[Federal Register Volume 61, Number 210 (Tuesday, October 29, 1996)]
[Rules and Regulations]
[Pages 55731-55733]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-27723]
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DEPARTMENT OF AGRICULTURE
7 CFR Part 1079
[DA-96-11]
Milk in the Iowa Marketing Area; Revision of Pool Supply Plant
Shipping Percentage
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: This document reinstates certain provisions of the Iowa
Federal milk order indefinitely for the months of September through
November, beginning with October 1996 milk deliveries, and revises
other provisions for the months of December 1996 through March 1997.
This action increases the percentage of a supply plant's receipts that
must be delivered to fluid milk plants to qualify a supply plant for
pooling under the Iowa Federal milk order. The applicable percentage
will be increased by 5 percentage points, from 30 percent to 35
percent, for the months of September through November; and by 10
percentage points, from 20 percent to 30 percent, for the months of
December 1996 through March 1997. The revision is being made in
response to a request by a distributing plant that is regulated under
the order. This action is necessary to assure an adequate supply of
milk for fluid use.
EFFECTIVE DATES:
1. Amendment number 1 is effective October 1, 1996.
2. Amendment number 2 is effective October 1, 1996, and applies
October 1, 1996, through November 30, 1996, and for the September
through November period thereafter.
3. Amendment number 3 is effective December 1, 1996, through March
31, 1997.
4. Amendment number 4 is effective April 1, 1997.
FOR FURTHER INFORMATION CONTACT: Constance M. Brenner, Marketing
Specialist, USDA/AMS/Division, Order Formulation Branch, Room 2968,
South Building, P.O. Box 96456, Washington, DC 20090-6456, (202) 720-
2357.
SUPPLEMENTARY INFORMATION: Prior document in this proceeding:
Notice of Proposed Revision of Rule: Issued August 26, 1996;
published September 4, 1996 (61 FR 46571).
The Department is issuing this final rule in conformance with
Executive Order 12866.
This final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. This rule is not intended to have a retroactive
effect. This rule will not preempt any state or local laws,
regulations, or policies, unless they present an irreconcilable
conflict with this rule.
The Agricultural Marketing Agreement Act of 1937, as amended (7
U.S.C. 601-674), provides that administrative proceedings must be
exhausted before parties may file suit in court. Under section
608c(15)(A) of the Act, any handler subject to an order may file with
the Secretary a petition stating that the order, any provisions of the
order, or any obligation imposed in connection with the order is not in
accordance with the law and request a modification of an order or an
exemption from the order. A handler is afforded the opportunity for a
hearing on the petition. After a hearing, the Secretary would rule on
the petition. The Act provides that the district court of the United
States in any district in which the handler is an inhabitant, or has
its principal place of business, has jurisdiction in equity to review
the Secretary's ruling on the petition, provided a bill in equity is
filed not later than 20 days after the date of the entry of the ruling.
This document reinstates the pool supply plant shipping percentage
of 35 percent under the Iowa order for the period October 1 through
November 30, 1996, and the September through November period
thereafter. A reduction from 35 to 30 percent was issued in 1990 (55 FR
41504, published October 12, 1990) effective October 12, 1990, for an
indefinite period. This action increases the percentage by reinstating
the original percentage of 35, thus eliminating the prior 1990 action.
The proposed rule for this action (61 FR 46571, published September 4,
1996) incorrectly stated that the current percentage for the months of
September through November was 35 and would have been increased to 45.
The current issue of the Code of Federal Regulations (CFR) shows
the percentage requirements to be 35 percent for September through
November and 20 percent for December through August because a temporary
change (e.g., 35 percent to 30 percent) is not printed in the CFR.
Small Business Consideration
In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.), the Agricultural Marketing Service has considered the economic
impact of this action on small entities and has certified that this
rule will not have a significant economic impact on a substantial
number of small entities. For the purpose of the Regulatory Flexibility
Act, a dairy farm is considered a ``small business'' if it has an
annual gross revenue of less than $500,000, and a dairy products
manufacturer is a ``small business'' if it has fewer than 500
employees. For the purposes of determining which dairy 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 farms. 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.
The supply plant shipping percentage provisions are being increased
in the order to assure an adequate supply of milk for the fluid market.
It is expected that producers and their handlers who share in the
benefits of the higher-valued fluid uses of the market through their
participation in a marketwide pool should be required to help supply
milk to fluid milk distributing plants when additional supplies are
needed. As a result of this expectation, order
[[Page 55732]]
provisions based on testimony and data presented at a public hearing in
which all interested parties were encouraged to participate were
promulgated and approved by at least two-thirds of the dairy farmers
whose milk was pooled under the Iowa order.
The Iowa order provides that the pool supply plant shipping
percentages in the order may be increased or reduced by the Director of
the Dairy Division, Agricultural Marketing Service, to assure that an
adequate supply of milk will be made available to distributing plants,
or to avoid excessive costs of hauling and handling milk that may be
moved to distributing plants only to pool plentiful supplies of
producer milk.
For the month of July 1996, 2,995 dairy farmers were producers
under the Iowa milk order. Of these, all but 23 would be considered
small businesses, having under 326,000 pounds of production for the
month. Of the dairy farmers in the small business category, 2,389
produced under 100,000 pounds of milk, 533 produced between 100,000 and
200,000, and 50 produced between 200,000 and 326,000 pounds of milk
during July 1996.
The reports filed on behalf of the slightly more than 20 milk
handlers pooled, or regulated, under the Iowa order in July 1996 were
filed for individual establishments that, for the most part, would meet
the SBA definition of a small business, having less than 500 employees.
However, most of these establishments are part of larger businesses
that operate multiple plants and meet the definition of large entities
on that basis.
This revision will increase the percentage of milk receipts that
handlers are required to move to fluid milk distributing plants. Some
handlers may choose to move increased volumes of their milk supplies
from manufacturing uses to fluid use in order to assure that all of
their producer milk supplies will be able to share in the benefits of
the marketwide pool. Other handlers may elect to not pool some of their
producer milk supplies rather than ship more milk to distributing
plants. Still others may already be moving as much as they will be
required to move under increased percentages and will be unaffected by
the revision.
If the shipping percentages are not increased, the distributing
plant operator requesting the revisions, a large entity based on its
multiple plant operations, may not be able to obtain an adequate supply
of milk at a competitive price to meet its needs. The handlers from
whom the distributing plant handler would be most likely to receive
increased shipments are also, for the most part, large entities.
This revision is issued pursuant to the provisions of the
Agricultural Marketing Agreement Act and the provisions of
Sec. 1079.7(b)(1)of the Iowa order.
Notice of proposed rulemaking was published in the Federal Register
(61 FR 46571) concerning a proposed increase in the percentage of a
supply plant's receipts that must be delivered to fluid milk plants to
qualify a supply plant for pooling under the Iowa Federal milk order.
The revisions were proposed to be effective for the months of September
1, 1996, through March 31, 1997. The public was afforded the
opportunity to comment on the proposed notice by submitting written
data, views, and arguments by September 11, 1996.
Two comments supporting and one opposing the proposed revision were
received.
Statement of Consideration
After consideration of all relevant material, including the
proposal set forth in the aforesaid notice, and other available
information, it is hereby found and determined that the supply plant
shipping percentage set forth in Sec. 1079.7(b) of the Iowa Federal
milk order should be increased by 5 percentage points, from 30 percent
to 35 percent for the months of September through November, effective
October 1, 1996, and should be increased by 10 percentage points, from
20 percent to 30 percent, for the months of December through March.
An increase of 10 percentage points to the supply plant shipping
percentages for the months of September 1996 through March 1997 was
proposed by Anderson-Erickson Dairy Company (A-E), a proprietary
distributing plant that is regulated under the order. The handler
contends that the increase in the shipping standard is necessary to
bring forth an adequate supply of fluid milk for fluid use.
According to A-E, the handler has been and is willing to pay the
announced market price for milk, which includes over-order premiums. A-
E states that the higher-valued uses of fluid milk are not being shared
in the pool. Thus, fluid milk is not being made available to A-E at a
market price which can retain A-E's competitiveness. The handler's
comments state that the federal order for Iowa has at least temporarily
ceased performing its statutorily-mandated functions because it is not
equalizing payments to producers and simultaneously is not assuring the
delivery of fluid milk to fluid handlers. In the absence of increased
shipping percentages, A-E urged the Secretary immediately to suspend
(or terminate) the pricing provisions of the Iowa order until such time
as the pricing actually results in uniform prices to producers and in
the delivery of fluid milk to fluid plants. Comments received from Hy-
Vee Food Stores, Inc., of West Des Moines, Iowa, support A-E's request
for an increase in the percentage of a pool supply plant's receipts to
be shipped to fluid milk plants.
Beatrice Cheese, Inc., is a proprietary manufacturer of dairy
products in Fredericksburg, Iowa, that markets milk for eight small
cooperatives located in Northeast Iowa and Southeast Minnesota.
Beatrice also has its own supply of milk from nonmember producers.
Beatrice Cheese, Inc., strongly opposes the shipping percentage
increases proposed by A-E Dairy. Beatrice claims to have supplied A-E,
on a monthly basis, with what Beatrice estimates to be about fifty
percent of A-E's needs. Beatrice also supplies milk to pool
distributing plants regulated under another Federal order at a level
they claim meets or exceeds current order supply plant shipping
percentages. Beatrice contends that they are supplying the pool
distributing plants in the marketing area with more than a fair share
of the milk pooled by Beatrice. According to Beatrice, if additional
supplies were available to be shipped to A-E without creating a
financial burden on Beatrice, Beatrice would be fulfilling A-E's needs,
but these additional supplies are not available. Based on recent Class
I use percentages, Beatrice contends that if the 45 percent shipping
requirement were adopted, excessive milk supplies could be required to
be shipped to bottlers, necessitating uneconomic shipments back to
other milk users. Beatrice states that the proposed shipping
requirements would put unjust financial pressures on Beatrice, creating
a competitive disadvantage for its dairy farmers. Since January 1996,
Beatrice claims, it has incurred a substantial financial loss due to
current shipping requirements, given the absence of hauling credits
under Order 79. Beatrice states that it may be necessary for pool
distributing plants to go outside their normal procurement avenues to
purchase the extra milk they require at current market prices, without
using the Federal Order system to force shipments.
Market data show that the Class I percentage of milk pooled in the
Iowa marketing area since March 1996 has been significantly higher than
for the same periods in several preceding years.
[[Page 55733]]
For the months of June through August 1996, the percentage of pool milk
used in Class I has increased over the average of the same months of
1993-95 by an average of 10.5 percentage points. The average increase
has grown from 9.3 percentage points for June 1996 compared with June
1993-95, to 12.7 for August 1996 over August 1993-95. Although some of
the increase in the Class I utilization percentage undoubtedly reflects
the effect of customarily-pooled milk that was not pooled because of
Class III and Class III-A pricing differences, these numbers still
indicate that the supply of milk available to the fluid market has
declined in recent months. This revision to increase the percentage of
a supply plant's receipts that must be delivered to fluid milk plants
to qualify a supply plant for pooling under the Iowa Federal milk order
is necessary to attract an adequate supply of milk for fluid use due to
the increasing percentage of milk used in Class I.
Although the proposed revision published September 4, 1996 (61 FR
46571) discussed the possibility of increasing the applicable
percentage from 35 percent to 45 percent for the months of September
through November 1996, the effective shipping percentage for that
period previously had been lowered to 30 percent on October 12, 1990
(55 FR 41504). According to market data, however, it appears that a
reinstatement of the 35-percent shipping percentage would be
appropriate to bring forth an adequate supply of milk for fluid use.
Such a percentage is also within the 10-percent revision limitation
provided for within the order while the proposed 45 percent level would
be greater than that allowable under the 10 percentage point increase
limitation (Sec. 1079.7(b)( 1)). Furthermore, the market data indicates
that a 40 percent standard would provide an excess of Class I milk.
Finally, the market data indicates that the need for increased Class I
milk supplies will continue beyond November 1996 and so it is
appropriate to increase the supply plant shipping percentages for
December 1996 through March 1997.
It is hereby found and determined that 30 days' notice of the
effective date hereof is impractical, unnecessary, and contrary to the
public interest in that:
(a) This revision is necessary to reflect current marketing
conditions and to maintain orderly marketing conditions in the
marketing area for the months of October and November, and for December
1996 through March 1997.
(b) This revision does not require of persons affected substantial
or extensive preparation prior to the effective date; and
(c) Notice of the proposed revision was given interested parties
and they were afforded opportunity to file written data, views, or
arguments concerning this revision.
Two comments supporting and one opposing the proposed revision were
received.
Therefore, good cause exists for making this revision effective
less than 30 days from the date of publication in the Federal Register.
List of Subjects in 7 CFR Part 1079
Milk marketing orders.
For the reasons set forth in the preamble, 7 CFR Part 1079, is
amended as follows:
PART 1079--MILK IN THE IOWA MARKETING AREA
1. The authority for 7 CFR Part 1079 continues to read as follows:
Authority: 7 U.S.C. 601-674.
Sec. 1079.7 [Amended in Part]
2. In Sec. 1079.7(b), the introductory text is amended by revising
the words ``30 percent'' to read ``35 percent,'' effective October 1,
1996. This amendment applies as of October 1, 1996, through November
30, 1996, and for the months of September through November thereafter.
3. In Sec. 1079.7(b), the introductory text is amended by revising
the words ``20 percent'' to read ``30 percent,'' effective December 1,
1996, through March 31, 1997.
4. In Sec. 1079.7(b), the introductory text is amended by revising
the words ``30 percent'' to read ``20 percent,'' effective April 1,
1997.
Dated: October 23, 1996.
Richard M. McKee,
Director, Dairy Division.
[FR Doc. 96-27723 Filed 10-28-96; 8:45 am]
BILLING CODE 3410-02-P
