason to expect them to be suitable in serving a price-
setting function for which they were not intended. There are also
questions about the long term viability of the milk futures contract.
Although volumes traded increased last summer, they have since
declined, even more after the opening of the basic formula price cash
settlement contract. Even if the milk futures markets continue to
operate, they are very thin. Their use in establishing Federal order
prices would result in a very small amount of trading setting prices
across the nation.
The USC rejected use of the futures market to replace the basic
formula price for many of the same reasons discussed above. The USC
expressed particular concern about what is priced by milk futures
contracts, and about the future viability of the milk futures market.

Cost of Production

A considerable number of comments received, predominantly from
dairy producers, supported determining the basic formula price on the
basis of the cost of producing milk. Proponents explained that the
minimum price for milk should be no less than the cost to produce the
milk, and many proponents expressed the opinion that a profit should
also be included in the cost of production figure. Other proponents
suggested a yearly adjustment or updater to account for inflation. Some
proponents suggested the implementation of a quota system in addition
to using the cost of production to determine the BFP, realizing that a
guaranteed cost of production would undoubtedly lead to over-
production. Very few of the proponents discussed what cost of
production figures should be used or how to implement a cost of
production basis across an industry with substantially different costs,
even within the same region.
Very few comments opposed the use of cost of production to
establish the BFP. Those filing opposing comments pointed out that cost
of production represents only the supply factor for milk, including no
demand factor. The opponents also observed that there are great
difficulties in determining a cost of production regionally, let alone
nationally, because cost of production varies greatly across regions.
Cost of production would be more stable than the current BFP, and
more stable than other options based heavily on commodity market
prices. Stability is due to the fact that many of the input values do
not change rapidly or as rapidly as commodity prices. In fact, some
cost factors may move in opposite directions, reducing the net effect
of any one input factor. This is also one of the drawbacks to a cost of
production-based BFP. The cost of production may not respond quickly
enough, or sufficiently to reflect changes in supply conditions if,
indeed, there is any observable link between cost of production and
levels of milk production.
A basic formula price based on cost of production would be more
complicated than many other options suggested, since considerably more
data would be needed to accurately estimate cost of production. And,
although a uniform price could be calculated if national averages are
used, there is a wide range of cost differences by region, which would
introduce problems of uniformity in prices.
The most serious drawback with using cost of production to replace
the BFP, and the reason the USC dropped cost of production from
consideration based on their level one criteria, is that cost of
production represents only the supply side of the market, ignoring
factors underlying demand or changes in demand for milk and milk
products.

Competitive Pay Price

A number of producer groups and cooperative associations submitted
comments supporting the use of a competitive pay price to establish the
basic formula price. These proponents expressed the view that a
competitive pay price is a good indicator of the national supply and
demand for milk and would provide a simple, economically defensible
method of calculating the true value of milk used in manufactured dairy
products. Many of the proponents suggested adding additional states to
the competitive pay price survey of purchasers of manufacturing grade
milk in Minnesota and Wisconsin. Some of these proponents also
suggested that a competitive pay price be adjusted for hauling
subsidies, that premiums be removed, and that adjustments be provided
for any unique payments that would not necessarily reflect true supply/
demand conditions. Several proponents suggested including a competitive
pay price for Grade A milk, with some adjustments, as a way to improve
the size and representativeness of the competitive pay price.

[[Page 4880]]

Some of the comments favoring a competitive pay price addressed the
issue of adjusting the competitive pay price to the current month. For
the most part, proponents were opposed to using a formula containing a
cheese price established on the National Cheese Exchange or the Chicago
Mercantile Exchange, but supported the use of the NASS cheese survey
price for such a purpose.
Opponents of a competitive pay price expressed the view that the
current BFP, which uses a competitive pay price determined in Minnesota
and Wisconsin, does not represent the national supply and demand for
milk used in manufacturing but represents the value of such milk in
Minnesota and Wisconsin. These comments stated that supply/demand
situations in other regions of the country may vary significantly from
Minnesota and Wisconsin, with regional price distortions resulting from
the use of prices from a specific region.
A competitive pay price results from open market negotiation
between dairy farmers (or their cooperatives) and milk processors.
Competition requires sufficient numbers of buyers and sellers so that
no one participant or group of participants can unduly influence the
price. In addition, the price can not be a Federal- or State-regulated
price, such as the price for Grade A milk currently priced under
Federal milk orders.
Identifying a competitive pay price in today's dairy industry,
where 70 percent of the milk is currently covered under Federal milk
marketing orders, is a challenge. After accounting for state
regulations, only about two percent of Grade A milk is unregulated, and
it is unlikely that even this small amount of milk is not affected by
regulated prices. Only about five percent of the total milk marketed in
the U.S. is Grade B or unregulated, and 42 percent of that milk is
located in Minnesota and Wisconsin. The remainder is scattered among 23
states in amounts too small and delivered to too few processing plants
to generate a competitive pay price. In areas where alternative markets
exist, the price for unregulated milk likely will not be below the
price paid for regulated milk, since producers would prefer to sell
their milk to regulated handlers to receive the higher regulated price.
Thus, unregulated handlers are compelled to meet the regulated price in
order to attract sufficient supplies of milk. The circular result is
that the regulated price ultimately becomes the competitive price. This
process does not lead to a representative competitive pay price for
milk.
Most competitive pay price alternatives are not structurally
different from the current BFP and will not yield a price series any
more stable than the current BFP. Some improvement in stability might
be possible with a more stable ``updater'' to adjust the competitive
pay price. However, the updater may then result in a competitive price
that fails to reflect the current value of milk used in manufacturing.
Competitive pay prices may have problems associated with
uniformity, simplicity, and sound economics. With regard to simplicity,
an updater would be necessary in conjunction with a method to determine
premiums and federal order payments to deduct from the competitively
set price. These adjustment mechanisms are neither very simple nor
transparent. A competitive pay price may be uniformly applied, but as
the competitive pay price often reflects the use of prices in just one
region, the derived price may not be fully applicable across regions.
The concept of a competitive pay price has appeal from the
standpoint of sound economics. But the submitted proposals, as well as
the current basic formula price construction, raise concerns about the
degree of competition reflected in a price based on the declining
volume of Grade B milk produced and purchased, or the introduction of
Grade A milk that, even if unregulated, is significantly influenced by
minimum order prices and therefore suspect as a ``competitive'' price.
The addition of a Grade A price to a competitive pay price survey
has been considered likely to raise the level of the BFP significantly
above the level of the current basic formula price. The Minnesota-
Wisconsin Grade A/B price currently collected by NASS has averaged
about $0.75 per hundredweight above the BFP over the past five years.
While the proposal to exclude performance premiums and the need for
adjustment for the current month may help to minimize problems
associated with the regulated price serving as the competitive price,
serious issues are raised by this proposal. More data would be
necessary, increasing the burden of reporting premiums paid to
producers, the basis for such premiums, hauling subsidies, and hauling
cost data.
The changes in market conditions and limited information would
reduce the predictability of the new basic formula price, and
transparency would not be assured, particularly if the price is based
on a survey. The current BFP suffers from these same shortcomings,
particularly as the price support program has declined in importance in
the market.
In response to comments concerning the declining base of
manufacturing milk in Minnesota and Wisconsin from which to draw survey
information and the limited geographical area encompassed by the
current survey, Grade A manufacturing milk data was gathered to analyze
alternatives to the Minnesota-Wisconsin base month price. A Grade A pay
price series was then computed. The price series included nine states'
pay prices for Grade A milk that is used in manufacturing. These nine
states, California, Idaho, Iowa, Minnesota, New Mexico, New York,
Pennsylvania, Washington, and Wisconsin, account for approximately 75%
of the Grade A milk used for manufacturing in the U.S. The Grade A pay
prices were adjusted for protein content, performance premiums, over-
order premiums, and hauling subsidies. The Grade A competitive pay
price was below the current BFP base month price in 27 of the 35 months
included in the study. When the product price formula updater was
included, the Grade A pay price averaged $0.11 per hundredweight below
the current BFP.
The determination that a Grade A pay price is lower than the
current BFP conflicts with the hypothesis presented earlier. However,
further analysis indicates that the result is not surprising when one
considers the relative pay price and the quantity of milk used for
manufacturing in each of the states that were included. Also, the 5-
percent weighting of butter/powder versus 95 percent cheese production
in the current BFP updating formula changed significantly, to
approximately 30 percent butter/powder and 70 percent cheese with the
use of national production data rather than the Minnesota-Wisconsin
production data.
The reduced price level that would result from this study certainly
provides justification for discarding a competitive pay price as a
replacement for the basic formula price. One reason for the lower price
level is the inclusion of prices from western states, especially
California. California has become the nation's largest milk-producing
state, and a major percentage of California milk is used in
manufactured products. California has its own State milk order
regulation, and maintains prices for milk used in manufactured products
at levels below those in other areas of the nation, largely through use
of very generous manufacturing allowances in computing milk prices from
product prices. Handlers in other western states, even those under
Federal order price

[[Page 4881]]

regulation, must compete with California handlers to sell their
manufactured products. As a result, pay prices to producers in these
areas tend to be lower than in the rest of the United States.
The USC evaluated several different competitive pay price series.
Two of these price series, an A/B series and an adjusted A/B series,
passed the level one criteria, but even these two series were
questionable in their ability to reflect the manufactured milk market.
Neither one of these two price series performed well when tested using
the level two criteria and therefore were dropped from further
consideration.

Product Price Formulas and Component Pricing

In comments supporting the use of a product price formula to
replace the current basic formula price, proponents expressed the
opinion that a price determined from the national finished product
markets more accurately reflects the value of milk for manufacturing
than other methods of determining a milk price. Proponents explained
that the price handlers can afford to pay for milk is determined by the
price for which the finished product can be sold. Therefore, a pricing
system that translates finished product prices to a price for raw milk
would result in the most representative raw milk price for both
producers and handlers. Proponents of product price formulas explained
that component pricing, with prices determined for butterfat, protein,
nonfat solids, etc., would best be accomplished through product price
formulas, to reflect the value of each component in finished product
prices. Proponents also explained that product price formulas are
relatively easy to use and understand, and that the value of milk may
be computed on an on-going basis by everyone in the dairy industry by
following commodity markets.
Proponents of multiple component pricing (MCP) explained that since
the components of milk are what give milk its value, particularly in
manufactured products, it is the components that should be priced;
particularly butterfat and protein, and to a lesser extent the other
solids contained in the milk.
Opposition to product price formulas was directed at the need for
product yields and make allowances in determining a milk price or
component prices. Opponents expressed the view that yields and make
allowances would not reflect the true results in manufacturing plants,
and therefore would not yield an accurate price for milk. Opponents
further explained that when yields and make allowances are determined,
they would be difficult to adjust and would not react to changes in
manufacturing conditions. Opponents also argued that when an incorrect
make allowance is established, plants are guaranteed a return, or
profit, to the detriment of dairy farmers. Other opponents explained
that an incorrect yield or make allowance may force payment for milk at
a level that would not allow a return to the manufacturing plant.
The USC tested several product price formulas, including a one-
class multiple component pricing formula and a set of formulas similar
to the formulas recommended in this decision. Based on the results of
the USC analysis measured against their level two criteria, the
multiple component pricing formulas had the best overall performance of
any of those alternatives reaching the level two testing.

Commodity Prices

A considerable number of comments were received concerning the use
of commodity prices in determining a basic formula price. Most of the
comments were directed at the use of National Cheese Exchange prices in
the computation of the current BFP. Commenters expressed the view that
the prices were being manipulated by the big cheese companies in order
to keep milk prices low so that the cheese companies could make a
larger profit.

Proposed Basic Formula Price Replacement

Application of the BFP and USC Committees' criteria for BFP
replacement to the various BFP alternatives resulted in the
determination that the proposed component pricing product price
formulas best meet the stated goals and criteria.
Prices derived from product price formulas that use commodity
prices as the basis for the computed price are subject to the same
problems of stability as the underlying commodity prices. For the most
part product price formulas do not include a factor to improve
stability.
Product price formulas are relatively simple to compute and
understand, and may be applied uniformly, or on a regional basis,
accommodating differences in yields or make allowances. Product prices
established in a relatively free and open interaction between supply
and demand directly translate the value of the finished products to the
value of milk and its components. Therefore, they have a sound economic
underpinning. Arguably, product price formulas reflect the supply and
demand for the manufactured product, rather than for raw milk used to
produce the product, and therefore may be criticized for not adequately
representing market conditions for milk used in manufacturing. They
should, however, reflect accurately the market values of the products
made from such milk.
Product price formulas can require increased data collection,
particularly if industry insists on audited make allowances and actual
transaction prices to be used in the formulas.
The predictability of prices computed from product price formulas
should be reasonably good, or at least no worse than predictability of
the underlying commodity prices. Short run predictability should even
improve since all information needed to compute prices is reported on
an ongoing basis, unless survey information is used. This contrasts
with the present BFP computation in which a major part of the formula,
the base month Minnesota-Wisconsin price, is not available until the
actual basic formula price is announced.
Product price formulas are transparent, since the information to
compute the price is available, and the effect of a change in commodity
prices or one of the other factors may be observed and quantified.
This proposed rule recommends that the BFP be replaced with a
multiple component pricing system which will determine butterfat,
protein, and other solids prices for milk used in Class III products
and butterfat and nonfat solids prices for milk used in Class IV
products.
Numerous comments were received concerning whether the revised
orders should keep Class III-A (i.e. a four class market) or whether
all hard manufactured products should be priced in Class III. The
opposition to Class III-A centered around two issues: (1) the integrity
of the classified pricing system, and (2) the perception that a butter/
nonfat dry milk class would reduce producer pay prices. The supply/
demand for butter and nonfat dry milk is sufficiently different from
the supply/demand for cheese to justify separate classification and
pricing. In addition, the recommendation to use the higher of the Class
III or Class IV price for determining the Class I price, and base the
Class II price on the Class IV price, should more accurately reflect
the value of these different categories of use.
Changes in the cheese markets have a major impact on the dairy
industry. The cheese industry has evolved from cheese production being
a means of surplus milk storage and removal to a competitive consumer
demand-driven

[[Page 4882]]

industry. Currently, more milk is used in cheese production than is
used in Class I. The nonfat dry milk industry is now one which balances
surplus milk storage and removals. This category is also evolving, with
increasing commercial uses for nonfat dry milk, and dry milk products
formulated for specific needs. Increasing quantities of nonfat dry milk
are being produced for use in other dairy products and the food and
pharmaceutical industries.
The separation of manufacturing milk into two classes will assure
that shifts in demand for any one manufactured product will not lower
the prices for milk used in all other classifications, including Class
I prices. Recent milk price increases have been attributed to increased
cheese values. Many people expect that per capita cheese consumption
will continue to grow. However, some warn of impending market
saturation as more cheese plant capacity materializes and consumer
tastes and preferences change. Cheese consumption patterns are based on
many factors outside the dairy industry's control. Health concerns
relating to changing demographics, changes in pizza consumption and
income growth, as well as retail and wholesale inventory decisions,
etc., will impact consumption and prices. A recent report by the Food
and Agricultural Policy Research Institute noted that ``anything that
results in demand weakness for cheese will likely result in a markedly
different outlook for the entire dairy sector . . .'' The proposed
pricing system will allow other manufactured products (i.e. Class IV)
to move Class I prices, helping to reduce the volatility in milk
prices.
Over the last six years cheese prices, and to a lesser extent
butter prices, have shown considerable fluctuation while the nonfat dry
milk price remained relatively stable. Price changes for these finished
products are indicative of various supply/demand situations over time.
The stable nonfat dry milk prices and the butter prices prior to the
fall of 1995 were a reflection of large stocks being carried in storage
and flat demand. Prices for nonfat dry milk and butter became more
volatile once government inventories were depleted and were no longer a
factor in stabilizing prices. Butter prices increased during May and
June of 1997 in response to demand for cream, while both cheese and
nonfat dry milk prices remained relatively flat. These differences in
price movements indicate separate supply and demand balances for
different manufactured dairy products.
The different supply and demand characteristics for the cheese and
butter/nonfat dry milk market segments warrant separate classification
and prices. Research by Emmons (discussed in the BFP Committee
Preliminary Report) concluded that no single pricing system is
appropriate for all classes of milk and, in fact, that multiple pricing
formulas are appropriate. Each product would be allowed to achieve its
market clearing level independent of the other products. Dairy farmers
will be paid a price which is more representative of the level at which
the market values their milk.
The current BFP serves two functions: (1) a fixed differential is
added to the current BFP to establish the Class I and Class II prices;
and (2) the current BFP serves as the Class III price, or the price for
milk used in manufactured products. In some Federal milk orders a
seasonal adjuster is added to the BFP to determine the Class III price.
The proposed replacement would function in a similar fashion, using
component prices. Class IV (butter/nonfat dry milk) would be priced on
a butterfat and nonfat solids basis. Class III (hard cheese) would be
priced on a butterfat, protein, and other solids basis. The price of
butterfat would be the same in Class II, Class III, and Class IV.
Payments to producers under MCP would be based on the Class III prices
for butterfat, protein, and other solids in addition to a producer
price differential computed from the value differences between other
classes and Class III components and from differences in butterfat and
other solids values between classes. Producer pay prices also would be
adjusted for the somatic cell count of producers' milk under orders
with MCP.
Because nonfat dry milk may be substituted for fresh milk or wet
solids in the production of many Class II products, the Class II price
should be determined using Class IV butterfat and nonfat solids prices
plus a fixed per hundredweight differential of $0.70 over the Class IV
skim price. The $0.70 differential represents the cost of converting
concentrated milk to dry solids, plus rehydration. Class II would be
priced on a current basis rather than in advance to enable the Class II
price to be aligned with the Class IV price. This alignment should also
reduce perceived problems in the use of nonfat dry milk to make Class
II products. Tying the Class II price to the Class IV price by this
fixed differential should reduce the incentive to produce nonfat dry
milk for use in Class II products.
The Class I price should consist of a Class I butterfat price and a
Class I skim milk price. The Class I butterfat price would be
determined by adding a fixed Class I differential to a 6-month
declining average of the second preceding month's butterfat price (used
in Classes II, III, & IV). The Class I skim milk price would be
determined by adding a Class I differential to a 6-month declining
average of the second preceding month's skim milk price (using the
higher of Class III or Class IV skim prices). The calculation of Class
I prices would be the same for both MCP and non-MCP markets.
Announcement of Class I butterfat and skim milk prices in advance
eliminates current problems caused by butterfat differential
fluctuations. Handlers would have true advance Class I pricing. There
would be two different butterfat prices each month but no butterfat
differential. The separate Class I butterfat price should integrate
easily since Class I butterfat testing and reporting currently exists.
The prices for butterfat, protein, and other solids used in Class
III would be computed as follows:

Butterfat price=(NASS AA Butter survey price-0.079)/0.82)
Protein price=((NASS block cheese survey price-0.127)x1.32)+((((NASS
block cheese survey price-0.127)x1.582)-butterfat price)x1.20)
Other solids price=((NASS dry whey survey price-.10)/0.968).

The butterfat price for Class IV products is the same as for Class
III while the nonfat solids price is computed as follows:

Nonfat solids price=((NASS nonfat dry milk survey price-0.125)/0.96)

This system of pricing best fits the three established goals and
criteria, discussed previously, for a replacement to the BFP.
The first goal, that a replacement for the basic formula price meet
the supply/demand criteria set forth in the Act, may be the most
difficult to evaluate definitively since the Act specifically mentions
minimum prices to producers. The BFP, as part of a classified pricing
system, does contribute to minimum prices to producers. However, the
basic formula price does not need to be set at a level to ``assure an
adequate supply of wholesome milk.'' The proposed BFP replacement meets
the supply and demand criteria for milk used in butter/nonfat dry milk
and cheese even though they are established from finished product
commodity prices. The commodity prices are based on a competitive
marketplace and reflect the supply and demand for those products (Class
III and Class IV) that utilize

[[Page 4883]]

approximately 50% of the Grade A milk supply.
The supply and demand for Grade A milk is not limited to one
category of products. The same milk may be used for fluid or soft
manufactured products as well as the Class III and Class IV products
used to determine the BFP. As a result, the minimum prices established
for Class III and Class IV reflect supply and demand not only for
finished products but for the milk used to make them.
The second goal is that a BFP replacement should not deviate
greatly from the price level of the current BFP. Several comparisons of
this proposed basic formula price replacement were made to the current
BFP to determine whether the proposed formulas resulted in a price
level for milk used in manufactured products that is reasonably close
to the current BFP.
Protein, butterfat, and other solids values were combined to
compute a Class III hundredweight price using standard factors of 3.15
for protein and 5.5 for other solids. The resulting price averaged
$0.26 or 2 percent above the current BFP for the 69-month period of
September 1991 through May 1997. The Class IV hundredweight price,
computed from the butterfat price and the nonfat solids price using a
constant 8.65 for nonfat solids, averaged $0.22 or 2 percent below the
current BFP during the same period. The proposed Class III and Class IV
prices were both highly correlated with the current basic formula
price. The Class III price had a .963 correlation coefficient while the
Class IV price had a .749 correlation coefficient.
The proposed basic formula price replacement also meets the third
primary goal. The proposed formulas have the ability to respond to
supply/demand changes. The Class III and Class IV prices should respond
appropriately since the formulas use NASS-surveyed commodity prices
that reflect the supply and demand for these commodities.
Overall, the proposed BFP replacement formulas (for Class III and
Class IV) meet the established criteria necessary for a BFP
replacement. The formulas are relatively simple to use and can be
applied uniformly. The formulas are transparent and the Class III and
Class IV formulas meet the sound economics criterion.
The proposed use of NASS survey prices may reduce the ability to
predict prices, at least in the near term, since there is a limited
history of using NASS survey prices for computing Federal order prices.
Predictability should improve over time as the relationship between the
survey prices and easily-tracked exchange prices becomes apparent to
industry observers. Regulation should be reduced since NASS is
collecting the weekly cheese survey, and the manufacturing plant survey
would no longer be required. Regulation could increase, however, make
allowances are audited.
The proposed formulas used in the basic formula price replacement
may result in prices that are less stable than the current BFP. Unlike
the current BFP, in which commodity updates are used to adjust the
producer pay price survey, changes in product prices would be the sole
determinant of changes in component prices. The current BFP is based
primarily on the base month survey price, which does not move as
rapidly as the commodity markets (as noted by many respondents). As a
result, the current BFP reacts more slowly to changes in the commodity
markets than does the proposed commodity-driven price series.
There has been considerable criticism of the use of exchange prices
(particularly cheese) in determining the basic formula price. This
criticism ranged from inaccurate representation of commodity values to
accusations of market manipulation. The National Cheese Exchange
eventually closed and the Department decided to use a new NASS Cheddar
cheese price survey in the computation of the basic formula price and
in federal milk order component pricing plans. Cheese transactions
occurring during the week are surveyed and released by NASS on the
following Friday. From the weekly price and sales volume a monthly
weighted average price is determined.
The BFP Committee recommended using NASS cheese survey prices and
having NASS develop a price survey for butter. This survey would have
to be expanded and data released more often. Nonfat dry milk and dry
whey prices are currently surveyed and published, but will need to be
published on a more timely basis if they are used in component price
computations.
Several alternatives to a NASS price survey were considered. There
is a cash butter market at the Chicago Mercantile Exchange (CME). These
prices are currently used to determine the butterfat differential and
butterfat price in all federal milk orders. Dairy Market News (DMN)
publishes a wholesale butter price. Both of these price series have
been criticized due to the ``thinness'' of trading. There is no
exchange trading of dry milk products. Alternatives to a NASS survey
are limited to prices published by Dairy Market News or a California
survey. The prices reported by DMN are generally considered to be
representative of the dry product markets. However, the prices are
reported as a range. A simple average of the prices is used to compute
a monthly price and may not reflect the weighted average price at which
the product moved. In many instances multiple heat treatment products
are involved, and a substantial number of forward contracts are
included. The DMN prices are not intended to establish prices but are
provided for market information.
NASS data traditionally have been collected via a survey with
voluntary participation. The price information in the current cheese
price survey, like most NASS data, is not audited. NASS applies various
statistical techniques and cross-checking with other sources to provide
the most reliable information available.
Alternatives and comments regarding exchange trading and the use of
NASS survey prices are invited. This decision proposes the use of NASS
survey prices for computing the component values used in the BFP
replacement.

Make Allowances

Several characteristics of Federal milk orders should be kept in
mind concerning make allowances. First, federal milk order prices are
minimum prices. Second, the BFP and its replacement should price milk
used in what have been considered surplus products. The BFP is not
intended to represent the total value of all milk. Third, most dairy
manufacturing plants are not required to participate in the federal
milk order pool and are not required to pay federal milk order prices.
An economic engineering approach to determine appropriate make
allowances was investigated. Neither the time nor the resources are
available to construct models for determining appropriate make
allowances at this time. As an alternative, various sources were used
to determine appropriate make allowances for the basic formula price
replacement. Research by Stephenson and Novakovic of Cornell University
indicates that results obtained by using an economic engineering
approach can be comparable to a survey of plants. Resources may need to
be devoted to developing an economic engineering model, a survey, or a
combination of the two.
The proposed butter make allowance of $0.079 per pound and the
nonfat solids make allowance of $0.125 per pound were developed from an
analysis of several sources. Research by Stephenson and Novakovic on
surveyed data from butter and nonfat dry milk manufacturing plants
resulted in

[[Page 4884]]

equations for estimating the long-run average cost per pound of
producing butter and nonfat dry milk.
Applying these equations to national average nonfat dry milk
production resulted in make allowances ranging from $0.1166 to $0.1561
per pound. These values are in alignment with the seven-year average,
$0.1392 per pound, based on audited cost of production data published
by the California Department of Food and Agriculture. This California
average included a return on investment. These computed costs straddle
the proposed $0.125 make allowance. The proposed $0.125 make allowance
is approximately 90 percent of the California production costs. The
$0.125 make allowance is appropriate, as it covers the costs of most
plants but does not cover the costs of all manufacturing plants.
Several comments in support of product price formulas also suggested
that a make allowance of $0.125 for nonfat dry milk was appropriate.
The determination of the $0.079 butter make allowance is also based
on research by Stephenson and Novakovic. However, applying the long run
cost equations to national production results in national make
allowances ranging from $0.1318 to $0.1013. These values are
considerably higher than the seven-year average of $0.0879 reported by
California. Variation in plant size, or capacity, is the main reason
for the differences between the computed values and the average for
California butter plants. Many plants produce small quantities of
butter, resulting in an understated average plant size and overstated
cost figures. This rapidly becomes apparent when comparing California
data to the national average data. California produces approximately
three times more butter per plant than the national average at a lower
cost. The $0.079 make allowance is set at 90 percent of the California
audited cost of production. This make allowance should allow an
efficient butter plant to operate.
The other solids make allowance is based on research conducted by
Hurst, Aplin, and Barbano of Cornell University. Their research
indicated a make allowance range of $0.079 to $0.259 per pound of whey
powder, depending on plant size. The $0.10 used in the other solids
price computation corresponds to the area of the manufacturing cost
curve at which manufacturing costs per unit, that diminish as volume of
production increases, begin to level off. This part of the cost curve
would appear to be the most appropriate to use for determination of the
other solids make allowance.
As in the case of the other solids make allowance, the proposed
$0.127 per pound protein make allowance reflects the point where the
long-run average cost curve begins to level off for Cheddar cheese
production. This cost curve was developed by Mesa-Dishington, Barbano,
and Aplin of Cornell University. The combination of the cheese and
other solids (dry whey) make allowances result in a total Class III
make allowance approximately $0.10 below the reported California
audited make allowance.
The proposed make allowances used in computing the component prices
for Class III and Class IV result in per hundredweight prices which did
not deviate greatly on average from the current BFP over the period
analyzed, one of the criteria for a basic formula price replacement.
During the September 1991 through May 1997 period on which this
analysis is based, Class III prices would average $0.26 per
hundredweight above the current BFP, with Class IV prices averaging
$0.22 per hundredweight below.
Changes in make allowances will affect component prices and per
hundredweight milk values. A one-cent per pound change in the butter
make allowance will affect the butterfat price in the opposite
direction by $0.0122 per pound. This would be $0.0427 per hundredweight
for milk at 3.5 percent butterfat. The butterfat price also is used in
the computation of the protein price. The protein price will change
inversely to the butter make allowance by $0.0146 per pound or $0.046
per hundredweight for milk with 3.15 percent protein. A positive make
allowance change for nonfat dry milk will result in a decline in the
nonfat solids price. A one-cent change in the nonfat dry milk make
allowance will result in a $0.0104 per pound or $0.094 per
hundredweight opposite change in the nonfat solids price. A one-cent
change in the cheese make allowance will cause an opposite change in
the protein price by $0.0322 per pound or $0.1014 per hundredweight for
milk with 3.15 percent protein. Finally, a one-cent change in the other
solids (dry whey) make allowance will change the other solids price by
$0.0103 per pound or $0.0567 per hundredweight in the opposite
direction.
The factors used in the proposed formulas to compute component
prices are determined by the quantity of the component in the
commodity, except for protein, for which the Van Slyke yield formula is
used. In the protein formula, the 1.32 and 1.582 are yield factors
derived from the Van Slyke cheese yield formula. The 1.32 factor times
the cheese price is used in the protein price formulas in many current
Federal order component pricing plans. Both the 1.32 and 1.582 are
determined by calculating the change in cheese yield if an additional
tenth of a pound of protein or butterfat is contained in the milk,
holding everything else constant. Accounting for the additional value
of butterfat in cheese is necessary. This additional value is included
with the protein price calculation as a means of quantifying the amount
by which the value of butterfat in cheese exceeds the value of
butterfat in butter, and because it is the casein in protein that forms
the molecular matrix that retains the butterfat in cheese. The ratio of
butterfat to protein is calculated from the protein and butterfat yield
factors of 1.32 and 1.582.
The nonfat solids formula uses the 0.96 factor as the percent or
quantity of nonfat solids in a pound of nonfat dry milk. The 0.82 in
the butterfat formula represents the percent or quantity of butterfat
in one pound of butter. The 0.968 factor in the other solids formula
represents the percentage of other solids in whey powder.
This proposed pricing system eliminates the need for regional
yields based on regional differences in milk composition. The value of
milk would be adjusted automatically based on the level of components
contained in the milk in each order even though the component prices
are the same nationally. This automatic adjustment means that handlers
would pay the same price per pound of component but have differing per
hundredweight values based on the milk component levels, creating
equity in the minimum cost of milk used for manufacturing purposes.
An analysis of the basic formula price replacement requires several
assumptions. Historic commodity price surveys are not available for all
of the commodities. Prices used as substitutes for historic price
survey data in this analysis include: the National Cheese Exchange 40-
pound block prices for computing protein prices; the Chicago Mercantile
Exchange Grade AA butter prices for computing butterfat prices; and the
Dairy Market News Central States dry whey price for computing the other
solids prices. Available survey prices used were nonfat dry milk prices
published monthly by NASS in ``Dairy Products''.
One of the requirements of a basic formula price replacement, based
on the assumption that the current basic formula price reflects the
national

[[Page 4885]]

supply and demand for manufacturing milk, is that the price level not
deviate greatly from the current basic formula price. All comparisons
are thus made to the current basic formula price.
Three different comparisons were examined. First, standard
component levels were used to compute a hundredweight price that was
compared to the current basic formula price. The standards for
computing Class III prices were 3.5 percent butterfat, 3.15 percent
protein, and 5.5 percent other solids. The standards for computing
Class IV prices were 3.5 percent butterfat and 8.65 percent nonfat
solids. The second comparison computed a per hundredweight price using
actual component tests to determine an ``at test'' value. A third
comparison computed hundredweight prices at 3.5 percent butterfat with
protein and other solids adjusted to reflect the change in skim milk
that occurs as the butterfat is changed from ``at test'' to 3.5
percent. The latter two comparisons: (1) eliminate any bias occurring
from the use of ``standard'' component levels, and (2) address
seasonality of component levels. These latter two comparisons require
tests for protein and other solids and were only performed for months
in which test data was available (September 1991 through May 1997).
Statistically, the Class III hundredweight price and the Class IV
hundredweight price did not equal the current basic formula price for
all comparisons. However, in absolute terms, the average differences
were relatively small. When compared to the Class III and Class IV
prices computed using the constants, the current basic formula price
averaged $0.26 per hundredweight below the Class III price and $0.22
per hundredweight above the Class IV price during the September 1991
through May 1997 period. Comparing the Class III and Class IV prices at
test to the current basic formula price at test, the Class III price
averaged $0.35 per hundredweight above the current basic formula price
while the Class IV price averaged $0.19 below the current basic formula
price. The third comparison, in which the Class III and Class IV prices
are adjusted to 3.5 percent butterfat, had the Class III price
averaging $0.32 per hundredweight above the current BFP, while the
Class IV price averaged $0.22 per hundredweight below the current BFP.
In addition to comparing the absolute Class III and Class IV prices
to the current BFP, it is important to compare the relationship between
the Class III and Class IV prices and the current basic formula price.
Correlation coefficients were computed to statistically test the
relationships between the Class III and Class IV prices and the current
basic formula price. Statistically, the correlation coefficients are
positive and significant, indicating positive relationships between the
current basic formula price and the Class III and Class IV prices. The
correlation coefficient between the Class III price and the current
basic formula price is generally above .95 while the correlation
coefficient between the Class IV price and the current basic formula
price is approximately .75. These relationships are expected since the
current basic formula price is weighted more heavily on milk used for
the manufacture of cheese than on the value of milk used in the
manufacture of butter and nonfat dry milk.
The proposed Class III and Class IV formulas are computed from
product prices representing the use of milk in each class. That is, the
Class III price would be derived from the value of cheese while the
Class IV price would be derived from the value of butter and nonfat dry
milk. Therefore the Class III and Class IV prices could, and would,
vary significantly from the current BFP in individual months,
reflecting the economic (supply and demand) conditions for cheese,
butter, and nonfat dry milk. This situation is particularly true of the
Class IV price. For example, during 1993 and 1994 the price of butter
and nonfat dry milk was relatively low and stable compared to the price
of cheese. The degree of variability of individual months' prices from
the average for the year is expressed by a standard deviation. A lower
standard deviation indicates that individual observations (in this
case, monthly product prices) vary less from the mean than would be
indicated by higher standard deviations. These statistical descriptions
indicate the difference in variability of prices between butter/powder
and cheese in 1993 and 1994. Further examples are included in the
attached table.
During 1993 the proposed Class IV price would have averaged $11.51
with a standard deviation of .15, compared to the 1993 BFP average of
$11.80 with a standard deviation of .72, and the average Class III
price of $11.99 with a standard deviation of .83. In 1994, the proposed
Class IV price would have averaged $11.15 with a standard deviation of
.13, compared to the 1994 BFP average of $12.00 with a standard
deviation of .57, and the average proposed Class III price of $12.18
with a standard deviation of .65. For 1996, when the economic
conditions for butter and nonfat dry milk had changed, and the prices
become more volatile, the proposed Class IV price averaged $13.82 with
a standard deviation of 2.19 versus the 1996 BFP average of $13.39 with
a standard deviation of 1.26, and the proposed Class III average price
of $14.04 with a standard deviation of 1.33.
The Class III and Class IV prices clearly reflect the value of the
milk used in the respective manufactured products, whereas the current
basic formula price reflects primarily the value of milk used to
manufacture cheese. Therefore, to the extent the proposed Class III and
Class IV formulas deviate from the present level of the BFP, they may
be more appropriate indicators of the value of milk used in those
products than the current BFP.

Class I

The basic formula price replacement also will act as a mover for
the Class I price in addition to establishing prices for milk used in
Class III and Class IV. Several comments were filed relative to the use
of the basic formula price replacement to establish the Class I price.
These comments ranged from continuing the current system to
establishing the Class I price independently of the basic formula
price(s) for milk used in manufactured products. One comment suggested
eliminating the basic formula price and pooling only the Class I and
Class II differentials.
In comments suggesting that the Class I price not be computed from
the basic formula price, commenters expressed the opinion that the
Class I price should not be based on prices for milk used in
manufactured products because these prices do not reflect the market
for Class I milk. The comments noted that fluctuations in the Class I
price do not result in corresponding changes in the retail price for
fluid milk, particularly when the Class I price is declining. These
commenters suggested including the retail milk price, as well as other
factors, in computing the Class I price. The result would be to
determine the Class I price from an economic formula.
Other commenters expressed the opinion that the Class I price
should be more stable, and that with advance pricing it is very
difficult to price fluid milk products because of large fluctuations in
the butter market. (It is the Class I hundredweight price at 3.5
percent butterfat that is announced in advance. Fluctuations in the
butterfat differential, which is not announced in advance, result in
corresponding fluctuations in the skim price, which is predominately
applicable to Class I

[[Page 4886]]

milk.) Other commenters suggested that if the current basic formula
price reflects the demand for fluid milk, the basic formula price and
the Class I price should at least move in the same direction, rather
than in opposite directions as they have done at times over the past
several years. In addition, commenters expressed the opinion that the
elasticity of demand for fluid milk products is significantly different
from the elasticity of demand for manufactured products, justifying
separate pricing of Class I and the basic formula price.
Proponents of eliminating the BFP and pooling only the Class I and
Class II differentials explained that this proposal would eliminate the
need and controversy of determining a basic formula price while still
distributing the proceeds of the Class I and Class II markets to
producers. The remainder of the producer value of milk would be
determined directly by the market rather than from an administratively-
established value for milk used in manufacturing.
The concept of pooling differentials only would eliminate the need
to determine a basic formula price. However, the Act states that the
Secretary shall establish minimum prices for milk and classify milk in
accordance with the purpose for which it is used. The differential milk
value would not be the minimum value nor differentiate between classes
as specified in the Act. As interpreted herein, the Act does not
provide for pooling differentials only and new legislative authority
would be required in order to do so.
There certainly are some reasons for partially breaking the direct
link between Class I prices and the BFP. This proposed rule includes a
method for pricing Class I based on a six-month declining average of
the higher of the Class III or Class IV prices. A complete separation
should not occur since handlers compete for the same undifferentiated
milk to use in Class I fluid milk products as well as in cheese and
other manufactured dairy products. Therefore, an appropriate price
relationship must be maintained between Class I and the manufacturing
classes to assure an adequate supply of milk for Class I uses.
Partially breaking the direct link between Class I prices and the
basic formula price replacement would reduce the volatility in producer
prices. This rule proposes that the fixed Class I differential for each
order be added to a 6-month declining average of the higher of Class
III or Class IV skim prices and a 6-month declining average of the
butterfat price. The skim milk price is determined for Class III by
combining the result of multiplying 3.3 by the protein price and 5.7 by
the other solids price, and for Class IV by multiplying the nonfat
solids price by 9. These factors represent the quantities of the
respective components in 100 pounds of skim milk. The use of a 6-month
declining average would significantly decrease monthly Class I price
volatility while minimally affecting the long-run price. Application of
the 6-month declining average of the higher of the Class III or Class
IV prices to the computation of Class I prices for the period February
1992 through May 1997 would have resulted in prices which averaged only
two cents below the average price computed by adding a fixed
differential to the higher of the Class III or Class IV skim milk price
for the second preceding month.
The Class I butterfat price computation adds the Class I
differential to the 6-month declining average of the butterfat price.
Application of the Class I differential to both the skim and butterfat
pounds rather than to total product pounds achieves true Class I
advance pricing. A Class I handler consequently would know both the
skim milk and butterfat prices in advance.
Several options were analyzed with respect to selecting the
appropriate Class I price mover. The options included using the second
preceding month's prices, using a moving average, and using a declining
average. A declining average weights the current price most heavily,
with the next most current price receiving a smaller weight, and so
forth for the number of months included. For example, a three month
declining average would weight the most current price by three, the
next most current by 2, and the third price by 1, with the resulting
sum divided by 6 to determine the average.
All options were evaluated on the ability to improve price
stability while maintaining appropriate producer price signals. A Class
I price mover using the higher of the Class III and Class IV skim milk
prices for the second preceding month (most resembling the current
mover) was the least stable option, with a standard deviation of
1.3188. A 12-month moving average of the higher of the Class III and
Class IV skim milk prices resulted in the most price stability with a
standard deviation of .8840. However, a 12-month moving average tends
to react more slowly to economic signals since the most current month,
which most nearly reflects current economic conditions, has a weight of
only 8.3 percent. The 6-month declining average contributes a weight of
28.6 percent of the price to the most current month, while a 6-month
moving average reflects only 16.7 percent of the current month's price
in the average. By reflecting current economic conditions more rapidly
than the longer moving averages, the 6-month declining average strikes
an acceptable balance between responsiveness to current market values
and the goal of stability.
The combination of advanced butterfat and skim milk pricing and a
6-month declining average will allow Class I handlers true advanced
Class I pricing and increased price stability. Increased producer pay
price stability as a result of increased Class I price stability will
remain dependent on the Class I utilization of each market.
Improving price stability has other advantages. Dairy processors,
consumers, and producers will benefit from less month-to-month
variation in prices than is experienced under the current pricing
mechanisms. Increased Class I price stability may result in lower
prices to consumers.
As discussed previously, the price link between Class I use and
Grade A milk used to manufacture Class III and Class IV products should
be maintained since Grade A milk can be used for fluid uses as well as
for manufacturing uses. Because handlers compete for the same milk for
different uses, Class I prices should exceed Class III and Class IV
prices to assure an adequate supply of milk for fluid use. Federal milk
orders traditionally have viewed fluid use as having a higher value
than manufacturing use. The proposed Class I price mover reflects this
philosophy by using the higher of the Class III or Class IV price for
computing the Class I price.
In some markets the use of a simple or even weighted average of the
various manufacturing values would inhibit the ability of Class I
handlers to procure milk supplies in competition with those plants that
make the higher-valued of the manufactured products. Use of the higher
of the Class III or Class IV price will make it more difficult to draw
milk away from Class I uses for manufacturing. For example, if the
Class IV price were used as the Class I mover there would be months in
which the Class III price would be more than two dollars above the
Class IV price. As a result, the Class I differential would have to be
well over two dollars for the Class I price to remain above the Class
III price. Certainly, in this scenario the economic decision would be
to sell milk for Class III manufacturing, at least in those markets
with a Class I differential below two dollars, since the price is above
the Class I price. If the Class III

[[Page 4887]]

price is used as the Class I price mover, the reverse situation of
having the Class IV price well above the Class III price would result
in the same problem. The potential of having a Class III or IV price in
excess of the Class I price is not entirely eliminated by using the
higher of the Class III or Class IV price because of the advance Class
I pricing feature, and, to some extent, because of the effect of using
a 6-month declining average on which to base the Class I price.
However, use of the higher of the two manufacturing prices for each of
the months averaged and weighting the average toward the most recent
month should reduce the popential considerably, allowing Class I
handlers to compete more effectively with manufacturing plants for
fluid milk.

Class II

Under this proposed rule, the value of Class II milk would be
determined by multiplying the pounds of nonfat solids in producer milk
allocated to Class II by the nonfat solids price, the pounds of
butterfat by the butterfat price, and the hundredweight of Class II
skim milk by $0.70. Generally, the source of inputs alternative to
producer milk for the manufacture of Class II products is dry milk
products and butterfat. Basing the price of milk used to make Class II
products on these alternative ingredients should help considerably to
remedy a situation in which it is perceived that a separate product
class for dry milk (Class III-A) has a competitive advantage over
producer milk used to produce Class II products. The 70-cent
differential between the Class IV and Class II skim milk prices is an
estimate of the cost of drying condensed milk and re-wetting the solids
to be used in Class II products. One commenter suggested that there
should be a $1.00 difference between Class IV and Class II. Additional
comments on the appropriate level of this differential, with supporting
data, are encouraged.
The proposed rule would not provide for advance pricing on Class II
milk, for several reasons. First, although the current Class II price
is announced in advance on the basis of the second preceding month's
BFP, it is announced as a hundredweight price for milk containing 3.5%
butterfat. When the butterfat price changes between the time the price
is announced and the month to which the price applies, the 3.5%
hundredweight price is still applicable, but the balance between the
skim milk price and the butterfat price may have shifted significantly.
This phenomenon effectively eliminates the advance announcement feature
of Class II pricing. For example, on July 3rd the June basic formula
price was announced, establishing the August Class II price for milk
containing 3.5 percent butterfat at $11.04 per hundredweight. The June
butterfat differential was $0.114, which if applied to the $11.04 would
have resulted in a butterfat price of $1.2105 per pound of butterfat
and $0.0705 per pound of skim milk. However, the August butterfat
differential was $0.106. The actual butterfat price would therefore
have been $1.11333 per pound, and the actual skim milk price would have
been $0.0733. This example illustrates that even though the Class II
price is announced in advance, the price of the skim milk and butterfat
used in Class II currently is not known in advance. The further a
product varies from a 3.5 percent butterfat content, the greater will
be the effect of the butterfat price changes between the announcement
date and the month in which the milk is used.
Second, although advance pricing would be possible under the
proposed component plan, a problem occurs in accounting for the skim
milk and butterfat, particularly butterfat, in Class II products.
Additional finished product testing and accountability, and therefore
increased regulation, would be needed to account properly for butterfat
used in Class II since it would have to have a different price than the
butterfat, priced on a current basis, used in other manufacturing
classes.
Third, pricing Class II on a current basis would allow the price
relationship between the nonfat solids and butterfat in Class IV and
Class II to remain constant from month to month. With a constant price
relationship between these two classes, competition and substitution
between milk and the Class IV products used to make Class II products
will be based on the relative merit of the alternative inputs rather
than on regulated price relationships. The use of product price
formulas, for Class II and well as for Class IV, should allow industry
participants to track price trends throughout the month, enabling them
to estimate changes in price.

Quality Adjustments

This proposed rule would adjust producer payments for the somatic
cell count of producers' milk under orders using multiple component
pricing. Payments made by handlers for milk used in Class II, Class
III, and Class IV should also be adjusted on the basis of the somatic
cell count of the milk. A somatic cell adjustment is appropriate for
several reasons. First, somatic cell levels are not only an indicator
of general milk quality, but also are an indicator of the potential
yield of milk in cheese and other products that require casein for
their structure and body. Research has shown a direct link between
increased somatic cell counts and decreased cheese yields. Milk with
the same protein content but different somatic cell counts has
different values due to the difference in cheese yields caused by
varying somatic cell counts.
Second, many producers currently are subject to some type of
multiple component pricing plan or quality premium program that adjusts
their pay prices for somatic cell levels even if the order in which
their milk is pooled does not incorporate such adjustments. Although
many producers' returns are affected by the somatic cell count of the
milk, there is little, if any, oversight of the testing for somatic
cells if the order does not include pricing adjustments. Fair and
accurate testing can be assured by incorporating multiple component
pricing and somatic cell adjustments into Federal orders. Third,
somatic cell counts have taken on greater importance in the world dairy
market, as evidenced by the recent debate between the European
Community and the United States over allowable somatic cell counts in
milk used to make exported dairy products. It is now more important
that the somatic cell level of producer milk be verifiable.
The somatic cell adjustment should apply on a hundredweight basis
and be computed by subtracting the somatic cell count (in thousands)
from 350 and multiplying the result by the product of .0005 times the
monthly average cheese price. This level of adjustment has worked well
in orders currently containing somatic cell adjustments, and is
supported by data and research contained in Federal order milk hearing
records.

Application of the Proposed Basic Formula Price

Under this proposed rule, producers in most Federal order markets
would be paid on a multiple component basis since the basic formula
price replacement is based on individual milk component prices.
Producers will be paid for the pounds of butterfat, pounds of protein,
pounds of other solids, a per hundredweight price known as the producer
price differential, and a per hundredweight somatic cell adjustment.
The producer price differential returns to producers their pro rata
share of the proceeds of the classified pricing system. The butterfat
price for producers would be the same butterfat price computed for
Class III and Class

[[Page 4888]]

IV butterfat. The protein and other solids prices would be the same
protein and other solids prices computed for Class III.
Handler obligations and producer payments under the orders that are
not proposed to have component pricing provisions would be based on
hundredweight prices computed from these component prices.
All of the Federal milk orders will require changes to accommodate
replacement of the current BFP with the proposed multiple component
pricing plan or with its hundredweight price equivalent. There would no
longer be a butterfat differential under any order, but a butterfat
price. The same butterfat price would be used for butterfat in Class
II, Class III, and Class IV, while a separate butterfat price,
announced in advance, would apply to butterfat used in Class I.
For purposes of allocation of producer receipts the assumption will
be made that the protein and other solids (nonfat solids) can not be
separated easily from the skim milk. The protein and other solids will
therefore be allocated proportionately with the skim milk based on the
percentage of protein and other solids in the skim milk received from
producers. Accordingly, the pounds of protein and other solids will be
determined by multiplying the percent protein or percent other solids
in the skim milk of the total producer milk received by the handler
times the pounds of skim milk allocated to each class. The assumption
that the nonfat components follow the skim milk may need to be
revisited as the fractionation technology of milk continues to improve
and the pricing system falls short of meeting the needs of marketing
practices. At the present time such a problem is not apparent.
For the Market Administrator to compute the producer price
differential, handlers will need to supply additional information on
their monthly reports of receipts and utilization. Handlers that are
filing reports in orders that currently have multiple component pricing
and a somatic cell adjustment will see little or no change in their
reporting requirements. Under orders that would be adopting component
pricing for the first time, the pounds of protein, the pounds of other
solids, and somatic cell information will be needed in addition to the
product pounds and the butterfat currently reported. This data will be
required from each handler for all producer receipts, including milk
diverted by the handler, receipts from cooperatives as 9(c) handlers
and, in some cases, receipts of bulk milk received by transfer or
diversion.
Payments by handlers to cooperative associations for Class I milk
would be calculated on the basis of Class I skim pounds times the Class
I skim price plus the pounds of Class I butterfat times the Class I
butterfat price. Payment for Class II milk would be paid for based on
the Class II differential times the hundredweight of producer skim milk
in Class II, the pounds of nonfat solids in Class II times the nonfat
solids price, and the pounds of butterfat in Class II times the
butterfat price. Class III milk will be paid for based on the pounds of
protein in Class III times the protein price, the pounds of other
solids in Class III times the other solids price, and the pounds of
butterfat in Class III times the butterfat price. The pounds of nonfat
solids in Class IV times the nonfat solids price, and the pounds of
butterfat in Class IV times the butterfat price would be used to
calculate obligations for Class IV milk. The appropriate somatic cell
adjustment will apply to milk in Class II, Class III, and Class IV.
The Class I value of milk to handlers would be calculated by
multiplying the skim pounds of producer milk in Class I times the Class
I skim price plus the pounds of Class I butterfat times the Class I
butterfat price. Class II milk value would be computed on the basis of
the Class II differential times the hundredweight of producer skim milk
allocated to Class II, the pounds of nonfat solids in Class II times
the nonfat solids price, and the pounds of butterfat in Class II times
the butterfat price. Class III milk value would be computed based on
the pounds of protein in Class III times the protein price, the pounds
of other solids in Class III times the other solids price, and the
pounds of butterfat in Class III times the butterfat price. The pounds
of nonfat solids in Class IV times the nonfat solids price, and the
pounds of butterfat in Class IV times the butterfat price would
comprise the value of Class IV producer milk. Also included would be
the appropriate somatic cell adjustment applied to milk in Class II,
Class III, and Class IV, the value of overage, the value of inventory
reclassification, the value of other source receipts and receipts from
unregulated supply plants allocated to Class I, and the value of
handler location adjustments.
The handler's obligation to the producer settlement fund will be
determined by subtracting from the handler's value of milk the
following values: (a) the total pounds of producer milk times the
producer price differential adjusted for location, (b) the total pounds
of butterfat times the butterfat price, (c) the total pounds of protein
times the protein price, (d) the total pounds of other solids times the
other solids price, (e) the total value of the somatic cell adjustments
to the producer milk, and (f) the value of other source milk at the
producer price differential with any applicable location adjustment at
the plant from which the milk was shipped deducted from the handler's
value of milk.
Payments to producers traditionally have been made in two payments,
a partial payment based, in most cases, on the prior month's Class III
price and a final payment at the uniform price. This traditional
payment system will continue, with any exceptions for local marketing
practices noted in the regional discussions. The partial payment will
be paid on a per hundredweight basis with the price equaling the
combined value of the skim and butterfat prices for the lowest-priced
class in the previous month. By computing the partial payment on a
hundredweight basis, confusion about the use of partial month component
test averages will be eliminated and handler's partial payroll
processing costs should not be affected. Final payments to producers
and for 9(c) milk will be based on: (a) the hundred weight of milk
times the producer price differential adjusted for location, (b) the
pounds of protein times the protein price, (c) the pounds of other
solids times the other solids price, (d) the pounds of butterfat times
the butterfat price, and (f) the somatic cell adjustment rate times the
hundredweight of milk.
Since producers will be receiving payments based on the component
levels of their milk, the payroll reports that handlers supply to
producers and to the Market Administrator must reflect the basis for
such payment. Therefore the handler will be required to supply the
producer not only with the information currently supplied, but also:
(a) the pounds of butterfat, protein, and other solids in the
producer's milk, as well as the average somatic cell count of the
producer's milk, and (b) the minimum rates that are required for
payment for each pricing factor and, if a different rate is paid, the
effective rate also. The requirement that payment factors be reported
to producers when producers are paid currently exists in all of the
orders. Addition of the component information is purely a conforming
change. Administration of these provisions should not be changed from
current practices.
With advance pricing of Class I and the inherent instability of the
commodity markets there may be occasions when the computation of the

[[Page 4889]]

producer price differential results in a value of zero or below. In
such a situation, the producer price differential will be as computed.
The following table is of actual and proposed class prices and the
proposed Class I price mover for the period of January 1994 through
December 1997. The proposed prices are shown for information purposes
only. These prices result from the strict application of the proposed
formulas using current market situations. These prices should not be
interpreted as prices that would have actually occurred throughout the
data period because industry participants likely would have reacted
differently to the proposed price levels than they reacted to the
actual price levels.
Although the proposed formulas for calculating the Class III and
Class IV prices resulted in prices fairly close to the BFP for the
period over which data was collected and analyzed (September 1991
through May 1997), the price differences during the last six months of
1997 have been considerably greater. The proposed Class II price has
averaged 83 cents over the BFP during July through December 1997, with
a range of 63 cents to $1.00 more than the BFP. Over the same period,
the proposed Class IV price has averaged $1.01 more than the BFP, with
differences ranging from 3 cents under to $1.97 over. Comments on this
failure of the more recent data to fit the relationship between the BFP
and the proposed Class III and IV prices observed over the earlier and
longer period are invited.
A feature of the relationships between the proposed class prices
that should be pointed out is that there is no assurance that the class
prices will retain the relative values that their designations might
imply. Because of the advance pricing feature for Class I, and because
the Class I price would be based on a declining average of former
months' prices, there is some possibility that the Class I price level
for some markets may fall below the levels of one or more of the other
classes. At the same time, basing the Class II price on the Class IV
component values might, at times, result in the Class II price falling
below the level of the Class III price. Comments on whether such
changing price relationships are appropriate and, if not, how they
might be avoided, are welcome.
The pricing formulas contained in this proposed rule are suggested
as viable replacements for the current basic formula price for use in
establishing minimum prices for milk and the components of milk.
Comments should address whether the formulas suggested are appropriate
or whether other pricing methods would be preferable. In addition,
comments are welcomed on the specific details of the suggested pricing
formulas. This would include comments on the appropriate commodity
prices from which component prices are to be calculated, the method of
obtaining such prices, the content of each component to be priced in
the relevant commodity, the appropriate make allowance to be used in
the determination of each component price, the optimum method of
determining the Class I price mover, as well as the appropriate level
of the Class II skim milk differential. Such comments should
incorporate relevant data and rationale to support the adoption of
factors that differ from those 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 mover Class III price Class IV price Class II
price * price price price
--------------------------------------------------------------------------------------------------------------------------------------------------------

(6)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

[[Page 4890]]

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

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

\22\ Earlier research that has been reported elsewhere was based
on an older version of the model. Present revisions have made
substantial changes to the various transportation cost functions. In
particular, distribution costs for refrigerated products were
reduced substantially and now are on par with bulk milk assembly
costs.

---------------------------------------------------------------------------

[[Page 4891]]

The output from the USDSS model provides information as to optimal
processing locations and volumes at those locations, milk assembly, and
intermediate and finished product distribution flows. It represents a
least cost, or `efficient' organization of the industry. Importantly
for the research, the model provides the marginal values (i.e., the
value of one more unit) of milk at each location. These values,
technically known as shadow prices, are indicative of values that are
consistent with the optimized solution. A shadow price on one unit of
milk at any processing location can be interpreted as follows: If the
processor at a particular location had one more unit of milk, the
entire pattern of milk assembly, and product transportation could be
reorganized in such a way that marketing costs, equal to the shadow
price, could be saved. This notion of marginal value is consistent with
economic theory on how prices are determined in a competitive market.
The significance of the shadow value in terms of milk price
regulation may be stated. If the regulated price, or cost of milk, is
arbitrarily set higher than the shadow price at a particular processing
location, a lower cost solution could be found by processing more milk
at other locations. This would imply higher transportation costs for
either raw milk assembly, finished product distribution, or both. Such
a result clearly leads to a higher cost, less efficient system. It is
also contrary to what is generally thought of as ``orderly'' marketing
of milk which is a fundamental reason for the existence of federal milk
marketing orders.
It should be stressed that for the purposes of looking at Class I
values, the calculated shadow prices provide information regarding the
relationship of the prices between geographic locations. They do not
provide guidance regarding the overall level of Class I price or
differential values. That is, the model does not help us understand
whether the Class I prices should be $14 in Minneapolis and $15 in New
York City, or $15 in Minneapolis and $16 in New York City. However, it
does tell us that the Class I price difference between the two
locations should be about one dollar.
A relative merit of the USDSS model is the degree of detail
available in the output. This detail is achieved through the careful
assembly of spatially disaggregated data. However, it should be
remembered that by its construction the USDSS is a `model' and thus a
simplification of a complex dairy industry. In actuality, both the
level and relative values between locations would change virtually
daily and would reflect a host of influences not represented in the
model. That notwithstanding, the USDSS model provides an objective
guidepost from which to compare current federal order differentials and
to consider possible alternatives.
Several factors must be considered when selecting a replacement for
the current \23\ Class I price structure. First, a Class I price
structure must be considered from a national, as well as a local or
regional, perspective. As expected, many comments from industry address
Class I pricing issues from a local or regional perspective. These
comments provide valuable information about particular markets but do
not consider the feasibility or impact of a local or regional issue on
a national basis. While remaining mindful of local and regional
concerns, USDA has also evaluated structures from a national
perspective.
---------------------------------------------------------------------------

\23\ Any references to the ``current'' system of Class I prices
or the ``current'' price structure are to be interpreted as those
established in or after the final decision based on the 1990
national hearing issued March 5, 1993 (58 FR 12634).
---------------------------------------------------------------------------

Second, a Class I price structure must recognize the location value
of milk. Results from the USDSS model confirm that milk has value at
location. As described earlier, the model provides shadow prices
reflecting the relative values of milk and milk components at
geographic locations. While shadow prices do not suggest Class I
differentials for specific locations, they do provide a means to
evaluate price relationships among locations.
Third, a Class I price structure must recognize all uses of milk.
The classified pricing system contained in the Federal milk order
program values milk for fluid use higher than milk used for soft or
hard manufactured products. The higher Class I price encourages all
milk to be used first to satisfy Class I needs. At the point where the
cost of moving milk from an alternate location for Class I use is equal
to the cost to supply milk for manufactured products, demand for
manufactured products influences a market's ability to procure milk for
Class I needs. Thus, all uses of milk must be considered when
evaluating a national Class I pricing structure.
Finally, a Class I price structure must meet the requirements of
the AMAA. The broad tenet of the AMAA is to establish and maintain
orderly marketing conditions. For the Federal milk order program this
is achieved primarily through classified pricing and pooling. With
regard to pricing, it is recognized that the objective of the AMAA is
to stabilize the marketplace with minimum prices, not to set market
prices. In evaluating a national Class I pricing structure,
consideration was given to whether the proposed prices reflect enough
of the milk value to maintain sufficient revenue for producers to
maintain an adequate supply of milk and provide equity to handlers with
regard to raw product costs.
Of the numerous Class I price proposals submitted, seven broad
categories of proposals were selected for further evaluation. These
seven categories of proposals are all based on a basic formula price
plus a differential. The seven categories of proposals were selected
because they basically adhered to these four standards. The seven
options considered in further detail are location specific
differentials, flat differentials, relative use differentials, demand-
based differentials, and decoupled baseline with adjusted
differentials. These options will be explained in more detail later.
Several comments were received that suggested pooling only Class I
differentials as a replacement for the current Class I price structure.
This proposal was eliminated from further analysis because it would
require new legislative authority to implement since the AMAA requires
the Secretary to establish minimum prices for milk. This proposal would
result in the elimination of all manufacturing milk classes. Processors
and manufacturers would compete for available milk supplies providing
producers with a basic competitive price for their milk.
The AMAA requires in 7 U.S.C. 608c(5)(A) that the Department
classify ``* * * milk in accordance with the form in which or the
purpose for which it is used * * *'' and establish ``* * * minimum
prices for each such use of classification.'' If the Department did not
differentiate between the uses of milk as suggested in this proposal,
it is difficult to determine how this would be accomplished. Moreover,
Section 8c(5)(B) provides ``* * * for the payment to all producers and
associations of producers delivering milk to all handlers of uniform
prices for all milk so delivered, irrespective of the uses made of such
milk by the individual handlers to whom it is delivered * * *.'' This
further indicates that the intent of the authorizing legislation is the
classification and pricing of all producer deliveries. Otherwise, it
would be difficult to pay producers a uniform price for all of their
milk ``* * * irrespective of the uses made of such milk by the
individual handler to whom it is delivered.''
Several proposals were submitted supporting ``decoupling'' Class I
prices

[[Page 4892]]

from Class III prices. The term ``decoupling'' has been construed in a
number of ways; however, a review of the proposals indicates that the
primary concern is about how the BFP influences Class I prices. The
purist definition of decoupling is to determine Class I prices without
relating them to the Class III price through differentials. This
approach implies no relationship between the value of milk for fluid
use and milk used for manufacturing. With this in mind, in general,
decoupled prices could be determined in two ways: (1) Set Class I
prices administratively; or (2) Set Class I prices based on a
relationship that does not include the Class III price.
While it is true that milk for fluid use and milk for manufacturing
use have different values, the realities of the characteristics of milk
supply and demand, and the AMAA mandate ``to provide an adequate supply
of milk'' for fluid use, suggests the necessity of a relationship
between the price of milk for fluid use and milk used for
manufacturing. Adopting a Class I price based on the purist definition
of decoupling would not provide a relationship between fluid and
manufacturing uses. In this context, decoupling Class I prices from
Class III prices has been eliminated. However, the use of a
``decoupled'' price based on the Class III price is considered in
further detail later.
Some comments were received recommending the use of end product
pricing. One comment specifically recommended it on all classes of milk
while others were unclear if end product pricing should apply to all
classes of milk. Under end product pricing, milk components would be
priced according to their value in the product mix.
A number of questions arise with the recommendation of end product
pricing. Mathematically it is relatively easy to take commodity prices
and work backward on the average. However, where is the appropriate
``end'' to work backward from? Nonfat dry milk, for example, is not an
end product at the consumption level. Likewise, sweet butter can be
used for ice cream, etc. Other questions raised by this option include:
Is a Class I milk value properly discovered based on component value in
manufacturing products? Do make allowances protect inefficiencies in
the manufacturing sector and thereby transfer costs to the other
sectors?
At this point in time there is no need to price Class I milk on end
product components. The market system has limited ability to value
additional nonfat solids in fluid milk sales. However, technology is on
the horizon that may substantially change milk composition. If it
results in a consumer acceptable product at some point in the future,
end product pricing to establish fluid milk prices may need to be
revisited.
Several comments supported the adoption of a cost of production
factor in the determination of a Class I price. Milk prices are a
result of the supply and demand conditions in the marketplace. The cost
of producing milk is obviously a factor in the supply function.
However, many other factors affect the price of milk. Demand influences
such as household income levels, prices of substitutes or complements,
and availability all have a significant impact on the price. Pricing
milk solely on the cost of production lacks economic justification.
Numerous other Class I pricing proposals were presented to the
Department. At this time they are not being further considered
primarily because they are regionally based and are not feasibly
adaptable on a nationwide basis, do not adhere to the requirements of
the AMAA, do not recognize the location value of milk, or do not
recognize all class uses of milk.
Of the seven categories of options selected for further review, six
options were contained in the pricing reports issued by AMS Dairy
Programs in March 1997. Based on the feedback received from these
reports, another pricing option was submitted for consideration by USDA
and has been included for further review. In addition, further analysis
and development of the modified location-specific differentials (Option
1B), presented in the March pricing reports, has resulted in a revision
of this proposal and it is now referred to as relative value-specific
differentials. The seven options analyzed in further detail,
representing a broad spectrum of views expressed by interested parties,
are as follows:
Option 1A: Location-Specific Differentials--$1.60 per hundredweight
fixed differential for three surplus zones (Upper Midwest, West, and
Southwest) within a nine-zone national price surface, plus for the
other six zones, an added component that reflects regional differences
in the value of fluid and manufacturing milk.
Option 1B: Relative Value-Specific Differentials--Class I
differentials are established based on a relationship between prices
and geographic location. This option establishes the differential
levels by equating the relative value-specific differential in
Minneapolis, Minnesota, to current Class I differential level at this
location of $1.20 per hundredweight. A location adjusted price
differential for every county is established by evaluating differences
between nearby Class I differential pricing points generated by the
USDSS model.
Option 2: Relative Use Differentials--$1.60 per hundredweight fixed
differential plus a formula-based differential driven by the ratio of
Class I milk to all other uses of milk.
Option 3A: Flat Differentials--$1.60 per hundredweight flat
differential, uniformly applied across all orders to generate an
identical minimum Class I price at all locations.
Option 3B: Flat Differentials Modified by Class I Use--$2.00 per
hundredweight differential in markets where Class I utilization is less
than 70 percent on an annual basis and a differential equal to
$2.00+$0.075 (Class I use %-70%) in markets where the Class I
utilization is equal to or exceeds 70 percent.
Option 4: Demand-based Differentials--$1.00 per hundredweight fixed
differential plus a transportation credit based on location of reserve
milk supplies.
Option 5: Decoupled Baseline Class I Prices with Adjustors--
Baseline 1996 Class I prices adjusted by a supply/demand adjustor that
uses a 12-month rolling average utilization to determine a 2 percent
change that results in a $0.12 per hundred weight price adjustment. A
short-term cost of production adjustor may also be applied to this
option.
Evaluation Criteria
In order to evaluate the Class I pricing options, nine performance
criteria, based upon the regulatory objectives and limitations of the
AMAA, were developed. Economic principles of efficiency and equity were
used to describe market performance. These evaluation criteria
established an initial framework for analysis of the Class I pricing
options. The nine evaluation criteria were divided into two categories,
objective and administrative. Six objective criteria were identified
and defined as follows:
1. Ensure an adequate supply of milk for fluid use. Class I price
levels need to provide a sufficient price signal to maintain an
adequate supply of milk for fluid use. This supply level can be
achieved through either the movement of milk to where it is needed,
increased production, or some combination of both.
2. Recognize quality (Grade A) value of milk. Grade A milk is
required for fluid use. Additional costs of obtaining

[[Page 4893]]

and maintaining Grade A status need to be reflected in Class I prices.
3. Provide appropriate market signals. A Class I price should send
timely signals to the market regarding supply/demand conditions.
4. Recognize value of milk at location. Basic economic theory,
validated by actual market observations and University-based research,
affirms that milk for Class I use has a different value at different
locations. This value needs to be reflected in the Class I price in
order for the system to recognize and resemble the market rather than
interfere with the market.
5. Facilitate orderly marketing with coordinated system of prices.
A system of Class I prices needs to be coordinated on a national level.
Appropriate levels of prices will provide alignment both within and
among marketing areas. This coordination is necessary for the efficient
and orderly marketing of milk.
6. Recognize handler equity with regard to raw product costs.
Appropriate levels of Class I prices provide known and visible prices
at all locations thereby ensuring that handlers are able to compete for
available milk supplies on an equitable basis.
Three administrative criteria were identified and described as
follows:
1. Minimize regulatory burden. The Class I price structure should
not significantly increase the burden on handlers, particularly small
businesses. This would include increased reporting requirements and
recordkeeping, as well as possible increases in administrative
assessment should Market Administrators be required to manage a more
complex regulatory system.
2. Minimize impact on small businesses. The Class I price should be
set at a level that does not disadvantage small businesses in
competition with large businesses.
3. Provide long-term viability. The Class I price structure should
be expected to operate for an extended time period without major
modifications.
The nine evaluation criteria listed above were used to
qualitatively evaluate each of the seven options. Each option was
evaluated based on how the option performed compared to the current
system, either better than, worse than, or the same as, for each
performance criterion. The results of the qualitative analysis provided
a preliminary framework from which to identify options that would be
analyzed quantitatively using a multi-regional model developed by the
Economic Research Service of the Department.
Based on the qualitative analysis, four of the seven options were
eliminated from further analysis. These options were: Option 2--
Relative Use Differentials, Option 3A--Flat Differentials, Option 3B--
Modified Flat Differentials, and Option 4--Demand-Based Differentials.
These options were eliminated for various reasons including failure to
adhere to AMAA, creation of disorderly marketing conditions, and
impacts on small businesses. A discussion of the four eliminated
options, including the evaluation against the evaluation criteria
follows.
Option 2: Relative Use Differential. Utilization-based
differentials were discussed extensively during the Farm Bill debate
and have been discussed by the industry for several years. The 1996
Farm Bill specifically authorizes the Secretary to consider utilization
rates when establishing Class I differentials. This is perceived to be
based on an order's marketwide utilization. A utilization-based
differential would allow Class I differentials to adjust automatically
with changing market supply and demand conditions. An increased demand
for fluid milk relative to supply would generate an increase in the
Class I differential. Hence an incentive is provided to increase local
production or attract alternate supplies. Likewise, if milk supplies
increase in relation to fluid sales, the differential would adjust
downward signaling to producers and handlers that milk is more than
adequate to meet the local needs.
One possible option of a utilization-based differential is relative
use. Under this concept, a marketing area's differential would be
determined by a formula based on the ratio of Class I milk to milk in
all other classes. In order to prevent widely fluctuating prices, a
percentage limit could be placed on differential changes to temper
adjustments based on market supply and demand conditions. For this
analysis, a limit of 25 percent has been applied. The relative use
ratio could be computed on a monthly, quarterly, or annually moving
average basis.
Using this concept, the relative use Class I differential would
equal $1.60 per hundredweight plus the relative use ratio times $1.00.
A 25 percent limit would be applied so the new differential would not
exceed 125 percent of the current differential nor fall to less than 75
percent of the current differential. The $1.60 base differential was
selected to be comparable with other options considered in this rule
such as Option 1A, location-specific differentials. Further discussion
of the $1.60 base differential will be addressed under the discussion
of Option 1A later in this proposed rule.
The table below illustrates the Class I differentials under the
proposed consolidated orders. These differentials are not location-
specific within the applicable orders. For purposes of this analysis
and to provide a basis for comparison within the proposed consolidated
orders, a weighted average Class I differential for each order has been
calculated, based on October 1995 data. This weighted average
differential is computed by multiplying the percentage of Class I milk
in each of the current orders that comprise the consolidated order by
the applicable current order differential and adding the resulting
amounts. This weighted average differential is not location-specific
for the consolidated orders.

Table 1.--Class I Differentials in Proposed Orders Based on October 1995 Data Under Option 2--Relative Use
--------------------------------------------------------------------------------------------------------------------------------------------------------
+ $1.60=Class Weighted Maximum diff.
Proposed order \1\ Relative use I diff. ($/ average diff. range (75%- New diff. ($/ Change in
ratio \2\ (%) cwt) \3\ ($/cwt) \3\ 125%) cwt) diff. ($/cwt)
--------------------------------------------------------------------------------------------------------------------------------------------------------
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

[[Page 4894]]

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 Iall 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 current order
multiplied by the applicable current order differential.

Analysis Based on Evaluation Criteria
In one of the nine criteria, Option 2 may perform slightly better
than the current system. In five of the nine criteria, Option 2
performs poorer than the current system, while in the remaining three
criteria, it performed about the same as the current system.
Option 2 was evaluated against the objective criteria as follows:
1. Ensure an adequate supply of milk for fluid use. In terms of
ensuring an adequate supply of milk for the fluid market, Option 2
provides for the appropriate minimum price levels necessary to bring
forth adequate milk supplies to meet the needs of the fluid market.
Based on the comparisons of weighted average current differentials
versus the relative use ratio differentials, eight of the proposed
orders would receive moderate to significant increases while three
markets would have slight to significant decreases. Differential
changes of these magnitudes could have some effect on milk supplies in
some regions. However, the availability of milk for fluid use would not
be significantly different from what exists today.
2. Recognize quality (Grade A) value of milk. Option 2 does
recognize the quality value (Grade A) of milk with the $1.60 base
differential.
3. Provide appropriate market signals. One of the benefits of a
self-adjusting system is to provide producers with a better signal of
the market conditions. In theory, when supplies increase in relation to
fluid demand, the Class I utilization would decrease precipitating a
downward adjustment in the differential thereby signaling producers to
decrease production. Likewise, if supplies decrease relative to demand,
the Class I utilization would increase precipitating an upward
adjustment in the differential signaling producers to increase
production and/or signaling processors of the need to reach further for
the milk supply. Option 2 provides for a faster market signal than the
current system of simply pooling the various classes of milk.
Option 2 does not recognize that utilization percentages may be
affected by factors such as decisions to pool or not pool manufacturing
plants, shifting supplies among markets, market incentives or
disincentives such as transportation credits, and pool plant and
producer definitions. These may or may not be appropriate factors to
consider in determining supply/demand conditions accurately but these
factors will directly impact the relative use ratio.
4. Recognize value of milk at location. Cornell's economic research
indicates that milk has different values based on location and use. The
relative use concept suggests that a market has only some average value
and not a value at any specific location. Markets such as the Arizona-
Las Vegas and Southwest would have similar utilizations but are quite
different in size and in the distance milk must be hauled to provide
sufficient supplies for the fluid market. Phoenix, Arizona handlers
receive milk from relatively close supplies, less than 50 miles,
whereas the San Antonio, Texas handlers must reach out 200-500 miles
and Houston, Texas handlers must reach out 270-650 miles to adequately
supply their total needs. The relative use concept does not take this
into account. Location adjustments could not overcome this deficiency
since they would create disorderly marketing conditions at points where
they bordered on neighboring orders. Market structure with regard to
supply areas and demand centers must be considered, thus Option 2
performs worse than the current system.
5. Facilitate orderly marketing with coordinated system of prices.
The need for coordination of prices between and among markets is not
recognized under the relative use concept. Markets with high Class I
utilization could be adjacent to low utilization markets. Prices in
adjacent markets need to be aligned to facilitate orderly marketing
conditions. If utilization is the primary criteria for establishing
Class I differentials, price alignment may not exist between adjacent
markets creating handler inequity and disorderly marketing conditions.
6. Recognize handler equity with regard to raw product costs.
Markets can adjust rapidly depending on pooling decisions of
cooperatives. In 1996, the New Mexico-West Texas Order had a Class I
utilization high of 52.1% in May falling to a low of 23.9% in December.
Heavy manufacturing markets regularly have larger volumes of milk
depooled during periods of rapidly increasing prices. If Class I
differentials were allowed to adjust too frequently, price alignments
established between and among markets would disappear causing inequity
among competing handlers. To prevent extreme differential changes,
percentage limits are proposed to limit differential changes. However
when a change is warranted, a significant price adjustment could occur
requiring realignment of zones between adjacent markets. Thus, the main
attraction of this concept, the self-adjustment of differentials,
actually creates problems with price alignment and handler equity
between orders.
Option 2 was evaluated against the administrative criteria as
follows:
1. Minimize regulatory burden. Option 2 would not likely increase
the regulatory burden on handlers. Differentials would be set until
market conditions warranted a change. No additional reporting would be
necessary to implement such a system.
2. Minimize impact on small businesses. Small handlers in markets
where Class I differentials are decreasing might be somewhat
disadvantaged since over-order charges would probably increase. This
tends to affect small and large handlers disproportionately. Small milk
producers in these markets could also experience a small decline in
their pay prices.
3. Provide long-term viability. As supply and demand conditions in
markets adjust to the point where differentials need to be changed,
administrative input may be required to

[[Page 4895]]

align markets and maintain handler equity. Thus, the system becomes an
administered system such as we have today rather than a self-adjusting
procedure. This fact, as well as the other shortcomings, mentioned
tends to negate its appeal as a viable long-term option.
Although Option 2 appears to perform better than the current system
in providing appropriate market signals to producers, this becomes a
major obstacle with this proposal. In fact, it is because of this self-
adjustment that Option 2 performs poorer than the current system in
five of the criteria. Even though independent of other factors Option 2
provides more appropriate price signals, it does so in a way that will
have significant impacts on certain regions of the country. The
projected impacts of Option 2 by region are discussed below:
Central, Mideast, and Upper Midwest. Class I differentials are
estimated to increase from $0.00-$0.48 in the Central, Mideast, and
Midwestern regions. Currently, over-order charges are significantly
higher and likely would largely absorb these differential increases.
Impacts on producers and processors would be minimal.
Northeast. The Northeastern marketing area would be affected
significantly by the adoption of a relative use differential.
Processors would pay on average $0.58 less for Class I milk as compared
to the current system. Producers would likely turn to over-order
charges to try to make up for their lost revenue. Historically, this
region has had difficulty maintaining a large over-order premium
structure and assumptions are that this would continue. Producer
incomes would decrease possibly impacting the total market's milk
supplies.
Southeast. Large increases in Class I differentials would occur in
the orders located in the Southeast. Class I handlers would experience
increased competition from lower cost handlers in nearby markets.
Producers in these markets would probably not experience any
significant gains from these increased differentials due to the over-
order premiums that are currently being charged.
Southwest. The Southwest market is the only other market to
experience decreases in differentials. Over-order charges currently are
relatively small in this market and an attempt to increase the charges
would likely occur. However, producer groups have had the same
difficulty as the Northeast in maintaining an over-order structure. A
$0.48 drop in the average differential in the Southwestern market would
surely be felt by producers and accelerate the exodus of producers from
the East Texas supply area. Producers in New Mexico and West Texas
would also be affected, but the impact may not be as severe.
Arizona-Las Vegas, Western, and Pacific Northwest. In the Western
regions, Class I differentials are expected to increase slightly. Over-
order charges in these markets are not as great as in the Midwestern
markets and would probably be unable to totally absorb any significant
Class I price increase. Producer pay prices and Class I handler costs
would increase slightly.
Because of the limited effect of overall Class I differential
changes, Option 2 would have a minimal effect on small businesses, both
producers and processors. Areas that have decreases in Class I
differentials would have a minimal negative impact on producer pay
prices. The majority of producers impacted in these regions are
categorized as small businesses. On the other hand, handlers in areas
with larger increases in the Class I differentials would experience
increased competition from lower cost regions. Location advantages of
some small handlers would disappear while others emerge. Handler equity
in these competing markets could erode placing some small handlers
under greater risk.
It is difficult to quantify the impact to consumers under this
option. Federal Order Class I differentials around the country would
likely increase slightly. Over-order charges may decline to offset this
increase. It is expected that overall handler costs would change
slightly under this option resulting in little change to consumer
prices.
Although this option would provide more appropriate and timely
market signals to producers, setting Class I differentials based solely
on utilization presents price alignment problems. Because Class I
differentials would be allowed to change independently from adjacent
markets, this would result in significant equity problems among
competing handlers thus impacting small businesses on a continual
basis. Consequently, this proposal would lead to disorderly marketing
conditions throughout the Federal order program and is not given
further consideration as a possible Class I price structure.
Option 3A: Flat Differential. Under this option, an equal
differential would be applied in all orders resulting in an identical
minimum Class I price at all locations. For example, the Class I
differential in Atlanta, Georgia, would be the same as the Class I
differential in Minneapolis, Minnesota. For comparison to other Class I
price options discussed in this proposed rule, a flat $1.60
differential level has been evaluated even though some public comments
proposed flat differentials of $2.00 or more per hundredweight.
The concept of flat Class I differentials across all orders is
largely predicated on the view that current Class I differential levels
are too high in many parts of the country. Accordingly, regionally
differentiated Class I prices are generally unwarranted and have led to
or have not been properly adjusted to reflect changes in milk
production. The most recent consideration of a flat Class I price plan
was considered during a National Hearing held in Fall 1990.
Proponents of flat Class I pricing maintain that the marketplace
should establish more of the value required to draw milk to fluid
outlets than is reflected in the minimum prices established by the
current Class I system. Increased reliance on the marketplace in
determining a price has appeal because the competitive normal
marketplace, where there are many buyers and sellers with equal market
knowledge and power, is generally viewed as the most efficient
determinant of values and prices.
The following table illustrates the differential-level impact on
the suggested consolidated orders based on October 1995 data assuming a
flat differential level of $1.60. As indicated in the table, a flat
$1.60 differential level is significantly less than the calculated
weighted average differential level in most marketing areas, except for
the suggested Upper Midwest regional order.

[[Page 4896]]

Table 2.--Class I Differentials in Proposed Orders Based on October 1995 Data Under Option 3A--Flat
Differentials
----------------------------------------------------------------------------------------------------------------
Weighted
New average Change ($/
Suggested consolidated order \1\ differential differential cwt)
($/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 current order multiplied by the applicable current order differential.

Analysis Based on Evaluation Criteria
In two of the nine evaluation criteria, the concept of a flat Class
I price structure performs equal to the current Class I system. In all
the other criteria, a flat Class I price structure performs worse than
the current Class I price system.
Option 3A was evaluated against the objective criteria as follows:
1. Ensure an adequate supply of milk for fluid use. A flat Class I
price structure performs worse than the current Class I price structure
in ensuring an adequate supply of milk for fluid use because it ignores
the fundamental fact that Class I milk has different values depending
on its location. As a result, the marketplace would have to establish
all of the appropriate values of milk within and between markets. The
current method of establishing Class I differentials reflects the
sufficiency and availability of local milk supplies together with
valuing alternative milk supplies. Because some milk is produced just
about everywhere, a Class I differential needs only to be high enough
to bring forth enough milk--``local'' and milk from alternative and
more distant supply areas--at any location to meet Class I demand. The
cost of transporting alternative milk supplies into an area places an
upper limit constraint on the value of milk at that location and thus
provides a measure by which to evaluate whether or not the differential
level established is reasonable.
Under a flat Class I price plan, the assumption is made that the
minimum differential value of Class I milk is the same at all
locations. Reforming the Class I price structure should continue to
recognize the observable and measurable fact that Class I milk has a
location value. At all locations, the Class I differential value needs
to represent a reasonable sum of such factors that, taken as a whole,
accomplish the goal of assuring an adequate supply of milk to meet
demands. In this context, there does not appear to be a sufficient
economic rationale to apply a flat Class I differential value that may
be appropriate to one market and apply it to all other markets. Doing
so would not reflect the important and measurable characteristic that
fluid milk takes on different relative value depending on where it is
located and where it needs to go to satisfy demand. Therefore, the
Class I milk pricing plan needs to establish a price level that
provides sufficient economic incentives for the movement of Class I
milk. Such a basis is consistent with the supply and demand pricing
criteria of the AMAA.
2. Recognize quality (Grade A) value of milk. A flat Class I price
structure does recognize the quality value (Grade A) of milk with the
$1.60 flat differential.
3. Provide appropriate market signals. Because a flat Class I price
option does not recognize the observable fact that milk has differing
location values, it cannot provide the appropriate price signals to
ensure that, in all markets, the differential level is sufficiently
high enough to bring forth the amount of milk needed to satisfy demand.
Additionally, a flat Class I price option does not provide appropriate
market signals on how a deficit market can obtain needed supplemental
milk supplies. For example, if the Class I price in Chicago is the same
as Atlanta, where supplemental supplies are often needed, a flat Class
I price provides no economic incentive to absorb the producer-incurred
cost of moving milk to Atlanta. In this example, the total price
incentives that would encourage milk to move must come from outside the
pricing structure.
The following real-world intra-market example demonstrates problems
with flat Class I pricing. In Texas, the cities of Dallas and Houston
are major milk consumption centers. Dallas is located nearly
equidistant (about 70 miles) from two major milk supply areas to the
east and south. Houston is located much further (about 255 miles) from
the same two milk supply areas and, like Dallas, relies on the same two
milksheds for satisfying its Class I demands. A flat Class I price
surface applicable to both cities does not, in and of itself, provide
the price difference necessary to cause producers to deliver their milk
to Houston. The additional dollars (value) that would need to attach to
milk to cause it to be delivered to Houston would fall outside of the
regulated price. Producers might not share in the value above the
minimum regulated price if handlers have the market power to play one
producer against another to lower prices. Because this additional value
is not represented in a regulated price charged to handlers, a degree
of market power is returned to handlers. Those producers located nearer
to Houston would have no marketing alternative since they could only
haul their milk greater distances to a manufacturing outlet for surplus
disposal. Additionally, handlers at Houston would also be less certain
of the price their competitors were paying for milk than they were with
a regulated price that more adequately reflected different location
values of milk. Location adjustments, which address such problems,
could not be used under

[[Page 4897]]

a flat differential option since they would create disorderly marketing
conditions at points where they bordered on neighboring orders.
Examining an inter-market example moves the analysis to one that is
more regional and national in scope. Using prevailing Class I
utilization rates between the Ohio and Carolina markets at an assumed
flat Class I differential of $2.00 results in nearly no change in the
blend price to producers in the Ohio market. However, in the higher
Class I use Carolina market, producer blend prices are reduced by 81
cents, changing the blend price differences between the two markets
from $1.27 (current blend price difference) to only 46 cents. Since the
blend price provides the price signal to producers in a market to alter
production, and should provide the incentive to move milk from the Ohio
market to the Carolina market, the 46-cent price difference is simply
not enough of a price signal difference to achieve this outcome.
4. Recognize value of milk at location. Flat Class I pricing does
not fully recognize that milk has value at location. Instead, it
assumes that all Class I milk has the same value at any location. To
the extent that milk would take on additional value above a specified
flat differential, that additional value would be determined by the
marketplace and be outside of the minimum regulated value which is
shared with producers. Research conducted by Cornell University
suggests that Class I prices would vary in the absence of regulation on
the basis of supply and demand conditions under assumptions of a
rational, competitive market. Results of the USDSS model conclude that
there is a location value for milk used in fluid uses and that value
does not resemble a flat Class I price surface. Because flat Class I
pricing does not fully recognize the value of milk at location, it can
only be concluded that it does not perform as well as the current Class
I price system.
5. Facilitate orderly marketing with a coordinated system of Class
I prices. Flat Class I pricing does not assure orderly marketing with a
coordinated system of Class I prices. Flat Class I pricing sets an
equal value on Class I milk in all markets even when such a price is
not warranted. Flat Class I pricing does not provide for coordination
of Class I milk value on a national scale because the location value is
not reflected in the regulated price but left for the producers and
processors to individually negotiate.
6. Recognize handler equity with regard to raw product costs. Class
I values that are location-based assure that handlers' costs for milk
are more equitable and uniform. Because differential levels largely
represent location value, adjusting the level by location relative to
all other locations from the lowest point level (price alignment),
assures that all handlers are paying the same relative price for their
milk supply. The need or incentive for handlers to compete on the basis
of the cost of a milk supply, otherwise a burden borne by dairy
farmers, is mitigated because of the location adjustments on the
minimum procurement prices paid by their competitors. Mitigated also is
the possible disorder from price uncertainty for both handlers and
producers. Because milk is valued on an equitable basis, handlers
compete with each other on the basis of plant operations and on the
basis of service to their customers.
Option 3A was evaluated against the administrative criteria as
follows:
1. Minimize regulatory burden. The flat differential price
structure performs equal to the current system in minimizing the
regulatory burden on handlers because no additional information would
be required under this option than is currently required.
2. Minimize the impact on small businesses. Flat Class I pricing
can impact small businesses, both producers and handlers. Flat Class I
pricing changes the competitive relationship between large and small
handlers. Under the current Class I pricing system all handlers,
regardless of size, compete equally on the cost of their milk supply.
Under a flat pricing system, a large handler could have a greater
competitive advantage in procuring a milk supply because it may be able
to, in the short run, offer producers a price somewhat above the flat
minimum level or above what a small handler is able to pay. Over a
longer time period, the small handler might not be able to procure a
supply of milk.
3. Provide long-term viability. An important objective in the
reform of the Class I price structure is that the resulting price
structure be viable for a longer period of time. Given the potential
competitive problems associated with flat Class I pricing addressed
above, a flat Class I price structure would seem to fail the criterion
of offering an alternative that would endure.
Flat Class I pricing performs worse than the current system,
raising a number of issues regarding its impact on dairy farmers. As
Table 2 suggests, there is significantly less Class I revenue that
could be shared with producers resulting in a lowering of producer
blend prices everywhere. Only in the proposed Upper Midwest order would
there be an increase, all other areas would lose revenue. However, even
with the increase in the Class I differential in the Upper Midwest,
given the relatively low Class I utilization of this market the actual
change in producer blend prices would be much smaller than the change
in the differential.
As discussed earlier, flat Class I pricing could effect small
businesses, both producers and handlers, depending on where they are
located and the magnitude of change in the Class I differential. Plants
located further from significant surplus regions would experience
losses. Similarly producers more distantly located would also
experience significant revenue losses. Apparent advantages of a flat
Class I price plan are the initial equity among all producers
regardless of their location and the short-run potential for lower
prices to consumers in areas that would experience a lowering of Class
I prices. The long-run effect on producers in distant and generally
milk deficit markets is unclear.
Because flat Class I pricing does not ensure an adequate supply of
milk for fluid uses as well as the current system, it is unclear that
over the long run consumers would actually enjoy lower milk prices.
Should a flat Class I price structure negatively affect producer
income, there is diminished certainty that the order program would
ensure consumers with an adequate supply of milk at reasonable prices.
A problem in employing a flat Class I differential was demonstrated
in the intra-market example discussed previously. Producers might not
share in the value above the minimum regulated prices which more fully
represents the value of Class I milk because handlers have the market
power to obtain price concessions from producers. Likewise, those
producers who are located more distant from the primary milk sheds
could have reduced market power since the alternative would be to haul
their milk greater distances to a manufacturing outlet for surplus
disposal. Handlers at greater distances from the milkshed would be less
certain of the price their competitors are paying for their milk supply
than they were with a regulated price that more fully reflected the
value of milk at location.
In the inter-market example also discussed earlier, flat Class I
pricing introduces another variable, Class I utilization rates, into
the increased market power transferred from the producer to the
handler. Flat Class I pricing combined with Class I

[[Page 4898]]

utilization rates results in an insignificant change in the blend price
paid to producers in an adequately supplied market. However, in higher
Class I utilization and deficit markets, producer blend prices are
significantly reduced. Since the blend price provides the price signal
to producers in a market to alter production based on demand, and
provides the incentive to move needed milk between two markets, the
narrower price difference may not provide an adequate price difference
for more adequately supplied markets to ship needed milk to deficit
markets.
There are few real experiences on what might happen under a system
of flat Class I differentials. The Mississippi milk order was voted out
during May 1973 (38 FR 8751) through March 1976. In the absence of the
order, ``flat'' pricing replaced classified pricing. Sharp variations
in prices paid to producers by individual handlers developed as sales
shifted from handler to handler within the market. Producers shifted
from handler to handler, and milk that would otherwise have been used
for manufacturing purposes was brought in from outside the state at
lower prices and displaced the Class I marketings of local producers.
Finally, adoption of a flat Class I pricing plan was rejected by
the Secretary in the recommended and final decisions of the 1990
National Hearing because it did not meet the supply and demand pricing
standard of the AMAA, namely Sec. 608c(18). In light of this statutory
requirement that Federal milk order prices be established based on
economic conditions that affect supply and demand, flat Class I pricing
has no legal foundation.
Option 3B: Flat Differential Modified by Class I Use.
Under this option, an equal differential of $2.00 per hundredweight
would apply in an order if the Class I use is less than or equal to 70
percent. If Class I use exceeds 70 percent, the Class I differential in
an order would be $2.00 + $0.075* (Class I use percent--70 percent).
This option is based on the flat Class I price concept modified by the
relative use price concept. This option assumes that markets with Class
I use equal to or below 70 percent have an adequate reserve supply of
milk to meet fluid needs and that markets with Class I use above 70
percent require additional milk supplies to meet fluid demand. This 70
percent figure was merely selected for illustrative purposes and no
analysis has been done to determine if this is an appropriate
percentage.
A level of $2.00 per hundredweight for the flat portion of the
differential was selected because such a level has been suggested in
comments concerning the flat Class I price concept.
The differentials resulting from this option are listed in the
table below. As with the relative use option (Option 2), the estimated
Class I differentials presented in the table are not entirely location-
specific within the consolidated order. To provide a basis for
comparison, a weighted average differential for each order has been
calculated based on current differentials for the consolidated orders
using October 1995 data. These differentials are also not location-
specific for the consolidated orders.

Table 3.--Class I Differentials in Proposed Orders Based on October 1995 Data Under Option 3B--Flat Differential
Modified by Class I Use
----------------------------------------------------------------------------------------------------------------
New Weighted avg
Proposed order \1\ Class I use differential diff \2\ ($/ Change ($/cwt)
(percent) ($/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 current order multiplied by the applicable current order differential.

Analysis Based on Evaluation criteria.
Of the nine evaluation criteria developed to evaluate Class I
pricing options, the concept of a modified flat Class I price structure
performs equal to the current system in two of the criteria and worse
than the current system in the rest of the criteria. However, this
option does perform marginally better than Option 3A in the three
proposed southern orders. Nevertheless, Option 3B would still perform
worse than the current system because the remainder of the proposed
orders retain a purely flat differential.
Option 3B was evaluated against the objective criteria as follows:
1. Ensure an adequate supply of milk for fluid use. The concept of
a modified flat Class I price structure performs poorer than the
current Class I price structure in ensuring an adequate supply of milk
for fluid use for the same reasons articulated in Option 3A. In three
of the suggested orders with over 70% Class I utilization, this option
does give marginal increased recognition to the inherent location value
of milk by relying on Class I utilization to trigger price incentives
for attracting Class I milk. However, a majority of the suggested new
orders continue to employ a lower and purely flat differential because
Class I utilization does not exceed 70 percent. It is unlikely that an
adequate supply of milk for fluid use would be ensured.
2. Recognize quality (Grade A) value of milk. A modified flat Class
I price structure does recognize the quality (Grade A) value of milk
with the $2.00 base differential.
3. Provide appropriate market signals. The concept of a modified
flat Class I price structure that changes based on Class I utilization
appears to provide marginally superior market signals in three of the
proposed new orders than does the purely flat option. The modified flat
Class I price structure offers the potential for being self-

[[Page 4899]]

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

[[Page 4900]]

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

Table 4.--Class I Differentials for Selected Cities Under Option 4: Demand-Based Differentials
----------------------------------------------------------------------------------------------------------------
Current Demand-based
Selected location differential differential Change ($/
($/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
In eight of the nine criteria, Option 4 performs poorer than the
current system. In the remaining criterion, Option 4 performs about the
same as the current system.
Option 4 was evaluated against the objective criteria as follows:
1. Ensure an adequate supply of milk for fluid use. In terms of
ensuring an adequate supply of milk for the fluid market, proponents
argue that the package of Class I differentials and pool structure
established under this option would produce an adequate supply of milk
for the fluid market. It is apparent, however, that the Class I
differentials on their own would not. This is a prime function of
Federal milk marketing orders. While Class I differentials should be
set at the minimum level necessary to bring forth adequate milk
supplies, Option 4 would not result in differentials that would perform
this function. Substantial over-order values would be required in many
areas to attract adequate milk supplies for fluid purposes plus a
reserve. Over-order prices are useful tools for allowing the market to
find the final value of Class I milk; however, it is Federal order
Class I prices that must meet the basic tenets of the AMAA.
2. Recognize quality (Grade A) value of milk. As with all of the
seven options, Option 4 does recognize the quality (Grade A) value of
milk with the $1.00 base differential.
3. Provide appropriate market signals. The net result of Option 4
failing to provide Class I differentials that recognize an appropriate
price level for milk at location is that appropriate market signals are
not sent to market participants. Federal orders should provide known
and visible prices to market participants at all locations. The net
effect of Option 4 would be to provide frequently shifting prices to
market participants that fail to provide appropriate market signals.
Currently, blend prices and changes in blend prices provide signals
to producers to make production adjustments. Under this option, the
transportation portion of the Class I differential (the amount above
$1.00) would be paid to those responsible for transporting milk, while
producers would be guaranteed only $1.00 on Class I milk. Thus, the
option by design could send distorted price signals to producers in
blend prices. At times when milk supply is plentiful, local fluid
handlers may need to go a relatively short distance to procure milk.
Thus, there may be residual transportation credit revenues in the pool
to be paid to producers in the blend price signaling that supplies are
short and more production is needed. However, when handlers bring milk
in from long distances, all transportation credit revenue would be used
up and producers would only share in the $1.00 differential indicating
to producers that there are ample supplies of milk. Thus, blend prices
could be lower when local supplies are tight than when local supplies
are plentiful.
4. Recognize value of milk at location. Option 4 would result in
differing Class I levels at different locations that may significantly
underrepresent the true Class I value at many locations. This would
force a greater portion of the true Class I value outside of the order
structure. Moreover, higher or lower price levels for fluid milk in an
area may not be reflected in Federal order blend prices to producers in
the area due to transportation costs. In terms of blend prices,
producers in all areas would share in $1.00 plus potentially a variable
residual of their respective

[[Page 4901]]

differential. Hence, Option 4 performs worse than the current system.
5. Facilitate orderly marketing with coordinated system of prices.
Another problem with Option 4 is that resulting Class I differentials
are not coordinated across wide areas and thus do not facilitate
orderly marketing. Milk, both packaged and bulk, moves long distances.
Class I differentials should encourage milk to move in directions
indicated by underlying economics, essentially from areas that have
relative surpluses of milk to areas that are relatively deficit. Option
4 performs worse than the current system in this area.
6. Recognize handler equity with regard to raw product costs.
Processor equity suffers under Option 4 because Class I over-order
charges would need to increase in many areas. While it may be desirable
for the market to set the final Class I price charged to bottlers, when
a large portion of this price occurs outside of regulation, Federal
orders cannot assure a reasonable degree of handler equity concerning
prices paid for Class I milk. Additionally, the net effect of the Class
I price paid by handlers less the transportation credits received would
likely create inequity among handlers.
Option 4 was evaluated against the administrative criteria as
follows:
1. Minimize regulatory burden. Option 4 would increase the
regulatory burden on handlers as compared to the present system.
Additional reporting on sources of milk and transportation costs would
be required. Fluid handlers would be required to report, and Market
Administrators to verify, hauling cost information on each load of bulk
milk received. This additional regulatory requirement may also result
in an increase in administrative assessments to handle the additional
record verifications.
2. Minimize impact on small business. It is likely that small
handlers might be disadvantaged by this option. With demand-based
differentials, a substantial part of the Class I value needed to
attract adequate milk supplies would likely come from over-order
payments. Federal order Class I prices are mandatory and should affect
handlers in an area equally. Over-order pricing is not mandatory and
may or may not affect different handlers equally. The potential exists
under Option 4 for large handlers to have an advantage over small
handlers in competing for milk for Class I purposes because they will
be able to outbid smaller handlers for a supply of milk.
3. Provide long-term viability. Option 4 would involve Class I
differentials that could change over time as milk supply/demand
conditions change. As such, the system could remain viable for a long
period of time if the problems outlined above did not jeopardize the
viability of this proposal. There is a certain attractiveness to a
system which is self-adjusting. The difficulty is in deriving a system
where the self-adjusting feature stays current over time.
This proposal could have a significant impact on various sectors of
the dairy industry. The impact would likely vary by region, with large
impacts on regions where Class I differentials would change
significantly and lesser impacts in regions with small changes in Class
I differentials. The impacts by region are discussed below:
Midwest. Class I differentials in the Midwest would be similar to
current differentials under Option 4. In addition, the vast majority of
milk produced in the Midwest is used for manufactured products, not for
Class I. As such, the impact on producers and processors would be
expected to be relatively small. Producer groups and cooperatives in
this area fully recognize that, due to low Class I utilization in this
area, changes in Class I differentials will have relatively less impact
here than in other areas which have higher rates of Class I
utilization.
Northeast. In the Northeast, Class I differentials would be
substantially reduced from current levels under Option 4. For example,
the Class I differential in New York City would be $1.34 less than the
current differential, while the Class I differential in Baltimore would
be $1.80 less than under the current system. Producer organizations in
the Northeast have historically had a difficult time enforcing Class I
over-order charges significantly above Federal order minimums.
Cooperatives have depended heavily upon Federal order minimums, and
more recently upon the Northeast Dairy Compact, to try to maintain
revenues from Class I sales.
Processors in this area have historically had significant marketing
power over cooperatives. Substantial drops in Class I differentials
would likely increase processor marketing power and prevent
cooperatives from establishing over-order prices that would reflect the
full Class I value thus, dairy farmers would see a decline in their
revenue.
Producer income levels in this area would be expected to decrease
with a resulting decline in producer numbers, milk production and,
eventually, manufacturing capacity. The decline in manufacturing
capacity, over time, would likely be the most significant impact on the
processing side of the industry in the Northeast.
Southeast. In the Southeast, Class I differentials would be
substantially reduced from current levels under Option 4 in many areas.
For example, the Class I differential in Atlanta would be set at $0.70
less than the current system, while the Class I differential in New
Orleans would be $2.37 less than under the current system. It is
unclear if over-order charges in most parts of the Southeast could be
increased enough to compensate for the drop in Federal order Class I
differentials. Thus, producer income and milk production would be
expected to decrease in total in this area. Much of this area is
deficit of milk production and, at certain times of the year, for fluid
needs. Dropping the Class I differentials substantially would likely
increase this deficit and make it increasingly difficult to meet the
AMAA requirements for meeting the needs of the fluid market.
Southwest. In the Southwest, Class I differentials would be
substantially reduced from current levels under Option 4. For example,
the Class I differential in Dallas would be set at $1.76 less than the
current system, while the Class I differential in Denver would be $1.54
less than under the current system. It is unlikely that over-order
charges in most parts of the Southwest could be increased enough to
compensate for the drop in Federal order Class I differentials. Thus,
producer income and milk production would be expected to decrease in
total in this area. The impacts would likely vary within this region as
lower production costs in West Texas and New Mexico could offset the
drop in Class I revenues, but higher production cost areas (e.g., East
Texas) would likely show substantial drops in milk production.
Pacific Northwest. In the Pacific Northwest, Class I differentials
would be reduced from current levels under Option 4 in many areas. For
example, the Class I differential in Portland, Oregon, would be set at
$0.77 less than the current system, while the Class I differential in
Seattle would be $0.59 less than under the current system. It is
unlikely that over-order charges in most parts of the Pacific Northwest
could be increased enough to compensate fully for the drop in Federal
order Class I differentials.
This proposal would, all else being equal, result in lower blend
prices to producers in most parts of the country. It is expected that
mailbox prices to producers would also decline in most regions. The
vast majority of producers pooled on Federal orders are considered

[[Page 4902]]

as small businesses. Thus, this proposal would have a negative impact
on small business producers through a loss of income.
In addition, it is expected that in regions that are deficit of
milk for some or all uses, an increased reliance on over-order prices
would result from this proposal. Experience has shown that in an
unregulated or partially-regulated environment, such as where
substantial over-order premiums are paid, large producers often have
greater leverage with milk buyers than small producers. This advantage
can take many forms including volume premiums, lower hauling rates, and
the ability to negotiate individually with handlers in a manner
difficult for small producers.
This proposal could likely increase the regulatory burden on
handlers that are small businesses. Maintenance of transportation
credit records and increased verification that may be required could
burden small business handlers. Moreover, setting Class I differentials
at levels significantly below the full economic value of Class I milk
at location has the impact of deregulating the effective price of Class
I milk. As such, small handlers would be competing for milk supplies
with large handlers with no assurance of similar prices. Equity among
handlers is one of the benefits of the Federal order system. By setting
Class I differentials at a level well under the full economic value,
some of the handler equity is lost. It is expected that such a scenario
would provide a greater burden on small business handlers than on large
business handlers.
It is difficult to quantify the impact to consumers under this
option. Federal order Class I differentials around the country would
likely be lower than under the current system at many locations.
Increased over-order charges may make up part of the difference, at
least at locations with strong supply organization cooperation. It is
expected that the overall impact on consumer prices would be slight.
Option 4 presents certain attractive provisions when viewed as a
theoretical model for establishing Class I differentials. While it is
intellectually appealing to have frequently adjusting Class I
differentials, this type of proposal contains significant challenges to
actual implementation. A substantial set of calculations would be
necessary, together with strong assumptions regarding transportation
costs, to determine Class I differentials under this option. The
proponents of Option 4 utilized the USDSS model to estimate their Class
I differentials. Proponents were unclear as to the specific points for
calculating transportation. Arguably, the distance from each farm to
each distributing plant that the farm supplies, as well as the distance
from each supply plant or reserve processing plant to each distributing
plant, would need to be determined.
Option 4 is not a pure pricing concept, but an allocation of costs.
It proposes ``Class I differentials'' at location, thereby intimating
value of milk at location. However, such a surface conclusion is
erroneous when it becomes operational. It essentially becomes a flat
price proposal insofar as milk value (price) is concerned.
This option in essence proposes that regulators intervene in the
contractual relationships among producers, processors and haulers.
Rather than creating a system whereby producers are paid a price for a
product (valued to include all costs of producing and delivering the
product to market), this proposal seeks to administratively isolate
transportation cost and reimburse that cost at a fixed rate. To attempt
to intervene in marketplace relationships in this way, particularly
under the umbrella of price, does not seem appropriate.
As a result of this analysis, it is concluded that Option 4 would
merely result in a greater degree of regulation with less money
returned to producers. Thus, based on the issues discussed, Option 4 is
not further considered as a replacement for the Class I price
structure.
Based on the qualitative analysis, three pricing options were
selected for further quantitative analysis. The Department determined
that the three options selected represented a broad spectrum of
possible Class I price structures. These three options are Option 1A,
Option 1B, and Option 5.
To further analyze these options, beyond the evaluation criteria
and basic quantitative analyses, a multi-regional model of the U.S.
dairy sector, developed by the Economic Research Service of USDA, was
used to generate both the ``model baseline'' results and analysis of
the three pricing options. The model has been specified to generate a
long-term outlook that is consistent with the Department's official
baseline forecast for the dairy sector. The model baseline serves as a
benchmark for comparing price and income changes of an option. For
example, price impacts are reported as differences from the baseline
for each of six years (1999-2004) and from the 6-year average. A more
detailed explanation of the model and the economic impact results are
included in the initial regulatory impact analysis.\24\
---------------------------------------------------------------------------

\24\ Copies of this analysis can be obtained from Dairy Programs
at (202) 720-4392, any Market Administrator office, or via the
Internet at http://www.ams.usda.gov/dairy/.
---------------------------------------------------------------------------

Based on this analysis, Option 5 was eliminated from further
consideration as a viable replacement for the Class I price structure.
Although Option 5 appeared appealing in the qualitative analysis, the
quantitative analysis revealed that Option 5 would create an
unsustainable situation, based on the degree of increased price levels,
given the dynamics of milk marketing. The analysis of Option 5 follows:
Option 5: Decoupled Baseline Class I Price with Adjustors. Option
5, as proposed by Mid-America Dairymen, Inc. (Mid-Am), is a price
structure that would decouple Class I prices from the volatility of the
commodity markets. Since the Class I price would be decoupled from the
basic formula price, the proponents suggest that 1996 average Class I
prices become the base, with adjustments made utilizing changes in
fluid use rates and short term costs of production (i.e., feed costs).
Thus, for Class I purposes the BFP would be floored at $13.63 per
hundredweight, the 1996 annual average BFP. This price level would be
used to establish Class I prices using current differentials.
A supply/demand adjustor would be used to change prices in each of
the orders to reflect long-term trends. Proponents suggest using a 12-
month rolling average Class I utilization, rounded to the nearest full
percentage. Class I prices would be adjusted by $0.12 per hundredweight
for each 2 percent change in the rolling average utilization. For
example, a Class I utilization change from 44 percent to 46 percent in
a market would result in a $0.12 per hundredweight gain in the market's
Class I differential. Once the utilization level changes, the new
utilization rate becomes the base for future changes. Thus, if a market
falls from 44 percent to 42 percent, the new base for comparing a 2-
percentage point change up or down is 42 percent.
In addition to the supply/demand adjustor, a cost of production
indicator would be developed whereby Class I prices would be increased
in a timely manner when input costs to dairy farmers are increasing.
One such economic indicator might be feed costs.
The table below illustrates the initial Class I differentials under
the proposed consolidated orders. These differentials are not location-
specific within the applicable orders. For purposes of this

[[Page 4903]]

analysis and to provide a basis for comparison within the proposed
consolidated orders, a weighted average Class I differential for each
order has been calculated for each order based on October 1995 data.
This weighted average differential is computed by multiplying the
percentage of Class I milk in each of the current orders that comprise
the consolidated order by the applicable current order differential and
adding the resulting amounts. The weighted average differential is not
location-specific for the consolidated orders. Initially the
differentials will be the same. However, as Option 5 impacts production
and utilization, and when an economic indicator (such as feed costs) is
calculated, the differentials will vary.

Table 5.--Initial 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
($/cwt) \2\ ($/cwt) ($/cwt)
----------------------------------------------------------------------------------------------------------------
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 current order multiplied by the applicable current order differential.

Analysis Based on the Evaluation Criteria
Option 5 performs about equal to the current system in five of the
nine evaluation criteria. The option performs poorer than the current
system in the other four evaluation criteria.
Option 5 was evaluated against the objective criteria as follows:
1. Ensure an adequate supply of milk for fluid use. With a high
baseline and a supply/demand adjustor (and possibly an economic
adjustor), Option 5 performs on a national level about the same as the
current system, particularly in the short term.
2. Recognize quality (Grade A) value of milk. As with all of the
options, Option 5 does recognize the quality (Grade A) value of milk.
Use of the current differentials to achieve the Class I price
recognizes this value.
3. Provide appropriate market signals. Option 5 decouples the Class
I price from the basic formula price and thus the commodity market. A
rolling average Class I utilization is proposed as the appropriate
measure of supply/demand. A rolling average further delays any market
signal sent by Class I utilization. Moreover, the option proposes to
change the Class I price only when the rolling average utilization
changes by 2 percent or more. Option 5 essentially freezes prices,
albeit, at a historically high level. In fact, it appears to suggest
that the market signal for fluid use milk should be fairly static.
Proponents have suggested an economic indicator (feed cost
adjustor) of some kind be used to adjust prices short term. While it is
likely true that inclusion of such an index would mute declines in milk
prices when feed costs are rising, market driven declines in milk
prices also could be accelerated if feed costs were declining at the
same time. Thus, even combined with a supply/demand adjustor, this
option would not perform as well in providing appropriate market
signals as the current system.
4. Recognize value of milk at location. Option 5 would include the
current system of differentials. Therefore, this option does recognize
the value of milk at location and performs as well as the current
system.
5. Facilitate orderly marketing with coordinated system of Class I
prices. As long as no adjustment is made to the baseline prices,
alignment would be maintained fairly well. However, Option 5 has no
provision to align prices when price changes occur. A possible $0.24
price spread between two markets within one month could exist.
Moreover, misaligned prices could create disorderly conditions as
industry participants between and among the markets seek other measures
to regain alignment in prices. Hence, Option 5 performs worse than the
current system because it would lead to disorderly marketing
conditions.
6. Recognize handler equity with regard to raw product costs. As
long as no adjustment is made to the baseline prices, handler equity
would be maintained fairly well. Option 5 does ignore the relationship
of handlers in adjacent markets. If prices are increased or decreased
in a market, the handler regulated in an adjacent market may be
affected by the misalignment of prices. Misaligned prices could create
disorderly conditions as industry participants between and among the
markets seek other measures to regain alignment in prices.
Option 5 was evaluated against the administrative criteria as
follows:
1. Minimize regulatory burden. Option 5 is not likely to increase
the regulatory burden on handlers when compared to the current system.
The addition of adjustors would create some additional burden on
regulators; however, this would not be substantial.
2. Minimize impact on small business. Option 5 performs worse than
the current system with regards to small businesses. It is likely that
the individual market supply/demand adjustor will create some
disruption in inter-market price alignment over time. Such a system may
result in the need for over-order charges in some markets. Small
handlers would likely be affected in their ability to compete with
large handlers for a raw milk supply.
3. Provide long-term viability. The use of a historic baseline
price as the major portion of a price fails to factor into the

[[Page 4904]]

competitive price of milk any of the influences of the national milk
market. It ignores advances in technology and increased efficiencies.
In addition, it fails to recognize trends in the overall economy such
as inflation and interest rates. Thus, this option does not provide
long-term viability.
Upon implementation, all Class I differentials would be equal to
current differentials. With the baseline utilizations established at
1996 levels, producers would experience Class I price increases since
1996 was a record high year for milk prices. Every existing order area
would see increases in Class I prices of $0.85 per hundredweight above
the baseline in the initial year. However, even with this increase,
some producers may see declines in blend prices as a result of the
proposed consolidation of orders contained in this proposed rule.
Initially, Option 5 would not have a significant impact on the
competitiveness of small businesses, producers, or processors because
prices would remain relatively the same. However, as the supply/demand
adjustor modifies the differentials based on changes in Class I
utilization, price alignment between markets will become an issue that
would affect a small business' ability to compete. This option would
increase the retail cost of fluid milk in the initial year or two but
would lower the cost of manufactured dairy products.
This option appears attractive on the surface since higher Class I
prices will help most producers. If utilization and feed costs do not
move abruptly, or if the feed cost formula is designed in such a way as
to moderate any abrupt price movements, then variability in Class I
prices would be moderated. However, it seems likely that milk prices
will be increasing or decreasing in the same direction as feed prices
(i.e., higher feed prices means less milk production thus higher milk
prices, lower feed prices means more milk production thus lower milk
prices.)
Another attractive feature of this option is that the use of a feed
cost adjustor would adhere to requirements of the AMAA that the
Department consider such costs and other economic conditions in the
establishment of prices. In addition, an automatic utilization adjustor
could reduce the need to have hearings to change Class I differentials
if changes in production or consumption in an area make the existing
differentials inappropriate.
Although attractive on the surface, further analyses of Option 5
reveals significant problems. First, analysis completed by the multi-
regional ERS model indicates that the increase in prices experienced
will not be sustainable. The results of the model analysis indicate
that the higher floored Class I prices will impact the all-milk price,
and after 3 years, producers will begin seeing a decrease in the
revenue initially generated by Option 5. This will occur because the
higher Class I prices will stimulate milk production, which will then
lead to lower manufacturing prices. Because it is the blend price that
is paid to producers, the increase in the Class I prices will not be
enough to offset the decrease in prices of the other classes of use and
the changes in utilization which will affect the differential level.
Further details of the model results are included in the economic
impact analysis published in conjunction with this proposed rule.
Next, Option 5 may cause disorderly marketing with the introduction
of inter-market disparities based on temporary changes in use.
Producers in high Class I markets would benefit at the expense of
producers in low Class I markets. In addition, flooring the Class I
price will shift volatility to milk prices in manufacturing markets. If
the feed cost adjustor only affects Class I prices, high utilization
markets will gain relative to producers in lower Class I use markets,
who would also bear the higher feed costs.
Finally, Option 5 uses current differentials to establish Class I
prices. Although, the 1990 hearing resulted in changes to many of the
current Class I differentials, many of the current differentials are
similar to those that were prescribed in the 1985 Farm Bill. Thus,
arguments could be made that using the current 1996 Class I
differentials as a base for a new Class I pricing surface runs counter
to the 1996 Farm Bill mandate that the new Class I differentials cannot
be based on the differentials described in the 1985 Farm Bill.
As discussed, Option 5 will create several problems if implemented
as a Class I price structure. Furthermore, questions arise as to
whether or not Option 5 is legal as it may violate the mandates of the
1996 Farm Bill. Finally, proponents may no longer be actively
supporting this option as a viable replacement for the Class I price
structure. Thus, based on this qualitative and quantitative analysis,
Option 5 is eliminated from further consideration as a Class I price
structure replacement.
With the elimination of Option 5, only two Class I price structure
options remain as possible replacements for the current Class I price
structure, Option 1A and Option 1B. These two options present national
price structures developed utilizing the USDSS model. The options vary
in their reliance and application of the USDSS model but both are based
on economic principles contained within the model. Both price
structures have been evaluated qualitatively against the evaluation
criteria and quantitatively utilizing the multi-regional ERS model
discussed earlier. In addition to analysis conducted by the multi-
regional ERS model, a static Federal order pool analysis has been
conducted for Option 1A and Option 1B to provide an estimate of how the
options would have impacted producer prices during October 1996. The
results of the pool analyses will be addressed in a discussion
comparing the two price structures.
It should be noted that both Option 1A and Option 1B may require
additional fine-tuning of the Class I differentials and adjustments for
location when actual implementation of the selected price structure
occurs within the Federal order program. However, this fine-tuning
would only slightly alter the impacts of either option. The price
surfaces presented provide a reasonable indication of the level of
Class I differentials that may result under each price surface.
Option 1A: Location-Specific Differentials. Option 1A would
establish a nationally coordinated system of location-specific Class I
price differentials reflecting the relative economic value of milk by
location. An important feature of the option is that it would also
include location adjustments that geographically align minimum Class I
milk prices paid by fluid milk processors nationwide regardless of
defined milk marketing area boundaries or order pooling provisions. It
is based on the economic efficiency rationale presented in Cornell
University research on the U.S. dairy sector.\25\ A basic premise of
Option 1A, confirmed by the Cornell research, is that the value of milk
varies according to location across the United States. Option 1A
combines these concepts of spatial price value and relative price
relationships together with marketing data and expert knowledge of
local conditions and

[[Page 4905]]

marketing practices to develop a national Class I price structure.
---------------------------------------------------------------------------

\25\ Pratt, James E., Phillip M. Bishop, Eric M. Erba, Andrew M.
Novakovic, and Mark W. Stephenson, ``A Description of the Methods
and Data Employed in the U.S. Dairy Sector Simulator, Version
97.3,'' Research Bulletin 97-09, A Publication of the Cornell
Program on Dairy Markets and Policy, Department of Agricultural,
Resource, and Managerial Economics, Cornell University, July 1997.
---------------------------------------------------------------------------

Compared to other Class I price structure options which have been
proposed by interested parties and/or are under consideration by the
Department, this option reflects the current Class I pricing surface
more than the others. Although similar to the current Class I price
surface, there are distinct differences.
Under Option 1A, Class I differentials are lowest in geographical
areas evidencing the largest supplies of milk relative to local/
regional fluid milk needs. The differentials become progressively
higher as they move from these areas to markets with less production
relative to demand for fluid milk. Nine differential zones provide the
basis for establishing the price structure. These zones were
established based on results of the USDSS model, knowledge of current
supply and demand conditions, and recognition of other marketing
conditions such as fluid versus manufacturing markets, urban versus
rural areas, and surplus versus deficit markets.
Class I differentials under this option range from a low of $1.60
per hundredweight in the base zones of the Upper Midwest, Southwest,
and West, where there are abundant supplies of milk in excess of fluid
milk use, to a high of $4.30 per hundredweight in Florida, where there
are deficit supplies of milk for fluid use, thus reflecting the
location value of milk for fluid use. The nine zones, differential
ranges, and basis for establishing the Class I differential levels are
as follows:
Zone 1. The suggested differentials within Zone 1 range from $1.60
to $1.90 per hundredweight. Geographically this zone is very large and
encompasses the entire Northwestern United States. It consists of
Washington, Oregon, Montana, Idaho, Northern and Central California,
Northern and Western Nevada, Northern and Western Wyoming, and Northern
Utah.
The area defined includes the top milk production state as well as
two more of the top ten milk producing states. Milk production in this
region has grown and continues to do so. Milk production in this zone
tends to be concentrated in three areas: Western Washington and Oregon,
the Southern Valley of Idaho and Northern Utah, and the Central Valley
of California. Due to the numerous mountain ranges it encompasses, much
of the zone is rural and sparsely populated. The exception is the
heavily populated Western Coastal areas.
Class I utilization for this zone is fairly low and a significant
amount of manufacturing is required to balance the markets.
Manufacturing facilities are readily accessible in the milk producing
areas. Zone 1 has excess supplies of milk, and therefore, could be an
additional source of milk for other regions of the country.
It is expected that Zone 1 will continue to maintain adequate
supplies of milk for the Northwestern United States. The supplies of
milk are within relatively short distances of plants thus not requiring
significant location adjustments within the zone.
Zone 2. The suggested differentials within Zone 2 would range from
$1.60 to $2.65 per hundredweight. Zone 2 is a large region encompassing
the Southwestern United States. It consists of Arizona, New Mexico,
Colorado, Southern California, Southeastern Nevada, Southern Utah,
Southeastern Wyoming, Southwestern Kansas, West Texas, and the
Panhandle of Oklahoma.
The area defined includes portions of two of the top ten states in
milk production as well as two more in the top twenty. Milk production
in this zone has grown significantly over the last several years, but
has recently slowed. Milk production in this zone tends to be
concentrated in five areas: the Southern Valley of California, the
Phoenix area of Arizona, North Central Colorado, the El Paso area of
Texas and New Mexico, and the Roswell area of New Mexico. Much of this
region is rural and sparsely populated due to the mountainous and arid
terrain. The only heavily populated area is the Coastal region of
Southern California. For the rest of the zone, populated areas tend to
congregate around the capital cities of the Southwestern states.
Class I utilization for this area is slightly greater than the
average for the United States. Manufacturing is needed to balance these
markets; however, only a limited number of plants are located within
the zone. Milk supplies in the zone are ample for Class I demand, but
not always within a short distance of these needs. Distant
manufacturing facilities are used at times for balancing. Other regions
of the country have relied on this zone as a supplemental supply
source. However, a slight change in the manufacturing capacity of this
zone could change milk availability for other regions. Some location
adjustments are needed for alignment purposes with the more deficit
markets to the East.
Zone 3. The suggested differentials within Zone 3 would range from
$1.60 to $1.80 per hundredweight. Geographically this zone encompasses
the Upper Midwest region including the states of Minnesota, Wisconsin,
Iowa, and North Dakota, the Michigan Upper Peninsula, and parts of
South Dakota, Nebraska, Missouri, and Illinois.
This zone includes two of the nation's top five milk producing
states, Wisconsin and Minnesota, as well as the substantial milk
supplies available in parts of surrounding states. The vast majority of
milk in Zone 3 is used for manufacturing purposes throughout the year.
In addition, as was readily apparent in the fall of 1996, this area
provides large quantities of milk to distant markets at times of
shortages for fluid purposes in those markets. The $1.60 differential
equates to the Class I differential in base zones to the Southwest and
West that also use substantial quantities of milk for manufacturing
purposes throughout the year. The 20-cent range provides some
flexibility in setting Class I differentials that align with
neighboring zones and in encouraging shipments to high Class I demand
areas within the zone.
In addition, a Class I differential of $1.60 to $1.80 in this zone
will provide a greater incentive for manufacturing organizations in
this zone to pool milk. Historically, there have been small pool draws
(that at times fluctuate between positive and negative) and negative
location adjustments. Generally, over-order charges have been required
to ensure adequate milk supplies for fluid purposes. Hence, the
additional revenue generated in this region will be used to move some
of these over-order charges under the Federal order program in the form
of transportation credits. As a result, the $1.60 to $1.80 Class I
differentials will help to establish higher pool draws and enable more
market participants to share in the benefits of servicing the fluid
market.
For a number of years, prevailing over-order charges in this zone
have resulted in effective Class I prices to fluid milk processors that
are well above the Federal order minimums herein proposed. Thus, Class
I processors should see no increase in their milk procurement costs,
but would likely only see a partial redistribution of their costs from
over-order charges to Federal order obligations.
Zone 4. The suggested differentials within Zone 4 would range from
$2.65 to $3.65 per hundredweight. Geographically, this zone is fairly
small and primarily covers two states: Louisiana, west of the
Mississippi River, and central and east Texas.
The zone defined has a significant amount of milk production and
population. Texas ranks as the sixth largest milk-producing state and
is the second most populated. Milk production in this zone is
concentrated in two areas: East of Dallas and

[[Page 4906]]

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

Table 6.--Comparative Class I Differentials Adjusted for Location at Selected Cities Under Option 1A--Location-
Specific Differentials
----------------------------------------------------------------------------------------------------------------
Class I differential
City -------------------------------- Difference
Current Option 1A
----------------------------------------------------------------------------------------------------------------

(2) 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

[[Page 4907]]

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
Option 1A performs equal to or better than the current Class I
system in each of the evaluation criteria. This is largely explained by
the adjustments made to the current system based on current marketing
conditions and USDSS model results. However, Option 1A leaves
essentially unchanged the role of market forces and the Federal
government, in determining Class I prices and the incentives to move
milk to deficit areas.
Option 1A was evaluated against the objective criteria as follows:
1. Ensure an adequate supply of milk for fluid use. Option 1A
performs essentially the same as the current price structure in
ensuring an adequate supply of milk for fluid use. Proposed changes
from current differential levels by region or locality to more
accurately reflect current milk supply-demand conditions and inter-
market price alignment contributes to more appropriate market by market
supply adjustments. Option 1A will have minimal impacts on farm level
milk prices and should continue to ensure adequate supplies of milk for
fluid use.
2. Recognize quality (Grade A) value of milk. Option 1A does
recognize the quality value (Grade A) of milk through the addition of a
differential that begins at $1.60 per hundredweight in the base zone.
3. Provide appropriate market signals. Option 1A adjusts and
refines the existing Class I price structure to more accurately reflect
recent prices. In some geographical areas, Class I differentials would
be modestly increased. In certain other areas, Class I differentials
would be lowered somewhat, suggesting that they now exceed levels
necessary to adequately supply the associated markets with their fluid
milk needs.
4. Recognize value of milk at location. The spatial values of milk
as reflected in Option 1A recognize the value of milk at location more
accurately than the current system for two principal reasons. First, in
structuring the differentials in Option 1A, the effect of current Class
I differential levels on milk supplies, demand, and dairy farmer
returns regionally during the past decade were reviewed. Second, the
results of the USDSS model, explained previously, that obtained the
relative values of milk and milk components at geographic locations
throughout the United States, were used. Together, the results of these
studies provided the basis to construct the Option 1A price surface.
5. Facilitate orderly marketing with coordinated system of prices.
A primary element of Option 1A is the coordination of Class I
differential levels and location adjustments within and among regional
marketing areas. As such, Option 1A is an improvement over the current
price structure which evolved in a piecemeal fashion. The Class I
differentials and location adjustments in Option 1A will facilitate
orderly marketing of milk for fluid use through the nationwide
coordination of prices.
6. Recognize handler equity with regard to raw product costs. Class
I differentials proposed under Option 1A reflect differences in
economic costs of procuring and marketing milk depending upon
geographic location. This coordination and alignment of prices based
upon cost differences and current marketing conditions better ensures
handlers of equity in competing for available milk supplies and sales
of fluid milk products.
Option 1A was evaluated against the objective criteria as follows:
1. Minimize regulatory burden. Option 1A would not change the
regulatory burden of the Federal order program. Because Option 1A is
similar to the current Class I pricing structure, it would not result
in increased reporting, record keeping, compliance, or administrative
costs to handlers. The role of regulation in influencing Class I prices
would also be about the same as the current system.
2. Minimize impact on small businesses. In regions where more of
the actual value of fluid milk would be reflected in the differentials
than is currently reflected, small businesses may have a marginal
improvement in their relative competitive bargaining position vis-a-vis
large businesses. This is based on the concept that large businesses
(producers, cooperatives or handlers) are better able to negotiate
premiums above minimum order prices due to advantages attained from
size. Overall, this option is not expected to materially impact small
businesses differently than the current price structure.
3. Provide long-term viability. To the extent the proposed location
adjusted Class I differentials under Option 1A will correct instances
of price misalignment and more accurately reflect the economic value of
milk by location, the long-term viability of Option 1A is expected to
exceed that of the current price structure.
Option 1A utilizes the USDSS model results as a basis for
development. All results, including the preliminary results based on
1993 annual data and the preliminary results based on May 1995 and
October 1995 data, were used. However, the variance of price
differentials under Option 1A are somewhat less than the range in
relative values of milk (shadow prices) determined through the USDSS
model. There are several explanations for the differences, including
the fact that the model generates value differences between geographic
locations, not actual prices. That is, it computes the marginal value
of an additional hundredweight of milk supplied to a plant at a
specific location for fluid use. This approach results in a pricing or
value surface for Class I milk but does not take into account
marketwide pooling and other factors affecting the supply of and demand
for milk.
Since the USDSS model only determines the spatial value differences
for fluid milk between location and not the price level, Option 1A
utilizes $1.60 as the minimum price in the three base zones. Currently,
the lowest differential in Federal orders is $1.04 ($1.20 in
Minneapolis) in the Upper Midwest order.
A review of current marketing practices has revealed that the $1.04
per

[[Page 4908]]

hundredweight base zone differential may not be established at a level
high enough to ensure adequate milk supplies for fluid use. First, a
portion of the Class I differential must reflect the value associated
with maintaining Grade A milk supplies since this is the only milk
available for fluid use. Originally the differential needed to be
established at a level that would encourage conversion from Grade B to
Grade A status. With approximately 96 percent of all milk already
converted to Grade A,\26\ this value now needs to reflect the cost of
maintaining Grade A milk supplies. Although it may be difficult to
quantify the cost to maintain Grade A status, there are specific
associated costs, as described below.
---------------------------------------------------------------------------

\26\ Milk Production, Disposition and Income, 1996 Summary,
National Agricultural Statistics Service, USDA, DA 1-2 (97).
---------------------------------------------------------------------------

There are several requirements for producers to meet to convert to
a Grade A dairy farm and then maintain it. A Grade A farm requires an
approved water system (typically one of the greatest conversion
expenses), specific facility construction and plumbing requirements,
certain specifications on the appearance of the facilities, and
specific equipment. After achieving Grade A status, producers must
maintain the required equipment and facilities, and adhere to certain
management practices.\27\ Often, this will require additional labor,
resource, and utility expenses. It has been estimated that this value
may be worth approximately $0.40 per hundredweight.\28\
---------------------------------------------------------------------------

\27\ References: Grade ``A'' Pasteurized Milk Ordinance, 1993
Revision, U.S. Department of Health and Human Services, Public
Health Service, Food and Drug Administration and General
Instructions for Performing Farm Inspections According to the USDA
Recommended Requirements for Manufacturing Purposes and Its
Production and Processing For Adoption by State Regulatory Agencies,
USDA, AMS, Dairy Division, August 1, 1976.
\28\ This is the value associated with Class I milk. The amount
of this value actually returned to a producer is dependent upon a
marketing order's Class I utilization and is reflected in the blend
price. For example, in the proposed Upper Midwest order
approximately $.06/hundredweight would be returned to producers to
cover the costs associated with maintaining Grade A milk supplies.
---------------------------------------------------------------------------

Traditionally, the additional portion of the Class I differential
reflects the marketing costs incurred in supplying the Class I market.
These marketing costs include such things as seasonal and daily reserve
balancing of milk supplies, transportation to more distant processing
plants, shrinkage, administrative costs, and opportunity or ``give-up''
charges at manufacturing milk plants that service the fluid Class I
markets. This value has typically represented approximately $0.60 per
hundredweight.
Originally recognizing these two factors in the base zone was
sufficient to bring forth enough milk to meet Class I demands given the
abundant volumes of milk and the abundance of manufacturing plants.
However, recognizing just these two factors at the values specified may
no longer be adequate to ensure sufficient supplies of Class I milk in
the Upper Midwest region.
The Upper Midwest region is considered a surplus market for fluid
use because its average Class I utilization is only approximately 20
percent.\29\ However, as a result of the abundance of manufacturing
facilities that require milk, the Upper Midwest region is actually a
highly competitive area in which to procure Grade A milk. Because of
this competitiveness, manufacturing facilities are willing to pay more
than the Federal order minimum price, the basic formula price (BFP),
for Grade A milk used in manufactured products. For example, during
1995, Minnesota manufacturing plants paid, on average, $0.77 per
hundredweight more than the BFP for Grade A milk; price premiums in
excess of the BFP ranged from $0.38 per hundredweight in June to $1.24
per hundredweight in December. In 1996, the average pay price for Grade
A manufacturing milk in Minnesota was $0.94 per hundredweight more than
the BFP, ranging from $0.68 per hundredweight in October to $1.18 per
hundredweight in November. Similar pay price patterns occur in
Wisconsin for Grade A milk used in manufactured products. In 1995, the
average pay price for Grade A milk used in manufacturing was $0.85 per
hundredweight more than the BFP, with pay prices ranging from $0.55 per
hundredweight above the BFP in July to $1.22 per hundredweight in
December. During 1996, the average pay price for Grade A milk used in
manufacturing was $0.93 per hundredweight more than the BFP, ranging
from $0.82 per hundredweight (January) to $1.10 per hundredweight
(September). Table 7 sets forth specific data for pay prices for Grade
A milk used in manufacturing for 1995 and 1996.
---------------------------------------------------------------------------

\29\ Federal Milk Order Statistics, 1996 Annual Summary, USDA,
Marketing and Regulatory Programs, Agricultural Marketing Service,
Dairy Division, Statistical Bulletin 938.

Table 7.--Comparison of Prices Paid for Grade A Milk Used in Manufacturing Products in Minnesota and Wisconsin
to the Basic Formula Price
----------------------------------------------------------------------------------------------------------------
Minnesota Wisconsin
---------------------------------------------------------------
Year/Month Basic formula Grade A pay Diff. between Grade A pay Diff. between
price price @ 3.5% BFP and grade price @ 3.5% BFP and grade
\1\ A pay price \1\ A pay price
----------------------------------------------------------------------------------------------------------------

(4)$ /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

[[Page 4909]]

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 Statistic Service adjusted by butterfat differential used under Federal milk
orders.

Because manufacturing facilities are willing to pay these values
above the BFP to ensure adequate supplies of milk into their plants,
fluid processors must pay at least these values to attract the
necessary supplies of fluid milk to the bottling plants. Although data
indicating the exact value that fluid plants are willing to pay to
ensure this supply is not published, an indication of the market value
of this milk can be obtained from the announced cooperative Class I
prices.\30\ Other than in Miami, Florida, which is a deficit Class I
market with a 1996 annual average Class I utilization of nearly 90
percent,\31\ the announced cooperative Class I prices are the highest
in the Upper Midwest region. These prices range from $1.19 per
hundredweight above the minimum Class I price in Minneapolis,
Minnesota, to $1.79 per hundredweight above the minimum Class I price
in Milwaukee, Wisconsin, and Chicago, Illinois.
---------------------------------------------------------------------------

\30\ Table 35--1996 Annual Average Announced Cooperative Class I
Prices in Selected Cities, Dairy Market Statistics, 1996 Annual
Summary, USDA, AMS.
\31\ Federal Milk Order Statistics, 1996 Annual Summary, USDA,
Marketing and Regulatory Programs, Agricultural Marketing Service,
Dairy Division, Statistical Bulletin 938.
---------------------------------------------------------------------------

Option 1A presumes that the $1.04 per hundredweight minimum Class I
differential is no longer adequate to ensure a sufficient supply of
milk due to the competitive nature of the manufacturing facilities in
this region. Thus, Option 1A establishes an additional competitive
factor into the development of the base zone Class I differential.
Option 1A values this competitive factor to be worth about $0.60 per
hundredweight. This value reflects approximately two-thirds of the
actual competitive costs incurred by fluid plants to simply compete
with manufacturing plants for a supply of milk.
An additional benefit of establishing the minimum Class I
differential at a level that more accurately reflects the actual value
of milk for fluid purposes is the added monies generated in the Federal
order pool. Class I milk provides the vast majority of pool value in
Federal orders. If an order has a low Class I differential and a low
Class I utilization, it frequently does not have enough pool value to
provide proper price signals to pool participants. In these orders, the
Class I price is established by the suppliers of milk at levels above
the Federal order minimums. When these over-order markets dictate
substantially higher prices than the order minimums there is a risk
that handlers may not face equal raw product costs for various reasons.
Thus, having a larger proportion of the actual value of Class I milk in
the market order pool in these areas, than is now the case, should
promote pricing equity among market participants. The $1.60 minimum
differential level proposed is perceived to be the lowest value
necessary under present supply and demand conditions to maintain stable
and viable pools of milk for Class I use in markets that are
predominantly manufacturing oriented. Applying this minimum
differential to each of the three low pricing areas will ensure that
low utilization and surplus markets will have similar differentials.
However, having a larger portion of Class I value pooled could mute
price signals to producers more than prices determined strictly by
market forces. If the blend price exceeds the marginal value of milk in
manufacturing, there would be an incentive to overproduce for fluid
needs.
Quantitative analysis using the ERS multi-regional model which
assumed the eleven market order consolidation, four classes of
utilization, and the BFP as proposed, suggests that most producers for
the 6-year average would see little to modest changes in revenue due to
Class I price increases resulting from Option 1A when compared to the
baseline. However, some producers would experience Class I price
decreases. Producers located in the following Federal milk markets
would experience revenue reductions due to average Class I price
decreases: New Mexico-West Texas--($0.19/cwt), Eastern Colorado--
($0.12/cwt), Central Arizona--($0.11/cwt), Southwest Plains--($0.11/
cwt), and Texas--($0.10/cwt). All other orders for the 6-year average
would have a Class I price increase. The Chicago Regional, Michigan
Upper Peninsula, and Upper Midwest orders would experience the largest
increases: $0.46, $0.51, and $0.56 per hundredweight, respectively.
Overall, the magnitude of price and income changes under Option 1A
is small when compared to the baseline. Option 1A results in a 10-cent
increase in the average Class I price for all current Federal orders.
Further details

[[Page 4910]]

of the impact of these Class I price changes on the all-milk price and
cash receipts based on the model results are available in the economic
analysis statement.
Option 1B--Relative Value-Specific Differentials. Option 1B
establishes a nationally coordinated system of relative value-specific
Class I price differentials and adjustments that recognizes several low
pricing areas. Option 1B relies on a least cost optimal solution from
the USDSS Cornell model to develop a Class I price structure that is
based on the most efficient assembly and shipment of milk and dairy
products to meet all market demands for milk and its products.
The results of the USDSS model provide information regarding the
relationship of prices between geographic locations but do not
determine the level of Class I differentials. Option 1B utilizes
geographic relationships as its foundation and maintains the current
Class I differential of $1.20 at Minneapolis, Minnesota. A location
adjusted price differential for every county is established by
evaluating differences between nearby Class I differential pricing
points generated by the model. The marginal values (shadow prices) are
used to determine the price structure because they reflect the value of
additional milk supplied to a plant at a specific location for fluid
use. This price surface recognizes several low pricing areas located
primarily in the Upper Midwest and Western regions.
Option 1B would move the dairy industry into a more market-oriented
system. By establishing differentials on the basis of optimal milk
movements, market conditions will play a greater role in determining
Class I prices. To the extent that higher Class I prices are needed and
negotiated to attract milk supplies, the higher prices will accrue to
those producers who service the fluid market. Hence, Option 1B places
more emphasis on negotiations between dairy farmers and processors to
determine actual Class I prices. The location adjusted differentials
established for each county are set forth in Maps 3A, 3B, and 3C and in
General Provisions Sec. 1000.52. Table 8 sets forth the location
adjusted differentials at selected cities.

Table 8.--Comparative Class I Differentials at Selected Cities Under Option 1B-Relative Value-Specific
Differentials
----------------------------------------------------------------------------------------------------------------
City Current Option 1B Difference
----------------------------------------------------------------------------------------------------------------

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

Table 9.--Option 1B Base Differentials
----------------------------------------------------------------------------------------------------------------
Option 1B--Base differentials \1\
City Current ----------------------------------------------------------------
1999 2000 2001 2002 2003
----------------------------------------------------------------------------------------------------------------

(5) 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

[[Page 4911]]

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

Table 10.--Option 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\
----------------------------------------------------------------------------------------------------------------

(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 Option 1B would consist of adding
a decreasing ``transitional payment'' to the base differential that
would enhance revenue beyond what the current Class I system would have
generated during the four years of transitioning to Option 1B. During
this four-year period, it is projected that $878.4 million would be
added to the Federal order system through the revenue-enhanced payment.
This would result in a net increase of $489.8 million added to the
system once the projected decrease resulting from Option 1B phased in
during this period is deducted. This additional money would not only
provide producers with an opportunity to prepare and restructure their
marketing practices to adapt to more market-determined pricing but
would also allow them to obtain the education and resources necessary
to become more effective in a more market-oriented environment. Again,
the payment in the first year would be the highest with reductions
occurring thereafter to result in implementation of the Option 1B
differentials by 2003. The addition to the base differential would
equal $1.10 per hundredweight in 1999, $0.70 per hundredweight in 2000,
$0.40 per hundredweight in 2001, and $0.20 per hundredweight in 2002.
Table 11 sets forth the location adjusted Class I differentials under
this revenue-enhanced alternative for selected cities.

[[Page 4912]]

Table 11.--Option 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\
----------------------------------------------------------------------------------------------------------------

(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
Option 1B performs equal to or better than the current system when
combined with a phase-in program option because it provides the
industry time to adapt to a more market-oriented system.
Option 1B was evaluated against the objective criteria as follows:
1. Ensure an adequate supply of milk for fluid use. Option 1B
suggests lower differentials than current levels in most of the
proposed markets when using a $1.20 differential at Minneapolis,
Minnesota. Option 1B relies more on the use of over-order premiums in
many areas to attract adequate milk supplies for fluid purposes. Over-
order prices are useful tools for allowing the market to find the final
value of Class I milk, and Option 1B would ensure an adequate supply of
milk for fluid use by rewarding those producers who service the Class I
market needs. The use of ``transitional payment'' alternatives would
ensure an adequate supply of milk for fluid purposes by providing the
industry time to adapt to adjust their marketing practices in adapting
to more market-determined pricing.
2. Recognize quality (Grade A) value of milk. Option 1B recognizes
the quality (Grade A) value of milk through the use of a differential
added to the basic formula price.
3. Provide appropriate market signals. Under Option 1B, greater
reliance is placed on market forces to establish prices which will
allow for clearer transmission of supply and demand signals between
producers and consumers than does the current system.
4. Recognize value of milk at location. Option 1B does recognize
the value of milk at location. Option 1B is based on the least cost
movement of milk and dairy products based on the May 1995 results of
the USDSS model. Thus the resulting price structure reflects the most
efficient assembly and transportation of milk and dairy products and
performs better than the current system.
5. Facilitate orderly marketing with coordinated system of prices.
Like Option 1A, Option 1B also establishes a coordinated system of
differentials and location adjustments that sets a minimum value for
Class I milk in every county. Prices will be aligned within and among
orders, thereby facilitating orderly marketing of milk.
6. Recognize handler equity with regard to raw product costs. Class
I differentials proposed under Option 1B reflect differences in
economic costs of procuring and marketing milk depending on geographic
location. This coordination and alignment of minimum prices provides an
equitable foundation upon which handlers can compete for available milk
supplies and sales of fluid products in a more market-oriented
environment.
Option 1B was evaluated against the administrative criteria as
follows:
1. Minimize regulatory burden. Option 1B would not change the
regulatory burden of the Federal order program in terms of reporting,
recordkeeping, compliance, and administrative costs to handlers. The
role of regulation in determining minimum prices would be reduced, as
more responsibility would be placed on market forces.
2. Minimize impact on small businesses. Under Option 1B, a
substantial part of the Class I value needed to attract adequate milk
supplies would likely come from over-order payments negotiated outside
the Federal order system.
Smaller, less efficient businesses would likely have a greater
responsibility under Option 1B to bargain with processors for over-
order premiums that adequately cover their costs. With processors less
likely to face similar raw product costs, less efficient small
processors may have to negotiate and/or sustain over-order price levels
necessary to attract and maintain a sufficient supply of milk, while
efficient large businesses may be in a better competitive position to
do this. The use of a transitional payment program would help provide
less efficient small businesses make the needed investments to move to
a more competitive position in the market.
3. Provide long-term viability. When Option 1B is combined with one
of the transitional phase-in program options, the long-term viability
of Option 1B is increased and is expected to exceed that of the current
price structure. Gradually moving from a regulated system to one that
is less regulated will require adaptation of all entities within the
dairy industry. A transitional period will allow market participants to
make necessary adjustments in marketing practices to continue in the
industry for years to come.
Option 1B would establish a market-oriented approach to Class I
pricing, by reducing the traditional role the Federal order program has
maintained with regards to Class I pricing. Historically the Class I
price established under Federal orders represented the

[[Page 4913]]

minimum value of Class I milk in the marketplace based on the cost of
maintaining Grade A milk and additional marketing costs with the cost
of alternative milk supplies placing an upper limit on this value.
Option 1B provides an opportunity for free-market conditions to
determine more of the value of fluid milk, but prices would still be
undergirded by minimum prices based on the best available estimates of
milk transportation costs. Ultimately, Option 1B should promote more
market efficiencies; however, adjustments will be required by both
producers and processors.

Quantitative Analysis

Using ERS multi-regional model analyses of the 11 order
consolidations, four classes of utilization, and a Class I price mover
as proposed, suggests that most producers would experience lower
prices, when compared to the baseline, if Option 1B were phased-in with
no transition assistance. The 6-year average Class I price in all
current Federal order markets would decline $0.37 per hundredweight.
However, producers located in the Chicago Regional, Upper Midwest,
Iowa, Central Illinois, Tampa Bay and Southeastern Florida orders would
benefit from Class I price increases ranging from $0.07 to $0.28 per
hundredweight. Producers in all other current orders would experience
losses of revenue because of Class I price decreases ranging from $0.03
to $1.07 per hundredweight. The smallest decline occurs in the Upper
Florida order with the greatest declines occurring in the current
Carolina ($-0.68), Middle Atlantic ($-0.72), Southwest Plains ($-0.76),
Central Arizona ($-0.80), Texas ($-0.87) and Eastern Colorado ($-1.07)
orders.
Both the increases and decreases are mitigated somewhat by the
amount of milk used in Class I. Thus no market would see declines in
the all-milk price in excess of $0.60 per hundredweight. Further
details of the impact of these Class I price changes on the all-milk
price and cash receipts based on the model results are available in the
economic analysis statement.
Because current Federal order producers and processors have
developed and designed their marketing practices based on the existing
Class I price structure which has been in place for several years,
moving immediately to a more market-oriented system could be disruptive
for some producers and handlers. To reduce this marketplace disruption,
Option 1B has been analyzed by the ERS multi-regional model in
conjunction with transitional phase-in program alternatives from the
current differentials.
The revenue-neutral phase-in alternative from current differentials
to Option 1B differentials would minimize the impact of Option 1B
during the phase-in period. Through a gradual phase-in, both producers
and processors would be given time to adjust their marketing practices
in preparing for the new minimum Class I price levels. Results of the
model analysis indicate that almost all producers would experience
increased revenue because of Class I price increases during the first
revenue-neutral phase-in year when compared to the baseline. In fact,
the Class I price would be higher in all but one of the current Federal
order markets. The price increases range from $0.25 per hundredweight
to $0.59 per hundredweight and for all 32 Federal order markets the
average first year Class I price would be up $0.39 per hundredweight.
In year two, producers located in 25 of the Federal order markets would
continue to experience increased revenue because of Class I price
increases compared with the baseline ranging from $0.01 per
hundredweight to $0.48 per hundredweight. In year three, 17 orders
would experience Class I price increases compared with the baseline. By
year four, only the Florida, Upper Midwest, and parts of the Central
areas would remain with price increases from the baseline.
Like the revenue-neutral phase-in, the revenue-enhancement phase-in
would provide producers and processors a period of time to adjust their
marketing practices in preparing for the new minimum price levels by
initially providing payment assistance. The use of the revenue-
enhancement phase-in option would provide producers with additional
income to adjust their operations and obtain necessary education and
resources to prepare for a more market-oriented system.
Results of the ERS multi-regional model indicate that during the
first year, all current orders would experience Class I price increases
over the baseline. In year two, all but one order would have increased
Class I prices. By year three, 21 orders would continue to experience
increases. During year four, 11 orders would maintain a Class I price
increase over the baseline, while 21 orders would have price decreases
of between $0.01 per hundredweight and $1.05 per hundredweight. Further
details of the model results for both transitional payment program
options are available in the economic analysis statement.

Comparison of Options 1A and 1B

Option 1A and Option 1B have similarities but rely on differing
methods to establish a Class I price structure. First, both options
recognize that milk has a location value. Secondly, both options
establish a price surface that assigns a price to every county in the
United States. Currently, a price at any particular location may vary
depending upon the order under which the milk is pooled. Finally, both
options utilized the USDSS model results to establish the price
surface.
Although similar in these respects, the two pricing options differ
on several issues. First, the options differ on the level at which
Class I differentials are established. Option 1A is based on the
premise that Class I differentials be established at a minimum price
that reflects more closely the current value of the Class I milk based
on local supply and demand conditions and agency judgement on the costs
of obtaining alternative supplies of milk. Option 1B relies on the
premise that a lower minimum price should be established strictly on
the basis of the best available estimates of transportation costs to
provide for a more market-oriented structure that allows dairy farmers
and processors more freedom to negotiate fluid milk price levels.
Second, the two options differ in how the price surface should be
established regardless of the level. Option 1A provides for a surface
that is smoother and flows primarily from north to south and west to
east. Option 1B establishes a price surface that is flatter throughout
a majority of the United States and then increases significantly in the
deficit milk production areas of the Southeast. A comparison of the
price surfaces established under Options 1A and 1B from Minneapolis to
Miami demonstrates this difference.
The total distance from Minneapolis to Miami is approximately 1775
miles. Since Atlanta is the first major metropolitan center located in
the Southeast order, and is considered a deficit area, a review of the
two price surfaces between Minneapolis and Atlanta and Atlanta and
Miami highlights the differences in the price surface pattern. The
distance between Minneapolis and Atlanta is about 1110 miles, or 63
percent of the total distance. The distance between Atlanta and Miami
is approximately 665 miles, or 37 percent of the total distance.
Under Option 1A the differential established in Minneapolis is
$1.70 per hundredweight and $1.20 per hundredweight under Option 1B.
The Option 1A differential in Atlanta is

[[Page 4914]]

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

Table 12.--Consolidation Plus Option 1A and Option 1B Price Structure Impacts on Proposed Orders' Estimated
Uniform Prices--October 1996
----------------------------------------------------------------------------------------------------------------
Estimated uniform price Difference between pool
------------------------------------------------ impacts of consolidation plus
options 1A & 1B and
Proposed order Cons. plus Cons. plus consolidation
Consolidation option 1A option 1B -------------------------------
only (Col. 1) (Col. 2) (Col. 3) Col. 2 - Col. Col. 3 - Col.
1 1
----------------------------------------------------------------------------------------------------------------

(4) $/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 impacts of the two Class I
pricing surfaces when combined with the proposed orders. This pool
analysis does not reveal the impacts of the three possible alternatives
for phasing-in Option 1B.

Conclusion

As previously indicated, the Department, based on the evidence and
arguments currently before it, does not believe Options 2-5 or the
other ideas discussed with less detail are viable options. But this
proceeding is still a proposal. Therefore, commenters may still present
evidence or arguments regarding any of the Options or ideas.
All of the provisions of Federal milk marketing orders continue, in
addition to a pricing surface as proposed under Options 1A or 1B. Thus,
recordkeeping, prompt payment provisions, auditing plant receipts and
utilization, and verification of farm weights and tests still
continues. Both Option 1A and 1B also recognize that milk used for
fluid purposes should be valued higher than milk used in other
products. The two options differ in their approach for establishing
minimum values for fluid milk. Option 1A focuses on establishing a
minimum price that reflects existing marketing conditions and the
current value of milk used for fluid purposes. Option 1B focuses on
reducing government intervention, to provide more room for market
forces to determine the actual value of Class I milk.
At this time Option 1B is preferred for several reasons. First,
this option is based on model results that reflects the best available
estimates of least cost assembly and shipment of milk and dairy
products to meet all dairy product demands. By promoting market
efficiencies, it would be expected to

[[Page 4915]]

result in the most preferable allocation of resources over time.
Option 1B would move the dairy industry into a more market-
determined pricing system. By lowering differentials, marketing
conditions will have a greater impact on actual Class I prices in the
form of higher prices that are provided to those producers who service
the Class I market. In this way, the revenue necessary to obtain milk
for fluid use may be minimized since the Class I value is not shared
marketwide with those producers that do not service the fluid market.
U.S. agriculture is transitioning to a more market-determined
environment, relying less on traditional government involvement
typified by price and income support programs. This transition is
emphasized in the 1996 Farm Bill, which specifically provided for the
gradual phase-out of traditional price and income support programs,
including the dairy price support program that has existed since 1950.
Because Option 1B is more market oriented and reduces the government
presence in establishing minimum Class I prices, three methods of
transitioning to Option 1B are offered. One variation is a gradual
phase-in to lower Class I differentials with no transition assistance
to offset any lower revenue to dairy farmers that may occur. This
variation would reduce Class I differentials in market order areas by
20 percent each year until the final Class I differentials under Option
1B are reached in 2003.
A second variation provides transition assistance at increases
Class I differentials initially to offset reduced revenue that may
occur to producers due to the decline in Class I differentials. In this
variation, the Class I differentials in all market order areas would be
increased by $0.55 per hundredweight in the first year of the phase-in,
$0.35 per hundredweight in the second year, $0.20 in the third year,
and $0.10 per hundredweight in the fourth year of phase-in. This level
of assistance would restore income to dairy farmers that might be lost
in the transition, and if the market generates additional premiums,
these assistance levels would more than make up for lower producer
revenue due to lower minimum Class I prices.
A third variation offers transition assistance that initially
increases the Class I differentials even more, while still phasing
toward a more market-oriented price surface by 2004. Under this
variation, all Class I differentials in all market order areas would be
increased by $1.10 per hundredweight in the first year of phase-in,
$0.70 in the second year, $0.40 in the third year, and $0.20 in the
fourth year before reaching the final Class I differentials described
by Option 1B. The assistance provided by this variation would enable
dairy farmers to make the adjustments necessary to succeed in a more
market-oriented environment.
While Option 1B is preferred at this time, Option 1A and other
pricing options are still under consideration. Therefore, comments
should address at least the following questions:

--Should the Class I price structure be designed to move the dairy
industry towards a more market-oriented system that relies less on
government regulation in establishing the pricing terms of trade
between handlers and dairy farmers or should the Class I price
structure be established at the estimated current value of Class I
milk?
--What is the appropriate Class I differential level in surplus areas?
How low can a Class I differential be established to ensure an adequate
supply of fluid milk? What Class I differential level is necessary for
producers to maintain sufficient revenue for ensuring an adequate
supply of milk? Is that level $1.00, $1.60, or is it another value and
why?
--Option 1B has been presented with three phase-in programs; which of
these phase-in programs would be preferred and why? Is five years a
sufficient time period for the industry to make necessary adjustments
to move towards a more market-oriented, less governmentally regulated
system?
--How will the California state program interact with either Option 1A
or Option 1B?
--To what extent would consumers benefit from reduced differentials
under Option 1B versus Option 1A?

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4. Classification of Milk

Under this proposal, the Federal milk order system would continue
to contain uniform classification provisions, but with some
modification. The proposed modifications would be consistent with the
Agricultural Marketing Agreement Act of 1937, which requires that milk
must be classified ``in accordance with the form in which or the
purpose for which it is used.''
The proposed uniform provisions would provide for 4 classes of use.
They are similar to the uniform classification provisions contained in
the current orders. The purpose and application of the current
classification and classification-related provisions are contained in
the Department's final decisions that were issued February 19, 1974 (39
FR 9012), July 17, 1975 (40 FR 30119), February 5, 1993 (58 FR 12634),
and October 20, 1993 (58 FR 58112). The differences in this proposal
from the current classification system are discussed herein and are the
result of a thorough review of Federal order classification provisions
since passage of the 1996 Farm Bill.
Major proposed changes from the current classification plan include
the formation of a new Class IV which includes milk used to produce
nonfat dry milk (currently in Class III-A) and milk used to produce
butter and other dry milk powders (currently in Class III). Other
classification changes include reclassifying eggnog as a fluid milk
product, moving cream cheese from Class III to Class II, broadening the
Class II classification for infant formulas and meal replacement to
include all such formulas meeting redefined criteria for such products
regardless of the type of container they come in, removing the words
``dietary use'' from the fluid milk product definition and eliminating
the term ``filled milk.''
In addition to the class uses of milk, consideration has been given
in this proposal to a number of modifications related to order
definitions and provisions that are necessary to administer an
effective classified pricing plan. Related definitions include the
definitions of fluid milk, filled milk, and commercial food processing
establishments. Also, modifications have been considered for
administrative rules related to the classification of milk. These
include rules for classifying skim milk and butterfat that is
transferred or diverted between plants, general rules pertaining to the
classification of producer milk (including the determination of
shrinkage and overage), rules describing how to allocate a handler's
receipts of skim milk and butterfat to the handler's utilization of
such receipts, and provisions concerning the market administrator's
reports and announcements concerning classification. The classification
and classification-related provisions are proposed to be restructured
and redrafted to achieve part of the goal of standardizing and
simplifying the regulatory program.
In response to a Classification Committee draft report released
during the developmental stage for this proposed rule, comments letters
were received regarding the classification of milk. The comments ranged
from suggestions that the entire classification system be revised by
providing 2, 4, or 5 classes of milk to suggestions regarding the
classification of individual products. Some comments supported the
classification method the California state order provides and
recommended a review of that method. The comments will be discussed
according to each issue.
4a. Fluid Milk Product (Sec. 1000.15)
The new orders would include a modified fluid milk product
definition in Sec. 1000.15. The proposed changes to the fluid milk
product definition include eliminating the term filled milk, including
eggnog in the list of specified fluid milk products, and revising the
word buttermilk to read cultured buttermilk. The revised fluid milk
product definition would read ``any milk products in fluid or frozen
form containing less than 9 percent butterfat and more than 6.5% nonfat
milk solids that are intended to be used as beverages. Such products
include, but are not limited to, milk, skim milk, lowfat milk, milk
drinks, eggnog, and cultured buttermilk, including any such beverage
products that are flavored, cultured, modified with added nonfat milk
solids, sterilized, concentrated (to not more than 50% total milk
solids), or reconstituted.''
The term ``buttermilk,'' as used in the fluid milk product
definition, would be changed to read ``cultured buttermilk.'' The
revised term clearly distinguishes the ``beverage'' buttermilk product
from the buttermilk byproduct which is produced from a continuous
churning operation.
The fluid milk product definition also would be modified to exclude
``filled milk'' and to include eggnog in its list of products. Although
it is apparent that eggnog is a beverage milk product and clearly meets
many of the criteria for being considered a fluid milk product, it is
not now included in the list of products identified as fluid milk
products. The proposed addition of eggnog to the list of fluid milk
products results in a change of the product's classification from a
Class II product to a Class I product. The elimination of the term
``filled milk'' from the fluid milk product definition is discussed
later.
Section 15(b)(1) of the fluid milk product definition would be
modified to exclude any product from the fluid milk product definition
if the product is a formula especially prepared for infant feeding or a
meal replacement without regard to the type of container used to
package the product. The reference to ``dietary use,'' which is an
imprecise term, would be deleted as a standard for classifying milk
products.
At present, ``formulas especially prepared for infant feeding or
dietary use that are packaged in hermetically sealed containers'' are
not ``fluid milk products'' but the exact same formula packaged in a
conventional container may be considered to be a fluid milk product if
it otherwise meets the standards for such products. This possible
difference in classification of these formulas would be eliminated.
The consolidated orders would continue to exclude from the fluid
milk product definition formulas designed as ``meal replacements'' but,
as noted above, any reference to ``dietary use'' should be removed as a
classification standard. The words ``dietary use'' have not been
helpful in distinguishing the products that are really beverages from
other products that are meant to be much more than just beverages.
As intended for the consolidated orders, the words ``meal
replacement'' would pertain to the type of specialty product that one
might find in a hospital or nursing home for people who have a
swallowing disability, some type of digestive impairment, or other
health or medical problems. Such products include those that are
thickened with a thickening agent, such as waxy maize starch, which
make them consumable for a person with special dietary needs. Such
products do not compete with fluid milk products as a beverage. They
are prepared for a limited market and are not sold as milk to the
general public.
The term ``meal replacement'' would not include various types of
shake products that are designed for people who are trying to gain or
lose weight. Neither would the term apply to products that are
advertised as ``protein supplements,'' ``instant breakfasts,'' or
``high in fibre.'' These products clearly may be consumed as beverages
and are sold to the general public. Therefore, like other fluid milk
products, it is

[[Page 4924]]

proposed that they be classified[ as Class I.
The meal replacement standard proposed for the consolidated orders
is more stringent than the one that is currently applied. At the
present time, for instance, products such as ``Sportshake,''
``Powergetic,'' ``Carnation Instant Breakfast,'' ``Resource Dairy
Thick,'' ``ReadyCare Thickened Dairy Drink,'' and ``Ultra Slim-Fast''
are classified as ``meal replacements.'' As redefined in this proposal,
however, only ``Resource Dairy Thick,'' ``ReadyCare Thickened Dairy
Drink,'' and similar products would fall within the meaning of ``meal
replacement,'' as described above.
Fluid milk products that contain less than 6.5% nonfat milk solids
are excluded from the current and proposed fluid milk product
definition. Consideration was given to eliminating or lowering this
standard because there are some products that resemble fluid milk
products but are excluded from the fluid milk product category because
their nonfat solids content falls slightly below the 6.5% standard.
Several comment letters were received opposing any adjustment of
the 6.5% standard. Some interested parties pointed out that elimination
of the 6.5% nonfat milk solids standard would greatly expand the fluid
milk product category to include many essentially non-milk products
that contain very little milk in them. This could greatly increase
market administrator auditing costs in following these products and
could regulate several new facilities that would not reasonably be
considered to be milk plants. In addition, several dairy product
manufacturers argued that their products would be detrimentally
affected as other shelf-stable competitive products would gain a
substantial economic advantage. The letters stated that the increase in
cost associated with the Class I price would force manufacturers to
reformulate their products so that no fluid milk or substantially less
fluid milk would be used.
After carefully weighing these arguments, it is concluded that any
competitive problems that may now exist as a result of the 6.5%
standard are very minor and that no change in the standard is warranted
at this time.
4b. Fluid Cream Product (Sec. 1000.16)
No change would be made to the fluid cream product definition. The
current definition is uniform under all the orders and should be used
in the newly merged orders. No comment letters were received which
suggested changing the current fluid cream product definition; however,
several comments were received in support of the current definition.
4c. Filled Milk
It is proposed that the definition of filled milk be eliminated and
the term be removed from the fluid milk product definition and other
provisions within the orders. Filled milk is a product that contains a
combination of nonmilk fat or oil with skim milk (whether fresh,
cultured, reconstituted, or modified by the addition of nonfat milk
solids). Filled milk was first produced and marketed in the 1960s. In
1968, the orders were amended to provide a definition of filled milk.
Currently, there is little or no filled milk being produced under
Federal orders. The term filled milk is used 18 times in a milk order.
It serves little purpose today except to complicate and lengthen the
regulatory language. For this reason, the definition of filled milk
would be eliminated and the term removed from the fluid milk product
definition and other provisions within the orders.
The form of filled milk and purpose for which it is used are the
same as the form and purpose for which whole milk is used. Filled milk
is marketed by handlers in the same types of packages and in the same
trade channels as whole milk, and is mainly intended to be used as a
beverage substitute for milk. Whether made from vegetable fat and fresh
or reconstituted skim milk, or any combination thereof, the resulting
product resembles whole milk in appearance. Therefore, any filled milk
produced and marketed in the future would be classified as a Class I
product under the revised fluid milk product definition.
One cooperative association submitted a comment supporting the
suggestion to eliminate the definition of filled milk. No comments were
received in opposition to this idea.
4d. Commercial Food Processing Establishment (Sec. 1000.19)
The definition of commercial food processing establishment (CFPE)
is proposed to be revised by removing the filled milk reference, for
the reasons previously discussed, and by removing the word ``bulk''
from the definition. The removal of the word ``bulk'' would allow a
CFPE to receive fluid milk products and fluid cream products for Class
II use in certain sized packages as well as in bulk.
Presently, the CFPE definition prohibits the receipt of fluid milk
products for Class II use in relatively small pre-measured packages
that might reduce the CFPE's production costs. Although there were no
comment letters directed specifically to this point, this problem has
come to the attention of market administrator personnel. While
proposing that packaged fluid milk products be permitted to be
transferred to a CFPE in any size, it is also proposed that only milk
which is shipped in larger-than-consumer-sized packages (i.e., larger
than one gallon) should be eligible for a Class II classification. If
milk is received in gallon containers or smaller, the milk should be
priced as Class I milk since there is no way of guaranteeing that such
products will not be sold for fluid use. Permitting milk in any sized
container to be sold to a CFPE for Class II use if the container had a
special label, such as ``for commercial food processing use only,'' was
considered, but such a provision would be impractical and it would be
prohibitively expensive for a handler to prepare specially labeled
products for small accounts. The current restriction barring a CFPE
from having any disposition of fluid milk products other than those in
consumer-sized packages (one gallon or less) should be retained under
the new orders.
These two restrictions are based upon practical considerations. The
integrity of the classified pricing system would be much more difficult
to maintain if the market administrator were forced to audit every CFPE
on a regular basis. By prohibiting the sale of fluid milk products in
consumer-sized packages to a CFPE for anything but Class I use, there
would be less need to regularly audit CFPE's to be sure that such
products are not being sold to the public. Similarly, since packaged
fluid milk products in containers larger than one gallon are rarely, if
ever, found in retail outlets, it is unlikely that such products will
be sold for fluid use. By restricting fluid milk product disposition by
CFPE's to packaged products not larger than one gallon in size, there
is reasonable assurance that milk priced as Class II will not be
disposed of as fluid milk sold by the glass from a bulk dispenser.
One handler submitted a comment in support of the Committee's
suggestions regarding the commercial food processing establishment
definition; none were received in opposition to these suggestions.
4e. Classes of Utilization (Sec. 1000.40)
Historically, the fluid or beverage uses of milk have been
classified in the highest-priced class (Class I), and soft or spoonable
products, those from which some of the moisture has been removed, have
been classified in the intermediate class of milk (Class II). The final

[[Page 4925]]

decision issued on February 5, 1993 (58 FR 12634) provided 3 uniform
classes of milk for all orders. Classes I and II continued the
traditional classification of milk, while the lowest-priced class
(Class III) contained the hard, storable products. In a final decision
that became effective December 1993, a fourth class--Class III-A
(actually a sub-section of Class III)--was established for most orders
for milk used to produce nonfat dry milk.
It is recommended that the fluid and beverage uses of milk continue
to be the highest-priced class of milk, Class I. Soft or spoonable
products, or those used in the manufacture of other food products or
sweetened condensed milk, would be classified as Class II products.
Class III would contain primarily the hard cheeses, but also such
storable products as plain or sweetened evaporated or sweetened
condensed milk (or skim milk) in a consumer-type package. Finally, a
new Class IV would contain all skim milk and butterfat used to produce
butter or any milk product in dried form.
Comments filed regarding the number of classes of utilization for
the proposed merged orders varied from supporters of one class, which
would eliminate all manufacturing classes, to supporters of 5 classes
of milk. Comments concerning the addition of an export class were also
received. Some comments urged the immediate suspension or termination
of Class III-A, while others recommended a thorough review of Class
III-A.
Many commenters suggested that there be one class of milk. A dairy
farmer stated that dry milk powder can be used for making cheese or
fluid milk and could be easily stored, and later dumped on the market
again which could influence the milk price. A large cheese manufacturer
maintains that multiple classes of utilization for competing
manufactured product uses create market distortion and regulatory
adjustments, and argues that a single, market-clearing price for all
non-fluid uses would allow competitive forces to determine supply and
demand.
Another commenter, also a dairy producer, stated that manufacturing
Class II and Class III products is the only means of storing excess
milk. According to the producer, at one time much of the country's milk
was produced at Grade B standards and, consequently, at a lower cost of
production. However, he contends, this is not true today. The producer
asserts that the current Federal order system of milk classification is
the reason why the dairy industry is not unified and unable to come to
a consensus and that milk is the only commodity in the country that is
priced according to its use.
A major dairy foods association suggested that there be two classes
of milk (i.e., Class I and all other). However, if multiple classes of
milk are maintained, the association proposed that some products be
reclassified to Class III and that Class III-A be discontinued. The
association also stated that no new milk classifications should be
established such as an export class of milk. Another commenter
suggested that more than one class of non-fluid utilization of milk is
unnecessary and does little to enhance producer income.
A manufacturer of shelf-stable products also supported a two-class
system for clarification and simplification reasons, and stated that
such a system would also eliminate the need for future hearings to
determine the classification of new products. The commenter strongly
opposed the reclassification of Class II products in aseptic containers
to Class I and argued that these products do not compete with current
Class I products, but rather compete in the juice market.
Another handler stated that it supported 3 classes of milk, but
stated that many products that are currently in Class III should be
reclassified as Class II. The handler contended that classification
should be based upon demand elasticity and suggested that the criteria
for placing various products into classes should be expanded. Very few
products are processed to utilize true surplus supplies of milk, it
stated.
A major cooperative association's comment letter supported a 4-
class system where Class IV would include butter and nonfat dry milk
products, thus serving as the class for market-clearing products. The
cooperative stated that a 3-class system would not provide enough
differentiation for market clearing. It stated that a distorted market
may result when pooled handlers must pay the same prices for milk used
in nonfat dry milk as for milk used in cheese. Another cooperative also
supported the separate classification for cheese (Class III) and butter
and powder (Class IV).
Two trade associations recommended 5 classes of milk for the merged
orders. One association recommended that the 5 classes be divided into
Classes I, II, III, IVA, and IVB and that products be classified on the
basis of product yields. The other association stated that the 5
classes of milk should consist of Classes I, IIA, IIB, IIIA, and IIIB,
and that Classes IIA and IIB should be classified on the basis of
protein and butterfat, whereas Classes IVA and IVB should be classified
on the basis of solids not-fat and butterfat.
A few comments addressed the issue of an export class. One comment
letter supported the concept of continuing to develop export markets
and providing for Class III-A or Class IV to compete in the
international marketplace. A Missouri dairy farmer wrote that an export
class is needed so that the cost of clearing the U.S. market can be
shared across Federal order and state order lines.
Another commenter, a dairy products manufacturer, recommended an
export class be established for Class I products. The handler stated it
is engaged in the packaging and selling of UHT (i.e., ultra high
temperature) processed shelf-stable dairy products sold within the
United States and abroad. According to the handler, its inability to
compete with the price offered by its competitors is the principal
reason it has been unable to increase its volume of business in the
international market. The handler contends that changes in the Federal
order system are needed to allow the American dairy industry to become
competitive in the international market.
The handler suggested that the export class price be established
just above the Class III level because it would allow milk to flow into
either the cheese market or export markets, whichever provides the
greater opportunity. The handler claims that the addition of an export-
oriented, value-added, product class would yield greater returns to
producers than exporting skim or whole milk powder (i.e., currently
Class III-A products).
A northwest cooperative association also recommended that
consideration be given to establishing an export-oriented class to
facilitate the development of export markets and to promote fair trade.
Products produced for the world market would be included in a class
with a price that reflects ``world market'' levels. With such a class,
according to the cooperative, the dairy industry would be in a better
position to promote exports and contribute to the U.S. balance of
trade. The commenter contends that processors with exporting potential
will benefit from an export class and that producers also will benefit
because expanded exports will lead to reduced dairy surpluses.
After careful consideration of the comments and arguments, 4
classes of utilization are proposed for the consolidated orders, as
described below. Inclusion of an export class is not proposed because
classification is based on form and use without regard to sales area.
In addition, it would be difficult to support a concept of dual pricing
of a

[[Page 4926]]

product--one price for domestic use and a lower price for export.
Moreover, to adopt such dual pricing would be inconsistent with the
principles of the World Trade Organization.
4f. Class I Milk
Under this proposal, Class I milk would be all skim milk and
butterfat contained in milk products that are intended to be consumed
in fluid form as beverages. Class I should include all the products
included in Class I in the 1993 uniform classification decision plus
eggnog.
The 1974 uniform classification decision classified eggnog as a
Class II product. The decision recognized that eggnog was prepared to
be consumed as a beverage and that it was classified in 9 of the 32
orders as a Class I product. However, the decision stated that eggnog
was a highly seasonal product with limited sales. It was also estimated
that approximately 40% of the sales of this product was in the form of
imitation eggnog. The decision stated that a Class II classification
would enhance the competitive position of the product in the
marketplace.
In 1991, the recommended decision of the national hearing changed
the classification of eggnog from its historical Class II
classification to Class I. However, the 1993 final decision for the
proceeding reversed the recommended decision classification. The
primary reason for the change in the product's Class I classification
back to the historical Class II classification was based on exceptions
to the recommended decision. At the same time, however, the final
decision left low-fat eggnog as a fluid milk product with a Class I
classification, as it was prior to the 1990 national hearing.
Class I products are generally classified on the basis of their
fluid form and intended use. Eggnog, a highly seasonal product, is
clearly intended to be consumed as a beverage. Since this product is
manufactured, packaged and distributed to the consumer as a drinkable
beverage, it is proposed to be classified as a Class I product. The
modest change in the ingredient cost of the finished product should
have little or no effect on its sales in the marketplace. Comments
received regarding the reclassification of eggnog were generally in
support of its reclassification into Class I.
A western producer organization supports the recommendation to
include all milk consumed in beverage form in Class I. The organization
rejects a two-class system as proposed by processor groups, arguing
that such a system makes no economic sense since not all non-fluid uses
of milk are market-clearing in nature and thus should not be placed in
the same class. A shift to a two-class system would benefit processors
and manufacturers at the expense of producers, according to this
commenter.
Class I Used-to-Produce. In order to simplify the accountability
for milk products classified as Class I that may contain nonmilk
ingredients and/or previously processed and priced skim milk and
butterfat, we recommend adding a ``used-to-produce'' category to Class
I. The used-to-produce accountability method would preclude the need to
develop and maintain nonstandard conversion factors and non-milk
credits (i.e., salt, flavoring, stabilizers) for milk product
accountability. This method should improve the accuracy of handler
reporting and minimize audit corrections without sacrificing any
statistical information, pricing considerations, or classification
criteria. No comments were received in response to the recommendation
that this category be added to the proposal.
4g. Class II Milk
Most of the products included in Class II as a result of the 1993
uniform classification amendments would continue to be classified as
Class II products under the new orders, with 3 exceptions. The
exceptions include: (1) Cream cheese, which would be reclassified from
a Class III product to a Class II product; (2) eggnog, as discussed
already, which would be reclassified as a Class I product; and (3) any
fluid product in a hermetically-sealed, all-metal container which would
be classified as a Class II product.
The 1993 national hearing decision included cream cheese in Class
III. The decision placed spreadable cheeses and cheeses that can be
crumbled into separate pieces in Class III, while other more liquid
``spoonable'' products were placed in Class II. The decision stated
that cream cheese is used as a substitute for butter because it
functions as a spread and, thus, classified cream cheese in Class III.
The classification of cream cheese should be changed from Class III
to Class II. The milk used in Class II products, generally described as
``soft'' products, is used to process or manufacture products for which
handlers know a consumer demand exists. Generally, these products have
some of the water removed from producer milk or contain a high enough
butterfat content that they will not be used as beverages. Products
included in Class II are those that are neither as perishable as fluid
products nor perform a balancing function for the market. Many Class II
products have longer shelf-lives than fluid milk products, while being
less storable than markets' surplus uses of milk.
The primary distinction between Class II products and the products
used to balance the market is existing consumer demand. Although cream
cheese may be used as a substitute for butter, it is not made to be
stored when no other outlets are available, as is butter. It is a
consumer convenience product that is produced to meet consumer demand
and not to utilize surplus supplies of milk. Handlers do not process
milk into perishable or semi-perishable dairy products if they do not
have a consumer market for those products. Accordingly, it is proposed
that cream cheese be reclassified from its current Class III
classification to Class II.
Three comment letters stated that there is no basis for
reclassifying cream cheese into Class II and it should remain with
other cheeses in Class III. At least 2 comment letters supported the
revised classification of cream cheese. One commenter argued that cream
cheese competes for consumer market share with butter, which is
currently a Class III product, and should be classified according to
its ``use'' which supersedes any ``form'' criterion argument. The
letter stated that while the reclassification will have no appreciable
effect on the blend price, it may be financially detrimental to plants
that produce cream cheese.
Some comments addressed the classification of cottage cheese and
ricotta cheese, in addition to cream cheese. A national manufacturer of
cheese products supports the reclassification of milk used to produce
cottage cheese and ricotta cheese from Class II to Class III. The
handler states that due to falling demand for cottage cheese, it should
be placed with other cheeses in Class III. Another cottage cheese
manufacturer made the same suggestion.
These suggestions should not be incorporated in this proposal.
Great care should be taken in reclassifying dairy farmers' milk to any
class below Class I. Such reclassification may occur when it is
necessary to dispose of surplus milk or to allow intermediate dairy
products to compete with a nondairy substitute to the benefit of dairy
farmers. Neither of these reasons would appear to fit the situation
facing milk used in cottage cheese.
The declining market for cottage cheese is likely the result of
several factors besides its price. Some of these

[[Page 4927]]

factors may be the substitution of newer or improved dairy products for
cottage cheese, changing consumer tastes, or consumer preference for
lower fat products. There is no indication that reducing the ingredient
cost of this product by a fraction of a cent per container would do
much to stimulate consumer preference for it.
As discussed above, the phrase in Secs. 1000.15(b)(1) and 40(b)(v),
``or dietary use (meal replacement)'' would be removed and any fluid
product packaged in a hermetically-sealed, all-metal container would be
reclassified as a Class II product. Formulas especially prepared for
infant feeding should continue to be classified as Class II products
without regard to the type of container in which they are packaged.
Although no change is intended for the present classification of
buttermilk for drinking purposes and buttermilk for baking purposes,
some changes are needed to clarify the distinction between the 2
products. First, as noted previously, drinking buttermilk should be
labeled as ``cultured buttermilk.'' In addition, some changes are
needed to distinguish this product, which is a Class I product, from
buttermilk biscuit mix, buttermilk for baking, or simply baking
buttermilk, which is a Class II product.
Currently, the criteria used to distinguish drinking buttermilk
from buttermilk for baking is that the latter product must contain food
starch in excess of 2% of the total solids in the product. However,
this criteria is not specified in the orders themselves, but rather in
administrative guidelines that have been issued. This guideline should
be formalized by stating the standard in the general provisions that
will contain the classification section for the consolidated orders. As
now specified in Section 1000.40(b)(2)(v), the Class II classification
is limited to ``buttermilk biscuit mixes and other buttermilk for
baking that contain food starch in excess of 2% of the total solids,
provided that the product is labeled to indicate the food starch
content.'' It should be emphasized that the proposed standard not only
requires buttermilk for baking or buttermilk biscuit mix to contain the
required amount of food starch but, in addition, the label must
indicate the food starch content of the product.
Class II Used-to-Produce. The 1993 uniform classification
amendments changed the accountability method of several products from a
disposition basis to a used-to-produce basis. Except for some fluid
cream products, all products were moved to the used-to-produce
category. The change resulted in simplification and improved accuracy
in the reporting and auditing of these products. This method should be
extended to the remaining Class II products that are currently
accounted for on a disposition basis, specifically creamers, light
cream, milk and cream mixtures, and heavy cream.
4h. Class III and Class III-A (i.e., Class IV) Milk
The July 1993 national hearing decision provided that hard,
storable products be included in Class III. Class III-A became
effective in 3 Federal orders in November 1992 and was implemented in
27 Federal orders in December 1993. The amendments established a Class
III-A milk class that included only nonfat dry milk. It is recommended
that the products currently included in Class III continue to be
classified in that class with two exceptions. As discussed under the
Class II section, the classification of cream cheese should be changed
from Class III to Class II. Also, butter and all milk powders that are
currently in Class III should be moved to Class IV.
The 1993 Class III-A decision stated that the separate class for
milk used to produce nonfat dry milk (NFDM) was needed to allow
handlers to recover the cost of producing NFDM. The Class III-A price
is calculated from a product price formula, which provides a make
allowance, to arrive at a price for milk used to produce NFDM.
There has been a good deal of criticism of Class III-A. Some of the
arguments made by critics of III-A are that:
Class III-A has resulted in lower uniform prices under
Federal milk orders;
A significant amount of milk was not pooled when the Class
III-A price exceeded the uniform price adjusted for location;
The wide gap between the Class II price and the Class III-
A price was destroying the market for bulk sweetened condensed milk;
and
The Class III-A pricing system was undermining the Class
II and Class III price by allowing milk that is manufactured into NFDM
at a lower price to be utilized in increasingly large quantities to
make soft products and cheese.
Supporters of Class III-A argue that it should be retained for
several reasons. One argument that appeared in several letters was the
need to remain competitive with butter/powder plants under California's
4a pricing program.
The Pennsylvania Farm Bureau noted that as the dairy industry moves
toward the elimination of support prices and more into the
international market, Class III-A pricing will offer a way to capture
changing price relationships between cheese, butter, and powder.
Michigan Milk Producers Association (MMPA) and Independent
Cooperative Milk Producers Association (ICMPA) argued that the
elimination of Class III-A will competitively disadvantage those
parties who currently provide market balancing services. They note that
as long as California remains outside of the Federal order program, the
West Coast nonfat dry milk price, plus a transportation differential,
will continue to effectively establish a price ceiling for Midwest
nonfat dry milk. This product, according to MMPA and ICMPA, is still a
market-clearing product for Michigan, Indiana, Kentucky, and parts of
Ohio.
A major Northeast cooperative association, Agri-Mark, also opposed
any suggestion to eliminate Class III-A. According to Agri-Mark,
arguments that Class III-A pricing has encouraged unneeded nonfat dry
milk production are false. Class III-A pricing, in Agri-Mark's view,
has allowed nonfat dry milk manufacturers to resume their role of
efficiently balancing Class I markets and disposing of reserve
supplies. While vigorously supporting the retention of Class III-A
pricing, Agri-Mark also stated that it is necessary to modify Class
III-A pricing in two primary areas. The first modification involves the
replacement of the Central states price with a Class III-A price
calculation using a California nonfat dry milk price announced each
week. The second modification involves including milk used to
manufacture buttermilk powder in the Class III-A definition.
Agri-Mark contends that Class III-A should be continued in all
Federal marketing areas in order to allow their nonfat dry milk
manufacturing plants to remain competitive with California and
therefore be available to balance Class I needs and facilitate the
handling of reserve milk supplies in each market. It is also Agri-
Mark's view that the current Class III-A pricing formula has worked
well and has not given an advantage to nonfat dry milk manufacturers
relative to cheese manufacturers.
Agri-Mark acknowledges that the problem of using nonfat dry milk to
replace fresh milk in traditional dairy uses when Class III-A prices
are significantly below Class II and III prices does exist; however, it
argues that the elimination of Class III-A pricing will not alleviate
this problem because low-priced nonfat dry milk manufactured in
California will still be available to replace local fresh milk. In the
absence of Class III-A, local fresh milk may be unable to find a nearby
outlet, particularly on a seasonal basis,

[[Page 4928]]

resulting in disorderly marketing conditions.
Another commenter, the Alliance of Western Milk Producers (AWMP),
stated that separate butter/powder and cheese milk pricing classes
would not be detrimental to producers, but rather that a single price
class would cause producers economic disaster. The AWMP supports a two-
class system for manufactured products. It recommends that Class III
include cheese and Class IV include butter, nonfat dry milk, and whole
milk powder.
Darigold, a cooperative association based in Seattle, Washington,
submitted a comment in support of separate classes for butter/powder
(Class III-A) and for cheese (Class III) and offered several arguments
why separate classes for butter, powder, and cheese should be adopted.
Darigold states that the reconstitution of nonfat dry milk should be
viewed as a means to economic efficiency rather than a pricing
disruption or distortion. Darigold points out that it is inefficient to
have milk transported several hundred miles if cheaper solids could be
transported at a lower cost. Darigold also states that reconstitution
is actually consistent with the purposes of Federal orders because it
promotes the goal of making adequate supplies of milk solids available
within a deficit market.
Darigold also states that reconstitution of nonfat dry milk into
higher-classed dairy products is much more demand-driven than price-
driven and that the increased use of nonfat dry milk in the processing
of higher-valued products may be explained by the shortages of milk and
continuing declines in milk production that have occurred in some
regions, not by price incentives associated with Class III-A. The
cooperative also states that milk movements in recent years to the
Upper Midwest would have occurred even without Class III-A because milk
production was decreasing in the Upper Midwest but growing in the West.
Darigold maintains that concerns about ``artificial drying'' (i.e.,
drying milk just to be able to obtain nonfat dry milk solids as a
substitute for fresh milk in Class II products) overstate the problem
and should be kept in perspective. In addition to acknowledging that
such practice would be inconsistent with Federal order program goals,
the cooperative points out that it would also be inconsistent with
economic efficiency. Darigold states that only a limited amount of
nonfat dry milk reconstitution has been driven by a price difference
between Class III and III-A sufficient to offset the costs of drying
and reconstitution. Furthermore, it is argued that suggestions to
increase the Class III-A price to make it closer to the Class III price
is unsound policy. The commenter argues that it makes no economic sense
to artificially increase the lowest class price which typically clears
the market.\32\
---------------------------------------------------------------------------

\32\ See Issue Number 3 of this proposed rule for a
comprehensive discussion of Class III and IV prices.
---------------------------------------------------------------------------

Dairylea, a cooperative association with members in the Northeast,
also supports continuation of Class III-A for milk used to produce
nonfat dry milk stating that the incorporation of this class allowed
for a more equitable sharing of costs among all producers in balancing
weekly and seasonal supplies of a market via nonfat dry milk
production. While acknowledging that the substitution of nonfat dry
milk for fresh milk in Class II and III products decreases producer
blend prices, Dairylea contends that this would continue to occur in
the absence of Class III-A pricing because lower-priced powder from
California would be available.
Some commenters, while supporting Class III-A, urged the Department
to broaden the class to include more products, such as dry whole milk.
In addition, several comments were received urging the reclassification
of sweetened condensed milk from Class II to Class III or to the same
class which includes nonfat dry milk. The commenters explained that
sweetened condensed milk is primarily used in commercial food
processing establishments and in the confections industry and that it
is interchangeable with powdered milk products and sugar in ingredient
markets for processed foods and candy. They argued that manufacturers
of sweetened condensed milk are currently at a competitive disadvantage
with manufacturers of nonfat dry milk. Another commenter also stated
that it was losing business because nonfat dry milk is substantially
cheaper than fluid dairy ingredients.
A major dairy manufacturer stated that product classifications
should not create price discrimination among milk products used for
similar purposes. Therefore, it supports the same classification for
nonfat dry milk, sweetened condensed milk, and condensed skim milk,
which are largely interchangeable. According to the commenter, the
current system of classification places sweetened condensed milk at a
significant disadvantage and has virtually destroyed the market for
sweetened condensed milk. The commenter also stated that other products
that compete with nonfat dry milk, including evaporated milk, should be
placed in the same class as nonfat dry.
A great deal of consideration was given to the argument that bulk
sweetened condensed milk/skim milk should be reclassified to be in the
same class as nonfat dry milk, i.e., Class IV in the proposed new
orders. In fact, such a change was recommended in a preliminary Dairy
Program Classification Committee report. With the change in class
pricing formulas proposed for the new orders, however, the problems
leading to this recommendation will be removed. Consequently, bulk
sweetened condensed milk and skim milk should remain in Class II.
Bulk sweetened condensed milk/skim milk is used as an intermediate
product in ice cream, candy, and other manufactured products. However,
these manufactured products can also be made from powdered milk. When
powder prices are low relative to the Class II price, there is an
economic incentive for powder to be substituted for bulk sweetened
condensed milk. As a result, there must be an economic relationship
between the Class II price and the cost of using alternative dry or
concentrated products to make Class II products. Under current pricing
provisions, the Class II price can be excessive relative to using
nonfat dry milk since the Class II price is a measure of the value of
milk in cheese (the Class III price) plus a differential.
As proposed in this rule, the Class II price for the new orders
would be based upon the Class IV price plus a differential of 70 cents.
This fixed difference precludes the much wider price differences that
have existed at times between Class II and Class III-A prices.
Consequently, sweetened condensed milk should continue to be classified
as a Class II use.
4i. Shrinkage and Overage
The shrinkage provisions of the new orders should be modified to
reflect a pro rata assignment of shrinkage based on handler
utilization. In other words, each handler's ``shrinkage'' or lost milk
should be classified according to the handler's use of milk that was
not lost in transit or processing. Adoption of such modification will
simplify both order language and accounting procedures.
Shrinkage is experienced by handlers in milk processing operations
and in the receipt of farm bulk tank milk at receiving stations and
processing plants. Milk is unavoidably lost as it remains in pipe
lines, adheres to tanker walls and/

[[Page 4929]]

or other plant equipment, and is washed away in the cleaning
operations. In addition, unexpected losses, including spillage or
leaking packages, also contribute to shrinkage.
A shift from the current shrinkage allowance provisions to a pro
rata assignment of shrinkage based on utilization would improve market
efficiencies, create a more equitable situation among handlers, and
facilitate accounting procedures involving shrinkage and overage
assignment. Over time, changing conditions within milk markets have led
to the adoption of a rather complex shrinkage provision. This provision
can be both modified and simplified without compromising the objectives
of the Federal milk marketing program. The proposed provision should
meet the goals of simplification and improvement of Federal milk
marketing orders.
Arguments in support of the proposal illustrate the advantages of a
shift to pro rata shrinkage assignment as opposed to either
continuation of the current shrinkage class assignment and allocation
system or adoption of other alternatives. Several of the major
cooperative associations expressed support for the suggestion to
prorate shrinkage based on plant utilization. According to one
commenter, plants should account to the pool at a price that is the
intended use for milk processed at that plant. The commenter added that
this will encourage and assure plant efficiency.
Simplification of order language was one of the more frequent
comments received in response to the preliminary reports on
classification. The shrinkage provision undoubtedly falls within this
category. As pointed out earlier, the shrinkage provision has become
rather complex. A comment letter submitted by one industry member
argues that the retainment of the shrinkage provision is unnecessary
and that any milk which is not accounted for should be classified as
Class I. While this suggestion seems to provide an incentive to
inefficient plant operators to minimize the amount of milk loss by
placing a higher value on shrinkage than presently exists in the
current system, a more equitable method is to assign shrinkage pro rata
based on a handler's utilization. This will prevent any handler with
solely Class III utilization from being responsible to the pool for
shrinkage assigned to Class I.
Other comment letters suggested that shrinkage should be
eliminated, along with some other order provisions, because it reduces
income to dairy farmers. Some commenters argued that the costs
associated with record keeping, reporting and auditing plant loss has
little value to the producer, consumer, or handler. One cooperative
association expressed support for the elimination of accounting for
animal feed and dumped products; no opposing comments were received.
One handler proposed that shrinkage be assigned all at the lowest
classification or all Class I with a monetary credit. The monetary
credit would be based on a fixed allowance depending on where the
handler's loss is assumed. The handler stated that this would eliminate
a substantial number of words from the order language. This handler
also suggested expanding the shrinkage rules to allow for aseptic
packaging because shrinkage in aseptic packaging is far greater than in
a plant processing milk in containers, according to the handler. The
handler suggested a 4% shrinkage allowance for aseptic packaging.
In Section 30 of each order, pool plant operators and certain other
handlers are required to report their total receipts and disposition of
skim milk and butterfat. In Section 40, the total reported receipts are
classified according to usage. Any positive difference between receipts
and utilization is referred to as shrinkage and any negative difference
is called overage. The proposed orders would provide that for each pool
plant and each cooperative association bulk tank handler, the market
administrator would determine the shrinkage or overage by subtracting
the handler's utilization of milk from its receipts of milk, and then
prorate the shrinkage to the respective quantities of skim milk and
butterfat in each class by using the handler's total reported
utilization. In contrast to the current lengthy provision for assigning
shrinkage, the new shrinkage provision would remove the necessity for
computing shrinkage allowances on various sources of receipts.
Currently, the shrinkage provision maintains allowances for various
sources of receipts. Milk that a handler receives at its plant on the
basis of weights determined from its measurement at the farm and
butterfat tests determined from bulk tank samples (farm weights and
test) receives a 2 percent allowance to be classified as Class III. If
the handler receives milk on other than farm weights and tests from a
cooperative bulk tank handler or another pool plant, a 1.5 percent
allowance is given to the receiving handler and a 0.5 percent shrinkage
allowance is given to the bulk tank handler or other pool plant selling
the milk. Any shrinkage assigned to pooled milk is assigned to Class
III up to this allowance.
If a handler receives fluid other source milk, it receives a pro
rata share of the total loss which is assigned to Class III without
limit. Any shrinkage exceeding the total of these two assignments is
assigned to Class I.
When comparing the dairy industry to other industries, there is a
difference in how waste, or shrinkage, is handled. A non-dairy
manufacturing plant has a certain amount of waste, and it pays the same
for wasted material as that going into the product made. It does not
pay less or assign a lower value for the ``shrinkage'' as is done in
the dairy industry. Although some may argue that shrinkage should be
assigned to the lowest class because handlers receive no return on milk
losses experienced in the receiving and processing operations, a pro
rata assignment should result in handlers' limiting milk loss
throughout the dairy process. In a bottling plant, shrinkage would be
assigned to Class I in a larger proportion than the current method.
This would have the effect of creating more costs for a Class I
handler. In other words, placing a higher value on shrinkage by having
milk assigned pro rata to all classes, as is recommended, would
encourage a handler to reduce costs associated with shrinkage,
resulting in more efficient dairy operations. Also, as proposed here,
shrinkage would be assigned to Class II for the first time. This would
also encourage less shrinkage, hence, greater efficiency.
Pro-rata shrinkage assignment would more closely reflect the nature
of the plant's operation. If milk is to be classified on the basis of
form and use, it would appear logical that any loss associated with a
particular use should be classified the same as the usage. If a handler
has a high Class I utilization, it seems appropriate that the same
utilization percentage would apply to its loss/shrinkage. A handler
with a multi-class operation would have shrinkage prorated to all
classes of utilization based on the percentage used in each class. If a
handler has only Class III utilization, all shrinkage would be assigned
to Class III.
In doing its cost accounting for Class I fluid milk, a handler
would have to factor in the extra cost for shrinkage as part of its
calculations. The handler would feel secure knowing that its
competition is going to have the same method of prorating shrinkage
applied to its operation. The benefit of greater uniformity is
apparent. Class I handlers would have a greater incentive to operate
more efficiently if they are to account for milk lost at the higher
class

[[Page 4930]]

value; hence, greater consideration would be given to minimizing
shrinkage to reduce costs.
The additional money paid into the pool by handlers operating pool
distributing plants with high Class I utilization would not be offset
by a lesser amount paid into the pool by handlers operating plants that
manufacture primarily Class II and III products. Therefore, the blend
price to producers would be enhanced by this change in the shrinkage
rules, but it is estimated that it would be less than an average of one
cent per cwt.
Historically, overage has been allocated pursuant to Section 44
(Classification of producer milk) starting with Class III. Since
shrinkage would be assigned pro rata based on the utilization in each
class, it would appear logical to assign overage on the same basis.
Utilization would be adjusted to arrive at gross utilization. The
references to overage and shrinkage would be removed from Section 44.
In computing a handler's value of milk, the method of pricing overage
in Section 60(b) would not change. However, the reference to Sections
44(a)(14) and 44(b) would be replaced with Section 43. Also, as
explained under the discussion of ``General classification rules,''
Section 41 would be removed entirely and the remaining shrinkage
provision would be incorporated in Section 43.
There would be minimal impact on the blend price by assigning
overage before allocation begins rather than in the current step 14 of
Section 44. The total value of milk classified plus the overage value
would be the same using either method. However, if a handler had
receipts from an unregulated supply plant or a plant regulated under
another Federal order, the assignment of such receipts may be slightly
different than the current assignment method.
Animal feed and dumped products should be removed from Class III in
Section 40 and included in shrinkage. This would place less of a
regulatory burden on handlers who are required to file reports
regarding these types of disposition. It would also simplify market
administrator auditing procedures considerably.
The suggestion to include a dollar credit at the difference between
Class III and Class I prices for unaccounted milk was also considered.
This alternative would result in additional time and resource
allocation, and would not simplify the orders, but rather complicate
them.
4j. Classification of Transfers and Diversions (Sec. 1000.42)
Certain changes should be made to the classification of transfers
and diversions section of the orders to simplify and clarify order
language. At the present time, in many orders if any milk that is
diverted from one order to another for requested Class II or III use is
assigned to Class I, the dairy farmer who shipped that milk is defined
as a producer under the order receiving the milk with respect to that
portion of the milk assigned to Class I. In other orders under similar
conditions, the dairy farmer becomes a producer on the receiving order
for all of the milk diverted even though only a portion of the milk was
classified as Class I. When this type of adjustment is necessary, the
diverting handler is informed by the market administrator's office that
there is not enough Class II or III use remaining in the receiving
plant to absorb all of the milk diverted. In such case, the diverting
handler may pick which load or loads of diverted milk will become
producer milk under the receiving order.
Since the orders are not precisely clear on how inter-order
diverted milk should be handled, some modification is needed in the
order language. Under most orders, and as provided in this proposed
rule, milk may be diverted from one order to another for a requested
use other than Class I. However, if there is not enough Class II, III,
or IV utilization in the receiving plant to be assigned to the diverted
milk, some milk may have to be assigned to Class I. When this happens,
the practical administrative problems involve determining which milk of
which dairy farmers and which loads of milk will be shifted as producer
milk from one order to another.
Market administrators should be given some flexibility to handle
these administrative problems on a market-by-market and case-by-case
basis. As a practical matter, most milk diverted between orders is
diverted by cooperative associations that reblend proceeds to their
members. In most cases, it makes little difference to a cooperative
association whether a dairy farmer is a producer on one order or
another order; any differences in blend prices between the orders will
be washed out in the reblending process. In the case of nonmember
producers diverted inter-order, however, differences could arise in a
producer's net proceeds for the month depending upon how much milk was
pooled in each order. Therefore, these situations should be handled in
such a way as to be least disruptive to individual dairy farmers.
A market administrator does not know until handlers' reports have
been received that some portion of milk reported as diverted to another
order cannot be absorbed by the amount of non-Class I utilization in
the receiving order's plant. In such case, the diverting handler should
be given the option of designating the entire load of diverted milk as
producer milk at the plant physically receiving the milk.
Alternatively, if the diverting handler wishes, it may designate which
dairy farmers on the diverted load of milk will be designated as
producers under the order physically receiving the milk. As a last
resort, the market administrator would prorate the portion of diverted
milk among all the dairy farmers whose milk was received from the
diverting handler on the last day of the month, then the second-to-last
day, and continuing in that fashion until the diverted milk that is in
excess of Class II, III, and IV use has been assigned as producer milk
under the receiving order.
A conforming change that should be made in each order relates to
milk that is transferred or diverted for Class II or III use.
Presently, milk may be transferred or diverted on a requested Class II
or III basis. However, with 4 classes of utilization recommended for
the new orders, milk could be diverted for requested Class IV use also.
Rather than specifying ``Class II, III, or IV,'' however, the orders
should simply state ``other than Class I'' to accommodate a system of
more than 3 classes. This language is simpler, shorter, and
accomplishes the same end.
Comments received from interested parties involving transfers and
diversions suggested general simplification and clarification of order
language, as well as some suggestions on how to facilitate the
administration of these provisions. Generally, the comment letters
suggest that the orders be amended so that inter-market transfers are
allocated to Class I in the same manner as transfers within markets.
These letters state that, otherwise, a barrier to the movement of milk
is created. It was argued that such modification would help to assure
distributing plants an adequate supply of milk for fluid use whenever
and wherever it is needed. Other comments argued that if a shipment
between orders is designated as Class I, it is only logical and fair
that the entire shipment should be Class I, rather than be subject to
current pro rata allocation procedures. Proponents of this view argued
that this would lead to a more

[[Page 4931]]

equitable situation in the treatment of inter- and intra-order
transfers, allow for greater equity among handlers, and contribute to
the simplification and reduction of administrative procedure and cost.
A cooperative association and a handler filed comments endorsing a
prelimary suggestion of allowing milk to be diverted inter-order for
any use, but a dairy farmer association submitted one comment critical
of the idea. The association which opposed the idea implied that milk
received on a diverted basis from another order would get a priority
Class I assignment over local producer milk. This was not the intention
behind this suggesion. Any milk that was diverted from one market to
another would have been assigned based upon the lower of the receiving
plant's Class I utilization or the receiving market's Class I
utilization. In view of the concern about the possible impact of
permitting milk to be diverted for any use between orders, no change in
this regard is proposed for the consolidated orders.
Inter-order transfers would continue to be allocated based on the
lower of the receiving plant's or receiving market's utilization rate.
Preference should not be given to such other order bulk milk in the
manner suggested by various commenters. Even within markets with high
Class I utilization rates, there are times when milk is used in surplus
products, and classified as other than Class I. There is no reason why
milk from an other order should be classified as completely Class I
when local milk inevitably is classified other than Class I. Both types
of receipts should share equally in the Class I and surplus
utilization.
In Sec. 1000.42(d)(2)(i), the phrase, ``excluding the milk
equivalent of both nonfat milk solids and concentrated milk used in the
plant during the month,'' is proposed to be added to this sub-paragraph
to more directly arrive at transfer and diversion classification on the
basis of the assignment of a nonpool plant's utilization to its
receipts. The recommended modification will prevent unnecessary
accounting steps which serve no purpose in verifying the utilization at
the nonpool plant. In classifying receipts of fluid milk and cream
products at nonpool plants from Federal order plants, an accounting
balance function serves no purpose.
In Sec. 1000.42(d)(2)(vi), the allocation process for bulk fluid
milk transferred from pool plants to nonpool plants is proposed to be
modified such that any remaining unassigned receipts of bulk fluid
products be assigned, pro rata among such plants, to the extent
possible first to any remaining Class I utilization and then to all
other utilization, in sequence beginning with the lowest class at the
nonpool plant. This change returns the order language to the assignment
sequence that was adopted in the Uniform Classification Decision of
1974. Receipts from pool plants should not be given preference by
assigning such milk to the available Class II use before assigning
receipts from dairy farmers who constitute the regular source of milk
for such nonpool plant. Generally, milk transferred or diverted from
pool plants to nonpool plants is surplus milk and would be used in
storable manufactured products, such as nonfat dry milk and butter. By
assigning transferred or diverted milk to a nonpool plant's Class II
utilization first, the pool plant operator is forced to account for
this milk at the Class II price, even though the nonfat dry milk or
other surplus product that was made with the milk is of a lesser value.
This process will prevent the assignment of receipts at a higher
utilization than the actual utilization.
Receipts of bulk fluid cream products at nonpool plants from pool
plants and plants regulated under other Federal orders, similarly,
would be assigned to the lowest class utilization first. Generally, a
plant operator will use its regular source of supply in the highest
valued uses before using alternative supplies. Thus, if a nonpool plant
receives cream from a pool plant or a plant regulated under another
Federal order, it is likely that the regulated plants were trying to
dispose of their excess cream. The nonpool plant receiving the cream
will most likely use it for manufacturing purposes; therefore, it
should be assigned to the lowest class first. The priority given to
regular source supplies is recognized and the provision modified to
reflect this.
4k. General Classification Rules (Sec. 1000.43)
For classification purposes, the milk of a cooperative bulk tank
handler--i.e., ``a 9(c) handler''--should be treated as ``producer
milk'' of a pool plant operator. This change will shorten and simplify
the allocation section. Accordingly, paragraph (a) of Section 43, as
revised, no longer contains a reference to the classification of
producer milk with respect to a handler described in Section 9(c).
The computation and classification of shrinkage and overage have
been added to this section. This will eliminate Section 41, the section
previously used for this purpose. Also, the last paragraph of Section
43 should be removed because milk for Class IV use now would be
classified in Section 44 of the orders.
4l. Classification of Producer Milk (Sec. 1000.44)
A handler may receive milk from a producer, a cooperative
association acting as a handler on bulk tank milk, by transfer from
another pool plant, or from ``other sources'' such as nonpool plants,
partially regulated plants, and plants that are regulated under other
orders. Because of this diversity in sources of receipt, it is
necessary in a milk order to go through an allocation sequence to
determine which source of milk gets priority to a particular class of
utilization and to determine how producer milk was used. In some
orders, this allocation sequence is done on a system-wide basis; in
others, it is done for each plant receiving producer milk.
Section 44 is one of the most complicated and difficult-to-
understand sections in a milk order. Consequently, an attempt has been
made to simplify and shorten it. Part of this task was made easier by
proposed changes to other sections (e.g., elimination of filled milk,
elimination of individual handler pools, and modification of the
treatment of inter-order transfers and diversions). Also, because
shrinkage and overage are prorated to a handler's gross utilization,
these items do not have to be allocated.
All orders are not now uniform in the classification of producer
milk. For example, some orders (e.g., Chicago Regional) provide for
system allocation while others allocate receipts on a plant-by-plant
basis for a multiple plant handler.
Under the consolidated orders, milk would be allocated on a plant-
by-plant basis, as modified to reflect the other changes proposed
herein. The system allocation method that is found in some orders is
based upon a set of marketing conditions concerning the locations of
handlers' plants and the market's available milk supply in relation to
those plants. These provisions were intended to stop abuses that
occurred when milk was imported from one market to another. Rather than
permit an inter-order transfer to be assigned at a handler's high Class
I utilization plant, while the handler's producer milk was assigned to
lower use value at another of its plants, the system allocation
provisions assigned the transfers on the basis of the handler's
utilization at all plants combined. The objective was to prevent more
distant other order milk from being assigned to Class I use at the
expense of producers who were located nearer to the city markets and
who represented the normal source of supply for the markets' fluid milk
needs.

[[Page 4932]]

The 11 new orders proposed here do not fit within the parameters of
the classical model where a major consumption area is surrounded by
production areas. The marketing areas proposed for the consolidated
orders span several states and have a number of major population
centers. They also have pockets of milk production that, in a number of
cases, are in higher-priced areas than some of the fluid milk plants
within the marketing area. This milk may not be economically available
to a fluid milk plant several hundred miles away. In fact, it may be
that a plant near the periphery of a multi-state market may find its
closest and cheapest source of supply from outside the market rather
than from within the marketing area. Accordingly, the foundation on
which the system allocation rules are based does not support current
marketing conditions. Therefore, all orders are proposed to be modified
to allocate milk only on a plant-by-plant basis rather than on a system
basis.
Another change that should be made in the allocation section
concerns the ``98/2'' rule. At the present time, only 98 percent of the
packaged fluid milk products transferred between orders is allocated to
Class I; the remaining 2 percent is allocated to Class III. This
provision, originating from the June 19, 1964, ``compensatory payment''
decision, was adopted to provide an allowance for ``route returns.''
According to that decision, ``it is reasonable to expect some route
returns will be associated with inter-market transfers just as there
are in connection with milk locally processed in the receiving market *
* * a small allowance of 2 percent for such returns, which must fall
into surplus use, should be included to avoid such over-assignment in
Class I.'' (29 FR 9120).
The 2 percent Class III allowance on inter-market packaged
transfers would be eliminated. As explained above in connection with
the proposed changes to the shrinkage provisions, animal feed and
dumped products would no longer receive an automatic Class III
classification, but instead would be treated as shrinkage and prorated
to the plant's utilization. Similarly, inter-order packaged transfers
would no longer receive an automatic Class III classification for 2
percent of those transfers but instead should be allocated 100 percent
to Class I utilization.
In Sec. 1000.44(a)(3)(iv), some new language to most, but not all,
orders is proposed to be added to make it clear that any fluid milk
products received by a regulated handler from a producer-handler will
be assigned to the receiving handler's lowest utilization available
whether such products are physically received at the regulated
handler's plant or whether they are ``acquired for distribution'' at
some other location. The additional words, ``acquired for
distribution,'' would clarify the application of this provision in
those orders that do not now contain this language.
A key basis for exempting producer-handlers from regulation rests
on the presumption that producer-handlers will be responsible for
disposing of their surplus milk. This is why milk received from a
producer-handler is down-allocated to the lowest possible utilization.
If this were not done, a producer-handler could undercut the minimum
order Class I price by selling its surplus milk to regulated handlers
for fluid use.
In some isolated cases, producer-handlers have avoided lowest-class
pricing of their surplus milk by selling their packaged fluid milk
products to regulated handlers at a non-plant location, such as a
warehouse, from which it is then distributed on routes by the regulated
handler. Under some orders, this milk would not be considered a receipt
from a producer-handler and thus would not be priced. As proposed
herein, however, such fluid milk products that are acquired at the non-
plant location will nevertheless be treated as if they had been
received at the regulated handler's plant and will be priced
accordingly.
In addition to the changes discussed above, Section 44 is proposed
to be shortened and simplified by removing unnecessary references that
serve to confuse the language rather than make it easier to understand.
Where possible, simpler language has been used to replace lengthy
section references.
4m. Conforming Changes to Other Sections (Secs. ________.14,
________.41, and ________.60)
Paragraph (b) of Sec. ________.14 should be removed to reflect the
fact that all packaged fluid cream products now would be accounted for
on a used-to-produce basis. Also, as previously noted, the simpler and
shorter treatment for shrinkage shortens the existing provision to the
point where it is no longer necessary to keep a separate section for
it. Therefore, Section 41 should be eliminated and the revised contents
of that section should be incorporated as a new paragraph (b) in
Section 43. Finally, conforming changes should be made to Section 60
(Handler's value of milk for computing the uniform price) to reflect
the elimination of filled milk from the order, and to reflect changes
in references due to other modifications such as the changes in the
treatment of shrinkage and overage.
4n. Organic Milk
During the development stage of the order reform process, a
proposal was received from Horizon Foods to exempt organic milk from
pricing and pooling under Federal milk orders.
In 1990, Congress passed, and the President signed into law, the
Organic Food Production Act of 1990 (7 U.S.C. 6501 et seq.),
establishing the first Federal standards for organic food products. A
proposed rule was issued on December 5, 1997, and published in the
Federal Register on December 16, 1997 (62 FR 65849), to implement the
National Organic Program.
Organic dairy products can now be found in many, if not most, major
grocery chains in metropolitan areas. The retail price of organic dairy
products is well above non-organic products. For example, in one
Washington-area supermarket a half-gallon of regular 1% milk sells for
$1.59, while a half-gallon of Horizon Organic 1% milk sells for $2.29.
In addition to carrying organic milk, many supermarkets now also carry
organic yogurt, sour cream, butter, and other organic dairy products.
All of these products are priced well above their non-organic
counterparts.
Processors of organic milk have asked for exemption from Federal
regulation. In a May 20 letter to the Department, Horizon Foods argued
that (1) organic milk is a different commodity; (2) the market for
organic dairy products is a niche market; and (3) Federal order
regulation of organic milk is contrary to the intent of the Organic
Foods Production Act because it does not ``facilitate interstate
commerce in fresh and processed food that is organically produced.''
Horizon's proposed solution is to exempt organic milk from the producer
milk definition if the milk is produced on a certified organic farm and
if the broker pays the producer at least 110% of the month's Class I
price for such milk.
The proposal to exempt organic milk from Federal order pricing
should be denied for several reasons. First, contrary to the assertions
of Horizon Foods that all organic milk is priced at 110% of the Class I
price, regardless of how the milk is used, there is evidence that some
organic milk is pooled and priced as non-organic milk under some
orders, including the Chicago Regional and Southern Michigan orders,
for example. Second, if special treatment is provided for organic milk,
a ``Pandora's box'' would be opened for special treatment for other
kinds of milk as

[[Page 4933]]

well. Third, although the retail price of organic milk is well above
non-organic milk, many people believe that organic milk competes with
the regulated market and, therefore, also must be fully regulated.
Fourth, if Congress wished to exempt organic milk from Federal milk
order regulation, they could have done so either in the Organic Foods
Production Act or in the 1996 Federal Agricultural Improvement and
Reform Act; but they did not. Fifth, there is no indication that all
processors of organic milk price their receipts the same way as Horizon
Foods. Even if they did, however, the one class/one price system
currently used by Horizon could be a temporary phenomenon due to the
rapidly expanding market for organic products. The day may come when
the organic market becomes saturated and milk in excess of fluid needs
must be disposed at competitive prices. If and when this happens, it is
likely that some form of classified pricing will be implemented.
Finally, the Act provides for classifying and pricing milk on the basis
of its form and use. As a result, different costs that may be
associated with producing organic milk or other types of milk are not
relevant. For these reasons, it would be inappropriate at this time to
exempt organic milk from pooling or to provide any other type of
special treatment for it under the guise of Federal order reform.
4o. Allocation of Location Adjustment Credits
A provision that is now common to most orders is not suggested for
the proposed consolidated orders. This provision, which allocates
location adjustment credits that are applied to transfers of bulk fluid
milk products between pool plants, is commonly found in Section 52 of
most current orders (See, for example, Secs. 1001.53(h), 1007.52(b),
1030.52(c), or 1079.52(d)).
Under most orders, intra market shipments of milk between handlers
are assigned to Class I use, unless both handlers agree on a lower
classification. Milk that is assigned to Class I use is priced at the
receiving plant subject to a location adjustment credit that may apply
if it is demonstrated that such milk is actually needed for Class I
use. If the credit is applied, the milk is priced at the transferring
plant. This assignment of location adjustment credits is intended to
prevent the use of pool proceeds to pay the hauling cost for the
transfer of bulk milk between pool plants when the intended use of the
milk is for other than Class I use.
To carry out this concept, the provision typically assigns a pool
distributing plant's Class I use first to its milk receipts directly
from producers, then to bulk milk received from a cooperative bulk tank
handler, then to milk received by diversion from another pool plant,
and then to packaged fluid milk products received from other pool
plants. The remaining Class I use in the distributing plant is then
assigned to bulk milk received by transfer from other pool plants. In
some orders, this remaining Class I use is assigned pro rata to all of
the pool plants from which bulk milk was obtained. In other orders, the
remaining Class I milk is first assigned to pool plants with the same
Class I price and then, in sequence, to pool plants with progressively
lower Class I prices.
This provision has varying usage in orders today. Some orders use
it; but most orders never use it. Accordingly, it is not clear whether
it should be included in the consolidated orders.
This proposed rule is based on the premise that Class I milk does
not have the same value at every location. For this reason, Class I
differentials have been established for each order with location
adjustments that result in establishing a unified Class I price
structure that applies to every county and city in the contiguous 48
states. Given this approach, it may no longer be necessary to classify
a bulk movement of milk as Class I milk in one section of the order and
then in another section of the order depart from the principle of
pricing such Class I milk at the plant where it was physically
received.
Some of the proposed orders have transportation credit provisions
that provide for hauling credits on bulk milk received by transfer from
a plant regulated under another Federal order and assigned to Class I
use at the receiving plant. To arrive at the classification of such
milk, the milk is assigned to the lower of the receiving plant's or the
receiving market's Class I utilization. With the long distances
exhibited by milk movements today and the use of transportation credit
provisions that help defray the costs for such movements, it may not be
appropriate to continue location adjustment credit provisions that
could discourage milk from being transferred from pool plants located
closer to distributing plants needing supplemental supplies of milk.
In actual practice, a distributing plant does not receive a fixed
amount of milk each day of the week. Some days are heavy bottling days
when more milk is needed for Class I use. On such days, a distributing
plant may not be able to obtain enough local milk to meet its Class I
needs and may have to import plant milk from more distant locations. At
the end of the month, however, when the allocation of location
adjustment credits takes place, it may appear that there was more than
enough local milk to meet the distributing plant's fluid needs, even
though this was not the case when recapped on a daily basis.
Nevertheless, the allocation provision allocates location adjustment
credits based on monthly volumes of milk, not daily volumes, so the
supply plant could be in a position where it receives no Class I
location adjustment credit even though the milk was indeed shipped for
Class I use.
Finally, the current application of the provision in question can
result in a situation where there is more incentive to receive bulk
milk transferred from a plant regulated under another Federal order
than from a plant regulated under the same order, whether or not any
other transportation credits are involved. Should this occur, it can
result in a transfer of Class I sales to the transferring plant's
Federal order market.

5. Provisions Applicable to All Orders

In addition to the terms and conditions of milk orders previously
described, there are a number of other provisions that need to be
contained in milk orders that describe and define those affected by the
regulatory plan of the program and that provide for common descriptions
of entities, persons, terms of measurement, pooling, and other
administrative needs so that an order can be administered effectively.
Many of these provisions can be uniform across all proposed
consolidated orders. However, different marketing conditions in the
consolidated areas, together with institutional factors, do not lend
themselves to an entirely uniform set of provisions for all orders.
Consequently, in each of the proposed consolidated orders there are
provisions that are unique to each order.
As part of the reform process, an Identical Provisions Committee
(IPC) was established to investigate and recommend needed order
provisions that could be uniformly applied across the consolidated
system of Federal milk orders. The IPC was formed with a three point
purpose: to develop Federal order provisions that can or should be
uniform among orders, to explain why the adoption of the recommended
provisions are needed, and to simplify and streamline proposed order
provisions where feasible. While the previously discussed issues such
as classification, the basic formula price, and Class I milk pricing
lend themselves to uniform applicability across all

[[Page 4934]]

orders, the IPC mission tended to focus on other aspects of milk order
provisions such as uniform definitions, pooling criteria, reporting
requirements and handler payment obligations.
This part of the proposed rule discusses the nature of the proposed
consolidated order provisions, explains why they are needed, and
details whether or not a provision can be uniformly applied in all
consolidated orders. When a provision does not lend itself to uniform
application, the provision is described in subsequent sections of this
proposed rule where the provisions unique to each of the individual
orders are discussed.
To the extent that provisions can be uniformly applicable across
all of the proposed consolidated orders, they are included in Part
1000, the General Provisions of Federal Milk Marketing Orders which
are, by reference, already a part of each milk order. Thus, as proposed
here, the General Provisions includes the definitions of route
disposition, plant, distributing plant, supply plant, nonpool plant,
handler, other source milk, fluid milk product, fluid cream product,
cooperative association, and commercial food processing establishment.
In addition, the General Provisions include the milk classification
section of the order, pricing provisions, and most of the provisions
relating to payments. These additions to the General Provisions should
make milk order provisions more understandable to the general public by
removing the differences that now exist and by consolidating uniform
provisions in one place. Thus, an interested person would only have to
read one ``nonpool plant'' section, for instance, to understand how
that term is applied to all orders. By contrast, at the present time,
``nonpool plant'' is defined in every order and there are slight
differences in the definition from one order to the next.
Pooling Issues
How producers share in the additional revenue that is derived from
classified pricing is one of the most important features of a milk
marketing order. How milk is pooled sets the basis for returning a
blend price to producers by accounting for the use-value, or classified
value, of milk charged to handlers. Marketwide pooling is the method
advocated for distributing these returns as indicated by an
overwhelming majority of public participants. It is the prevailing
method employed in the current system of milk orders, and should
continue to be employed in the consolidated orders.
There were a number of proposals and public comments considered in
determining how Federal milk orders should pool milk and which
producers would be eligible to have their milk pooled in the
consolidated orders. In the broadest sense, most public comments and
proposals advocated a policy of liberal pooling, thereby allowing the
greatest number of dairy farmers the ability to share in the economic
benefits that arise from the classified pricing of milk. While there
were also a number of public comments supporting identical pooling
provisions in all orders, other proposals voiced comments on the need
to have pooling provisions reflect the unique and prevailing supply and
demand conditions in each marketing area. Fundamental to most pooling
proposals and comments was the notion that the pooling of producer milk
should be performance oriented in meeting the needs of the fluid
market. The pooling provisions proposed for the consolidated orders
provide a balance between reasonable and needed performance criteria
and a liberal pooling policy.
The pooling provisions for the consolidated orders are overall less
restrictive in the movement of milk between orders and make it easier
for producers to become associated with and pooled on a market.
Additionally, the provisions are more ``market oriented'' because they
allow milk to become pooled and priced where the greatest needs are
exhibited for satisfying fluid demands. Additionally, there is enhanced
flexibility in how plants can be pooled without diminishing the ability
of the regulatory plan to satisfy the fluid demands of a market. For
example, this decision recognizes that in some markets, fluid milk
processors handle a significant volume of milk for Class II uses. Much
of the time this milk may be processed in a separate processing plant.
To accommodate this, unit pooling is an option if at least one plant of
the unit qualified as a pool distributing plant and the other plants of
the pool unit are located in the marketing area and process only Class
I or Class II products. The separate processing plant would also need
to be located in the same or lower price zone than the qualifying pool
distributing plant. For supply plants, system pooling offers
flexibility where handlers operate more than one supply plant. Further,
the consolidated orders have identical performance requirements for
pooling cooperative and proprietary handlers alike, thereby making
plant ownership irrelevant for pooling purposes.
Pool plant eligibility continues to be dependent upon plant
operators and handlers meeting certain performance standards geared to
satisfying the fluid demands of the market. Because of differences
between the consolidated markets, mainly the level of Class I demand
and the seasonality of milk production, a uniform standard for pool
plants for the consolidated markets is not recommended. Such standards
need to be specific to each of the consolidated orders. Additionally,
the market administrator should be authorized to react to changing
market conditions if there is a need to change performance standards
and to promote the efficient movement of milk and in satisfying
expected demands of the fluid market. These needs are reflected and
accommodated in the definitions of the types of pool supply plants in
the consolidated orders. Providing for differences between markets
ensures more equitable distribution of the benefits and burdens of
marketwide pooling.
Taken as a whole, the pooling provisions also are designed to
properly specify which producers are associated with the marketwide
pool, thereby assuring their ability to share in the economic benefits
that accrue from classified pricing. Orders do require some criteria
for determining when a producer has an association with a market under
which their milk will be pooled and priced. In this context, a minimal
``touch-base'' requirement for producer milk is called for in most
consolidated orders for pooling qualification. This provision allows a
producer's milk to be received at a pool plant a minimum number of
times to be eligible for diversion to nonpool plants thereby ensuring
that the milk is available for fluid use if needed.
The producer and producer milk provisions for the consolidated
orders also recognize that disorderly marketing conditions can arise
from the actions of handlers that seek to pool milk on an order only
when more favorable alternatives are not otherwise available.
Reasonable measures are provided to prevent producers who are not
regularly a part of a marketwide pool from deriving the benefits of the
marketwide pool if certain performance criteria are not met. Similarly,
it is recognized that producer milk might not be pooled because of
changes in class-price relationships in any given month. Public
comments and proposals offered to address these issues included ``lock-
in'' or ``lock-out'' provisions that, as proposed, would have the
effect of regulating producers. They are not recommended. The
provisions

[[Page 4935]]

presented for both the producer and producer milk definitions provide
reasonable measures and safeguards for determining conditions where
producers and their milk should participate in a marketwide pool
without causing producers to become regulated in their capacity as
producers.
A suggestion for ``open pooling,'' where milk can be pooled
anywhere, is not provided for in the consolidated orders. There are two
reasons for this. First, open pooling is not based on performance, that
is, open pooling provides no reasonable assurance that milk will be
made available in satisfying the fluid demand of a market. Second,
advocates of open pooling have presented this pooling option in the
context of a ``package'' of other order provisions, including Class I
pricing, that conflict with the method of Class I pricing recommended
in this decision. For this reason open pooling is unworkable. For this
reason also, proposals to create and fund ``stand-by'' pools are
similarly rejected.
Where a handler's plants are regulated continues to be based
primarily on the basis of where sales are made, rather than where
plants are physically located, with only minor exceptions. The change
in where a distributing plant will be regulated will require a
reasonable measure of at least three consecutive months of more sales
in another market area before the regulatory status of a plant and
producer milk associated with the plant will shift to another milk
order. Supply plants will be regulated under the order in which the
greatest portion of its qualifying shipments have been made.
The proposed definition of an exempt plant recognizes that some
handler operations are too small to have a significant impact on the
competitive relationship of competing fluid processors in the market.
In recognition of this, the amount of milk for an exempt plant has been
liberalized without references to daily average deliveries criteria
that are currently applicable in some orders.
Route Disposition
Route disposition is a measurement of sales used to determine a
distributing plant's association with a marketing area. It is defined
to mean the amount of milk delivered by a distributing plant to a
retail or wholesale outlet (except a plant), either directly or through
any distribution facility (including disposition from a plant store,
vendor or vending machine), of a fluid milk product in consumer-type
packages or dispenser units that is classified as Class I milk.
The recommended route disposition definition differs from the
definition contained in some current orders. Presently, the route
disposition definition of several orders makes reference to plant
movements of packaged fluid milk products between distributing plants
with respect to determining if such transfers should be considered
``route disposition'' of the transferring or receiving plant. As
proposed here, however, this issue is addressed in the pool plant
section, which deals with the pooling standards applicable to a
distributing plant.
Plant
A plant definition is included in all orders to specify what
constitutes an operating entity for pricing and regulatory purposes. As
provided in Sec. 1000.4 of the General Provisions, a plant is the land,
buildings, facilities, and equipment constituting a single operating
unit or establishment at which milk or milk products are received,
processed, or packaged. This is meant to encompass all departments,
including those where milk products are stored, such as a cooler. The
plant definition does not include a physically separate facility
without stationary storage tanks that is used only as a reload point
for transferring bulk milk from one tank to another, or a physically
separate facility that is used only as a distribution point for storing
packaged fluid milk products in transit for route disposition.
To account for regional differences and practices in transporting
milk, some orders provide for the use of reload points for transporting
bulk milk that do not have stationary storage tanks.
Farm-Separated Milk
With the advent of new technology for on-farm separation of milk
into its components, some additional regulatory language is needed to
specify who is the responsible handler for the milk or milk components
leaving the farm and how these components will be classified and
priced. This determination will be based, in part, on whether the farm
processing facility is a plant.
Ultrafiltration (UF) is a membrane process that transfers water and
low-molecular weight compounds through a membrane while retaining
suspended solids, colloids, and large organic molecules. It selectively
fractionates some milk solids components and selectively concentrates
other solids components of milk.
When a UF membrane is used, water, lactose, uncomplexed minerals
and other low-molecular-weight organic compounds pass through the
membrane. For example, if unaltered milk containing 3.5 percent fat,
3.1 percent protein, and 4.9 percent lactose is run through a UF
membrane until half of the original volume is eliminated, the remaining
product not passing through the membrane (i.e., retentate) will contain
all of the fat and protein but only half of the lactose. The permeate
(i.e., that part of the original milk that does pass through the
membrane) will contain water, lactose, non-protein nitrogen, and about
one-sixth of the minerals.
Reverse osmosis (RO) is also a membrane process, but the membranes
have much smaller pores than UF membranes, allowing only the water to
pass through. The end product essentially is concentrated milk.
At the present time, both reverse osmosis and ultrafiltration
systems are being utilized on some farms, principally large farms in
the southwestern United States. The product shipped from these farms
(i.e., the retentate) currently is sent to processing plants for use in
manufactured products but it could be used in a range of milk products.
The retentate received from a farm with a UF or RO system will be
treated as producer milk at the pool plant at which the milk is
physically received or, if the retentate is shipped to a nonpool plant,
as producer milk diverted to a nonpool plant. In either case, the milk
or milk components will be priced at the pool plant or nonpool plant
where the milk is physically received.
To be considered a farm and a producer, as opposed to a plant and a
handler, an RO or UF unit must be under the same ownership as the farm
on which it is located and only milk from that farm or other farms
under the same ownership may be processed through the unit. The
producer operating the unit shall be responsible for providing records
of the daily weights of the milk going through the unit. Also, the
producer must provide samples for each load of milk going through the
unit and must furnish the receiving plant with a manifest on each load
of retentate showing the scale weight along with samples of the
retentate. Finally, the producer operating the RO or UF unit must
maintain records of all transactions which must be available to the
Market Administrator upon request. If the producer does not meet these
recordkeeping and reporting requirements, the unit will be considered
to be a plant.
RO and UF retentate will be considered to be producer milk at the
plant which receives it. The pounds of

[[Page 4936]]

RO and UF retentate received will be priced according to the skim-
equivalent pounds of such milk. The skim-equivalent pounds for RO
retentate will be determined by dividing the solids-not-fat pounds in
the retentate by the average producer solids-not-fat in the skim
portion of the producer milk used in the product. The butterfat pounds
would then be added to this number to arrive at the product skim-
equivalent pounds.
In computing the fluid equivalent of UF retentate, the fluid
equivalent factor should be computed by dividing the true protein test
in the skim milk portion of the retentate by the true protein test in
the skim milk portion of the producer milk used in the product. Adding
the butterfat pounds to this computation will yield the product
equivalent pounds.
In addition to having UF and RO equipment, some farms today may
have a separator to separate skim milk from cream before they leave the
farm. Rules must also be established for this type of operation.
Skim milk and cream going through a farm separator also should be
treated as producer milk if received at a pool plant or diverted to a
nonpool plant. The producer will be required to obtain scale weights
and tests on each load of skim and cream shipped along with samples of
each. The same ownership, recordkeeping, sampling and reporting
requirements that apply to RO and UF units will also be applicable.
In formulating a policy for the treatment of RO and UF retentate,
it is important to recognize that the milk produced on a farm with RO
or UF equipment is fully available to meet the needs of the fluid
market, either before or after passing through such units. Therefore,
there should be no question concerning the propriety of pooling this
milk along with other producers' milk.
At this writing, the Food and Drug Administration (FDA) has not yet
decided whether UF retentate can be reconstituted and sold as fluid
milk. However, FDA has approved the use of UF retentate in certain
cheese products on a trial basis. Therefore, before receiving UF
retentate for use in any product, handlers should be certain that such
use has been approved by the FDA.
Distributing Plant
A distributing plant is defined as a plant that is approved by a
duly constituted regulatory agency to handle Grade A milk and at which
fluid milk products are processed or packaged and from which there is
route disposition. The time and location of route disposition are
included in the distributing plant definition in some current orders.
However, whether route disposition occurred during the month or, within
the marketing area, are more appropriately determined to be pooling
issues. Therefore, they are discussed and included in each consolidated
order's pool plant definition.
Supply Plant
A supply plant is a regular or reserve supplier of bulk milk for
the fluid market that seasonally contributes to coordinating the supply
of milk with the demand for milk in a market. As defined in this
decision, a supply plant is a plant other than a distributing plant
that is approved by a duly constituted regulatory agency to handle
Grade A milk and at which fluid milk products are received or from
which fluid milk products are transferred or diverted.
Pool Plant
The pool plant definition of each proposed consolidated order
provides standards to distinguish between those plants engaged in
serving the fluid needs of the marketing area and those plants that do
not. Pool plants serve the market to a degree that warrants their
producers sharing in the added value that derives from the classified
pricing of milk. While the pool plant definition in every consolidated
order provides for a set of common principles, the definition is
specific and unique to each consolidated order.
Each type of pool plant can be generically described to share
certain common characteristics. However, to the extent that marketing
conditions and other related factors vary across the country, the
proposed consolidated orders need differing terms of applicability and
performance standards in order to determine the regulatory status of a
plant.
All pool distributing plants in the consolidated orders will base
pool plant status on two performance measures: (1) the proportion of
its route disposition to bulk receipts, and (2) the proportion of route
disposition in the marketing area. If a pool distributing plant
operates in more than one market, the plant's primary association with
a marketing area generally will be determined on the basis of where the
majority of fluid sales occur. In the event that a plant is not
primarily associated with any marketing area, it will be regulated in
the marketing area in which it is located provided the plant meets the
order's pooling standards. If it is not located within any marketing
area, it will be regulated wherever it has the most route disposition.
Performance standards for pool supply plants are designed to
attract an adequate supply of milk to meet the demands for fluid milk
in a market. Historically, a pool supply plant did not include any
portion of a plant that was not approved for handling Grade A milk and
that was physically separated from a portion of the plant that had
approval. Currently, inspection agencies most commonly render only one
type of approval for an operation, but provision is made to designate a
physically separated portion of the plant as a ``nonpool plant.''
Types of Pool Plants and Pool Qualifications Pool Distributing Plant
Many orders presently refer to Grade A milk in defining a pool
distributing plant. However, a distributing plant, by definition, can
only handle Grade A milk, so this qualification is redundant and has
been removed from the structure of the pool plant section. Also, as
proposed here, the proportion of route disposition to receipts is
derived from a divisor of receipts of bulk fluid milk products as
opposed to receipts of total fluid milk products.
The recommended ratio of route disposition to total receipts of
bulk fluid milk products for pool distributing plant qualification will
vary among orders, but for most orders it will be at least 25 percent.
This is the lowest ratio currently used among all orders, and will
prevent depooling of plants that presently enjoy pool plant status. To
the extent this percentage is found to be too low for certain milk
``deficit'' regions, higher percentages are provided in those proposed
consolidated orders.
Performance standards are also needed to establish a minimum
threshold of market participation, as measured by route dispositions in
a marketing area, which when met or surpassed, cause a distributing
plant to be fully regulated in that market. Currently, the proportion
of route disposition in the marketing area is expressed in some orders
as a percentage of total route disposition and in other orders as a
percentage of total receipts of fluid milk products. A percentage of
total route disposition is recommended for the consolidated orders.
Some current orders require a daily average minimum of route
disposition in the marketing area. This standard has been removed
because it is covered under the exempt distributing plant definition
described below. The recommended ratio of 15-25 percent of a plant's
route disposition in the marketing area provides a reasonable measure
of a distributing plant's

[[Page 4937]]

association with a marketing area, while, at the same time, precluding
a change in the regulatory status of plants that are currently
partially regulated or regulated by a state regulatory program.
To facilitate proper administration and accounting, all orders
currently provide that packaged fluid milk products transferred from
one handler to another be treated as interhandler transfers, with each
transaction properly identified and specifically reported to affected
market administrators. This should continue in the consolidated orders.
However, for the single purpose of qualifying a plant as a pool
distributing plant, a subsection in each consolidated order is included
to address the transfer of packaged fluid milk products to a
distributing plant. Packaged fluid milk products that are transferred
to a distributing plant shall be considered as route disposition from
the transferring plant rather than the receiving plant. In addition to
transfers that occur for sales in the marketing area, this subsection
is also meant to address the concern of properly pooling a plant with
sales outside of the marketing area that are made through another
plant. This is necessary to preclude a plant from becoming partially
regulated if the plant shipped significant quantities of packaged fluid
milk products to another distributing plant.
Pool Supply Plant
Currently, pool supply plants are generally defined by their
association with a marketing area and their ability to move milk to
pool distributing plants that service the marketing area. Pool supply
plants should continue to be defined in this way. However, the pool
supply plant definition does not lend itself to uniform application in
all consolidated orders. Therefore, pool supply plant performance
standards should be established according to regional needs. The
specific standards adopted in each order are described in the pool
plant section of each new order. For orders outside the southeastern
United States, provisions are provided for two types of supply plants:
a pool supply plant and pool reserve supply plant. Pool reserve supply
plants are generally defined as plants located within the marketing
area that are involved primarily in manufacturing nonfluid milk
products. They nevertheless serve to balance the market by providing a
ready supply of fluid milk when needed and a manufacturing alternative
when milk for fluid uses is not needed. By contrast, pool supply plants
are generally defined as plants involved predominately in the assembly
of raw milk supplies at the farm and shipment of these supplies to
distributing plants. There are proposed marketing areas where just a
pool supply plant provision would be adequate, without the additional
distinction of a pool reserve supply plant. For those marketing areas
where it is preferable to distinguish between plants located in and out
of the marketing area, different performance requirements are
recommended to fit the needs of the consolidated order.
Pool Reserve Supply Plant
A pool reserve supply plant is defined as a plant capable of
handling the reserve milk required for a marketing area that also
stands ready to make milk available to meet the fluid needs of the
market. Such a plant must be approved to handle Grade A milk, and must
be located in the marketing area. In addition, the plant must provide
milk in fluid use to pool distributing plants certain month of the year
when milk production declines. Finally, a reserve supply plant must
apply for, and receive, formal acknowledgment of pool status by the
market administrator. Because deliveries of a pool reserve supply plant
to a distributing plant will specify seasonal performance standards,
they cannot be uniform across all orders. Therefore, each proposed
consolidated order having a pool reserve supply plant definition will
differ with respect to the level and timing of performance required.
In qualifying a supply plant's milk receipts for pooling, several
current orders allow direct milk shipment from farms to distributing
plants, while other current orders require all of the milk, or at least
some of it, to be transferred through a plant. Transferring deliveries
through a plant may often be uneconomical and inefficient when compared
to the direct delivery of milk from farms. Therefore, for most of the
consolidated orders, both supply plants and reserve supply plants are
allowed the flexibility to meet delivery requirements by direct
deliveries from farms to distributing plants if the supply plant
operator deems that to be the most efficient means of moving milk.
A number of orders currently provide for special pool status for
supply plants located in the marketing area but such status is
generally limited to cooperatives. Several of the orders which have
this provision will retain it under the consolidated orders. In other
orders, however, especially those with many manufacturing plants
operated by proprietary handlers, ownership distinction as a condition
for pool reserve supply plant status has been removed. This should
promote increased handler equity in the ability for plants to compete
for milk supplies and for producers associated with such plants to have
their milk priced and pooled under the order. Additionally, there are
manufacturing plants located in some marketing areas that are currently
designated as pool plants. This provision will ensure the retention of
pool status of such plants.
Location in the marketing area should also be a requirement for
pool reserve supply plant status. This is recommended because it will
preclude the pooling of a plant that is outside the marketing area and
not in a position to economically supply the market with supplemental
milk or to efficiently handle its reserve supplies. In addition, it
will preclude the pooling of milk on a market when such milk has no
real association with the market at all and only serves to lower a
market's Class I utilization, thereby making it more difficult to
attract milk needed for fluid use. When a distributing plant needs more
milk, a reserve supply plant located in the marketing area can most
rapidly and economically route milk directly to where it is needed.
For those orders providing for reserve supply plants, pool plant
status will be conveyed by the market administrator after notification
is filed in writing by the plant operator. The notification should be
filed no later than June 15 of each year. Pool status would begin on
July 1 of the same year and continue for the remainder of the year
unless: (1) the plant operator later requests nonpool plant status; (2)
the plant subsequently fails to meet the specified performance
standards, or; (3) the plant qualifies as a pool plant under another
Federal order. If a plant operator requests nonpool status for any
month, such nonpool status should remain in effect until the following
June, when the cycle of notification for pool reserve supply plant
status begins anew. Notification to the market administrator serves to
demonstrate a commitment to the market and to act as a deterrent to
temporary changes in pooling status to the detriment of the market.
Pooling Options
Unit pooling. Unit pooling allows two or more plants located in the
marketing area and operated by the same handler to qualify for pool
status as a unit by meeting the total and in-area route disposition
standard as if they were a single pool distributing plant. To qualify
as a unit, at least one of the plants in the unit--i.e., the primary
plant-- must qualify as a pool distributing plant on its own standing
and the other plants in

[[Page 4938]]

the unit must process only Class I or Class II milk products.
Unit pooling serves to accommodate and provide a flexible
regulatory approach in addressing the specialization of plant
operations. It also minimizes unintended regulatory effects that may
cause the uneconomical and inefficient movement of milk for the sole
purpose of retaining pool status. However, some conditions need to be
satisfied for unit pooling. The ``other'' plant(s) of the pool unit--
i.e., the plants that would not qualify for pool status as a single
plant--must be located in an equivalent or a lower price zone than the
primary pool distributing plant. This condition is required to assure
that the transportation of milk for Class II uses will not be
subsidized through the marketwide pool and to assure pricing equity to
all handlers processing Class II products that do not use unit pooling.
Unit pooling arrangements status must be requested in writing and
approved by the market administrator for its proper implementation and
administration.
System pooling. As previously discussed, supply plants and reserve
supply plants provide a benefit to the market because they are required
to meet certain performance standards in supplying the needs of the
fluid market. They also serve to balance the market. Because handlers
often operate more than one supply plant within the market, they should
be afforded flexibility in meeting the performance standards for
pooling. System pooling can provide this flexibility. A system of
plants can be established if the plants meet applicable performance
standards in the same manner as any single plant. A system may consist
of two or more supply plants, or two or more reserve supply plants,
operated by the same handler or by one or more cooperative
associations.
System pooling should be declared by a handler in writing to the
market administrator so that pooling of the system can be properly
administered. If a handler causes one of the plants to become
ineligible for system pooling, that plant will not be part of the
system for the duration of the calendar year. Likewise, plants, except
for the proposed Upper Midwest consolidated marketing area, cannot be
added to the system after the written request for system pooling is
acknowledged by the market administrator.
Adjustment of Pooling Standards
The consolidated orders should provide the market administrator
with authority to adjust various pooling standards, including pool
plant shipping standards in most consolidated orders. Such a provision
would replace the ``call'' provision that is now included in some
orders. This change allows all market administrators to adjust the
shipping standards for pool supply and pool reserve supply plants if
they find that such revision is necessary to encourage needed shipments
or to prevent uneconomic shipments of milk. For most consolidated
orders, it is also recommended that the market administrator be
authorized to adjust the total and in-area route disposition
requirements for pool distributing plants. This flexibility could be
particularly beneficial during a plant breakdown, a labor strike, the
sudden loss or change in accounts, or some other conditions that would
otherwise result in regulatory instability or market disruption.
A finding by the market administrator that adjustments are
warranted would follow an investigation conducted on the market
administrator's own initiative or at the request of interested parties.
This provision allows the market administrator to respond promptly to
changes in local marketing conditions. Granting the authority for the
market administrator to make needed adjustments in the manner specified
currently exists in some Federal orders and has proven to be
responsive, efficient, effective, and commensurate with the authorities
already delegated by the Secretary to the market administrator.
Nonpool Plant
A definition is provided in all orders describing plants which
receive, process or package milk, but which do not satisfy the
standards for being a pool plant. While providing for such a definition
may appear redundant, this provision is useful to more clearly define
the extent of regulation applicable to plants. Nonpool plants should
include a plant that is fully regulated under another Federal order, a
producer-handler plant, a partially regulated distributing plant, an
unregulated supply plant and an exempt plant. The definitions for these
nonpool plants are not materially different than those provided in the
current orders with the possible exception of an ``exempt plant.''
A number of Federal orders exempt from regulation small
distributing plants which, because of their size, do not significantly
impact competitive relationships among handlers in the market. The
level of route disposition required before an exempt plant becomes
regulated varies in the current orders. As recommended, any plant with
route disposition during the month of 150,000 pounds or less would be
exempt in the consolidated orders. This limit reflects the maximum
amount of fluid milk products allowed by an exempt plant in any current
Federal milk order and ensures plants that are currently exempt from
regulation will remain so.
Many current Federal orders also provide regulatory exemption for a
plant operated by a state or Federal governmental agency. For example,
some states have dairy farm and plant operations that provide milk for
their prison populations. As recommended, regulatory exemption would be
continued under the consolidated orders unless pool plant status is
desired. Additionally, regulatory exemption is intended to include
colleges, universities and charitable institutions because these
institutions generally handle fluid milk products internally and have
no impact in the mainstream commercial market. However, in the event
that these entities do distribute fluid milk through commercial
channels, route sales by such entities, including government agencies,
will be monitored for determining if Federal regulation should apply.
The determination and verification of exempt plant status will,
from time to time, necessitate the need for the market administrator to
require reports and information deemed appropriate for the sole purpose
of making this determination. Such authority is currently provided in
orders and should continue.
Handler
Federal milk orders regulate those persons who buy milk from dairy
farmers. Such persons are called handlers under the order. These
persons have a financial responsibility for payments to dairy farmers
for milk in accordance with its classified use. They must file reports
with the market administrator detailing their receipts and utilization
of milk. As recommended, the handler definition includes the operator
of a pool plant, a cooperative association that diverts milk to nonpool
plants or delivers milk to pool plants for its account, and the
operator of a ``nonpool plant,'' which would encompass a producer-
handler, a partially regulated distributing plant, a plant fully
regulated under another Federal order, an unregulated supply plant, and
an exempt plant.
In addition, ``third party'' organizations that are not otherwise
regulated under provisions of an order are included in the handler
definition.

[[Page 4939]]

This category includes any person who engages in the business of
receiving milk from any plant for resale and distribution to wholesale
and retail outlets, brokers or others who negotiate the purchase or
sale of fluid milk products or fluid cream products from or to any
plant, and persons who, by purchase or direction, cause the milk of
producers to be picked up at the farm and/or moved to a plant. Such
intermediaries provide a service to the dairy industry. These persons
are not, however, recognized or regulated as entities required to make
minimum payments to producers. The expanded marketing chain brought
about by such intermediaries has made it increasingly difficult for the
market administrator to track the movement of milk from farms to
consumers. The recommended handler definition enables the market
administrator to more readily identify those entities for the
information needed to properly administer an order.
Producer-Handler
It has been a long-standing policy to exempt from full regulation
many of those entities that operate as both a producer and a handler.
Generally, a producer-handler is any person who provides satisfactory
proof to the market administrator that the care and management of the
dairy farm and other resources necessary for own-farm production and
the management and operation of the processing plant are the personal
enterprise and risk of such person. A primary basis for exempting
producer-handlers from the pricing and pooling provisions of a milk
order is that these entities are customarily small businesses that
operate essentially in a self-sufficient manner. Also, during the
history of producer-handler exemption from full regulation there has
been no demonstration that such entities have an advantage as either
producers or handlers so long as they are responsible for balancing
their fluid milk needs and cannot transfer balancing costs, including
the cost of disposing of reserve milk supplies, to other market
participants.
The current orders have varying producer-handler definitions that
address specific marketing conditions and circumstances. For example,
they specify different limits on the amount of milk that producer-
handlers may purchase and retain their exempt status. Some
modifications are being made to the producer-handler provisions in the
consolidated orders for standardization. However, these changes are not
intended to fully regulate any producer-handler that is currently
exempt from regulation.
As proposed, any handler, including a producer-handler, is exempt
from the pooling and pricing provisions of an order during any month in
which route disposition is less than 150,000 pounds. Thus, the
producer-handler exemption only applies to producer-handlers with route
disposition of 150,000 pounds or more. Since such producer-handlers are
not subject to the pricing and pooling provisions of an order as are
fully regulated handlers, it is appropriate to continue to require
producer-handlers to rely on their own-farm production in meeting their
fluid sales and to independently market their surplus milk production
without participation in the marketwide pool. However, a producer-
handler should be allowed some marginal flexibility on supplemental
milk purchases provided they are from regulated sources. Relatively
small supplemental purchases do not undermine the concepts of
classified pricing and marketwide pooling. As proposed, producer-
handlers are allowed to purchase some specified amount of supplemental
fluid milk products each month from pool sources. As is currently the
case, any supplemental requirements of fluid milk products by a
producer-handler will continue to be limited to receipts from regulated
sources, thus insuring that producers associated with the marketwide
pool share in the economic benefit of all Class I sales over and above
what a producer-handler's own production may not have satisfied.
It is appropriate to continue requiring producer-handlers to rely
primarily on their own-farm production to balance their fluid sales and
to find outlets for their surplus production. Producer-handlers must
also rely upon their own distribution system to find outlets for their
milk. A producer-handler will be allowed to distribute milk to the
plant of a fully regulated handler. However, disposal of surplus milk
production by a producer-handler to the plant of a fully regulated
handler, whether in bulk or packaged form, will be allocated at the
pool plant to the lowest class-use of the receiving plant, thereby
preserving the Class I share of the market for producers who bear the
burden of balancing a market's surplus disposal. Disposal of packaged
fluid milk products by a producer-handler to a distribution facility
operated by a fully regulated handler should not be permitted. It would
allow a producer-handler to dispose of its surplus production by
capturing a greater share of the Class I market thereby receiving an
unearned economic benefit not accorded to producers pooled on the
market. This restriction also prevents a fully regulated handler from
purchasing Class I milk at less than the minimum order price that other
fully regulated handlers must pay. Accordingly, a producer-handler will
not be allowed to dispose of fluid milk products using the distribution
system of another handler, nor through any other channel, division, or
department of a pool handler and retain exemption from full regulation
under an order. Since a producer-handler must control its own
distribution, it will not be allowed to have disposed of milk to any
independent distributor. Route disposition to retail stores (owned by
any entity and not located in a regulated plant) or to a distribution
facility owned by retail stores (and not by a regulated plant or
independent entity) would be allowed.
Notwithstanding the exemption of producer-handlers from regulation,
there may be instances where it is to the advantage of the person who
is both a producer and a handler to operate such businesses as two
distinct entities. The proposed new orders provide the producer-handler
with the flexibility to realize this advantage. Upon request by a
producer-handler to the market administrator, the plant portion of the
operation would be a fully regulated distributing plant while the farm
portion of the operation would be accorded producer status.
Public comments were received regarding the extent of regulation
that should apply to producer-handlers. The majority of public comments
supported the status-quo regarding the regulatory treatment of producer
handlers, emphasizing that they should remain exempt from regulation in
accordance with current order provisions and that the provisions should
be regional in nature so as not to affect or change the current
regulatory status of producer-handlers. One of the public comments
received proposed that the exemption of producer-handlers from the
regulatory plan of milk orders be eliminated. This proposal is denied.
In the legislative actions taken by the Congress to amend the AMAA
since 1965, the legislation has consistently and specifically exempted
producer-handlers from regulation. The 1996 Farm Bill, unlike previous
legislation, did not amend the AMAA and was silent on continuing to
preserve the exemption of producer-handlers from regulation. However,
past legislative history is replete with the specific intent of
Congress to exempt producer-handlers from regulation. If it had been
the intent of Congress to remove the exemption, Congress would

[[Page 4940]]

likely have spoken directly to the issue rather than through omission
of language that had, for over 30 years, specifically addressed the
regulatory treatment of producer-handlers.
Since producer-handlers are intended to be exempt from most
regulation, some means must be provided to determine and to verify
producer-handler status. Accordingly, the market administrator is
provided with the authority to require reports and other information
deemed appropriate to determine that an entity satisfies the
requirements of producer-handler status. Such authority is currently
provided in the orders and should continue.
Producer
Under all orders, producers are dairy farmers that supply the
market with milk for fluid use or who are at least capable of doing so
if necessary. Producers are eligible to share in the revenue that
accrues from marketwide pooling of milk. The producer definitions of
the individual orders are described under the regional discussions
later in this document. Responding to regional needs, producer
definitions will differ by order with respect to the degree of
association that a dairy farmer must demonstrate with a market.
A dairy farmer may not be considered a producer under two Federal
milk orders with respect to the same milk. If a dairy farmer's milk is
diverted by a handler regulated under one Federal order to a plant
regulated under another Federal order, and the milk is allocated at the
receiving plant (by request of the diverting handler) to Class II, III
or IV, the dairy farmer will maintain producer status in the original
order from which milk was diverted.
Since producer-handlers and exempt plants are specifically exempt
from Federal order pricing provisions, the term producer should not
include a producer-handler as defined in any Federal order. Likewise,
the term producer should not apply to any person whose milk is
delivered to an exempt plant, excluding producer milk diverted to such
exempt plant.
It would not be appropriate to share the economic benefits that
arise from classified pricing through marketwide pooling with dairy
farmers whose milk is not regularly associated with the market. For
example, a dairy farmer may decide to deliver milk to a market's pool
plants only when a more favorable unregulated market is not available,
or an unregulated plant may attempt to move its surplus milk to a
market's pool plant only to derive an economic benefit from the
marketwide pool.
An unregulated plant operator, often a cooperative association, may
receive all of a dairy farmer's milk at its plant when milk supplies
are tight and, during such times, not share the higher-use value of
such milk with other dairy farmers through the marketwide pool. On the
other hand, during a period of flush production, the same plant may
seek to dispose of surplus milk through a market's pool plants to pass
the cost of balancing milk supplies to dairy farmers that regularly
supply the fluid market through the mechanism of the marketwide pool.
Under such circumstances, producer status should not be accorded to
those dairy farmers under an order. Doing so would place producers who
regularly fulfill a market's fluid milk needs with the burden of
carrying the surplus costs of balancing unregulated fluid markets
without the benefit of sharing in the additional revenue that is
derived from those markets when circumstances are more favorable.
Another circumstance can also arise when it may be advantageous not
to pool milk, a practice commonly referred to as ``depooling.'' When
manufacturing class prices for a month are higher than an order's
uniform, or blend price, milk at manufacturing plants is often depooled
because the operators of such plants otherwise would be required to pay
into the marketwide producer-settlement fund. Such payments would
benefit the marketwide pool but would be disadvantageous to those
having to make them. This practice is generally disruptive to the
marketwide pool and is not conducive to maintaining orderly market
conditions. In instances involving depooled milk, it is a handler's
decision in moving milk that impacts producers and pool milk value. It
is also a handler's action that determines whether a farmer retains
producer status or becomes associated with another marketing area.
The proposed orders that are vulnerable to this type of abuse
contain a provision to deter handlers from moving milk in a manner that
is disadvantageous to the market's regular producers. Handlers who
choose to regularly supply nonpool plants as their primary market, and
handlers who move milk in and out of the regulated market, should not
consistently enjoy the benefits of equalization payments from the
marketwide pool. However, this should not apply in the event that a
handler moves milk supplied by a producer under one Federal order to
another Federal order, nor are these provisions intended to overlap
with order provisions for the diversion of milk. Should a handler
exceed specified diversion limits, only the over-diverted milk is
removed from the pool; the producer should maintain ``producer'' status
for other milk delivered that month.
The recommended method for determining when a dairy farmer is not
properly associated with a market is commonly referred to as a ``dairy
farmer for other markets'' provision, which is a component of the
producer definition in some of the consolidated orders. Under this type
of provision, milk deliveries to nonpool plants that are not reported
by handlers as diversions from pool plants would result in the loss of
producer status for a dairy farmer's milk for some fixed time period.
While the receipt of, or diversion by, a pool handler of other milk
from the same producer during that fixed time period is not restricted,
the minimum payment obligation of the handler for that milk would not
be regulated under the Federal milk marketing orders. Such milk would
be treated as ``other source milk,'' and the dairy farmer's milk would
not be included in the pool.
Where this provision is provided, the loss of producer status would
remain in effect for the current month and for the following two
months. Exception is made to accommodate the market demands for milk
during the ``short'' season. If milk is depooled during the ``short''
season, the loss of producer status should remain in effect for the
current month only; otherwise, it would discourage the pooling of milk
during the remainder of the ``short'' season. Once the short season
ends, however, the dairy farmer should not be eligible for producer
status during the subsequent flush production season. Producer status
will be lost until the beginning of the following ``short'' season. The
relevant time periods that describe which months are applicable in
defining the ``short'' season are described in each of the consolidated
orders.
Producer Milk
All orders currently provide for defining and identifying the milk
of producers which is eligible for inclusion in a particular marketwide
pool and should continue to do so. However, this definition is specific
to each consolidated order and is therefore not uniform across all
orders.
In general, the definition of producer milk for all consolidated
orders continues to include the milk of a producer which is received at
a pool plant or which is received by a cooperative association in its
capacity as

[[Page 4941]]

a handler. Most current orders consider milk to be ``received'' when it
is physically unloaded at the plant and the proposed orders would
continue that treatment. However, to ensure that producers are promptly
paid for their milk, milk picked up from the producer's farm, but not
received at a plant until the following month, will be considered as
having been received by the handler during the month in which it is
picked up at the producer's farm. In this situation, milk will be
priced under an order at the location of the plant where it is
physically received in the following month.
In order to promote the efficient movement of milk, all orders
currently allow a handler to move producer milk, within certain
specified limits, from a producer's farm to a plant other than the
handler's own plant. This is referred to as a ``diversion'' of milk. As
proposed for the consolidated orders, the definition of producer milk
allows unlimited diversions to other pool plants, thereby providing
maximum flexibility in efficiently supplying the fluid market.
Under some orders, unlimited diversions to nonpool plants would
also be allowed once a dairy farmer has become associated with a
particular order. Under other orders, however, a producer would be
required to ``touch base'' at a pool plant one or more times each month
and, in addition, aggregate diversion limits may be applied to a
handlers' total diversions.
For pool distributing plants, route disposition as a percent of
total receipts of bulk milk automatically limits diversions by those
plants. With respect to pool supply plants and pool reserve supply
plants, the specific shipping standards will ensure that a sufficient
quantity of milk is available for the fluid market. Since some orders
may allow for unlimited diversions, the maximum quantity of milk that a
pool plant would be able to divert and still maintain its pool plant
status would be 100% less the pool plant shipping standards for the
month. This will mitigate the need for suspending order diversion
limitations, an action that is quite common in some of the current
orders. Unlimited diversions would also allow for maximum efficiency in
balancing the market's milk supply. The market administrator's ability
to adjust shipping percentages for pool supply plants and pool reserve
supply plants will further ensure that an adequate supply of milk is
available for the fluid market without the imposition of diversion
limits.
While it is expected that a one time producer ``touch base''
standard and virtually unlimited diversions would be appropriate for
most of the consolidated Federal orders, it is recognized that it may
not be appropriate for certain ``deficit'' markets. In these cases, the
order may provide for diversion limits to ensure an adequate supply of
fluid milk for that particular market. In these cases, the alternate
standards for diversion privileges specify the minimum number of days
that milk of a producer must be physically received at a pool plant and
the percent of total producer receipts that may be diverted by the
handler. The months during which such minimums must be met are also
identified in both cases.
In order to provide regulatory flexibility and marketing
efficiencies, all of the proposed orders having diversion limits allow
the market administrator to increase or decrease the delivery
requirements for producers and the aggregate diversion limits
applicable to handlers. Granting the authority for the market
administrator to make needed adjustments in the manner specified
currently exists in some Federal orders and has proven to be a
responsive, efficient, and effective way to deal with rapidly changing
marketing conditions.
Cooperative Association
All current orders provide a definition for dairy farmer
cooperative associations that market milk on behalf of their dairy
farmer members and should continue to do so in the consolidated orders.
Providing for a uniform definition of a cooperative association
facilitates the administration of the various order provisions as they
apply to such producer organizations and recognizes the unique standing
granted to dairy farmer cooperatives under the Capper-Volstead Act.
Moreover, dairy farmer cooperatives are responsible for marketing the
majority of the milk supplied to regulated handlers under the Federal
order system.
As provided herein, a cooperative association means any cooperative
marketing association of producers which the Secretary determines,
after application for such recognition by the cooperative, is qualified
as such under the provisions of the Act of Congress of February 18,
1922, as amended, known as the ``Capper-Volstead Act''. Additionally,
most orders currently require that a cooperative association have full
authority in the sale of the milk of its members and that it be engaged
in making collective sales or marketings of milk or milk products for
its dairy farmer members. This should continue. The cooperative
association definition provides for universal applicability in all
consolidated orders.
Several current orders also provide a definition for a federation
of two or more cooperative associations. As recommended herein, all
consolidated orders would recognize a federation of cooperatives as
satisfying the cooperative definition for the purposes of determining
milk payments and pooling. Individual cooperatives of a federation of
cooperatives must also meets the criteria as set forth for individual
cooperative associations and their federations as incorporated under
state laws.
Handler Reports
Reports of receipts and utilization, payroll and other reports. All
current orders require handlers to submit monthly reports detailing the
sources and uses of milk and milk products so that market average use
values, or blend prices, can be determined and administered. Payroll
reports and other reports required by the market administrator are also
provided for in the orders. The proposed language for the consolidated
orders for handler reports is similar to that contained in current
orders. The dates when reports are due in the market administrator's
office differ slightly by order according to custom and industry
practice.
Announcements by the Market Administrator
Public announcements by market administrators. Four sections of
each consolidated order provide for requiring the market administrator
to make certain announcements in the course of order administration.
These include: Sec. 100__.45, Market administrator's reports and
announcements concerning classification; Sec. 100__.53, Announcement of
class prices and component prices; Sec. 100__.54, Equivalent price; and
Sec. 100____.62, Announcement of producer prices, or in orders without
component pricing, Announcement of uniform price, uniform butterfat
price, and uniform skim milk price. These announcements are currently
required by market administrators in all orders and should continue. As
proposed, these provisions are uniform to all consolidated orders and
are nearly identical to current order provisions. However,
Sec. 100____.62, is unique to each order and is described in each of
the consolidated orders.
Payments for Milk
Producer-settlement fund. All of the current orders provide for
minimum payment terms and obligations by regulated handlers and such
provisions should continue to be part of the consolidated orders.
Handlers are

[[Page 4942]]

charged with minimum class prices. However, producers are returned a
uniform, or blend, price through the marketwide pooling of milk. The
mechanism for the equalization of a handler's use value of milk is the
producer-settlement fund. It is established and administered by the
market administrator for each order.
The producer-settlement fund ensures that all handlers are able to
return the market blend price to producers whose milk was pooled under
the order. Payments into the producer-settlement fund are made each
month by handlers whose total classified use-value of milk exceeds the
value of such milk calculated at the uniform price or at component
prices for those orders with component pricing. Similarly, payments out
of the producer-settlement fund are made each month to any handler
whose use-value is below the value of milk at the uniform price or
component prices, as the case may be. The transfer of funds enables
handlers with a use-value below the average for the market to pay their
producers the same uniform price as handlers whose Class I utilization
exceeds the market average. This provision is uniform for all
consolidated orders.
Payments to and from the producer-settlement fund. The current
orders vary with respect to dates for payments to the producer-
settlement fund, due largely to industry practices and how certain
orders evolved over time to reflect those practices. Each consolidated
order provides for payment dates, and they are specific for each
consolidated order. Also, as proposed, payment to the producer-
settlement fund would be considered made upon receipt by the market
administrator. In view of the need to make timely payment to handlers
from the producer-settlement fund, it is essential that money due the
fund be received by the due date. Additionally, payment cannot be
received on a nonbusiness day. Therefore, if the due date is a
Saturday, Sunday, or national holiday, payment would not be due until
the next business day. This is specified in Sec. 1000.90 of the General
Provisions.
Payments from the producer-settlement fund provide for payments to
those handlers whose milk use-value is below the value of milk at the
uniform price. As proposed, this section is similar to those contained
in current orders. As with payments to the producer-settlement fund,
the payments from the fund are specific to each consolidated order.
Generally, payments from the producer-settlement fund would be required
one day after the required date for payments into the fund. This goal
is consistent with the average time lapse between payment into the
producer-settlement fund and payments from the fund in existing orders.
As in the prior section, payments would be made on the next business
day when the required payment date falls on a Saturday, Sunday, or
national holiday.
Payments to producers and to cooperative associations. The AMAA
provides that handlers must pay to all producers and producer
associations the uniform price. The existing orders generally allow
proper deductions authorized by the producer in writing. Proper
deductions are those that are unrelated to the minimum value of milk in
the transaction between the producer and handler. Producer associations
are allowed by the statue to ``reblend'' their payments to their
producer members. The Capper Volstead Act and the AMAA make it clear
that cooperative associations have a unique role in this regard.
The payment provisions to producers and cooperatives vary greatly
among the current Federal orders, particularly in regard to partial
payment frequency, timing, and amount. The proposed provisions are
consistent with the needs of the consolidated orders. Each order
currently requires handlers to make at least one partial payment to
producers in advance of the announcement of the applicable uniform
prices. The partial payment varies across orders by the required
payment date, rate of payment, and volume of milk for which payment is
made. This provision continues to require partial payments, although
they will vary by consolidated order. Full payment is required to be
made so that it is received by producers no later than two days after
the required pay-out date of monies from the producer-settlement fund.
Cooperatives will be paid by handlers for bulk milk and skim milk
on the terms described for individual producers except that required
receipt of payment will be one day earlier. Providing for an earlier
payment date for cooperative associations is warranted because it will
permit the cooperative association the time needed to distribute
payments to individual producer-members. The cooperative payment
language in each of the consolidated orders has been expanded to
include bulk milk and skim sold by cooperative pool plants as well as
by cooperatives acting as a handler.
All of the payment dates are receipt dates. Since payment cannot be
received on a non-business day, payment dates that fall on a Saturday,
Sunday, or national holiday will be delayed until the next business
day. While this has the effect of delaying payment to cooperatives and
producers, the delay is offset by the shift from ``date of payment'' to
``date of payment receipt.''
Minimum payments to producers. In a proceeding involving the
current Carolina, Southeast, Louisville-Lexington-Evansville, and the
former Tennessee Valley Federal milk orders (Orders 5, 7, 46, and 11),
a proposal was made to clarify what constitutes a minimum payment to
producers. The proposal was recommended by Hunter Farms (Hunter) and
Milkco Inc. (Milkco), two handlers regulated under the current Carolina
order. Under the proposal, a handler (except a cooperative acting in
its capacity as a handler pursuant to paragraph 9(b) or 9(c)) may not
reduce its obligations to producers or cooperatives by permitting
producers or cooperatives to provide services which are the
responsibility of the handler. According to the Hunter/Milkco proposal,
such services include: (1) Preparation of producer payroll; (2) conduct
of screening tests of tanker loads of milk; and (3) any services for
processing or marketing of raw milk or marketing of packaged milk by
the handler.
At the May 1996 hearing, representatives of Hunter and Milkco
testified that both handlers receive milk from cooperative associations
and Piedmont Milk Sales, a marketing agent handling the milk of non-
member producers. The Hunter representative explained, due to
competitive marketing conditions in the Southeast in late 1994 and
early 1995, handlers were able to purchase milk supplies at Federal
order minimum prices without any over-order premiums being charged. As
a result of the absence of over-order premiums, the representative
stated, Hunter received underpayment notices from the market
administrator on milk that it had received from Piedmont Milk Sales.
Hunter contends the problem of what constitutes a minimum payment
to producers should be clarified in the event that premiums again
disappear in the future. If this issue is not resolved, according to
Hunter, it will suffer a loss of milk sales and its producers will
receive lower prices. Hunter argues that the current policy is
discriminatory and unfair and that everyone would benefit from a
clarification of the rules defining Federal order minimum prices.
Milkco supported Hunter's position and stated that it also received
underpayment notices from the market administrator for the December
1994 through October 1995 period on milk received from independent
dairy farmers, but did not receive

[[Page 4943]]

underpayment notices on milk received under the same or similar
conditions from cooperative associations.
Carolina-Virginia Milk Producers Association offered qualified
support for the Hunter/Milkco proposal. The cooperative suggested
expanding handlers' responsibilities to cover tanker washing and
tagging, supplying milk to handlers on an irregular delivery schedule,
field work, disposing of surplus milk during months when the supply is
above local needs, and importing supplemental milk for Class I use
during periods of short production.
Mid-America Dairymen, Inc. (Mid-Am) testified and filed a post-
hearing brief strongly objecting to the Hunter/Milkco proposal. Mid-Am
argued that the issue of minimum payments to producers is national in
scope and suggested that the issue be addressed on a national basis
within the context of the Federal order reform as required by the 1996
Farm Bill. Furthermore, Mid-Am stated that clearly the costs for
butterfat testing are borne by all producers, and the costs of testing
milk in tankers for antibiotics are borne by all handlers, regardless
of their source of supply. According to Mid-Am, no confusion exists as
to who is responsible for these tests and, therefore, they should not
be included in the proposed amendments.
Several handlers either supported the Milkco/Hunter proposal or
stated the proposal should be considered by the Secretary for all
Federal milk marketing orders within the context of Federal milk order
reform.
Based on the testimony presented at the public hearing and comments
received, the Department's recommendation issued on July 17, 1997 (62
FR 39470), was to consider this issue as part of Federal order reform.
The decision stated that no changes were being recommended for the 4
southeastern orders involved in the proceeding because this issue is
central to all Federal milk orders and should not be interpreted
differently from one order to another. The decision also noted the
conceptual differences among market participants concerning what
constitutes minimum prices to producers. The record was not extensive
in detailing the particular services to be assigned to each party, nor
in providing guidance concerning the cost of these services which
appeared to vary considerably from organization to organization.
Hunter and Milkco, Inc., filed an exception to the Department's
partial recommended decision and urged adoption of their proposal.
These handlers stated that their proposal would specify the
responsibility of all handlers with respect to producer milk and
thereby rectify any inconsistency that may currently exist in order
language concerning this issue.
Hunter and Milkco also stated that any disagreement within the
industry concerning which services are the responsibility of the
handler is secondary to the issue under review and does not warrant the
denial of their proposal. The commenters contend that the central
principle surrounding this issue is uniformity in the treatment of
handlers purchasing milk supplies from cooperatives or independent
producers. The precise list of services is of secondary importance,
they state, and industry disagreement concerning these services should
not prevent the Department from embracing the central thrust of their
proposal.
Regardless of the short-term outcome in the pending rulemaking,
there is a long-term issue that transcends individual orders and should
be uniformly applied in the interpretation and administration of all
Federal milk orders if possible. Accordingly, interested parties are
invited to submit comments concerning this issue.
Payments by a handler operating a partially regulated distributing
plant. All current and consolidated orders provide a method for
determining the payment obligations due to producers by handlers that
operate plants which are not fully regulated under any Federal order.
These unregulated handlers are not required under the scope of Federal
milk order regulation to account to dairy farmers for their milk at
classified prices or in returning a minimum uniform price to producers
who have supplied the handler with milk. However, such handlers may
sell fluid milk on routes in a regulated area in competition with
handlers who are fully regulated.
Therefore, the regulatory plan of Federal milk orders needs to
provide a minimum degree of regulation to all handlers who enjoy routes
sales of fluid milk in a regulated marketing area. This is necessary so
that classified pricing and pooling provisions of an order can be
maintained. It is also necessary so that orderly marketing conditions
can be assured with respect to handlers being charged the classified
value under an order for the milk they purchase from dairy farmers.
Without this provision, milk prices in an order would not be uniform
among handlers competing for sales in the marketing area, a milk
pricing requirement of the AMAA. There are 3 regulatory options that
are available at the option of the partially regulated handler.
It is recognized under current orders that the purchase of Class I
milk by a partially regulated handler of milk that is priced under a
Federal order in an amount equal to, or in excess of, quantities sold
by partially regulated handlers in the marketing area ensures that
price equality is maintained between these entities. In these
circumstances, a partially regulated handler will not be required to
make payments to the producer-settlement fund so that the use-value of
milk has been equalized between fully regulated and partially regulated
handlers.
For those instances in which a partially regulated handler
purchases no milk from fully regulated handlers, or where purchases are
less than the quantity of route disposition in the marketing area by
the partially regulated handler, a payment may be made by the partially
regulated handler into the producer-settlement fund of the regulated
market at a rate equal to the difference between the Class I price and
the uniform price of the regulated market.
Many current orders also allow the operator of a partially
regulated plant to demonstrate that the payment for its total supply of
milk received from dairy farmers was in an amount equal to the amount
which the partially regulated plant would have been required to pay if
the plant were fully regulated. This amount may be paid entirely to the
dairy farmers that supplied the handlers, or in part to those dairy
farmers with the balance paid into the producer-settlement fund of the
regulated market. This should be adopted in all orders.
All of the current orders also provide, under certain
circumstances, for payment options by partially regulated handlers
relating to reconstituted milk. All of the payment options available to
a partially regulated handler are retained under the consolidated
orders. This provision is now found in Sec. 1000.76 of the General
Provisions.
Adjustment of accounts. All current orders provide for the market
administrator to adjust, based on verification of a handler's reports,
books, records, or accounts, any amount due to or from the market
administrator, or to a producer or a cooperative association. This
provision continues to be included in the consolidated orders. The
provision requires the market administrator to provide prompt
notification to a handler of any amount so due and requires payment
adjustment to be made on or before the next date for making payments as
set forth in the provisions under which the error(s) occurred.

[[Page 4944]]

Charges on overdue accounts. All current orders provide for an
additional charge to handlers who fail to make required payments to the
producer-settlement fund when due. Such payments include payments to
the producer-settlement fund, payments to producers and cooperative
associations, payments by a partially regulated distributing plant,
assessments for order administration, and marketing service and certain
other payment obligations in orders with specialized provisions such as
transportation credits. This should continue to be provided for in the
consolidated orders.
In order to discourage late payments, it is proposed that a 1.0
percent charge per month be incorporated in the consolidated orders.
This rate represents the mid-point in the range of charges by all
orders presently. Overdue charges shall begin the day following the
date an obligation was due. Any remaining amount due will be increased
at the rate of 1.0 percent on the corresponding day of each month until
the obligation is paid in full.
As proposed, all overdue charges would accrue to the administrative
assessment fund. The late-payment charge is to be a penalty that is
meant to induce compliance with the payment terms of the order. If
late-payment charges for monies due on producer milk were to accrue to
the balance owed to either producers, cooperatives or producers/
cooperatives via the producer-settlement fund, it could result in such
producers and cooperatives being less concerned whether they are paid
on time, thus being counterproductive to the purpose of late payment
provisions. Under the provision recommended, cooperatives and producers
would not be placed in a position where they would prefer to be paid
several days late so that they would receive the late-payment charges
or increase the level of producer prices due to late payment fee
accrual to the producer-settlement fund. This is of particular concern
in markets with a single dominant cooperative. Additionally, by having
late-payment fees accrue to the administrative fund, monies are made
available to enforce late-payment provisions that would otherwise have
to be generated through handlers' administrative assessments.
Assessment for Order Administration
The AMAA provides that the cost of order administration shall be
financed by an assessment on handlers. All current orders provide for
proportionate per hundredweight assessments of varying rates. As
proposed, a maximum rate of 5 cents per hundredweight is provided. The
assessment would apply to all of a handler's receipts pooled under the
order.
Deduction for Marketing Services
As in most current orders, the consolidated orders should provide
for the furnishing of marketing services to producers for whom
cooperative associations do not perform services. Such services should
include providing market information and establishing or verifying
weights, samples and tests of milk received from such producers. In
accordance with the Act, a marketing services provision must benefit
all nonmember producers under the order. They are not uniform in the
consolidated orders.
The market administrator may contract with a qualified agent
including a cooperative association to provide such services. The cost
of such services should be borne by the producers for whom the services
are provided. Accordingly, it is proposed that each handler be required
to deduct a maximum of 7 cents per hundredweight from amounts due each
producer for whom a cooperative association is not providing such
services. All amounts deducted should be paid to the market
administrator not later than the due date for payments to the producer-
settlement fund.

6a. Northeast Region

The Northeast Marketing Area
The recommended consolidated Northeast order differs significantly
from other consolidated orders. In addition to merging three existing
Federal milk orders, the proposed Northeast order also recommends
expansion in the western and northern regions of New York state, and
all currently unregulated areas of the New England states (except
Maine).
While the current New England (Order 1) and Middle Atlantic (Order
4) order have similar pricing provisions for adjusting producer blend
prices in a manner identical to how plant prices are charged, the
current New York-New Jersey (Order 2) order employs a ``farm-point''
pricing method. This decision recommends that the pricing of milk
should employ a plant-point pricing methodology in the consolidated
Northeast order. This method is used in every other current marketing
area and in every recommended consolidated marketing area. This
represents a considerable change in how milk will be priced for those
handlers and producers who currently are priced under the provisions of
the New York-New Jersey order.
In addition to the different pricing provisions of the three
existing orders, other important differences and related provisions
need to be addressed in recommending a complete Northeast regional
order that will accomplish the goals of the AMAA. These include what is
commonly referred to in the New-York-New Jersey order as the ``pass
through'' provision, the need for providing marketwide service payments
in the form of cooperative service payments and balancing payments that
currently exist in the New York-New Jersey order and do not exist in
either the current New England or Middle Atlantic orders. Additionally,
the three current northeast orders also provide for seasonal
adjustments to the Class III and IIIA price, which may no longer be
necessary in light of the replacement being recommended for the BFP.
It is fair to observe that the current order most affected by the
recommended consolidation is the New York-New Jersey order. In addition
to the differences already described, certain terms and provisions of
the recommended Northeast order are also different in how they are
described and presented but are nevertheless consistent with existing
provisions that accomplish the goals of the AMAA. This is less of an
issue for those entities that are accustomed to the terminology of
provisions used in the New England and Middle Atlantic orders. The
following presents a discussion of the recommended order provisions and
issues that are unique to the consolidated Northeast order.
Plant
The plant definition for the proposed consolidated Northeast order
should differ from that of the other consolidated orders by allowing
stationary storage tanks to be used as reload points. This exception to
the plant definition is warranted for the consolidated Northeast order
due to certain unique conditions that affect the ability of producers
to assemble milk in an efficient manner and subsequently transport it
to a plant that actually processes milk into finished dairy products,
including fluid milk products. This exception would not consider the
reload point or facility as a point from which to price producer milk.
Rather, milk once assembled would be shipped to a processing plant
where it would be priced.
A portion of the Northeast milk supply is derived from some 200
small dairy farms located in Maine. Because much of this state is
serviced by secondary and rural winding roads, the current New England
order has

[[Page 4945]]

provided for reload points as a workable solution to the inherent
hauling difficulties in transporting relatively small loads of milk
from the countryside to reload points and facilities with stationary
storage tanks that do not serve as a pricing point. This should
continue to be provided for in the consolidated Northeast order. Not to
provide this accommodation would adversely affect a substantial number
of small producers and the milk haulers that service them.
Pool Plant
The pool distributing and pool supply plant definitions of the
proposed consolidated Northeast order should use the standard order
language format used in other orders, combined with performance
standards that are adapted to marketing conditions in the Northeast.
The proposed pool distributing plant definition specifies that a
pool distributing plant must have 25 percent or more of its total
physical receipts of bulk fluid milk distributed as route disposition
and that route disposition within the marketing area be at least 25
percent. The 25 percent level of total receipts distributed on routes
is a reasonably high enough level to establish a distributing plant's
association with the marketing area. The in-area route distribution
performance requirement of 25 percent is recommended for two reasons.
First, as one of the intents of Federal milk order reform was to adopt
liberal pooling standards, a 25 percent level provides a level of
association with the market that is liberal yet sufficiently high
enough to assure pooling standards that are performance oriented.
Second, it tends to minimize changing the regulatory status of handlers
from their current regulatory status by the Federal order program
through the consolidation of existing orders. This also seems a
reasonable standard in light of individual state regulatory plans
currently in place in Maine, Pennsylvania, and Virginia are applicable.
As already discussed, the recommended consolidated Northeast order
and other nearby consolidated marketing orders do not recommend
expansion to include currently unregulated areas. This includes areas
in the states of Pennsylvania, Virginia, and the entire state of Maine.
Some distributing plants in these areas are not currently regulated, or
are only partially regulated to the extent they enjoy Class I sales in
regulated areas. A 25 percent in-area route distribution level will
serve to ensure or minimize any change in their current regulatory
status under the Federal program that result from consolidation of the
three northeast marketing areas into a single new order.
Unit pooling, wherein two or more plants operated by the same
handler located in the marketing area can qualify for pooling as a unit
by meeting the total and in-area route distribution requirements of a
pool distributing plant, is recommended for inclusion in the
consolidated Northeast order. Providing for unit pooling provides a
degree of regulatory flexibility for handlers by recognizing
specialization of plant operations.
Due primarily to positions offered by many of the major Northeast
dairy cooperatives and their recommendations on appropriate pool supply
plant performance requirements, the consolidated Northeast order supply
plant performance requirements initially should be set to require that
in the months of August and December, at least 10 percent of the total
quantity of bulk milk that is physically received at a supply plant be
shipped to distributing plant. For the months of September through
November, such shipments by pool supply plants should be at least 20
percent. To the extent that a supply plant has met these performance
requirements, no performance requirement is recommended for the months
of January through July. However, a supply plant that has not met these
performance requirements will need to meet a 10 percent performance
requirement in each of the months of January through July in order to
qualify as a pool supply plant.
While this decision has recommended providing for pool reserve
supply plants, it is not recommended for inclusion in the provisions
for the consolidated Northeast order. However, providing for a system
of supply plants is recommended for the consolidated Northeast order
and this provision is sufficiently self-explanatory in the proposed
order language.
Producer-Handler
The producer-handler definition for the consolidated Northeast
order should conform to the limitations on receipts at its plant or
acquiring for route disposition no more than 150,000 pounds of fluid
milk products from handlers fully regulated under any Federal order.
This should cause no change in the regulatory status of any known
producer-handler currently in operation in the proposed consolidated
Northeast order region.
Producer
The producer definition of the proposed consolidated Northeast
order should be defined as described in the proposed order language for
the order. This definition describes those dairy farmers who are
properly associated with the Northeast marketing area and who should
share in the benefits that accrue from the marketwide pooling of milk
in this area.
The months specified in the producer definition for defining when a
dairy farmer would not be considered a producer under the order are so
indicated because they tend to accurately reflect the seasonality of
supply for meeting the market demands for milk during the ``short''
season in the proposed Northeast marketing area. Accordingly, the
producer definition should not include dairy farmers who's milk during
any month of December through June is received as producer milk at a
pool plant or by a cooperative association handler if the operator of
the pool plant or the cooperative association caused the milk from such
producer's farm to be delivered to any plant as other than producer
milk as defined in the producer milk provision of the proposed
Northeast order, or any other Federal milk order during the same month,
in either of the two preceding months, or during any of the months of
July through November.
Similarly a dairy farmer would not be considered a producer under
the order, for any month of July through November, any dairy farmer
whose milk is received as producer milk at a pool plant or by a
cooperative association handler if the pool plant operator or the
cooperative association caused the dairy farmer's milk to be delivered
to any plant as other than producer milk, as defined in this proposed
order, or in any other Federal milk order during the same month.
Producer Milk
The producer milk definition of the consolidated Northeast order
should follow the general structure and format of other consolidated
orders. It differs from other consolidated orders in that it requires
cooperative handlers to organize reports of producer receipts that are
outside of the states included in the marketing area, or that are
outside of the states of Maine or West Virginia, into state units with
each unit separately reporting receipts.
As previously discussed, not all consolidated orders set diversion
limits for producer milk. For the proposed Northeast order, no
diversion limits are established as they are, for example in

[[Page 4946]]

the proposed Florida order. However, diversions are limited in
functional terms. The maximum quantity of milk that a pool plant would
be able to divert and still maintain pool plant status would be 100
percent minus the applicable shipping standard.
Component Pricing
The consolidated Northeast order should employ a component pricing
plan in the classified pricing of milk under the order as previously
discussed in the BFP section of this recommended decision. This
recommendation is consistent with positions taken and proposals offered
by major cooperative groups in the Northeast who supply a large
percentage of the milk needs of the market. This also conforms with the
recommendations discussed earlier in this decision on replacing the
BFP.
Farm-Point vs. Plant Point Pricing
At issue in the suggested merging of the three northeast marketing
areas is the use of two distinct pricing methods. The Middle Atlantic
and New England marketing area employ a system of plant-point pricing.
This pricing method is also employed in every other marketing area in
the Federal order system. Only the New York-New Jersey marketing area
uses what is called ``farm-point'' pricing. This decision recommends
the adoption of plant point pricing as the pricing method for the
consolidated Northeast order.
Plant-point pricing of milk that is pooled under an order prices
milk f.o.b. the plant of first receipt. The cost of hauling from the
farm to the plant is the responsibility of the producer. When the
receiving handler is also the hauler, orders permit the handlers in
making payments to each producer to deduct hauling costs up to the full
amount authorized in writing by the producer.
As originally employed in the New York-New Jersey order (Order 2),
farm-point pricing establishes the price for milk by the zone (distance
from market computed the nearer of the basing points) of the township
in which a producer's milkhouse is located. While termed ``farm-point''
farms are grouped by their township location. However, this is the
nearest practicable proxy for farm location. In functional terms, when
a handler picks up milk at a producer's farm, the handler takes title
of the milk at the time and point of pickup. Accordingly, there are no
adjustments in payments to producers to cover any part of the cost of
pickup or hauling in moving milk to the handler's plant. Farm-point
pricing fundamentally shifts the cost of transporting milk from the
producer to the handler. Farm-point pricing has been in effect in Order
2 since 1961. While the fundamental concept of farm-point pricing has
been retained with respect to its overall structure of mileage zones,
other order provisions were adopted subsequent to its establishment and
modified over time so that farm-point pricing could remain viable.
In the decision that established farm-point pricing (25 FR 8610,
Sept. 7, 1960), prevailing marketing conditions served to warrant this
type of pricing system. At that time, the emergence of bulk-tank milk
began to take on a degree of prominence in the milk supply of Order 2.
Prior to the adoption of farm-point pricing (1959), about 8 percent of
the producers had bulk tanks, accounting for at least 14 percent of the
volume of milk associated with the market. About 92 percent of
producers delivered their milk at their own expense directly to plants
in 40 quart cans. Most of the milk can-delivered was from farms within
a radius of not more than 15 miles from the plant. The milk of
producers who had converted to bulk tanks, in some instances, had been
hauled more than 200 miles from farm to city plants, but the majority
of bulk tank milk was moved much shorter distances to country receiving
plants. The decision cited that in October, 1959, milk was received
from 49,719 producers at 691 plants.
When milk was delivered in cans to a handler's plant, the plant was
the location of where milk was weighed, sampled for butterfat and
quality, and where cans were washed. It was at the plant that milk was
accepted or rejected. It was the place where milk was cooled and co-
mingled with other individual producer's milk. More importantly, it was
the place where control of the milk passed from producer to the plant
operator or moved by the plant to other plants for fluid or
manufacturing uses. Minimum prices required by the order to be paid by
handlers were adjusted for the location of the plant at which milk was
received from dairy farmers.
Bulk tank milk brought a set of new factors. When milk is
transferred from a producer's bulk tank to the hauler, the point of
transfer is also the point where several functions are performed. Milk
in a producer's bulk tank has already been cooled, and therefore not
subject to the early delivery deadlines. The weight of milk is
determined at the bulk tank and is also the place where samples are
taken for butterfat and quality. It is also here that the individual
producer's milk is accepted or rejected and loses its identity by being
co-mingled with other milk.
Numerous problems arose in regulating the handling of bulk tank
milk in an order where pooling depended upon direct delivery from the
farm to a pool plant and under which minimum class prices and the
uniform prices to be paid to producers was reflective of the location
of the plant where delivery was made:
1. Administrative problems associated with bulk tank handling
arose, particularly where and when milk was regarded to have been
received. Bulk tank milk provided the opportunity to deliver milk to
different plants, some pool and some nonpool. Where a given tank load
of milk was unloaded if it went to two or more plants of the same or
different handlers on the same day was difficult to determine.
2. The incentive arose (because of the administrative difficulty of
determining when and where milk was received) for handlers to behave in
a way that would result in the maximum exclusion of milk from the pool
for fluid use outside the marketing area.
3. The incentive arose for the maximum inclusion in the pool of
milk in fluid and manufacturing uses.
4. The incentive and opportunity arose for handlers to select one
of several plants for receipt of bulk tank milk, with or without
manipulation of hauling charges. This distorted and impinged upon the
effectiveness of the minimum price provisions of the order, especially
in the case of relatively long hauls of bulk tank milk.
The 1961 decision that established farm-point pricing provided 8
scenarios that demonstrated how handlers behaved so as to minimize
their pricing obligations to producers. Most of the scenarios arose
from the inability to determine when milk was received at a plant. In
order to mitigate such circumstances, several things were done.
Foremost, was the establishment of farm-point pricing on the basis of
bulk tank units and the designation of each bulk tank unit as either a
pool or nonpool unit and defining the circumstances under which
designations could be changed.
The pricing of milk at the farm eliminated the incentive for
handlers to attempt to make it appear that the plant of receipt was
other than the plant where milk is actually received and handled. It
was made crystal clear that delivery and receipt of bulk milk takes
place at the farm. Once acquired by the handler, the plant or plants to
which the milk may be delivered depended on the decision of the
handler, not the producer. Under these circumstances, where the milk is
actually used is not a factor to be reflected in the minimum

[[Page 4947]]

producer price. The operator of the bulk tank unit was defined as the
handler and the point of receipt of milk. This entity was responsible
for establishing the unit, and the entity held the responsibility for
reporting, accounting, pooling and paying producers. Additionally, the
decision concluded that the price at which the farm bulk tank is
accounted for to the pool should be the minimum class price adjusted
for location of the farm, that payments by handlers directly to
producers be adjusted to reflect all location differentials based on
where farms are located and where bulk tank milk is received.
A proposal that would have allowed a tank truck service charge
authorized by the producer but not in excess of 20 cents per
hundredweight (cwt.), and payments to cooperatives which serve as
handlers operating a bulk tank unit should be at the price reflecting
transportation and (the then existing) direct delivery differential
applicable at the handler's plant where milk is delivered by the
cooperative was not incorporated into the order. At that time, it was
found that plant hauling charges averaged nearly 20 cents per cwt. This
was offered as rationale for a negotiable 20 cent per cwt. charge by
handlers for hauling. Arguments notwithstanding, the underlying
concepts embodied in farm-point pricing caused the Department to not
allow for any hauling deduction by handlers.
Shortly after the implementation of farm-point pricing, the need to
amend the order to keep farm-point pricing viable arose. The first
occurrence was in 1963. In the 1963 decision (28 FR 11956, Oct. 31,
1963), it was noted that there had been significant changes in
marketing conditions that arose from establishing farm-point pricing in
1961. These included the reduction in premiums to bulk tank producers
in general; the reluctance of proprietary handlers to receive bulk tank
milk from individual producers in order to avoid the hauling costs; the
differences in pricing can and bulk tank milk; and a slowdown in the
trend of conversion from can milk to bulk tank milk. The 1963 decision,
in acknowledging changing marketing conditions, incorporated into the
Order, an authorized 10-cent per cwt. charge for hauling, provided that
producers authorize this maximum level in writing.
In the 1963 decision the Secretary found that allowing for a
limited authorized service charge for hauling bulk tank milk at a
maximum rate of 10 cents per cwt. was sufficient. This was largely
based on the fact that handlers were not then charging for bulk tank
pickup and hauling, but rather were paying premiums for bulk tank milk.
Additionally, can milk direct delivered by producers to plants was
still very much the norm. While bulk tank milk was growing, it had not
yet accounted for a majority of milk pooled on the order. The 10-cent
negotiable hauling charge was found to provide the needed flexibility
for handlers to receive bulk tank milk from individual producers.
This decision raised, for the first time with respect to farm-point
pricing, the maintenance of orderly conditions and the uniform pricing
to handlers on all milk priced and pooled under the order. Because bulk
tank milk is priced by township zone (the best proxy for a farm's
location) all farms in any particular township have the same value
assigned to their milk. However, the decision found it necessary to
reflect appropriate uniform pricing of bulk tank milk because it has
differing value dependent on the accessibility and relative location of
individual farms within the township. With this finding, it was
determined that responsibility for hauling to the township pricing
point should be borne by the producer with appropriate safeguards to
protect the producer. Therefore, a maximum negotiable hauling charge
from handlers of 10 cents per cwt. was brought under the order.
By 1970, marketing conditions in the New York-New Jersey market had
changed to the point where handlers were authorized to receive a full
10-cent hauling credit for each cwt. of bulk tank milk which was
disposed of for manufacturing uses. Additionally, the negotiable 10-
cent hauling charge to producers for a handler's cost offset
established by the 1963 decision was retained. However, the 10-cent
negotiable limit was limited to manufacturing milk. Can milk at this
time represented about 25 percent of the total amount of milk pooled in
Order 2, with the balance being bulk tank milk.
Proponents supporting this change to the order claimed, and the
decision affirmed, that the manufacturing price for milk in Order 2 was
not properly aligned with manufacturing class prices in adjacent
Federal orders. In this decision (35 FR 15927, Oct. 9, 1970) the
Secretary found that to the extent that Order 2 handlers had borne the
transportation costs associated with the pickup and movement of bulk
tank milk used in manufacturing from the farm to the plant, Order 2
handler costs exceeded the price which handlers in adjacent order
markets were required to pay for milk used in manufacturing. By
adopting this transportation credit for handlers, there was no need to
adopt other proposals that would have lowered the manufacturing price
for milk under the other northeastern orders or lower the Class I price
for milk in Order 2 as had been proposed and denied.
By 1977, some 16 years since the adoption of farm-point pricing,
marketing conditions had changed again and the issue of providing for
more equitable competition both within the Order 2 market and between
other orders took on primary importance. By this point in time, can
milk was about 3 percent of the market, with the balance represented by
bulk tank milk, the near inverse of the marketing conditions prevailing
in 1961. The transportation credit that had been established for
handlers in the 1970 decision for manufacturing milk was now extended
to all milk received by handlers. The transportation credit was
increased to 15 cents per cwt., plus an additional 15-cent maximum
negotiable credit above the ``automatic'' 15 cents because total
average transportation costs was found to be about 30 cents per cwt.
For reasons nearly identical to the 1963 and 1970 decisions,
``formalizing'' the negotiable hauling charge was not adopted because
of the need of flexibility in accounting for milk movements from the
farm to the township pricing point (42 FR 41582, Aug. 17, 1977). In
that decision the Secretary also raised the direct delivery
differential from 5 cents to 15 cents per cwt. in the 1-70 mile zone
for can milk delivered by farmers to plants within this zone, changed
the transportation adjustment rate from 1.2 cents per cwt. for each 10
miles to 1.5 cents per cwt. for each 10-mile zone beyond the 201-210
zone, and 1.8 cents per cwt. for each 10-mile zone within the 201-210
mile zone.
Cooperatives were of the strong opinion that the cost of milk
assembly and transportation are the marketing costs of the handler and
not by producers. However, they also indicated that changes are
warranted in the order because of the failure of neighboring markets to
adopt farm-point pricing.
Comparative examples of handler price inequities with respect to
their cost of milk was amply demonstrated for both intra and inter
market situations. With respect to inappropriate price alignment
between orders, the competitive relationships between Order 2 and Order
4 (then known as the Delaware Valley Order) were closely examined. On
intra-order movements of milk, it was shown that Class I handlers in
New York City had a significantly

[[Page 4948]]

lower procurement cost for direct-ship over bulk tank milk because bulk
tank milk from ``distant'' supply plants had higher transfer and over-
the-road hauling costs. Supply plant milk at the city represented about
80 percent of milk receipts at city plants. The inter-market situation
demonstrated that handlers in Philadelphia accounted for milk at prices
lower than New York handlers. Order 4 handlers were in a position to
establish lower resale prices for fluid milk than their competitors in
the New York market because the burden of increased hauling costs fell
largely on Order 2 handlers. As in 1970, other proposals were denied in
light of adopting the 15-cent hauling credit for handlers. These other
proposals included lowering Class I and the manufacturing price for
milk in the order by 15 cents per cwt.
By 1981, bulk tank milk accounted for nearly the entire milk supply
pooled on Order 2--about 99.6 percent. As the result of a hearing held
in June 1980, in the final decision (FR 46 33008, June 25, 1981) the
Secretary again amended the transportation credit provisions of the
order. The 15 cents per cwt credit for handlers was retained, however,
the 15-cent negotiable transportation service charge was modified to
allow handlers to negotiate with producers for any farm-to-first plant
hauling cost in excess of the 15-cent transportation credit, plus ``the
amount that the class use value of the milk at the location of the
plant of first receipt was in excess of its class use value at the
location where milk was received in the bulk tank unit from which the
milk was transferred.'' According to the 1981 decision, this amendment
would adjust hauling allowances for handlers to more closely relate the
location value of milk to the costs incurred in transporting milk from
farms and country plants to distributing plants in the major consuming
markets of the market. Additionally, the decision indicated that this
change was necessary to reflect current marketing conditions and permit
a more equitable competitive situation for regulated handlers, both on
an intra market and inter market basis. The decision also applied a 15-
cent direct delivery differential for bulk tank milk from New York City
out to the 61-70 mile price zone, on the basis that direct delivery
differential is applicable to milk received in cans at a plant in the
1-70 mile zone.
In the 1981 decision the Secretary found that the majority of milk
moved to distributing plants in 1979 from the 1-70 mile zone moved
directly from farms, accounting for about 58 percent of plants in this
zone with 48 percent being reloaded. Moreover, the decision found that
Order 2 plants located in northern New Jersey received direct shipped
milk as did handlers located in Order 4. Thus, inter market price
alignment needed to be structured primarily on the basis of handlers
obtaining direct shipped milk.
A federation of cooperative associations representing Order 4
producers proposed that Order 2 be amended to return to plant-point
pricing, with the direct delivery differential being reduced to 10
cents per cwt, and that the Class I differential at the base zone of
Order 2 be increased from the $2.25 level then in effect, to $2.40.
This federation of cooperatives believed that this ``package'' of order
modifications would provide for proper price alignment between Order 2
and Order 4. While the decision did apply different transportation
rates at a rate of 1.8 cents per cwt. outside the base zone of the
Order (201-210) and a rate of 2.2 cents per cwt. inside the base zone,
it did not provide for a return to plant-point pricing.
While the decision did not adopt plant point pricing, the decision
does acknowledge that the amendments adopted tended to establish plant
pricing with respect to the classified prices to handlers. However,
farm-point pricing was retained with respect to uniform prices to
producers. With this being the case, the basic substantive difference
between the amendments and plant pricing is the impact on the movement
of milk to higher-priced zones for manufacturing use. Under plant
pricing, the minimum uniform price payable to producers applies at the
location of the plant of first receipt and handlers receive a credit
from the producer settlement fund at such uniform price. The decision
also concluded that plant-point pricing for producers would provide a
greater incentive to haul direct-shipped milk to city plants for
manufacturing uses, since there would be a credit from the pool for the
full amount that the uniform price transportation differential at the
city plant exceeds the transportation differential for the zone of the
bulk tank unit. Adopting plant-point pricing for producers would have
had the effect of encouraging milk to move long distances to city
plants for manufacturing uses when transportation savings could be
realized if such milk stayed nearer to manufacturing plants generally
located in the milkshed.
Farm-point pricing has undergone many evolutionary changes from its
inception in 1961. The original rationale for farm-point pricing, free
hauling and the administrative difficulty of determining when milk from
bulk tank units was received seems far removed from present-day
marketing conditions and the rationale for continuing it. There were a
number of years that hearings were necessary to first recognize that
the burden of transportation costs rested with handlers. This resulted
in handlers being able to successfully argue that with this burden, it
becomes much more difficult for the order to establish and maintain
uniform prices to handlers as required by Sec. 608(5)(c) of the AMAA.
This is evidenced by the nature of the decisions of 1963, 1970, 1977,
and 1981. Much ``repair'' to other order provisions was also needed to
retain farm-point pricing. Accordingly, farm-point pricing has outlived
its intended purpose and the Secretary proposes that it should not be
retained in a consolidated Northeast order.
The Need for a Producer-Price Mechanism
As discussed above, farm-point pricing for producers did provide
some rational pricing incentives to promote efficiency within the Order
2 marketing area. This can reasonably be summed up by concluding that
farm-point pricing would not provide, as plant-point pricing would,
incentives to haul direct-shipped milk to city plants for manufacturing
uses, since there would not be a credit from the pool for the full
amount that a uniform price transportation differential at the city
plant exceeds the transportation differential for the zone of the bulk
tank unit. Adopting plant pricing would have had the effect of
encouraging milk to move long distances to city plants for
manufacturing uses when transportation savings could be realized if
such milk stayed nearer to manufacturing plants generally located in
the milkshed.
In an effort to address the dairy industry structures that have
evolved over the past four decades in the three current northeast
marketing areas, efforts were undertaken by a major group of dairy
farmer cooperatives in the northeast to address what the pricing
implications are to producers and handlers as the region moves to a
unified plant-point pricing method. This has resulted in a proposal by
the Association of Dairy Cooperatives in the Northeast (ADCNE) that
include St. Albans Cooperative Creamery, Inc., Land O'Lakes, Upstate
Farms Cooperative, Inc., Agri-Mark, Inc., Milk Marketing Inc., Dairylea
Cooperative Inc., and Maryland & Virginia Milk Producers Cooperative
Association Inc. These dairy farmer cooperatives account for well over
half of the milk that would be pooled and priced under the

[[Page 4949]]

proposed consolidated Northeast order. Their proposal calls for
establishing a producer differential structure that would ``overlay''
the Class I differential structure that would apply in the consolidated
Northeast order.
The structure proposed is a county-based plant-point price
structure, providing for 14 zones that accommodate the need to reflect
existing and longstanding competitive price relationships among plants,
while integrating the farm and plant point pricing systems currently
used in Order 1, 2, and 4 and with currently state-regulated areas that
fall outside of the proposed marketing area. Further, the ADCNE
proposed prices at the major cities in the Northeast, including Boston,
New York City, Philadelphia, Baltimore, and Washington, D.C. to have
specific Class I differential levels that are somewhat different from
those recommended in the Option 1A Class I price surface. For example,
this decision recommends a New York City Class I differential of $3.15,
while ADCNE proposes $3.20. In general, the ADCNE proposal assumes that
the Class I differential structure that will be adopted is Option 1A,
is the Class I pricing option they strongly support, and is also the
Class I pricing option overwhelmingly supported in public comments
received from interested parties from the northeast.
With respect to a producer differential surface, the ADCNE proposed
that a debit of 5 cents per cwt. be made to the blend price applicable
at non-distributing plants in certain zones. The need for the debit,
according to the ADCNE proposal, is to make deliveries to distributing
plants somewhat more attractive to producers, while decreasing the
amount by which manufacturing plants draw on the marketwide pool for
transportation values, offering also that such a debit is economically
justified and authorized by the AMAA. According to ADCNE, it is
distributing plants that provide the revenue, in the form of Class I
values which form the blend price paid to producers. Deliveries to
manufacturing plants do not contribute to increasing the value to the
marketwide pool. The debit, according to ADCNE, is a reflection in part
of the Order 2 system, which has priced some 50 percent of the milk in
the northeast region, and which does not provide location-based
transportation payments for movements from farms to manufacturing
plants. The ADCNE proposal provides that deliveries to Class I plants
are rewarded under this system with an additional 5-cent payment from
the pool for the marketwide benefit conferred a distributing plant's
utilization.
For the Western New York State order area of the order, ADCNE also
proposed a broad area in which a producer differential of $2.40 per
cwt. to producers would be payable on deliveries of producer milk at
all plant locations in this area. This portion of the price surface
proposed by ADCNE purports to be reflective of the major historical
movements of milk from east to west in the region which returned the
eastern farm point price to dairy farmers under Order 2's farm-point
price system, and that the Western New York State order has not had any
location differentials, thereby establishing a ``flat'' price surface
in the area. If those plants, for producer pricing purposes, were zoned
lower in value reflecting the westerly and northerly distance from New
York City or Philadelphia, ADCNE is of the view that the ability of
both distributing and supply plants of plants to attract an adequate
supply of milk could be in jeopardy. Furthermore, the expectation that
Class I utilization of the proposed Mideast order will be nearly 10
percent higher than the Class I utilization in the Northeast order was
also offered in support of ADCNE-proposed producer differential level
in this area.
The ADCNE proposal also recommends producer differential levels in
areas that they believed should be included in either the consolidated
Northeast order or the Mideast order through expansion that this
proposed rule does include for consideration. Additionally, the ADCNE
proposal also addresses producer differential levels at other locations
outside of the Northeast region.
Additional supporting and amplifying comments were also provided by
Dairylea. These comments supported the major themes offered in the
ADCNE proposal for a producer differential overlay to Class I
differential levels. Dairylea states that moving directly to a plant-
point pricing method would accentuate ``existing inequities and market
dysfunctions.'' Dairylea further commented that a plant-point
differential schedule would maintain current inter-plant price
differences in the current New England and Middle Atlantic orders, but
would worsen them for New York manufacturing plants, many of which are
cooperatively owned. Their view of the ADCNE pricing proposal is that
it maintains economic incentives for milk to move to Class I
distributing plants, would provide for more balanced procurement equity
among competing manufacturing plants, maintain equitable producer
pricing when milk is marketed by transporting it from a higher priced
zone to a lower priced zone, and provides a structure that allows for
adequate blend price levels in all areas of the Northeast milkshed.
Dairylea further comments that in addressing adopting plant-point
pricing, existing ``near-in'' manufacturing plants (plants located in a
relatively high differential location) would enjoy a procurement
advantage relative to their competitors that are located in a lower
priced location. Dairylea recommends narrowing the price difference
between manufacturing plants that compete for producer milk and/or
finished dairy product sales. To do this, Dairylea supports lowering
producer differentials for manufacturing plants that are located in
high-valued locations and increasing those differentials at
manufacturing plants in areas that have lower location values. Dairylea
advocates the ADCNE proposal for a producer differential that is 5-
cents lower than those of Class I plants when such plants are located
in the same pricing zones. Dairylea's view of this design results in
maintaining, or slightly increasing, producer differentials applicable
at Class I plants and reducing those applicable at ``near-in''
manufacturing plants. At the same time this would provide for
increasing producer differentials at manufacturing plants in central,
western, and northern New York. According to Dairylea, this producer
pricing surface would present a more equitable marketing environment
than strict plant-point pricing currently employed in Orders 1 and 4,
while at the same time not threatening the viability of manufacturing
plants in those areas of a consolidated Northeast marketing area.
A major theme of Dairylea is its view that Federal milk orders and
their provisions should foster an environment under which manufacturing
plants are provided equal cost and procurement ability, and not to
disfavor such manufacturing plants located in high milk production
areas where Class I differentials are lower. This view, as expressed,
seems a departure from the intent of Class I differentials serving to
attract an adequate supply of milk at locations to satisfy fluid
demands. Dairylea also states that the final rule of 1991 that
realigned intra-order prices in Order 2 resulted in harm to producers
in northern and western New York. While it is not appropriate to
specifically revisit this issue and decision here, official notice is
taken of the final decision (55 FR 50934, December 11, 1990) that
realigned Class

[[Page 4950]]

I differentials in the three existing northeast marketing areas.
Comments supporting the ADCNE proposal for a producer pricing
surface were also offered by Upstate Farms Cooperative, Inc. The
Upstate Farms views served to reiterate the major themes developed in
the ADCNE proposal.
Agri-Mark, a part of ADCNE, filed separate and dissenting views on
the ADCNE proposal. Conceptually, Agri-Mark notes that plant and farm-
point pricing are different, but notes further that the differences are
not always unfavorable. Agri-Mark submits that under plant-point
pricing, all producers shipping to the same plant receive the same
minimum order blend price regardless of where their farm is located.
Under farm-point pricing, farmers shipping to the same plant receive
different prices under the order depending on where their farm is
located. Farms closer to New York City, Agri-Mark notes, receive a
higher price than farms farther from the city, even though their milk
ends up in the same place.
As to the efficiency arguments touted to be derived from farm-point
pricing, Agri-Mark notes that most manufacturing plants, especially
cheese plants, were built in the northeast prior to the adoption of
farm-point pricing and not in response to it. Rather, says Agri-Mark,
these plants were built at their present locations because of their
proximity to abundant milk supplies. The procurement problems for
manufacturing plants that Order 2 entities alert us to, did not arise
in New England manufacturing plants under plant-point pricing even
though these plants were located as far north as possible within the
milkshed for New England.
Simply put, Agri-Mark believes that rather than decreasing the
differential between manufacturing plants and city distributing plants,
an increase is justified. They are also of the opinion that
manufacturing plants located far from higher-priced zones will maintain
an advantage even with the adoption of strict plant-point pricing
because this milk does not need to travel long distances to reach
manufacturing plants. The ADCNE proposal would cause Agri-Mark
producers to receive lower prices that competitive price relationships
do not warrant.
The Agri-Mark view of Federal milk marketing orders differs
substantially from the views expressed by Dairylea. Agri-Mark states
that the role of Federal milk marketing orders is to treat all
producers equitably relative to how their milk is used and not to
weaken price integrity by promoting or causing producers to compete for
Class I sales. This is best accomplished, according to Agri-Mark, with
appropriate pooling requirements and Class I differentials to satisfy
the Class I demands of the market. Agri-Mark fears that if the
regulatory pricing plan gives a distributing plant an advantage over a
cooperative manufacturing/balancing plant in the same zone, that plant
can use this advantage for itself instead of passing it along to
farmers to offset transporting their milk to market. A 5-cent debit to
the Class I differential schedule is, in the view of Agri-Mark,
significant. If so set, Agri-Mark submits, pressure will come from
distributing plants to see this 5-cent price difference grow.
Lastly, in their opposition to the ADCNE proposal, Agri-Mark notes
that no manufacturing plant has been built in any city zone for
decades, noting that the only significant plants in such areas for the
northeast are older plants producing nonfat dry milk and butter and
serve to balance the Class I needs of city markets, concluding that
such plants are there for common sense and efficiency reasons. In
support of this observation, Agri-Mark notes that existing Class I
differentials have not been adjusted to more fully account for
increases in hauling costs.
A recommendation on whether or not to adopt a producer pricing
differential structure that differs from a Class I differential cannot
be made in this proposed rule. The issue before the Department is to
examine the impact of the change from farm-point to plant-point pricing
on producers as part of recommending the adoption of plant-point
pricing for the new consolidated order. The change to plant-point
pricing will affect approximately one-half of the producers in the
consolidated marketing area and is a significant departure from
historical methods of distributing the revenue that accrues from
classified pricing to producers. Plants will not experience significant
change since plants currently regulated under Order 2 already account
to the marketwide pool at the Class I location differential value. The
issue then, tends to focus on how to pool and distribute the revenue as
equitable as possible to producers.
There are significant differences between Option 1A and Option 1B
that may result in price relationships never before experienced by
either producers or handlers in the northeast. This, in and of itself,
may cause both proponents for and against a producer price differential
to reconsider their position in the need for and development of a
producer price surface founded on the pricing structure of Option 1A.
Nevertheless, under either Option 1A or Option 1B, further analysis is
needed in determining the need for adjusting producer blend prices by a
method that differs from that currently applied to all orders,
including the development of appropriate order language.
Competitive equity between manufacturing plants is already ensured
by the classified prices applicable to handlers who operate such
plants. In fact, this proposed rule suggests a uniform Class III and
Class IV price be applicable for all locations. The more appropriate
issue this proposal seems to address is that manufacturing plants are
often cooperatively owned. All entities, including cooperatives in
their capacity as handlers, account to the marketwide pool at the
manufacturing price for milk received at their plants. The price paid
to producers is the blend price for all milk pooled on the market and
that was priced according to its use. Cooperatively owned manufacturing
plants located in higher priced areas will pay a higher blend price to
producers who deliver milk to that location provided they meet the
performance requirements for being pooled thereby demonstrating the
appropriate degree of association with the market. In this regard, it
is worthy to note that not all manufacturing plants in the high-valued
zones in the New York marketing area are pool plants. Blend prices are
adjusted everywhere according to the location value of the plant.
Adjusting producer blend prices on the basis of whether or not milk was
delivered to a distributing plant or to a manufacturing plant seems to
create a form of producer price discrimination that classified pricing
and the mechanism of marketwide pooling and its related provisions
attempt to mitigate. Such pooling provisions provide a degree of equity
to producers in the form of a uniform blend price adjusted only for the
location value on all milk pooled on the market. Classified pricing and
marketwide pooling have served well to mitigate the price competition
between producers seeking preferred higher-valued outlets for their
milk, while at the same time ensuring handlers uniform prices, adjusted
only for location, in the prices they pay for milk. This proposal, as
currently developed, seems to take a step backward in that it may be
inadvertently creating a degree of price competition between producers
that classified pricing and marketwide pooling sought to minimize.
As Dairylea commented, the 1991 rule that realigned prices in the
three current northeast orders may not have gone far

[[Page 4951]]

enough is establishing a Class I differential structure and indeed may
have resulted in harm to producers located in northern and western New
York. Prior to the 1991 final rule, the price difference between the
New York base zone and New York City was 59 cents. The 1991 final rule
increased this to 72 cents, but in doing so, the differential at the
base zone was lowered by 13 cents. This resulted in a lowering of blend
prices to producers in the far reaches of the milkshed. This
observation may provide the basis for further examination of the Class
I differential structure presented under Option 1A. Specifically, a 5-
cent increase in the New York Class I differential and a similar
increase in the Class I differential at Philadelphia, together with
appropriate location adjustments between these pricing points, may
accomplish what a producer price differential schedule does not seem to
accomplish at its current state of development.
A submission from New York State Dairy Foods, Inc., (NYSDF) a trade
association representing dairy product manufacturers and retailers
voiced the need for raising the New York City Class I differential.
NYSDF proposed an 8-cent per cwt. increase to reflect the reality of
higher hauling rates. If this proposal is accepted, this would raise
the Class I differential in New York City from the current $3.14 to
$3.22. According to NYSDF, the 8-cent increase may not be sufficient
depending on the length of time needed to implement milk order reforms.
NYSDF also commented on their support for retaining farm-point pricing,
but offered no compelling arguments for doing so.
Marketwide Service Payments
Cooperative Service Payments. The Secretary proposes that
cooperative service payments as part of a marketwide service payment
provision for the consolidated Northeast order should not be included
in a consolidated Northeast order. As proposed by ADCNE a 2-cent per
cwt. payment would be made out of the marketwide pool to cooperatives
and non-cooperative entities for funding ``information and policy
services'' that would be of marketwide benefit. Cooperative service
payments of this sort currently are provided for under terms of the New
York-New Jersey order, but are not provided for in either the New
England or Middle Atlantic orders. However, under the New York-New
Jersey order, cooperative service payments are made only to qualified
cooperatives that meet the conditions specified under the order and
does not provide for such payments to non-cooperative entities.
Rationale offered in support for a cooperative service type payment
to cooperatives and non-cooperative entities were based on recognizing
that in a regulatory pool structure, private parties provide important
services that are of benefit to everyone involved in the marketwide
pool, including the promulgation, amendments to, and administration of
the order. Not to provide a mechanism for the recovery of a portion of
the expense involved in providing such services would disadvantage
those incurring these expenses while everyone in the market benefits as
a result of these services.
Qualification criteria presented for entities eligible to receive
this payment included a demonstration to the market administrator that
it provides information with respect to market order prices and
marketing conditions, that it has retained legal and economic staff or
consulting personnel available to participate in marketing order
amendatory proceedings, to consult with the market administrator with
respect to marketing order issues, and that the entity pool at least
2.5 percent of the order's total milk volume.
As presently presented there is not a compelling reason to adopt
this sort of compensatory plan to reimburse those entities that incur
these costs. Market administrators and their staffs make themselves
available to meet with, discuss, and aid in formulating positions that
are reflective of the need of the marketing area as a normal part of
their duties. Additionally, there are numerous provisions in the order
that require as a matter of course, the issuance of reports, prices,
and other information that affect all marketing order participants and
to provide service to the entities affected by the regulatory plan of
the order. Finally, no other current or recommended consolidated order
recommends providing for such cost compensation. Cooperative and
proprietary handlers in the New England and Middle Atlantic marketing
areas included in the consolidated Northeast order, as well as entities
in all other marketing areas have not experienced or have demonstrated
any of the harm or ``disadvantage'' that arises, or may arise, if such
costs are not shared by the entire pool of producers in the marketing
area. This proposed rule can only assume that industry participants
that have an interest in developing the promulgation and amendments to
marketing orders would be willing to do so at their own expense. The
positions and arguments offered are largely issues of the self-interest
of entities. As such, self-interest may or may not be of marketwide
benefit.
Balancing Payments. The Secretary proposes that a marketwide
service payment plan offered for inclusion in the consolidated
Northeast order includes a 4-cent per cwt. marketwide service payment
to qualified handlers that perform market balancing from the marketwide
pool should not be included in the consolidated Northeast order.
The proposal for balancing payments from the marketwide pool is
intended to reflect that there are costs that handlers incur in
balancing the Class I needs of the market and in providing for clearing
the market of temporary surpluses. According to the proponents, these
balancing costs are not fully recoverable from Class I handlers,
however the benefit that results from this service being provided is a
benefit of all producers in the market.
Handlers that incur the costs would be those handlers that would
receive partial cost reimbursement. Cooperatives would be eligible to
form common marketing agencies or federations for purposes of
qualifying for balancing payments. Such handlers would include those
who: (1) demonstrate ownership or operation of a balancing plant with
the capacity to process a million pounds of milk per day into storable
products such as cheese, butter, and nonfat dry milk and that such
handler also represent at least 2.5 percent of the total volume of milk
pooled under the order; (2) have under contract and the obligation to
pool on a year-round basis at least 8 percent of the market's milk
volume; (3) own a balancing plant that must be made available to other
handlers or cooperatives at the request of the market administrator;
(4) qualify to provide pool producers with a temporary market for their
milk for up to 30 days at the request of the market administrator; and
(5) demonstrate to the market administrator that their utilization of
milk in Class I uses is greater than the minimum shipments required for
pool plant qualification under the order.
There are several reasons for not recommending balancing payments
for the consolidated Northeast order. First, the proposed Northeast
order consolidates two current orders, New England and the Middle
Atlantic, that do not currently provide for balancing cost offsets to
handlers for such purposes and that these markets have not experienced
any undue harm or disadvantage by not providing for this sort of cost
offset. Secondly, and in addition to expressed opposition to

[[Page 4952]]

compensate handlers for balancing the market, an appropriate class
price has been provided for market clearing purposes--the Class III--A
price. It is a price that is applicable in all current Northeast
orders, and is continued in this proposed rule as the Class IV price.
While these two class prices are not the same (as explained in the BFP
section of this decision), they are conceptually similar in that
handlers have been provided with a market clearing price and further
compensation beyond this is not warranted. Lastly, the proposed 4-cent
per cwt. level is unexplained with respect to how adequately it tends
to offset balancing costs.
The ``Pass-Through'' Provision
Currently, the New York order provides for what is commonly
referred to as the ``pass-through'' provision. The intent of this
provision is to provide for a degree of competitive equity for handlers
that pay the order's Class I price for milk so that they can compete
with handlers in unregulated areas that do not. This provision has been
in place in the New York order since 1957 and is a part of how the
order allocates and classifies milk. In functional terms, the pass-
through provision removes the amount of milk distributed outside of the
marketing area from the full Class I allocation provisions of the
order, thereby providing a degree of price relief to handlers who
compete with other handlers who are not held to the pricing provisions
of the order in unregulated areas. Regulated New York handlers
currently compete with unregulated handlers in the unregulated areas of
Pennsylvania and other areas in the Northeast region.
The current provisions of the New England and Middle Atlantic
orders do not have this provision although they too adjoin similar non-
federally regulated areas. Handlers regulated by these two orders also
compete with these same handlers for Class I sales. The merging and
expansion of these three Northeast orders continue to result in areas
that adjoin the recommended Northeast order that would not be
regulated.
While there were proposals both for and against retaining a pass-
through provision in the consolidated order, the need for it was
expresses on the basis of the extent the Northeast consolidated order
would be expanded to include currently unregulated areas. Generally,
handlers support continuing to provide for a pass-through provision,
and this position can only be considered reinforced given the limited
degree of expansion of the consolidated Northeast order. If the entire
Northeast region would fall under Federal milk order regulation, the
need for the pass-through would be moot.
The Secretary proposes that a pass through provision, even in light
of the limited expansion suggested for the consolidated Northeast
order, should not be included. Class I prices charged to handlers that
compete within the marketing area for fluid sales are determined by the
location value of their plants. The Class I differential structure
recommended by either Option 1A or Option 1B both recognize the
location value of milk for Class I uses and are both designed to
establish Class I differential values to cause milk to be delivered to
bottling plant to satisfy fluid demands. Accordingly, any handler
located in high-valued pricing areas will be charged for the location
value of Class I milk at their plant location regardless of whether or
not they compete with other handlers for fluid sales in areas where the
location value of Class I milk at these plant locations are lower. This
location value pricing principle should be extended to address handlers
competing for sales with handlers who do not pay the same price for
Class I milk in unregulated areas.
Seasonal Adjustments to the Class III and Class IV Prices
The three northeast orders to be consolidated into a single
Northeast order currently provide for a seasonal adjustor on Class III
and Class IIIA milk prices. These provisions have been a part of these
three orders for more than 30 years. Prior to the adoption of the
Minnesota-Wisconsin (M-W) price series in the mid-1970's, these markets
established the equivalent of the modern Class III price on the basis
of what was known as the U.S. Average Manufacturing Grade Milk-Price
Series (U.S. average price).
The U.S. average price series was a competitive pay price series,
but differed from the M-W in that it recorded price averages
consistently below the M-W that was rapidly being adopted elsewhere in
the country as the appropriate price for surplus uses of milk and used
as a price mover for higher-valued class prices. Given the national
marketplace in which surplus diary products compete for sales, a
mechanism was needed to align these two differing price series.
Accordingly, seasonal adjustments to the Class III price were developed
and made a part of these orders. These seasonal adjustors were found
not only to be warranted for better price coordination between these
two price series, but also served to encourage handlers to dispose of
the maximum amount of milk in Class I uses.
By the mid-1970's, the M-W was adopted to replace the US. average
price series and the seasonal adjustors were retained. The reason for
retaining these adjustments were indicated to encourage handlers to
make more milk readily available for fluid use in the short production
months and to facilitate the orderly disposition of excess reserve milk
supplies in flush production months. Although some regional price
disparity was acknowledged to result from retaining these adjustments,
they were nevertheless retained because there was no evidence that
providing for such adjustment had led to any interregional problems in
the marketing of the reserve milk supply.
Agri-Mark, a major cooperative in the northeast, has proposed that
seasonal adjustments continue in the consolidated Northeast order. The
main thrust of their proposal is that markets with relatively high
Class I use create a burden on the manufacturing sector in their areas.
They view seasonal adjustments as also assisting in sending the proper
economic signal to manufacturers. This is important, according to Agri-
Mark because the seasonal adjustment provides an economic
``disincentive'' for Class III and Class IV manufacturers to use milk
in the fall when less producer milk is available and additional
supplies are needed for Class I uses.
The Secretary proposes that as presently formulated, seasonal
adjustors to the Class III and Class IV prices should not be
incorporated into the provisions of the consolidated Northeast order.
This proposed rule proposes a much more permanent replacement for the
current BFP. If the suggested BFP is adopted in all new consolidated
orders, there is no compelling reason offered at this time to
contemplate continuing seasonal adjustments to Class III and Class IV
prices in light of how these prices would be derived. They are also not
proposed for orders that are expected to have Class I utilizations
similar to those anticipated in the consolidated Northeast order and
who similarly have important manufacturing activity in such markets.

6b. Southeast Regional Issues

The 3 proposed orders for the Southeastern United States--Florida,
Southeast, and Appalachian--are faced with a different set of marketing
conditions than other orders. The Southeastern United States is one of
the fastest growing areas of the country but the most deficit area in
terms of milk

[[Page 4953]]

production per capita. From 1988 to 1995, the population of the 12
Southeastern states rose from 57.9 million to 63.5 million. By the year
2000, the population is expected to reach 66.8 million people.
While population increases in the Southeast, milk production in the
12 Southeast states (i.e., Alabama, Arkansas, Florida, Georgia,
Kentucky, Louisiana, Mississippi, North Carolina, South Carolina,
Tennessee, Virginia, and West Virginia) has been decreasing--from 15.4
billion pounds in 1988 to 13.7 billion pounds in 1996. The net result
of these opposite trends is a widening gap between the local supply of
milk for fluid use and the demand for such milk.
Unlike other parts of the country, the Southeast has few facilities
for handling surplus milk. Consequently, surplus production during the
months of January through June must, in some cases, be shipped hundreds
of miles for processing at manufacturing plants generally to the north.
For this reason, the provisions in these orders must be aimed at the
twin goals of encouraging supplemental milk to move to these markets
during the short production months--generally July through December--
but they must also discourage supplemental milk to move to these
markets when it is not needed in the flush production months--generally
January through June--because such milk would simply displace local
milk and increase cooperative organizations' costs to dispose of the
milk.
Transportation Credits
As a result of the need to import milk to the Southeast from many
areas outside the Southeast during certain months of the year,
transportation credit provisions were incorporated in the Carolina,
Southeast, Tennessee Valley, and Louisville-Lexington-Evansville orders
in August 1996. These provisions provide credits to handlers that
import supplemental milk for fluid use to the market during the short
production months of July through December. The provisions restrict
credits to producers and plants outside of the marketing areas. The
credits are also restricted to producers who supply the markets during
the short season and are not applicable to producers who are on the
market throughout the year.
Following the initial implementation of transportation credits in
August 1996, the provisions were modified in a final decision issued on
May 12, 1997. The amendments became effective on August 1, 1997, in 3
of the 4 orders.\33\
---------------------------------------------------------------------------

\33\ The Tennessee Valley order, as amended, was not approved by
producers. The order was terminated effective October 1, 1997.
---------------------------------------------------------------------------

The Secretary proposes that transportation credit provisions should
be retained in the new Southeast and Appalachian orders but should not
be included in the Florida order. Written comments received in response
to the advance notice of proposed rulemaking indicate that producers in
the Southeast favor retention of these provisions for these two orders.
The Secretary proposes that the provisions should not be included in
the Florida order, however, because that market is largely supplied by
2 cooperative associations which are able to recoup their costs of
supplying the market with supplemental milk.
With the consolidation of orders, the Secretary proposes that some
conforming changes should be made to the transportation credit
provisions of the Southeast and Appalachian orders. Section 82(c)(1) of
the present orders limits transportation credits on transferred bulk
milk to plants that are regulated under orders other than the southeast
orders that currently have the provisions, and section 82(c)(2)(ii)
limits the area where farms may be located to be eligible for
transportation credits on milk shipped directly from producers' farms.
In Secs. 1005.82(c)(1), 1007.82(c)(1), 1005.82(c)(2)(ii), and
1007.82(c)(2)(ii), the references to ``1011 and 1046'' should be
removed.
The addition of northwest Arkansas and southern Missouri to the
Southeast marketing area will make those 2 areas ineligible for
transportation credits. This change in the application of the credits
would naturally follow from the logic for incorporating these 2 areas
in the Southeast marketing area. Specifically, northwest Arkansas and
southern Missouri are regular sources of supply for handlers in the
Southeast marketing area and, in addition, include plants that compete
for sales with handlers regulated under the Southeast order.
Accordingly, the producers in these 2 areas should, and will, regularly
share in the pool proceeds of the Southeast market. Of course, since
transportation credits are designed to attract supplemental milk to the
market for fluid use from producers who are not regularly associated
with the market, transportation credits should not, and will not, apply
to a farm or a plant in northwest Arkansas or that portion of southern
Missouri that is to be included in the Southeast marketing area.
Pooling Standards
A number of comments were submitted regarding the issue of pooling
standards in the southeast region. The Southeast Dairy Farmers
Association (SDFA) recommended that pooling standards be maintained at
levels that are as strict or stricter than current regulations and that
southeastern milk marketing orders contain pooling requirements that
reflect the deficit nature of these markets. SDFA argued that such
provisions would discourage the movement of milk into and out of a
Federal marketing area that does not normally serve the area unless the
milk was actually needed. The association stated that performance
requirements for plants are an important element in ensuring that
southeastern fluid markets are adequately supplied on a year-round
basis and in ensuring that only those plants that have as their
principle purpose the supplying of the markets' fluid milk requirements
receive the benefits of higher uniform prices. Currently, pooling
standards vary between markets and regions, and the association
believes that these varying standards should be maintained. SDFA
supports a 50% route disposition requirement for pool distributing
plants and recommends that the in-area route disposition requirement be
standardized at 15% and the 1500-pound daily average exemption be
changed to 150,000 pounds per month.
The National Farmers Organization (NFO), recommends that pooling
standards for all of the orders recognize and accommodate the pooling
on a year-round basis of milk supplies which are actually required for
that market's Class I needs on a seasonal basis. NFO suggests that each
order should be viewed separately in determining the standards and
urges the Department to carefully evaluate pooling provisions to assure
equity throughout the system. Another commentor, Middlefield Cheese of
Ohio (Middlefield), recommends that all orders have the same pooling
requirements. Middlefield states that varying pooling standards between
orders create great difficulty in procuring milk for small businesses.
It argues that uniformity would allow milk to be economically and
efficiently marketed to where it is needed as opposed to a ``large co-
op dictating control over the milk market.''
One of the major cooperatives operating within the Southeast, Mid-
America Dairymen, Inc. (Mid-Am), recommends that the pooling standard
for distributing plants in high utilization markets should be 50% Class
I. Mid-Am also recommends that market

[[Page 4954]]

administrators be given the authority to adjust shipping requirements
in all orders.
A number of comments addressed the issue of where a plant should be
regulated and whether there should be a ``lock-in'' provision which
would keep a distributing plant regulated under the order where it is
located rather than where it may have the most sales. SDFA supports the
adoption of lock-in provisions in the consolidated southeast orders.
Prairie Farms Dairy, Inc. states that pool distributing plants should
be regulated where located rather than where route disposition occurs.
Another cooperative association, Milk Marketing Inc. (MMI), states that
competition for local milk supply and a competitive pay price with
neighboring plants is much more important to both producers and
processors than a price that is competitive with other plants that
compete for sales in a given area. Therefore, MMI recommends regulating
a distributing plant in the market where it is located rather than on
the location of its sales. MMI contends that the Federal milk order
program should be concerned with attracting milk to a plant, not the
retail location. The cooperative states that plants in unregulated
areas should continue to be regulated based on sales areas.
Some comments received addressed supply plant requirements. SDFA
recommends that for the southeastern orders the supply plant shipping
requirement be 60% of a plant's receipts during July through November
and 40% during December through June. However, SDFA also acknowledges
that specific exceptions to this principle may be necessary to
accommodate specific needs and should be considered on a case by case
basis.
SDFA states that supply plant performance requirements should not
be changed in an effort to allow all Grade A milk to be included in a
marketwide pool. Such a change, it contends, would result in disorderly
marketing and jeopardize the viability of local supplies. SDFA
requested year-round shipping requirements for supply plants under
Orders 5, 6, and 7.
SDFA also states that automatic pooling should be provided for
manufacturing or receiving plants located in the marketing area if the
plant is operated by a cooperative association, but only if the
cooperative has a substantial association with the market.
MMI maintains that southeastern orders would be well-served by
provisions which allow reserve supply plants in the North and West to
participate in higher blend prices throughout the year, in exchange for
greater assurance of a milk supply in the short production months when
additional milk is needed. Land O'Lakes (LOL) recommended the
elimination of shipping requirements for supply plants, but suggested
that supply plant operators make a commitment to supply the market when
additional milk is needed. LOL also supports the adoption of a ``call''
provision in each order that would allow the market administrator to
require supply plant shipments on an as-needed basis.
Another cooperative operating in the Southeast wrote that reserve
supply plant qualification should be based on total cooperative
performance but that such plants should not be required to be located
in the marketing area. This cooperative contends that if a cooperative
is performing a balancing function for the market, it should not be
discriminated against just because its plant is not located in the
marketing area.
Suggestions were also received concerning certain specialty plants
that are located in the Southeast. SDFA recommended amending the route
disposition definition to accommodate a specialty fluid milk plant in
Jacksonville that disposes of long shelf life dairy products. SDFA
states that although a large portion of its fluid supply is disposed
for Class I use, because of the nature of its business, it is likely
that the plant would not meet the 50% route disposition requirement for
pool status.
Proposal: The Secretary proposes that the pool plant provisions for
the Appalachian, Florida, and Southeast orders under consideration
should closely follow the provisions now contained in the southeast
orders. The performance standards proposed are appropriate for the
needs of these seasonally-deficit markets.
Section 7(a) of each Federal milk order describes the pooling
standards for a distributing plant. To qualify for pooling under each
of the 3 orders, a distributing plant must dispose of 50 percent of the
total fluid milk products received at the plant as route disposition.
In addition, at least 10 percent of the plant's receipts must be
disposed of as route disposition in the marketing area. These standards
would indicate that a distributing plant is closely associated with the
fluid market and, therefore, should be part of the marketwide pool.
Paragraph (b) of Section 7 would accommodate the pooling of plants
that specialize in aseptically-packaged products. There are at least
two such plants in the southeast markets: the Ryan Foods Company plants
in Jacksonville, Florida and Murray, Kentucky.
Unlike a typical distributing plant, a plant specializing in
aseptically packaged products may have a more erratic processing
schedule, reflecting the longer shelf life of the products packaged at
the plant. Consequently, a plant's Class I utilization may vary
considerably from month to month. In the past, such variability has
resulted in shifting pool status for some of these plants from one
order to another. In some months, the plant may have been partially
regulated, even though all of the milk received at the plant was priced
under the order. This type of regulatory instability is not conducive
to orderly marketing. To guarantee greater regulatory stability for
these plants, they should be fully regulated pool plants if they are
located in the marketing area and have route disposition in the
marketing area. However, if the plant has no route disposition in the
marketing area during the month, the plant operator may request nonpool
status for the plant.
The Secretary proposes that each of the three orders also should
specify pooling standards for a supply plant. For the Appalachian and
Southeast orders, a supply plant must ship at least 50 percent of the
milk physically received during the month from dairy farmers and
cooperative bulk tank handlers. In the case of the Florida order, the
shipping percentage should be slightly higher at 60 percent.
Unlike supply plant provisions in other orders, the supply plant
provisions in the three southeast orders should not recognize shipments
directly from producers' farms as qualifying shipments for a supply
plant. At the present time, there are no plants qualifying as ``pool
supply plants'' under any of the southeast orders.
Almost all of the plants that balance the fluid needs of the
Southeast are operated by cooperative associations. These ``balancing
plants'' qualify for pooling based upon the performance of the
cooperative association and not based upon shipments from the plant
alone. The Secretary proposes that balancing plant provisions should be
maintained for the three southeast orders.
A balancing plant may qualify based upon shipments directly from
producers' farms as well as shipments from the plant. To qualify as a
balancing plant, the plant must be located within the order's marketing
area. This requirement ensures that milk pooled through the balancing
plant is economically available to processors of fluid milk if needed.
However, in the

[[Page 4955]]

case of the Appalachian order only, a balancing plant also may be
located in the State of Virginia. This provision has been in the
Carolina order and should be continued in the Appalachian order. The
performance standards for a balancing plant should be 60 percent of
producer receipts under each of the orders every month of the year.
There is no necessity to seasonally adjust the supply plant and
balancing plant shipping requirements for the three southeast orders
because the standards proposed are flexible enough to accommodate the
disposal of surplus milk during the flush production season. In
addition, the Secretary proposes that each of the three orders should
contain a provision to allow the market administrator to increase or
decrease shipping requirements and other pooling standards by up to 10
percentage points. This provision also should be included in the
producer milk section of all three orders with respect to the
percentage of milk that may be diverted and the number of days in which
a producer's milk must be received at a pool plant.
In addition to the provisions described above, the Secretary
proposes that each of the southeast orders should contain a provision
to allow unit pooling of distributing plants operated by the same
handler. The proposed rule is based upon the provision that has been in
the Southeast order since 1995.
Some distributing plants may meet the pooling standards of more
than one order. Consequently, the Secretary proposes that it is
necessary to specify the rules for determining where a plant will be
regulated. Under the southeast orders, if a plant meets the pooling
standards of the order and is located in the order's respective
marketing area, the plant should be regulated under that order even if
it has greater sales in some other order's marketing area. This
provision has evolved as a result of several price alignment problems
in the Southeast involving a plant located in one marketing area but
regulated under another order. In every such case, a plant's supply of
milk was put in jeopardy as a result of a lower blend price under the
order in which it became regulated based on its sales. Notwithstanding
the merging of several of the smaller markets in the Southeast, the
Secretary proposes that this provision should be retained for the
southeast orders to preclude a repetition of this problem. There was
widespread support in comment letters for retention of this provision.
In the case of a distributing plant that is not located within any
order's marketing area, the Secretary proposes that a different
standard should apply. Since, in this case, it cannot be presumed with
certainty that a plant is most closely associated with the market in
which it is located, its association with a market should be determined
based upon where it has the most sales.
Producer-Handler
The Secretary proposes that the producer-handler provisions for the
three southeast orders should be very similar to the current
provisions. To qualify as a producer-handler, a dairy farmer would have
to have route disposition in excess of 150,000 pounds per month;
otherwise, the producer's plant would be exempt from regulation
pursuant to a provision that has been uniformly adopted for all orders.
To qualify as a producer-handler, a dairy farmer may receive no
fluid milk products from sources other than his or her farm and may
dispose of no fluid milk products using the distribution system of
another handler. Finally, the dairy farmer must provide proof
satisfactory to the market administrator that the care and management
of the dairy animals and other resources necessary to produce all Class
I milk handled, and the processing, packaging, and distribution
operations, are his/her own enterprise and are operated at his/her own
risk.
At the present time, there are three or four producer-handlers
operating in the southeast markets. None of these operations would lose
their status as producer-handlers under the provision recommended for
new southeast orders.
Producer/Producer Milk
The Secretary proposes that the producer and producer milk
definitions recommended for the three southeast orders should be nearly
identical to the provisions now in the individual orders. These
provisions define which dairy farmers are eligible to share in the
proceeds of the marketwide pool.
A producer should be defined as a dairy farmer whose milk is
received at a pool plant, diverted to a nonpool plant, or received by a
cooperative association acting as a bulk tank handler. It excludes a
producer-handler, a dairy farmer whose milk is delivered to an exempt
plant, or a dairy farmer whose milk is reported as diverted milk under
the provisions of another Federal order.
The proposed diversion limits that are specified in the producer
milk section should be slightly different among the three southeast
orders. To qualify for diversion to a nonpool plant, a minimum amount
of a producer's milk should be received at a pool plant during the
month (i.e., this is called a ``touch-base'' requirement). Under the
Appalachian order, six days' production should be received at a pool
plant during each of the months of July through December, and two days'
production should be received at a pool plant during each of the other
months of the year. Under the Southeast order, ten days' production
should be required to be delivered to a pool plant during each of the
months of July through December to qualify a producer's milk for
diversion to a nonpool plant. During the months of January through
June, 4 days' production should be required to be delivered to a pool
plant.
Under the proposed Florida order, which will have a higher Class I
utilization and less need to divert milk, a producer should be required
to deliver at least ten days' production to a pool plant during every
month of the year in order to be eligible for diversion to a nonpool
plant. These proposed standards are comparable to those required under
the separate Florida orders.
The total quantity of milk which may be diverted by a pool plant
operator or cooperative association during the month also should vary
by market as well as by month. Under the Appalachian order, a pool
plant operator or cooperative association should be permitted to divert
25 percent of their producer milk during the months of July through
November, January and February. During the months of December and March
through June, the total diversion limit should increase to 40 percent
of producer milk receipts. The Secretary proposes that the Southeast
order should provide a total diversion limit of 33 percent during the
months of July through December, and 50 percent during the other
months. The proposed diversion limits under the Florida order should be
20 percent during the months of July through November, 25 percent
during the months of December through February, and 40 percent during
all other months.
The proposed ``touch base'' requirements and gross diversion limits
described above should be adjustable by the market administrator to
assure orderly marketing and/or efficient handling of milk in the
marketing area. This procedure is described in Secs. 1005.13(d)(7),
1006.13(d)(6), and 1007.13(d)(7).
Although a ``dairy farmer for other markets'' provision was
requested for the new orders by some producer organizations, it was
opposed by others. The Secretary does not propose inclusion of this
provision in the three southeast orders at this time. Such a

[[Page 4956]]

provision would restrict the free movement of milk as needed between
market. The proposed diversion limits and touch-base requirements in
the southeast orders should preclude the association of milk with these
markets when such milk is not needed at pool plants.
Report of Receipts and Utilization
The Secretary proposes that to accommodate the payment schedule
desired for the three southeast orders, the handler's report of
receipts and utilization must be in the market administrator's office
no later than the 7th day of the month. The producer payroll report
will be required by the 20th day of the month. The information to be
included in these proposed reports is essentially identical to the
current order provisions.
Payments for Milk
The Secretary proposes that the southeast orders should provide
uniform payment schedules for payments to and from the producer-
settlement fund and to producers and cooperative associations. Payment
to the producer-settlement fund should be made by the 12th day of the
month and payment from the producer-settlement fund should be made one
day later.
In the case of payments to producers and cooperative associations,
the Secretary proposes that the merged Florida order should maintain
the longstanding three-payment schedule that has been part of the
present Florida orders for many years. The partial payments to
producers under the new Florida order should be made on the 20th day of
the month for milk received during the first 15 days of the month and
on the 5th day of the following month for milk received during the
remainder of the month. The rate of payment should be at not less than
85 percent of the preceding month's uniform price, adjusted for plant
location and for proper deductions authorized in writing by the
producer. The final payment for milk received during the previous month
should be made on or before the 15th day of the month.
The Secretary proposes that the Appalachian and Southeast orders
should have identical payment schedules. The partial payment for milk
received during the first 15 days of the month should be made on the
26th day of the month. The rate of payment should be 90 percent of the
preceding month's uniform price. The final payment should be required
to be received by the producer on or before the 15th day of the
following month. The rate of final payment for all 3 orders should be
the preceding month's uniform price adjusted for butterfat, plant
location, partial payments, marketing services, and proper deductions
authorized in writing by the producer.
Each order now requires payment to a cooperative association to be
made one day earlier than the payment to an individual producer. The
Secretary proposes that this practice should continue under the new
orders.

6c. Midwest Region

Upper Midwest Order
Pool Plant
The Secretary proposes that the pool distributing and pool supply
plant definitions of the proposed consolidated Upper Midwest order
should use the standard order language used in other orders, adapted to
marketing conditions in the Upper Midwest.
The proposed pool distributing plant definition specifies that for
a plant to be a pool distributing plant, it must have 15 percent or
more of its total receipts of bulk fluid milk distributed as route
disposition. This percentage is considerably lower than the percentage
used in the Chicago Regional order, which varies from 30 percent to 45
percent depending on the month. However, the current Upper Midwest
order uses a percentage based on the marketwide Class I percentage for
the same month of the previous year. During ``normal'' months this
percentage is approximately 15 percent. When some milk is held off the
pool for economic reasons (primarily unusual price differences between
classes), the percentage may vary considerably, ranging from the
``normal'' 15 percent to over 50 percent. Use of a constant percentage
at approximately the market Class I percentage will reduce the current
opportunities available to distributing plants to become partially
regulated by manipulating their reported receipts and diversions of
milk. In addition, the proposed language should eliminate month-to-
month uncertainty caused by basing handlers' regulatory status on the
market's fluctuating utilization percentage.
In addition to specifying the route disposition percentage at 15
percent, the proposed percentage would be calculated on the basis of
the total receipts of bulk fluid milk products physically received at
the distributing plant. Currently both the Chicago Regional and Upper
Midwest orders include milk diverted from the distributing plant in the
total bulk receipts used to compute the route disposition percentage.
The Identical Provisions Committee recommended that the in-area
distribution criteria for pool distributing plants be 15 percent of
total route disposition. The Committee explained that use of total
route disposition rather than bulk receipts as the denominator would
reduce opportunities for handlers to manipulate the manner in which
they may report their operations to avoid regulation. Currently in the
Chicago Regional and Upper Midwest orders the in-area route disposition
standard is computed using the same basis (bulk receipts, including
diversions) as is used to determine whether a plant meets the
definition of a pool distributing plant.
The Secretary proposes that provision be made for a single handler
to form a unit of distributing plants and manufacturing plants, all of
which must be located within the marketing area. The unit would have to
meet the requirements for a pool distributing plant and at least one of
the plants in the unit would be required to meet the pool distributing
plant requirements as a separate plant. Plants not meeting the pool
distributing plant definition would be required to have disposition of
packaged fluid milk products, packaged fluid cream products, or cottage
cheese and other soft manufactured products of at least half of their
receipts of Grade A bulk fluid milk products, including milk diverted
by the plant operator.
Manufacturing plants traditionally have been included in units with
distributing plants because the manufacturing plants produced products
such as packaged fluid cream, sour cream, and cottage cheese that are
marketed in conjunction with bottled fluid milk products. In addition,
some of these plants produce a limited quantity of fluid milk products.
Handlers have argued that the operator of a free-standing manufacturing
plant that manufactures these complementary products should be able to
pool its milk supply for both (or for several) plants as if all of the
products were made in the bottling plant.
Both the Chicago Regional and Upper Midwest orders contain a
provision for a distributing plant unit. Although the current Chicago
Regional order does not specify the types of products that may be
manufactured at plants in the unit, the Upper Midwest order does. The
Secretary proposes that it is reasonable to place restrictions on the
types of products that are disposed of from the manufacturing plants in
the unit, since these plants would receive the benefits reserved for
pool distributing plants and

[[Page 4957]]

shipments from supply plants to the plants in the unit would be
considered in determining pool supply plant qualifications.
A pool supply plant operator should ship as qualifying shipments at
least 10 percent of the plant's receipts of milk from producers,
including milk diverted by the handler, each month. As in the current
Chicago Regional order, it is proposed that such shipments may be made
to pool distributing plants, pool distributing plant units, plants of
producer-handlers, partially regulated distributing plants, or
distributing plants fully regulated by other Federal milk orders. The
extent of shipments to partially regulated distributing plants to be
used for qualification would be limited to the quantity classified as
Class I. Qualifying shipments to distributing plants regulated by other
Federal milk orders should be limited to the quantity shipped to pool
distributing plants, and may not be agreed-upon Class II, Class III or
Class IV utilization. Shipments directly from farms to pool
distributing plants and to plants contained in pool distributing plant
units should be included as shipments that help to meet the percentage
qualification standard.
The proposed 10 percent shipping requirement is approximately 5
percentage points less than the anticipated Class I percentage for the
proposed consolidated Upper Midwest order. The 10 percent shipping
standard is greater than the current individual supply plant shipping
standard and equal to the maximum shipping percentage required of pool
units during the qualifying period in the current Chicago Regional
order. The standard under the current Upper Midwest order, which uses
the Class I use percentage of the same month in the previous year as
the supply plant shipping percentage, would exceed the proposed
percentage. Also under the current Upper Midwest order, a reserve
supply plant must ship 10 percent of its receipts to pool distributing
plants during January through June, and the marketwide Class I
percentage for the same months of the preceding year for the months of
July through December.
Although the proposed shipping percentage is below the estimated
Class I percentage for the proposed Upper Midwest order, the 10 percent
shipping standard should be appropriate, in view of the fact that many
distributing plants have a supply of milk from their own producers. In
September 1997, approximately 27 percent of the milk pooled or received
at distributing plants in the Chicago Regional order was pooled as
producer milk with the distributing plant operators as the handlers,
rather than as producer milk pooled by cooperatives and other handlers.
The milk pooled by distributing plant handlers accounted for
approximately 12 percent of the total milk pooled in September 1997 (or
approximately 5 percent of the total milk that would have been pooled
if all of the milk eligible to be pooled in September 1997 had been
pooled). Approximately 7 percent of the Class I producer milk, or
approximately 2 percent of the total producer milk, pooled under the
Upper Midwest order is pooled by distributing plant operators. The
combination of the supply plant shipping percentage and the percentage
of milk pooled directly by distributing plant handlers would appear
sufficient to meet anticipated Class I needs in the proposed Upper
Midwest order. The proposed 10 percent supply plant shipping percentage
also should be appropriate to avoid unnecessary and uneconomic
shipments.
The proposed rule would allow the market administrator to increase
or decrease the required shipping percentage on a marketwide or
selected area basis if deemed necessary to assure an adequate supply of
milk to pool distributing plants or to prevent uneconomic shipments of
milk. If the shipping percentage is increased by the market
administrator, shipments made for the purpose of meeting the increased
percentage may be made only to pool distributing plants or plants
contained in pool distributing plant units.
Groups of two or more supply plants should be allowed to form
systems of supply plants for the purpose of meeting the shipping
requirements, by shipping the same percentage as that required for
individual pool supply plants that are not part of such a system. These
pool supply plant systems may consist of plants of the same handler,
more than one handler, and may contain both proprietary and cooperative
handlers. The only requirement affecting an individual plant within the
unit is that the plant must be physically located within the marketing
area. This restriction is necessary to prevent distant plants from
receiving the benefits of participating in the marketwide pool without
having an actual association with the market.
Several plants located outside the boundaries of the proposed
marketing area currently are included in supply plant units by a
``grandfather clause'' in the Upper Midwest order. The proposed order
provides that these plants may continue to be included in a supply
plant unit if they so desire as long as they maintain continuous pool
plant status.
The Secretary proposes that handlers may form supply plant systems
by filing a written request by July 15, listing the plants to be in the
system. The system would remain in effect from August 1 through July 31
of the following year. These dates deviate from those proposed for
other orders because of the difference in seasonal production
variations between this and other orders. The handler or handlers
establishing the system may also delete a plant from the system or
dissolve the system by submitting a written request to the market
administrator. Any plant deleted from a system, or plants that were
part of a system that was discontinued, may not be part of a system
until the following August.
Provisions that allow handlers to add plants to a system under
certain circumstances and to allow systems to reorganize in the event a
plant changes ownership or in the event of a business failure by a
handler are also incorporated in the proposed order.
A system failing to meet pooling standards would be allowed to drop
plants from the system until the system does qualify. The handler
responsible for assuring that the system qualifies should notify the
market administrator of which plants are to be deleted from the system.
If the handler does not notify the market administrator, the market
administrator would exclude plants from the system beginning with the
plant at the bottom of the list of plants submitted by the handler
responsible for qualifying the system, and continuing up the list until
the system qualifies.
The provisions for supply plant systems are very similar to the
provisions currently contained in both the Chicago Regional and Upper
Midwest orders. Unlike the Chicago Regional and the Upper Midwest
orders, however, the proposed order does not contain a specific
shipping requirement for individual plants within a supply plant
system. In the current Chicago Regional order, pool supply plant
systems have twice the percentage shipping standard of individual
supply plants, with individual plants within the systems required to
ship 47,000 pounds or three percent of their producer receipts,
whichever is less, in five of the six months of August through January.
The current Upper Midwest order requires handlers with supply plants in
a supply plant system to ship five percent of each handler's Grade A
receipts, including milk diverted by the handler to nonpool plants,
during one of

[[Page 4958]]

the months of August through December.
This proposed rule does not propose providing for the category of
supply plants referred to as reserve supply plants. Reserve supply
plants ceased to be included in the Chicago Regional order in 1987,
while the Upper Midwest continues to provide for them. With year-round
shipping requirements, the unlimited ability of the market
administrator to change shipping percentages both in level and in area,
and the ability of supply plants to form systems, it is proposed that
there is no compelling reason to have two categories of supply plants.
A provision to allow plants to remain qualified for up to two
consecutive months due to unavoidable circumstances, such as a natural
disaster, fire, breakdown of equipment, or work stoppage is included in
this proposed order. The provision is contained in the Chicago Regional
order and has worked quite well in giving handlers some administrative
relief in the face of certain unavoidable circumstances.
Producer Milk
The definition of producer milk determines which milk will be
eligible to participate in the Federal order pool. The proposed order
provides that milk received at a pool plant directly from producers or
from a cooperative association acting as a handler should be eligible
to be producer milk. Milk for which the operator of a pool plant is the
handler that is delivered directly from the farm to another pool plant
should also be considered producer milk. Under certain circumstances,
milk delivered to a nonpool plant may also be considered producer milk.
Milk delivered directly from a farm to a nonpool plant may be
considered producer milk if at least one day's production is received
at a pool plant during the dairy farmer's first month as a producer.
In order to qualify as producer milk the milk pooled by a
cooperative association acting as a handler described in
Sec. 1030.9(c), the cooperative must deliver at least 10 percent of the
milk for which it is the handler pursuant to Sec. 1030.9(c) to pool
distributing plants, units of pool distributing plants, plants of
producer-handlers, partially regulated distributing plants, or
distributing plants fully regulated by other Federal milk orders. The
shipments to partially regulated distributing plants are limited to the
quantity classified as Class I. Qualifying shipments to distributing
plants regulated by other Federal milk orders are limited to the same
quantity shipped to pool distributing plants and may not be shipped as
agreed-upon Class II, Class III or Class IV utilization. These are the
same performance requirements that would apply to supply plants.
Likewise, the same performance requirements that apply to supply plants
would apply to cooperative associations acting as handlers if the
market administrator adjusts the shipping percentages.
The Secretary proposes that there would be no significant
differences in the treatment of milk received at pool plants under the
proposed order and under the Chicago Regional or Upper Midwest orders.
There are, however, several differences relating to diverted milk. The
proposed order would allow the operator of a pool plant to divert, or
ship milk directly from the farm to another pool plant, the milk of
producers for which it is the handler, and account for the milk as
producer milk at the shipping plant. Allowing either a proprietary pool
plant or a cooperative pool plant to divert milk to another pool plant
is consistent with the Chicago Regional order. In the Upper Midwest
order, milk that is received at a pool plant and for which a
cooperative association is the handler is considered producer milk at
the receiving plant. The Upper Midwest order specifies that a
proprietary handler may divert milk to another pool plant and that such
milk will be considered producer milk of the diverting proprietary
handler. The proposed language leaves to the discretion of the
cooperative association the option of diverting milk to another pool
plant from its own pool plant or delivering the milk to the pool plant
in its capacity as a handler of producer milk pursuant to
Sec. 1030.9(c).
The proposed Upper Midwest order would require that a new producer
or a producer who has broken association with the market have at least
one day's production received at a pool plant during the first month in
which the producer's milk is reported as producer milk. Currently the
Chicago Regional order requires a new producer on the market or a
producer who has broken association with the market to have at least
one day's production received at the pool plant at which the milk is
reported during the first month in which the producer's milk is
considered to be producer milk eligible for diversion to a nonpool
plant. In addition, at least one day's production of a producer's milk
must be received at a pool plant in each of the months of August
through January to be eligible for diversion to a nonpool plant. The
current Upper Midwest order requires that a new producer or a producer
who has broken association with the market be received at a pool plant
prior to the milk being diverted to a nonpool plant.
There is little or no justification for forcing producer milk to be
received at a pool plant to maintain or prove association with the
market. Supply plants and cooperatives would be required to ship a
fixed percentage of their total milk supply, not just that portion
received at their plants, to the fluid market. Since both cooperatives
and proprietary handlers can move milk directly from the farm to the
fluid market there is little reason to force milk into a pool plant for
regulatory purposes only. Certainly the extra cost to the handler of
moving milk for regulatory purposes does not enhance economic
efficiency or milk quality and in fact decreases economic efficiency
and milk quality to the detriment of the entire market.
The proposed order provides that producer milk be priced in the
month in which it is picked up at the farm and at the location of the
plant at which the milk is physically unloaded into processing
facilities or a storage tank. In the current Chicago Regional order
milk is priced where milk is pumped within the confines of a plant. The
proposed order would eliminate the pricing of milk where it is pumped
from truck to truck and price the milk where it is eventually unloaded
into processing facilities or a storage tank.
Location Adjustments and Transportation Credits
To help move milk to the fluid market a transportation credit and a
procurement credit to be applied to Class I milk are contained in the
proposed Upper Midwest order. The transportation credit would be
computed by multiplying the hundredweight of Class I milk contained in
transfers of bulk fluid milk from pool plants to pool distributing
plants by the value obtained by multiplying .0028 times the number of
miles between the shipping plant and the receiving plant. The
transportation credit should be paid to the shipping handler, since the
milk would be priced at the location at which it is first received.
The proposed transportation credit is similar to the transportation
credit currently contained in the Chicago Regional order. Both the
proposed transportation credit and the current credit, which use the
same .0028 rate, are applied to Class I milk only. However, in the
current Chicago Regional order the credit is based on 110 percent of
the Class I milk received

[[Page 4959]]

at the pool distributing plant, rather than on the Class I milk
delivered by the shipping handler, as proposed. Since the
transportation credit is computed on the basis of milk classified as
Class I at the shipping plant, the credit would be paid to the shipping
handler.
Unlike the transportation credit, which is based on mileage and
paid only on transfers of bulk milk to pool distributing plants, the
procurement credit would be paid at the rate of 8 cents per
hundredweight of Class I milk transferred or diverted by a pool plant
to a pool distributing plant. A procurement credit also will be applied
to milk received from producers and from cooperative associations
acting as handlers pursuant to Sec. 1030.9(c) based on the pro rata
share of producer milk delivered to a pool distributing plant and
allocated to Class I.
A transportation credit and procurement credit would be
incorporated in the proposed order to assist handlers in supplying the
Class I market. These transportation and procurement credits, to be
paid on Class I milk only in combination with the Class I price surface
discussed elsewhere in this proposed rule, will help handlers move milk
to the fluid market by distributing the cost of supplying the fluid
market to all market participants who share in the marketwide pool.
Handlers and producers who supply the Class I market on a regular basis
should not be expected to bear the entire cost of supplying the Class I
market while handlers and producers who meet only the minimum
requirements derive the benefits of marketwide pooling. Incorporation
of a transportation credit and procurement credit on Class I milk in
the marketwide pool will assure that at least some of the cost of
supplying the Class I market is shared among all market participants.
Mideast Order
Many of the provisions of the proposed Mideast order are explained
in the ``Identical Provisions'' portion of this proposed rule, and need
not be addressed here. The provisions that deviate somewhat from those
proposed for other order areas are the provisions dealing with
standards for determining the pool status of producers and handlers,
and those describing the pricing of milk under a component pricing plan
that differs slightly from that common to the other orders with
proposed multiple component pricing provisions. For the most part,
pooling provisions have less effect on the current Michigan Upper
Peninsula market than on the 4 other markets included in this
consolidated order because Michigan Upper Peninsula is the only
remaining individual handler pool in the current Federal order system.
Therefore, pooling provisions are discussed in relation to the 4
principal markets included in the proposed Mideast order.
Pool Plant
The proposed Mideast pool distributing plant definition would
differ from that contained in most of the other proposed orders to make
less likely the full Federal regulation of three State-regulated
plants, two in Pennsylvania and one in Virginia, that currently are
partially regulated under one or more of these orders. These State-
regulated handlers must pay a minimum Class I price for milk used in
fluid products, often a higher price than would be applied under
Federal order regulation. At the same time, Federal regulation of the
Pennsylvania and Virginia-regulated handlers under the consolidated
order would reduce producer returns while having little effect on
handlers' costs of Class I milk.
Specifically, the percentage of a handler's total route
dispositions distributed within the marketing area that would result in
the handler being fully regulated under the Mideast order should be 30
percent under this order rather than the 15-percent standard proposed
for all but one of the other 10 orders. This level of sales in the
marketing area can be compared to the current pooling standards for
distributing plants in the Eastern Ohio-Western Pennsylvania and
Indiana orders. These orders currently have variable (30-50 percent)
pooling standards for the percentage of a distributing plant's receipts
distributed on routes, combined with a 10-15 percent standard for
receipts distributed within the marketing area. Plants that meet the
total dispositions standard at the lower end of the range (35 or 40
percent) and distribute only 10 or 15 percent of their receipts on
routes in the marketing area would actually distribute approximately 30
percent of their route dispositions on routes in the marketing area. At
the same time, it would be difficult to justify establishing a pooling
standard so high that the significant role played in a market by a
handler having more than 30 percent of its route disposition in the
marketing area would fail to be recognized by inclusion in the
marketwide pool.
In addition to specifying the in-area route disposition percentage
at 30 percent of total routes, the total and in-area route disposition
percentages would be calculated on the basis of the total receipts of
bulk fluid milk products physically received at the distributing plant.
Currently all four of the larger orders to be included in the
consolidated Mideast order include milk diverted from the distributing
plant in the total bulk receipts used to compute the route disposition
percentages.
To assure continued pool qualification for all of the handlers who
currently are associated with the Mideast markets, the pool supply
plant definition of the consolidated Mideast order would provide for
all of the types of supply plants that currently qualify for pooling
under the 4 principal orders. The Eastern Ohio-Western Pennsylvania
pool plant provision includes a plant operated by a cooperative if the
cooperative association delivers to distributing plants at least 35
percent of the milk for which it is the handler during the current
month or over the preceding 12 months. The Southern Michigan order
includes as pool supply plants: (a) a plant that has been a pool plant
for 12 consecutive months and has a marketing agreement with a
cooperative association, and (b) a system of supply plants operated by
one or more handlers. Order 40 also includes some shipments to other
Federal order plants and partially regulated distributing plants, in
addition to pool distributing plants, as qualifying shipments by supply
plants.
The percentage of receipts as qualifying shipments to distributing
plants currently ranges from 30 to 40 percent for these orders, with
direct deliveries from farms rather than plant transfers limited to
half of the required deliveries under three of the orders. All four of
the orders require performance of pooling standards by supply plants
for the months of September through February, followed by a ``free
ride'' period during which shipping percentages need not be met by
supply plants that met the shipping standards during the required
period. The Indiana order contains a provision allowing the continued
pooling of a plant that fails to meet pooling standards because of
circumstances beyond the handler's control.
The proposed shipping standards for pool supply plants are 35
percent for all months, with plants meeting the standard for the months
of September through February being allowed to retain their pool status
for the immediately following months of March through August. For the
purpose of making the 35 percent level of shipping standard less
burdensome, up to 90 percent of required shipments should be allowed to
be made directly from farms

[[Page 4960]]

to distributing plants. The cooperative association plant provided for
in the Eastern Ohio-Western Pennsylvania order would be retained, as
would the supply plant provisions peculiar to the Southern Michigan
order.
Producer Milk
The producer and producer milk provisions of the orders to be
consolidated in the Mideast order are quite similar and differ little
from those to be incorporated in the other consolidated orders. The
principal difference between some of the individual orders and the
consolidated order would be the limit on the percentage of a handler's
pooled producer milk that may be diverted to nonpool plants. The Ohio
Valley, Indiana and Eastern Ohio-Western Pennsylvania orders all
contain 50 percent diversion limits for the months of September through
November, January and February and a 60 percent limit for the month of
December, with no diversion limit for the months of March through
August. The Southern Michigan order contains a 60-percent diversion
limit for the months of September through February, with no limit for
the months of March through August. In order to assure that all of the
milk that has been pooled under these orders continues to qualify for
pooling, the diversion limit proposed for the Mideast order is 60
percent for the months of September through February, with no limit for
the March through August period. At the same time, the market
administrator would be authorized to increase or reduce the diversion
limit as needed to maintain orderly marketing and efficient handling of
milk in the marketing area.
Multiple Component Pricing
The reporting and payment provisions of the proposed consolidated
Mideast order differ somewhat from those of the other consolidated
orders that provide for multiple component pricing (MCP) by retaining
the current Southern Michigan component pricing plan. The Southern
Michigan multiple component pricing plan is very similar to that
proposed for the other MCP orders, but prices ``fluid carrier'' instead
of ``other solids.'' The Mideast order language is changed accordingly.
This difference appears to be favored by market participants in the
Mideast, and would result in very little difference in total payments,
either by handlers or to producers whose milk is pooled under the
differing provisions.
Central Order
Many of the provisions of the proposed Central order are explained
in the ``Identical Provisions'' portion of this proposed rule, and need
not be addressed here. The provisions that deviate somewhat from those
proposed for other order areas are the provisions dealing with
standards for determining the pool status of producers and handlers. An
effort is made to explain significant differences between the pooling
provisions of the 8 individual orders included in this consolidation
and those of the consolidated order.
Pool Plant
The proposed Central pool distributing plant definition should
follow closely the provisions contained in most of the other proposed
orders. The proposed provisions would make no difference in the pool
status of distributing plants currently pooled under the individual
orders.
Specifically, the percentage of a handler's total route disposition
distributed within the marketing area that would result in the handler
being fully regulated under the Central order should be the 15-percent
standard proposed for most of the other 10 orders. The minimum
percentage of a pool distributing plant's actual physical receipts of
bulk fluid milk products that would have to be distributed on route is
proposed to be 25. Currently most of the orders to be included in the
consolidated Central order include milk diverted from the distributing
plant in the total bulk receipts used to compute the route disposition
percentages.
The proposed order would provide that a single handler be allowed
to form a unit of distributing plants and Class II manufacturing
plants, all of which must be located within the marketing area. The
unit would have to meet the requirements for a pool distributing plant,
and at least one of the plants in the unit would be required to meet
the pool distributing plant requirements as a separate plant. Plants in
the unit that do not meet the pool distributing plant definition would
be required to have disposition of packaged fluid milk products,
packaged fluid cream products, or cottage cheese and other Class II
products of at least half of their receipts of Grade A bulk fluid milk
products, including milk diverted by the plant operator.
The proposed inclusion of Class II manufacturing plants in units
with distributing plants is supported because the manufacturing plants
produce products such as packaged fluid cream, sour cream, and cottage
cheese that are marketed in conjunction with bottled fluid milk
products. In addition, some of these plants produce a limited quantity
of fluid milk products. Handlers have argued that the operator of a
free-standing manufacturing plant that manufactures these complementary
products should be able to pool its milk supply for both (or for
several) plants as if all of the products were made in the bottling
plant.
The pool supply plant definition of the consolidated Central order
would contain provisions that assure continued pool qualification for
any handlers or milk currently associated with the markets consolidated
into the proposed Central market. The Iowa order contains no limit on
the amount of direct-shipped milk that can be used to qualify a supply
plant, and several of the other orders allow such deliveries to make up
a portion of qualifying shipments. The proposed order allows direct-
shipped milk to be counted as pool qualifying shipments without limit.
The Greater Kansas City, Nebraska-Western Iowa, Southern Illinois-
Eastern Missouri, and Southwest Plains orders contain cooperative
balancing plant provisions, allowing cooperative-operated plants to be
pooled if the cooperative delivers a given percentage of the milk for
which it is the handler to pool distributing plants. The proposed
Central order also contains such a provision, including in the pool
plant definition a cooperative association plant that supplies at least
35 percent of the milk for which it is the handler to pool distributing
plants, either during the current month or for the immediately
preceding 12-month period. The deliveries to pool distributing plants
may include deliveries directly from the farms of producers for whom
the co-op is the handler, as well as transfers from the cooperative's
plant.
Cooperative association ``balancing plants'' serve the market as
the outlet of last resort. When surplus milk has no other place to go
on weekends, holidays, or during months of surplus production, it moves
to cooperative association ``balancing plants'' where it is
manufactured into storable products. When production decreases, these
plants operate at minimal capacity or may be shut down completely.
Cooperative members assume the burden and cost of processing surplus
milk through such plants.
Most of the Central orders allow a period during which supply
plants do not have to meet shipping percentages if they have done so
for the months during which milk production levels are

[[Page 4961]]

low and demand for fluid milk is high. The Iowa order has reduced
shipping standards for such months. The proposed order should include a
period during which supply plants that have served the needs of the
market when milk supplies are tight are not required to meet shipping
standards, but it is reduced from the 5-7 month period existing in the
current orders to a 3-month period from May through July.
The percentage of receipts as qualifying shipments to distributing
plants currently ranges from 30 to 50 percent for these orders, the
Iowa percentage reduced to 20 for the months of December through
August.
The proposed shipping standards for pool supply plants under the
proposed consolidated order are 35 percent for the months of September
through November and January and 25 percent for all other months, with
plants meeting the percentage standard for the months of August through
April being allowed to retain their pool status for the immediately
following months of May through July.
Groups of two or more supply plants should be allowed to form
systems of supply plants for the purpose of meeting the shipping
requirements, by shipping the same percentage as that required for
individual pool supply plants that are not part of such a system. These
pool supply plant systems may consist of plants of the same handler or
more than one handler, and may contain both proprietary and cooperative
handlers. The only requirement affecting each plant within the system
is that the plant must be physically located within the marketing area.
This restriction is necessary to prevent distant plants from receiving
the benefits of participating in the marketwide pool without having an
actual association with the market.
As in the other proposed consolidated orders, the market
administrator would have the authority to increase or reduce the
order's pooling provisions as marketing conditions change for the
purpose of assuring that an adequate supply of milk will be available
for fluid use, or to assure that the order does not require handlers to
undertake uneconomic movements of milk to maintain the pool status of
their plants.
Producer Milk
The producer and producer milk provisions of the orders to be
consolidated in the Central order are quite similar to each other and
differ little from those to be incorporated in the other consolidated
orders. The principal difference between some of the individual orders
and the consolidated order would be the limit on the percentage of a
handler's pooled producer milk that may be diverted to nonpool plants.
The percentage of a handler's milk that may be diverted to nonpool
plants varies under the individual orders from 20 percent of milk
received at pool plants during some months under the Eastern Colorado
order to 70 percent for some months under the Nebraska-Western Iowa and
Iowa orders. Most of the orders require each producer's milk to be
received at a pool plant at least once each month.
In order to assure that all of the milk that has been pooled under
these orders continues to qualify for pooling, the diversion limit
proposed for the Central order is 65 percent for the months of
September through November and January, and 75 percent for the months
of February through April and December. Allowable diversions for the
months of May through July would be unlimited. There would be no
requirement that each producer's milk be received at pool plants for a
minimum number of days per month. At the same time, the market
administrator would be authorized to increase or reduce the diversion
limit as needed to maintain orderly marketing and efficient handling of
milk in the marketing area.
Multiple Component Pricing
The reporting and payment provisions of the proposed consolidated
Central order would include those common to other orders with multiple
component pricing. These markets have a significant amount of milk used
in manufactured products, and component pricing will enable producers
to be paid according to the valuable components of their milk.

6d. Western Region

Southwest Order
The proposed consolidated Southwest marketing area is comprised
principally of the current Texas and New Mexico-West Texas marketing
areas. With regard to milk production and population (consumption),
these areas are both in the process of change, but in different ways.
Texas has one of the fastest-growing populations in the U.S., and until
recently has been able to maintain milk production on a per capita
basis. After a significant increase in milk production during the 1988-
1994 period, Texas milk production has been declining somewhat,
accompanied by the exit of approximately 29 percent of the State's
Grade A dairy farmers. If the current trend continues, the Texas market
could come to resemble more closely those of the Southeast portion of
the U.S., relying significantly on more distant milk supplies to meet
the market's Class I and II needs. This scenario currently is true for
the southern parts of Texas.
The State of New Mexico has experienced relatively slow population
growth, but dramatic increases in milk production--from 1.099 billion
pounds in 1988 to an estimated 4.020 billion pounds in 1997. With the
declining production in Texas, the New Mexico milkshed will be drawn
upon more often to supply Class I and II needs in the Texas demand
centers, 500-600 miles distant. Procurement costs would be expected to
increase dramatically. In light of these circumstances, proposed
provisions in the proposed Southwest order would provide flexibility to
handlers supplying the market to prevent inefficient movements of milk
and unnecessary costs of operation incurred for the purpose of
participating in the marketwide pool.
Prior to enactment of the 1996 Farm Bill, cooperatives operating in
the Southwestern Markets had determined that the two milk orders in the
region were being operated as one and should be merged. Much discussion
took place and proposed order provisions were developed by the
principal cooperatives involved. These comments, with numerous others,
were considered in the development of this proposed rule for the
Southwest marketing area.
Pooling Standards
Most of the pooling standards in the Texas and New Mexico-West
Texas orders have been suspended for some time. The rapid expansion of
milk production in the region during the late 1980's created a
situation in which handlers operating in the region could no longer
meet the provisions of the orders while pooling all of their milk
supplies.
Pool Distributing Plant. The identical provisions committee
recommended that a pool distributing plant distribute as route
disposition at least 25% of its bulk fluid milk receipts at the plant,
and distribute at least 15% of its total route disposition within the
marketing area. One partially regulated plant located in the Texas
marketing area would become fully regulated under this provision. The
plant has been partially regulated under the Texas order and,
periodically, fully regulated under the Chicago Regional order. The
proposed percentages for pool distributing plants will cause this plant
to become fully regulated under the Southwest order and alleviate the
disorderly conditions caused by its shifts between orders. There should
be no change in the

[[Page 4962]]

plant's costs, since their supply of milk comes from Southwest pool
sources.
Pool Supply Plant. The Texas and New Mexico-West Texas orders
currently contain a 50% pool supply plant shipping percentage during
the Fall months, with a lower percentage or an automatic pooling
provision for the remaining months. Currently there are no pool supply
plants regulated under either of the Southwest orders, but provision is
made for such an operation if it should meet the proposed order's
definition. A provision defining cooperative plants located in the
marketing area would base pool qualification on total cooperative
performance in delivering at least 30 percent of the cooperative's milk
supply pooled under this order to pool distributing plants.
Although neither the Texas nor New Mexico-West Texas orders
currently have provisions for split-plant operations (plants that have
both pool and nonpool portions) or the authority for the Market
Administrator to adjust shipping requirements, these provisions are
included in the proposed order, as recommended by the identical
provisions committee.
Producer Milk
The current Texas and New Mexico-West Texas orders have provisions
that require a producer's milk to be received at a pool plant, or touch
base, before milk of the producer is eligible to be diverted. Based on
comments received, the order would limit diversions of producer milk on
the basis of a portion of a handler's total milk supply. At least fifty
percent of the milk pooled by a handler should be received at pool
plants for the handler's entire milk supply to be pooled. Milk produced
by producers located in the marketing area should be eligible for
pooling without a particular percentage or number of days' production
being required to be received at a pool plant. For producers located
outside the marketing area, however, the currently-suspended ``touch-
base'' provision of 15% delivered to pool plants during the month
(rather than before diversions are allowed), is continued in this
proposed rule.
Diversion limits are suggested to be 50% of a handler's total milk
supply. The current Texas order allows an amount equal to one-third of
the milk delivered to pool plants to be diverted (this provision is
currently suspended), while the (currently suspended) New Mexico-West
Texas provision allows 50% of a handler's total milk supply to be
diverted. The current Texas order provisions base allowable diversions
on deliveries to individual pool plants, greatly exacerbating the time
and effort required to keep track of milk movements. The total
performance standard will allow handlers to meet diversion limits more
easily with more efficient movements of milk. In addition, the
increased percentage of allowable diversions will assure that all of
the producers whose milk would qualify for pooling under either of the
two orders being consolidated would continue to meet pooling
qualifications.
Transportation Credits for Surplus Milk
The Texas order currently has a market-wide service payment
provision that gives credits for hauling surplus milk located in
certain zones in Texas to nonpool plants outside the State for use in
manufactured products. The provision has not been included in the
proposed Southwest order language because of declining production and
increasing balancing plant capacity in the affected areas of Texas.
Payment Provision
The Texas order is one of only a few marketing orders that require
handlers to submit the full classified value during the month to the
market Administration. In turn, the Market Administrator acts as a
clearing house and forwards these proceeds on to the respective
organizations. Interested persons have expressed an interest in
retaining these provisions, not only for the proposed Southwest order,
but for all other orders.
The current Texas payment provision was found necessary because of
problems encountered in assuring timely payments by pooled handlers.
The provision has been in the Texas order since 1979, and the earlier
payment problems have been remedied. Such a provision involves a rather
large degree of regulatory intervention between milk processors and
their suppliers that should be shown to be necessary to correct
existing problems. There is no indication that such problems currently
exist, or would exist in the absence of the provision. Nearly all of
the milk that will be pooled under the consolidated Southwest order is
produced by cooperative members and pooled by the cooperatives. These
large, business-oriented organizations should be able to assure that
they receive full payment for their members' milk in a timely manner.
Arizona-Las Vegas Order
Many of the provisions of the proposed Arizona-Las Vegas order are
explained in the ``Identical Provisions'' portion of this proposed rule
and need not be addressed here. Those provisions that deviate to some
extent from the ``Identical Provisions'' are addressed in this
discussion.
Pool Plant
The proposed pool distributing plant definition is similar to that
contained in most of the other proposed orders. The minimum percentage
of a pool distributing plant's physical receipts of bulk fluid milk
products that are disposed of as route disposition is proposed to be
25%. The percentage of a handler's total route disposition into the
marketing area that would result in a distributing plant becoming fully
regulated under the Arizona-Las Vegas order is proposed to be 15%.
While this definition differs slightly from the current order language,
it provides uniformity with other proposed orders and should result in
no additional distributing plants being pooled under the proposed order
or any change in the pool status of distributing plants currently
pooled.
The proposed pool supply plant definition would require a supply
plant to ship 50% of its physical receipts of milk from dairy farmers
to pool distributing plants during the month in order to be a pool
supply plant. This definition would provide for easy, effective order
administration and would result in no additional handlers being
regulated under the order. There are currently no pool supply plants in
the proposed marketing area.
The current Central Arizona order permits a manufacturing plant
located in the marketing area that is operated by a cooperative
association to be a pool plant, provided that the cooperative ships at
least 50% of its member milk to pool plants of other handlers during
the current month or the previous 12-month period ending with the
current month. This percentage requirement is currently suspended. The
proposed order would reduce this percentage to 35%. In conjunction with
the market administrator being authorized to increase or reduce the
percentage in response to market conditions, the reduced performance
standard should enable the continued pooling of producer milk that
currently is pooled without resulting in uneconomic handling or
disorderly marketing.
The proposed Arizona-Las Vegas order should provide that a single
handler be allowed to form a unit of distributing plants and Class II
manufacturing plants provided each plant is located within the
marketing area. The unit in total would be required to meet the
requirements for a pool distributing plant and at least one of the

[[Page 4963]]

plants in the unit would be required to meet the pool distributing
plant definition individually. This provision would provide uniformity
with other federal orders and would not change the status of any plants
currently pooled. Class II manufacturing plants are included for unit
pooling with distributing plants operated by the same handler because
such plants produce products that are marketed in conjunction with
fluid milk products.
A provision permitting the market administrator to adjust the
percentages specified in the pool plant definition will provide the
flexibility to respond in a timely manner to changing marketing
conditions without the need for a formal hearing process.
Producer
The proposed order contains a dairy farmer for other markets
definition. A producer could not be pooled under the proposed Arizona-
Las Vegas order unless all of the milk from the same farm was pooled
under this or some other federal order or unless such nonpooled milk
went to a plant with only Class III or Class IV utilization. This
differs slightly from the current definition in the Central Arizona
Order. Such a provision is needed in the proposed order to prevent
dairy farmers whose milk is regularly used for fluid disposition in
other markets from pooling the surplus portion of their production
under the proposed order.
Producer Milk
The percentage of a handler's pooled milk that may be diverted to
nonpool plants is proposed to be 20% in any month. Currently,
diversions under the Central Arizona order are limited to eight days'
production of a producer during four months of the year, with unlimited
diversions the remainder of the year. The 20% diversion limit would
result in the amount of milk eligible for diversion being approximately
equivalent to eight days' production and would be easier to administer.
The 20% limit year round will assure that pooled milk will have a close
association with the market's fluid processing plants.
Component Pricing
The proposed Arizona-Las Vegas order does not provide for multiple
component pricing. There are six plants that are expected to be
regulated under the proposed order: five proprietary distributing
plants, and one manufacturing plant operated by a cooperative
association. The Class I utilization for the proposed order is expected
to be less than 50 percent, a level that would, in some other orders,
be an indication that component pricing would be appropriate. However,
the Class I utilization at the five distributing plants is more than 80
percent. With the exception of the one cooperative balancing plant, the
handlers to be regulated constitute predominantly a Class I market.
They have expressed no interest in component pricing, and the fluid
nature of much of the market would not seem to warrant multiple
component pricing at this time.
Western Order
Many of the provisions of the proposed Western order are explained
in the ``Identical Provisions'' portion of this proposed rule and need
not be addressed here. Those provisions that differ from those
explained in the ``Identical Provisions,'' or those currently contained
in the orders to be consolidated, are discussed below.
Pool Plant
The proposed pool distributing plant definition is similar to that
contained in most of the other proposed orders. The minimum percentage
of a pool distributing plant's physical receipts of bulk fluid milk
products that are disposed of as route disposition is proposed to be
25%. The percentage of a handler's total route disposition distributed
into the marketing area that would result in a distributing plant
becoming fully regulated under the Western order is proposed to be 15%.
While this definition differs slightly from the current language of the
orders involved in this proposed consolidation, it provides uniformity
with other proposed orders and should result in no additional
distributing plants being pooled under the proposed order or any change
in the pool status of distributing plants currently pooled.
The proposed pool supply plant definition would require a supply
plant operator to ship 35% of the milk pooled at the supply plant,
either by transfer or diversion, to pool distributing plants during the
month in order to qualify for pooling. This definition would provide
for more efficient order administration and would result in no
additional handlers being regulated under the order. The proposed
percentage is slightly higher than that contained in the current
Southwest Idaho-Eastern Oregon order and slightly lower than that
contained in the current Great Basin and Western Colorado orders. This
change should result in no milk that is currently associated with any
of the three orders losing such association.
The proposed pool supply plant definition includes provision for a
March through August period during which a supply plant that has met
the order's shipping percentages for the preceding months of September
through February to be able to continue to be a pool plant without
meeting the shipping standards. As with other proposed orders, the
market administrator would have the authority to increase or decrease
the order's supply plant pooling standards as marketing conditions
change.
The proposed order contains a provision that would permit a
manufacturing plant operated by a cooperative association and located
in the marketing area to be a pool plant if 35% of the milk for which
the cooperative is the handler is received at pool distributing plants
during the month or during the immediately preceding 12-month period.
This provision is similar to one currently contained in the Great Basin
order and in some of the other proposed orders. The proposed order
retains the ``bulk tank handler'' provision that is currently in the
Southwestern Idaho-Eastern Oregon order, permitting a handler other
than a cooperative association to divert milk to nonpool plants for the
handler's account based on shipments of milk to pool plants of other
handlers.
Although the three current orders proposed to be consolidated do
not contain such a provision, the proposed Western order would provide
that a single handler be allowed to form a unit of distributing plants
and Class II manufacturing plants provided each plant is located within
the marketing area, as suggested by the Identical Provisions committee.
The unit in total would be required to meet the requirements for a pool
distributing plant and at least one of the plants in the unit would be
required to meet the pool distributing plant definition individually.
This provision would provide uniformity with other federal orders and
would not change the status of any plants currently pooled. Class II
manufacturing plants are proposed to be included for unit pooling with
distributing plants operated by the same handler because such plants
produce products that are marketed in conjunction with fluid milk
products.
Producer
The proposed order contains a dairy farmer for other markets
definition. A producer would not qualify for pooling under the proposed
Western order unless all of the milk from the same farm was pooled
under this or some other federal order or unless such nonpooled milk
went to a plant with only Class III or Class IV utilization.

[[Page 4964]]

This differs slightly from the current definition in the Great Basin
order. Such a provision is proposed for the consolidated order to
prevent dairy farmers whose milk is regularly used for fluid
disposition in other markets from pooling the surplus portion of their
production on the proposed order.
Producer Milk
The percentage of a handler's pooled milk that may be diverted to
nonpool plants is proposed to be 80% in any month. This is identical to
the percentage currently included in the Southwestern Idaho-Eastern
Oregon order and is only slightly higher than that for the present
Great Basin order, which is 75% for cooperatives and 70% for
proprietary handlers. The 80% limit on movements of pooled milk to
nonpool plants should permit all milk associated with the market that
is not needed at pool plants during the month to be pooled and priced
under the order. These percentages are higher than those contained in
the Western Colorado order, but should not have the effect of
encouraging additional amounts of unneeded milk to be pooled in that
area.
Reports of Receipts and Utilization and Payroll Reports
The proposed order requires pool handlers to file a ``report of
receipts and utilization'' on or before the seventh day after the end
of the month. This is identical to the current reporting date in the
Western Colorado and Great Basin orders but two days earlier than the
same provision in the Southwestern Idaho-Eastern Oregon order. Almost
all handlers currently file reports by FAX or some other form of
electronic data transfer, which eliminates delays due to mail handling.
A seven-day reporting period should allow adequate time for handlers to
prepare reports and will allow the computation and release of producer
price information to occur on or before the 12th day after the end of
the month.
The date on which the report of payments to producers is proposed
to be due to the market administrator under the Western order is on or
before the 21st day after the end of the month. This is the same date
as that under the Great Basin order, but one day earlier than under the
Southwestern Idaho-Eastern Oregon order and two days earlier than the
Western Colorado order. The earlier reporting date and announcement of
producer prices should assure that an earlier payroll reporting date
would not be burdensome.
Multiple Component Pricing
Both the Great Basin order and the Southwestern Idaho-Eastern
Oregon order currently have multiple component pricing based on
protein; the Western Colorado order does not. The multiple component
pricing provisions of the proposed Western order should be the same as
those for other proposed orders that provide for multiple component
pricing based on protein. The proposed Western order has a significant
amount of milk used in manufactured products, especially cheese, and
component pricing will enable producers to be paid according to the
value of the components of their milk. However, the somatic cell
adjustment included in most of the rest of the orders for which
component pricing is proposed is not warranted by marketing conditions
under the Western order, and such an adjustment is not included.
Payments to and From the Producer Settlement Fund
Payments to the producer settlement fund under the proposed order
are due on or before the 14th day after the end of the month. This is
two days after the announcement of uniform producer prices, which is an
identical time period to that which exists in the three current orders
proposed to be consolidated.
Payments from the producer settlement fund under the proposed order
would be due on or before the 15th day after the end of the month. This
is the same date as under the current Great Basin order, three days
earlier than under the Southwestern Idaho-Eastern Oregon order, and one
day later than the Western Colorado order. This payment date should be
practicable given the use of current banking and transmission
techniques.
Payments to Producers and Cooperative Associations
Under the proposed order, partial payments would be due from
handlers to producers who are not members of cooperative associations
on or before the 25th day of the month in an amount not less than 1.2
times the lowest class price for the preceding month multiplied by the
hundredweight of milk received from such producers during the first 15
days of the month. Final payments would be due on or before the 17th
day after the end of the month.
Partial payments to cooperative associations would be due on or
before the 24th day of the month at the same rate as above, with final
payments due on or before the 16th day after the end of the month.
These final payment dates represent very little or no change from the
orders' present payment dates. The proposed partial payment dates are
earlier than those required under the current orders, but are very
close to those suggested by the Identical Provisions committee, and
compliance should present no hardship to handlers who would already
have had the use of the producers' milk for 9 to 23 days.
Pacific Northwest Order
Many of the provisions of the proposed Pacific Northwest order are
explained in the ``Identical Provisions'' portion of this proposed
rule, and need not be addressed here. The provisions that deviate
somewhat from those proposed for other order areas are the provisions
dealing with standards for determining the pool status of producers and
handlers, the definition of producer-handlers, the factors upon which
payments to producers are calculated, and reporting and payment dates.
Because this order is not proposed to be consolidated with any other
orders, there is little reason for changing the substance of many of
the provisions that are not included in the General Provisions.
Pool Distributing Plant
The pool distributing plant provisions of the proposed Pacific
Northwest Order would be changed from the current definition to one
that more closely resembles the definition suggested in the identical
provisions report. Rather than basing the identification of a pool
distributing plant on only 10 percent of the plant's receipts as in-
area route dispositions, the order should specify that such a plant
have at least 25 percent of its physical receipts distributed as route
disposition, and at least 15 percent of its route disposition
distributed within the marketing area.
It is not expected that the proposed pooling standard will affect
the pool status of any plant that currently does or does not meet the
pooling standard of the Pacific Northwest order. In addition, it would
remedy a provision that could result in fully regulating a plant that
has minimal association with the marketing area.
Pool Supply Plant
For the most part, the current pool supply plant definition of the
Pacific Northwest order is appropriate to the marketing conditions in
the area. However, the provision that currently requires a handler to
include producer milk moved directly to pool distributing plants in the
shipments on which pool plant performance is calculated would be
changed to allow the handler to

[[Page 4965]]

include such movements if the handler wants to qualify its plant for
pooling. A plant operator who receives milk at a plant only for
manufacturing use also would be able to supply producer milk directly
to distributing plants without a requirement that the manufacturing
plant be a supply plant.
The Pacific Northwest order's current pool supply plant performance
standard of 20 percent of milk receipts shipped to distributing plants
should continue to be appropriate for this market. The current March
through August period during which supply plants do not have to ship
the minimum percentage to distributing plants if they have done so
during the previous September through February period would continue to
be included in the pool supply plant definition.
As in the other proposed consolidated orders, the market
administrator is proposed to have the authority to increase or decrease
the order's pooling provisions as marketing conditions change for the
purpose of assuring that an adequate supply of milk will be available
for fluid use, or to assure that the order does not require handlers to
undertake uneconomic movements of milk to maintain: (1) the pool status
of their plants, or (2) the pooling of producers who have historically
been associated with the market and who help serve Class I needs.
Nonpool Plant
The current definition and exemption for milk produced and
processed by state institutions, as contained in the present order's
producer-handler definition, would be expanded and moved to be included
in the ``Nonpool plant'' definition contained in the General
Provisions. Such entities, along with colleges and universities and
charitable organizations, would not be subject to the orders' pricing
and pooling provisions as long as they have no sales in commercial
channels.
The present Pacific Northwest order provisions allow a state
institution to avoid any regulation on the portion of its milk that is
used only within the institution, and apply some pricing regulation to
that portion that is distributed in commercial channels. In some
respects, this arrangement is similar to the situation of partially
regulated distributing plants. However, partially regulated
distributing plant operators, to avoid obligations under Federal
orders, must show that they pay the dairy farmers who ship milk to them
at a rate at least commensurate with that paid to producers whose milk
is pooled under the order. In any case, they must procure a milk supply
in the competitive market. State institutions may have any number of
cost advantages over regulated handlers in the production and
processing of milk, such as not having to pay a minimum wage and not
having to pay property taxes. It would be unjust to allow such
institutions to compete with fully regulated handlers in regular
commercial channels as if the playing field were level. Therefore,
state and other institutions that compete with regulated handlers in
regular commercial channels, such as bids for school milk programs,
would also be fully regulated.
Producer-Handler
The current Pacific Northwest producer-handler provisions should
remain essentially untouched. Some of the ``Identical Provisions''
features of the producer-handler definition, such as the 150,000-pound
thresholds for route dispositions, own farm production, and receipts
from pool plants; and the ability to request to operate as both a pool
plant and a producer, would be adopted. The rest of the current
producer-handler provisions would remain in effect for administrative
purposes.
Producer-handlers represent a much larger portion of the Class I
dispositions in the Pacific Northwest marketing area than in most other
Federal order areas. In many marketing areas, producer-handlers supply
1 percent or less of the Class I sales. In the Pacific Northwest area,
however, they furnish almost 10 percent of the market's Class I
dispositions. The larger average size of the dairy farmers in the
western United States makes more likely the existence of a producer-
handler that is a significant factor in the market.
The current order's producer-handler provisions are based on the
history of producer-handler operations in this marketing area,
reflecting difficulties encountered in order administration, attempts
to circumvent order provisions, and court challenges.
In addition to the current order provisions, the producer-handler
definition would also contain language clarifying that milk received by
the producer-handler at a location other than the producer-handler's
processing plant for distribution on routes will be included as a
receipt from another handler.
Reserve Supply Unit
The Pacific Northwest order would continue to provide for a
cooperative reserve supply unit. The existing provision has many
similarities to a reserve supply plant, which is not provided in this
order but which is included in several of the proposed consolidated
orders.
Under the terms of the present provision, the cooperative members
of the reserve supply unit must be located near a pool distributing
plant, as a reserve supply plant must be located in the marketing area.
Both the reserve supply unit and the reserve supply plant provisions
require that the plant or unit operator request prior approval of the
market administrator to initiate and cancel their status, both require
long-term association with the market, and both provide substantial
penalties for failing to meet all required conditions. Although the
cooperative unit does not have monthly qualification requirements, it
is subject to a call by the market administrator after the market
administrator's investigation of the need for supplemental supplies of
milk. Because of the current existence of this provision, based on the
need shown at a public hearing, and its similarities to a pooling
mechanism suggested for other orders, provision for the cooperative
reserve supply unit would continue to be included in the proposed
Pacific Northwest order.
Producer and Producer Milk
The proposed Pacific Northwest order would contain a ``dairy farmer
for other markets'' provision for each month of the year. The large
volume of milk production in California and California's quota system
give dairy farmers an incentive to pool production in a volume equal to
their quota pounds on the California order, and then attempt to share
in the Pacific Northwest Class I market with their over-quota
production, for which returns under the California order are much less.
At the same time, none of the California Class I returns would be
shared with Pacific Northwest producers. Similarly, the reserve
supplies for the State-regulated markets of Western Nevada and Montana
should not be allowed to share in returns from the Pacific Northwest
order's higher classes of utilization while enjoying the benefits of
the State orders' Class I returns.
The current provisions of the Pacific Northwest order do not
require that a producer's milk be received at pool plants for the
producer's first pooled delivery on the market or for any specified
period. If a handler meets its overall performance requirements for
supplying milk to the market, it should make no difference which
individual producer's milk is actually delivered to pool plants as long
as the milk of each

[[Page 4966]]

producer participating in the pool is Grade A and available to the
market if and when needed. It is expensive, inefficient, and
unnecessary to move milk from areas close to nonpool manufacturing
plants to bottling plants in the city markets when that milk is not
needed for bottling. For the above reasons and the physical fact that
there are often great distances and mountainous terrain between plants
and farms in the more sparsely populated West, no ``touch base''
requirements should be included.
This order and other western orders have allowed producers to pool
milk on more than one order during the same month. Because of the
locations of a number of dairy farmers, their milk may be used by pool
plants regulated under more than one order in a single month. These
producers also represent a reserve supply for more than one market.
Large, multi-market handlers should be given the flexibility to market
and transport their milk to fulfill the needs of their customers in the
most efficient way possible.
The small degree of change from the current provisions necessary in
the pooling provisions of the proposed Pacific Northwest results in
very little change proposed for the order's diversion limits. The limit
of 80% of the handler's supply of producer milk should remain
unchanged, with the months during which the percentage is effective
changed from September through April to September through February.
These months will correspond to the months during which supply plants
must ship 20 percent of their receipts to pool distributing plants.
There would be no limit on diversions of producer milk for the months
of March through August. These delivery standards have not been overly
restrictive nor associated unneeded supplies with the market and should
be allowed to continue without change.
Payments to Producers and Cooperative Associations
Although the current Pacific Northwest order contains a multiple
component pricing plan very like that proposed to be standard for the
consolidated orders, it does not now and would not under this reform
process contain a somatic cell adjustment provision. The level of
somatic cells in the western U.S. is generally lower than in the east,
with an overall average of approximately 250,000 instead of 350,000.
This lower somatic cell count would seem to reduce the need for such a
provision. Historically, the principal argument for a somatic cell
adjuster has been the negative effect of somatic cells on the cheese
yields. Although cheese manufacturing in the Northwest is increasing,
most cheese manufacturing is done by cooperative associations who have
expressed the opinion that an adjustment for somatic cells is a quality
issue best dealt with internally. The somatic cell adjustments in the
proposed consolidated orders are not incorporated in the proposed
Pacific Northwest order.
Announcement of Producer Prices
The dates on which handler reports, market administrator's
announcement of producer prices, and payment to producers would remain
unchanged from those of the current order.

8. Miscellaneous and Administrative

(a) Consolidation of the Marketing Service, Administrative Expense, and
Producer-Settlement Funds
To complete the proposed consolidation of the present 31 Federal
orders effectively and equitably, the reserve balances in the marketing
service, administrative expense, and producer-settlement funds that
have resulted under the individual orders would be combined.
The balances in these three funds should be combined on the same
basis that the marketing areas are consolidated into regional orders
herein. For instance, the Texas and New Mexico-West Texas marketing
areas are merged into a new regional Southwest order. Accordingly, the
reserve balances in the marketing service, administrative expense and
producer-settlement funds of the two individual orders likewise should
be combined into three separate funds established under the
consolidated Southwest order.
The marketing areas of the proposed 11 consolidated orders
essentially represent the territory covered by the 31 individual orders
plus the territory included in the former Tennessee Valley marketing
area. Because of this, the handlers and producers servicing the milk
needs of the individual markets will continue to furnish the milk needs
of the applicable regional market for the most part.
In that regard, the reserve balances in the funds that have
resulted under the 31 individual orders should be combined on a
marketing area basis into the appropriate separate fund established for
each of the 11 regional orders. Any liabilities of such funds under the
individual orders would be paid from the appropriate newly established
fund of the applicable regional order. Similarly, obligations that are
due the separate funds under the individual orders would be paid to the
appropriate combined fund of the applicable consolidated order.
In most cases, the entire marketing area of an order or orders is
included in the proposed consolidated marketing area of one of the 11
regional orders. Three present marketing areas would be split between
two consolidated orders. One county of the present Louisville-
Lexington-Evansville (Order 46) marketing area would be included in the
Southeast order, and the rest of the territory in the Order 46
marketing area would be included under the Appalachian order. Even
though one Order 46 county is included in the proposed Southeast order,
all of the present Order 46 producers and handlers are expected to be
covered under the proposed consolidated Appalachian order. Accordingly,
the balances in the Order 46 marketing service, administrative expense,
and producer settlement funds should be consolidated into the three
separate funds established for the consolidated Appalachian market.
Different regulatory situations, however, will occur in the other
two instances where a current marketing area is divided between two
proposed consolidated orders. One county of the current Great Basin
(Order 139) marketing area would be included in the consolidated
Arizona-Las Vegas order and the rest of the Order 139 marketing area
would be included in the consolidated marketing area for the West. Some
of the present Order 139 producers and handlers would become regulated
under the Arizona-Las Vegas consolidated order and others would become
regulated under the regional order for the West. Similarly, two zones
of the Michigan Upper Peninsula (Order 44) marketing area would be
included in the consolidated Upper Midwest marketing area and the other
zone of the Order 44 marketing area would be included in the marketing
area for the Mideast regional order. Accordingly, any reserve balances
in the marketing service, administrative expense and producer-
settlement funds of these two individual orders should be divided
equitably among the applicable consolidated orders.
The money accumulated in the marketing service funds of the
individual orders is that which has been paid by producers for whom the
market administrators are performing such services. Since the marketing
areas of the proposed 11 regional orders encompass the territory
covered by the individual orders, for the most part, the producers who
have contributed to the

[[Page 4967]]

marketing service funds of the individual orders are expected to
continue supplying milk for the consolidated orders. Since marketing
service programs will be continued for these producers under the
regional orders, it would be appropriate to combine the reserve
balances in the marketing service funds of the order or orders that are
represented in the consolidation of each of the proposed 11 regional
orders.
When the proposed consolidated marketing area includes the
marketing area of one or more individual orders, any remaining balance
in the marketing service fund of the individual order or orders should
be combined in the marketing service fund established for the
applicable consolidated order. If a current marketing area is split
between two consolidated markets and the regulatory status of producers
and handlers is divided between the two regional orders, as is the case
with the Michigan Upper Peninsula and Great Basin orders, any balance
in the marketing service fund of the individual order should be
prorated between the two consolidated orders on the basis of the amount
of milk subject to the marketing service deduction that will be covered
by each respective regional order (using producer deliveries in the
last month the individual orders are in effect but assuming that the
marketing areas had been consolidated).
The money paid to the administrative expense fund is each handler's
proportionate share of the cost of administering the order. For the
most part, handlers currently regulated under the individual orders
will continue to be regulated under the proposed consolidated orders.
In view of this, it would be an unnecessary administrative and
financial burden to allocate the reserve funds of the individual orders
back to handlers and then accumulate an adequate reserve for each of
the consolidated orders. It would be as equitable and more efficient to
combine the remaining administrative monies accumulated under the
individual orders in the same manner as the marketing areas are
proposed to be combined.
For the orders where the proposed consolidated marketing area
includes the regulated territory of one or more of the individual
orders, any remaining balance in the administrative expense fund of the
individual order or orders would be combined into the administrative
expense fund established for the applicable consolidated order. In the
situations where the current individual marketing area is split and the
regulatory status of producers and handlers is divided (as in the case
of the Michigan Upper Peninsula and Great Basin orders) between two
consolidated marketing areas, the remaining balance in the
administrative expense fund should be prorated between the two regional
orders on the basis of the amount of milk that would be pooled and
priced under each respective consolidated order (using producer milk
deliveries during the last month the individual orders are in effect
but assuming that the orders had been consolidated).
Likewise, the producer-settlement fund balances of the individual
orders should be combined. They should be combined on the same basis as
the marketing areas are consolidated herein. This will enable the
producer-settlement funds of the consolidated orders to continue
without interruption.
The producers currently supplying the individual markets are
expected to supply milk for the proposed consolidated markets. Thus,
monetary balances in the producer-settlement funds of the individual
orders now would be reflected in the pay prices of the producers who
will benefit from the applicable consolidated orders. The combined fund
for each proposed consolidated order also would serve as a contingency
fund from which money would be available to meet obligations (resulting
from audit adjustments and otherwise) occurring under the individual
orders.
The same procedure used in combining the remaining balances in the
marketing service and administrative expense funds of the individual
orders should be followed in combining the producer-settlement fund
balances when the individual orders are consolidated. For orders where
the consolidated marketing area includes the marketing area of one or
more orders, any remaining balance in the producer-settlement fund of
the individual order or orders would be combined into the producer-
settlement fund established for the applicable consolidated order. In
the two situations (Michigan Upper Peninsula and Great Basin) where the
marketing area of a current order is split between two proposed
consolidated orders and some of the individual market's producers and
handlers would be regulated under one consolidated order and others
would be regulated under another consolidated order, the balance in the
producer-settlement fund should be divided equitably between the two
consolidated orders. Since the Michigan Upper Peninsula order is an
individual-handler pool market, no producer-settlement fund is
provided. The remaining balance in the producer-settlement fund of the
Great Basin order should be prorated between the consolidated Arizona-
Las Vegas order and the regional order for the West on the basis of the
amount of milk that will be pooled and priced under each respective
proposed consolidated order (using producer milk deliveries during the
last month the individual orders are in effect but assuming that the
orders had been consolidated).
(b) Consolidation of the Transportation Credit Balancing Funds
To complete the consolidation process, the reserve balances in the
transportation credit balancing funds that are in effect now under
three Southeast orders (Carolina, Order 5; Southeast, Order 7; and
Louisville-Lexington-Evansville, Order 46) should be consolidated also.
These funds should be combined on a marketing area basis. In that
regard, the reserve balances in the transportation credit balancing
funds of the Carolina and Louisville-Lexington-Evansville orders should
be consolidated into a newly established transportation credit
balancing fund for the Appalachian order, which also includes the
current marketing areas of these two orders with the exception of one
county. Similarly, the reserve balance in the transportation credit
balancing fund of the present Southeast order should be transferred to
the consolidated Southeast order, which includes all of the marketing
area of the present Southeast order. These procedures will enable the
transportation credits to continue without interruption under these two
proposed consolidated orders.
(c) Proposed General Findings
The proposed findings and determinations hereinafter set forth
supplement those that were made when the aforesaid orders were first
issued and when they were amended. The previous findings and
determinations are hereby ratified and confirmed, except where they may
conflict with those set forth herein.
(1) The tentative marketing agreements and the orders, as hereby
proposed to be amended, and all of the terms and conditions thereof,
will tend to effectuate the declared policy of the Act;
(2) The parity prices of milk as determined pursuant to section 2
of the Act are not reasonable in view of the price of feeds, available
supplies of feeds, and other economic conditions which affect market
supply and demand for milk in each of the aforesaid marketing areas,
and the minimum

[[Page 4968]]

prices specified in the tentative marketing agreements and the orders,
as hereby proposed to be amended, are such prices as will reflect the
aforesaid factors, insure a sufficient quantity of pure and wholesome
milk, and be in the public interest;
(3) The tentative marketing agreements and the orders, as hereby
proposed to be amended, will regulate the handling of milk in the same
manner as, and will be applicable only to persons in the respective
classes of industrial and commercial activity specified in the
marketing agreements;
(4) All milk and milk products handled by handlers, as defined in
the tentative marketing agreements and the orders as hereby proposed to
be amended, are in the current of interstate commerce or directly
burden, obstruct, or affect interstate commerce in milk or its
products; and
(5) It is hereby found that the necessary expense of the market
administrator for the maintenance and functioning of such agency will
require the payment by each handler, as his pro rata share of such
expense, 5 cents per hundredweight or such lesser amount as the
Secretary may prescribe, with respect to milk specified in Sec. 1000.85
of the General Provisions.

Proposed Marketing Agreements and Order Amending the Orders

The proposed marketing agreements are not included in this proposed
rule because the regulatory provisions thereof would be the same as
those contained in the orders, as hereby proposed to be amended. The
following order amending the orders regulating the handling of milk in
the respective marketing areas of these orders is proposed as the
detailed and appropriate means by which the foregoing conclusions may
be carried out.

List of Subjects in 7 CFR Chapter X

Milk marketing orders.

For the reasons set forth in the preamble and under the authority
of 7 U.S.C. 601-674, Title 7, chapter X, CFR parts 1002, 1004, 1012,
1013, 1036, 1040, 1044, 1046, 1049, 1050, 1064, 1065, 1068, 1076, 1079,
1106, 1135, 1137, 1138, and 1139 are proposed to be removed, and Parts
1000, 1001, 1005, 1006, 1007, 1030, 1032, 1033, 1124, 1126, 1131, and
1134 are proposed to be revised as follows:

PART 1000--GENERAL PROVISIONS OF FEDERAL MILK MARKETING ORDERS

Subpart A--Scope and Purpose

Sec.
1000.1 Scope and purpose of Part 1000.

Subpart B--Definitions

1000.2 General definitions.
1000.3 Route disposition.
1000.4 Plant.
1000.5 Distributing plant.
1000.6 Supply plant.
1000.8 Nonpool plant.
1000.9 Handler.
1000.14 Other source milk.
1000.15 Fluid milk product.
1000.16 Fluid cream product.
1000.17 [Reserved]
1000.18 Cooperative association.
1000.19 Commercial food processing establishment.

Subpart C--Rules of Practice and Procedure Governing Market
Administrators

1000.25 Market administrator.

Subpart D--Rules Governing Order Provisions

1000.26 Continuity and separability of provisions.

Subpart E--Rules of Practice and Procedure Governing Handlers

1000.27 Handler responsibility for records and facilities.
1000.28 Termination of obligations.

Subpart F--Classification of Milk

1000.40 Classes of utilization.
1000.41 [Reserved]
1000.42 Classification of transfers and diversions.
1000.43 General classification rules.
1000.44 Classification of producer milk.
1000.45 Market administrator's reports and announcements concerning
classification.

Subpart G--Class Prices

1000.50 Class prices and component prices.
1000.51 [Reserved]
1000.52 Adjusted Class I differentials.
1000.53 Announcement of class prices and component prices.
1000.54 Equivalent price.

Subpart H--Payments for Milk

1000.70 Producer-settlement fund.
1000.71 Payments to the producer-settlement fund.
1000.72 Payments from the producer-settlement fund.
1000.76 Payments by a handler operating a partially regulated
distributing plant.
1000.77 Adjustment of accounts.
1000.78 Charges on overdue accounts.

Subpart I--Administrative Assessment and Marketing Service Deduction

1000.85 Assessment for order administration.
1000.86 Deduction for marketing services.

Subpart J--Miscellaneous Regulations

1000.90 Dates.
1000.91-1000.92 [Reserved]
1000.93 OMB control number assigned pursuant to the Paperwork
Reduction Act.

Authority: 7 U.S.C. 601-674.

Subpart A--Scope and Purpose

Sec. 1000.1 Scope and purpose of Part 1000.

This part sets forth certain terms, definitions, and provisions
which shall be common to and part of each Federal milk marketing order
in 7 CFR, chapter X except as specifically defined otherwise, or
modified, or otherwise provided, in an individual order in 7 CFR,
chapter X.

Subpart B--Definitions

Sec. 1000.2 General definitions.

(a) Act means Public Act No. 10, 73d Congress, as amended and as
reenacted and amended by the Agricultural Marketing Agreement Act of
1937, as amended (7 U.S.C. 601 et seq.).
(b) Order means the applicable part of Title 7 of the Code of
Federal Regulations issued pursuant to Section 8c of the Act as a
Federal milk marketing order (as amended).
(c) Department means the U.S. Department of Agriculture.
(d) Secretary means the Secretary of Agriculture of the United
States or any officer or employee of the Department to whom authority
has heretofore been delegated, or to whom authority may hereafter be
delegated, to act in his stead.
(e) Person means any individual, partnership, corporation,
association, or other business unit.

Sec. 1000.3 Route disposition.

Route disposition means a delivery to a retail or wholesale outlet
(except a plant), either directly or through any distribution facility
(including disposition from a plant store, vendor, or vending machine)
of a fluid milk product in consumer-type packages or dispenser units
classified as Class I milk.

Sec. 1000.4 Plant.

[[Page 4969]]

as a reload point for transferring bulk milk from one tank truck to
another or a separate building used only as a distribution point for
storing packaged fluid milk products in transit for route disposition;
or
(2) An on-farm facility operated as part of a single dairy farm
entity for the separation of cream and skim or the removal of water
from milk.

Sec. 1000.5 Distributing plant.

Distributing plant means a plant that is approved by a duly
constituted regulatory agency for the handling of Grade A milk and at
which fluid milk products are processed or packaged and from which
there is route disposition.

Sec. 1000.6 Supply plant.

Supply plant means a plant, other than a distributing plant, that
is approved by a duly constituted regulatory agency for the handling of
Grade A milk and at which fluid milk products are received or from
which fluid milk products are transferred or diverted.

Sec. 1000.8 Nonpool plant.

Nonpool plant means any milk receiving, manufacturing, or
processing plant other than a pool plant. The following categories of
nonpool plants are further defined as follows:
(a) A plant fully regulated under another Federal order means a
plant that is fully subject to the pricing and pooling provisions of
another Federal order.
(b) Producer-handler plant means a plant operated by a producer-
handler as defined under any Federal order.
(c) Partially regulated distributing plant means a nonpool plant
that is not a plant fully regulated under another Federal order, a
producer-handler plant, or an exempt plant, from which there is route
disposition in the marketing area during the month.
(d) Unregulated supply plant means a supply plant that does not
qualify as a pool supply plant and is not a plant fully regulated under
another Federal order, a producer-handler plant, or an exempt plant.
(e) An exempt plant means a plant described in this paragraph that
is exempt from the pricing and pooling provisions of any order provided
that the operator of the plant files reports as prescribed by the
market administrator to enable determination of the handler's exempt
status:
(1) A plant that is operated by a governmental agency that has no
route disposition in commercial channels;
(2) A plant that is operated by a duly accredited college or
university disposing of fluid milk products only through the operation
of its own campus with no route disposition in commercial channels;
(3) A plant from which the total route disposition is for
individuals or institutions for charitable purposes without
remuneration; or
(4) A plant that has route disposition of 150,000 pounds or less
during the month.

Sec. 1000.9 Handler.

Handler means:
(a) Any person who operates a pool plant or a nonpool plant.
(b) Any person who receives packaged fluid milk products from a
plant for resale and distribution to retail or wholesale outlets, any
person who as a broker negotiates a purchase or sale of fluid milk
products or fluid cream products from or to any pool or nonpool plant,
and any person who by purchase or direction causes milk of producers to
be picked up at the farm and/or moved to a plant. Persons who qualify
as handlers only under this paragraph under any Federal milk order in 7
CFR, chapter X are not subject to the payment provisions of
Secs. ____.70, ____.71, ____.72, ____.73, ____.76, and ____.85 of that
order.
(c) Any cooperative association with respect to milk that it
receives for its account from the farm of a producer and delivers to
pool plants or diverts to nonpool plants pursuant to Sec. __.13 of the
order. The operator of a pool plant receiving milk from a cooperative
association may be the handler for such milk if both parties notify the
market administrator of this agreement prior to the time that the milk
is delivered to the pool plant and the plant operator purchases the
milk on the basis of weights determined from its measurement at the
farm and butterfat tests determined from farm bulk tank samples.

Sec. 1000.14 Other source milk.

Other source milk means all skim milk and butterfat contained in or
represented by:
(a) Receipts of fluid milk products and bulk fluid cream products
from any source other than producers, handlers described in
Sec. 1000.9(c), or pool plants;
(b) Products (other than fluid milk products, fluid cream products,
and products produced at the plant during the same month) from any
source which are reprocessed, converted into, or combined with another
product in the plant during the month; and
(c) Receipts of any milk product (other than a fluid milk product
or a fluid cream product) for which the handler fails to establish a
disposition.

Sec. 1000.15 Fluid milk product.

(a) Except as provided in paragraph (b) of this section, fluid milk
product means any milk products in fluid or frozen form containing less
than 9 percent butterfat that are intended to be used as beverages.
Such products include, but are not limited to: Milk, fat-free milk,
lowfat milk, light milk, reduced fat milk, milk drinks, eggnog and
cultured buttermilk, including any such beverage products that are
flavored, cultured, modified with added nonfat milk solids, sterilized,
concentrated (to not more than 50 percent total milk solids), or
reconstituted.
(b) The term fluid milk product shall not include:
(1) Plain or sweetened evaporated milk/skim milk, sweetened
condensed milk/skim milk, formulas especially prepared for infant
feeding or meal replacement, any product that contains by weight less
than 6.5 percent nonfat milk solids, and whey; and
(2) The quantity of skim milk equivalent in any modified product
specified in paragraph (a) of this section that is greater than an
equal volume of an unmodified product of the same nature and butterfat
content.

Sec. 1000.16 Fluid cream product.

Fluid cream product means cream (other than plastic cream or frozen
cream), including sterilized cream, or a mixture of cream and milk or
skim milk containing 9 percent or more butterfat, with or without the
addition of other ingredients.

Sec. 1000.17 [Reserved]

Sec. 1000.18 Cooperative association.

Cooperative association means any cooperative marketing association
of producers which the Secretary determines is qualified under the
provisions of the Capper-Volstead Act, has full authority in the sale
of milk of its members, and is engaged in marketing milk or milk
products for its members. A federation of two or more cooperatives
incorporated under the laws of any state will be considered a
cooperative association under any Federal milk order if all member
cooperatives meet the requirements of this section.

Sec. 1000.19 Commercial food processing establishment.

Commercial food processing establishment means any facility, other
than a milk plant, to which fluid milk products and fluid cream
products are

[[Page 4970]]

disposed of, or producer milk is diverted, that uses such receipts as
ingredients in food products and has no other disposition of fluid milk
products other than those received in consumer-type packages (1 gallon
or less). Producer milk diverted to commercial food processing
establishments shall be subject to the same provisions relating to
diversions to plants, including, but not limited to, Secs. ____.13 and
____.52 of each Federal milk order in 7 CFR, chapter X.

Subpart C--Rules of Practice and Procedure Governing Market
Administrators

Sec. 1000.25 Market administrator.

(a) Designation. The agency for the administration of the order
shall be a market administrator selected by the Secretary and subject
to removal at the Secretary's discretion. The market administrator
shall be entitled to compensation determined by the Secretary.
(b) Powers. The market administrator shall have the following
powers with respect to each order under his/her administration:
(1) Administer the order in accordance with its terms and
provisions;
(2) Maintain funds outside of the United States Department of the
Treasury for the purpose of administering the order;
(3) Make rules and regulations to effectuate the terms and
provisions of the order;
(4) Receive, investigate, and report complaints of violations to
the Secretary; and
(5) Recommend amendments to the Secretary.
(c) Duties. The market administrator shall perform all the duties
necessary to administer the terms and provisions of each order under
his/her administration, including, but not limited to, the following:
(1) Employ and fix the compensation of persons necessary to enable
him/her to exercise the powers and perform the duties of the office;
(2) Pay out of funds provided by the administrative assessment,
except expenses associated with functions for which the order provides
a separate charge, all expenses necessarily incurred in the maintenance
and functioning of the office and in the performance of the duties of
the office, including the market administrator's compensation;
(3) Keep records which will clearly reflect the transactions
provided for in the order, and upon request by the Secretary, surrender
the records to a successor or such other person as the Secretary may
designate;
(4) Furnish information and reports requested by the Secretary and
submit office records for examination by the Secretary;
(5) Announce publicly at his/her discretion, unless otherwise
directed by the Secretary, by such means as he/she deems appropriate,
the name of any handler who, after the date upon which the handler is
required to perform such act, has not:
(i) Made reports required by the order;
(ii) Made payments required by the order; or
(iii) Made available records and facilities as required pursuant to
Sec. 1000.27;
(6) Prescribe reports required of each handler under the order.
Verify such reports and the payments required by the order by examining
records (including such papers as copies of income tax reports, fiscal
and product accounts, correspondence, contracts, documents or memoranda
of the handler, and the records of any other persons that are relevant
to the handler's obligation under the order), by examining such
handler's milk handling facilities, and by such other investigation as
the market administrator deems necessary for the purpose of
ascertaining the correctness of any report or any obligation under the
order. Reclassify skim milk and butterfat received by any handler if
such examination and investigation discloses that the original
classification was incorrect;
(7) Furnish each regulated handler a written statement of such
handler's accounts with the market administrator promptly each month.
Furnish a corrected statement to such handler if verification discloses
that the original statement was incorrect; and
(8) Prepare and disseminate publicly for the benefit of producers,
handlers, and consumers such statistics and other information
concerning operation of the order and facts relevant to the provisions
thereof (or proposed provisions) as do not reveal confidential
information.

Subpart D--Rules Governing Order Provisions

Sec. 1000.26 Continuity and separability of provisions.

(a) Effective time. The provisions of the order or any amendment to
the order shall become effective at such time as the Secretary may
declare and shall continue in force until suspended or terminated.
(b) Suspension or termination. The Secretary shall suspend or
terminate any or all of the provisions of the order whenever he/she
finds that such provision(s) obstructs or does not tend to effectuate
the declared policy of the Act. The order shall terminate whenever the
provisions of the Act authorizing it cease to be in effect.
(c) Continuing obligations. If upon the suspension or termination
of any or all of the provisions of the order there are any obligations
arising under the order, the final accrual or ascertainment of which
requires acts by any handler, by the market administrator or by any
other person, the power and duty to perform such further acts shall
continue notwithstanding such suspension or termination.
(d) Liquidation. (1) Upon the suspension or termination of any or
all provisions of the order, the market administrator, or such other
liquidating agent designated by the Secretary, shall, if so directed by
the Secretary, liquidate the business of the market administrator's
office, dispose of all property in his/her possession or control,
including accounts receivable, and execute and deliver all assignments
or other instruments necessary or appropriate to effectuate any such
disposition; and
(2) If a liquidating agent is so designated, all assets and records
of the market administrator shall be transferred promptly to such
liquidating agent. If, upon such liquidation, the funds on hand exceed
the amounts required to pay outstanding obligations of the office of
the market administrator and to pay necessary expenses of liquidation
and distribution, such excess shall be distributed to contributing
handlers and producers in an equitable manner.
(e) Separability of provisions. If any provision of the order or
its application to any person or circumstances is held invalid, the
application of such provision and of the remaining provisions of the
order to other persons or circumstances shall not be affected thereby.

Subpart E--Rules of Practice and Procedure Governing Handlers

Sec. 1000.27 Handler responsibility for records and facilities.

Each handler shall maintain and retain records of its operations
and make such records and its facilities available to the market
administrator. If adequate records of a handler, or of any other
persons, that are relevant to the obligation of such handler are not
maintained and made available, any

[[Page 4971]]

skim milk and butterfat required to be reported by such handler for
which adequate records are not available shall be considered as used in
the highest-priced class.
(a) Records to be maintained. (1) Each handler shall maintain
records of its operations (including, but not limited to, records of
purchases, sales, processing, packaging, and disposition) as are
necessary to verify whether such handler has any obligation under the
order, and if so, the amount of such obligation. Such records shall be
such as to establish for each plant or other receiving point for each
month:
(i) The quantities of skim milk and butterfat contained in, or
represented by, products received in any form, including inventories on
hand at the beginning of the month, according to form, time, and source
of each receipt;
(ii) The utilization of all skim milk and butterfat showing the
respective quantities of such skim milk and butterfat in each form
disposed of or on hand at the end of the month; and
(iii) Payments to producers, dairy farmers and cooperative
associations, including the amount and nature of any deductions and the
disbursement of money so deducted.
(2) Each handler shall keep such other specific records as the
market administrator deems necessary to verify or establish such
handler's obligation under the order.
(b) Availability of records and facilities. Each handler shall make
available all records pertaining to such handler's operations and all
facilities the market administrator finds are necessary to verify the
information required to be reported by the order and/or to ascertain
such handler's reporting, monetary or other obligation under the order.
Each handler shall permit the market administrator to weigh, sample,
and test milk and milk products and observe plant operations and
equipment and make available to the market administrator such
facilities as are necessary to carry out his/her duties.
(c) Retention of records. All records required under the order to
be made available to the market administrator shall be retained by the
handler for a period of 3 years to begin at the end of the month to
which such records pertain. If, within such 3-year period, the market
administrator notifies the handler in writing that the retention of
such records, or of specified records, is necessary in connection with
a proceeding under section 8c(15)(A) of the Act or a court action
specified in such notice, the handler shall retain such records, or
specified records, until further written notification from the market
administrator. The market administrator shall give further written
notification to the handler promptly upon the termination of the
litigation or when the records are no longer necessary in connection
therewith.

Sec. 1000.28 Termination of obligations.

The provisions of this section shall apply to any obligation under
the order for the payment of money:
(a) Except as provided in paragraphs (b) and (c) of this section,
the obligation of any handler to pay money required to be paid under
the terms of the order shall terminate 2 years after the last day of
the month during which the market administrator receives the handler's
report of receipts and utilization on which such obligation is based,
unless within such 2-year period, the market administrator notifies the
handler in writing that such money is due and payable. Service of such
written notice shall be complete upon mailing to the handler's last
known address and it shall contain, but need not be limited to, the
following information:
(1) The amount of the obligation;
(2) The month(s) on which such obligation is based; and
(3) If the obligation is payable to one or more producers or to a
cooperative association, the name of such producer(s) or such
cooperative association, or if the obligation is payable to the market
administrator, the account for which it is to be paid.
(b) If a handler fails or refuses, with respect to any obligation
under the order, to make available to the market administrator all
records required by the order to be made available, the market
administrator may notify the handler in writing, within the 2-year
period provided for in paragraph (a) of this section, of such failure
or refusal. If the market administrator so notifies a handler, the said
2-year period with respect to such obligation shall not begin to run
until the first day of the month following the month during which all
such records pertaining to such obligation are made available to the
market administrator.
(c) Notwithstanding the provisions of paragraphs (a) and (b) of
this section, a handler's obligation under the order to pay money shall
not be terminated with respect to any transaction involving fraud or
willful concealment of a fact, material to the obligation, on the part
of the handler against whom the obligation is sought to be imposed.
(d) Unless the handler files a petition pursuant to section
8c(15)(A) of the Act and the applicable rules and regulations (7 CFR
900.50 et seq.) within the applicable 2-year period indicated below,
the obligation of the market administrator:
(1) To pay a handler any money which such handler claims is due
under the terms of the order shall terminate 2 years after the end of
the month during which the skim milk and butterfat involved in the
claim were received; or
(2) To refund any payment made by a handler (including a deduction
or offset by the market administrator) shall terminate 2 years after
the end of the month during which payment was made by the handler.

Subpart F--Classification of Milk

Sec. 1000.40 Classes of utilization.

Except as provided in Sec. 1000.42, all skim milk and butterfat
required to be reported pursuant to Sec. ____.30 of each Federal milk
order in 7 CFR, chapter X shall be classified as follows:
(a) Class I milk shall be all skim milk and butterfat:
(1) Disposed of in the form of fluid milk products, except as
otherwise provided in this section;
(2) Used to produce fluid milk products modifed in volume by the
addition of nonmilk ingredients and/or previously processed and priced
skim milk and butterfat, including milkshake and milkshake drinks sold
in containers less than one half-gallon;
(3) In packaged fluid milk products in inventory at the end of the
month, exclusive of skim milk and butterfat accounted for in paragraph
(a)(2) of this section; and
(4) In shrinkage assigned pursuant to Sec. 1000.43(b).
(b) Class II milk shall be all skim milk and butterfat:
(1) In fluid milk products in containers larger than 1 gallon and
fluid cream products disposed of or diverted to a commercial food
processing establishment if the market administrator is permitted to
audit the records of the commercial food processing establishment for
the purpose of verification. Otherwise, such uses shall be Class I;
(2) Used to produce:
(i) Cottage cheese, lowfat cottage cheese, dry curd cottage cheese,
ricotta cheese, pot cheese, Creole cheese, cream cheese and any similar
soft, high-moisture cheese resembling cottage cheese in form or use;
(ii) Milkshake and ice milk mixes (or bases), frozen desserts, and
frozen dessert mixes distributed in half-gallon containers or larger
and intended to be used in soft or semi-solid form;
(iii) Aerated cream, frozen cream, sour cream, sour half-and-half,
sour cream

[[Page 4972]]

mixtures containing nonmilk items, yogurt, and any other semi-solid
product resembling a Class II product;
(iv) Custards, puddings, pancake mixes, coatings, batter, and
similar products;
(v) Buttermilk biscuit mixes and other buttermilk for baking that
contain food starch in excess of 2% of the total solids, provided that
the product is labeled to indicate the food starch content;
(vi) Formulas especially prepared for infant feeding or meal
replacement;
(vii) Candy, soup, bakery products and other prepared foods which
are processed for general distribution to the public, and intermediate
products, including sweetened condensed milk, to be used in processing
such prepared food products;
(viii) A fluid cream product or any product containing artificial
fat or fat substitutes that resembles a fluid cream product, except as
otherwise provided in paragraph (c) of this section;
(ix) Any product not otherwise specified in this section; and
(3) In shrinkage assigned pursuant to Sec. 1000.43(b).
(c) Class III milk shall be all skim milk and butterfat:
(1) Used to produce:
(i) Spreadable cheeses (other than cream cheese) and hard cheese of
types that may be shredded, grated, or crumbled and that are not
included in paragraph (b)(2)(i) of this section;
(ii) Plastic cream, anhydrous milkfat, and butteroil; and
(iii) Evaporated or sweetened condensed milk/skim milk in a
consumer-type package;
(2) In inventory at the end of the month of fluid milk products and
fluid cream products in bulk form;
(3) In any products classified pursuant to paragraphs (a) or (b) of
this section that are destroyed or lost by a handler in a vehicular
accident, flood, fire, or in a similar occurrence beyond the handler's
control, to the extent that the quantities destroyed or lost can be
verified from records satisfactory to the market administrator;
(4) In the skim milk equivalent of nonfat milk solids used to
modify a fluid milk product that has not been accounted for in Class I;
and
(5) In shrinkage assigned pursuant to Sec. 1000.43(b).
(d) Class IV milk shall be all skim milk and butterfat:
(1) Used to produce:
(i) Butter; and
(ii) Any milk product in dried form; and
(2) In shrinkage assigned pursuant to Sec. 1000.43(b).

Sec. 1000.41 [Reserved]

Sec. 1000.42 Classification of transfers and diversions.

(a) Transfers and diversions to pool plants. Skim milk or butterfat
transferred or diverted in the form of a fluid milk product or
transferred in the form of a bulk fluid cream product from a pool plant
to another pool plant shall be classified as Class I milk unless the
operators of both plants request the same classification in another
class. In either case, the classification shall be subject to the
following conditions:
(1) The skim milk and butterfat classified in each class shall be
limited to the amount of skim milk and butterfat, respectively,
remaining in such class at the receiving plant after the computations
pursuant to Sec. 1000.44(a)(9) and the corresponding step of
Sec. 1000.44(b);
(2) If the transferring plant received during the month other
source milk to be allocated pursuant to Sec. 1000.44(a)(3) or the
corresponding step of Sec. 1000.44(b), the skim milk or butterfat so
transferred shall be classified so as to allocate the least possible
Class I utilization to such other source milk; and
(3) If the transferring handler received during the month other
source milk to be allocated pursuant to Sec. 1000.44(a)(8) or (9) or
the corresponding steps of Sec. 1000.44(b), the skim milk or butterfat
so transferred, up to the total of the skim milk and butterfat,
respectively, in such receipts of other source milk, shall not be
classified as Class I milk to a greater extent than would be the case
if the other source milk had been received at the receiving plant.
(b) Transfers and diversions to a plant regulated under another
Federal order. Skim milk or butterfat transferred or diverted in the
form of a fluid milk product or transferred in the form of a bulk fluid
cream product from a pool plant to a plant regulated under another
Federal order shall be classified in the following manner. Such
classification shall apply only to the skim milk or butterfat that is
in excess of any receipts at the pool plant from a plant regulated
under another Federal order of skim milk and butterfat, respectively,
in fluid milk products and bulk fluid cream products, respectively,
that are in the same category as described in paragraph (b)(1) or (2)
of this section:
(1) As Class I milk, if transferred as packaged fluid milk
products;
(2) If transferred or diverted in bulk form, classification shall
be in the classes to which allocated under the other order:
(i) If the operators of both plants so request in their reports of
receipts and utilization filed with their respective market
administrators, transfers in bulk form shall be classified as other
than Class I to the extent that such utilization is available for such
classification pursuant to the allocation provisions of the other
order;
(ii) If diverted, the diverting handler must request a
classification other than Class I. If the plant receiving the diverted
milk does not have sufficient utilization available for the requested
classification and some of the diverted milk is consequently assigned
to Class I use, the diverting handler shall be given the option of
designating the entire load of diverted milk as producer milk at the
plant physically receiving the milk. Alternatively, if the diverting
handler so chooses, it may designate which dairy farmers whose milk was
diverted during the month will be designated as producers under the
order physically receiving the milk. If the diverting handler declines
to accept either of these options, the market administrator will
prorate the portion of diverted milk in excess of Class II, III, and IV
use among all the dairy farmers whose milk was received from the
diverting handler on the last day of the month, then the second-to-last
day, and continuing in that fashion until the excess diverted milk has
been assigned as producer milk under the receiving order; and
(iii) If information concerning the classes to which such transfers
or diversions were allocated under the other order is not available to
the market administrator for the purpose of establishing classification
under this paragraph, classification shall be Class I, subject to
adjustment when such information is available.
(c) Transfers and diversions to producer-handlers and to exempt
plants. Skim milk or butterfat that is transferred or diverted from a
pool plant to a producer-handler under any Federal order in 7 CFR,
chapter X or to an exempt plant shall be classified:
(1) As Class I milk if transferred or diverted to a producer-
handler;
(2) As Class I milk if transferred to an exempt plant in the form
of a packaged fluid milk product; and
(3) In accordance with the utilization assigned to it by the market
administrator if transferred or diverted in the form of a bulk fluid
milk product or transferred in the form of a bulk fluid cream product
to an exempt plant. For this purpose, the receiving handler's
utilization of skim milk and butterfat in each class, in series
beginning with Class IV, shall be assigned to the extent

[[Page 4973]]

possible to its receipts of skim milk and butterfat, in bulk fluid
cream products, and bulk fluid milk products, respectively, pro rata to
each source.
(d) Transfers and diversions to other nonpool plants. Skim milk or
butterfat transferred or diverted in the following forms from a pool
plant to a nonpool plant that is not a plant regulated under another
order in 7 CFR, chapter X, an exempt plant, or a producer-handler plant
shall be classified:
(1) As Class I milk, if transferred in the form of a packaged fluid
milk product; and
(2) As Class I milk, if transferred or diverted in the form of a
bulk fluid milk product or transferred in the form of a bulk fluid
cream product, unless the following conditions apply:
(i) If the conditions described in paragraphs (d)(2)(i)(A) and (B)
of this section are met, transfers or diversions in bulk form shall be
classified on the basis of the assignment of the nonpool plant's
utilization, excluding the milk equivalent of both nonfat milk solids
and concentrated milk used in the plant during the month, to its
receipts as set forth in paragraphs (d)(2)(ii) through (viii) of this
section:
(A) The transferring handler or diverting handler claims such
classification in such handler's report of receipts and utilization
filed pursuant to Sec. ____.30 of each Federal milk order in 7 CFR,
chapter X for the month within which such transaction occurred; and
(B) The nonpool plant operator maintains books and records showing
the utilization of all skim milk and butterfat received at such plant
which are made available for verification purposes if requested by the
market administrator;
(ii) Route disposition in the marketing area of each Federal milk
order in 7 CFR, chapter X from the nonpool plant and transfers of
packaged fluid milk products from such nonpool plant to plants fully
regulated thereunder shall be assigned to the extent possible in the
following sequence:
(A) Pro rata to receipts of packaged fluid milk products at such
nonpool plant from pool plants;
(B) Pro rata to any remaining unassigned receipts of packaged fluid
milk products at such nonpool plant from plants regulated under other
Federal orders in 7 CFR, chapter X;
(C) Pro rata to receipts of bulk fluid milk products at such
nonpool plant from pool plants; and
(D) Pro rata to any remaining unassigned receipts of bulk fluid
milk products at such nonpool plant from plants regulated under other
Federal orders in 7 CFR, chapter X;
(iii) Any remaining Class I disposition of packaged fluid milk
products from the nonpool plant shall be assigned to the extent
possible pro rata to any remaining unassigned receipts of packaged
fluid milk products at such nonpool plant from pool plants and plants
regulated under other Federal orders in 7 CFR, chapter X;
(iv) Transfers of bulk fluid milk products from the nonpool plant
to a plant regulated under any Federal order in 7 CFR, chapter X, to
the extent that such transfers to the regulated plant exceed receipts
of fluid milk products from such plant and are allocated to Class I at
the receiving plant, shall be assigned to the extent possible in the
following sequence:
(A) Pro rata to receipts of fluid milk products at such nonpool
plant from pool plants; and
(B) Pro rata to any remaining unassigned receipts of fluid milk
products at such nonpool plant from plants regulated under other
Federal orders in 7 CFR, chapter X;
(v) Any remaining unassigned Class I disposition from the nonpool
plant shall be assigned to the extent possible in the following
sequence:
(A) To such nonpool plant's receipts from dairy farmers who the
market administrator determines constitute regular sources of Grade A
milk for such nonpool plant; and
(B) To such nonpool plant's receipts of Grade A milk from plants
not fully regulated under any Federal order in 7 CFR, chapter X which
the market administrator determines constitute regular sources of Grade
A milk for such nonpool plant;
(vi) Any remaining unassigned receipts of bulk fluid milk products
at the nonpool plant from pool plants and plants regulated under other
Federal orders in 7 CFR, chapter X shall be assigned, pro rata among
such plants, to the extent possible first to any remaining Class I
utilization and then to all other utilization, in sequence beginning
with Class IV at such nonpool plant;
(vii) Receipts of bulk fluid cream products at the nonpool plant
from pool plants and plants regulated under other Federal orders in 7
CFR, chapter X shall be assigned, pro rata among such plants, to the
extent possible to any remaining utilization, in sequence beginning
with Class IV at such nonpool plant; and
(viii) In determining the nonpool plant's utilization for purposes
of this paragraph, any fluid milk products and bulk fluid cream
products transferred from such nonpool plant to a plant not fully
regulated under any Federal order in 7 CFR, chapter X shall be
classified on the basis of the second plant's utilization using the
same assignment priorities at the second plant that are set forth in
this paragraph.

Sec. 1000.43 General classification rules.

In determining the classification of producer milk pursuant to
Sec. 1000.44, the following rules shall apply:
(a) Each month the market administrator shall correct for
mathematical and other obvious errors all reports filed pursuant to
Sec. ____.30 of each Federal milk order in 7 CFR, chapter X and shall
compute separately for each pool plant, and for each cooperative
association with respect to milk for which it is the handler pursuant
to Sec. 1000.9(c) the pounds of skim milk and butterfat, respectively,
in each class in accordance with Secs. 1000.40 and 1000.42, and
paragraph (b) of this section.
(b) For purposes of classifying all milk reported by a handler
pursuant to Sec. ____.30 of each Federal milk order in 7 CFR, chapter
X, the market administrator shall:
(1) Determine the shrinkage or overage of skim milk and butterfat
for each pool plant and for each handler described in Sec. 1000.9(c) by
subtracting total utilization from total receipts. Any positive
difference would be shrinkage, and any negative difference would be
overage;
(2) Prorate the shrinkage or overage computed in paragraph (b)(1)
of this section to the respective quantities of skim milk and butterfat
reported in each class. In the case of a handler described in
Sec. 1000.9(c), the proration of shrinkage shall be based upon the
utilization of the plants to which the milk was delivered; and
(3) Add the prorated shrinkage to, or subtract the prorated overage
from, the handler's reported utilization. The results shall be known as
the gross utilization in each class.
(c) If any of the water contained in the milk from which a product
is made is removed before the product is utilized or disposed of by the
handler, the pounds of skim milk in such product that are to be
considered under this part as used or disposed of by the handler shall
be an amount equivalent to the nonfat milk solids contained in such
product plus all of the water originally associated with such solids.
(d) Skim milk and butterfat contained in receipts of bulk
concentrated fluid milk and nonfluid milk products that are
reconstituted for fluid use shall be assigned to Class I use, up to the
reconstituted portion of labeled reconstituted fluid milk products, on
a pro rata basis (except for any Class I use

[[Page 4974]]

of specific concentrated receipts that is established by the handler)
prior to any assignments under Sec. 1000.44. Any remaining skim milk
and butterfat in concentrated receipts shall be assigned to uses under
Sec. 1000.44 on a pro rata basis, unless a specific use of such
receipts is established by the handler.

Sec. 1000.44 Classification of producer milk.

For each month the market administrator shall determine for each
handler described in Sec. 1000.9(a) for each pool plant of the handler
separately and for each handler described in Sec. 1000.9(c) the
classification of producer milk by allocating the handler's receipts of
skim milk and butterfat to the gross utilization of such receipts
pursuant to Sec. 1000.43(b)(3) by such handler as follows:
(a) Skim milk shall be allocated in the following manner:
(1) Subtract from the pounds of skim milk in Class I the pounds of
skim milk in:
(i) Receipts of packaged fluid milk products from an unregulated
supply plant to the extent that an equivalent amount of skim milk
disposed of to such plant by handlers fully regulated under any Federal
order in 7 CFR, chapter X is classified and priced as Class I milk and
is not used as an offset for any other payment obligation under any
order in 7 CFR, chapter X;
(ii) Packaged fluid milk products in inventory at the beginning of
the month. This paragraph shall apply only if the pool plant was
subject to the provisions of this paragraph or comparable provisions of
another Federal order in 7 CFR, chapter X in the immediately preceding
month;
(iii) Fluid milk products received in packaged form from plants
regulated under other Federal orders in 7 CFR, chapter X;
(iv) Any remaining receipts of skim milk shall be allocated
pursuant to paragraph (a)(3)(iv) of this section.
(2) Subtract from the pounds of skim milk in Class II the pounds of
skim milk in the receipts of skim milk in bulk concentrated fluid milk
products and in other source milk (except other source milk received in
the form of an unconcentrated fluid milk product or a fluid cream
product) that is used to produce, or added to, any product in Class II
(excluding the quantity of such skim milk that was classified as Class
III milk pursuant to Sec. 1000.40(c)(4)). Any remaining receipts of
skim milk shall be allocated pursuant to paragraph (a)(3)(iv) of this
section.
(3) Subtract from the pounds of skim milk remaining in each class,
in series beginning with Class IV, the pounds of skim milk in:
(i) Receipts of bulk concentrated fluid milk products and other
source milk (except other source milk received in the form of an
unconcentrated fluid milk product);
(ii) Receipts of fluid milk products and bulk fluid cream products
for which appropriate health approval is not established and from
unidentified sources;
(iii) Receipts of fluid milk products and bulk fluid cream products
from an exempt plant;
(iv) Fluid milk products and bulk fluid cream products received, or
acquired for distribution, from a producer-handler as defined under
this order or any other Federal order in 7 CFR, chapter X; and
(v) Any receipts not subtracted pursuant to paragraphs (a)(1) and
(a)(2) of this section.
(4) Subtract from the pounds of skim milk remaining in all classes
other than Class I, in sequence beginning with Class IV, the receipts
of fluid milk products from an unregulated supply plant that were not
previously subtracted in this section for which the handler requests
classification other than Class I, but not in excess of the pounds of
skim milk remaining in these other classes combined.
(5) Subtract from the pounds of skim milk remaining in all classes
other than Class I, in sequence beginning with Class IV, receipts of
fluid milk products from an unregulated supply plant that were not
subtracted in previous paragraphs, and which are in excess of the
pounds of skim milk determined pursuant to paragraphs (a)(5)(i) through
(iii) of this section;
(i) Multiply by 1.25 the pounds of skim milk remaining in Class I
at this allocation step;
(ii) Subtract from the above result the pounds of skim milk in
receipts of producer milk and fluid milk products from pool plants of
other handlers; and
(iii) Multiply any plus quantity resulting above by the percentage
that the receipts of skim milk in fluid milk products from unregulated
supply plants remaining at this pool plant is of all such receipts
remaining pursuant to this allocation step.
(6) Subtract from the pounds of skim milk remaining in all classes
other than Class I, in sequence beginning with Class IV, the pounds of
skim milk in receipts of bulk fluid milk products from a handler
regulated under another Federal order in 7 CFR, chapter X that are in
excess of bulk fluid milk products transferred or diverted to such
handler, if other than Class I classification is requested, but not in
excess of the pounds of skim milk remaining in these classes combined.
(7) Subtract from the pounds of skim milk remaining in each class,
in series beginning with Class III (or Class IV if the plant had only
Class IV utilization), the pounds of skim milk in fluid milk products
and bulk fluid cream products in inventory at the beginning of the
month that were not previously subtracted in this section.
(8) Subtract from the pounds of skim milk remaining in each class
at the plant, pro rata to the total pounds of skim milk remaining in
Class I and in all other classes combined, and in sequence beginning
with Class IV, the pounds of skim milk in receipts of fluid milk
products from an unregulated supply plant that were not previously
subtracted in this section and that were not offset by transfers or
diversions of fluid milk products to the unregulated supply plant from
which fluid milk products to be allocated at this step were received.
(9) Subtract in the manner specified below from the pounds of skim
milk remaining in each class the pounds of skim milk in receipts of
bulk fluid milk products from a handler regulated under another Federal
order in 7 CFR, chapter X that are in excess of bulk fluid milk
products transferred or diverted to such handler that were not
subtracted in paragraph (a)(6) of this section;
(i) Such subtraction shall be pro rata to the pounds of skim milk
in Class I and in all other classes combined, with the quantity
prorated to all classes combined being subtracted in sequence beginning
with Class IV, with respect to whichever of the following quantities
represents the lower proportion of Class I milk:
(A) The estimated utilization of skim milk of all handlers in each
class as announced for the month pursuant to Sec. 1000.45(a); or
(B) The total pounds of skim milk remaining in each class at this
allocation step.
(ii) [Reserved]
(10) Subtract from the pounds of skim milk remaining in each class
the pounds of skim milk in receipts of fluid milk products and bulk
fluid cream products from another pool plant according to the
classification of such products pursuant to Sec. 1000.42(a).
(b) Butterfat shall be allocated in accordance with the procedure
outlined for skim milk in paragraph (a) of this section; and
(c) The quantity of producer milk in each class shall be the
combined pounds of skim milk and butterfat remaining in each class
after the

[[Page 4975]]

computations pursuant to paragraphs (a) and (b) of this section.

Sec. 1000.45 Market administrator's reports and announcements
concerning classification.

(a) Whenever required for the purpose of allocating receipts from
other Federal order plants pursuant to Sec. 1000.44(a)(9) and the
corresponding step of Sec. 1000.44(b), the market administrator shall
estimate and publicly announce the utilization (to the nearest whole
percentage) in Class I during the month of skim milk and butterfat,
respectively, in producer milk of all handlers. The estimate shall be
based upon the most current available data and shall be final for such
purpose.
(b) The market administrator shall report to the other Federal
order market administrators, as soon as possible after the handlers'
reports of receipts and utilization are received, the class to which
receipts from other Federal order plants are allocated pursuant to
Secs. 1000.43(d) and 1000.44 (including any reclassification of
inventories of bulk concentrated fluid milk products), and thereafter
any change in allocation required to correct errors disclosed on the
verification of such report.
(c) The market administrator shall furnish each handler operating a
pool plant who has shipped fluid milk products or bulk fluid cream
products to a plant fully regulated under another Federal order in 7
CFR, chapter X the class to which the shipments were allocated by the
market administrator of the other Federal order in 7 CFR, chapter X on
the basis of the report by the receiving handler and, as necessary, any
changes in the allocation arising from the verification of such report.
(d) The market administrator shall report to each cooperative
association which so requests, the percentage of producer milk
delivered by members of the association that was used in each class by
each handler receiving the milk. For the purpose of this report, the
milk so received shall be prorated to each class in accordance with the
total utilization of producer milk by the handler.

Subpart G--Class Prices

Sec. 1000.50 Class prices and component prices.

Subject to the provisions of Sec. 1000.52, the class prices per
hundredweight of milk containing 3.5 percent butterfat and the
component prices for the month shall be as follows:
(a) Class I price. The Class I price shall be .965 times the Class
I skim milk price plus 3.5 times the Class I butterfat price.
(b) Class II price. The Class II price shall be .965 times the
Class II skim milk price plus 3.5 times the month's butterfat price.
(c) Class III price. The Class III price shall be .965 times the
Class III skim milk price plus 3.5 times the month's butterfat price.
(d) Class IV price. The Class IV price shall be .965 times the
Class IV skim milk price plus 3.5 times the month's butterfat price.
(e) Class I differential price. The Class I differential price
shall be the difference between the current month's Class I and Class
III prices (this price may be negative).
(f) Class II differential price. The Class II differential price
shall be the difference between the current month's Class II and Class
IV prices.
(g) Class I skim milk price. The Class I skim milk price per
hundredweight, rounded to the nearest cent, shall be the adjusted Class
I differential effective at the location of the plant as specified in
Sec. 1000.52(a) plus a six month declining average computed by totaling
the value of the higher of Class III or Class IV skim milk price for
each month, starting with the second preceding month, multiplied by a
factor of six and reducing the factor by one for each preceding month
and dividing the sum by 21.
(h) Class II skim milk price. The Class II skim milk price per
hundredweight shall be the Class IV skim milk price for the month plus
70 cents.
(i) Class III skim milk price. The Class III skim milk price per
hundredweight, rounded to the nearest cent, shall be the protein price
per pound times 3.3 pounds of protein plus the other solids price per
pound times 5.7 pounds of other solids;
(j) Class IV skim milk price. The Class IV skim milk price per
hundredweight, rounded to the nearest cent, shall be the nonfat solids
price per pound times 9 pounds of nonfat solids.
(k) Class I butterfat price. The Class I butterfat price per pound,
rounded to the nearest one-hundredth cent, shall be the adjusted Class
I differential effective at the location of the plant as specified in
Sec. 1000.52(a) divided by 100, plus a six month declining average
computed by totaling the value of the butterfat price for each month,
starting with the second preceding month, multiplied by a factor of six
and reducing the factor by one for each preceding month and dividing
the sum by 21.
(l) Butterfat price. The butterfat price per pound, rounded to the
nearest one-hundredth cent, shall be the National Agricultural
Statistical Service (NASS) AA Butter survey price as reported by the
Department less .079 (make allowance), with the result divided by 0.82.
(m) Nonfat solids price. The nonfat solids price per pound, rounded
to the nearest one-hundredth cent, shall be the NASS nonfat dry milk
survey price as reported by the Department less $0.125 (make
allowance), with the result divided by 0.96.
(n) Protein price. The protein price per pound, rounded to the
nearest one-hundredth cent shall be the total of:
(1) The NASS 40-lb block cheese survey price as reported by the
Department less 12.7 cents, with the result multiplied by 1.32; and
(2) Multiply by 1.20 an amount computed as follows: The NASS 40-lb
block cheese survey price as reported by the Department less 12.7
cents, with the result multiplied by 1.582 then reduced by the
butterfat price.
(o) Other solids price. The other solids price per pound, rounded
to the nearest one-hundredth cent, shall be the NASS dry whey survey
price as reported by the Department minus 10 cents, with the result
divided by 0.968.
(p) Somatic cell adjustment. (1) The somatic cell adjustment rate,
per 1,000 somatic cells, rounded to five decimal places, shall be
computed by multiplying .0005 times the monthly NASS 40-pound block
cheese survey price;
(2) The somatic cell adjustment, per hundredweight, shall be
determined by subtracting from 350 the somatic cell count (in
thousands) of the milk, multiplying the difference by the somatic cell
adjustment rate, and rounding to the nearest full cent.

Sec. 1000.51 [Reserved]

Sec. 1000.52 Adjusted Class I differentials.

The Class I differential adjusted for location to be used in
Sec. 1000.50(g) and (k) shall be as follows, except that:
(1) Under the Option 1B Revenue-Enhancement Phase-In, the
differential shall be increased by $1.10 in 1999, $.70 in 2000, $.40 in
2001, and $.20 in 2002; and
(2) Under the Option 1B Revenue Neutral Phase-In, the differential
shall be increased by $.55 in 1999, $.35 in 2000, $.20 in 2001, and
$.10 in 2002:

[[Page 4976]]

--------------------------------------------------------------------------------------------------------------------------------------------------------
OPTION 1B DIFFERENTIAL (Per Year)
OPTION 1A ----------------------------------------------------------------
COUNTY/PARISH STATE DIFFERENTIAL 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

[[Page 4977]]

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

[[Page 4978]]

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

[[Page 4979]]

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

[[Page 4980]]

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

[[Page 4981]]

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

[[Page 4982]]

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

[[Page 4983]]

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

[[Page 4984]]

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

[[Page 4985]]

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

[[Page 4986]]

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

[[Page 4987]]

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

[[Page 4988]]

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

[[Page 4989]]

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

[[Page 4990]]

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

[[Page 4991]]

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

[[Page 4992]]

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

[[Page 4993]]

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

[[Page 4994]]

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

[[Page 4995]]

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

[[Page 4996]]

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

[[Page 4997]]

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

[[Page 4998]]

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

[[Page 4999]]

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

[[Page 5000]]

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

[[Page 5001]]

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

[[Page 5002]]

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

[[Page 5003]]

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

[[Page 5004]]

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

[[Page 5005]]

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

[[Page 5006]]

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

[[Page 5007]]

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

[[Page 5008]]

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

[[Page 5009]]

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

[[Page 5010]]

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

[[Page 5011]]

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

[[Page 5012]]

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

[[Page 5013]]

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

[[Page 5014]]

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

[[Page 5015]]

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

[[Page 5016]]

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

[[Page 5017]]

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

[[Page 5018]]

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

[[Page 5019]]

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

[[Page 5020]]

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
--------------------------------------------------------------------------------------------------------------------------------------------------------

Sec. 1000.53 Announcement of class prices and component prices.

On or before the 5th day of the month, the market administrator
shall announce for each Federal milk marketing order in 7 CFR, chapter
X the following applicable prices:
(a) For the following month:
(1) The Class I price;
(2) The Class I skim milk price;
(3) The Class I butterfat price;
(b) For the preceding month:
(1) The Class II price;
(2) The Class III price;
(3) The Class IV price;
(4) The Class II skim milk price;
(5) The Class III skim milk price;
(6) The Class IV skim milk price;
(7) The butterfat price;
(8) The nonfat solids price;
(9) The protein price;
(10) The other solids price; and
(11) The somatic cell adjustment rate.

Sec. 1000.54 Equivalent price.

If for any reason a price or pricing constituent required for
computing class prices or for other purposes is not available as
prescribed in any Federal milk order, the market administrator shall
use a price or pricing constituent determined by the Deputy
Administrator, Dairy Programs, Agricultural Marketing Service, to be
equivalent to the price or pricing constituent that is required.

Subpart H--Payments for Milk

Sec. 1000.70 Producer-settlement fund.

The market administrator shall establish and maintain a separate
fund known as the producer-settlement fund into which the market
administrator shall deposit all payments made by handlers pursuant to
Secs. ____.71, ____.76, and ____.77 of each Federal milk order in 7
CFR, chapter X, and out of which the market administrator shall make
all payments pursuant to Secs. ____.72 and ____.77 of each Federal milk
order in 7 CFR, chapter X. Payments due any handler shall be offset by
any payments due from that handler.

Sec. 1000.71 Payments to the producer-settlement fund.

Each handler shall make a payment to the producer-settlement fund
in a manner that provides receipt of the funds by the market
administrator no later than the date specified in Sec. ____.71 of each
order in 7 CFR, chapter X. Payment shall be the amount, if any, by
which the amount specified in (a) of this section exceeds the amount
specified in (b) or (c) of this section:
(a) The total value of milk of the handler for the month as
determined pursuant to Sec. ____.60 of the order; and
(b) For orders in 7 CFR, chapter X with component pricing, the sum
of:
(1) An amount obtained by multiplying the total hundredweight of
producer milk as determined pursuant to Sec. 1000.44(c) by the producer
price differential, adjusted pursuant to Sec. ____.75 of the order;
(2) An amount obtained by multiplying the pounds of protein, other
solids, and butterfat contained in producer milk by the protein, other
solids, and butterfat prices, respectively;
(3) The total value of the somatic cell adjustment to producer
milk; and
(4) An amount obtained by multiplying the pounds of skim milk and
butterfat for which a value was computed pursuant to Sec. ____.60(i) of
the order by the producer price differential as adjusted pursuant to
Sec. ____.75 of the order for the location of the plant from which
received; or
(c) For orders in 7 CFR, chapter X with skim milk and butterfat
pricing, the sum of the value at the uniform prices for skim milk and
butterfat, adjusted for plant location, of the

[[Page 5021]]

handler's receipts of producer milk; and the value at the uniform price
as adjusted pursuant to Sec. ____.75 of the order applicable at the
location of the plant from which received of other source milk for
which a value is computed pursuant to Sec. ____.60(e) of the order.

Sec. 1000.72 Payments from the producer-settlement fund.

No later than one day after the date of payment receipt required
under Sec. 1000.71, the market administrator shall pay to each handler
the amount, if any, by which the amount computed pursuant to
Sec. 1000.71(b) or (c), as the case may be, exceeds the amount computed
pursuant to Sec. 1000.71(a). If, at such time, the balance in the
producer-settlement fund is insufficient to make all payments pursuant
to this section, the market administrator shall reduce uniformly such
payments and shall complete the payments as soon as the funds are
available.

Sec. 1000.76 Payments by a handler operating a partially regulated
distributing plant.

On or before the 25th day after the end of the month, the operator
of a partially regulated distributing plant shall pay to the market
administrator for the producer-settlement fund the amount computed
pursuant to paragraph (a) of this section or, if the handler submits
the information specified in Secs. ____.30(b) and ____.31(b) of the
order, the handler may elect to pay the amount computed pursuant to
paragraph (b) of this section:
(a) The payment under this paragraph shall be an amount resulting
from the following computations:
(1) From the plant's route disposition in the marketing area:
(i) Subtract receipts of fluid milk products classified as Class I
milk from pool plants and plants fully regulated under other Federal
orders in 7 CFR, chapter X, except that subtracted under a similar
provision of another Federal milk order in 7 CFR, chapter X;
(ii) Subtract receipts of fluid milk products from another nonpool
plant that is not a plant fully regulated under another Federal order
in 7 CFR, chapter X to the extent that an equivalent amount of fluid
milk products disposed of to the nonpool plant by handlers fully
regulated under any Federal order in 7 CFR, chapter X is classified and
priced as Class I milk and is not used as an offset for any payment
obligation under any order; and
(iii) Subtract the pounds of reconstituted milk made from nonfluid
milk products which are then disposed of as route disposition in the
marketing area;
(2) For orders in 7 CFR, chapter X with multiple component pricing,
multiply the remaining pounds by the amount by which the Class I
differential price exceeds the producer price differential, both prices
to be applicable at the location of the partially regulated
distributing plant except that neither the adjusted Class I
differential price nor the adjusted producer price differential shall
be less than zero;
(3) For orders in 7 CFR, chapter X with skim milk and butterfat
pricing, multiply the remaining pounds by the amount by which the Class
I price exceeds the uniform price, both prices to be applicable at the
location of the partially regulated distributing plant except that
neither the adjusted Class I price nor the adjusted uniform price
differential shall be less than the lowest announced class price; and
(4) Add the amount obtained from multiplying the pounds of labeled
reconstituted milk included in paragraph (a)(1)(iii) of this section by
any positive difference between the Class I price applicable at the
location of the partially regulated distributing plant less $1.00 and
the Class IV price. For any reconstituted milk that is not so labeled,
the Class I price shall not be reduced by $1.00. Alternatively, for
such disposition, payments may be made to the producer-settlement fund
of the order regulating the producer milk used to produce the nonfluid
milk ingredients at the positive difference between the Class I price
applicable under the other Federal order in 7 CFR, chapter X at the
location of the plant where the nonfluid milk ingredients were
processed and the Class IV price. This payment option shall apply only
if a majority of the total milk received at the plant that processed
the nonfluid milk ingredients is regulated under one or more Federal
orders in 7 CFR, chapter X and payment may only be made to the
producer-settlement fund of the order pricing a plurality of the milk
used to produce the nonfluid milk ingredients. This payment option
shall not apply if the source of the nonfluid ingredients used in
reconstituted fluid milk products cannot be determined by the market
administrator.
(b) The payment under this paragraph shall be the amount resulting
from the following computations:
(1) Determine the value that would have been computed pursuant to
Sec. ____.60 of the order for the partially regulated distributing
plant if the plant had been a pool plant, subject to the following
modifications:
(i) Fluid milk products and bulk fluid cream products received at
the plant from a pool plant or a plant fully regulated under another
Federal order plant shall be allocated at the partially regulated
distributing plant to the same class in which such products were
classified at the fully regulated plant;
(ii) Fluid milk products and bulk fluid cream products transferred
from the partially regulated distributing plant to a pool plant or a
plant fully regulated under another Federal order in 7 CFR, chapter X
shall be classified at the partially regulated distributing plant in
the class to which allocated at the fully regulated plant. Such
transfers shall be computed to the extent possible to those receipts at
the partially regulated distributing plant from the pool plant and
plants fully regulated under other Federal orders in 7 CFR, chapter X
that are classified in the corresponding class pursuant to paragraph
(b)(1)(i) of this section. Any such transfers remaining after the above
allocation which are in Class I and for which a value is computed
pursuant to Sec. ____.60 of the order for the partially regulated
distributing plant shall be priced at the statistical uniform price or
uniform price, whichever is applicable, of the respective order
regulating the handling of milk at the receiving plant, with such
statistical uniform price or uniform price adjusted to the location of
the nonpool plant (but not to be less than the lowest announced class
price of the respective order); and
(iii) If the operator of the partially regulated distributing plant
so requests, the handler's value of milk determined pursuant to
Sec. ____.60 of the order shall include a value of milk determined for
each nonpool plant that is not a plant fully regulated under another
Federal order in 7 CFR, chapter X which serves as a supply plant for
the partially regulated distributing plant by making shipments to the
partially regulated distributing plant during the month equivalent to
the requirements of Section 7(c) of the order, subject to the following
conditions:
(A) The operator of the partially regulated distributing plant
submits with its reports filed pursuant to Secs. ____.30(b) and
____.31(b) of the order similar reports for each such nonpool supply
plant;
(B) The operator of the nonpool plant maintains books and records
showing the utilization of all skim milk and butterfat received at the
plant which are made available if requested by the market administrator
for verification purposes; and
(C) The value of milk determined pursuant to Sec. ____.60 for the

[[Page 5022]]

unregulated supply plant shall be determined in the same manner
prescribed for computing the obligation of the partially regulated
distributing plant; and
(2) From the partially regulated distributing plant's value of milk
computed pursuant to paragraph (b)(1) of this section, subtract:
(i) The gross payments by the operator of the partially regulated
distributing plant for milk received at the plant during the month that
would have been producer milk had the plant been fully regulated;
(ii) If paragraph (b)(1)(iii) of this section applies, the gross
payments by the operator of such nonpool supply plant for milk received
at the plant during the month that would have been producer milk if the
plant had been fully regulated; and
(iii) The payments by the operator of the partially regulated
distributing plant to the producer-settlement fund of another Federal
order in 7 CFR, chapter X under which the plant is also a partially
regulated distributing plant and like payments by the operator of the
nonpool supply plant if paragraph (b)(1)(iii) of this section applies.
(c) Any handler may elect partially regulated distributing plant
status for any plant with respect to receipts of nonfluid milk
ingredients assigned to Class I use under Sec. 1000.43(d). Payments may
be made to the producer-settlement fund of the order regulating the
producer milk used to produce the nonfluid milk ingredients at the
positive difference between the Class I price applicable under the
other order at the location of the plant where the nonfluid milk
ingredients were processed and the Class IV price. This payment option
shall apply only if a majority of the total milk received at the plant
that processed the nonfluid milk ingredients is regulated under one or
more Federal orders in 7 CFR, chapter X and payment may only be made to
the producer-settlement fund of the order pricing a plurality of the
milk used to produce the nonfluid milk ingredients. This payment option
shall not apply if the source of the nonfluid ingredients used in
reconstituted fluid milk products cannot be determined by the market
administrator.

Sec. 1000.77 Adjustment of accounts.

Whenever audit by the market administrator of any handler's
reports, books, records, or accounts, or other verification discloses
errors resulting in money due the market administrator from a handler,
or due a handler from the market administrator, or due a producer or
cooperative association from a handler, the market administrator shall
promptly notify such handler of any amount so due and payment thereof
shall be made on or before the next date for making payments as set
forth in the provisions under which the error(s) occurred.

Sec. 1000.78 Charges on overdue accounts.

Any unpaid obligation due the market administrator, producers, or
cooperative associations from a handler pursuant to the provisions of
the order shall be increased 1.0 percent each month beginning with the
day following the date such obligation was due under the order. Any
remaining amount due shall be increased at the same rate on the
corresponding day of each succeeding month until paid. The amounts
payable pursuant to this section shall be computed monthly on each
unpaid obligation and shall include any unpaid charges previously
computed pursuant to this section. The late charges shall accrue to the
administrative assessment fund. For the purpose of this section, any
obligation that was determined at a date later than prescribed by the
order because of a handler's failure to submit a report to the market
administrator when due shall be considered to have been payable by the
date it would have been due if the report had been filed when due.

Subpart I--Administrative Assessment and Marketing Service
Deduction

Sec. 1000.85 Assessment for order administration.

On or before the payment receipt date specified under Sec. ____.71
of each Federal milk order in 7 CFR, chapter X, each handler shall pay
to the market administrator its pro rata share of the expense of
administration of the order at a rate specified by the market
administrator that is no more than 5 cents per hundredweight with
respect to:
(a) Receipts of producer milk (including the handler's own
production) other than such receipts by a handler described in
Sec. 1000.9(c) that were delivered to pool plants of other handlers;
(b) Receipts from a handler described in Sec. 1000.9(c);
(c) Receipts of concentrated fluid milk products from unregulated
supply plants and receipts of nonfluid milk products assigned to Class
I use pursuant to Sec. 1000.43(d) and other source milk allocated to
Class I pursuant to Sec. 1000.44(a)(3) and (8) and the corresponding
steps of Sec. 1000.44(b), except other source milk that is excluded
from the computations pursuant to Sec. ____.60(d) and (e) of Parts
1005, 1006, and 1007 or Sec. ____.60(h) and (i) of Parts 1001, 1030,
1032, 1033, 1124, 1126, 1131, and 1134 in 7 CFR, chapter X; and
(d) Route disposition in the marketing area from a partially
regulated distributing plant that exceeds the skim milk and butterfat
subtracted pursuant to Sec. 1000.76(a)(1)(i)and (ii).

Sec. 1000.86 Deduction for marketing services.

(a) Except as provided in paragraph (b) of this section, each
handler in making payments to producers for milk (other than milk of
such handler's own production) pursuant to Sec. ____.73 of each Federal
milk order in 7 CFR, chapter X, shall deduct an amount specified by the
market administrator that is no more than 7 cents per hundredweight and
shall pay the amount deducted to the market administrator not later
than the payment receipt date specified under Sec. ____.71 of each
Federal milk order in 7 CFR, chapter X. The money shall be used by the
market administrator to verify or establish weights, samples and tests
of producer milk and provide market information for producers who are
not receiving such services from a cooperative association. The
services shall be performed in whole or in part by the market
administrator or an agent engaged by and responsible to the market
administrator;
(b) In the case of producers for whom the market administrator has
determined that a cooperative association is actually performing the
services set forth in paragraph (a) of this section, each handler shall
make deductions from the payments to be made to producers as may be
authorized by the membership agreement or marketing contract between
the cooperative association and the producers. On or before the 15th
day after the end of the month, such deductions shall be paid to the
cooperative association rendering the services accompanied by a
statement showing the amount of any deductions and the amount of milk
for which the deduction was computed for each producer. These
deductions shall be made in lieu of the deduction specified in
paragraph (a) of this section.

Subpart J--Miscellaneous Provisions

Sec. 1000.90 Dates.

If a date required for a report, payment, or announcement contained
in a Federal milk order in 7 CFR, chapter X falls on a Saturday,
Sunday, or national holiday, such report, payment,

[[Page 5023]]

or announcement will be on the next day that the market administrator's
office is open for public business.

Secs. 1000.91--1000.92 [Reserved]

Sec. 1000.93 OMB control number assigned pursuant to the Paperwork
Reduction Act.

The information collection requirements contained in this
regulation have been approved by the Office of Management and Budget
(OMB) under the provisions of Title 44 U.S.C. chapter 35 and have been
assigned OMB control number 0581-0032.

PART 1001--MILK IN THE NORTHEAST MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1001.1 General Provisions.

Definitions

1001.2 Northeast marketing area.
1001.3 Route disposition.
1001.4 Plant.
1001.5 Distributing plant.
1001.6 Supply plant.
1001.7 Pool plant.
1001.8 Nonpool plant.
1001.9 Handler.
1001.10 Producer-handler.
1001.11 [Reserved]
1001.12 Producer.
1001.13 Producer milk.
1001.14 Other source milk.
1001.15 Fluid milk product.
1001.16 Fluid cream product.
1001.17 [Reserved]
1001.18 Cooperative association.
1001.19 Commercial food processing establishment.

Handler Reports

1001.30 Reports of receipts and utilization.
1001.31 Payroll reports.
1001.32 Other reports.

Classification of Milk

1001.40 Classes of utilization.
1001.41 [Reserved]
1001.42 Classification of transfers and diversions.
1001.43 General classification rules.
1001.44 Classification of producer milk.
1001.45 Market administrator's reports and announcements concerning
classification.

Class Prices

1001.50 Class prices and component prices.
1001.51 Class I differential and price.
1001.52 Adjusted Class I differentials.
1001.53 Announcement of class prices and component prices.
1001.54 Equivalent price.

Producer Price Differential

1001.60 Handler's value of milk.
1001.61 Computation of producer price differential.
1001.62 Announcement of producer prices.

Payments for Milk

1001.70 Producer-settlement fund.
1001.71 Payments to the producer-settlement fund.
1001.72 Payments from the producer-settlement fund.
1001.73 Payments to producers and to cooperative associations.
1001.74 [Reserved]
1001.75 Plant location adjustments for producer milk and nonpool
milk.
1001.76 Payments by a handler operating a partially regulated
distributing plant.
1001.77 Adjustment of accounts.
1001.78 Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1001.85 Assessment for order administration.
1001.86 Deduction for marketing services.

Authority: 7 U.S.C. 601-674.

Subpart--Order Regulating Handling

General Provisions

Sec. 1001.1 General provisions.

The terms, definitions, and provisions in part 1000 of this chapter
apply to and are hereby made a part of this order.

Definitions

Sec. 1001.2 Northeast marketing area.

The marketing area means all the territory within the bounds of the
following states and political subdivisions, including all piers, docks
and wharves connected therewith and all craft moored thereat, and all
territory occupied by government (municipal, State or Federal)
reservations, installations, institutions, or other similar
establishments if any part thereof is within any of the listed states
or political subdivisions:

Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey,
Rhode Island, Vermont and District of Columbia

All of the States of Connecticut, Delaware, Massachusetts, New
Hampshire, New Jersey, Rhode Island, Vermont and the District of
Columbia.

Maryland Counties and City

All of the State of Maryland except the counties of Allegany and
Garrett.

New York Counties and Cities

All counties within the State of New York except Chautauqua,
Allegany (except the township Hume) and Cattaraugus (except the
township Yorkshire).

Pennsylvania Counties

Adams, Bucks, Chester, Cumberland, Dauphin, Delaware, Franklin,
Fulton, Juniata, Lancaster, Lebanon, Montgomery, Perry,
Philadelphia, and York.

Virginia Counties and Cities

Counties of Arlington, Fairfax, Loudoun, and Prince William, and
cities of Alexandria, Fairfax, Falls Church, Manassas, and Manassas
Park.

Sec. 1001.3 Route disposition.

See Sec. 1000.3 of this chapter.

Sec. 1001.4 Plant.

(a) Except as provided in paragraph (b) of this section, plant
means the land, buildings, facilities, and equipment constituting a
single operating unit or establishment at which milk or milk products
are received, processed, or packaged, including a facility described in
paragraph (b)(2) of this section if the facility receives the milk of
more than one dairy farmer.
(b) Plant shall not include:
(1) A separate building without stationary storage tanks that is
used only as a reload point for transferring bulk milk from one tank
truck to another or a separate building used only as a distribution
point for storing packaged fluid milk products in transit for route
disposition; or
(2) An on-farm facility operated as part of a single dairy farm
entity for the separation of cream and skim milk; or
(3) Bulk reload points where milk is transferred from one tank
truck to another while en route from a dairy farmer's farms to a plant.
If stationary storage tanks are used for transferring milk at the
premises, the operator of the facility shall make an advance written
request to the market administrator that the facility shall be treated
as a reload point. The cooling of milk, collection of samples, and
washing and sanitizing of tank trucks at the premises shall not
disqualify it as a bulk reload point.

Sec. 1001.5 Distributing plant.

See Sec. 1000.5 of this chapter.

Sec. 1001.6 Supply plant.

See Sec. 1000.6 of this chapter.

Sec. 1001.7 Pool plant.

Pool plant means a plant, unit of plants, or a system of plants as
specified in paragraphs (a) through (f) of this section. The pooling
standards described in paragraphs (c) and (f) of this section are
subject to modification pursuant to paragraph (g) of this section:
(a) A distributing plant from which during the month total route
disposition is equal to 25 percent or more of the total quantity of
bulk fluid milk products physically received at the plant; and route
disposition in the marketing area is at least 25 percent of total route
disposition. For purposes of this section, packaged fluid milk products
that are transferred to a distributing plant shall be considered as
route disposition from the transferring plant, rather than the
receiving plant,

[[Page 5024]]

for the single purpose of qualifying the transferring plant as a pool
distributing plant.
(b) A distributing plant located in the marketing area at which the
majority of milk received is processed into aseptically packaged fluid
milk products unless there are no sales from the plant into any
marketing area and the plant operator in writing requests nonpool plant
status for the plant for the month.
(c) A supply plant from which fluid milk products are transferred
or diverted to plants described in paragraph (a) or (b) of this section
subject to the following additional conditions:
(1) During the months of August through December, such shipments
must equal not less than 10 percent of the total quantity of bulk milk
that is physically received at the plant during the month;
(2) During the months of September through November, such shipments
must equal not less than 20 percent of the total quantity of bulk milk
that is physically received at the plant during the month;
(3) A plant which meets the shipping requirements of this paragraph
during each of the months of August through December shall be a pool
plant during the following months of January through July unless the
milk received at the plant fails to meet the requirements of a duly
constituted regulatory agency, the plant fails to meet a shipping
requirement instituted pursuant to paragraph (f) of this section, or
the plant operator requests nonpool status for the plant. The shipping
requirement for any plant which has not met the requirements of
paragraphs (c)(1) and (c)(2) of this section must equal not less than
10 percent of the total quantity of bulk milk that is physically
received at the plant during each of the months of January through July
in order for the plant to be a pool plant in each of those months; and
(4) If milk is delivered directly from producers' farms that are
located outside of the states included in the marketing area or outside
Maine or West Virginia, such producers must be grouped by state into
units and each such unit must independently meet the shipping
requirements of this paragraph.
(d) [Reserved]
(e) Two or more plants operated by the same handler and located in
the marketing area qualified for pool status as a unit by meeting the
total and in-area route distribution requirements specified in
paragraph (a) of this section and subject to the following additional
requirements:
(1) At least one of the plants in the unit qualifies as a pool
plant pursuant to paragraph (a) of this section;
(2) Other plants in the unit must process only Class I or Class II
products and must be located in a pricing zone providing the same or a
lower Class I price than the price applicable at the distributing plant
included in the unit; and
(3) A written request to form a unit, or to add or remove plants
from a unit, or to cancel a unit, must be filed with the market
administrator prior to the first day of the month for which unit
formation it is to be effective.
(f) Two or more supply plants operated by the same handler, or by
one or more cooperative associations, qualified for pooling as a system
of supply plants by meeting the applicable percentage requirements of
paragraph (c) of this section in the same manner as a single plant and
subject to the following additional requirements:
(1) A written notification to the market administrator listing the
plants to be included in the system prior to the first day of August
that a system of supply plants will be effective for the period of
September 1 through August 31 of the following year. The listed plants
included in the system shall also be in the sequence in which they
shall qualify for pool plant status based on the minimum deliveries
required. If the deliveries made are insufficient to qualify the entire
system for pooling, the last listed plant shall be excluded from the
system, followed by the plant next-to-last on the list, and continuing
in this sequence until remaining listed plants have met the minimum
shipping requirements; and
(2) Each plant that qualifies as a pool plant within a system shall
continue each month as a plant in the system through the following
August unless the plant subsequently fails to qualify for pooling, the
handler submits a written notification to the market administrator
prior to the first day of the month that the plant be deleted from the
system, or that the system be discontinued. Any plant that has been so
deleted from the system, or that has failed to qualify as a pool plant
in any month, will not be part of the system for the remaining months
through August. No plant may be added in any subsequent month through
the following August to a system that qualifies in September.
(g) The applicable shipping percentages of paragraphs (c) and (f)
of this section may be increased or decreased by the market
administrator if the market administrator finds that such adjustment is
necessary to encourage needed shipments or to prevent uneconomic
shipments. Before making such a finding, the market administrator shall
investigate the need for adjustment either on the market
administrator's own initiative or at the request of interested parties.
If the investigation shows that an adjustment of the shipping
percentages might be appropriate, the market administrator shall issue
a notice stating that an adjustment is being considered and invite
data, views and arguments. If the market administrator determines that
an adjustment to the shipping percentages is necessary, the market
administrator shall notify the industry within one day of the effective
date of such adjustment.
(h) The term pool plant shall not apply to the following plants:
(1) A producer-handler plant;
(2) An exempt plant as defined in Sec. 1000.8(e);
(3) A plant qualified pursuant to paragraph (a) of this section
that is located within the marketing area if the plant also meets the
pooling requirements of another Federal order and more than 50 percent
of its route distribution has been in such other Federal order
marketing area for three consecutive months;
(4) A plant qualified pursuant to paragraph (a) of this section
which is not located within any Federal order marketing area that meets
the pooling requirements of another Federal order and has had greater
sales in such other Federal order's marketing area for 3 consecutive
months;
(5) A plant qualified pursuant to paragraph (a) of this section
that is located in another Federal order marketing area if the plant
meets the pooling requirements of such other Federal order and does not
have a majority of its route distribution in this marketing area for 3
consecutive months or if the plant is required to be regulated under
such other Federal order without regard to its route disposition in any
other Federal order marketing area;
(6) A plant qualified pursuant to paragraph (c) of this section
which also meets the pooling requirements of another Federal order and
from which greater qualifying shipments are made to plants regulated
under the other Federal order than are made to plants regulated under
this order, or the plant has automatic pooling status under the other
Federal order; and
(7) That portion of a pool plant designated as a ``nonpool plant''
that is physically separate and operated separately from the pool
portion of such plant. The designation of a portion of a regulated
plant as a nonpool plant must

[[Page 5025]]

be requested in writing by the handler and must be approved by the
market administrator.

Sec. 1001.8 Nonpool plant.

See Sec. 1000.8 of this chapter.

Sec. 1001.9 Handler.

See Sec. 1000.9 of this chapter.

Sec. 1001.10 Producer-handler.

Except as provided in paragraph (g) of this section, producer-
handler means a person who:
(a) Operates a dairy farm and a distributing plant from which there
is monthly route disposition in excess of 150,000 pounds during the
month;
(b) Receives no fluid milk products from sources other than own
farm production, pool handlers, and plants fully regulated under
another Federal order.
(c) Receives at its plant or acquires for route disposition no more
than 150,000 pounds of fluid milk products from handlers fully
regulated under any Federal order. This limitation shall not apply if
the producer-handler's own farm production is less than 150,000 pounds
during the month.
(d) Disposes of no other source milk as Class I milk except by
increasing the nonfat milk solids content of the fluid milk products
received from own-farm production or pool handlers;
(e) Disposes of no fluid milk products using the distribution
system of another handler except for direct deliveries to retail
outlets or to a pool handler's plant;
(f) Provides proof satisfactory to the market administrator that
the care and management of the dairy animals and other resources
necessary to produce all Class I milk handled (excluding receipts from
handlers fully regulated under any Federal order) and the processing,
packaging, and distribution operations are the producer-handler's own
enterprise and at its own risk; and
(g) Producer-handler shall not include any producer who also
operates a distributing plant if the producer-handler so requests that
the two be operated as separate entities with the distributing plant
regulated under Sec. 1001.7(a) and the farm operated as a producer
under Sec. 1001.12.

Sec. 1001.11 [Reserved]

Sec. 1001.12 Producer.

(a) Except as provided in paragraph (b) of this section, producer
means any person who produces milk approved by a duly constituted
regulatory agency for fluid consumption as Grade A milk and whose milk
(or components of milk) is:
(1) Received at a pool plant directly from the producer or diverted
by the plant operator in accordance with Sec. 1001.13; or
(2) Received by a handler described in Sec. 1000.9(c).
(b) Producer shall not include:
(1) A producer-handler as defined in any Federal order;
(2) A dairy farmer whose milk is received at an exempt plant,
excluding producer milk diverted to the exempt plant pursuant to
Sec. 1001.13(d);
(3) A dairy farmer whose milk is received by diversion at a pool
plant from a handler regulated under another Federal order if the other
Federal order designates the dairy farmer as a producer under that
order and that milk is allocated by request to a utilization other than
Class I;
(4) A dairy farmer whose milk is reported as diverted to a plant
fully regulated under another Federal order with respect to that
portion of the milk so diverted that is assigned to Class I under the
provisions of such other order; and
(5) For any month of December through June, any dairy farmer whose
milk is received at a pool plant or by a cooperative association
handler described in Sec. 1000.9(c) if the pool plant operator or the
cooperative association caused milk from the same farm to be delivered
to any plant as other than producer milk, as defined under this order
or any other Federal milk order, during the same month, either of the 2
preceding months, or during any of the preceding months of July through
November; and
(6) For any month of July through November, any dairy farmer whose
milk is received at a pool plant or by a cooperative association
handler described in Sec. 1000.9(c) if the pool plant operator or the
cooperative association caused milk from the same farm to be delivered
to any plant as other than producer milk, as defined under this order
or any other Federal milk order, during the same month.

Sec. 1001.13 Producer milk.

Sec. 1001.14 Other source milk.

See Sec. 1000.14 of this chapter.

Sec. 1001.15 Fluid milk product.

See Sec. 1000.15 of this chapter.

1001.16 Fluid cream product.

See Sec. 1000.16 of this chapter.

Sec. 1001.17 [Reserved]

Sec. 1001.18 Cooperative association.

See Sec. 1000.18 of this chapter.

Sec. 1001.19 Commercial food processing establishment.

See Sec. 1000.19 of this chapter.

[[Page 5026]]

Handler Reports

Sec. 1001.30 Reports of receipts and utilization.

Each handler shall report monthly so that the market
administrator's office receives the report on or before the 9th day
after the end of the month, in the detail and on prescribed forms, as
follows:
(a) Each pool plant operator and each handler described in
Sec. 1000.9(c), shall report for each of its operations the following
information:
(1) Product pounds, pounds of butterfat, pounds of protein, pounds
of nonfat solids other than protein (other solids), and the value of
the somatic cell adjustment contained in or represented by:
(i) Receipts of producer milk, including producer milk diverted by
the reporting handler; and
(ii) Receipts of milk from handlers described in Sec. 1000.9(c);
(2) Product pounds and pounds of butterfat contained in:
(i) Receipts of fluid milk products and bulk fluid cream products
from other pool plants;
(ii) Receipts of other source milk; and
(iii) Inventories at the beginning and end of the month of fluid
milk products and bulk fluid cream products; and
(3) The utilization or disposition of all milk and milk products
required to be reported pursuant to this paragraph; and
(4) Such other information with respect to the receipts and
utilization of skim milk, butterfat, milk protein, other nonfat solids,
and somatic cell information as the market administrator may prescribe.
(b) Each handler operating a partially regulated distributing plant
shall report with respect to such plant in the same manner as
prescribed for reports required by paragraph (a) of this section.
Receipts of milk that would have been producer milk if the plant had
been fully regulated shall be reported in lieu of producer milk. The
report shall show also the quantity of any reconstituted skim milk in
route disposition in the marketing area.
(c) Each handler not specified in paragraphs (a) or (b) of this
section shall report with respect to its receipts and utilization of
milk and milk products in such manner as the market administrator may
prescribe.

Sec. 1001.31 Payroll reports.

(a) On or before the 22nd day after the end of each month, each
handler described in Sec. 1000.9(a) and (c) shall report to the market
administrator its producer payroll for the month, in detail prescribed
by the market administrator, showing for each producer the information
specified in Sec. 1001.73(e);
(b) Each handler operating a partially regulated distributing plant
who elects to make payment pursuant to Sec. 1000.76(b) shall report for
each dairy farmer who would have been a producer if the plant had been
fully regulated in the same manner as prescribed for reports required
by paragraph (a) of this section.

Sec. 1001.32 Other reports.

In addition to the reports required pursuant to Secs. 1001.30 and
1001.31, each handler shall report any information the market
administrator deems necessary to verify or establish each handler's
obligation under the order.

Classification of Milk

Sec. 1001.40 Classes of utilization.

See Sec. 1000.40 of this chapter.

Sec. 1001.41 [Reserved]

Sec. 1001.42 Classification of transfers and diversions.

See Sec. 1000.42 of this chapter.

Sec. 1001.43 General classification rules.

See Sec. 1000.43 of this chapter.

Sec. 1001.44 Classification of producer milk.

See Sec. 1000.44 of this chapter.

Sec. 1001.45 Market administrator's reports and announcements
concerning classification.

See Sec. 1000.45 of this chapter.

Class Prices

Sec. 1001.50 Class prices and component prices.

See Sec. 1000.50 of this chapter.

Sec. 1001.51 Class I differential and price.

The Class I differential shall be the differential established for
Suffolk County, Massachusetts, which is reported in Sec. 1000.52. The
Class I price shall be the price computed pursuant to Sec. 1000.50(a)
for Suffolk County, Massachusetts.

Sec. 1001.52 Adjusted Class I differentials.

See Sec. 1000.52 of this chapter.

Sec. 1001.53 Announcement of class and component prices.

See Sec. 1000.53 of this chapter.

Sec. 1001.54 Equivalent price.

See Sec. 1000.54 of this chapter.

Producer Price Differential

Sec. 1001.60 Handler's value of milk.

[[Page 5027]]

Sec. 1001.30(a)(1) by the percentage of the total producer milk
allocated to Class II, Class III, and Class IV pursuant to
Sec. 1000.44(c).
(f) Add the amounts obtained from multiplying the pounds of skim
milk and butterfat overage assigned to each class pursuant to
Sec. 1000.43(b)(2) by the respective class skim milk prices and the
respective class butterfat prices (Class I butterfat price for Class I
and the butterfat price for all other classes) applicable at the
location of the pool plant;
(g) Add the amount obtained from multiplying the difference between
the Class III price for the preceding month and the Class I price
applicable at the location of the pool plant or the Class II price, as
the case may be, for the current month by the hundredweight of skim
milk and butterfat subtracted from Class I and Class II pursuant to
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
(h) Add the amount obtained from multiplying the difference between
the Class I price applicable at the location of the pool plant and the
Class III price by the hundredweight of skim milk and butterfat
assigned to Class I pursuant to Sec. 1000.43(d) and the hundredweight
of skim milk and butterfat subtracted from Class I pursuant to
Sec. 1000.44(a)(3)(i) through (iii) and the corresponding step of
Sec. 1000.44(b), excluding receipts of bulk fluid cream products from a
plant regulated under other Federal orders and bulk concentrated fluid
milk products from pool plants, plants regulated under other Federal
orders, and unregulated supply plant;
(i) Add the amount obtained from multiplying the difference between
the Class I price and the Class III price applicable at the location of
the nearest unregulated supply plants from which an equivalent volume
was received by the pounds of skim milk and butterfat in receipts of
concentrated fluid milk products assigned to Class I pursuant to
Secs. 1000.43(d) and 1000.44(a)(3)(i) and the pounds of skim milk and
butterfat subtracted from Class I pursuant to Sec. 1000.44(a)(8) and
the corresponding step of Sec. 1000.44(b), excluding such skim milk and
butterfat in receipts of fluid milk products from an unregulated supply
plant to the extent that an equivalent amount of skim milk or butterfat
disposed of to such plant by handlers fully regulated under any Federal
milk order is classified and priced as Class I milk and is not used as
an offset for any other payment obligation under any order;
(j) Subtract, for reconstituted milk made from receipts of nonfluid
milk products, an amount computed by multiplying $1.00 (but not more
than the difference between the Class I price applicable at the
location of the pool plant and the Class IV price) by the hundredweight
of skim milk and butterfat contained in receipts of nonfluid milk
products that are allocated to Class I use pursuant to Sec. 1000.43(d);
and
(k) Exclude, for pricing purposes under this section, receipts of
nonfluid milk products that are distributed as labeled reconstituted
milk for which payments are made to the producer-settlement fund of
another Federal order under Sec. 1000.76(a)(5) or (c).

Sec. 1001.61 Computation of producer price differential.

For each month the market administrator shall compute a producer
price differential per hundredweight. If the unreserved balance in the
producer-settlement fund to be included in the computation is less than
2 cents per hundredweight of producer milk on all reports, the report
of any handler who has not made payments required pursuant to
Sec. 1001.71 for the preceding month shall not be included in the
computation of the producer price differential. The report of such
handler shall not be included in the computation for succeeding months
until the handler has made full payment of outstanding monthly
obligations. Subject to the aforementioned conditions, the market
administrator shall compute the producer price differential in the
following manner:
(a) Combine into one total the values computed pursuant to
Sec. 1001.60 for all handlers required to file reports prescribed in
Sec. 1001.30;
(b) Subtract the total of the values obtained by multiplying each
handler's total pounds of protein, other solids, and butterfat
contained in the milk for which an obligation was computed pursuant to
Sec. 1001.60 by the protein price, other solids price, and the
butterfat price, respectively, and the total value of the somatic cell
adjustment pursuant to Sec. 1001.60(e);
(c) Add an amount equal to the sum of the location adjustments
computed pursuant to Sec. 1001.75;
(d) Add an amount equal to not less than one-half of the
unobligated balance in the producer-settlement fund;
(e) Divide the resulting amount by the sum of the following for all
handlers included in these computations:
(1) The total hundredweight of producer milk; and
(2) The total hundredweight for which a value is computed pursuant
to Sec. 1001.60(i); and
(f) Subtract not less than 4 cents nor more than 5 cents from the
price computed pursuant to paragraph (e) of this section. The result,
rounded to the nearest cent, shall be known as the producer price
differential for the month.

Sec. 1001.62 Announcement of producer prices.

On or before the 13th day after the end of the month, the market
administrator shall announce the following prices and information:
(a) The producer price differential;
(b) The protein price;
(c) The other solids price;
(d) The butterfat price;
(e) The somatic cell adjustment rate;
(f) The average butterfat, nonfat solids, protein, and other solids
content of producer milk; and
(g) The statistical uniform price for milk containing 3.5 percent
butterfat.

Payments for Milk

Sec. 1001.70 Producer-settlement fund.

See Sec. 1000.70 of this chapter.

Sec. 1001.71 Payments to the producer-settlement fund.

The payments to the producer-settlement fund specified in
Sec. 1000.71 are due no later than the 15th day after the end of the
month.

Sec. 1001.72 Payments from the producer-settlement fund.

See Sec. 1000.72 of this chapter.

Sec. 1001.73 Payments to producers and to cooperative associations.

[[Page 5028]]

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

Sec. 1001.74 [Reserved]

Sec. 1001.75 Plant location adjustments for producer milk and nonpool
milk.

(a) The producer price differential for producer milk shall be
adjusted according to the location of the plant at which the milk was
physically received by subtracting from the price the amount by which
the Class I price specified in Sec. 1001.50 exceeds the Class I price
at the plant's location. If the Class I price at the plant location
exceeds the Class I price specified in Sec. 1001.50, the difference
shall be added to the producer price differential; and
(b) The producer price differential applicable for other source
milk shall be adjusted following the procedure specified in paragraph
(a) of this section, except that the adjusted producer price
differential shall not be less than zero.

Sec. 1001.76 Payments by a handler operating a partially regulated
distributing plant.

See Sec. 1000.76 of this chapter.

Sec. 1001.77 Adjustment of accounts.

See Sec. 1000.77 of this chapter.

Sec. 1001.78 Charges on overdue accounts.

See Sec. 1000.78 of this chapter.

[[Page 5029]]

Administrative Assessment and Marketing Service Deduction

Sec. 1001.85 Assessment for order administration.

See Sec. 1000.85 of this chapter.

Sec. 1001.86 Deduction for marketing services.

See Sec. 1000.86 of this chapter.

PART 1005--MILK IN THE APPALACHIAN MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1005.1 General provisions.

Definitions

1005.2 Appalachian marketing area.
1005.3 Route disposition.
1005.4 Plant.
1005.5 Distributing plant.
1005.6 Supply plant.
1005.7 Pool plant.
1005.8 Nonpool plant.
1005.9 Handler.
1005.10 Producer-handler.
1005.11 [Reserved]
1005.12 Producer.
1005.13 Producer milk.
1005.14 Other source milk.
1005.15 Fluid milk product.
1005.16 Fluid cream product.
1005.17 [Reserved]
1005.18 Cooperative association.
1005.19 Commercial food processing establishment.

Handler Reports

1005.30 Reports of receipts and utilization.
1005.31 Payroll reports.
1005.32 Other reports.

Classification of Milk

1005.40 Classes of utilization.
1005.41 [Reserved]
1005.42 Classification of transfers and diversions.
1005.43 General classification rules.
1005.44 Classification of producer milk.
1005.45 Market administrator's reports and announcements concerning
classification.

Class Prices

1005.50 Class prices, component prices, Class I differential and
price.
1005.51 [Reserved]
1005.52 Adjusted Class I differentials.
1005.53 Announcement of class prices and component prices.
1005.54 Equivalent price.

Uniform Prices

1005.60 Handler's value of milk.
1005.61 Computation of uniform price, uniform butterfat price and
uniform skim milk price.
1005.62 Announcement of uniform price, uniform butterfat price and
uniform skim milk price.

Payments for Milk

1005.70 Producer-settlement fund.
1005.71 Payments to the producer-settlement fund.
1005.72 Payments from the producer-settlement fund.
1005.73 Payments to producers and to cooperative associations.
1005.74 [Reserved]
1005.75 Plant location adjustments for producer milk and nonpool
milk.
1005.76 Payments by a handler operating a partially regulated
distributing plant.
1005.77 Adjustment of accounts.
1005.78 Charges on overdue accounts.

Marketwide Service Payments

1005.80 Transportation credit balancing fund.
1005.81 Payments to the transportation credit balancing fund.
1005.82 Payments from the transportation credit balancing fund.

Administrative Assessment and Marketing Service Deduction

1005.85 Assessment for order administration.
1005.86 Deduction for marketing services.

Authority: 7 U.S.C. 601-674.

Subpart--Order Regulating Handling

General Provisions

Sec. 1005.1 General provisions.

The terms, definitions, and provisions in part 1000 of this chapter
apply to and are hereby made a part of this order.

Definitions

Sec. 1005.2 Appalachian marketing area.

Georgia Counties

Catoosa, Chattooga, Dade, Fannin, Murray, Walker, and Whitfield.

Indiana Counties

Clark, Crawford, Daviess, Dubois, Floyd, Gibson, Greene,
Harrison, Knox, Martin, Orange, Perry, Pike, Posey, Scott, Spencer,
Sullivan, Vanderburgh, Warrick, and Washington.

Kentucky Counties

Adair, Anderson, Bath, Bell, Bourbon, Boyle, Breathitt,
Breckinridge, Bullitt, Butler, Carroll, Carter, Casey, Clark, Clay,
Clinton, Cumberland, Daviess, Edmonson, Elliott, Estill, Fayette,
Fleming, Franklin, Gallatin, Garrard, Grayson, Green, Hancock,
Hardin, Harlan, Hart, Henderson, Henry, Hopkins, Jackson, Jefferson,
Jessamine, Knott, Knox, Larue, Laurel, Lee, Leslie, Letcher,
Lincoln, Madison, Marion, McCreary, McLean, Meade, Menifee, Mercer,
Montgomery, Morgan, Muhlenberg, Nelson, Nicholas, Ohio, Oldham,
Owen, Owsley, Perry, Powell, Pulaski, Rockcastle, Rowan, Russell,
Scott, Shelby, Spencer, Taylor, Trimble, Union, Washington, Wayne,
Webster, Whitley, Wolfe, and Woodford.

North Carolina and South Carolina

All of the States of North Carolina and South Carolina.

Tennessee Counties

Anderson, Blount, Bradley, Campbell, Carter, Claiborne, Cocke,
Cumberland, Grainger, Greene, Hamblen, Hamilton, Hancock, Hawkins,
Jefferson, Johnson, Knox, Loudon, Marion, McMinn, Meigs, Monroe,
Morgan, Polk, Rhea, Roane, Scott, Sequatchie, Sevier, Sullivan,
Unicoi, Union, and Washington.

Virginia Counties and Cities

Buchanan, Dickenson, Lee, Russell, Scott, Tazewell, Washington,
and Wise, and cities of Bristol and Norton.

West Virginia Counties

McDowell and Mercer.

Sec. 1005.3 Route disposition.

See Sec. 1000.3 of this chapter.

Sec. 1005.4 Plant.

See Sec. 1000.4 of this chapter.

Sec. 1005.5 Distributing plant.

See Sec. 1000.5 of this chapter.

Sec. 1005.6 Supply plant.

See Sec. 1000.6 of this chapter.

Sec. 1005.7 Pool plant.

[[Page 5030]]

milk products. If the plant had no route disposition in the marketing
area during the month, the plant operator may request nonpool status
for the plant.
(c) A supply plant from which 50 percent of the total quantity of
milk that is physically received during the month from dairy farmers
and handlers described in Sec. 1000.9(c) is transferred to pool
distributing plants.
(d) A plant located within the marketing area or in the State of
Virginia that is operated by a cooperative association if pool plant
status under this paragraph is requested for such plant by the
cooperative association and during the month at least 60 percent of the
producer milk of members of such cooperative association is delivered
directly from farms to pool distributing plants or is transferred to
such plants as a fluid milk product from the cooperative's plant.
(e) Two or more plants operated by the same handler and that are
located within the marketing area may qualify for pool status as a unit
by meeting the total and in-area route disposition requirements
specified in paragraph (a) of this section and the following additional
requirements:
(1) At least one of the plants in the unit must qualify as a pool
plant pursuant to paragraph (a) of this section;
(2) Other plants in the unit must process only Class I or Class II
products and must be located in a pricing zone providing the same or a
lower Class I price than the price applicable at the distributing plant
included in the unit pursuant to paragraph (e)(1) of this section; and
(3) A written request to form a unit, or to add or remove plants
from a unit, must be filed with the market administrator prior to the
first day of the month for which it is to be effective.
(f) The applicable percentages in paragraphs (a), (c), and (d) of
this section may be increased or decreased up to 10 percentage points
by the market administrator if the market administrator finds that such
revision is necessary to assure orderly marketing and efficient
handling of milk in the marketing area. Before making such a finding,
the market administrator shall investigate the need for the revision
either on the market administrator's own initiative or at the request
of interested parties if the request is made in writing at least 15
days prior to the date for which the requested revision is desired
effective. If the investigation shows that a revision might be
appropriate, the market administrator shall issue a notice stating that
the revision is being considered and inviting written data, views, and
arguments. Any decision to revise an applicable percentage must be
issued in writing at least one day before the effective date.
(g) The term pool plant shall not apply to the following plants:
(1) A producer-handler plant;
(2) An exempt plant as defined in Sec. 1000.8(e);
(3) A plant qualified pursuant to paragraph (a) of this section
which is not located within any Federal order marketing area, meets the
pooling requirements of another Federal order, and has had greater
route disposition in such other Federal order marketing area for 3
consecutive months;
(4) A plant qualified pursuant to paragraph (a) of this section
which is located in another Federal order marketing area, meets the
pooling standards of the other Federal order, and has not had a
majority of its route disposition in this marketing area for 3
consecutive months or is locked into pool status under such other
Federal order without regard to its route disposition in any other
Federal order marketing area;
(5) A plant qualified pursuant to paragraph (c) of this section
which also meets the pooling requirements of another Federal order and
from which greater qualifying shipments are made to plants regulated
under such other order than are made to plants regulated under this
order, or such plant has automatic pooling status under such other
order; and
(6) That portion of a pool plant designated as a ``nonpool plant''
that is physically separate and operated separately from the pool
portion of such plant. The designation of a portion of a regulated
plant as a nonpool plant must be requested in writing by the handler
and must be approved by the market administrator.

Sec. 1005.8 Nonpool plant.

See Sec. 1000.8 of this chapter.

Sec. 1005.9 Handler.

See Sec. 1000.9 of this chapter.

Sec. 1005.10 Producer-handler.

Producer-handler means a person who:
(a) Operates a dairy farm and a distributing plant from which there
is monthly route disposition in excess of 150,000 pounds per month,
unless the person requests that the two be operated as separate
entities with the distributing plant regulated under Sec. 1005.7(a) and
the farm operated as a producer under Sec. 1005.12;
(b) Receives no fluid milk products, and acquires no fluid milk
products for route disposition, from sources other than own farm
production;
(c) Disposes of no other source milk as Class I milk except by
increasing the nonfat milk solids content of the fluid milk products
received from own farm production;
(d) Disposes of no fluid milk products using the distribution
system of another handler; and
(e) Provides proof satisfactory to the market administrator that
the care and management of the dairy animals and other resources
necessary to produce all Class I milk handled, and the processing,
packaging, and distribution operations, are the producer-handler's own
enterprise and are operated at the producer-handler's own risk.

Sec. 1005.11 [Reserved]

Sec. 1005.12 Producer.

Sec. 1005.13 Producer milk.

[[Page 5031]]

which is not received at a plant until the following month shall be
considered as having been received by the handler during the month in
which it is picked up at the producer's farm. All milk received
pursuant to this paragraph shall be priced at the location of the plant
where it is first physically received;
(b) Received by a handler described in Sec. 1000.9(c) in excess of
the quantity delivered to pool plants;
(c) Diverted by a pool plant operator to another pool plant. Milk
so diverted shall be priced at the location of the plant to which
diverted; or
(d) Diverted by the operator of a pool plant or a handler described
in Sec. 1000.9(c) to a nonpool plant, subject to the following
conditions:
(1) In any month of July through December, not less than 6 days'
production of the producer whose milk is diverted is physically
received at a pool plant during the month;
(2) In any month of January through June, not less than 2 days'
production of the producer whose milk is diverted is physically
received at a pool plant during the month;
(3) The total quantity of milk so diverted during the month by a
cooperative association shall not exceed 25 percent during the months
of July through November, January, and February, and 40 percent during
the months of December and March through June, of the producer milk
that the cooperative association caused to be delivered to, and
physically received at, pool plants during the month;
(4) The operator of a pool plant that is not a cooperative
association may divert any milk that is not under the control of a
cooperative association that diverts milk during the month pursuant to
paragraph (d) of this section. The total quantity of milk so diverted
during the month shall not exceed 25 percent during the months of July
through November, January, and February, and 40 percent during the
months of December and March through June, of the producer milk
physically received at such plant (or such unit of plants in the case
of plants that pool as a unit pursuant to Sec. 1005.7(d)) during the
month, excluding the quantity of producer milk received from a handler
described in Sec. 1000.9(c);
(5) Any milk diverted in excess of the limits prescribed in
paragraphs (d)(3) and (4) of this section shall not be producer milk.
If the diverting handler or cooperative association fails to designate
the dairy farmers' deliveries that will not be producer milk, no milk
diverted by the handler or cooperative association shall be producer
milk;
(6) Diverted milk shall be priced at the location of the plant to
which diverted; and
(7) The delivery day requirements and the diversion percentages in
paragraphs (d)(1) through (4) of this section may be increased or
decreased by the market administrator if the market administrator finds
that such revision is necessary to assure orderly marketing and
efficient handling of milk in the marketing area. Before making such a
finding, the market administrator shall investigate the need for the
revision either on the market administrator's own initiative or at the
request of interested persons. If the investigation shows that a
revision might be appropriate, the market administrator shall issue a
notice stating that the revision is being considered and inviting
written data, views, and arguments. Any decision to revise an
applicable percentage must be issued in writing at least one day before
the effective date.

Sec. 1005.14 Other source milk.

See Sec. 1000.14 of this chapter.

Sec. 1005.15 Fluid milk product.

See Sec. 1000.15 of this chapter.

Sec. 1005.16 Fluid cream product.

See Sec. 1000.16 of this chapter.

Sec. 1005.17 [Reserved]

Sec. 1005.18 Cooperative association.

See Sec. 1000.18 of this chapter.

Sec. 1005.19 Commercial food processing establishment.

See Sec. 1000.19 of this chapter.

Handler Reports

Sec. 1005.30 Reports of receipts and utilization.

Each handler shall report monthly so that the market
administrator's office receives the report on or before the 7th day
after the end of the month, in the detail and on prescribed forms, as
follows:
(a) With respect to each of its pool plants, the quantities of skim
milk and butterfat contained in or represented by:
(1) Receipts of producer milk, including producer milk diverted by
the plant operator to other plants;
(2) Receipts of milk from handlers described in Sec. 1000.9(c);
(3) Receipts of fluid milk products and bulk fluid cream products
from other pool plants;
(4) Receipts of other source milk;
(5) Receipts of bulk milk from a plant regulated under another
Federal order, except Federal Order 1007, for which a transportation
credit is requested pursuant to Sec. 1005.82;
(6) Receipts of producer milk described in Sec. 1005.82(c)(2),
including the identity of the individual producers whose milk is
eligible for the transportation credit pursuant to that paragraph and
the date that such milk was received;
(7) For handlers submitting transportation credit requests,
transfers of bulk milk to nonpool plants, including the dates that such
milk was transferred;
(8) Inventories at the beginning and end of the month of fluid milk
products and bulk fluid cream products; and
(9) The utilization or disposition of all milk and milk products
required to be reported pursuant to this paragraph.
(b) Each handler operating a partially regulated distributing plant
shall report with respect to such plant in the same manner as
prescribed for reports required by paragraph (a) of this section.
Receipts of milk that would have been producer milk if the plant had
been fully regulated shall be reported in lieu of producer milk. The
report shall show also the quantity of any reconstituted skim milk in
route disposition in the marketing area.
(c) Each handler described in Sec. 1000.9(c) shall report:
(1) The quantities of all skim milk and butterfat contained in
receipts of milk from producers;
(2) The utilization or disposition of all such receipts; and
(3) With respect to milk for which a cooperative association is
requesting a transportation credit pursuant to Sec. 1005.82, all of the
information required in paragraph (a)(5), (a)(6), and (a)(7) of this
section.
(d) Each handler not specified in paragraphs (a) through (c) of
this section shall report with respect to its receipts and utilization
of milk and milk products in such manner as the market administrator
may prescribe.

Sec. 1005.31 Payroll reports.

(a) On or before the 20th day after the end of each month, each
handler described in Sec. 1000.9(a) and (c) shall report to the market
administrator its producer payroll for the month, in detail prescribed
by the market administrator, showing for each producer the information
specified in Sec. 1005.73(e).
(b) Each handler operating a partially regulated distributing plant
who elects to make payment pursuant to Sec. 1000.76(b) shall report for
each dairy farmer who would have been a producer if the plant had been
fully regulated in the same manner as prescribed for reports required
by paragraph (a) of this section.

[[Page 5032]]

Sec. 1005.32 Other reports.

(a) On or before the 20th day after the end of each month, each
handler described in Sec. 1000.9(a) and (c) shall report to the market
administrator any adjustments to transportation credit requests as
reported pursuant to Sec. 1005.30(a)(5), (6), and (7).
(b) In addition to the reports required pursuant to Secs. 1005.30,
31, and 32(a), each handler shall report any information the market
administrator deems necessary to verify or establish each handler's
obligation under the order.

Classification of Milk

Sec. 1005.40 Classes of utilization.

See Sec. 1000.40 of this chapter.

Sec. 1005.41 [Reserved]

Sec. 1005.42 Classification of transfers and diversions.

See Sec. 1000.42 of this chapter.

Sec. 1005.43 General classification rules.

See Sec. 1000.43 of this chapter.

Sec. 1005.44 Classification of producer milk.

See Sec. 1000.44 of this chapter.

Sec. 1005.45 Market administrator's reports and announcements
concerning classification.

See Sec. 1000.45 of this chapter.

Class Prices

Sec. 1005.50 Class prices, component prices, Class I differential and
price.

Class prices and component prices are described in Sec. 1000.50.
The Class I differential shall be the differential established for
Meklenburg County, North Carolina, which is reported in Sec. 1000.52.
The Class I price shall be the price computed pursuant to
Sec. 1000.50(a) for Meklenburg County, North Carolina.

Sec. 1005.51 [Reserved]

Sec. 1005.52 Adjusted Class I differentials.

See Sec. 1000.52 of this chapter.

Sec. 1005.53 Announcement of class prices and component prices.

See Sec. 1000.53 of this chapter.

Sec. 1005.54 Equivalent price.

See Sec. 1000.54 of this chapter.

Uniform Price

Sec. 1005.60 Handler's value of milk.

For the purpose of computing the uniform price, the market
administrator shall determine for each month the value of milk of each
handler with respect to each of the handler's pool plants and of each
handler described in Sec. 1000.9(c) as follows:
(a) Multiply the pounds of skim milk and butterfat in producer milk
that were classified in each class pursuant to Sec. 1000.44(c) by the
applicable skim milk and butterfat prices, and add the resulting
amounts;
(b) Add the amounts obtained from multiplying the pounds of skim
milk and butterfat overage assigned to each class pursuant to
Sec. 1000.43(b)(2) by the respective skim milk and butterfat prices
applicable at the location of the pool plant;
(c) Add the amount obtained from multiplying the difference between
the Class III price for the preceding month and the Class I price
applicable at the location of the pool plant or the Class II price, as
the case may be, for the current month by the hundredweight of skim
milk and butterfat subtracted from Class I and Class II pursuant to
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
(d) Add the amount obtained from multiplying the difference between
the Class I price applicable at the location of the pool plant and the
Class III price by the hundredweight of skim milk and butterfat
assigned to Class I pursuant to Sec. 1000.43(d) and the hundredweight
of skim milk and butterfat subtracted from Class I pursuant to
Sec. 1000.44(a)(3)(i) through (iii) and the corresponding step of
Sec. 1000.44(b), excluding receipts of bulk fluid cream products from a
plant regulated under other Federal orders and bulk concentrated fluid
milk products from pool plants, plants regulated under other Federal
orders, and unregulated supply plants;
(e) Add the amount obtained from multiplying the Class I price
applicable at the location of the nearest unregulated supply plants
from which an equivalent volume was received by the pounds of skim milk
and butterfat in receipts of concentrated fluid milk products assigned
to Class I pursuant to Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and
the pounds of skim milk and butterfat subtracted from Class I pursuant
to Sec. 1000.44(a)(8) and the corresponding step of Sec. 1000.44(b),
excluding such skim milk and butterfat in receipts of fluid milk
products from an unregulated supply plant to the extent that an
equivalent amount of skim milk or butterfat disposed of to such plant
by handlers fully regulated under any Federal milk order is classified
and priced as Class I milk and is not used as an offset for any other
payment obligation under any order;
(f) Subtract, for reconstituted milk made from receipts of nonfluid
milk products, an amount computed by multiplying $1.00 (but not more
than the difference between the Class I price applicable at the
location of the pool plant and the Class IV price) by the hundredweight
of skim milk and butterfat contained in receipts of nonfluid milk
products that are allocated to Class I use pursuant to Sec. 1000.43(e);
and
(g) Exclude, for pricing purposes under this section, receipts of
nonfluid milk products that are distributed as labeled reconstituted
milk for which payments are made to the producer-settlement fund of
another Federal order under Sec. 1000.76(a)(5) or (c).

Sec. 1005.61 Computation of uniform price, uniform butterfat price and
uniform skim milk price.

(a) Uniform price. For each month the market administrator shall
compute the uniform price per hundredweight. If the unreserved balance
in the producer-settlement fund to be included in the computation is
less than 2 cents per hundredweight of producer milk on all reports,
the report of any handler who has not made payments required pursuant
to Sec. 1005.71 for the preceding month shall not be included in the
computation of the uniform price. The report of such handler shall not
be included in the computation for succeeding months until the handler
has made full payment of outstanding monthly obligations. Subject to
the aforementioned conditions, the market administrator shall compute
the uniform price in the following manner:
(1) Combine into one total the values computed pursuant to
Sec. 1005.60 for all handlers required to file reports prescribed in
Sec. 1005.30;
(2) Add an amount equal to the sum of the location adjustments
computed pursuant to Sec. 1005.75;
(3) Add an amount equal to not less than one-half of the
unobligated balance in the producer-settlement fund;
(4) Add or subtract, as the case may be, to obtain an all-producer
milk test of 3.5 percent butterfat, the value of the required pounds of
butterfat times the uniform butterfat price computed in paragraph (b)
of this section;
(5) Divide the resulting amount by the sum of the following for all
handlers included in these computations:
(i) The total hundredweight of producer milk; and
(ii) The total hundredweight for which a value is computed pursuant
to Sec. 1005.60(f); and
(6) Subtract not less than 4 cents nor more than 5 cents from the
price computed pursuant to paragraph (e) of this section. The result,
rounded to the nearest cent, shall be known as the ``uniform price''
for the month.
(b) Uniform butterfat price. The uniform butterfat price per pound,

[[Page 5033]]

rounded to the nearest one-hundredth cent, shall be obtained by
multiplying the pounds of butterfat in producer milk allocated to each
class pursuant to Sec. 1000.44(b) by the respective class butterfat
prices (Class I butterfat price for Class I and the butterfat price for
all other classes) and dividing the sum of such values by the total
pounds of such butterfat.
(c) Uniform skim milk price. The uniform skim milk price per
hundredweight, rounded to the nearest cent, shall be the uniform price
for the month pursuant to pursuant to paragraph (a) of this section
less the uniform butterfat price for the month pursuant to paragraph
(b) of this section multiplied by 3.5 pounds of butterfat, with the
result divided by .965.

Sec. 1005.62 Announcement of uniform price, uniform butterfat price
and uniform skim milk price.

On or before the 11th day after the end of the month, the market
administrator shall announce the following prices and information:
(a) The uniform price pursuant to Sec. 1005.61 for such month;
(b) The uniform butterfat price pursuant to Sec. 1005.61(b) for
such month; and
(c) The uniform skim milk price pursuant to Sec. 1005.61(c) for
such month.

Payments for Milk

Sec. 1005.70 Producer-settlement fund.

See Sec. 1000.70 of this chapter.

Sec. 1005.71 Payments to the producer-settlement fund.

The payments to the producer-settlement fund specified in
Sec. 1000.71 are due no later than the 12th day after the end of the
month.

Sec. 1005.72 Payments from the producer-settlement fund.

See Sec. 1000.72 of this chapter.

Sec. 1005.73 Payments to producers and to cooperative associations.

(a) Each pool plant operator that is not paying a cooperative
association for producer milk shall pay each producer as follows:
(1) Partial payment. For each producer who has not discontinued
shipments as of the 23rd day of the month, payment shall be made so
that it is received by the producer on or before the 26th day of the
month for milk received during the first 15 days of the month at not
less than the 90 percent of the preceding month's uniform price,
adjusted for plant location pursuant to Sec. 1005.75 and proper
deductions authorized in writing by the producer;
(2) Final payment. For milk received during the month, payment
shall be made so that it is received by each producer one day after the
payment date required in Sec. 1000.72 an amount computed as follows:
(i) Multiply the hundredweight of producer milk received times the
uniform price for the month as adjusted pursuant to Sec. 1005.75;
(ii) Multiply the hundredweight of producer skim milk received
times the uniform skim milk price for the month;
(iii) Multiply the pounds of butterfat received times the uniform
butterfat price for the month;
(iv) Add the amounts computed in paragraph (a)(2)(i), (ii), and
(iii) of the section, and from that sum:
(A) Subtract the partial payment made pursuant to paragraph (a)(1)
of this section;
(B) Subtract the deduction for marketing services pursuant to
Sec. 1000.86;
(C) Add or subtract for errors made in previous payments to the
producer; and
(D) Subtract proper deductions authorized in writing by the
producer.
(b) One day before partial and final payments are due pursuant to
paragraph (a) of this section, each pool plant operator shall pay a
cooperative association for milk received as follows:
(1) Partial payment to a cooperative association. For bulk milk/
skimmed milk received during the first 15 days of the month from a
cooperative association in any capacity, except as the operator of a
pool plant, the payment shall be equal to the hundredweight of milk
received multiplied by 90 percent of the preceding month's uniform
price, adjusted for plant location pursuant to Sec. 1005.75;
(2) Partial payment to a cooperative association for milk
transferred from its pool plant. For bulk fluid milk products and bulk
fluid cream products received during the first 15 days of the month
from a cooperative association in its capacity as the operator of a
pool plant, the partial payment shall be at the pool plant operator's
estimated use value of the milk using the most recent class prices
available, adjusted for butterfat value and plant location;
(3) Final payment to a cooperative association for milk transferred
from its pool plant. For bulk fluid milk products and bulk fluid cream
products received during the month from a cooperative association in
its capacity as the operator of a pool plant, the final payment shall
be the classified value of such milk as determined by multiplying the
pounds of milk assigned to each class pursuant to Sec. 1000.44 by the
class prices for the month, adjusted for plant location and butterfat
value, and subtracting from this sum the partial payment made pursuant
to paragraph (b)(2) of this section.
(4) Final payment to a cooperative association for bulk milk
received directly from producers' farms. For bulk milk received from a
cooperative association during the month, including the milk of
producers who are not members of such association and who the market
administrator determines have authorized the cooperative association to
collect payment for their milk, the final payment for such milk shall
be an amount equal to the sum of the individual payments otherwise
payable for such milk pursuant to paragraph (a)(2) of this section.
(c) If a handler has not received full payment from the market
administrator pursuant to Sec. 1005.72 by the payment date specified in
paragraph (a) or (b) of this section, the handler may reduce payments
pursuant to paragraphs (a) and (b) of this section, but by not more
than the amount of the underpayment. The payments shall be completed on
the next scheduled payment date after receipt of the balance due from
the market administrator.
(d) If a handler claims that a required payment to a producer
cannot be made because the producer is deceased or cannot be located,
or because the cooperative association or its lawful successor or
assignee is no longer in existence, the payment shall be made to the
producer-settlement fund, and in the event that the handler
subsequently locates and pays the producer or a lawful claimant, or in
the event that the handler no longer exists and a lawful claim is later
established, the market administrator shall make the required payment
from the producer-settlement fund to the handler or to the lawful
claimant as the case may be.
(e) In making payments to producers pursuant to this section, each
pool plant operator shall furnish each producer, except a producer
whose milk was received from a handler described in Sec. 1000.9(a) or
(c), a supporting statement in such form that it may be retained by the
recipient which shall show:
(1) The name, address, Grade A identifier assigned by a duly
constituted regulatory agency, and the payroll number of the producer;
(2) The month and dates that milk was received from the producer,
including the daily and total pounds of milk received;
(3) The total pounds of butterfat in the producer's milk;

[[Page 5034]]

(4) The minimum rate at which payment to the producer is required
pursuant to this order;
(5) The rate used in making payment if the rate is other than the
applicable minimum rate;
(6) The amount, or rate per hundredweight, and nature of each
deduction claimed by the handler; and
(7) The net amount of payment to the producer or cooperative
association.

Sec. 1005.74 [Reserved]

Sec. 1005.75 Plant location adjustments for producer milk and nonpool
milk.

(a) The uniform price for producer milk shall be adjusted according
to the location of the plant at which the milk was physically received
by subtracting from the price the amount by which the Class I price
specified in Sec. 1005.50 exceeds the Class I price at the plant's
location. If the Class I price at the plant location exceeds the Class
I price specified in Sec. 1005.50, the difference shall be added to the
uniform price; and
(b) The uniform price applicable for other source milk shall be
adjusted following the procedure specified in paragraph (a) of this
section, except that the adjusted uniform price shall not be less than
the lowest announced class price.

Sec. 1005.76 Payments by a handler operating a partially regulated
distributing plant.

See Sec. 1000.76 of this chapter.

Sec. 1005.77 Adjustment of accounts.

See Sec. 1000.77 of this chapter.

Sec. 1005.78 Charges on overdue accounts.

See Sec. 1000.78 of this chapter.

Marketwide Service Payments

Sec. 1005.80 Transportation credit balancing fund.

The market administrator shall maintain a separate fund known as
the Transportation Credit Balancing Fund into which shall be deposited
the payments made by handlers pursuant to Sec. 1005.81 and out of which
shall be made the payments due handlers pursuant to Sec. 1005.82.
Payments due a handler shall be offset against payments due from the
handler.

Sec. 1005.81 Payments to the transportation credit balancing fund.

(a) On or before the 12th day after the end of the month, each
handler operating a pool plant and each handler specified in
Sec. 1000.9(a) and (c) shall pay to the market administrator a
transportation credit balancing fund assessment determined by
multiplying the pounds of Class I producer milk assigned pursuant to
Sec. 1005.44 by $0.065 per hundredweight or such lesser amount as the
market administrator deems necessary to maintain a balance in the fund
equal to the total transportation credits disbursed during the prior
June-January period. In the event that during any month of the June-
January period the fund balance is insufficient to cover the amount of
credits that are due, the assessment should be based upon the amount of
credits that would have been disbursed had the fund balance been
sufficient.
(b) The market administrator shall announce publicly on or before
the 5th day of the month the assessment pursuant to paragraph (a) of
this section for the following month.

Sec. 1005.82 Payments from the transportation credit balancing fund.

(a) Payments from the transportation credit balancing fund to
handlers and cooperative associations requesting transportation credits
shall be made as follows:
(1) On or before the 13th day after the end of each of the months
of July through December and any other month in which transportation
credits are in effect pursuant to paragraph (b) of this section, the
market administrator shall pay to each handler that received, and
reported pursuant to Sec. 1005.30(a)(5), bulk milk transferred from a
plant fully regulated under another Federal order as described in
paragraph (c)(1) of this section or that received, and reported
pursuant to Sec. 1005.30(a)(6), milk directly from producers' farms as
specified in paragraph (c)(2) of this section, a preliminary amount
determined pursuant to paragraph (d) of this section to the extent that
funds are available in the transportation credit balancing fund. If an
insufficient balance exists to pay all of the credits computed pursuant
to this section, the market administrator shall distribute the balance
available in the transportation credit balancing fund by reducing
payments prorata using the percentage derived by dividing the balance
in the fund by the total credits that are due for the month. The amount
of credits resulting from this initial proration shall be subject to
audit adjustment pursuant to paragraph (a)(2) of this section;
(2) The market administrator shall accept adjusted requests for
transportation credits on or before the 20th day of the month following
the month for which such credits were requested pursuant to
Sec. 1005.32(a). After such date, a preliminary audit will be conducted
by the market administrator, who will recalculate any necessary
proration of transportation credit payments for the preceding month
pursuant to paragraph (a) of this section. Handlers will be promptly
notified of an overpayment of credits based upon this final computation
and remedial payments to or from the transportation credit balancing
fund will be made on or before the next payment date for the following
month;
(3) Transportation credits paid pursuant to paragraph (a)(1) and
(2) of this section shall be subject to final verification by the
market administrator pursuant to Sec. 1000.77. Adjusted payments to or
from the transportation credit balancing fund will remain subject to
the final proration established pursuant to paragraph (a)(2) of this
section; and
(4) In the event that a qualified cooperative association is the
responsible party for whose account such milk is received and written
documentation of this fact is provided to the market administrator
pursuant to Sec. 1005.30(c)(3) prior to the date payment is due, the
transportation credits for such milk computed pursuant to this section
shall be made to such cooperative association rather than to the
operator of the pool plant at which the milk was received.
(b) The market administrator may extend the period during which
transportation credits are in effect (i.e., the transportation credit
period) to the months of January and June if a written request to do so
is received 15 days prior to the beginning of the month for which the
request is made and, after conducting an independent investigation,
finds that such extension is necessary to assure the market of an
adequate supply of milk for fluid use. Before making such a finding,
the market administrator shall notify the Director of the Dairy
Division and all handlers in the market that an extension is being
considered and invite written data, views, and arguments. Any decision
to extend the transportation credit period must be issued in writing
prior to the first day of the month for which the extension is to be
effective.
(c) Transportation credits shall apply to the following milk:
(1) Bulk milk received from a plant regulated under another Federal
order, except Federal Orders 1007, and allocated to Class I milk
pursuant to Sec. 1000.44(a)(12); and
(2) Bulk milk received directly from the farms of dairy farmers at
pool distributing plants subject to the following conditions:
(i) The quantity of such milk that shall be eligible for the
transportation credit shall be determined by

[[Page 5035]]

multiplying the total pounds of milk received from producers meeting
the conditions of this paragraph by the lower of:
(A) The marketwide estimated Class I utilization of all handlers
for the month pursuant to Sec. 1000.45(a); or
(B) The Class I utilization of all producer milk of the pool plant
operator receiving the milk after the computations described in
Sec. 1000.44;
(ii) The dairy farmer was not a ``producer'' under this order
during more than 2 of the immediately preceding months of January
through June and not more than 50 percent of the production of the
dairy farmer during those 2 months, in aggregate, was received as
producer milk under this order during those 2 months. However, if
January and/or June are months in which transportation credits are
disbursed pursuant to paragraph (a) of this section, these months shall
not be included in the 2-month limit provided in this paragraph; and
(iii) The farm on which the milk was produced is not located within
the specified marketing area of this order or the marketing area of
Federal Order 1007.
(d) Transportation credits shall be computed as follows:
(1) The market administrator shall subtract from the pounds of milk
described in paragraphs (c)(1) and (2) of this section the pounds of
bulk milk transferred from the pool plant receiving the supplemental
milk if milk was transferred to a nonpool plant on the same calendar
day that the supplemental milk was received. For this purpose, the
transferred milk shall be subtracted from the most distant load of
supplemental milk received, and then in sequence with the next most
distant load until all of the transfers have been offset;
(2) With respect to the pounds of milk described in paragraph
(c)(1) of this section that remain after the computations described in
paragraph (d)(1) of this section, the market administrator shall:
(i) Determine the shortest hard-surface highway distance between
the shipping plant and the receiving plant;
(ii) Multiply the number of miles so determined by 0.35 cent;
(iii) Subtract the other order's Class I price applicable at the
shipping plant's location from the Class I price applicable at the
receiving plant as specified in Sec. 1005.53;
(iv) Subtract any positive difference computed in paragraph
(d)(2)(iii) of this section from the amount computed in paragraph
(d)(2)(ii) of this section; and
(v) Multiply the remainder computed in paragraph (d)(2)(iv) of this
section by the hundredweight of milk described in paragraph (d)(2) of
this section.
(3) For the remaining milk described in paragraph (c)(2) of this
section after computations described in paragraph (d)(1) of this
section, the market administrator shall:
(i) Determine an origination point for each load of milk by
locating the nearest city to the last producer's farm from which milk
was picked up for delivery to the receiving pool plant. Alternatively,
the milk hauler that is transporting the milk of producers described in
paragraph (c)(2) of this section may establish an origination point
following the last farm pickup by stopping at the nearest
independently-operated truck stop with a certified truck scale and
obtaining a weight certificate indicating the weight of the truck and
its contents, the date and time of weighing, and the location of the
truck stop;
(ii) Determine the shortest hard-surface highway distance between
the receiving pool plant and the truck stop or city, as the case may
be;
(iii) Subtract 85 miles from the mileage so determined;
(iv) Multiply the remaining miles so computed by 0.35 cent;
(v) If the origination point determined pursuant to paragraph
(d)(3)(i) of this section is in a Federal order marketing area,
subtract the Class I price applicable at the origination point pursuant
to the provisions of such other order (as if the origination point were
a plant location) from the Class I price applicable at the distributing
plant receiving the milk. If the origination point is not in any
Federal order marketing area, determine the Class I price at the
origination point based upon the provisions of this order and subtract
this price from the Class I price applicable at the distributing plant
receiving the milk;
(vi) Subtract any positive difference computed in paragraph
(d)(3)(v) of this section from the amount computed in paragraph
(d)(3)(iv) of this section; and
(vii) Multiply the remainder computed in paragraph (d)(3)(vi) by
the hundredweight of milk described in paragraph (d)(3) of this
section.

Administrative Assessment and Marketing Service Deduction

Sec. 1005.85 Assessment for order administration.

See Sec. 1000.85 of this chapter.

Sec. 1005.86 Deduction for marketing services.

See Sec. 1000.86 of this chapter.

PART 1006--MILK IN THE FLORIDA MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1006.1 General provisions.

Definitions

1006.2 Florida marketing area.
1006.3 Route disposition.
1006.4 Plant.
1006.5 Distributing plant.
1006.6 Supply plant.
1006.7 Pool plant.
1006.8 Nonpool plant.
1006.9 Handler.
1006.10 Producer-handler.
1006.11 [Reserved]
1006.12 Producer.
1006.13 Producer milk.
1006.14 Other source milk.
1006.15 Fluid milk product.
1006.16 Fluid cream product.
1006.17 [Reserved]
1006.18 Cooperative association.
1006.19 Commercial food processing establishment.

Handler Reports

1006.30 Reports of receipts and utilization.
1006.31 Payroll reports.
1006.32 Other reports.

Classification of Milk

1006.40 Classes of utilization.
1006.41 [Reserved]
1006.42 Classification of transfers and diversions.
1006.43 General classification rules.
1006.44 Classification of producer milk.
1006.45 Market administrator's reports and announcements concerning
classification.

Class Prices

1006.50 Class prices, component prices, Class I differential and
price.
1006.51 [Reserved]
1006.52 Adjusted Class I differentials.
1006.53 Announcement of class prices and component prices.
1006.54 Equivalent price.

Uniform Prices

1006.60 Handler's value of milk.
1006.61 Computation of uniform price, uniform butterfat price, and
uniform skim milk price.
1006.62 Announcement of uniform price, uniform butterfat price, and
uniform skim milk price.

Payments for Milk

1006.70 Producer-settlement fund.
1006.71 Payments to the producer-settlement fund.
1006.72 Payments from the producer-settlement fund.
1006.73 Payments to producers and to cooperative associations.
1006.74 [Reserved]
1006.75 Plant location adjustments for producer milk and nonpool
milk.
1006.76 Payments by a handler operating a partially regulated
distributing plant.

[[Page 5036]]

1006.77 Adjustment of accounts.
1006.78 Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1006.85 Assessment for order administration.
1006.86 Deduction for marketing services.

Authority: 7 U.S.C. 601-674.

Subpart--Order Regulating Handling

General Provisions

Sec. 1006.1 General provisions.

The terms, definitions, and provisions in part 1000 of this chapter
apply to and are hereby made a part of this order.

Definitions

Sec. 1006.2 Florida marketing area.

The marketing area means all the territory within the State of
Florida, except the counties of Escambia, Okaloosa, Santa Rosa, and
Walton., including all piers, docks and wharves connected therewith and
all craft moored thereat, and all territory occupied by government
(municipal, State or Federal) reservations, installations,
institutions, or other similar establishments if any part thereof is
within any of the listed states or political subdivisions.

Sec. 1006.3 Route disposition.

See Sec. 1000.3 of this chapter.

Sec. 1006.4 Plant.

See Sec. 1000.4 of this chapter.

Sec. 1006.5 Distributing plant.

See Sec. 1000.5 of this chapter.

Sec. 1006.6 Supply plant.

See Sec. 1000.6 of this chapter.

Sec. 1006.7 Pool plant.

Pool plant means a plant specified in paragraphs (a) through (d) of
this section, or a unit of plants as specified in paragraph (e) of this
section, but excluding a plant specified in paragraph (g) of this
section. The pooling standards described in paragraphs (a), (c), and
(d) of this section are subject to modification pursuant to paragraph
(f) of this section:
(a) A distributing plant from which during the month the total
route disposition is equal to 50 percent or more of the total quantity
of fluid milk products physically received at such plant and route
disposition in the marketing area is at least 10 percent of such
receipts. Packaged fluid milk products that are transferred to a
distributing plant shall be considered as route disposition from the
transferring plant, rather than the receiving plant, for the purpose of
determining the transferring plant's pool status under this paragraph.
(b) Any distributing plant located in the marketing area which
during the month processed a majority of its milk receipts into
aseptically packaged fluid milk products. If the plant had no route
disposition in the marketing area during the month, the plant operator
may request nonpool status for the plant.
(c) A supply plant from which 60 percent of the total quantity of
milk that is physically received during the month from dairy farmers
and handlers described in Sec. 1000.9(c) is transferred to pool
distributing plants.
(d) A plant located within the marketing area that is operated by a
cooperative association if pool plant status under this paragraph is
requested for such plant by the cooperative association and during the
month 60 percent of the producer milk of members of such cooperative
association is delivered directly from farms to pool distributing
plants or is transferred to such plants as a fluid milk product from
the cooperative's plant.
(e) Two or more plants operated by the same handler and that are
located within the marketing area may qualify for pool status as a unit
by meeting the total and in-area route disposition requirements
specified in paragraph (a) of this section and the following additional
requirements:
(1) At least one of the plants in the unit must qualify as a pool
plant pursuant to paragraph (a) of this section;
(2) Other plants in the unit must process only Class I or Class II
products and must be located in a pricing zone providing the same or a
lower Class I price than the price applicable at the distributing plant
included in the unit pursuant to paragraph (e)(1) of this section; and
(3) A written request to form a unit, or to add or remove plants
from a unit, must be filed with the market administrator prior to the
first day of the month for which it is to be effective.
(f) The applicable percentages in paragraphs (a), (c), and (d) of
this section may be increased or decreased up to 10 percentage points
by the market administrator if the market administrator finds that such
revision is necessary to assure orderly marketing and efficient
handling of milk in the marketing area. Before making such a finding,
the market administrator shall investigate the need for the revision
either on the market administrator's own initiative or at the request
of interested parties if the request is made in writing at least 15
days prior to the date for which the requested revision is desired
effective. If the investigation shows that a revision might be
appropriate, the market administrator shall issue a notice stating that
the revision is being considered and inviting written data, views, and
arguments. Any decision to revise an applicable percentage must be
issued in writing at least one day before the effective date.
(g) The term pool plant shall not apply to the following plants:
(1) A producer-handler plant;
(2) An exempt plant as defined in Sec. 1000.8(e);
(3) A plant qualified pursuant to paragraph (a) of this section
which is not located within any Federal order marketing area, meets the
pooling requirements of another Federal order, and has had greater
route disposition in such other Federal order marketing area for 3
consecutive months;
(4) A plant qualified pursuant to paragraph (a) of this section
which is located in another Federal order marketing area, meets the
pooling standards of the other Federal order, and has not had a
majority of its route disposition in this marketing area for 3
consecutive months or is locked into pool status under such other
Federal order without regard to its route disposition in any other
Federal order marketing area; and
(5) A plant qualified pursuant to paragraph (c) of this section
which also meets the pooling requirements of another Federal order and
from which greater qualifying shipments are made to plants regulated
under such other order than are made to plants regulated under this
order, or such plant has automatic pooling status under such other
order.

Sec. 1006.8 Nonpool plant.

See Sec. 1000.8 of this chapter.

Sec. 1006.9 Handler.

See Sec. 1000.9 of this chapter.

Sec. 1006.10 Producer-handler.

[[Page 5037]]

nonfat milk solids content of the fluid milk products received from own
farm production;
(d) Disposes of no fluid milk products using the distribution
system of another handler; and
(e) Provides proof satisfactory to the market administrator that
the care and management of the dairy animals and other resources
necessary to produce all Class I milk handled, and the processing,
packaging, and distribution operations, are the producer-handler's own
enterprise and are operated at the producer-handler's own risk.

Sec. 1006.11 [Reserved]

Sec. 1006.12 Producer.

Sec. 1006.13 Producer milk.

Producer milk means the skim milk (or the skim equivalent of
components of skim milk) and butterfat contained in milk of a producer
that is:
(a) Received by the operator of a pool plant directly from a
producer or a handler described in Sec. 1000.9(c). Any milk picked up
from the producer's farm tank in a tank truck under the control of the
operator of a pool plant or a handler described in Sec. 1000.9(c) but
which is not received at a plant until the following month shall be
considered as having been received by the handler during the month in
which it is picked up at the producer's farm. All milk received
pursuant to this paragraph shall be priced at the location of the plant
where it is first physically received;
(b) Received by a handler described in Sec. 1000.9(c) in excess of
the quantity delivered to pool plants;
(c) Diverted by a pool plant operator to another pool plant. Milk
so diverted shall be priced at the location of the plant to which
diverted; or
(d) Diverted by the operator of a pool plant or a handler described
in Sec. 1000.9(c) to a nonpool plant, subject to the following
conditions:
(1) In any month, not less than 10 days' production of the producer
whose milk is diverted is physically received at a pool plant during
the month;
(2) The total quantity of milk so diverted during the month by a
cooperative association shall not exceed 20 percent during the months
of July through November, 25 percent during the months of December
through February, and 40 percent during all other months, of the
producer milk that the cooperative association caused to be delivered
to, and physically received at, pool plants during the month;
(3) The operator of a pool plant that is not a cooperative
association may divert any milk that is not under the control of a
cooperative association that diverts milk during the month pursuant to
paragraph (d) of this section. The total quantity of milk so diverted
during the month shall not exceed 20 percent during the months of July
through November, 25 percent during the months of December through
February, and 40 percent during all other months, of the producer milk
physically received at such plant (or such unit of plants in the case
of plants that pool as a unit pursuant to Sec. 1006.7(d)) during the
month, excluding the quantity of producer milk received from a handler
described in Sec. 1000.9(c);
(4) Any milk diverted in excess of the limits prescribed in
paragraphs (d)(3) and (4) of this section shall not be producer milk.
If the diverting handler or cooperative association fails to designate
the dairy farmers' deliveries that will not be producer milk, no milk
diverted by the handler or cooperative association shall be producer
milk;
(5) Diverted milk shall be priced at the location of the plant to
which diverted; and
(6) The delivery day requirements and the diversion percentages in
paragraphs (d)(1) through (3) of this section may be increased or
decreased by the market administrator if the market administrator finds
that such revision is necessary to assure orderly marketing and
efficient handling of milk in the marketing area. Before making such a
finding, the market administrator shall investigate the need for the
revision either on the market administrator's own initiative or at the
request of interested persons. If the investigation shows that a
revision might be appropriate, the market administrator shall issue a
notice stating that the revision is being considered and inviting
written data, views, and arguments. Any decision to revise an
applicable percentage must be issued in writing at least one day before
the effective date.

Sec. 1006.14 Other source milk.

See Sec. 1000.14 of this chapter.

Sec. 1006.15 Fluid milk product.

See Sec. 1000.15 of this chapter.

Sec. 1006.16 Fluid cream product.

See Sec. 1000.16 of this chapter.

Sec. 1006.17 [Reserved]

Sec. 1006.18 Cooperative association.

See Sec. 1000.18 of this chapter.

Sec. 1006.19 Commercial food processing establishment.

See Sec. 1000.19 of this chapter.

Handler Reports

Sec. 1006.30 Reports of receipts and utilization.

[[Page 5038]]

fully regulated shall be reported in lieu of producer milk. The report
shall show also the quantity of any reconstituted skim milk in route
disposition in the marketing area.
(c) Each handler described in Sec. 1000.9(c) shall report:
(1) The quantities of all skim milk and butterfat contained in
receipts of milk from producers; and
(2) The utilization or disposition of all such receipts.
(d) Each handler not specified in paragraphs (a) through (c) of
this section shall report with respect to its receipts and utilization
of milk and milk products in such manner as the market administrator
may prescribe.

Sec. 1006.31 Payroll reports.

(a) On or before the 20th day after the end of each month, each
handler described in Sec. 1000.9 (a) and (c) shall report to the market
administrator its producer payroll for the month, in detail prescribed
by the market administrator, showing for each producer the information
specified in Sec. 1006.73(e).
(b) Each handler operating a partially regulated distributing plant
who elects to make payment pursuant to Sec. 1000.76(b) shall report for
each dairy farmer who would have been a producer if the plant had been
fully regulated in the same manner as prescribed for reports required
by paragraph (a) of this section.

Sec. 1006.32 Other reports.

(a) In addition to the reports required pursuant to Secs. 1006.30
and 1006.31, each handler shall report any information the market
administrator deems necessary to verify or establish each handler's
obligation under the order.
(b) [Reserved]

Classification of Milk

Sec. 1006.40 Classes of utilization.

See Sec. 1000.40 of this chapter.

Sec. 1006.41 [Reserved]

Sec. 1006.42 Classification of transfers and diversions.

See Sec. 1000.42 of this chapter.

Sec. 1006.43 General classification rules.

See Sec. 1000.43 of this chapter.

Sec. 1006.44 Classification of producer milk.

See Sec. 1000.44 of this chapter.

Sec. 1006.45 Market administrator's reports and announcements
concerning classification.

See Sec. 1000.45 of this chapter.

Class Prices

Sec. 1006.50 Class prices, component prices, Class I differential and
price.

Class prices and component prices are described in Sec. 1000.50.
The Class I differential shall be the differential established for
Hillsborough County, Florida, which is reported in Sec. 1000.52. The
Class I price shall be the price computed pursuant to Sec. 1000.50(a)
for Hillsborough County, Florida.

Sec. 1006.51 [Reserved]

Sec. 1006.52 Adjusted Class I differentials.

See Sec. 1000.52 of this chapter.

Sec. 1006.53 Announcement of class prices and component prices.

See Sec. 1000.53 of this chapter.

Sec. 1006.54 Equivalent price.

See Sec. 1000.54 of this chapter.

Uniform Price

Sec. 1006.60 Handler's value of milk.

(b) Add the amounts obtained from multiplying the pounds of skim
milk and butterfat overage assigned to each class pursuant to
Sec. 1000.43 (b)(2) by the respective skim milk and butterfat prices
applicable at the location of the pool plant;
(c) Add the amount obtained from multiplying the difference between
the Class III price for the preceding month and the Class I price
applicable at the location of the pool plant or the Class II price, as
the case may be, for the current month by the hundredweight of skim
milk and butterfat subtracted from Class I and Class II pursuant to
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
(d) Add the amount obtained from multiplying the difference between
the Class I price applicable at the location of the pool plant and the
Class III price by the hundredweight of skim milk and butterfat
assigned to Class I pursuant to Sec. 1000.43(d) and the hundredweight
of skim milk and butterfat subtracted from Class I pursuant to
Sec. 1000.44(a)(3) (i) through (iii) and the corresponding step of
Sec. 1000.44(b), excluding receipts of bulk fluid cream products from a
plant regulated under other Federal orders and bulk concentrated fluid
milk products from pool plants, plants regulated under other Federal
orders, and unregulated supply plants;
(e) Add the amount obtained from multiplying the Class I price
applicable at the location of the nearest unregulated supply plants
from which an equivalent volume was received by the pounds of skim milk
and butterfat in receipts of concentrated fluid milk products assigned
to Class I pursuant to Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and
the pounds of skim milk and butterfat subtracted from Class I pursuant
to Sec. 1000.44(a)(8) and the corresponding step of Sec. 1000.44(b),
excluding such skim milk and butterfat in receipts of fluid milk
products from an unregulated supply plant to the extent that an
equivalent amount of skim milk or butterfat disposed of to such plant
by handlers fully regulated under any Federal milk order is classified
and priced as Class I milk and is not used as an offset for any other
payment obligation under any order;
(f) Subtract, for reconstituted milk made from receipts of nonfluid
milk products, an amount computed by multiplying $1.00 (but not more
than the difference between the Class I price applicable at the
location of the pool plant and the Class IV price) by the hundredweight
of skim milk and butterfat contained in receipts of nonfluid milk
products that are allocated to Class I use pursuant to Sec. 1000.43(e);
and
(g) Exclude, for pricing purposes under this section, receipts of
nonfluid milk products that are distributed as labeled reconstituted
milk for which payments are made to the producer-settlement fund of
another Federal order under Sec. 1000.76(a)(5) or (c).

Sec. 1006.61 Computation of uniform price, uniform butterfat price and
uniform skim milk price.

[[Page 5039]]

administrator shall compute the uniform price in the following manner:
(1) Combine into one total the values computed pursuant to
Sec. 1006.60 for all handlers required to file reports prescribed in
Sec. 1006.30;
(2) Add an amount equal to the sum of the location adjustments
computed pursuant to Sec. 1006.75;
(3) Add an amount equal to not less than one-half of the
unobligated balance in the producer-settlement fund;
(4) Add or subtract, as the case may be, to obtain an all-producer
milk test of 3.5 percent butterfat, the value of the required pounds of
butterfat times the uniform butterfat price computed in paragraph (b)
of this section;
(5) Divide the resulting amount by the sum of the following for all
handlers included in these computations:
(i) The total hundredweight of producer milk; and
(ii) The total hundredweight for which a value is computed pursuant
to Sec. 1006.60(f); and
(6) Subtract not less than 4 cents not more than 5 cents from the
price computed pursuant to paragraph (e) of this section. The result,
rounded to the nearest cent, shall be known as the ``uniform price''
for the month.
(b) Uniform butterfat price. The uniform butterfat price per pound,
rounded to the nearest one-hundredth cent, shall be obtained by
multiplying the pounds of butterfat in producer milk allocated to each
class pursuant to Sec. 1000.44(b) by the respective class butterfat
prices (Class I butterfat price for Class I and the butterfat price for
all other classes) and dividing the sum of such values by the total
pounds of such butterfat.
(c) Uniform skim milk price. The uniform skim milk price per
hundredweight, rounded to the nearest cent, shall be the uniform price
for the month pursuant to pursuant to paragraph (a) of this section
less the uniform butterfat price for the month pursuant to paragraph
(b) of this section multiplied by 3.5 pounds of butterfat, with the
result divided by .965.

Sec. 1006.62 Announcement of uniform price, uniform butterfat price
and uniform skim milk price.

On or before the 11th day after the end of the month, the market
administrator shall announce the following prices and information:
(a) The uniform price pursuant to Sec. 1006.61 for such month;
(b) The uniform butterfat price pursuant to Sec. 1006.61(b) for
such month; and
(c) The uniform skim milk price pursuant to Sec. 1006.61(c) for
such month.

Payments for Milk

Sec. 1006.70 Producer-settlement fund.

See Sec. 1000.70 of this chapter.

Sec. 1006.71 Payments to the producer-settlement fund.

The payments to the producer-settlement fund specified in
Sec. 1000.71 are due no later than the 12th day after the end of the
month.

Sec. 1006.72 Payments from the producer-settlement fund.

See Sec. 1000.72 of this chapter.

Sec. 1006.73 Payments to producers and to cooperative associations.

(a) Each pool plant operator that is not paying a cooperative
association for producer milk shall pay each producer as follows:
(1) Partial payments. (i) For each producer who has not
discontinued shipments as of the 15th day of the month, payment shall
be made so that it is received by the producer on or before the 20th
day of the month for milk received during the first 15 days of the
month at not less than the 85 percent of the preceding month's uniform
price, adjusted for plant location pursuant to Sec. 1006.75 and proper
deductions authorized in writing by the producer; and
(ii) For each producer who has not discontinued shipments as of the
last day of the month, payment shall be made so that it is received by
the producer on or before the 5th day of the following month for milk
received from the 16th to the last day of the month at not less than
the 85 percent of the preceding month's uniform price, adjusted for
plant location pursuant to 1006.75 and proper deductions authorized in
writing by the producer.
(2) Final payment. For milk received during the month, payment
shall be made so that it is received by each producer one day after the
payment date required in Sec. 1000.72 an amount computed as follows:
(i) Multiply the hundredweight of producer milk received times the
uniform price for the month as adjusted pursuant to Sec. 1006.75;
(ii) Multiply the hundredweight of producer skim milk received
times the uniform skim milk price for the month;
(iii) Multiply the pounds of butterfat received times the uniform
butterfat price for the month;
(iv) Add the amounts computed in paragraph (a)(2)(i), (ii), and
(iii) of the section, and from that sum:
(A) Subtract the partial payment made pursuant to paragraph (a)(1)
of this section;
(B) Subtract the deduction for marketing services pursuant to
Sec. 1000.86;
(C) Add or subtract for errors made in previous payments to the
producer; and
(D) Subtract proper deductions authorized in writing by the
producer.
(b) One day before partial and final payments are due pursuant to
paragraph (a) of this section, each pool plant operator shall pay a
cooperative association for milk received as follows:
(1) Partial payment to a cooperative association. For bulk milk/
skimmed milk received during the first 15 days of the month from a
cooperative association in any capacity, except as the operator of a
pool plant, the payment shall be equal to the hundredweight of milk
received multiplied by 90 percent of the preceding month's uniform
price, adjusted for plant location pursuant to Sec. 1006.75;
(2) Partial payment to a cooperative association for milk
transferred from its pool plant. For bulk fluid milk products and bulk
fluid cream products received during the first 15 days of the month
from a cooperative association in its capacity as the operator of a
pool plant, the partial payment shall be at the pool plant operator's
estimated use value of the milk using the most recent class prices
available, adjusted for butterfat value and plant location;
(3) Final payment to a cooperative association for milk transferred
from its pool plant. For bulk fluid milk products and bulk fluid cream
products received during the month from a cooperative association in
its capacity as the operator of a pool plant, the final payment shall
be the classified value of such milk as determined by multiplying the
pounds of milk assigned to each class pursuant to Sec. 1000.44 by the
class prices for the month, adjusted for plant location and butterfat
value, and subtracting from this sum the partial payment made pursuant
to paragraph (b)(2) of this section.
(4) Final payment to a cooperative association for bulk milk
received directly from producers' farms. For bulk milk received from a
cooperative association during the month, including the milk of
producers who are not members of such association and who the market
administrator determines have authorized the cooperative association to
collect payment for their milk, the final payment for such milk shall
be an amount equal to the sum of the individual payments otherwise
payable for such milk pursuant to paragraph (a)(2) of this section.
(c) If a handler has not received full payment from the market
administrator

[[Page 5040]]

pursuant to Sec. 1006.72 by the payment date specified in paragraph (a)
or (b) of this section, the handler may reduce payments pursuant to
paragraphs (a) and (b) of this section, but by not more than the amount
of the underpayment. The payments shall be completed on the next
scheduled payment date after receipt of the balance due from the market
administrator.
(d) If a handler claims that a required payment to a producer
cannot be made because the producer is deceased or cannot be located,
or because the cooperative association or its lawful successor or
assignee is no longer in existence, the payment shall be made to the
producer-settlement fund, and in the event that the handler
subsequently locates and pays the producer or a lawful claimant, or in
the event that the handler no longer exists and a lawful claim is later
established, the market administrator shall make the required payment
from the producer-settlement fund to the handler or to the lawful
claimant as the case may be.
(e) In making payments to producers pursuant to this section, each
pool plant operator shall furnish each producer, except a producer
whose milk was received from a handler described in Sec. 1000.9(a) or
(c), a supporting statement in such form that it may be retained by the
recipient which shall show:
(1) The name, address, Grade A identifier assigned by a duly
constituted regulatory agency, and the payroll number of the producer;
(2) The month and dates that milk was received from the producer,
including the daily and total pounds of milk received;
(3) The total pounds of butterfat in the producer's milk;
(4) The minimum rate at which payment to the producer is required
pursuant to this order;
(5) The rate used in making payment if the rate is other than the
applicable minimum rate;
(6) The amount, or rate per hundredweight, and nature of each
deduction claimed by the handler; and
(7) The net amount of payment to the producer or cooperative
association.

Sec. 1006.74 [Reserved]

Sec. 1006.75 Plant location adjustments for producer milk and nonpool
milk.

(a) The uniform price for producer milk shall be adjusted according
to the location of the plant at which the milk was physically received
by subtracting from the price the amount by which the Class I price
specified in Sec. 1006.50 exceeds the Class I price at the plant's
location. If the Class I price at the plant location exceeds the Class
I price specified in Sec. 1006.50, the difference shall be added to the
uniform price; and
(b) The uniform price applicable for other source milk shall be
adjusted following the procedure specified in paragraph (a) of this
section, except that the adjusted uniform price shall not be less than
the lowest announced class price.

Sec. 1006.76 Payments by a handler operating a partially regulated
distributing plant.

See Sec. 1000.76 of this chapter.

Sec. 1006.77 Adjustment of accounts.

See Sec. 1000.77 of this chapter.

Sec. 1006.78 Charges on overdue accounts.

See Sec. 1000.78 of this chapter.

Adminstrative Assessment and Marketing Service Deduction

Sec. 1006.85 Assessment for order administration.

See Sec. 1000.85 of this chapter.

Sec. 1006.86 Deduction for marketing services.

See Sec. 1000.86 of this chapter.

PART 1007--MILK IN THE SOUTHEAST MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1007.1 General provisions.

Definitions

1007.2 Southeast marketing area.
1007.3 Route disposition.
1007.4 Plant.
1007.5 Distributing plant.
1007.6 Supply plant.
1007.7 Pool plant.
1007.8 Nonpool plant.
1007.9 Handler.
1007.10 Producer-handler.
1007.11 [Reserved]
1007.12 Producer.
1007.13 Producer milk.
1007.14 Other source milk.
1007.15 Fluid milk product.
1007.16 Fluid cream product.
1007.17 [Reserved]
1007.18 Cooperative association.
1007.19 Commercial food processing establishment.

Handler Reports

1007.30 Reports of receipts and utilization.
1007.31 Payroll reports.
1007.32 Other reports.

Classification of Milk

1007.40 Classes of utilization.
1007.41 [Reserved]
1007.42 Classification of transfers and diversions.
1007.43 General classification rules.
1007.44 Classification of producer milk.
1007.45 Market administrator's reports and announcements concerning
classification.

Class Prices

1007.50 Class prices, component prices, Class I differential and
price.
1007.51 [Reserved]
1007.52 Adjusted Class I differentials.
1007.53 Announcement of class and component prices.
1007.54 Equivalent price.

Uniform Price

1007.60 Handler's value of milk.
1007.61 Computation of uniform price, uniform butterfat price, and
uniform skim milk price.
1007.62 Announcement of uniform price, uniform butterfat price, and
uniform skim milk price.

Payments for Milk

1007.70 Producer-settlement fund.
1007.71 Payments to the producer-settlement fund.
1007.72 Payments from the producer-settlement fund.
1007.73 Payments to producers and to cooperative associations.
1007.74 [Reserved]
1007.75 Plant location adjustments for producer milk and nonpool
milk.
1007.76 Payments by a handler operating a partially regulated
distributing plant.
1007.77 Adjustment of accounts.
1007.78 Charges on overdue accounts.

Marketwide Service Payments

1007.80 Transportation credit balancing fund.
1007.81 Payments to the transportation credit balancing fund.
1007.82 Payments from the transportation credit balancing fund.

Administrative Assessment and Marketing Service Deduction

1007.85 Assessment for order administration.
1007.86 Deduction for marketing services.

Authority: 7 U.S.C. 601-674.

Subpart--Order Regulating Handling

General Provisions

Sec. 1007.1 General provisions.

The terms, definitions, and provisions in part 1000 of this chapter
apply to and are hereby made a part of this order.

Definitions

Sec. 1007.2 Southeast marketing area.

The marketing area means all territory within the bounds of the
following states and political subdivisions, including all piers, docks
and wharves connected therewith and all craft moored thereat, and all
territory occupied by government (municipal, State or Federal)
reservations, installations, institutions, or other similar
establishments if any part

[[Page 5041]]

thereof is within any of the listed states or political subdivisions:

Alabama, Arkansas, Louisiana, and Mississippi

All of the States of Alabama, Arkansas, Louisiana, and
Mississippi.

Florida Counties

Escambia, Okaloosa, Santa Rosa, and Walton.

Georgia Counties

All of the State of Georgia except for the counties of Catoosa,
Chattooga, Dade, Fannin, Murray, Walker, and Whitfield.

Kentucky Counties

Allen, Ballard, Barren, Caldwell, Calloway, Carlisle, Christian,
Crittenden, Fulton, Graves, Hickman, Livingston, Logan, Lyon,
Marshall, McCracken, Metcalfe, Monroe, Simpson, Todd, Trigg, and
Warren.

Missouri Counties

Barry, Barton, Bollinger, Butler, Cape Girardeau, Carter, Cedar,
Christian, Crawford, Dade, Dallas, Dent, Douglas, Dunklin, Greene,
Howell, Iron, Jasper, Laclede, Lawrence, Madsion, McDonald,
Mississippi, New Madrid, Newton, Oregon, Ozark, Pemiscot, Perry,
Polk, Pulaski, Reynolds, Ripley, Scott, Shannon, St. Francois,
Stoddard, Stone, Taney, Texas, Vernon, Washington, Wayne, Webster,
and Wright.

Tennessee Counties

All of the State of Tennessee except for the counties of
Anderson, Blount, Bradley, Campbell, Carter, Claiborne, Cocke,
Cumberland, Grainger, Greene, Hamblen, Hamilton, Hancock, Hawkins,
Jefferson, Johnson, Knox, Loudon, Marion, McMinn, Meigs, Monroe,
Morgan, Polk, Rhea, Roane, Scott, Sequatchie, Sevier, Sullivan,
Unicoi, Union, and Washington.

Sec. 1007.3 Route disposition.

See Sec. 1000.3 of this chapter.

Sec. 1007.4 Plant.

See Sec. 1000.4 of this chapter.

Sec. 1007.5 Distributing plant.

See Sec. 1000.5 of this chapter.

Sec. 1007.6 Supply plant.

See Sec. 1000.6 of this chapter.

Sec. 1007.7 Pool plant.

Pool plant means a plant specified in paragraphs (a) through (d) of
this section, or a unit of plants as specified in paragraph (e) of this
section, but excluding a plant specified in paragraph (g) of this
section. The pooling standards described in paragraphs (a), (c), and
(d) of this section are subject to modification pursuant to paragraph
(f) of this section:
(a) A distributing plant from which during the month the total
route disposition is equal to 50 percent or more of the total quantity
of fluid milk products physically received at such plant and route
disposition in the marketing area is at least 10 percent of such
receipts. Packaged fluid milk products that are transferred to a
distributing plant shall be considered as route disposition from the
transferring plant, rather than the receiving plant, for the purpose of
determining the transferring plant's pool status under this paragraph.
(b) Any distributing plant located in the marketing area which
during the month processed a majority of its milk receipts into
aseptically packaged fluid milk products. If the plant had no route
disposition in the marketing area during the month, the plant operator
may request nonpool status for the plant.
(c) A supply plant from which 50 percent of the total quantity of
milk that is physically received during the month from dairy farmers
and handlers described in Sec. 1000.9(c) is transferred to pool
distributing plants.
(d) A plant located within the marketing area that is operated by a
cooperative association if pool plant status under this paragraph is
requested for such plant by the cooperative association and during the
month at least 60 percent of the producer milk of members of such
cooperative association is delivered directly from farms to pool
distributing plants or is transferred to such plants as a fluid milk
product from the cooperative's plant.
(e) Two or more plants operated by the same handler and located
within the marketing area may qualify for pool status as a unit by
meeting the total and in-area route disposition requirements specified
in paragraph (a) of this section and the following additional
requirements:
(1) At least one of the plants in the unit must qualify as a pool
plant pursuant to paragraph (a) of this section;
(2) Other plants in the unit must process only Class I or Class II
products and must be located in a pricing zone providing the same or a
lower Class I price than the price applicable at the distributing plant
included in the unit pursuant to paragraph (e)(1) of this section; and
(3) A written request to form a unit, or to add or remove plants
from a unit, must be filed with the market administrator prior to the
first day of the month for which it is to be effective.
(f) The applicable percentages in paragraphs (a), (c), and (d) of
this section may be increased or decreased up to 10 percentage points
by the market administrator if the market administrator finds that such
revision is necessary to assure orderly marketing and efficient
handling of milk in the marketing area. Before making such a finding,
the market administrator shall investigate the need for the revision
either on the market administrator's own initiative or at the request
of interested parties if the request is made in writing at least 15
days prior to the date for which the requested revision is desired
effective. If the investigation shows that a revision might be
appropriate, the market administrator shall issue a notice stating that
the revision is being considered and inviting written data, views, and
arguments. Any decision to revise an applicable percentage must be
issued in writing at least one day before the effective date.
(g) The term pool plant shall not apply to the following plants:
(1) A producer-handler plant;
(2) An exempt plant as defined in Sec. 1000.8(e);
(3) A plant qualified pursuant to paragraph (a) of this section
which is not located within any Federal order marketing area, meets the
pooling requirements of another Federal order, and has had greater
route disposition in such other Federal order marketing area for 3
consecutive months;
(4) A plant qualified pursuant to paragraph (a) of this section
which is located in another Federal order marketing area, meets the
pooling standards of the other Federal order, and has not had a
majority of its route disposition in this marketing area for 3
consecutive months or is locked into pool status under such other
Federal order without regard to its route disposition in any other
Federal order marketing area; and
(5) A plant qualified pursuant to paragraph (c) of this section
which also meets the pooling requirements of another Federal order and
from which greater qualifying shipments are made to plants regulated
under such other order than are made to plants regulated under this
order, or such plant has automatic pooling status under such other
order.

Sec. 1007.8 Nonpool plant.

See Sec. 1000.8 of this chapter.

Sec. 1007.9 Handler.

See Sec. 1000.9 of this chapter.

Sec. 1007.10 Producer-handler.

[[Page 5042]]

the farm operated as a producer under Sec. 1007.12;
(b) Receives no fluid milk products, and acquires no fluid milk
products for route disposition, from sources other than own farm
production;
(c) Disposes of no other source milk as Class I milk except by
increasing the nonfat milk solids content of the fluid milk products
received from own farm production;
(d) Disposes of no fluid milk products using the distribution
system of another handler; and
(e) Provides proof satisfactory to the market administrator that
the care and management of the dairy animals and other resources
necessary to produce all Class I milk handled, and the processing,
packaging, and distribution operations, are the producer-handler's own
enterprise and are operated at the producer-handler's own risk.

Sec. 1007.11 [Reserved]

Sec. 1007.12 Producer.

Sec. 1007.13 Producer milk.

Producer milk means the skim milk (or the skim equivalent of
components of skim milk) and butterfat contained in milk of a producer
that is:
(a) Received by the operator of a pool plant directly from a
producer or a handler described in Sec. 1000.9(c). Any milk picked up
from the producer's farm tank in a tank truck under the control of the
operator of a pool plant or a handler described in Sec. 1000.9(c) but
which is not received at a plant until the following month shall be
considered as having been received by the handler during the month in
which it is picked up at the producer's farm. All milk received
pursuant to this paragraph shall be priced at the location of the plant
where it is first physically received;
(b) Received by a handler described in Sec. 1000.9(c) in excess of
the quantity delivered to pool plants;
(c) Diverted by a pool plant operator to another pool plant. Milk
so diverted shall be priced at the location of the plant to which
diverted; or
(d) Diverted by the operator of a pool plant or a handler described
in Sec. 1000.9(c) to a nonpool plant, subject to the following
conditions:
(1) In any month of January through June, not less than 4 days'
production of the producer whose milk is diverted is physically
received at a pool plant during the month;
(2) In any month of July through December, not less than 10 days'
production of the producer whose milk is diverted is physically
received at a pool plant during the month;
(3) The total quantity of milk so diverted during the month by a
cooperative association shall not exceed 33 percent during the months
of July through December, and 50 percent during the months of January
through June, of the producer milk that the cooperative association
caused to be delivered to, and physically received at, pool plants
during the month;
(4) The operator of a pool plant that is not a cooperative
association may divert any milk that is not under the control of a
cooperative association that diverts milk during the month pursuant to
paragraph (d) of this section. The total quantity of milk so diverted
during the month shall not exceed 33 percent during the months of July
through December, or 50 percent during the months of January through
June, of the producer milk physically received at such plant (or such
unit of plants in the case of plants that pool as a unit pursuant to
Sec. 1007.7(e)) during the month, excluding the quantity of producer
milk received from a handler described in Sec. 1000.9(c);
(5) Any milk diverted in excess of the limits prescribed in
paragraphs (d)(3) and (4) of this section shall not be producer milk.
If the diverting handler or cooperative association fails to designate
the dairy farmers' deliveries that will not be producer milk, no milk
diverted by the handler or cooperative association shall be producer
milk;
(6) Diverted milk shall be priced at the location of the plant to
which diverted; and
(7) The delivery day requirements and the diversion percentages in
paragraphs (d)(1) through (4) of this section may be increased or
decreased by the market administrator if the market administrator finds
that such revision is necessary to assure orderly marketing and
efficient handling of milk in the marketing area. Before making such a
finding, the market administrator shall investigate the need for the
revision either on the market administrator's own initiative or at the
request of interested persons. If the investigation shows that a
revision might be appropriate, the market administrator shall issue a
notice stating that the revision is being considered and inviting
written data, views, and arguments. Any decision to revise an
applicable percentage must be issued in writing at least one day before
the effective date.

Sec. 1007.14 Other source milk.

See Sec. 1000.14 of this chapter.

Sec. 1007.15 Fluid milk product.

See Sec. 1000.15 of this chapter.

Sec. 1007.16 Fluid cream product.

See Sec. 1000.16 of this chapter.

Sec. 1007.17 [Reserved]

Sec. 1007.18 Cooperative association.

See Sec. 1000.18 of this chapter.

Sec. 1007.19 Commercial food processing establishment.

See Sec. 1000.19 of this chapter.

Handler Reports

Sec. 1007.30 Reports of receipts and utilization.

[[Page 5043]]

except Federal Order 1005, for which a transportation credit is
requested pursuant to Sec. 1007.82;
(6) Receipts of producer milk described in Sec. 1007.82(c)(2),
including the identity of the individual producers whose milk is
eligible for the transportation credit pursuant to that paragraph and
the date that such milk was received;
(7) For handlers submitting transportation credit requests,
transfers of bulk milk to nonpool plants, including the dates that such
milk was transferred;
(8) Inventories at the beginning and end of the month of fluid milk
products and bulk fluid cream products; and
(9) The utilization or disposition of all milk and milk products
required to be reported pursuant to this paragraph.
(b) Each handler operating a partially regulated distributing plant
shall report with respect to such plant in the same manner as
prescribed for reports required by paragraph (a)(1), (a)(2), (a)(3),
(a)(4), and (a)(8) of this section. Receipts of milk that would have
been producer milk if the plant had been fully regulated shall be
reported in lieu of producer milk. The report shall show also the
quantity of any reconstituted skim milk in route disposition in the
marketing area.
(c) Each handler described in Sec. 1000.9(c) shall report:
(1) The quantities of all skim milk and butterfat contained in
receipts of milk from producers;
(2) The utilization or disposition of all such receipts; and
(3) With respect to milk for which a cooperative association is
requesting a transportation credit pursuant to Sec. 1007.82, all of the
information required in paragraph (a)(5), (a)(6), and (a)(7) of this
section.
(d) Each handler not specified in paragraphs (a) through (c) of
this section shall report with respect to its receipts and utilization
of milk and milk products in such manner as the market administrator
may prescribe.

Sec. 1007.31 Payroll reports.

(a) On or before the 20th day after the end of each month, each
handler described in Sec. 1000.9(a) and (c) shall report to the market
administrator its producer payroll for the month, in detail prescribed
by the market administrator, showing for each producer the information
specified in Sec. 1007.73(e).
(b) Each handler operating a partially regulated distributing plant
who elects to make payment pursuant to Sec. 1000.76(b) shall report for
each dairy farmer who would have been a producer if the plant had been
fully regulated in the same manner as prescribed for reports required
by paragraph (a) of this section.

Sec. 1007.32 Other reports.

(a) On or before the 20th day after the end of each month, each
handler described in Sec. 1000.9(a) and (c) shall report to the market
administrator any adjustments to transportation credit requests as
reported pursuant to Sec. 1007.30(a)(5), (6), and (7).
(b) In addition to the reports required pursuant to Secs. 1007.30,
31, and 32(a), each handler shall report any information the market
administrator deems necessary to verify or establish each handler's
obligation under the order.

Classification of Milk

Sec. 1007.40 Classes of utilization.

See Sec. 1000.40 of this chapter.

Sec. 1007.41 [Reserved]

Sec. 1007.42 Classification of transfers and diversions.

See Sec. 1000.42 of this chapter.

Sec. 1007.43 General classification rules.

See Sec. 1000.43 of this chapter.

Sec. 1007.44 Classification of producer milk.

See Sec. 1000.44 of this chapter.

Sec. 1007.45 Market administrator's reports and announcements
concerning classification.

See Sec. 1000.45 of this chapter.

Class Prices

Sec. 1007.50 Class prices, component prices, Class I differential and
price.

Class prices and component prices are described in Sec. 1000.50.
The Class I differential shall be the differential established for
Fulton County, Georgia, which is reported in Sec. 1000.52. The Class I
price shall be the price computed pursuant to Sec. 1000.50(a) for
Fulton County, Georgia.

Sec. 1007.51 [Reserved]

Sec. 1007.52 Adjusted Class I differentials.

See Sec. 1000.52 of this chapter.

Sec. 1007.53 Announcement of class prices and component prices.

See Sec. 1000.53 of this chapter.

Sec. 1007.54 Equivalent price.

See Sec. 1000.54 of this chapter.

Uniform Price

Sec. 1007.60 Handler's value of milk.

[[Page 5044]]

products, an amount computed by multiplying $1.00 (but not more than
the difference between the Class I price applicable at the location of
the pool plant and the Class IV price) by the hundredweight of skim
milk and butterfat contained in receipts of nonfluid milk products that
are allocated to Class I use pursuant to Sec. 1000.43(e); and
(g) Exclude, for pricing purposes under this section, receipts of
nonfluid milk products that are distributed as labeled reconstituted
milk for which payments are made to the producer-settlement fund of
another Federal order under Sec. 1000.76(a)(5) or (c).

Sec. 1007.61 Computation of uniform price, uniform butterfat price and
uniform skim milk price.

(a) Uniform price. For each month the market administrator shall
compute the uniform price per hundredweight. If the unreserved balance
in the producer-settlement fund to be included in the computation is
less than 2 cents per hundredweight of producer milk on all reports,
the report of any handler who has not made payments required pursuant
to Sec. 1007.71 for the preceding month shall not be included in the
computation of the uniform price. The report of such handler shall not
be included in the computation for succeeding months until the handler
has made full payment of outstanding monthly obligations. Subject to
the aforementioned conditions, the market administrator shall compute
the uniform price in the following manner:
(1) Combine into one total the values computed pursuant to
Sec. 1007.60 for all handlers required to file reports prescribed in
Sec. 1007.30;
(2) Add an amount equal to the sum of the location adjustments
computed pursuant to Sec. 1007.75;
(3) Add an amount equal to not less than one-half of the
unobligated balance in the producer-settlement fund;
(4) Add or subtract, as the case may be, to obtain an all-producer
milk test of 3.5 percent butterfat, the value of the required pounds of
butterfat times the uniform butterfat price computed in paragraph (b)
of this section;
(5) Divide the resulting amount by the sum of the following for all
handlers included in these computations:
(i) The total hundredweight of producer milk; and
(ii) The total hundredweight for which a value is computed pursuant
to Sec. 1007.60(f); and
(6) Subtract not less than 4 cents not more than 5 cents from the
price computed pursuant to paragraph (e) of this section. The result,
rounded to the nearest cent, shall be known as the ``uniform price''
for the month.
(b) Uniform butterfat price. The uniform butterfat price per pound,
rounded to the nearest one-hundredth cent, shall be obtained by
multiplying the pounds of butterfat in producer milk allocated to each
class pursuant to Sec. 1000.44(b) by the respective class butterfat
prices (Class I butterfat price for Class I and the butterfat price for
all other classes) and dividing the sum of such values by the total
pounds of such butterfat.
(c) Uniform skim milk price. The uniform skim milk price per
hundredweight, rounded to the nearest cent, shall be the uniform price
for the month pursuant to paragraph (a) of this section less the
uniform butterfat price for the month pursuant to paragraph (b) of this
section multiplied by 3.5 pounds of butterfat, with the result divided
by .965.

Sec. 1007.62 Announcement of uniform price, uniform butterfat price
and uniform skim milk price.

On or before the 11th day after the end of the month, the market
administrator shall announce the following prices and information:
(a) The uniform price pursuant to Sec. 1007.61 for such month;
(b) The uniform butterfat price pursuant to Sec. 1007.61(b) for
such month; and
(c) The uniform skim milk price pursuant to Sec. 1007.61(c) for
such month.

Payments for Milk

Sec. 1007.70 Producer-settlement fund.

See Sec. 1000.70 of this chapter.

Sec. 1007.71 Payments to the producer-settlement fund.

The payments to the producer-settlement fund specified in
Sec. 1000.71 are due no later than the 12th day after the end of the
month.

Sec. 1007.72 Payments from the producer-settlement fund.

See Sec. 1000.72 of this chapter.

Sec. 1007.73 Payments to producers and to cooperative associations.

[[Page 5045]]

payment shall be the classified value of such milk as determined by
multiplying the pounds of milk assigned to each class pursuant to
Sec. 1000.44 by the class prices for the month, adjusted for plant
location and butterfat value, and subtracting from this sum the partial
payment made pursuant to paragraph (b)(2) of this section.
(4) Final payment to a cooperative association for bulk milk
received directly from producers' farms. For bulk milk received from a
cooperative association during the month, including the milk of
producers who are not members of such association and who the market
administrator determines have authorized the cooperative association to
collect payment for their milk, the final payment for such milk shall
be an amount equal to the sum of the individual payments otherwise
payable for such milk pursuant to paragraph (a)(2) of this section.
(c) If a handler has not received full payment from the market
administrator pursuant to Sec. 1007.72 by the payment date specified in
paragraph (a) or (b) of this section, the handler may reduce payments
pursuant to paragraphs (a) and (b) of this section, but by not more
than the amount of the underpayment. The payments shall be completed on
the next scheduled payment date after receipt of the balance due from
the market administrator.
(d) If a handler claims that a required payment to a producer
cannot be made because the producer is deceased or cannot be located,
or because the cooperative association or its lawful successor or
assignee is no longer in existence, the payment shall be made to the
producer-settlement fund, and in the event that the handler
subsequently locates and pays the producer or a lawful claimant, or in
the event that the handler no longer exists and a lawful claim is later
established, the market administrator shall make the required payment
from the producer-settlement fund to the handler or to the lawful
claimant as the case may be.
(e) In making payments to producers pursuant to this section, each
pool plant operator shall furnish each producer, except a producer
whose milk was received from a handler described in Sec. 1000.9 (a) or
(c), a supporting statement in such form that it may be retained by the
recipient which shall show:
(1) The name, address, Grade A identifier assigned by a duly
constituted regulatory agency, and the payroll number of the producer;
(2) The month and dates that milk was received from the producer,
including the daily and total pounds of milk received;
(3) The total pounds of butterfat in the producer's milk;
(4) The minimum rate at which payment to the producer is required
pursuant to this order;
(5) The rate used in making payment if the rate is other than the
applicable minimum rate;
(6) The amount, or rate per hundredweight, and nature of each
deduction claimed by the handler; and
(7) The net amount of payment to the producer or cooperative
association.

Sec. 1007.74 [Reserved]

Sec. 1007.75 Plant location adjustments for producer milk and nonpool
milk.

(a) The uniform price for producer milk shall be adjusted according
to the location of the plant at which the milk was physically received
by subtracting from the price the amount by which the Class I price
specified in Sec. 1007.50 exceeds the Class I price at the plant's
location. If the Class I price at the plant location exceeds the Class
I price specified in Sec. 1007.50, the difference shall be added to the
uniform price; and
(b) The uniform price applicable for other source milk shall be
adjusted following the procedure specified in paragraph (a) of this
section, except that the adjusted uniform price shall not be less than
the lowest announced class price.

Sec. 1007.76 Payments by a handler operating a partially regulated
distributing plant.

See Sec. 1000.76 of this chapter.

Sec. 1007.77 Adjustment of accounts.

See Sec. 1000.77 of this chapter.

Sec. 1007.78 Charges on overdue accounts.

See Sec. 1000.78 of this chapter.

Marketwide Service Payments

Sec. 1007.80 Transportation credit balancing fund.

The market administrator shall maintain a separate fund known as
the Transportation Credit Balancing Fund into which shall be deposited
the payments made by handlers pursuant to Sec. 1007.81 and out of which
shall be made the payments due handlers pursuant to Sec. 1007.82.
Payments due a handler shall be offset against payments due from the
handler.

Sec. 1007.81 Payments to the transportation credit balancing fund.

(a) On or before the 12th day after the end of the month, each
handler operating a pool plant and each handler specified in
Sec. 1000.9 (a) and (c) shall pay to the market administrator a
transportation credit balancing fund assessment determined by
multiplying the pounds of Class I producer milk assigned pursuant to
Sec. 1000.44 by $0.07 per hundredweight or such lesser amount as the
market administrator deems necessary to maintain a balance in the fund
equal to the total transportation credits disbursed during the prior
June-January period. In the event that during any month of the June-
January period the fund balance is insufficient to cover the amount of
credits that are due, the assessment should be based upon the amount of
credits that would have been disbursed had the fund balance been
sufficient.
(b) The market administrator shall announce publicly on or before
the 5th day of the month the assessment pursuant to paragraph (a) of
this section for the following month.

Sec. 1007.82 Payments from the transportation credit balancing fund.

[[Page 5046]]

such date, a preliminary audit will be conducted by the market
administrator, who will recalculate any necessary proration of
transportation credit payments for the preceding month pursuant to
paragraph (a) of this section. Handlers will be promptly notified of an
overpayment of credits based upon this final computation and remedial
payments to or from the transportation credit balancing fund will be
made on or before the next payment date for the following month;
(3) Transportation credits paid pursuant to paragraphs (a)(1) and
(2) of this section shall be subject to final verification by the
market administrator pursuant to Sec. 1000.77. Adjusted payments to or
from the transportation credit balancing fund will remain subject to
the final proration established pursuant to paragraph (a)(2) of this
section; and
(4) In the event that a qualified cooperative association is the
responsible party for whose account such milk is received and written
documentation of this fact is provided to the market administrator
pursuant to Sec. 1007.30(c)(3) prior to the date payment is due, the
transportation credits for such milk computed pursuant to this section
shall be made to such cooperative association rather than to the
operator of the pool plant at which the milk was received.
(b) The market administrator may extend the period during which
transportation credits are in effect (i.e., the transportation credit
period) to the months of January and June if a written request to do so
is received 15 days prior to the beginning of the month for which the
request is made and, after conducting an independent investigation,
finds that such extension is necessary to assure the market of an
adequate supply of milk for fluid use. Before making such a finding,
the market administrator shall notify the Director of the Dairy
Division and all handlers in the market that an extension is being
considered and invite written data, views, and arguments. Any decision
to extend the transportation credit period must be issued in writing
prior to the first day of the month for which the extension is to be
effective.
(c) Transportation credits shall apply to the following milk:
(1) Bulk milk received from a plant regulated under another Federal
order, except Federal Orders 1005, and allocated to Class I milk
pursuant to Sec. 1000.44(a)(12); and
(2) Bulk milk received directly from the farms of dairy farmers at
pool distributing plants subject to the following conditions:
(i) The quantity of such milk that shall be eligible for the
transportation credit shall be determined by multiplying the total
pounds of milk received from producers meeting the conditions of this
paragraph by the lower of:
(A) The marketwide estimated Class I utilization of all handlers
for the month pursuant to Sec. 1000.45(a); or
(B) The Class I utilization of all producer milk of the pool plant
operator receiving the milk after the computations described in
Sec. 1000.44;
(ii) The dairy farmer was not a ``producer'' under this order
during more than 2 of the immediately preceding months of January
through June and not more than 50 percent of the production of the
dairy farmer during those 2 months, in aggregate, was received as
producer milk under this order during those 2 months. However, if
January and/or June are months in which transportation credits are
disbursed pursuant to paragraph (a) of this section, these months shall
not be included in the 2-month limit provided in this paragraph; and
(iii) The farm on which the milk was produced is not located within
the specified marketing area of this order or the marketing area of
Federal Order 1005.
(d) Transportation credits shall be computed as follows:
(1) The market administrator shall subtract from the pounds of milk
described in paragraphs (c)(1) and (2) of this section the pounds of
bulk milk transferred from the pool plant receiving the supplemental
milk if milk was transferred to a nonpool plant on the same calendar
day that the supplemental milk was received. For this purpose, the
transferred milk shall be subtracted from the most distant load of
supplemental milk received, and then in sequence with the next most
distant load until all of the transfers have been offset;
(2) With respect to the pounds of milk described in paragraph
(c)(1) of this section that remain after the computations described in
paragraph (d)(1) of this section, the market administrator shall:
(i) Determine the shortest hard-surface highway distance between
the shipping plant and the receiving plant;
(ii) Multiply the number of miles so determined by 0.35 cent;
(iii) Subtract the other order's Class I price applicable at the
shipping plant's location from the Class I price applicable at the
receiving plant as specified in Sec. 1007.53;
(iv) Subtract any positive difference computed in paragraph
(d)(2)(iii) of this section from the amount computed in paragraph
(d)(2)(ii) of this section; and
(v) Multiply the remainder computed in paragraph (d)(2)(iv) of this
section by the hundredweight of milk described in paragraph (d)(2) of
this section.
(3) For the remaining milk described in paragraph (c)(2) of this
section after computations described in paragraph (d)(1) of this
section, the market administrator shall:
(i) Determine an origination point for each load of milk by
locating the nearest city to the last producer's farm from which milk
was picked up for delivery to the receiving pool plant. Alternatively,
the milk hauler that is transporting the milk of producers described in
paragraph (c)(2) of this section may establish an origination point
following the last farm pickup by stopping at the nearest
independently-operated truck stop with a certified truck scale and
obtaining a weight certificate indicating the weight of the truck and
its contents, the date and time of weighing, and the location of the
truck stop;
(ii) Determine the shortest hard-surface highway distance between
the receiving pool plant and the truck stop or city, as the case may
be;
(iii) Subtract 85 miles from the mileage so determined;
(iv) Multiply the remaining miles so computed by 0.35 cent;
(v) If the origination point determined pursuant to paragraph
(d)(3)(i) of this section is in a Federal order marketing area,
subtract the Class I price applicable at the origination point pursuant
to the provisions of such other order (as if the origination point were
a plant location) from the Class I price applicable at the distributing
plant receiving the milk. If the origination point is not in any
Federal order marketing area, determine the Class I price at the
origination point based upon the provisions of this order and subtract
this price from the Class I price applicable at the distributing plant
receiving the milk;
(vi) Subtract any positive difference computed in paragraph
(d)(3)(v) of this section from the amount computed in paragraph
(d)(3)(iv) of this section; and
(vii) Multiply the remainder computed in paragraph (d)(3)(vi) by
the hundredweight of milk described in paragraph (d)(3) of this
section.

Administrative Assessment and Marketing Service Deduction

Sec. 1007.85 Assessment for order administration.

See Sec. 1000.85 of this chapter.

[[Page 5047]]

Sec. 1007.86 Deduction for marketing services.

See Sec. 1000.86 of this chapter.

PART 1030--MILK IN THE UPPER MIDWEST MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1030.1 General provisions.

Definitions

1030.2 Upper Midwest marketing area.
1030.3 Route disposition.
1030.4 Plant.
1030.5 Distributing plant.
1030.6 Supply plant.
1030.7 Pool plant.
1030.8 Nonpool plant.
1030.9 Handler.
1030.10 Producer-handler.
1030.11 [Reserved]
1030.12 Producer.
1030.13 Producer milk.
1030.14 Other source milk.
1030.15 Fluid milk product.
1030.16 Fluid cream product.
1030.17 [Reserved]
1030.18 Cooperative association.
1030.19 Commercial food processing establishment.

Handler Reports

1030.30 Reports of receipts and utilization.
1030.31 Payroll reports.
1030.32 Other reports.

Classification of Milk

1030.40 Classes of utilization.
1030.41 [Reserved]
1030.42 Classification of transfers and diversions.
1030.43 General classification rules.
1030.44 Classification of producer milk.
1030.45 Market administrator's reports and announcements concerning
classification.

Class Prices

1030.50 Class and component prices.
1030.51 Class I differential and price.
1030.52 Adjusted Class I differentials.
1030.53 Announcement of class prices and component prices.
1030.54 Equivalent price.
1030.55 Transfer credits and assembly credits.

Producer Price Differential

1030.60 Handler's value of milk.
1030.61 Computation of producer price differential.
1030.62 Announcement of producer prices.

Payments for Milk

1030.70 Producer-settlement fund.
1030.71 Payments to the producer-settlement fund.
1030.72 Payments from the producer-settlement fund.
1030.73 Payments to producers and to cooperative associations.
1030.74 [Reserved]
1030.75 Plant location adjustments for producer milk and nonpool
milk.
1030.76 Payments by a handler operating a partially regulated
distributing plant.
1030.77 Adjustment of accounts.
1030.78 Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1030.85 Assessment for order administration.
1030.86 Deduction for marketing services.

Authority: 7 U.S.C. 601-674.

Subpart--Order Regulating Handling

General Provisions

Sec. 1030.1 General provisions.

The terms, definitions, and provisions in Part 1000 of this chapter
apply to and are hereby made a part of this order.

Definitions

Sec. 1030.2 Upper Midwest marketing area.

The marketing area means all territory within the bounds of the
following states and political subdivisions, including all piers,
docks, and wharves connected therewith and all craft moored thereat,
and all territory occupied by government (municipal, State, or Federal)
reservations, installations, institutions, or other similar
establishments if any part thereof is within any of the listed states
or political subdivisions:

Illinois Counties

Boone, Carroll, Cook, De Kalb, Du Page, Jo Daviess (except the
city of East Dubuque), Kane, Kendall, Lake, Lee, McHenry, Ogle,
Stephenson, Whiteside (the townships of Caloma, Hahnaman, Hopkins,
Hume, Jordan, Montmorency, Sterling, and Tampico only), Will, and
Winnebago.

Iowa Counties

Howard, Kossuth, Mitchell (except the city of Osage), Winnebago,
Winneshiek, and Worth.

Michigan Counties

Delta, Dickinson, Gogebic, Iron, Menominee, and Ontonagon.

Minnesota

All counties except Lincoln, Nobles, Pipestone, and Rock.

North Dakota Counties

Barnes, Cass, Cavalier, Dickey, Grand Forks, Griggs, La Moure,
Nelson, Pembina, Ramsey, Ransom, Richland, Sargent, Steele, Traill,
and Walsh.

South Dakota Counties

Brown, Day, Edmunds, Grant, Marshall, McPherson, Roberts, and
Walworth.

Wisconsin Counties

All counties except Crawford and Grant.

Sec. 1030.3 Route disposition.

See Sec. 1000.3 of this chapter.

Sec. 1030.4 Plant.

See Sec. 1000.4 of this chapter.

Sec. 1030.5 Distributing plant.

See Sec. 1000.5 of this chapter.

Sec. 1000.6 Supply plant.

See Sec. 1000.6 of this chapter.

Sec. 1030.7 Pool plant.

[[Page 5048]]

(i) Pool plants described in Sec. 1030.7(a), (b) and (e);
(ii) Plants of producer-handlers;
(iii) Partially regulated distributing plants, except that credit
for such shipments shall be limited to the amount of such milk
classified as Class I at the transferee plant; and
(iv) Distributing plants fully regulated under other Federal
orders, except that credit for shipments to such plants shall be
limited to the quantity shipped to pool distributing plants during the
month and credits for shipments to other order plants shall not include
any such shipments made on the basis of agreed-upon Class II, Class
III, or Class IV utilization.
(2) The operator of a supply plant may include as qualifying
shipments deliveries to pool distributing plants and deliveries to
plants described in Sec. 1030.7(e) directly from farms of producers
pursuant to Sec. 1030.13(c).
(d) [Reserved]
(e) Two or more plants operated by the same handler and located in
the marketing area may qualify for pool status as a unit by meeting the
total and in-area route disposition requirements of a pool distributing
plant specified in paragraph (a) of this section and subject to the
following additional requirements:
(1) At least one of the plants in the unit must qualify as a pool
plant pursuant to paragraph (a) of this section;
(2) Other plants in the unit must process Class I or Class II
products, using 50 percent or more of the total Grade A fluid milk
products received in bulk form at such plant or diverted therefrom by
the plant operator in Class I or Class II products; and
(3) The operator of the unit has filed a written request with the
market administrator prior to the first day of the month for which such
status is desired to be effective. The unit shall continue from month-
to-month thereafter without further notification. The handler shall
notify the market administrator in writing prior to the first day of
any month for which termination or any change of the unit is desired.
(f) A system of supply plants may be qualified for pooling by the
association of two or more supply plants operated by one or more
handlers by meeting the applicable percentage requirements of paragraph
(c) of this section in the same manner as a single plant and subject to
the following additional requirements:
(1) Each plant in the system is located within the marketing area,
or was a pool supply plant pursuant to Sec. 1068.7(b) for each of the
three months immediately preceding the effective date of this paragraph
so long as it continues to maintain pool status. Cooperative
associations may not use shipments pursuant to Sec. 1000.9(c) to
qualify plants located outside the marketing area;
(2) The handler(s) establishing the system submits a written
request to the market administrator on or before July 15 requesting
that such plants qualify as a system for the period of August through
July of the following year. Such request will contain a list of the
plants participating in the system in the order, beginning with the
last plant, in which the plants will be dropped from the system if the
system fails to qualify. Each plant that qualifies as a pool plant
within a system shall continue each month as a plant in the system
through the following July unless the handler(s) establishing the
system submits a written request to the market administrator that the
plant be deleted from the system or that the system be discontinued.
Any plant that has been so deleted from a system, or that has failed to
qualify in any month, will not be part of any system for the remaining
months through July. The handler(s) that established a system may add a
plant operated by such handler(s) to a system, if such plant has been a
pool plant each of the six prior months and would otherwise be eligible
to be in a system, upon written request to the market administrator no
later than the 15th day of the prior month. In the event of an
ownership change or business failure of a handler that is a participant
in a system, the system may be reorganized to reflect such changes by
submitting a written request to file a new marketing agreement with the
market administrator; and
(3) If a system fails to qualify under the requirements of this
paragraph, the handler responsible for qualifying the system shall
notify the market administrator which plant or plants will be deleted
from the system so that the remaining plants may be pooled as a system.
If the handler fails to do so, the market administrator shall exclude
one or more plants, beginning at the bottom of the list of plants in
the system and continuing up the list as necessary until the deliveries
are sufficient to qualify the remaining plants in the system.
(g) The performance standards of paragraphs (a), (c), (d), (e) and
(f) of this section may be increased or decreased, for part or all of
the marketing area, by the market administrator if found necessary to
obtain needed shipments or to prevent uneconomic shipments. Before
making a finding that a change is necessary the market administrator
shall investigate the need for revision, either on such person's own
initiative or at the request of interested persons. If such
investigation shows that a revision might be appropriate, a notice
shall be issued stating that a revision is being considered and
inviting data, views, and arguments. If the market administrator
determines that an adjustment to the shipping percentages is necessary,
the market administrator shall notify the industry within one day of
the effective date of such adjustment.
(h) The term pool plant shall not apply to the following plants:
(1) A producer-handler as defined under any Federal order;
(2) An exempt plant as defined in Sec. 1000.8(e);
(3) A plant located within the marketing area and qualified
pursuant to paragraph (a) or (e) of this section which meets the
pooling requirements of another Federal order, and from which more than
50 percent of its route disposition has been in the other Federal order
marketing area for three consecutive months;
(4) A plant located outside the marketing area and qualified
pursuant to paragraph (a) of this section that meets the pooling
requirements of another Federal order and has had greater sales in such
other Federal order's marketing area for 3 consecutive months;
(5) A plant located in another Federal order marketing area and
qualified pursuant to paragraph (a) of this section that meets the
pooling requirements of such other Federal order and does not have a
majority of its route distribution in this marketing area for 3
consecutive months or if the plant is required to be regulated under
such other Federal order without regard to its route disposition in any
other Federal order marketing area;
(6) A plant qualified pursuant to paragraph (c) of this section
which also meets the pooling requirements of another Federal order and
from which greater qualifying shipments are made to plants regulated
under the other Federal order than are made to plants regulated under
this order, or the plant has automatic pooling status under the other
Federal order; and
(7) That portion of a regulated plant designated as a nonpool plant
that is physically separate and operated separately from the pool
portion of such plant. The designation of a portion of a regulated
plant as a nonpool plant must be requested in advance and in writing by
the handler and must be approved by the market administrator.
(i) Any plant that qualifies as a pool plant in each of the
immediately preceding three months pursuant to paragraph (a) of this
section or the shipping percentages in paragraph (c) of

[[Page 5049]]

this section that is unable to meet such performance standards for the
current month because of unavoidable circumstances determined by the
market administrator to be beyond the control of the handler operating
the plant, such as a natural disaster (ice storm, wind storm, flood),
fire, breakdown of equipment, or work stoppage, shall be considered to
have met the minimum performance standards during the period of such
unavoidable circumstances, but such relief shall not be granted for
more than two consecutive months.

Sec. 1030.8 Nonpool plant.

See Sec. 1000.8 of this chapter.

Sec. 1030.9 Handler.

See Sec. 1000.9 of this chapter.

Sec. 1030.10 Producer-handler.

Except as provided in paragraph (g) of this section, producer-
handler means a person who:
(a) Operates a dairy farm and a distributing plant from which there
is monthly route disposition in excess of 150,000 pounds during the
month;
(b) Receives no fluid milk products from sources other than own
farm production, pool handlers, and plants fully regulated under
another Federal order;
(c) Receives at its plant or acquires for route disposition no more
than 150,000 pounds of fluid milk products from handlers fully
regulated under any Federal order. This limitation shall not apply if
the producer-handler's own farm production is less than 150,000 pounds
during the month.
(d) Disposes of no other source milk as Class I milk except by
increasing the nonfat milk solids content of the fluid milk products
received from own farm production or pool handlers;
(e) Disposes of no fluid milk products using the distribution
system of another handler except for direct deliveries to retail
outlets or to a pool handler's plant;
(f) Provides proof satisfactory to the market administrator that
the care and management of the dairy animals and other resources
necessary to produce all Class I milk handled (excluding receipts from
handlers fully regulated under any Federal order) and the processing,
packaging, and distribution operations are the producer-handler's own
enterprise and at its own risk; and
(g) Producer-handler shall not include any producer who also
operates a distributing plant if the producer-handler so requests that
the two be operated as separate entities with the distributing plant
regulated under Sec. 1030.7(a) and the farm operated as a producer
under Sec. 1030.12.

Sec. 1030.11 [Reserved]

Sec. 1030.12 Producer.

Sec. 1030.13 Producer milk.

Sec. 1030.14 Other source milk.

See Sec. 1000.14 of this chapter.

Sec. 1030.15 Fluid milk product.

See Sec. 1000.15 of this chapter.

Sec. 1030.16 Fluid cream product.

See Sec. 1000.16 of this chapter.

Sec. 1030.18 Cooperative association.

See Sec. 1000.18 of this chapter.

Sec. 1030.19 Commercial food processing establishment.

See Sec. 1000.19 of this chapter.

Handler Reports

Sec. 1030.30 Reports of receipts and utilization.

[[Page 5050]]

(i) Receipts of producer milk, including producer milk diverted by
the handler; and
(ii) Receipts of milk from handlers described in Sec. 1000.9(c);
(2) Product pounds and pounds of butterfat contained in:
(i) Receipts of fluid milk products and bulk fluid cream products
from other pool plants;
(ii) Receipts of other source milk; and
(iii) Inventories at the beginning and end of the month of fluid
milk products and bulk fluid cream products;
(3) The utilization or disposition of all milk and milk products
required to be reported pursuant to this paragraph; and
(4) Such other information with respect to the receipts and
utilization of skim milk, butterfat, milk protein, other nonfat solids,
and somatic cell information, as the market administrator may
prescribe.
(b) Each handler operating a partially regulated distributing plant
shall report with respect to such plant in the same manner as
prescribed for reports required by paragraph (a) of this section.
Receipts of milk that would have been producer milk if the plant had
been fully regulated shall be reported in lieu of producer milk. The
report shall show also the quantity of any reconstituted skim milk in
route disposition in the marketing area.
(c) Each handler not specified in paragraphs (a) and (b) of this
section shall report with respect to its receipts and utilization of
milk and milk products in such manner as the market administrator may
prescribe.

Sec. 1030.31 Payroll reports.

(a) On or before the 22nd day after the end of each month, each
handler that operates a pool plant pursuant to Sec. 1030.7 and each
handler described in Sec. 1000.9(c) shall report to the market
administrator its producer payroll for the month, in the detail
prescribed by the market administrator, showing for each producer the
information described in Sec. 1030.73(f).
(b) Each handler operating a partially regulated distributing plant
who elects to make payment pursuant to Sec. 1000.76(b) shall report for
each dairy farmer who would have been a producer if the plant had been
fully regulated in the same manner as prescribed for reports required
by paragraph (a) of this section.

Sec. 1030.32 Other reports.

In addition to the reports required pursuant to Secs. 1030.30 and
1030.31, each handler shall report any information the market
administrator deems necessary to verify or establish each handler's
obligation under the order.

Classification of Milk

Sec. 1030.40 Classes of utilization.

See Sec. 1000.40 of this chapter.

Sec. 1030.42 Classification of transfers and diversions.

See Sec. 1000.42 of this chapter.

Sec. 1000.43 General classification rules.

See Sec. 1000.43 of this chapter.

Sec. 1000.44 Classification of producer milk.

See Sec. 1000.44 of this chapter.

Sec. 1000.45 Market administrator's reports and announcements
concerning classification.

See Sec. 1000.45 of this chapter.

Class Prices

Sec. 1030.50 Class prices and component prices.

See Sec. 1000.50 of this chapter.

Sec. 1030.51 Class I differential and price.

The Class I differential shall be the differential established for
Cook County, Illinois, which is reported in Sec. 1000.52. The Class I
price shall be the price computed pursuant to Sec. 1000.50(a) for Cook
County, Illinois.

Sec. 1030.52 Adjusted Class I differentials.

See Sec. 1000.52 of this chapter.

Sec. 1030.53 Announcement of class prices and component prices.

See Sec. 1000.53 of this chapter.

Sec. 1030.54 Equivalent price.

See Sec. 1000.54 of this chapter.

Sec. 1030.55 Transfer credits and assembly credits on Class I milk.

(a) For bulk milk transferred from a pool plant to a pool
distributing plant, and which is classified as Class I milk, the
shipping handler shall receive a transportation credit computed by
multiplying the pounds of Class I milk by the product of .0028 times
the number of miles between the transferor plant and the transferee
plant.
(b) For each handler who transfers or diverts bulk fluid milk from
a pool plant to a pool distributing plant a procurement credit shall be
determined by multiplying the hundredweight of milk classified as Class
I at the pool plant by 8 cents.
(c) For each handler described in Sec. 1000.9(c), a procurement
credit for bulk fluid milk received as producer milk at a pool
distributing plant shall be determined by prorating the producer milk
classified as Class I at the pool distributing plant, and multiplying
by 8 cents per hundredweight.
(d) For each handler operating a pool distributing plant pursuant
to Sec. 1030.7(a) or (b), a procurement credit for bulk fluid milk
received shall be calculated by multiplying the producer milk
classified as Class I at the pool distributing plant by 8 cents per
hundredweight.
(e) For purposes of this section, the distances to be computed
shall be determined by the market administrator using the shortest
available state and/or Federal highway mileage. Mileage determinations
are subject to redetermination at all times. In the event a handler
requests a redetermination of the mileage pertaining to any plant, the
market administrator shall notify the handler of such redetermination
within 30 days after the receipt of such request. Any financial
obligations resulting from a change in mileage shall not be retroactive
for any periods prior to the redetermination by the market
administrator.

Producer Price Differential

Sec. 1030.60 Handler's value of milk.

[[Page 5051]]

(1) Multiply the pounds of skim milk in Class III as determined
pursuant to Sec. 1000.44(a) by the average protein content of producer
skim milk received by the handler, and multiply the resulting pounds of
protein by the protein price;
(2) Add an amount obtained by multiplying the pounds of skim milk
in Class III as determined pursuant to Sec. 1000.44(a) by the average
other solids content of producer skim milk received by the handler, and
multiply the resulting pounds of other solids by the other solids
price; and
(3) Add an amount obtained by multiplying the pounds of butterfat
in Class III as determined pursuant to Sec. 1000.44(b) by the butterfat
price;
(d) Add the Class IV value computed as follows:
(1) Multiply the pounds of skim milk in Class IV as determined
pursuant to Sec. 1000.44(a) by the average nonfat solids content of
producer skim milk received by the handler, and multiply the resulting
pounds of nonfat solids by the nonfat solids price; and
(2) Add an amount obtained by multiplying the pounds of butterfat
in Class IV as determined pursuant to Sec. 1000.44(b) by the butterfat
price;
(e) Add an adjustment for somatic cell content of producer milk
determined by multiplying the value reported pursuant to
Sec. 1030.30(a)(1) by the percentage of the total producer milk
allocated to Class II, Class III, and Class IV pursuant to
Sec. 1000.44(c);
(f) Add the amounts obtained from multiplying the pounds of skim
milk and butterfat overage assigned to each class pursuant to
Sec. 1000.43(b)(2) by the respective skim milk and butterfat prices
applicable at the location of the pool plant;
(g) Add the amount obtained from multiplying the difference between
the Class III price for the preceding month and the Class I price
applicable at the location of the pool plant or the Class II price, as
the case may be, for the current month by the hundredweight of skim
milk and butterfat subtracted from Class I and Class II pursuant to
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
(h) Add the amount obtained from multiplying the difference between
the Class I price applicable at the location of the pool plant and the
Class III price by the hundredweight of skim milk and butterfat
assigned to Class I pursuant to Sec. 1000.43(d) and the hundredweight
of skim milk and butterfat subtracted from Class I pursuant to
Sec. 1000.44(a)(3)(i) through (iii) and the corresponding step of
Sec. 1000.44(b), excluding receipts of bulk fluid cream products from a
plant regulated under other Federal orders and bulk concentrated fluid
milk products from pool plants, plants regulated under other Federal
orders, and unregulated supply plants;
(i) Add the amount obtained from multiplying the difference between
the Class I price and the Class III price applicable at the location of
the nearest unregulated supply plants from which an equivalent volume
was received by the pounds of skim milk and butterfat in receipts of
concentrated fluid milk products assigned to Class I pursuant to
Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and the pounds of skim milk
and butterfat subtracted from Class I pursuant to Sec. 1000.44(a)(8)
and the corresponding step of Sec. 1000.44(b), excluding such skim milk
and butterfat in receipts of bulk fluid milk products from an
unregulated supply plant to the extent that an equivalent amount of
skim milk or butterfat disposed of to such plant by handlers fully
regulated under any Federal milk order is classified and priced as
Class I milk and is not used as an offset for any other payment
obligation under any order;
(j) Subtract an amount equal to any credits applicable pursuant to
Sec. 1030.55;
(k) Subtract, for reconstituted milk made from receipts of nonfluid
milk products, an amount computed by multiplying $1.00 (but not more
than the difference between the Class I price applicable at the
location of the pool plant and the Class IV price) by the hundredweight
of skim milk and butterfat contained in receipts of nonfluid milk
products that are allocated to Class I pursuant to Sec. 1000.43(d); and
(l) Exclude, for pricing purposes under this section, receipts of
nonfluid milk products that are distributed as labeled reconstituted
milk for which payments are made to the producer-settlement fund of
another order under Sec. 1000.76(a)(5) or (c).

Sec. 1030.61 Computation of producer price differential.

For each month the market administrator shall compute a producer
price differential per hundredweight. If the unreserved balance in the
producer-settlement fund to be included in the computation is less than
2 cents per hundredweight of producer milk on all reports, the report
of any handler who has not made payments required pursuant to
Sec. 1030.71 for the preceding month shall not be included in the
computation of the producer price differential. The report of such
handler shall not be included in the computation for succeeding months
until the handler has made full payment of outstanding monthly
obligations. Subject to the aforementioned conditions, the market
administrator shall compute the producer price differential in the
following manner:
(a) Combine into one total the values computed pursuant to
Sec. 1030.60 for all handlers required to file reports prescribed in
Sec. 1030.30;
(b) Subtract the total values obtained by multiplying each
handler's total pounds of protein, other solids, and butterfat
contained in the milk for which an obligation was computed pursuant to
Sec. 1030.60 by the protein price, the other solids price, and the
butterfat price, respectively, and the total value of the somatic cell
adjustment pursuant to Sec. 1030.30(a)(1);
(c) Add an amount equal to the sum of the location adjustments
computed pursuant to Sec. 1030.75;
(d) Add an amount equal to not less than one-half of the
unobligated balance in the producer-settlement fund;
(e) Divide the resulting amount by the sum of the following for all
handlers included in these computations:
(1) The total hundredweight of producer milk; and
(2) The total hundredweight for which a value is computed pursuant
to Sec. 1030.60(i); and
(f) Subtract not less than 4 cents nor more than 5 cents from the
price computed pursuant to paragraph (e) of this section. The result
shall be known as the producer price differential for the month.

Sec. 1030.62 Announcement of producer prices.

On or before the 13th day after the end of each month, the market
administrator shall announce publicly the following prices and
information:
(a) The producer price differential;
(b) The protein price;
(c) The other solids price;
(d) The butterfat price;
(e) The somatic cell adjustment rate;
(f) The average butterfat, protein and other solids content of
producer milk; and
(g) The statistical uniform price for milk containing 3.5 percent
butterfat, computed by combining the Class III price and the producer
price differential.

Payments for Milk

Sec. 1030.70 Producer-settlement fund.

See Sec. 1000.70 of this chapter.

Sec. 1030.71 Payments to the producer-settlement fund.

Each handler shall make payment to the producer-settlement fund in
a manner that provides receipt of the

[[Page 5052]]

funds by the market administrator no later than the 15th day after the
end of the month. Payment shall be the amount, if any, by which the
amount specified in (a) of this section exceeds the amount specified in
(b) of this section:
(a) The total value of milk to the handler for the month as
determined pursuant to Sec. 1030.60.
(b) The sum of:
(1) An amount obtained by multiplying the total hundredweight of
producer milk as determined pursuant to Sec. 1000.44(c) by the producer
price differential as adjusted pursuant to Sec. 1030.75;
(2) An amount obtained by multiplying the total pounds of protein,
other solids, and butterfat contained in producer milk by the protein,
other solids, and butterfat prices respectively;
(3) The total value of the somatic cell adjustment to producer
milk; and
(4) An amount obtained by multiplying the pounds of skim milk and
butterfat for which a value was computed pursuant to Sec. 1030.60(i) by
the producer price differential as adjusted pursuant to Sec. 1030.75
for the location of the plant from which received.

Sec. 1030.72 Payments from the producer-settlement fund.

No later than the 16th day after the end of each month, the market
administrator shall pay to each handler the amount, if any, by which
the amount computed pursuant to Sec. 1030.71(b) exceeds the amount
computed pursuant to Sec. 1030.71(a). If, at such time, the balance in
the producer-settlement fund is insufficient to make all payments
pursuant to this section, the market administrator shall reduce
uniformly such payments and shall complete the payments as soon as the
funds are available.

Sec. 1030.73 Payments to producers and to cooperative associations.

(a) Each handler shall pay each producer for producer milk for
which payment is not made to a cooperative association pursuant to
paragraph (b) of this section, as follows:
(1) Partial payment. For each producer who has not discontinued
shipments as of the date of this partial payment, payment shall be made
so that it is received by each producer on or before the 26th day of
the month for milk received during the first 15 days of the month from
the producer at not less than the lowest announced class price for the
preceding month, less proper deductions authorized in writing by the
producer; and
(2) Final payment. For milk received during the month, payment
shall be made so that it is received by each producer no later than the
17th day after the end of the month in an amount equal to not less than
the sum of:
(i) The hundredweight of producer milk received times the producer
price differential for the month as adjusted pursuant to Sec. 1030.75;
(ii) The pounds of butterfat received times the butterfat price for
the month;
(iii) The pounds of protein received times the protein price for
the month;
(iv) The pounds of other solids received times the other solids
price for the month;
(v) The hundredweight of milk received times the somatic cell
adjustment for the month;
(vi) Less any payment made pursuant to paragraph (a)(1) of this
section;
(vii) Less proper deductions authorized in writing by such producer
and plus or minus adjustments for errors in previous payments to such
producer; and
(viii) Less deductions for marketing services pursuant to
Sec. 1000.86.
(b) Payments for milk received from cooperative association
members. On or before the day prior to the dates specified in
paragraphs (a)(1) and (a)(2) of this section, each handler shall pay to
a cooperative association for milk from producers who market their milk
through the cooperative association and who have authorized the
cooperative to collect such payments on their behalf an amount equal to
the sum of the individual payments otherwise payable for such producer
milk pursuant to paragraphs (a)(1) and (a)(2) of this section.
(c) Payment for milk received from cooperative association pool
plants or from cooperatives as handlers pursuant to Sec. 1000.9(c). On
or before the day prior to the dates specified in paragraph (a)(1) and
(a)(2) of this section, each handler who receives fluid milk products
at its plant from a cooperative association in its capacity as the
operator of a pool plant or who receives milk from a cooperative
association in its capacity as a handler pursuant to Sec. 1000.9(c),
including the milk of producers who are not members of such association
and who the market administrator determines have authorized the
cooperative association to collect payment for their milk, shall pay
the cooperative for such milk as follows:
(1) For bulk fluid milk products and bulk fluid cream products
received from a cooperative association in its capacity as the operator
of a pool plant and for milk received from a cooperative association in
its capacity as a handler pursuant to Sec. 1000.9(c) during the first
15 days of the month, at not less than the lowest announced class price
per hundredweight for the preceding month;
(2) For the total quantity of bulk fluid milk products and bulk
fluid cream products received from a cooperative association in its
capacity as the operator of a pool plant, at not less than the total
value of such products received from the association's pool plants, as
determined by multiplying the respective quantities assigned to each
class under Sec. 1000.44, as follows:
(i) The hundredweight of Class I skim milk times the Class I skim
milk price for the month plus the pounds of Class I butterfat times the
Class I butterfat price for the month. The Class I price to be used
shall be that price effective at the location of the shipping plant;
(ii) The hundredweight of Class II skim milk times $ .70;
(iii) The pounds of nonfat solids received in Class II and Class IV
milk times the nonfat solids price for the month;
(iv) The pounds of butterfat received in Class II, Class III, and
Class IV milk times the butterfat price for the month;
(v) The pounds of protein received in Class III milk times the
protein price for the month;
(vi) The pounds of other solids received in Class III milk times
the other solids price for the month;
(vii) The hundredweight of Class II, Class III, and Class IV milk
received times the somatic cell adjustment; and
(viii) Add together the amounts computed in paragraphs (c)(2)(i)
through (vii) of this section and from that sum deduct any payment made
pursuant to paragraph (c)(1) of this section.
(3) For the total quantity of milk received during the month from a
cooperative association in its capacity as a handler under
Sec. 1000.9(c) as follows:
(i) The hundredweight of producer milk received times the producer
price differential as adjusted pursuant to Sec. 1030.75;
(ii) The pounds of butterfat received times the butterfat price for
the month;
(iii) The pounds of protein received times the protein price for
the month;
(iv) The pounds of other solids received times the other solids
price for the month;
(v) The hundredweight of milk received times the somatic cell
adjustment for the month; and
(vi) Add together the amounts computed in paragraphs (c)(3)(i)
through (v) of this section and from that sum deduct any payment made
pursuant to paragraph (c)(1) of this section.

[[Page 5053]]

(d) If a handler has not received full payment from the market
administrator pursuant to Sec. 1030.72 by the payment date specified in
paragraph (a), (b) or (c)(2) of this section, the handler may reduce
pro rata its payments to producers or to the cooperative association
(with respect to receipts described in paragraph (b), prorating the
underpayment to the volume of milk received from the cooperative
association in proportion to the total milk received from producers by
the handler), but not by more than the amount of the underpayment. The
payments shall be completed on the next scheduled payment date after
receipt of the balance due from the market administrator.
(e) If a handler claims that a required payment to a producer
cannot be made because the producer is deceased or cannot be located,
or because the cooperative association or its lawful successor or
assignee is no longer in existence, the payment shall be made to the
producer-settlement fund, and in the event that the handler
subsequently locates and pays the producer or a lawful claimant, or in
the event that the handler no longer exists and a lawful claim is later
established, the market administrator shall make the required payment
from the producer-settlement fund to the handler or to the lawful
claimant, as the case may be.
(f) In making payments to producers pursuant to this section, each
handler shall furnish each producer, except a producer whose milk was
received from a cooperative association handler described in
Sec. 1000.9(a) or (c), a supporting statement in a form that may be
retained by the recipient which shall show:
(1) The name, address, Grade A identifier assigned by a duly
constituted regulatory agency, and payroll number of the producer;
(2) The daily and total pounds, and the month and dates such milk
was received from that producer;
(3) The total pounds of butterfat, protein, and other solids
contained in the producer's milk;
(4) The somatic cell count of the producer's milk;
(5) The minimum rate or rates at which payment to the producer is
required pursuant to this order;
(6) The rate used in making payment if the rate is other than the
applicable minimum rate;
(7) The amount, or rate per hundredweight, or rate per pound of
component, and the nature of each deduction claimed by the handler; and
(8) The net amount of payment to the producer or cooperative
association.

Sec. 1030.74 [Reserved]

Sec. 1030.75 Plant location adjustments for producer milk and nonpool
milk.

(a) The producer price differential for producer milk shall be
adjusted according to the location of the plant at which the milk was
physically received by subtracting from the price differential the
amount by which the Class I price specified in Sec. 1030.51 exceeds the
Class I price at the plant's location. If the Class I price at the
plant location exceeds the Class I price specified in Sec. 1030.51, the
difference shall be added to the producer price differential price; and
(b) The producer price differential applicable to other source milk
shall be adjusted following the procedure specified in paragraph (a) of
this section, except that the adjusted producer price differential
shall not be less than zero.

Sec. 1030.76 Payments by a handler operating a partially regulated
distributing plant.

See Sec. 1000.76 of this chapter.

Sec. 1030.77 Adjustment of accounts.

See Sec. 1000.77 of this chapter.

Sec. 1030.78 Charges on overdue accounts.

See Sec. 1000.78 of this chapter.

Administrative Assessment and Marketing Service Deduction

Sec. 1030.85 Assessment for order administration.

See Sec. 1000.85 of this chapter.

Sec. 1030.86 Deduction for marketing services.

See Sec. 1000.86 of this chapter.

PART 1032--MILK IN THE CENTRAL MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1032.1 General provisions.

Definitions

1032.2 Central marketing area.
1032.3 Route disposition.
1032.4 Plant.
1032.5 Distributing plant.
1032.6 Supply plant.
1032.7 Pool plant.
1032.8 Nonpool plant.
1032.9 Handler.
1032.10 Producer-handler.
1032.11 [Reserved]
1032.12 Producer.
1032.13 Producer milk.
1032.14 Other source milk.
1032.15 Fluid milk product.
1032.16 Fluid cream product.
1032.17 [Reserved]
1032.18 Cooperative association.
1032.19 Commercial food processing establishment.

Handler Reports

1032.30 Reports of receipts and utilization.
1032.31 Payroll reports.
1032.32 Other reports.

Classification of Milk

1032.40 Classes of utilization.
1032.41 [Reserved]
1032.42 Classification of transfers and diversions.
1032.43 General classification rules.
1032.44 Classification of producer milk.
1032.45 Market administrator's reports and announcements concerning
classification.

Class Prices

1032.50 Class prices and component prices.
1032.51 Class I differential and price.
1032.52 Adjusted Class I differentials.
1032.53 Announcement of class prices and component prices.
1032.54 Equivalent price.

Producer Price Differential

1032.60 Handler's value of milk.
1032.61 Computation of producer price differential.
1032.62 Announcement of producer prices.

Payments for Milk

1032.70 Producer-settlement fund.
1032.71 Payments to the producer-settlement fund.
1032.72 Payments from the producer-settlement fund.
1032.73 Payments to producers and to cooperative associations.
1032.74 [Reserved]
1032.75 Plant location adjustments for producer milk and nonpool
milk.
1032.76 Payments by a handler operating a partially regulated
distributing plant.
1032.77 Adjustment of accounts.
1032.78 Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1032.85 Assessment for order administration.
1032.86 Deduction for marketing services.

Authority: 7 U.S.C. 601-674.

Subpart--Order Regulating Handling

General Provisions

Sec. 1032.1 General provisions.

The terms, definitions, and provisions in Part 1000 of this chapter
apply to and are hereby made a part of this order.

Definitions

Sec. 1032.2 Central marketing area.

[[Page 5054]]

installations, institutions, or other similar establishments if any
part thereof is within any of the listed states or political
subdivisions:
(a) In the State of Colorado, the counties of: Adams, Arapahoe,
Baca, Bent, Boulder, Clear Creek, Cheyenne, Crowley, Custer, Denver,
Douglas, El Paso, Elbert, Gilpin, Huerfano, Jefferson, Kiowa, Kit
Carson, Larimer, Las Animas, Lincoln, Logan, Morgan, Otero, Park,
Phillips, Prowers, Pueblo, Sedgwick, Teller, Washington, Weld, and
Yuma.
(b) In the State of Illinois, the counties of:
(1) Adams, Alexander, Bond, Brown, Bureau, Calhoun, Cass,
Champaign, Christian, Clark, Clay, Clinton, Coles, Crawford,
Cumberland, De Witt, Douglas, Edgar, Edwards, Effingham, Fayette, Ford,
Franklin, Fulton, Gallatin, Greene, Grundy, Hamilton, Hancock, Hardin,
Henderson, Henry, Iroquois, Jackson, Jasper, Jefferson, Jersey,
Johnson, Kankakee, Knox, La Salle, Lawrence, Livingston, Logan,
McDonough, McLean, Macon, Macoupin, Madison, Marion, Marshall, Mason,
Massac, Menard, Mercer, Monroe, Montgomery, Morgan, Moultrie, Peoria,
Perry, Piatt, Pike, Pope, Pulaski, Putnam, Randolph, Richland, Rock
Island, Saline, Sangamon, Schuyler, Scott, Shelby, St. Clair, Stark,
Tazewell, Union, Vermilion, Wabash, Warren, Washington, Wayne, White,
Williamson, and Woodford;
(2) In Jo Daviess County, the city of East Dubuque; and
(3) In Whiteside County, the townships of Fulton, Ustick, Clyde,
Genesee, Mount Pleasant, Union Grove, Garden Plain, Lyndon, Fenton,
Newton, Prophetstown, Portland, and Erie.
(c) In the State of Iowa:
(1) All of the counties except: Howard, Kossuth, Mitchell (except
the city of Osage), Winnebago, Winneshiek, and Worth; and
(2) In Mitchell County the city of Osage.
(d) All of the State of Kansas.
(e) In the State of Minnesota, the counties of: Lincoln, Nobles,
Pipestone, and Rock.
(f) In the State of Missouri: (1) The counties of:
Andrew, Atchison, Bates, Buchanan, Caldwell, Carroll, Cass, Clark,
Clay, Clinton, Daviess, De Kalb, Franklin, Gentry, Grundy, Harrison,
Henry, Hickory, Holt, Jackson, Jefferson, Johnson, Knox, Lafayette,
Lewis, Lincoln, Livingston, Marion, Mercer, Nodaway, Pettis, Platte,
Putnam, Ray, Saline, Schuyler, Scotland, Shelby, St. Charles, St.
Clair, Ste. Genevieve, St. Louis, Sullivan, Warren, and Worth; and
(2) The city of St. Louis.
(g) In the State of Nebraska, the counties of: Adams, Antelope,
Boone, Buffalo, Burt, Butler, Cass, Cedar, Chase, Clay, Colfax, Cuming,
Custer, Dakota, Dawson, Dixon, Dodge, Douglas, Dundy, Fillmore,
Franklin, Frontier, Furnas, Gage, Gosper, Greeley, Hall, Hamilton,
Harlan, Hayes, Hitchcock, Howard, Jefferson, Johnson, Kearney, Keith,
Knox, Lancaster, Lincoln, Madison, Merrick, Nance, Nemaha, Nuckolls,
Otoe, Pawnee, Perkins, Phelps, Pierce, Platte, Polk, Red Willow,
Richardson, Saline, Sarpy, Saunders, Seward, Sherman, Stanton, Thayer,
Thurston, Valley, Washington, Wayne, Webster, and York.
(h) All of the State of Oklahoma.
(i) In the State of South Dakota, the counties of: Aurora, Beadle,
Bon Homme, Brookings, Clark, Clay, Codington, Davison, Deuel, Douglas,
Hamlin, Hanson, Hutchinson, Jerauld, Kingsbury, Lake, Lincoln, McCook,
Miner, Minnehaha, Moody, Sanborn, Spink, Turner, Union, and Yankton.
(j) In the State of Wisconsin, the counties of: Crawford and Grant.

Sec. 1032.3 Route disposition.

See Sec. 1000.3 of this chapter.

Sec. 1032.4 Plant.

See Sec. 1000.4 of this chapter.

Sec. 1032.5 Distributing plant.

Sec. 1000.5 of this chapter.

Sec. 1032.6 Supply plant.

Sec. 1000.6 of this chapter.

Sec. 1032.7 Pool plant.

[[Page 5055]]

plants specified in paragraph (a) or (b) of this section either
directly from farms or by transfer from supply plants operated by the
cooperative association and from plants of the cooperative association
for which pool plant status has been requested under this paragraph
subject to the following conditions:
(1) The plant does not qualify as a pool plant under paragraph (a),
(b) or (c) of this section or under comparable provisions of another
Federal order; and
(2) The plant is approved by a duly constituted regulatory agency
for the handling of milk approved for fluid consumption in the
marketing area.
(e) Two or more plants operated by the same handler and located in
the marketing area may qualify for pool status as a unit by meeting the
total and in-area route disposition requirements of a pool distributing
plant specified in paragraph (a) of this section and subject to the
following additional requirements:
(1) At least one of the plants in the unit must qualify as a pool
plant pursuant to paragraph (a) of this section;
(2) Other plants in the unit must process Class I or Class II
products, using 50 percent or more of the total Grade A fluid milk
products received in bulk form at such plant or diverted therefrom by
the plant operator in Class I or Class II products, and must be located
in a pricing zone providing the same or a lower Class I price than the
price applicable at the distributing plant included in the unit
pursuant to paragraph (e)(1) of this section; and
(3) The operator of the unit has filed a written request with the
market administrator prior to the first day of the month for which such
status is desired to be effective. The unit shall continue from month
to month thereafter without further notification. The handler shall
notify the market administrator in writing prior to the first day of
any month for which termination or any change of the unit is desired.
(f) A system of supply plants may be qualified for pooling by the
association of two or more supply plants operated by one or more
handlers by meeting the applicable percentage requirements of paragraph
(c) of this section in the same manner as a single plant, subject to
the following additional requirements:
(1) Each plant in the system is located within the marketing area;
(2) The handler(s) establishing the system submits a written
request to the market administrator on or before September 1 requesting
that such plants qualify as a system for the period of September
through August of the following year. Such request will contain a list
of the plants participating in the system.
(3) Each plant included within a pool supply plant system shall
continue each month as a plant in the system through the following
August unless the handler(s) establishing the system submits a written
request to the market administrator that the plant be deleted from the
system or that the system be discontinued. Any plant that has been so
deleted from a system, or that has failed to qualify in any month, will
not be part of any system for the remaining months through August. No
plant may be added in any subsequent month through the following August
to a system that qualifies in September.
(4) If a system fails to qualify under the requirements of this
paragraph, the handler responsible for qualifying the system shall
notify the market administrator which plant or plants will be deleted
from the system so that the remaining plants may be pooled as a system.
If the handler fails to do so, the market administrator shall exclude
one or more plants, beginning at the bottom of the list of plants in
the system and continuing up the list as necessary until the deliveries
are sufficient to qualify the remaining plants in the system;
(g) The applicable shipping percentages of paragraphs (a), (c),
(d), and (f) of this section may be increased or decreased by the
market administrator if found necessary to obtain needed shipments or
to prevent uneconomic shipments. Before making a finding that a change
is necessary the market administrator shall investigate the need for
revision, either on the market administrator's own initiative or at the
request of interested persons. If such investigation shows that a
revision might be appropriate, a notice shall be issued stating that a
revision is being considered and inviting data, views, and arguments.
If the market administrator determines that an adjustment to the
shipping percentages is necessary, the market administrator shall
notify the industry within one day of the effective date of such
adjustment.
(h) The term pool plant shall not apply to the following plants:
(1) A producer-handler as defined under any Federal order;
(2) An exempt plant as defined in Sec. 1000.8(e);
(3) A plant located within the marketing area and qualified
pursuant to paragraph (a) or (e) of this section which meets the
pooling requirements of another Federal order, and from which more than
50 percent of its route disposition has been in the other Federal order
marketing area for three consecutive months. On the basis of a written
application made by the plant operator at least 15 days prior to the
date for which a determination of the market administrator is to be
effective, the market administrator may determine that the route
disposition in the respective marketing areas to be used for purposes
of this paragraph shall exclude (for a specified period of time) route
disposition made under limited term contracts to governmental bases and
institutions;
(4) A plant located outside the marketing area and qualified
pursuant to paragraph (a) of this section that meets the pooling
requirements of another Federal order and has had greater sales in such
other Federal order's marketing area for 3 consecutive months;
(5) A plant located in another Federal order marketing area and
qualified pursuant to paragraph (a) of this section that meets the
pooling requirements of such other Federal order and does not have a
majority of its route distribution in this marketing area for 3
consecutive months or if the plant is required to be regulated under
such other Federal order without regard to its route disposition in any
other Federal order marketing area;
(6) A plant qualified pursuant to paragraph (c) of this section
which also meets the pooling requirements of another Federal order and
from which greater qualifying shipments are made to plants regulated
under the other Federal order than are made to plants regulated under
this order, or the plant has automatic pooling status under the other
Federal order; and
(7) That portion of a regulated plant designated as a nonpool plant
that is physically separate and operated separately from the pool
portion of such plant. The designation of a portion of a regulated
plant as a nonpool plant must be requested in advance and in writing by
the handler and must be approved by the market administrator.

Sec. 1032.8 Nonpool plant.

See Sec. 1000.8 of this chapter.

Sec. 1032.9 Handler.

See Sec. 1000.9 of this chapter.

Sec. 1032.10 Producer-handler.

[[Page 5056]]

fully regulated under another Federal order;
(c) Receives at its plant or acquires for route disposition no more
than 150,000 pounds of fluid milk products from handlers fully
regulated under any Federal order. This limitation shall not apply if
the producer-handler's own farm production is less than 150,000 pounds
during the month.
(d) Disposes of no other source milk as Class I milk except by
increasing the nonfat milk solids content of the fluid milk products
received from own farm production or pool handlers;
(e) Disposes of no fluid milk products using the distribution
system of another handler except for direct deliveries to retail
outlets or to a pool handler's plant;
(f) Provides proof satisfactory to the market administrator that
the care and management of the dairy animals and other resources
necessary to produce all Class I milk handled (excluding receipts from
handlers fully regulated under any Federal order) and the processing,
packaging, and distribution operations are the producer-handler's own
enterprise and at its own risk; and
(g) Producer-handler shall not include any producer who also
operates a distributing plant if the producer-handler so requests that
the two be operated as separate entities with the distributing plant
regulated under Sec. 1032.7(a) and the farm operated as a producer
under Sec. 1032.12.

Sec. 1032.11 [Reserved]

Sec. 1032.12 Producer.

Sec. 1032.13 Producer milk.

Producer milk means the skim milk (or the skim equivalent of
components of skim milk), including nonfat components, and butterfat in
milk of a producer that is:
(a) Received by the operator of a pool plant directly from a
producer or a handler described in Sec. 1000.9(c). Any milk picked up
from the producer's farm tank in a tank truck under the control of the
operator of a pool plant or a handler described in Sec. 1000.9(c) but
which is not received at a plant until the following month shall be
considered as having been received by the handler during the month in
which it is picked up at the producer's farm. All milk received
pursuant to this paragraph shall be priced at the location of the plant
where it is first physically received;
(b) Received by a handler described in Sec. 1000.9(c) in excess of
the quantity delivered to pool plants;
(c) Diverted by a pool plant operator to another pool plant. Milk
so diverted shall be priced at the location of the plant to which
diverted; or
(d) Diverted by the operator of a pool plant or a cooperative
association described in Sec. 1000.9(c) to a nonpool plant, subject to
the following conditions:
(1) Milk of a dairy farmer shall not be eligible for diversion
unless at least one day's production of such dairy farmer has been
physically received as producer milk at a pool plant and the dairy
farmer has continuously retained producer status since that time. If a
dairy farmer loses producer status under this order (except as a result
of a temporary loss of Grade A approval), the dairy farmer's milk shall
not be eligible for diversion until milk of the dairy farmer has been
physically received as producer milk at a pool plant;
(2) Of the quantity of producer milk received during the month
(including diversions, but excluding the quantity of producer milk
received from a handler described in Sec. 1000.9(c)) the handler
diverts to nonpool plants not more than 65 percent during the months of
September through November and January, and not more than 75 percent
during the months of February through August and December;
(3) Diverted milk shall be priced at the location of the plant to
which diverted;
(4) Any milk diverted in excess of the limits prescribed in (d)(2)
of this section shall not be producer milk. If the diverting handler or
cooperative association fails to designate the dairy farmers'
deliveries that are not to be producer milk, no milk diverted by the
handler or cooperative association during the month to a nonpool plant
shall be producer milk; and
(5) The applicable diversion limits in paragraph (d)(2) of this
section may be increased or decreased by the market administrator if
the market administrator finds that such revision is necessary to
assure orderly marketing and efficient handling of milk in the
marketing area. Before making such a finding, the market administrator
shall investigate the need for the revision either on the market
administrator's own initiative or at the request of interested persons.
If the investigation shows that a revision might be appropriate, the
market administrator shall issue a notice stating that the revision is
being considered and inviting written data, views, and arguments. Any
decision to revise an applicable percentage must be issued in writing
at least one day before the effective date.

Sec. 1032.14 Other source milk.

See Sec. 1000.14 of this chapter.

Sec. 1032.15 Fluid milk product.

See Sec. 1000.15 of this chapter.

Sec. 1032.16 Fluid cream product.

See Sec. 1000.16 of this chapter.

Sec. 1032.17 [Reserved]

Sec. 1032.18 Cooperative association.

See Sec. 1000.18 of this chapter.

Sec. 1032.19 Commercial food processing establishment.

See Sec. 1000.19 of this chapter.

Handler Reports

Sec. 1032.30 Reports of receipts and utilization.

[[Page 5057]]

solids-not-fat other than protein (other solids), and the value of the
somatic cell adjustment pursuant to Sec. 1000.50(p), contained in or
represented by:
(i) Receipts of producer milk, including producer milk diverted by
the handler; and
(ii) Receipts of milk from handlers described in Sec. 1000.9(c);
(2) Product pounds and pounds of butterfat contained in:
(i) Receipts of fluid milk products and bulk fluid cream products
from other pool plants;
(ii) Receipts of other source milk; and
(iii) Inventories at the beginning and end of the month of fluid
milk products and bulk fluid cream products;
(3) The utilization or disposition of all milk and milk products
required to be reported pursuant to this paragraph; and
(4) Such other information with respect to the receipts and
utilization of skim milk, butterfat, milk protein, other nonfat solids,
and somatic cell information, as the market administrator may
prescribe.
(b) Each handler operating a partially regulated distributing plant
shall report with respect to such plant in the same manner as
prescribed for reports required by paragraph (a) of this section.
Receipts of milk that would have been producer milk if the plant had
been fully regulated shall be reported in lieu of producer milk. The
report shall show also the quantity of any reconstituted skim milk in
route disposition in the marketing area.
(c) Each handler not specified in paragraphs (a) and (b) of this
section shall report with respect to its receipts and utilization of
milk and milk products in such manner as the market administrator may
prescribe.

Sec. 1032.31 Payroll reports.

(a) On or before the 20th day after the end of each month, each
handler that operates a pool plant pursuant to Sec. 1032.7 and each
handler described in Sec. 1000.9(c) shall report to the market
administrator its producer payroll for the month, in the detail
prescribed by the market administrator, showing for each producer the
information described in Sec. 1032.73(f).
(b) Each handler operating a partially regulated distributing plant
who elects to make payment pursuant to Sec. 1000.76(b) shall report for
each dairy farmer who would have been a producer if the plant had been
fully regulated in the same manner as prescribed for reports required
by paragraph (a) of this section.

Sec. 1032.32 Other reports.

In addition to the reports required pursuant to Secs. 1032.30 and
1032.31, each handler shall report any information the market
administrator deems necessary to verify or establish each handler's
obligation under the order.

Classification of Milk

Sec. 1032.40 Classes of utilization.

See Sec. 1000.40 of this chapter.

Sec. 1032.41 [Reserved]

Sec. 1032.42 Classification of transfers and diversions.

See Sec. 1000.42 of this chapter.

Sec. 1032.43 General classification rules.

See Sec. 1000.43 of this chapter.

Sec. 1032.44 Classification of producer milk.

See Sec. 1000.44 of this chapter.

Sec. 1032.45 Market administrator's reports and announcements
concerning classification.

See Sec. 1000.45 of this chapter.

Class Prices

Sec. 1032.50 Class prices and component prices.

See Sec. 1000.50 of this chapter.

Sec. 1032.51 Class I differential and price.

The Class I differential shall be the differential established for
Jackson County, Missouri, which is reported in Sec. 1000.52. The Class
I price shall be the price computed pursuant to Sec. 1000.50(a) for
Jackson County, Missouri.

Sec. 1032.52 Adjusted Class I differentials.

See Sec. 1000.52 of this chapter.

Sec. 1032.53 Announcement of class prices and component prices.

See Sec. 1000.53 of this chapter.

Sec. 1032.54 Equivalent price.

See Sec. 1000.54 of this chapter.

Producer Price Differential

Sec. 1032.60 Handler's value of milk.

For the purpose of computing a handler's obligation for producer
milk, the market administrator shall determine for each month the value
of milk of each handler with respect to each of its pool plants, and of
each handler described in Sec. 1000.9(c) as follows:
(a) Class I value.
(1) Multiply the hundredweight of skim milk in Class I as
determined pursuant to Sec. 1000.44(a) by the Class I skim milk price
applicable at the handler's location; and
(2) Add an amount obtained by multiplying the pounds of butterfat
in Class I as determined pursuant to Sec. 1000.44(b) by the Class I
butterfat price applicable at the handler's location.
(b) Add the Class II value, computed as follows:
(1) Multiply the hundredweight of skim milk in Class II as
determined pursuant to Sec. 1000.44(a) by 70 cents;
(2) Add an amount obtained by multiplying the pounds of skim milk
in Class II as determined pursuant to Sec. 1000.44(a) by the average
nonfat solids content of producer skim milk received by the handler,
and multiply the resulting pounds of nonfat solids by the nonfat solids
price; and
(3) Add an amount obtained by multiplying the pounds of butterfat
in Class II as determined pursuant to Sec. 1000.44(b) by the butterfat
price;
(c) Add the Class III value computed as follows:
(1) Multiply the pounds of skim milk in Class III as determined
pursuant to Sec. 1000.44(a) by the average protein content of producer
skim milk received by the handler, and multiply the resulting pounds of
protein by the protein price;
(2) Add an amount obtained by multiplying the pounds of skim milk
in Class III as determined pursuant to Sec. 1000.44(a) by the average
other solids content of producer skim milk received by the handler, and
multiply the resulting pounds of other solids by the other solids
price; and
(3) Add an amount obtained by multiplying the pounds of butterfat
in Class III as determined pursuant to Sec. 1000.44(b) by the butterfat
price;
(d) Add the Class IV value computed as follows:
(1) Multiply the pounds of skim milk in Class IV as determined
pursuant to Sec. 1000.44(a) by the average nonfat solids content of
producer skim milk received by the handler, and multiply the resulting
pounds of nonfat solids by the nonfat solids price; and
(2) Add an amount obtained by multiplying the pounds of butterfat
in Class IV as determined pursuant to Sec. 1000.44(b) by the butterfat
price;
(e) Add an adjustment for somatic cell content of producer milk
determined by multiplying the value reported pursuant to
Sec. 1032.30(a)(1) by the percentage of the total producer milk
allocated to Class II, Class III, and Class IV pursuant to
Sec. 1000.44(c);
(f) Add the amounts obtained from multiplying the pounds of skim
milk and butterfat overage assigned to each class pursuant to
Sec. 1000.43(b)(2) by the respective skim milk and butterfat prices
applicable at the location of the pool plant;
(g) Add the amount obtained from multiplying the difference between
the

[[Page 5058]]

Class III price for the preceding month and the Class I price
applicable at the location of the pool plant or the Class II price, as
the case may be, for the current month by the hundredweight of skim
milk and butterfat subtracted from Class I and Class II pursuant to
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
(h) Add the amount obtained from multiplying the difference between
the Class I price applicable at the location of the pool plant and the
Class III price by the hundredweight of skim milk and butterfat
assigned to Class I pursuant to Sec. 1000.43(d) and the hundredweight
of skim milk and butterfat subtracted from Class I pursuant to
Sec. 1000.44(a)(3)(i) through (iii) and the corresponding step of
Sec. 1000.44(b), excluding receipts of bulk fluid cream products from a
plant regulated under other Federal orders and bulk concentrated fluid
milk products from pool plants, plants regulated under other Federal
orders, and unregulated supply plants;
(i) Add the amount obtained from multiplying the difference between
the Class I price and the Class III price applicable at the location of
the nearest unregulated supply plants from which an equivalent volume
was received by the pounds of skim milk and butterfat in receipts of
concentrated fluid milk products assigned to Class I pursuant to
Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and the pounds of skim milk
and butterfat subtracted from Class I pursuant to Sec. 1000.44(a)(8)
and the corresponding step of Sec. 1000.44(b), excluding such skim milk
and butterfat in receipts of bulk fluid milk products from an
unregulated supply plant to the extent that an equivalent amount of
skim milk or butterfat disposed of to such plant by handlers fully
regulated under any Federal milk order is classified and priced as
Class I milk and is not used as an offset for any other payment
obligation under any order;
(j) Subtract, for reconstituted milk made from receipts of nonfluid
milk products, an amount computed by multiplying $1.00 (but not more
than the difference between the Class I price applicable at the
location of the pool plant and the Class IV price) by the hundredweight
of skim milk and butterfat contained in receipts of nonfluid milk
products that are allocated to Class I pursuant to Sec. 1000.43(d); and
(k) Exclude, for pricing purposes under this section, receipts of
nonfluid milk products that are distributed as labeled reconstituted
milk for which payments are made to the producer-settlement fund of
another order under Sec. 1000.76(a)(5) or (c).

Sec. 1032.61 Computation of producer price differential.

For each month the market administrator shall compute a producer
price differential per hundredweight. If the unreserved balance in the
producer-settlement fund to be included in the computation is less than
2 cents per hundredweight of producer milk on all reports, the report
of any handler who has not made payments required pursuant to
Sec. 1032.71 for the preceding month shall not be included in the
computation of the producer price differential. The report of such
handler shall not be included in the computation for succeeding months
until the handler has made full payment of outstanding monthly
obligations. Subject to the aforementioned conditions, the market
administrator shall compute the producer price differential in the
following manner:
(a) Combine into one total the values computed pursuant to
Sec. 1032.60 for all handlers required to file reports prescribed in
Sec. 1032.30;
(b) Subtract the total values obtained by multiplying each
handler's total pounds of protein, other solids, and butterfat
contained in the milk for which an obligation was computed pursuant to
Sec. 1032.60 by the protein price, the other solids price, and the
butterfat price, respectively, and the total value of the somatic cell
adjustment pursuant to Sec. 1032.30(a)(1);
(c) Add an amount equal to the sum of the location adjustments
computed pursuant to Sec. 1032.75;
(d) Add an amount equal to not less than one-half of the
unobligated balance in the producer-settlement fund;
(e) Divide the resulting amount by the sum of the following for all
handlers included in these computations:
(1) The total hundredweight of producer milk; and
(2) The total hundredweight for which a value is computed pursuant
to Sec. 1032.60(i); and
(f) Subtract not less than 4 cents nor more than 5 cents from the
price computed pursuant to paragraph (e) of this section. The result
shall be known as the producer price differential for the month.

Sec. 1032.62 Announcement of producer prices.

On or before the 11th day after the end of each month, the market
administrator shall announce publicly the following prices and
information:
(a) The producer price differential;
(b) The protein price;
(c) The other solids price;
(d) The butterfat price;
(e) The somatic cell adjustment rate;
(f) The average butterfat, protein and other solids content of
producer milk; and
(g) The statistical uniform price for milk containing 3.5 percent
butterfat, computed by combining the Class III price and the producer
price differential.

Payments for Milk

Sec. 1032.70 Producer-settlement fund.

See Sec. 1000.70 of this chapter.

Sec. 1032.71 Payments to the producer-settlement fund.

Each handler shall make payment to the producer-settlement fund in
a manner that provides receipt of the funds by the market administrator
no later than the 14th day after the end of the month. Payment shall be
the amount, if any, by which the amount specified in (a) of this
section exceeds the amount specified in (b) of this section:
(a) The total value of milk to the handler for the month as
determined pursuant to Sec. 1032.60.
(b) The sum of:
(1) An amount obtained by multiplying the total hundredweight of
producer milk as determined pursuant to Sec. 1000.44(c) by the producer
price differential as adjusted pursuant to Sec. 1032.75;
(2) An amount obtained by multiplying the total pounds of protein,
other solids, and butterfat contained in producer milk by the protein,
other solids, and butterfat prices respectively;
(3) The total value of the somatic cell adjustment to producer
milk; and
(4) An amount obtained by multiplying the pounds of skim milk and
butterfat for which a value was computed pursuant to Sec. 1032.60(i) by
the producer price differential as adjusted pursuant to Sec. 1032.75
for the location of the plant from which received.

Sec. 1032.72 Payments from the producer-settlement fund.

No later than the 15th day after the end of each month, the market
administrator shall pay to each handler the amount, if any, by which
the amount computed pursuant to Sec. 1032.71(b) exceeds the amount
computed pursuant to Sec. 1032.71(a). If, at such time, the balance in
the producer-settlement fund is insufficient to make all payments
pursuant to this section, the market administrator shall reduce
uniformly such payments and shall complete the payments as soon as the
funds are available.

[[Page 5059]]

Sec. 1032.73 Payments to producers and to cooperative associations.

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

[[Page 5060]]

(2) The daily and total pounds, and the month and dates such milk
was received from that producer;
(3) The total pounds of butterfat, protein, and other solids
contained in the producer's milk;
(4) The somatic cell count of the producer's milk;
(5) The minimum rate or rates at which payment to the producer is
required pursuant to this order;
(6) The rate used in making payment if the rate is other than the
applicable minimum rate;
(7) The amount, or rate per hundredweight, or rate per pound of
component, and the nature of each deduction claimed by the handler; and
(8) The net amount of payment to the producer or cooperative
association.

Sec. 1032.74 [Reserved]

Sec. 1032.75 Plant location adjustments for producer milk and nonpool
milk.

(a) The producer price differential for producer milk shall be
adjusted according to the location of the plant at which the milk was
physically received by subtracting from the price differential the
amount by which the Class I price specified in Sec. 1032.51 exceeds the
Class I price at the plant's location. If the Class I price at the
plant location exceeds the Class I price specified in Sec. 1032.51, the
difference shall be added to the producer price differential; and
(b) The producer price differential applicable to other source milk
shall be adjusted following the procedure specified in paragraph (a) of
this section, except that the adjusted producer price differential
shall not be less than zero.

Sec. 1032.76 Payments by a handler operating a partially regulated
distributing plant.

See Sec. 1000.76 of this chapter.

Sec. 1032.77 Adjustment of accounts.

See Sec. 1000.77 of this chapter.

Sec. 1032.78 Charges on overdue accounts.

See Sec. 1000.78 of this chapter.

Administrative Assessment and Marketing Service Deduction

Sec. 1032.85 Assessment for order administration.

See Sec. 1000.85 of this chapter.

Sec. 1032.86 Deduction for marketing services.

See Sec. 1000.86 of this chapter.

PART 1033--MILK IN THE MIDEAST MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1033.1 General provisions.

Definitions

1033.2 Mideast marketing area.
1033.3 Route disposition.
1033.4 Plant.
1033.5 Distributing plant.
1033.6 Supply plant.
1033.7 Pool plant.
1033.8 Nonpool plant.
1033.9 Handler.
1033.10 Producer-handler.
1033.11 [Reserved]
1033.12 Producer.
1033.13 Producer milk.
1033.14 Other source milk.
1033.15 Fluid milk product.
1033.16 Fluid cream product.
1033.17 [Reserved]
1033.18 Cooperative association.
1033.19 Commercial food processing establishment.

Handler Reports

1033.30 Reports of receipts and utilization.
1033.31 Payroll reports.
1033.32 Other reports.

Classification of Milk

1033.40 Classes of utilization.
1033.41 [Reserved]
1033.42 Classification of transfers and diversions.
1033.43 General classification rules.
1033.44 Classification of producer milk.
1033.45 Market administrator's reports and announcements concerning
classification.

Class Prices

1033.50 Class prices and component prices.
1033.51 Class I differential and price.
1033.52 Adjusted Class I differentials.
1033.53 Announcement of class prices and component prices.
1033.54 Equivalent price.

Producer Price Differential

1033.60 Handler's value of milk.
1033.61 Computation of producer price differential.
1033.62 Announcement of producer prices.

Payments for Milk

1033.70 Producer-settlement fund.
1033.71 Payments to the producer-settlement fund.
1033.72 Payments from the producer-settlement fund.
1033.73 Payments to producers and to cooperative associations.
1033.74 [Reserved]
1033.75 Plant location adjustments for producer milk and nonpool
milk.
1033.76 Payments by a handler operating a partially regulated
distributing plant.
1033.77 Adjustment of accounts.
1033.78 Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1033.85 Assessment for order administration.
1033.86 Deduction for marketing services.

Authority: 7 U.S.C. 601-674.

Subpart--Order Regulating Handling

General Provisions

Sec. 1033.1 General provisions.

The terms, definitions, and provisions in Part 1000 of this chapter
apply to and are hereby made a part of this order.

Definitions

Sec. 1033.2 Mideast marketing area.

Ohio

All of the State of Ohio.

Indiana Counties

Adams, Allen, Bartholomew, Benton, Blackford, Boone, Brown,
Carroll, Cass, Clay, Clinton, Dearborn, Decatur, De Kalb, Delaware,
Elkhart, Fayette, Fountain, Franklin, Fulton, Grant, Hamilton,
Hancock, Hendricks, Henry, Howard, Huntington, Jackson, Jasper, Jay,
Jefferson, Jennings, Johnson, Kosciusko, Lagrange, Lake, La Porte,
Lawrence, Madison, Marion, Marshall, Miami, Monroe, Montgomery,
Morgan, Newton, Noble, Ohio, Owen, Parke, Porter, Pulaski, Putnam,
Randolph, Ripley, Rush, Shelby, St. Joseph, Starke, Steuben,
Switzerland, Tippecanoe, Tipton, Union, Vermillion, Vigo, Wabash,
Warren, Wayne, Wells, White, and Whitley.

Kentucky Counties

Boone, Boyd, Bracken, Campbell, Floyd, Grant, Greenup, Harrison,
Johnson, Kenton, Lawrence, Lewis, Magoffin, Martin, Mason,
Pendleton, Pike, and Robertson.

Michigan Counties

All counties except Delta, Dickinson, Gogebic, Iron, Menominee,
and Ontonagon.

Pennsylvania Counties

Allegheny, Armstrong, Beaver, Butler, Crawford, Erie, Fayette,
Greene, Lawrence, Mercer, Venango, and Washington.
In Clarion County only the townships of Ashland, Beaver,
Licking, Madison, Perry, Piney, Richland, Salem, and Toby.
All of Westmoreland County except the townships of Cook,
Donegal, Fairfield, Ligonier, and St. Clair, and the boroughs of
Bolivar, Donegal, Ligonier, New Florence, and Seward.

[[Page 5061]]

West Virginia Counties

Barbour, Boone, Brooke, Cabell, Calhoun, Doddridge, Fayette,
Gilmer, Hancock, Harrison, Jackson, Kanawha, Lewis, Lincoln, Logan,
Marion, Marshall, Mason, Mingo, Monongalia, Ohio, Pleasants,
Preston, Putnam, Raleigh, Randolph, Ritchie, Roane, Taylor, Tucker,
Tyler, Upshur, Wayne, Wetzel, Wirt, Wood, and Wyoming.

Sec. 1033.3 Route disposition.

See Sec. 1000.3 of this chapter.

Sec. 1033.4 Plant.

See Sec. 1000.4 of this chapter.

Sec. 1033.5 Distributing plant.

See Sec. 1000.5 of this chapter.

Sec. 1033.6 Supply plant.

See Sec. 1000.6 of this chapter.

Sec. 1033.7 Pool plant.

Pool plant means a plant, unit of plants, or a system of plants as
specified in paragraphs (a) through (f) of this section. The pooling
standards described in paragraphs (a), (c), (d), (e), and (f) of this
section are subject to modification pursuant to paragraph (g) of this
section:
(a) A distributing plant from which during the month:
(1) Total route disposition is equal to 30 percent or more of the
total quantity of bulk fluid milk products physically received at the
plant;
(2) Route disposition in the marketing area is at least 30 percent
of total route disposition.
(3) For purposes of this section, packaged fluid milk products that
are transferred to a distributing plant shall be considered as route
disposition from the transferring plant, rather than the receiving
plant, for the single purpose of qualifying the transferring plant as a
pool distributing plant.
(b) A distributing plant located in the marketing area at which the
majority of milk received is processed into aseptically packaged fluid
milk products unless there are no sales from the plant into any
marketing area and the plant operator in writing requests nonpool plant
status for the plant for the month.
(c) A supply plant from which the quantity of bulk fluid milk
products shipped to, received at, and physically unloaded into plants
described in paragraph (a) or (b) of this section as a percent of the
Grade A milk received at the plant from dairy farmers (except dairy
farmers described in Sec. 1033.12(b)) and handlers described in
Sec. 1033.9(c), as reported in Sec. 1033.30(a), is not less than 30
percent of the milk received from dairy farmers, including milk
diverted pursuant to Sec. 1033.13, subject to the following conditions:
(1) Qualifying shipments pursuant to this paragraph may be made to
the following plants, except whenever the authority provided in
paragraph (g) of this section is applied to increase the shipping
requirements specified in this section, only shipments to pool plants
described in Sec. 1033.7(a) and (b), and units described in
Sec. 1033.7(e) shall count as qualifying shipments for the purpose of
meeting the increased shipments:
(i) Pool plants described in Sec. 1033.7(a), (b) and (e);
(ii) Plants of producer-handlers;
(iii) Partially regulated distributing plants, except that credit
for such shipments shall be limited to the amount of such milk
classified as Class I at the transferee plant; and
(iv) Distributing plants fully regulated under other Federal
orders, except that credit for transfers to such plants shall be
limited to the quantity shipped to pool distributing plants during the
month. Qualifying transfers to other order plants shall not include
transfers made on the basis of agreed-upon Class II, Class III, or
Class IV utilization.
(2) The operator of a supply plant may include deliveries to pool
distributing plants directly from farms of producers pursuant to
Sec. 1033.13(c) as up to 90 percent of the supply plant's qualifying
shipments;
(3) A supply plant that meets the shipping requirements of this
paragraph during each of the immediately preceding months of September
through February shall be a pool plant during the following months of
March through August unless the milk received at the plant fails to
meet the requirements of a duly constituted regulatory agency, the
plant fails to meet a shipping requirement instituted pursuant to
paragraph (f) of this section, or the plant operator requests nonpool
status for the plant. Such nonpool status shall be effective on the
first day of the month following the receipts of such request and
thereafter until the plant again qualifies as a pool plant on the basis
of its deliveries to a pool distributing plant(s).
The automatic pool qualification of a plant can be waived if the
handler or cooperative requests in writing to the market administrator
the nonpool status of such plant. The request must be made prior to the
beginning of any month during the March through August period. The
plant shall be a nonpool plant for such month and thereafter until it
requalifies under paragraph (c) of this section on the basis of actual
shipments therefrom. To requalify as a pool plant under paragraph (d),
(e) or (f) of this section, such plant must first have met the
percentage shipping requirements of paragraph (c) of this section for 6
consecutive months; and
(4) A supply plant that does not meet the minimum delivery
requirements specified in this paragraph to qualify for pool status in
the current month because a distributing plant to which the supply
plant delivered its fluid milk products during such month failed to
qualify as a pool plant pursuant to paragraph (a) or (b) of this
section shall continue to be a pool plant for the current month if such
supply plant qualified as a pool plant in the three immediately
preceding months.
(d) A plant operated by a cooperative association if, during the
month, 35 percent or more of the producer milk of members of the
association is delivered to a distributing pool plant(s) or to a
nonpool plant(s), and classification other than Class I is not
requested. Deliveries for qualification purposes may be made directly
from the farm or by transfer from such association's plant, subject to
the following conditions:
(1) The cooperative requests pool status for such plant;
(2) The 35-percent delivery requirement may be met for the current
month or it may be met on the basis of deliveries during the preceding
12-month period ending with the current month;
(3) The plant is approved by a duly constituted regulatory
authority to handle milk for fluid consumption; and
(4) The plant does not qualify as a pool plant under (a), (b), or
(c) of this section or under the similar provisions of another Federal
order applicable to a distributing plant or supply plant.
(e) A plant located inside the marketing area which has been a pool
plant under this order or its predecessor orders for twelve consecutive
months, but is not otherwise qualified under this paragraph, if it has
a marketing agreement with a cooperative association and it fulfills
the following conditions:
(1) The aggregate monthly quantity supplied by all parties to such
an agreement as a percentage of the producer milk receipts included in
the unit during the month is not less than 35 percent; and
(2) Shipments for qualification purposes shall include both
transfers from supply plants to plants described in paragraph (c)(1) of
this section, and deliveries made direct from the farm to plants
qualified under paragraph (a) of this section.
(f) A system of supply plants may be qualified for pooling by the
association of two or more supply plants operated

[[Page 5062]]

by one or more handlers by meeting the applicable percentage
requirements of paragraph (c) of this section in the same manner as a
single plant and subject to the following additional requirements:
(1) Each plant in the system is located within the marketing area,
or was a pool supply plant for each of the three months immediately
preceding the effective date of this paragraph so long as it continues
to maintain pool status. Cooperative associations may not use shipments
pursuant to Sec. 1033.9(c) to qualify plants located outside the
marketing area;
(2) A written notification to the market administrator listing the
plants to be included in the system and the handler that is responsible
for meeting the performance requirements of this paragraph under a
marketing agreement certified to the market administrator by the
designated handler and any others included in the system, and the
period during which such consideration shall apply. Such notice, and
notice of any change in designation, shall be furnished on or before
the fifth working day following the month to which the notice applies.
The listed plants included in the system shall also be in the sequence
in which they shall qualify for pool plant status based on the minimum
deliveries required. If the deliveries made are insufficient to qualify
the entire system for pooling, the last listed plant shall be excluded
from the system, followed by the plant next-to-last on the list, and
continuing in this sequence until remaining listed plants have met the
minimum shipping requirements; and
(3) Each plant that qualifies as a pool plant within a system shall
continue each month as a plant in the system unless the plant
subsequently fails to qualify for pooling, or the responsible handler
submits a written notification to the market administrator prior to the
first day of the month that the plant is to be deleted from the system,
or that the system is to be discontinued. In any month of March through
August, a system shall not contain any plant which was not qualified
under this paragraph, either individually or as a member of a system,
during the previous September through February.
(g) The performance standards of paragraphs (a), (c), (d), (e) and
(f) of this section may be increased or decreased by the market
administrator if the market administrator finds that such adjustment is
necessary to obtain needed shipments or to prevent uneconomic
shipments. Before making such a finding, the market administrator shall
investigate the need for revision, either on the market administrator's
own initiative or at the request of interested persons. If such
investigation shows that a revision might be appropriate, the market
administrator shall issue a notice stating that a revision is being
considered and inviting data, views, and arguments. If the market
administrator determines that an adjustment to the shipping percentages
is necessary, the market administrator shall notify the industry within
one day of the effective date of such adjustment.
(h) The term pool plant shall not apply to the following plants:
(1) A producer-handler as defined under any Federal order;
(2) An exempt plant as defined in Sec. 1000.8(e);
(3) A plant located within the marketing area and qualified
pursuant to paragraph (a) of this section that meets the pooling
requirements of another Federal order, and from which more than 50
percent of its route disposition has been in the other Federal order
marketing area for three consecutive months;
(4) A plant located outside any Federal order marketing area and
qualified pursuant to paragraph (a) of this section that meets the
pooling requirements of another Federal order and has had greater sales
in such other Federal order's marketing area for 3 consecutive months;
(5) A plant located in another Federal order marketing area and
qualified pursuant to paragraph (a) of this section that meets the
pooling requirements of such other Federal order and does not have a
majority of its route distribution in this marketing area for 3
consecutive months or if the plant is required to be regulated under
such other Federal order without regard to its route disposition in any
other Federal order marketing area;
(6) A plant qualified pursuant to paragraph (c) or (d) of this
section that also meets the pooling requirements of another Federal
order and from which greater qualifying shipments are made to plants
regulated under the other Federal order than are made to plants
regulated under this order, or the plant has automatic pooling status
under the other Federal order; and
(7) That portion of a regulated plant designated as a nonpool plant
that is physically separate and operated separately from the pool
portion of such plant. The designation of a portion of a regulated
plant as a nonpool plant must be requested in advance and in writing by
the handler and must be approved by the market administrator.
(i) Any plant that qualifies as a pool plant in each of the
immediately preceding three months pursuant to paragraph (a) of this
section or the shipping percentages in paragraph (c) of this section
that is unable to meet such performance standards for the current month
because of unavoidable circumstances determined by the market
administrator to be beyond the control of the handler operating the
plant, such as a natural disaster (ice storm, wind storm, flood), fire,
breakdown of equipment, or work stoppage, shall be considered to have
met the minimum performance standards during the period of such
unavoidable circumstances, but such relief shall not be granted for
more than two consecutive months.

Sec. 1033.8 Nonpool plant.

See Sec. 1000.8 of this chapter.

Sec. 1033.9 Handler.

See Sec. 1000.9 of this chapter.

Sec. 1033.10 Producer-handler.

Except as provided in paragraph (g) of this section, producer-
handler means a person who:
(a) Operates a dairy farm and a distributing plant from which there
is monthly route disposition in excess of 150,000 pounds during the
month;
(b) Receives no fluid milk products from sources other than own
farm production, pool handlers, and plants fully regulated under
another Federal order;
(c) Receives at its plant or acquires for route disposition no more
than 150,000 pounds of fluid milk products from handlers fully
regulated under any Federal order. This limitation shall not apply if
the producer-handler's own farm production is less than 150,000 pounds
during the month.
(d) Disposes of no other source milk as Class I milk except by
increasing the nonfat milk solids content of the fluid milk products
received from own farm production or pool handlers;
(e) Disposes of no fluid milk products using the distribution
system of another handler except for direct deliveries to retail
outlets or to a pool handler's plant;
(f) Provides proof satisfactory to the market administrator that
the care and management of the dairy animals and other resources
necessary to produce all Class I milk handled (excluding receipts from
handlers fully regulated under any Federal order) and the processing,
packaging, and distribution operations are the producer-handler's own
enterprise and at its own risk; and
(g) Producer-handler shall not include any producer who also
operates a distributing plant if the producer-

[[Page 5063]]

handler so requests that the two be operated as separate entities with
the distributing plant regulated under Sec. 1033.7(a) and the farm
operated as a producer under Sec. 1033.12.

Sec. 1033.11 [Reserved]

Sec. 1033.12 Producer.

Sec. 1033.13 Producer milk.

Producer milk means the skim milk (or the skim equivalent of
components of skim milk), including nonfat components, and butterfat in
milk of a producer that is:
(a) Received by the operator of a pool plant directly from a
producer or a handler described in Sec. 1000.9(c). Any milk picked up
from the producer's farm tank in a tank truck under the control of the
operator of a pool plant or a handler described in Sec. 1000.9(c) but
which is not received at a plant until the following month shall be
considered as having been received by the handler during the month in
which it is picked up at the producer's farm. All milk received
pursuant to this paragraph shall be priced at the location of the plant
where it is first physically received;
(b) Received by a handler described in Sec. 1000.9(c) in excess of
the quantity delivered to pool plants;
(c) Diverted by a pool plant operator to another pool plant. Milk
so diverted shall be priced at the location of the plant to which
diverted; or
(d) Diverted by the operator of a pool plant or by a cooperative
association described in Sec. 1033.9(c) to a nonpool plant, subject to
the following conditions:
(1) Milk of a dairy farmer shall not be eligible for diversion
until milk of such dairy farmer has been physically received as
producer milk at a pool plant and the dairy farmer has continuously
retained producer status since that time. If a dairy farmer loses
producer status under this order (except as a result of a temporary
loss of Grade A approval), the dairy farmer's milk shall not be
eligible for diversion until milk of the dairy farmer has been
physically received as producer milk at a pool plant;
(2) The equivalent of at least one day's production is caused by
the handler to be physically received at a pool plant in each of the
months of September through November;
(3) Of the total quantity of producer milk received during the
month (including diversions but excluding the quantity of producer milk
received from a handler described in Sec. 1000.9(c)), the handler
diverted to nonpool plants not more than 60 percent during the months
of September through February;
(4) Diverted milk shall be priced at the location of the plant to
which diverted;
(5) Any milk diverted in excess of the limits set forth in
paragraph (d)(3) of this section shall not be producer milk. The
diverting handler shall designate the dairy farmer deliveries that
shall not be producer milk. If the handler fails to designate the dairy
farmer deliveries which are ineligible, producer milk status shall be
forfeited with respect to all milk diverted to nonpool plants by such
handler; and
(6) The delivery day requirements and the diversion percentages in
paragraphs (d)(2) and (d)(3) of this section may be increased or
decreased by the market administrator if the market administrator finds
that such revision is necessary to assure orderly marketing and
efficient handling of milk in the marketing area. Before making such a
finding, the market administrator shall investigate the need for the
revision either on the market administrator's own initiative or at the
request of interested persons. If the investigation shows that a
revision might be appropriate, the market administrator shall issue a
notice stating that the revision is being considered and inviting
written data, views, and arguments. Any decision to revise an
applicable percentage must be issued in writing at least one day before
the effective date.

Sec. 1033.14 Other source milk.

See Sec. 1000.14 of this chapter.

Sec. 1033.15 Fluid milk product.

See Sec. 1000.15 of this chapter.

Sec. 1033.16 Fluid cream product.

See Sec. 1000.16 of this chapter.

Sec. 1033.17 [Reserved]

Sec. 1033.18 Cooperative association.

See Sec. 1000.18 of this chapter.

Sec. 1033.19 Commercial food processing establishment.

See Sec. 1000.19 of this chapter.

Handler Reports

Sec. 1033.30 Reports of receipts and utilization.

Each handler shall report monthly so that the market
administrator's office receives the report on or before the 7th day
after the end of the month, in the detail and on the prescribed forms,
as follows:
(a) Each handler that operates a pool plant pursuant to Sec. 1033.7
and each handler described in Sec. 1000.9(c) shall report for each of
its operations the following information:
(1) Product pounds, pounds of butterfat, pounds of protein, and the
value of the somatic cell adjustment pursuant to Sec. 1000.50(p),
contained in or represented by:
(i) Receipts of producer milk, including producer milk diverted by
the reporting handler; and
(ii) Receipts of milk from handlers described in Sec. 1000.9(c);
(2) Product pounds and pounds of butterfat contained in:
(i) Receipts of fluid milk products and bulk fluid cream products
from other pool plants;
(ii) Receipts of other source milk; and
(iii) Inventories at the beginning and end of the month of fluid
milk products and bulk fluid cream products;
(3) The utilization or disposition of all milk and milk products
required to be reported pursuant to this paragraph; and
(4) Such other information with respect to the receipts and
utilization of skim milk, butterfat, milk protein, and somatic cell
information as the market administrator may prescribe.
(b) Each handler operating a partially regulated distributing plant
shall report with respect to such plant in the same manner as
prescribed for reports required by paragraph (a) of this section.
Receipts of milk that would have been

[[Page 5064]]

producer milk if the plant had been fully regulated shall be reported
in lieu of producer milk. The report shall show also the quantity of
any reconstituted skim milk in route disposition in the marketing area.
(c) Each handler not specified in paragraphs (a) and (b) of this
section shall report with respect to its receipts and utilization of
milk and milk products in such manner as the market administrator may
prescribe.

Sec. 1033.31 Payroll reports.

(a) On or before the 22nd day after the end of each month, each
handler that operates a pool plant pursuant to Sec. 1033.7 and each
handler described in Sec. 1033.9(c) shall report to the market
administrator its producer payroll for the month, in the detail
prescribed by the market administrator, showing for each producer the
information described in Sec. 1033.73(e).
(b) Each handler operating a partially regulated distributing plant
who elects to make payment pursuant to Sec. 1000.76(b) shall report for
each dairy farmer who would have been a producer if the plant had been
fully regulated in the same manner as prescribed for reports required
by paragraph (a) of this section.

Sec. 1033.32 Other reports.

In addition to the reports required pursuant to Secs. 1033.30 and
1033.31, each handler shall report any information the market
administrator deems necessary to verify or establish each handler's
obligation under the order.

Classification of Milk

Sec. 1033.40 Classes of utilization.

See Sec. 1000.40 of this chapter.

Sec. 1033.41 [Reserved]

Sec. 1033.42 Classification of transfers and diversions.

See Sec. 1000.42 of this chapter.

Sec. 1033.43 General classification rules.

See Sec. 1000.43 of this chapter.

Sec. 1033.44 Classification of producer milk.

See Sec. 1000.44 of this chapter.

Sec. 1033.45 Market administrator's reports and announcements
concerning classification.

See Sec. 1000.45 of this chapter.

Class Prices

Sec. 1033.50 Class prices and component prices.

See Sec. 1000.50 of this chapter.

Sec. 1033.51 Class I differential and price.

The Class I differential shall be the differential established for
Cuyahoga County, Ohio which is reported in Sec. 1000.52. The Class I
price shall be the price computed pursuant to Sec. 1000.50(a) for
Cuyahoga County, Ohio.

Sec. 1033.52 Adjusted Class I differentials.

See Sec. 1000.52 of this chapter.

Sec. 1033.53 Announcement of class prices and component prices.

See Sec. 1000.53 of this chapter.

Sec. 1033.54 Equivalent price.

See Sec. 1000.54 of this chapter.

Producer Price Differential

Sec. 1033.60 Handler's value of milk.

For the purpose of computing a handler's obligation for producer
milk, the market administrator shall determine for each month the value
of milk of each handler with respect to each of its pool plants, and of
each handler described in Sec. 1033.9(c) as follows:
(a) Class I value.
(1) Multiply the hundredweight of skim milk in Class I as
determined pursuant to Sec. 1000.44(a) by the Class I skim milk price
applicable at the handler's location; and
(2) Add an amount obtained by multiplying the pounds of butterfat
in Class I as determined pursuant to Sec. 1000.44(b) by the Class I
butterfat price applicable at the handler's location;
(b) Add the Class II value computed as follows:
(1) Multiply the hundredweight of skim milk in Class II as
determined pursuant to Sec. 1000.44(a) by 70 cents;
(2) Add an amount obtained by multiplying the pounds of skim milk
in Class II as determined pursuant to Sec. 1000.44(a) by the average
nonfat solids content of producer skim milk received by the handler,
and multiply the resulting pounds of nonfat solids by the nonfat solids
price; and
(3) Add an amount obtained by multiplying the pounds of butterfat
in Class II as determined pursuant to Sec. 1000.44(b) by the butterfat
price;
(c) Add the Class III value computed as follows:
(1) Multiply the pounds of skim milk in Class III as determined
pursuant to Sec. 1000.44(a) by the average protein content of producer
skim milk received by the handler, and multiply the resulting pounds of
protein by the protein price;
(2) Add an amount obtained by subtracting from the pounds of skim
milk in Class III as determined pursuant to Sec. 1000.44(a) the pounds
of protein determined in Sec. 1033.60(c)(1) and multiplying the
resulting pounds of fluid carrier by a price determined by multiplying
5.7 times the other solids price and dividing the result by 91 (the
resulting price, rounded to the 4th decimal place, shall be known as
the fluid carrier price); and
(3) Add an amount obtained by multiplying the pounds of butterfat
in Class III as determined pursuant to Sec. 1000.44(b) by the butterfat
price;
(d) Add the Class IV value computed as follows:
(1) Multiply the pounds of skim milk in Class IV as determined
pursuant to Sec. 1000.44(a) by the average nonfat solids content of
producer skim milk received by the handler, and multiply the resulting
pounds of nonfat solids by the nonfat solids price; and
(2) Add an amount obtained by multiplying the pounds of butterfat
in Class IV as determined pursuant to Sec. 1000.44(b) by the butterfat
price;
(e) Add an adjustment for the somatic cell content of producer milk
determined by multiplying the value reported pursuant to
Sec. 1033.30(a)(1) by the percentage of the total producer milk
allocated to Class II, Class III, and Class IV pursuant to
Sec. 1000.44(c);
(f) Add the amounts obtained from multiplying the pounds of skim
milk and butterfat overage assigned to each class pursuant to
Sec. 1000.43(b)(2) by the respective skim milk and butterfat prices
applicable at the location of the pool plant;
(g) Add the amount obtained from multiplying the difference between
the Class III price for the preceding month and the Class I price
applicable at the location of the pool plant or the Class II price, as
the case may be, for the current month by the hundredweight of skim
milk and butterfat subtracted from Class I and Class II pursuant to
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
(h) Add the amount obtained from multiplying the difference between
the Class I price applicable at the location of the pool plant and the
Class III price by the hundredweight of skim milk and butterfat
assigned to Class I pursuant to Sec. 1000.43(d) and the hundredweight
of skim milk and butterfat subtracted from Class I pursuant to
Sec. 1000.44(a)(3)(i) through (iii) and the corresponding step of
Sec. 1000.44(b), excluding receipts of bulk fluid cream products from
plants regulated under other Federal orders and bulk concentrated fluid
milk products from pool plants, plants regulated under other Federal
orders, and unregulated supply plants;

[[Page 5065]]

(i) Add the amount obtained from multiplying the difference between
the Class I price and the Class III price applicable at the location of
the nearest unregulated supply plants from which an equivalent volume
was received by the pounds of skim milk and butterfat in receipts of
concentrated fluid milk products assigned to Class I pursuant to
Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and the pounds of skim milk
and butterfat subtracted from Class I pursuant to Sec. 1000.44(a)(8)
and the corresponding step of Sec. 1000.44(b), excluding such skim milk
and butterfat in receipts of bulk fluid milk products from an
unregulated supply plant to the extent that an equivalent amount of
skim milk or butterfat disposed of to such plant by handlers fully
regulated under any Federal milk order is classified and priced as
Class I milk and is not used as an offset for any other payment
obligation under any order;
(j) Subtract, for reconstituted milk made from receipts of nonfluid
milk products, an amount computed by multiplying $1.00 (but not more
than the difference between the Class I price applicable at the
location of the pool plant and the Class IV price) by the hundredweight
of skim milk and butterfat contained in receipts of nonfluid milk
products that are allocated to Class I pursuant to Sec. 1000.43(d); and
(k) Exclude, for pricing purposes under this section, receipts of
nonfluid milk products that are distributed as labeled reconstituted
milk for which payments are made to the producer-settlement fund of
another order under Sec. 1000.76(a)(5) or (c).

Sec. 1033.61 Computation of producer price differential.

For each month the market administrator shall compute a producer
price differential per hundredweight. If the unreserved balance in the
producer-settlement fund to be included in the computation is less than
2 cents per hundredweight of producer milk on all reports, the report
of any handler who has not made payments required pursuant to
Sec. 1033.71 for the preceding month shall not be included in the
computation of the producer price differential. The report of such
handler shall not be included in the computation for succeeding months
until the handler has made full payment of outstanding monthly
obligations. Subject to the aforementioned conditions, the market
administrator shall compute the producer price differential in the
following manner:
(a) Combine into one total the values computed pursuant to
Sec. 1033.60 for all handlers required to file reports prescribed in
Sec. 1033.30;
(b) Subtract the total values obtained by multiplying each
handler's total pounds of protein, fluid carrier, and butterfat
contained in the milk for which an obligation was computed pursuant to
Sec. 1033.60 by the protein price, the fluid carrier price, and the
butterfat price, respectively, and the total value of the somatic cell
adjustment pursuant to Sec. 1033.30(a)(1);
(c) Add an amount equal to the sum of the location adjustments
computed pursuant to Sec. 1033.75;
(d) Add an amount equal to not less than one-half of the
unobligated balance in the producer-settlement fund;
(e) Divide the resulting amount by the sum of the following for all
handlers included in these computations:
(1) The total hundredweight of producer milk; and
(2) The total hundredweight for which a value is computed pursuant
to Sec. 1033.60(i); and
(f) Subtract not less than 4 cents nor more than 5 cents from the
price computed pursuant to paragraph (e) of this section. The result
shall be known as the producer price differential for the month.

Sec. 1033.62 Announcement of producer prices.

On or before the 13th day after the end of each month, the market
administrator shall announce publicly the following prices and
information:
(a) The producer price differential;
(b) The protein price;
(c) The fluid carrier price;
(d) The butterfat price;
(e) The somatic cell adjustment rate;
(f) The average butterfat and protein content of producer milk; and
(g) The statistical uniform price for milk containing 3.5 percent
butterfat, computed by combining the Class III price and the producer
price differential.

Payments for Milk

Sec. 1033.70 Producer-settlement fund.

See Sec. 1000.70 of this chapter.

Sec. 1033.71 Payments to the producer-settlement fund.

Each handler shall make payment to the producer-settlement fund in
a manner that provides receipt of the funds by the market administrator
no later than the 15th day after the end of the month. Payment shall be
the amount, if any, by which the amount specified in (a) of this
section exceeds the amount specified in (b) of this section:
(a) The total value of milk to the handler for the month as
determined pursuant to Sec. 1033.60.
(b) The sum of:
(1) An amount obtained by multiplying the total hundredweight of
producer milk as determined pursuant to Sec. 1000.44(c) by the producer
price differential as adjusted pursuant to Sec. 1033.75;
(2) An amount obtained by multiplying the total pounds of protein
and butterfat contained in producer milk by the protein and butterfat
prices, respectively;
(3) An amount obtained by multiplying the total hundredweight of
fluid carrier contained in producer milk by the fluid carrier price
computed pursuant to Sec. 1033.60(c)(2);
(4) The total value of the somatic cell adjustment to producer
milk; and
(5) An amount obtained by multiplying the pounds of skim milk and
butterfat for which a value was computed pursuant to Sec. 1033.60(i) by
the producer price differential as adjusted pursuant to Sec. 1033.75
for the location of the plant from which received.

Sec. 1033.72 Payments from the producer-settlement fund.

No later than the 16th day after the end of each month, the market
administrator shall pay to each handler the amount, if any, by which
the amount computed pursuant to Sec. 1033.71(b) exceeds the amount
computed pursuant to Sec. 1033.71(a). If, at such time, the balance in
the producer-settlement fund is insufficient to make all payments
pursuant to this section, the market administrator shall reduce
uniformly such payments and shall complete the payments as soon as the
funds are available.

Sec. 1033.73 Payments to producers and to cooperative associations.

[[Page 5066]]

made so that it is received by each producer no later than the 17th day
after the end of the month in an amount equal to not less than the sum
of:
(i) The hundredweight of producer milk received times the producer
price differential for the month as adjusted pursuant to Sec. 1033.75;
(ii) The pounds of butterfat received times the butterfat price for
the month;
(iii) The pounds of protein received times the protein price for
the month;
(iv) The hundredweight of fluid carrier received times the fluid
carrier price for the month;
(v) The hundredweight of milk received times the somatic cell
adjustment for the month;
(vi) Less any payment made pursuant to paragraph (a)(1) of this
section;
(vii) Less proper deductions authorized in writing by such producer
and plus or minus adjustments for errors in previous payments to such
producer; and
(viii) Less deductions for marketing services pursuant to
Sec. 1000.86.
(b) Payments for milk received from cooperative associations. On or
before the day prior to the dates specified in paragraphs (a)(1) and
(a)(2) of this section, each handler shall pay to a cooperative
association for milk received as follows:
(1) Partial payment to a cooperative association. For bulk fluid
milk/skimmed milk received during the first 15 days of the month from a
cooperative association in any capacity, except as the operator of a
pool plant, the partial payment shall be equal to the hundredweight of
milk received multiplied by the lowest announced class price for the
preceding month;
(2) Partial payment to a cooperative association for milk
transferred from its pool plant. For bulk milk/skimmed milk products
received during the first 15 days of the month from a cooperative
association in its capacity as the operator of a pool plant, the
partial payment shall be at the pool plant operator's estimated use
value of the milk using the most recent class prices available,
adjusted for butterfat and plant location;
(3) Final payment to a cooperative association for milk transferred
from its pool plant. Following the classification of bulk fluid milk
products and bulk fluid cream products received during the month from a
cooperative association in its capacity as the operator of a pool
plant, the final payment for such receipts shall be not less than an
amount computed by multiplying the respective quantities assigned to
each class under Sec. 1000.44 by the value calculated pursuant to
Sec. 1033.60(a) and location adjustments pursuant to Sec. 1033.75,
minus the amount of the payment made to the association pursuant to
paragraph (a)(1) of this section.
(4) Final payment to a cooperative association for bulk milk
received directly from producers' farms. For bulk milk received from a
cooperative association during the month, including the milk of
producers who are not members of such association and who the market
administrator determines have authorized the cooperative association to
collect payment for their milk, the final payment for such milk shall
be an amount equal to the sum of the individual payments otherwise
payable for such milk pursuant to paragraph (a)(2) of this section.
(c) If a handler has not received full payment from the market
administrator pursuant to Sec. 1033.72 by the payment date specified in
paragraph (a) or (b) of this section, the handler may reduce payments
pursuant to paragraphs (a) and (b) of this section, but not by more
than the amount of the underpayment. The payments shall be completed on
the next scheduled payment date after receipt of the balance due from
the market administrator.
(d) If a handler claims that a required payment to a producer
cannot be made because the producer is deceased or cannot be located,
or because the cooperative association or its lawful successor or
assignee is no longer in existence, the payment shall be made to the
producer-settlement fund, and in the event that the handler
subsequently locates and pays the producer or a lawful claimant, or in
the event that the handler no longer exists and a lawful claim is later
established, the market administrator shall make the required payment
from the producer-settlement fund to the handler or to the lawful
claimant, as the case may be.
(e) In making payments to producers pursuant to this section, each
handler shall furnish each producer, except a producer whose milk was
received from a cooperative association handler described in
Sec. 1000.9(c), a supporting statement in a form that may be retained
by the recipient which shall show:
(1) The name, address, Grade A identifier assigned by a duly
constituted regulatory agency, and payroll number of the producer;
(2) The daily and total pounds, and the month and dates such milk
was received from that producer;
(3) The total pounds of butterfat, protein, and fluid carrier
contained in the producer's milk;
(4) The average somatic cell count of the producer's milk;
(5) The minimum rate or rates at which payment to the producer is
required pursuant to this order;
(6) The rate used in making payment if the rate is other than the
applicable minimum rate;
(7) The amount, or rate per hundredweight, or rate per pound of
component, and the nature of each deduction claimed by the handler; and
(8) The net amount of payment to the producer or cooperative
association.

Sec. 1033.74 [Reserved]

Sec. 1033.75 Plant location adjustments for producer milk and nonpool
milk.

(a) The producer price differential for producer milk shall be
adjusted according to the location of the plant at which the milk was
physically received by subtracting from the price differential the
amount by which the Class I price specified in Sec. 1033.51 exceeds the
Class I price at the plant's location. If the Class I price at the
plant location exceeds the Class I price specified in Sec. 1033.51, the
difference shall be added to the producer price differential; and
(b) The producer price differential applicable to other source milk
shall be adjusted following the procedure specified in paragraph (a) of
this section, except that the adjusted producer price differential
shall not be less than zero.

Sec. 1033.76 Payments by a handler operating a partially regulated
distributing plant.

See Sec. 1000.76 of this chapter.

Sec. 1033.77 Adjustment of accounts.

See Sec. 1000.77 of this chapter.

Sec. 1033.78 Charges on overdue accounts.

See Sec. 1000.78 of this chapter.

Administrative Assessment and Marketing Service Deduction

Sec. 1033.85 Assessment for order administration.

See Sec. 1000.85 of this chapter.

Sec. 1033.86 Deduction for marketing services.

See Sec. 1000.86 of this chapter.

PART 1124--MILK IN THE PACIFIC NORTHWEST MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1124.1 General provisions.

Definitions

1124.2 Pacific Northwest marketing area.
1124.3 Route disposition.
1124.4 Plant.
1124.5 Distributing plant.

[[Page 5067]]

1124.6 Supply plant.
1124.7 Pool plant.
1124.8 Nonpool plant.
1124.9 Handler.
1124.10 Producer-handler.
1124.11 Cooperative reserve supply unit.
1124.12 Producer.
1124.13 Producer milk.
1124.14 Other source milk.
1124.15 Fluid milk product.
1124.16 Fluid cream product.
1124.17 [Reserved]
1124.18 Cooperative association.
1124.19 Commercial food processing establishment.

Handler Reports

1124.30 Reports of receipts and utilization.
1124.31 Payroll reports.
1124.32 Other reports.

Classification of Milk

1124.40 Classes of utilization.
1124.41 [Reserved]
1124.42 Classification of transfers and diversions.
1124.43 General classification rules.
1124.44 Classification of producer milk.
1124.45 Market administrator's reports and announcements concerning
classification.

Class Prices

1124.50 Class prices and component prices.
1124.51 Class I differential and price.
1124.52 Adjusted Class I differentials.
1124.53 Announcement of class prices and component prices.
1124.54 Equivalent price.

Producer Price Differential

1124.60 Handler's value of milk.
1124.61 Computation of producer price differential.
1124.62 Announcement of producer prices.

Payments for Milk

1124.70 Producer-settlement fund.
1124.71 Payments to the producer-settlement fund.
1124.72 Payments from the producer-settlement fund.
1124.73 Payments to producers and to cooperative associations.
1124.74 [Reserved]
1124.75 Plant location adjustments for producer milk and nonpool
milk.
1124.76 Payments by a handler operating a partially regulated
distributing plant.
1124.77 Adjustment of accounts.
1124.78 Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1124.85 Assessment for order administration.
1124.86 Deduction for marketing services.

Authority: 7 U.S.C. 601-674.

Subpart--Order Regulating Handling

General Provisions

Sec. 1124.1 General provisions.

The terms, definitions, and provisions in Part 1000 of this chapter
apply to and are hereby made a part of this order.

Definitions

Sec. 1124.2 Pacific Northwest marketing area.

Washington

All of the State of Washington.

Idaho Counties

Benewah, Bonner, Boundary, Kootenai, Latah, and Shoshone.

Oregon Counties

Benton, Clackamas, Clatsop, Columbia, Coos, Crook, Curry,
Deschutes, Douglas, Gilliam, Hood River, Jackson, Jefferson,
Josephine, Klamath, Lake, Lane, Lincoln, Linn, Marion, Morrow,
Multnomah, Polk, Sherman, Tillamook, Umatilla, Wasco, Washington,
Wheeler, and Yamhill.

Sec. 1124.3 Route disposition.

See Sec. 1000.3 of this chapter.

Sec. 1124.4 Plant.

See Sec. 1000.4 of this chapter.

Sec. 1124.5 Distributing plant.

See Sec. 1000.5 of this chapter.

Sec. 1124.6 Supply plant.

See Sec. 1000.6 of this chapter.

Sec. 1124.7 Pool plant.

[[Page 5068]]

investigation shows that a revision might be appropriate, a notice
shall be issued stating that a revision is being considered and
inviting data, views, and arguments. If the market administrator
determines that an adjustment to the shipping percentages is necessary,
the market administrator shall notify the industry within one day of
the effective date of such adjustment.
(h) The term pool plant shall not apply to the following plants:
(1) A producer-handler as defined under any Federal order;
(2) An exempt plant as defined in Sec. 1000.8(e);
(3) A plant located within the marketing area and qualified
pursuant to paragraph (a) of this section which meets the pooling
requirements of another Federal order, and from which more than 50
percent of its route disposition has been in the other Federal order
marketing area for three consecutive months;
(4) A plant located outside the marketing area and qualified
pursuant to paragraph (a) of this section that meets the pooling
requirements of another Federal order and has had greater sales in such
other Federal order's marketing area for 3 consecutive months;
(5) A plant located in another Federal order marketing area and
qualified pursuant to paragraph (a) of this section that meets the
pooling requirements of such other Federal order and does not have a
majority of its route distribution in this marketing area for 3
consecutive months or if the plant is required to be regulated under
such other Federal order without regard to its route disposition in any
other Federal order marketing area; and
(6) A plant qualified pursuant to paragraph (c) of this section
which also meets the pooling requirements of another Federal order and
from which greater qualifying shipments are made to plants regulated
under the other Federal order than are made to plants regulated under
this order, or the plant has automatic pooling status under the other
Federal order.

Sec. 1124.8 Nonpool plant.

See Sec. 1000.8 of this chapter.

Sec. 1124.9 Handler.

See Sec. 1000.9 of this chapter.

Sec. 1124.10 Producer-handler.

Except as provided in paragraph (f) of this section, producer-
handler means a person who operates a dairy farm and a distributing
plant from which there is monthly route disposition within the
marketing area in excess of 150,000 pounds during the month and who has
been so designated by the market administrator upon determination that
all of the requirements of this section have been met, providing that
none of the conditions therein for cancellation of such designation
exists.
(a) Requirements for designation. The producer-handler provides
proof satisfactory to the market administrator that:
(1) In its capacity as a dairy farmer, the care and management of
the dairy animals and other resources and facilities (designated as
such pursuant to paragraph (b)(1) of this section) necessary to produce
all Class I milk handled (excluding receipts from handlers fully
regulated under any Federal order); and
(2) In its capacity as a handler, the plant operation at which it
processes and packages and from which it distributes its own milk
production (designated as such pursuant to paragraph (b)(2) of this
section) are under the complete and exclusive control and management of
the producer-handler and are at its own enterprise and at its sole
risk.
(3) The producer-handler neither receives at its designated milk
production resources and facilities nor receives, handles, processes or
distributes at or through any of its designated milk handling,
processing or distributing resources and facilities other source milk
products for reconstitution into fluid milk products, or fluid milk
products derived from any source other than:
(i) Its designated milk production resources and facilities (own
farm production);
(ii) Pool handlers and plants regulated under any Federal order
within the limitation specified in paragraph (c)(2) of this section; or
(iii) nonfat milk solids which are used to fortify fluid milk
products.
(4) The producer-handler is neither directly nor indirectly
associated with the business control or management of, nor has a
financial interest in, another handler's operation; nor is any other
handler so associated with the producer-handler's operation.
(5) Designation of any person as a producer-handler following a
cancellation of its prior designation shall be preceded by performance
in accordance with paragraph (a)(1) through (4) of this section for a
period of 1 month.
(b) Designation of resources and facilities. Designation of a
person as a producer-handler shall include the determination and
designation of the milk production, handling, processing and
distributing resources and facilities, all of which shall be deemed to
constitute an integrated operation, as follows:
(1) As milk production resources and facilities. All resources and
facilities (milking herd(s), buildings housing such herd(s), and the
land on which such buildings are located) used for the production of
milk:
(i) Which are directly, indirectly or partially owned, operated or
controlled by the producer-handler;
(ii) In which the producer-handler in any way has an interest,
including any contractual arrangement; and
(iii) Which are directly, indirectly or partially owned, operated
or controlled by any partner or stockholder of the producer-handler.
However, for purposes of this paragraph, any such milk production
resources and facilities which the producer-handler proves to the
satisfaction of the market administrator do not constitute an actual or
potential source of milk supply for the producer-handler's operation as
such shall not be considered a part of the producer-handler's milk
production resources and facilities.
(2) As milk handling, processing and distributing resources and
facilities. All resources and facilities (including store outlets) used
for handling, processing and distributing any fluid milk product:
(i) Which are directly, indirectly or partially owned, operated or
controlled by the producer-handler; or
(ii) In which the producer-handler in any way has an interest,
including any contractual arrangement, or with respect to which the
producer-handler directly or indirectly exercises any degree of
management or control.
(3) All designations shall remain in effect until canceled pursuant
to paragraph (c) of this section.
(c) Cancellation. The designation as a producer-handler shall be
canceled upon determination by the market administrator that any of the
requirements of paragraph (a)(1) through (4) of this section are not
continuing to be met, or under any of the following conditions:
(1) Milk from the milk production resources and facilities of the
producer-handler, designated in paragraph (b)(1) of this section is
delivered in the name of another person as producer milk to another
handler;
(2) The producer-handler handles fluid milk products derived from
sources other than the milk production facilities and resources
designated in paragraph (b)(1) of this section, except that it may
receive at its plant or acquire for route disposition fluid milk
products from fully regulated plants and handlers

[[Page 5069]]

under any Federal order if such receipts do not exceed 150,000 pounds
monthly. This limitation shall not apply if the producer-handler's own
farm production is less than 150,000 pounds during the month; or
(3) The producer-handler disposes of fluid milk products using the
distribution system of another handler, except for direct deliveries by
the producer-handler to retail outlets or to a pool handler's plant.
(4) Cancellation of a producer-handler's status pursuant to this
paragraph shall be effective on the first day of the month following
the month in which the requirements were not met, or the conditions for
cancellation occurred.
(d) Public announcement. The market administrator shall publicly
announce the name, plant location and farm location(s) of persons
designated as producer-handlers, of those whose designations have been
canceled, and the effective dates of producer-handler status or loss of
producer-handler status for each. Such announcements shall be
controlling with respect to the accounting at plants of other handlers
for fluid milk products received from any producer-handler.
(e) Burden of establishing and maintaining producer-handler status.
The burden rests upon the handler who is designated as a producer-
handler to establish through records required pursuant to Sec. 1000.5
that the requirements set forth in paragraph (a) of this section have
been and are continuing to be met, and that the conditions set forth in
paragraph (c) of this section for cancellation of designation do not
exist.
(f) Producer-handler shall not include any producer who also
operates a distributing plant if the producer-handler so requests that
the two be operated as separate entities with the distributing plant
regulated pursuant to Sec. 1124.7(a) and the farm operated as a
producer pursuant to Sec. 1124.12.

Sec. 1124.11 Cooperative reserve supply unit.

Cooperative reserve supply unit means any cooperative association
or its agent that is a handler pursuant to Sec. 1000.9(c) that does not
own or operate a plant, if such cooperative has been qualified to
receive payments pursuant to Sec. 1124.73 and has been a handler of
producer milk under this or its predecessor order during each of the 12
previous months, and if a majority of the cooperative's member
producers are located within 125 miles of a pool distributing plant. A
cooperative reserve supply unit shall be subject to the following
conditions:
(a) The cooperative shall file a request with the market
administrator for cooperative reserve supply unit status at least 15
days prior to the first day of the month in which such status is
desired to be effective. Once qualified as a cooperative reserve supply
unit pursuant to this paragraph, such status shall continue to be
effective unless the cooperative requests termination prior to the
first day of the month that change of status is requested, or the
cooperative fails to meet all of the conditions of this section;
(b) The cooperative reserve supply unit supplies fluid milk
products to pool distributing plants located within 125 miles of a
majority of the cooperative's member producers in compliance with any
announcement by the market administrator requesting a minimum level of
shipments as further provided below:
(1) The market administrator may require such supplies of bulk
fluid milk from cooperative reserve supply units whenever the market
administrator finds that milk supplies for Class I use are needed for
plants defined in Sec. 1124.7(a) or (b). Before making such a finding,
the market administrator shall investigate the need for such shipments
either on the market administrator's own initiative or at the request
of interested persons. If the market administrator's investigation
shows that such shipments might be appropriate, the market
administrator shall issue a notice stating that a shipping announcement
is being considered and inviting data, views and arguments with respect
to the proposed shipping announcement.
(2) Failure of a cooperative reserve supply unit to comply with any
announced shipping requirements, including making any significant
change in the unit's marketing operation that the market administrator
determines has the impact of evading or forcing such an announcement,
shall result in immediate loss of cooperative reserve supply unit
status until such time as the unit has been a handler pursuant to
Sec. 1000.9(c) for at least 12 consecutive months.

Sec. 1124.12 Producer.

Sec. 1124.13 Producer milk.

[[Page 5070]]

September through November and January, and not more than 75 percent
during the months of February through August and December;
(3) Diverted milk shall be priced at the location of the plant to
which diverted;
(4) Any milk diverted in excess of the limits prescribed in
paragraph (d)(2) of this section shall not be producer milk. If the
diverting handler or cooperative association fails to designate the
dairy farmers' deliveries that are not to be producer milk, no milk
diverted by the handler or cooperative association during the month to
a nonpool plant shall be producer milk; and
(5) The applicable diversion limits in paragraph (d)(2) of this
section may be increased or decreased by the market administrator if
the market administrator finds that such revision is necessary to
assure orderly marketing and efficient handling of milk in the
marketing area. Before making such a finding, the market administrator
shall investigate the need for the revision either on the market
administrator's own initiative or at the request of interested persons.
If the investigation shows that a revision might be appropriate, the
market administrator shall issue a notice stating that the revision is
being considered and inviting written data, views, and arguments.
Any decision to revise an applicable percentage must be issued in
writing at least one day before the effective date.

Sec. 1124.14 Other source milk.

See Sec. 1000.14 of this chapter.

Sec. 1124.15 Fluid milk product.

See Sec. 1000.15 of this chapter.

Sec. 1124.16 Fluid cream product.

See Sec. 1000.16 of this chapter.

Sec. 1124.17 [Reserved]

Sec. 1124.18 Cooperative association.

See Sec. 1000.18 of this chapter.

Sec. 1124.19 Commercial food processing establishment.

See Sec. 1000.19 of this chapter.

Handler Reports

Sec. 1124.30 Reports of receipts and utilization.

Each handler shall report monthly so that the market
administrator's office receives the report on or before the 9th day
after the end of the month, in the detail and on the prescribed forms,
as follows:
(a) Each handler that operates a pool plant pursuant to Sec. 1124.7
and each handler described in Sec. 1000.9(c) shall report for each of
its operations the following information:
(1) Product pounds, pounds of butterfat, pounds of protein, and
pounds of solids-not-fat other than protein (other solids) contained in
or represented by:
(i) Receipts of producer milk, including producer milk diverted by
the handler; and
(ii) Receipts of milk from handlers described in Sec. 1000.9(c);
(2) Product pounds and pounds of butterfat contained in:
(i) Receipts of fluid milk products and bulk fluid cream products
from other pool plants;
(ii) Receipts of other source milk; and
(iii) Inventories at the beginning and end of the month of fluid
milk products and bulk fluid cream products;
(3) The utilization or disposition of all milk and milk products
required to be reported pursuant to this paragraph; and
(4) Such other information with respect to the receipts and
utilization of skim milk, butterfat, milk protein, and other nonfat
solids, as the market administrator may prescribe.
(b) Each handler operating a partially regulated distributing plant
shall report with respect to such plant in the same manner as
prescribed for reports required by paragraph (a) of this section.
Receipts of milk that would have been producer milk if the plant had
been fully regulated shall be reported in lieu of producer milk. The
report shall show also the quantity of any reconstituted skim milk in
route disposition in the marketing area.
(c) Each handler not specified in paragraphs (a) and (b) of this
section shall report with respect to its receipts and utilization of
milk and milk products in such manner as the market administrator may
prescribe.

Sec. 1124.31 Payroll reports.

(a) On or before the 20th day after the end of each month, each
handler that operates a pool plant pursuant to Sec. 1124.7 and each
handler described in Sec. 1000.9(c) shall report to the market
administrator its producer payroll for the month, in the detail
prescribed by the market administrator, showing for each producer the
information described in Sec. 1124.73(f).
(b) Each handler operating a partially regulated distributing plant
who elects to make payment pursuant to Sec. 1000.76(b) shall report for
each dairy farmer who would have been a producer if the plant had been
fully regulated in the same manner as prescribed for reports required
by paragraph (a) of this section.

Sec. 1124.32 Other reports.

In addition to the reports required pursuant to Secs. 1124.30 and
1124.31, each handler shall report any information the market
administrator deems necessary to verify or establish each handler's
obligation under the order.

Classification of Milk

Sec. 1124.40 Classes of utilization.

See Sec. 1000.40 of this chapter.

Sec. 1124.41 [Reserved]

Sec. 1124.42 Classification of transfers and diversions.

See Sec. 1000.42 of this chapter.

Sec. 1124.43 General classification rules.

See Sec. 1000.43 of this chapter.

Sec. 1124.44 Classification of producer milk.

See Sec. 1000.44 of this chapter.

Sec. 1124.45 Market administrator's reports and announcements
concerning classification.

See Sec. 1000.45 of this chapter.

Class Prices

Sec. 1124.50 Class prices and component prices.

See Sec. 1000.50 of this chapter.

Sec. 1124.51 Class I differential and price.

The Class I differential shall be the differential established for
King County, Washington, which is reported in Sec. 1000.52. The Class I
price shall be the price computed pursuant to Sec. 1000.50(a) for King
County, Washington.

Sec. 1124.52 Adjusted Class I differentials.

See Sec. 1000.52 of this chapter.

Sec. 1124.53 Announcement of class prices and component prices.

See Sec. 1000.53 of this chapter.

Sec. 1124.54 Equivalent price.

See Sec. 1000.54 of this chapter.

Producer Price Differential

Sec. 1124.60 Handler's value of milk.

[[Page 5071]]

Class I as determined pursuant to Sec. 1000.44(b) by the Class I
butterfat price applicable at the handler's location.
(b) Add the Class II value, computed as follows:
(1) Multiply the hundredweight of skim milk in Class II as
determined pursuant to Sec. 1000.44(a) by 70 cents;
(2) Add an amount obtained by multiplying the pounds of skim milk
in Class II as determined pursuant to Sec. 1000.44(a) by the average
nonfat solids content of producer skim milk received by the handler,
and multiply the resulting pounds of nonfat solids by the nonfat solids
price;
(3) Add an amount obtained by multiplying the pounds of butterfat
in Class II as determined pursuant to Sec. 1000.44(b) by the butterfat
price;
(c) Add the Class III value computed as follows:
(1) Multiply the pounds of skim milk in Class III as determined
pursuant to Sec. 1000.44(a) by the average protein content of producer
skim milk received by the handler, and multiply the resulting pounds of
protein by the protein price;
(2) Add an amount obtained by multiplying the pounds of skim milk
in Class III as determined pursuant to Sec. 1000.44(a) by the average
other solids content of producer skim milk received by the handler, and
multiply the resulting pounds of other solids by the other solids
price; and
(3) Add an amount obtained by multiplying the pounds of butterfat
in Class III as determined pursuant to Sec. 1000.44(b) by the butterfat
price;
(d) Add the Class IV value computed as follows:
(1) Multiply the pounds of skim milk in Class IV as determined
pursuant to Sec. 1000.44(a) by the average nonfat solids content of
producer skim milk received by the handler, and multiply the resulting
pounds of nonfat solids by the nonfat solids price; and
(2) Add an amount obtained by multiplying the pounds of butterfat
in Class IV as determined pursuant to Sec. 1000.44(b) by the butterfat
price;
(e) Add the amounts obtained from multiplying the pounds of skim
milk and butterfat overage assigned to each class pursuant to
Sec. 1000.43(b)(2) by the respective skim milk and butterfat prices
applicable at the location of the pool plant;
(f) Add the amount obtained from multiplying the difference between
the Class III price for the preceding month and the Class I price
applicable at the location of the pool plant or the Class II price, as
the case may be, for the current month by the hundredweight of skim
milk and butterfat subtracted from Class I and Class II pursuant to
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
(g) Add the amount obtained from multiplying the difference between
the Class I price applicable at the location of the pool plant and the
Class III price by the hundredweight of skim milk and butterfat
assigned to Class I pursuant to Sec. 1000.43(d) and the hundredweight
of skim milk and butterfat subtracted from Class I pursuant to
Sec. 1000.44(a)(3)(i) through (iii) and the corresponding step of
Sec. 1000.44(b), excluding receipts of bulk fluid cream products from a
plant regulated under other Federal orders and bulk concentrated fluid
milk products from pool plants, plants regulated under other Federal
orders, and unregulated supply plants;
(h) Add the amount obtained from multiplying the difference between
the Class I price and the Class III price applicable at the location of
the nearest unregulated supply plants from which an equivalent volume
was received by the pounds of skim milk and butterfat in receipts of
concentrated fluid milk products assigned to Class I pursuant to
Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and the pounds of skim milk
and butterfat subtracted from Class I pursuant to Sec. 1000.44(a)(8)
and the corresponding step of Sec. 1000.44(b), excluding such skim milk
and butterfat in receipts of bulk fluid milk products from an
unregulated supply plant to the extent that an equivalent amount of
skim milk or butterfat disposed of to such plant by handlers fully
regulated under any Federal milk order is classified and priced as
Class I milk and is not used as an offset for any other payment
obligation under any order;
(i) Subtract, for reconstituted milk made from receipts of nonfluid
milk products, an amount computed by multiplying $1.00 (but not more
than the difference between the Class I price applicale at the location
of the pool plant and the Class IV price) by the hundredweight of skim
milk and butterfat contained in receipts of nonfluid milk products that
are allocated to Class I pursuant to Sec. 1000.43(d); and
(j) Exclude, for pricing purposes under this section, receipts of
nonfluid milk products that are distributed as labeled reconstituted
milk for which payments are made to the producer-settlement fund of
another order under Sec. 1000.76(a)(5) or (c).

Sec. 1124.61 Computation of producer price differential.

For each month the market administrator shall compute a producer
price differential per hundredweight. If the unreserved balance in the
producer-settlement fund to be included in the computation is less than
2 cents per hundredweight of producer milk on all reports, the report
of any handler who has not made payments required pursuant to
Sec. 1124.71 for the preceding month shall not be included in the
computation of the producer price differential. The report of such
handler shall not be included in the computation for succeeding months
until the handler has made full payment of outstanding monthly
obligations. Subject to the aforementioned conditions, the market
administrator shall compute the producer price differential in the
following manner:
(a) Combine into one total the values computed pursuant to
Sec. 1124.60 for all handlers required to file reports prescribed in
Sec. 1124.30;
(b) Subtract the total values obtained by multiplying each
handler's total pounds of protein, other solids, and butterfat
contained in the milk for which an obligation was computed pursuant to
Sec. 1124.60 by the protein price, the other solids price, and the
butterfat price, respectively;
(c) Add an amount equal to the sum of the location adjustments
computed pursuant to Sec. 1124.75;
(d) Add an amount equal to not less than one-half of the
unobligated balance in the producer-settlement fund;
(e) Divide the resulting amount by the sum of the following for all
handlers included in these computations:
(1) The total hundredweight of producer milk; and
(2) The total hundredweight for which a value is computed pursuant
to Sec. 1124.60(i); and
(f) Subtract not less than 4 cents nor more than 5 cents from the
price computed pursuant to paragraph (e) of this section. The result
shall be known as the producer price differential for the month.

Sec. 1124.62 Announcement of producer prices.

On or before the 14th day after the end of each month, the market
administrator shall announce publicly the following prices and
information:
(a) The producer price differential;
(b) The protein price;
(c) The other solids price;
(d) The butterfat price;
(e) The average butterfat, protein and other solids content of
producer milk; and
(f) The statistical uniform price for milk containing 3.5 percent
butterfat, computed by combining the Class III price and the producer
price differential.

[[Page 5072]]

Payment for Milk

Sec. 1124.70 Producer-settlement fund.

See Sec. 1000.70 of this chapter.

Sec. 1124.71 Payments to the producer-settlement fund.

Each handler shall make payment to the producer-settlement fund in
a manner that provides receipt of the funds by the market administrator
no later than the 16th day after the end of the month. Payment shall be
the amount, if any, by which the amount specified in (a) of this
section exceeds the amount specified in (b) of this section:
(a) The total value of milk to the handler for the month as
determined pursuant to Sec. 1124.60.
(b) The sum of:
(1) An amount obtained by multiplying the total hundredweight of
producer milk as determined pursuant to Sec. 1000.44(c) by the producer
price differential as adjusted pursuant to Sec. 1124.75;
(2) An amount obtained by multiplying the total pounds of protein,
other solids, and butterfat contained in producer milk by the protein,
other solids, and butterfat prices respectively; and
(3) An amount obtained by multiplying the pounds of skim milk and
butterfat for which a value was computed pursuant to Sec. 1124.60(i) by
the producer price differential as adjusted pursuant to Sec. 1124.75
for the location of the plant from which received.

Sec. 1124.72 Payments from the producer-settlement fund.

No later than the 18th day after the end of each month, the market
administrator shall pay to each handler the amount, if any, by which
the amount computed pursuant to Sec. 1124.71(b) exceeds the amount
computed pursuant to Sec. 1124.71(a). If, at such time, the balance in
the producer-settlement fund is insufficient to make all payments
pursuant to this section, the market administrator shall reduce
uniformly such payments and shall complete the payments as soon as the
funds are available.

Sec. 1124.73 Payments to producers and to cooperative associations.

(a) Each handler shall pay each producer for producer milk for
which payment is not made to a cooperative association pursuant to
paragraph (b) of this section, as follows:
(1) Partial payment. For each producer who has not discontinued
shipments as of the 18th day of the month, partial payment shall be
made so that it is received by each producer on or before the last day
of the month for milk received during the first 15 days of the month
from the producer at not less than the lowest announced class price for
the preceding month, less proper deductions authorized in writing by
the producer; and
(2) Final payment. For milk received during the month, payment
shall be made so that it is received by each producer no later than the
19th day after the end of the month in an amount equal to not less than
the sum of:
(i) The hundredweight of producer milk received times the producer
price differential for the month as adjusted pursuant to Sec. 1124.75;
(ii) The pounds of butterfat received times the butterfat price for
the month;
(iii) The pounds of protein received times the protein price for
the month;
(iv) The pounds of other solids received times the other solids
price for the month;
(v) Less any payment made pursuant to paragraph (a)(1) of this
section;
(vi) Less proper deductions authorized in writing by such producer
and plus or minus adjustments for errors in previous payments to such
producer; and
(vii) Less deductions for marketing services pursuant to
Sec. 1000.86.
(b) Payments for milk received from cooperative association
members. On or before the 2nd day prior to the dates specified in
paragraphs (a)(1) and (a)(2) of this section, each handler shall pay to
a cooperative association for milk from producers who market their milk
through the cooperative association and who have authorized the
cooperative to collect such payments on their behalf an amount equal to
the sum of the individual payments otherwise payable for such producer
milk pursuant to paragraphs (a)(1) and (a)(2) of this section.
(c) Payment for milk received from cooperative association pool
plants or from cooperatives as handlers pursuant to Sec. 1000.9(c). On
or before the 2nd day prior to the dates specified in paragraph (a)(1)
and (a)(2) of this section, each handler who receives fluid milk
products at its plant from a cooperative association in its capacity as
the operator of a pool plant or who receives milk from a cooperative
association in its capacity as a handler pursuant to Sec. 1000.9(c),
including the milk of producers who are not members of such association
and who the market administrator determines have authorized the
cooperative association to collect payment for their milk, shall pay
the cooperative for such milk as follows:
(1) For bulk fluid milk products and bulk fluid cream products
received from a cooperative association in its capacity as the operator
of a pool plant and for milk received from a cooperative association in
its capacity as a handler pursuant to Sec. 1000.9(c) during the first
15 days of the month, at not less than the lowest announced class price
per hundredweight for the preceding month;
(2) For the total quantity of bulk fluid milk products and bulk
fluid cream products received from a cooperative association in its
capacity as the operator of a pool plant, at not less than the total
value of such products received from the association's pool plants, as
determined by multiplying the respective quantities assigned to each
class under Sec. 1000.44, as follows:
(i) The hundredweight of Class I skim milk times the Class I skim
milk price for the month plus the pounds of Class I butterfat times the
Class I butterfat price for the month. The Class I price to be used
shall be that price effective at the location of the shipping plant;
(ii) The hundredweight of Class II skim milk times $ .70;
(iii) The pounds of nonfat solids received in Class II and Class IV
milk times the nonfat solids price for the month;
(iv) The pounds of butterfat received in Class II, Class III, and
Class IV milk times the butterfat price for the month;
(v) The pounds of protein received in Class III milk times the
protein price for the month;
(vi) The pounds of other solids received in Class III milk times
the other solids price for the month; and
(vii) Add together the amounts computed in paragraphs (c)(2)(i)
through (vi) of this section and from that sum deduct any payment made
pursuant to paragraph (c)(1) of this section.
(3) For the total quantity of milk received during the month from a
cooperative association in its capacity as a handler under
Sec. 1000.9(c) as follows:
(i) The hundredweight of producer milk received times the producer
price differential as adjusted pursuant to Sec. 1124.75;
(ii) The pounds of butterfat received times the butterfat price for
the month;
(iii) The pounds of protein received times the protein price for
the month;
(iv) The pounds of other solids received times the other solids
price for the month; and
(v) Add together the amounts computed in paragraphs (c)(3)(i)
through (iv) of this section and from that sum deduct any payment made

[[Page 5073]]

pursuant to paragraph (c)(1) of this section.
(d) If a handler has not received full payment from the market
administrator pursuant to Sec. 1124.72 by the payment date specified in
paragraph (a), (b) or (c) of this section, the handler may reduce pro
rata its payments to producers or to the cooperative association (with
respect to receipts described in paragraph (b), prorating the
underpayment to the volume of milk received from the cooperative
association in proportion to the total milk received from producers by
the handler), but not by more than the amount of the underpayment. The
payments shall be completed on the next scheduled payment date after
receipt of the balance due from the market administrator.
(e) If a handler claims that a required payment to a producer
cannot be made because the producer is deceased or cannot be located,
or because the cooperative association or its lawful successor or
assignee is no longer in existence, the payment shall be made to the
producer-settlement fund, and in the event that the handler
subsequently locates and pays the producer or a lawful claimant, or in
the event that the handler no longer exists and a lawful claim is later
established, the market administrator shall make the required payment
from the producer-settlement fund to the handler or to the lawful
claimant, as the case may be.
(f) In making payments to producers pursuant to this section, each
handler shall furnish each producer, except a producer whose milk was
received from a cooperative association handler described in
Sec. 1000.9(a) or (c), a supporting statement in a form that may be
retained by the recipient which shall show:
(1) The name, address, Grade A identifier assigned by a duly
constituted regulatory agency, and payroll number of the producer;
(2) The daily and total pounds, and the month and dates such milk
was received from that producer;
(3) The total pounds of butterfat, protein, and other solids
contained in the producer's milk;
(4) The minimum rate or rates at which payment to the producer is
required pursuant to this order;
(5) The rate used in making payment if the rate is other than the
applicable minimum rate;
(6) The amount, or rate per hundredweight, or rate per pound of
component, and the nature of each deduction claimed by the handler; and
(7) The net amount of payment to the producer or cooperative
association.

Sec. 1124.74 [Reserved]

Sec. 1124.75 Plant location adjustments for producer milk and nonpool
milk.

(a) The producer price differential for producer milk shall be
adjusted according to the location of the plant at which the milk was
physically received by subtracting from the price differential the
amount by which the Class I price specified in Sec. 1124.51 exceeds the
Class I price at the plant's location. If the Class I price at the
plant location exceeds the Class I price specified in Sec. 1124.51, the
difference shall be added to the producer price differential; and
(b) The producer price differential applicable to other source milk
shall be adjusted following the procedure specified in paragraph (a) of
this section, except that the adjusted producer price differential
shall not be less than zero.

Sec. 1124.76 Payments by a handler operating a partially regulated
distributing plant.

See Sec. 1000.76 of this chapter.

Sec. 1124.77 Adjustment of accounts.

See Sec. 1000.77 of this chapter.

Sec. 1124.78 Charges on overdue accounts.

See Sec. 1000.78 of this chapter.

Administrative Assessment and Marketing Service Deduction

Sec. 1124.85 Assessment for order administration.

See Sec. 1000.85 of this chapter.

Sec. 1124.86 Deduction for marketing services.

See Sec. 1000.86 of this chapter.

PART 1126--MILK IN THE SOUTHWEST MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1126.1 General Provisions.

Definitions

1126.2 Southwest marketing area.
1126.3 Route disposition.
1126.4 Plant.
1126.5 Distributing plant.
1126.6 Supply plant.
1126.7 Pool plant.
1126.8 Nonpool plant.
1126.9 Handler.
1126.10 Producer-handler.
1126.11 [Reserved]
1126.12 Producer.
1126.13 Producer milk.
1126.14 Other source milk.
1126.15 Fluid milk product.
1126.16 Fluid cream product.
1126.17 [Reserved]
1126.18 Cooperative association.
1126.19 Commercial food processing establishment.

Handler Reports

1126.30 Reports of receipts and utilization.
1126.31 Payroll reports.
1126.32 Other reports.

Classification of Milk

1126.40 Classes of utilization.
1126.41 [Reserved]
1126.42 Classification of transfers and diversions.
1126.43 General classification rules.
1126.44 Classification of producer milk.
1126.45 Market administrator's reports and announcements concerning
classification.

Class Prices

1126.50 Class prices and component prices.
1126.51 Class I differential and price.
1126.52 Adjusted Class I differentials.
1126.53 Announcement of class prices and component prices.
1126.54 Equivalent price.

Producer Price Differential

1126.60 Handler's value of milk.
1126.61 Computation of producer price differential.
1126.62 Announcement of producer prices.

Payments for Milk

1126.70 Producer-settlement fund.
1126.71 Payments to the producer-settlement fund.
1126.72 Payments from the producer-settlement fund.
1126.73 Payments to producers and to cooperative associations.
1126.74 [Reserved]
1126.75 Plant location adjustments for producer milk and nonpool
milk.
1126.76 Payments by a handler operating a partially regulated
distributing plant.
1126.77 Adjustment of accounts.
1126.78 Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1126.85 Assessment for order administration.
1126.86 Deduction for marketing services.

Authority: 7 U.S.C. 601-674.

Subpart--Order Regulating Handling

General Provisions

Sec. 1126.1 General provisions.

The terms, definitions, and provisions in part 1000 of this chapter
apply to and are hereby made a part of this order.

Definitions

Sec. 1126.2 Southwest marketing area.

[[Page 5074]]

thereof is within any of the listed states or political subdivisions:

New Mexico and Texas

All of the States of New Mexico and Texas.

Colorado Counties

Archuleta, LaPlata, and Montezuma.

Sec. 1126.3 Route disposition.

See Sec. 1000.3 of this chapter.

Sec. 1126.4 Plant.

See Sec. 1000.4 of this chapter.

Sec. 1126.5 Distributing plant.

See Sec. 1000.5 of this chapter.

Sec. 1126.6 Supply plant.

See Sec. 1000.6 of this chapter.

Sec. 1126.7 Pool plant.

Pool plant means a plant specified in paragraphs (a) through (d) of
this section, or a unit of plants as specified in paragraph (e) of this
section, but excluding a plant specified in paragraph (g) of this
section. The pooling standards described in paragraphs (a), (c), and
(d) of this section are subject to modification pursuant to paragraph
(f) of this section:
(a) A distributing plant from which during the month the total
route disposition is equal to 25 percent or more of the total quantity
of fluid milk products physically received at such plant and route
disposition in the marketing area is at least 15 percent of total route
distribution. Packaged fluid milk products that are transferred to a
distributing plant and which are classified as Class I milk shall be
considered as route disposition from the transferring plant, rather
than the receiving plant, for the single purpose of determining the
transferring plant's pool status under this paragraph.
(b) A distributing plant located in the marketing area at which the
majority of milk received is processed into aseptically packaged fluid
milk products unless there are no sales from the plant into any
marketing area and the plant operator in writing requests nonpool
status for the plant for the month.
(c) A supply plant from which 50 percent of the total quantity of
milk that is physically received during the month from dairy farmers
and handlers described in Sec. 1000.9(c) is transferred to pool
distributing plants.
(d) A plant located within the marketing area that is operated by a
cooperative association if pool plant status under this paragraph is
requested for such plant by the cooperative association and during the
month at least 30 percent of the producer milk of members of such
cooperative association is delivered directly from farms to pool
distributing plants or is transferred to such plants as a fluid milk
product from the cooperative's plant.
(e) Two or more plants operated by the same handler and located
within the marketing area may qualify for pool status as a unit by
meeting the total and in-area route disposition requirements specified
in paragraph (a) of this section and the following additional
requirements:
(1) At least one of the plants in the unit must qualify as a pool
plant pursuant to paragraph (a) of this section;
(2) Other plants in the unit must process only Class I or Class II
products and must be located in a pricing zone providing the same or a
lower Class I price than the price applicable at the distributing plant
included in the unit pursuant to paragraph (e)(1) of this section; and
(3) A written request to form a unit, or to add or remove plants
from a unit, must be filed with the market administrator prior to the
first day of the month for which it is to be effective.
(f) The applicable percentages in paragraphs (a), (c), and (d) of
this section may be increased or decreased up to 10 percentage points
by the market administrator if the market administrator finds that such
revision is necessary to assure orderly marketing and efficient
handling of milk in the marketing area. Before making such a finding,
the market administrator shall investigate the need for the revision
either on the market administrator's own initiative or at the request
of interested parties if the request is made in writing at least 15
days prior to the date for which the requested revision is desired
effective. If the investigation shows that a revision might be
appropriate, the market administrator shall issue a notice stating that
the revision is being considered and inviting written data, views, and
arguments. Any decision to revise an applicable percentage must be
issued in writing at least one day before the effective date.
(g) The term pool plant shall not apply to the following plants:
(1) A producer-handler plant;
(2) An exempt plant as defined in Sec. 1000.8(e);
(3) A plant qualified pursuant to paragraph (a) of this section
that is located within the marketing area if the plant also meets the
pooling requirements of another Federal order, and more than 50 percent
of its route distribution has been in such other Federal order
marketing area for 3 consecutive months;
(4) A plant qualified pursuant to paragraph (a) of this section
which is not located within any Federal order marketing area that meets
the pooling requirements of another Federal order and has had greater
sales in such other Federal order's marketing area for 3 consecutive
months;
(5) A plant qualified pursuant to paragraph (a) of this section
that is located in another Federal order marketing area if the plant
meets the pooling requirements of such other Federal order and does not
have a majority of its route distribution in this marketing area for 3
consecutive months or if the plant is required to be regulated under
such other Federal order without regard to its route disposition in any
other Federal order marketing area;
(6) A plant qualified pursuant to paragraph (c) or (d) of this
section which also meets the pooling requirements of another Federal
order and from which greater qualifying shipments are made to plants
regulated under the other Federal order than are made to plants
regulated under this order, or the plant has automatic pooling status
under the other Federal order; and
(7) That portion of a pool plant designated as a nonpool plant that
is physically separate and operated separately from the pool portion of
such plant. The designation of a portion of a regulated plant as a
nonpool plant must be requested in writing by the handler and must be
approved by the market administrator.

Sec. 1126.8 Nonpool plant.

See Sec. 1000.8 of this chapter.

Sec. 1126.9 Handler.

See Sec. 1000.9 of this chapter.

Sec. 1126.10 Producer-handler.

[[Page 5075]]

(d) Disposes of no other source milk as Class I milk except by
increasing the nonfat milk solids content of the fluid milk products
received from own farm production or pool handlers;
(e) Disposes of no fluid milk products using the distribution
system of another handler except for direct deliveries to retail
outlets or to a pool handler's plant;
(f) Provides proof satisfactory to the market administrator that
the care and management of the dairy animals and other resources
necessary to produce all Class I milk handled (excluding receipts from
handlers fully regulated under any Federal order) and the processing,
packaging, and distribution operations are the producer-handler's own
enterprise and at its own risk; and
(g) Producer-handler shall not include any producer who also
operates a distributing plant if the producer-handler so requests that
the two be operated as separate entities with the distributing plant
regulated under Sec. 1126.7(a) and the farm operated as a producer
under Sec. 1126.12.

Sec. 1126.11 [Reserved]

Sec. 1126.12 Producer.

Sec. 1126.13 Producer milk.

Producer milk means the skim milk (or the skim equivalent of
components of skim milk), including nonfat components, and butterfat
contained in milk of a producer that is:
(a) Received by the operator of a pool plant directly from a
producer or a handler described in Sec. 1000.9(c). Any milk picked up
from the producer's farm tank in a tank truck under the control of the
operator of a pool plant or a handler described in Sec. 1000.9(c) but
which is not received at a plant until the following month shall be
considered as having been received by the handler during the month in
which it is picked up at the producer's farm. All milk received
pursuant to this paragraph shall be priced at the location of the plant
where it is first physically received;
(b) Received by a handler described in Sec. 1000.9(c) in excess of
the quantity delivered to pool plants;
(c) Diverted by a pool plant operator for the account of the
handler operating such plant to another pool plant. Milk so diverted
shall be priced at the location of the plant to which diverted; or
(d) Diverted by the operator of a pool plant or a handler described
in Sec. 1000.9(c) to a nonpool plant, subject to the following
conditions:
(1) Milk of a producer whose dairy farm is located outside the
marketing area shall not be eligible for diversion unless at least 15%
of the producer's milk is physically received at a pool plant during
the month;
(2) The total quantity of milk so diverted during the month by a
cooperative association shall not exceed the total quantity of producer
milk that the cooperative association caused to be delivered to, and
physically received at, pool plants during the month;
(3) The operator of a pool plant that is not a cooperative
association may divert any milk that is not under the control of a
cooperative association that diverts milk during the month pursuant to
this paragraph. The total quantity of milk so diverted during the month
shall not exceed the total quantity of the producer milk physically
received at such plant (or such unit of plants in the case of plants
that pool as a unit pursuant to Sec. 1126.7(e)) during the month;
(4) Any milk diverted in excess of the limits prescribed in
paragraphs (d)(2) and (3) of this section shall not be producer milk.
If the diverting handler or cooperative association fails to designate
the dairy farmers' deliveries that will not be producer milk, no milk
diverted by the handler or cooperative association shall be producer
milk;
(5) Diverted milk shall be priced at the location of the plant to
which diverted; and
(6) The delivery day requirements in paragraph (d)(1) and the
diversion percentages in paragraphs (d)(2) and (3) of this section may
be increased or decreased by the market administrator if the market
administrator finds that such revision is necessary to assure orderly
marketing and efficient handling of milk in the marketing area. Before
making such a finding, the market administrator shall investigate the
need for the revision either on the market administrator's own
initiative or at the request of interested persons. If the
investigation shows that a revision might be appropriate, the market
administrator shall issue a notice stating that the revision is being
considered and inviting written data, views, and arguments. Any
decision to revise an applicable percentage must be issued in writing
at least one day before the effective date.

Sec. 1126.14 Other source milk.

See Sec. 1000.14 of this chapter.

Sec. 1126.15 Fluid milk product.

See Sec. 1000.15 of this chapter.

Sec. 1126.16 Fluid cream product.

See Sec. 1000.16 of this chapter.

Sec. 1126.17 [Reserved]

Sec. 1126.18 Cooperative association.

See Sec. 1000.18 of this chapter.

Sec. 1126.19 Commercial food processing establishment.

See Sec. 1000.19 of this chapter.

Handler Reports

Sec. 1126.30 Reports of receipts and utilization.

Each handler shall report monthly so that the market
administrator's office receives the report on or before the 8th day
after the end of the month, in the detail and on prescribed forms, as
follows:
(a) Each pool plant operator and each handler described in
Sec. 1000.9(c), shall report for each of its operations the following
information:
(1) Product pounds, pounds of butterfat, pounds of protein, pounds
of nonfat solids other than protein (other solids), and the value of
the somatic cell adjustment pursuant to Sec. 1000.50(p) contained in or
represented by:
(i) Receipts of producer milk, including producer milk diverted by
the reporting handler; and
(ii) Receipts of milk from handlers described in Sec. 1000.9(c);
(2) Product pounds and pounds of butterfat contained in:

[[Page 5076]]

(i) Receipts of fluid milk products and bulk fluid cream products
from other pool plants;
(ii) Receipts of other source milk; and
(iii) Inventories at the beginning and end of the month of fluid
milk products and bulk fluid cream products; and
(3) The utilization or disposition of all milk and milk products
required to be reported pursuant to this paragraph; and
(4) Such other information with respect to the receipts and
utilization of skim milk, butterfat, milk protein, other nonfat solids,
and somatic cell information, as the market administrator may
prescribe.
(b) Each handler operating a partially regulated distributing plant
shall report with respect to such plant in the same manner as
prescribed for reports required by paragraph (a) of this section.
Receipts of milk that would have been producer milk if the plant had
been fully regulated shall be reported in lieu of producer milk. The
report shall show also the quantity of any reconstituted skim milk in
route disposition in the marketing area.
(c) Each handler not specified in paragraphs (a) or (b) of this
section shall report with respect to its receipts and utilization of
milk and milk products in such manner as the market administrator may
prescribe.

Sec. 1126.31 Payroll reports.

(a) On or before the 20th day after the end of each month, each
handler that operates a pool plant pursuant to Sec. 1126.7 and each
handler described in Sec. 1000.9(c) shall report to the market
administrator its producer payroll for the month, in the detail
prescribed by the market administrator, showing for each producer the
information specified in Sec. 1126.73(e);
(b) Each handler operating a partially regulated distributing plant
who elects to make payment pursuant to Sec. 1000.76(b) shall report for
each dairy farmer who would have been a producer if the plant had been
fully regulated in the same manner as prescribed for reports required
by paragraph (a) of this section.

Sec. 1126.32 Other reports.

In addition to the reports required pursuant to Secs. 1126.30 and
1126.31, each handler shall report any information the market
administrator deems necessary to verify or establish each handler's
obligation under the order.

Classification of Milk

Sec. 1126.40 Classes of utilization.

See Sec. 1000.40 of this chapter.

Sec. 1126.41 [Reserved]

Sec. 1126.42 Classification of transfers and diversions.

See Sec. 1000.42 of this chapter.

Sec. 1126.43 General classification rules.

See Sec. 1000.43 of this chapter.

Sec. 1126.44 Classification of producer milk.

See Sec. 1000.44 of this chapter.

Sec. 1126.45 Market administrator's reports and announcements
concerning classification.

See Sec. 1000.45 of this chapter.

Class Prices

Sec. 1126.50 Class prices and component prices.

See Sec. 1000.50 of this chapter.

Sec. 1126.51 Class I differential and price.

The Class I differential shall be the differential established for
Dallas County, Texas, which is reported in Sec. 1000.52. The Class I
price shall be the price computed pursuant to Sec. 1000.50(a) for
Dallas County, Texas.

Sec. 1126.52 Adjusted Class I differentials.

See Sec. 1000.52 of this chapter.

Sec. 1126.53 Announcement of class prices and component prices.

See Sec. 1000.53 of this chapter.

Sec. 1126.54 Equivalent price.

See Sec. 1000.54 of this chapter.

Producer Price Differential

Sec. 1126.60 Handler's value of milk.

For the purpose of computing a handler's obligation for producer
milk, the market administrator shall determine for each month the value
of milk of each handler with respect to each of the handler's pool
plants and of each handler described in Sec. 1000.9(c) as follows:
(a) Class I value.
(1) Multiply the hundredweight of skim milk in Class I as
determined pursuant to Sec. 1000.44(a) by the Class I skim milk price
applicable at the handler's location; and
(2) Add an amount obtained by multiplying the total pounds of
butterfat in Class I as determined pursuant to Sec. 1000.44(b) by the
Class I butterfat price applicable at the handler's location.
(b) Add the Class II value, computed as follows:
(1) Multiply the hundredweight of milk in Class II as determined
pursuant to Sec. 1000.44(a) by 70 cents;
(2) Add an amount obtained by multiplying the pounds of skim milk
in Class II as determined pursuant to Sec. 1000.44(a) by the average
nonfat solids content of producer skim milk received by the handler,
and multiplying the resulting pounds of nonfat solids by the nonfat
solids price; and
(3) Add an amount obtained by multiplying the pounds of butterfat
in Class II as determined pursuant to Sec. 1000.44(b) by the butterfat
price.
(c) Add the Class III value, computed as follows:
(1) Multiply the pounds of skim milk in Class III as determined
pursuant to Sec. 1000.44(a) by the average protein content of producer
skim milk received by the handler, and multiply the resulting pounds of
protein by the protein price;
(2) Add an amount obtained by multiplying the pounds of skim milk
in Class III as determined pursuant to Sec. 1000.44(a) by the average
other solids content of producer skim milk received by the handler, and
multiplying the resulting pounds of other solids by the other solids
price; and
(3) Add an amount obtained by multiplying the pounds of butterfat
in Class III as determined pursuant to Sec. 1000.44(b) by the butterfat
price.
(d) Add the Class IV value, computed as follows:
(1) Multiply the pounds of skim milk in Class IV as determined
pursuant to Sec. 1000.44(a) by the average nonfat solids content of
producer skim milk received by the handler, and multiply the resulting
pounds of nonfat solids by the nonfat solids price; and
(2) Add an amount obtained by multiplying the pounds of butterfat
in Class IV as determined pursuant to Sec. 1000.44(b) by the butterfat
price.
(e) Add an adjustment for somatic cell content of producer milk as
determined by multiplying the value reported pursuant to
Sec. 1126.30(a)(1) by the percentage of the total producer milk
allocated to Class II, Class III, and Class IV pursuant to
Sec. 1000.44(c).
(f) Add the amounts obtained from multiplying the pounds of skim
milk and butterfat overage assigned to each class pursuant to
Sec. 1000.43(b)(2) by the respective skim milk and butterfat prices
applicable at the location of the pool plant;
(g) Add the amount obtained from multiplying the difference between
the Class III price for the preceding month and the Class I price
applicable at the location of the pool plant or the Class II price, as
the case may be, for the current month by the hundredweight of skim
milk and butterfat subtracted from Class I and Class II pursuant to
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);

[[Page 5077]]

(h) Add the amount obtained from multiplying the difference between
the Class I price applicable at the location of the pool plant and the
Class III price by the hundredweight of skim milk and butterfat
assigned to Class I pursuant to Sec. 1000.43(d) and the hundredweight
of skim milk and butterfat subtracted from Class I pursuant to
Sec. 1000.44(a)(3)(i) through (iii) and the corresponding step of
Sec. 1000.44(b), excluding receipts of bulk fluid cream products from a
plant regulated under other Federal orders and bulk concentrated fluid
milk products from pool plants, plants regulated under other Federal
orders, and unregulated supply plants;
(i) Add the amount obtained from multiplying the difference between
the Class I price and the Class III price applicable at the location of
the nearest unregulated supply plants from which an equivalent volume
was received by the pounds of skim milk and butterfat in receipts of
concentrated fluid milk products assigned to Class I pursuant to
Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and the pounds of skim milk
and butterfat subtracted from Class I pursuant to Sec. 1000.44(a)(8)
and the corresponding step of Sec. 1000.44(b), excluding such skim milk
and butterfat in receipts of bulk fluid milk products from an
unregulated supply plant to the extent that an equivalent amount of
skim milk or butterfat disposed of to such plant by handlers fully
regulated under any Federal milk order is classified and priced as
Class I milk and is not used as an offset for any other payment
obligation under any order;
(j) Subtract, for reconstituted milk made from receipts of nonfluid
milk products, an amount computed by multiplying $1.00 (but not more
than the difference between the Class I price applicable at the
location of the pool plant and the Class IV price) by the hundredweight
of skim milk and butterfat contained in receipts of nonfluid milk
products that are allocated to Class I use pursuant to Sec. 1000.43(d);
and
(k) Exclude, for pricing purposes under this section, receipts of
nonfluid milk products that are distributed as labeled reconstituted
milk for which payments are made to the producer-settlement fund of
another Federal order under Sec. 1000.76(a)(5) or (c).

Sec. 1126.61 Computation of producer price differential.

For each month the market administrator shall compute a producer
price differential per hundredweight. If the unreserved balance in the
producer-settlement fund to be included in the computation is less than
2 cents per hundredweight of producer milk on all reports, the report
of any handler who has not made payments required pursuant to
Sec. 1126.71 for the preceding month shall not be included in the
computation of the producer price differential. The report of such
handler shall not be included in the computation for succeeding months
until the handler has made full payment of outstanding monthly
obligations. Subject to the aforementioned conditions, the market
administrator shall compute the producer price differential in the
following manner:
(a) Combine into one total the values computed pursuant to
Sec. 1126.60 for all handlers required to file reports prescribed in
Sec. 1126.30;
(b) Subtract the total of the values obtained by multiplying each
handler's total pounds of protein, other solids, and butterfat
contained in the milk for which an obligation was computed pursuant to
Sec. 1126.60 by the protein price, other solids price, and the
butterfat price, respectively, and the total value of the somatic cell
adjustment pursuant to Sec. 1126.30(a)(1);
(c) Add an amount equal to the sum of the location adjustments
computed pursuant to Sec. 1126.75;
(d) Add an amount equal to not less than one-half of the
unobligated balance in the producer-settlement fund;
(e) Divide the resulting amount by the sum of the following for all
handlers included in these computations:
(1) The total hundredweight of producer milk; and
(2) The total hundredweight for which a value is computed pursuant
to Sec. 1126.60(i); and
(f) Subtract not less than 4 cents nor more than 5 cents from the
price computed pursuant to paragraph (e) of this section. The result
shall be known as the producer price differential for the month.

Sec. 1126.62 Announcement of producer prices.

On or before the 13th day after the end of each month, the market
administrator shall announce the following prices and information:
(a) The producer price differential;
(b) The protein price;
(c) The other solids price;
(d) The butterfat price;
(e) The somatic cell adjustment rate;
(f) The average butterfat, nonfat solids, protein, and other solids
content of producer milk; and
(g) The statistical uniform price for milk containing 3.5 percent
butterfat, computed by combining the Class III price and the producer
price differential.

Payments for Milk

Sec. 1126.70 Producer-settlement fund.

See Sec. 1000.70 of this chapter.

Sec. 1126.71 Payments to the producer-settlement fund.

Each handler shall make payment to the producer-settlement fund in
a manner that provides receipt of the funds by the market administrator
no later than the 16th day after the end of the month. Payment shall be
the amount, if any, by which the amount specified in paragraph (a) of
this section exceeds the amount specified in paragraph (b) of this
section:
(a) The total value of milk to the handler for the month as
determined pursuant to Sec. 1126.60.
(b) The sum of:
(1) An amount obtained by multiplying the total hundredweight of
producer milk as determined pursuant to Sec. 1000.44(c) by the producer
price differential as adjusted pursuant to Sec. 1126.75;
(2) An amount obtained by multiplying the total pounds of protein,
other solids, and butterfat contained in producer milk by the protein,
other solids, and butterfat prices respectively;
(3) The total value of the somatic cell adjustment to producer
milk; and
(4) An amount obtained by multiplying the pounds of skim milk and
butterfat for which a value was computed pursuant to Sec. 1126.60(i) by
the producer price differential as adjusted pursuant to Sec. 1126.75
for the location of the plant from which received.

Sec. 1126.72 Payments from the producer-settlement fund.

No later than the 17th day after the end of each month, the market
administrator shall pay to each handler the amount, if any, by which
the amount computed pursuant to Sec. 1126.71(b) exceeds the amount
computed pursuant to Sec. 1126.71(a). If, at such time, the balance in
the producer-settlement fund is insufficient to make all payments
pursuant to this section, the market administrator shall reduce
uniformly such payments and shall complete the payments as soon as the
funds are available.

Sec. 1126.73 Payments to producers and to cooperative associations.

[[Page 5078]]

month, payment shall be made so that it is received by the producer on
or before the 26th day of the month for milk received during the first
15 days of the month at not less than the lowest announced class price
for the preceding month, less proper deductions authorized in writing
by the producer; and
(2) Final payment. For milk received during the month, payment
shall be made so that it is received by each producer no later than the
18th day after the end of the month in an amount computed as follows:
(i) Multiply the hundredweight of producer milk received times the
producer price differential for the month as adjusted pursuant to
Sec. 1126.75;
(ii) Multiply the pounds of butterfat received times the butterfat
price for the month;
(iii) Multiply the pounds of protein received times the protein
price for the month;
(iv) Multiply the pounds of other solids received times the other
solids price for the month;
(v) Multiply the hundredweight of milk received times the somatic
cell adjustment for the month;
(vi) Add the amounts computed in paragraph (a)(2)(i) through (v) of
this section, and from that sum:
(A) Subtract the partial payment made pursuant to paragraph (a)(1)
of this section;
(B) Subtract the deduction for marketing services pursuant to
Sec. 1000.86;
(C) Add or subtract for errors made in previous payments to the
producer; and
(D) Subtract proper deductions authorized in writing by the
producer.
(b) On or before the day prior to the dates specified for partial
and final payments pursuant to paragraph (a) of this section, each pool
plant operator shall pay a cooperative association for milk received as
follows:
(1) Partial payment to a cooperative association. For bulk milk/
skimmed milk received during the first 15 days of the month from a
cooperative association in any capacity, except as the operator of a
pool plant, the payment shall be equal to the hundredweight of milk
received multiplied by the lowest announced class price for the
preceding month;
(2) Partial payment to a cooperative association for milk
transferred from its pool plant. For bulk milk/skimmed milk products
received during the first 15 days of the month from a cooperative
association in its capacity as the operator of a pool plant, the
partial payment shall be at the pool plant operator's estimated use
value of the milk using the most recent class prices available,
adjusted for butterfat value and plant location;
(3) Final payment to a cooperative association for milk transferred
from its pool plant. Following the classification of bulk fluid milk
products and bulk fluid cream products received during the month from a
cooperative association in its capacity as the operator of a pool
plant, the final payment for such receipts shall be determined as
follows:
(i) Multiply the hundredweight of Class I skim milk by the Class I
skim milk price for the month applicable at the location of the
shipping plant;
(ii) Multiply the pounds of Class I butterfat by the Class I
butterfat price for the month applicable at the location of the
shipping plant;
(iii) Multiply the hundredweight of Class II skim milk by $.70;
(iv) Multiply the pounds of nonfat solids received in Class II and
Class IV milk by the nonfat solids price for the month;
(v) Multiply the hundredweight of butterfat in Class II, III, and
IV milk by the butterfat price for the month;
(vi) Multiply the pounds of protein received in Class III milk by
the protein price for the month;
(vii) Multiply the pounds of other solids received in Class III
milk by the other solids price for the month;
(viii) Multiply the hundredweight of Class II, Class III, and Class
IV milk received times the somatic cell adjustment;
(ix) Add together the amounts computed in paragraph (b)(3)(i)
through (viii) of this section and from that sum deduct any payment
made pursuant to paragraph (b)(2) of this section.
(4) Final payment to a cooperative association for bulk milk
received directly from producers' farms. For bulk milk received from a
cooperative association during the month, including the milk of
producers who are not members of such association and who the market
administrator determines have authorized the cooperative association to
collect payment for their milk, the final payment for such milk shall
be an amount equal to the sum of the individual payments otherwise
payable for such milk pursuant to paragraph (a)(2) of this section.
(c) If a handler has not received full payment from the market
administrator pursuant to Sec. 1126.72 by the payment date specified in
paragraph (a) or (b) of this section, the handler may reduce pro rata
its payments to producers or to cooperative associations pursuant to
paragraphs (a) and (b) of this section, but by not more than the amount
of the underpayment. The payments shall be completed on the next
scheduled payment date after receipt of the balance due from the market
administrator.
(d) If a handler claims that a required payment to a producer
cannot be made because the producer is deceased or cannot be located,
or because the cooperative association or its lawful successor or
assignee is no longer in existence, the payment shall be made to the
producer-settlement fund, and in the event that the handler
subsequently locates and pays the producer or a lawful claimant, or in
the event that the handler no longer exists and a lawful claim is later
established, the market administrator shall make the required payment
from the producer-settlement fund to the handler or to the lawful
claimant as the case may be.
(e) In making payments to producers pursuant to this section, each
pool plant operator shall furnish each producer, except a producer
whose milk was received from a cooperative association handler
described in Sec. 1000.9(a) or (c), a supporting statement in a form
that may be retained by the recipient which shall show:
(1) The name, address, Grade A identifier assigned by a duly
constituted regulatory agency, and the payroll number of the producer;
(2) The month and dates that milk was received from the producer,
including the daily and total pounds of milk received;
(3) The total pounds of butterfat, protein, and other solids
contained in the producer's milk;
(4) The somatic cell count of the producer's milk;
(5) The minimum rate or rates at which payment to the producer is
required pursuant to this order;
(6) The rate used in making payment if the rate is other than the
applicable minimum rate;
(7) The amount, or rate per hundredweight, or rate per pound of
component, and the nature of each deduction claimed by the handler; and
(8) The net amount of payment to the producer or cooperative
association.

Sec. 1126.74 [Reserved]

Sec. 1126.75 Plant location adjustments for producer milk and nonpool
milk.

[[Page 5079]]

Class I price at the plant location exceeds the Class I price specified
in Sec. 1126.51, the difference shall be added to the producer price
differential; and
(b) The producer price differential applicable for other source
milk shall be adjusted following the procedure specified in paragraph
(a) of this section, except that the adjusted producer price
differential shall not be less than zero.

Sec. 1126.76 Payments by a handler operating a partially regulated
distributing plant.

See Sec. 1000.76 of this chapter.

Sec. 1126.77 Adjustment of accounts.

See Sec. 1000.77 of this chapter.

Sec. 1126.78 Charges on overdue accounts.

See Sec. 1000.78 of this chapter.

Administrative Assessment and Marketing Service Deduction

Sec. 1126.85 Assessment for order administration.

See Sec. 1000.85 of this chapter.

Sec. 1126.86 Deduction for marketing services.

See Sec. 1000.86 of this chapter.

PART 1131--MILK IN ARIZONA-LAS VEGAS MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1131.1 General provisions.

Definitions

1131.2 Arizona-Las Vegas marketing area.
1131.3 Route disposition.
1131.4 Plant.
1131.5 Distributing Plant.
1131.6 Supply Plant.
1131.7 Pool plant.
1131.8 Nonpool plant.
1131.9 Handler.
1131.10 Producer-handler.
1131.11 [Reserved]
1131.12 Producer.
1131.13 Producer milk.
1131.14 Other source milk.
1131.15 Fluid milk product.
1131.16 Fluid cream product.
1131.17 [Reserved]
1131.18 Cooperative association.
1131.19 Commercial food processing establishment.

Handler Reports

1131.30 Reports of receipts and utilization.
1131.31 Payroll reports.
1131.32 Other reports.

Classification of Milk

1131.40 Classes of utilization.
1131.41 [Reserved]
1131.42 Classification of transfers and diversions.
1131.43 General classification rules.
1131.44 Classification of producer milk.
1131.45 Market administrator's reports and announcements concerning
classification.

Class Prices

1131.50 Class prices, component prices, Class I differential and
price.
1131.51 [Reserved]
1131.52 Adjusted Class I differentials.
1131.53 Announcement of class prices and component prices.
1131.54 Equivalent price.

Uniform Price

1131.60 Handler's value of milk.
1131.61 Computation of uniform price, uniform butterfat price and
uniform skim milk price.
1131.62 Announcement of uniform price, uniform butterfat price and
uniform skim milk price.

Payments for Milk

1131.70 Producer-settlement fund.
1131.71 Payments to the producer-settlement fund.
1131.72 Payments from the producer-settlement fund.
1131.73 Payments to producers and to cooperative associations.
1131.74 [Reserved]
1131.75 Plant location adjustments for producers and nonpool milk.
1131.76 Payments by a handler operating a partially regulated
distributing plant.
1131.77 Adjustment of accounts.
1131.78 Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1131.85 Assessment for order administration.
1131.86 Deduction for marketing services.

Authority: 7 U.S.C. 601--674.

Subpart--Order Regulating Handling

General Provisions

Sec. 1131.1 General provisions.

The terms, definitions, and provisions in Part 1000 of this chapter
apply to and are hereby made a part of this order.

Definitions

Sec. 1131.2 Arizona-Las Vegas marketing area.

Arizona

All of the State of Arizona.

Nevada Counties

Clark.

Sec. 1131.3 Route disposition.

See Sec. 1000.3 of this chapter.

Sec. 1131.4 Plant.

See Sec. 1000.4 of this chapter.

Sec. 1131.5 Distributing Plant.

See Sec. 1000.5 of this chapter.

Sec. 1131.6 Supply Plant.

See Sec. 1000.6 of this chapter.

Sec. 1131.7 Pool plant.

[[Page 5080]]

and from plants of the cooperative association for which pool plant
status has been requested under this paragraph subject to the following
conditions:
(1) The plant does not qualify as a pool plant under paragraph (a),
(b) or (c) or this section or under comparable provisions of another
Federal order; and
(2) The plant is approved by a duly constituted regulatory agency
for the handling of milk approved for fluid consumption in the
marketing area.
(e) Two or more plants operated by the same handler and located in
the marketing area may qualify for pool plant status as a unit by
together meeting the requirements specified in paragraph (a) of this
section and subject to all of the following additional requirements:
(1) At least one of the plants in the unit must qualify as a pool
plant pursuant to paragraph (a) of this section;
(2) Other plants in the unit must process Class I or Class II
products, using 50 percent or more of the total Grade A fluid milk
products received in bulk form at such plant or diverted therefrom by
the plant operator in Class I or Class II products, and must be located
in a pricing zone providing the same or lower Class I price than the
price applicable at the distributing plant included in the unit
pursuant to paragraph (e)(1) of this section;
(3) A written request to form a unit must be filed by the handler
with the market administrator prior to the first day of the month for
which such status is desired to be effective. The unit shall continue
from month to month thereafter without further notification. The
handler shall notify the market administrator in writing prior to the
first day of any month for which termination or any change of the unit
is desired.
(f) The applicable percentages in paragraphs (a), (b), (c), and (d)
of this section may be increased or decreased by the market
administrator if found necessary to obtain needed shipments or to
prevent uneconomic shipments. Before making such a finding, the market
administrator shall investigate the need for revision, either on the
market administrator's own initiative or at the request of interested
parties. If such investigation shows that a revision might be
appropriate, a notice shall be issued stating that a revision
adjustment is being considered and inviting data, views, and arguments.
If the market administrator determines that an adjustment to the
shipping percentages is necessary, the market administrator shall
notify the industry within one day of the effective date of such
adjustment.
(g) The term pool plant shall not apply to the following plants:
(1) A producer-handler as defined under any Federal order;
(2) An exempt plant as defined in Sec. 1000.8(e).
(3) A plant located within the marketing area and qualified
pursuant to paragraph (a) or (e) of this section which meets the
pooling requirements of another Federal order, and from which more than
50 percent of its route disposition has been in the other Federal order
marketing area for three consecutive months.
(4) A plant located outside the marketing area and qualified
pursuant to paragraph (a) of this section that meets the pooling
requirements of another Federal order or a State order providing for
marketwide pooling, and has had greater sales in such other Federal
order's marketing area for 3 consecutive months;
(5) A plant located in another Federal order marketing area and
qualified pursuant to paragraph (a) of this section that meets the
pooling requirements of such other Federal order and does not have a
majority of its route distribution in this marketing area for 3
consecutive months or if the plant is required to be regulated under
such other Federal order without regard to its route disposition in any
other Federal order marketing area;
(6) A plant qualified pursuant to paragraph (c) of this section
which also meets the pooling requirements of another Federal order and
from which greater qualifying shipments are made to plants regulated
under the other Federal order than are made to plants regulated under
this order, or the plant has automatic pooling status under the other
Federal order; and
(7) That portion of a regulated plant designated as a nonpool plant
that is physically separate and operated separately from the pool
portion of such plant. The designation of a portion of a regulated
plant as a nonpool plant must be requested in advance and in writing by
the handler and must be approved by the market administrator.

Sec. 1131.8 Nonpool plant.

See Sec. 1000.8 of this chapter.

Sec. 1131.9 Handler.

See Sec. 1000.9 of this chapter.

Sec. 1131.10 Producer-handler.

Except as provided in paragraph (g) of this section, producer-
handler means a person who:
(a) Operates a dairy farm and a distributing plant from which there
is monthly route disposition in excess of 150,000 pounds during the
month;
(b) Receives no fluid milk products from sources other than own
farm production, pool handlers, and plants fully regulated under
another Federal order;
(c) Receives at its plant or acquires for route disposition no more
than 150,000 pounds of fluid milk products from handlers fully
regulated under any Federal order. This limitation shall not apply if
the producer-handler's own farm production is less than 150,000 pounds
during the month.
(d) Disposes of no other source milk as Class I milk except by
increasing the nonfat milk solids content of the fluid milk products
received from own farm production or pool handlers;
(e) Disposes of no fluid milk products using the distribution
system of another handler except for direct deliveries to retail
outlets or to a pool handler's plant;
(f) Does not distribute fluid milk products to a wholesale customer
who also is serviced by a handler described in Sec. 1000.9(a) or (d)
that supplied the same product in the same-sized package with a similar
label to the wholesale customer during the month;
(g) Provides proof satisfactory to the market administrator that
the care and management of the dairy animals and other resources
necessary to produce all Class I milk handled (excluding receipts from
handlers fully regulated under any Federal order) and the processing,
packaging, and distribution operations are the producer-handler's own
enterprise and at its own risk; and
(h) Producer-handler shall not include any producer who also
operates a distributing plant if the producer-handler so requests that
the two be operated as separate entities with the distributing plant
regulated under Sec. 1131.7(a) and the farm operated as a producer
under Sec. 1131.12.

Sec. 1131.11 [Reserved]

Sec. 1131.12 Producer.

[[Page 5081]]

(3) A dairy farmer whose milk is received by diversion at a pool
plant from a handler regulated under another Federal order if the other
Federal order designates the dairy farmer as a producer under that
order and that milk is allocated by request to a utilization other than
Class I;
(4) A dairy farmer whose milk is reported as diverted to a plant
fully regulated under another Federal order with respect to that
portion of the milk so diverted that is assigned to Class I under the
provisions of such other order; and
(5) A dairy farmer whose milk is received at a pool plant if during
the month milk from the same farm is received at a nonpool plant
(except a nonpool plant that has no utilization or milk products in any
class other than Class III or Class IV) other than as a diversion under
this or some other Federal order.

Sec. 1131.13 Producer milk.

Producer milk means the skim milk (or the skim equivalent of
components of skim milk) and butterfat in milk of a producer that is:
(a) Received by the operator of a pool plant directly from a
producer or a handler described in Sec. 1000.9(c). Any milk picked up
from the producer's farm tank in a tank truck under the control of the
operator of the pool plant or a handler described in Sec. 1000.9(c) but
which is not received at a plant until the following month shall be
considered as having been received by the handler during the month in
which it was picked up at the producer's farm. All milk received
pursuant to this paragraph shall be priced at the location of the plant
where it is first physically received.
(b) Received by a handler described in Sec. 1000.9(c) in excess of
the quantity delivered to pool plants.
(c) Diverted by a pool plant operator to another pool plant. Milk
so diverted shall be priced at the location of the plant to which
diverted; or
(d) Diverted by the operator of a pool plant or a cooperative
association described in Sec. 1000.9(c) to a nonpool plant, subject to
the following conditions:
(1) Milk of a dairy farmer shall not be eligible for diversion
unless at least one day's production of such dairy farmer is physically
received at a pool plant during the month;
(2) The total quantity of milk diverted by a handler in any month
shall not exceed 20 percent of the total producer milk caused by the
handler to be received at pool plants or diverted;
(3) Diverted milk shall be priced at the location of the plant to
which diverted;
(4) Any milk diverted in excess of the limits prescribed in (d)(2)
of this section shall not be producer milk. If the diverting handler or
cooperative association fails to designate the dairy farmers'
deliveries that are not to be producer milk, no milk diverted by the
handler or cooperative association during the month to a nonpool plant
shall be producer milk. In the event some of the milk of any producer
is determined not to be producer milk pursuant to this paragraph, other
milk delivered by such producer as producer milk during the month will
not be subject to Sec. 1131.12(b)(5); and
(5) The applicable diversion limits in paragraph (d)(2) of this
section may be increased or decreased by the market administrator if
the market administrator finds that such revision is necessary to
assure orderly marketing and efficient handling of milk in the
marketing area. Before making such a finding, the market administrator
shall investigate the need for the revision either on the market
administrator's own initiative or at the request of interested persons.
If the investigation shows that a revision might be appropriate, the
market administrator shall issue a notice stating that the revision is
being considered and inviting written data, views, and arguments. Any
decision to revise an applicable percentage must be issued in writing
at least one day before the effective date.

Sec. 1131.14 Other source milk.

See Sec. 1000.14 of this chapter.

Sec. 1131.15 Fluid milk product.

See Sec. 1000.15 of this chapter.

Sec. 1131.16 Fluid cream product.

See Sec. 1000.16 of this chapter.

Sec. 1131.17 [Reserved]

Sec. 1131.18 Cooperative association.

See Sec. 1000.18 of this chapter.

Sec. 1131.19 Commercial food processing establishment.

See Sec. 1000.19 of this chapter.

Handler Reports

Sec. 1131.30 Reports of receipts and utilization.

Each handler shall report monthly so that the market
administrator's office received the report on or before the 7th day
after the end of the month, in the detail and on the forms prescribed
by the market administrator, as follows:
(a) With respect to each of its pool plants, the quantities of skim
milk and butterfat contained in or represented by:
(1) Receipts of producer milk, including producer milk diverted by
the plant operator to other plants;
(2) Receipts of milk from handlers described in Sec. 1000.9(c);
(3) Receipts of fluid milk products and bulk fluid cream products
from other pool plants;
(4) Receipts of other source milk;
(5) Inventories at the beginning and end of the month of fluid milk
products and bulk fluid cream products; and
(6) The utilization or disposition of all milk and milk products
required to be reported pursuant to this paragraph.
(b) Each handler operating a partially regulated distributing plant
shall report with respect to such plant in the same manner as
prescribed for reports required by paragraph (a) of this section.
Receipts of milk that would have been producer milk if the plant had
been fully regulated shall be reported in lieu of producer milk. Such
report shall show also the quantity of any reconstituted skim milk in
route disposition in the marketing area.
(c) Each handler described in Sec. 1000.9(c) shall report:
(1) The quantities of all skim milk and butterfat contained in
receipts of milk from producers; and
(2) The utilization or disposition of all such receipts.
(d) Each handler described in Sec. 1131.10 shall report:
(1) The pounds of milk received from each of the handler's own-farm
production units, showing separately the production of each farm unit
and the number of dairy cows in production at each farm unit;
(2) Fluid milk products and bulk fluid cream products received at
its plant or acquired for route disposition from pool plants, other
order plants, and handlers described in Sec. 1000.9(c);
(3) Receipts of other source milk not reported pursuant to
paragraph (d)(2) of this section;
(4) Inventories at the beginning and end of the month of fluid milk
products and fluid cream products; and
(5) The utilization or disposition of all milk and milk products
required to be reported pursuant to this paragraph.
(e) Each handler not specified in paragraphs (a) through (d) of
this section shall report with respect to its receipts and utilization
of milk and milk products in such manner as the market administrator
may prescribe.

Sec. 1131.31 Payroll reports.

(a) On or before the 20th day after the end of each month, each
handler

[[Page 5082]]

described in Sec. 1000.9(a) and (c) shall report to the market
administrator its producer payroll for such month, in the detail
prescribed by the market administrator, showing for each producer:
(1) The producer's name and address;
(2) The total pounds of milk received from the producer;
(3) The average butterfat content of such milk; and
(4) The price per hundredweight, the gross amount due, the amount
and nature of any deductions, and the net amount paid.
(b) Each handler operating a partially regulated distributing plant
who elects to make payment pursuant to Sec. 1000.76(b) shall report for
each dairy farmer who would have been a producer if the plant had been
fully regulated in the same manner as prescribed for reports required
by paragraph (a) of this section.

Sec. 1131.32 Other reports.

In addition to the reports required pursuant to Sec. 1131.30 and
Sec. 1131.31, each handler shall report any information the market
administrator deems necessary to verify or establish each handler's
obligation under the order.

Classification of Milk

Sec. 1131.40 Classes of utilization.

See Sec. 1000.40 of this chapter.

Sec. 1131.41 [Reserved]

Sec. 1131.42 Classification of transfers and diversions.

See Sec. 1000.42 of this chapter.

Sec. 1131.43 General classification rules.

See Sec. 1000.43 of this chapter.

Sec. 1131.44 Classification of producer milk.

See Sec. 1000.44 of this chapter.

Sec. 1131.45 Market administrator's reports and announcements
concerning classification.

See Sec. 1000.45 of this chapter.

Class Prices

Sec. 1131.50 Class prices, component prices, Class I differential and
price.

Class prices and component prices are described in Sec. 1000.50.
The Class I differential shall be the differential established for
Maricopa County, Arizona, which is reported in Sec. 1000.52. The Class
I price shall be the price computed pursuant to Sec. 1000.50(a) for
Maricopa County, Arizona.

Sec. 1131.51 [Reserved]

Sec. 1131.52 Adjusted Class I differentials.

See Sec. 1000.52 of this chapter.

Sec. 1131.53 Announcement of class prices and component prices.

See Sec. 1000.53 of this chapter.

Sec. 1131.54 Equivalent price.

See Sec. 1000.54 of this chapter.

Uniform Price

Sec. 1131.60 Handler's value of milk.

For the purpose of computing the uniform price, the market
administrator shall determine for each month the value of milk of each
handler with respect to each of the handler's pool plants and of each
handler described in Sec. 1000.9(c) as follows:
(a) Multiply the pounds of skim milk and butterfat in producer milk
that were classified in each class pursuant to Sec. 1000.44(c) by the
applicable skim milk and butterfat prices and add the resulting
amounts;
(b) Add the amounts obtained from multiplying the pounds of skim
milk and butterfat overage assigned to each class pursuant to
Sec. 1000.43(b)(2) by the respective skim milk and butterfat prices
applicable at the location of the pool plant;
(c) Add the amount obtained from multiplying the difference between
the Class III price for the preceding month and the Class I price
applicable at the location of the pool plant or the Class II price, as
the case may be, for the current month by the hundredweight of skim
milk and butterfat subtracted from Class I and Class II pursuant to
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
(d) Add the amount obtained from multiplying the difference between
the Class I price applicable at the location of the pool plant and the
Class III price by the hundredweight of skim milk and butterfat
assigned to Class I pursuant to Sec. 1000.43(d) and the hundredweight
of skim milk and butterfat subtracted from Class I pursuant to
Sec. 1000.44(a)(3)(i) through (iii), and the corresponding step of
Sec. 1000.44(b), excluding receipts of bulk fluid cream products from a
plant regulated under other Federal orders and bulk concentrated fluid
milk products from pool plants, plants regulated under other Federal
orders, and unregulated supply plants;
(e) Add the amount obtained from multiplying the Class I price
applicable at the location of the nearest unregulated supply plants
from which an equivalent volume was received by the pounds of skim milk
and butterfat in receipts of concentrated fluid milk products assigned
to Class I pursuant to Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and
the pounds of skim milk and butterfat subtracted from Class I pursuant
to Sec. 1000.44(a)(8) and the corresponding steps of Sec. 1000.44(b),
excluding such skim milk and butterfat in receipts of bulk fluid milk
products from an unregulated supply plant to the extent that an
equivalent amount of skim milk or butterfat disposed of to such plant
by handlers fully regulated under any Federal milk order is classified
and priced as Class I milk and is not used as an offset for any other
payment obligation under any order;
(f) Subtract, for reconstituted milk made from receipts of nonfluid
milk products, an amount computed by multiplying $1.00 (but not more
than the difference between the Class I price applicable at the
location of the pool plant and the Class IV price) by the hundredweight
of skim milk and butterfat contained in receipts of nonfluid milk
products that are allocated to Class I use pursuant to Sec. 1000.43(d);
(g) Exclude, for pricing purposes under this section, receipts of
nonfluid milk products that are distributed as labeled reconstituted
milk for which payments are made to the producer-settlement fund of
another order under Sec. 1000.76(a)(5) or (c).

Sec. 1131.61 Computation of uniform price, uniform butterfat price and
uniform skim milk price.

(a) For each month the market administrator shall compute the
uniform price per hundredweight. If the unreserved balance in the
producer-settlement fund to be included in the computation is less than
two cents per hundredweight of producer milk on all reports, the report
of any handler who has not made payments required pursuant to
Sec. 1131.71 for the preceding month shall not be included in the
computation of the uniform price. The report of such handler shall not
be included in the computation for succeeding months until the handler
has made full payment of outstanding monthly obligations. Subject to
the aforementioned conditions, the market administrator shall compute
the uniform price in the following manner:
(1) Combine into one total the values computed pursuant to
Sec. 1131.60 for all handlers required to file reports prescribed in
Sec. 1131.30;
(2) Add an amount equal to the sum of the location adjustments
computed pursuant to Sec. 1131.75;
(3) Add an amount equal to not less than one-half of the
unobligated balance in the producer-settlement fund;
(4) Add or subtract, as the case may be, to obtain an all-producer
milk test of 3.5% butterfat, the value of the required pounds of
butterfat times the uniform

[[Page 5083]]

butterfat price computed pursuant to paragraph (b) of this section;
(5) Divide the resulting amount by the sum of the following for all
handlers included in these computations:
(i) The total hundredweight of producer milk;
(ii) The total hundredweight for which a value is computed pursuant
to Sec. 1131.60(f); and
(6) Subtract not less than 4 cents nor more than 5 cents per
hundredweight. The result shall be the uniform price for milk received
from producers during the month.
(b) Uniform butterfat price. The Uniform butterfat price per pound,
rounded to the nearest one-hundredth cent, shall be obtained by
multiplying the pounds of butterfat in producer milk allocated to each
class pursuant to Sec. 1000.44(b) by the respective class butterfat
prices (Class I butterfat price for Class I and the butterfat price for
all other classes) and dividing the sum of such values by the total
pounds of such butterfat.
(c) Uniform skim milk price. The uniform skim milk price per
hundredweight, rounded to the nearest cent, shall be the uniform price
for the month computed pursuant to paragraph (a) of this section, less
the uniform butterfat price for the month computed pursuant to
paragraph (b) of this section multiplied by 3.5, with the result
divided by .965.

Sec. 1131.62 Announcement of uniform price, uniform butterfat price
and uniform skim milk price.

On or before the 11th day after the end of each month, the market
administrator shall announce the following prices and information:
(a) The uniform price computed pursuant to Sec. 1131.61 for such
month;
(b) The uniform butterfat price computed pursuant to
Sec. 1131.61(b) for such month; and
(c) The uniform skim milk price computed pursuant to
Sec. 1131.61(c) for such month.

Payments for Milk

Sec. 1131.70 Producer-settlement fund.

See Sec. 1000.70 of this chapter.

Sec. 1131.71 Payments to the producer-settlement fund.

Each handler shall make payment to the producer-settlement fund in
a manner that provides receipt of the funds by the market administrator
no later than the 13th day after the end of the month. Payments due the
market administrator shall be deemed not to have been made until the
money owed has been received at the market administrator's office, or
deposited into the market administrator's bank account. Payment shall
be the amount, if any, by which the amount specified in paragraph (a)
of this section exceeds the amount specified in paragraph (b) of this
section:
(a) The total value of milk to the handler for the month as
determined pursuant to Sec. 1131.60.
(b) The sum of:
(1) The value at the uniform prices for skim milk and butterfat,
adjusted for plant location, of the handler's receipts of producer
milk; and
(2) The value at the uniform price as adjusted pursuant to
Sec. 1131.75 applicable at the location of the plant from which
received of other source milk for which a value is computed pursuant to
Sec. 1131.60(e).

Sec. 1131.72 Payments from the producer-settlement fund.

No later than the 14th day after the end of each month, the market
administrator shall pay to each handler the amount, if any, by which
the amount computed pursuant to Sec. 1131.71(b) exceeds the amount
computed pursuant to Sec. 1131.71(a). If, at such time, the balance in
the producer-settlement fund is insufficient to make all payments
pursuant to this section, the market administrator shall reduce
uniformly such payments and shall complete the payments as soon as the
funds are available.

Sec. 1131.73 Payments to producers and to cooperative associations.

(a) Except as provided in paragraphs (b) and (c) of this section,
each handler shall make payment to each producer from whom milk is
received during the month as follows:
(1) Partial Payment. For each producer who has not discontinued
shipments as of the 25th day of the month, payment shall be made so
that it is received by the producer on or before the 27th day of each
month to each producer who did not discontinue shipping milk to such
handler before the 25th day of the month, for milk received from such
producer during the first 15 days of the month at not less than 1.3
times the lowest class price for the preceding month, adjusted for
plant location pursuant to Sec. 1131.75 and proper deductions
authorized in writing by the producer; and
(2) Final Payment. On or before the 15th day of the following
month, not less than an amount computed by the sum of the following:
(i) The hundredweight of producer milk received times the uniform
price for the month as adjusted pursuant to Sec. 1131.75;
(ii) The hundredweight of producer skim milk received times the
uniform skim milk price for the month;
(iii) The pounds of producer butterfat received times the uniform
butterfat price for the month;
(iv) Less payments made pursuant to paragraph (a) of this section;
(v) Less deductions made for marketing service pursuant to
Sec. 1000.86;
(vi) Plus or minus adjustments for errors made in previous payments
to such producer; and
(vii) Less proper deductions authorized in writing by such
producer.
(b) Two days prior to the dates on which partial and final payments
are due pursuant to paragraph (a) of this section, each pool plant
operator shall pay a cooperative association for milk received as
follows:
(1) Partial payment to a cooperative association. On or before the
25th day of the month each handler shall pay to a cooperative
association that the market administrator determines is authorized by
its members to collect payment for their milk, an amount not less than
1.3 times the lowest class price for the preceding month multiplied by
the hundredweight of milk received during the first 15 days of the
month from such cooperative association, including the milk of
producers not members of such cooperative association who the market
administrator determines have authorized the cooperative association to
collect payment for their milk;
(2) Final Payment to a cooperative association. On or before the
13th day of the following month, each handler shall pay to a
cooperative association which the market administrator determines is
authorized by its members to collect payment for their milk not less
than an amount computed pursuant to paragraph (a)(2) of this section
for milk received from such cooperative association during the month,
including the milk of producers not members of such cooperative
association who the market administrator determines have authorized the
cooperative association to collect payment for their milk;
(c) If a handler has not received full payment from the market
administrator pursuant to Sec. 1131.72 by the payment date specified in
paragraph (a) or (b) of this section, the handler may reduce pro rata
his payments pursuant to such paragraphs, but by not more than the
amount of such underpayment. Payments to producers shall be completed
on the next scheduled payment date after receipt of the balance due
from the market administrator.
(d) If a handler claims that a required payment to a producer
cannot be made

[[Page 5084]]

because the producer is deceased or cannot be located, or because the
cooperative association or its lawful successor or assignee is no
longer in existence, the payment shall be made to the producer-
settlement fund. In the event the handler subsequently locates and pays
the producer or a lawful claimant, or in the event that the handler no
longer exists and a lawful claim is later established, the market
administrator shall make the required payment from the producer-
settlement fund to the handler or the lawful claimant, as the case may
be.
(e) In making payments to producers pursuant to this section, each
pool plant operator shall furnish each producer, except a producer
whose milk was received from a handler described in Sec. 1000.9(a) or
(c), a supporting statement in such form that it may be retained by the
recipient which shall show:
(1) The month, and identity of the producer;
(2) The daily and total pounds and the total pounds of butterfat
content of producer milk;
(3) The minimum rate at which payment to the producer is required
pursuant to this order;
(4) The rate used in making payments if the rate is other than the
applicable minimum rate;
(5) The amount, rate per hundredweight, and nature of each
deduction claimed by the handler; and
(6) The net amount of payment to the producer.

Sec. 1131.74 [Reserved]

Sec. 1131.75 Plant location adjustments for producers and on nonpool
milk.

(a) The uniform price for producer milk shall be adjusted according
to the location of the plant at which the milk was first physically
received by subtracting from the price the amount by which the Class I
price specified in Sec. 1131.50 exceeds the Class I price at the
plant's location. If the Class I price at the plant location exceeds
the Class I price specified in Sec. 1131.50, the difference shall be
added to the uniform price; and
(b) The uniform price applicable to other source milk shall be
adjusted following the procedure specified in paragraph (a) of this
section, except that the adjusted uniform price shall not be less than
the lowest announced class price.

Sec. 1131.76 Payments by handler operating a partially regulated
distributing plant.

See Sec. 1000.76 of this chapter.

Sec. 1131.77 Adjustment of accounts.

See Sec. 1000.77 of this chapter.

Sec. 1131.78 Charges on overdue accounts.

See Sec. 1000.78 of this chapter.

Administrative Assessment and Marketing Service Deduction

Sec. 1131.85 Assessment for order administration.

See Sec. 1000.85 of this chapter.

Sec. 1131.86 Deduction for marketing services.

See Sec. 1000.86 of this chapter.

PART 1134--MILK IN THE WESTERN MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1134.1 General provisions.

Definitions

1134.2 Western marketing area.
1134.3 Route disposition.
1134.4 Plant.
1134.5 Distributing plant.
1134.6 Supply plant.
1134.7 Pool plant.
1134.8 Nonpool plant.
1134.9 Handler.
1134.10 Producer-handler.
1134.11 Proprietary bulk tank handler.
1134.12 Producer.
1134.13 Producer milk.
1134.14 Other source milk.
1134.15 Fluid milk product.
1134.16 Fluid cream product.
1134.17 [Reserved]
1134.18 Cooperative association.
1134.19 Commercial food processing establishment.

Handler Reports

1134.30 Reports of receipts and utilization.
1134.31 Payroll reports.
1134.32 Other reports.

Classification of Milk

1134.40 Classes of utilization.
1134.41 [Reserved]
1134.42 Classification of transfers and diversions.
1134.43 General classification rules.
1134.44 Classification of producer milk.
1134.45 Market administrator's reports and announcements concerning
classification.

Class Prices

1134.50 Class prices and component prices.
1134.51 Class I differential and price.
1134.52 Adjusted Class I differentials.
1134.53 Announcement of class and component prices.
1134.54 Equivalent price.

Producer Price Differential

1134.60 Handler's value of milk.
1134.61 Computation of producer price differential.
1134.62 Announcement of producer prices.

Payments for Milk

1134.70 Producer-settlement fund.
1134.71 Payments to the producer-settlement fund.
1134.72 Payments from the producer-settlement fund.
1134.73 Payments to producers and to cooperative associations.
1134.74 [Reserved]
1134.75 Plant location adjustments for producer milk and nonpool
milk.
1134.76 Payments by a handler operating a partially regulated
distributing plant.
1134.77 Adjustment of accounts.
1134.78 Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1134.85 Assessment for order administration.
1134.86 Deduction for marketing services.

Authority: 7 U.S.C. 601-674.

Subpart--Order Regulating Handling

General Provisions

Sec. 1134.1 General provisions.

The terms, definitions, and provisions in Part 1000 of this chapter
apply to and are hereby made a part of this order.

Definitions

Sec. 1134.2 Western marketing area.

Utah

All of the State of Utah.

Colorado Counties

Delta, Garfield, Mesa, and Montrose.

Idaho Counties

Ada, Adams, Bannock, Bear Lake, Bingham, Blaine, Boise,
Bonneville, Camas, Canyon, Caribou, Cassia, Elmore, Franklin, Gem,
Gooding, Jefferson, Jerome, Lincoln, Madison, Minidoka, Oneida,
Owyhee, Payette, Power, Twin Falls, Valley, and Washington.

Nevada Counties

Elko, Lincoln, and White Pine.

Oregon Counties

Baker, Grant, Harney, Malheur, and Union.

Wyoming Counties

Lincoln and Uinta.

Sec. 1134.3 Route disposition.

See Sec. 1000.3 of this chapter.

Sec. 1134.4 Plant.

See Sec. 1000.4 of this chapter.

[[Page 5085]]

Sec. 1134.5 Distributing plant.

See Sec. 1000.5 of this chapter.

Sec. 1134.6 Supply plant.

See Sec. 1000.6 of this chapter.

Sec. 1134.7 Pool plant.

Pool Plant means a plant or unit of plants specified in paragraphs
(a) through (e) of this section. The pooling standards described in
paragraphs (a), (c), and (d) of this section are subject to
modification pursuant to paragraph (f) of this section.
(a) A distributing plant from which during the month there is route
disposition equal to 25 percent or more of the total quantity of bulk
fluid milk products physically received at such plant and there is
route disposition in the marketing area of at least 15 percent of total
route disposition. For purposes of this section, packaged fluid milk
products that are transferred to a distributing plant shall be
considered as route disposition from the transferring plant, rather
than the receiving plant, for the single purpose of determining the
pool status of the transferring plant under this section.
(b) A distributing plant located in the marketing area which during
the month processes a majority of its receipts of milk products into
aseptically packaged fluid milk products. If during the month the plant
had no route disposition into any federal milk order the plant operator
may request nonpool status for such plant for the month.
(c) A supply plant from which during the month the quantity of bulk
fluid milk products transferred or diverted to plants described in
paragraph (a) or (b) of this section is 35 percent of more of the total
Grade A milk received at the plant from dairy farmers (except dairy
farmers described in Sec. 1134.12(b)) and handlers described in
Sec. 1000.9(c), including milk diverted by the plant operator, subject
to the following conditions:
(1) A supply plant that has qualified as a pool plant during each
of the immediately preceding months of September through February shall
continue to so qualify in each of the following months of March through
August unless the plant operator files a written request with the
market administrator that such plant not be a pool plant, such nonpool
status to be effective the first month following such request. A plant
withdrawn from pool supply plant status may not be reinstated for any
subsequent month of the March through July period unless it qualifies
as a pool plant on the basis of milk shipments;
(2) A pool plant operator may include as qualifying shipments milk
diverted to pool distributing plants pursuant to Sec. 1134.13(c);
(3) No plant may qualify as a pool plant due to a reduction in the
shipping percentage pursuant to paragraph (f) of this section unless it
has been a pool supply plant during each of the immediately preceding
three months.
(d) A milk manufacturing plant located within the marketing area
that is operated by a cooperative association if, during the month or
the immediately preceding 12-month period ending with the current
month, 35% or more of such cooperative's member producer milk (and any
producer milk of nonmembers and members of another cooperative
association which may be marketed by the cooperative association) is
physically received in the form of bulk fluid milk products at plants
specified in paragraph (a) or (b) of this section either directly from
farms or by transfer from supply plants operated by the cooperative
association and from plants of the cooperative association for which
pool plant status has been requested under this paragraph subject to
the following conditions:
(1) The plant does not qualify as a pool plant under paragraph (a),
(b) or (c) of this section or under comparable provisions of another
Federal order; and
(2) The plant is approved by a duly constituted regulatory agency
for the handling of milk approved for fluid consumption in the
marketing area.
(e) Two or more plants located in the marketing area and operated
by the same handler may qualify for pool plant status as a unit by
together meeting the requirements specified in paragraph (a) of this
section and subject to the following additional requirements:
(1) At least one of the plants in the unit must individually
qualify as a pool plant pursuant to paragraph (a) of this section.
(2) Other plants in the unit must process Class I or Class II
products, using 50 percent or more of the total Grade A fluid milk
products received in bulk form at such plant or diverted therefrom by
the plant operator in Class I or Class II products, and must be located
in a pricing zone providing the same or a lower Class I price than the
price applicable at the distributing plant included in the unit
pursuant to paragraph (e)(1) of this section; and
(3) A written request to form a unit must be filed by the handler
with the market administrator prior to the first day of the month for
which such status is to be effective. The unit shall continue from
month to month thereafter without further notification. The handler
shall notify the market administrator in writing prior to the first day
of any month for which termination or any change of the unit is
desired.
(f) The applicable percentages in paragraphs (a), (c), and (d) of
this section may be increased or decreased by the market administrator
if found necessary to obtain needed shipments or to prevent uneconomic
shipments. Before making a finding that a change is necessary, the
market administrator shall investigate the need for revision, either on
the market administrator's own initiative or at the request of
interested persons. If such investigation shows that a revision might
be appropriate, a notice shall be issued stating that such a revision
is being considered and inviting written data, views, and arguments. If
the market administrator determines that an adjustment to the shipping
percentages is necessary, the market administrator shall notify the
industry within one day of the effective date of such adjustment.
(g) The term pool plant shall not apply to the following plants:
(1) A producer-handler as defined under any Federal order;
(2) An exempt plant as defined in 1000.8(e).
(3) A plant located within the marketing area and qualified
pursuant to paragraph (a) or (e) of this section which meets the
pooling requirements of another Federal order, and from which more than
50 percent of its route disposition has been in the other Federal order
marketing area for three consecutive months;
(4) A plant located outside the marketing area and qualified
pursuant to paragraph (a) of this section that meets the pooling
requirements of another Federal order and has had greater sales in such
other Federal order's marketing area for 3 consecutive months;
(5) A plant located in another Federal order marketing area and
qualified pursuant to paragraph (a) of this section that meets the
pooling requirements of such other Federal order and does not have a
majority of its route distribution in this marketing area for 3
consecutive months or if the plant is required to be regulated under
such other Federal order without regard to its route disposition in any
other Federal order marketing area;
(6) A plant qualified pursuant to paragraph (c) of this section
which also meets the pooling requirements of another Federal order and
from which greater qualifying shipments are made to plants regulated
under the other Federal order than are made to plants regulated under
this order, or the plant

[[Page 5086]]

has automatic pooling status under the other Federal order; and
(7) That portion of a regulated plant designated as a nonpool plant
that is physically separate and operated separately from the pool
portion of such plant. The designation of a portion of a regulated
plant as a nonpool plant must be requested in advance and in writing by
the handler and must be approved by the market administrator.

Sec. 1134.8 Nonpool plant.

See Sec. 1000.8 of this chapter.

Sec. 1134.9 Handler.

See Sec. 1000.9 of this chapter.

Sec. 1134.10 Producer-handler.

Except as provided in paragraph (g) of this section, producer-
handler means a person who:
(a) Operates a dairy farm and a distributing plant from which there
is monthly route disposition in excess of 150,000 pounds during the
month;
(b) Receives no fluid milk products from sources other than own
farm production, pool handlers, and plants fully regulated under
another Federal order;
(c) Receives at its plant or acquires for route disposition no more
than 150,000 pounds of fluid milk products from handlers fully
regulated under any Federal order. This limitation shall not apply if
the producer-handler's own farm production is less than 150,000 pounds
during the month.
(d) Disposes of no other source milk as Class I milk except by
increasing the nonfat milk solids content of the fluid milk products
received from own farm production or pool handlers;
(e) Disposes of no fluid milk products using the distribution
system of another handler except for direct deliveries to retail
outlets or to a pool handler's plant;
(f) Provides proof satisfactory to the market administrator that
the care and management of the dairy animals and other resources
necessary to produce all Class I milk handled (excluding receipts from
handlers fully regulated under any Federal order) and the processing,
packaging, and distribution operations are the producer-handler's own
enterprise and at its own risk; and
(g) Producer-handler shall not include any producer who also
operates a distributing plant if the producer-handler so requests that
the two be operated as separate entities with the distributing plant
regulated under Sec. 1134.7(a) and the farm operated as a producer
under Sec. 1134.12.

Sec. 1134.11 Proprietary bulk tank handler.

(a) Any person, except a cooperative association, with respect to
milk that it receives for its account from the farm of a producer in a
tank truck owned and operated by, or under the control of, such person
and which is delivered during the month for the account of such person
to the pool plant of another handler or diverted pursuant to
Sec. 1134.13, subject to the following conditions:
(1) Such person (who, if qualified pursuant to this paragraph,
shall be known as a proprietary bulk tank handler) must operate a plant
located in the marketing area at which milk is processed only into
Class II, Class III, or Class IV products; and
(2) Prior to operating as a handler pursuant to this paragraph,
such person must submit to the marker administrator a statement signed
by the applicant and the operator of the pool plant to which the milk
will be delivered specifying that the applicant will be the responsible
handler for the milk.

Sec. 1134.12 Producer.

(a) Except as provided in paragraph (b) of this section, producer
means any person who produces milk approved by a duly constituted
regulatory agency for fluid consumption as Grade A milk and whose milk
(or components of milk) is:
(1) Received at a pool plant directly from the producer or diverted
by the plant operator in accordance with Sec. 1134.13; or
(2) Received by a handler described in Sec. 1000.9(c).
(b) Producer shall not include:
(1) A producer-handler as defined in any Federal order;
(2) A dairy farmer whose milk is delivered to an exempt plant,
excluding producer milk diverted to the exempt plant pursuant to
Sec. 1134.13(d);
(3) A dairy farmer whose milk is diverted to a pool plant by a
handler regulated under another Federal order if the other Federal
order designates the dairy farmer as a producer under that order and
that milk is allocated by request to a utilization other than Class I;
and
(4) A dairy farmer whose milk is reported as diverted to a plant
fully regulated under another Federal order with respect to that
portion of the milk so diverted that is assigned to Class I under the
provisions of such other order.
(5) A dairy farmer whose milk was received at a pool plant if
during the month milk from the same farm was received at a nonpool
plant (except a nonpool plant that has no utilization of milk products
in any Class other than Class III or Class IV) other than as a
diversion under this or some other Federal order.

Sec. 1134.13 Producer milk.

[[Page 5087]]

producer milk, no milk diverted by the handler, cooperative
association, or proprietary bulk tank handler during the month to a
nonpool plant shall be producer milk. In the event some of the milk of
any producer is determined not to be producer milk pursuant to this
paragraph, other milk delivered by such producer as producer milk
during the month will not be subject to Sec. 1134.12(b)(5); and
(5) The applicable diversion limits in paragraph (d)(2) of this
section may be increased or decreased by the market administrator if
the market administrator finds that such revision is necessary to
assure orderly marketing and efficient handling of milk in the
marketing area. Before making such a finding, the market administrator
shall investigate the need for the revision either on the market
administrator's own initiative or at the request of interested persons.
If the investigation shows that a revision might be appropriate, the
market administrator shall issue a notice stating that the revision is
being considered and inviting written data, views, and arguments. Any
decision to revise an applicable percentage must be issued in writing
at least one day before the effective date.

Sec. 1134.14 Other source milk.

See Sec. 1000.14 of this chapter.

Sec. 1134.15 Fluid milk product.

See Sec. 1000.15 of this chapter.

Sec. 1134.16 Fluid cream product.

See Sec. 1000.16 of this chapter.

Sec. 1134.17 [Reserved]

Sec. 1134.18 Cooperative association.

See Sec. 1000.18 of this chapter.

Sec. 1134.19 Commercial food processing establishment.

See Sec. 1000.19 of this chapter.

Handler Reports

Sec. 1134.30 Reports of receipts and utilization.

Each handler shall report monthly so that the market administrator
receives the report on or before the 7th day after the end of each
month, in the detail and on the forms prescribed by the market
administrator, as follows:
(a) Each handler that operates a pool plant pursuant to
Sec. 1134.7, and each handler described in Sec. 1000.9(c) or in
Sec. 1134.11, shall report for each of its operations the following
information:
(1) Product pounds, pounds of butterfat, pounds of protein, nd
pounds of solids-not-fat other than protein (other solids), contained
in or represented by:
(i) Receipts of producer milk, including producer milk diverted by
the handler; and
(ii) Receipts of milk from handlers described in Sec. 1000.9(c);
(2) Product pounds and pounds of butterfat contained in:
(i) Receipts of fluid milk products and bulk fluid cream products
from other pool plants;
(ii) Receipts of other source milk; and
(iii) Inventories at the beginning and end of the month of fluid
milk products and bulk fluid cream products;
(3) The utilization or disposition of all milk and milk products
required to be reported pursuant to this paragraph; and
(4) Such other information with respect to the receipts and
utilization of skim milk, butterfat, milk protein, and other nonfat
solids, as the market administrator may prescribe.
(b) Each handler operating a partially regulated distributing plant
shall report with respect to such plant in the same manner as
prescribed for reports required by paragraph (a) of this section.
Receipts of milk that would have been producer milk if the plant had
been fully regulated shall be reported in lieu of producer milk. The
report shall show also the quantity of any reconstituted skim milk in
route disposition in the marketing area.
(c) Each handler not specified in paragraphs (a) and (b) of this
section shall report with respect to its receipts and utilization of
milk and milk products in such manner as the market administrator may
prescribe.

Sec. 1134.31 Payroll reports.

(a) On or before the 21st day after the end of each month, each
handler that operates a pool plant pursuant to Sec. 1134.7 and each
handler described in Sec. 1000.9(c) and in Sec. 1134.11 shall report to
the market administrator its producer payroll for the month, in the
detail prescribed by the market administrator, showing for each
producer the information described in Sec. 1134.73(f).
(b) Each handler operating a partially regulated distributing plant
who elects to make payment pursuant to Sec. 1000.76(b) shall report for
each dairy farmer who would have been a producer if the plant had been
fully regulated in the same manner as prescribed for reports required
by paragraph (a) of this section.

Sec. 1134.32 Other reports.

In addition to the reports required pursuant to Secs. 1134.30 and
1134.31, each handler shall report any information the market
administrator deems necessary to verify or establish each handler's
obligation under the order.

Classification of Milk

Sec. 1134.40 Classes of utilization.

See Sec. 1134.40 of this chapter.

Sec. 1134.41 [Reserved]

Sec. 1134.42 Classification of transfers and diversions.

See Sec. 1000.42 of this chapter.

Sec. 1134.43 General classification rules.

See Sec. 1000.43 of this chapter.

Sec. 1134.44 Classification of producer milk.

See Sec. 1000.44 of this chapter.

Sec. 1134.45 Market administrator's reports and announcements
concerning classification.

See Sec. 1000.45 of this chapter.

Class Prices

Sec. 1134.50 Class prices and component prices.

See Sec. 1000.50 of this chapter.

Sec. 1134.51 Class I differential and price.

The Class I differential shall be the differential established at
Salt Lake County, Utah, which is reported in Sec. 1000.52. The Class I
price shall be the price computed pursuant to Sec. 1000.50(a) for Salt
Lake County, Utah.

Sec. 1134.52 Adjusted Class I differentials.

See Sec. 1000.52 of this chapter.

Sec. 1134.53 Announcement of class prices and component prices.

See Sec. 1000.53 of this chapter.

Sec. 1134.54 Equivalent price.

See Sec. 1000.54 of this chapter.

Producer Price Differential

Sec. 1134.60 Handler's value of milk.

[[Page 5088]]

(b) Add the Class II value, computed as follows:
(1) Multiply the hundredweight of skim milk in Class II as
determined pursuant to Sec. 1000.44(a) by 70 cents;
(2) Add an amount obtained by multiplying the pounds of skim milk
in Class II as determined pursuant to Sec. 1000.44(a) by the average
nonfat solids content of producer skim milk received by the handler,
and multiply the resulting pounds of nonfat solids by the nonfat solids
price; and
(3) Add an amount obtained by multiplying the pounds of butterfat
in Class II as determined pursuant to Sec. 1000.44(b) by the butterfat
price;
(c) Add the Class III value computed as follows:
(1) Multiply the pounds of skim milk in Class III as determined
pursuant to Sec. 1000.44(a) by the average protein content of producer
skim milk received by the handler, and multiply the resulting pounds of
protein by the protein price;
(2) Add an amount obtained by multiplying the pounds of skim milk
in Class III as determined pursuant to Sec. 1000.44(a) by the average
other solids content of producer skim milk received by the handler, and
multiply the resulting pounds of other solids by the other solids
price; and
(3) Add an amount obtained by multiplying the pounds of butterfat
in Class III as determined pursuant to Sec. 1000.44(b) by the butterfat
price;
(d) Add the Class IV value computed as follows:
(1) Multiply the pounds of skim milk in Class IV as determined
pursuant to Sec. 1000.44(a) by the average nonfat solids content of
producer skim milk received by the handler, and multiply the resulting
pounds of nonfat solids by the nonfat solids price; and
(2) Add an amount obtained by multiplying the pounds of butterfat
in Class IV as determined pursuant to Sec. 1000.44(b) by the butterfat
price;
(e) [Reserved]
(f) Add the amounts obtained from multiplying the pounds of skim
milk and butterfat overage assigned to each class pursuant to
Sec. 1000.43(b)(2) by the respective skim milk and butterfat prices
applicable at the location of the pool plant;
(g) Add the amount obtained from multiplying the difference between
the Class III price for the preceding month and the Class I price
applicable at the location of the pool plant or the Class II price, as
the case may be, for the current month by the hundredweight of skim
milk and butterfat subtracted from Class I and Class II pursuant to
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
(h) Add the amount obtained from multiplying the difference between
the Class I price applicable at the location of the pool plant and the
Class III price by the hundredweight of skim milk and butterfat
assigned to Class I pursuant to Sec. 1000.43(d) and the hundredweight
of skim milk and butterfat subtracted from Class I pursuant to
Sec. 1000.44(a)(3)(i) through (iii) and the corresponding step of
Sec. 1000.44(b), excluding receipts of bulk fluid cream products from a
plant regulated under other Federal orders and bulk concentrated fluid
milk products from pool plants, plants regulated under other Federal
orders, and unregulated supply plants;
(i) Add the amount obtained from multiplying the difference between
the Class I price and the Class III price applicable at the location of
the nearest unregulated supply plants from which an equivalent volume
was received by the pounds of skim milk and butterfat in receipts of
concentrated fluid milk products assigned to Class I pursuant to
Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and the pounds of skim milk
and butterfat subtracted from Class I pursuant to Sec. 1000.44(a)(8)
and the corresponding step of Sec. 1000.44(b), excluding such skim milk
and butterfat in receipts of bulk fluid milk products from an
unregulated supply plant to the extent that an equivalent amount of
skim milk or butterfat disposed of to such plant by handlers fully
regulated under any Federal milk order is classified and priced as
Class I milk and is not used as an offset for any other payment
obligation under any order;
(j) Subtract, for reconstituted milk made from receipts of nonfluid
milk products, an amount computed by multiplying $1.00 (but not more
than the difference between the Class I price applicable at the
location of the pool plant and the Class IV price) by the hundredweight
of skim milk and butterfat contained in receipts of nonfluid milk
products that are allocated to Class I pursuant to Sec. 1000.43(d); and
(k) Exclude, for pricing purposes under this section, receipts of
nonfluid milk products that are distributed as labeled reconstituted
milk for which payments are made to the producer-settlement fund of
another order under Sec. 1000.76(a)(5) or (c).

Sec. 1134.61 Computation of producer price differential.

For each month the market administrator shall compute a producer
price differential per hundredweight. If the unreserved balance in the
producer-settlement fund to be included in the computation is less than
2 cents per hundredweight of producer milk on all reports, the report
of any handler who has not made payments required pursuant to
Sec. 1134.71 for the preceding month shall not be included in the
computation of the producer price differential. The report of such
handler shall not be included in the computation for succeeding months
until the handler has made full payment of outstanding monthly
obligations. Subject to the aforementioned conditions, the market
administrator shall compute the producer price differential in the
following manner:
(a) Combine into one total the values computed pursuant to
Sec. 1134.60 for all handlers required to file reports prescribed in
Sec. 1134.30;
(b) Subtract the total values obtained by multiplying each
handler's total pounds of protein, other solids, and butterfat
contained in the milk for which an obligation was computed pursuant to
Sec. 1134.60 by the protein price, the other solids price, and the
butterfat price, respectively;
(c) Add an amount equal to the sum of the location adjustments
computed pursuant to Sec. 1134.75;
(d) Add an amount equal to not less than one-half of the
unobligated balance in the producer-settlement fund;
(e) Divide the resulting amount by the sum of the following for all
handlers included in these computations:
(1) The total hundredweight of producer milk; and
(2) The total hundredweight for which a value is computed pursuant
to Sec. 1134.60(i); and
(f) Subtract not less than 4 cents nor more than 5 cents from the
price computed pursuant to paragraph (e) of this section. The result
shall be known as the producer price differential for the month.

Sec. 1134.62 Announcement of producer prices.

On or before the 12th day after the end of each month, the market
administrator shall announce publicly the following prices and
information:
(a) The producer price differential;
(b) The protein price;
(c) The other solids price;
(d) The butterfat price;
(e) [Reserved]
(f) The average butterfat, protein and other solids content of
producer milk; and
(g) The statistical uniform price for milk containing 3.5 percent
butterfat, computed by combining the Class III price and the producer
price differential.

[[Page 5089]]

Payments for Milk

Sec. 1134.70 Producer-settlement fund.

See Sec. 1000.70 of this chapter.

Sec. 1134.71 Payments to the producer-settlement fund.

Each handler shall make payment to the producer-settlement fund in
a manner that provides receipt of the funds by the market administrator
no later than the 14th day after the end of the month. Payment shall be
the amount, if any, by which the amount specified in paragraph (a) of
this section exceeds the amount specified in paragraph (b) of this
section:
(a) The total value of milk to the handler for the month as
determined pursuant to Sec. 1134.60.
(b) The sum of:
(1) An amount obtained by multiplying the total hundredweight of
producer milk as determined pursuant to Sec. 1000.44(c) by the producer
price differential as adjusted pursuant to Sec. 1134.75;
(2) An amount obtained by multiplying the total pounds of protein,
other solids, and butterfat contained in producer milk by the protein,
other solids, and butterfat prices respectively;
(3) [Reserved]
(4) An amount obtained by multiplying the pounds of skim milk and
butterfat for which a value was computed pursuant to Sec. 1134.60(i) by
the producer price differential as adjusted pursuant to Sec. 1134.75
for the location of the plant from which received.

Sec. 1134.72 Payments from the producer-settlement fund.

No later than the 15th day after the end of each month, the market
administrator shall pay to each handler the amount, if any, by which
the amount computed pursuant to Sec. 1134.71(b) exceeds the amount
computed pursuant to Sec. 1134.71(a). If, at such time, the balance in
the producer-settlement fund is insufficient to make all payments
pursuant to this section, the market administrator shall reduce
uniformly such payments and shall complete the payments as soon as the
funds are available.

Sec. 1134.73 Payments to producers and to cooperative associations.

(a) Except as provided in paragraph (b) and (c) of this section,
each handler shall make payment to each producer from whom milk is
received during the month as follows:
(1) Partial Payment. On or before the 25th day of each month to
each producer an amount not less than 1.2 times the lowest class price
for the preceding month multiplied by the hundredweight of milk
received from such producer during the first 15 days of the month, less
proper deductions authorized by such producer to be made from payments
due pursuant to this paragraph; and
(2) Final Payment. On or before the 17th day of the following
month, not less than an amount computed by the sum of the following:
(i) The hundredweight of producer milk received times the producer
price differential for the month as adjusted pursuant to Sec. 1134.75;
(ii) The pounds of butterfat in producer milk received times the
butterfat price for the month;
(iii) The pounds of protein in producer milk received times the
protein price for the month;
(iv) The pounds of other solids in producer milk received times the
other solids price for the month;
(v) [Reserved]
(vi) Less any payments made pursuant to paragraph (a)(1) of this
section;
(vii) Less proper deductions authorized in writing by such producer
and plus or minus adjustments for errors in previous payments to such
producer; and
(viii) Less deductions made for marketing service pursuant to
Sec. 1000.86;
(b) Partial payment to a cooperative association. On or before the
24th day of each month each handler shall pay to a cooperative
association, which the market administrator determines is authorized by
its members to collect payment for their milk, an amount not less than
1.2 times the lowest class price for the preceding month multiplied by
the hundredweight of milk received during the first 15 days of the
month from such cooperative association, including the milk of
producers not members of such cooperative association who the market
administrator determines have authorized the cooperative association to
collect payment for their milk;
(c) Final Payment to a cooperative association. On or before the
16th day of the following month, each handler shall pay to a
cooperative association which the market administrator determines is
authorized by its members to collect payment for their milk not less
than an amount computed pursuant to paragraph (a)(2) of this section
for milk received from such cooperative association during the month,
including the milk of producers not members of such cooperative
association who the market administrator determines have authorized the
cooperative association to collect payment for their milk;
(d) If a handler has not received full payment from the market
administrator pursuant to Sec. 1134.72 by the payment date specified in
paragraph (a), (b), or (c) of this section, the handler may reduce pro
rata its payments to producers or to the cooperative association by not
more than the amount of such underpayment. The payments shall be
completed on the next scheduled payment date after receipt of the
balance due from the market administrator.
(e) If a handler claims that a required payment to a producer
cannot be made because the producer is deceased or cannot be located,
or because the cooperative association or its lawful successor or
assignee is no longer in existence, the payment shall be made to the
producer settlement fund, and in the event the handler subsequently
locates and pays the producer or a lawful claimant, or in the event
that the handler no longer exists and a lawful claim is later
established, the market administrator shall make the required payment
from the producer-settlement fund to the handler or to the lawful
claimant, as the case may be.
(f) In making payments to producers pursuant to this section, each
handler shall furnish each producer, except a producer whose milk was
received from a cooperative association handler described in
Sec. 1000.9(a) or (c), a supporting statement in a form that may be
retained by the recipient which shall show:
(1) The name, address, Grade A identifier assigned by a duly
constituted regulatory agency, and payroll number of the producer;
(2) The daily and total pounds, and the month and dates such milk
was received from that producer;
(3) The total pounds of butterfat, protein, and other solids
contained in the producer's milk;
(4) [Reserved];
(5) The minimum rate or rates at which payment to the producer is
required pursuant to this order;
(6) The rate used in making payment if the rate is other than the
applicable minimum rate;
(7) The amount, or rate per hundredweight, or rate per pounds of
component, and the nature of each deduction claimed by the handler; and
(8) The net amount of payment to the producer or cooperative
association.

Sec. 1134.74 [Reserved]

Sec. 1134.75 Plant location adjustments for producer milk and nonpool
milk.

(a) The producer price differential for producer milk shall be
adjusted according to the location of the plant at

[[Page 5090]]

which the milk was first physically received by subtracting from the
price differential the amount by which the Class I price specified in
Sec. 1134.51 exceeds the Class I price at the plant's location. If the
Class I price at the plant location exceeds the Class I price specified
in Sec. 1134.51, the difference shall be added to the producer price
differential; and
(b) The producer price differential applicable to other source milk
shall be adjusted following the procedure specified in paragraph (a) of
this section, except that the adjusted producer price differential
shall not be less than zero.

Sec. 1134.76 Payments by a handler operating a partially regulated
distributing plant.

See Sec. 1000.76 of this chapter.

Sec. 1134.77 Adjustment of accounts.

See Sec. 1000.77 of this chapter.

Sec. 1134.78 Charges on overdue accounts.

See Sec. 1000.78 of this chapter.

Administrative Assessment and Marketing Service Deduction

Sec. 1134.85 Assessment for order administration.

See Sec. 1000.85 of this chapter.

Sec. 1134.86 Deduction for marketing services.

See Sec. 1000.86 of this chapter.

Dated: January 21, 1998.
Michael V. Dunn,
Assistant Secretary for Marketing and Regulatory Programs.

Note: The following appendices will not appear in the Code of
Federal Regulations.

Appendix A: Summary of Preliminary Suggested Order Consolidation
Report

Ten marketing areas are suggested in the preliminary
consolidation report. As a means of determining where
interrelationships among the current marketing areas are strongest,
data relating to the receipts and distribution of fluid milk
products by distributing plants were gathered for all known
distributing plants located in the 47 contiguous States, not
including the State of California, for the month of October 1995. At
this time, California is not included as a suggested order area. The
1996 Farm Bill allows for the inclusion of a California Federal milk
order if California producers petition for and approve an order. If
a California order were included in the suggested Federal order
structure at a later time, it would encompass the entire State and
would include no area outside the State of California. Although
interest in a Federal order has been expressed by some California
producer groups, no definite action has been taken.
An analysis of the distribution and procurement patterns of the
fluid processing plants, along with other factors, was used to
determine which order areas were most closely related. Proposals
submitted by the public were also taken into account. The primary
criteria used in determining which markets exhibit a sufficient
degree of association in terms of sales, procurement, and structural
relationships to warrant consolidation were:
1. Overlapping route disposition.
2. Overlapping areas of milk supply.
3. Number of handlers within a market.
4. Natural boundaries.
5. Cooperative association service areas.
6. Features common to existing orders, such as similar multiple
component pricing payment plans.
7. Milk utilization in common dairy products.
The requirement to consolidate existing marketing areas does not
specify expansion of regulation to previously nonfederally regulated
areas where such expansion would have the effect of regulating
handlers not currently regulated. However, a number of the current
marketing areas enclose unregulated areas. These ``pockets'' are
included in the suggested merged marketing areas only if their
inclusion does not change the current regulatory status of a plant.
In the process of consolidating marketing areas, some handlers who
currently are partially regulated may become fully regulated because
their sales in a combined marketing area will likely meet the
pooling standards of a suggested consolidated order. Further
expansion of the marketing areas, which would result in regulating
additional handlers, is an issue that should be addressed by the
industry. Proposals to take such action should be accompanied by
supporting data, views, and arguments concerning the need and basis
for any such expansion.
The 10 suggested consolidated marketing areas and the major
reasons for consolidation are:

1. Northeast

Current marketing areas of the New England, New York-New Jersey,
and Middle Atlantic Federal milk orders. Reasons for consolidation
include the existence of overlapping sales and procurement areas
between New England and New York-New Jersey and between New York-New
Jersey and Middle Atlantic. The orders are also surrounded by
nonfederally regulated territory. A further measure of association
is evident by industry efforts to study and pursue consolidation of
the three Federal orders, as well as some of the nonfederally
regulated territory, prior to the 1996 Farm Bill.

2. Appalachian

Current marketing areas of the Carolina and Tennessee Valley
Federal milk orders, and a portion of the Louisville-Lexington-
Evansville Federal milk order. Overlapping sales and procurement
areas between these marketing areas are major factors for supporting
such a consolidation.

3. Florida

Current marketing areas of the Upper Florida, Tampa Bay, and
Southeastern Florida Federal milk orders. Natural boundary
limitations and overlapping sales and procurement areas among the
three orders are major reasons for consolidation, as well as a
measure of association evidenced by cooperative association
proposals to consolidate these three marketing areas. Further, the
cooperative associations in this area have worked together for a
number of years to accommodate needed movements of milk between the
three Florida Federal orders.

4. Southeast

Current marketing area of the Southeast Federal milk order, plus
1 county from the Louisville-Lexington-Evansville Federal milk order
marketing area, 15 currently unregulated Kentucky counties, and 2
currently unregulated northeast Texas counties. Major reasons for
this consolidation include sales and procurement area overlaps
between the Southeast order and the Kentucky and Texas counties
suggested for inclusion. There is minimal sales area overlap with
handlers regulated under other Federal orders.

5. Mideast

Current marketing areas of the Ohio Valley, Eastern Ohio-Western
Pennsylvania, Southern Michigan, and Indiana Federal milk orders,
plus most of the current marketing area of the Louisville-Lexington-
Evansville Federal milk order, Zone 2 of the Michigan Upper
Peninsula Federal milk order, and 12 counties of the Southern
Illinois-Eastern Missouri Federal milk order. Major criteria
suggesting this consolidation include the overlap of fluid sales in
the Ohio Valley marketing area by handlers from the other areas
suggested to be consolidated. With the consolidation, most route
disposition by handlers located within the suggested Mideast order
would be within the marketing area. Also, nearly all milk produced
within the area would be pooled under the consolidated order. The
portion of the Michigan Upper Peninsula marketing area suggested to
be included in the Mideast consolidated area has sales and milk
procurement areas in common with the Southern Michigan area and has
minimal association with the western end of the current Michigan
Upper Peninsula marketing area.

6. Upper Midwest

Current marketing areas of the Chicago Regional and Upper
Midwest Federal milk orders, plus Zones I and I(a) of the Michigan
Upper Peninsula Federal milk order and seven unregulated or partly
unregulated Wisconsin counties. Major consolidation criteria include
an overlapping procurement area between the Chicago Regional and
Upper Midwest orders, overlapping procurement and route disposition
area between the western end of the Michigan Upper Peninsula order
and the Chicago Regional order, natural boundary limitations, and
the prevalence of cheese as a major manufactured product for the
substantial reserve milk supplies that exceed fluid milk needs.

[[Page 5091]]

7. Central

Current marketing areas of the Southern Illinois-Eastern
Missouri (less 12 counties included in the suggested Mideast
marketing area), Central Illinois, Greater Kansas City, Nebraska-
Western Iowa (less 11 currently-regulated counties suggested to be
unregulated), Eastern South Dakota, Iowa, Southwest Plains, and
Eastern Colorado Federal milk orders, plus 63 currently-unregulated
counties in seven of the states. Major criteria suggesting this
consolidation include the overlapping procurement and route
disposition between the current orders. The suggested consolidation
would result in a concentration of both the sales and supplies of
milk within the consolidated marketing area. The suggested
consolidation would combine several relatively small orders and
provide for the release of market data without revealing proprietary
information. In addition, most of the producers in these areas share
membership in several common cooperatives.

8. Southwest

Current marketing areas of the Texas, New Mexico-West Texas, and
Central Arizona Federal milk orders. Major criteria suggesting
consolidation include sales and procurement area overlaps and common
cooperative association membership between the Texas and New Mexico-
West Texas marketing areas, and similar marketing concerns with
respect to trade with Mexico for all three orders. In addition,
there is some route disposition by Central Arizona handlers into the
New Mexico-West Texas marketing area, and the Central Arizona market
contains a small number of handlers.

9. Western

Current marketing areas of the Western Colorado, Southwestern
Idaho-Eastern Oregon, and Great Basin Federal milk orders. Major
criteria suggesting consolidation include overlapping sales between
Southwestern Idaho-Eastern Oregon and Great Basin, as well as a
significant overlap in procurement for the two orders in five Idaho
counties. The two orders also share a similar multiple component
pricing plan. The Western Colorado order is included because it is a
small market where data cannot be released without revealing
confidential information unless combined with the adjacent Great
Basin order.

10. Pacific Northwest

Current marketing area of the Pacific Northwest Federal milk
order plus 1 currently-unregulated county in Oregon. The degree of
association with other marketing areas is insufficient to warrant
consolidation.
Following is a table summarizing relevant data for the
consolidated markets:

Consolidated Market Summary
[Based on October 1995 data]
------------------------------------------------------------------------
Number of
Total fully Combined
Consolidated order producer regulated class I
milk (1,000 distributing utilization
lbs.) 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\ 1,140,9
52 68 57.8
Upper Midwest................... \2\ 1,046,5
39 \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
included 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 Options

Several options for modifying Class I pricing under the Federal
milk market order program, representing a spectrum of views, are
discussed in this summary report. The accompanying technical report
summarizes all of the comments and proposals received by the
Department related to Class I pricing under Federal orders.
Most Class I pricing concepts that were suggested would continue
to employ a market-driven basic formula price (BFP) with an added
differential. Differentials are a composite of one or more of the
following elements: (1) A fixed component, (2) a location
adjustment, (3) an adjustor relating to utilization, or (4) the cost
of balancing the market. Based on the pricing concepts received, the
following options were developed:

Option 1A: Location-Specific Differential

$1.60 per hundredweight fixed differential for three surplus
regions (Upper Midwest, West, and Southwest) within a nine-zone
national price surface, plus for the other six zones an added
component that reflects regional differences in the value of fluid
and manufacturing milk.

Option 1B: Modified Location-Specific Differential Option

$1.00 per hundredweight fixed differential plus an added
component that reflects the cost of moving bulk milk to deficit
markets.

Option 2: Relative Use Differential

$1.60 per hundredweight fixed differential plus a formula-based
differential driven by the ratio of Class I milk to all other uses
of milk.

Option 3A: Flat Differential Option

$1.60 per hundredweight flat differential, uniformly applied
across all orders to generate an identical minimum Class I price.

Option 3B: Flat Differential Modified by Class I Use--

$2.00 per hundredweight differential in markets where Class I
utilization is less than 70 percent on an annual basis and a
differential equal to $2.00 + $0.075(Class I use %--70%) in markets
where the Class I utilization is equal to or exceeds 70 percent.

Option 4: Demand-Based Differential--

$1.00 per hundredweight fixed differential plus a transportation
credit based on location of reserve milk supplies.
Estimated Class I differentials are presented for each option to
provide a preliminary basis for determining impacts that may occur.
The report provides estimated differentials for the suggested 10

[[Page 5092]]

consolidated orders and for the current 32 Federal milk marketing
orders.
The report concludes by soliciting comments on the options
presented and poses a series of questions for the public to address
when submitting comments back to the Department on the issue of
Class I pricing.

Appendix C: Summary of Classification Report

The Agricultural Marketing Agreement Act of 1937 provides that
all milk should be classified ``in accordance with the form in which
or the purpose for which it is used.'' This has resulted in a system
of uniform classification provisions that places milk used for fluid
purposes in the highest use class, Class I, and other manufactured
products in lower classes, Classes II, III, and III-A.
Currently products packaged for fluid consumption such as whole
milk, skim milk, buttermilk, and flavored milk drinks are classified
as Class I products. Class II products include ice cream, yogurt,
cottage cheese, and cream. Class III and Class III-A products
include cheese, butter, and nonfat dry milk.
Among the changes in classification recommended in the technical
report are the following:
Eggnog would be reclassified from Class II to Class I.
Any fluid beverage having less than 6.5 percent nonfat
milk solids would be reclassified from Class II to Class I.
Cream cheese would be reclassified from Class III to
Class II.
The technical report recommends changing the classification of
milk used in nonfat dry milk from Class III-A to Class III. The
report recommends that if Class III-A pricing is not eliminated, the
following four alternatives be considered:
Place a floor beneath the Class III-A price;
Restrict III-A pricing to certain months or to certain
markets;
Provide an up-charge for nonfat dry milk used in
higher-valued products; or
Provide for a combination of these options.
Maintaining the classification of milk used to make nonfat dry
milk in Class III-A is also an option, although not discussed in the
technical report.
The technical report addresses Class III-A pricing because of
industry concerns about the substitution of nonfat dry milk for
fluid milk in Class II and III uses when the Class III-A price is
substantially below the Class III price.

Appendix D: Summary of Identical Provisions Report

Federal milk marketing orders contain numerous provisions that
establish the regulations for the operation of the orders. Over the
years, the orders have been individualized to account for specific
situations associated with a given marketing area. However, there
are several provisions within the orders that are similar or that
could be similar and still provide for efficient and orderly
marketing of milk.
The technical report does the following:
Suggests a model for establishing the consolidated
orders and provides suggestions on the order language that can be
adopted uniformly throughout all orders.
Reviewed, simplified, modified, and eliminated
differences in order provisions that:
Define various terms used in the orders
Establish regulatory standards for plants and handlers
Provide for uniform reporting dates of milk receipts
and utilization
Provide for uniform dates for payment of milk
Provide for computation of a uniform price
Reduces performance standards to make it easier for
producers to associate with a market.
At this time, it is impossible to determine if there would be
any financial impact on producers, handlers, or consumers as a
result of any of these suggested provision revisions. It is
projected that there will be little impact on the overall program
because the changes primarily provide for uniformity. There may be
minimal impact on selected individual producers, handlers, or
consumers, but this cannot be determined until more specific
information is developed regarding the orders (i.e., marketing area
and pricing). The suggested identical provisions will be applied to
each of the suggested consolidated orders and determinations will be
based on the marketing conditions of the given region.
One suggested change in the report that may stimulate some
debate is the definition of a producer-handler. The technical report
suggests applying the most liberal standard to the producer-handler
definition to prevent any producer-handler from becoming regulated
as a result of milk order reform. Producer-handlers have been exempt
from full regulation because they assume the full risks associated
with being a producer and a distributor of milk produced with only
occasional and small volumes of milk being purchased from other
dairy farmers.

Appendix E: Summary of Basic Formula Price Report

The basic formula price (BFP) is used to determine Federal order
prices for milk used in manufactured products and, with the addition
of differentials, to determine minimum Class I and II prices for
milk pooled under the Federal orders. The current BFP is based on a
survey of prices paid for manufacturing grade (Grade B) milk by
plants in Minnesota and Wisconsin, updated by month-to-month changes
in commodity prices (especially cheese). The continuing decline in
the volume of Grade B milk produced in the upper Midwest and
nationally is an indication that, in the near future, the M-W price
series may not be statistically reliable as an indicator of the
value of milk used in manufactured products.
The BFP Committee has received input provided during a public
BFP Forum held in Madison, Wisconsin, and from over 200 written
public comments, and conducted a survey of transaction prices for
manufactured dairy products. The Committee also has sponsored
analysis by a group of university researchers, and conducted
extensive study and analysis of its own. The BFP Committee evaluated
alternatives to the BFP against the criteria of stability,
predictability, simplicity, uniformity, transparency, sound
economics and reduced regulation. Options identified by the
Committee were grouped into the following categories:
Options Considered: Economic formulas, Product price and
component formulas, Futures markets, California pricing, Cost of
production, Informal rulemaking, Competitive pay price, Pooling
differentials only.
At this time, the Committee has identified four options for
further discussion and debate:
A four-class, multiple component pricing plan to price
butterfat, protein and lactose used in cheese (Class III), and
butterfat and nonfat solids used in butter/powder (Class IV).
A three-class, multiple component pricing plan to price
protein used in cheese, butterfat used in butter, and other nonfat
solids used in powder (Class III--one manufacturing class).
A product price formula computed from the butter,
powder and cheese shares of U.S. production, using seasonal product
yields and a California cost-based make allowance; and
A competitive pay price series using a national
weighted average price paid for Grade A milk used in manufactured
products, updated by a product price formula. The price series would
contain an adjuster to attempt to remove the effect of current
regulation and to reduce it to a level more comparable to the
current BFP.
As a basis for Class I prices, the BFP could be made more stable
by using an economic formula or using a moving average of a
manufacturing price. Class II prices could be based on components or
continue to include a differential from the manufacturing price
level.
The BFP Committee is continuing to study and analyze
alternatives in response to public comments.

Appendix F: Summary of Revised Preliminary Suggested Order
Consolidation Report

The ten marketing areas suggested in the initial preliminary
consolidation report have increased to eleven and been modified to
some extent in this revised preliminary report. Several of the
initially suggested marketing areas were the subjects of numerous
comments containing information that indicated that the boundaries
of those areas should be re-evaluated. In addition, shifts in
regulation and distributing plant distribution areas were known to
have occurred. As a result, more detailed and updated (January 1997)
data was obtained relating to the receipts of producer milk and
distribution of fluid milk products by distributing plants in a
number of the initially-suggested order marketing areas. As a
result, changes were made in the suggested marketing areas of the
Northeast, Appalachian, Southeast, Mideast, Upper Midwest, Central,
Southwest, and Western

[[Page 5093]]

regions, and a new Arizona-Las Vegas area was added.
An analysis of the distribution and procurement patterns of the
fluid processing plants, along with other factors, was used to
determine which order areas were most closely related. Proposals
submitted by the public were also taken into account. The primary
criteria used in determining which markets exhibit a sufficient
degree of association in terms of sales, procurement, and structural
relationships to warrant consolidation continued to be:
1. Overlapping route disposition.
2. Overlapping areas of milk supply.
3. Number of handlers within a market.
4. Natural boundaries.
5. Cooperative association service areas.
6. Features common to existing orders, such as similar multiple
component pricing plans.
7. Milk utilization in common dairy products.
In the initial preliminary report, it was observed that the Farm
Bill requirement to consolidate existing marketing areas does not
specify expansion of regulation to previously non-Federally
regulated areas where such expansion would have the effect of
regulating handlers not currently regulated. This revised
preliminary report suggests that some currently non-Federally
regulated area be added on the basis of comments supported by data,
views and arguments filed by interested persons. Specifically,
unregulated areas contiguous to the initial suggested consolidated
Northeast and Mideast marketing areas are suggested for inclusion in
those suggested order areas. Some handlers currently not subject to
full Federal order regulation would become pool plants if the
suggested areas are added. Handlers who would be affected will be
notified of the possible change in their status, and encouraged to
comment.
As in the initial preliminary report, ``pockets'' of unregulated
areas enclosed in the current marketing areas are included in the
suggested consolidated marketing areas if their inclusion does not
change the current regulatory status of a plant. However, in the
process of consolidating marketing areas, some handlers who
currently are partially regulated may become fully regulated because
their sales in a combined marketing area will meet the pooling
standards of a suggested consolidated order area. As a result, this
report suggests that some unregulated areas contiguous to currently-
regulated areas be added to Federal order areas where additional
handlers would be affected.
The 11 modified suggested marketing areas (with those modified
from the initial preliminary report, and the modifications, marked
by *) and the major reasons for consolidation are:

*1. Northeast

Current marketing areas of the New England, New York-New Jersey,
and Middle Atlantic Federal milk orders, *with the addition of:
contiguous unregulated areas of New Hampshire, Vermont and New York;
the western non-Federally regulated portion of Massachusetts, the
Western New York State order area, and Pennsylvania Milk Marketing
Board Areas 2 and 3 in northeastern Pennsylvania.
Reasons for consolidation include the existence of overlapping
sales and procurement areas between New England and New York-New
Jersey and between New York-New Jersey and Middle Atlantic. In
several cases, handlers who would become regulated because their
total sales in the combined areas would meet pooling standards are
located in areas where they compete with handlers who would not be
similarly regulated. Handler equity suggests that these handlers,
too, should become regulated. Another important measure of
association is evidenced by industry efforts to study and pursue
consolidation of the three Federal orders, as well as some of the
nonfederally regulated territory, prior to the 1996 Farm Bill.
Sixteen additional distributing plants would be pooled as a
result of the expansion of the consolidated area. Nine of these
plants currently are partially regulated.

*2. Appalachian

Current marketing areas of the Carolina and Tennessee Valley
Federal milk orders, *with the addition of: all of the Louisville-
Lexington-Evansville Federal order area (except one county--in the
suggested Southeast area) and 26 currently-unregulated counties in
Indiana and Kentucky.
More detailed and updated data showing overlapping sales and
procurement areas between these marketing areas are major factors
for supporting such a consolidation.

3. Florida

Current marketing areas of the Upper Florida, Tampa Bay, and
Southeastern Florida Federal milk orders.
Natural boundary limitations and overlapping sales and
procurement areas among the three orders are major reasons for
consolidation, as well as a measure of association evidenced by
cooperative association proposals to consolidate these three
marketing areas. Further, the cooperative associations in this area
have worked together for a number of years to accommodate needed
movements of milk between the three Florida Federal orders.

*4. Southeast

Current marketing area of the Southeast Federal milk order, plus
1 county from the Louisville-Lexington-Evansville Federal milk order
marketing area, plus 15 currently-unregulated Kentucky counties,
*minus 2 currently-unregulated counties in northeast Texas (in the
suggested Southwest area).
Major reasons for this consolidation include sales and
procurement area overlaps between the Southeast order and this
county. There is minimal sales area overlap with handlers regulated
under other Federal orders. Collection of additional data showed
greater disposition in the two Texas counties from Texas handlers
than from Southeast handlers. There are no handlers in these two
counties that would be affected.

*5. Mideast

Current marketing areas of the Ohio Valley, Eastern Ohio-Western
Pennsylvania, Southern Michigan, and Indiana Federal milk orders,
plus Zone 2 of the Michigan Upper Peninsula Federal milk order, and
currently-unregulated counties in Michigan, Indiana, and Ohio *with
the addition of: Pennsylvania Milk Marketing Board Area 6 (in
western/central Pennsylvania) and 2 currently-unregulated counties
in New York, and *minus the Louisville-Lexington-Evansville order
area, 12 counties in Illinois, and unregulated counties in Indiana
and Kentucky that are being suggested for inclusion in the
Appalachian area.
Major criteria suggesting this consolidation include the overlap
of fluid sales in the Ohio Valley marketing area by handlers from
the other areas suggested to be consolidated. With the
consolidation, most route disposition by handlers located within the
suggested Mideast order would be within the marketing area. Also,
nearly all milk produced within the area would be pooled under the
consolidated order. The portion of the Michigan Upper Peninsula
marketing area suggested to be included in the Mideast consolidated
area has sales and milk procurement areas in common with the
Southern Michigan area and has minimal association with the western
end of the current Michigan Upper Peninsula marketing area.
Collection of additional data and recent changes in marketing
patterns indicate that the relationship between the Louisville-
Lexington-Evansville (L-L-E) area and the order areas initially
included in the suggested Appalachian area is closer than
relationship between L-L-E and the Mideast area.
Seven distributing plants that would not have been pool plants
as a result of the initially-suggested consolidation would become
pool plants due to the suggested expansion of the consolidated area
into Pennsylvania and New York. The number of pool plants also is
affected by a shift of pool plants from one consolidated area to
another because of the shift of territory from the initially-
suggested Mideast area to the revised suggested Appalachian area.

*6. Upper Midwest

Current marketing areas of the Chicago Regional, Upper Midwest,
Zones I and I(a) of the Michigan Upper Peninsula Federal milk
orders, and unregulated portions of Wisconsin, *with the addition
of: the Iowa, Eastern South Dakota, and most of the Nebraska-Western
Iowa Federal order areas, plus currently-unregulated counties in
Iowa and Nebraska.
Major consolidation criteria include an overlapping procurement
area between the Chicago Regional and Upper Midwest orders and
overlapping procurement and route disposition area between the
western end of the Michigan Upper Peninsula order and the Chicago
Regional order. More-detailed and updated information revealed more
significant overlapping procurement and route disposition areas
between the Iowa, Eastern South Dakota and Nebraska-Western orders
and Chicago Regional and Upper Midwest orders than had been observed
in the initial study. In addition, a common pricing plan for
producers, natural boundary

[[Page 5094]]

limitations, and the prevalence of cheese as a major manufactured
product for the substantial reserve milk supplies that exceed fluid
milk needs exist in these orders. Some of the western Nebraska area
is more closely associated with the Eastern Colorado area, however,
and is suggested to remain with the Central consolidated area.
Eleven additional handlers that would have been pooled under the
consolidated Central order in the initial Preliminary Report would
be pooled under a consolidated Upper Midwest order under this
revised report.

*7. Central

Current marketing areas of the Southern Illinois-Eastern
Missouri, Central Illinois, Greater Kansas City, Southwest Plains,
and Eastern Colorado Federal milk orders, 10 counties currently in
the Nebraska-Western Iowa Federal order area, plus 55 currently-
unregulated counties in Kansas, Missouri, Illinois, Nebraska and
Colorado, *plus the 12 counties in the current Southern Illinois-
Eastern Missouri area that initially were suggested as part of the
consolidated Mideast area, *minus the Eastern South Dakota, Iowa and
most of the Nebraska-Western Iowa Federal order marketing areas.
Major criteria suggesting this consolidation include the
overlapping procurement and route disposition between the current
orders. The suggested consolidation would result in a concentration
of both the sales and supplies of milk within the consolidated
marketing area. The suggested consolidation would combine several
relatively small orders and provide for the release of market data
without revealing proprietary information. In addition, most of the
producers in these areas share membership in several common
cooperatives.

*8. Southwest

Current marketing areas of Texas and New Mexico-West Texas
Federal milk orders, *with the addition of: two northeast Texas
counties previously suggested to be added to the Southeast marketing
area, and 47 currently-unregulated counties in southwest Texas, and
*minus the Central Arizona marketing area.
Major criteria suggesting consolidation include sales and
procurement area overlaps and common cooperative association
membership between the Texas and New Mexico-West Texas marketing
areas, and similar marketing concerns with respect to trade with
Mexico for both orders. Addition of the currently-unregulated Texas
counties will result in the regulation of no additional handlers,
and will reduce handlers' recordkeeping and reporting burden and the
market administrator's administrative costs. In the initial
consolidation report, the Central Arizona area was found to have a
minimal association with the New Mexico-West Texas and Texas order
areas. Further analysis showed that it has a much more significant
degree of association with the Clark County, Nevada, portion of the
current Great Basin order area.
The revised suggested consolidated Southwest area would include
4 fewer fully regulated pool plants as a result of the removal of
the Central Arizona area.

*9. Arizona-Las Vegas

*An eleventh marketing area composed of the current marketing
area of the Central Arizona order and the Clark County, Nevada,
portion of the current Great Basin marketing area, plus eight
currently-unregulated Arizona counties.
The major criterion suggesting consolidation is sales overlap
between the sole Las Vegas, Nevada, handler and handlers regulated
under the Central Arizona order in both Clark County, Nevada, and
unregulated portions of northern Arizona. In addition, both areas
exchange significant volumes of bulk and packaged milk with Southern
California.
The suggested Arizona-Las Vegas marketing area would include
five fully regulated handlers, with no additional handlers regulated
because of the addition of the currently-unregulated northern
Arizona area.

*10. Western

Current marketing areas of the Western Colorado, Southwestern
Idaho-Eastern Oregon, and Great Basin Federal milk orders, *minus
Clark County, Nevada. Major criteria suggesting consolidation
include overlapping sales between Southwestern Idaho-Eastern Oregon
and Great Basin, as well as a significant overlap in procurement for
the two orders in five Idaho counties. The two orders also share a
similar multiple component pricing plan. The Western Colorado order
is included because it is a small market where data cannot be
released without revealing confidential information unless combined
with the adjacent Great Basin order.
Collection of more-detailed data indicates that the strength of
earlier relationships between the former Great Basin and Lake Mead
orders that justified their 1988 merger have dwindled significantly,
with the Las Vegas area now more closely related to southern
California and competing most heavily with Central Arizona handlers.

11. Pacific Northwest

Consolidated Market Summary
[Based on October 1995 Data]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of fully Total producer milk Combined class I use Weighted average
regulated distributing (1000 lbs.) (percent) utilization value
plants -----------------------------------------------------------------------------
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\ 1,140,9
52 1,103,366 57.8 57.2 $12.96 $12.94
Upper Midwest................................... 27 39 \6\ 1,046,5
39 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
Arizona--Las Vegas.............................. N/A 7 N/A \10\ 181,07
5 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 consolidated 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 initially-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.

[[Page 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}

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Document Information

Published:: 01/30/1998
Department:: Agricultural Marketing Service
Entry Type:: Proposed Rule
Action:: Proposed rule.
Document Number:: 98-1758
Dates:: Comments must be submitted on or before March 31, 1998.
Pages:: 4802-5095 (294 pages)
Docket Numbers:: DA-97-12
PDF File:: 98-1758.pdf
CFR: (695): 7 CFR 1000.44(a)(7); 7 CFR 1000.9(a); 7 CFR 1005.32(a); 7 CFR 1000.44(a)(7); 7 CFR 1000.44(a)(3); More ...